CAKE BOX HOLDINGS PLC

Earnings Release • Nov 14, 2022

National Storage Mechanism | Additional information

RNS Number : 2240G

Cake Box Holdings PLC

14 November 2022

Cake Box Holdings plc

("Cake Box", "the Company" or "the Group")

Unaudited Half Year Results for the six months ended 30 September 2022

Revenue growth against strong comparative period, continued investment in infrastructure whilst maintaining a

strong cash position

Cake Box Holdings plc, the specialist retailer of fresh cream cakes, today announces its half year results for the six months ended 30 September 2022.

Sukh Chamdal, Chief Executive Officer, commented

"Although revenue increased, trading in the first half of the period was against a very strong comparative period last year, and was impacted by exceptionally hot weather which went on for a far longer period than normal. In addition, higher levels of international travel in July and August, were coupled with the rising cost of living and inflation. Once the summer holiday period finished, we began to see a recovery in our sales, alongside the continued growth of our franchise store estate.

Encouragingly, the improvement in trading seen towards the end of the half year has continued into October. Whilst the Board remains cautious in light of the uncertain economic climate and the unpredictability in consumer spending, the Group's current trading is on track to achieve full year market expectations.

Longer term, the Board is confident in Cake Box's significant potential, underpinned by its attractive customer and franchisee proposition and bolstered by ongoing investment in the Group's functions and capabilities, and a strengthened leadership team."

Financial Highlights

	Half year	Half year	Change1
	ended	ended
	30 September 2022	30 September 2021
Revenue	£16.8m	£16.5m	2.1%
Gross profit	£8.0m	£7.6m	5.5%
EBITDA*	£2.8m	£4.1m	(32.4%)
Pre-tax profit	£2.0m	£3.7m	(45.1%)
Net cash	£4.2m	£4.1m	1.2%
Cash at Bank	£5.5m	£5.6m	(2.0%)
Earnings per share	3.72p	7.46p	(50.0%)
Interim dividend	2.625p	2.5p	5.0%

1 Change % is calculated on the figures included in consolidated statement of comprehensive income and consolidated statement of financial position

* EBITDA is calculated as operating profit before depreciation and amortisation

·    Group revenues up 2.1% to £16.8m (H1 FY22: £16.5m)

o  Sustained recovery in trading towards the end of the period against a very strong comparative, with like-for-like1 sales growth of 3.6% in September

·    Gross margins increased to 47.7% (H1 FY22: 46.2%) despite input cost increases

·    Reduction in EBITDA and pre-tax profit, reflects the previously reported challenging trading environment in H1, cost pressures and increased investment in the business

·    Continued balance sheet strength with net cash increasing to £4.2m (H1 FY22: £4.1m)

·    Interim dividend up 5% at 2.625p reflecting the Group's progressive dividend policy and continued cash generation despite continued investment in infrastructure to underpin future growth

Operational highlights

·    196 franchise stores in operation at 30 September 2022 (30 September 2021: 174)

·    11 new franchise stores added in the period (H1 FY22: 20 new franchise stores)

·    Significant investment in production and distribution assets to improve efficiency

·    Managing cost pressures, particularly though established supplier relationships

Franchise store highlights

·    Like-for-like sales slight decline of 1.1% in the period against very strong comparative period

·    Franchisee store sales in the period, up 7.9% to £31.8m (H1 FY22: £29.5m)

·    Franchisee total sales including kiosks in the period up 9.9% to £34.7m (H1 FY22 £31.6m)

·    Despite the lifting of lockdown last year, Franchisee online sales have been maintained at £6.7m (H1 FY22: £6.7m)

·    Number of kiosks at 30 September 2022 is 33, with an increase in the number of supermarket kiosks to 20 (H1 FY22: 7 supermarket kiosks and 15 supermarket kiosks at 31 March 2022)

·    Number of multi-site franchisees has increased to 43 (H1 FY22: 40)

Current trading and outlook

·    Trading has improved post summer, with franchise sales up like-for-like 4.6% and online sales increasing 6.8% in October versus last year

·    Whilst macro-economic challenges continue and consumer spending is likely to remain unpredictable, the Group's current trading is on track to achieve full year market expectations

·    Three new stores have opened since the period end, with a strong pipeline for future openings (44 deposits held at period end)

·    Further supermarket kiosk openings being negotiated

1 Like-for-like: Stores trading for at least one full financial year prior to 30 September 2022

There will be a virtual presentation for analysts and institutional investors this morning at 9.30am. For details, please contact cakebox@mhpc.com.

For further information, please contact:

Cake Box Holdings plc Sukh Chamdal, CEO Martin Blair, Acting CFO	Enquiries via MHP Communications
Shore Capital (Broker and NOMAD) Stephane Auton Patrick Castle Rachel Goldstein Fiona Conroy - Corporate Broking	+44 (0) 20 7408 4090
Liberum (Joint Broker) Clayton Bush Edward Thomas	+44 (0) 20 3100 2000
MHP Communications (Financial PR) Simon Hockridge Pete Lambie	+44 (0) 20 3128 8570

Operational Review

Results overview

Last financial year was an exceptionally strong year for Cake Box with many retailers shut because of the Covid-19 pandemic.  However, we were permitted to open and as a result trading was strong, both in stores and online.  Against this good performance, we started the year with challenging comparatives; during the first few months we were trading at or slightly below last year on a like-for-like basis.  We continued to open new stores and trading was starting to improve in June. However, July and August were exceptionally hot and sunny and, as we have found in the past, this is not particularly conducive to cake sales.  Sentiment around the cost of living, inflation and utilities price rises also weighed on the consumer.  In addition, many customers took advantage of the relaxation in travel restrictions to take holidays they had been planning for the last two years, which also contributed to lower sales.  We were, however, encouraged to see our customers returning in September with like-for-like franchisee sales up 3.6%.

Reflecting the wider inflationary environment, we have inevitably seen significant increases in our raw material costs, namely cake mix and fresh cream.  We have absorbed some of these costs, however, we have had to pass some of these onto our franchisees and have made considered increases to our retail prices, whilst ensuring the value proposition that Cake Box is known for, remains.  Customers have been accepting of these increases, in line with the wider sector, and are still returning to enjoy our cakes, albeit we keep our pricing strategy continually under review.

Under the tough consumer-spending conditions it is encouraging to see an increase in overall revenues to £16.8m from £16.5m for the equivalent period last year and that we have achieved a small increase in gross margin. 

Continued investment for growth

We have continued investing for future growth in the business.  We had already enhanced our management team, bringing in a new Chief Operating Officer and a Marketing Director, as well as bolstering the production and food hygiene teams.  In the last six months, we have made a significant investment in our Enfield bakery by bringing in new state-of-the-art production facilities for cheesecakes, whilst also making other improvements to provide a better environment for our baking and production staff.  This investment is reflected in the significantly higher admin costs in the period of £5.9m compared to £3.9m last year.

We are also continuing to look at ways to improve our baking process to reduce waste and the cost of ingredients.  We have invested in our delivery van fleet, replacing older vans, and adding more refrigerated vehicles to reflect increased demand.  Planned van replacement last year was delayed into this year due to unavailability of new vehicles in the market.

Online Sales and new website

Online sales were flat compared to H1 FY22 due to much stronger trading conditions in the same period last year in the aftermath of Covid. During H2, we are investing in digital advertising, and this is now increasing online sales month by month. We expect this to accelerate with a new website which is planned to launch next month. The new site will give the customer a better user experience and in doing so, increase conversion rate and customer loyalty. The site will be data driven and automated to deliver bespoke marketing campaigns to increase customer lifetime value.

Franchisees and new stores

We now have 96 franchisees with 43 of them owning more than one store and between them managing 147 sites (out of the total 196 stores).  Where we know franchisees are performing well, we are actively encouraging them to take on additional sites so as to harness their entrepreneurial skills. 

The Group opened 11 new franchise stores in the period (excluding kiosk openings), with the total number of stores at 30 September 2022 being 196 (H1 FY22: 174). New locations added in the period include St. Neots, Gateshead, Nottingham, and Norwood (London).

The appeal of the Group's franchise proposition is reflected in the continuing strength of our pipeline of new potential franchisees, with 44 deposits held at period end.  Of these 44 deposits, 20 are from existing franchisees.

Balance Sheet and cashflow

The Group's balance sheet remains strong, underpinned by the highly cash generative nature of our business model. Cash at period end was £5.5m, down only 2% from the same point last year, despite making significant investments in production and distribution facilities and paying a higher dividend. The Group's net cash position increased, by 1.2% to £4.2m (H1 FY22: £4.1m).

Dividends

In line with our progressive dividend policy to reflect the cash generation and earnings of the Group, today we are declaring an interim dividend of 2.625 pence per share representing an increase of 5.0% from last year.

The interim dividend will be paid on 9th December 2022 to those shareholders on the register at the close of business on 18th November 2022. The ex-dividend date is therefore 17th November 2022.

Outlook

The improvement in trading towards the end of H1 has continued into H2 with October like-for-like franchisee sales up 4.6%.and total franchisee sales in the six weeks to 6 November 2022 up 12.9%.

The Group's franchise store estate has continued to grow, with three new stores opened since the period end and a further 11 expected to open in the second half.

While the Board remains cognisant of the current economic climate and the unpredictability in consumer spending, the Group's current trading is on track to achieve full year market expectations.

Longer term, the Board is confident in Cake Box's significant potential, underpinned by its attractive customer and franchisee proposition and bolstered by ongoing investment in the Group's functions and capabilities, and a stronger leadership team.

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

		6 months to     30 September 2022		6 months to     30 September 2021		12 months to       31 March 2022
		(unaudited)		(unaudited)		(audited)
	Note	£		£		£
Revenue	2	16,822,209		16,471,577		32,964,846
Cost of sales		(8,791,924)		(8,863,477)		(17,133,685)
Gross profit		8,030,285		7,608,100		15,831,161
Administrative expenses		(5,933,111)		(3,889,519)		(8,012,448)
Operating profit		2,097,174		3,718,581		7,818,713
Net finance costs		(67,128)		(19,202)		(81,388)
Profit before income tax		2,030,046		3,699,379		7,737,325
Income tax expense		(541,563)		(717,333)		(1,425,709)
PROFIT AFTER INCOME TAX		1,488,483		2,982,046		6,311,616
OTHER COMPREHENSIVE INCOME FOR THE PERIOD
Items that will not be reclassified to profit and loss, net of tax
Revaluation of freehold property		-		-		1,250,175
Deferred tax on revaluation of freehold property		-		-		(237,533)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		1,488,483		2,982,046		7,324,258
EARNINGS PER SHARE
Basic	4	3.72p		7.46p		15.78p
Diluted	4	3.72p		7.46p		15.78p

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2022

		30 September 2022 (unaudited)	30 September 2021 (unaudited)	31 March 2022 (audited)
	Note	£	£	£
ASSETS
Non-current assets
Property, plant and equipment		10,750,275	8.707,374	10,029,209
Right-of-use assets		2,724,460	-	2,874,430
Other financial assets		595,314	564,194	710,059
Deferred tax asset		-	95,447	-
		14,070,049	9,367,015	13,613,698
Current assets
Inventories		2,577,643	2,111,194	2,468,921
Trade and other receivables		2,962,332	2,861,845	2,553,209
Other financial assets		252,488	237,994	357,548
Cash and cash equivalents		5,464,364	5,565,501	6,571,558
		11,256,827	10,776,534	11,951,236
TOTAL ASSETS		25,326,876	20,143,549	25,564,934
EQUITY AND LIABILITIES
Share capital and reserves
Issued share capital	4	400,000	400,000	400,000
Capital redemption reserve		40	40	40
Revaluation reserve		3,616,383	2,622,092	3,634,734
Share option reserve		-	488,596	-
Retained earnings		11,941,865	10,145,461	12,475,031
TOTAL EQUITY		15,958,288	13,656,189	16,509,805
Current liabilities
Trade and other payables		2,996,742	3,313,081	2,661,372
Lease liabilities		213,963	-	260,191
Short-term borrowings		167,754	167,754	167,754
Current tax payable		749,834	740,415	837,946
Provisions		243,100	243,100	243,100
		4,371,393	4,464,350	4,170,363
Non-current liabilities
Lease liabilities		2,617,568	-	2,699,958
Borrowings		1,101,223	1,252,336	1,185,978
Deferred tax liabilities		1,278,404	770,674	998,830
		4,997,195	2,023,010	4,884,766
TOTAL LIABILITES		9,368,588	6,487,360	9,055,129
TOTAL EQUITY & LIABILITIES		25,326,876	20,143,549	25,564,934

.

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

	Share capital	Capital redemption reserve	Share option reserve	Revaluation reserve	Retained earnings	Total
	£	£	£	£	£	£
Balance at 1 April 2021	400,000	40	488,596	1,609,592	8,643,415	11,141,643
Total comprehensive income	-	-	-	-	2,982,046	2,982,046
Dividends paid	-	-	-	-	(1,480,000)	(1,480,000)
Balance at 30 September 2021 (as previously stated)	400,000	40	488,596	1,609,592	10,145,461	12,643,689
Revaluation of freehold property 1				1,250,000		1,250,000
Deferred tax on revaluation of freehold properties 1				(237,500)		(237,500)
Restated balance at 30 September 2021 (as restated)	400,000	40	488,596	2,622,092	10,145,461	13,656,189
Total comprehensive income	-	-	-	-	3,329,570	3,329,570
Share based payments	-	-	(486,368)	-	-	(486,368)
Deferred tax on share based payments	-	-	(2,228)	-	-	(2,228)
Revaluation of freehold property	-	-	-	1,250,175	-	1,250,175
Deferred tax on revaluation of freehold properties	-	-	-	(237,533)	-	(237,533)
Dividends paid	-	-	-	-	(1,000,000)	(1,000,000)
Balance at 31 March 2022	400,000	40	-	3,634,734	12,475,031	16,509,805
Total comprehensive income	-	-	-	-	1,488,483	1,488,483
Dividends paid	-	-	-	-	(2,040,000)	(2,040,000)
Transfer of excess depreciation on revalued assets	-	-	-	(18,351)	18,351	-
Balance at 30 September 2022	400,000	40	-	3,616,383	11,941,865	15,958,288

1 During the year to 31 March 2022 it was discovered that an uplift to value of freehold properties was not properly reflected in the financial statements in the prior year.  This was reflected in the financial statements to 31 March 2022

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

		6 months to 30 September 2022 (unaudited)	6 months to 30 September 2021 (unaudited)	12 months to 31 March 2022 (audited)
		£	£	£
Cash from operating activities:
Profit before income tax		2,030,046	3,699,379	7,737,325
Adjusted for:
Depreciation		546,344	425,833	853,633
Amortisation of right-of-use assets		149,970	-	124,975
Profit on disposal of tangible fixed assets		(34,204)	(13,515)	(13,154)
(Increase) in inventories		(108,722)	(209,023)	(566,749)
(Increase) in trade and other receivables		(409,123)	(371,630)	(82,993)
(Increase) in other financial assets		219,804	236,626	(28,794)
Increase / (decrease) in trade and other payables		335,371	(283,886)	(915,596)
Share based payment provision		-	-	(486,368)
Finance income		(6,711)	(1,021)	(1,802)
Finance costs		73,839	20,223	83,190
Cash generated by operations		2,796,614	3,502,986	6,703,667
Taxation paid		(350,100)	(880,387)	(1,407,391)
Net cash inflow from operating activities		2,446,514	2,622,599	5,296,276
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		34,204	16,375	16,014
Purchase of property, plant and equipment		(1,267,412)	(634,466)	(1,133,926)
Interest received		6,711	1,021	1,802
Net cash flows used in investing activities		(1,226,497)	(617,070)	(1,116,110)
Cash flows from financing activities:
Repayment of finance leases		(128,618)	-	(39,255)
Repayment of borrowings		(84,754)	(65,669)	(132,027)
Dividends paid		(2,040,000)	(1,480,000)	(2,480,000)
Interest paid		(73,839)	(20,223)	(83,190)
Net cash flows used in financing activities		(2,327,211)	(1,565,892)	(2,734,472)
Net increase in cash and cash equivalents		(1,107,194)	439,637	1,445,694
Cash and cash equivalents brought forward		6,571,558	5,125,864	5,125,864
Cash and cash equivalents carried forward		5,464,364	5,565,501	6,571,558

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

Cash at bank and in hand	5,464,364	5,565,501	6,571,558

CAKE BOX HOLDINGS PLC

NOTES TO THE INTERIM ACCOUNTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

1.     Notes to the Interim Report

Basis of preparation

The consolidated half-yearly financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2022 have been filed with the Registrar of Companies at Companies House. The auditor's report on the statutory accounts for the year ended 31 March 2022 was unqualified, did not include any matters to which the auditor drew attention by way of emphasis and did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006.

The published financial statements for the year ended 31 March 2022 were prepared in accordance with the recognition and measurement principles of UK adopted International Financial Reporting Standards ("UK adopted IFRS") that are expected to be applied in the preparation of the next annual report.

The consolidated annual financial statements of Cake Box Holdings Plc for the year ended 31 March 2023 will be prepared in accordance with IFRS. Accordingly, these interim financial statements have been prepared using accounting policies consistent with those which will be adopted by the Group in the financial statements for the year ended 31 March 2023, but do not contain all the information necessary for full compliance with IFRS.

The consolidated half-yearly financial statements for the six months to 30 September 2022 have not been audited or reviewed by auditors, pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

The consolidated half-yearly financial statements have been prepared under the going concern assumption and historical cost convention as modified by fair value for property, plant and equipment.

Basis of consolidation

The Group consolidated half-yearly financial statements consolidates the company and its subsidiaries. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

2.     Segment reporting

Components reported to the chief operating decision maker, the board of directors, are not separately identifiable. The Group makes varied sales to its customers, but none are a separately identifiable component. The following information is disclosed:
	6 months to 30 September 2022 (unaudited)	6 months to 30 September 2021 (unaudited)	12 months to 31 March 2022 (audited)
	£	£	£
Sales of sponge	6,170,612	5,991,526	12,301,051
Sales of food	2,930,966	2,717,955	5,479,076
Sales of fresh cream	1,761,069	1,707,951	3,442,619
Sales of other goods	3,686,104	3,309,034	7,023,665
Online sales commission	487,168	453,379	937,640
Franchise packages	1,786,290	2,291,732	3,780,795
	16,822,209	16,471,577	32,964,846

CAKE BOX HOLDINGS PLC

NOTES TO THE INTERIM ACCOUNTS (cont'd)

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

3.     Dividends

	6 months to       30 September 2022	6 months to 30 September 2021	12 months to    31 March   2022
	(unaudited)	(unaudited)	(audited)
	£	£	£
Dividends paid	2,040,000	1,480,000	2,480,000

4.     Share Capital

	6 months to       30 September 2022	6 months to 30 September 2021	12 months to 31 March   2022
	(unaudited)	(unaudited)	(audited)
	£	£	£
40,000,000 Ordinary Shares of £0.01 each	400,000	400,000	400,000

Earnings per share

The basic earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average number of shares in issue.  In calculating the diluted earnings per share, share options outstanding have been taken into account where the impact of these is dilutive.

	6 months to       30 September 2022	6 months to  30 September 2021	12 months to   31 March   2022
	(unaudited)	(unaudited)	(audited)
	£	£	£
Basic earnings per share	3.72p	7.46p	15.78p
Diluted earnings per share	3.72p	7.46p	15.78p

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