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

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:

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

   CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2022

   .

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

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