Cake Box

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Ticker: CBOX Exchange: AIM

Cake Box specialises in making delicious, high quality, bespoke celebration fresh cream cakes in-store while customers wait. Their cakes are entirely egg free and are sold in over 100 franchise stores across the UK.  

Latest Reports

Cake Box Management Presentation with Q&A June 2020

Published: 16th June 2020

Sukh Chamdal, CEO, and Pardip Dass, CFO, discuss Cake Box's Full Year results and answer questions on how they have dealt with the pandemic, and why, with at least 75% of stores operating at a pre-COVID level, they see plenty of reasons to be optimistic. 

 

Stores reopened and a positive outlook

Published: 15th June 2020

Cake Box’s preliminary FY2020 results, released today, reconfirmed strong sales growth in FY2020 with scope for an expanded distribution footprint to deliver further sales revenue expansion in FY2021.  While the Covid19 lockdown clearly disrupted franchisees’ in-store sales, Cake Box appears well placed to spring back both quickly and with a positive growth trajectory. 

Current trading news looks positive.  Cake Box was in a position to start re-opening its franchised stores, commencing 18th May.   By the end of the month 98% of its stores were open with the added benefit that 75% of these were trading at a level of at least 90% of pre-Covid19 levels.  The overall closure period – i.e. time lost to the pandemic – was around 6 weeks.  While comprehensive in scope, the company’s safety measures were implemented for an immaterial cost. Importantly, its stores were open in advance of the end of Ramadan celebrations. 

Based on the company’s FY2020 figures the company trades on a trailing EV/sales ratio of 3x. We are surprised that this rating is only in line with what we deem to be its franchised food retailer peer group, given the brisk underlying sales growth at Cake Box, plus a robust balance sheet and the benefits of operating with a capital light business model. 

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Underlying FY2020 Growth Confirmed

Published: 14th April 2020

Cake Box’s FY2020 trading statement released today confirmed that, ahead of the impact of the COVID-19 measures, the company was enjoying brisk growth – both in terms of overall and like-for-like sales revenue. Moreover, in the current period of uncertainty the company’s finances are underpinned by its strong balance sheet and franchised business model.

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Growth outlook remains sweet

Published: 25th November 2019
Cake Box, which announced strong interim results today, benefits from a unique value for money fresh Devon cream egg-free cake product offering, unusually visible growth and high returns on capital associated with its franchise model.  The company should continue to add value as a brand manager, food manufacturer, and franchise retailer, with excellent execution.    

Cake Box Holdings Plc released interim results today.  Total sales were 6.0% higher with an 8.0% increase in gross profit.  However, costs associated with important raised investment in the administrative team were a drag on profitability.  More positively, net cash increased by £0.8m, which should reduce H2 finance costs, and new store openings maintained a good momentum to be on-track for the full year.

Cake Box’s fresh Devon cream egg-free cakes clearly boast strong customer appeal.  Its cakes represent affordable indulgences that are well suited to its franchisees’ retail locations and customer bases.  As special occasion and “treat” purchases, its products seem unlikely to fall foul of any health issues prevalent in UK consumer goods right now.  Moreover, egg-free has appeal to a wide range of religious and dietary groups.  Today, approximately 1 person in 20 in the UK has some form of egg allergy.

Cake Box’s organic sales growth should remain brisk and visible.  The company looks to open new franchise stores at a rate of around 24 per year.  The ambition is to  take its current franchised estate of 122 up to 250 in the next few years.  Overall, the market for cakes and indulgences continues to grow.  In this report, we also identify key UK regions which are ripe for footprint expansion.

Cake Box’s franchise model massively uplifts shareholder value creation, through superior returns on capital employed and free cash flow generation.  In contrast to “owned and managed” store operators, there is no cash drain that arises as a result of new openings.  Return on capital employed and return on net equity in FY2019 were of the order of 40% and 48% respectively.

Share price weakness since the company’s 14th October 2019 trading statement leaves the company’s stock attractively valued, in our view.  Based on valuation relative to an eclectic peer group, we argue a 170p share price makes sense, a potential uplift of 21%.  This implies 3.2x EV/sales, 12x EV/EBITDA and a 17x P/E – i.e.  arguably undemanding valuation multiples given Cake Box’s capital light/brisk growth status.

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Presenting at the ED Investor Forum November 2018

Published: 4th December 2018
If you missed our Investor Forum on the 28th of November, or simply want to hear the presentation again, the recording of Cake Box is now available on our website. 
Following their successful IPO earlier this year Sukh Chamdal, CEO, Pardip Dass, CFO, & Dr Jaswir Singh, COO, discuss their strong maiden set of interim results, setting out their strategy for further franchise expansion.