Patisserie Holdings Plc Regulatory News (CAKE)

Patisserie Holdings PLC ('the Group')

Interim results for the six months ended 31 March 2018

Patisserie Holdings PLC, the leading UK branded café and casual dining group, today reports its interim results for the six months ended 31 March 2018

Financial summary

* EBITDA is calculated as operating profit before depreciation and amortisation.

Highlights

· Group revenue of £60.5m up by 9.1% (2017: £55.5m)

· Gross profit of £47.1m up by 8.7% (2017: £43.3m)

o Gross margin of 77.8% (2017: 78.0%)

· EBITDA of £13.6m up by 11.6% (2017: £12.2m)

o EBITDA margin of 22.5% (2017: 22.0%)

· Pre-tax profit of £11.1m up by 14.2% (2017: £9.7m)

· Operating cash flows of £11.9m (2017: £9.3m) with EBITDA cash conversion of 108% (2017: 96%)

· Strong balance sheet position with net cash of £28.8m (2017: £16.2m)

· 10 new stores opened to date all funded from operating cash flow with a strong pipeline

· Trading from 206 stores

· Diluted earnings per share of 8.92 pence up by 13.2% (2017: 7.88 pence)

· Interim dividend up 20% to 1.44 pence per share (2017: 1.20 pence per share)

Luke Johnson, Executive Chairman, said

"The group has delivered a strong set of results in a sector which has well documented challenges. Our vertically integrated and flexible business model enables us to deliver consistent profits with our affordable treats remaining popular with our very diverse customer base. We remain focused on organic growth and with a strong balance sheet continue to assess acquisition opportunities which will have a strategic and cultural fit."

Enquiries

Chief Executive's Review

Results

I am delighted to announce our interim results for the six months ended 31 March 2018, during which we continued to deliver growth in revenues and profit.

Revenue for the period was £60.5m, an increase of £5.0m or 9.1% (2017: £55.5m). Revenue from our largest brand, Patisserie Valerie, was up £5.4m or 13.2% to £45.8m (2017: £40.4m). Due to a store closure in the prior year, revenue from our other brands was down £0.3m or 2.6% to £14.7m (2017: £15.1m).

EBITDA for the period was £13.6m, an increase of £1.4m or 11.6% (2017: £12.2m) and pre-tax profit was £11.1m, an increase of £1.4m or 14.2% (2017: £9.7m).

Basic earnings per share were 8.98 pence per share (2017: 7.95 pence per share) and diluted earnings per share were 8.92 pence per share (2017: 7.88 pence per share), an increase of 13.0% and 13.2% respectively.

The period started well with a good build up to Christmas with our new festive range, including the limited edition Reindeer slice, selling well. Sales were slightly hampered by the adverse weather conditions. However thanks to our vertically integrated supply chain and the flexibility of our workforce we were able to limit the impact on profit. We finished the period strongly with a record Mother's Day weekend and a good lead up to Easter.

The group achieved strong sales from our website of £2.6m in the period, up £1.0m or 62.5% (2017: £1.6m). This was driven by our social media strategy and the relaunch of our website in February 2018, which provides customers with an enhanced user experience, including video imaging of our products, tablet/mobile compatibility and a streamlined checkout process. The revamped website is proving successful.

We established a new product development team towards the end of the prior year and are currently trialling a number of initiatives in selected stores including a new menu, a new savoury range and in store bake-off of morning goods. In January we also launched Slice of the Month which is proving popular. All of these new product initiatives are helping to drive incremental sales.

Our partnership with Sainsbury's continues. We have a supply only agreement for a limited Patisserie Valerie range to be sold at Patisserie Valerie branded counters within Sainsbury's stores. We currently have counters in 31 Sainsbury's stores in addition to 14 click and collect locations. We will shortly be entering a further 10 Sainsbury's stores.

We continue to work hard to control our gross profit margin which remained at 77.8% (2017: 78.0%). We benefitted in the period from a number of contract renegotiations, and in some cases we switched suppliers to mitigate inflationary pressures, along with production efficiencies from investment in our bakeries in the prior year. We remain proactive in managing our cost base and in some cases we have seen a reduction in some of our core ingredient prices.

Labour inflation now has the biggest impact on profit with National Minimum Wage, National Living Wage and Apprenticeship Levy costing an additional £0.3m in the period. Ongoing labour inflation is built into our budgets and is being absorbed as the group continues to grow. Staff retention and wellbeing is a key area of strategic focus for us and we are investing in training, rewards schemes and career planning for our employees.

Rent and rates reviews added £0.2m of cost in the period and we have now had rent reviews at all of our key sites. We also made a number of smaller savings on various non-direct spends which had a cumulative positive impact of £0.4m.

Estate Development

We have successfully opened 10 new stores to date and are on track to deliver the Board's annual target of 20 new openings.

The openings included five new geographical locations at Basingstoke, Wigan, Cwmbran, Chesterfield and Carlisle. In addition we opened new stores in Glasgow, Liverpool, Cardiff, Milton Keynes and Sutton Coldfield.

The new store in Glasgow is our 13th store in Scotland and the addition of stores in Cwmbran and Cardiff takes the number of stores in Wales to four.

Our new openings are performing in line with management's expectations.

We currently have builders on site in three locations; Lancaster, Battersea and Belfast Forestside. These stores are expected to be open by the end of May 2018. The Belfast Forestside opening will be our fifth store in Ireland and will be serviced from our bakery in Belfast. All of the Irish stores continue to perform strongly and provide management with growing confidence in the prospects for the region.

In the period we closed two stores following lease expiries and we exited one concession arrangement.

All of our new openings are profitable from the first week of trading and are all funded from operating cash flows. We have an exciting pipeline which is well developed.

We remain confident in our ability to grow our estate and continue to believe that there is a large addressable market in the UK and Ireland.

Cash flow & Financing

In the period we generated operating cash flows of £14.7m, up £2.9m or 24.9% (2017: £11.7m). We paid £2.8m in corporation tax and spent £5.0m in capex on our estate leaving free cash flows of £6.8m, up £1.9m or 40.0% (2017: £4.9m). We returned £2.4m to shareholders in dividend payments and generated £2.9m of proceeds from the exercise of employee share options resulting in net cash at the end of the period of £28.8m (2017: £16.2m).

Our experienced Estates team continues to deliver high quality new stores at an average expenditure of £0.25m per site, which continue to deliver payback in less than 24 months.

The final dividend for the year ended 30 September 2017 of 2.4 pence per share or £2.4m in total was paid to shareholders in the period. The Group remains cash generative and the Board has declared an interim dividend for this financial year of 1.44 pence per share representing a 20% increase year on year. The interim dividend will be paid on 13 July 2018 to shareholders on the register at the close of business on 1 June 2018.

Our business model converts profit to cash efficiently and delivers consistent and predictable cash flows. The Group continues to be funded from operating cash flows and reserves, and with a cash balance of £28.8m at the period end, is well positioned to make strategic acquisitions should appropriate opportunities arise.

Current trading and outlook

Trading after the period end is in line with management's expectations. We have just launched our new summer menu which includes a new range of ice creams and iced lattes. Three new stores are due to open shortly and with a well-developed new store pipeline I am confident of a good second half to the year.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 MARCH 2018

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET

31 MARCH 2018

Registered no. 08963601

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 MARCH 2018

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTH ENDED 31 MARCH 2018

1. General information

Patisserie Holdings plc (the 'Company') and its subsidiaries (collectively the 'Group') operate in the casual dining sector offering cakes, pastries, snacks, meals and hot and cold drinks across the UK.

The Company is a public limited company which is listed on the AIM of the London Stock Exchange and incorporated and domiciled in England and Wales. The registered office of the Company is 146 - 156 Sarehole Road, Birmingham, B28 8DT. This document along with copies of the Annual Report and Accounts may be obtained from the registered office or via the Investor section of the Company's website at www. patisserie-valerie.co.uk

2. Basis of preparation

The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union and in accordance with IAS34 - "Interim Financial Reporting". The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Group's latest annual audited financial statements.

The financial information for the year ended 30 September 2017 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2017 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2017 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The condensed financial statements have been prepared under the historical cost convention and financial information is presented in sterling and has been rounded to the nearest thousand (£'000) unless otherwise stated.

3. Segmental information

Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision Maker ("CODM") comprising the Board of Directors. During the six month period to 31 March 2018, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment profit or loss.

The segmental information is split on the basis of those same profit centres, however, management report only the contents of the consolidated statement of comprehensive income and therefore no balance sheet information is provided on a segmental basis in the following tables.

The Group's segment operating profit reconciles to the Group's profit before tax as presented in its financial statements as follows:

4. Income tax expense

The tax charge has been calculated by reference to the expected effective current and deferred tax rates for the full financial year to 30 September 2018 applied against the profit before tax for the period ended 31 March 2018. The full year effective tax charge on the underlying trading profit is estimated to be 19.0% (2017: 19.5%).

5. Earnings before interest, tax, depreciation and amortisation (EBITDA)

6. Earnings per share

7. Property, plant and equipment

There were no assets held under finance leases during the period.