Patisserie Holdings Plc Regulatory News (CAKE)

Patisserie Holdings PLC ('the Group')

Interim results for the six months ended 31 March 2017

Patisserie Holdings PLC, the leading UK branded café and casual dining group, today reports its interim results for the six months ended 31 March 2017

Financial summary

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

Highlights

· Group revenue of £55.5m up by 11.0% (2016: £50.0m)

· Gross profit of £43.3m up by 10.6% (2016: £39.2m)

o Gross margin of 78.0% (2016: 78.3%)

· EBITDA of £12.2m up by 15.6% (2016: £10.6m)

o EBITDA margin of 22.0% (2016: 21.1%)

· Pre-tax profit of £9.7m up by 15.7% (2016: £8.4m)

· Operating cash flows of £9.3m (2016: £8.9m) with EBITDA cash conversion of 96%

· Strong balance sheet position with net cash at 31 March 2017 of £16.2m (2016: £8.9m)

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

· Trading from 192 stores

· Diluted earnings per share of 7.88 pence up by 19.2% (2016: 6.61 pence)

· Interim dividend up 20% to 1.20 pence per share (2016: 1.00 pence per share)

Luke Johnson, Executive Chairman, said

"We have delivered another strong set of results with growth in both revenues and profit and excellent cash conversion despite the challenging market conditions and the current inflationary environment. We have opened 10 new stores including our first international store in the Republic of Ireland, and the pipeline to the end of the year to achieve our target of 20 new store openings is on track. With a strong balance sheet and an experienced management team, we remain operationally focused on the organic delivery and continue to assess acquisition opportunities. Accordingly I am confident of delivering a successful second half of the year and beyond."

Enquiries

Luke Johnson, Executive Chairman

Paul May, Chief Executive Officer

Chris Marsh, Finance Director

Nomad and Broker

Bruce Garrow

Chris Connors

Ben Griffiths

Financial Public Relations

Dan Yea

Chief Executive's Review

Results

In the first half of the year, we have delivered another strong performance, both financially and operationally, due to our robust operating model, strong management team and appealing brands.

Revenue for the period is £55.5m, an increase of £5.5m or 11.0% (2016: £50.0m). EBITDA is £12.2m, an increase of £1.6m or 15.6% (2016: £10.6m) and pre-tax profit is £9.7m, an increase of £1.3m or 15.7% (2016: £8.4m).

Basic earnings per share is 7.95 pence per share (2016: 6.68 pence per share) and diluted earnings per share is 7.88 pence per share (2016: 6.61 pence per share), an increase of 19.0% and 19.2% respectively.

Revenues from our principal brand, Patisserie Valerie are £40.4m, up £5.5m or 15.7% (2016: £35.0m) and revenues from our other brands are £15.9m, up £0.1m or 0.6% (2016: £15.8m).

Revenue from our website continues to grow with digital sales in the period of £1.6m, up £0.2m or 14.3% (2016: £1.4m). Our Cakeclub membership increased by 22,000 members in the period, up to 383,000, with an ever increasing social media following.

Our seasonal ranges performed particularly well in the period with sales from our winter menu up over 160%, we sold over 103,000 mince pies and our new festive afternoon tea range sold over 26,000 units.

Earlier this year we ran a competition, inviting customers to design a custom gateau. We received over 11,000 entries and the chosen winner was named the Madame Valerie Gateau. The Gateau contains chocolate layers, caramel cream and honeycomb pieces and was launched for general sale in January 2017. The Madame Valerie Gateau has become our best-selling online 8" gateau with the corresponding slice becoming our fifth best seller instore.

In April, we entered into a 12 week supply only trial with Sainsbury's. The arrangement is to supply 12 nationwide Sainsbury's stores with Patisserie Valerie product which is being sold instore from Patisserie Valerie branded counters at Patisserie Valerie price points.

In the first half of the period, inflation on food costs was high, however, we are now seeing prices stabilise with the majority of core ingredients now at normalised levels. We have actively mitigated inflationary pressures resulting in only a minor impact of 0.3% on our gross profit margin which was 78.0% for the period (2016: 78.3%). We are continually working on our supply chain to ensure we buy at the best market prices and have fixed price contracts on a number of key lines. With further improvements in our supply chain and operational gearing from the growing group, we expect our gross margin to be broadly constant to the end of the year.

Pay rates continue to increase from the impact of both National Minimum and National Living Wage. However, with more effective rostering in stores, as well as making some minor central changes, we have limited the impact of pay pressures whilst maintaining an excellent customer experience.

Additional wage increases implemented in April 17 with the next stage of the National Living Wage increase will have an impact of approximately £0.5m on our wage bill. Again with more effective rostering and other areas of scale benefits that will come through in the second half of the year, we would hope to mitigate much of this increase.

Other costs have remained relatively benign with no material rent increases and the change in Business Rates from April 2017 likely to be neutral across our nationwide estate.

Estate Development

We continue to target 20 new store openings per year and in the period to the date of our results announcement have opened 10 new stores, which are trading strongly, and 2 closures due to leases expiring. The openings are a mixture of counter and full menu offerings with locations ranging from high-streets, retail parks and concession arrangements.

In the prior year we opened our first store in Belfast, Northern Ireland, and trading to date has been excellent. The store is fitted with a bakery to support at least a further 10 store openings. Following the success of the Belfast store, in the period we opened one additional store at Castle Lane, Belfast.

We have also opened our first International store in Blanchardstown, Republic of Ireland and the encouraging, albeit early, success in this market has highlighted to management that the brand has international potential.

In the period we opened our first store under our Philpotts brand since its acquisition in 2014. The store is located in Manchester's financial and professional services hub at Spinningfields. Sales to date have been promising.

Other notable openings in the period include Dundee, which is our 11th store in Scotland, and Ashford Kent which is located on the McArthur Glenn designer complex. Performance at all of our designer outlet centres continues to remain strong.

All of our new openings are profitable from the first week of trading and are all funded from operating cash flows. The new store pipeline is healthy giving confidence on our target of opening a total of 20 new stores for the full year.

We continue to believe there is considerable scope to expand the footprint of our estate and remain confident of the large addressable market in the UK and Ireland.

Cash flow & Balance sheet

The Group maintains a strong balance sheet which is funded from operating cash flow and reserves and it is the reliability and predictability of the strong cash generation that is so manifest in the business model. In the period the Group generated operating cash flows of £11.7m, up £1.5m or 15.2% (2015: £10.2m), £2.5m was used to make income tax payments and £4.4m was invested in capital expenditure leaving free cash flows of £4.9m (2015: £4.5m).

We invested £2.9m in new stores and £1.5m in refurbishment of the existing estate or additional bakery or fleet facilities. The return on investment from our stores remains strong with the majority of stores having a payback period of less than 24 months and the average remains 23 months.

In the period, the final dividend for the year ended 30 September 2016 of 2 pence per share or £2.0m in total was paid to shareholders. The Group remains cash generative and the Board has declared an interim dividend for this financial year of 1.20 pence per share representing a 20% increase year on year. The interim dividend will be paid on 7th July 2017 to shareholders on the register at the close of business on 2nd June 2017.

Net cash at the end of the first half is £16.2m (2015: £8.9m) and the group is well positioned to make acquisitions of portfolios of stores to convert to the Patisserie Valerie brand, and acquisitions of other brands which will add value to the Group.

Current trading and outlook

Performance in the six weeks after the period end has been good with a strong Easter period. We are on track with our roll-out programme and have some exciting new locations for the remainder of the year. We continue to react positively to changes in the market place and I am confident we are well positioned to deliver another period of good growth in the second half of the year.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 MARCH 2017

CONDENSED CONSOLIDATED BALANCE SHEET

31 MARCH 2017

Registered no. 08963601

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 MARCH 2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTH ENDED 31 MARCH 2017

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 Alternative Investment Market (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 2016 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2016 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2016 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 2017, 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 2017 applied against the profit before tax for the period ended 31 March 2017. The full year effective tax charge on the underlying trading profit is estimated to be 19.5% (2016: 20.0%).

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.