Cake Box Holdi. Regulatory News (CBOX)

14 April 2020

Cake Box Holdings plc

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

Full Year Trading Update

A resilient business with an attractive offer to consumers and franchisees

Cake Box Holdings plc, the specialist retailer of fresh cream cakes, today announces a trading update for the full year ended 31 March 2020.

Full year trading performance

In the period to 8 March 2020, trading continued to be strong across the Group, with like-for-like sales growth of c.5.1% in franchise stores.

However, the Group saw a reduction in sales across its franchise stores as the COVID-19 crisis developed during the remainder of March 2020. Following updated UK Government advice on 23 March 2020, we decided to close all of our franchise stores as we looked to protect our staff, franchisees and customers and also to help relieve any further pressure on our NHS. As a result of this impact towards the end of our reporting period, total like-for-like franchise store sales growth for the full year to 31 March 2020 was c.2.0% (FY19: 6.5%).

The Group expects to report revenue for the year of c.£18.7m, up c.10% compared to the same period last year despite the disruption experienced in March 2020 from COVID-19. The Board expects adjusted profit before tax to be in the range of £4.1 - 4.3m (FY19: £4.0m). This figure excludes a £1.4m uplift from the freehold revaluation of the Group's Enfield warehouse and head office which is expected to be included in the Group's statutory numbers.

The Cake Box proposition remains attractive to new and existing customers across the country, offering personalisation, convenience and serving dietary requirements at an appealing price point. The Group is confident that consumers remain loyal to Cake Box and will continue to be so following the lifting of restrictions.

COVID-19 update and support for franchisees

Further to our announcement of 24 March 2020, the Group is exploring all possible routes to support franchisees amidst the current crisis. In particular, we are assisting them in applying for the Government's Retail, Hospitality and Leisure Grant which will provide a significant level of support. We are also providing franchisees with advice and assistance relating to the furloughing of staff, whilst providing flexibility in certain payment terms where appropriate. In addition, we welcome the UK Government announcement that our franchisees will not have to pay business rates for 12 months.

As a result of the above, noting that our franchise stores have relatively low levels of rent and overheads, we are very confident that our franchisees will be able to navigate this unprecedented period. The Group has very healthy stock levels and therefore is well placed to support the reopening of its franchise stores as soon as UK Government advice allows.

At Group level, we are applying to the Government's Job Retention Scheme in relation to Head Office, Warehouse and Bakery staff that have been furloughed due to being unable to work in the business during the current crisis. We are also taking all other appropriate cost saving measures.

New store openings and pipeline

The Group opened 20 new high street stores in the year, including Cardiff, Harlow and Portsmouth, whilst also expanding the successful initial small trial of shopping centre kiosks to 12 locations, operated by local franchisees. The Company ended the period with 133 franchise stores.

The Group has a strong pipeline of new franchise store openings, although there may be an impact on the timing of openings as a result of COVID-19, as there has been during March 2020.

Balance sheet and dividend

As reported on 24 March 2020, Cake Box has a strong balance sheet with a current cash balance of c.£4m. The Group's only debt is a mortgage of £1.6m secured by its freehold properties in Enfield and Coventry.

The Group operates a franchise model and therefore has a relatively low and flexible cost base. Following the cost saving measures described above, the Group expects to have a monthly cash burn of c.£200k while its franchise stores remain shut. The Board is therefore very comfortable with the Group's current cash level and liquidity despite the closure of its franchise stores.

Despite the strength of our balance sheet, the Board feels that it is not appropriate to recommend a final dividend for FY20 with the Group's full year results. At a time when there is so much uncertainty, it seems inappropriate to use the cash for anything other than protecting the financial strength and resilience of the business. The Board recognises the importance of income to many of the Group's shareholders and will continue to assess when it is appropriate to recommence dividend payments.

Full year results date

The Group will confirm the date for its full year results for the 12 months ended 31 March 2020 in due course.

Sukh Chamdal, Chief Executive Officer, commented:

"Our first priority remains the health, safety and wellbeing of our colleagues, franchisees, customers and the communities in which we operate across the country. Whilst this is an uncertain and difficult time for the country, we are incredibly proud of the efforts of our franchisees who have been sending thousands of our cakes to front line workers to give them a slice of comfort during these challenging times.

"Whilst the current closure of our franchise stores has and will continue to have an impact on performance, we are confident that our unique customer offer will continue to resonate over the long term. Life is somewhat on hold for now, but when we emerge from this we will still have birthdays, marriages and numerous other occasions small and large to celebrate up and down the country.

"We're equally confident that our proposition to potential franchisees remains attractive. We have a strong pipeline in place to help continue to grow the Cake Box family and are developing new, innovative ways to work with our existing partners, including the expanded trial of our shopping centre kiosks. With our strong balance sheet, the actions we are taking to reduce costs and our resilient business model, we remain confident in the Group's future prospects."

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