Half-year Report

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

Unaudited Half Year Results for the six months ended 30 September 2020

Sustained recovery in trading in stores and online, with strong cash and dividend growth

Cake Box Holdings plc, the specialist retailer of fresh cream cakes, today announces its half year results for the six months ended 30 September 2020.

Financial Highlights

* EBITDA is calculated as operating profit before depreciation

· The half year includes six weeks during which all stores were closed

· Group revenue up 30% to £8.6m in the 20 weeks to 30 September 2020 (Equivalent 20 weeks FY20: £6.6m)

· Gross margin improved to 48.4% (H1 FY20: 45.0%)

· Interim dividend up 15% to 1.85p (H1 FY20: 1.6p) reflecting strong cash generation with cash from operations of £2.0m (H1 FY20: £1.85m)

· Strong balance sheet at period end with £3.80m net cash (H1 FY20: £1.50m) resulting in repayment of furlough aid and payment of a special dividend of 3.2p in October 2020

Operational highlights

· 139 franchise stores in operation as at 30 September 2020. (As at 30 September 2019: 122)

· Six new franchise stores added in the period (H1 FY20: Nine new franchise stores)

· Online sales increased 51% having successfully launched a new home delivery proposition during the period via Uber Eats, Just Eat and Deliveroo

· Coventry warehouse and distribution facility nearing completion and expected to open in H2

· Strong pipeline of new franchisees and confident of meeting full year opening target of new stores

· Successful launch of new product ranges including gluten free and vegan loaf cakes

Franchisee Store highlights

· Like-for-like sales growth of 12.1% in franchise stores in the 20 weeks to 30 September 2020 (H1 FY20: 6.9%)

· Franchisee total turnover up 23% to £17.1m in the 20 weeks to 30 September 2020 (Equivalent 20 weeks FY20: £13.9m))

· Franchisee online sales up 51% to £4.0m in the 20 weeks to 30 September 2020 (H1 FY20: £2.64m)

Current trading

· As at 20 November 2020, all the Group's franchise stores remained open, with the exception of the majority of shopping centre kiosks

· Positive sales growth maintained in H2, with Franchisee like for like sales at +12.7% in October and +2.0% for the first two weeks of November following the imposition of a second national lockdown

· Following the launch of the Cake Box home delivery service to complement our existing partner offer, online sales have continued to increase in H2, up c.56.5% in the six weeks since period end versus last year

· Five new stores opened since the period end, with encouraging initial trading including a new record first week sales record in Staines

Sukh Chamdal, Chief Executive Officer, commented:

"We have shown considerable resilience during an unprecedented half year period and have emerged a stronger business for it. This is demonstrated by the strength of our trading momentum since reopening the business, with our franchisee like-for-like sales up by 12.1%, including a 51% increase in online franchisee sales, six new franchise stores opened and a record number of new store applications. This gives us confidence that the momentum in our national rollout will return to pre-COVID levels.

"This has all been the result of a monumental effort from our franchisees, who have continued to focus on giving customers the very best service, and a delicious product, in difficult times. With a strong balance sheet and unique proposition, we remain confident of making continued progress in the second half."

For further information, please contact:

Operational Review

Results overview

We delivered a resilient performance in the first half of the year, with trading recovering strongly as our store estate began to reopen from mid-May. This translated into revenue growth of 30% to £8.6m in the 20 weeks to 30 September 2020 (20 weeks to 30 September 2019: £6.6m), with store like for like sales up 12.1% for the same period.

This strong performance was inevitably offset by the first six weeks of the period when the Group's stores were closed due to the UK lockdown, resulting in the Group achieving revenues of £8.6m (HY20: £8.8m) and profits before tax of £1.66m (HY20: £1.74m) over the half year.

Gross margin improved to 48.4% (H1 FY20: 45.0%), driven by a higher proportion of sponge sales where the gross margin is c.70% and a lower number of new stores where the gross margin is c.25%.

The evolving nature of the COVID-19 situation and Government guidance during the period demonstrated the flexibility and strength of our business model, as we were able to work closely with our franchisees to gradually and safely reopen the store estate. We took careful steps to first re-introduce a limited service to customers through our Click & Collect service. We then finalised new ways of working that allowed franchisees to begin to open their stores, ensuring the safety of our franchisees and their employees by putting into place social distancing measures and issuing appropriate personal protective equipment .

By the end of May production had resumed across all sites, where we implemented new health and safety procedures and operated with reduced staffing levels to maintain the appropriate distancing. We continue to keep all measures under review, prioritising the safety of our stakeholders.

Building on the popularity of our online 'Click & Collect' offer, we successfully launched a new home delivery proposition via Uber Eats, Just Eat and Deliveroo, with an encouraging customer response. This has continued to grow in importance amidst the current pandemic and we have seen our online service go from strength to strength as we look for new ways to serve our customers. This helped drive online franchisee sales 51% higher than the same period last year.

We also made further strategic progress, with our new Coventry warehouse and distribution facility nearing completion and expected to open during the second half of the year, complementing our existing facilities in Enfield and Bradford.

Store openings

Six new franchise stores were added to the Group's estate during the half year, bringing the total number of stores to 139. Recent store openings included Chatham, Swindon and Hemel Hempstead. In addition, since the period end, five new franchise stores opened in Staines, Barnsley, Tolworth, Cricklewood and Corby. Staines set a new record by achieving the highest sales in the first week of trading in a new store.

The Group has a very strong pipeline of new franchisees, underpinning confidence that the franchise store rollout programme will return to levels seen prior to the onset of COVID-19. As at 20 November 2020 the Group has received a significant number of deposits for sites across the country.

Warehouse and distribution

Our new Coventry warehouse and distribution facility continued to progress towards completion and is expected to open in the second half of the year It will be Cake Box's third warehouse and distribution facility, with sponge production capability that will enable us to continue to reduce our existing distribution costs and provide a back up to our other production facilities in Enfield and Bradford. This will also create skilled employment opportunities in the area and reduce food delivery miles, supporting our goal of mitigating our environmental impact.

Products

Product innovation remains at the heart of our strategy to retain and gain new customers. We launched several new products into our range, including gluten-free and vegan loaf cakes which have been very well-received by customers across our store network.

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 £5.3m, 66% higher than at the same point last year. The groups debt has reduced by £180k to £1.54m (H1 FY20: £1.72m)

During the period, the Group repaid government monies received for the furloughing of Group level employees who were unable to work during the immediate impact of COVID-19, amounting to £156k. The Group does not plan to make any claims under the Government's Job Retention Bonus.

Dividend

As previously announced on 1 September 2020, the Group declared a special dividend of 3.2p per share, which was paid on 23 October 2020. This figure was the same amount as the intended final dividend for the year ending 31 March 2020 that was subsequently withdrawn on 14 April 2020. Whilst the Group retains a prudent approach to capital management, this decision reflected the Board's confidence in the strength of the balance sheet.

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 1.85 pence per share representing an increase of 15% from last year.

The interim dividend will be paid on 23 December 2020 to those shareholders on the register at the close of business on 4 December 2020. The ex-dividend date is therefore 3 December 2020.

Outlook

Trading during the first six weeks of the second half has been encouraging, with five new franchise stores opened across various UK locations in Staines, Barnsley, Tolworth, Cricklewood and Corby.

The Group's franchise store estate traded well in October, with like-for-like sales increasing +12.7%.

The franchise store estate has remained open following the imposition of another national lockdown on 5 November, with the exception of the majority of shopping centre kiosks. Despite the impact of the lockdown on high street footfall, the Group has maintained positive sales growth in November, with like-for-like sales increasing +2.0% in the first two weeks of the month. Online sales have continued to grow strongly following the launch of the Cake Box delivery service, up 56.5% in the six weeks since the end of September versus the same period last year.

While mindful of the current lockdown conditions and the level of uncertainty around future regional restrictions, we expect to open around 20 new franchise stores during the current financial year. This is underpinned by a very strong pipeline of new franchisees. 

With a strong balance sheet, business model and brand, we remain confident in the Group's future prospects.

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

The notes on pages 10-12 form part of these interim financial statements.

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2020

The notes on pages 10 to 12 form part of these interim financial statements.

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

CAKE BOX HOLDINGS PLC

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

CAKE BOX HOLDINGS PLC

NOTES TO THE INTERIM ACCOUNTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

1. Notes to the Interim Report

Basis of preparation

The consolidated half-yearly financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2020 have been filed with the Registrar of Companies at Companies House. The auditor's report on the statutory accounts for the year ended 31 March 2020 was unqualified, did not include any matters to which the auditor drew attention by way of emphasis and did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006.

The published financial statements for the year ended 31 March 2020 were prepared in accordance with International Financial Reporting Standards as adopted for use in the EU ("IFRS").

The consolidated annual financial statements of Cake Box Holdings Plc for the year ended 31 March 2021 will be prepared in accordance with IFRS. Accordingly, these interim financial statements have been prepared using accounting policies consistent with those which will be adopted by the Group in the financial statements for the year ended 31 March 2021 but do not contain all the information necessary for full compliance with IFRS.

The consolidated half-yearly financial statements for the six months to 30 September 020 have not been audited or reviewed by auditors, pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

The consolidated half-yearly financial statements have been prepared under the going concern assumption and historical cost convention as modified by fair value for property, plant and equipment.

Basis of consolidation

The Group consolidated half-yearly financial statements consolidates the company and its subsidiaries. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

2. Segment reporting

3. Dividends

4. Share Capital

On the 24 July 2019, the Group granted share options under two schemes for 688,036 shares with an exercise price of either £1.65 or £0.01 per share. The options' vesting conditions are based on financial performance over three years. An option pricing model was used to determine the value of these options at the reporting date.

Earnings per share

The basic earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average number of shares in issue. In calculating the diluted earnings per share, share options outstanding have been taken into account where the impact of these is dilutive.