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Profits have crumbled at fresh cream cakes retailer Cake Box as rising ingredients costs and low consumer confidence put pressure on the group’s bottom line.
Revenues in the first half to 30 September increased 2.1% to £16.8m as it opened new franchise stores and increased prices, but franchisee like-for-like sales declined 1.1% as the group came up against a strong performance a year ago when the pandemic boosted the business.
Cake Box also blamed the unusually hot and long summer for depressing consumer demand for cream cakes, but said trading improved toward the end of the half, with like-for-like sales growth of 3.6% in September and 4.6% in October as momentum continued in the second half.
EBITDA in the first half fell 32.4% to £2.8m and pre-tax profits declined 45.1% to £2m as the group experienced significant increases in raw material costs, including cake mix and fresh cream.
The group absorbed some of these costs, but passed some onto franchisees and also made “considered increases” to retail prices.
It also invested in its Enfield bakery with new state-of-the-art production facilities for cheesecakes, pushing up admin costs for the half.
CEO Sukh Chamdal said: “Although revenue increased, trading in the first half of the period was against a very strong comparative period last year, and was impacted by exceptionally hot weather, which went on for a far longer period than normal.
“In addition, higher levels of international travel in July and August were coupled with the rising cost of living and inflation. Once the summer holiday period finished, we began to see a recovery in our sales, alongside the continued growth of our franchise store estate.”
Cake Box ended the half with 196 franchise stores in operation and 33 kiosks in supermarkets.
Chamdal added: “Encouragingly, the improvement in trading seen towards the end of the half year has continued into October. Whilst the board remains cautious in light of the uncertain economic climate and the unpredictability in consumer spending, the group’s current trading is on track to achieve full-year market expectations.”
He said the board was confident in Cake Box’s “significant potential” over the long term, “underpinned by its attractive customer and franchisee proposition and bolstered by ongoing investment in the group’s functions and capabilities, and a strengthened leadership team”.
The group also increased the interim dividend by 5% to 2.6p per share.
Shares in the group jumped 7.1% to 116.8p despite the fall in profits on the optimistic outlook.
Morning update
PZ Cussons has agreed a new £325m credit facility, provided by a syndicate of lenders.
It incorporates a term loan and revolving credit facility structure, with maturity dates of up to November 2028, and replaces the existing £325m RCF facility due to expire in November 2023.
The facility includes a pricing structure linked to PZ Cussons’ new sustainability framework ‘Better For All’, incorporating ESG key performance indicators focused on achieving B Corp certification, reducing use of virgin plastic packaging and reducing carbon emissions.
CFO Sarah Pollard said: “We are delighted to announce this refinancing, demonstrating our commitment to embed our sustainability framework into all parts of our business, while achieving attractive commercial terms.
“We are grateful for the support of our lending syndicate in this highly innovative facility.”
The FTSE 100 started the week on a positive, rising 0.5% this morning to 7,352.46pts.
Alongside Cake Box, PZ Cussons is also up 0.5% to 205p, while other risers include Naked Wines, up 4.7% to 104.1p, Nichols, up 2.8% to 1,161.7p, Imperial Brands, up 1.9% to 2,032p, and C&C Group, up 1.9% to 179.8p.
THG leads the early fallers, down 4.2% to 75p.
This week in the City
Fmcg newsflow on the markets continues this week, but all eyes will be on chancellor Jeremy Hunt for the much-anticipated autumn statement on Thursday.
Tomorrow kicks off with the latest Nielsen grocery till roll figures, with annual results also published by tobacco giant Imperial Brands and interims by logistics group Wincanton. In the US, Walmart issues quarterly results.
Premier Foods will report half-year figures on Wednesday, with a trading update from Target in the US.
The week ends with the latest GfK consumer confidence index and ONS retail sales for October.
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