Cake Box on track after first half of growth

Fresh cream cake retailer Cake Box reported a 6.8% improvement in first-half revenue on Tuesday to £18m.

The AIM-traded company put the growth down to the opening of 20 stores in the prior year and the addition of nine new stores in the first half.

Its trading momentum for franchise store sales improved, with a notable 6.2% increase in like-for-like sales growth during the six months ended 30 September.

Gross margins also saw an uptick, rising to 49.6% from 47.7% in the prior year due to eased input cost increases and enhanced yield benefits in distribution centres.

Cake Box said its financial position remained robust, with net cash increasing to £5.9m from £4.2m in the first half of the 2023 financial year.

That solid financial position allowed the company to increase its interim dividend by 10.5% to 2.9p per share, reflecting a commitment to a progressive dividend policy and continued strong cash generation.

Operationally, Cake Box expanded its franchise stores to 214 as of 30 September, compared to 196 in the prior year period.

That included the addition of nine new franchise stores entering new geographies, such as Liverpool, Cambridge, and Cheadle.

The firm also invested in its growth platform, launching a new website in June and implementing a new customer relationship management (CRM) system in May.

Furthermore, Cake Box secured a £2m co-funded annual marketing fund with its franchisees to drive sales growth, raise brand awareness, broaden its customer base, and evolve the brand.

Cake Box also developed new products during the period, successfully launching a premium Mango range during the summer.

Despite cost pressures, the company said it effectively managed its expenses, mainly through established supplier relationships.

Regarding franchise store highlights, Cake Box reported a 12.9% increase in sales, reaching £36.1m.

Total franchise sales, including kiosks, rose 10.7% to £38.5m, and franchisee online sales increased 15.1% to £7.7m.

The number of multi-site franchisees also grew to 46, compared to 43 in the first half of the 2023 financial year.

Looking ahead, Cake Box reported positive trading since the half-year period, with total franchise sales up 5.1% in October compared to the same period last year.

Online sales also increased 12.8% year-on-year.

The company said it was on track to deliver a full-year performance in line with market expectations.

“We have performed well in the first half of the year, generating strong growth across key financial metrics and making further progress on our strategy,” said chief executive officer Sukh Chamdal.

“We achieved double-digit increases in profits, cash and dividends as raw material and input costs stabilised, and we started to benefit from the recent investments we have made in the business to drive growth.

“As outlined in our recent capital markets event, our new website has increased online sales and improved customer experience and loyalty, while brand awareness continues to increase as a result of the success of our marketing campaigns including national radio and multi-channel expansion.”

Chamdal said the firm’s franchise proposition remained attractive, with nine new franchise stores opening over the period and a strong pipeline of future openings.

“We continue to engage with property consultants to identify target growth areas, which will help us reach our 400-store target over the medium term.

“We are also excited to launch our new Cake Box identity in the second half of the year, which will broaden the appeal of our brand to new customers and demographics, amplifying the opportunity for new store openings.”

While the board was mindful of the ongoing macroeconomic uncertainty, Sukh Chamdal said customer demand remained robust, demonstrating the brand’s appeal.

“We enter the second half with momentum and are on track to deliver full-year performance in line with market expectations.

“The board remains confident in the company’s long-term prospects, underpinned by our ambitious growth strategy, the attractiveness of the brand and focused investment programme.”

At 1140 GMT, shares in Cake Box Holdings were up 3.89% at 145.45p.

Reporting by Josh White for Sharecast.com.