Patisserie Holdings serves up sweet profit and cash flow

Patisserie Holdings served up a bigger slice of half-time profits as the operator of the Patisserie Valerie chain demonstrated admirable discipline to widen margins in spite of the increased wage costs.

Revenue for the six months ended 31 March of £50.0m was a 14% increase on the same period last year.

A net 11 Patisserie Valerie outlet openings were added to the eight in the second half of last year to take the total to 126, all funded from operating cash flow in line with strategy. Including all brands, there are now 177 stores.

Revenue under the Valerie brand was up 21.1% to £35m, with Druckers and Baker & Spice copntributing £9.1m (2015: £8.7m), wholesale bakery Flour Power City £1.8m (£1.6m), with only premium sandwich retailer Philpotts's sales falling, to £4.9m from £5.0m partly due to an earlier Easter period and partly due to a focus on higher margin corporate sales.

Operating profits of £10.6m were up 21%, with pre-tax profit rising almost 21% to £8.4m and basic earnings per share up 21/5% to 6.68p.

Operating cash flows of £8.9m in the period fed through to a balance sheet position at the end of March of £8.9m, up from £3m at the year end.

Following the maiden final dividend paid for the full year under the progressive dividend policy, an interim dividend of 1p was declared as icing on an already appetising set of financials.

Broker Canaccord said PBT was £0.2m ahead of its forecasts, attributing the Valerie brand helped by the "ongoing success of afternoon tea and the growing success of create-a-cake".

But analysts left full year PBT forecasts unchanged to reflect the cost pressures derived from the introduction of the National Living Wage and, to a lesser extent, higher central London rents, which will be offset by an 80 basis point increase in gross margin from increased buying power.

"The ongoing build up of cash on the balance sheet leaves Patisserie increasingly well placed to step up the rate of new store openings or make bolt-on acquisitions should the right opportunities present themselves."