Cake Box Holdings (LSE:CBOX) — Full Year Results Presentation

0:00 Good morning, everybody. I'm Sukha Chandar. I'm the CEO of the Egg Free Kickbox. I'm joined today by Michael Botha, our CFO, who joined the business and our board in April this year. I would like to thank Martin Blair for stepping up as an interim CFO over the past year ahead of Michael joining the business. As I mentioned at the time of our interim results, Michael joined from Domino's Pizza where he worked most recently as CFO of one of the largest franchise groups in The UK and Ireland. He has already made a significant contribution to the business and you'll hear from him shortly as he goes to through the financials after I've given you an overview of the full year performance.

0:48 After Michael has been through his section, I will then update you on our strategic and operational progress before concluding with our current trading and outlook. It'll be exactly five years tomorrow since we listed on AIM and I'm proud of what we have achieved over that time. We have grown the business significantly, welcoming many new franchises into the CAKE BOX family and expanding our following across The UK. As our businesses have grown over the pay, so have the payments we've made each year to our shareholders through our progressive dividend policy, and as we look ahead to the next five years and beyond, I would like to thank them for their ongoing support. Later in the year, we plan to host a capital markets event which will go into more details on our strategy for the next phase of our growth.

1:41 We look forward to welcoming all our shareholders then.

1:48 Turning back to the year just gone, although the last year presented a number of challenges, CAKE BOX remained resilient and trading has been robust, with a significant bounce back in H2, demonstrating the continued appeal of our products and proposition. Our franchise model remains attractive and we are pleased to have continued to deliver store growth both with new and existing franchisees. Crucially, we have been investing to underpin our future growth with a major investment in our distribution centres to facilitate increased levels of demand as a result of store expansion, and reflected our confidence in our strategy and our business model, we again increased our dividend.

2:36 We also continue to grow across a number of other key metrics as you can see on this slide leaving us well positioned for the future. I will expand on that shortly. Before I do, I will hand over to Michael who will take you through the financials in further detail. Michael? Well, thank you very much, Sikh and good morning to everybody. Sikh, thank you for the kind introduction and it's great to finally be on board and working alongside you and the fantastic team we have in our building at CAKE BOX. 2023 was a classic year of two halves, with macroeconomic headwinds, extended warmer weather, and the rush to overseas holidays following the lifting of the COVID restrictions. Against this backdrop, the group performed well, growing sales, opening new stores, and increasing the returns to shareholders.

3:27 Franchise sales were up 9.6%, driven by a 1% increase in like for likes and opening 20 new stores. Group revenue was up 5.6% and gross profit 8.5%. As previously reported, underlying EBITDA for the period was impacted by an increase in overheads and the softer sales in half one twenty twenty three. Showing the cash generative nature of the business, our cash increased by 11.9%, which enabled us to declare a full year dividend 6.9% up on the prior year. The group's product sales were in line with the total franchise sales increase of 9.6% for the year. Our margins increased by 1.4 percentage points due to inefficiencies in the distribution centers.

4:15 On this slide, we can see that $2,600,000 of the $6,300,000 increase in franchise sales was due to new store openings. The remainder 3,600,000 was a combination of like for like increase from mature stores. And during the year, we saw a widening of the group's margins due to efficiencies at its distribution centers. Now we've spoken about the stronger half two sales performance that has ensured that our mature franchise sales were positive for the full year. Our half two like for likes were 3.4% positive versus marginally negative like for likes of 1.6% for half one. Now online sales was a real improvement for us last year.

5:02 Our H2 online sales were 10.8% ahead of the first half and 9.1% ahead of the second half of twenty twenty two. Overall, our online sales were 4.1% ahead of 2022 for the full year. In this slide, we can clearly see the improvement year on year following the headwinds during the first half of twenty twenty three and the investment in marketing with a new marketing director, Shay Watkins, and a subsequent increased focus on online marketing channels.

5:43 Our group sales were in line with total franchise sales, excluding new store sales. The new store sales were impacted by opening 11 stores less year on year. Underlying our group EBITDA was 16.9% or 1,300,000 below 2022. As previously reported, this was due to an increase in overheads and the first half sales performance during 2023.

6:21 The group did experience a $1,300,000 increase in gross revenue, driven by an increase in sales at a higher margin rate, which was offset by the increase in overheads, which has been previously reported. Our profit before tax was $5,500,000 which was 28.6 percent down on 2022 due to the reduction in underlying EBITDA. Depreciation and amortization was £100,000 higher than 2022 due to the first full year of the amortization charges for our right of use assets. Our effective tax rate was 22.2, which was above the statutory rate of 19% due to tax rate increases in deferred tax.

7:08 Our EPS ended at 10.59p versus 15.78p for the previous year.

7:19 Our free cash flow was 300,000 above the prior year due to the timing of payment of suppliers at year end. Now our net surplus cash increased by 800,000 in 2023, showing the cash generative nature of the business. 6,000,000 of free cash flow was offset by $2,000,000 CapEx spend and $3,100,000 of dividends paid during the year to shareholders. The 2,000,000 of CapEx spend underpins the future growth of the group. 1,100,000 of the spend was on the distribution center improvements, 400,000 on technology, which was for our website and our new ERP system, and 500,000 was spent on our new distribution fleet.

8:13 Thank you very much. I'll hand you back to Silk. Thank you, Michael. As Michael's slides showed, our franchises have shown incredible resilience over the past year, and this is reflected in our operational highlights. Despite difficult conditions, we again grew our total franchise sales and online sales with our rollout program continuing at pace. We are delighted to open 20 we had opened 20 new CAKE shops this year, including our two hundredth trade in store. And whether our oldest or newest franchise, we've been working with them closely to help them manage the challenges of the inflationary environment while helping them achieve their growth potential. Turning to franchise highlights, I'd like to highlight three things.

9:02 Firstly, our continued growth in online sales to a record 13,800,000. I'll talk shortly about how we plan to further develop this channel to drive growth. Secondly, the record number of 44 franchisees who own multiple store shops, 17 of whom are female owned, they know and understand how CAKE BOX operates and what the brand means. So, we're happy to see them increasing their ambitions and building on their first CAKE BOX successes. And finally, the positive like for like sales growth over the year, a visible demonstration of our resilience against a very tough market backdrop. As we look ahead to our new financial year, we have prioritized five key areas to continue to drive our growth.

9:51 Number one, empowering our franchisees and focus on operational excellence that includes continuing to fine tune cost controls and deliver efficiencies. Number two, we will continue to expand our store estate and provide opportunities for businesses to grow their businesses. Three, we are aiming to become a data rich business and place data in the center of our approach, utilizing e commerce and becoming multi channel. This will help us enhance our marketing efforts, store rollout and maximize growth. Number four, we have made good progress strengthening our leadership team, which includes appointing Michael as our CFO and we'll continue to do so to ensure long term growth. We also commit into improving governance, finance and audit processes.

10:41 But last and by no means the least, the community in which we operate and being a responsible business are core to CAKE BOX. We'll continue to support local initiatives while our ESG committee shapes our ESG agenda. Marketing is closely linked to a number of those focus areas and pivotal to driving our future growth. We have made good progress strengthening our marketing team and have invested more than ever in our digital and e commerce capabilities. This includes a new website which went live in June this year, which will improve customer experience and allow us to capture better data. This data would be key as we become a multi channel business over the next few years supporting our marketing on products, stores and customers.

11:27 We go to the next slide. Using that data or with customers consent, there's a huge opportunity with click and collect both on and offline. This will allow us to gain more customers, retain them for longer by improving the experience and increase their lifetime value. So, in conclusion, FY twenty three was a tough year in several ways, but we have navigated our way through, emerging a stronger business, better prepared for an exciting new chapter of growth. We'll continue to execute our strategy, running up new shops and entering new locations. Our food purchasing has allowed us to maintain value to our customers as not to impact demand. And we have invested in the business to support our future growth platform from marketing through to operations.

12:15 It has been a good start to a new financial year with strong franchise like for like sales growth in the first eleven weeks of the year. And as a result, we are confident in our outlook for the year ahead. As previously mentioned, we look forward to providing a further update on our strategy later in the financial year at a Capital Markets event. I'd like to thank everybody for listening to our presentation.