Since life began, humans have celebrated important family occasions, whatever the economic climate. Sure fewer watches, shoes or designer clothes may be sold during recessions.
Yet equally, people tend to still treat themselves for weddings, Christmas, Eid & birthday parties, especially as these events become even more significant.
One way of benefiting from this enduring resilience is via Cake Box (CBOX ) (100% franchiser) - the UK’s ‘go-to’ provider of affordable, fresh eggfree celebration cakes.
Today the firm said that it has enjoyed an “exceptional FY22” thanks to 31 new store openings (24 LY) and digital sales up +27% LFL - alongside the roll out of kiosks at shopping centres (20 total) & Asda outlets (15).
Altogether driving turnover up 50% YoY to circa £32.8m (or 12% LFL), adjusted PBT in line with expectations (Shore Capital £7.0m vs £4.7m LY) and Mar’22 net cash to £5.2m (£3.6m LY), or 13p/share.
Elsewhere, input cost pressures are being well managed too, whilst internal controls (eg reporting) have already been materially improved.
So what does the future hold?
Here further expansion is planned for FY23, as franchisees (53 deposits) continue to open new outlets (185 Mar’22), with Shore Capital expecting FY23 adjusted EPS & EBITDA of 16.3p & £8.6m respectively on sales of £35.1m.
Meaning, I would conservatively value the stock on a modest 12x-15x forward EV/EBITDA multiple (see sector comparatives) – equivalent to a theoretical 275p-340p/share vs 195p currently.
What's more, the bull case suggests even greater upside potential, based on CBOX’s consistently strong track record.
In fact, I suspect revenues might even tip £65m by FY27 (re further UK & possibly international expansion too). Which assuming 22% EBIT margins & a 20x multiple - would hypothetically generate a 715p/share figure, representing a 5-year CAGR of almost 30% pa.
CEO Sukh Chamdal adding "We have delivered another record performance, demonstrating the continuing appeal of our customer & franchisee proposition. With a strengthened team & investment in our operations & processes, we have all the right ingredients to continue to sustainably grow the Cake Box customer base, brand & family."
