Cake Box’s interim results reconfirmed the company’s resilience in the face of extremely adverse circumstances for UK High Street retailers. Cake Box reported only single digit declines in sales revenue and profits in the period as the business benefited from its flexibility, financial strength, and an ongoing customer commitment to celebration. In our view, celebration’s resilience as a category, product innovation, increased outlets, and a commitment to “steady, sensible and sustainable” growth, augur well for further revenue expansion. Yet the group’s valuation remains attractive.
Cake Box’s capital light model and high degree of growth visibility implies potential to grow ahead of expectations. In our view, the company veers towards under-promising and over-delivering which is positive for valuation multiples and potential for forecast upgrades alike. Based on 4.0x FY2022 sales and a 20.0x FY2022 P/E ratio, we consider 250p as an appropriate fair value for the shares.
