Cake Box’s preliminary FY2020 results, released today, reconfirmed strong sales growth in FY2020 with scope for an expanded distribution footprint to deliver further sales revenue expansion in FY2021. While the Covid19 lockdown clearly disrupted franchisees’ in-store sales, Cake Box appears well placed to spring back both quickly and with a positive growth trajectory.
Current trading news looks positive. Cake Box was in a position to start re-opening its franchised stores, commencing 18th May. By the end of the month 98% of its stores were open with the added benefit that 75% of these were trading at a level of at least 90% of pre-Covid19 levels. The overall closure period – i.e. time lost to the pandemic – was around 6 weeks. While comprehensive in scope, the company’s safety measures were implemented for an immaterial cost. Importantly, its stores were open in advance of the end of Ramadan celebrations.
Based on the company’s FY2020 figures the company trades on a trailing EV/sales ratio of 3x. We are surprised that this rating is only in line with what we deem to be its franchised food retailer peer group, given the brisk underlying sales growth at Cake Box, plus a robust balance sheet and the benefits of operating with a capital light business model.
