Good afternoon, ladies and gentlemen. Welcome to the Cake Box Holdings PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time. Just using that Q&A tab on the right-hand corner of your screen, please simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during today's call. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. I'd now like to hand over to the management team from Cake Box Holdings PLC. Good afternoon to you.
Good afternoon. Thank you for joining us today. For those of you who don't know us, Cake Box is the U.K.'s largest retailer of fresh cream celebration cakes. I will give you an overview and then hand over to Michael to present the financial performance of the business. After that, I'll give you a strategic and operational update, followed by Q&A. So let's go. Here we are. We are pleased to announce we're pleased with our performance in the first half of the year. As you will have noted, we delivered an increase in revenue, profit, and dividend. Our store opening program is gaining momentum, with more stores open to date than compared to last year. I will speak later about this in the presentation. We've seen continued growth in our online sales, as well as brand awareness, and seen our customer database grow by 40%.
We have entered the second half with ongoing positive trading momentum and expect to deliver full growth for the full year 2025 in line with market expectations. I'll come back and provide further details into our operations. But first, let me hand you over to Michael to present the financial performance of the business.
Thank you very much, Sukh, and just to say as well, we're very happy to have Chay Watkins, our marketing director, with us today as well, who will be available to answer some questions during the Q&A. From a financial point of view, I'll highlight, if you just run through them, and then I can go into a bit of more detail on some further slides. Our Cake Box Group revenue was up 4.3%, so this includes the majority of what we sell to our franchisees, ingredients that they then use to assemble cakes, cupcakes, etc., in the stores to sell on to customers. Total franchise sales, so this is the sales from all our stores, our kiosks, and our web sales to the end customer, was up 7.6%, and that included a like-for-like of 2% for the period. We opened up seven new stores in this half.
Our gross profit went up by 11.5%, which included our gross margin percentage going up by 350 basis points. EBITDA increased by just shy of 12%. Our profit after tax was up just over 16%, and our cash generation and our results have meant that we could declare a dividend of GBP 0.034 per share, which was up 17.2% on the dividend of GBP 0.029 for the same period in the prior year. I'm just going to flip straight on to slide eight, if we can, so this just breaks out a bit more of the sales performance. As I mentioned, the franchise sales went up by 7.6%. Within that, we've got a 2% like-for-like for the mature stores, the annualization of the 20 new stores that opened in the prior year, and then the benefit of the seven stores that we opened in this half.
Our sales, which is broken out below in terms of our product sales, that's all our sales to our franchisees, that went up 2.3%. Our online commission, which we charge to the franchisees, which is used to costs of the website and our e-commerce platform, went up 7.3%. Franchise packages, this is the cost of the building of new stores, which we then invoice onto franchisees, was slightly down, and that was due to us opening up a couple of stores less than the prior year. And then we have our National Marketing Levy, which came into force from August 2023. So we only had six weeks in the first half of the 2024 year versus the full half of this year.
So that meant overall our sales grew from GBP 18 million to GBP 18.7 million, which was 4.3% up. If we then just move on to slide 10, please, Sukh. So just a little bit more color around the like-for-like sales performance. The 2%, which was positive, 2% was up against a strong comparator of 6.2% from the prior year. Just on the right, we can see actually how that materialized during the period. We started off with a tough period trading in the beginning of the year. A couple of factors in that was our franchisees implemented a 6% price rise to the customers, which was to cover the large increase in the labor costs at that time. And then we can see how our customers then reacted to that price increase. We also had timing of Eid from the prior year to this year.
But we can see how that during the half, that like-for-like built and built up to September, the momentum, which has carried on through October, which Sukh will talk about a bit later, and then into November as well. And what's nice to see is we can see some volume coming back into the business through that period into November now as well. On the next slide, just a bit about the online sales performance, which has been fantastic, 16.6% up year on year. And that includes 14% of volume within that 16.6% sales increase. As a percentage of our overall franchise store sales, that's increased from 21.3% in the prior year to 22.9%. And subsequent after September, we're now into above 24%. So again, a really strong performance of what we're doing. And Chay can put a bit more color around that later as well.
We just looked in at our EBITDA analysis, so gross profit was up 11.5%, which is a really strong performance. Within that, when we strip out the impact of the accounting treatment for the National Marketing Levy, we were up to 32.4% versus 30% from the prior year, and that's our strong margins coming through from product in the second half of the 2024 year, which has now come through into half one of this year. What is pleasing as well on this slide is our underlying overhead, so when we strip out our National Marketing expenses, we can actually see that that's grown by 4.2%. If any of you have seen our previous presentations over the last couple of years, we've had a double-digit increase as we built the teams and the capability back at our head office and invested in a different skill set as well.
But that's nice to see now that that has subsided and a slow single-digit increase, which will mean more operational gearing going forward. So overall, our EBITDA was up just shy of 12% for the period. The next slide just shows our gross margins when we break out the impact of the national marketing expenses, which is an underlying there for 32.4% versus 50%. And that's carried on. So we're very comfortable with that level of margin going forward as well. Further down the P&L, we go from EBITDA of just shy of 12% to an increase of PBT of 16.3%. And our profit after tax, as well as our earnings per share, has gone up 16.4%. Then just a bit about our net cash position. We started off the year on GBP 7.3 million, generated GBP 2.5 million of cash, of which we spent GBP 1.6 million on CapEx.
We paid our final dividend for the 2024 year, which is GBP 2.4 million, and then our GBP 200,000, which is the repayment of our leases and our borrowings, which left us with a net cash position of GBP 5.6 million, GBP 300,000 down in the prior year, but this included us paying out GBP 700,000 to buy the land next to our Bradford depot, then just on the next slide, if we look at our capital allocation policy, of the GBP 1.6 million of CapEx, GBP 700,000 went on the land purchase, GBP 400,000 went on the further investment in our IT infrastructure, and then the GBP 500,000 was spent on our current depots, where a large portion of that is just reinvesting in our delivery fleet, and then we also mentioned our dividend in there, which was up 17.2%. Thank you very much. Back to you, Sukh.
Thank you very much for that, Michael. On the next few slides, let me give you a flavor of what we've achieved so far this year and what you should expect from us on the second half of the year. This year, we expanded our store estate, and I'll be talking about this in the next slides. As Michael also said, franchise sales increased by 7.6%, and online sales saw an increase of 16.6%, and we managed cost pressures in a highly inflationary environment, then to our store estate, we opened seven new stores in the first six months in places like Bruges. Since the period end, we have opened another seven new stores. Such is the momentum behind us that we are on course to open more stores in 2025 financial year than expectations. We are finding locations and identifying franchisees and providing financial support if required.
There are three key strands to our marketing model: digital media, data and customer loyalty, and marketing automation. Brand awareness increased by 8%, online visits increased by 40%, and online sales increased by 16.6%. Our loyalty scheme, Cake Club, launched in June 2024 and has 63,000 subscribers. As you can see from the graph, we are trending higher than we were last year. As I said in the previous slide, online sales increased by 16%, and we expect this to continue to grow due to a new marketing initiative we have launched and continue to launch. In 2025, our aim really was to grow our customer database. Our total database has grown by 40% to 517,000 people in the first half of the year. Also, as you can see from the graph on the bottom right, SMS subscriptions were up 48% to 169,000.
The first half has seen some noteworthy successes in the new product launches. We launched the Nutella Range of cakes, cupcakes, and cheesecakes. These have been a resounding success and were the only officially endorsed Nutella cake in the country. We've introduced over 50 new designs and enhanced our popular Red Velvet Range due to increased customer demand. Whilst our focus remains on growing the estate in the U.K., we are testing the international markets. We'll open up a pilot store in Paris, France, in the first quarter of the new financial year. Also, we continue to evaluate M&A opportunities that will grow our customer base. So in summary, we grew our sales driven by online and in-store sales. We're investing in new land for future growth and continue to grow our customer database, which is going to contribute to increased sales in the future.
Before we take any questions, let me give you a bit of guidance on what we expect in the second half of the year and what it means for our full-year performance. Post-period, in the month of October, trading has been very positive. Total franchise sales are up 9.9% and like-for-like sales up 4% compared to the month of October last year. We've opened 14 stores to date compared to 14 new stores we had opened by this time last year. We're on target to achieve at least 25 new stores by the end of the full year. We continue to actively evaluate opportunities that will accelerate our growth and include potential acquisitions. Consequently, we are expected to report continued growth in line with market expectations. Thank you, everybody, for listening. We will now take you to the Q&A.
Excellent. Michael, thank you very much indeed for updating us. Just kind of please ask us to continue to submit your questions. Just using the Q&A tab situated on the right-hand corner of the screen, which is why the guys take a few moments. Just to review the questions you've submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, will be accessible via your Investor Meet Company dashboard. Chay, as you can see, you've had a number of questions submitted ahead of today's presentation and a number throughout it. So firstly, thank you to everybody for your engagement. But if I may, Chay, just hand back to you just to read through those questions, and then I'll pick up from you. Yes?
No problem. Let's kick off. So question number one was around the loyalty scheme. And the question stated, you have to spend a minimum of GBP 10 to get a loyalty point. And is this too much for a customer? And the answer to that is our average spend in store is GBP 22. And the discount the customer gets at the end of four stamps is GBP 10. So what we do is we've set a minimum spend because we don't want to give more than 25% minimum discount at the fourth visit. So it's a control thing to stop people. We want to incentivize people to come back and spend more. So it's frequency of purchase and volume of purchase as well. So hopefully that clears up question number one. And then question number two is around the cakes versus slices.
So cakes are selling, but sales of slices are quite high too. What's your view on that? Sukh, do you want to take that question?
Yes. So when a new shop opens, slice sales are very high because people are trying the new products. And then eventually, they settle into the pattern that we've got, which is 70% cake and 30% slices and cupcakes. And so you'll see that pattern all through the evolution of the shop as it opens, or you get a massive amount of slice sales, then they settle down, the customers have tasted the product, and they're confident enough to buy the cake. And then it settles down into routine as more cake sales and less slice sales.
In terms of just a follow-up question from the slice mix in our business, do you think there's a bigger opportunity to sell more slices to more customers?
Oh, absolutely. So we always look out that at the end of the day, we want purchases. And whether it's the cakes or slices, it really does not matter. And so we put offers out or three slices for GBP 10, or we'll do a box of six cupcakes, etc. So it's all about getting the customer to spend that little bit more. So a customer will buy a cake, and then they'll buy a few cupcakes on the side, or they'll buy a few slices on the side as well.
Okay. The next question, Michael, is for yourself, and it's, "What is the long-term neutral position for profit margins? And when will this be achieved?
In terms of our margins from our product, where we are now, we've seen that increase in the second half of last year and maintained that throughout the first half of this year. In terms of our longer-term sort of EBITDA margins, with our investment into our overheads, we can see that growing into the long term. So at the moment, I can't see where it's actually going to neutralize.
Okay. And then what can we expect from capital allocation in Cake Box going forward? Would you consider any share buyback options?
I think the answer to that is yes, we will. I think at the moment, we are looking at where we can invest to grow the business. As Sukh said, we are evaluating certain opportunities. We're going to be investing in a new Bradford warehouse. And once we're sort of through that sort of cycle, we'll definitely be looking at share buyback as an option.
Okay. I'm just going to expand on the loyalty question because I can see a couple of comments or follow-up questions on whether or not we captured data from the loyalty scheme. And so in answer to that, at the moment, the loyalty scheme is for offline only, so it's in store. And what we do is we capture the customer's data at point of sign-up. And that is to be, in this financial year, to be linked to EPOS so we can track what they purchased. But as soon as that customer comes into the loyalty scheme, they sign up to our CRM system. So we capture all of that customer's data, what they buy online from us, what type of cake, therefore we can remarket to them.
So we do capture the data, and we will capture the data going forward offline once we introduce our new EPOS system. The next question is all around the next 10 years. So where do you see the company in the next 10 years? And considering international expansion, we can see that we're looking at France, but would you consider the USA and India also?
Oh, absolutely. Well, domination, I do. And it was part of Europe. And then, of course, we have plans, or we have aspirations to go to Canada, the USA, and eventually India. China is a very nice market as well. So we think about this all the time. So in the next 10 years, let me just create this. It was a baby when I started the business, and it was a problem in the last few years. We've just got to be a teenager, and we still want to get into another, get married, and have children.
Okay. The next question is about current cash position seeming quite high. What is our appetite? What do we want to do with this cash? Would we consider extra dividends or, again, share repurchases?
So I think, again, we were looking at investing in actually growth of the business. And one part of that is the investment in the Bradford warehouse, the other are the opportunities that we are looking into. And then finally, after that, we'll be looking into a share buyback program.
Okay, and how is the development of sales per store progressing?
Oh, sorry.
Oh, my. Go Mike.
I'll start it. You can give more flavor to it. It's progressed. We've seen the like-for-like over the last year, the 6.2%, and then it was 3.4% for the second half, another 2% growth in mature stores. October has gone up by 4% in mature stores. We've continually seen that growth in the store sales. Chay, if you can give us some more color on it in terms of what we're doing around that area to grow sales.
Yes, absolutely. So online is the big win for us because we're a click-and-collect model. So the more we do online, the smarter we get online, and the more competent we get online, the better a store does. So we're seeing the percentage of mix move up to, for example, up to 24% in October. So the better we do online, the better a store does in terms of like-for-like. But also, as we introduce the loyalty scheme for offline and as we raise brand awareness, that is the overall how do we drive sales offline as well. So the loyalty scheme gets customers to come back and to buy more. And the brand awareness, as we move that forward, and we're using social media massively to drive the brand awareness metric, people become more aware of our locations.
And I really believe we've got a long way to go on brand awareness to really drive it. And the loyalty scheme is new, and we're already seeing customers come back for their second round of sort of eighth purchase, which is encouraging. The next question then is about the impact of the national minimum wage and employer national insurance. What do we expect the effect of that on our business?
So if we look at it in terms of our business, we can break that between ourselves and franchisees. Our business, it'll be about GBP 100,000-GBP 150,000 in terms of a total impact price of the year. So it's an impact that we can absorb. Our franchisees, it'll vary. And we've got 51 one-store franchisees who work in the store. So their actual labor part, their paid labor, is a very small part of their P&L. Up until when you go to your multi-store franchisees, it'll have a bigger impact on them. But within that, our franchisees have generally paid their labor. People in store the same. So they haven't looked at age. So if you're on the counter or if you're actually assembling the cakes, you're doing the same role, you get paid the same amount.
So they won't be hit with the increase in the differential in the rates. And in terms of ourselves, if we compare our franchisees to other franchise groups in other brands, their labor is a smaller part of the P&L. So our franchisees is a third of their variable costs, where in other brands, it'll be more than 50%. So it'll have a lesser impact than other brands.
Okay. So we have two questions that are similar but slightly different. So I'll ask. The first part is, do you have any plans to bring any senior executives in from bigger franchise businesses to accelerate your growth and to really add value to the business? So that's the first part. And the second part is, would you consider a McDonald's model where you invest in land or stores and then you let the franchisees sort of lease them from you and run them?
So in answer to the first question, we have engaged with an external property company who have the skills in terms of finding sites, doing property negotiations, doing rent negotiations. So we've in effect outsourced that skill set. So we won't be bringing in anybody with that sort of skill set because we've already got that in place. The answer to the second question is no. We're not going to go out and do a property play like a McDonald's. That's a totally different franchise model than what we have.
Okay. And there's a couple more questions. So the first one is around our supermarket pop-ups. How are they going?
They're doing very well. And they're on hold at the moment because the supermarket's got problems on its own. But the 18 that we've got are performing very well. And same as the ones in the shopping malls, they're doing very good as well.
I think the final question I can see in the list is around with all the metrics going positive in terms of like-for-likes, higher revenue growth, what are we likely to see in the future? What is the top-line growth when our new stores mature? So what headroom is there in new stores in the future for our growth?
I think, I mean, the two of us could probably answer that. I think we've seen those stores growing every year now. And as the brand awareness grows, we're in the sort of second year now with customers signing up. So we can now start talking to the customer about when they bought in the prior year. We know that a bit like the card companies, we can remind them when they bought. There's just so much at the moment that there'll be probably low-hanging fruit for us to go after that can actually grow those stores. When we look at stores, there's a different level in terms of the sign-up of the loyalty scheme. And again, that's an opportunity for stores.
Okay. In terms of all the questions that are in the Q&A, I think we've answered the majority of them. I think we should take one more question from someone?
Yes, we've got plenty of time. Yeah.
I'm just sifting through to see if we've missed any.
Okay.
There's question here around what are your thoughts on the increase in share ownership of River Capital? Thoughts on that second one?
I think it shows how positive they feel on our business. It's not just them. There are some other shareholders who've come in in the last year who've actually overtaken them in the holding. I think it's a real positive in terms of new shareholders who've come to understand our business and our brand and want to be part of it.
And we've got one around, given the cost pressures and the environment we're trading in, how are we working with suppliers to ensure stable margins and a stable business? And is there any risk going forward?
For every product that we buy, we have multiple suppliers. And by having multiple suppliers, they all compete with each other. And what we've found generally in the last six months, commodities have stabilized. So there's not a huge spike in the cost of them. And so it's a steady go. And we're not too worried about how the prices are now at the moment.
Okay. I have another question here, and it's for myself. And it's about collaborations. We've done the Nutella collaboration. In terms of long-term brand strategy, are there any similar partnerships we're looking at? So the answer to that is we always look for partnerships. We call them perfect partnerships with, number one, businesses that are complementary to cake. So Nutella is one example of that. And number two is other partnership opportunities. So we are looking at partnerships in movies, movie launches, cinema launches, the movies that are coming up in the next financial year. And we will sort of strike the right partnership for our customer. So we're looking at a lot of these partnerships at the moment just to amplify our brand awareness and, yeah, capitalize on what's happening in the world of cinemas at the moment. And that's all of the questions answered. That's great.
Look, thank you very much indeed. And we can make any other questions available to you post today's call. So, Michael, I know investor feedback is particularly important to you both and to the team. And I'll shortly redirect investors to give you their thoughts and expectations. I also have a video to play on the exit, so I'll play that on the way out. But before doing so, I wondered if I may just ask you for a couple of closing comments.
Yeah. I think it's very positive, and there's a lot of confidence out there in our franchisees. The franchisees are coming to us to expand. We've expanded into Scotland. We're expanding to Northern Ireland, France, as you know, so there's a lot of white space out there, so we can reach our goal of 400 shops. Michael?
Yeah. So I'll just reiterate in terms of it's in the franchise business. It's all about the profitability of the franchisees and the profitability of the store. And we've seen that come back with lower utility prices, with margins not just stabilizing, but our franchisees' margins growing. And that's just given them the impetus to come to us and challenge us to wanting more stores, which is why we are sitting here this week and we're saying that we ambition is to increase our number of stores we open per year from 20-25 plus going forward.
That's great. Sukh, Michael, Chay, thank you very much indeed for updating investors. I'll shortly redirect investors to give you your feedback, which will only take a couple of moments to complete, and I'm sure it'll be greatly valued by the company. But before doing so, if I may just play you out with a video from the company.