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Further to media speculation, CAKE’s shares have been temporarily suspended pending clarification of the company’s financial position. A separate RNS confirmed that CAKE’s Board has been “notified of significant, and potentially fraudulent, accounting irregularities”, furthermore clarifying that “this has significantly impacted the Company’s cash position and may lead to a material change in its overall financial position”. In light of this development, we have placed our forecasts, recommendation and target price under review.
Patisserie
Patisserie Holdings announced H1 FY18 interim results to 31 March 2018 earlier this week, showing continued strong growth and a robust balance sheet, despite industry pressures across the casual dining and high street spaces.
Record sales and profit in an extremely challenging environment highlights disciplined expansion, rigorous cost control and the right pricing and format strategy. An unwarranted pullback from the 365p peak in September creates a good entry point, in our view. We retain our 360p PT and BUY.
Patisserie Holdings, the UK’s leading branded operator of patisserie shops has announced FY17 preliminary results in line with our expectations. Revenue is up 9.7% to £114.2m, adjusted EBITDA is up 15.7% to £25.6m and adjusted PBT is up 17.1% to £20.2m. We have left our estimates unchanged as management continues to deliver to plan.
Patisserie Holdings (CAKE): Reassuringly good (BUY) | President Energy* (PPC): New Argentine debt facility (CORP) | Premaitha Health* (NIPT): Middle East customer wins (CORP) | Intercede* (IGP): Interims to September (CORP) | Trakm8* (TRAK): A longer road but a greater goal (CORP) | Renew (RNWH): Essential services carefully selected (BUY) | Universe Group* (UNG): Trading update (CORP)
CAKE MEN YGEN IGP TRAK RNWH UNG
Patisserie Holdings, the UK’s leading branded operator of patisserie shops, has announced H1 results in line with our expectations. Revenue was up 11% to £55.5m, EBITDA up 16% to £12.2m and adjusted PBT up 16% to £9.7m. H1 EPS and dividend were up 19% and 20% respectively. We have left our estimates unchanged except for DPS, which we have edged up to 3.6p (prev. 3.5p). The results are particularly encouraging in the context of difficulties reported in the casual dining space whilst the potential flotation of Pret a Manger in the US on a multiple rumoured at up to 18x EBITDA could add investor interest.
The shares currently trade on an FY17 EV/EBITDA multiple of 9.9x, which is broadly in line with other leisure retail stocks (we estimate the sector average is currently around 9.6x).
Recent share price weakness presents a good entry point on the back of today's strong FY16 numbers. We retain our 350p price target and BUY.
A positive site visit this week has given us comfort on FY16 (September) numbers. Our focus therefore now turns to FY17 forecasts, which bear upside risk, in our view. The share price remains 10% below pre-referendum levels and has been largely ignored in the post-Brexit recovery. We reaffirm our 350p price target and upgrade from Hold to Buy.
There is a brave new retail landscape, and who would wish to be a retailer? Consumers are breaking the mould, mobile Internet is transforming shopping behaviour globally, everyone is aspiring to create the principal relationship with the consumer and there will be more retail casualties on the horizon. Those that stand the best chance of survival will be able to 1) accept the certainty of uncertainty 2) be prepared to widen the risk envelope 3) be constantly vigilant to new entrants 4) champion innovation and 5) prioritise effectively.
CAKE MEGP RBG SCS SHOE MLM
Patisserie Holdings, the UK’s leading branded operator of patisserie shops, has announced H1 results broadly in line with our expectations. We have edged up our PBT estimate to reflect slightly lower than expected depreciation and reduced our tax charge estimate by 60bps to 20.4% in line with the H1 charge. The Group opened 12 stores in H1 (11 Patisserie Valerie and 1 Baker & Spice) taking the size of the chain up to 177 stores, leaving the Group comfortably on track to reach its target of 20 openings by the year end. New stores were reported to be ‘performing well’.
While wider sector malaise has seen the share price come off recent highs, these numbers demonstrate the discipline that management continues to exert over the business. Our 350p price target values the group on 23x FY17 fd EPS with the rating warranted, in our view, by the unique proposition: 1) well positioned, vertically integrated brands which straddle two growth markets and have plenty of runway for growth; 2) successful formats in a variety of guises and multiple routes to market; 3) strong and consistent cash flows to internally fund growth and an ungeared balance sheet with net cash of £8.9m; 4) no sizeable direct competitors; and 5) a highly experienced management team.
Topic of the quarter: While the overall number of licensed premises in Britain has declined over the past five years, there has been a significant divergence in the fortunes of wet-led and dry-led outlets as a result of changing consumer trends, the smoking ban and an uneven playing field between pubs and supermarkets. Data for 2015, however, shows that pub closures may be bottoming and dry-led outlet growth slowing amidst a deterioration in the consumer outlook, rising costs amongst operators and excess capacity in the market. With total leisure spend per consumer coming under pressure, this report considers the major eating and drinking trends amongst three core consumer groups: 18-24 year olds (who are going out less and are more concerned about food than alcohol), 25-44 year olds (who comprise 30% of out-of-home occasions and eat and drink out more than most despite having school age children) and 55+ year olds (only 4% of whom eat out more than once a week and a third of whom had not been out for a drink within the past six months).
CAKE MEGP SCS SHOE MLM
Patisserie Holdings, the UK’s leading branded operator of patisserie shops, is in the midst of a store rollout that is delivering consistently high investment returns across a wide variety of trading locations and store formats. This, combined with economies of scale, a unique competitive position and a highly experienced management team, give the potential for exceptional long-term growth.
The final results were in line with expectation with revenue growth of 20% and growth in adjusted PBT of 29%. Our PBT forecasts remain unchanged and we have introduced a 2018 forecast which implies a three-year growth in forecast PBT of 48%. We raise our target price to 350p but retain our Hold recommendation for now on valuation grounds.
We believe this stock has a business model, brand base and executive management team sufficient to generate strong growth well into the next decade.
Patisserie Holdings: Research initiation (HOLD) | Staffline: On track – we forecast 54% EPS growth (BUY)
Patisserie Staffline Group plc
Patisserie Holdings: Research initiation (HOLD) | Staffline: On track – we forecast 54% EPS growth (BUY) | BATM*: Celare wins a major government contract (CORP)
CAKE STAF BVC
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