Economic figures are grim, unemployment is shooting up and retailers across the country are battening down the hatches. Not Cake Box. The specialist cake chain last week reported upbeat half-year figures and said prospects are better than ever.
Admittedly, chief executive Sukh Chamdal kept every outlet shut for the first six weeks of lockdown last spring, to keep staff and customers safe. Those temporary closures meant that overall numbers for the six months to September 30 were marginally down.
However, sales and profits have rebounded since the business reopened in May. Furlough money was repaid in September and a cancelled final dividend was replaced with a one-off special payment of 3.2p last month.
Rising fortunes: Cake Box founder Sukh Chamdal kept every outlet shut for the first six weeks of lockdown last spring, to keep staff and customers safe
No redundancies have been made, staff have been taken on and the chain now comprises 144 sites, five of which have been added in the last two months alone. Encouragingly, too, Chamdal has declared an interim dividend of 1.85p, up 15 per cent since last year.
Most purchases are made from the group’s distinctively coloured purple and orange stores but there is also a fast-growing online offer. Lockdown saw customers snapping up Cake Box wares from Just Eat, Uber Eats and Deliveroo and the firm has recently started its own delivery service.
The company specialises in egg-free, fresh cream cakes, most of which are bought for birthdays and other festive occasions. Originally catering for Asian customers who avoided eggs on religious grounds, Cake Box’s wares are now bought by cake-lovers of every race and creed. Christmas is the group’s busiest time of the year, with 90 per cent of stores open on Christmas Day itself, as people choose to celebrate with a fresh cream cake rather than a traditional pud.
Chamdal co-founded Cake Box in 2009 with finance director Pardip Dass. Their fathers came from the same village in the Punjab in India and they grew up in London’s East End. Having started the business in the teeth of the financial crisis, they are confident they can withstand post-pandemic headwinds this time round.
Analysts agree, forecasting a 5 per cent increase in revenues to £19.6million, with pre-tax profits up 16 per cent to £4.3million and total dividends of around 5.9p, excluding last month’s special payment. Further strong gains are expected in 2022 and beyond.
The group operates a franchise model, there are 65 franchisees currently and record numbers lining up to open Cake Box stores. Vetting procedures are strict but demand from potential new managers bodes well for the future.
Property firms are also coming to Cake Box and offering them better sites on better terms than ever before, as Covid-19 bites and traditional retailers are forced to close.
Midas verdict: Midas recommended Cake Box shares in July 2018, just after the group floated on AIM. The shares have since risen 37 per cent to £1.88 and should continue to gain ground. Growth in recent months has shown that, in good times and bad, the British are committed to cake. Chamdal and Dass own around 40 per cent of the stock as well so they are highly incentivised to making the business work. Existing investors may choose to sell some stock and bank a chunk of profit but they should keep at least two-thirds of their shares. New investors might also be tempted to grab a slice of this stock.
Traded on: AIM Ticker: CBOX Contact: eggfreecake.co.uk or 020 8050 2026