Patisserie Holdings: reports FY 2016 interim results

Birmingham / UK. (rcp) Patisserie Holdings Limited, which operates a leading UK branded café and casual dining group offering premium cakes, pastries, snacks, meals and hot and cold drinks across five differentiated brands, reports its preliminary results for the twelve months ended 30 September 2016 – a year of outstanding financial and operational performance, the company said in its news release.

Financial Summary

	FY-2016	FY-2015	Change
Revenue	104.1 million GBP	91.9 million GBP	13.3%
Gross profit	81.3 million GBP	71.0 million GBP	14.5%
Ebitda	22.2 million GBP	18.8 million GBP	18.1%
Statutory pre-tax profit	17.2 million GBP	14.6 million GBP	18.2%
Basic earnings per share	13.74 GBPence	11.41 GBPence	20.4%
Diluted earnings per share	13.60 GBPence	11.32 GBPence	20.1%
Final dividend per share	2.00 GBPence	1.67 GBPence	19.8%

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Financial Highlights

• Tenth consecutive year of revenue and profit growth with revenue up 13.3 percent to 104.1 million GBP (2015: 91.9 million GBP)
  • Online sales up 23 percent to 3.8 million GBP (2015: 3.1 million GBP)
• Gross profit of 81.3 million GBP up by 14.5 percent (2015: 71.0 million GBP)
  • Gross margin of 78.1 percent (2015: 77.3 percent)
• Ebitda of 22.2 million GBP up 18.1 percent (2015: 18.8 million GBP)
• Excellent growth in pre-tax profit to 17.2 million GBP up 18.2 percent (2015: 14.6 million GBP)
• Diluted earnings per share of 13.60 Pence up 20.1 percent (2015: 11.32 Pence per share)
• Net cash at year end of 13.3 million GBP (2015: 6.1 million GBP) with operating cash inflows of 22.0 million GBP (2015: 18.3 million GBP)
• Average store payback period of 23 months
• Final dividend of 2.00 Pence per share proposed up 20.0 percent (2015: 1.67 Pence per share)

Operational Highlights

• 21 new stores opened in the year all funded from operating cash flows including flagship stores in Belfast, Birmingham Resorts World and Oxford Street in London
  • First store opened in Northern Ireland which has an attached bakery with capacity to support a further 10 stores
  • New standalone bakery opened in Edinburgh which will facilitate future expansion in Scotland
  • A number of new stores opened in towns and cities which are generally trading ahead of management’s expectations, demonstrating the breadth of appeal of our brands and products
• 184 stores at end of year (2015:166)
• Six new stores opened since the year end with a well developed pipeline for 2017. The Group continues to target 20 new store openings per annum.
• Significant investment in people with a number of senior positions recruited in the year
• Wage and ingredient cost pressures mitigated in the year and the Group remains vigilant about future increases

Luke Johnson, Executive Chairman, said «The excellent results for the year show the continuing appeal of our brands, the financial strength of the group and the strong cash generative nature of our business model. We have achieved growth in revenues and profits despite uncertain economic conditions and for the first time we have exceeded revenues of 100 million GBP: a significant achievement. Our roll-out programme continues to deliver successful store openings and I am particularly pleased with the performance of our first store in Northern Ireland. Our strategy remains that of organic growth; however we are well positioned to make acquisitions should any suitable opportunities arise. Performance for the first eight weeks of the year has been encouraging and we have already opened six new stores. We have a strong pipeline for the year ahead with a number of promising locations already secured. We will continue to control costs and manage our supply chain in this period of macro-economic uncertainty, thus I am confident of another successful year of growth».

Chief Executive’s Review

Overview: Our business continues to grow and perform extremely well, driven principally by the strong appeal of our Patisserie Valerie brand. Despite uncertain market conditions the Group has delivered excellent results for the year ended 30 September 2016. Annual revenues exceeded 100 million GBP for the first time at 104.1 million GBP, an increase of 12.2 million GBP or 13.3 percent (2015: 91.9 million GBP). Ebitda is 22.2 million GBP, an increase of 3.4 million GBP or 18.1 percent (2015: 18.8 million GBP) and profit before tax is 17.2 million GBP, an increase of 2.6 million GBP or 18.2 percent (2015: 14.6 million GBP).

Basic earnings per share is 13.74 Pence per share (2015: 11.41 Pence per share) and diluted earnings per share is 13.60 Pence per share (2015: 11.32 Pence per share), an increase of 20.4 percent and 20.1 percent respectively.

Revenues from our largest brand, Patisserie Valerie, which trades from 135 stores, are 73.9 million GBP, up 11.0 million GBP or 17.6 percent (2015: 62.9 million GBP from 116 stores) and revenues from our other brands are 30.2 million GBP, up 1.1 million GBP or 4.1 percent (2015 29.1 million GBP).

Review: General market conditions remain competitive and in 2016 we experienced a number of macro events which may have had an impact to our trading; however the performance of our new and existing estate was resilient, which gives us great confidence as to the economic resilience of our business. Our products are seen as affordable treats in times of uncertainty, and as a luxurious indulgence when celebrating. We saw little or no effect on sales from Brexit and experienced no impact on our workforce.

The cost base has remained relatively stable in the year with a gross profit margin at 78.1 percent (2015: 77.3 percent). Our margin has benefitted from food deflation over the last few years and we are now beginning to see ingredient prices harden. We are confident that we will be able to offset price increases by re-negotiating key contracts, by making savings in non-direct spends and through further efficiencies in our production process so that our overall margin remains neutral going forward.

As anticipated, the largest cost pressure this year has been National Living Wage (NLW) which had a full year impact of 0.5 million GBP. However we introduced a more efficient labour rostering method in the year which has almost offset this increase. The increase to minimum wage from 1 October 2016 will be 0.1 million GBP and we will continue to monitor and react appropriately to future increases in the NLW.

Helpfully, given our strategy of growth outside of London, we anticipate that cost increases from the changes to Business Rates from April 2017 will be marginal.

In the prior year we launched Afternoon Tea which is becoming one of our most successful offerings. We sold 133’000 afternoon teas in the year, generating sales of 2.3 million GBP compared to 1.2 million GBP in 2015. Afternoon Tea appeals to our customers as it allows diners to try a selection of our cakes as well as being a great British experience. We have developed a number of variants and will be launching a Festive Afternoon Tea for the Christmas period.

Our online channel continues to grow with digital sales of 3.8 million GBP up by 23 percent (2015 3.1 million GBP). Cake Club membership has grown to 361’000 members an increase of 18 percent (2015: 306’000 members) and we have also developed a growing social media following. We recognise the importance of customer loyalty and during the year commenced development of a rewards scheme which will be piloted in the first half of 2017.