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 12 months ended 30 September 2017 as follows.
Financial summary
12M-2017 | 12M-2016 | Change | |
Revenue | 114.2 million GBP | 104.1 million GBP | 9.7 percent |
Gross profit | 89.3 million GBP | 81.3 million GBP | 9.8 percent |
Ebitda | 25.6 million GBP | 22.2 million GBP | 15.7 percent |
Statutory pre-tax profit | 20.2 million GBP | 17.2 million GBP | 17.1 percent |
Basic earnings per share | 16.36 Pence | 13.74 Pence | 19.1 percent |
Diluted earnings per share | 16.20 Pence | 13.60 Pence | 19.1 percent |
Final dividend per share | 2.40 Pence | 2.00 Pence | 20.0 percent |
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Financial highlights
- Revenue up 9.7 percent to 114.2 million GBP (2016: 104.1 million GBP)
- Online sales up 26 percent to 4.8 million GBP (2016: 3.8 million GBP)
- Gross profit of 89.3 million GBP up by 9.8 percent (2016: 81.3 million GBP)
- Gross margin of 78.2 percent (2016: 78.1 percent)
- Ebitda of 25.6 million GBP up 15.7 percent (2016: 22.2 million GBP)
- Excellent growth in pre-tax profit to 20.2 million GBP up 17.1 percent (2016: 17.2 million GBP)
- Diluted earnings per share of 16.20 Pence up 19.1 percent (2016: 13.60 Pence per share)
- Net cash at year end of 21.5 million GBP (2016: 13.3 million GBP) with operating cash inflows of 24.4 million GBP (2016: 22.0 million GBP)
- Average store payback period of 23 months (ahead of our 24 month target)
- Final dividend of 2.40 Pence per share proposed up 20.0 percent (2016: 2.00 Pence per share)
Operational highlights
- Successfully opened 20 stores in the year including stores in 12 new geographical locations
- Expansion outside of England continues with two stores opened in Republic of Ireland, a second store opened in Northern Ireland and two new stores in Scotland
- First store opened under the Philpotts brand
- All new stores profitable from first day of trading and funded from operating cash flows
- Trading from 199 stores at end of year (2016:184)
- 20 new stores targeted for 2018 with four opened since the financial year end
- Entered into a supply only agreement with Sainsbury’s during the year, trading from 18 Sainsbury’s counters by the year end
- Costs tightly controlled with inflationary wage and ingredient cost pressures mitigated in the year
Executive Chairman Luke Johnson said: «We have delivered another year of excellent financial results, achieving our targets in a challenging environment. We opened 20 new stores many of which are performing ahead of expectations, and the performance of our new bakeries in the Republic of Ireland is encouraging. Our indulgent, affordable treats remain attractive to customers, and our flexible business model has enabled us to mitigate inflationary cost pressures. With a highly cash generative group, strong brands and a focused management team I remain confident of another year of growth and achievement».
Chief Executive’s Review – Overview
I am pleased to report the results for the year ended 30 September 2017 which has been another strong year for the Group. The management team delivered record sales and profit, against the backdrop of a challenging economic and operating environment. We also achieved our target of opening 20 new stores.
In the year we have tested a number of new markets, including expansion into the Republic of Ireland, opening our first Philpotts branded store, trialling our Patisserie Valerie product within Sainsbury’s and the development of a number of new product lines.
In the prior year we opened our first store in Belfast in Northern Ireland and the store was fitted with a bakery to support expansion in this area. Following a strong performance at this first store in Belfast, in the year we opened our second Northern Irish store and our first and second international stores in the Republic of Ireland. All of these stores have been well received by our new customers and are performing ahead of expectations. These openings give management confidence that the brand has international appeal and expansion potential.
In 2014 we acquired the Philpotts brand which is a premium sandwich and salad retailer. In the year under review we opened our first store under this brand in Manchester’s financial and professional services hub at Spinningfields. Since opening, this store has consistently ranked in the top three performers under the Philpotts offering. The success of this store provides potential for a roll-out of the Philpotts brand.
We continue to engage with our customers via social medial platforms. We have run a number of online competitions in the year, one of which resulted in the customer designed Madame Valerie gateau. This type of engagement has boosted our Facebook followers by over 100 percent to 140’000 followers (2016: 70’000 followers). Cake Club membership continues to grow and is up 11.9 percent to 404’000 members (2016: 361’000 members) with pleasing growth on other platforms such as Twitter and Instagram. All of these online channels help increase our brand profile, and contributed to an increase in online sales of 26 percent to 4.8 million GBP (2016: 3.8 million GBP).
We have serviced the Group over the last few years from our main bakery in Birmingham and from seven satellite bakeries across the UK. Although we have excess capacity in our bakeries, as our geographical footprint expands, we have started to review how we best serve our estate from a production and logistical stand point. We are currently reviewing options for an additional production facility in the Manchester area with capacity to serve approximately 70 stores as well as instore baking of morning goods from within all of our stores. Both of these initiatives will provide additional capacity to the Group as well as releasing savings and efficiency and improving product quality.
We finished the year encouragingly and this momentum has carried into the first eight weeks of 2018. We have just launched our new festive range, which includes two new limited edition slices, and are looking forward to another successful year ahead.
Financials
Revenue for the year is 114.2 million GBP, an increase of 10.1 million GBP or 9.7 percent (2016: 104.1 million GBP). Ebitda is 25.6 million GBP, an increase of 3.4 million GBP or 15.7 percent (2016: 22.2 million GBP) and profit before tax is 20.2 million GBP, an increase of 3.0 million GBP or 17.1 percent (2016: 17.2 million GBP).
Basic earnings per share are 16.36 Pence per share (2016: 13.74 Pence per share) and diluted earnings per share are 16.20 Pence per share (2016: 13.60 Pence per share), an increase of 19.1 percent.
Revenues from our largest brand, Patisserie Valerie, which trades from 152 stores, are 84.3 million GBP, up 10.4 million GBP or 14.1 percent (2016: 73.9 million GBP from 135 stores) and revenues from our other brands are 29.9 million GBP, down 0.4 million GBP or 1.3 percent due to two store closures (2016 30.2 million GBP).
In the first half of the year we experienced rising costs with prices returning to normalised levels in the second half of the year. We worked hard with our suppliers to manage costs and also realised production efficiencies from investment in our bakeries in the prior year which resulted in a stable gross profit margin of 78.2 percent (2016: 78.1 percent). Although the inflationary environment appears to be easing, we remain alert to any pricing pressures.
Minimum wage increases from 1 October 2016 and National Living wage increases from April 2017 had an impact during the year of 0.3 million GBP.
Other costs have remained relatively stable in the year with modest rent increases offset by savings made in operating costs.
Estate Development
The Board’s strategy for organic growth targets 20 new store openings per annum. During the year we successfully achieved this target, opening 20 stores across counter and full menu offerings. The openings were predominantly in high-street and retail parks locations, (11 stores) however we also developed our partnership with Debenhams. We opened one store at St Pancras train station and one Philpotts store. During the year, leases on five stores expired and as these stores were no longer in prime locations they were closed, taking the total number of trading stores to 199 at the end of the year (2016: 184).
As discussed above, new markets in which we have opened stores in the year include our second store in Northern Ireland, our first and second international stores in the Republic of Ireland and our first Philpotts branded store. All of these stores are performing ahead of expectations and give management confidence in these territories.
Three of the openings this year were in retail outlets: McArthur Glenn Ashford, Rushden Lakes Northampton and The Lexicon Bracknell, bringing the total number of stores in retail outlets to seven. Performance at all of our stores in retail outlets remain consistently strong.
We continue to target new towns and cities for store openings and in the year opened in twelve new geographical locations. Many of these stores are performing ahead of expectations and reinforces the demand for the Patisserie Valerie brand.
Due to the highly cash generative nature of the business, the rollout programme is funded entirely from operating cash flows. All of our new stores were profitable from the first week of trading and we expect all of these stores to achieve the payback target of 24 months.
Since the year end we have opened four new stores with two store due to open in the next two weeks, exchanged contracts for two stores and are in advanced negotiations at a further five locations. The strong performance of our new stores, especially at new geographical locations, continues to provide confidence in our ability to grow our estate across the UK and Ireland.
Cash flow and financing
The group generated operating cash flow of 24.4 million GBP, up 2.4 million GBP or 10.9 percent (2016: 22.0 million GBP). Income tax payments of 4.0 million GBP were made and 9.4 million GBP was used for investing activities, leaving free cash flows of 11.0 million GBP (2016: 9.9 million GBP).
In the year 5.1 million GBP was invested in new stores, 1.5 million GBP of capital expenditure on refreshing the existing estate and 2.1 million GBP on central infrastructure. We continue to measure the ROI of our stores against a 24 month payback period and are pleased that the substantial majority of stores perform within this target.
From free cash flows, dividend payments of 3.2 million GBP were made to shareholders. We also generated 0.4 million GBP, of proceeds from the exercise of employee share options. Net cash at the end of the year was 21.5 million GBP (2016: 13.3 million GBP). The group remains solely funded from operating cash flows and is well positioned to make strategic acquisitions.
Dividends
In the year, we paid 2.0 million GBP in relation to the final dividend for FY2016 of 2.0 Pence per share and an interim dividend costing 1.2 million GBP for FY2017 of 1.20 Pence per share. The group is cash generative and the Board is committed to a progressive dividend policy for its shareholders. The Board is recommending a final dividend for FY2017 of 2.40 Pence per share which represents a 20 percent increase over the final dividend paid in relation to FY2016. Subject to shareholder approval at the Annual General Meeting, to be held on 30thJanuary 2018, the final dividend will be paid on 9th February 2018 to shareholders on the register at 12th January 2018.
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