Cake Box Holdings plc
("Cake Box", "the Company" or "the Group")
Audited Full Year Results for the 12 months ended 31 March 2023
Steady progress, investment in growth and robust current trading, confident of further progress
Cake Box Holdings plc, the specialist retailer of fresh cream cakes, today announces its audited full year results for the twelve months ended 31 March 2023.
Financial Highlights
| | Full year | Full year | Change*** |
| ended | ended | ||
| 31-Mar-23 | 31-Mar-22 ( as restated) | ||
| Revenue | £34.8m | £33.0m | 5.6% |
| Gross profit | £17.2m | £15.8m | 8.5% |
| EBITDA* | £6.7m | £8.8m | (24.3%) |
| Adjusted EBITDA ** | £6.7m | £8.0m | (16.9%) |
| Pre-tax profit | £5.4m | £7.7m | (28.6%) |
| Adjusted pre-tax profits ** | £5.4m | £7.0m | (22.9%) |
| Cash at Bank | £7.4m | £6.6m | 11.9% |
| Earnings per share | 10.6p | 15.8p | (31.7%) |
| Final dividend recommended | 5.5p | 5.1p | 7.8% |
*EBITDA is calculated as operating profit before depreciation and amortisation.
**Adjusted EBITDA and pre-tax profits is after adjusting for the exceptional items in the prior year
***% Change is based on amounts in the Consolidated Statement of Comprehensive Income
· Group revenue up 5.6% to £34.8m (2022: £33.0m), reflecting a resilient business model.
· Gross margin increased to 49.4% (2022: 48.0%), due to enhanced controls.
· Cash from operations of £6.3m (2022: £5.3m).
· Strong balance sheet with £7.4m cash at period end (2022: £6.6m).
· Dividend per share for the full year: 5.5 pence per share recommended. (Interim dividend of 2.625 pence per share).
Operational highlights
· 4.1% growth in online sales for the year to £13.8m (2022: £13.3m) after 41% growth last year due to Covid restrictions.
· 20 new franchise stores opened in the year (2022: 31).
· 205 franchise stores in operation as at the end of FY23 (2022: 185).
· Further expansion of our supermarket kiosk offering now with 18 supermarket kiosks (2022:15).
· Significant investment in the baking facilities at Enfield leading to improved baking yield.
Franchisee store highlights
· Like-for-like1 sales growth of 1.0% in franchise stores in the year to 31 March 2023. (2022:12.0%)
· Franchisee total turnover up 9.6% to £72.1m (2022: £66.0m)
· 17 shops opened in new towns or cities this year
Current trading and outlook
· The Board is optimistic about the prospects for the year and the sales performance continues to be robust, with franchise sales up 5.4% like-for-like in the last 11 weeks.
· Whilst we remain mindful of the ongoing economic challenges and trading environment, inflation is starting to soften in some areas which will support margin progression over the medium term. We continue to expand our geographic presence with our targeted store opening programme to drive future growth with a further 3 stores opened since the end of March 2023.
· We have increased our investment in marketing via our strengthened marketing team to grow brand awareness and to expand our digital and e-commerce capabilities.
1 Like-for-like: Stores trading for at least one full financial year prior to 31 March 2023
Sukh Chamdal, Chief Executive Officer, commented:
"During the year we have continued to innovate to meet the needs of our customers, worked on improving our operational infrastructure despite facing a unique set of macro-economic pressures and continued to grow sales and margins. We are looking at new ways to reach our customers and the new website offers many new marketing opportunities.
We have continued with our steady store opening program to add to the 205 Cake Box shops we had at year end. As we approach the 250 target number of stores we set ourselves at our IPO almost 5 years ago to the day, we continue to look to stretch ourselves with a new target of 400 and new ways to provide the UK consumer with our unique egg-free fresh cream cakes.
The market outlook is improving, our capabilities have been expanded, and the Cake Box brand is stronger than ever. We have the right platform in place for the Group's development to accelerate over the coming year and beyond."
A recording of our results presentation will be available on Investor Meet Company via the link:
https://www.investormeetcompany.com/cake-box-holdings-plc/register-investor
For further information, please contact:
| Cake Box Holdings plc Sukh Chamdal, CEO Michael Botha, CFO
| Enquiries via MHP |
| Shore Capital Stephane Auton Patrick Castle
Liberum (Joint Broker) Clayton Bush Edward Thomas
| +44 (0) 20 7408 4090
+44 (0) 20 3100 200 |
| MHP Communications Charlie Barker Robert Collett-Creedy
| +44 (0) 7834 623818 |
Chairman's Statement
Sustainable growth
The past year has been filled with challenges for Cake Box, but we have successfully navigated through them and emerge better prepared for an exciting new chapter of growth for the business. Despite the difficult trading environment caused by the Ukraine war, inflationary pressures, an exceptionally hot summer and labour shortages, we have shown determination and continued to grow.
Our franchisees have shown great resilience, and we anticipate even greater opportunities with the return of normal lending conditions from banks supporting our existing and new franchisees. We recently celebrated the opening of our 200th Cake Box store and continue to expand our store estate. During the past year, we opened 20 new stores and 6 kiosks, welcoming 13 new franchisees to our Cake Box family.
Our primary goal is to enable our family of franchisees to fulfil their potential and grow their businesses. We have therefore focused on empowering our franchisees, enhancing operational standards and investing more money than ever before on marketing and brand building initiatives. We work with multiple suppliers for all our key products which has enabled us to control costs effectively despite the inflationary pressures, enabling both the Group's and our franchisees margins to be preserved. Our baking processes have been optimised for greater efficiency, and we have raised our hygiene, safety, and service standards. These efforts have positioned us well for sustainable growth next year and beyond.
Refining our Strategy
We have focused on expanding the reach of the Cake Box brand and our marketing team over the last twelve months, which has enabled us to engage with our customers and franchisees in many new and effective ways. E-commerce has become integral to our growth story, and our new website will allow for customised marketing campaigns. We aim to become a fully integrated multi-channel business in the next few years and are exploring new ways to optimise our store rollout based on customer data to both improve new store performance as well as refine our property strategy.
Our Environmental, Social, and Governance (ESG) Committee continues to shape our ESG strategy, focusing on Supply chain due diligence, waste reduction, and sustainability. For example, our van fleet has been updated. The new vehicles are more fuel-efficient, helping improve running costs and environmental impact. We also continue to take steps to improve the Group's governance, especially in respect of its finance and audit processes.
The Cake Box Family
I extend my gratitude to our loyal customers, dedicated franchisees, and hardworking staff. We now have 166 staff at our various locations from a wide range of backgrounds, and we will persist in improving gender and minority representation at all levels. In respect of our franchisees, we provide the opportunity for people in the UK from all walks of life to start a business no matter what their background or education, enabling a real inclusive and diverse community of entrepreneurs.
This year, we continued the process of putting in place an experienced leadership team, capable of fostering sustainable growth. We also acknowledge there is more to do to have a leadership team that is fit for the future. We asked Martin Blair, one of my Non-executive colleagues, to be our Interim CFO whilst we looked for a permanent CFO. We have now handed over the baton to our new CFO, Michael Botha. Michael is an exceptionally talented individual who will bring a clear focus to what we want to achieve with Cake Box over the long-term.
Our priorities for the year
Objective 1: Expanding Store Estate and Franchisee Growth
We remain committed to expanding our store estate and providing opportunities for franchisees to grow their businesses. Despite the challenging market environment, we have successfully opened 20 new stores and 6 kiosks in the past year and our goal is to continue this growth trajectory. We believe there are many more areas for us to reach and the year ahead will be about agreeing the plan to accelerate our expansion beyond our previously published target with a new stretch target of 400 stores. We will achieve this goal by supporting our franchisees and by creating an environment conducive to their success and by leveraging their experience and skills to build their Cake Box portfolios.
Objective 2: Focus on Operational Excellence
As we continue to grow our store estate, we recognise the need to continue to strengthen our operational discipline. This will underpin our ability to grow substantially and preserve both our and our franchisees margins. We will focus on fine-tuning cost controls, securing improved supplier terms, and identifying areas for improved efficiencies. By optimising baking processes and enhancing operational standards, including hygiene, safety, and service, we will ensure that our stores and bakeries deliver the highest quality products and customer experiences.
Objective 3: Data-driven Approach and Multi-channel Expansion
To refine our strategy and stay ahead of the competition, we will adopt a data-driven approach. We recognise the importance of e-commerce and its potential to drive growth. Our online sales have been progressing well, and we aim to become a fully integrated multi-channel business in the next few years. By leveraging data provided by our franchisees, we will target regions with limited Cake Box presence, ensuring a sophisticated and strategic store rollout that maximises growth opportunities.
Objective 4: Strengthening Leadership and Governance
Building a strong leadership team is crucial to fostering sustainable growth. We have made significant progress in assembling an experienced leadership team capable of driving growth. We will continue to strengthen our leadership team, focusing on succession planning to ensure a smooth transition and long-term success. Additionally, we are committed to improving governance, finance, and audit processes to uphold the highest standards and support our growth objectives.
We are also ever conscious of the need to take opportunities to further professionalise the Group, and as our minds turn to succession planning for the long term, our leadership team will continue to evolve in that regard.
Objective 5: Commitment to Community and ESG Initiatives
Community engagement and responsible business practices are core to our mission. We will continue to positively impact the communities we serve by supporting local initiatives and engaging in volunteer work. Our ESG Committee will play a vital role in shaping our ESG strategy, focusing on providing clear nutritional information, reducing waste, and implementing sustainable practices throughout our operations.
Moving forward together
The challenges faced in the first half of the year have been managed with resilience, and we enter the new financial year with a solid foundation. A strong balance sheet, underpinned by the highly cash generative nature of our business model, and an increased dividend is testament to this. While macro-economic challenges and unpredictable consumer spending persist, we are optimistic about the future. We are committed to ensuring Cake Box's sustainable growth, building on our improved practices and disciplined strategies.
Thank you for your continued support.
Neil Sachdev MBE,
Chairman of Cake Box
Chief Executive's review
Meaningful progress, well positioned for growth
A resilient business
Cake Box performed resiliently during the year, with revenue growth of 5.6% and total franchisee sales growth of 9.6% demonstrating the continued appeal of our products and proposition. We continued to innovate to meet the needs of our customers, improved our operational infrastructure and responded to an exceptional set of circumstances that Cake Box, like many retailers, faced in 2022.
Having emerged confidently from the pandemic, we encountered the combination of rising energy prices, raw materials inflation, and increased living costs for customers - a unique cocktail of interlinked macro-economic pressures that made growth hard to come by. Alongside this, pent-up demand for holidays from the pandemic took customers away from our stores and a nine week-long heat wave over the summer created a difficult trading environment for a business such as ours.
Despite these headwinds, we were able to again grow sales and gross margins, supported by shrewd purchasing decisions. We strengthened our procurement team, to take advantage of volatility in the prices of commodities and essential products, and as a result have been able to be highly selective with any price increases. This has been supported by our renting a bulk storage facility to maintain continuity of supply. The 27,000 sq ft premises is a stone's throw from our Enfield site and has given us greater purchasing power.
As ever, we aim to improve and expand our customer offer so that more people experience Cake Box products and build a relationship with our brand. We have made great strides in that respect this year, with our franchisees selling 1.45m cakes and 2.89m slices, worth £43.2m and £10.5m respectively in FY23.
To complement this core approach, we have been exploring new ways to reach customers. Our marketing team has been working on our new website which went live in June 2023 that will provide additional functionality, a better customer experience and allow us to glean more product and customer consented data. Franchisee online sales have risen to £13.8m (FY22: £13.3m) or 20.8% of total franchise store sales (FY22: 21.8%) and we are optimistic this figure will continue to grow on the back of the new website and increasingly sophisticated digital marketing.
Franchisees at the forefront
We were able to advance many aspects of the Cake Box business in 2023. I'm particularly pleased with the development of our roll-out programme and in spite of the difficult retail conditions we opened 20 new stores over the year, taking us to a total of 205 stores across the country. Our pipeline of potential franchisees remains strong (with 47 deposits held at year end) and there is increasing ambition amongst existing franchisees, with many looking to expand their portfolios and own multiple sites where they can demonstrate their business acumen.
Franchisees remain at the heart of our business - when they win, we win - and we are there to support them every step of the way. We now have three regional area sales and support managers who help franchisees develop their business, as well as four compliance officers who audit stores on average once every six weeks. These are under the leadership of a Field Operations Manager who reports to the Head of Franchise Operations.
Refreshing our offer
Our Research & Development team are constantly expanding our product range, to keep it current and on trend. For the 2023 summer season, we look forward to promoting our variety of mango products - mango cake, cheesecake, slices, cupcakes, and sundaes have all been introduced to our stores. Recent upgrades to improve processes at our facilities give us much more scope to explore exciting new recipes and products, and to expand our gifting and treat product ranges as well as our celebration cakes. We are confident that they will delight our customers. Our new cheesecake line, with its capacity to produce products in an array of flavours, is also now fully operational.
The right ingredients for growth
This year has shown, more than most, just how much of Cake Box's success relies on the collective endeavours of the whole Cake Box Family. We are fortunate to have such dedicated staff, and a motivated supplier base which helped us meet the many challenges we have had to confront in the past twelve months. I would also like to thank Martin Blair for stepping up as Interim CFO this past year, whilst we waited for our new permanent CFO, Michael Botha, to complete his notice period prior to joining the team.
My main take-away from the year was a feeling of making meaningful progress across the business in difficult circumstances. The market outlook is improving, our capabilities have been expanded, and the Cake Box brand is stronger than ever. We have the right platform in place for the Group's development to accelerate over the coming year and beyond.
Sukh Chamdal,
Chief Executive Officer
Financial Review
| | FY23 | As restated FY22 |
| | £m | £m |
| Revenue | 34.8 | 33.0 |
| Gross profit | 17.2 | 15.8 |
| Operating expenses before exceptional items | (11.6) | (8.8) |
| Exceptional Items | - | 0.8 |
| Operating profit | 5.6 | 7.8 |
| Finance Cost | (0.2) | (0.1) |
| Profit before tax | 5.4 | 7.7 |
| Adjusted Profit before tax | 5.4 | 6.9* |
| Tax | (1.2) | (1.4) |
| Profit for the period | 4.2 | 6.3 |
|
Adjusted Profit for the period* | 4.2 | 5.5 |
| Revaluation of freehold property | 0.2 | 1.2 |
| Deferred tax on revaluation | - | (0.2) |
|
Total Comprehensive income for the year | 4.4 | 7.3 |
| EBITDA | 6.7 | 8.8 |
Adjusted EBITDA* 6.7 8.0
* Calculated after adjusting for exceptional items in 2022 see note 10
Another year of growth when the headwinds of economic pressure were very much against us confirms the resilient nature of the Cake Box model. Franchisee total turnover increased 9.6% to £72.1m.
Revenue
Reported revenue for the year FY23 was £34.8m. Whilst below our prior expectations, still amounted to an increase of 5.6% year on year despite the challenging economic and consumer environment. This was achieved through an increase in store like-for-like sales and with the addition of 20 new stores around the UK in new locations including Rugby, Aylesbury, Bristol, Camberley and Leeds.
Gross margin
Gross profit as a percentage of sales increased from 48.0% to 49.4%, despite significant rises in raw materials and freight costs in the first half of the year. As the year progressed, input prices stabilised and we were able to pass on some price rises to franchisees who in turn were able to raise sales prices to customers albeit at a lower rate than the food retail sector without having a significant impact on volumes.
EBITDA
EBITDA decreased by 24.3% to £6.7m as a result of a planned increase in overheads and lower than anticipated revenue growth during the year. Adjusted EBITDA was 16.9% below prior year.
Balance Sheet
Cake Box has a strong balance sheet with a cash balance at the year-end of £7.4m (FY22: £6.6m). The Group's only debts are mortgages of £1.3m (FY22: £1.4m) secured by its freehold properties in Enfield, Bradford and Coventry.
The Group operates a franchise model and therefore has a relatively low and flexible cost base. The Board is therefore very comfortable with the Group's cash levels and liquidity despite the unprecedented events of the last three years.
Property
Our three main sites at Enfield, Bradford and Coventry are all freehold. At year end, we instructed surveyors to value all three properties in order to have a consistent value base. This resulted in a revaluation gain in respect of our properties of £0.2m compared to the previous revaluation in 2022 (FY22: £2.5m which was apportioned between FY22 and FY21 in the accounts).
Last year, we also took a lease on a 27,000 sq. ft warehouse in Enfield to support our business expansion. This warehouse has allowed us to remodel our Enfield depot into a state-of-the-art facility, with bulk stock stored in the new warehouse and then distributed to our other depots. Having stock all in one place allows us to control stock more efficiently.
Taxation
The effective rate of taxation was 22.2% (FY22: 18.4%). This includes the relief obtained via the super deduction claim, which is a temporary increase by HMRC to capital allowances for capital expenditure of 130% compared to the normal rate of 100%, as well as other corporation tax timing differences on capital assets. The effective tax rate is higher than the statutory rate due to the impact of tax rate increases in deferred tax calculations.
Earnings per share (EPS)
Earnings per share were 10.59p (FY22: 15.78p). A decrease of 31.7% reflecting the decrease in profitability of the Group year on year. The number of shares in issue was 40,000,000 and is unchanged since the Company's IPO in June 2018.
Dividend
In-line with our progressive dividend policy, having performed resiliently and increased our cash generation, the Board is pleased to recommend a final dividend of 5.5 pence per share (FY22: 5.1 pence), bringing the total dividend for the year to 8.125 pence per share (FY22: 7.6 pence).
If approved by the shareholders at the Company's AGM on 22nd August 2023, the final dividend of 5.5 pence per share will be paid on 29th August 2023. The record date for shareholders on the register will be 28th July 2023, with an ex-dividend date of 27th July 2023.
As previously stated, the Company intends that the total dividend for each year will split into one third for the first six months of the year to two thirds for the year end.
Cash position
The Group had £7.4m of cash at year end, an increase of £0.8m. At the year end, the Group had a net cash position of £6.1m which was up £0.9m from the previous year. Net cash is calculated as £7.4m of cash, less £1.3m of mortgage debt relating to the Group's freehold properties.
Trade and other receivables
The Group had £2.7m of trade and other receivables at the end of FY23, compared to £2.6m at the end of FY22. The majority of this balance relates to trade receivables which have remained at £1.7m (FY22: £2.0m), showing good credit control given the increase in revenue. Trading debts relating to purchases of products by franchisees have a defined seven-day payment term.
Trade and other payables
The Group had £3.8m of trade and other payables at the year end, an increase of £1.1m on the prior year. The Group actively sources cost effective suppliers without compromising on the quality of the products. Other payables are paid according to terms specified.
Michael Botha
Chief Financial Officer
Cake Box Holdings Plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
Company Registration No. 08777765
| | | | | 2023 |
| As restated 2022 |
| | | Note |
| £ |
| £ |
| | | | | | | |
| Revenue |
| 3 |
| 34,800,941 |
| 32,964,846 |
| | | | ||||
| Cost of sales | | | | (17,626,671) |
| (17,133,685) |
| | | | | | | |
| Gross profit |
| | | 17,174,270 |
| 15,831,161 |
| | | | |
| | |
| Administrative expenses before Exceptional items | | | | (11,595,228) |
| (8,794,413) |
| Exceptional items | | 10 | | - | | 781,965 |
| Administrative expenses | | 4 |
| (11,595,228) |
| (8,012,448) |
| | | | |
|
| |
| | | 5 |
| 5,579,042 |
| 7,818,713 |
| Operating profit | ||||||
|
| | | | | | |
| Finance income | | 6 |
| 25,019 |
| 1,802 |
| Finance expense | | 6 |
| (160,494) |
| (83,190) |
| | | | | | | |
| Profit before income tax |
| | | 5,443,567 |
| 7,737,325 |
| | | | | | | |
| Income tax expense | | 11 |
| (1,206,896) |
| (1,425,709) |
| | | | |
|
| |
| Profit after income tax |
| | | 4,236,671 |
| 6,311,616 |
| | | | | | | |
| Other comprehensive income for the year |
| | | | | |
| Revaluation of freehold property | | 13 |
| 187,665 |
| 1,250,175 |
| Deferred tax on revaluation of freehold property | | 12 |
| (35,656) |
| (237,533) |
| Total other comprehensive income for the year |
| | | 152,009 |
| 1,012,642 |
| | | | |
|
| |
| Total comprehensive income for the year |
| | | 4,388,680 |
| 7,324,258 |
| | | | | 4,388,680 |
| 7,324,258 |
| Attributable to: | ||||||
| Equity holders of the parent | ||||||
| | | | | | | |
| Earnings per share | ||||||
| Basic | | 34 |
| 10.59 |
| 15.78p |
| Diluted | | 34 |
| 10.59 |
| 15.78p |
The notes on pages form an integral part of these financial statements.
Cake Box Holdings Plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| | | | As restated | As restated |
| | | 2023 | 2022 | 01 April 2021 |
| | Note | £ | £ | £ |
| Assets |
| | | |
| Non-current assets |
| | | |
| Intangible assets | 15 | 399,186 | 107,273 | - |
| Property, plant and equipment | 13 | 11,267,783 | 10,252,748 | 8,791,072 |
| Right-of-use assets | 16 | 2,574,490 | 2,874,430 | - |
| Loans to franchisees | 19 | 508,532 | 710,059 | 656,004 |
| Deferred tax asset |
| - | - | 95,447 |
| | | 14,749,991 | 13,944,510 | 9,542,523 |
| | |
| | |
| Current assets |
|
| | |
| Inventories | 17 | 2,790,724 | 2,468,921 | 1,902,171 |
| Trade and other receivables | 18 | 2,683,621 | 2,553,209 | 2,490,217 |
| Other financial assets | 19 | 245,880 | 357,548 | 382,808 |
| Cash and cash equivalents | 32 | 7,353,583 | 6,571,558 | 5,125,864 |
| | | 13,073,808 | 11,951,236 | 9,901,060 |
| | |
| | |
| Total Assets |
| 27,823,799 | 25,895,746 | 19,443,583 |
| Equity and liabilities |
|
| | |
| Equity |
|
| | |
| Issued share capital | 20 | 400,000 | 400,000 | 400,000 |
| Capital redemption reserve | 21 | 40 | 40 | 40 |
| Share option reserve | 21 | - | - | 488,596 |
| Revaluation reserve | 21 | 3,786,742 | 3,634,734 | 2,622,092 |
| Retained earnings | 21 | 13,552,573 | 12,742,989 | 8,877,886 |
| Equity attributable to the owners of the Parent company |
| 17,739,355 | 16,777,763 | 12,388,614 |
| Current liabilities |
|
| | |
| Trade and other payables | 24 | 3,766,413 | 2,661,372 | 3,353,749 |
| Lease liabilities | 16 | 270,117 | 260,191 | - |
| Short-term borrowings | 23 | 104,498 | 167,754 | 167,754 |
| Current tax payable | | 294,262 | 837,946 | 903,469 |
| Provisions | 25 | 243,100 | 243,100 | 486,319 |
| | | 4,678,390 | 4,170,363 | 4,911,291 |
| Non-current liabilities |
|
| | |
| Lease liabilities | 16 | 2,429,838 | 2,699,958 | - |
| Borrowings | 23 | 1,132,292 | 1,185,978 | 1,318,005 |
| Deferred tax liabilities | 12 | 1,843,924 | 1,061,684 | 825,673 |
| | | 5,406,054 | 4,947,620 | 2,143,678 |
| | |
| | |
| Total Equity and liabilities |
| 27,823,799 | 25,895,746 | 19,443,583 |
Company Registration No. 08777765
The financial statements were approved and authorised for issue by the Board on 25 June 2023 and signed on its behalf by
S R Chamdal
Director
The notes on pages form an integral part of these financial statements
Cake Box Holdings Plc
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
|
| Note |
| | 2023 |
| As restated |
| 2022 | ||||||
| | | | | £ |
| £ |
| Cash flows from operating activities |
| | | | | |
| Profit before income tax | | | | 5,443,567 |
| 7,737,325 |
| Adjusted for: |
| | | | | |
| Depreciation | 4 & 13 |
| | 831,681 |
| 853,633 |
| Depreciation of right-of-use assets | 4 & 16 |
| | 299,940 |
| 124,975 |
| Profit on disposal of tangible fixed assets | | | | (50,733) |
| (13,154) |
| (Increase)/decrease in inventories | | | | (321,803) |
| (566,749) |
| (Increase)/decrease in trade and other receivables | | | | (360,950) |
| (82,993) |
| (Increase)/decrease in other financial assets | | | | 263,307 |
| (28,794) |
| (Decrease)/increase in trade and other payables | | | | 1,105,042 |
| (915,596) |
| (Increase in provisions | | | | 280,425 |
| - |
| Share based payment (credit)/charge | | | | - |
| (486,368) |
| Finance income | | | | (25,019) |
| (1,802) |
| Cash generated from operations |
| | | 7,465,457 |
| 6,620,477 |
|
| | | | | | |
| Finance costs | | | | 160,494 |
| 83,190 |
| Taxation paid | | | | (1,341,087) |
| (1,407,391) |
| | | | |
|
| |
| Net cash inflow from operating activities |
| | | 6,284,864 |
| 5,296,276 |
|
| | | | | | |
| Cash flows from investing activities |
| | | | | |
| Purchases of property, plant and equipment | | | | (1,961,233) |
| (1,133,926) |
| Proceeds from sale of property, plant and equipment | | | | 61,003 |
| 16,014 |
| Interest received | | | | 25,019 |
| 1,802 |
| Net cash outflow from in investing activities |
| | | (1,875,211) |
| (1,116,110) |
| | | | | | | |
| Cash flows from financing activities |
| | | | | |
| Repayment of finance leases | | | | (260,192) |
| (39,255) |
| Repayment of borrowings | | | | (116,942) |
| (132,027) |
| Dividends paid | 8 |
| | (3,090,000) |
| (2,480,000) |
| Interest paid | | | | (160,494) |
| (83,190) |
| Net cash outflow from financing activities |
| | | (3,627,628) |
| (2,734,472) |
| | | | | | | |
| Net increase in cash and cash equivalents |
| | | 782,025 |
| 1,445,694 |
|
| | | | | | |
| Cash and cash equivalents at 1 April 2022 | | | | 6,571,558 |
| 5,125,864 |
|
| | | | | | |
| Cash and cash equivalents at 31 March 2023 | 32 |
| | 7,353,583 |
| 6,571,558 |
The notes on pages form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
| | | | | | | Attributable to the owners of the Parent Company |
| | ||||
| | | | | | | | | | As restated |
| As restated | |
|
| Share capital £ |
| Capital redemption reserve |
| Share option reserve |
| Revaluation reserve |
| Retained earnings |
| Total | |
| £ | £ | £ | £ | £ | ||||||||
|
| | | |
| ||||||||
|
| | | | | | | | | | | | |
| At 31 March 2021 | 400,000 |
| 40 |
| 488,596 |
| 2,622,092 |
| 8,643,415 |
| 12,154,143 | |
|
| | | | | | | | | | | | |
| Profit for the year | - | | - | | - | | - | | 6,311,616 | | 6,311,616 | |
| Revaluation of freehold property | - | | - | | - | | 1,250,175 | | - | | 1,250,175 | |
| Deferred tax on revaluation of freehold property | - | | - | | - | | (237,533) | | - | | (237,533) | |
| Total comprehensive income for the year | - | | - | | - | | 1,012,642 | | 6,311,616 | | 7,324,258 | |
| Transactions with owners in their capacity as owners |
| | | | | | | | | | | |
| Share-based payments | - | | - | | (486,368) | | - | | - | | (486,368) | |
| Deferred tax on share-based payments | - | | - | | (2,228) | | - | | - | | (2,228) | |
| Adjustment to asset lives (see below*) | - | | - | | - | | - | | 330,812 | | 330,812 | |
| Deferred tax on adjust to asset live | | - | | - | | - | | - | | (62,854) | | (62,854) |
| Dividends paid | - | | - | | - | | - | | (2,480,000) | | (2,480,000) | |
| At 31 March 2022 | 400,000 |
| 40 |
| - |
| 3,634,734 |
| 12,742,989 |
| 16,777,763 | |
|
| | | | | | | | | | | | |
| Profit for the year | - | | - | | - | | - | | 4,236,671 | | 4,236,671 | |
| Revaluation of freehold property | - | | - | | - | | 187,665 | | - | | 187,665 | |
| Deferred tax on revaluation of freehold property | - | | - | | - | | (35,656) | | - | | (35,656) | |
| Tax rate changes | | | | | | | | | | (337,088) | | (337,088) |
| Total comprehensive income for the year | - | | - | | - | | 152,009 | | 3,899,583 | | 4,051,592 | |
| Transactions with owners in their capacity as owners |
| | | | | | | | | |
| |
| Dividends paid | - | | - | | - | | - | | (3,090,000) | | (3,090,000) | |
| At 31 March 2023 | 400,000 |
| 40 |
| - |
| 3,786,743 |
| 13,552,572 |
| 17,739,355 | |
The notes on pages form an integral part of these financial statements.
Cake Box Holdings Plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1. General information
Cake Box Holdings Plc is a listed Company limited by shares, incorporated and domiciled in England and Wales. Its registered office is 20 - 22 Jute Lane, Enfield, Middlesex, EN3 7PJ.
The financial statements cover Cake Box Holdings Plc ('Company') and the entities it controlled at the end of, or during, the financial year (referred to as the 'Group').
The principal activity of the Group continues to be the specialist retailer of fresh cream cakes and franchise operator.
2. Accounting policies
2.1 Basis of preparation of financial statements
The financial information set out in this statement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. This set of financial results was approved by the Board on 25 June 2023. The financial information for the years ended 31 March 2023, 31 March 2022 and 31 March 2021 has been extracted from the statutory accounts for each year. The auditors' report on the 2023 statutory accounts was (i) unqualified, (ii) did not include references to any matters to which the auditor drew attention by way emphasis without qualifying its reports and (iii) did not contain statements under section S498(2) or S498(3) of the Companies Act 2006.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with those standards. The Company expects to publish full financial statements that comply with International Financial Reporting Standards in August 2023.
The consolidated financial statements for the year ended 31 March 2023 have been prepared in accordance with United Kingdom adopted International Financial Reporting Standards (UK Adopted IFRS) and those parts of the Companies Act 2006 that are applicable to companies which apply UK adopted IFRS.
The consolidated financial statements have been prepared under the historical cost convention, other than certain classes of property, plant and equipment.
The numbers presented in the financial statements have been rounded to the nearest pound (£) unless otherwise stated.
Sources of estimation uncertainty
The preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis and any revision to estimates or assumptions are recognised in the period in which they are revised and in future periods affected.
Significant judgements and estimates
The material areas in which estimates, and judgements are applied are as follows:
Provisions - Judgement and Estimate
The Group had previously recognised provisions following a data breach which impacted the Group's website payment system. The provision relates to the fine received by the merchant service provider, and estimated costs associated including potential fines from the ICO in respect to GDPR breaches and associated legal and professional fees. Management use judgement in respect of potential fees and fines and estimates to calculate the quantum of costs.
The Group applies the Expected Cash Loss (ECL) on trade and other receivables and on loans to franchisees as set out in the accounting policy on financial instruments.
Freehold property - Judgement
Freehold properties are held at valuation. When measuring the fair value of an asset or liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.as prices) or indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of investment property was determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The independent valuers provide the fair value of the Group's investment property portfolio every 12 months.
2.2 Functional and presentation currency
The currency of the primary economic environment in which the Parent and its subsidiaries operate (the functional currency) is Pound Sterling ("GBP or £") which is also the presentation currency.
2.3 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 29 to the Company's separate financial statements.
2.4 Application of New and Revised IFRS's
At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective and are not expected to have a material impact on the Group:
| | | Effective Date |
| IAS 1 | The amendments aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies.
| 1 January 2023 |
| IAS 12 | Amendments requiring a company to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deductible temporary differences.
| 1 January 2023 |
| IAS 1 | Amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability.
| 1 January 2024 |
| IFRS 16 | Amendments include requirements for sale and leaseback transactions in IFRS 16 to explain how an entity accounts for a sale and leaseback after the date of the transaction | 1 January 2024 |
| | | Effective Date |
| IAS 1 & IAS 8 | Amendments regarding the disclosure of accounting policies and amendments regarding the definition of accounting estimates.
| 1 January 2023 |
| IAS 12 | Amendments to deferred Tax Related to Assets and Liabilities arising from a Single Transaction.
| 1 January 2023 |
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors that make strategic decisions. Whilst the Group trading has numerous components, the chief operating decision maker (CODM) is of the opinion that there is only one operating segment. This is in line with internal reporting provided to the executive directors.
2.6 Going concern
The directors pay careful attention to the cost base of the Group ensuring not only that it is kept at a level to satisfy the commercial requirements but also that it remains appropriate to the level of activity of the Group and the financial resources available to it.
The current cash balance has increased by £0.8m to £7.4m, the Group continues to be cash generative.
Based on the current working capital forecast, there is no need to raise additional funds as the Group considers that they are in a position where the scenario of not meeting liabilities is remote. After making enquiries and considering the assumptions upon which the forecasts have been based, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the period of at least twelve months from the date of approval of these financial statements. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
2.7 Revenue recognition
The Group recognises revenue from the following major sources:
· Sale of sponges, fresh cream and other goods to franchisees
· Online sales of cakes and related products to customers
· Franchise package
Sale of sponges and related ingredients to franchisees
For sales of goods to franchisees, revenue is recognised when control of the goods has transferred, being at the point at which the goods are dispatched. Payment of the transaction price is due within 14 days after delivery. The Group actively works with its franchisees to ensure credit terms are met and if terms are required to be extended a suitable debt recovery plan is agreed.
Online sales of cakes and related products to customers
Online sales which include click and collect sales where the franchisee has the primary responsibility for the fulfilment of the order and the Group is collecting consideration on behalf of the franchisee as agent are not recognised as revenue of the Group. Only the net commission amount is recognised. Revenue is recognised at the date of order and payment is taken at this point.
Franchise package
The franchise package consists of up-front revenues which relate to pre and post-opening costs mainly for store fit-out; and initial set up costs to cover site selection, pre opening support, and franchisee and staff training. Each part is considered distinct.
The pre and post-opening costs are required to get the new franchisee trading and are therefore recognised at a point in time which is at the end of the month in which trading commenced. Each package is tailored to a specific franchisee's needs and elements can be added or removed as appropriate which will affect the price. Each element carries its own price.
2.8 Current and deferred taxation
Current tax liabilities
Current tax for the current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of the current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset, limited to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
A provision is recognised for those matters for which the tax determination is uncertain, but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.
No material uncertain tax positions exist as at 31 March 2023. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
Current taxes are calculated using tax rates and laws that are enacted or substantively enacted at the reporting date.
Deferred Tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and their corresponding tax bases (known as temporary differences). Deferred tax liabilities are recognised for all temporary differences that are expected to increase taxable profit in the future. Deferred tax assets are recognised for all temporary differences that are expected to reduce taxable profit in the future, and any unused tax losses or unused tax credits, limited to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which it expects the deferred tax asset to be realised or the deferred tax liability to be settled.
Deferred taxes are calculated using tax rates and laws that are enacted or substantively enacted at the reporting date that are expected to apply as or when the temporary differences reverses.
Tax Expense
Income tax expense represents the sum of the tax currently payable and deferred tax movement for the current period. The tax currently payable is based on taxable profit for the year.
Income taxes are recognised in profit or loss unless they relate to items recognised in other comprehensive income or equity, in which case the income tax is recognised in other comprehensive income or equity respectively.
2.9 Property, Plant and Equipment - held at cost
Property, plant and equipment, other than investment and freehold properties, are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Land is not depreciated. Depreciation on other assets is charged to allocate the cost of assets less their residual value over their estimated useful lives, using the straight‑line method.
Depreciation is provided on the following annual basis:
| Freehold property improvements | - | Over 4 to 30 years |
| Plant & machinery | - | 4 years |
| Motor vehicles | - | 4 years |
| Fixtures & fittings | - | Over 4 to 12 years |
| Assets under construction | - | Not depreciated |
Assets under the course of construction are carried at cost less any recognised impairment loss. Depreciation of these assets commences when the assets become available for use.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the profit or loss.
2.10 Tangible fixed assets - held at valuation
Individual freehold properties are carried at fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are undertaken with sufficient regularity to ensure the carrying amount does not differ materially from that which would be determined using fair value at each Consolidated Statement of Financial Position date.
Fair values are determined by an independent valuer and updated by the directors from market-based evidence.
Revaluation gains and losses are recognised in Other Comprehensive Income unless losses exceed the previously recognised gains or reflect a clear consumption of economic benefits, in which case the excess losses are recognised in the profit or loss.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis.
2.12 Financial instruments
Recognition of Financial Instruments
Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables without a significant financing component are initially measured at transaction price which approximates fair value at the transaction date. All sales are made on the basis of normal credit terms, and the receivables do not bear interest. Where credit is extended beyond normal credit terms, receivables are measured at amortised cost using the effective interest method. All trade receivables are subsequently measured at amortised cost. At the end of each reporting period, the carrying amounts of trade and other receivables are reviewed. Impairment allowance for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such allowances are recorded in a separate allowance account with the loss being recognised in the statement of profit or loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Loans to franchisees
Loans to franchisees include an upfront charge which is spread over the term of the loan and used to calculate the effective interest rate and are initially measured at fair value and subsequently at amortised cost. At the end of each reporting period, the carrying amounts of other financial assets are reviewed on an individual balance basis and appropriate impairments is made if losses are anticipated..
Trade and other payables
Trade and other payables are initially measured at fair value and subsequently at amortised cost. Trade payables are obligations on the basis of normal credit terms and do not bear interest. Trade payables denominated in a foreign currency are translated into Sterling using the exchange rate at the reporting date. Foreign exchange gains or losses are included in other income or other expenses.
2.13 Financial instruments
Bank loans and overdrafts
All borrowings are initially recorded at fair value, net of transaction costs. Borrowings are subsequently carried at amortised cost under the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
2.14 Finance costs and income
Finance costs are charged to the profit and loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Finance income is charged to the profit and loss on receipt or accrued if there is a signed agreement in place.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and deposits with maturities of three months or less from inception, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
2.16 Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an Annual General Meeting.
2.17 Leases
The Group assesses whether a contract is, or contains, a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
· Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
· The amount expected to be payable by the lessee under residual value guarantees;
· The exercise price of purchase options if the lessee is reasonably certain to exercise the options;
· Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease
The lease liability is presented as a separate line in the Consolidated Statement of Financial Position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (at a constant rate) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
· The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using a revised discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used);
· A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy.
2.18 Employee benefits
Short Term Employee Benefits
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as leave pay and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.
Defined contribution pension plan
The Group operates a defined contribution plan for its staff. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in the profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Consolidated Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.
Termination benefits
The entity recognises the expense and corresponding liability for termination benefits when it is demonstrably committed to either of the following scenarios:
a. The termination of the employment of an employee or group of staff before the normal retirement age, or
b. The provision of termination benefits in relation to an offer made to encourage voluntary redundancy.
The value of such benefit is measured at the best estimate of the expenditure required to settle the obligation at the reporting date.
2.19 Provisions and contingencies
Provisions are recognised when the Group has an obligation at the reporting date as a result of a past event; it is probable that the Group will be required to transfer economic benefits in settlement; and the amount of the obligation can be estimated reliably.
Provisions are measured at the present value of the amount expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks to a specific obligation. The increase in the provision due to the passage of time is recognised as interest expense.
Provisions are not recognised for future operating losses.
Contingent liabilities are not recognised in the consolidated financial statements. They are disclosed if the possibility of an outflow of resources embodying economic benefit is remote. A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of economic benefit is probable.
2.20 Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.
2.21 Research and development
Research and development expenditure is charged to the Consolidated Statement of Comprehensive Income in the year in which it is incurred. The expenditure does not meet the definition of 'Development' under IAS 38.
2.22 Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.
2.23 Share based payment
Where share options are awarded to staff, the fair value of the options (measured using the Black-Scholes model) at the date of grant is charged to the profit and loss over the vesting period. Non-market vesting conditions are considered by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also considers non-vesting conditions. These are either factors beyond the control of either party or factors which are within the control of one or another of the parties. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Lapsed share options are derecognised as soon as it known that vesting conditions will not be met. Previous charges to the Statement of Comprehensive Income are credited back to this statement.
2.24 Exceptional items
Exceptional items are transactions that fall within the ordinary activities of the Group but are presented separately due to their size or incidence.
2.25 Impairment of non-financial assets
Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows or other assets of CGUs.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other asset in the CGU on a pro rate basis. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.26 Intangible assets
Intangible Assets Policy
The purpose of this policy is to outline the guidelines and procedures for managing and accounting for intangible assets, specifically focusing on Website costs, Software, and ERP Systems. These assets are valuable resources that contribute to the organisation's competitive advantage and need to be properly identified, evaluated, recorded, and monitored.
1. Recognition and Initial Measurement:
a. Website Costs:
Expenditures related to developing or acquiring a website should be capitalised when they meet
the following criteria:
- It is probable that the future economic benefits associated with the website will flow to the
organisation.
- The costs of the website can be reliably measured.
- Website costs should be amortised over their estimated useful life or expensed if they have a short useful life.
b. Software:
Software costs should be capitalised if they meet the following criteria:
- The software is intended for internal use.
- It is probable that the organisation will derive future economic benefits from the software.
- The costs of the software can be reliably measured.
- Capitalised software costs should be amortised over their estimated useful life or expensed if they have a short useful life.
c. ERP Systems:
The costs related to acquiring, implementing, and customising an Enterprise Resource Planning (ERP)
system should be capitalised if they meet the following criteria:
- The ERP system is intended for internal use.
- It is probable that the organisation will derive future economic benefits from the ERP system.
- The costs of the ERP system can be reliably measured.
- Capitalised ERP system costs should be amortised over their estimated useful life or expensed if they
have a short useful life.
3. Subsequent Expenditure:
Subsequent expenditures related to intangible assets, such as enhancements, upgrades, or additions,
should be evaluated to determine if they meet the criteria for capitalisation.
If the subsequent expenditure enhances the future economic benefits or extends the useful life of
the asset, it should be capitalised and added to the carrying amount of the asset.
Otherwise, the expenditure should be expensed as incurred.
4. Amortisation:
Intangible assets subject to amortisation should be amortised over their estimated useful lives.
The amortisation method should be applied consistently and reflect the pattern in which the asset's
economic benefits are consumed or utilised.
The amortisation expense should be recorded in the organisation's financial statements.
The estimated useful lives for current and comparative periods are as follows:
Website - 4 years
Software - 4 years
ERP - 4 years
5. Monitoring and Impairment Testing:
a. Regular Reviews:
Periodic reviews should be conducted to assess the ongoing value and useful life of intangible
assets.
Changes in market conditions, technology advancements, or other factors should be considered
during these reviews.
b. Impairment Testing:
If indicators of impairment exist, such as a significant decline in the asset's market value or changes in the asset's usefulness, an impairment test should be performed.
If an impairment is identified, the asset's carrying amount should be reduced to its recoverable amount, and an impairment loss should be recognised in the financial statements.
3. Segment reporting
Components reported to the chief operating decision maker (CODM) are not separately identifiable and as such consider there to be one reporting segment. The Group makes varied sales to its customers but none are a separately identifiable component. The following information is disclosed:
| | 2023 |
| 2022 |
| |
| | £ |
| £ |
| |
| | |||||
| Sales of sponge | 13,631,930 |
| 12,301,051 | | |
| Sales of food | 5,870,607 |
| 5,479,076 | | |
| Sales of fresh cream | 3,976,694 |
| 3,442,619 | | |
| Sales of other goods | 7,454,354 |
| 7,023,665 | | |
| Online sales commission | 1,001,192 |
| 937,640 | | |
| Franchise packages | 2,866,164 |
| 3,780,795 | | |
| |
|
| | | |
| | 34,800,941 |
| 32,964,846 | |
All revenue occurred in the United Kingdom for both financial years.
The operating segment information is the same information as provided throughout the consolidated financial statements and is therefore not duplicated.
The Group was not reliant upon any major customer during 2023 or 2022.
4. Expenses by nature
The Administrative expenses have been arrived at after charging/(crediting):
| | | | | | As restated |
| | | | 2023 |
| 2022 |
| | | | £ |
| £ |
| Wages and salaries | | | 6,140,162 |
| 5,302,849 |
| Travel and entertaining costs | | | 599,151 |
| 372,303 |
| Supplies costs | | | 481,596 |
| 293,620 |
| Professional costs | | | 1,729,948 |
| 839,897 |
| Depreciation | | | 831,681 |
| 853,633 |
| Amortisation of right-of-use assets | | | 299,940 |
| 124,975 |
| Rates and utilities costs | | | 595,697 |
| 307,200 |
| Property maintenance costs | | | 265,400 |
| 338,817 |
| Advertising costs | | | 308,564 |
| 312,907 |
| Other costs | | | 62,664 |
| 48,212 |
| Impairment of receivables | | | 280,425 |
| - |
| Exceptional items (see note 10) | | | - |
| (781,965) |
|
| | |
|
| |
| | | | 11,595,228 |
| 8,012,448 |
| | | |
|
|
|
5.Operating profit
The operating profit is stated after charging/(crediting):
| | | | As restated |
|
| 2023 |
| 2022 |
| | £ |
| £ |
| | |||
| Depreciation of tangible fixed assets | 831,681 |
| 522,821 |
| Depreciation of right-of-use asset | 299,940 |
| 124,975 |
| Stock recognised as an expense | 17,626,671 |
| 17,133,685 |
| Profit on disposal of property, plant & equipment | (50,733) |
| (13,154) |
| Fees payable to the Group's auditor and its associates for the audit of the Group's annual financial statements | 85,000 |
| 75,000 |
| Fees payable to the Group's auditor and its associates for the audit of the Group's interim financial statements | 13,000 |
| - |
| Share based payment (credit)/expense | - |
| (486,368) |
|
| | | |
6. Net finance costs
| | 2023 |
| 2022 |
| |
| Finance expenses | £ |
| £ |
| |
| | |||||
| Bank loan interest | 55,686 |
| 33,971 | | |
| Finance lease interest | 104,808 |
| 46,228 | | |
| Interest on overdue tax | - |
| 2,991 | | |
| | | | | | |
| Finance income | | | | | |
| Bank interest receivable | (25,019) |
| (1,802) | | |
| |
|
| | | |
| | 135,475 |
| 81,388 | |
7. Staff costs
Staff costs, including directors' remuneration, were as follows:
| | | | 2023 |
| 2022 |
| | | | £ |
| £ |
| Wages and salaries | | | 5,426,189 |
| 4,737,683 |
| Social security costs | | | 561,337 |
| 456,259 |
| Pension costs | | | 74,144 |
| 56,798 |
| Private health | | | 78,492 |
| 52,109 |
| | | | 6,140,162 |
| 5,302,849 |
| Reversal of share-based payment expense (note 10) | | | - |
| (486,368) |
|
| | | 6,140,162 |
| 4,816,481 |
The average monthly number of staff, including directors, for the year was 173 (FY22 - 155). The breakdown by department is as follows;
|
| | | 2023 |
| 2022 |
| | | | | | |
| Directors | | | 6 | | 7 |
| Admin | | | 41 | | 31 |
| Maintenance | | | 19 | | 17 |
| Production & Logistics | | | 107 | | 100 |
| | | |
|
| |
| | | | 173 |
| 155 |
8. Dividends
| | 2023 | | 2022 |
|
| £
| | £
|
| Interim dividend of 2.625p per ordinary share | 1,050,000 | | - |
| Final dividend of 5.1p per ordinary share proposed and paid during the year relating to the previous year's results | 2,040,000 | | - |
| Interim dividend of 2.5 per ordinary share | - | | 1,000,000 |
| Final dividend of 3.7p per ordinary share proposed and paid during the year relating to the previous year's results | - | | 1,480,000 |
| |
| | |
| | 3,090,000 | | 2,480,000 |
Since the year end the Directors recommend payment of a dividend of 5.5 pence (FY22 - 5.1 pence) per share totaling £2,120,000 (2022 - £2,040,000) for the year ended 31 March 2023.
9. Directors' remuneration and key management personnel
The Directors' remuneration is disclosed within the Directors' Remuneration Report on page 31. The Executive Directors are considered key management personnel. Employers NIC paid on Directors' remuneration in the year was £90,861 (FY22 - £114,388).
10. Exceptional items
| | | | |
| | 2023 | | 2022 |
| | £
| | £
|
| Lapse of share options (note 20) | - | | (486,368) |
| Reversal of accrued rates | - | | (295,597) |
| | | | |
| | - | | (781,965) |
In FY22 rates costs included a credit of £295,597 related to an accrual raised in a previous year, which has been released on the basis the Directors have received confirmation it is no longer required.
11. Taxation
| | | | 2023 | | 2022 |
|
| | | | £ | | £ |
|
| Corporation tax | | |
| | |
|
| Current tax on profits for the year | | | 789,096 | | 1,340,469 |
|
| Adjustments in respect of previous periods | | | 8,305 | | (838) |
|
| | | |
| | |
|
| Deferred tax | | |
| | |
|
| Arising from origination and reversal of temporary differences | | | 262,433 | | 86,078 |
|
| | | |
| | |
|
| Effect of changes in tax rates | | | 142,951 | | - |
|
| Adjustments in respect of previous periods | | | 4,111 | | - |
|
| | | |
| | |
|
| Taxation on profit on ordinary activities | | | 1,206,896 | | 1,425,709 |
|
| | | |
| | |
|
| Factors affecting tax charge for the year | | |
| | |
|
| | | |
| | |
|
| The tax assessed for the year is lower than (FY22 - 19%) the standard rate of corporation tax in the UK of 19% (FY22 - 19%). The differences are explained below: |
| |||||
| |
| |||||
| | | | 2023 | | 2022 |
|
| | | | £ | | £ |
|
| Profit on ordinary activities before tax | | | 5,443,567 | | 7,737,325 |
|
| | | |
| | |
|
| Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (FY22 - 19%) | | | 1,034,279 | | 1,470,092 |
|
| Effects of: | | |
| | |
|
| Expenses not deductible for tax purposes, other than goodwill amortisation and impairment | | | 96,260 | | 11,700 |
|
| Income not taxable | | | (79,010) | | (22,267) |
|
| Deferred tax not provided | | | - | | 22 |
|
| Use of super deduction allowance | | | - | | (33,808) |
|
| | | |
| | |
|
| Effect of changes in tax rates | | | 142,951 | | 808 |
|
| Adjustments to tax charge in respect of prior periods | | | 12,416 | | (838) |
|
| | | |
| | |
|
| Total tax charge for the year |
|
| 1,206,896 |
| 1,425,709 |
|
Factors that may affect future tax charge
At the Budget 2021 on 3 March 2021, the Government announced that the Corporation Tax rate will increase to 25% for companies with profits above £250,000 with effect from 1 April 2023, as well as announcing a number of other changes to allowances and treatment of losses. This will impact the Company's future tax charge accordingly.
12. Deferred taxation
|
| | | | As restated |
| |
| | 2023 | | | 2022 |
| |
| | £ | | | £ |
| |
| | | | | |
| |
| Balance brought forward | 1,061,684 | | | 675,227 |
| |
| |
| | | |
| |
| Charged to other comprehensive income: |
| | | |
| |
| Deferred tax on revalued freehold property | 35,656 | | | 237,533 |
| |
| Tax rate changes | 337,088 | | | - |
| |
| |
| | | |
| |
| Charged directly to reserves: |
| | | |
| |
| Employee benefits (including share-based payments) | - | | | 2,228 |
| |
| Adjustment in respect of prior years | - | | | 62,854 | ||
| |
| | | |
| |
| Charged to profit and loss: |
| | | |
| |
| Accelerated capital allowances | 266,659 | | | (7,557) |
| |
| Tax rate changes | 142,951 | | | - | ||
| Share -based payments | - | | | 93,219 |
| |
| Adjustments in respect of prior periods | 4,111 | | | - |
| |
| Other short-term timing differences | (4,226) | | | (1,820) |
| |
| |
| | | |
| |
| Balance carried forward | 1,843,923 | | | 1,061,684 |
| |
|
| | | |
|
| | 2023 | | 2022 |
|
| | £ | | £ |
|
| Deferred tax liabilities |
| | |
|
| Accelerated capital allowances | 603,425 | | 189,704 |
|
| Other short-term timing differences | (7,797) | | (3,571) |
|
| Property revaluations (including indexation) | 1,248,295 | | 875,551 |
|
| | 1,843,923 | | 1,061,684 |
|
| |
| | |
|
| |
| | |
|
| | 1,843,923 | | 1,061,684 |
|
| | | | |
|
Movements in deferred tax in direct relation to freehold property revaluation are recognised immediately against the revaluation reserve.
See note 20 for more information for restated comparatives.
13. Property, plant and equipment
| | Assets under construction | Freehold Land and Building | Freehold Improvements | Plant & machinery | Motor vehicles | Fixtures & fittings | Total |
|
| £ | £ | £ | £ | £ | £ | £ |
| Cost or valuation |
| | | | | | |
| At 1 April 2021 | 1,120,573 | 6,176,810 | - | 1,073,744 | 702,870 | 1,930,695 | 11,004,692 |
| Additions | - | 478,876 | 76,570 | 107,697 | 373,516 | 97,267 | 1,133,926 |
| Disposals | - | - | - | - | (43,910) | - | (43,910) |
| Transfers between classes | (1,120,573) | 1,120,573 | - | - | - | - | - |
| Reclassification of Intangible assets | - | - | - | (288,205) | - | - | (288,205) |
| Revaluations | - | 1,250,175 | - | - | - | - | 1,250,175 |
| As restated at 31 March 2022 | - | 9,026,434 | 76,570 | 893,236 | 1,032,476 | 2,027,962 | 13,056,678 |
|
| | | | | | | |
| Depreciation |
| | | | | | |
| At 1 April 2021 | - | 187,243 | | 786,799 | 399,043 | 1,130,005 | 2,503,090 |
| Charge for the year | - | 234,191 | 2162 | 84,866 | 180,840 | 351,574 | 853,633 |
| Adjustment to asset lives (see below*) | - | - | - | 109,292 | (23,814) | (416,290) | (330,812) |
| Removal of depreciation charged on Intangible assets | - | - | - | (180,932) | - | - | (180,932) |
| Transfers between classes (depreciation) | - | - | - | - | - | - | - |
| Disposals | - | - | - | - | (41,049) | - | (41,049) |
| As restated at 31 March 2022 | - | 421,434 | 2,162 | 800,025 | 515,020 | 1,065,289 | 2,803,930 |
|
| | | | | | | |
| Net book value | | | | | | | |
| As restated 31 at March 2022 | - | 8,605,000 | 74,408 | 93,211 | 517,456 | 962,673 | 10,252,748 |
|
|
|
|
|
|
|
|
|
| | Assets under construction | Freehold Land and Building | Freehold improvements | Plant & machinery | Motor vehicles | Fixtures & fittings | Total |
|
| £ |
| £ | £ | £ | £ | £ |
| Cost or valuation |
| | | | | | |
| At 1 April 2022 | - | 9,026,434 | 76,570 | 893,236 | 1,032,476 | 2,027,962 | 13,056,678 |
| Additions | - | - | 711,560 | 50,150 | 481,942 | 371,557 | 1,615,209 |
| Disposals | - | - | - | - | (112,002) | - | (112,002) |
| Revaluations | - | 187,665 | - | - | - | - | 187,665 |
| At 31 March 2023 | - | 9,214,099 | 788,130 | 943,386 | 1,402,416 | 2,399,519 | 14,747,550 |
|
| | | | | | | |
| Depreciation |
| | | | | | |
| At 1 April 2022 | - | 421,434 | 2,162 | 800,025 | 515,020 | 1,065,289 | 2,803,930 |
| Charge for the year | - | 77,665 | 118,970 | 41,911 | 286,595 | 252,430 | 777,570 |
| Disposals | - | - | - | - | (101,733) | - | (101,733) |
| At 31 March 2023 | - | 499,099 | 121,132 | 841,936 | 699,882 | 1,317,719 | 3,479,767 |
|
| | | | | | | |
| Net book value | | | | | | | |
| At 31 March 2023 | - | 8,715,000 | 666,998 | 101,450 | 702,535 | 1,081,800 | 11,267,783 |
Assets under construction became operational during the year.
* During the year the Directors reviewed the asset lives of the various assets and determined that some assets were still being used by the business despite being almost fully depreciated. The asset lives were amended to more appropriate lengths and the depreciation for all assets in use were adjusted.
As at 31 March 2023, all freehold property was valued by independent 3rd party qualified valuers, in accordance with the RICS Valuation - Global Standards 2017 (the Red Book). During their valuation, the valuers have taken into account the various geographical areas the properties are located in and the market values of similar properties in the same areas. The directors believe these valuations to be representative of the fair value as at the balance sheet date.
The fair value of freehold property is categorised as a level 3 recurring fair value measurement.
The following table summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurements:
| Property | Fair value at 31 March 2023 £ | Valuation technique | Sq ft | Rate per sq ft | |||
|
| | | | | Average |
| |
| Enfield | 7,000,000 | Vacant possession | 39,121 | | 179 |
| |
| Coventry | 1,150,000 | Vacant possession | 13,000 | | 83 |
| |
| Bradford | 565,000 | Vacant possession | 9,358 | | 56 |
| |
| | | | | | |
| |
| Total | 8,715,000 | | | | | | |
| If the Freehold properties had been accounted for under the historic cost accounting rules, the properties would have been measured as follows: | |||
| | 2023 | |
2022 |
| | £ | | £ |
| |
| | |
| Historic cost | 3,433,746 | | 3,433,746 |
14. Change in Asset Lives and Transfer of Intangible Assets
During the year the Directors reviewed the fixed assets category and made adjustments to change the asset lives of various assets and determined that some assets were still being used by the business despite being almost fully depreciated. The change in asset lives was made to better align the use of the assets with the periods they were depreciated so that the charge in the profit and loss better represented that use.
The following table summarises the impact of changes in the asset lives and freehold land & buildings revaluation reserves on the Group's financial statements as at 31 March 2022.
I. Consolidated statement of financial position
| | As Reported 31 March 2022 | Adjustment | As Restated 31 March 2022 |
| | £ | £ | £ |
| Intangible assets | - | 107,273 | 107,273 |
| Property, plant and equipment | 10,029,209 | 223,539 | 10,252,748 |
| Right of use assets | 2,874,430 | - | 2,874,430 |
| Loans to franchisees | 710,059 | - | 710,059 |
| Total non-current assets | 13,613,698 | 330,812 | 13,944,510 |
| Current assets | 11,951,236 | | 11,951,236 |
| Total assets | 25,564,934 | 330,812 | 25,895,746 |
| Retained earnings | 12,475,031 | 267,958 | 12,742,989 |
| Others | 4,034,774 | - | 4,034,774 |
| Total Equity | 16,509,805 | 267,958 | 16,777,763 |
| Total Liabilities | 9,055,129 | 62,854 | 9,117,983 |
| Total equity and liabilities | 25,564,934 | 330,812 | 25,895,746 |
II. Consolidated statement of profit and loss
| | As Reported 31 March 2022 | Adjustment | As Restated 31 March 2022 |
| | £ | £ | £ |
| Revenue | 32,964,846 | - | 32,964,846 |
| Cost of sales | (17,133,685) | - | (17,133,685) |
| Gross profit | 15,831,161 | - | 15,831,161 |
| Administrative expenses | (8,012,448) | 330,812 | 7,681,636 |
| Operating profit | 7,818,713 | 330,812 | 8,149,525 |
| Finance income | 1,802 | - | 1,802 |
| Finance costs | (83,190) | - | (83,190) |
| Profit before tax | 7,737,325 | 330,812 | 8,068,137 |
| Income tax expense | (1,425,709) | (62,854) | 1,488,563 |
| Profit after income tax | 6,311,616 | 267,958 | 6,579,574 |
| Other comprehensive income for the year | 1,012,642 | - | 1,012,642 |
| Total comprehensive income for the year | 7,324,258 | 267,958 | 7,592,216 |
15. Intangible Assets
| Reconciliation of carrying amount |
| | | |
|
| | | | |
| | Website | Software | ERP System | Total |
| Cost as at 1 April 2021 | 144,025 | 60,270 | 57,265 | 261,560 |
|
| | | | |
| Acquisitions |
| | | |
| | | | | |
| External work on website | 26,645 | - | - | 26,645 |
| | | | | |
| Disposals | - | - | - | - |
| | | | | |
| Amortisation to 31 March 2022 | (108,125) | (47,754) | (25,053) | (180,932) |
|
| | | | |
| Restated balance at 31 March 2022 | 62,545 | 12,516 | 32,212 | 107,273 |
|
| | | | |
| Acquisitions |
| | | |
| | | | | |
| External website design work | 144,784 | - | - | 144,784 |
| Purchase of software | - | 18,358 | - | 18,358 |
| Internally developed website work | 118,648 | - | | 118,648 |
| Internally developed ERP work | - | - | 64,233 | 64,233 |
| | | | | |
| Disposals | - | - | - | - |
| | | | | |
| Amortisation charge Financial Year 2023 | (28,447) | (11,347) | (14,316) | (54,110) |
|
| | | | |
| Balance at 31 March 2023 | 297,530 | 19,527 | 82,129 | 399,186 |
16. Leases
The Consolidated Statement of Financial Position shows the following amounts in relation to leases:
| | | | | | Properties |
|
| | | | | £ |
| Cost |
| | | | |
| At 1 April 2022 | | | | 2,999,405 | |
| Additions | | | | | - |
| At 31 March 2023 |
| | | 2,999,405 | |
|
| | | | | |
| Depreciation |
| | | | |
| At 1 April 2022 | | | | 124,975 | |
| Charge for the year | | | | 299,940 | |
| At 31 March 2023 |
| | | 424,915 | |
|
| | | | | |
| Net book value |
| | | | |
| At 31 March 2023 |
| | | 2,574,490 | |
| Net book value |
| | | |
| At 31 March 2022 |
| | | 2,874,430 |
The Group leases one property and the term is ten years. There are no variable lease payments or commitment to short term leases.
| Lease liabilities | | | | 2023 | | 2022 |
| | | | | £ | | £ |
| | | | |
| | |
| Current | | | | 270,118 | | 260,191 |
| Non-current | | | | 2,429,838 | | 2,699,958 |
| | | | |
| | |
|
| | |
| 2,699,956 | | 2,960,149 |
The Group's obligations are secured by the lessor's title to the leased assets for such leases.
Amounts recognised in the Consolidated Statement of Comprehensive Income are as follows:
| | 2023 | |
2022 |
| | £ | | £ |
| | | | |
| Depreciation expense of right-of-use assets | 299,940 | | 124,975 |
| Interest expense on lease liabilities | 104,808 | | 46,228 |
The total cash outflow for leases amount to £365,000 (FY22 - £85,483).
17. Inventories
| | | | | 2023 | | 2022 |
| | | | | £ | | £ |
| | | | |
| | |
| Finished goods and goods for resale | | | | 2,790,724 |
| 2,468,921 |
Inventories are charged to cost of sales in the Consolidated Statement of Comprehensive Income.
18. Trade and other receivables
| | | 2023 |
| 2022 |
| | | £ |
| £ |
| | | | | |
| Trade receivables | | 1,743,776 |
| 2,002,807 |
| Other receivables | | 370,222 |
| 280,613 |
| Prepayments | | 569,623 |
| 269,789 |
| | |
|
| |
| | | 2,683,621 |
| 2,553,209 |
The fair value of those trade and other receivables classified as financial assets at amortised cost are disclosed in the financial instruments (note 26).
The Group's exposure to credit and market risks, including impairments and allowances for credit losses, relating to trade and other receivables is disclosed in the financial risk management and impairment of financial assets note (note 27).
Trade receivables are non-interest bearing, are generally on 14-day terms and are shown net of a provision for impairment. Management's assessment is that a provision of £xx is required against certain receivables from franchisees.
The age profile of the trade receivables is shown in Note 27
19. Loans to Franchisees
| | | | | 2023 |
| 2022 |
| | | | | £ |
| £ |
| | | | | | | |
| Loans to franchisees | | | 754,412 |
| 1,067,607 | |
| | | | | | | |
| Non-current | | | 508,532 |
| 710,059 | |
| Current | | | | 245,880 |
| 357,548 |
Loans are interest free and payable in equal monthly instalments. All non-current assets are due within five years of the statement of financial position date. The carrying amount of the loans is considered to be equal to their fair value.
20. Share capital
| | | 2023 | | 2022 |
| | | £ | | £ |
| | |
| | |
| 40,000,000 Ordinary shares of £0.01 each | | 400,000 | | 400,000 |
All of the ordinary shares of £0.01 each carry voting rights, the right to participate in dividends, and entitle the shareholders to a pro-rata share of assets on a winding up.
21. Reserves
The following describes the nature and purpose of each reserve within equity:
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Revaluation reserve
Gain/(losses) arising on the revaluation of the Group's property (other than investment property).
Retained earnings
All other net gains and losses and transactions with owners (e.g., dividends, fair value movements of investment property) not recognised elsewhere.
Share option reserve
Gains/losses arising on amounts in respect of equity-settled share options outstanding. See note 21 for more information.
22. Share-Based Payments
The Group's Share based payment scheme lapsed in 2022. The Group does not currently have a new Share based payment scheme.
23. Borrowings
| | | 2023 | | 2022 |
|
|
| | £ | | £ |
|
| Non-current borrowings | |
| | |
|
| Bank loans | | 1,132,292 | | 1,185,978 |
|
| | |
| | |
|
|
| | 1,132,292 | | 1,185,978 |
|
| | |
| | |
|
| Current borrowings | |
| | |
|
| Bank loans | | 104,498 | | 167,754 |
|
| | |
| | |
|
| | | 104,498 | | 167,754 |
|
Bank loans have fixed charges over the properties to which they relate and interest of 2.15% - 2.23% above Bank of England base rate are charged on the loans. The loans are repayable in monthly instalments with final payments due between March 2024 and November 2025.
24. Trade and other payables
| | | | | 2023 |
| 2022 |
|
| | | | £ |
| £ |
|
| | | | | | |
| Trade payables | | | 2,648,770 |
|
1,994,411 | |
| Other taxation and social security | 268,635 |
|
340,035 | |||
| Other payables | | | 316,375 |
|
36,497 | |
| Accruals | | | | 532,633 |
|
290,429 |
|
| | | |
|
| |
|
| | | | 3,766,413 |
|
2,661,372 |
The fair value of the trade and other payables classified as financial instruments are disclosed in the financial instruments (note 27).
The Group's exposure to market and liquidity risks related to trade and other payables is disclosed in the financial risk management and impairment of financial assets note. The Group pays its trade payables on terms and as such trade payables are not yet due at the statement of financial position dates.
25. Provisions
The provision includes a website data breach in 2020. The amount remaining represents potential fines in respect of the website data breach and is based upon independent legal advice. The provision for bad debts is made up of a provision for the impairment of franchisee loans of £49,888 (FY22: Nil) and a provision for the impairment of trade receivables of £230,537 (FY22:Nil)
| | | | 2023 |
| 2022 |
| | | | £ |
| £ |
| Website data breach | 243,100 |
| 243,100 | ||
| | | | 243,100 |
| 243,100 |
26. Pension commitments
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £74,144 (FY22 - £56,798). Contributions totaling £16,904 (FY22- £19,890) were payable to the fund at the statement of financial position date and are included in other payables (see note 22).
27 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. Related party transactions are considered to be at arms-length.
Key management personnel are only the executive and non-executive directors and details of the amounts paid to them are included within note 9 and the Directors Remuneration Report on the Annual Report.
Key management personnel had an interest in dividends as follows:
|
|
| 2023 | 2022 |
| | | £ | £ |
| | |
| |
| Sukh Chamdal | | 777,435 | 792,851 |
| Jaswir Singh | | 45,815 | 34,473 |
| Neil Sachdev | | 2,589 | 1,148 |
| Alison Green | | 464 | 222 |
| Martin Blair | | 1,545 | - |
| | | 827,848 | 828,694 |
During the year the Group made sales to companies under the control of the directors. All sales were made on an arms-length basis. These are detailed as follows with director shareholding % shown in brackets:
| Mr. Sukh Chamdal |
| 2023 | 2022 | ||
|
|
| £ | £ | £ | £ |
|
|
| Sales | Balance | Sales | Balance |
| Cake Box (Crawley) Limited (0%)* |
| 170,370 | 11,163 | 168,684 | 11,095 |
| Cake Box CT Limited (0%) |
| 287,837 | 18,198 | 280,706 | 19,326 |
| Cake Box (Strood) Limited (0%) |
| 132,353 | 6,824 | 157,247 | 2,241 |
| Cake Box (Gravesend) Limited (0%)** |
| 159,997 | 7,744 | 123,162 | (1,021) |
|
|
|
|
| | |
|
|
| 750,557 | 43,929 | 729,799 | 31,641 |
* 100% Owned by Mr. Chamdal's daughter
** This store no longer considered a related party
| Dr Jaswir Singh |
| 2023 | 2022 | ||
|
|
| £ | £ | £ | £ |
| |
| Sales | Balance | Sales | Balance |
| Luton Cake Box Limited (10%) |
| 410,560 | 18 | 419,676 | 15,544 |
| Peterborough Cake Box Limited (30%) |
| 229,149 | (324) | 258,807 | 5,983 |
| Cream Cake Limited (30%) |
| 246,223 | - | 230,591 | 12,971 |
| MK Cakes Limited (0%)*** |
| 228,082 | - | 292,202 | 10,532 |
| Bedford Cake Box Limited (0%)*** |
| 197,808 | - | 199,553 | 5,436 |
| Chaz Cakes Limited (50%) |
| 177,785 | - | 266,563 | 6,446 |
| Eggless Cake Company (50%) |
| 178,344 | - | 194,201 | 9,366 |
|
|
|
|
| | |
|
|
| 1,667,951 | (306) | 1,861,593 | 66,278 |
*** 100% Owned by Dr Singh's son or daughter
28. Financial instruments
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
The significant accounting policies regarding financial instruments are disclosed in note 2.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in this (See note 87).
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
| Financial Assets | | | |
| |
| | | | Held at amortised cost | ||
| | | | 2023 |
| 2022 |
| | | | £ |
| £ |
| | | |
|
| |
| Cash and cash equivalents | | | 7,353,583 |
| 6,571,558 |
| Trade and other receivables | | | 2,344,536 |
| 2,116,254 |
| Other financial assets | | | 804,300 |
| 1,067,607 |
| Impairment of trade receivables | | | (230,537) |
| - |
| Impairment of franchisee loans | | | (49,888) |
| - |
| | | |
|
| |
|
| | | 10,221,994 |
| 9,755,419 |
| Financial Liabilities | | | |
| |
| | | | Held at amortised cost | ||
| | | | 2023 |
| 2022 |
| | | | £ |
| £ |
| | | |
|
| |
| Trade and other payables | | | 3,233,781 |
| 2,584,437 |
| Secured borrowings | | | 1,236,790 |
| 1,353,732 |
| | | |
|
| |
|
| | | 4,470,571 |
| 3,938,169 |
29. Financial risk management
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The board receives regular reports from the Chief Financial Officer through which it reviews the effectiveness of processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
Cake Box Holdings Plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
29. Financial risk management (continued)
Credit risk and impairment
Credit risk arises principally from the Group's trade and other receivables. It is the risk that the counter party fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk equals the carrying value of these items in the financial statements as the Group has the power to stop supplying the customer until payment is received in full.
Definition of default
The loss allowance on all financial assets is measured by considering the probability of default.
Receivables are considered to be in default when the principal or any interest is more than 90 days past due, based on an assessment of past payment practices and the likelihood of such overdue amounts being recovered.
Determination of credit-impaired financial assets
The Group considers financial assets to be 'credit-impaired' when the following events, or combinations of several events, have occurred before the year-end:
• significant financial difficulty of the counterparty arising from significant downturns in operating results and/or significant unavoidable cash requirements when the counterparty has insufficient finance from internal working capital resources, external funding and/or group support;
• a breach of contract, including receipts being more than 240 days past due;
• it becoming probable that the counterparty will enter bankruptcy or liquidation.
Write-off policy
Receivables are written off by the Company when there is no reasonable expectation of recovery, such as when the counterparty is known to be going bankrupt, or into liquidation or administration. Receivables will also be written off when the amount is more than 300 days past due and is not covered by security over the assets of the counterparty or a guarantee.
Impairment of trade receivables and other financial assets
The Group calculates lifetime expected credit losses for trade receivables and other financial assets using a portfolio approach. All items are grouped based on the credit terms offered and the type of product sold. The probability of default is determined at the year-end based on the aging of the receivables and historical data about default rates on the same basis. That data is adjusted if the Group determines that historical data is not reflective of expected future conditions due changes in the nature of its customers and how they are affected by external factors such as economic and market conditions.
The age profile of the trade receivables and expected credit loss is shown in the table below:
| | Expected Loss Rate | 2023 | 2022 |
| | | £ | £ |
| 0- 30 days | 0.1% | 1,509,715 | 1,475,111 |
| 30 - 60 days | 0.2% | 43,111 | 261,482 |
| 60 - 90 days | 0.5% | 32,822 | 9,132 |
| More than 90 days | 1.0% | 388,665 | 257,081 |
| Impairment provision | | (230,537) | - |
| Total | | 1,743,776 | 2,002,806 |
The Group applies the IFRS 9 simplified approach to measure credit losses using an expected credit loss provision for trade receivables.
The Group provides loans to franchisees when the banks were not lending to small businesses as they were focused on giving Covid Recovery loans. The loans are interest free with an upfront arrangement fee included in the loan. The loans are unsecured but if loan repayments are not kept up supply of product is stopped and franchisees are in breach of their franchisee agreement. As a result the Group has the option to resell the franchise to another interested party with the purchase price being used to first repay the loan and any outstanding trade receivables, with any excess going to the original franchisee. The loan periods are for periods of one or five years.
The Group uses three categories for loans which reflect their credit risk and how the loan loss provision is determined for each of those categories. A summary of the assumptions underpinning the Group's expected credit loss model is as follows:
| Category | Group definition of category | Basis for recognition of expected credit loss provision |
| Performing | Loans whose credit risk is in line with original expectations | 12 month expected losses. Where the expected lifetime of an asset is less than 12 months, expected losses are measured at its expected lifetime (stage 1). |
| Underperforming | Loans for which a significant increase in credit risk has occurred compared to original expectations; a significant increase in credit risk is presumed if interest and/or principal repayments are 30 days past due (see above in more detail) | Lifetime expected losses (stage 2). |
| Non-performing (credit impaired) | Interest and/or principal repayments are 60 days past due or it becomes probable a customer will enter bankruptcy | Lifetime expected losses (stage 3). |
| Write-off | Interest and/or principal repayments are 120 days past due and there is no reasonable expectation of recovery | Asset is written off |
Interest-free loans are provided to franchisees to assist them with new store build costs. The Group does not require the franchisees to pledge collateral as security against the loan.
Over the term of the loans, the group accounts for its credit risk by appropriately providing for expected credit losses on a timely basis. In calculating the expected credit loss rates, the Group considers historical loss rates and adjusts for forward-looking macroeconomic data. The Group provides for credit losses against loans to franchisees as follows:
| Group internal credit rating as at 31 March 2023 | Expected credit loss rate | Gross carrying amount (stage 1)
| Gross carrying amount (stage 2) | Gross carrying amount (stage 3) |
| | | £ | £ | £ |
| High | 0.1% | 754,412 | - | - |
| Medium | 10.0% | - | - | - |
| Low | 20.0% | 49,888 | - | - |
| | | | | |
| | Performing | Under-performing | Non-performing | Total |
| | £ | £ | £ | £ |
| Individual financial assets transferred to under-performing (lifetime expected credit losses) | - | 49,888 | - | 49,888 |
No significant changes to estimation techniques or assumptions were made during the reporting period.
The loss allowance for loans to franchisees as at 31 March 2022 and 31 March 2023 reconciles to the opening loss allowance for that provision as follows:
The impairment provision of £280,425 (FY22: Nil) relates £230,537 (FY22: Nil) to specifically impaired trade receivable debt and £49,888 (FY22: Nil) franchisee loans.
Liquidity risk
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The Board receives cash flow projections on a regular basis which are monitored regularly. The Board will not commit to material expenditure in respect of its ongoing development programme prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:
| Borrowings | |||
| | 2023 |
| 2022 |
| | £ |
| £ |
| |
|
| |
| Borrowings - Due within one year | 104,498 |
| 167,754 |
| Borrowings - Due between one to two years | 109,296 |
| 167,754 |
| Borrowings - Due after more than two years | 1,022,996 |
| 1,018,224 |
| |
|
| |
| | 1,236,790 |
| 1,353,732 |
| |
|
| |
| Right-of-use assets - Due within one year | 270,118 | | 260,191 |
| Right-of-use assets - Due between one to two years | 280,425 | | 270,119 |
| Right-of-use assets - Due between two to five years | 907,113 | | 873,777 |
| Right-of-use assets - Due after more than five years | 1,242,300 |
| 1,556,062 |
| | 2,699,956 |
| 2,960,149 |
| Trade and other payables |
| |
| | 2023 | 2022 |
| | £ | £ |
| | | |
| 0 to 30 Days | 2,995,879 | 2,049,774 |
| 30 to 60 Days | 768,490 | 249,613 |
| 60 to 90 Days | - | 17,646 |
| 90 to 120 Days | 2,045 | 73,891 |
| 120 Days to 1 year | - | 193,513 |
|
|
| |
| | 3,766,414 | 2,584,437 |
Interest rate risk
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining good relationships with banks and other lending providers and by ensuring cash reserves are high enough to cover the debt. Where possible fixed terms of interest will be sought.
The Group analyses the interest rate exposure on a regular basis. A sensitivity analysis is performed by applying a simulation technique to the liabilities that represent major interest-bearing positions. Various scenarios are run taking into consideration refinancing, renewal of the existing positions, alternative financing and hedging. Based on the simulations performed, the impact on profit or loss and net assets of a 100 basis-point shift (FY22: 25 basis-point) would be a change of £12,368 (FY22- £3,384).
Capital risk management
The Group considers its capital to comprise its ordinary share capital and retained profits as its equity capital. In managing its capital, the Group's primary objective is to provide return for its equity shareholders through capital growth and future dividend income. The Group's policy is to seek to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through new share issues or the issue of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives.
Details of the Group's capital are disclosed in the Consolidated Statement of Changes in Equity.
There have been no other significant changes to the Group's management objectives, policies and procedures in the year nor has there been any change in what the Group considers to be capital.
Currency risk
The Group is not exposed to any significant currency risk. The Group manages any currency exposure by retaining a small holding in US Dollars however all other cash balances are held in Sterling.
30. Events after the reporting period
Post year end the directors have recommended dividends of 5.5 p per share (FY22 - 5.1 p per share).
31. Subsidiary undertakings
The following were subsidiary undertakings of the Company included in the Group results:
| Name
| Country of | Class of shares | Holding | Principal activity | |
| Eggfree Cake Box Limited | United Kingdom | Ordinary | 100% | Franchisor of specialist cake stores | |
| Chaz Limited | United Kingdom | Ordinary | 100% | Property rental company | |
The above subsidiaries have the same registered office address as Cake Box Holdings Plc.
32. Notes supporting statement of cashflows
Cash and cash equivalents for the purposes of the statement of cashflows comprise of:
| | 2023 |
| 2022 |
| | £ |
| £ |
| |
|
| |
| Cash at bank available on demand | 7,353,183 |
| 6,570,739 |
| Cash on hand | 400 |
| 819 |
| |
|
| |
| | 7,353,583 |
| 6,571,558 |
There were no significant non-cash transactions from financing activities (FY22 - none).
Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions below:
| | Non-current lease liabilities | | Current lease liabilities | | Non-current borrowings | | Current borrowings | | Total |
| £ | £ | £ | £ | £ | |||||
|
As at 31 March 2021 |
- | |
- | |
1,318,005 | |
167,754 | | 1,485,759 |
| Cash flows |
| | | | | | | | |
| New leases | 2,999,405 | | - | | - | | - | | 2,999,405 |
| Repayments | (85,484) | | - | | - | | (167,754) | | (253,238) |
| Non-Cash flows: |
| | | | | | | | |
| Interest | 46,228 | | - | | 35,727 | | - | | 81,955 |
| Non-current liabilities becoming current during the year | (260,191) | | 260,191 | | (167,754) | | 167,754 | | - |
| As at 31 March 2022 | 2,699,958 | | 260,191 | | 1,185,978 | | 167,754 | | 4,313,881 |
| Cash flows |
| | | | | | | | |
| New leases | - |
| - |
| - |
| - |
| - |
| Repayments | - |
| (365,000) |
| - |
| (172,628) |
| (537,628) |
| Non-Cash flows: |
| | | | | | | | |
| Interest | - |
| 104,808 |
| 50,812 |
| 4,874 |
| 160,494 |
| Non-current liabilities becoming current during the year | (270,119) |
| 270,119 |
| (104,498) |
| 104,498 |
| - |
|
| | | | | | | | | |
| As at 31 March 2023 | 2,429,839 |
| 270,118 |
| 1,132,292 |
| 104,498 |
| 3,936,747 |
33. Ultimate controlling party
The Group considers there is no ultimate controlling party.
34. Earnings per share
| | 2023 | | 2022 |
| | £ | | £ |
| |
| | |
| Profit after tax attributable to the owners of Cake Box Holdings Plc | 4,236,671 | | 6,311,616 |
| |
| | |
| |
Number | |
Number |
| Weighted average number of ordinary shares used in calculating basic earnings per share | 40,000,000 | | 40,000,000 |
| |
| | |
| Weighted average number of ordinary shares used in calculating diluted earnings per share | 40,000,000 | | 40,000,000 |
| |
| | |
| | Pence | | Pence |
| Basic earnings per share | 10.59 | | 15.78 |
| Diluted earnings per share | 10.59 | | 15.78 |
|
|
| | |
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
