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Patisserie Holdings digests inflationary pressure

The restaurant chain is doing well to keep sales, margins and profits ticking over in an inflationary environment
May 18, 2017

These numbers from Patisserie Valerie owner Patisserie Holdings (CAKE) are good, and there are several reasons why. First, the principal brand continues to perform well, with sales up 15.7 per cent to £40.4m, while sales from its other brands - which include Druckers Vienna Patisserie and Philpotts cafes - increased by 0.6 per cent during the first half. Online sales also continue to grow strongly, up 14.3 per cent to £1.6m, while membership of the group's Cake Club grew by 22,000 to 383,000 members at the period end.

IC TIP: Hold at 359p

These numbers also include Christmas trading. Seasonal ranges performed well, with sales from the winter menu up more than 160 per cent. The group claims to have sold 103,000 mince pies, while the new festive afternoon tea range sold more than 26,000 units.

But, like many retailers and restaurants, Patisserie admits it was hurt by higher food costs due to wider inflationary pressures. It says prices have now stabilised, with only a 0.3 per cent impact to gross margins of 78 per cent for the year. Wage costs are also rising, although rent increases and higher business rates have been immaterial across the estate.

Analysts at FinnCap expect pre-tax profits of £20.2m for the year ending September 2017, giving EPS of 16.2p, up from £17.2m and 13.6p in FY2016.

PATISSERIE HOLDINGS (CAKE)
ORD PRICE:359pMARKET VALUE:£359m
TOUCH:354-359p12-MONTH HIGH:370pLOW: 253p
DIVIDEND YIELD:0.6%PE RATIO:24
NET ASSET VALUE:84p*NET CASH:£16.2m

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201650.08.46.71.00
201755.59.78.01.20
% change+11+16+19+20

Ex-div: 1 Jun

Payment: 7 Jul

*Includes intangible assets of £17.8m, or 17.8p a share