REG - Cake Box Holdings - Final Results
26/06/2023 07:00
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RNS Number : 8109D Cake Box Holdings PLC 26 June 2023
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-like(1) 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
(https://www.investormeetcompany.com/cake-box-holdings-plc/register-investor)
For further information, please contact:
Cake Box Holdings plc Enquiries via MHP
Sukh Chamdal, CEO
Michael Botha, CFO
Shore Capital +44 (0) 20 7408 4090
Stephane Auton
Patrick Castle
Liberum (Joint Broker) +44 (0) 20 3100 200
Clayton Bush
Edward Thomas
MHP Communications +44 (0) 7834 623818
Charlie Barker cakebox@mhpc.com (mailto:cakebox@mhpc.com)
Robert Collett-Creedy
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
4.2 5.5
Adjusted Profit for the period*
Revaluation of freehold property 0.2 1.2
Deferred tax on revaluation - (0.2)
4.4 7.3
Total Comprehensive income for the year
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 22(nd) August 2023,
the final dividend of 5.5 pence per share will be paid on 29(th) August 2023.
The record date for shareholders on the register will be 28(th) July 2023,
with an ex-dividend date of 27(th) 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 1 January 2023
of the financial statements to distinguish between changes in accounting
estimates and changes in accounting policies.
IAS 12 Amendments requiring a company to recognise deferred tax on transactions that, 1 January 2023
on initial recognition give rise to equal amounts of taxable and deductible
temporary differences.
IAS 1 Amendments clarify how conditions with which an entity must comply within 1 January 2024
twelve months after the reporting period affect the classification of a
liability.
IFRS 16 Amendments include requirements for sale and leaseback transactions in IFRS 16 1 January 2024
to explain how an entity accounts for a sale and leaseback after the date of
the transaction
Effective Date
IAS 1 & IAS 8 Amendments regarding the disclosure of accounting policies and amendments 1 January 2023
regarding the definition of accounting estimates.
IAS 12 Amendments to deferred Tax Related to Assets and Liabilities arising from a 1 January 2023
Single Transaction.
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 85,000 75,000
Group's annual financial statements
Fees payable to the Group's auditor and its associates for the audit of the 13,000 -
Group's interim financial statements
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 2,040,000 -
relating to the previous year's results
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 - 1,480,000
relating to the previous year's results
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 1,034,279 1,470,092
in the UK of 19% (FY22 - 19%)
Effects of:
Expenses not deductible for tax purposes, other than goodwill amortisation and 96,260 11,700
impairment
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 Adjustment As Restated
31 March 2022 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 Adjustment As Restated
31 March 2022 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 Lifetime expected losses (stage 2).
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)
Non-performing Interest and/or principal repayments are 60 days past due or it becomes Lifetime expected losses (stage 3).
probable a customer will enter bankruptcy
(credit impaired)
Write-off Interest and/or principal repayments are 120 days past due and there is no Asset is written off
reasonable expectation of recovery
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 - 49,888 - 49,888
credit losses)
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
incorporation
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
£ £ £ £ £
1,485,759
As at 31 March 2021 - - 1,318,005 167,754
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 40,000,000 40,000,000
per share
Weighted average number of ordinary shares used in calculating diluted 40,000,000 40,000,000
earnings per share
Pence Pence
Basic earnings per share 10.59 15.78
Diluted earnings per share 10.59 15.78
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