Almost everyone likes cake and almost everyone likes a reason to celebrate, so Cake Box, offering freshly-baked, egg-free celebratory cakes, should be on to a winner.
And for much of its 15-year life, it has delivered the good. Founded in 2008, Cake Box joined AIM in 2018 with 91 franchise-run stores and a consistent record of sales and profits growth.
Floated at £1.08, the shares hit £4.28 in 2021, as the estate doubled in size and turnover soared.
Last year, however, founder Sukh Chamdal was forced to issue a profits warning, as Cake Box was hit by rising costs and falling sales. The shares crashed to £1.11 and are still substantially below their peak, at just £1.48. The price fails to reflect improvements that Chamdal has made in recent months or growth potential over the coming years.
Costs have been tightened, a new chairman and finance director have been appointed and half-year results last week revealed double-digit profit growth and a 10.5 per cent hike in the interim dividend to 2.9p.
Going cheap: Cake Box’s 214 shops specialise in egg-free products
There are now 214 franchise stores with Chamdal expecting to take this to 400. The firm is spending on advertising and consumers are responding with enthusiasm.
Brokers are looking for a 9 per cent increase in profits to £5.9 million in the year to March 2024 and a dividend of 8.4p, putting Cake Box on a yield of more than 5.5 per cent. Longer-term growth is forecast too, as store numbers increase and inflationary pressures continue to ease.
Midas verdict: Cake Box specialises in egg-free, fresh-cream cakes, popular with consumers who do not eat eggs for religious or dietary reasons and anyone else with a sweet tooth. Midas recommended the shares at £1.38 in 2019. They have been on a rollercoaster ride since then but at £.1.48, the price seems too cheap. Some analysts believe the business could attract predators if the shares do not pick up soon.
Traded on: AIM Ticker: CBOX Contact: investors.eggfreecake.co.uk or 020 8443 1113