Patisserie Holdings: a rising roll-out Patisserie Holdings is a collection of food businesses. The group comprises three patisserie brands (Patisserie Valerie, Druckers Vienna Patisserie and Baker & Spice), one bakery (Flour Power City) and the Philpotts sandwich chain. At the end of September 2014, the retail operations comprised 147 stores. 98 were Patisserie Valerie, 22 Druckers Vienna Patisserie, four Baker & Spice and 23 Philpotts. The group is led by restaurant roll-out legend Luke Johnson. Johnson was the driving force behind the early growth of Pizza Express and Strada. During Johnson’s leadership, Pizza Express expanded from twelve restaurants to more than 250. Strada was built from scratch to reach 30 units before both were sold.
group is led by restaurant roll-out legend Luke Johnson Mr Johnson first became involved with the organisation in 2006, when he led a private equity buyout of a majority stake in Pattiserie Valerie. The other group businesses were added one-by-one and Patisserie Holdings came to AIM via an IPO in May. The group’s maiden results showed the continued momentum of the rollout. Nineteen stores were opened in the year. Two sites were closed, one of 8
which was the only loss-making store in the entire portfolio. 2014 was the eighth consecutive year of organic growth in the organisation. Since the end of September, another three sites have opened and management expects to open another seventeen before endSeptember 2015.
online sales doubled in the year Growth flowed through to the company’s reported figures. A 28% increase in revenues produced a 27% profit increase and a 32% increase in diluted earnings per share (adjusted for cost of AIM IPO and the Philpotts acquisition). Management reported how efficiencies were gained from ownership and operation of Flour Power City. Further gains are expected from the upmarket Philpotts (avocado & crispy bacon sandwich: £3.50), which has already incorporated Patisserie Valerie desserts into its menu. Patisserie Valerie has pole position in a market that previously did not exist on this scale. Following the cupcake and Great British Bake Off phenomena, Britons seem to have fallen back in love with cakes. Patisserie Holdings looks a great way to get exposure to this trend and management has thrust the
Patisserie Valerie brand to the forefront of its efforts. Impressively, online sales doubled in the year. The online market, serving workplace or home parties, will inevitably have some cannibalising effect on store sales but I expect that it would mostly add new sales and enhance operational efficiencies within kitchens. According to Stockopedia, a 22% increase in net profit is forecast for 2015 before moderating slightly the next year. Although the stock-market rating is high, a successful roll-out from a winner such as Mr Johnson was always going to be richly valued. If cake is indeed the new coffee, in five years time we could be looking at a vastly larger business.
Patisserie Holdings (LON:CAKE) FOR Run by proven winners Plenty of opportunities for expansion AGAINST Exposed to food fashion Easily copied format Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£199m 200p:203.75p 18.8 1.8% 177p:215p
Published on Dec 8, 2014