Patisserie Holdings is a share I have been keeping a watch on for a few months. Strangely I first visited one of their outlets when I was attending a football match following the hatters. The local police would not let any football supporters into any pub within town; even a pleasant mature chap like myself: Well no beer, so I sought out the next best thing; coffee and cake. The outlet I attended was indeed impressive and I made a mental note. Oh, the match was a fairly dull goal less draw in atrocious wet conditions that saw us defend the shallow end in the first half.
Today, 18th May 2016, Patisserie Holdings issued their half-year results for the period to 31st March 2016 and to my mind, they were a really sound set of results.
From the RNS:
Current Trading and Outlook
These results represent another strong performance from the Group. We continue to control costs tightly, make efficiencies in our supply chain and with the quality of the new site openings in the first half of the year, the developed pipeline and continued solid trading from our premium offerings I am confident of achieving the Board's expectations for the full year.
The company are increasing the size of their estate and as they put it, very pleasingly funding the roll out from its own funds.
Back to today’s RNS:
Cash flow & Balance Sheet
The Group remains solely funded from reserves and operating cash flows and at the end of the period had net cash of £8.9m (2015: £3.0m).
Operating cash generated in the period was £10.2m (2015: £9.2m) and after interest and tax payments, free cash flows available for investment were £8.9m (2015: £8.0m).
We invested £4.4m on property plant and equipment, which includes investment in new stores and a refresh of the existing estate.
Even after that, they manage to allow funds for the payment of a small but possibly growing dividend.
In summary, the company has the following attributes that I like:
Very good operating margin
Very decent ROCE
Good cash flow
A concept that is being rolled out under what appears to be a well managed system.
The dash board from the excellent SharePad shows:
The recent share price graph from ShareScope shows that the price has come off about 30% since the high the high in early 2016 but has been creeping up a little in the last few days and also got a nice 4% lift today (not shown on the SP graph below) with the interims:
My View on Patisserie Holdings
I like the company and the financial numbers but was a touch concerned at the end of 2015 that the valuation had become a bit excessive. To some extent this has improved as the share price has fallen back as much as 30% but then even to some, the share will appear overvalued. With today’s interims looking so strong and with the rate of growth and no debt, I am happy to take today as a buying opportunity and take my first nibble of CAKE: will it prove too rich for my palate? Only time will tell!
As ever, these notes are not investment advice. They are just a rambling on my thought process that resulted in my purchase of a position.
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