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Head Office
20-22 Jute Lane
Enfield
London EN3 7PJ
Tel: 020 8050 2026
info@eggfreecake.co.uk | www.eggfreecake.co.uk
A N N U A L R E P O RT A N D A C C O U N T S
2 0 2 0
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CAKE BOX HOLDINGS PLC
Anual Report and Accounts
CONTENTS
COMPANY OVERVIEW
Highlights
About us
Our growth
Meet our franchisees
STRATEGIC REPORT
Chair’s Statement
Chief Executive’s Statement
Our business model
Financial review
Operational review
Risk management
GOVERNANCE
Corporate Governance Statement
Board of Directors
Audit Committee
Remuneration Committee
Environmental & Social Governance
Director’s Responsibility
FINANCIAL STATEMENTS
Independent Auditors’ report
Consolidated Statement of Cash Flow
Consolidated Statement of Financial Position
Company Cash Flow Statement
Company Statement of Changes in Equity
Notes to the Company Financial statements
Company information
01
02
03
04 - 05
6 - 7
8 - 11
12 - 13
14 - 15
16 - 19
20 - 21
22 - 25
26 - 27
28 - 29
30 - 33
34 - 35
36 - 37
39 - 43
44 - 74
75
76
77
78 - 82
83
“making
celebrations a
piece of cake”
COMPANY OVERVIEW
2020 Highlights
1
2020 Highlights
REVENUE
£18.7m
(2019: £16.9m)
GROSS PROFIT
£8.8m
(2019: £7.7m)
PROFIT AFTER TAX*
£3.1m
(2019: £3.2m)
+11%
+14%
-1%
2020
2019
2018
2020
2019
2018
2020
2019
2018
£18.7m
£16.9m
£12.7m
£8.8m
£7.7m
£5.5m
£3.1m
£3.2m
£2.8m
CASH AT BANK
£3.7m
up £0.6m
(2019: £3.1m)
EARNINGS PER SHARE
7.8p
+4.1%
(2019: 7.5p)
NET CASH
£2.1m
up £1.2m
(2019: £0.9m)
20
12
133
NEW STORES OPENED
NEW KIOSKS OPENED
TOTAL NUMBER OF STORES
5.1%
25%
LIKE FOR LIKE GROWTH**
ONLINE SALES GROWTH
£5.5m
ONLINE ORDERS
*2019 after Exceptional AIM listing cost of £599k and fair value property uplift of £444k
** Like-for-like: Stores trading for at least one full financial year prior to 31st March 2020 (49 weeks to 8th March 2020 used in FY20 due to COVID-19)
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2
3
About us
The Cake Box journey began in 2008 by opening one small
store in the heart of east London after our founders’ daughter
requested an egg free cake for her birthday. Our mission became
to provide the UK market with delicious fresh cream celebration
cakes made without eggs, and providing an ‘on demand’ service
to cater for our ever-increasingly busy lives.
We now have 133 franchise stores nationally and have never
looked back. We like to think of each other as family, and feel
our success is not only due to our commitment to the brand, but
extending our family circle to include our staff, franchisees and
customers.
We continue to use our high end secret recipe eliminating
the egg in all of our products, whilst guaranteeing there is no
compromising on the taste, texture or appearance of any of our
ethically sourced ingredients, and teamed with our commitment
to quality and value, means that you will receive a delicious
product every time.
Our research & development team are constantly expanding our
trends to bring fresh products to market. We have launched
a new range of vegan loaf cakes, a visually delightful range of
‘luscious cupcakes’ and are constantly updating the designs of our
.’gnidnert‘ yltnerruc si revetahw etaroprocni ot sekac noitarbelec
We have a great social media following who react and drool over
each new post and give us fabulous feedback on our new designs.
We are now working with the three main food delivery giants
to provide our celebration cakes directly to the doorsteps of
our customers. Never has this been more important than in
the current climate. So, in the good times, and the not so good
times, Cake Box will continue to serve our loyal customers for
every celebration and every ‘just because we love cake’ moment.
Our growth
Born at the height of the recession in 2008 the business has proved to be resilient in all economic climates, as witnessed
by 2009. We added a further 2 stores the following year and continued with steady growth thereafter.
In the early years, we attended franchisee shows and advertised on franchisee portals. However, due to the increasing
demand from potential franchisees via direct applications from our website, we withdrew all advertising by 2014. We
found that this produced a better franchisee model as they had actively sought the opportunity to join our family.
We opened our 50th store in 2016 and reached the milestone of our 100th store in 2018. In June 2018 we listed
exposure that listing on the Stock Exchange brings.
We will continue to grow in various avenues, with more store openings coupled with newer formats. Our kiosks in
shopping malls have been successful in this regard, with franchisees running them as complimentary extensions to
their existing stores.
A rapidly growing portfolio of franchise stores
The development of the Group’s
franchise estate from
31 March 2010 to 31 March 2020
133
113
9
20
1
28
86
63
47
39
20
13
3
6
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
*All informationcorrect asof June 2020.
5
Meet our
franchisees
“ I worked as a Pharmacy Manager for 6 years when I decided to give up my career due to childcare issues. I had been a
working woman with a full time responsible job so, staying at home was never going to be an option for me. I was looking
to start something of my own, where I could be my own boss but also have the flexibility of looking after my child. Whilst
collecting a cake from one of the Cake Box shops it suddenly occurred to me that this could be an ideal business opportunity
for me. I spoke to my husband that night and he was very supportive of the idea so we embarked on an investigation to buy
a franchise.
It was a very smooth journey from making my initial enquiries to getting full support on how to run the business. The on-
boarding process was relatively straight forward and the Directors and Franchise Manager were all very supportive with their
help and advice on finding the right shop, finalising and setting it up to open. I now own the shop on Enfield Highway which
also happens to be the closest shop to Head Office.
I went through extensive training for four weeks prior to opening. We learnt everything from decorating the cakes to
operating the tills and managing the day to day business of the store. After the training, I felt ready and fully confident to take
the plunge and start my Cake Box journey knowing I had the ongoing support from the Directors and training team.
In March 2018, we opened the doors of our first Cake Box to the public. After a few inevitable stumbling blocks, with hard
work and support from Head Office, the business took off and there has been no looking back. I subsequently opened a kiosk
in the Enfield Town Shopping Centre in 2020 and am looking for more opportunities to expand further.
I can now manage my personal and professional life with ease. This feels like the best decision that I ever took and I cannot
wait to see what the future with Cake Box holds for me.
Poonam Panchal
(Proud owner of 1 Store & 1 Kiosk
Cake Box Franchise).
“ I had worked in retail for over 20 years and had been in a management role for 10 of those years. I knew that I wanted to
do more than just work for someone else and it felt the right time to do something for me. With my ambition and drive, I
started looking into Franchising.
My husband and I started exploring the different franchise opportunities available as I only wanted to open a franchise that I
believed in, with a product that I loved. I was immediately drawn to Cake Box as it was a product that I was familiar with and
had enjoyed on many occasions. The food industry was completely new to me, but this was something that didn’t scare me as
I really felt it was right for me.
After sending my application to Head Office, I was excited to receive an invitation to attend a presentation with the Franchise
Manager and Directors. We were given further information on the brand and product, but more importantly, also had the
opportunity to speak to them in a group and on a one to one basis.
My husband and I attended the meeting and I immediately felt that this was right for me and that Cake Box was the franchise
that I wanted to be a part of and invest my future into.
We researched different areas that we hoped to open our first store in, and decided that Harlesden was the location for us.
We went on to open the store in June 2018. Initially, it was a lot of hard work as I was still working full time, but it was worth
every minute to know that we were building something that was ours.
Cake Box has been very supportive and the pre-opening training was incredibly helpful in establishing policies and procedures.
In March 2019, as the store became more and more successful, I decided to leave my job and dedicate all my energy and
resources into growing the business further. I am now looking to open a second store and honestly can’t wait. “
Tela Dobariya
(Proud owner of a
Cake Box Franchise Store).
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STRATEGIC REPORT
Chair’s Statement
Chair’s Statement
“Our capital light business model and strong
balance sheet means we are well placed to weather
any ongoing disruption to normal trading conditions.
It is difficult to look too far ahead in the current
circumstances, but we remain confident that the
strategy that has brought us success so far will help
us to do so again and I am confident that the team
will adapt to the new and emerging challenges.”
Neil Sachdev MBE
Chair
RESULTS
Whilst we remain in an uncertain and difficult situation for the
The Group delivered another strong performance over the year,
country, Cake Box’s values have ensured that we do things in the
with revenues rising by 11% to £18.7 million. This was achieved
right way. I am very grateful and proud of the efforts of all our
despite a disruption in sales across our franchise stores as the
staff in Enfield and franchisees across our store estate, who have
COVID-19 pandemic started to impact trading during the final
been supporting the effort in their local communities by sending
month of our financial calendar year in March 2020.
thousands of our cakes to front line workers, especially the NHS.
Notwithstanding
the challenges presented by COVID-19
There remains much uncertainty about the virus and how long
towards the end of the year, we have over the last few months
it will continue to impact our business, our customers, and the
of lockdown continued to plan how we can grow the business
wider public and economy, but I am confident that we have
in line with our plans, ensuring we deliver the Cake Box offering
the financial and operational resilience to withstand the various
to the whole of the UK over time. During the year, we opened
challenges, emerge from the crisis and return to serving our loyal
20 new franchise stores, expanding our regional footprint in new
customer base whilst continuing to pursue our growth plans.
locations including Harlow, Portsmouth and Cardiff, our first store
in Wales. We were pleased with the number of franchise stores
PEOPLE
opened during the year given the disruption to our opening plans
Guided by our founder-led management team, a core part of
at the end of the year due to COVID-19. New openings like
our strength lies in the entrepreneurial example they set for our
these continued to deliver good returns for our franchisees and
growing network of franchisees, many of whom are running their
customer satisfaction remains at high levels as well as increase our
own businesses for the first time. Some have expanded their
geographical reach to more customers.
business to encompass multiple shops and all are working hard to
serve customers in their local communities.
COVID-19
The COVID-19 pandemic has been unprecedented in scale and
On behalf of the Board and shareholders, I would like to place on
impact, and we have taken swift and decisive action to protect our
record my sincere thanks to all our customers, staff and franchises
customers, colleagues, franchisees, and the communities in which
for their incredible enthusiasm and dedication that has made
we operate, by implementing the necessary steps to safeguard
Cake Box the success it is today, but especially over the last few
our business through the crisis, in line with UK Government
uncertain and difficult months. I know they will help us to get
guidelines.
Cake Box back to growth, reaching many more customers across
the UK.
STRATEGIC REPORT
Chair’s Statement
7
DIVIDEND
Despite the strength of our balance sheet, as previously
announced the Board concluded that it was not appropriate to
recommend a final dividend for FY20 with the Group’s full year
results. Given the support the UK Government has given to the
Group during the crisis, the Board decided it would have been
inappropriate to utilise cash resources for anything other than
protecting the financial strength and resilience of the business.
LOOKING AHEAD
While mindful of the challenges brought about by COVID-19,
we will remain focused on continuing to deliver our growth plans
over the long-term, whilst adapting to the near-term issues. Our
capital light business model and strong balance sheet means we
are well placed to weather any ongoing disruption to normal
trading conditions.
It is difficult to look too far ahead in the current circumstances,
but we remain confident that the strategy that has brought us
success so far will help us to do so again and I am confident that
the team will adapt to the new and emerging challenges.
I am looking forward to continuing to work with the Board, our
staff and the franchisee community to deliver our vision of making
Cake Box accessible to all.
Neil Sachdev MBE
Non-Executive Chair
“I am confident
that we have
the financial
and operational
resilience to
withstand the
various challenges”
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STRATEGIC REPORT
CEO Statement
CEO Statement
“Life is clearly different to the world we were living in 12
months ago. However, as we emerge into a new sense
of normality, there will still be birthdays, marriages and
numerous other occasions, large and small, to celebrate
up and down the country, with Cake Box’s growing family
of dedicated franchisees committed to supporting those
festivities as best they can.”
Sukh Chamdal
Chief Executive Officer
In our second set of full year results since the Company’s IPO in 2018, I am pleased to be reporting on
another strong performance over the year. These results demonstrate the ongoing appeal of the Cake
Box brand and our unique customer proposition, combined with the financial strength of the Group and
the strong cash generative nature of our business model.
OVERVIEW
In addition, we continued to invest in the future growth of the
business. This included the opening of our new warehouse and
We have continued to develop and expand the Cake Box
distribution centre in Bradford in late 2019, which has started to
brand across the UK, maintaining good trading momentum. I
deliver efficiencies in both baking capacity and distribution since
am equally pleased with how the business has responded to the
it became operational.
unprecedented challenges of COVID-19, which impacted the
Group towards the end of our financial year, in March 2020. The
pandemic has posed difficulties across the business, and for the
Response to COVID-19
nation as a whole, but I am immensely proud of the way in which
Like other businesses across the UK and around the world,
our staff and franchisees have responded to these challenges.
managing the impact of COVID-19 has been a primary focus for
STRATEGIC REPORT
CEO Statement
9
We looked at all possible routes to support franchisees
We saw continued strong growth in franchisee online sales which
amidst the crisis, in particular, assisting them in applying for the
were up 25% to £5.5 million (FY19: £4.4 million), as customers
Government’s Retail, Hospitality and Leisure Grant which has and
increasingly enjoyed the convenience of our Click-and-Collect
will continue to provide a significant level of support. We have
service. Online orders are processed centrally through the
also been providing franchisees with advice and assistance relating
Group’s website with orders fulfilled through our franchise estate.
to the furloughing of staff, whilst providing flexibility in certain
payment terms where appropriate. In addition, we welcomed the
Franchise store like-for-like sales were also strong, increasing by
UK Government’s announcement that our franchisees will not
5.1% up to 8 March 2020. However, the Group saw a reduction in
have to pay business rates for 12 months.
sales across its franchise stores as the COVID-19 crisis developed
during the remainder of March 2020 and resulted in total like-
At Group level, we applied to the Government’s Job Retention
for-like franchise store sales growth for the full year to 31 March
Scheme in relation to Head Office, Warehouse and Bakery staff
2020 of 2.0% (FY19: 6.5%).
in order to protect the jobs of the workforce due to the closure
during the current crisis. We also took all other appropriate cost
OUTLOOK
saving measures, including cutting discretionary marketing spend.
131 of the 133 stores have now re-opened and our production
facilities continue to ramp back up to meet an increasing demand,
As a result of the above, noting that our franchise stores have
with both operating under new guidelines to ensure the safety of
relatively low levels of rent and overheads, we are very confident
all of our stakeholders. Whilst COVID-19 has inevitably impacted
that our franchisees will be able to navigate this unprecedented
performance of our new financial year and will continue to do
period.
As the COVID-19 situation and Government guidance has
so. We have seen an improving sales trend, with sales in the first
week of June showing positive like for like. Around 75% of our
stores1 are now trading at pre-COVID-19 Levels2. We continue
evolved since the end of March, we have made careful steps to
to closely monitor the market environment and our operational
gradually re-introduce a limited service to customers, through
planning remains dynamic.
our Click & Collect service. As announced on 11 May 2020,
having reviewed our operations, consulted with our franchisees
and listened to their employees and customers, we finalised new
ways of working that allowed franchisees to begin to open their
stores, whilst ensuring the safety of our franchisees and their
employees by putting into place social distancing measures and
issuing appropriate personal protective equipment (PPE) to all
franchisees for their staff.
Accordingly, as at 1 June 2020, we had 131 of the 133 franchise
stores open, offering a limited menu of products. Initial demand
from customers has been encouraging, with 75% of stores trading
at pre COVID-19 levels.
Production has now resumed across all sites, where we have
also implemented new health and safety procedures and are
operating with reduced staffing levels to maintain the appropriate
“Our first
priority has
remained
the health,
safety and
wellbeing of
our customers,
colleagues,
franchisees and
their staff”
For the second year in a row, Group revenues increased at a
has remained the health, safety and wellbeing of our customers,
the Group since the outbreak of the pandemic. Our first priority
distancing.
double-digit rate, up by 11%, to £18.7m.
colleagues, franchisees and their staff and the communities in
We will continue to keep all measures under review, prioritising
which we operate across the country.
the safety of all of our stakeholders.
We also made further progress on our strategic priorities over
the year, growing our franchise store estate, introducing new
Following updated UK Government advice on 23 March 2020,
SALES
product lines and developing our digital marketing. In particular,
we closed all of our franchise stores as we looked to protect
We achieved impressive growth in franchisee total turnover
we extended our geographical footprint in towns and cities in
our staff, franchisees and customers and also to help relieve any
during the year, which rose by 19% to £36.5m, despite the impact
England, as well as opening our first store in Wales.
further pressure on our NHS.
of COVID-19 in the final month.
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STRATEGIC REPORT
CEO Statement
STRATEGIC REPORT
CEO Statement
11
We are investing further in our online and digital capabilities
to ensure customers everywhere can access our products
from a choice of channels that are convenient for them. This
has become more important than ever amidst the current
pandemic and we have seen our ‘Click and Collect’ service go
IMAGE ?
from strength to strength as we look for new ways to serve our
customers in line with Government guidelines. Since re-opening
the majority of our stores at the end of May, online sales since
for the period end were up c.60% compared to the previous
year period.
Additionally, in May, we launched home delivery of cakes via
Uber Eats and Just Eat with encouraging customer response
and have very recently onboarded with Deliveroo.
Life is clearly different to the world we were living in 12 months
ago. However, as we emerge into a new sense of normality, there
will still be birthdays, marriages and numerous other occasions,
small and large, to celebrate up and down the country, with
Cake Box’s growing family of dedicated franchisees committed
to supporting those festivities as best they can.
We remain confident that our proposition to potential new
franchisees remains attractive. We have a strong pipeline in
place to help continue to grow the Cake Box family and are
developing new, innovative ways to work with our existing
partners, including the expanded trial of our shopping centre
kiosks.
With our strong balance sheet, the actions we are taking to
reduce costs and our resilient business model, we remain
confident in the Group’s future prospects.
1 Current trading defined as average store turnover for last
two weeks to week ended 7 June 2020
2 Pre Covid-19 trading levels calculated as average turnover
for seven weeks prior to week ended 15 March 2020
Sukh Chamdal
Chief Executive Officer
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CAKE BOX HOLDINGS PLC
Our Business Model
Our Business Model
CAKE BOX HOLDINGS PLC
Our Business Model
13
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14
STRATEGIC REPORT
Financial Review
Financial Review
“We have delivered another year of excellent financial
performance despite COVID-19 spoiling the party in the
final month of the financial year”
Pardip Dass
Chief Financial Officer
STRATEGIC REPORT
Financial Review
15
FY19 included nine months of additional plc costs (compared to
DIVIDENDS
12 in this period). This led to a modest decrease in adjusted PBT
The Board feels that it is not appropriate to recommend a final
to £3.8m from £4.0m in the prior year.
BALANCE SHEET
dividend for FY20 with the Group’s full year results. The Board
recognises the importance of income to many of the Group’s
shareholders and will continue to assess when it is appropriate to
Cake Box has a strong balance sheet with a cash balance at the
recommence dividend payments.
year-end of £3.7m. The Group’s only debt is a mortgage of £1.6m
secured by its freehold properties in Enfield and Coventry. The
CASH POSITION
Enfield Warehouse has been revalued at £3.9m, a £1.4m increase
The Group had £3.7m of cash at year end, an increase of £0.6m.
on its previous Net Book Value of £2.5m.
At the year end, the Group has a net cash position of £2.1m
which was up £1.2m from the previous year.
The Group operates a franchise model and therefore has a
relatively low and flexible cost base. Following the cost saving
TRADE AND OTHER RECEIVABLES
measures described above in response to COVID-19, the Group
The Group had £1.46m of trade and other receivables at 31
had a monthly cash burn of c.£200k while its franchise stores
March 2020, a marginal decrease on the prior year. The majority
were shut at the end of March and into April. This burn rate has
of this balance relates to trade receivables which have decreased
receded as we have gradually reopened 131 of the 133 stores.
by 19.7% despite the increase in turnover. Trading debts relating
to purchases of products remain low in comparison as credit
The Board is therefore very comfortable with the Group’s cash
terms have a strict seven day payment term.
levels and liquidity despite the closure of its franchise stores in the
final month of the financial year.
TRADE AND OTHER PAYABLES
Revenue
Profit after Tax*
TAXATION
The Group had £1.49m of trade and other payables at the year
end, a decrease of 2.5% on the prior year. The Group actively
The effective rate of taxation was 16.9% (2019: 21.0%). This is
sources cost effective suppliers without compromising on the
slightly lower due to additional relief obtained in Research and
quality of the products. Other payables are paid according to
Development costs.
terms specified.
EARNINGS PER SHARE (EPS)
Underlying basic and diluted earnings per share were 7.82p and
7.74 respectively (2019: 7.51p). The number of shares in issue
was 40,000,000 and is unchanged since the Company’s IPO in
June 2018.
Pardip Dass
Chief Financial Officer
2020
2019
2018
£18.7m
£16.9m
£12.7m
2020
2019
2018
£2.8m
£3.1m
£3.2m
Gross Profit
Earnings Per Share*
2020
2019
2018
£8.8m
£7.7m
£5.5m
2020
2019
2018
7.82p
7.51p
6.96p
*2019 after Exceptional AIM listing cost of £599k and fair value property uplift of £444k
REVENUE
GROSS MARGIN
Reported revenue for the year to 31 March 2020 was £18.7m.
Gross Profit as a percentage of sales improved from 45.7% to
Revenue increased by 11% compared to the previous financial
46.7% as the overall sales were weighted higher on sponges sales
year. This was achieved through an increase in store like-for-like
which has a much higher Gross Profit percentage.
sales and with the addition of 20 new stores and 12 new kiosk
openings in shopping centres around the UK in new locations
ADJUSTED EBITDA
including Liverpool, Middlesbrough and Basildon.
EBITDA fell by 3.2% to £4.3m, impacted, as expected, given that
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16
STRATEGIC REPORT
Operational Review
Operational Review
“We believe that the focus we have on our people
and our franchisees will allow us to continue delivering
resilient sales growth”
STRATEGIC REPORT
Operational Review
17
Dr. Jaswir Singh
Chief Operating Officer
BRADFORD
Number of stores
86
63
133
113
March 2017
March 2018
March 2019
March 2020
STORES
The kiosks have performed very well to date, delivering similar
average weekly sales to our traditional franchise stores, driven by
strong demand for ‘grab-and-go’ products like cake slices in high
footfall locations.
Although there was an impact on the timing of openings as a
result of COVID-19, during March 2020, the Group has a strong
pipeline of new franchise store openings. Since the start of the
new financial year we have opened two new franchise stores,
which had been already been fitted out in March.
PRODUCTS
Product innovation is a core part of our strategy as new products
create a real buzz with both new and existing customers, who
are excited by our evolving range. Accordingly, during the year,
we successfully introduced several new products to the menu.
This included the launch of a new premium salted caramel fresh
cream cake and and an exciting new range of red velvet cakes
which have been particularly well-received by customers across
The Group opened 20 new franchise stores in the year, taking
our store network. These are individually and expertly decorated
the total number of franchise stores to 133 at the year-end.
by our in-store designers.
New openings during the year included our first Welsh store,
in Cardiff, whilst we also expanded the successful initial small
STORE FRANCHISE MODEL
trial of shopping centre kiosks to 12 locations, operated by local
Our franchise model has underpinned our success as a business
franchisees as an extension to their existing stores.
to date, as we have grown to 133 franchise stores operated by
70 franchisees since opening our first shop in 2008. We believe
This maximises the efficiency of the operation and allows access
that the focus we have on our people and our franchisees
to a wider customer base, with limited additional overheads and
who, as owner occupiers, are driven to increase sales and offer
relatively low capital outlay when compared with the set-up costs
exceptional customer service with the support of Head Office,
of a new store.
will allow us to continue delivering resilient sales growth.
COVENTRY
LONDON
WAREHOUSE, DISTRIBUTION AND
PRODUCTION FACILITIES
Of the two additional warehouse and distribution centres that
we purchased in our prior financial year, Bradford has become
operational. Coventry is expected to be operational by the
second half of the financial year ending March 2021, later than
originally planned due to COVID-19 related delays.
We have installed sponge production capability at the new sites
which will enable us to reduce our existing distribution costs and
provide a back up to our production facility in Enfield. This has
provided us with a more streamlined production and distribution
operation, reducing the delivery time to within 90 minutes
for 90% of our franchise stores. In turn, this has reduced our
annual road miles from 602,000 to 97,000, a saving of over 80%
once both sites are fully operational as well as creating skilled
employment opportunities in these areas. This also addresses
our goals of reducing food delivery miles which helps mitigate our
environmental impact.
Dr. Jaswir Singh
Chief Operating Officer
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STRATEGIC REPORT
Operational Review
STRATEGIC REPORT
Operational Review
19
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STRATEGIC REPORT
Risk Management
RISK MANAGEMENT
The Executive Directors and senior management lead an ongoing identification and assessment process of the key risks (both financial and non-
financial), which is presented annually to the Board. The review process includes an evaluation of the detailed risk registers and is designed to
ensure that significant risks are identified and prioritised according to the likelihood of the event occurring and the impact of that event. Once
the risks have been assessed, appropriate mitigation actions are implemented. The principal risks identified are as follows:
STRATEGIC REPORT
Risk Management
21
RISK CATEGORY
POTENTIAL IMPACT
MITIGATION
RISK RATING
COVID-19 pandemic
Government action in instigating further lockdown bringing closure of retail operations and
temporary shut down of the business.
The group has a strong Balance Sheet to weather any potential lockdown. It has also shown that it can
operate safely as a food business during the lockdown period through the delivery platforms that have been
established.
Medium
Competitive environment
The Group operates in a competitive market with competitors drawn from local and very
large-scale multinational corporations.
The Group is well positioned with relatively few direct competitors. There is no comparable national chain,
only small localised competition. There is also a complexity of the supplier chain and we have a unique cake
recipe.
Consumer trends
Financial results can be materially impacted by any material change in consumer habits within the
United Kingdom.
Our products are “treats” in the mind of the consumer. When it comes to treats, consumers disregard
health, sugar and fat concerns as can be seen in the purchasing of chocolate bars. Our products are indulgent
treats.
Low
Low
Product quality
A reduction in quality may reduce franchisee sales and therefore, all supplies are purchased all
supplies are purchased from Cake Box.
Shops are regularly visited by one of four Regional Business Development Managers who oversee new
product launches and support shops to maintain standards through audits and training.
Medium
Reliance on key staff
Loss of key management could impact the group’s ability to continue the roll out programme
within the desired timeframe.
The Group is not reliant on one single individual and seeks to have a deputy for each department. The
Remuneration Committee seeks to ensure that key individuals are suitably incentivised to aid retention.
Medium
Ability to recruit and retain
skilled franchisees
The ability of the Group to attract and retain new franchisees with the appropriate attitude,
expertise and skills, in available and suitable locations, cannot be guaranteed. Therefore, the Group
may experience difficulties in finding and retaining appropriate franchisees.
The Group undertakes a rigorous recruitment and vetting process and has become very experienced at
identifying good franchisees.
Medium
Poor performance of
franchisees
Multiple franchisees could under perform in the market, which could result in lower revenues
for the Group and potential damage to its reputation and financial performance. Even though the
Group has the ability to terminate under performing franchisees, this may not in itself allow it to
stop any such potential damage.
The Directors believe that the Group provides its franchisees with all the appropriate and necessary training,
guidance and procedures to operate a franchisee store successfully, safely and to the standards that the
Group expects of its franchise stores. The Group also undertakes periodic audits of its franchise stores.
Poor audit scores automatically trigger retraining the franchisee and their staff at our in-house training centre
which is chargeable.
Low
Failure of significant sites
Potential risks include a disruptive event such as fire, flood or a major incident at site level, such
as an explosion, IT systems failure, cyber attack or other events such as geopolitical instability.
The consequences associated with this risk include the impact on our ability to manufacture
goods and satisfy customer demands.
We recognised this this was an area of high risk with only one site in operation, so last year we took the
action of purchasing two additional sites in Bradford and Coventry. Bradford is now operational and provides
backup to the Company in both Baking and Warehouse facilities.
Medium then Low
towards the end
of the year
Cost pressures reduce
profits for franchisees
Increased labour costs through rises in the Living Wage / Minimum Wage and increases in shop
running costs (rents / rates etc.) mean that operating a franchise may become less profitable. This
could reduce the interest in new franchises and reduce the number of existing.
Franchisees currently have a healthy profit margin and so can absorb small increases in labour costs. There
will also be a short-term benefit from the reduction in rates for small businesses. Franchisees can also
increase the retail price of cakes to maintain margin as we are a unique offering.
Low
Exchange rates
A weak sterling can cause the cost of imported goods, both materials and capital equipment to
become more expensive.
These are negated with the built in contingency in the price due to the buying power and length of stock
holdings which equalizes over the longer term.
Low
Brexit
Uncertainty around Brexit has caused volatility in Sterling and this can cause purchase prices to be
higher and unpredictable. Brexit may also reduce consumer spending because of the uncertainty.
Historically at times of uncertainty the celebration cake market has not been impacted as much as the rest
of the economy. The unit price remains low relative to other purchases and special events will continue to
be celebrated in economical ways.
Low
Cyber security
As Cake Box increases its online presence it could become increasingly targeted.
Our customers have other options to place orders for their cakes such as visiting in store or ordering on the
phone. Our online ordering only represents 20% of sales.
We have multiple backups of data both in the cloud and physical servers and we have a second server backup
of data files.
Medium
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22
CAKE BOX HOLDINGS PLC
Annual Report and Accounts
GOVERNANCE
23
Governance
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Corporate Governance Statement 22 - 25
Board of Directors
Audit Committee
Remuneration Committee
26 - 27
28 - 29
30 - 33
Environmental & Social Governance 34 - 35
Directors Responsibility
36 - 37
24
CAKE BOX HOLDINGS PLC
Corporate Governance Statement
CAKE BOX HOLDINGS PLC
Corporate Governance Statement
25
Statement from the Chair of the Nomination Committee
Directors and Officers Liability insurance
The Nomination Committee is chaired by Neil Sachdev and its other members are Adam Batty and Martin Blair who are all Independent
Non-Executive Directors.
The Nominations Committee is responsible for reviewing the structure, size and composition (including the skills knowledge experience and
diversity) of the Board and making recommendations to the Board with regard to the changes. The committee considers succession planning
taking into account the challenges and opportunities facing the company now and in the future. The Committee regularly reviews the skills
and expertise needed on the board and in management, to ensure we are able to deliver our aims and objectives for the longer term. The
Committee regularly reviews the leadership needs of the organisation to ensure our values are upheld.
The Committee has met once this year and has reviewed its terms of reference.
Time commitments
All Directors have been advised of the time requirement to fulfil their roles prior to appointment and all have confirmed they can fulfil the
requirement before they were appointed. This requirement is also included in their letters of appointment.
The Board is satisfied that the Chair and each of the Non-Executive Directors are able to devote sufficient time to the groups business.
Board effectiveness review
The company has purchased Directors and Officer’s Liability insurance during the period as allowed by Company’s Articles
Election of Directors and Officers
In accordance with the provisions of the code to enable a smooth rotation of Directors, all Directors will offer themselves up for re-election
every year. This year, Neil Sachdev, Sukh Chamdal, Dr Jaswir Singh, Pardip Dass, Martin Blair and Adam Batty will offer themselves up for re-
election.
Culture and Values
The Board monitors and promotes a value’s based corporate culture and has considered how the culture is consistent with the company’s
objectives, strategy and business model. The Board review staff surveys to ensure that the values of the organisation are fully embedded and
actions followed through.
The Board has considered and assessed the culture and continues to monitor its inclusiveness. However, the Board are fully aware of the need
to improve Gender balance on the Board and across the organisation at management levels. This is a key action over the coming period.
The group has a Code of Conduct, Anti Bribery and Corruption Policy, modern slavery statements and policies and procedures relating to
whistle blowing stating the companies commitment to conducting its business with honesty and integrity, it’s expectation that staff will maintain
high standards and encouraging prompt disclosure of any suspected wrong doing.
No formal Board Evaluation was undertaken this year, as the Board has only recently been formed. We conducted an internal evaluation in
The directives follow the guidance set out by Rule 21 of AIM Rules relating to dealings by directors in the company securities and to this end,
February 2020 by way of questionnaire. The findings have been discussed and actions created post the review. Additionally, the Board have
the company has adopted an appropriate share dealing code. the company has adopted an appropriate share dealing code.
met to discuss and evaluate the Chair’s performance without his presence.
The Board was satisfied that it was well run, whilst acknowledging areas of improvements for the Board and individuals. The evaluation also
tested strategic direction of the company and these items are taken forward to future Board meetings. We shall again carry out an internal
review every year with a formal external review in 2021/22.
Continuous Development of Directors
The Directors are all required to keep themselves abreast of changes in relevant legislation and regulations. The Chair and Non-Executives are
encouraged to share their wider experiences at Board to enhance the learning experiences at every Board meeting.
Succession Planning and External Appointments
The Board reviews succession planning for the senior management every year and considers the skill gaps in planning its recruitment. All senior
appointments have Independent Non-Executive involvement and use of external recruitment advisors is recommended to ensure we do get
reach into talent pools.
All new external appointments require the Chair’s approval.
Conflicts of Interest
At each meeting the Board considers Directors Conflicts of Interest. The Company’s Articles of Association provide for the Board to authorise
any or actual Conflicts of Interest.
Independent Professional Advice
BOARD MEETINGS
The Board met 10 times into 2019/20, Non-Executive Directors communicate directly with Executive Directors and senior management
between formal Board meetings. The Board held the focused dedicated Board meeting on strategy in November 2019 and intends to schedule
similiar meetings annually. At this meeting the Board considered key issues relevant to the company as part of the business planning process
and reviewed presentations from our advisors’ senior management team. Directors are expected to attend all meetings of the Board and the
committees on which they sit and devote sufficient time to the company’s affairs to enable them to fulfil their duties as Directors. In the event
the Directors are unable to attend the meeting, their comments on paper to be considered at the meeting will be discussed in advance with
the Chair to ensure their contribution can be included in the wider Board discussion.
The following table shows Directors at schedules for Board Meetings and Committees during the year.
Neil Sachdev*
Sukh Chamdal
Pardip Dass
Jaswir Singh
Adam Batty*
Martin Blair*
Board
10/10
10/10
10/10
10/10
9/10
9/10
Audit
3/3
3/3
3/3
Remuneration
Nomination
2/2
2/2
2/2
2/2
2/2
2/2
Directors have access to independent professional advice at the company’s expense. In addition, they also have access to the advice and services
* Neil Sachdev, Adam Batty and Martin Blair were appointed as Non-Executive Directors on 1st June 2018.
of the company advisors.
Neil Sachdev
Chair of the Nominations Committee
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26
CAKE BOX HOLDINGS PLC
Board Of Directors
Board of Directors
Experienced founder led team supported by highly experienced Chair and
Non-Executive Directors.
CAKE BOX HOLDINGS PLC
Board Of Directors
27
Neil Sachdev MBE (62)
Non-Executive Chair
Sukh Chamdal (58)
Co-founder and Chief Executive Officer
Pardip Dass ACMA (48)
Co-founder and Chief Financial Officer
Dr. Jaswir Singh (63)
Chief Operating Officer
Martin Blair (62)
Non-Executive Director
Adam Batty (48)
Non-Executive Director
Neil joined Cake Box as Non-
Sukh opened the first Cake Box concept
Pardip co-founded the Cake Box
Dr Singh joined Cake Box Holdings as
Martin joined Cake Box Holdings as Non-
Adam
joined the Company as Non-
Executive Chair in June 2018.
store in 2008 and co-founded the franchise
franchise business in 2009. He has
Chief Operating Officer and has extensive
Executive Director in June 2018. He is
Executive Director in June 2018.
He is an experienced Non-Executive
business in 2009. He has over 35 years’
over 20 years’ experience within
retail experience within the clothing
Non-Executive Director of AIM listed Kape
Adam is a corporate lawyer and was
Director and Chair and has
experience in the food manufacturing and
the food and beverage industry and
industry. He successfully ran his own
Technologies and Starcom plc. Previously
previously General Counsel and Company
extensive retail experience in Tesco
food retail industry. He was previously a
has previously worked for Starbucks,
restaurant business for nine years before
Martin was CFO of Pilat Media (AIM listed)
Secretary of Domino’s Pizza Group plc
and Sainsbury’s. He is currently
consultant for a food equipment company
Masala Zone, Group Chez Gerard
joining Cake Box in March 2010.
from 2001 to 2014.
and Selfridges Group and has run his own
Chair of Warwick Business School,
that specialised in high volume food
Restaurants & Real pubs.
restaurant business. Adam is currently
Bonhill Plc and serves as Non-
production.
Jaswir is a qualified medical doctor.
Martin is a qualified Chartered Accountant .
General Counsel and Company Secretary
Pardip qualified as a Chartered
Management Accountant in 2007.
Executive Director in the public
sector.
Neil was awarded his MBE for his
work in the retail sector.
Nomination Committee Chair
Audit Committee Member
Remuneration Committee Member
at McCarthy & Stone plc, the FTSE250
house builder.
Adam is a qualified solicitor.
Audit Committee Chair
Remuneration Committee Member
Nomination Committee Member
Remuneration Committee Chair
Audit Committee Member
Nomination Committee Member
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28
CAKE BOX HOLDINGS PLC
Audit Committee Report
Audit Committee Report
Martin Blair
Non-Executive Director
of the Audit Committee
On behalf of the Board I am pleased to present the Audit Committee report for the period to 31 March 2020.
“This is now our second year as a public company and we have continued to improve the internal controls as the Group grows in size. Last
year we purchased two new warehouses to reduce our reliance on Enfield as our sole production location, to improve our distribution to
more northern franchisees, and reduce road miles. We are in the process of installing a new stock system which will allow us a more integrated
and comprehensive view of the stock levels we carry. The warehouse at Bradford had only been open a few weeks before we had to shut it
in response to the COVID-19 pandemic and we were finalising the last changes to the new stock system. This project will now be completed
once production increases to include Bradford. At the year end the new warehouse at Coventry was still being fitted out so it is shown as an
asset under construction in the balance sheet”
INTERNAL CONTROL
The Group’s policies, internal control and corporate governance are reviewed periodically and where appropriate they are enhanced and
improved:
• proper business records are maintained and reported on, which might reasonably affect the conduct of the business;
• monitoring procedures for the performance of the Group are presented to the Board at regular intervals;
• budget proposals are submitted to the Board no later than one month before the start of each financial year;
• accounting policies and practices suitable for the Group’s activities are followed in preparing the financial statements;
• the Group is provided with general accounting, administrative and secretarial services as may reasonably be required; and
• interim and annual accounts are prepared and submitted in time to enable the Group to meet statutory filing deadlines.
The Group continues to review its system of internal control to ensure compliance with best practice, whilst also having regard to its size and
the resources available. The Board considers that the introduction of an internal audit function is not appropriate at this juncture, however it
will keep this under review.
BOARD COMMITTEES
To assist it in carrying out its duties, the Board has set up three committees comprising the Audit Committee, the Remuneration Committee,
and the Nomination Committee with formally delegated duties and responsibilities and with written terms of reference. From time to time
separate committees may be set up by the Board to consider specific issues when the need arises. An explanation of the responsibilities and
composition of these committees is set out below and the terms of reference can be downloaded from our website.
Audit Committee
Remuneration Committee
Nomination Committee
The Audit Committee consists of:
The Remuneration Committee consists of:
The Nomination Committee consists of:
Martin Blair, Non-Executive Director
Adam Batty
Neil Sachdev
Adam Batty, Non-Executive Director
Neil Sachdev
Martin Blair
Neil Sachdev, Non-Executive Chair
Adam Batty
Martin Blair
The Audit Committee is expected to meet formally
at least twice a year and otherwise as required. It
has responsibility for ensuring that the financial
performance of the Group is properly reported on
and reviewed, and its role includes monitoring the
integrity of the financial statements of the Group
(including annual and interim accounts and results
announcements), reviewing internal control and
risk management systems, reviewing any changes
to accounting policies, reviewing and monitoring
the extent of the non-audit services undertaken by
external auditors and advising on the appointment
of external auditors.
The Remuneration Committee is expected to
meet not less than twice a year and at such other
times as required. The Remuneration Committee
has responsibility for determining, within the
agreed terms of reference, the Group’s policy
on the remuneration packages of the Company’s
Chief Executive, the Chair, the Executives and
Non-Executive Directors, and other
senior
executives.
The Remuneration Committee
also has responsibility for determining the total
individual remuneration package of the Chair, each
Executive Director and the Chief Executive Officer
(including bonuses, incentive payments and share
options or other share awards).
No Director or manager may be involved in any
discussions as to their own remuneration.
The Nomination Committee is expected to meet
not less than once a year and at such other times
as required. It has responsibility for reviewing the
structure, size and composition (including the skills,
knowledge and experience) of the Board, and
giving full consideration to succession planning.
It also has responsibility for recommending new
appointments to the Board.
CAKE BOX HOLDINGS PLC
Audit Committee Report
29
APPOINTMENT OF THE EXTERNAL AUDITOR
The Committee considers a number of areas when reviewing the external auditor appointment, namely their performance in
discharging the audit, the scope of the audit and terms of engagement, their independence and objectivity, and remuneration. RSM
were engaged as an adviser for the IPO in June 2018 and the Committee concluded it was appropriate to appoint them as the
Group’s external auditor in September 2018. RSM conducted the audit of the Group’s financial statements for the financial year ended
31 March 2020.
AUDITOR INDEPENDENCE
The Audit Committee monitors the independence of the Group’s external auditor. The Audit Committee considered the threats to
the independence of RSM created by the provision of the non-audit services and concluded that sufficient safeguards were in place.
EXTERNAL AUDIT PROCESS
The external auditor prepares a plan for its audit of the full year financial statements which was presented to the company in February.
The audit plan sets out the scope of the audit, areas of significant risk to focus their work on and audit timetable. This plan is reviewed
and agreed in advance by the Audit Committee.
Following its external audit process, the auditor presented its findings to the Audit Committee for discussion. No major areas
of concern were highlighted by the external auditor during the year, however areas of significant risk and other matters of audit
relevance were discussed.
This year the audit coincided with the COVID-19 lockdown which presented some unique challenges which the Company and
RSM worked together to overcome. The year-end stock take was under taken at Enfield and Bradford whilst the country was under
lockdown. The company provide photographic evidence of the stock in the Bradford warehouse. At the Enfield warehouse where the
majority of the stock is held, a stock take was under taken attended by company staff, appropriately social-distanced and RSM attended
vir tually by camera and stock was counted to their instruction.
ANTI-CORRUPTION
The Board is also responsible for ensuring the Group’s compliance with all applicable anti-corruption legislation, including, but not
limited to, the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act 1977. The Group complies and always has complied
with all applicable anti-corruption laws. In view of the requirement in the UK Bribery Act 2010 for relevant companies to have
adequate anti-bribery procedures, the Group has devised and implemented a suite of anti-corruption policies and procedures
designed to prevent corruption by anyone working on its behalf. The Group has adopted a zero-tolerance approach to corruption
and is committed to ethical business practices.
NEW AND FORTHCOMING ACCOUNTING STANDARDS
In the current year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) which is effective for annual periods that
begin on or after 1 January 2019. As at the date of initial application of IFRS 16, 1 April 2019, the impact of the adoption of IFRS
16 on the Group is minimal because the leases in operation fall under the definition of shor t-term leases and therefore an available
exemption was applied.
RISK MANAGEMENT AND CONTROLS
As described on page 11 of the Strategic Repor t and page 15 of the Corporate Governance Statement, the Board has established a
framework of risk management and internal control systems, policies and procedures. The Audit Committee is responsible for reviewing
the risk management and internal control framework and ensuring that it operates effectively. During the year, the Committee has
reviewed the framework and the Committee is satisfied that the internal control systems in place are currently operating effectively.
One of the risks that the company has is its supply chain and we are pleased that we took action early in ordering additional stock
for those items that might have been impacted by a delay in delivery. We continually review the suppliers we use and make sure we
don’t have an overdependence on one supplier and can obtain items from a number of locations meaning any impact on global supply
routes is minimised.
At present the Group does not have an internal audit function. The Committee believes that in view of the current size and nature
of the Group’s businesses, management is able to derive sufficient assurance as to the adequacy and effectiveness of internal controls
and risk management procedures without a formal internal audit function. This will be kept under review as the business evolves.
Martin Blair
Chair of the Audit Committee
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CAKE BOX HOLDINGS PLC
Remuneration Committee
Remuneration Committee
Adam Batty
Non-Executive Director of the
Remuneration Committee
I am pleased to present this remuneration report, which sets out the remuneration policy and the remuneration
paid to the Directors for the period.
Below is set out the Annual Report of the Remuneration Committee (the “Committee”). The report comprises a description of how the
Committee operates; a brief overview of the remuneration policy and how we intend to implement it in 2020/21; together with details of
compensation paid to the Board of Directors within the financial year.
In the financial year, the Committee undertook a thorough review of the remuneration policy that had originally been introduced in the year
following on from admission. This recent review took place to ensure the remuneration levels set were still competitive, recognised the skills
and experience of the Executive Directors and reflected the growth in size of the Company since it listed on AIM. The Committee further
reviewed the operation of variable incentive plans to ensure they have the correct link between performance and reward.
As a result of this review, the Committee decided that its previous policy was still, in the main, appropriate for the FY19/20 financial year and
for the foreseeable future. This policy can be summarised as follows:
• base salaries generally lower than equivalent roles at companies with similar characteristics and sector comparators, recognising the capabilities
and strong performance to date and reflecting responsibility levels and complexity of the roles;
• annual bonus maximum quantum set by reference to each individual’s salary, with performance assessed against a combination of financial and
operational goals linked to the Company’s strategy; and
• an annual award of performance shares subject to a combination of performance conditions measured over a four-year performance period,
aligned to the main strategic objectives of delivering sustained profitable growth and increasing the Company’s share price over the medium term.
Against the backdrop of a successful year for the Company in its second year as a public company, the Committee is satisfied that the
remuneration policy adopted at the 2019/20 financial year operates in such a way as to incentivise Company growth and development and
reward for strong performance, offering an appropriate balance between fixed and performance-related, immediate and deferred remuneration,
but without overpaying or creating the risk of rewards for failure.
Against the backdrop of a successful year for the Company in its first year as a public company, the Committee is satisfied that the remuneration
policy adopted at the 2019/20 financial year operates in such a way as to incentivise Company growth and development and reward for strong
performance, offering an appropriate balance between fixed and performance-related, immediate and deferred remuneration, but without
overpaying or creating the risk of rewards for failure.
REMUNERATION COMMITTEE REPORT
The Committee is appointed by the Board and is formed of Non-Executive Directors. In the year, the Committee was chaired by Adam Batty;
the other members of the Committee were Neil Sachdev and Martin Blair.
The Committee met three times during the year and all Committee members attended every meeting. The Committee’s terms of reference
are available for public inspection on the Company’s website at www.eggfreecake.co.uk.
Other members of the Board of Directors are invited to attend meetings when appropriate, but no Director is present when his remuneration
is discussed. MM&K Remuneration Consultants (“MMK”) provided advice to the Committee during the current year. MMK is a signatory to the
Remuneration Consultants Group code of conduct and has no other connection with the Company other than in the provision of advice on
remuneration from time to time.
CAKE BOX HOLDINGS PLC
Remuneration Committee
31
The Committee’s principal duties remain as follows:
• to review and make recommendations in relation to the Company’s Senior Executive remuneration policy;
• to apply these recommendations when setting the specific remuneration packages for each Executive Director, the Company Chairman and
other selected members of senior management and to include annual bonuses, the eligibility requirements for long-term incentive schemes,
pension rights, contracts of employment and any compensation payments;
• to ensure that the remuneration policy is aligned with the short and long-term strategy of the Company;
• to manage performance measurements and make awards under the Company’s annual bonus and long-term incentive plans;
• to consult with key shareholders with regards to remuneration where appropriate and take their views into account; and
• to manage reporting and disclosure requirements relating to Executive remuneration.
The Committee has decided that, in light of the evolving governance regime, effective from the FY21/22 AGM, it will
seek shareholder approval (by way of advisory vote) on the Remuneration Report.
PAY POLICY
The remuneration policy is designed to provide an appropriate level of compensation to senior management such that they are sufficiently
incentivised and rewarded for their strong performance, levels of responsibility and complexity of their role and to reflect their skills and
experience over time. Using appropriate measures of financial and personal performance, as well as equity-based rewards, helps to align the
interests of the Directors with those of the Company’s shareholders.
The Committee has taken into account market data when setting remuneration levels, positioning Executives’ overall pay at a broadly mid-
market level relative to similarly sized AIM-listed companies, as well as those from the food sector. This provides a package which is both fair
and competitive within the market.
BASE SALARY
The base salary provides a base level of remuneration to support recruitment and retention of Executive Directors with the necessary
experience and expertise to deliver the Company strategy. Base salaries are reviewed on an annual basis, and any increases become effective
from the start of the financial year. Originally, as a result of the salary benchmarking exercise undertaken in the 2019/20 financial year (which
showed that the base salaries were still lower quartile and reflecting a year of strong financial performance of the Company, the Committee had
decided, with effect from 1 April 2020, to increase the base salaries of each of the Executive Directors by 5% over the previous financial year.
However, in light of the COVID-19 crisis and the Government advice to close the Group’s stores, the Executive Directors have volunteered
(and the Committee fully supports the decision) to defer such base salary increases until such time as it is appropriate to introduce them. If
and when that happens, Sukh Chamdal will be entitled to a base salary of £193,200, Pardip Dass will be entitled to a base salary of £126,780
and Dr Jaswir Singh will be entitled to a base salary of £96,600.
PENSION AND BENEFITS
The Executive Directors are entitled to a pension contribution of up to 2% of salary in the form of a defined contribution to a stakeholder
pension plan, in line with the rest of the workforce. Additionally, the Executive Directors are entitled to private medical insurance as a benefit
in kind.
ANNUAL BONUS
The annual bonus provides an incentive linked to the achievement in delivering goals that are closely aligned with the Company’s strategy and
the creation of value for shareholders.
The remuneration policy allows the Committee, at its discretion, to make annual cash bonus awards to the Executive Directors, which will
normally be limited to a bonus opportunity of 75% of salary per annum.
Stretching performance targets are determined by the Committee at the start of the financial year, which are fully aligned with the Company’s
strategy and objectives. These targets (a majority of the bonus) are financial in nature (e.g. adjusted EBITDA), with a minority of the bonus
payable for the achievement of qualitative strategic and personal performance targets set by the Chief Executive Officer and agreed by the
Chair. For the financial targets, a sliding scale target range is used, with no bonus payable for this element unless a threshold level of performance
is achieved (which will be achieving market consensus). Clawback provisions do apply.
As a result of missing the threshold level of performance in FY19/20, no annual bonus will be paid to the Executive Directors.
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32
CAKE BOX HOLDINGS PLC
Remuneration Committee
LONG-TERM INCENTIVES
The Group operates two equity-settled share-based remuneration schemes as described in note 21 of the financial statements. Awards are
granted to incentivise, retain and reward Executive Directors in relation to long term performance and achievement of the Company’s strategy.
Payment in shares enables Executive Directors to build on their existing shareholdings and provides alignment of interest with shareholders.
During the financial year under review, the Group made its first annual awards in respect of the schemes. Full details of both schemes can be
found in note 21. The EMI scheme awards are subject to stretching performance conditions set at the time of grant, which comprise metrics
based on financial performance in line with our key objectives of delivering returns to our shareholders through achievement of our growth
strategy and ongoing employment. The Committee firmly believes that these challenging performance conditions will help to drive strong
performance over the long term.
As the Executive Directors did not receive an award of share options at IPO, the initial award of performance shares was larger than future
awards, at 250% of salary. From FY20/21, it will be at the Committee’s discretion to make annual awards with a face value of up to 100% of
each Executive Director’s salary for the relevant financial year, on a four-year vesting period. The Committee has decided not to award any
performance shares to the Executive Directors in FY20/21 in light of the disruption to the business caused by COVID-19 crisis.
NON-EXECUTIVE DIRECTOR FEES
Fees for Non-executive Directors are set with reference to market data, time commitment, responsibilities and chairmanship of Board
Committees. Fees are normally reviewed biennially and the current fees were set at Admission. During the 19/20 financial year, the fees payable
to the Non-Executive Directors were reviewed (in the case of the Chair of the Board by the Committee and in the case of the Non-Executive
Directors by the Board). As a result, the Chair, Neil Sachdev, will receive an annual fee of £62,000, an increase of 12.5% on the prior year to
recognise his material time contribution in supporting the Executive Directors and the Company. The two other Non-Executive Directors,
Adam Batty and Martin Blair, will receive annual fees of £38,500, an increase of 10% on the prior year. However, in light of the COVID-19 crisis,
the Non-Executive Directors have volunteered to defer the increases in their fees until such time as they feel it is appropriate. Other than their
annual fee, as well as appropriate travel expenses to and from Board meetings, no additional compensation is payable.
PAY AND CONDITIONS ELSEWHERE IN THE COMPANY
The remuneration policy described above provides an overview of the structure that operates for the most senior Executives in the Company,
with a significant element of remuneration dependent on Company and individual performances. A lower aggregate level of incentive payment
applies below Executive Director level. The vast majority of the Company’s employees participate in an annual bonus plan with the limits
and performance conditions varying according to job grade. The Committee believes in broad-based employee share ownership being a
key element in retention and motivation in the wider workforce, so a number of the more senior employees are provided with longer term
incentives through discretionary share schemes. The Committee takes into account remuneration packages within the Company as a whole
when determining Executive pay levels.
Service agreements
The Executive Directors’ service agreements provide that their employment with the Company is on a rolling basis, subject to written notice
being served by either party of not less than six months.
The current service contracts and letters of appointment include the following terms:
Executive Directors
Non-Executive Directors
Sukh Chamdal
Pardip Dass
Dr Jaswir Singh
Adam Batty
Martin Blair
Neil Sachdev
Date of contract Notice Period
20 June 2018
20 June 2018
20 June 2018
Six Months
Six Months
Six Months
20 June 2018
20 June 2018
20 June 2018
Three Months
Three Months
Three Months
CAKE BOX HOLDINGS PLC
Remuneration Committee
33
Directors’ Remuneration Report
The Directors received the following remuneration for the financial year ended 31 March 2020:
Salary
Benefits
and fees
in kind
Pension
£’000
£’000
£’000
Annual
Bonus
£’000
Share-based
Payments
charge
£’000
2020
total
£’000
2019
total
£’000
176,000 3,142 1,316
115,000 1,666 1,316
88,000 2,588 1,316
0
0
0
109,948 290,406 164,404
22,491 140,973 107,795
54,974 146,878 79,914
35,000 -
35,000 -
55,000 -
-
865
-
-
-
-
0
0
0
35,000 29,167
35,865 29,505
55,000 45,833
Executive Directors
Sukh Chamdal
Pardip Dass
Dr Jaswir Singh
Non-Executive Directors
Adam Batty
Martin Blair
Neil Sachdev
Aggregate emoluments
1.
Including the provision of private medical insurance.
Outstanding share-based awards
The following share-based payments awards were granted during the year and remain unvested:
Date of
Grant
Number
Market Price at
Exercise Price
Grant date
Number still
outstanding
EMI Share Options
Pardip Dass
24 July 2019
Unapproved Share Options
Sukh Chamdal
Pardip Dass
Dr Jaswir Singh
24 July 2019
24 July 2019
24 July 2019
151,515 181p
165p £151,515
266,667 181p
23,485 181p
133,333 181p
1p 266,667
23,485
1p
133,333
1p
Total
575,000
575,000
Statement of Directors’ interests
The table below sets out the beneficial interests in shares and the unvested share options of all Directors holding office as at 31 March 2020:
Ordinary shares
Unexercised share options
Total interests
At
At
At
At
At
At
31 March 2020
31 March 2019
31 March 2020
31 March 2019
31 March 2020
31 March 2019
16,537,915 16,537,915 266,667 - 16,804,572 16,537,915
3,520,418 3,670,418 175,000 - 3,845,418 3,520,418
546,666 541,666 133,333 - 679,999 541,666
-
-
-
-
18,518 18,518 - - 18,518 18,518
-
-
-
-
-
-
-
-
Sukh Chamdal
Pardip Dass
Dr Jaswir Singh
Adam Batty
Martin Blair
Neil Sachdev
Under these service contracts, the Company may terminate an Executive Director’s employment immediately by making a payment in lieu of
base salary, benefits and statutory entitlements, and any bonus or commission payments pro-rated for the duration of the notice period. No
bonus would be payable in the event of an Executive Director’s resignation.
Adam Batty
Chair of the Remuneration Committee
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CAKE BOX HOLDINGS PLC
Environmental and Social Governance Report
35
34
CAKE BOX HOLDINGS PLC
Environmental and Social Governance Report
Environmental and Social Governance Report
Cake Box believes that ESG and social responsibility is about being community minded, responsible and making a difference. We have an
obligation to consider the interests of our customers, employees, shareholders, communities, and to the environment. We must continue
to consider the social and environmental consequences of all our business activities.
By adopting socially and environmentally responsible behaviour, we believe that we can make a significant contribution to our core
business processes and stakeholder management. This will help us achieve the ultimate goal of creating both social and corporate value,
enabling us to boost wealth creation and employment, promote social justice, help those less fortunate and protect the environment.
OUR AIMS AND VALUES
Our values underpin our vision, and guide all of our actions. Their presence in everything we do will ensure that we are ethical in all our dealings.
Customers
Recognition
Improvement
Honesty
Success
– listen to our customers and provide great customer service
– reward the efforts and achievements of our colleagues
– get better at what we do
– openness and honesty as a way of working
– drive commercial success through effective leadership and teamwork
We promote initiatives which suppor t and encourage staff to achieve a reasonable work/life balance. As a company we strive to recruit
and retain the best people, continue our family culture and values, motivate our people and reward them accordingly.
Cake Box is committed to creating a positive impact on the communities around us. We follow many business principles and are mindful of
our ethical, social and economic impact. To us, ESG means doing everything we can to be a good company committed to socially responsible
practices. This strategy confirms our commitment to acting acting responsibly whilst delivering high quality products and service.
OUR ECONOMY
We provide employment to people in local communities across the whole of Britain and we are proud to have a large, diverse workforce
which we encourage. We have opened 133 stores nationwide since we started in 2008, thereby boosting the economy and providing
100% recyclable or biodegradable plastic by 2022.
employment, nationally. Our aim is to teach the unemployed new, practical skills and to improve incentives to work. We have around 900
employees within the Franchise Group across the whole of the UK and we encourage applications for employment from all demographics.
OUR PEOPLE
OUR ENVIRONMENT
Protecting and preserving the environment
Our company is dedicated to protecting our employee’s health and well-being. Our people are our best asset and one of our objectives
is to keep them safe and healthy. We provide a comprehensive Private Health policy for every eligible employee. We are constantly
Apar t from legal obligations, our company is committed to proactively protecting the environment.
auditing our internal policies and procedures to see where we can incorporate more beneficial practices for our employees. We have a
Sickness Absence policy which incorporates paid Company Sick pay for all staff.
Plastics - Our aim is to have 100% recyclable or biodegradable plastic from all our suppliers and any plastic that we have on our
packaging by 2022. We are still researching biodegradable carrier bags which will be charged for and the proceeds will be distributed
OUR COMMUNITIES
to nominated charities by the franchisees.
Our company will initiate and suppor t community investment and educational programs. We are currently looking at ways we can
Our aim is to ensure our bags are environmentally friendly and fully recyclable by the end of 2022.
provide suppor t to non-profit organisations or movements to promote cultural and economic development of local communities.
Charitable giving and volunteer effor ts within our communities. We run a ‘Hot Kitchen’ every Wednesday for the homeless in a deprived
Borough. This runs from October to April every year.
Carbon Footprint - We have reduced our travel mileage by opening distribution centres within 90 minutes of our stores. This will help
to reduce our carbon footprint and our diesel miles. We have 1 distribution centre currently operational in Bradford and 1 in Coventry
that is in the process of being refurbished. We hope to have the Coventry site fully operational by the end of 2020.
The Directors also sponsor a free dispensary back in their home village in India providing tests, free medicines and check-ups for the
whole community. Our Franchisees carry out charity driven initiatives in their local communities.
We have also installed LED lights across our offices and our depots to fur ther reduce our emissions. We’ve also introduced gas ovens,
making sure that we’re baking efficiently whilst reducing our impact on emissions.
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36
CAKE BOX HOLDINGS PLC
Director’s Responsibilities
Director’s Responsibilities
OVERVIEW
The Board seeks to “Do the right thing” for our customers, people, suppliers and shareholders. The Board is strongly focused on promoting
a positive culture and we believe that equality, diversity and inclusion are fundamental for our strategy to be successful. To achieve an optimal
culture within the company, and decision making which is informed by a range of expertise, experience and cultural perspectives. The Board
believes this is vital to creating a sustainable growing business and is a key responsibility of the Company. The Non-Executive Directors
continue to provide independent judgment on key issues affecting the Company. The Board seeks to follow best practice in corporate
governance as appropriate for a company of our size, nature and stage of development. As a public company, admitted to trading on AIM,
we are mindful of the trust placed in the Board by institutional and retail investors, employees and other stakeholders. Taking account
of this, the Board has adopted the Quoted Company Alliance’s (QCA) Corporate Governance Code for Small and Mid-Size Quoted
Companies (“QCA Code”). The principal means of communicating our application of the Code are this annual report and our website
https://investors.eggfreecake.co.uk/corporate-governance. As Chair, I am the custodian of the corporate governance approach adopted
by the Board to ensure that the Company has the right people, strategy and culture to deliver success in the medium to long term. Since
adopting the QCA Code I have led the Company’s application of its ten principles to ensure that the Company’s strategy is linked to and
supported by its governance arrangements. The remainder of this statement sets out the Company’s application of the Code including,
where appropriate, cross references to other sections of the annual report.
Principle 1: Establish a strategy and business model which promote long term value for shareholders
The Board has clearly articulated its strategy and business model in the Company’s admission document and the strategy and business
operations of the Group are set out in the Chair’s Statement on pages 6 - 7 and the Chief Executive Officer’s Review on pages 8 - 9. The
Board is responsible for the Group’s strategy and the operation of the Board is documented in a formal schedule of matters reserved for
its approval which is reviewed annually. This includes the Group’s strategic aims and objectives. The Group’s overall strategic objective is to
become the UK customers number one choice when ordering a celebration cake. The Group continues to grow and deploys its financial
and other resources towards developing its franchisee network. The Board believes that this approach will continue to deliver significant
long-term value for shareholders through a strong share performance and against the Group’s key performance indicators. The Board also
believes that remaining admitted to trading on AIM is of long-term value to shareholders as it offers a combination of access to capital
markets, flexibility to make acquisitions, incentives and rewards to management through share schemes, and a regulatory environment
appropriate to the size of the Company.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Company recognises the importance of engaging with its shareholders in order to communicate the Group/Company’s strategy
and progress and to understand the expectations and needs of shareholders. Beyond the Annual General Meeting, the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer meet regularly with investors (including institutional shareholders) and analysts
to actively build the relationship, provide them with updates on the Group’s business and to obtain feedback regarding the market’s
expectations for the Group. Shareholders also have access to current information on the Company through its website https://investors.
eggfreecake.co.uk and via its financial PR advisor.
CAKE BOX HOLDINGS PLC
Director’s Responsibilities
37
Principle 5: Maintain the board as a well- functioning, balanced team led by the chair
The Board includes a balance of Executive and Non-Executive Directors. All the directors have appropriate skills and experience for the
roles they perform at Cake box, including as members of Board Committees. The Board is responsible to the Company’s shareholders and
sets the Company’s strategy for achieving long term success. It is also ultimately responsible for the management, governance, controls, risk
management, direction and performance of the Company. The Board meets 10 times per year. The Chair is responsible for ensuring that the
Directors receive accurate and timely information and ensures that any feedback or suggestions for improvement on Board papers is fed back
to management. Adam Batty and Martin Blair are Non-Executive Directors of the Company and Neil Sachdev is the Non-Executive Chair.
The Board considers that Neil, Adam and Martin are independent, in character and in judgement, and have no business relationships which
impact on their independence. The Board has delegated specific responsibilities to the Audit, Remuneration and Nomination committees. Each
committee reports back to the Board and has written terms of reference setting out its duties, authority and reporting responsibilities. The
terms of reference will be kept under continuous review to ensure they remain appropriate and reflect any changes in legislation, regulation or
best-practice. Each committee meets 4 times per year. The Company is satisfied that the current Board is sufficiently resourced to discharge its
governance obligations on behalf of all stakeholders and will consider the requirement for additional Non-Executive Directors as the company
fulfils its growth objectives. Directors are subject to re-election at least every three years.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Board currently comprises of three Executive and three Non-Executive Directors with an appropriate balance of sector, financial and
public market skills and experience. The experience and knowledge of each of the Directors gives them the ability to constructively challenge
strategy and to scrutinise performance. In addition, the Chair, Neil Sachdev, brings further strategic, commercial, transaction and leadership
experience which will be invaluable as the Board pursues the Company’s growth strategy and continues to transform the Company. The
Directors’ biographies are set out on pages 24 - 25.
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Chair reviews the contributions of Board members, as well as the Board Committees and conducts effectiveness reviews. The next
review is due to be undertaken before October 2019. In addition, the Non-Executive Directors will meet, without the Chair present, and
will evaluate his performance. The Nomination Committee is responsible for succession planning of the executive leadership team and makes
recommendations to the Board for the re-appointment of any Non-Executive Directors if and when necessary. Succession planning is reviewed
on an ongoing basis alongside the capability of the senior management and Directors.
Principle 8: Promote a corporate culture that is based on ethical values and behaviour
The Board monitors and promotes a healthy corporate culture and considers how that culture is consistent with the Company’s objectives,
strategy and business model and with the description of principal risks and uncertainties. Our Franchise Manual is issued to all Franchisees and
provides specific detail of the policies and procedures in place to promote and support ethical behaviour and values. The Company employs
Audit Compliance Officers who visit each shop to ensure policies, procedures and standards are being adhered to. We also employ Mystery
shoppers who go into shops anonymously at various times throughout the year, and report back. The Board has considered and assessed the
culture as being inclusive, transparent and collaborative with appropriate behaviours. The Board is satisfied that the Company has a ‘speak
up’ culture and the Directors regularly observe this occurring in practice. The Company has a Code of Conduct and policies and procedures
relating to whistleblowing stating the Company’s commitment to conducting its business with honesty and integrity, its expectation that staff
will maintain high standards, and encouraging prompt disclosure of any suspected wrongdoing. The terms of reference of the Audit Committee
include reviewing the adequacy and security of the Company’s arrangements for its employees and contractors to raise concerns, in confidence,
about possible wrongdoing in financial reporting or other matters and keeping under review the Company’s procedures for handling allegations
from whistle-blowers. The board believes that diversity is a key to future success of our business (we widen our business to include franchisees)
as we firmly believe that part of the company success is the global and diverse nature of our workforce and we intend to continue our effort
to promote diversity.
Principle 3: Consider wider stakeholder and social responsibilities and their implications for long-term success
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision- making by the board
We recognise that we are responsible not only to shareholders and employees, but to a wider group of stakeholders (including our
customers and suppliers) and the communities in which we operate. The Company is focused on inclusivity, leadership and engagement.
The Company strives for a visible benefit from everything it does, whether that is promoting diversity and inclusivity through its events or
creating value for its shareholders. The Company acts with integrity, focuses on creating results and importantly values people – from its
members of staff to those who form the communities with which it engages. The Non-Executive Directors are available to discuss any
matter stakeholders might wish to raise. The Company is especially focused on building and nurturing its relationships with the Franchisees
who are key to the business model. The Company solidifies its relationship with the Franchisees by holding a bi-monthly Franchise Forum,
that all franchisees can attend. This is a regular, team building day, where the Executive Team, employees and franchisees can get together.
New products are launched and any outstanding issues are addressed.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board is responsible for determining the nature and extent of significant risks that may have an impact on the Company’s operations,
and for maintaining a risk management framework. The Board is responsible for the management of risk and carries out robust assessments
of the principal risks and uncertainties affecting the Company’s business, discussing how these could affect operations, performance and
solvency and what mitigating actions, if any, should be taken. This process, along with the key risks are described on pages 16.
The governance structure adopted by the Group is set out in the Governance section of this annual report and on our website. This includes,
but is not limited to, the composition and role of the Board; roles and responsibilities of the Board; the roles of the Board Committees and the
compliance with our chosen corporate governance code. The terms of reference of our Board Committees is available on our website. The
Board believes our governance framework is consistent with our culture and appropriate to our size and requirements. We will continue to
evolve our governance framework, as necessary.
Principle 10: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant
stakeholders.
The above-mentioned formal schedule of matters reviewed annually by the Board includes matters relating to effective communication
with the Company’s shareholders. The Company maintains communication with their institutional shareholders through individual meetings
with Executive Directors, particularly following publication of the Group’s interim and full year results. Private shareholders are encouraged
to attend the Company’s Annual General Meeting at which the Company’s activities will be considered and questions answered. If 20% of
the independent votes have been cast against a resolution proposed at any general meeting, the Company will include, on a timely basis, an
explanation of what actions it intends to take to understand the reasons behind that vote result, and, where appropriate, any different action
it will take as a result of that vote. The Non-Executive Directors are available to discuss any matter stakeholders might wish to raise, and the
Chair and independent Non-Executive Directors will attend meetings with investors and analysts as required.
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38
CAKE BOX HOLDINGS PLC
Financial Statements
CAKE BOX HOLDINGS PLC
Financial Statements
39
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31st MARCH 2020
Cake Box Holdings Plc
CONTENTS
PAGE
Independent Auditors’ report
Consolidated Statement of Cash Flow
39 - 43
44 - 74
Consolidated Statement of Financial Position
75
Company Cash Flow Statement
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Company information
76
77
83
78 - 82
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAKE BOX HOLDINGS PLC
Opinion
We have audited the financial statements of Cake Box Holdings Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for
the year ended 31 March 2020 which comprise the Consolidated and Company Statement of Financial Position, Consolidated
Statement of Comprehensive Income, Consolidated and Company Statement of Changes in Equity and Consolidated and
Company Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at
31 March 2020 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to SME listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group
and parent company financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit
strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the group and parent company financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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40
CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
41
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAKE BOX HOLDINGS PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAKE BOX HOLDINGS PLC
We have determined the matters described below to be the key audit matters to be communicated in our report:
Our application of materiality
Risk of fraud in revenue recognition
Key audit matter description
Revenue is the most significant component of the financial statements comprising of sale of goods and franchise fees. Total
revenue for the Group for the year-ended 31 March 2020 was £18.7m (2019: £16.9m), which is largely formed of a high
volume of low value items. IFRS 15 requires the Group to assess whether the five-point revenue recognition criteria as set
out by the Standard have been met.
Management judgement is required to assess the impact of IFRS 15 on franchise fees and its assessment of whether it is
acting as principal or agent in respect of online sales, store fit-outs and recharges. Furthermore, the fraud risk in revenue is
not rebutted.
These matters resulted in revenue recognition being a key audit matter.
Refer to notes 2.7 (Accounting policies – Revenue recognition) and 3 (Notes to the Consolidated Financial Statements – Segmental
reporting) for the disclosures relating to revenue.
How the matter was addressed in the audit
Our audit procedures included:
• Review of management’s assessment of franchise agreements to determine amounts applicable to separate
performance obligations.
• Review of management’s consideration of whether the Group acts as principal or agent in relation to online
sales, shop fit-outs and recharges.
• Performance of substantive analytical review and data analysis procedures in relation to revenue recognised in
the year, including the assessment of any deviations from sales trends in the year.
• Substantive testing of a sample of revenue transactions back to supporting documentation.
• Performance of cut-off testing procedures
• Reviewed disclosures in the financial statements for adequacy.
Existence of inventories and valuation
Key audit matter description
Inventories are material to the Group, with a total of £1.4m held at the year-end date (2019: £0.9m). The balance is formed
of equipment for franchisees, non-food items, as well as food stock, including fresh food items.
As a result of COVID19 and in line with Government guidance, the Group largely stopped trading before year-end, with
limited stores open. In addition, given the restrictions in place, physical stock take attendance at the warehouses was not
possible.
Given these exceptional circumstances and the limited trade around the year end stock, there was an increased risk that
fresh food items could be impaired at the year-end date, increasing the risk that stock at the year-end could be overstated.
The added complication of not being able to physically attend the year end stock take resulted in this being completed
“virtually”, which added additional procedures to our work in this material area.
These matters resulted in the existence and valuation of stock being a key audit matter.
Refer to notes 2.13 (Accounting policies – Inventories), 6 (Notes to the Consolidated Financial Statements – Operating profit) and 17
(Notes to the Consolidated Financial Statements – Inventories)
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent
of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements
as a whole, could reasonably influence the economic decisions of the users we take into account the qualitative nature and the
size of the misstatements. Based on our professional judgement, we determined materiality as follows:
Overall materiality
£199,000
£20,400
Group
Parent Company
Basis for determining
overall materiality
Rationale for benchmark
applied
5% of EBITDA
3% of total assets
EBITDA is the main measure by which the
users of the financial statements assess
financial performance and health of the
Group which is consistent with a number of
Listed businesses in the Consumer market
and EBITDA is disclosed as a KPI.
Assets chosen as a benchmark as the
Company is a holding company with limited
costs, being solely Plc and payroll costs.
Performance materiality
£149,000 (2019: £261,000)
£15,300 (2019: £12,600)
Basis for determining
performance materiality
Reporting of
misstatements to the
Audit Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £9,970 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
Misstatements in excess of £1,020 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
The group consists of 3 components, all of which are based in the UK.
The coverage achieved by our audit procedures was:
Number of components Revenue
Total assets
Profit before tax
Full scope audit
3
Total
3
100%
100%
100%
100%
100%
100%
Of the above, full scope audits for 3 components were undertaken by RSM UK Audit LLP.
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42
CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
43
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAKE BOX HOLDINGS PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAKE BOX HOLDINGS PLC
Other information
Auditor’s responsibilities for the audit of the financial statements
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditors responsibilities. This description forms part of our auditor’s report.
We have nothing to report in this regard.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Euan Banks (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 30, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or
have no realistic alternative but to do so.
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44
CAKE BOX HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2020
CAKE BOX HOLDINGS PLC
45
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 MARCH 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Fair value movements
Other operating income
Operating profit
Exceptional items
Net finance costs
Note
2020
£
2019
£
3
18,742,175
16,908,999
(9,978,675) (9,189,297)
8,763,500
7,719,702
4 (4,971,999) (3,742,684)
15
6
11
5
7
-
8,800
444,148
27,719
3,800,301
4,448,885
-
(36,357)
(598,645)
(41,534)
Profit before income tax
3,763,944
3,808,706
Income tax expense
12
(635,349)
(806,290)
Profit after income tax
3,128,595
3,002,416
Other comprehensive income for the year
Revaluation of freehold property
Deferred tax on revaluation of freehold property
14
13
1,400,000
-
(266,000)
-
4,262,595
3,002,416
Earnings per share
Basic
Diluted
33
33
7.82p
7.74p
7.51p
7.51p
Assets
Non-current assets
Property, plant and equipment
Investment property
Trade and other receivables
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Non-current assets held for sale
Total Assets
Equity and liabilities
Equity
Issued share capital
Capital redemption reserve
Share option reserve
Revaluation reserve
Retained earnings
Equity attributable to the owners of the
Parent company
Current liabilities
Trade and other payables
Short-term borrowings
Current tax payable
Non-current liabilities
Borrowings
Deferred tax liabilities
Note
2020
£
2019
£
14
18
18
16
20
15
13
17
19
20
20
20
24
22
22
13
7,199,549
-
10,000
37,690
7,247,239
1,396,235
1,453,232
3,676,042
-
6,525,509
5,047,791
-
52,861
-
5,100,652
909,716
1,532,487
3,082,044
649,998
6,174,245
13,772,748
11,274,897
400,000
40
198,368
1,589,422
7,296,507
400,000
40
-
455,422
5,767,912
9,484,337
6,623,374
1,493,352
167,754
648,522
2,309,628
1,446,288
532,495
1,978,783
1,531,887
212,183
747,473
2,491,543
1,937,577
222,403
2,159,980
Total Equity and Liabilities
13,772,748
11,274,897
The notes on pages 44 - 82 form part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 21 June 2020.
They were signed on its behalf by:
Pardip Dass
Chief Financial Officer
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46
CAKE BOX HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2020
2020
£
2019
£
Cash flows from operating activities
Profit before income tax
3,763,944
3,808,706
Adjusted for:
Depreciation
Profit on Disposal
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
Net fair value gain
Share based payment charge
Finance income
491,630
(5,608)
(486,519)
122,116
(38,537)
-
198,368
(17,872)
430,676
(3,222)
(200,504)
(25,254)
38,541
(444,148)
-
(6,981)
CAKE BOX HOLDINGS PLC
47
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Attributable to the owners of the Parent Company
Share
capital
£
Capital
redemption
reserve
£
Share option
reserve
Revaluation
reserve
Retained
earnings
Total
£
£
£
£
At 1 April 2018
160
40
- 455,422
4,205,336
4,660,958
Total comprehensive income
for the year
-
Share bonus issue 399,840
-
Dividends paid
-
-
-
-
-
3,002,416 3,002,416
-
-
(399,840)
16,970
- -
(1,040,000) (1,040,000)
At 31 March 2019
400,000
40
- 455,422
5,767,912 6,623,374
Profit for the year
-
Revaluation of freehold property
-
-
-
-
3,128,595 3,128,595
- 1,400,000
- 1,400,000
Cash generated in operations
3,597,814
3,531,930
Deferred tax on revaluation of
freehold property
-
-
-
(266,000) - (266,000)
Total comprehensive income
for the year
-
-
-
1,134,000
3,128,595
4,262,595
Share based payments
-
- 198,368 -
-
198,368
Dividends paid
-
-
- -
(1,600,000) (1,600,000)
At 31 March 2020
400,000
40 198,368 1,589,422
7,296,507 9,484,337
The notes on pages 45 to 82 form part of these financial statements.
Finance costs
Taxation paid
54,229
(727,898)
48,515
(497,250)
Net cash generated from operating activities
3,353,853
3,149,079
Cash flows from investing activities
Sale of investment properties
Purchases of property, plant and equipment
Purchases of assets under construction
Proceeds from sale of property, plant and equipment
Interest received
Net cash used in investing activities
650,000
(1,266,242)
-
28,462
17,872
(569,908)
140,000
(567,154
(1,570,793)
-
6,981
(1,990,966)
Cash flows from financing activities
New borrowings
Repayment of borrowings
Repayment of finance leases
Dividends paid
Interest paid
-
(535,718)
-
(1,600,000)
(54,229)
870,000
(329,983)
(33,228)
(1,040,000)
(48,515)
Net cash used in from financing activities
(2,189,947)
(581,726)
Net increase in cash and cash equivalents
593,998
576,387
Cash and cash equivalents brought forward
3,082,044
2,505,657
Cash and cash equivalents carried forward
3,676,042
3,082,044
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
1.
General information
2.2
Functional and presentation currency
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 currency of the primary economic environment in which the Group operates (the functional currency) is Pound Sterling
(“GBP or £”) which is also the presentation currency.
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’).
2.3
Basis of consolidation
The principal activity of the Group continues to be the specialist retailer of fresh cream cakes.
2.
Accounting policies
2.1
Basis of preparation of financial statements
The financial statements for the year ended 31 March 2020 and the historic financial information for the year ended 31 March
2019 have been prepared under the historical cost convention as modified by fair value measurement of freehold property
and, in accordance with International Financial Reporting Standards as adopted by the EU (“IFRS”).
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
The material areas in which estimates, and judgements are applied are as follows:
Freehold property - Judgement
Freehold properties are held at valuation. Depreciation has not been provided as there is no difference between the carrying
value and expected residual value.
One property held at valuation has been revalued by an independent valuer during the year. The directors consider that the
value of the freehold property is representative of the current market value after consideration to similar properties in the
surrounding area based upon extensive research at the balance sheet date. See note 14 for further information.
Share-based payment – Estimate
Share based payments have been measured using the Black-Scholes valuation model which requires a range of input
factors which are estimates based on historical data, expected data, benchmarking and consideration of non-market based
performance conditions. Full details of these factors are detailed in note 21.
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. Subsidiaries
include all entities over which the Group has the power to govern financial and operating policies. The existence and effect
of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control
ceases. Intra-group transactions are eliminated in preparing the Consolidated Financial Statements.
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership
interest is given in note 5 to the Company’s separate financial statements.
2.4
Application of New and Revised IFRS’s
New and amended Standards and Interpretations applied
The following new and amended Standards and Interpretations have been issued and are effective for the current financial
period of the Group:
IFRS 16 ‘Leases’
In the current year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) which is effective for annual periods that
begin on or after 1 January 2019. IFRS 16 introduces significant changes to lessee accounting by removing the distinction between
operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases,
except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting
have remained largely unchanged.
As at the date of initial application of IFRS 16, 1 April 2019, the impact of the adoption of IFRS 16 on the Group is minimal because
the leases in operation fall under the definition of short-term leases and therefore an available exemption was applied.
In the current year, the Group has applied a number of other amendments to Standards and Interpretations issued by the IASB
that are effective for an annual period that begins on or after 1 January 2019. This has not had any material impact on the amounts
reported for the current and prior years. These include:
IFRS 9
Amendments regarding prepayment features with negative
compensation and modifications of financial liabilities
IFRS 11
IAS 12
IAS 23
Amendments to remeasurement of previously held interest
Amendments to income tax consequences of dividends
Amendments to borrowing costs eligible for capitalisation
Effective Date
1 January 2019
1 January 2019
1 January 2019
1 January 2019
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2. Accounting policies (continued)
2.
Accounting policies (continued)
2.4 Application of New and Revised IFRS’s (continued)
Sale of goods
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:
IAS 1 & 8
IFRS 3
Conceptual Framework
Definition of material
Definition of a business
Amendments References to the Conceptual Framework
in IFRS standards
Effective Date
1 January 2020
1 January 2020
1 January 2020
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
Turnover from the sale of goods is recognised when all of the following conditions are satisfied:
• the Group has transferred the significant risks and rewards of ownership to the buyer;
• the Group retains neither continuing managerial involvement to the degree usually associated with the
ownership nor effective control over the goods sold;
• the amount of turnover can be measured reliably;
• it is probable that the Group will receive the consideration due under the transaction; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Fees
Fees receivable from the franchisee for branding, equipment, training and initial support are recognised on delivery of the
equipment and rendering of the services enabling the franchisee to operate at which time the Group has performed its
obligations under the franchise agreement in respect of the fees. Fees received in advance are held on the Consolidated
Statement of Financial Position as deferred income.
Online sales
Online sales which include click and collect sales where the franchisee has the primary responsibility for the fulfillment 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.
The COVID-19 pandemic has been unprecedented in scale and impact and the directors have taken swift and decisive
action to protect customers, colleagues, franchisees, and the communities in which the Group operates, by implementing the
necessary steps to safeguard business through the crisis, in line with UK Government guidelines.
2.8 Current and deferred taxation
Current tax liabilities
There remains much uncertainty about the virus and how long it will continue to impact the Group, customers, and the wider
public and economy but the directors are confident that the Group has the financial and operational resilience including if
any lockdown restrictions are reintroduced such that no material uncertainty exists.
Based on the current working capital forecast, the Group is unlikely to need additional funds within twelve months of the date
of approval of these financial statements in order to maintain its proposed work levels and to continue successfully managing
its cash resources. 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
foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
2.7 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can
be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts,
rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in
respect of 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.
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. Any adjustments are recognised in the statement of comprehensive income. 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, on the basis of tax rates that have been enacted
or substantively enacted by the end of the reporting period.
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
2.
Accounting policies (continued)
2.8
Current and deferred taxation (continued)
2.11
Inventories
Tax Expense
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.
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.
2.12
Financial instruments
2.9
Tangible fixed assets – held at cost
Property, plant & 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 straightline method.
Depreciation is provided on the following annual basis:
Plant & machinery
Motor vehicles
Fixtures & fittings
Assets under construction
-
-
-
-
25% Straight-line method
25% Straight-line method
25% Straight-line method
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 are ready for the intended 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 and 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 accumulated 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 and
loss.
Recognition of Financial Instruments
Financial assets and financial liabilities are recognised when the company becomes party to the contractual provisions of the
instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value and subsequently amortised cost. 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. At the end of each reporting period, the
carrying amounts of trade and other receivables are reviewed. Impairment provisions 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 provisions are
recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement
of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
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.
Bank loans and overdrafts
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently
carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on
redemption being recognised as a charge to the income statement over the period of the relevant borrowing.
Interest expenses are recognised on the basis of the effective interest method and are included in finance costs.
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.
Trade and other payables
Finance costs are charged to the Consolidated Statement of Comprehensive Income 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
2.14
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, 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.
2.15 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.
2.16
Leases
2.18
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 assets and contingent liabilities are not recognised.
Leases would have been recognised under IFRS16 but as the leases have less than twelve months until expiry they have been
recognised on a straight line basis.
2.19
Share capital
2.17
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 employees. 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 Consolidated Statement of Comprehensive Income 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 employees 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.
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.
2.20
Research and development
Research and development expenditure is charged to the Consolidated Statement of Comprehensive Income in the year in
which it is incurred.
2.21
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
2.22
Share based payment
4.
Expenses by nature
The Administrative expenses have been arrived at after charging:
Where share options are awarded to employees, the fair value of the options (measured using the Black-Scholes model) at the
date of grant is charged to the Statement of Comprehensive Income over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position
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 takes into account non-vesting conditions. These are either factors beyond the control of
either party or factors which are within the control of one or other 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 Statement of Comprehensive Income over the remaining vesting period.
3.
Segment reporting
Wages and salaries
Travel and entertaining costs
Supplies costs
Professional costs
Depreciation costs
Rates and utilities costs
Property maintenance costs
Advertising costs
Other costs
Other costs
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:
5.
Other operating income
2020
£
2,821,761
389,781
99,254
433,513
491,630
291,626
148,910
231,013
64,511
2019
£
2,064,106
264,992
80,541
371,095
430,676
120,734
116,187
171,869
122,484
4,971,999
3,742,684
2020
£
2019
£
2020
£
2019
£
Sale of goods
Sale of services
16,580,555
2,161,620
14,121,607
2,787,392
18,742,175
16,908,999
All revenue occurred in the United Kingdom.
The operating segment information is the same information as provided throughout the consolidated financial
statements and are therefore not duplicated.
The Group is not reliant upon any major customer.
Rent receivable
8,800 27,719
8,800 27,719
6.
Operating profit
The operating profit is stated after charging:
2020
£
2019
£
491,630
9,978,675
(5,608)
254,053
45,000
-
Depreciation of tangible fixed assets
Stock recognised as an expense
Profit on disposal of property, plant & equipment
Research and development charged as an expense
Operating lease rentals
AIM listing costs
Fees payable to the Group’s auditor and its associates
for the audit of the Group’s annual financial statements 60,000
Fees payable to the Group’s auditor and its associates
for the audit of the Group’s interim financial statements 7,000
Fees payable to the Group’s auditor and its associates
for non-audit services
Share based payment charge
Defined contribution pension cost
-
198,368
32,780
318,548
9,189,297
(3,222)
226,653
45,000
598,645
45,000
6,000
90,000
-
19,235
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59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
7.
Net finance costs
Finance expenses
Bank loan interest
Interest on overdue tax
Finance income
Bank interest received
8.
Staff costs
2020
£
2019
£
54,229 45,833
- 2,682
(17,872)
(6,981)
36,357
41,534
Staff costs, including directors’ remuneration, were as follows:
Wages and salaries
Social security costs
Pension costs
Private health
Share based payment expense
2020
£
2,341,395
221,297
32,780
27,921
198,368
2,821,761
2019
£
1,840,896
174,848
19,235
29,127
-
2,064,106
9.
Dividends
2020
£
2019
£
Interim dividend of 1.2p per ordinary share
Final dividend of 1.4p per ordinary share proposed and
paid during the year relating to the previous year’s results
Interim dividend of 1.6p per ordinary share
Final dividend of 2.4p per ordinary share proposed and
paid during the year relating to the previous year’s results
-
480,000
-
560,000
640,000 -
960,000
-
1,600,000
1,040,000
Since the year end the Directors have proposed no payment of a final dividend (2019 – 2.4 pence per share).
Total dividends proposed in respect of a final dividend total £Nil (2019 - £960,000) for the year ended 31 March 2020.
10.
Directors remuneration
The Directors’ remuneration is disclosed within the Directors’ Remuneration Report on page 21. The Directors are
considered key management personnel. Employers NIC paid on Directors’ remuneration in the year was £51,970 (2019 -
£49,541).
The average monthly number of employees, including directors, for the year was 81 (2019 – 67).
11.
Exceptional items
2020
£
2019
£
AIM listing costs
-
598,645
-
598,645
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61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
12.
Taxation
Corporation tax
Deferred tax
2020
£
2019
£
Current tax on profits for the year
Adjustments in respect of previous periods
716,221
(19,574) 8,979
648,521
Arising from origination and reversal of
temporary differences
Adjustments in respect of previous periods
6,402
81,913
- (823)
Taxation on profit on ordinary activities
635,349 806,290
Factors affecting tax charge for the year
The tax assessed for the year is lower than (2019 – higher than) the standard rate of corporation tax in the UK of 19%
(2019 – 19%). The differences are explained below:
Profit on ordinary activities before tax
3,763,944 3,808,706
2020
£
2019
£
715,149 723,654
Profit on ordinary activities multiplied by standard rate of
corporation tax in the UK of 19% (2018 - 19%)
Effects of:
Expenses not deductible for tax purposes, other than
goodwill amortisation and impairment
Adjustment in research and development tax credit leading to
a decrease in the tax charge
Deferred tax on revalued investment properties
Adjustments to tax charge in respect of prior periods
13.
Deferred taxation
Balance brought forward
2020
£
2019
£
222,403 141,313
Charged to the statement of comprehensive income:
Deferred tax on revalued freehold property
266,000
-
Charged to profit and loss:
Deferred tax on revalued investment properties (
Accelerated capital allowances
Employee benefits (including share-based payments)
Adjustments to tax charge in respect of prior periods
78,169)
122,261
78,169
3,744
(37,690) -
- (823)
Balance carried forward
494,805 222,403
Deferred tax liabilities
Accelerated capital allowances
Property revaluations (including indexation)
2020
£
2019
£
199,562
332,933
77,301
145,102
532,495 222,403
50,795
52,294
Employee benefits (including share-based payments)
(37,690)
222,40
Deferred tax assets
-
(111,021) (55,983)
78,169
(19,574) 8,156
494,805 222,403
Total tax charge for the year
635,349 806,290
Movements in deferred tax in direct relation to freehold property revaluation are recognised immediately against the revaluation reserve.
Factors that may affect future tax charge
There are no factors that may affect future tax charges.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Assets under
construction
£
Freehold
property
£
Plant &
machinery
£
Motor
vehicles
£
Fixtures &
fittings
£
Total
£
On 31 October 2019 existing freehold property was revalued by an independent qualified valuer, in accordance with the
RICS Valuation – Global Standards 2017 (the Red Book). This valuation was maintained by the directors after consideration
to similar properties in the surrounding area based upon extensive research at the balance sheet date.
14.
Property, plant and equipment (continued)
14.
Property, plant
and equipment
Cost or valuation
At 1 April 2018
Additions
- 2,500,000 793,404
1,570,793 - 310,248
337,923 799,903 4,431,230
54,387 202,519 2,137,947
At 31 March 2019 1,570,793 2,500,000 1,103,652
392,310 1,002,422 6,569,177
Depreciation
At 1 April 2018
Charge for the year
At 31 March 2019
-
-
-
118,566 503,258 1,090,710
- 468,886
- 156,007
85,730 188,939 430,676
- 624,893 204,296 692,197 1,521,386
Net book value
At 31 March 2019
1,570,793 2,500,000 478,759
188,014 310,225 5,047,791
Assets under
construction
£
Freehold
property
£
Plant &
machinery
£
Motor
vehicles
£
Fixtures &
fittings
£
Total
£
Cost or valuation
1,570,793 2,500,000 1,103,652 392,310 1,002,422 4,431,230
At 1 April 2019
306,927 - 120,348 253,837 585,130 1,266,242
Additions
- - - (49,142) - (49,142)
Disposals
Transfer between classes (839,543) 724,851 (207,972) 4,025 318,639 -
306,927 - 120,348 253,837 585,130 1,266,242
Assets written off
- 1,400,000
- -
Revaluations
- -
At 31 March 2019
1,570,793 2,500,000 1,103,652 392,310 1,002,422 6,569,177
Depreciation
At 1 April 2019
Charge for the year
Disposals
Transfer between classes
Assets written off
At 31 March 2020
-
-
- 624,893 204,296 692,197 1,521,386
275,950 491,630
- 93,359 122,321
- - - (26,288) - (26,288)
- - (39,640) 2,934 (36,706) -
- - (30,579) - (86,701) (117,280)
-
- 648,033 303,263 918,152 1,869,448
Net book value
At 31 March 2019
1,038,177 4,624,851 337,416 297,767 910,338 7,199,549
Previous valuations were made by the directors, on a similar basis to the above.
The fair value of freehold property is categorised as a level 1 recurring fair value measurement.
Historic cost
2,817,188 1,977,645
2020
£
2019
£
15.
Investment property
2,817,188 1,977,645
Freehold
Investment
property
£
Valuation
At 1 April 2018
Additions
Disposals
Revaluations
Transfers from property, plant and equipment
342,629
-
(136,779)
444,148
(649,998)
At 31 March 2019
Additions
At 31 March 2020
-
-
-
A freehold property was reclassified to an investment property in the prior year due to a change in use.
The 2019 valuation was made by the directors, on an open market value for existing use basis after comparison to similar
properties in the surrounding area.
The fair value of the investment property has not been adjusted significantly for the purpose of financial reporting. The fair
value of investment property is categorised as a level 3 recurring fair value measurement. The reconciliation of opening and
closing fair value is the same as disclosed above.
Some assets under construction became operational during the year and the valuation at the balance sheet date has been
made by the directors based upon costs incurred during the construction phase.
There are no investment properties with a carrying value (2019 - £649,998) used in operating leases. The Group received
rental income in relation to these operating leases amounting to £8,800 (2019 - £27,719).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
16.
Non-current Assets held for sale
2020
£
2019
£
Investment property
-
649,998
19.
Share capital
2020
£
2019
£
During the prior year, the investment property was presented as held for sale pending its disposal as part of a compulsory
purchase order. The asset was subsequently disposed during the current year.
40,000,000
Ordinary shares of £0.01 each
400,000
400,000
400,000
400,000
All shares rank equally in all respects.
17.
Inventories
2020
£
2018
£
20.
Reserves
Finished goods and goods for resale
1,396,235
909,716
Inventories are charged to cost of sales in the Consolidated Statement of Comprehensive Income.
18.
Trade and other receivables
Trade receivables
Other receivables
Prepayments
204,170
2020
£
1,079,826
179,236
2019
£
1,345,105
201,037
39,206
1,463,232
1,585,348
Non-current
Current
10,000
52,861
1,453,232 1,532,487
1,463,232
1,585,348
The fair value of those trade and other receivables classified as financial assets at amortised cost are disclosed in the financial
instruments note.
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.
All non-current assets are due within three years of the statement of financial position date.
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.
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67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
21.
Share Based Payments
22.
Borrowings
Non-current borrowings
Bank loans
2020
£
2019
£
1,446,288
1,937,577
1,446,288
1,937,577
Current borrowings
Bank loans
167,754
212,183
167,754
212,183
Bank loans of £1,614,042 (2019 - £2,149,760) are secured via fixed charges over specific properties and floating charges upon
certain assets held by the Group. Interest rates of 0.5 - 2.15% above Bank of England base rate are charged on the loans. The
loans are repayable in monthly instalments with final payments due between July 2024 and November 2025.
23.
Leases
Operating Leases – Lessee
The Group leases a building and cars under noncancellable operating lease agreements.
The total future value of minimum lease payments is as follows:
Land and buildings
Not later than 1 year
Later than 1 year and not later than 5 years
2020
£
2019
£
23,671
-
45,000
23,671
Total
23,671
68,671
The Group operates two equity-settled share based remuneration schemes for certain employees at management and
executive director level: A United Kingdom tax authority approved scheme for senior managers and an executive director
and an unapproved scheme for executive directors. The main vesting condition for senior managers is EBITDA reaching £19
million by the third anniversary of the date of the grant. The main vesting condition for the executive director is Earnings Per
Share reaching a minimum of 36.41p by the third anniversary of the date of the grant on which 30% will be exercisable. This
increases by 0.0963% for every penny over the minimum level. The individuals must remain employees of the Group over the
3 or 4 year period. Under the unapproved scheme, options vest on the same basis as the approved scheme for the executive
director. In addition, the options will lapse 10 years after the grant date.
2020
Weighted
average
exercise
price
(pence)
Outstanding as at 1 April
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year
Outstanding as at 31 March
64
64
2020
Number
-
688,400
-
-
-
688,400
2019
Weighted
average
exercise
price
(pence)
2019
Number
-
-
-
-
-
-
The exercise price of options outstanding at 31 March 2020 ranged between 1 penny and 165 pence which represented
the grant of the unapproved and approved options respectively. Their weighted average remaining contractual life of these
options at the year end date was 885 days.
Of the total number of options outstanding at 31 March 2020, none had vested and were exercisable.
Option pricing model used
Share price at date of grant (pence)
Contractual life (days)
Exercise price (pence)
Volatility
Risk free interest rate
2020
2019
£
Black-Scholes
181
1096 - 1461
1-165
20%
0.71%
£
N/a
-
-
-
-
-
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis
of share prices of similar listed entities over the recent years. The share based payment expense of £198,368 is included in
notes 6 and 8. This is calculated on the above assumptions over the relevant period and that the attrition rate is 100%.
The Group did not enter into any share-based payment transactions with parties other than employees during the current
or previous period.
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
23.
Leases (continued)
Operating Leases – Lessor
26.
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.
One leased property is sub-leased. The total future value of minimum lease payments is due as follows:
Included within other payables are amounts due to directors of £Nil (2019 - £77,143).
Not later than 1 year
Later than 1 year and not later than 5 years
46,288
-
2020
£
2019
£
50,496
46,346
Total
46,288 96,842
24.
Trade and other payables
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
2020
£
2019
£
684,767
207,336
142,250
458,999
602,113
249,497
250,256
430,021
1,493,352 1,531,887
The fair value of the trade and other payables classified as financial instruments are disclosed in the financial instruments
note.
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.
Included within Other payables are amounts due to directors of £Nil (2019 - £77,143).
25.
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 £32,780 (2019 - £19,235). Contributions totaling £10,652 (2019 - £9,201) were payable to the
fund at the statement of financial position date.
Details of amounts paid to key management personnel which includes executive and non-executive directors are included
within note 10 and the Directors Remuneration Report on page 21.
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*
S & S Cakes Limited (0%)
Cake Box (Gravesend) Limited (0%)
Cake Box (Maidstone) Ltd (0%)
Cake Box (Strood) Limited (0%)
Cake Box (Crawley) Limited (0%)
Cake Box CT
Limited (Canning Town) (0%)
Mr Pardip Dass
2020
2019
£
Sales
£
Balance
£
Sales
£
Balance
216,997
123,298
117,869
116,814
132,092
126,110
833,180
234,337
-
-
6,197 129,143 6,242
120,054 8,180
9,977
19,060 106,813
4,431
195,01 13,541
13,708
195,017
-
-
785,364 32,394
48,942
2020
2019
£
Sales
£
Balance
£
Sales
£
Balance
Eggfree Cake Box Barking
Limited (30%)
206,152
6,075
215,937
-
206,152
6,075
215,937
-
2019
2018
£
Sales
£
Balance
£
Sales
£
Balance
Dr Jaswir Singh
Luton Cake Box Limited (10%)
Peterborough Cake Box Limited (30%)
Cream Cake Limited (30%)
MK Cakes Limited (0%)**
Bedford Cake Box Limited (0%)
315,243
187,136
319,432
185,575
134,251
(996)
-
-
-
-
-
363,569
-
190,617
250,039 -
242,332 666
-
138,717
1,141,637 (996) 1,185,274 666
* 100% Owned by Mr. Chamdal’s daughter
** 100% Owned by Dr Singh’s son/daughter
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
27.
Financial instruments
28.
Financial risk management (continued)
In common with other businesses, 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 note.
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
Financial Assets
Held at amortised cost
2020
£
2019
£
Cash and cash equivalents
Trade and other receivables
3,676,042
1,259,062
3,082,044
1,365,853
Financial Liabilities
4,935,104
4,447,897
Held at amortised cost
2020
£
2019
£
Trade and other payables
Secured borrowings
1,286,016
1,614,042
1,282,390
2,149,760
2,900,058
3,432,150
Net
2,035,046
1,015,747
There is no significant difference between the fair value and carrying value of financial instruments.
28.
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 Finance Director 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:
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 counter-party arising from significant downturns in operating results and/or
significant unavoidable cash requirements when the counter-party 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 counter-party 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 counter-
party 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 counter-party or a guarantee.
Impairment of trade receivables
The Group calculates lifetime expected credit losses for trade receivables using a portfolio approach. Receivables 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, 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.
In accordance with IFRS 9, the Group performed a year end impairment exercise to determine whether any write down in
amounts receivable was required, using an expected credit loss model. The expected loss rate for receivables less than 90
days old is 0% on the basis of the group’s history of bad debt write offs and above 90 days has not been considered on the
basis of immateriality.
As at 31 March 2020, the total loss allowances against the Group’s financial assets were immaterial and no charge to the
income statement was recognised.
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
28.
Financial risk management (continued)
Capital risk management
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
2020
£
2019
£
Borrowings – Due within one year
167,754
Borrowings – Due between one to five years 1,446,288
212,183
1,937,577
1,614,042
2,149,760
Trade and other payables
2020
£
2019
£
0 to 30 Days
30 to 60 Days
60 to 90 Days
90 to 120 Days
120 Days to 1 year
Interest rate risk
1,105,254
45,509
475
119,278
5,500
1,266,495
40,971
(593)
-
468
1,286,016
1,307,341
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 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.
29.
Post statement of financial position events
Post year end the Group has declared no final dividends (2019 - £960,000).
The ongoing COVID-19 pandemic will affect the Group’s operations and results thereof in the forthcoming financial year.
The full effect is not known at this point though the directors have plans and adequate resources to limit the impact that the
pandemic has had and uncertainties surrounding the economic recovery. Further details are disclosed in the Group Strategic
Report.
30.
Subsidiary undertakings
The following were subsidiary undertakings of the Company included in the Group results:
Name
Country of
incorporation
Class of
shares
Holding
Principal Activity
Eggfree Cake Box Ltd
Chaz Ltd
United Kingdom
United Kingdom
Ordinary 100%
Ordinary 100%
Franchisor of specialist cake store
Property rental company
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.
31.
Notes supporting statement of cashflows
The above subsidiaries have the same registered office address as Cake Box Holdings Plc.
28.
Financial risk management (continued)
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 25 basis-point shift (being the maximum reasonable expectation of changes in interest
rates) would be a change of £4,035 (2019 - £5,374). The gain or loss potential is then compared to the limits determined by
management.
2020
£
2019
£
Cash at bank available on demand
Cash on hand
3,675,981
61
3,081,855
189
3,676,042
3,082,044
There were no significant non-cash transactions from financing activities (2019 – two new loans).
Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions
( Next page: )
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Non-current
borrowings
Current
borrowings
Total
£
As at 1 April 2018
Cash flows
Repayments
New Bank Loans
Non-Cash flows:
Non-current loans becoming current
during the year
As at 31 March 2019
Cash flows
Repayments
Non-Cash flows:
Non-current loans becoming current
during the year
As at 31 March 2020
1,457,377
(257,066)
792,040
(54,774)
1,937,577
(349,494)
(141,795)
1,446,288
185,594
1,642,971
(106,145)
77,960
(363,211)
870,000
(54,774)
212,183
-
2,149,760
(186,224) (535,718)
-
-
167,754 1,614,042
141,795
31.
Ultimate controlling party
The Group considers there is no ultimate controlling party.
32.
Earnings per share
Profit after income tax attributable to the owners of
Cake Box Holdings Plc
3,128,595
3,002,416
2020
£
2019
£
Number
Number
Weighted average number of ordinary shares used in
calculating basic earnings per share
40,000,000
40,000,000
Effect of dilutive potential ordinary shares from share options
423,485
-
Weighted average number of ordinary shares used in
calculating diluted earnings per share
40,423,485
40,000,000
Basic earnings per share
Diluted earnings per share
Excluding exceptional AIM listing costs and fair value uplift
Basic earnings per share
Diluted earnings per share
Pence
Pence
7.82
7.74
7.82
7.74
7.51
7.51
7.90
7.90
Cake Box Holdings Plc | Company no. 08777765
Note
2020
£
2019
£
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and Liabilities
Issued share capital
Capital redemption reserve
Share option reserve
Retained earnings
5
6
7
8
198,568 200
198,568 200
600,643 566,136
82,171 94
682,814 566,230
881,382 566,430
400,000 400,000
40
40
198,368
35,979
-
20,707
Total Equity
634,387 420,747
Current liabilities
Trade and other payables
9
Current tax payable
240,901
2,990
6,094 142,693
246,995 145,683
Total Equity and Liabilities
881,382 566,430
The financial statements were approved by the board on 21 June 2020.
As permitted by Section 408 of the Companies Act 2006, no separate Statement of Comprehensive Income is presented in
respect of Cake Box Holdings Plc. Its profit for the year ended 31 March 2020 was £1,615,272 (2019 - £1,412,713).
Pardip Dass
Chief Financial Officer
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76
CAKE BOX HOLDINGS PLC
COMPANY CASHFLOW STATEMENT
AS AT 31 MARCH 2020
Cash flows from operating activities
Profit before income tax
Adjusted for:
Increase in trade and other receivables
(Decrease)/Increase in trade and other payables
2020
£
2019
£
1,621,366
1,412,713
(34,507)
237,911
(515,422)
142,693
Cash generated in operations
1,824,770
1,039,984
Taxation paid
(142,693)
-
Net cash generated from operating activities
1,682,077
1,039,984
Cash flows from financing activities
Dividends paid
Net cash used in from financing activities
(1,600,000)
(1,600,000)
(1,040,000)
(1,040,000)
Net decrease in cash and cash equivalents
82,077
Cash and cash equivalents brought forward
94
Cash and cash equivalents carried forward
82,171
(16)
110
94
The notes on pages 72 to 75 form part of these financial statements.
CAKE BOX HOLDINGS PLC
77
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Share
capital
£
Capital
redemption
reserve
£
Share option
reserve
£
Retained
earnings
£
Total
£
At 1 April 2018
160
40
- 47,834 48,034
Total comprehensive income for the year
-
Share bonus issue
Dividends paid
399,840
-
-
-
-
- 1,412,713 1,412,713
- 399,840 -
- (1,040,000) (1,040,000)
At 31 March 2019
400,000 40 - 20,707 420,747
Total comprehensive income for the year
-
-
- 1,615,272 1,615,272
Share bonus issue
Dividends paid
-
-
-
198,368
- 198,368
-
- (1,600,000) (1,040,000)
At 31 March 2020
400,000 40 198,368 35,979 634,387
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CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
79
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
1.
ACCOUNTING POLICIES
5.
Investment in subsidiary undertakings
The accounting policies of the Company are shown in the Consolidated Financial Statements on pages 41 to 49.
1.1
Investment in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment.
2.
Staff costs
Cost
At 1 April 2019
Additions
At 31 March 2019
Net book value
At 31 March 2020
At 31 March 2019
Investments
in subsidiary
companies
£
200
198,368
198,568
198,568
200
The average number of employees, including directors, during the year was 6 (2019 – 6). The directors received
remuneration during the year as detailed in Note 4.
The additions are share based payments to be settled in the Company’s equity for services received by a subsidiary company.
3.
Dividends
The following companies are the principal subsidiary undertakings at 31 March 2020 and are all consolidated:
2020
£
2019
£
Eggfree Cake Box Ltd
Chaz Ltd
England and Wales
England and Wales
Ordinary
Ordinary
100%
100%
Subsidiary undertakings
Country of incorporation
Class of share
Percentage of shares held
Dividends paid
1,600,000
1,040,000
4.
Directors’ remuneration
Subsidiary undertakings
Principal activity
1,600,000
1,040,000
The principal activity of these undertakings for the last relevant financial year was as follows:
Directors emoluments
Social security costs
Company contributions to defined
contribution pension schemes
2020
£
504,500
62,383
4,011
570,894
2019
£
352,500
42,188
2,152
396,840
Eggfree Cake Box Ltd
Chaz Ltd
Franchisor of specialist cake stores
Property rental company
6.
Trade and other receivables
2020
£
2019
£
Amounts receivable from subsidiaries
Other debtors
598,310 565,830
306
2,3336
600,643 566,136
The directors service contracts were transferred to the Company upon listing. Please see note 10 in the
consolidated notes for full directors’ remuneration.
The fair value of those trade and other receivables classified as financial assets are disclosed in the financial instruments note.
7.
Cash and cash equivalents
2020
£
2019
£
Cash at bank
82,171
94
For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 March 2020:
Cash at bank
82,171 94
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80
CAKE BOX HOLDINGS PLC
CAKE BOX HOLDINGS PLC
81
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
8.
Issued share capital
13.
Financial instruments
2020
£
2019
£
Details of key risks are included at Note 28 to the Consolidated Financial Statements.
Accessing significant increases in credit risk
40,000,000 Ordinary shares of £0.01 each
400,000 400,000
400,000 400,000
Details of changes in share capital are included at note 19 to the Consolidated Financial Statements.
9.
Trade and other payables
2020
£
2019
£
Accruals
Other taxation and social security
Other payables
Accruals
154,778
60,894
22,020
3,209
-
-
-
2,990
The Company undertake the following procedures to determine whether there has been a significant increase in the credit
risk of its other receivables, including group balances, since their initial recognition. Where these procedures identify a
significant increase in credit risk, the loss allowance is measured based on the risk of a default occurring over the expected
life of the instrument rather than considering only the default events expected within 12 months of the year-end.
The Company’s group receivables represent trading balances and interest free amounts advanced to other group companies
with no fixed repayment dates.
The Company determines that credit risk has increased significantly when:
• there are significant actual or expected changes in the operating results of the group entity, including declining
revenues profitability or liquidity management problems, or;
• there are existing or forecast adverse changes to the business, financial or economic conditions that may impact
the group entity’s ability to meet its debt obligations, and;
• the group entity is unable to rely on the support of other group entities to meet its debt obligations.
• no impairment has been recognised in respect of this. (2019: £ nil)
240,901 2,990
10.
Capital Commitments
There were no capital commitments at the year end.
11.
Key management personnel compensation
Key management personnel compensation is disclosed in Note 10 to the Consolidated Financial Statements.
12.
Related party disclosures
The following transactions and balances occurred with related parties:
Amounts due from own subsidiaries
Management charges to own subsidiaries
Dividends received from own subsidiaries
The above loans are interest free and repayable on demand.
2020
£
2019
£
598,310 565,830
840,000 1,230,670
1,600,000 1,395,000
Held at amortised cost
2020
£
2019
£
Cash and cash equivalents
Trade and other receivables
82,171 94
598,310 566,136
680,481 566,230
Financial Liabilities
Trade and other payables
86,123
Held at amortised cost
2020
£
2019
£
2,990
86,123
2,990
14.
Ultimate controlling party
There is no ultimate controlling party.
15.
Events after the reporting period
The ongoing COVID-19 pandemic will affect the company’s operations and results thereof in the forthcoming financial year. The full
effect is not known at this point though the directors have plans and adequate resources to limit the impact that the pandemic has
had and uncertainties surrounding the economic recovery. Further details are disclosed in the Group Strategic Report.
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82
CAKE BOX HOLDINGS PLC
Company Information
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
14.
Ultimate controlling party
There is no ultimate controlling party.
15.
Events after the reporting period
No matter or circumstance has arisen since 31 March 2019 that has significantly affected, or may significantly
affect the Company’s operations, the results of those operations, or the Company’s state of affairs in future
financial years.
83
Cake Box Holdings Plc
Company Information
Directors
N Sachdev
Non-Executive Chair
S R Chamdal
Co-founder and Chief Executive Officer
P Dass
Co-founder and Chief Financial Officer
Dr J Singh
Chief Operating Officer
Non-Executive Director
Non-Executive Director
M Blair
A Batty
P Dass
08777765 (England and Wales)
20 – 22 Jute Lane
Enfield
Middlesex
EN3 7PJ
RSM UK Audit LLP
Chartered Accountants and Statutory Auditor
25 Farringdon Street
London
EC4A 4AB
Company secretary
Company number
Registered office
Auditor
Legal Adviser
Charles Russell Speechlys LLP
5 Fleet Place
London
EC4M 7RD
Registrars
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Nominated Adviser & Broker
Shore Capital & Corporate Limited &
Shore Capital Stockbrokers Limited
Cassini House
57 St James’s Street
London
SW1A 1LD
Financial PR and Media
MHP Communications
60 Great Portland Street
London
W1W 7RT
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CAKE BOX HOLDINGS PLC
Anual Report and Accounts
CONTENTS
COMPANY OVERVIEW
Highlights
About us
Our growth
Meet our franchisees
STRATEGIC REPORT
Chair’s Statement
Chief Executive’s Statement
Our business model
Financial review
Operational review
Risk management
GOVERNANCE
Corporate Governance Statement
Board of Directors
Audit Committee
Remuneration Committee
Environmental & Social Governance
Director’s Responsibility
FINANCIAL STATEMENTS
Independent Auditors’ report
Consolidated Statement of Cash Flow
Consolidated Statement of Financial Position
Company Cash Flow Statement
Company Statement of Changes in Equity
Notes to the Company Financial statements
Company information
01
02
03
04 - 05
6 - 7
8 - 11
12 - 13
14 - 15
16 - 19
20 - 21
22 - 25
26 - 27
28 - 29
30 - 33
34 - 35
36 - 37
39 - 43
44 - 74
75
76
77
78 - 82
83
“making
celebrations a
piece of cake”
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E
G
G
F
R
E
E
C
A
K
E
B
O
X
|
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
|
2
0
2
0
Head Office
20-22 Jute Lane
Enfield
London EN3 7PJ
Tel: 020 8050 2026
info@eggfreecake.co.uk | www.eggfreecake.co.uk
A N N U A L R E P O RT A N D AC C O U N T S
2 0 2 0
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