Cake Box (CBOX): A potential stock disaster for 2022?

Hi Maynard,

CBOX maybe? (I don’t hold).

It’s on a TTM PE of 37.3x and a Price to Turnover of over 6x, and that is for a cake franchise store. To put these metrics into perspective, another food related franchise seller, DOM, reached a PE peak of 31x and Price to Turnover of below 6 in it’s heyday of 2006. :thinking:

The market cap is £143.2m, up from £46m, so today’s market cap is currently 3.1x that of 31 March 20 which was 21 months ago :rocket:.

CBOX’s float date was 27 June 18 - relatively recent and therefore, on average, risky. :skull_and_crossbones:

CBOX has been hyped by the retail investor press. :heart_eyes_cat:

CBOX is forecasting turnover of £38.5m in 2024 against turnover of £21.9m for the y/e 31 March 21, an increase of just over 20% p.a. for the next 3 years. In total, by my rough calculations this equates to an additional total £30m franchisee turnover or 1m of individual cake sales at £30 per cake. The population of Bristol is 617k, to put that into perspective, but I appreciate there will be repeat customers over the period of a year.

Current Market Value to Earnings Power Value ~ 0.4, so 60% of it’s share price may be related to future growth at this point.


Arguably this was a lock-down winner which will be punished by the market if it can’t keep it’s sales growth up.

If CBOX can keep attracting new franchisees, all well and good, but it’s a good question whether this will be possible if there is a revenue ‘bump in the road’. Incidentally there appears to be over £1m lent to their franchisees, which increases risk for the investor. In it’s favour, though, the business model is capital light.

The CEO has recently sold shares for £10.5m/7.5% of the company’s issued share count (25 Nov 21), and the company secretary £1.29m (14 Sept 21). (Last year they additionally sold about half of these respective monetary amounts). They still hold 24.5% and 5%,though.

If I held this one I would think hard about the current risk to reward, and just where is CBOX taking it’s increased business from (who’s cake is CBOX eating?! :grinning: :thinking:), just because I don’t believe it is increasing the size of it’s end market.

No advice intended.

Edit - My personal experience is that I have purchased one of their cakes for someone’s birthday and it was very nice. Website abit clunky. You could get a photo put onto the icing, though. Overpriced in my miserly opinion :grimacing:, but nicer than the plastic birthday cakes from the supermarket if you seriously like whipped cream and sickly sweet food. Delivery was expensive from memory, though. A bloke turned up in a taxi to deliver! Not sure I felt that was appropriate for a food delivery because it could have been interfered with. (I am not paranoid but they are definitely out to get me :grinning:).




Hi anon,

Many thanks for the write-up. I did skim CBOX back in 2019 and was not entirely convinced about the popularity of egg-free cake. I could not see the product being mass market (c.f. Domino’s) and I would never be a customer. From memory the business makes its money selling sponge to the franchisees and I was not sure whether I wanted to get involved with a sponge manufacturer (albeit with good margins).

I recall @FundHunter looking at the company in the past, and he was more bullish than me!

The latest results said 32 new stores are set to open this year and a record 62 new franchisee deposits were being held. So egg-free cake seems more popular than I imagined, and the store network expansion is very impressive given retail generally is suffering from online and now the pandemic.

Which of course means the share price has rocketed since my skim!

I shall look at the company in more depth for a SharePad article next year.


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Thanks Maynard, anon,

Yup CakeBox (CBOX) is a stock I covered for Cube Investments a couple of times. Unfortunately that website has been taken offline. The best bit of research I did on it was trying the cakes. They are pretty good. A lot of people I have come across have strong views on CakeBox but have never tried the cakes.

The financial metrics for the business are great and it is founder controlled and run I believe. The main question is the long-term growth potential. But cake is unlikely to go out of fashion! Might post some more detailed thoughts when I have time.




Now had a look and was not impressed:

A few extra observations that I did not mention in the SharePad article.

1) Audit chairman: The non-exec in charge of CBOX’s audit committee is also in charge of the audit committee at KAPE:

I did not like this accounting at KAPE:

2) Number of customers: More inconsistent reporting:

3) Related party transactions (RPTs):

RPT sales total £2,291k and RPT balances total £54k. I am assuming balances represent money owed by the RP to CBOX, which CBOX carries as trade receivables.

RPT total sales for 2021 represent 10.5% of CBOX’s £21,911k revenue.

RPT total balance for 2021 represents 2.5% of CBOX’s £2,042k trade receivables.

So the RPs appear far more timelier paying their invoices than the standard franchisee.

I reckon the RPs take c8 days and the other franchisees c37 days to clear their invoices. All a bit odd when the company said standard terms were 7 days.

Also, CBOX has cited before when an RP ceases to be an RP:

So the RPT inconsistencies noted within my SharePad article seem all the more peculiar.

4) Loans to franchisees:

The 2021 results said the loans to franchisees match the terms of commercial loans:

The Franchisee Support Fund has been put in place whilst COVID-19 affects the availability of commercial loans to franchisees and matches the terms of commercial loans that have historically been available through the banks, some of which have been withdrawn during COVID 19. These loans typically amount to a £50k contribution to new franchise store start-up costs and to date, Cake Box has loaned c.£890k to 16 franchisees.

But the accounting notes say the loans are interest free (and repayable within up to five years):

Not sure commercial loans for franchisee start-ups are interest free but I could be wrong.

No wonder, perhaps, that the results also said:

We have a record number of holding deposits for new franchise stores wanting to start and grow their own businesses.

Such strong demand for new franchise stores does not seem to correlate with the need for a franchisee support fund.

And do these franchisee loans then feed back to CBOX’s revenue through payments etc for equipment, training, initial support etc? I am starting to think they do.

5) Webinars

Can’t say I was impressed with the standard of questions asked on various webinars:

And that comment may be on to something.

6) Share sales

The admission document shows the FD selling a hefty 72% of his holding at the float, raising £9.6m:

The chief exec has reduced his shareholding by a total 57% during the float and then at 170p and then at 350p.

7) New non-exec

Perhaps not the best non-exec CV to help ensure improved financial controls:

Cake Box, the specialist retailer of fresh cream cakes, today announces the appointment of Alison Green to the Board as an Independent Non-executive Director, effective following the Company’s AGM on 6th August 2021.

Alison started her career in advertising before moving into marketing where she held a number of senior executive roles, most recently as Chief Marketing Officer at Optima Health and prior to that as Head of Marketing & Communications at AXA Health. She has extensive experience in brand management, marketing, communications strategy and digital transformation.

8) New auditor

CBOX’s new auditor Macintyre Hudson likes a challenge:

PCF Group appointed Macintyre Hudson after E&Y quit as auditor last year:

Following the completion of the Annual Report & Financial Statements 2020 process and, as set out in the earlier announcement today, Ernst & Young LLP (EY) have now resigned as auditors and, having undertaken a prior tender exercise in anticipation of that resignation, the Board have now appointed MacIntyre Hudson LLP to be the Group’s new auditor.

E&Y’s resignation letter said:

The independent forensic investigation identified certain manual adjustments made by the Group for internal management, financial and regulatory reporting purposes. We concluded that certain of these matters were indicators of fraud.



Had to try a cake for scuttlebutt purposes:

A strawberry slice from the Gravesend shop, an outlet owned by the chief exec’s daughter. Cake was very nice, and I could not tell it was egg free. Sponge and cream were light. Packaged in a nice box as well. Cost was £3.25. Two other customers in the shop at the time, too.


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Terrific investigative work Maynard.

You have highlighted many red flags. If I were an investor (disclosure - I have never held although I am a scarred former Patisserie Valerie holder) I would be very concerned.

It will be interesting how this all unfolds.


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Or an alternative explanation for the lower RPT balances is the RPs simply pay a lot less than the standard franchisees for the sponge from CBOX.

Scuttlebutt from a would-be franchisee has emerged on social media:

Perhaps the RPs are indeed taking the lucrative locations. Would be useful to know the typical margin of an RP store versus a standard franchisees store.


wow. RNS reply @MaynardPaton Investegate |Cake Box Holdings Announcements | Cake Box Holdings: Response to share price movement

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My SharePad article and the share-price reaction have prompted an RNS from CBOX:

Cake Box notes the movement in its share price this morning and also notes recent commentary from a retail investor blogger.

The Company acknowledges some transcription errors between its 2021 Full Year Results announcement published on 30 June 2021 (the “Results Announcement”) and the 2021 Annual Report and Accounts (the “Annual Report”). It also notes inconsistencies in prior period inventory reporting and comparative period disclosures relating to director interests in franchise stores. Where such discrepancies exist between the Annual Report and the Results Announcement, investors should refer to the Results Announcement.

The errors noted have no impact on the Group’s reported profits, cash flows or balance sheet and the Company received a clean audit opinion for the year.

As previously announced and as we continue to grow the business, a key priority for the Board remains underpinning growth with the appropriate level of experience and expertise for the Group’s central functions, internal controls and processes. BDO has also been appointed to assist with implementing improved internal audit practices.

The Board confirms that, since the Company updated the market with its half year results in November, trading in H2 has continued strongly and in line with expectations for the full year.

I am still not convinced, but let’s see what happens.



MacIntyre Hudson seem to have some form?

The Financial Reporting Council (“FRC”) has commenced an investigation in relation to the audits conducted by MacIntyre Hudson LLP (trading as MHA MacIntyre Hudson) of the financial statements of MRG Finance UK plc for the years ended 31 December 2018 and 31 December 2019.

The SharePad article has created lots of discussion as well as an RNS from CBOX. And Tom Winnifrith has even been in touch to let me know he is investigating CBOX further:

Two points I would emphasise from my SharePad article:

I cannot recall ever seeing another company provide the ageing profile of its trade and other payables:

This ageing of payables seems very unusual to me. The FD (I presume) has deliberately decided to report ageing of payables rather than the conventional ageing of receivables. And you have to ask why? This decision cannot be blamed on transcription errors or a lack of senior staff.

The audit report also contained this line: “Transactions posted to nominal ledger codes outside of the normal revenue cycle were identified using a data analytic tool and investigated.

This line could well be standard audit report text and "Transactions… outside of the normal revenue cycle" could occur at every company (I don’t know). But the line just feels peculiar to me and is not something I have seen before. Indeed, the wording of the line and reference to a “data analytic tool” reads to me as if management did not inform the auditor of these transactions and the auditor had to dig them up for itself.

I think anyone bullish on CBOX has to find explanations for these points, or at least find other companies that report in the same way to ensure CBOX is not an outlier.


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Good spot. I have searched for ‘change of auditor’ RNSs on SharePad and found 49 for 2021:

I found 3 among those 49 (Cake Box, PCF Bank and Integrated Diagnostics) referred to audit letters that in turn referred to matters that should be brought to the attention of shareholders.

The majority of RNSs I looked at had text such as this:

RSM replace Grant Thornton UK LLP (‘Grant Thornton’) who have formally resigned and confirmed that there are no reasons or matters connected with their ceasing to hold office as auditors which they consider should be brought to the attention of the members of Aptitude Software.

I have not checked every one of the 49 RNSs, but I have looked at enough to know that a resignation letter from an auditor citing concerns does not happen every day.

As noted earlier in this topic, MacIntyre Hudson has taken on Cake Box and PCF Bank.


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Whilst the jury is still out, CBOX scores a anoneish M-score of +2.18 which unfortunately puts it at 1,008th place out of 1,043 companies in the ftse (non investment trust) companies listing (if one hasn’t heard of this metric, above -2.22 is generally considered worthy of further investigation, according to SharePad).

This makes me think I should investigate others in my portfolio next week, such as POLR +1.42, CLIG -0.41, LUCE -1.58 and LIO -1.66. (CLIG may be due to their Karpus merger).

PS: By the same token, K3C and UPGS may merit review, with poor f-scores, to boot. (I don’t hold)

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Pleased to see two bull/rebuttal cases to my SharePad article have emerged:

Both write-ups suggest the various points raised in the article are minor mistakes. And I would agree – in isolation, any of those points could be seen as a reporting quirk and nothing to be overly concerned with.

But… you have to consider the wider picture – the fact that the annual report included so many unusual disclosures, including those I observed earlier in this thread and not mentioned in the article.

All those quirks add up and you have to consider that something may not be quite right. You also have to look at other companies to ensure CBOX is not an outlier. And you have to think of other small AIM companies that exhibited a similar batch of reporting quirks and what then happened to them.

So… we’ll see, but for now I remain unconvinced. The 2022 results will be published during the summer and I trust will clarify the situation.


Looking at it, maybe I am being a bit premature on the M-score for CBOX, with asset quality being such a large part of the overall M-score, as below?


Non-current assets were so small in 2020, it gave an exaggerated AQI index score when compared to 2021:


DSRI is inflated due to the 890k ‘franchisee support fund’.

I read this morning on Stockopedia that CBOX are apparently not members of the British Franchise Association. I tried to check this on the BFA website but my anti-virus checker blocked me!

However, assuming this information is correct it would seem rather unusual as membership would convey a certain level of authenticity / trust / compliance.

There may be a good reason for CBOX not being a member. On the other hand this might be another red flag?



I can confirm they are not listed. Image included.
(the site works but the cert is outdated so you have to accept that to progress)


Good spot. And I am pleased Paul Scott has double-checked my article:

Paul says:

However, the CFO selling 5% of the company 2 days before the auditor resigned with a critical departure letter, is outrageous.

Another good spot. Here is the statement:

The Company has been notified that on 14 September 2021, Mr Pardip Dass, Chief Financial Officer, sold 375,000 ordinary shares in the Company (“Ordinary Shares”) at a price of 345 pence per Ordinary Share (the “Dealing”). Following the Dealing and Mr Dass’s recent divorce, Mr Dass is beneficially interested in 2,010,678 Ordinary Shares, representing 5.03 per cent. of the current issued share capital. Mr Dass’s ex wife, Ms Kulwinder Kaur, is beneficially interested in 1,509,740 Ordinary Shares representing 3.77 per cent. of the current issued share capital.

The CFO sold 375k shares, so 16% of his then holding or 0.9% of the share count (Paul looks to have mistakenly written the FD sold 5% of the company on Stockopedia). The disposal took place on 14 September and the Change of Auditor statement confirmed the auditor’s resignation letter was indeed submitted two days later:

The Company’s previous auditor, RSM UK Audit LLP, submitted its letter of resignation to the Board of Directors on 16 September 2021. In accordance with the relevant Companies Act 2006 requirements, a copy of the resignation letter and statement of reasons will be sent to shareholders of the Company.

The words “recent divorce” in the share disposal RNS may have allayed fears at the time of the FD knowing something untoward. As noted earlier in this topic, the FD did sell 72% of his then holding at the IPO.

I do not have a Stockopedia subscription so don’t know if Paul has uncovered anything else.


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Good to see more rebuttals to my SharePad article.

This from Dr Paul Jourdan from Amati (from 22m20s):

"I think CBOX has been a remarkable growth story and I think what we are seeing is really classic growing pains in a company that has internal systems that are ok for one size but don’t really work when it gets bigger.

And the guy who wrote the blog made some valid points, and they made some very careless, just kind of administrative errors in their annual report, so what will be inevitably happening is that they will add in a whole load of extra processes, improve internal governance, there is no suggestion there is any kind of fraud or bad practice, but it has made the market very uneasy and the shares have sold off a long way as you point out. Hopefully good value here.

It’s been a remarkable growth story, there’s a lot more they can do with that business, but just hit a juncture where they clearly need to tighten up on some of their internal administrations and they’re appointing an internal auditor, extra NEDs and doing the right things

I think it’s the kind of situation where it takes a little while for the company then to prove it’s addressed the issues and moved on and hopefully we will continue to see the company really prospering."

Dr Jourdan has a good investment record, so is somebody worth listening to. CBOX is part of Amati’s UK Smaller Companies Fund, which is up 9-fold since Dr Jourdan took charge during 2000:

CBOX was a 1.1% holding from the last (July 2021) long-form report:

Among the other shares held is Alphawave IP, which was also a c1% position and was subject to a negative report on financial disclosures from the FT following Amati’s purchase :point_down:

Dr Jourdan was interviewed by Paul Hill, who participated in this Vox Markets podcast and also appeared keen on CBOX (from 10m:00s):

It had a negative, I would say journalist, report from a guy called Maynard Paton from ShareScope about 10 days ago, 7 days ago; the shares were trading at nearly 4 pounds and they’re currently being flattened to around about 2.50 or 2.40, just on the back of this report.

Because what happens is that they get sprayed around the internet, anybody who is remotely fearful sees the headlines and then just hits the checkout button and just sells and so you do get these enormous wild swings which are totally disproportionate to the fundamentals of the business, particularly when the company responded to the actual report.

Most of the issues are just to do with historical balance sheet reporting and frankly are just not significant. I’ve had a look at it, just not significant at all. And the company in their response said they’re actually trading really strongly anyway. They are cash generative and they’re growing really well, they had a good Christmas. And the share price has been absolutely flattened, so that really shows opportunity to long-term investors prepared to look through the short-term headwinds.

It’s a trend of social media, it’s unfortunately the double-edged sword. It’s good for informing people, but too many investors and too many of the general populace then just use it as effectively their decision-making process. They’re not rational themselves, they don’t think for themselves. They just rely on somebody else to do it for them and so when you get this guy like Maynard Paton and frankly I just think, ok, he’s a bright chap, no doubt about it, he’s done some good work there, but he’s drawn out largely historical issues that frankly are not significant for the intrinsic worth of the business. And it has just led to a huge avalanche of selling, totally disproportionate to the underlying strength of the business.



Hi Maynard,

CBOX is essentially a chain of cake shops (with franchisees being the equivalent of profit sharing employees).

At it’s peak, CBOX was trading on a PE greater than Microsoft (44.5x vs 38.4x). How was that ever going to end well? I don’t believe it has as many growth levers as MSFT, does it?

I notice none of the talking heads are disputing the facts in your article and it’s good to have both sides of the story reported. CBOX seems to be a classic story stock (just imo).

More power to you for writing about the shortfalls so PIs can see more balanced picture overall.

It will be interesting to see how this plays out over the next few years…

Keep up the good work!