REG - ProCook Group PLC - Interim Results
14/12/2022 07:00
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RNS Number : 6108J ProCook Group PLC 14 December 2022
14 December 2022
ProCook Group plc
Interim results for the 28 weeks ended 16 October 2022
Challenging trading conditions, good strategic progress
ProCook Group plc ("ProCook" or "the Group"), the UK's leading
direct-to-consumer specialist kitchenware brand, today announces its interim
results for the first half of FY23 (the 28 weeks ended 16 October 2022).
£m H1 FY23 H1 FY22 YoY
Revenue 27.4 32.0 (14.5%)
Gross profit 16.7 21.3 (21.8%)
Gross margin % 61.0% 66.6%
Underlying (loss) / profit before tax(1) (2.8) 3.8
Reported (Loss) / profit before tax (3.5) 2.4
Net (debt) / cash (1.3) 0.9
New customers acquired ('000) 320 319 +0.2%
Number of active customers L12M ('000)(2) 1,001 733 +36.5%
12 month repeat rate %(3) 25.3% 24.7% +0.6%pts
Financial and strategic highlights
· Revenue of £27.4m against strong prior year comparatives was
-14.5% YoY (FY22 H1: +34.4% YoY) but remained +119.7% higher than FY20
pre-pandemic levels on a LFL(4) basis
· Challenging trading conditions driven by the combined effects of
heightened pressures on consumer spending and the prolonged hot summer weather
· Excluding Amazon marketplaces, revenue was -8.6% YoY, marginally
below the UK kitchenware market(5) (which was -6.3% YoY) after ProCook's
considerable out-performance last year; tracking slightly ahead of the
market in the eight weeks since H1
· Gross margin impacted by cost pressures, including shipping, with
underlying loss reflecting challenging market conditions
· Net debt at the end of the first half was -£1.3m (FY22 year end:
-£1.8m) with available liquidity of £14.7m
· ProCook proposition remains attractive to new and existing
customers:
o Attracted 320,000 new customers to shop with ProCook for the first time
o Increased our 12 month repeat purchase rate to 25.3% (FY22 H1: 24.7%)
o Active customers in the last 12 months increased to in excess of one
million (+36.5% YoY)
· Continued strategic progress to build a stronger and more
sustainable business for all stakeholders:
o One new store and two relocations to larger sites opened in first half
o Development of new Distribution Centre and Head Office progressing on
track to deliver future operational efficiencies
o ProCook became the first London Stock Exchange listed retailer to achieve
B Corp certification
Current trading and outlook
In the eight weeks to date of H2, including the important Black Friday period
and the early part of Christmas trading, revenue was significantly improved on
the first half. However, it has remained weaker than we anticipated at -5.7%
YoY. Total LFL revenue was -6.4% which was +116.0% compared to the same period
in FY20 pre-pandemic.
Total retail revenue in this eight week period was +0.7% YoY, albeit Retail
LFL revenue remained -6.9% lower. Ecommerce revenue was -12.6% YoY, including
a -6.6%pts impact of our exit from EU marketplaces. UK website sales remained
softer year on year at -6.0%. However, website revenue remains up +201.0% on
pre-pandemic levels in H1 FY20. Whilst traffic and footfall remain reasonably
strong, conversion rates both in store and online continue to be significantly
down year on year and ATV remains down year on year in Retail.
As announced in our trading update on 9 December 2022, we now expect our full
year revenue for FY23 to be between £60 - £65m. The combination of the
continued softer year on year sales performance and heightened costs due to
shipping and foreign exchange impacts, additional marketing and promotional
activity, and investing in our operational teams to serve higher volumes,
means that we now expect that full year FY23 underlying PBT will be
approximately breakeven.
We have initiated a plan to maximise our trading performance and
profitability, and have begun taking action to reduce operating costs by £3m
on an annualised basis.
We are confident this plan will enable us to emerge stronger from this
difficult trading environment to become customers' first choice for
kitchenware. The Group remains well placed to capture increased share of the
large kitchenware market and deliver long term growth and value to all
stakeholders.
Daniel O'Neill, CEO & Founder, commented:
"This has been a difficult trading period, reflecting the wider consumer
environment and also a very strong comparable period in our last financial
year. However, ProCook has traded through tough conditions in the past and we
remain confident in our specialist offer and ability to continue taking
long-term decisions to build a stronger and more sustainable business.
"Our B Corp certification reflects that focus and is a huge achievement for
the whole team at ProCook. We've also made good progress with our store
roll-out and the development of our new Distribution Centre and Head Office,
which will provide us with a much improved and efficient base from which to
take the business forward.
"We are taking cost actions to manage the current pressures and the business
remains well placed to capture increased share of the large kitchenware market
and deliver long term growth and value to all stakeholders."
Analyst Presentation
There will be a live presentation for analysts and institutional investors
this morning at 9.00am, hosted via a webinar with a facility for Q&A. For
details, please contact procook@mhpgroup.com (mailto:procook@mhpgroup.com) .
For further information please contact:
ProCook Group plc investor.relations@procook.co.uk
Daniel O'Neill, Chief Executive Officer & Founder
Dan Walden, Chief Financial Officer
MHP (Financial PR Adviser) procook@mhpgroup.com
Katie Hunt Tel: +44 (0)7709 496 125
Catherine Chapman
Next scheduled event:
ProCook expects to release its third quarter trading update in mid January
2023.
Notes to editors
ProCook is the UK's leading direct-to-consumer specialist kitchenware brand.
ProCook offers a direct-to-consumer proposition, designing, developing and
retailing a high-quality range of cookware, kitchenware and tableware which
provides customers with significant value for money.
The brand sells directly through its website, www.procook.co.uk
(http://www.procook.co.uk) , and via over 50 own-brand retail stores, located
across the UK. ProCook products are also available in Germany and France with
delivery options extending to Belgium, Austria, Luxembourg, the Netherlands
and Poland.
Founded over 25 years ago as a family business, selling cookware sets by
direct mail in the UK, ProCook has grown into a market leading, multi-channel
specialist kitchenware company, employing over 600 colleagues and operating
from its Head Office in Gloucester.
ProCook has been listed on the London Stock Exchange since November 2021
(PROC.L).
Quarterly revenue performance
FY23 (52 weeks ending 2 April 2022)
Q1 Q2 H1 Q3 Q4 H2 FY
Revenue £11.4m £15.9m £27.4m
Revenue growth % (22.6%) (7.6%) (14.5%)
Yo3Y revenue growth % 35.5% 54.0% 45.6%
LFL revenue(4) £10.0m £13.6m £23.6m
LFL growth % (17.1%) (15.6%) (16.2%)
Yo3Y LFL growth % 133.3% 110.4% 119.7%
FY22 (52 weeks ending 3 April 2022)
Q1 Q2 H1 Q3 Q4 H2 FY
Revenue £14.6m £17.5m £32.1m £23.0m £14.0m £37.0m £69.2m
Revenue growth % 84.9% 9.8% 34.6% 35.7% 11.4% 25.4% 29.5%
Yo2Y revenue growth % 72.9% 69.3% 70.9% 84.0% 85.8% 84.7% 78.0%
LFL revenue(6) £11.2m £14.3m £25.5m £18.6m £10.9m £29.5m £55.0m
LFL growth % 96.7% 19.5% 44.4% 34.1% 7.7% 23.0% 32.1%
Yo2Y LFL growth % 167.7% 131.5% 146.2% 105.7% 109.1% 107.0% 123.5%
Notes
(1) Underlying profit before tax is presented before non-underlying items of
£0.7m in FY23 in relation to IPO-related share-based awards and pre-opening
costs in respect of the Group's new distribution centre and head office and
£1.4m in FY22 in relation to IPO costs
(2) Number of active customers reflects those customers on our database who
have purchased in the last 12 months
(3) 12 month repeat rate reflects the % of customers first acquired in a
previous financial year which have made at least one subsequent purchase in
the following financial year
(4) FY23 LFL (Like For Like) revenue reflects:
- Retail YoY - Continuing Retail stores which were trading for
at least one full financial year prior to the 3 April 2022, inclusive of any
stores which may have moved location or increased/ decreased footprint within
a given retail centre
- Retail Yo3Y - Continuing Retail stores which were trading for
at least one full financial year prior to the 29 March 2020, inclusive of any
stores which may have moved location or increased/ decreased footprint within
a given retail centre
- Ecommerce YoY and Yo3Y - ProCook direct website channel only
(5) UK Kitchenware market growth (excluding ProCook) calculated using weekly
GfK data and management estimates
(6) FY22 LFL reflects:
- Retail LFL - Continuing Retail stores which were trading for
at least one full financial year prior to 29 March 2020 inclusive of any
stores which may have moved location or increased/ decreased footprint within
a given retail centre
- Ecommerce LFL - Continuing ecommerce websites and
marketplaces that have been trading for at least one full financial year prior
to 29 March 2020, excluding the UK Marketplace which ceased trading on 28th
June 2021
CEO's Review
Introduction
The weakened macro-economic backdrop has created one of the most challenging
consumer environments in recent years and, coupled with the unusually hot
weather over the summer, has led to significantly weaker trading conditions.
Despite these near-term challenges, we continue to take long term decisions
for the business and have made good strategic progress, whilst accelerating
those initiatives that are central in helping us manage the difficult
backdrop.
I am extremely proud that ProCook became the first London Stock Exchange
listed retailer to be B Corp certified. This is the result of huge efforts
across the Group and reflects our long-held commitment to building a
responsible brand.
We are well placed to manage the current challenges with a resilient and
flexible business model, a clear strategy for sustainable and profitable
growth, and a customer proposition focused on exceptional value, quality and
service. We have prioritised the actions and initiatives that will best
support our performance in the near term and drive our brand forward for the
longer term, making ProCook a stronger business for all of our stakeholders.
I would like to thank all of our people who have supported our customers so
tirelessly over these recent months. I would also like to express my sincere
thanks to both Steve Sanders (COO) and Gillian Davies (NED) who both step down
from the Board today, as previously announced. Steve remains with ProCook as
COO until his retirement in Spring 2023.
Challenging trading conditions compounded by a long hot summer
First half revenue of £27.4m was down -14.5% year on year, yet was +119.7%
higher, on a like for like basis, than H1 FY20 (pre-pandemic) reflecting our
significant growth over the previous two years, or +45.6% higher on a reported
basis.
Our trading performance during the first half, against strong prior year
comparative results, reflects the challenging market conditions driven by the
combined effects of heightened pressures on consumer spending and the
prolonged hot summer weather. Additionally, it reflects the annualisation of
our strategic exit from Amazon UK in June 2021, and our withdrawal as planned
from the Amazon EU marketplaces during the first half of this year.
The UK kitchenware market has remained reasonably resilient in the first half,
declining -6.3% year on year against strong growth last year. ProCook revenue,
excluding revenue from Amazon marketplaces, declined by -8.6% partly
reflecting our strong performance in the comparative period when our sales
growth outperformed the market by +60.8% in H1 FY22.
In the year to date, we have attracted 320,000 new customers to shop with
ProCook for the first time and we have increased our 12 month repeat purchase
rate to 25.3% (FY22 H1: 24.7%). As a result, the number of active customers in
the last 12 months has now increased to above one million (+36.5% year on
year).
Whilst like for like footfall and website traffic remained relatively
resilient in the first half (-2.5% and -3.3% respectively year on year),
conversion rates and average transaction values (ATV) have both declined,
reflecting the challenging consumer environment. In Retail, like for like
conversion dropped by -12.0% year on year whilst ATV declined by -3.9%. ATV
held up well on our website, but conversion rates dropped by -9.1% year on
year.
In the first half we have made an underlying loss before tax of -£2.8m (H1
FY22: profit of +£3.8m) reflecting the lower year on year revenue
performance, reduced gross margins due to shipping and foreign exchange
impacts and additional promotional activity required to help convert sales.
Year on year, our cost base is higher, however we have managed this carefully,
identifying and implementing efficiencies where possible, as we continue to
invest in areas that will support the long term growth and efficiency of the
business.
Further detail on our financial performance in the first half is set out in
the CFO's Review.
Becoming the customers' first choice for Kitchenware
Well positioned, with a large market opportunity
Despite the challenging consumer macro environment, the UK kitchenware market
has, unusually, contracted throughout the first half of this financial year
against strong growth last year. The market as a whole has continued to shift
back towards Retail (from Ecommerce channels) since Covid-19 restrictions
eased, with Ecommerce sales mix at 24.5% (H1 FY22: 26.1%). The effects of
price increases are evident in the market with volumes down -12% in the first
half.
Our value for money credentials, accompanied by our stores in leisure-focused
retail destinations, and our strong service levels both in-store and online,
provide a level of resilience to the current macro challenges, albeit we are
not immune to the general weakening of consumer confidence in the period.
We have made considerable progress with developing our operational
capabilities to drive revenue in the current climate and position us well for
the significant opportunity we have to raise brand awareness and increase
market share, which we estimate was just 2.2% in the UK in 2021, as we pursue
our mission to become customers' first choice for kitchenware.
Attract, engage and retain more customers
During the first half we have made good progress with our marketing strategy.
We have attracted 320,000 new customers to shop with our brand (similar to the
same period last year) and further improved our 12 month repeat purchase rate.
We have completed the implementation of our new customer experience platform
in the first half which we will now put to good use to drive forward our
retention marketing activities following a period of disruption in the first
half. We have begun to use improved customer segmentation to enhance
re-targeting across our sales channels. Additionally, we have taken steps to
increase the rate of email collection in both our Retail and Website channels
to increase the size and value of our customer database.
We have launched our first digital catalogues to extend our reach to more
customers in the future, alongside trials of programmatic brand campaigns
which are underway utilising digital content created in our own cookery school
and photography studio. We have also recently implemented automated paid media
bidding which will ensure we optimise the capture of in-market demand and
better control the higher cost per acquisition we have incurred in H1 FY23.
During the first half, given the macro backdrop, we have focused more on
promotional marketing to appeal to customers. We have strengthened our offers
assisting the sell-through of clearance products, and developed a new Build
Your Own set saving mechanism which further sets us apart in the kitchenware
market and offers customers even greater choice and flexibility.
Developing our proposition
I am pleased with the progress we have made in developing our website during
the first half. We have successfully completed the re-platforming of our
website to our new codebase which provides site speed benefits, enhanced
security features and faster future development time. We will now deploy user
experience improvements far more rapidly, helping to improve conversion rates.
We have been winding down our activity on our remaining Amazon EU marketplaces
in recent months in order to focus fully on our own website and the priority
UK market.
We continue to invest in our retail portfolio, confident that our stores
provide customers with an inspirational experience and a convenient
opportunity to test, seek advice and take products home the same day, whilst
also acting as a beacon for the ProCook brand. We have opened one new store
during the first half, and one last week, taking our current total to 57
retail stores, and we have also relocated two successful and established
stores (Mansfield and York) to larger units within existing retail centres,
building on our track record of successfully growing sales through footprint
expansion in other locations. We currently expect to open a further one to two
new stores in the remainder of this financial year.
Our product range has continued to move forward with 11.4% of our range
refreshed in the first half and five new range launches including our new
Micarta knife sets and Malmo white tableware - an extension of our popular
existing Malmo ranges. As planned, we have adjusted pricing where possible to
reflect the higher cost of product intake, and we continue to monitor the
effect carefully. Whilst prices in the wider market have moved up, and we have
moved broadly in line, prices have not been sufficiently increased to fully
offset the increased shipping costs incurred post Covid.
Design and development of the first phases of our new ranges of Kitchen
Electricals is progressing well, and we have identified a key supplier to
partner with as we prepare to launch this new category to provide another
reason for customers to shop with ProCook.
Building on our foundations
In September we took possession of our new BREEAM-certified Distribution
Centre and Head Office site in Gloucester. The build programme was delivered
to plan and we are now progressing with the internal fit out. We currently
expect to have the site operational around the end of this financial year.
This will improve efficiency and capacity in our logistics operations and
provide an inspiring working environment for our colleagues for the years
ahead.
Our technology teams have delivered a series of successful roadmap initiatives
in the first half to support trading performance, operational efficiency and
improve system security and resilience. A further pipeline of work is
scheduled for the second half of the year.
One of our proudest achievements in the first half is our B Corp certification
which was awarded in October, making ProCook the first London Stock Exchange
listed retailer to be certified. The certification reflects our long-held
commitment to building a responsible brand with a strong purpose. Alongside
our existing sustainability goals, and the roadmap we are creating to reach
Net Zero emissions by 2030, our new membership of B Corp provides a stringent
framework by which we can continue to measure our performance and progress.
Daniel O'Neill
Chief Executive Officer
13 December 2022
CFO's Review
The macro and consumer environment has created increasingly challenging
trading conditions resulting in weaker sales and profit performance over the
first half compared to last year. We are highly focused on driving our
financial performance and managing our cost base whilst still investing in the
areas that will support our medium and long term growth and performance.
During the first half we have made good progress with reducing inventory
levels, which has supported stronger year on year free cash flow. Our net debt
reduced to £1.3m from £1.8m at FY22 year end, with available liquidity of
£14.7m.
Revenue
£m H1 FY23 YoY % Yo3Y %
Revenue 27.4 (14.5%) 45.6%
Ecommerce 11.4 (24.5%) 102.6%
Retail 16.0 (5.6%) 21.2%
LFL Revenue(1) 23.6 (16.2%) 119.7%
LFL Ecommerce 10.7 (13.6%) 258.8%
LFL Retail 12.9 (18.3%) 49.1%
Total revenue of £27.4m in the first half was -14.5% lower than H1 FY22,
however remained +119.7% on a like for like basis compared to H1 FY20
(pre-pandemic).
Revenue of £11.4m from Ecommerce channels was -24.5% year on year. This
includes a -£2.3m (-15.0%pt) impact of the reduction in sales from Amazon
marketplaces (following the exit of Amazon UK in June 2021, and the withdrawal
from Amazon EU during the year to date). Additionally, this includes a further
-9.5%pt impact of the lower like for like performance on our UK website as
consumers continue to migrate back towards retail, and as a result of lower
conversion rates year on year. Our website revenue remains up +258.8% on
pre-pandemic levels in H1 FY20.
Retail revenue of £16.0m was -5.6% year on year. On a like for like basis
revenue was -18.3% reflecting the challenging retail conditions and hot
weather over the summer, and extremely strong comparatives in the prior year,
when like for like stores were +95.0% on H1 FY21 and +77.7% on H1 FY20 as a
result of pent-up demand after the lifting of Covid restrictions. Revenue from
like for like stores remained +49.1% ahead of pre-pandemic performance during
the first half of this year.
During the first half we have opened one new retail store and two relocations
to larger sites within existing centres increasing our total retail estate to
56 stores. On 9 December 2022, we opened one additional new store at Lakeside,
Thurrock taking the total retail estate to 57 stores.
Gross profit
We delivered gross profit of £16.7m in H1 FY23 (H1 FY22: £21.3m) with gross
margins declining to 61.0% (H1 FY22: 66.6%), primarily driven by a combination
of increased shipping and transport costs (-430bps YoY), adverse foreign
exchange impacts (-80bps YoY), and higher levels of promotions to convert
sales (-40bps YoY), partly offset by price increases (+60bps).
Prior year adjustment
At the FY22 year end, we reported the costs associated with transporting
inventory to its final selling location within gross profit. We have adjusted
for this in the first half results of that year to aid comparability, reducing
H1 FY22 gross margin by -120bps. A corresponding credit has been made to
reduce operating costs, with the remaining cost being held in inventory at the
end of the half resulting in £0.2m net improvement to profits in the first
half of FY22.
Operating expenses and other income
Underlying operating expenses net of other income
Total underlying operating expenses net of other income were £19.1m (H1 FY22:
£17.8m) representing 69.7% of sales (H1 FY22: 55.6%). This growth in costs
was driven by a number of key factors:
· Ecommerce: +£1.0m saving year on year driven by exit from Amazon
(+£0.6m), lower sales volumes and efficiencies (+£1.2m), partly offset by
cost per acquisition increasing from £16 last year to £24 this year
(-£0.8m)
· Retail: -£1.9m increase year on year driven by business rates
following the end of Covid-reliefs (-£0.9m), inflationary pressures (-£0.5m)
and new stores (-£1.4m) partly offset by volume and efficiency savings
(+£0.9m)
· Annualisation of plc costs: +£0.9m partly offset by lower brand
marketing spend year on year of -£0.5m
Non-underlying operating expenses
Non-underlying operating expenses in H1 FY23 of £0.7m include employee
share-based IPO awards of £0.6m and pre-opening costs in relation to the new
Distribution Centre and Head Office of £0.1m. Expenses in relation to these
IPO awards are expected to continue through relevant vesting periods to FY25,
albeit these costs reduce over time. In H1 FY22 non-underlying operating
expenses of £1.4m related to IPO costs.
Operating profit / (loss)
Total underlying operating loss for the period was £2.4m (H1 FY22: £3.5m
profit) with H1 FY22 boosted by the favourable trading conditions and pent-up
demand following the lifting of Covid-19 restrictions. Ecommerce operating
profitability declined from 23.1% of revenue to 10.8% as demand and gross
profit margins reduced and cost per acquisition increased back to pre-pandemic
levels. Retail profitability reduced from 26.1% of revenue to 7.3%, reflecting
the hot summer weather impact on footfall compared to the heightened demand
last year as shops reopened, and the increased cost base year on year.
£m H1 FY23 H1 FY22
Underlying operating (loss) / profit
Ecommerce 1.2 3.5
Retail 1.2 4.4
Central costs (4.8) (4.5)
Total (2.4) 3.4
As a % revenue
Ecommerce 10.8% 23.1%
Retail 7.3% 26.1%
Central costs (17.5%) (14%)
Total (8.7%) 10.7%
Total reported operating loss, after the £0.7m of non-underlying costs in the
first half, was -£3.0m (H1 FY22: profit of £2.2m).
Profit / (loss) and earnings per share
The underlying loss before tax was £2.8m in the first half of the year (H1
FY22: £3.8m profit).
During the first half there was a net cost of £0.4m (H1 FY22: £0.2m net
gain) in respect of financial items in the period. Financial items included
interest expenses on lease liabilities and borrowings of -£0.4m (H1 FY22:
-£0.3m) reflecting the rise in interest rates year on year. Foreign exchange
losses were £17k in the first half compared with gains of £0.5m H1 FY22.
After non-underlying costs, loss before tax was £3.5m (H1 FY22: £2.4m
profit). Reported loss after tax was £2.8m (H1 FY22: £1.9m profit).
The effective tax rate for the first half based on underlying (loss) / profit
before tax was 18.7% (H1 FY22: 21.8%).
Earnings per Share
Underlying basic earnings per share for the first half reduced to -2.12 pence
(H1 FY22: +3.10 pence) and underlying diluted earnings per share reduced to
-1.98 pence (H1 FY22: 2.85 pence).
Reported basic earnings per share for the first half were -2.61 pence (H1
FY22: +1.92 pence) and reported diluted earnings per share were -2.44 pence
(H1 FY22: +1.77 pence).
New distribution centre and head office
During the first half, the Group took possession of the new distribution and
head office site in Gloucester. This new site provides additional capacity for
logistics operations and central administrative functions, and will enable
efficiency improvements to be realised in the years ahead compared to the
current two warehouse set-up. The fit out of the site is underway and we
currently expect to occupy the site around the end of this financial year. The
Group entered into a lease agreement for the new site on 22 September 2022
which, on inception, had a right of use asset value of £10.7m, lease
liability of £10.7m and a lease term of 15 years.
Dividends
During the first half the Group paid the final dividend in respect of FY22 of
0.9p per share. Dividend waivers by the O'Neill family shareholders to
preserve cash within the business have reduced the total dividend paid by
£0.6m to £0.3m.
Due to the ongoing challenging consumer environment and the uncertainty that
it creates around trading performance, the Board have concluded that no
interim dividend will be paid in respect of FY23.
Cash generation and net cash / debt
The Group had a free cash inflow of £0.4m in the current period (H1 FY22:
outflow of £1.2m) and ended the first half with net debt of £1.3m (FY22 year
end: £1.8m net debt; H1 FY22: £0.9m net cash).
£m H1 FY23 H1 FY22
Reported profit before tax (3.5) 2.4
Depreciation, amortisation, impairment and profit/loss on disposal 2.5 1.9
Share based payments 0.6 -
Finance expense 0.4 0.3
Unrealised FX (gains)/losses (0.2) (0.5)
Net working capital outflow 3.8 (0.7)
Tax paid - (1.5)
Net operating cash flow 3.8 1.9
Net capital expenditure (1.1) (1.9)
Interest (0.4) (0.3)
Payment of lease liabilities (1.8) (0.9)
Free Cash Flow 0.4 (1.2)
Cash and Cash equivalents 2.1 4.3
Borrowings (3.4) (3.4)
Net (Debt)/ Cash (1.3) 0.9
During the first half we have made good progress in reducing our inventory
position whilst still maintaining strong availability, supporting an improved
net working capital position and cash inflow of £3.8m in the period (H1 FY22:
£0.7m outflow). Total inventory at the end of the first half was £12.8m
(down from £16.8m at the FY22 year end and down 7.8% year on year). The
reduction in inventory was partly offset by increases in trade and other
receivables largely relating to increased prepayments on property rates due to
the ending of the government rates relief programme. We maintain a
higher-than-normal VAT payable balance (£1.9m), as a result of the Group's
application to HMRC to create a VAT Group a year ago, but we expect to make
payment of this historical balance in the second half of the financial year.
Net capital expenditure of £1.1m in the first half primarily related to the
one new store and two relocations which opened during the half. Capital
expenditure on the new Distribution Centre and Head Office will largely be
incurred in the second half.
We continue to manage cash flows carefully, cognisant of the capital spend
planned for the second half in respect of the new distribution centre and head
office, and the Group's lower profitability.
Prior Year restatement
As reported for the year ended 3 April 2022, as part of the full transition to
IFRS, the Group has undertaken a comprehensive review of its historical
reporting to consider the accuracy and integrity of the historical financial
statements. As a result, a number of prior year adjustments to the amounts
previously disclosed in the IFRS Transition within the FY22 interim results,
have been identified. The adjustments are set out in note 14 to the financial
statements and are consistent in approach to those identified at the FY22 year
end.
Banking agreements
On 20 April 2022 the Group entered into an agreement for a committed £10m
Revolving Credit Facility (RCF) to provide additional cash headroom to support
operational and investment activities. This facility expires in April 2025 and
has two one-year extension options. The terms of the facility are consistent
with normal practice and include covenants in respect of leverage (net debt to
be no greater than 2.0x EBITDA) and fixed charge cover (EBITDAR to be no less
than 1.7x fixed charges). Both covenants are calculated on a pre-IFRS 16
basis.
As part of this agreement, the Company has retained its access to the existing
£6.0m trade finance facility (although this is now an uncommitted facility),
which is due to expire in September 2023. The terms of the facility are
consistent with normal practice.
Additionally, the RCF agreement provides an accordion option, subject to the
lender's approval, to extend the facility by a further £5m.
Capital allocation and dividend policy
The Board believes that it is important to maintain a minimum level of
unrestricted liquidity headroom. The Board determines the level of headroom it
deems appropriate on an annual basis, or more frequently as required.
Maintaining this headroom provides a level of flexibility sufficient to fund
ProCook's working capital needs as well as setting aside an appropriate
operating reserve for unexpected events.
The Group's dividend policy targets an ordinary dividend pay-out ratio of 20%
to 30% of profit after tax during the financial year to which the dividend
relates.
The Group's full capital and dividend policy is available on our website at
www.procookgroup.co.uk (http://www.procookgroup.co.uk) .
Going concern
As at 16th October 2022, the date of the interim financial statements, the
Group had net debt of £1.3m and available liquidity of £14.7m including a
£6m uncommitted trade finance facility.
As reported in the trading update on 9th December 2022, trading in the first
eight weeks of the second half of the financial year was below the Board's
expectations. However, due to the seasonal profile of cash generation,
available liquidity has increased to £15.6m as at 11th December 2022.
At the time of approving these financial statements, the Board of Directors
are required to consider whether the Group has sufficient resources to
continue in operational existence for the foreseeable future and hence support
the use of the going concern basis. In doing this, the Board has considered
the forecast future cash position and profitability of the Group under a range
of forecast scenarios taking into consideration the Group's principal risks
and uncertainties.
The Board considers that the factors which present the greatest risk to
performance over the next twelve months are:
· Competition, market and macro-economic risks - in light of the
challenging economic and consumer market conditions
· Financial and treasury risks - impact of increased interest rates
and volatile foreign exchange movements
The potential impacts of these factors are reflected in the downside scenarios
below.
Base Case scenario
The Base Case for the scenario modelling reflects the Board's latest forecast
outturn performance for FY23 and FY24. These forecasts assume a partial
recovery from the level of revenue decline seen in the first half of the
financial year, based on recent run rate trading performance applied to a
historical average profile, but despite this, revenue for FY23 as a whole
remains below the previous year. A recovery in FY24 is assumed given the new
store opening programme and website improvements we plan to deliver, bringing
sales in that year to a similar level as achieved in FY22. Prudent cost and
cash management are also assumed throughout.
Under this scenario, the Group will remain within its £10m committed
borrowing facilities and will meet relevant banking covenants (leverage and
fixed charge cover).
Downside scenario
The Directors consider that the principal risks to achieving the Base Case
scenario relate to the broad ranging macro conditions affecting consumer
confidence and disposable income. Therefore, a downside scenario has been
prepared which assumes an 8% sales underperformance compared to the Base Case
in the remainder of FY23, reflecting our year to date run rate performance
(including the impacts of a very hot summer, and ignoring the recent improved
trend that we have delivered), and a 3% lower sales performance throughout
FY24 compared to the Base Case.
Under this scenario, and before mitigating actions, the Group would remain
within its £10m committed borrowing facilities throughout the next 12 months
and remain compliant with the leverage covenant, however would breach the
Fixed Charge covenant (Debt Service plus Rent / EBITDAR) at the quarterly test
date at the end of the fourth quarter of FY23 only.
Severe downside scenario
This scenario reflects a further and pronounced deterioration in trading
conditions during the remainder of FY23 such that sales performance reduces by
18% compared to the Base Case in the remainder of the current financial year
(with LFL sales declining year on year by a further -5%pts compared to year to
date performance), and by 7% in FY24. Additionally, given the uncertainty and
volatility around foreign exchange rates, this scenario reflects a reduction
in anticipated gross profit margins by 100bps in FY24 compared to the base
case. This scenario also incorporates a further 100bps increase in the FED
rate throughout FY24 for interest incurred on the Group's trade finance
facility and a 100bps increase in the BOE rate throughout FY24 for interest
incurred on any utilisation of the revolving credit facility.
Under this severe scenario, and before mitigating actions, the Group would
remain within its £10m committed borrowing facilities throughout the next 12
months. However, it would breach the leverage covenant at the quarterly test
dates of Q4 FY23, Q1 and Q2 FY24, and would breach the Fixed Charge covenant
at the quarterly test dates of Q3 and Q4 FY23, Q1 and Q2 FY24 before
recovering.
Mitigating actions
The Group has numerous mitigating actions available to improve liquidity if
this were required, including (but not limited to):
· Seek to renegotiate banking covenants or other terms with partners
for the relevant periods
· Reduce discretionary expenditure (not including performance
marketing)
· Reduce capital expenditure
· Reduce paid media marketing spend to enhance ecommerce
profitability
· Reduce reward arrangements (including pay rises and bonuses)
· Reduce costs in operational functions to reflect the lower sales
volumes
· Extend payment terms with suppliers, or delay product intake or
other activities
· Additional promotional activity to accelerate trading performance
and reduce stock levels
Conclusion
Having considered the range of scenarios, including the main risks within them
and the available mitigating actions described above, the Directors believe
that there is low likelihood of the Group failing to operate within its
liquidity headroom over the twelve months from the date of this report.
Accordingly, the financial statements have been prepared under the going
concern basis of accounting.
However, the Directors recognise that in a plausible downside or severe
downside scenario, the Group is likely to breach one or more of its banking
covenants, requiring it to negotiate covenant waivers or other new banking
terms. The Directors note the positive and long-standing relationship the
Group has with HSBC. However, there can be no certainty that covenant waivers
will be granted, the Directors therefore acknowledge a material uncertainty
surrounding the Group's going concern status.
Principal risks and uncertainties
The Board regularly reviews and monitors the risks and uncertainties which
could have a material effect on the Group's results. A summary of the
principal risks is set out below.
During the first half of the FY23 financial year we have experienced a
significant and rapid worsening in the consumer and wider macro-economic
landscape. Inflationary pressures post-covid (e.g. supply chain and fuel) have
been compounded with the effects of the war in Ukraine, a tight labour market
and further upward pressure across many day to day costs including energy and
food, pushing inflation rates up to the highest levels in 40 years. Interest
rates have risen accordingly, in efforts to combat inflation. The effects of
political turmoil in the UK and the mini-budget caused significant short term
uncertainty and foreign exchange market volatility. Consumer spending and
disposable incomes have been significantly impacted, and consumer confidence
remains at record lows.
In the context of this backdrop the Board have carefully considered the
principal risks and whether there are any new emerging risks which ProCook
faces. The Board has not identified any new or emerging risks which were not
previously captured in the Group's risk register. However, it has been
determined that there are five risks in which the inherent risk has increased
since the FY22 financial year end, four have not changed, and one has
decreased.
Risk Impact Risk vs
FY22
Competition, Failure to adapt to changing consumer needs and to maintain a compelling Increased
market and customer offer compared to competitors could limit or reduce profitability and
macroeconomic opportunities for growth. Macroeconomic factors which reduce consumer
confidence and / or disposable incomes or create additional cost pressures
could impact revenue growth and profit generation.
Strategy and business change Failure to design and effectively implement appropriate strategies could slow No change
or limit the growth of the business, and / or impact the overall customers
proposition - in turn impacting revenue growth and profit generation
Brand and customer Reputational damage due to a variety of issues such as data loss, product No change
quality or safety, and ethical or sustainability issues in the supply chain
could negatively impact the Group.
Climate change Changing customer needs and preferences, impacts on supply chain, increased No change
compliance burden, and changes to product and packaging requirements could
lead to lower revenues or increased costs.
Supply chain Delays or higher costs in the supply chain could impact product availability Decreased
and customer satisfaction, or increased costs. This could lead to lower
revenues and profitability or reduced repeat rates in the future.
IT platforms, data loss and Failing to develop and maintain appropriate technology to support operations, No change
cyber security or the loss of key platforms or data due to cyber-attacks or other failures,
could lead to reputational damage and fines and a loss of customer confidence
in the Group.
People and culture Failing to attract, retain and motivate high calibre employees, and to Increased
maintain our unique culture could lead to operational challenges and failure
to execute the Group strategy.
Marketing effectiveness Loss of ability to attract new customers and retain existing customers in a Increased
cost-effective way could slow growth, and lead to loss of sales and / or
profits.
Finance and Failure to manage financial matters such as liquidity, foreign exchange, Increased
treasury access to capital and effective financial planning and reporting could impact
growth and efficiency.
Regulatory Adverse reputational risk and potential higher costs incurred due to failure No change
compliance to comply with legal and regulatory requirements, accompanied by potential
fines or other penalties, relating to a broad range of regulatory issues such
as health and safety, legal and financial compliance.
Dan Walden
Chief Financial Officer
13 December 2022
Statement of Directors' responsibilities
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
- An indication of important events that have occurred during the
first half of the year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- Material related-party transactions in the first half of the year
and any material changes in the related-party transactions described in the
last annual report.
The Directors of Company are listed in the Company's annual report for 3 April
2022. A list of current Directors is maintained on the Company's corporate
website: www.procookgroup.co.uk.
For and on behalf of the Board
Dan Walden
Chief Financial Officer
13 December 2022
Consolidated Income Statement (Unaudited)
For the 28 weeks to 16 October 2022
28 weeks ended 16 October 2022 28 weeks ended 17 October 2021
Restated(1)
Underlying Non-underlying(2) Reported Underlying Non-underlying(2) Reported
£'000s Note
Revenue 1 27,382 - 27,382 32,038 - 32,038
Cost of sales (10,680) - (10,680) (10,692) - (10,692)
Gross profit 16,702 - 16,702 21,346 - 21,346
Operating expenses (19,113) (655) (19,768) (18,104) (1,355) (19,459)
Other income 25 - 25 294 - 294
Operating (loss) / profit (2,386) (655) (3,041) 3,536 (1,355) 2,181
Finance expense (430) (14) (444) (269) - (269)
Other (losses)/gains (17) - (17) 514 - 514
(Loss) / profit before tax (2,833) (669) (3,502) 3,781 (1,355) 2,426
Tax credit/(expense) 4 524 132 656 (683) 181 (502)
(Loss) / profit for the period (2,309) (537) (2,846) 3,098 (1,174) 1,924
Total comprehensive (loss) / income (2,309) (537) (2,846) 3,098 (1,174) 1,924
Earnings per ordinary share - basic 6 (2.12)p (2.61)p 3.10p 1.92p
Earnings per ordinary share - diluted 6 (1.98)p (2.44)p 2.85p 1.77p
52 weeks ended 3 April 2022
Underlying Non-underlying(2) Reported
£'000s Note
Revenue 1 69,154 - 69,154
Cost of sales (24,111) - (24,111)
Gross profit 45,043 - 45,043
Operating expenses (36,277) (9,400) (45,677)
Other income 407 - 407
Operating loss 9,173 (9,400) (227)
Finance expense (623) - (623)
Other gains 944 - 944
Profit before tax 9,494 (9,400) 94
Tax expense 4 (1,900) 1,720 (180)
Loss for the period 7,594 (7,680) (86)
Total comprehensive loss 7,594 (7,680) (86)
Earnings per ordinary share - basic 6 7.34p (0.01)p
Earnings per ordinary share - diluted 6 6.76p (0.01)p
(1) See note 14 for further information
(2) See note 2 for further information
Consolidated Statement of Financial Position (Unaudited)
As at 16 October 2022
£'000s Note As at 16 October 2022 As at 17 October 2021 As at 3 April 2022
Restated(1)
Assets
Non-current assets
Intangible assets 313 155 363
Property, plant, and equipment 6,551 4,810 5,801
Right-of-use assets 7 31,846 18,225 20,985
Deferred tax asset 1,112 - 1,175
Total non-current assets 39,822 23,190 28,324
Current assets
Inventories 8 12,761 13,845 16,759
Trade and other receivables 3,148 1,731 1,975
Current tax asset 965 577 271
Cash and cash equivalents 9 2,116 4,287 3,782
Total current assets 18,990 20,440 22,787
Total assets 58,812 43,630 51,111
Liabilities
Current liabilities
Trade and other payables 9,160 8,769 8,278
Lease liabilities 7 3,287 3,167 2,844
Provisions 141 179 173
Borrowings 10 3,390 3,419 5,540
Total current liabilities 15,978 15,534 16,835
Non-current liabilities
Trade and other payables 896 - 816
Lease liabilities 7 30,497 17,169 19,605
Provisions 530 435 444
Deferred tax liability - 63 -
Total non-current liabilities 31,923 17,667 20,865
Total liabilities 47,901 33,201 37,700
Net assets 10,911 10,429 13,411
Equity and reserves attributable to shareholders of ProCook Group plc
Share capital 1,090 - 1,090
Share option reserve 6,454 - 5,801
Share premium 1 - 1
Retained earnings 3,366 10,429 6,519
Total equity and reserves 10,911 10,429 13,411
(1) See note 14 for further information
The interim financial statements were approved by the Board of Directors on 13
December 2022 and were signed on its behalf by:
Dan Walden
Chief Financial Officer
13 December 2022
Consolidated Statement of cash flows (Unaudited)
For the 28 weeks to 16 October 2022
28 weeks ended 28 weeks ended 52 weeks ended
£'000s Note 16 October 2022 17 October 2021 3 April 2022
Restated(1)
Cash flows from operating activities
Profit before tax (3,502) 2,426 94
Adjustments for:
Depreciation of property, plant, and equipment 521 334 860
Amortisation of Intangible assets 50 18 52
Loss on disposal of property, plant, and equipment 38 63 135
Profit on disposal of leases (24) (104) (50)
Amortisation of right-of-use assets 7 1,916 1,599 3,056
Unrealised FX gains (150) (514) (1,098)
Share Based Payments 649 - 5,837
Finance expense 444 269 623
Decrease/(Increase) in inventories 8 3,998 (3,758) (6,671)
Increase in trade and other receivables (1,173) (276) (372)
Increase in trade and other payables 1,016 3,118 3,881
Corporation tax paid 4 - (1,466) (2,041)
Net cash flows from operating activities 3,783 1,709 4,306
Investing activities
Purchase of property, plant, and equipment (1,309) (1,638) (3,165)
Purchase of intangible assets - (106) (348)
Lease start-up costs 222 (182) (248)
Net cash used in investing activities (1,087) (1,926) (3,761)
Financing activities
Interest (139) (24) (156)
Interest paid on lease liabilities 7 (305) (245) (467)
Proceeds from borrowings 10 11,033 3,419 28,320
Repayment of borrowings 10 (13,322) (2,803) (25,583)
Principle movement on lease liabilities 7 (1,827) (722) (2,910)
Proceeds from the issue of shares - - 54
Dividends paid 5 (307) (1,000) (1,900)
Net cash used in financing activities (4,867) (1,375) (2,642)
Net decrease in cash and cash equivalents (2,171) (1,592) (2,097)
Cash and cash equivalents at beginning of the period 4,287 5,879 5,879
Cash and cash equivalents at end of period 9 2,116 4,287 3,782
(1) See note 14 for further information
Consolidated statement of changes in equity (Unaudited)
For the 28 weeks to 16 October 2022
£'000 Note Share capital Share premium Share option reserve Retained earnings Total equity
As at 5 April 2021 - - - 9,505 9,505
Total comprehensive profit for the period - - - 1,924 1,924
Ordinary dividends paid 5 - - - (1,000) (1,000)
As at 17 October 2021 (Restated)(1) - - - 10,429 10,429
Total comprehensive loss for the period - - - (2,010) (2,010)
Bonus issue 117,300 - - (117,300) -
Capital reduction (116,300) - - 116,300 -
Share options exercised 54 1 - - 55
Issue of shares 36 - (36) - -
Employee Share Based Payment Awards - - 5,837 - 5,837
Ordinary dividends paid 5 - - - (900) (900)
As at 3 April 2022 1,090 1 5,801 6,519 13,411
Total comprehensive loss for the period - - - (2,846) (2,846)
Employee Share Based Payment Awards - - 653 - 653
Ordinary dividends paid 5 - - - (307) (307)
As at 16 October 2022 1,090 1 6,454 3,366 10,911
(1) See note 14 for further information
Consolidated Financial Statements Accounting Policies (Unaudited)
For the 28 weeks to 16 October 2022
General Information
The Group financial statements consolidate those of the ProCook Group plc (the
'Company') and its subsidiaries, together referred to as the 'Group'.
ProCook Group plc is a public limited company incorporated and domiciled in
England and Wales under the Companies Act 2006 (Registration number:
13679248). The registered office is ProCook, Davy Way, Waterwells, Gloucester,
GL2 2BY.
The principal activity of the Company together with its subsidiary
undertakings throughout the period is the sale of kitchenware and related
products in stores and via ecommerce platforms.
The Group's financial results and cashflows are subject to seasonal trends
throughout the financial period. Typically, revenue and profit are higher in
the last 24 weeks of the financial year due to the seasonal impact of
increased trade in the run up to Christmas.
Basis of preparation
These condensed interim financial statements for the 28 weeks ended 16 October
2022 have been prepared in accordance with IAS 34 "Interim financial
information".
The condensed interim financial statements should be read in conjunction with
the annual financial statements for the year ended 27 June 2020, which were
prepared in accordance with IFRSs as adopted by the European Union.
The presentation of the condensed financial statements requires the Directors
to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experiences
and various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of Section 434 of the Companies Act 2006 and are
not audited. Statutory accounts for the period ended 3 April 2022 were
approved by the Board of Directors on 4 August 2022 and delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under Section 498 of the Companies Act 2006.
Basis of consolidation
Group companies included in these consolidated financial statements for FY23
include ProCook Group plc and all subsidiary undertakings, which are those
entities it controls. ProCook Group plc controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity
and can affect those returns through its power to direct the activities of the
entity. Subsidiaries are fully consolidated from the date on which control is
transferred to ProCook Group plc until the date that control ceases. The
Company assesses whether it controls an investee if facts and circumstances
indicate that there are changes in the control indicators listed above.
On 26 October 2021, ProCook Group Limited acquired the entire shareholding of
ProCook Limited via a share-for-share exchange, with the existing owners of
ProCook Limited at that time becoming the owners of ProCook Group Limited.
ProCook Group Limited was subsequently renamed to ProCook Group plc upon
listing on the London Stock Exchange's Main market for listed securities on
the 10 November 2021. The prior period ending 17 October 2021 comparatives are
those of the former ProCook Limited Group since no substantive economic
changes have occurred.
Where necessary, amounts reported by subsidiaries have been adjusted to
conform with ProCook Group plc's accounting policies.
Transactions eliminated on consolidation
Intra-group balances, and any unrealised gains and losses or income and
expenses arising from intra-group transactions are eliminated in preparing the
financial information. Losses are eliminated in the same way as gains, but
only to the extent that there is no evidence of impairment.
Going concern
As at 16th October 2022, the date of the interim financial statements, the
Group had net debt of £1.3m and available liquidity of £14.7m including a
£6m uncommitted trade finance facility.
As reported in the trading update on 9th December 2022, trading in the first
eight weeks of the second half of the financial year was below the Board's
expectations. However, due to the seasonal profile of cash generation,
available liquidity has increased to £15.6m as at 11th December 2022.
At the time of approving these financial statements, the Board of Directors
are required to consider whether the Group has sufficient resources to
continue in operational existence for the foreseeable future and hence support
the use of the going concern basis. In doing this, the Board has considered
the forecast future cash position and profitability of the Group under a range
of forecast scenarios taking into consideration the Group's principal risks
and uncertainties.
The Board considers that the factors which present the greatest risk to
performance over the next twelve months are:
· Competition, market and macro-economic risks - in light of the
challenging economic and consumer market conditions
· Financial and treasury risks - impact of increased interest rates
and volatile foreign exchange movements
The potential impacts of these factors are reflected in the downside scenarios
below.
Base Case scenario
The Base Case for the scenario modelling reflects the Board's latest forecast
outturn performance for FY23 and FY24. These forecasts assume a partial
recovery from the level of revenue decline seen in the first half of the
financial year, based on recent run rate trading performance applied to a
historical average profile, but despite this, revenue for FY23 as a whole
remains below the previous year. A recovery in FY24 is assumed, bringing sales
in that year to a similar level as achieved in FY22. Prudent cost and cash
management are also assumed throughout.
Under this scenario, the Group will remain within its £10m committed
borrowing facilities and will meet relevant banking covenants (leverage and
fixed charge cover).
Downside scenario
The Directors consider that the principal risks to achieving the Base Case
scenario relate to the broad ranging macro conditions affecting consumer
confidence and disposable income. Therefore, a downside scenario has been
prepared which assumes an 8% sales underperformance compared to the Base Case
in the remainder of FY23, reflecting our year to date run rate performance
(including the impacts of a very hot summer, and ignoring the recent improved
trend that we have delivered), and a 3% lower sales performance throughout
FY24 compared to the Base Case.
Under this scenario, and before mitigating actions, the Group would remain
within its £10m committed borrowing facilities throughout the next 12 months
and remain compliant with the leverage covenant, however would breach the
Fixed Charge covenant (Debt Service plus Rent / EBITDAR) at the quarterly test
date at the end of the fourth quarter of FY23 only.
Severe downside scenario
This scenario reflects a further and pronounced deterioration in trading
conditions during the remainder of FY23 such that sales performance reduces by
18% compared to the Base Case in the remainder of the current financial year
(with LFL sales declining year on year by a further -5%pts compared to year to
date performance), and by 7% in FY24. Additionally, given the uncertainty and
volatility around foreign exchange rates, this scenario reflects a reduction
in anticipated gross profit margins by 100bps in FY24 compared to the base
case. This scenario also incorporates a further 100bps increase in the FED
rate throughout FY24 for interest incurred on the Group's trade finance
facility and a 100bps increase in the BOE rate throughout FY24 for interest
incurred on any utilisation of the revolving credit facility.
Under this severe scenario, and before mitigating actions, the Group would
remain within its £10m committed borrowing facilities throughout the next 12
months. However, it would breach the leverage covenant at the quarterly test
dates of Q4 FY23, Q1 and Q2 FY24, and would breach the Fixed Charge covenant
at the quarterly test dates of Q3 and Q4 FY23, Q1 and Q2 FY24 before
recovering.
Mitigating actions
The Group has numerous mitigating actions available to improve liquidity if
this were required, including (but not limited to):
· Seek to renegotiate banking covenants or other terms with partners
for the relevant periods
· Reduce discretionary expenditure (not including performance
marketing)
· Reduce capital expenditure
· Reduce paid media marketing spend to enhance ecommerce
profitability
· Reduce reward arrangements (including pay rises and bonuses)
· Reduce costs in operational functions to reflect the lower sales
volumes
· Extend payment terms with suppliers, or delay product intake or
other activities
· Additional promotional activity to accelerate trading performance
and reduce stock levels
Conclusion
Having considered the range of scenarios, including the main risks within them
and the available mitigating actions described above, the Directors believe
that there is low likelihood of the Group failing to operate within its
liquidity headroom over the twelve months from the date of this report.
Accordingly, the financial statements have been prepared under the going
concern basis of accounting.
However, the Directors recognise that in a plausible downside or severe
downside scenario, the Group is likely to breach one or more of its banking
covenants, requiring it to negotiate covenant waivers or other new banking
terms. The Directors note the positive and long-standing relationship the
Group has with HSBC. However, there can be no certainty that covenant waivers
will be granted, the Directors therefore acknowledge a material uncertainty
surrounding the Group's going concern status.
Accounting Policies
The condensed interim financial statements have been prepared under the
historical cost convention, except for derivative financial instruments and
share based payments which are stated at their fair value. The accounting
policies adopted, as well as significant judgements and key estimates applied,
are consistent with those in the annual financial statements for the year
ended 3 April 2022, as described in those financial statements.
Notes to the Consolidated Financial Statements
For the 28 weeks to 16 October 2022
1. Revenue
Group revenue is not reliant on any single major customer or group of
customers. Management considers revenue to be derived from one business stream
being the retail of kitchenware and related products and services.
Customers interact and shop with the Group across multiple touchpoints and
their journey often involves more than one channel. The Chief Operating
Decision-maker is the Board of Directors of ProCook Group plc. The Board
reviews internal management reports on a frequent basis, and in line with
internal reporting, the channel reporting below indicates where customers
complete their final purchase transaction.
The majority of the Group's operations are carried out in the UK, with a
smaller proportion of the Group's revenue being generated in the European
Union. All revenue is from external customers.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 16 October 2022 17 October 2021 3 April 2022
United Kingdom 26,638 30,623 66,124
European Union 744 1,415 3,030
Total revenue 27,382 32,038 69,154
2. Non-underlying items
Due to the non-recurring nature of the Initial Public Offering on the London
Stock Exchange by the Group in the period ended 3 April 2022 and the
development of the Group's new Distribution Centre (DC) and Head Office in the
period ending 16 October 2022, the business has incurred costs which relate to
non-recurring events, and are material in nature, and so have been separately
disclosed on the face of the Consolidated Income Statement as non-underlying
items. These include non-recurring costs in respect of employee share-based
IPO awards of £579k (17 October 2021: £nil) and pre-opening costs of £90k
associated with the DC and Head Office whilst it is an asset under
construction. Expenses in relation to the IPO awards are expected to continue
through relevant vesting periods to FY25, albeit these costs reduce over time.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 16 October 2022 17 October 2021 3 April 2022
New DC and Head office pre-opening costs 90 - -
IPO associated costs - 1,355 2,742
IPO Share based awards 579 - 6,658
Total 669 1,355 9,400
3. Segmental reporting
The Chief Operating Decision Maker (CODM) has been identified as the Board of
Directors and segmental reporting analysis is presented based on the Group's
internal reporting to the Board. At 16 October 2022, the Group had two
operating segments, being Ecommerce and Retail. Central costs are reported
separately to the Board but this is not considered an operating segment.
Substantially all of the assets of the Group are located in the UK.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 16 October 2022 17 October 2021 3 April 2022
Revenue
Ecommerce 11,431 15,144 32,332
Retail 15,951 16,894 36,822
Total revenue 27,382 32,038 69,154
Operating profit
Ecommerce 1,238 3,557 8,056
Retail 1,167 4,461 9,635
Central costs (4,779) (4,482) (8,518)
Non-underlying costs (669) (1,355) (9,400)
Operating (loss) / profit (3,041) 2,181 (227)
Finance costs (444) (269) (623)
Other (losses)/gains (17) 514 944
(Loss) / profit before tax (3,502) 2,426 94
4. Tax expense
The Group's effective tax rate for the 28 weeks ended 16 October 2022 was
18.7% (28 weeks ended 17 October 2021: 21.8%; year ended 3 April 2022: 20.0%).
The standard rate of UK corporate income tax was 19% for all periods
presented.
5. Dividends
28 Weeks ended 52 weeks ended
£'000 16 October 2022 03 April 2022
Final dividend for the period ended 4 April 2021 - paid 1.0 pence 1,000
Interim dividend for the period ended 3 April 2022 - paid 1.0 pence - 900
Final dividend for the period ended 3 April 2022 - paid 0.9 pence 307 -
The final dividend for the period ended 3 April 2022 of 0.9p per share and the
interim dividend for the period ended 3 April 2022 of 1.0p per share were
declared, however waivers by certain shareholders have reduced the total
dividend amounts paid by £(0.6)m to £0.3m for the final dividend for the
period ended 3 April 2022 and by £(0.1)m to £0.9m for the interim dividend
for the period ended 3 April 2022.
The Group has not declared an interim dividend in respect of the current half
year period.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to equity holders of the Parent by the weighted average number of
ordinary shares in issue.
Diluted earnings per share is calculated by dividing the profit for the period
attributable to equity holders of the Parent by the weighted average number of
ordinary shares in issue during the period plus the weighted average number of
ordinary shares that would have been issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
28 weeks ended 28 weeks ended 52 weeks ended
16 October 2022 17 October 2021 3 April 2022
Weighted average number of shares 108,956,624 100,000,000 103,509,034
Impact of share options 7,796,576 8,580,000 8,774,159
Number of shares for diluted earnings per share 116,753,200 108,580,000 112,283,193
28 weeks ended 52 weeks ended
16 October 2022 17 October 2021 3 April 2022
£'000 Underlying Reported Underlying Reported Underlying Reported
(Loss)/Profit for the period (2,309) (2,846) 3,098 1,924 7,594 (86)
Earnings per ordinary share - basic (2.12)p (2.61)p 3.10p 1.92p 7.34p (0.01)p
Earnings per ordinary share - diluted (1.98)p (2.44)p 2.85p 1.77p 6.76p (0.01)p
7. Leased assets
The Group leases a number of assets, with all lease payments fixed over the
lease term. Where there are leasehold properties which hold a variable element
to lease payments made these are not capitalised as part of the right of use
asset. All expected future non-variable cash out flows are reflected within
the measurement of the lease liabilities at each period end.
As at 16 October As at 17 October As at 3 April
2022 2021 2022
Number of active leases 75 63 71
Right of use assets
Leasehold Property Plant and Equipment
£'000 Motor Vehicles Total
Cost
At 4 April 2022 26,225 236 68 26,529
Additions 13,218 - - 13,218
Re-measurement(2) 30 - - 30
Disposals (1,042) - (16) (1,058)
At 16 October 2022 38,431 236 52 38,719
Amortisation
At 4 April 2022 5,430 87 27 5,544
Charge for the period 1,870 38 8 1,916
Disposals (571) - (16) (587)
At 16 October 2022 6,729 125 19 6,873
Net book value
At 4 April 2022 20,795 149 41 20,985
At 16 October 2022 31,702 111 33 31,846
Lease liabilities
Leasehold Property Plant and Equipment
£'000 Motor Vehicles Total
At 3 April 2022 22,269 141 39 22,449
Additions(1) 13,323 - - 13,323
Re-measurement(2) 30 - - 30
Interest expense 303 2 - 305
Lease payments (1,782) (38) (7) (1,827)
Disposals (496) - - (496)
At 16 October 2022 33,647 105 32 33,784
(1) Additions include our new distribution centre and head office. The lease
was entered into on the 22 September 2022 and on inception had a right of use
asset value of £10.7m, lease liability of £10.7m and a lease term of 15
years.
(2) Remeasurements have arisen where store lease rental terms and/ or lease
expiry dates have been amended.
8. Inventories
As at 16 October As at 17 October As at 3 April
£'000 2022 2021 2022
Finished goods and goods for resale 12,761 13,845 16,759
The cost of inventories recognised as an expense in the period to 16 October
2022 amounted to £10,680k (17 October 2021: 10,692k).
9. Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents
include cash on hand and in banks and investments in money market instruments.
Cash and cash equivalents at the end of the financial year as shown in the
statement of cash flows can be reconciled to the related items in the
statement of financial position as follows:
As at 16 October As at 17 October As at 3 April
£'000 2022 2021 2022
Cash at bank available on demand 1,426 3,243 3,058
Cash in transit 690 1,044 724
Total 2,116 4,287 3,782
10. Borrowings
As at 16 October As at 17 October As at 3 April
£'000 2022 2021 2022
Current
Bank loans 3,390 3,419 5,540
Total borrowings 3,390 3,419 5,540
Bank loans comprise solely of an uncommitted trade finance facility and a
revolving credit facility (RCF). As at 16 October 2022, the trade finance
facility limit was £6.0m, whilst the RCF's limit was £10m. The following
amounts had been drawn down and were outstanding at 16 October 2022: £3.4m (3
April 2022: £5.5m).
11. Derivatives
The Group's local currency is pounds sterling however due to international
purchases in foreign currencies, the Group seeks to reduce its foreign
exchange risk by entering into forward contracts and other derivatives. At 16
October 2022, the outstanding contracts all mature within 8 months of the
period end. At the balance sheet date, Group was committed to buy $29,532,917.
All derivative contracts are measured at fair value, and are determined using
valuation techniques that utilise observable inputs. The derivatives held on
the balance sheet as at 16 October 2022 are recognised under level 2 of the
fair value hierarchy. The key inputs used in valuing the derivatives are the
forward exchange rates. There were no designated hedges in place during the
current or proceeding financial year.
The fair value of derivative financial assets, included within Trade and other
receivables, are as follows:
As at 16 October As at 3 April
£'000 2022 2022
Derivatives 298 148
Total 298 148
12. Financial Instruments
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. To minimise the risk, the Group endeavours only to deal with
companies which are demonstrably creditworthy and this, together with the
aggregate financial exposure, is continuously monitored. The maximum exposure
to credit risk is the carrying value of its financial receivables, trade and
other receivables and cash and cash equivalents as disclosed in the notes to
the financial information.
Interest rate risk
As at 16 October 2022 the Group's only current borrowings are the trade
finance facility at a floating interest rate linked to the Bank of England
base rate. This is variable on the amount drawn down and there is no fixed
settlement date, therefore the interest rate risk exposure for the Group is
minimal. The Group's policy aims to manage the interest cost of the Group
within the constraints of its financial borrowings.
Foreign exchange risk
Foreign exchange risk arises when the Group enter transactions in a currency
other than their functional currency. The Group's policy is, where possible,
to settle liabilities denominated in a currency other than its functional
currency with cash already denominated in that currency.
The Group will make purchases of large inventory orders from overseas, and the
Group will use additional means to cover its exposure to the foreign exchange
movement. The Group will use various financial derivatives such as forward
exchange contracts, to mitigate any predicted movement in foreign currency to
restrict losses and to ascertain control of expected cash out flows. All the
Group's foreign exchange contracts are designated to settle the corresponding
liability.
Liquidity risk
The Group seeks to maintain sufficient cash balances. The Board reviews cash
flow forecasts on a regular basis to determine whether the Group has
sufficient cash reserves to meet future working capital requirements and to
take advantage of business opportunities.
13. Related Parties
Transactions with Quella Bicycle Limited, a related party by virtue of one of
the Group's Directors (Daniel O'Neill) holding a financial interest, related
to the renting of warehouse space from ProCook Limited. During the period,
Quella Bicycle Limited were charged £9k for the warehouse rental (3 April
2022: £16k). No payments were received from Quella during the period ended 16
October 2022 (3 April 2022: £19k). The amount receivable at 16 October 2022
was £9k (3 April 2022: £7k).
Included in other payables at the period ended 16 October 2022 was £19k (3
April 2022: £19k) owed to a Director (Daniel O'Neill) in respect of remaining
dividends payable. The balance is non-interest bearing. Amounts paid by
ProCook Group plc to the Director in respect of this balance were £Nil during
the period ended 16 October 2022 (3 April 2022: £77k).
Transactions with Life's a Beach Limited, a related party by virtue of one of
the Group's Directors (Daniel O'Neill) being a trustee, related to charitable
donations based on ProCook revenue in respect of relevant products and other
associated transactions. During the period, ProCook revenue resulted in £6k
of donations payable to Life's a Beach (3 April 2022: £20k). During the
period ended 16 October 2022, ProCook made payments to Life's a Beach of £7k
(3 April 2022: £62k). The amount payable at 16 October 2022 was £6k (3 April
2022: £7k).
14. Transition to IFRS and other adjustments
As reported for the year ended 3 April 2022, as part of the full transition to
IFRS, the Group has undertaken a comprehensive review of its historical
reporting to consider the accuracy and integrity of the historical financial
statements. As a result, a number of prior year adjustments to the amounts
previously disclosed in the IFRS Transition within the FY22 interim results,
have been identified. The adjustments are set out below and are consistent in
approach to those identified at the FY22 year end.
Adjustment 1
The accuracy of the adoption of IFRS 16 has been reviewed which identified
errors in the valuation of several leases and lease modifications. Items
previously classified as Property, Plant and Equipment have also been
appropriately reclassified into the Right of use asset. The adjustments to
reflect this are:
i. PPE decreased by £(302)k in the period ended 17 October 2021.
ii. Right of use assets of £1,381k were recognised in the period ended
17 October 2021.
iii. Trade and other receivables decreased by £(414)k in the period ended
17 October 2021.
iv. Trade and other payables decreased by £(898)k in the period ended 17
October 2021.
v. Current lease liabilities increased by £495k in the period ended 17
October 2021. Non-current lease liabilities increased by £1,468k in the
period ended 17 October 2021.
vi. Operating expenses decreased by £(78)k in the period ended 17 October
2021.
vii. Finance expenses increased by £19k in the period ended 17 October
2021.
viii. Retained earnings decreased by £(400)k in the period ended 17 October
2021.
Adjustment 2
Upon adoption of IFRS 15 for the first time, the Group considered the
customer's right to return products for refunds as this is not explicitly set
out under UK GAAP. The adjustment to previous periods for the right to return
is made consistently. The adjustments to reflect this are:
i. Inventory increased by £11k in the period ended 17 October 2021.
ii. Current provisions increased by £38k in the period ended 17 October
2021.
iii. Reduce revenue by £(38k) in the period to 17 October 2021.
iv. Reduce cost of sales by £(11k) in the period to 17 October 2021.
v. Retained earnings reduced by £(27k) in the period ended 17 October
2021.
Adjustment 3
Under IAS 8 a restatement of prior periods is required to appropriately
recognise provisions for dilapidations in the prior period where they were
previously omitted. The adjustments to reflect this are:
i. ROU asset of £280k was recognised in the period ended 17 October
2021.
ii. Current provisions increased by £19k in the period ended 17 October
2021. Non-current provisions increased by £435k in the period ended 17
October 2021.
iii. Increased operating expenses by £39k in the period ended 17 October
2021.
iv. Increased finance expenses by £7k in the period ended 17 October
2021.
v. Retained earnings reduced by £(174k) in the period ended 17 October
2021.
Adjustment 4
A further restatement in respect of inventory is required as the Group did not
historically include directly attributable transport and labour costs in
relation to bringing inventory into its present location. Such labour and
transport costs were also previously recognised within operating expenses -
this adjustment correctly allocates them to cost of sales. The adjustments to
reflect this are:
i. Increase in inventories of £289k in the period ended 17 October
2021.
ii. Increase cost of sales by £370k in the period ended 17 October
2021.
iii. A corresponding decrease in operating expenses of £(569k) in the
period ended 17 October 2021.
iv. Retained earnings increased by £289k in the period ended 17 October
2021.
Adjustment 5
A reclassification was required to recognise the warranty provision as current
as opposed to non-current. The adjustments to reflect this are:
i. Increase current provisions by £160k in the period ended 17
October 2021.
ii. Decrease non-current provisions by £(160k) in the period ended 17
October 2021.
Restated Consolidated Income Statement (Unaudited)
For the 28 weeks to 17 October 2021
28 weeks ended 17 October 2021
£'000 Reported Adj 1 Adj 2 Adj 3 Adj 4 Restated
Revenue 32,076 - (38) - - 32,038
Cost of sales (10,333) - 11 - (370) (10,692)
Gross profit 21,743 - (27) - (370) 21,346
Operating expenses (20,067) 78 - (39) 569 (19,459)
Other income 294 - - - - 294
Operating Profit 1,970 78 (27) (39) 199 2,181
Finance expense (243) (19) - (7) - (269)
Other gains/(losses) 514 - - - - 514
Profit before tax 2,241 59 (27) (46) 199 2,426
Tax expense (502) - - - - (502)
Profit for the period 1,739 59 (27) (46) 199 1,924
Total comprehensive income 1,739 59 (27) (46) 199 1,924
Earnings per ordinary share - basic 1.74p 1.92p
Earnings per ordinary share - diluted 1.60p 1.77p
Restated Consolidated Statement of Financial Position (Unaudited)
As at 17 October 2021
As at 17 October 2021
£'000s Reported Adj 1 Adj 2 Adj 3 Adj 4 Adj 5 Restated
Assets
Non-current assets
Intangible assets 155 - - - - - 155
Property, plant, and equipment 5,112 (302) - - - - 4,810
Right-of-use assets 16,564 1,381 - 280 - - 18,225
Total non-current assets 21,831 1,079 - 280 - - 23,190
Current assets
Inventories 13,545 - 11 - 289 - 13,845
Trade and other receivables 2,145 (414) - - - - 1,731
Current tax asset 577 - - - - - 577
Cash and cash equivalents 4,287 - - - - - 4,287
Total current assets 20,554 (414) 11 - 289 - 20,440
Total assets 42,385 665 11 280 289 - 43,630
Liabilities
Current liabilities
Trade and other payables 9,629 (898) 38 - - - 8,769
Lease liabilities 2,672 495 - - - - 3,167
Provisions - - - 19 - 160 179
Borrowings 3,419 - - - - - 3,419
Total current liabilities 15,720 (403) 38 19 - 160 15,534
Non-current liabilities
Lease liabilities 15,701 1,468 - - - - 17,169
Provisions 160 - - 435 - (160) 435
Deferred tax liability 63 - - - - - 63
Total non-current liabilities 15,924 1,468 - 435 - (160) 17,667
Total liabilities 31,644 1,065 38 454 - - 33,201
Net assets 10,741 (400) (27) (174) 289 - 10,429
Equity and reserves attributable to shareholders of ProCook Group plc
Share capital - - - - - - -
Share option reserve - - - - - - -
Share premium - - - - - - -
Retained earnings 10,741 (400) (27) (174) 289 - 10,429
Total equity and reserves 10,741 (400) (26) (174) 289 - 10,429
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