REG - ProCook Group PLC - Interim Results
13/12/2023 07:15
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RNS Number : 5461W ProCook Group PLC 13 December 2023
13 December 2023
ProCook Group plc
Interim results for the 28 weeks ended 15 October 2023
Building a stronger customer-focused business to accelerate future growth
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 FY24 (the 28 weeks ended 15 October 2023).
£m H1 FY24 H1 FY23 YoY
Revenue 26.3 27.4 (3.8%)
Gross Profit 17.6 16.7 +5.1%
Gross margin % 66.7% 61.0% +570bps
Underlying loss before tax(1) (1.7) (2.8) +39.5%
Reported loss before tax (3.2) (3.5) +7.9%
Net debt (3.2) (1.3)
Financial and Strategic Highlights
· Total revenue of £26.3m declined by 3.8% YoY, or 1.2% excluding
the Amazon EU channels which we exited last year
· LFL revenue declined by 4.4% YoY after a volatile first half in
difficult trading conditions and impacted by teething issues following the
launch of our new website
· Held our UK kitchenware market share YoY(2), despite a continued
shift away from online with UK Ecommerce revenue representing 34.7% of total
revenue (H1 FY23: 40.1%)
· Gross profit margins significantly improved YoY to 66.7%
(+570bps) as expected following the unwinding of heightened costs in our stock
file as marine freight costs have returned to pre-pandemic levels
· Underlying LBT of £1.7m improved by +39.5% YoY driven by
stronger gross margins and ongoing cost discipline
· Net debt at the end of the first half was £3.2m (FY23 year end:
£2.8m) with available liquidity of £12.8m
· Delivering for our customers:
o Returned to 4.8 Trustpilot score with over 100,000 5-star reviews received
o New brand campaign, Meta marketing, and referral scheme to raise awareness
and loyalty
o Attracted 290,000 new customers to shop with ProCook for the first time
· Good strategic progress will help us unlock and accelerate future
growth:
o Committed to two new stores (opened shortly after half year) and one
upsize relocation for FY24
o Launched our new website which, following early teething issues is now
performing well
o Launched phase one of small electricals (kettles and toasters), with phase
two launching in spring 2024
o Completed the transition into our new Store Support Centre; delivering
operational efficiencies
o On track to deliver in full our £3m cost improvement programme,
offsetting cost headwinds
Current trading and outlook
In the first eight weeks of the second half, including Black Friday and the
early part of Christmas trading, total revenue was +1.5% YoY, outperforming
the market during this period.
Having solved the majority of the new website teething issues by the beginning
of the Black Friday period, we delivered a robust Black Friday campaign with
revenue growth of 3.5% YoY.
Our retail stores continue to perform well with +4.1% YoY LFL performance and
total revenue growth of 10.7% year on year supported by the opening of
Trafford Centre and Watford stores.
Trading conditions remain challenging and volatile as we experienced in the
first half, and the Board remains cautious about the timing and pace of market
recovery. However, we are confident in our specialist proposition, and we are
making good strategic progress in building a stronger customer-focused
business ready to accelerate as conditions improve, to deliver profitable and
sustainable growth for all stakeholders.
Lee Tappenden, Chief Executive Officer, commented:
"Whilst the consumer macro backdrop remains challenging, we are pleased to
have delivered a robust Black Friday campaign and an improvement in recent
trading, as we enter the important pre-Christmas trading period.
"I am delighted to have joined the business, with its strong foundations as a
specialist retailer with a differentiated model and high-quality products
providing a firm base from which to build brand awareness and expand the
product range and store portfolio.
"Whilst we remain cautious about the timing and pace of market recovery, we
are confident in our proposition and are making good strategic progress in
building a stronger customer-focused business ready to accelerate growth as
trading conditions improve and deliver profitable and sustainable growth for
all stakeholders."
Analyst Presentation:
An interim results presentation for analysts and investors will be made
available on the Group's corporate website at
https://www.procookgroup.co.uk/investors/reports-and-presentations/
(https://www.procookgroup.co.uk/investors/reports-and-presentations/) this
morning from 7.00am.
For further information please contact:
ProCook Group plc investor.relations@procook.co.uk
Lee Tappenden, Chief Executive Officer
Dan Walden, Chief Financial Officer
MHP Group (Financial PR Adviser) procook@mhpgroup.com
Katie Tel: +44 (0)7711 191 518
Hunt
Catherine Chapman
Next scheduled event:
ProCook expects to release its third quarter trading update in mid-January
2024.
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 through its 60 own-brand retail stores,
conveniently located across the UK.
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 Store Support Centre in Gloucester.
ProCook has been listed on the London Stock Exchange since November 2021
(PROC.L).
Quarterly revenue performance:
FY24 (52 weeks ending 31 March 2024)
Q1 Q2 H1 Q3 Q4 H2 FY
Revenue £10.7m £15.7m £26.3m
Revenue growth % (6.7%) (1.8%) (3.8%)
LFL revenue(3) £10.2m £15.0m £25.3m
LFL growth % (7.9%) (1.8%) (4.4%)
FY23 (52 weeks ending 2 April 2023)
Q1 Q2 H1 Q3 Q4 H2 FY
Revenue £11.4m £15.9m £27.4m £22.4m £12.6m £35.0m £62.3m
Revenue growth % (22.6%) (7.6%) (14.5%) (2.5%) (9.7%) (5.2%) (9.9%)
Yo3Y revenue growth % 35.5% 54.0% 45.6% 78.8% 64.6% 73.4% 60.0%
LFL revenue(4) £10.0m £13.6m £23.6m £19.7m £10.8m £30.5m £54.1m
LFL growth % (17.1%) (15.6%) (16.2%) (3.8%) (9.4%) (5.9%) (10.7%)
Yo3Y LFL growth % 133.3% 110.4% 119.7% 108.7% 103.2% 106.7% 112.2%
Notes
(1) Underlying loss before tax is presented before non-underlying items of
£1.5m in H1 FY24 (H1 FY23: £0.7m) in relation to IPO-related share-based
awards and transition and dual running costs in respect of the Group's new
Store Support Centre
(2) UK Kitchenware market growth (excluding ProCook) calculated using weekly
GfK data and management estimates
(3) FY24 LFL (Like For Like) revenue reflects:
- Ecommerce LFL - ProCook direct website channel only.
- Retail LFL - Continuing Retail stores which were trading
for at least one full financial year prior to the 2 April 2023, inclusive of
any stores which may have moved location or increased/ decreased footprint
within a given retail centre.
(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
CEO's Review
Introduction
I am pleased to report on our progress and performance during the first half
of FY24 having joined ProCook 12 weeks ago. In this brief period, I have spent
time listening and learning about our business in our stores with our
colleagues and customers, with many supplier partners, and with every team in
our Store Support Centre ("SSC"). My first impressions of ProCook reinforce
those that I had formed before I joined.
We have a real strength and competitive point of difference in our business
model through the direct-sourcing of our ProCook-brand products and by selling
directly to customers through our own website and retail stores, owning every
point of the "source to sale" journey.
As a specialist retailer, the breadth and quality of our product range is
paramount to positioning our authority across our offer. We cater for
customers at different price points and by cutting out the middleman, we offer
everyday great value pricing across our range. Our passionate colleagues who
deliver outstanding levels of customer service reinforce our specialist
credentials and are key to building loyalty amongst our customer base.
We have low brand awareness, with less than 10% of the UK population
spontaneously recognising us as a kitchenware retailer, and only around 30%
when prompted. Our retail stores coverage is only just over 30% of the UK
population. However, when customers do find us, loyalty is strong with almost
40% of our sales being generated by just 10% of our active customer base.
I am pleased that ProCook has taken a long term view with regards to decision
making, which means that the foundations of the business are strong, have been
well developed, and are ready for scale.
Holding market share in challenging trading conditions
Trading conditions remain challenging. Consumer spending is squeezed, and
customers are delaying big ticket purchases which has impacted sales of our
larger cookware and knife sets. Our UK revenue, excluding the Amazon EU
marketplaces which we exited last year, was down 1.2% year on year. We have
held our UK market share position despite the ongoing channel shift back to
retail (where we remain under-represented in the UK) and our authority in
bigger ticket and more discretionary Cookware and Knife sets.
Performance in our retail stores has been pleasing with +2.6% like for like
revenue growth and 7.9% total growth including new stores. Ecommerce sales
have been more challenging. Excluding the impact of our prior year exit of
Amazon EU channels, our like for like Ecommerce sales reduced by -14.6%.
We completed the development and transition to our new website at the end of
August after A/B testing over the summer. With a cleaner and more modern
layout, more inspiration and improved user experience this provides a great
platform for future growth. We endured teething issues in the weeks following
launch which impacted our performance, but I am pleased to see improved
metrics coming through including conversion which is now +15% year on year.
We have delivered a strong recovery in gross margins (+570bps year on year to
66.7%) as expected, benefitting from the unwinding of higher shipping costs
within our stock file and reduced factory gate pricing negotiated with
suppliers.
We have maintained our focus on cost discipline. Entering FY24 with many cost
headwinds including pay and cost inflation, our new SSC, and our new stores,
we have worked hard to offset these with the £3m cost savings plan which we
announced last year and which we are on track to deliver in full.
As a result, our underlying loss before tax during the first half was £1.7m,
which is 39.5% improved year on year, and we finished the first half with net
debt of £3.2m (FY23 year end: £2.8m) and available liquidity of £12.8m.
Further detail on our financial performance in the first half is set out in
the CFO's Report.
Good strategic progress with clear opportunities to accelerate growth
Whilst I was only with ProCook for the last 4 weeks of the first half, I am
pleased with the good strategic progress made by the team, which will help us
unlock and accelerate future growth.
We have continued to develop our marketing capability to attract new customers
to our brand. We launched our latest brand awareness campaign in October
featuring Saturday Kitchen chef Matt Tebbutt and are pleased with the results
so far which have delivered over 30 million impressions in the first few weeks
of the campaign. Brand building is a long term exercise and we have
complemented this with further experimentation on Meta channels which will
drive more immediate conversion. I am excited by the potential to do much more
in this area. Additionally, we have launched a new referral scheme to attract
new customers, using the power of customer advocacy to recommend our products
and services to their friends and family.
We have worked hard to improve our service levels in stores through more
training, and improved rota scheduling which has also improved our efficiency
helping to offset cost pressures. We were particularly pleased to re-earn our
4.8 star Excellent rated Trustpilot score in the first half with over 100,000
5 star reviews received from our customers.
As planned, we have pressed on with retail store expansion. Shortly after the
half year we completed the fit out works and openings of our 2 new stores at
the Trafford Centre Manchester and Atria Watford. We will also be upsizing our
Cheshire Oaks store in Q4. Our retail estate is now at 60 stores and as we
increase our UK coverage further, we will continue to apply rigorous opening
criteria to each new store acquisition.
Our new website is now performing much better, with conversion and traffic now
ahead of last year. Our team has worked hard to improve site performance with
all metrics now in a stronger position. There are still many opportunities
available to improve user experience which our teams will focus on in the
months ahead.
During the first half we launched the first phase of electricals - our new
kettles and toasters ranges. This sub-category alone represents approximately
30% of the £1 billion small kitchen appliance market in the UK, and we are
thrilled to have been awarded best kettle by the Good Housekeeping awards and
joint-best two slice toaster; a testament to the great work done by our
product teams to design and source these ranges. We have now completed designs
and raised production orders for our phase 2 of electricals which includes
mixers, blenders, choppers, processors, slow cookers and our first airfryer
ready for launch in spring 2024. We have also added coloured cookware ranges,
new knife ranges, and new tableware with a new product refresh of 7.5% of our
range in the first half and more planned for the second half.
We completed the transition to our new SSC in the first quarter, with the
final elements of our Ecommerce logistics operations moving over in May. We
have eliminated the transport and dual handling costs associated with
operating the two previous distribution centres and we are making good
progress in reducing pick and pack costs which are 12% lower year on year in
H1.
Priorities for growth
I am working with our leadership team to update our strategic plan, and I will
share further detail on that when we release our FY24 annual results. In the
meantime, our priorities are clear.
With a very strong product focus already established in the business, we will
focus even more on our customers. This will ensure we have the right range,
quality, pricing, marketing and service levels combining to create a stand-out
proposition.
We will revisit our value positioning against our competitive set. We are
committed to providing customers with value through both better quality and
our direct-sourcing model supporting lower pricing, and, following the return
to normal shipping costs, we will work to improve our everyday low pricing for
customers with support from our suppliers. We have begun detailed category
reviews and already implemented new pricing strategies across parts of our
range with encouraging early results.
We will expand our digital marketing capabilities, shifting reliance away from
Google channels and adding more social media content. Our category is
well-suited to content-led marketing with a large proportion of the population
interested in cooking and dining. This will help us attract new customers to
our brand and raise awareness of our offer to customers who are in the early
consideration stages of the purchase journey.
Our product range is already strong and broad; however, gaps exist that will
enable us to build a fuller offer. In addition to building out our electricals
range, we will add more entry level products to appeal to a broader customer
base (including students and first time renters/ buyers), expand our tableware
and baking offer, and add more seasonal and promotional relevance to our
assortment providing more inspiration to customers. Given the design and
production lead times, this will take time, and so we have begun work on this
already.
With only 60 retail stores in the UK, we have a significant opportunity to
accelerate growth through retail expansion. Our stores offer customers the
chance to test and trial products supported by knowledgeable colleagues who
help customers find the right product to suit their needs and budget. With
only 30% of the UK population served by our stores within reasonable drive
times, we have already begun building our pipeline of new store openings for
FY24 and beyond. Not only will new stores trade effectively, but they will
support greater awareness of our brand and increased sales online.
Now that we have a new website, we will delve deeper into improving user
experience. We have identified a series of priority developments to focus on
which will better support customers in their online journey, making it easier
to find the right products. We are building the expertise in the team to
support this important initiative.
Finally, we will seek to eliminate all unnecessary complexity in our business,
reducing cost where possible, and allowing us to operate a simpler, more
nimble and more profitable business.
The fundamentals of our business are strong, and I am energised by the many
opportunities we have to build a stronger customer-focused business. As market
conditions improve, these initial priorities will help us accelerate growth
and deliver profitable and sustainable growth for our stakeholders.
Lee Tappenden
Chief Executive Officer
12 December 2023
CFO's Review
Trading conditions have remained challenging and volatile throughout the first
half, with customers seeking out greater value and completing more research
before committing to spend especially on discretionary items. Despite this we
have held our market share.
As expected, our gross margins have improved significantly, and combined with
our cost discipline and actions to deliver £3m of cost improvements year on
year in FY24, we have reduced our first half underlying operating loss by 36%
year on year.
We continue to prioritise and invest in the areas which will support our
performance and growth for the long term including new stores, our logistics
operations and our technology, as well as focusing on delivering the excellent
service that we are known for.
The first half typically generates around 40% of full year sales, and with
strong product availability and a robust trading plan in place we are well
prepared for the second half.
Revenue
£m H1 FY24 YoY %
Revenue (3.8%)
26.3
Ecommerce (20.2%)
9.1
Retail +7.9%
17.2
LFL Revenue (4.4%)
25.3
LFL Ecommerce (14.6%)
9.1
LFL Retail +2.6%
16.1
First half revenue of £26.3m was -3.8% year on year, or -1.2% excluding the
exit from Amazon EU during the last financial year. On a like for like basis,
first half revenue was -4.4% year on year, an improving trend compared to
prior year (H1: -16.2%, H2: -5.9%).
Ecommerce revenue of £9.1m was -14.6% year on year on a LFL basis. This
reflects reduced promotional activity year on year in the first quarter, and
teething issues following the launch of our newly designed website in late
August which impacted traffic and conversion in the second quarter, and which
has subsequently been largely resolved.
Retail revenue of £17.2m was +7.9% year on year, with LFL revenue growth of
+2.6% outperforming the market, benefitting from strong product availability
and launches of new products, accompanied by our excellent customer service.
Gross profit
Gross profit increased +5.1% year on year to £17.6m despite the drop in sales
with gross profit margins increasing by +570bps as expected. The key drivers
of margin growth have been reduced shipping costs (+550bps YoY), improved
pricing and reduced promotional costs (+90bps), partly offset by adverse
foreign exchange impacts (-100bps).
Operating expenses and other income
Underlying operating expenses net of other income
We have maintained a disciplined approach to costs, holding total underlying
operating expenses net of other income flat year on year at £19.1m despite
significant cost pressures. We are on track to deliver in full the £3m cost
improvement plan we set out this time last year which has helped offset these
cost pressures in the first half. The key drivers of change in first half
operating expenses year on year include:
· New store costs: +£0.5m
· Payroll cost inflation: +£0.5m
· New Store Support Centre ("SSC") occupancy costs: +£0.4m
· Capability investment: +£0.4m
· Retail hours structures and scheduling improvements: -£0.4m
· Logistics cost savings (volume): -£0.7m
· Logistics cost savings (efficiency): -£0.2m
· Exit of Amazon EU: -£0.5m
Non-underlying operating expenses
It is the Group's policy to disclose separately such items that relate to
non-recurring events and are material in nature, and incurred outside of the
normal business operations, in order to provide a consistent and comparable
view of the underlying performance of the Group. Non-underlying operating
expenses in H1 FY24 were £1.4m (H1 FY23: £0.7m).
Consistent with prior periods, expenses in respect of employee share-based
awards which relate to the IPO in FY22, which itself is non-recurring, have
been presented as non-underlying costs. These expenses amounted to £0.7m in
H1 FY24 (H1 FY23: £0.6m). These expenses are expected to continue through
relevant vesting periods to FY25, albeit these costs reduce over time.
During the first half of FY24, we completed the final elements of transition
into our new SSC. Operating expenses associated with the costs of
transitioning into the new site and the dual occupancy of the new and previous
sites were £0.8m in H1 FY24 (H1 FY23: £0.1m) and have been presented as
non-underlying items as these costs are non-recurring, dual-running and
transition-related.
At the FY23 year end, the Group performed impairment assessments in respect of
all Retail stores which had indicators of impairment as well as the Group's
two pre-existing distribution/ head office sites. The impairment provision
will be reviewed at least annually where impairment indicators arise.
Shortly after the first half the Group assigned the lease for one of its two
pre-existing distribution centres to a third party. The marketing and search
for a new occupier for the second site remains underway.
Operating profit / (loss)
Total underlying operating loss for the period improved by 36.3% year on year
to £1.5m (H1 FY23: £2.4m) driven by the gross profit and cost improvements
delivered in the first half. Ecommerce operating margins increased to 20.5%
(H1 FY23: 10.8%) whilst Retail operating margins increased to 13.6% (H1 FY23:
7.3%).
£m H1 FY24 H1 FY23
Underlying operating (loss) / profit
Ecommerce 1.9 1.2
Retail 2.3 1.2
Central costs (5.7) (4.8)
Total (1.5) (2.4)
As a % of revenue
Ecommerce 20.5% 10.8%
Retail 13.6% 7.3%
Central costs (21.8%) (17.5%)
Total (5.8%) (8.7%)
Total reported operating loss in the first half of FY24 of £3.0m, after
£1.4m of non-underlying operating expense items, was +2.8% improved year on
year.
Profit and earnings per share
Underlying losses before tax improved by 39.5% year on year to £1.7m in the
first half of FY24 (H1 FY23: £2.8m).
During the first half there was a net expense of £0.2m (H1 FY23: £0.4m net
expense) in respect of financial items. Financial items included interest
expenses on lease liabilities and borrowings of £0.7m (H1 FY23: £0.4m)
reflecting increased interest rates year on year and a higher average net debt
position. In H1 FY24, interest expenses were partly offset by unrealised gains
of £0.5m in respect of foreign exchange (H1 FY23: £17k unrealised losses).
After non-underlying items, the loss before tax was £3.2m (H1 FY23: £3.5m).
Reported loss after tax was £2.4m (H1 FY23: £2.8m).
The effective tax rate based on underlying loss before tax was 25.0% (H1 FY23:
18.5%).
Earnings per Share
Underlying basic earnings per share for the first half improved to -1.18 pence
(H1 FY23: -2.12 pence) and underlying diluted earnings per share increased to
-1.18 pence (H1 FY23: -2.12 pence).
Reported basic earnings per share for the first half were -2.22 pence (H1
FY23: -2.61 pence) and reported diluted earnings per share were -2.22 pence
(H1 FY23: -2.61 pence).
Cash generation and net cash / debt
We have carefully managed our cash position during the first half, with net
debt increasing by £0.4m since the FY23 year end despite the typical seasonal
impacts of lower cash generation during the first half and the requirement to
build inventory ahead of peak trading in Q3.
Free cash outflow for the first half was £0.3m (H1 FY23: inflow of £0.4m,
supported by significant inventory reduction) with net debt at the period end
of £3.2m (FY23 year end: £2.8m; H1 FY23: £1.3m) and available liquidity of
£12.8m.
£m H1 FY24 H1 FY23
Reported loss before tax (3.2) (3.5)
Depreciation, amortisation, impairment and profit/loss on disposal 2.6 2.5
Share based payments 0.7 0.6
Finance expense 0.8 0.4
Unrealised FX gains (0.5) (0.2)
Net working capital 2.6 3.8
Net operating cash flow 2.9 3.8
Net capital expenditure (1.0) (1.1)
Interest (0.8) (0.4)
Payment of lease liabilities (1.4) (1.8)
Free Cash Flow (0.3) 0.4
Movement in borrowings (0.2) (2.3)
Dividends paid - (0.3)
Movement in cash and cash equivalents (0.5) (2.2)
Cash and Cash equivalents 1.4 2.1
Borrowings (4.6) (3.4)
Net (Debt)/ Cash (3.2) (1.3)
The lower reported loss before tax in the first half includes £1.5m of
non-underlying items which resulted in £0.7m of cash outflows (H1 FY23:
£0.7m of non-underlying items of which £0.1m were cash outflows).
A reduction in net working capital resulted in a cash inflow of £2.6m in the
first half (H1 FY23: £3.8m) driven by continued planned reduction in
inventory on hand as a result of improved discipline around product intake
prior to the peak trading period and through improved payment terms negotiated
with suppliers. Inventory on hand at the half year was £8.5m, 16.8% lower
year on year and down from £9.5m at the FY23 year end. Total inventory at the
half year was £11.9m (H1 FY23: £12.8m).
Net capital expenditure of £1.0m in the first half related to the final
elements of the development of the new SSC, as well as continued investment in
retail expansion.
Banking arrangements
The Group has access to 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 a one-year extension
option available to extend the term to April 2026. Additionally, the RCF
agreement provides an accordion option, subject to the lender's approval, to
extend the facility by a further £5m.
During the first half, the Group successfully agreed an amendment to the RCF
terms in respect of the fixed charge cover covenant, in order to provide
additional headroom against that covenant at the H1 FY24 test date given that
the Group's EBITDA performance declined during the prior 12 months and would
have breached the existing covenant test at that date. The revised test
required EBITDAR to be no less than 1.25x fixed charges for that test date and
reverts to 1.40x thereafter. The leverage coverage remains unchanged with net
debt to be no greater than 2.0x EBITDA. Both covenants are tested quarterly
and are calculated on a last twelve month rolling, pre-IFRS 16 basis.
The Group's ability to meet these covenants has been stress tested as part of
going concern considerations, which is described in more detail below.
The Group has retained its access to an existing £6.0m trade finance
facility, which is due to expire in September 2024, although is expected to be
renewed at that date. There are no covenants associated with this facility.
The terms of this facility are consistent with normal practice.
Capital allocation and dividend policy
In normal circumstances, the Board currently believes that, to ensure
operating flexibility through the business cycle, it must maintain a minimum
unrestricted cash / debt headroom which the Board reviews on an annual basis,
or more frequently as required. Maintaining this headroom provides a level of
flexibility sufficient to fund the working capital and investment needs of the
Group (as well as set 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 Board anticipates, under normal circumstances, that it will
consider returning surplus cash to shareholders if average cash / debt
headroom over a period consistently exceeds the minimum headroom target,
subject to known and anticipated investment plans at the time.
The full capital and dividend policy is available on the Group's website at
www.procookgroup.co.uk.
Dividends
Due to the ongoing challenging consumer environment and the uncertainty that
it creates around trading performance, and therefore taking a cautious and
responsible decision to preserve cash within the business during these times,
the Board have not recommended any interim dividend in respect of FY24.
Going concern
As at 15 October 2023, the date of the interim financial statements, the Group
had net debt of £3.2m and available liquidity of £12.8m including a £6.0m
uncommitted trade finance facility.
Trading in the first eight weeks of the second half of the financial year has
been in line with the Board's expectations. As a result of the seasonal
profile of cash generation, net debt as at 10 December 2023, has reduced to
£0.8m (11 December 2022: £0.4m) and available liquidity has increased to
£15.2m (11 December 2022: £15.6m).
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 risk - 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 FY24 and projections for FY25. These forecasts assume
a recovery from the level of revenue decline seen in the first half of the
financial year, based on recent run rate trading performance and actions taken
to drive improved performance including recent new store openings. Further
revenue growth in FY25 is expected. 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 4% sales underperformance compared to the Base Case in
the remainder of FY24, and a 6% lower sales performance throughout FY25
compared to the Base Case.
Under this scenario, and before mitigating actions, the Group would remain
comfortably 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
third quarter test date of FY24 only.
Severe downside scenario
This scenario reflects a further pronounced deterioration in trading
conditions during the remainder of FY24 such that sales performance reduces by
10% compared to the Base Case in the remainder of the current financial year,
and by 10% in FY25. Additionally, given the uncertainty and volatility around
foreign exchange rates, this scenario reflects a reduction in anticipated
gross profit margins by 100bps in both the remainder of FY24 and throughout
FY25 compared to the base case.
Under this severe scenario, and before mitigation actions, the Group would
remain comfortably within its £10m committed borrowing facilities throughout
the next 12 months. However, the Group would breach the leverage covenant at
the quarterly test dates of Q1 FY25 and would breach the Fixed Charge covenant
at the quarterly test dates of Q3 FY24, Q1 FY25 and Q2 FY25 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 or delay 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 renegotiate covenant waivers or seek 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 or other new banking terms will be granted, the Directors therefore
acknowledge a material uncertainty surrounding the Group's going concern
basis.
Principal risks and uncertainties
The Board continually 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:
Risk Impact
Strategy and business change Failure to identify and successfully execute appropriate strategies to develop
and grow the brand over the medium to long term could be affected by a range
of factors including changes in competition or products, consumer behaviours
and trends, inadequate change management or leadership. This could slow or
limit the growth of the business, distract from and / or damage the overall
customer proposition, incur additional cost or serve to demotivate colleagues
if not led effectively.
Competition, Failure to adapt to changing consumer needs given external macro factors, and
market and to maintain a compelling customer offer compared to competitors could limit or
macroeconomic reduce profitability and 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.
Brand and customer Reputational damage leading to loss of consumer confidence in ProCook products
or services, which could be caused by a variety of factors including customer
data loss, product quality, health and safety, level of direct marketing
activity, ethical or sustainability concerns, poor customer service or,
regulatory non-compliance.
Climate change Any failure to implement our ESG ambitions within acceptable timescales and
deliver on stakeholder expectations to reduce the environmental impact of our
business and progress towards our net zero targets. These include actions
linked to our ESG strategy and managing the potential consequences of climate
change on our business. Failure to meet the expectations of our customers,
colleagues, investors and other stakeholders, may impact our brand reputation
and future trading performance.
Supply chain Failure to source products effectively and efficiently, potentially relating
to geopolitics surrounding Far East manufacturing reliance, or to ensure
inventory is maintained in the right volumes at the right locations could
adversely impact our short and medium term operational and financial
performance.
Technology platforms, data loss and cyber security Failure to develop and maintain appropriate technology to support operations,
or the loss of key platforms or data due to cyber-attacks or other failures
without an adequate response, could lead to reputational damage, fines or
higher costs, or a loss of stakeholder and customer confidence in our Brand.
Marketing effectiveness Any failure to attract new customers and retain existing customers in a
cost-effective and engaging way could impact short term performance and medium
strategic growth ambitions.
People and culture Any failure to attract, retain and develop the right talent, skills and
capabilities or to successfully protect and develop our culture could impact
operational activities including customer service and our longer-term
strategic objectives.
Finance and Any failure to effectively manage our financial affairs and ensure an
treasury appropriate financial position and sufficient liquidity for future growth, or
any failure in financial planning, financial reporting, compliance with tax
legislation, or the maintenance of a robust financial control environment,
could impact our ability to deliver our strategic objectives, as well as have
an adverse impact on business viability.
Regulatory and Any failure to comply with legal and regulatory obligations, or our wider
compliance corporate responsibility could result in financial or legal exposures or
damage our reputation with our Stakeholders as a responsible brand.
Dan Walden
Chief Financial Officer
12 December 2023
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
remainder 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 the Company are listed in the Company's Annual Report and
Accounts for the year ended 2 April 2023. 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
12 December 2023
Consolidated Income Statement (Unaudited)
For the 28 weeks to 15 October 2023
28 weeks ended 15 October 2023 28 weeks ended 16 October 2022
£'000s Note Underlying Non-underlying(1) Reported Underlying Non-underlying(1) Reported
Revenue 1 26,330 - 26,330 27,382 - 27,382
Cost of sales (8,775) - (8,775) (10,680) - (10,680)
Gross profit 17,555 - 17,555 16,702 - 16,702
Operating expenses (19,098) (1,435) (20,533) (19,113) (655) (19,768)
Other income 23 - 23 25 - 25
Operating Loss (1,520) (1,435) (2,955) (2,386) (655) (3,041)
Finance expense (708) (77) (785) (430) (14) (444)
Other gains/(losses) 513 - 513 (17) - (17)
Loss before tax (1,715) (1,512) (3,227) (2,833) (669) (3,502)
Tax credit 4 428 378 806 524 132 656
Loss for the period (1,287) (1,134) (2,421) (2,309) (537) (2,846)
Total comprehensive loss (1,287) (1,134) (2,421) (2,309) (537) (2,846)
Earnings per ordinary share - basic (1.18)p (2.22)p (2.12)p (2.61)p
Earnings per ordinary share - diluted (1.18)p (2.22)p (2.12)p (2.61)p
52 weeks ended 2 April 2023
£'000s Note Underlying Non-underlying(1) Reported
Revenue 1 62,340 - 62,340
Cost of sales (23,994) - (23,994)
Gross profit 38,346 - 38,346
Operating expenses (37,645) (6,159) (43,804)
Other income 51 - 51
Operating profit/(loss) 752 (6,159) (5,407)
Finance expense (861) (204) (1,065)
Other losses (55) - (55)
Loss before tax (164) (6,363) (6,527)
Tax credit 4 29 1,559 1,588
Loss for the period (135) (4,804) (4,939)
Total comprehensive loss (135) (4,804) (4,939)
Earnings per ordinary share - basic (0.12)p (4.53)p
Earnings per ordinary share - diluted (0.12)p (4.53)p
(1) See note 2 for further information
Consolidated Statement of Financial Position (Unaudited)
As at 15 October 2023
£'000s Note As at 15 October 2023 As at 16 October 2022 As at 2 April 2023
Assets
Non-current assets
Intangible assets 164 313 235
Property, plant, and equipment 8,169 6,551 7,781
Right-of-use assets 7 25,493 31,846 25,450
Deferred tax asset 2,520 1,112 2,520
Total non-current assets 36,346 39,822 35,986
Current assets
Inventories 8 11,885 12,761 11,515
Trade and other receivables 3,409 3,148 2,240
Current tax asset 936 965 611
Cash and cash equivalents 9 1,446 2,116 1,962
Total current assets 17,676 18,990 16,328
Total assets 54,022 58,812 52,314
Liabilities
Current liabilities
Trade and other payables 10,722 9,160 7,276
Lease liabilities 7 3,772 3,287 2,836
Provisions 206 141 200
Borrowings 10 4,624 3,390 4,716
Total current liabilities 19,324 15,978 15,028
Non-current liabilities
Trade and other payables 357 896 954
Lease liabilities 7 26,267 30,497 26,430
Provisions 552 530 612
Total non-current liabilities 27,176 31,923 27,996
Total liabilities 46,500 47,901 43,024
Net Assets 7,522 10,911 9,290
Equity and reserves attributable to Shareholders of ProCook Group plc
Share capital 1,090 1,090 1,090
Ordinary Shares to be issued 7,544 6,454 6,891
Share Premium 1 1 1
Retained earnings (1,113) 3,366 1,308
Total equity and reserves 7,522 10,911 9,290
The interim financial statements were approved by the Board of Directors on 13
December 2023 and were signed on its behalf by:
Dan Walden
Chief Financial Officer
12 December 2023
Consolidated Statement of cash flows (Unaudited)
For the 28 weeks to 15 October 2023
28 weeks ended 28 weeks ended 52 weeks ended
£'000s Note 15 October 2023 16 October 2022 2 April 2023
Cash flows from operating activities
Loss before tax (3,227) (3,502) (6,527)
Adjustments for:
Depreciation of property, plant, and equipment 489 521 967
Impairment 2 - - 4,405
Amortisation of intangible assets 70 50 128
Loss on disposal of property, plant, and equipment - 38 37
Profit on termination of leases (5) (24) (75)
Amortisation of right-of-use assets 7 2,053 1,916 4,034
Unrealised FX (gains)/losses (549) (150) 518
Share Based Payments 653 649 1,090
Finance expense 785 444 1,065
(Increase)/decrease in inventories 8 (370) 3,998 5,244
Increase in trade and other receivables (664) (1,173) (413)
Increase/(decrease) in trade and other payables 3,700 1,016 (1,233)
(Decrease)/increase in provisions (54) - 195
Income taxes credited/(paid) 4 - - (97)
Net cash flows from operating activities 2,881 3,783 9,338
Investing activities
Purchase of property, plant, and equipment (1,060) (1,309) (4,928)
Purchase of intangible assets - - -
Lease inception costs (11) - (460)
Lease incentives received 10 222 204
Net cash (used in) investing activities (1,061) (1,087) (5,184)
Financing activities
Interest paid on borrowings (246) (139) (294)
Interest paid on lease liabilities 7 (539) (305) (771)
Proceeds from borrowings 10 15,785 11,033 18,689
Repayment of borrowings 10 (15,965) (13,322) (19,701)
Lease principle payments 7 (1,371) (1,827) (3,625)
Dividends paid 5 - (307) (272)
Net cash (used in) financing activities (2,374) (4,867) (5,974)
Net movement in cash and cash equivalents (516) (2,171) (1,820)
Cash and cash equivalents at beginning of the period 1,962 4,287 3,782
Cash and cash equivalents at end of period 9 1,446 2,116 1,962
Consolidated statement of changes in equity (Unaudited)
For the 28 weeks to 15 October 2023
£'000 Note Share capital Share Premium Share Option Reserve Retained earnings Total equity
As at 4 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 5 - - - (307) (307)
As at 16 October 2022 1,090 1 6,454 3,366 10,911
Total comprehensive loss for the period - - - (2,093) (2,093)
Employee Share Based Payment Awards - - 437 - 437
Ordinary dividends 5 - - - 35 35
As at 2 April 2023 1,090 1 6,891 1,308 9,290
Total comprehensive loss for the period - - - (2,421) (2,421)
Employee Share Based Payment Awards - - 653 - 653
As at 15 October 2023 1,090 1 7,544 (1,113) 7,522
Consolidated Financial Statements Accounting Policies (Unaudited)
For the 28 weeks to 15 October 2023
General Information
The Group interim 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, 10 St Modwen Park, Gloucester,
GL10 3EZ.
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 15 October
2023 have been prepared in accordance with IAS 34 "Interim financial
information". 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.
The condensed interim financial statements should be read in conjunction with
the annual financial statements for the year ended 2 April 2023, which were
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006, UK-adopted IFRS as issued by
the International Accounting Standards Board.
Statutory financial statements for the period ended 2 April 2023 were approved
by the Board of Directors on 28 June 2023 and delivered to the Registrar of
Companies. The auditors have reported on those financial statements; their
reports were (i) unqualified, (ii) contained a reference to the material
uncertainty in respect of going concern to which the auditor drew attention by
way of emphasis without modifying their report, (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
The presentation of the condensed financial statements requires 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.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial statements.
Basis of consolidation
Group companies included in these consolidated interim financial statements
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.
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 15 October 2023, the date of the interim financial statements, the Group
had net debt of £3.2m and available liquidity of £12.8m including a £6.0m
uncommitted trade finance facility.
Trading in the first eight weeks of the second half of the financial year has
been in line with the Board's expectations. As a result of the seasonal
profile of cash generation, net debt as at 10 December 2023, has reduced to
£0.8m (11 December 2022: £0.4m) and available liquidity has increased to
£15.2m (11 December 2022: £15.6m).
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 risk - 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 FY24 and projections for FY25. These forecasts assume
a recovery from the level of revenue decline seen in the first half of the
financial year, based on recent run rate trading performance and actions taken
to drive improved performance including recent new store openings. Further
revenue growth in FY25 is expected. 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 4% sales underperformance compared to the Base Case in
the remainder of FY24, and a 6% lower sales performance throughout FY25
compared to the Base Case.
Under this scenario, and before mitigating actions, the Group would remain
comfortably 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
third quarter test date of FY24 only.
Severe downside scenario
This scenario reflects a further pronounced deterioration in trading
conditions during the remainder of FY24 such that sales performance reduces by
10% compared to the Base Case in the remainder of the current financial year,
and by 10% in FY25. Additionally, given the uncertainty and volatility around
foreign exchange rates, this scenario reflects a reduction in anticipated
gross profit margins by 100bps in both the remainder of FY24 and throughout
FY25 compared to the base case.
Under this severe scenario, and before mitigation actions, the Group would
remain comfortably within its £10m committed borrowing facilities throughout
the next 12 months. However, the Group would breach the leverage covenant at
the quarterly test dates of Q1 FY25 and would breach the Fixed Charge covenant
at the quarterly test dates of Q3 FY24, Q1 FY25 and Q2 FY25 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 or delay 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 renegotiate covenant waivers or seek 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 or other new banking terms will be granted, the Directors therefore
acknowledge a material uncertainty surrounding the Group's going concern
basis.
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 2 April 2023, as described in those financial statements.
Notes to the Consolidated Financial Statements
For the 28 weeks to 15 October 2023
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.
All of the Group's operations are carried out in the UK during H1 FY24,
following the cessation of the Group's EU operations during FY23. All revenue
is from external customers.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 15 October 2023 16 October 2022 2 April 2023
United Kingdom 26,330 26,638 61,550
European Union - 744 790
Total revenue 26,330 27,382 62,340
2. Non-underlying items
Consistent with prior periods, expenses in respect of employee share-based
awards which relate to the IPO event in FY22, which itself is non-recurring,
have been presented as non-underlying costs. These expenses are expected to
continue through relevant vesting periods to FY25, albeit these costs reduce
over time.
During the first half of FY24, the Group completed the final elements of
consolidation of its head office and warehouse operations into its new Store
Support Centre ("SSC"). Operating and finance expenses associated with the
costs of transitioning into the new site and the dual occupancy of the new or
previous sites of £0.9m in H1 FY24 (H1 FY23: £0.1m) have been presented as
non-underlying costs as these items are non-recurring, dual-running and
transition-related.
At the FY23 year end, the Group performed impairment assessments in respect of
all Retail stores which had indicators of impairment as well as the Group's
two pre-existing distribution/ head office sites. The impairment provision
will be reviewed at least annually where impairment indicators arise.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 15 October 2023 16 October 2022 2 April 2023
SSC transition and dual running costs 851 90 749
Share based payments 661 579 1,209
Impairment expense - - 4,405
Total 1,512 669 6,363
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 15 October 2023, the Group had two
operating segments, being Ecommerce and Retail. Central costs are reported
separately to the Board. Whilst central costs are not considered to be an
operating segment, it has been included below to aid reconciliation with
operating profit as presented in the Consolidated Income Statement.
28 weeks ended 28 weeks ended 52 weeks ended
£'000 15 October 2023 16 October 2022 2 April 2023
Revenue
Ecommerce 9,124 11,431 25,653
Retail 17,206 15,951 36,687
Total revenue 26,330 27,382 62,340
Operating profit/ (loss)
Ecommerce 1,870 1,238 4,588
Retail 2,347 1,167 5,319
Central costs (5,737) (4,791) (9,155)
Non-underlying costs (1,435) (655) (6,159)
Operating loss (2,955) (3,041) (5,407)
Finance costs (708) (430) (861)
Other gains/(losses) 513 (17) (55)
Non-underlying finance costs(1) (77) (14) (204)
Loss before tax (3,227) (3,502) (6,527)
(1)Non-underlying finance costs are the interest costs on the lease
liabilities for the disused warehouses.
Substantially all of the assets of the Group are located in the UK.
4. Tax expense
The underlying effective tax rate for the 28 weeks ending 15 October 2023 is
25.0% (28 weeks ended 16 October 2022: 18.7%; year ended 2 April 2023: 17.6%).
The standard rate of UK corporate income tax was 25% for H1 FY24 and 19% for
all other periods presented.
5. Dividends
Dividends paid and declared during the periods presented are as follows:
28 weeks ended Dividend per share 52 weeks ended Dividend per share
£'000 15 October 2023 (pence) 2 April 2023 (pence)
Final dividend for the year ended 3 April 2022 - - 272 0.9 pence
The FY22 final dividend of £1.0m was declared representing 0.9 pence per
share, however £0.7m of this dividend was waived by certain shareholders.
This final dividend was paid to the shareholders on the register at close of
business on 2 September 2022.
No final dividend was declared in respect of the period ended 2 April 2023 and
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
15 October 2023 16 October 2022 2 April 2023
Weighted average number of shares 108,956,624 108,956,624 108,956,624
Impact of share options 11,897,040 7,796,576 9,126,940
Number of shares for diluted earnings per share 120,853,664 116,753,200 118,083,564
28 weeks ended 28 weeks ended 52 weeks ended
15 October 2023 16 October 2022 2 April 2023
£'000 Underlying(1) Reported Underlying Reported Underlying Reported
Loss for the period (1,287) (2,421) (2,309) (2,846) (135) (4,939)
Earnings per ordinary share - basic (1.18)p (2.22)p (2.12)p (2.61)p (0.12)p (4.53)p
Earnings per ordinary share - diluted(2) (1.18)p (2.22)p (2.12)p (2.61)p (0.12)p (4.53)p
(1)Underlying earnings per ordinary share is a non-IFRS measure.
(2) H1 FY23 diluted EPS corrected from H1 FY23 interims disclosure.
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 15 October As at 16 October As at 2 April
2023 2022 2023
Number of active leases 72 75 71
Right of use assets
£'000 Leasehold Property Motor Vehicles Plant and Equipment Total
Cost
At 2 April 2023 36,484 182 39 36,705
Additions 2,044 - 53 2,097
Remeasurement(1) (1) - - (1)
At 15 October 2023 38,527 182 92 38,801
Accumulated amortisation and impairments
At 2 April 2023 11,149 97 9 11,255
Charge for the period 2,015 29 9 2,053
At 15 October 2023 13,164 126 18 13,308
Net Book Value
At 2 April 2023 25,335 85 30 25,450
At 15 October 2023 25,363 56 74 25,493
Lease liabilities
£'000 Leasehold Property Motor Vehicles Plant and Equipment Total
At 2 April 2023 29,161 76 29 29,266
Additions 2,044 - 53 2,097
Remeasurement(1) 54 - - 54
Interest expense 536 1 1 538
Lease payments (1,872) (26) (12) (1,910)
Disposals (5) - - (5)
At 15 October 2023 29,918 51 71 30,040
(1) Remeasurements have arisen where store lease rental terms and/ or lease
expiry dates have been amended.
8. Inventories
As at 15 October As at 16 October As at 2 April
£'000 2023 2022 2023
Finished goods and goods for resale 11,885 12,761 11,515
Total 11,885 12,761 11,515
The cost of inventories recognised as an expense in the 28 weeks ending 15
October 2023 amounted to £8.8m (28 weeks ending 16 October 2022: £10.7m).
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 15 October As at 16 October As at 2 April
£'000 2023 2022 2023
Cash at bank available on demand 472 1,426 1,180
Cash in transit 974 690 782
Total 1,446 2,116 1,962
10. Borrowings
As at 15 October As at 16 October As at 2 April
£'000 2023 2022 2023
Current
Bank loans 4,624 3,390 4,716
Total borrowings 4,624 3,390 4,716
11. Derivatives
The Group's local currency is pounds sterling however but due to purchases of
goods and services in foreign currencies the Group seeks to reduce foreign
exchange risk by entering into forward contracts and other derivatives. At 15
October 2023, the outstanding contracts all mature within 17 months of the
period end, with committed purchases of $19.8m (2 April 2023: $21.5m).
The contracts are measured at their fair value, which is determined using
valuation techniques that utilise observable inputs. 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 15 October As at 16 October As at 2 April
£'000 2023 2022 2023
Derivatives 505 298 -
Total 505 298 -
The fair value of derivative financial liabilities, included within Trade and
other payables, are as follows:
As at 15 October As at 16 October As at 2 April
£'000 2023 2022 2023
Derivatives - - 369
Total - - 369
12. Financial Risk Management
Financial risk management
The Group is exposed through its operation to the following financial risks:
credit risk, interest rate risk, foreign exchange risk and liquidity risk.
Risk management is carried out by the Directors of the Group. The Group uses
financial instruments to provide flexibility regarding its working capital
requirements and to enable it to manage specific financial risks to which it
is exposed.
The Group finances its operations through a mixture of debt finance, cash and
liquid resources and various items such as trade debtors and trade payables
which arise directly from the Business's operations.
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.
The receivables' age analysis is evaluated on a regular basis for potential
doubtful debts, considering historic, current, and forward-looking
information. No impairments to trade receivables have been made to date.
Further disclosures regarding trade and other receivables are provided within
the notes to financial statements.
Credit risk also arises on cash and cash equivalents and deposits with banks
and financial institutions. For banks and financial institutions, only
independently rated parties with minimum rating "B+" are accepted.
Currently all financial institutions whereby the Group holds significant
levels of cash are rated A+ to A-.
Interest rate risk
As at 15 October 2023 the Group's drawn borrowings are through its trade
finance facility with a floating interest rate linked to the United States
Federal funds rate and its revolving credit facility with a floating interest
rate linked to the Bank of England base rate. Both are 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.
The Group does not currently use any form of derivatives to manage interest
rate volatility or future rate increases, however it does seek to minimise
interest costs through careful management of its use of facilities.
Foreign exchange risk
Foreign exchange risk arises when the Group enters 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 makes purchases of goods and services from overseas in foreign
currencies and uses additional means to cover its exposure to the foreign
exchange movement. The Group uses various financial derivatives such as
forward exchange contracts, to help mitigate movements 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 to support its working
capital and investment requirements. Management reviews cash flow forecasts on
a regular basis to determine whether the Group has sufficient cash available
to support its operational and investment activities.
13. Related Parties
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Transactions with Quella Bicycle Limited, a related party by virtue of one of
the Group's Directors during the period (Daniel O'Neill) holding a financial
interest, have previously related to the renting of warehouse space from
ProCook Limited. Quella vacated the premises in March 2023, therefore no
charges were made in the period H1 FY24 (2 April 2023: £7k). The amount
receivable at 16 October 2023 was £9k.
Transactions with Life's a Beach a related party by virtue of one of the
Group's Directors during the period (Daniel O'Neill) being a trustee, relate
to charitable donations made on ProCook sales and other associated
transactions. During the period, ProCook sales generated £17k of donations
payable to Life's a Beach (28 weeks ending 16 October 2022: £6k). During the
period ending 15 October 2023, ProCook made no payments to Life's a Beach (28
weeks ending 16 October 2022: £7k). The amount payable at 15 October 2023 was
£23k (16 October 2022: £6k).
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