REG - ProCook Group PLC - Preliminary Results
28/06/2023 07:15
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RNS Number : 2111E ProCook Group PLC 28 June 2023
28 June 2023
ProCook Group plc
Preliminary Results for the 52 weeks ended 2 April 2023
Emerging stronger from difficult trading conditions through good strategic
progress
ProCook Group plc ("ProCook" or "the Group"), the UK's leading
direct-to-consumer specialist kitchenware brand, today reports its preliminary
results for the 52 weeks ended 2 April 2023.
FY23 FY22 YoY
Revenue £62.3m £69.2m (9.9%)
Gross Profit £38.3m £45.0m (14.9%)
Gross profit margin% 61.5% 65.1% (360bps)
Underlying (loss) / profit before tax(1) (£0.2m) £9.5m (102.1%)
Underlying (loss) / profit before tax % (0.3%) 13.7% (14.0%pts)
New customers acquired ('000) 692 723 (4.3%)
Number of active customers L12M ('000)(2) 991 974 +1.8%
12 month repeat rate %(3) 23.6% 25.5% (1.9%pts)
Financial and strategic highlights
- Total revenue of £62.3m declined by 9.9%, or 5.0% excluding the
Amazon channels which we exited over the last two years
- LFL revenue declined by 10.7% YoY against outperformance in the
prior year and remained +112.2% Yo3Y (pre-pandemic) highlighting the
substantial gains we have maintained over the last three years(4)
- Broadly held our UK kitchenware market share(5) YoY in a year of
significant trading uncertainty, despite a significant shift away from online
sales
- Growth in L12M active customers of +1.8% YoY to almost one million
customers. Successfully attracted 692,000 new customers to the brand in FY23
- Gross profit margin % held back by higher supply chain costs and
foreign exchange impacts, partly offset by pricing; supply chain costs now
largely unwound, with marine freight costs stabilising back to pre-pandemic
levels
- Underlying LBT of £0.2m (FY22: Underlying PBT of £9.5m) reflecting
lower sales, gross margin impacts, inflationary cost pressures and investment
in capability to drive continued growth
- Completed the opening of our new Distribution Centre and HQ in
Gloucester which provides a significant increase in capacity and potential for
operational efficiency benefits
- Became the first UK-listed retailer to achieve B Corp certification
- Recognised by Which? as a Recommended Provider, ranking fourth
amongst a large peer group based on customer feedback
- Careful working capital management supported investment in capital
spend and improved free cash flow year on year
- Year-end net debt of £2.8m (FY22: £1.8m)
Current Trading and Summary Outlook
Trading conditions during the first quarter of FY24 to 26 June 2023 have
remained challenging, with the continued impact of inflation and further
interest rate increases. Revenue of £10.7m was 6.7% lower year on year with
LFL revenue down 7.9% year on year impacted by the warm weather and soft
homewares market during May and June. Our share of the market(5) has remained
flat year on year during the first quarter. Excluding the impact of
discontinued Amazon channels, total revenue was down 3.9% year on year.
The market led shift back towards retail shopping and away from online has
continued in the first quarter. Our retail stores continue to outperform
online, with 0.2% growth in retail like for like revenue in the first quarter,
and total retail revenue growth of 7.3%. Revenue from our website was down
18.8% year on year, partly impacted by a higher level of promotional activity
last year.
The outlook remains challenging and much is uncertain. While there are
indications that inflationary pressures will ease over the months ahead, UK
consumers have suffered a significant adverse impact on disposable incomes and
discretionary spending power.
Despite this, we see clear opportunities ahead of us to attract more customers
to the ProCook brand and grow our market share, by building a better business
through developing our products, service and operating model, thereby emerging
stronger from this challenging period.
Daniel O'Neill, CEO and Founder, commented:
"In the 27 years since we first founded ProCook our focus on product quality,
value and service have served as the key pillars of our customer offer, and I
am pleased that this year we have again increased our active customer base,
added three more retail stores and upsized two more, and retained our
excellent-rated Trustpilot score. Our value for money offer has enabled us to
retain a resilient trading performance despite the many headwinds.
"This year the economic backdrop has been one of the toughest I have
experienced in my career. Our customers and colleagues have felt the squeeze
on disposable incomes as inflation has soared upwards. We have faced
challenging trading conditions before, and emerged stronger, more nimble, and
more determined to press ahead with our mission to become the customers' first
choice for kitchenware.
"I am pleased with the strong strategic progress we have made this year,
despite the challenging economic backdrop. In opening our new distribution
centre, simplifying our operations to focus on the UK, improving our in-store
and online experience, and becoming a B Corp, while also extending and
improving our product ranges, we have made significant steps forward. We have
continued to invest in the areas that will support our long-term growth and
performance, while taking difficult decisions to manage costs and preserve
cash.
"We know that our proposition continues to resonate very well with customers,
and with our progress this year, we have built a better business, paving the
way for improved performance and future profitable growth in the years ahead."
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 Group (Financial PR Adviser) procook@mhpgroup.com
Katie Hunt Tel: +44 (0)7711 191 518
Catherine Chapman
Next scheduled event:
ProCook expects to release its FY24 quarter two trading update in late October
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, and through
58 own-brand retail stores, 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 HQ in Gloucester.
ProCook has been listed on the London Stock Exchange since November 2021
(PROC.L).
Further information about the ProCook Group can be found at
www.procookgroup.co.uk.
Quarterly revenue performance
FY24 (52 weeks ending 31 March 2024)
Q1 Q2 H1 Q3 Q4 H2 FY
Revenue £10.7m
Revenue growth % (6.7%)
LFL revenue £10.2m
LFL growth % (7.9%)
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 £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%
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 £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
£9.4m in FY22 in relation to IPO costs and IPO-related share-based awards
(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) 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) Management estimate based on internal sales data GFK market weekly sales
information
Chairman's Statement
In a year which has been challenging for many reasons, not least the impact of
inflation on the cost of living for our customers and our colleagues, I am
pleased that ProCook has delivered a resilient trading performance. We broadly
maintained market share in the UK, while making significant progress on
strategic priorities which will support the development of the brand in the
years ahead.
The year has been a pivotal one for a number of reasons. We completed the
transition away from unprofitable Amazon channels, reducing revenue by 4.9%
year on year, in order to focus fully on attracting customers to shop directly
with the brand. Additionally, the opening of our new Distribution Centre and
HQ has been a key strategic achievement, which paves the way for improved
operational efficiency in the years ahead and provides capacity for continued
growth.
We have relaunched our brand purpose and Company values, based on the ethos
and principles of the business which was first established in the late 1990's
by the O'Neill family. Equipping everyone with the tools to bring joy to
everyday cooking clearly articulates why we do what we do. This will guide all
of our activities and help us focus our efforts as we move forward to become
the customers' first choice for kitchenware.
The significant inflationary and cost of living pressures have presented
challenges for our business, as well as for our customers, colleagues, and
suppliers, and is evident in our gross margins following the impact of
heightened shipping costs post Covid-19. However, we are confident in our
strategy, our business model, and our proposition. We have the right plans and
foundations to deliver sustainable, profitable growth over the medium to
longer term and we are focused on developing our business to be stronger and
even more appealing to customers.
I would like to thank all of the ProCook team, suppliers, and partners on
behalf of the Board for their resilience in the face of difficult conditions
and in their efforts to continually improve our proposition and serve our
customers with such commitment.
Governance and CEO succession planning
We are committed to the highest standards of corporate governance, and I am
pleased to report that the Board considers that it has complied in full with
the UK Corporate Governance Code's principles and provisions during the year.
The Non-Executive Directors continue to work very well with the Executive
Directors and wider Leadership Team, providing highly relevant sector
experience and skills with pragmatic knowledge-sharing and support, and
healthy challenge on strategic, operational and governance matters.
During the year, we have reduced the size of the Board to five members,
following the retirement in Spring 2023 of Steve Sanders, who has been
instrumental to ProCook's growth and success over the last seven years, and as
Gillian Davies stepped down from the Board at the same time as Steve in
December 2022. I would like to reiterate my thanks, on behalf of the Board, to
both Steve and Gillian for their contributions to the Board during their
tenure.
Daniel O'Neill has indicated his intention to step back from the CEO role at
an appropriate point. Daniel has discussed the timing of this with the
Nominations Committee and it was agreed that the business had reached a stage
where he could begin thinking about making this transition. Having founded
ProCook over twenty years ago, Daniel has deep knowledge of the business, and
it is his intention to continue to add value by supporting the product
development team on a part-time basis. The Board has therefore commenced a
search process to ensure effective succession planning and in the meantime,
Daniel will remain in the role, until a suitable successor is appointed, and
an orderly handover is complete.
Sustainability
The Group's new values highlight ProCook's commitment to always doing the
right thing, and that is exemplified by the successful achievement of the B
Corp certification during the year, with ProCook becoming the first UK listed
retailer to achieve this award. This reflects the Group's long-held commitment
to building a responsible brand with a strong purpose; having already
celebrated many milestones including eliminating and mitigating Scope 1 and 2
emissions, committing to the real Living Wage, and being recognised as one of
the UK's Best Workplaces(TM).
The Group reported carbon neutral status for Scope 1 and 2 emissions last
year, and since then the Leadership Team have completed the work to understand
and measure Scope 3 emissions and have begun to develop strategies to
eliminate and mitigate them over the years ahead. This is a critical task,
necessary to help protect our planet for future generations, but we recognise
it is challenging given the nature of global supply chains and is not
something that can be solved in the immediate term. It will instead be
achieved through continually caring for our community and planet, and I am
pleased to see plentiful evidence of this in both the day-to-day operational
decision-making, and broader strategic decisions that the Group takes.
Daniel O'Neill, in his report, sets out more detail about this important topic
and the next steps we will take.
Dividend
With the wider macro-economic uncertainty in mind, and therefore taking a
cautious and responsible decision to preserve cash within the business during
these times, the board is not recommending a dividend payment for this
financial year. The Board will continue to review dividend payments in future
periods in line with the Group's capital allocation policy.
Outlook
The outlook remains challenging and much is uncertain. While there are
indications that inflationary pressures will ease over the months ahead, UK
consumers have suffered a significant adverse impact on disposable incomes and
discretionary spending power.
Despite this, we see clear opportunities ahead of us to attract more customers
to the ProCook brand and grow our market share, by building a better business
through developing our products, service and operating model, thereby emerging
stronger from this challenging period.
Greg Hodder
Chairman
27 June 2023
CEO's Review
Bringing joy to everyday cooking
This year the economic backdrop has been one of the toughest I have
experienced in the 27 years since we founded the business. Our customers and
colleagues have felt the squeeze on disposable incomes as inflation has soared
upwards.
As a specialist kitchenware brand, our value for money offer has enabled us to
retain a resilient trading performance despite the many headwinds. We have
faced challenging trading conditions before, and emerged stronger, more
nimble, and more determined to press ahead with our mission to become the
customers' first choice for kitchenware.
Our team have worked incredibly hard this year as we have faced into these
challenges. We have continued to invest in the areas that will support our
long-term growth and performance, most notably in our new Distribution Centre
and HQ in Gloucester, while taking difficult decisions to manage costs,
preserve cash, and improve our focus on our core business in the UK, resulting
in the exit of our EU operations.
We have spent time this year developing our people and culture, and our new
brand purpose; equipping everyone with the tools to bring joy to everyday
cooking. This purpose accompanied by our new Company values which reflect the
principles upon which we have always worked, together provide a North Star for
our future activities.
Challenging trading conditions
The significant pressures on consumers' disposable income, due to the high
inflation macro-environment, have led to very difficult trading conditions in
FY23. Our total revenue of £62.3m was 9.9% lower year on year, in part due to
the decisions we took to exit unprofitable Amazon Marketplace channels
including in the EU, which reduced revenue by 4.9%. Sales in our core UK
business were down 5.0% year on year, yet still up 112.2% on a like-for-like
basis ("LFL") compared to pre-pandemic (FY20), and we broadly held our share
of the UK kitchenware market year on year despite a significant shift away
from online sales (a channel which we over-index in) as consumers returned to
physical retail shopping.
Cost inflation impacted our gross margins, particularly the post-pandemic
heightened shipping costs and the adverse movement in foreign exchange rates,
and these impacts were only partly offset by price increases. As a result, our
gross profit margins declined by 3.6% points year on year to 61.5%. While we
are seeing some easing of these gross margin impacts, other inflationary cost
pressures, including wages, energy and fuel costs remain high in the current
financial year.
We have made difficult choices to manage and right-size our cost base during
the year. We have implemented a plan to deliver £3.0m of annualised cost
savings, which we expect to realise the benefits of in the current financial
year and beyond.
Underlying profit before tax reduced to a loss of £0.2m in the year (FY22:
£9.5m profit), and after non-underlying items including impairment charges,
we reported a loss before tax of £6.5m.
We maintained a strong focus on cash management with tight discipline of
working capital, while investing in the areas that will continue to drive our
business forward including three new stores openings, two upsized store
relocations, and our new distribution centre and headquarters. Free cash flow
improved by £2.5m year on year to an outflow of £0.5m (FY22: outflow of
£3.0m).
Attracting more customers to our brand
In a recent survey that we commissioned with YouGov, spontaneous awareness of
ProCook was just 7% of the UK population, with prompted awareness at 33%.
Combined with our relatively low kitchenware market share, which we estimate
is approximately 2%, this provides a significant opportunity to grow our
customer base over the medium term.
During the last year we attracted a further 692,000 new customers to shop with
us (FY22: 723,000) and increased our active customer base to 991,000 (FY22:
974,000). Our 12 month repeat rate decreased by 1.9% points year on year to
23.6%, largely reflecting the market-driven channel shift back towards Retail
which has historically had a lower repeat frequency. Retail repeat rates
increased year on year, while Ecommerce repeat rates slowed slightly.
We have invested in and implemented a new CRM platform. This will provide us
greater opportunity to increase loyalty and advocacy through improved
segmentation, greater personalisation, and a broadening of our communications
across more customer channels including social media.
We cautiously reduced our brand marketing spend in the year while we revisited
our brand purpose, which, now refreshed, will provide improved clarity to our
future marketing messaging.
Developing our customer proposition
During the year we made the considered decision to discontinue our operations
on Amazon marketplace channels, including in the EU, in order to focus more
fully on our UK market and our own direct consumer proposition. The Amazon
channels historically provided a lower contribution than our core business,
and added complexity to our business model, which we are pleased to have
eliminated.
While performance in our own Ecommerce website has been difficult, with LFL
sales declining by 11.0% largely driven by changing customer shopping
preferences between channels, exacerbated by the Royal Mail strikes during
December, we have made positive progress in developing our capabilities. We
completed a technical re-platform of our website in the first half of the
year, improving the code base which has made subsequent developments far
quicker and has improved site speed. We have enhanced our delivery offer for
customers to include a named day and a cheaper 2-3 day service, improved
product range navigation, and experimented with a wide range of smaller
changes. During the latter part of the year, we initiated a programme of work
to overhaul the design and user experience on our website which is progressing
well, and we plan to test and launch this to customers during the summer.
We have increased our Retail estate to 58 stores, adding three new stores in
destination retail locations, and completing upsize relocations for two
existing stores during the year. Early performance in these new stores has
been strong and we expect a combined payback on investment of less than one
year. We have also worked hard to improve retail service in existing stores,
and through continued investment in training and development, we have improved
conversion rates and average transaction values which had been impacted by the
macro-environment.
In the latter part of the year, supported by external expertise, we developed
our understanding of the potential for retail estate expansion in the UK,
increasing our expectation of how many stores we can open in the UK and
providing a list of target location opportunities to consider further. While
we will pursue these newly identified locations with appropriate caution in
this rapidly changing retail environment, we are excited by the opportunities
ahead of us to extend our customer reach and firmly believe that bricks and
mortar retailing is a key component of our proposition.
We were pleased to have been recognised by Which? as a Recommended Provider,
ranking fourth amongst a large peer group based on customer feedback, noting
in particular our product quality and range. Our continued focus on product
development has resulted in the launch of 154 new products in the year with a
range refresh rate of 20%. We have been cautious in our pricing, carefully
monitoring the impact of increases we have had to make in response to cost
pressures and retaining our relative value advantage.
We have identified a new manufacturing partner and worked together to design
the first phase of our range of small kitchen electricals during the year,
ready for launch in H1 FY24. We are excited by the potential opportunity that
this new complementary category brings in creating another reason to shop with
ProCook, extending our total market size by a quarter, and enabling us to
attract a new group of in-market customers to our brand.
Building on our strong foundations
A key strategic priority for us this last year has been the development of our
new distribution centre and headquarters in Gloucester which we began to
transition into during February 2023. This new facility provides significant
capacity for growth and will allow us to achieve efficiencies in our logistics
operations, as well as providing a more collaborative and inspirational
workplace for our office-based colleagues. We are focused on completing the
transition and realising the efficiencies that this new site provides.
We have continued to develop our technology capabilities, and our team have
successfully delivered a comprehensive roadmap of initiatives this year,
building on our core bespoke platforms. Their focus has been to support
customer experience and revenue growth initiatives, operational efficiencies,
and reduce risk through a range of infrastructure and cyber security
improvements.
Creating an even better place to work
We are committed to continually making ProCook an even better place to work.
We recognise that the last year has been challenging for our colleagues, and
while it is disappointing to see our engagement score drop year over year, we
welcome the opportunity to receive feedback and to identify more ways to
support our team. During the year we launched our Colleague Advisory Panel and
regular monthly Town Hall meetings, improved our benefits and total reward
package (including our response to the cost of living crisis), and reiterated
our commitment to the Real Living Wage Foundation.
We were pleased to be recognised again as a Great Place to Work(TM) for the
second year running and for two categories, Women and Wellbeing, to have
finished inside the top tier as well as being ranked amongst the UK's Best
Places to Work.
Reducing our environmental footprint
In October 2022, we were certified as a B Corp following a rigorous assessment
and enormous team effort across our business. There are very few publicly
listed brands certified as B Corps and so we are incredibly proud to be
trailblazing in our sector. Alongside our sustainability goals, B Corp
provides a stringent framework against which we can measure ourselves.
Now that we have completed our full carbon footprint analysis including our
Scope 1, 2 and 3 emissions, we have gained a fuller understanding of the
extent of the emissions implicit in our indirect sourcing activities. These
are significant in comparison to the relatively modest emissions from our own
operations which we have worked hard to reduce or eliminate over recent years.
As a result of the emissions in our supply chain not being directly in our
control and being in sectors and countries where no clear de-carbonisation
plans exist yet, we are undertaking a detailed exercise to reassess the
timescales on which we can commit to net zero with confidence across our value
chain as a whole and in the meantime, we have set out eight initial priorities
to progress in the next twelve months. We believe in honouring our
responsibilities to people and the planet alongside our commercial goals, and
we are committed to making as much progress as we possibly can with our
suppliers and partners to reduce our environmental impact.
Emerging stronger than ever
I am pleased with the strong strategic progress we have made this year,
despite the challenging economic backdrop. We have faced challenging
conditions before in our 27-year history, and by focusing on our customers and
improving our business model for the long term, we have always emerged
stronger.
In opening our new distribution centre, simplifying our operations to focus on
the UK, improving our customers' in-store and online experience, and becoming
a B Corp, while also extending and improving our product ranges, we have made
significant steps forward. We know that our proposition continues to resonate
very well with customers, and with our progress this year, we have built a
better business, paving the way for improved performance and profitable growth
in the years ahead.
Daniel O'Neill
CEO and Founder
27 June 2023
CFO's Review
Trading performance has been challenging over the last financial year, with
revenue excluding the discontinued Amazon channels declining by 5.0%, margins
under pressure from heightened freight costs and foreign exchange, and
inflationary pressures impacting our cost base. We have carefully managed our
cash flows, while still investing in the areas which will support improved
operational performance and profitability in the years ahead, and we have
reduced costs which will benefit the current financial year and beyond.
Revenue
£m / % FY23 YoY growth Yo3Y growth
£m % %
Revenue 62.3 (9.9%) 60.0%
Ecommerce 25.6 (20.7%) 77.1%
Retail 36.7 (0.4%) 49.9%
LFL Revenue 54.1 (10.7%) 112.2%
Ecommerce 24.9 (11.0%) 207.6%
Retail 29.2 (10.4%) 52.5%
Total revenue in FY23 (the 52-week period ending 2 April 2023) reduced by 9.9%
to £62.3m (FY22, the 52-week period ending 3 April 2022: £69.2m). This
included a £3.4m or 4.9 percentage point reduction in revenue in respect of
discontinued Amazon channels. Compared to FY20 pre-pandemic, total revenue
remains 60.0% ahead, reflecting like for like growth of 112.2%.
We have broadly maintained our share in the UK Kitchenware market, which as a
whole, has experienced a significant shift in sales mix back towards physical
Retail stores (from Ecommerce channels) compared to the last financial year.
Based on Euromonitor's total UK kitchenware market size for the 2022 calendar
year(1), we estimate that our share of the market remained similar year on
year at 1.85% (2021: 1.90%), and broadly flat year on year for the financial
year ended 2 April 2023.(2)
Ecommerce revenue decreased by 20.7% to £25.6m (FY22: £32.3m) including the
£3.4m impact of lower sales year on year from the discontinued Amazon
channels. Revenue from our own website channels declined by 11.0%
year-on-year, remaining 207.6% compared to pre-pandemic performance in FY20,
driven by the challenging macro trading environment and the market-wide return
of customers to physical retail stores throughout the year.
Retail revenue was broadly flat year on year, declining by 0.4% to £36.7m
(FY22: £36.8m), benefiting from the eight new stores opened last year and the
three new stores opened in the year. Like-for-like Retail revenue was down
10.4% year on year against strong comparatives due to pent up demand post
Covid-19 restrictions, and was also impacted by consumer spending which
impacted customer conversion rates. Compared to FY20 pre-pandemic, on a
like-for-like basis, revenue in existing stores remained up 52.5%. The three
new stores openings in the current year increased our UK Retail estate to 58
stores.
(1) Euromonitor "Homewares in the UK report" April 2023. The 2021 UK
Kitchenware market size has been revised upwards to £3.9bn from £3.4bn as
reported in April 2022.
(2) Management estimates based on internal sales data and GFK weekly
kitchenware sales data.
Gross profit
Gross profit of £38.3m in FY23 (FY22: £45.0m) reflected the lower revenue
performance and was compounded by lower gross margins of 61.5% (FY22: 65.1%)
which were driven by the heighted costs of marine freight (-270 bps impact),
adverse foreign exchange movements (-130 bps impact) in costs of goods sold,
and higher levels of promotional activity to support revenue performance (-20
bps impact). These adverse effects were partly offset by selling price
increases which were carefully applied and monitored throughout the year (+70
bps impact).
Operating expenses and other income
Underlying operating expenses net of other income
Total underlying operating expenses net of other income were £37.6m (FY22:
£35.9m) representing 60.3% of sales (FY22: 51.9%). This growth in costs was
driven by a number of key factors:
- Existing store rent and rates(3) uplifts: +£1.3m
- Expenses in relation to the 3 new stores opened this year and the
annualisation of the net six new stores opened last year: +£2.0m
- Increased digital marketing costs: +£1.1m
- Annualisation of plc expenses including the Board and professional
fees: +£1.1m
- Central cost inflation and investment: +£0.5m
- Partly offset by lower costs in the Amazon marketplace channels (UK
and EU) and website volume-related savings: -£3.1m
- Partly offset by lower marketing spend: -£1.0m
(3) Retail costs benefitted in the prior year from the property rates
'holiday' by approximately £1.3m. This temporary relief came to an end in
April 2022.
Other income
Total other income of £0.1m in FY23 (FY22: £0.4m) related solely to rental
income.
In the prior year, £0.4m of other income was reported in respect of the final
elements of the Government's Coronavirus Job Retention Scheme and Business
Rates Relief scheme which came into effect during the pandemic while our
stores (as 'non-essential' retail stores) were closed for significant periods
of time. These have been included in the above explanations on a net basis as
they relate directly to operating costs in relation to our Retail stores.
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 FY23 were £6.2m (FY22: £9.4m).
Consistent with FY22, expenses in respect of employee share-based awards which
relate to the IPO event in that year, which itself is non-recurring, have been
presented as non-underlying costs. These expenses amounted to £1.2m in the
year ended 2 April 2023 (FY22: £6.7m). These expenses are expected to
continue through relevant vesting periods to FY25.
During the year ended 2 April 2023, the Group consolidated its head office and
warehouse operations into a new site. Non-underlying operating expenses
associated with occupying the site while its development was completed, and
transitioning into the new site during the year were £0.7m. A smaller
residual expense is expected in FY24 as the transition fully completes.
The Group's impairment assessment has resulted in an expense to the
Consolidated Income Statement of £3.3m (2022: £nil) in respect of Retail CGU
impairment and £1.1m (2022: £nil) in respect of the Group's two pre-existing
distribution / head office sites. Further detail of this impairment assessment
is set out in note 3.
In FY22, non-underlying items included expenses of £2.7m in relation to the
IPO.
Operating profit
Total underlying operating profit for the period was £0.8m (FY22: £9.2m).
Ecommerce operating profitability declined from 24.9% of revenue to 17.9%
impacted by the lower gross profit margins, and higher costs of customer
acquisition year on year. Retail profitability reduced from 26.2% of revenue
to 14.5%, driven by the lower sales performance and gross profit margins year
on year, and the impact of increased rates costs which benefitted from relief
in the prior year. The total operating profit from our Ecommerce and Retail
channels combined was £9.9m (FY22: £17.7m). Central costs increased by
£0.6m year on year driven by full year annualisation of plc and board costs
and wage inflation, partly offset by lower brand marketing spend year on year.
£m FY23 FY22
Underlying operating profit
Ecommerce 4.6 8.1
Retail 5.3 9.6
Central costs (9.1) (8.5)
Total 0.8 9.2
Underlying operating profit % of revenue
Ecommerce 17.9% 24.9%
Retail 14.5% 26.2%
Central costs (14.7%) (12.3%)
Total 1.2% 13.3%
Total reported operating loss, after the £6.2m of non-underlying expenses set
out above was £5.4m (FY22: £0.2m).
Profit and earnings per share
Underlying loss before tax was £0.2m (FY22: Underling profit before tax of
£9.5m).
During the year there was an expense of £1.1m (FY22: £0.3m gain) in respect
of financial items in the period. Financial items included interest expenses
on lease liabilities and borrowings of £1,065k (FY22: £623k), and other
losses in respect of foreign exchange of £55k (FY22: £944k gain).
After non-underlying costs, loss before tax was £6.5m (FY22: £0.1m profit
before tax). Reported loss after tax was £4.9m (FY22: £0.1m).
The effective tax rate based on underlying profit before tax was 17.6% (FY22:
20.0%).
Earnings per Share
Underlying basic earnings per share for the year decreased to -0.12 pence
(FY22: 7.34 pence) and underlying diluted earnings per share decreased to
-0.12 pence (FY22: 6.76 pence).
Reported basic earnings per share and reported diluted earnings per share for
the year were -4.53 pence (FY22: -0.01 pence).
Cash generation and net cash/ debt
We have carefully managed our cash position during the year, preserving cash
in the business while investing in the areas that will support our long term
growth. During the year we improved our free cash outflow by £2.5m to £0.5m
(FY22: outflow of £3.0m) and ended the year with net debt of £2.8m (FY22:
net debt £1.8m), with available liquidity headroom of £13.2m (FY22:
£14.2m).
£m FY23 FY22
Reported profit before tax (6.5) 0.1
Depreciation, amortisation, impairment, and profit/loss on disposal 9.5 4.1
Share based payments 1.1 5.8
Finance expense 1.1 0.6
Unrealised FX (gains)/losses 0.5 (1.1)
Net working capital 3.8 (3.2)
Tax paid (0.1) (2.0)
Net operating cash flow 9.3 4.3
Net capital expenditure (5.2) (3.8)
Interest (1.1) (0.6)
Payment of lease liabilities (3.6) (2.9)
Free cash flow (0.5) (3.0)
Movement in borrowings (1.0) (2.7)
Proceeds from the issue of shares - 0.1
Dividends paid (0.3) (1.9)
Movement in cash and cash equivalents (1.8) (2.1)
£m FY23 FY22
Cash and cash equivalents 2.0 3.8
Borrowings (4.8) (5.5)
Net (Debt)/ Cash (2.8) (1.8)
The lower reported profit before tax in the year includes £6.2m of
non-underlying expenses which resulted in £0.7m of additional cash outflows
(FY22: £2.2m).
A reduction in net working capital resulted in a cash inflow of £3.8m in the
year (FY22: £3.2m outflow) reflecting our planned reduction of inventory.
Inventory on hand at the year-end (excluding inventory in transit) was £9.5m
(FY22: £15.2m) down 37.5% year on year. Total inventory at the year-end was
£11.5m (FY22: £16.8m).
Net capital expenditure of £5.2m in the year primarily related to the
investment in the new distribution centre and HQ, and three new stores and two
upsize relocation stores which opened during the year. In the prior year, net
capital expenditure of £3.8m largely related to the eight new store openings
and the ProCook Cookery School.
There was £0.1m of corporation tax paid in the year reflecting the Group's
lower profitability (FY22: £2.0m). As at 2 April 2023, we had a current tax
asset of £0.6m (FY22: £0.3m).
Banking agreements
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.
Shortly after the year-end, on the 5 May 2023, the Group successfully
finalised an amendment to the RCF terms in respect of the fixed charge cover
covenant which had been agreed with HSBC during March 2023, in order to
provide additional headroom against that covenant given that the Group's
EBITDA performance declined during the year and would have breached the
covenant test at the FY23 Q4 test date. The revised test requires EBITDAR to
be no less than 1.25x fixed charges for the FY23 Q4 and FY24 Q1 test dates,
and 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 and viability considerations, which is described in more detail
in the Going Concern section below.
The Group has retained its access to an existing £6.0m trade finance
facility, which is due to expire on 23 September 2023, 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
During the first half of the year ended 2 April 2023, 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, 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, and therefore taking a cautious and
responsible decision to preserve cash within the business during these times,
the Board have not recommended any final dividend in respect of FY23.
Treasury Management
The Group is exposed to foreign currency risk through its trading activities.
The main source of this relates to stock purchases from non-UK suppliers,
which accounts for approximately 95% of the Group's annual stock purchases. To
manage the exchange rate risk, a mixture of standard ("vanilla") forwards and
outperformance trades are utilised. The Group seeks target levels of coverage
for future USD payments, as determined by internal forecasts and the Group's
Treasury Management Policy.
Given the level of USD transactions and cover obtained via financial
instruments, the Group is exposed to a counter-party risk with each of the
financial institutions where arrangements are held. The Group manages this
risk by ensuring only highly credited institutions are used and limiting the
level of exposure with each.
The Group is also exposed to interest rate risk where the Group has financial
obligations that give rise to a variable interest charge. To minimise the
charges and exposure driven by interest rates, the Group ensures that credit
facilities are used optimally in parallel with the latest interest rate
information and forecasts.
Tax Strategy
The Group's tax policy is to manage its tax affairs in a responsible and
transparent manner in line with our commitment to high corporate governance
standards. This ensures the Group complies with the relevant legislation and
has due regard to our reputation and thus seek to promote the long-term
success of the Group and deliver sustainable shareholder value.
A full copy of the Tax Strategy is available on the Group's website at
www.procookgroup.co.uk.
Going Concern
The financial statements have been prepared on a going concern basis. The
Group has reported a loss before tax of £6.5m after non-underlying items for
the financial year ended 2 April 2023 (FY22: profit before tax of £94k) and
had a net asset position of £9.3m as at 2 April 2023 (3 April 2022: £13.4m),
with a net current asset position of £1.3m (3 April 2022: £6.0m). The Group
had net debt (cash and cash equivalents less borrowings) of £2.8m at 2 April
2023 (3 April 2022: £1.8m) with available liquidity headroom of £13.2m.
In their assessment of going concern the Board has considered a period of at
least 12 months from the date of signing these financial statements. In
considering whether it is appropriate to adopt the going concern basis in the
preparation of the financial statements, the Directors have considered the
Group's principal risks and uncertainties and have assessed the impact of a
range of downside scenarios, including a severe but plausible downside
scenario, on the Group's expected financial performance, position, and cash
generation. The scenarios have been informed by a comprehensive review of the
macroeconomic environment, including the Group's experience of trading through
challenging periods such as the Covid-19 pandemic, and the most recent
macro-economic downturn in which consumers have been impacted by significant
inflationary pressures.
Consideration has been given to the availability of facility headroom and
covenant compliance within the Group's financing facilities, details of which
are as follows:
1. An uncommitted trade finance facility of £6.0m. There
are no covenants associated with this facility.
2. A Revolving Credit Facility ("RCF") of £10.0m which was
entered into on 20 April 2022 (expiring in April 2025, with a one-year
extension option to April 2026) with two covenants in respect of fixed charge
cover and leverage. Shortly after the year-end, on the 5 May 2023, the Group
successfully finalised an amendment to the RCF terms in respect of the fixed
charge cover covenant, which had been agreed with HSBC during March 2023 in
order to provide additional headroom against that covenant given that the
Group's EBITDA performance declined during the year and would have breached
the test at the end of the financial year without action. The revised test
requires EBITDAR to be no less than 1.25x fixed charges for the FY23 Q4 and
FY24 Q1 test dates, and 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 calculated on a last twelve month rolling, pre-IFRS 16
bases.
The base case for the scenario modelling extends from the annual budget plan
that was approved by the Board in April 2023. Forecasts for future periods are
based on the Group's strategic plan and its five year financial plan, which
project forwards from the FY24 budget.
Key assumptions include Ecommerce and Retail like for like revenue growth,
gross margin performance reflecting the return to more normal marine freight
costs, the financial impacts of opening of new stores (including capital
investments and time to maturity), operational efficiencies being delivered,
investment in brand marketing activities, and the appropriate level of
inventory required to maintain strong availability for customers.
In their consideration of the Group's principal risks and uncertainties the
Board believes that the most likely and most impactful risks that the Group
faces are those surrounding customer and macro-economic factors, marketing
effectiveness, and financial and treasury risks, all of which are heightened
as a result of the current macro-environment.
The Board has reviewed the potential downside impacts of these risks
unfolding, modelled under a number of scenarios including a severe but
plausible downside scenario which reflected the following assumptions:
- A significant reduction in customer demand and shopping frequency,
caused by continued macro inflationary pressures and further increases in
interest rates throughout the going concern period, resulting in a 15% lower
revenue performance in the FY24 year to go compared to base case (with LFL
revenue declining a further -5%pts compared to year to date performance),
increasing to a 20% decrease compared to base case in FY25.
- Heightened competition to acquire customers in the market as demand
falls, results in a 10% increase in the cost of customer acquisition through
online channels.
- The level of promotional activity required to convert customers
increases and coupled with a deterioration in GBP against the US dollar, gross
profit margins reduce by 200bps compared to base case, commencing in H2 FY24.
- The increase in interest rates results in an increase of 100bps in
the Group's cost of borrowing through its facilities.
Under this severe but plausible downside 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 test. However, it would breach the fixed charge covenant at
the Q2 FY24 test date. The Group has a positive and long-standing relationship
with its banking partner HSBC, however there is no guarantee that a covenant
waiver, new banking terms, or alternative funding arrangements could be agreed
within an acceptable period, and there is therefore the risk that current
funding arrangements could be withdrawn.
The Board has also reviewed a reverse stress test which has been applied to
the base case model to determine the level of sales decline which would result
in a breach of financial covenants. A reduction in revenue, with no
mitigations applied, of approximately 11% in Q2 FY24 (representing a year on
year decline in LFL revenue of 12% in the remainder of FY24), would be
required to breach fixed charge covenants at that quarter-end test date. A
further reduction in revenue of 21% in FY25 would be required to breach fixed
charge covenants in that year.
The other downside scenarios linked to the key principal risks and
uncertainties, which were considered by the Board, have a cumulative impact
which was similar to the severe but plausible downside scenario outlined
above.
The Board has also considered the potential impacts of climate change risks.
These are not considered to have a material effect on the Group's financial
projections over the assessment period.
If any of the downside scenarios were to arise, including the severe but
plausible downside scenario and the reverse stress test scenario, there are a
series of mitigating actions that the Group could seek to implement to protect
or enhance financial performance and position including to:
- Increase selling prices for products which have lower price
elasticity to help offset additional sourcing costs
- Increase promotional activity to accelerate trading performance and
reduce stock levels, or alternatively, reduce promotional activity to better
protect gross margins
- Reduce paid media, above-the-line or retention marketing spend
- Reduce non-variable costs in operational functions to reflect the
lower sales volumes
- Reduce central overhead costs (including headcount investment) over
the short or medium term
- Delay capital expenditure in retail, technology, and logistics
- Renegotiate payment terms with suppliers
- Seek alternative forms of financing to support working capital and
investment requirements
Conclusion
The Board has undertaken a comprehensive review and assessment of going
concern including the Group's financial projections, debt servicing
requirements, available facility headroom and liquidity, and its principal
risks and uncertainties. In the base case scenario, and in the other downside
scenarios which the Directors have reviewed, the Group remains comfortably
within its available facility headroom, and no facility covenants would be
breached. However, the Directors recognise that under the severe but plausible
downside scenario, the Group is likely to breach its fixed charge covenant,
unless mitigating actions can be applied sufficiently in advance to prevent
such a breach, requiring agreement of a covenant waiver, new banking terms, or
alternative funding arrangements, none of which can be guaranteed. The
Directors therefore acknowledge that this potential breach represents a
material uncertainty which may cast significant doubt on the Group's ability
to continue as a going concern.
The Board considers the likelihood of such a severe downside scenario
materialising to be low and recognises the range of mitigating actions
available to the Group to prevent such a breach occurring, and the positive
and long-standing relationship which the Group has with its banking partner
HSBC. The Directors therefore have a reasonable expectation that the Group has
adequate resources to continue in operational existence and meet its
liabilities as they fall due over the period of at least 12 months from the
date of approving these financial statements. Accordingly, the financial
statements have been prepared under the going concern basis of accounting.
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, 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
27 June 2023
Consolidated Income Statement
For the 52 weeks to 2 April 2023
52 weeks ended 2 April 2023 52 weeks ended 3 April 2022
£'000s Note Underlying Non-underlying Reported Underlying Non-underlying Reported
Revenue 1 62,340 - 62,340 69,154 - 69,154
Cost of sales (23,994) - (23,994) (24,111) - (24,111)
Gross profit 38,346 - 38,346 45,043 - 45,043
Operating expenses 2 (37,645) (6,159) (43,804) (36,277) (9,400) (45,677)
Other income 51 - 51 407 - 407
Operating profit/(loss) 752 (6,159) (5,407) 9,173 (9,400) (227)
Finance expense (861) (204) (1,065) (623) - (623)
Other (losses)/gains (55) - (55) 944 - 944
(Loss)/profit before tax (164) (6,363) (6,527) 9,494 (9,400) 94
Tax credit/(expense) 5 29 1,559 1,588 (1,900) 1,720 (180)
Profit/(loss) for the period (135) (4,804) (4,939) 7,594 (7,680) (86)
Total comprehensive income/(loss) (135) (4,804) (4,939) 7,594 (7,680) (86)
Earnings per ordinary share - basic 7 (0.12)p (4.53)p 7.34p (0.01)p
Earnings per ordinary share - diluted 7 (0.12)p (4.53)p 6.76p (0.01)p
Consolidated Statement of Financial Position
As at 2 April 2023
£'000s Note As at 2 April 2023 As at 3 April 2022
Assets
Non-current assets
Intangible assets 8 235 363
Property, plant, and equipment 9 7,781 5,801
Right-of-use assets 10 25,450 20,985
Deferred tax asset 5 2,520 1,175
Total non-current assets 35,986 28,324
Current assets
Inventories 11,515 16,759
Trade and other receivables 2,240 1,975
Current tax asset 611 271
Cash and cash equivalents 1,962 3,782
Total current assets 16,328 22,787
Total assets 52,314 51,111
Liabilities
Current liabilities
Trade and other payables 7,276 8,278
Lease liabilities 10 2,836 2,844
Provisions 200 173
Borrowings 4,716 5,540
Total current liabilities 15,028 16,835
Non-current liabilities
Trade and other payables 954 816
Lease liabilities 10 26,430 19,605
Provisions 612 444
Total non-current liabilities 27,996 20,865
Total liabilities 43,024 37,700
Net Assets 9,290 13,411
Equity and reserves attributable to Shareholders of ProCook Group plc
Share capital 1,090 1,090
Ordinary Shares to be issued 6,891 5,801
Share Premium 1 1
Retained earnings 1,308 6,519
Total equity and reserves 9,290 13,411
Consolidated statement of cash flows
For the 52 weeks to 2 April 2023
52 weeks ended 52 weeks ended
£'000s Note 2 April 2023 3 April 2022
Cash flows from operating activities
(Loss)/Profit before tax (6,527) 94
Adjustments for:
Depreciation of property, plant, and equipment 9 967 860
Amortisation of Intangible assets 8 128 52
Loss on disposal of property, plant, and equipment 2 37 135
Profit on termination of leases (75) (50)
Amortisation of right-of-use assets 10 4,034 3,056
Impairment 2 4,405 -
Unrealised FX (gains)/losses 518 (1,098)
Share Based Payments 1,090 5,837
Finance expense 1,065 623
Decrease/(Increase) in inventories 5,244 (6,671)
Increase in trade and other receivables (413) (372)
(Decrease)/Increase in trade and other payables (1,233) 3,822
Increase in provisions 195 59
Income taxes paid (97) (2,041)
Net cash flows from operating activities 9,338 4,306
Investing activities
Purchase of property, plant, and equipment 9 (4,928) (3,165)
Purchase of intangible assets 8 - (348)
Lease inception costs (460) (248)
Lease incentives received 204 -
Net cash (used in) investing activities (5,184) (3,761)
Financing activities
Interest paid (294) (156)
Interest paid on lease liabilities (771) (467)
Proceeds from borrowings 18,689 28,320
Repayment of borrowings (19,701) (25,583)
Lease principle payments 10 (3,625) (2,910)
Proceeds from the issue of shares - 54
Dividends paid 6 (272) (1,900)
Net cash (used in) financing activities (5,974) (2,642)
Net movement in cash and cash equivalents (1,820) (2,097)
Cash and cash equivalents at beginning of the period 3,782 5,879
Cash and cash equivalents at end of period 1,962 3,782
Consolidated statement of changes in equity
For the 52 weeks to 2 April 2023
£'000s Note Share Share Premium Share Option Reserve Retained earnings Total
capital equity
As at 4 April 2021 - - - 9,505 9,505
Total comprehensive loss for the period - - - (86) (86)
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 6 - - - (1,900) (1,900)
As at 3 April 2022 1,090 1 5,801 6,519 13,411
Total comprehensive loss for the period - - - (4,939) (4,939)
Employee Share Based Payment Awards - - 1,090 - 1,090
Ordinary dividends paid 6 - - - (272) (272)
As at 2 April 2023 1,090 1 6,891 1,308 9,290
Notes to the consolidated financial statements
For the 52 weeks ending 2 April 2023
General Information
The financial information set out herein does not constitute the Company's
statutory financial statements for the periods ended 2 April 2023 or 3 April
2022, but is derived from those financial statements. Statutory financial
statements for 2023 will be delivered to the Registrar of Companies in due
course. The financial statements were approved by the Board of directors on 27
June 2023. 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.
ProCook Group plc (the Company) 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.
Basis of preparation
These consolidated financial statements have been 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. The consolidated Group financial statements are presented in
Pounds Sterling, being the Group's functional currency, and generally rounded
to the nearest thousand. They are prepared on the historical cost basis,
unless otherwise stated.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and Group have 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. Further information on going concern is set out in the
CFO's Review.
1. Revenue
Group revenue is not reliant on any single major customer or group of
customers. Management considers revenue is 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. During the financial year ended 2 April 2023 the Group ceased its
trading operations in the European Union. All revenue is from external
customers.
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
United Kingdom 61,550 66,124
European Union 790 3,030
Total revenue 62,340 69,154
2. Operating expenses
Operating profit/(loss) for the periods is stated after charging:
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
Depreciation of tangible fixed assets 967 860
Amortisation of Intangible assets 128 52
Amortisation of right-of-use assets 4,034 3,056
Impairment of tangible fixed assets 1,944 -
Impairment of right-of-use assets 2,461
Variable lease payments 785 985
Loss on disposal of property, plant, and equipment 37 174
3. Non-underlying items
Consistent with FY22, expenses in respect of employee share-based awards which
relate to the IPO event in that year, 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 financial year ended 2 April 2023, the Group consolidated its head
office and warehouse operations into a new site. Operating expenses of £0.7m
associated with occupying the site while its development was completed, and
the costs of transitioning into the new site have been presented as
non-underlying costs as these costs are non-recurring, dual-running and
transition-related.
The Group's impairment assessment has resulted in an expense to the
Consolidated Income Statement of £3.3m (2022: £nil) in respect of Retail CGU
impairment and £1.1m (2022: £nil) in respect of the Group's two pre-existing
distribution / head office sites. These have been presented as non-underlying
items as each are material in nature, and by virtue of their relationship to
future performance, are not considered related to the performance of the
financial year ended 2 April 2023.
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
IPO Associated costs - 2,742
Share based payments 1,209 6,658
Headquarters transition-related costs 749 -
Impairment expense 4,405 -
Total 6,363 9,400
4. Segmental reporting
The Chief Operating Decision Maker (CODM) is the Board of Directors and
segmental reporting analysis is presented based on the Group's internal
reporting to the Board. At 2 April 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 Statement of Income.
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
Revenue
Ecommerce 25,653 32,332
Retail 36,687 36,822
Total revenue 62,340 69,154
Operating profit
Ecommerce 4,588 8,056
Retail 5,319 9,635
Central costs (9,155) (8,518)
Non-underlying operating costs (6,159) (9,400)
Operating loss (5,407) (227)
Non-underlying finance costs (204) -
Finance costs (861) (623)
Other (losses)/gains (55) 944
(Loss)/profit before tax (6,527) 94
5. Tax expense
The tax expense for the periods presented differ from the standard rate of UK
corporate income tax applicable in the financial year. The differences are
explained below:
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
Current taxation
Corporate income tax charge for the period - 1,384
Adjustments in respect of previous years (243) -
(243) 1,384
Deferred tax
Origination and reversal of temporary differences (1,632) (920)
Impact of change in tax rate - (284)
Adjustments in respect of prior periods 287 -
Total tax (credit)/expense (1,588) 180
The tax charge reconciles with the standard rate of UK corporate income tax as
follows:
52 weeks ended 52 weeks ended
£'000 2 April 2023 3 April 2022
Profit on ordinary activities before tax (6,527) 94
UK Corporate income tax at standard rate of 19% (2021: 19%) (1,240) 18
Factors effecting the charge in the period:
Tax effect of expenses that are not deductible for tax purposes (20) 446
Adjustments in respect of prior years (243) -
Adjustments in respect of prior periods (deferred tax) 287 -
Remeasurement of deferred tax for changes in tax rates (372) (284)
Total taxation (credit)/expense (1,588) 180
The underlying taxation expense for the period as a percentage of profit
before tax (the effective tax rate) was 17.6% (2022: 20.0%).
The standard rate of UK corporate income tax was 19% for all periods
presented. Deferred tax balances reflect future corporation tax rates of 25%.
The deferred tax asset has arisen due to accelerated capital allowances on
items of property, plant and equipment and the timing of future vesting dates
in respect of share based payments. The amounts have been presented on a net
basis to follow the way in which they will be recouped by the Group. The
following is the analysis of the deferred tax balances for financial reporting
purposes:
Movement in the year:
£'000 Accelerated capital allowances Share based payments Carried forward losses Total
Deferred tax asset as at 3 April 2022 (479) 1,654 - 1,175
(Debit)/Credit to profit and loss (601) 315 1,631 1,345
Deferred tax asset at 2 April 2023 (1,080) 1,969 1,631 2,520
Carried forward losses arise from the tax losses incurred during this
financial year. This has been recognised as a deferred tax asset as the Group
believes there is a high degree of likelihood there will be sufficient future
profits to offset against over the medium term planning cycle.
6. Dividends
52 weeks ended Dividend per 52 weeks ended Dividend per
£'000 2 April 2023 share (pence) 3 April 2022 share (pence)
Final dividend for the period ended 4 April 2021 - - 1,000 1.0 pence
Interim dividend for the period ended 3 April 2022 - - 900 1.0 pence
Final dividend for the period ended 3 April 2022 272 0.9 pence - -
Interim dividend for the period ended 2 April 2023 - - - -
The FY22 final dividend of £1.0m was declared representing 0.9 pence per
share, however £0.6m of this dividend was waived by certain shareholders. The
final dividend was paid to the shareholders on the register at close of
business on 2 September 2022.
The FY22 interim dividend of £1.0m was declared and paid representing 1.0
pence per ordinary share, however £0.1m of this dividend was waived by
certain shareholders.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to equity holders of the Group 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 ordinary 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.
52 weeks ended 52 weeks ended
2 April 2023 3 April 2022
Weighted average number of shares 108,956,624 103,509,034
Impact of share options 9,126,940 8,774,159
Number of shares for diluted earnings per share 118,083,564 112,283,193
52 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended
2 April 2023 2 April 2023 3 April 2022 3 April 2022
£'000 Underlying Reported Underlying Reported
(Loss)/profit for the period (135) (4,939) 7,594 (86)
Earnings per ordinary share - basic (0.12)p (4.53)p 7.34p (0.01)p
Earnings per ordinary share - diluted (0.12)p (4.53)p 6.76p (0.01)p
8. Intangible assets
£'000 Software Assets under construction Total
Cost
At 5 April 2021 - 67 67
Transfers out of Assets under construction 67 (67) -
Additions 190 158 348
At 3 April 2022 257 158 415
Additions - - -
Transfers out of Assets under construction 158 (158) -
At 2 April 2023 415 - 415
Accumulated Amortisation
At 5 April 2021 - - -
Charge for the period 52 - 52
At 3 April 2022 52 - 52
Charge for the period 128 - 128
At 2 April 2023 180 - 180
Net book value
At 4 April 2021 - 67 67
At 3 April 2022 205 158 363
At 2 April 2023 235 - 235
Amortisation was recognised in the Consolidated Statement of Income within
operating expenses throughout the period.
9. Property, plant and equipment
£'000 Land and Buildings Plant and Machinery Fixtures and Fittings Motor Vehicles Assets under Construction Total
Cost
At 5 April 2021 34 320 6,044 4 - 6,402
Additions 34 167 2,514 25 425 3,165
Disposals (56) - (96) - - (152)
At 3 April 2022 12 487 8,462 29 425 9,415
Additions - - 1,112 - 3,816 4,928
Transfers 175 21 2,418 - (2,614) -
Disposals - - (241) - - (241)
At 2 April 2023 187 508 11,751 29 1,627 14,102
Accumulated depreciation and impairments
At 5 April 2021 9 32 2,726 4 - 2,771
Charge for the period 3 31 818 8 - 860
Disposals (9) - (3) (5) - (17)
At 3 April 2022 3 63 3,541 7 - 3,614
Charge for the period 3 34 925 5 - 967
Disposals - - (204) - - (204)
Impairment 1 101 1,838 4 - 1,944
At 2 April 2023 7 198 6,100 16 - 6,321
Net book value
At 4 April 2021 25 288 3,318 - - 3,631
At 3 April 2022 9 424 4,921 22 425 5,801
At 2 April 2023 180 310 5,651 13 1,627 7,781
Assets under construction includes retail store equipment and fixtures
acquired but not yet in use, and certain assets relating to the new
distribution centre and head office which had not been fully developed or
commissioned at 2 April 2023.
Impairment tests have been carried out where appropriate and an impairment
charge of £1.9m has been recognised in the 52 weeks ended 2 April 2023 (3
April 2022: £nil). This impairment charge relates to a retail wide impairment
review where certain stores have been identified as impaired.
Depreciation was recognised in the Consolidated Income Statement within
operating expenses throughout the period.
10. Leased assets
Right-of-use assets included in the Consolidated Statement of Financial
Position were as follows:
Plant and Equipment
£'000 Leasehold Property Motor Vehicles Total
Cost
At 5 April 2021 20,437 179 29 20,645
Additions 7,843 57 39 7,939
Re-measurement(1) 241 - - 241
Disposals (2,296) - - (2,296)
At 3 April 2022 26,225 236 68 26,529
Additions 16,336 - - 16,336
Re-measurement (4,371) - - (4,371)
Disposals (1,706) (54) (29) (1,789)
At 2 April 2023 36,484 182 39 36,705
Accumulated amortisation and impairments
At 4 April 2021 2,779 19 13 2,811
Charge for the period 2,974 68 14 3,056
Disposals (323) - - (323)
At 3 April 2022 5,430 87 27 5,544
Charge for the period 3,959 64 11 4,034
Disposals (701) (54) (29) (784)
Impairment 2,461 - - 2,461
At 2 April 2023 11,149 97 9 11,255
Net book value
At 4 April 2021 17,658 160 16 17,834
At 3 April 2022 20,795 149 41 20,985
At 2 April 2023 25,335 85 30 25,450
For impairment testing purposes, the Group has determined that each store is a
separate CGU. Each CGU is tested for impairment at the balance sheet date for
any indicators of impairment. Due to the macro-economic environment in the UK,
all stores have been assessed for impairment.
The value in use of each CGU is calculated based on the Group's latest budget
and forecast cash flows, covering a five-year period, which have regard to
historic performance and knowledge of the current market, together with the
Group's views on the future achievable growth. Cash flows beyond this
five-year period are extrapolated using a long-term growth rate based on
management's future expectations.
The key assumptions in the value in use calculations are the growth rates of
sales and gross profit margins, changes in the operating cost base, long-term
growth rates and the risk-adjusted pre-tax discount rate. The pre-tax discount
rates are derived from the Group's weighted average cost of capital, which has
been calculated using the capital asset pricing model, the inputs of which
include a country risk-free rate, equity risk premium, Group size premium and
a risk adjustment (beta) along with the cost of debt.
Lease liabilities included in the Consolidated Statement of Financial Position
were as follows:
£'000 Leasehold Property Motor Vehicles Plant and Equipment Total
At 4 April 2021 19,281 155 15 19,451
Additions 7,615 57 39 7,711
Remeasurement(1) 241 - - 241
Interest expense 462 4 1 467
Lease payments (3,286) (75) (16) (3,377)
Disposals (2,044) - - (2,044)
At 3 April 2022 22,269 141 39 22,449
Additions 15,893 - - 15,893
Remeasurement(1) (4,371) - - (4,371)
Interest expense 768 2 1 771
Lease payments (4,318) (67) (11) (4,255)
Disposals (1,080) - - (1,080)
At 2 April 2023 29,161 76 29 29,266
(1)Remeasurements have arisen where store lease rental terms and lease expiry
dates have been renegotiated.
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