DJ Eve Sleep plc: Interim Results
Eve Sleep plc (EVE) Eve Sleep plc: Interim Results 23-Sep-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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eve Sleep plc ("eve" the "Company")
Interim Results
Good H1 led by strong UK&I performance, on-course for full year expectations
eve Sleep, the direct-to-consumer sleep wellness brand operating in the UK, Ireland (together the "UK&I") and France, today issues its results for the six months ended 30 June 2021 (the "Period").
Financial Highlights1
2021 H1 GBPm 2020 H1 GBPm Movement Revenue 13.9 12.2 +13% Gross profit 7.6 6.8 +12% Gross profit margin 55.0% 55.6% -58bps Marketing costs as a % of revenue 32.7% 25.3% +737bps Marketing contribution2 0.7 1.5 -GBP0.8m Underlying EBITDA Loss3 (1.9) (0.8) -GBP1.0m Statutory loss before tax (2.3) (1.3) -GBP1.0m Cashflow from operations (3.1) 1.8 -GBP4.9m Net cash at period end 5.2 9.2 -GBP4.0m
Business Highlights
-- UK&I revenue increased 19% year-on year and 15% on H1 2019
-- Average order value in the UK grew 31% as mattress purchases were increasingly accompanied with bedroomfurniture, bedding and other sleep accessories from the growing range
-- Two-year customer repeat rate4 in the UK increased 160 bps year-on-year to 14.5%
-- French revenues in H1 decreased 8% year-on-year on minimal Q1 marketing spend ahead of a new marketingcampaign and Covid related retail partner store closures
-- Gross profit margin gains secured in 2020 largely held despite inflationary pressures
-- Marketing investment across the business has been first half weighted
-- Operating cash outflow of GBP3.1m is first half weighted, in part due to GBP0.9m of one-off factors relatingto increased stock holding and the payment of VAT deferred from Q1 2020, and GBP0.3m for other working capitalmovements
Post Period End
-- July saw the successful launch of the 'Sleep Away' sleepover mattress with strong early sales
-- In September the new premium foam mattress range goes live
Current Trading and Outlook
-- Strong trading momentum in the UK&I has continued with revenues ahead of board expectations at +46% forJuly and August against 2019 pre-Covid equivalents
-- Group revenues in July and August increased 1% year-on-year against very strong comparatives and grew 26%on 2019 pre-Covid equivalents
-- Net cash as at 31 August 2021 increased to GBP5.9m, with minimal H2 outflow expected
-- The UK&I is on-course to report a healthy positive marketing contribution for the second consecutive fullyear as the region moves towards profitability in 2022
Cheryl Calverley, CEO of eve Sleep, commented:
"We are starting to reap the benefits of our three year rebuild strategy. Our UK&I business continues to go from strength-to-strength, with our re-engineered supply chain able to meet continued strong demand, with sales up 46% in July and August on 2019 pre-Covid comparatives. The ongoing expansion of the product ranges is gaining traction, with new accessory ranges driving growth in customer numbers, customer repeats and average spend through the year. This gives us increasing confidence for the full year outturn for the UK&I, which we expect to generate a healthy profit pre overheads for the second consecutive year.
Our focus for the next 12-18 months is on delivering a core UK business that is both growing and sustainably profitable, whilst building our scale in France to generate a similarly accretive business there in the medium term. To achieve these growth objectives we continue to expand our sleep wellness offering with a strong pipeline of new products for the second half of the year, alongside the launch of our personalised sleep content engine, which will serve information to customers on a wide range of sleep related topics, further creating a differentiated business which meets a fundamental and growing customer need and derives as a result improving profitability."
Footnotes
1. Financial data has been rounded for presentation purposes. As a result of this rounding the totals, comparatives and calculations presented in this document may vary slightly from the arithmetic totals or calculations using such data.
2. Marketing contribution is defined as the profit/loss after marketing expenditure but before overhead costs; a measure also referred to as operational profitability.
3. Underlying EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, impairment, share-based payment charges connected with employee remuneration and fundraising-related expenditure.
4. Based on the cohort who first ordered in H1 2019 compared to the cohort who first ordered in H1 2018 and then placed subsequent orders over the following two years.
For further information, please contact:
eve Sleep plc via M7 Communications LTD Cheryl Calverley, Chief Executive Officer Tim Parfitt, Chief Financial Officer finnCap Limited (NOMAD and Broker) +44(0)20 7220 0500 Matt Goode (Corporate Finance) Teddy Whiley Alice Lane (ECM) M7 Communications LTD +44(0) 7903 089 543 Mark Reed
Summary
Good first half
The UK&I business continues to gain momentum. Looking through all of the distortions to trading patterns resulting from the pandemic, revenues for the UK&I in the first half of the year were up 15% on pre-Covid H1 2019 comparatives. This growth is despite the decision to exit Amazon sales shortly after the end of H1 2020 and is testament to the success of the three-year rebuild strategy, which made structural improvements to the business across product and customer service, infrastructure and marketing, alongside a greater focus on profitable sales.
Trading momentum in the first half of 2021 in the UK&I continued throughout the first half, despite more challenging comparatives in May and June. Revenue growth for the half of 19% year-on-year in the UK&I was driven primarily through online channels, with a softer performance overall from retail partners, reflecting lock down restrictions over the first quarter and to some extent the permanence of channel shift to ecommerce. However, some retail partners bucked the trend with both Argos and Shop Direct performing strongly. Ireland recorded a strong performance, generating year-on-year revenue growth in excess of 130%, although it remains a small part of the overall business.
Demand was strong across the mattress range, with eve's hybrid mattresses selling particularly well. The underlying strength in the core products continued to be supported by the 2020 Which? survey, rating eve's original and its premium hybrid the two best mattresses in the UK. Five of the six eve mattresses now have a Which? Best Buy rating and in June 2021 eve's premium hybrid mattress received the Indy Best Award. Substantial progress has also been made in the period with range extensions into the wider bedding and sleep wellness categories, which was one of the three pillars of the rebuild strategy. Sales of premium bed frames remain strong and during the period, eve launched the new, entry level 'minimal' bedframe.
An important development in the period was the increase in ancillary sales of new products, which drove both an increase in average basket size and the number of customers in the period. Recently launched new products, including the weighted blanket, morphee sleep aid, the 'sleep away' sleep over range and the temperature balancing mattress protector, alongside a redevelopment of the 'baby sleep' offering, sold well and reflect eve's increasing focus on the broader sleep wellness category. The broadening of the product range in the UK has been a key contributing factor to the 31% year-on-year growth in the average order value and the improvement in the UK two-year customer repeat rate KPI, which for the first six months of 2021 stands at 14.5%, a 160 bps year-on-year increase.
eve's business in France is at an earlier stage in its development than the UK&I, with a lower level of brand awareness, a more limited range of products on the website and a less advanced customer experience. While much of eve's French business has been restructured over the last three years, there is still a lot of work to do in order to match the depth and breadth of product ranges and the high quality customer experience achieved in the UK. Restructuring has so far included manufacturing consolidation, the move to the more stable Shopify ecommerce platform and a reduced cost base, combined with defining a more distinct brand position for this local market. During these initial stages of restructuring the French business has received minimal marketing investment.
The majority of the first half of the year in France was spent preparing for the launch of the new marketing campaign - 'La vie en jaune', which commenced in May. Ahead of the new campaign, marketing spend remained minimal and retail partner store closures resulting from Covid restrictions, both impacted on revenues in the period, which were marginally lower year-on-year at GBP2.2m (H1 2020: GBP2.4m).
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