Parsley Box cuts losses, but orders and sales lag

Edinburgh-based ready meals firm Parsley Box Group plc on Wednesday published a trading update for the five months ending May 31 and revised guidance for FY22.

The firm said sales growth is anticipated to resume in the second half of the year, and losses to halve.

Parsley Box joined the stock market in March last year at £2 per share — but the firm has suffered a torrid first year as a public company with its shares falling around 90% to around 18p.

“Following completion of the £6.1m fundraising at the end of March, the group has continued product development at pace, stabilised stock levels with >95% ongoing availability and increased new customer marketing spend after the preceding cut backs,” said Parsley Box.

The group’s drive to improve returns on marketing spend remains the key focus.

“All marketing activity has been targeted at consumers with the greatest need for our product range together with those who value the personal service provided by our contact centre, the ease of our online platform and the speed of our delivery.

“Marketing spend has concentrated on cost effective campaigns to win back lapsed customers and new customer acquisition.

We have made some progress.

“For the five months ending 31 May, the adjusted EBITDA loss is circa 10% better than management expectations, with losses reduced by circa 44% from the prior year.

“Average order values have continued to grow at a double-digit rate, with good stock availability and ongoing product development supporting the growth in basket size.

“However, to date, order volumes have been behind expectations.

As a result of the lower order volumes, sales for the five months ending 31 May 2022 are circa 11% below management expectations.

“We have focused on delivering gross margins, with process improvements made to order fulfilment delivering gross margin improvements that have more than offset product and delivery cost inflation, and overheads have been well managed.

As recently announced, a new marketing director joins this month and will lead on developing the Parsley Box brand and cost-effective customer engagement and acquisition.

“Upcoming product releases include further expansion of our food range into meals for two to increase our available market and the launch of upsell products such as sides and snacks to increase average order values. 

“The group has  also begun its strategy to move beyond meals with the first gift hampers selling out for the Queen’s Jubilee, and will launch a new gift range curated for the over 65s market in the second half of this year.

Parsley Box remains confident that as one of very few brands solely focused on the underserved over 65 demographic, it will return to revenue growth in the second half of the year by increasing awareness of the brand in our target customer group, providing excellent value to our existing customers, continuing product innovation in food and adding new products beyond food.

“The current macroeconomic environment is, however, presenting challenges and therefore we are taking a prudent view for the remainder of the year and we now expect revenue to be in the region of £22.5m.

“Where practical, the group is buying some stock ahead of plan to hedge cost increases whilst balancing cashflow, and has to date minimised price increases for customers. 

“These measures together with new product releases and ongoing efficiencies in order fulfilment are expected to keep gross margins ahead of management expectations for the rest of the year.

“The impact on adjusted EBITDA loss for the year is therefore limited, and is expected to improve 44% from last year, slightly below our expectation, at circa £4m.

“The group remains well funded following the £6.1m fundraising completed in March 2022.”

Parsley Box CEO Kevin Dorren said: “We continue to navigate a challenging consumer environment suffering from a well-documented reduction in consumer confidence, but continue to make progress, anticipating EBITDA losses for the full year to be approximately £4m, 44% better than last year.

“Our excellent value ambient meal range is well suited to allow us to hedge short term inflation pressure and we hope this will help alleviate pressure on our customers’ wallet.

“We remain well funded and confident that our product innovation, recommenced targeted marketing strategies and strong cash position will enable us to retain and grow our customer base in our over 65 target market, and return the group to sales growth in the second half of the year.”