(Alliance News) - eve Sleep PLC issued a revenue warning on Friday and said merger talks with fellow online mattress sale firm Simba Sleep Ltd have ended.
eve Sleep shares, which were suspended during talks, resumed trading and were down 35% at 3.20 pence in London in morning trade.
The company announced the merger talks in August but said it "has decided that now is not the right time to pursue the potential merger". eve Sleep said it is still considering "further acquisitive growth opportunities" alongside organic growth.
eve Sleep will instead focus on its "rebuild plan", as announced in its 2018 annual results. This plan aims at focused investment in marketing, as well as a broader range of products and a "lower friction customer experience".
The company also issued a results warning, announcing that given the "economic backdrop" and "heavy discounting" from competitors, the company now expects revenue to drop to between GBP25 million and GBP27 million for 2019. This would mean a drop of as much as 28% from the GBP34.8 million annual revenue figure reported for 2018.
eve Sleep said it has worked to cut operational costs and control overheads, which should produce a stronger performance in terms of earnings before interest, depreciation, taxation, and amortisation - and first half loss is likely to be cut in half year-on-year. The firm's 2018 interim adjusted Ebitda loss was GBP11.9 million.
"It is anticipated that the reduction in revenue expectations will have some flow throw to the Ebitda loss, though a substantial reduction year-on-year in H2 and for the full year is still expected," said eve Sleep.
The firm will publish its interim results for 2019 on Thursday next week.
Chief Executive James Sturrock said: "We have continued to make progress with our rebuild strategy and have taken action to reduce our cost base, including a significant reduction in administrative expenses compared to 2018 along with a refocused and reduced marketing investment strategy removing inefficient activity. As detailed above, we anticipate a significant reduction in losses in 2019.
"The opportunity to create a leading sleep wellness brand remains undiminished and I am confident that eve's rebuild strategy, centred around a differentiated brand positioning, expanded product range, lower friction customer experience, combined with increasing brand awareness sets out a clear path to building a profitable business, which delivers for shareholders. We will continue to examine ways of accelerating eve's rebuild strategy and the move to profitability, through organic and inorganic growth."
