MEAL.L Regulatory News (MEAL)

12 April 2022

Parsley Box Group plc

("Parsley Box", the "Company" or the "Group")

Preliminary results for the year end 31 December 2021

Parsley Box Group plc (AIM: MEAL), the direct-to-consumer provider of ready meals focused on the over 65s today announces its preliminary results for the year ended 31 December 2021.

During a challenging year for direct-to-consumer ("DTC") brands, Parsley Box focused on its core loyal repeat customers. Marketing spend was reduced in H2 2021 to ensure that the limited product supply was focused on our core repeat customers and service levels maintained. This decision limited growth in the second half but allowed the team to evaluate every part of our operation to ensure a solid platform for long term growth.

Financial highlights

· Repeat customer revenue grew by 18% to £20.7m (FY20: £17.5m)

· Total revenue grew by 4% to £25.5m (FY20: £24.4m)

· Cash closed at £2.5m (FY20: £0.9m)

Operational highlights

· 15% growth in repeat customer order numbers demonstrating increasing customer loyalty

· 8% growth in active customer numbers showing increasing brand awareness

· 3% growth in repeat customer AOVs despite supply chain headwinds

· Significant development of our product range:

o launch of a new long-life chilled range

o 50% of the cupboard stored meals updated with improved recipes

o overall menu extended by 20%

· Strengthening of our management team with key new hires from retail, food innovation and high growth tech

· Stock levels although lower year on year were significantly rebuilt to around 30 days by the year end following second half availability issues

· In depth marketing review completed and new marketing strategy implemented for FY22

Post Period events

· Over £6m raised from shareholders enabling the Group to recommence higher targeted marketing and execute its growth strategy

Current trading and outlook:

After a challenging 2021, the £6m equity fundraising completing in March 2022 gives the Board confidence that 2022 will be the beginning of a new chapter in the Group's development.

Stock levels have continued to increase since the year end and more than 95% of product lines are now available, delivering good growth in basket size and high service levels. The Group is progressing well towards its FY22 target of 25% growth in repeat AOV through an increased pace of product innovation and good stock availability.

The Group is focused on implementing the fresh targeted marketing strategy. This is already showing early positive signs of acquiring higher spending customers. Whilst marketing expense was reduced in the first quarter by circa 50% of the FY21 average to test the new strategy, higher levels of marketing spend has resumed from April to stimulate higher order numbers.

Costs are being managed so that adjusted EBITDA losses have reduced in the period to date and are in line with management expectations for FY22.

Despite the wider macroeconomic challenges, with the funding complete, stock levels in good shape and the new marketing strategy showing early positive signs, the Board remains confident about the year ahead.

Kevin Dorren, CEO, said:

"We have stabilised and improved the business significantly. The new management team members have settled in and with the funding now complete, we are well placed to execute our growth strategy for 2022 and beyond. The Parsley Box team comprises experience, commitment, inspiration, creativity, and leadership - the skillset for business growth. We are confident and excited about the future, and the team and I are determined to build on the current stronger foundations to expand and grow.

I would like to thank our staff for their hard work during the year. I am incredibly proud of everyone at Parsley Box and how they adapted to the disruption caused by COVID-19 and for their efforts in an extraordinarily busy year having listed in March 2021. I would like to also thank our customers for their continued loyalty and support, our suppliers for rising to the challenges in a difficult year in the food manufacturing industry and our shareholders who have continued to support the Company."

For more information, please contact:

Notes to editors:

Parsley Box was founded in March 2017 specifically to target the fast-growing and underserved over 65s demographic. The Group promotes, supports, and celebrates independent living and wellbeing by making mealtimes for the over 65s easier and more enjoyable. The product range comprises over 120 products, of which over 50 are single portion sized meals spanning various popular cuisines. The dishes are made in the UK using the highest quality ingredients and provided at a competitive price point with quick delivery times to the customer's door.

CHAIRMAN'S STATEMENT

2021 was the start of our journey as a public company, having experienced significant growth in 2020 through a turbulent consumer market. There followed the well-publicised supply chain constraints and inflationary retail environment which significantly impacted the development of the business and the cessation of marketing spend to attract new customers. As a result, our first year as a listed company was very challenging and we reported revenue increased by 4% to £25.5m and adjusted EBITDA loss increased to £7.1m.

Despite these challenges, the Group built on the increasing loyalty to the brand by delivering 18% growth in repeat order revenue and growing active customer numbers by 8%, and as we stand today, most of the supply chain challenges are now within our control.

Other key successes which will support longer term business growth were the significant expansion of our product range; the increase in our brand awareness; and the strengthening of our management and operational team. The innovation the new team is bringing to both product development and marketing is leading to further engagement from our core market segments, which in turn will enable us to become more deeply embedded within our consumers' lives and to expand our offering beyond core food products to other areas of wellness and independent living.

The Parsley Box vision

Parsley Box is one of the few brands solely focused on the over 65s. This gives the business the opportunity to offer an increasing range of products and services on its platform to promote, support and celebrate independent living and deliver significant social impact through the improvement in quality of life for our consumers.

The Group is developing its "Food - Food Plus - Beyond Food" strategy over the medium term. The food and drink range expansion continues at pace with new products for seasonal occasions, meals for two and more upsell items to increase basket sizes and increase consumption occasions in the pipeline for FY22. In the medium term, the product range will expand beyond food into complementary products for the over 65s to include gifting and high repeat purchase items like wellness, and potential service offerings are also under review. Furthermore, the Group plans to develop a membership programme to build a community of customers to increase brand loyalty, foster long-term relations and gain consumer insight to inform future product and technology roadmaps.

The seismic demographic shift of the over 65 consumer base, their affluence, aligned with the strong desire to remain independent within the comfort of their own home should enable the Group to grow in years to come. Our opportunity is to match our values with the social purpose that has been largely forgotten by an underfunded social care system, continued pressure on the NHS and a rapidly ageing demographic within the UK.

The Group is aiming to balance short term performance with its key position as a challenger brand for this demographic. Just as younger consumers align with brands that go beyond "selling" to brands with purpose we truly believe that our older demographic is looking for the same.

Outlook

Post the year end, gross proceeds of £6m were raised to facilitate the strategy above to be executed. After a challenging 2021, the Board anticipates that 2022 will be the beginning of a new chapter in the Group's development.

Stock levels have continued to increase since the year end with more than 95% of product lines now available, delivering good growth in basket size and high service levels. The Group is progressing well towards its FY22 target of 25% growth in repeat AOV through an increased pace of product innovation and good stock availability.

The Group is focused on implementing the fresh targeted marketing strategy which is already showing early positive signs of acquiring higher spending customers. Whilst marketing expense was reduced in the first quarter by circa 50% of the FY21 average to test the new strategy, higher levels of marketing spend has resumed from April to stimulate greater order numbers.

Costs are being well managed so that adjusted EBITDA losses have reduced in the period to date and are in line with management expectations for FY22.

We have made significant progress in broadening our team in 2021 and we believe we are well placed to grow the business and its relevance to our target customers throughout 2022.

Chris van der KuylChairman 

CHIEF EXECUTIVE OFFICER'S STATEMENT

Since its foundation in 2017, Parsley Box has continued to be one of very few businesses entirely focused on the older consumer. The Group is a leading innovator in the DTC ready meal market, providing easy and nutritious meals for the over 65s, delivered fast to the customer's door.

In the year under review Parsley Box, along with many other UK food companies, faced and overcame a number of challenges and I am now pleased to report a strengthening business with many positive key markers for future success.

Operations

During a challenging year for DTC brands, Parsley Box focused on our core loyal repeat customers. This required us to reduce marketing spend in H2 2021 to ensure that limited product supply was focused on our core customers. This decision limited our growth in the second half but allowed the team to evaluate every part of our operation to ensure a solid platform for long term growth.

This focus allowed us to continue to grow repeat revenue in 2021 by 18% over 2020 despite lower stock availability in H2 2021, and to maintain product margins at circa 50%.

Growing demographic

Parsley Box currently targets customers in the 65+ age bracket, a demographic that is set to grow exponentially in future decades. Projections produced by the Office for National Statistics (ONS) show that through the latter half of the 20th Century, the UK population has been steadily getting older and this trend is projected to continue in the future.

In 2020, there were 16 million UK residents aged 60 years and over, representing 24% of the total population, and looking ahead 20 years to 2040, there will be a further 5 million projected UK residents aged 60 years and over, taking the total number in this group to 21 million, making up 30% of the total population. This is the only demographic in the UK that is growing at this rate.

This provides enormous potential for Parsley Box, allowing the focus to remain on the older customer buying our food predominantly for convenience.

The brand also aims to empower the over 65s, with a communications drive to capture the essence of the Baby Boomer + generation as one living a full, colourful, and inspirational life. By supporting a media culture that smashes the stereotypes of older people, we are aligning Parsley Box with a customer base that doesn't want to be patronised by the traditional and tired 'pensioner' marketing tactics.

Product range

The long-term growth of the brand has been at the forefront of the product development strategy. During 2021, 50% of the Group's product range was relaunched with new recipes, and a new premium chilled range was introduced. The new products have been integral to reactivating lapsed customers and also widened the offering to our growing active customer base.

Delivering new products every quarter to surprise and delight our loyal customers, launching products for seasonal occasions and expanding our range into meals for two are all part of our future product development plan.

The team

We are very fortunate to have a highly motivated and committed workforce, recently strengthened by top level appointments to the senior team.

Simon Russell (Managing Director), Holly McComb (CFO), Cassandra Suddes (Head of Product), and Chris Hodder (Head of Technology) have strengthened the leadership of Parsley Box, bringing experience, inspiration, and guidance to the business.

All have relevant growth experience, Cassandra from a similar food innovation role at Marks and Spencer, Simon from his many years at John Lewis and most recently Amazon, Holly from working with start-ups and AIM-listed companies, and Chris from his roles in high growth technology businesses, which has been quickly and efficiently integrated into propositions for the ongoing successful development of Parsley Box.

We are also delighted to welcome Emma Oberholzer as Head of People who joined in January 2022.

We are a Living Wage Employer and are entirely committed to investing in our people. We have a real opportunity to harness the culture through a carefully curated people value proposition that will attract and retain top talent. Our people experience will be co-created with our people, aligned to our mission and values and will build on our work/life balance offering with a family-first ethos.

Investors and suppliers

None of our successes would have been possible without the unwavering support of our key investors and suppliers, who have all worked with us tirelessly to meet targets, find solutions and deliver over and above the highest expectations.

I thank all for their continued contribution which has been at the heart of driving Parsley Box forward to its current position.

Sustainability

We continue to strive to shorten the supply chain, reduce waste and food miles and ensure we are fastidious in monitoring and policing all areas of provenance. Parsley Box has worked hard and continues to do so in reducing packaging waste and seeking efficient recycling processes.

Supporting British and local suppliers and manufacturers is essential to this continued process of sustainable and ethical business. We whole-heartedly welcome the continued support and partnership we have with suppliers and manufacturers. The open relationship we have with all those we work with is based on long term trust and a common goal to ensure the best possible outcomes for all within the food cycle. I thank all of those who continue to work with us in achieving these results.

Long term vision

Looking ahead our target customer base is projected to grow by around 30% between 2020 and 2040. This offers considerable opportunities for expansion and growth as many of these Baby Boomers will seek convenient, quality, provision of ready meals.

Our investment in enlarging and developing the product range together with innovation and research into further additions to our offer is already delivering promising results.

2021 was extremely challenging, but we have stabilised and improved the business significantly and following the fundraising in March 2022 we are funded to execute our growth strategy.

We are confident and excited about the future. The team is determined to build an even stronger foundation from which to expand and grow.

Kevin Dorren

Chief Executive Officer

CHIEF FINANCIAL OFFICER'S STATEMENT

FY21 provided good learnings for the Group that have prompted a focus on shoring up the supply chain, enhancing returns on marketing spend and increasing reorder frequency.

Financial Highlights

 1 Adjusted to exclude IPO costs and share based payments.

Revenue

Total revenue grew by 4% to £25.5m (FY20: £24.4m).

Notably, repeat customer revenue grew by 18% to £20.7m (FY20: £17.5m) and accounted for a higher proportion of total revenue of 81% (FY20: 72%). This growth was partially offset by a 31% decline in new customer revenue of £4.7m (FY20: £6.8m). In order to minimise service disruption to our loyal repeat customers caused by the supply chain issues felt across the sector in the second half of the year, the difficult decision was taken to reduce customer acquisition marketing. This resulted in a decline in new customer revenue but enabled repeat customer revenue to be maintained.

Key to the Group's revenue model is attracting and retaining customers with a frequent reorder cycle and expanding the Group's product range to increase AOV. The revenue drivers are repeat order numbers, AOV and the number of active customers, all of which delivered year on year growth.

Repeat customer order numbers grew 15% to 488k (FY20: 425k) showing an increasing loyalty to the brand. Repeat AOV grew by 3% to £42.51 (FY20: £41.28) and had been growing more strongly until the stock availability issues. Active customers also grew by 8% to 167k (FY20: 154k).

Product margin

Product margin grew by 3% to £12.5m (FY20: £12.2m). Product margin as a % of revenue decreased slightly to 49% (FY20: 50%) due to higher sales promotions as opposed to an increase in average product costs which were well managed during the year.

Marketing expenses

Marketing expenses grew by 42% to £8.3m (FY20: £5.8m), split circa 60% in H1 and 40% in H2. Investment was made in brand building through television campaigns and events to drive long term consumer awareness. However, as stock availability became an issue in the second half of FY21, marketing was cut back to maintain service levels.

Customer acquisition costs ("CAC") rose by circa 80% year on year and total marketing expenses rose from 24% of revenue in FY20 to 33% in FY21, prompting an in depth review of marketing strategy.

A number of corrective measures have been initiated to improve payback on marketing expenses. Customer acquisition is now focused on market segments with the greatest propensity for regular reordering. These are typically slightly older customers who value the convenience of the product range and the high touch offline service available should they require it. Tailored offline and online customer journeys are being developed to support a higher frequency reorder cycle and increase in average customer life time values ("LTV"). Improving the LTV:CAC ratio is a strategic priority for the Group.

Adjusted EBITDA

Adjusted EBITDA loss was £7.1m (FY20: £2.2m) and excludes IPO costs and share based payments. The higher loss was largely due to the £2.5m increase in marketing expenses. G&A expenses also rose by £2.4m driven by a 34% increase in employee numbers to an average of 117 (FY20: 87), to support the long term growth objectives of the Group, together with the additional costs associated with running a public company.

Cash

Cash closed at £2.5m (FY20: £0.9m). The Group also has a £0.5m unutilised overdraft facility.

The Group raised £10.7m from the issue of ordinary shares and the exercise of share options, £5.7m in January 2021 and £5.0m from the IPO in March 2021. Net cash outflow from operations was £8.3m (FY20: £1.0m) and £0.6m (FY20: £0.4m) was paid for office lease obligations.

Post year end the Group closed the equity funding round, raising gross proceeds of slightly over £6m.

Stock and supply chain

As reported in September 2021, the Group, together with the wider retail sector, experienced labour issues in its supply chain that significantly restricted stock availability in the second half of the year. As part of the product relaunch, the Group began the process of transitioning to a new lead supplier prior to the supply chain labour shortages, and as stock was consumed from old lines there was low availability of the new lines. This resulted in a prolonged period of low stock.

By year end, stock levels began recovering to £1.2m (FY20: £1.5m), up 47% from June, and providing an average of 30 days (FY20: 33 days) of cover.

Holly McCombChief Financial Officer 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2021

 The results for the years shown above are derived entirely from continuing activities.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2021

The financial statements of Parsley Box Group plc, registered number SC685656 were approved by the Board of Directors and authorised for issue on 11 April 2022.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

CONSOLIDATED STATEMENT OF CASHFLOWS

For the year ended 31 December 2021

Notes to the preliminary information

1. Basis of preparation

Basis of accounting

Parsley Box Group plc (the "Company") is a public limited company incorporated and domiciled in the UK.

This financial information does not include all information required for full annual financial statements and therefore does not constitute statutory accounts within the meaning of section 435(1) and (2) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of International Financial Reporting Standards. These should be read in conjunction with the Financial Statements of the Group as at and for the year ended 31 December 2021.

The comparative figures for the year ended 31 December 2020 are the results of the Company's subsidiary, Parsley Box Limited for that financial year. The comparatives are not the Subsidiary's statutory financial statements for that year - those accounts have been reported on by the auditors and delivered to the Registrar of Companies.

The report of the auditors for the year ended 31 December 2021 was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The preliminary financial information was approved by the Board of Directors on 11 April 2022.

Functional and presentation currency

The financial information is presented in pounds Sterling, which is the functional and presentation currency of the Company. Results in this financial information have been prepared to the nearest thousand.

Basis of consolidation

The consolidated financial statements incorporate the results of Parsley Box Group plc, and all of its subsidiaries. Subsidiaries results are consolidated in the financial statements from the earlier date that economic benefit is obtained or control commences until the date that control ceases.

On 31 March 2021, the whole share capital of Parsley Box Limited was acquired by the Company via a share for share exchange agreement. The Directors have considered the accounting policy that should be applied in respect of the consolidation of the Group formed in anticipation of Admission to AIM. They have concluded the transaction described above represented a combination of entities under common control and in the absence of specific guidance in IFRS the Group has selected an appropriate accounting policy using the hierarchy described in paragraphs 10 to 12 of IAS 8, which permits the consideration of other Financial Reporting Standards. The Group has adopted the principles of merger accounting from FRS 102. Accordingly, the consolidated financial statements for the Group have been presented as if Parsley Box Limited has been owned by Parsley Box Group plc throughout the current and preceding periods. The comparative results include the results of the merged entity, the assets and liabilities at the previous balance sheet dates and the shares issued as if they had always been in issue. 

A subsidiary is an entity controlled by the Group, i.e. the Group is exposed to, or has the rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its current ability to direct the entity's relevant activities (power over the investee). All intra-Group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The total comprehensive income, assets and liabilities of the entities are amended, where necessary to align the accounting policies.

The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values (with a few exceptions as required by IFRS 3 Business Combinations).

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

The acquisition of assets that falls outside the scope of IFRS 3 are accounted for by bringing the assets and liabilities of the acquired entity into the financial information at their nominal value from the date of acquisition. Comparative information is not restated.

Adoption of new and revised standards

New standards, amendments to standards and interpretations which came into effect for accounting periods starting on or after 1 January 2021 and have had an impact on the financial information are as follows:

Amendment to IFRS 16 'COVID-19-Related Rent Concessions' (effective 1 April 2021) - allows for lessees to simplify how they account for rent concessions required as a direct result of COVID-19 up to June 2022. This did not affect the Group in the year to December 2021.

'Interest rate Benchmark Reform - Phase 2' (effective 1 January 2021) relates to the impact of moving away from interbank offer rate (IBOR) benchmarks on lending and borrowing such as LIBOR, EURIBOR or TIBOR. Phase 2 addresses the issues that might affect financial reporting when an existing interest rate benchmark is replaced. This is not deemed applicable for the business as it has no such borrowing, but we will review terms of any borrowing that we may have in the future and consider the financial reporting impact at that time.

No early adoption of any amended standards with effective dates beyond 31 December 2021 have been made accordingly.

Going concern

The Group recently completed an equity fundraise of £5.7m (net) to support a more focussed growth strategy following the reported loss before tax for the year ended 31 December 2021 of £9.7m. The new strategy, supported by recruitment in senior positions, is documented in the Fundraising Circular available on the Company's website at: corporate.parsleybox.com/investors/documents/.

The Board has approved forecasts for the 12 months following the date of approving these financial statements and have applied sensitivity analysis to these forecasts, overlaying what they consider to be reasonably possible scenarios that could arise in that period. These scenarios look at downside risks associated primarily with order volumes and achieved margin, and take account of anticipated inflationary pressures on all key input costs.

The forecasts were produced on the following bases :

· A base case scenario which assumes a steady reduction in operating losses within the forecast period. This scenario assumes improved marketing payback generating a return to top line growth, new product introductions driving modest margin improvement and allowing for inflationary offset, ongoing order fulfilment efficiencies in line with recent performance and good allowance for discretionary overhead spend to support the growth strategy.

· A downside scenario which assumes sales are circa 17% lower than the base case for the next 12 months, gross margins as a percentage of revenue are also circa 5% lower than the base forecast and less discretionary overhead spend.

The base case and downside scenarios both indicate that the Group will continue to operate within the available cash headroom throughout the forecast period.

Based on the assessment outlined above, the Directors have a reasonable expectation that the Group has access to adequate resources to enable it to continue in operational existence for a period of at least 12 months from the date of approving these financial statements. Accordingly, the financial statements of the Group have been prepared on a going concern basis in accordance with UK-adopted International Accounting Standards and the requirements of the Companies Act 2006.

2. Operating loss

3. Inventory

Cost of inventories recognised as an expense during the year to 31 December 2021 is £13,228,000 (2020: £12,376,000).

4. Trade and other payables 

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

Contract liabilities represent consideration received for performance obligations not yet satisfied in relation to the Group's loyalty point scheme. A reconciliation of the contract labilities movement in the year is detailed below:

The directors consider that the carrying amount of trade and other payables and lease liabilities approximates their fair value.

5. Leases

The Group leases buildings for its head office in Edinburgh, Scotland. The current lease was agreed on 18 December 2020 and will run for the 22 month period to 11 October 2022. The Group has recognised a right-of use asset and a lease liability applying a discount rate of 3.1% for this lease.

The carrying value of right of use assets, and lease obligations recognised with respect to these leases are shown below:

 Right-of-use assets

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

Lease liabilities

6. Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of Ordinary Shares in issue during the year.

Diluted loss per share is capped at the basic loss per share as the impact of dilution cannot result in a reduction in the loss per share as the Group is loss making.

The weighted average number of shares at 31 December 2021 was 40,934,754 (2020: 34,229,170) for basic and diluted loss per share.

Adjusted loss per share excludes IPO costs and share based payments and the tax effect of these adjustments. The Group has adjusted for IPO costs as they are one-off in nature and are exceptional to normal trading expenses. Share based payments are considered to be exceptional in nature as well.

Post year end 30,326,619 ordinary shares of £0.01 were issued.