The information contained within this announcement is deemed to constitute inside information as stipulated under retained EU law version of the Market Abuse Regulations (EU No. 596/2014) (the "UK MAR"), which is part of UK law by virtue of the European Union (withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
For immediate release
8th November 2022
Seraphine Group plc
("Seraphine" or the "Group")
Half Year Trading Update and Full Year Outlook
Seraphine, an international digitally-led maternity and nursing wear brand, provides an update on trading for the 26 weeks ending 2nd October 2022 and full year outlook.
· Product Revenue in H1 is expected to be c. £19m versus the previous half year at £20.8m, with an adjusted EBITDA (post IFRS-16) loss of c. £1.5m. The period was impacted by the continuing challenging retail trading environment and softer trading during the summer months, consistent with the broader retail sector.
o Own digital platform sales declined c. 9% YoY, c. 12% CCY, primarily driven by the previously flagged inflation in marketing costs and, as a result, lower than planned spend.
o Digital Partner revenue was lower, as expected, as the business manages this channel with a focus on improved profitability.
o Trading in our retail stores is starting to improve, delivering c. 20% YoY growth in the period, but still remains behind pre-pandemic levels. Our retail stores are and always have been a very small part of our overall business
· Gross Sales and Basket sizes increased YoY but as returns rates reverted to pre-pandemic levels, net sales were impacted. Despite this increase we are not seeing returns rates across our markets exceed pre-pandemic levels, unlike many other ecommerce retailers. We believe this is due to our niche customer demographic, the needs-based nature of our product and carefully balanced promotion and pricing.
· Gross margin improved during the period as we carefully balanced a higher promotional stance with April's price increases.
· Inflation in Customer Acquisition Cost ('CAC') has reduced throughout Q2 at c. +43% YoY, down from the previously reported c. +60% in Q1. We have started to execute our strategy to further diversify our marketing channels and are optimistic that these actions will deliver further improvement in CAC; however it is too early to quantify timelines or magnitude.
· Net debt at the end of the period was c. £3.5m, with cash of £3.3m and RCF headroom of £0.5m. Net debt position is expected to improve by the end of the second half in line with stock unwind.
· Stock levels are expected to return to normal in the next 12 months and, with the high continuity mix of our product, we expect to be able to achieve this whilst continuing to maintain or improve gross margin YoY.
Current trading and outlook
The summer months have been particularly challenging, as they have been across the entire retail sector. However, a number of KPIs have improved through the period as we have executed on our stated plans to strengthen the business. The start of the Autumn/Winter season was particularly encouraging but more recent trading has been weaker, again, in line with the broader sector. We expect volatility in trading to continue throughout FY23 but believe H2 will be an improvement on H1 as we start to annualise against normalised returns rates and higher marketing costs and take benefit from seasonally higher basket sizes and lower return rates. As a result, we expect H2 to be profitable on a post-IFRS16 Adjusted EBITDA basis. However, we are mindful of the challenging UK economic environment and the impact on consumer confidence and disposable incomes.
David N Williams, CEO of Seraphine said:
"Along with many retailers, the summer months were challenging for Seraphine. The continued pressure on marketing costs and weak consumer sentiment, coupled with our own strategic focus on improving margins to drive future profitability, have resulted in a decline in sales over the period.
"An encouraging start to our Autumn/Winter season has been followed by more recent weaker trading. We have observed a declining trend in CAC inflation through the period, with an expectation that our strategic rebalancing of marketing investment will lead to further improvement in the medium term. Our outlook is for the second half to be better than the first given the extremely weak summer period and softer forward comparatives, although we expect performance trends to remain highly volatile throughout."
The Board will provide a further update in the Group's Interim Results which are expected to be published in December 2022.