10th Jun 2022 10:08
(Alliance News) - ProCook Group PLC's current financial year will be a "lost one", analysts at investment bank Peel Hunt commented, while AJ Bell analyst Russ Mould said the London listing may struggle to win back investors in the wake of a profit warning on Friday.
A cost of living crisis has hit sales of its kitchenware range, a stark contrast to a pandemic-induced boost it has enjoyed in recent years.
ProCook's stock tumbled 38% to 48.44 pence each in London on Friday morning. Shares are down 67% from its 145p initial public offering price. ProCook floated on London's Main Market in November.
"ProCook has served up a dog's dinner of a trading statement," AJ Bell's Mould commented.
"The pots and pans seller joined the stock market after a period of success where the nation was stuck at home during lockdown and many people embraced their culinary skills. Now we've got a squeeze on consumer spending and a lot of people have found they can only afford the essentials in life. So, the idea of buying a new cast iron frying pan or a new set of knives has been put on ice and ProCook's growth expectations have been pared back."
Mould added investors are sceptical about firms that serve up earnings cautions so soon into their time on the stock market.
The analyst explained: "Companies that deliver profit warnings in their first year as a listed business typically find it takes a long time to win back the market's favour, as investors distrust anyone dishing out bad news so soon after floating."
For the fourth quarter, ended April 3, ProCook said it faced "exceptionally strong comparatives" from the prior year, when it benefited from pent-up demand following the lifting of Covid-19 restrictions and the reopening of retail stores.
Like-for-like sales have now weakened across the board, in line with the wider kitchenware market. However, revenue is still ahead of pre-Covid times.
ProCook sees the kitchenware market remaining in the doldrums for the rest of the new financial year. For financial 2023, it expects revenue to be broadly in line with GBP69.2 million seen in financial 2022.
ProCook now expects to deliver adjusted pretax profit of between GBP4 million to GBP6 million for financial 2023. It didn't provide its adjusted pretax profit figure for financial 2022. In the first half of financial 2022, the six months that ended October 21 last year, underlying pretax profit was GBP3.6 million.
Analysts at Peel Hunt commented: "ProCook is still winning market share, but the kitchenware sector has struggled so far in FY23. Making the assumption that life remains tough, we must downgrade numbers today."
Peel expects ProCook's pretax profit for financial 2023 to be GBP5 million, more than halved from the previous GBP11 million forecast.
"The biggest issue comes in retail where footfall is weak and conversion is difficult (against v tough comps): online ratios are OK but in general there is a malaise. The customer will return and ProCook should come out of the crisis stronger in the UK, but realistically FY23 will be a bit of a lost year," Peel added.
Peel rates ProCook at 'buy', saying its shares sill "offer value". It cut its price target to 150p from 200p, however.
The pressure ProCook faces are clear. Gfk's latest UK consumer confidence monitor dropped by two points to minus 40 in May, the lowest score since records began in 1974. In May 2021, the figure stood at a much more favourable minus 9.
ProCook Chief Executive Officer Daniel O'Neill added: "Whilst we are still seeing lots of new customers discovering the ProCook brand and buying our products, it is clear that many are tightening their belts. This creates a difficult short-term trading environment, but does not distract us from our strategic priorities, as we work towards our mission of becoming the first choice for kitchenware."
By Eric Cunha; [email protected]
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