Eve Sleep plc (EVE)
eve Sleep plc ("eve" or the "Company")
Pre-close trading update
eve Sleep, a direct to consumer sleep wellness brand operating in the UK, Ireland (together the 'UK&I') and France, today issues a trading update for the six months ended 30 June 2019 (the 'Period').
In line with the rebuild strategy announced earlier in the year, the focus in the Period has been on reducing EBITDA losses and improving cash management. Good progress has been made in both cases. In line with Board expectations, the Underlying EBITDA1 loss reduced by 50% to £5.9m (H1 2018: -£11.9m), driven by the refocus on just three markets, greater marketing efficiency and a reduction in overheads. Net cash at the end of the Period was £12.5m.
As previously guided Group revenue growth for the year is expected to be second half weighted. UK&I revenues for the Period were broadly flat at 0.9% below last year, owing to the planned reduction in H1 marketing investment, as well as the challenging retail backdrop and a highly promotional mattress market. France revenues decreased 29%, reflecting the Board's decision to prioritise margin contribution over revenue growth, as well as the additional work to localise and reposition the eve brand. Group underlying revenue2 for the Period decreased by 8% to £12.9m (H1 2018: £14.1m).
The Board expects revenue growth to return in H2 with the launch of new marketing campaigns, three new retail partnerships and the further benefits of the rebuild strategy coming through. The Company remains on track to deliver a full year EBITDA loss reduction in line with expectations as it continues to focus on cost management, whilst full year revenue is expected to be slightly below previous guidance, owing to softer than expected market conditions in H1.
Good progress is being made against the three pillars of the rebuild strategy:
New retail partnerships
Retail partnerships remain an important element of the strategy, raising brand awareness and increasing the number of places for customers to experience and purchase eve products. Since the Period end new partnerships have been signed with Argos, Dunelm and Homebase to sell eve products through their online sites. The Argos partnership is expected to commence around the end of this month, with Dunelm and Homebase launching later this summer.
James Sturrock, CEO of eve Sleep, commented:
"I am pleased with the financial and strategic progress made in H1, against a backdrop of substantial retail headwinds and the current competitive nature of the category. We have a strong new team in place, and there are early signs that the rebuild strategy is driving meaningful improvements in our key metrics in both the UK&I and France. Our focus on reducing losses, whilst creating a differentiated proposition as a sleep wellness brand, will underpin the business and lay the path to long-term profitability.
We have some exciting plans and partnerships launching and I look forward to seeing more progress against our strategy in some of the biggest peak trading periods for the business in the second half of the year."
1 Underlying EBITDA is defined as Group earnings before interest, tax, depreciation and amortisation and before share based payment charges. In the current year the performance relates to the three core markets of the UK&I and France. In the prior year it includes all the additional territories that eve was trading in at the time.
2 Group underlying revenue is defined as revenue for the core three markets of the UK&I and France for both the current and prior year periods and is used to provide a more meaningful year-on-year comparison. In July 2018, the Board reviewed the number of territories that eve traded from, deciding to focus on these three markets and withdrawing from the other territories.
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