Shares in online card and gifts company Moonpig (MOON) dropped 6% to 398.6p after it warned that the re-opening of high street outlets run by rivals will pull growth sharply down from the elevated levels during lockdown.
Moonpig has benefited from its purely online presence which prompted higher purchase frequency and drove revenues up 113% to £368.2 million for the year to 30 April 2021. EBITDA (earnings before interest, depreciation, and amortisation) grew 107% to £92.1 million.
The results were ahead of expectations at the time of the firm’s listing and at the top end of the range indicated in February, but investors were more focused on the forward guidance.
BACK DOWN TO EARTH
The company said that it expected fiscal 2022 revenues to be about 5% ahead of pre-Covid levels at around £250 million-to-£260 million, implying a drop of 30% below current levels reflecting ‘normalisation’ of customer purchase frequency from elevated levels.
Investment director at AJ Bell, Russ Mould commented, ‘the problem for Moonpig, which feels inevitable in hindsight, is that while these numbers show impressive growth, forward guidance is much less positive, reflecting the fact that, with rivals’ physical shops reopened, it is going to lose some of the market share it won in lockdown from being an online operator.’
PRIORITISE MARKET SHARE OVER PROFITS
The priority for the current financial year is to invest in marketing to capture market share rather than maximise profits. The company is hoping that it can retain new customers gained to drive an ‘enduring uplift’ in the scale of the business.
The firm claims that the scale of its proprietary data with over 50 million reminders set, is a growing source of competitive advantage.
In the medium term Moonpig is targeting annual revenue growth in the mid-teens and an adjusted EBITDA margin of between 24% and 25%.
Chief executive Nickyl Raithatha said, the long-term growth opportunity remains vast, with the majority of the card and gifting market still offline, and we have never been in a better position to capture this growth.’
