Shares in Parsley Box (MEAL:AIM) plunged 14% to 104.5p after the direct-to-consumer ready meals group delivered widened losses for the first half to June.

Nevertheless, the Edinburgh-based business remains confident it can serve up further growth in the seasonally-busier second half thanks to higher priced new ranges and marketing adjustments that are delivering ‘positive momentum on new customer recruitment’.

Floated on AIM in March this year, shares in the prepared food delivery firm slumped in July after it warned of a slowdown in sales following the loosening of Covid-19 restrictions.

Its shares were marked down again today despite Parsley Box reporting a 26% rise in first half revenues to £14 million driven by a sharp rise in active customers to a record 177,174, although new sign-ups ‘returned to a more normalised level’ versus the unusually high level of new customers recruited in the first half of 2020.

Unfortunately, investors were more focused on the fact Parsley Box continues to lose money, chalking up pre-tax losses of £5.4 million for the six months to June after marketing, staffing and IPO listing costs, versus a loss of £1 million in the same period last year.

CUSTOMERS WARM TO NEW CHILLED LINES

However, CEO Kevin Dorren insisted his charge is ‘well capitalised and is using the opportunity to invest in new customers, product innovation and broadening our team as outlined in the run up to IPO.’

He added that ‘the initial results of the investment in product innovation have been encouraging with the trial of chilled ready meals delivering an increase in customer basket size and lower new customer recruitment costs compared to our purely ambient offering.

‘Delivering our initial product innovation plan has been well received by our customer base’, enthused Dorren.

THE EXPERTS’ VIEW

AJ Bell investment director Russ Mould commented: ‘Parsley Box delivers ready meals that don’t need to be stored in a fridge or freezer direct to the “Baby Boomer+” demographic, so people aged 60 and over.

‘It’s an area with lots of existing competition and it is unclear exactly what marks the Parsley Box proposition out from other options.

‘The company also saw the rate of new customer additions slow as pandemic restrictions were eased and its target market felt more confident about going out to eat.

‘While Parsley Box is pleased with the response to its launch of chilled ready meals it is questionable whether this will really move the dial and there is a risk that as it looks to shift to higher price points it loses customers who are turned off by the increased cost.

‘With the shares having nearly halved on the 200p at which they floated in March, Parsley Box has a lot to do to generate investor appetite for its story.’

Yet Finncap remains ‘encouraged on the progress it is making to deliver the considerable promise that it holds: the launch of the new chilled food products is going well, with more new products to follow and the team has been strengthened with important new hires.’

Still forecasting a £4.6 million loss for 2021 ahead of a swing to pre-tax profits of £900,000 in 2022, the broker retained its 180p share price target, implying at least 70% upside from current lowly levels.

READ MORE ON PARSLEY BOX HERE

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Issue Date: 07 Sep 2021