- £57 million write down
- Lurch into loss
- Full-year revenue guidance unchanged
First-half results from online greeting cards-to-gifting platform Moonpig (MOON) were solid enough, with revenue up 3.8% to £158 million as growth in the namesake brand offset a decline at Netherlands-based arm Greetz.
Robust cash generation and rapid deleveraging gave Moonpig the confidence to announce an inaugural interim dividend of 1p on top of a maiden share buyback programme underway.
Unfortunately, the experience gifting division remains a major headwind for Moonpig, which trotted into the red after a £57 million write-down of this troublesome unit that is taking longer than expected to turn round.
The lurch into loss provided a catalyst for profit-taking after a strong year-to-date run for the shares, which tumbled 12% to 235p on the news.
CORE BRAND STRENGTH
Moonpig’s positive progress in the half to October 2024 was driven by double digit growth at the eponymous and core brand famed for its earworm of a jingle, where revenue rose 10% year-on-year amid strong sales and orders, more than compensating for a 4% decline at Greetz.
However, investors took a dim view of the 20.8% revenue decrease at Experiences, a category that remains challenging given macro headwinds in gifting.
Moonpig now expects a longer timeline for fully realising the revenue growth potential of Experiences, which includes the Red Letter Days and Buyagift brands.
This was reflected in a £56.7 million non-cash charge for the impairment of goodwill, resulting in a swing from pre-tax profits of £18.9 million to a £33.3 million loss, although adjusted pre-tax profits actually improved by 9% to £27.3 million thanks to top line growth combined with a lower interest bill.
MARGIN TARGET RAISED
Moonpig maintained its previously provided full-year 2025 guidance for mid-to-high single-digit revenue growth.
Management has previously suggested its expects adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) margins to be towards the top end of the 25% to 26% medium term range, but that range has now been upgraded to 26% to 27%.
WHAT DID THE CEO SAY?
CEO Nickyl Raithatha commented: ‘Moonpig’s performance has been underpinned by robust growth in order volumes, powered by our multi-year investments in technology and innovation and the structural market shift to online. Raising our medium-term profit margin target demonstrates our confidence in the outlook for the business.’
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘It feels as if Christmas cards have been losing popularity in recent years as people can’t be bothered to send things by post unless they’re parcels. With the price of a first-class stamp now costing more than many Christmas cards, there are even greater headwinds for greetings card companies like Moonpig.’
Coatsworth observed that Moonpig is having to work hard to keep growing and diversifying into other areas like experiences hasn’t gone smoothly.
‘A lot of people are still watching their pennies and the higher-priced experiences like getting people to sign up for a day at the racetrack or a spa treatment are hard sells in the current economic environment. Moonpig has had to moderate its growth expectations for this part of its business and that’s caused the share price to fall out of bed.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
