Shares in Parsley Box (MEAL:AIM) plunged 11.6% to 38p after the struggling direct-to-consumer ready meals group announced plans for a new year fundraise in order to help get the business back on track.
Investors took the view that the loss-making prepared food delivery play, which is the worst performing IPO (initial public offering) of 2021, will only be able to raise more money if new shares are issued at a chunky discount.
Cash call concerns overshadowed news of recently improved trading, with supply having improved markedly, as well as a better than expected year-end net cash position at the Edinburgh-based firm.
FRESH FUNDS
In a pre-close trading update, Parsley Box said that in order to support its investment plan, it intends to raise fresh funds during the first quarter of 2022.
‘Certain members of the board together with their associates have indicated their intention to invest, demonstrating their strong support for the company,’ insisted the troubled ready meals delivery specialist.
The fundraise plan left shares in Parsley Box, which floated on AIM in March, trading 80% below their 200p issue price and follows two profit warnings, the first pinned on a sales slowdown following the loosening of Covid-19 restrictions and the second blamed on supply chain problems impacting stock availability.
Today’s encouraging news is sales for the year to December are expected to come in ‘marginally over’ Parsley Box’s previous £25 million forecast, representing ‘modest’ year-on-year growth, and the company will close the year with a better than expected £2.2 million of cash in the coffers.
Stock levels have been rebuilt in recent weeks, just in time in for any lockdown-spurred uptick in Christmas demand, and trading is in line with Parsley Box’s late September guidance.
Parsley Box has completed an overhaul of its product range and launched a well-received new chilled range in the second half.
It has also beefed-up its management team by appointing former John Lewis executive Simon Russell as managing director. He’ll focus on the day-to-day running of the business, allowing CEO Kevin Dorren to focus on the strategic development of Parsley Box as the ‘go-to’ platform for the ‘Baby Boomer+’ demographic.
THE EXPERTS’ TAKE
‘Revenue is now expected to be marginally over the £25 million forecast for full year 2021 and we have edged our forecast ahead by £400,000 to £25.4 million to reflect the update,’ said broker FinnCap, which sees losses widening from £3.2 million to £8 million.
The revenue beat has been ‘helped by improved supply and a positive customer reaction to the new recipes of existing ambient meals and the new chilled product range’, added FinnCap, while stressing that Parsley Box is ‘seeking to get on the front foot again. A successful fund raise, and an improving outlook and a more robust supply chain are the main ingredients for a share-price recovery.’
AJ Bell investment director Russ Mould commented: ‘Parsley Box says it has now relaunched half of its entire product range with new recipes. That is not a ringing endorsement for its meals, as a relaunch normally suggests sales have been sluggish and so something must be done to get the tills ringing again.’
Mould argued the company’s key problem is that it ‘doesn’t have a unique selling proposition. It provides meals for old people that can stay on the shelf for a long time without having to be put in the fridge or freezer. Fray Bentos has already cornered that market and there is plenty of competition from supermarkets for individual meals that are either frozen or chilled.
‘Companies like Cook and Wiltshire Farm Foods are thriving from selling posh ready meals to the older generation, so Parsley Box is left fighting for space in what is already a well-served industry.’
Disclaimer: The author and editor of this story both own shares in AJ Bell, owner and publisher of Shares
