Investors in Moonpig headed for the exit yesterday after the online gift and cards group cut its revenue forecast for the year as the cost-of-living crisis and Royal Mail strikes deterred consumers.
In its half-year results, the FTSE 250 group said revenue for the year would be around £320m, below its earlier forecast of £350m, due to challenging trading conditions and “continued macroeconomic uncertainty”. .
Postal strikes and an unflattering comparison to rising sales during the Covid-19 lockdowns meant revenue, excluding the experience part of the business such as hot air balloon rides, fell 8 per cent to £131. million of £142 million in the six months. until the end of October.
However, Nickyl Raithatha, chief executive, remained optimistic about the prospects. “We are a high-margin, cash-generating business with a great opportunity in front of us and a clear leadership position in the market,” he said. “Once the external environment stabilizes, we absolutely expect to resume our long-term growth trajectory.”
A reliable Royal Mail service is crucial for the business, which sells cards for special occasions. The Communication Workers Union has scheduled strikes in recent months, with more planned over the Christmas period of December 9, 11, 14 and 15. Eight of them fell in the period covered by Moonpig’s half-year results.
Moonpig was founded over 20 years ago by Nick Jenkins in the aftermath of the dotcom crash and traded successfully during the financial crisis. A former commodity trader, he named his company after his detested school nickname. It went public last year at a price of 350 pence with a valuation of £1.2bn in February by Exponent, which had owned it since 2016. The shares closed down 13½ pence, or 8.9 per cent. cent, at 137¾ pence yesterday.
The number of orders for the Netherlands-based gift and card businesses Moonpig and Greetz fell 13 percent to 16.9 million from 19.5 million. Despite the drop, the company reaffirmed its full-year profit target of £85-88m due to the size of its profit margin. Its strategy for navigating the uncertain economic landscape is to focus on the higher-margin card business and offer a cheaper range of gifts to customers.
Moonpig’s pre-tax profit halved in the first six months to £9.1m from £18.7m in the same period last year, partly driven by increased interest payments on its purchase of Red Letter Days and Buyagift in July as it expanded into the gift offering and experience market.
David Reynolds, analyst at Davy Research, said: “UK-focused business models are caught in the downdraft of a recession and what that does for consumer confidence, rising cost of living and their spending power “. He said the share price plunge came as investors were spooked by the company’s rapid change in its revenue target, which he reaffirmed in September.
In a note, Peel Hunt analysts said: “The reasons for the downgrade are beyond Moonpig’s control and are unique in nature.”
Raithatha insisted that the online greeting card business was still in its early stages. “The long-term trend shows that clearly the market continues to move in line and the numbers are still low; we think it’s around 16 per cent penetration in the UK,” he said.