ProCook Group H2 2025 Earnings Call Transcript

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Provided by Quartr
June 25, 2025

Key Takeaways

  • Positive Sentiment: ProCook reported record FY 2025 revenue of £69.5 million, up 11% year on year, with like-for-like sales growth of 4.9% and market share gains.
  • Positive Sentiment: Profitability improved as gross margin stayed resilient and EBITDA margin rose from 10.9% to 12.8%, while underlying operating profit and PBT increased 51% year on year.
  • Positive Sentiment: The company continued to expand its store estate, opening 12 new stores in FY 2025 and guiding to 5 to 10 net new openings in FY 2026 as it advances toward its 100-store UK target.
  • Positive Sentiment: Online sales momentum returned, with website revenue up 10.3% and Amazon UK relaunching as an incremental profit contributor; Q1 FY 2026 total revenue then grew 13.7% year on year.
  • Neutral Sentiment: Management reiterated its medium-term goals of £100 million revenue and a 10% operating margin, but expects FY 2026 to remain first-half loss-making due to seasonal weighting and continued growth investment.
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Earnings Conference Call
ProCook Group H2 2025
00:00 / 00:00

There are 3 speakers on the call.

Speaker 2

Good morning, and welcome to the ProCook Group PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'll now hand over to Lee Tappenden, CEO. Good morning, sir.

Speaker 1

Great. Thank you very much for the introduction. Welcome everybody. Welcome to our FY 2025 annual results. I'm Lee Tappenden. I lead our business at ProCook. I'm joined by Dan Walden, our CFO. Straight into the agenda for today. Dan and I are going to talk to you for about 20 minutes to try and leave some time for Q&A at the end. I will give a brief overview of the highlights from FY 2025. Dan will go into much more detail around the financial performance. I will look back at our strategy that we set out last year and give you some updates of how we performed. Dan will finish on our current trading over Q1 and our outlook for the balance of FY 2026.

Speaker 1

Last year, 12 months ago, we set out a very clear medium-term strategy to open 100 stores in the U.K. to deliver GBP 100 million in sales revenue and deliver us operating profit of 10%. I'll give you a few highlights now of how we performed against that strategy. We're really pleased with our trading momentum. We delivered record sales last year of GBP 69.5 million, which is up 11% year-on-year, plus 4.9% like-for-like. That sales performance translated into an outperformance against the market and gave us quite significant market share gains. At the outset of the year, our clear strategy was to increase our customer acquisition. Both from a record new customer acquisition and live last 12 months active customers, we've seen up 7% and 8% respectively.

Speaker 1

I won't talk in too much detail about profit, just to say that our gross margin % has remained very, very consistent over the year and has improved towards the tail end. Our cost discipline has been very good. Dan will cover that in more detail. We've delivered on our strategic objectives. I will give you a deeper dive into a few of those in coming slides. Some of you will be very familiar, but I would touch on this just very quickly around the ProCook business model, given that it is pretty unique. We are 100% ProCook own brand products. We direct source all of our products and no middlemen included. What that offers us is the ability to drive incredible value, own the quality agenda, and as such, deliver a very healthy gross margin position.

Speaker 1

We operate our own stores and our own website, which enables us to own end-to-end everything that ProCook does and how we show up to our customers. We've managed to maintain a very high rating on Trustpilot, which we're very proud of, at 4.8, and over 135,000 5-star plus reviews. We're building awareness through the new store opening program, which we talk about in-depth, as well as a different approach to our marketing campaigns. We are a B Corp certified business, and we've been recognized as a great place to work over the last year. A lot of great things happening in the business. I thought it was just useful to level set on what our business model is. With that, I'll hand over to Dan, who's going to give you a bit more detail about our financials last year.

Operator

Thank you, Lee, and good morning, everyone. We've delivered strong results and improved trading momentum in the first year of executing our refreshed strategic plan. Together with our continued focus on cost discipline and operational efficiency, we've improved profitability and strengthened our balance sheet while self-funding significant capital investments to expand our store estate. Across key financial metrics, we're in a stronger place with revenue growth, improved gross margin, improved EBITDA and robust cash management. Throughout the year, we've delivered a second year of positive free cash flow, leading to a net cash position at year-end. Our revenue grew by 11% year-on-year to a new record level of GBP 69.5 million, with growth positive across both channels and a like-for-like of 4.9%.

Operator

Like-for-like retail stores grew by 1.5%, reflecting seven quarters of positive and consecutive like-for-like growth, driven by improved conversion, which was up 390 basis points year-on-year, and growth in ATV, which was up 40 basis points, partly offset by a small decline in footfall year-on-year. The addition of new stores during the year, the 12 new stores that we opened during the year, added a further 8.8 percentage points of retail channel growth, taking total revenue during the year up to 10.3% in our retail channel. With further full-year annualization benefits and maturity benefits expected to follow in a couple of years ahead. Online, our website sales grew by 10.3%, recovering and returning to positive momentum on a two-year basis from the disruption that we incurred last year as we migrated to a new web platform.

Operator

Growth was driven by a recovery in traffic of 6.5%, including the benefit of new social media acquisition channels which we developed during the year, whilst conversion improved by 160 basis points. We began trading on Amazon UK again at the end of Q1 last year, offering a small curated range which has been successful in adding incremental and profitable sales this year. This has contributed a further 2 percentage points of sales growth to the e-commerce channel for customers who prefer to shop this way. As you can see, we're rightly pleased with the trading momentum that we've established over the recent months. With both channels performing well, it's particularly encouraging as we look ahead. We've accelerated top-line revenue performance throughout the FY 2025 year Having now delivered six consecutive quarters of top-line revenue growth. Importantly, we've also improved gross margins through the year.

Operator

We held lower prices during the early part of the year. We absorbed the impact of higher shipping costs due to the Red Sea closure, which peaked at around $8,000 per container, with the impact on margins being most pronounced during our peak trading period in Q3. As these cost pressures subsided in the later part of the year, FX gains provided some year-on-year support. We also optimized pricing across a number of core ranges. We therefore improved margins back towards our target range, with gross margin reaching 57.4% during the final quarter. We continue to act with a high degree of discipline around costs, managing our operational activities prudently and carefully as we identify areas where we can improve efficiency to help mitigate inflationary pressures. This focus is supporting improved profit margins, with EBITDA margin increasing from 10.9% to 12.8% during the year.

Operator

We remain committed to paying all colleagues at least the real living wage. Last year, our average pay inflation for colleagues was 8.3%. We've also returned to paying colleagues a more meaningful bonus this year-end to provide added motivation and to intensify the high-performance culture that we're embedding after a number of years of lower rewards. As planned, we didn't repeat the top-of-funnel brand campaigns this year, instead focusing on developing our paid media strategy, where we've made strong progress in the year. This is not only helping us attract more customers to shop with us and build brand awareness. It's also improving marketing efficiency, reducing our total marketing spend by GBP 1.4 million year-on-year as we improve our paid media mix and reduce reliance on bottom-of-funnel Google Ads. We continue to work on central overheads and reducing costs wherever possible.

Operator

This year, we identified and delivered a further GBP 0.3 million year-on-year of cost savings on top of the cost savings we've already implemented over the last couple of years, particularly focused in technology costs. We'll look a little later in the presentation that as we scale the top line, we're already starting to see some benefits in central overhead costs coming through to support improved operating and EBITDA margins. Our underlying operating profit and PBT both increased by 51% year-on-year. We delivered GBP 4.6 million more gross profit this year, driven by sales growth. Our operating cost base increased by GBP 3.5 million year-on-year. This was driven by incremental store costs, including the new store openings, the pay inflation and reward that I just mentioned, volume-related costs associated with e-commerce volume growth. Partly offset by the marketing efficiency that I just described.

Operator

On a like-to-like basis, our operating expenses increased by 1.4% compared to like-to-like revenue growth of 4.9%. That cost increase is after the impact of inflation. Foreign exchange losses have been volatile. Particularly at the end of the year. As we came into Q4, we experienced a sharp downward adjustment in the mark-to-market valuations of our foreign exchange trades as the dollar weakened as a result of the U.S. tariff policy. This resulted in non-cash foreign exchange unrealized loss of GBP 0.3 million across the year as a whole and a GBP 0.4 million adverse swing year-on-year. Opening new stores is a key component of our strategy. We're confident that we have a compelling route to drive profitable sales growth. In the year, we successfully accelerated our plans, opened 12 stores with a cautiously anticipated average material sales expectation of GBP 0.9 million per store.

Operator

We project to achieve 24% EBITDA margin at maturity, which typically takes two to three years to achieve. With a GBP 300,000 CapEx investment per store, our average payback net of incentives is just two years. We also measure the halo effect of new stores on our website sales. For every GBP 100 spent by customers in a new retail store, we see an incremental GBP 7 being spent on the website by customers who live within a 10-mile radius of a new store. This strengthens the investment case further. The nature of accounting and rent-free periods mean that opening new stores have different impacts on EBITDA and OP, operating profit, over time. EBITDA increases dramatically as soon as the store opens, benefiting from lease incentives that typically are in the form of rent-free periods. It begins to grow but at a slower pace as the store matures.

Operator

Operating profit, however, grows more steadily, with the lease incentives smoothed over the lease length and fit-out cost depreciation spread straight line over a typical five-year period. It means that in year one, there's a dilutive effect of new store openings on operating profit margins, where we see an operating profit of just 8% improving to 18% in year two and up to over 20% in year three onwards as the store matures. This effect will benefit growth in operating margins over time as our estate matures. We have again delivered a healthy and positive free cash flow in the year of GBP 1.7 million, improving our net debt position at year-end to a GBP 1 million net cash position. Improved profitability has enabled the self-funding of capital expenditure, GBP 4.1 million of total CapEx, of which GBP 3.8 million was related to new stores.

Operator

We've improved payables terms to stay with key suppliers, which has more than offset our investment in inventory to support sales growth. At this point, I hand back to you, Lee.

Speaker 1

Thank you, Dan. I'll now take a few minutes to walk through an update around some of our strategic plans that we set out a year ago in four distinct buckets around accelerating our profitable sales growth, improving our operating efficiency, and internally creating a great place to work for our colleagues, and more externally looking at how we are a force for good in ProCook. I start with the new stores that Dan talked about. We've been very pleased with our progress over the last 12 months. We set out an ambitious plan to open 10 new stores. We over-delivered on that goal and opened 12 new stores, equating to a net new nine stores, closing three of our smaller stores that we didn't feel were fit for our longer term brand proposition.

Speaker 1

As Dan alluded to, these 12 stores on a mature full year basis equate to about GBP 10 million in annualized sales. We're confident of the two-year anticipated payback based on the experience we've had the last 12 months. This success is continuing into next year already, with three stores opening in Q1, those stores in Hereford, Southampton, Reading. Really pleased out of the gate with how those stores are performing. We expect to open five to 10 net new stores for the full year of FY 2026. Excitingly, we're also looking at a change to our design package, store concept, and format feel. We plan to launch a new store look and feel in end of Q2 this year with two new stores. We'll also refit the program into a couple of existing stores to test customer reaction and also the sales metrics and improvements as a result of that.

Speaker 1

It's an exciting time for us to be opening more stores based on learnings last year. This new format will just build on that success. In terms of also driving our sales, our product offer is continuing to evolve. We talked before last year around the launch of electricals continuing to prove very successful. Electricals today represents about 5% of our sales. I'll talk in a minute about our coffee launch in particular, which is a real success. We've also introduced some more premium ranges within our heritage cookware and knife cutleries, which are performing very well equally. Seasonality is important for us. We were not really showing up in a great way around seasonality. Last Christmas was our first Christmas dedicated range. We treated our Black Friday campaign in a different way and proved very successful.

Speaker 1

We're seeing changes coming through in summer this year, and we'll double down even further on a more comprehensive Christmas package for this coming year. With regards to improving our buying terms, we've rationalized our supply base in the last 12 months by about 20%. We see more work to be done here, reduce complexity, improve our buying terms and our payment terms as well. I mentioned coffee. This was a great success launching in Q4. You can see on this, the ranges across four different products, from an entry-level pod machine all the way up to a barista style GBP 599 bean to cup model. The reaction around the quality, the value from both PR and media has been incredible. There's one example there listed. What we thought was initial buy of five to six months actually sold out in about eight weeks.

Speaker 1

I'm pleased to say they were back in stock as of this weekend and look to see this business growing from strength to strength within the coffee category. In terms of our omni-channel service, we really want to separate ourselves out from big box retailer and offer a more tailored, personalized service. We're really proud of our Trustpilot excellent rating, still standing at 4.8. We're doing a lot of work around retail in particular. We've got a new retail director who's joined us three months ago, Joe Pennington from Charles Tyrwhitt. We've also introduced field-based regional trainers to double down on product knowledge and training and customer service. They're also supporting our new store opening programs and have been invaluable for the last few months. In e-com, it's a continual improvement approach around our navigation and creating less friction for our customers.

Speaker 1

We're trying to think more and more around how our stores and our eCom business are joined in an omni-channel approach, and one example here is how we're looking at gift cards and refund processes. Growing our brand awareness was a really important opportunity and strategic focus last year. We're growing our customers, and we've looked at social media in a very different way going forward. We've seen social media play an important role with our expanding reach over 130% year-on-year. We're creating far more content internally, and this will be a real focus for us going forward in the coming year with a 70% increase in internally produced content looking back 12 months. Our organic reach is up over 150% at over 20 million, and we're seeing real traction around increased focus on Meta and really early days of using TikTok as well.

Speaker 1

Improving our costs and operating efficiency has been a major focus. I think it's important to say that with a like for like operating expense increase of only 1.4% year-on-year in the context of a like for like revenue increase of 4.9%, we're trying to drive real leverage across the business. Supply chain is a major focus, looking end-to-end between our warehouse and our stores, and we're thinking very differently around how we deliver product to stores. We now have over 80% of our stores serviced by a new delivery partner servicing with cages versus pallets, which is a real step change on improving damage, shrinkage, and basically product availability to increase frequency of drops. We continue to do a lot around technology and working between our tech and our eCom teams on constant website A/B testing.

Speaker 1

We've also launched an age verification facial recognition tool on AI as part of our online purchase of knives, which has taken out a lot of inefficiencies within our business, but also made the experience for customers so much better. Retail handheld terminals have been launched in all of our stores, improving the ability to actually recognize product deliveries from our warehouse, but also do perpetual inventory checks versus cumbersome year-end stock takes. Finally, in terms of cost discipline, I will call a couple out here in particular. Our marketing efficiency last year improved by about 20%, and we're continuing to see increasing improvements going into this half of this year. Finally, we've managed to negotiate improved terms with our delivery partners as part of eCom.

Speaker 1

Finally, internally, with all this change, a massive change agenda, I'm really pleased to say that we had a record customer engagement with our colleagues of up to 77%, and we ranked 61 across the U.K. best places to work in the large company category, which is our best performance. As Dan mentioned, we continue to support real living wage, and over the last 5 years, that represents about a 40% increase in the payment to our colleagues per hour. In terms of being a force for good, we are in the process of B Corp recertification, and we've managed to achieve 100% green energy over the last 12 months. So some really big moves forward around our sustainability and ESG agenda. With that, I'll hand back to Dan to talk about current trading and FY 2026 outlook.

Operator

Thanks, Lee. We're pleased to report another strong performance in Q1 and a good start to the new financial year. Total revenue grew by 13.7% year-on-year, building on the momentum that we've established. We've delivered total like-for-like sales growth of 2%, marking the sixth consecutive quarter of total like-for-like growth, with retail up 0.3% on a like-for-like basis, impacted by lower footfall due to the warm weather and eCom up 4.9% like-for-like year-on-year. During the first quarter, we opened three new stores, including Southampton, Hereford and Reading, and we also closed one in central London where the economics were not attractive. Our retail estate now stands at 68 stores today, and our total retail revenue growth during the quarter was 16.9% year-on-year.

Operator

Including the impact of the Amazon channel relaunch, which delivered 3.2 percentage points of growth, our total e-commerce revenue grew by 8.2%. Margin remains in a positive territory year-on-year, as we expected, and our cost base is in line with where we expect them to be over the first quarter. As we look ahead, we expect to open five to 10 net new stores this year as we progress towards our target of 100 new stores. The new stores that we opened last year will continue to provide annualization benefits this year, as well as the maturity benefits, which will come through over the next couple of years. This will add incremental sales and these will support improved operating profits over time. We expect to deliver low single digit revenue growth, primarily driven by product service and brand awareness improvements, and weighted slightly more towards e-commerce.

Operator

From a gross margin perspective, we anticipate a step up year-on-year, as we've discussed, 50 to 100 basis points towards our target levels of approximately 67% over time. Whilst we still face inflationary pressures, including wage inflation and of course, National Insurance, we anticipate at least that the cost efficiencies that we will secure will provide sufficient mitigation to fully offset these pressures. It's worth noting again that our typical H1 weighting means that sales in the first half are around 40% of the full year, and we do expect the first half to still be loss-making. Cash flow, we expect to invest more in inventory to support sales growth. However, this will be partly offset by increased trade payables. As we open more stores, we expect to continue with growth CapEx, with each new store costing approximately GBP 300K.

Operator

Finally, with respect to corporation tax, we hold a deferred tax asset on the balance sheet, and this will provide the ability to mitigate corporation tax cash payments during FY 2026. Looking out to the medium term, our targets of 100 new stores, 100 stores in the U.K., GBP 100 million revenue and 10% operating profit margin and the route to get there from a sales perspective are unchanged. I've set out a guide on this slide of how we see operating margin progressing with time, driven by the gross margin improvements, retail maturity, e-commerce efficiency due to marketing that we've already discussed. Additionally, we anticipate being able to better leverage our central cost base, including the store support center, which we opened in 2023 as we prepared in advance to grow our business. I'll hand back to Lee to wrap up.

Speaker 1

Thank you, Dan. In quick summary, we're confident of delivering this medium-term plan that we've talked about. In complete summary of the sessions we've had the last 20 odd minutes, we're really confident in the business model we have, which is unique to ProCook, and we're confident in that customer proposition that it delivers. We've seen strong trading momentum throughout FY 2025 and into Q1 of FY 2026, and we've got a growing customer base. The improved financial performance that Dan talked to in detail enables us to think about this year ahead with growth ambitions in line with our medium-term strategy. We're transitioning internally to a much more high-performance culture, starting with the leadership team that we fully rounded out now over the last 12 months. We believe we now have a clear plan to accelerate profitable growth against that medium-term strategy we set out 12 months ago.

Speaker 1

With that, we'll wrap up the presentation. We've actually got a lot of questions have come through. I'm conscious of time, I'll tail straight into these, read them out, and then between Dan and I, we will cover them off separately. The first question, with 12 new stores opened ahead of guidance, what learnings have you drawn from store performance so far, and how are they shaping plans for new openings in FY 2026? I think really, last year, looking back, it gives us confidence, first of all, that we can open stores in a mixture of locations where there's really high traffic, regional shopping malls or more affluent market towns. We've taken a lot of learnings. As Dan covered, we've seen some of our stores with very different footprints in terms of size.

Speaker 1

We're able to tailor the offer to those specific stores and still make them work. It gives a lot of confidence going into FY 2026. As we mentioned, the pipeline for new stores is forming up very well for the balance of the year, the next nine months. The next question, I think Dan covered this. What percent or proportion of our e-commerce sales in Q1 FY 2026 was attributable to Amazon? I think you said over 3%, Dan.

Operator

3.2% for Amazon and 4.9% for like to like.

Speaker 1

Yeah

Operator

within the channel.

Speaker 1

Okay. That one should have been covered up earlier. I have maybe a question here for you, Dan.

Speaker 1

While understandable given growth investment, under what conditions would the board consider reinstating the dividend?

Operator

Yeah. I think it's a good question. We actually have continued to discuss this at our board meetings, something that we're keeping under review. I think we're clear that we have opportunity to invest capital and allocate cash to deliver returns for shareholders over the medium term. That said, we are cognizant that we're generating free cash flow. We'll keep that under review, and at the point where we have surplus cash, we'll be following our capital allocation policy that's set out on our website.

Speaker 1

Thank you, Dan. Next couple maybe more in your camp as well, if you're okay taking those.

Operator

Yeah, I think the final one.

Speaker 1

Yes.

Operator

This question from Andrew. With the repeat purchase rate falling, how are you working to improve long-term customer retention? Yeah, we've seen a slight drop in repeat rates over the last 12 months for customers. I think it's not at a level that we are overly concerned about. That said, there are actions that we are taking and which continue to take to drive up repeat rate. Our business is not a high frequency business model. Our products are built to last. That said, there are opportunities for us to improve frequency, and that's where really we're going to focus. A lot of that starts with product, expanding the range, creating more reasons to shop with us. A second element is all around providing access to shop with us, this is around our stores, our storage state, reducing the drive times between stores.

Operator

Being in locations such as shopping malls, which have higher visit frequency than an outlet center or a garden center. These things will help us over time. Equally, we're incredibly focused on CRM as well as social media engagement. We've got lots of things underway, and we're really focused on making sure we deliver the best possible service, best possible product, and best price so that we do drive that engagement and loyalty over time.

Speaker 1

Great. Thank you, Dan. Thank you, everybody for your time. I know we're at time now, but just a quick wrap up. We look back at FY 2025 and we're very pleased with our progress, both in terms of momentum, financial performance, and actually making progress against the strategic plan we set out 12 months ago. We're confident going into this coming year that what we're working on has the right focus and that we can accelerate those plans. Thank you very much for your time and your interest and look forward to talking to you in the future.

Speaker 2

Lee, Dan, thank you for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This should only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of ProCook Group PLC, we'd like to thank you for attending today's presentation and good morning to you all.

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