New AIM admission: Parsley Box

All images © Sandy Young Photography Parsley Box Ltd, Edinburgh based meal delivery business. PICTURED L-R Adrienne MacAulay. Founder & Head of Product with Kevin Dorren, chief executive. Web: www.scottishphotographer.com Blog: sandyyoungphotography.wordpress.com Mail: sandy@scottishphotographer.com Tel: 07970 268944 ***Credit should read Sandy Young/scottishphotographer.com***

Parsley Box has gained an even higher profile thanks to the flotation on AIM. The delivered ready meals supplier has also gained customers as shareholders. However, initial trading was disappointing with the shares ending the first day at 185p, before recovering to 187.5p. That is a 6% discount to the placing price.

This is still an early stage business. The low-cost model with most aspects of the business outsourced reduces the overheads of the business. It is important to note that Parsley Box uses existing delivery businesses rather than a costly fleet of vans operated by the company. This enables more of the company’s cash to be ploughed into marketing.

Parsley Box has a strong brand position in its market niche and the Covid-19 lockdown may have accelerated customer growth by at least a year.

The flotation was priced at a level which already assumes significant growth. If the company can demonstrate that the cash ploughed into marketing is paying off, then the share price should improve.

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Parsley Box (LON: MEAL)

Ready meals  

www.parsleybox.com

Market: AIM

Placing / PrimaryBid offer

Flotation date: 31 March 2021

Issue price: 200p

Amount raised: £5m

Float expenses: £1.1m

Market capitalisation: £83.8m

Nominated adviser: finnCap

Broker: finnCap

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What does it do?

Scotland-based Parsley Box was founded in 2017 by husband and wife Gordon and Adrienne MacAulay, who is still a director. The focus is people aged 60 years and over. Manufacturing and delivery are outsourced, while the customer contact centre is at the company’s head office in Edinburgh.

Chief executive Kevin Dorren is the main shareholder in Diet Chef, which supplies services to Parsley Box, including licensing ecommerce software.

The company has a range of more than 60 single portion meals, that can be stored in a cupboard and do not have to put in a fridge or freezer. They are delivered direct to the consumer – delivery free on orders over £19 – and can be stored for up to six months. The ready meal market niche is valued at £1.4bn a year and Parsley Box’s target market is around one-quarter of that figure.

Parsley Box makes more than 900,000 deliveries per month and demand has increased due to Covid-19. There are more than 500,000 registered users and 154,000 of these active customers at the beginning of this year. There was a 188% increase in active customers during 2020. Analysis of sales indicates that 28% of customers reorder within 60 days of the initial order.

The main competition is Wiltshire Farm Foods and Oakhouse Foods, both of which supply frozen ready meals and handle their own logistics.

Growth will come from adding customers and selling more products to them. The product range is already being extended to wine, spirits, desserts and chocolates. Further products, such as vitamins and personal care items, could be added.

Longer-term, management is considering moving into markets outside of the UK.

Financials

Revenues of £24.4m were generated in 2020. The sharp increase in demand thanks to Covid-19 means that the underlying repeat business is profitable. However, marketing spending in order to grow the business means that Parsley Box is loss making and it is likely to continue to be. The 2020 loss was £3.2m.

Marketing spend is the main way of driving revenue growth. As the company grows, economies of scale will bring down the marketing cost as a percentage of revenues. Average order value was £23.46 in 2020, which makes sense because it is just above the level where delivery is free, but it is £42.17 for repeat customers, up from £31.88 two years ago.

There was £5.6m raised at the beginning of 2021 on top of the £3.9m net that came with the flotation.

The cash will be spent on marketing to grow the customer base and increase the average order value.

Directors

Chris van der Kuyl (Non-exec chairman)

Annual fee: £90,000

Kevin Dorren (Chief executive)

Annual salary: £250,000

John Swan (Finance director)

Annual salary: £150,000

Adrienne MacAulay (Chief product officer)

Annual salary: £150,000

Chris Britton (Senior independent non-exec)

Annual fee: £50,000

Hazel Cameron (Independent non-exec)

Annual fee: £50,000

Ana Stewart (Independent non-exec)

Annual fee: £50,000

Shareholdings

Investment manager Mobeus was an investor in the pre-IPO fundraising via at least two of its VCTs and it originally invested in the company in 2019. Existing shareholders raised £12m in the placing. This includes Mobeus, management and other employees.

Mobeus funds still own 13.9% of the company. Chief executive Kevin Dorren is the largest individual shareholder with a 13.18% stake. The directors own nearly one-third of the company.

Schroders, Canaccord Genuity and Octopus bought shares in the flotation and own 4.77%, 4.62% and 3.29% respectively.

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Andrew Hore
Andrew Hore is the publisher of AIM Journal, which is an online monthly publication covering the Alternative Investment Market.