S-Ventures PLC (AQSE:SVEN), a company investing in and growing exciting brands across the natural, wellness and food-tech category, is pleased to issue a trading update in respect of the financial year ended 30 September 2022, the audited results of which, are expected to be published in full on, or around, 28 February 2023.
S-Ventures was formed to identify investment opportunities within the natural, wellness, food-tech, organic and vegan snacking sectors within the UK and Europe that have the potential for further development through the knowledge and expertise of our management team. The performance of each brand within the Group reflects the different phases of growth each has experienced, however, we continue to make good overall progress throughout our product range towards achieving greater results.
The Group FYE 2022 performance
Revenues for the FYE 2022 were approximately £8.7m, with revenues recorded in the second half of FYE 2022 being £4.6m, an increase of approximately 12% from that of the first half of FYE 2022 of £4.1m. Revenue performance was impacted by significant headwinds, particularly issues relating to the supply of certain ingredients, including those supplies from Ukraine in Q2 and Q3 FYE 2022, which resulted in a loss of sales income. The total impact, an outturn approximately 20% below the Group’s initial targets, was slightly worse than the 15% impact anticipated in our interim results release of 30 June 2022.
Since 30 September 2022, the impact of ingredient and labour supplies has abated considerably, although the possibility of further disruption remains, and recent trading has not been materially affected. Inflationary and exchange rate pressures continue and we have passed on some price increases across the Group to maintain margins. We continue to monitor our financial and trading performance very closely.
The underlying operating losses before depreciation and acquisition costs for FYE 2022 were approximately £2m, reflecting the impact of lower than expected sales income, the impact on costs of lockdown-related labour supply issues, and the general impact of inflation and exchange rates in Q1 and Q2 FYE 2022. The losses include re-organisation and redundancy costs of c.£0.1m and the initial losses from the acquisition of Lizza GmbH (“Lizza”) of c.£0.2m. Operating losses after depreciation and other costs are expected to be c.£2.6m.
Recent acquisitions
We are delighted to have announced our most recent acquisition of Juvela, the gluten-free and free-from baked goods brand. This acquisition is expected to have a significant positive impact on the shape of our Group, operating profitability and operating cashflow. The acquisition is also the culmination of a busy year in terms of corporate actions, which included the following:
1. In March 2022, the acquisition of Livia, an indulgent plant-based nutrition business
2. In April 2022, the acquisition of Market Rocket, a technology and amazon D2C business
3. In August 2022, the acquisition of Lizza, a German factory and free-from brand
4. In December 2022, the acquisition of Juvela, a gluten-free and free-from bakery and pharma and retail brand
Business segment reporting and highlights
Going forward, given the larger scale of the Group, additional financial information will be presented based on the following three separate sub-group business segments:
i. Bakery: Juvela and Lizza (Sales in FYE 2022 – £0.1m)
ii. Plant-based nutrition: Pulsin, Livia’s, Ohso, and Purely (Sales in FYE 2022 – £8.1m)
iii. Technical services: Market Rocket (Sales in FYE 2022 – £0.4m).
Bakery
The new Bakery segment came into existence with the acquisition of Lizza in August 2022. This business focuses on flax seed based keto products that fit well with our other food brands. Strategically, Lizza gives us an important market presence in the EU as a platform to generate income from overseas. Lizza is currently loss-making and we envisage a turnaround period of 18 months as we reposition its product range and implement group synergies. Subsequent to the FYE 2022, we have acquired Juvela, a profitable company that sells a range of gluten-free products through both the pharma and retail channels in the United Kingdom. We are exploring opportunities to deploy Lizza’s facilities for the supply of various group products presently outsourced.
Plant-based nutrition
The Plant-based nutrition segment includes: Pulsin protein powders, sport nutrition bars, keto products and healthy snack bars; Livia’s indulgent free-from treats; Purely plantain crisps; and, Ohso pro-biotic chocolate. All products are free from gluten, palm oil and contain no artificial ingredients. In FYE 2022, this segment faced economic headwinds and several trading challenges. As a result, we have undertaken an internal restructuring exercise, which includes the restructuring of leadership and employees’ positions, to enhance cost efficiency and profitability. These efforts are bearing fruit and the turnover for the first quarter of FY23 has been encouraging.
Technical services
The technical services segment, that includes Market Rocket (“MRL”) which provides a range of marketing and support services to third parties as well as the Group, is currently performing above the Group’s expectations since its acquisition in April 2022. In October 2022, the Group invested through MRL in a specialist team to enable MRL to provide a complete range of search engine optimization (SEO), public relations (PR) and marketing services which have resulted in both additional sales to existing customers and the introduction of new accounts.
Future outlook
Our Board of Directors remains optimistic about the business and financial performance in the financial year ending 30 September 2023 given the current progress in the implementation of our corporate strategic plans.
Our Board and management team continue to look for new acquisition and collaboration opportunities to take advantage of market conditions. However, the Group’s priorities are the consolidation of existing brands, integration of new brands, roll-out of new product development, which has been delayed by supply shortages last year, cost saving opportunities and synergistic plans to further enhance profitability and top-line growth of the Group. The Board is also considering a range of financing options to support the future growth and development of the Group.
S-Ventures Board and management team remain dedicated to creating improved returns and value for all our stakeholders and to capitalise on the market conditions as we move into FYE 2023 across our Bakery, Plant-based nutrition and Technical services platforms.
