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30 September 2024

Huddled Group plc

("Huddled", the "Company" or the "Group")

Interim Results & Trading Update

Huddled Group plc (AIM:HUD), the circular economy e-commerce business, is pleased to announce its unaudited interim results for the six months to 30 June 2024, along with an update on trading  for Q3 2024 to date.

Highlights

Group

H1 Highlights

Q3 Highlights to date

Discount Dragon

H1 Highlights

Q3 Highlights to date

Nutricircle

H1 Highlights (12 April - 30 June 2024)

Q3 Highlights to date

Boop Beauty

Martin Higginson, Chief Executive Officer of Huddled, commented:

"H1 2024 was all about investment and growth, expanding our offering and solidifying the foundations of the business. Alongside this, we were pleased to deliver continued growth in revenues exceeding £5m. The acquisition of Food Circle Supermarket, now rebranded Nutricircle, followed by Boop Beauty in Q3 have strengthened the Group's e-commerce portfolio, and underpinned our commitment to saving surplus stock from going to waste. We have demonstrated to manufacturers and suppliers alike that there is an alternative, allowing customers to save money on some of their favourite brands, from coffee to cosmetics, perfumes to protein shakes. The positive comments we receive on TrustPilot, as well as the thousands of customers that come back month after month is testament to our strategy.

"H2 2024 is now about continued growth, while also driving efficiencies from shared Group operations and expertise, all of which we believe will deliver a profitable and sustainable business model."

Enquiries:

For further information please visit www.huddled.com/investors, or contact:

Huddled Group plc                                                                                                               [email protected]

Martin Higginson                                                                                                             

David Marks

Daniel Wortley

Zeus (Nominated Adviser and Sole Broker)                                                                   Tel + 44 (0) 203 829 5000

Nick Cowles, James Hornigold, Alex Campbell-Harris  (Investment Banking)

Dominic King (Corporate Broking)

Alma Strategic Communications (Financial PR)                                                      [email protected]

Rebecca Sanders-Hewett

Sam Modlin

Kieran Breheny

Chairman's statement

Group revenue continues to grow strongly, as well as improving the key performance indicators of average order value (AOV) and basket margin. This successful formula will, we believe, drive the operating businesses forward towards monthly profitability.

The team continues to deliver growth as demonstrated by the performance in Q3 2024. We believe the decision to remove the minimum order value on Discount Dragon has proven to be the correct one, resulting in AOV and basket margin (revenue less cost of goods, packaging and processing fees) improving significantly. This has allowed customers the choice of placing smaller orders and paying for postage, or spending over £30 to get free postage. 

The acquisition of both Nutricircle (formerly Food Circle Supermarket) and Boop Beauty have been excellent additions alongside Discount Dragon, and fit perfectly into our strategy of saving surplus products from waste, whilst providing customers with great deals. Early signs following the rebranding of Nutricircle are encouraging and suggest further growth for Q4.  We also look forward to seeing the impact of our initial improvements, including a new website, and a much broader range, on the Boop Beauty business over the balance of the current financial year.

Overall, the team has delivered a period of good progress in the year to date. Now with a portfolio of complementary e-commerce businesses utilising shared fulfilment, marketing and finance resources, the team is focused on growing revenue in Q4 and reaching the tipping point for profitability in the three core trading businesses.

Chief Executive's review

Group

With a focus very much on top line growth we saw Group revenues for H1 2024 grow to £5,274,000. Bolstered by the Nutricircle acquisition, trading in Q2 2024 saw solid progress delivering £3,130,000 of revenue for the period, an increase of circa 46% vs £2,144,000 in Q1 2024.

The Group reported an expected adjusted EBITDA loss of £1,550,000 for the period (net of £602,000 PLC costs), as we invested in the building blocks for future growth. We have grown the e-commerce and marketing teams, invested in the production of a TV advert, further developed and rebranded our websites, as well as strengthening the warehouse operations along with increased marketing spend. In the period we attracted over 44,000 new customers helping us drive revenue to over £5m.

During the period we continued to invest in stock, strengthening selected categories such as alcohol and homeware for Discount Dragon, and deepening the stock for Nutricircle.

At the half year stock levels had increased to some £1.3m for the Group (31 December 2023: £0.7m). Our ability to be able to react to stock opportunities quickly and efficiently has enabled us to establish deeper relationships with key suppliers, and to open new sources of supply, and take steps in developing direct relationships with manufacturers. We believe our approach to surplus stock resonates with suppliers and brands as they look to reduce waste and improve their ESG footprint.

We are pleased with the progress we have made in the H1 2024, and look forward to driving further operational synergies over the coming months. We have continued to invest across all areas in Q3 2024, fuelling further growth in revenues to circa £3.5m, which would represent an increase of circa 13%, against Q2 2024. Nutricircle has moved into operational profitability, Boop Beauty has relaunched successfully, and the losses at Discount Dragon have reduced significantly as we move towards operational profitability.

Discount Dragon

Discount Dragon's revenue increased 61.3% to £4,903,000 in the period (H2 2023: £3,039,000).  This was driven by a 53.9% increase in the number of orders to 137.8k (H2 2023: 89.5k) and a 3.8% increase in AOV to £34.99 (H2 2023: £33.70)¹. The business added 41.5k new customers in the period, an increase of 70.6% from the prior period.

In what was a period of heavy investment in operational capabilities, the division made an adjusted EBITDA loss of £731,000. As demonstrated by the table below, divisional basket margin was £953,000, with strong quarter-on-quarter growth in both revenue and margin per cent.

As Nutricircle and Boop Beauty are integrated into the Group's central operations, both marketing and warehouse personnel costs will be shared across the three brands and the current cost of Nutricircle's warehouse and related personnel will be saved.

Warehouse personnel costs increased significantly in Q2 2024, predominantly due to additional shifts to be able to service increased levels of demand. A substantial element of the warehouse personnel costs are fixed meaning that additional picking and packing capacity can be added to existing shifts incrementally as needed and costs do not grow pro-rata to order levels, such that the overall warehouse staff costs per order should fall with increasing volume. With effect from its relaunch earlier this month, Boop Beauty's orders are being fulfilled from Discount Dragon's Leigh warehouse and Nutricircle's warehousing is expected to be absorbed into the same operation in October 2024. Fulfilment capacity across the Group will increase substantially as of February 2025, following the doubling of the operational space and related fit-out at the current facility.

In July 2024 we produced and ran a regional trial of a TV advertisement on ITV1 in Granada and Yorkshire and a trial on Heart and LBC radio, the results were encouraging, with some important data points coming out of the trial. On the back of this we decided to remove the minimum £30 spend threshold, and invest in improvements to the website, making the User Experience (UX) easier to navigate, as well as easier to checkout. We reduced advertising spend in August and early September whilst these changes were made. The TV and Radio advertising campaign was resumed as of 23 September 2024.

Following the removal of the £30 minimum order threshold, allowing customers to purchase as little or as much as they need, along with the UX improvements, we have seen improved customer satisfaction, and a steady increase in AOV with September 2024 AOV expected to exceed £41. In addition, we have seen a steady increase in basket margin, along with returning customer numbers - 74% of  August 2024 orders came from returning customers.

Having successfully driven up the AOV and basket margin in Q3, we will now look to scale marketing to drive further growth and harness the efficiencies which will flow from running three businesses from the one location.

¹ As previously reported, AOV in Q1 2024 was negatively impacted by incentives given to new customers. Q2 2024 AOV was £36.87 and Q3 2024 is trending above that.

Nutricircle

We have been pleased with Nutricircle's progress following the completion of its acquisition on 11 April 2024.

The business generated £349,000 revenue and delivered gross profit of £53,000 in the period from its acquisition to 30 June 2024.

In late August 2024 the rebrand to Nutricircle was completed. This has been extremely well received with September 2024 revenue not only exceeding expectations but delivering the brand's best performance to date, and driving this operational business into profitability. September 2024 revenue is expected to be circa £225,000 allowing the business to deliver a modest profit contribution, and paving the way for further growth and synergies over the coming months.

As noted above, we expect fulfilment of all Nutricircle orders will be absorbed into our centralised warehouse in Leigh during October 2024 which should result in significant net cost savings.  The move will also allow us to migrate the postage to a single Royal Mail contract, which we expect to yield future volume discounts, as well as allowing Nutricircle to join Discount Dragon and Boop Beauty in being able to deliver to any location in the UK, including Northern Ireland, the Highlands of Scotland and the Channel Islands, all of which are currently charged a significant premium on the delivery charges. This combination should not only aid sales growth but also reduce overall delivery costs.

With Nutricircle already turning a modest profit contribution we look forward to building on this and driving further synergies as we continue to exploit the benefits of Group fulfilment, marketing and website user experience knowledge.

Boop Beauty

On 5 July 2024, Huddled acquired a controlling stake of 75% of the share capital in Boop Beauty Limited, an e-commerce business specialising in surplus beauty and cosmetic products.  Boop Beauty was founded by Yasmine Amr, formerly a L'Oreal in-house lawyer, who remains with the business in an advisory role. Since the acquisition, we have introduced a new website, improving the stock offering, and preparing for launch. The business was officially relaunched on 12 September 2024.

Whilst still early days, we are pleased with the initial sales performance which has exceeded our expectations. The range being offered to consumers is impressive with products from many well known brands such as Sol de Janeiro, Drunk Elephant, L'Oreal, ESPA and many more at substantial discounts to high street prices.

With over £3 billion of cosmetics going to waste each year it was clear to us there was a need for a business like Boop Beauty, helping cosmetic companies solve their waste challenges, as well as allowing customers to purchase products, some of which they would sample for the first time, often at a huge discount to their retail price.

The strategy of the business was further endorsed recently when Boop Beauty was awarded the Marie Claire 2024 Sustainability Award in the category of Small Business: Best Multi-Brand Retailer for beauty, health & wellness.

Let's Explore

On 10 May 2024, the Group entered into a strategic partnership with Wicked Vision Limited. Under the terms of the agreement, Wicked Vision initially acquired a 25% stake in the business, with Huddled retaining 75% ownership. The agreement allows Wicked Vision to increase its stake to 50% once Huddled has received a net inflow of circa £400,000, being the value of the working capital in the business at the time the deal was completed. Wicked Vision has taken charge of the day-to-day operations of the Let's Explore business and we have already started to observe encouraging signs of progress.

Post-period end, in July 2024, an updated Vodiac Pro product, which includes a new and improved headset and 100 VR experiences, was launched on QVC USA. The new product was received well with all 6,000 units ordered selling out across two airings. QVC USA has since ordered a further 15,000 units to be delivered in November, and QVC UK some 6,000 units.

In addition to the QVC sales and a number of smaller B2B sales, we have commenced our Q4 B2C, and Amazon sales strategy for the Let's Explore range, including Oceans, Wildlife and Space. In total we hold circa 12,000 units which we plan to sell in Q4 2024 via Amazon and via our website priced at $99.