Creightons PLC (LSE:CRL) shares fell over 20% after the UK skincare and haircare brand reported a swing to a first-half loss and a big jump in costs that led it to pause the integration of its recent acquisitions for several months "whilst the ship was steadied".
A pre-tax loss of £0.36mln was reported for the six months to 30 September 2022, compared to a £2.3mln profit last time, even though sales were flat at £30mln, including £1.2mln from the recent acquisition of Brodie & Stone and £1.4mln from Emma Hardie. Brodie & Stone brands include Janina Ultra White, Natural World and T-Zone in hair, body, skin and male grooming categories, while Emma Hardie is a premium skincare brand.
Gross margins fell to 40.4% from 42.7% a year ago, which it said reflected the "ongoing struggle to pass on significant direct cost increases to retailers, contract customers and consumers", though the selling price improvements now agreed are expected to help the gross margin "continue on the upward trend evident in recent months".
Since 21 November alone the company said it "suffered direct annualised cost increases approximating to £4mln", but that most cost increases have now been successfully passed on, with high street retailers agreeing to take increases varying from 5% to 15%.
Creightons said, "'No agreement - no supply' had to be the rule to ensure our return to profit," with a "small number" of price increases remaining outstanding that it plans to address by cost mitigation or cessation of supply.
There has been a further £0.7mln of "potential" annual increase in overheads, mainly from energy costs.
Management said they have implemented a strategy to drive down annualised overheads by £2mln, while sales levels are expected to hold steady for the second half, with benefits of the acquisitions "expected to emerge during the second half" as they are sold in what the company calls the "mass to masstige" section of the market.
The shares fell 21% to 29.56p, down almost 70% over the past year and back to levels seen in May 2019.