After a nightmare 18 months on AIM, Eve Sleep Plc (LON:EVE) investors might finally be able to get a good night’s rest.
The mattress maker, which floated on the junior market last May, got rid of its chief executive and founder Jas Bagniewski over summer, citing a series of “strategic missteps”.
Specifically, the board said Eve had lost focus and had failed to understand what was required to crack new markets overseas. Sales were still good, it added, just not as good as it had hoped.
READ: Eve shares plummet as CEO departs
To get it back on the straight and narrow, the company poached James Sturrock from online greeting cards group Moonpig to be its new boss, although he has only just got his feet under the table having arrived earlier this month.
Today the company confirmed that it would be focusing on its core markets of the UK, Ireland and France and will scale back its operations elsewhere. Cost-cutting measures have also been brought in.
“As you would expect from a new CEO, James is conducting his own strategic and financial review of the business and I have no doubt given his experience and capabilities, more improvements will be forthcoming,” said chairman Paul Pindar.
Despite the overhaul, Eve still managed to grow sales by 63% to £18.8mln (H1 17: £11.5mln) in the first half of 2018, while gross profits rose almost 50% to £10.2mln (H1 17: £7.0mln). Loss before tax widened to £12.0mln from £9.1mln a year ago.
Future looks brighter
Perhaps most importantly, there are signs that the changes are working, with trading in Eve’s core markets increasing by 40% so far in the second half.
A new partnership with UK bed retailer Dreams is going better than originally expected as well, which is providing a fillip to sales.
“While there is much to be proud of in our first half results, with sales growth of 63%, our group results fell short of our own high expectations,” said chairman Pindar.
“We have however taken swift and decisive action, including re-focusing on fewer core markets where we have a leading position and significant growth potential, which has enabled us to reduce costs substantially.”
He added: “The market opportunity remains undiminished and eve, as the most well-known direct to consumer sleep brand, continues to win market share.”
‘Stage set to rebuild investor confidence’
“While we were disappointed to cut revenue forecasts as eve exits from non-core markets, it is difficult to argue with the rationale as non-core territories generated c25% of group revenues at a cost of 60% of the cash burn,” said City broker Peel Hunt.
“Eve now has an accelerated pipeline of new product launches in process, has eliminated excess discounting and has also benefited from the successful launch of a retail partnership with UK market leader Dreams.”
It added: “While revenue forecasts have fallen, 2019 and 2020 profit expectations rise from the elimination of non-core markets.”
Eve shares were up 17.5% to 20.8p on Thursday morning.