22-23_Cardsharp.qxp_Layout 1 02/10/2023 12:54 Page 2
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Smoke and mirrors “Accountants know the cost of everything, but the value of nothing” is something Cardsharp often quotes, in jest to one of his best friends, a financial accountant who has worked for many major blue-chip PLCs during his career. While a bit different to the stereotype, because of his chosen profession as a ‘Bean Counter’, he was long ago given the nickname ‘Beany’, a moniker he delights in as it appeals to his great sense of humour. With Beany always able to see through the hype, Cardsharp asked for his realistic take on Moonpig’s latest set of financials that the company announced at the end of September. Nickyl Raithatha, CEO of market leading online greeting card operator Moonpig, was very bullish with his comments when announcing its full year results recently. Annual turnover for the year rose to £320 million, an increase of 5.2% on the previous financial year and Moonpig showed “resilient profitability and robust cash generation”. And profit adjusted for EBITDA was up 12.4% to
22 PROGRESSIVE GREETINGS WORLDWIDE
£84 million. “We have laid the groundwork for our expected return to organic growth for FY24,” he added. Cardsharp wondered if he was one of little faith. In previous columns Cardsharp has poured a lot of cold water on both Moonpig’s past performance and future prospects, musing that its share price at the time of its IPO launch in February 2021 was ludicrously high at £3.50, and the company had exploited the sales boost it was enjoying because of Covid lockdowns to aid the IPO. He had contrasted still to his mind Moonpig’s overvalued share price with that of Card Factory, the market leading bricks and mortar greeting card
Above: Are financials a true reflection or a case of smoke and mirrors? Below left: Nickyl Raithatha, ceo of Moonpig remains bullish about the company’s future growth.
retailer, whose share price was struggling at around the £1 mark, despite a fine return to profitability in the last year. So, Cardsharp asked his financial friend, Beany for his interpretation of the Moonpig results. As to Beany’s response: “It’s a classic case of smoke and mirrors” he commented, and “Always be suspicious of profits before EBITDA in any financial statement.” So, what exactly is profit before EBITDA? Usually it is defined as profits incurred before tax, unusual and infrequent items, including but not limited to, merger or restructuring charges, goodwill or impairments. In other words, given compliant auditors, you can bung everything and the kitchen sink into that EBITDA figure in order to flatter your profit results and to try and boost your share price. Moonpig’s ‘real’ pre-tax profit dropped to £34.9 million, down 12.6 % on the previous year. Sales were up by 5.2%, but this seems to have been down to increasing the price of its cards, not to volume growth. Some were obviously impressed by the statement and the share price briefly rallied to £1.70 before dropping back nearer to £1.60. This is well under the IPO price of £3.50 and the £4.40 per share that it was at its peak in 2021. If you bought a £1,000 worth of shares then your investment would be worth about £360 now. Despite the company’s bullish predictions, Cardsharp sees rain clouds ahead. Postal delivery times getting longer and less