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Trustpilot is promising investors it will soon prove more profitable. The website offering user-contributed reviews has so far struggled to make much cash from operations but last month said it would generate positive adjusted free cash flow in 2023.
Management expects that once the company reaches a certain scale its costs will be spread widely enough that they will no longer exceed revenue.
Trustpilot is an internet platform connecting businesses with users, who also double as reviewers of companies’ services. Last year, the company said it deliberately focused on growth, investing heavily in brand marketing. This meant it declared an adjusted cash loss of $4.4mn (£3.55mn), compared with a cash profit of $3.9mn in 2021.
Admittedly, the company achieved impressive topline growth. Last year, revenue rose 23 per cent to $149mn while bookings were up 20 per cent to $165mn. This year, Trustpilot has warned it is feeling the effects of the “uncertain macro environment” but is still forecasting growth to be in the “mid-teens percentage” range.
Chair Zillah Byng-Thorne certainly seems hopeful. She took charge of the board this month after recently stepping down as chief executive of publishing company Future and has just acquired £200,000 worth of shares in Trustpilot.
Trustpilot’s share price is cheap relative to its short history as a public company, down 40 per cent in the past year. But there is some justification for the discount. As well as weathering the macroeconomic conditions affecting the hospitality sector, the company is also having to spend more time and money on removing fake reviews. Last year, it removed 2.7mn from the platform.
Combine this with the fact it is not a particularly differentiated product (Google Reviews provides a similar service, among others), and it’s not obvious that it will ever be hugely profitable. Statutory profit is not yet in sight, and with an adjusted free cash outflow of £13mn last year there is a lot a ground to make up on reported figures, too. Arthur Sants
Hilton Food directors fish for bargains
Everything was going so well for Hilton Food until last year, the meatpacker having enjoyed several years of steady, profitable growth, bolting on acquisitions along the way.
In December 2021, it tapped shareholders for £75mn to help it buy a smoked salmon producer, Foppen, with a view to strengthening its seafood arm and establishing a foothold in the US market.
Yet things had taken a turn for the worse by last September, when Hilton reported a 10 per cent fall in first-half profit as inflationary pressures bit into its margins. Earnings per share slid by 23 per cent and, with the company also reporting a near-doubling of net debt in an environment where interest rates were rising, its share price slumped 30 per cent.
It hasn’t really recovered since and remains about 47 per cent lower than its most recent peak of 1,248p hit last May. Full-year results announced this month did little to lift the gloom.
Although acquisitions contributed to a 16 per cent increase in revenue, pre-tax profit dropped 38 per cent, with an underperforming UK seafood business, automation investments and ongoing costs relating to a fire in its Belgian plant dragging down margins.
The company also announced co-founder Philip Heffer is to step back from the day-to-day running of the company, although he will continue to advise the board. It is bringing in former Co-operative Group chief Steve Murrells from July. Both Murrells and Hilton’s other co-founder, chair Robert Watson, each bought about £200,000 of shares last week.
The company recently told analysts it intends to focus on organic growth in the short term and it expects a recovery in its seafood business this year. The shares trade at about 13 times FactSet consensus forecast earnings, below their five-year average of 19 times. Michael Fahy
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