Good morning everyone, welcome to Global Fashion Group's Q1 2026 results presentation. I'm Helen Hickman, CFO of GFG. Today, I'll provide an overview of our first quarter's performance. Our CEO, Christoph Barchewitz, will then join us for the Q&A session. In quarter one, we delivered another strong step forward in our profitability journey. Our adjusted EBITDA margin increased by 3.5 percentage points year-over-year, driven by a combination of gross margin expansion and cost discipline, proving that our focus on healthy order and customer economics is delivering tangible bottom line impact. On a regional basis, ANZ remained resilient with growth across all top line metrics, which helped mitigate the group's overall small NMV decline. Our focus on customer quality is delivering clear results with order frequency over the last 12 months rising to 2.4x , up 1.9% year-over-year.
This marks our third consecutive quarter of growth and a turnaround from the past two years. By prioritizing frequent shoppers who drive long-term value, we're building a higher quality active customer base currently at 7.2 million customers. Our more loyal customer provides a resilient foundation to navigate current pressures on new customer acquisition and volume. Our Average Order Value grew by 5.2% to EUR 61. This growth was mainly driven by inflation and a favorable regional mix with increased contribution from ANZ's higher Average Order Value. This increase helped mitigate the impact of lower volumes on our NMV, which declined by 3% on a constant currency basis to EUR 250 million. Moving on to revenue and margins. We generated EUR 138 million in revenue, representing a 4.3% year-over-year decline.
The gap between revenue and our 3% NMV decline was driven by the continued shift in our business model mix as Marketplace share increased to 42% NMV. Gross margin improved by half a percentage point year-over-year to 46.5% with higher margin contribution from Platform Services balancing our retail performance. This demonstrated our ability to maintain margin gains even as business model mix and inventory benefit from 2024 and 2025 normalize. On adjusted EBITDA, we delivered a strong EUR 5.4 million increase year-over-year as we realized savings from our 2025 and early 2026 cost initiatives and continued fulfillment efficiencies across the group. Let's turn to our regional performance. ANZ proved resilient this quarter for a softer consumer spending environment.
ANZ achieved a 3.5% increase in NMV and a 4.0% revenue growth on a constant currency basis. This was supported by a 3.7% rise in active customers, driven by successful new customer acquisition and reactivation initiatives. ANZ's gross margin compressed slightly by 0.4 percentage points due to investment in our new loyalty program. In LATAM and SEA, we prioritized margin health as we face lower demand. In LATAM, a greater contribution from Marketplace drove a 1.4 percentage point gross margin expansion. In SEA, Platform Service drove a 1 percentage point increase. Let's move on to our cash flow for the quarter. Q1 normalized free cash flow improved by EUR 10 million year-over-year to negative EUR 51 million. Whilst Q1 is a seasonally high outflow period, our trajectory towards break even is strong.
On a last twelve months basis, normalized free cash flow has improved by EUR 24 million year-over-year to negative EUR 22 million. The year-over-year progress in Q1 was primarily driven by the EUR 5 million improvement in adjusted EBITDA, supported by further discipline in working capital and CapEx. Looking at our liquidity position, we had a EUR 19 million net reduction in borrowings this quarter, which was driven by the EUR 32 million reduction of our convertible bond completed in March. This reduction was partly offset by a EUR 13 million drawdown from our working capital facilities, which primarily consist of our new Australian RCF with NAB. Following the redemption, we now have EUR 9 million in our convertible bond outstanding. We closed Q1 in a strong position with EUR 109 million in pro forma cash and EUR 86 million in pro forma net cash.
Now looking to the rest of the year. Our Q1 results were in line with expectation. The softer top line described as our Q4 results was successfully offset by improving margin trends. We are reconfirming our full year 2026 guidance as set out in March. We expect NMV growth to range from -4% to +4% year-over-year on a constant currency basis. This implies an NMV range of EUR 990 million-EUR 1.07 billion. On adjusted EBITDA, we expect to deliver EUR 15 million-EUR 25 million. Our guidance is based on December 2025 closing rates, we've observed currency tailwinds with the Australian dollar and the Brazilian real strengthening against the EUR as of the end of Q1. If this persists throughout the year, we may see a benefit to our EUR ranges.
Our guidance range continues to reflect softer first-half expectation while factoring in different trajectories for the second-half. GFG has no direct exposure to the Middle East and is closely monitoring the secondary impacts on global supply chains and consumer sentiment. Our guidance reflects factors specific to our markets, such as interest rates increases in Australia and upcoming election cycles in LATAM. Our guidance does not assume prolonged geopolitical volatility as this cannot be reliably predicted. We remain highly confident in our overall strategic direction. By prioritizing customer quality and maintaining rigorous cost discipline, we've built a solid foundation that allows us to navigate external variables while continuing to drive forward our profitable growth goals. We'll now open the call to your questions. If you'd like to submit a written question, please click on the speech bubble at the bottom of the screen. Thank you.
Thank you very much. Ladies and gentlemen, if you'd like to ask an audio question, please press star one on your telephone keypad. Just make sure your line is not muted by your speaker equipment. Our very first question this morning is coming from Russell Pointon of Edison. Please go ahead. Your line is open.
Thank you. Morning, Christoph, morning, Helen. Couple of questions. First of all, there's a very clear message that you're focusing on quality customers, which is showing up in a slight increase in the rate of decline, quarter-on-quarter. I suspect this is quite a difficult question to answer, but can you help say anything that helps understand what percentage of your customers are kind of where you want them to be and what percentage are probably not where you want them to be from a quality perspective? I suspect within that, there's quite a lot of drivers in terms of product, you know, marketing, promotions, that type of thing. Where is the focus?
Great. Thanks, Russell. I'll take a stab at that. It is not an easy question to answer, but I think fundamentally the way we look at it is, we look at it from, in driving, you know, profitable growth from two angles. We look at order profitability, and we look at customer profitability. On the order profitability side, we're constantly looking to drive efficiency into fulfillment, delivery proposition, all of those things, because obviously, as we can kind of, better economics to each individual order, that helps the overall picture. Through the customer profitability lens, we look very much at the entire life cycle of the customer. As you know, we're now, you know, 15 years into this business and in these markets.
We have a huge amount of historical data around which types of customers, through which channels, in which locations, which devices, et cetera, and also with which initial browsing, search, purchase, behavior end up being the ones that really become long-term loyal customers. There's a lot of effort in terms of driving our new customer acquisition and also our reactivation towards those higher value customers, such that we are not investing marketing spending on customers that have a, you know, high probability of turning out to be lower value customers. To your percentage question, it's obviously a distribution.
That's why, things like the loyalty program we announced in Australia are so important to us to really make sure that the very high value customers, so let's say the top 5% or 10% of customers who are accounting for a large, much larger percentage obviously of spend, are feeling, you know, particularly special and looked after from every aspect of the experience. At the other end of the distribution, you know, we do have customers that, through also behaviors around returns and other things end up being very, very unprofitable. That's an area where we are tightening some of our policies and behaviors as well. I would say it's a very multidimensional effort to try to drive this.
Ultimately, where we think this will be most visible is through the purchase frequency of the average customer base and moving that upwards. I think that's what we want to be measured against as the ultimate outcome from this effort.
Great. Thanks. Secondly, on Southeast Asia, it's interesting that you saw a lower revenue decline than you did in active customers. Could you just talk about what's happened in Southeast Asia, please?
Sorry. Yeah, Russell, morning. Hi. I mean, what we're seeing really in Southeast Asia, again, sort of goes back a little bit to Christoph with regards, you know, the customers that we're retaining and attracting actually are increasing their overall purchasing. We're seeing, you know, that build up with actually the decline in revenue as a result then ends up being lower than the decline in customer.
Okay. Helen, there was a broad improvement in profitability, you know, EBITDA and EBIT year-on-year. Was that across all three divisions or did it effectively follow the trends in gross margin? The gross margin in Australia was a little weaker.
The gross margin was a little weaker, but we've seen sort of consistent improvement in profitability across all of our regions. You know, we've got the improvement in gross margin at a total level, but also you'll see, you know, it's a 3.5 percentage point improvement on adjusted EBITDA. There's been significant efficiency and further cost out which we've seen across all regions. All regions stepping forward.
My final question is, I know it is not long since the last set of results. I would just be interested in how your thoughts have evolved over the last month or so to how you get the improvements in profitability this year given, you know, the conflict is going on a bit longer. Do you think you are having to work a bit harder on OpEx this year than perhaps you previously thought?
I mean, we set the year out. As you say, it's about 6 weeks since we, since we last spoke, so I mean, a lot has happened over that time. I mean, we set the year with a broad top line range from -4% to +4%. And we are confident that within those bookends we have plans to be able to deliver the profitability improvements that we've set out in the guidance. Obviously, the longer that the wider macro impacts last, et cetera, we need to be mindful overall around OpEx, CapEx. As you can imagine, you know, we're making very conscious decisions on a day-to-day basis with regards, you know, intake, with regards CapEx, with regards head count, et cetera.
As we stand at the moment within the range that still feel comfortable with, we're committed to that improvement in profitability.
Okay. Thanks very much.
Thank you very much for your question, Russell. Our next question is coming from Anne Critchlow of Berenberg. Please go ahead, Anne. Your line is open. Thank you.
Thanks. Good morning, Helen and Christoph. I've got three questions, if I may. The first one's on current trading because last time you spoke to us, I think at the beginning of March, you did mention a weaker consumer in January and February, compared to Q4 in Australia and Brazil. I just wondered if that had actually weakened further since you last spoke to us due to any impacts on consumer sentiment, given the Iran conflict. The second question's on Average Order Value, that 5% growth year-on-year. Just wondered what the drivers were behind that, you know, whether it's like for like inflation or not. The third question's on the gross margin. Just wondered what the drivers were behind the gross margin increase in LATAM and Southeast Asia.
You know, was it mix or, you know, whatever was going on there. Thanks very much.
Morning, Anne. Hello. Let me take all of those in order. Current trading, I mean, Q1 has played out in line with our expectations and in line with the trade that we described when we did our full year results at the start of March. We're really seeing similar trends at a group level as in April. We're not seeing anything particularly worse at a group level than the Q1. We're broadly, you know, in those similar trends. That remains in line with the way in which we've described guidance that overall we expect a softer half one overall for the year. Your second point was on Average Order Value, I think with regards what's driving that increase.
We are seeing, you know, the 5% increase, we're seeing about half of it coming from wider inflation. The rest really around country mix. As the Average Order Value, which is higher in Australia, grows as well, proportionately that's driving the overall group Average Order up as well. I broadly look at it in two buckets, overall inflation and then country mix driven by Australia. Lastly, Anne, your question on gross margin. I think specifically it was what was driving some of the increases in LATAM and then in Southeast Asia. Overall, retail margins remain sort of broadly stable across the, across the board, little bit of movement within each region.
Within LATAM, we've seen a larger participation in Marketplace, so that's really driven the overall increase within LATAM. The main driver in Southeast Asia is Platform Services. We've seen a higher participation in Platform Services revenue in the quarter, which has driven the increase there.
Great. Thank you.
Thank you very much, Anne. As we have no further audio questions at this time, I'd like turn the call over to Sari for any questions submitted through webcast. Thank you.
A question from Christian at Numis: Are you seeing any first impact from the loyalty program at ANZ?
Yeah. Thanks, Christian. I'm happy to take that. As you already know, we launched THE ICONIC Front Row in October last year, we're still, you know, kind of, you know, probably six months into it. So far, you know, customers are earning items and rewards, and the program is meeting our expectations around the level of engagement, the level of people using those items and rewards, and also the cost to us as a business. We are also seeing the improvement in purchase frequency and loyalty that we expected. I think overall, we're also very conscious that it does take time to really embed this in and make sure that all of our customers understand it.
Clearly, the high frequency, you know, high value customers understand it more quickly given the very frequent engagement they have with the platform. We also have a large number of customers that shop only a few times a year, for those, it will take a bit longer to really understand the dynamics. We are working on continued communication and engagement with customers to really make sure they all understand the mechanics of the program, the benefits of the program, expect that to continue to drive further improvements in the customer behavior. We will also continue to look at ways of how we, you know, increase the value of the program to the customer.
Overall, very much on track and very pleased with the launch and the rollout of that program last year.
Just going back to the live questions. I think Anne has another one. Might be disconnected. If that's the case, we have no further questions.
Okay. I'm sorry to interrupt, maybe we just have Anne. Christian has just signaled again for an audio question. If it's okay, we'll take that question now. Is that okay? Here we go.
Yes, please.
Thank you. Anne, your line is open. Please go ahead.
Thanks. Thanks. I've got two questions, sort of thematic ones. The first one on AI, because last time you said that about a low single-digit % of traffic was coming from AI. Just wondered if that's building fast or not. The second one is on the idea of SaaS, because you've got proprietary tech and you've got Fulfilled by GFG. I'm just wondering if you've ever considered doing a Zalando or a Next, basically, and putting them together to offer other brands and retailers, you know, help with website tech perhaps, or software generally, in addition to logistics.
Thanks, Anne. I'll take those two. On AI and specifically the traffic, I think what you're referring to is the traffic volume we're getting from, you know, the Gemini, ChatGPT, Claude, et cetera, of the world. That remains very, very small. We do obviously see it growing, and it is growing at a good percentage, but not in a way that we think that there is a fast path to that becoming a very important traffic source. That's the current status. Obviously, there's a lot of things around, you know, commerce protocols and other things on the technology side evolving there.
Please keep in mind also that very often a lot of these, let's say, more headline-grabbing rollouts, they start in the U.S., they eventually come to Europe, you know, it takes a lot longer until they land in all of our markets. You know, we can often see quite a lot of this kind of innovations that are driven by, let's say, the Western technology companies, you know, in the real world, in markets like the U.S., U.K., or other European markets before they come to us. What we're very focused on is making sure that we are showing up as a important retail platform on all of the AI tools.
When people, you know, look for fashion advice, look for products, et cetera, that we have the same strong visibility that we enjoy on the traditional search engines. That's on the AI traffic side. On the SaaS question, very good question. Thank you. We are very focused on enabling our Marketplace and Platform Services for, you know, brand partners. There's a lot of opportunity to grow this in particular Fulfilled by GFG and the marketing, and we're focusing most of the tech investments on those platforms. We are enabling brands to sell on other marketplaces in Southeast Asia through our single-stop solution.
In that case, we do provide technology that lets the brands, you know, sell on their brand.com, not the front end, but basically the back end of that in terms of the fulfillment, but also integrates them into our ZALORA platform as well as into other marketplaces if they want to sell on those. We have made a quite conscious decision not to go into the business of e-commerce stores or front ends or those types of things because we don't think we have a particular competence to do that well for brand.coms. Also please remember that most of the global brands make those technology choices in their largest markets. For most of the global brands, obviously, our markets are not the largest, they are often more follower markets when it comes to technology choices.
Therefore we've looked at this opportunity in the past, but, you know, never concluded that that would be a worthwhile investment to make for us.
Thank you very much.
Thank you, Anne. We have no further audio questions at this time.
Okay. Thank you all for joining today. If you have any further questions, please reach out to the investor relations team directly.