Good day, ladies and gentlemen, and welcome to the Moonpig Group FY 2024 Full Year Results Q&A Session. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, we ask that you please use the Raise Hand function at the bottom of your Zoom screen. Participants can also submit questions through the webcast page using the Ask a Question button. I would like to remind all participants that this call is being recorded. I will now hand over to Nickyl Raithatha, CEO, for his opening remarks.
Hi, everyone, and thank you for joining today, the full year results Q&A session. Hopefully, you've all had a chance to look through the announcement and to watch the presentation video. I'll say a few words, and then we'll get straight on to Q&A. I'm really pleased today to report a strong set of results for Moonpig Group, with the underlying trends in our business giving us confidence in our outlook for the future. The second half of the year, in particular, saw a significant step up in growth trajectory, and this momentum has continued into the current year.
The growth was underpinned by our card brands, Moonpig and Greetz, where order growth stepped up 10 percentage points in the half, from -5% to +5%, and new customers stepped up 11 percentage points in the half to +3% growth, back into positive territory for the first time since the pandemic. We're 18 months into completing our tech replatforming, and we're only now really starting to see the benefits translate into customer metrics, which is powering this change in growth levels. We delivered this growth while maintaining high profitability levels, EBITDA and PBT margins up on the year, and it all translated into a 30% increase in operating cash flow, which reduced our leverage to 1.3x at the end of April, ahead of expectations that we laid out earlier.
Our strategy is to build a customer loyalty business, driving an increasing share of wallet from our customers each year, and we've made strong progress on our strategic goals in the last 12 months. Our subscription service, Plus, has exceeded expectations and is driving significant value in the business. Our new creative card features are being adopted at record rates. Our AI roadmap is running at full speed and driving a more relevant and personalized customer experience than ever before. We're making great progress with digital gifting by integrating the experience gift experience into the Moonpig card and unlocking instant delivery capabilities. These initiatives, and more, delivered by our continued investments in technology, our product range and our brand, are powering our growth and underpin our growth expectations for the current financial year.
We expect revenue growth in the mid- to high-single-digit range in FY 2025, and in the medium term, we expect the business to deliver double-digit revenue growth, EBITDA margins between 25% and 26%, and consistent mid-teens EPS growth. Our continued strong cash generation has the potential to drive another 0.7 turns of deleverage, deleveraging this year, taking us below our leverage target of 1x, which in turn will give us the financial flexibility to consider returning excess capital to shareholders. So in a macroeconomic climate that remains challenging, the resilience of our market, the loyalty of our customers, and the return on our technology investments is really starting to show as Moonpig Group continues to demonstrate a unique combination of top-line growth, high profitability, and strong cash generation, and we're excited for the long-term prospects of the business.
We'll be sharing more details on our key strategic initiatives and our outlook for the medium term at our Capital Markets Event on October 16. For now, I'll turn over to questions.
Thank you. If you wish to ask a question, we ask that you please use the Raise Hand function at the bottom of your Zoom screen. As a reminder, participants can also submit questions through the webcast page using the Ask a Question button. Our first question comes from Jonathan Pritchard at Peel Hunt. Please unmute yourself and begin with your question.
Good morning. Two, if I may. Just the stronger performance in the second half, was that a case of you just sort of nailing the big events, a great Mother's Day, Valentine's, or is it something utterly more fundamental, you know, that you've actually got this, you sort of cracked it from a growth perspective? Just, just a bit of your thoughts on that. And then I'm sure this is in your pack of Q&A, but just on the timing of any sort of distribution, it would appear that you're not gonna make a huge amount of progress, isn't the criticism, but not a huge amount of progress in the first half.
Would you think any sort of conversations would be more second half or, or 12 months from now, or do you think it might be sooner than that in terms of the cash return?
I'll take the first, and I'll pass to Andy for the second question. The change in growth we saw was pretty much, like, consistent across the second half. So we did have three peak events in the half, and, you know, those were all successful. But the key change, which is, you know, the moving into positive order growth, that has been every month, you know, in the half. Moving into new customer growth, that's got consistently better through the half, as we've kind of gone on. Kind of, you know, peaks haven't been different to the non-peak.
So, so really, you know, we look at this as an underlying trend in our, in our all year round business, has, has really just stepped up, and that's new customers, existing customers, you know, and, and orders, which, you know, I think is a, is a really healthy place to be. So, so yeah.
Maybe I'll catch your second?... Yeah. Hi, Jonathan. Yeah, I think you're right. I think what you're calling out is the fact that our cash generation is strongly weighted into the second half of each financial year. And therefore, you know, we expect our net leverage to be broadly unchanged at the 31st of October, but then reduce significantly in the second half of the year. In terms of approach to returning capital to shareholders, I think that's something we're looking to update further on at the Capital Markets Event that we'll hold in mid-October.
You know, clearly, if you look at the trajectory of cash flow in the business, if we chose not to return cash to shareholders in the second half of the year, we'd be lower than our target leverage by the end of the financial year. And so, you know, at the other side of summer, I think it'll be appropriate to provide a further update.
Lovely. Thank you very much, gents.
Just a reminder, if you wish to ask a question, we ask that you please use the Raise Hand function at the bottom of your screen. Also, if participants want to submit questions, they can through the webcast page using the Ask a Question button. Our next question is from Andrew Wade at Jefferies. Please unmute yourself and begin with your question.
Morning, chaps. Congratulations on a strong second half there. But first of all, just wanted to touch on sort of squaring the circle on the guidance. You're sort of talking about mid-single digit growth from the ex-breakage number, sort of, so say 5% on that. If you take even the top end of that 25%-26% EBITDA range, it gets you sort of GBP 91-ish, and that compares to consensus of GBP 94-ish for EBITDA. But you say you're trading in line, so I'm just wanting to square the circle on that. Will it come out slightly above that 25%-26% EBITDA margin range? Is that the balancing factor in there?
Yeah. So I think, and hi, hi, Andy. What we're trying to say in terms of the revenue guidance is, obviously, we've, we, you know, we've, we've printed revenue for this year of GBP 341 million. Within that, there's mid-single digit breakage, so, you know, GBP 5 million-GBP 6 million worth of excess breakage from COVID vouchers. So we're saying effectively apply our revenue guidance to, to, the, the lower number, so, you know, around about the 335 rather than the 341.
In terms of EBITDA margin, we'd expect to be sort of, you know, towards the top of the or maybe sort of slightly above our medium-term range. You know, if you look at- if you, you know, we've obviously just reported an EBITDA margin rate of 28%, but within that, there's, you know, just under two percentage points of benefit from that, sort of one-time breakage. So if you sort of strip that out, you get to a rate which is, you know, slightly ahead of 26%, and we'd expect to broadly meet that in the year ahead.
Great. Okay. That's, that's very clear. Thanks. Secondly, sort of the just the ... I think I sort of already know the answer, but just to sort of run it by you, I guess, the math on the mid-teen EPS growth versus double-digit revenue growth, presumably the differential comes from leverage over the interest and depreciation there, rather than anything else. Or is factored into that some benefit on the interest line or some lowering of depreciation? I'm sort of interested as to the mechanics there.
Yeah, absolutely. I think the primary driver there is deleveraging. So, you know, obviously- we've got a business that is generating, you know, you know, in this current year, GBP 50 million-GBP 60 million worth of, operating cashflow and growing in future periods thereafter. You know, if you just take an interest rate on that, you'd see that's sort of enough to bring you into the, into sort of the mid-teens.
Okay, yeah, so implicit within that is that there's some benefit from deleveraging?
Yeah. You know, if you think about the ways that we might allocate capital, you'd either get benefit from deleveraging or, you know, as we've signaled in, in- this morning's announcement, you'd look at returns to shareholders, and you know, there are ways to do that that would be EPS accretive.
Gotcha, thanks. And then finally, on the sort of, well, I guess the question for Nickyl, sort of looking at the gift attach side of things, could you sort of talk about what momentum's looking like on the gift attach side? If your aspirations, in terms of where you can get to on gift attach, have changed, and what the big initiatives that you've got coming up, to drive gift attach are? Thanks.
Yeah, thanks. So, you know, I think, you know, probably the first thing to say is, you know, we are operating in a, you know, in a world where sort of the cyclical impacts on gifting are, you know, much more pronounced than they are on cards. But, you know, despite that, I think what we showed in this half was gift revenues up 4% year-on-year in what is likely a, you know, a challenging market.
So it really talks to sort of the power of the business model, where, you know, we bring customers in for cards, we upsell them to gifts, and we can drive gifting growth even, you know, without having to push that and kind of push water uphill, you know, from an online marketing perspective. You know, that said, you know, attach rate was kind of stable in the second half. You know, that's not, you know, kind of where we want it to be. I think, you know, what we'd expect going forward is that attach rate is back in growth. You know, our attach rate is in the sort of high teens range at the moment.
And, you know, we see no reason why that shouldn't, you know, move into the high 20s, you know, and even 30s in the sort of medium term. So our aspirations for the amount of customers that can add gifts to their cards hasn't changed. We think there's still a huge runway to grow. And it really comes down to, you know, continuing to improve our algorithms and improve our range. And actually, you know, I think on the algorithm side, we're really excited. You know, there's a lot of developments using sort of new machine learning and AI capabilities that are kind of allowing our recommendations to be powered by much more intelligent models than previously.
So previously, where we would have had a rule-based model that kind of would essentially say, if you see card X, show gift Y, I think now we're starting to introduce semantic search, where we can really interpret the customer's intent from all of their behavior, from the message they write inside the card, from the way they browse, how they browse, and use that intent to suggest the range of gifts. And so I think over the next 6-12 months, you know, we'll expect to see the quality of that cross-sell, in particular on sort of the smaller occasions. So, you know, birthdays were pretty well optimized, but on, you know, get well soon or new baby, you know, we haven't put the same focus.
But I think these new models allow us to really, you know, catch up fast. So expect to see, you know, the data science capabilities really start to come through in the next year. And on the range side, we're making great progress. So we've got, you know, we launched a couple of new brands, like Hotel Chocolat was one of the big, big launches- this year. It's been incredibly successful and moved straight to, like, number one in terms of our, you know, kind of, you know, chocolate sales, you know, which was really good to see, and, you know, obviously at a slightly higher price point than our previous chocolate offering.
And, you know, we've got some, we've got some exciting launches coming this year, in particular in the sort of the kids categories. We've got some, you know, really, really exciting brand launches coming, and we're very confident those will kind of further step up. So, attach rate, look, challenging environment. You know, I think the model is working, but, you know, we have a lot we can do organically to push it.
Great stuff. Thank you very much, and well done.
Just a reminder, if you wish to ask a question, we ask that you please use the Raise Hand function at the bottom of your Zoom screen. Participants can also submit questions through the webcast page using an Ask a Question button. Our next question is from Caroline Gulliver at Equity Development. Please unmute yourself and begin with your question.
Good morning, congratulations from me to a really good turnaround, really good set of results. Oh, hell! Good morning. It's Caroline Gulliver here. Congratulations from me, too, on a really strong set of results, momentum. I just had a follow-up question to Andy's question, really, on gift attach, all the initiatives you've got going on. I completely get that, it's cards first, and that's the best way to market and best way to get people in. But I'm just wondering what you're doing as sort of overall brand marketing and maybe introducing new customers to the idea that you're actually selling gifts and selling experiences, and how you're getting the message across more widely, or whether you just want to focus very much on cards first from a marketing perspective.
Thanks, Caroline. It's a great question. It's something we've talked about in the past. So I think, like, the beauty of our model is that we sell gifts without having to market them directly. And, you know, I think if we look at our flower business, you know, we know we're probably top three online florist in the U.K. But, you know, we have no marketing costs associated, and so, you know, we're probably more profitable than the rest of the online flower industry combined. And so that kind of talks to the model of, like, why we believe so firmly in card first, where you drive the volume, and you can, you know, use upsell and cross-sell to sell gifts.
And, you know, I think when we, when we have tried in the past to just sort of acquire customers profitably, you know, from a gift first perspective, so trying to acquire a flower customer or a chocolate customer, it's hard to get the paybacks on those customers because they tend to be less loyal. Because when you, when you come to our site and buy flowers, you don't give us the same data about who you're buying for and why you're buying, that you do when you buy a card. And, you know, data is ultimately what powers the loyalty, which powers the sort of sustainable, profitable growth.
That said, I think there is a really interesting point about how can we, how can we increase awareness and perception of the fact that Moonpig is a great place to get a gift from, as well as your card? And so I think, you know, what we've really been doing on that front is, you know, apart from improving the range, I think we're using different marketing channels to sort of make it clear that you can put a, you know, buy a gift with a card. And so, you know, for a couple of years, a lot of our above-the-line marketing on TV didn't feature any sort of gifts. Whereas now we're starting to sort of introduce gifts in the background alongside the card.
We're experimenting quite a lot with new digital channels. We're seeing some great results with TikTok at the moment in terms of some of the campaigns we're running there. And again, those are probably, you know, things where actually, you know, highlighting the fact that you can actually put a gift inside a card now is a really powerful combo, and I think that's driving awareness as well. So, you know, that alongside the fact that we're, you know, we're continuing to improve our packaging, improve the unboxing experience, so that actually everyone that receives our gifts becoming, you know, more and more comfortable that Moonpig is a great place to buy gifting.
So, I think it's a combination of, you know, the algorithms, the brands we're bringing on board, you know, photography on the site, all of those things, alongside starting to introduce elements of gifting into our marketing, but we're not going into a gift-first marketing world because we just don't see the paybacks. And quite honestly, now, you know, when we're starting to see the order growth in cards that we're seeing, we don't feel the need to.
Yeah, makes sense. Thank you.
Our next question is from Sean Kealy. Please unmute yourself and begin with your question.
Morning, guys. How are you all doing today? I just wanted to follow up on the gift attach point, if I can. So I was wondering if we could dig a bit more into some of the more expensive experiences, in particular. Are there any different strategies for driving attachment, particularly for those more expensive products, as compared to some of the slightly lower ticket items?
Yeah, thanks. Yes, it's a good question. I think it's something that, you know, is, is probably one of the key reasons why, you know, kind of we've done the acquisition of experiences two years ago, and we're only really now starting to see the momentum of those experience sales on the Moonpig side. It's because it's a more complex product and a more expensive product than our average gift. I think there are two elements. One is, you know, for customers that, you know... Our average gift previously was in the sort of GBP 15-GBP 20 range. That's kind of what customers tend to pay for a gift on average at Moonpig.
The experience businesses Buyagift and Red Letter Days themselves on their consumer websites, the average experience they'll sell is in the sort of GBP 80-GBP 90 range, so quite a difference. What we really focused on is the sub GBP 50 range for sales on Moonpig, and that's been, you know, and that's kind of where we've really seen the traction. So actually, you know, I think as a starting point, just making sure we have a great range of products that are available for sub GBP 50. You know, there's a lot of gourmet products, so dinner for two, meals for two, afternoon tea for two. There's, you know, subscriptions, so, you know, HelloFresh subscriptions and the like, that, you know, have been really successful with our customers.
So kind of, I think rather than trying to get them from GBP 15-GBP 80, I think we're kind of moving from GBP 15-GBP 50, and actually, that's where we're seeing traction. Bearing in mind that most experience gifts are for two people to use, 'cause it tends to be, you know, an overnight stay for two or afternoon tea for two. So kind of when people look at the price, they kind of, they can kind of rationalize it that way. I think the other element, and this is really, really important, is the new capabilities we're building into our recommendation algorithms using these kind of new AI technologies, is going to allow us to personalize our recommendation engine in a much more powerful way than we've done before.
We've launched kind of Version 1 of this about six months ago, where, you know, we could kind of have a relatively crude recommendation that basically looked at whether you bought a gift above GBP 30 in the past, and if you had, we would show you a different, more premium gifting, you know, cross-sell page to others. I think, you know, that's kind of a very, very basic version. We're getting much more sophisticated at that, and so over the coming year, we'll be able to differentiate customers based on their previous history and based on what we know about them, which I think, again, unlocks a way for us to show higher priced items to customers that, you know, have the propensity to buy that, and, you know, much lower priced items to others.
So, you know, we're confident that, like, over time, you know, this will continue to grow, and we've seen great growth in digital gifting in the past, you know, in the past months.
Thank you very much.
Just a reminder, if you'd like to ask a question, we ask that you please use the Raise Hand function at the bottom of your screen. Participants can also submit questions through the webcast page using the Ask a Question button. There are no further questions on the webinar. I will now hand over to Nickyl Raithatha for closing remarks. Please go ahead.
Thank you, everyone, for your continued interest in Moonpig and for joining today. You know, as we've announced a pleasing set of results, it's a step change in revenue and profit growth during the second half of the year, and we're really confident that the growth will continue as we go through the rest of the year. Our business has a unique combination of top-line growth, high profitability, and strong cash generation, and we remain extremely well positioned to continue this consistently over the next years. We look forward to seeing you again in a few months at our Capital Markets Event on the 16th of October. Thank you very much.