Good morning, and welcome to the Moonpig Group half year results presentation. I'm Nickyl Raithatha, Chief Exec, and I'm here today with Andy MacKinnon, our CFO. First, I'd like to draw your attention to the disclaimer. Please take a moment to read it. In terms of the running order today, I'll kick off with an overview of the half. I'll hand over to Andy to take you through the financials, and then I'll close with an update on our strategic progress. It's been a busy six months to say the least. We have had to adapt to changing customer behaviors in a challenging environment, whilst also completing the delivery of several milestone strategic projects.
In that context, I'm really pleased with the results we are presenting today, which highlight the resilience of our brands and the flexibility of our model, which ultimately has delivered solid results and allows us to reiterate our profit expectations for the current year. Group revenues for the period were flat on the previous year, with the unwind of last year's COVID boost offset by the consolidation of the Experiences division. On an underlying basis, our card revenues continue to grow at double-digit rates. Due to the actions we've taken throughout the period, our profitability remains extremely strong, with gross margin up year-on-year and EBITDA margins above expectation. During the half, we delivered several major strategic milestones.
A successful migration of the Greetz business onto the Moonpig platform means that we now have a single unified technology platform across the card first businesses, which unlocks significant future opportunity. We acquired the Buyagift and Red Letter Days brands earlier this year, adding the U.K.'s largest gift experience platform to our group. I'm really happy with the performance and progress of the business so far, and I'm very excited about the future opportunity it brings us in the digital gifting space. We also completed the build and go live of two new operational facilities in the U.K. and the Netherlands, both of which are currently operating at full pace and delivering thousands of Christmas gifts to our customers every day. We have, however, seen the external environment become progressively more challenging since the end of September, exacerbated by the ongoing Royal Mail strikes in the U.K.
This has required us to be fast to respond to changing customer patterns across the group. In response to customers beginning to trade down on gifts, we took two major actions. We shifted resource toward our high margin card business, while also developing an exciting range of entry price gifts, which have resonated extremely well with our customer base. Likewise, in a context of a more challenging environment for new customer acquisition, we have chosen to reduce budgets and maintain payback efficiencies, while shifting internal resource toward our existing customers who are remaining extremely loyal. The Experience business performed in line with our expectations in the H1 and has continued to do so through November. We are still early in the transformation journey for this new part of our group.
The inherent resilience and flexibility of our business model is what has allowed us to absorb the macro headwinds that we are currently seeing, to reiterate our profit targets for the full year. The engine that drives our business is our greeting card business, a market with a 20-year track record of stability throughout the economic cycle. It is a low ticket, high frequency product where most purchases repeat every year, 95% of orders in Moonpig & Greetz start with a card. Our strategy has been to leverage the data we get from a card purchase to increase the loyalty of our customers, that has created a business where 90% of our revenue comes from existing customers. That gives us a healthy layer of insulation from changes to the external customer acquisition climate.
We are a high margin business with our strategy of upselling gifts to our profitable card customers, consistently delivering EBITDA margins in the mid-20s. We have had very limited impact from cost inflation over the past year and continue to exercise cost discipline across the business. Our balance sheet remains in strong health with confidence in our deleveraging profile. All of these attributes together, along with the actions that we have taken over the past few months, give us confidence in our profit expectations for the full year. With that, I'll pass on to Andy to take you through the results in more detail.
Thanks, Nickyl. Good morning everyone. As Nickyl said, we delivered solid financial results in the H1 of this financial year. That's despite a tough market environment, which became progressively more challenging through October and November. Our revenue was GBP 143 million, which was flat year-on-year and up 115% against pre-COVID comparatives. Within this, Experiences contributed GBP 12 million of post-acquisition revenue, which in part offset annualization against the GBP 16 million of COVID boost in the H1 of last year. We maintained adjusted EBITDA at GBP 35 million, in line with prior year, with an adjusted EBITDA margin rate ahead of expectations at 24.2%. We finished the period with significant headroom against senior facilities.
Net leverage was 2.45x , which is better than we expected when we acquired Experiences, we expect this to be below 2 x by the end of the financial year. Let's look first at the drivers of revenue. At Moonpig & Greetz, we've driven a 6% year-on-year increase in Average Order Value through price changes and more targeted use of promotional discounting, which more than offset the impact from customers trading down to lower price gifts. The year-on-year reduction in total orders primarily reflects annualization against prior year COVID boost. There's also been some impact from strikes at Royal Mail, as there was a day of industrial action in every week throughout September and October, which impacted U.K. card-only orders as next day delivery was not available for affected dates.
After the half year end, we've seen Royal Mail strikes around Black Friday and further industrial action has been announced for December. The trend in orders has been strongest for existing customers, reflecting how we've built our business model around Customer Lifetime Value. Existing customers now account for 90% of Moonpig & Greetz revenue, and revenue from existing customers grew by 5% year-on-year on an underlying basis after adjusting for prior year COVID boost. New customer acquisition has become more challenging, with fewer people searching online for goods and services to consume. In response, we've chosen to maintain payback periods within our existing framework, which means that new customer revenue was lower than prior year, albeit it remains ahead of pre-COVID levels. Turning now to revenue by product category.
Moonpig & Greetz both operate a cards first strategy, which leverages the wide resilience of the greeting card market. More than 19 out of 20 orders of these brands contain a card. During the H1 of the year, cards revenue grew at 12% on an underlying basis, adjusted for prior year COVID impact. Trading at Experiences has been in line with their expectations at acquisition, both in the half year and through November. The revenue impact for attached gifting at Moonpig & Greetz has been more challenging, reflecting consumers trading down to lower price points. Bringing all of that together, the group's total H1 revenue was GBP 143 million, which is in line with the H1 of last year, and 115% larger than it was in the H1 of FY 2020.
It is also 148% larger than it was in the H1 of FY 2019. I mention that because FY 2019 is the most recent year that was unaffected by COVID, and is therefore one benchmark for comparing revenue trends in the first and H2 of this financial year. The revenue trend was stronger at Moonpig than at Greetz, which is consistent with what we've seen in previous periods, and is reflected in Greetz' lower three year revenue growth rate. It reflects the fact that Moonpig has benefited from sustained investment in technology over multiple years. Greetz has not had the benefit of this until September, when we migrated it onto our unified technology platform.
Going forward, we can now start to use data and technology to drive increased customer loyalty in the Netherlands in the same way as we have been doing in the U.K. Turning now to look at profitability. We have raised gross profit year-on-year from GBP 70 million to GBP 77 million, reflecting an increase in gross margin rate of over 500 basis points, which includes the positive mix impact from the acquisition of Experiences. There has been margin rate improvement at Moonpig, reflecting intake margin negotiation, card pricing changes, and more precise targeting of promotions. Whereas gross margin at Greetz decreased slightly, reflecting a lower intensity of promotional activity last year. Across the group, we continue to see no material impact on gross margin rate from cost inflation at any of our brands. This growth in gross profit has enabled us to maintain adjusted EBITDA at GBP 35 million.
Notwithstanding the challenging environment, our management team is focused on ensuring that we deliver against our unchanged expectations for FY 2023 adjusted EBITDA. We will do this by leveraging the flexibility of our model. For instance, our ability to shift emphasis between categories and events, our ability to take a dynamic approach to pricing, and the flexibility that we have in our indirect cost base, each of which are themes that Nickyl will talk about further. Turning now to how we convert EBITDA into cash flow. When we put in place the financing for the acquisition of Experiences, we knew that the enlarged group would have low operating cash conversion in the H1 of this financial year, and we planned on that basis. This lower operating cash conversion has reflected three factors.
Firstly, cash conversion at Moonpig & Greetz is typically lower in the H1 of each year as a result of working capital seasonality. Secondly, the profile of working capital at Experiences is particularly seasonal. Strong cash generation from sales in November and December is typically followed by cash outflows across spring and summer as vouchers are redeemed and we then pay the merchants. Thirdly, the H1 of FY 2023 includes GBP 7.5 million of tangible CapEx, reflecting the fitting out of two new operational facilities. Tangible CapEx will fall to below GBP 2 million per annum from next financial year. It remains the case that the group is strongly cash generative on an annual basis.
Because of the seasonal weighting of working capital inflows into H2, we expect to deleverage between now and April such that net debt to adjusted EBITDA will be below 2x at the end of the current financial year. Our balance sheet is liquid with senior facilities of GBP 255 million. Those facilities are committed until January 2026. We have significant levels of covenant headroom, and we have hedged three-quarters of our expected net senior debt until November 2024. Finally, turning to outlook. As we've said, trading conditions have become progressively more challenging through October and November. Given the continued macroeconomic uncertainty, we now expect revenue for FY 2023 to be approximately GBP 320 million. The actions that we've taken in response to the current environment mean that our expectations for full year absolute adjusted EBITDA remain unchanged.
Our business is highly cash generative on an annual basis, and we expect deleveraging in the H2 of the financial year such that the ratio of net debt to pro forma adjusted EBITDA is expected to be below 2x at 30th of April 2023. We remain confident in the structural growth opportunity in our markets, as well as the fundamental strength, resilience, and agility of our business. Now I'll hand back to Nickyl, who will provide a strategic update on the last six months.
Thank you, Andy. I'll now give an update on our strategic progress, starting with our card-first businesses. Our card brands, Moonpig & Greetz, are built on a model of card first and gift attach. We are the clear online leaders in a card market that is shifting online, and we have consistently acquired customers with short payback times and improved their loyalty using the data we get from each card. We then use the card purchase as an opportunity for a highly targeted upsell to a gift with no associated marketing costs, delivering a highly profitable gifting revenue stream as well. This strategy gives us high resilience, even in challenging conditions as we are currently seeing. Over 95% of orders in Moonpig & Greetz contain a card, which is itself a market that has been incredibly stable over the past 20 years.
Our focus on using data to drive loyalty means that we now have assets that give us a defensive moat, such as our 79 million customer reminders, and it means that 90% of the business comes from customers that come back year after year. We've seen very limited impact from cost inflation, and we have actually increased our gross margins compared to last year and will deliver strong annual cash flow. Work done by OC&C shows that the U.K. greeting market grew in each of the last 15 years, including through the 2008-2010 recession. In fact, greeting cards were shown to have no correlation with GDP over the period. On top of this resilience, our model also gives us a high degree of flexibility, which has allowed us to adapt to changing customer behaviors and needs over the past months.
We are able to dynamically shift our resource between categories and between events. That means that currently we are prioritizing the high margin, low ticket card category and focusing on peak events like Christmas when more people are in market. Our inventory light model means that we can change our gifting range at relatively short notice, and we did this in the past months by building a range of lower priced gifts across Moonpig & Greetz. We have relatively low price elasticity, and we have made pricing adjustments across our card range. We also shifted the strategic goals of our promotional strategy. For example, moving away from driving app downloads towards driving card multi-buy, given the shorter payback periods. The fact that the majority of our business comes from existing customers means that we are less dependent on new customers to drive the business in the short term.
In light of a more challenging external environment for new customer acquisition, we have taken the approach of reducing our marketing spend in order to maintain efficiency levels rather than chasing lower quality customers. It's these actions that have allowed us to absorb the revenue headwinds we are seeing and to maintain overall profit targets whilst also continuing to make progress on our strategic pillars. That means continuing to invest in our technology, in our brands, and in our range to move us closer to our long-term vision of becoming the ultimate gifting companion. Starting with some technology highlights. This half marked a significant milestone as we completed the migration of Greetz onto the Group platform.
This is a critical step in the journey to transition Greetz to a loyalty based business in line with Moonpig by leveraging all of the data and algorithms that are built into the platform. Being on a single platform will instantly increase the leverage of all of our engineers going forward as features are now delivered across the group simultaneously. We're already starting to see the acceleration in the development of customer facing features as our teams switch focus from platform to growth. One of the new products we've launched in the last few months is our Magic Cards, which automatically create collages of customers' photos on a layout of their choice, and it's seen exciting levels of take-up already.
Video Cards are finally here with a rollout of the technology across thousands of our cards going live over the next weeks. Creating not only an opportunity to increase Average Order Value, but more importantly, giving us another clear point of differentiation from the offline market. Our subscription service, Moonpig Plus, continues to remain in testing mode, with multiple learnings from each test that we run and growing evidence that we can influence customer behavior over the long term. We will continue testing for the rest of this year and expect to start rolling it out to the wider customer base in the next financial year. Our brands continue to go from strength to strength, with Moonpig brand awareness at 90% and Greetz just below 80%.
Keeping our brands top of mind for our customers is as important as it has ever been, and the more relevant we can be for our customers, the more loyal they become. Our card range continues to improve with new licenses, themes, and designs going live every day. We now have over 45,000 designs live on our platform. Our gifting business is driven by smart recommendations on our cross-sell pages. This means that we are able to operate with low inventory levels and a narrower range per category than traditional retailers. Because it is recommendation rather than browsing based, there is a high degree of substitutability across our gifting, and that means we can react fast to customer trends.
In the last six months, as we started to see evidence of our customers trading down, we focused on building a range of products they would love at affordable price points. This range of moments for less has had great traction with customers across Moonpig & Greetz. I'm very pleased with the early performance of our Experiences business since joining the group this summer, with performance in line with our expectations despite the challenging external conditions. Our focus has been on strengthening the range, driving optimizations within marketing, and laying the foundations for future growth through technology investments. We have added several exciting new partners to the range, including Legoland, London Eye, and Alton Towers, and we have also strengthened the sub GBP 50 range.
Although we are still very early in our journey to transform the technology platform, we have made positive steps already by strengthening the leadership of the function. As we mentioned when we announced the acquisition earlier this year, there is an exciting opportunity to drive revenue synergies across the group by cross-selling Experiences on the Moonpig platform. Version one of this was to load, Buyagift, and Red Letter Days physical products onto the Moonpig website, and this has already had decent traction, with Moonpig instantly becoming the largest online partner channel for Buyagift. The real opportunity, however, will come with the launch of digital gifting, when we can extend the available range, increase the relevance in our cross-sell, and print the gift inside the card. We expect to see this coming to life over the next six months.
In summary, it has been a busy period where we have delivered a solid set of numbers and completed several milestone strategic projects. The challenging external conditions have required us to adapt and have highlighted the resilience and flexibility built into our model. As a result, we remain confident in our profit expectations for the full financial year. Thank you for listening, and see you shortly at the Q&A.