Good day, ladies and gentlemen, and welcome to the Moonpig Group's Financial Year 2024 Half 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, or if you have dialed in, please select star nine to raise your hand and star six to unmute. 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. Thank you.
Thank you. Hi, everyone, and thanks for joining the Moonpig Group Half Year Results call. I'm here with Andy MacKinnon, our CFO. Hopefully, you've all had a chance to look through the announcement and to watch the presentation video on the website. I'll say a few words, and then we'll quickly get to the Q&A session. In short, we've delivered a really pleasing set of numbers in what is a continued challenging environment. These results today mark a real inflection point for our business, with a return to both revenue and profit growth, in line with the expectations we laid out at the beginning of the year. The positive trends have continued since the end of the half, and we're confident now to deliver on our expectations for the full year.
The growth and the profitability is underpinned by the Moonpig UK business, where the technology investments we have continued to make through the cycle are really starting to pay off, with extraordinary loyalty from our customers underpinning a 5% growth in the first half. The velocity of technology feature releases, of new products, and of AI tooling have seen a significant step change increase in the half and will drive increase in customer acquisition, customer frequency, and gift attach rate going forward. The experience business, which is comprised of the Buyagift and the Red Letter Days brands, is one year into a full transformation project, with solid performance in tough conditions. The technology replatforming is proceeding very well, with some promising early wins, and the new brand positionings have been received really well by customers.
Today's results highlight the key strengths of our business: a resilient market that delivers growth even in challenging conditions, high profitability driven by the loyalty of our customers, and a strong annual cash conversion that means we will continue to delever at pace. The long-term opportunity remains vast, with the market leaders in a card market that is still in the early days of shifting online, and with a model that gives us a clear path to consistently growing a large and profitable gifting business. With that, we'll turn over to your 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 screen, or if you've dialed in, please select star nine to raise your hand and star six to unmute. As a reminder, participants can also submit questions through the webcast page using the Ask a Question button. Our first question is from Charlotte Barry at J.P. Morgan. Charlotte, if you'd like to unmute your line and ask your question. Thank you.
Hello, can you hear me?
Hi, Charlotte.
Hi, Nickyl. Hi, Andy. Thanks for the presentation. I have two questions, please. I can go one by one if that's easier. On Moonpig Plus and Greetz Plus, I guess, are there any changes you're having to make to that offering in the Netherlands to make it more applicable to the market there? And I guess in the same vein, what gives you confidence it will work in the same way?
Yeah, so, so I think in the first instance, we're gonna roll out essentially exactly the same subscription scheme. I think, you know, we've got a lot of data on, you know, millions of customers and multiple years of cohorts that show patterns are very consistent in both markets. And in particular, the promotional strategies that we have, you know, across the group, just in sort of daily trading, you know, give us a pretty good indication on how customers react to different benefits. And so, you know, I think as a first iteration, launching what we've kind of refined in the UK is where we'll go. But, you know, over time, we'll of course adapt and react.
I think the great thing about the subscription scheme is it's not a... You know, we are, we do have flexibility to change the benefits, the pricing, et cetera, as we go. So I think initially, we'll launch with essentially the same scheme early in the new year. And we'll kind of analyze the sort of the take-up and the behavioral changes from customers and iterate from there. But we, you know, we largely see that customer behavior is very similar across both markets, and so we see no reason why it shouldn't work effectively there.
Okay, great. Thank you. And then my second question is just on Tamworth. Could you please just remind us what, whether this is expected to have any implications on your inventory light model? So, like, what proportion of the inventory held there is on a consignment basis, and whether that's gonna change over the coming years?
Yes, there'll be no, no, no expected change in our inventory model. So what we've effectively done with Tamworth is take operations that were previously operated by a third party on our behalf and brought them in-house. You know, as a reminder, you know, we do operate a pretty light inventory model. So, you know, our overall balance of stock across the business is relatively tight in scope, and we expect to maintain that going forwards. I think obviously, you know, as we scale the gift experiences business within Moonpig, that does offer opportunities to drive gift attach rate without incremental inventory. But for our existing gifting business, the model remains unchanged.
Okay, thank you very much.
... Thank you. Our next question is from Jonathan Pritchard at Peel Hunt. Jonathan, if you could please unmute yourself and ask your question. Thank you.
Thank you. Yeah, and morning, morning, all. Two similar questions, actually, possibly both for, for Nickyl. The customer segmentation you talk about in the presentation, you talk about a roadmap there. Can we perhaps, without being too commercially sensitive, perhaps the next sort of couple of steps on the roadmap to, roadmap on, on segmentation? And, and not a dissimilar question, as to say, the upsell capability on gifts, what's the sort of next step there, and, and how has that improved?
Yeah, you should come spend some time with our tech teams and our data science teams. So I think on customer segmentation, the real change that we think we've kind of seen in the half, which sets us up for sort of, you know, I think multiple years of probably iterations at a higher pace than before, is, you know, when we look at the algorithms that we've used for recommendations on site. Historically, we've only incorporated data based on the mission that you're there for today.
So if you, if you take the example of, you know, a customer coming to buy a Disney card for her sister's birthday, you know, customer one buying that same card for her sister's birthday, and customer two buying that same card for her sister's birthday, would see the same recommendations in the gifting cross-sell page. What we're doing now is we're actually incorporating the customer's history. So maybe customer one has, you know, been with us for 10 years and typically spends GBP 40 on, you know, luxury flowers. Whereas customer, you know, two, who's buying the same card for the same recipient, you know, has made two purchases in the past and never attached a gift.
And so I think, you know, the first step was, was, you know, was really about just saying, "Let's just have a way of differentiating what we show those customers to drive attach rate." And I think that's the main driver why we saw attach rate grow in the, you know, year-on-year, in the half, was really that kind of ability to be even more relevant than before to customers and to show those. I think the, you know, it, it's kind of... That's version one. I think there's a whole... You know, right now, it's really sort of, it's almost, you know, we've kind of been quite binary in terms of segmenting customers into large buckets of sort of customers with a propensity to spend on gifts and not.
You know, I think this can go all the way to individual user personalization. So, you know, I think the sort of where we're looking to go is towards what we call internally a next best action. So if we can see that in the past you've added a certain type of gift, then we'll recommend you a different type of gift, or maybe a promotion, or maybe, you know, flowers. And so it's actually so that almost every single individual, you know, moves beyond an individual who's in a bucket, but actually becomes a sort of a personalized journey. And so I think that's gonna have real positives for sort of the relevance on the cross-sell. We're already actually starting to do that on other parts of the journey.
So if you take the homepage now, you know, the homepage banner for the first time, that's personalized. So the banner that you will see will be different to what I will see, and it will be based on, you know, when the last time you bought was, what you bought, you know, how you've typically bought, and any reminders you may have, that kind of might give us indication into what you're doing. So I think just in general, the way we are, the way we've invested in data science is basically moving us towards a world where we will be able to personalize for the user at every touch point. And, you know, and I think another thing we probably, you know, have made pretty good progress on is personalized promotions.
We are seeing, you know, we know that in particular in this environment, you know, customers do react to a 10% discount on gifts if we give it to them. You know, we're able now to target customers who have never added a gift before at checkout, you know, for example, with kind of a promotion that's tailored for them. So it might be a promotion on flowers, it might be a 10% promotion, it might be a promotion with a minimum spend, but we're looking at their past history to work out what is the best thing that we can do for that individual. So really it's about personalization.
I think on upsell capability, you know, I think the sort of simple but quite effective tool that we launched this year was add-ons on gifts. So now for a whole range of, you know, gifts and flowers, you can add two bars or an extra box of chocolates. That's been limited to just one product per gift. I think we wanted to keep the operational complexity down to, you know, to as simple as possible.
But, you know, we're increasing the range of options to the customer, to the point where customers will more and more be able to, you know, to choose, you know, choose between multiple gifts, and then ultimately, to add more than one gift to their cart, and it arrive in the right way. And again, you know, I think this is all based on using the sort of AI tools that we've been investing in, to make sure that we're able to recommend the right gift to the right person, and, you know, to do that multiple times. So, you know, the upsell, I think that's, you know, it's been a real surprise, I think, in the last...
positive surprise in the past year, of the fact that we've got you know, more customers to upgrade from small cards to large cards than ever before. And on top of that, you know, more customers to add gifts. And then on top of that, we've got more customers to add extra gifts to their, you know, to their original gifts. And so kind of there's several levels to this, and we're making progress in all of that.
Great. Thank you very much.
Our next question is from Andrew Wade at Jefferies. Andrew, if you could please unmute your line and ask your question. Thank you.
Morning, team. Just a couple of questions from me, albeit the first one could arguably be a couple of questions. On the Moonpig brands, adjusted EBITDA margin in the first, obviously well, obviously well ahead. You sort of detailed the reasons why, Tamworth price changes and shipping prices for gifts. Just wondering, as we sort of head into the second half and we annualize some of those price increases, how sustainable that margin uplift is in the Moonpig brand? And I guess a similar question on the flip side for the experiences business, given the provisions in there, should we be expecting the adjusted EBITDA margin in that business to sort of recover to historical levels?
So that was sort of question one, albeit two parts, and the second one around the annualization of the trade down in gifts, attached gifts. What have you seen as you've annualized that trading down in behavior? Have we seen the mechanical uplift, or mechanical removal of the drag on the revenue growth rate as we've annualized that step down a year ago, or just over a year ago now? Those are my two questions. Thanks.
Andy, why don't you take the first?
Yeah, sure. Thanks. I think firstly on, first question was around, the impact of, pricing changes in, in Moonpig. And I think obviously, while once we annualize that, it will drop out of AOV growth, and therefore, you know, our AOV growth in Moonpig brand will be, more of a balance of, orders, pricing and attached growth in the second half of the year. Obviously, it will stay there in gross margin, because to the extent that,
Yeah
... we've increased prices, that will remain in place. And that's why we're effectively saying that we expect gross margin for Moonpig and Greetz to be broadly similar in the second half of the year compared to the first half.
Yeah.
On the question around experiences gross margin, that is a very specific point. It's a one-off provisioning against gift boxes, so effectively packaging relating to the rebranding of Buyagift and Red Letter Days, for which we've introduced a new visual identity. It's quite small. While it sort of sticks out in terms of the percentage margin, you're talking about, you know, a few hundred thousand GBP worth of cost.
Right. Just to circle back on the Moonpig brand, Adjusted EBITDA margin, you think that sort of 30% adjusted EBITDA margin is a sustainable level going forward?
Yeah, I think in terms of, we've said in the announcement, in terms of cost, we have been quite prudent in the way that we've managed the cost base in the first half of the year. So less of a gross margin, but more in the indirect cost base of the business. We have been quite cautious as we've been through the first half of the year. And probably you will see some additional costs coming in in the second half. We've done that deliberately, where there have been elements of discretionary spend, that we can make some choices around, you know, the timing of when we do that research, or the timing of when we kick off that project, or the timing of when we make a, you know, significant hire in the business.
We've, we've sort of tended towards the second half of the year, and that's to make sure that we've got flexibility, to help manage P&L in the event that we see any sort of step down in the environment between now and the end of the year. On your other question, which was around the annualization of the attach gifts, we've, we've not seen any sort of further step change in customer behavior. So the movement in, you know, effectively sort of center of gravity of the gifting merchandise range, that we saw in around about this time last year, is something that's endured and has remained unchanged.
So obviously, to the extent that that was a drag on average selling price and average order value, from the point that we made the change, we're seeing that annualized out.
Very, very helpful. Thank you. Thank you.
Thanks, Andy.
Our next question is from Monique Pollard at Citi. Monique, if you could please unmute your line and ask your question. Thank you.
Hi. Morning, morning, Nickyl. Morning, Andy. A couple of questions from me, if I may. The first one, just on the Adjusted EBITDA margin expectations for FY 2024. Obviously, if we would say that the Adjusted EBITDA margin would be flat for this year, and assuming sort of mid- to high-single-digit revenue growth in line with your guidance, that implies 2H margins down, let's say, 240 basis points year-on-year, and also down 160 basis points, half-on-half. I mean, given your comments, Andy, obviously on the gross margin, you're expecting that to be sort of flat, half-on-half.
I understand that, you know, there was a bit of cost that has probably been delayed into the second half, but it just seems like down 160 basis points, half on half, seems pretty aggressive. So just trying to understand sort of what I might be missing there, apart from the delay in some cost items. And then the second question was just on the, obviously, the close to four million customers that are using your innovative card creativity features, you know, such as the video and the audio messages, et cetera. I'm just wondering if you're able to give any indication of the typical price uplift you see from those customers versus just a standard card customer. Thanks very much.
... I'll pick up the first question. I suppose the macro point there is that the stretch of our cost base is such that we've got significant flexibility with respect to where we land Adjusted EBITDA. You know, if you think more medium term and the fact that our Adjusted EBITDA margin guidance is for a flat EBITDA percentage, despite the inherent operating leverage in the business, is effectively an indication of the fact that you know, we as a business make choices on a half year and half year basis as to what level of investment in future growth initiatives we want to make.
I think what we're signaling here is that we've probably held back a bit in terms of doing things that we think will be beneficial in the medium term until the second half of the year, in order to make sure that we've got scope to effectively pull levers to make sure that we deliver our commitments in terms of Adjusted EBITDA for the full financial year. But there is opportunity for us to go harder in terms of choices, investments, should we think that we're seeing stability in terms of overall trading environment as we move through the second half of the year.
I think specifically on the comparison of EBITDA percentage margin for H2 this year implied versus H2 of last year, obviously, the context last year was a slowdown in our expectations for revenue for the group, as we moved into the downturn round about October, November of 2022, and what we did was effectively quite assertively manage the cost base of the business in order to still deliver the same level of adjusted EBITDA.
So obviously, to the extent that we're comping against a period in which we took quite robust cost action, you know, an example would be, you know, a significant reduction versus the current accrual rate in the annual bonus that we pay to all of our staff, 'cause everybody in our business is on a performance scheme each year, which is linked to profit and financial performance. Then that does have an impact upon the year-on-year Adjusted EBITDA margin rate.
And yeah, taking your-
That's helpful.
Taking your second question, so the short answer is there is no price uplift from any of these features. You know, we've made a conscious choice here that actually, rather than looking to sort of move to a world of micro transaction, you know, we're after what we see as the bigger goal here, which is capturing a bigger share of the market. And if you think about just the core equity story, right? Is you know, this is about you know, Moonpig moving a market online, so moving the card market online. And so you know, the real point of differentiation we have versus the high street is we have a better card.
You know, we've always had a better front of card because you can personalize it and choose from a bigger range. But we wanna kind of really kind of extend that product lead. And so that's why, you know, we've really focused on innovating within the card. So the fact that you can now add a video message, you can, you know, get your kids to record, you know, sing a song for your, for their grandparents. You can, you know, we have an AI message writer now, so which has, you know, been, you know, customers are loving it, 'cause sometimes it's very hard to find the right words, you know, especially things like condolences but also, you know, for lots of other occasions.
The fact that you can add a gift inside the card, and you can, you know, now say, "Happy Birthday, and here's, you know, two theater tickets," it's. I think this is all about elevating the card so that a Moonpig card just stands out and is more memorable. And the real benefits that we see from this are twofold. I think one is in customer frequency, that customers realize that Moonpig is the only place they should be buying cards from, and it really does make a difference in terms of how happy the recipient is when they receive, you know, a fully loaded Moonpig card compared to a, to a sort of regular supermarket card.
And the second thing is the wow factor you get as a recipient, and this is, you know, this is a big thing for us, that actually, you know, we, we see, we're hearing time and time again, you know, that people who receive a video card, it, you know, it's a, it's novelty, it's new, and it, and it's just, it's, it's a wow factor. So they keep the card on their mantelpiece for longer. They show it to more people. They talk about it more. And guess what? They become more, you know, they'll become Moonpig customers in the future because they'll want to pass that on.
So I think for us, you know, this vein of innovation has really been about get customers to be more and more delighted in using our cards, in sending our cards, and in receiving them, and, you know, we're gonna continue this this sort of path of innovation. I think there's kind of a lot more to come. I think there's a, you know, a project we're working on where, you know, potentially customers can save their own handwriting in the on Moonpig, and potentially you can, you know, type cards in your own, you know, perfect kind of handwriting, which we'll print and send for you.
You know, looking at kind of fusing different AI tools to sort of personalize videos and audio messages so that maybe, you know, your audio message can be converted to a Snoop Dogg rap or a David Attenborough documentary style. So I think, you know, we're looking at a whole bunch of different ways of just making the card more exciting, and, you know, giving this away for free, essentially, to just increase the value, increase the differentiation from the high street, and then continue to drive those long-term levers of getting more customers to buy more cards each time.
That's really helpful. Thank you.
Our next question is from David Hughes at Stifel. David, if you could please unmute your line and ask your question. Thank you.
Morning, all. Can you hear me?
Yes. Hi, David.
Great. Um-
So, just in terms of a couple of questions on kind of the international business. Obviously, results in the Netherlands kind of significantly behind what we saw in the UK. I know that you kind of highlight the kind of tough macroeconomic conditions and perhaps some of the features in the U.K. that haven't been rolled out to the Netherlands yet. Do you just view the kind of that economy as the big driver, or is there anything in terms of changing behavior that you're seeing differing between the UK and the Netherlands? And then secondly, just on the wider expansion, I know that other countries remain very small, they're kind of a proportion of the whole, but you have seen significant growth there.
Is there anything you're doing or thinking about doing in terms of marketing more in Australia, Ireland, the U.S., given the level of growth you are seeing there?
Yeah, absolutely. So, I think the context on... I think, well, the primary thing here is when we look at the performance of the sort of the Greetz business, I think it really validates the commitment we've made to technology. Because what we've seen is that two businesses that looked very, very similar pre-pandemic, that looked very similar during the pandemic, have had quite different trajectories as we've kind of come post-pandemic. And what we saw on Moonpig was that actually customers that were engaging with us, engaging with our platform, you know, we were able to sort of drive that loyalty up by getting them to download our app, to set reminders, to use multiple occasions, to you know, to capture their data, to personalize their experience.
In Greetz, we weren't able to do that during the pandemic. I think that's directly driven essentially what is probably similar to most other e-commerce verticals, where, you know, many of those customers just haven't stayed with us and have kind of gone back to the sort of previous behaviors. I think it really does show the power of the Moonpig platform that we've built. I think for us, the focus now is that now we have the new platform at Greetz, we have all of the loyalty levers, you know, in place, that every new customer that comes to us now, you know, behaves, you know, much more similarly to what the Moonpig UK customers behave like in terms of their loyalty and their retention.
But also that actually every existing customer from Greetz that comes and interacts with us now, that we really encourage them to sort of, you know, adopt the, the features. So, you know, we've been pushing very hard on app. You know, we've kind of... If you look at the sort of the app share in Greetz, it's gone from sort of, you know, high teens to, to high twenties in, in, you know, in, in the last year. So we're really pushing on that, and that's, you know, that's gonna have those benefits.
I think for Greetz, it—I guess the way we see it is, you know, we weren't able to sort of hold on to as many of the pandemic gains as possible, but when we look at it on a sort of, you know, day-to-day, you know, across both markets, actually, we see very similar patterns of behavior from customers who are engaging with the platform for the first time or even, you know, existing customers coming to the platform for the first time.
Actually, when you know, when we look at Greetz, we look at the trajectory, we look at the business that was, you know, minus 20%, you know, last year, minus 10% in the first half, and probably, you know, close to breakeven by the end of this half. So, you know, a pretty strong improvement in trajectory, and we expect that to continue in that business to return to growth. I think on sort of the other... Is that clear?
Yeah, I just, I think that, that makes a lot of sense. So kind of in some ways, you kind of missed out on being able to capture all that data during COVID, but if we view the current state as more of a baseline from this point onwards, the kind of that data capture, that technology is happening, and so you're kind of in a improved trajectory going forward.
Absolutely. Yeah, absolutely.
Yeah, makes sense.
Yeah, and then, yeah, in terms of rest of world, you know, look, we, you know, we launched Ireland last year. You know, we have what were kind of dormant sites in Australia and the U.S. You know, we have started, you know, at a very small scale, kind of you know meddling and testing kind of different marketing strategies and tools. Again, very lean in these markets and, you know, that's contributing to the growth we're seeing.
So I think for us, you know, really just continuing on that path, you know, experimenting, looking for product market fit, and I think, you know, and I think, hopefully, that, you know, the growth in those countries, which are small, but you know, are starting to move, you know, continues and, you know, and we can kind of grow our investments alongside the growth in the businesses.
Great! Thanks, Nickyl.
Our next question is from Simon Sheridan at Numis. Simon, if you could please unmute your line and ask your question. Thank you.
Morning, gents. Two for myself, if okay. The second one's just a little bit on some more kind of technical modeling pieces. Just on the first one, it sounds like again, kind of another period of kind of some strong innovation and proposition improvements coming through, and Nickyl, you've spoken around kind of penetration still being low in the category. And I guess I'm just trying to square that with, you know, we've seen kind of volumes down and kind of less new customers coming into the business. What do you put that down to? Is this kind of still a bit of a COVID hangover that's coming through in this sector? Do you think kind of market volumes are down? Is it purely a macro factor?
Just wondering how you kind of rationalize those aspects?
Yeah, it's a great question. I think there's sort of two elements there. I think one is the sort of the final piece of the COVID unwind. I think it was the sort of the return to offices. You know, which didn't finish last year, which actually, you know, if you look at mobility data or, you know, TfL data, you can see kind of continued all the way through to sort of September this year. So I think there was that kind of final reversion to the new baseline, and just, you know, society behavior, I think, did continue sort of through, you know, through parts of this half.
You know, we think we're there, now, so we don't expect that to be a continuing trend. That puts a little bit of pressure on just the headline numbers, but not the underlying. But, you know, our existing customers remain pretty strong, and actually, if you look at just the. You know, every cohort that we've acquired, you know, pre-pandemic, during the pandemic, and post-pandemic, the sort of activity of those customers on a monthly basis is just, you know, significantly higher than it was, you know, at any point. So, you know, the activity of our existing customers, you know, is kind of doing very well. I think, you know, what is more cyclical is, I think the new customer acquisition.
You know, what we've seen is, you know, we kind of... Last year we saw a step down, and I think this year we've seen another sort of step down in sort of the amount of customers we can acquire at the payback levels that we kind of hold ourselves to. You know, and kind of our strategy has always been that, like, we have a sort of minimum quality level and a maximum payback level that we're willing to pay for a customer, and we kind of hold pretty firm on that. Which has meant, you know, we have pulled back slightly on sort of the marketing budget to sort of, you know, to make sure, and that means we're bringing in less new customers.
That kind of compounds, you know, after one year because those customers become existing customers. So, I think that bit is a bit more cyclical, but we're very, very, you know, confident that this is just this is purely a cyclical trend. We see it, you know, in every other e-commerce business, you know, that at least that I, you know, I speak to and and engage with. You know, new customer acquisition is more challenging in, you know, when the consumer is stretched, and people are less willing to try something new. But, you know, structurally, we see absolutely no change here, right? Ultimately, the size of the card market is, you know, is flat. Has been flat for 20 years.
You know, we have a more convenient and, you know, service and a better product and, you know, we will continue to pull the market online. So really, for us, it's kind of waiting till the winds turn externally, and within the new customer acquisition will turn, and existing customers will continue to display the behaviors they're displaying.
Okay, great. Thank you. And then the second question was just on some of the guidance on the bits below EBITDA, so might be more of a, more of an Andy question. I think I'm comparing apples with apples here, but I think first off, interest was just over £8 million, full year guidance unchanged at £15 million, despite some of your interest rolling off fixed rates. Just anything that's worth us understanding there. And then secondly, on the D&A side, again, I think this is apples for apples. First half charge was just over £12 million, and full year guidance unchanged at £27 million-£29 million. Just wanted to double-check that there is a step-up coming in the second half, which I presume we should then anniversary through into next year?
Yes, first on the depreciation, that's correct. So obviously, to the extent that we effectively stepped up investment in CapEx within the technology organization as of a couple of years ago. We're still in a period of time whereby sort of period on period, our depreciation will increase half on half. 'Cause obviously, to the extent that we are incurring CapEx, and we're amortising the cost over a three-year useful life. We're on a trajectory towards the point where CapEx and depreciation equal out, which we'll get to soon. And then there's nothing of note on the net finance costs.
We've effectively, you know, we modeled that according to a SONIA curve for both first and second half.
Okay, cool. Thank you.
Just as 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, or you can also submit a written question through the webcast page using the Ask a Question button. Our next question is from Hannah Sheridan at Berenberg. Hannah, if you could please unmute your line and ask your question. Thank you.
Hi, can you hear me?
Yeah. Hi, Hannah.
Hi, yeah. Yeah, just a couple from me as well. So has there been an increase in the order frequency that you're seeing from existing customers following some of the introduction of your new features? And my second question is, just how much of that average order value increase has been from kind of your price increases on inflation versus the, you know, features you've introduced?
Sure. I'll take the frequency question, and Andy can take the AOV breakdown. So I think, you know what, I think what we've seen is what, you know, kind of, as I mentioned on, on, to Simon's question, when we look at the customers in the UK on the Moonpig business, every customer has a higher level of frequency than they did pre-pandemic by, you know, by quite some way. I think we've talked in the past about it being roughly 20% higher. We're always looking to try and increase that, and if you think about some of the levers we've talked about in the past, we've talked about how when a customer downloads our app, their frequency jumps by 15% almost instantly.
When a customer sets a reminder, their frequency jumps by slightly less, but, you know, still pretty significantly. And actually, one of the exciting things about Moonpig Plus is we can see that when a customer signs up to Moonpig Plus, their frequency jumps significantly. You know, more than, you know, significantly more than when they download the app. And so, you know, that is a big lever. It's, you know, these numbers are being very encouraging for us, but they are still a small part of our base.
But, you know, that's something that we're really looking at carefully, is probably the, you know, the next big driver of frequency for us, is like how we can use our subscription service to bring more customers onto the platform, that really, you know, purchase. You know, give us a significant share of their wallet. If we kind of, you know, remember the big picture here is that, you know, our average customer is buying just under three cards from us every year, and buying around 17 cards from somewhere else, typically the offline market. And so, you know, there's a huge opportunity to get them to get more of that share of wallet. And, you know, we think, you know, everything we've been doing and will continue to do, will continue.
But we think, you know, what we see that Moonpig Plus is, is another way to really sort of unlock some of that frequency gain. You know, we're also measuring, I think, you know, with all of the new card features, the creative features, people using video messages, people using AI text, people, you know, using digital handwriting. We are measuring the frequency. It takes time for each one of these tests, because you need to sort of wait probably six months before you can get clear data. So we are looking at those. You know, we believe it will be a sort of slow burn in terms of each of those sort of compounding to drive that customer loyalty.
As yet, you know, Moonpig Plus is where we have pretty compelling data, and that's where we are, you know, we're focused on growing.
On your second question, Hannah, around average order value. The primary driver of that has been in cards. Obviously, we put a GBP 0.20 increase on the price of a standard-sized card in the UK on the first of November last year. And there's also been changes in Royal Mail's first-class stamp prices both in this year, actually, both in March and at the beginning of October, because Royal Mail put through an additional price increase, so those have been the primary driver.
However, there has been some lesser increase in AOV through gifting, which relates principally to the fact that we changed the shipping price that we charge to customers in January for both off-the-shelf gifts and flowers, and we put GBP 1 on the price there. And then to a lesser extent, there's been some positive impact from the fact that we've resumed the trajectory of attach rate growth.
Brilliant. Thank you so much. That's really clear.
Thanks.
Our next question is from Paul Sheridan at HSBC. Paul, if you could please unmute your line and ask your question. Thank you.
Good morning, everyone. Hopefully you can hear me. Just a quick question from me. You talked about reducing net debt leverage this year by 0.5, 0.5 or half a turn. Perhaps you can just remind me, 'cause I can't find it in the statement, what your kind of longer term, kind of, or medium-term net debt leverage type numbers or targets look like? And once you get to that level, what is then the use for any surplus over and above that? Thank you. Cheers.
I'll pick that one up. So we've not, at this stage, set a precise long-term target for net leverage, but we are focused, as we say in the announcement, on bringing down leverage in the short term. We'll be below 1.5x by the end of the financial year, and I think once we're in a situation where we're in that 1-1.5x range, that starts to give us some optionality.
It's really, it's really a question for the second half of next financial year, 'cause whilst by the end of this year, we'll be down at 1.5, actually, most of the delevering that you see within our business through operating cash flow tends to happen in the second half of the year, as a reflection of the seasonality of our trading and net working capital. I think what we'll have there is optionality. So, you know, those, depending upon market circumstances at the time, it may make sense to delever a little bit further. I think, you know, we are aware of the fact that, you know, share buybacks may make sense, but obviously dependent upon the prevailing share price at the time.
And if we think that the external environment is in a sufficiently robust, robust, state, and we think that there are investment opportunities that are a strong and reasonably certain ROI, then we do have some option to you know effectively resume stepping up investment in the business as well. So I think overall, you know, we're on a path of deleveraging. That remains our short and medium-term focus, but we do have optionality once we get down to a lower level of net debt to adjusted EBITDA.
Thank you. Thanks. Is it, is it plausible to assume that on that areas of potential investment, that might mean a little bit more going into some of the other international markets where you're present beyond the Netherlands, that that would be an option?
Yeah, I think at this stage, you know, we don't kind of have visibility of that. But I think, you know, like I said, if we can find a compelling path to, you know, to generating, you know, return on investment, and, you know, we don't think the distraction cost is too great, then at some point that may come. But I think, you know, for now, we, you know, we're focused very much on deleveraging.
Thanks very much.
Okay.
Our next question is from Caroline Gulliver at Equity Development. Caroline, if you could please unmute your line and ask your question. Thank you.
Morning, Nico, Andy. I had a similar question to Simon's on new customer acquisition. And I just wondered if you could expand on the brand investment you're making. And I ask because you've obviously got a lot of sort of great technology, technology initiatives going on, and it's clear how you've got a lot of access to your existing customers and getting that message across. But I'm just wondering how you're getting that innovation message out to potential new customers, or whether now is just not the right time, given the marketing environment.
Yeah, great question. So actually, it's something we have been looking at and testing. So what we've started, and we've actually started it first in the Netherlands, and we're now rolling it out in the UK, is we're using... We're kind of continuing with our sort of, well, let me say, in the Netherlands, we basically started a campaign that really runs only on digital, so primarily YouTube, Meta, and display, that focuses only on features. And we've been testing the sort of how different features resonate with customers, both to excite and inspire and convert them.
You know, measuring, you know, we can see that in the Netherlands, you know, stickers and video cards, you know, tend to have a really high engagement. You know, we've kind of been pushing those features to sort of in the market. So it's almost like picking one by one, kind of these features and coming up with creative videos through sort of social and YouTube to really try and educate the customer. What we haven't and then actually what we're doing is in the U.K., we're now kind of rolling out the same thing. So actually, you'll see, you know, we've got a kind of a part of our budget that's allocated to this sort of product marketing and feature marketing, and that, you know, we are seeing pretty encouraging take-up.
I mean, you know, the sort of engagement we're seeing on these product feature ads, and particular ones we've optimized them, is, you know, kind of significantly higher than what we were seeing previously on sort of generic, you know, card app convenience range ads. So, you know, I think that's something we've started. We're testing, and we're growing. The primary budget that we spend there from a marketing perspective and a brand perspective is obviously, you know, around the peaks, so, you know, Christmas, Valentine's, et cetera. And I think there's a few things. I think, one, we have the creative assets kind of, you know, ready to go, that are done quite a while in advance.
really, you know, for those, it's very much still focusing on, you know, the reminder of the event and the sentiment. I think one of the challenges for us is probably working out how we can integrate more kind of educational-type messages into those brand campaigns as we go through the year, and that's something we're actively looking at. So, you know, I think there are ways of doing it. The other way of thinking about, you know, educating customers, and I know this is an existing customer piece, but is, you know, really just trying to drive adoption of, you know, customers that come to our site even more, with the knowledge that actually, you know, every existing customer is probably gifting these products to a new customer.
And that's something that, you know, I think is something we've never really been able to do before, so trying to build in mechanisms. And if you take the example of, you know, video cards, when you receive a video card from somebody, you know, if you wanna watch the video, you have to come to the Moonpig platform. And so you're kind of, you know, if you're a non-Moonpig customer, which many people are, you come to the Moonpig platform to watch the video, and we have an opportunity there to engage you, you know, to capture your email address, to get you to sign up, to get you to, you know, send a video message yourself.
I think, I think we're really working on driving some of these viral tools to drive kind of organic awareness, rather than purely paid awareness. I think they'll work hand in hand.
Thanks. Makes sense.
There are no further questions on the webinar at this time, so I will now hand over to Gareth Davis to read out any written questions. Thank you.
Good morning, everyone. This is Gareth Davis from the finance team here at Moonpig. We have one written question, which comes from Lara Mayerhofer at The Times. It reads: "What is your strategy for the use of AI going forward?
Great, my favorite topic. I think there's probably three different work streams that work in parallel when it comes to AI, and I think there's... The first is the customer-facing side of things. You know, we released our first sort of AI feature a few months ago, which is kind of AI message writing facility, and that just, you know, helps customers write poems or, you know, messages or, you know, just find the words when they're lost. Actually, you know, customers have been loving it. In particular in the Netherlands, actually, we've seen very good take-up.
You know, I think, I think there's a lot more we can do with AI, you know, all the way to sort of helping customers, you know, completely create their own card. So I think there's a, there's kind of a long roadmap there. We wanna make sure that we kind of release things, you know, slowly, and, and to, to the previous point from, from Caroline, that we kind of we're able to sort of bring customers along the journey with us in terms of, you know, not, not adding too much complexity. But, you know, I, I touched on previously just whether, whether we can add more, more AI personalization into the, the audio or video capacity as, as well, using AI to try to generate, you know, digital handwriting fonts.
So the customer side of things, I think, is kind of pillar one, and we're making progress on that. The second is kind of using AI with our sort of data science capabilities to sort of almost improve the plumbing of the business. And that means, you know, having smarter personalization, smarter segmentation, smarter recommendations throughout the website. Again, you know, we're pretty advanced there. We're kind of all in on just using you know, the latest technologies to make sure customers get the best experience every time. The third sort of work stream in AI is driving internal productivity, and there, you know, we're still experimenting, as I think most businesses are.
You know, it's, we are seeing that it, you know, it's, it's had pretty widespread adoption from our technology workforce, so, you know, we're seeing productivity gains across the technology workforce. We're using different tools, you know, with our creative teams, with our marketing teams, and I think so across the business, we are seeing adoption, but really, we're looking at... You know, I think we're still probably early in the days of kind of being able to sort of to know exactly what the benefits are. But, you know, I think we're pretty encouraged on all three fronts, and we'll continue to make progress over time.
Given there's no further questions, I will now hand back to Nicol for closing remarks.
Thanks, Gareth. Thank you everyone, for, for joining the call, and for some, for some great questions. You know, today we announced a pleasing set of results, for the first half, returning to revenue and profit growth, and we're confident that the trend is gonna continue as we go through the year. You know, Moonpig Group is a high-margin, cash-generative business with a large long-term growth opportunity, and we remain extremely well positioned to continue delivering profitable growth consistently over the next years. Look forward to speaking to you again in a few months. Thank you very much.