29 June 2023

Moonpig Group plc ("Moonpig Group" or the "Group")

RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 APRIL 2023

FY23 results demonstrate resilient profitability and robust cash generation

Summary financial results

1.     Before adjusting items of £13.1m in FY23 and £11.6m in FY22. See Adjusting Items at Note 5 and definition of Alternative Performance Measures below.

Results summary

·      Revenue growth of 5.2% year-on-year to £320.1m.

·      Adjusted EBITDA growth to £84.2m (FY22: £74.9m) with Adjusted EBITDA margin increased to 26.3% (FY22: 24.6%).

·      Adjusted Profit before Taxation of £48.0m (FY22: £51.5m).

·      Net debt to pro forma Adjusted EBITDA decreased to 1.97x as at 30 April 2023 from 2.45x as at 31 October 2022.

Strategic and operational highlights

A milestone year establishing key capabilities to drive future growth:

·      Scaled our technology team to 250 (April 2022: 195) roles and transitioned from re-platforming to a focus on initiatives that are delivering new features for our customers.

·      Opened new operational facilities in Almere, Netherlands, and Tamworth, UK.

·      Continued customer acquisition across our brands, with revenue from new customers at Moonpig and Greetz of £31.7m, remaining ahead of pre-pandemic levels (FY19: £23.9m).

·      Delivered significant operational improvements at Experiences, including appointing a new leadership team and investing in the technology platform.

Resilient profitability through the economic cycle:

·      Our business model's inherent flexibility enabled us to deliver Adjusted EBITDA in line with expectations despite the challenging economic context from October 2022 onwards.

·      Adjusted EBITDA for Moonpig and Greetz was £71.2m (FY22: £74.9m), surpassing the level implied by pre-IPO guidance.

·      Resilience is rooted in the stability of the greeting cards market and in our loyal customer cohorts, with 88.6% of Moonpig and Greetz revenue from existing customers (FY22: 86.5%). It is bolstered by our proprietary data, with 84m occasion reminders (April 2022: 72m).

·      Experiences revenue grew year-on-year, albeit more slowly in the second half of the year in light of the macroeconomic environment.

Strong cash generation:

·      Operating cash inflow of £56.2m (FY22: £59.6m).

·      Continued deleveraging, with net debt to pro forma Adjusted EBITDA decreasing to 1.97x as at 30 April 2023 from 2.45x as at 31 October 2022.

·      Significant liquidity headroom and covenant against £255.0m senior debt facilities, committed until 8 December 2025.

·      Floating interest rate exposure hedged for broadly three quarters of expected senior debt (less cash) until 30 November 2024.

Focus on digital innovation to drive growth:

·      Full launch of Moonpig Plus, our low-cost, affordable subscription service.

·      Innovation to differentiate and elevate Moonpig cards:

o  Video messages rolled out across the card range, with over 75,000 messages sent by Father's Day 2023.

o  Ability to use digital codes for gift experiences in Moonpig cards.

o  Ability to add stickers and photos to the inside of Moonpig and Greetz cards.

o  New functionality for Moonpig group cards, providing opportunity to convert message contributors into future customers.

·      Recommended gift bundles and gift cross-sell at the basket stage of the customer journey at Moonpig.

·      Developed new iOS and Android apps for Greetz.

·      New recommendation algorithms tailored to Dutch customer preferences to drive gift attachment at Greetz.

·      Commenced building a new content management system and on-site search at Experiences ahead of roll-out in FY24.

Outlook

Trading since the start of the year has been in line with our expectations. In the context of the current macroeconomic environment, we expect pro forma revenue to grow at a low single digit percentage rate in the first half of FY24, underpinned by the Moonpig brand, which has been in growth since March.

For the full financial year, we expect consolidated revenue growth at a mid to high single digit percentage rate, with all of our brands returning to growth in the second half. Adjusted EBITDA margin is expected to remain resilient.

Nickyl Raithatha, CEO, commented:

"Today's results demonstrate the resilience of our business model which is rooted in the stability of the greeting cards market and our unique use of data to drive customer loyalty. We have high profitability, strong cash generation and inherent flexibility that allows us to respond rapidly to a dynamic macroeconomic environment.

We are innovating to differentiate and elevate Moonpig cards with embedded video messages, personalised content and the ability to include a gift experience within the card. We have continued to extend our market leadership in online cards and we expect to return to growth during the year ahead, underpinned by our continued investments in our technology, marketing and operational capabilities. As the clear online leader in greetings cards, Moonpig Group is well positioned to benefit from the long-term structural market shift to online."

Investor and analyst meeting

The full year results presentation will be available on the Investor Relations section of Moonpig Group's corporate website (www.moonpig.group/investors) shortly after 7:00am on 29 June 2023.

Nickyl Raithatha (CEO) and Andy MacKinnon (CFO) will host a Q&A for analysts and investors via webcast at 9:30am. Please note that the presentation will not be repeated during the webcast. Analysts wishing to register for the event should email investors@moonpig.com.

Investors wishing to join the Q&A should register via the following link: https://www.lsegissuerservices.com/spark/MoonpigGroup/events/9aa6b9a3-02dd-477f-a830-bcd687826fa3

Enquiries:

Brunswick Group                                                                                       +44 20 7404 5959

Sarah West, Fiona Micallef-Eynaud, Sofie Brewis                                       moonpig@brunswickgroup.com

Moonpig Group                                                                       investors@moonpig.com, pressoffice@moonpig.com

Nickyl Raithatha, Chief Executive Officer

Andy MacKinnon, Chief Financial Officer

About Moonpig Group:

Moonpig Group plc (the "Group") is a leading online greeting cards and gifting platform, comprising the Moonpig, Red Letter Days and Buyagift brands in the UK and the Greetz brand in the Netherlands. The Group's leading customer proposition includes an extensive range of cards, a curated range of gifts, personalisation features and next day delivery offering.

The Group offers its products through its proprietary technology platforms and apps, which utilise unique data science capabilities designed by the Group to optimise and personalise the customer experience and provide scalability. Learn more at https://www.moonpig.group/.

Forward Looking Statements:

This announcement contains certain forward-looking statements with respect to the financial condition, results or operation and businesses of Moonpig Group plc. Such statements and forecasts by their nature involve risks and uncertainty because they relate to future events and circumstances. There are a number of other factors that may cause actual results, performance or achievements, or industry results to be materially different from those projected in the forward-looking statements.

These factors include general economic and business conditions; changes in technology; timing or delay in signing, commencement, implementation and performance of programmes, or the delivery of products or services under them; industry; relationships with customers; competition and ability to attract personnel. You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. We undertake no obligation to update or revise any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances.

Business review

Overview

The Group's business model is resilient, profitable and cash generative. This has enabled us to maintain investment in our technology, marketing and operations throughout the year ended 30 April 2023, laying the groundwork for an expected return to organic revenue growth during FY24:

·      We have scaled our technology team to 250 skilled data scientists, analysts, and engineers, up from 195 in April 2022 and 153 in April 2021.

·      After four years of foundational work and the successful migration of Greetz onto our unified technology platform, our technology teams are now accelerating growth initiatives that can be leveraged across both of our card-first brands. A technology and data-led innovation roadmap is being implemented, including features such as Moonpig Plus subscriptions, video messages in greeting cards and group cards that will enhance the Moonpig and Greetz value proposition relative to online and offline alternatives.

·      We have opened new operational facilities on ten-year leases in Almere, Netherlands and Tamworth, UK. Insourcing operations enhances scalability, provides flexibility for driving customer basket size through bundling gifts and offers potential for gross margin efficiencies.

·      We have continued to build our brands. Our principle of maintaining marketing efficiency led to a lower marketing spend in light of fewer available online search engine impressions, however our customer acquisition activity remained substantial, with revenue from new customers continuing to exceed pre-pandemic levels.

·      We completed the acquisition of Red Letter Days and Buyagift, welcoming them to the Group as our Experiences segment. Following acquisition, we have implemented significant operational changes, including appointing a new Managing Director and leadership team and are now investing to deliver the strategic roadmap set out at acquisition, including modernising the Experiences technology platform.

The Group has a compelling market growth opportunity ahead of it, as online penetration of the single greeting cards market remains low at approximately 15% in the UK and 21% in the Netherlands for 2022 (source: OC&C). As the clear leader in the online segment, we are well placed to capitalise on and drive the transition from offline to online. We also now own Experiences, which provides opportunities to unlock innovation through digital gifting and has equipped us with a profitable presence in the standalone gifting market.

Despite facing a more challenging trading environment from October 2022 onwards, we have delivered a strong set of results. This reflects the commitment of our people across the UK, Guernsey and the Netherlands, and has been made possible by the strength and flexibility of our business model:

·      Our focus on customer lifetime value equips us with resilience in more challenging conditions. Our approach at Moonpig and Greetz is focused on acquiring loyal customer cohorts that drive recurring annual revenue and 88.6% of revenue at these brands was generated from existing customers (FY22: 86.5%). The long-term "sticky" nature of these customer cohorts is supported by our data and technology platform, which allows us to personalise the user experience. Our database of 84m reminders (April 2022: 72m) enables us to communicate directly with customers at times of maximum purchase intent. More generally, the greeting cards market has a long track record of recession-resilience.

·      We have delivered £84.2m (FY22: £74.9m) of Adjusted EBITDA, reflecting 12.4% year-on-year growth. The acquisition of Experiences contributed £13.0m of Adjusted EBITDA, which was broadly offset by the impact of the post-Covid reversion of trading at Moonpig and Greetz. Gross margin rate has improved year-on-year, reflecting management action to improve intake margin, the category mix impact of prioritising resources towards higher-margin cards, the use of our personalised promotions engine to target discounts more precisely and the impact of the acquisition of Experiences. We have prioritised resources where the return on investment is highest. We have taken a disciplined approach to the management of indirect costs.

·      Our business is highly cash generative. Net debt to pro forma Adjusted EBITDA decreased from 2.45x at 31 October 2022 to 1.97x at 30 April 2023 and we expect this trajectory of deleveraging to continue in the year ahead.

We delivered FY23 Adjusted EBITDA of £84.2m (FY22: £74.9m) and operating cash flow of £56.2m (FY22: £59.6m) whilst maintaining investment for growth and delivering on our three strategic pillars. These pillars focus on leveraging data and technology to make the gifting experience effortless, building our brands so receiving our product always means more and ensuring the perfect range of cards and gifts for every occasion.

Leveraging data and technology

In 2018, we embarked on a multi-year journey to transform Moonpig and Greetz into technology and data-led businesses. We accomplished this in September 2022 with the completion of a unified technology platform. After four years of work on foundational projects, the majority of our skilled data scientists, analysts and engineers are now focused on iteration, testing and improvement to drive revenue growth at Moonpig and Greetz.

The pace of technology innovation has risen, with key developments including:

·      The full launch of Moonpig Plus, our low-cost, affordable subscription service, in May 2023. Based on extensive testing throughout FY23 we expect that this will increase customer order frequency.

·      The introduction of new iOS and Android apps for Greetz.

·      The launch of tailored recommendation algorithms at Greetz to drive gift attachment by Dutch customers.

·      The implementation of suggested gift bundles, an improved gift/flower image carousel, and gift cross-sell at the basket stage of the customer journey at Moonpig.

·      The roll-out of video messages across the card range, with over 75,000 messages sent by Father's Day 2023.

·      The launch of digital codes for gift experiences in Moonpig cards.

·      The introduction of stickers and photos for the inside of cards at Moonpig and Greetz.

·      The phased roll-out of new features and functionality for Moonpig group cards.

At Experiences, we have extended direct voucher redemption to more products including The View from The Shard and city cruises to drive recipient-into-customer conversion. We are also investing in modernising the Experiences technology platform, with a new content management system and on-site search scheduled for roll-out in FY24.

Building our brands

Through continued, disciplined marketing activity, we delivered FY23 revenue from new customers that was 33% higher than in FY19, the largest pre-Covid year. Moonpig launched its most comprehensive cross-channel marketing campaign ahead of Mother's Day in the UK, enabling Moonpig to record its largest ever week of sales during March 2023.

Over the past five years, our strategy has consistently emphasised delivering revenue growth through the existing customer base, and the share of revenue from existing customers increased year-on-year to 88.6% (FY22: 86.5%). We maintained our disciplined approach to new customer acquisition in which we ensure that payback periods stay within our framework. We aim to acquire high-quality, loyal customer cohorts that deliver lifetime value rather than pursuing short-term, transactional revenue.

We have broadened the marketing mix through increased consumer PR coverage and partnerships, such as the successful launch of the "Disney 100" flowers range. At Greetz, we focused on driving app downloads after launching new iOS and Android apps in September 2022.

Reminders are one of the most effective ways for Moonpig and Greetz to communicate with customers and growing the number of reminders set has been a key business objective across recent years. We delivered against this in FY23, further increasing the size of the database from 72m reminders at April 2022 to 84m reminders at April 2023. In the year ahead we will emphasise reminder collection at Greetz, where a smaller proportion of customers have set more than one reminder, compared to Moonpig. We are also implementing initiatives such as "upcoming occasions" panels on customer landing pages to improve reminder conversion.

Whilst Experiences primarily focused on optimising online performance marketing, we have begun the process of differentiating the Red Letter Days and Buyagift brands, so that the former emphasises iconic experiences and a more curated range, whilst the latter will be more value-led. Moonpig became the Experiences segment's largest online distribution partner in FY23 after launching the first version of digital gift experiences in a card. As we expand digital gifting beyond the current 300 SKU range and enhance search and browse functionality, we anticipate further sales growth.

Expanding our range

We aim to have the perfect card and gift for every relationship and every occasion. For greeting cards, we have formed a single global design team to leverage the strength and breadth of our UK range across geographies. This team manages in-house and licensed card designs, with a current key focus on bringing global licensed properties that already feature on Moonpig (such as Marvel, Disney and Star Wars) to Greetz.

In gifting, we have expanded our offering with personalised balloons at Greetz and Moonpig's most extensive flower range to date, with 72 bouquets at Valentine's Day and 102 bouquets at Mother's Day. We have emphasised bringing new products and curating gift sets and bundles to differentiate our offering.

We have partnered with new gifting brands, such as My 1st Years for baby and young children's gifts and Mars for personalised chocolates. We have enhanced our flowers offering through co-branding with Cath Kidston and Disney. Moreover, we have introduced the Red Letter Days and Buyagift brands at Moonpig, offering both physical gift boxes and digital gifting options.

In response to customer demand for more affordable gifting we have strengthened our range of gifts at price points below £16, launched a new letterbox gifting range at Greetz and added numerous new designs to Moonpig's balloon and personalised mug ranges. We have also offered value for customers through an expanded range of supplier-funded promotions.

Finally, we continue to enhance the Experiences range by launching new experiences with premium partners such as Harvey Nichols, Harrods, Côte, Macdonald Hotels and the Gordon Ramsay Academy.

Maintaining high ethical, environmental and sustainability standards

We continue to execute against our ESG strategy, which commits the Group to eight long-term goals focused on the environment, its people and its communities.

Progress has been strong on climate-related goals. We surpassed our expectations with respect to Scope 1 and 2 greenhouse gas emissions, achieving 95% renewable energy mix at Tamworth and Almere. We have fully measured out our Scope 3 emissions baseline and have developed the Group's inaugural climate transition plan. In view of the progress made, we have set new goals for greenhouse gas emissions reduction, comprising near-term and long-term targets for each of Scope 1 and 2 (direct) emissions and Scope 3 (value chain) emissions.

We have also made good progress on our diversity goals. One of our ESG goals is for new hires into technology security, engineering, product and analytics roles to be at least 45% from women by 2025. For the year ended 30 April 2023, 45% of new hires into these technical roles were women (FY22: 37%).

Our employee engagement KPI has been impacted by the need for disciplined control of costs during an economic downturn. Customer net promoter score reflects repeated industrial action at Royal Mail in the UK. We are confident in our ability to deliver significant improvements in both areas during the months ahead.

Financial review

Overview

Throughout the year our resilient, profitable and cash-generative business model has enabled us to maintain investment in the drivers of expected long-term growth. We have increased the size of our technology team and transitioned its focus from re-platforming to customer-facing growth initiatives. We have invested in our operational network by opening new facilities on ten-year leases in Almere, Netherlands and Tamworth, UK. Although we reduced marketing spend to maintain its efficiency in the light of lower year-on-year online search engine impressions, we have maintained revenue from new customers above pre-pandemic levels.

We also completed the acquisition of Red Letter Days and Buyagift, welcoming them to the Group as our Experiences segment. Following acquisition, we have implemented significant operational changes, including appointing a new Managing Director and leadership team, commencing modernisation of the Experiences technology platform, relocating fulfilment to Tamworth, outsourcing customer services and co-locating Experiences employees at the Group's head office.

As expected, the Group's robust generation of operating cash flows has driven rapid deleveraging. We increased borrowings to fund the acquisition of Experiences in July 2022, since when net debt to pro forma Adjusted EBITDA has reduced to 2.45x as at 31 October 2022 and 1.97x as at 30 April 2023, with further reduction expected in the year ahead. Both liquidity headroom and covenant headroom remain substantial.

Despite the economic downturn that impacted our business from October 2022, the Group delivered Adjusted EBITDA of £84.2m, with Moonpig and Greetz contributing £71.2m of the total. These figures surpass the level implied by guidance in the IPO Prospectus and demonstrate the key strengths of the Group's differentiated financial model, which are: resilience rooted in loyal customer cohorts and the characteristics of the greeting card market; flexibility to respond rapidly to market changes; sustainably high profit margins; and strong cash generation.

Financial performance - Group

1. Before adjusting items of £13.1m in FY23 and £11.6m in FY22. See Adjusting Items at Note 5 and definition of Alternative Performance Measures below.

2. Earnings per share not disclosed for periods arising prior to the Group's formation because of the pre-IPO reorganisation in February 2021.

3. Net debt is defined as total borrowings, inclusive of lease liabilities, less cash and cash equivalents.

Trading performance in FY23 has demonstrated the resilience of our business, with the Group delivering Adjusted EBITDA of £84.2m (FY22: £74.9m) despite the economic context. The acquisition of Experiences contributed £13.0m of Adjusted EBITDA which broadly offset the impact of the post-Covid reversion in trading at Moonpig and Greetz. The delivery of Adjusted EBITDA margin of 26.3% (FY22: 24.6%) was made possible through a combination of price optimisation, improvements to gross margin rate, resource allocation decisions (for instance shifting marketing activity into peak trading periods) and efficient management of indirect costs.

Year-on-year revenue growth of 5.2% reflects the acquisition of Experiences, partially offset by the positive impact on prior year from lockdown restrictions at Moonpig and Greetz. The most resilient areas of trading included greeting card orders (reflecting the overall market's low sensitivity to GDP changes), orders from existing customer cohorts and the proportion of orders with attached gifts. More challenging economic conditions have primarily impacted new customer acquisition levels and the average selling price of gifts, as some customers opted for lower-priced items.

Adjusted PBT was £48.0m (FY22: £51.5m), with the decrease resulting from higher finance charges and increases in depreciation and amortisation. Higher finance charges were driven by additional borrowings to fund the Experiences acquisition and rising interest rates, partially offset by the Group's hedging arrangements. The increase in depreciation and amortisation reflects the full year impact of the Group's technology development investments and the depreciation of fit-out costs and right-of-use assets related to the new leasehold operational facilities. Reported PBT additionally reflected the impact of Adjusting Items, which comprised pre-IPO incentive scheme costs and M&A transaction costs.

Net debt is a non-GAAP measure and is defined as total borrowings, inclusive of lease liabilities, less cash and cash equivalents. Group net debt as at 30 April 2023 was £167.7m (FY22: £83.8m), resulting in a ratio of net debt to pro forma Adjusted EBITDA of 1.97x. The year-on-year increase in net debt reflects financing for the acquisition of Experiences and initial recognition of an additional lease for the new operational facility at Almere, Netherlands.

Revenue

Group revenue increased by 5.2% year-on-year, reflecting annualisation against the prior year impact on sales from lockdown restrictions, offset in part by the consolidation of £41.6m revenue from Experiences from 13 July 2022 onwards.

Moonpig and Greetz revenue decreased year-on-year by 8.5%:

·      Management estimates that FY22 revenue included approximately £39m resulting from the impact of Covid lockdowns on customer order frequency, translating to an approximate 13% effect on FY23 growth. This estimation is based on a comparison of actual customer behaviour at the individual cohort level against historical pre-Covid behaviour for similarly aged cohorts, which generally displayed consistency over time. Although rooted in analysis, this assessment unavoidably involves some subjectivity and should be considered a management belief statement.

·      Orders decreased by 14.9%, primarily driven by the impact of annualisation against periods of Covid lockdown. The macroeconomic downturn from October 2022 onwards also affected the level of orders from new customers in the UK and the Netherlands. There was also a more limited impact in the UK from industrial action at Royal Mail affected trading in the months leading up to Christmas 2022.

·      Average Order Value increased by 7.6% year-on-year, reflecting card price increases and more targeted use of promotional discounting, offset in part by lower average selling prices on gifting as customers traded down to cheaper price points in view of macroeconomic pressures.

Consistent with previous periods, the movement in year-on-year revenue remained stronger at Moonpig than at Greetz, supported by sustained investment in technology over the last four years. Greetz was successfully migrated onto our unified technology platform during September 2022, which we expect will contribute to future revenue growth. Greetz also faced tougher prior year comparatives due to full lockdown measures in the Netherlands from November 2021 to February 2022, in contrast to voluntary social distancing guidelines effective in the UK during the same period.

Experiences revenue was £41.6m and represents agency commission earned from partners for the distribution of experiences rather than the gross transaction value. Full year revenue increased from £43.8m in FY22 to £47.9m in FY23, with year-on-year growth decelerating from 19.4% in H1 FY23 to 4.1% in H2 FY23 due to the macroeconomic downturn.

Gifting mix of revenue

The Group's gifting mix of revenue increased to 50.7% (FY22: 47.7%) driven by the acquisition of Experiences. At Moonpig and Greetz, gifting mix of revenue decreased to 43.4% (FY22: 47.7%). Cards revenue benefited from price changes in the UK, whilst gifting revenue was adversely impacted by consumers trading down to lower price points in both the UK and the Netherlands. Our inventory-light model enables us to flex our offering at short notice and we have reacted to changing demand patterns by strengthening the gifting range at lower price points.

Gross margin rate

Gross margin rate strengthened year-on-year at Moonpig, reflecting greeting card price changes, management action to improve intake margin on gifts, the category mix impact of prioritising resources towards higher-margin cards and the use of our personalised promotions engine to target discounts. The year-on-year trend in gross margin rate at Greetz reflects atypically low intensity of promotional activity last year.

Experiences gross margin stood at 92.0%, with the cost of goods relating primarily to packaging and distribution for those orders requiring physical gift box delivery rather than digital fulfilment. Full year gross margin rate increased from 84.3% in FY22 to 92.3% in FY23, reflecting growth in high-margin revenue from upselling to recipients, consistent application of fees for voucher extension (waived during lockdown), revenue growth through third-party websites where retail partners cover shipping costs and an increase in the proportion of orders fulfilled digitally. In addition, we have seen redemptions of experience vouchers issued during the pandemic 5% lower than implied by the historical trend, causing an increase in the deferred liability when compared to normalised redemption levels. Experiences gross margin rate is expected to remain stable at around the FY23 level into next year and beyond.

Adjusted EBITDA margin

Group Adjusted EBITDA margin rate was 26.3% (FY22: 24.6%) reflecting the first-time consolidation of Experiences and the actions taken by management to maintain absolute Adjusted EBITDA in more challenging trading conditions.

Moonpig Adjusted EBITDA margin rate increased by 1.6%pts to 26.8%, reflecting card price increases, gross margin discipline and careful management of indirect costs. Greetz Adjusted EBITDA margin decreased by 2.4% to 20.3% reflecting planned additional promotional activity to incentivise customer migration to the new Greetz apps.

Experiences Adjusted EBITDA margin rate was 31.4% (FY22 full year: 31.1%). The impact of higher gross margin rate was offset by operational restructuring costs for customer service outsourcing, relocation of fulfilment, head office relocation and employee severance.

Alternative Performance Measures

The Group has identified certain Alternative Performance Measures ("APMs") that it believes provide additional useful information on the performance of the Group. These APMs are not defined within IFRS and are not intended to substitute or be considered as superior to IFRS measures. Furthermore, these APMs may not necessarily be comparable to similarly titled measures used by other companies. The Group's Directors and management use these APMs in conjunction with IFRS measures when budgeting, planning and reviewing business performance. Executive management bonus targets include an Adjusted EBITDA measure and long-term incentive plans include an Adjusted Basic Pre-Tax Earnings Per Share ("EPS") measure.

^{1 See Adjusting Items at Note 5.}

The definitions for the adjusted measures in the table are as follows:

·      Adjusted PAT is profit after taxation and before Adjusting Items.

·      Adjusted PBT is profit before taxation and Adjusting Items. Adjusted PBT margin is Adjusted PBT divided by total revenue.

·      Adjusted EBIT is profit before taxation, interest and Adjusting Items. Adjusted EBIT margin is Adjusted EBIT divided by total revenue.

·      Adjusted EBITDA is profit before taxation, interest, depreciation, amortisation and Adjusting Items. Adjusted EBITDA margin is Adjusted EBITDA divided by total revenue.

Adjusting Items comprise:

·      Pre-IPO incentive scheme costs, consisting of £5.4m (FY22: £7.0m) share-based payment charges and £3.3m (FY22: £3.6m) cash bonus awards. These relate to one-off compensation arrangements granted prior to IPO and set out in the Prospectus. The Group treats these costs as Adjusting Items as they relate to one-off awards implemented whilst the Group was under private equity ownership and are not part of the Group's ongoing remuneration arrangements.

·      M&A-related transaction costs of £4.4m arising in FY23 comprise advisers' fees, stamp duty and other costs directly relating to the acquisition of Experiences. These are additional to the £0.9m of such costs recognised in the second half of FY22. The Group treats these costs as Adjusting Items as they are not part of normal business operations.

The charge relating to pre-IPO incentive schemes comprises £2.3m (FY22: £3.0m) relating to shares that were restricted and have now vested and £6.4m (FY22: £7.6m) relating to the "Pre-IPO Awards", which consist of cash and nil-cost options over shares. The Pre-IPO Awards vest in two tranches on 30 April 2023 and 30 April 2024, subject to FY23 revenue and Adjusted EBITDA performance conditions. The Group exceeded maximum performance for both measures, including on an organic basis without the post-acquisition revenue and profit from Experiences. The FY23 charge is lower than expected with an anticipated offsetting increase in FY24, reflecting the fact that when a participant leaves their award may be reallocated to another employee (excluding the Executive Directors) affecting the timing of charges to profit and loss. Cash outflows for each tranche of the Pre-IPO Award are expected to arise in the first quarter of FY24 and the first quarter of FY25 respectively.

Determining which items should be classified as Adjusting Items involves the exercise of judgement. Our classification of items as Adjusting Items has remained unchanged year-on-year. We do not classify the following as Adjusting Items on the basis that they are recurring costs associated with delivery of financial performance for the year. However, we have observed that certain users of our accounts adopt a different approach in their own financial modelling and have therefore provided the information below to assist these users:

^{1 Share-based payment charges are stated inclusive of national insurance of £0.3m (FY22: £0.2m).}

Profit before taxation ("PBT")

Although Adjusted EBITDA increased year-on-year, PBT decreased from £40.0m in FY22 to £34.9m in FY23 because of higher Adjusting Items, additional depreciation and amortisation and an increase in finance costs.

Depreciation and amortisation increased to £22.7m (FY22: £14.4m). The primary reason for this was a £5.6m increase in the amortisation of acquired intangible fixed assets arising on business combination with Experiences. The amortisation of internally generated intangible fixed assets also increased by £2.6m, due to the decision taken last financial year to expand the size of the technology team and increase investment in our technology. The depreciation of plant, property and equipment also increased due to expenditure on fitting out new operational facilities. There has been no change in the Group's accounting policies or practices relating to the capitalisation of costs as internally generated intangible assets. We continue to amortise internally generated intangible assets over a relatively short useful life of three years.

Finance costs increased from £9.0m in FY22 to £13.6m in FY23:

·      Interest on senior debt rose from £6.3m in FY22 to £11.6m in FY23 reflecting additional senior debt drawn down in July to finance the acquisition of the Experiences segment, together with increases in the SONIA reference rate. All amounts drawn under the revolving credit facilities were repaid in full as at 30 April 2023.

·      Amortisation of fees increased from £1.4m in FY22 to £2.0m in FY23, reflecting the additional costs for arranging the Additional revolving credit facility ("Additional RCF") in July 2022 and putting in place interest rate hedging.

·      Deemed interest on lease liabilities increased from £0.7m to £0.9m because of new leases relating to warehouses in Tamworth, UK and Almere, Netherlands.

·      In addition, the Group recognised a £0.9m gain (FY22: £0.7m loss) in respect of the monetary foreign exchange gain on a Euro-denominated intercompany loan balance, with the corresponding intercompany loss recognised in Other Comprehensive Income in accordance with IAS 21.

The taxation charge was £8.3m (FY22: £8.5m), which represents an effective taxation rate of 23.8% (FY22: 21.3%). This exceeded the prevailing rate of corporation tax of 19.4% in the UK (19.0% until 1 April 2023 when the rate increased to 25.0%) primarily because of the non-deductible nature of the M&A-related transaction costs relating to the acquisition of the Experiences segment. Expressed as a percentage of Adjusted Profit Before Taxation, the effective tax rate was 21.0% (FY22: 19.2%).

Earnings Per Share ("EPS")

Basic EPS for FY23 was 7.8p (FY22: 9.3p) and Adjusted basic EPS, which is stated before Adjusting Items was 11.1p (FY22: 12.3p). After accounting for the effect of employee share arrangements, diluted earnings per share was 7.7p (FY22: 9.1p).

The calculation of basic EPS is based on the weighted average number of ordinary shares outstanding during the year of 340,061,402 (FY22: 339,036,292). Throughout both years, the total issued share capital was 342,111,621, however 3,075,329 shares issued to employees prior to the IPO remained subject to recall within a two-year period if employment conditions were not met. These shares were excluded from the number of ordinary shares outstanding in FY22 and the relevant portion of FY23 in accordance with paragraph 24 of IAS 33 on the basis that they were contingently returnable.

Cash flow

Cash generated from operating activities was £57.9m (FY22: £63.9m):

·      There was a cash outflow in the year of £0.8m (FY22: £4.8m inflow), due to a temporary increase in inventories from the opening of our new operations facilities. Inventory acquired upon business combination with the Experiences segment was £1.4m. Total inventory at 30 April 2023 was £12.3m (FY22: £10.1m).

·      There was a trade and other payables working capital outflow in the year of £22.1m (FY22: £10.8m). The outflow derived from Moonpig and Greetz was £7.7m (compared to the £10.8m outflow in FY22, which was driven by annualisation against periods of Covid-related lockdown restrictions). The remaining outflow of £14.5m (FY22: £nil) is driven by a reduction in Experiences trade and other payables since acquisition, reflecting the one-off settlement of legacy incentive obligations of £13.5m associated with the acquisition, which were fully provided for in the opening balance sheet, and movement in the merchant accrual during the year.

The merchant accrual balance acquired upon business combination with Experiences was £61.2m. A payables balance is recognised when a gift experience is sold to a consumer to reflect the expected future liability to the merchant; this balance is settled through the remittance of cash to the merchant following redemption of the voucher by the recipient.

The acquisition of Experiences (comprising the legal entity Experience More Limited) was completed on 13 July 2022 for net consideration of £88.6m, comprising gross cash consideration paid of £124.3m net of cash balances acquired of £35.7m. There was no deferred element to the purchase consideration. M&A transaction costs of £0.9m in FY22 and £4.4m in FY23 are recognised as Adjusting Items.

Capital expenditure increased year-on-year to £22.6m (FY22: £9.7m) reflecting one-off tangible capex to expand our operations footprint and higher intangible capex resulting from an increase in the size of the technology organisation that is intended to remain in place in future periods.

Adjusted Operating Cash Conversion

The Group generated an operating cash inflow of £56.2m in FY23, compared to £59.6m in the previous year. Adjusted Operating Cash Conversion decreased from 80% in FY22 to 67% in FY23, reflecting higher capital expenditure, including an increase in tangible capital expenditure to £9.7m due to the fit out of new operational facilities in the UK and the Netherlands. This is not expected to recur, and annual tangible capex is expected to be below £2m in future periods, with total expected tangible and intangible capex reverting to the pre-Covid trend of around 5% of revenue in FY24 and beyond.

1 Comprises non-cash share-based payment charges recognised within Adjusted EBITDA and relating to operation of post-IPO Remuneration Policy (£2.2m), net of employer's national insurance on the share-based payments relating to pre-IPO awards recognised below Adjusted EBITDA (£0.3m).

2 Working capital movements for the year ended 30 April 2023 have been adjusted for the opening balances arising upon acquisition of Experiences.

3 Operating cash flow excludes settlement of legacy incentive obligations associated with the acquisition, which were fully provided for in the opening balance sheet.

Operating cash flow and Adjusted Operating Cash Conversion are non-GAAP measures. Adjusted Operating Cash Conversion is defined as operating cash flow divided by Adjusted EBITDA, expressed as a ratio. Adjusted Operating Cash Conversion informs management and investors about the cash operating cycle of the business and how efficiently operating profit is converted into cash.

Capital structure

The Group deleveraged during the second half of the financial year, driven by H2 FY23 operating cash conversion of 111% (H2 FY22: 116%). Net debt decreased to £167.7m as at 30 April 2023, and the ratio of net debt to pro forma Adjusted EBITDA decreased to 1.97x. Net debt remained higher than at the start of the financial year, reflecting the acquisition of Experiences. Net debt is a non-GAAP measure and is defined as total borrowings, inclusive of lease liabilities, less cash and cash equivalents.

^{1 Borrowings are stated net of capitalised loan arrangement fees and hedging instrument fees of £4.6m as at 30 April 2023 (31 Oct 2022: £5.2m, 30 April 2022: £5.1m,).}

^{2 Pro forma Adjusted EBITDA is stated inclusive of a full year of profit from acquired businesses.}

The Group maintains considerable liquidity headroom, with senior facilities of £255.0m. These facilities consist of a Term Loan of £175.0m with a bullet repayment profile, an Original revolving credit facility ("Original RCF") of £20.0m and an Additional RCF of £60.0m. The senior facilities agreement runs until 8 January 2026 with the facilities committed until 8 December 2025.

The Group has significant covenant headroom. Senior facilities are subject to a single covenant of net debt to last twelve months' pro forma Adjusted EBITDA which is tested six-monthly. The covenant threshold it set at 4.00x for 30 April 2023 and 3.50x for all subsequent test dates. As the Senior Facilities Agreement was put in place under a previous ownership structure, the definition of Adjusted EBITDA for covenant purposes includes favourable add-backs that are typical of an acquisition finance facility, for instance the pre-acquisition profits of acquired businesses, the anticipated pro forma impact of any planned cost reduction actions and the exclusion of recurring share-based expenses that are not treated by the Group as an Adjusting Item for reporting purposes.

The Group has in place an interest rate swap at a rate of 2.4725% with a floor strike rate of 0% on £90m notional until 1 December 2022 and £55m notional until the term expires on 30 November 2023 and an interest rate cap with a cap strike rate of 3.0000% on £70m notional until 30 November 2024. This is intended to hedge floating rate exposure to SONIA interest for broadly three quarters of expected senior debt (less cash) for the duration of the hedge.

The Group's short term capital allocation priority is continued deleveraging. Net leverage remains on a strong downward trajectory. We do not intend to pay a dividend as we continue to invest in growth. We will continue to evaluate dividend policy over time.

Technical guidance

Outlook

Trading since the start of the year has been in line with our expectations. In the context of the current macroeconomic environment, we expect pro forma revenue to grow at a low single digit percentage rate in the first half of FY24, underpinned by the Moonpig brand, which has been in growth since March.

For the full financial year, we expect consolidated revenue growth at a mid to high single digit percentage rate, with all of our brands returning to growth in the second half. Adjusted EBITDA margin is expected to remain resilient.

Condensed Consolidated Financial Information

Condensed Consolidated Income Statement

For the year ended 30 April 2023

All activities relate to continuing operations.

The accompanying notes are an integral part of this condensed consolidated financial information.

Condensed Consolidated Statement of Comprehensive Income

For the year ended 30 April 2023

The accompanying notes are an integral part of this condensed consolidated financial information