27 June 2024

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

RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 April 2024

Revenue and profit growth underpinned by technology and innovation

Summary financial results

 1 Before Adjusting Items of £3.5m in FY24 and £13.1m in FY23. See Adjusting Items at Note 6 and definition of Alternative Performance Measures below.

 2 Before Adjusting Items of £11.8m in FY24 and £20.6m in FY23. The Group has amended its definition of Adjusting Items such that £8.3m of acquisition amortisation (FY23: £7.5m) is treated as an Adjusting Item in both the current and prior year. See Adjusting Items at Note 6.

Results summary

·      Delivered revenue growth of 6.6% to £341.1m driven by strong performance at the Moonpig brand.

·      Adjusted EBITDA growth to £95.5m (FY23: £84.2m) reflecting revenue growth and improved gross margin rate.

·      Adjusted profit before taxation of £58.2m (FY23: £55.4m) reflecting stronger trading offset in part by higher interest charges and the amortisation of technology platform investments.

Strategic and operational highlights

Organic revenue growth accelerated through the year:

·      Underpinned by Moonpig, which grew revenue by 8.2% through growth in both orders and average order value.

·      New customer revenue returned to growth at Moonpig in the second half of the year.

·      Improving trajectory at Greetz, with revenue declines abating to 5.3% in H2 FY24 from 9.8% in H1 FY24 and 20.4% in FY23.

·      Across Moonpig and Greetz, growth in orders improved from a decrease of 5.1% in H1 to an increase of 5.2% in H2 FY24.

·      At Experiences, pro forma revenue increased by 1.5% year-on-year to £48.6m. This includes mid-single-digit million upside from temporarily higher breakage on gift boxes and vouchers that were sold during Covid with extended expiry dates; these expiry dates have now passed, so this benefit is not expected to recur in future years.

Strong cash generation:

·      The Group remains strongly cash generative, with operating cash inflows of £74.2m (FY23: £56.2m).

·      Net leverage improved to 1.31x at 30 April 2024, from 1.99x at 30 April 2023.

·      Significant liquidity and covenant headroom, with a new £180m four-year, committed revolving credit facility in place.

Continued technology innovation to drive higher customer lifetime value:

·      89% of Moonpig and Greetz revenue (FY23: 89%) delivered from existing customers.

·      Moonpig Plus subscriptions surpassed our expectations with over half a million members within a year of launch.

·      Greetz Plus launched in January 2024 and is following a similar encouraging trajectory to the UK.

·      Database of customer occasion reminders grew to 90 million (April 2023: 84 million).

·      Our creativity features were used over 10 million times to add video and audio messages, "sticker" images, digital gift vouchers and AI-driven customised messages to the inside of greeting cards.

·      Same-day gifting launched on Moonpig, by combining of e-cards with new digital gift experiences. Encouraging early traction across peak event days so far.

·      Technology re-platforming of the Red Letter Days and Buyagift websites continues at pace with a full rebuild of the front end now complete.

Enhanced deployment of AI to personalise customer experience:

·      Significant upgrade to our algorithms by incorporating individual customer level data into our gift recommendation engine, unlocking the ability to show different price ranges to different cohorts.

·      Introduced personalisation elements into all parts of the journey, including homepage banners and promotions unique to the individual customer.

·      Enhanced the capabilities of our AI-powered Customer Service chatbot, driving a significant reduction in the number of customer contacts being handled by agents.

·      Launched AI semantic search capability, using large language models to better understand and interpret customer search terms, which will drive increasingly more relevant search results over time.

Capital allocation

We remain disciplined in our approach to allocation of capital and continue to prioritise organic investment to drive growth, including investment in technology and marketing. Future investments may extend to new geographical markets, contingent upon achieving optimal customer acquisition costs and confidence in customer lifetime value. We will also selectively consider value-accretive M&A opportunities, maintaining a high threshold for strategic and financial returns.

Over the past two financial years, we have also focused on balance sheet deleveraging. In FY24, we reduced net leverage from 1.99x to 1.31x, a decrease of approximately 0.7 turns. Given our strong cash generation, there is potential for a similar reduction in net leverage in FY25. To maintain an efficient capital structure, our target is to operate with net leverage of approximately 1.0x over the medium term, with flexibility to move beyond this as business needs require.

We will continue to prioritise investment to drive the execution of our growth strategy. With our consistent strong operating cash generation and the progress being made with deleveraging, we will also have the financial flexibility to consider returning excess capital to shareholders.

Outlook

Trading since the start of the year has been in line with our expectations with both new and existing customer orders in growth. In the context of the current macroeconomic environment, we expect FY25 revenue growth (after adjusting for temporarily higher breakage on experience vouchers in FY24) at a mid to high single digit percentage rate, underpinned by growth in orders at the Moonpig brand.

Our business is well positioned to deliver sustained growth in revenue, profit and free cash flow, driven by our continued focus on data and technology. With respect to the medium-term, we are targeting double digit percentage annual revenue growth, an Adjusted EBITDA margin rate of approximately 25% to 26% and growth in Adjusted earnings per share at a mid-teens percentage rate.

Nickyl Raithatha, CEO, commented

"We are delighted that the Group has delivered full-year growth in both revenue and profit, with trading performance strengthening across our peak trading periods in the second half of the year. This has been driven by our multi-year investments in technology and innovation, which continue to foster extraordinary customer loyalty.

The Moonpig Plus subscription scheme has exceeded our expectations, passing the milestone of half a million members within one year. Our investments in new AI technologies are delivering an increasingly personalised experience for our customers. 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 7:00 am on 27 June 2024.

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 [email protected].

Investors wishing to listen to the Q&A should register via the following link:

https://www.lsegissuerservices.com/spark/MoonpigGroup/events/d8692b0f-da5f-4bd7-8080-e6a925bfb67d

Capital market event

The Group intends to hold a capital markets event on 16 October 2024. Further information will be provided in due course.

Enquiries

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

FY24 has been a period of strong financial and strategic delivery, with activity focused in the following key areas:

·      Innovation on our unified technology platform, which drove a strengthening in revenue growth to 6.6% in the second half of the year. Our product, data and technology teams have significantly increased the velocity of delivery for customer-facing growth initiatives. These include Moonpig Plus and Greetz Plus subscriptions, card creativity features (such as audio and video messages, group cards, digital delivery of gift experiences) and AI technologies that leverage data on previous customer purchase behaviour to enhance gifting recommendation algorithms.

·      Continued execution of the transformation project at Experiences, including phased migration to a new technology platform and the launch of a new visual identity for both brands to support differentiated market positioning.

·      Developing our pipeline of initiatives intended to drive medium-term growth, including marketing investment in Ireland, targeted testing to identify profitable ways to scale customer acquisition in Australia and the US, and testing of our prototype Moonpig for Work solution for SME business to employee gifting.

Moonpig Group has maintained its investment in technology, marketing and operations through the economic cycle due to the resilience, profitability and cash generation of our business:

·      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 revenue and 89% of revenue at these brands was generated from existing customers (FY23: 89%). 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. More generally, the greeting cards market has a long track record of recession-resilience.

·      Adjusted EBITDA margin rate increased to 28.0% (FY23: 26.3%) through a combination of gross margin rate improvement and disciplined control of indirect costs. Our low-inventory strategy means that profit margins are not exposed to significant stock-related risks.

·      Our business is highly cash generative. We improved the ratio of net debt to Adjusted EBITDA to 1.31x at 30 April 2024, from 1.99x at 30 April 2023.

Leveraging data and technology

Last year, we completed a multi-year project to unite Moonpig and Greetz onto a single technology platform. This freed most of our technology teams to focus on innovation and experimentation, driving an acceleration of the pace at which we deploy new features.

We have further enhanced our use of AI to personalise customer experience:

·      Significant upgrade to our algorithms by incorporating individual customer level data into our gift recommendation engine, unlocking the ability to show different price ranges to different cohorts.

·      Introduced personalisation elements into all parts of the journey, including homepage banners and promotions unique to the individual customer.

·      Enhanced the capabilities of our AI-powered Customer Service chatbot, driving a significant reduction in the number of customer contacts being handled by agents.

·      Launched AI semantic search capability, using large language models to better understand and interpret customer search terms, which will drive increasingly more relevant search results over time.

We are leveraging technology to drive higher customer lifetime value:

·      Moonpig Plus subscriptions passed the milestone of half a million members, with continued strong sign-up rates and promising renewal rates for the first cohort who joined in June 2023.

·      Greetz Plus launched in January 2024 and is following a similar encouraging trajectory to the UK.

·      Our creativity features were used over 10 million times, allowing customers to add video and audio messages, "sticker" images, digital gift vouchers and AI-driven customised messages to greeting cards.

We are building deeper network effects:

·      We have deployed features that enable online interaction with recipients (such as video messages and digital gifts) and message contributors (group cards), increasing the potential to convert them into new customers.

·      Moonpig for Work is live in beta version for several customers ahead of planned launch in FY25. This solution is initially targeted at SME business-to-employee card giving and gifting around events such as birthdays, work anniversaries and Christmas.

We are investing in technology at Experiences, and upgrading how we cross-sell gift experiences to Moonpig customers:

·      We have launched same-day gifting capability on Moonpig by combining e-cards with digital gift experiences, with encouraging early traction across peak event days so far.

·      Technology re-platforming of the Red Letter Days and Buyagift websites continues at pace with a full rebuild of the front end now complete.

·      We completed an integration with a premium dining partner unlocking access to restaurants in London such as Harvey Nichols, Benihana, Colonel Saab, Corrigan's Mayfair and Harrods.

Building our brands

Our strategy remains focused on delivering revenue growth through our existing customer base and we grew Moonpig and Greetz revenue from existing customers by 5.9% to £261.3m (FY23: £246.8m). Our key areas of focus remain:

·      Continuously improving how we leverage our database of 90 million customer occasion reminders (April 2023: 84 million) to communicate with customers. Reminders represent a powerful ecosystem, enabling us to engage with customers at moments of high card-giving intent, and drive a significant proportion of Moonpig and Greetz revenue.

·      Encouraging customer sign-up to Moonpig Plus and Greetz Plus, as well as migrating Greetz customers to the app that we launched in FY23. Greetz app penetration increased during the year to 33% (April 2023: 22%).

·      Raising customer awareness of differentiated card creativity options that we believe will drive customer loyalty and increase lifetime value. By showcasing innovative features such as video and audio messages, we emphasise that our offering is superior to the online and offline competition. This message is delivered through our website real estate, social media and video on demand. Initiatives include the "With Greetz you give more than a card" campaign in the Netherlands and new creative advertising copy for Moonpig, which we plan to launch across all channels including TV in the UK in FY25.

We were pleased that revenue from newly acquired customers moved back into year-on-year growth at Moonpig in H2 FY24, whilst the behaviour of cohorts acquired in the past year remained consistent with historical cohorts. Our brands are powerful assets, built over several decades, with high levels of consumer awareness and a strong association with convenience, service and range. Across FY24 we have maintained significant investment in marketing in the UK and the Netherlands, in line with prior year levels. We continue to acquire loyal customer cohorts that deliver lifetime value rather than pursuing short-term, transactional revenue.

We want to build a pipeline of early-stage revenue expansion initiatives and have increased our activity in new geographical markets. Revenue from Moonpig websites in Ireland, Australia and the US grew by 34.3% to £8.7 million (FY23: £6.5 million). We successfully increased new customer acquisition in Ireland and are conducting tests to identify scalable marketing strategies in Australia and the US. Additionally, we are enhancing the customer proposition by introducing localised card design ranges, expanding the gifting range (through physical gifts in Ireland and Australia and retail gift vouchers in the US) and building partnerships with local gifting providers. Where we gain confidence in customer lifetime value in any of these markets, we would look to further scale our marketing investment.

At Experiences, we have continued 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 is more value-led. A new, fresh visual identity has been rolled-out at each brand. We have also increased marketing investment during the key pre-Christmas trading period, supplementing the optimisation of performance marketing with new brand marketing activity focused around online video and social media to build awareness and purchase consideration.

Evolving our range

Our customers love well-known brands that provide reassurance that the gift will delight the recipient. As part of our ongoing programme to onboard "trusted brands" at Moonpig, we expanded our partnership with Virgin Wines to cover personalised still and sparkling wine and launched Hotel Chocolat in February 2024, which instantly became one of our most popular gifting options. Similarly, at Greetz we are likewise strengthening our roster of trusted brands, for instance through the recent launch of Lindt chocolate.

We have established a unified global team responsible for all designs on greeting cards and personalised gifts. This team continues to negotiate with global licensors to bring internationally recognised properties to Greetz that already feature on Moonpig. Given the popularity of "sticker" images that customers can use to personalise the inside of greeting cards on Moonpig and Greetz, we have also expanded our range of sticker designs to include images from franchises such as Disney Princess, Marvel, Star Wars and Harry Potter.

In FY24, our Experiences division onboarded "hero" brands such as Champneys Health Spa and W Hotels. With Moonpig scaling sales of gift experiences as both physically printed codes in cards and instantly delivered digital attachments to e-cards, we are now focused on expanding our range of mid-priced experiences in categories such as casual dining that resonate well with Moonpig customers.

In the current trading environment, we have also focused on operational process efficiency and the delivery of improvements in gross margin. We delivered an increase in Group gross margin rate to 59.4% (FY23: 56.1%), the reduction in inventories to £7.1m (April 2023: £12.3m) and an extension in the Greetz cut-off time for same-day dispatch to 11pm for all cards, gifts and flowers.

Maintaining high ethical, environmental and sustainability standards

We continue to execute against our sustainability strategy, which commits the Group to eight long-term goals focused on the environment, its people and its communities. In particular, the Group has made strong progress against its target to obtain commitments from suppliers to set net zero emissions reduction targets aligned with SBTi criteria, representing 67% of Scope 3 emissions by 30 April 2030. At the end of the financial year, the Group had obtained supplier commitments covering 19.3% of Scope 3 emissions, compared to 9.7% at 30 April 2023.

A key area of focus remains customer net promoter score, which has been impacted by the delivery performance of postal service providers in the UK and the Netherlands. To address this, we have implemented a clear strategy focused on:

·      Encouraging earlier ordering and delivery, including sending the first reminder message to customers 14 days before each occasion.

·      Improving how we communicate estimated delivery dates. Our new "date first" user experience flows at the checkout on our website and apps clearly inform customers about the possibility of scheduling their orders for cards and gifts in advance.

·      Providing more options for tracked delivery. We have collaborated with Royal Mail to introduce a tracked delivery service at an attractive consumer price. This service, available during peak demand periods such as Christmas, Valentine's Day, and Mother's Day, allows customers to send greeting cards even after the cut-off for first-class letter post.

·      Expanding our digital offering to include e-cards with same-date digital delivery of a gift experience, leveraging the range of Red Letter Days and Buyagift.

We are passionate about diversity in the technology sector. As at 30 April 2024, the combined representation of women and ethnic minorities on our extended leadership team stands at 49% (April 2023: 52%). Female representation at this level is 41%, exceeding the 40% target set by the FTSE Women Leaders Review Target. We were proud to be ranked 32nd in the FTSE 250 for women on boards and in leadership by the FTSE Women Leaders Review 2023.

Financial review

Overview

The Group delivered consolidated revenue growth at 6.6% in FY24, underpinned by revenue at the Moonpig brand, which grew year-on-year at 8.2%, and by the consolidation of a full year of trading at Experiences.

Alongside positive and strengthening Group revenue growth, we have continued to focus on profitability, raising Adjusted EBIT margin rate to 22.9% (FY23: 21.6%) through a combination of gross margin rate improvement and disciplined control of indirect costs. Our low-inventory strategy means that profit margins are not exposed to significant stock-related risks.

The Group has amended its definition of Adjusting Items such that amortisation of intangible assets arising on business combinations (acquisition amortisation) is now treated as an Adjusting Item. The change has been made in response to investor feedback that it would bring the Group's approach into closer alignment with majority market practice and result in the reporting of Alternative Performance Measures that are more readily comparable with those of other listed businesses. As a result, current year and prior year Adjusted EBIT, Adjusted profit before taxation and Adjusted EPS are stated excluding acquisition amortisation of £8.3m (FY23: £7.5m).

The Group remains strongly cash generative, with operating cash inflows of £74.2m in FY24, compared to £56.2m in FY23. Net debt to Adjusted EBITDA decreased from 1.99x at 30 April 2023 to 1.31x at 30 April 2024. In February 2024, the Group agreed a new four-year, committed, multi-currency revolving credit facility ("RCF") of £180m with a syndicate of banks. The Group's previous £175m term loan and £80m revolving credit facilities have been fully repaid and cancelled. The RCF is fully available for general corporate purposes.

Financial performance - Group

 1 Before Adjusting Items of £3.5m in FY24 and £13.1m in FY23. See Adjusting Items at Note 6 and definition of Alternative Performance Measures below.

 2 Before Adjusting Items of £11.8m in FY24 and £20.6m in FY23. The Group has amended its definition of Adjusting Items such that £8.3m of acquisition amortisation (FY23: £7.5m) is treated as an Adjusting Item in both the current and prior year. See Adjusting Items at Note 6 and definition of Alternative Performance Measures below.

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

The Group delivered revenue of £341.1m in FY24, representing year-on-year growth of 6.6% on a consolidated basis. This reflects the inclusion of a full year of Experiences revenue in FY24, which would have contributed an additional £6.3m of prior year revenue if owned throughout FY23. Pro forma revenue growth was 4.5%, underpinned by the Moonpig brand.

Gross margin rate strengthened by 3.3%pts year-on-year reflecting the benefits from insourcing fulfilment in the UK, the full year impact of changes to card prices and shipping prices for gifts and the mix impact of a full year of trading at Experiences. Combined with continued disciplined control of indirect costs, this enabled the Group to deliver increases in Adjusted EBITDA margin to 28.0% (FY23: 26.3%) and Adjusted EBIT margin to 22.9% (FY23: 21.6%).

FY24 revenue and Adjusted EBIT include a mid-single-digit millions uplift from temporarily higher breakage on gift boxes (primarily distributed through high street retail partners) and individual experience vouchers that were sold during Covid with extended expiry dates. As these extended expiry dates have now passed, this benefit is not expected to recur in future years.

Reported profit before taxation increased by 32.9% to £46.4m (FY23: £34.9m), as a lower charge for Adjusting Items was offset in part by higher depreciation and amortisation and higher finance costs. Net finance costs increased from £13.6m in FY23 to £19.9m in FY24, primarily reflecting higher SONIA charges on the unhedged element of borrowings, the accelerated amortisation of loan arrangement fees arising on refinancing and the imputation of interest on the Experiences merchant liability balance. Adjusted profit before taxation increased year-on-year by 5.0% to £58.2m. Adjusting Items were lower in FY24 as there were no M&A transaction fees and the cost of only the final tranche of the pre-IPO award which vested on 30 April 2024.

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 2024 was £125.1m (30 April 2023: £167.7m), resulting in a ratio of net debt to Adjusted EBITDA of 1.31x (30 April 2023: 1.99x). Net debt excluding lease liabilities was £108.8m (30 April 2023: £148.1m).

Revenue

Moonpig and Greetz orders were flat year-on-year for full year FY24. However, there has been a positive trend in performance, with new technology features delivering volume growth in the second half of the year. Orders decreased by 14.9% in full year FY23, decreased by 5.1% in H1 FY24 and increased by 5.2% in H2 FY24. The key driver of orders growth in H2 FY24 was the strong performance of existing customer cohorts at Moonpig, reflecting initiatives including Moonpig Plus subscriptions. New customer orders at Moonpig decreased year-on-year but with an improving trajectory, reaching flat year-on-year in the final quarter. Greetz order performance also improved although the exit run-rate was not yet in growth.

Average order value at Moonpig and Greetz increased by 5.1% year-on-year, reflecting the full annual impact of card price increases implemented at the end of H1 FY23, stamp price increases and subscription membership fee income.

This was reflected in the strengthening of Moonpig revenue, which increased by 8.2% across the full year and by 11.0% in H2 FY24, underpinned by orders growth in the second half. However this includes annualisation against prior year disruption from industrial action at Royal Mail, excluding which, growth would have been at a high single digit rate.

The revenue trajectory at Greetz has continued to improve, with year-on-year revenue declines abating to 5.3% in H2 FY24 from 9.8% in H1 FY24 and 20.4% in FY23. This reflects organisational changes that have enabled Greetz to better leverage Group capabilities, the roll-out of new technology features such as audio and video messaging for Dutch customers, a sharper brand marketing focus on the differentiated features of Greetz cards and encouraging customer adoption of functionality that drive lifetime value such as Greetz Plus subscription membership and the Greetz app. Trading across the last two years has been impacted by the migration of Greetz onto our unified technology platform, which features a clearly card-first online customer journey and has therefore led to the foregoing of standalone gifting revenue, which is not core to our strategy; however, the resulting card-first business is now positioned for growth in FY25.

Trading at Red Letter Days and Buyagift has been resilient, in the context of its higher average selling price and the more discretionary nature of its gifting offering. We continue to make good progress with strategic delivery, including the technology re-platforming of Red Letter Days and Buyagift and launch of same-day gifting on Moonpig by combining e-cards with digital gift experiences. Experiences revenue totalled £48.6m, which represents an increase of 1.5% relative to full-year revenue for FY23 of £47.9m (stated pro forma to include the period prior to acquisition). Pro forma revenue would have decreased year-on-year if not for the mid-single-digit million upside from temporarily higher breakage on gift boxes and vouchers that were sold during Covid with extended expiry dates; these expiry dates have now passed, so this benefit is not expected to recur in future years.

Breakage is revenue earned in respect of vouchers that expire without being redeemed. When a voucher is purchased, the expected value of future amounts that will become payable to merchant providers is recorded within trade and other payables on the consolidated balance sheet. The Group considers historical redemption rates when estimating future payments to merchant providers and estimates are trued up for actual customer redemption rates. For cohorts of vouchers where non-redemption exceeds the expected rate, the Group recognises revenue from the additional unredeemed vouchers and derecognises the accrued merchant payable once its legal obligations to the merchants expire.

Gifting mix of revenue

Gifting mix of revenue remained broadly flat at 49.6% (FY23: 50.7%), reflecting a full year of consolidated revenue at Experiences. Excluding the Experiences segment, gifting revenue mix decreased from 43.4% in FY23 to 41.2% in FY24. This primarily reflected the full year impact of greeting card price increases implemented during the prior year. Gift attachment rate was stable notwithstanding the more challenging market environment for gifting. Standalone gifting revenue decreased by 14.8% year-on-year; however, this is not an area of focus as our strategy at Moonpig and Greetz is to drive growth in cards and attached gifting.

Gross margin rate

Management has maintained its focus on margin rate improvement, increasing the Group's gross margin rate to 59.4% (FY23: 56.1%). This primarily reflects a 3.4%pts year-on-year improvement in gross margin rate at Moonpig, which was driven by operational efficiencies in the UK delivered in the year after opening new operational facilities, and the full year impact of FY23 greeting card price increases.

Experiences gross margin rate remained relatively consistent year-on-year at 92.9% (FY23: 92.0%). The relatively high gross margin rate at Experiences reflects the nature of revenue recognised at this segment, which comprises agency commission earned from partners for the distribution of experiences, rather than gross transaction value. Cost of goods at the Experiences segment relates primarily to packaging and distribution for those orders where the consumer elects to pay for a physical gift box rather than digital delivery.

Adjusted EBITDA margin

Adjusted EBITDA margin rate at Moonpig increased by 3.3%pts, reflecting pass-through of the higher gross margin rate. The reduction in Adjusted EBITDA margin rate at Greetz reflects the operational leverage impact of lower revenue. Across both businesses, we have applied disciplined management of indirect costs.

Adjusted EBITDA margin at Experiences was 30.9%, which is comparable to a pro forma Adjusted EBITDA margin rate of 29.2% for FY23 (stated as though the business had been owned throughout the year). The reported prior year Adjusted EBITDA margin rate of 31.4% relates to only part of the year and is therefore impacted by the seasonality of trading, which is typically lower in the pre-acquisition months that were excluded from consolidation.

Adjusted EBIT margin

Adjusted EBIT increased year-on-year by 13.2% to £78.1m reflecting revenue growth and the pass through of higher gross margin rates. Adjusted EBIT margin rate increased year-on-year by 1.3%pts to 22.9%, whereas Adjusted EBITDA margin rate increased by 1.7%pts to 28.0%. This reflects an increase in depreciation and amortisation (excluding acquisition amortisation) from £15.2m in FY23 to £17.4m in FY24, resulting from additional investment in operational facilities and technology development. 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.

Profit before taxation

1 Adjusted EBIT for both FY24 and FY23 excludes acquisition amortisation following a change in the definition of Adjusting Items. The impact of this change on Adjusted EBIT is set out in the Alternative Performance Measures section below.

Reported profit before taxation increased by 32.9% to £46.4m (FY23: £34.9m), as stronger operating profit and a lower charge for Adjusting Items were only partially offset by higher net finance costs.

Net finance costs increased from £13.6m in FY23 to £19.9m in FY24:

●      Interest on bank borrowings increased from £11.6m in FY23 to £12.3m in FY24. The impact of a higher reference rate on the unhedged element of the Group's interest rate exposure was offset in part by lower draw-down of the Group's revolving credit facilities.

●      Amortisation of fees increased from £2.0m in FY23 to £5.0m in FY24, reflecting a non-cash interest charge of £3.1m in FY24 for the accelerated amortisation of loan arrangement fees arising on refinancing (which would otherwise have been recognised in FY25 and FY26).

●      There was an additional £1.6m relating to imputation of interest on the Experiences merchant liability balance, which we treat as a financial liability and discount to present value in accordance with IFRS 9.

●      Interest on lease liabilities remained unchanged year-on-year at £0.9m.

●      There was a £1.3m year-on-year movement in the monetary foreign exchange impact of Euro-denominated intercompany loan balances. The Group recognised a £0.4m loss (FY23: £0.9m gain), with the corresponding intercompany gain recognised in other comprehensive income in accordance with IAS 21.

Adjusted profit before taxation increased year-on-year by 5.0% to £58.2m. Adjusting Items were lower in FY24 as there were no M&A transaction fees and the cost of the pre-IPO award related only to the final tranche following vesting of the first tranche in June 2023.

Taxation

The taxation charge of £12.2m (FY23: £8.3m) represents an effective taxation rate of 26.4% (FY23: 23.8%). This exceeded the prevailing rates of corporation tax of 25.0% in the UK and 25.8% in the Netherlands primarily because of the impact of the Group's share schemes. Expressed as a percentage of Adjusted profit before taxation, the effective tax rate was 25.1% (FY23: 19.9%).

Earnings Per Share ("EPS")

Basic EPS for FY24 was 10.0p (FY23: 7.8p) and Adjusted Basic EPS, which is stated before Adjusting Items was 12.7p

(FY23: 13.1p). After accounting for the effect of employee share arrangements, diluted earnings per share was 9.6p

(FY23: 7.7p).

The calculation of basic EPS is based on the weighted average number of ordinary shares outstanding during FY24 of 343,093,868 (FY23: 340,061,402), which includes the issue of 1,198,394 shares to employees following vesting of the first tranche of the pre-IPO award and in relation to the DSBP where shares have been awarded to good leavers.

Throughout FY23, 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 relevant portion of FY23 in accordance with paragraph 24 of IAS 33 on the basis that they were contingently returnable. The employment condition fell away in January 2023 therefore these shares are included in the number of ordinary shares outstanding throughout FY24.

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 for FY25 include an Adjusted EBIT measure (FY24: Adjusted EBITDA) and long-term incentive plans include an Adjusted Basic Pre-Tax Earnings Per Share ("EPS") measure.

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

●      Adjusted profit after taxation is profit after taxation and before Adjusting Items.

●      Adjusted profit before taxation is profit before taxation and Adjusting Items. Adjusted PBT margin is Adjusted profit before taxation 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 £1.1m (FY23: £5.4m) share-based payment charges and £2.4m

(FY23: £3.3m) cash bonus awards. These relate to one-off compensation arrangements, which have now fully vested, 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 £nil (FY23: £4.4m). The prior year costs comprise advisers' fees, stamp duty and other costs directly relating to the acquisition of Experiences. The Group treats these costs as Adjusting Items as they are not part of normal business operations.

●      Acquisition amortisation of £8.3m (FY23: £7.5m). For FY24, the Group has changed its definition of Adjusting Items to include acquisition amortisation. The change means that the Group now reports Alternative Performance Measures on a basis that is more readily comparable with other listed businesses. Adjusted taxation includes the deferred taxation impact of acquisition amortisation.

The impact of changing the definition of Adjusting Items to include acquisition amortisation is summarised below.

Determining which items should be classified as Adjusting Items involves the exercise of judgement. We do not classify the following as Adjusting Items on the basis that they are recurring costs associated with delivery of financial performance. 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 Stated inclusive of employer's national insurance of £0.5m (FY23: £0.3m).

Net debt

Net debt decreased during the period, from £167.7m at 30 April 2023 to £125.1m as at 30 April 2024. Net leverage improved to 1.31x (30 April 2023: 1.99x). 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 £2.7m as at 30 April 2024 (30 April 2023: £4.6m).

In February 2024, the Group agreed a new four-year, committed, multi-currency revolving credit facility ("RCF") of £180m with a syndicate of banks. The Group's previous £175m term loan and £80m revolving credit facilities have been fully repaid and cancelled. The RCF is fully available for general corporate purposes.

The RCF has an initial maturity date of 29 February 2028 with an option to extend by one year, subject to lender approval. Borrowings are subject to interest at a margin over the relevant currency reference interest rate dependent on net leverage, with margins of between 2.00%-2.50% at net leverage levels of 1.0x-2.0x. The facility covenants are tested semi-annually and comprise a maximum ratio of net debt to Adjusted EBITDA of 3.5x until 30 April 2025 and 3.0x thereafter and a minimum Adjusted EBITDA interest cover ratio of 3.5x for the term of the facility. For FY24 the actual interest cover was 7.5x calculated as the ratio of Adjusted EBITDA (£95.5m) plus share based payments (£3.1m) to the total of bank interest payable (£12.3m) and interest payable on leases (£0.9m). Other line items within finance income and charges are excluded from the covenant definition in the facility agreement.

The Group's interest rate hedging arrangements now comprise an interest rate cap in place with a cap strike rate of 3.00% on £70m notional until 30 November 2024 and a new cap, put in place during the current financial year, of 5.00% on £50m notional from this date until 1 June 2025 and £35m until 30 November 2025. This follows the expiry of an interest rate swap (a rate of 2.4725% on £90m notional) on 30 November 2023.

Cash flow

Cash generated from operations was £85.3m (FY23: £57.9m):

●      There was a cash inflow from lower inventory of £5.2m (FY23: £0.8m outflow) driven through more efficient stock management. Net inventory at 30 April 2024 was £7.1m (FY23: £12.3m).

●      Trade and other receivables remained broadly unchanged year-on-year, with a net inflow of £0.3m (FY23: £5.3m). The prior year inflow includes the collection of a £3.2m receivable balance in the Experiences opening balance sheet at acquisition, consisting of funds placed in escrow to settle deferred legacy incentive obligations.

●      There was a cash outflow from trade and other payables of £16.2m (FY23: £25.3m). This reflects lower trade creditors and a reduction in the Experiences merchant accrual, including the impact of additional breakage on vouchers sold during Covid with extended expiry dates. The prior year outflow includes the impact of the one-off settlement in FY23 of £13.5m of legacy incentive obligations associated with the acquisition, which were fully provided for in the opening balance sheet.

·      Capital expenditure decreased year-on-year to £13.7m (FY23: £22.6m) reflecting one-time expenditure on plant and equipment in the prior year to fit out new operational facilities in both the UK and the Netherlands.

Within trade and other payables as at 30 April 2023, we have reclassified £2.3m from merchant accrual to other taxation and social security. As such, merchant accrual balances of £45.3m as at 30 April 2024 and £53.5m as at 30 April 2023 are stated excluding the corresponding VAT.

Adjusted Operating Cash Conversion

The Group is strongly cash generative, with operating cash inflows of £74.2m (FY23: £56.2m) representing Adjusted Operating Cash Conversion of 78% (FY23: 67%). The increase in Operating Cash Conversion reflects prior year one-time capital expenditure on new operational facilities in both the UK and the Netherlands.

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 allocation

We remain disciplined in our approach to allocation of capital and continue to prioritise organic investment to drive growth, including investment in technology and marketing. Future investments may extend to new geographical markets, contingent upon achieving optimal customer acquisition costs and confidence in customer lifetime value. We will also selectively consider value-accretive M&A opportunities, maintaining a high threshold for strategic and financial returns.

Over the past two financial years, we have also focused on balance sheet deleveraging. In FY24, we reduced net leverage from 1.99x to 1.31x, a decrease of approximately 0.7 turns. Given our strong cash generation, there is potential for a similar reduction in net leverage in FY25. To maintain an efficient capital structure, our target is to operate with net leverage of approximately 1.0x over the medium term, with flexibility to move beyond this as business needs require.

We will continue to prioritise investment to drive the execution of our growth strategy. With our consistent strong operating cash generation and the progress being made with deleveraging, we will also have the financial flexibility to consider returning excess capital to shareholders.

Outlook

Trading since the start of the year has been in line with our expectations with both new and existing customer orders in growth. In the context of the current macroeconomic environment, we expect FY25 revenue growth (after adjusting for temporarily higher breakage on experience vouchers in FY24) at a mid to high single digit percentage rate, underpinned by growth in orders at the Moonpig brand.

Our business is well positioned to deliver sustained growth in revenue, profit and free cash flow, driven by our continued focus on data and technology. With respect to the medium-term, we are targeting double digit percentage annual revenue growth, an Adjusted EBITDA margin rate of approximately 25% to 26% and growth in Adjusted earnings per share at a mid-teens percentage rate.

Technical guidance

Consolidated income statement

For the year ended 30 April 2024

All activities relate to continuing operations.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Consolidated statement of comprehensive income

For the year ended 30 April 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.