HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2022
Resilient business model with high profitability and robust cash generation
Summary H1 FY23 financial results
| Six months ended 31 October 2022 | Six months ended 31 October 2021 | Six months ended 31 October 20193 | H1 FY23 | H1 FY23 |
Group revenue (£m) | 142.8 | 142.6 | 66.3 | 0.1% | 115.4% |
Gross profit (£m) | 77.2 | 69.9 | 35.2 | 10.5% | 119.3% |
Gross margin (%) | 54.1% | 49.0% | 53.1% | 5.1%pts | 1.0%pts |
Adjusted EBITDA (£m)1 | 34.6 | 35.0 | 15.0 | (1.2%) | 129.6% |
Adjusted EBITDA margin (%)1 | 24.2% | 24.5% | 22.7% | (0.3%pts) | 1.5%pts |
Reported profit before taxation (£m) | 9.1 | 18.7 | 9.4 | (51.3%) | (3.2%) |
Adjusted profit before taxation (£m)1 | 18.9 | 24.1 | 9.8 | (21.6%) | 92.9% |
Basic earnings per share (pence)2 | 1.7 | 4.5 | n/a | (62.2%) | n/a |
1 Before adjusting items of £9.8m in H1 FY23 and £5.4m in H1 FY22. See Adjusting Items at Note 3 and definition of Alternative Performance Measures at Note 20.
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 Three-year growth included to contextualise the impact of Covid-19 in H1 FY22.
Results summary
- Successfully navigating a challenging trading environment and Royal Mail industrial action in the UK.
- Revenue growth of 115.4% on a three-year basis against pre-Covid comparatives for H1 FY20.
- Revenue flat year-on-year reflecting annualisation against the prior year sales impact from lockdown restrictions, offset in part by first-time consolidation of £11.7m revenue from Experiences (Red Letter Days and Buyagift).
- Adjusted EBITDA more than doubled on a three-year basis and was flat year-on-year at £34.6m (H1 FY22: £35.0m).
- Adjusted Profit before Taxation of £18.9m (H1 FY22: £24.1m), reflecting interest on financing for the Experiences acquisition and amortisation of the technology platform investments that underpin our expectations for future growth.
Strategic and operational highlights
Resilience in more challenging conditions:
- Loyal customer cohorts, with 90% of Moonpig and Greetz revenue from existing customers (H1 FY22: 89%).
- Underpinned by the Group's proprietary data and AI capabilities, with over 79m occasion reminders (October 2021: over 60m) set by our customers.
- The greeting cards market has a long track record of stability and resilience through recession.
- Short buying cycles and structurally low inventory of £12.6m (October 2021: £12.0m) allow us to rapidly adapt the gifting range for changes in consumer preferences.
- Experiences revenue growth in H1 and through the Black Friday weekend has been in line with our expectations at acquisition.
High profitability:
- Gross margin rate has increased year-on-year, driven by category optimisation.
- No significant impact on gross margin rate from input cost inflation.
- The flexibility in our model has enabled us to maintain Adjusted EBITDA whilst continuing to deliver against strategy.
- We have taken a disciplined approach to indirect cost management in the light of trading conditions.
Borrowings controlled with deleveraging expected in H2:
- Net debt to last twelve months' pro forma Adjusted EBITDA was 2.45x as at 31 October 2022, with significant liquidity on the balance sheet.
- Most of the annual operating cash inflow typically arises in the second half of the financial year due to working capital seasonality. We expect pro forma net leverage to decrease to between approximately 1.9x and 2.0x at 30 April 2023.
- Senior debt facilities are committed until January 2026 with significant covenant headroom.
Continued delivery against our growth strategy:
- Greetz was successfully migrated onto our unified technology platform in September 2022.
- Most of our software engineers are now focused on delivering growth initiatives, enabling a step-up in the pace at which we are rolling out incremental improvements to our websites and apps.
- Management team at the Experiences segment strengthened by new leadership for the technology function.
- Continued focus on innovation, including testing the Moonpig Plus subscription service ahead of launch, the roll-out of video greeting cards across the Moonpig card design range and ongoing work to build digital gift experiences capability.
- Moonpig "Moments for Less" gift range introduced to meet increased consumer demand for gifting at lower price points.
- New in-house facilities at Tamworth in the UK and Almere in the Netherlands are now fully operational.
Significant runway for growth:
- Online penetration for greeting cards remains low, estimated at approximately 16% in the UK and 20% in the Netherlands for 2022 (source: OC&C).
- Significant opportunity to drive card-attached gifting, with fewer than one in five of orders across Moonpig and Greetz currently containing a gift.
- Overall value of customer spending on gifting in the UK, the Netherlands and the Republic of Ireland is £57 billion, of which £22 billion relates to gifts that are sent with a card (source: OC&C).
- Acquisition of Experiences in July 2022 is an enabler for unlocking innovation through digital gifting.
Outlook
Unchanged expectations for full year Adjusted EBITDA in FY23:
- Trading conditions have become progressively more challenging through October and November, and given the continued macroeconomic uncertainty, we now expect revenue for FY23 to be approximately £320 million.
- The actions that we have taken in response to the current environment mean that our expectations for full year Adjusted EBITDA remain unchanged.
- The business is highly cash generative on an annual basis, and we expect deleveraging in the second half of the financial year such that the ratio of net debt to pro forma Adjusted EBITDA is between approximately 1.9x and 2.0x at 30 April 2023.
- We remain confident in the structural growth opportunity in our markets, as well as the fundamental strength, resilience and agility of our business.
Nickyl Raithatha, CEO, commented:
"As the clear online leader in greetings cards, Moonpig Group is positioned to benefit as the market continues the long-term structural shift to online.
Our resilient business model offers a powerful and unique combination of leading market positions, strong customer retention, high profitability and robust cash generation, giving us flexibility to manage through the economic cycle. As a result, our expectations for profit for the current financial year remain unchanged.
We remain focused on delivering against our strategy, with the successful migration of Greetz onto our central technology platform and innovations such as the launch of video greeting cards and ongoing testing of our Moonpig Plus subscription service. Despite the difficult trading environment, we have delivered a robust set of results and with our data-led model we are ideally positioned to capture the significant long term opportunities in our markets."
Investor and analyst meeting
The half 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 7 December 2022.
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/f811b7b7-afb7-4670-8c51-f6de8eaec8ed
Enquiries:
Brunswick Group
Sarah West, Fiona Micallef-Eynaud, Sofie Brewis
+44 20 7404 5959
moonpig@brunswickgroup.com
Moonpig Group
Nickyl Raithatha, Chief Executive Officer
Andy MacKinnon, Chief Financial Officer
investors@moonpig.com
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 is the online market leader in cards in both of its markets and is also the UK market leader in gift experiences.
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.