Moonpig Group PLC (MOON.L) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Moonpig Group FY 2026 Half Year Results Q&A session. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Nickyl Raithatha, CEO, for his opening remarks.

Hi, everyone. Thank you for joining the Q&A this morning. Hopefully, you have had a chance to look through the announcement and to watch the video on the website. I'll just give a quick intro, and then we will get to Q&A as soon as possible. Overall, it's been a great period for the group, and we now have strong momentum across the board. The first half of the year saw the core Moonpig brand delivering 9.4% revenue growth, saw Greetz returning to positive growth, and we delivered 13% adjusted EPS as a group. The Moonpig business continues to leverage our outstanding data and technology capabilities to drive top line growth in a challenging consumer environment with both growth in customers and gift attach during the period. It's a direct result of the accelerating growth in our loyalty drivers. Our subscriptions grew over 36% to over 1 million subscribers now. Reminders keep growing over 11% over the year to over 107 million now. And our AI creative features are growing at a rapid pace, over almost 60% year-on-year, and now over half of our cards include a creative feature. Greetz has now successfully returned to growth. We delivered a 1.3% increase in constant currency over the period. And this is due to us fully embedding the benefits of the global technology platform to our Dutch business. And Greetz exited the half at a higher growth rate than the average of the first half, and we will see a sequential step-up in the second half. The transformation at our Experiences business is now nearly complete, with the tech platform, the team and the product range all rebuilt. And though this did not impact the first half results, we are very encouraged by the step-up in trading momentum that we've seen since the start of the second half, which is particularly crucial given that almost half of the year's trading is captured through November and December alone. We completed the first half of our GBP 60 million share buyback, and we've increased our interim dividend by 25%, underscoring our commitment to significant capital returns. On a personal note, this is my last, final -- this is and final results presentation. And I wanted to take the opportunity to thank, firstly, the extraordinary employees of the Moonpig Group that have supported me on this incredible journey over the last 7 years as CEO. And also to thank everyone on this call, investors and analysts for all of your support over the last few years. My successor, Catherine, will be joining the business at the beginning of March. And she's going to be inheriting a fantastic business with great trading momentum, a super leadership team led by Andy, who you know well, and a vast long-term growth opportunity that we are really well placed to capture. Thank you very much, and I will turn over to questions.

[Operator Instructions] The first question is from Ross Broadfoot at RBC Capital Markets.

Three from me, please. Number one, could you give any color on how the Moonpig brand has started H2? You obviously gave a little bit of color for Experiences. Number two, just on the KPI mix. You've obviously had a bigger contribution from AOV, some contribution from new customers and relatively flat order frequency. So question 2a, would you expect similar drivers of growth in H2? And do you have any early indicators that frequency may pick up? And then number three, regarding the better performance that you flagged at Experiences in November and early December, can you give any color on what you think is moving the needle there from the customer's perspective?

Sure. Andy, do you want to take the first two, and I'll take the rest of them?

Yes. So on the first one was around the trajectory of Moonpig for the start of the second half. And actually, we've seen sort of trading consistent with the rate at which we sort of exited the business. So we would, based on current trading, expect the business to continue delivering growth at sort of a high single-digit rate, and sort of close to the sort of 10% mark. The second question was around the KPI mix. And you're right, the primary driver of revenue growth at Moonpig in the first half was average order value with the contribution as well from growth in new customers. And we were pleased with sort of strong continued delivery of new customer acquisition throughout the first half. I think the point I'd make would be that we don't look to see each of our KPI drivers move in lockstep in each financial period. And we view each of those drivers as a portfolio that we can pull on in order to deliver revenue growth in each period. And for instance, if we look last year, we saw particularly strong new customer acquisition. In the first half of this year, there's been a stronger sort of AOV growth. And specifically on frequency, that was flat year-on-year. But in the context of a tougher consumer environment and the fact that we have seen some increase in average selling price from moving people on to track delivery, which is a more expensive product, but also a sort of better solution for customer and a better quality product. I think we're actually pretty comfortable with the fact that frequency has been flat. We think that's a solid place to be. Looking at where we are in current trading, I would expect the drivers of frequency in the second half to be similar. So on AOV, we're continuing to see strong progress in terms of driving gift attach rate. I'd expect H2 to be another period where we drive gift attach. We're making great progress in terms of the rollout of trusted brands, and we've got a number of brands such as Lush and some of the Boots Beauty brands that we expect to launch in the second half, which will continue to drive gift attach. And then if you think about sort of the increase in track delivery, that really started from the end of FY '25. So we've got a sort of a tailwind in terms of that for the majority of H2. So we'd expect the drivers of Moonpig growth to remain broadly consistent H1 versus H2.

Thanks, Andy. Yes. And on Experiences, I think the -- we've kind of talked in the past about how we've had this three-phase transformation plan. So we've rebuilt the technology platform. That on its own doesn't do anything. What it does is it allows us to then optimize and improve the experience at a much faster pace. And that's something we've been working on delivering huge volume of experiments, which have improved conversion rate consistently. The team, we kind of finished the rebuild of the team. So kind of the leadership team is now complete. We've kind of improved the capabilities, in particular, on sort of the buying and sort of commercial side of the business. And actually, all of that work has been really targeted around how do we then take that -- take those capabilities and prepare the business for the peak period, which really is the key period in the year. And so actually, a lot of the products we've launched in the last few months have just been about building those supplier relationships, getting products live, but the real focus is actually on getting exclusive products for the peak period, exclusive supplier-funded discounts, exclusive ranges and just setting everything up so that kind of once we hit the ground in the key trading period that we're actually really well placed. And we saw a sort of pretty kind of clear step change once we launch that peak kind of trading offering. So both from a product perspective, from the way we are doing promotions, from the CRM plan and from our kind of marketing plan as well, where we've kind of saved a lot of our marketing efforts for this period. And so actually, I think from our side, what we're seeing is we've just got better capabilities to trade. But primarily, we've also got better products to trade as well. And so I think maybe to give you one bit of a color on this, it's not just about new suppliers. So when we have launched some really exciting new partners and those -- the ones that are driving value are the -- and driving excitement are the sort of the exclusive and the very topical ones. So the traders experience is we have exclusivity on that. That drives a lot of interest, a lot of engagement. Clarkson's Farm similarly. We've also got kind of more products that are sort of more utility-type products, so something like a Spotify subscription where people feel if they don't want to do something that's onetime and it's got a longer use, they're using that. But actually, what we've done is we've gone to some of our older suppliers that we've been working with for years. And we said rather than selling the same products again, how can we package these up and kind of refresh these to make them to look more interesting or to sort of make them more modern and kind of reexcite the customer. And so we've seen like pretty good success in taking some of our old suppliers, spas or restaurants and just creating new menus, new packages, new combinations of products, and that's driving value as well. So I think it's just -- it's a kind of -- it's a new way of working that we're really working closely with suppliers. They're funding exclusive, they're funding discounts, and we've just got a more compelling range. And I think that gives us confidence that actually the step change we've seen in the last couple of months will kind of continue through into the future.

The next question is from Georgina Johanan at JPMorgan.

Can you hear me?

Yes. Hi, Georgi.

Yes, I just wanted to ask a question on CapEx, actually. Your guidance is really clear. I just wanted to understand kind of on a midterm perspective, how we should expect the CapEx to be spent because it feels like you've invested well over the last sort of 12 months and currently. So what kind of investments are going to be made from a CapEx perspective? And how should they be supporting growth over a midterm perspective, please?

Yes, sure I'll pick up that. Georgi, I think we would expect CapEx to continue within the sort of 4% to 5% of revenue range over time. So steadily growing broadly in line with revenue. There was a slightly different mix to capital expenditure in sort of the first half of this year because I think generally, we expect relatively low tangible capital expenditure, because the nature of our operations is relatively asset-light, but we have seen opportunities for automation in our fulfillment center. And we call out in the announcement two particular projects that we've implemented in H1, which went live in November, which are -- we've in-sourced the production of giant cards. So our largest size format was previously outsourced, but now we're doing it ourselves. And we've implemented parcel sortation, which allows us to effectively sort of dispatch packages by different sort of career services at different rates. And so there's a sort of a good ROI on each of those in terms of effectively sort of closing the year-on-year margin gap in Moonpig from H2. The majority of our CapEx will continue to be spent on technology development. So we obviously have around about 250 software engineers and product people and data scientists within the organization. And as we talked about when we did the Capital Markets Day just over 12 months ago, we see that as a driver of revenue growth. It's people who are incrementally were working on building out the tech platform, conducting UX experiments. And every time we deploy some of the winning variant, that makes a contribution to one of the drivers behind our sort of revenue growth at Moonpig and Greetz. And so broadly looking forward, I would expect the envelope of CapEx to be broadly similar. Tactically where there are opportunities to invest for efficiency in fulfillment, we'll do that, but it won't be the bulk. And the majority of our investment will be in tech. And obviously, to the extent that's people internally and capitalized time, just to the extent that the salary rate increases, that will contribute to CapEx growth. But also as we see opportunities to invest, we'll look to do that as well.

The next question is from Adam Tomlinson at Berenberg.

Can you hear me okay?

Yes. Hi, Adam.

So the first question is, I suppose, just on guidance. So with your EPS growth coming in, in H1, I think, about 13%, still guiding to that 8% to 12% for the full year, obviously, implies a bit of a step back in H2. But to your mind, is there anything -- any reason -- I get it's still peak trading to come, but is there anything we need to be thinking about in H2, headwinds or comps or anything like that as to why we should see that -- necessarily see that slowdown is the first question. Second question is just a current trading question, really. We've had I suppose some of the retail sales data out there was a bit slower heading into the budget. Just wondering, it doesn't feel like you have, but if you saw any kind of slowdown or consumer caution on that front, and was there much volatility in terms of trading. And then third question was just actually on the subscription customers. So obviously, that number going up nicely and now about 20% of sales. And just a reminder, if you could, please, just in terms of the characteristics of your subscription customers and some of the stats around those would be great.

Do you want to take the EPS question?

Yes, sure. Will do. Yes, I mean, you're right. We're really pleased with the fact that the H1 results had EPS growth 13% ahead of our sort of outlook for the full year of 8% to 12%, reflecting obviously both the sort of strong result in terms of profit for the first half, but also the way that we're putting our free cash flow to work through share buybacks and the GBP 30 million that we bought back in the first half, which Nickyl talked about. And I think our stance on guidance is very much informed by the point that you made, Adam, which is obviously, we're coming into our peak trading period. We still got Valentine's Day and U.K. Mother's Day ahead of us. So I don't think we're seeing any particular headwind or reversal that we've factored in for the second half. But we think at this stage of the year, with two of our major peaks still to come, the right stance is to hold our guidance in its current place.

Yes. And I think on kind of the consumer impact of the budget, I think we were reading the same news articles as you, but we didn't see it in our business. I think one of the things about the Moonpig business is that it kind of -- it does have this kind of pretty extraordinary resilience. And because the business is driven so much by existing customers, by reminders, by our CRM that actually it's kind of -- it was able to sort of continue through November, December. We didn't see any sort of volatility there, similarly in -- obviously, in Greece given there was no budget. But actually, on the Experiences side, I think the sort of the -- this was the move into sort of the peak season. But I think in particular, the change in kind of our transformation plan probably kind of outweighed any macro effects. And so that's why we saw the step-up. So yes, I think our business didn't see any direct read from the sort of consumer uncertainty. On Moonpig Plus, yes, as you mentioned, we're really thrilled with how this is going. It's kind of 2.5 years since launch now. And like we're continually surprised by just how well it's going, both in terms of how many customers are signing up, the type of customers that are signing up, the change in their behavior and the number of them renewing. And kind of if you put all of those things together, those are the four ingredients for a pretty great subscription service. We've talked about in the past how the average customer is someone who is buying kind of sort of high single-digit kind of number of cards a year. And their frequency once they sign up goes -- is up by about 25%. So a subscriber once they subscribe, they do buy more cards. And actually, what we've also seen is customers that become members, their attach rate also goes up by kind of a 1 percentage point or so. So we're seeing customers that sign up, they're buying more cards and they're adding slightly more gifts to those cards, which is obviously great. That's obviously in exchange for the discount they get. What's really encouraging is we're seeing very strong renewal numbers sort of, I think, in sort of year 1 to year 2, kind of in the sort of 2/3. Actually higher than 2/3 of customers are renewing, which we know is kind of best-in-class for a sort of membership scheme. And actually, that's kind of -- as we've kind of got the first cohorts kind of moving from year 2 to year 3, we're seeing equally encouraging numbers in terms of the customers that are kind of staying with us into that year. And obviously, the subscription fee is not discounted as you kind of move into year 2 and year 3. So you're paying the full GBP 10 subscription fee, which makes the scheme even more profitable. So from our perspective, we're kind of -- we've got 1 million very high-value customers that are kind of more locked in and embedded into the ecosystem than ever before. And actually, we're just seeing sort of the snowball effect of the more behavior. Those are the customers that use our new AI features earlier, which drives even more frequency. And so we've really got this kind of virtuous cycle going. And so the focus is very much on how can we move more customers into it. Just probably to give you some color, Greetz is kind of further behind on the Plus journey. So Greetz Plus is live, but it's following a very similar pattern sort of 18 months behind the U.K. And so I think we're kind of excited for, again, what that can bring to the Netherlands as well.

The next question is from Andrew Wade at Jefferies.

Fairwell to Nickyl, I suppose. Good luck in your next role. On to my questions. I've got three of them. First one on the gift side of things. Obviously, the easy answer to this is a bit of everything, but anything in particular you think that's moved that from being relatively flat over a number of years to sort of moving into quite a decent step forward? So that's the first one. Anything in particular in there? Or is it just a bit of everything? The second one, EBITDA margin impact of gifts. Historically, you've sort of talked to it not being a drag on EBITDA margin. Being a drag at gross margin, but not EBITDA margin. But in your commentary, you sort of talked to adjusted EBITDA margin being down 110 basis points, reflecting the sort of gift impact on gross margin. So sort of interested as to how we see that one going forward now. And then the third one, track delivery, obviously, been a big boon to revenue this year. Just sort of interested as to whether you're anticipating a sort of step down in top line growth in Moonpig once we annualize that track delivery step forward, i.e., at the start of next year or if you're going to have other dynamics that you expect to sort of pick up the slack?

Yes. Look, I'll take the first and then Andy can take the gift margin and kind of next year's revenue comments. So I think one of the -- you're right, the gift attach didn't move for a few years. I think we were sort of -- we were saying at the time on an underlying basis, we could see how we were driving increases in attach rate. So AB tests when we were launching UX changes, algorithm upgrades, but those were being offset by macro headwinds. So kind of as we entered the cost of living challenges and so on in sort of '22, '23. What we see now is actually -- I think no one think -- everyone is aware, it's not a particularly favorable consumer environment. But we think from our perspective, it is a relatively stable consumer environment. And so actually, the sort of the year-on-year, there is no macro headwind when you sort of -- when you're annualizing the previous year. And so actually, what we're seeing is probably a continuation of the sort of the organic improvements we were making just that they're no longer being offset by kind of macro headwinds. Those changes are very much linked to the momentum we've got in gifting brands. I think Andy just touched on this, but the sort of the brands that we're bringing on board, they're bigger and better, and we're able to execute them much better than before. So rather than just putting them on site, it's now a true partnership. If you look at kind of what we've done with NEXT, we're the only third-party reseller of NEXT products in the world, right? NEXT has never in its history, worked with anyone else to sell their own branded products. Not only are they working with Moonpig, but we launched a small range last Christmas. We grew it over Valentine's, over spring, over Mother's Day, Father's Day. And now we've expanded it into more categories. So it's kind of a much bigger range. It's performing exceptionally well. We've launched NEXT Flowers. And so just our ability to work with these gifting partners has really improved, and that kind of obviously then provides case studies for more of them to come on board. And so I think our gifting team has never been this busy, but it's also -- it's easier than it's been for them to actually convince the next partner to work on board because we kind of -- we're a more attractive proposition. We can demonstrate to pretty much any partner that we are an incremental channel for sales that doesn't compete with their own, and we're able to present their brand in a really positive light because it's a gifting business. So I think lots happening there on the range. Then on the data science side, there is loss because we've got a 5- or 10-year road map ahead of us in terms of just making those cross-sell recommendations more relevant month after month after month. And we see -- we're consistently doing that. We eke out a few basis points of attach rate every time. And I think with the new AI technologies that are kind of out there, those will continue to deliver for years to come. Andy, do you want to take the margin?

Yes, sure. Will do. I think the commentary in the RNS was intended to be an explanation of the movement in gross margin rather than EBITDA margin, but it's a useful opportunity sort of just to reiterate in our business model, every time we sell an additional gift, it's incremental absolute margin. We're not paying marketing money for gift sales because every time we sell a gift, it's on a cross-sell for somebody who's come to the business to buy a card. And the gross margin is net of all fulfillment costs, which means that actually there's hardly anything in the cost base, which is variable beneath gross profit for that incremental gift, just a little bit of card acquirer fees, but nothing much else. And so actually, it remains the case that incremental gifting sales are not dilutive to adjusted EBITDA margin. Or otherwise stated, our gross margin on gifts and fully loaded is higher than our EBITDA margin rate. And so what you're seeing in the EBITDA margin in the first half is the sort of the benefit of operating leverage come through. It does mean obviously that there is a headline reduction in the sort of the gross margin percentage rate and down to mix, but that isn't impacting us further down the P&L. The third question was on track delivery. And probably just a reminder, track delivery is a fantastic product. The reason we originally introduced it was not as a revenue driver, but to solve for the customer. It's unique. Nobody else in the market does it. It's a great price point. So GBP 2.79 for guaranteed next-day delivery. Nobody else in the market offers it. And we see it really positive for consumer Net Promoter Score. We originally introduced it just over a year ago for peak periods only. But at the end of FY '25, started to scale that as an everyday proposition, and it's up to about 40% of card-only orders at the moment are through our Moonpig guarantee delivery service. To the point about what happens when the current penetration of track delivery rolls off, I think the answer is that actually we don't think that the current 4 in 10 is the sort of the limit of what we will do on track delivery. And I think there's opportunity in future periods for that to scale further. And in particular, at the moment, we have some commitments around the amount of first class volume that we put through the network. And as they roll off, there's actually sort of further opportunity to scale that product, and we think probably actually ways that we can drive sort of further demand. So I don't see it as being something that we will necessarily annualize when we get to the end of the year. More broadly, I would go back to the comments around the portfolio of levers that we have. And hopefully, investors will see that actually over the past 4, 5 halves, what we've done is effectively use the sort of portfolio of levers that are available to us to drive growth. In some periods, it's particularly strong customer acquisition. That was the case last year when we had a particularly strong focus in our road map on things that reduce purchase friction and improve new customer acquisition. In other periods, it might be other levers. But no reason to think that we should see a step back in performance as a consequence.

The next question is from Jonathan Pritchard at Peel Hunt.

A slightly different angle here. Just talk to us a bit about Catherine. I don't know, Nickyl or Andy, whether it's appropriate for you to talk about her strengths and sort of how she won the interview process. And then Nickyl, as you leave and very best wishes for what you do in the future, what's the biggest challenge you think that Catherine faces?

Yes. Good questions. I'm not sure, I guess, how well placed we are. I mean the Board obviously led the hire of Catherine, as I think is the appropriate process in this. So that's very much something that maybe the Chair, if you can speak to her, he is probably in best place to answer. Myself and Andy have obviously spent time with Catherine kind of talking about the business, and she's kind of said hello to the team. From my perspective, she seems like a fantastic person candidate, an experienced background mindset to sort of take this business on to great things. So I'm very excited for the change and very happy I'm handing to her, but I probably can't share more than that with a qualified view. I think the -- I mean, the biggest challenge for Catherine, I think it's actually going to be -- I'd probably reframe it. I think it's the biggest opportunity. I think what she's -- Catherine is coming into a business which has great trading momentum and a really strong leadership team kind of driving that. And so actually, I think one of the things we look at in the business is we need to make sure we maintain that momentum on the Moonpig side and work out how can we continue to capture that opportunity, make sure that sort of the turnaround of Greetz and then Experiences kind of continue their trajectory. And so I think the strategy is very clear there and actually continuing that is going to be really important. But beyond that, I think the interesting is sort of the smaller sort of seeds that we've planted. So the new markets business, our international business is very nascent, but growing really well. Moonpig for Business is even more nascent. It's launched just in the last 2, 3 months. We've kind of really started to sort of see that scale quite nicely. And so kind of I think the challenge will be how to sort of invest for the future in kind of new things alongside maintaining that momentum in the core business. But this is a business which is kind of showing pretty strong stability, sustainable growth and an ability to sort of generate those high margins, deliver cash, deliver growth. And so hopefully, Catherine comes into a stable platform and our focus can be very much on how to build on top of that.

The next question is from Hai Huynh at UBS.

And you alluded to this just now in your answer. I just wanted to ask on the contribution of Moonpig for Business at the moment in terms of revenue and profitability. Anything you can say there, a bit more color?

Yes, sure. Look, so it's very small. It's very small at this point. We really -- we kind of -- we were in testing phase for quite some time. We sort of -- I think September is kind of when we sort of -- did a sort of soft launch, and this was mostly sort of through organic LinkedIn posts and referrals. But what we've seen is kind of over the last 10, 12 weeks, we've seen really kind of exciting week-on-week growth. So very much kind of -- we think of this as a sort of small start-up in the company, but we've seen week-on-week growth. We've seen November was more than double October, first week of December was bigger than the whole of November. So we're kind of seeing some pretty exciting growth numbers on a very, very small base. What's been really interesting here is we've built a product that works great for multiple use cases in an enormous market. And so I think whilst the revenues and P&L are very small at this point, the potential of what this business could be is obviously huge given the size of the market within the U.K. but also globally. And we're catering to sort of two primary use cases. So one is for employers, gifting to employees. And so we're seeing Thank You cards, New Starter cards, Well Done on 5 years at UBS cards, Going Out or Thank You for a Great Year. So that's a really interesting use case to drive employee engagement, and that is -- that's probably about half of the orders we're seeing. Again, these are driving -- think about the average order size of this business, cards is 50, 100, 150 cards per order. So significantly different to our consumer business so far. And then we're also seeing it used for corporate gifting as well. So we added gifts to the product just, I think, beginning of November, so very recently. And we're seeing people gifting a bottle of champagne to thank you for the end of the year to the 20 clients to 100 clients. And so we've got lots of interest. We've got a very, very small team working on this. It's kind of a couple of individuals, but lots of inbound coming in, lots of momentum building. And so I think if we can find product market fit, then we will look to scale this. And again, that's something that Catherine and Andy will be kind of making decisions on. But I think there's -- it's a big market, and we're seeing lots of encouraging signs that this could be a really good fit for the business.

Sure. Just two other quick questions, if you don't mind. The first one is just to understand the longer-term economics a little bit. Because you're guiding for 25% to 27% EBITDA margins, and part of that is because of increasing gift attach rate. What are the sort of gift attach rate you're targeting in that midterm range that gives you that 25% to 27% guidance?

Yes. I'll pick that one up. So if you think about our business model with a sort of relatively large fixed element to cost base beneath gross profit, there's a large element of operating leverage inherent in our operating model. And I think all things being equal, what you would expect is that the EBITDA margin rate percentage would increase over time. Our guidance is and has been since IPO for a flat percentage. And I think the important thing is that, that's a choice. So it's us saying that what we want to do is have the opportunity to invest the surplus that would otherwise accrue into opportunities for growth within the business. And probably the most obvious example of that at the moment is the expansion that we're doing in new markets. So the way that we operate Ireland, Australia and the U.S. together is as a profit pool where to the extent that we drive additional gross profit in those markets, we reinvest all of that into marketing to fund the growth in those markets. And what that means is that to the extent that we drive an extra GBP 1 million of revenue in those new markets, that's effectively at 0 EBITDA. So that's an example of us reinvesting the surplus that would otherwise accrue into sort of revenue expansion within the business. Now clearly, we've got choice in that going forward. But our guidance as it stands is that EBITDA margin will stay constant, and that's because we think that there are lots of opportunities to continue investing to drive top line growth.

And my last question is just on the competitive landscape. So we're aware of a merger of a key competitor. But do you see -- they're in the transition period, but do you see a longer-term threat there in terms of the competitive landscape? Or do you think the market is large enough for you to grow as you're targeting without being affected?

I think what we've shown over the last several years is that actually we've been able to grow our market share because of the investments we've made in technology and the sort of the virtuous flywheel that it creates in terms of the fact that we are 4 or 5x larger than the next player in both the U.K. and the Netherlands means we have significantly more sort of firepower when it comes to marketing. We have significantly more data, significantly more investments in technology. And then when you sort of combine those things together, that allows us to sort of pull away from the competition in terms of the experience and then the loyalty drivers and the sort of data moat that we're able to create. So we kind of think that, that will continue going forward. We haven't seen any change in competitive dynamics or competitive behavior over the last period. And actually, we're not really anticipating it based on anything we've heard or read publicly. And I think maybe the other sort of change that's probably more -- that we're more focused on is whether there's a sort of change in the marketing landscape, the growth in LLMs, all of that stuff. And that we're very focused on making sure that if those trends do emerge, we will be very well placed to sort of actually continue our kind of market leadership and extend our market leadership through being the most prominent, whether that's on LLMs or new emerging channels and in other ways because I think we've got the sort of the technology mindset and capabilities to sort of make sure we are all over and kind of at the forefront of any innovations that can come.

The next question is from Matthew McEachran at Singer Capital.

A couple of questions left over for me, if that's okay. And one just comes back to this query about Moonpig operating leverage and EBITDA margin. Let's go back to your point, Andy, about new markets where you're going to be reinvesting the gains. I mean you're annualizing at what, I don't know, GBP 15 million of sales, roughly 4% of group sales. Could you give us some idea as to the scale or critical mass in that side of the business where we should expect some contribution to drop through to profit? I mean is it plausible that, that doesn't start happening until you reach 10% of sales, in which case that is quite a bit of dilution against the accrued benefits through the core business?

I think the honest answer is we don't have a sort of fixed target for the scale of those businesses. We just think that there's significant opportunity that we want to sort of leverage going forward. I think we think about it more in terms of actually outside of Ireland, where we're already profitable, how do we get to a point where we're confident that we can scale investment on attractive economics. So I think we talked in the past about the fact that actually, if you look at Australia and the U.S., the thing that we're solving for is the fact that at the moment, our cost of new customer acquisition is higher than we'd want it to be because people don't know the Moonpig brand in those territories. And therefore, we're working to find out better ways to acquire customers and paybacks that are getting closer to where we are in the U.K. And we don't have the same lifetime value as we do in the U.K., probably primarily because the gifting range is less mature. So our ability to monetize the customers over time is a bit less because the attach rate is lower. And so the way we think about that and the work that we're doing is to sort of bring down the cost of customer acquisition over time and to raise the lifetime value of customers by progressively improving the gifting range in each of those markets. And we're really looking for the point where we're confident that if we increase our investment in those markets and probably Australia is the sort of the furthest along in terms of being close to a point where we're able to look at that decision. Where we're confident that if we invest in additional marketing, the payback is there because we know the way that the customer cohorts will behave and it presents us with a sort of sensible return on investment. When we get to that point, it may be that we sort of come back and say we are going to scale and that actually one of the sort of primary uses of that excess in EBITDA margin will be to increase our presence in one of those other markets. But I think we're not there in terms of that yet because it really is dependent upon what we see in the results on the ground.

Yes. That's helpful. Second question, Nickyl, just in relation to experiences. In your video, you talked about the pace of development and new initiatives never having been quicker. And you did talk quite a bit about new suppliers and brand propositions coming through, some of which are -- they're supporting in terms of promotional activity. Could you give us a flavor -- sorry, I'll get to the point. Could you give us a flavor as to what's in the pipeline between now and the key upcoming events around Christmas? Is there still a lot to come? Or have you landed most of what needs to be landed and now it's just a case of getting some yield out of it?

Yes. I mean, look, I think there's a sort of -- there's a very clear Christmas plan, which started really on -- started at the beginning of November. A lot of those key offers and products and exclusives were launched over the Black Friday weekend. And then kind of as we sort of ramp up over the next couple of weeks, I think every day, there are sort of different products that will be featured in different kind of exclusive offers. And then kind of in those final couple of days, I think we've said many times, Christmas Eve is the biggest day of the year for the Experiences business. And so Christmas Morning is also one of the top 5 days. So there are many people that leave it very, very late. And so I think on those, we also want to have sort of special products ready. So I don't think we can give color on specific SKUs. I think just there's a daily newsletter and a daily website which we're featuring. But I think it's -- a lot of it will be the key suppliers that we have kind of on the website, but that there's special products from within those. So that might be, I think Marco Pierre White, there's a sort of six course tasting menu for a pretty extraordinary price. We've kind of launched that. It's been kind of on and off the website at various points, and I'm sure that, that will come back in the next couple of weeks. That drives huge volume. We just launched codes [indiscernible] which is kind of something we've been working on for a while, and that's gone live, I think, a couple of days ago. So there are new products coming live, but I think primarily, it's about tweaking the offering and the specific products within those and the sort of the promotional campaign that we'll do around that. So yes, I think I'd probably say the next 2 weeks are kind of more of the same of the last 2 weeks in terms of just the way we're executing it.

The next question is from Anubhav Malhotra at Panmure Liberum.

I've got three on the Experiences business really. Firstly, can you talk about -- in the Experiences business, you said you have secured some supplier discounts for peak trading. But have you been investing more in the gross margin yourself in the second half to drive some of the revenue progress? And then maybe talk about the operating leverage in the Experiences business, in particular, as the performance improves. I mean, you mentioned you're spending more on advertising in the second half. You kept the firepower. But any other operating costs that necessarily increase with growing revenue or improving revenue in that business? And then just lastly, this competition seems to have launched a loyalty program of their own in the Experiences business, your key competitor there. Is that something that you have considered? And I know you used the Moonpig branding already on the Buyagift website. So could that eventually be part of the same envelope of Plus program in your thinking?

Sure. Why don't I'll take the loyalty one, and I'll pass to Andy to talk about the margin questions and the leverage? So I think we haven't considered launching a loyalty program in the Experiences business directly. I think what we see in -- if we think about the difference between the two platforms, the Moonpig business has an average frequency of 3, but the average member who's signing up to this has a frequency in the sort of high single digits. So buying seven, eight, nine cards a year before they sign up, which is kind of, I think, kind of -- it makes sense to sort of be a reward member when you have a frequency that's slightly higher. In the Experiences business, that number is closer to 1. And so it's above 1, but it's quite low. And so we haven't seen a priority to launch a loyalty product for a business that tends to have a lower frequency. It doesn't rule it out in the future. I think we'll stay close. But for now, our focus has really just been on operational excellence and just making sure we've got amazing products, and we're turning over that product, and we're driving kind of excitement for the customer, and we're making it easier for them to find. This kind of e-commerce basics and kind of range basics is very much where we are laser-focused and not looking at sort of adding kind of ancillary features at this stage.

Cool. And then the other two questions were around sort of the impact upon profitability of discounts and advertising. I think the simple answer on both of those is that we wouldn't expect any change in mix in the first half to the second half. So it has always been a feature of the Buyagift business model that there is some discount which is supplied, which is funded by the company. And that is -- that has historically been sort of the primary sort of way of sort of providing value to customers. So there's a sort of an agreed commission rate with the merchant providers and part of what that has funded is effectively sort of discounting as part of the sort of the trading calendar for Buyagift and Red Letter Days. What we've actually got better at doing as part of the changes that we've made in the last year and the strengthening of the commercial team is that we're placing a much greater focus on supplementing that with supplier-funded discounts, so that from a consumer perspective, the proposition that they see on the website is stronger and more attractive. And we think actually, we've doubled the number of sort of hero deals that we show on the website through November and December, and that has resonated very well with customers. And alongside that, we've put a lot of work into making sure that the hero deals that we shown on the website are differentiated. So there's something about the proposition, which is unique and attractive to the customer. It's the same with advertising. Clearly, in a business model which is more focused than Moonpig on paid traffic acquisition to the extent that we sell more in the second half, we spend proportionately more on advertising, but that's just a reflection of the seasonality of trading, and there's no structural change in the economics of the business there. And actually, if you look at the shape of EBITDA margin in H1 versus H2 in previous years, what you'll see is that we actually typically have a higher EBITDA margin in the second half. And I would expect that in H2 of this year, reflecting the fact that, again, it's a business with a degree of operating leverage and November and December are particularly important for Buyagift. So about 4/10 of revenue come through the door in those 2 months of the year.

As there are no further questions on the webinar, I will now hand over to Gareth Davis to read out the written questions. Please go ahead.

Good morning, everyone. This is Gareth Davis from the finance team here at Moonpig. We have a question each from a couple of individuals. Firstly, we have a single question from Caroline Gulliver at Equity Development. It reads, could you add some color on frequency? Although the average is just under three cards per annum, what is the variance? I understand that some customers order one or two cards per annum and then a few customers order cards more frequently. Noting that you've had an 11% increase in reminders, what is the average number of reminders per customer and also the range of reminders per customer? And does this give you any insight into how much you could increase frequency?

Yes. Thanks. So I guess to start like -- maybe the point to start with is if we look at the average Moonpig customer in the U.K. buys 23 cards a year. And we've done this -- we've surveyed, we've spoken to customers. We've done extensive research on this, and that's been kind of verified multiple times. So when we think about the average Moonpig customer being slightly higher than the average U.K. consumer, but there's -- there are 23 cards a year being bought by our customers, and they are on average buying 3 from us. So it leaves 20 is the sort of the white space for us to grow into from our already loyal customer base. And so when we think about how much frequency could increase, there's sort of -- there's an enormous runway. I think that said, if we could get one more card from each customer, I think that would be transformational for the business. If you can kind of get beyond that, I think that's interesting. So there is a huge white space and a long runway for us to grow into. Reminders are a kind of useful indicator on this. They continue to grow. We have sort of between -- the average customer has set between six and seven reminders, which is kind of an indication of -- to the extent that, that's -- those reminders are either linked to events they've previously bought for or it's linked to kind of events where we've encouraged them to set. Then I think it does give you an indication of kind of maybe the near-term goal should be to absolutely capture all of those reminders. And we've used some pretty interesting kind of tools in the past. So for everyone buying a card at Mother's Day, we've encouraged those customers to set a mother's birthday reminder given we can kind of pre-populate a lot of the information already. And that's been very successful. And so sort of just trying to use kind of user experience and sort of behavioral tools to sort of to drive that next card from customers. And so yes, so I think we continue to try and set more reminders and then convert those better and kind of everything we're doing shows that is working. The final point was just on the average frequency. Yes, the average is three. But when we break that down, there really is a sort of barbell distribution where you've got sort of 40%, 50% of customers buying one or two cards and the others buying five or six or more cards. And then there's a long tail of customers buying 10, 20, 30, 40, 50 cards a year. So actually, there is a sort of -- there is a point here with Moonpig that kind of -- there are some customers that sort of come once and don't come back. Those tend to be the new customers. But once you're sort of in the Moonpig ecosystem, once you're kind of coming back in that second year, where we've shown the cohorts consistently show those customers essentially never leave, those customers are in that sort of that higher bucket of kind of buying five or six cards. And so actually, the journey of getting them into Plus, getting them up the curve, getting them to seven cards, eight cards, nine cards is the key. And so we think there's sort of two big opportunities here. One is to get the half of our customers that are already using us to use us more and Plus is a big, big driver of that. The other half is to get a lot of the onetime customers to make sure they do come back for that second and then third card. And that's where a lot of our CRM and promotional incentives go into. And both of those [Technical Difficulty] we've got a pretty clear plan to deliver on.

Secondly, we have a single and final written question from Hamish Adam, an individual investor. It reads what factors will influence how much of the GBP 60 million buyback you complete? And what is your current best estimate of how much you will complete?

I'll take that. Hamish, I mean, look, in the last 12 months, our business has generated GBP 65 million worth of free cash flow. And the great thing about that is that is funding some significant capital returns to shareholders. So as you observe, we've got the GBP 60 million buyback across the year in addition to the fact that we've put up the interim dividend by 25%. We've got a pretty clear approach to how we think about buybacks. And so we do it where there is excess capital, where we're confident that it's earnings accretive. And then actually, we also pay attention to whether or not in terms of return on investment, it's a useful deployment of capital. In terms of where we stand today, we do have excess capital because we're very well invested in all of the areas that we want to put money into the business. So we've got, what, 10% of revenue has been spent on marketing. We're spending between 4% and 5% of revenue on capital expenditure. And we're doing everything that we can at the moment in our international markets. So as I touched on in one of the earlier questions, the sort of constraint there is around how we get to the point where we're confident in the economics to be able to scale further. And then in terms of EPS accretion and ROI, I think at the current share price, I think we think that Moonpig investing in itself by buying back its own shares is an attractive use of capital. And therefore, whilst the share price remains at the sort of the current level, my expectation would be that we would continued to spend all of the GBP 60 million on buying back shares. And following the same approach that we've applied throughout each of the last 2 halves, which is broadly to be always on in the market in terms of activity. Probably the one final thing that I'd note is that actually the total amount of shares which are repurchased in the year will be higher than GBP 60 million because in addition to the purchases by the -- as part of the share buyback program, the employee benefit trust has started to make purchases of shares because we've moved to satisfying share awards through market purchases rather than through dilution. And actually, as we stand today across H1 and H2 to date, the EBT has purchased just under GBP 6 million of shares in addition to the GBP 60 million program. Thank you.

Given there are no further questions, we shall now hand back to Nickyl for closing remarks.

Thank you, everyone. Thanks for all your questions and thank you on a personal note for all the interest and support you've shown to Moonpig over the last few years. I think we are -- I feel like I'm leaving Moonpig in a great place with very good momentum across the group. Fantastic platform, a fantastic team and a huge growth opportunity. And I think that this business is very well placed to deliver extraordinary value for shareholders over the coming years. Thank you all for your time today. And hopefully, I'll see as many of you as possible over the next couple of weeks on the road show. Otherwise, at a different point. Thank you.

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