The Artisanal Spirits Company plc (ART.L) Q2 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. I'm Andrew Dane, Chief Executive of Artisanal Spirits Company. I'm joined today by Bill McCarter, our CFO. So a very warm welcome to you all, and thanks for joining us. If we flick over on to the next slide, you can see the headlines on us and a reminder of who we are and what we do and what we're going to cover today. So we're going to start with an intro, a bit of an exec summary on the results. I'll then hand over to Billy to talk you through a bit of a trading update. I'll then talk through a more strategic update and then finish with a bit of current trading and outlook. So we flick over. First of all, a reminder that The Artisanal Spirits Company creates and sells outstanding one-of-a-kind limited edition whiskeys and experiences around the world. Now at the heart of the business is the Scotch Malt Whisky Society, which has been around since 1983, but we've been expanding the portfolio with the acquisition of Single Cask Nation in January of last year, the recent launch of Artisan Casks that we're going to touch on later in July, J.G. Thomson, small batch limitation blended malts as well as other services under The Artisanal Spirits umbrella, trade cask sales, bottling services, et cetera, but all with that shared purpose of creating and selling outstanding limited edition whiskeys and experiences around the world. So if we flick on, I'll touch on some of the headlines for the performance in the first 6 months of the year. And overall, I would categorize that as a pretty resilient delivery with EBITDA flat year-on-year with a continued focus on cost efficiencies across the business, offsetting a marginal revenue decline at the top level, and that reflects some of the continued challenges in trading conditions in a couple of the key markets. Billy will touch on a little bit about where those cost savings are coming from, cost efficiencies as well where we're making sure we're spending money in the areas that deliver value and saving money where appropriate. The second piece is that continued asset backing with over 18,000 casks with the market value over GBP 100 million, but also this focus on how do we realize more value quicker from that asset base. And that's both the areas we've already been doing, bottling and selling, trade cask sales, but also that launch of the new luxury high-end private cask program called Artisan Casks. And we will touch on that in a minute, but just a reminder that, that is where people are buying a whole cask worth of bottles. It's not a kind of cask investment scheme or anything like that. Alongside that, the core of the business is around bottle sales, and we've been continuing to focus on that engaged global SMWS membership base of over 40,000 members around the world, maintaining high retention rates and progress made with increased active member engagement. If we think about U.K., for example, as our biggest market where almost half our members are, we've been seeing a steady increase in average bottles per member, a kind of metric of member engagement over the last 12 to 15 months. So the initiatives in fact we've been deploying are working. But also, we're looking to grow the membership. And one of the key pieces that has helped in H1 was our new AMEX partnership, part of a suite of partnership opportunities we're looking at, attracting almost 1,000 new members and looking for a launch, with Amazon as we look at new channels in the second half of the year to drive recruitment rather than as an ongoing sales channel. And alongside that, we expand continued international expansion. So we actually launched the new franchise in Vietnam as well as signing up a new franchise partner in India ahead of a launch there as well as Single Cask Nation beginning exports into other markets like Brazil, building on success with Denmark last year. So that's the headlines. Billy, do you want to talk through some more of the details?

Thank you, Andrew. Yes. So Andrew has given you the headlines there. I'll take a few minutes just to give you a bit more of an insight into our financials in the first half. I think the first thing to note is -- the U.S. situation, predominantly tariff situation does play a role in our Half 1 results. So the first thing I'd call out that we're really keen to make clear is if we were to exclude Americas and evaluate our performance, we have grown revenue 6% year-on-year. Now the reported is down 4%, as Andrew mentioned. But if we exclude the Americas, which I'll come back to in a minute, that is up 6%. Now we're pleased with that resilient performance. Challenging conditions remain tough. So plus 6% is good. If we look at that in a little more detail in our Europe region, we're up 20%. Now the really positive performance in there is our continued commitment to our strategic objective of Cask sales. Cask sales now representing Trade Cask sales, not in Half 1, but in Half 2, we launched Artisan Cask, so that will start to play a role in there, and we'll come on to talk a bit more about Artisan Cask shortly. So we made a fast start to our Trade Cask sales. As I said, our commitment to retaining that as a strategic opportunity for the business as we continue to diversify revenue and manage risk. We're also very pleased with continued growth in venues and events. So in the first half, that was up 6% in the U.K. So meaning that in-person experience is still at the heart of what our members require. And from an e-commerce perspective within Europe, that is down. I'd say the challenge -- the bigger challenge there has been in Europe, where we have seen some difficulties. I'd say the U.K. is roughly around flat year-on-year, really good Q1, challenging Q2. And what I would say is a positive start to Q3 where in both months, we have seen double-digit growth. So that's a bit of a breakdown in Europe. And we expect Europe to perform well or better than Q2, more like Q1, as I've mentioned, U.K. has seen double-digit growth in the first 2 months. And in August, Venues and Events are similar. If I then go to Asia, Asia has been particularly challenging in the last couple of years. It is down 30% year-on-year. So our markets there are China -- our main markets, China, Taiwan, Japan, continue to see challenging conditions. There is an element of phasing impact in there. Within China, many of the key campaigns and bottling have actually moved into Half 2. So that will -- it won't fully reverse, but we will see an improvement in the second half, particularly in August, for example, seeing double-digit growth in China. So part of that is phasing, but part of it is it still remains a challenging market, and we recognize that. And we're managing risk, as I've mentioned, elsewhere. Within other, that's predominantly our market in Australia, our fully-owned subsidiary there, it's down 11%. It's partly due to our New Zealand franchise kind of reducing stock in the market. But there's no significant update there. The numbers are relatively low, and we continue to chase membership growth in Australia and see no kind of long-term risk in that. So as we then come to Americas. So what you can see is we're essentially tracking about GBP 1 million down in U.S. shipments year-on-year. Now it's important to recognize that much of that was planned. The tariff situation that started here, if I was to summarize at the start of the year, there was still uncertainty if it would remain for the longer term. At the minute, it does seem like those tariffs are here to stay. And as we come to that conclusion, we have spent Q2 identifying a more optimized route to market to reduce our tariff impact. Because of that, we moved any major plant shipments in Half 1 to Half 2. I can now say we've got that relevant route to market set up to ensure that we are essentially reducing our tariff impact by about 80%. So looking after our EBITDA. So there are significant shipments to come in the second half to catch up on Half 1. So overall, from a revenue perspective, reported down 4%, excluding Americas up 6%. We recognize that as a resilient revenue performance. And more importantly, we've managed to deliver flat year-on-year EBITDA on that, which I'll come on to in the next slide. Part of the reason for being able to ensure we retain a flat adjusted EBITDA year-on-year is our continued management of costs, achieving efficiencies and effectiveness where we can. And you can see that on the slide. So if we were to analyze year-on-year cost base, we've reduced that by 10%. Now when we talk cost base internally, there's 4 key categories: Commission, Marketing, Payroll and Overheads. And across all 4, we have made savings. Now Payroll sees a slight upgrade there. It's important to remember that we've taken on all of the U.S. staff. So the saving in commission partially offset by taking on that U.S. staff. That increase of GBP 300,000 year-on-year is actually offset from a GBP 600,000 to GBP 700,000 impact. The half year cost of taking on that U.S. staff, you're talking 4 or 5 heads, has a full year impact of GBP 1 million, plus the NI increase, which the U.K. -- which all U.K. businesses suffered of around GBP 100,000. We have managed to offset the impact of that to a much lower number of GBP 300,000, which we're pleased about. And it's key to remember that will continue, and we'll continue to look at efficiencies across our cost base. Just focusing on the other buckets, I've mentioned Commission, that's primarily from the change of approach in the U.S. and greater control. So we reduced Commission by taking on the Payroll. And in Marketing, it's simply trying to ensure we get greater return on investment, focusing on recruitment and retention and shorter-term delivery rather than getting the balance right between that and longer-term brand awareness. So that would be the key points. In Overheads, it's continual focus on management. One thing I'm really pleased about is a lot of saving recruitment spend as our employee value proposition increases. We do find we get a high caliber of candidates to the business, and Andrew is going to talk about our people shortly. So we're pleased on that. But overall, cost-efficient objectives play a role in our achievement of flat adjusted EBITDA year-on-year and we'll continue to play a role going forward as we ensure we deliver profit in line with our expectations. And from a cash perspective, our net debt has grown, but it's key to point out that like 2024, this business, profit is heavily weighted to Half 2. So net debt is always going to grow in the first half and come down by Half 2. As a guide, for example, per analyst expectations, that net debt is expected to drop closer to GBP 27 million. And when we look at '24, we saw GBP 1.5 million to GBP 2 million of inflow. So that will naturally come down. But what I'm key to point out is a lot of the reason I've just mentioned in terms of our revenue performance and our profit performance is that planned U.S. shipment phasing that plays a key role in cash as well for the half year. So not only the impact that's had on EBITDA, but as we've mentioned, we made a GBP 0.5 million investment in the U.S. at the start of the year. We had the remainder of our SCN deferred -- Single Cask Nation deferred consideration. So these are all known things that are there and explain why we are at the position that we are at half year. But just to make clear that strong half 2 profit delivery will ensure that, that drops back to a level and that we believe reasonable and it's something that will continue to occur in this business due to the seasonal nature of profit performance.

Okay. So I thought at this point, having sort of talked through what's happening in the trading, maybe setting that into the context of our strategy. And our strategy has 2 elements to it, has a kind of focused regional approach and the 5 kind of pillars of our business. So I was going to start by talking about the kind of focused regional approach first and really building on the context for each of those regions into which those results drop. So if we flick over a page, we pick up on our first market being Europe, which is, by far and away, the largest part of the business. And that includes Trade Cask sales, U.K. Online sales, EU Online sales, U.K. Venues and a couple of key franchises, particularly in Switzerland and Denmark. And in H1, the kind of real standout strong performance was on strong casks sales delivery with the profile of delivery year-on-year is much more H1 weighted this year, which is positive to see. Good to see kind of high single-digit growth in venues, and that's been true in each quarter. So we have seen that level of growth in Q1, Q2 and Q3 to date. We did see a slight decline in e-commerce in the first half though as Billy commented, the U.K., which is the largest part of that, has been in double-digit growth so far in H2, so helping to get that momentum going as well as U.K. membership recruitment and engagement performing strongly. And it's worth just picking up on a couple of those. From a membership perspective, U.K. recruitment year-to-date is up by almost 40%. And from an engagement perspective, the average bottles per member, we have a cohort, which we'll talk about in a minute, which joined at the tail end of last year. Excluding that group, our average bottles per member has been growing pretty steadily for about 15 months and is now up more than 10% versus pre-COVID levels. Of course, the levels spiked during COVID, but we are ahead of and growing ahead versus pre-COVID times. So membership is up. reflecting a targeted shareholder recruitment program that we ran in Q4 '24, noting that, that was a free recruitment. We've added something like 600 engaged members, but we also added a couple of thousand of essentially unengaged members who joined for free and at no cost to us, and we, therefore, expect them to lapse out without engaging. So still a successful campaign, but slightly distorting the numbers. So full year expecting membership numbers to come back closer to 40,000. But the underlying retention remains strong and the revenue performance and engagement of people is strong. And talked about recruitment having performed well, that Amex promotion, but also coming up what we have is the look at a launch on Amazon, selling new memberships through that channel. So that would be membership with a bottle or membership with a kind of welcome pack and using that as a recruitment channel, which is something that we can reinvest in. So looking at it very much from the recruitment angle rather than a kind of commercial sales channel. So that's some of the initiatives in Europe that put into context the performance of our largest market and the underlying bottle sales momentum there being reasonably positive. If we look into our next market, across in Asia on the next -- sorry America on the next slide, I would say it's been progress on our strategic objectives against pretty challenging economic headwinds. When we think about the strategic areas, we talked about the U.S. being a key strategic focus for this year and the transition of the team that occurred in January that Billy referenced has been a success, both from a cultural perspective where the team have really engaged, we've got direct control. They really fit in. Employee scores have been fantastic and the quality and execution of their work has really stepped up. And that direct operational control really coming through, but it's also an optimized cost structure, as Billy talked about savings on commission. And that team has also really responded well to feedback from members in the market that the key pinch points there, shipping costs, relative pricing in the market. And having addressed those, we've led the active members to buy more. We've seen growth in average bottles per order, average selling price, average order value are all up both versus the prior year and our budget for the current year. So those have delivered. The other one that's going well is Single Cask Nation, which has continued to expand and building our presence in the U.S. and kind of complementing nicely the presence of SMWS in the market. Offset against that is shorter-term challenges around recruitment. So rather being strategic, these are performance challenges. So a digital campaign that we ran in Q1 didn't deliver the levels of new membership recruitment we'd hoped, and that area has been more challenging. And our most effective route actually continues to be member-led recruitment where it's kind of members are engaging with us and getting gifts of complementary membership to bring in their friends. So that is -- we're having to pivot the tactics, but the overall strategy is still right. And overall, it remains the world's largest premium scotch whiskey market, premium whiskey market and therefore, remains a key area of focus for longer-term growth. Final one is on Asia. The tough conditions remain, but are definitely easing. I think if we look to our more recent performance and our outlook for the balance of the year, having experienced of 30% compounding declines in -- over the last kind of couple of years, actually seeing double-digit growth in August, an expectation of even better in September gives us better hope that we might be flattening out in that market ahead of hopefully returning to growth over the medium term. And it remains a key market, not just for SMWS, particularly the more premium end, but also as a key market with regards to the new Artisan Cask offering. So hopefully, that provides a bit more context in our perspective on the strategic importance across those 3 regions. Alongside the kind of regional focus, we then also have our strategic pillars, which apply across all regions. The focus on whiskey, membership experiences, new brands and audiences and our people. And I'm not going to talk about everything we're doing under each of these. But over the coming slides, I'm just going to pick some examples under each of them. And first of all, talking about whiskey. And on the next slide, you'll see something I'm quite excited about, which is the Artisan Cask launch. And hopefully, you've seen a little about this sitting under our banner of creating and selling outstanding limited edition whiskeys. So you're going to get a chance to watch a little video. Here we go. [Presentation]

So that gives you a little flavor of the launch. And it's a really outstanding quality of build and launch over the 6 months. So James MacKay, who you saw there speaking on the yacht that unfortunately, I wasn't invited to, joined us in January, and I'll talk about him in a second. But over the course of the following 6 months, they built a really high-quality campaign program and brand launch. And importantly, looked at what it was that was driving consumer demand in that space and really focusing on the experience that goes with it. It's about more than outstanding rare exclusive high-quality whiskeys, but it's the experience that goes with it. And that's why it fits so well with the Artisanal Spirits Company's overall proposition. So since its first launch on that boat in Monaco at the start of July, we've been generating sales. The first few hundred thousand have started to come in, and it's gathering momentum with the next. So we had Monaco, Singapore, New York already happened with a launch event in Dubai happening in the next couple of weeks' time. So really building momentum into that new offering. So that's the first piece, something new from a whiskey perspective. The second is actually whiskey in the context of bottle sales. And we've talked quite a lot about Creators Collection, which is part of the range review, which has been going over the last couple of years, and delivered in stages. So Creators Collection launched for the first time at the end of last year. It's a chance for us to bring together selections of whiskeys with a story that binds them together. So on the screen there, you can see 3 bottles from our worm tub trilogy, essentially 3 great examples of great whiskeys from different distilleries, all of which use worm tub condensers. So a really kind of nice geeky whiskey moment, but celebrating the kind of robust [indiscernible] nature of liquid from distilleries that have worm tub condensers. And that has resonated really well. And the August releases, we had them selling out in the U.K. in a month, in the EU in a week, in the U.S. in 1 hour and in just over a minute in China. So showing that where we have develop product innovation that resonated well with what consumers were looking at, that's really cutting through and it's really selling well. And in the U.K., for example, it's more than offset the Old Vault collection, which was the kind of super high-end space, which had been struggling in the years before that. It's more than offset that space. So it's been a really good delivery and in particular, because it's whiskey led. So that's been brilliant. And the next stage of our whiskey journey will come out with the Signature range expansion in the coming weeks. The next pillar is around membership, and that's around captivating a global community of whiskey adventures. And what we've been doing is looking at the power of partnerships to leverage up our own footprint. And in first half of the year, a couple of examples there, Whiskey Magazine, which is the world's kind of largest Whiskey Magazine, both in print and online, and a great exercise with Christopher Cote, who you can just about see in the photo there on the left-hand side, together with our very own Calvin Lawson, our Head of Membership Engagement, selecting 3 casks, which were offered together with membership to readers of whiskey Magazine. What's been our most successful partnership in the first half was the American Express partnership, which launched in Q2, so May, June time. And over a 3-month period or just under that, we recruited almost 1,000 new members from that. And together, they've helped really drive, as I say, almost a 40% increase in year-to-date recruitment in the U.K. As we look ahead to the second half of the year, continuing this idea of partnerships and new channels and new approaches to recruiting members, we have worked as part of the range review to develop a bottle and membership product, which has really helped grow recruitment and actually something like 98% of all members in the U.K. now join with that product. Amazon will be the first time that we've actually sold that product, a bottle with membership to a completely new audience. And obviously, Amazon is the largest e-commerce platform in the U.K. So it's an opportunity to reach a new demographic, particularly from a gifting perspective as we go through the key gifting period over the following 3, 4 months. So we again think that, that could be a key driver of recruitment as we look to grow membership. And importantly, we've also identified these as ideas of partnerships or channels, which can be replicated in other markets. American Express partnership has already been done in Australia. Whiskey Magazine also has a big presence in the U.S. and a number of other markets. I did an interview with them when I was in Asia a couple of months ago. Amazon obviously has footprints in other markets, including some of our key European geographies. We're looking at things that have size and scale that we can double down on. So that's from a membership perspective. The third pillar is around experiences and that focus on delivering the world's best whiskey experiences. And a number of things we've been doing, you can see highlighted in here. In the top left, we've got the -- we call them the Champs, which is the premium kind of whiskey tasting championships in Australia, and that's an SMWS offering. And it's only done every couple of years, but brings hundreds of people from across the whiskey space together. The next couple of images are from an event I went to in Guangzhou, where we had -- there was almost 350 people together at an SMWS event in Guangzhou, it was brilliant bringing people together. All the way across to the right-hand side, we've taken a new approach to catering across the venues where we brought in-house the offering. Nick Fulton, our Group Head Chef there, has really elevated the quality of the experience and made it resonate and align much better with the whiskey offering. So the experiences we're bringing to life across the business really elevating the brand. From a fourth perspective, we've got new brands and audiences, and that international expansion continues. Now when we launch in a new market, it takes a while to seed and grow, but we continue to identify new market opportunities. So with SMWS launching a new franchise in Vietnam, and I went to the launch event there in early June, Single Cask Nation doing their first exports into Brazil, which is a big market, which SMWS has never been in. So a new one for the Artisanal Spirits Company Group. And from an India perspective, India alone is the biggest scotch whiskey market by volume globally and has a growing premium space. So we worked hard over the last couple of years to identify the right partner. We've now signed a franchise agreement and look forward to the first shipments leaving in the coming months. And finally, our people and a focus on recruiting, retaining and training the best. We did our annual employee engagement survey and our scores -- well, engagement and the number of people completing it was up, but also really pleasingly, our actual engagement survey score was up 5 percentage points to 80%. And our survey platform benchmarks, all people who completed it and anything over 70 is classified as very good. So that's a really good result, feedback on the culture of the business. But we've also added significant strength to the executive team with that addition of James MacKay, who I talked about, who was previously the Global Private Client Director and Head of Rare and Exceptional Spirits for Diageo, who joined in January to lead the Artisan Casks program. And Emily Puddephatt, who was formerly Director at Stripe Communications, who joined at the start of last week as our new Marketing Director to help drive that membership recruitment and engagement growth. So that's our strategic regions and our strategic pillars. And I'll hand over to Billy to talk a little bit about strategy around capital allocation.

Thank you. Yes. So I'll take a couple of minutes over the next couple of slides to talk, as Andrew mentioned, about a balanced approach to capital allocation, but also the strength of our balance sheet and more importantly, the underlying value within our balance sheet. So a balanced approach to cash. We are a business who are -- we are generating profits. We are generating cash. And one of the key priorities for this business is to make sure our net debt is at the appropriate level, and that will remain a key priority. So that top right, that debt reduction is something we are focused on. Now as we look at other opportunities, whether that be short term or longer term, if I stay on the right-hand side, probably more on the longer-term side, we're key to make sure there is shareholder returns, and we will always analyze M&A opportunities at this period in time where market conditions are challenging, and we're managing cash and that priority of debt reduction, those are perhaps longer term at the minute, but things we are focused on and things we want to deliver on in the near future. If we move to the left-hand side and think about our operational use, there are 3 key areas we look at. So growth marketing. How do we deliver growth from a revenue perspective and an EBITDA perspective. It's really about ensuring we have the right level of investment in our marketing to drive growth in members to, therefore, drive profit delivery. And then we've essentially got 2 investment considerations, so Cask Spirit and CapEx. Cask Spirit represents an opportunity for this business. We do not own a distillery. We buy Cask from every distillery across Scotland and many across the world. So it's an important consideration for us. And on the next slide, I'll bring that to life a little bit more to show you the levels of return. So on this slide, what this looks to call out is the underlying value within our balance sheet and importantly, talk about that kind of Cask Spirit return. So on our balance sheet, currently, we have a net book value of Cask Spirit stock held of GBP 28 million, that can be compared at its highest level to an independent valuation carried out last year, which says the valuation of those, if we were to go to the market and sell over a number of years at market rates is GBP 100 million. That's a really important comparison. And then when you compare it to some other key comparators like market cap, our enterprise value and our bank value, you can see that there is significant underlying value in this business. And it's important to recognize that because with a market cap of GBP 32 million and an enterprise value of GBP 61 million, it's important to recognize there is a little disproportionate approach to that. Now importantly, as we've said before, we will sell most of that spirit in bottles over a number of years because that generates the greatest gross profit return and the greatest bottom line EBITDA return. But we are also keen to ensure that we recognize value from those assets in other ways. I mentioned earlier about our commitment to the strategic delivery of trade cask sales and that will remain. So I'll leave with the point that we are a business who have a net debt of around GBP 29 million that will reduce for the second half, but we're a business with over 18,000 casks with around GBP 100 million market value. And it's important for our investors and business to understand that, and we will continue to recognize all the value we can from that going forward.

Just before we move on in slides, as Billy was referencing, it's important to note that, that asset backing gives us an additional degree of comfort and support for the business valuation and is a reflection of our ability to deliver value in 2 stages. And the first of that being the strategy of buying Spirit young, maturing and capturing its value and that first part of the strategy is having been successful. We spent GBP 28 million, it's now worth GBP 100 million. So that's first part of the strategy. But exactly, as Billy said, actually, the vast majority of our value comes by turning those casks into bottle and selling them to members. And our job is to grow the membership, to grow the sales channels, to grow total sales, to turn that back into cash through bottle sales as fast as possible. So if we flip over now and just do a quick wrap-up on the current trading and outlook. And we've touched on a few of these points today. But first of all, trading in H2 so far has been in line with expectations. A couple of little snippets there. We've seen double-digit revenue growth for U.K., EU and China in August. We started to see gathering momentum for the Artisan Casks sales since it launched in July and preparations underway for the next phase of launch of our range review, which will be in the coming weeks in the Signature range, alongside some work on new Creators Collection releases and additional focus on Heresy releases, which you're going to see more on in the coming months, too. And overall, that leaves us with commitment to delivering the full year EBITDA, and that's going to be delivered through revenue success with 3 real areas of focus. First is single-digit growth in SMWS depletions versus prior year. That's what's was needed for H2. Second of all, greater year-on-year U.S. shipments following that implementation of new route to market. And finally, significant margin return in H2 required from that newly launched Artisan Cask program as well as further Trade Cask sales that are to come through in H2. And those combination of revenue deliveries would deliver the full year profit. So that's it for me. I'm now happy to hand over and take some questions.

[Operator Instructions] Our first question is, can you elaborate on your plans for Cask sales in H2? What is your future Cask sales strategy? And what quantum should we anticipate going forward?

Okay. So if we pick that into a few parts. So if we think of cask sales and split it into trade cask sales and private cask sales. Trade cask sales remain an important part of the cash generation of the business, and it had been a strategic area of focus, which has grown over recent years. I think long term, it's a diminishing proportion of the total value. So it shouldn't be a huge driver of future revenue growth. But in the short to medium term, we'll continue to be levels broadly similar to what we've seen before as a kind of run rate, though we will continue to look at opportunities for one-off swaps, sales, rebalancing of our stock from an operational perspective as well as value realization opportunities. From a private cask sales perspective, that is an area which I think can grow. So in addition to the private cask sales that we have done to date, where -- we had the first [ pot ], which was around casks that are in GBP 4,000, 5,000, 6,000, 7,000 range, where a member typically as part of a syndicate would be buying a whole cask worth of new make spirit or young spirit and being part of its maturation journey all the way through to 2033 when they will get whole cask worth of 10-year-old whiskey bottles. And that's called our 50th cask. That continues. Alongside that, we launched a kind of SMWS member exclusive, where members can buy a whole cask worth of 12-year-old, 15-year-old whiskey from distillery 68 in the flavor profile and range and wood style that they were looking at. And that in the kind of GBP 20,000, GBP 30,000, GBP 40,000 cask range. Those 2 parts will continue. But on top of that, we now have the Artisan Casks kind of luxury where it's about the experience that goes with it, the really old and rare whiskeys over 20 years old. starting at GBP 50,000, but going up GBP 0.5 million plus in terms of cask sales value. So altogether, that area, I think, can grow in the future. In terms of the balance of the year, there's still a few million pounds worth of cask sales to come in the balance. So that's a key part of the revenue execution required for the balance of this year. I hope that gives some help.

Our next question comes from Wayne Brown.

It's actually Anubhav. I think I've logged in from Wayne. I've got 3 questions, if you don't mind. Firstly, on the U.S. depletions, so that those were down 30%. Just maybe some more color on why the existing members are probably engaging a bit less because I see the membership was only down 9% and how you think you can fix that? And then secondly, on your comment around the U.S. on the shipments for the full year, you expect them to be flat Y-o-Y. And just comparing that with the depletions being minus 30% in the first half, why do you think the shipments have to be flat year-over-year and not declining? And then in terms of terms of artisanal cask, I thought that was very interesting. But maybe give us an idea on your current inventory, the 18,000 cask you have, how much of it do you think is suitable for being sold in the Artisanal Casks program? Do you have plenty of it. Is it a real commodity, something you need to acquire actually if this program ends up being bigger than what you initially thought?

Okay. So why don't we pick those. So yes, U.S. depletion has definitely been challenging, particularly at the start of the year. And I would I ascribe quite a lot of that to the uncertainty associated with the tariffs rather than the direct impact of the tariffs themselves. As Billy was talking about the kind of direct tariff impact to us this year will be a couple of hundred thousand. Going forward, the team have managed to identify and execute a new route to market that would offset 80% of the kind of tariff impact going forward. So that's been a real success. But its impact on consumer confidence in the market, in particular in the U.S. was substantial. What we're seeing, as you saw in the kind of commentary, was those focus areas on addressing the key consumer challenges. shipping costs, bottle pricings, et cetera, has helped has helped drive and certainly that the kind of performance has improved. We've had some good months of growth. It's an intermittent patchy message in the U.S. at the moment, but certainly an expectation that those -- that kind of level of depletions decline is short-lived and that the team are driving hard with lots of intensity of activity, things that are within our control, levers we can pull. Creators Collection is a great example. The most recently sold out in an hour. So 2 things. First of all, we went back to members to tell them that it's sold out within an hour, so they've got that fear of missing out and offer them not an equivalent product, but another opportunity from another worm tub distillery, for example. Alongside that, centrally, we identified some extra stock of other creators collections, which could go to that market since they're going well. So intensity of activations and campaigns to support improvements in U.S. depletions alongside driving membership growth. From a shipment perspective, yes, the intention is to ship flat year-on-year. That would result, of course, in a slight increase in stock in the market. But it's important to note that the vast majority of the stock that would be in market at year-end or on the water would be recently stocked. So this is not building up lots of legacy stock that's been there for years, something like 3/4 of the year-end stock, maybe slightly less 2/3 would have shipped in Q4. And in particular, we talked about the new ranges Creators Collection, the new Signature range. It's shipping that product to market ready for their launches early in the new year. So we do expect some stock build in the market, but that the stock that will be there will be fresh stock in primarily in new livery. Final piece was a question on Artisan cask. It is by nature, the rerisk of the stock we own. We have enough kind of visibility and run within existing products that are already to do the next kind of couple of years as we sort of build confidence in that space. As it starts to continue to gather momentum, there are products lower down the age ranges, which may start to mature into that space as well as looking at opportunities to perhaps swap or purchase or acquire stock in that space. but that stock that could be turned around relatively quickly. So there is enough stock to give it runway and to get a proof of concept. Thereafter, we would, of course, have to look at some degree of replacement, but primarily, we'd be hoping to do that from existing inventories. Does that help, Anubhav, hopefully?

That's very helpful. Can I just ask one more on the recent U.K. trading, which seems to be very good, a couple of months of double-digit growth. Maybe what your thoughts are behind on what's driving that? Has it been one of these creator collection launches that has been helpful clearly. But any other thing that you have been noticed?

Yes. So a combination, the AMEX campaign, which drove recruitment, but people were buying membership. So it wasn't a giveaway. People were spending money using their AMEX card directed to the membership plus bottle page, but they were buying that at full price. And then they were getting a GBP 50 credit back through their AMEX card. The average spend was the thick part of GBP 150. So that drove a decent chunk of revenue. We had a Creators Collection release, and we actually had 2 during that period, which has certainly helped as well as well as Heresy releases, which is the kind of limited small batch releases with real personality and flavor, they've been great. And all of that combined with just an underlying kind of long-term improvement in engagement in U.K. members. I think actually, if you look back at Q2, the reason that you didn't see the same trajectory in Q2 is a slight misfire perhaps on our festival releases in May, which was enough to slightly knock off the trajectory. But actually, it's more that the current performance is a reflection of a longer-term trend in U.K., which has been performing well.

Our next question comes from Milo Bussell.

Just one question from me. On partnerships, clearly, Amex has been going well and the Amazon channel sounds interesting. I think in the presentation, you mentioned that you would -- you're looking to target different demographics with the Amazon partnership. So just interested what those demographics are that you're trying to go into.

So just to put this into 2 parts. So first of all, we've done a lot of work looking at what are good target demographics for us to target directly. And that's where we are focusing the marketing spend that we are making. It's not maybe affluent explorers or whatever kind of categorizations that we are looking to target directly. The -- where we work with partnerships, we've looked at those with big overlaps with broader areas of target demographics, too big, too unfocused for us to individually target, but actually through partnerships, we can access them. So from an Amazon perspective, it's a huge space that we couldn't possibly target directly with marketing and comms. But particularly from a gifting perspective, actually, we think there's quite a neat space for consumers who are on Amazon, who are looking for whiskey gifting, but would never look in any of the places that we would directly be targeting from SMWS membership recruitment perspective to engage with an SMWS product, which lends itself really well to gifting, this bottle of membership gifting pack and membership. So it's using Amazon's existing scale and reach to get into that space through the channel, which would not make sense for us to target those gifting consumers directly because the spend required would be far too high. Does that...

[Operator Instructions] Our next question is, how has trading been at the start of H2? And how do you expect this to continue into the full year 2025?

So yes, again, if we pick into the 3 parts of focus areas for the second half, we've got SMWS depletions, we've got U.S. shipments, and we've got Cask sales. So from a depletions perspective, positive start to H2, double-digit growth in U.K. in both July and August. In August, we had that in EU and China as well, some more positive momentum in September in China as well there. So from a depletions perspective, the requirement is -- for us is broadly for single-digit growth in depletions for SMWS bottle sales in second half of the year, and we're on track for that. From the other elements, shipments, they're coming together. The new bottles delivery, they are being produced now. Those will -- in fact, they're starting to ship imminently to deliver the full year shipment forecast. Then you've got trade and private cask sales. Trade cask sales, I saw the team meeting out there just now. They've had a good run rate. It's quite lumpy. So there are leads and discussions underway, but it's quite a lumpy profile where a significant trade cask sale might be GBP 1 million plus in one goal. And then finally, from the private cask sales perspective, the largest part of that is going to come from Artisan casks, which has started to gather momentum since its launch in July. And as I say, it's delivered a couple of hundred thousand already with a thick part of GBP 1 million still to come in the balance of the year, supported by things like the launch in Dubai in a couple of weeks and live discussions with a couple of key -- with relation to a couple of key casks.

Okay. Nigel has raised his hand.

I just wanted to just understand the sort of robustness of the cask valuation. Is that a direct evaluation or independent valuation? And secondly, this is an unfair question, but if you put 18,000 casks on the market at once, what happens to the price? So what is -- how robust is that valuation is the question?

It's a fair question. So to answer the first question, yes, it's independent -- completely independent. We had 2 well-respected independent valuers within the industry valued at last year at GBP 100 million. Now to be clear, that sale is not what you call a fire sale or an orderly liquidated value approach. That is if we chose to do something over the next few years, that is the value we generate. Your second question is very apt. And the closest you could get to that kind of orderly liquidated value is essentially a valuation our bank does in relation to our RCF. So GBP 100 million independent valuation, net book value roughly 1/4 of that. I showed on the screen that the recent bank valuation where if we were to put all the cash on the market and needed to sell them very quickly, that valuation is about GBP 50 million. So as a guide, an orderly liquidated value approach is double what our net book value is a more managed commercial approach over a longer period of time is about GBP 100 million. Importantly, the bank valuation is also an independent valuation. So they bring independent valuers. So you've got kind of 2 key comparators there, GBP 100 million independent valuation through a managed approach, GBP 50 million through a more -- we need to sell these cash quickly from an orderly liquidated value if that helps.

Both above market cap.

Yes.

Okay. Thanks for that. Yes. So overall, I think a resilient performance in H1, continued focus on managing the cost base, product innovation and focus on SMWS membership, Single Cask Nation bottle sales and driving value from them. As we look ahead, the expansion of Artisan Cask, more product innovation to come, some improved momentum in a couple of markets, but a real focus on those 3 areas to deliver the full year results, single-digit depletions, which are on track, U.S. shipments, which are coming together now and trade and private cask, which while lumpy, so we have a pipeline and visibility to deliver that for the full year. That's it. Thank you very much all.