The Artisanal Spirits Company plc (ART) Earnings Call Transcript & Summary

Well, good morning, all, and thanks very much for coming on as we present the 2020 results for ASC plc. And overall, it's a year where, of course, we were pleased to have grown, but disappointed not quite to have grown at the rate that we had targeted for the year. 8% revenue growth, 9% gross profit growth and importantly for me, delivery of quite good momentum into the second half of the year. So before I kind of hand over to Billy to go through the detailed results, I'll set out a bit of some headlines and some context and then we'll come across to Billy to go through a lot of the detail. And really, while that's the group picture. If we think about the key markets in Asia, that expansion of our footprint in the Asian markets, particularly with the addition of Taiwan in August and South Korea in April helped to offset most of the downside, not all, but most of the downside from the challenges in China. Alongside that, for us, delivery of a large number of strategic initiatives across the year, most notably, we'll go through detail, but most notably the private cask sales to members. Another good year of membership growth for those members. So now over 41,000 members in our 40th year. We were looking for the symmetry of 40,000 members in 40 years. So it was nice to get slightly ahead of that. And then finally, real substantial growth in the value of our inventory. And in part, that's been underpinned by some cask sales, but also Billy will talk about a new facility with Ferovinum, where the lending is against the real market value of that, and that's almost 4.8x the book value of that asset. From a current trading perspective, good start to the year, acquisition of Single Cask Nation and a positive start to trading. 2024 has started on track, plus 10% revenue growth in the first couple of months and maintain confidence in our ability to deliver full year expectations. And that puts us on the path from low to mid to high single-digit EBITDA margin over the next 2 years. That, combined with all the delivery gives us confidence that we're well placed to deliver. So that's the headlines. I'll give a little bit of context again in the business overview, I hand over to Billy for '23 results and angle through the model and the long-term opportunity. So many of you will have been through this before. The vision for success remains the same: focus on going after that global community of whiskey adventures by creating and selling outstanding limited edition whiskeys and experiences around the world with that ambition of creating a highly profitable, high-quality, cash-generative premium business, underpinned by those 5 strategic pillars across whiskey, membership, our experiences, new brands and audiences and our people. Now the portfolio of brands is now expanding. So you can see how Single Cask Nation as a new business fits with our overall company purpose and strategy and fits nicely as both complementary and incremental to our existing businesses with a real focus to start in the American market where we remain very confident, particularly with a very strong end to the year in SMWS in America was almost 30% growth in the U.S. in Q4, double-digit growth in early '24. But at the heart of the business remains the Scotch Malt Whiskey Society. So it's not a producer, so we are buying from a range of distills maturing those casks, bottling them at our own facility and selling them exclusively to members. And that really makes it a global business, 2/3 of our revenue being international, it's direct-to-consumer both e-commerce and in venues, premium and selling those limited additional whiskeys to our members around the world. And now over 41,000 members around the world. And finally, as I said before I hand over to Billy for 2023, it is worth just pausing and reflecting on quite a lot of the progress that's been made since IPO. So if we go back a couple of years to what we said we would do when we floated just under 3 years ago, we've made progress against almost all of these -- we've made progress against almost, but we've delivered almost all of the things we said we would do. But we haven't quite achieved the doubling of revenue by 2024. We have grown revenue by over 50%. Similarly, grown membership by over 50%. We've developed our e-commerce and route to market capability with new markets with new initiatives last year, new U.S. website, which has had a positive impact. New U.K. app launched at the end of last year, which has had good results. We've improved those margins with margins having grown by 5 percentage points since pre-IPO levels. We've grown the cash level not only in volume, but significantly in value the value of that inventory. We've used our venues to expand our footprint and profitable growth in those venues as well as refurbishing the vaults, which is a fantastic venue fills you haven't been. And we created new brands through both the launch of J.G. Thomson at the tail end of '21 and the more recent acquisition of Single Cask Nation. So lots of progress against what we said we would do at the time of IPO. So I'll hand over to Bill now to take you through 2023 results.

Thank you, Andrew. Good morning, all. Yes. We share this slide every time. And the most important measure is that middle measure. The heart of ASC is SMWS, the heart of SMWS as its members. We have a committed loyal band of members who believe in what we do, enjoy what we do, enjoy experience, enjoy our whiskeys. So what's pleasing to note is, as Andrew has mentioned, 10% increase in members to 41,000 at the year-end. And along with that, while retention has dipped slightly. 74% is still really strong measure in terms of retention and is still up on 2020, and we expect to see that kind of improve by 77% levels over the immediate future. And just finishing that middle one, in terms of lifetime value, up 25% to IPO, which is fantastic. We do recognize that there is a dip there, and we do recognize that we have -- we did have difficult performance in China last year with a 30% decline. That's ultimately driving that. But the point is there's still a lighting value after a dip in China, and that will come back as we see China recover as well. So 25% up since IPO is still an incredibly important statistic to call out. What that then drives our growth. So Andrew, as Andrew has mentioned, we've delivered 8% revenue growth, 9% gross profit and our contribution margin is up as well, which is fantastic to see that going in the right direction and will continue to grow over the next couple of years. I'll go into that in a bit more detail in a second. And then in the further slides, we always talk about the valuation. Andrew talked about that inherent valuation so far. We've grown our cask spirit stock over the year, which means we now hold over GBP 25 million on our accounts. But as we go and remember, the bank are valuing that at pretty much 50% premium to what we hold it. And I'll come on to it, but we've got a couple of good examples. We've talked before about this market valuation. We have to hold the cash on our books at NBV. We got a couple of good examples to kind of highlight what that range is. So, it's going the right way. So from a revenue perspective, it was a challenging year. China, macroeconomic conditions in the market saw within that Asia line around a 30% reduction in China, which is always a challenge. But I think the key thing for us, we've shown revenue growth. We've shown gross profit growth. So it's really calling out that robust diversified revenue delivery this year. One of the key callouts on this slide being trade cask sales. We mentioned this last year, we kind of ceded what we're doing. It was always a strategic objective. We perhaps are not a little earlier than what we had planned. But those trade cask sales are something that will continue into the future at similar levels is something that exists within the business. And also what's important to call out is at the tail end of last year in December, we sold around 300 to 400 of private cask sales. So that's to our members. And that again, will remain as a strategic objective. So that's core in there. Venues & Events, another year of growth. You see that steadily increasing. What's good for us there is, I mean, we all know that the high inflation environment we're living in last year and the year before, the cost of living measures. We found that people really do want to enjoy experiences and quality experiences. That's come along well. Andrew mentioned in the call this morning that London has had a fantastic start to 2024 as well. So the power of our venues remains, and we're putting -- and we've put a lot of investment into that. For example the vaults refurbishment and Andrew will tell you that later. So those are really driving Europe performance. America is relatively flat year-on-year from a shipment perspective. As a reminder, in America, it's a shipment in a depleting market. The momentum that we will jump on from the end of F '23 was 5 consecutive months of depletion growth in the U.S. from October, November, December, January, February. So it's really seeing a bit of a rebound in our return. After the U.S. has gone through a rebalance in post-COVID but we're seeing this depletion levels in market increased significantly in the last few months, which therefore from a shipment perspective, basically demand for our product, and we can get that into the market. I've mentioned Asia, we've mentioned China. What I would call out is that diversified revenue. We had a China growth in there plus 20%. We've got Taiwan delivery around 6 months in the year, GBP 0.3 million, GBP .4 million in the new franchise in Korea. So that's helped offset that because of China at 30%, you can see is down 14%. So a key point for her is really increasing the diversification of our revenue and ultimately, recognizing that of the total addressable market, 0.3%, so the opportunity still exists. From a full P&L perspective, we have resulted in an adjusted EBITDA of GBP 0.1 million. Now I recognize that at a loss level, at an EBITDA level that is GBP 0.5 million, and that is primarily done by China, and we've offset that with cask sales, but China is a key driver. If we take China number, we would have far outperformed against our initial EBITDA expectation. But one of the key things on this slide is improvement in gross margin, but more positively, momentum going into F '24 as we see our cost base reduction half 1, half 2. So you'll see marketing, GBP 1.6 million, GBP 1.4 million, payroll, GBP 3.5 million to GBP 2.8 million, other overheads to [ GBP 2.2 million ]. That will sustain to a degree, sorry, -- for example, in other overheads, and Andrew will comment on some of the investments we've made. Technology road map, we've made, as I mentioned in an earlier slide, we've made investment in a new U.S. website. One of our bigger more kind of customer-facing is a launch of a new U.K. member app. And within marketing, we had a fair number of new product innovations there, Membership & Bottle, Drop & Dram. So our expectation for cost over the -- over [ 20, 40 ] future years is around a half 2 level. Those investments have been made in a number of strategic objectives last year. There aren't as many this year because we really set the base to build on. So cost control and efficiency there. And what that resulted in was a GBP 1.9 million adjusted EBITDA have to. It's not all cost control. There is some phasing in particular, cash sales, but that more identifies where this business can deliver from F '24 onwards and our belief that we can deliver against consensus forecast this year. From a balance sheet and cash perspective, I mean, with a net asset of GBP 18.3 million, it's a really strong capitalized balance sheet. Our cask goods has grown by GBP 2 million. Again, that's an appreciate cask wood and asset that we'll always want to invest in. One, so we can meet the demand. So we have got 100% of the cask wood but we need to meet demand till F '28 and 75% long into the next decade, FY '35 FY '36. And in a minute, when I come on to the more inherent value in that, that's important to that is at a strong level, as you can see. In terms of our cash flow, and we have drawn down our debt. It was our expectation that we would. We draw down a little more due to a lower profit delivery. But again, it's key to note that if you look at our operating cash flow for H2, that's significantly positive to what we've previously shown. That's ultimately driven by our profit performance in the second half. But those are the -- that's what we'll start to see come through again as we start to take the F '23 half 2 momentum and deliver the consensus forecast in the next couple of years. We have made significant investments. I think it's important to recognize the interest cost impacts as U.K. interest rates at its highest level. So that has been a significant cost in the year and a reason for debt drawdown. But as I say, some of it was expected. We spent a significant amount on capital expenditure. Those being in the vault refurbishment, completion of Masterton Bond. That material investment is now complete wood investment and the launch of our new app. Okay. So Andrew talked about -- and we'll talk a bit more about the 2 stages of our business in terms of our cask [ product ]. And I mentioned at the beginning around having a bit more of a tangible example of the inherent value within our cask. So during the year, we entered into a financing facility of GBP 50 million with a company called Ferovinum. What this does is it allows us to -- it gives us liquidity against the value of that stock on our balance sheet, which is a fantastic opportunity and is -- to a degree fairly new in the way Ferovinum are doing this. Ferovinum are extremely popular right now they allow companies to recognize the liquidity in the balance sheet. And what that did for us was we engaged with them on an initial tranche of stock. That initial tranche of stock was valued at GBP 0.8 million on our balance sheet. The bank value, roughly 50% increment again, was about GBP 1.3 million. Ferovinum took those cash and utilizing market data value them at GBP 3.8 million, resulting in a 70% LTV released GBP 2.6 million of liquidity for us to invest in the future. So we are not -- we do not have this facility to necessarily just go down and draw down debt. As you know, we're going to deliver EBITDA positive cash flow over the next few years. But what it allows us to do is utilize the value of that stock on our balance sheet, a more truer market valuation to give us optionality and flexibility around the future years. And I think that's really important to recognize that example alongside, so we've mentioned this inherent value before, but not only Ferovinum through the cash sales we made in the year. I'll move to the next slide. Remainder net book value of GBP 25 million. We have 2 stages. We have an inherent value of our casks. But ultimately, if we go to the last stage, we want to sell it in bottles based on our current stock for around GBP 500 million of revenue, GBP 300 million of gross profit. That's ultimately what SMWC is here for. That is where the inherent value and the delivery in terms of margin and profits. But while this goes on, there is an inherent value within our cask stock base. And it's important to note that not only did Ferovinum value at 4.8x NBV, but for the cash sales during the year, they delivered our revenue and EBITDA position that was 4.5x. So we are not saying we're not going to sell our cask for this. That is not the model that is not what we want to do. We want to achieve increased membership, increase bottle sales, improved experiences to deliver GBP 500 million $300 million to gross profit at a minimum. However, it's important to recognize that there is an inherent value in that intermediate stage not only to help drive that in terms of cask sales. But also show the strength of our balance sheet and the value of our business. At the minute, for example, our cash good balance sheet holding is 80% of our market cap, which is significantly strong in market valuation it's off the period in terms of that. So, okay. I think this last one for me. Again, we talk about our lifetime value. It would be remiss of me to say that, that -- as per the earlier slide that has gone down as a result of China. China is a market with a strong level of membership interest. Has a lower membership number, but there's a strong level of engagement the average book per member and the average selling price in that market is the highest within the group. So when China is impacted, that will impact that. But still at over GBP 1,100 nearly GBP 1,200. There's a significant opportunity for this business around delivering profit. We've got contribution over 300. As I said, retention is still at a very strong benchmark rate, I'd say, it's 74% and expected years and membership of 4 years. So we don't use this as directional value in -- a directional [indiscernible] the business, but what it tells us is that there's still engagement there, and we think and we know that will come back up as we see China recover. And importantly, as we look forward, we believe China will recover slowly within our expectations for '24 onwards, we will see gradual improvement in China. We're not expecting a quick rebound to take us back up. It's that diversified revenue of cask sales, 2 year of Taiwan for your Single Cask Nation. So these will all improve those numbers.

Yes. I think just picking on what Billy has just said there. It's not a directional KPI. So that -- this lifetime value doesn't need to go up. What we're trying to drive is overall profitability of the business. And I would rather be driving up a number of members, driving their engagement, driving up margin, which results in increased profitability of the business. But if that reverted to GBP 900 what it was at the IPO or fell to GBP 700, that's still a huge number, the purposes drive value to the business pointing out that each member we're still recruiting fantastic high-value, highly engaged members and combining them with that high margin model. And as Billy says, that's what we'd like to do with inventory. We want to take it all the way through the model we have over 40,000 members who are spending over GBP 500 a year buying bottles from us at over 65% margin. That's the model. But in the meantime, we've already generated a huge amount of value from the asset that's on our books. And that's the model. Combining that loyal, highly engaged, valuable growing global membership with that stream of unique outstanding whiskeys to deliver value over time. Now we talked a lot about the initiatives to where I'm not going to talk through all of them on the page, but I think it's worth pulling out a few of them. It's a structured the things that we've delivered in '23 under our 5 pillars across whiskey, membership experience, new brands and audiences and people. A few examples on this page, including our first prestige products, so a 40-year-old whiskey that was released at the end of last year, generating over GBP 0.5 million worth of profit from one product alone. A donation to a fantastic charity called the one-of-one auction, where we created one unique bottle that sold, I think, for GBP 18,000, which is the highest valve generated all of those proceeds go to charity. Launch of Taiwan, Korea, which has been fantastic and fully operational Masterton Bond facility. So if we pick a couple of examples, the refurbishment of the vaults. As Billy said, what we have definitely seen in consumer behavior is that desire for quality experiences and being able to deliver a really outstanding world-class whiskey venue at the vaults has been fantastic. So we've had a really good response both in terms of feedback and in terms of spending engagement since refurbishing the vaults. So I would strongly encourage any of you who haven't been there or any of you have to come in. The other area is Masterton Bond, which is the supply chain facility now fully operational. So over 200,000 bottles produced to date, well over 2,000 of our tasks being there. The idea was never to move all of our cask there. These are the cask that are sort of likely to be bottled over the next year or 2 or require additional maturation or work on them. All the fulfillment and international dispatches being done there as well as now bottling of Single Cask Nation. So in fact, this bottle was the first one ever produced of Single Cask Nation at Masterton Bond. Such an obvious and natural synergy that we get immediately from day 1. So bottling of that already underway. So hopefully bringing a couple of those examples of the initiatives to life a little bit. And then when we think about Single Cask Nation, it's a really important strategic fit for us. So we bought 100% of the trade and assets of the business. It's expected to be PBT profitable in year 1. We see EBITDA, but in reality, it has no interest of depreciation. So profitable from year 1. And it really is complementary and incremental to what we already have in the U.S. and allows us to not only operate outside the paid membership model. They do have a direct-to-consumer e-commerce business, but we also operate in traditional retail channels, both in the U.S. and in some of the world's biggest whiskey market, but also gives a home as we look to develop American whiskey products themselves and offerings. So playing into a space that we really think is important. And what was wonderful was shortly after the acquisition, they were actually named independent bottler of the year at the whiskey awards in the U.S. in the tail end of January, which is a really pretty substantial accolade to receive. And as a reflection of Jason and Joshua the founders of Single Cask Nation and the brand that they've built over the last decade, and it's a really good addition to the ASC portfolio and one which I think we can see substantial growth from over time and really good results already for them. So they acquired in January, first sales happened in February. Their first U.S. e-commerce release was in mid-March, sold out 50% on day 1. So some good results from -- good initial results from there. The other comment that quite often we get is people looking for some insights into how we market. And maybe 2 things I'll do here. One, talk about conceptually how we approach our marketing spend. And we think of it across recruitment, retention and engagement. How do we bring more people into the SMWS world, how do we retain them and how do we engage with those members. And maybe just sort of bring this to life in a couple of ways, maybe pick a couple of member journeys as a sort of way bring it to life. But if we think about it in the U.S., that member journey might -- or prospect journey might start with a corporate tasting event. It's quite good recruitment tool where the ticket cost actually includes your first year's membership. So we managed to bring someone in, they come to an event, the first time they've ever seen this I think that's getting explained to them over a couple of hours. They actually get to taste the whiskey, liquid to lips. So straight off the back, they understand it, they've enjoyed it. So there, the onboarding and engagement journey is really about getting them to spend their own money for the first time because so far, they understand certainly they've enjoyed it, but they haven't had to spend their money. So that's the direction that we take the engagement target. An alternative path in the U.S. would be -- which [indiscernible] comes say, a gift. Fathers day, for example, is a big recruitment source for SMWS in the U.S., advertised through traditional digital channels as well as classic gift guides, whiskey magazines, et cetera. And in this scenario, the engagement retention piece is then around education. Explaining to this person who's received a gift what the society is. So that starts with the member services team in the U.S. calling every new member as an introduction, and they love that kind of personal introduction, a chance for them to hear and connect and ask any questions that we have. From a retention perspective, in both front of the moment to auto renewal, making it really easy and engaging them to retain. So that's a couple of different parts in the U.S. In other markets, the channels vary. We always have both in-person and online. It's key elements of recruitment. We talked about the U.K. venues are a big source of recruitment, but even in markets like China, festivals in Taiwan, Murphy, the country director there has done an awful lot of tasting events as he builds awareness and recruits in there. But then if we think retention and engagement in those markets, choosing China as an example, Bill, we've built sort of membership levels, so you can -- we encourage engagement and reward that through, if you bought 10 core range bottles that allows you the right to early access when we next release Vault collection, not a hard-to-access facility or bottle release. So those are sort of some examples of how we bring that marketing to life across those 3 pots that we think about it. So come back to the kind of final section here around the opportunity. And it continues to be substantial. We operate as so in a market that is significant. It's a huge addressable market already, and it is continuing to grow. Perhaps the pace of that growth maybe starting slow, but it is still a growing market and driven still by premiumization. And particularly, if you think about our diversification, we still see that opportunity across many markets. And you can see that we've looked as we often do, we look at where we have credits, where are the opportunities. So the obvious additions, most recently, Taiwan and Korea were added to the portfolio last year. If you expand this down and you look at the gaps, Vietnam, India, Brazil, Nigeria, all start to fall into that pot. We start looking at which of those opportunities are good spaces for the business. And that's -- how big is the market already? What pace is it growing at? What does the regulatory environment look like how easy is it to get into the market, but in market specifics around commercial. So India is a good example, 150% tariffs and hopefully, free trade agreements can help on that. But we look at all of those factors as we assess ClearNext as we continue to grow our global footprint. But in all markets and certainly at a global level, that continuation of premiumization. And you can see this graph is basically on what percentage of the global scotch/whiskey market is in the premium space. And you can see that that's what's been driving value growth over time even when volume growth in the scotch/whiskey industry is not substantial. So summary. Where are we now? 2024 has started well. Acquisition of Single Cask Nation is really good. It's a new avenue, a new channel, a new material element of the business, and it's helping us to grow our presence in the U.S., which is a key market opportunity for us. A positive start across the business in 2024, double-digit revenue growth in the first couple of months, giving us good confidence and ability to deliver this year's targets. And overall, that path from low to mid to high single-digit EBITDA margins over the next 3 years. So that combination of good momentum in the tail end of 2023 that Billy talked about substantial growth in the second half of the year, particularly profitability, good momentum into 2024, combining with all of those strategic initiatives that we've already delivered. We've already built the app. We've already launched the U.S. website. We've already launched a private cask sales program. We've already launched Taiwan and Korea. It's now getting the full year benefit the upside of those in 2024. So that combination of momentum and strategic delivery means that we're increasingly confident of our ability not just to deliver this year's is, but that path to generate the kind of profitability and cash that this business is very capable of delivering over the next few years. So that's I think it. And again, one thing, just as we then look at to say how are we going to continue to build a much shorter list of areas to build on. So of the initiatives for this year, we have already acquired Single Cask Nation. New office move in Edinburgh is imminent. The private cask sales continues to grow. A new EPOS system [indiscernible] both improving staff and member experience in, but also combining the systems with our e-commerce to allow a richer use of the data that already exists to give an improved experience. Looking at our range review, it's been 5 or 6 years since the SMWS range review. So where have we got opportunities to develop, how are consumer trends changing and we're making sure we continue to be fit for purpose and getting that whiskey to all right places all the right times in the most efficient way that we can. So over the course of this year, you'll continue to see us updating on progress against these initiatives as we look to build further. So that's it. I'll pause there and happy to take any questions.

Wait for a microphone.

It's Mark from Canaccord. Just a quick one on Masterton Bonds. I think you previously sort of talked about a 200 basis point margin improvement from that new facility. Obviously, the margin over the -- the gross margin over the year was up, I think, 20 basis points or so. But in the second half, there was a bigger step up. How much of that 200 million have you delivered to date, I guess? And how much is there to come through?

I think one thing to note off the back is, while we still expect the same overall benefit from Masterton Bond, the accounting treatment of it will be different. So the [indiscernible] said that the cost, which we assumed would come through as overheads will be treated as cost of sales. So the gross margin uplift won't come from Masterton Bond. It will continue to come from the Ex-sherry cask program, the premiumization, the growth in high-margin markets, that, that will drive gross margin growth. the overall value benefit of master bond continues, but it will flow as a 200 basis points on EBITDA margin rather than gross margin. In terms of how much is being delivered to date, some but not full benefit yet because while the site is fully operational, as we just noted, the actual production demand was lower last year, and therefore, we haven't -- it's not operating at as much capacity as it could be. So there is still a bit more benefit to come. But certainly, it only became fully operational in May, June with the e-fulfillment. So we did get more of that benefit in the second half, and that's flowing through now. But that cost base is now pretty fixed. So as production volumes go, there's a bit more benefit to come.

And to bring that to life for '23 in terms of that part year, that 0.2 percentage points improvement would have been 0.4 without the account adjustment, for example. So -- but as Andrew said, the benefit will fall to the bottom line. It's just the way the kind of what is essentially the difference between doing it internally, in-house, as opposed to paying an external -- but there's some boring accounting elements and that point is EBITDA should still see the benefit.

The total value hasn't changed. It's just where it appears is different.

Great. And then just on the cost sales. I think you said you expected to keep that level broader in. So is that in terms of absolute quantum of and a bit million as opposed to percent of the group revenue?

I think percent is a better and better are. The area that we will see growth this year is in private cask sales. So that element of the overall kind of sales a bit because obviously, when we came out in December with the trading update, one of the things we noted in terms of not delivering the full revenue target was the private cask sales program. but it has actually been a successful launch. It just came too late and not quite at the pace needed to deliver what we needed in '23. But for an initiative that is a completely new product concept created from scratch and launched for the first time in mid-November, is delivered GBP 0.5 million of value already. So it's actually quite a successful addition to the group, and that will continue as part of our growth. So I would see full year benefit, full year expansion of that offering. And that, as a reminder, is still direct-to-consumer sale of SMWS bottles to SMWS members, but we're selling them whole cask at time. And there are 2 elements to that we pushed. One is what we call the 50th anniversary cask program, which is between GBP 4,000 and GBP 5,500 for a whole cask worth of whiskey, but it's new make spit it today. and you get to go on its journey as it matures over 10 years, samples and experiences over 10 years, and it will be bottled in 10th year, hence, 50th anniversary bottles. But that's something that has been accessed by primarily in the U.K., but across Europe. We've had people in China, in the U.S., in a number of other markets buying into that program, but at that [indiscernible]. The second element is a high net worth private cask sales, where someone is spending tens of thousands or hundreds of thousands of pounds on a cask, much more white glove service. First one is those were at the tail end of last year, and we're imminent on first ones of this year now. And that's the bigger box. It's a much lumpier profile. So we've built the program. We've got a kind of some really outstanding whiskeys to offer. But it's new, so it will take time to come. Does that make sense?

A couple from me, please. David Hughes from Stifel. Firstly, in terms of kind of the line to getting into cash flow positive and the higher EBITDA, what sales do you kind of need to hit in the next 3 years in order to hit that milestone?

Yes. So I think a couple of things from when we think about cash, what's important to note is the net investment in cask spirit has peaked, and we noted that last year. So the net outflow into new spirit has already peaked and will start to come down. And that profitability flows through now. So as we -- as the EBITDA grows, you can see we already generated the operating cash flows before spirit investment. And in the not dispute over the next years, you will see that come through as even after spirit investment. And the reason for that is twofold. One, the spirit requirement is like a wave. And what we've done is we filled both the front of the wave, and we've filled the back because 6 years ago, we were an independent business for the first time and all we had was a couple of thousand cask. So not only did we need to buy this year's requirement, we were buying the whole way through. We've now materially filled that gap. Of all of the cask, if we had an unlimited spirit budget today, the net casks that exist today that we don't already own that we think we need, it's 1,000 casks. So we're materially there. We now just need to fill the front of the wave, and that's us buying new make spirit, which is a fraction of a cost of the mature spirit, which we're selling. So as a reminder, when we're selling bottles, last year, the average was over 13 years old. But we're buying it as new make, and we're almost there. We've almost filled that model. So that's why the net outlay has peaked. And as the profitability flows through over the coming years, that flows through to the cash. Does that help?

Yes. Very helpful. And then secondly, in terms of geographical expansion, obviously, you added quite a lot last year. Are there more plans are there more target areas that you're looking to get to in the next couple of years?

So yes, for 2024, ruthless focus on delivering this year's results. So it's exploring opportunities, but don't expect that to actually be delivered this year. So as I said, those are real examples as discussed to the Board this month. So the markets that are in the next tranche, India, Vietnam, Brazil, Nigeria, I think top of that pile is probably India. Where the market has grown in that premium space so fast despite the tariffs that I think is worth looking at. Now it's not really India, you would be 1, maybe 2 states or provinces. So we've got discussions ongoing in that space because it will take a long time to find the right partners, decide the right route to market. So we're exploring those now, but I would expect to only start adding any new markets '25 or more so starting that process. Well, thank you very much all for your time this morning. Really appreciate it as always. It's a busy time of the year, but it's good. Thank you.

Thank you.