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

Good afternoon, and thank you for joining this Yellowstone Advisory webinar. Today's company presenting is The Artisanal Spirits Company, and we're delighted to have with us Andrew Dane, the CEO; and Billy McCarter, CFO. They're going to give us an introduction to the company and update on performance following the publication of the recent results. And before we start, I'd just like to go through a few points of admin. Hopefully, you should all see the poll on your screen. I wondered if you could respond to that. And the format today is a presentation, which is scheduled to last about 30 minutes, and then we'll go on to Q&A. [Operator Instructions] And just looking at that poll result, it looks like we have about 70% or so shareholders and 30% non-shareholders. So I think I've covered all the admin points. So I'd now like to hand over to Andrew Dane, the CEO of Artisanal Spirits Company, to start today's presentation. Andrew, I will share your screen.

Thank you, Alex. Thank you, everyone, for joining us this afternoon. Hopefully, you can now see the presentation slides. As Alex said, we'll spend about half an hour or so talking through, giving an overview and update of what the business is, our approach, recent results, current trading strategy and outlook and then look forward to going through Q&A, including some of the questions which were submitted in advance. So [indiscernible] Chief Exec, been with the business now almost 5 years as we have grown from a business that owns the Scotch Malt Whiskey Society to a group with an ambition of delivering profitable growth around the world. Joined by Billy, who will take you through some of the more recent results and trading as we get through this presentation. First of all, I thought we'd start by talking about who we are. So The Artisanal Spirits Company creates and sells outstanding limited edition whiskeys and experiences around the world. And we primarily do that through a brand called the Scotch Malt Whiskey Society, which I'll talk about quite a lot, and I'll give you a bit more of an overview in a few moments around that business, which is a direct-to-consumer membership-based whiskey business around the world, founded in 1983 with just over 40,000 paying members around the world. Alongside that, in early 2024, we acquired a U.S.-based independent bottler. I mean it's a company that buys casks from whiskey distilleries called Single Cask Nation, which had a very successful first year for us last year. We also launched J.G. Thomson, a brand which does primarily small batch blended malt whiskeys as well as gin and rum other spirits available through direct consumer and classic retail channels. And as a group, one of the things we spent IPO proceeds on was a supply chain facility called Masterton Bond, which does our own bottling as well as contract bottling and cask services for third parties. But the bit that unites them all, that binds them all together is in our mission of captivating a global community of whiskey adventures and an underpin of outstanding quality across the group. But we're going to spend quite a lot of time talking about Scotch Malt Whiskey Society, which is the heart of the business. So we'll start by touching on the headline results for 2024. I'm really pleased to say that we delivered EBITDA of just over GBP 1 million, which was up by over GBP 1.5 million year-on-year and slightly ahead of market expectations and actually represents record profit for the group. Alongside that, really important that, that profitable generation and profit generation has been converted into cash. And the business' net debt peaked in June -- in the summer of 2024 and has now started to reduce. So there was a GBP 1.5 million net debt reduction in the second half of 2024 with continued net debt reductions forecast for future years as we have now transitioned into being cash generative. Underpinning the business, and Billy will talk about this later on, is an outstanding asset backing. We hold over 18,000 casks of whiskey valued at over GBP 100 million at current -- current replacement value essentially. That represents 4x the book value, 4x debt, but also a significant multiple of the enterprise value of the business. The story for this year was really about diversification. We continue to diversify revenue with growth in cask sales, full year results from new markets like Taiwan, Korea, the addition of Single Cask Nation to the group, offsetting some of the headwinds, particularly in China, China having gone from around 1/4 of our business 2 years ago to closer to 10% now. But underpinning that strong and growing membership base, particularly with growth in U.K., leading Europe as well as growth in Korea, which is a relative new market as well as actually membership growth in China. And those have sat alongside that strategic progress of the group, adding Single Cask Nation as an acquisition and innovation from the core brand, and we'll talk a little bit about new product development, things like the new Creators Collection whiskey range, which has been leased to good results, having supported that 2024 performance where we delivered profitable growth, cash generation and all with a substantial asset backing. One of the things that we've also been touching on now as we reflect on now almost 4 years since IPO with some of the progress that we've made since then. So it's easy when you look at the headline share price, which was down substantially since IPO, to forget the significant progress that has been made. Membership up by almost 60%, revenue up by almost 60%, the value of our cask spirit net book value up by almost 50% since IPO as we used most of the IPO proceeds, the GBP 15 million that came to the company to invest in assets, Cask Spirit, Cask Wood and that supply chain facility. So good progress made since IPO. And the other thing that's worth noting is that since IPO, we've been talking about that transition into profit and cash generation. And it's therefore very pleasing to have now reached that tipping point to reach that transition point and now be generating profits with, I say, EBITDA up by over GBP 1.5 million, starting to generate cash and all the while with a substantial asset backing sitting behind us. So that's been really pleasing to see that long-term strategy starting to pay dividends. So Bill, you may want to go through some of the drivers of those key factors. Yes. And as Andrew mentioned, we have grown significantly since IPO. And over the next few slides, I just want to kind of give a bit more insight behind the revenue growth, the cost base management and EBITDA delivering. So if we focus on revenue growth, what we're really pleased about within the business is not only the growth, but the diversification of our revenue. So in the last couple of years, the whiskey industry and some of the key economies of some of our key markets like China, they have had headwinds. There's no doubt about that. Notably, in China, which was 25% of our business around 2 years ago, is now only 10% given the economic headwinds within that specific market. Yet we have grown revenue and have grown profit, as Andrew mentioned. So one of the key things we're clear on is we did deliver 20% initial growth since IPO. In the last couple of years, there's been market and economic headwinds. We've delivered marginal revenue growth. But we're clear -- we want to make clear that through our ability for new strategic areas such as our cash sales program, our new strategic market of Taiwan, a new strategic market of Korea in which we operate a franchise, we have been able to manage some of those difficulties. And we're well placed going forward. We don't view the China economy is coming back immediately. But in the short term, we're able to manage those risks and able to deliver growth, and it's our expectation that we will deliver revenue growth again this year. If we move on to our cost base, when we originally completed the IPO, we invested heavily to ensure we could deliver the growth required. And as you can see on the slide, our cost base moved from around 57% of revenue to around 66% and held there for about 2 to 3 years. And the investment in that area was in predominantly people and systems from a P&L point of view to really help us deliver growth. And that has helped us do that. We have some strong systems within the business. We introduced a new ERP system, and we introduced some really strong employees within the business who have helped deliver growth to this point. Through that investment, we've been able to drive efficiency in our cost base in FY '24. So not only through the ability to achieve efficiency through those improved systems, but also just being more mature and having reduced the amount we're investing in the business in terms of new projects compared to prior years. So as a result, you can see our cost base as a percent of revenue has dropped back towards pre-IPO levels, and it will sustain at that level. And in the little circle on the slide, you can see we've saved on commission year-on-year. We've reduced our marketing spend year-on-year as we've done a lot of brand building in the last few years. It's much more around recruitment, retention and getting immediate return. So we're getting a better return on investment in marketing and within our other overheads as well, some of it is just general efficiency in the way we manage our cost base, but also through efficiency that our systems have created. And I would call out where our payroll has increased year-on-year. If we remove the fact and the bonus was reinstated this year for our employees hitting the target, payroll was flat. So payroll was flat year-on-year where we gave a 3% increase in the prior year. So we have also made some efficiencies within our payroll base. So as you can see, there's a -- there's a key reason we've delivered profit this year. Revenue growth is marginal, cost base savings are significant. That's helped us deliver what we want to deliver in FY '24. Going forward, that cost base is well placed to deliver growth. We do not need to invest more heavily in any of that cost base. It's all about revenue growth that will, therefore, predominantly drop to the bottom line as we go forward. Now one of the key things for this business is cash generation. So at net debt level, as Andrew mentioned, we have a net debt that's around 25% of our overall asset value. We're relatively comfortable with our net debt for that reason. However, directionally, as a business, we are becoming more cash self-sufficient. We are generating more profit, generating more cash. So profit is a key reason for that. The other being we will start to work our cask spirit inventory more on a replenishment basis rather than a growth basis. So that will take some of the working capital reduction. However, if I was to make clear what we achieved in F '24 that shows us on that trajectory to be more cash generating, you can see from the slide in terms of operational cash flow, the delivery of EBITDA, the improvement of net working capital, which is debtor timing improvements, trade creditor timing and just reduced spending as well as a reduction in drying finished goods, we delivered a significant GBP 3 million improvement year-on-year. We will continue to try and do that alongside other things like EBITDA growth and reduced spending on Cask and Spiritwood compared to previous years, which will be around 1/3, I guess, prior levels. So we're very keen to make clear that we will become cash self-sufficient going forward. I mentioned asset backing. This slide just calls in a bit more detail what Andrew has already called out. We had an asset valuation carried out in July last year. Roughly GBP 102 million of asset value. They're on our books at GBP 25 million. They have to be on our books at what we paid for them. At the time of creating this before our results release, our market cap was GBP 23 million, our net debt was GBP 25 million, our enterprise value is around GBP 50 million. This is really just to highlight the asset valuation against some of the key financial indicators of this business. [ And alongside ] that, to further represent the value that we can create from our asset value is basically if we were to look at the cash sales we've made in the last 2 years, over GBP 5 million, we've generated an average return of 4.9x NBV. So this slide is really to do a couple of things to give our view that we currently feel that the market cap and enterprise value of the business is lower than the asset valuation, it's factually correct, but also that we are well placed to deliver returns on the asset value. That leads us nicely to our kind of our strategy of capital -- regarding capital allocation. We see it as a balanced approach. So the right-hand side showing the strategic issues, the left-hand side show the operational. I did mention 2 minutes ago, a key thing for us is directionally, we will start to reduce net debt marginally going forward because we will be more cash generative. If we then look at other things we could do as we generate cash and deliver profitable growth. On the left-hand side, it's investing in marketing, essentially investing in increasing the number of members that we have in the business, therefore, driving that revenue growth. We spend on cask spirit. As I mentioned in a minute, it's a replenishment approach because we have more than enough cask spirit to last us long into the next decade, but that's somewhere we'll always look to invest our cask because it gives good return. And in our CapEx, there is no immediate significant CapEx spend compared to prior years, but where opportunities arise, CapEx is somewhere we can put our cash, for example, venues and things like that. On the right-hand side, we're always open and considering shareholder returns. At this moment in time, there is no dividend being earmarked, we want to invest the cash in the business to grow the business. We don't think now is the right time to give a dividend. And then at some point, whether that gives the opportunity for share buybacks, but these are just considerations. At this point, we're not intimating we're going to do that currently. And then the final piece would be M&A opportunities. You can see the success we've had with Single Cask Nation in the last year. We're very proud and delighted with what that's delivered. So we'll always keep an eye open for other opportunities. Nothing significant -- nothing significant specific to flag at this time. But these are things as a business we consider when we're looking at the profit and cash we're generating and how we invest that. Thanks. And then if you sort of take that path to profitable growth that we just talked about and look ahead for what that means in the future, continued growth in profits. 2025, you see there's a slightly lower step-up. In part, that reflects the fact that we made a one-off payment in the U.S. at the start of January 2025 of GBP 0.5 million. But you can see the trajectory that even despite that payment, profits improving. Cash generation and net debt reduction, marginal in '25 and '26, but the trajectory is important. But the thing I would really draw out is the bottom of this page, which to Billy's point about the asset value, the long-term strategy of this business to date has been to invest in Spirit. And that part of the strategy, that first part of value creation from our business has been very successful. We spent GBP 27 million on assets that are now worth GBP 100 million on the same basis. So that's been a really successful part of the strategies today. Even though that value creation, while it has occurred, is not yet captured in our books. We don't get to mark-to-market. We carry those at cost, noting that if we had to buy them today, we'd have had to spend GBP 100 million to buy those same assets, like a land bank for a housebuilder. You paid GBP 27 million for the land, but today, that land is worth GBP 100 million but the thing that creates the real long-term value for our business is not selling the land, it's taking those casks and turning them into bottles because that's where we generate much more substantial value. We can turn GBP 100 million of theoretical today's cask value into GBP 500 million worth of bottles based on the number of bottles worth of liquid we currently own and our current selling prices and that, that would generate well over GBP 300 million of gross profit over time. So that's where the long-term value comes. And our objective, as Billy said, is to get back to top line growth. We've taken costs out of the business. We've rightsized the cost base so we can now leverage much more profit, but the growth of this business comes from top line growth. And I'm going to talk a little bit about where we see that growth coming from and the framework through which we view growth. So the first thing to note is as a business, we have a kind of strategic framework of 5 core pillars across whiskey, membership, experiences, new brands and audiences and people. And that's how we view the opportunities that are. And across each of these pillars, we look at how we can expand. And I'm not going to go through every one of them, but across a couple of those, I'm going to bring to life some areas of focus. And alongside those kind of global pillars, we also have a regional perspective. Growth in Americas, Europe, doing the heavy lifting this year, [indiscernible] Asia and the kind of rest of world. So again, when I talk about some of the key areas of focus, we'll look at it through those strategic pillars and the regional focus. I thought it might be helpful to just bring that to life a little bit in the short term. So first of all, when we think about the whiskey pillar, where does the growth come from? And a big part of that comes from making sure that we get the focus on creating and selling our own outstanding limited edition whiskeys. That comes from innovation, from product development. So across the page here in the middle, there's a cask ownership certificate from the 50th anniversary Cask program that we launched, where members can buy a whole casks worth of bottles, which has generated, I think, approaching GBP 0.5 million of value over the last kind of couple of years. We also have in the bottom left, a range called the Heresy range, which is growing in popularity given it's, I mean, amazing liquid, beautifully presented and at great price points. And in the top left, the example of our first release from the Creators Collection, a completely new range, which was launched at the tail end of last year. I think it generated about GBP 0.25 million in Q1, where we have connected the story, the history of the liquid to create a narrative that goes with what was already outstanding liquid, but to create something that people can really relate and engage to. And then, the example at the top left, it's about peaked, peaked being a key piece of interest for whiskey fans, but actually taking a different perspective about how peak from different parts of Scotland can influence whiskey in different ways, whether it's from Highlands or Islands, and that part of innovation driving growth through the whiskey pillar. That's the first example. Second one is from a regional perspective. I continue to see the U.S. as a significant opportunity. I mean, in short order, it's because it's the world's largest market by a considerable margin. And that I see that the long-term opportunity there remains substantial, not because we need the market conditions to return or to recover or to improve to drive that, but because our own presence in that market relative to the size of the market should be bigger. And you can see a couple of line graphs on the page. The one on the left shows U.S. alcohol sales, showing that actually, if you look at the last 4 years of data, you would see an industry in decline. But if you look at the longer-term trend, what you see is a recovery to pre-pandemic trends after that kind of COVID super cycle. The right-hand graph shows that again, but in a slightly different way with the orange bars, ones on the left, the darker ones being the actual U.S. spirits sales numbers through to 2024 and the yellow bar being the 2019 projections on what those spirit sales would look like. And you can see that 2024 U.S. spirits sales were exactly in line with previous projections. So these things just paint a slightly different perspective of what's happening in the U.S. market. So overall, I still see it as a big opportunity. So what we're doing about that? Well, the challenge we've created to the team is what would need to be true to double that size of that business over the next few years. So to support that, we completed the acquisition of Single Cask Nation, which has made a very positive contribution since its acquisition. And then we followed that with the announcement in early 2025 of a GBP 0.5 million investment in the Scotch Malt Whisky Society's operations in America. What that means in practice is we have taken direct control of the marketing and operations in that market, which gives us an improved and optimized cost structure, but it also gives us the ability to directly control that team and the spend, investment in marketing, unleash their potential more. And the team have really liked that opportunity and are doing great work in the market to go after that substantial market opportunity. So that's another example there. A third one probably I bring to life that isn't on the slide here is around membership and a desire -- one of the pillars around membership and a desire to deliver a step change in membership for the business. And I think that, that can come through looking at membership recruitment through new partnerships, new channels, new approaches where we are already our #1 recruitment tool in the U.K. is the sale of a bottle with membership that expanding that into new channels, offering that through new partnerships, for example, with Amex, which will go live in a few weeks, I think, as well as in new places, that's another way to drive membership growth is another example of where we're driving growth as we try to get back to double-digit top line growth. The other thing that we've been doing is while our #1 focus is on driving value from the business, delivering profitable growth, delivering cash generation, delivering that asset backing and realizing value from asset backing. We're also conscious from a shareholder engagement perspective that we can try to drive value there, too. And particularly my view is from a retail shareholder perspective, we're doing more events like this, trying to talk to retail shareholders. We've also recently relaunched our Spirited shareholder benefit program, which you can see on the page there. So we introduced some additional benefits for the existing [ tier ] if you own 1,000 shares, reminding people also that at the time of the IPO, you had to pay GBP 1,100 for your shares to get that value. Now that was more like GBP 400. But also introducing a new tier, Spirited shareholder plus benefits for those who own 5,000 shares or more. And that includes a complementary 21-year-old bottle for anyone who's in that tier at 30th of June this year as well as a range of other benefits and ways to engage in people. I'm really pleased that, that has been very successful with a large number of new people joining the program, and that's giving a chance for members to really take an ownership stake in the business and kind of embed that connection and get to some of the advantages, some of the benefits that come from that program. So that's been a good successful release. So as we look ahead, profitable growth being driven by top line revenue growth, driving EBITDA because we've now rightsized the cost base. So that will be profitable growth. Then taking that EBITDA growth and combining with the fact that our Spirit strategy has paid off. We've now largely filled the Spirit backing. So we move from a Spirit investment phase to a Spirit replenishment phase. And that means that much more positive impact for cash generation, so the EBITDA now falls into cash generation. It's worth noting that we're an unusual business in that a large chunk of our cost of sales are noncash because we're selling, recognizing the expense of liquid we bought years ago. So a few million pounds worth of our cost of sales are noncash. So that EBITDA growth can really turn into cash generation. Still with substantial asset backing, still generating value from that asset, looking after the market opportunity, driving membership growth through channels like I've just suggested, focus on the U.S., heavy lifting in Europe with a good start to the year there and then building on the innovation that we talked about earlier, Creators collection as well as new product ideas for a Single Cask Nation, development and launch of a brand-new exclusive private cask sales program, which is underway, and then market expansion. In the short term, the Vietnam franchise opening in the coming weeks. So that's sort of to the future long-term opportunity and where that growth comes from. And in the short term, we're on track. We've had a strong start to the year, delivering double-digit revenue growth in Q1 versus Q1 last year, in line with expectations. But that has been led by bottle sales in our largest market, Europe, supported by further success in that product development I talked about Creators Collection as well as early success in delivering on our full year cask sales target. And overall, that's delivered profitable growth with year-on-year profitability improvement offsetting the impact of that GBP 0.5 million investment in SMWS America. That investment in the U.S. helping us to take greater control of operations there. As I started this, the thing that unites the whole business is the focus on outstanding quality. We've continued to win awards in the early part of this year, including Single Cask Nation retaining their Independent Bottler of the Year award for the second time and SMWS now getting well over 300 awards over the last few years. and then continue to generate cash through the core business as well as capital allocations. We've been selling a couple of the residential properties that we had as part of the whiskey tourism for the business, so generating another few hundred thousand of cash inflow in Q1. So overall, that's a good start to the year, in line with our expectations and on track to deliver further profitable growth and cash generation in 2025 and beyond. So that's the end of the formal presentation. We're now happy to move over to Q&A.

Brilliant. Thank you, Andrew. Thank you, Billy, for that. It looks like we've got a few whiskey lovers in the webinar today because we've got a few questions that have come in. [Operator Instructions] So just starting here with the first one. Will the Trump tariffs have any impact on your business?

Thanks, Alex. Like everyone at the minute, we're watching -- and just to be clear, there's currently a 10% tariff on U.K. goods going to the U.S. And we are able to mitigate most of the impact of that. As a business, we can manage that 10% tariff level. I mentioned earlier about the diversification of our revenue. So the impact at a group level will be lower. But we're doing everything we currently can to mitigate the impact of that, not calling out any significant risk to our profit number. And at this minute in time, we'll watch and wait. We do have some stock in the U.S. market currently as well, which didn't attract tariffs, and we don't need to, in the next couple of months, send any more into the market. So if that position should change, which we'd all like, that would be great. But at this point in time, if they were to stay, we can mitigate it to a level that will not put significant harm on the group risk.

Thank you. Next question here. When do you expect to make a profit at the after-tax level? Looking at the Liberum numbers, you're still unprofitable in 2026. Given that, how should we as investors value the business? And what's the most appropriate metric to use?

Yes. Okay. So a few pieces on that. The first is to note that once we get into 2027, a few factors start to come into play. So the Masterton Bond kind of assets will be largely depreciated. So you get a big step-up in reduction in depreciation charge and our kind of current trajectory of profitable growth would take us towards PBT in 2027 to the following year. On a profit after-tax basis, which I think is what the question was, it's worth noting that we have a pretty substantial unrecognized deferred tax asset in relation to so it would be quite a long time before there was actually any tax charge thereafter. So within the next couple of years, you could be moving to a point where that is a positive number. From a valuation perspective, there's 2 parts. In the short term, that asset backing at the time we went to press with the results release, you could have tripled the market cap before the enterprise value caught up with the asset value. But in the longer term, the value does come from traditional metrics. It comes from profit and cash generation. Now in the short term, as we're on that profit growth trajectory, the historical metric was a revenue multiple as a proxy for future cash generation -- profit and cash generation. At the time of IPO, we were -- when we were listed, the valuation metric, I think, was 4.2x revenue. That had fallen back to more like 1x, 1 and a bit time. So on any valuation metric you would choose, the company shares are materially undervalued. That's the perspective of the exec and the Board and that in part reflects a number of factors, including fund outflows in AIM small cap funds, et cetera. But certainly, based on any metric, asset backing, revenue multiples, future cash generation, I would say it's undervalued. But long term, the goal of the business is generating a highly profitable, high strong cash-generative business that -- that's the basis for valuing, but we're on that trajectory rather than that being the basis on which it [indiscernible] to be. Hope that helps.

Yes. No, very clear. Thank you. Next question here. Does the company see other opportunities to expand the business such as the purchase of other independent bottlers, expanding of the bond or the purchase of whiskey distilleries?

So certainly, we are open -- I think Billy mentioned this, we are open-minded to M&A opportunities. We're looking at what made Single Cask Nation so successful. There were so many synergies. We looked at a business that had good brand reputation, good footprint, but had no assets really materially, had no access to whiskey buying and the commercial -- the structure of it was not strong. Those were all areas that we could improve and do so for a low outlay. It was immediately cash positive, so no cash drag, no profit drag. So we continue to have conversations with people in those spaces that -- we also look at opportunities as independent bottlers as we're seeing some distressed distilleries, et cetera. My view is particularly when it comes to distilleries themselves that those opportunities are more around cask purchasing, buying from distilleries that perhaps you couldn't have bought for rather than owning a distillery itself, but certainly open-minded to acquisition opportunities. And I think that over the coming year or 2, you will start to see those. But they need to be complementary. The need to be incremental and they need to be -- we need to avoid a scenario where they had a significant profit or cash drag on the wider business.

Can you address why shareholders who backed the management by investing at the IPO stage had to pay for membership while sitting on losses of over 60%, while free memberships were offered to new members in November?

So that's just trying to piece that through. People who bought in at the time of the IPO were offered a discount on their renewal, 50% discount on the renewal as part of a suite of shareholder benefits. In November of last year, we offered those people the chance to give a gift of a free membership to a friend as a way to grow the business. What we basically looked at was to say that we want to expand, we want to grow the business and who better to help us do that than people who are already both members and shareholders. And the idea was that everybody has a friend who we think would love the society, but for whatever reason, isn't a member yet. And we gave our shareholders a benefit of saying that they could gift a membership to a friend. That recruitment opportunity has been quite successful. We added a big chunk of new members in the U.K. because they were gifted, the levels of engagement are lower, but we still had about 15% of those people having engaged, having bought, having spent well over GBP 100,000. Average spend per member of those new groups have been something like [ GBP 143 ]. So it's been a good recruitment tool but that was the rationale for the piece in November was to give those people the benefit of being able to gift to a friend. I hope that helps.

You've got a link question here from someone else. I think you might have answered some of this, but let me ask this question, which is membership growth is only good if the new members are buying whiskey. Do you have figures for the average number of bottles purchased by each member? And how is that number changing over time?

Yes. So I think one of the things that I'm [indiscernible] is that long term, you want growth in the number of engaged members. That's the objective. In the short term, I don't think we should be afraid of campaigns, approaches like the shareholder program, where in the short term, you actually add some members as part of an overall campaign who don't remain long-term engaged people as long as you're aware and clear from upfront that you will go through a bit of a bump on that journey. So overall, long term, growing number of engaged members. What I would say is that, yes, we have detailed membership analysis across all markets. You can see that the number of bottles per member across the world varies significantly. And on average, it's between 3 and 4, but in markets like Southeast Asia, that can be 8, 10 double digits plus. In the U.K. -- in the U.S., it's more like 5 or 6, similar in the EU. In the U.K., it's slightly lower. It's more like 2 or 3 because people spend more money. So we have real detail around that space. We can also look at individual cohorts. We know that, for example, year 1, when people have just joined, the level of engagement typically lower, the level of retention typically lower. But once someone has renewed at least once, in the U.K. and EU, average tenure of a member is about 9 years. What I can see then in terms of trends, those trends have -- had been declining in '23, in particular and into a part of '24 alongside the broader challenges that Billy alluded to around whiskey sales in all markets. What I would say is that particularly when you look at core markets like the U.K., average bottles per member started to increase from around the summer of last year. I think there was some really good work done by the team here to engage members really strongly. So those have started to improve. But yes, we look at those across all markets and in detail.

Okay. Moving on to the next question here. What are your plans for digital investments? So for example, do you plan on introducing a system that voucher codes can be used online as well as within the tasting rooms? And also, do you plan on investing in the SMWS app, for example, by incorporating membership cards within it instead of issuing physical ones?

Yes. So both of those are definitely on our kind of what we would call technology road map. One of the things I would say is a challenge for a business of our size is as you look at where we have essentially constrained funds, you look at opportunities, opportunities to expand the app, the functionality, voucher codes and digital voucher codes and [ that are ] both things that we actively talk about, but where are they prioritized? And at the moment, those are not things which will be developed in the coming weeks or months, but are certainly on the longer-term track. I also think alongside that greater levels of personalization and outreach to members is a sort of technology piece, so improvements to CRM systems to allow us to engage more directly and personally with members are part of the things that I think will drive member enjoyment and engagement with the society through the use of technology in that setting.

Next question here. Given the positive performance of the business, when do you expect the share price to recover to the IPO levels? And also in hindsight, is it viewed that the IPO share price was too high?

So ultimately, we don't control the share price. So I can't give a projection on when I would expect the share price to occur. What I can say is that Liberum as our broker has their current forecast of what they believe today's share price to be is around double where we are at the moment. We're materially back towards where it was at the time of the IPO. That's essentially where they think the share price should be today. How quickly it takes to recover? I don't know. Since we released our results, we're up something like 40% year-to-date, it's only about plus 25%, but that's in the context of an AIM market, which is down double digits. If you look at the big spirits majors, Diageo, Pernod, et cetera, they're all down substantially over the historical period. So we're in a challenging economic environment, and we're not immune to those pieces. So we can focus on the bits that drive value ourselves. If you go back to the time of the IPO, was it overpriced? I think the answer is no. It was certainly fully priced for the time, but it reflected market conditions, market sentiment at that point in time as the share price does at any point. So I think we raised -- there's GBP 26 million of investment made at that point, and I think that reflected the appropriate value at that point in time. Our goal is to make sure the business delivers profit and cash to support that -- the value of that investment. And certainly, that's our #1 aim and Billy and [indiscernible] on are well aligned with delivering that.

Are there any additional business diversifications planned to try and address the impending global trade tariff situation?

Yes, there's certainly plenty of things that we are always working on. We are expanding our footprint in the U.S., including growing American whiskey in America, which does not attract tariffs. We, yes, are looking at premium private cask, exclusive cask sales where the value of the tariff is less important to the overall price, the price elasticity, et cetera, is much higher. Those are the things short term in addition to expanding the number of markets that we're in, say the next one up is Vietnam, adding that market and growing presence in those markets, all as ways of sort of diversifying the business, continue to be open-minded about acquisitions and new business lines, new business products, et cetera. But overall, it's about diversifying the whole base. So we're not exposed to any one tariff, any one market.

Okay. The next question here, with a market cap of GBP 34 million and inventory of GBP 102 million, what does this say about the share price and the potential for a takeover?

I mean my views on what it says about share price is that the share price is too low. I mean that's a personal perspective. And that is one of the reasons we got the valuation done to try to support that investment message and try to get people for there to be a call to action now. Certainly, our objective is to deliver long-term value for our existing shareholders and to draw attention of shareholders to that valuation gap. Certainly, there are no sharks floating around with -- making offers to buy the business. The idea is to get all of the broader shareholders and potential shareholders to see the value at that higher level and to reflect that in the current share price. That's the strategy.

Why are shareholder vouchers no longer valid to purchase bottles from the members' rooms when that was the case for the first 2 years?

I mean I would have to check the details. Certainly, that was never the intention. And it may be that, that was -- that happened on occasion, but certainly, I don't believe that was ever the intention. So I don't think there was a change in strategy, but I don't have the details in front of me. The idea was that would allow people to go into the venues and get a discount, using it to drink, to have [indiscernible] or whatever in the venues as that's what we're trying to encourage. And it's trying to strike the benefits, and we've done that again in the new ones where you are giving benefits aligned with engagement. One of the challenges that many businesses have with a shareholder benefits program is if it's all a value give away, while that's brilliant for the shareholders, it's unsustainable for the business and it is destructive long term to shareholder value of those same people because you -- the cost of the program is unsustainable or the administration of the share of the program is [Technical Issue]. So what we've tried to do is introduce benefits, which are of value to people who want to engage anyway, and that's the idea here.

Okay. Next question. How much of your net worth is invested in the business? And where does the GBP 7 million payroll go?

How much of -- Andrew Dane's personal net worth, it's certainly I have been buying shares at a level which is sustainable for a father of 3 young kids, 7, 9 and 11, who would rather that money was spent on slime and/or trips whatever to the play. But certainly, it's an area where I have been buying, spending my own money on it. Certainly, in terms of my overall compensation structure, the majority of it is well aligned with the shareholder performance. So whether that be bonuses, long-term incentive plans, short-term incentive plans are linked to delivering profitable growth, cash generation and share price increase. So that's how we deliver value there. In terms of the GBP 7 million of payroll, we have around about 150 staff worldwide. That includes around about 20 staff internationally, including in the U.S. now, in Taiwan, in Japan, in China, operating. We are direct-to-consumer. So what that means is we get great margins, but we have everybody's cost of the entire chain. So we operate warehouses in Japan, China, Australia, Taiwan that we have sales and marketing teams in those. We are doing tastings and events. We did -- I think we did 100 tasting and events in France alone last year. So some of the costs operating them. A big chunk of the cost, about 65 of those staff are based in the U.K. running the venues. So those 4 member rooms that we have, that includes all of the catering team are on our staff, the bar staff, the venue managers, assistant managers, events teams, et cetera, are all in our team. We also have a supply chain facility where we do our own. We brought that in house. That means more payroll, but more margin. So we have staff there doing cask handling, cask tipping, bottling, order fulfillment. We do the pick pack dispatch, both for U.K. orders as well as for international palletized and shipping container shipments to international markets. We then have around about 50 office staff. That includes finance team, central marketing, but also things like the whiskey team, the people who actually buy the liquid, who are in charge of maturing it, making sure we create what we want from it, HR teams, product innovation teams, et cetera, all based in there. So overall, that's where the pot goes. And as Billy said, of that number this year, about [ GBP 400,000 ] was bonus for hitting or beating profit expectation.

I think important to note your point, over the last few years, the payroll amount has grown, but the offsets are -- remain within the P&L at this point. We used to have all done externally, do that at a more efficient rate ourselves. We've taken on the U.S. team. So again, we believe we can do that more efficiently. So the payroll number is a payroll number. It's as efficient as it can be. We're recognizing that, that efficiency ensures the other numbers within the P&L are really at an optimum level as possible to make sure that, that profit number is the one that everyone focus.

Exactly. So this year, you will see an increase in payroll because we brought the catering team in-house. We brought the U.S. team in-house, but there are direct cost savings elsewhere in the P&L that more than offset those numbers. So while payroll will go up, you will see a reduction in cost of sales, overheads, et cetera, to offset that.

The next question is a sort of capital allocation question. And the question is, how would buying your shares compare to buying new whiskey stock looks like you're basically buying 18,000 cask of a known whiskey at a discounted price.

Yes. Yes, certainly, that's part of it. And we look at that as an active choice between acquisition opportunities for new casks. Yes, theoretically, if you were to buy back your own shares, theoretically, you could be buying -- you're buying the underlying asset at a fraction of its original cost. It comes with other challenges and questions. For example, one of our issues is liquidity, buying back more of our own shares reduces liquidity. It can have other [ values ], something that we are open-minded to and have had discussions and explorations of. But certainly, it is one opportunity which is available. I think overall, the appetite towards, for example, using debt to fund such a transaction, there's mix, some shareholders are supportive, some shareholders are not. Whereas if it was something like an incremental opportunity to sell some additional casks to fund that, I think there would be more support for that kind of approach. So it's something we are aware of and are thinking about.

Okay. We've got the last question currently. [Operator Instructions] But currently, one last question. How much has Brexit impacted European sales compared to the previous system of direct free shipping from the U.K. that was much faster?

Yes. So prior to Brexit, EU and China were our 2 fastest growth markets. In the year immediately following Brexit, I think China grew 30%, 40% and EU went backwards 5% so certainly, it knocked a lot of the wind out of the sales of that. That said, by the end of the first year post-Brexit, we had a new warehousing system set up in Europe that allows us to ship to most markets back within a couple of days. So similar delivery times to what we had before, priced in Euros rather than in Sterling. So operationally, it carries an additional administrative and cost burden from a working capital perspective. We have to have stock now in Germany as well as in the U.K. So it's a pain, but I think we've addressed most of the kind of immediate consumer concerns there, but it certainly knocked some of the momentum out of what had been really strong growth in that market. But it is back to growth. Again, now we're now over 5,000 members. It was less than 3,000 pre-Brexit. So the momentum is back there, but it certainly did have an impact.

We've had no further questions come in. So could I just remind everyone, when you do exit this webinar, there will be a shorter survey. It'd be really appreciated if you could just spend a couple of minutes answering some of those questions. I know management appreciate your feedback. And just before we go, if I could hand back to Andrew, just to say a couple of concluding words at the end of this webinar. Andrew?

Yes. Well, I guess, first of all, thanks very much for all the questions because we do find it really helpful. And I realize there's quite a lot covered there, but I appreciate everyone taking the time to join us just now to ask the questions, and please keep them coming. We have changed our website, so it's easier for people to interact. So you can always go on our artisanalspirits.com website and ask more questions if you think of things afterwards. We do want to drive more engagement there. So thanks for your time there. As a business, I would say we continue to be focused on delivering profitable growth, cash generation and asset backing, and we've had a good start to 2025, and we'll continue to focus on delivering value for everyone by delivering the profits and the results of the business. So that's all folks.

Wonderful. Andrew, thank you very much. Thank you, everyone, for attending, and we hope to see you soon.

Thanks very much.

Thanks, everyone.