Ten Lifestyle Group Plc

So welcome to 10 results for the six months to the end of February 2023. And the highlights are that we grew our revenues by 49% year on year. We achieved record profitability, our first maiden and positive profit before tax since IPO. We retained all of our corporate clients and won some more corporate clients. And we saw an increase in the active members, the people actually using our service, up 43%. in the period compared with the year before. And all while we continue to invest into the technology in our proposition, which drives differentiation of the value of our service. As a reminder, we're all about becoming the most trusted service platform in the world, working behind global brands and to support our members, individuals around the world, high net worth, mass affluent, ultra high net worth members in organizing their travel, their eating out, their entertainment, helping them buy things, helping them enjoy events. And all the time being educated and inspired with our content, the editorial and our CRM that inspires them on how best to use our service or how best to understand travel, retail, dining and entertainment. Now, we're paid to deliver that service largely by corporate clients, banks, private banks, wealth managers and premium credit card companies. Because the more that their customers use our service, the more money they make because they acquire customers better, they retain customers better, and they make more profit either by having increased assets under management or spend on card or a mix of metrics like that. And they can prove that with data from their customer base who are engaged with our service. As an investment, we think of ourselves as being valuable because there's a huge market opportunity with a market leader in that space and because we've got a proven growth engine which improves our business as we develop over time and with scale. Now, how we're actually doing is that we have won new contracts, we've retained all of our contracts, we've got a very, very strong competitive position in the market. In terms of the growth engine, every ingredient every major ingredient in the growth engine is improving and that's driving repeat use is driving the value that we provide to our corporate partners that's driving investment into our service into our business that then increases the proposition improves the number of members using the service enjoying the service and that improves the value to our corporate clients again And it's a very big market opportunity, not only because as we become the best place in the world to organize travel, dining, event tickets and luxury retail, as we become the best place in the world to organize that, that's clearly a huge opportunity. But on top of that, today, we're only 0.2% of loyalty spent in financial services. Now that gives us an immediate market opportunity to grow our share of the loyalty services within financial services, but also to address the very big market of organising travel, dining, tickets and retail. The best way to understand the growth ingredients, the ingredients in our growth engine, is to see the video that's explained here. That's a very short video, six minutes, but investors find it incredibly useful. And that's been updated with this set of results. Alan, over to you.

Thank you, Alex. As Alex said, our net revenue grew at 49% year on year, and that was at 39% at constant currency. Within that, our corporate revenue grew by 49% and supplier revenue up by 42%. That meant that our adjusted EBITDA came in at 5 million, which is up 4.1 million on prior year, and that was at 3.9 at constant currency. That produced a PBT of 0.4, up 3.2 from a loss of 2.8 last year. And that meant that at the end of the year, end of the half year, we had cash in the bank of 7.2 million with net cash of half a million. If you look at our income statement, I talk about the net revenue growth. Our expenses increased as well as we had to then increase employee numbers to support the growth in the business. But operating expenses grew by 30% as opposed to 49% growth in revenue. And that meant our adjusted EBITDA margin improved from 4.3% last year to 16.1% this year, which is a fourfold increase. We continue to invest in our digital capabilities with amortization increasing to 2.5 million. And as Alex said, we did actually make our maiden first year, half year PVT of 0.4 in the period since IPO. This is our normal net revenue bridge, which shows that the net revenue growth up to 30.9, up 49% and 39% at constant currency. We've retained all our material contracts. Our net corporate revenue retention rate sits at 144% and our base corporate revenue was up 7 million year on year. We did have some new mandates launched in H1. They were small, but they will grow as they embed into the business. And our supply revenue recovered strongly as global travel restrictions were lifted through the period. And a bit of a further analysis on supply revenue that shows the impact of it over the COVID period and how it's recovered strongly. So through the half year this year, we were at 3.4 million, up 42% year-on-year. That equates to about 11% of net revenue as opposed to 11.4 last year. There is some seasonality in our travel-related bookings, and it comes stronger in the second half of the year, and the margin in H123 is slightly lower due to increase of non-travel activity in the period. This breaks down the net revenue by region, the 49%, and as you can see, EMA grew strongly at 33%, with both base, corporate, and supplier revenue growing strongly. However, the biggest growth was in America's region, up 102% year-on-year, and again, that's been driven by our base corporate growth and supplier revenue growth. APAC was slightly more subdued with base business up 6% as COVID restrictions continued. And then by adjusted EBITDA by region, we look at EMEA is up 2.2 million year-on-year to 4 million, going back to sort of historic margins of 30% plus for a mature region. America's given a profit for the first time ever at a profit of 1 million as opposed to loss 1.1 million last year, which is an improvement of 2.2 million. And APAC slightly below last year, a loss of 0.1 against profit of 0.2 as we had to invest some resources in the half year which impacted profitability. This is the normal slide we show that the group has invested significant monies, 45 million in the development of our technology over the period, over the length of the 10's history. And why have we done that? It's investment in the digital platform, 10 made content, as well as the infrastructure around that. We do that because it creates competitive advantage for us. also drives efficiency of the business it drives the service levels and also ultimately revenues our cash flow for appears shows an operating cash inflow of 3.5 million which reflects ppt i talked about 0.4 we haven't had an impact on working capital of 1.4 million but that was due to mostly a client late client receipt which we've now received of a million and then the normal not add back of non-cash items of 4.4 million We, as I said, continue to develop in technology and invest. So we invested 3.7 million in the half year. And then also to support our working capital requirements, we just secured an invoice financing facility of up to 2.1 million and also issued additional loan notes of 1.2 million in the period. That means that our net increase in cash and cash equivalents in the period was 0.6 to 7.2, as opposed to 6.6 at the end of the full year last year.

Great. Thank you, Alan. So how do we do operationally? Well, we're pleased to say that we did very well in the period. So we won new contract. We retained all of our existing contracts. We had revenue growth in all regions, as you've heard, whilst we continue to invest in our proprietary tech content to grow the power of our proposition, how well it gets communicated. It's important to mention that many of our corporate clients are banks and private banks, wealth managers, who tend to think that they offer banking, lending, investments, estate planning, and so on. And now many of them are seeing lifestyle as a fifth pillar that they offer their customers that helps them acquire, engage, retain their embedded customer base and strengthen it. And we develop our service differently depending on the value of the individual member to the financial institution. So this graph shows that very high value members tend to have high penetration because they get more marketing of our service to them. They're encouraged to use the service more. And they're also given a real choice about whether they want to use the service digitally or whether they want to use it high touch. So they may have a medium mix of digital to non-digital. Now, medium value customers who are less valuable to the financial service organization have a higher percentage is digital mix. because they have to be more cost effective because they're less profitable for the financial organization. And also, you tend to have a lower percentage of eligible members using the service. So there's lower penetration. And we can affect that by how we communicate to those people, how we explain the proposition, what proposition we express to them, and how much we embed things like AI and chat as well. Now, the best way to look at how we are improving our proposition is to watch this video, which explains by our category pillar, dining, entertainment, travel and retail, what we're doing to improve our service, what we've done in recent months, what we're doing in the months and years to come. A lot of it is about how we're improving our digital platform, the platform that our members can use to access our service. And we've already built a fabulous platform, which is live with multiple brands all over the world and being used all the time by high net worths, mass affluent individuals and their families all over the world. It's worth maybe pausing on this and just understanding quite what we've built. And although here we've just chosen 12 features, if you like, of our digital platform that we've developed, we've developed far more than just this. And we're not stopping. Already this year, we've developed the three items on the left. We're halfway through the Viator integration, improving events, entertainment tickets, self-serve, adding in some labels and icons and searchability around ESG and differentiated dining benefits. And then we're already speccing out how we can build more AI to sit over our knowledge base to help our lifestyle managers. how we can use chatbots and other parts of AI machine learning to personalize our service very efficiently to our members. And there's other things that we're looking to improve in our tech stack in the coming months and years as well. one thing in particular is we're always looking to grow how much we can personalize our service to our members we know that's very very powerful for us so for instance here you can see that members can follow and track their preferred interests brands hotels events artists and then we can tell them about those things as they become available and we can use other data as well in order to help reach our members and personalize our service to them. We can use the data that banks tend to give us when we sign up members. So banks tend to tell us the age of each member, their home address, and their approximate wealth levels, and of course, all of their contact information. We then build other information explicitly And then we've also got implicit data through member behaviors in our service and also member behaviors sometimes in terms of how they use spend on card. And with the individual members authorization, we can use that spend information to further personalize our service to them. Beyond that, ESG is important for us. It's important for many of our corporate partners and for many of our members. We are in the process of becoming a B Corp, which is helping educate us on what more we could be doing to strengthen our business. But also we know that we can help our members make the right choices for the planet. We can't force them to do anything. We can offer them a menu of alternatives that might be good for the planet, good for society, give them more visibility of choice. And we can also one of the interests that we track is how interest our members are in, for instance, things like philanthropy. And then if they tell us their interest in philanthropy, we can help enable that, help encourage that. So we are doing the right thing for our members, for our corporate partners, and it's good for our business and for our people as well.

Thank you, Alex. Thank you. I will touch on the business model. Again, watch the Growth Engine video as Alex said earlier, but I'll touch on our revenue model as to how we make money. So the pie chart on the left hand side looks at the split of our revenue. So 88% of our revenue approximately comes from our corporate clients who pay us to look after their clients, our members. And we also make about 12% from supplier revenue, that's mostly travel hotel commissions. And a typical contract with a corporate client is we get paid by request, be it high touch through a lifestyle manager, answering a phone or answering email, or we have it through the platform digital request, which is normally a lower fee. And that's wrapped up to our client revenue. And these contracts are long term in nature and often have agreed minimums within them to give us some protection. This next slide we've shared before, which is looking at the record eligible member base to achieve the growth that we've talked about. So the left-hand side of the graph looks at the eligible members by high and very high value segments, as Alex mentioned earlier. And then on the right-hand side, this is the total active members who's actually used the service at least once in the past 12 months. And as you can see, it's grown strongly. And as we've said, active members have grown to 316,000 by the end of the half year that's gone and continued growth from 2021. And the way we look at this is we look at the penetration, as Alex says, and this is just a reminder that, you know, by segment, the penetration is higher and very high value compared to high and medium. And the digital mix will be more towards the medium in terms of affordability. And actually we go on to the next slide, which looks at our average concierge revenue per active member, which shows that actually we do make more money per active member from the very high segment because the bank can afford to spend more money with that client. who has larger amounts of assets on the management or premium credit card with them than they could do with high and what they do with medium. So that's the shape of our average concierge revenue per active member.

Thanks, Alan. So where from here? Well, as is always the case with us, we're looking to grow our current clients. We're looking to grow new contracts with current clients. And we're looking to grow new contracts with new clients as well, both within financial services and then into the future in new verticals as well. This paragraph is taken from our R&S that announced our results. And it essentially says that we are on track to meet the board expectations for the full financial year.