Naked Wines plc

Good morning and welcome to the Naked Wines PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in lesson early mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO Ruchiko Mazza. Good morning.

Hello, everyone, and welcome to our half-year 26 results presentation. We are very grateful for your time. I'm Rodrigo Maza, Naked CEO. I'll be presenting today along with Dominic Neri, our Chief Financial Officer. Here's the agenda that we'll cover this morning. Before we get into the details, a few headlines to set the stage. We've made a lot of progress in the first half of the year. Our performance continues to track in line with the guidance we've shared with the market. We remain focused on delivering shareholder returns and we're pleased to have completed our first distribution during the summer. As stated during our last presentation, we made structural changes to our business at the start of the year to enhance focus, speed and accountability. We're making tangible progress on both acquisition and retention. We strengthened both our senior leadership team and our board of directors. We're happy to welcome Jan Moore and Susan Cooper as non-executive directors. We extend our gratitude to Deirdre Arunet, who's exiting our board, for all her contributions to Naked Wines. We remain confident in the strategy shared with investors last March as we go through our peak trading season. Results so far are positive. Let's dive in. Naked Wines is all about connecting wine drinkers and winemakers. Our model removes the middlemen so customers get better wine for their money, and winemakers earn more for doing what they do best, making exceptional wine. This direct, meaningful relationship builds loyalty, drives a sense of community, and differentiates us in the market. Now this is what our model delivers. This chart leverages Vivino's data to show how Naked consistently over delivers on quality for price when compared to traditional retail brands. This is one of our main drivers of retention. This is our model at scale. Naked currently connects over half a million very satisfied angels in the UK, the US and Australia, with over 300 of the world's most talented independent winemakers. As stated during a strategy event back in March, we think of our footprint as an advantage. This is especially true in the US, where the ability to legally deliver wine to over 90% of the population is a true moat. Operating across three countries adds meaningful resilience to our business. That diversification protects us from overexposure to any single market or regulatory shift. It also allows us to test things faster, accelerating our learning. When we exceed our angels' expectations, our whole flywheel accelerates. Delighted angels tell others. And when that happens at scale, everything moves. More angels means more funds, more sales, more cash. It's truly a virtual cycle. When our angels are happy, our winemakers, our teams, and our shareholders, they feel it too. Now over to you, Dom.

Thank you very much, Mazza. I'm going to be taking us through HY26 performance. We'll then move on to our strategic pillars. I'll cover the first two of those and Mazza will cover return to growth. So moving on to our financials. We're seeing, first of all, continued strong cash generation. including the 2 million share buyback, which was completed in September. So that's 10 million of cash generation, less the 2 million share buyback is an 8 million increase on 12 months ago. Adjusted EBITDA is doubling, reflecting the intentional strategy to reduce acquisition investment and to focus on higher quality core profitable customers. So adjusted EBITDA up 112% on prior year at 3.6 million. This strategic change, which we've communicated before, leads to the lower revenue number you see there down on prior year. And as I repeat, this is what we've communicated and this is expected and it's in line, tracking in line with our full year guidance. The loss before tax you see there benefits, of course, from the doubling in EBITDA. It includes a number of items. There's a two million restructuring, which we've announced in April. There's the one-off impact of EPR costs, which will unwind in H2. And then, of course, there's £2.6 million of the inventory liquidation costs, which we've flagged as we proceed with the liquidation of our inventory. And that is part of the £12 million or $17 million target, which we have over the medium term, which is likely to impact this year and the next two. As we move on to our key strategic KPIs, um free cash flow if we start at the top free cash flow is positive it's where we expect it to be so inventories are down uh in the year in half year um but what we are seeing is uh some inventory build in the uk and oz which is why free cash flow is lower than prior year but this is still a strong result reflecting as it does cash generation ahead of our peak season, where we would normally see cash being used up as we build for peak. So a strong result there. As we move on to ROIC, we can see the impact primarily of the doubling in profitability, but also the impact of share buyback impacting that as well. Gross profit margin is up materially. 50% of this is related to inventory liquidation differences between this year and prior year. But the rest of that is a genuine improvement reflecting significant reductions in first order losses we acquire customers and cost savings in G&A and marketing efficiencies. And this is despite significant ongoing regulatory cost increases from duty and EPR, which are impacting the industry more broadly. Acquisition break even. This is our new metric. So this historically we've looked at a five year forecast for marketing acquisition, which we've called payback. We're now, as we've already indicated, moving to a 24 month metric. which we estimate is circa the same as an IRR of 23%. And it's the equivalent to what would have been 1.7x in our old payback metric. So acquisition break even, which is when we obviously get the break even on our marketing acquisition investment. has improved significantly on this time 12 months ago. So we're down to 44 months from 75 months. Clearly not at our target, but nevertheless moving well in the right direction. And that is driven by a number of factors. We're seeing lower CACs, which we'll come on to in a second. We're seeing better retention of acquisition customers. and there are some notable impacts from margin improvements and this is an area where we continue to anticipate significant margin improvements are forthcoming over the next few years adjusted ebitda we've already talked about so i'll move on moving on to the bottom row returns to sustainable growth mps remains excellent so no change there member retention rate is In line with 12 months ago, it's actually up 100 basis points on the end of last year. We are seeing, as I've indicated, already some positive signals on retention rates of new members. Given this is a 12 month metric, you're not going to see that in here yet. That will come through at the end of the year. But nevertheless, positive movements in retention overall. CAC, as I've already said, is down and that impacts from a number of factors, but is critical to our metrics. And revenue per member, going backwards slightly, this is largely geographic mix and there is a little bit of hesitancy in the broader industry, in our industry, which is having a small impact on that as well. Moving on to our three strategic pillars. So we're happy with the progress of our KPIs, and we believe this reflects progress as we implement our new strategic plan. As I've indicated, I'm going to be covering off the first two of these pillars. So that's cash and profitability. And Maz is going to be talking to you later about returning to sustainable growth. So if we dive straight into cash. HY26 sees the continuation of a strong story. So cash generation continues. As I've already said, we've seen 10 million of cash generation, which has funded 2 million of share buyback, which was completed in September. So that's an 8 million net cash increase. And importantly, we've seen an increase in cash generation in cash in the first half of the year against normal seasonality. And of course, that reflects the ongoing improvements, both in profitability, but also in liquidation of our inventory. So inventory continuing to decline. We are progressing well with this, with our plan to generate 40 million of net cash from inventory. Whilst the majority of the big drops are likely to happen in FY28 and 29, we continue to see improvements here. And we have confidence, particularly because the biggest portion of overstock is in US expensive reds. And the good news on these is that they last for in excess of 10 years. So we continue to anticipate generating net cash from our inventory. And that's a key part of that. We also continue with our commitment to generate value from our capital. So I talked already about the share back we completed in September, which the board believes was at a value that is significantly below the intrinsic value of the company. We continue to anticipate ongoing distributions and, of course, more substantial distributions in the median term. We will, of course, consider inorganic opportunities as they arise as well. Moving on to our profitable core. Again, we're seeing solid progress with profitability as we reiterate our medium term target of up to 14 million EBITDA over the medium term, clearly making great progress with this on EBITDA and the improvements to the gross margin and G&A I've talked about. key aspects of this are obviously visible in hy26 so i've already talked about our new acquisition break even kpi which is replacing payback and this is a much better short-term focus as i've indicated targeting that 24-month break-even point and we're seeing significant improvements in this and a key part of those margin improvements is coming out of price increases in australia in the uk And also, of course, another driver is the acquisition retention improvements that I flagged earlier. As a result of this focus on profitability, we are reducing inefficient marketing investment, and that's driving in excess of five million of efficiencies versus FY25. That reflects the strategy we talked about in March, where we've reduced investment in vouchers and other ineffective channels. We are, of course, focused on costs everywhere across the P&L, and we have delivered one million and a half million of G&A savings, which after inflation delivers the 1.1 million reduction in G&A costs that we're seeing coming through the P&L. We continue to see this as an opportunity to drive significant value. And to that end, we are implementing a ZBB strategy on our costs, which will take effect from FY27. So continuing focus here. And I'm going to hand over now to Mazza, who's going to take you through the final pillar.