Naked Wines Stock

Good afternoon, and welcome to the Naked Wines plc investor presentation review. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand over to Rodrigo Maza, CEO. Good afternoon, sir.

Hello, everyone, and welcome to our FY '26 results presentation. We are very grateful for your time. My name is Rodrigo Maza. I'm Naked's CEO. I'll be presenting today along with Dominic Neary, our Chief Financial Officer. This is the agenda we'll go through. In FY '26, we delivered results in line with the strategy we set out in March of 2025. While our revenue declined, our focus on profitability resulted in adjusted EBITDA coming in ahead at GBP 7.6 million, which represents a 35% year-on-year improvement at constant currency.

We finished the year with GBP 33.4 million in net cash, up GBP 9 million, even after buying back over 10% of the company in recent months. In FY '26, we made an important call to transition from our legacy tech stack into Shopify, a move that will not only deliver an improved experience to our customers, but will materially reduce cost for Naked Wines. We saw customer satisfaction and retention strengthen from what was already a high baseline. This was driven by our focus on the elements that make Naked Wines stand out, the craft of independent winemaking, the people who make the product and those who fund them to do so and critically, the connection between them.

Let me tell you more about this. In FY '26, we continue to investigate what makes Naked different and better in the eyes of our customers. We always start with the angels we have, especially those that have been loyal to us for a very long time. But we also talk to those who we want to recruit, but for whatever reason, have yet to bring in. And after literally thousands of interactions with all of them, we came to the conclusion that our customer value proposition needed some refreshing.

While we remain focused on delivering high quality at a fair price, a reliable and trustworthy delivery experience, and we are making active investments in enhancing the shopping experience on our site, it's that direct meaningful connection between winemakers and Angels that people value most. It's what truly sets us apart, so we're doubling down on it.

It's the consistent delivery of our customer value proposition that makes the Naked flywheel spin. When we fulfill our promises, Angels don't just stay, they recruit. Their funds allow us to back independent winemakers who armed with the data we provide can then offer more choice and better wines. As the flywheel turns, it generates more sales and resources that our team then invests in capabilities that allow us to deliver even more value to our angels, and so it goes.

Every turn of the flywheel makes the business stronger. And for shareholders, that shows up directly as return on equity and capital. This isn't a linear model. It's a compounding one, and it's the lens for everything else we'll cover today. So over to you, Dom.

Thank you, Maza, and good morning, everyone. I'm going to take you through the FY '26 numbers and then walk you through the progress we've made against the first 2 of our strategic pillars, releasing cash and recalibrating to profitability. Maza will then take you through the progress we've made on a return to growth pillar after that. But let's start with the shape of the business today.

For those newer to the story, a quick reminder of what Naked looks like. We finished the year with 486,000 Angels, our members across 3 markets. The U.K. is our largest with 49% of that. The U.S. is 38% and Australia, 13%. The health metrics matter as much as the size. NPS of 77 is really excellent. Member retention of 76% is also great as well. 93% of our wines are rated as like it by the picked people who actually rank them. And behind all of that sit around 280 independent winemakers. And we can also, in the U.S., ship to over 90% of the population in what is a heavily regulated market.

So we are deliberately a smaller business, but a demonstrably healthier one, and you'll see that theme running through everything today. Our headlines for the year on our key financial KPIs. First, net cash is GBP 33.4 million. So that's up GBP 3.3 million on last year. Underneath that, we actually generated GBP 9 million of cash because we returned GBP 6 million of that through the share buyback.

Second, on to adjusted EBITDA. So that's before inventory liquidation and associated costs, which we'll come on to in a minute. This was GBP 7.6 million, up 35% at constant currency. And 3 things drove that. There were over GBP 11 million of marketing efficiencies as we focused on more profitable customers. Gross margin improved by 150 basis points on prior year, reflecting the impact of pricing and our savings initiative.

And we saw the first contribution from our B2B services business of over GBP 300,000. And that's coming out of the new Sonoma facility, and we see upside for that in the future. Third, as I've already indicated, revenue is GBP 199.1 million, down 18% at constant currency. Now Maza will come back to this later, but essentially, there are 2 distinct impacts here, both of which mechanically reduce and lessen over the medium term.

First is the mechanical unwind of the exceptionally large FY '21 and '22 cohorts. And second is our deliberate decision to stop inefficient acquisition spend from the second half of FY '25 onwards. This is the impact of resetting the model and the reason why EBITDA will grow progressively over the medium term. Finally, a loss before tax of GBP 6.3 million. Now there are over GBP 11 million of adjusting items and inventory liquidation costs here, which are truly unusual in nature.

The first is this year's restructuring and also the write-down relating to the digital transformation as we move digital transformation from CapEx into OpEx. This is a really important part of our future savings and essentially is the driver, which will mean that ultimately, by the end of FY '29, we will see G&A GBP 10 million lower than it's going to be in FY '27. The GBP 5 million inventory liquidation costs will not be new to you. They're obviously painful to the P&L, but conversely, they are resulting in the cash delivery as we liquidate our inventory.

We provide guidance to them later on as to how that will continue over the medium term. So what do the key strategic KPIs look like? Well, we've lined these up across the 3 pillars and the numbers here on a reported FX basis. So on releasing cash, free cash flow was GBP 10.6 million. So this is, as expected, lower than last year's GBP 18.5 million free cash flow as the significant inventory unwind matures. Return on capital employed is up from 9% to 12%, and that's helped both by the EBITDA growth and the buyback.

On recalibrating profitability, gross margin, as I've already said, is up to 19.9%, a trend that's going to continue on as we go forward. That's up 150 basis points higher than last year. Acquisition breakeven has materially improved from 75 months to 42 months. For me, this is one of the most important numbers on this page. And adjusted EBITDA of GBP 7.6 million, including more than GBP 11 million of marketing G&A savings. As we move on to growth, NPS is excellent at 77% and up slightly on prior year.

Retention is also up to 76% with particularly notable improvement in the U.S. and Australia. Customer acquisition costs and revenue per member both look slightly softer as reported, but both are actually improving in constant currency. So every KPI on the page is moving in the right direction, and we continue to anticipate ongoing improvements as we continue to implement the strategy.

So that's the year-end numbers. Now we'll move on to the pillars and show you where we stand against the strategy we set out in March 2025. So as a reminder, the March '25 strategy carried 3 medium-term commitments.

Firstly, on releasing cash, we were going to -- we committed that we would generate more than GBP 45 million by the end of FY '30. We've delivered GBP 9 million of that so far, so 20% of the way there in year 1. On recalibrating profitability, adjusted for FX, we committed to GBP 9 million to GBP 14 million of EBITDA over the medium term. At GBP 7.6 million this year, we are likely to reach that range early, potentially as early as FY '27.

And on return to growth, we communicated a 5% to 10% exit growth rate. That's one still in progress. Acquisition breakeven has improved significantly to 42 months, and we're already seeing 24 months or better in FY '27. So the economics are fixed, but volumes are still too low. Maza will come back on this. So an honest scorecard, 2 on track or ahead and one where the machine works but isn't yet quite running at scale.

Moving on to releasing cash from the balance sheet in a bit more detail. So we have GBP 33.4 million of net cash plus an undrawn facility of around GBP 19 million. So liquidity remains strong and is improving. Net cash is up GBP 9 million before the buyback. One thing to note, GBP 7 million of Angel balances now sit in a noncash obligation, and we anticipate this will keep growing over the medium term.

On inventory, this is down around GBP 11 million since FY '25, of which GBP 4 million is FX and noncash, so movements in the provision. But there's plenty of upside left there. We're still carrying roughly GBP 27 million more stock than we were in FY '20, and we anticipate, therefore, significant cash coming out of this.

Importantly, of course, the -- and I communicated this at the half year, the overstock is mostly in premium U.S. rents, and those typically have more than 10 years of shelf life. So this is a timing question, not a quality one. And on distributions, the GBP 6 million buyback is complete as of early FY '27. That's 10.5% of the share capital we had back in August 2025. We remain committed to substantial ongoing and ad hoc distributions over the medium term, and we will consider inorganic opportunities as they arise.

Now all of this is governed by the disciplined capital allocation we've launched, which is the next slide. So our disciplined approach to capital allocation. This is how we make investment decisions, and the Board and management are completely aligned on this. Every material invested is tested against a new 20% IRR hurdle. Where returns clear the hurdle, we reinvest. Customer acquisition where the payback works, operational investments like the SaaS replatform that Maza will be coming back to, inorganic opportunities where they arise and share buybacks when the share sits below the intrinsic value that the Board believes.

Of course, when nothing clears that hurdle, the surplus will go back to shareholders as dividends. It's deliberately simple, and it's already working. We have GBP 33.4 million of net cash. We anticipate that this cash balance will be able to be reduced materially over the medium term. We've already delivered 20% of the GBP 45 million medium-term cash generation target. And because of this, we've bought back 10.5% of our shares.

On to profitability, on cost discipline, we've now actioned GBP 25 million of savings against the original GBP 23 million target which means they've either been delivered in FY '26 or we've taken the actions, which will ensure that those savings are generated in FY '27. We stopped low ROI customer acquisition, and that's resulted in breakeven -- acquisition breakeven reducing from 75 months down to 42. Zero-based budgeting has been introduced and is now a part of our culture, and it's funding the GBP 5 million of SaaS transition costs, which historically we had told you we were going to be going to CapEx are now going to OpEx to G&A and are not leading to an increase in G&A because of the cost discipline and zero-based budgeting approach.

On the P&L, gross margin is up 150 basis points, and that's from better first order losses, so better acquisition, better pricing. Improvements in retention and the improvements in lifetime value of about 35% to 40% in all markets. And we would also flag we've now got price rises of over 5% live in every market and with more to come.

So just to double-click a little bit more into that pricing point. This is one of the most encouraging things that has happened this year. Now we knew we had room to raise prices. But rather than slipping them through quietly, Maza wrote to Angels and told them exactly what we were doing and why. And the response, and you can see some of it on the slide, was remarkable.

Many Angels don't just tolerate the increases, they support them because they understand the money protects our independent winemakers. That's the connection at the heart of this business doing real commercial work. And the numbers bear it out. Increases of more than 5% are live in every market. You can see 150 basis points of margin improvement that will continue to improve in FY '27 and first order losses down 53% globally.

And moving on to the medium term. We delivered GBP 7.6 million EBITDA, which is ahead of target and up 35% in constant currency, and that's EBITDA, excluding inventory liquidation adjusted. The replatform takes GBP 10 million of cost out versus FY '27 by the end of FY '29. So that is GBP 5 million of genuine future savings and GBP 5 million reduction as the transition costs are falling away. All of this makes us increasingly confident on both the scale and the speed of the medium-term EBITDA range, which we'll double-click into now.

So this chart builds a bridge which explains our confidence as to why we are committed and why we believe in our medium-term EBITDA guidance and potentially better. So we start with the EBITDA range of GBP 7.6 million to GBP 9 million, which is the guidance we'll be coming to at the end of this presentation. So imagine we delivered that in FY '27. How would that build over the next few years? From there through FY '30, I'd highlight 2 EBITDA drivers that we ensure as a minimum, we deliver our medium-term goal.

Firstly, even in a downside revenue scenario, we have already identified more than GBP 10 million of clearly identified cost savings, and that's the SaaS replatform implementation that I've already talked about. So clearly identified. We also now have a proven track record of delivering on our cost savings. So that alone gives us strong confidence that we will hit our medium-term EBITDA guidance. But on top of that, there are many other things which will be driving profitability in the future, and we've already seen and proven opportunities from already.

One example of that is pricing. So we are assuming that pricing offsets COGS in our modeling. But actually, what we're seeing at the moment is that pricing will overdeliver on our cost of goods increases. And if pricing was just 0.7% above inflation, -- that's worth GBP 3 million of EBITDA on its own. And of course, that forgets other opportunities in COGS and variable costs, which we are pursuing as well.

But the levers that take us beyond that range, potentially towards GBP 20 million and more are the commercial levers of retention and acquisition. These are the 2 dials that over deliver this plan. And on that note, I'm going to hand back to Maza to talk about the return to growth.

Thank you, Dom. Our revenue declined by 18% last year. That is driven by 2 factors: the expected attrition of the large FY '21 and FY '22 cohorts and the deliberate decision we made to walk away from inefficient acquisition investment. In FY '26, we've been extremely disciplined in ensuring investments clear tight IRR hurdles, which we knew would result in us acquiring fewer but much more valuable Angels.

As we've deployed this strategy, we've seen breakeven improve materially, and we expect that trend to continue. The challenge we now face is how to scale our volume of new customers while maintaining a healthy LTV to CAC ratio. Let me walk you through how we've been tackling that.

We've said it before, but it bears repeating. Growth at Naked Wines is a loop, not a funnel. The retention of our engaged community of Angels should be the main driver of our acquisition efforts, which should, in turn, convert more high-value Angels and on and on. The move we're making to Shopify will enable us to accelerate our results on both sides of the loop.

Now let's go deep. Let me start with retention. It improved to 76% in FY '26, mainly driven by our U.S. and Australian markets. Our activity continues to revolve around discovery, where we've enhanced navigation ease across our range with personalized recommendations to help customers find their next favorite wine and then subscribe to it, which provides convenience to them and predictable revenue to us.

Around delivery, where we've run several tests to determine if the rewards we offer to our customers actually deliver value to them while strengthening their connection to our brand. This has led us to double down on benefits that make a difference to our angels while reducing discounting activity and therefore, improving our margins.

And most importantly, around community, where we've doubled down on telling the stories that we know Angels love and where we're actively involving them in decisions that shape our range and our offer. These actions have resulted in significant improvements in lifetime value across all our markets, and they give us confidence that this is the path we need to follow to go back to sustainable, profitable growth.

We continue to run tests to confirm through reliable data, what's working and should be scaled and also what should be abandoned. As a result, we have validated that expanding our credit guarantee to all Angels improves both retention and order rates and that the free sample we offer our clients does, in fact, increase not only retention, but our contribution.

What stood out most in FY '26 was the response we received from our Angels as we focused on reigniting the part of our community. Campaigns built around what makes Naked different generated some of the strongest engagement we've seen in years. Angels didn't just purchase. They shared, they advocated, they brought new people in.

At our tasting tour all across the U.K. and from Victoria to Coravin to Sonoma, Angels and winemakers show up for each other. That's the kind of relationship no competitor can replicate. "Craft, people, connection". That's our magic formula, and we'll keep on driving it home, which now leads me to acquisition.

I've mentioned it already, but the discipline we've created is leading to consistent reductions of our customer acquisition costs and therefore, to our breakeven periods. Our acquisition activity is focused on 2 main engines, generating more high-quality demand and converting it more efficiently in our site. Both are underpinned by a single operating system consisting of reliable performance metrics and consistent investment guardrails.

And we continue to run tests here, too. We found the acquisition offer that balances conversion and lifetime value improvement best. We continue to run ambition tests on our homepage, and we are assertively walking away from channels that fail to deliver healthy paybacks. We're using the power of our community for acquisition purposes, too. We found great creators who understand our brand and customer value proposition and they bring it to life in engaging ways. We're leaning more and more on our winemakers to attract high-value customers.

We find ways to come together with our angels, such as a tasting tour, and they find ways to show up for winemakers as evidenced by our Coravin and Victoria campaigns, where customers rally together to provide support to communities in need. This has produced material improvements in our referral rates, but there's so much opportunity to accelerate this even more. And we need to as the lifetime value of Angels acquired through referrals is quite remarkable.

We wanted to share an important preview with you today. As we close the first quarter of FY '27, we see that the last 5 monthly cohorts have delivered a breakeven of less than 24 months. This is amazing progress, and we need more of it. We're working on several levers to deliver it and the migration to Shopify will enhance our impact across all of them. We're very excited to partner with Shopify in this new chapter in Naked's journey. There are many spaces in which we believe this migration will enhance results for our company. They all come down to offering customers a more simple and convenient way to interact with us, one that recognizes their preferences and that celebrates their history at Angels.

And importantly, this migration will result not only in a better shopping experience, but in a more efficient business. We expect to capture circa GBP 10 million in cost savings by the end of FY '29, enhancing the profitability of our company.

Regarding other channels, we continue to invest in B2B as a way to add resilience to our business. In FY '26, we leveraged our Sonoma facility to produce additional EBITDA and anticipate this becoming a meaningful profit driver over the medium term. And while the market remains challenging, we delivered GBP 4 million in B2B sales and are confident that the relationships we're building will yield relevant long-term results for Naked. Finally, we continue to monitor the market for relevant inorganic opportunities that might strengthen our business. Back to you, Dom.

Thanks, Maza. And on to post period end and FY '27. First, current trading, which is progressing as we would expect it to in relation to our medium-term guidance. In other words, consistent with profit growth and adjusted EBITDA and continued cash generation. It's worth noting that the price increases we discussed earlier have a fuller effect in FY '27 as we get a complete year of their benefit and ongoing future increases come online as well.

Second, delivery on the plan has continued past year-end. The GBP 25 million of savings, which is ahead of that GBP 23 million target, is supporting the SaaS platform implementation, and we are reaffirming at least GBP 36 million remaining of the original GBP 45 million medium-term cash generation target. And capital allocation stays exactly as I described earlier. We're committed to ongoing and ad hoc distributions with a strict 20% IRR hurdle on every use of cash. And we continue to monitor inorganic opportunities as they arise.

Now to the guidance itself, and this is across a performance range. Revenue of between GBP 158 million and GBP 175 million. The revenue impact there of focusing on profitable customers, but the impact of that lessens in FY '27 and will continue to do so over the medium term. Adjusted EBITDA, that's excluding inventory liquidation costs of GBP 7.6 million to GBP 9 million, so ahead of FY '26 and potentially delivering on our medium-term guidance 3 years early.

Net cash of GBP 34 million to GBP 42 million, and we'll adjust that through the year for any share buybacks as they occur. As we've previously communicated, the majority of the inventory reduction has always been expected to hit in FY '28 to FY '30, and we continue to anticipate this dynamic.

And we continue to anticipate around GBP 14 million remaining of that GBP 40 million remaining of inventory liquidation costs, which will be spread over the medium term, and that will help us to generate the cash that we've talked about from our inventory. So in short, cash keeps building and profitability continues to grow progressively. And over to Maza, who's going to wrap up.

So to close, FY '26 was a year of delivery. We're in a strong position, both in terms of profitability and liquidity and have developed a capital allocation mindset that will translate into disciplined investments over time. We said we'd generate at least GBP 45 million of cash over the medium term, and we've delivered GBP 9 million in FY '26. Still at least GBP 36 million to go, but a strong start for sure.

We're excited about our move to Shopify as we believe the enhanced experiences we offer our customers will translate into significant growth opportunities. In the words of one of our angels, we got our mojo back. We'll continue to double down on what makes Naked unique. It's all about craft, people and connection. As we share our FY '27 guidance, we are excited about our future. The best of Naked Wines is still ahead. Once again, thanks for joining today.

That's great. [Operator Instructions] I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed by investor dashboard. As you can see, we have received a number of questions throughout today's presentation. And Dominic, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Thank you very much. Right. I'm going to take these questions in order. So the first one is about AGM resolutions. You must have come close to the top of your AGM resolutions on share buybacks this year. Any plans to amend these at the next AGM? And if so, how?

Yes. So our AGM resolutions will be going out shortly. We are considering revised buyback resolutions, which will give us more flexibility. Whilst doing that, we're mindful of our capital allocation policy and ensuring we apply capital in the most effective manner. So that is answered.

The next question is when do we expect revenue to stabilize? There's a couple of questions on this.

As we've said, we are focusing on a business which is more profitable and part of that means acquiring fewer customers, and therefore, there will be a continued decline in revenue for the -- over the medium term. Saying that, we expect to return to stability over the medium term although that is more likely to be 28 or 29, possibly 30. The more important point, though, is, as we've discussed today, we are committing to ongoing and progressive growth of EBITDA. And we are increasingly confident of that guidance range that EBITDA will rise to at least 11 million to 14 million, and we envisage that happening at any -- even in our worst case downside scenario on revenue before revenue returns to growth.

The next one is on the SaaS platform. So I'm going to hand this over to Maza, which is when will the transition to the SaaS platform to Shopify start and what are the transition risks?

The transition is already on its way, right? So we are working quite intensely in building the plan, ensuring that the customer experience is as smooth as it can possibly be, and we will go live in Australia in a couple of months. Australia is the market where we usually test new things. We have a highly entrepreneurial team there that is really excited about this change.

So there are some risks. It's to be expected that some metrics will experience a small dip before they trend in the right direction. But we'll capture those learnings in Australia, and we're going to be in a very, very strong position before we implement in the U.S. and the U.K.

Thank you. Right. So the next question is you've repurchased 10.5% of the opening share capital since the buyback program began at prices you describe as well below intrinsic value. What intrinsic value estimate is the Board using? And is it independently reviewed? Or is it management's own model?

So we've repurchased, as the question says, 10.5% of the August number of shares the company had back in August 2025, and that's typically at prices between 70 and 75. The Board's view is that even if we consider any prices out there and the most obvious is the analyst market price, the target price rather, even with a significant haircut on that, the IRR that we generate from doing the share buybacks is, therefore, significantly in excess of our 20% hurdle rate. So this is essentially the Board's conservative view of an external independent target that is out there.

The next question is, Naked has stated that the strategic reset has improved profitability and cash generation. What proportion of this financial benefit comes from selling inventory, reduced supplier purchasing and commitments and what proportion of this financial benefit has been reinvested into rebuilding demand and future growth versus retained as cash or return to shareholders.

So the -- I guess the starting point for this is we've talked about the GBP 45 million cash generation target. That comes from essentially 3 core movements. One is liquidation of inventory. The next is profitability. And the third, which works in the other direction is any reduction in angel funds.

What we've got left in inventory is in excess of GBP 30 million. It will depend a little bit on what happens to FX, what that turns into a GBP because most of the excess is in the U.S. But you could, therefore, expect in excess of GBP 30 million coming out of that. which then leaves, given we've got GBP 36 million, we expect to generate in excess of GBP 36 million still of net cash, that GBP 6 million will come from a combination of profit and Angel funds reductions.

Now given the stability of Angel funds that we've seen because it is heavily weighted to age members, actually, you can also see there's potential for meaningful overdelivery of that number. But yes, that's where it comes from and how the balance works out.

The next question is, please define the metrics around a profitable core. How many customers in the core, how stable are they? What's the lifetime value? Can the core grow? And once the business reaches a smaller profitable core, what is the mechanism for sustainable revenue growth?

So the -- we don't break down our customer cohorts by -- I'm sorry, our membership numbers by customer cohorts. So we're not going to start doing that. And what I can say is try and give you some flavor on that. So if I was to say, look at the members who are more than 48 months old, they are about 70% of our membership base, and they have in excess of 85% retention.

As it happens, they were broadly stable this year versus last year, but you would anticipate that over time, they would reduce by maybe 5% per annum and gradually get refilled from the top. So that's the flavor for the core. But the real question is, can they and the business return to growth. And I come back to sort of the essence of the question I gave earlier, which is that our EBIT target in the medium term is for GBP 9 million to GBP 4 million EBITDA.

In our modeling, we see stability coming over the medium term. And at that point, we will be -- EBITDA will be in the GBP 9 million to GBP 40 million range, and we then anticipate growth -- revenue growth thereafter, which, of course, will drive improved profitability.

That one? Could you explain what you mean by GBP 7 million of Angel balances sitting in noncash obligation?

Yes, this is quite simple. We have about GBP 63 million of Angel balances, which have been given to us by Angels to invest in winemakers and inventory. And those are funds that are then used for sales in the future. That balance has remained remarkably stable versus last year. It's actually remained pretty much flat. What has happened since April '24 is that new customers who've been coming into the business, new Angels have been signing up to terms, which means that the company has the option to return those funds should it ever be asked for either as cash or as inventory.

And so we anticipate that the balance which sits with those new terms, in other words, we do not have a cash obligation will significantly improve over the next 12 to 18 months. What I would say is that is slightly technical because we have never seen material cancellations or for that cash to be returned. People put it in to buy wine and they use it to buy wine as well.

I think the next question is on revenue growth, and I think we -- when do we return to growth? I think we've already answered that. I think the final one is one that I'll hand over to Maza. That question is, you mentioned that you're not getting as much volume of new customers as you planned. How much is the gap? How will this impact your buying planning? What is the shortfall in volume?

I mean we want to acquire as many customers as we possibly can within expected payback, right? And that's a nonnegotiable condition since what, 18 months when we started like implementing aggressively this policy. So we are acquiring less customers than we expected based on our modeling. We are experiencing, as every other DTC business out there, a significant CAC inflation.

And that's the struggle we're working our way around, right? So we need to, I would say, acquire close to twice the number of members that we are acquiring today to reach the stability of our member base in the next 2, 3 years. So I wouldn't say that's our target. Our target is to exceed that, but that should give you an idea about the size of the gap we're currently facing.

Now again, it's quality over quantity for us. We are acquiring less customers, but the quality of those we are acquiring as evidenced by their LTV is materially higher, right? So that matters a lot. It connects with the retention question Dom addressed, right? Like we want to bring in high-value angels that will stay with us for a very long time, and that's what we're doing right now.

And I just want to add, just from a stability point, whilst we are obviously targeting significant growth in our customer acquisition, the guidance that we've given about medium-term EBITDA 9% to 14% does not require us to double that acquisition growth. We expect to do it. But even in our downside scenarios where it only increases marginally, we still deliver that EBITDA guidance.

We will stabilize because that's the mechanics of it, and we will return to growth. And I think that's the last question we've got. So unless there's any last minute ones, I'm going to hand over to IMC to wrap up.

That's great. Thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Maza, could I please just ask you for a few closing comments?

Yes, sure thing. Well, as we said in the presentation, we think of FY '26 as a year of delivery, delivery of our strategy. We're pleased with the evolution of our profitability. We're pleased with our cash position. We are clear on our challenges around growth, particularly customer acquisition. And we are very excited about Shopify and how this tool will enable us to move forward and offer our customers an enhanced shopping experience with Naked Wines.

We are doubling down on what makes Naked different and better. It's all about craft, people and connection for us. And you can expect us to continue to drive that message home. And we are excited about the future. We strongly believe that the best days for Naked Wines are ahead. And again, thank you for your time.

That's great. Thanks for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Good morning, and welcome to the Naked Wines plc Half Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Rodrigo Maza. 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's CEO. I'll be presenting today along with Dominic Neary, 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 Mohr and Susan Hooper as Non-Executive Directors. We extend our gratitude to Deirdre Runnette, 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 overdelivers 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 0.5 million very satisfied angels in the U.K., the U.S. and Australia with over 300 of the world's most talented independent winemakers.

As stated during our strategy event back in March, we think of our footprint as an advantage. This is especially true in the U.S. where the ability to legally deliver wine to over 90% of the population is a true moat. Operating across 3 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. The lighter angels tell others. And when that happens at scale, everything moves. More angels means more funds, more sales, more cash. It's truly a virtuous 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, Maza. I'm going to be taking us through HY '26 performance. We'll then move on to our strategic pillars. I'll cover the first 2 of those, and Maza will cover return to growth.

So moving on to our financials. We're seeing, first of all, continued strong cash generation, including the GBP 2 million share buyback, which was completed in September. So that's GBP 10 million of cash generation less the GBP 2 million share buyback is an GBP 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 GBP 3.6 billion. 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 GBP 2 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 GBP 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 GBP 12 million or $17 million target, which we have over the medium term, which is likely to impact this year and the next 2.

As we move on to our key strategic KPIs, 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 in the year -- in the half year. But what we are seeing is some inventory build in the U.K. 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 loss as 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 breakeven, this is our new metric. So this -- historically, we've looked at a 5-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 breakeven, which is when we obviously get the breakeven on our marketing acquisition investment, has improved significantly, 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, particularly 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 forthcoming over the next few years.

Adjusted EBITDA, we've already talked about, so I'll move on. Moving on to the bottom row, return to sustainable growth. NPS 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 it 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 3 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 2 of these pillars. So that's cash and profitability, and Maza is going to be talking to you later about returning to sustainable growth.

So if we dive straight into cash, HY '26 sees the continuation of a strong story. So cash generation continues. As I've already said, we've seen GBP 10 million of cash generation, which has funded GBP 2 million of share buyback, which was completed in September. So that's an GBP 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 GBP 40 million of net cash from inventory. Whilst the majority of the big drops are likely to happen in FY '28 and '29, we continue to see improvements here, and we have confidence, particularly because the biggest portion of overstock is in U.S. 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 buyback 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 medium 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 GBP 14 million EBITDA over the medium term, clearly making great progress with this on EBITDA and the improvements to gross margin and G&A I've talked about.

Key aspects of this are obviously visible in HY '26. So I've already talked about our new acquisition breakeven KPI, which is replacing payback. This is a much better short-term focus, as I've indicated, targeting about 24-month breakeven point, and we are seeing significant improvements in this. And a key part of those margin improvements is coming out of price increases in Australia and the U.K. 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 GBP 5 million of efficiencies versus FY '25. And 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 GBP 1.5 million of G&A savings, which after inflation delivers the GBP 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 FY '27. So continuing focus here. And I'm going to hand over now to Maza, who's going to take you through the final pillar.

Thank you, Dom. As you know, our third pillar is focused on the work we're doing across both retention and acquisition, leveraging our engaged community of angels and winemakers to drive sustainable growth. We're also enhancing our activity around business-to-business sales, which we view as a credible source for medium-term revenue and contribution growth.

Back in March, we presented our growth strategy structured around retention and acquisition and enabled by selective tech modernization. While the building blocks remain unchanged, our understanding of how they come together in an improved experience that delivers on our mission and value proposition has evolved.

Our business is a loop, not a funnel. What this means is that for us to accelerate sustainable growth, we need to find more ways to tap into our engaged community of angels and winemakers. Retention is our foundation. We remain focused on facilitating discovery with improvements to our catalog and its navigation soon to be scaled. We have created more options for our customers around delivery, and we're focused on unleashing the power of our community, partnering with winemakers to tell not only their wine stories, but to present the category to existing and future angels the Naked way, tearing down the parochial approach to wine that's very prevalent in our industry.

As we deliver on our retention priorities, acquisition is becoming more efficient with advocacy and word of mouth becoming its key drivers. We remain committed to acquire customers that have a real interest in Naked's value proposition, which requires us evaluating every channel investment diligently, moving away from underperformance and scaling only those that deliver sustainable customer acquisition costs. Importantly, we remain focused on making sure that the first interaction with Naked delights every new joiner.

A few highlights to share on the retention front. Our entry-level range in the U.S. has produced solid results since launch. We've seen a material increase in our rate of sale without cannibalizing our segments within our -- other segments within our catalog, which is exactly what we set out to do. We are now ready to roll out our automatic credit pack guarantee to all angels after a few months of validation. We view this as a key enabler of discovery and therefore, retention.

We are now offering more delivery options to our customers. And while results still need to age out, we are seeing frequency improving in the markets in which these alternatives are available. And finally, we have started to offer angels the option to purchase 3-bottle cases through careful cost management to protect unit economics. This is proving to be quite effective as a reactivation lever. Next step is to offer this on the acquisition side of things as well as it reduces the amount customers would pay for trying out Naked Wines, which could obviously have a very positive impact on conversion.

As I mentioned already, it's our community that's our unfair advantage and what we need to leverage to get Naked growing again. The campaigns we've recently launched have landed very well, not only commercially, but in driving angel engagement. You are bringing the magic back. This is the type of thing that makes me proud to be Naked. These are real customer comments that show we're in the right direction. As we're starting to get data that backs that up, we've seen referrals in the U.K. reaching the highest levels in over 2 years.

Now let's talk acquisition. We've run several tests regarding our acquisition offer across all markets. We've seen significant improvement to our first order contribution as a result, and we are now ready to scale the learnings globally. We have a new homepage experience live in the U.K. and the U.S. This is a massive step forward for Naked as we're now representing our customer value proposition much more clearly while also allowing customers with different levels of intent to explore Naked the way that best suits them. We are very excited about this launch and its potential impact on our growth.

It's important to talk about the things that haven't worked out too. We are expecting YouTube and other video platforms to become relevant channels for us. And while they are driving an important number of sessions and improving frequency among existing angels, the fact is that conversion remains challenging. For that reason, we are divesting away from this channel while we see focus on conversion efforts yield results. The same applies for lead gen. After running holdout tests across Australian geographies, it's clear to us that this channel is fast diminishing returns and that it makes no sense for us to continue to invest in it.

We plan to get this business growing through advocacy and referrals. In order to do that, we need to go bigger on the moments that best represent Naked's model. The connection between winemakers and angels and how it adds value to both needs to be front and center, and we need both of them, plus carefully selected creators to spread the word about it. While these are still the early days, we're excited with the reaction we're getting and remain convinced that this is how we'll win in the market.

Now back to you, Dom.

Thank you very much, Maza. So moving on to post period end trading and reiterating our FY '26 guidance. So firstly, and importantly, we are in line -- we are tracking in line with guidance. We're delivering on what we said. We are also making good progress with the strategy we set out in March. The clear progress here is visible in margin and marketing efficiencies and, of course, in cash. We continue to see that and expect progress on that and cost savings as we progress.

And of course, we continue to reiterate our medium-term inventory target. We continue to be committed to ongoing distributions and engaging with our partners on our next distribution. Peak is progressing satisfactorily so far. The next 2 weeks, as ever every year are critical, and we will revert in January with a trading update.

On to our guidance, there is no change to our guidance. We are comfortable with all the metrics and particularly happy with the significant improvement in EBITDA versus 12 months ago. We continue to anticipate the full $17 million of inventory liquidation costs that we've talked about before. Those are, of course, spread over the next 3 years.

As we wrap up, the headline is simple. The business is moving in the right direction. Our first half performance tracks the guidance we set, and we've begun returning cash to shareholders, an important milestone. The structural changes we made earlier this year are bedding in and are already driving clearer focus, faster execution and stronger accountability. We're seeing real progress in both acquisition and retention as a result. We've also strengthened the leadership bench and our Board. Jan and Susan bring fresh perspectives and diverse expertise to Naked. We're grateful to Deirdre for her commitment and service.

To end, we remain fully confident in the strategy we set out in March. We're going through peak trading with momentum. And so far, results are encouraging. Thank you all for your time.

That's great. Rodrigo and Dominic. Thank you very much indeed for your presentation. [Operator Instructions] While the company takes a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. And Rodrigo, Dominic, if I may now hand back to you to take us through the Q&A session to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you.

Sure thing, and thank you. Dom, do you want to take the first couple of questions, which is basically the same.

Yes. Thanks, Maza. Yes. So we've got 2 questions, which are on share buybacks, essentially saying, should we be moving faster on those given the shares are trading below intrinsic value. As we set out in March in our Strategy Day, this is a business that is generating cash and is going to have significant excess cash over the medium term as we increase our profitability and as we generate GBP 40 million cash from our excess inventory.

We also set out at the full year results, our clear policy of ongoing distributions, which we would be making as we go forward. And so that policy is that we will distribute up to 50% of cash generation in the last 12 months or adjusted EBITDA in the last 12 months as well, the lower of those 2. And as you'll see, we've made progress with that, and we've implemented that and done our first share buyback back in September. So that's an ongoing policy that will continue.

Of course, that still leaves potentially material excess cash, particularly over the coming years. And we've been very clear that we would make one-off and will make one-off distributions of that where that makes sense. What we also need to be clear about is that -- and we said this, is that the key to that is increasing our profitability and working with our financial partners to agree those one-off distributions, and that's exactly what we're doing.

So really to wrap up, we are moving ahead with our ongoing distribution policy. As the business becomes more profitable and as more excess cash is generated, that will free up the opportunity to do one-off distributions. That's a question of when, not if. It's not today, but it's hopefully in the not-too-distant future.

Thank you, Dom. We also have a question related to the revenue mix from core members versus new growth and what's our views on that?

So as we've shared, we're still going through the impact of the COVID cohorts. Once that has flowed through our base, we are expecting stabilization in the next couple of years. So that then means that acquisition needs to work, right? And our position there has been very, very clear. We are committed to disciplined acquisition, which means focusing on quality over quantity, getting customers -- getting the right customers through the door, people that actually are interested in Naked for the right reasons, for our value proposition and that deliver healthy paybacks for the business. So in summary, we remain focused on keeping retention, keeping Net Promoter Score high as we go through the COVID cohorts, and we remain committed to our disciplined acquisition strategies.

There's another question, how about opening a few pop-up stores for peak season and sell Christmas gift boxes and other high-margin wines?

This is something that we're definitely looking into. How can we leverage partnerships to bring the Naked experience into the real world beyond our tasting tour, which is massively successful and it's the biggest wine event in the U.K. But yes, we -- this is an area we're exploring. This is an area that we like. I don't think we need help in selling our Christmas gift boxes. Actually, we're very close to selling out of them this year. Over 70,000 of those Christmas cases have already been delivered into our angels homes. So we're very pleased about that. And yes, Christmas season is going well so far.

Yes, I'd add we have a fantastic wine calendar as well, which -- advent calendar, which I have one of myself at home. And if there are any left at the end of the street when I go home, I'll be having some of that myself.

That's great, Rodrigo, Dominic. Thank you for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we will publish those responses on the Investor Meet Company platform. But Rodrigo, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please just ask you for a few closing comments?

Yes, of course. Well, first of all, thanks, everyone, for your time. We really appreciate it. We continue to be excited about Naked's future, and we remain very confident in our plan. Thank you for your time, and happy holidays.

Fantastic, Rodrigo, Dominic, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Naked Wines plc, we'd like to thank you for attending today's presentation, and good morning to you all.