Naked Wines plc (MWJ.F) Earnings Call Transcript

Good morning, and welcome to the Naked Wines plc Investor Presentation. [Operator Instructions] I'd now like to hand you to James Crawford. Good morning, to you sir.

Thank you, Alessandro. Good morning, everybody. Welcome to the Naked Investor Meet Company presentation. I'm James, I'm the CFO of Naked. I've been with Naked for almost 10 years, worked as CFO and also managing our U.K. business for a stint in the middle, came back to the CFO role in July of last year, and looking forward to talking to you today about our business. So I'm going to run through 15. 15 to 20 slides, and then hopefully, that will leave some time for Q&A. Please do submit some questions. We've had a couple presubmitted, it'd be great to have some more on that and see what you're interested in talking about. So I'm going to start with just a little bit of context about Naked for those of you who are new to the business. So Naked sells wine, we support independent winemakers, and they make us exclusive wines at preferential prices. And the idea is that through our customers, supporting winemakers, we get this greater value that we can pass on to the customers and also help customers really feel good about the wine they're buying by connecting with our winemakers. So we see it as our purpose to connect wine drinkers with great independent winemakers, really building connection and that gives people a sense of kind of value in the wine and also the impact they're having on the individuals who make it. By doing that, we -- by doing that, we're able to build brand awareness. We're able to enhance kind of quality, and actually make people say, they feel really good about the wine. And ultimately, that's quite disruptive versus the traditional wine business, which has been very focused on either brands or affiliations and pricing and not actually uncovering the stories of the heroes who sit behind the products and make the products. When we put that together, it generates a virtuous circle. So we call our customers Angels because they put money into their account every month as a prepayment against a purchase of wine, and that generates two things for us, it generates a stream of cashflow, which we're able to invest into the supply chain as the core winemakers in what's a very capital-intensive industry. It also generates a stream of data as to who is ready to shop, how much cash they got in their account, and overtime, we build the profile of the kind of wines that people like and enjoy and their shopping habits. And we can use that to really customize their experience. As I said, we used the money that Angels put into their accounts to back winemakers, generally through prepayments towards wine in terms of set to stage payments. In the U.S. market that we operate in, we actually buy grapes and operate the winery, we stay there and come and work in to make their wines. And that gives us wines made exclusively for us. It's one that's made with preferential economics because we've helped support the capital base of the winemaker. So the winemakers then make beautiful wines. We do the rest in terms of sales and marketing. So a big challenge if you want to be an independent winemaker of how you get access to the market. We provide that and already made way to a set of customers who are already engaged in the journey of that winemaker. And ultimately, that helps us generate revenue and scale, and that scale means more Angels, which means more funding and you go round and round the circle, building a better business. But it's not a business without its challenges, and those challenges at the moment have really been borne out to the growth we saw through the pandemic. On the left-hand side there, you can see how revenue scale significantly in 2020. As to the Angel base, you'll don't really see the full growth in this chart. And then since the pandemic has finished, people have reverted their shopping habit somewhat back to where they were, and we've seen a decline in the scale of our customer base. On the right-hand side, I think this is where we kind of show what one of the big challenges in the business is. During that pandemic, we had to very quickly scale business. We built out a big fulfillment operation. We also made significant commitments to inventory to our winemakers. And actually, as we've not delivered sustained sales at the level that we hope to, that has led to an increase in inventory within the business. We have not seen an increase in the amount of Angel funding and prepayments that we've got. So we've had to fund that inventory through the business, it's cash. And as a result, we have seen liquidity reducing over the last few years, and we've had flattened that curve. But one of the challenges in the business has really been the aftermath of the pandemic in terms of liquidity, and also in terms of the cost base that the business has because we built significant staffing and a bigger fulfillment operator that we ultimately needed as we went through that pandemic period. I think that's a beautiful context there to talk about some of the results that we've announced recently and have that aligned with plans that we've got and the actions that we're taking. So a lot of these slides will have been taken from our half year reporting or our trading statement, if any of you have seen those recently. But the kind of 3 areas of focus are around strengthening the balance sheet, so getting the right level of inventory and commitment to our winemakers, releasing cash by reducing that inventory and actually getting our credit facilities in the right shape for the change of the business that we've got. Making our profitability sustainable. We announced an GBP 18 million adjusted EBIT number for the last full fiscal year. It was loss making at the bottom line due to inventory provisioning and goodwill write-offs. But actually, our adjusted measure is intended to demonstrate the underlying profitability of the business. And with costs coming out and more costs to come out, we are driving the business to a place where we can deliver profitability at a lower sales level should that decline in revenue continue, and I'll talk about why we think that's happening in a moment. And actually, we do want to stabilize the customer base because ultimately, a smaller customer base is what is generating a lower revenue. And then actually, we want to go from making that profit sustainable to delivering profitable growth. Prior to the pandemic, this was a business that grew pretty consistently, around about a year -- 10% to 15% a year. We had a pretty reliable marketing model and a payback model that supported that in terms of returns on that marketing investments. And by rebuilding that payback and continuing to invest, we -- our goal is to get back to a position where we're growing this business again. But with the cost base, where it will be, we'll be able to do that whilst delivering profitability, which was not something that we were able to do consistently prior to the pandemic. So where are we on that journey? Well, lots of good news. We are moving in the direction of cash generation. As you saw on the earlier slide, the kind of cash outflow has now all the stock. So we're in the kind of bottom of that liquidity valley and should be building our way out of it, in particular in H2 of the next fiscal year. And that's because we see the opportunity to reduce inventory materially and generate cash out of that over time. Costs are coming down. That was evident in the half year reporting, and we announced with our trading statement that we've just undertaken an SG&A reduction exercise that will deliver GBP 7 million a year of cost benefit. We also have a series of changes we've made in our fulfillment operation and contractual arrangements that will deliver additional savings through the warehousing line in particular. And then actually, we see really positive trends in our existing customer base for the customers that we're retaining, sales from customers are increasing. And the rate of cancellation, the attrition rate is down. So we're actually holding on to relatively more of those customers. But the bad news is that actually recruiting new customers remains tough, and we continue to not recruit quite a lot of new customers to maintain the scale of customer base, hence, revenue is reducing. Drilling in some of these trends in a bit more detail. This is kind of a table that shows how we've really moderated the rate of cash consumption. If we look at the first half of fiscal '24, which ended back at the end of September and compare it to the year previously. You can see at the bottom of that chart, in the prior year, the business consumes nearly GBP 22 million of cash. And the majority of that went into that change in inventory line at the top of the big box. It is a seasonal business. You always build inventory in the run-up to Christmas. But you can see very much how then, in this year, we significantly moderated the rate of increase in inventory. And really, that change is what flows through to a significant reduction in the rate of operating cash outflow. And then on the right-hand side, we've just shown here, our inventory trend. You can see how significantly it has increased over the last 2 years. And you can see that our forecast range shows at reducing, whether we're at the kind of top or bottom end of sales forecast, we should see that inventory level reduced over the next 18 months or so. We have good line of sight to the commitments that we have. We are reducing those below our cost of goods level. And really, we need to then wait for the peak sales in H2 of next year before we really see that inventory level drop. Again, this is just a chart that kind of shows all the history of that. So the dark bars are the purchases we've made in terms of inventory, the lighter bars are the cost of goods we've discharged. You can really see how in FY '22, the dark bar was GBP 50-plus million, ahead of the light color bar, that is a significant build in inventory, that has been a significant drain of cash. A little more of that in FY '23, and then we start to reverse that trend through '24 and '25. And that is where we see cash being released off the balance sheet over the next few years. And because liquidity has been an area of focus for a lot of our stakeholders, I think it's worth understanding a little bit how the balance sheet is funded, 2 big sources of funding outside of the equity in business. One is the Angel funds that we hold, which were around about GBP 70 million when we reported. That's the dark blue bars on the chart on the left, and you can see those Angel funds grew through the period of pandemic as we've got more customers, and it's been stabilized and actually dropped a little bit as the customer base has shrunk. I think what's important is people often worry about this business being susceptible to Angels withdrawing their funds very, very rapidly. If you actually look at the percentage withdrawal of the balance over a rolling 6-month period, which is the yellow line, you can see, as the customer base has improved as we've got kind of customers who have got longer tenure and therefore generally better retention, the rate at which Angel funds are being withdrawn and refunded has been shrinking. And then just on the right-hand side, business has a credit facility secured on the stock, it's an asset-based lending facility. That's what ABL stands for. I think, candidly, the structure of that facility was wrong. That facility was opened in early 2022, just before I came back into the CFO role. And it was basically linked to continued growth in the business. Obviously, the business did not continue to grow. So we've been through a process of refining and restructuring that facility with the incumbent provider. We're now in the process of forward placement, we have a debt adviser appointed, and their preliminary view is that we should be able to source a replacement, which is actually better suited to the business, provides more on that liquidity, and hopefully, greater flexibility around what we can and can't do with the P&L. So those are balance sheet, looking at the cost initiatives we've undertaken. If you look at the business as it was, it needed just under GBP 280 million of revenue to remain profitable at the adjusted EBIT level, which is our critical profitability KPI. With the cost actions we've just taken, as I said, we took GBP 7 million out of the run rate of SG&A a couple of weeks ago, that will actually reduce to just under GBP 250 million, and for what it's worth, the consensus in the market for revenue this year, I think, is somewhere around about a GBP 290 million number. So we've taken cost out to give us the latitude that should the business continue to decline, we can still be profitable. Obviously, our hope is that the business will not continue to decline for reasons I'll explain in a moment. And then as a highlight here, I repeat customer performance is good. This is a bunch of metrics, looking at the customers who obviously have not canceled. But if we look at the amount of revenue that we're generating for each active Angels, which is our measure of customers, you can see that between the first half of fiscal '23 and into '24 that increased, an increase of about [ 700% ], so actually, we are seeing customers willing to spend more. And unfortunately, but underneath that, we see that the number of customers who are remaining in that period has shrunk, and that is what's ultimately driving the revenue trend. And that although the customer base has been shrinking, the rate at which the customer base is shrinking is slowing. So the top right-hand chart, you can see a reduction in the monthly attrition rate averaged over 3 months. That's been taking place over the last couple of years. And I think, important to understand that, that means we're seeing an increasingly loyal core of customers remaining. I think, important that we don't fully take credit for that, some of that is just the arithmetic effect of having a lot of new customers arrive during the pandemic. You'll see this spike upwards in kind of March and June of 2020. People tend to cancel subscriptions early in the life cycle. And as you have fewer and fewer customers early in the life cycle, you do see an improvement in that. But that improvement is real, it will be enduring, and it gives us confidence that the rate of customer base reduction is low. So let me talk about the challenges, the challenges in recruiting new customers. I think this slide is just for those who are new to Naked. We've always been very disciplined, and we've had a pretty well established model, as to how we invest in customers. And ultimately, we make an upfront investment in recruiting a new customer, which is a combination of marketing expenditure plus any profit or loss on the first order. It varies, depending on what our 3 markets, the U.K., U.S. and Australia, you look at. And then what we do is we look at the profitability generated by those customers over the next 5 years. The chart here is an illustration of that, per joining customer, you make the most money in the first 12 months because you're then losing customers. But you have a long tail there of sales and contribution that comes from those customers. And we measure this payback at the contribution level. That is the sales less the cost of the product less all the cost of fulfillment, whether that's warehousing, couriers, customer service operators, credit card fees, et cetera. And we look at that over 5 years. But historically, we've delivered 2x or actually greater than 2x payback over those 5 years as we measure the ratio of that future value to that upfront investment. But those economics have become significantly more challenging recently, and that's a combination of really fulfillment cost inflation. There have been significant uplifts in things like careers, warehousing and the people costs associated with those as we've been through the post-COVID inflationary period, and a tougher marketing environment, both a combination of a weaker economy, and changes made in a lot of digital platforms for privacy reasons meant that we saw a significant reduction in the efficiency of those channels. So lower customer recruitment is a challenge. The chart on the left here shows a reasonably long-term history where you can see our payback trend on the yellow line has reduced from above that 2x that we always targeted, very much above it during the peak of the pandemic. And then somewhat below, and then we've focused quite heavily on trying to drive up from that low point of 1.2x, which was kind of the first half of fiscal '22. And now we're around about 1.5x. And right now, we're trying to balance a combination of continuing to maintain scale and drive cash out of inventory whilst remaining disciplined and testing some different approaches to how we recruit customers, I'll talk about in a minute. So there's some tensions in what's driving that metric. You can see alongside that, the kind of the pale blue bar show the amount that we were investing. And during the peak of the pandemic, we invested GBP 45 million to GBP 50 million a year. Currently operating more at a run rate, around about GBP 20 million a year, and targeting GBP 25 million a year is a sustainable level of investment. And on the right-hand side, you see the number of new members that we gained in a year with a huge, huge spike during the pandemic. That is what drove a lot of that growth. And then as we've entered this period of lower payback and lower efficiency spend, we've got the marketing budget substantially. And that means we've seen a few of new customers coming through the door. But I think here, for the first time, if you look at the right-hand side of that right-hand chart, you do begin to see a stabilization in the number of new customers that we're recruiting. And when you stabilize that number, you begin to get a much clearer forecast of the scale, business is trending towards, especially when you combine that with the stability and improvement, in fact, in the retention trend of the repeat customer base. But we do have some emerging signs of positivity in new customer recruitment. So I referred earlier to some testing that we've been doing in terms of different ways of recruiting customers. One of the ways that we've done that is essentially a different form of subscription model, that in particular appealing, we think, to young customers. We've been testing that quite a lot over the last 12 months or so, and that scales through the recent peak. And the chart here shows, if you imagine that building contribution from a newly signed customer over time, under 35s have never delivered us, that same value as we go on an average, our customer base on average is probably around about 55. But the controller is kind of taking an under 35 customers through that historic journey. The light blue test line shows that we've almost doubled the value of an under 35 customers by taking through a different journey with a slightly different form of subscription. And we're beginning to test that on broader groups of customers across different markets and seeing some signs that we can deliver that. And that's one of a number of initiatives that gives us some confidence that we have opportunity to rebuild the number of new customers that are joining us, and therefore, actually see signs that we can turn the corner rather than the net of that improved subscription and the lower number of sign-ups being a small decline in the customer base turn that towards flat and hopefully over time, back into growth. I think the other thing that's important to say is whether or not we're ultimately successful in deploying better payback, marketing investment and customer recruitment or not. Actually, with the cost actions we've taken, we think this is a business that should still be profitable and cash generative over the medium term. And we -- we announced some what we call some what we call guardrails of how we're going to run the business, to try and remove the amount of volatility we saw during the pandemic. Those guardrails are really around -- we will spend GBP 25 million a year on new customer recruitment, and we will let payback move depending on how successful we are in deploying that. We will maintain our SG&A base, our fixed cost base, at around about 11% of revenue, which means that we have to cut our cost according to the scale of business. But I think in particular thinking about that, marketing spend guardrail. If we're only able to achieve 1.5x to 1.75x payback, the business should still be able over time to deliver GBP 280 million to GBP 300 million sales, and probably an EBIT number of around about GBP 10 million given the cost actions that we've taken and the opportunities we see. And it will still reduce the inventory over the course of a couple of years. And we will, therefore, still generate significant cash flow out of the business. If we're able to deliver payback out of that investment in excess of that because efficiency gets better, the initiative I just talked through actually carry through and scale us across the business, you could see sequentially higher sales and EBIT and cash flow out of the business. You don't need to see a massive uplift in that to see a business forecast over the coming years, which still delivers good profitability at the adjusted level and good cash flow. So that was really a lot of the headlines we share for the H1 results. I think I didn't put some of these numbers in, just summarizing them here, but GBP 132 million of revenue in the half, it's a minus 18% constant currency number, which really reflects the decline in the customer base. And the second half, after what we did in the third quarter, which is a sequential improvement on that, still delivered a positive adjusted EBIT number of GBP 2.2 million. We did pay a statutory loss. We wrote off a lot of goodwill that relates back to the kind of corporate evolution and the sale of Naked into Majestic over time, and that generated that statutory loss before tax. Closed the half with a net cash position, excluding these liabilities, those familiar with the intricacies of lease accounting, just under GBP 3 million, and that means that once we add our credit facility alongside that, it gives us liquidity of GBP 48 million, and you could already see G&A costs coming down, a 27% reduction in the first half. And we very much kind of we're announcing that we do see the inventory optimization, delivering significant cash flow over the next 18 months or so. And then I think I've talked through the majority of those operational highlights already, but really kind of reiterating that we are at the turning point where we move in the direction of cash generation. Repeat customers are performing well and some real positive signs on our new customer recruitment model. And then lastly, we announced a trading update for the peak period of Q3, October, November, December, obviously, being a retailer and a wine retailer, peak is very important. A peak trading was in line with our expectations. So constant currency sales were 10% down. Obviously, that's an improvement versus the minus 18% in the first half. Again, really driven by the repeat customer base, which was about 12% smaller, and actually, we delivered some more improvement in sales for repeat customer. We did acquire more customers year-on-year, albeit we spent significantly more to do that. And part of the reason we're doing that is we're beginning to see some of these green shoots in how we recruit new customers. For the quarter, the adjusted EBIT, we expect to be about GBP 3 million to GBP 5 million, which is consistent with the expectations we have. I'm beginning to see a stabilization of our net cash position. So all the way back to that very first chart. Actually, the net cash position was all but flat year-on-year. If you do the constant currency adjustments, we were kind of GBP 4 million a year ago, GBP 3 million now. And again, the credit facility remains available, delivering the total liquidity of about GBP 45 million. And then we announced that we had undertaken a reduction of SG&A to GBP 7 million of savings per year, takes the guidance for fiscal '25 down from GBP 37 million to GBP 40 million to GBP 30 million to GBP 33 million a year. There are some one-off cash costs to execute that, which we expect to report an adjusted item. Beginning to see size of the inventory stabilizing. So closing Q3 inventory of GBP 163 million versus GBP 173 million a year ago. And that's really where I'm about to stop presenting and to start answering questions. But I think in summary, we are making a set of changes to make Naked Wines a leaner and a stronger business than it has been. We have a great core to this business in the repeat customer base, high levels of royalty. But the absolute scale of it is recovering from the post-COVID challenges. We see some good progress with enhancing our ability to recruit new customers through an enhanced customer proposition. And we see an 18-month outlook where we should generate significant cash with the inventory coming down, and that's turning into cash. And you'd see the first signs of that and the stabilization of the net cash position. We're making progress replacing the credit facility with something that's more fit to the purpose of the business. And SG&A is down, which means this business should be able to break even at the adjusted EBIT level, about GBP 250 million sales. And that's where Naked is, it's been a journey of massive growth through the pandemic period and then, unfortunately, dealing with the aftermath of that in common with a lot of businesses with too much stock and too much cost, but making good, meaningful progress on delivering against changing that. And that's where I'm going to stop speaking, and kind of hand over to questions. I say stop speaking to answer your questions. But please do put any more questions you may have in the Q&A.

Perfect, James. Thank you very much for your presentation. [Operator Instructions] But just while the company takes a few moments for your questions today, I'd like to remind you the recording of this presentation, along with the copy of the slides and the published Q&A can be accessed by our Investor dashboard. James, as you can see, we have received a number of questions for today's presentation. If I could just hand back to you just to read out those questions and give response to which it's appropriate to do so. I'll pick up for you at the end.

Yes, I'll do that. Going to start on kind of quick one. How's the search for new CEO progressing? Would it be Rowan's intention to still remain as Chairman, in the events of a new CEO was to be appointed? So first, it's progressing well, looking at a range of options. Absolutely, yes, Rowan's intention to remain as Chairman once that new CEO is in place. He is not intending to remain as an Executive Chairman forever, but I think there will be a succession of him back to the Chair, and then no specific plans on how long he stays in that role. Could be long-term; don’t know. But making good progress. And when we have news, then we will share it. One on our addressable market. Is our estimate of a $25 billion total addressable market still accurate? For those who may not be familiar with that number, it's the number that we've put in our annual report a number of times. That number was generated based on the overall wine market in the 3 geographies that we operate in. That is segmented by price point because we don't operate at the lowest price points in any market. It was then adjusted for the number of people active in that market who shop online, not necessarily for wine, but for other things, and for people who are engaged in the wine that they buy rather than picking up whatever is in the shelf. So I think it's definitely still a good read of the overall market that should be addressable by an online wine retailer. I think if we were to be a little circumspect, because clearly, our customer recruitment challenge would suggest it's not easy to penetrate that market, I think we'd say that there are probably some barriers in the way that we do business, whether it's the subscription, whether it's the kind of nature of the range that we have, that means that there are segments of that addressable market that is more challenging for us to be. I think the good news is, if you think about one of those segments that's been historically challenging for us, has been the younger consumer in that market, and we are now exploring ways to evolve the proposition to meet that customer more kind of where they want to be. And I think that gives us kind of confidence that we can start to pick up big chunks of that addressable market and going to be relevant to it. So I think the overall answer would be, yes, it's still accurate, but there are clearly subsections of that market that we are better and worse [indiscernible], and we are systematically trying to work at how we make the business able to address all the components of that for the addressable market rather than the subsections we are in today. Going to move on. So new customers are up 35%, investments up 70%. Is that mainly a delay from investment to sign up? Or is it lacking economics? It's a good question. I think a couple of things. One is that's the full quarter. So during that quarter, we were -- we would have still running some of the testing in different countries or different ways to do things. And we know that, that testing gives us kind of weaker economics. I think the other thing would be that the -- things like the flip side of that testing would be that where we are now recruiting new customers in that under 35 segment, for example, we are expecting much higher value from each of those new recruits whereas previously, it was lower. So we have set our investment levels and our tactics to reflect that. And therefore, it's kind of okay that you're getting a lower conversion of money into new customers if your expectation is that those customers are going to be worth more on average. And then there is going to be a degree of delay. One of the things we've seen quite commonly is the biggest channel we use for customer recruitment is marketing partnerships and parcel inserts. A lot of people really struggling to estimate and forecast the volume of orders that they would be circulating, that drives that into traffic. And I expect that we do have a bit of a backup of inserts that will hit during Q1. But I wouldn't like to kind of bank an upside from that because the uncertainty in those volumes will probably kind of carry on for long. And then the second part to that question is, the 1.4 LTV to CAC estimate based on current low repeat margin orders that take into account the margin improvements you achieve in FY '25? Good question. So obviously, when we look at a payback forecast, it's based on our forecasted LTV for customers, we run that LTV forecast based on a model of forecast sales based on history of a set of dimensions of each customer. And then we apply and expect to repeat margin to that. Some of the margin improvements we expect in F '25 would be included in that, not necessarily all of them. So we have to take a view on the forecast margin. And the way that we do that is we build a kind of low-end scenario based on the drivers we have and the forecast that we have, and we use that. So I would expect there to be a little LTV enhancement when we see the full range of cost savings come through in the contribution margin. But yes, some of it will be factored into the way that we forecast that. I think that leads to another question we've had, which is how are you going to return the payback on new customer acquisition to previously attractive levels? That is ultimately the big challenge. And we don't have all the answers to the reason that we show those scenarios with. If we're not successful, this is what it looks like, and if we are successful, this is what it looks like. I think we've touched on parts of it. So continuing to take cost action in the fulfillment network and delivering improved contribution margins for the previous, hence, some of that is baked in, some of it is not, so there should be more opportunities there over time. Excuse me, my phone is ringing. Sorry, I hope you can all see me. The screen is just unclear, which is unhelpful. There we go. And then actually, improving the efficiency of the marketing spend. So building that kind of new recruitment model into our numbers. Just in of itself, the data I showed you on the under 35s, if we apply that to where we've seen some improvements, there is a 0.1 or 0.2x payback improvement there, and whilst that sounds like a small decimal number on a journey towards 2x. That could be a 10% of that improvement needed. So we actually think that there are better ways of triaging customers into different new customer recruitment channels. Once we have 2 or 3 or even 4 different kind of models for recruiting people, we think we can then help optimize further from there to get to that place. And then we are continuing to build out new channels. I think the business has historically been very dependent on the partner channel, digital social media channel, the digital channel trend significantly through that period challenge. We are clearly rebuilding that with different approaches to creative and different approaches to deploying that creative. And actually, we recognize as a business, we need a broader mix of channels that will support one another. I think if we can crack that better, as we know a lot of our peer group businesses have, we will be able to see kind of benefits across the payback spectrum from that. Right. Can I give some color on the SG&A cuts, which buckets are the savings coming from? Ultimately, the majority of our SG&A costs is people related, about 70% of it, and about 70% of those savings come from people-related costs. Other parts come from things like office leases. We've been over time moving ourselves, as have nearly every other business, to appropriate size offices to kind of new ways of working post-pandemic. We're reducing some of the advisory spend that we've used historically, et cetera. But the simple answer to the majority of that is, unfortunately, people cost. It's been a challenging process, but one that we're coming through the other side of now. I think the couple of questions in here around inventory and cash, which I'll try and book it up. So you reduce inventory intake by more than 50%. Are you having the right inventory for FY '25 peak trading? Or would you say inventory quality improves as you use opportunity to cut down wine makers not selling and keep the wine customers want. Yes, a lot of directions in there. And yes, we believe we will have the right inventory for peak trading. We are going to end up with slightly different set ranges. But one of the things we've done, for example, is we've moved inventory that was committed for the U.S. market into the U.K. market. And that sounds like it must be really hard, and you're going to have to sell a lot of American wine in the U.K. Well, actually, in the U.S., we sell wine from around the world, so a number of big opportunities. It's exactly the same wine that we're selling in the U.S. as the U.K. We will ship that container from, say, South Africa, straight of the U.K. rather than the U.S. So there have been some things that we are able to do like that, that means we absolutely preserve kind of range quality. When we looked at the kind of range changes by country and wine maker, you might see a few percentage point movements between category. Yes, we will sell more American wine in the U.K., and we're engaging our U.K. customers about the great value opportunities they're going to have as a result of that. But I think we are pretty comfortable, we're headed towards the right shape range. And that range quality should improve because we will end up a parting company with some winemakers. You can't see a business shrink by kind of 15%, 20%, 25%, and believe it's right to maintain the full range of the supply base because it would mean that everybody's expectations had to be shrunk. So we are taking that opportunity, and obviously, we're working collaborative -- collaboratively with our winemakers as we always do to ensure we understand the impact on their business and do that in a responsible way. I think that speaks to a different question, which is how is Naked strategically managing winemakers relationships as the business is just through its new scale. Look, there has been some challenging conversations. We have had to significantly reduce volumes. When you look at those inventory numbers, it's clear across the supply chain, there is 12 months excess inventory. But rather than tell everybody, we're not buying anything for a year because that would neither give us the right shape of inventory nor sustainability for the winemakers, we're working one on one with them to understand, be asked the possible -- what support is needed, et cetera. And as I alluded to previously, also changing the winemaker supplier base somewhat to reflect the fact that we will need fewer winemakers for a business, which is more. So hopefully kind of that answers those questions. Trying to group these up somewhat as they go. I think -- I guess if you go to inventory and balance sheet cash flow, how much cash do you need on the balance sheet before we can talk about capital returns? How do you think about this and how should we as investors? Great question. The -- the challenge in the balance sheet and the cash is that you always have to have enough liquidity available to manage our downside stress test as you work through going concern testing. I think as you have seen, we do still carry uncertainty on our ongoing concern because of the wide range of those downside stress test and actually a period of change for the business, the wide range of drivers that could move. Ultimately, this is a business that probably needs to carry about GBP 10 million of operating cash from month-to-month. It probably needs GBP 15 million to GBP 20 million patterns of clear liquidity headroom above that, not liquidity, which is helped by the bank, available liquidity. And I think it's hard to answer this question specifically because we're in the process of sourcing new credit facility. If we have a new credit facility that can comfortably respond to GBP 15 million, GBP 20 million, GBP 25 million of cash if needed, then I think you're very much in a position when you can look at any additional cash above that as excess, but we have to really kind of complete the process of what does the new credit facility look like at this point and make sure that, that foundational piece is in place before we can really talk about how much excess capital might we have over what time frame. Right, a couple of -- probably questions more about kind of customer base and market. So retention of [indiscernible] Angels must be a priority. Are you using their buying history effectively given your ample stock situation? Yes. So absolutely, retention is a priority. If there's one number which the long-term forecast for businesses like ours is very, very sensitive to is that retention number. Couple of percentage point changes here and there compound significantly over time. Are we using that history effectively? Yes. So we use the data a lot in the month-to-month merchandising plan. And also in evolving, whether it's the range or sort of the kind of product proposition. So if any of you are Angels, you'll get a free bottle every month, the free bottle that you're offered will be tailored based on your buying history. Any of you shop at the site, there are options for you to fill your basket, there's a product called Wine Genie, which will automate a case, a kind of a bespoke case for you every month. All of that is using the data set that we have on what you've been buying, what you've rated, whether you bought it again. And essentially we then look to marry up where we have significant stock headroom with [indiscernible] Angels that like that kind of stock, and we might even put together a specific case or a specific deal for people. And that may get merchandise to them. We may get merchandise to them through checkout. We may get merchandise to them through e-mail. There may get put together some form of marketplace deal where we say, if we can find 2,000 Angels all willing to take the case, 6 of this bottle, which we think we have a lot we can clear for this winemaker, then we'll ship it, but it's only worth shipping if we do a full container. So yes, we're using that history all the time, and we are very much informing our range plans around that history as well. Can you give an indication of how offline retail has performed over the last 2 years in the U.K. and U.S.? Have you lost shares to these competitors? So we don't spend the money buying the Nielsons of the world or the [ RIs ] of the world. It's expensive and it tends to get kind of high-level [ data ]. So I think we have certainly seen a reversion towards store-based shopping across all categories of retail. You see this across the e-com and D2C space. You only have to look at the Majestic business that we separated from. And whilst -- I think they generally choose their weeks quite carefully. I think they chose 8 weeks this peak. I think they reported something like 7% or 8% increase in sales. And obviously, that's we're ahead of kind of where we are. So I think it would be hard to deny that you have seen a reversion to store-based shopping. And therefore, we probably have lost overall share to those competitors. I think if you look across the universe of direct-to-consumer and kind of e-com businesses, I saw Virgin's trading statement was out yesterday, they were plus 2%, but they were plus 2 on the back of, I think, minus 27% the year before. So I think if you look over the kind of 2-year period, we've probably done slightly better than them. The Wine Society publish their accounts each year. I think their trends have been broadly similar to ours. I don't think I've [indiscernible], I'm not sure if they're out, but we're certainly seeing kind of double-digit type declines in the U.K. And then in the U.S., and this I think also addresses the question you had, which is have any direct consumer competitors in the U.S. exited the market? Who's winning? I think in the U.S. we've seen businesses like wine.com announce a revenue number that was substantially lower than the revenue number we have seen in previous kind of PR-type reporting. In the U.S., there have been businesses who have exited. So Winc went through a bankruptcy process. They've been bought out of that, but I think they are, again, sequentially small than we are. And we do have contact with peers. We know everyone is wrestling with a lot of same challenges. So I don't know whether we could confidently say we're winning in the U.S. market. I don't think that we would say that we're losing. I think we would say that we are in the path that are seeing the same dynamics and those dynamics' impacts, that's the previous question of people who found online purchasing convenience over the pandemic actually finding that they are going back to store-based purchasing. I know it's hard to convince them that there's no need to do that and that there are benefits, and that's what we continue to do. Right. What have we got left? The profit credentials of Naked are not in question. Is it time to focus on the business now if we ensure this component of Naked DNA can be deployed in future years? I think that ultimately, you see from our first slide, we're very, very focused on the business. Naked is a business that likes to do the right thing. We believe that by treating suppliers truly as partners, treating staff like family, we generate best outcomes for shareholders. But we are taking tough decisions for the business, whether that's at the cost line, whether that is in terms of the inventory purchasing we're doing. So the focus is absolutely on the business, very clear to us that we have to reshape this business to scale that it's at, even if that means tough decisions that don't appear as philanthropic as maybe we do to our supply base as our stakeholder base. And I think kind of -- we're saying -- I don't know, whether there's any kind of misinterpretation, that philanthropy. We don't run that business like it's charity. We do, do some great charitable work, but it's our customers that support causes like Carmen's Kids. We do sometimes enable winemakers to support charities that they're passionate about by using our customer base to sell wine and giving a proportion of that revenue to charity. But ultimately, we're a business that's here to deliver value for shareholders. We think the right way to do that is by treating people the right way, but we do prioritize all stakeholders to get there. And I think the last question I have here is what's our view on the online wine market size, e-com penetration, especially in Western Europe. Not sure if that question is kind of trying to explore, should we be in other markets or whether it's kind of more general in terms of what are the dynamics. Hopefully, I covered some of the dynamics, the reversion back towards physical retail post-pandemic. But look, I think ultimately, over a long-term period, call it 10 years, all of the reasons that the online -- well, the online sales in all categories have grown over that period aren't going away, right? It remains convenient, it remains cost-effective, it's time for people, it remains simple. So I think, structurally, we're still in the right place in terms of being -- or taking into kind of that long-term structural shift. I think what you saw was an acceleration of that shift hugely over a 2-year period. We're seeing a small reversion in that shift now. And hopefully, in a couple of years' time, we'll say that we're kind of back in system with the long-term trend. Not sure if that answers it. If not, please do ping us a revised version or a follow-up afterwards. But I think that is the majority of the questions. I think that's all the questions I've got on the list here.