FD Interview: Paul Lantsbury

SELF-EFFACEMENT is at a premium at Moonpig.com. Finance director Paul Lantsbury’s business card is a case in point. In the form of a mini greetings card, the cover bears an archive image of a secretary answering the phone. The legend reads: “Yes, Mr Lantsbury is in… or you could talk to me and get the job done properly.”

There can’t be many FDs around willing to send themselves up on their business cards. Presentation for many is everything, but Lantsbury seems at home with the tongue-in-cheek, open and youthful culture that Moonpig has fostered.

Headquarters is an open space in a converted south London warehouse. There’s a ping pong table in one of the meeting rooms, there are TV screens everywhere, the walls are dominated by giant versions of some of the company’s racier cards, and there’s also a quiet corner dominated by trendy vintage leather sofas where visitors can see photographs from Moonpig’s charity work.

But the jocular atmosphere belies the serious business behind sending out personalised greetings cards. And while Lantsbury talks freely, much in keeping with the apparently open culture, it quickly becomes apparent that after jaw-dropping growth year on year for the past few years, the 11-year-old company stands at a crossroads. The nexus of issues facing Lantsbury revolves around figuring out from where the next round of growth will come, setting out a strategy for reliable overseas expansion, extending the company’s product range, fending off newly arrived competitors, and securing a £120m merger with digital photoservice Photobox (potentially a solution to funding its future growth).

He sums it up neatly: “The business has reached a certain stage in its growth and is kind of ready to get to the next phase.” That’s putting it mildly.

Explosive growth

Most people will be familiar with Moonpig’s slightly annoying advertising jingle. They will be less familiar with just how quickly the company has grown since it began that TV ad campaign in November 2006 after five years of barely turning a profit. This year saw the company appear at number three in the Sunday Times Profit Track 100 list of the UK’s fastest-growing companies.

To make the number three slot, Moonpig clocked a year-on-year hike in revenues of 50% to £31.2m, while profits soared by 69% to £11.1m for the 12 months to April 2010. The previous year was even more impressive, with revenues rocketing 150% and profits 178%. Figures such as those must be every FD’s dream.

Not only that, but the company carries no debt and all the growth (organic) has been funded from working capital, including a spanking new production centre in Guernsey, which cost the company £4m to buy and renovate (Moonpig is Guernsey Post’s biggest customer). So flush was Moonpig that it also felt able in 2010 to pay a dividend to shareholders amounting to £7.3m.

The 2011 accounts are yet to be filed and, while Lantsbury holds back from divulging any details, he reveals he is happy with top-line growth.

Moonpig was founded in 2000 by Nick Jenkins (the company is named after his schoolboy nickname), sends in the vicinity 12 million cards a year, and employs about 100 staff.

Lantsbury joined the company four years ago. It was his first post as an FD after spells with Gillette and MTV. When he started at Moonpig, he was the only person in finance and was doing everything himself – right down to invoicing.

Things have changed in those four years and he says his main role now is getting the forecasts right and “managing those relationships with our shareholders, the board directors and the higher key suppliers and drivers of the business”.

Forecasting sounds a bit dull but can be critical for Moonpig, not least when dealing with Guernsey Post and the people now supplying flowers. “All these people are relying on numbers and it’s critical we get those right, otherwise we can shoot ourselves in the foot,” he says. The forecasting headache extends from the cards, through flowers and into future plans for children’s gifts.

The 2006 ad campaign saw the company take off in the UK, and there has been an effort to replicate that success in both the US and Australia. The US foray has been something of a disappointment, Lantsbury readily admits, while the Australian incursion has been more successful. That raises a big question about how to go forwards for an FD involved in the company’s growth strategy.

View to a sale

Pushing the US market further would be expensive, but it places Lantsbury in an interesting position given his role working with two significant shareholders on the board. Clearly, their personal interests were key factors in weighing up the risks of US expansion, which Lantsbury is clear would have taken a “substantial amount of money”.

Board members, according to Lantsbury, did not want to stymie their dividend after several years of losses and scraping by.

He says board meetings are interesting because “it’s not the same as having an independent board because they’re wondering what’s going to happen in terms of their cashflow”.

That is partly why Moonpig found itself in talks with the private equity-backed Photobox with a view to a sale that was completed in July. “If we look at our options, then perhaps working with someone else, or bringing in some other investment, will give shareholders a chance to take some risk – some money – off the table, and give the business the capital that will enable it to do those plans,” says Lantsbury.

But that means the talks have soaked up Lantsbury’s time. He admits they’ve taken him away somewhat from the day-to-day running of the business, though he says he has been aided by a “tight” management team, and plans and targets have still been met.

Working for private equity owners is likely to bring quite a different working culture for Lantsbury: “I’m sure it will bring some challenges, and it will be different from what I’m used to. But I’m very excited to see how that’s going to be. I don’t know yet.”

He adds that while it could be “more stressful, what that will bring to the table in terms of funds and being able to go into business development… is a good trade-off”.

National newspapers have valued Moonpig at £100m for the sale. The company was eventually sold for £120m, but at three times revenues it doesn’t look like the wild multiples put on some of the global dotcom players.

“This is a brand-new market sector so, in terms of what to compare us against – what would be reasonable multiples – it’s not very easy because our business model is fundamentally different from a high-street greetings cards retailer,” says Lantsbury.

He adds that the valuation is about future cashflows, attitudes to risk and what the perceived risks are going forwards: “It has been interesting to see how a third party, or independent person who doesn’t know the business, sees it from the outside in terms of what they can perceive as the opportunities, the risks and the value.” ?