Earnings Call: H1 2024

Apr 12, 2024

Good morning, everybody. I am going to start with an apology. I seem to have come down with a bit of a cold today. I think it must have been all those air-conditioned offices in London over the course of this week. So apologies if I am a bit croaky. I would like to start, Hannah, on page 3. Hannah has asked me, as always, to give a brief overview of the company for those of you who are new to the business. So we are Ultimate Products, and we are a branded consumer goods business. We specialize in general merchandise, and our main product areas are small domestic appliances, so things like kitchen, electrical, and electrical floor care, housewares, so things like cookware and utensils, and laundry, so things like ironing boards, airers, mops, buckets, and many other things besides. They are our main areas. We are branded, and you can see some of our brands along the bottom there, but particularly I will come to this in a later slide, but 80% of our revenue comes from brands that we own. 60% of our revenue comes from Salter and Beldray. I will say a bit more about those later. Russell Hobbs, just to be clear, we license Russell Hobbs for cookware, so we do not sell the electrical. We have a mission, and our mission is to sell beautiful products for every home. Beautiful products because we are proud to be mass market. We want to sell to families and households, ordinary families and ordinary households up and down this country. Beautiful products because we want people to be proud of the products that we sell to them. We want them, of course, to perform their function, but we also want them to be beautiful. We often talk about the countertop test. We want people to buy our product, put it on their countertop, and when their friends come around, it stays on the countertop. It does not go in the cupboard before they arrive. We are quite unusual in that most branded businesses build brand equity in order to drive selling prices up. We want to use our brand equity to drive volume. We are determined to stay at that price point, which is on or just above own label. I am going to move forward to page 5, please. Chris will go into the financial results in more detail, but I did want to share my overall perspective with you on the results. I think the first thing I would say is, I am never going to celebrate a period where revenue is down, albeit relatively slightly. I think it is worth taking a step back and consider what has happened over the last 2 years, really during calendar year 2022 and calendar year 2023. From a macro perspective, during that period, we have largely had wage deflation, combined with food inflation. The combination of those two factors is really quite toxic for a business, for a non-food business, any non-food business, because it means you have a smaller share of a smaller basket to go after. I think we have seen the outcome of that in a number of profit warnings, particularly in the non-food arena. In addition to that, we as a wholesaler have had to deal with some additional challenges. During that entire period, retailers have been overstocked, so they inherited an overstock position at the beginning of calendar year 2022 as a result of the volatility of demand during COVID and the difficulty they had in planning their buys. Retailers have spent the best part of two years, really, unwinding that overstock position. For us as a wholesaler, that is problematic because in the meantime, they do reduce intake. I think given those challenges, as I say, I am not going to celebrate a minus 4% revenue decline. I think despite those challenges, I am really proud of the performance of the entire team at UP, particularly the commercial teams who have traded exceptionally hard to make up for, to mitigate those external challenges. I do believe there is some good cause for optimism going forward, and I will pick that up when we get to the outlook statements at the end. If we move forward to page 8, please. I just want to talk to you about. Obviously, many of you will be aware that I am the Incoming CEO, albeit probably fair to say very much the continuity candidate, having been in the business for 19 years this year. Many of you are familiar with me anyway through previous presentations in my role as Managing Director. I just want to explain why Simon and I have made this switch, myself to CEO and Simon to CCO. Because it is part of the plan for the next few years. It is wrapped up in the things that we want to achieve for the business. What I want to do first is to look backwards, and I want to go back to December 2013. In December 2013, we had a business that was a sourcing business. By that I mean we would go to a retailer with a blank piece of paper, say what you want, and then we would go off and get it for them. The problem with that model is it was breaking down. We were about GBP 50 million of revenue. That was a bit up, a bit down every year. Despite our best efforts, we couldn't grow. We were making about a 3% EBITDA margin. Then we took all our senior managers off site, and we said to them, "We are going to prioritize our brands." Back then, we sold based on product and price, and the message we gave them was we wanted to sell on brand, product, and price. Despite the challenges of the last five financial years, really since January 2020, we have had to deal with a lot of external stresses. Over the last 10 years, over the longer term, the business has become transformed. We have tripled revenue. We have increased the EBITDA by a factor of 12 or 13. As you can see from the coloring on the pie chart, that is being driven by the brands. Back in FY 2013, GBP 10 million of our revenue came from our brands, only 20% of our overall revenue. In FY 2023, over GBP 130 million, 80% of our revenue from the brands that we own. Within that, 60% of our overall revenue from Salter and Beldray. The way we see the next few years going, for the foreseeable really, is more of the same, doubling down on the execution of that strategy, driving our brands, particularly those two brands I mentioned, Salter and Beldray, both in the U.K., where we think there's still plenty of growth, but also particularly in Europe, which is effectively new territory for us. Just with regard to those brands, Beldray is 150 years old. It's our laundry and floor care brand. It's one of the U.K.'s oldest housewares brands. Then we have Salter, which is our scales and kitchen brands. It's the U.K.'s oldest housewares brands, older, in fact, than the United States of America. So a great brand, a great story to tell, both in terms of our U.K. expansion and our European growth plans. If you go onto the next slide. How are we going to do this? I've mentioned that we want to sell on brands. We moved 10 years ago from selling on product and price to brand, product, and price. It's been transformational. But we have realized over the last 18 months since we recruited our brand director that on the branding side, while we've done a good job, we haven't done a great job. We are in the process of changing that. So we've done fantastically well. We could do better again by refining the execution of our branding. We're just in the process of rebranding Salter. We're in the final stages. That'll be complete over the course of this summer. We've just started the rebrand of Beldray. I saw the new brand look last week, and it is pretty fabulous, I have to say. So very, very excited about that. In due course, we'll move our attention to Petra, Progress, and Kleeneze, et cetera. So we're going to take what we already do and become better at it. That will aid in that expansion, both in U.K. and Europe. The second thing we're going to do is take all those things which we are, I think it's fair to say, hopefully this doesn't sound too boastful, that we're already generally viewed as being class around execution, things like supply chain, things like product development, sourcing, account management, quality. We're going to take where we are, I believe, already great, and we're going to become super great. We're going to go from great to unbeatable. We're going to do that by using many of the tools that we've talked about in previous calls around things like automation, robotics, AI, and continue a process that has been underway for some time to really put clear water between ourselves and our competition. Then I think we've got a business where, in my opinion, we are already the lowest cost, highest service GM supplier to retail. We're going to take that up a few notches, and we're going to sort of envelope that in a branded offer that really is in a branding that really is best in class. The final thing we're going to do, and by the way, these points arise out of our five guiding principles, which you'll see in our annual report, execution branding and focus. We're just going to do, and I don't want to overstate this, we're going to just do some refinements of what we're doing under which brands to enhance the clarity of our brands, but also bring some operational simplification as well. If we can move over onto the next slide, please. Just a quick few words on this one there, because I don't think this is. I think sometimes we have failed to get this across, so this is the reason for the slide. Just how complex our business is. It's complex because retailers make things complex for their suppliers in order to make things simple for them. It's exactly what I would do if I was in their shoes. We have 300 retailers, 3,000 SKUs a year, very complex. To give you a sense of context there, we've got each purchase order that we issue has on average 80 steps. At the moment, we have 2,300 purchase orders in issue. We're managing about 200,000 steps at any given point in time. So it provides operational challenge, but it also provides barriers to entry and resilience. We always have to balance that with that ability. We square the circle by using our automation, our process management, and that's allowed us to scale the business over recent years in a way that others do struggle with, because we are better at managing that complexity. But it does need to be balanced, hence the scales, and hence my commentary on the previous slide about making simpler. Because if there is too much complexity, then despite the best efforts, it can have an impact on scalability. This is something that I think we manage very well, and I felt it was an important message to communicate, because I feel in the past, we've not been able to do that. We've not been as effective as we could have been in doing that. The next slide. Many of you who are familiar with the story will know we're always banging on about productivity. It sounds at first sight like an OpEx play. I understand that. Of course, it is to some extent, and we have seen. We are moving now into flywheel territory with these developments. Since the end of calendar year 2023, we have seen a decent drop in headcounts as the accumulation of these marginal gains feeds through into a lower resource requirements. But really, it's more than that. As we become more efficient, more productive, we want to recycle that into a number of things and not just into OpEx gains. We want to recycle it into better pricing. We want to recycle the benefits into increased marketing spends and also into better rewards for our colleagues, which in turn delivers more productivity. It's already delivering commercial benefits. We've been able to absorb, or certainly mitigate the big increases in wage inflation that all corporates have seen recently by our focus on productivity. That's put us in a better pricing position relative to our peers. In addition to the fact that we don't have a lot of gearing in the business, and we haven't seen biggest increases in interest costs, which our competitors have, it is really already translating into a distinct competitive pricing advantage for our products. Okay. At this point, I'm going to hand over to Chris, our CFO, for the next slide. Brilliant. Thanks very much, Andy. Here we can see that revenue is down by 4%. If we go onto slide 13, what we can end up seeing is the very complicated movements which are going on when we look at breakdowns in their various different categorizations. Here we have geography, major products, strategic pillars. These tables can be very difficult to understand. What I've done on slide 14 is to try and simplify those tables into a bridge chart to show the major movements that we have. The first headwind is probably not the right word in relation to air fryers, because this is really down to prior year comps. What happened with air fryers is that they have been a product which we have sold for the last ten years, usually selling around GBP 5 million worth of them a year. Last year, Martin Lewis, you know, called these out as an energy efficient product, which was great for saving money during the cost of living crisis. We saw a mini boom in the sales of air fryers, especially in the autumn and winter of 2022, which caused them to go from an annual selling rate of GBP 5 million up to GBP 25 million, which is sort of like a fivefold increase. In the current period, it's come off the boil slightly, and we've now gone from selling at GBP 5 million a year to selling at around GBP 15 million a year. They are still a very good product line for us. They have certainly entered the consumer's consciousness now. Unlike previous booms or froth that we have seen, think of sort of like spiralizers where people were making courgette spaghetti. These have really entered the consumer consciousness and are a good line to us. But in the current period, we're seeing the headwind of the froth that we saw in air fryer sales last year. In some way, those air fryer sales last year compensated for a larger issue which has existed within our market for the last two to three years, which is retailer overstocks, which is actually an effect of COVID. In COVID, the supermarkets and retailers saw a boom in the sale of goods, especially in relation to things which people were buying when they were locked down. An awful lot of cookware, for instance, for us. What happened is post-COVID, when the economy started to open up again, the retailers over-ordered on the back of the consumer demand which had existed during lockdowns. These overstocks have been working their way through the system in the last two years. It is true to say that discounters who got themselves into bigger problems were much better at dealing with overstocks and have dealt with them, which is why in the current period, discounters have returned to growth and actually grew by 17% in the period. However, supermarkets were slightly less good in terms of dealing with those, and some of our customers on the continent have been behind dealing with those overstock issues. That is causing that 7.1 negative variance to German supermarkets. The final little bit is revenue deferral. Some of you will be aware of what has been occurring in the Red Sea. In previous years, you may have called this a crisis, but we had a proper shipping crisis back in 2021. The current Red Sea issues have been more of a nuisance in terms of supply chains. What ends up happening is ships which were en route to go through the Red Sea ended up diverting around Africa, which has meant that shipping times have increased from about 25 days up to around 40 days. That meant that there was some deferral at the end of the period where goods which were meant to have been delivered in January ended up being delivered in February. Against these three headwinds, what we have seen is all other sales up by GBP 9.8 million, which is firstly due to our commercial teams paddling incredibly hard to make up those headwinds. Then looking down at the bottom end of the income statement over on slide 15. Adjusted EBITDA flat at 0% despite revenue being down 4%. A lot of that is due to our productivity increases. Obviously adjusted EBITDA margin up from 12.8% to 13.4% as we now strive incredibly hard to continue to be profitable with what we are doing in terms of our productivity gains. Probably the other interesting lines down below EBITDA are our finance expense, which is down due to the fact that net debt is down significantly during the period, causing a reduced cost, which means that our adjusted PBT was actually up 2% in the period. However, the taxman is now taking more in corporation tax, so due to the increase in the corporate tax rate from 19% to 25%, our adjusted profit after tax slipped slightly by 3%, which also meant that our EPS dropped by 3% as well. However, we have decided due to our strong cash generation to increase the dividend per share by 1%. Overall, we try to roughly pay out 50% of our profit after tax in relation to dividends. Moving on to slide 16, we can look at that decrease in net debt, which I spoke about earlier. We started the period with GBP 50 million of net debt, finished at a low of GBP 8 million of net debt. In the period, we have seen a very strong operating cash conversion, so 128%. That is rare for our business. As a business, we do have a working capital requirement, and we do see swings in that working capital requirement. Those swings can be somewhere between GBP 20 million and GBP 25 million in any given year. However, over a period of three years, we do see our profits always turning into cash. That can be shown quite clearly on slide 17, where we can see over periods of time, our leverage coming down quite strongly as we expect to see our profits converting into cash. What happened here, you can see that in H2 2021, net debt increased quite significantly. That wasn't due to working capital, that was due to our acquisition of Salter. When we acquired Salter, we took out GBP 20 million of debt to fund that, as well as doing an equity raise. That debt that we took out has now been paid off, which did mean that the board then had an issue. Not so much an issue as an opportunity to re-look at our capital allocation policy to decide how much debt we do want in the business in the longer term. As I've said, we do have a working capital requirement. Although the cost of debt has gone up, debt is still cheaper than equity. We believe that it's appropriate as a PLC with a strong balance sheet to be funding our working capital with debt. That's what we will look to do going forward. Our working capital balance, as I say, can swing between GBP 10 million and GBP 30 million in any given year, and having a debt that's an average of 1x EBITDA, so an average of GBP 20 million compared to our EBITDA at the moment, feels to be a relatively conservative level at which to set our leverage. At the end of the period, our debt was only GBP 8 million, so 0.4x, so significantly below that, meaning that we do have an excess of cash at the moment. In addition to continuing to pay out 50% of our net debt in terms of dividends, we've also decided to do a moderate level of share buybacks. That can be seen on slide 19. That was announced on Tuesday just after we announced our interim results. At the moment, we're looking at regulatory and shareholder approval to do a share buyback of up to 10% of the issued share capital. The 10% is the max that we are looking to do. In addition, we've given an idea of the quantum. The board does want to have flexibility over the amount of shares that it may be buying back. Obviously first of all, the key requirement in relation to cash management is ensuring that the business has enough cash for working management and investment. But with the excess cash, we are looking at the moment to do about GBP 1 million worth of share buybacks per quarter, which we believe is a relatively modest level. Andy, handing back to you to have a discussion about the outlook. Great. Thanks, Chris. As I mentioned before, we've had a couple of difficult years with regards to external challenges, I suppose. I mentioned about wage deflation combined with food inflation, and then about retailers destocking over quite an extended period. I think we've got work to do to get FY 2024 across the line. As Chris mentioned before, the commercial teams have paddled very fast to deliver the numbers to date. I think there's more work to do to deliver the current year numbers. But we are currently on track, so that's good news. Looking further ahead to FY 2025, I think there is some decent cause for optimism. Since October, we've had real wage inflation, which is good, and we're seeing food inflation dropping. So that external macro pressure is easing. We're also satisfied that retailer stocks have now normalized as of January, I would say. That headwinds, which has been a kind of two-year headwinds, has abated. It may well be, and this is a personal view, it may well be that they move to an under stock position come the summer given the delays on replenishments that the Red Sea crisis has created. The Red Sea has essentially added 20 days to all lead times because of the extended voyage time around Africa. I think also market research is showing that consumers are retrenching back to the home after the novelty of going out and experience hospitality post-COVID. There is quite a lot of data out there that their intentions 2024 is to return to their home more and entertain more at home, which tends to benefit our products. I think maybe one or two tones of caution. I'm personally probably a bit more, slightly more pessimistic on employments than maybe wider commentators are. Of course, just because people have money in their pockets, it doesn't mean they're going to automatically want to spend it on general merchandise. We're going to have to fight very hard for the consumer dollar, albeit I do think we are very well positioned in the, we are that mass market price, and great value products, great quality, some really nice brands. So I do think we're in a good position, but the consumer these days is very savvy, has a lot of tools at their disposal, and will only spend when they want on what they want. So we're going to have to work hard for them to spend on our product. Okay. That was the presentation. Hannah, any questions? Can you say a bit more about your marketing plans to accelerate sales growth? Well, we're in the process of rebranding. We're final throws of rebranding Salter, and we have started process of rebranding Beldray. Our marketing team, which maybe four years ago consisted of one person, is now 10 people. We've invested in people. We do actually quite a lot of traditional PR, which we find very useful. In fact, our air fryer's featured on Emmerdale and Lorraine over the last few days, so that's the efforts of that team. We do a fair amount of influencer work. I think as we step forward into Europe, we are going to have to develop a different marketing approach for those territories, and that is something which is a plan we're working on at the moment. I suspect it will involve influencer type activity like in the U.K., and possibly use of the kind of brand-building tools that sit within the Amazon ecosystem. Our gang planks into Europe, we really want to focus on European supermarkets. But online is a key gang plank into that territory. Our products are all widely listed on Amazon. Amazon is Europe's largest GM retailer. If you're known on Amazon, you're known full stop. We'll probably utilize some of the brand-building tools that they have embedded in that platform. Couple of questions here on the excess cash. Why not return it as a special dividend rather than buybacks? This week, we have heard a number of different views. Obviously there are three different methods of returning cash, the normal dividends, special dividends, share buybacks. This week we have heard many different views about how people like cash to be returned. Obviously there's always a balancing act about how you do that. We see our current dividend policy as fairly generous in terms of the 50% of post-tax profit. I would usually see myself a special dividend arising when excess cash has arised due to a corporate event, a sale, so there's a large amount to be returned. Here we're more talking about progressive amounts. With that, we do have a principle of cash cost caution. This is a relatively cautious sort of like move of starting to return some back to the market. Obviously, I would never say never in relation to special dividends. If we found ourselves in a position where the excess cash was a significant amount, a special dividend might at that point be more appropriate than share buybacks. But the share buybacks is the chosen route at the moment. Thank you. You talked there about your continuous improvement program. Two parts to this. One, are the easy wins behind you, and how much more cost can you drive out of the business? And two, will you need to invest in any technology to help you drive further improvements? Yes. We feel quite bullish about this. The graph on page 11, which is a five-year graph. The robotics program is only really 2.5 years old. Most of the graph hasn't benefited from that program. Of course, when it comes to AI, it's only really since ChatGPT was released, so you're looking at maybe a year or so. So we feel we have more opportunity in front of us than we do behind us because we now have an ever-developing tool set that we can deploy. Just on this, by the way, we have seen some decent headcount drops since the turn of the year. Over October, November, December, we averaged 395 heads. We were down to 360 at the end of February, and we're down below 350 at the end of March. These are all very much sort of driven by the productivity gains. A little bit seasonal. We will be recruiting more people as we go into peak recruitment season, so we'll probably float back up to maybe 365. But that's still a structural reduction on where we were in calendar year 2023. I think with regard to this, it's best not to think of it as a tech play. The products that we're using are widely available. ChatGPT is widely available, and Power Automate, which is what we use, is part of the Microsoft suite. It really is a people play. It's our people that come up with the ideas to automate, and then it's our process development team that executes that. That culture of people, that bottom-up culture of continuous improvement, sits on top of our graduate development scheme. This is why I do not mind talking about it, because I do not think others will follow, because if they want to do what we are doing, they will need to set up a graduate development scheme, and maybe in five years' time, they will be able to get cracking. I do think this is not just the result of ChatGPT and RPA, robotics process automation. It is the result of 10 years of investment in our graduate development scheme and in training of our people. So I do think we have something quite unusual here. Right. You referenced supply chain volatility and quality control issues as specific problems. Can you give some examples where quality was an issue and what you did to fix it? I do not think I mentioned quality as an issue. I think it is one of the things we do very well relative to our peers. I think the sort of price quality kind of formula, that balance we do get right. I think- It was mentioned in the RNS as a factor for why you would have a lot of different suppliers. So it is a theoretical risk of why- Okay you would have a lot of different retailers or a lot of different suppliers and factories if there were. Usually when those arise is when you are doing our audits. We have a team out there in China who are continually auditing the factory. Therefore, if you find a quality control issue in those audits, then we have a lot of other suppliers who you would turn to in order to combat those. Yeah. I think, again, we're quite unusual. We have 45 people in China. This isn't an agent or an associate. These are our employees. That includes an inspection team of 15. Again, we do use some external inspections depending on timetables and demands, but wherever possible, we use our own inspectors. We're very proactive in going into factories ahead of time to deal with any issues. So the feedback we get from our retailers is when it comes to management of quality, we're pretty far ahead of other people. Supply chain volatility, we have of course had the Red Sea. I think the reality is that that's going to be an issue for the foreseeable future. Ships are going to be rerouted. We've taken the view that ships being rerouted around Africa is now the way things are. That has lengthened lead times, but the lead times are longer but regular. Sorry, longer but reliable. Whereas in 2021, they were longer but unreliable, which was a much more difficult combination to manage. There is a bit of an issue, and it is that retailer timetables haven't been changed yet to reflect that. So that's something that we're going to have to manage as we go through the next few months. Well, prevention sounds better than cure on the quality front. Just picking up on that Red Sea disruption, we've got another one here. What percentage of your products are affected? It sounds like I know the answer to that one. You mentioned this disruption is adversely affecting lead times, but is it making any difference to freight cost? Really interesting one this, because when the Red Sea crisis started, it was just before Chinese New Year. The Chinese New Year, you generally see a tightening of capacity. It was a bit unhelpful. You saw rates which had been pre-COVID around about $2,000-$2,500 went up to $18,000, then collapsed to as low as $900, then floated up to about $1,400 just before the Red Sea. When the Red Sea, when that hit, they spiked back up to five and a half, because of that combination of Chinese New Year and the impact of the Red Sea. By the way, lengthening shipping times, obviously, there's additional cost in terms of fuel, et cetera, but really it's about capacity. It means that the ships can make the round trip less often in a year. It's probably led to a 30% reduction in capacity compared to pre-Red Sea. So rates spiked up to five and a half, but they've subsequently floated back down to two and a half. Two and a half is about the long-term average for shipping rates, so that is manageable from a cost point of view. Obviously, the reason why despite the drop in capacity that is we haven't got elevated shipping rates is twofold. First of all, a lot of shipping capacity came online, was built and came online in 2023 and that's mitigated that loss of capacity by going around Africa. But also there is still a softness of demand in the West for goods from China. So yeah, two and a half is manageable. I do have a slight fear that as retailer stocks normalize, demand for goods increases, and therefore we might see rates float up as we go through the rest of 2024 into 2025. But I think that process will be gradual and easy to manage. Thank you. What are the factors behind the poor performance of Russell Hobbs in the second half of last year and first half of this year? Is it really all about Germany? What are you doing to reverse this trend of declining sales? It does end up being a lot about Germany, but it is a fantastic door opener for us. It is a well-known brand, and it is especially a great door opener in Europe, where perhaps Salter and Beldray are at the moment a little less well-known. Therefore, the German supermarkets have bought a lot of Russell Hobbs. What also is with Russell Hobbs, we only sell cookware for it, and cookware is where we have seen a large amount of overstocks from COVID. That has been a particular area of overstocks. Yes, it is primarily due to the German supermarkets who were down EUR 7.1 million in terms of their sales, compared to the EUR 4 million decrease in Russell Hobbs sales. In some ways, there will be a natural reversal of that because those overstocks are reaching an end now. In terms of our European expansion and how we hope to grow that brand, that will be one of the key brands which will be sold from our Paris showroom, which we opened last year, which has had a very successful start. We are very happy with how the future is looking for that in terms of European sales. I have a question here on the progress of the new Petra brand. Is there anything else you would like to add on that basis, Chris? Yeah. Petra has been quite similar. Interestingly, the sales to Petra in the previous year were generally through one channel, through one supermarket, and they have seen some overstocks. What we have done with Petra in the current period is we started to sell it through different channels. We have been selling it through online as well, and we have been selling it through to other retailers in Germany. Actually, that has been about building that brand upwards by starting to sell it through other channels and with other customers. Okay. Thank you. Stock clearance. Obviously, it has been a real winner in H1, the way you have handled it, preventing a bigger fall in sales. This one will not be repeated, but do you intend to maintain this opportunistic capacity? It will not be repeated at that level. This is the core of the original business, which was actually founded 30 years ago by Simon. It was a closeout and clearance business. That has continued within there. Now, usually it has been about 3% or 4% of revenue in previous years. Obviously, with the overstocks which have existed, there have been lots of opportunities in the current period as we have seen suppliers trying to sort of clear those overstocks out. Certainly that business will continue, but the opportunities will probably be more around the 3% or 4% of sales going forward. Thanks. Okay. Do you see increasing competition from companies licensing other brands out, e.g., Blaupunkt? I do not know if I am saying that right, Blaupunkt. Is there any material opportunity to license the Salter brand to other regions in the world? It is not something we have explored. Becoming a licensor is quite tricky because to some extent you lose control of your brand. I think wherever we sell Salter, we would want to be the people who execute that. Okay, thanks. In terms of the increasing competition from other companies licensing out brands, part of the business. Yeah. Blaupunkt, I think from memory, it is licensed by B&M as a kind of quasi own label brands. Look, there is competition all around us, is not it? We are going to see there is competition from Temu, there is competition from own label, competition from other brands. I would not say licenses particularly keep me awake at night, other people selling licensed product because there is another person in the mix taking a license fee and a slice of the margin, is not it? I think that can often make them less price competitive. Okay, thanks. Just looking around continental Europe outside of Germany, which are the key markets and what is the growth outlook? We are going to focus, if this is not exclusively so, but we are going to focus on the wealthier, more populated parts of the European continent. That is going to be sort of Western Europe, so Germany, Benelux, France, and of course, Italy and Spain. They are already being targeted by the Amazon platform anyway. But yeah, it can be useful to have an online presence as you go out into new territories because you are already in the market, and that does help with retail buyers. Okay. Staying in- Quite often our growth is coming through individual retailers. The countries we end up selling with is because we may end up with a big multinational retailer who is operating in 20 different countries across Europe. We may concentrate on German supermarkets, French supermarkets, which can give us presence in many sorts of different markets, rather necessarily going for an individual store in Czechoslovakia or Poland, we'll be selling to a pan-European retailer. The perfect segue. Thank you, Chris. Which retailers are handling most of the sales in France, and what products account for the majority of the sales? We try not to talk about individual retailers because for commercial reasons, they tend not to like that. They don't really appreciate suppliers talking about them, so we always have to be, for commercial reasons, quite careful. France is still relatively early stage. We only opened the showroom there in September. We are in all these territories targeting What does success look like? It looks like opening large supermarket accounts. That is what, going back to the reasons why Simon and I have made this switch. Simon is targeting opening large store groups, particularly supermarkets, and establishing relationships at a very senior level. Going back to what I said before about we used to sell 10 years ago on product and price, we now sell on brands, product, and price. We want to evolve into a business that sells on capability, brands, product, and price. What we are seeing increasingly with very large retailers is they want to partner with suppliers that can really back up their growth plans. Relationships are increasingly being forged at C-suite level, CEO, CCO level. That is what we want to do over time. If you take someone like a Li & Fung, and we do not do what Li & Fung does. Li & Fung, they go in at CEO level, when they want to establish a commercial relationship with a particular retailer. That is increasingly really what we want to do over time, sell our capability, and then sell our brands, product, and price. Okay, thank you. Can you comment on competitive threats, particularly interested in the Temu threat? Yeah, I think Temu has got to be taken seriously by anyone in general merchandise. I do not think they are going to have. Really, it is at this point that we should be looking to governments to ensure that there is a level playing field when it comes to competition, and we all know that that is not going to happen because we have a dysfunctional, sorry, I am going to get a little bit political here. We have a dysfunctional state in this country. It is something which while they are arguing about whatever nonsense they argue about, we in business are going to have to deal with this because it is fundamentally unfair what is happening with the likes of Temu. I think what it means for us is. I think they will find it much harder in the medium term to target Western territories because what are they going to do about safety of product and recall of product and things like this? We will see how all that develops. But it does represent a material threat. To general merchandise businesses. I think for us it means that we have got to double down more than ever on our brands. Because we have been a branded business for 10 years, and people who buy our products value our brands. If they value our brands, I think they are much less likely to buy products. They are much less likely already to buy this kind of unbranded ultra-low cost, cheap and cheerful products that Temu does offer. Okay. What gives you confidence that H2 will be only marginally below H1 this year, given that last year it was significantly below? I would not say that last year was significantly below. It does change from period to period. In some periods it has been as high as 60% in H1. I think it was 54/46 last year, and this year it may be 52/48, so we are talking relatively at the margins. The business has become less seasonal, mainly because of the growth in online. It is also partially affected by whether people are buying landed or FOB. FOB, people are buying quite far in advance, but what we are seeing at the moment is people buying a lot more from stock. Especially since Christmas, what we are seeing is retailers who have not been ordering because they have been stocking are finding that they are having gaps in their shelves, and they are coming to us now and buying from stock. Whereas two to three years ago, they would have never done that. So we are seeing a slightly less seasonal business than we have done in the past. Okay. Thank you. Couple of questions here. One more use for cash, going out and making little strategic bits of M&A, given the tricky macro outlook. Are you seeing opportunities out there? Yes. When we have generally bought things, it has been for relatively minor amounts. When you've been like grabbing things from distressed purchasers, we've bought things for €100,000, £100,000. So obviously, we continue to have headroom in relation to our cash and our facilities to be doing things like that. So those opportunistic things could come about. Also in our use of cash, if there were large strategic acquisitions, we as a PLC have plenty of headroom. Our one times EBITDA, general policy that we are working to, you have plenty of balance sheet headroom above that. When we did the acquisition of Salter, we did go two times. So you still do have capacity there for doing M&A. But it should be said, doing M&A is not part of our strategy. We feel that we have the brands to be able to grow in Europe without needing to do those acquisitions. But as you say, if there's a distressed purchase, we've certainly got the ability to do that. Great. Well, I am conscious of time, and I know you have both got another meeting to get on to. Perhaps, with a slight closing question of some frustration that your share price is not budging at the moment, for which you are not alone in the market. But any closing thoughts? On the share price? On the share price. You can segue into an outlook. Oh. I always try and dodge those because it is for the market to set our price. I guess it is difficult to talk about our share price without talking about what is going on in the market more widely and where you think that is going to happen. We do have a range of views, don't we? Everyone who is forecasting the death of the London Stock Exchange through to we have just got off a call with a fund manager who thinks that a redemption. A lot of it has been caused by forced selling, which in turn has been caused by redemptions. At some point, surely you get to the bottom of the barrel. Because if redemptions continue forever, then you literally do not have any funds and no fund managers and possibly no stock exchange. I think it has gone on for what? Three years, redemptions. I guess at the point that redemptions stop and we stop having forced sellers, then I think we might have a more sensibly valued stock market by me. But it's certainly not an area I'm an expert in. We prefer to focus on the business and let others look after that. Good response. Thank you, Andy. Thank you, Chris. Have a good weekend. Thank you to everyone who joined us, and please don't forget to fill out our feedback forms. We'll look forward to hearing you in six months' time. Great. Thanks everyone. Thanks for your time.