Earnings Call: H2 2024

Oct 31, 2024

Summary

FY24 revenue, adjusted EBITDA and statutory profit declined amid air-fryer normalization, destocking and weak UK demand, while gross margin held at 26%. European growth and productivity underpin the outlook, despite a £2m H1 FY25 freight headwind.

Thanks everyone for being on the call today. We are Ultimate Products. We are a branded consumer goods business. We supply typically into retail, although we do sell via online platforms as well. Our mission is a beautiful product for every home. Every home, because we want to be at those price points that households can afford. We are a bit counterintuitive. Most branded businesses use their brand equity to increase the price of their product. In increasing the price of their product, they increase their GM, and therefore create the space within that GM to spend on marketing their brand. We go the other way. We use our brand equity to drive volume, and we use the productivity in the business in order to create the space to market those brands. We want to be at price points for every home on or just above own label. What we mean by beautiful products is, we talk internally about the countertop test. We want our product to pass the countertop test. What does that mean? That means that when you buy our product and you take it home, and you put it on your countertop, and your friends come round, do you keep the product on the countertop? Or do you put it in the cupboard before your friends arrive? If you put it in the cupboard, it has failed the countertop test, and that is product that we do not want to sell. Our brands are, we have a number of brands, typically British heritage, but our two principal brands are Salter, famous for its scales and kitchen. Salter is the U.K.'s oldest housewares brand, dates back to 1760, older than the United States of America. As we say to our French colleagues these days, founded before the French Revolution. Our other principal brand is Beldray, which is well known for its laundry and floor care. Beldray dates back to, is over 150 years old, dates back to the 1870s. Another beautiful British heritage brand. Between those two brands, we already feature in 80% of U.K. households. People will say to me, "I have never heard of your product." I will often get a call back the next day where they say, "Actually, I went back home, I checked with my partner, and we have got a couple of your products in the cupboard." Or indeed on the countertop. What is the investment proposition? We offer four things. We offer an unusual mix of capital growth and income. Capital growth because there are 1.5 billion kitchens in this world. We are still two thirds U.K. focused. In the short to medium term, we see the majority of our growth coming from mainland Europe. In the long, long term, as I say, there are 1.5 billion kitchens globally. Secondly, we combine that with income. We are a capital light model. That means we can grow and pay a dividend along the way. An unusual combination. The third thing we offer is resilience. We have a very flexible commercial model. As I think we have evidenced in the periods since 2020, we can adapt commercially and operationally to almost whatever external challenges come our way. Finally, we offer a leading approach to ESG. For some people, this is important, some people less important, from an investor perspective. We use this commercially to sell. We have customers for whom ESG is retailers for whom ESG is super important. We can offer a solution to them, which helps Simon Showman, our Founder and Chief Commercial Officer, to sell into those blue chip retailers. Looking at the presentation here on page 2, compelling customer proposition provides resilience. Established international online presence provides the opportunity for accelerated growth. We are going to talk about this a bit later on, huge focus on automation and productivity, really important at the moment as all of U.K. PLC has seen and will see escalating wage costs and as mentioned before, a leading ESG strategy. If you go on to page 3, please, Hannah. I am not going to go through this. It is quite a lot on this slide. I will leave it to you to read at your leisure. On the right-hand side, these priorities are our five guiding principles that we have had since the end of 2013 when the group pivoted from being a sourcing business to a brand-led business. I am just going to pick out for the moment execution, to have best in class execution everything we do. This is going to sound really boastful, but if you do not blow your own trumpet, no one else will. We are the best, we believe, at what we do in the GM space. We believe when you look at all the elements of what we do, we are better than other people. Whether it is product developments, supply chain, sourcing, product quality, account management, inventory management, we believe we are certainly best in U.K. and Europe and certainly up there globally. The one area where we have historically been not as good as our competition, but we are catching up rapidly, is in our approach to branding and marketing. We appointed a Brand Director a couple of years ago, Tracy Carroll. We have recently rebranded Salter, one of our two main brands, and we are in the process of rebranding Beldray around that, a significant step up in marketing efforts. We have been learning a lot over the last couple of years in terms of branding. There is probably still a gap there between us and some of our direct competition, but that gap over the next couple of years will That gap is closing and over the next couple of years will be closed. If you move on to page 4. Chris is going to go into more detail around the FY 2024 numbers. I just wanted to pick out, make a couple of points on this slide. We did have, really from January 2022 to December 2023, 2 years of retailer de-stocking. For us as a B2B business that supplies retail, when retailers are overstocked, it is really tough because they do not just reduce their orders, they stop their orders, and they wait until their stock is normalized, and then they start ordering again. For a 2-year period there, it was really quite challenging because retailers had built up excess stock bought off the back of really strong COVID demands. When that COVID demand, when that boom eased, they found they had too much inventory. Stock levels have been clean generally in retail since January this year, so that is behind us. But it did make for a challenging couple of years. In FY 2023, that was mitigated by the air fryer boom, which was really helpful, but in FY 2024 when that boom started to come off, it unfortunately did lead to a drop in revenue and a drop in profitability. Nonetheless, we have held our dividend. Under our policy of 50% of profit after tax, there was debate about whether we should stay within that policy and reduce the dividends. We are very confident in our prospects, and for that reason. Also of course, we have a strong balance sheet, strong cash and debt position. So the board, I think, very sensibly made the decision to hold the dividends for FY 2024. If you move on to page 5. We moved from a sourcing model in 2013 to be focused on, rather than selling on product and price, we moved to selling on brand, product and price with Salter and Beldray at the forefront of that change. We are moving into a different phase now, which is we are not just going to sell on brand, product and price, we are going to sell on capability, brand, product and price. As I say, we have built an immense capability over the last couple of decades through substantial investments in the business in terms of our systems and processes and automation. We believe this really sets us apart from our competition, and it is that capability which retailers often, always need from their suppliers, particularly the larger retailers. You can see that on page 6, the development over last 10 years. Ten years ago, half of our revenues came from brands that we owned, and a quarter came from our two principal brands. If you actually go back to FY 2013, the numbers were even lower again. It was only 20% of our revenues came from brands that we owned. Now, 80% of our revenues come from brands that we own, and 60% come from those two principal brands, Salter, famous for its scales and kitchen, and Beldray, our laundry and floor care brand. As you can see on the right-hand side, we have been really working hard on those brands over the last 18 months, rebranding Salter and at the moment, sort of partway through the process of rebranding Beldray. Just move on to page 7. I just want to talk about this capability point, because it is the capability that builds strategic relationships with retailers. I just want to, for those of you who are maybe less familiar with the supply side, you might be more familiar with retail than the supply side of supplying into retail. It is very complex to supply retailers. I don't blame them, but they make it complicated for their suppliers because it makes it simple for them, which is exactly what I would do if I was in their shoes. I always use Ryanair. It is not a retailer, but it is a consumer-facing business as an example. If you want to buy a flight off Ryanair and pay by check, well, you can't. They define how you interact with them. That is the case with many consumer-facing businesses. When you are supplying retailers, they define how you will interact with them. For example, a large supermarket retailer that we are very proud to serve, has three vendor manuals. Each of these vendor manuals may be 100 to 200 pages long, and we have to comply with all of the requirements in those vendor manuals. Those requirements might vary from everything from their ethical process to how high you can stack a pallet. So huge complexity, particularly when you multiply that across 300 plus retailers, all of whom need to be supplied differently. So we have built a machine to deal with this complexity, and the graphic on the screen is our way of articulating this. At the core, we have a culture of continuous improvement, and this culture is built upon our graduate development scheme. We are highly unusual in our space, both our geographic space in the northwest and in terms of where we are in the supply chain, in having a graduate development scheme, and it has been in place since 2012. What that does is it gives us the human capital that has the desire to improve day after day and is not afraid to point out the bits of what we do that can be either removed or automated. Built upon that foundation, that generates automation ideas. Our process development team deliver that automation. That delivers increased productivity. About two-thirds of that over recent years have been recycled back into higher salaries. That in turn gives us better quality recruits and so on, and delivers the virtuous circle. Of course, the obvious benefits of this is control of OpEx. Honestly, UK PLC is suffering from significant inflation and has done for a number of years now of a salary line. If you look at our results for FY 2024 on OpEx are roughly level with 2023, and I think 2025 will be similar again. So we have been able to mitigate these upward pressures on our cost lines through the use of productivity and automation. But really the big deliverables for me are the ones which are perhaps a bit more difficult to directly measure, but are more commercial in nature. It means, for example, that we can invest in branding and marketing despite having super competitive price points. It means we should always be lowest cost, and this is the instruction to the business. When it comes to what we charge our retailers and what our consumers pay, we must be lowest price spec for spec. If someone is a lower price because it is a poorer spec, can't do much about that. Specs for spec, we have got to be the lowest cost. If we recycle the benefits of increased productivity and automation into these sort of commercial benefits, then that in turn should deliver more revenue and improve our competitive positioning. If we go to page 8 very briefly, what it means is we have all the bits in place to achieve what we need to achieve over the medium to long term. The work that has gone in over the last couple of decades is there and good to go. For us, the big opportunity, if we go onto page 9, the big opportunity is we are relatively mature in the U.K. I still think there is further opportunities for growth via market share gains. But the big opportunity in the short to medium term is in mainland Europe. 35% of our revenue in FY 2024 was from international sales, predominantly, mainland Europe. It was up from 30% the year before. We expect in FY 2025 that to be more like 40%-45%. We have had a plan in place to grow in Europe. But plans are plans, and many investors, not unreasonably, have said to us, "Until you can show that you're delivering on that plan, we're going to keep valuing you as a U.K. cyclical," which I do understand. FY 2025 is going to be the year when we will really start delivering on our European ambitions in terms of growth and revenue. But it is only just a start, and I'll talk about this a bit more as we go through the presentation. So page 10. The strategy for Europe is really quite simple. We are marketing ourselves in two ways. The first thing we're going to do is we're going to market our brands on the Amazon EU platforms. The logic there is really simple. Amazon is the biggest GM retailer in Western Europe. If we can use the brand building tools that are within Amazon's marketing toolkit, and they are very effective and particularly cost-effective, and we can drive awareness of those brands on that platform in those territories, it will drive wider awareness of our Salter and Beldray brands. So that's the first way that we plan to market ourselves into Europe. The second thing we plan to do is market our capability by being the most effective supplier to our current European retailers. We're not exactly new to Europe. We serve retailers such as Kaufland in Germany, Lidl, which is sort of pan-European, Biedronka in Poland, and of course, Action. Action is going to be, we feel, of particular importance in terms of marketing our capability. These are hugely credible retailers, and as other European retailers see what we're doing in these other accounts, then that will, we believe, drive those retailers towards us. We have our European showroom in Paris to greet them with, and we have an account management team there. Possibly Action being the more important one of that group. Action is really a retailer that other retailers follow very closely. So we have a five-step plan for marketing our capability. We're going to have products that some of them are pretty straightforward. We're going to supply products that sell through, of course. We're going to be the best supplier for quality, which is of ever-increasing importance. We're going to help retailers manage their inventory, which is a service that very few suppliers offer. We're going to be the most responsive in terms of account management, and then we're going to market our successes when we do well. Okay, I'm going to come back a bit later on to talk about outlook. I'll hand over to Chris to talk about the FY 2024 numbers. Thanks, Andy. Obviously, disappointing year with revenue down by 6.5%. As Andy mentioned earlier, there had been a period of 2 years where most retailers were overstocked. We started to see the end of that in FY 2024, and the major component for us was our German supermarket customers remained overstocked. In FY 2023, some of that overstocking was compensated by the air fryer boom that we saw. The air fryer boom was fantastic when it happened, and we thank Martin Lewis for that. We have been selling air fryers for a number of years at sale levels of about GBP 5 million. During FY 2023, they jumped up to GBP 26 million, which was fantastic at the time, but with all booms you know that they are going to start coming down. In FY 2024, they came down to about GBP 15 million. That was a GBP 10 million headwind to us, and that was especially in the first half of the year. When we started January 2024, so halfway through the year, we came back with quite a lot of positivity because we thought we had got through the headwind of the overstocks. We had got through the hard comparatives in relation to air fryers, and we were starting to think that the U.K. consumer would start spending again. The U.K. consumer had gone through a difficult period with the cost of living crisis, and by the time we got to January 2024, people were starting to see their real living wages go up, so they have more money in their pocket because inflation had come down, and salaries were going up again. What has been really odd about the whole of FY 2024 is that the U.K. consumer has not been spending. There has been a variety of reasons given for that during the year. For the first 3 months, it ended up being the weather. The weather in February, the weather in March, the weather in April. That started to wear a bit thin, then the excuses went on to the election uncertainty, and then in recent times, it has actually moved on to budget uncertainty. I think one of the things is nobody really knows why the U.K. consumer at the moment is choosing to save more money than to spend. Various different reasons have been given about interest rates or rebuilding balance sheets or nervousness. There probably has not been enough research to give a definitive answer. It is certainly true to say at the moment that that softness that we saw in the U.K. consumer has continued into FY 2025 at this moment in time. We are starting to see some very early signs of green shoots as we move into peak, but we really do need to see the consumer starting to spend more, and we hope for that over the peak trading season over the next couple of months. Looking down in relation to gross margin. Gross margin remained remarkably steady at 26%. Some of you who follow us will have known that we have been speaking about freight rate rises quite a lot this year. Freight had a proper crisis a couple of years ago where rates went up to $18,000. It is a bit more of a mini crisis that we have had this year, which has been caused by the Red Sea being closed, with freight being diverted around Africa instead. That did cause shipping rates to spike over the summer. Now, that didn't hit our margin during FY 2024 because during that peak is when we were shipping it over but hadn't sold the goods yet. What happens is you inventorize that and it goes on the balance sheet in stock. So that higher freight rate is actually going to hit profitability in the first half of FY 2025 when those higher shipping rates come through. Now, we do know that that is a one-off effect because what we've seen is shipping rates rose very high during July and August. They have come back down now to a normalized rate. So that increase and decrease, that triangle, is about GBP 2 million of excess freight costs that we will see coming through our income statement. As Andy has alluded to, admin expenses flat during the year. That's despite us having wage inflation and other cost increases. But we have squared that circle through our drive in relation to productivity. And that can actually be seen in the stat just above that despite gross profit going down, our gross profit per employee is up 4% to GBP 118,000, which reflects the success of our efficiencies. Just moving on to slide 12, we've got a very detailed breakdown of revenue here. I'm not going to go into all of these because you can get absolutely lost in all the detail. I think there's probably just two things that I want to pick up on there, is that firstly, Europe being up 7%, and that's despite having overstocks with the German supermarkets, and that's because we've seen a large amount of growth from European discounters in the year, and we expect to see that level of growth continue into FY 2025. The other positive, which is probably more of a one-off, is in relation to our clearance division. Now, the clearance division is actually the heart of UP. It is where we started when Simon Showman founded the business. It was dealing with closeout packages. The overstocks that we saw were not just at retailers, they were at brands as well. So during the year where there were overstocks, which hit our branded products as well, there were abilities to buy some closeout packages and sell those on. So this actually shows the resilience of our business and the way that we trade incredibly hard to counter the weaknesses that we were seeing in demand. And in some ways, that clearance is a countercyclical thing. So when there are overstocks, there are more opportunities for that clearance division. So we would not be expecting to see as many opportunities there for that as overstocks have ended and there are more opportunities for the rest of our brands to be sold instead. So on page 13, I've tried to simplify what happened in relation to revenue to not have the complicated table, but to simplify it. So you can see there the big GBP 11 million headwind in relation to air fryers, the headwind in relation to German supermarkets, which has now come to an end, and then showing that all of our other sales put together up by that GBP 6.7 million. Moving on to the bottom end of the income statement. So on slide 14. Adjusted EBITDA down 11% to GBP 18 million. Then further down, depreciation, amortization, relatively flat. The finance expense up due to interest rates being higher. We previously had some wonderful caps and swaps, which we took out when interest rates were at 0%, which had held back our interest charge. Obviously, all good things must come to an end. We had those for a period of time. They have come off, so we are now seeing a higher effective interest rate on our finance expense. The tax rate has gone up in the U.K. from 19% to 25%, meaning that the tax expense up 7%, despite PBT falling, which has left our statutory profit down by 16% to GBP 10 million. Now moving on to slide 15. As Andy said, we have decided to maintain the dividend. Our policy is, and will continue to be, to pay out 50% of our profits, which would therefore indicate the dividend should have gone down by 16%, but we decided to maintain it, and there are two reasons for that. First of all, is that we have a new capital allocation policy, which is aiming for a 1x EBITDA net debt. At the end of the year, our net debt was at 0.6x, so we have plenty of headroom within our capital allocation policy. So there is that thing of returning more cash to shareholders. Therefore, we maintain the dividend for that perspective. And it is also because we have confidence in the medium term prospects for the group as well. So we maintain that dividend at GBP 0.0738. Moving on to the balance sheet, slide 16. Now, the balance sheet has remained remarkably stable overall. Fixed assets stable, working capital stable, accounting assets relatively stable. Net debt obviously down due to the profits that we have made during the period. I think the one thing I want to bring out is a couple of those movements in the working capital. So you can see there that stock is up by GBP 8 million. Now that comes down to the shipping crisis. So one of the things that happens now is that the ships are not going through the Red Sea, Suez Canal, they are going round Africa. So that has added a significant amount of time, which means that we have more stock on the water because it is taking more days. So in the prior year, we had about GBP 5 million of stock on the water at year end. This year, it is up to GBP 15 million that we had on the water that we were importing into the country. Now, obviously within that and within that sort of stock balance, we do have that GBP 2 million of the excess freight charge, which obviously that has gone in there and that will flow through the income statement during H1 2025. Just moving on to slide 17. You can see there how net debt has moved. So we went from GBP 14.8 million down to GBP 10.4 million. So, 0.6x, debt to EBITDA ratio, so well within our sort of 1x capital allocation policy. So you can see there some of the uses, not very much investment in working capital on a net basis over the year. I would be expecting as we grow in Europe and we grow with our European discounters, that we would be expecting to see investments in working capital. That is why we do have quite a lot of working capital facilities. So in total, GBP 37 million of facilities that we have with HSBC, which is to fund working capital. Obviously, we did start a share buyback process during the year as well, along with the 1x EBITDA. So at the moment, we are doing that at a level of about GBP 1 million per quarter, but that could go up and down depending on the working capital requirements of the business. So that is a flexible item. Andy, handing back to you for the outlook. Yeah. Thanks, Hannah. Obviously, it is very early on the year. We are just at the end of Q1, and we do have the crucial November, December period just ahead of us. There are, I would say, three factors influencing, three major factors influencing the performance this year. One of them is known already, and Chris has talked about it, which is the GBP 2 million of additional shipping costs, which will go through the P&L in H1. We do not see the circumstances around this recurring next year. I think there is a particular set of circumstances for this year. So we do see this as a known one-off hit. Obviously very disappointing, but we were certainly one of the very earliest businesses to highlight this issue back in the summertime. The second factor is U.K. demand. Again, Chris made reference to this before. It has been particularly soft during this calendar year, somewhat unexpectedly because consumers were expected to use their spare cash to spend, and they have in fact used it to save, which is certainly an unexpected outcome. I mean, in my lifetime certainly, consumers have tended to, in the U.K., have tended to spend rather than save. I think your view, and I have my view as to how this is going to play out, but you may well have your own views as to how this will play out. My view is, it is going to be a headwind in Q1 H1, but we do think U.K. demand will firm up as we move through the second half of our financial year. We have seen some very early green shoots, in terms of demand through what we call our near term business, like our online business, through our call-off business, and through accounts which tend towards a more hand to mouth. So there is some very early green shoots. But having said all of that, November, December will be critical, I think, in signing the direction of travel for calendar year 2025. If the consumer does not spend in November, December, they will not be spending in January, February, March. That is just a fact. If the consumer comes out over the next couple of months as they run to Christmas, then there is a decent chance that that momentum will continue into calendar year 2025. I say, our view is that there will be a modest firming up of demands. No one is expecting some sort of consumer boom. But you may have a different view on that, and I think that view will be informed by what happens over the next couple of months. The third factor, again, we have touched upon it already, is our European growth. We are seeing strong growth in H1, but we are seeing accelerated growth in our order book for H2. With our European customers, we get more visibility because they order further ahead. So that order book for second half is helpful in terms of that visibility. But yeah, strong growth in H1, accelerated growth in H2. I think for me, what is really exciting about this, the additional shipping costs and the softness of the U.K. consumer, these are FY 2025 issues. The growth in our European business we see as an FY 2025, FY 2026, FY 2027, FY 2028 trend. We do think that the strong growth we are seeing accelerate through FY 2025 will continue on into future financial years as well. That, for me, is hugely exciting because as a cyclical consumer goods business, a U.K. focused cyclical goods business, it is going to be very difficult to deal with the headwinds of escalating wage costs. That is not just us, that is everyone in our sector, whether they are on the retail side or the supply side. I do not want to refer to individual names, but there have been plenty examples of that in recent weeks and months in terms of people's announcements to the market. We have two ways to mitigate that. First of all, as I said before, our relentless focus on productivity, which has already proven itself in terms of mitigating those headwinds. But secondly, our ability to find different markets, go into Europe and find additional volumes from a market where we are still, in terms of market share, incredibly low. Just linking back to the point on the automation. I have talked a lot about how the automation has mitigated the headwinds that we have had to our cost line. But actually, we are going to see the big benefits as we grow our top line. It means that as we grow the top line, the increase in our cost line should be relatively modest because of the automation that we have introduced into our processes. Okay, I hope that was useful to you all. Hannah, I think it is time for Q&A. European sales reached a peak of 39% in turnover in 2019. What are the challenges in trying to return to this level and beat it on a consistent basis? Well, I think I've probably answered that one, I hope. We do see that share going to 40%-45% in FY 2025, and very much kicking on from there. We do think in a couple of years we'll be a majority non-U.K. revenue business. Thank you. What steps will you be taking to mitigate the effects of the budget? You've had 24 hours, Andy. Well, maybe we've had more than 24 hours because I think the increase in our NI has been well flagged. Chris, you've done the Back of the fag packet, it's about a GBP 400,000 hit to us. As a business, we have been seeing wage inflation and cost increase over a number of years. The way we mitigate that is through our continued productivity and the continued work that we're doing now, which has meant that our admin expenses were flat FY 2023 to 2024. I'm still expecting them to be flat 2024 to 2025 because we will continue to invest in our productivity. Thank you. Just back to Europe. Do you expect German sales to recover to their 2022 highs in the medium term? I think that's a specific country focus there. Are there more fundamental issues with that market? No, the decline was down to the overstocks, which did take longer to clear in Europe, and Germany more specifically. No, we do expect to see a recovery in that market. I would just say though, the kind of retailers that we're targeting typically have a pan-European footprint. We're not looking to replicate what we have in the U.K., which is an offer where we serve retailers from Tesco all the way down to very small individual retailers. We are targeting the very large retailers over in Western Europe. It may be that we will continue to analyze the revenue over there between France, Germany, et cetera, but it's the European segment as a whole and the revenue that accrues that which will be more relevant going forward, if that helps. Okay. Again, Europe, when you opened your showroom in Germany, the sales jumped, but growth did not continue. I think you've just touched on that. Now you've moved to France, French sales have jumped. Do you expect the French growth to continue? The best way to think about our showroom is not as a French showroom, as a European showroom. That showroom underpins a European business that's already a GBP 50 million revenue business. That's the way to think about it. Really what we did is we didn't close our German showroom and open a French one. We moved our European showroom to Paris. We moved it to Paris for a few reasons. First of all, in Germany, the retailers there post-COVID versus pre-COVID were less willing to visit showrooms. They prefer now you to visit them. Whereas in France, it's still very much the culture of people visiting showrooms. The connectivity in Cologne degraded post versus pre-COVID, whereas the European showroom where it is now, a 15-minute taxi ride from Charles de Gaulle, is really accessible both for our people who can literally travel out in the morning and back in the evening if they need to, but also for our retailers across Europe for whom Paris Charles de Gaulle is much more accessible than Cologne. The biggest orders that we have written in our Paris showroom have been to a Dutch customer. It is not that this is only about selling to French customers; it's about selling to everybody and having that accessibility of a showroom to see our beautiful products to all European supermarkets and discounters. Thank you. Can you expand on how you plan to attract European prospects with inventory management? Is it mainly greater timelines, or do you mean things like clearance as a service too? What we really like with a retailer is we really like data. We want their sales out data. We want their inventory data. Most large retailers are very happy to share this with you. One or two are a bit reticent, should we say. In the main, large retailers are happy to share this data with you. I think, once we have this data, we've got a load of tools that we developed internally to analyze this data and then contribute. I think often the problem for retailers, they don't have the resource and maybe to an extent they don't have the tools in order to do the analysis work that we can do. What we want to be, we want to be the stock planner's right-hand person. Taking their data, dropping it into the tools that we use to analyze it, and then be able to go back to that stock planner and say, "Look, you may not have noticed because you're managing hundreds of lines, but this particular line is selling well, and if you don't reorder by this date, you're going to end up with an out of stock." Alternatively, and we are, I think one of possibly the only supplier that will do this, is possibly it may be that this line is selling more slowly than was planned. At that point, we'll be wanting to speak to that stock planner and that buyer to say, "Look, this isn't going as well as we'd hoped. Let's maybe plan a promotional period." We might offer to make a financial contribution to that and see if we can find a way to accelerate the sales back to the levels that were acceptable. Or maybe even say, and we really are the only supplier that does this, say to the retailer, "Look, if you've got another purchase order coming in on this, why don't you let us delay that purchase order till you're in." It's all this kind of stuff really, which we do that other suppliers don't do. They don't do it for two reasons. First of all, they maybe don't have the tools to do it. Secondly, the idea of a supplier saying to a retailer, order less, is a bit kind of culturally difficult for a lot of suppliers out there. To be fair, FMCG suppliers do this kind of stuff all the time. It's not something that is common on the GM side, but on the FMCG side, it's actually a kind of core skill set. That's why we're delighted to have Andrew Milne joining the board from an FMCG background, and José Carlos joining the board from an FMCG background as well, because we do think there's lots for us to learn off top quality FMCG suppliers. Okay. Thank you. Two questions here on Petra, which almost mirror each other. Are the big hopes for its future dashed? Where do you see it now? Will it ever be on a par with Salter and Beldray? Petra, we did make a decision earlier in the year to really double down on our focus on Salter and Beldray. If you look at where the growth has come from the last decades, the key drivers have been those two brands. We really, really want to focus our investment, our attention, our marketing on those two brands. You will, however, see, I think Petra grow into a fairly significant brand, over in Europe. Even though we need to have our focus on Salter and Beldray, you always need some plan Bs. Because sometimes, most of the time, that's what's going to work. But sometimes, for whatever reason, it could be channel management, it could be another reason where the retailer, for whatever reason, doesn't want to have the same product in their store as other people. You want to have a plan B. And we have some tremendous plan Bs. We have Progress, which is a Lancashire bakeware brand, dates back to the 1930s. We have Kleeneze, over 100 years old as a brand. And we have Petra, which is sort of a Bavarian, originally coffee brand, which was created in the 1960s. So I think we will see Petra grow, but it will be on the basis really of our main focus is going to be on Salter and Beldray. Oh, you're silent. Thank you. I said, let's stick on that theme. It's clear that some obvious good work with the Salter rebranding, which we can see in various retailers. I was surprised to see a decline in branded sales and a strong increase in own label. What were the reasons for this, and when do you expect to see the benefits from the rebranding? Salter specifically as a brand, it is in relation to air fryers, because we sold most of our air fryers, well, 99% of our air fryers were sold under the Salter brand. So really that is an air fryer story. The clearance, I think I spoke about it quite a bit earlier. The clearance is our closeout business, and when there are overstocks, and overstocks mean that it is more difficult to sell our own branded goods. The flip side of it is because there are overstocks within the whole of the ecosystem, people are trying to get rid of them. That is what we can do in our closeout business. Because we have multiple different channels that we are selling through, because we have relationships in different countries, we are incredibly useful for doing that. What we can do is take a closeout parcel from a German supplier, and we can clear it out to U.K. retailers. Actually, that has been incredibly useful this year because it has opened up some doors with new accounts. There is one U.K. supermarket chain who we have not been working with for a number of years, but we have opened the doors there with selling that closeout. But now we have got through that closeout, they have gone, "Oh, you pay-- You are great. We like your capability." Now we are moving them on to selling our own branded products there, because you do not want that clearance to become a large part of your business, because it does eat into your own branded goods. What we want to grow ultimately is the branded side of the business. Okay. Will there be a material difference in the Salter and Beldray brand management and rebrand process in mainland Europe versus U.K.? No, I do not think so. It is possibly a question better answered at the interim. We are in the process of what I said before about marketing our brands, particularly Salter and Beldray on the Amazon platform, we are in the process of writing up the marketing plan for that. So it is a great question. My initial response is possibly, probably not. But Tracy is going to be presenting to the board in January on her plans for marketing Salter and Beldray in Europe via the Amazon EU platforms. Okay. Thank you. Question here around the effects that you have seen from the Temu effect and their offering. Is this having a material impact on your sales? No, it is not. It is a threat that does need to be taken very seriously. The product on the Temu platform is very cheap. It is very cheap, frankly, because a lot of the time it does not comply with U.K. regulations. This should be a source of huge concern for government. There is a lot being put on businesses at the moment, like yesterday, and that is fine, and we have got broad shoulders. The quid pro quo is that government has to ensure a level playing field for We are paying employers NI, the suppliers on Temu are not. We are paying packaging taxes, suppliers on Temu are not. We are complying with U.K. regulations, workers' rights bill, people on Temu really are not. Obviously, the wheels of government regulation turn very slowly, as we all know. We are making representations along with other people in our industry on this issue. In the meantime, it really reinforces the importance of focusing on our brands. Going down an unbranded route, and we get asked all the time to do own label, that is the part that is going to be most exposed to the threat of Temu. We know from our market research that the consumers want a brand when they buy general merchandise. They want that. It is often different with food, where a retailer brand, particularly a grocery brand, can be just as attractive to them. We know the brands really count when it comes to the consumer. All we can do in the short term to counter the threat of that is to double down on our brands, particularly Salter and Beldray. I think what is terrible about the situation with Temu is it probably is going to take a human tragedy to get government to move. Almost with this, it is like, okay, fine, you buy a T-shirt for GBP 0.99, and it does not fit, you throw it in the bin. What we are probably now going back to is the 1970s, where people were dying because their Christmas tree light set on fire and set their house ablaze. What we are moving to now is people buying things which could risk their family's lives because they are dangerous substandard, and therefore, the plastics that you are using in your power pack, if that power pack fails, that plastic should not burn. Whereas if you are seeing cheap replacements, they are not just going to cause a problem like, okay, it looks rubbish. It could actually be causing danger to your home. We've seen some of this already with e-bikes, haven't we? People putting e-bikes in their hallway, and maybe not from a decent brand. Then the battery. Batteries are really dangerous if they're not produced properly. You wouldn't put a can of petrol in your hallway, and yet you've got an equivalent amount of power stored in that battery. Then, of course, you're leaving it in the hallway, which is your fire exit. If you Google Daily Mirror Temu toys, you'll see an article last week where according to a study, a review that they'd done, 80% of children's toys bought off Temu don't comply. Children's toys. We're back to the 1970s, and I remember lead painting in kids' toys. I think the difficulty is, Hannah, that we have become used to the fact that what we buy is safe. We didn't always take that for granted. But people are taking for granted that what they're buying off certain platforms is safe, and I think people need to be more careful, in my opinion. I'll send Tracy around to have a chat with you, Andy. How long is the lag on freight prices, both up and down, and do you use spot prices or some form of hedging? We've already The crisis is behind us now, so the mini crisis is behind us. When we last updated, it was still a variable. We were predicting that it would come down in time for about November. Thankfully, our predictions were correct. I did have my fingers crossed, I must admit. In fact, the freight rates have come down more quickly than we expected. So, it's a known quantity. It's GBP 2 million, and it will be going through gross profits in H1 of FY 2025. Okay. Just on the specific question about the lag, normally for us, it is about a lag of 3 months. So it is about the working capital cycle that it takes between peaking and it starting to come through our income statement. On the hedge points, we do enter into certain fixed contracts. Shipping is an unusual industry, shall we say, in that you can contract to certain rates which overnight disappear depending on what is going on in the general market. We hedge our interest rates, we hedge our currency. There is no really effective hedge on freight, unfortunately. We have to roll with the punches. We do, of course, watch spot and what is happening to that the whole time. Probably the important thing to go is that, we rarely pay spot, and most people rarely pay spot because most people have some sort of contracts going ahead. So it is only at the sort of like the margins that you end up paying the very high spot rates. Okay. Understood. Thank you. Can you explain the reasons for remarkably high year-end inventories and payables and explain how this unfolds in FY 2025? I think I've gone into that in terms of it being the stock and the freight. Given the fact shipping times have extended, that has caused stock to go up, probably not any point in doing it. No, probably covered that one, yeah. Online sales, after a down year in 2024, when are they expected to hit the stated target of 30%? I think that it was a disappointing year. Obviously, we grew by 60% in FY 2023. An element of that was air fryers, but probably as a channel, online was the biggest beneficiary of air fryers in 2023. There was a correction in FY 2024. I suspect FY 2025 will be flat-ish on online, and we'll return to growth in FY 2026. In terms of when it will hit 30%, I think that's going to be quite a difficult one to answer, not least because of what might happen with our international revenues, which will be largely retail-focused. I'll come back to you on that one. As long as the pie is growing. 12 months time. Good. That is it for the questions. Thank you both very much for your time today. Thank you. Any closing remarks? No, just to say thanks to everyone for the time. Hannah knows I am very fond of our retail base. We really do value the engagement and the interest which everyone shows in UP. So, thank you all, particularly the holders, but the non-holders as well for being on the call. Absolutely. Well, we look forward to further updates. Thank you both. Thanks.