Earnings Call: H2 2022

Nov 9, 2022

Annual report

Good afternoon, ladies and gentlemen. Welcome to the UP Global Sourcing Holdings PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that is just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, and if you could give that your kind attention, I am sure the company would be most grateful. I would now like to hand you over to CEO, Simon Showman. Good afternoon, sir. Good afternoon, and thank you very much. Nice introduction. I am going to just run through this slide now, just to the introduction page here. The presenters, myself, Simon Showman, CEO and founder of Ultimate Products. Andy Gossage, Managing Director, been my partner for 17 years. Chris Dent, our new CFO, that has been here for 7 months, and he is just on quite a long handover with our previous CFO, Graham Screawn, who has retired to go running. Chris has fitted in like an absolute glove and he is definitely a three ball. I am just going to press on to the next slide. This is for the people that do not know Ultimate Products. Ultimate Products is 25 years old this year. We employ over 300 people in the U.K., Germany, and China. We sell to over 300 retailers in 45 different countries. You can see it can be quite complex because in each country, it is different languages, different specification, and different rules, especially since after Brexit, when we made it much more difficult. Ultimate Products is the owner of a number of leading homewares brands. Salter, which we fully acquired last year. This brand is the U.K.'s oldest houseware brand. It is over 260 years old, and we are very proud to own that. It has got full market share of the scales business, and we had the license for housewares and electronics, but now we have the whole brand. You have got Beldray, which is our brand as well, which we bought, which is laundry and floor care and heating and cooling. Progress. Kleeneze, which I am sure you all know. Petra was a brand that we just bought 18 months ago, which is a German brand, which I am going to go into a bit later on, but it is doing very well. Our only license that we have now, and we have had it for 12 years, which is Russell Hobbs. What sets us apart? Really interesting. Compelling customer proposition. Our products, our mission in this business is we want to put beautiful, sustainable products in everybody's home. Everybody wants a beautiful product. Everybody wants a Dyson, but not everybody can afford a GBP 450 or a GBP 400 Dyson. What we do is we put affordable, beautiful products in their home, for example, under the Beldray brand at GBP 99. We are a mix of growth and income. We are a growing business, and we give out 50% dividends. We're a very resilient business model because we have different sections of our business, from electronics to housewares to laundry. We own most of our brands, which is very interesting, and we have a very strong balance sheet. Our currency and our interests are hedged, which a lot of people haven't got that. We came to this financial year with GBP 60 million hedged and interest hedged, which thank God that was hedged. We've always hedged our business, interest hedged it. We invest in our people. Our people is this business. We've had a graduate scheme in this business for over 12 years. 60% of the people in this business have been on the graduate scheme or are on the graduate scheme. I'll just give you a bit of an example. Our Head of Homewares, which is a GBP 40 million division, Katie Maxwell, she was from the graduate scheme 10 years ago. Our Head of Online, which is one of our fastest-growing sections of our business, Becky Beasley, she was from the graduate scheme. Celine, Head of IT. Many, many people are high up in this business from the graduate scheme. They are all Ultimate trained, and 80% of the people are shareholders in this business, which is also very important because it makes them want to build this business with us. We've got a very strong, established international presence, but there's so much more to grow, and it is going to be a massive focus of ours over the next five years, which I'll go into. We invest heavily into our systems. We've had programmers in this business for nearly 20 years. We build 90% of our systems, from our warehouse management systems to our robotic systems, to our online delivery systems. Very important. It has given us an online delivery of 98% KPI to the board. ESG, please, if you've got time, we released our ESG presentation. We did an RNS last night. It's on our website under investor relations. We are leaders in our industry on ESG. This ESG is not a tick in the box for us. We've been doing it just over three years. We have an environmental committee with 22 people on it. Our retailers, Tesco, Asda, Action, Primark, told us we are leaders in this. We've already changed our packaging quite a long time ago to FSC. We've taken the plastics out of our packaging, the polythene out of our packaging. We've planted over 1 million trees this year alone with a fantastic company called Ecologi. Ecologi are one of the sponsors of COP27 at the moment, and you'll see them on Sky. It's a non-for-profit organization. We're really, really focused on our ESG. Our community, we're based in Oldham, which is one of the most deprived areas in England, and we really, really want to look after our community. Over 55% of the employees are employed from the Oldham postcode, and we do want to improve that. Highlights. Financial highlights for the year, revenue, GBP 154.2 million, +13%. Adjusted EBITDA, GBP 18.8 million, +41%. Adjusted profit before tax, GBP 15.8 million, +42%. Adjusted earnings per share, 14.7p, +32%. Dividend per share, 7.12p, +42%. Got a net bank debt of adjusted EBITDA 1.3 times, and this is a real big focus of ours to get this back down to one. But 1.3 times after doing the big acquisition is not too bad, but we will be happier at one. Chris is going to go into this in a lot more detail later on in the slides. So operational highlights, I really like this slide because we have operational highlights. There is a lot of businesses over the last year or two that do not have any operational highlights because all they have been doing is firefighting. But we as a business have these highlights, and we have also got a lot of highlights going forward. So on the number one, at the beginning of the year, we finished the Salter acquisition. It was fully integrated and has been very earning enhancing. We are now focused on getting this Salter brand into Europe. We have big exhibitions in Germany in February, and this is where we are going to launch the Salter brand into Europe. We do not have to spend any money on product, on packaging, on design. It is all done and it is all ready to go. Petra, what we bought 18 months ago, Petra is a fabulous brand. It was a very good coffee maker brand in Germany. Most people in Germany know this brand, and when we relaunched it in IFA, which is the biggest electrical show in Germany, we had so many people coming on the stand so happy that Petra was coming back. We went exclusive with the number one supermarket in Germany for the relaunch, which is Kaufland, 3,000 stores. Their first delivery, which they ordered nine months ago, which was EUR 1 million, goes into store in two weeks. So we will have the full reading by January, and we are very, very excited about that. They are doing over 1 million leaflets on this. We have also got another two orders, one on party products and one on vacuum cleaners, and we have also delivered a range of Petra into our European warehouse for online, and the sales have been fantastic. So we are very excited about Petra being a Beldray in the European market. We have also brought Petra into the U.K. market with English plugs, which you can go online now and see on Amazon, and it is selling. It has been selling every day very, very well. As a company, big operational highlight for us was how successful we did manage the global shipping crisis. We used to pay $1,500 for a 40-foot container, and it went up to $18,000. It was not just the $18,000, you could not get on ships. We got on ships. We got our factories producing for us. Because we do have 45 people in Guangzhou, we were able to be at the factories, making sure that all the materials were arriving for all of our orders, making sure they were being made, making sure they were going on the containers, and then getting on the ships. The supply chain and how we managed it over the last two years has definitely been a massive eye-opener to all of our customers and elevated us above all the other competition. Now it is about we have to keep that shelf space that we took off our competition that did not deliver. Number four, our robotics. Our robotics program is really important for the future. We have 1,000 tasks that we are going through now. We have done 200. We have saved thousands of hours on this already. Once we get through to the 500 mark, there's going to be another load of new systems coming through. We know how pleased the people are that work in this company that we are doing this because it's just stopping them doing a lot of mundane, everyday things that take hours and hours and hours. Andy's going to go through this as well, give you a bit more of an explanation. Our offices, we fully refurbished our offices during COVID, which was very important because we had everybody back to work last September when we were allowed. Again, important because we do have so many graduates. We're innovating daily, hourly, so we need to be together. We are always teaching. I don't know how businesses are working when half the staff are working from home. You need to be together to run a business. Part of our ESG as well, we installed over 1,000 solar panels on our roof, on our mill. We work in a 120-year-old mill, and now it has 1,000 solar panels on. We only got them on in August, switched on in August, so we did get some sun in Oldham, believe it or not. We believe the run rate is going to save us about 40% of our energy bills, so we're very pleased with that. Russell Hobbs, which has been a license of ours and our only license that we have left, but it was always under a three-year license. Unfortunately, with a three-year license, the minute you sign it, the minute you think you're nervous when you're going to sign it again. We always said we had a great relationship with Russell Hobbs and for people not to worry, but for investors and for Andy and us, it was a worry. We've now signed a brand-new license, which is a four-year rolling contract, so we don't have to re-sign. It just rolls. They've also given us Australia and New Zealand on top of our original license, which we are already in the market with Salter. Now we're going to roll out Russell Hobbs into the Australian market. Just one point that isn't on here, which I am very excited about. We worked very hard this year putting up our EU warehouse for online distribution in Europe. This was tested for nine months, and the last three months has been fully operational. We are now supplying France, Poland, Holland, Germany out of this EU warehouse. We only have low-value products in there at the moment, which is laundry and cookware, but it's flying. Every week, the orders are going up and up. We just put Petra stock in there, but we sold out in five days, which was electrical. Over the next 12 months, that warehouse now we're going to focus on filling it with all of our fantastic branded products, start marketing the brands into EU online, and get the turnover up. Okay, thanks, Simon, and evening, everybody. The profit figure for FY 2022, there is a bridge on the screen. Chris Dent will go into the numbers in a bit more detail later on, but it is actually a very simple story. First of all, we maintained our core profitability. Secondly, we bolted on the Salter acquisition, which took place in July 2021, just right at the end of the FY 2021 financial year. So a really, really simple story. We maintained core profitability, which in the environment we have been operating in was, I think, a very, very decent achievement. Then what we also did is we delivered on the promise we made or the promises we made when we did the acquisition of Salter in July 2021, when we issued that Class 1 circular, and when we raised equity through a placing. Again, really delighted because I am sure as many of you will be aware, promising returns from M&A activity is a bit easier than actually delivering them. That acquisition most certainly delivered an increase in EPS. So it was very much earnings enhancing. Moving on to the next slide. When it comes to the investment proposition for Ultimate, there are four elements as we see it, and we see it that way because we are significant shareholders as well. We see, number 1, growth potential. Our products are the kind of products which feature on countertops in kitchens all over the world. So in the long, long term, our growth potential really is limitless. Even though in the short and medium term, we are very much focused on U.K. and Europe. Number 2, income. We are a capital-light business. We outsource our manufacture. That means we can pay a dividend, and we did distribute 50% of our profit after tax. So an unusual combination of growth and income. Number 3, ESG, which Simon Showman has already outlined. Great for governance but also very much used by the business as a selling tool. Number 4, resilience. I do think resilience is perhaps an undervalued strength sometimes with investors. So we want to spend a little bit of time talking about resilience, given that we are moving into a recession, and certainly from a demand-side point of view, some significant challenges. So we have worked really hard to diversify the business, and in diversifying it, give us more resilience. So you can see on the right-hand side there, the two pie charts. Back in FY 2018, we were heavily dependent on discounters. Now we are more diversified between discounters, supermarkets, with online very much coming up on the rails. We do expect our online share of revenue to be similar to supermarkets and discounters over the next two to three years. That means that when segments are adversely affected, we have other options available to us. We saw this benefit during the COVID period. Discounters were more likely to be closed as non-essential retailers. Supermarkets remained open because they sold food, so that was great. Online remained open as well. So we were able to move our focus in the face of some extreme external pressures. We have also worked very hard to reduce customer concentration. So in FY 2017, over 40% of our revenue came from our top two customers. Our top two customers in FY 2022, less than 20% of revenue. We very much diversified our customer base and removed that concentration risk. When it comes to products, we have 3,000 SKUs split across a number of product categories that Simon has already outlined. What that means is if all categories go through cycles, if a particular product is going through a difficult period, we can move our focus to a different product category. At the moment, what we are finding with products is certain products are not doing as well, but certain products are doing extremely well, like anything with an energy saving message. We are selling lots of slow cookers, lots of airers, because people do not want to use the tumble dryer, and also lots of air fryers, which seems to be all that anyone is talking about at the moment. Okay, moving on to the next slide. Brands. Again, this resilience point. Back in FY 2018, only half our revenue came from brands that we owned. Now in FY 2022, 75% of our revenue comes from brands that we own, helped of course by the Salter acquisition. Of the one remaining license we have, Russell Hobbs, even that has changed with the new contractual arrangements that Simon has outlined. Now we always have four years worth of visibility, which again, I think makes for a much higher quality of earnings. Moving on to the next slide. Okay. Just in terms of how we manage the business, as Simon said before, he is the founder of the business. I have been with the business for 17 years. Our managements hold close to half of the equity in this company. We very much take a custodial approach to the way we manage it. We are very mindful of risk and are conservative in our approach. We want growth, but we do not want growth at any cost or at any level of risk. We are careful about how we manage the company. That means, for example, we have lots of headroom within our bank facilities. It means that we hedge our interest rates and many others do not, and we are going to find out more about that as we go through the next few months. We have a well-established hedging policy, which means we came into this financial year with nearly $60 million bought forward at an average rate of 129. That gives us time to adapt if currency rates move suddenly. At the moment, it means we can be patient and wait till the reduction in freight comes through. Freight rates, as Simon highlighted before, spiked during calendar year 2021 from $2,000-$3,000 for a 40 foot up to $18,000, and then came down as we moved into calendar year 2022. But as recently as seven weeks ago, we were paying $8,000 for that same container. Now we are paying $2,300. There is a big fall in shipping rates. That will come through as a benefit in due course, and the foreign currency hedging provides a bridge to that situation. We fully insure our debtors ledger. If a customer cannot be insured, our default position is we do not supply. A difficult decision, but one we must make. If we do make exceptions, and we do from time to time, then that has to be signed off by our non-executives. We are very, very careful about those things. But the one thing I would point out, more than any other, is the way that we manage our stock. We have sophisticated, well-established stock forecasting systems, and we have a conservative approach to how we invest in inventory. We go into this period, and we are entering recession, with the right level of the right mix of stock. Some of you will note that stock levels did increase during FY22, but that was more a normalization, something which Chris Dent will go into more detail on. Online. Online, big part of our growth story over recent years. Did have a bit of a stutter in FY22 because of the lack of stock availability. The shipping crisis meant we had limited access to shipping capacity. That meant that we had choices to make, and we prioritized our retailers. If we had two containers to ship, one for Tesco, one for our online business, but we could only ship one, we looked after our retailer, and we looked after Tesco. That meant our core online business went backwards by 1% in FY22. But as availability returned in the second half, we did see growth return, and that growth has continued into the first half of FY23. So what you're going to see, which is going to feel a bit counterintuitive, is you're going to see UP growing its online business while others go backwards. Most online businesses are seeing a decline in sales off the back of really quite strong comparators. International. We do see growth in the U.K., probably mid-single digits over the medium to long term. We see a higher rate of growth in Europe, so we do see more of our growth coming from international territories, particularly Europe. Okay. We see that the plan is very simple. Half of that growth we expect to see from online, which is going to be largely through the Amazon platform, which is going to be a bit like shelling peas. We know what to do with Amazon. We're very, very experienced at it in the U.K. So I suppose a cut and paste rollout across Europe, which is already well advanced. The other half of that growth is going to come from our sales into retailers. And we're targeting opening 10 big accounts over the next three to four years, with maybe two or three being opened during calendar year 2023. Petra is a very exciting opportunity which will help facilitate that. We've already sold it into one very large German retailer. It's going into store in December. If it performs as well in store as it has online, we should see strong repeats of that business. And we have engaged Simon Hathaway. Simon is our advisor for our European business. Simon was previously the Commercial Director of Action, Europe's most exciting retailer, and he was there when it went from 300 stores to 1,700, 1,800 stores. And he does a lot of work with other large European retailers and other large advisors. Moving on to the next slide. Couple of things here. The first one might sound a bit, at first, like a negative, but it's actually a big positive. What we found with the expansion of our online and international business is product life cycles have extended. We normally invoice 3,000 SKUs a year, and we bring 1,000 new products to market each year. That implies an average three-year product life cycle. That has been steadily increasing because when a product is finished in retail, it has an afterlife online. For international, we are often selling products that we have developed for the home U.K. markets. We are finding product life cycles are extending out to maybe four to five years, which is brilliant, because it means we are leveraging our product development spend over a much longer period, getting that longer return on investments. It means that without jeopardizing our revenue potential at all, we can reduce our product developments from 1,000 products, which is a fairly monstrous amount, to 600, which is still a very sizable amount of newness that we are bringing to market each year. That has a very obvious operating cost implications, but also means we can focus more of our resource on the products that we do bring to market, which is really important for things like Amazon reviews, online reviews, Trustpilot. Really spend that little bit longer to really get the product right. Simon mentioned robotics. We supply 300 customers a year. Retailers make it really quite complicated for suppliers in order to make it simple for them, which we all understand. We have 300 retailers that want to be supplied in 300 different ways. In fact, some of them want to be supplied in different ways as an individual retailer, depending on how we supply them. It is immensely complex what we do. The way we square that circle of complexity, how we deal with that complexity, is through process and automation. It is the way we have always done it. Robotic process automation is the next step. Now, before you think this is about little gizmos kind of going around the warehouse picking, this is about robotics processes that sit at server level. Just to give you a little example, although there are literally thousands of these, each one of our purchase orders has 80 steps. We have on average 2,000 open purchase orders. That means we are managing, at any given point in time, somewhere between 150,000 and 200,000 steps. Now, one of those steps is to organize price labeling for the customer. Now, for one of our customers who place their orders quarterly, they have 67 variants of price label. One customer, 67 variants. That can take a human being seven days just to do that step of the process. Now, with the robot, the UP robot, that takes an hour. That means that in that hour, that means that releases up that resource to focus on higher value tasks. A big time saving, but also a revenue generator, because we can recycle our talent to focus on tasks which deliver revenue. But I think more than that from an investor point of view, it makes our business more scalable. There comes a point where adding on extra staff just gives you a diminished return on investment. Each member of staff is slightly less productive than the one before. The robotics program really adds to our scalability as a business, which from an investment proposition point of view, is really quite powerful. Okay, I am going to hand over to Chris now, who is going to take us through the financials in a bit more detail. Thanks, Andy. Good evening, all. Here we can see the income statement for the period. Revenue up 13% to GBP 154 million. The majority of that growth has been through the acquisition of the Salter Scales business, which happened at the end of FY 2021. It was a resilient performance for the core part of the business, up 1%. What has been really pleasing to see over the course of this year is the gross margin, which has increased 2.6 percentage points from 22.2% to 24.8%. There are three real driving reasons behind that, two of them in relation to the acquisition. With the acquisition, we have the Salter Scales business. Scales is a precision product, has a slightly higher margin implicitly than the other products that we sell. Secondly, we bought Salter because we already had a license for other Salter products. We were selling Salter housewares and Salter electronic products. We were paying to Salter a royalty rate of about 5% on that, which was costing us around GBP 1 million a year. Having bought the whole of the Salter brands and the Salter Scales business, it meant that we are no longer paying that GBP 1 million royalty on the Salter business, which we already have under license. The third part is that our actual gross margin for our underlying core business remains stable. That was despite a headwind of 2.2% in relation to freight costs. Actually, we managed to keep our gross margin despite that. That was through a variety of trading reasons. Through a mix of products, through the new products that we brought to market over the course of the year, which would have different margins on them, and also in constant renegotiations with our factories out in China to chip away at their costs and their prices whenever we can. Overall, that meant that gross profit was up 27% to GBP 38 million. Admin expenses was up 16%. 8% of this is in relation to salary costs, which were up GBP 1.2 million or around 10%. Our overall headcount increased from around 300 to around 365. The majority of these people were in our distribution center, which is based at our Heron Mill site in Oldham. This is really where we are supporting our online customers, whereby we need to support Amazon in relation to their timings and support our own consumers who are buying direct from our beldrayandsalter.com websites. The big change that we have made there during this year is actually moving from an agency based to a fully employed based. Many warehouses used to employ agency staff. However, since Brexit, there have been issues with supply of labor, but also in relation to the quality and the turnover of staff that we saw with agency. We have moved to being fully employed. We have seen an increase in the quality of staff and a downturn in the churn, hence providing a better service to both our consumers to our websites and also to our online customers and other retailers. Overall, admin expense is up 16% compared to a 27% increase in gross profit, which has led to a 41% increase in adjusted EBITDA to GBP 18.8 million. Just to look a bit more in where the revenue increase has come from. As stated, the majority has been in relation to Salter, but what we have been seeing is big increases in relation to supermarkets. Over the last five years, that's been a cumulative average growth rate of 52% in relation to supermarkets. In the current year, a 20% increase in our core business. Discounters have gone back slightly in the period. Many of our discount retailers, they overstocked off the back of boom years in relation to COVID. They found themselves overstocked and have been closed to orders over the current year. We're starting to see light at the end of the tunnel there as they have worked their way through that excess stock and are now reopening up to orders. We also expect that there'll be an opportunity for retailers over the cost of living crisis as consumers look to more competitively priced products. In relation to online, that's really been a game of two halves. In the first half of the year, we were impacted by the shipping crisis. This meant that we had suboptimal levels of stock. When there was a choice between supplying our retailers or supplying our own online business, we took the choice of continuing to supply our retailers, which meant we ended last year with a suboptimal level of inventory, which means it suppressed our online sales, which went backwards in the first half of the year. However, as supply chain issues ease, we were able to build back up our inventory levels, which enabled us to grow online sales in the second half of the year by 20%. That pattern has continued into the first few months of FY 2023. Geographically, U.K. sales up 9%, whereas international sales are up 22%. That's where we see a real growth area for us in the medium term. At the moment, we sell about GBP 2 to each U.K. consumer, whereas internationally in Europe, we only sell about GBP 0.10 of goods to each European consumer, therefore 20 times less. We see it as being a game of increasing our penetration in Europe using our online skills and also through growing penetration with our supermarket customers. Looking down the bottom end of the income statement, depreciation up 27%, which is due to the GBP 2 million investment which we made into our head office, which includes an investment in 1,000 solar panels which were put on the roof. We expect that that will have a three to four year payback, and they will probably provide about 40% of our energy usage on that site. Finance expense up 62% on the back of higher net debt. That's due to the acquisition, which cost GBP 34 million. That was done two-thirds through debt and one-third through raising new equity. Our tax expense runs at about 21% of profit, which is slightly higher than the current 19% rate in the U.K. because we do have branches in Germany and Poland which pay slightly higher rates of tax. Overall, adjusted profit after tax up 46%, statutory profit after tax up 69% as we do not have the reoccurring exceptional items in relation to the acquisition costs last year. In terms of EPS and dividend, EPS is up 32% compared to adjusted profit being up 46%. That is because of the dilutive effect of the new shares that we issued to fund the acquisition of the Salter Scales business. It is the board's intention to continue paying out 50% of our adjusted profits as dividends. Therefore, that increases the final dividend this year by 42% to a recommended 7.12p. In terms of cash flow and net debt, net debt has increased slightly to GBP 24 million. That is still a relatively low level in terms of gearing for us, so we have moved down from a 1.4 level of gearing to a 1.3 level of gearing. We do want to move that towards one times, but we do still see that at 1.3 we have plenty of headroom with our facilities. At the year end with our bank facilities, we have GBP 18 million of headroom, so plenty of room there. The big movement in the year has been our investment in working capital, which is better explained on the next slide. Overall, a GBP 12 million investment in working capital. The largest part of that has been in relation to inventory, a GBP 7.5 million increase there. That is due to the fact that at the end of last year, inventory had been suppressed by lack of availability due to the supply chain crisis and the shipping issues that we saw. What that had negative consequences of holding back our online business. In the current year, we have moved to an optimal level of stock, and that is probably more of a normalized level, which allows us to push our online business because we have the free stock to enable us to do that. Going forward, inventory will continue to move up in relation to turnover and will not repeat this step up to this optimal level of stock that we now have. Debtors up 6.5%. Debt days up ever so slightly from 57 to 60, so still absolute within a reasonable range. The shift in that is probably due to our shift towards supermarkets, who do tend to have a slightly higher terms of trade with us. Slightly esoteric thing to point out to everybody is the value of our derivatives. This is the value of our forward-bought currency. At the end of the year, we had bought forward $57 million at an average rate of 1.29, which will support our gross margin going forward into FY23, and also in relation to our swaps and caps that we have in relation to interest rates. They are valued at the year end at GBP 4.1 million fair value of them. Obviously, we are not about to sell them. We want to use those for trading to protect our margin, but it does show the effectiveness that we have in relation to our hedging strategy. I hand over back now to Andy Gossage to talk about outlook. Thanks, Chris. We have given an inline guidance, which I guess is pretty unusual for a consumer goods business. We are very happy with how trading is progressing as we move through the earlier part of FY 2023. I just want at this point, though, to reflect on the last three years. We have seen extreme supply sides challenges, and we were affected earlier than most because of our China operations. China lockdowns, U.K. lockdowns, port congestion, Brexit, a container ship stuck in the Suez Canal with 12 of our containers on and about 100 stuck behind. A haulage crisis last year, lack of drivers, a shipping crisis, GBP 18,000 and a lack of availability. Moving through into things like Omicron. This time last year, certainly in December last year, I had a lot of my warehouse staff off ill with Omicron, so I had to dial down demand. Then, of course, which is kind of currently ongoing, various port strikes in the U.K. and indeed in Europe. So we faced really quite extreme external supply side challenge, and yet over the period since FY 2019, we have grown EPS by 75%. As we move forward, it is perhaps the demands, the supply side challenges are fading. Although they are still there to an extent, there are still ports on strike, for example, but certainly an awful lot better. And we are moving into periods of, I think, demand side challenge. The mark of the general merchandise is going to be smaller overall. We have a cost of living crisis. People have less money to spend, and when they do come to spend, they typically prioritize food in an inflationary environment. So we are looking at, for general merchandise, a smaller share of a smaller basket. So, a pretty difficult environment. Our job is to confound expectations again. We have confounded expectations over the last three years to deliver a strong earnings per share growth, despite everything that has been thrown at us. Our job is to do it again, albeit the challenges are slightly different. And it is going to be about taking market share. We are a relatively small player still. So taking market share is eminently doable. And in Europe, our market share probably rounds to zero, is fair to say. And even if the market for general merchandise is smaller, it is still an enormous market. So there is still an awful lot to go after. And with our brand assortment and with our product assortment, we have always got plenty to sell. It really helps that we have a value offer. I think it really does in this environment. But I think, for me, and this is where it becomes perhaps a little bit less tangible, but for me, it is the important thing. We have just got to do what we have done over the last three years, which is be better than everyone at everything that we do. Better than everyone else at everything we do. And if we have that relentless focus on execution, I do not think we are going to go too far wrong. We tend to shine when the going gets tough. I must admit, I would not mind a normal year for change. It would help with the gray hair. But when the going gets tough, I think we do shine. So we are very determined over the next couple of years to see down this new demand side challenge. Okay. I think at this point, I am going to open it for questions. Andrew. Yeah. Absolutely. Simon and Chris as well, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Simon, Chris, Andrew, as you can see, we have received a number of questions throughout your presentation today. Thank you to all of those on the call for taking the time to submit their questions. Andrew, perhaps I could hand back to you to chair the Q&A session with the team, and then I'll pick up from you at the end. Thank you. No problem. The first question is, what are your plans re international expansion? How do you look to roll out in new territories? Simon, do you want to pick that one up? Yeah. Europe is our big focus, international focus. We are now looking at opening 10 new big retailers in Europe. We do deal with Kaufland, we deal with Action, we deal with a few of the big guys. But we want to open another 10 over the next three years. And we've already got the list. There is a lot more than 10 to open, but if we open 10, we've done that job. And then the other 50% of our growth will be the online growth. 50% is going to be online and 50% is going to be retail. Okay, brilliant. Thanks, Simon. Next question is, how much of an impact has the shipping crisis, and more generally the associated supply chain issues, had on the business? Well, I suppose if I was going to summarize it in one word, the word would be absolutely massive. It has been an immensely challenging period from a supply chain point of view, for all of the reasons which I laid out before. From lockdowns through to port issues, through to Brexit, through to strikes, through to haulage crisis, through to obviously the shipping crisis. Probably the couple of things I would pick out would be when shipping rates go from $2,000 to $3,000 up to $18,000, that has a big margin implication for FY22. Now, we did manage that extremely well. As Chris said earlier on, it was equivalent to a 2.2% margin headwinds, and yet our core margin remained stable. I think that should give potential investors confidence in the company's ability to manage margin, even in the face of external pressures. That was quite sudden and quite extreme. The way we manage margin is, there is many elements to it, but probably the main way is through that new product development. When we bring new products to market, that is an opportunity to reset margins, maybe deliver more value to the consumer and therefore justify a different price point. I think the second thing I would highlight is the impact on online. It was growing at 20% plus a year up to FY22. The core online business ended up down 1%. As Chris highlighted, it was down heavily in the first half off the back of a lack of availability, which was a direct result of that shipping crisis, and then grew in the second half as that availability returned. That growth has continued into FY23, as we maintain a good level of profitability now the shipping crisis has passed. Question from Nick B. "Spectrum Brands have an extensive catalog of products. Are there considerations to replicate the Russell Hobbs relationship and perhaps enter new areas outside the home?" Simon, if you have any thoughts on that. I think probably we are looking at sort of focusing on our core cookware offer, are not we, in terms of how we- Yeah. The thing that everyone always says, Jose, what else are you going to buy? What else are you going to do? We genuinely do not need to do anything else. We have got all of our brands. We have got our ranges. All we need to do is focus on keep improving innovation on our products, open these 10 accounts, roll out online EU and U.K., because our online business is still fledgling, but the numbers are getting bigger and bigger and bigger. At the end of the day, we do have the brands and the products for hard goods. So online, open another 10 accounts, keep delivering great products to our supermarkets and our discount stores in the U.K., and it is a GBP 500 million business. Yeah, agreed. The next question, Simon, which I think links in with that is, do you see further brand acquisitions in the pipeline following the success of Salter? I think I just answered that with these Yeah with that question. But if something came up in France and it was cheap, then, yeah. We will never say never, but we do not need to. I think probably plan A is organic growth, but we are often opportunistic with our acquisitions, so something may come along. But we have got plenty to do with rolling out Salter internationally, and Petra is very exciting. The Progress has took off in Europe, it is already doing EUR 8 million in Europe. Yeah. We have got a lot to do. Yeah. Nick asks, "You reference process automation and robotics. Can you explain more on this and what that looks like, investment needed, benefits, et cetera?" I gave an example around labeling, and it is quite a tricky one to get across, because it is about a thousand small things, not about one or two big things. It is about the granular detail of how our people go about their work and eliminating those low-value tasks. I gave the example of the labeling. I will give you another example. We sell online across multiple platforms. Our warehouse colleagues would come in in the morning and download those orders and then create a pick note. That would take half an hour to an hour if there was not any. We sell across something like 17 platforms, so it is a fairly admin-heavy task. The robot does it at 4:30 A.M., creates the pick note, and our warehouse colleagues come into a pick note. It is that kind of stuff. The way we reference the return on investments is we use a really simple payback period calculation to decide which tasks to prioritize. We look at the time it is going to save the user. Let us say it saves an hour a week, and then we say, how many hours will it cost our process team to do whatever programming is required? Let us say in that example, it is going to take four hours of time from the process team, and it is going to save an hour a week. A very simple four-week payback period. At the moment, we are only doing things, at my insistence, that have a four-week payback period or less. Now, in due course, we'll exhaust those, and we'll move on to eight weeks and less, and then on to 12 weeks and less. I'm sure you guys as investors will appreciate that's a pretty good return on investment. It is really exciting from an operating cost point of view. Really exciting, it means we can refocus our talent on things that really do add value, and really exciting because it gives us genuine scalability as a business. Andrew, if I may just jump back in there, and Chris and Simon as well, thank you very much indeed for addressing all of those questions that came in from investors this afternoon. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review, and then add any additional responses where it's appropriate to do so. Andrew, perhaps before redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great. Yes. The first thing I'd like to say is to thank everyone for your time this evening. We really, really do appreciate it, and we really do value our retail investor base. You are all very, very important to us. I think, if I'm going to summarize where we are, a very, very pleasing year, FY22. Delighted with the performance we delivered against a very tough background. We go into tough times, more from a demand side point of view than a supply side. We as a business and as a management team remain very optimistic about our ability to navigate what I'm sure will be some challenging days ahead. Thank you, everyone. Thank you very much. Thank you. That is great. Simon and Chris as well, thank you once again for updating investors today. I please ask investors not to close this session, as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I am sure it will be greatly valued by the company. On behalf of the management team of UP Global Sourcing Holdings PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good evening to you all.