Ultimate Products Plc (ULTP) Earnings Call Transcript & Summary

Good morning, everybody. I'm going to start with an apology. I seem to have come down with a bit of a cold today. I think it must be in all those air-conditioned offices in London over the course of this week. So apologies if I'm a bit croaky. I'd 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've 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 iron boards, buckets and many other things besides -- there are main areas. We are branded, and you can see some of our brands along the bottom there, but particularly -- and I'll at later slides, where 80% of our revenue comes from brands that we own, 60% of our revenue comes from Salter and Beldray, I'll say a bit more about those later. Russell Hobbs, just to be clear, we licensed Russell Hobbs for cookware, so we owns -- we don't sell the electrical. And 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 households up and down this country and beautiful products because we want people to be out of the products that we sell to them, not that we don't -- we want them, of course, to perform their function, but we also want them to be beautiful. And 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 in the countertop, it doesn't go in the cupboard before they arrive. We're quite unusual and 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 in that -- at that price point, which is on or just above a label. Okay. I'm going to move forward to Page 5, please. So Chris will go into the financial results in more detail, but I did want to share my overall perspective with you on the results. And I think the first thing I would say is I'm never going to celebrate a period where revenue is down, albeit relatively slightly. I think it's worth taking a step back and consider what's happened over the last 2 years really during calendar year '22 and calendar year '23. From a macro perspective, during that period, we largely had wage deflation combined with food inflation. And the combination of those 2 factors is really quite toxic for a business for a nonfood business -- any nonfood business and because it means you have a smaller share of the smaller baskets go after. And I think we've seen the outcome of that in sort of a number of profit warnings particularly in the nonfood arena. In addition to that, we, as a wholesaler, have had to deal with some additional challenges. During my entire period, retailers have been overstocked. So the inherited and overstock position at the beginning of calendar year '22 as a result of the volatility of demand during COVID and the difficulty they have in planning their [ buys ]. Retailers have spent the best part of 2 years really to unwinding that overstock position. And for us, as a wholesaler, that's problematic because in the meantime, they do reduce intake. I think given those challenges, so to say, I'm not going to celebrate a minus 4% revenue decline. I think despite those challenges, I'm really proud of the performance of the entire team at UP, particularly the commercial teams who've traded exceptionally hard to mitigate those external challenges. I do believe there is some good cause for optimism going forward, and I'll pick that up when we get to the outlook statements at the end. So if I move forward to Page 8, please. So I just want to talk to you about -- I mean, obviously, many of you will be aware that I'm the incoming CEO, albeit probably fair to say very much the continuity candidates having been in the business for 19 years this year. And many of you are familiar with me anyway through previous presentations in my role as Managing Director. And I just want to explain why Simon and I have made this switch, myself, the CEO and Simon the CCO. But it is part of the plan for the next few years, it's wrapped up in the things that we want to achieve for the business. But what I want to do first is to look backwards. And I want to go back to December '13. December '13, we had a business that was a [ sorting ] business. And by that, I mean, we would go to a retailer with a blank piece of paper, say, what you want and then we go off and get it for them. And the problem with that model is it was breaking down. We were about GBP 50 million of revenue. That was a bit up and bit down every year. Despite our best efforts, we couldn't grow. And we're making about a 3% EBITDA margin. And then we decided to -- we took all our senior managers off-site, and we said to them we're going to prioritize our brands. Back then, we sold based on products and price and the message we gave them was we wanted to sell on brands, product and price. And despite the challenges in the last 5 financial years where we've had to be -- really since January 2020, we've had to deal with a lot of external stresses. Over the last 10 years, over the longer term, the business has become transformed. We've tripled revenue. We've increased the EBITDA by a factor of 12 or 13. And as you can see from the coloring on the pie chart, that's being driven by the brands. Back in FY '13, GBP 10 million of our revenue came from our brands, only 20% of our overall revenue. FY '23 over GBP 130 million about 80% of our revenue from the brands that we own. And within that, 60% of our overall revenue in terms of our overall revenue from Salter from Beldray. And so the way we see the next few years going the foreseeable really is more of the same, doubling down on the execution of that strategy, driving our brands, particularly those 2 brands I mentioned Salter from Beldray, both in the U.K. where we think there's still plenty of growth, but also particularly in Europe, which is effectively sort of new territory for us. I mean just with regards 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. And then we have Salter, which is our scales in kitchen brands. It's the U.K.'s oldest housewares brands, older in fact than the United States of America. So a great brand with a great story to tell, both in terms of our U.K. expansion and our European growth plans. And if we go on to the next slide. So how are we going to do this? Well, 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. And it's been transformational. What we have realized over the last 18 months since we recruited our brand direct that on the branding side, while we have done a good job, we haven't done a great job. And we want to -- 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. And we're just in the process of rebranding Salter in the final stages. That will be complete over the course of this summer, and we've just started the rebrand of Beldray. And 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. And 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 been in class around execution, things like supply chain, things like product development, sourcing, account management and quality. And 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. And 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 continued process that we -- has been underway for some time to really, really put clear water between ourselves and our competition. Another thing we've got -- 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 of 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 5 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 give -- to enhance the clarity of our brands but also bring some operational simplification as well. If we can move over on to 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 this slide, just how complex our business is, and 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. So 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 an 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. And we always have to balance that with that ability. And 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 it simpler because if there is too much complexity that despite the best efforts, it can have an impact on scalability. So 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 have not been as effective as we could have been in doing that. So the next slide. Many of you who are familiar with the story will know we're always banging on about productivity. And it sounds at first sight like an OpEx play. And I understand that -- it is some expense. And we have seen -- we are moving now into flywheel territory with these developments. And since the end of calendar year '23, we have seen a decent drop in headcounts as the accumulation of these marginal gains feed through into a lower resource requirements. But really, it's more than that. As we become more efficient and 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 seen -- we've been able to absorb or certainly mitigate the big increases in wage inflation are all corporates have seen recently by our folks on productivity. That puts us in a better pricing position relative to our peers. And in addition to the fact that we are -- we don't have a lot of gearing in the business and we haven't seen biggest increase in interest cost, 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. So here, we can see that revenue is down by 4%. And if we go on to Slide 13, what we can end up seeing is the very complicated movements, which are going on when we look at breakdowns in the various different categorizations. So here, we have geography, major products, strategic pillars. These tables can be very difficult to understand. So then 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. So the first headwind is probably not the right word in relation to air fryers because it is really down to prior year comps. So what happened with air fryers is that they have been a product which we have sold for the last 10 years, usually selling around GBP 5 million worth of them a year. Last year, Martin Lewis called these out as an energy-efficient product, which was great for saving money during the cost of living crisis. So 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. So they are still a very good product line for us. They have certainly entered the consumers' consciousness now. So unlike previous booms or froth that we have seen, I think a sort of like spiralizers where people are making konjac 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 frost 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 markets for the last 2 to 3 years, which is retailer overstocks, which is actually an effect of COVID. So 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. So an awful lot of cookware, for instance, for us. Then 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 has existed during lockdowns. These overstocks have been working their way through the system in the last 2 years. It's 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. So that's causing that 7.1% negative variance to German supermarkets. The final little bit is revenue deferral. So some of you will be aware of what has been occurring in the Red Sea. Now in previous years you may have called this a crisis, but we had a proper shipping crisis back in 2021. So the current Red Sea issues have been more of a nuisance in terms of supply chains. So what ends up happening is ships which were on 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. And 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. So against these 3 headwinds, what we've seen is all other sales up by GBP 9.8 million, which is certainly due to our commercial teams paddling incredibly hard to make up those headwinds. So then looking down at the bottom end of the income statement over on Slide 15. So adjusted EBITDA flat at 0% despite revenue being down 4%. So a lot of that is due to our productivity increases. So obviously, adjusted EBITDA margin up from 12.8% to 13.4%, as we strive incredibly hard to continue to be profitable with what we're doing in terms of our productivity gains. So probably the other interesting lines down below EBITDA are 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 tax man 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 payout 50% of our profit after tax in relation to dividends. So moving on to Slide 16. We can look at that sort of like a decrease in net debt, which I spoke about earlier. So 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've seen a very strong operating cash conversion, so 128%, that's rare for our business. So 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 sort of like a period of 3 years, we do see our profits always turning into cash and that can be shown quite clearly on Slide 17, where we can see over a period of time, our leverage coming down quite strongly as we expect to see our profits converting into cash. So what happened here? You can see that in H2 '21, 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 -- well, not so much an issue, as an opportunity to relook 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. So we believe that it's appropriate as a plc with a strong balance sheet to be funding our working capital with debt and that's what we will look to do going forward. I mean our working capital balance, as I say, can swing between GBP 10 million and GBP 30 million in any given year. And having debt at 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 of 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. So in addition to continuing to pay out 50% of our net debt in terms of dividend, we've also decided to do a moderate level of share buybacks. So that can be sort of like seen on Slide 19. So that was announced on Tuesday just after we announced our interim results. So 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. Now the 10% is the max that we are looking to do. So in addition, we've given an idea of the quantum. So the Board does want to have flexibility over the amount of shares that may be buying back. So 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. So Andy, handing back to you to have a discussion about the outlook.

Thanks, Chris. So as I mentioned before, we've had a couple of difficult years with regards to external challenges, I suppose, I mentioned about wage inflation, 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 '24 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 ahead, further ahead to FY '25, I think there is some decent cause for optimism. We are now -- 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. So that headwind, which has been a kind of 2-year headwind has abated. And it may well be -- and this is a personal view, it may well be that they move to an under stock position from the summer, given the delays on replenishments that the Red Sea crisis has created. The Red Sea is essentially out of 20 days to all lead times because of the extended voyage time rounds around Africa. I think also, we've -- market research is showing that consumers are retrenching back to the home. After the novelty of going out and experienced hospitality post COVID, there is quite a lot of data out there that their intentions to 2024 is to return to the home more and entertain more at home, which tends the benefits of our products. I think maybe 1 or 2 tones of caution. I'm personally probably a bit more -- slightly more pessimistic on employments than maybe why the commentators are? And of course, just because people have money in the pockets, it doesn't mean they're going to automatically want to spend their own 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 that we are that mass market pricing, 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 products. 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 have final throes of rebranding Salter, and we have started a process of rebranding Beldray. Our marketing team was -- which maybe 4 years ago, consists of 1 person is now 10 people. So we've invested in people. We do actually quite a lot of traditional PR, which we found very useful. In fact, our air fryers featured on Amedeo and Lorraine over the last few days. So that's the efforts of those -- of that team. We do a fair amount of influencer work. I think as we step forward into -- very much 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 in the U.K. and possibly use of the brand building tools that sit within the Amazon ecosystem. Our game plans into Europe. We really want to focus on European supermarkets. But online is a key gangplank into that territory. Our products are all widely listed on Amazon. Amazon is Europe's largest GM retailer. So if you know we're on Amazon, you know full stop. So we'll probably do -- we'll probably utilize some of the brand building tools that they have embedded in that platform.

A couple of questions here on the excess cash and why not return to a special dividend rather than buy backs?

So this week, I mean, we have heard a number of different views. And obviously, there are 3 different methods sort of like returning capital by the normal dividend, special dividend, share buybacks. And this week, we have heard many different views about how people like cash to be returned. So 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 as sort of like special dividend arising when excess cash has arise due to corporate events sort of like sales. So there's a large amount be returned. Here, we're more probably talking about progressive amounts. And with that, we do have a principle of cash cost caution. So this is a relatively cautious 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. And you talked there about your continuous improvement program, 2 parts to this. One, are the easy wins behind you? And how much more can you -- cost can you drive out of the business? And two, will you need to invest in any technology to help you drive further improvements?

So yes, the I -- we feel quite bullish about this. The graph on Page 11 which is a 5-year graph. We've only really had -- the robotics program is only really 2, 2.5 years old. So most of the graph hasn't benefited from that program. And of course, when it comes to AI, it's really, 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 -- we have an ever developing tool sets that we can deploy. I mean just on this, by the way, we have seen some decent headcount drop since the turn of the year. We've -- we average sort of -- over October, November, December, we averaged 395 heads, and we were down to 360 end February and we're down below 350 at the end of March. I mean 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 it probably flow back up to maybe 365. But that's still a structural reduction on where we were in calendar year '23. 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. So ChatGPT is widely available; and Power Automate, which is what we use is part of the Microsoft suite. So we -- 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. And that has built that culture of people -- that bottom-up culture of continuous improvements sits on top of our graduate development scheme. And this is why I'm -- I don't mind talking about it because I don't think others will follow because if they want to do what we're doing, they'll need to set up a graduate development scheme and maybe in 5 years' time, they'll be able to get cracking. I do think this is not just the resource of ChatGPT and RPA, robotics process automation, it's the result of 10 years investment in our graduate development scheme and then 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 a specific problems. Can you give some examples where quality was an issue and what you did to fix it?

I don't think I mentioned quality as an issue. I think we're -- it's one of the things we do very well relative to our peers. And I think sort of price quality kind of formula with that balance we do get rise. I think...

It was mentioned in the RNS as a factor for why you'd have a lot of different suppliers. So it's a theoretical risk of why you would have a lot of different retailers -- a lot of different suppliers and factories if there were and usually when those arise is when you are doing our audit. So we have a team out there in China who are continually auditing the factory. And 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.

Yes. And I think, again, we're quite unusual. We have 45 people in China. And this isn't an agents or an associate. These are our employees and that includes an inspection team of 15. So -- and again, we don't -- we do use some external inspections depending on time tables and demands. But wherever possible, we use our own inspectors. And we're quite -- we're very proactive in going into factories ahead of time to sort of deal with any issues. So where we -- the feedback we get from our retailers is when it comes to management of quality, we're pretty far ahead with other people. Supply chain volatility, we have, of course, had -- we have had the Red Sea. And 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 ship to be rerouted around Africa is now the way things are. And that has lengthened lead times and -- but the lead times are longer, but regular -- sorry, longer but reliable, whereas in '21, they were longer but unreliable, which is a much more difficult combination to manage. There is a bit of an issue and is the 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. So...

Well, prevention sounds better than on the quality front. And 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?

So really interesting one this because when the Red Sea crisis started, it was just before Chinese New Year. So the Chinese New Year, you generally see a tightening of capacity. So it was a bit unhelpful. So you saw rates. Rates which have been so pre-COVID with around about $2,000, $2,500 when it is 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 [ 5% to 5.5% ] 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 costs in terms of fuel, et cetera, but really, it's about capacity. So it means that the ships can make the round trip less often in a year. So it's probably led to a 30% reduction in capacity compared to pre-Red Sea. So rate spiked up to [ 5.5% ], but they've subsequently floated back down to [ 2.5% ]. And [ 2.5% ] is above 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 with belts and came online in '23 and that's mitigated that loss of capacity by going around Africa, but also there is still a softness in demand in the West for goods from China. So yes, [ 2.5% ] is manageable. I do have a slight fear that as retailer stocks normalize, demand for goods increases, and therefore, we might see a rate flows up as we go through the rest of '24 into '25. But I think that process will be gradual and easier to manage.

Thank you. One of 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 you do to reverse this trend of declining sales?

So it does end up being a lot about Germany, but it is a fantastic door-opener for us. It's a well-known brand, and especially a great door-opener in Europe, where perhaps Salter and Beldray are at the moment a little less well known. And therefore, the German supermarkets have bought lot of Russell Hobbs. And we also remember of Russell Hobbs, we only sell cookware for it. And cookware is where we have seen a large amounts of overstock from COVID that has been a particular area of overstocks. So yes, it is primarily due to the German supermarkets who were down GBP 7.1 million in terms of their sales compared to being over GBP 4 million decrease in Russell Hobbs sales. So in some ways, there'll be a natural reversal of that because those overstocks are reaching an end now. But in terms of our European expansion and how we hope to grow that brand, I mean 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. So we're very happy with how the future is looking for that in terms of European sales.

A question here on the progress of the new Petra brand. So is there anything else you'd like to add on that basis, Chris?

Yes. So Petra has been quite similar. So Interestingly, the sales to Petra in the previous year were generally through one channel through one supermarket and they've seen some overstock. So what we've done with Petra in the current period is we started to sell it through different channels. So we've been selling it through online as well. And we've been selling it through to other retailers in Germany. So 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 has been real winner in H1, where you've handled it preventing a bigger fall in sales. This won't be repeated, but do you intend to maintain this opportunistic capacity?

It won't be repeated at that level. So 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's 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've seen suppliers trying to clear those overstocks out. So certainly, that business will continue, but the opportunities will probably be more at around 3% or 4% of sales going forward.

Thanks. Okay. Do you see increasing competition from companies licensing other brands out, e.g., I don't know if I am saying that right, but -- is there any material opportunity to license the Salter brand to other regions in the world?

It's not something that we've explored. I mean becoming a licensor is quite tricky because to some extent, you lose control of your brands. And I think wherever we sell Salter we would want to be the people who execute that.

Okay. Thanks. And then in terms of the increase in competition from other companies licensing our brands...

Yes. I mean platforms I think it's -- from memory, it's licensed by B&M as a kind of quasi own label brands. I mean look, it's -- there's competition all around this isn't -- we're going to see -- there's competition from [indiscernible], there's competition from own label, competition from other brands. I won't say licenses particularly keep me awake at night other people sell a licensed product because there's another person in the mix taking a license fee and a slice of the margin. I think that can often make them let less price competitive.

Okay. Thanks. Just looking around Continental Europe outside of Germany, which in key markets and what is the growth outlook?

So we're going to focus -- I mean this is not exclusively so, but we are going to focus on the wealthier, more populated parts of the sort of the European continent. So that is going to be sort of Western Europe, so Germany, Benelux, France and of course, Italy and Spain. They've already been targeted by the Amazon platform anyway. So yes -- I think it can be useful to have an online presence as you go out into new territories because you're already in the market and that does help with retail buyers.

But quite often our growth is coming through individual retailers. So 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. So we may concentrate on German supermarkets, French supermarkets, which can give us presence in many different markets rather than necessarily going for an individual store in Czech Slovakia or Poland, we'll be selling to a pan-European retailer.

The perfect segue, thank you, Chris. Which retailers are handling most of sales in France and what products account for the majority of the sales?

Well, we don't -- 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. I mean France is still relatively early stage, we've -- we only opened the showroom there in September. But we are in all these territories targeting -- what does success look like? It looks like opening large supermarket accounts. And that's what -- going back to kind of the reasons why Simon and I have made a switch. Simon is targeting opening large store groups, particularly supermarkets and establishing relationships at a very senior level. So going back to what I said before about we used to sell 10 years ago on product and price. We now sell on brand's product and price -- we now -- we want to evolve into a business that sells on capability, brand, product and price. And what we're seeing increasingly with large -- very large retailers is they -- they want to partner with suppliers that can really back up their growth plans. And so relationships are increasingly being forged at kind of C-suite level, CEO, CCO level, and that's what we want to -- that's why we want to do over time. If you take someone like Li & Fung, we don't do what Li & Fung does. Li & Fung don't -- they go in at CEO level when they want to establish a commercial relationship with a particular retailer. And that's kind of increasingly -- really what we want to do over time, sell our capability and then sell our brand's product and price.

Can you comment on competitive threats, particularly interested in the TEMU threat?

So yes, I mean, I think TEMU has got to be taken seriously by anyone in general merchandise. I do -- I don't think they're going to have -- and really, it's -- at this point that we should be looking to governments to ensure that there's a level playing field when it comes to competition. And we all know that that's not going to happen because we have sort of a dysfunctional -- sorry, I'm going to get a little bit political here, we have a dysfunctional space in this country. So it is something which -- while they're arguing about whatever nonsense they argue about, we and business is going to have to sort of deal with this because it is fundamentally unfair what's happening with the likes of TEMU. I think what it means for us is -- and by the way, I think that -- 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. So we'll see how that develops. But it does represent a material threat to general merchandise businesses. I think for us, it means that we've got to double down more than ever on our brands because -- and we've been a branded business for 10 years and people who buy our products, value our brands. And if they value our brands, I think they're much less likely to buy products. But they're much less likely already to buy this kind of unbranded ultra low-cost, cheap and cheerful for products that the 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 wouldn't say that last year was significantly below. I mean it does change from period to period. I mean in some periods, it has been as high as 60% in sort of like H1. I think it was 54%, 46% last year and this year, it may be 52%, 48%. So we're talking relatively at the margins. The business has become less seasonal mainly because of the growth in online. And it's also partially affected by whether people are buying landed or FOB. So FOB people are buying quite far in advance. But what we're seeing at the moment is people buying a lot more from stock. And especially since Christmas, what we're seeing is retailers who haven't been ordering because they've been stocking are finding that they are having gaps in their shelves and they're coming to us now and buying from stock whereas 2 or 3 years ago, they would have never have done that. So we are seeing a slightly less seasonal business than we have done in the past.

Okay. Thank you. A couple of questions here. One, more use for cash going out and making the strategic bits of M&A given the tricky macro outlook. Are you seeing opportunities out there?

I mean, yes, when we have generally bought things, it's been relatively minor amount. So when you've been grabbing things from distressed purchases, we bought things for EUR 100,000, GBP 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. And also in sort of use of cash, if there were large strategic acquisitions [indiscernible] have plenty of headroom, so our 1x EBITDA general sort of like policy that we are working to. You have plenty of balance sheet headroom above that. So when we did the acquisition of Salter, we did go to 2x. 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, there's a distressed purchase we've certainly got the ability to do that.

Great. Well, I'm conscious of time, and I know you both got another meeting to get on to and perhaps with a sort of slight closing question, some frustration that our share price is not bunching at the moment, which you are not alone in the market. But any closing thoughts?

On the share price?

On the share price, you can segue into and out but...

I always try and dodge those because it's for the market to set our price. I guess -- I mean, I guess it's difficult to talk about our share price without talking about kind of what's going on the market more widely and where you think -- where you think that's going to happen? I mean -- and we do have a range of views, don't we have everyone who's forecasting the death of the London Stock Exchange through to. We just come off a call with a fund manager who thinks that redemption -- I mean a lot of it is being caused by forced selling, which in turn has been caused by redemptions. And at some point, surely, you get to the bottom of the barrel, because if redemptions continue to -- continue forever, and you literally don't have any funds and no fund managers and possibly no stock exchange. So I think it's gone on for about 3 years redemptions. So I guess, at the point the redemption stock and we stop having full of sellers that I think we might have a more sensibly valued stock market. But it's certainly not an area I'm an expert in. We prefer to focus on the business and that let us 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 get fill out feedback forms. And we'll look forward to hearing in 6 months' time.

Thanks everyone. Thanks for your time.