Videndum Plc (VID.L) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Videndum 2023 Full Year Results. [Operator Instructions] I would now like to turn this conference call over to our host, Stephen Bird, Group Chief Executive.

Good morning, and welcome to Videndum's full-year results presentation for 2023. I'm Stephen Bird, Group Chief Executive, and I'm presenting today with Andrea Rigamonti, Group Chief Financial Officer. Here's today's agenda. I'll start with an overview of last year before updating you on current trading and market conditions. Andrea will then take you through the financials. And I'll conclude with a summary before we go to analyst Q&A. 2023 was a very tough year for our employees, our shareholders and our customers with multiple challenges. I want to start by saying thank you to everyone at Videndum for how they've responded to the incredibly difficult market environment, and thank you also to our shareholders. Through their support, we've preserved the long-term capabilities of the business and ensured we're positioned strongly for the recovery. Turning now to the full-year results. Our 2023 financial performance was impacted significantly by 3 headwinds. First, the macroeconomic backdrop led to weaker consumer confidence and customers delaying purchases. Second, concerns amongst our retail channel customers regarding the global economy, high interest rates and their working capital levels led to destocking that, in my experience, was unprecedented. These 2 headwinds affected our consumer segment in Media Solutions as well as the independent content creator segment in all 3 divisions. Third, the unprecedented and unforeseen impact from the lengthy U.S. writers and actor strikes significantly affected demand for our high-end cine and scripted TV products and the industry as a whole. The strikes lasted much longer than anyone expected, and their impact on the group was more significant in the second half of the year than the first. They had a wider impact geographically than we had expected, and also led to sales of some of our new product launches being delayed. Most of the group was affected by these 3 headwinds, and this meant that we finished the year with revenue from continuing operations down 31%. Given the headwinds, we acted quickly to implement mitigating actions, including agreeing initial covenant amendments with our lending banks and reducing costs. We also utilized the Italian furlough scheme and accelerated longer-term restructuring projects. Our actions helped to reduce operating expenses by GBP 21.2 million and ensured the business is now well placed for when demand returns. Adjusted operating profit was GBP 12.8 million, reflecting a 39% drop through on the lower revenue. And note that within profit, there are GBP 4.1 million of one-off charges in relation to an inventory provision for JOBY and professional fees incurred in 2023. Whilst the response of our teams was outstanding, the self-help actions only part mitigated the weaker trading, and the low trailing 12-month EBITDA resulted in an increase in leverage. As a result, having reviewed all the options, the Board decided that an equity raise was required. And we're grateful for the support of our shareholders and new investors for the equity raise in December 2023. This enabled the group to deleverage and helped provide the platform to benefit from the post-strike recovery and deliver the group's strategy. Turning now to current trading and outlook. Although industry confidence in the post-strike recovery in the cine market remains strong, the recovery is still at an early stage and it's taking more time than anyone anticipated to ramp up and get fully back to normal. January and February started well, in line with our expectations, but we've not yet seen the significant pickup in the cine and scripted TV segment that we were expecting to happen during March. And as a result, Q1, which is always our smallest quarter, ended up being below our expectations. Recently published data shows that the recovery has started, just not yet at the expected levels. Our Q1 2024 orders were slightly ahead of Q1 2023. And we should remember that the strikes didn't start until May last year, so we are comparing with pre-strike performance. And our broadcast segment is performing well, with our market-leading robotics and AI technology driving cost efficiencies for the studios. And it's a quadrennial year, so the group's second half performance will benefit from the Summer 2024 Olympic Games and the U.S. presidential election. The macro remains challenging, as we expected, although the consumer and ICC segments are not getting any worse, and we're seeing some encouraging signs of recovery. For example, in our travel segment and with sales of backgrounds and with positive CIPA data. Net debt is on track, and we're managing our cost base tightly. I'm confident that our markets will recover strongly in the second half of the year, although the timing is obviously uncertain. And it's encouraging that major production companies are saying they will commit production spend and expand capacity. I'm just back from the NAB Show in Las Vegas, where the mood was positive for the future. We have an incredible lineup of new products for our cine customers. The medium-term prospects and fundamental structural growth drivers for the group are compelling, particularly in our focus area of high-end professional content creation. And turning to Slide 6, I'll explain why I'm confident in our recovery. This slide summarizes the 5 building blocks we see to achieving our recovery. Even assuming that the macroeconomic environment remains challenging throughout 2024 and applying some caution, we believe these building blocks enable us to benefit from the strong recovery in the second half of 2024. The following slides refer to each of these in turn. First, market conditions, which are starting to improve. The 2 major strikes are over and destocking is largely completed. We estimate that these 2 headwinds impacted the business by approximately GBP 85 million of revenue last year. We're beginning to see the first signs of recovery in the cine and scripted TV market, with Q1 orders in cine up double digit on the same period last year, which was before the impact of the strikes had really kicked in. Specifically, orders for our batteries, lighting stands and wireless video transmission systems are up significantly on 2023. These numbers are encouraging as productions restart. However, it's slower than anyone expected. It's also worth noting that quarter 1 is typically a very small quarter. And as I've said, the macro remains challenging. Turning now to our structural growth drivers. The fundamental market growth drivers remain attractive and we don't believe there have been any structural changes as a result of the headwinds. Our belief in the medium-term prospects for our markets remains intact. It doesn't matter to us if it's a broadcaster, a film studio, a streaming company or an independent content creator, our equipment is used throughout the process of capturing and sharing original content. While the market will evolve, there is continued investment in our sweet spot of high-end professional content creation. And by high end, I mean live news and sport, reality and scripted TV shows, feature films and digital visual content for e-commerce. We're not the only company to believe that high-end content creation will continue to grow, and I'll share a few examples from this slide. These have been grouped under our 5 structural growth drivers. First, cameras used to photograph and film new products for retail e-commerce. CIPA data shows that sales of new professional compact system cameras are growing and major camera manufacturers are forecasting growth in their imaging segments. Second, subscription TV and original content creation, where the medium-term investment in sound stages is positive. A recent report from FilmLA shows a planned 40% expansion in sound stages in Los Angeles. In the next 2 years, 180 stages will be added. And this is a good indicator of the continued demand for original content and the volume being produced. And in January, Netflix reconfirmed its plans to increase its content spend to $17 billion in 2024. This is a significant increase on 2023 and at the same level as 2022. This increasing investment demonstrates the long-term confidence in the market, which we will benefit from. Third, video sharing platforms used by influencers and vloggers. Although the softer economy and lack of business confidence more generally are impacting our JOBY and Manfrotto brands, the global short video sharing platforms market such as YouTube is expected to grow at a 10% CAGR from 2023 to 2030. And the final driver of this page reflects environmental legislation, which generates demand for sustainable products and is the driver behind our LED lighting and our sustainable power proposition, Salt-E Dog. We continue to focus on developing new products to improve our customers' productivity and drive shorter replacement cycles. This slide shows some examples of the group's exciting technology innovations, which save our customers time and money and support the recovery. In broadcast TV, our market-leading robotics and AI speech recognition prompting technology drive cost efficiencies in studios. And our AI autonomous presenter tracking software using kinetic modeling to predict movement is now being installed in TV studios around the world, and it could potentially have more applications. In May, we launched our sustainable portable power solution based on sodium technology. Salt-E Dog is now in production in Costa Rica, and it received the Excellence in Sustainability award at NAB last week. There's a good pipeline of opportunities and products are shipping and in customers' hands. We've applied for comprehensive patent protection, and we believe there could be wider applications for the product in adjacent vertical markets such as live events. Sales of our 4K/HDR zero delay products and our small HD monitors are picking up now the strike is over, driven by the migration from HD to 4K and the launch of the Bolt 6. We expect growth in lighting stands and LED lighting, where virtual production is increasing and there is strong demand to enhance virtual environments with real lighting. High-end audio capture is also an exciting growth opportunity for the group, particularly as we develop on-camera microphones using Audix's capabilities. And the final building block is the positive impact from key global media events. We're starting to see the usual benefits from the Summer Olympics and Paralympics, as well as the positive impact from the media coverage of elections. These are not only being held in the U.S. and the U.K., but over 60 countries are meant to be holding national elections this year. And historically, U.S. presidential election years have brought a 10% to 15% increase in our broadcast business. In summary, market conditions are starting to improve, although the pace of the cine recovery, in particular, is uncertain. The structural growth drivers remain attractive, and we believe that our new technologies will continue to drive shorter product replacement cycles. Now I'll hand over to Andrea for more details on our financial performance.

Thank you, Stephen. I will now take you through the numbers for what was an exceptionally challenging year for the group. I will set out the impact of the external and market headwinds that we faced in 2023 and the self-help action we took to mitigate them. Results and comparatives are presented on a continuing basis as we exited the non-core businesses of Lightstream in the gaming market as the business was sold in the second half of 2023, and we wound down our R&D center in New Zealand. The Amimon medical business remains held for sale at the year-end. These businesses are being reported within discontinued operations. Revenue declined by 31% and was partly mitigated by cost savings, including the implementation of cassa integrazione, the Italian government supported furlough scheme in our media solutions division. In the next 2 slides, I will provide bridges, setting out of the main factors that have impacted revenue and adjusted operating profit. Net finance expense increased, as expected, due to higher interest rates and higher average debt. As a result, profit before tax and EPS were minimal. No dividend has been declared, but we recognize the importance of dividends to our shareholders and intend resuming payments as soon as we can. Let's now take a look at revenue. Revenue was down 31%, mainly due to 3 effects, as Stephen mentioned. First, the strikes, which significantly affected demand for our high-end cine and scripted TV products, representing around 30% of group revenue. The strikes impacted from March through to the end of 2023 and had a larger impact in the second half than in the first half. Second, the weak macroeconomic environment impacted demand from consumers and independent content creators, together representing 40% to 50% of group revenue. And third, the destocking effect seen following concerns amongst our retail customers and distribution partners regarding the global economy, high interest rates and their working capital levels. 2022 benefited from the Winter Olympics, which is part of the other volume decline. Partly offsetting this decline was the year-on-year effect of price increases put through in July 2022 as well as selected price increases put through in January 2023. I'll now turn to the factors impacting adjusted operating profit. The lower sales volume dropped through to operating profit at around 50%, which is in line with our average margin contribution. This was mitigated by management actions, including price increases and cost savings. Pricing once again offset inflation, partly helped by raw material inflation plateauing and in some instances declining. The benefit from cost actions includes minimizing discretionary spend in the short term as well as the impact of longer-term restructuring and lower corporate costs. In 2023, we continued to take self-help actions to streamline our cost base and take advantage of location synergies, ensuring that the business is well set up for long-term growth. In the U.K., our Rycote windshield production was relocated to our Ashby factory. This has expanded our manufacturing capacity and efficiency at this site. In the U.S., audio R&D and microphone production moved to our audio center of excellence in Portland. In the media solutions, U.S. distribution site moved out to New Jersey and into our existing Savage facilities in Arizona. Assembly of Wooden Camera products were moved from Dallas to our production solutions facility in Cartago, Costa Rica. 2023 also benefited from the restructuring actions taken in 2022, including a small reorganization within Creative Solutions. Alongside these longer-term actions, we made short-term savings as we limited discretionary spend in operating expenses and on capital expenditure. Overall, these actions drove GBP 13 million of cost reductions compared to 2022, of which the majority of the reduction will remain in 2024. Let's now take a look at the divisional detail. As you can see, revenue was down in all divisions, although the factors impacting each were different. The strikes had the largest impact within Creative Solutions, but also impacted Production Solutions and to some extent Media Solutions. Consumer and ICC demand weakness was mainly felt in Media Solutions, but ICC also impacted within both Production and Creative Solutions. Destocking predominantly impacted Media Solutions. All divisions controlled their cost basis to mitigate against the revenue decline, along with taking the restructuring actions discussed on the previous slide. Corporate costs were significantly lower than last year mainly due to a decrease in the charges relating to share options and no bonus awards for 2023. Whilst it was a tough year for all divisions, there were areas of positive momentum, particularly regarding new product development. Media Solutions saw growth in Avenger lighting supports until the strikes, led by its Long John Silver and Buccaneer products. And despite the strikes reducing demand, revenue was still significantly above 2021, demonstrating the gains we have made in this market. Production Solutions launched Salt-E Dog and Vinten VEGA products. Creative Solutions within their live production product range nearly doubled sales of Prism and Ranger following the launch of the latest Ranger product. Now that we have looked at the P&L, let's turn to cash and debt. Net debt at the end of December was GBP 129 million, GBP 65 million lower than at the end of December '22. We delivered GBP 11 million of operating cash flow, representing an 84% cash conversion on operating profit. Within operating cash flow, inventory decreased by GBP 2 million as we applied effective control measures to offset the decrease in demand, whilst we maintained stocks of critical electronic components to support the recovery now the strikes are over. Non-trade working capital increased by GBP 7 million due largely to no accruals for bonuses relating to 2023. The operating cash inflow was offset by tax and interest payments of GBP 26 million, GBP 4 million of retention bonuses relating to recent acquisitions and GBP 5 million of restructuring costs, resulting in free cash outflow of GBP 24 million. There were also cash outflows for the final dividend of 2022 paid in May '23 of GBP 11.6 million and GBP 16 million of other items, which mainly reflects discontinued operations, deferred consideration for acquisitions and purchase of shares for employee incentive schemes. Leases increased by GBP 7 million, which primarily related to Media Solutions headquarters in Cassola. And there was an FX benefit of GBP 6 million due to the weaker dollar. The low trailing 12-month EBITDA impacted by the headwinds mentioned above resulted in an increase in leverage from 2.2x at December '22 to 4.2x at September '23. As a result, having reviewed all options, the Board decided that an equity raise was required. Alongside this, we benefited from the support of our lending banks to agree amending our covenants, which are based on trailing 12-month profit measure. These covenants can be found within the appendix to this presentation. The equity raise in December resulted in GBP 118 million of net cash proceeds, which led to the reduction in net debt towards the end of 2023. The term loans taken after the time of the acquisitions of Savage and Audix were also fully repaid upon completion of the equity raise. Our covenant leverage ratio at December '23 reduced to 3.3x, while liquidity improved to GBP 105 million. At March 2024, leverage reduced further to 3.0x and liquidity was higher at GBP 112 million as net debt reduced by GBP 7 million in Q1 '24 to GBP 122 million. I'll now hand back to Stephen.

Thank you, Andrea. So to summarize, 2023 was exceptionally challenging for the group, but we're in an exciting market with structural growth drivers. And thanks to the support of our shareholders, we've preserved the long-term capabilities of the business. The cine and scripted TV market is beginning to recover and we're confident about the future. We remain focused on high-end professional content creation, driving continued operational excellence and investing appropriately in new products to deliver the recovery. We've got market-leading premium products and exceptional people. We remain confident that the group will benefit from a strong recovery in the second half of 2024. And the medium to long-term prospects of the business are good. We're now going to move on to our analyst question-and-answer session. So I'd like to hand over to our operator. And dial-in details are shown on this slide.

[Operator Instructions] Our first question comes from the line of Scott Cagehin of Investec.

I'm sure you're glad to get through full-year '23. I understand some of the bigger drivers of recovery, but could you just give us a bit more detail or some color on what you're seeing more near term, not what you're hearing from customers in the cine or scripted TV markets? And then following on from that, the evidence or confidence you have of sort of coming to the end of destocking? That would be very helpful.

Sure. It's Stephen here. Yes, you're absolutely right, we're pleased to get 2023 behind us. I've just come back from the NAB Show out in Las Vegas and I've been able to see a lot of customers, and the general mood is pretty consistent. Clearly, the whole situation with the strikes has been a seismic -- had a seismic impact on the business and the industry, a bit like COVID frankly. And so, the major uncertainty is around how quickly the recovery is going to come. So there's no debate that the market is going to bounce back and bounce back to similar levels that we saw pre-strike. The question is just about how quickly that's going to happen. I think the encouraging thing is, A, if you look at the macro, all the evidence is that there will continue to be significant investment in cine and scripted TV. So if you look at Netflix for example, they're saying they're going to be spending 17 -- even though there's been a slower recovery this year, there's going to be an investment of $17 billion from them this year, which is actually significantly -- obviously, significantly up on last year. And if you look at what people in the industry know about the demand for stages, for example, there's going to be an investment and an increase in stages of about 40% around the world over the next couple of years, which is also very significant. So now you can debate the macro and -- or clearly, there are some companies, for example, Disney, saying they're going to be spending a little bit less. Overall, it's a huge market. It's a market of about $100 billion of content creation. And where we think we will win is in helping our customers solve the problems that they've got, and particularly around helping them to save cost. And so, therefore, products which have unique technology like the Bolt 4K, HDR transmitters and monitors or even products that are driven by legislation, for example, the new Salt-E Dog, which is a solution to a problem that all of our customers have, which is that diesel and petrol generators are going to become illegal in California very soon, those sorts of products plus our AI tracking software are going to drive the reduction in the replacement cycle. So we're very confident that, that is going to drive growth even if the market doesn't grow significantly. I believe the market is going to continue to grow. Some people disagree with that. But overall, you can see the investment that's being made in stages, for example, which seems to be consistent with the big growth. So all of the feedback I've had from customers is significant confidence in the market bouncing back. Everyone is slightly bemused that it's not happened a bit quicker. But it is a bit of an oil tanker. It's a huge industry that takes time to recover. So I guess in hindsight, it's not a huge surprise it's taking a bit longer. But confidence that it's going to start to pick up in a couple of months, certainly in June. And then in terms of evidence about destocking, again, I've managed talked to a number of customers recently, particularly B&H, who are our biggest customer. And there's very clear evidence that the overstocking that we saw over the last year or so has pretty much come to an end. And our hope that as the market starts to pick up and our customers stock sitting on their hands and start buying again, we should actually see some restocking. And certainly, B&H's confidence in, for example, the photographic market and not the cine -- who are not so exposed to the cine market, but in the photographic market, their confidence in photographic market is the highest I've seen for many, many years. They're starting to see camera shipments taking off and there's been some new cameras, particularly Fuji cameras being launched recently, which has been phenomenally successful particularly with young people, which is really encouraging. So overall, confident in the recovery, timing is a bit uncertain at the moment, but it's becoming clearer. And as you've -- I think we've indicated, the FilmLA data is consistent with the recovery coming through in the second quarter. Does that kind of answer your question?

Your next question comes from the line of Andy Douglas of Jefferies.

I've got 3 questions, although I guess one has got 2 parts, so maybe 4 questions. Let's go through it one by one. Can you talk a bit more please about the competitive landscape that you're currently facing? Clearly, last year was a tough year, and we've started a bit slower than we would like. You guys have been through the mill. What are your competitors' kind of position at the moment? Are we seeing lots of people go bust? Clearly, they're going to be, I suspect, in a worst position than you guys are. Can you just give us a feel for that, please?

Sure. I mean I think although we've obviously had a horrible time, and I know it's been a horrible time for our shareholders, we think that we have managed this crisis pretty well and better than most of our competitors. And in a similar way, I think we handled things well during COVID as well. So I think we've handled things well. In terms of the competition, there's not a lot of our -- I mean, A, we don't have a lot of direct competitors, so it's quite difficult to pick out any in particular. But we know that anyone who is 100% exposed to the cine market has had a terrible, terrible time. So there are smaller businesses that have gone to the wall. But generally, across the board, there's nothing significant in terms of large competitors going bust. They are struggling. And clearly, in the last 6 months, quite a lot of them have been a bit more desperate and been chasing business and so on. Hopefully, that's going to start to stop a little bit. But as we've seen post-COVID, we're going to I think come out of this crisis in a stronger place. And certainly, a lot of the smaller Chinese competitors have really, really struggled, obviously. So I think, hopefully, we'll come out in a stronger competitive position as we did coming out of COVID. And again, as I've said many times before, our business has less competition. It has a stronger competitive position than we did when I joined the business 15 years ago. So we have a very strong position in our markets. Our customers love us. They love the fact we introduce new technology to the business and stimulate the market. And our competitors tend to follow us if they can, although a lot of our products have IP protection. So the net-net is the competitive position is stronger.

On Salt-E Dog, my understanding is you've got orders for about 20, but you've got a lot of more -- kind of expressions of interest in the hundreds. Can you just give us a feel for the competitive position there? What are the alternatives? And am I right in saying that once a couple of people have bought it, then it kind of becomes a snowball effect, where, if one person has it, the other person needs to have it, et cetera? Is that right?

Sure. So the fact that petrol and diesel generators have begun -- become illegal to buy and then illegal to use, obviously, it's not a secret and everybody knows that. So there are obviously a number of companies going after that market. And the solution is some sort of battery technology, which is cleaner and more efficient and so on. All of the competition, pretty much all of the competition is lithium. And as you know, we are using sodium technology. So all of the competition is lithium, which is fine. And lithium -- we've used lithium in Anton Bauer batteries for many, many years. The problem with lithium is, number one, it's environmentally unfriendly. So it is very difficult -- A, it's difficult to dig up out of the ground. And secondly, it's difficult to dispose of. And secondly, it has a very bad reputation for catching fire and exploding. So those 2 things are quite big deals. Sodium doesn't suffer from that. Sodium is a technology that is -- obviously, it's salt, so it's environmentally friendly. It's very easy to dispose of. It doesn't catch fire. So in terms of our proposition to our customers, we've got a very strong proposition that's unique. We are applying for a bunch of patents around the product, which at the moment looks very, very successful. So we've got, we think, pretty much exclusive use of sodium in this market and in other markets where we think we can expand into, for example, like live events. So this is all about, as you say, getting people used to the technology, seeding the market. So we have been giving some products to some customers to get them used to it, particularly rental companies, who then started to rent the product out. And so it's going to take a little while to get it moving. But once it gets moving, we think this market is going to be phenomenal. So very, very exciting.

Okay. Superb. And then last one for me. With regards to the refinancing that's taking place and the tweaking of the covenants, can you just walk us through what's happening there and the rationale behind that? I believe your refinancing is in -- well, you need to refinance before Feb '26. And as part of the negotiations, you'll be looking to just tweak your covenants a little bit. If you could just give me some details on that, that would be helpful.

Yes, Good question, Andy. So it's Andrea. And we obviously have been very close to our banks for the last few months. And as part of the normal routine at this point in the cycle, we would -- and we have started contacting them about an amend and extend to our RCF. And we think that we would look to, in conjunction with the banks, provide some additional flexibility on the covenants primarily as a extra insurance to navigate the current market trends.

Okay. And that will be done by second quarter. Is that right? Or that's what you're aiming for?

Yes, we are aiming -- obviously, it's a negotiation. So we need to work with the banks. But yes, within the possibilities, we're willing to do -- to get that done by the second quarter.

I think that might be all the questions, unless anyone wants to quickly put their hand up. I think we may have one more. Is that right?

That is correct. Our next question comes from Tom Fraine of Shore Capital.

Just trying to get an idea on H2. Presumably, the H1, H2 split will be a lot greater than usual this year. Are there any clear headwinds that you see for H2? Obviously, there is quite a bit of tailwinds that you've outlined. But are you able to give any thoughts on the split this year?

Yes, good question, Tom. I mean, typically, on revenue, our split is slightly towards H2, 48% H1 on average. But as we saw last year and certainly going forward given the current slightly delayed uptick of the cine market, we would have a slightly skewed H1 to H2. So you could be looking at something in the region of 40% or so on revenue, perhaps slightly less on profit given the drop-through. But yes, that's what we're looking at, at the moment.

Yes. I mean in terms of this -- again, last year was a pretty strange year. We've had a few strange years, obviously, with COVID and so on. So what is the new normal? I mean the new normal certainly is going to be, I think, H2 weighted. That's the seasonality of the business. This year, again, it's going to be slightly unusual. So we've got the recovery of the cine market. We're also seeing destocking finishing. In the second half, we've also got the Summer Olympics, which is reasonably important to us. We've also got the presidential elections. The presidential elections, as you know, I think this year is going to be no exception. I think particularly in the U.S., the presidential election is going to drive a lot of demand for our products. So we're going to see that as well. And then in terms of new products, we've got -- we've had for the [Audio Gap]. This year I think we're going to be even more H2 weighted than normal. So it maybe even more H2 weighted than Andrea just said. And things like Salt-E Dog, we just talked about. I think my sense is that, that will really start to pick up in the second half. I should mention, by the way, about Salt-E Dog that we've literally just in the last few days won the award for best sustainable product at the NAB Show, which is a very big deal. And for companies -- there are a lot of our customers, for example, Sky, for whom sustainability is a hugely important factor. The fact that they're buying a product that has won a sustainability award is very important. So I think there are quite a lot of reasons to expect H2 to be significantly stronger. Tom, does that answer your question?

Yes, that's great. I mean just a slight follow-up. If you could discuss whether the macro headwinds could still impact H2? You talk about recovery in H2. Will that be at the start of H2? Will that be sort of at some point during H2? And also on Salt-E Dog, you were able to comment on the materiality of that. I know you've probably got limited visibility. But if you're able to comment on the percentage of sales for group sales that could drive in the future.

Did you get that?

Yes. Sorry, Tom. Could you just clarify the second question? Is it sales of Salt-E Dog?

Yes. Just as a percentage of -- or yes, where you think you can get to in the short and medium term?

Okay. And did you have a question on materiality?

Yes. Well, the materiality of Salt-E Dog...

Oh, I see.

Category. And also -- yes, the other one was on the macro headwinds, whether you think they will persist in H2? Whether that will be at sort of the start of H2 it might recover or towards the end of H2?

Yes. So I mean broad numbers around Salt-E Dog are -- our expectation is to build our position in that market and grow it to -- in the region of about 10 million.

Certainly, in this year, it's going to take a little time to pick up. I mean, obviously, that's 10 million from nothing. But in the long term, we see -- I think we've talked about this before. We see sustainable power as a big market. So for us, certainly a sort of $50 million market going forward turns out quickly, we can do that. And again, specifically on Salt-E Dog, we are looking very aggressively at other markets that are adjacent like live events. So you can imagine live events use an awful lot of petrol and diesel generators. There's absolutely no reason why we can't get into that market. We know that channel reasonably well. And then there's other areas like construction. And what we're doing is we -- as we've done before with LED lighting, we are good at creating intellectual property around this sort of product. And if we can do what we did with LED lighting with the sodium technology, then we've got a very exciting product for the future and also a very exciting income stream from intellectual property. So yes, we see that's very exciting. I think you were asking about other headwinds in the second half. I mean, clearly, I think there's a lot of tailwinds as in the bad things stopping, so the strike over destocking being over. Clearly, we're also very realistic about what the macro economy looks like. And we're not assuming a significant improvement in the macroeconomic situation. Clearly, if interest rates do start to come down, then for a lot of our independent content creators that's going to be a very, very positive thing. At the moment, you can imagine particularly sort of one-manned operators have suffered from high interest rates. The cost of buying product is too high. So that's been a dampening impact on us. If interest rates were to start to come down towards the end of the year, then I think we would see, again, a big bounce back in the independent content creator segment. Tom, does that answer your questions?

Yes, that's great.

As there are no additional questions, at this time I'd like to hand the conference back over to Stephen Bird for closing remarks.

Great. Okay. Well, thanks, everybody. Sorry for the lack of notice about this meeting. Hopefully, you understand it's been a bit of a challenging time getting the results out. But delighted that we've got the results out. 2023 is behind us. Looking forward to 2024. And thank you all for your support. And hopefully, we'll manage to talk to many of you over the next few weeks. Thanks very much.