Anpario (LSE:ANP) — Interim Results

0:00 Good afternoon, and welcome to the ANPARIO PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand you over to Mark Wilson, group finance director. Good afternoon, sir.

0:32 Hi. Thanks, everyone, for joining our first IMC meeting. I'm Mark Wilson, group finance director. I'm joined by Richard, chief executive officer. I'm gonna start by running through the most recent set of results, and then I'll probably go through these quite quickly because given it's our first IMC then I'm sure it would be useful to go through the strategy more and Rich will do that later on in the slides. Okay. So just a bit of an overview in terms of the highlights of of the business for this most recent interim results. We've seen an increase in revenue of 11%, 1,700,000 to 17,000,000 and a larger increase in gross profit of 20%, 1,400,000 to 8,100,000.

1:17 Adjusted EBITDA has increased higher on a on a percentage basis by 41% or 800,000 to 2,700,000, and profit before taxes up 53%. Following the tender offer last year, then we've had a larger impact on the diluted adjusted EPS, which is up 84% for the period, and we've increased the interim dividend by 2% over the same year last year. I'll just move on through the next slides. So in terms of income statement, as I said, we've seen that revenue increase and that's alongside a volume increase of 20% for the period. We've seen most product classes see continued growth such as the Regastim, which continues to be the highest contributor towards sales growth and recovering the higher volume, lower contribution products that we've been talking about such as pellet binders and our acid base Ubartic range.

2:09 Gross profit as I said was up higher at 20% and that's related to a margin increase of 47.5% and there's a slide coming up shortly on that. Admin expenses for the period were up 11%. There's continued inflation and cost increases, which outpaced the savings made through last year's restructuring exercise. And again, I'll talk through that shortly. As I mentioned, the EBITDA before tax up has been a slightly higher tax charge for the period 17.9% compared to last year's 10.6%. The prior year benefited from lower headline rates for the period, beneficial deferred tax movements in that period, and there was higher R and D tax credits. In terms of EPS, then as I said, up 84% and interim dividend of 2%.

2:54 So moving on in terms of gross margins. So if you've been following the ANPARIO story, you'll probably be familiar with the fact that in in 2022, we saw a large drop in gross margins. There was a number of contributing factors to that. There were some supply shocks in the industry due to force majeure events. And then following that, there was the energy crisis following the Ukraine war, which led to a high degree of exceptional cost inflation, a number of products almost tripling in price that go into to our end products. So since then, we've been on a journey to recover those gross margins. And in the most recent period, then we've been managed to increase gross margins back up to 47.5%. Now that's partially helped by the volume recovery.

3:40 Volumes have increased 20% in the period. They are still below their peak levels that we saw in 2021, around 17% lower. But nonetheless, you know, we are seeing that recovery come through in the market, and we've had our best ever half year sales performance in nominal terms. In terms of that volume reduction then that did have an impact on the margins. We've got a very highly automated and efficient production line but it's fairly fixed and semi fixed costs and so that led to a production under recovery which did as well as the raw material cost inflation, then that did impact our margins. As we look forward, then generally raw material prices have stabilized. There are a few that are still at historically elevated levels, but they're not necessarily showing any further signs of reductions and a few of those were experiencing spikes in the cost. However, generally, the prices have stabilized, which is, if anything, that's what we want.

4:35 It means that this time of year when we're putting budgets together, we can do better planning, and we usually lock in around 80% of our raw material spend through pricing agreements at the beginning, you know, around this time of the year. So in terms of the margin recovery, though, that what that means is there's less there's less potential margin recovery from lower raw material price movements. And if from where we are today, then any margin improvements will be more linked to further volume recovery and increased production recovery rates from that and the lower cost of production per ton, but also any, you know, price rises that we might look look to introduce in the New Year.

5:14 And then due to this, you know, gross gross profits have increased 8,100,000,000 matching similar levels that we were that's what we were 2021, although it albeit in nominal terms. Moving on to admin expenses. I mean, in short, last year was a difficult year, and we did a redundancy and restriction exercise, and that mainly focused on employment costs and establishment costs to try and, you know, make ourselves more efficient and rebase the costs for the level of performance that we're at. We did see savings across both of those. Employment costs were down by 10% in the period and establishment costs, the cost of running the facilities excluding the production site, they were down by 10%.

6:00 So 12% as well or 100,000. In terms of cost increases for the period, then we've seen a lower level of staff capitalization. We've typically had, you know, a number of r and d projects going on, and we continue to develop a number of r and d innovations. They're more evolutionary than than revolutionary, but what we can do typically is is credit the p and l for the employment costs related to those r and d projects. But because of a lower level of activity through the period, then that number is reduced. Marketing costs were higher for the period around 100,000, and that was part of reference to both stimulate the sales growth and volume growth that we've seen, but also to launch, you know, new products the recent Forte and new applications for existing products like MasterCube.

6:46 But we've seen that, you know, fortunately come through in terms of the the sales performance. There's a slight increase in legal and professional costs of 9,100,000 for the period. Services in general continue to see a high level of inflation, and there's been an increased utilization of of legal and professional costs through the period. In terms of foreign exchange, the business is exposed to foreign exchange movements being a global business, trading in lots of different currencies. The principal exposure is to dollars where we have around 40% of our revenue in dollars with, you know, not much offsetting it in terms of overall costs. So we tend to hedge, and we tend to hedge up two to three years. But nonetheless, you know, during the period that the exchange rate was lower, and we we saw a a loss come through in the period. And then lastly, bonuses, we are still on a journey to recover, but there's been a number of notable sales performances across the group. And, you know, the sales team are focused on growth and then bonuses for that growth. The bonus is an accrual. It's only paid out at the end of the year following the audited results, but at the half year then necessitated having that accrual in place. So And when we look at the cost, if you exclude foreign exchange and bonus, the bonus being self funding as it's always based on, you know, either sales or profit growth and and the foreign exchange being a more volatile item than on a more like for like basis than administrative costs were were relatively similar to last year.

8:10 Moving on to the earnings per share. Just wanted to draw this out on the impact of the tender offer. So the EPS increased by 84% or 4.73 p to to 10.39p. This is a level which is slightly higher than for the h one of 2021. This has been driven by the increased profitability that we've been speaking about, but also a slight offset there in terms of a higher effective tax charge for the period. As many people know, we did a £9,000,000 tender offer, which we bought back 4,000,000 shares at £2.25 last year. That was completed in July, and that has had a beneficial impact on the diluted adjusted share for the period and increased the EPS by 24% or just in the 2p.

8:57 This next slide, we often get asked about, one of the largest shareholders is, who they call JTC. And what that is is an employee benefit trust for for management and staff of ANPARIO PLC. And it's useful to draw out that if you look at the top right hand section, then the way that the earnings per share is calculated is we take our issued share capital. We remove those shares held by the by JTC and the and the JSoft trust, and that creates the number of shares available in the market. And then that number is diluted according to the, you know, potential dilution at the average share price for the period. So an average share price for h one of £2.49, the dilution was a 105,000 shares, which which really reflects that most of the awards under that employee benefit trust were underwater for the period.

9:48 And then I've tried to outline in the bottom right hand section an illustration at different share prices based on the current, you know, the current awards, What the market capital change would be and the dilution through those those Jason's awards. I know it's a bit complicated, but it's a question that we often get asked. I just want to try and draw out a little bit because the the dilution is not the potential dilution would never be the full 3,700,000 of shares that's held in that JTC. So if we take a share price growth from three, you £3 to £6, the market capital would increase to a 122,000,000, but the die the number of diluted diluted shares would increase by 1,500,000 or a dilution of 9%.

10:35 So it's just trying to draw that out for those who have previously asked questions in in this area. In terms of cash flow, their notes have been following us for a number of years. We'll we'll know that this return to normal. We're usually a highly cash generative business in a number of years in the last few years, then we've seen both the buildup of working capital and then a release last year as supply chains and logistics situations improved. In terms of this period, then there was operating cash flow from from profitability of 2,600,000. There was a release in inventory point 7,000,000 due to lower lower inventory levels for the period. That's mostly related to the timing of purchases. I think I highlighted at the end of last year that I expected working capital terms to be more proportional movements moving forward. And that's been the case in terms of the receivables, which has been proportional to the increase in revenue.

11:32 A low level of tax pays as we utilize some losses in terms of the payments for the period from previous years, and then a low level of CapEx for the period of just 200,000. H one twenty twenty three was 500,000, And in in previous years, it's been even higher. And, generally, then in terms of plant and equipment and tangible investments, then the the site is well invested and has all the equipment that we need to, you know, to for the future growth of the business and from an intangibles perspective in terms of R and D, then we have a number of opportunities for the sales team to grow sales. And so R and D work continues, but at lower levels than in previous periods. So there's a lower level of CapEx requirement for the business moving forward.

12:19 At the end of the period, then cash balances were $13,500,000 and the primary focus for these cash reserves and key strategic priorities to find suitable acquisition targets to utilize this cash. Moving on. Just in terms of highlighting some of those messages that generally we're highly cash generative and have a strong balance sheet. We have a progressive dividend policy. We've had growth in in the dividend every year since the maiden dividend in 2008. The goal is to continue to increase the dividend payout year on year, and we've had a long run average of 4045% payout ratio. So at the minute, you know, when we had a downturn in performance, we continue to increase the the dividend, and we've continued to do so this year, but with earnings per share growth outstripping the the growth in the dividend till we return to those previous payout ratio levels.

13:07 As I said, working capital movements should be more proportional to the current position at the end of last year moving forward. And we continue to invest in building up the brands, the power brands as Richard calls them and working on trademarks, marketing marketing trials and product registrations. And the work continues to evaluate and consider earnings enhancing acquisitions. That's the end of my section. I'll hand you over to Richard now who will talk through the operational performance of the business. Thanks, Mark, and welcome to everyone who's listening. So we just I'll just give a bit of an overview in terms of geographic performance. But as you can see, we're very pleased with the Asia growth because it is our biggest region and there was a good sort of recovery in sales there during the period.

13:58 Then if you go right to the end and look at The Middle East, nearly 100% growth. We're doing some strong work there and some really strong business development that's starting to pay dividends. And I'll go into detail in that a little bit later. Europe has been modest growth, but again, there's some we think some good things to come come through over the coming sort of months and periods. The problem there has been The US really and then The Americas. And and a couple of reasons for that. One of the primary ones is the swine market that has struggled. Think the swine or pig producers are only just getting to breakeven over the year in The U. S. And the problem and it really leads to one of the questions that we've had has been last year, the Chinese put a 25% import tariff on The U. S. Pork. And so they have struggled basically with their export market. The Americas tend to export quite a lot of their produce and they've obviously struggled with that. It used to go into the Chinese pork market quite considerably.

15:04 But instead, some of that has had to go elsewhere and they've struggled to really make the profit to be profitable as a swine industry. And this does happen. And so we had a downturn in some of the business that we had there. The other factor in The U. S. Was a big customer who had sort of and again, this is a question that someone has asked, who had switched back to using or or had taken stopped producing the no antibiotics forever or no antibiotics ever in in their produce. I think it's actually in poultry. And part of this was a little bit driven by a decision by McDonald's to switch from no antibiotics ever to no antibiotics of human importance.

15:50 So it meant you still could use antibiotics in meat production to supply, think it was McDonald's, but only if those antibiotics were not being used for human medical reasons. So we think that's a temporary setback in those areas. But there are still

16:06 companies, consumer food companies such as Panera Bread and Chick fil A who are still very much supporting no antibiotics ever. There are producers that we are starting to target. But Marco, if can move to the next slide and just go in some of the details. Don't really want to go into every single country because we deal with sort of 80 countries around the world. But in China, we're quite pleased. They've done a lot of good work there in terms of keeping Augustine going.

16:36 And what has been quite a China hasn't been an easy market given where their economy is and there is quite high unemployment in the youth there in the twenty to thirty year olds. So it hasn't been easy. We are undertaking some commercial trials for Otsomega algae which is successful and that's both in the swine market and in the dairy market could lead to some decent sales next year. But it does depend on those trials. So it's not guaranteed, but there could be some significant volumes there. If we just sort of look at Asia Pacific, the Southeast Asian countries, places like Vietnam, Korea Malaysia in particular, that has recovered, you know, significantly as you can see from 2022, the end of twenty twenty two, and the beginning of twenty twenty three where we had a lot of the the example, well, the best example is to describe how it happened in Malaysia.

17:35 When the Russians sort of invaded Ukraine,

17:39 there was the feed prices and raw material prices shot through the roof. So compound feed being fed into chickens and pigs actually went through the roof and it slashed or reduced the margins to virtually nothing for poultry producers. In Malaysia, the producers naturally then have tried to pass on those prices to the consumers in in food price inflation. The problem there was the government thought, well, there's gonna be riots and there's gonna be, you know, a lot of protests against high chicken prices. So they then slapped a pricing cap on chicken in supermarkets. So what did the producers do? The next time around they put chickens down to grow, they didn't do that. So there was a complete reduction in there in twenty twenty three of them producing chicken.

18:25 And if there's no chickens to eat feed, then they're not going to eat ANPARIO's feed additives. And that's why you see that cap was taken away when the politicians realized that it was futile and also when raw material prices have dropped and have obviously dropped significantly. So producers in the region have got much better economic conditions and that's why you're seeing a turnaround in Asia along with some of the initiatives that we are doing and certainly a little bit in aquaculture in Thailand and a few other places. So that was those areas that are driving Asia Pacific. Australia is a little bit small for us,

19:02 but it's having a tougher period than normal, but we expect that by the year end, we hope that it will be sort of similar to last year. Mark, if we do thank you. So as I said on The USA, the two areas we're really particularly forced with the swine, pork U. Pork producers really struggling there and Origo Stem in terms of the customers who are switching back to cheaper antibiotics. We are doing well with the Oregostim into the calf branches and into the ruminant area and that's an area we want to grow just to try and diversify us more from the pig and poultry area because we are probably nearly 75%, 80% dependent on the pig and poultry market. But we do want to sort of spread out and get diversified species wise in a similar way that we are geographic wise.

19:55 If you look at South America, I mean, one of

19:58 benefit one of the benefits or the benefactors of the import tariff on The USA was Brazil because Brazil had done a deal with China and particularly on pork. And so the pork producers in Brazil were having a good time and a stronger time. We have sort of benefited from that. It's helped to sort of support the impact of The USA business. And that's, again, the benefit of being geographically diversified. There are issues or can be geopolitical issues and trade disputes where one country may suffer, but another country may benefit. And the Brazilian deal that Lula did with Xi Jinping and in particular, Brazil prepared to take Chinese currency RMB for its pork exports benefited their market.

20:51 So I think that's really all I want to say about that we have good sales in Venezuela. It's a new territory for us and we hope that will continue.

21:00 So just moving on to Europe, again sort of modest growth there in Europe from a number of sort of countries, in particular Italy and Austria. I mean Italy in terms of the Parma ham, they're more protected because they've got good strong branding for their produce. And so we've been supplying into those, producers. Spain suffered for us because Spain is is the big volume basically, the high volume, low margin producer of pork that has to compete on the world stage. So their margins are much more tighter. They haven't got the branding that the Italian parm ham sort of industry has. So you can see where you've where, you know, it's the same in most industries.

21:45 If you differentiate, you can command a higher a higher price and and and higher profitability. So Spain has suffered really because of tough conditions for pork producers, but it's also quite competitive local market there.

21:59 The UK sales were down with us as customer that sort of we lost or a small customer we lost in acid base shoe biopsies. However, it was a quite a very competitive price piece of business with us, so the gross profit impact was low. Actually, since then, we used to have quite a big high volume user of acids in in The UK a couple of years ago that I think was doing about 2,000,000 of sales and that was for cleansing or basically decontaminating oil seed processing husk. And that customer a few weeks ago has sort of started to reorder. We're sort of trying to find out exactly how long this will continue, but it was a welcome that, you know, for eighteen months, we haven't really had any business with them and then some of that business comes back. And that's what you do find. Occasionally, you lose some customers for various different reasons.

22:51 And then further down the line, these customers come back on. MasterCube has been a focus for us and in terms of pellet binder, and I think I sort of mentioned in in the last report or the previous one about us getting into the pet food with that product. And I'll talk a little bit more about Master Cube later on. And then Aurigostim has done you know, continues to do well, as Miles says, and it's a high value add product. It's but we also got the organic certification, which it goes into the sort of name as FIBL in in Europe. So we hope that we can support that business, sales of that product further into Europe. So I think the next slide is the standout performer.

23:38 And really, this has been a year of well, it's been a few years of transition because we did used to do quite a lot of tender work here, which is high volume, low margin. But we started to move about two, three years or three years ago, the Regional Director there started to move more to getting higher margin business and more with better products. So initially got the margins up over the last few years, but now that the volume is starting to come in and there's a couple of areas because of that. Saudi, we've got a new distributor there. It took about a year to sort of get the registrations, in place, but now they are using MasterCube generally because the feed there is very, very dry conditions and because there isn't as much moisture, they need something to bind those pellets.

24:25 And we've also posted some strong growth in Egypt.

24:29 And there are a number of sort of initiatives, Turkey, India and Iraq. I mean, obviously with our partner ship there has has grown and helped, and there's more to come from that. And I know there's a question on that later, so I'll go into a bit more detail on India later. So that really just gives, an overview of the countries. We we trade in 80 countries around around about 80 countries around the world because we need that for geographic diversification where some go up, some go down and it can change within a six month period. So just to

25:01 sort of as some of you may not have seen these slides or listen to myself and Martin, we talk about the strategy. So we sort of focus drive broaden. So we focus on what we're good at. So we are in a niche area of specialty feed additives and we want to stick in that. We don't want to get into compound feed. And so so we work on standardized formulations and branding where we can get a clear competitive advantage and where we can prove that the product works and that's why we do the marketing trials either with university institutions or with reputable big customers who want to try it, and then we can maybe publish some of those trials and use them all the trial data, use it for marketing. Consistency is important that customers can rely on that product delivering the same performance to the animal and that's really why Aurigastim is the market leader in this area because it's very, very consistent in its performance.

26:00 We've moved probably quicker than any other sort of feed additive business to be more to market ourselves and to be more natural and sustainable products. So, you know, we exited out of certain products we used to do. We we actually did some antibiotic growth promoters, which came from the Meriden acquisition in 2017. We exited out of that business and I think that was about $1,700,000 of sales that we got out of that because we said if we are hoping to reduce health producers, reduce the amount of antibiotics they use, we can't be also selling them to our Philippines distributor. So we have moved more quickly to get out of what we think are undesirable type products and pitch ourselves as being natural and sustainable and people within the industry would view us as that.

26:51 I spoke about sort of the, you know, the live marketing trials and product registrations to

26:55 support what we do. And having a local sales team means that we can get behind and focus our products and the technical sell, in front of the customer. And, you know, what I what we found out what we found out we're using distributors, and we still use distributors, but alongside them, we will have our sales team. But some of our distributors aren't necessarily can't do the technical sell, aren't always focusing on our products. So in 2016, we decided that we would start to build out a network of regional sales teams and put down wholly owned subsidiaries. And, and that's what we mean by sort of focusing on, you know, our products, our value proposition, and our sort of sales approach.

27:40 And centralizing global, you know, production not not only delivers that product consistency and quality, but also high operational gearing, which you would seen coming through in the numbers in the first half. So we just go and and and I can show you a few examples.

27:56 I don't know. Can we click on that link? Will that work? Yeah. It it won't. Okay. The the I think you you'll probably see on on the website that that that Vimeo link, there is a, a video that shows 20 different batches of our natural oregano oil. And the the problem when you use natural products is you get variability because of the seasons, the different fields that they're growing in. The way that we grow and the way that the way you steam extract the key components, it means that we can get very consistent, and that that's basically a grasp chromatography sort of fingerprint. And what you're seeing with carbacol, thymol, p chymine, white Tiffany, those are key active ingredients that do some good. So carbacol is an antimicrobial, so it will kill things like gram negative bacteria such as salmonella and e coli. Thymol is a probiotic, so it helps promote the probiotic effect in the gut and improve the gut microbiome.

28:56 So this is the oregano that we own.

28:58 No one else has this in the market. We work very close with our supplier. We know all the way back to the agronomy and the strain in that agronomy together is a high yield. And they make sure that we get that consistent reading on every single batch that we produce. And I have had vets in Mexico come to us and say, when I put my customers' pigs on your product, they seem to perform more consistently than anyone else's. Other competitors would just tend to buy oregano

29:29 from different suppliers and blend them together. So really you should think of the oregano oil in oregano stem as a malt whiskey compared to a blend of whiskey. And that has a lot of benefits in terms of the same product efficacy, consistency, and the number of different applications that can be used because we've got a very broad range. Those are just, I think on there, just see five compounds. There are over a 100 in in in our natural in in a natural oregano oil. And there are some benefits that we don't even know that that that this oil can do. And that's why when Mark says that we tend to be evolutionary doing developments and evolutionary development and research. It's because we know that Aurigastin can do a lot more. One of the things we've done with Aurigastin Forte is combine it with another phytogenetic and it's doing some really good work in in some in the agriculture space. So that's what we're and the focus is getting this product that is top class consistently performs.

30:34 I think, Mark, the next slide. And, yeah, we spoke about Auriga Simpora. It's just a little bit about our marketing and what this can do. You know, we have the interesting thing on this bit of work we're doing and our sales director is actually out in Thailand visiting shrimp farms now who are using the product. It has inhibited the growth of particular Vibrio species that is now quite prevalent in the shrimp industry, certainly in Thailand and in Asia. And we've done that without antibiotics. And what's happened is this Vibrio species have now become resistant to some of the antibiotics that have been used in aquaculture. So essentially, Aurigastim Forte is probably the first line and the last line of defense in terms of Vibrio and we are trying to get that, the trials marketed and out there and show the customers of this thing. Certainly, it's continued it still delivers a performance and good performance and a return on investment for

31:35 the pharma. But it is really like a next generation product that is really helping to impact Vibrio in that. This product can also go into poultry and probably will. We just and I know I think that in The US, there are some customers sort of working with it and looking at it. And we'll develop and see where it can be specifically positioned as a to give us that competitive advantage. So enough on that. Just going to the growth drivers. I mean, there's, you know, there's the market drivers and the company drivers. So and this is really, from our point of view, is building efficient and effective sales channels. But if we just step back and look at the market drivers, increase in spend in animal nutrition is going to be driven by population growth around the world, which is still forecast to grow and GDP growth certainly in developing economies.

32:26 And when there's GDP growth, people do eat it's shown as a correlation with people eating more meat protein.

32:32 The trend as I've spoken about before to more natural products against things like antibiotics. Legislation is partially coming through. In The US, it's more consumer driven, but we think there is a big antibiotic resistance issue that is going to hit the headlines more and more. And and again, I know there's a question on that. I I can talk a bit more about that later. But it's also removing and replacing other harmful substances, things like formaldehyde and zinc oxide. Yes, formaldehyde was used in animal feed across Europe. It has now been removed, but it's still used in The U. S. And various other places around the world. And maybe at the moment, ESG requirements for some the large customers is not quite on the agenda, but it will come back on the agenda and it certainly was sort of before this downturn.

33:19 So we feel we're well placed to sort of meet those requirements. And we have set up the company with documentation and various processes to be able to meet those requirements. But what can we affect generally is the company drivers. So growth in direct sales, and that's what we put the subsidiaries down. We do want to selectively increase the sales team in certain area in certain areas. Selling added value is a lot harder than selling on price and selling a volume product. So it does take a different type of animal. And what we're tending to do is sort of recruit people who have been in the production. So producing pigs, producing chickens or dairy or understand the farming process

34:00 and then training them up on our products. And we tend to find that's helping and working sort of better than maybe recruiting someone who's been selling compound feed to farmers for the past number of years. Enter new territories. I mean, we've been in India for a while, it's sort of been upscaled with this with the partnership agreement we've done. But Canada, we are doing registrations for, and there will be one or two. I think Sri Lanka is another one that we're we're looking at as well that we're doing registrations for. And then the other thing,

34:31 Jarvis, is taking our existing products that we spoke about and looking at new applications. And that's sort of partly broadening out, but partly, you know, leveraging the capability of some of our products and particularly our against them into and and that should be mass the masquerade pellet binder into other other uses. So if we just if we just go on to actually,

34:57 Mark went too fast there. So the third the third bit is, the strategy is broaden. And this is where at the moment we're probably a little bit more focused on because we feel that we've we've we've done quite a bit on the focus. We've done quite a bit on the growth drivers. There is always building out those sales channels a bit more. You can always do. You never finished on that. But broadening the the portfolio and really it's just leveraging our core competencies. So we want to do more in ruminants and aquaculture species. As I say, we're predominantly what was the pig and poultry which classes monogastrics, so that's single stomach. And they did get impacted in twenty twenty two, twenty three because the reason mainly 80% of the cost of a of a monogastric mono poultry producer or pig producer is the feed. And when the feed prices went up, that's put them under significant pressure.

35:50 They're also quite a bit more dependent on geopolitical sort of

35:54 trade wars and things because those meat products can be shipped more readily around the world. So getting into more ruminants and expanding out that and agriculture is important. Pet sector as well, we are working on and trying to feel our way and get more Pet sector customers. But also feed and raw material segments and and the hygiene and processing agent. I'll say a little bit about that later on. That's things like MasterCube and when I just spoke about this UK organic acid customer coming back that was using it for cleaning

36:28 the the oilseed processing husk. Then you asked what I mean about cleaning and and high hygiene and feed and raw materials. And then trying to broaden the product range, but sell it through, you know, the same channel. If you take Aurigastim when we bought that business, in 2012, the sales of Aurigastim have quadrupled or probably more than quadrupled since then. If we can find another sort of product group and this pro would require an acquisition in something like probiotics or enzymes

37:00 that we can sort of sell alongside our range. Again, it diversifies and broadens out our range, but it also gives the expertise to sort of sell sell these products to some of our existing customers and new customers. And then there's getting to the smaller farms and and and that direct sales platform. So there is work to try and look at how we can do that, getting a cost effective channel to serve smaller customers. We do have the online business. It's small volumes at the moment, but actually has increased in in The UK well, in The UK and Australia where we have an online platform. It has increased year on year. But farmers aren't quite ready just to switch over and and use an Internet sort of ordering system.

37:46 We think of, you know, eventually some of these smaller farmers will, but they still do sort of go through through some of the branch network. So I think just just to try and emphasize and explain what we mean by broaden and where we're doing that on the next slide, if we, mark if you see there, we're we're, you know, 36% in what we call the broiler, the meat, the the chicken meat, produces. Layers, 25%. Swine down at 22%. The dairy is currently seven but probably growing and maybe a little bit higher than that. Now I think this this is a couple years old. But we do want to grow out the dairy and the aqua, and aqua is probably now now a bit higher as well. And if we can balance those out then it would have obviously by growing dairy in aquaculture not by shrinking the other segments in terms of volume but it's growing those other segments will just balance out and give us a a more resilient business if there's problems in the swine and and the poultry market.

38:45 And, you know, we've we've got plans afoot

38:47 to sort of try and do that. So that's on the species mix. If we just look at the product mix again, you'll see I think this was for the whole of 2023. I think there's a slight change on that in the first six months because the acid base eubiotics have grown, come back. So I think that was 40% of sales for the last year. I think for the first six months, it's now about 36%. But that's after a 20 odd percent growth in Auriga Stim. So it's just that the we've had some pullback on the organic assets, which is a welcome pullback last in six months. But we do want to try and mass secure. We've high hopes for potentially Oxtamiga.

39:32 We do want to try and grow those just to again diversify and spread spread the risk across a number of different product areas. As a company in this industry, we are we have quite a broad range and quite well spread. A lot of companies focus on maybe just an oregano or phytogenic type product or organic acid or just toxin binders. So we are quite broad, but we do want to try and add to that and and and again leverage our core competencies with another one or two product groups. So I think just a little bit about MasterQ because there's quite a it's not just in the in the animals feed and pelleting process or even in the pet sector that this is got opportunities. We're also identifying equine and we are doing tests in Austria Austria and Germany where they use a lot of wood pellets for heating their homes as a sort of, I think, a renewable energy source.

40:33 There there are trials going ahead for MasterCube in wood pellets and actually fertilizer pellets. There is a company trialing that and testing that for fertilizer pellets in The UK. But on wood pellets, because it's a natural product, they are looking to see what is left in the ash. Is it minimal? And is it environmentally friendly and it's not leaving any toxic toxic waste? And that's what MasterCube is doing. So that's why we're with it in in the pelleted feeds, wood pellets, but in and and also focusing on pet and equine. So it's not easy to get pellets to work well, and you do need quite a bit of expertise in that to get it working. It takes quite a a long time to to get it working in in through the process.

41:23 And the dog food company that we got in Belgium, they did two years of tests because not only did they have to get it right in terms of the conditioning of the pellet through the process, but they also have to test it on the animals that it's it's got the palatability and that the animals are still, you know, have the appetite and they're still eating that pellet. So there's quite a bit of a testing to go on with that. So what some people sometimes think is, oh, is is this a low value add product? It's not. It takes quite a bit of expertise, and we don't have that many competitors in the market doing natural natural pellet binders. So that's sort of one for the future that's growing. Just really just the outlook is what we put into the recent r and s a few weeks ago. The second half has started well, and I know people have asked about the acceleration of sales and volume growth. We had very good stronger July and August and I think September is going well. So it has sort of picked up a bit more in the beginning of the second half.

42:24 You never know until the end. It's like a steeple chase. You never know until the last fence. And December can be tricky because if you're getting stuff on a ship, it only gets counted as a sail if you get it over the rail and onto the ship. And in the end, so December, we're always holding our breath. But so far, things are doing well. Just really something we've continued to grow both the premium brands and things like Aurigastim, but also it's welcoming to get this recovery in the higher volume, more price sensitive products of acid based eubiotics and that has helped with the operational gearing. One of the challenge or the one challenge we're just flagging up is shipping and logistic issues. They're not as slick as they were before.

43:09 The pandemic. Shipping companies seem to have a lot, you know, work on their own timetable and sometimes they can miss out a port or pick up lights or drop your container off in a different port and then pick it up with another ship. So we we we have to manage that. Everyone has to manage it in the in the industry and and and global trade. As I say, it's not as slick as it used to be in the Red Sea. Other issues have obviously compounded that. And there is potentially, there's a strike on the Eastern Seaboard with the dockers in The US, although I haven't heard recently if there's been any resolution to that. It's due to start at the beginning of October. But we are sending product out there early, and we'll we'll manage that. We're we're at depth at managing these global trade and shipping challenges.

43:59 The key focus is is really just the strategy. So strength and strengthen and grow our global sales channels. We've got to get closer to the end customer. That's always is is always our challenge that we're challenging all the sales team is we've to be speaking to the person that makes the decision maker, building that relationship. And we really do want to expand that species segments into ruminant agriculture pets. And that's what's set, as I said before, in a monogastric species disruption because we do have a bit more of a dependency on that currently. And, you know, we we if we can acquire other proven sort of technologies to complement our product range, that really helps because we can put it through the same sales channel. And, you know, I do think the antibiotics story is still there trying to reduce the amount of antibiotics.

44:50 And that will impact the growth of the, you know, products certainly, which is already listed as well as some of the other ANPARIO products. Yeah, Mark has spoken about a strong cash position and we're using that for various things, but we do continue to evaluate acquisition opportunities. And that's really thank you for listening. I think we've got some questions. Think there's anything else on the slide. If you are, there are some slides later in the appendix. So if you just wanna flick through some of those. We won't go through them, but it might be useful. I think there's, yeah, just the how we sort of see the sales channel and the people playing in that. And then slide picture of our production facility and the geographic sort of sales mix and the split between direct and distribution channels. So that really concludes the presentation. I think we'll move to the questions.

45:53 Submit your questions just by using the Q and A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via investor dashboard. Mark, Richard, as you can see, we received a number of both presubmitted and live questions throughout today's presentation. Could I please ask you to read out the questions and give responses where appropriate to do so? And I'll pick up from you at the end. Yes. Sorry. I'm just gonna will just find the question. Bear with me. I'm just trying to find the q and a a second ago. Is it Lily? Lily? If you just press escape there, Mark.

46:41 And if you got a a blue little bubble on the bottom right hand corner, perhaps, if you just click on that for me, that will expand. Okay. Yeah. Thank you. Okay. Yes. Yeah. So I'll I'll I'll do that. Yeah. In terms of will the threat of increased trade tariffs between major EU, US, UK, and Chinese markets for the likes of pork or beef pose threats to livestock rearing and as an extension to feed production. Yet, look, there will be an effect. There always is, but it's very difficult to sort of predict precisely how it will play out. I think I mentioned about our pig business, pork business suffering in The U. S. Because of the 25% tariff on in on U. Pork imports into China.

47:29 It is what tends to happen in certain countries or regions where they will struggle because of a trade tariff, but then there's a beneficial effect somewhere else and that's where we saw in Brazil. So I think there will be pluses and minuses, but I don't think it will affect ANPARIO because of that geographic spread. That's why we try to mitigate against it with that geographical diversification. But, you know, in the knowledge that the trend for meat protein consumption is steady growth. So if people are eating, meat protein, then these animals have got to be fed. It will just be where are they gonna be with the most, and and and which country is gonna get impacted. And we are cognizant, you know, that we, you know, generally, the pork, poultry, and beef sector is the one that gets impacted more by geographical disputes.

48:26 Why? Because it's easier to transport those. You can't transport milk so easily. Then it's powder you can. It's not as easy to transport the agriculture side or or or, like, shrimp you can a bit. But in term and and then layers and eggs, you can't really transport for the for the eggs. So the ones where they're more regionally, locally based, and they tend not to suffer from geopolitical sort of disputes. But this is why we also want to broaden out into other sectors. So hopefully that's answered your question. We go on to Mark, do want to do the next one? Yes. So the next question is what are the key raw materials for the business and how do you safeguard your supply chain? I mean, materials include essential oils such as oregano oil for the phytogenic range of products. There's organic acids such as formic and propionic acid and a range of natural gums and and various minerals.

49:19 We have strong relationships with particularly important suppliers. They're all important obviously, but but some slightly more important than others. And where where they are particularly important then we'll have long long term supply relationships and agreements, and and that would include exclusivity periods as well. So we try to protect it that way. Most of the materials are available in the global commodity market. We focus on choosing long term partners that can deliver quality materials. It's not about getting the cheapest. It's about who can deliver the quality of product that we need to give that consistency and performance of our products. And but but also have good availability and logistics and and a reasonable sustainable price for both us and and the supply. Richard, if you wanna answer the next No. Legal and professional. Oh, sorry. Not me. Sorry. Yeah. So the next question being your recent results of being referred to increased spend on the legal professional. Can you please elaborate?

50:15 So in terms of the increase in legal professional costs and I said before that there's been a high level of service inflation for for services with the legal professional. But alongside that, there's been an increase in utilization on on these services and that includes work ongoing work for me and Richard on identifying and analyzing potential M and A targets. That as well as high inflation, there's an increased utilization included looking at M and A targets. Yeah. Next question is how do you think about the potential size of the opportunity with Masacur around the pet food market? I mean, yeah, we think it's significant. It does take a long time though to get into a pet food company and do extensive trials. I think as I said, the one we had in Europe in dog food was at two years, not nearly over two years. So it does say that we are working with someone about in terms of equine trialing, trialing for equine in The U. S.

51:13 But it's also, you know, used in in the aquaculture markets, particularly shrimp pelleted feeds that need to have longer stability because that that that those pellets are at the bottom of the the pond waiting for the shrimp to come along and eat that. So they have to stay in the water and and have that integrity for longer. And if you want to ship, you know, traditionally, shrimp shrimp feed producers would have been using what's called urea formaldehyde, which is basically wood glue. But if you want to to send shrimp into the European market or into The US market, you can't really use urea formaldehyde. So a natural pellet bind that is one to use, and MasterCube is up there as as one of leading ones. So we do think that there's a there is a quite significant potential opportunity for MasterCube. It's a natural products products of the future, but it will take, yeah, it will take good some time to business develop, do the business development into these bigger companies that will do extensive testing.

52:15 I think yeah. The next one is number five. When you reference the h two has accelerated the h one so far, what has been driving that incremental acceleration? Well, as I said, sort of July, August have been strong. And, you know, partially that is driven by this recovery in Asia, which is our largest region. So that our real largest region. So that does help us drive the whole company, and that's really down to sort of better economics for producing a few business development initiatives that are coming through. Also, The Middle East, we've got a new distributor on board, and he started off with some strong volume, and we hope that will continue. What's also happening in the Middle East region is they are that places like Saudi want to become self sufficient on meat protein production.

53:05 COVID scared them and one of the reasons they sent home or tried to send home a lot of imported labor was because they couldn't feed them because they just didn't have the homegrown production to feed them. So they got worried about that and they're putting a lot of investment into The Middle East to have their become self sufficient. And then our India partnerships performed well and there's, as I say, some other sort of specific business development initiatives that are starting to bear fruit. So Mark, gross margins? Yes. Moving on to the next question, so it's number six. The gross margins historically run-in or around 50%. Is 50 plus percent a reasonable target for the business as you look into twenty five to twenty six? I talked through a little bit of this earlier in the presentation, the, you know, the group did produce margins of 50% and higher for several years since h one two thousand twenty two as a highlight then we saw a drop to 42.1% and have been on the journey to recover to those previous levels. During this period, it's difficult period for the agriculture market.

54:05 The focus was initially on maintaining the pound gross profitability, trying to balance out volume, you know, volumes and sustaining those customers through that difficult period. But over the last twelve months, we've been able to see that improvement in gross margins return pound gross profitability increasing significantly higher than where it was previously. We're very happy with the progress that we've made to achieve 47.5% margins through the first half of the year. As we look forward then, as I said before, raw material prices have generally stabilized and margin improvements here will be more driven by sales mix improvements and volume recovery and any potential selling price increases. There are potential headwinds as we talked before about the exposure to the US dollar, but also, you know, any unexpected raw material price limits that we're not aware of currently.

54:54 So the focus is now on driving the volumes to deliver gross in overall gross profit and to benefit from that operational gearing. And so in margin terms, we're looking to maintain the current margins, and, we can continue continue to improve on them, but with a bigger focus on sales growth. And then the next question, how far through the volume recovery are you as of h one two thousand twenty four? I think I said this earlier in terms of tons sold because there's a difference between the amount we produce and and and sell due to the stocking of the subsidiaries. And in terms of tons of, we're still around 17% below the peak levels achieved in 2021. In 2021, we required a multiple shift pattern to produce that level of volume. But due to continued efficiency measures and automation in the plan that we're now able to work on just a single plant to produce that level of volume.

55:46 Okay. So question eight, could you give some context around the India SAIFI Vetmed partnership and potential ambitions you have for this? Well, we have high ambitions for a number of reasons. I mean, currently, we were just working with Aurigastim and they can do and that we send out a concentrate and then they dilute it down and effectively package it into smaller package sizes for their end market. We are also looking at organic assets. Potentially, we had our Product Operations Director and Engineering and Safety Quality team out there looking at how they could do other products and produce it to the local market there. But what's interesting, I was there in August and they've got a very ambitious poultry sector. They really are just producing for local market, but they have the ambitions to be the next Brazil.

56:35 And I think through investment and modernization, they really do want to be a major exporter of poultry products around the world. And we want to be in at the beginning of this trend and we think we are with this guys. Very good partnership. There are also it's important to note the UK government is in discussions about trade deal with India, which would boost their shrimp industry. And again, that offers opportunities for, you know, PARIO and and and MasterCube and and also Origus and Forte. We're also looking to use our other, say, other products in in partnership with them, but also as well then the supplying into the East Africa region from India makes a lot of sense because there's a lot of Indian nutritionists, vets, technical people who work in East Africa region, and we just feel that supplying through this partnership will be more effective getting into that region for us.

57:30 So question nine, OPTIMAGRALGO, which trials are you running in which regions? At the moment, the big sort of trials and the big potential is in China and that's for both on the pig and the dairy side. We are also looking to work with a partner in The U. S. And they will try and register. It needs to be registered in The U. S. The particular argon that we use needs a bit of registration work. And I think we are seeing them or talking to them potentially next week about that actually. In terms of how is your M and A pipeline looking given that you have spec capacity at your factory facility to drive operating leverage, how should we think about the EPS accretion you target and these deals of the level of ROIC? We're continuously looking at m and a opportunities which do fit specific criteria to our strategy. In the past, we have you know, we consolidated three acquisitions into one production facility, which is a Mantam wooden workshop. This has delivered significant synergies.

58:32 It takes time to do that because it's not just so easy to pick up where you produce a product and put it into a different production plan. It's a little bit like baking a cake. If you use a different oven, sometimes it can come out differently. So it takes time to do those tests. But the ability to integrate production or M and A target will sort of depend on the location and particularly if they're outsourcing production then it makes a lot of sense for us to take the outsourced volume and bring it into Manson Wood and that's what we've done before. The it will also mean the type of products, not everything might be suitable to manufacture Manson Wood. But the more volume we put through, then EPS accretion will potentially be significantly because of the operational gearing.

59:22 The gross profit tends to drop down to the bottom line. And when we look at acquisitions, we expect them to be either immediately EPS accretive or can be made accretive quite quickly. In terms of ROIC, return on invested capital, yes, we quite like this number because we think it's a good measure and I know a lot of fund managers are starting to look at this measure. And we've tended to have high teens in that in the past and we certainly want to aim for that. So we target companies with strong gross margins and relatively lower requirements for capital expenditure. And that's why we try and build enough added value into the product that we can sell around the world from one or two production plants. But we can sell it. We can sell and compete in places like Brazil, which can be a competitive market or China by producing in The UK from one production plant. I don't want the production plant in every country, but there will be coming time where we feel we might need a production facility in one of the bigger markets.

1:00:26 How do you see the regulation market evolving over the years ahead around antibiotics and harmful additives? E. G. The UK banning zinc oxide, The U. S. Seems to have been more lax around the antibiotics topic so far. EU further tightening. Well, we we just think it's it's only gonna go in the one direction, and that's to tighten. It'll take time. And sometimes there's a lap, you know, a lapse back. But generally, the antibiotic resistance issue is is becoming even bigger. The world's population, know, some people in the world are becoming resistant to certain antibiotics that are used by humans such such that the routine operations are becoming a high risk. And I don't know if any of you saw in the newspaper, few some newspapers a few weeks ago about the Ukrainian soldier who was given nine different antibiotics including colostine, which I think is a human antibiotic of last resort for his leg that got a lot of infection.

1:01:26 None of these antibiotics work because of the resistance built up. In the end, that's amputated part of his leg. And that's how serious it is. So I just think this is it's worse than COVID if you look at the stats, they reckon that just under five million deaths per year associated with antimicrobial resistance. And if you look at how people reacted to COVID and I think there were probably overall less deaths than that, then this is only gonna become an issue. And what happened in The US with the protein producer, it was basically they moved away from labeling no antibiotics ever. That doesn't happen in The EU. Some antibiotics are still used in The EU are just classified differently. They're classified as feed ingredients even though we would say that they are effectively an antibiotic.

1:02:17 So there is a little bit of like all the regulation people trying to get around it and not maybe apply it in the way they should. The US, it's true to say The US doesn't hasn't got the regulatory authorities currently regulating against it. It is more consumer driven. But we just think with all these, it's only going to go one way and hopefully we're going to benefit from that trend. But it will be a little bit bumpy along the way and then you'll get spurs. And I think a good example is when they banned antibiotic growth promoters in feed in China of all places where they produce the most of the antibiotics. We've been already benefited from that because they aren't allowed to use antibiotic growth promoters in in in the feed in China. So it's coming, but it's it's a long journey, but it's going in the right direction and we believe it will continue to do so.

1:03:11 So I think is that That's all the pre submitted questions. There's been quite a lot of questions asked, probably more than we're going be able to get through. So Rich, if just want to scroll through and pick some Yeah. Well, well, it's a Middle East conflict. Hang on. Affecting affecting sales there. I'm not sure whether you mean down or up. I think it's affecting some some countries that, you know, more more so than others. But overall, the growth, you know, there is significant growth in in the market. So I mean, we've continued to supply Israel with with not a problem, but, you know, this the situation is escalating. But places are are big areas, you know, like Egypt and Saudi, you know, we we don't think there'll be much impact there.

1:03:59 Any sign of improving sales in The USA? Mark, I haven't looked at the figures recent. I think there's a little bit, but Yeah. I think the the the the downturn in The USA started around July last year. September's a a a month of change in terms of the diet and a lot of producers. So far from what we can see from September, there's been a bit of a pickup. There's a lot of recovery to come, but, yeah, certainly the signs are starting to be a bit more encouraging for The US. Can you give us a breakdown of sales of varicosecond for back up, Mark. Per pork and cattle. No. Roger, it's difficult because we don't exactly know. Would you know, across 80 countries, it takes us a lot of analysis to try and work that out. And when we go through distributors, we don't always know where they go and we don't always know when it goes into a feed mill because the same Oregon stem formulation can be used in pig and poultry. There are slightly different ones, for dairy in terms of the type of orgasm that that we do put in there, but we haven't measured it down to that level. We haven't done that analysis. It's quite difficult.

1:05:08 Do you lose orgasm sales because of pricing, or are there other products in the market which produce better results? We may lose it because of pricing because someone's giving a cheaper product, but then the benefits of the farmer will get with Mark, can you go? The benefits of the farmer will get, we would say that you can maybe get a cheaper oregano product, but it won't do as as well as us. We've had that where people have tried other products and then come back to us. So there are other products in the market, but we don't believe they produce better results. We get feedback on that. I mean, who who are who are our main competitors? I mean, generally, on the on the whole product group of people like Kemin, Oltec, private they're private American companies.

1:05:58 In Belgium, INPEXTRACO, Doctor. Eccoll in Germany. Most of them are owner managed or private companies. On the Oregano side, there would be people like Delicom that is now owned by Cargill, potentially PANCOSMA that's owned by ADM. And then there are a number of other EW Nutrition that is owned by a big German family. So there are we do have other competitors, but Oregistem has got the strongest brand name and we believe it produces about the best results. I see sales of forced products in Canada where they introduced EU type regulation. Is there any realistic is there any realistic of these regulations being introduced in The US? If so, at federal or state level.

1:06:51 Yeah. Not yet. The US still is using formaldehyde, whereas think in Canada, they're not. And and that's why we we feel force will will do. But we we feel at some point The US will start to you know, formaldehyde is a carcinogen, and we feel at some point at federal level, it it may get ramped, but not it's not imminent. For Andrew c, this is number 19. Can you talk a little bit about trends you see in meat consumption? Do you think this will increase with the things like lower interest rates? And do you expect to see this growing in some countries as they become wealthier to offset any structural decline in certain countries? Yes. People have more disposable income than they will spend more on meat protein.

1:07:37 I think you'll you'll see probably that in potentially if there's a turnaround in places like McDonald's. We do see pork across Europe consumption probably will remain subdued for a while. But we do see that, you know, over the long term with more disposable income, people will spend more on meat protein and particularly products like chicken and eggs in particular and fish, you know, aquaculture as well. We feel that some of that as well. But tend to do it tends to come back and we feel that that will happen. I see H1 increase in 100% in the sales of Salgard. My reading is that this is an acid base ebiosis and hence a commodity type product.

1:08:25 If that is correct, do I assume this increase in sales is unlikely to be made? No. Roger, in terms of Salgard, it it we we it's a little bit confusing in that we we we've mentioned acid base antibiotics are more price sensitive. They're not they're not what you'd term as commodity. If we use we take liquid acid as things like propionic acid, formic acid, we blend them, buffer them, and put them onto a powdered carrier. So we we make a niche product out of them. Formic acid is liquid. Yes. It's a commodity, but we put some added value in. It's just that we do sometimes maybe describe it incorrectly by saying it's a bit more commodity type or more price sensitive. It is still added value. It's just not as added value as something like Oreo said.

1:09:14 But the I think the return for that was because probably I can't remember exactly the country that came back and the customer. But I think in Asia, you know, there had been a running down of inventory because it's been overstocked, and so some of that has come back. So we do see the sales of that is likely to be or should be maintained, know, going forward. It's it it of our products, we would say, are added value. There's just some products that are more added value than others within our portfolio. But within the industry, they would be classed as added value. Martin V21, do you Yeah. I'll take this one. So why do you adjust out interest income from adjusted EPS? I think the short answer is this is that it's an alternative performance measure and we clearly identified the calculation of it in the annual report.

1:10:05 What I'd say is how we see this is the interest income doesn't reflect the underlying operating performance of the business and that is what we're trying to show through that value to adjusted earnings per share measure. Now lots of people have lots of alternative performance measures and and some companies have none. We're trying to really reflect the underlying operating performance of the business and how much cash we've got in the bank, particularly when we've got more cash than we need. We don't necessarily think it should be reflected in that adjusted earnings per share measure. Take, for example, last year, we did the tender offer and the movement in cash in that could affect our adjusted earnings per share. And as I said, it's really focusing on as a business and how we operate, how are we performing. And that's what we're trying to share with that measure there. Question 22 from DNB. Do you have a list of possible acquisition targets and what are the criteria? Yes, we do.

1:10:55 Quite a lot of them aren't ready to sell. They're only managed. We did have a slide in another presentation that has the criteria. I mean generally, we're starting we're looking at some smaller ones now, bolt on ones because there aren't the bigger ones or the ones that are either our size or even 50% of our size that are really on the market or coming on the market. But it's generally they're gonna be higher value ads that they've got to have, you know, in being that specialty feed additive area. So if you can add a product group to us that I spoke about on that broadening part of our our strategy matrix or if it's in the species and help with the species or help us to get to the smaller the smaller business, then then we would do that. And we would tend to we would tend to look in more stable jurisdictions such as Europe, The US.

1:11:43 You know, we have looked at something in Brazil, but we just felt that it's not easy doing acquisitions in Brazil and managing assets in Brazil, period. So we're sort of happy to go infrastructure lights in Brazil where we have an office and we have a sales team and we use third party warehousing. But the the, you know, the criteria generally trying to add add value to what we do, broadening out the product range. If we can find there's certainly a company where we can consolidate their volume into ours, then, yeah, that ticks ticks quite a lot of boxes. But there's also others where we're trying to diversify, spread it, broaden the product range as I say, broaden species mix and make the geographic mix. Andrew C23, do you see pressure in the market from larger companies that can benefit from their size?

1:12:32 We don't see pressure in terms of necessarily pricing. We would see pressure in terms of they're a bigger company. They're better known. So it's like the some vets on nutritious may say, well, we'd buy IBM. Yeah. No one ever got sat for buying the IBM mainframe computer. But where's that mainframe computer now if you look at Apple, Microsoft, and all those other companies? So I think we have better products because we're, you know, we're focused, you know, like a surgeon, like a heart surgeon or an oncologist. We're not a general practitioner like some of these bigger companies. So we we feel we have better products we can deliver, but but we do because we're smaller, we probably don't always have the presence that we would like globally. We have to build that into the ANPARIO brand and just keep building either through acquisition or gaining more customers. So yeah, if we're a bigger company, then it would help, but that's what we're trying to aspire to. But it doesn't we don't get the pressure in terms of pricing.

1:13:34 It's more because of, you know, just just the presence of a bigger company. Hopefully, that's answered your question. 24, Martin B. Richard, I'll take this So is the NOK 4,000,000 bonus accrual expected to be sufficient for the full year in line with Shaw's estimates? Or will an additional bonus be needed in H2? So nothing's been paid. It's just an accrual, but it's prorated for the period. So that reflects the amount that, you know, if if you at the end of the six months and extrapolate that performance forward for the rest of the year, then that's how much was due. So if the same performance continues for the second half, then the bonus that, you know, the bonus would increase. It wouldn't necessarily double because of way the the mechanics work, but a higher level of bonus would would potentially be required. But in terms of the short estimates, then that is for a repeat of the the the first half performance and and all of the bonuses of self financing. They're all based on sales growth and profit growth so that, you know, should be fully covered in terms of what we're expecting for for performance.

1:14:33 What is the market opportunity for our go in Europe? We think it's still good, particularly with this sort of organic registration that that that will give us a, you know, bigger opportunity. We do have competitors in Europe that are on Mainland Europe, so we do have to compete with them. But we have some good distributors certainly down in places like Austria. So we still think there's an opportunity for that. I mean Europe, the EU do have said that they want to have, I think it's 25% production as organic. There's no way they're going to achieve that because they just couldn't get the raw material in terms of organic. But the ambition is there and so we think we can ride off the back of that. So that will help. Six countries, 27 six countries in EMEA have taken orders in H1. Will this continue? Think that's a new the new potential reference in new countries.

1:15:22 Yeah. They haven't ordered in the last year. So it depends on the country. But generally, we hope they continue to order It's it's the product's working for them. So I I don't think they just ordered for the year, and that would be it. It wouldn't we'd probably expect them to order later on in in in the year as a second order. So but that yeah. We'd have to check specifics on that. Them b, MasterCube highlighted has been trialed in a number of new in a number of new markets. How is that going? Well, the equine one in The US and the Chinese one, we are no. It's not the Chinese one. Stops me growing. The equine one in The US we're still yeah, it's just started or it started a few weeks ago. That it has it has been tested and trialed extensively in Ecuador by a big aquafine producer who says out of all the natural ones they've tried, Mass Tube has come out on top.

1:16:17 But we are sort of waiting to see if they start to order it. They had a few issues themselves, financial issues themselves in terms of, what was going on in Ecuador. So, they're in a bit of turmoil and and but that is we we do feel that that sort of just reinforces how good MasterCube is. And so we we think this trial's, you know, will will continue to feedback that MasterCube can be used in in a number of different applications. 29, Roger f. You talk about acquisitions. Can I go on the basis that it would be impractical for you to buy a non European company? And indeed, it would be a stretch to buy a company on Continental Europe for you to buy a non Europe. It would be a practical view to buy a non No.

1:17:03 Not not at all. And it's not a stretch to back does that does that mean sort of leaves us just buying something in The UK? No. I mean, the the we we we would look at something in Europe. We'd look at something, you know, in The US. We'd look at places like Australia. Brazil, we wouldn't be as I said before, we did look at something in Brazil. It got it's and and we wouldn't be looking at probably things in China and Pakistan or places. Now if we do one, then don't hold me to this. But generally, we want them to be in more stable in in more stable countries where where we can understand the business and where it supports the business. Actually a lot of the specialist feed additive companies are based in Europe and some in US.

1:17:51 There are quite a lot in Europe because with Europe moving more to removing antibiotic growth promoters early on, then the specialty feed additive business sort of developed sooner rather than later that. So no, we're not averse. We've actually we bought our distributor out in Australia in 2017 and we're not averse to doing things like that. But we are conscious of having stable sort of country where we want to go and pull assets down. 30, you are seeing acceleration of sales growth in early H2, but this does not seem to be reflected in the forecast comments. That would be the analyst. He's probably been a bit well, as I said, we don't know what happens in quarter four. We can't predict. So there's probably a little bit of prudence there. I think as well just to add, next question is about what visibility to have to the year end expectations.

1:18:50 We don't have sales contracts and orders come through as they arrive. Around And 50% of the sales are now through subsidiaries and, you know, at most we get one week notice on an order. Where we sell from The UK, around the world then we usually have about a four four to six week lead time visibility there. So you know, as we look at any given month, we've got an idea of of how that month might be. But in terms of the following months, then it is difficult to see. I think the other thing to to point out is there's been a lot of volatility through this last twenty four months where, you know, we've seen, you know, good good months and then bad months. And as Richard talked to before in terms of sales cut off, and that can be quite large. In some years, the sales cut off at the end the year has been up to a million pound because of logistics disruptions.

1:19:37 So, really, until we get to the beginning of the year, the first week in January, then it's it's hard to be certain about where where the performance of the business will end up. But the main thing there is that in terms of the signs that there have been there have been improvements and we expect them to continue. Always just difficult because we have that in terms of forecasting, then we have a a low level of visibility, and there's always that year end cut off. But, generally, sales are improving and the volumes are recovering. A little bit on '31. Now three months till year end with shipping, do you have full visibility to end year end expectations? No. Probably because of what Mark says, we have very we have a few weeks of visibility of what orders are coming in. And I think one year at the end of December because, we had about a million pounds of the sales that left our production site, but didn't get over the rail onto the ship.

1:20:31 And so that can't be counted as a sale under INCA terms and under IFRS or whatever. So that was up to 1,000,000. So it is very difficult to know until January exactly what has gone and can be counted in the year. So it's right up to the wire. Can you tell us more about the U. S. Large veterinary group? Yes, they're a spine veteran. They look after, God, can't remember how many, maybe 150,000,200,000 sows that they look after. They have put our Force product on their list they like it because it's not compared to formaldehyde, which other people use out there. It is not carcinogenic. So we're gearing up for that and hopefully they're going to go around and start specifying and putting that in, in terms of preventing PRRS outbreaks on farms.

1:21:22 But they go and they look after and they manage quite a large number of pig producers out in in the Midwest. Who are your main competitors and are they in the areas where you are and are there any areas where you're a market leader? I mean, our main competitors are listed before are Altec, Hemen and you know, the the area we'd probably say we'd be market leader in, I mean, it's it's quite difficult sort of specifying some of the sizes of the market. So a natural oregano product, yes, we probably are. Certainly, the brand is recognized as a market leader. It's difficult to know other people's volumes. I would say MasterCube is well recognized as well, but there's a lot more growth to come from that as people move to natural pellet binders. But we really do work in niches.

1:22:13 And if you look at an organic acid, that covers a wide, a broad area of types of products. So it includes our types of products that are more added value all the way through to just liquid that they may spray on the feed to try and kill salmonella, but it won't do anything in the gut of the animal. So it is sort of working more in niches. And I think, hopefully, I have listed some of those major competitors that we deal with. But we also have some local competitors in in in certain local types of countries. So, you know, if we were operating in Brazil, we would have our global competitors there, but there will be one or two there will be a few that are locally set up as well, and we have to try and compete with that. But we compete by building strong power brands and having the best products that are most efficacious.

1:23:01 Let me just move on 37, Martin. What do you see is driving ANPARIO's increasing sales and profitability? Is your overall target market growing? What is driving your competitive advantage? Are these business features you can further improve going forward? Well, just in terms of driving the is getting obviously more market share working with more customers. The overall target market, yes, they are growing in terms of phytogenics. They expect toxin binders to grow because of changing climate conditions. You're going to get more damp, moist, wet and if you've more damp, moist, wet conditions, you get more fungal growth which cause toxins in the grain or the feed and that requires more. So toxin binds are set to grow and I think to a certain extent organic acids are.

1:23:48 So the end product markets are set to grow. What's driving our competitive advantage? Well, I think it a little bit like the consistency and the quality of the Augusta Morrigana oil, the whole natural, you know, the Pet Master Q pellet binder where we put it into the dog pet food, we have about our inclusion rate is about a quarter of what the other products that that we replaced was. And I think we didn't have any palatability issues with the dogs whereas the competitor product that was replaced did. So there's a number of different, you know, competitor advantages. But generally, a lot of this is proven by the trial work that the customer will do when he wants to use the product. All these business features you can further improve going? Yes, I mean, we're always trying to improve the product to make it more effective or look at a new application.

1:24:39 Just number 36, Filippo. Good afternoon. Congratulations on the results. Thank you. Is it possible to have guidance on revenue margin for 2025? Yeah. I mean, we don't as a management team, we don't publish expectations. Obviously, there are market, you know, market numbers out there available. And we'll know more about 2025 as we go through the budget process in the coming weeks and months. But, generally, we'd be hopeful to see, you know, continued recovery in sales volumes and margins as I spoke to you before. If they stay where they are or slightly increase, they'll be happy. But certainly, we're we're very much gonna be protecting them from where where we've gotten to, but it's more about driving that volume growth and and we hope to see more positive momentum through through next year. But but, yeah, we don't we don't provide management expectations.

1:25:28 Thirty seven Pascot, feels like the business is in really good shape place at the moment, and there's real scope to push on and move this into much bigger business over the next few years as some of these strategic initiatives come through. Is that fair? Yeah. I mean, it is. You know, we sort of say, certainly, when we see fund managers that we expect over, you know, annual sort of, sales growth of maybe, high single digits. That's what we'd hope to try and do. It doesn't always happen because you get some blow up in some other country somewhere or we lost some business for a particular reason. But we'd hope that high single digit sales growth and then that will translate with the operational gearing into a higher sort of profit growth. But I think we'd have to sort of we do need to sort of supplement that maybe with acquisition opportunities as well in terms of building into bigger business. But we do feel, yes, can we get to next stage $50,000,000 60,000,000 $70,000,000 and beyond?

1:26:25 We feel with some of these initiatives we can start to do that. But it will yes, we feel it needs to be supplemented with acquisitions. 38, Nicole, how much is the Red Sea shipping crisis to to your bottom line in 2024? Yeah. I'm I'm I'm happy to take that. I mean, around around 50% of the sale this is last year. It's probably a bit lower because of the growth through some of the distributor customers through this period. But but it let's say 60% of the sales go through distributors and out from The UK and and around the world, then then when we're selling on those terms, the customer is suffering the increased cost. We're about 40 to 45% of the business, then we are selling through the subsidiary entities. And so the increased shipping costs where it is affected by the Red Sea shipping prices, then that's absorbed into their, you know, inventory costs and then and then their margins. So it has had an impact, but only about 4045% of the business is potentially impacted. And and where it is, then, you know, I wouldn't say it's had a material impact on the bottom line, but it has had an impact in terms of margins. But I haven't quantified it specifically.

1:27:38 Do you want to do the next one? Sorry. Eric, in terms of utilization factors at 35%, how much revenue capacity do you feel the facility therefore has? I mean, it was simply, you know, if if we were producing the same sales mix, then we could threefold the the revenue. What I would say there is it depends, you know, there's five different production lines. It's not a single product or, you know, single production line facility. And so that would depend on, you know, proportional sales growth. There is a lot more capacity in certain lines. For example, the rigs in or even the bottling line, you know, that has a lot more spare capacity and and and it's usually quite high margin area because we're we're selling in smaller smaller presentation skews to the end customer. So there's a lot more capacity in certain areas, but certainly, we can we can triple the revenue from where we are today.

1:28:31 And, you know, there's other opportunities. If we got to that level, there are other things we can do in the side and increase further production capacity. Yeah. 41, Bill, would the animal foods additives operation of Carls Group be the sort of acquisition that would fit into our diversity? Yeah. Probably would. You know, I mean, we keep an eye on these things. It it probably would. We're looking at other things as well. And then but can't really comment any more on that to be honest. Just going to number 40. What delivery terms to overseas customers primarily in the PDP or similar to affect your revenue in December? How do miss getting the risk of not being able to book the sales at the year end? When we're trading from The UK parent entity overseas, and it's generally on CIF and CFR terms.

1:29:20 So the the crucial thing there is that it gets onto the boat, whether it's been through Brexit or, you know, other logistics, COVID logistics issues, then we have seen high degrees of disruption. And now we're seeing things like boats being canceled, so it sat on on the dock. So it's a bit of an unknown factor. Probably about 60 55, 60% of the business is is affected potentially by that. Where we're selling within within a subsidiary, within a territory, that it was more likely to be a sort of DAP, DDP or similar type sale. But generally, it would arrive within a day and as you expect an extensive audit process that goes through to make sure that we're recognizing revenue according to IFRS terms. 42. What are the competitive threats and how do you and and will you address these?

1:30:15 You know, we're competing with people all over the world in all the various different markets. The way we address it is we we build these power brands so that people know, a marketing guy told me years ago, if you if you view products as being people, you you view brands as being friends. And I certainly think with with with products like, Oreo Stimp, people do view it as being friend. They can trust the product. So it is all in the branding, making sure that we keep a step ahead of some of the competition by evolving our products and looking for new applications. The competitive threats, we're getting them all the time. We have to compete with customers of very sorry, with competitors of varying degrees of capability. You know, we do lose business to poor products that are lower price, don't even work.

1:31:06 And but quite often, those those customers come back and then say, actually, we want to use your products again. So it it is just we're a product marketing company, and it's keeping ahead, making sure our products are delivering value for for the customers. 43, last one. On a scale of one to 10, how optimistic are you about ANPARIO's future growth? Is that it? I don't know what's happening there. I think we're still on, Richard. Oh. So I think it's just the connection to the screen. Sorry. Sorry. The plug came out. Mark's computer. On the crucial question. Yeah. Look. I'd be saying, you know, I'm at nine. I'm at that nine level. If some of the growth opportunities and the big initiatives we got come off, but these are binary, they may happen, they may not, then I'd be at 12. So we always have these and some of the we don't get excited about it, sometimes they don't come off. But at the high end of that range one to 10 and we do have some potentially big opportunities that could come off and that would take us over the time.

1:32:15 But it's as I say it's binary. And we also we haven't talked about we have this very many technology advertise that we asked, we have started to trial. That's technology that's not valued, we don't think in the share price. It could be quite significant. It was the original technology of ANPARIO and we are that is getting trialed at the moment in Brazil. And I don't like to talk about that too much because it could be pie in the sky, but you never know. This it's one of my, you know, one of my objectives that I haven't quite completed yet when I came into this business in 02/2006. But, you know, there is some still novel tech there's some novel technology that we have not exploited yet that we we we have in our portfolio. So I think I think that's all the questions. That's great. So yeah. Thank you. Thank you. Rich and Mark, thank you for taking the additional time to answer all those questions that came in from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform.

1:33:11 Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Richard, could I please just ask you for a few closing comments? Yes. Just this has been a company that has consistently sort of delivered and performed. It's cash generative. We have a strong balance sheet. We have very good and strong products. We're probably at the size the smallest size you can be to be a global company, but it gives us the options. It gives us that resilience. We're in strong markets or markets that the trend is in our direction. And we just aim to build and we are very focused on building on delivering shareholder value creation to shareholders. And we hope we can continue to do that. And I think we you've seen myself and Mark and, you know, I'm at 58, but there's a younger Mark's not even 40 yet. There's a younger senior management team that is well capable in this business.

1:34:12 So we have strength and depth of management across the business, across the globe. And for a small company, think that's, you know, is a strength and we can go from strength to strength and build this business successfully. And just like to thank everyone for participating and apologize if we ran through those questions very quickly, but we had a lot to do. Mark's got to train us again. Rich and Mark, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected 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, and I'm sure will be greatly valued by the company. On behalf of the management team of ANPARIO PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.