Ultimate Products (LSE:ULTP) — UPGS 2022 Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the UP Global Sourcing Holdings PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They could be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so.

0:32 Before we begin, I would like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Simon Schoeman. Good afternoon, sir. Good afternoon, and thank you very much. Nice introduction. I'm gonna just run through this slide now just to the introduction page here. The presenters, myself, Simon Schoeman, CEO and founder of ULTIMATE PRODUCTS, ANDY GOSIGH, managing director, been my partner for seventeen years, And Chris Dent, our new CFO, that's been here for seven months. He's just done a a quite a long handover with our previous c CFO, Graham Screw, who's retired to go running.

1:19 Chris has fitted in like an absolute glove, and he's definitely a three ball. So I'm just going to press on to the next slide. So this is for the people that don't know ULTIMATE PRODUCTS. ULTIMATE PRODUCTS is twenty five years old this year. We employ over 300 people in The UK, Germany, and China. We sell to over 300 retailers in 45 different countries. So you can see it's it's it can be quite complex because in each country, it's different languages, different specification, and different rules, especially since after Brexit when we made it much more difficult. ULTIMATE PRODUCTS is the owner of a number of leading homeware homeware's brands, Solta, which we fully acquired last year.

2:06 This brand is the oldest UK's houseware brand. It's over 260 years old, and we're very proud to own that. It's got full market share of the scales business, and we have the license for housewares and electronics, but now we have the whole brand. You've got Beldray, which is our brand as well, which we bought, which is laundry and floor care and heating and cooling, progress, clean easy, which I'm sure you all know. Petra was a brand that we just bought eighteen months ago, which is a German brand, which I'm gonna go into a bit later on, but it's doing very well. And our only license that we have now, and we've had it for twelve years, which is Russell Hobbs.

2:52 So what sets us apart? Really interesting. Compelling customer proposition. Our products, our mission in this business is we wanna put beautiful, sustainable products in everybody's home. Everybody wants a beautiful product. Everybody wants a Dyson, but not everybody can afford a 450 pounds or a 400 pound Dyson. So what we do is we put affordable, beautiful products in their home, for example, under the Belgrade brand at £99. We're a mix of growth and income. We're a growing business, and we and we give out 50% dividends. We're a very resilient business model because we have different sections of our business. We from electronics to housewares to laundry.

3:39 We own most of our brands, which is very which is very interesting, and we have a very strong balance sheet. And we have our currency, and our interests are hedged, which a lot of people haven't got that. We came into this financial year with $60,000,000 hedged and interest hedge, which thank god thank god that was hedged, which but we've always hedged our business interest hedged it. We invest in our people. Our people is this business. We've had a graduate scheme in this business for over twelve years. 60% of the people in this business have been on the graduate scheme or are on the graduate scheme. I'll just give you a bit of an example. Our head of homewares, which is a £40,000,000 division, Katie Maxwell, she was from the graduate scheme ten years ago. Our head of online, which is one of our fastest growing sections of our business, Becky Beasley, she was from the graduate scheme.

4:33 Selim, head of IT. Many, many, many, many people are high up in this business from the graduate scheme. They are all ULTIMATE all ULTIMATE train, and 80% of the people are shareholders in this business, which is also very important because it makes them wanna build this business with us. We've got a very strong established international presence, but there's so much more to grow, and it is gonna be a massive focus of ours over the next five years, which I'll go into. We invest heavily into our systems. We've had programmers in this business for nearly twenty years. We build nine 90% of our systems from our warehouse management systems to our robotic systems to our online delivery systems.

5:19 Very, very important. It has give us an online delivery of 98% KPI to the board. ESG, if please, if you've got time, we released our ESG presentation. We did an r and s night. It's on our website under investor relations. We are leaders in our industry on ESG. This ESG is not a tick in the box for us. We've been doing it three just over three years. We have an environmental committee with 22 people on it. Our retailers, Tesco's, Azda, Action, Primark, told us we are leaders in this. You know, we've already changed our packaging many you know, quite a long time ago to FSC. We've taken the plastics out of our packaging, the polyuren out of our packaging.

6:06 We've planted over 1,000,000 trees this year alone with a fantastic company called Ecology. Ecology are the one of the sponsors of COP twenty seven at the moment, and you'll see them on Sky. It's a non for profit organization. We're really, really focused on our ESG. Our community we're based in Oldham, which is one of the the most deprived areas in England, and we we really, really wanna look after our community. Over 55% of the employees are employed from the old old postcode, and we do wanna improve that.

6:47 So highlights, financial highlights for the year. Revenue, $154,200,000 plus 13%. Adjusted EBITDA, $18,800,000 plus 41% adjusted profit before tax $15,800,000 plus 42% adjusted earnings per share 14.7p plus 32% Dividend per share, seven point one point seven point one two p plus 42%. The net bank debt of adjusted EBITDA, 1.3 times, and this is a real big focus of ours to get this back down to one. But but 1.3 times after doing the big acquisition is not too bad, but we'll we'll we'll be happier at one. But on on all these divisions, Chris is gonna go into this in a lot more detail later on in the slides.

7:40 So operational highlights. I really like this slide because we've got operational highlights. There's a lot of businesses over the last year or two that don't have any operate operational highlights because all they have been doing is firefighting. But we as a business have got these highlights, and we've also got a lot of highlights going forward. So on the number one, at the beginning of the year, we finished the Solta acquisition. It was fully integrated and has been very earning enhancing. We are now focused on getting this salsa brand into Europe. We've got big exhibitions in Germany in February, and this is where we're going to launch the salsa brand into into Europe. We don't have to spend any money on product, on packaging, on design. It is all done, and it's all ready to go.

8:29 Petra, what we bought eighteen months ago, Petra is a fab fabulous brand. It was a very good coffee maker brand in Germany. People most people in in Germany know this brand. And when we relaunched it in EFA, which is the biggest electrical show in Germany, we had so many people coming on the stand, so happy that Petra was coming back. Have been we went exclusive with the number one supermarket in Germany for the relaunch, which is Kaufland, 3,000 stores. This their first delivery, which they ordered nine months ago, was a million euros, goes into store in two weeks. So we'll have the full reading by January. And we're very, very excited about that. They're doing a million over a million leaflets on this. We're also we've also got another two orders, one on party products and one on vacuum cleaners.

9:19 And we have also delivered a range of Petra into our European warehouse for online, and the sales have been fantastic. So we're we're very excited about Petra being a Belgrade in the European market. We have also bought Petra into The UK market with English plugs, which you can go online now and see on Amazon, and it's selling. It's been selling every day very, very well. As a company, big operational highlight for us was how successful we did manage the global shipping crisis. We used to pay $1,500 for a 40 foot container, and it went up to $18,000. It wasn't just the $18,000 you couldn't get on ships. We got on ships. We got our factories producing for us.

10:06 Because we do have 45 people in Guangzhou, we were able to be at the factories making sure that that all materials were arriving for all of our orders, making sure they were being made, making sure they were going on the containers, and then getting on the ships. The supply chain and how we managed it over the last two years has definitely been a massive eye opener to all of our customers and elevated us above all the other competition. And now it's about we've gotta keep that shelf space that we took off our competition that didn't that didn't deliver.

10:39 Number four, our robotics. Our robotics program is is really important for the future. We have a thousand tasks that we are sort that we're going through now. We've done 200. We've saved thousands of hours on this already. Once we get through to the 500 mark, there's gonna be another load of new systems coming through. And we and we know we know how how pleased the people are that work in this company that we are doing this because it's just stopping them doing a lot of mundane everyday things that take hours and hours and hours. And Andy's gonna go through this as well, give you a bit more of an explanation. Our offices, we fully refurbished our offices during COVID, which was very important because we had everybody back to work last September when we were allowed.

11:28 Again, important because we do have so many graduates. We're we also we're daily, hourly, so we need to be together. We are always teaching. I I don't know how businesses are working when they are when half the staff are working from home. You you need to be together to run a business. Our part of our ESG as well, we installed over 1,000 solar panels on our roof, on our mill. So we're we work in a 120 year old mill, and now it has 1,000 solar panels on. We only got them on in August, switched on in August. So we did get some sun in Oldham, believe it or not. But we believe the run rate is gonna save us about 40% of our energy bills, so we're very pleased with that.

12:15 Russell Hobbs, which has been a a license of ours and our only license that we have left, but it was always under a three year license. And, unfortunately, with a three year license, the minute you sign it, the minute you think you're nervous when you're gonna sign it again. We always said we had a great relationship with Russell Hobbs and for people not to worry. But for investors and for, you know, for Andy and us, it was a worry. We've now signed a brand new license, which is a four year rolling contract. So we don't have to resign. It just rolls. They've also give us Australia and New Zealand on top of on top of our original license, which we are already in the market with Salter. So now we're gonna roll out Russell Hobbs into the Australian market. Just one point that isn't on here, which I am very excited about. We we worked very hard this year, putting up our EU warehouse for online distribution in Europe.

13:08 This was tested for nine months, and the last three months has been fully operational. We are now supplying France, Poland, Holland, Germany out of this EU warehouse. We only have low low value products in there at the moment, which is laundry and cookware, but it's flying. Every week, the orders are going up and up and up. We just put petrol stock in there, but we sold out in five days, which is electrical. So over the next twelve months, that warehouse now, we've gotta focus on filling it with all of our fantastic branded products, start marketing the brands into EU online, get the turnover up.

13:47 Okay. Thanks, Simon, and evening, everybody. So the the the profit figure for for f y twenty two, there's a bridge on on the screen. Will go into the numbers in a bit more detail later on, but it's actually a very simple story. First of all, we maintained our core profitability. And secondly, we we bolted on the Solter acquisition, which took place in July 21, just right at the end of the f y twenty one financial year. So a really, really simple story, maintains core profitability, which in the the environment we've been operating in was, I think, a a very decent achievement. And then what we also did is we we we delivered on the promise we made of the promises we made when we when we did the acquisition of Solta in in July 21, when we issued that class one circular, and when when we raised raised equity through through a placing. So again, really delighted because I'm sure as many many of you will be aware, promising returns from from M and A activity is a bit easier than actually delivering them. That acquisition most certainly delivered an increase in EPS. So it was very much earnings enhancing.

15:08 Moving on to the next slide. When it comes to the investment proposition for for ULTIMATE, there are four elements as as we see it. And and we see it that way because we are significant shareholders as well. See, number one, growth growth potential. Our products are the kind of products which feature in on countertops in kitchens all over the world. So in the long, long term, our growth potential really is limitless even though in the short to medium term, we're very much focused on UK and Europe. Number two, income. We are a capital light business. You know, we we outsource our our manufacture. That means we can we can pay dividends, and and we did distribute 50% of our profit after tax. So an unusual combination of growth and income. Number three, ESG, which Simon's already outlined.

16:03 Great for governance, but also very much used by the business as a as a selling tool. But then number four, resilience. And I do think resilience is is is perhaps an undervalued strength sometimes with with with investors. So we want to spend a little bit of time talking about resilience given that we are moving into into recession and certainly from a demand side point of view, some some significant challenges. So we've worked really hard to diversify the business, and in and in diversifying it give us more resilience. So you can see on the right hand side there the two pie charts. Back in f y eighteen, we were heavily dependent on discounters. Now we're more diversified between discounts, supermarkets with online very much coming up on the rails.

16:56 And we do expect our online share of revenue to be similar to supermarkets and discounters over the next two to three years. That means that when when when segments are are adversely affected, we have other options available to us. And we saw this benefit during the COVID period. Discounters were more likely to be closed as nonessential retailers. Supermarkets remained open as as because we sold food. So that was great. Online remained open as well. So we were able to to to to move our focus in the face of some some extreme external pressures. We've also worked very hard to reduce customer concentration. So in in f y seventeen, over 40% of our revenue came from our top two customers.

17:48 Our top two customers in f y twenty two, less than 20% of revenue. So we very much diversified our customer base and removed that concentration risk. When it comes to products, we have 3,000 SKUs split across a number of product categories that Simon has already outlined. What that means is if all categories go through cycles, if a particular product is going through a difficult period, we can move our focus to a different product category. And at the moment, what we're finding with with products is certain products are are not doing as well, but certain products are doing extremely like anything with an energy saving message. We're selling lots of slow cookers, lots of errors because people don't want to use the tumble dryer, but and also lots of air fryers, which seems to be all that anyone's talking about at the moment.

18:41 Okay. Moving on to the next slide. Brands. So again, this resilience point. Back in f y eighteen, only half our revenue came from brands that we owned. Now in f y twenty two, 75% of it come from of our revenue comes from brands that we own, helped of course by the Sulzer acquisition. Of the the one remaining license we have, Russell Hobbs, even that has has changed with the with the new contractual arrangements that Simon has outlined. So now we all we we always have four years worth of visibility, which again, I think, makes for a much higher quality of earnings. Moving on to the next slide. Okay. Just in terms of how we manage the business.

19:29 As Simon said before, he is the founder of the business. I've been with the business for seventeen years.

19:36 Management hold the, you know, close to half of the accuracy in this company. So we very much take a custodial approach to the way we manage it. You know, we we are very mindful of risk and and and some and and and are conservative in our our approach. We want growth, but we don't want we don't want growth at any cost or at any level of risk. So we we're careful about how we how we manage the company. That means, for example, we have lots of headroom within our bank facilities. It means that we hedge our interest rates and and and and many others don't. So we're gonna find out more about that as we go through the next few months. We have a well established hedging policy, which means we came into this financial year with nearly $60,000,000 of, bought forward at an average rate of one twenty nine.

20:25 That gives us time to adapt if if currency rates move suddenly. At the moment, it means we can be patient and wait till the reduction in freight comes through. Freight rates, as Simon highlighted before, spiked during calendar year '21 from 2 to $3,000 for a 40 foot up to 18,000, and then came down as we moved into calendar year '22. But as recently as seven weeks ago, we were paying $8,000 for that same container. Now we're paying $2,300. So there's been a there's a big fall in in in shipping rates. That will come through as a benefit in due course, and and and the and the foreign currency hedging provides a bridge to to that situation.

21:13 We fully ensure our debtors ledger. If a customer can't be insured, our default position is we don't supply. A difficult decision, but one we must make. If we do make exceptions and we do from time to time, then that has to be signed off by by our non executives. So we're very, very careful about those things. But the one thing I would point out there more than any other is is the way that we manage our stock. We have sophisticated, well established stock forecasting systems, and we have a conservative approach to to how we invest in in inventory. So we we go into this period, you know, and and and and and we are entering recession with the right level of the right mix of stock.

22:01 Some of you will note that stock levels did increase during f y twenty two, but that was more a normalization, something which Chris will go into more detail on.

22:14 Online. So online, big part of our, of of our growth story over recent years. Did have a bit of a stutter in f y twenty two because of the lack of stock availability. The shipping crisis meant we had limited access to, shipping capacity. That meant that we, we have choices to make, and we prioritized our retailers. If we had two containers to ship, one for Tesco, one for our online business, but we could only ship one, we looked after our retailer. We looked after Tesco. That meant our core online business went backwards by 1% in f y twenty two. But as availability returned in the second half, we did see growth return, and that growth has continued into the first half of f y twenty three. So what you're going to see, which is gonna feel a bit counterintuitive, is you're going to see UP growing its online business while others go backwards. Most online businesses are seeing a decline in sales off the back of really quite strong comparators.

23:23 International. We do see growth in The UK, probably mid single digits over over the medium to long term. We see we see a higher rate of growth in Europe. So we do see more of our growth coming from international territories, particularly Europe. Okay? We see that the plan is very simple. Half of that growth we expect to see from online, which is gonna be largely about through the Amazon platform, which is gonna be a bit like shelling peas. You know, we we know what to do with Amazon. We're we're we're very, very experienced asset in The UK. So it's about it's a it's a it's a it's I suppose a cut and paste rollout across Europe, which which is already well advanced. The other half of that growth is gonna come from our sales into retailers with and we're targeting opening 10 big accounts over the next three to four years with maybe two or three being opened during calendar year '23.

24:17 We've Petra is a very exciting opportunity which will help facilitate that. We've already sold it into one very large German retailer. It's going into store in December. If it if it performs as well in store as it has online, we should see strong repeats, of of of that business. And we have engaged Simon Hathaway. Simon is our our our adviser for our European business. Sam was previously the commercial director of action, Europe's most exciting retailer and a business and he and he was there when it went from 300 stores to seventeen, eighteen hundred stores. So and he does a lot of work with with other large European retailers and other large advisers.

25:04 So moving on to the next slide. Couple of things here. The first one might sound a bit at first like a negative, but it's actually a big positive. What we found with with the expansion of our online and international business is product life cycles have extended. So we normally invoice 3,000 SKUs a year, and we bring a thousand new products to market each year. That that implies an average three year product life cycle. That's that has been steadily increasing because when when a product is finished in retail, it has an afterlife online. If we're for international, we're often selling products that we've developed for the home UK markets.

25:50 So we're finding product life cycles are extending out to maybe four to five years, which is brilliant. Because it means we're it means we're leveraging our product development spends over a much more over a much longer period, getting that getting that, you know, longer return on invest investments.

26:05 It means that without jeopardizing our revenue potential at all, we can reduce our product developments from a thousand products, which is a fairly monstrous amount, to 600, which is still a very, very sizable, you know, amount of newness that we're bringing to market each year. That's how has a very obvious operating cost implications, but also means we can focus more of our resource on the products that we do bring to market, which is really important for things like Amazon reviews, online reviews, trust pilots. Really, really spend that little bit longer to really get the product right. Simon mentioned robotics. So we we we supply 300 customers a year, and and and retailers retailers make it really quite complicated for suppliers in order to make it simple for them, which which which we all understand.

27:01 So we have 300 retailers that want to be provide want to be supplied in 300 different ways. In fact, some of them want to be provide want to be supplied in different ways as an individual retailer depending on how we supply them. So it's immensely complex what we do. And the way we square that circle of complexity, how we deal with that complexity is is through process and automation. It's the way we've always done it. Robotics process automation is the next step. Now before you think and this is about little little geezers kind of going around the warehouse picking, is really this is this is about robotics processes that sit at server level. So just to give you a little example, although there there are literally thousands of these, we we we have each each one of our purchase orders has 80 steps.

27:56 We have on average 2,000 open purchase orders. That means we're managing at any given point in time somewhere between a 150,200 steps. Now the way we deal with the what what what, you know, one of those steps is to organize price labeling for the customer. Now for one of our customers who placed their orders quarterly, they have 67 variants of price label. Right? One customer, 67 variants. That can take a a human being seven days just to do that step of the process. Now with with the with the robots, the UP robots, that takes an hour.

28:42 And and that means that in that hour, that means that releases up that resource to to focus on higher value tasks. So big time saving, but also a revenue generator because we can recycle our talent to focus on task which deliver revenue. But I think more than that from an investor point of view, it makes our business more scalable. There comes a point where adding on extra staff just gives you a diminished return on investments. Each member of staff is slightly less productive than the one before. The the robotics program really really adds to our scalability as a business, which which from a from a an investment proposition point of view is really quite powerful.

29:28 Okay. I'm gonna hand over to Chris now who's going to take us through the financials in a bit more detail. Thanks, Andy. Good evening all. So here we can see the income statement for the period. So revenue up 13% to 154,000,000. The majority of that growth has been through the acquisition of the SolterScales business, which happened at the end of FY twenty one. It was a resilient performance for the core part of the business, up 1%.

29:59 What's been really pleasing to see over the course of this year is the gross margin, which has increased 2.6 percentage points from 2.2 22.2% to 24.8%. Now there's three real driving reasons behind that. Two of them in relation to the acquisition. So with the acquisition, we have the SoltaScales business. Scales is a position

30:25 precision product has a slightly higher margin implicitly than the other products that we sell. Secondly, we bought Solta because we already had a license for other Solta products. So we were selling Solta housewares and Solta electronic products. We were paying to Salter a royalty rate of about 5% on that, which was costing us around 1,000,000 a year. So having bought the whole of the Salter brands and the Salter scales business, it meant that we are no longer paying that million pound royalty on the Salter business, which we already have under license.

31:06 The third part is that our actual gross margin for our underlying core business remained stable. Now that was despite a headwind of 2.2% in relation to freight costs. So actually, we managed to keep our gross margin despite that. So that was through a variety of trading reasons. So through a mix of products, through the new products that we brought to market over the course of the year, which would have different margins on them, and also in constant renegotiations with our factories out in out in China to chip away at their costs and their prices whenever we can. So overall, that meant that gross profit was up 27% to 38,000,000.

31:55 Ad and expenses was up 16%. 8% of this is in relation to salary costs, which were up 1,200,000 or around 10%. So our overall headcount increased from around 300 to around 365. The majority of these people were in our distribution center, which is based at our Heron Mill site in Oldham. So this is really where we are supporting our online customers whereby, you know, we need to support Amazon in relation to their sort of like timings and support our own consumers who are buying direct from our beldryandsalter.com websites. The big change that we have made there during this year is actually moving from an agency based to a fully employed based.

32:47 So many warehouses used to employ agency staff. However, since Brexit, there have been issues with supply of labor, but also in relation to the quality and the turnover of staff that we saw with agency. So we've moved to being fully employed. We've seen an increase in the quality of staff and a downturn in the churn, hence providing a better service to both our consumers, to our websites, and also to our online customers and other retailers.

33:19 So overall admin expense is up 16% compared to a 27 increase in gross profit, which has led to a 41% increase in adjusted EBITDA to 18,800,000. So just to look a bit more in where the revenue increases come from. So as stated, the majority has been in relation to Solta, but what we have been seeing is big increases in relation to supermarkets. So over the last five years, that's been a cumulative average growth rate of 52% in relation to supermarkets. In the current year, a 20% increase in our core business. Discounters have gone back slightly in the period. So many of our discount retailers, they overstocked off the back of boomer years in relation to COVID. So they found themselves overstocked and have been closed to orders over the current year. We're starting to see light at the end of the tunnel there as they have worked their way through that excess stock and are now reopening up to orders.

34:26 And we also expect that there'll be an opportunity for retailers over the cost of living crisis as consumers look to more competitively priced products. In relation to online, that's really been a game of two halves. In the first half of the year, we were impacted by the shipping crisis. This meant that we have suboptimal levels of stock. When there was a choice between supplying our retailers or supplying our own online business, we took the choice of continuing to supply our retailers, which meant we ended last year with a suboptimal level of inventory, which means it suppressed our online sales, which went backwards in the first half of the year. However, as supply chain issues eased, we were able

35:14 to build back up our inventory levels, which enabled us to grow online sales in the second half of the year by 20%. And that pattern has continued into the first few months of FY '23. Geographically, UK sales up 9%, whereas international sales were up 22%, and that's where we see a real growth areas for us in the medium term. At the moment, we sell about £2 to each UK consumer, whereas internationally in Europe, we only sell about 10 p of goods to each European consumer, therefore 20 times less. So we see it as being a game of increasing our penetration in Europe using our online skills and also through growing penetration with our supermarket customers.

36:07 Looking down the bottom end of the income statement, depreciation up 27%, which is due to the £2,000,000 investment which we made into our head office, which includes an investment on 1,000 solar panels, which we put on the roof. We expect that that will have a three to four year payback, and will they will probably provide about 40% of our energy usage on that site. Finance expense up 62% on the back of higher net debt. That's due to the acquisition, which cost 34,000,000. That was done two thirds through debt and one third through raising new equity. Our tax expense runs at about 21% of profits, which is slightly higher than the current 19% rate in The UK because we do have branches in Germany and Poland which play slightly higher rates of tax. So overall, adjusted profit after tax up 46%, statutory profit after tax up 69% as we don't have the reoccurring exceptional items in relation to the acquisition costs last year.

37:21 So in terms of EPS and dividend, EPS is up 32% compared to adjusted profit being up 46. That is because of the dilutive effect of the new shares that we issued to fund the acquisition of the sold scales business. So it's the board's intention to continue paying out 50% of our adjusted profits as dividends. Therefore, that increases the final dividend this year by 42% to a recommended 7.12 p. In terms of cash flow and net debt, net debt has increased slightly to 24,000,000. That is still a relatively low level in terms of gearing for us.

38:06 So we've moved down from a 1.4 level of gearing to a 1.3 level of gearing. We do want to move that towards one times, but we do still see that at 1.3, we have plenty of headroom with our facilities. So at the year end with our bank facilities, we have 18,000,000 of of headroom. So, you know, plenty of room there. The big movement in the year has been our investment in working capital, which is better explained on the the next slide. So overall, a 12,000,000 investments in working capital. The largest part of that has been in relation to inventory, a 7,500,000 increase there. That's due to the fact that at the end of last year, inventory had been suppressed by lack of availability due to the supply chain crisis and the shipping issues that we saw.

39:02 What that had negative consequences of holding back our online business. In the current year, we have moved to an optimal level of stock and that's probably more of a normalized level which allows us to push our online business because we have the free stock to enable us to to do that. Going forward, inventory will continue to move up in relation to turnover and repeat this step up to this optimal level of stock that we now have. Debt is up 6.5%. Debt today is up ever so slightly from 57 to to 60. So still absolute with a within a reasonable range. The shift in that is probably due to our shift towards supermarkets who do tend to have a slightly higher terms of trade with us.

39:56 Slightly esoteric thing to to point out to everybody is the value of our derivatives. So this is the value of our forward bought currency. So at the end of the year, we bought forward 57,000,000 of of dollars at an average rate of 1.29, which will support our gross margin going forward into FY '23 and also in relation to our swaps and caps that we have in relation to to interest rates. So they are valued at the year end at 4,100,000 fair value of them. Obviously, we aren't about to sell them. We want to use those for trading to protect our margin, but it does show the effectiveness that we have in relation to our hedging strategy.

40:45 So I hand over back now to Andy to talk about outlook. Thanks, Chris. So, we we've given an in line guidance, which, I guess, is pretty unusual for a consumer goods business. We're we're we're very happy with how trading is progressing as we move through, the earlier parts of f y twenty three. I just wanted at this point though to to, you know, to to reflect on the last three years. You know, we we have seen extreme supply sides challenges, and and and we were affected early the most because of our China operations. So, you know, China lockdowns, UK lockdowns, poor congestion, Brexit, you know, a container ship stuck in the Suez Canal with 12 of our containers on and and about a 100 stuck behind.

41:43 A haulage crisis last year, lack of drivers, a shipping crisis, $18,000, and and a lack of availability. Moving through into things like Omicron, you know, this time last year, I had so certainly in December last year, I had a lot of my warehouse staff off ill with Omicron, so I had to dial down demand. And then, of course, which is kinda currently ongoing, various port strikes, in The UK and indeed in Europe. So we faced really quite extreme external supply side challenge. And yet, over the period since f y nineteen, we've grown EPS by 75%. So as we move forward, it's perhaps the the demands the the supply side challenges are fading, although although they are still there to an extent. There are still ports on strike, for example.

42:41 But certainly an awful lot better. And we're moving into a period of, I think, demand side challenge. You know, general merchandise is the mark of the general merchandise is going to be smaller overall. Know, we have a cost of living crisis. People have less money to spend. And when they do come to spend, they are you typically prioritize food in an inflationary environment. So we're looking at, for general merchandise, a smaller share of a smaller basket. So, you know, a pretty difficult environment. Our job is to confound expectations again. We've confounded expectations over the last three years to deliver a strong earnings per share growth despite everything that's been thrown at us. Our job is to do it again, albeit the challenges are are slightly different.

43:28 And it's gonna be about taking market share. You know, we are a relatively small player still, so so taking market share is eminently doable. And in Europe, we are we're actually, we're we're actually our market share probably probably rounds to zero is is fair to say. So we and even if the market for general merchandise is smaller, it's still an enormous market. So there's still an awful lot to go after. And with our brand assortments and with our product assortments, we've always got plenty to sell. It really helps that we have a value offer. I think it really does in this environment. But I think I think for me, and and and this is where it it becomes perhaps a little bit less tangible book, for me it it it it it's the important thing.

44:14 We've just got to do what we've done over the last three years, which is be better than everyone at everyone at everything that we do. Better than everyone else at everything we do. And if we have that relentless focus on execution, I don't think we're gonna go too far wrong. We tend to shine when the going gets tough. I must admit I wouldn't mind a normal year for change that would help with the gray hair. But when when the going gets tough, I think we do shine. So we we are we we are very determined over the next couple of years to to see down this this new demand side challenge. Okay. I think at this point, I'm going to open it for questions. Andrew. Absolutely. Simon and Chris as well, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen.

45:10 But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Simon, Chris, Andrew, as you can see, we have received a number of questions throughout your presentation today. And thank you to all of those on the call for taking the time to submit their questions. Andrew, perhaps I could hand back to you to chair the q and a session with the team, and then I'll pick up from you at the end. Thank you. No problem. So the first question is, what are your plans re international expansion? How do you look to roll out in new territories? So, Simon, do you wanna sort of pick that one up? Yeah. So Europe is our is our big focus, international focus.

45:57 We are now looking at opening 10 new big retailers in Europe. So we do deal with. We deal with, you know, deal with with a few of the the big guys. But we wanna open another 10 over the next three years, and we've already got the list. There is a lot more than 10 to open, but if we open 10, we've done that job. And then the other 50% of our growth will be the online growth. So 50% is gonna be online, and 50% is gonna be retail. Okay. Brilliant. Thanks, Simon. So next question is, how much of an impact does the shipping crisis and more generally the associated supply chain issues had on the business? Well, I suppose if I was gonna summarize it in one word, the word would be absolutely massive.

46:46 It it it has been a an immensely challenging period from a supply chain point of view for for for all all of the reasons which I laid out before. You know, we've we've, you know, from lockdowns through support issues, through to Brexit, through to strikes, through to haulage crisis, through to, obviously, the shipping crisis. Probably probably the couple of things I'd pick out would be, you know, when when shipping rates go from 2 to $3,000 up to $18,000, that that that that meant that that had a big margin implication for f y twenty two. Now we did manage we did manage that extremely well. As Chris said earlier on, it was equivalent to 2.2% margin headwinds.

47:33 And yet our core margin remained stable. And I think that should give, you know, potential investors confidence in the company's ability to manage margin even in the face of of external pressures. That was quite sudden and quite extreme. And the way we manage margin is there's many elements to it, but probably the the main way is is through that new product development. You know, when when we bring new products to market, that's an opportunity to reset margins, you know, maybe deliver deliver more value to the consumer and therefore justify a a different price point. I think the second thing I would highlight is the impact on online. It was growing at 20% plus a year up to f y twenty two. Core the core online business end up down 1%.

48:18 As Chris as Chris highlighted, it was down heavily in the first half off the off the back of a lack of availability, which was a direct result of our shipping crisis, and then and then grew in the second half as that availability returns. That growth has continued into FY twenty three as as as as we as we maintain a good level of profitability now that now the shipping crisis has passed. Question from Nick b. Spectrum Brands have an extensive catalog of products. Are there considerations to replicate the Russell Hobbs relationship and perhaps enter new areas outside the home? And, Sam, if you have any thoughts on that. I think I think probably we are looking at route sort of focusing on our core cookware offer, aren't we, in terms of how we how we The thing that every everyone looked always says was, what else are you gonna buy? What else are you gonna do? We genuinely don't need to do anything else. We've got all of our brands. We've got our ranges. All we need to do is focus on keep improving innovation on our products, open these 10 accounts, roll out online EU and UK because our online business is still fledgling, but the numbers are getting bigger and bigger and bigger. And at the end of the day, we do have the brands on the products for hard goods. So online, open another 10 accounts, keep delivering great products to our supermarkets and our discount stores in The UK, and it's a £500,000,000 business.

49:48 Yeah. Great. And and the next question, Simon, which I think links in with that is, do you see further brand acquisitions in the pipeline following the success of Solta? I think I just answered that with these you know, with that with that question. But, I mean, if something came up in France and it was cheap, then yeah. I mean, we we'll we'll never not we'll never say never, but we don't need to. I think probably a plan a is organic growth, but but but we can't we are often opportunistic with our acquisitions. So something may come along, but we we've got plenty to do with with, you know, rolling out Solta internationally, and and Petra is is is very exciting. And the progress around progress has took off in Europe. It's already doing 8,000,000 in Europe. So, you know, there's a long there's we've got a lot to do.

50:37 Yeah. So Nick Nick asks, you referenced process automation and robotics. Can you explain more on this and what that looks like? Investment needed benefits, etcetera. So I I gave an example around labeling, and it is it it it is quite tricky one to get across because it is about a thousand small things, not not about one or two big things. So it's a bit you know, so it's it's about the granular detail of how our how our people go about their work and and eliminating those low value tasks. So I gave the example of the labeling. I'll give you another example. We we sell online across multiple platforms. So our our warehouse colleagues would come in the morning and download those orders and then create a picnotes. And that would that would take half an hour to an hour if there wasn't any you know, we sell across something like 17 platforms, so it's it it it's a fairly admin heavy task.

51:32 Now now the robot does it at 04:30AM, creates the pick notes, and our warehouse colleagues come into a pick notes. So it's that kind of stuff. And and and the way the way we reference the the return on investments is we use a really simple payback period calculation to decide which tasks to prioritize. So we look at the time it's gonna save the user. So let's say it saves an hour a week, and then we say how many hours will they will will it take will it cost our process team to do whatever programming is required? So let's say in in that example, it's gonna take four hours of of time from the process team, and it's gonna save an hour a week. So a very simple four week payback period. At the moment, we are only doing things at my insistence that have a four week payback period or less.

52:26 Now in due course, we'll exhaust those, and we'll move on to eight weeks and less and then on to twelve weeks and less. But I'm sure you guys as as investors will appreciate that's a pretty good return pretty good return on investments. So we're it it is really exciting really exciting from a operating cost point of view. Really exciting. It means we can refocus our talent on things that really do add value. And really exciting because it really it it it it gives us genuine scalability as a business. Andrew, if I if I may just jump back in there, and Chris and Simon as well, thank you very much indeed for addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review and then add any additional responses where it's appropriate to do so. Andrew, perhaps before redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

53:28 Yes. The first thing I'd like to say is to thank everyone for your time this evening. Really, we we really, really do appreciate it. We really do value our our retail investor base. You you are all very, very important to us. I think if I was gonna if I'm gonna summarize where we are, you know, a very, very pleasing year, f y twenty two. Delighted with the with the performance we we delivered against a very tough background. We go into tough times more from a demand side point of view than a supply side, but we as a business and as a management team remain very optimistic about our our ability to navigate what I'm sure will be some some some challenging days ahead. Thank you thank you, everyone. Thank you very much for your time. That's great. And Simon and Chris as well, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

54:29 It's going to take a few moments to complete, but I'm sure it'd be greatly valued by the company. On behalf of the management team of UP Global Sourcing Holdings PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good evening to you all.