Venture Life Group (LSE:VLG) — Interim Results

0:00 Good afternoon, and welcome to the VENTURE LIFE GROUP PLC interim results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Jerry Randall. Good afternoon to you, sir. Good afternoon. Thanks, Alessandro. Thanks for the introduction. Welcome, everyone. I'm Gerry Randle, CEO, VENTURE LIFE. By my side, Danny Wells, CFO. Welcome to our interim results presentation. We'll take you through the slides. And as already mentioned, happy to look at any questions towards the end.

0:49 So on the first slide here, we're just drawing out some of the key highlights from our first half twenty twenty four results. We saw the VENTURE LIFE brands revenue grow by 8%. The VENTURE LIFE brands constitute approximately 60% of our overall revenues. And within that, we've got just over 50% of that is in The UK, where we support it with marketing, advertising promotion, and the balance outside of The UK in a number of different countries where we use distribution partners where we don't support with marketing. That's the responsibility of the partners. So 8% growth overall on Aventure Life brands, that's 6% in terms of volume and 2% from price. So we're still seeing the ability to put price increases through on certain products selectively.

1:35 And if we look just at The UK part of that VENTURE LIFE brand growth, that was 15% year on year. So the impact of our increased marketing spend, which you see below, we've nearly doubled our marketing spend in the first half, and that's all in The UK, has yielded very good growth within our business. And we'll talk a bit more about the increased marketing spend later. We see an improvement in gross margin of 90 basis points. Danny will go through the gross margin position later. But we've also seen really good cash generation from operations. So that's up 58% compared with the prior period. And again, we'll talk about that a bit later, but that cash generation has enabled us to delever the business. So our net leverage has fallen from 1.3 times at the end of twenty twenty three to just under 1.1 times at the end of June. Excuse me. And by the end of the year, we we will be well below one, assuming we don't do any acquisitions.

2:27 And we'll be closer to the north point eight times net leverage. So really good growth in the business, particularly from the brands, good cash generation, cash generation reducing our overall leverage. If we dive a little bit more into those key brands, we've got what we call three power brands. These are our main brands. And this is where in The UK, the focus of our marketing investment is going. So LIFE, which is for type one diabetics, it's a glucose supplement, that grew 35% in UK in the first half of this year. And we'll talk about the drivers for that later on. Balance Active, our women's health range, primarily around bacterial vaginosis, but now moving out into thrush and other areas grew 14%. And ear roll, which is our product for removing and helping to remove earwax, that grew 22% in UK. And again, good growth there.

3:18 Balance Active, just goes to the right hand side of the slide. Balance Active is The UK's number one treatment for bacterial vaginosis. It was by value the number one, but in this first half period, it's also become the number one by volume. We've had quite a good progress in the pharmacy channel this year. We appointed two new members of our team at the start of 2024 to support in the pharmacy channel, not visiting individual pharmacies, but getting our products listed in the wholesalers, and main wholesalers, Alliance, Ah, Lexon, Phoenix, etcetera. And then our activations and our marketing through social media, digital marketing, pulling the product through those pharmacies by attracting customers. So good growth in Ballast Active in the pharmacy channel, we saw good growth across other products.

4:07 We also do a lot of brand awareness work. We do that tend to do more of that in the first half of the year than the second half. That's worked really well with LIFE. And that growth of revenues in LIFE has been driven partly by this increasing brand awareness. So we look at the prompted and unprompted brand awareness. We look before and after certain campaigns, and we see a really strong growth in brand awareness for LIFE. Within The UK, what really drives revenue as well is a growth in distribution points or listings. So if if one new store chain, for example, Tesco's takes one product, we call that one new listing. So first half of the year, we had 29 new listings across a number of different channels and retailers. And we've got a slide later where we'll detail that in a in a bit more granularity.

4:55 And in the second half of the year, we're gonna have further 25 new listings. These new listings contribute to revenue. The 29 new listings that we had in the first half, we had a small number of losses as well. We had six delistings, and that's perfectly normal because you have products. One new product goes into a store, one has to come out. Hopefully, it's one of your competitors that comes out. Sometimes it's your own, but we had of that 29 new listings, we had six losses. So we had a 23 net gain of new listings, and that's generating on an annualized basis about a million pounds of additional revenue for us. We saw 200,000 of that in the first half as the listings came online. We'll see 500,000 of additional revenue in the second half and from those listings. And again, as I say, million annualized. And then we've got more listings coming online in the second half, which will add to annualized revenues.

5:49 And finally, 50% online growth. The online channel has been really strong for us in the last few years. And we have products that are very suitable and and receptive to digital activation, subscribe and save, and some of those techniques that we have online. But, again, very pleased about our online growth. So as as Jerry said at the start of the the presentation, we've increased our, level of marketing investment this year, up nearly double from, what we spent in the first half of last year. And what we're seeing from that across our VLG brands is an overall growth of 8% on the VLG brands in the first half. That's across both our UK and international business combined. But within The UK business alone, there's a growth of 15% on those VLG brands, and that's an accelerated level of growth compared to the last few years, whereby we've seen sort of single high single digit growth across our core power brands, which I'll talk about in a moment on the left hand side. So this year, we've invested around an extra three and a half percent of our revenues from our our own brands in The UK back into marketing investment, and we're seeing an increased rate of growth in the top line as a result of that in The UK. And so just talking to that a bit more on the left hand side of this slide, energy, women's health, and ENT ear, nose, and throat is where three of our key brands sit within. Energy, first of all, 27% growth across the first half of this year, up to around 4,200,000 of revenue in h one. That comprised growth from a LIFE brand

7:20 of 35%, as Jerry showed a moment ago, and growth from a of about 10% on our Glucogel product. Just as a reminder, the Glucogel product is, is prescribed, and we didn't put any marketing support behind that, but we did launch it onto Amazon in the first half of this year. So along with our other product offerings, you can buy that via via Amazon now, and that's helped contribute to the 10% growth we've seen in the first half. Within the LIFE brands, there'll be a common theme across all of our power brands in terms of what's driving the growth. But on LIFE, first of all, we launched some new products at the end of last year under the LIFE active energy boost range. We also launched that on our own d to c consumer websites, and we're seeing an impact of that coming through in first half revenues contributing to the growth. We've also continued to build out build out the performance on Amazon in The UK and and at a more profitable rate, because as these products have now been available on Amazon for two or three years, we're able to make them more profitable as the more mature they get online, and we get advertising cost efficiencies from that. So driving more profitable growth from the LIFE brand online. And thirdly, we internationalized this product into The Republic Of Ireland around eighteen months ago.

8:28 Those partners have continued to perform really well, built out to increase distribution, increased sell through. So, continued good performance from Ireland. Under women's health, our core brand is the Balanced Active brand. We saw 14 growth, year on year. That growth came from two places. Around 50% of that growth was UK driven, 50% from international. In The UK, the growth came partly from launching the new thrush cream product at the end of twenty twenty three. We launched that under the Balance Active brand, and that's driven revenues up in the first half of this year in The UK. But also, we've been focusing on getting more distribution and sell through into the pharmacy channel. So Balance Active has been a bit underrepresented through pharmacies in The UK, and that's been a real area of focus. And I think Jerry mentioned we employed two people to manage those channels at the start of this year, and we're starting to see a significant growth in distribution through pharmacy for Balance Active.

9:21 And and then then internationally, we've got two key partners. One of those is Bayer, the other one is Viatris. Bayer, as we've talked about in the past, we've got an agreement with them for up to 50 countries. We're in around 30 of those right now. Although there's been no new geographic launches for Bear in the first half of this year, what we've seen is increased orders from the geographies that they're within, and that's supporting around a 10% growth from that customer in the first half. So good performance across UK and internationally under our women's health brands. Under ear, nose, and throat, EARL is our key product. We acquired that at the end of twenty twenty two, and we've driven that up 21% in the first half of this year. Again, we launched new products under the Earls brand. We launched baby Earls at the very end of twenty twenty three, and that's growth that supported first half revenues for us. But also, we launched the product online at the end of twenty twenty three, so it's some small Amazon related revenues back at the end of last year, and we've seen the run rate and build up of that continue to benefit first half performance from AEROL.

10:24 Moving on to oral care. There's a one there's a 1% overall growth in oral care for the first half, but very different story underneath the skin of that. So our Ultradex product has grown by 18% in the first half of this year. The dental brand has declined by 22%, and I'll talk more about the reasons for that in a moment. But first of all, on Ultradex, over the last three years or so since we've come out of COVID and people have been going out more, this is a product for bad breath. It's it treats halitosis. We're number one in that market. We've seen increased usage of this product on the back of more activation and social media activities we've been doing. Put out a lot of TikTok TikTok, rather, and Instagram posts, and we've seen a great response to that, and it's continuing to build the more activity we do through that digital platform. On dental, the first half has suffered a bit from some delistings at the end of twenty twenty three, namely in super drug, which was a key one for us. But we've been doing work to improve the claims of that product this year, and we've got more second half promotions built in now that those claims are in place. And Jerry will talk a bit more about those later in the deck.

11:26 Lastly, on foot care. Foot care revenues grew 25% to a million. This is essentially a private label offering within our VLG brands portfolio. I think those of you who've followed us for a while will know that we are planning to talk about private label as a separate stream going forward. But at the moment, we're just wrapping up in VLG brands for the purpose of this presentation. As we build it out, we'll talk more to the private label as that segment continues to grow. But 25% growth on the foot care portfolio up to a million in the first half of this year. You'll note on the slide that we also show VLG brands performance excluding GelClair was up 17% year on year. Why have we done that? Well, on our GelClare product, this is a partnered product, which is distribute distributed, through, third parties. So we don't sell directly into retail ourselves.

12:13 That product, we saw customers stock up significantly during 2023 ahead of an MDR related transition for that product. Not to get into too much detail, but there was a legal manufacturer change on that product, which meant that some customers in order to protect any uncertainty of supply at the beginning of 2024, they stocked up more to ensure they had stock for the first half of this year. That spent we've had some slower orders in the first half this year, but we've got strong visibility of the second half. So we'll get a recovery on the GelClair product and see that product being growth for the full year in 2024, and we've got the order book to support that. But important to strip that out, the first half performance to understand that, you know, taking that big impact aside as a million pound of revenue from phasing and timing, that actually overall VLG brands was up 17% on a on a h one basis.

13:05 And lastly, on this slide, customer brands. Customer brands declined 9% in the first half of this year. That was anticipated. We expected that performance as the comparative period in h one twenty three was exceptionally strong. In h one twenty three, we saw a number of customers build up stock again. This was off the back of the Ukraine Russia conflict in late twenty twenty two. In order to secure supply, reduce uncertainty, a number of customers built up stock levels across the end of twenty three and or sorry, early twenty three. And therefore, we've seen some destocking impact and we're at a more normalized level of performance in the first half of twenty twenty four. So decline, but in line of our plans and a more normalized level of performance for the first half on that customer brands business. Great. Thanks, Danny. We're going to take a little bit more of a dive into the key brands and how they perform in The UK where we support the marketing there. So we'll start with energy management. So this is the two products, LIFE and Glucogel. LIFE is the biggest component. We've talked about the growth already in LIFE, the 35% like for like year on year growth. And where have we seen that? Well, that's been in the LIFE fast acting glucose shots, which are up 35% year on year.

14:15 And overall, those shots are growing very nicely online, 41% online, and 79 at pharmacy. Now pharmacy, most of that growth has come from price increases. We're able to put price increase through there. We launched the active energy boost, and that's getting ground in grocery. We also introduced Glucogel into Amazon. So Glucogel is the more viscous product that can be applied to the gums, particularly useful if there's an elderly person you're caring for who can't maybe take a shot or chew the chewable tablets. We launched that on Amazon. We haven't seen any significant cannibalization of the pharmacy sales there. And so we've seen a small amount of incremental sales. We've got some of these products, particularly the active energy boost now into the Alliance wholesale channel and they lose, and that's in that's spreading out into the pharmacies being pulled through.

15:06 And most importantly, with the awareness campaigns you run-in the first half, and I've referred to this already, we saw a significant increase in awareness, which we think is also driving sales for this product. On the right hand side of the slide here, you see some of the activations that we've all the activities that we've done. Moving on to women's health. As you know, in here, Balax Active brand, And Danny's already mentioned that we launched the thrush cream at the back end of last year. And thrush is the biggest sector of the women's intimate health market. In The UK, probably about half of that market, bacterial vaginosis, where we already have a product, is smaller, but we've had good traction with the thrush screen. We're starting to roll that out into more and more of the retailers. As you said, Balance Active is The UK's number one treatment for bacterial vaginosis.

15:52 You'll also be aware, as Danny's mentioned, that we make that product for Bayer. Sell it under the Canniston brand in the Cannist Balance livery. So we're even in a stronger market position in The UK than they are. Grocery's growing very well there. We've had some good wins in the grocery channel. Pharmacy also. One of the activities we did this year was to run a campaign we called the V revolution. And on the right hand side here, you see the the pharmacy pricelist order forms that goes out to the pharmacies where we've been advertising this campaign, and it's getting women to engage more around women's intimate health and more information building. What's interesting here as well is we've got a number of new listings. And on a later page, I'll show you what those new listings are. But we've also now developed a range of products in the menopause space. Menopause is is gaining a lot of traction, a lot of visibility in the retailers, and particularly the the main high street health and beauty retailers are giving more and more space to this. So we've developed a range of products within our business, topical products, they will start to launch at the back end of this year with our Irish partner there. But also in the first quarter and second quarter of next year, we'll be launching those in The UK. And we see menopause as a a really good growth area for us in using our technologies and expertise developing topical products in there.

17:16 Then moving on to Erol. Erol, acquired at the end of twenty twenty two. Really good pharmacy growth in Erolwear. When we first acquired the brand at the back end of twenty twenty two, it was principally sold in boots in The UK and through an international partner in Scandinavia and Northern Europe. Revenues were about half in The UK, half internationally. We've managed to get these products listed in the wholesaler, again, and getting good growth in the pharmacy. It is the number one ear wax removal spray in the market. And we have when we acquired the brand, we had two key products there, which is the main spray and then also a swim product, which gave you some extra barrier protection when you're swimming in the ear. We've since acquiring the products, we've developed baby Vaxil, which is for children from six months and upwards.

18:05 And we've actually just developed two further new products in this space. There's an almond oil air spray, which is for the more sensitive people with more sensitive skin, And an aftercare aftercare spray as well, which when you use the oils to have the ear wax softened, you then have the ear wax removed by a healthcare practitioner. And then you might have sore or irritated ears from that, and we've developed a spray that will help soothe that. And we've launched the new almond oil and the new aftercare spray this last week in boots, and you can go into the main boot stores and see that available now. So nice lot of NPD that's gone on within here. We've done a good off shelf off shelf activation. Bottom right corner here, see what we have in boots. And that was where we had a top shelf positioning with our three main products.

18:53 And pharmacy has been driving performance as well because we put a price increase through in the pharmacy channel. And we see further brand expansion in the grocery and high streets in the second half. And finally, talking about oral care, and that's the two brands, dental and objects. Danny's covered quite a lot of this, but what we have done in the first half of this year was to improve the claims on the pack. We've the main competitor in this space is Listerine, and they added claims last year to their packs talking about being three or four or five times more effective than either brushing or perhaps flossing alone. And so we've got similar claims now on our packs. And we've also focused the brand. There's two formulations here. There's the active there's the advanced protection, excuse me, which has slightly more fluoride. It's a more premium product. And that now is sold only through health and beauty and grocery. And the dual action, which has slightly less fluoride, is sold through the discount to change. That and that's helped in in terms of not getting read across or confusion on the products.

19:53 Good marketing campaigns using our KOL Doctor Ash and some good off shelf activation and some good new listings on Alphadex. On the following slide, this is getting into more detail about the new listings that we've achieved. So we've got the wins and losses here. And as I mentioned earlier, when you try to get a win with a new product in, that's only gonna happen if the retailer takes a product out. So most of the time, that's gonna be a competitor's product coming out. Sometimes it might be ours just because of rates of sale or perhaps a rationalization of of the shelf space by the retailer. But we had 29 new listings in the first half and six losses, so 23 net. And as I mentioned, this delivers an annualized 1,000,000 of additional revenue. And we've got a further 25 new listings coming online during the second half of the year. So really good progress by our commercial team to deliver those additional listings.

20:47 The next slide is a little bit more about sort of highlights and priorities. So we've talked quite a lot about things we've done across the key brands in the first half of twenty twenty four. In the second half, we've got some priorities that we're working on. So the thrush cream is being launched in Morrison. We've got a number of new listings going to Morrison's. That's a retailer we've not had a high presence in before, but both across dental and across here and across balance active, we're getting more listings in that space. And the rollout of our menopause range within the balance active space, that's gonna happen towards the end of this year and into the first quarter of next year. Under LIFE, we've got launches of new products that we developed. We've got some additional flavors in the shops. We are pushing the Active Energy Boost, Cheapable tablets more and more. Under Eero, we moved we launched baby Eero recently. That's starting to roll out both UK and internationally.

21:41 And Tesco's have moved this from the pharmacy to the general sales shelves. It means you don't have to go and ask for it behind the pharmacist counter at the end general display that will increase visibility. And of course, those new newly developed products, the almond oil and the aftercare, starting to launch, and and we expect those to also launch internationally. So good things going on in the second half of the year, and I'm very pleased with that progress. Just finally looking at the international part of our brands business. So this is the slightly less than 50% of the overall branded revenues. And this is where we sell to partners. We don't contribute to marketing. We have long term distribution partners, and it goes across a number of our brands. We signed six new long term partner agreements in the first half of the year.

22:26 And the first orders from those are contributing a million of revenue into our 2024 results. That'll all be pretty much all weighted to the second half of the year. We saw for those agreements as we signed the GelClad product to Jaguar Health in The USA, and that's now rolling out in the second half of the year. We've also got a new collaboration agreement that's being built up by our development team in in Italy in our in our factory there with one of our big blue chip customers. We'll be now developing a brand new medical device product for them, and that will begin to bring revenues online in 2026, but significant revenues. And also, we've got agreement in principle with a very significant EU consumer health care business to launch a number of our medical devices across main European territories under their brand. And you'll see more about that as we report in the future.

23:17 So good growth across the brands, both in The UK and internationally. And I'll I'll pass back to Danny to look a little more closely at the financials. I'll just provide an overview of the key financials, going clockwise from the top left. So revenues were flat as we've talked about for the first half of the year, but underneath that, the VLG brands are growing, up 8% in the first half of the year to 13,900,000 from 12.9 the year before. And under the skin of that, 15% growth in The UK. So we'll see the growth on the international business come in the second half of the year. So with growing VLG brands, it's growing the proportion of our overall revenues related to those brands up to 59% for the first half of this year compared to 55% last year. And by the end of this year, we should see 63% or in that region of our total revenues coming from our higher margin VLG brands. So that's important to us not only because they are higher margin, but we're also gonna control the destiny of those those brands, where they're listed, where which geographies they're in, how much marketing investment we put behind these brands. So by the fact that we are investing more in that that now and seeing the growth returns coming through on that, That gives us confidence in our ability to maintain that investment and deliver these sorts of levels going forward.

24:33 Talking to gross profits, so although revenues were flat for the first half of the year at top level, pound note profitability was up by about 200,000 in the first half, and with that, from around a 90 basis point improvement in the gross margin percentage. I'll talk more to gross margin on on the next slide. Skipping down to EBITDA at the bottom right hand side, we've got a temporary suppression of our EBITDA margins in the first half of this year down to around 15 and a half percent. First half is always lower than the second half because of the leverage impacts in our business. The business is heavily weighted from a revenue perspective towards the second half, but we're investing more in our marketing in the first half of this year. And whilst that marketing investment is delivering returns on accelerated growth, we'll get full half impact from those returns in the second half of this year on and without increasing the the pound note cost of marketing related to that. So we'll see a significant uplift in the EBITDA margins in the second half of this year resulting from that temporary dilution on the marketing investment we've done upfront in h one.

25:35 Turning to cash, the business in the last couple of years has been, increasing its cash generation significantly, and we've continued that in 2024. So net cash was up to 5,800,000 in the first half of this year from 3,700,000 the year before. Really, that's been driven by a number of key factors. One of those being the fact that given our business is heavily q four weighted in terms of revenues from international partners, we see cash collection from the furth from that in the q one of the following years, the year we're in now. That's a normal cycle we have. But as those revenues build, we get a greater cash generation from high margin international VLG brands revenues being collected in q one. We streamlined our operating model across the business with regards to the order to cash cycle.

26:20 We were doing lots of rationalization work to streamline the number of entities we have, streamline the way we build those customers and place orders. These activities and initiatives are driving down debt to days in the business and enabling us to get a clear and more fluid cycle around that cash collection. And finally, we're we're required highly cash generative acquisitions over the last few years. Eero was one of the latest ones at the end of twenty twenty two, and we've started to get the full benefit of the growth of that coming through the p and l now as well and through the balance sheet. With that strong operating cash improvement, 4,300,000 of 5.8 has flown down to free cash flow. That free cash flow is is growing significantly over the last couple of years. Again, it's common trend, the net operating cash chart, and we're using that free cash flow generation to pay down our debts. That's our focus to show that we can delever the business and get ready again to go for what we hope will be more m and a, in the in the near future. So you can see net debt has come down gradually over the last four period ends, down to just shy of 1.1 times leverage at the end of twenty twenty three, around 10,500,000 net debt in real terms. And we expect that to be more like naught point eight times by the end of this year, net debt around $88,000,000.

27:33 I'll talk more to margin on the next slide, just go into a bit more detail. Talking to the left hand side of the slide first. The dotted orange line at the top of the left hand side represents our first half gross margins over the last five years. And you can see in h one twenty two in the middle top of the slide there, we peaked at 40.3% in the first half off the back of lots of accretive m and a. But came h 02/22, we saw the conflict in Ukraine and Russia and the supply chain issues that followed thereafter. So from h 02/22 and h 01/23, we started to see inflationary pressures really, impact margins on a temporary basis. So we've been coming out of that in h one twenty four in the back end of last year as COGS have continued to plateau. So we've got more stability in the cost of goods now, and we're able to gain leverage benefits and also economies of scale as we grow out our products and our products that we make internally as well as the products we make with third party suppliers. We're able to gain economies of scale with those with those costs too.

28:33 But within the detail of that, we've also been increasing our VLG brands revenues as we've seen on the last slide. That's a higher margin part of our business, and we've been able to put through price increases to on some of the specific products within VLG brands at the end of last year. So the two key ones I'd highlight will be price increases into the pharmacy channel, on the LIFE brand in particular, which went in at the end of twenty three. So we've got a full half of impact coming through the numbers in the first half of this year. And also, put some specific price increases onto some international partners where there was a key requirement to do so. Talking to EBITDA margins, I've talked in a bit of detail on the last slide about how these have been suppressed in the first half of this year. That's because we're investing more in our marketing. I'll refer you to the bottom right of the charts bottom right chart on this slide and the blue dotted line.

29:24 This is showing the percentage of marketing cost sorry, percentage of revenue being put back into marketing relative to the revenue that is being driven by that marketing investment. So The UK is where we promote our brands with our retailers and online. Historically, we've done around 7% of those revenues have gone directly back into marketing activities, and we've increased that by around three and a half percentage points in the first half of this year to help build out the relationships with our retailers. Our retailers want to work with less suppliers who have a bigger product offering to give them. In tandem with that, we want to work closer with those retailers to build out the distribution, gain greater shelf presence, and also demonstrate to those customers that we are working to do more brand awareness activities in our business. So some of our marketing costs in the first half this year is related to making consumers aware of our products, then researching to to to determine rather how what awareness impact has that had, and that's the type of one off activity we'll do each year. So we won't repeat those activities in the second half. And in the second half, we'll have a sort of similar pound note spend on the marketing cost, but it'll be focused on activation spend, promotions in stores, online advertising to further drive up the revenues and the momentum going into 2025.

30:40 So we we would like to and we expect to maintain a percentage of, the percentage of investment at around 10 and a half percent going forward on a blended basis across our products because we're seeing that return come through on the top line. I think the important to highlight again here is that although it's 10% on a blended basis across the VLG brands, that can be as much as 16 or 17% across our most important brands, our core brands that we have right now, LIFE, EARL, Balance, Active again, and a lower lower amount going into our more lower opportunity opportunity brands, for example, where dental is at the moment. We're in more of a maintenance mode with that right now. So we spend a lower percentage of revenues into that brand just to give you an example of how that money has been attributed across the portfolio.

31:28 Thanks, Danny. Just got some points here on the sort of development of the business and the operations. So in terms of operational improvements, we've now internalized the manufacture of the ear roll product into our factory in Italy. This is a fantastic job by the team there. The machine was purchased in the first half. It was put into the plant, validated. And from September, we're actually manufacturing that product. That will give us an improvement in gross margin. It will add another 10 percentage points to the gross margin on the ear roll products. And you'll see, obviously, the impact of that in quarter four this year, but for a full year impact next year. And that next year, we'll be making the full volume both for UK and international of the EROUP products. So that's great operational leverage, spreading the cost of the whole plant over more products, but as I say, giving a really good gross margin improvement there.

32:22 We're also looking at entity and group structure rationalization that will save us some some costs in this year. As we've acquired businesses and assets, we've had quite a complex structure internally, and we're rationalizing that, simplifying it. Also on the regulatory side, simplifying our QMS systems and regulatory notified body relationships. All of that's adding to some cost savings that we can have in making it easier and simpler to integrate more acquisitions as we go forward. We're gonna be implementing a new ERP system over the next eighteen months. That's because, again, as a growing business, we need better and more efficient, clearer reporting structures, and that enable us to manage the business, have more accurate, relevant, and timely information.

33:10 And it will enable us to have a good playbook for m and a. We're using the Microsoft Dynamics finance and operations package, and that will significantly enhance our reporting efficiency and speed. All our medical device regulations work is on track. The team in Italy done a fantastic job here, team in UK as well, just making sure that our medical device products pass through that regulatory process. And for those of you familiar, the old regulations for the MDD, medical device directive, the new regulations, the medical device regulations are coming into play. And you have to transition your products to the new regulations by 2028. That involves making sure your technical files up to spec. You may have to generate more clinical data. You may have to do more tests. All of our medical device files are registered with notified bodies and passing through that progress. We've already had approval and transition into medical device regulations for some of our products, for example, GelClare that we received this year, but they're all on track and in time to to progress.

34:14 Originally, the timetable to complete was 2026, They've been extended that to 2028 because there's a lot of congestion. And so we're gonna spread out the cost of that remaining NDR work to 2028 because there's no rush, and we can continue selling our products under the old certification until then. Moving over on to sustainability. We do a lot of work on sustainability. We were delighted to get, again, the silver sustainability rating from EcoVadis. They're an independent consultancy that rates a 190,000 businesses a year around the world to look at their sustainability. We got silver recognition last year for the twenty two year. We've got it again this year. And what that means is you're in the top 15% of companies assessed regards as regards to your sustainability.

35:01 It's an important, validation for our customers. A lot of our retail customers, look for this look to this for their understanding of our sustainability. On top of that, we're doing obviously the the normal work that lots of companies are doing now to look at our scope one, two, and three emissions, our carbon footprint analysis, our life cycle analysis of our key brands. We're working towards getting b corp status in our Italian facility, then we'll work towards getting that across the group. And we'll make great strides in getting closer to our net zero plan, which we will get into next year. We've got a great team in our facility in Italy who run that and do that work. We've been doing lots of things around smaller sustainability gains. For example, the Ultradex products always had plastic foil around the outside as a as an anti tamper device. We've now changed that. The foil's gone, and we've an anti tamper lid. So lots of small improvements on products as well to improve our sustainability and our our workforce and well-being across the business.

36:05 So finally, as a a wrap up slide before we get to some of the questions. So looking what are we looking for for for post period? What's gonna what's the outlook? Well, the margin improvement from a strong h two revenues will come through and drive a much better gross margin in the second half. A lot more of the revenues in the second half are from our VENTURE LIFE GROUP brands. They're a higher margin, and they're coming through. So that will drive both the mix of VENTURE LIFE brands to custom brands in the revenue, the line gross margin of the business, as Danny's already referred to. New product development continuing to fuel growth and distribution gains. So the menopause range we've spoken about launching back end of this year and first quarter next year in The UK. Expansion of the year old product portfolio, those two new products launching this weekend. And the menopause range will will also be expanded as we go forward. So lots of new products coming through there.

37:02 Good leverage reduction. I think that's really important. You know, as a business, we convert a lot of our profitability into cash, reducing our leverage, and that's freeing up capacity for us to look potentially at more m and a. The operational efficiencies, so Eero is a good example. We've internalized it now. The team in Italy running the plant there and and even in Sweden doing a great job looking at, marginal efficiencies, reducing wastage, reducing scrappage, and improving the efficiencies using AI to improve that. So that's ongoing all the time. And that will also contribute to a steady gross margin progression. New partnerships with long term partners, both on international partnering, but also, as you said, developing new products and taking products out into other people's brands where we make good profitability.

37:47 And as I've mentioned, I think, once or twice, we are, again, looking and assessing at m and a opportunities because as we deliver, we have more capacity in our RCF. We have our RCF has the opportunity to to give us lending up to two and a half times net leverage, so times our EBITDA. We wouldn't go to that because, obviously, that's that's pushing the boundaries. But, you know, we've comfortably go to maybe one and a half times net leverage to an order us in order for us to do a a small bolt on acquisition, and we're actually assessing some of those now. So I'm very, very happy with the first half. The brand's growth in particularly. We're we're really pleased because having put more investment in marketing, advertising, promotion, We're seeing a profitable return on that investment as we see growth in the core brands where we've applied that.

38:36 And that will continue to be a theme going forward of increased marketing in The UK, good NPD development, good improvements in our efficiencies of manufacturing. And as I said, you know, the customer brands having some great new customers to come through next year to continue its growth. And customer brands has grown over 11% compound annual growth rate since it became part of the group ten years ago. So that tends to have a period of growth and consolidation, and I think we'll see another period of growth next year. So thank you for your attention. That concludes our formal presentation, but we're happy to look at some of the questions that have come in and answer those for you. Perfect. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated just on the top right hand corner of your screen. Just while the company take a few moments through the questions that have been 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 your investor dashboard.

39:32 As you can see, we have received a number of questions throughout today's presentation. If And I could hand back to you just to run through those questions, I'll pick up from you both at the end. Yes. Sure. Happy to do that. So we're just gonna scroll through the questions. I'll read them out, and then either myself or Daniel will take them. So first first question, could could we clarify whether MicaClear has now been recategorized as private label in h one twenty four? MicaClear is a brand. It is foot care brand and we do sell it to some partners, but we include it in the overall foot care category. The majority of the foot care category that you saw in the earlier slide is private label where we sell the products to the likes of the Croyd Vat, Superdrug and other other stores.

40:19 Jerry, for clarity for the person who's asked the question, within the RNS, MicroClear is within the private label line of our revenue table in the RNS under foot care, as Jerry says. Thanks, Danny. Next question. Are there any product categories where you're anticipating lower sales in h two due to forward buying and customer overstocking similar to what occurred in the first half twenty four for? Do wanna take it or no? The short answer is no. Not not across the VLG brands. We're seeing the stronger growth come through in the second half, including the positive impact of that timing piece on GelClare. So short answer to the question is no. In our customer brands business, so we talked earlier about normalized performance in the first half of this year, we'd expect similar levels of performance from customer brands in the second half of this year.

41:06 Revenues won't be as strong as they were in 2023 from customer brands, but we've got some key new customers coming through, which will support next year, as Jerry mentioned. Okay. Next question. Spare capacity was reported at 56% in the 2022 annual report. Can you share whether that percentage has been appreciably reduced bringing gel clear production in house? And what the percentage currently is, please? I think the first thing to say there, we we haven't bought gel clear production in house. We always produce gel care. In fact, Biocosmos was making gel care from '20 sorry, 2001. What happened is we acquired the rights to the brand. So as well as making the product, instead of selling it to a third party, we were selling it internally to the group.

41:51 Obviously, the inclusion now of the manufacturer has taken up some of that capacity. So we're probably in the early sixties now of utilization. So when you say spare capacity was 56%, what we said was utilization was at 56% and the capacity of 44% was there. So we probably with ARROW coming in, we've taken another 10% of that capacity, but we still got good capacity in the footprint that we're in. And plus, we can rent more space nearby in Italy, and we have reasonable capacity in Sweden. Next question is, do you see £1,000,000,000 first orders for international VLG product sales as an upper limit for 2024, or could it be higher? The simple answer there is that's the first orders that are coming on those agreements, and the second orders won't come in until 2025 because they'll be delivered in the second half of twenty twenty two. But there obvious there there will be other orders that are coming in across other partners and other brands across the piece.

42:54 Next question. John c has been quite busy. Quite a lot of questions from John c. I noticed that a lot of audiologists speak negatively about the irritation of hydrogen peroxide versus olive oil. The number one brand uses hydrogen peroxide. That's OTEC, I think it's the number one brand, as you know. Have you considered a marketing campaign that highlights the difference to customers? Particularly, noticed Specsavers audiology speaks to this. Their advertising here is is being should have gone to olive oil. Yes. I mean, the observation is correct. Hydrogen peroxide is more irritating. Olive oil is a much more natural substance. So we haven't done marketing campaign specifically highlighting the differences, but it's a good suggestion, and we'll we'll certainly take take note of that and look into that. And and again, what we've also done now launching the almond product is that's an even more gentle product, so even more suitable for sensitive ears. So but but thanks for the suggestion. We'll we'll consider that.

43:58 Next question. When stating that Ultradex is number one in its category, how do you define the category? Presumably exclude brands such as Listerine from this comparison, so why? So Ultradex is specifically indicated for bad breath halitosis, and there's only three other mouthwashes specifically indicated for that in this space, which is ourselves, c b twelve, and by ourselves, I mean, Ultradex, c b twelve and the Fresh Breath Company. And we, by volume and by value, are the number one market share fresh breath mouthwash in The UK. We have the market data to support that. Listerine is a more general mouthwash. It's not specifically indicated for for fresh breath. Lots of different versions claim lots of different things. But in the fresh breath category, which is probably only 10% or less of the overall mouthwash category in The UK, we are the number one.

44:53 Next question. Can you talk through the Eeroll acquisition, how that has performed against expectations since in terms of payback and further opportunities? I'll let Danny pick up on that one. Yeah. Sure. So in in terms of the first question, how has it performed against expectations? Well, our investment thesis for the acquisition of Eero was to do a forward looking five year CAGR of 12%. Over the first half of this year, we've just showed you we've we've done 21% growth on the Eero products on the back of the MPT we've launched and the building out online and getting new listings into The UK. So we're we're forming ahead of plan on the EARL acquisition and delivering great results from that. In terms of the payback question, we target a payback of less than five years on, acquisitions of the sort of size of VLG.

45:39 So we generated last year around so we acquired it at the end of twenty two. In '23, we acquired, or achieved rather around 2,500,000 of EBITDA and real cash profit from that acquisition. We'll do a similar two point seven, two point eight million of cash profit from that acquisition this year. So we're well on track to achieve a payback of less than five years on that acquisition, which is, what our plans were based on. Would you like to touch base on the opportunities? Oh, yeah. Sure. Yeah. So with our with our RCF and sticking, you know, and no more than around the 1.5 times net leverage, By the end of this year, we'll have available to us what I'd refer to as one sort of turn of EBITDA in terms of debt availability to us to to not breach that. So that's the sort of size at the moment we're looking without any equity raise. Obviously, we'd like the share price to appreciate more before we look at using equity as well for for bigger acquisitions. But so looking at those sort of bolt on acquisitions.

46:38 And we'll be looking to fill out primarily the therapy areas of our core products, which is obviously women's health, women's intimate health now moving into menopause and other areas. In inner throat category, not too many other fill out opportunities at the moment because we've just launched so many new products into there. But if we look into diabetes, plenty of opportunities in that space. We're in, obviously, the glucose space, but there's opportunities, particularly in skin care ulceration, for example, where we have a lot of expertise and technologies available. And then I think the other area where we're where we're looking is in the sort of mother and baby segment because we start to have some products impinging already. So we've now launched Baby Erol, which is in the baby space. We've got some postpartum products in our new menopause range, which obviously post pregnancy.

47:29 And that mother is the shopper for mother and mother and baby. So we are looking at potentially some opportunities into that space, and that would be some of the therapy areas we'd we'd be looking at. Next question is what potential revenue impacts do you expect from the new licensing partnership agreements in the women's health category? So that particular opportunity that I spoke to, we've been working on for some time. Obviously, when we conclude that in our next results update, we can give you more details. But that certainly after three years, that will be delivering incremental revenues in 7 figures and above. So a very meaningful opportunity for us. Next question is: In the R and S announcement, under outlook, you used the phrase confidence in meeting management's expectations for the full year.

48:19 This is not helpful for shareholders because we do not know what they are. What we do know is the market expectations, and this is clearly not in line because Cavendish slashed EPS for December 24 from 5.5 p to 4.6 p. Would you be able to refer to market expectations in the future outlook statements? This will make things clearer. I'm happy for Danny to answer this one. Yeah. Sure. So in terms of what what are the market expectations, well, these are set out around four times a year by Cavendish. You'll see in Cavendish's note that we set out our EBITDA expectations and and all of our rest of our expectations for the year at the beginning of 2024. We've confirmed that we are on on track and confident of achieving that EBITDA for this year.

49:05 In terms of the EPS point, whether it's probably not well clarified in the Cavendish note, but there's been a corrective treatment applied to the add back of intangibles amortization related to self generated assets. So development costs there, we project we make products in house and capitalize some of those costs. Historically, in the Cavendish note, all of the amortization has been added back. So both on acquired intangibles and self generated intangibles, meaning that the adjusted EPS figure was benefiting from that in the past. So there's been a correction to add back the elements of amortization on the self generated development costs, and that's the adjustment that Cavendish have made. Great. Thanks, Danny. I think just on that point as well, when we refer to management's expectations, I think we we also interchange that with market expectations. So but we take the note on board. Maybe it's better in the future to refer to market expectations rather than management expectations, if that would be clearer.

50:04 The next question is, has the company considered the merits of providing investors with a clear and concise reporting? For example, starting with a comprehensive results summary table, including profit and loss for the period. Yes. I mean, we're always we're always open to the ways that we report. We get a lot of feedback from our institutional shareholders who who own, you know, nearly 70% of the business, and we're constantly trying to adapt and change and improve our reporting to make it clear. So further down in the obviously, RNS, we have the summaries of revenues by therapy area, by products. And we've also had I wouldn't say criticism, but observation in the past that we have too much in our RNS. So we're we're considering you know, we're we're trying to make that more concise. So we do do appreciate the comment. Always happy to accept and hear feedback, and we'll do our best to continue to make concise reporting the best we can sort of rec receiving feedback from all of the stakeholders in the business.

51:09 The last question we've got here, are you genuinely happy with the performance and direction of our company? As it seems, again, we've disappointed a large number this morning. I presume this question was submitted on Monday morning with our published results. No one has addressed the ball, but I believe in the past, pleasant surprises, under promising and over delivering has been mentioned. Are we happy that we can be VENTURE LIFE? I think you mean can we do that VENTURE LIFE? Yeah, I think I'd say a few things there. I think the first thing is we have overperformed in a number of years against our market expectations in the past. So we do, at times, overperform. I think first priority is to perform to your market expectations and perform above them is obviously a good target. Am I genuinely happy with the performance of the business? Well, I am.

52:01 I think we've we've shown this this year that we've increased our investment in marketing and sales promotion in the brands, and they've responded. We've increased our percentage of revenues from six and a half to 10.3%, and we've achieved over 15% growth in those brands that they've been applied to. So I think that's pretty successful and is profitable as well. So I think in an environment where you look at a lot of our other competitors who are achieving very little growth at all in terms of their consumer brands, we're achieving eight percent growth across all of the markets and 15% growth in The UK. I think also if you look at the likes of Halion and some of the much bigger consumer healthcare products, they're deriving the vast majority of their growth from price increase, not from volume increase. And with us, you're seeing volume increase and price increase.

52:51 So I wholeheartedly agree nobody wants any unpleasant surprises. We have a consolidated business. We sell in re into retail partners. We sell online to Amazon. Amazon's great our online business, which is mainly Amazon, is growing 50% this year. You know, making really strong growth there. And there's a lot of companies envious of our traction in the area. We we sell customer brands. We support customers in developing their own products that fills the factory, spreads costs. We're we're moving more and more into private label. You'll see more of that next year. And and, you know, delivering is signing and delivering some really significant partnerships with big companies. So in short, yes, I think we are you know, I am pleased with the results. I think our cash generation and cash conversion is excellent. The free cash flow of our business is fantastic. I think going back to your point in that question about we disappointed a lot of people on Monday morning. I don't think we did.

53:43 We've just sat with, for the last two days, all our institutional shareholders. I haven't heard the word disappointment from any of them. And in fact, all of those shares that were sold on Monday morning were pretty much bought by Slaters. You would have seen that announcement, the tier one that went out yesterday. So our biggest shareholder shareholder bought over over a million shares. I think it's probably 1,300,000 shares on Monday because they understand the value and and in fact, the undervalue currently of the business. I think probably a lot of that retail exit could have been around the impending budget. I know at the moment, people are looking at the capital gains tax position. They may have had gains. You know, a lot of people bought stock when our shares were down at 23, 25 p, 30 p, and we were now set at 45. So if you've got nice gains, the government's almost certain to increase capital gains tax, so you'd wanna liquidate that. And you wait for the results to see if you get a bounce. If you get a bounce, you make even more sort of saving your profit. So I think that's what we're seeing. There's a lot of concern, obviously, in the city about the budget and how it will affect IHT and CTT, and I'm sure that goes through to retail investors too. So, yes, I'm a big shareholder of VENTURE LIFE. I think the performance is very good, very promising. And also the new business we have and the opportunity in front of us are very strong. So that would be my answer as somebody who founded the business, you know, fourteen, fifteen years ago with my colleagues. And so, yeah, always strive for better, always want more growth.

55:07 The team delivered a fantastic performance last year. They're doing the same this year in The UK internationally and in our customer brands and manufacturing business. So I'm very happy with the performance. And I think, unfortunately, we're in a market that suffered from low liquidity and impact on small cap shares. So I could talk about that a long time. But I think that is the end of our questions. So I would just thank everybody for their questions, for their support, participation, and look forward to speaking to you again at the next set of results. Perfect. Thank you very much for updating investors today. Could I please ask investors not to close the session? As you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but some should be greatly valued by the company. On behalf of management team of VENTURE LIFE GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.