Eurocell (LSE:ECEL) — Investor Presentation relating to the preliminary results for the year ending 31 Dec 2020

0:02 Good morning, ladies and gentlemen, and welcome to the EUROCELL PLC Investor Presentation relating to the preliminary results for the year ended 12/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today and publish responses where it's appropriate to

0:33 do so. These will be available via your Investor Meet company dashboard, and you'll be notified once they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Mark Kelly, CEO Michael Scott, CFO of EUROCELL PLC. Good morning. Good morning. Thank you, Paul. Yes, and may I echo Paul's words, a very warm welcome to EUROCELL's full year update ending December 2020 utilizing the Investor Meet company platform. My name is Mark Kelly, and I'm the CEO. And today, I'm joined by Michael Scott, EUROCELL's CFO, and both of us will be taking you through this presentation. We are assuming that not everybody on this call will be fully familiar with our business, so this presentation is different to the one made at our year end update.

1:21 However, you will find the full slide deck and commentary, including analyst questions and answers, on the EUROCELL website in the Investors section. If we can move to the next slide, please, Michael. So EUROCELL has two main trading divisions. The first sells PVC window profile, PVC window frame to circa 400 independently owned window fabricators. We do not fabricate windows. Everything is produced through our partner fabricators. For the most part, the fabricators are sole sourced to EUROCELL. We have a broad range of products, as you can see in this slide, from windows, skylights, patio doors, and then in the middle, bottom conservatories and warm roofs. We then have a building plastics division. This is to say that everything that is used on a building in timber could be replaced by UPVC maintenance free products, and these are demonstrated in the bottom left picture where you can see cladding, fascia, and soffits plus rainwater products.

2:22 All of these products are sold through a wholly owned branch network. The estate is currently 208 branches. And as well as building plastics, the branches also sell doors made for us by Vista, a EUROCELL owned company, plus all of the products made by our fabricators, I. E, conservatories, warm roofs, etcetera. You can see the inside of one of our branches in the bottom right picture. Additionally, as you might expect, we also sell all of the tools and ancillaries, silicons, nails, PPE required to complete a job. Our intention is for the branches to be a one stop shop. EUROCELL is also the largest recycler and user of replaced window frames in The UK, giving us a real differentiation from the rest of our competitors and increasing interest from a number of investors who are looking for companies with an excellent green or ESG aligned credentials.

3:16 So simply put, EUROCELL are the largest manufacturer, distributor, and recycler of UPVC window and building products in The UK. Going on to the next slide, I would like to talk about the building profiles division. As previously discussed, the profile division sells to circa 400 fabricators, of which 300 mostly concentrate on just windows and buy in everything else required. For the purposes of this presentation, there are four types of fabricator. Trade frame fabricators, they make windows for everyone and have no installation capability. New build fabricators, these guys only supply into the new build market and install windows. And then commercial fabricators supplying from local authority housing, medium rise building, student accommodation, etcetera.

4:07 They also fit. And then lastly, retail fabricators of which Safe Dall or Everest would be examples. EUROCELL doesn't really have any retail fabricators, and the rest of its business splits 60% trade or trade fabricators, 30% new build, and 10% commercial. Our larger profiles include recycled product. This is extruded down the center of the profile, and then we envelope it with a virgin skin to ensure that we have control over colorfastness, etcetera. As you can see from the chart on the right, we've seen steady progress in utilizing increasing percentages of recycled products. And this year, we will save more than 3,500,000 windows going to landfill. As detailed in the acquisitions, we have capacity for making our own trims and joining pieces through S and S Plastics, which is an injection moulder.

5:01 Doors, we've already mentioned, and we have added to our recycling capacity with the purchase of our recycled North site, which will give us the capacity to keep up with the ongoing demand for the foreseeable future. Next slide, please, Michael. EUROCELL has a track record of excellent revenue growth, and we see no reason why this will stop for the foreseeable future. The case for continuing to grow market share remains strong. Our technical sales forces continue to drive tight specifications for our fabricators to fulfill, and we've achieved a number of larger new account wins over the last few months. Additionally, our new build teams are introducing Vista doors to a number of clients, and trials of our products are very well advanced with a number of the better known brands.

5:46 Vista are currently fulfilling record demand. We continue to extend the Windows product range and are working to speed up the NPD process to ensure that we meet the needs of our ambitious fabricators whilst allowing our sales force to continue delivering differentiated specifications. Rather than just a commercial play, recycling is increasing in its importance to our customers on a day by day basis, and we're doing everything possible to utilize more of this product. Where we have served the supply, we make it available to other non fenestration trade extruders at market price. On the next slide, I want to take you through the branch business. We've already discussed the products that the branch business sells, the windows, patio doors, conservators, etcetera, we call made to order made to orders.

6:37 The volume of sales on a daily basis have a beat to them and don't vary too much and are all available off the shelf. The made to orders run a lead time and therefore are connected with project work accomplished through our small builder customers, I. E, extensions or long term improvements. We watch this order book to give us confidence for the coming months. Our made to order book is currently the largest we have ever seen, and this gives us confidence that current sales rate will continue to the half year and beyond. We are mostly focused on the RMI market. We do not supply large customers or contracts on a direct basis, although we do work with some of the larger facility management companies. Whilst we have purchased branches in the past, we don't see any reason to do so going forward.

7:25 We can reach a target of between two hundred and seventy and three hundred branches and have national coverage through organic openings, which leaves us with branches set up where we want them in the manner we want to develop them. Recent openings have been break have seen breakeven times of under eighteen months. And with new format stores still resonating with trade and consumers alike, we see that opening new stores ourselves is the best way forward. Next slide, please, Michael. On this slide, we can see some of the actions we've taken to steadily increase average sales whilst improving the size of average transaction values. When taken with the dramatically reduced time to breakeven, the continued development of the product offering, we believe this all speaks to a team that are really on top of their game.

8:12 This combined with better targeted marketing, greater utilization of our cashback promotional tool, and the delivery of new store mats store formats with new products being ranged all of the time means that we can continue to resonate and grow share with our current and prospective customers. Currently, we have the highest level of live customers we've ever had and the lowest number of those not trading. We have the highest ATVs we have seen, and we are really seeing new categories like landscaping and garden rooms taking off combined with huge increases in survey type products as customers look to expand their homes economically. The picture on the right shows one of the new range of garden rooms. We continually develop our prod our digital offering to ensure that the journey is as easy as possible for our customers, both trade and retail alike.

9:03 Additionally, we are starting to understand the meaning of our EUROCELL home offering where we are supplying doors, windows, and garden rooms directly to consumers, although made and installed by our customers. We'll take the rest of 2021 to work with this, test the results, and establish whether this is worth pursuing in the future. New slide. On this slide, 2020 in review, we can see this excellent pictorial of our journey over the last year. You can clearly see the impact of the drop off as we closed down in the second quarter, but also the impressive return with the difference in growth between quarter three and quarter four largely being attributed to the return of newbuild in the fourth quarter, although all parts of the business continued to build through to the end of the year.

9:55 2021 has started with 4% growth in January and 12% in February, and March has continued that growth trend. All of this growth has been accomplished without too much contribution from our commercial fabricators as that work has been slow to return post COVID, but we're now seeing demand from those start from those sites starting to kick in. Moving to slide eight, which shows us our 2020 overview, and it shows what a very interesting year it was. And all of you are aware, we moved very fast to close down and protect both our employees and the business until we came to understand more about COVID and the demands and obligations it places on all. Whilst COVID has been a burden, our self working safe working practices have given huge confidence to our employees and customers and reduced our exposure to infection.

10:49 As of today, we have four employees of a workforce of circa 1,900 self isolating due to COVID inspections, so a very low amount. During the closedown period, we determined to come out fighting and secure market share gains, and it is this which I believe has assisted us in making the very best of a stronger than anticipated RMI market. Customers and staff alike have appreciated us putting in a groundbreaking virtual queuing system where customers can stay in their vans until they are called into the branch by an SMS messaging system, meaning they don't have to queue in the cold or the rain. New build lagged but started to gain momentum in the final quarter, and this has carried on into the first quarter of two thousand twenty one.

11:36 The strong volumes were matched with excellent operational inefficiencies, and we've not been troubled with the inefficiencies caused by excess demand in the previous two years. In each of those years, top line growth was undermined to the tune of circa 2,000,000 each years as cost of inefficiencies. And as this has now been resolved, the drop through hugely improved in h two, and it gives us great encouragement for our journey from here. From the beginning of the year, all window profiles being supplied from the new warehouse and the branch product will transfer during quarter two. We continue to drive recycling capacity and the efficiency of those sites. We are now able to confirm the potential reduction in carbon footprint for any users of our products.

12:24 EUROCELL is very well set to continue taking share and has gone off to an excellent start in 2021, which allows us to return to paying dividends. And now I'm going to hand over to Michael, who will take you through the next few slides. Thanks, Mark. So I'll cover off the financial highlights with Slide nine. The headline is that 2020 was a year of two acutely different halves, and we came through it very well with a strong h two performance. As a result, the balance sheet is in excellent shape, and we feel very well placed for 2021. Revenue down 8% for the year includes h one sales down 31%, reflecting the period of closure during the first lockdown, followed by a great second half performance with sales up 15% compared to h two twenty nineteen.

13:17 Gross margin for the year down 1.8% includes h one at 46.8%, reflecting reduced production volumes and therefore a lower recovery of direct costs, followed by h two at 50.9% with gross margins improving as volumes increased. Overheads were down 3%, which includes government support received for 8,300,000, primarily under the job retention scheme. These results also include an increase to our stock and bad debt provisions of together £5,000,000. And whilst we were encouraged to be prudent by our auditors, this represents a substantial strengthening of the balance sheet. Taken altogether, this gives an adjusted PBT for the year of 8,500,000, reflecting a loss in h one driven by lower sales volumes and the impact of operational gearing, followed by strong sales and good operating efficiencies in the second half with profits well up on h two twenty nineteen.

14:19 The reported loss before tax of 1,500,000 is stated after an exceptional charge of 10,000,000 incurred mostly in h one, with the major components being a good a noncash goodwill impairment of 5,800,000, which is really just accounting and nothing to be concerned about, and warehouse due running costs of 2,700,000. Net debt at year end on a pre IFRS 16 basis was 10,000,000, down 35,000,000 at the end of twenty nine compared to the end of twenty nineteen. This is also a good performance and reflects actions taken to conserve cash in h one and the benefit of our April share placing as well as strong cash flow generation in the second half. Finally, this slide, we took the difficult decision in March 2020 to cancel the final dividend for 2019 And mindful of the substantial government support we received last year, we haven't proposed a final dividend for 2020.

15:15 However, I can confirm that it is our intention to return to paying dividends in 2021, and you should assume we will do so at a cover of approximately two times.

15:30 Over on page 10, there's a summary of our strategic priorities and how we intend to develop them. Back in twenty twenty sixteen, we set out five strategic priorities to support our overall objective of delivering sustainable growth in shareholder value, and they're included in the blue boxes on this chart. Moving left to right, growing market share, expanding the grant the branch network, introducing new products, increasing recycling, and acquisitions. We've made good progress with all of them, which has supported very strong top line growth over the last few years. However, those who have followed us for some time will know that 2018 and '19 financial results were frustrated by inefficiencies arising largely out of sales growth exceeding operational capacity, which held profits back over this period.

16:20 We've therefore added a further strategic priority to deliver sustained operational excellence. We spent the last two years building out the operating capacity required to support growth and future proof the operation. This included substantial investments in manufacturing capacity in 2019 and in warehousing and distribution in 2020. We also strengthened our team, most importantly, with the appointment of Mark Hemming as COO in August 2019.

16:50 We can now point back to the second half performance in 2020 as clear evidence that Mark and his team have the operation well under control and that the inefficiencies we experienced in 2018 and '19 are behind us. From here, we expect operational excellence to drive good returns on these recent investments in capacity, which should see the benefit of our sales growth flowing through to improve profits and margins. Additionally, on this chart, you can see that we added a seventh strategic priority to develop a sector leading digital proposition. To be clear here, this is not a major IT implementation or a signal that there is a big capital investment to come. It's about leveraging the capability of our current systems to deliver a better experience for our customers, suppliers, and employees.

17:39 For example, we currently operate ecommerce from a number of different sources, and we'll consolidate these onto a single platform to ensure consistency of product and pricing information to facilitate sales through that channel.

17:54 Moving on to slide 11, which covers operational excellence, I would like here to focus on the new warehouse because not only does it deliver efficiencies in its own right, but it also unlocks the operational footprint of the group to support future growth. With Mark Hemming's expertise, we recognized towards the end of twenty nineteen that we had broken through the capacity of our existing warehouse.

18:16 We needed a new solution, and I think here we have to recognize the tremendous achievement of the project team who secured and fitted out a fantastic new facility from concept to substantial completion completion in around eighteen months and all done through the COVID pandemic. It's a great solution that for the same size as our old facility allows us to increase storage space by 20 by 60% and modernise our picking operation with the very latest racking and mobile plant technology, which provides a far safer and more productive environment. I'll show you some pictures to illustrate in a moment, but first I wanted to explain how the new site unlocks our property footprint. Footprint. Our existing warehouse will become a specialist manufacturing facility.

19:03 Once transition to the new warehouse is complete later in q two, we'll relocate our foiling operation onto this site. The foiling operation is currently housed at our second extrusion hall where it takes up around half of the available space. Relocation frees up that space and will allow us to add up to 20 new extrusion machines over time, leveraging the electricity connection and PVC compound mixing place already in place at that site. To put this in context, we have 60 extrusion machines today, and with continuous improvements in technology, the addition of 20 new machines will give us the potential to increase manufacturing volumes by around 40% to support the work of our commercial teams as they bring on new accounts and open new branches.

19:53 As a result, this program will future proof our extrusion operation for the foreseeable future. Lead times on new extrusion machines are approximately six months, and we'll add them ahead of time when we have visibility of increased volumes. And we're already sufficiently confident to add the first four new machines later in 2021.

20:15 Now a couple of slides that bring the benefits of our new warehouse to life starting on page 12. First, the picture top left shows the storage configuration in the old facility, and what you should notice are two things. Firstly, that the product is stored in floor stood stillages. Those are the red and yellow cages you can see more clearly in the bottom left picture stacked seven high, one on top of the other. So what that means is if you want to get to the stillage in the middle, you need to take the ones on top off first in order to gain access. Then look at the space above the stacked products in the top left picture. Around half of the capacity of the building is not being used. Now look at the picture bottom right, which shows the picking operation.

21:01 You have one operator on a small piece of mobile plant passing the product down to a second operator on the ground, who will then place it in the stillage on the floor, which will be filled with the customer's order. So it's a two person operation, which could be safer for both the product and the individual.

21:21 Now let's look over the page at the new warehouse, again, starting top left. So what you can see here is, first, the stillages are in racking rather than stacked one on top of the other. And second, you can see that the racks are now 12 stillages high, which means we're using all of the space available. Now look bottom left, and you see that the racking is mobile. It's parted to allow the orange mobile plant in between to access the fill access the stillages, which might be, for example, to put the product away after manufacture. So together, it's that combination of using the full height of the building plus mobile racking that allows us to increase storage capacity by 60%. Now let's look at the picking operation in the two pictures on the right of the slide.

22:08 In the top shot, you see the mobile plant at height and a single operator pulling the product out onto the stillages for for the customer's order. And in the bottom picture, you get a closer view of what he's doing. So it's one operator rather than two, in effect halving the picking workforce. It's safer and more productive with the mobile plant linked to the warehouse management software and GPS guided to protect both the individual and the infrastructure.

22:37 In summary, we're very pleased with the new facility, and the final stages of the transition will be completed in q two. Finally, before handing back to Mark, a word on our developing sustainability story on page 14, with recycling absolutely central to this. We are the leading UK based recycler of PVC windows. In h two last year, we had a recycling run rate saving around three and a half million old windows from going to landfill. The operation itself saved approximately 36,000 tonnes of carbon compared to the use of brand new PVC compound. That's equivalent to the annual c o two output from about 6,000 UK homes.

23:22 The communication of carbon savings is a new one for us this year, and we think it's very helpful for all our stakeholders, including customers. For example, in the bottom right of the chart, we show the savings available to new build against a standard new home, and we expect to make more use of this and similar data going forward. As well as the carbon benefits, we're also in the enviable position that the economics of recycling are attractive, with the cost of recycled polymer less than that of virgin resin. There aren't many instances where doing the right thing for the environment also benefits the bottom line. Investment in our two recycling plants means that as well as keeping up with our sales growth, we've also been able to increase the proportion of recycled products used, which is now up to 25% of raw material consumption, and our intention is to keep increasing this through the years to come.

24:19 Recycling will always be at the heart of our sustainability story, but we do recognise that the ESG agenda is much wider than that. We're therefore starting to embed our chosen themes from the UN 17 sustainable development goals. We're also aligning with guidance from the Ellen MacArthur Foundation around their vision for plastics. The MacArthur Foundation is used as a benchmark for many governments and investors and is widely quoted and respected. Whilst they campaign for lobby and change, their solutions are entirely pragmatic and very sensible. Just to finish up, I think it's also worth noting that we continue to support other government initiatives. With 24 apprentices live in our business and 69 kickstart positions now under recruitment.

25:07 In our next market update, we'll bring investors up to speed with our selected sustainability KPIs and the start of our progress against them. And with that, back to Mark to wrap up. Thank you very much indeed, Michael. So in summary, we believe we have a clear and proven strategy, and our team are executing with a real energy and effectiveness. We are certain that we can continue to consolidate the market utilizing our excellent sales specification and branch teams. Again, we will return to a substantive branch opening program with 12 planned for this year whilst continuing to drive and improve our current estate. We will continue to leverage our points of differentiation around the recycling aspects and make the case clearer and easier to understand for our clients and therefore more compelling.

26:01 When we secure the sales, we are confident that our operations teams and logistics guys will and know how to deliver.

26:10 2021 has started well. And to quote the Bank of England, there are plenty of reasons to be optimistic, but we remain cautious. Analysts have been rightly prudent about the second half as COVID keeps throwing everyone curveballs. But as every day goes by and we see no signs of sales pulling back, our confidence grows that 2021 could be an excellent year for all involved. I would like to thank you for listening. I would now hand back to Paul as we move to answering questions. Using the Q and A tab situated in the right hand corner of the screen. I just want the company to take a few moments to review those investor questions submitted already.

26:57 I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q and A, can be accessed via your investor dashboard on the Investor Me

27:04 Company platform. I'd also like to remind you your feedback is important to the company. Immediately after the presentation has ended, you will be redirected for the opportunity to provide your feedback, so that the company can better understand your views and expectations. Michael, thank you very much indeed for the presentation. We have had several questions that have come through from investors during today's presentation. Perhaps I could hand back to you to read out the question where appropriate to do so and give your answer. That would be fantastic. Thank you. Thank you, Paul. Thank you very much, ECE. So the first question we've got in from is from Nick Jay. I'll read out the question. It says, the direct to customer opportunity looks interesting. How do you see this growing? And do customers want to see the finishes before purchasing? How do you manage this? That's an excellent question, Nick. Now we have one advantage, of course, that practically no one else in The UK has, which is that we have a national coverage of branches.

27:59 And all of those branches have windows in situ. So, if you want to buy your windows on the web, but you're uncertain as to the final finish that you'd like, you can go to one of our branches, and you can see all of the colors, all of the different finishes actually in the branch. They're not windows, showrooms, but we've got all of the information and all of the samples in there where they can sit. So as I said in the presentation, we're going to take 21 to work out how this adds value as part of our portfolio. You know, does it is it accretive to the bottom line? You know, how much money does it take to bring on investors from the point of view of pay per click and the such like? So we're we're not minded whether to do this or not, but we are also aware that, you know, consumers in The UK are very confident about buying online.

28:53 Indeed, they buy their bathrooms online and even cars now and the such like. So it's probably that time when buying windows is not too big a leap. So we'll we'll look at that, and we'll come back in our update in in, you know, March 22 with how we're gonna take this forward. But we're gonna take the rest of the year to examine it. So the next question comes from Simon c. Do you feel growth moving forward will be organic, or would you like to look at new areas through m and a? So the answer to that, Simon, is as we've tried to lay out in this brief presentation, we've got a lot of self help initiatives at the moment. We're back to opening up branches again. We've got the warehouse to land fully and make sure we exploit all the benefits from that. If our COO was on the line, he would say, yep. We've stopped the big inefficiencies that hit your bottom line in two thousand eighteen and nineteen. But by the way, guys, you're still not best in class from the manufacturing point of view. So there's plenty of other opportunity for us to take benefit out of manufacturing.

29:57 So so we wanna focus on that. And then, basically, the new warehouse frees up a lot more manufacturing capacity for us, but we've gotta move a few factories around. So we're gonna do that through 2021. So that's where we're gonna focus. I can't buy any profiles business because our market share at about 17% would mean that if I bought another profiles company provided I could, you know, I could access one, It would take us over the 25% hurdle when the competition markets authorities get interested.

30:31 And, anyway, we're we're doing excellent organic growth at the moment through the, you know, we don't need to go buy profile houses. And I think I talked in the presentation the natural fact, the new store openings are so impressive and the, move to breakeven is so fast that really buying branches is probably not the way forward. Abiar, what in your view is the greatest risk and opportunity to the company moving forward? The biggest issue right at this moment, I think, is just ensuring that we continue to get supply of resin into our business. There is considerable shortages of UPVC resin, and, by the way, most other plastics right at this moment, where, basically, the resin houses did not return to full capacity straight away, and now they've got to do essential maintenance and such like. We have not been shorted yet, but only 70% of all resin can be supplied from The UK. The rest has to come in from Europe.

31:41 And we are concerned that with, you know, some of the problems that there are at the ports that there may be constraint in The UK going forward. We are the biggest user of UPVC, you know, glazing grade. And therefore, do know once this is all settled down, we're probably gonna be their largest customer. So they're looking after us at the moment, but that's my biggest single concern. David. Oh, h twenty twenty margins are very encouraging. Are there any one offs within the figure that we would consider when looking forward into full year '21 and beyond? How important is the circularity sustainability credentials of EUROCELL's products being as you've acquired new customers in the residential market? Given the momentum in store opening and market share gains of the company, has attracting talent been to the business become a much easier task? Michael, do you wanna pick up those ones there? So in terms of one offs in the second half of twenty twenty, Nothing of any material nature. Almost all of the government support that we received was in h one.

32:50 So h two is is very clean from a performance perspective. And as you rightly point out, we're we're pleased with the margins. I would point out that Mark's just talked about raw material supply and raw material pricing. It was relatively low coming out of the first lockdown, and we we did benefit from that in the second half of last year with prices starting to increase quite significantly towards the end of the year. I would emphasize to you that we have good mechanisms for recovering raw material price inflation, either via selling price increases or, at the moment, via surcharges when the underlying raw material price can be quite volatile, a surcharge is probably the best way to deal with that.

33:39 And that can be dilutive to the overall margin achieved, but it won't be dilutive to the pound notes profit that we make. So just a little watch out there, but nothing from a profitability perspective that concerns us. H two twenty was a a great performance, and we're very pleased with it. Sustainability credentials was the next question to remind you how important was the circularity sustainability credentials of the EUROCELL's products as you've been as you've acquired new customers in the new residential markets. The reality is that so far, it it hasn't been so important to the acquisition of customers. My view of this is that we have an excellent story here on sustainability, but we probably historically haven't told it very well.

34:33 The the ESG teams, whether it's in providers of finance or in new house builders, will be focused on carbon footprint carbon footprint reduction, GHG emissions reduction. It it's only now that we're starting to tell the story in those terms. So what you've just seen from us is the is the beginning of our journey to better communicate the impact of our recycling operation on the, the carbon footprint of the business as a whole and what it can therefore do for the carbon footprint for our customers. So so far, not so important, but you you'll absolutely see us now go onto the onto the front foot in terms of communicating that.

35:20 And last part of this question was given the momentum in store opening and market share gains of the company, has attracting talent to the business become a much easier task? I wouldn't say it's become a much easier task, but the progress that we've made, having a fantastic new facility as well for for people to operate from has been beneficial in that regard. But, look, there's a there's a lot of competition out there for talent at the moment. So, you know, we need to continue to to work on this, we will I think coming out of COVID, it probably has changed the way people are gonna work going forward. We will make sure that we offer the right flexible benefits and the right compensation and everything that goes with that to to make sure that we do secure the best talent going forward. But but we are very pleased with the the the elevation of the management team that we now have. It does represent a substantial step up from when Mark and I both joined the business in 2016.

36:27 Thank you, Michael. I think also the new facilities, Michael, make a huge, impact, don't they, in us being able to bring people into the business as well? The new warehouse comes with some excellent office space and parking space, which has always been a problem up at EUROCELL, so that'll help. Ari has asked two questions. Given the average order value of garden rooms, eight to 15,000, how big is the revenue opportunity for EUROCELL relative to the 800,000 unit level branch revenue that's average pre per per year I was talking to? This would suggest that EUROCELL would only need us sell a limited number per month to have a meaningful impact to branch revenues. Any commentary on the garden room market size and EUROCELL's potential business with it would be helpful. Yes. We agree.

37:17 I think the average value of a sale at the moment is more like 12,000 at the moment, and we have sold one at 26,000. So, you know, the team are talking about revenue somewhere in the 3 to 6,000,000 mark. It's not a and we are seeing substantial interest right at this moment, right across, and we're selling plenty of them online as well as directly through the branches. So, yes, it could be a meaningful contribution. This is a developing market. Previously, a lot of the garden rooms that you were purchased, would be wood ones, you know, $2.03, £4,000 worth, but not, properly insulated for use as a office all the way through the year, which is exactly where ours are. So the size of the market, I think, is still under development. Any figures that you managed to pick out of it would be for those products rather than the more technically efficient products that we're putting into the marketplace.

38:12 But we do see this as being an area of growth. There's no doubt that in the future, as Michael alluded to, people are gonna be working much more from home. And and we see garden rooms as having a splendid opportunity for us. And by the way, people are also spending a lot more money on their gardens as well. So we're selling a lot of decking and fencing products, which are really a category that we only started focusing on a couple of years ago. And what are the differences in branch performance are you seeing in the larger branch format versus the traditional size, and how do the returns compare to the traditional size? So we've only opened up two large format branches at the moment. I was a little skeptical about opening them. How do they vary?

38:58 Well, the regular branches are sort of three and a half to four and a half thousand square feet, and these this one, one was 10 and a half and one was 12,000 square feet. The returns have been absolutely excellent, and the time to breakeven has been well below our normal expectations, which would be three years. They've been in the sub year year and a half to two years place. And the revenue is much higher. And what we're seeing here is a good engagement with consumers, and we're seeing tradesmen sending consumers into these branches. But, however, I would just confirm there are only limited opportunities for these, and we think about 18 to 20 across our total estate of up to 300 branches. And the reason for that is because to get the footfall we require, they need to be sited basically on ring roads where a trunk road comes through.

39:49 And whilst a small branch footfall would normally see us on a light industrial, light retail park, these were and so keeping, you know, tool station, Screwfix, or Greg's Bakers or Tops Tiles for company. These larger sites, you'd normally see us on the estates where you'll find, you know, car showrooms and that sort of stuff. The returns have been absolutely excellent. The new format stores of which you can see one in Cheltenham or one in Isleworth, you know, we have floor to ceiling merchandising. Getting to breakeven in eighteen months is absolutely fabulous and rolls out m and a. I would say that this year, we're looking for over 50 branches to be tailing over a million pounds plus on average. So, the whole branch network is doing better and taking more market share all the time.

40:43 Thank you for your question mark. H, given the economics, what is stopping your competitors from using recycled PVC? The one competitor, Vika, does a lot of recycling but doesn't use all of it in its products in The UK. It sends a lot of that back to Germany, but they also sell it on the open market. Recycling windows is not easy. It's a very aggressive product. You cannot buy if you go to, you know, one of the large recycling shows where you can buy kit to do tires or plastic bottles or plastic film waste and such. Like, you cannot buy a line to do windows. You can start talking to the guys, and then they'll suddenly be gone. It's a very complicated and aggressive product, and and the cost of it is very high.

41:35 So the barriers to entry are fairly high to this, I think. And so while some of our competitors do it in Europe, I don't think there'd be many other people coming into The UK to do this. Do you see opportunities for further new product introductions to leverage the branch network? At the moment, we're extending the range on, you know, on garden products, more on roofing on roofing. We will look all the time to add new categories, new ranges, and try and bring in new customer base to them. But, of course, EUROCELL homes selling directly to consumers is a part of that, and I'm looking to see whether that works. There was one in the middle there, Mark, which Have I missed one? Thank you. Which is what are the final stages of the warehouse transition and what are the risks? Do you wanna pick that up, Michael? Yeah. So just to to explain what we've done, Mark talked about the two divisions in the business. What happened was that between Christmas and New Year, we moved the inventory associated with our profiles division from the old to the new warehouse and began the commercial operations delivering to customers for the profiles division from the new site at the beginning of January.

42:47 And frankly, that that was the most important and most difficult piece because within profiles, here we are delivering to the end customer. That is a process that has gone very well. You know, it it wouldn't have been without the odd hiccup, but in a project of that size, that's going to happen. Those teething issues, let's call them, have been substantially ironed out. And we're now looking ahead to the remainder of the transition, is moving the building plastics division. If you think that building plastics, though, this is delivering to our own internal customers, it's delivering from HQ into our branches, you you would begin to see that the risks associated with that aspect of the transition are are are much reduced.

43:37 So it is just making sure that we've got all of the learnings from the profiles transition embedded in and then picking a time that that's appropriate to move over the the the building plastics inventory. And, you know, you could assume that's gonna be associated with kind of bank holidays is when we would do that. But we don't see any kind of significant risks associated with those final stages. And we've got a a late question from Patrick b. What innovation do you see in the profiles business? Well, I'm not gonna give away the state secrets on where we're headed with all of this, Patrick. But to say that we are very involved in speeding up the MPD process and making sure that we bring products out that really resonate with our customers. We're gonna be looking all the time to be using more recycled product in our profiles.

44:33 We have seen a considerable pickup in the amount of interest that has been happening in conservatories, conservatory roofs, and such like. You know? And I think anybody that knows about, you know, conservatory propositions right at this moment will recognize there hasn't been a lot of development in them, and that's because that category has been going backwards for the last ten years. But, obviously, if customers are gonna be spending more time in their homes or doing more Zoom calls or Teams calls from their homes, they'll want more space for them. So we will be doing an amount of work to innovate, conservatories to bring them more up to speed and more up to date. We have a number of other exciting innovations going on, but I'm like I said, I'm not gonna be broadcasting those to my competitors right at this moment.

45:18 Thank you for your question, Patrick. Mark h back with another question. At the time of rising raw material prices, how quickly can you pass these costs on via via price increases? Very good question. Very relevant right at this moment. So what we have done is, we put in a price increase which went through in February, which took us up to the budgeted expectation for the price of our raw materials through to the end of the year. Since then, the price of plastic resin has gone up substantially. I mean, really substantially. We are now paying the highest level for per ton for resin since 2014, and there's no sign of them abating right at this moment. So what we put in place is a surcharge mechanism, and this surcharge will be passed on to all plastics invoices from the April 6 and will be revised on a monthly basis, both up and down in line with the, resin price movements. I I would be anticipating the resin price, it will start to fall through July, August.

46:30 Normally, there is a cycle to this thing, which is that, basically, resin prices start off fairly low in January, rise right the way through the year as demand rises until we get to July. And in July, you'll be aware Southern Europe goes on holiday. And unlike The UK holiday season, they basically just disappear and shut down their factories. So there is no demand. And, therefore, we see a big drop in prices through July, August, and then prices start building again through to the end of the year when they collapse over the Christmas period. This year, there is trouble in the marketplace because, basically, America, the two hurricanes that hit the Gulf Of Mexico where a lot of American supply comes from, followed by the Texan Freeze has taken out the plants over there, and they're not sending into Europe at the moment. But they will start to do so anytime soon, and that will also increase capacity.

47:24 So the answer is we can pass on the price increases very quickly because we have a surcharge, like I said, working on a monthly basis. Mark and Yeah. I was gonna say thank you very much indeed. You've answered all those questions we've received from investors today. And, of course, Mark and Michael will review any further questions submitted today. We'll publish responses where appropriate to do so on the Investor Me Company platform. Mark, perhaps before we send investors to give you some feedback, I can ask you just for a few words just to wrap up, please. Thank you very much indeed, Paul, and thank you, everybody, for joining us today and listening to us. As Paul says, if you've any further questions, please submit them. We'll pick them up personally and answer them for you. We think we are set very well. I mean, what is frustrating frustrated us running EUROCELL through '18 and '19 was the operational inefficiencies.

48:17 Second half two thousand and twenty sure saw us returning with huge volumes, and and, you know, the operations team have absolutely nailed the inefficiencies. So the drop through was absolutely excellent. If volumes continue to the end of the year as they've started and are still growing, then we're gonna have a fantastic year. I'm pretty sure the drop through will be pleasurable, and therefore, I think we're gonna please investors, the market, and indeed all of our company, alike. So, I hope you'll join us for that journey. I think it's a good time to be here. Thank you. Mark Michael, thank you again for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected for the opportunity to provide your feedback?

49:06 If you've accessed the meeting via our website, the feedbacker page will appear. But if you've accessed the meeting via the link sent to you by email, you'll simply be asked to log back in and submit your feedback. Please do take a few moments to do so. Your feedback is greatly appreciated by the company. On behalf of the management team of EUROCELL PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you very much, and good afternoon to you all. Thank you. Good afternoon.