Luceco (LSE:LUCE) — 2021 Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the LUCECO twenty twenty one Interim Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just please 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. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard, and we'll notify you by email when they are 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. And if you'd give that to your kind attention, we'd be most grateful. And I'd now like to hand over to John Hornby, CEO and Matt Webb, CFO from LUCECO. Good morning to you both. Good morning.

0:51 Good morning, Mark. Good morning, everyone. Thank you for joining our webinar this morning. I'm just going to start with a quick overview of the company for those that are not familiar with us. I'll then give you an overview of the financial results that we announced last Tuesday. Then I'll hand over to John Hornby, CEO, to do a review of the business highlights for the period as well as covering the outlook, and then we'll turn to Q and A.

1:21 Okay. So just an overview of who we are. So so in short, we are a designer and manufacturer of electrical products in three categories. So wiring wiring accessories, portable power, and LED lighting. So by wiring accessories, we mean those devices that sits on the wall or behind the wall that provide you with power, for example, to a main socket or to a light switch in a residential or commercial setting. We also include in this what we call circuit protection. So these are those the devices that can regulate the power and control the safety of the power in the home. So, for example, a fuse board. So wiring accessories, that that represents 50% of group revenues. So the largest and certainly the most profitable part of what we do is a long long established part of the group and is mostly sold into the into The UK market.

2:21 So the next category then complements that. So portable power, these are the devices that take the power from the wall to wherever you need it in in the home. So I'm referring here to cable reels and extension leads. Again, another long established part of what the the group does. So that's 25% of group revenue. The remaining 25% is then added LED lighting. So this is a newer part of the group. We have quite a comprehensive range of LED lights, so used in both residential and commercial settings, both indoor and outdoor. The range, for example, would extend from a downlight that you might have in your home through to a very large floodlight that might illuminate, for example, a football pitch.

3:10 So so that's what we what we make and what we sell. In terms of who we sell these products to, we sell them to a combination of consumers and professionals. So two thirds of the revenue approximately would be for products that are installed by a professional contractor, I. An electrician. The remaining third products that are bought by a consumer, and that's particularly relevant for the portable power category. So we don't sell directly to the end user, or we certainly don't distribute to the end user. We sell through distribution channels that then serve the end user. We do sometimes, however, have relationships with the end user directly to negotiate the sale, and this is particularly relevant for the LED lighting category when you're sometimes talking about a quite a large complex early LED retrofit project.

4:05 In terms of where we operate, it's certainly a business with a UK heritage. So 80% of group revenue is into The UK market, but there is a more recently established international presence as well, which makes up the remaining 20% of group revenue. In terms of the markets that we're ex ultimately exposed to, we would say that we are driven by the construction, repair, and remodel market. That's what generates the demand for our products. And that's a market, as you'll see in a second, that throws off pretty good growth and certainly relatively stable growth ahead of GDP. In terms of our operations, we have a pretty significant manufacturing base within The UK market. Ultimately, that's where most of our products end up.

4:54 We also have a significantly sized manufacturing and r and d facility in China, which was established approximately twelve years ago. So we make ourselves in China roughly half of everything that we sell. We also have offices in various different countries to support our international sales presence. In terms of what makes us successful in what we do, so we have long established, well invested brands, excuse me, with a clear brand proposition. So we are generally speaking, we are not the most expensive products. We're not the cheapest products. Our price point is somewhere in the middle, but we offer above average design and above average quality. So the value for money proposition is strong and clear to those that buy our products.

5:48 We have some long established customer relationships in the distribution channels. So retailers and wholesalers have been working with us for a long time. It's a good collaborative relationship. They know that we can support them in what they're doing. We have, we believe, market leading product innovation, and that has driven us to extend our brand into new product categories successfully over time. And we support that product development with good, high quality, and low cost China sourcing, including making our own stuff in our own factory in China. And we have some flexibility in the way in which we distribute our products to our So they can pick it up for themselves in China if they wish, or we can deliver it to their branch networks in the country of sale if that's what they prefer.

6:44 So that, in a nutshell, is is LUCECO. If you're familiar with us, you will know that we announced our results for the first half last Tuesday. These are the highlights. So a very successful period for the group. So we delivered revenue growth versus last year in excess of 50%. Obviously, this time last year, you know, the world, including us, was somewhat disrupted by COVID. So some good growth naturally came there, but we actually also grew versus our h one twenty nineteen pre COVID comparison. So so certainly, we have progressed the business during the COVID era. That revenue growth has been translated very well into profit. So we've more than doubled our profit in H1 twenty twenty one versus the previous two years.

7:40 And that improvement in profit and profitability generated some a really quite strong return on capital. So we target a range of 30% to 40% return on capital. In the first half, you can see that we actually exceeded that. So 42.5, extremely good result. In terms of this progress, it was driven largely by three factors, which we highlight on the bottom of this slide. So significant new business wins during the last two years, so adding 27,500,000 to group revenue. There's no question that we have benefited from some of our customer relationships. So our customers some of our customers have, you know, grown well during COVID. We have grown with them, and I'll come on to speak more about that in a second.

8:32 And we've then supported that with really quite strong product availability. So the output of our own manufacturing facility in China has grown by 50% during the pandemic. So that has really helped us to to gain market share. Okay. So those are the highlights. Let me just take a a bit of a a a more detailed review of the income statement. So as I mentioned, revenue came in for the half at 108,200,000, more than 50% higher than h one twenty twenty. Okay. That number was disrupted a bit by COVID. But what was more important was that it was nearly 31% higher than the first half of twenty nineteen.

9:19 Now the market the market conditions that we faced in the half were undoubtedly favorable. I mean, certainly, there's been more money spent on the home by people residing more at home during COVID, but the market wasn't strong enough to justify that kind of growth. So in other words, that growth during COVID underlines that we took market share. We took it through new business wins, superior channel access, and improved products availability, And I'll come back more to talk about those in a second. In terms of the gross margin performance, so it came in at 38.5%. That was actually slightly better than what we did we we delivered in the first half of twenty twenty, but it was slightly lower than our record h two twenty twenty performance of 40.8%.

10:13 That was expected, and it does reflect some temporary compression from cost inflation that's affecting, to be honest, all manufacturers at the moment. And, again, I'll speak I'll speak more about that in a second. However, what we managed to do, despite the gross margin pressure that we faced, we kept our overheads under good control, and we managed to convert a good chunk of the revenue growth into profit growth. So good operating leverage on the revenue growth that we saw. And as a consequence of that, we managed to deliver a really healthy operating margin of 17.7% for the period, which actually was slightly better than last year's full year record performance of 17.0%.

11:06 Okay. So let's have a look at our performance versus the market. So I mentioned that, you know, we feel like we significantly outperformed the market in the first half. Let me just try to put that into numbers for you. So if you look on the right hand side of this page, I've zoomed in here on the growth that we've seen through what you might say is the COVID era. So growth from 2019, which was a pre clean pre COVID comparative through to 2021. And what I'm showing you is, you know, our growth versus what we would say is the market proxy for us. So starting with UK GDP growth because we are mostly a UK company.

11:53 Also then, more specifically, UK construction repair and remodel growth as well. So UK GDP edged slightly forward in h one twenty twenty one versus h one twenty nineteen. The repair and remodel construction market actually did better than the wider UK economy, and that's actually one of the great things about the market that we're exposed to. This often happens. Construction demand is slightly better than wider GDP demand. So the market that we're exposed to gave 2.5% of annual growth. In that same period, you can see that we in The UK grew by 13% per annum. So a very significant market outperformance, which we then supplemented with some good growth overseas as well.

12:47 Now that obviously, given how well we have done looking at that chart during COVID, it does then beg the question, what happens when, hopefully, The UK and the rest of the world moves at least beyond the pandemic, if not beyond COVID? The left hand side is intended to begin to answer that question. So I've looked back in time over the performance of the market and the performance of the company all the way back to the year 2000. So in the period 2000 to 2018, which is almost two economic cycles, there's a couple couple of conclusions that are clear. The first is that, again, UK repair and remodel construction has given off really quite good growth over that time period, averaging 4% growth per annum.

13:40 And, again, LUCECO has outperformed that. So we've delivered roughly double that amount of growth in our UK business. So market outperformance is not an unusual thing for this company. And, also, we have then supplemented that growth with some acquired growth from our acquisition of Kingfisher Lighting as well as some growth overseas as well. So market outperformance can reasonably be expected to continue after the world has moved beyond this pandemic phase.

14:15 Okay. So what drove the outperformance that we experienced in the last couple of years? So this this slide here is intended to give you an explanation of that. So there are a number of key drivers. If I start start in the top top left, we picked up during the pandemic a significant amount of new business, so totaling £27,500,000 of additional annual revenue. And as you can see from the table, it was focused on our wiring accessory business. This is our most profitable it's the most profitable segment within the business. And most of that growth came from really quite profitable customers.

15:00 It came from selling additional products to existing customers, which therefore needed no extra investment in overhead. So very profitable at the gross margin line, also very profitable at the net margin line. So so great business for us to have have won. Now, of course, we did lose some business as well. What I would say is that, obviously, the business that we lost was smaller in magnitude, but it was also lower margin, lower quality business than the business that we won. Moving to the bottom left, so superior channel access. What do we mean by this? Well, we are strongly associated with what we call the hybrid channel in The UK. So these are distributors that don't sell to consumers, and they don't exclusively sell to professionals.

15:56 They sell to both groups, which is quite unusual. So I'm thinking here of the likes of Screwfix and Toolstation. If you're familiar with the industry, you'll know those names. They're both parts of much larger UK listed businesses. So now these hybrid operators have done extremely well over recent years. They've significantly outperformed the market. Professionals, in particular, have slowly moved their allegiance towards these type of operators, particularly because of the multichannel capability that they have. So professionals can place their orders in branch, over the phone, online. They can click and collect. It's a very efficient and convenient, model for a professional in particular. So they've outperformed the market.

16:47 That, advantage was, accentuated during COVID. So, obviously, as professional wholesale electrical wholesalers had to close their physical branch networks during COVID, the likes of Screwfix and Toolstation were able to remain open. So it was a significant advantage for them and a disadvantage that they kept. And you can see that the impact of that here. So in the year 2020, so the COVID year, in aggregate, Screwfix and Toolstation themselves grew by 16%. The wider electrical wholesale market, declined by 16%, so significant outperformance. These hybrid operators, I estimate, represent roughly 12% of the electrical wholesale market.

17:39 But as you can see in the table, they represent nearly one third of my UK sales. So in summary, I am three times overweight with a group of customers that outperformed the wider market by 32% in terms of growth. So that's a significant advantage to us. But I stress that this is something that is actually fairly normal for for these types of customers to experience. They've outperformed the market over a long period of time, not necessarily to this to this extent, though. Moving to the right hand side. So, certainly, the things on the left generated significant demand for our products. We actually worked extremely hard to meet that demand and meet customer, you know, customer expectations.

18:31 And we did that by significantly increasing the manufacturing output of our facility in China. You can see that in the top right. So we're achieving levels of output. Hitherto, not achieved from that facility, so an extremely, extremely good performance. And then bottom right, there's no doubt that everyone in the industry has had to, you know, you might say, put up with longer lead times on products out of China caused by, in some cases, by component shortages,

19:04 in other cases, by, you know, extremely delayed sea container transit times. We combated that by increasing our inventory cover in our selling organization to make sure that we could continue to serve the customer. Okay. Moving on to the next slide here. So this gives you an idea of how our revenue came through by channel. The channels are listed at the top of the slide. So we have retail distribution partners such as DIY chains, online brands such as Amazon, and, you know, high street grocers that serve the consumer. We also work with the professional wholesalers to to serve the professional electrician, and we also serve what we call the hybrids that sit in between the two somehow.

19:52 So, you know, so there's there's, you know, there's those channels that we that we sell for, including professional projects, which is which is very relevant to the LED category. The growth by channel was certainly it varied a little bit. It's actually quite similar. The dynamics are quite similar to what we shared at the year end. So really very strong growth from our hybrid customers, but also recovering demand from professional wholesalers. So these networks found a way to work with COVID even more effectively as the pandemic evolved, and you can see that translated into good growth in the first half. And then finally, I would just say for professional projects, so a lot of our LED retrofit project work ends up going into commercial and institutional settings.

20:45 And that has taken a little bit longer to come back during the COVID period. I'm pleased to say that in the second quarter of twenty twenty one, this particular channel for us actually returned to revenue levels ahead of pre pandemic levels. So we're entering the second half with a broader base of market growth to call upon. Okay. So just quickly looking at the inflation first the second of the half we've the a

21:28 This this slide just shows you the biggest inflationary forces that impact LUCECO. So the US dollar RMB exchange rates, so we invoice quite a bit of our work in US dollars because we sell FOB. We buy nearly everything that we sell, make or buy nearly everything that we sell in China. So the RMB is an important exchange of currency for us. The other drivers are the cost of copper, the cost of plastic, and then the cost of a sea container from China to The UK. If you look at the charts, all of them have worked against us in the period. Collectively, we estimate that this will result in, over time, a £20,000,000 cost increase to the company.

22:17 £13,000,000 will occur in 2021. £7,000,000 will be deferred into later years by different hedging arrangements that we that we have in place. I think in short, though, we have the brand and pricing power to be able to pass this cost inflation on in the channel, and we have plans in place to do that. It would just take a little bit of time for that to happen. And hence, this is why we have a little bit of gross margin compression in H1, and it's also reasonable to assume that gross margin compression will continue as we get into the second half before then improving thereafter as we get into 2022. Okay. Moving on to Slide 10. So profitability bridge.

23:08 So this shows you the different drivers of the improvement in profitability that we've seen in the period. So the first column in from the left, you can see the impact of cost inflation. So we're calling out £3,000,000 worth of of that inflation rebill coming through in h one. Towards the right hand side, you can also see that that was supplemented by roughly £1,000,000 worth of adverse currency movements at the gross profit line. So in other words, £4,000,000 of the total £20,000,000 cost inflation has come through so far. The good news is that we've been able to offset that. So we've offset that with some selling price increases.

23:53 We've offset that with a really quite helpful manufacturing efficiency gain in our own factory. And we have also offset that with, as you can see in the middle of the table there, really quite good operating leverage from strong sales growth. So GBP 40,000,000 on the top line translating into GBP 12,000,000 on the bottom line. So that was the key to us maintaining our profitability despite a significant amount of cost inflation out there.

24:25 So just quickly on overheads. I won't go into this in a in a lot of detail. The bottom line is really that we are keeping our overheads under good control at the discretionary levels. So we are being just as diligent as we were before around travel cost and entertainment. Really, the only reason why our overheads increased in the period is, a, because we're going to pay quite rightly a little more bonus to our people for the strong performance and also because we're investing in things like m and a activity, which hopefully will give us a, excuse me, a payback in time. Okay. Just finishing off on the on the cash flow and balance sheet.

25:11 So, again, if you're familiar with us, you you'll know that we set a whole bunch of public targets for ourselves. So it's quite clear what you should expect when you in terms of financial performance when invest in LUCECO. One of those targets is that we say that our free cash flow margin should be between 1015% of revenue. Now in this particular half, it came in a little bit less. So if you can see in the table there, the free cash flow margin for the first half was just under 5%. Really, the only reason for that is because we invested, as you can see further up that column, roughly £10,000,000 extra in working capital. And that was all inventory to be able to continue the customer service despite the supply chain disruption that I referred to earlier.

26:01 We did our very best to offset that with some you know, with collect collecting cash from customers a bit quicker. But nevertheless, it did result in slightly lower free cash flow margin for the first half. This should get better as, hopefully, supply chains return to normal. And that slight shortfall in free cash flow did, therefore, result in slightly increased net debt for the half, leverage. So our net debt to EBITDA remains at nil point five times. And that within our capital structure, that does allow roughly £80,000,000 of headroom for borrowing to invest in acquisitions, which we fully intend to do going forward.

26:47 So no change in the overall leverage position. And then finally, the balance sheet, there's nothing much more to say here. You can see the impacts of being increased inventory days, but you can also see the nine day improvement year over year at the bottom in data days. So we are collecting our cash from customers quicker than we ever have. So that was certainly pleasing to see. With that, I shall pass you on to to John. Thank you, Matt. That's very helpful and comprehensive. So if you move on to the next slide, Matt, we'll look at the

27:28 other business in terms of the individual product lines. The first and most important product line we have is wiring accessories, which is approximately 50% of group revenue, and you can see it had an extremely strong period. The sales growth against 2020 was over 70%, and the operating margin improved up to 20.8%. So, undoubtedly, significant market share gains. How have we done that? Well, as Matt said earlier, those customers with whom we are particularly strong had a very strong period in the pandemic. So the likes of Screwfix, likes of Toolstation, the likes of Amazon, and those other customers with strong online and digital platforms are the ones who have outperformed.

28:19 And those are the customers with whom we are very overweight. We also won, some large, new contracts in existing customers, which is why the operating margin has also been so strong.

28:39 So if we move on to the next slide, Matt, LED lighting is about a quarter of group revenue. Again, it has grown very strongly by north of 30% in the half, and the operating margin has also almost doubled. Having said that, the recent increase in the shipping costs will have disproportionately affected LED lighting. So the margin story going forward here is gonna be slightly more challenged. As Matt said, the cost of the container from China to Europe has increased by over sevenfold, and LED lighting from a volume density point of view with is not as as good as wiring accessories.

29:37 Sorry. If you just go back, we've what we have done, however, within our lighting category is Harry's successfully moved into the in the more technical, more specified, higher margin areas. We do believe that over time, we can move the operating margin of our lighting business up into sort of 12, maybe 13% margin. But as I say, it's gonna take a bit of time.

30:10 Okay. Next slide. Yeah. Pausible Power. This is the master plug brand where we have an extreme an extremely strong UK market position of approximately 40%. And, again, in the period, the sales growth was extremely strong. We've won new business in Europe, and we've won some new business in The US. We don't anymore have a sales operation in The US, but but we do have some customers who we supply

30:48 directly from the Far East. Again, the operating margin has improved up to 6%. So although it's a relatively low margin business, this, from a working capital point of view and a and a return on capital point of view is extremely strong because all of the all of the manufacturing is is hub contracted, and we supply most of the product FOB. So we don't have to stock it either.

31:21 Matt, do wanna move? So I'm not gonna list some other activities that we've carried out in the period. We have invested a lot in our UK warehouse and distribution up in Telford where we've implemented a new warehouse management system, which will improve our customer service and, hopefully, therefore, our market share.

31:59 We've also made significant further investments in our digital marketing capability, and we have been working on launching new websites, which will go live later this year.

32:23 I think one of the one of one of the reasons that our business has been so successful is the investments that we have made and continue to make in our manufacturing plant in the Far East. We are the we are the only UK wiring accessory brand that actually owns our own manufacturing. And as a result of that, we are able to invest in the process much more efficiently than our competitors. So here are some examples of investments we have made, both at the larger and the smaller end. And overall, this year, we will have invested over £2,000,000 in automation at the factory with a payback period of approximately two years.

33:21 This is an increasingly important part of any investor story, and we believe we have very strong ESG credentials. So by the end of this year, we kind of offset offset all of our scope one and some open two greenhouse gas emissions. And we will have a plan to quantify all of our scope three emissions. In the bottom left of this slide, there's a little bit about our EV charging opportunity.

34:06 So later this year, we'll be launching a new range of EV chargers, which we believe is a huge opportunity for us. As you know, by 2030, all new vehicles in The UK will be either hybrid or fully plug in electric. And, therefore, every every residential home with off street parking will have to have a high power EV charger. So we reckon that by the middle of the decade, the market will be worth somewhere between 4 to 500,000,000, and we would hope that we would be able to achieve our normal market share of of of 10 to 15%.

35:01 Our customers, such as house builders, such as Screwfix, such as the electrical wholesale channel, will be the people who are supplying this, well, into the market. So there's no reason that we are not able to get our market share.

35:18 Okay. Outlook. The market has been very strong. The first half was significantly stronger than what we experienced last year. And as you can see, our revenue growth in the first half was over 50%. In the second half, we think things are gonna get a little bit softer. You read that construction is being held up by shortages of other materials, but, hopefully, this will be a reasonably short term problem. If you look at the other indicators of hygiene transactions, planning app applications, and the measure of the architect's workload, you can see that the RMI market in The UK is forecast to continue to be strong. We have claimed in the past that we are a five to 10% organic revenue growth business.

36:29 So the growth rates that we have been achieving recently are unlikely to continue, but we do believe that we can continue to grow the business against this reasonably strong market background. So the outlook for the rest of this year, we have confirmed our guidance as our operating profit of approximately 39,000,000 on a revenue of at least 220,000,000. As I said, we believe that the market will remain strong into next year. Inflation is is the major challenge that as a business, we are now facing.

37:15 Shipping costs have spiked up. Commodities have spiked up. And we can pass all of this into the market, but, inevitably, there will be a certain, amount of time, you know, required to get all the customers to accept the new pricing. So we anticipate that our gross margin will be will be weaker in the second half of this year. But our operating margin, we should still be able to make a very healthy return. And then into next year, we should be able to improve our gross margin as we pass on this inflation into the market. Okay. With that, I would like to turn to any questions.

38:01 John, Matt, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. I just want the company to take a few moments to review those investor questions submitted already. I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, will be available via your Investor Meet company dashboard, and we'll send you an e mail when that's ready for your review. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected to the opportunity provide feedback in order that the company can better understand your views and expectations. Matt, John, obviously investors have submitted a number of questions through today's event and perhaps I could hand back to you. And if I may ask you to read out the question and give response where it's appropriate. Thank you.

38:46 So the first question for Mark is what proportion of the market share gains you have made may be deemed to be temporary and as a result of the stocking issues by competitors? I think it's very hard to judge how much is temporary and how much is permanent. I think I think the stocking issue was a benefit, but I think a much larger benefit was the progress made by the likes of Screwfix and Toolstation, and as I said, you know, other customers with a strong online and digital platform. Their rate of growth will definitely slow, and we can see that in the numbers, and it has slowed.

39:39 Whether those business those businesses will actually go backwards, which would result in us losing market share. I don't think so. Screwfix are opening another 60 to 70 branches this year. I believe, you know, their, you know, their business model is so successful that they will continue to grow and as a result of which we will get a certain amount of or planet growth and supply chain and market share gains on the back of that. The stocking issue, which you specifically asked about, yes. I mean, that probably contributed to one or 2% of growth. Maybe a little bit more, but I don't think I don't think much more than that.

40:30 The second question, any views on the medium term outlook for costs, raw materials, labor? Again, very difficult to know. Raw materials have flatlined sort of since the late spring. Actually, copper is is down from its peak. Shipping cost is the is the big unknown. We thought when it was at $12,000 that it couldn't, in any way, go higher, and then it went up to 15. We think that, obviously, can't last forever, but it's very hard to say when it will reverse. You know, commodity prices are highly elevated levels. I think probably copper can stay higher for longer.

41:26 What's happening with the electrification of the world, you know, moving away from fossil fuels to renewables that will use a lot of copper. Things like plastic, you would think over time would return to normal, But it's very difficult, you know, to predict these things. A question from Andy about the supply chain issues. I mean, the biggest one here is the shipping, the lack of availability of containers. It is taking twice as long to get a container from China to The UK because the ships are having to sit out of port at at each end.

42:23 When will that improve? Well, we thought it would have improved by now, and it hasn't. Chinese New Year, which is is the February 1, means that probably shipping volumes will be elevated between now and then. I mean, ultimately, until global consumption of products returns to something approaching normality, supply and demand on shipping is gonna be out of is gonna be out of kilter, and you're gonna have elevated shipping rates. How long it will be, you know, before supply and demand, you know, reach a balance?

43:09 I I don't know. There's a lot of anecdotal stuff about how long it takes to build a ship, how long it takes to invest in some port infrastructure. And, of course, all of those things, you know, they take a long time. So it could be a long time. Can I jump? I'll just add one thing to that. Nick, you know, obviously, this is affecting everyone. I mean, even if you don't make your stuff in China, the reality is that you'll be reliant upon your components from China. So it's an industry wide phenomenon. What I would say is that we're quite unusual in as much as we sell half of our revenue FOB. So the customer is responsible for picking up the product from us, from our from our factory gates in in China.

44:02 The the the the container cost is their problem and not ours. So we're in a I'm not saying it's easy, but we're in a we're certainly in a better position than most because of our use of that FOB delivery method. Yeah. You know, that's very true. Also, another supply chain issue is in the supply of electronic components. So computer chips and ICs have been a major problem and continue to be a major problem. We sell quite a lot of products involving electronic components. When that will ease again is very hard to say.

44:50 It takes years to build a new factory to make electronic components. So you can see that problem, you know, could easily go on, you know, for one or two years even. We just don't know. Are there product lines that you consider adding to the existing range? Question from Simon. Yes. I mean, we add products into our range all the time. We spend 3 to 4,000,000 a year on new product development. This historically has been a major driver of of the group's growth. The products that we're particularly excited about at the moment, I mentioned earlier, EV charging, we think a huge opportunity for us.

45:40 We have very strong relationships with house builders. We have very strong relationships in the distribution channel, which will be selling these products into UK residential, hospital, car parks, schools, hotels, you know, workplace. We should be able to, we hope, achieve our market share in this category, like we have, for example, with consumer units. So the circuit protection range that we sell, we we started from scratch about ten years ago, and we're number three in The UK market. If we can get our share of this EV charging opportunity, it would be highly valuable. We have a new product range that we've been working on for the last year, and we are launching it, you know, by the end of this year.

46:36 So we have very high hopes for that. Another question for from Simon, what capacity do you have at your factory in China? We think that currently we're at about 80%, But as we invest more in the kind of automation that I talked about earlier, you can improve the productivity of the existing plant. So, you know, faster machines, more efficient machines, smarter ways of doing things means that you can increase the throughput over the same floor plan. So if we do that, then the capacity, we know we're probably at sort of 70%.

47:31 A question from Kenneth. Are there any sizable acquisitions in the pipeline? Depends what you call sizable. We we can spend about 80 to 90,000,000 without issuing equity. We are working on three acquisitions, which if we did them all, would, equate to about 70 to 80,000,000. We would hope to do at least one or two of those in the near future. Matt, John, I I think I might just jump in there on the basis that, you've been very kind and answered every question that's coming from investors. So firstly, thank you to those investors who take time to submit those questions and for your kind responses. I know investor feedback is important to you, we are coming up to the hour. So perhaps before I redirect investors to provide some feedback, I could ask you just for a few closing comments to wrap up with.

48:31 Well, I mean, certainly, thank you to everyone for taking the time to to hear our results this morning. It's always a pleasure to be able to reach out to investors directly like this. It's the second time we've done it. And, you know, certainly, also, it's a great opportunity for us to, you know, through the questions that you ask, get a sense for, you know, what is important to our investors. And obviously, we take all of that into our thinking for the future. So thanks again. Thank you, Mark, and thank you for your time. That's great. Matt, John, thank you once again for updating investors this morning. Can I please ask investors not to close this session as we will now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations?

49:22 This will only take a few moments to complete, but I'm sure will be greatly appreciated by the company. On behalf of the management team of LUCECO, I'd like to thank you for attending today's presentation. That now concludes today's presentation, and good afternoon to you all. Thank you.