Luceco (LSE:LUCE) — Interim Results 2022

0:00 Good afternoon, and welcome to the LUCECO PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could 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 will review all questions submitted today and public responses where it is appropriate to do so. Before I'd like to submit the following poll. And I'd now like to hand you over to John Hornby, CEO. Good afternoon to you,

0:31 sir. Thank you very much, and thank you very much, everybody, for joining this webcast of our first half results from 2022. Turning to slide three. Our revenue in line with what we said in the July update at one zero six point four with operating profit of 11,500,000. This compared to the pre COVID period is an extremely strong result. However, disappointingly, is not as good as we made in the first half of last year. As we know, there's been a significant slowdown in the DIY demand particularly. And as stated before, our customers overstopped in that period, and we are now feeling the effects of ongoing destocking.

1:20 However, as I say, up against a 2019 pre pandemic comparative, our revenue was up almost 30 percent, and our operating profit was up more than 60%. And we have well outperformed the market during that time. Yeah. Turning to the next slide. We are well positioned for the macroeconomic uncertainty ahead.

1:48 We did a lot of work last year on passing on the inflation that we experienced in the likes of the commodity prices and also freight rates. And our gross margin in the second half of this year will be significantly stronger than in the first half. We also made a successful entry into the EV charging market, which we think is a huge opportunity for the future and about which I will speak more later. And we also purchased an excellent lighting company called called DW Windsor. We made made a a lot lot of of progress on our low carbon footprint, which we believe will become an increasingly important differentiator in the market, and we have a healthy balance sheet. The for the second half of this year well, since we last spoke to the market, we have been trading in line with our expectations.

2:41 The consumer DIY demand is expected to slow, but we have been expecting that for some time. However, the professional contractor remains strong, and therefore, we expect full year earnings to be in line with current market expectations. We are therefore emerging from the pandemic as a stronger business with significant significant long term potential growth prospects. And with that, I will hand over to Matt. Okay. Thank you, John. Good afternoon, everybody. Just before I take you through the detail of the financial performance, I just wanted to pull out some of the key highlights within our numbers on this slide. So for those of you that have followed the LUCECO story, you will know that the last year last year was an outstanding year for the group.

3:30 Within those outstanding 2021 results, we flagged that first half the first half was particularly strong. We enjoyed buoyant sales at high margins. The buoyant sales were helped by the pandemic. In h one twenty twenty one, the furlough and vaccine programs combined to give consumers the confidence to spend, but sporadic lockdowns diverted that spending disproportionately towards home improvement, and that obviously benefited us. As and our margins at that stage, so the first half of twenty twenty one, were still healthy as they had not yet been meaningfully impacted by the wave of input cost inflation created by the global increase in demand for goods.

4:16 In the current half year, we have perhaps inevitably fallen short of that record prior year performance as home improvement activity has begun to normalize post COVID, and normalization of both demand and supply this year prompted some of our large distributor customers to reduce their own inventory of our products in their supply chains. This left our first half sales temporarily lower, widening the gap into last year. I'll talk more about destocking in a moment. In terms of the numbers themselves, you can see that revenue came in at 106,400,000, which was within 2% of last year's level, and that was the function of a reduction in like for like sales broadly offset by new sales contributed by acquisitions.

5:10 Adjusted operating profit came in at 11,500,000, which was 40% lower than last year, reflecting that reduction in like for like sales. And the reduction in EPS at the bottom of the page broadly mirrored that of adjusted operating profit. Now, obviously, it was a bit disappointing to fall short of last year's numbers, but we do need to put this into the appropriate context. So as our markets normalize, it is useful, we believe, to compare our results to the last set that we published pre COVID, namely h one twenty nineteen. We have we have made this comparison on the slide, as you can see. And as can be seen, the broader context of these results is that our performance remains well ahead of pre pandemic levels, underlining the strategic progress that we have made over recent years, and John will expand upon that later in the presentation.

6:08 Okay. So moving on to the next slide. Just wanted to give you a bit more color behind the profit performance. Once again, here, we provide an h one twenty nineteen pre COVID comparison. As I mentioned a moment ago, revenue of 106,400,000 was the product of two factors. So firstly, a circa 17% like for like sales decline. And secondly, revenue added via the acquisition of DW Windsor and Sync EV. One factor broadly offset the other, leaving group revenue only 1.7% lower than last year, but revenue remains nearly 29% higher than h one twenty nineteen, meaning we meaning we have undoubtedly gained share during the pandemic.

6:58 Gross margin came in at 34%, which was certainly lower than last year's record first half performance of 38.5. This was largely due to the decline in like for like sales. So last year, we saw a particularly strong demand for wiring accessories, which is our highest margin product category and one which we make ourselves in house. This means our manufacturing overhead at that time was being spread over very high production output, and that benefited gross margin. This year, of course, we have seen the opposite effect, holding back margins. Some of the reduction in wiring accessories volume this year has come from the impact of customer destocking that I referenced earlier.

7:43 And, of course, destocking is temp fundamentally temporary in nature, meaning that production utilization and therefore margin should improve once customers have rebalanced their own inventory levels of our product. We are also seeing margins benefit from the evolution of cost inflation. We saw the selling price increases that we put in place to combat inflation come through in in full effect during the first half. And the input cost inflation itself now seems to be reversing in areas that most impact us, e g commodity prices and c container rates. Although, clearly, the situation is quite fluid.

8:29 Collectively, this means we ex exited the half at a gross margin of 36.5%, and that was higher than what we achieved on average for the half as a whole, which is obviously encouraging momentum as we start the second half. Turning to overheads. These were kept in tight control. Acquisitions added £3,700,000 of overheads to our half yearly overhead bill, but but total overheads only increased by 2,200,000, meaning that we lowered overheads across the rest of the group, and this was thanks to lower variable pay and controlled discretionary spending. The net result of all of this was an adjusted operating profit of £11,500,000 that was 40% lower than a truly exceptional h one twenty twenty one performance, but still 60% ahead of where we were pre COVID.

9:27 We were able to make some good progress on the tax line, so our adjusted effective tax rate has dropped steadily over recent years as we have managed our tax matters better, and this year was no exception to that to that trend. We achieved an effective tax rate of 14.3% for h one and should be able to maintain a tax rate of 15% for the year as a whole. Okay. So this slide provides a bit more detail on the drivers of the revenue evolution. I mentioned earlier that our performance was impacted by customer stock movements. This drove the majority of the like for like revenue decline that that you can see at the top of the slide. So let me just explain this in a bit more detail. So the construction products industry as a whole has experienced strong market conditions since the second half of twenty twenty, particularly in the home improvement sector.

10:27 However, production and supply chain capacity in the market has not always been sufficient to fully meet that demand, having been reduced in the early days of COVID. In h one twenty twenty one, distributors serving the industry, I e, customers, responded to tight supply chain conditions by stocking up to maintain service levels and meet expected future demand increases. In short, they bought more of our products than they sold, and, obviously, that boosted our sales. In h one twenty twenty two, normality has begun to return to both demand and supply, allowing our distributor customers to reduce their stock levels, buying less from us than they have sold.

11:15 We know this because with help from our customers, we have been able to compare their sales of our products to end users with our sales of our products to them.

11:26 Any difference between the two is a stock movement. We believe the net effect of these stock movements was circa 15,000,000 was a circa £15,000,000 reduction in rev revenue relative to h one twenty twenty one, which is obviously significant. Customer stock changes therefore drove the majority of the reduction in like for like sales. Absent these actions by our customers, our like for like sales would have declined by approximately 2.5%, not the 16.5% that you can see at the top of the slide. I'm pretty sure this was happening to some extent across the industry, but the impact on us is large because, a, we have large customers serving the hottest construction market, namely home improvement.

12:13 And, b, these customers buy from us directly in in China on what's called an FOB basis. So that means they buy product on long lead times, and long lead times require them to hold a lot of inventory. In 2021, we were not fully aware that this was happening. Manufacturers like us generally don't have great visibility of stock of their product elsewhere in their supply chain, but we have worked hard over the last few months to get and keep the visibility that we need. This destocking phase will continue into the second half of this year and into early twenty twenty three, but there is some good news within this. Firstly, the destocking phase this destocking phase, like all destocking phases, is fundamentally temporary in nature.

13:03 And this one is most unusual in terms of its size and duration. It is very much a function of the unprecedented circumstances created by the pandemic. And secondly, end user demand for our products is clearly better than our revenue line currently suggests.

13:23 Okay. So there's no question that temporary customer destocking meant that our sales underperformed with the wider market in the period. But the key question really is, how did we perform versus the market absent destocking? This is relevant because this is the performance that we will see when destocking inevitably comes to an end. In short, we believe our addressable market slowed by 2% in the period. Admittedly, that's a 2% that's a 2% decline net of a big price increase driven by cost inflation across the industry. And given our selling prices are on average 12% higher than a year ago, We believe and and we believe we fundamentally followed the market on price.

14:09 This really says that market volumes are about 14% lower than a year ago, and clearly, that's a fairly significant slowdown. The majority of the slowdown, as you can see at the top there, came within the DIY market as consumers rediscovered old ways to spend their money, I e, on travel and entertainment. Whereas the professional residential RMI market, I e, the residential electrician, was by contrast that part of the market was by contrast flat. We believe this held up better since electricians continued to complete residential renovation work that they won last year. Nonresidential and infrastructure sectors were more active than last year, which is very encouraging, and we saw the benefit of this of this in our LED project installed businesses.

15:02 As I mentioned earlier, we estimate that our like for like sales decline absent customer destocking, in other words, the decline in end user demand for our products, was 2.5%. This means end user demand for our products has broadly evolved in line with the wider market over the last twelve months. Taking a long bit longer term perspective, we believe we have increased our share of the market during COVID, I. E, since h one twenty nineteen for two reasons. Firstly, we have added revenue and gained share by recommencing our m and a strategy. And secondly, on the previous page, you may have noticed that our sales have grown by 12.8% on a like for like basis since 2019.

15:51 And this is despite a a strong temporary headwind from customer destocking right now. Were it not for that, we estimate that we would would have grown by 21% over the same time period, and we believe that that level of growth is faster than the market.

16:08 Okay. On the next slide, this effectively mirrors the slide that you saw before for revenue, but this time showing operating profit. In the top chart, you can see we experienced a £6,100,000,000 like for like reduction in OP. We believe all of this is attributable to customer stock changes. Indeed, we estimate that if our demand had mirrored end user demand, our profits would have actually grown slightly year over year, and this is thanks to the progressive recovery of input cost inflation, which I'll talk more about in a moment. Customer stock changes had a significant impact on revenue and profit. This is because they largely involved the same high margin wiring accessory product category sales that I referenced earlier.

16:58 As you can see in the bottom chart, the group has delivered significant like for like profit growth during the pandemic. And again, this was despite the temporary headwind of customer destocking. And therefore, profit will benefit when destocking inevitably comes to an end. Okay. So this slide provides an update on on an old favorite if you've been a party to LUCECO webcast in the past. So this is input cost inflation. My last update on this was back in March. At that time, I said that input cost inflation and currency movements collectively, and and these are, you know, effects that have occurred during the pandemic, they were on course to add £25,000,000 to our annual cost base.

17:49 The good news is that inflation is now moving in our favor overall, but, clearly, the situation is is is fairly fast moving. My latest estimate, as you can see top right, is that inflation will now add £21,500,000 to our annual cost base, not the £3,500,000 sorry, £3,500,000 less than before. And to be clear, this is due to reductions in price, not volume. Our rate of spend has obviously slowed this year as activity in the business has slowed, but that's not a factor here. So for this purpose, I have kept activity levels constant throughout this analysis. Up until this year, the impact of cost inflation was largely confined to the cost of product, but but we are about to see this expand into the cost of labor and services, I. E, overheads.

18:43 It's very difficult to say at this stage what the cost of this will be. In my latest inflation estimate at the top of the page, I have shown what I think is a fairly conservative view, and that is a namely a £3,200,000 or 7% increase in our overhead base excluding depreciation.

19:02 We will we will obviously do what we can to minimize that whilst retaining the talent that we need within the business. The good news here is that we have the selling prices in the market today that can accommodate this amount of inflation in aggregate as the bottom charts attempt to show. So looking at the right hand chart, the selling price increases we have in place today will generate approximately £22,500,000 of extra annual income, and the prices are set, let's say, are in the market as we speak. The only thing that needs to happen from here is we need to see a small annualization benefit from the prices that we have in place.

19:48 Comparing to the left hand chart, the £22,500,000 of income is actually £11,000,000 more than the total annual inflationary build that we expect to see. And, obviously, that provides a little bit of room to maneuver as inflation evolves. While selling price increases and cost inflation are fairly well balanced in total, the bottom charts also show the lag we have seen between experiencing the inflation and passing it through. So to expand on that, up until the end of twenty twenty one, which is the dark green bars, our annual cost base had increased by £16,500,000, and £7,000,000 of this had been offset by selling price increases. And that therefore means that by the end of last year, cost inflation had reduced our annual profit by just under 10,000,000.

20:40 Now that's a big number, but it reflects quite how unusually sharp and widespread the inflation was. The good news is that the selling prices have now broadly caught up with inflation as we said that they would. So in 2022, we have reversed the 10,000,000 profit headwind and therefore insulated our gross profit from inflationary forces. This catch up in the recovery of input cost inflation helped with our underlying profit progression in the period. It's very difficult to say what happens next. If aggregate inflation impacting us continues to reverse, we are likely to see the same lag effect in reverse, I. E, cost deflation leading selling price deflation, and therefore, that should theoretically give us a temporary profit boost in the future.

21:36 Okay. So just finishing up on the numbers. This slide shows working capital, cash flow, and net debt performance. As you can see in the top left, supply delivery lead times in the first half were longer than they were on average in 2021, but not actually any worse than they were at the very end of last year. In fact, if anything, we've seen lead time shorten as 2022 has progressed with ports and container congestion becoming much less of a problem. We did keep our inventory cover fairly high in early twenty twenty two, but supply chain normalization now gives us the opportunity to bring this down, and we are therefore targeting a circa £10,000,000 reduction in inventory over h two.

22:22 The chart in the bottom left shows our historic free cash flow generation by half year. Cash generation is naturally weighted towards h two in this business, so h one is never really a a high point for us. But h one twenty twenty two was certainly not our best, to be honest, and that this was really due to keeping inventory high. But this should turn around in h two as I've described. Our borrowing and debt leverage increased in the half. We did make fairly large tax and dividend payments against strong prior year earnings in the period, but plus, of course, we completed the acquisition

22:59 of Sync EV. I've got every confidence that debt will reduce in h two as inventory reduces and cash flows benefit from our improved gross margins that we're carrying into the half. But overall, I feel like we have a healthy balance sheet with ample committed facility headroom and leverage in the middle of our targeted range of one to two times EBITDA. So we're well prepared for any macro headwinds that may come our way. I will hand you over to to John. Thank you, Matt, for that excellent summary.

23:33 As Matt has said, you know, it's obviously disappointing to be presenting results weaker than the same period last year. But as per this slide, I think it's important to keep it in the context of the period before the pandemic. So revenue up almost 30%, operating profit up 60%, operating margin two and a half percent higher, and EPS up as much as 87%, which is a pretty excellent performance in that context. And I'm just gonna go through some of the other areas of the business where we have made significant progress. Before I do that, some of the longer term market drivers. So we like the industries that we're in, and these are some of the reasons why. Every every few years in The UK, there are new electrical standards, and these are driving product innovation and more demanding regulations which increase the value of our products.

24:32 Consumer units, for example, last year had a major upgrade and more and more as EV charging and solar installations are installed, more and more consumer units will need to be changed and updated, for example. Other new technologies as an example here of a plastic wall socket that we used to sell for for

24:54 about one pound. Now we sell a USB socket for approximately eight pounds. As we sell millions of sockets, this is an example of where innovation has greatly increased the value of the category. Ongoing investment in the housing stock in our country has been driving UK residential RMI spending well above average rates of GDP. In fact, over the last twenty years, UK Resi RMI has been approximately 4% per year, and annual house prices have been in excess of 5% per year. And because of the pandemic, more and more people are obviously spending more time working from home. This, we believe, will be driving further investment in the housing stock.

25:44 Also worth pointing out that as many as 4,000,000 homes in The UK fall below the decent homes standard and will require further investment. And And finally, the climate emergency. The electrification of transport and the electrification of heating will require a general upgrade to the residential electrical systems, which will require more of our products and more of the accessories and peripheries that we sell, and therefore should benefit us over the longer term. So a review of we have grown against the pre pandemic comparator. As I said before, we have grown almost almost 30%.

26:30 That's a market which has grown only 15%. So new business wins, and we've been overweight with successful customers such as Screwfix and Toolstation, and also some excellent m and a talk about later. Particularly, the EV opportunity where we purchased a small business called Sync EV earlier this year, which will give us access to a market that we believe by 2025 will be worth £500,000,000. We've also become more of a diversified business with less exposure to the consumer channel. As you can see in the table in the top right, our professional projects and our professional wholesaler business where we are supplying the contractor has grown as a percentage of the overall turnover.

27:28 Also in the period, we have closed underperforming businesses in France and Germany, and now all of our overseas startup businesses are making decent returns. This has enriched our overall group operating margin. This is some examples of the innovation circuit protection. As I said earlier, a whole new range of regulations came out last year, and that has driven further increases in the value of this category. We are constantly investing in our product ranges, and historically, this has been a major driver of the group's growth. On the on on the top right, you can see some examples of the product innovation we've done in the business called Kingfisher Lighting that we bought in 2017.

28:19 When we bought that business, it had turnover of approximately a lamp 7,000,000. I was making about £1,200,000 profit. This year, the turnover should reach approximately 17,500,000, and we should make profits in excess of £2,500,000. So that has been a hugely successful acquisition from us. And we're hoping that we can do the same with the d w There's some information on the EBE charging business that we bought. We are launching new products, particularly high wattage phase three products later on into next year.

29:08 Gonna move the slide. Other areas of the business where have been moving forward, we have invested a lot in the training of apprenticeships and other Christians. We believe that if we invest in the next generation of contractors and we educate them in the wider market, but also on using our products particularly, that we can increase their loyalty to our brands. On the climate climate side, as you can see in the graph on the top right, we have one of the lowest carbon in densities in our sector, and we have recently joined the science based targets initiative. This is an area where we think our green credentials can also help us in the market as more and more our customers and contractors are highly conscious of the climate impact of all the products that they are buying.

30:07 And lastly, we have invested a lot in our people. We have a 7% improvement in our employer satisfaction survey, and we've invested over seven thousand hours in employee training. And now I'll just update a little more on the acquisitions. So is an outdoor lighting business in the public realm. So so major lease selling to local authorities has roughly a 14% market share of a £300,000,000 market, and it's highly complementary with the Kingfisher business, which I mentioned earlier. We paid approximately seven times EBITDA. And last year, it had revenues of approximately 23,000,000, which it'll have similar revenues this year.

30:58 The progress to date has been excellent. We've been integrating it with the group's ability. We have reengineered products, and we believe we can significantly improve the gross margin of this business going forward. It has an excellent brand, an excellent team, and an excellent position in the market. And we think, you know, long term will prove to be an excellent addition to the group. SyncEV is a business that we invested in last year, and we completed the acquisition of in March this year. Primarily focused on home and residential EV charging devices. It has only a 2% market share so far of a market, which is forecast to increase extremely quickly up to 500,000,000 by 2025.

31:48 We paid approximately £10,000,000, and the business turned over £3,000,000 last year. This year, however, that will more than double up up to £7,000,000, and we think think we can double it again to approximately £15,000,000 next year. We are using our existing commercial teams for the distribution of this product. And And as as a a result, result, it has has an extremely high operating margin. So the outlook for the future. Just before I go into that in specific detail, here are some of the market trends we are experiencing currently. So residential DIY, this is the area which was particularly strong in the pandemic as people working from home and locked down at home spent an unusually amount high amount of money on their DIY.

32:47 As well as an increase in demand, we also saw a significant pull forward of demand. And therefore, after such a such a busy period, there is an inevitable weakness. On the residential side, on the professional contractor, again, it is weaker than before, but it's still significantly ahead of 2019. However, the nonresidential and infrastructure sides of our business have been performing very strongly, and market actually continues to be highly robust. For example, Kingfisher Lighting, mentioned before, unit sales are up over 30% this year. So the outlook for the rest of the year.

33:36 Trading's been in line with expectations in the second half so far. We were anticipating the consumer DIY activity to slow, and it has been doing so. But as I said earlier, the professional contractor market has remained reasonably strong and broadly stable. Improving gross margins will mean that our second half profit will be considerably ahead of the same period in the the pre COVID twenty nineteen comparison. Indeed, our gross margins in the second half of this year will be considerably higher than in the first half. Therefore, we expect our full year earnings to be in line with current market expectations.

34:23 And with that, I will hand over to any questions. John, Matt, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just using the q and a tab situated in the top right hand corner of your screen. But just for the company to take a few minutes to review the questions submitted today, I'd like to remind you that recording of this presentation along with the copy of the slide and the published q and a can be accessed via your investor dashboard. John, Matt, as you can see, we've received a question throughout today's presentation. Thank you to the investors for submitting that. We've just got another one coming as well. Could I just ask you to read out the questions and give responses where it's appropriate to do so, and I'll pick up from you at the end? Okay. Yeah. Happy to do that. So, John, the first question appears to come from yourself, so from John h. Oh.

35:11 So why does Sync EV get such poor customer reviews? 80% of Trustpilot reviews are one stop. Yeah. I mean, that's a very fair question. They were a victim of their own success. So the business grew very strongly last year, and it was a very small team. Their sales exploded at the end of last year and the early part of this year before we made the acquisition, and they didn't have enough technical support and after sales in order to keep all of their customers happy. Since acquisition, we've increased the amount of technical support and after sales customer service considerably from actually one person up to five persons.

36:05 And we've also improved the products in terms of reliability and the software installation. So I'm very confident that we we can can improve the Trustpilot reviews from here on in. So the new products that we've launched that we've actually made in our own factory in China have been very well received by the market. And as I say, we've adequately resourced the after after sales and and customer service element of the business, which prior to acquisition was lacking. Okay. So next question from Ian. What do you see as the biggest opportunity and the biggest challenge in the coming year?

36:54 Well, I think the biggest opportunity would be EV. We have a very significant market share of UK residential electrical. We sell more sockets than anyone else in this country, particularly particularly into, as I said, the residential space where EV chargers are primarily gonna be located. So if we can convert some of that market share into a meaningful market share in the EV charging category, it should result in a very large and successful business for us. The biggest challenge is no doubt the wider economic macro situation. That's obviously changing by the hour as the new government makes their plans, and we will see how that how that plays out.

37:44 But there's no doubt that the economic backdrop for for next year is gonna be more challenging than it's been for a while. So we'll have to see how that plays out. Matt, do you wanna add on to that? No. I think that's a great summary. And then the final question we have so far is from Mark. So thank you, Mark. With the EV charging market, how do you see the competitive pressures in growing share? Yeah. I mean, look, we have a competitive in terms of price and cost. We're manufacturing it at our own factory in China. We have a competitive position in the marketplace in terms of our brand. Our BG brand is highly accepted by the contractors. You know, there are 10,000 plus contractors using our products at any time. And so dual branded the Sync EV product with a BG Sync EV brand.

38:51 We have the route to market. You know, we have thousands of electrical distributors who stock our products. We have very strong relationships with the likes of Screwfix and others. So we definitely have a route to market. I think there's every reason we should be successful. And as I as I think I've said elsewhere, you know, in August, we did 800,000 of revenue in the EV category. Mhmm. There were lots of other products that we're developing in and around the category because it's not just the charger we can sell, but all the periphery and accessories. So I think, you know, we should be able to to build a significant business here. Is that all? Do you wanna add anything? That's that's good. Okay. Well, that's one more.

39:37 Oh, yes, sir. There is. Okay. So get another one from Ian. So are you at the optimal size and product mix, or do you see there being a need for further acquisitions and additional product sectors? I don't know. I mean, optimal. I mean, I think, you know, I mean, our market shares in many categories is very small. I mean, our market share in UK lighting would be sub 5%. Our market share in international wiring accessories would be zero. Our market share in other categories is quite high and is probably, you know, sufficient to drive the operational leverage that we need to make a good return. And you can see that in our numbers. You know, UK wiring accessories is a highly profitable business for us. UK lighting, not so much.

40:30 So, certainly, we wanna grow our business. We wanna grow organically and inorganically. And we will continue to invest in new products, in new markets, and in new acquisitions. Matt, do wanna Yeah. So, I mean, there is a slide in this deck, and I think it was actually shown as part of John's section where we just sort of remind everybody that, you know, we we sell, you know, £200,000,000 worth of stuff. But, ultimately, you know, the biggest market that that is sold into is is electrical wholesale, and that's a biz that is a market worth many billions. So there's a lot of room for us to move into in terms of products that are ultimately installed by professional contractors.

41:25 You know? And and that's a part of the market which is high margin. It's attractive. It's sticky. It's branded. It's the kind of part of the market where you probably have to acquire your way in. I see a lot of potential for the group to use its cash from operations to gradually build out, you know, a portfolio of professionally installed electrical products. And and and EV charging is but one example, but there are but there are many others. Yeah. Can I also add? I mean, we've been talking a lot about our UK business. You know, we do also have international businesses. We have a a business in Mexico, which is small, but it's highly successful and is growing.

42:10 We have a business in Spain. We have a business in The Middle East based in Dubai. I mean, all of these are actually subscale businesses. I they're not the, you know, the optimal size that they need to be to make a really excellent return. So, So, you know, definitely investing more in those businesses and growing them up to be that size would be one of our key objectives. Okay. So the next question is from Scott. Thank you, Scott. Are you still considering acquisitions done to diversify manufacturing away from China? Yeah. I mean, I was in Poland yesterday, in fact, looking at a possible acquisition in Poland where we could we could move some of our our manufacturing from China.

42:59 I'm not necessarily sure that that that particular solution is the right one, but, yes, I mean, we are very cognizant of people's, you know, concerns around our concentration risk on the sourcing side, particularly from China. And it it's high on our agenda to try and mitigate that in the coming years. Okay. Well, there are no further questions showing for now. Mark, I think we're I guess we're back to to to you. Sorry. No. Not Mark. John, Matt, thank thank you very much. I think you actually managed to address all those questions from investors. And, of course, the company will review all questions submitted today, and we'll publish those responses on the InvestoMe company platform.

43:50 Just before redirecting, investors provide you with their feedback, which I know is particularly important to you both. John or Matt, could I just ask one of you for a few closing comments? Yeah. Sure. Well, thanks everyone for joining in this afternoon. I think this is the certainly not the first time that we've been on the IMC platform. We're always, you know, pleased to join you join you here. It's an important part of our investor outreach strategy. I think it is the first time that we've managed to do this on the same day that we published our results, and that's quite right. So so thank you very much for your time. Thank you for listening to our results and story, and we'll see you in in six months' time. John, Matt, thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

44:40 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of LUCECO PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.