Portmeirion Group (LSE:PMP) — Interim Results

0:00 Good afternoon, and welcome to the PORTMEIRION GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question that receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Mike Raybold, CEO. Good afternoon, sir. Thank you, Lily. Good afternoon, everybody, and thank you for joining us this afternoon. This is PORTMEIRION GROUP's half one interim results presentation. I'm gonna start with a brief overview, and I'm gonna hand on to my colleague, John, our CFO, who will talk about our financial results before I come back and do a more in-depth review of our key sales markets and then a review on the progress against our strategic and and transformation plan.

1:02 So as an overview, our group sales for the six month period grew by just under 3% at constant currency. However, the top line number was significantly impacted by our largest sales market, The US, due to the tariff disruption that started in April. Excluding that U. S. Market, our overall group sales were up nearly 11 at constant currency, pleasing result. As a result of the impact of tariffs on our U. S. Market, our loss for the first half, traditionally quieter half of the year increased from million dollars to $2,800,000 again driven by that U. S. Market.

1:51 I'll talk much more in our market with you about the tariff situation and our strong response plan and where we are now, later on the presentation. But in short, the tariffs were very disruptive to our market, both getting our stock into the market and our customer, buying an order pattern. However, we had a very strong and fast plan. I think we now find ourselves in as good a place as we could have hoped to be. Elsewhere, we saw good growth in the first half. And our wax lyrical business has continued to improve and turnaround with growth in the top line and a significant improvement in profitability in the first half. We continue to control our overheads very carefully with growth of just 3% despite a lot of inflation, government taxation increases and the planned investment into sales marketing heads and a rebuild of finance team.

2:48 We're very early stages of the transformation plan that we launched back at the end of March. I'll update on the progress we've made during this presentation. And then finally, we've revised our RCF facility to support the impact that The U. S. Tariffs has on our seasonal cash flow. And John will talk about that as we go through the presentation. So that concludes our overview. I'll now hand on to John, who'll do a financial review. Thanks, Mike, and afternoon, everybody. Looking at financials, as Mike's already mentioned, half one sales were up by just over one percent on a constant currency basis, just under three. When you strip out The US situation and the performance in that market, actually, the sales of the group were very pleasing, 11% higher on a constant currency basis compared to the first half of twenty twenty four.

3:44 As Mike said, the tariff disruption severely impacted H1 sales and that was the single reason for the greater loss in the period, widening from $2,000,000 to $2,800,000 which was all about The U. S. Profitability being lower and its impact on net debt and therefore increased interest charge. Within the results though, Wax Lyrical momentum has continued. We're very happy with the results. It was up 15% on profitability, which was all driven by sales and improved margin and returned to profitability in the first half of the year for the first time for some time. And overhead costs were in line with our internal plans. We feel we've kept them under control, reflecting, as Mike said, investment in our internal capabilities, but also dealing with higher tax, from the earlier part of the year and also general inflationary pressures.

4:40 As a result of all that, net debt increased by just over 10% by $1,400,000 to $14,800,000 again, driven by that profitability within The U. S. And us taking some higher stock, which I'll come to later on into The US market for The US for the Christmas trading period earlier than previously. And where we have been able to pull levers on cash flow, free cash flow in particular, we've done so. And while still an outflow of $2,800,000 there was a 46% improvement on free cash flow between this period and the same period last year as we've tightened up and improved our collections from customers. And we're very happy with that result, and we intend to sustain that.

5:29 And as we said back in March, we continue to prioritize net debt such as the reduced interest and reinvest in the business and therefore no dividend is proposed for the half year. Moving to the balance sheet. Net assets reduced by 3% to $51,000,000 The inventory increase is due primarily to cost inflation and operation timing differences, which I will come to in the next slide. Net debt, as I said, has increased by $1,400,000 as a result of the higher loss and The U. S. Tariff uncertainty impacting performance and stock levels. Free cash flow has improved. And as Mike has already mentioned, we have revised our RCF facility with our primary lender Barclays, recognizing impact of tariffs and the like and allowing us to continue to support our transfer plan transformation plan whilst reflecting what is a highly seasonable working capital profile.

6:32 The legacy pension scheme is remains on a small surplus. Inventory is at $43,000,000 It's about $3,000,000 higher than at the end close of h one last year. And I guess I would break those down into three sections. Cost inflation at the top of the table of about $1,700,000 that will persist. That's increased fuel charges, general inflationary pressure of materials and the like. But the following three of wax lyrical and the earlier Christmas in stock for The US with the tariffs that come with that are about £2,400,000, and that they're all operational timing differences. We've we've built stock in wax lyrical because of the momentum and the sales performance, and we accept that to reverse from the end of the year.

7:22 We have taken our product into The US market earlier as a result of our experience last year, which has been positively received. And that's along with the tariffs attached to about $1,300,000 As we said back in March, it is in our intention to reduce stock by $6,000,000 over the two financial years. And we've made a start on that, about $1,000,000 in the first half. We would have liked it to be more, but the uncertainty and the impact of The U. S. Tariffs on the macro global environment has slowed some of our progress down there. However, we expect up to a further $2,000,000 reduction on excess stock come the end of the year, alongside the remainder being achieved in 2026. Just looking at the shape of the business by markets.

8:13 As you can see, UK was up by just over 2% driven by Wax Lyrical. South Korea has made a very promising start to the year with a sizable increase of just under 30% or over 30% on a constant currency basis. And international overall was up by 11%. However, as you can see at the top of the table, the story in the first half was all about North America with the uncertainty and the impact on trade from the tariff situation, which continues. And that was down 12%, just under 12% for the first half. We are pleased with the way that wax lyrith was working and also the other international markets, which is a key part of our growth engine as we as when we launched our transformation plan back in March.

9:03 And looking at it from a a brand perspective, it's it's hard to ignore the impact of The US. But the PORTMEIRION brand benefited from the improved performance in Korea, the key driver there being eight percent up. And while Spode, one of our key brands, was down by 13% on a global basis, if you take The U. S. Performance out of that, it actually continued its trend of growth and was up nearly 8% in the first half. Wax Lyrical, as I mentioned, momentum continues with ongoing growth through new listings. And Nambe, which is a higher priced brand and very much US focused, we're pleased to see it stayed steady through the year. Royal Worcester and Pimpanel were more affected by The UK than The US market conditions and limited supply issues.

9:53 I think it's the end of that. If I hand you back to Mike for a deeper dive in the markets. Thank you very much, John. So I'm now going to do a more detailed review of some of our key sales markets around the world. I really want to spend some time first on The US. Just wanna make the slide on. That's great. The US is our largest market and significantly our largest profit contributor within the group. As John has shown us in the tables, this was the market that didn't grow. In fact, sales were down a little over 10% in the first half. So what has happened to our our market in The US? If we take ourselves back to the beginning of April this year, there were a series of announcements, of ever higher incremental tariffs imposed on importing products, kinds of products, any kind of product into The United States, whether it was coming from Asia, China, Europe, or even The UK.

11:01 Those peaked at around a 150 to 200% incremental. Put them into context, historic tariffs have been somewhere between 515% bringing products into The US. What that meant in second quarter was immediate disruption. What we saw was firstly, disruption to our ability to get product into The US. To bring products in at that time and have to pay a 150% extra tariff would be absolutely penal from a cash point of view. Secondly, we saw our customers, the large retailer groups across The United States that we deal with cancel or pause orders, not just on our business, but on most businesses that were importing product to The United States as they themselves took stock of the situation, what was gonna happen, waited for the next step.

11:59 So disruption to supply chain, bringing stock in because of the cash cost of of the extra tariffs disruption and and canceled orders. That included our customer base canceling pretty much all of the advanced Christmas orders that they'll replaced for this Christmas back in February and March. What we did was to cancel and pause production orders around the world that were expected to be routed into The US. We rerouted boats, container boats into Canada, for example, and we booked bonded warehouse space, all to make sure that we didn't have anything land in that very hot period of kind of April through mid June where there's very penal extra tariffs. As a result of the fast action that we took, we were able to avoid paying any of the very high tariffs of a 150 plus.

12:54 We decided to accelerate the transition, the onshoring of some of the Asian production for The US into our UK factory in Stoke On Trent, particularly our famous Ode Christmas tree range. We decided to accelerate that onshoring and have made a huge amount of that product this year over the summer in our Stoke factory. We then canceled a chunk of our historic Asia and Chinese made production business as it was no longer viable where the tariffs were. The tariffs have eased out and stabilized now in the third quarter at around 30 percent incremental. For China, 10% incremental for The UK, and I think 15% incremental for Europe. So still disruptive. So what do we do? What have we done to cover that final tariff position?

13:44 We've put our prices up. We've put our prices up to cover that extra tariff. We've secured those agreements with our our US customers and we've repriced some of our ranges to take into account the fact that we're now manufacturing them in The UK. That will require a margin investment in the short term because the cost of manufacturing in The UK is still much higher, but we think that is worthwhile. It will pay back. It's good for our brand and will lead to more positive a more positive position in the medium and long term for our brands and those ranges in The US in the future. The critical point is that right now, our stock, is in the market for Christmas to the seasonal period, key trading period is on time despite all that disruption, and it's in the market actually earlier than we managed to achieve last year. So that is a really good result.

14:42 In terms of what that means looking forward now for the rest of this year, obviously, we remain extremely cautious. We remain cautious about how The US consumer will react to higher prices, not just our high prices, but generally higher prices for from from product being imported into The US. I was in The US just two weeks ago and met with all our major retailer customers, the Macy's and Bloomingdale's and Amazon's. I was reassured in those meetings that they are generally cautiously optimistic themselves about Christmas spending in The US, but we are gonna have to wait and see how how the consumer reacts to higher prices. We're also cautious because we we don't know if there are more tariff announcements to come, further changes.

15:29 It's been a volatile situation. I think we've dealt with it very, very well. It's an important market. We have strong market positions with the ranges that we have, and we still see this as an important and critical growth opportunity going forward. Outside of the tariff situation in The US, just a few other points to make. Firstly, our independence channel. And by independence, I mean, the thousands and thousands of of small one off shops, individual shops, often family owned shops that exist up and down the country. We have renewed our focus on that channel, put a new package of supporting for them that encourages them to buy our products and take more ranges from us, give them more exclusive products.

16:14 That channel actually has responded by growing, 16% year on year, and we're hoping that that will continue through the second half. We've also have our US team starting to focus on South America, as a new market to develop. Very early days, we hope that over the next couple of years, we can build a good presence in physical retail and online within South American market. Turning to our next market to review in The UK. Total sales, as John reported earlier, were up 2%. That was really driven by our home fragrance business, Wax Lyrical, which has had a a strong performance. Our tableware sales were down on a like for like basis, excluding some canceled business, they were down about 2%.

17:05 Market in The UK is still soft. Our ecommerce business has had a good run from sort of February onwards through to to June, and we're confident that that will continue. We've done a lot of work in the last couple of months on resetting our UK sales team, bringing in some additional sales hires, and we think that that together with some new products and product innovation will help us return to some modest growth, in The UK in the second half and going forward. Our orders for Christmas advance orders for Christmas have been up on on last year. The third market that I want to talk to this afternoon is South Korea. For a long time, it's been a very important and significant market for our brands, particularly our PORTMEIRION brand and particularly our Botanic Garden range within the PORTMEIRION brand.

18:00 We're encouraged by the sales rebound of around 31% from what was a very low number at 24. It feels like we have seen the bottom in this market, and I'm pleased that the work that we put in, the new teams that we have in place, controlling the market are seeing the the rewards from the work they've put in. We have been supporting our customers through this year to help reduce the overstocks, the overstocks being the issue that impacted our sales last year. We've also brought to market and accelerated bringing to market some fresh new product again to give something new and different and a reason to buy, for our distributors and customers and and ultimately people in the shops over there.

18:51 I was there about four or five weeks ago. I think that, the market over there generally, the market conditions are still very challenging. Political turmoil that was earlier in the year clearly disrupted consumer and economic confidence that came through very loud and clear. And so we remain cautious on this market going forward. We're pleased that we have reached the bottom of all the way back up, but we need to be patient about how long this recovery in this market will take. There are still higher stock levels that I would like to see. And because the market is generally soft, economic issues are soft, it is gonna take some time for those overstocks to clear. It's important that they do for us to get back to more normalized ordering patterns and not to have, you know, up and downs in sales performance. So I think that's gonna take another eighteen to twenty four months.

19:46 In the meantime, we'll continue to innovate on product. We've been exploring new categories. We've actually just launched a new cookware range for the first time, a new category, and that will start to ship, we hope, late in quarter four, sort of November time onwards. And we hope that that is a success in the market. In the long term, we believe our position in Korea is unharmed. Our market share is still there. We believe the market will recover As those overstocks go, then we think we should get back to more historic levels of business in this market. And then my final market today that I wanna review is is our is our home frames division, wax lira pillows. John said, again, a very pleasing performance. They had a good really good result last year, continued growth in the first half of this year, plus 15 combined with a dropping through to improve profitability.

20:46 The new listings space wins within the grocery channel continue to perform well. We've put in a small but effective new factory CapEx that extends one of the key fill lines for the candles, adds capacity so that we have room for future growth and can satisfy customer growth going forward. A lot of good progress. The team now looking forward are focused on a new product road map that will help consolidate the grocery account wins and hopefully enable us to take even more share of that space going forward. Those factory efficiencies, again, should continue to kick in as well as the team focusing on a more efficient working capital and stock position.

21:31 So a good a good period for Wax Lyrica. So that concludes the market review. The next section is our strategy. I wanna start by doing a recap really of a a slide that we put in, the end of March when we did our our our last announcement. We set out very clearly a five short term plan, five point short term plan that we believe was gonna be effective in taking up business forward and transforming up business over the next twenty four months, our priorities if you like.

22:18 In brief, that led with the fact that we wanted to return to growth in our established markets, US, UK, Korea as soon as we could. Secondly, the importance of building a stronger fortress style balance sheet. Thirdly, it was important to invest much more behind our premium brands, the Spokes and PORTMEIRION and so on as soon as we're able to afford to do so. Point four, explore and develop includes things like the massive opportunity to develop our brands in new markets and international markets as well as doing more with product innovation and our extensive design archives. And five, finally, excellence everywhere was about making all those incremental improvements across all parts of our business that over time, give us momentum and change.

23:06 So I want to update on our progress, against those objectives. In terms of number one, return to growth in our established markets. As you would have heard through this presentation so far, we've made good progress in some of those markets, including South Korea. US, however, has been more more challenging. I'm not gonna repeat, the things that we've said so far. But aside from the tariff situation, we're pleased that we're in stock earlier. That was important in The US. We're pleased that we have some some growth in our independence channel, And we're doing some tests and learns, some exploring in The US by opening up some pop up stores. In the last couple of months, we've opened a pop up store in Dallas for our Nambay brand where we had a very strong ecommerce kinda hit rate and also in New Jersey, for our spoke. So that's interesting.

23:58 South Korea, I've really covered, and I I won't repeat now. And in The UK, as I've said, we're confident that we will continue to develop our websites and our website sales. We have some, platform surgery projects that are on track to go live, in quarter one twenty twenty six. We're seeing some growth on The UK website, and we're going to be launching some new and exciting parts of those websites in the next six to nine months. And as I say, generally, our Christmas seasonal ranges, which are very strong and have good market share positions, The advanced order books that we have outside of The U. S. Have been strong enough on previous years. The second point of this five point plan was that strengthening of our balance sheet. Again, John really has covered this.

24:52 We have seen a small increase in net debt. We are committed to reducing net debt as soon as we can and ultimately eliminate the the benefit of that is it releases the the cost of service and the interest that we can then reinvest back in the business behind sales and marketing. Part of that will be getting inventory down. John has already laid out the action we're taking and that's, you know, top of our mind through the rest of this year. I wanna spend a little bit more time on on number three, investing more behind our premium brands. We've been busy, since we launched launched this idea in our business, up and down our business. You'll see on this slide our new refreshed Spoke logo, which is, launched and rolling out right now across all of the major brand touch points.

25:44 The new logo includes its birthplace, England, as well as its birthdate, 1770, and where we have room, a nice depiction of the original Spok worksgates going back those hundreds of years. So we're really pleased with that refresh of the Spode logo. We have improved the packaging experience that we give to the customers that order off our website, Spode website. So there's a picture again on the slide where you can see that if you order now from Spode in The UK and we'll roll this out to The US shortly, you get a a really nice experience in terms of a box with branded, tape, branded tissue paper, stickers, lovely insert cards to tell the story of the brand.

26:34 And, again, this is about reinforcing the purchase decision, and what the brand stands for, and I'm sure will, lead to to repeat purchases. We're also have already started to increase and ramp up our spend behind other parts of our marketing budget, social media, influencer engagement, particularly digital assets. So many of our products are sold now off online platforms. In The US and UK, roughly 50% of all the sales are off somebody's online platform. So those digital assets, pictures, the videography are are increasingly important. We've done some major refreshes in the last couple of months, and that includes some of the key Christmas ranges that that will go live in the next few weeks.

27:22 A few words about progress on our reshoring, made in stone, bringing product back where we can to make in our own factory in Stoke On Trent. As I said on The US market review, we we took the opportunity that the disruption from the the many, many tariff announcements that went up and down for kind of over two or three months to make the decision to to really accelerate the onshoring of the product that was being made the spoke product that was being made in China for The US, bring that back to to the Stoke Of Trent factory. There's a graph on this slide that you can see at the bottom that shows the journey we've been on from 2023 where none of the spoke Christmas tree range was made here.

28:11 Last year, we made some 200,000 pieces. This year over the summer, we've made a huge 600,000 pieces of that range. Again, that that wasn't made at all just two years ago. That has been a great experience for our factory. It's been slightly chaotic times. I've seen products all over the place in the corridors. It's been a great challenge for the factory. I think this is important for the Spok brand. I think it's important for the product that ends up in The US market. There is clearly a margin investment that we make in the short term, but we think that it will pay back, and it's been great to see the factory busy over the summer. We have also taken that Spode logo, new brand logo, and launched a new Spode backstamp.

28:57 The backstamp is our seal of approval, our seal of authenticity that goes in the bottom of all of our products. And you can see an example of that new bag stamp on the bottom of this slide that talks about not only the birth date and the the birthplace, but, critically, now we're not just made in England. We're made in Stoke On Trent, England. And that means a huge amount to our workforce and the communities that come from the people that work every day and have worked for many, many, many years in our factory here in Stoke On Trent, knowing that that is going around the world recognizing, where it's been where it's been made. So lots of progress there. Point four, of our plan was about exploring and developing. And this covered a number of different areas. It covered growing those international markets.

29:51 We're pleased. Sales in those markets are up 11%. More work to do, and we expect that growth to continue, but we're excited about the opportunities that Malaysia, other parts of Asia, parts of Europe, Australia, China all present for our brands and our heritage ranges. Part of Explore and Develop is also about design, about product innovation, about leveraging the extensive design archives we have for SPORE going back for hundreds of years, indeed, for role as well. So we've created just in the last month or so a new role, a new hire, a new product strategy director has joined us with extensive experience in the industry and outside the industry, bringing lots of fresh ideas and energy into the business. That's really exciting.

30:44 We also set up sprinting. Sprinting has been a way of bringing people together in a room from different parts of the business that perhaps don't get to sit in a room together normally, trying to find ways to get them to collaborate and work, much faster. The sprint teams have looked at a number of things, including how do we speed up our product development cycle. And as an example, there on the right hand side, the sprint team has, taken an idea for an extension to our key spoke range, spoke green Italian range, and they've done the idea ideation through to production in about three months, which compares to a roughly average twelve month normal cycle. So significant shortening, of of the cycle. Again, using sprint teams, different methods of working. That's exciting. We've taken significant number of orders around the world for this new range, already.

31:46 Okay. Point five is progress on our excellence everywhere. Again, our our business starts with with our people. And so in the last few months, again, we've made a number of changes. As I said in the last slide, a new product strategy role, that's very important. We've also done an internal promotion to to a new role, COO role. A lady's been with the business for a long time, but it's gonna help John and I, in particular, to speed up our execution across the business on this plan. We've made, in the last two, three months, new hires in our UK sales team in growing our international sales team to drive that international sales growth as well as some strengthening of our our finance and back office teams.

32:38 We've designed and launched a new packaging for our SPOED products, new gift boxes as an example on the page there, and that is in the process of rolling out across our different markets. And as I said, the sprint teams that we've introduced started with new products, but now we've put sprint teams in the last few weeks into other parts of the business, including our factories. So that's an exciting way of generating incremental improvement week on week. Okay. That concludes the section on our strategy and in particular the updates on our progress against that plan, that five point plan that we launched back at the end of March. We're approaching the end of the full part of the presentation. I have two more slides, and then we will come to questions. But in terms of outlook, first of all, and then I'll do a summary.

33:38 I think that despite the disruption that we've had in our biggest market in The US from tariffs, we are happy and pleased that we have got our key seasonal ranges in place in market, in retailers, warehouses, onto their platforms online earlier than last year on time. That has been fed back to me in the different markets I've been to in the last four to six weeks. That is a positive thing, and it's great to sit in front of customers in the end and say, look. It's really good that we've got the stock that you're earlier, and you're gonna benefit from that. We are, however, cautious. We remain cautious about the uncertainty in The US market.

34:23 The impact of tariffs and price rises on, you know, generally on the consumer is really an unknown and how the consumer will react. We have seen a more stable pattern of buying, I think, in the last two or three months, but really, we need to see how the consumer spends over Christmas in The US. That will be important. Outside The US, we expect to see some modest growth in the second half because of the things that we've talked about as we've gone through this presentation. We're clear on our priorities, John and I, in terms of our transformation plan, including that strengthening of our balance sheet. We continue to see significant global potential for the brands that we have and that we love and we love to work with every day. And our job is to put together pieces in the right place in order to get that potential out and that top line growth as soon as we can.

35:16 And therefore, in summary, I conclude by saying that, a half one result, outside The US, we were pleased with the top line growth of 11%. We think that was a pleasing performance. We're also pleased with the progress that we're making on the transformation plan that will take time to feed into the numbers to complete the progress. The US tariff situation was was very disruptive to our business. You can see that in our numbers, but I think the team's done an excellent job reacting to it. We're pleased with the progress made in our transformation plan, and we continue to look at our organizational structure and our people and hire people that improve, our business and so that we can work on what we do every day, going forward. So we're excited by what we have ahead of us. We're excited about the potential that we have in our brands, and we thank you for for joining us today for this presentation.

36:27 That concludes the formal part of our presentation, and we'll now hand back to Lily, and we'll talk to the questions that we've received. Mike, Jonathan, thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. But please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. We're just we're just navigating to the questions. One moment.

37:18 They're very small. Are there any more beyond 21? Okay. We're just, just bear with us one moment while we try and get to the questions on the screen so that we can see them. Okay. Well, I'll I'll I'll just make a start, and then we'll try and bring up the ones that have come in during the presentation. So and look. There's I appreciate all the questions that come in. There's there's a there's a ton of questions here. And for some of the presubmitted ones, there were some duplications. So please forgive me if we don't answer every question, but that would simply be that it there was duplication or or or they were very close to to other questions that have been posted.

38:14 Let me start off with the one. Do we think when do we think The US market will recover? What's the question? So we've seen some stabilization already in quarter three, which is good. Was last in The US a couple of weeks ago. I met with the major retail groups. They were cautiously optimistic about general consumer seasonal spending. That was encouraging. However, really, we need to see how the consumer reacts over Christmas. So that's what we know today. Question two is a question about inventory and net debt, and I'll leave that to John to answer. Yeah. We're we're a high highly a very strong working capital profile peaking at about this time of the year, and that goes hand in hand with with net debt, obviously.

39:07 Difficult to say where we'll be at the year end. As Mike as Mike has said, it very much depends on trading, but we continue to focus on reduction of inventory. As I said earlier in the slides, we're targeting up to another $2,000,000 of excess inventory by the end of the year, and then trading will deal with the rest. Thank you. And question three, John, I think, is also a view about the interest rates on our borrowing. The interest rates on the RCF is 3% margin over Sonya until September 26, and then we drop to 1.8% from there on. Okay. Thank you. There's a question here about how we compete with companies with lower energy cost and labor cost. That's a good question. Look. We we have and will continue to lobby central government for what we call a a level playing field on energy costs, by which I mean that I think it's it's clearly not right that energy costs in The UK should be so much higher than they are in pretty much any other developed country in the world. However, you know, we're also clear that we shouldn't rely on government to do anything about it because they had two years to do something about it and haven't.

40:18 We need to compete on our product and on our brand strength, and I'm convinced our consumer will and will continue to pay a higher price for a great quality product with a great quality brand. Next question was about whether all parts of our business are go forward parts of our business if you like. Look. Our priority is to reduce net debt. We've talked about that. Part of that is is reducing our inventory. We will periodically always review at a board level all parts of our business, whether, you know, they're part of our forward plans or not. There's a question about our energy efficiency of our kilns. Can we make them more energy efficiency? Well, we we do that, you know, every year, our teams. We have energy teams and factories that look at doing that. We've done a lot of work. We have four or five kilns that are on generating most of our energy usage, but we'll continue to do that, continue to look for for continuous improvement for sure.

41:19 Question on whether we have a view on share buybacks. That's not really in our thinking right now. Our thinking and our priority, as we said, is on is on reducing net debt and and eliminating that interest cost so that we can invest more money in marketing. There's a question on new clay products and whether they help reduce energy costs. Again, that's a that's a really good question. We have this year been trialing a number of new blends of products, both clay and glazes, and those are interesting. Those results will continue to trial different things from existing and and new suppliers. And part of that is about whether it helps an engine firing temperatures, and part is about the end quality and the the yields we get. So performance we get of the product when it goes through the kill is also important.

42:19 There's a question about our South Korean market recovering and and what are we doing differently. So we're trying to get closer ever closer to the end customer, trying to get better information. We're trying to exert better controls. That is easily said and done. When the market's so far away, we have it at we do have an employee in in South Korea. We spent a lot of time in the market, but I think that we are making progress in all three of those areas. But as I said in the market review, whilst I'm pleased that we've certainly moved off the bottom last year where we were at sales and had a a a nice rebound so far this year, there is plenty more work that we need to do in the next eighteen months to stabilize the South Korean market, and it may not be a straight line from here in terms of recovery.

43:12 There's a question here on what will shift from distribution customers to direct retail sales cost and how much will it take? I don't quite understand some apologies for that, but I think that we sell through multiple channels, direct to consumer, retail, through distributors, and online. All those channels are important to us and are all channels that we continue to to continue with going forward. There's a question about our transformation plan. Can we tell us more about it? I I think we've covered that during the presentation. I I certainly hope that has given you the answers you you were after. There's a question about relocating production to UK and how does it sit against the challenge of rising energy costs.

44:07 So, yes, energy costs are high, abnormally high in The UK. Is that right? I don't think so. You know, we've lobbied for a level playing field on energy costs because, a, we have to compete with imports coming in from other countries, and, b, we wanna be competitive and able to to grow our in our export sales. Bear in mind that two thirds of our sales already are around the world, and we see a great opportunity to do more. But despite those energy costs being higher, we still think that there is a benefit from making more if we can in our own factory. We think it's the right thing for our brands. We think it's the right thing for our future factory economics as well. There's a question about the impact of margins in the short term from that transformation plan, and I think that relates to what the last question was about onshoring. And as I said during the presentation, there is, yes, a short term margin investment that we make because making something in UK is more expensive than making it in in in China or in Asia.

45:19 And part of that investment in margin is that when you make something in a factory in the first year that you haven't made before, then there's a learning process. Right? And, therefore, you'd expect in year two that you'll get an efficiency, a pickup, and a benefit and so on. So we've we've had some of that learning learning process, that learning margin investment in in over the summers, we've been making this Christmas tree. But, also, it's important that the product we make in The UK, we establish a higher price points, and that's supported through really effective brand brand brand brand position, brand marketing. Okay. When will the transformation plan be completed is the next question.

46:07 We set out in March 31, the five point plan. We said it covered the next twenty four months at two years. Priorities being a business with low or or or negligible debt, a business that's back to being profitable, and a business that has momentum in terms of sales growth. The next question is around share of how how much of our our supply base is for The US is Asia. I don't have an exact number for that. I'm sorry. What I can tell you is that we've reduced that this year clearly because of The US tariff situation. We do still make some products in China for The US. Product, we can't, at the moment, find anywhere else that can make it at anywhere near the right price, but that will remain as a review.

47:05 There's a question about inventory and whether there's a tariff on shipping from China to The UK, and the answer to that is no. There's no new incremental tariff that has happened this year for importing product from The China into The UK. There is, however, and has been for at least ten years an existing tariff. It's called ADD, antidumping duty, that was imposed by the European Parliament and includes The UK, and that's ranged between 1025% that you have to pay when you bring product that's been made in China into The UK. There's a question here, and I'm gonna let John answer about our capital cycle. Yeah. In terms of the capital cycle, within the year, as I've said, it's highly seasonal, so we're about our peak now. And then we see a rapid improvement as we go in go through the Christmas trading and collections to the back end of the year. So we always improve from that peak point of of the current position.

48:04 It also relates the question also relates to futures. It's difficult for us to say right now. Obviously, we want to see trading improve. Mike has just said that we are focused on growing the business and growing profits whilst also reducing net debt, and and that that focus and that intent remains the case. Thank you. There's a question about market consensus. There are there are there's no market consensus that's published at the moment. Longer term growth targets. I well, our focus right now is is on those five points over the next two years rather than issuing, you know, long term aspirational growth. Clearly, we believe we can grow the business, but I think we wanna focus on on the next two years. Similarly, around a multiyear plan of strategy, I've laid that out and and talked to that during the last half an hour.

49:02 When can we expect margins to recover? You know, we still believe this business should, at some time in the future, be able to have a 10% margin, but we also admit that it's gonna take some time. We've been, as a business, hit by a lot of events around the world that have impacted our business. We're dealing with that, but we clearly believe there is potential to have a good margin business in the future. I'm gonna now pick up some of the questions that have just come in, and we'll do as many as we can before we finish. Yeah. How do we get more international growth?

49:55 We're expanding the team. So it's about people. It's about identifying the right product, and it's about identifying a way of having products in the right place. The challenge with with markets sort of four, five thousand miles away is if someone places an order and it takes six months to get to them that it kind of they go, well, so what? So we need to have an effective way of of being having able to get stock to them quickly. How do we intend to reduce inventories? Well, that'll probably be done. We're we're being very careful. You know? We're being very careful as we try and reduce inventories not to impact price in the market. That that's critical. I've talked already about operating margin.

50:46 I can't, unfortunately, make a forecast about share price. I'm sorry. We've worked proactively with our our main funder Barclays. We have a good working relationship with them. RCF, yeah, John's talked to that. How much inventory do expect to hold in a normal market conditions? I I said in March John and I said in March that we believe we should have 6,000,000 less inventory in terms of volume, and that's what we are trying to achieve this year and next year without without hurting price in the market. Proportion of value stock was already shipped?

51:35 There's a question about how much of our value stock was already shipped to The US. So that it's it's not a a straightforward answer, I'm afraid, because we ship product into The US. We have warehouses in The US, one on the East Coast, one on the West Coast, and then we ship orders from those warehouses to the end customer based on on demand. Some of that demand is from, you know, a large retailer that has their own warehouse, and some of it is a direct to consumer order, which goes, you know, direct to a, you know, a consumer, a family household. And do we see any any MAAA activity? Our focus right now is on is on taking our existing business and our premium brands back to a profitable position and getting some some some some growth momentum with those. Okay. So thank you. A lot of questions. Really appreciate all those questions, and I hope that that is that is that has helped.

52:35 Mike, Jonathan, thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform. Just before redirecting investors to provide you with their feedback, which you know is particularly important to the company, Mike, could I please just ask you for a few closing comments? Sure. Thank you, Lily. Look. Thank you, everybody, for joining us today. I hope the presentation has been useful. We've done these IMC sessions now for around about five years, and we've always had some good feedback. If you have feedback on how we can improve these sessions, then please leave it at the end, and we'll do our very best to incorporate that for next time. But we thank you for your attendance, and we look forward to the next update. Mike, Jonathan, thank you for updating investors today.

53:22 Can I please ask investors not to close this session? It should now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of PORTMEIRION GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.