Portmeirion Group (LSE:PMP) — Interim results for the six months ended 30 June 2020

0:03 Good afternoon, ladies and gentlemen, and welcome to the PORTMEIRION GROUP Interim Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Please just type in the question in the box beneath and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will 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.

0:34 I'd like to remind you that this presentation is also being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Mike Graybold, CEO of PORTMEIRION GROUP. Good afternoon, Mike. Good afternoon, everybody. Thank you for joining PORTMEIRION GROUP's interim result presentation for 2020. I'm gonna do a few things this afternoon. I'm gonna talk about our half one results in a little bit of detail, move on to our strategy, and in particular, talk to you about the progress we've made on our strategy the last six months or so and since our recent fundraise. I'm gonna spend a little bit of time on on Outlook and then pull everything together. As Mark said, I'd like to answer any questions if you have, and you wanna post those during this, and I'll pick them up at the end.

1:26 Okay. Let's make a start. So, I think the first thing to say is, clearly, it's been a challenging period, a difficult backdrop for us like many companies for, you know, roughly half of the period that we're reporting on today, we've had retail shutdowns around the world. That has led to our numbers being down 8% like for like, 20% down, sorry, 20% down like for like, 8% including an acquisition. We actually think that our brands have shown a great deal of resilience during the first half against that backdrop, which I think is really encouraging for the future. And, also, you know, we're pleased to see a a good and continuing trend of improving sales in our key markets that kind of started mid June as retail started to reawaken as continued through to the the current day, and I think that's, also positive.

2:24 So our numbers overall show us having gone backwards like for like, and a small profit last year becomes a small loss this year. That's not a a result that we take lightly or are comfortable with, clearly. We wanna do as much as we can to fix that. But I think underneath those those headline numbers, there's actually some real some real positives, and I hope some of those come through as we go through the presentation this afternoon. In particular, we've seen substantial growth in our online sales, both from our own websites and indeed from retailer websites, and that's a core part of our strategy going forward, something we're really doubling down on investment on. I think that's that's fantastic. We've also sped up our decision making. I think our capabilities as a business have improved.

3:09 Our factories are back open and running, and have shown great agility through, through this last six months, both in terms of reopening in a in a safe way, but also being able to change and repurpose parts of our factory production lines to make hand sanitizer. We did a successful fundraise in June. We brought in over £11,000,000 of new equity, and that was on the basis of that we really wanted to be able to invest behind and accelerate the progress, that we're making on new strategy. I'll talk you, through, that in in more detail as we go through. We have a good strong balance sheet, which we've maintained through this period. Our cash is net positive, significant headroom, as well.

3:55 As I said earlier, we've seen an improving trend in sales since June, and that's continued through to the current data. Two UK factories that we own make roughly 50% of everything that we sell in a in a particular year around the world. Those two factories are now at or really close to the output levels they were pre COVID. So we expect to, return to profitability in the second half, which is great, and return to be able to make dividend payments in in financial year 2021.

4:32 So moving on now to our numbers overview of half one. As I said, revenue was down 8.3% or like for like 20% small profit last year becomes a small loss. That loss was in line with the expectations we had by the end of the second half. No surprises came through there. We've reduced our net debt significantly, by a couple of million even before the equity raise proceeds. In terms of our balance sheet, we have a strong balance sheet with good headroom on top of the 13,000,000 of cash. We also have significant headroom in our facilities. And I think together with the cash, we have $2,728,000,000 of facility headroom at the half year. So enough to see us through all kinds of twists and turns, I think, in in the coming years.

5:27 We actually had a cash inflow of 2,000,000, prior to the equity raise, and that was due to quick and strong action that we took to preserve cash and and cut our costs as, the country and much of the world entered the the lockdowns due to COVID. We have a small pension scheme deficit movement in in the period, minus 2,000,000, and that really is simply due to the change in actuarial assumptions, forward assumptions that have been made for discount rates rather than anything material in terms of change of valuation of the scheme in itself. Our inventory has increased by just over a quarter in the period, and there's a a walk there on the right hand side, which I hope you can see, which talks you through the key drivers of that. In particular, it's been the acquisition of, which wasn't in our numbers this time last year, just over 4,000,000.

6:24 And then in addition to that, we have some stocks in our wax lyrical business as we've extended into hand sanitizer production, and then new lines that we had, manufactured and designed, ready to launch in spring summer that were delayed from being going on the market due to the the retail lockdowns around the world. Stock and inventory levels remain a key part of our focus going forward. We expect to make progress from reducing year on year stock levels as we go through the remainder of this year and then reduce further in the twelve months next year.

7:02 Moving on to our sales by market. There's a table here that shows for our key markets. Now three big markets are The UK, US, and South Korea. You can see our year on year performance. Unfortunately, it's one of those years where there isn't so much to be read into the the like for like numbers. All the markets have been disrupted significantly due to retail shutdowns and and COVID. We've been pleased with the resilience, as I said earlier, that our that our brands have shown, and, we're expecting all of those markets to to pick up and grow as we go into next year. The US numbers benefit from the acquisition of Norm Bay. Korea, which has been a key market for us for many years, a few points on Korea.

7:49 Firstly, Korea was one of the first countries to to enter into a lockdown as early as as January, I think, at the start of this year. Retailers in in department stores in Korea significantly disrupted through the first half. So those numbers were showing minus 46% are no surprise. What is important and and far more encouraging is that the sales out data that our distributor sends us, what they're selling out of their stock to the end consumer have really turned around. And in the last two or three months, they're seeing year on year gains in the level of sell out, that they're making. So that's very positive. Similarly, we created a lot of new product, in the second half of twenty nineteen to deal with and help deal with the disruption we had in Korea from great shipping.

8:35 And, again, the positive news is those new product lines have started to sell well, in Korea, and, we're looking to to pick up repeat orders for those. The issue we have had in Korea and, in particular, 2019 was overstocks in, we call, the mid market due to too high levels of gray ship or parallel shipping from other markets into Korea. We've tackled that by being far more disciplined in how we sell botanic garden around the world and ensuring that product is not being gray shipped in in too higher volumes. And, again, the positive feedback that we're getting is those overstocks that were there last year have now gone in that mid market, and that, again, is good for the future. I'm now gonna move on to a section of the presentation where I'll deal with our strategy, our long term strategy, and in particular, the progress that we've made in in recent months.

9:33 Our strategy is built around six key building blocks, and those building blocks are in place against twin objectives. The twin objectives are to deliver consistent sales growth, top line sales growth, and to also increase our operating margins year on year. So we translate that sales and the sales growth more consistently and better into profit. At the heart of the strategy, it's about leveraging far harder the key brands we've got, these these strong six brands we sell around the world, and also making our products and our product development work harder and more commercially successful. We have a huge piece of transformation to do in terms of becoming more digitally savvy and online. Big opportunity around the world for us to increase the amount of online sales we do with the brands and the brand recognition that we have.

10:22 The third area is about being focused on South Korea, preventing the feast and famine that we've had in recent years by being more disciplined, diversifying what we sell and who we sell it to in that market. The fourth part of our strategy is leveraging recent acquisitions, both Wax Lyrical, our home fragrance business, and Nombe, the business we bought last year, leveraging those businesses and getting the return on acquisition. Finally, in terms of growing our sales, we're gonna be far more targeted about growing sustainable new markets, export markets around the world. We have three big markets today in The UK, US, and Korea, and we want to create another three or four big markets in the next two or three years. From an operating point of view, the sixth part of our strategy is about getting more efficient in everything we do, improving our capabilities, drawing and procurement expertise so that we can deliver operating margin point gains.

11:23 Against that strategy, those six key building blocks, the timeline here of progress we've made, and then I'm gonna go into some more detail on some of those areas. That strategy was put together in quarter four of last year. We had new management management changes. We've put that strategy together. As we came into the first half of this year, clearly, COVID, hit the world, and our our first priority really was how we responded to COVID. And as I've said earlier, we we had strong cash management. We took quick action to control costs, get our cash burn down, and actually had a cash inflow in the first half. We were able to reopen our key ceramic factory in Stoke On Trent in a safe way very quickly. I think we're the first people in the in the industry to be open safely at the beginning of May, and we repurposed our home frames factory to make hand sanitizer with a two or three week turnaround from the idea to being able to execute on that.

12:20 Our online sales grew significantly, and we increased our investment in that area as well. We then moved forwards to June. We did a successful fundraise, bringing over £11,000,000, and that fundraise was targeted at four key areas, driving online growth gains, getting more efficient in our factories, extending our home frames factory so that we can make hand and body care soaps and lotions in the future, and purchasing a long term joint venture in Canada and really being able to revitalize that sales market. We move forward to today, and the progress we've made. Well, we have purchased and completed the the purchase of the joint venture in Canada. We started the build for some value factory efficiency programs as well as starting the build with the extension to our wax lyrical factory.

13:13 We've simplified our board and key teams and and people structure in The UK that will give us much more laser focus from a sales point of view and cost synergies. We've continued to invest in people, systems, and warehouse capability for our online program.

13:32 I wanna move now and talk about the online opportunity in more detail. We set ourselves the objective of growing our own website sales to be at least 15% of our group in the next two to three years, and at the same time, all of our channel online sales to being at least 50% of our business. In the first half of twenty twenty, we've made considerable progress against that. Our own website sales grew over 90% and now represented 15% in the second in the first half. We've also had good growth in our retailer websites as well. We're not saying that we fixed this area, and, clearly, we've benefited from the the change in consumer demand and and and how consumers are ordering through through the COVID retail shutdown, but this is a clear example of just what is possible when we complete this program of investing in in digital and online.

14:28 Another key metric that we check-in on is our customer database, our email list. That grew 31% since the end of last year. In the six months, we've now got over 220,000 email customers that we can target and follow-up. We find that once people order from us once, we get a very high proportion of reordering, and so growing that customer database is key, to delivering growth and sales going forward. We're working on a number of different programs to boost customer acquisition to our own websites, including increasing resource and investment behind paid search, social media. We've also just filmed a television advert for our US market that will go live in October, and that's for one of our heritage ranges, Botanic Garden. This is a direct to consumer advert, and we'll advertise a set of Botanic Garden that can only be bought direct from our own website in The US. And we're excited to see how that how that plays out and whether it's a model that works that we can do further within other markets going forward.

15:30 We also need to make our product look far better in all online space. We've developed new platforms this year, completely new websites, updated websites. We've currently launched four new platforms, and indeed, this week, we are relaunching on a new platform all of our US websites for Nongbe, Portmeire, Royal Worcester, Spone, and Pimpernel. We've also doubled the amount of photography resource we have, and we're reshooting all of our key ranges, and that should be complete by the end of this year. And we're halfway through the build and rollout of a new digital asset management system as well, and that system will enable us to push the new content out to all of our retailer websites. And that should again be live by the end of this year. We've added people to this area to increase our pipe and the speed in which we can execute, and we have a four further new hires joining in October, including an experienced ecommerce transformation director.

16:24 The other part of this program online investment is building increased capacity in our warehouses to deliver drop ship online orders. We'll continue to invest in our UK and US websites, and we'll continue through next year to do that. We've also just integrated our systems with John Lewis in The UK so that we can accept, and and fulfill their website orders through our own website. The benefit of this is it will help us increase the amount of range stock that we have in John Lewis, without them needing to hold the inventory. So good progress in all things to do with online. The next area I'll update on in detail is our wax lyrical, our home frames business, the biggest candle manufacturer in The UK.

17:10 A good period despite shutdown of retailers for this business. We grew up two percent, despite all the disruption that was aided by the agile change we made to be out of making hand sanitizer. We produced over a million bottles of hand sanitizer in the second quarter, some which sold through and some which is gonna be in quarter three sales. To double this business, which is our ambition, we have to do a number of things. We have to increase the penetration in our core market in The UK, and that's partly about new products and partly about new listings. Although shutdown, during the first half, the retail channels in The UK have have reawakened, and we're seeing good order flow in quarter three, and we're optimistic about quarter four for this business. The new ranges that we've developed are now selling through, which is good, and we've got new ranges ready to go in 2021.

18:00 On the international front, we wanna get traction in new international markets, and I'm pleased to say we've opened up new distributors in countries like China, Taiwan, Germany, as well as appointing additional representation in other markets, including The US. And then finally, investing in range extensions and new lines for hand and body soaps and lotions and sanitizer. We're on track in terms of our build program, both for our commercial launch and also our factory being ready, and we hope to be launching this new range, this new product in the spring of next year. Canada has been a long, time market for us, and for for many decades, we've shared a fifty fifty joint venture with another company for how we operated in Canada.

18:50 In August, we bought that joint venture out. We now own this, company a 100%. We paid a million Canadian dollars, which is, around about 600,000 sterling. We think it's a great opportunity to grow this market given the sort of 33, 35,000,000 population. It's been a long, term market for us. Our product, we know, resonates in this market. So we're in the process now of integrating the team there based in Toronto into our existing New Jersey operation. And already, the team are reporting back to me that there are some quick wins they can go at in terms of online sales channels opening and more focus on that area. So we're excited about this. I think it's a market that should grow well for us in the next couple of years. And finally, in terms of strategic updates or detailed strategic updates, I wanted to talk about manufacturing efficiency.

19:42 We set an objective over the next three years of reducing our cost per unit of manufacturing by at least 10%, and that will feed into our target of getting our operating margins up each year. We've been working with a automation specialist, a third party automation specialist in The UK for four or five months, and we're very close to having a three year road map for both of our UK factories. We've also moved on and started getting on with some of the low hanging fruit, and I can give an example here of three of the investments we've made in the last two or three months that can start to transform efficiency of our manufacturing. On the left hand side is an example of how we've been operating in the past. The top line is a twenty year old machine that we've used to have for applying to decal the image to much of our product.

20:32 On the right hand side is a new custom built machine that will be ready by April next year. It's being built right now up in Manchester. When this is live, it will give us double the output in any shift for a third of the labor and less energy. So this will be a transformational piece of equipment for us. And, similarly, further down the page, again, examples on the left hand side of processes that have been very labor intensive to date and machines that we put in the last four to six weeks that are automating that. So an automated mug machine that went live gives us four times the output for every eight hour shift and a litho, kind of decal litho cutting machine that we implemented last month. But, again, massively improves the output, and has less labor cost.

21:17 This, I think, is just the start of what we're gonna be able to deliver in the next three years, and all of this will feed through into our target of increasing operating margins.

21:29 So that's the end of our strategy section. We think we've made good progress in our strategy despite the disruption of COVID, remote working, and and everything else. We're also in a good place with regard to product, product development. Our new product pipeline is on track, despite the the challenges of of of remote working and not being able to get to all the factories outside The UK. We've got key launches lined up for next year, both for spring, summer, and for autumn, winter. And in particular, one of our most successful contemporary ranges for the last ten years, Sophie Conran. We have a completely new launch, ready to go in in April, and that'll be a global launch. So I wanna move now onto Outlook, forward Outlook.

22:15 As I said at the outset, we're pleased to to see a continuation of the improving sales trend that we saw in June, and that has continued through quarter three. We continue to see good online sales growth year over year even with retail reopened. And our two factories in Stoke and up in the Lake District are are running out or really close to the key, the pre COVID output levels that we had. So we expect to return and become profitable again in the second half and to be marginally profitable for the full year. We are cognizant that we have a key trading period ahead of us. The next three months is always a a key trading period when they run up to Christmas. And, obviously, there are still COVID uncertainties that exist, not least in The UK. However, in the absence of a total retail shutdown again, we're confident, that we're gonna have a a good and continued trading grid in the run up to the end of the year.

23:12 As we move forward to next year, '21, we broadly expect to return to trading levels of 2019. We expect some of the benefits of the new programs and new initiatives we're working on to drive our sales forward, but we still are cautious and expect there will be an overhang a hangover from from COVID. So putting those two together, we think we're gonna be

23:32 back to 2019 levels in 2021. And then moving forward to 2022 and 2023, we then think we get the full benefit of investments we're making both in double digit sales growth, we hope, and improved operating margins as well. In terms of dividends, we understand that dividend payouts have been important to our shareholders over over the years, and we're not proposing to pay an interim dividend for f y twenty or for full year '21. We want to continue to see the improvement in trading. We want to get through our key seasonal Christmas trading period before we make firm commitments on dividends. However, with the trends that we see right now, we expect to better resume payments for f y twenty one.

24:20 Our first priority through this period is gonna be making sure we invest the right amount back in the business to drive our strategy, and then we'll be able to pay dividends out with, with what's left and ensure they are sustainable and well covered in terms of dividend cover too.

24:42 So if I try and pull this together, and then I'm gonna ask for for questions. So we think we had a very resilient performance in the first half against a very tough and challenging backdrop of retail closures around the world. We think our brands have performed with great resilience, and we think that's really encouraging for the future. In particular, we've seen very, very strong online growth. That's a key part of our strategy in Aero, which we're still investing in. So that that's that's great to see and gives us great confidence for the future. Our balance sheet is robust. We have huge amount of headroom, for whatever the world throws at us. The fundraise that we did was successful in June is about backing and accelerating our investment in that strategy.

25:30 We've seen an improving sales trend from sort of the middle of June onwards, and that's continued through quarter three.

25:38 And we've continued to invest in our business throughout this period, and that investment, we believe, will drive a much stronger performance in our business once the fog of COVID has cleared. So that's the formal part of this presentation. Thank you for for bearing with me. I hope it's been useful and give you given you added color and and flavor in terms of, what we've been doing and what the future holds for PORTMEIRION. We're excited with the opportunities that we see ahead of us. We're excited that we'll be able to continue to invest behind the key parts of our strategy, and we've got a strong balance sheet that we think supports that. So now we're gonna take over and and move on to to questions. That's great, Mike. Thank you very, very much indeed. Ladies and gentlemen, please do continue to submit your questions in the q and a tab

26:30 I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard. 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 for the opportunity to provide feedback in order that the company can better understand your views and expectations and would very much encourage you to do so. Mike, obviously, investors do have functionality where they can pre submit questions, and we have a number. Just if I could start off by throwing these at you. And then obviously, questions are in the live Q and A. And as they continue to come in, I'll hand over to you in a moment for those. So the first question we have is, what about absolute pound and percentage of sales are now made online through the company's controlled website? And two, online through third party internal estimates?

27:21 How do how do margins on company websites compare with margins of the traditional retail sale? Okay. Thank you. It's a good question. So in the first half, which is, you know, our smallest half in terms of half one and half two, our sales from our own websites were around 15% of the total. So out of our 32,000,000, that'll be between 4.5 and £5,000,000 that were sold through our own websites. In terms of the margins that we make, when we sell product through our own websites, our average margins are higher, roughly 10% higher than we would make by selling through wholesale or trade channels. There is a slightly higher cost of fulfillment in our warehouses from that in terms of picking a single product and and sending that out to a consumer rather than sending a full container to a big retail warehouse.

28:14 But even after that extra cost of warehouse, we're still accretive in terms of margins. And I think the final part of that question was about retailer website sales. I don't have an exact number for the first half in front of me, but we saw strong growth from our retailer websites. And in total, retailer websites and our own websites, they account for about 42 of our sales in The UK and US, the two big markets. In The UK and US, it's roughly two thirds of our sales. So of that two thirds, about 42% of that went through online, and that's a considerable step forward from where we were a year or two ago. Thank you very much. There's a question around, you know, I guess, how the company presents, numbers within, its result statements. And the the question reads, in its results statements, why does the company not publish simple tables this half, this half last year, full year of its performance and its key strategies?

29:09 It's very wordy, difficult to interpret. There's a little bit more to the question, but I guess in essence about how can investors better understand information. Okay. Well, look, you know, I'm I I'm sorry that that the the statements didn't give the information that you expect or you wanted to see or in the format that you wanted to see. I hope that this presentation today and the tables within it have have helped clear that up. We always come back and take reflect on feedback we get, and we'll reflect on that for next time. We do work with advisers for a considerable amount of time in terms of what we release and how you release it, but we'll we'll take that feedback on board. Thank you. That's great. And, of course, they do have the ability to put that in the feedback post the meeting as well.

29:55 The final question that was presubmitted. Is the Board confident that sales of over $1,000,000 in hand sanitizer line will deliver long term sustainable returns? Many, many companies have launched hand sanitizers and built CapEx for it. COVID is likely to be controlled within one to two years. Is Wax Lyrical a good brand for germ killer romantically scented candles? Well, that's a great question. And, firstly, Wax Lyrical is all about fragrance. We have, you know, a huge amount of fragrance expertise. Taking that fragrance expertise and giving delight to to customers and consumers around the world is really what we're about. In terms of the hand sanitizer part of of that, we are investing around a million pounds right now, ready to launch in April next year, range extensions. But this is not about just being able to improve our ability to make hand sanitizer.

30:46 The hand sanitizer we made in the first half of this year was by repurposing what we had and by having temporary tents on the side of our factory for mixing product. That wasn't a sustainable solution. The investment we're making right now and in the next three or four months gives us capabilities to make hand and body soaps and lotions as well as sanitizer and also can be used to give us extra capacity for our core lines of candles and rediffusers. So it really is multipurpose. And so I think that a hand sanitizer will be a small part of our our sales going forward, but the ability to do a product like Crabtree and Evelyn or Molten Brown in terms of bottles of of soaps and lotions and whatever, I think, gives us a new avenue. And they will be fragranced, and I think will tie in with the the brand very well.

31:35 That's perfect. Thank you very much, Mike. Just touching now onto the that's the pre submitted questions, Dan. I'll draw your attention to the q and a tab. Now you've had a number of questions submitted today. If I could perhaps hand back to you. If I could ask you just to read out the question as well, Mike, just on the basis of no investor can see another investor's question and give you a response where it's appropriate. Thanks ever so much. Thank you, Mark. So first question I've got is this. How how do you target the new markets to expand into, and what is the cost of doing so? It's a good question. So in terms of which new markets do we target, we clearly get, indications of where we'd be more successful or likely to be more successful. So, you know, particularly with online, we get a lot of interest from certain markets, and that tells you know, people are trying to place orders maybe on a UK website that are from another market, another part of around the world, and that happens a lot, we're getting a lot of interest through online.

32:34 Then, again, that's a very good, give direction of feed in terms of what we should be doing. We also know that our our product resonates in certain parts of the world, and career is a strong market for us. And, therefore, some of the countries around career also, are likely to be strong. So, yeah, we we take intelligence from from another a number of areas. In terms of the cost of doing that, it really depends about how we how we we go about it in terms of do we work with the distributor, in which case, you know, there's not a huge setup cost, or do we set up our own online business, which case it'd be a more substantial cost? The next question is, what I'm sure of further disruption in the market due to a second wave of COVID, what plans have you got in place to address the risk?

33:22 So what are we gonna do to address the risk of second wave of COVID? The the first thing is to make sure that our our online systems and channels are, you know, as capable as we can be because what we know from the first wave is that a huge amount of consumer demand moves to online. So building capacity and capability into online is is a major way of addressing that risk. In terms of other things, you know, it's it's just being about flexible and being pragmatic in the ways we work, what we can do in our factories, and really supporting retailers. You know, the number of key retailers throughout this that we've really worked hard to to support, both strategically and and and and in other ways.

34:10 Okay. Another question. Tell me more about the Canadian market and the opportunities there. So, you know, Canada, I think, is, you know, population of around 35,000,000. We've operated in Canada for over twenty years. It's not an area, I have to admit, that we we had a lot of focus on in the in the last two years, and I think we probably haven't suffered and and grown in the way we should have done. As a result, particularly, I don't think we've had any focus in terms of building online channels. So I think there's a big opportunity both from having our own websites and also supporting the big retailer websites, like and retailers like Hudson Bay over in Canada. There's a question here on saying I have seen a YouTube video on PORTMEIRION UK channel. Could you give me more information on digital strategy?

34:57 Yeah. So digital and online strategy, you know, is one of the most important things we're working on right now because we know how many millions of people around the world have bought into our brands in the past through traditional retail. Being able to tell that story of our brands and the products and the quality and the heritage in online space is really, really important. And part of this is about getting the message out to people, and that's sometimes through social media, posts of our own. It's sometimes through influencers. Sometimes it's about bringing people to our platforms, and I gave an example of a a television advert trial that we're gonna run-in October. But it's also about improving how our product looks in all on online space. And in particular, that's about the quality of the photography and having photography that includes the products in a lifestyle setting as well as just a photo of the product. Sometimes the the box as well if it's for gifting.

35:51 And then and then how we get that content and the brand story out towards the retail website. So that's that's a systems piece. There's a question here. Was some of the equity raised used to pay down debt? That's an easy answer. The answer was was no. We have long term loans that, were taken out for some of our acquisitions, and they remain in place. Will the new job scheme affect your business is the next question. I think in terms of what was announced at the end of last week in The UK, I think that's what the the question refers to, I don't think it will affect us a great deal. We already have, I think, everybody back off furlough schemes, in The UK. Our factories are running pretty close to full capacity, so I don't think the the new job scheme affects us.

36:40 How does the new lithograph application machine compare to the previous machine used? Well, you know, put simply, the technology is is twenty years further forward. As I think I said in the as I went through the presentation, it not only improves drastically output per hour, but it also reduces the amount of energy, which is really important, and the amount of of manual labor that needs to look after the machine. So we can get more product out. We can get it out at a cheaper cost per unit, and we can use energy. All three of those are are very important. The next question is if you had to profile your average customer, what it looked like by age, average purchasing size? Does it differ country by country? Is The US and The Far East different from The UK?

37:26 So, look, that's that's a great question, and I probably can't do just the question in in the time that we have this afternoon because it, you know, it could take a couple of hours to answer that. But we, you know, we have an avid we have a we have two two or three kinds of product. We have product that is, ranges that have been sold for tens, not hundreds of years. We call them heritage ranges, and those heritage ranges tend to have an older demographic in terms of consumer following. However, sometimes those older, more traditional ranges do come back in into style, into fashion. And a good example of that is something like Spo blue Italian, which has been around for two hundred years, still sold exactly the same today and made in Stoke as it was two hundred years ago, but it's now having a real resurgence in terms of its kind of fashion.

38:13 But we've got other other products and and ranges and brands that are targeted much more at a slightly more contemporary consumer. I talked about Sophie Conner for PORTMEIRION. We've also got Sarah Miller for PORTMEIRION, and we're working on new new ranges as well that are more that are more contemporary. Similarly, giftware and giftable product is an also an important driver of growth for us, and and so we're we're looking after that as well. Does it differ country by country? Yeah. To to some degree, but I think the factors I've just described are are pretty thematic across across all of our markets. How much product is made in The UK, and what are the percentages of other countries where products are made in? Have you considered going a 100% made in UK?

38:59 That's a good question. So 50% of our products broadly is made in The UK, our two UK factories. The other 50% is spread out across the Far East and Europe. Have we considered going a 100% in The UK? I don't think it's likely gonna go a 100% because there are certain products that we simply can't make with the capabilities we've got in The UK. However, we are fielding increasing number of inquiries in the last month from customers and retailers who are really interested in in made in UK, made in England product. And I think that's really exciting, really interesting. If that continues, then, you know, it would prompt us to to increase investment perhaps in our in our UK factories. To support supplement direct shareholdings, what incentive scheme is currently available for directors?

39:49 Our directors incentive schemes are all laid out in our annual reports, and, you know, part of the part of the scheme is a basic salary, part of it is a performance related bonus, and part of it is a performance related long term incentive plan. How long does it take to revive or receive an online order for a customer in The UK and The US? So we well, we take online orders every hour of every day. In The US, we tend to ship an order within forty eight hours. The geography is more challenging in The US and The UK. In quarter four of this year, we'll be aiming for next day delivery. Certain times of the year, we have a longer, a longer delivery promise, but we're we're gonna try and move, from quarter four onwards to being able to deliver in in twenty four hours. That's that's our aim.

40:45 Is there a transportation cost for online orders in The UK and The US? There is. You know, the cost is is around about £3 in The UK and and and, you know, 6 or $7 in The US. But even with that cost, we still make good strong margins with with online. You mentioned that new online customers tend to place repeat orders. What metrics do you use to measure this? Are you able to share how you're performing? That's a that's a really good question, and and I think the honest answer is that as online becomes more and more important, then we you know, our reporting and systems, you know, need to to be and metrics need to improve. But we do look at we do look at, how much of our orders are from first time customers versus repeat, and we're able to look at that metric.

41:37 And as I said, people do tend to order from us, more than once, once they come and and join us. And I think the final question this afternoon, is this. What do you say to the impression that all this talk about online and automation is just belatedly doing what many companies have been doing for a long time? You know, I think that's a that's a fair challenge. I think that, you know, you can you can say, should we have started this? Well, we did we did start investing in the in in online three or four years ago. Think what we're saying now is that far more of our focus need to be on online. I think we've we've demonstrated good progress in in the first half of this year, and I think we'll be reporting good progress when we do our full year numbers. So, you know, I think it's important to invest, and we will see great great progress, I think, in online coming up.

42:35 Similarly with automation, should we invest more than we have done in the past? Perhaps. But, you know, the opportunity that lies ahead from getting this right, both from a sales point of view and an operating margin point of view, I think, are well worth going after. That's brilliant, Mike. Thank you. And as you say, I think you've taken on all those questions that have been submitted during the, during the event. Thank you very much. Before, Mike, I address, or redirect investors to give feedback, perhaps you could just wrap up. And then, as I say, feedback is important, and, we will direct them accordingly. Yeah. So, look, I just wanna thank everybody for joining me, today. I hope this overview has been has been useful. We think we've had a very resilient performance in the first half, and we're really excited that we've continued to invest despite COVID in the key parts of our strategy.

43:25 I think that's gonna put us in a great place to to take advantage of the opportunities that that are gonna be around in the future. So we look forward to updating on those opportunities and our progress in in future meetings. Thank you. That's brilliant. Thank you, Mike. Ladies and gentlemen, could I ask you please not to close this session? It should be automatically redirected for the opportunity to provide your feedback. If you access this meeting from our website, the feedback page will appear. However, you if you access this by the link in the email, you'll be asked to log in and submit your feedback. It may take a few seconds, but please do provide the company your feedback. On behalf of Mike and the team at PORTMEIRION GROUP PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.