Venture Life Group (LSE:VLG) — Interim results for the six months ended 30 June 2022

0:01 Good afternoon, and welcome to the VENTURE LIFE GROUP PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just just simply type in your questions 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 is appropriate to do so. Before we begin, I'd like to submit the following poll.

0:30 And I'd now like to hand you over to Jay Randall, CEO. Good afternoon to you, sir. Thanks, Alexandra. Good afternoon, everyone. Thank you for joining us on our investor meets presentation. Very happy to present to you today as as you know, we'll run through the slides that are on the screen. We've got some questions that have been submitted before which we'll answer, and obviously, we'll answer any others that come up on the chat room. Welcome to the presentation. We're going to start on slide three. This gives an overall view of the key financial metrics for the first half of twenty twenty two. Danny is gonna go through this in a bit more detail later on the presentation, but I can just give you the flavor if you like that first half. So if we start on the top left, you can see group revenue growth.

1:18 These bars across the screen are all half years. We've taken out the one off large hand sanitizer gel sales in 2020 because that distorts the the overall path and and showing you here what is the underlying business. And you can see we've got 36% revenue growth in the first half of twenty two compared with the first half of twenty one, and this is driven from the acquisitions that we've made in 2021, the health care and the assets from the housing group. Okay. I've just seen a message saying there's a lot of echo. Is that is that a problem, Alessandra? Can you hear us okay?

1:59 I can hear you fine. I will monitor it and let you know if we need to change anything. Okay. Thank you. So these acquisitions made last year, they've been in growth, 9.5% growth year on year. The rest of the business prior to the acquisitions is relatively flat, but we'll have much bigger second half of year, I'll talk about later because the revenues are weighted to the second half. And that the acquisitions that we made last year and how they've added to revenue has given a consequent of boosting gross margin in two respects. The acquisitions were higher gross margin assets that are overall business when we acquired them. So that's contributed. Also, they contributed in additive terms in terms of how much you can see we've got good increase in gross margin. How much in terms, but also in percentage terms, our gross margin percentage has increased five percentage points compared to the first half of twenty twenty one. And again, Danny will walk through a gross margin bridge later to explain that. That's dropped through to obviously growth in EBITDA on the right hand side. If we go to the bottom row, on the left hand side, you can see the first half has continued the increase in revenue mix of the VENTURE LIFE brands. These are the brands and the products with higher gross margins.

3:10 So again, the strategy of the group has always been to grow the VENTURE LIFE brands because they bring greater gross margin. But the customer brands business also is growing, has grown in the first half. It will grow very well in the second half as well. And that's part of the dual strategy of our product placement in terms of both brands and both customer brands. The middle graph at the bottom, you can see the performance of the acquired businesses, BBI and the housing assets in 2022. And as I said, they grew over 9.5% in the period compared to prior years. And we'll we'll talk to those as we go through. And the final graph on the right hand side, we're talking to cash generation. You'll see there's been a strong swing between what we saw in the first half of twenty one to the first half of twenty two, 2,300,000 swing, which is which is really positive. But also, that's after movements in working capital. And as we talk to as you go through the presentation, supply chain and inventory build has been deducted and arriving at cash generation. So with a nearly £2,000,000 inventory build in the first half as well, which has been accounted for in arriving at that cash generation, you can see that we've got a very good cash generation in the first half of the year.

4:25 We'll go on to the next slide now. So just to talk about some of the some of the flavor of that first half, we've covered some of these points already. So good impact from the acquisitions, delivery, increased gross margin and EBITDA. We have a strong order book coming into the second half of the year, comfortably ahead of the same time last year, about 20% to 30% ahead on a growth basis. What that means is if you look at our business overall and our revenues overall, about 30% of our revenues are directed to The UK and The Netherlands where we sell directly into retailers. The other 70% goes to partners who order their products and we make their products to order. UK and Netherlands, we hold stock.

5:12 Retailers will draw that stock down as they need it. So boots, Tesco, and the rest of the group, they place an order, we infer that order, we manufacture and then we deliver. So that order looks relates to about 70% of our businesses well ahead for the year. Also, have on top of that an increase in our order book related to people ordering further forward. So customers ordering further ahead normally, and this is down to the supply chain issue. So as you will know, following our business and others, supply chain has been very difficult in the last twelve to eighteen months. The biggest concern for our customers at the moment is availability rather than cost. So you'll see in the gross margin bridge later that we have managed to pass on most of the costs, direct costs that have increased for us in cost of goods, and that's because customers want availability.

6:03 So we've asked them to order further ahead when we're making to order. So normally, in previous price, we would have asked them to order ahead three months, maybe four months ahead. Now we're asking towards six to nine months ahead. And this has had two impacts really. First thing is it enables us to buy inventory forward where necessary to protect supply and protect price because with a very volatile supply chain situations we see at the moment, you can have prices changing daily. You can have suppliers having product one day, not the next. So we want to encourage customers order early to make sure we can lock in price, but also lock in availability. The second thing it does is is give us much more visibility on the future. So our order book is now moving very well ahead into 2023 already, which is very different from last year. So very good short order book. That has resulted in us having a higher level of inventory, and Daniel will talk about that later in the financial section.

7:03 But we think that's important to, as I say, keep customers supplied and keep costs under control for both them and us. We have lots of good revenue growth opportunities in the portfolio. We'll talk about those going forward through the presentation. Our new partner in China, we shipped stock to them at the start of the first half. They 've now received that stock. It was stuck in the bonded warehouse in Shanghai during the lockdown. It's now come out and have started to sell. We have very limited expectations for this Chinese partner this year and into next year because of all the lockdowns, but we're hopeful as many people are that the zero COVID policy will be changed later this autumn in China, and that would open up that market more. So, again, the market number is very little from either analysts as regards to China business and for us ourselves, but I think in later 2020 and into 2024, we expect to see good growth from this partner.

7:54 We still have good capacity in the plant. We're running quite high levels of production through end of h one and also into q three, given us a good validation of the robustness and ability to deliver higher volumes. We still look at M and opportunities, but obviously in the current environment, we'll reevaluate

8:12 the use of an RCF at this time because of interest costs and leverage, but we'll have to, you know, consider perhaps m and a opportunities in a very different light given the impact of the last four or five days. And, you know, our supply strategies will remain in place to protect gross margin and fulfill demand. I'll just go one quick slide on the acquisitions in a bit more detail just to show you their financial performance, and I'm gonna hand over to Danny to talk to the overall finances. So as you can see, they're 10% growth year on year in the BBI brands. So that is the LIFE GROUP products, the glutathione glucose products, and the balance active bacterial vaginosis products. So LIFE had very significant growth, 42%, driven mainly by increased activity in relevant areas, plus the launch in Ireland. Balance active underlying growth, about 5%. We did have a couple of negatives outside of that. We had a customer who was supplying to Russia, so we chose not to supply into Russia where we all started. And it's all product on fertility job, which was launched in The in The UK did not do well, so we terminated that.

9:19 But good opportunities in that portfolio and the growth, and we'll talk more specifically on the products and how they're performing later. The housing products that we acquired, 5% growth in those. These are entirely partnered products. We don't sell them directly to any retailers. So having acquired them, we're now looking to partner out in additional territories, particularly USA, Brazil, and Canada. Big territories are quite advanced in discussions in those territories. So we'll see small growth from that, those assets this year. But as those new partnerships come in place, we expect to see a strong growth in 2023. And with that, I'll pass over to Danny who'll talk about the financial overview in detail. And then he'll come back to me, I'll talk in a bit more detail about the brands and how they're performing. Hi, everyone. Good afternoon. So just to emphasize a few of the key financial highlights to begin with, you can see the revenue revenue growth of 36% year on year at 18,900,000.

10:15 Now, of course, a large part of that revenue growth is the full six months impact of the VDI acquisition, which was acquired on 06/04/2021. So it's one month of revenue last year, full six months this time around. But as Jerry's just touched on, we delivered 10% organic growth from that in the first half. That acquisition acquired new products to the group that were highly accretive to the gross margin profile in percentage terms, both from the PPI brands and the health and brands, which were acquired in August 2021. These brands generate around 50% gross margin, which compares to more than 40% on the legacy VLG brands business. So very accretive to the agreement, of course, the customer brands are generating good marginals, but more around 30% on CDMO revenues, so from Italy. So much large parts of the portfolio are higher margin brands now driving that gross margin improvement to 14.6% in the first half. We have also achieved EBITDA growth of 71% on that, delivering 3,300,000 EBITDA from 1.9% EBITDA in the first half of last year.

11:25 So a lot of that gross margin flowing through to EBITDA with the VBI VBI Healthcare cost base coming in to the mix as well. And we'll talk more about administrative costs in a couple of slides time. And resulting in an EBITDA percentage margin improvements, which is important. So we identified big cost synergies as part of the VDI acquisition particularly, and we're taking costs out of that business, brought in higher margin products, and we've seen an increase in the EBITDA percentage margin by 3.6% in the first half of the year compared to last year. And operating profit as well in the first half. So we delivered a £400,000 operating profit h one of this year compared to a loss of 200,000 in the first half of last year. And that is after also incurring a significant increase in depreciation and amortization costs through the p and l following the acquisitions of BBI and Health in last year. So those acquisitions have had about a 1,200,000 impact in increased depreciation and amortization costs in the first half of the year. So that operating profit 400,000 is after absorbing that increased cost on the underlying of those assets.

12:36 And as you can see on the bottom left hand slide there, the bottom left hand chart, we're generating good cash from the business in the first half, 1,400,000 net cash inflow compared to negative 900,000 outflow in the previous year. So positive 2,300,000 swing on cash generation in h one twenty two. And and that's after absorbing some adverse working capital flux of around 1,300,000, which is predominantly being driven by the build in inventory that we have that we have made a conscious decision to do in light of the need to secure supply early and mitigate cost pressures and secure components at a cost effective price. I've just seen on the screen that there's a question the impact of the weakening sterling.

13:27 So I'll I'll may as well address this one now. So across our group, the majority of our revenues are built in euros, which is clearly helpful in in light of what's happening with the pound at the moment. And we've got most of our costs as well are received in euros or incurred in euros in terms of material costs, packaging costs. We buy lots of this from the continent. So we've got some natural hedging at play in the fact that our revenues and costs are largely euro denominated. We have very little currency and transacted in sterling sorry, transacted in the US dollar. Apologies. Very little US dollar exposure in the business right now, the way we are shaped at the moment. So we've got good natural hedging from from from euro. In fact, the euro is a heavy part of our international business, and we will see strong second half revenues from euro denominated customers.

14:23 We will get some nice tailwinds in the second half that will support our or reduce our currency exposure across the group. And as we move forward, we're looking to professionalize our FX management further into the group. We've recruited a new treasury manager a few months ago to start looking at that and looking at looking at outside of just natural hedging, what other mechanisms can we put in place to ensure that our pay now is as best protected as it can be. But just to get to the final point on FX, on a constant currency basis, our revenue was up 36% year on year on a reported basis. That was more like 35% on a constant currency basis. There is one other question. What was the growth of revenue in h one twenty twenty two versus h two of twenty twenty one? Okay. So the revenue was flat at 18,900,000 in the second half of last year. And in the first half of this year, we've done 18,900,000 also. So revenue will stay flat year on year. But if you look at the shape of the business over the last eighteen months, you think first half of twenty twenty one was 13,900,000.

15:34 Second half of twenty one was 18,900,000. First half of this year was 18.9 again. And going into the second half of this year, we would expect a significant step up in our revenues around 22 to 23,000,000 to meet current market consensus out there with Singers and Saint Glass. And that is typical of the shape of our business as we go throughout the year, particularly on the international side of the business. A higher proportion of the revenues are weighted into the second half and and particularly in q four as those customers restock for the New Year. We'll move on now to the revenue slide, which I think a few of us you will have seen from us before. What we're depicting here is the evolutionary of the revenue over a long period, looking at split between customer brand revenues and VLG brand revenues. And by customer brand revenues, what that means is the CDMO revenue served from our Italian manufacturing plants. And you can see there's there's a turquoise bar in the chart at the bottom.

16:32 And those are grown year on year. It's around single digit growth, good growth from that part of the business and consistent stable growth as well as you can see, delivering around 13% gross margin. But it is the VLG brands, those parts those charts in orange, the orange parts, that is our focus in terms of the growth story and build and building on the m and a that we've done and investing in the newly acquired brands. You can see that that proportion of the VLG brands is increasing year on year over the over the period we're looking at here. And particularly, the step up in '22 from 2021 is, of course, reflecting the impact of the acquisitions that have been made for six months of those. And we've also delivered organic growth from those acquisitions, and they're bringing accretive gross margin products or higher profitability products into our group, which is driving that GM percentage up worse.

17:26 Just to further illustrate that, the shape of the business and a bit more simplicity here. What we're looking at is on the left hand side of the page, we're looking at first half revenues in 2021, and you can see that 64% were those customer brand revenues in Turquoise that so a bit lower margin, 30% gross margin.

17:49 And now you can now see that VLG brands accounted for the larger share of the first half revenues and those are the higher margin contributing products, which is therefore driving up again that gross margin percentage to label the point of it. In the pie chart in the middle, we've it's the second half of last year. And the reason we've shown that is that you can see there's quite a big shift change between second half revenue proportion of VLG brands compared to the first half of this year. 69% of second half revenues last year were VLG brands. And what that difference is really highlighting is the increase in the VLG international revenues as we see strong second half orders from those customers as they're getting restocked for the New Year. We've got great visibility over that due to our order book going out much further than it has done historically, and we've talked about that a bit in our statements. So we've got good visibility in the second half VLG brand revenues increasing further, and that will also have a positive impact on the gross margin percentage as we move through the year.

18:59 On the next slide, we're we're just looking a bit more detail around the individual elements of the sales. So they're underneath the VLG brand. So we're parking customer brands for a moment, and we're focusing on the VLG brand revenues, which were the orange parts, the bars on the previous couple of slides. If I take you to the rectangle at the bottom of the page to begin with, you can see that we've set out what first half revenues by therapy area looks like. And the two biggest chunks of that were the diabetes management and women's health care products, which accounted for 55% of first half revenues. And and these are products that treat genuine need states. Bacterial vaginosis, if you've got if you're suffering with this condition, you need to treat it. And similarly, with diabetes, you need to regularly be able to treat that in a controlled manner. So we think we've got resilient products for genuine need states that makes the business well positioned and well diversified in light of the current economic climate that we're facing right now. And looking at the chart on top of the page, this is just an illustration simply of when you delve into that a bit further on a product by product basis, you can see that if I look at the left hand side of that chart, the green bars are the first half revenues of this year, and the orange bars are the first half of last year.

20:16 And you can see that balance acts from LIFE are now accounting for the largest portion of the VLG brands overall revenues.

20:24 And what that what what's what that's doing is because these margin the margins on these products rather are 65% on balance active and around 48% on LIFE. This they are highly accretive to that legacy VLG brands portfolio. Hence, again, driving up that GM percentage in the overall roll up of the numbers.

20:47 I I see the questions keep popping through. Perhaps we can take some of these at the end to make sure we get through the slide deck. Yep. We'll come back to the leads. Thank you for your question. On to Slide 12 now, just to build out that gross margin bridge in a bit more detail from last year where we did 35.6 GM first half into forty point six And looking the next next years. As we've had some challenges as you can see on the left hand side of the slide. And Supply chain piece, particularly around input prices to begin with. We've seen an adverse impact on costs by 1.45% in the first half driven over packaging and raw materials.

21:38 Predominantly on the packaging side because the cost of energy is driven up the price of the the packaging materials that we need to buy from our suppliers. But on the raw materials side, we have also had impact, but our procurement teams have done a good job of mitigating or limiting the the impacts of that by procuring smart lease. So whether it be buying much further in advance in bulk in bulk loads or reducing the number of shipments to get the products into our facilities or by shipping by train rather than freight, for example. So we've taken some initiatives to minimize the impact of those input price increases. And if I take you to the orange bar in the middle of that slide, you can see there's a positive impact from customer CPI of 1.4%.

22:24 Now this is where we are passing those cost increases on to our customers throughout the first half of this year and also from the end of last year. So what we've done is out of that 1.45, that first impact we've seen on input prices. We passed on almost all of that 1.4% onto our customers. But what we've not yet been able to pass on, and we're exploring opportunities, so whether we can pass on some of this utility cost impact, we've also seen. So on the utilities elements of the chart, you can see 0.8% impact on GM. That is around a 150,000 pounds of increase of gas and energy costs year on year. We're currently looking at opportunities whether it be surcharges that we pass on to our customers to try and minimize the impact on our MGM percentage. But as yet, that's not something that's in our in our first half numbers.

23:18 Okay. Moving on to administrative costs now. So first half of last year, we incurred 4,500,000 and we spent 7,000,000 in the first half of this year. Now there's some key key drivers of those increases. The first of those is the impact of the BBI Healthcare cost base coming into the business. So when that acquisition was made, 7 figure cost synergies were identified. And we executed a large part of those synergies at the end of last year and the beginning of this year. So that 1,500,000 is the net impact of all of that. So predominantly, that's the cost of running the site in Sweden and the team and overhead infrastructure there, which is it's in the business now, we're winning the business as we go into the second half. So there's no further impacts on that DBI cost base to come.

24:07 On the A and E spend, we've invested more in our newly acquired brands, particularly on the balance act brands. We've launched into Germany of this year. And we've invested more in our A and P to support growth through The UK retail bricks and mortar on that brand as well. On administrative costs, it's worth pointing out that out of that 600,000 of overall cost increase. Point two of that is simply the impact of last year. We had a positive impact from releasing the Chinese bad debt provision into the p and l. That benefit has not repeated in the first half of this year. So the real cash cost impact is 400,000 year on year, and that's reflecting investment across across the business, The UK and Italy, predominantly in the commercial team. So we've invested in our ecommerce function, new brand managers, strengthened our international alliance team. And we've also invested in Italy as well to support the sales team and customer services side there to make sure the business is well placed to drive organic growth as we move forward with the new acquisitions we've made. We've also strengthened our finance teams while importing a couple of extra roles into The UK.

25:20 Okay. And lastly on that slide, before I forget it, non cash items just to highlight again, that is the depreciation and amortization cost I was mentioning earlier. So the impact of the acquisitions that were made last year. So it's a noncash item.

25:39 Last two slides on finance now. I'll just run you through the P and L. It's a quick summary of what we've just been talking about. So revenue growth of 36% to 18.9%. Good gross profit growth of 55%, driving margin improvement up by five percentage points to 40.6%. We've seen increased administrative costs driven by the DBI cost base, bit more investment in our advertising and promotional and ensuring that our wider commercial finance teams across the business are well placed to manage future growth plans that we have. Overall, net of all of that, we've driven an EBITDA improvement of 71 to 3,300,000, asset percentage margin improvements of 17.6% in total. More DNA because of the acquisitions, reduced exceptional costs because those acquisitions were last year. We've delivered an operating profit of 400,000 in the first half compared to the last 200 in the previous year.

26:37 And on the final slide on balance sheet, I'll just talk to two rows of particular notes here. Firstly, six rows down the inventory row. You can see the inventory at the end of June is 11,500,000 compared to 9,800,000 on the thirtieth of June last year. So nearly a 2,000,000 investment in that inventory because of the need to secure supply, secure materials to serve our order book, and we've got the ability to do that because we've got such good visibility going out to well into h one twenty three on our order book now, which is two or three months ahead of what we would have normally. So this has allowed us to protect the cost of the materials packaging we're incurring. Otherwise, those percentage impacts on GM would have been larger than we presented today. But because of that inventory build, it has reduced our ability to bring down our overall gross debt a bit quicker. So if I take you to the second but last line on this balance sheet table, you can see net debt at the end of June was 3,100,000.

27:33 That was 3,200,000 at the end of December. So net debt

27:37 has remained flat since the end of the year. We would have expected to to come down to about 1,000,000 by end of June, how I think they if it had not been for the investment in inventory, but we feel that that was the right thing to do despite there being opportunity cost and capital cost tied up on that inventory. It is delivering a strong gross margin flow through to the p and l, which is a net positive impact for us.

28:02 There's a few questions here. We'll do it then. We'll do the questions at the end if that's okay. Thank you. Moving on to commercial engineering. Great. Thanks so much, Danny. We've got a few slides here just talking about particularly the brands and how they're performing and what we're doing with those brands, but also on the customer brands part of the business and then a little little bit on ESG and our sustainability. So this first page is about the brands that we acquired from when we acquired the BVI business. So that includes the LIFE product, which is a glucose product for for a number of areas. But on recent research, what we found is this is being predominantly used by type two diabetics because it gives a measured dose of glucose and and also people in sports and perhaps a sort of tiredness working environment.

28:54 Also, we have a product called Glucogel, which is a type one diabetic. It's a a gel that's generally prescribed and reimbursed for placing on your gum for a type one diabetic who has a sudden hypoglycemic episode. And the third product was balanced athlete, which you see at the bottom, which is for treatment of bacterial vaginosis. So what we can see here is that the overall portfolio for VDI grew 10% like for like from first half of this year compared to the first half of last year. And that was driven primarily by LIFE. LIFE grew 42% in the first half. And that came about through two aspects. The first was more people just out and about, whether it be sport, whether it be more activity, particularly for the types of diabetics needing portable or or in a handbag in the bag products if they have a hypoglycemic episode. But also, signed a new partner in Ireland. That that that product has grown very well in the first half. We haven't invested significantly in that product in A and P this year. We just haven't taken a lot of market research on who used the product, and that'll be shaping our brand plans for this for the next three years in particular. But that's the product where we see the growth in in The UK and Ireland at the moment and with the international expansion later.

30:08 Balance active, which is the bacterial vaginosis product that's sold. There's an endologic tube you can see at the bottom there. The right hand box is box of seven. The left hand box is the value pack that we're launching. It's going to be sold by one of the leading retailers later this year. And that puts 14 tubes in the same box. So the small box on the right, the regular pack, retails for $8.95. And the large value pack, just twice as many tubes, will retail for $13.95. So helping consumers with some of the, say, some of the pressures they're feeling with those prices that we launched in a leading retailer. Also, as you may know, Balance Act is sold by Bayer under their Caniston brand and the Caniston balance brand name.

30:53 And Bayer, obviously, trades on the premium brand of Caniston, and they sell seven tubes. They sell seven tube box, and it retails around £40. So our value pack is a similar price to the the Canister make pack we sell. It's a double the probably another tube. So we think that's a good offering. We think it brings value. On international markets, we've got three market launches with Bayer, including Brazil where approval for was achieved last year. UK. We did launch in in Germany on the Amazon platform. We've been very successful in The UK with the Amazon platform.

31:44 That only launched several weeks ago. It's gaining traction. We expect us to deliver good revenues some of this year, but also into into next year.

31:54 Thanks, honey. We're going to have a talk about the oral care brands. Oral care brands, as you know, we've had for some time. There was a small decrease in these in the first half, and this is primarily down to the customer price increase we put through on the dental products. So this is where we sell them in The UK. As I mentioned earlier, about 30% of our revenues are in The UK direct to retailers. And in that situation with the price increase, obviously, you're putting it across the board. So any retailer who's buying that product, we do increase that by 14%, very significant price increase. And dental hadn't had a price increase for a long time. And what we saw was a little bit of extra buying in the back end of twenty twenty one because we had to notify retailers three months before the end of the year about this increase. So some of them took advantage of buying a lower price before.

32:47 And then in the second and first quarter, excuse me, of 2022, some of them resisted that price increase and run their stocks down. Again, we held the ground, we'd have to put that price increase too, and they eventually fall. So that's what really contributed to that reduction, which, as I say, was made in the first quarter. And now it's back to the run rate that we would expect. We've lost no distribution in this, and particularly, we've got more distribution. So dental, we're going to start selling a bit more of it in the discounters. There's a general move, I think, in retail for some consumers to be shopping more in the discounters. And by this, we don't mean out the middle because their operating model means they just buy one off or to stock. It's what we call a biggie, which is when it's gone, it's gone. They buy a a set of product.

33:32 They sell it, and then you don't know if they're gonna come back for more. So by discounts, you mean the likes of Wilco, VENTURE, those stores, and and they have a lot a longer term relationship. Very pleased it's going back into Wilco because just before we bought VENTURE in 2018, it was delisted by Wilco and we brought it back in there. And also, if you see towards the bottom of this slide, a leading retailer is expected to launch the product in q four. That's another big grocery retailer. Both events are not. And again, again, distribution. Overall, you know, our our feeling on the oral care brands is that they've held up well. The oral care market as a whole over the last eighteen months has been roughly flat by value. It's a billion pound market in The UK, about 80% of that is toothpaste, 20% is mouthwashing.

34:17 The toothpaste market has grown slightly. The mouthwash market has come down. But against that, our brands have held relatively steady, so we're we're very happy with that. Moving on to the last slide of the products. So this covers the suite of products we acquired from HealthSyn last year for quality support. That's POMIT, which is a food supplement for the reduction of PSA and GelClare, which is a mouth rinse for treating oral mucositis, which is a side effect of keeping our radiotherapy to the head and neck. So POMiTEA, sorry, overall, all the 5% growth in these brands. These are the partner brands, as I mentioned earlier, with the press harping demand in new territories, and that's where we see the majority of growth coming from. So Pommetea is part of three new territories this year.

35:05 Expect to see orders beginning next year. Also, we're in active discussions in three sides of the markets, USA, Brazil, and Canada. The product was in The USA until 2020 under the previous ownership, but the the company in The USA went into chapter 11 during COVID. So now we're in active discussions with other USA distributors. It's sold very well in The US.

35:31 And in Brazil, we've recently got approval. Brazil is a big market with discussions there. So this year quite well, just 5% increase so far. We expect to see more next year. Towards the bottom of the page, the customer brands business, this grew 3% in the year in the first half, excuse me, which was good results overall, but you'll see much stronger growth from this portfolio in the second half again. Coming back to ordering patterns, customers returning to more normal levels of ordering compared to 2021, but there was a little bit of

36:06 destocking that went on. But again, good performance there. We're seeing that from existing customers. We're seeing it from new customers. We mentioned Alpha Sigma, of course, two new customers, of course, the big U. S. Business and Alpha Sigma is one of the larger private pharma companies in Italy. But also, we're seeing good interest from existing and new customers who are having issues with their current suppliers who are perhaps not managing the supply chain difficulties as well as we are, so are unable to supply. So that won't really impact this year, but if we do take on some of those products, you'll see the benefit next year. Moving on just to our scalability, I just want to reemphasize this, Those of you who know us would have seen this before, but the bars represent units of production in the millions.

36:54 So the first part on the left is what we produced in the last twelve months. And the turquoise is 26,000,000 units. That's from our Italian facility. In Orange, it's 2,000,000 units from the Swedish facility. The Swedish facility just makes the balance active products. By and by 2,000,000 units, we mean 2,000,000 boxes, which each contain seven tubes. So as you can see, the second bar there is our capacity currently, And you can see that we're running, you know, just over half our overall capacity. We did have very significant production in June, July, August, and September in Italy, higher than we've had on a consistent basis before. Bear in mind, August is normally a very quiet sort of shutdown month. We didn't shut down. We kept producing based on customer orders, customer demand. And then the plant held up very well.

37:41 The production level is very good. The efficiencies are good. So very happy with that. We're undertaking a few initiatives in the next twelve months investing in North Sweden, but in Italy. Swedish plants are fully automated, very efficient, two seventy tubes a minute go through that. Typically, in Italy, our lines run 50 to 100 units a minute, but it's more labor intensive. So we were working on a bit more automation, which help us to make our labor usage more efficient in Italy and help manage any upward pressure you may see on labor costs. I've got a few slides now talking about our sustainability project, sustainable life. This is a project where we work to become much more visible and transparent with our stakeholders regarding our sustainability.

38:26 We do quite a lot in the group already, but we haven't been particularly public about it. For example, in our part, Italy, we make use of solar energy, heat recycling, these closed water systems to help reduce the use of water, reduction in waste, reduction in packaging.

38:43 So many things to do already, and and now it's important that we become very visible and transparent with with what we're doing. So we kicked this off at the back end of twenty one when we picked a a team, including myself and other members of the business to begin to work on this project. We undertook stakeholder consultation in quarter two, which included employees, customers, suppliers and shareholders. And on the base of that, we will then decide which of those sustainable development goals published by the UN that we're going to prioritize. They're all good goals, but, of course, each business can only, if you if you like, focus on some and influence some more than others. And and from the feedback from our stakeholders, we've chosen those. And then we're gonna be setting the KPIs against which we're gonna measure the improvement in those areas and the baselines of those. And in our report accounts next year, we hope to publish the baseline KPI numbers and then each report season each reporting, excuse me, we will report against our progress against this.

39:43 Moving on, before I go into which of those priority goals, just a couple of related matters. So for our 2021 performance, we were awarded the sustainability sustainability rating of bronze by the EcoValis consultancy. There are consultancy that a number of our retail customers use to assess their suppliers, so boots, Tesco's, etcetera.

40:06 So very good easy to receive that. I don't have any data on whether that puts us in, you know, top half or quartile or whatever, but it is positive because the customers are very happy with that. We'll work obviously going forward to improve that. Also in 2023, we're going to be actively working towards achieving the B Corp status, because we know that's very important for visibly for a number of people, but also the standards that it sets you to are good standards to follow.

40:34 And then finally, this on the next slide, we've just set out here what we have identified as our priority sustainable development goals that we will be focusing on. I'm not going to sort of run through these or list these. You can see them here on the slide. But we'll be, as I say, identifying the correct KPIs, which measure progress there, then measuring our baseline position and reporting our progress against those KPIs as we go forward. So very, very much a project, embraced very well by everybody in the business and progressing. So I've just got a final slide, really, and then obviously, we'll get on to answering the questions that been asked. So if I look at the the first half, it's good impact of the new acquired businesses, which are growing in our hands. Legacy business was flat compared to previous year, but that's because revenues are much more weighted to the second half, and we have that. We see that through a very highly visible order book.

41:30 Gross margin improvement of five percentage points. Again, mainly due to the impact of, the acquisitions, but also, beginning to mitigate, measure and balance those gross margin pressures. Supply chain pressures do remain an issue, like I said earlier, only just over the, I think, the peak of the worst. They will continue, but we think we see them getting slightly better in the autumn and a bit better next year. Energy

41:56 consultative components are the ones where the issues will remain. So paper, card, glass, where a high level of the input costs are energy. So that will continue to be a pressure. But, again, with our policy of holding good inventory forward and take getting orders from customers forward, we can manage that. Good operating cash conversion in the first half, we expect that to continue. That's even against the backdrop of an inventory build. So what do we see for registering? Well, as we said already, legacy business will be stronger in the second half. Historic weighting, good visibility for order book supply chain management will continue. We'll keep the inventory where it is. We don't expect that to unwind because this continue continuing forward, I think, position with the order book, good cash conversion.

42:44 And also, want to deliver our expectations for 2022. So that concludes our presentation. I think we're going to hand back to Osandre to answer the questions that you've raised. Jerry, Daniel, thank you very much for your presentation. And 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. And we received a number of pre submitted questions from investors, and I wanted to start off the Q and A session with these. The first one reads as follows. In recent calls, you mentioned that new people had been hired to look after relationship with Amazon, specifically for UK and German markets. Can you give an update on how that is progressing against plan? And what should we be looking over for the next six months? Yes. Of course. So we had a a head of ecommerce that started the role in March 22, and that's enabled us to bring our e commerce expertise in house with using agencies before.

43:38 Overall, as we said, the H1 performance is flat against the prior year, but with a lower overall investment and consumers have started to return to bricks and mortar in H1 'twenty two compared to H1 twenty one. We've launched out in Germany, as we said. It's been operational since April. Sales continue to increase month on month. While at the same time, the one of the KPIs we will look at, which is take us, which is the advertising cost per sale is falling. So that in turn is driving higher profitability. It's still small and early, but we're very positive with that. If we look at the next six to twelve months, there are line extensions in the German business where we launched there, new product launches in The UK market expansion across EU, continued focus in driving efficiencies through our supply chain e spending. In addition, we're looking to expand into other key EU countries with the Amazon platform.

44:34 That's great. Thanks very much. The next question here reads as follows. In terms of overall headcount, how do you see that moving over the next twelve to six to twelve months? Do you need any specific highs for online transformation, product development, marketing, sales, etcetera? No. We've got all the right structure in place to to cope with all of that. So we've got structure and people to cope with all of those aspects and already, for example, you know, NPD marketing is already in house, so we don't it didn't we won't see additional resource being needed in those areas. Thank you very much. What are the key KPIs you're tracking? Is there a long term plan for the for the next three to five years for each brand or business line. How do you track progress on these plans slash strategies?

45:22 Sure. I mean, as a leadership team, we we have been able to develop a three year plan, which goes out, let's say, included this year in two more years. And we have prepared detailed brand plans that go behind that and then we have key KPIs. So key KPIs, first of all, net revenue. Net revenue takes account of fixed and variable investment requires increased top line sales. That's one of our such KPIs. We we the objective is to increase net revenue. So, for example, compared to gross revenue, net revenue would would have deducted promotion when we got volume related promotional costs, they'll be taken off of sales. So we make sure we take those off and measure net revenue as a real real measure there. Gross margin, of course, that's really important at the moment on a brand and on a country basis.

46:11 And overall, in the business, we're looking at, you know, net revenue, gross margin, cash conversion, there are sort of three key KPIs and their progress against these plans and targets is monitored continuously, more meetings, cross functional meetings, commercial finance across the sites. Thank you. That's great. You mentioned in the recent update about increased inbound customer inquiries around own label slash customer brand leads. Should we expect some of these opportunities to come to fruition over the next six to twelve months? Will there be increased emphasis in this area, own brand slash own manufacture for value pharmacy and retail channels? Sure. Yeah. As as I mentioned in the presentation, the inquiries, if if somebody inquires on what or they want to develop and make a product for them, it's it's a six to twelve month process before we start delivering depending on whether it's a cosmetic registration, food supplement registration, or a medical device. So, yeah, those inquiries will will come to fruition in terms of revenue in in future years and not this year.

47:14 There's a continued emphasis on the open brand area of the business. I mean, that that business is more than doubled since we merged with it in in 2014, and we see a a really good profitable level of business from there. We continue to expand those customers. I think it's a part of the business which contributes and significantly subsidizes the cost of the factory and therefore the cost of the facility that makes our own brands and spreads the overall cost in different volumes with lots of capacity. It's not limiting our ability to grow organically and build the brand. So we'll continue to develop that area. It's a very successful team in terms of bringing in new products, new developments. They do a fantastic job and that continues to grow our overall base. Similarly, we start to see cross validation with some of these partners, you know, potentially look at our brands as well. So it's a good way of building our overall customer base.

48:09 Thank you very much. Are you able to give a steer as to when inventory load investment in entry can start to be unwound? Is this something we can expect to still see well into next year? Sure. So as you'll have seen from the investment we've made that we've made this with a conscious decision because of the order book. And and probably going about twelve, fifteen weeks ago, we would have expected our order book, our inventory to unwind back to sort of 9,000,000 by the end of this year. And if not for the visibility, we've got going down into h one twenty twenty three. So that won't happen now because we're procuring materials to ensure supply of h one twenty twenty three revenues. So we would expect that for the end of this year, our inventory will still be around eleven, eleven and a half mark because we are still buying out into the first half of of next year. But as we move into next year, at what point now it'll start to come down? We would expect that around q one, as we serve a lot of our q one revenues, that we will start to see a decrease in that inventory level book and settling down around h one of next year. So around June 23, we think that will come down to around the 10,000,000 mark. So that's still higher than we have had as a benchmark historically.

49:26 We've been around 8 and a half to 9,000,000 in the recent years. So it is reflecting the fact we still are having to procure materials still in longer lead times than previously. However, that said, we do suspect to see there will be some wind down, just not at the same rate as we would have seen in previous years going into the the first half of next year and the end of this year. So just to summarize that, we expect we'll be around 11 to 11.5 still by the end of this year because of next year's raw materials that we procured winding down from Q1 through to end of June next year. Thank you very much. Understanding the current tough consumer spending slash cost of living environment, are there any segments or country markets where you're seeing growth or strength?

50:14 Yeah. Mean, all of our products address a need state. And therefore, despite the challenges around the cost of living crisis, we believe there's still been need for our products. We are seeing strong growth particularly in the diabetes energy management segment compared to last year. And we're seeing exceptional growth in The UK particularly in the look to a partner to partner these other markets internationally. On the oncology support job there, we're seeing good demand for this product given the strength of the products and the clinical studies. We expect to see growth from this in FY twenty three particularly in new key markets. Other markets, we're seeing good growth for products, which is proctomies and hemorrhoids in Austria and other women's health products in Greece and other countries and oral care in general. So, you know, we haven't seen any particular dampening of of of demand, and we're seeing good demand for our products.

51:07 Thank you very much for that. China and Samikan, understand this has been a slow burn, what with supply chain and COVID lockdown restrictions there. But all the next milestones be there assuming it will be next year before we start to expect progress? What kind of promotion is SummerCand currently able to undertake for the dental brands? Sure. I mean, there are ongoing lockdowns in China. Obviously, at the moment Chengdu, there are other problems such as restricted COVID measures, for example, Shenzhen. And all of this is adding to the continuing uncertainty and lows of consumer confidence. But next year will be a key year for that partner, and providing the lockdowns are over, consumer confidence is returning. The next milestones will be November, the eleven eleven event. It's a big sales event in China. It usually gives us good indication of how the brand's performing.

51:53 Then to install predominantly online, promotions will be price based or what they call GWP gifted purchase, which is very common in China. These brands are brands are being promoted by key influencers on social media, and almost all of their marketing is being done digitally. So, yeah, I think that the simple answer is it's a it's a slow burn at the moment, but we do expect to pick up next year of those changes. That's great. And maybe the final pre submitted question here. For the new in market product launches, are you able to give any color on how that's progressing and which ones you might as excited about over the next twelve months? Yeah. These these new launches haven't yet launched, but we secured the distributors and preparing for launch. So we expect them to launch October, November.

52:38 And we can't wait too much as it's commercially sensitive. And the nature of some of these new products and our NPD. But the NPD, have a balanced action. It's exciting. We've already talked about that and that will help us build the brand. Plus, as you said, within the balanced action category, the the launch of the thrush products, again, is positive. So those, I think, are the exciting ones, the next twelve months. I think as I mentioned earlier, the quality support business and the partnerships we're doing there will will also see launches in in the coming year. That's great. Thank you very much. And as you can see, we've also received a number of questions throughout today's live event. And I know we've already dealt with a a few questions during the presentation, but if I could just ask you to read out the questions give responses where it's appropriate to do so, then I'll pick up from you both at the end.

53:28 Okay. Sure. Yeah. I'm happy to answer these. We've got we've got some more time. Yeah. Yeah. Danny's gonna answer the first one. I'll take the first one. So I think we covered down segments or sales partly since this question was raised. Just just to summarize, we've seen that the new acquisitions, BBI delivered 10% growth organically. The health and deliver 5% growth organically. And then the customer brands business also delivered growth around 5%. But overall, the rest of the legacy business was slightly down by about 200 k versus the the previous year. So at one and a half percent. So good good organic growth coming through on new brands and new acquisitions, customer brands growing, slight softness in the rest of the legacy business, UPS side in the first half, but we've got strong visibility in the second half international revenues that will pick that back up into growth.

54:23 Okay. Yeah. That's all. This is a question. Which product do you think could add most materially to revenue growth over the next eighteen months and what is driving the growth? I think as we've we've mentioned earlier, I think VAMAS active is one of the ones we think will have significant growth. So the new the new product development of multipack going through The UK, the launch of in Germany on Amazon, the fresh product coming to market, expansion of territories, and the following of the Bayer launches because the agreement with Bayer is they launch kind of balance in new territories. We're allowed to launch Palantzak in the same territories as well. So I think Palantzak has really good material revenue impacts going forward. Similarly, LIFE, we've seen really strong growth in LIFE, and we haven't actually invested much money behind this. So I I think they're two big drivers. And I think sort of the third will be those oncology products that we bought from housing because let's say, they're being a partner at the moment and the revenues will come in a few years.

55:28 Okay. I will go to the next question now. Happy to answer. 25 vote against by shareholders at AGM with the issue of share resolutions. Any further color on why such significant vote against? Yeah. That's a bit disappointing, but I do have some color on that. I think, unfortunately, only I think just under a third of our shareholders voted. So I think that's personally, it's a bit disappointing because, obviously, shareholders have a chance once a year to to give us their thoughts, and only two thirds did. That predominantly covered our institutional shareholders, obviously, plus management, and I I suspect a small number of retail shareholders. So, the the vocus of games only represented 17% of our overall shares. It's just that only because only two thirds of the shares voted, then it represented 25%.

56:21 It was only just over 25%. And in fact, it was two institutional shareholders, one of whom is no longer on the register. So I can't give you any color as to why they made that vote. I suspect it was because they like to have a say in whether we issue shares for cash. Obviously, we're entitled well with resolutions to issue shares for noncash consideration. Of course, at the moment, we wouldn't consider any issue of shares for the current share price. But, yeah, I can't really comment on their views, but it was only one shareholder or other institutional shareholders that fully supported all of the resolutions at the meeting. Next question. Share price at all time low. Do you feel vulnerable to a takeover offer?

57:08 No. We don't. And I think there's two reasons for that. I think the first reason is we have a good supportive shareholder base. Obviously, the time of results at this, I I go and meet all of our best shareholders with Danny, and we talk to them. So good supportive shareholder base. You've got no we're not aware of any further institutional sellers. There's a question that's coming up later, but I can deal with it at the same point where someone was asking if there was an overhang of shares. You would have seen on Thursday of last week, there was on the day of our results, there was significant volume that was clearly out of an institutional shareholder. It was that one I referred to who voted against as we as we believe, voted against the share issue resolution. That shareholder's now been cleared out. All the stock was bought by one of our shareholders.

57:55 And I'm not aware of any overhang surge from an institutional basis and volumes in recent days. I'm gonna pick another question from the question originally, which is about are we vulnerable to take over? No. I don't believe we are because the the institutional shareholders are supportive. We've made significant proportion of our shareholder base for over 60% institutional. The share price is very low next to last fundraising. The shareholders believe there's significant value of the business and it's not represented by the current share price, which is obviously driven by marketing sentiment and not by underlying value. You know, our our market expectations this year is to deliver around 8,500,000 of EBITDA profit. You know, even at I've been on a 10 times multiple that puts you at 85,000,000, which is, you know, 60 or 70 p share price.

58:43 Certainly, my feedback from shareholders is, you know, they think that's the shares are worth a lot more now and now, and they wouldn't be interested. I don't think in any pursuit to take over. Meet the management team, businesses substantially undervalued. There's lots of growth in the business, which we've been called as ourselves. So, no, we don't at this time. Okay. Do you wanna do that? Yeah. Sure. So does the recent decline of sterling give you any issues with UK trade where your revenues are in GDP, yet your COGS are in euros? And how will you hedge this? So in in short, the answer is yes. It does put pressure on margins if we're buying goods in euros and selling them sterling through The UK trade. So what are we doing about it? So three three main things we're doing. The first one is that we've actually started to look at locking in euro rates with the the bankers when we buy goods from our intercompany based sites in Italy and The Netherlands.

59:44 So we we're trying to protect the FX and rate that we will get at the point when we then will have to pay those invoices. So there's some activity that we're exploring now. We did our first one about a month ago, and we're continuing to look at this hard within investment in our new treasury manager and professionalizing the FX function. So that's the specific FX element that we're looking at to try and mitigate that impact. But there are other elements that we are working on outside of pure FX management to help mitigate the impact that this FX issue is having on the gross margin in The UK. So the first of those is that we see there's lots more CPI, cost price increase opportunity slash necessity for some of our key products into The UK market where no CPI has yet been passed on. And we see that there is a real and validated opportunity to do that.

1:00:34 We're working in that at the moment as a potential for a CPI, which will help mitigate the impact. Small impact FX has had was having at the moment based on the rate movement we've seen. But also as part of our strategy, we're continuing to look to internalize more production throughout the business and reduce the any outsourcing we have. So some of our products are still manufactured by CMOs. So outside of our Swedish and Italian facilities, we do have other suppliers, and we're looking at feasibility studies to bring those products in house and therefore generate more margin ourselves by reducing the cost of goods to produce those products in the first place. So some directly FX related actions and some indirect actions help mitigate the impact of FX that's going to The UK trade as a result of recent rate movements.

1:01:24 I think the other thing on that as well is we do have a number of backup suppliers in The UK for our UK products. And I think if Sterling was insuriate too far, we can switch switch core production into there if it protects our margins if if there's an issue. I think we got probably time for one more question. So what other how many more have we got? Okay. We've got time probably just for one or two more questions. So, Danny, do wanna deal with sorry. That that one so that question about VENTURE. Yeah. Sure. So there's a question here. Do you have any plans to take VENTURE LIFE into The US? We're actually already in The US for both of these products, but in a very soft way. We launched online on Amazon and have been for around twelve to fifteen months now.

1:02:17 But those we're not doing much investment behind those products at the moment as we've been looking to do a reset on price and strategy for that market and a wider competitive benchmark assessment of the landscape in The US. So we certainly have more plans to drive growth through The US, but at this moment in time, we're just reevaluating the competitive landscape before putting a bit more a and b back into that online launch initially. And also looking at other online platforms in The US, such as walmart.com to further roll those products out with the aim of ultimately getting a bricks and mortar listing having shown success online. So that's a work in progress, but currently, only a low level investment people behind this. So there's a question on the chair as well, isn't there? Yes. Yep. So there's a question. What changes has the new chairman made to the business?

1:03:09 So Paul agreed. He joined us in May. Paul's a very experienced commercial operator. For those who don't know, he was instrumental in the expansion of the body shop business all the way across Europe. He's involved in a number of businesses in the consumer space, consumer products space, beauty, also health care, and significant experience in the Far East in terms of manufacturing and supply. Paul has been very good in helping us on a practical basis with sourcing more materials from Far East where we may have had issues earlier. Interest is far lower in Far East. Electricity costs are lower. So he's helped us with that. He's brought good rigor into the board, so we're spending a lot of time in the board on commercial aspects, strategy, growth plans, and particularly brand plans.

1:03:56 Going forward is introduced to risk ledger into the business, which we were doing formally for, but now formally each board meeting. We discussed that risk ledger, look at the risk weight to the business and also the financial aspects of the business and how we manage those. So, yeah, very, very happy with that. You you also see that we indicated it's the market during some of the 02/21/1996 will be stepping down through rotation. We've been active in that process. We've identified the replacement candidates who are going through the final diligence from our side at the moment, and there'll be some news about that in in due course. I think probably that's all we've got time for, if that's okay. If there are any remaining questions on there, we're very happy to see you. We'll we'll put a written answer for that in due course. But but thank you for your time and your questions today.

1:04:49 Jerry, Daniel, thank you very much for that. I think you've addressed those questions you can from investors. And, of course, the company will review all questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Jerry, could I just ask you for a few closing comments? Yes. Of course. I mean, it's a very difficult operating environment. I think supply chain has been the worst I've experienced in in in my business life. But I think the team, particularly in in Italy and our facilities there, you know, across the group have worked really well to manage those. It's if we go back, let's say, you know, a year, two years ago, supply chain issues, you might get price change once every few weeks. Now prices are changing daily, supply availability is changing daily. We'd have to find additional suppliers, replacement suppliers, even reformulate products here and there to improve.

1:05:44 So a very challenging environment. The team's done really. I think. I saw in the first half, the order book strong in the second half, very comfortable on year end numbers. We see good robustness in the business and the debts and good growing customers. So, yes, it's, you know, I'm sure it's frustrating to shareholders to see the share prices. I think they will see that across all of their holdings at the moment. The business is in, you know, really good shape, significantly undervalued at the moment on capital markets. But I'm sure that as the markets come back and recognize the value of the business that will revert. So, you know, thank you for your support, and thank you for your questions. So we're also very happy there if any of you want to ring in or email in at any time to ask questions. We're very happy to to speak to you immediately or or answer those questions. So, again, thank you for your time and support, and, you know, best wishes in these volatile times.

1:06:35 Jerry, Daniel, thank you very much for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few minutes to complete, but I'm sure will be greatly valued by the company. Behalf of the management team of VENTURE LIFE GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.