Venture Life Group (LSE:VLG) — Review of Prelim Results

0:02 Good afternoon, ladies and gentlemen, and welcome to the VENTURE LIFE GROUP PLC review of the preliminary results 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 simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it is appropriate to do so. These will be available via your investment company platform and we will notify you by email when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to start off with a poll. If I could ask you to give that your attention, I'd be most grateful.

0:50 And I'd now like to hand over to Jerry Randall, CEO, and Drew Waters, CFO and Sharon Collins, Commercial Director from VENTURE LIFE GROUP. Good afternoon to you all. Okay. Welcome, everybody. Apologies for that slight glitch, but as I say, you've got myself, Gerry, CEO and Co Founder of VENTURE LIFE Sharon, Commercial Director and Co Founder and Andrew Waters, our CFO. So I will give you some initial introductory slides. And then we'll move on to Andrew to give a bit more detail on the financial results and Sharon to give a bit more update on the commercial piece. So just flipping through the presentation. Starting with the highlights slide, Page three, we have here. So group revenues grew by 49% to $30,100,000 in 2020. That was a combination of some acquired growth, a company called Pharmasource that we acquired in the start of twenty twenty, but also organic growth through both our VENTURE LIFE Brands business and our Customer Brands business, and we'll talk more about that as we go through.

1:50 Our adjusted EBITDA was up over 100% to $6,100,000 And we continued this growth, as I say, through both organic and acquired strategy. Now Venture Life Brands revenues contribute 50% of the group's overall revenues compared with 33% last year. That doesn't mean that the customer brands has gone backwards. In fact, they grew 12% this year also. But it does mean the VENTURE LIFE brands growth has been stronger. We continue to sign long term distribution agreements and launch products in market, and Sharon will speak more about that later on. In terms of our acquisition strategy, we continued that during the year. We acquired PharmaSource based in The Netherlands. We acquired that in January, And that contributed $2,800,000 of our revenue for 2020.

2:36 And that was up 20% on a year on year basis from the previous year before we acquired the business. So that business has continued to grow, and we'll talk about that a bit more later in the presentation. We undertook a placing and open offer at the back end of twenty twenty. That was with our broker, Senkos. And through that, we raised £34,000,000 net of expenses for further acquisitions. We've additionally put in place or are putting in place at the moment, sorry, bank facilities of up to £50,000,000 to supplement that cash on a sensible leverage basis. So we will continue to acquire products, but with a combination of the cash we've raised through equity, but also with additional bank debt. This is a bank debt that will be through normal high street banks at normal commercial rates, not with any ratchets or, I guess, warrants or anything like that. These are not specialist lenders. These are normal high street banks, and we will disclose who they are once the facilities are in place.

3:33 We bolstered our acquisitions team. So we now have a specific Director of Corporate Development. He joined us a few weeks ago and an experienced person from PricewaterhouseCoopers. And we're using external resources, particularly consultants specializing in consumer health M and A transactions to identify interesting transactions and assets for us to acquire. What we look for in acquisitions is looking for products that are in the self care space that we think we could make in our factory because they're a liquid cream or a gel that have the opportunity for further geographic expansion where we're strong, the opportunity for new product development where we can add products into the range and also the opportunity to perhaps improve the marketing of that product. That's what we've done before with the acquisitions to date, which have been very successful and what we intend to do going forward. So with the cash and debt facilities we have, with the expanded production capacity that we put in place during 2020 And with a good pipeline in front of us, we are looking forward to some positive news on acquisitions during the course of this year.

4:41 I'll now move on to the next slide. A little bit more detail on the financial highlights. As you'll see, lots of good positive numbers down the page. And all I want to draw out here is the effect of the leverage on our business as we increase revenues. As I say, those revenues increase both through organic growth, which is existing customers doing more business, also new customers doing new business with them. And then from the acquisition side, the acquired PharmaSource business that came in for the year. But you'll see gross profit increase at a higher percentage rate than revenue. And again, that's due to this operating leverage. As you put more revenue through, we get a better gross margin. It was also contributed because of the move towards a greater percentage of our VENTURE LIFE brands.

5:28 They attract typically a higher percentage gross margin than the customer brands. And so the combination of those higher margin products comprising a larger proportion of our revenues and the increased revenues through the facility gave us that three point increase in gross margin from 39% to 42.7%, which is a great result. Adjusted EBITDA, as I say, more than doubled, increase in profit after tax and earnings per share. Net cash generated from operating activities was not as a lot larger than last year, and the main reason for that was investment in inventory. We had to build up inventory to protect against Brexit risk in The UK. You'll see in a further slide where we operate, and I'll tell you more about that. But we built up over six months stock in The UK for satisfying our customers here in the event there were issues shipping product through the border after Brexit.

6:20 Normally, we'd hold two to three months, so a significant increase there. And as we know, Brexit is done now and our operations are back back to normal. So you'll see that inventory unwind a bit more as we get through the year. Also on the raw material side, through COVID, we increased our levels of raw material holdings to make sure that we didn't have any interruption in supply for our customers in producing their products. During the quarter two of twenty twenty, there was quite a constriction in the supply chain of cash and suppliers were selling on a preferable basis on a preferred basis rather to customers who could pay upfront. And then we've got slightly better terms, but it meant we secured supplies of raw materials. So again, we built up those raw material supplies. And we're going to hold those higher levels, again, typically six months rather than three months through the pandemic period until we're sure that's cleared to make sure we don't have any risk of interrupting customers' supplies.

7:15 I finished the period end with significant cash, and we've talked about the debt facilities already. For those of you who don't know us, the next slide gives you just a little profile of the business. We are effectively vertically integrated. So we can go right from idealization of a product through formulation, pilot batches, technical development, registration, scale up, manufacture, and distribution of the product. So in two countries, The UK and Netherlands, we sell direct to key customers. So in The UK, it's the major pharmacy chains and

7:50 the major grocery chains. Similarly, in The Netherlands, everywhere else we use partners where we sell on an exclusive basis through partners around the world. And we'll talk more about that as we go through. In terms of where we are, anything in orange you see on this map is where one of our products that we make is sold. It could be sold through a distributor, as I say, in most of those 44 countries. But in The UK and The Netherlands, we have key account teams who sell direct into those key retailers. And you can see some of them from the left hand side of the page. Obviously, Boots, you'll recognize, but we also sell into Superdrug and Lloyd's on the pharmacy side and then all the major supermarkets plus, of course, Asda and Ocado. In The Netherlands, it's a similar setup. Croyde is the largest pharmacy chain in The Netherlands with approximately 50% of the market. We sell to others such as Trek, Pleisto and also into the grocery chain with the likes of DA.

8:44 On the right hand side of the page, at the bottom, you'll see some of our international partners. Some of you may know Alliance Pharma, a specialty pharma company based in Chippenham, are significant customer of ours. But we also sell to the likes of Menarini, Sunstar Butler, the big Japanese business Almoral, Spanish pharma business WinStar Medical is a big German OTC business. And as we say there, we have over 100 partners around the world. For our locations, we have our head office and VENTURE LIFE brand commercial office in The UK in Bracknell, New Reading. There's about 15 people there. We have an operation in The Netherlands, just South Of Amsterdam, which is the pharma source business we acquired in January 2020 with six people there and the balance of our employees, just North Of Milan in Northern Lombardy, where our production facility is. Also, is development, technical, regulatory, quality control, customer services, sales, etcetera. So, we have a big location there. I'll talk more later in the presentation about the capacity of that plant.

9:45 Obviously, that plant was at the forefront of the pandemic when it arrived last year and currently in Europe now, obviously going through a third wave of the pandemic. But we protect the facility. We stop external visitors coming in. Now we're testing our staff every week for COVID. A number of weeks ago, we had a handful of positive, but mainly asymptomatic cases. They were isolated. Now, they're back to work and we have no cases of COVID in the plant. And we plan to go forward with an operation to vaccinate the staff because in Italy, you're allowed to or you're able to procure private agencies to vaccinate your workforce. So we'll be doing that soon. But as I say, the plant has run at full capacity in operation through the previous waves of the pandemic and currently is now.

10:35 Moving on to the next slide. These are some of our products we have in the portfolio just to give you an example. Sharon is going to be talking more about these as she goes through. On the oral health side, dental and Ultradex are big products for us. And we also have products in proptology, other areas of skin care, nail fungus, which is primarily the products we acquired from Pharmasource. And also in women's health, have a product there, the Intimate Vaginal Gel for bacterial vaginosis, which again was a product we acquired from PharmaSource, but now we're beginning to license that out to new customers. But again, Sharon will talk more about that on the commercial side.

11:12 We have a picture here of the split of revenues between our various product categories. And the orange and green turquoise on the left, that's products that we call VENTURE LIFE brands. So they're owned entirely by VENTURE LIFE. We control all of the assets and IP relating to those. On the right hand side, you have the customer brands. And those are where the customer controls some of the assets. Could be trademarks, could be patents, could be something else. And we develop and manufacture products for them in exactly the same way as we do for our own brands. But we make more money, more margin from our own branded products. On the left, typically, have margins of between 40% to 60%. On the right hand side, that's gross margins. On the right hand side, for customer brands, we typically have margins between 3035%.

11:59 So that's why you're seeing that blended gross margin of around 42%. And as we look to acquire more brands and build the branded side of our business, we would expect our gross margin to progress further. I have a slide here now on PharmaSource with a little bit more detail, the business we bought in The Netherlands. And you'll see that before we acquired it in 2020, this business was growing well on its own. It's continued to grow. And the growth you see there is the business as it stands as we acquired it. And in addition, within the rest of our business, we have begun to license out those products and increase the revenues coming from them. That has been as a business, been well integrated into the VENTURE LIFE GROUP now. And this year, we're beginning to make the products at our plant in Italy. So full integration in place and the benefits that we get from that. Already, we struck seven new distribution agreements with the products that we acquired there. So really pleased with the integration we're seeing in that business.

12:57 I'll talk a bit more about our manufacturing capability here. And the picture on the top right is our bulk mixing facility in Italy. The way the plant is arranged, we have a facility of bulk mixing, which is essentially big mixing vats between with capacities between 300 kilograms and nine tons. And we use different machines depending on the size of the batch and the product. So obviously, when we're making bottles of one liter mouthwash, we tend to use the bigger nine ton machine. If we're making bottles of three ml nail lacquer for the fungal products, we would use one of the smaller machines. Then next door to that, we have 13 filling lines, which then fill those liquids into the appropriate containers. And then the rest of the factory, we have space for what we call secondary packaging. So that will be placing the containers into cartons or boxes, then into bigger cartons and being palletized before being shipped.

13:47 The facility there is 5,500 square meters. And what this graph here is showing is our capacity now and future capacity. So in 2020, we produced approximately 28,000,000 units of products. And a unit can be a three ml nail lacquer product or it can be a one liter jar of mouth container of mouthwash. So it's a slight approximation. It doesn't reflect volume of liquid we make, but it does reflect pieces. Our capacity at the start of the year was around 33,000,000 pieces, and you can see we produced 28,000,000. So when we saw the growth coming in the early part of twenty twenty, we decided to invest significantly to grow the capacity of the plant. Normally, would spend £200 to £300,000 a year on regular upgrades in the plant, could be new filling heads, could be changes to infrastructure, etcetera.

14:39 But we spent £1,200,000 during 2020. And that took our production capacity per year up from 33,000,000 units up to 55,000,000 units. And so you can see, even with what we've done during 2020, we've got the capacity to almost double our production compared to 2020. And that's there to accommodate the acquisitions and organic growth we look to achieve. We have plans further on from that, so we can hire new buildings or lease new buildings nearby. There's plenty of vacancy and opportunity, and we can increase our capacity then. We would probably move all our filling lines at that point into that new factory. And then also, we've got the capacity to extend the property we're in at the moment, physically extend that and create more. So again, with a total of £10,000,000 of investment, we can almost double our capacity again to 100,000,000 units a year. And because of the growth in revenues that would come, that would be funded out of the cash flow from that plant.

15:40 I'm going to hand over to Andrew now and he'll talk you through the financial highlights and then Sharon for the commercial highlights before coming back to me. Thanks Gerry. So I'm just going to go through three slides on financial section. And, so starting, with the performance the group has continued the progression of its buy and build strategy, and this is exemplified in the 2020 numbers and here we see the revenue was up 49% with an incremental £9,900,000 of revenue and if we look at that increase in revenue £2,800,000 was acquired growth coming from the acquisition of PharmaSource and the balance of £7,100,000 was organic and the key components of that were £1,800,000 of growth came from the new China agreement, pounds 3,600,000 of the growth came from the new hand sanitiser gel business and £1,700,000 of the growth was growth to the customer brands business.

16:49 So that 49% growth in revenue led to a substantial growth in gross profit both commensurate with the sales growth but also higher due to positive mix and positive volume variances. Here we see the first benefit of this buy and build strategy which is a leverage against the factory costs. But it's not just a leverage against the factory costs that's in play here. We also can see a little further down the P and L that there's a second leverage and this is leverage against the admin expenses which comprise the costs of sales and marketing and also finance and operations and these two leveraging effects led to a significant growth in the adjusted EBITDA and during the course of 2020 we broke through the 20% level as a percent of EBITDA.

17:52 So if we were to project forward a little bit and ask ourselves what would a sensible margin expectation be over the short to medium term through continued buy and build and continued leverage. I think we should be expecting to see the gross margin moving towards the mid 40s as a percent and hence with a similar amount of leverage on the admin expenses we should comfortably expect to see the adjusted EBITDA hitting the mid-20s as a percentage of sales. Now clearly with this level of top line growth all of the profitability measures look impressive whether we're looking at operating profit or pre or post tax profits So certainly the '20 twenty year very nicely demonstrates the buy and build strategy playing out in the financials.

18:49 And if we turn to the next slide here, I'm just showing here the past seven years of turnover and the blue comprises the VENTURE LIFE brands and the orange is the customer brands. So we can first of all see here that point that Gerry has alluded to earlier which is the VENTURE LIFE brands now represent 50% of the total business and with those brands carrying a gross margin range of between 40 to 60% versus the customer brands that are between 30 to 35% then the clear positive mix effect shines through.

19:34 I've also shown here the three most recent acquisitions over the past five years that's Ultradex, Dentile and Pharmasource and our agenda is clear for further acquisitions in 2021 and beyond.

19:49 In terms of the growth the compound growth rate of performance has been 27%. We target ourselves to deliver at least 20% and if you felt in any way that the 2020 year had perhaps been flattered due to the type of year it was, if repeated this assessment excluding the 2020 year we'd see the compound annual growth rate was 22%. So I think this is showing that we are achieving our objective of at least a 20% CAGR and that is what we are planning for and working towards going forward.

20:35 In the next slide just to show you the financial position and we're sitting on a strong balance sheet. In the first two rows I've broken out the non current assets into the intangibles and the tangibles to show you that a significant part of our balance sheet is intangible and in our sense it's what you'd expect from a company engaged in this buy and build strategy that we have big assets on our balance sheet which represent acquired intangibles that's acquired customer relationships, acquired distribution agreements, acquired brands, acquired trademarks and acquisition goodwill and the growth between 2019 and 2020 is very much the inclusion of the PharmaSource acquired intangibles.

21:30 On the second row we see the tangible assets and this is all factory related and it comprises two things. Firstly, have invested in plant and machinery, we've invested in a new mixing vessel and new filling lines throughout 2020 and those investment plans continue. But also during 2020 we exercised our option to extend our lease on the Italian factory which itself is a finance lease and we have rights to that factory through until at least 2031 and so that gives us a very good ten year runway on the continued use of that excellent facility.

22:19 On the cash line we see a substantial amount of cash and that has arisen through obviously the cash generative nature of the 2020 performance but more so was the substantial funding round in December taking cash to a very strong position. In other current assets it's exactly what you'd expect is inventory and trade data and the growth is commensurate with the growth of the business plus specific reasons for growing inventory of both finished goods but also raw materials to keep us in good stead for production particularly in Italy during this rather difficult period at the time with Covid.

23:07 So a strong asset backed balance sheet. We have increased our debt facility in 2020 by a couple of million but as Gerry has mentioned this will all be superseded in approximately a month's time when we will be closing a substantial debt facility that will bring in a very substantial amount of debt. The principle of this debt is that we will use it together with our own cash in funding our acquisitions on the principle that the acquisitions will be funded in a 50% geared manner so effectively we are able to double our cash and hence double our firepower in M and A activities through this debt.

24:01 So in conclusion we're sitting on a very strong balance sheet, a very strong cash position and that holds us in very good stead to continue this buy and build strategy through bringing in acquisitions in the future. So I will now hand over to Sharon who will talk to us about the commercial performance. Sharon? Thanks Andrew. So just my first slide on dental. Dental had a very strong performance last year. Revenue had increased by 80%, so from £2,400,000 to £4,300,000 And just for those that don't know, dental is an everyday mouthwash that we acquired in 2018.

24:47 It's been in The UK market for more than twenty five years and enjoys really wide distribution amongst the health and beauty channels, as well as online and the grocery channels. It's alcohol free, it's clinically proven and it contains fluoride. So here in The UK, we saw growth as well. Last year, we saw a 33% increase in revenues and that was driven by three main things: new business that we saw with new partners, we launched some new products, and we also saw a general increase in rate of sale. So we saw a couple of new launches last year. The most notable one was Boots. We launched the brand into 800 of the largest boot stores and

25:29 also on boots.com. We also launched in some value retailers. So B and M Bargains, we launched in all three fifty six stores, which is across their entire estate, and 130 of the stores, of the body care stores. In November of last year we announced that Cardiff University's independent in vitro study had finished. This was published and the data included in that for dental was very positive. This was a lab based study that was carried out independently by some scientists at Cardiff University, looking at the effect of mouthwashes, as well as dental, you had some other major brands involved in that study and looking to see what impact it had on the COVID-nineteen virus.

26:21 And the results were very positive for dental, as we announced, and this story was picked up really well by the media. So we had a lot of media coverage on the brand around that time. And we believe that it wasn't only this, but it was also some of the other initiatives that we've seen in the year that really had a positive impact on the performance of dental last year. And as that chart on the right hand side shows, dental became The UK's fastest growing mouthwash brand in the last three months of 2020. And as you can see, we outperformed all the major UK mouthwashes. This is data that is taken from Nielsen. So it's independent data and it's EPOS sales, so electronic point of sales. This is what goes through the TILs.

27:09 It includes all retailers. The only exception is Amazon and Ocado. So very good performance in dental, particularly against the backdrop of COVID last year. Outside of The UK, our biggest market is China, and we saw a three zero eight percent increase in revenue to China. You will have seen in April last year we signed a substantial deal with this Chinese partner. And just to really give you an update on where we are, so last year we shipped €2,600,000 in total to China and that was all shipped in the first half. They experienced delays in shipping and that was purely down to Covid, so they lost about four or five months whereby the goods didn't arrive until September October.

27:56 And as a result, they took a bit longer to pay. We gave them a bit more latitude, but in order to manage our risk, we wanted them to pay down some of that debt before we continued to ship to them. In terms of where we are now with them, they've paid €2,200,000 of that €2,600,000 and as a result we've resumed shipping. And in fact our first shipments went out in February. All that debt will be paid off by early mid early to mid April, by which time

28:27 we will have expected to have shipped around €700,000 in total. Moving forward this year, we expect them to pick up all the orders that weren't picked up last year, which total around €3,500,000. On top of that, they've given us a forecast for dental. When you look at their minima, we don't expect them to do the minima this year, which is about €7,000,000. And the reason, quite simply for that, is that they too have been affected by COVID and the lockdowns, as all our partners have. Before COVID struck, this partner was really starting to go places. They built momentum, and, as a result, we got strong orders off the back of that. And then Covid happened, lockdown happened, and it has affected their business.

29:17 Having said that, if we manage to do 3 to €4,000,000 with this partner this year, I think that they will be a very important partner to us. When you think our largest partner is Alliance Pharma, and last year we did €6,100,000 with them. So for us, it's about working with this partner, nurturing and supporting them through this difficult time. And then in 2022, we'll see where the land lies with them and see what action we need to take

29:49 moving forward. We also launched dental into four new international markets on top of this small markets, but still important ones nevertheless. In terms of our new product development, we developed a number of products for dental last year. We launched the dental editions. This was the mermaid and unicorn variants that we launched in summer last year. We launched into Superdrug and Savers, the brand, the products have gone into all Superdrug stores, so all 800 within their estate. And also the Mermaid has gone into all 500 of the Savers stores. And in fact, we were on target to launch both these variants into all retailers. But when COVID struck, all retailers outside of Superdrug and Savers said all new product launches are off, we'll do it in 2021.

30:43 So now we're in the process of going back to those retailers and hopefully launching these variants with them. We also developed what we're calling Dental Fresh Protect. This was a sub brand that we created. There's three different flavours in this range and it has a low price point. So it has a £2 RRP compared to the 3.95 pounds of the dental dual action. And really, the whole objective of Dental Fresh Protect is really to target that low end of the market, that private label end where consumers maybe aspire to buy brands but can't quite afford it. So we launched in Sainsbury's in October last year, it was a bit of a test and learn to see how the product would perform. Of course, we wanted to make sure it didn't cannibalize sales on the dual action and we wanted to see whether it was going to bring in incrementality.

31:39 We're just looking at those first insights now and we believe that it's all very positive. Incrementality is there and there's been very little cannibalization. So that's been very positive in Sainsbury's. And as a result, we'll start to look to roll that range, that sub brand out with our other retailers. And then finally, the last piece of product development was the dental spray. So up until this point, we only had dental in a mouthwash. We now have it in a spray. It will be launched early summer. And again, that will be important as we start to unlock and people start to move around. And then really the final point on this slide is the Cardiff University clinical study. We announced in November sorry, I should say in August last year that we were involved with Cardiff University and the clinical study.

32:31 And that study is now in its final stages. It's going to be finished in the next one to two weeks. At that point the results will be peer reviewed and then published in a scientific journal in about three months' time. We had expected it to be finished and published, in the first quarter and the reason being is that with the in vitro study that happened in November last year, Cardiff University published those results as a preprint. And what that means is that it was uploaded to a specific website as a preprint and was published within twenty four hours. It wasn't at that point peer reviewed and a lot of other institutions are working in that way. But with this main clinical study, Cardiff University has decided that that route isn't appropriate actually.

33:26 And we're going to go to get the results peer reviewed, which will add more credibility to the whole study. And it just means that there'll be a two to three month delay on those results coming out. In terms of the relevance, I think it will still have relevance. We don't know whether the product has worked yet. We have to wait and see. But if it has worked, if it is positive, even with a vaccine, we should all be vaccinated by the summer. All the preventative measures will still be in place. People are talking about hand washing, masks, social distancing for the rest of this year. So I think if the hand hygiene and oral hygiene is there, then I think the results, if they are positive, will be very relevant.

34:13 On to the next slide, which is our second mouth wash product. This is Ultradex, our second oral care brand. This is a brand that we acquired in 2016 and it's indicated for halitosis, so it's much more specialised than dental, which is more of an everyday mouthwash. Ultradex is being designed for treating bad breath. It's clinically proven, it's alcohol free and it was developed by dentists more than twenty five years ago. It's a great product. It's got lots of history and lots of heritage. Unlike dental, Ultradex was impacted by COVID-nineteen, particularly here in The UK. Revenues were down by £200,000 as a whole, which was about a 4% decrease on the prior year.

35:03 Here in The UK, in quarter one last year, the brand was in growth against quarter one twenty nineteen. And then quarter two hit, lockdown came along and the brand was impacted. And whilst we saw some recovery in the second half, it wasn't enough to make up that shortfall. Reasons for the impact: less people were going to the shops, we know that, during lockdown. But particularly the high street was very impacted, so Boots and Super Dragon. It's in both of these channels that Ultradex over indexes. As well as less people going out to the shops, whilst they were there, they were spending less as well. Also, consumer behaviours changed. Less product was being used because people were simply staying indoors.

35:50 So as we unlock, as we move forward this year and unlock, we believe that the brand will start to come back to levels seen pre COVID. Having said all that, the brand did fare very well against our competitors, And we're now the number one mouthwash brand for halitosis here in The UK. The chart on the right hand side shows Ultradex with its two main competitors and CB12, which is owned by Mylan. They're our biggest competitor in this segment. And you can see that they had a torrid time in 2020. So whilst Ultradex was affected, it wasn't impacted to the same degree. We also developed a new product, Ultradex CPC MAX. And this is, a new product we developed where we've taken the key ingredient in Ultradex, which is stabilized chlorine dioxide, and we've combined it with, the main ingredient in dental, which is CPC or cetylpyridinium chloride.

36:50 We've put those two together and that's another product that's also involved in the Cardiff University clinical trial, so both dental and Ultradex CPCmax. Having said that, all of our bets are on dental, so we're really, hoping that dental, has a positive result. And then finally, outside of The UK, the international markets, Ultradex is licensed in 15 markets in total. China is the biggest market and again all the points I made about China are relevant really to Ultradex here. And then finally, my last slide is on the rest of the international business. Jerry's already mentioned Pharmasource, which was the acquisition we acquired on the twenty fourth of January last year.

37:37 And we saw very good solid growth given that, we had the backdrop to COVID, but also we were integrating this business into the VENTURE LIFE GROUP. That growth came from our two core markets, The UK and The Netherlands. And as Gerry said, we've started to do deals already. We did six international deals on these products. Integration is on track commercially and financially. It's all integrated. The manufacturing has started. Brand, the product on the right hand side, which is for bacterial vaginosis, that's already started to manufacture. We've manufactured that in the plant in the second half of last year. We've also manufactured athlete's foot as well. 95% of our revenues from PharmaSource are on the nail fungal products.

38:29 And at the moment, we're just in the process of tech transferring that over. That completes at the end of half one. So by the summer, all of the products then will be manufactured in house. Excluding dental and Ultradex, which are of course our two big brands, we do have a number of other brands within the VENTURE LIFE portfolio. We have a brand, for example, called ProctoEase, which is for hemorrhoids, a brand called MicroClear for onychomycosis. These are much smaller brands, but nevertheless they're still growing. And they're growing due to some of our partners last year performing very well and also expansion into new markets. And as already has been mentioned, we signed 17 new long term distribution agreements.

39:14 They were signed by the commercial team. We have a business development team based here in The UK, and they're responsible to go out and find reputable partners around the world that have their own infrastructure that can take on our products, and in most cases, our brand, and sell them in that territory throughout the life of the agreement. And once you've signed an agreement, it's then really important that you get the product through registration and then you get the product to market. And that's why we have a small team of key account managers that work with our partners to ensure that that happens. So not only are we able to sign deals, we're then working with our partners to make sure that they then launch those products for us.

40:01 And then finally, the DisSim Plus, which is the new hand sanitizing brand that we created in response to COVID. This was all done in quarter two. You can see the revenues last year were £3,600,000 of which £3,200,000 came from quarter two. So a really strong response. We're not going to see the same level of revenues this year. The channels are very full with hand sanitising products. Having said that, Europe's just gone into a third lockdown. We're going to see surges here. So we have that product ready. And we are already selling this product initially. We've seen revenues so far this year as well. And then finally, the customer brands. This is the manufacturing side of our business. And again, you can see we saw double digit growth of 12%.

40:49 So all parts of our business grew last year. And again, that was against a very difficult background to COVID. That growth came from existing partners, so some of our partners performed well. And it also came as a result of new agreements being signed. Last year, we signed 21 development and manufacturing agreements. So we've got a BD business development team here in The UK working on the VENTURE LIFE brands. And then we have a business development team sat in Italy working on those products for manufacturing. So this is where, we will go out and find partners that will either, where we'll develop products on their behalf. So nine manufacturing agreements were done. There were 12 research and development, agreements reached. In total, we've got 80 live R and D projects that are underway.

41:43 Some will come to fruition this year, some will come to fruition next year. So that's a snapshot of the business, the commercial business and the performance of 2020. I'm now going to pass you back to Gerry, who's going to talk about the M and A before we then wrap up. And as you know, M and A is a really important part of our strategy. Gerry will give you an update on how close we are to concluding our next M and A deal. Gerry, over to you. Great. Thank you very much, Sharon. So, as you said earlier, and I mentioned, we undertook the raise, in the autumn. That's given us significant cash balances. We've got access to some significant debt facilities that we'll expect to conclude shortly.

42:28 The group is cash generative. We've invested quite a lot of our cash this year in inventory. But as we've already explained, we expect that to start to unwind this year, certainly as regards to Brexit stock and inventory, although the COVID raw materials may take a little bit longer to unwind. So we've got significant funds available for acquisition. We've bolstered our resource in M and A. And the strong balance sheet definitely opens the doors to more discussions that wouldn't have been open before. We're very active in that. We had some projects in the autumn that we highlighted we were working on, continue to work on, and we've got some new product projects as well. The sort of things we look for in our M and A are areas sort of therapeutic areas which fit within self care. So we're relatively therapy agnostic.

43:20 So there's not things we overtly seek to avoid. But it's something or products that can be sold in the consumer self care setting, something that we can ideally make. So in Biocosmos, our business in Italy that manufactures, we make liquids, creams, and gels. So anything that fits within that category is suitable. As you can see, we've got a wide distribution network geographically, so more than 40 countries around the world. And when we look to acquire an asset or product, we look for a product where there's an opportunity to continue to expand that geographical presence. So it might already only be on sale in one or two countries, and therefore, we can take it to more. As Sharon set out in her piece earlier, we undertake quite a lot of new product development. That's really important because if you have a brand that's either been neglected or a bit unloved or it's been flatlining for a while, then what you need to do is bring innovation into a brand.

44:22 Consumers want innovation. They want to see new things. They want to see progress. And that can be down to simple things like upgrades in formulation, changing some of the ingredients that are in there. But it can also mean broadening the range. And when we bought dental, effectively there were three products in the range, three flavors. And now what we've done since then is to put, as we see here, the Unicorn and Mermaid products out into the market. We've also launched the FreshProtect single place product. So again, broadening the range. You'd never look for those line extensions to overtake the core product, but you look for them to be additive. We did the same with Ultradex. So again, in searching for an acquisition, we're looking for that sort of opportunity. So we've got lots in the pipeline. We're working hard.

45:09 We'd expect to give good news about acquisitions acquisitions during the course of this year. It's always really, really important to make the right acquisitions in the right way. And we've made four very strong acquisitions since we founded the business. So we acquired the BioCarsence business in 2014. That's doubled since we acquired it. And then we've acquired Ultradex and Dental and PharmaSource more recently. And all of those businesses have grown. Even PharmaSource having grown 20% in the year since we acquired it. So we're very careful on what we buy, how we buy it, what we pay and to make sure we do the right level of due diligence. So that's a little bit on M and A. Really to wrap up and just summarize what we've spoken about already, and then I think we've got a short time to answer some questions.

45:59 So importantly, we've remained operational throughout the entire year 2020, and we are now. As you know, our plant manufacturing plant is in North Lombardy. It was at the center of the pandemic when it arrived last year. And obviously, now Europe is going through an uptick as well. But with using the measures that we put in place, the plant is fully operational. We're COVID free in the plant and regular testing to make sure. We've got good resources to spend. That capacity we've built and as Andrew has demonstrated, that leverage that we can apply by just simply putting more revenue through. Obviously, the more of that revenue that's a higher margin will significantly increase margins, but also just putting more volume through the same cost base improves our margins. And we've seen that particularly in the lift of our EBITDA margin from below 15% to over 20% in 2020. So we've got a track record of earnings enhancing acquisitions and a good pipeline of opportunities. And COVID is clearly giving everyone some uncertainties at the moment.

47:00 Many countries are still under growth of COVID cases. We're obviously in The UK starting to come out of it, although in severe lockdown. So we see that there'll be customers who do well, customers that don't do quite so well, but we've got a good spread of many customers in many countries and many products and we're feeling comfortable about the year ahead. So that ends the formal conclusion. And I think we have to finish it too, but we've got time to answer some of the questions, I think. Gerry, thank you very much, and also to Sharon and to Andrew. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of the screen. I'd like let the company take a few moments to review those investor questions submitted during the meeting itself. 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 dashboard. We'll send you an email to notify you when they are ready for your review. I'd also like to remind you that your feedback is important to the company.

47:57 And immediately after the presentation has ended, you will be redirected the opportunity to provide feedback in order that the company can better understand your views and expectations. Gerry, Sharon, Andrew, we've got time, so please feel free. There's a couple of questions that were pre submitted that I'd like just to post to you, if I may. One is about acquisitions, which I think you have touched on. I think there are a couple within the live Q and A that will probably address that pre submitted one. The other two pre submitted questions read as follows. Do you look to focus more resources into building your online presence and channels? Yeah, thanks, Mark. I'll take that. In a word, we don't. We don't have any immediate plans to build our online channels.

48:42 We've got really good relationships with our online partners as it is. So Amazon's our biggest online partner here in The UK. When I look at Ultradex, it's our second biggest retailer. And with dental, it's a top five retailer for us. So we've got a really good relationship that we've been nurturing over the last couple of years with Amazon. What we don't want to do is disrupt that relationship by going direct. Also, other point I'd mention is all of our major retailers have their own online stores. Boots.com, for example, represents 20% of their overall business and in fact is their largest store out of their 2 400 estate. Again, we work with Boots on that platform, as well as then working with all the groceries, whether it's Tesco, Sainsbury's, etcetera.

49:34 So we tend to work with those partners, rather than, going direct. Thank you. Perfect, thank you so much, Sharon. The only other pre submitted question just to raise here is what plans are in place to expand the site of the current factory to increase capacity? Sure, yeah, I'm happy to handle that, Mark. We did touch on it a little bit in the presentation, but essentially we've got a 5,500 square meter site, which is, as I say, about forty five minutes north of Milan. And that site has the current production facility and it has space within the buildings that are there for us to continue to expand some activities.

50:19 But most of the expansion regarding production capabilities we've undertaken to get us to that 55,000,000 units per year capacity. So the next phase is two parts. So there's plenty of free, as in unutilized buildings where we are. It's in an area of manufacturing, has been for a long time. So there's other buildings there which we can lease and move certain parts of the operation into. And one of the things we did earlier this year was to move a lot of our packaging materials outside. Packaging materials, by their very nature, can be bulky. There's a lot of plastic and cardboard and a lot of air. So, not only are they bulky, but they're also a significant fire risk. And so, by moving those off-site to a separate logistics warehouse nearby, we've created space within the plant to undertake the secondary packaging, which is is the bottles into boxes into cartons and then palletized.

51:17 But also it's enabled us to make more efficient use of the fire protection systems that we have in the factory and concentrate those around, the areas that are most in need. So, with that next phase, we'd look probably to move our filling lines out to that leaf site. Filling lines are quite simple to move because they're fairly discrete pieces of kit. Mix the bulk from the bulk area and you put it into a one meter cubed container, which you then move to the filling line. That's plugged into the filling line. It fills and it comes off the other end. So it's quite straightforward to do that, much easier than moving the bulk production capacity. So that newly created space, when we move filling lines out, would allow us to create more bulk mixing capacity and allow us to have more secondary filling capacity secondary packing capacity, sorry. And then finally, the next phase that we'd undertake is to physically increase the size of the buildings on the site that we're on.

52:14 And again, we could do that with extended buildings to increase again bulk production, filling if necessary, secondary packaging, and that will allow us to add more. So we've done it deliberately in a sort of stepped process. So as we grow revenues, we always want to keep what we call a bow wave of production capacity ahead of us so that you're not suddenly caught out with exceeding demands and with acquisitions. So that's the plan we have. It's robust. It's been well thought through and is in a good place. Gerry, thank you so much. If I could now ask you guys to turn to the live Q and A, if you could just open the Q and A tab, you'll see the question and you'll see the investor's name. Perhaps I could hand over to you to read out the question, who it's from, and perhaps give response where it's appropriate to do so.

53:05 I mean, feel free, Gerry, I know you've probably got, and Sharon and Andrew have got meetings scheduled for the rest of today. So please allocate whatever time you can. Any questions that we don't get round to, obviously we'll make available to you post this meeting. Yeah. Thanks, Mark. I mean, we're pretty pushed, actually. I've got a call at 02:00. I don't think I'm going to have a chance to do much justice. Mean, some of these questions are near related to M and A, and I think that's been dealt with. There was also some questions about various areas of growth. I think probably the simplest thing, Mark, is for us to answer these questions and obviously for you to post them up for investors. So thank you very much everybody for your questions here. But in the minute or so left, I don't think I'll do justice to the questions by rushing through them. So I'm happy that we prepare those answers and let shareholders happen. That's absolutely no problem, Andrew. What we'll do is we'll present those to you and obviously to all the investors.

54:00 Firstly, thank you, as Andrew said, for the questions. And then secondly, we will notify you as soon as they've been published by the company. So they will be you'll receive an email from us. And perhaps on that basis, Andrew, could I just ask you for a few closing comments to wrap up? I'll then divert investors to provide feedback and then end the session. Yeah, think you mean Gerry. Think you mean Sorry. Yeah. Mean, firstly, thanks everyone for attending this call. It's the first time we've done this, and hopefully, it's been it's been useful. We've had a great year 2020. 2021, is gonna be an interesting year year for us as well. We've We've delivered strong results in a pretty difficult environment in 2020 and the business feels strong and moving forward. I know some of the questions around when we're going to see M and A. Well, there's a lot of activity ongoing.

54:48 We'd expect to give you news on M and A this year. So, obviously, it's important for us to do the job properly and do the right M and A. So, be assured there's plenty of activity going on and plenty of opportunity in the pipeline. We look forward to giving you an update the next time. So thank you very much, everyone, for your questions and for giving us the time. Thank you so much indeed. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback. If you access this meeting from our platform, then the feedback page will appear. If you access this via the link sent to by email, you'll simply be asked to log back in to provide your feedback. On behalf of the management team of VENTURE LIFE GROUP PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.