Marks Electrical Group PLC

Welcome to not so sunny Leicester. A bit overcast here today. So thanks for taking the time to come and listen to us. Hopefully you'll start buying into our story, which is, you know, we're doing exceptionally well. So we'll just run through some key highlights to start off with. So if we look on there, we can see 15% growth year on year. I'll just run through the numbers pretty quickly and then we'll put some colour on the numbers as we go through the presentation. So 15% growth, which is okay. We're relatively happy with that. Considering the market was backwards almost 15%, so we've done all right. Sales, 43 million. We've finished with a net cash position of just shy of 8 million, which is very good. Our margin wasn't quite where we wanted it to be, but that will, Josh, will put some... flavour on that. We're expecting to get to the reported number by the end of the year. We paid an interim dividend in August. So it's a maiden dividend that we paid. So we're still finished with the cash position being very strong. Our Trustpilot rating is 4.8 still. We're trying to obviously improve that and trying to strive for 4.9. It's very, very difficult to actually even maintaining that. And that's all driven through our free next day delivery, seven days a week. And I must add, it is still free. We've looked at it and our competition are all signed to charge. We felt it's a little bit immoral sort of bolting on a delivery charge when a company can run profitably without sort of piling more misery on the people who are, for example, buying a £200 or £300 product. You then stick £20, £30 on top of that. It's thought, excuse me, it seems unfair. So we decided we're not going to do that. Excuse me. Houston, we have a problem. Phone ringing. And we've got over 35,000 SKUs in stock, or boxes in stock. In fact, almost 40,000 items in stock. 4,000 SKUs plus in stock. That's different models. This time last year, we only had 3,500 SKUs in stock. So we've improved the breadth of stockholding there considerably, which has helped drive our sales. We've got just over 200 employees now and over 50 brands. Next, please, Hannah. Here you can see the market. You can see how it's been contracting through HY23 compared to HY22. So the MDA market has shrunk somewhat. So we're still doing okay. The first quarter was very, very difficult, but we certainly pulled it back around. I'll explain to you the reasons behind that later in the presentation. You can see the market share overall. has grown from 1.6 to 2.1%. That's in the MBA market. And our online share has grown from 2.6 to 3.9%. So we're making headway. Our aim is to get to 10% of the overall market, sort of ASAP. That's what we want to do, strive for that. The consumer electronics, you can see that's down as well. We're making headway there, albeit we are still such a minute player in this. in this sector. So we were at 0.1%. We're now at 0.3%. So we're growing it. Plenty of work to do there, but it's great, exciting what we're doing. We're making inroads there, which is great. We've got some great deals set up for Black Friday as well, particularly on TV. Next, please, Anna. Josh will fire through the financials.

So as Mark mentioned, we were up 15.1% in the first half, and the online market for MDA, which is our primary market, was down over 15%. That drove to 43 million, and as Mark mentioned, we had what we call a resilient margin of 6.3% EBITDA, down from 8.1% in the prior year. and I'll come on to that a little bit more in the following slides. We maintained our overheads at 6.2%, which we were happy with, and that's within our targeted range of 5.5 to 6.5, and we should be able to improve that as a percentage of sales even more in the second half. We had a strong operating cash flow, and as Mark mentioned, a closing net cash position of 7.7 million, which is up significantly on the prior year, and our return on capital employed was 49%, which is down slightly versus the prior year, but that's largely driven by the increase in the cash asset balance. Next one, please. So having a look at the P&L in a little bit more detail, you can see here the gross margin was 18.1%. That was down 110 basis points versus the prior year at 19.2. This was largely driven by some challenges in the first quarter where we saw some severe competitor discounting and we had to follow suit. So that really impacted the gross margin in the first half. Our gross margin is post-delivery costs, so the other cost challenges that we saw were the fuel costs increased significantly year on year, and we had the national insurance increase of 1.25% on the driver's wages. Moving into the second half, we do believe that the gross margin can improve. We haven't run any discount sales recently. We didn't run one discount sale at all in October and we saw an improved gross margin. And we expect that to continue in the second half as the competitive discounting seems to have abated somewhat. And we're seeing gross margin come through at higher levels currently. On advertising and marketing, this was a strategic decision to spend a little bit more on marketing in the first half to make sure that people had heard of us before the peak trading period, which is now. And it definitely seems to have worked because we're seeing some strong sales growth now. And we'll come on to it later, but we've improved our brand awareness from 7% at the end of last year. to 10% now. So our brand awareness and our marketing has been working 5.6% of sales, so 50 bits versus the prior year. But we're looking to bring that down in the second half and land around the targeted 5% of sales, which we're aiming for, for the full year. On the overhead side, as mentioned, we managed to keep that broadly flat at 6.2% of sales. Worth noting that in the 6.1% of the previous year, there was zero PLC costs because we hadn't IPO'd at that point. We now obviously have. a fully fledged board and brokers and LSE fees and other types of PLC costs, which we've managed to absorb in that overhead base and keep it at 6.2% of sales. Definitely lots of opportunity as the business grows to get some really good operating leverage on the overhead base as it's largely fixed. But we're looking in the second half to see some good operating leverage come through on that base and improve that to below 6% of sales in the second half to again be around 6% for the full year. So that results in the margin of 6.3%. And as Mark mentioned, we've also declared an interim dividend of 0.3p, which will be payable in December for holders on the register on the 18th of November. Go to the next slide, please. Just a quick reiteration of what I mentioned on the previous slide. So the bridge from 8.1% to 6.3%, 110 basis points in the price discounting that we experienced, that impact in the gross product margin and the additional fuel costs, 50 bits more on advertising, which was a strategic decision. And then the 50 bits of PLC costs offset a little bit with 30 basis points of operational leverage on that overhead base, landing us at 6.3. In the second half, the margin roughly needs to be at about 9% in the second half to get us for our 8% consensus overall target for the full year. And we believe that that is achievable based on some of the things that I talked about in the previous slide. So we're feeling comfortable at the moment in terms of our full year targets. Finally, on the balance sheet and cash generation, we saw some really strong cash conversion in the first half. You can see that we've got an increase in payables here as we were able to extend credit lines with our suppliers as the business is becoming bigger and more healthy, the credit is increasing and the suppliers are happy to increase the credit lines. So that led to an inflow of 3.3 million and we managed to keep inventories broadly flat. We closed March with 14 million in inventory and we closed September with around 14 million in inventory. So very little increase, but we managed to improve the inventory turn during the period as well. CAPEX was very light in the first half, just £87,000. We expect the CAPEX to be H2 weighted, where we will probably spend in the region of £800,000 to £900,000. We've got the delivery of 10 new vehicles to help with our installation offering, which Mark will come on to shortly. We will pay for those in cash, given the prevailing interest rates. And we've also got some further site changes to our property just to improve for operational capacity. So we expect to finish the year with a closing net cash position in the range of about 9 million, which interestingly puts us about one year ahead of analyst forecasts at the point of IPO in terms of our cash position. So that's what we're aiming for. Next one, please.

Thanks, Josh. Just one point I'd like to make, by the way, regarding our H1 is that Q1, so April, May and June were really poor. They're always a poor quarter, but it was particularly poor. And that's because we made a couple of errors. We bought a lot of product, a lot of tumble dries in particular. We ordered them in December and January when tumble dry sales were flying. And we still should have continued to fly, but they were actually delayed. We didn't get, it normally takes about four weeks for delivery. And these ended up appearing in March and April. And there was a lot of containers of this stock. With hindsight, we should have... cancelled the order and said no you're too late on delivery we're not taking them but they were a really good price we thought no let's take them in then of course we had the heat wave through the summer so we've got all these tumble dries in stock you couldn't give them away for free to be perfectly honest so it was a bit of a mistake but you never stop learning so that blockaded the warehouse and bringing in a lot of the correct lines of stock So that was a bit of an error. But anyway, we needed to press the reset button and quickly take some action. The problem we got was in Q1 was that we got this massive competitive marketplace for bidding on Google. So, I mean, the Google bill was almost double what it was in October, this October, which just shows the strength of competition on bidding. It's caused so few sales. And everybody was chasing a few orders. So it made it difficult to queue one. We turned it round. We took some money away from Google, spent more on our advertising, our brand awareness. Like Josh was saying, we've taken that to just shy of 10%. We didn't actually quite believe we'd got it up to 10%, but we conducted another poll in England. It came out 11%. So we were rather pleased with that, to say the least. So queue two was very strong. Our exit rate in q2 is very very good indeed um so we're very pleased with that and then it's continued through into october and november we've not had a sale like josh was saying since september as in a site-wide sale we've still got lots of offers on um and we're particularly competitive in the market. Our pricing software tracks up the whole market to make sure we're always on the money, but we're not offering any discounts or wide sales, which helps boost the margin. Like Josh was saying, we're expecting to land on the numbers that are out there, up to 8%. Obviously, we want to do better than that, but we get to that sort of level and we feel like we're achieving the right sort of position. But this here, the installation, This is really, really strengthening our position as a business. We used to offer it at time of float, and we were doing it all the way through until August, and we were using a third-party company called Caboodle, which weren't particularly great. So a lot of our poor reviews came from using this third-party for doing installation of integrated appliances. We didn't realise what a problem it was creating, and a lot of the issues with our customer service were The fact that they couldn't do the installation quick enough, it was like two, three, even four weeks sometimes before they could get to carry out the installation. And the way it worked was that we would deliver to one of their three depots around the country. And then they would then ring the customer and arrange to speak to Mrs. Smith, sorry, speak to Mrs. Smith and arrange for the installation of a Miele integrated dishwasher. And they had no real incentive for completing these jobs because they'd just charge us again if the customer wasn't in or there was a reason why they couldn't do the job. Whereas we thought, hang on, this is creating a problem. So we bit the bullet and decided to set up our own installation offering, which was very, very difficult because you basically get trying to employ trades people and get them to work weekends as well. because that's how our workforce is deployed on a shift pattern of four days on and four days off. That's how all the logistics operate. So we went out to the market trying to find unicorns, which is effectively someone who's got gas safe experience and can do, has some electrical certification as well for doing, you know, induction cookers and electric hobs, et cetera. But then also have some experience in fitting Steve Tombson, Building kitchen appliances, that was a real task right sharp but they found two unicorns. Steve Tombson, And then we said well Okay, well, these guys we don't just want working Monday to Friday, they have to work on a four days on four days off, which we had a big push back there, but we insisted, and I was so glad that we actually did insist. And they actually like doing it now. We've now got 22 of these fitters. Nine of them are gas safe. There's obviously a lot more people want electrical appliances now with the issues with gas. People want to future prove themselves by taking out maybe a gas range cooker and installing an electric induction cooker. So what we're seeing there is a massive uptake. We've got 10 new vans that we ordered. We ordered one van, then another van. It was like, hang on a minute, this is like... getting almost out of control, the growth in this installation, which was fantastic. So we ordered 10 new vehicles, but I've just been on the phone now and ordered another four installation vans. You don't know that yet, Josh, but I thought the way this is growing, we really need to get a skates on there. And the area that we actually do the installation is within that green, let's call it almost an oval rectangular shape in the centre of England. And that covers about 90% of the chimney pots in England. So this service not only means we don't have to offer any discount or very little discount, it cements the sale. So where they can go to another retailer, they might be able to deliver the appliance, but they very rarely can offer the installation, especially not at weekends, which we do. There's no extra charge for a weekend installation like our competition charge. So it's the same price whether you have it on a Wednesday or a Sunday. and with a lot of people going back to work now instead of working from home we're finding a lot of people taking up the installation offering at weekends which is great so that has been a real string to our boat so we don't have to offer so much discount we're seeing a massive increase in sales due to this additional offering and we're unique with the suppliers now the brands out there because we almost don't fit any of their price list because we tick every single box we deliver nationally we've got our own installation team we hold lots of stock and we work with the suppliers so they're really keen on giving us more marketing money and even offering to to take up or pay us for doing a free installation offering on their products on their range which is which is great so it also gives an angle for asking for better discount from the suppliers as well so we're seeing a constant procession of suppliers, the top brass, the CEOs, the vice presidents all wanting to come and see us. We had Samsung in a couple of days ago wanting to come and see us and they brought all the head honchos in because they can't believe the growth in our business. So very exciting times. This will be a real key to our business that no one else really does it like us. And so we've also expanded the geographic footprint. So That's probably enough of the installation, but we'll answer more questions on that at the end. But you can see we've also introduced Devon and Cornwall, which Penzance is five hours from our HQ, our single site in the middle of England. It's also five hours to Glasgow. So we thought, you know what, let's try Glasgow and Edinburgh as well. Albeit the additional fuel costs are there, but it's passive sales because we don't actually advertise in those areas. So it's It's almost free sales. And yes, it costs more to get there. We do like an overnight trunking system. So we go bi-weekly stroke three times, which works very well. So that's incremental business. And we also have now introduced Anglesey and Haverford West, the far reaches of Wales, which was a bit reticent to do. So I didn't think we'd get many orders. But the first day we switched on Anglesey, we had five sales in one day in Anglesey, which I was pleased to see. So the expanded geographic footprint certainly working well and it's helping us build our our sales so even though the market's going backwards we're still going forward when times are tough and we're seeing massive growth since we introduced the installation which is fantastic so nothing's going to stop us now right next slide please hannah

Shall I take this, Mark? Yeah, so on the left hand side here, you can see the development in our SKU range. So we had just over 3000 SKUs if you go back to late 2020. And now we're at four to four and a half thousand SKUs that's in stock SKUs in the warehouse. So we've got a broader and deeper range across brands and across categories and products. We've also recently expanded into other areas. Like computing, for example, we don't have a fully credible offering there yet. And it's not something that we're pushing or advertising at all. But it's definitely something that may be a growth opportunity in the future, particularly for capturing the returning customer, given the life cycle for MDA is quite a bit longer. So definitely lots of opportunities for us in the future across small domestic appliances and the computing category. But as a business, we will continue to remain majority focused. on major domestic appliances and televisions, the big, bulky, difficult items that are difficult to deliver and install. On the right-hand side, you've got finance offering. So if you go back to April 21, we had quite a poor proposition for finance and credit offering for the customer. So it was only 3% of sales. It's now 13.7% of sales in September on a rolling 12-month basis. And this is split across ClearPay, Klarna, PayPal Credit and V12. Clearpay and Klarna, that appeals to a different demographic. The average order value is in the range of about £300, so quite a bit below our average order value as a group, which is between £500 to £600. But that is countered somewhat with V12, which is your more traditional retail finance, interest-free 12 months, interest-free 18 months, that type of offering, which attracts an average order value in the range of about £1.2 to £1.5k. So it's quite a mixture across the ranges. It's worth noting it's all off balance sheet. We pay a percentage to these partners to facilitate this. That's how they make their share. And this is all off balance sheet. So it's not a challenge for us. We believe that our penetration in credit is still below that of the competitors. So we have a little bit more room to grow here. But we don't anticipate the provision of sales on credit being more

um than 20 percent and as mentioned again you know this is not it's not a balance sheet risk for us next slide please can i take this josh sure yeah thank you right so on here guys you can see that we've got quite a nice spread of brands there we don't put all our eggs in one basket we don't want to um you know have one particular brand you know head and shoulders above the rest because it's too much uh it's too dangerous to do that. I found that years ago when I was dealing with Hotpoint, when a third of our business was with Hotpoint. On Friday night, they decided to take half a million pounds worth of our discount away, and we were only making 750 grand a year at the time, so they almost put us out of business, and that was a real tough lesson to learn, but you know you learn from it and you never let any brand get too much control over your business which is what we're doing now so we're making sure that we're we're building them all up nicely and we like to sell premium product we're not chasing the 200 pound beco washing machine or the you know the the non-branded mate that argos want to chase we want to chase the thousand pound samsung or melee washing machines you know it's same sort of margin but a lot more pound notes for product per unit on your vehicle. So that's the sensible approach we feel, and we're going to continue with that approach. But notwithstanding, we're not going to exclude our customers from buying Beko washing machines at £200. You know, there's a position for everyone and there's a product for everybody on our website. And plus, with it being free delivery, you know, we're helping everyone, whether the budget is £200 or £2,000. And that's what we feel is the right thing to do. But particularly, Focusing on premium product, so it's more reliable, the higher average order value, the instructions are better, the packaging is better, so they're also better built, and they're more reliable. So everything is in the favour of selling these premium products, and they're a lot easier to install, especially for our new installation team. And interestingly, the average order value on installed products is between 800 and 1000 pounds per order, whereas that a standard sale for, even though we've got one of the highest average order values for an e-commerce business in Europe is about 550 odd pounds. So we're actually improving our average order value. So yeah, can switch to the next one, please. Yeah, here you can see, guys, that there's been a real growth area in heat pump tumble dries, for example. You can see, you know, 40% growth. So The standard tumble dryer, condenser dryer and venti dryer, which are a lot more expensive to run, remain relatively flat, even slightly down. But you can see there's a big growth there in heat pump tumble dryers, which the payback is a couple of years. So we're seeing a lot of polarisation towards either people only for the cheapest item, the cheapest tumble dryer, or people maybe in the middle territory of, you know, 300 pounds on a hot point, they're trading up to a premium Bosch, Neff, Siemens, Samsung, heat pump, tumble dryer. We're seeing massive growth there. Now people realise they're going to actually save money in the long run, which plays right into the hands of where our market is, the John Lewis demographic. And that's incidentally who we feel we're taking a lot of business from. Next slide, please, Hannah. Here you can see what Josh was saying. Our market share grew from 7% in August last year to 10% now. Well, even 11% as the last survey showed. So particularly big growth in London, which is very pleasing to see. That's the biggest increase. And what we're focusing on that area is obviously a lot of people down there, a lot of wealth and the highest average order value too. Josh, do you want to?

talk about the marketing piece there because we've got some mega deals that we've bought yeah i mean if we go to the next slide please um so just just to drill in a little bit on on the web traffic and then we'll go into some marketing um so total web traffic was was up during the period this averages around 20 to 25 000 customers daily on our website um and that's a little bit less at the weekends We've actually seen this week that our average web visits are about 35,000 customers and that's becoming very attractive to the brands as well now. They're really starting to see us as a credible offering. So they're paying for display space on the front of our web pages because they really want to get across their messages to the customers which are specifically coming on our site to look at major domestic appliances and televisions. If we look back to when we IPO'd in around November last year, we had 120,000 people on our email database that those are the people who opted in to marketing. That number now sits at about 165,000. And we're very conscious not to over email those customers. We usually just send around one email per week because we noticed that when you send two or three, you see that the decline rate is faster than the growth rate. So we just like to target with some interesting offers once per week. From a total order perspective, you can see how this has grown. And then in terms of returning customers, we're averaging about 25 to 26% returning customers. And we actually fulfilled 4,000 returning customers for the very first time in the month of September. And we did even more than that in the month of October. So the returning customer base is growing quite nicely and should grow even more rapidly when we widen our offering with more small domestic appliances and the computing category. Next slide, please. So to talk a little bit about some of the marketing activity, as Mark mentioned, we've seen some very high costs at the start of the year in digital advertising. So what we decided to do was actually to pull back from digital advertising. So we reduced our Google spends quite significantly and we decided to deploy our marketing spend in different areas. So we did more on social media. You'll see on the left, we launched with a new social media agency that specifically focuses on social media. And you can see how in this time last year, we didn't even have a TikTok account. And we've now delivered over 2.2 million impressions with good engagement across TikTok. We've significantly ramped up our engagements in Instagram and a huge increase in Facebook to really just trying to get that brand awareness out there. We know that these channels don't lead to an immediate sale. You don't look at an Instagram picture and suddenly want to buy a dishwasher. But equally, it's about knowing the brand. So when you do need to buy a dishwasher, you have come across our brand. On the right-hand side, hopefully those of you that live in and around London will have seen some of our display adverts that are currently in zone one. We're doing some tube adverts. We've got some rears of some buses wrapped that are in central London. And we're also doing some phone kiosks at the moment. We've seen some great opportunities for purchasing there. It's really a buyer's market given that. how a lot of retailers are facing challenges. So we're getting some excellent deals across the advertising that we're doing. We also did airports during the half term and we managed to get a really good deal on those. So it's very good value advertising for us at the moment. And it's really getting the brand out there. We've got quite a nice character and we're getting a lot of compliments on people noticing the brand around. So we launched it in October. We've seen excellent growth in London and the Southeast since launching this activity. And really now it's about ensuring that that brand awareness really helps us grow. Finally, on the bottom right, we've continued our focus on television. We're very targeted. We use Sky AdSmart. We do ITV video on demand and Channel 4 video on demand. but we're not focused on prime time TV on a Saturday night. So you won't necessarily see us spending a fortune to do an advert in the middle of The Voice on Saturday night. That's not really our demographic. It's not what we're focused on. We'd much rather do Channel 4 video on demand, grand designs and lifestyle programmes because we believe this really sits well with our demographic of premium products. Go to the next one, please.

I'll do this one, Josh.

Yeah.

Yeah, so here you can see guys have got sort of 110 drivers, driver installers. So those guys have go out and fit freestanding products. So they can fit freestanding Americans, freestanding washing machines, dishwashers, washer dryers, and obviously all the other associated freestanding products. So they're trained in doing that. We've got 22 installation engineers there trained in gas and electric installation. And what we're doing, we're upskilling our guys. Anyone shows an appetite or an aptitude for um installation of integrated appliances we're now sending them out with our installation engineers and new engineers and training them installing integrated appliances so we're going to see a big increase in installation engineers so we're training up our current staff our current drivers which is great so we'll be adding a few additional drivers as well as lots of installation engineers so we'll really be coming a a full one-stop shop so we can do from start to finish from you know you're ordering to actually fit in the built-in product and there's about 60 of the market is built in now and it's that will only increase with the amount of apartments that are out there that are built in ovens hobs built-in fridge freezers dishwashers washing machines etc so that's a massive growth area and with the generally the millennials don't really know one end of the screwdriver or a drill to the other unfortunately luckily my my father showed me how to do it so i can do it but a lot of people cannot do it so our offering at 120 pounds for an installation of an integrated appliance you know it's not that expensive you know if you phoned up if you live in The London area inside the M25, you phone up Pimlico Plumbers, it's £150 just for them to answer the phone. Let alone, you know, they've got a customer bought an integrated dishwasher off us, they came out to install it and they might find every way they could not to do it and find an issue with not installing it, where our guys are targeted on turning up and actually completing the job start to finish and then so the way it works with installation is that it's the same model as we use for our normal deliveries is that the vans are loaded at night and then the drivers all turn up here at Boston Road in Leicester our HQ our single site and they all leave and they go and do installations, say they might start in Guildford, for example, and fit Mrs Smith's integrated Miele dishwasher. They'll take the old one out, that goes on our van, along with all the packaging, and that also goes on the van, and that also comes back to base for being recycled. And we do about six jobs per day. And we'll see that number increasing when we get the density of installation to probably circa seven jobs per day. There's an upside on the P&L for circa 20 to 30% margin, approximately in that figure that we charge out. But it was actually a negative from when we're paying the third party company. We're paying them about a million pounds a year. And they were charging us over £150 plus VAT for fitting a freestanding range cooker. We were charging £139 including VAT. So every time we did an installation, we were losing money. So now we've got an upside there and we've been able to double the amount of installations that we were actually doing with our third party company that we were using. So we've seen a big increase in the installations. We're sticking to that footprint at the minute, just in the middle of England, but we are looking to expand that. And we're doing 36 jobs per day, and that is seven days per week. We reckon if we up that now to 60 jobs, we are sure we'd fill those slots straight away. Because our lead time at the minute on installation is about seven to eight days, which isn't ideal, but it's still okay. We go to London every other day. We fill with, you know, send three or four van fulls every day down there. The appetite for installation is incredible, especially at our good rates. So that's been a real, Uh, shot in the arms. Fantastic. Um, we feel we could get to circa 250 million out of this site and the way we're going, we're going to get there pretty quickly. So we've got developers coming in to see us, uh, next week. We've spoken to them a year ago already. Uh, they're looking to get planning on a, on a big site. There's a site not far from us just shy of 600,000 square feet. And that's actually tripled the footprint of our current site. of circa 200,000 square foot, but it's also triple the height. So the additional volume you would get would be incredible. And you'd also get a lot of operational leverage on that as well, because you're not working from such a confined space, albeit that there's cut down on the over it. But that's another discussion. But that's something we're thinking about now. Two to three years before that would actually occur so but you know we need to get ahead of the game the rate we're growing we just need to push on with these talks now next one please Hannah Now you can see our average selling price. In the market for cooker, for example, on the left-hand side, £407. Our average selling price, £747. That's because we don't chase the cheap product. We look to the premium brands, and that just shows our average selling price in the market is a lot higher than competition. We're not after the cheap product. We're not going to start selling £20 Morphy Richards kettles We'll leave that to Amazon. There's just no money in it. There's no point just trying to create a sale and an order and a customer. It's a pointless, futile exercise in our opinion. But we will continue to sell SDA, small domestic appliances, but we're going to set a limit of circa £75 being not the cheapest product that we really want to be selling. So that's where we're aiming with that. Paul Ekinson, M.D.: : And you sell the right side recycling continue to do that we've been doing it for years we didn't just do it because we're IPO and it always felt morally the correct thing to do so, everything is recycled polythene cardboard polystyrene. Stuart Maddocks, strapping they're all separated when they get back off the lorries in different. Stuart Maddocks, Areas and then they're all recycled and you can say there's a brickette machine briquette in all the polystyrene narrow sold to a third party there's an upside now, whereas there wasn't before. Stuart Maddocks, Because the price of raw materials is increasing, as we all know, also there's a slight upside which you never used to get that's recently happened. John Wilkinson, on all our appliances so we're charging for them and we get paid by a third party recycling company and they will resolve correctly, as you would expect, through the week director. John Wilkinson, And you can say that job.

Yeah, I'll take this one. So, I mean, really to finish up on the fourth pillar of our strategy, financial performance really for shareholders, revenue growth, you can see here 15.1%, which was against a particularly tough comp last year of nearly 8%. And obviously in a market where online MDA is down over 15%. Our average revenue per employee has dropped slightly to 465. That's largely as a result of us bringing in-house the installers rather than outsourcing this and making sure that we're guaranteeing two men on every delivery just to give that extra quality customer service. We expect to maintain it at these types of levels, high 400s, early 500s. And that's far ahead of the competition, which are more like 200s to 300s. So we're much more productive on a per employee basis. And that's based on our single site operation, as well as the fact that we focus quite heavily on premium products. Overheads as a percentage of revenue have already been mentioned, as has EBITDA. On the DPS side, we're paying a dividend of 0.3p on the 8th of December to holders on the 18th of November. You can see the working capital was brought down in the period, which led to a nice improvement in net cash. And I think the other items we've covered. So next one, please. So just to quickly wrap up here on the current market dynamics outlook, As mentioned, the MDA market as a whole is down over 10% year to date, and it's down over 15% on the online market, which is obviously the market that we play in. Despite this, we were able to just drive a good revenue growth, as mentioned before, 80%. of our revenue is from distressed purchases so for example your fridge is broken you need a new one your washing machine is broken you need what need a new one not discretionary purchases we're continuing to expand our product range and our in-stock SKUs we've got an improved credit facility an interest-free offering for customers we continue to have free next day delivery and as Mark mentioned lots of our competitors have moved away from this but we still have this and it's baked into the margin that we deliver We're rapidly growing our installation offering for integrated gas and electrical appliances, which we're very excited about. And I think finally, one that we didn't mention as much is this reliance on ancillary revenue streams. Warranties and add-on services don't represent a huge amount of our revenue. So if customers do cut back on these ancillary services during the cost of living crisis, then we're well placed as we don't rely heavily on their profit contributions. From an Outlook perspective, As we've mentioned, we had a very strong start to October and an even stronger start to November. October was a record month for us, which surpassed September, which was a record month. And we're certainly on track in November to exceed that. We've got lots of out of home activity occurring, which is working very well for us. And we do believe that we can improve the margin in the second half.

uh and get up to uh our consensus expectations for the full year certainly try our hardest um to achieve them so we'd say we're on track um i think that's pretty much it hannah any questions i think yeah so apart from that we're doing really poorly aren't we josh our outlook is very positive and black friday we've got some mega deals haven't we um we're not looking to do any discounts uh we feel like our offerings uh class leading across piece no one can offer what we can we've got we've got a stock in a fantastic position as well so we've got the right stock at the right price um the right installation offering free next day delivery seven days a week um you know and that's why the sales are so good but for example i'll just shed a bit more color our sales on monday were better than cyber monday last year just to give an example of the marketplace so the market's still not it's still behind where it was and we're still can see continuing to see massive growth um even after that poor q1 start so all systems go so any questions guys we're more than pleased to take them thank you uh how will you slow marketing spend hit five percent of sales target

Will you stay elevated until December, then drop off in January, February, March, or just a consistently lower level throughout H2 to balance to the 5.6?

Yeah, so that's a good question. In the third quarter, we'll probably stay at similar-ish levels, given some of the activity we're doing, particularly during peak, and then we'll be quite a bit lower during the Jan, Feb, March period, which will get us down close to the 5% levels for the full year.

What's the typical CE gross margin versus MDA? And are you able to disclose the H1 mix, so it's a percentage of revenue from the MDA?

Yeah, so there's a slide in the pack, which is available both in the pack we've just gone through, as well as on our website, which has got splits by the different categories and you've got audio visual. So consumer electronics at 6.3% of the mix of revenue in the first half. Consumer electronics generally attracts a margin anywhere between 15 to 25% with MDA attracting margins between 20 to 35%. It really depends on the product, not necessarily the brand, but it really depends on the product. Thank you.

At what size would you need to start using outbases for distribution? And would this reduce your unit cost for delivery?

So when do you need a spoke, Mark? When do you need a hub and spoke?

Our model is unique. We are not following that route. That's why we make money. And look at all the competition and we're, oh, you know, it's just a another AO or another Couriers. We are not. We actually make money. And the reason we make money is because we're lean and efficient and we do not need to have the hub and spoke model, which does not work. It's been proved. Look at the results. Just have a look for yourself. It's blatantly obvious that having lots of warehouses all around the country costs a fortune to manage. You've got reverse flow of stock, which you have to keep trunking it between warehouse to wax. It's just cost of fortune. And then, you know, that's flawed again. You've got potential traffic jams and the cost of hauling. It's just, it's a ridiculous model. And to me, it does not work. You could perhaps sell my families on that. So we will not be having additional warehousing and we can grow. We just need a bigger warehouse. Not yet, but it's in the pipeline and, uh,

nothing will stop us thank you very clear answer there mark which i actually i think probably leads into the next question a little bit as well if is your ambition to achieve 10 percent of market share um and to what extent you know with the economics of the business change which you know i guess can you retain your central model up to 10 percent of market share and who would you expect to take that sizable share from anyone who's willing to give it to us

Just look at them. Just look at the P&Ls. You know, is it sustainable? Ours is. Theirs aren't. That's like the simple solution. And this is definitely sustainable. We're moving more to behaving like a national now. The manufacturers treat us like a national. And you get rewarded. We can achieve far better discounts than we're currently on. by forecasting stock. I mean, we've already, obviously we do it anyway to hit the numbers that we're hitting. But the better you are at forecasting, the manufacturers will give you additional discount because there's no trunking between additional warehouses from them shipping from say, Poland to, I don't know, Milton Keynes and then Milton Keynes to us. We can take the containers straight from Poland, straight into us and those attract like, you know, another three, four, five percentage points. So the manufacturers reward you far higher by taking in more stock of containers, and which we are doing that now. We're planning a lot better. We've got another buyer who's come in. So we've got, you know, there's four or five of us in the buying team. I'm still involved in a little bit of buying, which I enjoy doing just to keep my hand in, albeit I don't need to do it, but it's just nice to understand what's actually going on. So, yeah, so this is definitely sustainable. You know, I believed it at the time of float. and I now believe it even more so now.

Thank you. Can you talk a little bit about capital allocation priorities? If you had an extra pound of spare cash, would it go on investing in the brand, advertising, increasing warehouse space, or returns to shareholders?

Do you want me to start this, Mark? Yeah, OK, please, Josh. Yeah, so great question and one that came up regularly in the IPO. Obviously, you can see that we're generating quite a lot of cash. So you develop quite a nice cash pile. The challenge with spending more on advertising is that then it impacts the P&L and it really drives down the margin. So we wouldn't necessarily increase the marketing spend, let's say, from 5% to 8%. even though that could drive the top line because that would just damage the margin. And when we came to float, we explained how our margin was differentiated versus peers and we wanted it to remain that way. So the current plan is that we'll try and build up a bit of a war chest of cash that will help us and being flexible in the market, as well as being flexible for a site move in the future, as Mark mentioned, when we move to a much bigger site down the road. We'll have plenty of cash available for leasehold improvements, for new forklifts, for more stock, really to drive the business at a bigger site. And then I think more medium term, we would probably look at progressive dividend policy where we improve the payout ratio. It's currently 20% of adjusted earnings, but in the medium term, we might look to improve that payout ratio as we become a little bit more mature.

A question on installation. You talked, Mark, about your unicorns and how they were tricky to come across. And you also then latterly mentioned the fact that you are training up existing employees. How much of that, I'm assuming, lack of supply in terms of individuals is a bottleneck to growth in the installation business?

Well, OK, good question. Thank you very much. Thanks, Hannah. So I mean, in answer to that, so we had zero installation engineers in August, we've now got 22. So I'd say that's pretty rapid. And we've got a plus with the housing market going backwards. So there'll be a lot more people a lot more trades people without a guaranteed income, we can offer them a guaranteed income. And it's a good income as well. And they only work five months of the year and get very well remunerated. So You know, it was difficult to get them. You know, it's not easy, you know, but that's why we're in this space. You know, if it was easy, everyone would be doing it, wouldn't they? That's why they don't do it, you know. that that's how you make money and that's how you get a good return to your investors by doing something that no one wants to do. And I'd have to be brutally honest. I shied away from doing it because I thought it was a lot of hassle. We've done it before, but now we've got the right people in position because we're a PLC. We've got people who are used to a big scale of a big business, you know, from DPD, DHL, Josh came from Intertech. So, you know, big PLCs. So they used to, we've got, far more breadth in the management now as before it all used to fall back to me so that's why i shied away from it now we've got professional people in the right positions and um and hr are great at recruiting people and we pay well uh important for incentivizing and retaining and on that basis if you're at 22 now and where would you anticipate being in 12 months time well i mean who knows i mean 100 you know, why not? The businesses out there, people are tripping over themselves to take up our installation offering. They really are. I mean, just for example, so when we first started this installation offering, we just did it in Leicestershire with the two guys we'd got and that filled up. And then we got HR recruited another guy. So I thought, okay, let's just try North London. So in the morning I switched on probably 20 postcodes in North London. And by mid-afternoon, we had 10 installation jobs in North London. So I was like, yikes, switch this off quickly, because that was like too many. So it just shows how quickly, because you can't get people to do anything. There's a lot of wallies out there, and you need people to do a proper job. And we can actually fill that space, not with the wallies, but people are actually going to turn up and do the job. We've all, every person who will listen on this call would have tried to employ a plumber or an electrician and we'll have a horror story about when they turn up eventually and then there's a sharp intake of breath and it's double the price or triple the price. And we're offering a genuine job, a proper price and we're in control of the delivery. We'll make sure we fit that product. If we don't fit it, you can tell us to clear off, can't you? Simple as that.

Absolutely. And another question come through here. And how much of the 2700 operating expenses was staff cost?

Just probably means 2.7 million. In the range of about 75 to 80% is staff cost, which is customer services, sales, warehouse, and then HR, finance, management salaries and board.

Great. Well, if that is it for the questions, then it leaves me to say thank you to you both for that helpful presentation. And from the tone of the narrative, we're definitely looking forward to hearing from you both again in six months time. Thank you, Hannah.

Thank you, Hannah.

Thanks everyone for listening. Hopefully we didn't bore you too much.