Marks Electrical Group PLC

everybody. We're in sunny London at the moment. Thanks very much for tuning in to listen to our announcements of our first full year on the AIM stock market. We were listed on the stock market on November the 5th, 2021, and this is our first full year. So we're very pleased with our results. The market was very tough. It was backwards by about 10%. We finished just shy of 98 million. That was our revenue for the year ended 31st of March, 2023. The growth was 21.5% over the previous year. Adjusted EBITDA was 7.5 million. Cash conversion was very good. We finished in the net cash position of 10 million. And this is all driven from our next day delivery service and our installation service, which we'll talk about shortly. But we've got 4.8 rating on Trustpilot, which I'm sure you're all well aware of is a real benchmark in any industry now to give you a measure of your performance and your customer service. So that's market leading. We're very pleased with that 4.8 out of 5. And that's driven from the focus that we have on what we do, which is major domestic appliances and consumer electronics, television mainly. That's a market we really want to grow in. So we've got four and a half thousand SKUs in stock, which is made up of over 35,000 actual items, actual boxes. We deliver to over 90% of the UK population. And that's next day delivery. And next day installation is over 65% of the UK population. We've shown that 250 odd employees is now actually about 270 employees now and growing. was about 150, it's on the flow.

Moving to the market. So what we're showing here is a major domestic appliances market first, which is the major market in which we operate. You can see the full size of the market here in the small bars. So you can see it's gone down slightly. from 4.5 billion to 4.2 billion. For the eagle-eyed of you out there, GFK actually changed some of the market stats this year. They moved floor care out of the MDA market and moved it into the small domestic appliances market. So our numbers are slightly adjusted versus the presentation of last year. And we finished the year with a 2.5 percent market share of MDA and then a 4.7 percent market share online and you can see how we've moved from 3.5 to 4.7 because as Mark mentioned the online share contracted fairly sharply at the beginning of the year but it's now relatively consistent at around kind of 53 to 56 percent of the overall market is the part that's online. In relation to consumer electronics, during the COVID year, a lot of people updated televisions when they had spare cash. That market has been under some pressure for a couple of years now. And we're gradually increasing our market share in this market, albeit the market share is still extremely small. So we've got 0.3% market share of consumer electronics overall and 0.6% market share of the online market. So lots to go after in that market.

This slide's quite an interesting one. We thought we'd put it in. Thanks very much to those of you who have bought into our business. We really appreciate it. This shows a time of float. So November the 5th, 2021, we had a Trustpilot rating of 4.7, and you can see the dark blue air shading is what we're currently at. So we were at 4.7, we're now at 4.8. We had 190-odd employees. We're now actually at 270-odd employees. Currently, vehicles, we had 36 at time of float. We've now got 50. We would do an installation of built-in products. That's integrated appliances. We were doing that for a third party. We've now taken that in-house and we have our own crews going out doing the full installation. They take the products out and do the installation at the same time. We'll talk more about that in a bit. Now brand awareness has gone up from 6% to 15%. CRM database was about 100,000. It's doubled now to nearly 200,000. Daily website traffic was 15,000 and now it's 23,000 unique visitors per day. Cash position as well is pretty decent, went up from 4 million to 10 million. So that's a decent gain. It's a good position to be in. And on the right hand side, it shows a geographic coverage in the blue shaded area of where we do our next day delivery. where we were doing it and well sorry next day we don't do the shale is quite correct on the bottom Devon, Cornwall and Scotland that's a 48-hour delivery service but that's next day delivery all the the remainder. Financial highlights, Josh, section.

Okay, so talking through some of the really high level financials, you can see on the right hand side here, we've got the revenue development over the past few years. So when we floated, we just completed 56 million in the March, we floated in the November. So we were partway through that year when we finished 80 million. And as Mark mentioned, FY23 is our full year on the Ames stock market, and we've just achieved just shy of 98 million. Often asked the question whether we wanted to do 100 million. Of course we did. We would have really liked that, but we didn't want to sacrifice margin. And I think that's important here, that it's not revenue at all costs. You know, we really want to make a good margin, make sure that we're delivering good cash flow, and keeping that customer service very high. So we finished the margin at 7.7%. I'll come on to that in a little bit more detail in the future slides. Cash conversion was very strong at 118% as we benefited from some working capital improvements, which I'll go through. Return on capital employed, 41%, down slightly year on year, but that's literally just as a result of holding a net cash balance. The cash is up year on year, so the ROCI has declined slightly. And our overheads, a key element for us is to really keep a tight control on overheads. We limited this to 6.7% of sales, despite some external cost headwinds that I'll talk to, and we'll be looking for lower than 6.7% of sales in the coming 12 months as we get some operating leverage on that overhead base. Moving on to the P&L in a little bit more detail, you can see in FY22 how we delivered a 19.8% gross product margin. That is a gross margin that is the product margin itself and then the logistics cost And thirdly, any fees in relation to buy now, pay later, credit card, American Express charges, what we call the interchange charges. So that gross margin is a fully delivered margin to the customer. So the product less all the costs to actually get it to the customer, but doesn't include any overheads. So we saw a little bit of pressure there, 40 bps from 19.8 to 19.4 bps. And that was primarily driven by logistics cost increases across the fleet. You know, there were some temporary measures, for example, fuel costs were up in the year. Obviously, they're coming back now and national insurance was up temporarily as well. And we also had some pay rises. Advertising and marketing, we always said that we would spend about 5% of our sales as we're a growing business. And we kept that quite disciplined, went up in absolute terms by nearly a million pounds, but we kept it disciplined at 5% of sales. The overheads, as mentioned, went from 5.8% to 6.7%. And as I mentioned on the previous slide, we've been looking to reduce that 6.7% and head back towards 6% in the coming financial year, probably end up at something like 6.3, 6.4, but we will certainly try our best to get as much operating leverage as possible. We finished with adjusted earnings per share slightly down versus the prior year at 4.82p. There's a little bit more depreciation as well as we've added additional vehicles and made some leasehold improvements to better the operation. But the positive thing here again is we've done a 20% dividend payout ratio, bringing the final dividend to 0.66p and the full year dividend to 0.96p, which would be paid in August, hopefully after approval at the AGM. Going into a little bit more detail on the margin bridge, so last year we did 9% adjusted EBITDA margin, and that's moved down to 7.7%, so to give you some flavour as to why. Firstly, we had some logistics wage increases, making sure that our drivers are well paid. There was the temporary national insurance rate rise, which some of you may remember the employer paid 13.8%. That increased to just over 15%, and then it's now come back down. to 13.8%, so that shouldn't repeat in the next year. The fuel cost increases during the year, but they've now stabilized and starting to come back down slightly. Fuel costs are just over 1% of sales, so it's not heavily significant. In the overhead base, we made some employee cost investment. We've got a true 24-7 distribution centre now. Our warehouse operates on a 24-7 shift pattern with four days on, four days off, two shifts, a night shift and a day shift. We didn't use to operate it like that. We kind of closed on a Sunday. So introducing that true 24-7 did have a one-off cost impact, but we will start to lap that next year. We've added some additional resources, particularly in our buying teams. just making sure that we're really building a quality base of employees across all the different elements of the business. And then finally, the PLC costs. So last year, we only had five months of PLC costs. This year, we had 12 months of PLC costs. These are not significant costs, but small costs associated with being a PLC, like listing fees and various other costs. And again, as we move into FY24, We will lack this space effect as well, and we can try and drive some operating leverage of that so looking for around 7.9 to 8% margin in FY24 with a bit of an incremental improvement. Moving to the cash bridge. Just putting it in a bridge to make it nice and clear. So we finished last year in the net cash position of 3.9 million. We had quite a strong cash flow from operating activities driven by the profitability as well as the working capital improvements. We paid dividends of 1 million, which is the final dividend of last year paid in August, as well as the interim dividend that was paid in December. We had capex of about 1 million, which was spent on vehicles. We're now buying all of our vehicles cash rather than leasing them because of the interest rates. And we also had some leasehold improvements, some racking mezzanine floors that we'll talk about in a future slide. Lease liabilities is the rental cost for our existing property that we operate out of, as well as some vehicles that remain on a lease. And then you have tax payments taking us to our £10 million net cash position in March. The final section on the financial review is just a little bit more detail on the cash and working capital movements. So you will see in the top left there that we had a slight inflow from inventory as we reduced inventory from 14.4 million to 14.2 million, so just shy of 200k. cash inflow from that. That was probably slightly better than we expected, which is good. Those of you that have followed us since the IPO will know that at the IPO, we had an inventory holding of about 90 days. Obviously, that's quite high inventory holding, and we've managed to bring that down to about 70-ish days. We're looking for incremental improvements thereafter. So quite a big movement in one year to go from working capital at 4.9% of sales to working capital at 1.7% of sales. And we do think there are incremental improvements from here, but probably not quite as large as that big jump from 4.9% to 1.7%. The outflow from receivables primarily relates to year-end rebates that you receive from suppliers if you hit certain volume targets. So we usually collect those just after the year-end. And then the increase in payables is led to improved supplier terms and credit lines with the credit insurers. And that enables us, obviously, to offset future increases in inventory too. And so overall capex, as we mentioned, we spent around a million pounds on capex and that was 1.1% of sales. And we expect to spend around 1 to 1.1% of sales in FY23 with some of the developments that we've got planned. And we're also looking over the next 12 plus months to be introducing a new ERP system. We'll give detail more about that in our half year presentation as we actually embark on that project, but we're looking at changing our ERP system. um from from our legacy system which is which is quite old now it's called everest into a new erp system using microsoft dynamics so that's a kind of one and a bit year project this current financial year fy24 will be on the old legacy system but then as we plan for the future and we want to facilitate our growth we're going to put in place a new back-end ERP system really to support that growth in the future. Obviously a very big project. We expect it will probably cost us in the range of about £3 million, but just something that we obviously want to flag as happening and us investing, really investing in our growth.

Thanks, Geoff. So that's the end of the financials for now. So the ME strategy, the Marks Electrical Strategy, four key pillars within the business. So customer proposition is the first one, brand awareness, marketing, et cetera, operational capacity, that's about our current site, and then financial performance.

So just to take you through how we distribute across the UK, because obviously it's quite an unusual map and there's lots of colours here. So first and foremost, the green area in the centre, obviously you can see the ME, which is where our distribution centre is based in Leicester. We run a fairly unique model because we only have one distribution centre. and we go out from the distribution center and back each day apart from some of the extremities which we'll come to so on the green area the rectangle that you can see in the center that's 65 of the uk population and that's where we do next day installation of built-in items we'll explain that shortly to that green rectangular area so what that means if you live on the south coast say Folkestone, we wouldn't offer you installation at that point of a built-in item, but we could do installation of a freestanding item with our delivery team. So the core installation team just works within that green rectangular area. That's around two hours from the base, so it makes sure that the driving time works along with the installation time. The darker blue, as you go a little bit further, which is kind of, let's say, Newcastle in the top right, down to Exeter in the bottom left, that's where we will offer next day delivery. So we do next day delivery to those locations. We use a combination of vehicles. We use both five tonne vehicles, seven and a half tonne vehicles, as well as the 3.5 tonne vehicles. And depending on the route time, depending on how far the driver has to go, based on driver regulations, obviously we aim to fulfill that entire area, but it all has to work, of course, from a driver timing perspective. The extremities, the light blue, so this is Glasgow, Edinburgh and Cornwall. We run these with C-class vehicles. So these vehicles, for example, in Glasgow, we go up on a Tuesday. We deliver in Glasgow later in the Tuesday. The guys stay the night. We have some very nice arrangements with a number of B&Bs that we work with. The guys really enjoy the trip. They then do Edinburgh on the Wednesday and then they come back down and that works very efficient for us. It's profitable and we actually get quite a lot of driver uptake for this. Again, that's completed in C-class vehicles where there's that bit more of driving time to do. And it's all monitored and maintained that way. So this is how it works for us. I can imagine that in time, we will be able to do more frequent deliveries to Cornwall, Glasgow and Edinburgh and probably go up there more frequently. But as things stand, we believe that this simple distribution model is the best way to maintain our profitability. And certainly in the coming years, we're not looking to add additional distribution centres across the UK.

we just work within the areas that make sense for us from a profitability perspective thanks josh yeah so um to discuss a bit more about our built-in installation service here you can see on the slide so yeah like josh was saying the green rectangle let's call it a rectangle in the middle of england that's why we offer the installation built-in products so integrated fridge freezers you know range cookers it might be an induction range cooker an induction hot gas range cooker gas ovens etc etc so we do all the installation ourselves we used to farm it out and sub it out to a third party we brought it all in-house because you're always better to be in control of your own destiny we found we got a lot of issues using the third party so we now do it all ourselves This works very well, and the way it works, it's exactly the same. The vehicles are loaded overnight, and the vans, smaller vans, as you can see that picture on the left-hand side, bottom left, is a Mercedes Sprinter panel van. These have got tail lifts on. Some of them have tail lifts for the range cooker installations, and those go out, leave in the morning, go out and do half a dozen installations, depending on whereabouts they are, obviously, and then they come back the same day. hopefully with an empty van except with the old products on and the old recycling material. So we do the whole thing. So it's not like a lot of services where some people might do a delivery of an item and then a fitter comes along and actually connects the gas cooker up. We turn up and do the installation in one go, which works exceptionally well. So we get very good feedback about the service. It works very well. And it's a real driving force behind the success of the business. Last year, we had an attachment rate of about 2% to our sales, and this year it's about 8%. So we've seen a lot more uptake on the installation. When people buy a built-in product, they really do... It's not as anybody, apart from gas, can do the installation of an integrated product, but it's a nice service to have... You know, rather than having to do it yourself, it's also the actual option to be able to pay £139 for an integrated dishwasher for someone to come on and do the whole job. Install the dishwasher, take the old packaging away, the old product away as well. So it's a one-stop shop.

Next slide, please. So in relation to SKU development, I mean, I think the first thing that's worth pointing out is we have a very small market share of major domestic appliances at 2.5% and consumer electronics TV at 0.3%. So firstly, we're not looking to see a mass expansion in our SKUs. We want to make sure that for each of the manufacturers, we're ranging all of the SKUs that make sense for them and make sense for our business model and try and aim to have all of those SKUs in stock at all times if we can. Obviously easier said than done, but that is our objective. So we're not looking to take this skew count from 3,500, 4,000 skews to 20,000 skews. That's not our intention. We believe that we can really focus in on our core, which is delivering major domestic appliances and consumer electronics. So there'll be a bit of variability over time, but keep into this type of range. On the right hand side, you can see our improved penetration in finance. So we offer both buy now pay later options with the likes of Clearpay, Klarna and PayPal credit. And then we also offer the more traditional longer term retail financing offers, either interest bearing or interest free with the V12 retail finance offering. And that's been improving gradually over time. My expectation is that it will probably plateau at about 17 to 20%. And that's probably where we'll get to. So the overall share of basket of these products is probably going to be around 17 to 20%. I don't expect it to go much further than that.

Josh, next slide, please. Yeah, you can see here. We Focus on premium products. So we're like a higher average order value. That's what we go after. You know, I've built the business on selling premium product. So the likes of, you know, Miele, LG, Samsung, Rangemaster, Bosch, Samsung, et cetera, AEG. We like to sell premium product. It's got a higher average order value. They're easy to install. They go wrong less. The instructions are a lot better. The packaging is generally better as well. So, you know, you can't beat a higher average order value. So we really do aim for those products. We also sell, you know, the entry level products like your Beko and your Indesit as well. We don't want to ostracise ourselves from the lower end of the demographic. So we want to cater for everybody, but we predominantly focus on premium product. So that's that slide. Next slide, please, Hannah. This is an area that we're really invested in. We did a bit of a survey and we realised that we were very, very good at logistics. We were doing very well at what we were doing, but we weren't very good at training. So we decided what we're going to do is improve our training. We were already able to get a score of 4.8 out of 5 on Trustpilot. You know you're doing something pretty good to be at that level. We decided to set up our academy and that's within our current building. So everything, by the way, is under one roof for those of you that don't know us very well. we've just got the one site on boston road in leicester and the i.t team are there the accounts team are there josh and myself are there all the stock is there all the lorries are there the logistics are there the data inputting team are there as well so also we're going to have this academy there um so again they'll all be under one roof and when because at the moment we've been sending guys out and training them out on the road, but you don't get the consistency of how you actually want to do installations and how you do the delivery without actually putting them through a proper classroom setting and showing them, you know, mocked up a house or an apartment. So when you come in, you know, they're not actually going to park the vehicle outside. It will show them the attitude, how we expect them to talk to the consumer. You know, hello, Mrs Smith, good morning, and to see where the appliance needs to go and then we can view the route as you go in and the trainers will show our guys exactly how we want them to wiggle it into the house over the threshold or over doorsteps for example where to park the van how to unpack the product properly in the consumer's house or outside if necessary not to actually drag the cardboard down the walls of the you know the newly decorated hallway not to leave marks on the floor and wear shoe protectors wherever required just to do a really good job of bringing the product in you know an american fridge freezer it's not an easy product you want to take the doors off it get the product inside then you have to put the doors back on the product when you get it into the position where it's going and then connect up the water supply So it's quite a tricky job to do. We want to get consistency within our workforce of exactly what we expect from them when they're installing any product or just a straightforward delivery, whether it be, you know, installing an integrated range cooker or dropping off a tumble dryer. We still want to get a consistency of delivery, you know, a good quality, make it the best in class,

Yeah, so moving to brand awareness, as Mark mentioned in one of the earlier slides at the float, we had a 6% brand awareness in the UK. We created our own study with YouGov. We asked the simple question at the beginning of the study, have you heard of Mark's Electrical? And the response at the IPO was only 6% of people had heard of Mark's Electrical. Rolling back 12 months, so this time last year, 7% of people had heard of us. And about six months ago, when we did the study for the half year presentation, 10% of people had heard of us. So we've seen a good improvement in six months from 10% to 15% overall in England. And the most marked improvement clearly is over there on the left hand side in London, where we've moved it in six months from 12% to 22%. And a lot of that has been driven by our traditional out of home marketing across and around central London. So tube network on the rail network, telephone booths, roadside displays, these types of activities. So traditional, you could call it old school marketing has actually paid off here. And what that's allowed us to do is to be a bit more flexible across our marketing budget. So there's lots of areas that we could still penetrate. You can see, for example, the northwest 10 percent. No, that's only moved a little bit. Yorkshire and the Humberside as well. So there's a lot of opportunity where we can still grow our brand awareness. But for now, our focus, given our location, is on the East Midlands and London. And London is the largest market for us on a daily basis. And it's where the majority of our sales are generated on a daily basis. The right-hand chart, this again, it's from our YouGov study, so it's not necessarily an accurate split of how the market is carved up, but it's probably a reasonable proxy for the market shares of the various different players. We ask people where do they usually buy their major household electrical appliances from, so no surprise, Curry's being the largest, along with the ones that you'll know well, being Argos, John Lewis and AO. We often get asked, you know, where do we think we're taking share from? And as we're very focused on the premium end, you know, we believe it's probably John Lewis and that's certainly something that we'll be focused on. But it's a huge market. You know, there's lots of opportunity for a lot of players. But as we're focused at the premium end of the market, that's definitely our target. The 20% that says none of these, that's what that one is. That's likely to be the independence. So the smaller independence, you know, of which there are still many across the country, you know, doing doing an excellent job locally. Thanks, Josh.

So, you know, how we're carrying our growth is down to brand building. When we floated on November the 5th, 2021, we were floated and depicted by Pamuel Gordon as the UK's best kept secret. And it's all about changing that mindset and getting our name out there. And like Josh was just saying, you know, the brand building is a key part of this business. So we're now in our third generation of TV advert, which we launched at the beginning of this month. We've seen that sales have certainly very, very strong, which is great. And also it's just down to the TV advert, but we've got a, it's a really good advert. And we also do a lot through the tube, stations, airports, motorway service stations. We do this in conjunction with the manufacturers, you know, Heroin, their actual brand name, and we work alongside them creating the artwork, the imagery. And we take advantage of a lot of last minute offers on options on advertising. So on the right hand side, social media is an area we used to, we neglected it to be perfectly honest. We didn't really think you went on social media to buy a washing machine. And that was probably a bit of an old school thought with the, Now we've got a connection with a company who actually did Deliveroo and a few other big names as well. And then we've joined forces with them. And our social media is having a really big impact now. That's working exceptionally well.

So moving to annual website traffic. So we've seen a good and steady improvement in our annual website traffic. I think if anything, you know, the eagle-eyed will notice that the growth in total orders is faster than the growth in total website traffic. So the quality of that traffic is improving and the conversion rate is improving too, which we're very excited about. very focused on um you know it is it is quite easy to get um fairly poor quality traffic quite quickly but that doesn't mean that that traffic is actually going to convert so we're working with the various agencies we work on in terms of seo ppc um affiliate marketing and obviously the direct marketing that we're doing too um to drive that web traffic and make sure it's web traffic that's going to convert. On the right-hand side, you can see the continual growth each month in our CRM database. We only had 100,000 people on our email database. When we floated, we're now approaching, well, just over 200,000 people. We're quite disciplined in the way that we send our CRM We generally only send one email per week. Often there will be a brand that will sponsor that email and we'll work with that brand to send that to the customers. And again, it's a nice way of marketing to your existing customer base, but not too frequently. So as they would unsubscribe. Returning customer growth. So we're around 25% returning customers, which again, we're very happy with.

Thank you. So yeah, one of the other things is operational capacity. So we're continually looking to upgrade and improve and make the most of our warehouse space. So you can see that that's one of our warehouses. That's the smallest one. We've actually got seven warehouses all connected together on one site. It's an eight acre site at Boston Road. And this is the smallest one. There's about a thousand ovens in there. on that left-hand image. And then we decided we're going to put some nice racking in, some narrow aisle racking. And we now can fit in 2,500 ovens in that same space. So we're clearly using the airspace well with some narrow aisle forklifts, which are all electric, all Lindy, all German-built product. And they work very well. It's improved the picking massively, the speed in which you go and find the actual products. Before it was only quarterised in the warehouse, whereas now you've got, you know, 100 odd locations. So it's very easy to go exactly to the right place. You get less damages, easier to pick, easier for the actual operatives to actually go and find the products. And obviously increasing your space within your house, that's what everybody's after trying to maximise. So we've done that. Some mezzanine floors, we've put some more of those in. Some dock levelers are going in as well. And also improving the office space. We've managed to eke out some extra office space, which was before just some old rooms that we managed to knock through and improve the office space. So we're trying to stay there for as long as we can. We reckon we can... exceed £250 million from this current site. We said we'd float. We thought we could get to £250 million, whereas now we feel comfortable that we can surpass that. But we want to be moving, looking at moving before we actually get to that figure. But that's the aim. We want to keep improving our market share. You know, the market is still going backwards. Here we are making great inroads with our revenue development. vehicles as well, by the way, we've got currently 50. And we've actually got 35 on order now. So we're improving the size of the size of the fleet. And we have different sized vehicles for different areas. So bit like, you know, British Airways, for example, they have different sized planes for different sized routes. And we do exactly the same way we got big density of delivery, we do have larger trucks.

So just to finish this section, you know, the fourth pillar of our strategy is to make sure that we're delivering financially. Most of these steps we've already taken you through the average revenue per employee. So that went down slightly in the year. The 429,000 would have been probably more like 470,000 if we exclude the installation business because, of course, we brought that outsourced offering is now in-house. So that comes with headcount. But we're very keen. over the next 12 months to aim to keep that average revenue per employee above £400,000. It's a key metric we look at to think about when it comes to productivity. Dividend over on the right-hand side, as mentioned, we paid a final dividend of 0.67p last year. This year, the full year dividend shareholders is going to be 0.96 p. And we're proud that as a newly floated aim listed business that's growing, that we've been able to pay a dividend for holders for the past couple of years. Good improvements on the working capital, as previously mentioned, which has therefore led to a really nice free cash flow margin at 7.3%. and generating good quality cash is something that we're very focused on. It's revenue growth, absolutely, but not at all costs. We want good profitability and a nice, healthy return in cash. We've got 10 million of net cash we expect to finish next year, a little bit ahead of that, but obviously we've got some cost outflows with additional capex, as well as the ERP project that I mentioned earlier. That being said, we hope to improve net cash a little bit year on year. That's now earning us a little bit of finance interest, which is nice to see. And we want to build up a cash pile over a period of time so that when we do need to do that warehouse move one day down the road, we've got plenty of firepower to help us move warehouses, do some leasehold improvements. And then thereafter, we can think about our capital allocation policy in the future. But that's a nice problem to have in the future. Thanks, Josh.

Pardon me. Yeah, so outlook for this current year. So we've got a great start to the year already. Last year was quite a slow start to the year. So the comps are quite easy to beat, but we're 30% up in April and in May. And then we've improved on that through June, which is great. So even though there's a lot of talk about the consumer living crisis, you know, things are tough and retail is difficult, we're still managing to make, you know, taking market share, which is what we're after. One thing to remember here is that it's a huge market, you know, the TV market and the MDA market combined is huge. Now on 8 billion, you know, we're only doing, well, we've only just finished shy of 100 million. So we've got a minute market share of a huge, huge market. And we are in the business of selling products with distressed product. I think about 80% of our sales, something like that, are distressed purchases where people, you know, the washing machine's gone wrong and you need a new washing machine or your fridge freezer, you need a new one. It's not something, it's not a considered purchase. Television is a considered purchase. um but that is an area that we really want to push and drive into because currently we've got a minute market shelving it's 0.3 percent so it's uh Mind you, but it's an area that we're really going to drive into. We've got great connections with the likes of LG, Samsung already, Hisense, and we really want to push into that space. So that's summary. And we welcome questions.

Your main bricks and clicks competitor appears to be continuing to push for volumes. On the other side, your main online only competitor was forced to seek higher margins, but may now have a new source of funding. And how do you see the competitive situation developing in full year 24?

You know, I've been in business 36 years, Hannah, and the landscape is changing. There's always an acquisition or a merger, you know, a couple every year. You always get something. We just concentrate on what we're doing, which is building the business and delivering a return for our investors, our shareholders. You know, it's always easy to keep looking over and see what everyone else is doing. You need to be aware of the competition, but you just concentrate on, you know, driving your own business forward. That's what we always will do. and concentrate on margin, increasing revenue, improving the slings of our operation, and that's the focus.

Thank you. You alluded to this just in your summary comments, but what's the revenue capacity of your current business and how much can you grow before you have to spend more in growth capex?

£250 million we can get out of this current site. And capex is only like 1% of revenue anyway. And we're really, once we put the racking in, once we put the mezzanine floors in, which are all virtually in already, you won't be able to spend any more on that and the dock levers that are going in. So once we've spent that, that's about it. And vans we've been paying cash for as well. Yeah, the vehicles will always be on the capex, but apart from the ERP system, Josh, do you want to?

Yeah, no, as you've said, I think 250 million from the current site. Obviously, we've got ambitions to, you know, get there faster than the forecast suggests. And then we'll move to another site. And obviously, that will be an incremental step change. But from the current site, you know, we're pretty comfortable for the next few financial years that we can stay where we are without significant capex.

Question here, how much will the new warehouse cost? Would you like to hazard some thoughts?

I wouldn't buy it. A new warehouse, you know, it's about £8 a square foot. In Leicestershire, there's one very close to where we are. So, you know, it's 600,000 square feet. So you can do the maths there. We won't be buying it. It will be on a leasehold and by then we'll have built quite a nice cash reserve. So it will be a major problem moving to a new site. You're going to need a bit of a cash pot to work for leasehold improvements, et cetera. But we wouldn't need to go and fill it with a load of stock instantly. We wouldn't need to go and buy a load of new vehicles or a load of new forklifts because we'll have all those already. The IT system, we want to put that in the new software in place before we move. So that's why I want to crack on with that. We don't want to be in the situation where we're moving and putting in new software at the same time.

Double header. Yes, perhaps not. Roughly what percentage of your current revenue is next day delivery?

I would say it's probably about, at a guess, probably about 60%. We don't actually monitor that super closely on what is next day, but I can look at the numbers and say about 60% of what we sell is dropping into the next day, of course. A sale that we make right now for a customer, they might choose to book it in on a Friday. They might choose to book it in next Friday. That's really up to them. Interestingly, our busiest day for deliveries in a week is a Friday. Didn't used to be used to be the weekend. But now it's Friday because, you know, a lot of people work from home on Fridays nowadays. So a lot of people book their deliveries in on a Friday.

Good. Why is awareness in the southeast so much lower than in London specifically? And do you see scope for a southeast for the southeast catching up so that you can create a super trading area?

Yeah, look, it's a really good question. I think as we continue to do the marketing in central London, we will see a gradual improvement in the southeast. We don't do any specific campaigns in southeast catchment areas. So, for example, you know, we're not doing specific billboards in Tunbridge Wells, you know, or in Folkestone or locations like this. We may move to that in the future, but at the moment, we're really focused in on central London and some of the train lines around central London, and we'll hopefully pick up some of that passing southeast trade over time. So I think it will build over time. Interestingly, the market share... in the southeast is not aligned at the moment with the growth that we're seeing in the southeast. So we're seeing growth in the southeast that is quite similar to the growth that we're seeing in London, which is faster than the overall group growth. But the market share is still a bit softer there. So we'll see how that develops over time.

Perhaps one for you, Josh. I saw that there were fair value gains of 481,000 versus 195 last year, which helped to boost profits. I'm not sure what this relates to. Can you explain?

And indeed, yeah. So we are probably one of the very few companies on the market that has a statutory EPS that's higher than its adjusted EPS. You know, try and find one of those. And the reason for that is because we have a share in the buying group. So we're part of the Euronics buying group. Euronics buying group is the biggest buying group in the UK. Euronics is one of the, well, it's the biggest buying group in the whole of Europe and one of the biggest in the world. There are benefits of scale of being part of a buying group. And we have a kind of cooperative share in that buying group. And because of the timing of our different financial year ends, we decided at IPO, that we would keep this item separate and we wouldn't include it in our adjusted trading profits because it was quite difficult to forecast the performance of the buying group. Obviously, we're not in the management of the buying group, nor are we in the board, so we don't know how the buying group is performing at the top level and their accounts close after our accounts close. So this fair value gain relates to our share of the buying group, which basically sits as an investment on the balance sheet. So you will see an investment line on the balance sheet. That is our investment in the buying group. We are one of the largest members of the buying group. And if we were to ever leave, which is not something we're looking to do, but if we were to ever leave, then that investment would basically turn into cash. So it will get liquidated. into cash and then that fair value difference would move away.

Thank you. A couple of questions here on what you're defining as the premium segment. The first one is what market share do you have of the premium market you target? And then the second one is roughly how big is that portion of the overall electrics market?

It's a good question and we don't have precise stats on it because it's quite difficult to disaggregate some of that information and also our definition of premium could always be different to somebody else's. When we define premium, we're looking at things like Bosch, Neff, Siemens, LG, Samsung, Rangemaster, Miele, Fisher Paykel. These are brands that we would consider to be premium. You know, there are a whole host of other brands which we work with, like Hotpoint, Whirlpool, Beko, Indesit, and we don't not serve those brands and customers. We offer the whole range, but we have always, the business for 36 years has always had a focus on premium. It'll depend by brand. Some of the brands, we have high penetration. So if you take Rangemaster, for example, we are one of the biggest partners with Rangemaster in the UK and our market share of Rangemaster, which is a very premium range cooker, is much higher than our 2.5% market share of the overall MDA. But it's difficult to give a figure just generically on premium in the UK, but you can see it's higher than the 2.5% that we have of the overall market.

Okay. And are there any...

mda or c brands which you would consider to be too upmarket for your offering yeah things like gaga now um wolf viking you know a lot of the big american brands i mean there's you know there's not enough volume there for us to to bother going after it

Okay, thanks.

We don't neglect the entry-level branch. You know, we still do a lot of business with them, but we always want to try and sell premium. As does any business, you know, there's more profit in selling premium product. You would faster deliver a £1,000 Miele washing machine than a £200 Beko washing machine. You know, you might get the same 30% margin on either, but clearly if there's a bigger amount, you're selling the £1,000. Absolutely.

Absolutely. Do you earn revenue from the MDA you collect from customers?

Yeah, we do. Not a huge amount, but there's an upside of £20 for taking away the old product. That's including VAT. And then we get an upside for selling it as well. And it's a great service and it all gets dealt with through the WeDirected.

Thank you. ERP upgrades can be disruptive. I'm sure plenty of investors on here have had experience of that. What robust plans can you put in place to limit this potential disruption?

Good question. So I think I would, I would start with, obviously, you know, there's not a lot of businesses who would want to do an ERP upgrade, but if you want to plan for the future, you know, you have to do it now and you don't want to get to three to 400 million and then realize that you've run out of road with your existing system. So it's one of those difficult decisions you have to make to put yourself on the path to change the ERP. The one real positive here is there's a massive willingness inside the organization. We have eight IT, we have eight developers, real coders in our business. and all of our IT team are really keen for us to move onto the next platform. And I think that's always one of those stumbling blocks that companies have when the management team say, let's put in a new ERP and they face quite a lot of pushback internally where people don't actually want to put the effort in to move to the new ERP and that can be really disruptive. So I think the first point is we have a huge amount of willingness in the organization because The team have worked with this platform for about 20 years and they really want to move on to a new platform that's a bit more fit for purpose. So that's probably the most robust thing that we have. We're working with a well-experienced partner. We've been beauty parading. For about six to 12 months now, we considered doing this 12 months ago, but because of the cost of living crisis and we didn't know how the market would play out, we decided to just preserve cash and hence we've built our cash pile of 10 million. So we've been looking at a variety of providers over about 12 months and we've settled on one main provider, which is probably going to be KPMG. And we're quite happy with the creds and the stats and the work that they do directly with Microsoft. So hopefully a good implementation partner. We're putting some extra resource into it internally, and we've got a strong willingness across the teams.

And it's a pretty vanilla system that we've got, isn't it, Josh? So you've not got multi-currency, you've not got multi-site either, or not separate P&Ls. So it's quite a straightforward system.

software system that will be implemented. Yeah, it's quite a simple P&L from an investor's perspective. It's a simple P&L. There's no intercompany. We don't run consolidation. So all of those pitfalls are very difficult from an ERP perspective. They don't exist.

How are inflation and supply chain issues affecting Marks?

Well, I mean, it's been a bit of a rocky road. You've just got to navigate the waters, haven't you? That's what you have to do. There has been inflation, clearly. The cost of containers, I mean, they went up to $20,000 from China to the UK. Now they're back down at a more realistic pre-COVID levels, $2,500. So manufacturers have tried to hang on to that margin, though, wherever they can, for obvious reasons. But it's always great. That's a great thing to do in lots of different brands. You can work out the price, what it should be, and play them off against each other to keep the price lower. So things have gone up, but not massively gone up. And the ease of getting started, there's not really a problem with anybody now as such. The component issues have just about ceased. The supply of component issues has about ceased. So it's... pretty easy to get hold of stock.

Okay. Rolling a couple of questions here, basically around operational gearing. You know, the rollout of the built and installation offering obviously brings extra costs, but you'd assume extra business as well. You've got more trucks on order and drivers. So can you give us a sense of how, you know, your revenue is going to increase and the costs and how it won't be linear, I guess.

Okay, good question. So I mean, firstly, I'll take the vans first. So adding an additional 35 vehicles, that doesn't mean we're going to go from 50 to 85. What we'll probably do is go through a bit of a replacement cycle. So we'll have some vehicles that are becoming over three years old, and we will replace out some of the older ones with the new ones and probably settle at a fleet that's bigger than 50, but lower than 85. We're not sure exactly where that will land. We generally have a little bit more than the needed capacity on a daily basis, because what that allows us to do is, if there is a strong surge in sales over a weekend, or a strong surge in sales, for example, today, then we can actually put extra vans on to run that capacity tomorrow. We don't have to say no to those sales for tomorrow. We can drive that extra capacity. So it's always nice to run with a few spare vans, and of course, for those that are off the road as well. From an operational gearing perspective, quite a few of the costs that I mentioned in the financial section are baked in now. So the PLC costs, we had reintroduction of business rates after the business rates relief. We implemented the 24-7 shift change in the warehouse. So those costs are baked in now and we can actually start driving some operational gearing on the overhead base as we move into the future years. And the bigger we get, the smaller that overheads can be as a percentage of sales.

Okay, thank you. I think the final question then, and there's a couple left, all relate to valuation. Do you want to give some views on your position on the valuation of the shares? We obviously know where the market is at the moment, but also how your large shareholding, Mark, might... put some people off. You're a single shareholder. You could potentially take the business private again if the price got low enough. So would you consider reducing your holding? What comfort can you provide?

Yeah, I mean, I've come to market for a reason. I've I came to build the business and grow it. You know, we've doubled it effectively in the last couple of years, and that's what we want to keep on doing. I'm fully aware I need to sell a bit more. When it came to market, I thought, you know, I'll just sell 25%, wait for it to grow, wait for the share price to grow, then I'll keep selling another few percent. But obviously the market's went backwards considerably. We've delivered what we said we'd deliver. We've actually over-delivered. But that's just how things go. And I realise that I need to sell some stock, but I'm not going to sell below float price. It's not fair on the existing shareholders, and I'll wait until we get... you know, past float price, then I'll start releasing a little bit more into the market and give you some liquidity. And I know I need to do it. And that is my intention. You know, there's no devious plans here. You're recording it. So I'll sign anything you want. It's all about just being upfront with everybody, treat people the way you wish to be treated and drive the business, get your investors, your shareholders a return, which will happen. So we want to make sure that everyone that bought in at £1.10 will make a profit. And there's not many IPOs that can say that from the class of 2021. So we will make sure that we get past that and keep driving it. We've got a great team of people. I could get run over by a bus tomorrow and Josh and the team would just carry on and probably do a better job. I've not got a massive input, but the guys are great, very professional. And we know I need to sell some shares. So it will be happening, but not until we get past float price.

Thank you. Follow up question here, or a further question. When delivering to the further out areas, i.e. Scotland and Cornwall, what would a driver's day look like? Perhaps somebody looking for a job. From pick up to return overnight stay.

Interesting question. Yeah, so I mean, all of our vans leave the depot at a similar time in the morning, which can range anywhere between 4am, 6am, depending on the type of route. Those further out locations are C-class drivers, so they've got the CPC licence, they're on a bigger vehicle, either a 7.5 or a 5-tonne vehicle, which is on an operator's licence. So it can be a longer day. Those days can go for up to 21 hours, but generally it wouldn't be as long as 21 hours. It's only five hours, actually. from Leicester to Glasgow, and it's five hours from Leicester to Penzance. So we really are kind of equidistant, centre of the universe, as Mark likes to call it. I'm not from Leicester, so I'm not sure I call it the centre of the universe. A box of mud. Yeah, exactly. But basically, they will make their way up there. Generally, they'll head straight up there. Then they'll do some drops that time will allow within the Glasgow area, make sure that that works, and then arrive at their hotel in the evening Usually it's late afternoon into early evening so that within hours they can get a good break overnight. They get really well looked after by the hosts that we've got in the few B&Bs that we operate with because we're consistently booking these every single week. So the hosts really like us and like our business. They get looked after in the morning and then they'll do some drops in Edinburgh. and then they'll make the way back down and they'll be back at base at sensible time. So it's a very favoured run by the drivers because they get an overnight allowance as well as staying the night. They're usually with their friend in the cab. They generally like it because there's less traffic than London.

Sounds like a good deal. Final, I think a final question, given time as well, perhaps a wrap-up comment. What are your medium-term growth ambitions?

Medium term, just to keep pushing the business. We're at 30% growth year on year at the moment, and we just want to keep driving, but not sacrificing margin. That is the key. It'd be great to double the business overnight, but you've got to actually deliver the product. So it's operationally, taking the order is one thing, but you've actually got to then go and do the delivery. But, you know, the plans are to get to that 250 million and then push on to 500 million. It'd be nice to get a good share of the market. It's a huge market. There's plenty of room for everyone. And we see ourselves as a strong emerging player with a great proposition, one of the best offerings in the industry, but absolutely do installation of a built-in product, you know, tomorrow in London. if you order it now, of an integrated dishwasher, which there's not many companies out there that can do that.

Go off and buy yourself an aircon unit, everyone. Excellent. Well, listen, thank you both for your time this afternoon, and we look forward to an update in six months' time.

Thank you very much, Hannah. Thanks for listening, everybody. Thank you, everybody.