Formalities of the meeting were dealt with swiftly. Only noteworthy resolution was Resolution 10 - Disapplication of statutory pre-emption rights. This only just passed the 75%, threshold at 79.35%.

After the meeting I, along with another investor, spoke with Peter Butterfield & David Cook, the chairman. I also spoke with Richard Jones, the Independent Non Exec.

Much of the initial discussion was regarding Kelo-cote and its potential particularly in China. The market for scar products is big and growing and whilst publicly they don't comment on individual products margins, it was implied that Kelo-Cote along with having the biggest growth last year has the biggest margin of all their products. The growth since acquisition has been compelling and underlines the point that they can add significant value to bought in brands. This is evidenced by the c67% growth in Kelo-Cote sales last year. He was cautious enough to flag that growth cannot continue at that pace going forwards.

He then talked about Chinese distributors and the potential for evolution within that market and the challenges faced there, ie protection of the brands from counterfeiters. This resulted in focus on areas such as packaging to combat counterfeit products. He believes the geography of their distributor within China is good and if growth can be achieved with Kelo-Cote given the margins it would be significant.

I then asked about net debt to leverage and their persistent statements about it reducing to 2x, only for it to spike up again with acquisitions. I pointed out it hadn't been at that level for five years. I also tried to convey that as a relatively new CEO, it might serve him well in the long run to work it down in line with guidance before undertaking other acquisitions. He acknowledged it might be wise to demonstrate a prudence. He also acknowledged that another significant transaction now would likely result in the market punishing them. He did seem to agree that it would be viewed as prudent to manage the leverage down before embarking on further acquisitions. I pushed further to see what they might do if they found a no brainer purchase. I have no doubt they would do it. As to what makes it a no brainer for them, who knows! Interestingly, it did lead us onto to a vague point that organic growth is…

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