Ab Dynamics (LSE:ABDP) — Half Year Results

0:01 Good morning, and welcome to the AB Dynamics PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated at the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to James Ralph, CEO. Good morning to you, sir.

0:32 Good morning, everybody, and I'd like to welcome you all to the AB DYNAMICS half year results presentation. As always, today, I'm joined by our CFO, Sarah Matthews DeMiers. So in terms of content today, we're gonna start by providing an overview of our results and operational highlights before handing over to Sarah to take you through a more detailed presentation about financial performance. I'll then provide us some more color and detail around progress in our newly defined sectors of testing products, testing services and simulation before providing some updates on market dynamics, ABD solutions, and the recent acquisition of VTS. And then finally, I'll summarize and provide some guidance on future outlook. So we've had a very strong start to the financial year with continued financial and strategic progress, capitalizing on supportive market conditions and demonstrating the benefits of the investments that we've made in recent years in the commercial and operating capability of the business.

1:33 In terms of high level financial performance, revenues have increased by 8% to GBP52.3 million or a 10% increase on a constant currency basis. Through operating leverage, gross margin gains and improved efficiency, that translated into a 16% increase in adjusted operating profit to GBP 8,900,000, which is 17% adjusted operating margin. Through significant operating cash generation during the first half, our net cash position at the period end was GBP 29,000,000 after funding the final performance payment for the acquisition of Ansible Motion. And this strong net cash position gives us significant funding headroom support our ongoing investments in R and D, further acquisitions and also funded the acquisition of Venture Test Services, or VTS, as we'll refer to it during this presentation in early April, and I'll explain a bit more about that later in the presentation.

2:28 We continue to make really good progress in the organic development of the core business as well as building on the early successes that we've had at ABD Solutions by developing a strong pipeline of commercial opportunities. We've seen strong growth in both testing products and testing services, and we've continued to invest in new product development, technology and our operational facilities. So as mentioned during our previous presentations, we've now changed our reporting segmentation to better reflect the nature of the group today and how we're actually organized. So we're now reporting across three primary sectors of testing products, testing services and simulation. Overall results show 8% growth to 52.3 driven by good growth in testing products.

3:13 So this is now defined as track testing products plus our laboratory testing products under the previous definitions and a return to growth in testing services following a weaker period in FY 2023 due to China based COVID restrictions and availability of test vehicles.

3:30 Simulation had a weaker period with strong growth in simulation software offset by reduced simulator revenues due to the treatment of revenue recognition with revenues deferred into the second half of the year, And we expect our simulation revenues to recover during the second half due to delivery of several full motion driving simulators from Ansible Motion. In terms of revenue split, we're around two thirds of our revenues are testing products, around 20% relating to simulation and the remainder testing services. And in terms of geography, Asia Pacific remains our largest territory at 42% of revenues, with The U. K. And Europe increasing to 36% and North America 21%. And during the first half, we've seen particularly strong growth in UK and Europe at 50% growth, mostly due to continued good performance in Germany, where we've seen another period of circa 70% growth this year.

4:23 Other notable countries in Europe include The UK, Spain and Italy, and they're all showing strong growth. In APAC, the growth of 4% was driven by good performances in India, Korea and Taiwan, with China being broadly flat in the first half. And in North America, saw a weaker period where revenues decreased by 17%. However, order intake was significantly up across H1, indicating a strong second half of the year for The U. S. The revenue split by customer type shows a higher proportion of sales to OEMs over 80%, with the remainder dominated by service providers, so these are operators of testing facilities improving grounds at 17%. And during the period, the proportion of recurring revenues has increased to 52% as a result of the increase in testing services revenue and the change in revenue recognition policy shifting simulator revenues into the second half of the year. And we'd expect as those revenues come through, a portion of recurring revenues normalizes to around 40% to 45% in the second half as we see those simulator revenues coming to fruition.

5:30 So I'll now hand over to Sarah, and she'll take you through the financial details. Thanks, James. I'm pleased to be able to deliver a strong set of financial results for the first half of twenty twenty four, driven by organic growth. Our usual strong cash generation has enabled us to continue to invest in the future growth of the business and increase our returns to shareholders through a 20% increase in the interim dividend. Revenue grew by 8% to GBP 52,300,000 with strong activity in testing products and a recovery in testing services. We delivered a 90 basis points increase in gross margin through price increases and an improved mix from the increase in service revenue. Adjusted operating profit increased by 16% to GBP 8,900,000, driven by the improvement in gross margin and the operational gearing impact of the revenue growth, resulting in an improvement in the operating margin of 110 basis points to 17%.

6:33 This was held back by the continued investment in ABD Solutions of GBP 800,000. Excluding this, the operating margin would have been 18.6%, demonstrating the progress towards our medium term margin aspiration. The effective tax rate has increased to 18.4% as a result of the full year effect of the increase in The UK tax rate and the less favorable R and D tax credit regime.

7:00 This resulted in a 14% increase in diluted earnings per share. Strong cash conversion leaves us with significant cash resources of GBP 29,100,000, of which GBP 11,800,000 was invested in the acquisition of BTS shortly after the period end.

7:22 The revenue bridge shows the key drivers of the group's results. As we flagged at year end, we've now aggregated our components in a different way that better reflects the type of product or service offering, albeit we are still reporting the same individual components, just grouped together more in line with the way we run the business. Testing products includes robots, ADAS platforms, and laboratory testing equipment. This sector has grown by 12%, being positively impacted by the growing regulatory requirements for ADAS products. Testing services includes revenue from our track test in The sorry, our test track in The US and on road testing in China. This grew by 23% following recovery from the prior half year that was adversely impacted by local COVID restrictions in China and more widely delays in the availability of test vehicles, both of which have now been resolved.

8:18 Simulation includes both physical simulators and physics based simulation software. Growth in simulation software was offset by a decrease in revenue from motion platforms due to the timing of revenue recognition as much of the half one activity will be recognized on delivery in half two. FX provided a 2% headwind.

8:45 The 8% increase in revenue dropped through to a 16% increase in operating profit. This was delivered through the increase in organic sales volume, operating efficiencies and an improved mix with a higher proportion of testing services, partially offset by inflationary cost increases. And this demonstrates that following a period of investment in the commercial and operating capability of the business, we're now starting to see the benefit of operating leverage coming through.

9:18 Turning to the cash flow. Operating activities generated a cash inflow of £11,000,000 Our continued focus on disciplined working capital management enabled us to deliver cash conversion of 107%. We invested GBP 1,700,000 in CapEx, paid GBP 1,000,000 in dividends and funded the final performance payment on the prior year acquisition of ANS PLC promotion of GBP 5,700,000. After other items, including new leases and share purchases, closing net cash was £29,100,000 We have a £15,000,000 RCF, which extends to February 2026, leaving us with £45,000,000 available liquidity. Pounds 11,800,000 of this was used after the period end to fund the acquisition of ETFs, with the remainder giving us flexibility to support our future growth opportunities.

10:16 Currency provided a small headwind in the period as the dollar, euro and yen all weakened against sterling. The slide shows half one twenty twenty four retranslated at last half year's rates. At constant currency, revenue and profit were 1,200,000 and 100,000 higher than reported. Around 55% of revenue is denominated in dollars, euros and yen. Future guidance is based on $1.25, €1.17, and a 190 yen. In summary, we've delivered strong organic revenue and profit growth. Its operating leverage is delivering margin expansion towards our medium term target of 20%.

11:07 Effective management of interest and tax has delivered EPS growth of 14%, demonstrating improved returns to shareholders. We've delivered strong operating cash generation with a three year rolling average cash conversion of 106%. Our robust balance sheet and continued expected future cash generation enables investment in continuing to strengthen the business through organic and inorganic development. And I'll now hand back to James for the business review. Thank you, Sarah. So I'll now provide a brief overview of our three primary sectors during the first half. So starting with testing products, we saw a 12% increase in revenue to GBP 35,000,000, driven by ongoing supported market drivers and a strong performance in our ADAS products, particularly the Launchpad product line.

11:59 ADAS products grew by 39% during the period to nineteen point five million, and driving robots decreased by 12% against a very strong prior year comparator where robots grew by 46%. The reduction in driving robot revenue is purely a timing related issue as order intake was very strong during H1, so we're expecting this to recover during the second half. During the period, the group gained Euro NCAP approval for both the SP360 articulating pedestrian ADAS target as well as our latest track testing product, the launch pad spin. This means that these new products are now approved for use in any formal Euro NCAP testing facility for certification purposes. In testing services, we've seen a return to growth of 23% in both our U. S. Proving ground in California and our China based road testing operations.

12:51 We've received new contracts from NHTSA, The U. S. Government regulator, which will not be delivered during the second half and into FY twenty twenty five. The new testing facility we've set up in California has been completed, supporting both the track testing operations and also a new SPMM machine being offered as a service to The US market. As part of a major contract with a German OEM, we've established a new testing facility in Anhui, China to provide on road testing services, particularly focusing on electric vehicles and connectivity. For simulation, our simulation software, RFPro, has delivered a very strong performance, delivering significant revenue growth, particularly in the development and sale of digital twins.

13:36 And during the period, RFPro created their largest ever digital model of the city of Los Angeles for a major Japanese OEM, which included 80 kilometers of roads and features over 12,000 buildings and 13,000 additional roadside items. The driving simulators, Municipal Motion currently has several large Delta S3 simulators in build that are due for delivery during H2. And as we mentioned earlier, as part of that change in revenue recognition, this means revenue is weighted towards that second half of the year. And based on that weighting and the strong performance from RFPro, we anticipate a recovery from the decline in revenues once we get to the full year. In terms of new product development in simulation, we're currently developing the new Delta t one sports simulator.

14:21 We previously referred to that as the alpha project, and we expect this project to be complete and launched to market in h one FY twenty five. So we thought it would be useful to explain a little more about both our near term and our longer term growth drivers in the market. In the near term, we have strong market demand driven by ongoing regulatory requirements, which are at various different stages in different countries. For example, in 2022, new UN ECE regulations came into force, which all vehicle manufacturers have to meet to sell their vehicles into The UK and Europe. In the first phase, automatic emergency braking was

15:05 mandated on new newly introduced car and van models, with a second phase in July 24 extending the requirement to include emergency lane keeping for cars and vans, blind spot information systems and moving off information systems for certain vehicle classes. Consumer preference is a key driver, which is heavily influenced by global end caps and also The U. S. Government regulator, NHTSA. In order to gain a good safety rating for their vehicles, OEMs are required to meet ever increasing demands for safety systems across a very wide range of increasingly complex scenarios. This has recently been further expanded to commercial vehicles with Euro NCAP's introduction of their safer trucks rating program. And the graph on the top right of this slide clearly shows the significant increase in number of tests required per vehicle since 2014, and this is set to continue, particularly since the launch of the latest Euro NCAP 2,030 road map.

16:05 We're also heavily supporting our customers' sustainability challenges, in particular, the introduction of EVs, which have very different testing and simulation demands to that of conventional internal combustion engine driven vehicles. As part of this structural transition, there are now many new entrant OEMs in the EV market who are actively competing against traditional automotive OEMs, and we're well placed to continue to support these new companies as well as our traditional customers. Automotive OEMs are introducing ever higher levels of automated driving functions on vehicles that require significant levels of simulation and testing to make sure that they can demonstrate adequate safety in a very wide range of different scenarios. At present, there are a range of so called level three systems being deployed in the market typically for the automation of freeway or motorway drive.

16:57 So then moving on to the longer term. Both the structural and consumer drivers will continue to evolve and regulations are set to drive ever increasing levels of safety compliance on vehicles. For example, Euro NCAP have now published their 2030 road map, which includes a wide range of test requirements and includes increasing interaction with vulnerable road users. So these are defined as pedestrians, cyclists, motorcyclists, and also V2X, which is vehicle to everything communication systems. In The US, the National Highway Traffic and Safety Administration or NHTSA operates a similar vehicle rating scheme to Euro NCAP, but also functions as a government regulator. And as can be seen from the graph on this slide, since the EU focused on road safety, the numbers of deaths on European roads have decreased consistently over the past ten years. That's the bottom blue line. In contrast, in The US, where adoption of ADAS systems has been slower and not part of regulation, fatalities have consistently increased.

17:58 And, also, we have to bear in mind that that last data point of 2021 was influenced by COVID restrictions. So to address this issue, Nets have now recently issued a notice of proposed rulemaking, which marks its intention to mandate the use of ADAS technologies in The US, which in turn makes that market a very strong growth opportunity for ABC. In July last year, the Chinese government have now issued guidelines on standardization of intelligent connected vehicles. They include formulating a new system that will support assisted and autonomous driving functions by 2025 and the rollout of standards that will support the development of fully autonomous driving applications and a safety assurance system by 2030. So both phases will require significant amounts of testing and simulation, supporting ABD's growth profile as the leading provider of track testing and simulation systems in China.

18:53 In addition to the extensive testing of ADAS systems, simulation will also become an increasingly used tool to accelerate vehicle development time scales and also to derisk that product development. Our driving simulator technology and software is being increasingly used for hardware in the loop simulate simulation whereby sensors and vehicle systems are physically integrated into a simulator to use actual hardware. Another longer term trend is also the end to end vehicle development tool chain becoming increasingly important for more automotive OEMs and tier one suppliers to make the vehicle development process as seamless as possible. So this need to launch new models to market quicker and to derisk those development means we need an integrated tool chain.

19:40 Our simulation lab testing and track testing software tools are being increasingly integrated to allow data and information to move back and forth between the various stages of the vehicle development project, which would cement our strong position with our customers and also act as a barrier to entry for the competition. As well as revenue growth, we have strong gross margins, which are driven by our market leading products and services, which are highly differentiated amongst the case of the competition. And we have a clear strategy for further margin expansion through design for manufacture, operational excellence and improved supply chain management. And also longer term, ABD solutions will become an increasingly significant part of the group and will drive incremental products and recurring revenues as we start to commercialize and expand the business into our primary markets of mining and specialist off highway vehicles.

20:34 And finally, the growth drivers acquisitions will also remain a key part of our growth plan, and we'll continue to target complementary value enhancing acquisitions that will facilitate and accelerate the implementation of our overall strategy. So that's the sort of general market external conditions, but also there are some internal things we can do here, one of our margin drivers. So one of our key focus areas for the medium term is continued margin expansion, following our investments we've made in recent years, and this has been demonstrated in the first half results. We now have an operating platform that is scalable and will benefit from significant operating leverage as we grow our revenues. The group's overall portfolio of products and services is a strong platform for organic growth, and our market leading position means that we can manage gross margins through price increases during inflationary periods as well as internal initiatives to improve margins.

21:31 Our strong balance sheet provides the optionality to invest in innovation that provides differentiated products that drives and supports our gross margins. Our ERP system implementation in The UK is now complete and is in the process of being rolled out to our global operations. And this system provides significant improvement in management information, allowing us to focus on areas of business and margin improvement through improved supply chain management, inventory management and also operating efficiencies. As part of that, we've transformed our business processes in recent years to improve our operational performance and the overall customer experience, and we'll continue to invest in our product development to ensure we can maximize margins through design for manufacture and modularity of components whilst also implementing lean manufacturing.

22:22 In recent years, we've also invested in our talent across the organization to support our growth aspirations, including senior leadership, but also investing in all levels of the organization in terms of professional development, graduate programs, and also apprenticeships. So all of these self help initiatives have the potential to significantly improve our growth and therefore operating margins with our medium term goal to achieve operating margins above 20%. So now an update on ABD Solutions. So as a reminder, our ABD Solutions business was established to automate existing vehicles focusing on mining and other off highway specialist vehicles, leveraging our core technology in driving robotics. The product development is largely complete.

23:08 And during this time, we've been awarded two major contracts. One to support r and d and the other to develop a pedestrian detect system for construction machines. In parallel, we've also won several phase one feasibility studies for end user mining customers establish and demonstrate our capability. So this is where we go to the mine site, we map the mine site, and we demonstrate our capabilities to the customers, and those are normally funded by potential new customers. So these contracts are now all in the process of being delivered, and we expect to see a proportion of this revenue coming through during the second half of the year, but mostly into FY 2025. But our absolute focus right now is on converting our significant pipeline of commercial opportunities into purchase orders. Pipeline is strong. We have around 10 to 15 live opportunities valued between 400 k and 10,000,000 in countries like Canada, Australia, Japan, South America, and Africa.

24:06 And we're also seeing an increasing area of interest in teleoperation of mining vehicles, which is essentially remote driving the vehicle. This is a technology we are actively exploring with our key customers. We have dedicated business development resources in place in both Australia and Japan and are building our reach to market in other territories. One potential reach to market we're currently exploring is white labeling our automation system to specialist vehicles of specialist vehicle OEMs who will include automation as an option on their off highway vehicles. So now a brief sort of case study on the acquisition that we made after the period end. So on the April 2, we acquired a 100% of Venture Test Services or VTS, who are a leading provider of dynamometer based testing services in The US market.

24:59 They're particularly focused on supporting the development and deployment of electric vehicles for US based OEMs. And VTS offers a full range of testing services, including mileage accumulation and assessment of electric vehicle powertrain and battery performance across a range of extreme climatic conditions. So there's fast evolving regulations now for vehicle emissions paired with the need to improve EV range efficiency for customer adoption, and that's accelerating testing timescales and putting increasing pressure on OEMs. And to ensure compliance, OEMs must test their in development vehicles over their full lifespan across extreme temperatures and in varying conditions. New vehicles only achieve certification by passing these extensive tests, after which they can be approved for consumer sales.

25:50 And obviously, range is a key factor in determining consumer choice in EVs, and it's well documented that EV range is greatly reduced to cold temperatures, on average a reduction of 15 to 30% depending on the model. Therefore, performance in these extreme conditions is an essential part of the vehicle development for customers of VTS. So the acquisition builds out our existing testing services business and further aligns our offering to the structural growth drivers in the automotive sector around rolled out EVs. It complements our existing tracked based services business in California with laboratory based testing and offers the opportunity to potentially replicate this offering on the West Coast. We'll be using our existing U. S.-based sales channels to market the capabilities of BTS and use our existing strong customer relationship to drive increased sales.

26:43 So the initial consideration was $15,000,000 and there's a further $15,000,000 payable potentially in earn outs over a two year period subject to achieving significant growth targets. And BTS will be earning earnings enhancing from completion and has a strong both gross and operating margins. So turning to the summary and outlook. Overall, we're very pleased to report a very strong first half to the year with revenue growth of 8% or 10% on a constant currency basis and operating profit growth of 16%. We saw a particularly strong performance in testing products, dominated by growth in our ADAS testing products and also a return to growth from our testing services business.

27:30 During the first half, we continued to invest in new product developments, including new ADAS test products, simulation software, a new driving simulator platform, the Delta T1 Sport, and also our ABD solutions offering. We continue to drive operating efficiencies through improved operational management, supply chain improvements and design for manufacture, all supported by the recent implementation of our ERP system. And we've capitalized on supportive market conditions and have delivered good order intakes through the first half, meaning our order book provides good visibility for our FY 'twenty four year end position. In ABD Solutions, our absolute near term focus is on conversion of our opportunity pipeline into purchase orders and deliver our first existing first contracts.

28:19 And as just mentioned, we also acquired VTS after the period end. There will be earnings enhancing during H2. So in terms of outlook, we now expect to deliver full year FY 'twenty four operating profit ahead of the current expectations as we maintain our operating margin through H2 and the addition of VTS incremental operating profit. Market conditions continue to support significant growth opportunities in our core markets, which is supported by long term structural and regulatory growth drivers. Our broad based portfolio of businesses allows us to capitalize on these growth drivers and also drive significant revenue growth over the medium term while simultaneously expanding our operating margins. We continue to target acquisitions as a key element of our growth strategy and currently have a good pipeline of acquisition opportunities, which will continue to build out our broader based business and will always be earnings enhancing.

29:18 Our robust balance sheet with our strong net cash position continues to give us optionality in deployment of capital, where we intend to continue investing in innovation, new product development, and also further value enhancing acquisitions. So that brings the formal presentation to a close. So if I now hand back, I'd like to open up for any questions. Perfect. James, Sarah, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments to view the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation.

30:03 And if I could just hand back to you just to read out the questions and give responses where it's appropriate to do so, I'll pick up from you both at the end. Thanks. We have a couple of questions on revenue recognition, so I'll take those if they're quite close to my heart. So the question is what has changed with respect to revenue recognition and how are revenues typically recognized in simulation. So what has changed, is there's a new interpretation of a particular paragraph of the accounting standard. And what that means is that if there's a particular clause in a long term contract, that determines whether it's accounted for overtime as we build the equipment or over or point in time as we deliver it.

30:50 And the three simulator platforms that we've been building during half one are point in time recognition. So we'll recognize the revenue when we deliver them rather than as the activity, the build activities taking place. So those will come through in half two. So I think it's fair to say that, you know, our previous methodology was always over time on these contracts. And now we've moved to a mix of some over time where we can possibly make it that way, but many of them become points in time. So the next question is given the reduction in simulation revenues due to timing issues, how is the group managing project delivery timelines and customer expectations to mitigate similar impacts in the future. So there's absolutely no change on customer expectations.

31:39 We continue to build and deliver the equipment in the same way that we always have. In terms of the recognition of the revenue, we are obviously managing the delivery to customer timetables that may have an impact in a particular six month period, but we have visibility of that well in advance. And so we're able to let people know what when that is coming and also to manage delivery where we can to make sure that the revenue falls in the same periods as the activity that isn't doesn't always isn't always possible, but that's the aim.

32:28 Then the next question is, with the launch of new products like Indigo Drive and the SPMM plus, how does the group anticipate these will impact the competitive landscape? What market demands are these products addressing? And how do they fit into the broader regulatory environment? Okay. I'll take that one. As a general statement, all of our product development is led by the market. So we have very close relationships with OEMs. We also sit on various clients with panels for regulators, and so we've got good visibility of what future requirements are for test equipment or simulation equipment. We typically work very closely with our customers on those requirements. So we may establish the initial product requirements. We will go and talk to our key customers, and they will give us some feedback on those. So they're always aligned to the market needs, and they always are differentiated against the competition.

33:22 So we have, you know, additional features or capabilities or improved reliability, a better software, whatever it may be, to make sure that we maintain our market leading position above the competition. So all of them are driven by market need. All of them are looking to the future typically. I mean, you take, for example, the Launchpad Spin that we've just launched in the first half, it's now been Euro NCAP approved. That will align to future regulatory requirements. The regulations today doesn't require a Launchpad spin, but the regulations that are coming down the track will. So we're always well ahead of that because automakers are typically doing the development testing and development of new vehicle capabilities now for something that's going to be three to five years down the line. And the next question is in relation to OEMs. Are you more aligned with any specific OEMs or OEMs in certain regions?

34:16 Do you have the relationships with The U. S. OEMs that will enable you to benefit fully from the regulatory changes there? Simple answer, yes. So, you know, we we don't we're not look. We have our better customers in certain regions. Of course, there's always gonna be slightly bigger customers. But in in without exception, we sell to all OEMs in all regions. We have closer relationships with certain OEMs who, for example, we work on-site with them. We have people embedded on-site with our customers full time. First of all, that supports the customer. They pay for it. But also, it gives us that market feedback we need to develop new products as well. So we definitely have the relationship to The US to be able to capitalize on those regulation changes.

35:06 Has ABD expressly reduced investment in internal combustion related products? I think it's fair to say we've always been powertrain agnostic. The vast majority of our revenue comes from ADAS driver assistance technology and automated driving functions, and that's is irrelevant whether it's an internal combustion engine or hydrogen or any other form of powertrain. We we've never invested specifically in combustion technology or any other powertrain technologies. So one thing we are doing now is making sure that we align our capabilities to the needs of the market. So, for example, you mentioned the so we mentioned the SPMM. That machine now, we've adapted the capability of that machine to meet the needs of electric vehicles because they typically have a longer wheelbase and they're heavier vehicles. And, of course, the mass of the vehicle and therefore central gravity is distributed differently with the battery spread all across the chassis. So that we are adapting to what's going on in the market, but we have never had to pivot away from ICE investment because we never invested in it in the first place.

36:16 And the final question is, could you provide more clarity around current and future CapEx requirements and the ratio of capitalization versus P and L allocation? So our CapEx spend is broadly around 5,000,000 to 6,000,000 a year, and we expect it to continue in that that same kind of quantum. That includes new product development plus operational upgrades and general maintenance CapEx. The ratio of capitalization of new product development is broadly around fifty fifty capitalized versus p and l. And it's also fair to say that a lot of our r and d is customer funded. So so we may start a project.

37:02 We then go to our customers, as I mentioned earlier, and talk to them about those new projects, and they typically start raising purchase orders because they want to be the first to have that new product, which then covers the cost of that development for the first items. So that's the end of the questions. Perfect. James, Sarah, thank you very much for answering those questions from investors. And, course, the company can review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is important to you both, James, could I just ask you for a few closing comments? I'd like to thank everybody for their time this morning and taking the time to listen to our latest results presentation. And as always, if there are any further questions, put us through the platform and we'll answer them. Thank you very much. Thank you.

37:52 Perfect. James, Sarah, thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback order that the management team can better understand your views and expectations. This only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team for AB DYNAMICS PLC, we'd like to thank you for attending today's presentation, and good morning to you all.