Huddled Group (LSE:HUD) — Interim results for the six months to 30 June 2021

0:06 Good afternoon, ladies and gentlemen, and welcome to the Emotion Group Results Presentation. Throughout this meeting, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand side of your screen. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it is appropriate to do so. These will be

0:33 available via your investment company dashboard, and we will notify you by email when they are ready for your review. I'd also like to remind you that throughout this presentation, you'll be in listen only mode and that this presentation will be recorded. Before we begin, we would like to submit the following poll. And if you would give that to your kind attention, we would be most grateful. And I'd now like to hand over, if I may, to Martin Higginson, cofounder and group CEO David Marks, c cofounder and group finance director and Dan Walkley, company secretary. Good afternoon to you all. Yeah. Good afternoon. Thanks very much for having us. K. So we've turned our cameras off just in order to people can see the presentation a little bit better. And I think it's far nicer than our ugly mugs. So listen. We'll get stuck straight into it,

1:24 talk about our interim results, and talk about sort of where we are and where we're going, you know, to this year and beyond. Sorry. Just bear with me. It wouldn't as if technology.

1:45 Hopefully, you should be on slide two. There you go. So, I mean, really, we're gonna talk about whoops. We've had a very sort of strong sort of first half of the year. We've been very pleased. Quarter one was, you know, we showed at about a £200,000 loss in quarter one. And really that bounced back in quarter two was as our sort of location based sites opened up and gave us a a breakeven result or as close as we can get for the h one period on revenues of about 2,800,000. So we're we're really pleased with where we've sort of, you know, started the year. And as we as we sort of moved into quarter three, we've seen profitability from April all the way through to to September. So, you know, great position. Outstanding quarter three, revenues of 3,000,000, EBITDA of about £600,000.

2:35 And I think we're we're look as though we're we're sort of reasonably well set for a strong quarter four with the location oh, sorry. The home based

2:43 product, our Let's Explore Oceans product is selling well, sales are increasing. Our Ubisan orders are coming through, and people would have seen, hopefully, this morning that we announced sort of 64 cabinets going into the NHS. So I think we're we're in a great position, profitable and and and cash generative for sort of, you know, h two. I think that really sets us up well for as we sort of march into sort of 2022 and beyond. So I'll just hand over to David who'll talk a little bit about sort of the the the revenues and and and numbers around the h one period. Good afternoon, everyone. I mean, this clearly for us was a kind of landmark set of results, very, very pleasing, given, you know, the impact the lockdown had in our business. And I think, you know, what we've seen in h one and q three, together is, know, we've begun to see the true potential of the business that we had built and that kind of had our knees chopped away as the pandemic hit and and shut all all of our sites. So that's, you know, very, very gratifying.

3:50 The recovery has been led, as Martin said, since March, you know, mainly by our location based business. And by any measure, it's supposed to kind of record results as we've moved from sort of q two onwards year to date, including q three, it's produced 4,600,000 of revenues. And just you know, to give that some context, 2019, which is the last full year that we traded, that location based business reported revenues of 2,800,000. So I think you're really seeing the the business come of age. Just a few sort of bits and pieces on the p and l that I thought might be might be worth touching on. You know, we've seen some comments and questions from investors.

4:39 First of all, in terms of the the gross profit was But, essentially, all of that gross profit came from the location based business. So it actually produced gross profit of 1,000,000 on 2,300,000 of revenue. So whilst the overall gross profit margin was 36%, that business produced 43, and we would normally expect that to do a little bit better. It was pulled back by the fact that we had a number of our own operations with some fixed costs that clearly weren't trading in in the first few months of the year. Just to clear up one or two sort of questions that have arisen, there has been some confusion between our cost base and cost of sales. And just for the avoidance of doubt, in our location based business, the way that we measure gross profit is the gross revenue, which is effectively the ticket sales on the site, excluding any sales taxes or VAT, less the partner's share.

5:49 So just to repeat, a 100% of the revenue from the site, excluding taxes and VAT, goes through our revenue line, and from that is subtracted the partner share. And that's been consistent since we IPO ed the business. Martin and I have seen chat that suggested we've got 800,000 a month of expenses, and I think that came from a confusion between what was overhead and what was cost of sales. And indeed, you can see the admin expenses, are effectively the fixed operating costs of our business in the half where our 1,400,000 with average around 235,000 a month. And that's kind of where we are on a run rate basis. We may see that creep up a bit with some variable elements that are kinda driven by increased activities such as attending conferences and travel and the like.

6:49 Another thing that I just wanted to touch on is a number of is the question of you talk a lot about EBITDA. Are you actually ever going to make any money after depreciation and amortization? I think just to give a bit of context, when when we IPO ed the business, you know, it was a very new business in a kind of nascent sector that we we were almost creating ourselves from scratch. And we didn't have a lot of experience of the equipment, so we effectively took the view that we would you know, we thought be very, very prudent and write all of our equipment and our content off over three years. It it's very apparent to us as a as a that that most of our equipment, the motion platforms in particular, which are, you know, the bulk of the the the hardware cost of our installations have probably got a life with maintenance of five to ten years.

7:53 So the depreciation and amortization charge is is really very unflattering, compared to the kind of lifetime that we expect to see, from the equipment, and that that is probably something that my team will will be talking to the auditors about in the context of the full year results because people rightly are asking, you know, when are you gonna get into kind of full PPT normalized profit? And I think that's a fair question, but I think we we have to some extent through trying to be very prudent, done ourselves somewhat of a disservice. So they they were the kind of main things I wanted to touch on on the p and l. Just moving to the cash flow.

8:42 So the, you know, the overview of the we started the year with 1,600,000 of cash in the 10. The net cash outflow in the business, net of everything, was a million pounds, leaving us at the half year with 600,000. Now I think I think it's very important to understand the context of the cash outflow. And in the top half of that slide, you can see we start with the EBIT the feature of the first half's cash flow was the very significant cash outflow from working capital movements. And effectively, if you think about it from a very, very low level of activity at the end of twenty twenty, we effectively were rebuilding our revenues and effectively the debtors that go with rebuilding your revenues.

9:36 So we saw between trade receivables and other prepayments, we saw 600,000 movement effectively over the period, which, you know, is totally to be expected and natural given the kind of dramatic regrowth and the activity of the business as we went through q two and into q three. We had a little you know, we had some, like, I think probably most companies out there. We had some element of catch up on our payables, and we've paid off everything that we owed to HMRC. And we we had an agreement with HMRC. We've honored that and paid that all off. So we're, you know, we're in pretty good shape with a pretty clean balance sheet. The other items in the cash flow were 300,000 of, you know, effectively capital expenditure between tangible and intangible, and the split is set out there.

10:28 And the balance was the net from the the the small share placing that we did earlier in the year, less, loan repayments and a small additional loan that was received from the US government. I think one of the things that I think we want to emphasize today is we're really expecting a very successful, profitable, and cash generative h two. And you can begin to see the impact of the working capital growth in h one beginning to unwind because as of today, we're sitting with near a million pounds of cash as we begin, if you think about it, to collect the residue of those debtors that reflect the very, very strong trading that we had in the out of home business over the summer months.

11:18 Thanks, David. I'll just move to the next slide. So really, the outlook for sort of H2, we think, is very, very good indeed. We've had an outstanding quarter three, as David alluded to, revenue of 3,000,000, EBITDA of sort of £600,000 I think that really does bode well as we move into quarter four. Obviously, the the sort of winter months, kids being back at school, we see a quieter season for the location based entertainment, but there's still plenty of scale there. And I think as we said in our statement, there's enough sort of gross profit being generated to cover virtually all of our costs, if not all of our sort of operating costs. We're expecting a strong performance from our home based entertainment division.

12:14 We we're seeing revenues and sales pick up strongly. We've got and put in place distribution centers around the world. So we're now selling in Australia, New Zealand, UK, obviously, and US and Canada. We we've got 30,000 packs. There was some comments that could we not have done more. I think what we did is we took a prudent view. I mean, our main aim this year or at the beginning of this year and and certainly through last year was to make sure that we survived and to make sure that we're in a position to start growing the business. So we bought the stock ahead of ourselves of what we knew we we comfortably could sell, and I think it's not the worst position to be in if we if we sell out of that, making a good profit. Our average order value is north of £80, and we're seeing very positive margins, and we're hoping that those margins will get better as we get nearer the Christmas period.

13:08 So in terms of Ubisan, I spoke before about, you know, great order book. We've had sold 64 cabinets into the NHS, which I think is really sort of, you know, testament to the team and what they've achieved in in building the cabinets. And we've got, you know, good sales coming out of Australia through one of our distributors. It's still early days, but we're we're building the reseller network. We're seeing very, very strong growth. And I think, you know, you can see by some of the counterparties that we're selling into that we're selling into the right audience. And I think, you know, we've we've had recognition from Microsoft, same from Hewlett Packard. So we've got a great product out there. It's now a case of building on that using the cash that it generates. That will help in h two, and then that will really start underpinning our growth as we move into 2022.

14:08 So just looking at our location based entertainment division in in a little bit more detail. You know, revenues in quarter one, just under £600,000. Quarter two, you know, you'll see as the site started opening, it bounced back with a vengeance, 1,700,000. In quarter three, 2,300,000. So we've done, you know, over £4,500,000 so far. The recovery has been absolutely fantastic. We we we, you know, we're thrilled. We've got 44 of the 51 sites now up and running and fully trading. We're still in lockdown in in Australia, but all of the sites that are open, they're they're trading very well. Seven new locations. So we actually installed 64 headsets during that sort of COVID period.

14:53 Clearwater was a clear exemplar in that. We and it was another theater style installation. And I think as we move forward, we're seeing more and more sort of emphasis on our theater installations. You can see on the right of the picture the the theater there at Mandalay Bay, and it's it's these type of installations that we want to do more of. And it really sort of underpins, you know, we've touched on this before, how we are a tipping point business. That every new site that we open, that flows to effectively free cash into the business. So all our costs are covered. Any sites that we've obviously, we've got the CapEx that we've got to install those sites, but we are seeing good payback. And we're seeing payback in, you know, normally sort of sub twelve months

15:39 on our on our new installations. So we're we're thrilled. We've got new products coming in in terms of a new experience for the Zoom market. We think that's a huge opportunity for us as we move forward. The Zoom market's much, much bigger than the aquarium market. The product that we've got, I think, is is very much at the the sort of bleeding edge of conservation. It's another world first. I've mentioned that before, but it it it really will position us well in terms of allowing zoo visitors the opportunity to see animals in their natural environment that they just cannot see in those zoos. So I think as as that market, the zoo and aquarium market develops, I think us becoming an integral part of these faculties will really position us well, not only for 2022, but for many, many years going forward. So we've a very, you know, winning formula, and there are lots and lots of growth opportunities here for us.

16:39 So just in terms of our home based entertainment, we saw reasonable revenues in h one. We were never expecting massive revenues. The the the price of the product and the the design of the product aimed at the younger audience was always very much around the sort of quarter four period. But, yeah, it's still quite good. You can see, you know, revenues in quarter three have grown. So h one, you know, 300,000. Quarter three, 500,000, and we we expect to see rapid growth, on that as we as we enter quarter four. We've got the supply chain sort of sorted. You know, I touched on that before. We're in Amazon. We are doing more and more sort of market testing and just sort of understanding the market. But as we get into quarter four, focus very much on sort of US, Canada, Australia, and, of course, you know, we'll we continue to sell and see increasing sales in The UK.

17:30 So we're looking at selling about 28,000 units of stock in quarter four. Average order value at the moment is running north of £80, which should deliver strong margins. As we get into the quarter four period, we're seeing our cost per acquisition, our cost per sale falls as as intent increases from people looking for sort of Christmas gifts. And I think this year with the sort of state of the world, I think we're we are well positioned. Still some logistical challenges, but nothing that is is causing us any sleepless nights. And I think the fact that we've got stock and able to supply that stock into into customers should position us very, very well for for what we expect will be a busy period. One of the feedback or the big feedback we got from Let's Explore Oceans when we launched it last year and we we questioned our customers was when are you gonna give us more content?

18:24 When are you gonna, you know, expand the the sort of the the verticals that you're in? So we took that feedback. Obviously, our main focus earlier on this year was making sure that the the location based sites were open. That was our primary focus, and you can see that we we delivered on that. So I know there was some sort of criticism about not getting things launched early enough. And I think as a as a team, we've had to sort of prioritize. We've we a lot of our business, we've had effectively, we had to get out of mothballs, and we've had to make sure that not only works, you know, having had things sites closed down for over twelve months, we've gotta make sure it works, it's operational, and we could actually get out of the gates running, which we we clearly did. So for the sort of, you know, as we moved into sort of quarter two and quarter three, we started listening and and the the the sort of the home based team started looking at how could we improve our offering.

19:14 And I think one was about adding more channels. Two was about, you know, putting a product out there that was more competitively priced so that it wasn't just a quarter four product. It was an all year round product. It was an impulse buy. So VODIAC will be soft launch, beta launched in quarter four of this year. It is very much aimed at a much wider market. It's got seven channels, and I think if you think about this as sort of a Netflix, you can watch video in VR on a on a headset. So the VODIAC comes with a headset. It comes with separate seven channels. It's got a number of videos that you can watch free of charge, and it's gonna then got additional videos that you can rent, for a low cost amount. So, really, this is about building recurring revenues.

20:00 We think we've got the price right. We've also gotta test it. We've gotta tread carefully in this market, but we do see there's there's sort of sizable opportunities to create something that's an all round product with recurring revenues. So as we move to Ubisan, I'm just gonna head over to David because he's he's picked up the mantle very much on this and has been driving the team hard to to deliver the the success that we're we're now starting to enjoy.

20:27 Just in case there's some listeners not familiar, we I mean, we set Ubisan up really to meet our own needs originally. When the pandemic hit, obviously, having, you know, a business with hundreds and thousands of people using headsets as a core part of the experience, our concern was how do we very rapidly disinfect, headsets, our our location based installations, and, you know, we we designed and sourced the Uvison cabinet to meet that need initially. It became apparent that there was demand, you know, from other people with, you know, similar businesses. And when I got involved in the business, really, at the turn of the year, I I kinda took the view that either this is an internal service or we actually try and grow this into a proper business.

21:21 There's no there's no point doing sort of something in between.

21:26 So you the the path that we took was and we and we've got a small team, and we don't want to invest in a huge huge team or a call center or anything like that. So we kinda took the decision, a, you know, to price up because there was very little competing product, and, b, having done that and having seen the demand was still there, we, you know, we we were comfortable that that would allow us to have a reseller and distributor network that that could also get a decent share of economics. You know, it it was was never gonna be an overnight sensation, but I think we've made some, you know, very good progress. And, you know, I think that NHS order, you know, is a feather in the cap, and, hopefully, there'll be more to come there. We have an Australian distributor in situ now.

22:14 The first container load of product is actually, you know, on literally on the boat from China over to them at the moment.

22:22 And, you know, I'm expecting there'll be, you know, a number of repeat orders through the year from them. We've we've got some boots on the ground in The States, and that's obviously, you know, the big the biggest market that we could go for. So I think I think we've made very, very good progress. We're going to expand the range because we've we've looked at going into a couple of large NHS type tenders, and there are probably a couple of other pieces of the jigsaw we could have in

22:54 addition to the clean room product that, you know, you may have read about, which obviously is ideal for somewhere somewhere like an operating theater And the cabinets, you know, we're gonna we're gonna add a couple of complementary products, which will, a, widen the audience for the business anyway and, b, position us better to go into, you know, some of these huge, NHS and other public sector tenders. And and interestingly, in this UV space, it seems to be small companies that get the business because, obviously, the public tenders you get you do get to see who's won them. So, you know, I think it's a kind of go big or go home strategy, but, you know, I I I think that's really a 2022.

23:42 Let's see if we can really make that particular business come of age and transfer it from, you know, being a kind of cabinet reseller into being a specialist UV disinfection business has got some real shareholder value.

23:57 Thanks, David. And and I would add to that that, you know, these are we're running a sort of just in time scenario with stock. We've designed these up with internal teams. We've we've really used the team while we were in the lockdown to to sort of design this and make sure that we've got something that's very streamlined. So this is not massive investment No. From the company. This is something that is a cash generator, and and then we can use that cash to to invest in our sort of sort of immersive entertainment business. Yes. Investment wise, the the requirements are, like, a bit of stock, market capital, but and we're and we're leveraging resources across the group in terms of people and whatever. So we're not gonna be investing a crazy amount of money. So, look, in conclusion, you know, we've as as I said and I said before, the main aim coming out of the pandemic was to make sure that we came out not only that we survived, but we came out of this leaner, meaner, and fitter. And I think we've definitely done that. I think the the entrepreneurial spirit is really testament to the team. We've had an amazing location based

25:00 sort of recovery, which has been great. We've got six months of consecutive profits under our belt, which is a is a fantastic place to be in. And if I think if we both look back to sort of twelve months ago when, you know, the business world was very uncertain, we'd have taken that all day long. You know, we really have the entire team got their head down and actually really worked hard to deliver. Not was only an outstanding summer having, you know, has brought these things out of mothballs, but to to continue that growth into quarter three. Our core location based business is is growing. We've got lots of inbound inquiries, and it's now about doing the diligence with those other those partners to really make sure that we install our next sort of set of installs in the right locations where they've got footfall. And the good thing about our focus really on the aquarium and now the zoo market is that those audiences, their their footfall is pretty constant. If you look back over the last sort of ten years, most of the bigger zoos have got fairly constant footfall

26:01 year in, year out, and we can tap into that whether it be on a clip off ticket or whether it be on an upsell. We can really tap into that and and start being able to sort of predict the revenues from that business. Our home based entertainment business and Ubisan have both been almost accidental heroes that have been both been born out of the pandemic, but both have have contributed and continue to contribute and will contribute strongly as we move into sort of the quarter four period. So, you know, second half of year, very profitable. That generation is about the group coming of age. We we feel that we've actually, you know, reached the point where we were we were, I think, destined to to reap probably eighteen months ago. Unfortunately, things out of our our hands, but we've managed the ship through those stormy waters and come out the other side. So that sort of concludes our presentation. I'm I'm gonna open it up for for for questions now. We're happy to to answer as much as we can. There may be some things that may be commercially sensitive, but wherever possible, we will answer all the questions that that you raised.

27:04 That's great. Martin, David, thank you very much indeed for updating investors this afternoon.

27:10 Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the guys take a few moments to review the investor questions submitted already, I'd like to remind you that a recording of this presentation, with a copy of the slides and the published Q and A, can be accessed via your investor meet company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order

27:34 the company could better understand your views and expectations. Apologies if there is the occasional metallic breakup in the sound during this call, but so far so good, and we'll continue on this line. Investors had the ability to pre submit questions. We received a number of those, and I thought we'd start the Q and A off with those. So perhaps if I could start with the following, which reads as follows. When will Emotion Group have content available for the Zoom market? And when do they expect to sign their first contract? Okay. So in terms of when we want content ready, we we've been out filming in Rwanda literally over the last few weeks. We the team are now back in The US. They're pulling all that content together. We will launch that at a trade show called IAAPA in November, and we expect and we're already in talks with a number of zoos. We're in advanced talks with some larger zoos, and we would expect that we will have an installation of size, in the first quarter of two two thousand and twenty two.

28:42 Thank you very much indeed. How many of the Let's Explore Oceans do Motion Group plan to sell in the fourth quarter? Well, as we said in our thing, we we we've got about 30,000. We're slightly we sold some of those. So if you assume about 28,000 will get sold in in quarter four, And, you know, we're looking at sort of an average order value on a on a global basis of north of £80. That's great. And then the final question, which I again, I think you may have touched on is this, have you been affected by the global shortage of computer chips?

29:15 The simple answer is no. One of the things that we did some time ago is we we reduced the need for computers or in our motion platform. So we stripped them right back. Most of our motion platforms through some proprietary piece of tech that our our our team developed actually can now run off one single tablet. So the the the site in Mandalay Bay, whilst you've got 36 motion platform seats, it actually all runs off one iPad. And that also allows us we can tap in and see any diagnostics remotely. So we've developed proprietary pieces of tech that make us less reliant on on sort of individual computers and therefore individual chips.

29:58 That's great. Thank you. I might just redirect you to the q and a tab, if I may. There's there's quite a considerable number of questions that have come through from investors. So thank you to all those investors who have submitted questions today. And perhaps, Martin, David, I could hand back to you to read out those questions, perhaps even who it's from and give a response where it is appropriate for you to do so. Yeah. I mean, there's one from Anton, which I'll read and then David can answer. The location based entertainment business is capital intensive involving a lot of equipment to settle costs. These costs are the depreciate

30:28 then depreciated in the accounts over three years. Whilst it's pleasing to see breakeven and monthly profits at the EBITDA level, this doesn't account for the capital cost of each installation, ignoring the exceptional 2020 and 2019 accounts that were significantly higher than the gross profit. Can you tell us what your expectations are for profit margins over the life of individual LB installations, including all the capital and set up costs? Wow. Okay. Quite quite a number of issues there. I mean, I think we're I think we're in a very, very different place than we were in the sort of earlier part of the the life of the business. You know, I think I already alluded to earlier. I think I think in many ways, we've done ourselves, you know, somewhat of a disservice by trying to be too too prudent and too cautious. I think,

31:17 one thing I think well, a couple of things. Number one, we very heavily depreciated the the cost of equipment that we've been invested in. I think the net book value of our equipment is now 30% of the cost in our account. So what that means is we're actually seeing the depreciation and amortization charge reduce every month. So I think h one averaged a 180,000. The run rate's about a 150,000. And I think quite it's very noteworthy that by the end of twenty twenty two on the existing assets we have, the monthly depreciation and amortization charge will be down to £60,000 combined.

32:04 So you can see that a lot of the assets we already invested in are becoming fully depreciated and are still quite happily employed in our business earning us money. Absolutely. You know, I think I think that's one sort of observation worth making. I think the other thing and, you know, I think the question is absolutely right that, you know, we've got to carefully consider where we deploy capital. And I think, you know, we're very much now going to be about fewer sites with much more impact that move the dial and can be a core part of the the attraction, the the the overall attraction, the the partner's location

32:48 rather than being where we when we started, we were very much, you know, kind of ancillary revenue and and really a bit of a sideshow, and we wanna get away from that. So, you know, yes, the the business is capital intensive in that regard, but we're not gonna chase headsets. We're gonna go for quality over quantity. I just wanted to pick up on another related to the matter. Now now that we've kind of got to what Martin described as the tipping point, you know, I think I think it's worth just thinking about the the following very, very simple hopefully, a very simple example. We hope on or we expect on the sites that we installed to get payback in no more than a year. And I'm I'm just gonna use very simple numbers for illustration because I think it really shows the accretive impact of of doing, you know, good new sites.

33:44 If we if we invested, for argument's sake, a million pounds of CapEx in new sites, we'd expect to get a contribution back of a million pounds in the first twelve months to give us our our cash money invested back. But what that what that is gonna give us, if you think about it, is even if we depreciate that equipment over three years, even if we stayed with that policy, that million pounds is gonna give us 700,000 drop straight down to the PBT level. So, you know, I I per annum. So I think, you know what, the tipping point and this operational gearing of our business with the nature of our business, I think, is something that, you know, is really, really important for us to consider and, you know, should see us start to really fuel growth, not only the EBITDA line, but down at the PPT line as well.

34:37 Most I don't know if that answers that answer. Well, I think it answers I think it answers Anton's question. I think also his second question about, you know, where are we putting sites and how do we evaluate sites. And, you know, we look at sites very, very carefully. And I think as David David alluded to, you you know, this business really has come of age. When we first started this, we were creating a new market that just didn't exist. So as a consequence, you know, it's hard to convince somebody to put something in that nobody else has ever put in on a global basis. As we start putting insights at Clearwater and at Sea Life Orlando and Mandalay Bay, we now have real exemplars of of what a theater looks like. And now we actually install preshow areas, whether they be, you know, tracking sharks or taking pictures of of, you know, yourself in a shark cage or looking at the dissection of of whales. We can do all of that in a very immersive way. And I think this has really allowed us to become an integral part of these faculties. And the more we be the more we integrate with the faculties, the more we become part of the fixtures and fittings of that site, whether it be from a staff perspective or from a visitor perspective.

35:42 So I think, you know, we're spending a lot of time now on diligencing things. We've got the cash. We're generating the cash, and this is about being, you know, selective in what we're doing. So just sort of moving on to some of the questions Alan f has asked if 28,000 units is sufficient and can we order more? The simple answer is we have planned this with military precision. We've looked at what we can what we can actually afford to buy and what we can afford to sell. We manufacture in China, so the the simple answer to your question is no. We can't get any more, you know, especially with global logistics in time. WBS is splitting out partner shares of revenues, clearly computes new potential investors and probably deterred them. Cloud it not could it not be presented more clearly? I think this is how we've always presented the the numbers right from day one, but David can add to that. I think I think the observation is is clearly a fair observation.

36:38 I think it I think it has confused people. We've seen that from the boards and people that we've spoken to. I I think we've got to do a better job of a, engaging with a wider group of investors and b, making making it clear that, you know, the the the addressing addressing the point that David b raises, I think I think it is. It has caused confusion, and I think, you know, we are we are now try I mean, there there are limitations, I guess, in statutory accounts how we can describe things, but I think we can do, you know, a better job of, you know, making it plain and simple. And, you know, I think we'll always try and do that and be transparent. So I think it's a it's it's a work in progress, and we're I think we're conscious. So, you know, it has been an issue. I just wondered there was one point, Martin, just going back to the site installations.

37:33 I saw another question that asked, would we raise more money to do those? I mean, Martin and I, as substantial shareholders, do not want any further dilution. No. We look. We we've planned and, you know, we it's very much in our radar. We're looking at probably, you know, we think somewhere in the region of a 150 additional headsets for next year. We see that this doable out of the the capacity generated, and this is about being selective with the with those those installations. So the simple answer is no. We we don't see that on a on a horizon. I think that was a related question. Would would we consider that? I think we would if it was on Absolutely. If it was on the right terms, and we needed to to accelerate growth. But I think, you know, though, when we're when we're getting payback of these, you know, sites in in sub twelve months on sort of three year deals, then, you know, you know, debt debt can often make sense if we want to accelerate the business.

38:26 But I think, you know, our plans, what we've got in in train, we can do within cash flow. Obviously, the the logistics issue is a is a challenge within from China. We've we've we've got that in hand or as in hand as as you possibly can do. We've we've got ships landing in LA. LA, they actually landed today with stock, so there'll be clear customs, and they'll be in the warehouse in the next two or three days. We've got another boat that's due in next Friday, and then the final consignment, we will send via air as air freight gets cheaper and they run up to Christmas. So we're, you know, yes, it's a challenge. We think we've got it in hand, and we're dealing with it. In terms of the sort of capital strain that the Zoo product puts on the business next year, we just see this as a it's just another installation, and it's a much, much bigger market. The footfall at zoos is, in many cases, a lot, lot bigger, you know, well over a million, sometimes running into two two to two and a half million visitors per annum. So we see partially putting sites into zoos is the right thing for us to do. And as we put those in on an upsell basis, we know roughly what percentage we're seeing of those conversion.

39:41 So a percentage of a a a the same percentage of a larger number will actually deliver us more revenue and more profit. I think the business as a as a proposition for a lender is now in a completely different place than it was, you know, I guess, even before we entered the pandemic because, you know, we are now looking at funding growth. No lender you know, lenders are much more disciplined than they used to be. No lender wants to fund losses. They're not in that business anymore, or we should all hope that they aren't. But I think now that, you know, we've got a demonstrably profitable business that can generate, you know, strong operating cash flow, I think, you know, we are in a different place. But, you know, I think we've just gotta we gotta be measured about things. We're not gonna chase installations just for the sake of doing installations.

40:31 Yeah. Absolutely. And I think in terms of of margin on our HP product, you know, we're you know, we aim after after everything sort of, you know, acquisition costs and all the rest of it just to be around sort of 25% margin contribution. So, you know, you you can work that out from there. And that's after product cost, marketing, and fulfillment? Absolutely. So, yeah, that's a straight contribution into into the business. So, you know, we're we're buying the products at the right price. We're shipping them. We've got distribution. We've got acquisition, whether that be through some of our retail partners or whether it be through the likes of Amazon or or whatever. And we're marketing very heavily as as we go in. The the Bodhi app product will be available to all, Let's Explore customers. It will be made available to them first, and they'll have extensive range of of content.

41:21 So it it's very important for us to look after those customers. It will be a completely free download. There'll be no cost. There'll be a number of of, videos that they'll be able to watch free of charge, and they'll be able to rent additional ones, including the, the longer awaited dinosaur safari. So that'll be done. Sorry. Please, can I read the questions? Yes. Of course, can. So Heather Heather f, please clarify what products you are making available to previous purchases. Obviously, we've just done that. As I sort of, scoop down to to Tim w, when do you expect the new large installation at CLI Floor Register to start operating? Well, it is actually operating now. It's operating in a in a fairly sort of small and controlled way. We've got additional sort of theming going on as we speak, but it it is it is actually up and operational, and I think that will start scaling even more come this weekend.

42:18 If you go there, you can actually go on our experiences now, and it is generating revenue. David, is there an opportunity to carve out the Ubisone business into a separate listed entity? Would this potential enhance shareholder value as UV UV sanitation business may not be recognized properly? I think that's a it's a very valid question. I think it's one that we'd like to see more wool on the back throughout 2022 and then and take a decision. At the moment, it it generates cash for the business. The business is very, very focused on becoming a a sort of an immersive entertainment group. So it's a it's a very valid and good question, but I think we'll just sort of, you know, keep our powder dry and keep our options open. Yeah. I mean, I would I don't think we're emotionally married to being part of the group, you know, forever. I think it I think number one, we gotta build the business into something valuable.

43:09 I think then we'll have options. But, yeah, I think that's I think that's a very good idea. A number of sites stopped trading with emotion. What are the key reasons for that? Do you expect many more discontinuations? I'm not aware of any sites that have actually stopped trading with us. We've got some sites that are closed due to the pandemic, and we've got there may be one or two sites that we have decided to remove our equipment from. But to date, we haven't had any partner that I can recall. I don't know whether you can do that. Yeah. I think if we pulled out of any, they've been small and underperforming, and we've chosen to I think it's our choice, not the partner's choice. So we're not seeing any any sort of pushback. And, you know, in the main plenty of opportunity to redeploy equipment where Yeah. We'll make good money. And we're actually sort of seeing sites wanting more headsets.

44:01 You know, look at Sea Life London is a good example where but only if we we put more headsets in, they've actually now asked us to move and actually put even more headsets in to a larger location because we're we're seeing, you know, very lengthy queues at that site. And the last thing that any of us wants, including our partner, is people queuing up to to give us money. Martin, David, it might be I was gonna say that There you go. There was one more. So we have sort of presence in London's 02 as it's never mentioned. Yes. We do, and it it trades very, very well. The reason we don't particularly mention it, we we we have the London o two runs as a tower coaster product. And whilst it's great and generates good revenue, we have a number of them around the world.

44:49 It's not really our core focus as we go into 2022. Our mission really is is, as I said earlier on, when we're sort of creating content, is to is to focus in on that conservation, to focus in on delivering sort of movies of animals that that people can never experience. I think it's really giving giving people something, as I said, that one you can't experience. And also for the faculty itself, the zoo or the aquarium, it gives them the chance to really start talking about endangered species. You know, the swimming with humpbacks was a prime example. You're never gonna be able to see that in a zoo. You're never gonna be able to see a humpback whale in a zoo. This is a film with their calves filmed off Tonga. We've got a free diver to go down, hold his breath for five minutes, and hold a load of VR camera equipment. So it's a unique experience, and I think that's where we really wanna focus our our time, effort, and energy, and we're seeing great feedback from those. So London o two, you know, important part, but as I said, as we move forward, very much focused on the the sort of zoo and aquarium market.

45:54 Well, that's it. I think you've taken every single question that's come through Yeah. Martin. So thank you very much indeed. And thank you to all those investors that have taken time to submit questions. If any more come through, we'll make those available to the company for their review. Martin, David, I know investor feedback is important. I'll shortly redirect investors to give you their thoughts and their expectations. But I guess before doing so, could I ask you just for a few closing comments just to wrap up and then I'll divert investors? Yeah. No. I think as we as we touched on before, we we we've been through a torrid time. Not only we we come through that, we've come through, and I think the business is is in a meaner, and sort of fitter state than it's ever been. We are very much on the tipping point. The business has come of age and I think we're still in this nascent market as we grow this immersive entertainment group focused on not only locations but also home based products. I think we're just well positioned to take advantage of what I think will be a booming market in the months and years ahead.

46:53 That's great. Thank you, Martin. Thank you, David, for updating investors this afternoon. Can I please ask investors not to close this session as we'll now redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of EMOTION Group PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to you all.