React Group (LSE:REAT) — Interim Results

0:01 Good afternoon, and welcome to the REACT GROUP PLC investor presentation. Throughout today's recorded presentation, attendees will be in listen only mode. Questions are encouraged and could be submitted via the q and a tab situated on the right hand side of your screen. Before we begin, I'd just like to submit the following poll, which I kindly ask you to submit your responses to. I'd now like to hand over to the executive management team. Sean, good afternoon. Thank you, Jack. Thanks for everyone taking the time to join us today. I just wanna start off by introducing ourselves. So my name is Sean Doak. Those who have been on presentation before will know who I am. I joined the business originally back in March 2019 and then was appointed to the main board as group CEO in February 2020. I've got a strong track record of growing businesses both in the specialist cleaning facilities management and HVAC services sectors.

0:47 My background is very much sales and operations, and I've got a a business management degree. Over to you, Spencer. Thanks, Sean. So my name is Spencer Dredge. Joined the board, just over two years ago as CFO. As you would expect, I'm an accountant, twenty five years experience on or supporting PLC boards with strategic, opportunities, as well as doing a three year period corporate finance. And I'm Mark Broad. I'm the chair. I've been involved with the business since being asked to come in and look at what was originally a bit of a problem statement back in 2018, 2019. And I've been here ever since. Thank you very much, Mark. Just turn the page, please, Jack. Okay. So I'll give you a quick overview for those who have are new to the story. REACT GROUP, we operate within separate divisions. First of all, we've got the commercial window and cloud and creative business, which is Ladders Free, which is our second acquisition that we completed here within the group.

1:48 We operate on a nationwide basis. It is an indirect model. So very low working capital. We've got the opportunity to flex up as we drive incremental growth and bring on new customers. And we've got a a who's who of customers across the the nation from large retailers to some large hotel chains and so on and so forth. Second of all, we got the hygiene and maintenance business, which is for Dallas. That was our maiden acquisition. The customer commitment in that space is typically three to five years. The the revenue is typically recurring by nature, and we also have the opportunity to upsell some of our ad hoc services into the customer set there. Very strong in education, very strong in the NHS and and industry as well.

2:37 Third component is the REACT specialist cleaning, which was the core business when we walked through the door here. What what Mark and I walked through the door all those years ago. It's our emergency and decontamination business. Typically, on-site within four hours, everything from the unfortunate events of a fatality on the rail all the way through to some real specialist deep cleans within the NHS Trust, predominantly within and around London. And that's a a a direct model. And then we've got the drainage and plumbing business, which is our most recent acquisition, which was twenty four hour app flow based in Essex. Very strong coverage of Milton Keynes, but particularly within and around London.

3:22 Again, very responsive in terms of reactive call outs to customers, so, you know, very strong proposition there to the customer. There's a whole host of pre planned maintenance that business carries out for its FM customers. So in summary, we are a group that provides specialist support services mainly to the facilities management sector here in The UK. We've we're focused on markets with typically nondiscretionary requirements, often complex demands and and quite often on a nationwide fulfillment basis as I've just touched on. We continue to increase our valuable proposition in terms of scale, our range of services, and, of course, our geographical delivery, especially, after our latest acquisition of twenty four hour Aquaflow. And our strategy is is you know, remains unchanged. It's building out a business with market leading performance, the aim of achieving that £5,000,000 worth of, FCF per year within the next three years.

4:19 Just turn the slide, please, and I'll hand over to Spencer. Thanks, Sean. So performance summary. You would have heard me obviously present this slide before. I think the history here is relevant. You can see it, you know, represented in the graphical graphs below. So we've got a turnaround. It's been very successfully executed. And and what we're about now is we're trying to grow the business and scale it. What we have in front of us here is performance for the first half year for the period up to March 26. Diving into the detail, we've got we've recorded revenue of 13,200,000, which is 9% up on the same period last year, with strong repeat recurring business of over 85%. Gross profit of 4,300,000, which is over 10 which is 10% up on on, the prior year and slightly, increased gross margin at 32.4%.

5:12 Contributing to EBITDA at 1,500,000, which is 7% up on the same period last year. Free cash flow of 824,000. We see this as a resilient set of, results. Business is continuing to grow. It's continuing to generate cash. It's profitable, obviously, and despite challenging market headwinds. So if you can turn the slide, please. Little bit more detail around the the income statement. We often get questioned by shareholders on this. Our administration expense line was 4,200,000. Within that, we've got some recurring overheads as you would expect running the, the operations within the group of 2,800,000. There's some exceptional items which are one off in nature of just over a 100,000.

6:01 We have some IFRS, noncash items as well within that 4,200,000 number, most notably share based payments at 67,000 and amortization of intangible fixed assets at just short of a million pound for the, for the first half year. But the key thing here is to appreciate the cash recurring nature of our overheads at 2,800,000. So if you can turn the slide, please. Thank you very much. So just looking at our customers. Again, those who've seen the presentation before will recognize some of these logos. We have a whole host of blue chip customers and large facilities management companies dotted around The UK. As I said, we operate in a very diverse and resilient range of market sectors, and we typically, you know, actively hunt out customers who have a bias towards nondiscretionary services.

6:52 Very low customer concentration that remains com completely unchanged. Around about, you know, 1,150 customers, 204 of them are material, and our top 10 represent around about 42% of our revenue. So no single customer accounts for more than 7.6% of our revenue. You should recognize some of the logos on that slide. Some are new, some are existing, but it gives you an overview of of who we, who we serve. On to the next slide, just look at our strategic progress. We've had solid growth, which has been underpinned by strong customer retention. We've got circa £4,000,000 of recurring revenue contracts that are being renewed in the period. As I said, they can be anything from a year that through to to five years. We've had a number of small and mid sized customer contract wins across the group, which is which has been very good.

7:44 We launched a pub division within the twenty four hour business. It's a a division that our customers clearly wanted. We've quarters well in excess of of £500,000 worth of opportunities, which are sitting in the pipeline at the moment. We've had strong conversion with over a £150,000 of that turning into revenue so far. We launched that right about September time, so that's we're gonna start to to go very well. We're very pleased with that and the the upside potential that that that that brings for incremental growth within existing customers. And, obviously, it's a new service line to sell to to new customers alike. Project Sparkle, we've we've touched on this before. It's fully embedded now. You know, it's delivered a step change in operational efficiencies through digitizing the workflows.

8:34 Those who have seen the story before, this is obviously for for Lattice free business, so for the commercial window cleaner business. It's always been a great business, but we recognize very early on when we acquired the business that there was an upside opportunity to digitize the the workflows and and to give us the the holistic view and the data points that we require to really drive growth. And the customer portal, which is called Project Sparkle, gives our customers a a real time operational visibility of, you know, point of delivery, when the next clean is scheduled, and we believe that we're only we're the only company out there that are providing our customers with this with this capability. It's a a great great USP, you know, really good opportunity to to open up conversations when we're we're pitching for new business.

9:22 We've invested ahead of of plan on the back of this digitization in two new sales resources for that business of Lattice Free. People who have worked with the the leader Terry Oton previous, very much, you know, heavy hitters, always in excess of their targets previous, and they've hit the ground and built out a a steady pipeline. And they've also, in a short short period period of of time, time, added to those small and mid sized new customer contracts that we've secured. So in summary, we've got steady strategic advantages advances. Sorry. And we've strengthened our capability through the hires and the tech piece and the the latest acquisition of of of Aquaflow and obviously launch in the pump division, give us more resilience and more opportunity to grow.

10:10 To move on to the summary and outlook on the next slides. So as I said, we've had robust performance in h one despite, obviously, the the economic headwinds, which are are well documented in the press. We've got continued growth in very high sector margins. We continue to to operate in upper quartile margins, which is, you great know, to see despite the the challenges. 85% of our revenue is recurring, and we've improved the quality of earnings, as I've said. We continue to drive performance within the twenty four hour business with the investment of the the complementary pump division, and we've also, you know, continue to to develop incremental opportunities with existing customers and bring on new customers within that business too.

10:56 As I said, the investment ladder's freeze transitioned us to a tech enabled services business. So it gives us that real ability to really push that business forward and, you know, push the USP of the digitalization platform in in Project Sparkle to give customers the visibility that they they need. And we remain focused on our three year goal, which, as I said earlier in the presentation, is that £5,000,000 worth of free cash flow per annum. And And that's that's it for me. Perfect. Thank you guys for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions via the q and a tab on the right hand side of your screen. For your reference, a recording of today's presentation will be available on the Investor Meet company platform shortly shortly after the meeting's ended.

11:41 But for now, guys, as you can see, there are a number of questions which have been submitted. Mark, I'll hand over to you to chair the q and a, and I'll pick up back from you at the end. Thank you, Jack. Thank you. Okay. I'll read out the questions. I might answer one or two myself, but effectively Sean and Spencer to answer. So I'll coordinate. The first one is probably one that I am gonna answer myself, which is as these are all most of these are all pre submitted. So unfortunately, the name doesn't go with it. So I can't speak personally to the person that submitted it. After the decline of the share price, can you give a very good reason to do further investment in your company? That actually has had the name written after it. I think it's Ben Nielsen.

12:27 Yeah. Of course, I can. Yeah. I mean, it's a it's a great company. It's a fantastic management team. And if you don't mind, I'm just gonna move the slides back to this chart. This one. And leave that one up. We're a growing business. We've grown organically and inorganically. We've only had one period, one six month period where we did not grow organically, and that was the first half of last year. And ever since then, you know, all all before then and since, we've always grown organically. And we have a great financial model. 85% of our revenue is recurring. You've seen the customer base. We're not consolidated. It's a very strong customer base of blue chips and large FM customers.

13:17 We've got industry or sector leading margins. We we sell to quality, not for volume. And we convert a high degree of those of that margin, that gross profit into into earnings. And we convert a lot of that earnings into cash, especially when we're not doing a deal. So, you know, cash generative, 85% gross margins, growing business, capable of growing both organically and inorganically. And let's not forget, every acquisition we've made and we've made three, we have materially grown since acquiring. So great management team. That's why you should invest. And the share price is not a reflection of the performance or the value of the underlying asset. That's that's my personal view, but that's why people should invest.

14:08 Got anything to add to that, Sean, Spencer? No. I think you've you've answered it answered it well. It is where the share price is. It's something that we all talk about quite often. Probably Spencer and I together talk about it more because we we speak to each other more than we do you, Mark, but we share the share the view, but we just gotta focus on the day job. And at the end of the day, the team work incredibly hard, you know, from sales perspective, you know, Sam Hayward and and the two leaders, Chris Ryan and Terry Oton, are doing a fantastic job. And as as I I said said earlier, you know, the the founders of Aquaflow remain involved in in the business, and that business is good. It's it's trading incredibly strong. So we just need to remain focused on the day job, really, and hope that Yep. People do wake up to the the the the upside opportunity within this business.

14:55 Yeah. Yeah. And we have we should also add, you know, that we have main shareholders that, you know, not only woken up to it. They've believed in it and backed it. So so yeah. It it's really more the the sort of general, you know, buyers of shares that that are really impacting where we are today. Yeah. Okay. So that's that first one answered. Next one. The amounts of ad hoc work is up a lot. Is it project Sparkle Effect or just AquaFlow full consolidation? Oh, I'll say this one. Is it? This one and then, Spencer, you might wanna come in over the top. So some of the drive in terms of ad hoc increases is simply down to the way that the the guys and the RSCs that we are especially clear and have have leveraged leveraged relationships. There's a lot more project work that happens through existing customers.

15:54 So it's almost incremental opportunities as a as a add on to either a framework agreement or a contract piece of work. Yeah. Yeah. Absolutely right, Sean. I mean, you know, sometimes our we we, you know, we we got projects in this business, and sometimes those project the profile of those projects can sit differently in in half h one and half two. They're all existing relationships where we we continue to get recurring revenue from, which is what we're about as a team and and, you know, at good margin, which is where we focus. Yeah. Yeah. Brilliant. Thank you. The next one, for the £5,000,000 free cash flow ambition in three years, how much of that would need to come from further acquisitions, Spencer? Well, we we are acquisitive, and we've never not said we are. And it was always in our minds to continue to, you know, buy well and build out the group as we've said. So, yeah, I think it was, you know, acquisitions is very much still in our road map. Yeah.

16:55 Brilliant. Thank you. The next one, I'll I'll I'll cut through a little bit of a very, polite, preamble. It says, it relates to your approach regarding capital allocation. Can you provide a bit more clarity on that? Absent some immediate m and a opportunity and the current investments, stroke debt repayments, is there any reason to not return some of that capital to shareholders? So effectively, you know, what's our approach to capital allocation, and do we have any spare cash to return to shareholders? I'll I'll jump in here. I think, obviously, we're acquisitive. You know, we've we, you know, we just discussed that, and we're always looking at new opportunities. So just, you know, that's ongoing as as a matter of course.

17:43 And I guess we're a growth business. We're looking to deploy capital to create, equity value. So perhaps that's that's where we've always been as a focus. So perhaps the dividend is something that is doesn't sit alongside that at this moment in time. Yeah. I think it's important we we we say at this moment in time. It doesn't mean we we won't, and it doesn't mean that we will. But it's just right now, the strategy is what what Spencer has just defined. Brilliant. Okay. Thank you. Sean, please explain your competitive advantage. Yeah. Great question. Think we had this, not even last time or the time before or a similar version. Our competitive advantage. Right.

18:32 So you gotta remember we've got four different trading divisions. So the twenty four hour AQUA flow and the REACT special cleaning has the ability to be on-site incredibly quickly to respond to emergency. So that's that's one that's really powerful. RSC, which is REACT specialty and obviously has the ability to do on a nationwide scale. As I said earlier in the presentation, twenty four hour Aquaflow, particularly or predominantly operate south of of Milky, but very strong in and around London. So So that's one. The second one I touched on earlier in the presentation, or I hope it did, is the digitalization within the latest free business, free project sparkle. Gives the customers the ability to view things holistically, you know, POD, which is a proof of delivery on a cleans being done, which, you know, to this to this audience may sound like a a basic thing, but believe me, it's it's it's something that that this market's been crying out for for a long time.

19:33 And it's it's a great USP when we're having discussions with with new customers. We've seen that in some of the the recent wins that we've had. So, you know, that's that's great to see that the we've embedded that. We've customer portal live, and that's that's grown get going great guns. And the third one, which is one that happened about all the time, is we're present with our customers. We're very good at leveraging and opening doors with our customers. Now some of of the the open of the doors is the expertise we've got in the business and the fact that our our team are well known. But, also, as I as I alluded to earlier, when you react very quickly to a customer, especially a new customer, it allows you to land land and expand. And our sales team are incredibly good at at doing that.

20:19 So, yeah, I hope that's well, that answers your question. We're not interested in our sales team in a in a in a room in a dark room focused on tenders. We leave that to the big boys because typically they're single digit margins. We're not interested in that roll out given shareholder value here and and getting up a quartile margins. Spencer, you got anything to add to that? I I think I think being present with customers, you know, we're partnering with customers. We're trying to understand their problems and where we can help. You know, like Sean says, just just sitting in the back office tendering for things along with, you know, a whole bunch of other companies is just driving the price down. We're about trying to deliver a value service.

21:05 So I think that's the different that's a key differentiator for me. Yeah. I agree. I mean, what I would I would just stand back from it and and say two or three things based on what you both just said. The first one is customers actually believe that we're reliable. They can rely on us to deliver. It goes right back to the very beginning when we used to deliver just REACT reactive services. Customers loved what we did. We were just bad at billing and collecting the cash. But they they love what we did and we did it really reliably. And that's that's the that reliability of what we know we can give a problem to this company and they'll fix it and and off we go. And and each of the assets that we've acquired came from a similar sort of track record and we just built on that. So it's you know, holistically, customer believes we'll deliver. That's the first thing.

21:55 The second thing is is that they believe we deliver in a way that is is better than what they can get elsewhere. If it weren't, two things would not be happening. We wouldn't be retaining our customers and we wouldn't be enjoying, you know, good quality margins for our sector. Customers don't mind you making margins if you're delivering value. If don't deliver any value, that, you know, you're into a price game. So I think that right now and and for the last five or six years, that's exactly what we do. We differentiate by delivering real value. And then I certainly, I just wanna pull up on that sparkle thing because it it is easy for people that don't understand the industry to to do what you just said, Sean, which is maybe not understand the value of that. But if you can, as a procurer of of of things, see in real time what is being delivered and what isn't. That's a real value.

22:49 Now imagine if you're the person that's running a 100 or 200 or 300 coffee shops where actually the cleanliness of the windows is quite important to your brand. And you're probably contracting with 20 or 30 or 40 different window cleaning firms to get that work done. And you think it's being done every week, but you actually have no proof that it has been done. And in fact, the industry is pretty rife with sometimes, you know, they'll they'll commit to doing it once every week, but actually, they do it once every two weeks. Who's gonna notice? Now you can actually see that in real time and we can evidence it in a minimum of two out of three ways. One is a GPS based on the phone of the window cleaner being a particular point in time at a particular location. So that GPS, you know, evidence is one. Second is customer signing that work's been done, but often we're doing the work at 5AM, so they're not around.

23:44 So that's not always the case. And then the third one is picture evidence. So it's a really groundbreaking, seems simple, but groundbreaking digital technology that is differentiating the business. Yeah. I think there's one one thing to add on that, Mark, that I didn't I didn't mention is the is our our agility across the group. And unlike the the big players, you know, your your powerhouses like your CVREs of the world, so that's perhaps to them too. We you know, we're we're much more agile because of our size. So we we can operate much quicker and get decisions and, you know, secure business quicker than perhaps the large competitors in the market can. Indeed. Indeed. Brilliant. Right. We're moving on because there's quite a lot of questions.

24:32 What do you think the market is misunderstanding about your business? Why does the share price not seem to reflect fundamentals? I guess I ought to just comment on that. It's very difficult for us, obviously, to to comment credibly because we're on this side of the fence. But at the end of the day, you know, the AIM market is had its own challenges. And, you know, at the end of the day, I think that people are deciding to, you know, take their money to other parts of the market or gilts or The US or at the end of the day, I think there's been that challenge. However, just to be very clear, we have hugely supportive main investors, and they have done nothing but buy.

25:18 Now are they gonna go into the market and buy the odd 100,000, 10,000 shares? Of course, they're not. Not what they do. What drives the price down is that share price activity is taken by people that either day trade. I don't think we've many of them anymore. All those people that, you know, have decided they're gonna take the money and put it somewhere else, which we gotta respect. Which is at this moment in time, you know, where we are in AIM, the share price does not, in my opinion, truly reflect the value of the business. But we will soldier on. We'll keep selling the message, but at the same time, we'll keep driving value actually into the equity of the business. That's all we can do. What does the competitive landscape look like in your market? Where do you see greatest competition and from who, Sean? We've answered that before, but doing again. Yeah. We have. Yeah. No.

26:12 So the the market is incredibly fragmented. Right? There's a lot of SMEs operating within the space. I think I just alluded to it in in my previous answer. There's a lot of big players in this market, all the big six, big five, big six. But the end of the day, like I said, it's a fragmented market. And as I touched on earlier, you know, there's a lot of lot of positives and benefits to being a, a, you you know, know, an an SME. Like I said, your ability to be more agile. You're a local provider. You're able to map white space better, and you're able to kind of specialize your your proposition and leverage that the localized expertise that that mega operations don't have. At the market side here in The UK, like, this is is has been multi billion pound market. There's plenty of work to go around, but there's a a a a lot lot more more smaller players than than there is the larger players.

27:07 Brilliant. I think we'll leave that there and move on because I see there's a lot of questions. What percentage of your 9% growth is is attributed attributable to pure volume expansion versus price increases implemented to offset national living wage inflation? Well, I'll have a attempt to answer this. There is some of that 9%. We, you we have increased some of the revenues against the national living wage, but the majority of that increase has come through businesses that are growing, that we can see it growing. We've yeah. Like I said, we've had a resilient set of results in in challenging market in market, but we do have a growing business, and that's where the growth is coming from. It is also worth mentioning. We only have one out of the out of the four businesses that is susceptible to national minimum wage. Yeah? And that would be the Fidelis business where we employ part time workers, cleaning schools, and industry units, and so on and so forth.

28:07 And we're not a minimum wage payer. We are a living wage payer. And we have very little churn or turnover in our staff compared to the market. But it is only one part of our business. The other parts of our business, we've got professional engineers in drainage. You know, our workforce in window cleaning don't actually work for us. They are members. They are employed by themselves and by small companies that operate with us. And what have I forgotten? Oh, the RSC. Typically, workers in there are highly paid for their sector. Specialists that go into some very horrible situations. So they're not minimum wage employees. Okay.

28:55 Next question. When will you be able to get a new loan? Not sure we need one, but Well, I I would suggest depending on what it's for and the fundamentals of of the business, you know, where where we need to borrow money to to fund it. You know, we've got a very supportive bank in HSBC, and and, obviously, they cornerstones, you know, the the the acquisition of twenty four hour Aquaflow. They're a very supportive partner for us. We are acquisitive. We are always looking. But, obviously, it'll be based on the merit and what the, you know, the enlarged group combination would look like, its profitability, its ability to to to withstand new debt instrument. So you there's a whole process to it, a lot of review, and careful consideration, but it does depend on on on on the project in hand.

29:48 Yeah. And and we have no desire to be overleveraged. No. Not at all. Okay. Thank you. Next one is, why are you not buying back shares given the share price? Spencer? I don't think we've got resources necessarily to buy back lots of shares at this moment in time. Obviously, we borrowed some money from the bank. You know, we've we've we've done the acquisition with a structured deal. And we but I but I think we all recognize that the share price is is very cheap at these rates. We've discussed that to an extent on this call. But I think our our focus at the moment is on driving the growth in the business and deleveraging where we're at, obviously, with one eye on what we do next.

30:38 Yeah. Good. And, of course, if share if shareholders think that they're cheap, then, you know, they're good good to buy. Next one, with free cash flow recovering to 824,000, what is your strict net debt to EBITDA ceiling if a bolt on acquisition materializes in h two? You need to be very careful from a just from a regulatory point of view, you know, how we answer this one. Yeah. I think, again, I I just think that we look at things on merit with taking advice from brokers, speaking obviously, working closely with our banking arrangements and our key shareholders. So I think I think it comes down to the merit, but, again, I'm not gonna make any statements here of intent.

31:27 No. Thank you. With the new major shareholder on board, perhaps and this is actually, I'm very happy to take any question, but it's not the best of best way of wording it, to be brutally honest. And I hope the shareholder isn't isn't insulted by the question. I'm not, but I wouldn't want them to be. With a new major shareholder on board, perhaps you could get some equity from him to buy more, Aquaflow type of businesses. Our shareholders, both new and existing, are extremely supportive and always have been whenever we've gone to them with a rock solid opportunity and proposition.

32:20 And just to reinforce that point, you know, each time we've raised money, we have been massively oversubscribed. And I think the two points worth making are when we acquired Ladders Free, Russia had invaded Ukraine just six weeks earlier. You know, I I think our brokers at the time thought it was gonna be a very difficult task to go and raise money. And perhaps it should have been, but it wasn't. And our our shareholders backed us, you know, fully, all of them. And when we acquired 24, we also raised a million pounds on top of the debt we took. And we were massively oversubscribed for that. We have to have a fair allocation amongst the major shareholders when we do these things. So, you know, just suffice to say that, you know, we we we don't need to go cap in hand to anybody. What we need to do is have a a business proposition that makes a lot of sense.

33:20 One that is a an investment that will generate generate genuinely generate the kind of returns that we've been delivering from the acquisitions we've made and and go and and and seek funding and support for that. And so far, our investors have been brilliant at backing this management team to do just that. So so yeah. Hopefully, that answers that question. Next question. You announced a new investment. Sorry. You announced a new investment in a customer portal, which we've been talking about. What's the projected capital investor investment sorry, capital expenditure for this project? And what is the specific return on invested capital hurdle rate you require for internal tech investments? What has been the ROI on Project Sparkle so far?

34:08 I'm gonna let Spencer answer this, but we should be very, very clear. We're not talking about millions of pounds of investment going everywhere on on technology investment. You know, this was a very modest proposition that we pulled together. We built it with tech that was well established based on a Microsoft framework using Azure. And and we we we do we did it as a, you know, a an MPV. MPV, you know sorry. MVP, most viable product minimum viable product. Sorry. We're now beginning to enhance it. So we're not talking about massive investments here like you might see in other other organizations.

34:54 It's meaningful. It's material, but it's not massive. But, Spencer, would you like to answer the core of the question? Yeah. I mean, you're you're right. Phase one was MVP, minimum viable product, which is live. The portal was always a phase two opportunity. It is a very modest investment. It's it's an extra feature to what we've already got effectively. It's a window into the data from the customer's point of view. So it's not a big investment, and it was built within a month and tested within a month, and it's live straight away. So that will give you an idea of the fact that it isn't a large investment we've made. But what I would say is I think Ladders Free would have been a very difficult business to scale quick you know, efficiently without tech.

35:40 I think we're now in a position to do exactly that. Obviously, Sean talked earlier in the presentation about some investments we've now made into some sales resources. So you can see the timing of those is on the on the back of the system being live. Coming back to the portal just briefly, what we're seeing and talking to customers is, the proof of delivery, the verification that the work's been done to a satisfactory standard is becoming table stakes in this industry now. Whereas perhaps in the past, it was a frustration. The feedback from Sparkers, it gives customers that. The portal gives them a clear window into that so they can go and, you know, interrogate that data and those services themselves. So this is a self search type arrangement. So I I think, for me, I think this position this this division is now well placed for growth.

36:31 I think that would have been challenging before this this solution was in place. Yeah. And I I would add, I think, when we acquired this and you can see us online in back copies of this platform or some of you may have recalled seeing us at at various events. When we made this acquisition, we were very clear that we're buying what we thought was a fantastic platform, but a platform that hadn't been built from a technology point of view. It was all analog. And therefore, the, you know, digitization needed to happen. So we went into it with our eyes open. I think that had we been in a position where where this digital platform was already in, that is free. I think we would have ended up paying three times as much for it, if not more.

37:20 And we wouldn't have bought it. Probably probably wouldn't have been on our agenda. But the fact we've been to, you know, move to this and and create that that dynamic, I think, is a a really important thing this management team's done. And we'll see the benefits of it as we move forward. Okay. Moving on, cause there are still lots of questions and we do like to answer all the questions we get asked. Chris h. So this is a question from the session. Chris h has asked, are you seeing consolidation opportunities in your sector? Of course, we're in a couple of sectors, albeit all within that specialist FM space. Guys, comments? We need to speed it up because I think we are Yeah. No. No. Not some not any more so than we have previously. Obviously, there are some dominant players in this space as I alluded to earlier in the presentation.

38:10 They're they're clearly on the actively looking at m and m, but they have been since we got involved in this business, Mark. So I don't see it any any more prevalent than it was probably five, six years ago, if I'm honest. Spencer, anything to add? I think, yeah, we we operate in a fragmented, sector. I think there's always consolidation. We see that. So I think that's fair to say. Yep. Agreed. Okay. Thank you, Chris. Chris, you're asking another question, Chris h. Have customers become more price sensitive in recent quarters? We've seen that in some sectors, haven't we? I mean, that's certainly where our our dip our came, a little over a year ago. And, actually, let me just let me just answer that quickly because it was it was part of our answering, of of results over the last two periods.

39:02 When the labor government came in, it created turmoil. And this is not a political statement. It's just a fact amongst our customers. And then when the first budget came about where there was this material increase in employer's national insurance, there was increase in minimum and living wage, and NI bill went up for part time workers. That was that was one of the major kickers. That impacted a large proportion of our customers in the specifically, the window cleaning arena. And it was in that window cleaning arena that we felt that customers were gonna start to be challenged. So we were proactive and we we had very, very small churn because we spotted it really quickly. The management team did. They did a brilliant job. They spotted it quickly. They could see that customers were starting to find areas that they could take money out of their cost base as quickly as possible.

40:02 And so we went proactively and went to customers and said, I'll tell you what, you need a good quality service. That's what we deliver. You need to be able to rely on it. Rather than clean your windows every week, and in some cases, you have you have customers cleaning them twice a week, why don't you clean them once every ten days? We'll change the frequency for you, and that will save you a lot of cost. And that proactive approach retained the customers. They were grateful. But what it did almost overnight is halved our revenue in those customers. And because that that business is actually very cash generative and and and quite profitable, it it gave us a it gave us a a an impact that we a hit we took over a year ago. Now I'd like to think that things have started to restabilize and customers come back. And in fact, we've got some customers that have gone back to their original arrangements. But the point is that was the only area where we really saw, you know, price sensitivity take hold, and I think we dealt with it well. The only other area I think there is is in just in in generic cleaning. And we do do a bit generic cleaning, although we're a specialist. The specialist side doesn't tend to get impacted that much, Sean, do you think? But I think more generic stuff does. Yeah? Yeah.

41:15 Agree with you. Yeah. So yeah. I mean, you know, there there is price pressure, but let's not forget, this management team has been involved in this business for six years. We've been through a lot of challenges where price has been a big issue. Challenges meaning, you know, economic headwinds. You know, think of Russia, think of, you know, cost of living, think of what I've just described about the labor, you know, all the, you know, the government changes. Think about now, you know, we we we live and breathe in that environment and this business has continued to grow because what it does, it delivers quality to those that need it. We don't try and sell quality to those that don't care, I think is the answer. Indeed. Okay. If share buybacks would increase EBITDA per share or FCF per share more than acquisition, would you choose buybacks?

42:10 That's from Gustaf H. Yeah. I think you you got the moment in time versus the future, haven't you? And I think the the the purpose of buying a business is to generate further growth and value. So I'd have to look at it in that light. You know, you talked a bit about the acquisitions you made here, Mark, and and they've all been very successful. You've you've increased the businesses as they were bought. So you've gotta look at what that then does to value creation. Yeah. Yeah. And and I think one thing I'll say to you is we do not have a monopoly as a management team on the right ideas. We are always very open and consultative with our brokers, with advisers, and with shareholders. So, you know, you never say never, but I think your answer, Spencer, is the the one for now.

42:59 Thank you, Gus. Tutor T, following the capital allocation question, can you expand on your view of dividends versus share repurchases and have and if you have a preference? Thank you. Well, Spencer, I need the same old answer, isn't it? At the moment, neither of these are actually on our agenda because of, you know, the phase we're in at the minute. When it does come on our agenda, I think that's the point at which we get the right advice to choose the right answer. Yeah? Yeah. Absolutely. Yeah. Yeah. Yeah. Okay. Thank you. Frederick j, I missed the start of the call. Can you explain the growth in ad hoc? Is this substantial is this is this sustainable revenue and profits? Thank you. Spencer?

43:45 Yeah. I mean, look. It it is from existing customers. It's as the projects have fallen. So it's specific to those that that those works that were required in the first half year. So, you know but it is from customers that we continue to work with, but, you know, I can't say what their plans would be going forward. It's, you know, the nature of ad ad hoc revenue is exactly that. Yeah. Yeah. No. I agree. And and and at the end of day, we we we should mention that six years ago when we started this, we had a business that customers loved but we couldn't make any money from. That's what we inherited from, you know, from the previous management team. And one thing was for certain, we needed, you know, the regularity and certainty of of recurring revenue. And so we moved from pretty no pretty much no recurring revenue to the position we're in now.

44:35 So, you know, that that ad hoc revenue is still important to us, but it's not, you know, the heartbeat of the company as it were. Yeah. Okay. Last question. Really good one, this one. I'm gonna let you guys answer it first. From Tudor t, apart from the short to medium term FCF goal ambition, how do you view the company after five to ten years in five, ten years time, I think? Do you see the industry changing much apart from some digitization here and there? Sean? Yeah. Okay. So where where do we see it after five to ten years? Well, me personally, I am speaking personally. I'd like to see that business much larger in terms of revenue and and EBITDA as what it is now.

45:22 And that'll be two fold. One through organic growth, which we've got a proven track record of, and some more acquisitions, which, again, we've got a proven track record of doing well. Do I see it changing much in terms of digitization? Think we'd be we'd all be naive a little bit to to suggest it wouldn't change due to the pace that AI is developing on a daily basis. And it's something that we've got, you know, two eyes firmly planted on, and we all do bits of the background with our CRM system and our marketing and linking that back back to to our various systems. So, yeah, I think I I think that answers the question. I'm obviously, I've not got a crystal ball. I don't know to the what extent AI is gonna be used and, you know, our customers gonna switch to look at more cobotics and perhaps robotics potentially, but I don't think we're really operating in the space and doing the large airports and places that aren't where that's gonna be prevalent.

46:18 But but who knows? So just always looking at emerging technologies and and what's the capability looks like. Just reference what you mean by cobots versus robots. So so robots are full autonomous systems. So they'll they'll replace people doing work. Whereas cobotics is you still got the operator or the operative with the the aid of a cobotter. Brilliant. Okay. Spencer, your view? I think that we're focused on try you know, strategy focused on where we see key value for shareholders. And so very much we'll we'll we'll try and identify that and and and and follow that.

47:04 Five to ten years from here, look. If we get successful with what we plan to do to grow the business, then there's there's always a chance it may well find someone else to take it onto the next stage. We are seeing disruption with technology in this space. As Sean says, we talk about it a lot internally. We're always reviewing it. I do think certain businesses have got less exposure to that than than others that we look after. But look, you know, we we discuss it internally a lot. Yeah. So my my answer is is probably along the same line just for what it's worth. So let's talk about the market and let's talk about cost about our business. Our business, you know, continuous growth, very, very fragmented market in the spaces that we operate, huge growth potential both organic and inorganic.

47:53 So, you know, just just as much as your imagination can imagine, this company can can grow because it's a quality business quality management team. In terms of the markets we address, we we address four markets. So drainage, check that one first, drainage and plumbing. We have a country not unlike other many others where the infrastructure is old and it's underground a lot of time. Yeah? And buildings have infrastructure put in them that, you know, may have been built for twenty years, thirty years, but those buildings are still standing. And therefore, I think that the the the market is gonna continue to grow and perhaps become even even bigger than it is today, apparently, because that infrastructure will start to crumble. Now in terms of how you address that, cobotics and and and robotics may be part of the answer. But, you know, frankly, you know, getting vehicles and and and those robots or cobots to site, that that's a bit of work. And I I I help from an engineering background originally and, you know, trying to get a knot off of an old pipe.

49:01 It it takes some manual dexterity that I think a robot's gonna, you know, find difficult to sort out in the next five years, but who knows? So I I I think that there's that. And we can go through each of the industries where cobots or robots are gonna have an impact. But what we essentially are is dealing with things that are requiring manual input, specialist things. You know, there are you know, you can get a robot possibly to clean the bottom of a train after it's run over somebody or a or a or a calf and and and be be respectful with the body parts. But right now, that's not happening. That's that's our team that that does that. And if if a robot or a cobot becomes part of that process, we'll either move somewhere else or we'll we'll take it on. Who knows? I think where technology will help and which is where we're operating right now is in how you deliver customer service and how you identify where those customers need to operate and be predictive about the requirements and support they need. And that's where we're investing our time and energy.

50:03 Sean mentioned about reusing AI, this is, you know, technology that's well tested, but we're we're we're trying to push the envelope on to to help us in that process. And we're pretty pretty effective at it. And we continue to we'll continue to work with it. So that's my answer. Tudor, thank you very much for the question. That's the last of the questions. I'm gonna pass back to Jack. Brilliant. Thank you guys for answering all of those questions. Before we ask investors to share their feedback, which I know is important to you, Sean, if I could just ask you for a few closing comments to wrap up with, that'd be great. Yeah. Thanks, Jack. Yeah. Look, I just wanted to take the opportunity again to to thank everyone for, one, taking the time, especially on a bank holiday weekend. I'm sure everyone's got plans to to to go away for the weekend or do stuff for the family.

50:50 And for those who have been following the story, our shareholders just want to thank you for your continued support already, and have a great weekend. And any questions that you want to fire our way, please feel free to do that offline. We're very approachable as most of you already know. So, yeah, feel free to to send them across an email, and we'll pick them up in due course. Perfect. Thank you, guys, once again. Ladies and gentlemen, could I ask that you don't close the session just yet as you'll now be automatically redirected to a page to give your feedback, which helps the company better understand your views and and expectations. On behalf of the management team, we'd like to thank you for attending today's presentation. I wish you all a good afternoon. Thank you.