REACT Group (LSE:REAT) — Interim results for the six-month period ended 31 March 2025

0:01 Good afternoon, and welcome to the REACT GROUP PLC interim results investor presentation. Throughout the quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself, but the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to take the following poll. I'd now like to hand you over to CEO, Sean Dyer. Good afternoon, sir. Thank you very much. Thanks for

0:31 joining us today, guys. So my name is Shaun. I head up the group as our group CEO. We got Spencer Dredge, who's our group CFO, and also Mark Braun, our group chair on on the call today. I'll give you an overview of the REACT GROUP. A lot of you have probably seen this slide before or or or a similar version of it. So I'll not go into too much detail. Just a quick overview. We've got four trading divisions within the group. We've got a mix of indirect and direct models. So we got REACT specialist cleaning, which is a core business, emergency decontamination work, tends to be on-site in a lot of instances within four hours. Very strong in health care. We do a lot of deep cleans in hospital trusts. We do a lot of void cleans, you know, emergency decontamination such as fatalities on the railway, and a lot of work within police cells around The UK for for various customers.

1:28 Next, we've got Fidelis. So Fidelis is our hygiene and maintenance business. So recurring revenue, typical commitments from the customers are usually between three and five years. Very strong in industry, very strong in health care, and also education. And that business was our maiden acquisition just to give us the recurring revenue to allow us to grow the rest of the group. Next on the list is Lattice Free. That's our commercial windows and cloud business. That's an indirect model. So we have a membership model, cover the whole UK, got around about 300 members, some of them have teams of 10 or 15. It allows us to to scale up the business when we when we work, and we work with the who's who of customers. Typical commitments from customers in that space are anything from twelve months through to thirty six months.

2:15 And then the final component is twenty four hour Acafloss. That's our recent acquisition we completed back in October '24. Fantastic business. Operates South Of Milton Keynes. Very, very strong coverage within the the M 25 London and and the Southeast. Again, recurring revenue, and they work with mainly FM companies in in that part of the world. So in summary, we provide specialist support services mainly to the facilities management sector. We operate across the whole UK. We're focused on markets with typically nondiscretionary requirements, usually complex demands, and quite often on a nationwide basis. We continue to build out an increasingly valuable proposition in terms of our scale, our range of services, and our geographical delivery as we've continued to grow the business.

3:08 And our strategy is very much focused on building our business in what is very sizable and fragmented markets with market leading performance, and we aim to achieve a minimum of £5,000,000 worth of free cash flow within the next three years. Over to you, Spencer. Thanks, Sean. So just looking at the performance summary just for a moment. I think it's worth saying that many people, like Sean said, would have been been following the story for for a while. But the back story here is of a successful turnaround, and that's clearly evidenced in the graphs below. And what what the group is now is is, the profile is strong recurring revenues. It's profitable, and it generates cash. Diving into the KPIs. This is obviously reporting for our interims up to March 25 this year.

3:55 We've done revenue of 12,100,000, which is 14% up on this time last year. Much of that revenue is recurring in nature, and this is in a period where we've had some notable economic headwinds. And, really, the focus has been on customer retention, and, you know, helping customers get through some of their challenges effectively. Looking at gross profit, we've had 3,900,000 for the, six months, which is 35% up on the prior period. And importantly for us, it's, 32% gross margin, and that's significantly up from last year, 490 basis points higher than last year. So Aquaflow has helped with the contribution of that increased margin.

4:41 And we've had a couple of contracts that have been paused in the period, which have sort of kind of had a a negative impact on that performance. Looking at EBITDA, we've got 1,430,000 for the half year, which is 12% up on the prior year. And this is during a period where we're comparing against last year where we hadn't made some of the investments that we've made in the group now. So as we strengthen the the, the back office, both operationally, in the finance function and also in sales. From a free cash flow point of view, we've generated 200,000 for the interim period, and that is after paying for the, the deal

5:21 costs in the acquisition of Aquaflow. We've invested in project Sparkle, which we'll touch on as we go through the presentation and after settling some taxes. So we look at this interim performance as a robust performance in what we see as a very challenging UK market. And we've had great contribution from Macroflow, which is obviously, as Jordan mentioned, our latest acquisition, which is trading very strongly. So just turning the slide. What this slide does, it looks to give a little bit more detail around, our gross profit from interim period to interim period. So if you start at the left hand side of the slide, we've done we reported 2,900,000 of gross profit for the last half year.

6:12 And what you see here is some of the step downs where we've been challenged, by the conditions of The UK market. We've exited some contracts, in the period, for 291,000 gross profit. We've had some contracts that have paused outside of our own control, but they're not lost, but they've just been paused, which has again impacted the performance of the business. We've had to, work with some of our customers as they've had challenges. And what that means is we've had some margin erosion on some, contracted contractual arrangements. We've also had some changes in some of the frequency of our services. So, again, as a result of the economic headwinds that the country's had, sort of post budget, etcetera. So we've we've had to, work with our partner with our clients carefully on that.

7:02 More positively, we've had some contract wins,

7:07 and, we've had some great successes in cross selling and upselling. So, obviously, the, the introduction of, Aquaflow has helped that with its increased service, components, increased customer base. But we you know, this this business has been built on very successful cross selling and upselling historically, and we've continued that story. Touched on it in the slide before, but Aquaflow, it's been a great addition to the group. It's, it's traded very positively. And, again, that's really helped the half year result. So, again, you know, I would say that this is a challenging market. We've we've had notable headwinds, but we've, we've traded quite well through that. And and clearly, the, addition or the acquisition of Aquaflow has helped with its, with its increased margins and its new customers and, you know, new new services to the group.

8:06 The next slide, is here really because we often get asked a lot of questions about what sits within our administrative expenses line. For the interim period, we reported, just short of 4,000,000, 3,977,000 worth of admin expenses. The table below breaks down some of that detail. And what we, what we focus on in in, as a management team is the operational overhead of running the divisions in the group, which is 2.4 of that 4,000,000. A large component of that cost is, is an amortization on intangible fixed assets, which are assets that are recognized as a result of acquisitions, which is noncash. It's a noncash expense.

8:53 We report under IFRS as a public company, so we're obliged to account this way.

8:58 We've got depreciation in the period of a 193,000 and exceptional costs of 220, which are in relation to the acquisition of. So those expenses are one off in nature. And then we have a share based payments charge, which is another IFRS charge, which is noncash in nature in relation to some employee share option schemes. So hopefully, that gives a little bit of flavor as to what really sits within that £4,000,000 expense line. It is made up of some operational overheads as well as some IFRS noncash elements.

9:42 Thank you, Spencer. So just moving on to strategy. So our strategy remains unchanged, really. We want to build out a a market leading position in this specialist support services space, and we want to concentrate on focusing our attention on the facilities management sector across the entire UK. We've got high recurring revenue, as Spencer touched on earlier, high sector margins, and strong cash conversion and profit. And we just wanna continue driving that organic growth piece, which, you know, we've we've done for five out of six years. Spencer touching it. We've had some economic headwinds this year. We haven't stopped selling. You know, pipeline continues to improve. There was a little bit of slowdown in q four of last year and indeed q one, but we've certainly got signs of green shoots if we look at the pipeline and the deal age in q two and so far in q three.

10:38 Just moving on to our customers. We work with who's who of customers across The UK. Some of them are blue chip customers. Many of them are large facilities management companies and also midsize FM companies as well. As as before, we continue to work in a very diverse and resilient range of market sectors. We typically seek out customers with who have a bias towards nondiscretionary services for obvious reasons. Low customer concentration, got around about 1,260 customers now, 251 of them are material. Our top 10 is round about 42% of revenue, and no single customer accounts for more than 70 7% of the revenue. Those who've seen this presentation before, you'll notice some new logos on on the slide there.

11:24 It's just a small snapshot of some of the customers that we work with across The UK.

11:31 On sales performance, we've had robust robust sales performance in what has been a, you know, challenging market on the back of in government and, obviously, the challenges of of a budget, but we've ultimately had success across all divisions. I'm not gonna walk you through each and every one of these, but I'll just tease out a few. So for Dallas, you know, we we've very much been focused with ourselves activity on retaining customers, you know, being proactive and having conversations with them in some instances being pragmatic. So for Dallas, we've got three large customers who have renewed on long term contracts, you know, represents £800,000 a year. So fantastic result from from the whole sales team and and all the people across the group who were involved in that. Chris Ryan, runs that business, is doing a fantastic job and works very closely with our group commercial director, Sam Hayward, and has been instrumental in renewing those contracts.

12:24 And we've got Lattice Free. So Lattice Free is our commercial window cleaning business as I touched on earlier. We've had 40 new customers added to the mix. Two of them are national contracts with well known brands.

12:35 And Dave Rudge, the leader of that business, has done a fantastic job getting incremental revenue from existing customers, and we've had, you know, some success there with 68 incremental new sites being onboarded with existing customers. And then we got REACT, our specialist cleaning that side of the business. 18 incremental new customers gives us a mix of contracted and ad hoc work worth around about £500,000 a year. Again, Sam Hayward, you know, instrumental in in in helping drive that growth.

13:07 And Debbie and Abbas who work in the sales function, that business did a fantastic job. So in summary, we've had robust sales performance in what is a challenging market. And I'll pass you over to Spencer. Thanks, Sean. So, Aquiflow. So I think the the first statement we'd like to make is the fact that I think we're very pleased with this acquisition. It's traded very well in the first half year in what has been a notable challenging UK market. You know, it's a growing business. It contributes very well, and it's cash positive. Looking at some of its KPIs, you know, and we bought the business. It's worth noting that we bought the business at the end of October. So it it it hasn't got a full six months contribution. It's five months in a few days.

13:53 KPI wise revenue, it's done 2,800,000 for the period. Again, it has a profile of, revenues that are very high recurring revenues. 1.48 gross profit and an excellent EBITDA conversion at 870,000. So, yeah, this business is continuing to trade very well. Culturally, it's been a pleasure to work with the management team. It's slotted into the group really well. And, you know, Sean will attest to some of the successes that we've had across the group as a result of Acroflow being part of our group. Yeah. Thanks, Spencer. Absolutely. I think, look, the the the founders of that business and the management team of that business are fantastic individuals, very committed to what we're we are, you know, doing here across the group.

14:39 We've had some cross sell and upsell activities from very, very early on post acquisition, which is, you know, led to some incremental revenue and profit, multiple small and medium sized projects across across the board. It it's not hard to believe that when you go in and do a drainage job, often there's a there's a make good requirements post that work, and REACT Specialist Cleaning has has assisted on on on many occasions, and that, you know, continues to to work very well. We've had three new FM customers secured within that business. One of them is a first response contract for a 167 sites. And if we look at the spend for last year and the year before, it works out around about a £100,000 per year, not a £100 per year where it says there. So apologies for that mistake.

15:29 We've also secured a £100,000 annual contract for a prestigious site within London to do interceptor cleans and some PPM work, so preplanned maintenance. So in summary, we've had strong performance from a very high quality and quickly integrated strategic acquisition.

15:51 So just looking, at project Sparkle, many of you would be aware of what we're doing with Ladders Free, but just to, put just as a quick recap, Ladders Free is a indirect business. It's it was quite a few years ago back in '22, and it's fully, manual. So what we've what we've got at the moment is a project ongoing to invest in digitalizing it, and this will benefit the the customers. It'll be having a positive environmental impact, and it will also enable us to scale. In the last six months, we've built the system. It's now deployed, and we're rolling it out across our base.

16:30 We're already seeing some invoices to out to customers from it. We're already billing ourselves from our member community in terms of the work that they do on our behalf. And, yeah, and we're already beginning to see the impact. So system now exists, and, you know, we'd like to think that we're gonna be fully deployed, over the summer months. So yeah.

16:55 Thanks, Spencer. So I was just trying to find the the mute button there. Yeah. So just moving on to the next slide, please, Mark. Thanks. So just on the summary outlook, as I touched on earlier, you've had robust performance in h one. It's been impacted clearly by some challenging market conditions. It's and what certainly, when you compare it to an exceptionally strong prior year h one, but it has been lifted by strong performance from the strategic acquisition of four hour. I just mentioned, 85% of our revenue is is recurring. As I said earlier, high sector margin, strong cash conversion,

17:31 and we've got continued demand for our integrated specialist services across The UK. And we've proven that, you know, we we could we can sell. We've got a great track record of growing business organically, you know, five out to six years. And, you know, looking at some pipeline, you know, the the signs of green shoots there with confidence

17:51 that we can, you know, re return to to where we were in terms of, you know, the the the numbers. And we ultimately remain well positioned to achieve that three year goal of of £5,000,000 free worth of free cash flow.

18:10 That's it. That's great. Mark, Sean Smith, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just post in the Q and A tab that's situated on the top right hand corner of your screen. Just while the company take a few moments for you to review the questions that have been submitted today, I'd like to remind you that the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. As you can see, we have received a number of questions, both pre submitted and throughout today's live presentation. And Mark, at this point, I'm going to hand over to you to share the Q and A, and then I'll pick up from you at the end, if that's okay. Thank you very much. And thank you to everybody for listening. Right, I'll go through the questions. First one, the first two actually were pre submitted, so they don't have a name against them. The first one I think is for you, Spencer.

18:56 How have you been able to sorry, not for you, Spencer, it's for Sean. How have you been able to pass

19:02 the minimum wage requirements? And we should add, by the way, the NI cost to contractors sorry, customers' contracts and prices. Basically, by having proactive conversations with our customers. You know, as we said before, we don't lock our sales team or our operational team in in a room where they're just focused on tenders. So we are very close and and upfront with our with our customers. In terms of the contracted element, so the contract maintenance work, the contracts do have uplift baked into the contracts, albeit, you know, we've had to go through an education piece again this year to just reiterate to some customers that this is a government, some, you know, activity or legislation, and it hasn't been imposed by us.

19:51 And and, yeah, that that's it really. And and it is right to say that this is the second year on the trot. Obviously, minimum wage and and living wage has gone up. And we're not really a minimum wage payer, are we? No. Which I think is a testament to why we have very low churn amongst our employees. But clearly, the statutory costs are things that we contractually have a bit ability to pass on through the contract, but we've been sensitive this time around. I think two years on the trough, some customers have been experiencing, know, you 25% increase in cost suddenly. Yeah. Exactly that. Yeah. And then in terms of the noncontracted work,

20:29 that's just, you know, price at the point of time. So therefore, you know, we price it in to every contract. Yeah? Yeah. I think it's important just to to remind people who haven't seen the presentation before that all of our sales activity is linked to GP. We're we're not we don't pay on revenue. So we've always got two eyes firmly focused on protecting margin, if not improving it.

20:50 Yeah. And we should add the, you know, our margins because of the specialist nature of the work we do, you know, our margins are very much in the upper quartile for the industry. Yeah. Yeah. Second question, I think, is is largely for you, Spencer. It is presubmitted again, so no name. What synergies have been realized so far from the integration of twenty four hour Aquaflow services beyond the financial contribution?

21:16 Yeah. I mean, look. Just to take a step back, I mean, it was never about cost synergies, the acquisition. It was always about adding new services, adding new customers to the group, services of a specialist nature. But I would say that synergistically, we've we've got the benefit of an excellent management team, and an organization that culturally fits our group. Really, what that's enabled us to do, and, you know, we've got some track record, historically of doing this before the acquisition, is to cross sell and upsell successfully.

21:48 And, you know, we've seen that already in the first half year. So, I would say those are the the the the key synergies for me. Brilliant. Thank you. Next question, I think, is gonna probably be answered by me. It's from George s. It says, I believe your spend on acquisitions is larger than your current market cap. What does that say about m and a activity? Well, on the face of it, it might say that that m and a activity was was, was quite challenged. But, actually, I think it's really important that everybody understands the story here. When we got involved as a management team in this business six years ago, the business had a turnover of $3.73800000 pounds and was losing 1,300,000. It had a great service offering that customers loved, and it gave us, you know, sort of engagement with customers, but the business couldn't make money.

22:42 Sean and his team turned that business around and started to make some money, but we knew we also had to change the financial model, which we've done dramatically since then because that business was all about project work only. We now have 87% of our business running that's recurring, and the financial model is completely transformed. We've got business that generates good cash. It's on upmarket margins. And we convert nearly 40% of our GP into profit and 12% of our revenue into profit. In our sector, that's pretty much us leading. So that's the first thing. I think the second thing is to say is is that looking at the market cap on AIM right now

23:27 is not really a a great measure. It's not a measure of success. It's a measure of what the markets are doing. And I think everybody is very well aware, and this affects pretty much every stock. The the market is completely rerated over the last four years and has done so again just recently. Our first acquisition was four years ago at a time when it was different. And by the way, when we bought it, everybody thought it was a great a great purchase. It was absolutely accretive and absolutely earnings enhancing as has been every deal we've done so far. At the point of the acquisition, it's been accretive and earnings enhancing. So we transformed the business as a result of both the hard work that Sean and his team have done in terms of cross selling and

24:05 upselling, but they've done it with a product that now has a fantastic financial model. And I think it's really worth recognizing that. And therefore, from my point of view, it's not about the market cap because that's something that's out of our control. It's based on what the market is doing at any one point in time. What is in our control is running the operational business really, really well, which I think this team does extremely well. And what the value of that business is in terms of a go forward on a go forward basis and what, you know, what the enterprise value is. And and so I think the m and a strategy has been absolutely superb, and it's been superb for one reason that a lot of companies get wrong. And if if people know my background, they'll know that I've been involved in a lot of companies where I've been asked to come in and work with a team where acquisitions have actually gone wrong. There've been too many, and they haven't been accretive.

24:58 And I can say to you here, what's happened here is is every deal, not only been accretive in earnings enhancing, but we've massively impacted the performance of that business we've acquired. Fidelis, we acquired four years ago. We've more than doubled the revenue and doubled the profit. With ladders free, we'd grown the revenue by about 50% inside the first eighteen months. It shrunk a bit because of circumstances right now, but it will go back on into growth. And with twenty four hour Aquaflow, we've seen growth inside the first five months. So

25:33 sort of sounds a bit defensive, but I think our M and A strategy has been tremendous in terms of creating value, but measuring it just on the yardstick of an AIM market that is completely depressed. And after the lowest point in our history in terms of market conditions, I don't think that's a sensible value. And the final point I'll make on this is that we're a business that's very, very resilient. And this is a credit, again, to Sean and his team.

25:59 We've had six years, and you heard Sean say, we've grown organically, forget the acquisitions, organically by greater than 20% every year for the last five years, but not this year. And in that period, we've been through COVID, which did us no favors other than put our name on the map. We've been through the invasion by Russia in in Ukraine. We've been through the cost of living challenges. We've been through the challenges in and around The Middle East and the largest geopolitical challenges that take place. And then the final

26:31 thing that really was the straw that bent the camel's back rather than break it was a change in government policy and a change in government. And this is not a political statement. It's just a fact. The market stopped, not just here. I'm I mean, I have visibility of other industries. The market stopped after the election because there was no real clarity over what was gonna happen. And then on the October 31, three, four days after we acquired twenty four hour Aquaflow, we all got shocked by the increases to both minimum and living wage and the employers' NOI. And that impacts not us so much. The impact on us financially is less than £30,000 a year, which is de minimis in terms of the overall scheme of things. It impacts our customers.

27:17 What Sean's done with his team is gone on the front foot to go out there and retain customers. Our churn is less than two and a half percent. That's lower than anybody we know in our sector, and that's because we do a great job. And and so I think at the end of the day, again, sorry for sounding too defensive, but m and a is what's been part of the value creation here, and we've just been through a very tough time over the last year. Having been through a tough time for the last five or six years, and I think the team have done very well. So I think our m and a strategy has been spot on, frankly. So moving on, Tudor tea. Now, Tudor, I'm gonna read your question out, but it makes some assumptions that I I don't think the team are gonna agree with. But, anyway, that's by the by. Based on twenty four hour Aquaflow service margins

28:06 and numbers at the time it was acquired, I expected more value to be added in the first half. However, it seems free cash flow and EBITDA have been affected by the acquisition short term. Did Aquaflow shrink in business since last year, or does it hide a more shaky situation in the rest of the group? Well, I don't think we need to let the rest of the think. I just have. You know, it's it's been a challenge, but we are working our way through that extremely well in the circumstances. But, Spencer, could you answer the first part of that question, which says, did it shrink? No. Aquaflow is a is a growing business, and we're very pleased with the way it's traded in the first five months of ownership.

28:53 We've talked about the headwinds in the market. I I think that answers the question. Yeah. Brilliant. Thank you, Tudor. The next question is from Jesus. We've a couple of questions from Jesus. Exciting excluding twenty four hour Aquaflow, revenues are down, but EBITDA and FCF have decreased notably. Do you still hold to your target of five million FCF per year? And if so, have you already seen a reduction of those headwinds? Let me let me answer part of that and then pass to Spencer and Sean. We absolutely do still hold to our target over the next three years of getting to GBP 5,000,000 of free cash flow. We think we can see that trajectory within our scope and based on our track record and trend to date. So the answer is absolutely, that's not changed. That's why we we we made sure it was still on the slide.

29:47 Spencer, do you wanna cover some of what Jesus is asking here? Yeah. Look. We again, you know, we talked about the headwinds. Hopefully, they're beginning to, you know, we'd like to think that they're not gonna last forever. Sean will talk a bit about some of the sales activity that we're we're beginning to see. And, you know, we've had a great success in the past of growing this business. I think the headwinds have caused a challenge to us. If they dissipate, then I don't see any reason we can't we can't get back to the growth curve that we've enjoyed in the past, and you know, and that's what we're all hoping for. Sean, expand. Yeah. Yeah. I think I touched on it earlier in the presentation. There was definitely a slowdown in terms of deal age. So there was jobs will stay in the pipeline a lot longer in q four and then q one of this year.

30:41 Certainly, when we compare it to q two and q three, the pipeline has increased. And also the deal age has come down. So there there are signs that things are moving moving along, and I hope that and we believe that that that that trend has bottomed. So yeah. I mean, as we're out there, we're selling. We've made a few tweaks to the sales team, repositions, just act activities more than anything, just to try to make sure that we're as slick and and and as efficient as possible. But I'm confident that we've got the right team. You might have said it before. We've been here through adversity and difficult times before, and we've always come good, and I have absolutely no reason to think that that won't happen again. Yeah. I think it's important we recognize that we have not lost business. I think we've actually gained market share. Yeah. Because I think the industry has has been challenged as standards have dropped, And that's the issue here. We have services that are nondiscretion. You do have to clean.

31:37 But you could in certain parts of the business, you could clean rather than once a day. You could clean maybe once every other day. And that's what's created the impact here. And it is the impact on the end customer that we've been responding to. But as things come through, it will come through. And I think the key thing to recognize is we are a large player in a very fragmented market. We're a small company, but large player in the market we serve it. And our value proposition is actually very attractive. I think the one thing we can say that we've got smarter about is who we're trying to sell to. I do think that we did spend a bit of time trying to sell to very large customers outside of the FM industry. And I think we just saw that's where it slowed down the most.

32:25 Re pivoting into the mid market, which is where we are strong, freed some of that up. And I think our our focus now richly around what FM companies need, and they need a consolidated player. If they don't use us, they're probably gonna use tens, if not, you know, a 100 different individual subcontractors. I think that's an attractive proposition that that has a price point where we are. So so yeah. Right. Moving on. Jesus, again. Can you please expand on the loss of customers and the decrease in the frequency of our of our service use? Has this trend bottomed out? So we we have talked about this. I mean, it's really us exiting from Hitachi over a year ago.

33:14 And they're still a customer, but we exited from a certain part of the work. And in terms of frequencies, you know, Sean, what's your view? Do you do you feel that that we've made the adjustments that are needed and now that is really slow to a stop where we've we've seen the bottom of that sort of activity? Yeah. I think so. I think so. I mean, look. No one has a crystal ball, but we've had no one reach out to us. So conversations that that give us any indication that, you know, that's gonna go any further. And we haven't had conversations on that for some time. So, you know, I I'll go back to, you know, the pipeline, you know, if the pipeline's increasing, so it does look like, you know, things are on the turn.

34:00 Yep. Thank you. Next question is from Tudor Tee. Have you experienced capacity constraints in the recent years given your specialist needs in terms of experienced employees, or is capacity not really a bottleneck for the business? Sean. So now we've got no issues in terms of capacity. So we got, like I said earlier, we've got a direct model and an indirect model. On the indirect model, we have more than enough members who've been members, so subcontractors for for many, many years. We provide the work. They're happy with that arrangement. So there's no issues there at all. In terms of the contract maintenance work, when we win new contracts, we'd should be over the clean and operatives.

34:46 Or if it's a new site, then we'll just recruit from from the start, so there's no issues there. On the specialist cleaning sides, we we we split it. We've got some of the work done via direct models, some of it's done via indirect model. That was something that we put in place. If anyone's followed the story back in COVID, just to give us the scalability to deal with larger projects without adding cost base to the business. And then they recently acquired Aquaflow. It's a direct model. You know, as we continue to grow, yes, we will have to look at adding new engineers into the mix. But at the moment, we're certainly not constrained or have any bottlenecks. I I must say, Sean, and this is not me being patronizing. You make it sound easy. It's not easy. That that's something we've built up over the last six years. And and, you know, Aquaflow built up over, you know, fifteen years or more, and the business we've acquired are built up over a period of time. So we've reached a point where we have got capacity.

35:47 We don't have high churn for reasons that we think we know why. We're a very good employer. We focus on the right things, and we pay them the right amount of money. And so we don't have the challenges that that maybe many of our competitors do, and we we are very much aware of some of challenges they do, but but they don't seem to exist here and haven't done for the last sort of five or six years. Yeah. Not to say it won't change, but but I think it's because you're doing something right. Next question, Neil b. Is the 2,800,000 Aquaflow revenue in one h entirely in the contract maintenance division? There was a comment that it has contributed to contract REACT, which I think is is a reference that they that we you know, that the REACT business has actually been benefiting from some of the the work that's available. Yeah?

36:45 So entirely contract maintenance? Spencer? Well, the profile of the business is contract maintenance is about 50% of their revenue roughly. But let let me be clear. That 2,800,000 is Acroflow's contribution to the group. Where we've had cross sell and upsell successes, that sits elsewhere in the group. But and AquaFlow get a lot of revenue from their contracted clients in addition to those contracted amounts. They're very successful at that, and, you know, we're from that. And we should add, although it's not in the question, and I know it was said in the presentation, but, you know, there you know, they've been opening the door for the rest of the group into their customers for REACT and specifically for window cleaning.

37:35 And, you know, you, Sean, the team have been opening the door to, you know, at least three relationships that I'm familiar with that, you know, we've actually got, you know, material things happening with that they didn't used to have, which is creating some growth on their side. And what people should recognize is that depending on which business we're talking about, there is a time to revenue from a contract being signed. It doesn't happen overnight. Yeah. So we have a win, but actually that revenue actually, know, mobilizing and getting the revenue coming through the door, you know, is different depending on what type of product we're talking about. Okay. On to another question from Jesus. Can you provide an estimate completion date on the Project Sparkle and the estimated cost and cost savings? I'm gonna pass this to you, Spencer, but what I would say just in general is that Project Sparkle's priority was not cost savings.

38:29 It will generate a small amount of cost savings, but it's far, far greater value than that. So, Spencer, do you wanna Absolutely. So the original external build cost for project or or the actual solution was about 3 it was 300,000 with a smidge over that, a few percentage points over that. So it's pretty much aligned to budget. As I said, on the slide where we covered Sparkle, the system exists. It's been built. We're rolling it out. We'll be a little bit careful how we roll that out. It's it's a huge task, and let's not forget that the that is free business has less than a dozen people in it. To come back to your point on cost benefit, there isn't actually any cost to come out of that business really, Mark, because there isn't much cost in it in the first place. That's that indirect model. It's the benefit of that indirect model.

39:21 In terms of timing to complete the rollout, I'd like to think in the next three to four months, onus is on getting it right as opposed to just getting it in. And there is some handholding to do with both clients and members, So we have to step through it in a in a pragmatic and considered way, but we are fully focused on getting across to that platform. And just to finish on the value proposition here, two or three things. One is that sophisticated customers now are demanding a digital approach rather than signing bits to paper on-site. So basically, we've got some customers that probably would walk away if we didn't move in this direction at some point. And we've got customers that would like it and therefore represent themselves as a Secondly problem going is just the sheer weight of paperwork and processes when all this is done manually was huge, and that paperwork had to be retained somewhere, which was a risk.

40:28 And and the traceability was was extremely difficult and and arduous. And that meant that any growth that we put into that business had to be labor intensive. And because it was you could say, well, okay. The cost of labor is not that much. We've only got, you know, nine or 10 people in there. But it would take three to four months to get somebody to understand exactly every step they needed to go through to make that system work. So it was a real constraint on scalability, and that's why I think we only grew it by 40 or 50% in the first couple of years is because we couldn't run that fast. So with with Sparkle in place, it opens the door to two or three things. One is is that we're one of the very, very few players at our scale, if any, that have a digital platform such as this, which will be important to customers.

41:17 The second thing is is that it does free us up to then scale really, really rapidly. And then I think the third thing, which we have our eye on, which is more about potential than a forecast, is we think that these customers will buy other things down the same platform. Think of things like pest control or all sorts of different services that they might acquire or consume. We would have a ready made platform to push that down through. So that's why we've gone ahead with this project. And to get it done within budget, I think, is an achievement. And it just is we're just trying to make sure we don't fall over ourselves, especially right now in the current climate as we we do it well. Okay.

42:04 Jonathan, with the recent share price drop, do you see an opportunity for the company to repurchase shares? Possibly. It's not it's not something that immediately comes to mind. As you know, we wanna make sure that we are able to meet all of our commitments, which we are with with a degree of comfort. But, yeah, right now, that's a question for for us to think about, you know, not something that's immediately coming to mind. Neil b, in which sectors have been, sorry, in which sectors have been the reductions in frequency of cleaning and where contracts have been lost?

42:51 Or just to make sure that I know you're gonna answer it, Spencer, Sean, but I just wanna say that the key thing about cash loss isn't look. We've exited. We exited a very large contract where the requirements become of a lower specification, and the margins, therefore, became unviable for us. That's the bulk of it. The rest of it is is small beer. But on on reduction of frequencies, Sean, industry sectors? Yeah. Mainly retail and hospitality. We have one one where we work with a a council that, you know, did reduce its services whilst they were dealing with, obviously, internal items within the council, but that's come back online now. Brilliant. Thank you.

43:38 Next question from Jonathan D. Do you see opportunities within AIM market for acquisitions? You've mentioned REACT is being undervalued by the market. Are there other companies with similar or lower share prices? I'm absolutely certain there are. Whether any would be suitable for the kind of metrics that we look at in terms of acquisition or not is another question and not really something that we're taking a close look at right now. Would we look, yeah, when the time's right? But remember, I think the the reason the team have been really successful with the m and a they have done is that they're not only looking at the numbers in terms of, you know, is it earnings enhancing and and accretive. They're also looking at is there a good cultural fit because that's when we know we can motor ahead and add value. You know, a lot of acquisitions are done. Just don't add value beyond the acquisition. In fact, they lose value. And and I think we've we've kinda highlighted that that's quite the reverse here.

44:31 So, yeah, there there might well be. In fact, I'm pretty certain there will be because I think the market is is underwater at the minute. But but, unfortunately, that's not something that we're focusing on right now. That leads into the next question. Are you still looking at m and a? Or right now, are you referring to just from Jesus? Are we focusing on digesting Aquaflow? How is the status of the bidding and pipeline? So are we still looking for m and a? We still think that m and a is in our future between now and that sort of 5,000,000 free cash flow objective. And we also think that there are plenty of opportunities that are out there. Are we looking at them right now? No. Will we in the future? Yes. We need to get through the the market conditions we're in at the minute. We need to demonstrate further that we can add lots of value together with Aquaflow, which we are absolutely confident we can for all the reasons that, you know, the team have talked about.

45:32 And therefore, yeah, m and a will come back onto the agenda, but not until we've got the performance back where we need it to be. And clearly, you know, the share price needs to reflect that. Now we've got some fantastic shareholders. I think most people on this call will know who they are. And they are, you know, understanding and positive in terms of us as a, you know, as a business. So, you know, yeah, we we will we will be returning to the to the to the road, but but not before we next report for certain. You know? I think it'd be a little while. Yeah. Anything to add on that, guys? No. I mean, we just on the, you know, how was the status of bidding in pipeline. I think I've covered it in the presentation. You know, I'm happy with with where we are in terms of pipeline numbers and the the the deal age reducing.

46:29 So the sales team are all hands to the pump, you know, working extremely hard as they always do. I'm now involved in the channel sales. So, yeah, we got some good opportunities in the pipeline. Yeah. Question from Neil B, and I apologize, Neil. I'm not sure I understand the question, but but maybe one of my colleagues does. What is the split of Aquaflow's 2,800,000 h one revenues between the three divisions? We we we don't split it, do we? No. The 2,800,000 mark is from Macroflow. It's, you know, purely the revenues they've generated from their customers, selling their contracted services and and and the revenues they get on the back of being an incumbent, provider. You know, any any other revenues from cross sell where, you know, it's an AcquaFlow customer would sit elsewhere and it will be reported elsewhere in the group. And vice versa if we Absolutely. Yeah. Yeah. Yeah. Or yeah. So yeah.

47:28 So hope hopefully, Neil, that that clarifies or answers the question. And then the final question for now is from Tudor t. Following up on the buyback question, that was the one earlier from Jonathan d. Following up on the buyback question and capital allocation in general, right now, after less than a year post a quite big acquisition, how open are you to a new one? What would be the general buffer period? I think I've I've I did answer that a question or two ago, I hope, Tudor, to your satisfaction. We we've basically always swallowed one acquisition at a time. That's not to say in the future, the company couldn't be more than one. But right now, it's not just about how quickly can we integrate with twenty four hour Aquaflow because actually, I think that's done.

48:22 We, you know, we we have integrated. It's working really, really well. Great people. And and and and they and and we all seem to get on extremely well. So it's it's now more a matter of getting over this this this market induced challenge that we've had. And that's not to say that we can't do things better. Of course, we can. We pivoted in a few ways. But I think it's about, you know, getting the business back to a performance level. And with it, hopefully, the confidence of predominantly private investors to to see an opportunity here. And I and I would say, I think it's a fantastic opportunity. If you look at what how how the the share price reacted to our results, I think it was overdone by that, of course.

49:09 But I go back to the point I make about the the, you know, the financial model of the business. It's track record through difficult times. What it's done in the last six, seven months, I actually think as you look underneath the detail, is really good quality work to retain customers from which we will continue to grow. And, you know, I think this is a great business that, you know, people should, you know, think about investing in. So on that note, that's the last question. We we pass back. Perfect. Thanks very much, Thank and you for answering those questions from investors. Of course, the company can review all the questions submitted today. We will publish their responses on the Investor Week company platform as usual. Just before redirecting investors to provide you with their feedback, which is important to the company, Sean, could I just ask you for a few closing comments?

50:02 Yeah. Absolutely. Look, thanks for taking the time on a Thursday afternoon to jump on and watch the presentation. As always, if there's any questions, we're we're all always approachable. But as Mark said, you know, we've we've got a great business here. We've been affected by, you know, external forces, and we think this is a great opportunity for people to either buy some more shares or if you're not, you know, invest just yet to to get involved. So, yeah, thanks for your time, and we'll look forward to speaking to you soon. That's great, Mark, Sean, Spencer. Thank you once again for updating investors today. Could I please ask investors not to close this session? I shall now be automatically redirected to provide your feedback and all the management team can better understand your views and expectations. Half management team for REACT GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.

50:52 Thank you. Thank you. Thank you.