Shearwater Group (LSE:SWG) — HY25 Results

0:01 Good afternoon, and welcome to the SHEARWATER GROUP PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time just by using the q and a tab that's situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company can review all the questions submitted today and publish responses when it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Phil Higgins. Good afternoon to you, sir. Thank you, and good afternoon, everybody, and welcome to today's presentation. Firstly, I'm delighted to be able to introduce you to Jonathan Hall, our new Pence CFO. Jonathan will be presenting with me today. But Jonathan, maybe you want just a quick intro of yourself and and a bit of your background. Thank you. Yeah. So as Phil says, relatively new to SHEARWATER. I've been in post around three months now.

0:58 Not new to the AI market. I spent a number of years with a company called Gfinity PLC with the world's first listed esports business. And subsequent to that, a year in an interim role at Mind Gym PLC, another AIM listed business. Prior to those, I was finance director at Saracen's Rugby for five years. And going back even beyond that, I qualified with Arthur Andersen and spent about seven years in the management consultancy business as well. Thank you, Jonathan. Let's move on to today's events. So starting off, just want to give a little bit of an overview of for those who are unfamiliar with the group. At SHEARWATER, we provide cybersecurity, managed security and advisory professional advisory services to our corporate clients and their end users. We have two multi award winning divisions. One of them is a services division where we have Brookholt Solutions who provide high level sub security solutions to the corporate marketplace and to the government and SMEs.

1:56 Next door with that, we have our pen test company who are multi award winning and well renowned for their pen test skills where they provide purple teaming, red teaming and testing facilities for our corporate clients. On the other side of the fence, we have a software company headed up by Secure Envoy. We have they develop and produce our own IP based software, identity access management and DLP. They started off with a multifactorial authentication and then since they've developed into a hybrid cloud and to a cloud and we're glad to actually have them on board. A year ago, what we actually did, we actually consolidated our GEO LAN company into Secure Envoy to actually gain the efficiencies and the synergy savings from that happening.

2:46 We also did the same thing with our consulting company Xena and we bought that into Brookhall. We're now experiencing obviously greater efficiency savings there and collectively between us we cover our businesses over 50 countries across the globe. Moving on, so there is a strong market position. Cybersecurity is not an option anymore, it's a necessity and in some instances it's a legal requirement. It's ever increasing complexity and what we're actually seeing is an opportunity for us to work with continuously work with our blue chip customers. We're providing them unique specialized technologies that deliver their needs today. It's important for us to stay in front of the curb to actually keep those customers content and happy.

3:37 A lot of our client base have been with us for multiple years and within Brookhill alone we had clients that are going back and right back from the start major banks and they're still with us today. We differentiate ourselves in the marketplace by being not setting the mundane, say the off the shelf technologies. What we do is specialize in the key dark web cyber investigative softwares, also AI based softwares which allow us to, you know, protect the networks for our client base. These types of things actually keep us in front of the curve. It's because of that which allows us to actually develop these blue chip organizations and also to win new ones. We believe we are market leading in that position and we will continuously to actually invest in that space.

4:26 Coming on to Sandd numbers, just to give you a little bit of a rundown. John will give you a more in-depth breakdown of these later on in the deck, but this is still some of the funder. Revenues increased from 10.5 to 11.3 over in comparison to the last year and net cash has improved from 3,000,000 up from 2.2. Adjusted EBITDA is down. In H1 what we did, we decided to take a tactical deal which had the lower margin with the opportunity to get deeper and wider into a particular client account. We did that as a tactical strategy and I'm glad to say since that we post period end, we've actually won a second deal. And these were multi multi million dollar deals that we've we actually posted out on the on an RNS.

5:15 And I'm glad to say that our strategy has worked and now it's given us an opportunity to develop deeper and wider into with more profit into a particular client. So many other things of note really in on this slide. Obviously our business is made up of new client wins and business renewals and repeat activities. And I'm glad to say that obviously as and when the the more sizable ones come available, we do make the announcements where we possibly can. One of those most recent ones was the $12,800,000 deal which we announced on with with this with the original publication of our interims. Now a lot of people have been saying, why aren't you making more announcements? Well, we we do. I mean, that deal admittedly wasn't signed until Tuesday evening.

6:06 So it was it was a late entry to our to our submission. And one thing we're doing also is we're actually and I'll come into a little bit more detail later on, we're actually integrating more AI into our portfolio and I'll talk about that a little bit later and also talk about a little bit more in detail about our software development and the integrations that we've been doing there. On a closing point on this slide though, we do remain confident in our strategy and we are seeing some positive movement and improved conditions for us, particularly with some delayed projects that we had historically. Moving on to our services side to give you a little bit more in-depth detail as to what we're doing there. Within the services division, it represents about 90% of our revenues and it's driven significantly by contract renewals, large scale multiple year contracts from blue chip clients. We're very strong in the telco and financial sector. We've been very heavy in that area for a very long time now, But very recently, obviously, made an announcement to where we won a position on the gcloud 14.

7:17 That's a very important step forward for us. Historically, we hadn't invested the time but we took the strategic direction to spend time and effort in bidding for the government and I've got a little bit more detail on the next slide which I will take you through shortly. So in the first half of the year, we secured a number of key wins. Also helped because of the where we've actually brought in Exxena into the into the Brookline into the service side of the business, what it did allow us to do is get greater efficiencies and what we're seeing now is also stronger cross fertilization from Brookline accounts into our Exxena accounts and into our Pentest accounts. So I'm glad to see that that is moving well.

8:05 We also expanded some of our AI based offerings. So a lot of our vendor partners, they deliver to us technologies. It's the latest cutting edge technologies. And a lot of people now, as you can imagine, are moving into a more AI based offering. One thing we're also doing internally to actually help pick up out on our EBITDA is to actually create more service based business ourselves and to get more throughput of our business. So we're actually now developed our own AI based tool inside Brookal which will allow us to actually increase the throughput of our activities in bid response, bid risk writing and so forth without having to increase the headcount. And obviously if it's successful there we will then roll it out further into the wider group.

8:53 Moving on to a little bit more detail on to the public sector opportunity. So as I mentioned, took a strategic direction decision to get involved with the UK government and back in October 23, we were fortunate enough to actually win a proposal for a two year deal and it was for and was known as a CTI, so it's a cyber threat intel feed. It's one where we believe it's a market leader. We don't have many players in that space and we were fortunate enough to win this particular contract. It's for a very large division of the UK government. In '24, we took another slightly smaller deal but nevertheless significant of the same technology set inside the UK government.

9:44 And as you can appreciate, you know, this now gave us a good momentum to actually then respond to the g cloud 14 bid requirements. And what that gives us is it's a platform where central and local government and charities can actually buy from pre credited and pre approved suppliers. Now we are one supplier in that chain and we are specializing in all our offerings. All of our company products and services are actually included in there. We've got over 30 offerings on that platform and we're now starting to see opportunities come through and we'll be responding to those and hopefully if we're fortunate we'll be able to make further announcements later in the year. As we move through with this the gcloud 14 position, we will be obviously looking to invest in additional resources to actually help support our activities in that space.

10:41 Moving on, a little bit about software and what's been going on there. Now, obviously we're very excited to share the continued success with the software. Revenues of 1.1 with h one and obviously we're been spending a lot of time and effort on the development. The software started off as a as a two factor authentication many years ago and since then the guys have been really hard and we've made several announcements along the way. But now we're glad to say that we we offer multi factor authentication in not only on prem but also in private cloud and also in in the cloud. And the important thing to note is that a lot of our competitors out there in this space only develop their software for the cloud and we're seeing an uptick in the on premise activities.

11:32 Some government departments, some private organizations, they're opting to actually go back to the data center. So we're not going to shelve that technology. We'll continue with our investment in that for years to come. So in terms of the expansion of that opportunity, we are also looking at the AWS in The States. So this is the procurement path in The US is slightly different to The UK and there's an opportunity for us to put our software on the AWS marketplace. This will be in front of corporate America allowing them to easily purchase our software. It's a common practice at the moment. We see it with many of the manufacturers over there where they're actually the corporations pre deposit cash and it allows them to easily purchase softwares as they need it.

12:21 So that's something we're going to be launching in h two, so that's something to look forward to. On our data discovery side, we have been busy there also. We've been leveraging the AI and we've now also got some data discovery for a database and with the AI we've actually increased the security opportunities with inside the product set. So this is a technology that we're moving ahead with and both of these there's our access management and data discovery are both unique technologies. So we're looking for growth in those two areas in during the h two. Moving on right now, I can introduce you to Jonathan once again and he's going to take you over to take you through our financials.

13:07 John? Thank you. So Phil's given you some of the context of these already, so I will just pick out the the key points and if any further questions, can pick up on those once we've finished the main bulk of the presentation. Revenue was up 8% in the periods, up from 10.5 to 11,300,000,000. But I think the the thing that probably stands out most is that the despite the increase in revenue, EBITDA, adjusted EBITDA, which is our principal measure of our operating profit, was down from a 600,000 profit in the first half of last year to a 400,000 loss in the first half of this year. There are a couple of reasons for that, but it's principally driven by a drop in the gross margin down from 30 to 22% year on year. The things lying behind that, firstly, there was a slight change in the mix, and in particular, the growth of the business was driven out of the services side of the business, and and in particular, of the Brook Court side of the business.

14:03 And and even within that services side of the business, there was a slight reduction in the pen test side of the business, which tends to be the higher margin where we're we're letting out our own engineering team to conduct the the penetration testing on clients. And so there's there's a slight mix effect. More fundamentally, though, Phil also mentioned we took a a decision in the first half of the year to enter into a lower than typical margin with one material client, around a $4,000,000 deal at a lower than normal margin. It was something we went into eyes open, and and we did it to open up that account. It was an account we dealt with in the past, but nothing of that kind of scale. And what you'll have also seen since the start of h two, we've had a really positive start to the to h two. We've announced two large deals. One of those for about £3,700,000 was a second contract with that client. So that tactical decision we took in the first half of the year to open up that account, I think, has proved to be the right thing, we're starting to see growth in that account and a second contract that will come into h two at a higher at a higher percentage margin.

15:05 Underlying OpEx, very consistent year on year, 3% up. We did in the first half of last year have a Forex gain on the retranslation of our some of our forward contract balances, which didn't repeat, the underlying OpEx was relatively was relatively consistent year on year. So we got revenue growth. We we do have an adjusted EBITDA, but we as I say, adjusted EBITDA loss. Let's say we started h two strongly, and I I think we we can see a clear pathway through to to try our year end number, and we feel confident about delivering good revenue growth and and good profitability in the second half of the year. In terms of how that breaks down between the two segments of the business, at the moment, the services part of the business is around 90% of our business. So the sort of narrative I've given you around the business is really the narrative for the services side of the business, which you'll see on the left hand side of that slide.

15:56 In terms of the software side of the business, performance has been fairly resilient, year on year, as Phil mentioned, particularly around the on premise side of the multifactor authentication access management software. We've fallen just a little bit the wrong side of a couple of the roundings there. Revenue was down to £30,000 year on year, and the adjusted EBITDA was was within, I think, 24,000 year on year. So so fairly consistent performance with that. Software side of the business has dropped off a little bit over the last couple of years. We feel like that's that's leveling out now. And and again, we feel positive with with some new features having been launched in the first half of the year. We'll be talking about a sort of growth from that h one revenue number during the during the second half of the financial year. In terms of the lower half of the income statement, not too much to pull out, relatively clean picture.

16:45 Depreciation and and software amortization up very slightly with some of those new features we've been working on on the software side of the business having gone gone into the market in the first half of the year. In the first half of last year, there were some exceptional items or some recent exceptional restructuring items. Nothing similar in the first half of this year, relatively clean on the lower half of the P and L. And in terms of the cash flow, we have a healthy cash position, a healthy balance sheet, 3,000,000 of cash at the half year, up from GBP 2,200,000 at the same point last year. We have an R and D tax credit, which should of GBP 300,000, which had fallen into the first half last year. HMRC actually dug into that a little bit more this year, passed it all, and we subsequently been paid that money cash this year. That came through at the start of November, so it has fallen into h two.

17:33 So we we go into h two with a with a healthy cash balance, and h two is typically from both an EBITDA and a cash generation perspective where the business does slightly more of its volume. Again, we're looking forward to cash generation during H2. Thank you, Got a couple of slides here for you before questions. So just to this slide here is just taking you through our strategic direction. So we're we're anchored by four key pillars in in the business. So obviously, we want to become a leader in in the future cybersecurity and we're to achieve that obviously by pioneering new advancements in the solutions and bringing those to market for our corporate clients and developing our software.

18:18 So obviously, we're to stay invested in our software and we're going to continue with that for now. We're going be focusing around organic growth at the moment. We're using our cash and our reserves at moment to provide the services and facilities that our business need and to actually advance and grow, so to give them scale. Also, we're going to differentiate our offerings with obviously we're focusing very much around the cybersecurity space and professional advisory and obviously the production of our own IP. We're going to continue with that and we're we're going not to expand our client base and expand our geographies and how we deliver that business. But what we're not doing is obviously dipping our toe into a more commoditized market of general IT.

19:03 And also we're going to be looking for delivering sustainable growth. One of the things that we've been we suffered from historically is a the project based business. And what we've seen is large opportunities come in. We're fortunate enough to win them and we announce them and then there could be a multi year deal which would would land in the in the year one. What we're trying to do now is obviously smooth those out so that when we win these multiple year deals, so the one that we've recently announced for the 12,800,000 for example, That one was where this year we will take 3,500,000 of that on on the books and the outlining numbers will will be spread over the remaining four years of the contract. What we're trying to do is actually smooth that line and give you can so to say a more sustainable growth in a more consistent format.

19:55 And we're looking obviously to build now our client base. We've I'm glad to say that the 12,800,000 that was won was a new client and we've had lots of success this year in winning new clients and because we've got the ability to actually keep hold those clients for a long time, we'll be looking for obviously future opportunities from them. When you look at where are we with our original vision obviously was to do buy and build Today at the moment is very much around the organic growth to actually build up the consistency and confidence for the shareholders and actually bring back hopefully some value on our share price. It's still our long term goal there to where it makes sense to make a tactical acquisition and that would be obviously by the market consolidation inside the services division or feature and product enhancing for our software division.

20:46 Either way, what we'll be looking for would be organizations that are cash generative and give instant shareholder value. Moving on just to what the outlook looks like. So to I mentioned a little bit about the $12,800,000 deal that we just signed. The starting both these deals, 3.7 you see there and the 12.8, were expecting those in h '1. They did slip so we do still see some headwinds. A lot of those there are some delays about deals being signed. These are big deals. They do take a lot of signatures to actually get them out the organizations. And as I say, we were planning on those and coming in in h one. They slipped into h two which has given us a great platform to work from for h two period.

21:38 So it does give us a lot of confidence in actually moving through that our performance will be robust during this period. We also achieved the g cloud status, and this is an area that is to say that we're we're investing in. We're fortunate enough to work from a good strong platform. We got an opportunity for business renewals later in the year and to next year, and we've also got opportunity in front of us at the moment which we will bid for and we'll be spending more time and effort and resource in that space to hopefully grow that part of the market. So the outlook for us remains strong. You know, we're very pleased with the opportunity in front with us. The market in global cybersecurity is growing.

22:26 As I mentioned, it's not an option nowadays, it's a necessity. And only the other day it was mentioned in the press that the Russians have the ability to actually take down our utility companies. And the good thing is obviously even the utility companies now are having to spend money in the cybersecurity space and some of those tools and software sets that they're looking for are things that we can help them with and provide. So we'll be obviously spending a lot more time trying to actually address those needs. If you look at the opportunities moving forward, it's very much obviously business as usual, growing the company base, looking for the new opportunities, building deeper and wider into our existing clients, cross fertilizing with the rest of the group wherever we can. I'm glad to say that when we do that, we do see an awful lot repeat business coming back through particularly on the consulting side of the business and we're going to focus on our organic growth. We're going to get that momentum moving again and I'm glad to say that H2 is typically our stronger part of the year and so we're looking forward to seeing the results come through during this time.

23:39 And all in all, I think we're very focused on driving that pipeline right across the group and getting those new wins and wherever we can, where it makes sense, we will make more announcements on those. And now that we've got a good start to the h two, it does allow us to give us a good set of results moving forward and it does allow us to actually give you those those announcements as and when. And with that, I think that concludes the formal part of today and I would like now just to hand back and open up for any questions. Thank you. Perfect. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do that just by using the q and a tab which is situated on the top right hand corner of your screen. We have received a number of questions, and I'll just dive in with the first one here, which reads as follows.

24:26 Given your cash reserves, will you consider paying a dividend? Takes Slide that because it, yeah, it comes on a financial side. If you don't mind, because because I can see the the next question's coming up as well. Might tackle that together with the next one, which is which says, might you consider buying back some shares with your surplus cash to boost the share price? Because I think those two questions are very much related. The with with the cash we have at the September 30, which which we sustained since the start of the or since the end of the period, around 3,000,000, That that's not yet at a level where we'd look at doing either of those things. It's it's important for us to be able to show a very healthy working capital position, both for our own resilience because sometimes, you know, certain contracts will have working capital requirements. It's important we're able to meet. And also because we deal with very prestigious blue chip clients, it's important we can show them strong balance sheet. If we are able to generate the cash, which we think we might be able to through the second half of this year, then we reach a closing position around the year end, which might give us a little bit more flexibility and more working capital than we'd need for simply day to day management of the process. I think of the two options that are outlined there, the idea of buying back shares would probably be be more attractive, but that's not that's not sort of a board policy or decision.

25:40 But I think our sense of the board is that there is real value in the share price at the moment, and and that would send a message to the market that that we we believed in that. The decision we'd have to make at that time is whether that's the best use of the cash or whether there are growth opportunities that would actually provide a sort of more long term shareholder value. So not not quite just yet, but we're also not gonna let the cash just sort of stockpile and and sit on it and and not work for shareholders. That's great. Thanks very much, Jonathan. We'll move on to the the third question then. Do you have plans to actually raise share price by posting company news? Yes. It's a short answer. So, obviously, historically, we've announced large deals. We'll continuously do so.

26:27 When we do get a a number of slightly smaller deals, we and there's an opportunity to, you know, add those to an RNS newsfeed. We certainly will. We'll collect them together and try and provide those. The deals that we announced during at beginning of the week, it was literally signed and it's within sort of eight hours. We've actually had to edit the presentation, edit the RNS feed and actually squeezed it in. So we are turning these around as soon as we get them and when it makes sense to do so but we will do endeavor to actually try and do more. Thanks very much. Next question here. What key trends in the cybersecurity market do you see driving future growth, and how is the company positioned to capitalize on them?

27:14 With the the trends, we're obviously seeing an awful lot in the press, and that does spur on some clients to actually make make choices. We're seeing a lot more compliance requirements demanding activities and actions. We're also seeing things from even from the insurance companies that if you want cyber insurance, there's certain things you must do. And we're very aware of of all of those drivers and those pressures on corporate business and it's not just the large banks and retail outlets. This is now moving further down the stack and we're looking to actually capitalize on some of those those mid sized companies. We have an awful lot of large fortune three fifty and five hundred clients, leading banks, leading telcos.

28:06 We have a number of those and we want to step down and try and capture that second tier market of the slightly smaller company of around about a thousand employees. A lot of our big corporates at the moment, they're anywhere of up to 400,000 employees so you appreciate those contracts there are heavily negotiated and there is a richer fabric of opportunity in that tier two. So we'll be looking to keep our eye on the movement, the trends that are developing. We're very aware of what's in front of us. I do use our advisors. I've got Marcus Willett, ex deputy head of GCHQ and Lord Reed who worked for Tony Blair in government. Both of those individuals are actually working and helping me at the moment to work further and deeper into government and understand how the government work. Believe it or not, it's not an easy place. So, you know, we are making all the actions to actually try and, you know, improve our position and gather more business that way.

29:07 That's great. Thank you very much. Can you elaborate on which customers you're working with more predominantly and the scale of opportunity you see working with government departments? I can't really give you names of you know, we we sell cybersecurity and and managed security services, so it would be unfair of me to to label them. But needless to say, we do deal with high street banks and I'm sure some of you are using them. We provide everything from cyber threat feeds to personnel to audit points and secure email endpoint protection, AI based identity access management. We deliver an awful lot too. We're very strong in the telcos as well. We have a number of the telcos in this country.

29:54 There we are delivering advanced packet monitoring, so we're monitoring everything that goes through the network. They're doing it for compliance, they're doing it for quality of service and also doing it for security reasons as well. We're lucky to have actually carved out a position of expertise in and in those areas and we're attracting more players in there. We've the the recent deal that we just won was a global telecoms company and a lot of the announcements you see are from telcos and finances. They are all different companies, they're not all the same one but we also do an awful lot with the retail side of things. So the opportunities moving forward is obviously to get deeper and wider into all of those organizations but also to attract more. So we've incentivizing the teams to actually go out there and we're also recruiting additional sales staff to go out and win.

30:55 Thank you very much. And the next question here, with the developments made in software, what sets you apart from your competitors that aids the customers buying decision? Ladies and gentlemen, do bear with us. It looks like we've just lost the team in the room. Do bear with us while I just reconnect the team. Ladies and gentlemen, please do just hold on just while they reconnect.

32:02 Phil, you're back with us. Can you hear me? Yes. We can. Okay. The room link is just coming back in now. Just going to reconnect. Phil and Jonathan in the room. Teamwork is coming back in. Do bear with us. Hello? Okay. Phil, sorry. I think we lost you momentarily there. We were at a question.

32:50 If I just read it out, we'll we'll get straight back into it. With the developments made in software, what sets you apart from your competitors that aid to customers' buying decision? Okay. So what I was saying is that, obviously, people like Microsoft are a direct competitor, they develop with inside, you know, very well for Microsoft. What they don't do is obviously you you there's a lot of their time and effort spent in the cloud. One of the things that we have seen is obviously an uptick in our on premise and what we were expecting was as we developed our private cloud and our cloud platform offerings, we're expecting to see people from the on prem to migrate naturally into the cloud, some did, but what we also saw was an uptick in our on prem. So we've continued our development and so there's not many companies out there that are investing in on premise, private cloud, and cloud authentication.

33:46 We are. So we're hoping to actually carve out a little bit of an opportunity there from our software side. Does that answer your question? Yeah. That's great. We'll just move on to the next one now. What could revenue get to over the next three years? Should I should I take that? Maybe it's a I think well, first, I've to say, we're sitting in the office of of our Nomad, and and they do get a little strict with us if we start giving out our sort of own management projections that aren't on sort of numbers that are in the market. I think what we can say is through organic growth, we see significant potential on both sides of the business. The numbers in the market have us doing strong double digit revenue growth this year, and I think that's something we think we can sustain, and we'll do that profitably.

34:32 And then if if we do that and we continue to generate cash, that then gives us the chance to go in and strategically add add things to the group, which builds us up into a a much more material group. But I I don't wanna commit to a number that that that sort of sits outside of the forecast that are in the market at the moment. Thank you very much, Jonathan. What risk from proposed US tariffs does the group face? When you look at technology I mean, it's a good question. I mean, obviously, there's a change of guard next year. But when you look at technology, The UK would import more foreign based technology than it actually produces itself, unfortunately. There's not many software companies. Know, Secure Envoy is one of them. Homegrown won two queens awards for development and export, but as I say, we do import more US based technologies than possibly than we export so I'm not seeing that to be too much of an issue moving forward. I'm sure there will be it will be discussed. I'm sure there will be some concessions but it's to be honest with you, it's a wait and see. At the moment, our US market is not as you know, we're looking to actually step further into The US market and develop further, so we would obviously have to cost in any of those tariff increases and that could be in the way of you know, either price increases or it could simply be a case of the supply chain itself is more streamlined, more efficient and they could be natural savings

36:02 that we receive there, but we're hoping obviously, you know, the the quality of revenues we receive from Secure Envoy are very good, so it's certainly not going to put us off that investment. Perfect. Thanks very much. A question here from John. Do you bid for government contracts as a standalone contractor or as part of a wider partnershipgroup? Some of the prerequisites are is that because they run compliance and they're obviously looking for your accreditations and your your standing in the marketplace, they they some contracts do not allow you to have third party partners come in. We're obviously allowed to present technology and buy technology and present it that way, but if we were outsourcing to a bunch of consultants, for example, they don't like it. So it has to be part of the group of companies.

36:56 We are bidding and we're obviously going for what we consider is the lower hanging fruit. We're not purposely going after every single contract and we're going after ones that we believe that we have the best possible chances of winning, the ones which we can deliver ourselves using our technology partners that we've been working with for a long time. They're they're the sort of opportunities we're after. That's great. And we've got one final question here. Given the niche, last project nature of the business, can the revenue line really grow sustainably? Surely, model should not be about margin expansion. No. I mean, we've as I say, we did have a tactical change in this in h one where we looked for this particular deal to to actually expand our position with the client.

37:44 The a lot of these clients that we deal with because they're tier one firms, they're big these contracts some of them are domestic, some of them are international, they're multiple years, they're repeated, you know, time after time and you know historically when it was an appliance based computing we used to deliver something and that was the end of our obligations and obviously now what we've been doing is trying to actually bring in more service around those and the the new method of software as a service or subscription based computing and wrap more of our own in house services around that which should smooth out the line. We're not going to walk away from any big project that lands on our doorstep, we're obviously going to do that but as I say, there is the effort there to try and smooth it out. As I mentioned previously, the 12,800,000, we've done that to you. We're taking 3.5 of that this year. That will get delivered this fiscal and the rest of it will rolled out within the next five years. So you know that one is an example of what we're trying to do.

38:49 That's great. Phil, Jonathan, thanks very much for answering those questions. We have had a number of questions through today and, the company will follow-up with any additional responses where possible in writing on the platform. But just before redirecting investors, provide you with their feedback, which is important to the company, Phil, could I just ask you for a few closing comments? Certainly can. First of all, I'd like to thank the people today for actually joining us as shareholders. It has been a tough journey and but we have made some very good positive movements and we are obviously, you know, we're through a lot of the headwinds. We still do have some challenges and we're very confident about H2 performance as being a strong one. We do have, you know, a good start to the year with this half of the year and we're, you know, we can see a pathway through to the year end numbers.

39:42 We have a strong cash position, very healthy balance sheet and, you know, we will continuously to drive and look for that shareholders value and actually increasing those positions. As I say, we are confident in delivering a strong performance h two but, you know, rest assured as and when we do win sizable and new opportunities, we will try and give more of that feedback and through RNS to the shareholders. I think that really sort of you know, the journey starts now for us and we're now, you know, pushing forward for, you know, for what will be a hopefully exciting h two. Phil, Jonathan, thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations?

40:31 This will only take a few moments to complete, but I'm sure it be greatly valued by the company. On behalf of the management team of SHEARWATER GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you. Thanks.