Shearwater Group (LSE:SWG) — Results for the year ended 30 June 2026

0:01 Good morning, and welcome to the SHEARWATER GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press end. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Phil Higgins, CEO. Good morning, sir.

0:32 Good morning and thank you. Hello everyone and welcome to today's presentation. With me is John Hall, CFO of the group. And so we'd like to take you through today, obviously, our results. And this year, we're doing it slightly differently. We're actually going to show you our, obviously, our closing slide, our executive summary, just to, you know, what we're hoping for you to take away today is obviously, these key points. Firstly, obviously our sector that we're in is growing constantly as you can see from what's coming out in the news on a regular basis. We've got a proven track record and we've got over 40 awards to the group and we've got our own proprietary software, we've got our own award winning consulting business and we've got our own solutions business. So as you can appreciate, what we have from you know, we specialize in certain type of technology and services that we deliver through to blue chip customers.

1:28 Over the last twelve months, we've been delivering a good strong organic growth and this is our second year of good growth and we'll be able to give you some more details on it later on. The 34% revenue growth is obviously an annualized number. Don't forget fiscal twenty five was a fifteen month period and this is our fiscal twenty six was our first twelve months. So on an annualized basis, the numbers are up. Obviously, we've still been focusing on our organic growth. We've been looking at improving the efficiencies of the company, improving our balance sheet and also improving service offerings to actually help grow the company. But that's not all we're doing. Obviously, what we want to do is obviously deliver the value for the shareholders and hopefully you'll see that today as we walk you through the process.

2:18 So moving on, So a little bit about the group. The group is consistent of two divisions. We've got a services division where Brookhull and Pentest both well recognized within the industry, both award winning as I mentioned. But inside Brookhull, we sell the next generation cybersecurity solutions and services. And within Pentest, we sell bread team and blue team consulting. So these are professional hackers who actually test your network. We also own a software division where we've got our own proprietary software. We supply authentication solutions for on prem in the cloud and hybrid and we sell that through our resellers and a distribution channel as well. And it's sold in roughly around about 50 countries collectively when you consider our services and our software businesses.

3:10 When you look at obviously the numbers there, the services represent 96% of our revenues and software 4%. We give you a little bit more detail around those numbers later on. But some of the key points that you need to be aware of is obviously we, you know, the group we supply sub security solutions and services into large blue chip corporates. You know all the logos. We service banks, high street banks, investment houses, telcos, mobile operators, as well as retail and local government and central government as well. Very recently, we responded to the RFP requests for the g cloud 15 and we actually grew our services significantly from there from circa 30 odd on G Cloud 14 to over 50 in G Cloud 15. And we'll come on to a little bit more about that later on. But basically, we are in a very good market space and we have great momentum.

4:09 So the highlights of the day, the numbers. So revenue is up 34%, adjusted EBITDA up and obviously one of the questions down there is obviously on net cash position. John will give you a little bit more detail on that as to why our net cash is where it is and the timing of our cash which is most important. But the bottom line is obviously on a year on year basis, our revenue and our business is growing and we're growing above market rates at the moment which we're very pleased with. We've got strong momentum. We came out of fiscal twenty five and very good. We ended '26, very good and obviously our confidence so far into '27 is looking very good as well.

4:53 So just a little bit about the market opportunity. Outside of what you read in the press and what you see on TV, it's not a case of if we're going get hit, when we're going to get hit and how can you stand up. And there's a lot more talk around now about the resilience of a company and it's known and it's expected that there will be a lot more hacks which will be spoken about in the press. The fines are increasing, regulatory compliance is increasing and we're responding to that market space. We're providing new technologies and some of those technologies are AI based, but we're also looking forward. We're also and part of what we do as an organization is look at the next generation and we're already in the space of looking at quantum based technologies.

5:44 They're on our portfolio and we're talking to clients for those. And they're they're obviously they will become more, of a requirement as as the year goes on. The bad actors aren't going away. When the economy gets tight, when there's war, the bad actors, state actors, they increase. So the activity there is increasing and I'm sure we've all received those spam emails asking for money and throwing our data. So we're responding in as that's market space. So death, taxis and cyber and we're in it to stay.

6:17 Take the next slide, Joel. So a little bit about our positioning. There's three logos there, they're group companies. Brookhort say we supply the next generation. We sit above a lot of the noise So we don't sell the the day to day stuff. We're selling the specialist stuff and that's why you'll see on the RNSs multi year contracts, multi million dollar deals, and there's an awful lot of renewals and expansion. We see it in the government, we see it in our banks and our telcos and the commoditized technologies tend to be lower margin, they tend to be highly competitive whereas we have less competition in this space. However, solutions that we get involved with, as you can see in the closing month of fiscal twenty six, we did £25,000,000 deal and, you know, that took a year in negotiation, that one deal. So they do take longer and we do have a good pipeline and we do see these... We do win on the global stage for those type of techs.

7:22 PenTest, obviously, they also specialize in that area as well. Once you spend all this money, you need someone to actually test it and this is where the Pentests red teamers and blue teamers come in and it's a compliance requirement. It's a legal need and you can't ignore it anymore and you don't want to be caught out so this is why you test. And then you come into a... You've... How do we actually maximize even further? So you start selling the same services in these these consultants through the through the distribution channels. This is where we sell to distributors who then sell on through to other resellers who then sell on to end user customers. And we're able to do that with obviously with pen testing and with our secure Envoy products there. More so to do with secure Envoy, which is why we can touch so many countries around the world. And with today, we're touching around about circa 50 countries.

8:18 So a little bit about, you know, into the... Where the revenues have come from. Obviously, there you see the contractual highlights. These are some of the deals that we actually announced last year. When you don't see an announcement, it's because the deal's probably sub 1,000,000. We have an awful lot of run rate that's going on constantly, but these are the headline deals that came out. 25,000,000 of which half of that was seen in the '26, the rest of it will be discharged over the period. It is the first phase of a deal and that was for a telco provider. The 9,000,000 was for a financial institution once again trying to secure the email framework of their global network and as you appreciate, a lot of the viruses and hacks transfer the networks via your emails.

9:05 And then we had another contract extension and expansion with another mobile network. We are servicing all the mobile networks now in The UK, all the majors and obviously that's contributed to growth line. What we do have is obviously we're working hard to actually build out more of our services so they're homegrown. We've got a good strong consulting base where our engineers are fully engaged constantly. Our utilization rates are up and we're looking to obviously to expand as our client base expands, we'll expand our engineering to meet that demand. From a gross profit perspective, yeah, the services definitely is the major contributor to that. John, if you just move on.

9:51 Okay. So on to the software side, still, you know, whilst there's some negatives there, you've still got to look at the positives. We have been building out our software. We've got a enterprise grade software both in identity access management and data discovery. We can service both on prem and in cloud. And when you look at some of their competition, they've all been investing time into the cloud, but we're seeing also of activity coming back down to the on premise where some of their corporate clients and some of their government departments don't trust the cloud. They want that data back and they want it under their control. So there is a place for us to play. It's a boutique, it's a unique space, but we've also got a proprietary technology which has got, you know, two queens awards.

10:38 It's got multiple quality awards and it's still on the global stage today and it's still being used by some very significant organizations. When you look at the numbers, they're still contributing to the bottom line and we are seeing, you know, it's a good quality revenue and whilst we have been investing in that over the last couple of years, we do have a new technology that is now in POC which is coming through and we're expecting to see some revenues of that come through towards the end of this fiscal year. And with that, I'm going to pass over to John who will take you through a little bit more detail around the numbers. John, over to you. Thank you.

11:25 So good morning everyone. So as Phil's already touched on, the highlight is probably, you know, really strong growth year on year. So revenue up 34% on an annualized basis to 42,300,000 and that builds on really strong growth we had in FY twenty five We were 29% up in FY 2025. So when you compound that up, that's top line growth of more than 70% in two years. And as Phil has touched on, that was really driven by the strength of our services business. Our gross profit was up 9.4%, percentage margin down, which is really a mix effect

12:03 built out of where the growth has come from and I'll come on to a little bit more granularity in what's happening between the services and software side of the business on the next slide. Adjusted admin expenses, very small increase in fact, a very small reduction year on year. So we're effectively been able to do more for less and that's pleasing. And there's really two things at play there. Firstly, we did some restructuring activities in the end of FY 2025. And we've really had the first full year effect on that, Just trying to keep our cost base as lean as possible to make sure we're getting value or as much value for shareholders from everything we do. And the second thing we've been able to do is we've invested in our own technology, our own proprietary technology, our own AI tools and that's enabling us to get more for less. So we were the second organization to get our ISO for use of our second organization in UK, sixteenth globally to get our ISO for use of AI within the business.

13:01 We built our own proprietary AI tool and that's helping us distill what are often quite complex briefs we get from clients and and shape the responses. They can't do all the work, but it can break the back of it and it helps us respond to a lot more, be a lot more efficient in what we do. So it's great for us that we've been able to deliver that top line growth without actually increasing our cost base. All of that helps us deliver an adjusted EBITDA number, which is 44% up year on year to GBP 2,600,000. If you take out the depreciation on our own development spend and add back the finance income, that's an adjusted profit before tax of GBP 1,400,000. Small number of exceptionals this year compared to last year, there was a fairly sizable write down, non cash write down in value of intangibles.

13:47 Much smaller this year, just again, a small restructuring just to make sure we stay as lean as possible in what we do and principally affecting the services of the solutions software side of business rather, which I will come on to in a second. The amortization you see below the adjusted EBITDA is the more sort of conception amortization of that we were required to create on the intangibles we bought as part of acquisitions, which are just coming through. But again, that's a sort of non cash item, which takes us down to a loss before tax of GBP 300,000, which is 97%

14:18 improved year on year. And as Phil has touched on, we have a very different picture across the services and software side of the business. Firstly, just in the scale of the two businesses, the services side of the business is now 96% of our revenue, 90% of our gross profit. And that's been the real growth engine of what we've seen year on year. Some big high value multi year contracts from some of our blue chip client base. You still see within the services side of the business, the gross margin down slightly year on year. And that... And that's a reflection of the fact that even within the services side that there are two distinct business models to what we do. We sell our own people, we sell our own engineering services, we sell penetration testing, we sell our own governance and compliance consulting.

15:08 And that's good strong margins on selling our own people. We also sell top end cybersecurity solutions encompassing third party software and third party hardware.

15:18 And those are, again, better margins than you would see for a typical reseller because it's quite specialist stuff, which we are taking to and introducing to our clients. But it does have a more significant cost of sale. And while across the services side of the business, all those different components showed improvement year on year, The largest single element of the growth engine with those big multi year contracts Phil spoke about, which encompass the part of third party IP. So what that meant is on a percentage basis, we had a little bit dilution in the gross margin, but actually still a gross profit number that was up 18% year on year from £6,400,000 6,400,000 annualized to £7,600,000 of gross profit. And that again with admin expenses that were essentially static in real terms, dropped down to an adjusted EBITDA of 3,700,000 which is 40% up year on year. Really strong performance out of the services side of the business.

16:12 Software side, a lot of competitive pressures in that side of the business, in particular for those organizations that the Secure Envoy product was a real early adopter market leader in the multifactor authentication space.

16:28 A number of the clients you've had weren't using all the full functionality of it and where they've been able to use products like Microsoft Authenticator that they may have been able to get as part of a wider bundle, which they weren't having to pay extra for. They've been... They've done that. We've seen a bit of attrition there. But I think where we are seeing some real wins now is in that on premise side where actually the people who need our product, the people we have left are those who have the need for the additional functionality that our product can provide. So we expect to see that stabilizing and actually growing back into in FY twenty seven, particularly with the potential upside of the data discovery product, which we hope to see more of coming in H2. There's a little bit of a different classification between the cost of sales and the admin expenses this year. But what you're essentially seeing there is a relatively static cost base within the software side.

17:20 Revenue down 300,000 year on year on an annualized basis, dropping through to an EBITDA that's down 300,000 year on year. So what we do see opportunity there, we didn't want to just stay static on that. So we have also implemented a restructure in the tail end of this financial year. So not particularly impacting these numbers, but impacting the numbers going forward. So 800,000 reduction in annualized spend on software. More than half of that will be CapEx. So won't impact the P and L other than the amortization you'll see in future years, but also 0.3 reduction in OpEx. And we've also restructured that business to simplify distribution channel, take out some of the layers of distribution, which will mean on every deal we're selling in some of our key markets, we're actually going to retain about 20% higher

18:12 value of that deal into our revenue line than we've seen before. It's been a more challenging space in the software market. It is the smaller part of what we do, but we do see some some reasons and we've taken some good steps to set us up for more success going forward in that side of the business. From a cash flow side, we continue to grow our cash up to 5,600,000 at the year end with no debt. So it's a really strong balance sheet. The cash growth does lack or lag the profit growth a little bit. Principal reason for that is the largest single deal we signed during the year. The £25,000,000 deal with £12,000,000 of that impacting FY '26, we signed in June. And so none of the cash and the profit element of that deal would been collected at year end. But ultimately, we're seeing a strong cash position, strong balance sheet and that's creating opportunities for us. So

19:08 think we've always one of the questions that always comes up for us is you're holding quite a lot of cash, what are you doing for that and how are you going to make sure you're giving shareholders best returns for that? And I think we've tried to be very consistent in how we've answered that. It's important for us to have a strong balance sheet, Enables us to do a couple of things. Firstly, I'm sure you can appreciate if you're signing multiyear deals with Hamashti's government, with big banks, big telcos for mission critical pieces of software for them, you need to demonstrate a strong, strong level of resilience. They need to be very confident you're going to be around in a few years and having a healthy amount of cash on our balance sheet enables us to do that. It also enables us from time to time to cash flow certain deals and investors who've been paying close attention to our sort of our regular results and looked at the half year numbers, would have seen our cash was down at half year because we did exactly that. We paid out around $2,000,000 on a deal, which we didn't collect the cash on until the other side of the half year. So having a healthy balance sheet enables us to show that resilience, enables us to drive additional margin by occasional cash flowing certain deals.

20:15 But I think we've also always been consistent in having up to GBP 5,000,000 of cash allows us to do all those things. Beyond that, it opens up new opportunities for us. Yeah, the primary thing would always look at is how do we use that to drive growth. And if we can find great growth opportunities, we'll look to take advantage of that. But we also want us to have the flexibility to return value to shareholders in other ways. And so a number of you would have picked up on the fact that we've already started a capital reduction process, which will give us the flexibility to either declare a dividend or buy back our own shares in the future. There's two stages to that. One is to get the shareholder approval for it. And the second is then you've got to go through a high court approval process, which are primarily there to protect creditors to validate and complete the process before you're then able to declare a dividend. So we've been through the first part of that. You would have probably have seen we had a general meeting in the company about two weeks ago.

21:09 Pleased to say we had 99.8% of shareholders of the company approving that process. We're now in the process of preparing the documents we need to for the High Court process. We'll finish that process, I suspect around the end of the calendar year. So we'll go into FY 2027 as a calendar year with the flexibility to look at those different ways we can deliver value back to shareholders. And that is all I was going to do from the financial side. Thank you, John.

21:42 So just some of the key drivers as to where we are today. Obviously, you've seen the results, you've seen the numbers, but where are we going? Obviously, we've got a... There's two phases to what we're looking at. One is obviously continue with our organic growth. Our sector is growing and that's contributing well and we're we're very much in that space. We've been successful with our public sector and we've now got a significantly greater offering inside our g cloud 15 with the government and we're responding to more bits. We've using our own AI internally to get more throughput from the teams. And we're being more efficient. We're not using AI to reduce the headcount. We're using AI to actually increase our output. So hopefully we're going to get more bang for our buck And with that, we do see a good growth opportunity inside public sector.

22:41 We've also got quantum on the horizon. We've been talking about quantum now for a good three or four years and now we're starting to see new technologies come available. We've already got two in our kit bag that we're working with. One of them is around, obviously, front end security and the other is around data security. And, you know, the quantum computing isn't necessarily publicly available at the moment but, obviously there's a... There are nation states that do have it and there will come a time when it becomes more of a headline news and we're all going to have to respond differently to how we do things today. Until then, we're obviously working with large corporate clients to actually bring to their attention our capabilities and the technologies we've got today and they're in discussion.

23:30 Data discovery, obviously with the compliance rules, they're only getting tighter. The more bad actors that steal our data, the more we have to respond to it, the more regulation comes in, the more fines and penalties will be bestowed upon large corporates. And so we're in that space with our own proprietary software and we intend to build

23:49 on that. We have our data discovery but also we've got our data access management as well to validate who is touching data, who's moving the data and those control mechanisms are going to be a key significant part of what we do moving forward. Data sovereignty and who owns it? These are all the things we need to know now as individuals and the governments are making sure of it. So you know, with some of the technologies we've got, it helps control that data sovereignty, who owns it, where it sits. You got The UK data laws, you got the European data laws, the American data laws and then even in Europe you still got you certain principalities that are insisting on the higher level of data control and we're addressing those needs and wants with a very diverse set of technologies.

24:42 A lot of our blue chip customers, they're international by nature so we're very used to actually dealing with not just the laws and the systems of The UK but a further afield and we will continue to develop that. It's all going to be around the data, who sees it, who touches it, how do you secure it, how do you audit it and how do you make sure it doesn't get in the hands of the bad people. And that's what we're all about. Now, that's on the organic side so we're to carry on doing that but what's actually going to help us accelerate really quickly is obviously inorganic target acquisitions. We're looking for organizations when you consider if you're buying a software company, you know, with twenty years experience, the developed client base, developed product set,

25:25 they're expensive. So as John mentioned about our cash position at the moment, we want to bring best value to the shareholders. So it does give us choice, but what we are looking for is to obviously inorganic growth. And I'd imagine there's quite a few opportunities coming available at the moment where in the market space and I imagine for us focusing around the services sector would be a key priority for client acquisition and actually seeing the company grow that way. So it's on the agenda again. We're now in a good position and we've got a very strong footing and we can see a pathway through over the next few years of how do we actually get to that 100,000,000 target.

26:14 So coming back to the executive summary, so hopefully from today's presentation you can see obviously there's a major opportunity in the market sector. We're a company with proven ability. We've got awards to our name. We've built our individual brands over the last twenty years. They're recognized in the market space and they're by large global organizations today. The relationships with these some of these customers extend back north of twenty years. And I'm pleased to say that, you know, with the type of market space that we sit in, we are seeing a lot of repeat and expansion inside in those clients. And we delivered the last couple of years, we delivered strong growth and we're feeling confident about fiscal twenty seven.

27:03 We've already announced a couple of large deals. Obviously, we're positioned ourselves on g cloud 15. We've also won a a recent deal which we've published on the the RMS. So we're feeling confident about our growth in the government as well as our major corporate banks and and telcos. We've got a good strong financial position and zero borrowing. We've got good balance sheet. We will continuously use our cash to help fund and drive some of the larger deals. We need to make sure that we can stay in the game and appear and we act financially robust with that. But at the same time, know, the reason that doing John's been doing his recent work is obviously to free up some capital to see how we can best return some value back to the shareholders.

27:50 So inorganic growth is on the agenda. We're not just going to be buying anything. Only going be buying something which is accretive and they actually going to add value to the organization and something that we can actually show good value and good synergy to our shareholders. And that's all going to hopefully going to give our shareholders back the value that they've been searching for over the last few years both in the growth of the company from the top line and its EBITDA position

28:21 also with, you know, expansion by acquisition as well. And with that, I'd just like to thank you for listening today and I'd just like to pass back to Control. That's great. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. As you can see, we have received a number of questions. And if I may just start off with the first question here, which reads as follows. Where do you see growth within the company coming from in the next twelve months? Okay. So growth, obviously, we're seeing a lot of investment being made at moment in basic email security from our financial institutions. We're also seeing packet and forensic monitoring in our telcos.

29:09 At the end of the day, they're all having to invest. The larger the firms, obviously the bigger the numbers and you're seeing that in some of the RNSs we're releasing at the moment. We're also seeing a lot of threat intelligence requirements coming through. So this is information from the dark web. So, you know, that's all being coupled with one of the challenges is not having the resources available with our client base. So for us, we're actually sending those services as well. So it's not just a product and solution, we're wrapping those in services and that's where we're seeing the majority of our major growth coming from all sectors, government, telco and finance that we we operate in. That's great. Just turning here to the next question. I consider share buybacks reduced liquidity in small caps. Therefore, I prefer a dividend.

29:55 What are the views of the board and your nomad? Shall I shall I pick that up? First thing, I guess, to address there is why would we consider a share buyback? Historically, we're sometimes seeing some quite big fluctuations in the share price off the back of some very small volumes in trading. And if we go back to even the very tail end of last financial year, so back in sort of May, June, some of those sales were happening at share prices around 35.40 p, which we felt fundamentally undervalued the company. If we do go down the share buyback route, it's not going to be a significant proportion of the company's cash. We're not going to... We're not using that as a route to take a load of

30:38 shareholders, you know, out of the market. It would be used as a route just to smooth some of those fluctuations, which can be distracting for shareholders and create a sort of a slightly artificial picture of how the company is doing just because someone suddenly dropped some shares on the market on a particular day. That would be the logic we had share buyback. It wouldn't be hugely... Yeah, it wouldn't be off huge scale. Terms of where the board sit, think the dividend is the one that'd be more attractive to shareholders. We haven't formally approved that as a board policy yet. So as we clear the way and go through the process, the board will then formalize our decision on that front. So we don't have a, I guess, a policy to announce on that front yet. What I can say is obviously that there's quite a bit of work to do to go through a process like that. We've been through a general meeting. I've now got to prepare some analysis and as a witness statements to take to the high court. We've got to get a barrister to go through that process with us to submit the application. Yeah.

31:30 It's it's not something you'd do if, you know, if you, you know, just on the off chance you might want to might want to do something at a point in the future. Hopefully, that positions where where we sort of, you know, without without sort of quoting a bold policy that doesn't exist yet, it pretty gives you a flavor of what we're thinking on on those fronts. That's great. Just moving on. As threat actors increasingly leverage AI to automate and scale for sophisticated attacks and with quantum computing on the horizon threatening traditional encryption standards, how are you evolving your proprietary software, such as your access management and data discovery tools, and managed services portfolio to help blue chip and public sectors clients future proof their cyber resilience against these next generation risks?

32:17 Well, that's a big question. So, obviously, we're... We've been talking about Quantum now for a while. It's on the agenda with our software division. When quantum comes available, the world's gonna change if we believe what people are saying about it. So a lot of those old traditional methods probably won't be won't be used anymore. They will they will change. And that's right across the board and and that's, you know, from from Microsoft all the way down. So what we will see is, you know, we are reviewing that space. We are working with our customers as well and we do have a couple of technologies where we're defending from quantum at the front door but also in data management in terms of where it's stored and how it's stored.

33:02 So we're looking at those sorts of things. In terms of identity access management and data discovery, data discovery and some of those things will sit behind those security fences and they will sit inside the network. So as long as we've got a good strong perimeter, then we'll have more capability to actually still use some of those identity access management components inside our networks. But I'm does need to evolve, and the answers to that yet are not not available, to be honest with you, but they're being worked on. And, you know, the the people that are in the have been working in this space now for for the last twenty five odd years. They're they're the guys who are leading this conversation inside our organization. So we will be coming back once we're we're ready and we're still a few years away before you know, quantum's you out there but, we, rest assured it's on our agenda and it's being worked on at the moment.

34:01 Thank you. Just, turning to the next question. Going to all the effort to generate distributable reserves and then not declaring a small dividend or declaring a buyback today seems like a massive own goal. What is the thinking behind this?

34:14 That... That's probably one for me. So so the process to completing that transfer of reserves has to go through two stages. I think and I touched on this. We've been through the first half of that was to get the shareholder approval. We've now got to go to the High Court to ratify that. We then file that High Court decision at company's house, which completes the process. Once that is done, we're in a position to then announce. That's something that depending on how long it takes us to get a court appointment, why that happened just this side or just the other side of the new year. But but essentially, from the start of FY '27, we'll be in a position to to advise on that front. Thank you. Just moving on. It's it's like calendar year '27. Sorry. Congratulations on a fantastic year. I'm a fairly new investor. Can you help me understand your position in the market? Are you in competition against much larger businesses, or would you say you're the market leader in your niche?

35:08 I don't like using the word or phrase market leader. The market evolves too quickly for us to be a market leader. What we are is we sit at the top of the triangle and we invest time and effort in new technologies and leading edge technologies. We work with some very large banks and telcos where we do share thoughts and ideas with them. We do review technologies with them and we do bring on new technologies because of them. In terms of our competition, well, we all know the names, you know, the WWTs, the computer centers, the SCCs. Some of those are actually clients of ours. Others are also... We do go toe to toe with them, you know, big global organizations.

35:54 Some of them move at glacier speed and where we're more nimble, we're more agile and we can actually respond because we're bringing new technologies to the table. Our client base and the people that we talk to are very interested in having a meeting with us. Some of the big broadliners and they're talking about the same things that their competition are talking about on a daily basis. So we try and move ourselves out of that space. We only sell, you know, good strong technologies with good strong double digit opportunities with good repeatability and that's what you see in some of our RNSs. Those deals are multi years with blue chips and we've beaten global organizations to them both in domestic capability and internationally and that's also expanded into the government as well. So we're going toe to toe with the largest companies

36:44 and we are winning in our area which is a niche area but as for market leader, that's continuously evolving and, but we're up there and we're winning the deals. That's great. The company still has large contracts as the backbone of sales, which makes working capital flows particularly large for a company of this size. What was the max, minimum, and average cash balance during the year? And how do you expect these cash figures to develop in the current year? So I picked that up because you're right. It's... It it fluctuates a lot, and and there are days when you look at the cash balance and, you know, you feel incredibly wealthy if if we if we collect on on one of those major contracts where, let's say, we're invoicing £45,000,000 a year, and we're collecting that in advance of paying it out. There there have been days when I look at the cash balance over 10,000,000 and I think, you know, we're in incredibly luxurious position, but then you've got to pay the supplier who's who's supplied the software and hardware as part of those deals.

37:39 So it... There there are big fluctuations. I would say, typically, you know, you've seen us start a year with around 5,000,000 and I think in the previous year, we started somewhere around similar level. The cash will drop to its lowest underlying level, typically around the half year and I think if we had we not been sort of cash flowing a particular deal at the half year this year, would have been at around GBP 3,700,000. And then it tends to get to a high point often around the end of the financial year, sometimes just after in the case of this financial year because we hadn't collected on that one major deal. Typically, the end of the year would be a stronger period for us because our busiest period historically is in around the end of what's now our Q3 in around March kind of time.

38:27 It's one of the reasons, the main reason we moved our financial year end was to take it out to that kind of peak. So on an underlying basis, we would probably average somewhere around 4,000,000 through a year historically with a low point around half year and a high point at the period end. It's really hard to say what the high and low points are within that because they are so contract specific to when particular deals are landed and when particular suppliers get paid. But as a general trend, you will continue to see those sort of fluctuations up and down, but you should see the the overall level of cash steadily rising year on year. And so fluctuations around us sort of, I guess, an an ever an ever increasing underlying level.

39:08 That's great. And the next question we've got here reads, SHEARWATER has consistently demonstrated top line growth and healthy cash generation. Yet statutory pretax profitability has historically been eroded by exceptional restructuring, charges, impairments, and high amortization. Moving into f y twenty seven, what specific operational milestones must be crossed to ensure that top line revenue growth reliably flows through to statutory net profit rather than being absorbed by these reoccurring below the line items? Feels like an accounting question, which is probably me again. So I think firstly, part of that will come with your scale because if we strip out the exceptionals, which I'll come back to, a lot of those things are relatively constant.

39:53 The depreciation and amortization we look at probably more meaningfully is the depreciation and amortization on the spend we're making on our product, which is somewhere around £1,000,000 a year just over at the moment. That will come down slightly as I think I've touched on. We're going to slightly reduce the rate of investment in some of the new products because we understand where our core product can win and we've been through relatively intense phase. So that will start to come down slowly, but inevitably with depreciation and amortization, if you reduce spend now that it takes a few years before you get the full effect of that. We're not expecting significant exceptional items in future years. Last year, we had a big number, which again, it was a non cash item on impairment. A little bit of that, the answer that will depend on where the growth comes from and where the success comes from year on year. But we feel like we there's no impairments this year because we try to do a proper job on clearing books this year.

40:49 We did feel it was the right thing to do in the performance of the software business to do a restructuring towards the end of this year to position us for success going forward. But we're not anticipating that being a sort of recurring year on year item that sort of shareholders

41:03 would have to get used to seeing. So I think a combination of the depreciates amortization on non cash items, they take a while to clear. We've actually reduced our level of CapEx. So in terms of how quickly it translates to cash that will improve.

41:20 Amortization, I guess, attached to the historic acquisitions exists and it will it will flow through slowly, but it also needs to be taken with a pinch of salt into how much that is genuinely impacting on our sort of underlying underlying trading performance. And I... Yeah. As I said, I don't think we're going to see consistently high levels of exceptional items year on year. We've tried to, I guess, clear the decks to set ourselves up for, you know, consistent growth and improvement in that bottom line performance going forward. That's great. And the next question we've got here reads, how should we expect to see gross margins develop in future years? Obviously, margins in the team suggest reselling remains of the bulk of the company's activities, but a shift to higher margin activities would be transformational for the company.

42:06 Totally agree with you. Maybe I can answer part of that. So what, obviously, we're doing is developing more of our own in house services. As the technology product set and solution set narrows, our clients are looking for too much product sprawl and they're looking for fewer products to do more. They don't necessarily have the resources. So we're obviously lining up our resources and we're growing our engineering and our consulting side to actually meet that demand. So what we're seeing is a lot more opportunity for good, strong, reliable

42:40 long term contracts where we're actually delivering more service value inside the solution itself. And the problem when you're delivering to large corporates is they want to do it themselves but now because of some of the complexity, they need to outsource certain functions and we're getting involved in those. We've got a number of contracts today and some of those extending and expanding and we are hoping to actually see more of those coming through. We're also using more AI as I mentioned previously. We're getting more throughput so we're getting more done with the same amount of people and once again we're expecting to see big growth opportunities from that. And obviously John's been good at keeping the efficiencies inside the company. Obviously we have to look at inflation and the impact it has on our staff and we have to address those needs and spend money there but we're doing obviously very cautiously and what we are doing is making sure that our investments internally are adding value to the business and to the shareholders.

43:47 So we're very much focused on obviously margin growth and making sure that our solution mix is right and should any of those solutions not be strategic, then they will get cut and if there's inefficiencies inside the business, they will get addressed And so that's what we've been doing over the last few years and that's what we'll continue to do. That's great. And then the final question we've got here reads, given your recent g cloud 15 expansion and the new one 700,000 central government win, how well positioned is SHEARWATER to capture a larger share of upcoming public sector defense and critical infrastructure spending over the next year? Well, I think there's a lot of departments that I've seen... I think you've seen it on the news where they're all complaining because the government's not spending the money at them.

44:33 But the areas where they are spending it and they see the bigger threats is in security. And, obviously, we're well positioned. We've got north of 50 solutions and services in g cloud 15, up from 31 from from g cloud fourteen. We're using AI to get through... We get delivered an inch worth of paperwork which we then got to digest. Before it was a team of people who would have to read it in three or four times. It would take a week to review it, then a week to respond to it and then we'd have to wait months for it to come through. Now what we're seeing is that we can ingest this paperwork very quickly. Within thirty seconds we know we're going to bid it or not, then we can start actually preparing our response for it. Once again, we're using AI on this so we with our own homegrown technologies and services and solutions, it's great. We've also got our partners there where we're representing their technologies.

45:26 So we're not just advertising our name inside g cloud. We're also advertising the name of our technology vendor partners. So any opportunities that come through for them come... You know, there's an opportunity for that to flow through us. So we... We've got a very big net. So we do expect to see some good growth out of, out of Central and local government through the g cloud 15 platform. It was it was good for us the last time and we're expecting to see, growth on it this year as well. That's great. Thank you for answering those questions you can from investors. And, of course, the company can review all questions submitted today, we'll publish those responses on the Investor Meet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important for the company, Phil, could I please just ask you for some closing comments?

46:10 Certainly. First of all, I'd just like to thank the shareholders for their patience, and hopefully that you can see the journey that we've come from and, where we're going. The market is growing at phenomenal rate. We're growing as well. You can see it in our numbers. We've a good team. We've got a good strong board now. We've got a new chairman in who's, very pro growth and, he's assisting us. We're very active and we've got a great leadership team. So the company itself is in a very good position. Moving forward '27, we started off well. We're confident, we're on target, we're obviously we've got great opportunities in front of us and we're hoping that in the future we'll be able to bring some of those stories and an RS to you so you can be able to gauge our performance today.

47:01 And with that, I'd just like to thank you all for for taking the time today to come and listen to us. That's great. Thank you for updating investors today. If I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.