Sysgroup (LSE:SYS) — Interim Results for the period ending 30 September 2021

0:01 Good morning, ladies and gentlemen. Welcome to the SYSGROUP PLC interim results for the period ended 09/30/2021 investor presentation. Throughout this presentation, investors have been in listen only mode. Questions are encouraged. You can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. To click q and a, scroll to the bottom, type your question, and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via Investor Meet company dashboard, and you'll be notified once these are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Adam Binks, CEO and Martin Orton, CFO of SYSGROUP PLC. Good morning. Good morning, and thank you for the introduction.

0:46 Yes. Good morning, everybody, and thank you for, once again, taking the time to join us for SYSGROUP's half year under our FY twenty two period.

1:01 So just a quick introduction for those of you that don't know us. My name is Adam Banks. I'm the chief executive officer of SYSGROUP. I've been with the business since 2014. I was appointed as chief executive back in 2018. My colleague over here, Martin Austens, who's our chief financial officer, who's been with us since July 2018. Look, I appreciate many of you on the call will know who we are and what we do. But for those of you that are new to SYSGROUP, I'm just gonna spend the next five or ten minutes giving a quick overview of who we are and what we do just as a refresher and obviously to bring anybody up to speed that is new to the business.

1:49 So we are an AIM listed managed IT services and cloud hosting provider. Our full year last financial year, we reported revenues north of 18,000,000. We delivered adjusted EBITDA of 2,900,000. We're employing about a 110 people across five different locations in The UK, being Liverpool, which is our headquarters with an office in London, our new sales and marketing office in Manchester, which we opened earlier this year, with an office in Newport and another in Telford. So we're providing predominantly consultancy, cloud hosting, and connectivity services to The UK mid market, and I'm looking after around about 700 plus active customers.

2:40 We operate the business on a twenty four seven, three sixty five basis, so we're always available to our customers. As you'll know, IT is pivotal to what most businesses do now, in order to transact their own business. So we'll make sure we're always here to support them. And, we we maintain our greater than 97% customer satisfaction, which is a big KPI for us. It's really important for customer retention and making sure that we look after and support well those people that we do business with. So just down on the bottom right hand side of the slide, you'll see some well known logos there in terms of big vendors. Kinda shows the barriers to entry for businesses coming into this market space. You know, it's not simple to set up a managed services business.

3:31 You need to have the technically accredited people and sales staff within your business, and we invest a lot of time and effort with our partners such as watch watch god, Microsoft, and Dell, which puts their logo next to ours and gives great credibility when we go out to pitch to new businesses. It really shows that we're invested in technology and that we're market leaders in that position in that position. And as well as that, supplemented with our accreditations, you know, we've got the cyber essentials. We're ISO 27,001, and we're also a Visa, merchant service provider level one provider, meaning that we can host credit card data to the most secure standards out there and get help get our customers through their annual orders from the PCI DSS council.

4:27 So in terms of our capabilities, as I said, we were a managed IT services provider with huge cloud hosting capabilities. We have presence in five major data centers across The UK. The picture that you see over on the right hand side of the screen there is is actually you know, it's not stock image. That's one of the data centers that we have about a 100 racks worth of equipment in, which is now known as CWL one in Newport. It used to be known as next generation data until it was acquired earlier this year. So we we host our infrastructure quite strategically across different parts of The UK to give not only geographical diversity, but also low latency network interconnect between those data center footprints.

5:19 And I'll talk a bit more later on about our SYS cloud platform, But SYS cloud is our equivalent, if you like, of a Microsoft Azure or an an Amazon web services platform, which is architected in a hyperscale fashion, meaning that we can deploy workloads for customers over multiple locations being the five data centers that you you see on screen there, as if they were all running in the same building, which gives great diversity to our customers and also allows for us to be able to take sites offline for maintenance and also suffer outages without customers noticing it. Our network, when we acquired Hub Network Services back in June 2019, we pretty much fully integrated the network right across the business now, and we're running all of our connectivity and data transmission off the back of that network.

6:16 As you can see from the from the map there on screen, it runs right around The UK, meaning that when we bring customers into the business and we shift their workloads and their line of business applications into our data center locations, we can also provide the connectivity to their head offices and to their branch offices to bring their connectivity experience as close to the data as possible without the need for transversing the public Internet. So a nice big 10 gig fiber network ring that we partner with many different operators on to give us diversity, providing a 100% uptime on that network to date, which is fantastic news,

7:00 meaning that we can keep our customers always connected. And from our telly house and our NGD presence, we also plug into Amazon and Azure, which really helps support our hybrid cloud model where we use stuff in our data center to service people's requirements. And then we also make use of the public cloud, such as AWS and Azure, to support workloads that are are right for those, those facilities.

7:32 So in terms of what we do, you know, we split our offering down into into these seven core areas around cloud services, connectivity, managed IT, security, disaster recovery, professional services, and raw infrastructure and hosting. What this means, whilst it's quite a busy slide that, you know, those of you who've heard me before, I always say this is a very busy slide, but it helps demonstrate the breadth and depth of the service offering that SYSGROUP has.

8:03 So customers can take a very small portion of it, or they can take all of the things that we we we can offer to them from each of the seven circles on the on the the slide. You know, it's fantastic when a customer buys everything from us, but it's very few and far between, unfortunately. So, you know, we do try to prosecute the white white space that we have in the customer base all the time. But in terms of our capabilities, businesses, especially since the pandemic now, are looking to move to more of an outsourced model. They want to be able to have a single point of contact so they don't need to call the connectivity provider when there's an issue for the connectivity providers to say it's your hosting provider or they've got some issues with the actual equipment that they're using to access the hosted infrastructure such as your desktops or your laptops.

8:59 You know, so to speak, they want one throat to choke. And I can see that the industry is moving more and more towards that model of wanting to procure everything from a single supplier. Hence, the reason why we've made the acquisitions that we've made in the past. We've built out the service portfolio in order to give us the offering that we've got to date.

9:24 So just moving on now from the updates on the business before we get into reviewing the the first pay the half one period in FY twenty two. We've embarked on our ESG strategy for the first time, and I'm gonna let Martin give a little bit of an update on that before we move on. Yeah. Okay. Thanks, Adam. So, yeah, just to to give you an update on this, we decided this is for the first time we're gonna embark on an ESG project. We're we're not actually required to do this as as I'm sure you're all aware in terms of our size. We're we're not hitting any of those thresholds that make it mandatory. However, we've taken a decision we think on a voluntary basis this would be a really good thing for us to do. There's there's a number of reasons for that, as you can imagine.

10:13 One of them is we've got an investor community that's very interested in ESG and wanting to understand what their companies and investments are doing in this area. We also acknowledge that there's headwinds here around regulatory regime, which might take a number of years to go, but it's set in our direction. But also, and I think this is quite an important point we want to make, we we really wanna do this properly as as a company for the good corporate system that will will give us and allow us to do. So we're very keen to get this embedded in our business. So to that extent, just in the last couple of months, we've engaged a company called Inspired, who I'm sure some of you will will know they're a fellow A Mystic company. They have their own ESG advisory division, and they're gonna be working alongside us over the next two to three years helping us on journey.

11:07 So they're in spite of working with our senior leadership team. They've already started that. It's kicked off in the last month or so. Certainly in year one as this will be, we're keen to get ourselves benchmarked, see what we do and get that reported for our annual report next year which will come out in June. So really year one is where are we today, what are we doing, we are doing some good things in this area already and get that reported. So you can expect in our annual report disclosure on the TCFD and and ESG area. We'll then move on and and turn that forward in year two, year three. So so it's a big project for us. Spoken's get on with it, and we think it's a very good thing for us to do. Very good. Thank you.

11:53 So moving on into the the first half of the year, you know, look, we've reported a revenue down since the same period last year, which which we'll talk more about as we we move through the deck. But still a nice strong 7,580,000 of revenue in h 86% of which was delivered from our recurring managed IT services business, really demonstrating the strength of our contracted recurring income. And adjusted EBITDA coming out exactly where we expected it to at 1,340,000. Great cash balance of 3,470,000. As you know, still demonstrating a great cash generation from operations.

12:42 As I said earlier, we're we're maintaining the threshold on our customer satisfaction. We're still north of 97% for that six month period and rolling on into the months in h two. We've continued to maintain that. I said I'd talk some more about our investments into our SYS cloud platform. So we've we've invented SYS cloud 2.0 as we're calling it internally. And, actually, we're taking the opportunity to consolidate some of our data center space and make better use of the footprint that we've got in the next gen sorry, the CWL one facility that we've got in Newports in South Wales. And in this financial year, we'll probably invest about £200,000 of CapEx into expanding that SYSGROUP SYSGROUP for future growth and resilience and taking it up a level into the in terms of the the next layer of technology.

13:46 And as Martin has just nicely walked us through, we've commenced our ESG journey, albeit as a as a voluntary thing. You know, we're not mandated to do it, but we think it gives us good standing in the market.

14:01 It puts us up there with the with the bigger aim as the companies that acting more grown up and being a good corporate citizen to demonstrate that we are trying to have an impact on how we impact the environment and the the surrounding governance and social enterprises around that. So, Martin, if you wanna take us through the financials? Yeah. Okay. So we've got three, four slides for you just to sort you through our headlines, and and we'll go through the primary statements, and I'll explain that for you. So in terms of the headlines, and I'll I'll talk about revenue a little bit more on the next slide, but revenue is 7,580,000. As as Adam's mentioned, it is down the comparative period last year. I'll talk a bit more about that in a moment. Recurring management managed IT services.

14:49 If you've been on these calls previously, it's in our RNSs. We've already talked about 75%, 25% model of having 75% contracted income, 25% what what we call value added resell, which is the one off sales of equipment and licenses. I think what this is showing now over a number of periods as as we're going through is we're moving to an eighty twenty model now. Moving up the scale in in terms of having that contracted income. The adjusted EBITDA, 1,340,000. So it is slightly down on h one last year, but absolutely in line with our expectations. And our expectations indeed for the full year are held as expected on the forecast. Adjusted PBT is is similar to last year.

15:35 One one comment, I guess, on the EPS is You'll notice that it's 1.5 p, 1.7 p last half year. We've actually absorbed what is a deferred tax adjustment in the first half, which is about 140 k. And this has to do with the change in corporation tax rate in April 23. So this is something I imagine is gonna affect all companies. But because that change in corporation tax rate has been inactive now, the deferred tax has to be recognized this year. So in the first half year results, our tax charge includes a one off adjustment. That's had a 0.2 p impact, negative impact on EPS, but that will be something across the across all the companies. Net cash is very strong, and I'll I'll talk more about that on the cash flow slide.

16:25 So this is the this is the income statement for the half year. So I'll I'll just run down and give you a little commentary on this. So in terms of the revenue reduction, roughly 16% down in terms of against h one last year. Within that mix, managed services is down 13% and running on degree sales down 30%. And we've got several dynamics around this number, and it's worth, I think, just just putting some of these out. And and, indeed, Adam will talk a little bit more about these in terms of the market position after the financials. In terms of managed services in in FY twenty one, you'll recall that we had a a revenue decline clearly very much strongly linked to the COVID pandemic and the effect we had on that had on the economy at that time.

17:18 Well, that's what's happened in that in that time is we've had churn, higher churn than usual. And churn is is is two things. There's contract churn and customer churn. Now what what we found in terms of churn we've had to or we've we've we've found is that we can typically have a customer that has 10 or 12 contracts with us. And what they've done on renewable during the COVID period is that maybe typically have a 100 users, and they they now need to have a requirement of 80 users. So whilst contracts are still there, if you like, the the churn within the contract is reduced. So what we have is a customer base or or some of our customers in that period on renewals have taken the opportunity of moving down their own costs where they can. So that's what's impacted managed IT services.

18:04 And because we had that reduction in FY twenty one, we've entered FY twenty two at a lower managed services income level compared to the comparative period last year. So that's why we've got this trajectory downwards, which we're we're in the middle of in this half year period. Obviously, we'll come on to the the market today and how we see that going forward and how we think that will come around. Just in terms of value added resell, another dynamic which we're seeing is it's been an interesting period these eighteen months. So as you have heard, IT has got a lot more on board agendas over the eight last eighteen months for for obvious reasons. What's happening at the moment, and this is from the conversations we've had with with a number of our customers, is they're recognizing absolutely the need to move to cloud transformation and and and digital transformation.

18:58 But what they're doing is taking the time to work out how to do it because it's not it it there's some complexities to it. It's quite a lot of project management to get through. Now what they're doing or or certainly in some cases is whether on an on premise solution is extending the lives of their on premise equipment for another year or so, which is therefore affecting our value added resell. So we're not getting a site cyclical file and tech refreshes. But on the on the positive piece on that, it's good news that they're doing that insofar as they're considering the transformational piece, which then lends itself into our managed IT services and our cloud. So that's a bit of a a dynamic that's that's happening at the moment. It's it's why our revenue is down at the moment. But as I say, we'll we'll address where we see the market just a a little bit further on.

19:52 In in terms of gross margin, pleased that we've retained gross margin at 60%. I think that's a strong position. Obviously, in a revenue down position, I think it's strong that we've got that resilience where the margin sustains. It obviously draws the point that if once we get this revenue moving upwards, we've actually got an opportunity to leverage the gross margin higher. So we'd be looking to do that in the future. Overheads are in a very good position. They've been controlled very well, not just in this last six months, but throughout COVID period. The the Synagis post acquisition we had acquisitions back in 2019 have come to full realization in this half year period. And, actually, when you look at the overhead base, we're kind of where we were a couple of years ago just at the point of making those acquisitions.

20:43 So cost synergies have come through very, very strongly, which good to see. Just to reiterate the point, and maybe particularly for people who are on this call for the first time, we didn't furlough any employees throughout the COVID period. There's not been any one off credits in our income statement at all. I will draw out one point, and you'll see that on the on the tax. I just want to reiterate this. The the tax charge has gone to 83 k tax charge this half year. As I say, that includes a 140 k 1 off deferred tax charge for the enactment of that change in rate. So just move to the statement of position, aka the balance sheet. Again, think this is a fairly straightforward balance sheet to understand.

21:32 It's a strong position. We've got cash, gross cash of 3,500,000. We we are a cash generating business that continue to generate going forward. We've got net cash of almost 2,000,000 after after you take off the loans and any liabilities. That will continue to grow and we're expecting net cash to probably be around £2.6 £2,700,000 at year end. In terms of the major movements this half year, we took the opportunity to refurbish in our Newport office and we've opened the new Manchester office which we mentioned back in our June call. Both of those have been excellent jobs to do and as our teams have come back to the offices they've been pleased to see some new refreshed looks at the offices. So that's been good to do. But I guess from a financial point of view, it's obviously nonrecurring CapEx.

22:27 So it's about 300 k of nonrecurring. Lease liabilities have gone up, just the Manchester office lease. Intangible assets. Project Fusion has continued. Project Fusion has been an excellent internal project for us. We went live with a new unified set of operating systems last year at FY '21. And this year we're building it out further. So we've built out further the marketing module, the people management module, further reporting quality of the system. So it's been a really good project. The investment in that is at a lower level until last year, but it will continue all the way through to year end. Just a word on working capital generally. Working capital is unchanged.

23:15 It's in a very good position. We operate to debt today's target of twenty five days. We're slightly below that at half year. Supplier payments actually unchanged and paid as normal. So working capital's running well for us. And again, just a note for people maybe who've not been on this call before, we've not had taken any COVID loans at all throughout the period. There's no deferral of tax payments in in our balance sheet at all. One thing we did do last year was defer the VAT payment, and that was repaid actually in December 2020. So it's a clean balance sheet insofar as any COVID items. If we just move to the cash slide.

23:59 So I mentioned we're strong in the cash position. We have cash conversion of 85%. Just a a note on that one, and for those of you who who've read our RMS, you'll see that we've changed our cash conversion calculation this half year. What I've what I did was take the opportunity of looking at our peer group, our listed peer group, just to see how other people measure cash conversion. And what I've tried to do is align it with what everybody else does. Previous to this half year, our cash conversion included working capital movement, interest payments, and tax payments. What we've now done is is worked out cash conversion after working capital only. So we we've removed the interest and the tax. So that's just in terms of putting it alongside our peers.

24:47 Working capital cash conversion is strong. 85% is target range. It should be the same level at year end. Last year, I'll just make a comment on the last year number, 124%, just in case anybody's looking at that. That included the benefit of VAT deferral at that point, which is 280. So 20% of that 124 was because of the deferred VAT payment at that time.

25:13 Higher the the CapEx expenditure I've mentioned includes the office refurbs, so that will come down in h '2. Project Fusion, I've mentioned, it probably a similar level of of spend in h '2. Our bank loan repayments have gone up slightly. So we we have a five year loan facility agreement, which was dates back to February 19. So just as part of that agreement, in year three, that steps up in the third year, and that'll be an additional 100 k for the full year versus last year. Lease payments of the Manchester office are generally coming down, and we expect them to come down. We We tend to buy rather than lease where we can.

26:00 Just worth mentioning, we still have the revolving credit facility for £3,250,000 with the bank. It's undrawn at the moment. So I guess when put these pieces together, and again we'll talk about M and A in a little bit, the firepower we have is we've got a good cash position, we've got a growing cash generation, We've got a net cash that's gonna be going up for the year end, and we've got the the RCF to execute, certainly on the on the smaller acquisitions if we need to. So I think overall, cash and net cash is in a in a very strong position. Brilliant. Thank you very much. So moving on to the current state of play with the market and kind of feeding into our revenue down position, which, you know, while while it's slightly disappointing, it's almost not unexpected.

27:01 There's some very good reasons for it, some of which Martin's already alluded to talking through the financial slides.

27:09 You know, we've been busy talking to our existing customer base as well as talking to new potential customers from our prospect base. We spent a long time nurturing opportunities and leads that come through into the business before we we convert those into sales. And the biggest message that we're seeing right now, and I know this is the case for certainly our peers as well, having spoken to some of my counterparts in our peer group, is people are delaying the decision to commit to long term IT contracts, the delay in decisions to commit to contracts in other areas of their businesses as well.

27:56 But, obviously, what we're interested in is their IT spend. And the biggest reasoning behind that that we're seeing is fear and uncertainty. People still aren't convinced of where the outturn is gonna be from the pandemic. Obviously, we're we're still in a pandemic. There there's still rumors on a daily basis of another lockdown, which I think many people are are are frightened and disheartened by. And I certainly am. Could certainly do without that. I enjoy being back in the office. But, yeah, there's still a lot of uncertainty out there in the markets. People are aware that they need to invest. They know that they need to do things differently in order to drive their businesses forward.

28:47 But I think many are still getting comfortable with their own financial positions and really trying to scope out whether we're we're out of the the the the sick end of the pandemic, if you like. But, you know, we are starting to see some green shoots of opportunity from the efforts that we're we're making with our customers and our prospects.

29:15 You know, people know that they also if they're gonna move from this on premise infrastructure where they've got some servers stuck in a stock cupboard that have been there for years, They know that they need to engage with third parties to navigate the technical complexities of all of the different solutions that are available to them out there. You know, a lot of people are of the mindset that that don't know, that it's very simple to log in to Microsoft Azure or Amazon Web Services, spin up an entire environment, and, you know, they kind of transfer the files across and off they go. That's not the case and and many find find that not to be the case once they once they try to embark on that journey or or even worse, actually go off and and do something like that.

30:10 There's so many complexities around security, around management, around instance management the rely on having really good technical people who understand these platforms to manage it for you and put the right workloads in the right environments. So our business is still very, very relevant because, you know, I've said it before, I'll say it again. We're not afraid by the public cloud. We embrace the public cloud where it's appropriate to do so. We use our Amazon Web Services and Microsoft Azure ourselves, And we couple that with our private cloud and our multi tenanted SYSGROUP platforms to ensure that our customers are getting the best possible experience and the best value for money, again, by using the right platforms for the for the right workloads.

31:06 You know, one of the other recurring themes that's starting to come through now, it's in its infancy, but it's definitely there, Its costs are increasing in the public cloud. So, you know, I always tell people, if you're a staff of business, you've got very little capital to get your business off the ground. Starting in the public cloud in a major and in AWS is absolutely the right thing for you to do because you can scale resources up and down so easily. You can run minimal instances. You can keep the cost base really, really low. You can turn it off when you don't need it, save cash. But as a business starts to grow, as user count starts to grow, there is an inflection point where having everything in the public cloud outweighs the benefits of having things in all ways on data center environments.

31:58 And it's plus the it's the hidden cost that people don't understand. You know, there's no such thing as a firm quote that you will ever get from from Microsoft or from Amazon for their platforms. It's always an estimate. As your data goes in, that estimate can go up or down. And, you know, the hidden and unknown costs can start to really rattle in these public cloud environments if you choose to try and run your line of business applications that aren't designed for the public cloud in those services. So off the back of all these conversations, you know, pipeline is starting to grow again. It's starting to build. It's not yet at pre COVID levels. I'm sure as we move forward into calendar year 2022, and more confidence starts to come back into the marketplace and we're seeing more people mobilize back into offices and whatnot, that pipeline will will grow even further.

32:58 And as I said earlier, from that pipeline, we are starting to see green shoots of opportunity, which is great news. And I'm hoping that trend will continue and accelerate throughout the next twelve to eighteen months. So, you know, the opportunity that that's created by all of that is hybrid working, I think, is something that is definitely gonna be around for the long term. Think many, many people have enjoyed the flexibility of being able to have some office days and some home days. I know some people just prefer the office, some people just prefer home, but I think the the vast majority, like the hybrid model. And I think businesses are recognizing that they need to support the hybrid model.

33:45 It's exactly what we've done in our own business. But what that drives is the need and the demand for businesses to make their business systems and their data available easily and readily for their employees to be able to access pretty much from anywhere in the world. And that drives us into cloud hosting and taking those line of business applications and that data from on premise instances into the data center and into the public cloud. And, you know, I read a a KPMG report from a couple of months ago that 56% of business executives agree that cloud migration has absolutely become a necessity for their business. It doesn't mean that they've done it yet, but they know that they need to, and it's necessary for them to be successful moving forward.

34:39 And the great thing about that is that drives the need for security. And as many of you will heard me say before, everything that we do at SYSGROUP, you know, whilst we're not just on managed services security provider, it forms a lot of what we do around security compliance and governance, and that's where we've got some real strengths in our offering. And when people do make the decision to move their their systems and their IT estate into the data center is we've got experts that we employ that can help secure those environments to keep the data protected as best as we possibly can. So I mentioned earlier the need for hybrid cloud. So, you know, we have embrace the public cloud offerings from Azure and from AWS.

35:30 But also, we get some great advantages of being able to host infrastructure and data in our SYS cloud platform and bring the connectivity into that as well, which is a true end to end hybrid solution. So we are well placed to deliver hybrid solutions to our customers and to our prospects. And I firmly believe, given the research that we've done, that it's hybrid solutions that will drive the future growth and drive the demand and the transition into the data center and into the cloud. So, you know, look, it's it's apparent malice IT spend has declined across the sector as a result of COVID.

36:16 I think we can pretty much certainly attribute it to to COVID. Martin mentioned earlier the difference between customer churn and contract churn, and it's certainly contract churn that we've seen on renewal with our customers, not all of the customers, obviously, but some of them who have faced financial difficulties as a result of COVID themselves. They've had to let employees go. As a result of that, you need less resources in your IT estate, and therefore, you reduce the amount of resource that you've got. You reduce your licensing cost. You don't need as many Microsoft three six five licenses moving forward. But, you know, most of those businesses have got a plan as they come out of COVID to return to growth.

37:06 They're still working with SYSGROUP, which is great. And that means that together, we should grow again in the future. We should see the the demand come back for that from those customers for more resources as they're able to reemploy those people and grow their own businesses at the top line again. And, you know, The UK managed services market, including the cloud hosting and connectivity, At the moment, it's worth around £12,000,000,000. So you can see there is a a huge spend of managed IT services. There's a huge market to go after. And SYSGROUP has been very successful in the past at displacing incumbent providers and winning business from our competition off the back of our great customer satisfaction, our great customer journey experience, and our technical competencies that we have within the business.

38:02 But, you know, to answer that, the difficulty that we're seeing in as I say, we're having lots of conversations, but the difficulty that we're having in converting business is because of the uncertainty, because of the fear, people are delaying decisions to spend because they've been reluctant to embark on large scale projects right now, which takes their data, takes their applications from either on prem or provider to provider. However, I'm confident that that will return in the in the medium term. So why should you guys keep supporting us? Your support to date, we're we're really, really grateful for. We're grateful for the institutional support that we've got, but we're we're underpinned by contracted recurring income.

38:51 I think we've demonstrated that through the number. You can see from the sales mix, 86% of it is coming from recurring income. So we've got good visibility of our future revenues. We're turning that revenue into into profit and then turn into cash as we've got great strong cash generation. Our institutional shareholders are really, really supportive. We've spoken to most of them yesterday, immediately after announcing the results, and we've we've still got them all behind us. They're all invested with a medium to long term view in SYSGROUP, and they they understand the impacts that COVID has had across the sector, but they also understand that the sector is is forecasted to return to growth, and we will see people spending on IT once again.

39:39 M and A still very much formed part of our stated strategy. The markets in which we operate is still hugely fragmented. There's great opportunity for us to make acquisitions, both bolt on and strategic, and we're still well and truly committed to to that m and a strategy. And as Martin alluded earlier, the cash we've got in the bank, the undrawn debt facilities that we've got, we've got great firepower, and we're well placed for when the market settles to continue to make acquisitions. And, you know, SYSGROUP is operating in a growing growing market with high future demand. As I said in the previous slide, the future demand is definitely there. We can see it. We're talking to people. We're hearing it all the time. People want to make decisions. They're just withholding from making them at the moment.

40:30 And you still got a fantastic leadership team and a fantastic board of directors and a fantastic senior leadership team in this business that is committed to the success of SYSGROUP. You know, while whilst it's it's been a bit of a bumpy period, I think, for everybody way beyond SYSGROUP. We've by no means given up. The drive and enthusiasm is still there to take SYSGROUP forward and be the success story that we really want this business to be. So, you know, look, in in in summary, to to summarize what we've just said, great recurring revenue, 86%, delivering 7,580,000 in the period. Adjusted EBITDA is well and truly in line.

41:15 You know, we've done a great job of managing the cost base and making sure that that doesn't get out of control. We've been we remain disciplined on it. We're turning that EBITDA into cash, which is a really strong KPI performance for the business, 85% operational cash conversion, which is what we target. We continue to look after our customers, you know, right throughout this whole pandemic. I couldn't be any prouder of the team than what I am on the basis that they've still managed to maintain the high levels of customer service that our customers are accustomed to and that we strive to deliver. Project fusion, which Martin talked on earlier, has been fantastic for our business. It's made such significant improvements in the operations.

42:03 We we really can't run the business from a single pane of glass. You know, you get many businesses that embark on m and a strategy, and they they forget to integrate. But I think we've done a really, really good job of integrating the acquired businesses, integrating the customer bases, the service offerings, billing, customer service, everything into a single system even from a corporate point of view. We we've actually hived the trading assets of those businesses up into a a single trading entity, which makes it really, really clean from a reporting perspective. And, obviously, we're being a good corporate citizen that we'd like to be, We've embarked on our ESG project to give greater transparency out to the market, and we look forward to giving you a a much fuller update on our ESG discoveries at the full year in June in in 2022.

43:04 So look, thanks for for listening to me today, and I'm happy to take some questions. Fantastic, Adam Martin. Thank you indeed for for the presentation today. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just by the team, take a few moments to review those investor questions submitted already. I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard on the Investor Meet company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order the company can better understand your views and expectations. Adam Martin, we've had a number of questions come through, and perhaps I could just read out the first one, and we we can start with that. It reads as follows. Who is your competition, and what advances do you have over this competition?

43:57 Yeah. You know, look, it's a it's a good question. As I said earlier, it's a fragmented market, so there there is lots of competitors out there ranging in in various different sizes, shapes, and forms. So, you know, if I just take our listed peer group, you've got the likes of Iomart and you've got the likes of the DEP technology group. If you take an Iomart, for example, what's our competitive advantage over them? It's probably the breadth and depth of our service offering. You know, we're we're more managed IT than we are cloud hosting, so we we go beyond the infrastructure for the customer. We support end users. We support the platforms that those end users use to access the data center hosted services.

44:45 We've got the security capabilities. And then, you know, you take somebody like an Adept Technology Group. Those guys have been doing a fantastic job in in their m and a strategy. They're very big in the in public sector. But, again, you know, strategic advantages is that is were more of the managed IT services piece. Think we just need to do a better job about shouting about that the rooftop so people really know the differences. Fantastic. Yeah. Thank you very much indeed. And the next question we've got here is reads as follows. Is the recent reduction in the group sales purely down to COVID, or are there other factors at play? Yeah. I mean, look, it's largely down to COVID. I'm not gonna blame it a 100% on COVID because I think it would be it would be unfair to do so. We do, same as every every other business from time to time, lose lose customers either through acquisition, through liquidation, or just because they find a better deal elsewhere and something that's more suited to them.

45:51 And that's exactly how we win customers as well. You know, we take people away we take customers away from their incumbent providers because they find a better deal with us. But, certainly, this revenue decline that we've experienced is largely down to COVID. Thank you very much indeed. The next question we've got here is, you're an acquisitive company. What gaps have you got in terms of product or geography? What quite criteria, including financial, do you look for in a target company? Okay. Good question. I'll answer the geography piece first. Geography, I I used to be quite focused on, and it was one of the advantages of when we bought SYSGROUP down in in Newport in South Wales. It kinda gave us that South South South Wales coverage.

46:38 However, I think COVID's transformed things a little. Geographical coverage doesn't really matter, but still when I look at the map and see that we don't have a presence up in the up in the Northeast Of England, it always makes me think, you know, could we be doing better up there if we did have a physical presence? And I think that's still yet to be determined as we come out of COVID and and more and more people come back. But in terms of is there anything missing from the portfolio? I don't think so. You know, if you go back to earlier in the slides, the fourth, fifth slide, you can see we've got that real breadth and depth in service capability. So our acquisitions now, we're looking for more of the same. We're looking for real scale.

47:25 And in terms of what we look for in acquisitions, I mean, a number of criteria that I'm I'm not gonna give away on this call. It'll be available for all to see moving forward. But recurring revenue is one of the biggest things. We're always looking for recurring revenue. I mean, I've said it before, we we could do we could do a deal a month on businesses that claim to be managed services providers, but actually, they're resellers of licenses. So contracted recurring revenue for services is one of our biggest requirements when when we're looking at purchasing a business. Thank you very much indeed. And the next one we've got here is the company is active on Twitter and makes a regionally large number of posts. Engagement levels with the tweets appear fairly low. Has the use of social media resulted in new contracts or business?

48:17 What a great question. I have my I have my marketing director this all the time. So it's nigh on impossible for a business in in our sector to to measure what we're getting from from social media. Social media is more about presence and brand awareness, So it's a difficult question to answer. Thank you very much indeed. Perhaps if you could just have a quick look on the q and a tab just to see if there's any further questions that you could pick up guys before we perhaps redirect investors to give you a bit of feedback. Yeah let's have a quick look. We've got can you give an idea of breakdown by sector? Well look Jeremy just quickly tell you that one. I mean just in terms of our sector we're very diverse across industry sectors so our top sectors both of which are around 1011% are financial services and actually IT technology customers across other sectors that then goes into single figures. We're not we don't bid on very specific verticals. That's not how we work in SYSGROUP.

49:22 Our services can be offered across all sectors and that's how we sell and market. Over the COVID period One of the reasons why we have that resilience was our leisure and hospitality area is about five or 6%. So pretty pretty diverse, but equally in terms of how we sell, we can sell to to all industries. Fantastic. Thank you very much indeed. Martin, perhaps, Adam, just before we we we do close off, I could just ask you for some closing comments. And, of course, any further questions that do come through for the company, they will be able to review and publish responses where appropriate to do so. If I could perhaps hand back to you, Adam. Yeah. Absolutely. Look, you know, we're SYSGROUP is still a very strong business.

50:07 As I've mentioned, we've got great recurring revenue. We've got solid cash generation. We're operating in a in a market which is gonna return to growth, And I'm really confident about the future success of business. And I'd just like to thank everybody for taking the time to join us today. That's fantastic. Thank you very much indeed. Adam Martin, thank you very much for updating investors today. I please ask investors not to close this session as you'll be automatically redirected for the opportunity to provide your feedback in order that management team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the management team of SYSGROUP PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you very much, and good morning to you all.