Vianet Group (LSE:VNET) — Results for the year ended 31 March 2024

0:00 Good morning, and welcome to the VIANET GROUP PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question or receives during the meeting itself. However, the company can review all questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll.

0:31 And I would now like to hand you over to Chairman and CEO, James Dixon. Good morning to you. Yes. Good morning, and thank you for joining us today. I've got Mark Foster, CFO, with me here and Sarah Bentham, our Finance Director, to answer any questions that Mark and I might struggle with. We'll move straight into the results. We think there are strong set of results despite the economic economic backdrop. Very good momentum in unattended retail and real progress in new verticals as demonstrated by the wins in the forecourt sector with, VONTEC and Willkomatic. And, of course, we have the BMI acquisition, the BeverageMetrics acquisition in May 2023 and the FUMP integration, and that's going extremely well.

1:21 And hospitality division, now we think it's turned a corner, and it's looking really positive going forward. The numbers themselves were ahead in all the key metrics, so we're in a good place for it to fuel our ambitious growth plans. Bottom line is that, you know, for the past couple of years, we've got a real focus on top line growth, and we're starting to see that come through now. For those of you who are less familiar with, VIANET or new to VIANET, I'll do a quick summary of, what we do. We basically transport help customers transform their business performance. In essence, let them do more with less. We install hardware that allows us to harvest data, and that's processed through our software platforms, to create dashboards, alerts, and traffic light systems to help people run more efficient businesses.

2:21 We have two divisions, unattended retail division, which, you know, by the end of June, early July, will be closer to 40,000, you know, device in devices in vending and unattended retail machines out in the marketplace, and then the hospitality division where we're in best part of 10,000 pubs, bars, and restaurants.

2:46 In essence, we we sell hardware, install hardware, and we get paid for installing that hardware. So we have CapEx sales or rental sales. And then we have weekly and monthly subscriptions, and that's for service packs, licenses, and data processing, all long term contracts with three to five year terms. I think one of the sort of important things to really highlight is that we have a high degree of recurring income. And unlike a lot of businesses, it's less transactional income, it's subscription income, so there's very strong visibility on the levels of recurring income that we have. We turn to the financial highlights.

3:32 Without stealing any of Mark's thunder, I'll I'll just touch on some of the key areas here. Strong financial results, ahead of expectations on the key metrics. And that's, you know, that's it with the background of the mobile network operators three g switch off. That created a bit of a distraction for customers as customers, you know, try to determine what they're gonna do to, you address the three g switch off. So that impacted the first three quarters of the year, but there was a strong rebound in the fourth quarter of the year, and that that's came through in the results. And that's looking positive into the into full year '25 as well.

4:19 Hospitality turnaround, we're really pleased with the performance there, and we're we're set to see that grow further. Bottom line is the absolute focus on footprint expansion in new and existing customers to drive our top line. And, basically, with our strong cash generation, it flows through to the through to our earnings. Quickly touch on the revenues up 8%. Recurring revenue, though, 85% of turnover, down from 89% last year, really driven by the the higher proportion of hardware sales in the fourth quarter in smart machines. Of course, looking here, our cash generation is strong. Net debt is reduced substantially, and the EPS has risen risen strongly.

5:14 And that's allowed us to, you know, propose a 50% increase in the final dividend up to 75.75 p per share. Moving on to smart machines. Basically, we tick a lot of boxes in terms of we we have excellent hardware, great customer support, awarding winning customer support, cutting edge management software platform, the most competitive transaction rates in the marketplace through our relationship with SureSight, and we we've we've got highly competitive pricing because we see an opportunity to establish a much larger footprint and drive recurring income from that footprint.

6:08 We had a winning three g switch off strategy, which was all based about retaining our existing customers and gaining new customers. We were first out of the blocks with a comprehensive guide to the government's, you know, shutdown of three g, the mobile network operators response to that, what that meant for industry, and what what what that meant to unattended retailer in particular, and the solutions that we proposed for our customers. And having gone out of the blocks early, we built a lot of trust with customers, and we've still managed to, you know, establish longer term contracts with our existing customers to upgrade the three g to four g and give them the level of pricing that encourages them to go to, you know, a statewide connectivity, which will, again, drive our recurring income.

7:05 Importantly too, we we made an entry into buying groups with some substantial wins in there, an area that we hadn't particularly been strong on historically, but we've come through strong, and that's really driving driving the growth as well. I'll leave everything else to Mark and move on to the forecourt sector.

7:37 There's been eighteen, twenty four months of really hard groundwork working with SureSite and utilizing key relationships that some of our personnel have within the four corp sector, and taking advantage of the three g switch off, which has been impacting, you know, unattended retail, in the forecorp sector and creating a degree of dissatisfaction with, with the operators, with the with the, our competition, and that's opened some doors for us. As you can see here, there's a substantial UK self serve market covering car washes, jet washes, vacuums, and air towers. In general, these are higher ticket, you know, higher ticket higher ticket, VN's, take some rollover car washes, you can be rolling up to towards £10 a car wash and that's pretty substantial compared with average VN's across, you know, the wider unattended retail market.

8:44 That means you've got to have a high degree of reliability. You've got to have hardware that is robust and functional, and, you've got to have a support network because if if a if a car if a payment system is done and the car wash in a supermarket car park, then that substantial revenues they're gonna be losing. So reliability is key, and we tick those boxes.

9:10 SureSight. SureSight are our partner of choice and they've they've historically had a strong presence within the VNET sector where they've done a lot of payment processing on fuel transactions. And working with us, they saw an opportunity to get involved in unattended retail transactions on forecourts across the self serve market. And to date, you know, the good news for us is that, you know, SureSight actually act as, you know, one of our as an arm of our sales team. They've got over 200 independent customers that they do fuel transactions with, and those customers all have some form of air tower vac or or jet washer car wash, and they can give us access to that.

10:02 So we work with them and and to date, ShareSight have, you know, taken in excess of 600 devices to install in that independent sector. In the last, six months or so, we've announced VNET GROUP and, more recently, WilcoMatic, you know, best part of 2,000 devices going on to machines with those operators. I've got fill further field trials underway across a number of players.

10:33 There's also a linked opportunity. The bottom line is that, you know, working with these operators in The UK sector has introduced us to some of the machine man car wash machine manufacturers and operators in Europe. So we're in discussions at this moment in time about ensuring our hardware is compliant with the European operations. So it's a case of you know, nothing built into our numbers at this stage, but it's a case of watch this space. And then we look at you know, increasingly, there's gonna be unmanned forecourts that are gonna create vending opportunities. You look at EV charging where someone pulls into an EV charging station, and then we have to wait twenty, thirty minutes to charge their vehicle.

11:22 Now that's an opportunity for an unmanned EV charging to actually have, something similar to when you're waiting for your MOT to be completed where you can actually go and actually utilize a vending operation, to make for a better experience, and that's gonna be on the increase. So a significant UK and European opportunity that we're we're working hard on.

11:52 Moving on to hospitality. Our core lease and tenanted operations are robust, and they they perform particularly well during the, I guess, the cost of living crisis. Why is that? That's because you've got an entrepreneur who's personally invested in an operation and will work all the hours that are needed to make that operation successful, managed operators don't quite have that same flexibility where everyone is salaried or on zero hours. We have a pretty substantial and solid installed base of, you know, nine over 9,600 pubs. That's down a 194 pubs in the year, which is the the the smallest decline in the pub sector that we've had for probably ten, twelve, or more years. So, I think the the vast majority of the the the tail of, the published dates has been moved on now, and, we're in a we think we're in a pretty decent position there, and where we can start to actually look at turning the corner and actually growing it.

13:06 I think if we look at what, BeverageMetrix brings to the party for us, through COVID, we reengineered our draft beer flow monitoring product to reduce the hardware costs, improve the ease of installation, and reduce our ongoing costs with it, and also to ensure it more intuitive, user friendly for the for our customers and their operators. And that's been paying dividends. And now that that's been integrated with BeverageMetrics inventory platform, we we have a, you know, basically an all encompassing solution for customers that is sort of driving some real interest and engagement, which is is positive as positive for us.

13:53 So, you know, revenues are up, operating profit's up, recurring income is up, And with the BMI, you acquisition and integration and and launch in the second half of, you know, last year, we're in really good shape. The other positive thing as well is that the the inventory solution can be sold standalone, so it's not dependent on a on a a pub or a bar, you know, or hotel having strong draft beer sales. So it and it's also, it also does not require us to go to site to actually install and implement. It can be all done remotely from our from our offices. And, the other positive with the BMI as well is that the the point of sale shift variance analysis where we're ensuring that every pint that's poured is going through the tail, that in itself provides a return on investment before we start to look at any of the other productivity gains or reduction in waste.

14:56 And effectively, if we can have one additional pint a day going through the till, that gives that pays for the system. Turning over to, the the the prospects for UK hospitality. Well, the key drivers work in our favor. Costs have gone up, whether that's wages, utilities, raw materials, you know, pub operators are under pressure from a cost perspective. And they're under a bit pressure on consumer price analysis team because as pricing has gone up over recent years, it's almost on the breaking point where, you know, there's a limit to how much further they can increase their pricing to the consumer.

15:43 With those limited options, that means they need to do more with less. So we can help them a, ensure that they're actually getting the revenue going through the tills that, they're they're actually they're they're

15:56 every pour goes through the till and helping them do more with less, helping them increase their productivity. If you get a pint rust right first time, that means that it's in the consumer's hands right away, which means that the bartender can move on to the next consumer and that consumer has started drinking, which means that you increase your throughput as well. So you increase your throughputs and increase your productivity by actually getting it right first time. And that goes for wine cleaning and it goes for, you know, lifting keg and waste as well. We've got substantial UK business. You know, those 9,600 pubs, we've been in those for we've been in operation over twenty years. We're part of the landscape with little little or no competition in The UK. So a really strong base to, you know, a, layer on beverage metrics products on our existing customer base and grow that and also move into other other, you know, the wider on the market.

17:02 I've touched on the, you know, what beverage metrics brings to the party. Our products and solutions are increasingly relevant to the wider pub and hospitality market. Looking at the pub pub market in isolation, it's almost four times larger than our existing business. So that creates an excellent opportunity for us to grow utilizing the beverage metrics solutions. Bottom bottom left hand, box there, opportunities in current customers. There's probably still in the region of thousand sites, thousand pumps and bars to go at in our existing customers, And we're starting to see, you know, increased engagement and footprint expansion, because customers are wanting to maximize the efficiencies.

17:52 It's not just about securing your delivery, your supply chain. It's also about maximizing efficiency in those pumps and making them more successful

18:01 for them. So that's playing into our hands. Beyond the leasing tenanted, we're making some rain roads and managed, and one example is a pilot, in in a significant managed player in 30 it was paid for a pilot in 30 pubs, and the results have been very encouraging, and we expect to sort of move that forward in in due course. Another pilot is a 250 tap stadium trial in the oval. And, of course, now you can imagine that if you've got a cricket match or an event on there, it's it's a one time hit. So they want the information real time. They don't wanna wait until next day like most other customers. They want it real time because if there's an issue on-site, they won't be able to act on it immediately so it doesn't, detract from their from the day's takings.

18:55 And moving on to the acquisition of BeverageMetrics Excel. Well, I guess we bought bought them because they have a perpetual inventory management platform that we're in the process of integrating with. And we have now post acquisition, we've fully integrated our graph beer management solution with the beverage metrics, so it's all encompassing. The only thing that we lack at this moment in time is a wines and spirits monitoring solution, and that's something that is on our agenda. Bottom line is it's it's a configurable dashboard. It's intuitive, user friendly, allows the operator to drill down, and ensures that they're not overloaded with data so they get information paralysis.

19:47 And the the as as I touched on, bottom line is that shift loss the shift loss, you know, report pretty much drives, you know, payment for the system. One additional pint a day going through the system pays for the system, and everything else is a return on investment.

20:09 And then, you know, if we can improve if we can help operators improve quality where they're getting a perfect pint first time every time, that means they're improving the productivity and also reducing the waste. And, you know, in the current environment, that that's helpful.

20:30 There's been a high degree of engagement both in The UK and The USA, because we're bringing something to to operators and to pub owners that we've not had before, and that makes a real difference. I'll turn over the page to cover our USA partnership and the opportunities that are arising in The USA.

21:01 Firstly, you know, very briefly, I'll touch on The US addressable market. You know, there's over 380,000 on premise units across four key segments in The US that are all sort of relevant for us. And, you know, you take some of the customers that we're dealing with at this moment in time, either, you know, either in discussion on Rola or with pilots in place. Chili's have got o over 1,200 sites. Outback, over 700 owned sites. Applebee, 1,600, and Darden, a 800. And then you take Marriott in hotels with 1,300. So what we have here, it's a significant market.

21:47 So the questions are how do we access it? How do we serve that market? And and that's and that's where our partnership, you sort of comes into play with fintech, which I'll touch on shortly. So in terms of our pro progress in this United States, our proposition is is quite simple. We give a return on investment in three to six months. And as I said, that shift on the sale was report pays for it and gives a return on investment before you start to look at, you know, productivity and quality. It's intuitive. An operator only only needs to look at our dashboard a minute every morning, and that allows him to figure out a traffic light system will say green, ignore, carry on, red, go ahead, you've gotta act on this today, and, the the enterprise

22:46 structures within our customers want to actually know that the action is being taken on those those reds, and we help them do that. Margaritaville. Margaritaville are a long term beverage metrics customer, and we've now in in the past month, we've become part of the technology franchise, technology stack as a first.

23:14 Margaritaville have also had an exclude they had an until until the turn of the year, they had an exclusive franchise agreement where any new franchise site went to one operator in particular. That has now been freed up, and they're they've got aggressive plans to grow their franchises across The US, and that creates a wider opportunity for us. Chile's, you know, we've had we've got 20 site footprint in Chile's, and they're in the process of upgrading all 20 of what was iDraft to our new beverage metrics platform, and that's really positive. There's another another 1,200 to go at, so we're we're really pleased about what's happening there.

24:02 Appleby Applebee's franchisee, the franchisee themselves have a 100 sites in the Northeast Of The United States. Applebee's in general, over 1,500. And the the the the positive thing for us is that the pilot pilot ROI would give an ROI return investment inside three months. So really positive, and then we're at this we're in negotiations at this moment in time. Outback pilot, pre COVID, we did a 10 site pilot with, Outback, and that delivered great results. And then COVID hit, and, basically, what we've what we're doing now is we're going back in 10 new sites to you know, with the beverage metrics platform to validate the results they got pre COVID, so in reasonable shape.

24:54 Bottom line is, you know, only takes a 150 draft beer sites and, over a 103 d FAST scan inventory sites to get us pretty close to breakeven, and we're on the on the way to doing that. Moving on to fintech. Now who are fintech?

25:16 Well, fintech was born of the three tier system in The UK where the brand owner, the brewer, the, you know, the the spirits manufacturer, is separated from the retailer by distributors. There is a clear separation. Every state and even within some states, different counties will have different different rules and regulations that need to be followed. FinTech, you know, for over thirty years have been providing alcohol invoice payment, payment collection, and payment reconciliation to the to The US alcohol retail alcohol retail market.

26:01 As you can see from these bullets, there's a subs they are a substantial player. 40% of all retail and hospitality establishments with alcohol licenses operate, deal with them in some way, shape, or form, And, they have over 240,000 retail customers on their system and 5,000 distributors and suppliers, so a substantial business. That kinda gives us unique access to decision makers in chains and to independence, because it'd be very difficult for different very difficult for VIANET to address the independent sector in The US, but, you know, fintech have access to the independent sector who deal directly with them.

26:49 And that that unique access was amplified in in at the national retail restaurant association show in Chicago in the eighteenth to twenty second of May when fintech shared a stand with when we shared fintech's stand at the at the show. You you might ask why why do fintech why are fintech happy to partner with, with VIANET? Well, VIANET are the operational link to the retailer for a full cycle ecosystem for order invoice, you know, delivery seats. We look at that, you know, we take the tail, you know, VNET and BeverageMetrics have the ongoing perpetual inventory that allows us to create the automated, you know, suggested order, which is then submit to fintech and then fintech transmits that order to the various suppliers that might satisfy that order and then that order ships and we get from fintech what that order consists of, what substitutions have been, what items are missing, and then we can automate the receipt of that. So effectively, what we're doing is reducing the labor, the labor involved in the whole process for the retailer, which improves the productivity across ordering,

28:20 receiving deliveries, invoicing, and stock and inventory management. So it's a it's a it's a real sort of wing wing. And of course, by doing this, it provides a source of competitive advantage for fintech to in in in the face of anyone who might wanna try and get in on their business. I'll move on to Mark now with the financials. Morning, everyone. Hope you're well. A good set of financial results progressively ahead of last year and the h one twenty twenty four market expectations. Turnover was up 7.5% year on year. The gross margin held strong at near 69% from the incremental recurring revenue growth and the lower cost base.

29:08 Recurring revenue itself was resilient to 85% compared to last year's 89%, and as Jim alluded to, sales mix around hardware that impacts that dynamic. All that resulted in an improved EBITA operating profit to 3,470,000, up nearly 12% year on year. The pre exceptional EBITA was up at over 4,000,000, nearly 11% growth year on year. And the net PBT was up 73% to $784. And it's important to note that that is net of towards £500,000 worth of post acquisition BMI people and license costs. So a very, very good result, and that all played out into an improved EPS number you see at the bottom. We move on to the divisional stuff.

29:54 Smart zones, including The US, turnover was up five and a half percent. There was 260 new systems, as as Jim's touched on. Recurring revenue was still very good at 94%, 8,100,000, compared to last year's 7,760,000, 95%. So good incremental growth. There were three new contracts, eight re signed contracts, all three to five year duration. The rate of pub disposals declined quite markedly in the year, and the net reduction was a 194 sites compared to last year's 344. Of gross, it was 454 compared to the previous year's 803. So a public state now of just shy of 9,640 compared to 9,758 last year.

30:42 So a combination of the incremental recurring revenue growth and the unit sales, the reduced cost base, that led to a 600,000 improvement in gross margin, nearly 10% year on year, and that played out into improved operating profit of 3,940,000, nearly 4% growth. Again, noting that's net of the post acquisition cost of PMI. So it would have been that much more on a like for like basis. So very happy with that. In smart machines, obviously, Jim touched on the three g lag from the the network switch off and then the move to four g upgrades. There was a lag in h one, but turnover picked up in q four of of h two. So we saw an overall 600,000 growth in turnover, nearly 10% year on year.

31:28 There was 73 new contracts, all three to five year duration, but predominantly five years. There was 8,900 new units compared to last year's 6,554, 35% growth. And all that means is we've got a growing estate. Gross margin was up $470, 15%. We've got a healthy recurring revenue of 74%. And an operation operating profit growth to by $450, 22% growth year on year. So that's all good and and only set to continue with the plans that we have. From a cash perspective, the business continues to be a strong cash generator, and this year was no exception and probably more a normal year compared to the last couple of years coming out of pandemic and world supply problems.

32:17 Operating cash generation pre working capital and share based payments was $3,830,000 That was up 10.8% on a like for like basis compared to last year's $3,460,000 pre the tax rebate we accrued for in last year's cash generation number. Pre share based payments, this is 102% of EBITDA, demonstrating the strong cash to to profit conversion or profit to cash conversion. There was a working capital draw of $259. It's very much more normalized. That's the sort of level we expect to see outside of zero, mainly from increased trade debtors. And then we've got the tax rebate of over $900 in May 23. So that helps us deliver a post working capital tax generation position of 4,492,000, a big step forward compared to the position from last year.

33:12 Those funds were invested in R and D development costs, intangible assets, overall, dollars 1,700,000. But on a like for like basis, ignoring the impact of PMI in the year, it was $400,000 which is a $300 reduction on a like for like basis year on year. We refinanced the bank facilities, which I'll come on to when we get to the balance sheet. So overall, we had a 2,920,000 inflow for the year, which is very healthy compared to the 1,370,000 outflow last year, a good step forward and something that we can build on. From a balance sheet perspective, the balance sheet remains strong. It's been enhanced by the HSBC bank refinancing and the flexibility that, that affords. As we touched on in working capital, trade debts have slightly increased because of the increased turnover in the year.

34:04 Stock levels post the three g lag are now starting to unwind, which we said they would in due course. We have cash in the bank of 1,800,000 compared to $69 of the year before. We don't have an overdraft now, but obviously, we have refinanced the debt position. So across an RCF, a loan and a mortgage, have interest rates of 2.42 to 2.62% above base, a very healthy competitive levels of of borrowing, which is considerably lower than the previous bank we were with by over 1%. And all that contributed to net debt being much reduced to 1,520,000 at the year end compared to 3,370,000 the year before. So a significant reduction that helps support our growth plans.

34:50 Thank you, Mark. I'll just summarize where we are. We're in a pretty exciting position. We got strong platforms in both hospitality and unattended retail, delivering high quality subscription incomes that are only gonna grow. So we have a strong financial engine. Hospitality has turned the corner and is ready for growth both in The UK and The USA. And in smart machines, we've got the real focus on footprint expansion in existing customers and the new ones that we've just gained as part of the three g switch off initiative, that we we had.

35:38 And and that in itself will drive, you know, the growth that we require from machines before we consider, the the, you know, the additional income that we can expect to receive from the forecourt sector. Bottom line is that, you know, there is increased demand for data and insights, as customers across all sectors look to do more with less. They got to be more productive, because there's a limit to what they can do in terms of pricing and costs. So it's about being productive. So, you know, strategically, we're very well positioned. I've got the right products. We've got great people. Our finances are strong, and they're only gonna sort of, you know, improve.

36:29 We've focused really hard on being trusted advisers through COVID and and post COVID, doing the right thing and actually, you know, being honest with customers and and driving driving driving the relationships, and providing enterprise solutions. Bottom line is whilst we're keen to deliver, dashboards and alerts and, and traffic light systems to help people run, you know, improve businesses. We're also not a vast to pump in the data directly into large enterprises so they can feed them into their own dashboards. And the market drivers are working in our favor and and touched on those. So all in all, in a very exciting place and looking forward to the next, next, months and and years.

37:24 That's great, James. Mark, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. I'm James Mark. As you can see, we have received a number of questions throughout today's presentation. And James, if I may now hand back you to chair the q and a, read out the questions where appropriate to do so, and I'll pick up from you at the end. Okay. I'll read through the questions, and we'll answer them as far as we can. Question one, are you happy with the progress to date of VNET Americas and comfortable with the level of investment up to now into BMI?

38:11 Are you any closer to skewering an Oxford partnership style contract contract in The States? I guess, number one, I'm very happy with the progress with BeverageMetrix. So what did we get? You know, when we bought BeverageMetrix, we got some great people, and we got some excellent technology. And those people are fully integrated into our business now. Their CTO is now our group CTO, and he is he is a rock star. So we're in great shape in that respect, better place than we've we've ever been from a technology perspective. And, we're we've got strong engagement with customers in The States to the extent of I spend a week, a month, you know, with try helping the sales team in The States.

39:09 There's a lot to go at. It keeps us busy. Yeah. We'd love to be further down the road, but, we're making good progress. Oxford Partnership is pretty much unique in in in The UK and that, you as you can imagine, we've got 10,000 pubs and bars more or less in the state in the in The UK. That creates a lot of data and that allows OXXO partnership to produce some fantastic insights. In The US, we don't yet have the volume of installations, and data to, you know, utilize Oxford partnership in this in The USA. But working with FinTech, we hope to, you know, accelerate what we do.

39:55 Of course, the other the other great thing in The States is that we don't necessarily need to sell in the draft beer monitoring module. We can sell sell in the inventory module that allows us to, you know, remotely implement a solution without having to create an infrastructure on the ground to go out to directly to every single open bar. Next question. Can you expand on the specific initiatives or trends that driven growth in your markets? That's part a. Part b, how much embedded growth do you have within your existing client base? Okay. Let's, let me start with the first part of that question.

40:46 Mark's just can we stick on the question? Yeah. The drivers are pretty much the same. Whether you're in unattended retail with a large vending park, or you're a, you've got a foreground operator with, multiple, you know, self serve machines on your forecourt or whether you're a pub operator at the independent level all the way through to large pub co, you need to be able to do more with less because there's less flexibility in terms of your ability to play with costs or pricing and that's where we can help. And that's that's that's that drives our the pricing that we provide on our products because we price to ensure the the the our customers get a return on investment.

41:45 And the yeah. How much embedded growth do you have within your existing client base? If we look at the smart machines in The UK, the the unattended retail in The UK excluding the forecourt sector where there's still substantial growth opportunity. Take our existing customers, there's an excess of 20,000 machines for us to go at in terms of connectivity across their estates. So that that in itself could deliver our growth in the next couple of years. And within within hospitality, there's probably about another thousand pumps and bars within our existing customers that we could actually, you know, look to, you know, drive our solutions into.

42:33 And that's before you start to look at the wider independent managed and, you know, hotels and sporting club markets that become a target for us, with, with our, you know, FAST scan inventory solution. Next question. The US operations can be potentially very positive. How do you see this opportunity playing out? How large is the opportunity? Who are you competing with, and what resources are needed? That's there's a number of questions there. I think, I've touched on the scale of the market now and there's probably an immediately addressable market of about 50,000 bars and bars and bars and chains that we we will be sort of targeting.

43:35 Our access to our access to the market, you know, through our relationship with fintech clearly helps and gives us a unique opportunity. There are loads of different inventory solutions out there that are generally linked to point of sale systems. I think what's unique about ours is that, you know, very detailed recipe buildup from the base. It's probably three years three years old, so it's been built, you know, using using expertise that has been gained over a three, five, six year period by the, you know, the beverage metrics team, and it's basically cutting edge. And who are we competing with? On the one there's probably only about five players that do draft beer in The United States. Nobody here in The UK.

44:30 There's probably about there's probably about 50 people that do point of sale in inventory, and there's probably another ten, fifteen to inventory only. But we are the only people who are doing the full end to end inventory and draft beer flow monitoring. So and we're the only people with that relationship with fintech, so we're in good shape. Regarding the business model, are 100% of the vending machines sold rather than rented out? How much of the operating profit rises from sales? I'll hand you over to I'll hand you over to Sarah for this one. Yes. So the vending machines are actually $50.50.

45:19 Half are rented and half are CapEx models. So it depends what the customer wants, and they will be on contract from three to five years dependent on which they choose. In terms of the operating profit, have you got that? Yeah. I mean, the operating profit is a blend of the CapEx sales and the recurring revenue. So, you know, as we said, we've got a recurring revenue of 74% in the year. That's down on the previous year. That's because there's been more hardware sales in the current year, but, ultimately, there's there's been the growth in sales and the growth in recurring revenue. And the as you might expect, the the subscription type revenues that we drive from the recurrent in the recurring, long term contracts, they are higher margin than the than the hardware.

46:04 The bottom line is we don't have to give away the hardware to generate that that to extend that footprint. But if we really really had to, then we would, but we don't have to. We make a reasonable margin on hardware and that's we should be able to sustain that. How much of the recurring revenue is for maintenance type activities and how much is for analytics? In a nutshell, the the customer gets charged a blended fee, but the predominantly most of it is for the data insight that we provide to customers. There's very little, if any, maintenance around on on the unattended retail side. Any of the maintenance is more in the hospitality sector, but it is more driven by the data analytics than anything else. Now we have a question from Colin. Oh. Oh, Gordon.

46:55 From Jeff. How do the recurring revenues for connected unattended machines compare with the other units? But I guess in unattended retail, we base we basically have the contactless payment solution or we have a telemetry solution where there's no contactless payment required. And the contactless payment solution is probably, you know, three two and a half, three times the the subscription price that you'd pay for telemetry. And, obviously, pubs and bars, pubs are substantially larger than a vending machine, so there it's not really comparable in that respect.

47:53 How do the recurring revenues for how do the recurring revenues for connected unattended machines compare with the other units? I think we just had that one. Yeah. The next question is from Colin. Is SmartZones being renamed as BeverageMetrics? SmartZones is not being renamed as BeverageMetrics at this this moment in time. Smart zones increasingly will be would be called our hospitality division, because it's all encompassing. It's about hospitality. It's not just about, you know, smart zones. What we have done is iDraft and, you know, smart draft will be increasingly known as beverage metrics.

48:43 And within beverage metrics, you have an inventory module, you have a beer module, and we may have other modules in due course. Perfect. That's great. James, Mark, Sarah, thank you for that. I believe you have addressed all those questions for investors today. And, course, the company can review all questions submitted today, and we'll publish those responses on the investor me company platform. But before redirecting investors to provide you with their feedback, which I know is particularly important to the company, James, could I please ask you for a few closing comments? Yeah. Just simply reiterate that, we're in a really good place. The markets are moving in the market drivers work in our favor. Our products are our products hit the mark in terms of pricing and the return on investment, and that return on investment that we give customers will continue to drive our footprint expansion, which will drive our subscription incomes and give us the earnings and cash generation that we want. So an exciting place to be, and thank you for joining us today.

49:49 Fantastic. James, Mark, Sarah, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of VIANET GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.