First Property Group (LSE:FPO) — Preliminary Results

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

0:31 Good morning, everyone. Thank you very much for joining us this morning for our preliminary results announcements for the year to 03/31/2023. There's a presentation which is available on the website. Which section is it in, Jeremy, on the website? Media news. It's under media and news presentations. Yep. So you go to investors, then you click on media news, and then you No. You just go to the home page, and there's a bar at the top that says media and news. But you will be able to follow the presentation on, you know, as we go through it here. There's some preliminary information on the group on pages one on pages two and three, which I intend to skip, and indeed page four, just background information, which we'll cover off during the course of the presentation in any event.

1:21 Before I talk about the results and how the last year has been, I think it would be very helpful for shareholders to understand the genesis of the group to try and have a a picture of where we were before lockdowns in particular and where we are now. So before lockdowns, rather like now, we were ex you know, had a big exposure to Poland, which we still as I mentioned, as we still do. And the big properties that we owned in Poland as a company were was a an office block called in Warsaw and an office block in Gdynia, and 48% of an office block called Blue Tower in Warsaw.

2:10 All three of these buildings were fully leased, and we were therefore quite a high income generating company before we went into lockdown. We assessed back in 2019 before we knew about the pandemic, but actually the Polish market was quite toppy. And so we decided to sell have been our interest, which is a 52% interest in Hagibinskaya GROUP, which we contracted to sell in November 2019. And that completed in about April 2020, that sale, just after lockdowns had started, the pandemic had hit, and lockdowns had started. And the buyer followed through with the contract, which was, you know, an admirable observance of their obligations.

2:58 That, of course, meant that we lost the income on the property that we sold to them, Harvey and Gogo, but we cashed up quite significantly. So going by memory, I think that released about £17,000,000 of cash into the group. So as we travel through lockdown, we had quite a big cushion of cash underpinning the group. Then the other property, which is a very high income producer, the one in Gadinia, which we bought knowing that it was very over rented, and we adopted a special treatment for its asset value when we bought it in 2014, which was to depreciate it rather than marking it down by value. And, you know, as the value fell and as the lease got to its end because it was so over rented, we depreciated it instead in order to make sure that the net value of that property in our books at the lease expiry, which as I've mentioned was a very over rented lease, at lease expiry in October 2020, the net value of the property would be nil in our books. In other words, the asset value would be below the value of the debt.

4:04 And we did that because we feared that we might have a problem with the bank in October 2020 if the tenant were to vacate and leave us with a 13 and a half thousand square meter building in Gdynia. As it happens, we actually got an agreement to lease in place with the tenant for about six and a half thousand square meters. But the bank dragged its heels, and we were unable to get the tenant over the line with bank approval to sign that new lease. So instead, what transpired with Gudinia was that the tenant left. It became an entirely vacant building. And from a relative position of strength, because we've written down the value of the the net value of this property in our books to nil, we negotiated, we renegotiated the financing on this property, and the bank agreed to take a reduction in debt from 25,000,000 down to 12 with us putting 4,000,000 in. So we effectively bought the property, if you like, off the bank for €16,000,000, 4,000,000 of which we put in ourselves and 12,000,000 of which was a deferred consideration.

5:15 So we went at the beginning of the lockdown, just to recap, being quite a high income generating company with these two significant earning properties to to one of them being sold and one of them becoming vacant and with us having to reposition it. And then the other what we did with the other amount you know, the rest of the cash that was freed up when we sold how Binsky go was in part to invest it in UK Special Opportunities, which in turn bought out some selling shareholders in UK PPP, which is a UK fund as the name suggests that we managed. And I think we now own about 11% of special opportunities. And we also then last August, another 32% of Blue Tower. Remember, we own 48% of Blue Tower, a 100% leased, but the 32 we bought was from a bank called PKO SA, and they had been owner occupiers of this space, but had vacated it. And so we picked up seven thou well, they largely vacated it.

6:27 It was 7,100 odd square meters of space, 2,000 square meters of which they occupied on the sale and leaseback when we bought it. But the office space, 5,000 odd square meters was vacant when we bought it. We did quite a good deal with the bank when we bought that space. We agreed to pay for it in seven installments over a six year period with 9,000,000 zloty's up front and 5,000,000 zloty payments all the way through until the last one with a balancing payment at the end, on the seventh payment. So what we've become is a company which used to be high income generating, but is now repositioning the property in Gdynia, repositioning the 32% we just bought in Blue Tower, and obviously looking for other opportunities in which to make money.

7:18 During,

7:22 immediately after, rather, our investment in special ops, you might recall I mentioned we bought, you know, we increased our interest in special ops to 11% during the lockdown period when we bought out two exiting partners in The UK PPP fund. After we made that investment, we made some immediate sales by UK PPP. And as it now transpires, at what was a very good time to sell property in The UK market, you know, which was tail end of twenty twenty one, beginning of twenty twenty two before we had this inflationary spike, which we're now in. So the company has gone from being high income generating to repositioning these two Polish assets, but still predominantly exposed to Poland. 88% of our NAV roughly is exposed to Poland.

8:16 And our fortunes therefore turn much more on the Polish property market, the Polish economy, than they do on The United Kingdom. So that's a backdrop, which I hope is helpful for shareholders, and they can understand why our profits have reduced. But NAV, nevertheless, has held pretty solidly up. It's off a little bit, but it's basically solidly up at around 46p a share. The challenge for the group going forward, I'm slightly jumping ahead in the presentation, but the challenge for the group going forward, obviously, is to lease up these two vacant properties to resuscitate our earnings, and then with the benefit of having resuscitated our earnings, start moving our dividend back up. Shareholders will recall that when we had higher earnings, we were you know, we had a positive approach to dividend payments, and we will, you know, we will go back to that progressive approach to dividend payments once we've leased up these two buildings. The Gdynia property now is about 28% leased, and I'm pleased to say we've got quite a lot of demand for that space.

9:22 We've got a few deals going on, which I hope to be able to announce in the next few weeks. And, similarly, we've got quite a lot of demand for the Warsaw office, the the 32% of Blue Tower that we bought in August last year. But I'll come back to both those properties in greater detail as we go through the presentation. So starting having done that backdrop, starting on page six, just catching up with what we've done since the interim results is we sold a couple of supermarkets that we had owned in in Poland for £5,500,000, which generated a profit of 68 £680,000 in sterling.

10:10 And we we bought out, I think, about 5%. Yeah. Just six. So 6% of FIRST PROPERTY TRADING from an exiting shareholder who wanted to exit. And slightly irritatingly, that required us now to consolidate the property trading even though we don't own over 50% of it. So these sets of results consolidate the performance of fifth property trading into them, which previously used to be accounted for as an associate. So the the accounts are a bit confusing as a result of that consolidation, you know, when you compare this year's results to last year's results. But that's how we that, you know, that's how we got there. And then, of course, I'm gonna come back to the senior debt product that we've launched when I talk about the state of the markets and the economy generally.

11:02 But we have launched debt a product. We've never we've never been a lender before, but I think given what's been going on in the markets both in terms of interest rates as well as the impact it's had on lending institutions, it makes a lot of sense for FIRST PROPERTY GROUP to be using it at its expertise to enter that part of the market. On page seven, you have a summary of our AUM and the weighted average unexpired fund management contract term, which is now two years, nine months. Last year, it was three years, seven months. Of course, that keeps ticking down unless we either extend the life of a fund or we you start a new fund, which has a longer life and, you know, pushes the weighted average back up again. But just going back to AUM, quite a marked reduction in AUM from last year.

11:54 Significantly as a result of sales that we made in UK PPP and other funds, we sold about £69,000,000 worth of properties during the course of last year. And of and and there were markdowns. As inflation has gone up, interest rates have gone up, the market has come off quite significantly, particularly for offices in this country. And so there has been a marked reduction in the value of offices in The United Kingdom and and therefore, in our FPOC offices fund. We did pay a second interim dividend. It would have been a final in the normal way being paid in September, but we paid it as an interim dividend because the chancellor had changed the tax treatment of dividends, in the budget in the last budget, and we wished to get this cash out to shareholders at a time when it was in a more favorable tax environment for them.

12:54 Turning over to page eight. So after all the various changes in the group last year, the sales of properties and investments and so on that we made, we generated a statutory profit before tax of 2,500,000, down significantly from the previous year where we made a profit of 7,000,000. And that was because in the previous year, we had the benefit of a profit made on the restructuring of that loan on Virginia, which I mentioned, where we negotiated the rent where we negotiated the obligated debt obligation down from €25,000,000 to €16,000,000. All of that works back to diluted earnings per share of 1.7 p versus six p last year and with the dividend being held steady.

13:44 On page nine, we have a breakdown of the various property values that we hold. Just to remind shareholders that FIRST PROPERTY GROUP accounts for its properties at the lower of purchase price or market value. So we've got £47,000,000 worth of properties on our books as at 03/31/2023. That's up from 36,000,000 last year, partly due to the consolidation of FIRST PROPERTY TRADING into our accounts and also partly due to the acquisition of 32% of Blue Tower, which I've already mentioned. At market value, those properties, the the 47,000,000 I mentioned, would be worth 53,970,000, 54,000,000 roughly.

14:33 Associates of our investments in associates have obviously gone down in value because FIRST PROPERTY TRADING moved from being an associate investment into being a consolidated investment, and our cash balances went up slightly during the course of the year. And, of course, it's very it's very comforting to have that cash balance at the moment given the tumultuous markets in which we are now operating. And, of course, you know, we are a leveraged property company. Some of our funds have leverage. So to be cashed up at a time when banks are retreating from the market is a very sensible thing to be. Our gross debt turning over to page 10. Our gross debt is up from last year.

15:21 That's partly due to the consolidation again of FIRST PROPERTY TRADING, but also because of the deferred consideration, which we account as a debt on the purchase of the 32% more that we've acquired in the the additional 32% we've acquired in Blue Tower. Net debt, which is after putting cash against it, is 22,000,000, which brings us back to a gearing ratio with the properties held at at book, effectively at cost of around 40%. And if you mark the property portfolio to value, then we've got a leverage ratio of around 36%.

16:00 Net assets at book value, 43,000,000. When you mark the properties to their market value and tax effect them, we end up with a NAV of about 52,500,000, which is 46.5 p, slightly up from last year. I should say that last year's last year's NAV is lower. We had to restate last year's NAV as a result of the reduction in values in the office market because the shareholders might recall FPOP offices, the fund which we have a big office exposure in, is a fund from which we were not earning fees, but we had a profit share interest. And that profit share interest was subject to clawbacks. And so with the reduction in values and offices in the market, we, decided as a board of directors actually to reverse out any benefit from that profit, which we expect, you know, will end up at nil, frankly, unless there's a big turnaround in the fortunes of The United Kingdom's office market between now and the end of the life of the fund.

17:10 On page 11, we have a chart which sets out how our NAV has moved over the years as well as our cash. Cash being, the purple line and our NAV, book nav being dark blue and the gray the gray bit being, you know, properties marked to value and and tax affected. So we've been through the credit not the credit card. Sorry. We've been through COVID lockdowns, COVID inspired lockdowns, actually pretty robust. You know, a lot of companies had significant trouble as they went through the lockdowns, And partly as a result of the big sale we made beforehand, partly as a result of the kinds of properties we own, significantly partly as a result of being exposed to Poland rather than The United Kingdom, I think we've had a much better experience. The Polish economy, by the way, ever since we've invested there, has always performed better than the British economy, and I hope that continues to be the case going forward.

18:19 Page 12 sets out a NAV bridge. So it shows you how NAV has moved from last year to this year, taking into account profits, FX movements, and dividend payments. I I don't think there's any need for me to chart that that that movement. It's self evident, I think, from the graph. Page 13 was a graph we were very proud of because we had had until COVID lockdowns. We had had a progressively higher dividend. That changed, of course, when we sold that very high income producing property, and we became cash conservators, and now we've moved to repositioning the Gadinho property and the 32% of Blue Tower that we own. But our intention firmly is that as profits recover, we will push our dividend back up again.

19:19 So just now talking a little bit about our new product. First thing to say is that it is, I think, I've mentioned, largely a conceptual product. We have tested the market, and there's a real appetite for it, but we haven't done any deals, yet. And we're slightly doing our DD on how to get into the market in the best possible way at the moment. As shareholders will be aware, the Bank of England is actually failing to control inflation in the way that it had hoped it would. And so interest rates may end up higher than we had anticipated when we con initially conceived of this product. And so it's no you know, given that we wanna make fixed interest rate loans, it's no disadvantage just to be monitoring a bit what goes on in the commercial property space before we actually make our first loan.

20:21 The principle behind it, though, is as follows. Over the last ten years or so, banks have been actually quite sensible. They've been lending not more than 55% loan to value on commercial property, requiring debt ammo and charging sensible margins in order to, provide those provide those loans. But because of the interest rate increases over the last year, significant, I think we've had 14 increases in UK base rate in twelve months, which is remarkable when you think how steady it had been for all those years of 2008. How steady and low it had been since 2008. There's been a withdrawal of banks from the market and a tightening of their credit terms and, you you know, and obviously a reduction in the value of commercial property generally, particularly offices.

21:16 And what was a 5055% LTV loan before is now sitting at around 6065% LTV because fees come down. And with banks retreating, borrowers on the whole will only be able to borrow 40 to 45%, we think, in the current environment. And that creates a real problem for a borrower that has to refinance because they're gonna have a shortfall on cash, and they're gonna find that that shortfall is coming at a time where the investment markets are very difficult. And so our aim, being expert in investment property, commercial property invest you know, investing in commercial property, is to use that expertise to judicially identify properties where we can provide loans of 65% LTV, where we're comfortable making that higher LTV, bearing in mind, of course, that that's a much lower risk than actually buying the underlying asset.

22:17 So we we're 35% down the risk curve, if you like, as a result of being a lender rather than being an investor. And the other, you know, major attraction, obviously, from our perspective is that with interest rates where they are, the Sonia rate, I think, is around four and a half percent and about to go up and margins being at you know, for the best property now, margins are around three and a half percent. We think an interest only loan like the ones that we're gonna propose, and we're gonna make them interest only so borrowers can hold their position, that ammo isn't gonna be a problem for them. The amortization of debt during the life of the loan is not gonna be a problem for them. That allows us to charge a slightly higher interest rate.

23:04 So before the current increase that we expected before the increase that we expected from Bank of England of about a half percent, we were penciling in charging an all in fixed rate of around 10% for the 65% loan to value loans, which is a very high interest rate compared to where interest rates have been in the past, and therefore very attractive when you think that only a year ago, if you wanted to buy a property, the yield you would get is around six and a half percent. So if you can lend at much lower risk and make 10% plus, it's gonna be plus now, as opposed to buying the underlying asset, you know, I think that's the place to be.

23:50 It's also much easier for a company to scale a product like this because when you invest in the underlying product, you have to pay stamp duty, you have to pay legal fees, etcetera, as you go in. If you're a lender, there's no stamp duty, and the legal fees are paid for by your borrower. So getting in and out of the position is much less costly, and the income you make is therefore that better protected. You don't need a capital gain as you do with investment property in order to defray the cost of stamp duty and your purchase costs. So we think that this could be a really good opportunity for the group, and I'm very excited about it. And we're certainly gonna be giving it the best swing of our back as we go forward.

24:41 Initially, testing the market to see whether our thesis is right and whether we can find product that we wish to lend against, and, of course, then raising the funds required in order to do this at scale. And we do have very good relationships with a number of institutions with whom we've had some preliminary conversations, and we will develop those conversations as we go forward. But there's nothing I I would not count on any profits coming to FIRST PROPERTY GROUP in the in the immediate future from this product. It is something that I hope will be a know, will be a an income and profit generator in the in in the short term, but not in the immediate term. Anyway, so enough on that product. Then on page 15 is a statement by myself on on on results, which, you know, please read at your leisure.

25:35 And page 16 is a slide on why InvestoNet brought PLC. Just to recap, we are an experienced nimble management team. We've made significant changes a number of times in our life, and I've explained a few of the significant changes we've made in the last few years as we've to lockdowns and now this high interest rate environment and what we're doing to address all of that. We have a positive attitude to the dividend, and we will increase the dividend as soon as we possibly can. We have two legs to our business, which I think is helpful, the asset management side as well as being a direct investor. So, you know, we take a proprietary approach to asset management. We co invest, and this gives us a much broader array of ability to make money.

26:25 And our growth is going to come from, as I've already touched on, you know, principally from leasing up the property in Gudinia, leasing up the property in Warsaw, the 32% of Blue Tower that we just bought. And, hopefully, once the economy settles, inflation begins to come down and the investment landscape clears up, we should get some benefit in our existing portfolio of assets, you know, as we go forward. So that's the basic summary of FIRST PROPERTY GROUP, how we've done in the last year, and why I think we're still a solid bet for a for investment. Turning to the markets, which I've I've touched on already, so I won't labor. Poland, as it's done over the our entire period of investing there since 2005, is doing better than The UK.

27:21 It's got a very high inflation rate, but it has been growing. It hasn't got the kind of broken labor market that we've got here. And it's act it you know, it's been a beneficiary of the war in Ukraine, if if I can say that without being politically incorrect. The the refugee influx that it's had from Ukraine has helped to boost GDP, and there's obviously been a lot of investment from Western powers into their military NATO and so on. A lot of support for Poland from Western Europe and The US. And so all of that's been very helpful for Poland. And so bar an invasion by Russia, which I think is a remote possibility, bar an invasion, you know, we do think that Poland is a much better jurisdiction in which to invest. And as I mentioned at the outset, 88% of our NAV roughly, you know, is exposed to the Polish market, which is, you know, which gives me great comfort.

28:18 The UK market, I think, is in much greater difficulty. Growth is was nonexistent. And even when it was nonexistent, that was being trumpeted as an achievement by our government. But I think with the interest rate rise we're gonna get today and the trajectory of inflation, I can't see how we will avoid a recession in The United Kingdom. My own view for what it's worth is that the Bank of England is likely to overdo interest rate rises because it's not waiting for the effect of interest rate rises it's already made to have their impact on the mortgage market. Historically, in The UK, most people were on variable rate mortgages. So when the Bank of England raised interest rates, borrowers felt that almost immediately.

29:10 Nowadays, the majority of borrowers are in on fixed interest rate, and, you know, they vary from two to five years. So it'll take a while for the interest rates that have already the interest rate increases that have already taken place to have their impact on the consumer. And there's a real danger, and I'm I'm almost 90% certain that the Bank of England will fall into this trap. There's a real danger that it'll over increase interest rates. And as these fixed rate mortgages expire, there's going to be a real mortgage problem with people defaulting on their mortgages. Remember, you know, most people when they buy a property make their calculations based on what if the whatever the interest rate is to maximize their buying potential.

29:59 Back in 2000, the average house price was about 3 or 4 I think it was about four times average salary in The UK. It's now close to eight times the average salary in The UK. So if you have a reversal of that asset value growth, you're going to see major burdens on UK banks. And whilst the mortgage collapse will be a great tragedy to lots of people in the country, the bigger economic implication will be what happens to the banks because the banks are gonna get caught in the crosshairs of this debacle. If you read some of the output from, think tanks and, economists, they're saying banks are much better capitalized now than they were, you know, ten years ago or whatever. But I don't put much store by that. Even on the best of days, banks are highly leveraged institutions. That's what they are. And so if we get, you know, a wholesale collapse in The UK mortgage market, we could have real problems in our in our banking market.

31:09 And if we have real problems in our banking market, we have real problems in the economy. And it seems to me, at the moment, the government and the Bank of England really don't know how to get out of this very difficult spot. So I'm quite bearish on The United Kingdom. And I think that basically concludes my presentation. There is, of course, a lot more information going, you know, available for you all to read as you go through the presentation, but I don't think it it will really add much to your sum total of understanding of where we are as a group and how we're moving forward by me going through it line by line. So I think if that's satisfactory for everyone, I'll just move to questions.

31:58 Ben, thank you very much for presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab, which is situated on the top right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we received a number of questions throughout today's presentation. If I could just ask you to read out those questions and give responses where it is appropriate to do so, I'll pick up from you at the end.

32:27 So just going through the questions. We had a couple of presubmitted questions, one of which is what percentage of your net asset value is exposed to Poland? I've answered that about 88. About four and a half percent is exposed to Romania and about and and the remainder about six and a half percent exposed to The UK. What are your views on the property market?

32:49 Well, I've discussed that extensively. You have a Swedish shareholder. Sorry. You have a Swedish shareholder who is quite well known activist. He has over 20%, so it is consolidated. He is seeking because you are too small for share buybacks. Bear in mind, the discount to NAV, I would have thought that with over 20%, he must have an agenda. No doubt he has an agenda. Presumably, he sees value in our shares. Otherwise, he wouldn't have bought the shares. Our aim is firmly to deliver, obviously, for all shareholders. And as I've mentioned, the way we're going to do that and the only way to do it is to get these two properties in Gdynia and and Warsaw leased up and survey the markets, manage our debt, manage our cash, be prudent, and if possible, launch this new debt product successfully and make money in other avenues. By the way, there's there's always opportunity where there's adversity.

33:49 And, you know, typically, FIRST PROPERTY GROUP, this is no this is no guarantee, of course, but, typically, FIRST PROPERTY GROUP has done well in periods of difficulty. I have to say this is quite a different kind of period of difficulty to any that we've experienced. I think probably any of our working lives that we're we're almost back to the nineteen seventies, and there may be some some of you who were working in the seventies. I started life in the eighties. And even though, you know, my first brush with the recession was three years into starting my career, that recession, the late eighties, early nineties recession, was born out of demand led economic growth. This recession is born out of a collapse in this recessionary environment is born out of a collapse in the supply side of the economy, and that's much more akin to what was going on in the nineteen seventies.

34:45 I remember that one of your funds bought a large building in Horsham about four years ago. Does the fund still own it? Yes. HEDROUP PLC still owns it. We're managing it, and we've got a couple of interesting initiatives afoot with the tenant, which is Royal Sun Alliance. Is the cost of complying with net zero an issue for Polish commercial property as it is in The UK? Well, there's definitely a move in The in in Poland towards net zero and ESG in the same way as there is in The UK. The Polish government isn't quite as far down the line with it as we are. And, I mean, we know that for a fact because the Polish government refuses to stop burning coal in its power power plants.

35:33 So all our properties when when you measure the net output, carbon emissions output of a building for ESG purposes, you take into account the nature of the power supply. And because a lot of Poland's power supply is from dirty fuel, actually, all our properties in Poland look a lot dirtier, if you like, than our properties in The UK. And that will change as Poland, if it goes greener, you know, that'll automatically change. But the polls, and if I may say so, it's it's a policy I endorse personally. The polls have approached net zero with a much more sensible attitude than we have. We've decided to go to net zero ahead of the technology, eschewing our North Sea reserves, eschewing fracking.

36:21 And I don't know if shareholders are aware, but our government signed something called the North Sea transition deal in March 2021 in lockdown. It was part of the build back better initiative. You might remember that when we were meant when we were gonna unlock, the theory was that we'd emerge into a much better world, a much greener world. And the North Sea transition deal is effectively a deal with the fossil fuel companies and renewable energy companies to progressively shut down North Sea, shut down the reserve capability of our of our gas reserves, etcetera, and move towards renewables. So we've been actively shutting down our fossil fuel industry. And, of course, now we have a huge we have a huge supply side shock coming from the increase in in fossil fuels, and we've got the ridiculous position of being an importer of fracked LNG from The United States.

37:24 When, actually, if we hadn't turned our back on our own gas resources in The United Kingdom, we would have been able to be significantly better off than we are now. It's a fundamental failure in government policy, and I think that is a significant contributory factor to our inability to control inflation. So I hope that answers your net zero question. At the parent company level, are you cash flow positive or negative month by month?

37:52 I think we are basically cash flow positive, but we've got quite a lot of CapEx that we need to do in the properties to get them ready to be you know, once once we sign a lease, we have to fit them out. And the and the 32% we bought in Blue Tower needs a new ventilation system as well. So there's quite a lot of CapEx that goes with that. But the brilliant thing is the minute minute the minute you lease it up, you stop the burn, if you like, on that vacant property, which was costing you utilities, property taxes, undercovered insurance costs, etcetera. You stop that immediately, and it sees and it goes from being a negative to being a positive. And so you see quite a marked turnaround in the prospects and fortunes of a property as you go from being vacant to to being leased. And I'm hopeful, as I mentioned, that we'll be announcing some good stuff as far as those two properties are concerned in the in in the in the very near future. So, you know, I'm hoping that equation will get progressively better as we go forward. The challenge, of course, is to manage our cash balances as we need to invest in those properties to ensure that we make the requisite level of return required to be able to go forward with confidence.

39:04 So it's quite it's a it's a balancing act that we have to go through over the next twelve, twenty four months. But half the battle is being aware that you have to do that balancing act. We're fully aware of it. We are we are managing our cash very carefully. And, you know, we'll I I'm very confident we'll get through it. And as I say, there's good news, hopefully, coming down the line on leasing of those two properties. And I think that deals with all the questions unless there are any others. Oh, there's one more question. Are the REMCOM planning any option scheme for twenty three twenty twenty four? No. Beyond the existing option scheme and grants, no other option schemes or grants are planned. Thanks very much. I think you've actually addressed all those questions from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses on the investor meet company platform.

39:58 But just before redirecting investors to provide you with their feedback, which you know is particularly important to the company, Ben, could I just ask you for a few closing comments? Well, I I think I've said everything that I wanted to say. We live in very, very uncertain times. I have to say and admit that I didn't see, you know the credit crunch in 2008, I think, will come to be seen as a relative walk in the park compared to where we are at the moment. This is a supply side shock, which is being met by our policy with a a policy response of raising interest rates. I don't think you can control the cost of fuel or the cost of food by raising interest rates. Actually, all you do is pile pain on the consumer at a time when we're already very highly taxed as an economy.

40:47 So, you know, I we're this is a this is gonna be a really challenging time for The United Kingdom, and I and I'm and I'm delighted that, you know, 88% of our NAV is in Poland, frankly. The investment markets are broken, but at least the real economy in Poland is doing well. And that's important so that we can keep income levels up, we can lease these vacant properties, and we can be you know, we can grow our profits. Perfect. And thank you once again for updating investors today. Could 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 will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of FIRST PROPERTY GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

41:35 Thank you.