Nichols (LSE:NICL) — Interim Results

0:01 Good afternoon, and welcome to the NICLLS PLC interim 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 all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll.

0:27 And I'd now like to hand you over to Andrew Milne, CEO. Good afternoon to you, sir. Good afternoon, and a very warm welcome to the NICHOLS sorry. Bear with me. There's a problem on the screen. Apologies. Good afternoon, and a very warm welcome to our half year interim presentation. With myself today, I also have David Taylor, who's our new interim CFO, who's been with us four or five weeks, but has been, CFO of Churchill China for over thirty years. He's very experienced as they were on the AI market as well. And behind me, Gary Eden, who's our group financial controller and has been with us for, three years. Okay. So the plan today, is to make the presentation in three parts.

1:16 So I will, give you an upfront view of what's happened in the first half of the year from a strategic and an operational point of view. I will then hand over to David and Gary who will cover the financial review with yourselves and give you a financial outlook. Then I will come back and just cover what our forward strategic focus will be and where the clear focus to drive growth in the future will come from. Okay. So I'll start with outlining, the key highlights to take away from today's presentation. So first and foremost, we are really pleased to report that we have driven strong top line growth of 6.6% And in line with the strategic direction that we outlined back in March, that has been predominantly driven from our package business both in The UK and internationally.

2:08 Very encouragingly, our international package growth has had added added momentum this first half, and our key three regions of The Middle East, Africa, and rest of the world have all seen strong double digit growth. Both in The UK and abroad, we have continued to make strong accelerated investments in our exciting digital marketing campaigns, and that's very focused to drive and grow, but also driving the long term equity of the brands. Back in March, we signed posted that we were facing significant inflationary headwinds of about 16%. Pleased to be able to announce today that we have broadly mitigated all of those headwinds through a number of initiatives that we'll talk through in the presentation.

2:57 Again, back in March, we shared with you the outputs of our own to home strategic review, and I'm really pleased to say that we've made strong progress on them in the first half. That will continue into the second half, and we'll start to see the full benefit of that benefits of that program realized as we go into 2024. Altogether this year, we have maintained a very strong cash position, that will give us firepower for the future. We have strong momentum on our ESG commitments, which are against three core pillars that we'll outline in the presentation. Again, I'm pleased to say that our interim dividend of 12.6p is progressed on this time next year in spite of the increase that we've seen from a corporation tax point of view.

3:47 And finally, I'm really pleased to say that we are confident that our full year adjusted PPT, will be in line with the expectations we have out there at the moment. Okay. What I'll do now is to to give you a market update, in terms of what's happening in soft drinks. So just as a reminder, I'm gonna share with you the Nielsen data, which is the data that's used as the industry standard. But this takes, the till roll EPOS data from the grocers. In the convenience wholesale channel, it is sample data and doesn't include any of the mixed assortment discounters. This data also runs to the June 17, whereas our data runs to the end of June. So there are discrepancies, as you will see our growth in The UK package at the half year is four and a half percent growth, but this just gives some context and direction, to where the market is going.

4:46 So if we start with The UK performance, the soft drinks in a whole. So I'm really pleased to say that the soft drinks market has again proved very resilient. You can see that value growth is up 11% to that midpoint of June. And to give some context, it was 9% at the end of twenty two and seven and a half percent this time last year. So really pleasing to say that's still going forward. But as you've probably noticed, volume is down 2.4%, so clearly being driven by price being taken. Couple of highlights to pull out. So energy, which is a 1,700,000,000 category now within soft drinks, about 15% of the total market, continues to perform very well, delivering value growth at over 15%, but also volume growth still coming through.

5:40 A big change in the sports category, which has nearly doubled in size in the first half year, and that has been driven by the introduction of the prime drink into The UK. And finally, to say the only subcategory that's not growing at the moment in The UK is mixes as it starts to as it struggled really to recover from the impacts of COVID. If we reflect on our own performance then, so we're pleased that in both squash and sales, we are are growing, but we are absolutely focused this year on a value over volume strategy. We do not have factories. We're asset light, so we don't have to be worried about overhead recovery. So we have chosen to compromise a little bit of market share in the short term to absolutely protect our gross margins as we have reduced our frequency and depth of promotions.

6:39 However, I'm really pleased to say that within our squash portfolio, we are still firmly consolidated as the number two squash brand in The UK, and we are now enjoying six years of consecutive growth across that squash portfolio. Okay. So if we turn to what has been at the core of driving our package growth across our business in the first half. We'll start in the Middle East region. So I'm very pleased to say at the half year, we have driven sales by 17 and a half percent, which is on the back of us celebrating our hundredth year with Vimto and Ramadan in the region. On the back of that, we have had a very strong marketing campaign. And you'll see from the first box there, outstanding in store displays driving real strong availability and visibility for the brand throughout the whole region.

7:35 And we've had some milestone marketing campaigns, so we lit up the skies of Dubai with a light drone display that many people turned out to attend, and that was a real milestone event in the calendar over in the region to celebrate Bimso and Ramadan. We are in our third year of a highly successful sweet togetherness campaign that not only focuses on driving brand engagement during the key Ramadan training period, but has also allowed us to drive awareness of our brand new Xero cordial range that has been launched in the region during Ramadan this year. Innovation has been key for us in our success in the last few years in The Middle East, and we have really successfully launched a new line variant, into our portfolio.

8:25 And now what we see in the region is a much broader portfolio, giving us all year round incremental sales, and complementing the key trading period of Ramadan when cordial sales will peak. Okay. If we turn our attention to Africa, again, a key region for us. And, again, in the first half, we have driven 26% sales growth versus last year. At the heart of this success has been firstly the rollout, with a new partner into the Ivory Coast, which is a country in the heartland of our strength in West Africa. It's a population of 25,000,000 people, so a significant country, and it's proved very successful in the first half in in fueling our growth.

9:13 But equally important, in some of our core markets where we still have headroom for growth, Senegal, Guinea, and Cameroon, have proved very successful, And that has been on the back of strong investment into below the line marketing campaigns, such as, as you see on the screen there, sponsorship of pop concerts, and also continued rollout of our impactful new branding to drive visibility and awareness of the brand. Okay. Closer to home in our UK package business. At the core of our success this year has been the continued, rollout of innovation. So we brought new flavors into the marketplace and secured really strong listings with a number of retailers in the first half.

10:00 We have as well launched into the very strong and growing energy category with a new proposition for Vimto. So we've launched two SKUs in a 500 mil can format. Our proposition is it's a natural energy proposition with the caffeine coming from coffee beans. There are added b bit b vitamins in the products, and the products are low calorie. The zero product having 20 calories per 500 mil, and the nonzero product having only 90 calories. And both of these competitions have a great taste of Vimto. So we've launched this with an exclusive retailer in June. It's proved very successful.

10:46 We've now had more retailers approaches the list of product, which we're rolling out in the second half. We continue to invest in strong on pack promotions, such as the big cash giveaway and band sales to drive execution, and visibility of our brands at the point of purchase, as you can see on the third box. And we also support that with our find your different marketing campaign that's in its third year. And it's a fully integrated campaign, TV, video, digital, and social. And we had a number of our ads in the middle of Love Island, which is for our target consumer.

11:24 We've also added some excitement and innovation to our carbonates category this year. We have slush puppy in our slush business, and we've now extended that range into our carbonates product in package. We've launched four SKUs exclusively with Alstad during the first half, blue raspberry and strawberry in two liter and 500 mil variants. That's proved highly successful, and we're having a full roll rate of that across numerous customers in the second half.

11:59 We signposted to you and the outputs from our strategic review into our to go in March, which essentially was about a simplified business model, driving bottom line value, and and running the business separately from our core business so not to distract management attention. I'm really pleased with the progress we've made in the first half, and we're on track to continue that in the second half, and then the benefits being realized as we move into 2024.

12:35 As we exited COVID, we had a strategic focus in our business on making sure in our outsourced manufacturing model and logistics providers that we have the right foundations to provide the capacity and the capability to ensure we could realize our future growth ambitions. So I'm really pleased to say across the whole UK package business, we now have additional capacity, to give us our strong foundations to grow. We have, a number of tenders that we've taken out across all of our logistic providers in The UK and abroad, which has seen real enhanced service levels come through for us currently. And we've invested strongly in putting a new in house purchasing team in place now that will allow us to buy better for the future, but also with ESG in mind to buy in the right way.

13:31 And finally, from myself, we have made significant progress with our ESG commitments in the first half against the three key pillars that we focus on. I'm just gonna pull out two elements to focus on today. So within our products we're proud of, just a reminder that the deposit return scheme, which was due to go live in Scotland in August this year, which is where there will be a 20% deposit put on aluminium, PET, and and glass, and then given back to the consumer when they put that product into a returnable vendor has been delayed till October 2025, and that is in line with the rest of The UK. So we're working very closely in conjunction with the British Soft drinks Association to ensure as we approach that deadline in a couple of years that the rollout is as smooth as it can be.

14:27 The other point I would just ask to pull out really is the point around reformulation of our still slush portfolio. So back in 2018, when the sugar tax came into The UK, across the whole of the industry, the majority of slush manufacturers removed sugar from their portfolio and replaced it with glycerol. Glycerol is used in many food products today and and perform the function within the slush of stopping the slush free solidly, which is what sugar does in the slush product. However, in recent months, there have been a few issues across the whole industry where where glycerol is consumed in large quantities and as it dehydrates consumers, some younger consumers have suffered from nausea and and vomiting.

15:22 So it was one of the key industry leaders. We did move quickly and decided to remove all of the glycerol from our Still Slush portfolio that is predominantly sold into play barns and trampoline parks and replaced it with sugar. And as a result of that, we have taken some one off costs this year that we haven't exceptionalized and will be covered in the financial update in a in a in a few minutes. However, we do feel now we're in a very strong position to see FSA, the food standard agency, last week launched communication that any slush drink now that contains glycerol will have a warning on to say not suitable for children that fall under. Okay. Thank you very much. I will now hand it over to David and Gary, who will take you through the financial numbers and then the financial outlook.

16:15 Thank you. Thank you, Andrew, and good afternoon, everybody. Before we go into detail on the slides, just a quick summary of the first half, which I guess you can characterize the financial performance as being solid without being spectacular. I think a number of building blocks have been put in place for second half and into 2024, And the business addressed a number of challenges, not least the how to fairly and ethically put through an inflationary rise that covered off our increased costs without adversely impacting end consumers and customers. So but a very clear decision there just to focus on value rather than volume.

17:08 Looking at the revenue slide, overall sales up 6.6% to 85,500,000. Going through the components of that, just to reiterate what Andrew said, package revenue up 10.4%, £64,500,000. Standout performance obviously from the international business where it was up 24.6% with double digit growth in all regions. Obviously, very strong in Africa, very strong in rest of the world. I think The UK, we were pleased with the position we achieved, up 4.5%, very much protecting gross margins where we could. But in a sort of reasonably stable marketplace and some good progress there. The out of home business revenues were down three and a half percent, and that does reflect the

17:59 part of the restructuring process we embarked on where we were gonna withdraw from what we consider to be unprofitable customer accounts. Turning now to adjusted profit before tax. Good overall performance, up to £12,500,000 profit in the first half from 11,300,000. That's a 9% increase. Clearly, some of that down to improved interest receipts, which we'll come back to later, but good overall performance. The PBT margin moved up from 14% to 14.4%. Within that, gross margin was up £800,000 in absolute terms. The percentage margin was slightly down, but that reflected the decision really just to pass through increases in the increases in input cost inflation without putting an inflationary element on our gross profit.

18:59 So there was a, if you like, a natural arithmetic effect, which despite the overall margin going up, the percentage margin was slightly down. Looking at volumes, international business is pretty well level. UK was slightly down as we sort of defended margin rather than market share and out of home down with the restructuring. As I said before, underlying cost of goods inflation is about 16%. We did manage to mitigate that through one or two of the things we were working on already in terms of contract renegotiations with some of our co packers and with other improvement projects. So some of that cost of goods was was mitigated.

19:48 Looking at the big cost lines, distribution costs, £400,000 up, which is about 8%. That reflected entirely increased fuel costs in the first half against first half last year, and, obviously, that's now moderating.

20:04 Admin costs up slightly by about 200,000, which is about a a 1% year on year increase. A lot of that coming from increased payroll costs that we put through an average rise of about 5% in the first half year, but that's those costs were offset with some savings elsewhere. We have also increased our marketing spend in supporting the Vimto brand long term, and we expect that to be a little bit higher in the second half year. We're still committed to reinvesting some of the profit generation back into supporting the brand long term. And as I've mentioned before, interest income up £800,000 with increased interest rates on a pretty well maintained cash figure.

20:59 Okay. Kerry. Thank you, David. I'd like to start by taking you through our new segmental reporting. As was discussed at the year end presentation in March, we are now segmenting our business between packaged, out of home, and central costs. This new segmental split will allow the group to manage out of home as a distinct division in order to maximize value, also allowing the necessary focus to drive the accelerated growth across our packaged business in The UK and internationally. David has already mentioned the revenue performance of our segments, so I'll focus on adjusted operating profits. Within our total package segment, the group is pleased to report an adjusted operating profit of 18,000,000. With growth of 1,500,000 or 9% on the prior year.

21:46 The strong return on sales of 27.9% demonstrates the potential in this segment.

21:53 Despite the significant inflationary challenges previously mentioned, group's value over volume strategy has performed well during the period with margins broadly in line with that of prior year. Moving on to our auto home segment, our adjusted operating profit of 1,400,000 is marginally down versus the prior year of 1,600,000. Within the current period, we've incurred 500,000 of one off reformulation costs. Excluding these costs, performance would have been ahead of the previous year by 300,000 or 14%. The expected impact from the implementation of the out of home strategic review is to maximize value, enhance margin, and drive bottom line growth within this segment. Therefore, we're pleased that our performance, once we exclude these one off reformulation costs, would have returned a margin of circa 9% or compared to the 7.5% in the previous period.

22:51 Moving on to our central segment, which includes central payroll, head office overheads such as rent, rates, insurance, as well as governance and listed company costs increased by 1,000,000 on the prior year. This increase is principally related to payroll and staff related costs. The group's unadjusted profit before tax of 11,200,000 was after an exceptional charge of 1,100,000 as of the half year.

23:19 During the period, the group made significant progress on the implementation of the actions arising from the out of home strategic review. These actions have resulted in a charge of 9,600,000 in the period and principally relates to restructuring and depot closure costs. Further work will be undertaken during h two and more ex exceptional costs to be incurred.

23:42 Work to implement a new ERP system, which is focused on driving business transformation, is now underway and is expected to be operational at the end of twenty twenty four at the start of twenty five. Working with a dedicated implementation partner, groups incurred 9,500,000 of costs in the period. During the second half year, if the group group moves towards selecting its ERP solution and begins implementation during 2024, further exceptional costs will be incurred. Finally, group has incurred some minor legal costs as it seeks to conclude on the recovery of debts from current and previous employees in relation to the historic incentive scheme. This is progressing well and in line with expectations. Moving on to net assets and capital employed.

24:29 A principal KPI in this area is cash and cash equivalents. The group has maintained a strong cash balance at the half year, 56,100,000. Group is pleased to report a healthy EBITDA performance of 11,600,000, 13.5% of revenue. Working capital has marginally increased from the start of the year, has accelerated sales leading into the half year and resulted in an increase in the group's debt to balance. Remaining working capital is normalized and is broadly in line with the prior year end.

25:02 Capital investment, which has historically been weighted towards our out of home business, continues to be a key focus for the group, particularly following our out of home strategic review. Total CapEx spend was 9,100,000 at the half year. And whilst we expect increased spend in the second half, the group remains committed to managing its capital deployment closely. The group has seen a pleasing return on its cash deposits, following the rate rises at the tail end of last year and start of this year with increased income received. Our return from capital employed of 25.9% at half year is up from 25.2% in the prior period. This shows good growth from future potential, particularly within our package business, which offers our highest return.

25:49 Encouragingly, the group's pension surplus remains strong with a surplus of 4,300,000 at half year. Work to progress the pension surplus to a position for potential buyouts has commenced. I'll just pass back over to David. Okay. Thank you, Gary. Just looking quickly at the dividends. Obviously, the company's dividend policy is pretty is pretty standard at maintaining it at broadly two times cover. I think a slight disconnect really this this first half between the increase in PBT of 9¢ and the increase in dividend of 1.6 percent. The reason for that is that corporation tax rates have increased from 19 to 25% with effect from April this year.

26:38 So while we've delivered a much bigger pretax profit, more is going to corporation tax. So unfortunately, there's been a slight impact on the dividend, but the board's really pleased that it's been able to move it forward despite that. So I think had corporation tax not moved, we'd have been looking at maybe a point eight p higher dividend, but this is obviously something that really just affects this year rather than being ongoing. So so I'm moving on to the financial outlook just looking forward. I guess for business as a whole, very much more focused on a growth agenda going forward that, you know, we've sort out one, problems within the business as a whole.

27:24 We're a long way through the outbound strategic review, for example.

27:29 And we do see steady growth coming from The UK package business going forward. We've got good momentum in the international business and with good opportunities going forward both in second half and in 2024. I think underpinning both those businesses, we do expect to spend a little bit more on marketing, but, obviously, with an eye on what the bottom line is. Out of home restructuring is proceeding well, and the forward investment path there is pretty clear that there won't be a lot of new investment back into out of home. And we still expect to secure the the benefits that we identified, but largely within 2024 rather than 2023.

28:17 In short term, the business continues to trade well. There is still some inflation risk, though I think, as I said earlier, most of our input cost inflation seems to be moderating. We're seeing a little bit in sugar, but in other areas, the the the the slight evidence of some costs coming down. So broadly, we're not seeing the same level of input cost inflation at all. Where we we are slightly keeping a bit of a concerned eyes on the effects on the consumer of continued high cost of living costs. So just a little bit of caution there. As I said earlier, we do expect to spend a bit more on marketing in the second half, and maybe there'll be a bit more promotional support to push volumes forward in The UK.

29:05 But, overall, we're very confident in meeting forward market expectations. K. Thank you, David. Thank you, Gary. So I will just come in now and just clarify our our forward strategy and then sum up before we open the floor to questions. So five key areas of focus for us as a business. So, absolutely, the focus will be on our package business and accelerating our growth, as we've seen in The UK and, in international in the first half that will continue at pace. And we do have strong balance sheet, so, we do work closely to look at M and A opportunities. They will absolutely be in the packaged area and more likely in The UK package business.

29:54 So, that's something we'll monitor closely and looking to for in the future. And as we've said, we will be maximizing the value in our out of home business, keeping it simple, and keeping our senior management focused on driving that packed business. We will continue to implement the key initiatives, our operational change program to to maximize efficiency and also drive service. And we will deliver business transformation through the implementation of a new ERP system. We're working on that this year and into next year with implementation likely taking place in early twenty twenty five. So to sum up today, we're really encouraged with that first half financial performance at good top line growth and then flowing through to the bottom line.

30:45 Again, the diverse business model we have, has proven pivotal to that success. Hopefully, you can see we've got a clear strategic plan that is working. We do continue to be highly profitable and cash generative. And based on all of that, we're very confident that we can deliver our long term objectives and continue to drive profitable growth. Okay. Thank you for listening, and thank you for dialing in today. I think we're now gonna open the floor for questions. Andrew, David, Gary, thank you very much for your presentation. What I'll do is I'll just bring your cameras back up now. 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. But just while the company take a few minutes 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.

31:36 You can see, we received a number of questions throughout today's presentation. And, Andrew, perhaps if I could just hand over to you just to chair the q and a by reading out the questions where appropriate to do so, I'll pick up from you at the end. Okay. That's great. Thank you. Yeah. I'll, I'll read out a couple of the first questions. I'll perhaps take them and then hand over to David to, to take one. So, firstly, there's a question here asking around, the competitive landscape in The UK market, And there's one question here particularly around Ribena. Are they becoming more assertive, and, is that affecting, Bintog's all? So, yeah, I think it's it's fair to say, you know, Ribena are one of our our key competitors, not only competitor, but one key competitor in the squash market.

32:22 Yes. They, they are being more, aggressive in terms of more advertising in the marketplace, and they do seem to have not put, much price through in the first half. So that they have gained some market share, within The UK in that first half, but we're we're very confident in our plans. As I said, you know, we are firmly consolidated as the number two player in the marketplace, and and we are investing in the brand and having, you know, our six year consecutive growth. So very confident in the long term health of the, Intel brand. Second question I'll ask is a few questions here around just, how is out of home progressing?

33:08 Anything in the first half that will, stop out of home progressing at the pace we want it to. And, no. I think as we said in the presentation, really pleased with the progress we've made. We've implemented many of the actions in the first half even though we've had to reformulate part of our outbound business on Slush. We visited over a thousand outlets to do that. But as well as doing that, our plan is firmly on track. That will continue into the second half. And as we said, we'll then start to realize the benefits in 2024. Okay. Perhaps a question that I can ask for David, so I'll read this out. Would you consider a share split to increase liquidity in the shares? I guess this might benefit you as lack of liquidity might put off institutional investors.

33:59 Yeah. Thanks, Andrea. And thanks, Mark, for submitting the question. I would say this is an interesting one because the whenever you talk to our corporate corporate finance advisers, They always they always suggest there's absolutely no reason why a share split should improve the performance of a share. But, practically, there are always examples out there of it. And I think it is something that the the board's got a bit of a session later on in the year thinking about, things around shares, and it's certainly something that would come to the board. I wouldn't wanna prejudge, what the answer of that the answer to that would be at this stage. Thanks, David. Okay. Got an another question here.

34:45 In terms of marketing, do you or would you consider using implements as prime as a great example of the potential impact? Yeah. I think I think for for all of us who've been in soft drinks a long time, what's happened with Prime in the first six months of this year has been absolutely incredible. I've never seen growth like like that before. It's quite unique to have people that we're bidding to buy bottles of the product. And we do use influencers on our brands, and we'll continue to do so. It's a it's a real growing trend. But, yeah, it'd be nice to find one that that have the influence on a prime, but my instinct is they are they are few and far between. But but well done to them for being very successful with that.

35:37 Let me just ask these questions as they're coming through. What is the plan for the 56,000,000 cash on the balance sheet? As a second bit to that, what other international markets is NICHOLS trying to break into, or is it to go deeper into existing foreign markets? So I think if I start with the if I start with the international markets and perhaps hand over to David to to just answer about the the cash. So, yeah, I think I think it's clear for us that, you know, we're we're we're well established in The Middle East. We've been there, as I said, for a hundred years. So that market is is mature. But as you can see, even this year, we are starting to to drive 17 and a half percent growth through flavor innovation and focus on our execution in store. So we're still hedging that in mature markets.

36:32 In Africa, in the continent there, there's about 50 countries. We're in about 27, 28 countries. So, again, as we're seeing, we still see organic growth there, but, absolutely, we still see ourselves moving into other markets on the African continent as the brand is is very well known there. And there are there are a couple of markets further the field that we're just currently exploring, but it's it's about making sure that we we focus our investment, our time, on where we believe we can get the biggest returns, which probably in the short term will will be accurate still. Okay. Perhaps over to yourself, David, to just give a view on the plan for the £56,000,000 worth of cash on the balance sheet. Okay. Well, dealing with the second question first. I think at present, the majority of that 56,000,000 is invested in short to medium term deposits with, you know, sort of strong financial institutions.

37:34 So, you know, we do manage our our cash sensibly. In terms of forward looking piece, I think, clearly, 56,000,000 is a lot, and there is yeah. There's certainly some surplus there. I think at present, we are we're looking at, as we always do, is a couple of acquisitions. Mainly, these would be focused on developing The UK package business. We think there are a number of new product areas that we could probably get into more efficiently through acquisition rather than through internal new product development, certainly, could get to the position we want to see quickly. So there is quite a big part of the 56,000,000 is currently earmarked for m and a, but, you know, that that is proceeding at a certain level.

38:35 I I think we're very clear as a business that we don't want to overpay or opportunity that we want to be quite clear that anything that we buy sits alongside our overall strategy. So it's up there. I think the one of the I've not been with the business long, but one of the strengths of the NICHOLS business is that it is run prudently for the long term. So I I I don't think, for example, we would ever think about doing a really big acquisition or taking on debt to finance something. So there's always gonna be some question some cash on the balance sheet. I think it is a matter of just working through the acquisition opportunities and then seeing what the surface cash will be over and above that.

39:27 Okay. Thanks, David. I'll just I'll just ask a couple more questions, then then we'll need to wrap up. So, there is one here about out of home. And do we, do management believe that we will get the business to an acceptable profit level versus capital invested and and management time. Yeah, absolutely. We did we did a really thorough review of our out of home business over about twelve to fifteen months. As we get to the end of this year, we have a much more simplified business. As as Gary pointed out, the the margin without the one off reformulation cost this year, the bottom line would be 9%. We certainly believe we can get up to more like 10 to 12% as we get into next year, and therefore that, you know, returns an exceptional level of profit to us. We're running the business very separately to the day business at the moment, so senior management time is not is not focused there.

40:23 And and that business still provides us with with good cash as well. It gives Us firepower for future. There is one question here about, you know, some of the market share we've lost in the first half in The UK. And as I highlighted in the presentation, that was absolutely our strategy. We were very focused on protecting our gross margins. So we've lost share by not promoting as deep or frequently. But as inflation softens, we'll be reinvesting that back money back with our customers and and then ultimately to our consumers by putting in place additional promotions and deeper promotions but we're very confident we'll we'll recover that market share position. And perhaps just the last question before we do wrap up, there's a question here around, do we keep a pipeline of m and a targets?

41:13 And, absolutely, we work very closely with a partner who supports us. We are talking to lots of people in the last twelve to eighteen months about M and A opportunities. And, you know, as as David mentioned, we're still continuing to talk to a couple of opportunities for future. Perfect. Andrew, David, Gary, thank you very much for that. I think you've addressed those questions you can 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. But just before redirecting investors provide you with their feedback, which I know is particularly important to the company, Andrew, could I just ask you for a few closing comments? Yeah. Thank you. So, yeah, just in summary, firstly, I'd like to say thank you for everybody for taking the time to dial in today.

42:02 Thank you for all the questions as well. They're they're really helpful to us as well. And and as I as I summoned it earlier, you know, to summarize, say, we're we're really pleased with our performance in the first half, both from a financial performance, but also in terms of our strategic focus. We we believe we're firmly on track, making really strong progress, and and really firmly believe and are confident in the in the future for the business and still being able to deliver our long term profitable growth and objectives. Thank you. Thank you. Perfect. And thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order 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.

42:48 On behalf of the management team for NICHOLS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.