Nichols (LSE:NICL) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the NICHOLS PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab just situated on the right hand corner of your screen. Please just simply type in your questions at any time 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 of the questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard, and we will notify by email once these are ready for your review. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Andrew Mill. Good morning, sir.

0:47 Good morning, everybody. A very warm welcome to the session today, and thank you for taking the time to dial in this morning.

0:56 Before we go into the presentation, I'm just gonna spend a couple of minutes just giving a a brief overview of the company, in terms of what we do just for everybody, listening in today. So the company was founded a hundred and fourteen years ago by John Noel Nichols, who invented the Vimto brand. If we then fast forward to where we are today, we're now at AIM listed PLC business, and the family do have still a significant shareholding, about 36% of our shares. In terms of what we do, we have a portfolio of soft drinks. Our major brand is Vimto, and our drinks are sold both in The UK and internationally.

1:42 We go to market in three ways. So the first the first way we go to market is what we call UK packaged, and that's where we're selling packaged products like the one you'll see on the on the slide here into all of the major retailers, wholesalers, convenience stores right across The UK. And in this part of our market, we outsource all of our manufacturing. Second part of our business is our international business. Again, this is where we sell Vimto, across the globe in numerous countries. Again, our manufacturing is outsourced, and our two major markets are Middle East and Africa. And then our third route to market, which we call out of home, is any outlet that's not a retail outlet.

2:27 For example, could be a pub, a theme park, or a cinema, where we sell a portfolio of products, soft drink products, predominantly through equipment such as a dispensed gun or a slush machine, and and that is across The UK and some outlets in Europe. So hopefully, gives everybody a bit of a feel in terms of what we do. So in terms of the presentation today, we're going to take that in three parts. So I'm going to give an overview of the highlights for half one and then a bit of a a look into the strategic and operational strategies that we've had in place. I will then hand to David, who will give you a deep dive into the numbers and the financial outlook. Then I will come back and just clarify our our forward looking strategy and and sum up, and then we'll take questions.

3:16 So in terms of the key messages we'd like you to take away from today's presentation, firstly, we are really encouraged by the revenue growth that we have delivered this year in the marketplace, and that is circa 19%. And then our adjusted p PBT growth of 26.8%. In the biggest subcategory we play in The UK for us, which is squash, we are really pleased that we have taken market share again, and we have outperformed our competitors by nine percentage points. In The Middle East, the main trading, period for us and it's crucial to our success is Ramadan. And during the Ramadan period, the four weeks before Ramadan and the four weeks of Ramadan, our in market volumes are up 10%.

4:08 And that's really important to us because this is a concentrate market for us where we ship concentrate to The Middle East. So that belt bodes really well for us for the future. We continue to make really strong investment into our marketing programs both in The UK and in The Middle East and Africa. Earlier in the year, we launched our happier future ESG commitments. And, I'm pleased we've made strong progress here, and I will outline some of the progress we've made later in the presentation. Over the last eighteen months, we've embarked on, our operational change program, which was about making sure the foundations of our business across our supply chain and and ops were set up in the right way to ensure we have the, the capacity and the right cost base for the future.

4:56 And I'm really pleased to say that during the first half of the year, we have successfully transitioned our production of our dilutes business from our current copacker to a new copacker. We've had significant plans in place to help mitigate inflation, and that's been the combination of cost reduction programs and also appropriate pricing strategies across all of the markets and all of the channels we operate in. And I'm really be able to pleased to say that our full year adjusted PBT outlook is in line with market expectations. Okay. So I'm I'm now just going to give you a bit of an update on what's going on in the soft drinks market to provide context then our performance. I'm going to use the Nielsen data, which is the most recognized source of data in the market.

5:44 And this collects Epos sales from retailers and sample data from the convenience channel, but doesn't include discounters. And therefore, there are some slight discrepancies between these numbers and our numbers. From a soft drinks perspective, so I'm really pleased to say that at the half year, the soft drinks market has proved very resilient again, and you can see that value growth of 7.6%. At the end of last year, it was about eight and a half. So, again, it is proving very resilient. But what we are seeing in the marketplace is that our shoppers are buying soft drinks at higher prices. As you can see there, the relationship between value being up 7.6%, but volume being down 4.3%.

6:31 In terms of a couple of highlights to pull out, you know, one of the really strong winners is the subcategory of energy, which is the lot one of the largest subcategories in soft drinks. And you can see there that value growth is very strong at 13 and a half percent and has been for a number of years. Conversely, on the right hand side, some of the subcategories that have not performed as well this year, a couple of pull out would be squash, which is where we play. But that is simply because in q one last year, we were all in lockdown, and at that time, squash is consumed at a much higher rate, as people are at home more. Equally, if you look at mixes, that's down 14%. What's happening there is this data doesn't capture, out of home and pub data, and therefore, consumers have gone back out to pubs, etcetera. Less mixes are being consumed at home. So it is the lapping effect that is going on there.

7:28 If we look at our performance then from a Nielsen perspective, I'm really pleased to say that our brand value is up at 5.7%, and we've absolutely had a focus on value over volume. That's about us protecting our gross margin at this very important time. And and therefore, I'm pleased to say across the three subcategories we play in of squash, flavored fizzy carbonates, and ready to drink still juice drinks, we are taking value over volume. And a key measure for us is penetration and bringing new households into the brand. And I'm pleased to say that over the last five years, we've brought over 700,000 new households in. That's about 10% gain. And really importantly, about a third of those are from southern households, and that's part of our long term strategy to increase our penetration in the South.

8:21 We're now firmly consolidated in The UK as the number two squash brand, which is a particular highlight for us. And of all the major squash brands, we've been the fastest growing versus the first half year. Okay. If we look across our UK packaged business, what are some of the key initiatives we've had in place? Well, during the year, we have launched a fabulous looking new premium bottle across all of our dilute range and into every size, and it gives great standout on shelf. We've continued to roll out new flavors, so we've launched a cherry variant and a blackberry variant of our products, which is selling really well across our squash portfolio, our fizzy portfolio, and our still portfolio. As part of our drive from a happier future commitments point of view, we have moved all of our cans into cardboard.

9:15 And not only is that a good thing to do in terms of producing plastic, it gives a really good premium look on shelf. We've invested heavily in below the line promotions, and we've done in store the big cash giveaway where consumers can win 10 every time they pick up one of our bottles, and that proved very fortuitous in terms of the current, squeeze on cost of living in The UK. We are in the second year of our through the line integrated find your different marketing campaign, and that's currently airing on TV, in cinema, video on demand, and digitally socially. And then I'm really pleased that for the second year on a run, we we're now doing our biggest ever van sales across the whole of The UK, which is really targeting driving distribution in the impulse and convenience stores.

10:07 I'm also pleased to report that one of our second brands in our portfolio on the back of that strong distribution focus, our Levi's Roots portfolio is doing very, very well. We are in over 20% growth on the brand and we have driven distribution hard. We have also transitioned as part of our happier future commitments away from the colored green bottle into a clear bottle that makes separation easier, and and we've got real momentum behind this brand now, which is an out brand value of £6,000,000 brand in The UK. If we look slightly further afield and we start with one of our major international markets, The Middle East. As I mentioned earlier, great in market growth of 10% during the key Ramadan trading period, and that's being driven by some outstanding market execution from our sales force, working closely with our customers on the ground across The Middle East, and you can see that from the image there on image one.

11:07 We've also, for the first time, launched a Fimto Zero Cordial on the on the back of our consumers there, where in The Middle East, there is a a challenge around diabetes, and this offers an alternative product with lower sugar in the product. And that has gone very well and we'll be rolling that out further next year. And again, from a marketing investments, our Sweet Togetherness campaign is now running in its third year has proved very successful again in driving rate of sale in the region. If we look to our other major market internationally, Africa. So we're really pleased at the half year that we've achieved a 2% growth year on year in Africa.

11:51 Firstly, we had tough comps from last year where we grew at 9%. But in q one this year, due to the national driver strike that we saw in Spain, where our Vimto cans are produced before they're sent into Africa, we couldn't get any shipments out of the African region, and was very limited. However, during q two, we've seen 11% growth. We've got great momentum back, and that now means we're in growth in the first half and gives us confidence for the second half. Some of the major initiatives that we've had this year is we've launched our cans into three new markets in Africa, so Angola in the West, and then into Chad and the Central African Republic across the middle of the continent. Again, we've made strong marketing investments on the ground and in store in the Valentine promotions and the Ramadan promotions as you can see from some of the images.

12:45 And we've also continued to roll out our new branding across all of our countries in Africa.

12:55 I'm really pleased to say that the out of home sector continues to recover. Obviously, we're comping against lockdown last year. Our revenues are up a 131%. And what we're seeing versus 2019 pre COVID is our revenue is now actually higher than it was in '19 on the back of some of the price rises we put through this year. And also we're now selling ICEE as a new product into the cinema chains, which we weren't doing back in 2019. Our volumes are about 10% behind 2019, and this is really on the back of footfall into the cinemas was slower in the first half of the year and has accelerated due to the launch of the Maverick film. And also some of the holiday parks we service, they're not yet at full capacity because of staffing challenges they have. But we do expect that to see that acceleration in the second half.

13:52 And in terms of the strategic review that we announced we were doing earlier this year on our out of home business, we're making strong progress there, and we will report our findings back at the end of this year. As I mentioned, we launched our happier future commitments earlier this year against three pillars of everyone matters, products we're proud of, and owning our climate impact. And some initiatives that we've landed in the first half, so from everyone matters, and we've just conducted, for the first time in three years, an engagement survey with all our staff. And I'm really proud to say that our engagement levels are at 85% against industry norms of 60%.

14:39 We've also established our first two community groups of female leadership and LGBTQ plus, and they are proving very successful. In products we're proud of, again, all of our products in The UK are compliant with the high fat, salt, and sugar legislation due to hit later this year, That will give us no issues in terms of therefore where we can display our products in store. And in all of our NPD, whether it's in UK package or in out of home, where we've launched new IC products that all know added sugar. And I'm also pleased to say we have now ensured across all of the locations we have in The UK, and there's about 15, that all of them are on a 100% green electrical tariffs as part of our commitments around over that climate impact. Okay. Thank you. I'll now hand over to David and then come back and sum up at the end. Thank you.

15:30 Thank you, Andrew, and welcome everybody to the webinar this morning. So it's an encouraging revenue performance for the group. Our sales increased 12,800,000 or 19.1% from 67,400,000 in half one last year to 80,200,000 in half one this year, with increases seen in both our steel and carbonate segments driven largely by a strong out of home recovery. In The UK business, it grew strongly by 29.3. Half '1 revenue is now an encouraging 62,600,000, increasing from 48,400,000 this time last year. Within this geographic segment, our UK package route to market show continued revenue growth of 5.1%.

16:21 The UK soft drinks industry is experiencing a period of significant and accelerating ingredients, packaging, and distribution inflation, and overall market volumes are down 4.3%. Our UK package volumes were broadly flat in the period versus last year, driven by market outperformance of the Vinso brand in both value and volume terms across both the dilutes and ready to drink subcategories, as well as strong growth for our Levi routes and although against a much smaller base, our Feel Good brand. Our out of home route to market continued its recovery from the pandemic with revenues up 131.9 percent in the period as some outlets saw for the first time in over two years footfall close to 2019 levels.

17:08 Our revenues are now ahead of those seen in the first half of two thousand and nineteen, although those revenues did not include the full rollout of the IT brand to cinema cinemas through 2019 and early in q one twenty twenty. The group's international revenues fell by 7.2% to 17,600,000 as various markets were impacted by logistics challenges and phasing of shipments between the first and second half of the year. For The Middle East this year, shipments are phased more towards half two, but extremely encouraging is the volume sold into the trade in the period between October 2021 and April 2022, which is the critical buy in period for Ramadan, where volumes were 10% higher. Africa, after a very difficult quarter one, when national driver industrial action in Spain severely impacted our ability to ship product, recovered strongly in q two with revenues up 11% and closing the half year overall 2% higher.

18:09 The rest of world geographic segments, which essentially represents our sales to Continental Europe and The US, closed down 16.8% in half one, severely impacted by the much reported container availability issues across The Atlantic in the first half of the year. Encouragingly, our European sales progressed strongly, closing 18.6% ahead. Moving on to adjusted profit before tax. Encouragingly, our 19.1% revenue growth translated to 26.7% adjusted PBT growth at the bottom line. The group moving adjusted profits before tax from 8,900,000 this time last year to 11,300,000 this. Our gross profit grew 4,500,000 versus half $120.21.

18:57 And whilst our gross margin percentage fell 1.6 percentage points to 42.8% from 44.4, this was largely a result of route to market mix as out of home fully reopened post the pandemic and increased sales of our historically lower margin carbonate sales. Critically across the group in half one, despite significant and accelerating inflationary pressures in ingredients, packaging, and distribution costs, the group's diversified business model, and strong growing brands have ensured appropriate mitigation was in place to protect the shape of the p and l at this most critical junction as the group navigates its return to more normalized trading post the pandemic. The most significant driver of our improved gross profits this year is the net volume effect of our increased revenues driven by the reopening of out of home to market. This significant additional contribution has provided relief for the largely fixed cost the group incurs in this area, largely reversing the effects seen in the previous two years when out of home was often closed and costs remained uncovered.

20:08 The group's administration expenses increased 1,800,000 versus last year as out of home support teams returned to pre pandemic levels, and the group continued to invest in the future growth capability of its UK and international teams, both commercially and operationally. The group continued to increase its marketing spend building on the successful find your different campaign launched in 2021.

20:33 Overall then, 19.1% revenue growth has translated into 26.7% adjusted PBT growth. And given the challenging times, the board is encouraged by the group's financial performance in half one.

20:48 Moving on to PBT and exceptional costs incurred in the period. The group's unadjusted PBT was 10,100,000 in the period, meaning an exceptional charge of 1,200,000 in the first half. This largely relates to costs associated with the implementation of the findings from its UK operational supply chain review in q four twenty twenty. The group successfully completed in half one the move of its stylish production to a new contract manufacturer and costs associated with with this change, given their exceptional nature and scale have been treated as exceptional in the period. Critically, this project has provided the group with access to additional dilutes capacity and improved efficiencies. Both of these attributes are critical as we move forward, given both the growth opportunities we see in the medium term and the cost pressures we are experiencing right now.

21:42 Mitigation and self help is going to be critical over the coming year or so given the inflation pressures we are all experiencing. And in March 2022, we announced a strategic review into our out of home route to market following the pandemic and a number of acquisitions in the years preceding it. That project is progressing, and we expect to be able to communicate more fully at the end of this financial year. Given the likely scale and nature of costs associated with this review, it is our intention to report these as exceptional going forward to provide you with the appropriate visibility and opportunity for understanding. Moving on to net assets and capital employed. The principal KPI in this area is currently cash and cash equivalents, and the group maintains very strong cash balances as it closes half one twenty twenty two.

22:32 Strong and improving EBITDA at 12,400,000 or 15.5% has provided all of the funding for the signpost reinvestments into working capital this year following the full reopening of out of home and the group's decision to increase safety stock ahead of the summer as the group transitions its dilutes contract manufacturing arrangements. The group continued to maintain its focus on financial return for capital on on financial return for capital investments, particularly in out of home, and capital expenditure was 900,000 in the first half. During the first half, the group completed its share buyback program, spending 5,500,000 in order to provide treasury shares for future employee savings you earn options and management incentive schemes.

23:19 Encouragingly, the group's pension obligations continued to progress positively, and we now recognize an increased surplus of 6,600,000. Last year, that was 3,900,000, and you may recall that we completed a derisking program on the scheme's assets in half two twenty twenty two, which given the increasing surplus is extremely positive. With the full year 2021 results we signposted that we would focus going forward on the return on capital employed. And accordingly, we've introduced ROCE percentage as a KPI with these half year numbers. The group's ROCE of 25.2% is up from 14.6%, includes a cash balance of 49.2 in capital employed, and so presents for shareholders a significant opportunity going forward. And 25.2 removes any adjustments, that were made for impairments.

24:10 For dividend then, with an unchanged policy of broadly two times cover and an adjusted EPS of 24.8p per share, we can advise that the interim dividend will be 12.4p and will be paid on the September 9 with a record date of the August 5. Okay. In terms of financial outlook, firstly, we are pleased to confirm FY twenty two group adjusted PBT expectations. And whilst inflation in 2022 is significant, we highlighted in March an expectation of underlying inflation for this year of approximately 13.6%, and we planned accordingly.

24:48 These estimates approved largely correct, and our plans, whilst being significantly challenged, have in the round largely delivered, and therefore, we remain confident with f y twenty two. That said, inflation is accelerating and perhaps more critically is now expected to stay around longer than we anticipated in q four last year and q one twenty two this year. All of this has the potential to impact earnings in f y twenty three. We continue to monitor circumstances closely and work with our customers and suppliers to ensure the best balanced approach going forward. And as these plans progress, we will update you further. Thank you, David. Okay. So I'm just going to overview our our future strategies and and then summarize and close and open for questions.

25:40 So we have got five key strategic drivers that we are working on, and we have strong momentum across all of them. So the first being, we've we've got a clear focus on driving our accelerated growth in our asset light routes to market of UK packaged and international. That is our long term play, but during

26:00 the next couple of years, we are very much gonna ensure we focus on value over volume to protect our gross margin in these crucial areas. We've commenced our operational change program, and that will continue across this year and into next year to really ensure our cost base is appropriate, but we have the foundations in place to be able to deliver the growth we plan. As mentioned earlier, a big focus is our strategic review in out of home. It's making very good progress, and we will report back on that at the end of this year. With the strength we have on the balance sheet, one of the key focuses for us as a business is m and a. We're working very closely in the market and with a number of advisers and very much seeking out brands that complement our current portfolio, but we absolutely believe we can add value to over the next three to five years.

26:53 And finally, our ESG happy future strategy commitments will be making strong progress again in the second half. And some examples of the initiatives, we launched our first ever Camp Vimto, where we will invite young people, from backgrounds that have been difficult for themselves to come and work with us to help fulfill their potential. We will also take the delivery of our first electrical vans that will go out into our fleet to help deliver our products, and we are preparing ourselves and making sure we are ready for the deposit return scheme, DRS, that is due to launch in Scotland in August 2023. Okay. So to sum up and some thoughts to leave you with. So I think more than ever, we've really seen the strength of our diverse business model across the three routes to market play for us in the first half, and that's been a key factor in terms of our growth as that out of home market has built back.

27:52 We're highly profitable, cash generative, and we have a very strong balance sheet to provide firepower for the future. We have good momentum on our five strategic drivers, and that gives us real confidence that we can deliver over the next three to five years our strategic objectives and continue to deliver profitable growth. Okay. We're now going to take questions. So David, is going to read the questions out, and then we'll we'll answer those where appropriate, whether myself or David. Andrew, David, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the team takes a few moments to review those questions that were submitted already, I would 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.

28:47 Andrew, David, as you can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting their questions. David, if I could just hand back to you to run through that q and a tab, and where appropriate to do so, as Andrew mentioned, if you could just read out the question and give your response, and then I'll pick up from you at the end. Thank you. Thank you very much. So thank you very much for all the questions. There's some great questions in here, and I'll try and summarize them where it's appropriate. A number of the questions are overlapping the same areas, so I'll do my best to try and bridge that and and see up the right question for you. So there's a couple of commercial questions. One is are there any plans for Levi's routes to be sold in Africa? Yeah. That's a it's it's a good question.

29:34 I think at the moment, we believe that, you know, the main brand we've got available in Africa is the Vinto brand, and and we have a number of flavors within the Vinto brand that we've launched in Africa. Things like a good example would be would be watermelon. So at the moment, we're saying very focused on ensuring that we're driving the MPD and we're investing behind the MPD that we've got over in that market. But I don't think we should rule out launching tropical brands, which the lead by brand is, into into our markets. But at the moment, the laser focus will be on driving the flavors of Vimto in those regions. Thanks, Andrew. One question, which again is a really powerful question, is what do you think is behind Vimto's outperformance in diamonds?

30:22 Yeah. Great question again. I think it's a a range of of of initiatives. So I think if you step back a few years, one of the big moves we made was coming out of just the purple ranges in Vimto, and we now have a range of flavors or a rainbow of flavors as we call it. Now six or seven different flavors. That's been really important for a number of reasons. A, it's driven penetration and brought new users into the brand, particularly down in the South. And but it's also allowed us to have much better visibility and availability on shelf in stores to give us really strong standout. I think a second reason I would say is we've done a lot of work over the years in reformulating the products to make sure the vast majority of the products now are no added sugar, and all our products are below the sugar levy and the HFSS guidelines, and we still deliver a great unique product taste through our products.

31:22 As you'll see on the slide there, you know, the new bottle launch this year, which I think gives the brand a really premium and contemporary look that's gone down well with consumers. And we continue to invest in strong marketing programs, so we're not only present on TV still, but also through digital and and social channels. And and the van sales is really important to us as well in in outlets that are not centrally managed like a big grocer. We're therefore going into independent retailers and really help drive distribution of our products, and we go back to the outlets two or three times to make sure that distribution sticks. Thank you. Thanks, Andrew. Another question was around Vinto's penetration in the North Of England versus the rest of the the nations. How does that compare?

32:10 Yeah. It it is very different. So if you look at our squash portfolio, you know, our our penetration in the Northwest where the brand was was born, and, you know, we we have a a 33% share of the squash market in in that region. And we are the number one squash player in the Northwest Region, so we are bigger than our biggest competitor. And down in areas like London and the South, it is lower. It's down at seven or 8% share. But what we are seeing is our fastest growth is coming through those regions as part of our campaign to to to drive new penetration there. And and that's happening through both national retailers like the big grocers giving us more space and visibility in those outlets as the brand has momentum, but also that important band sales drive that I talked about to drive the distribution.

33:04 Thanks, Andrew. We've had a question which is regards to the outlook for international sales, particularly relevant to the shipping and logistics challenges that have been experienced in the first half. Yeah. Okay. So I think from The Middle East, you know, as as David referenced, the the key there is is literally timing of shipments. So demand is very strong in the region. We've seen that during Ramadan. So we're very confident in The Middle East in terms of our plans for the second half. And up to now, we've had no shipping issues out to that region. Africa, we've got good momentum. And at the moment, the the shipping and the logistics issue has has gone away for us, and and that's given us good positivity for the second half. I think the challenge is in America.

33:56 So although it's getting slightly easier, I'm not sure we'll get our American business back into growth from where we are today at the half year. But what is important is we do still have strong demand over in America. Our international director is actually there this week working with our customers over there to to make sure we do have a strong plan for the second half. Thanks, Andrew. We've had two or three questions with regards to the strength of the balance sheet cash allocation as as as as our approach to that. And then a related question to do with mergers and acquisitions. K. Would it be worth maybe just chatting about mergers and acquisitions first, then I can maybe come back on the balance sheet? Yeah. Absolutely.

34:42 So yeah. You know, as I said, you know, mergers and acquisitions is one of our key five strategic focuses. You know, we we have a very strong balance sheet, therefore, we want to invest that money to to grow the business in the long term. I think what's crucial to us, because we still believe we do have strong headroom in our core brands, is that we bring brands in that complement the current portfolio. And we really believe we can drive value into those so that the categories we see that are gonna grow in the long term. And and also categories that that drive premium nature to them as well. We don't want to go into categories that are perhaps commoditized in any way. So as I said, we're doing lots of work there and and something we're very active in to hopefully be able to ensure that we can we can bring some more brands into our portfolio.

35:34 Thanks, Andrew. And with regards to the balance sheet and the cash balances, over the last couple of years, we felt that it was appropriate to have a conservative approach to the balance sheet. These have been very challenging times for for all businesses. We've been not immune to that without at home, the impact from the pandemic, and obviously, the the the the the challenges that that that presented to us. Our balances are very strong and provide us with tremendous opportunity for driving shareholder value into the future. We've got a very, very strong growing brand. We have access to a number of markets that we know we can develop further, And we have a number of opportunities within soft drinks where we believe will be appropriate at the right time from an m and a point of view to ensure that the returns for the shareholders is is is is right.

36:40 So our balance sheet and our cash, we we we monitor. We we we we we ensure that the capital allocation policy is is appropriate between our reach to market. We we have our plans around m and a, as Andrew has described, and we have our dividend policy, which obviously is a two times cover, which in itself is designed to ensure the right balance between investing in the business going forward, but ensuring the right returns for shareholders in terms of dividend payments. So cash balances is something that we continually monitor. It's very much front of our mind. We do have a conservative approach. We think that is is right given the the challenges just now. But at the same time, we certainly intend to utilize that balance in the right way at the right time to drive shareholder value going forward.

37:31 One last question that's come through is regards to out of home and how out of home has opened up post the pandemic. Yeah. Yeah. Really pleased with the momentum we're seeing there. It's it's been a little bit lumpy across some of the channels. So if you look at footfall broadly across outlets such as pubs and restaurants, and footfall is very similar to 2,019 levels. In the cinema chains, it's it was a slower start and that's for us, that depends on the film slate, and we're selling slush in the cinema chains. So when you have, the right consumers who were purchasing slush going to see films, it helps. And Maverick, the new Tottenham film, was a great example of where the cinemas were full, and very much our target consumers were going to watch our films. Our slush sales did very well. And the films, like, does look positive at the second half.

38:29 I think what's gonna be interesting is as we've come into the school holidays now, our families going to try and go abroad Or due to the cost of living, crisis, are they going to, have a staycation and stay in The UK? And if they do stay in The UK and the sun shines, that will prove, very beneficial for the soft drinks market. So we're gonna see how that progresses over the next few weeks. But we remain very positive about how out of homes opened up back in the country. Thanks, Andrew. Okay. I think that concludes all our questions now, unless there's any final ones. So really just to Andrew, sorry. Thank you very much, and David as well for taking the time to address all of those questions that came in, from investors this morning. And, of course, guys, if there are any further questions that are submitted today, we'll make these available to you immediately after the presentation has ended for you to review. And ladies and gentlemen, we'll publish all those responses where it's appropriate to do so on the investor meet company platform.

39:29 Andrew, perhaps we're redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that'd be great. Yeah. Absolutely. No problem. Well, first and foremost, we really appreciate you taking the time to dial in today and to listen to our results. And a big thank you for everyone who submitted some really, really great questions there. I think, really, I'll start really with finish with where I started. So first and foremost, we are really encouraged by our financial results that we've delivered at the half year. You know, our outlook for full year '22 is in place, which is really important. And I think we have real momentum on our strategy that gives us the confidence to be able to deliver our long term plans and that profitable growth and deliver value back to our shareholders, which is crucial.

40:23 Okay. Thank you very much. Andrew, that's great. And David as well, thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity 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 will be greatly valued by the company. On behalf of the management team of NICHOLS PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.