Pphe Hotel Group (LSE:PPH) — Annual Results

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

0:31 over to CEO, Greg Hagerty. Good morning to you. Good morning. Thank you, and welcome, everyone, to our PPHE twenty twenty three Annual Results. Today, I'm Greg Hagerty. I'm the co CEO of PPHE. I'm joined on my left here by Daniel Kos, chief financial officer and our EVP of commercial affairs, Robert Henke.

0:55 Before we just kick off into our presentation, I would like to show you a short video which shows you our investments, our new openings, and our future pipeline. Thank you, Alex.

2:41 Good morning once again. For those of you that are new to the PPHE story and are watching us for the the first time, Alex, can you move to the next slide, please? And the next one. I thought I would give a a quick introduction as to who PPHE are. So, essentially, we are an integrated owner operator and developer of hospitality assets, mainly hotels in city center locations as well as resorts and a number of campsites in Croatia. We are currently active in eight countries and have 51 properties, which are valued externally every year. The most recent valuations from December last year give us a portfolio value of £2,200,000,000.

3:30 What makes us unique in our sector is that we have this integrated offering of owning, developing, and operating assets. So if we can move on to the next slide, please. We have a number of differentiators that we would like to go through with you today. So first of all, the the business model. As I said, it's quite typical in our sector to either own property or develop assets

3:54 or operate properties. We do all of this in house. We have our own in house management platform with every single specialist skill required to develop, launch, and operate hospitality properties. This is done through our teams, which are located in the in the core markets where we are active today, being The UK, The Netherlands, Croatia, and Germany. And then we have single assets in in other marketplaces, which we can go through in the presentation today. We always like to develop and operate hotels with a development angle or repositioning opportunity. This gives investors an upside opportunity. So we create more value through the redevelopment and reposition of assets over and above the acquisition price initially paid for the the property.

4:44 The the second differentiator is that we have grown the group a single property thirty five years ago into what it is today, into that 51 strong portfolio through capital recycling. And we do this always on the asset value in in our balance sheet. So we tend to refinance our properties after a successful number of operational years or we take third party equity, but we haven't been diluting our shareholders in in the the growth since the IPO in 2007. So very much a sort of homegrown portfolio on the back of the quality of the the assets. The additional component, number three on this slide, is the the platform. As I described, we have every single specialist skill in the business today.

5:31 We have a strong track record. We are an award winning management company as well and have managed through various economic cycles including the the downturn, obviously, and the the the pandemic, which is now well behind us. We have fully recovered. But the platform itself is its own independent store of value. We don't engage a third party operator, but every property in our ownership, every property that we manage on behalf of partners or third party owned assets has entered into a management agreement with the platform. So essentially, have income in the in the center on the back of these properties, and there's usually an incentive fee as well based on their operating performance if we meet certain targets. This platform is ready for growth.

6:17 We will be opening a number of new hotels this year, which Greg will elaborate on. And these hotels are serviced through our platform, so it is fully scalable and has its own value. The board is heavily involved in the business, in particular, the two founding shareholders and principles of the business. They currently own just over 43% between the between the them of the shareholding, and they've started this business nearly thirty five years ago. The management team has been with the business for quite some time. The average tenure is well over ten years, and the environment is very much of an entrepreneurial environment. We can move on to the next slide.

7:04 This sort of summarizes what I've described. We tend to buy plot of land, a tired office, a hotel with repositioning potential. Then operate once we have redeveloped, we operate the hotel, maximize the value, recycle the capital that we've invested, and then we invest in the new and next opportunity. And this is sort of an ongoing mechanism that that we've been using throughout the the last three decades. Moving on to the next slide, our financial capital stack, Daniel. Yes. Sure. Thanks, Robert. So as Robert alluded to, our strategy has been to unlock capital on the back of our assets, and we do that in many different ways. We do that in terms of equity partnerships, but we also raise capital on the back of assets in in terms of debt.

7:51 And the reason we do that is that we get access to capital on the back of fair values.

7:56 That business model can make our balance sheet a bit more complex, and and this picture tries to simplify our balance sheet. So if you look at our assets reported in our financial, they are presented at historical cost less depreciation. As Robert already mentioned, we get revaluations valuations in every year. So if you look at the gross asset value at a fair value, there's a difference of £750,000,000. So gross assets are at 2,600,000,000. And just to reiterate, 60% of those assets are in Central London and sick Central Amsterdam. And about 8% is pipeline, which is opening in the coming months. You can see that 63% of that gross asset value is funded by equity.

8:41 That's equity of PPHE shareholders, but that's also the equity of our minority partners. About 9% is financed by ground rent structures on certain hotels in London. We have sold the land under an asset and leased it back for over one hundred years, giving us access to very low yielding financing, CPI caps. So linking to CPI, but caps typically around 4%. It's nonrecourse, and we have no covenants on that. So 28% of the assets have been funded by regular debt bank debt funding. We have just over 700,000,000 in bank debt, and 170,000,000 of that relates to the pipeline that is opening in the current months.

9:28 The average cost of debt currently sits at 3.5 percent. It is all fully hedged, and we have a remaining majority of about four years. And And this is all nonrecourse asset backed debts. Moving on to the next slide. I've already explained that we have the property portfolio on one side, and then we have the management platform as its independent store of value.

9:52 There's a few additional elements that I wanted to today. One is that as a as a group, as a company, we have a very strong relationship in place with the Rannison Hotel Group, which is one of the larger hotel companies in the world. We have exclusivity to utilize their Park Plaza brand in Europe, Middle East, and Africa. That agreement is exclusive to us and also in perpetuity. So that's given us a lot of successful development cases in in London, in Amsterdam, in Croatia, and and beyond where we can basically develop our Plaza branded hotels knowing that we can plug these hotels into Radisson's ecosystem in terms of technology, buying power, the marketing, and loyalty networks that they possess. So we're able to compete with much larger brands.

10:38 In addition to that, we've extended our partnership recently so we can now leverage all of Radisson's brands. And in our pipeline, you'll see that we're about to open our first Radisson Red branded properties, and we've opened the Ransom luxury hotel as well last year. So our offering has gone from being Park Plaza and Arctotl focused to much more diverse tapping into different market segments. The platform, as I said, has its own value. So in 2012, the EBITDA generated was £12,000,000. We have a target that we're internally sort of wanting to hit is the is the £15,000,000 target for the platform itself, which will obviously benefit from the new hotels coming online between now and the end of this year. So the growth is going to

11:25 come through efficiencies, new technologies, new openings, and and obviously increased performance in our existing assets. Moving on to the next slide, we'll now go through the 2023 highlights. Greg? Thanks, Robert. So from a strategic and operational update point of view, we had a solid performance with excellent year on year growth in revenue and EBITDA. Specifically, revenue surged by 25.6% to 416,600,000, and EBITDA escalated by 36% also to a 182,200,000. Our recovery post the pandemic has surpassed expectations. The normalizations of booking levels across key market segment segments, including leisure, corporate, meeting and events has contributed significantly to our success in 2023.

12:16 Amidst inflationary pressures, we have honed our operational strategies to enhance our EBITDA, achieving an impressive improvement of over two percentage

12:26 points. Further, an organizational review by a specialist top five audit company has guided us in realigning our business towards sustained growth, leading our strategic opt strategic adjustments in our organizational structure. These These adjustments aim to optimize our food and beverage, consolidate our supply chain, and harness technology to enhance our operational efficiency and support in our support functions. Significant milestones in our development pipeline include the opening of the Arstel London Battersea earlier in 2023, which is managed by PPHE, investments in our Reyna France Ferdinand property in Austria, further investments in Arena Stoia in our campsites in Croatia, boosting our market presence in these areas with enhanced accommodations.

13:19 The launch of the ARTITED LIMITED later in 2023 also opened expanding our footprint in European capitals.

13:29 We also have the introduction of our first two Radisson Red properties in one in Belgrade, opened actually earlier this week, and the second in Berlin, which will be open in time for the Euro twenty twenty four football tournament. We also had achievements in our asset optimization strategy with a planning approval for our pioneering sub terrainian hotel in Victoria in London. This is a 179 key asset, which is actually gonna be built below

14:00 our existing Park Plaza Hotel in Victoria and operated as a separate business, but obviously with the synergies of one hotel. We also work significantly on our sustainability footprint. We have advanced our ESG strategy substantially building on a refreshed approach which we initiated in 2022. We have strengthened our team in this area. We have augmented and augmented that team with some external consultants to help foster and target our effectiveness in our ESG framework.

14:33 Our commitment to the sustainability is evident in our ongoing investments and our renewable energy, energy reduction initiatives, widespread adoption of our BREEM certification in our new properties, and the comprehensive scoping of our Scoop three emissions to solidify our ESG commitment overall.

14:54 Thank you. Can I get a few questions? Looking towards the pipeline, we have made significant progress with our £300,000,000 development pipeline, which is posed to enhance our EBITDA upon stabilization by 25,000,000. It's an ambitious pipeline, but not only does it underscore our commitment to the growth and both showcases our strategic mix of our new developments and asset optimization, and also it shows that we are repositioning repositioning our projects across all of our key markets.

15:28 We have further growth opportunities in our portfolio with the expansion, which include our two land sites, two in London and one in New York, offering substantial growth opportunities for the group. Additionally, we are advancing in our asset optimization project in Victoria, which I've already mentioned, and we're also looking at how we can undertake repositioning exercise of more of our properties in Croatia.

15:56 We are on schedule with our twenty twenty four project openings making significant milestones. In April, we are due to open our landmark Arstel London Hoxton, which is 356 rooms, co 55,000 square feet of coworking space, art gallery, spa, two food and beverage, destination gym. These this hotel is planned to soft open in April with a full opening by October 2024. We're really excited about it. It's gonna be an amazing opening and a real contribution to our business. I'm also pleased to say that we opened a hotel this week, is Radisson Hotel in Belgrade, 88 rooms, also featuring coworking space, meeting and event facilities, and we're excited to see that join the company.

16:50 The Radisson Red Hotel in Berlin, as I've already alluded to, is currently going through a transformation project, which will take back from a Park Plaza hotel into a Radisson Red, which is an upscale brand, which is due to open in time for the year of 2024. And, again, contributing to our upper upscale premium lifestyle brand, Ardstell, we have Rome opening in the second half of this year.

17:13 This will be a premium hotel next to Via Via Vento in the center of Rome. We're really looking forward to that coming on board. We're also continuing to enhance on our current portfolio. Focus extends to maximizing your performance on recently invested properties, including Zagreb. We opened the Artisel Zagreb in November last year, so we're continuing to launch this property into the market. We also opened our five star luxury property at Radisson Collection in Croatia called Brioni, which is also now gonna benefit from its

17:45 full year this year. And we also invested in Nachfeldt in Austria, which is currently ongoing ski season this season, which is currently underway, demonstrating our commitment to operational excellence and strategic growth. This strategic expansion will enable us to optimize and underscore our dedication to enhancing our market presence in these territories. It'll also we're gonna focus on our operational efficiency and profitability, setting a solid foundation for our future growth trajectory.

18:19 One page further, Alex. Thank you. In terms of revenue, we reported close to £450,000,000 of revenue. That's up 26% versus last year. If you see where this came from, it's mainly driven from a double digit increase in if increased occupancy with 12 percentage points, but also still showing a solid rate growth of 4%. Particularly looking at occupancy, reported at 72.4%. Pre pandemic, we used to report levels in the eighties. We are confident that we can get our occupancy back, but we're doing this very careful not to go on the back of rate drops. So in Amsterdam and London, we already see the occupancy trending back to where they were.

19:08 Markets like Germany and Croatia, they need a bit more time, but we're confident that we can occupancy in in the future.

19:17 We reported an EBITDA of £128,000,000, which is a growth of 36% on last year. EBITDA margins close to 31%. This year, margins were negatively impacted by the utility prices, which were £10,000,000 above 19.

19:37 That's a reflection of one was 1.8% in in terms of margin. We're quite confident to get that back given that energy prices are stabilizing currently and actually going back closer to the levels that we saw in 2019. We'll have some hedges in this year running. They're running out next year, so so we do expect margins on the back of utilities coming back from '25 onwards. In terms of EPRA earnings, we reported 50,100,000 after tax EPRA earnings. This is more than double versus last year. Per share, this comes down to £1.18 earnings per share, which is also the basis for our reinstated progressive dividend policy.

20:25 So we're paying a 20 we're proposing to pay a 20 p final dividend, bringing the total dividend to 36p, which reflects about 30% of EPRA earnings. And we expect to grow this with the EPRA earnings to grow with with the the new new new openings.

20:44 Going to the next slide. Thank you. In terms of our cash flow, we generated strong operational cash flow of 126,000,000. Part of that has been used for debt service, 82,000,000. That debt service is 32,000,000 of normal loan repayments. So as normal course of business, we repay our loans typically 25, 30% of the nominal over the over the maturity period, and 25,000,000 was due to bank interest. We've invested £121,000,000 in CapEx. If you break that down to expansion and maintenance CapEx, expansion CapEx came down to 106,000,000 and maintenance CapEx at 15,000,000.

21:31 And the expansion CapEx, the majority of that is obviously for our Hoxton project, which which is is opening in in the coming two months. That CapEx has been funded

21:42 with 83,000,000 worth of new bank financing and equity partnerships contributing to that development. And we've we've also had a 15,000,000 capital return in the year in terms of dividend and in terms of share buybacks that we did last year. So overall, quite a healthy cash position of a 150,000,000 with access to a further 30,000,000 in terms of undrawn rolling facilities. Our business model is backed by prime real estate. As I said, 60% in key locations in London and in Amsterdam. This gave us an per and half per share of £26.72. That has been fully valued again by Sandoz last year for the key cities and UniCredit in in Croatia.

22:35 In part of these valuations, we saw the cap rates going up slightly, which were largely offset by the increased operational results, which I will show later in the presentation. And I would like to reiterate that close to three pounds of our share price is currently locked in terms of pipeline. So that £3 is not yielding as we speak, but obviously, in the coming months, that will open and then we'll start actually yielding. Going to the next slide, you'll see that our NAV increased this year with 6.2%. The majority of that is due to positive property valuations. As I I said, valuers did not drop the discount rates used between seven seven five and eight twenty five in in London and Amsterdam.

23:27 However, our results and also prospective results did offset that that that increase in rates. Looking at the interest rate curve, we are currently looking to be peaking. The curve is showing a decline in rates, would indicate a positive outlook in terms of our property valuation. That's also something we see in recent market activity. In the appendix to the slides, we have presented to you a few market recent market transactions. We obviously are very active in today's market, also looking at deals that are pending. And we can comfortably say that our valuations are in line with the peer key prices that hotel assets are going for. And I think that's quite specific in our asset class where in the retail and in offices, you see that declining income or income that's not really reflective of inflation with rate increases. Obviously, those asset classes are are declining.

24:29 Our asset class typically links to inflation. So whereas we have seen increases in interest rates, also our results have gone up and provided a good offset against those rate increases. Thank you, Daniel. So looking at our current performance and future outlook, this year has commenced on a positive note, mirroring the booking levels observed at the start of the previous year. This period has highlighted continued balance in demand across leisure and is complemented by rising meeting and event business in our business, which is instrumental to continue supporting our occupancy rates. We've successfully maintained our average rates, a testament to our dynamic pricing and market positioning. Our economic resilience, despite the challenges posed by ongoing inflationary pressures, we remain confident with our ability to align our performance with the market consensus for the year.

25:26 We also continue with our strategic partnership with Radisson. And as we've already seen, we're set to enhance our portfolio with a further two Radisson properties this year, and the second coming in in Berlin, Cudan. Most of all, we're looking forward to the anticipated growth and looking forward to our highlighted openings. So we have several main properties opening this year with entries also into new markets. These strategic openings are expected to substantially contribute to an additional 25,000,000 EBITDA upon stabilization. So all in all, you know, a good, solid, robust performance, well controlled, great pipeline ahead of what we've got.

26:12 And most of all, we're looking forward to answering any questions you may have. Thank you. That's great, Greg, Daniel, Robert. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. Greg, Daniel, Robert, as you can see, we have received a number of questions throughout today's presentation. And Robert, if I may now hand back to you to chair the Q and A, and I'll pick up from you at the end. Sure. Thank you very much. The first question that's coming is around sort of growth growth for the business as a whole, and I'll summarize what Greg sort of outlined before I hand the question to Greg.

27:00 But EBITDA growth is going to come from the organic growth seen in the existing hotels As Greg summarized in his update, we have the pipeline that is hitting the market this year coming online expected to generate 25,000,000 worth of EBITDA growth on stabilization. We have the land sites and opportunities in Croatia for growth. We have new opportunities and the maturing of recent investments. Greg, over and above all of this, is there a desire for PPHE or intent to develop outside of the m 25 in The UK marketplace? And if so, what sort of areas and what sort of the deal criteria that you would be looking for? Yeah. Alright. Thanks, Robert. Good question. Well, first of all, I've gotta say we have a a development team. Companies got a dedicated team which look at all of the cities in terms of target cities. We do have target cities, obviously, in The UK.

27:54 Cities like Manchester, Edinburgh, for example, are good, well performing cities. Whenever we invest in something, we wanna make sure it has a certain level of IRR in anything we do. We look at IRR more than actually, you know, what does the asset generate. It's what about does what does it generate for the amount of capital we're gonna deploy into the the the hotel itself. So with that in mind, the team are focused. We do have an area. One of the main reasons also doing a the partnership with with Radisson was also to make sure that we can diversify our portfolio. So what's also advantageous to us is that we look at assets now which aren't just upper upscale assets. We could look at mid scale assets, and as we've already demonstrated what we're doing with the Victoria and the subterranean concept, These are gonna be mid scale assets.

28:44 So we're also looking at different asset classes to what we've looked at in the past. So yeah. So with that in mind, the ones we've got coming about, we've got a property on Westminster Bridge Road, which is in the pipeline and in planning. We have a property which has already been approved for planning on the 840, which is also gonna be a significant addition on top of this, which is currently in our land bank and to be developed. And we have New York as well. So with that in mind, we're very open. We're very entrepreneurial. We look at The UK. We look at, obviously, European cities more as well with the European hospitality fund, which we've got coming about. And, actually, our seed asset in Rome is gonna be part of our hospitality fund as well. So overall, we take development very seriously, but we are cautious, and we wanna make sure that we invest in the right thing, and we wanna make sure we have the right return.

29:37 Thank you. Daniel, I'm gonna hand this question to you. 2023 has been a a strong year for shareholders in terms of shareholder returns, for the the buyback, the dividend. What is sort of the future strategy for the the dividend and and the dividend policy? Where do you see this? What's your principle? Yeah. So pre pandemic, we've always had a progressive dividend policy. The earnings that we we were making. So as long as earnings are growing, we are linking the dividend to those earnings. We expect to pay 30% of our upper earnings. And as I just alluded to, we reported £1.18 this year, but we're opening a very substantial part, more than £300,000,000 of portfolio in in the coming months. On the back of that, we do expect earnings growth, and there we we also expect to increase dividends.

30:27 Thank you. On the the pipeline there, Greg, one of the terms that we use internally as well as in the presentation that is stabilized trading. Do you wanna sort of explain how we sort of open hotels and what stabilized trading then sort of means? Yeah. So typically, we sometimes may open hotels differently to our competitors. We actually phase our hotel openings. So for example, let's just take Hopston. We're opening it in mid April. We will open the public areas, the guest service areas, the facilities. And as and as demand grows with the property because as much as I would like to say, a hotel doesn't open at 84% occupancy by itself on day one. So we actually phase our occupancy to make sure it gives us the right level of return coupled with the right level of profit conversion as the the property operates and opens. So when we're gaining momentum and we're gaining occupancy and demand, we will increase more of the hotel.

31:21 However, stabilization pretty much predominantly looks like year three of the property. So one reopening year, two to ramp up, and three is a full year stabilization and fully performing. Excellent. I think, Daniel, the next one is probably for you, or maybe Greg wants to contribute as always, is sort of the inflationary pressures that we've been faced with in the last year, especially the wage increases, but also on the construction side. How how are we managing through all these increases, and what's the outlook going forward? Yeah. Well, our industry and particularly in The UK, I think we also pre pandemic, we've been used to substantial pay increases. With the introduction of the National Living Wage, for instance, we had double digit pay increases every year.

32:13 And we didn't really suffer in terms of margins because, obviously, our top line is growing, but also we constantly look at our business and operations and see how we can make that more efficient. That's also something we've done this year. So as Greg alluded to, we've had an external review and basically put a mirror in front of us in which areas we could perform a bit better and kind of get more efficiency out of the increases that we're seeing because also this year, across our territories, minimum wages are increasing 10. So we we have to look at how to make it more efficient. So you can think of things like looking at our F and B offering, basically, streamlining that. We are looking very closely at the back office currently. I know AI is a buzzword at the moment, but it does help a lot in terms of repetitive tasks such as surface tasks that that we obviously, as a as a as a big company, That's something we're looking at.

33:17 And and something else is that as as some of you might be aware, we are running our own housekeeping company here in in London with with 900 FTEs. We've implemented quite a disruptive software at the moment, which enables us to kind of plan capacity much better Given that that's one of our largest payroll cost that we have, we believe that we can be more efficient on that end. So it's really looking at every angle to make sure we can cover the payroll increases. And like we've done in the past, I'm confident that we'll be able to do so. And we've also benefited from the growth of the company because, one, as we have asset concentration, more inventory in an area, we've been able to efficientize the supply chain, for example, and benefit there as well. So that's really, really helped us indeed.

34:05 And one good thing about our company is our hotels are in amazing locations, very well invested in. And, you know, we've been able to pass average rate increases directly to our consumers for the quality and the service of the asset they're getting for. So that sort of is probably a nice bridge to the next question. What does that do to EBITDA margin moving forward given that we've presented a 2.2% uplift year on year? Where do you see this trending? Well, if you can see the margins that we've shown in 2019, the you you can say that approximately 1.8% in in terms of margin decrease versus '19 was caused by the utility prices. And as I alluded to earlier, utility prices are coming down. So we do expect that to come back to us in in the near future.

34:57 Then another 1.8% is due to pay increases in the past year. And again, as I alluded to, you know, pay increases have been quite substantial over the last two years. I do expect that to normalize because inflation is coming down. So I do expect the pay increases to normalize as well. So on the back of the projects, I've just explained, we do think that also that percentage can come back into into our margins. Excellent. Greg, on pipeline, final question that's been submitted so far, unless there's any last minute questions that come in. But But on pipeline, how do you prioritize with openings and developments into the year ahead where you've got so many new openings? I would say it's actually opportunistic, Robert, to be honest. As much as I would like to say it's strategic, but it very much depends on the supply chain, the developer, the the phasing of the construction, you know, in terms of able to implement.

35:55 But, obviously, when when we're looking at a a project and we're looking at capital, if we are looking at two areas in one city, for example, we will prioritize one with the highest rate of return and the the highest benefit to the profitability of the company coupled with what it does for the brand. Excellent. So do you want to explain maybe what that means in terms of guest feedback and sort of getting that right from day one? Yeah. Exactly. So as as we've as I alluded to before, the way we open hotels is to make sure everything is ready and, you know, you don't have, you know, the the wet paint on the walls, etcetera, or the pool is not working, or the restaurant's not fully open. So it's important that we get our properties implemented, trained in, opened up, and ready for sale on day one. Excellent. Sounds like an exciting year ahead. It is. It is. Very I saw a question over to going in, but she's not here anymore. But in terms of how does EBITDA convert to cash, which I think is an important question.

36:54 I think when we underwrite properties, on new properties, we typically, in terms of cash profile, have our EBITDA, and the two major expenses that we have is our maintenance CapEx, which typically sits at 4% of total revenue. That's not something we make up. That's an industry specific indicator. That's also what we use to underwrite on buying new properties. That's also what our valuers use in terms of valuing our property. So the two main costs that we have is obviously the maintenance reserve and the the interest charges. So the amortization, I do not calculate as as, you know, it's it's for me, it's part of an outgoing cash that we will get back up to from the moment that we do refinance. So if in terms of interest, you could say that the the interest that we're paying on our properties are around 30 to 40%, typically. So 30 to 40% of the EBITDA is is paid into to interest, and then you have the the percentage that we pay in in in maintenance reserves. So typically, we will generate in in excess of 50% of the EBITDA in cash.

38:02 And then depending on how the partnership works on a property, it's either shared with our partner or it's going fully fully to us. So So I hope that clarifies. Excellent. Alex, that concludes the the q and a and the time allocated for it. That's great. Thank you very much, Robert, Daniel, Greg, and thank you for addressing those questions for investors today. And, And of course, the company can review your questions submitted today, and we'll publish those responses on the investment company platform. But before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Greg, could I please ask you for a few closing comments? Yeah. Absolutely. As we've already reiterated, you know, it's an exciting year ahead. 2024 has started off positively. I'm pleased to say the anticipated growth of our company in the next year is very, very strong, and it's being materialized.

38:52 We have demonstrated strong economic resilience and the ability to convert profit with all of these inflationary measures, and we've got solid strategic partnerships and growth opportunity ahead of us. So with that in mind, thank you very much indeed. Greg, Daniel, Robert, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. Will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of PPHE HOTEL GROUP LIMITED, we'd like to thank you for attending today's presentation, and good afternoon to you all.