React Group (LSE:REAT) — Interim Results Presentation

0:02 Good morning, ladies and gentlemen, and welcome to the REACT GROUP PLC Interim Investor Presentation. In fact, this presentation, investors will in listen only mode. Questions are encouraged and can be submitted any time via the Q and A tab situated on the right hand corner of your screen. Simply click Q and A, type your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and pop up responses where it's appropriate to do so. These will be available via your Investor Me Company dashboard, and you'll be notified once they're ready for your review. I'd

0:34 also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mark Braun, Chairman Sean Jo, CEO and Andrea Pankhurst, CFO of REACT GROUP. Good morning. Thank you, Paul. Thanks for the introduction. Thanks for joining us today on the InvestoMe platform. So I'm just gonna start off by giving you a little walk through of what we're all about here at REACT and a little bit about the story. To those who have seen our presentations indeed on this platform before, then I apologize, but we will have some new investors on this platform. I think it's important we we give the backstory. So I'll move on to the first slide, please, Paul.

1:20 So we have to carry out specialist cleaning and decontamination work that others aren't qualified to do or they simply don't want to. We operate across several sectors and industries where hygiene and safety are critical components. Now you'll notice on this slide, we've got a number of photographs just gives you a flavor of some of the sectors that we we operate within. So first of all, we've got the health care system. So this work is recurring revenue, so it's contract maintenance work. Predominantly helps our clients remain compliant with their infection control, and it's a little bit like a pain in the fourth bridge. You know, we start it. By the time we come to to complete the contract, it's time to start it all over again. That gives you an idea of the work that we do in in that setting. Work with many hospital trusts around the country, but we are particularly strong within the m twenty five.

2:15 Next, we've got the the highways. It's a mix a blended mix really of contract maintenance work, so recurring in in nature, and also some reactive work. So the re recurring revenue typically involves the deep clean and all year rounds and ground maintenance work of some picnic sites and service stations around the country. Again, working for some large highways agencies and businesses typically involved in that space. And then we've also got the REACTED piece. That typically is, you know, road traffic collisions. We're on-site within four hours, often less, to help clean up bodily fluids, debris, oil spillages, and so on.

3:01 And we also do a lot of large fly tips within this space as well for some tier one customers. And next, we've got the the judiciary. So we we're we're currently active as the chosen supplier or the exclusive supplier for for many of the the the the companies or our clients within that space. And, ultimately, we're on on standby to react within four hours across the board, main lines, UK to decontaminate anything from a, like, hold and sell, transportation vehicles, magistrate courts, and so on. So we have a number of agreements within that space. And then we've got the housing associations that can be, again, more reactive work by nature, but it's typically anything from a high level good to clean all the way through to a needle pick, you know, a severe hoarding.

4:00 It can be dirty protests in some of these houses. So it's, you know, either after the people have been evicted or, you know, they could go avoid property.

4:08 And then last but not least, we've got the the rail sector. So again, a blended mix. The majority of the work in that space is recurrent by by nature, so it's contracted maintenance work. So we do a lot of periodic heavy cleans for a number of manufacturers and train operating companies. And, ultimately, that's a a generally a nightly clean, very in-depth, almost a clinical level clean to bring the train back to how it once looked when it left the manufacturing plant. So, you know, it is very specialist by nature, and that includes the external of the train also. And then we do more specialist reactive work such as train station deep cleans, you know, high level clean. There's lots of, specialities there. We've got to have road rail mutes, to be able to access some of the canopies on the railway stations and and so on.

5:01 And then, again, on the reactive, the the the lower revenue side of things, we've got the, fatality clean, and the graffiti clean. So we are on-site again within Mainland UK to respond within four hours. You know, at any site throughout The UK, we can be on-site within four hours to to help, you know, return the train back to how it once was, and and get it back in service. So clearly, you know, at the end of the day, the the work that we we undertake is tangible value. You know, the cost of not being able to to get a train back onto the onto the line or open a hospital wards is material. And that's the reason that we're valued by our customers, and we typically operate at high margins and standard janitorial cleaning. We operate in a a very fragmented market, but the addressable market is is significant.

5:52 And we are right now, beginning to see our clients consolidate their supply chain and we have to very much lead in that process, you know, talking to our customers, looking at the the current supply chains, and and consolidating them down to just a handful or, you know, an exclusive agreement. Next, you've got the just to touch on the the acquisition or our maiden acquisition with Fidelis that we got across the line back in March. It's it spends our contract maintenance work, and they're particularly strong within the health care and the education setting. So, you know, it gives us a a great ground and ready to really push the business on and and, you know, give shareholder value. So, ultimately, we're we're a specialist business. We've got some strong customer relationships, some good margins, and high potential for growth.

6:44 I'm gonna pass you over to Andrea now just to give you an overview of h one financials.

6:50 Okay. Thank you, Sean. Could you move the slide forward, please, Paul? Thank you. So as you can see from the figures on the slide, we've got some really good movements year on year from from last year, h one to this year. Revenue, gross profit, and gross margin are all showing improvements. So we have been through these figures in an update back in April, but I know there's probably some new people on here. So I'll just emphasize that these p and l figures that we are reporting are the existing REACT GROUP only.

7:37 We acquired Fidelis at the very end of March twenty twenty one. So there are no consolidated profit and loss figures in these results. Obviously, there will be at the end of the full year. There'll be six months worth of Fidelis Fidelis results. So the only figure of cash is the new consolidated group. So the balance sheet that we've reported in our interim accounts is it includes it's the new group. So the £771,000 of net cash includes Fidelis' cash reserves at that date. And also that cash figure is after we paid 1,500,000 cash as initial consideration for Fidelis.

8:27 So that's already taken out of that figure.

8:32 I'll just I mean, we've we've talked previously about the the different sectors we worked in and how they've performed. I'll just give a little bit of update around those. So our contract maintenance sector, this is the type of work we do under a a defined contract, and that contract could be a time defined contract or a price or a service defined contract.

9:00 And, typically, it's the sort of contract we do for hospitals doing their deep clean or for a rail company to do a program of of deep cleaning on on the trains or at some of the highways customers we've got as well where we have a a contract for three years to provide a certain service. So year on year, that sector has grown slightly as a result of some new contracts and some contract renewals. And margins have improved from just over 30% to more like 35%, so mid thirties. The second sector, which is our contract reactive sector.

9:49 This sector is where we have a framework agreement in place with our customer,

9:55 and we get called out as and when they need us. So typically, the police or the judiciary sector where they need us to clean a cell or a prisoner transport van. So that that work,

10:11 it's regular, it's recurring, but it is unpredictable as and when it happens. So that sector has seen a drop since last year. And we know that that is related to lockdown basically because the courts haven't sat during lockdown and the police have had had fewer prisoners to transport. So we fully expect that that sector to recover. I mean, this time last year, we had one month's worth of lockdown in our half year figures. This year, we've we've got several months out of the the six months that

10:52 have, you know, have been affected by lockdown. And then finally, our ad hoc sector. So these are really the one off jobs that can come from our existing customers who may have a contract with us but need us to do one off clean of some sort or brand new or one off customers who contact us to to help them out with a specialist bit of work. So this sector has seen a lot of growth year on year, And that has been primarily or it's been significantly affected by COVID nineteen decontaminations. But our other types of non COVID work have been have been very busy as well.

11:40 So like Sean mentioned earlier, they void property clearances or the flight clearances. Those are sort of ad hoc jobs as well.

11:50 So you can see that the average gross margin that we've reported in this half year is very high. It's it's just over 40 percent. It's it's gone up significantly since last half year. This is, you know, this is due to the the mix of revenue we've had, the very high or high proportionate level of ad hoc work has has swayed that margin. We actually think long term, that level of margin isn't sustainable for us. You know, with a more normal mix of business. We actually think that our true longer term margin will be between 3035%.

12:36 So I think I've covered everything I want to mention on on the figures for the half year. Obviously, we're very pleased with these results. We're looking forward now to working with TELUS and presenting their figures as part of our our full year results at the end of September. Thank you, Sean. I'll hand back to you. Thanks, Andrea. Cheers. So just moved on to the post period announcements. Sorry, Paul. Just go back to slide. Just moved on to post period announcements. I think I touched on it earlier on the first slide. One of our key objectives to to our strategy moving forward is to help our supply chains and our customers consolidate their supply chains.

13:21 And I think two examples of this listed on that on that slide there. We've got the first contract just shy of £600,000 It was double the previous year's commitment from that customer, and it's a customer in the highways setting. So we brought in additional revenue there for that contract.

13:41 And then secondly, we've got three year call vendor to one of the world's leading facilities management companies. You know, very drawn out process to go through the tender process. But, ultimately, we're working with that client now to help unpick the and that those embedded relationships that they had with their outgoing incumbent. And, you know, we're we're helping the category and cleaner manager work with their managers to shift that spend over from their previous incumbent to to ourselves.

14:14 We anticipate that there's still a bit of work to to be done there, and it could take up to twelve months or so for for it to really start bearing fruit. But I think it highlights, you know, a fantastic win for REACT and just highlights what what we're capable of when we really, focus our sales attention and marketing on on an opportunity. So moving on, Paul, to the next slide, please.

14:38 The outlook. Well, h two started really well. The the REACT is or the REACT underlying contract maintenance has performed well. I think that's really an important foundation for the business. But as, you know, Andrew alluded to earlier, we slight softening in contract maintenance due to lockdown, and it's almost mirrors exactly the same time this last year.

15:03 You know, as Andrew said, the judiciary sides, you know, people weren't getting arrested. People they weren't getting transported in in vehicles. So we saw a dip in in that work. But as of, you know, writing the statement a week ago, we've seen, you know, an uptick again to return to levels of last year. So the signs are very, very positive moving forward.

15:24 The post period wins, you know, like I said, it it underpins the medium to long term. And I'm just on to Fidelis, really. You know, the our maiden acquisition, it was really imperative that we got this one right. We we certainly feel as a board that we we've we've nailed it. They've had a record April and May, you know, some fantastic results.

15:44 90% of their revenue is reoccurring by nature, and typical tenure of their contract is is three to seven years. So, you know, it provides profitability, and a good cash conversion. It just ultimately, you know, gives us, a positive outlook for the remainder of the year and beyond. Moving on to summary, please, Paul. So in summary, you know, I said it on the first slide. We operate in a very fragmented market, but it is our strategy to help our customers consolidate those supply chains. We've had a very, very strong h one,

16:23 and and the outlook into h two looks very promising too. And, ultimately, you know, our strategy is to to continue the aggressive organic growth, by by utilizing the sales and marketing piece with that low hanging fruit that we've got within the the 25 or so key accounts. And we'll continue to to look at some carefully selected m and a as we continue to grow.

16:48 Thank you very much. That's fantastic. Thank you very much indeed, Sean, Andrea and Mark. Thank you for that presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the team take a few moments to review those investor questions submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard on the Investor Meet company platform. I'd also like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order that the company can better understand your views and expectations.

17:26 Mark, perhaps if I could hand back to you, obviously, we had a number of pre submitted questions and some questions that have come through during the event itself. If I may, just where appropriate to do so, ask you to read out the question and direct it to the team or respond. Thank you. Sure. Yeah. This is the bit I think we enjoy the most of all, because it's somewhat more interactive. And we'll give it a good go at trying to answer them as many as we can. And any we can't answer, obviously, we'll we'll answer the full the full

17:51 question set on our website later. So starting with the with the first few that came in prior, they've not got a name associated with them, I'm afraid. But the first one is probably a process to you, Sean. As a cleaning company, could you explain what you consider to be REACT's defensive moat, if any if any, and therefore, you know, effectively, what are the barriers to competition in competing with us in terms of where we're trying to focus. Yeah. Thanks, Mark. So, like I said earlier, we operate in a fragmented market, but we operate at the specialist end, you know, very much at the sharp end. You know, our SLA is a class leading, you know, four hours and less. We can operate through throughout Mainland UK, and we've got some, you know, some really good reoccurring revenue streams in terms of contract maintenance work that underpin the business. I think the barriers to to entry certainly in our space and on in our scale are

18:50 are very difficult. Yeah. Yeah. Basically, you know, to summarize that, you know, we have quality contracts with some very significant sized organizations. Our reach and range is pretty difficult for even large companies to to emulate. And when I talk about that, I mean, to deliver all the types of services we do that are very niche orientated across the whole country is is very difficult. That's why they tend to turn to us to to be a subcontractor. And then at the end of the day, we've got high service levels, haven't we? Our our our troops at the front end are exceptional in terms of the jobs they do, and the feedback we get through customer sat, not just surveys, but engagement is very high. That that's our moat, and it continues to be so.

19:35 Yeah. Okay. The I'm gonna take the second question a bit later because it's talking about what do we, see as our level of profitability or market cap in in over the next, you know, few years. I'll cover that later, I think.

19:50 There's a question here. The three year, agreement with one of the world's leading facility management firms was very encouraging news. How many more of your clients might this sole supplier ambition be applicable to, and are you in similar negotiations at present with any of them?

20:08 Do wanna cover that as well, Sean? Yeah. It's a good question. So we've touched on it in previous presentations. The 150 or so customers we've got, probably around about twenty five year, what we deem to be key accounts. And I think we've covered this previously. We we are proactively hunting and going after, you know, these 25, 30 accounts to try and, you know, capture as much spend in in our space as possible. And in terms of what I said earlier, it's very much our strategy to to help these clients consolidate the supply chain. And we're we're we're in a very unique position in the fact that we can provide a one stop shop and we can provide it throughout Mainland UK.

20:56 I don't believe there's anyone else that can that's out there that can do it. And as we've said previously, you know, the likes of the ISS,

21:04 your OCSs, people like that, they don't really want to involve themselves at the specialist end of the market. So I think we're we're in a good position as we continue that sales and marketing story and journey to, you know, help our customers look at consolidating these very fragmented supply chain. Yeah. I mean, I'll I'll make a couple of comments, maybe at a strategic level. The first thing is if you take those 25, 30 companies and what they spend in in our area of work, we don't need them to consolidate to just just us. I mean, I think if they did, I mean, we would be, you know, gazillion times bigger than we are right now. And so our job is actually to to become, you know, to become the number one choice. The fact that this one company has chosen to treat us as their one of one in in a particular niche is is great, and we're gonna deliver on that. And and what I think is knowing the market they operate in is very competitive.

21:56 Others will look to see if it works, and if it does, they'll look to emulate that because it's a competitive space. And the time lost in in trying to manage lots of suppliers in this space is is quite a compelling opportunity for for those other competitors to compete with this company. So long story short or to to answer the question, it's our strategy to go and consolidate. We've got the relationships. We've got the skills. It's just about working that through. And I've no doubt at some point, one or two of these companies will look to do the same as this company we're referring to has done. But but but even if they don't, the the opportunity for us is significant and and will Yes. Help us continue the organic growth we talked about. Sales productivity, Sean, I know it's all the questions are for you, but can we elaborate a bit more on the plans to improve sales productivity?

22:51 What metrics should we look at to track your progress on employee productivity? I I think the the metrics bit is something that we will work on to be able to present. I don't think we are necessarily able to give that visibility at the moment, but but but we I'm certain we will be able to because of the kind of process and systems you're putting in place. But do you wanna just quickly elaborate a bit more about how some of the guys like Lee and Dai and Abbas have become massively more productive in the way in which you've been working with them? Yeah. No. That's a good question. So, yeah, we've done a lot with our CRM system, which is HubSpot, and we've used fractional resources to to pull in some some real, you know, talented people in terms of marketing, you know, the the the CRM piece, just to make it as efficient and as effective as possible for the sales guys. So everything's linked back. So everything from our LinkedIn posts and the engagement that we have from that all the way through to the website and the click through from the email campaigns and cadences that we built out, feed back into the CRM system.

23:55 So we can ascertain response rates, click through rates, you know, call to action rates, everything else. So it's just about making the the sales team as as as effective as possible so that that some of the staff that we've got on the back of that has helped us, you know, really inform our marketing just to make it sharper as we continue that that journey. Absolutely. And I think we're we're gaining the productivity in terms of their more of their time is spent selling rather than cold calling. Correct. Yep. Because we're creating leads and we're creating cadences that developing those relationships with customers. And the other thing that's quite amazing, I mean, I've seen some of this, is the actual engagement rates. Now this may not be something that makes a lot of sense to all investors, but effectively, we can track and see how people are engaging with each campaign, whether it's an email campaign or you know, social media campaign or blog post.

24:48 And and I and I've seen some of the stats and and, you know, power to the elbow, it's it's phenomenal. I think we've had

24:56 27% engagement with one campaign, which is phenomenal. You normally expect 3%. And heard yesterday that we had a 69% open rate with our latest campaign, where 69% of the people we're sending this campaign to are opening it, spending time on the campaign. That kind of engagement is not normally heard of in in a b to b environment. No. So we know we're getting some of the productivity gains from that, and they do result in in the salespeople being more productive.

25:28 What competitor do we admire the most in our current market? Yeah. I don't really admire any of our competitors, and that's not arrogance. It's just you know, that I don't think there's anyone like us, really. But who I do admire, who are slightly different, but, you know, the similarities there in terms of our strategy is Marlowe. I think what they've done in Marlowe with their buy and build and the organic growth is is really impressive.

25:56 Yeah. Yeah. And I think customer sat is pretty fundamentally important as well, measuring and Right. And checking in on that. I mean, there's a question a bit later on about what's our customer retention rates Yeah. What's our win win rates. We can talk about win rates. Customer retention rates, don't think we actually have as a metric, and you might think that's complacent, but it's not. Every time we lose a customer, this is true for Fidelis, we have a very intensive and passionate view about why did we lose. And I think we've only lost pretty much in in REACT terms, one customer inside the last sort of six or nine months. And that's not because of our our work. It's because of their work. They were a a Yeah. They small FM company that lost their contract, and as a result, you know, we we missed out. So we we treat any lack of retention quite passionately and and by exception rather than looking at the rates. And and I know that Fidelis operate exactly the same way.

26:52 Yeah. Think it's important I think sorry, Matt. Just on the just on the back of that. I think it's important to add that although we lost that that one customer, we have filled it with with many more. And and, you know, that's testament to to the work that the the guys have done in sales and marketing, that fractional, you know, use of of of the CRM system. And we don't always announce the small wins that we have because, you know, we we wanna know. We wanna with a major rail network, we won a fatality and graffiti cleaning contract in the last few weeks. But we just don't know how big that's gonna be because we've got no track record with the customer to know how often their trains are covered in paint and how often they get animal strikes or fatalities. So we haven't announced it, but but these are the sort of background things that are going on all the time. Question for you, Andrea, at last.

27:41 How stable do you believe our gross margins can be going forward post COVID? And I think you've already answered it, but it might be just worth repeating. Yeah. Thanks, Mark. So, yeah, we monitor our margins very closely. We monitor them at a we actually monitor them at a job level and a customer level and a sector level. So we keep a very close eye on it. I think in the last year, we we have seen growth. We've we've seen growth in the margins over the last two years, and I think we are close to being at the levels we think we can get to. So, obviously, the mix is always, you know the future mix is always unknown. You know, our our margins are higher for the the more one off jobs or the more specialist jobs we do.

28:33 But we we do think our average margin is going to be somewhere in the range of 30 to 35% in the in the longer term. Brilliant. Thank you. Okay. Trying to rapidly move on. Questions now coming in during the meeting. So Vivek Vivek S. So I have a few questions here. First one is, as a shareholder, I wonder that the long sorry, I worry that long term contracts to provide support services can result in onerous contracts like Carilion, Capita and so on. How is this risk managed on initiation of contracts and through operational management? Now, I don't know whether you want to comment on this, Sean, but neither in Fidelis or in REACT do we have onerous terms, you know, consequential losses, big liabilities that aren't covered by insurance? These are not onerous contracts at all, are they?

29:27 Yeah. No. No. Not at all. No. It's very different to my background in the in the construction in in M and A space. You know, there's no liquidated liquidated damages or any of that out there. Yeah. And if there's anything, you know, we go for my my part of my background is quite commercial, so I'll do always do a commercial review of any any contract that we've got line of sight on anywhere. And if there's anything untoward in there, then I'll always push back and comment, and we've not had any issues so far with it. It it's not necessary. It's not a requirement. And, you know, if there were, we would walk away from it. It's just we don't need to have contracts that are gonna create that level of risk for the company. No. So, hopefully, that answers the question for you, Vivek. I mean, obviously, on the initiation, we're very strong in terms of, you know, engagement with the customer and and and initiating each contract in a specific way. We do an awful lot of training as do for Dallas. So I I think that we iron out any other risks associated with that contract engagement, you know, very early on with a very predictable and scalable process.

30:30 Second question from Vivek is competitive environment. Could we add some color around the industry fragmentation? To what extent do you partner with versus compete with large facility stroke hygiene companies like ISS and Rent A Kill? We've we've we've answered these questions before, so I just wanna give a quick summary, Sean. Yeah. So in terms of your large, compact well, competitors like ISS or OCS or people like them, As I as I mentioned earlier in the presentation, they don't operate at the at the specialist end of the market. So they partner with ourselves to they basically subcontract to to the likes of to to carry out that work for them. So we'll do it in almost like a JV approach to their client. Yeah. Yeah. Indeed. So it's I think it's an I I've seen it in the tech world as well. At the end of the day, you compete and you partner with with the same companies in order to get the end result that the customer wants and needs.

31:29 Right. Now by acquiring Fidelis, you could argue there's a little bit of competition there, but we're pretty much talking at a, you know, at a sort of a lower level. So, you know, in the likes of them and I I don't wanna be specific about the companies, but if you talk about the community that ISS and Rent A Kill and OCS and Odekso and all that they're in, they absolutely need companies like REACT in order to fulfill their customer obligations, which are over a much broader set of services. And therefore, I think that's what works well for them is the fact that we can deliver on time to the level of quality that they need, and and we can do it rapidly in a in a time frame that that we think is pretty much unbeatable at the moment and very competitive.

32:18 Okay. Moving on. Quick final question from that for the minute is about statues and graffiti cleaning. Lot of protests in 2020. I don't remember us actually turning up to clean any statues. Did did we? We did we did quite a bit of graffiti, but we do quite a bit of graffiti anyway. So I I don't have any sentimental analysis in terms of what was in response to that. I I know of a few isolated cases that was best as a result of that work, but nothing in particular, really. So it didn't create a spike of any kind, really? No. No. No. No. Okay. I'm gonna answer one of these other questions a bit later. It's about, you know, what's the situation in the future. That's from Dave. Sorry. It's from Bruce.

33:05 Dave, I'm gonna ask you a question in a minute. So I'm just going through these here. Bruce a, just to continue what we've been saying. Again, it might be repeating yourself, Sean, but can you give us an overview of the competitive landscape? Who are your major competitors, and what are your competitive strengths? And we've already talked about our competitive strengths, but that landscape, but again, about the small, you know, niche oriented short lived lived versus the big companies. You know? We know Rent A Killer in pest control, but they're not really into a lot of the other niche bits that we do. Yeah. No. It's a good question. So, you know, I've said it again. I've said it before. Sorry.

33:50 It's a fragmented market. There's a lot of people out there. There's some larger companies, as Mark said, you know, you rent to kill your PHSs who dabble in the specialist division. But, actually, their specialist division isn't really that big, so we don't come up against them that often. And the reason for that is they kind of mark that. We're a one stop shop. They they aren't. So I think there is an element where they do have to subcontract that workout. Below us, there's a lot of companies that may turn over perhaps up to a million pound or less, bigger than mom and pop shops, but they'll specialize in oil service cleanup. So they'll just specialize in fly tips. And you have to remember that we built out a very robust partnership agreement here. We ask that we we actually partner with with some of those specialists in that space to help us scale up when we're really, really busy.

34:45 And they are audited exactly the same way as our own employed offer test. It works really well. That's what I'm I'm getting at. Yeah. Look. There's no doubt that that we we we will end up with some form of competition. We have competition at that sort of localized level. Yep. There's no doubt it will come, but we can only focus on the fundamentals of our business and keep doing what we're doing and doing it well. And as that competition becomes more obvious, then they'll give us other benchmarks against which to compete. Let me just trying to see if there are any other questions here that that could be answered operationally before we get to some of the sort of other things. Bear with me a second. Oh, one for you, Andrea, from Dave R. As revenues grow, what will be the increase in the level of HQ and platform costs? Now we're a very humble company.

35:37 And if anybody wants to look at our premises on Google Earth, they might be a little bit surprised, as that's both for us and for Fidelis. And I'd like to think we have no ivory tower approach. We very much operate our head office at an atomic level. And we believe that the operational gearing we have is phenomenal, and we wanna keep it that way. But but any comments to that question? You know, what, you know, what will happen to our HQ and platform costs? Okay. So, yes, you know, there's not many of us really at the head office, but I I I feel we've invested a little bit this year in improving our systems. And when I say invested, it's not actually costing us any more than our old systems used to. It's more that we've invested time and effort in changing our processes a little bit and improving them and and making things a bit slicker.

36:36 So, you know, I don't see I feel there's quite a lot of growth we can still do without adding extra headcount or head office cost. I haven't got any particular figures or scale to sort of quote, but, you know, we have stated this in the past that we we have worked on becoming more efficient, and I think we are, you know, getting there. And so I I don't think scaling up will I think any scaling up and any additional profits will mostly fall to the bottom line. Yeah. I agree. Brilliant. That was a question from Bruce Day, by the way. Right. Sorry, I'm just trying to find the final operational one before we go to some of these more strategic financial type questions.

37:32 One other question from Vivek S. Was this is for you, Andrew, and I don't know whether you can answer it now or later. But was the cash flow from operations to profit reconciliation, excluding, which in brackets is adjusted for, working capital movements, so excluding working capital movements arising from the acquisition of Fidelis. So what is the cash flow Okay. From operations to profit reconciliation? Okay. So the reconciliation figures are very much based on operations. And as I said earlier, the p and l that we've reported is the old REACT GROUP only. So those cash flows in that reconciliation are relating to REACT GROUP only as well because I wanted to that reconciliation to match with the profit and loss account.

38:23 So in the actual consolidated statement of cash flows, you'll see a single line that mentions acquisition of subsidiary, and there's a cash outflow of £1,345,000. So that is our our spend that we've made during the period, less some cash reserves that were already in the company. So, hopefully, that answers the question. I hope so. I don't wanna write that down too much. It's there in the numbers, though. Yeah? It is there in the numbers. Yeah. It is. We're very transparent. We're very transparent. So hopefully, that answers your question, Vivek. Right. Let's go try try and clear off some more. So we answered the question about this is from the host, so it was a premeeting question. We answered the question about retention, customer retention. It just asked about win rates.

39:21 Now what are win rates when competing for contracts? Now this is different depending on what type of thing we're looking at, isn't it, Sean? If we look at Fidelis, we know their win rate is about one in three, is that right, of bids that they're working on? Yeah. Slightly more. Slightly more. Slightly better than that. Yeah. The the so from Fidelis' route to market, traditionally, it's been heavily geared towards traditional tenders. But as Mark said that they they have a really good success with, you know, typically, it's usually one in five at a push, one in six in this space. The REACT But theirs but theirs is better. Yeah? Yeah. Yeah. Lot's better. Yeah. Yeah. The the one in six is typical of the market where, you know, Fidelis were running up about 1.3.

40:10 Sorry. One to three. Yeah. One to three. Yeah. Whereas we act typically due to the nature of our work and the, I I guess, the strategy that we've always been playing, we tend to engage or we spend a lot more time engaging direct with the customers, And that pulls me back to, you know, the 24 key accounts sorry, 25 key accounts that we've got. You know, they already engaged with us. They're aware of us, but perhaps just not aware of the full range of one stop services we can provide. So we've worked really hard, the sales team and myself, being involved with the sharp end, getting in front of these customers, and I have since day one. And that very much continues as key, obviously, control over the overarching operations. So when we're bidding for work as opposed to tendering for work, our win rate is probably two in every three?

40:59 Yes. Easily. Could even be higher, yes. But it's our bid is when we're bidding for work. Tendering is a little bit more hit and miss or has been. And I think a lot of that has been down to, as we've gone through the last year or so, we have chosen to try our hand at various tenders, and we're slowly but surely understanding where we fit. And obviously, the successes we've had with the two contracts you mentioned in the post period is an example of that. But we're not a big tendering organization, are we, in terms of REACTED business? Don't need to. It's more bidding. No. No. That's true. But you also got to just to point out to the investors that are on the platform today, Mark, that all of those two are contracts, and we did have to go through a a formal bidding process, they they were actually started by relationship building.

41:53 Yeah. Exactly. Yeah. And that that that's that's very much key to to what you know, the strategy that we have. Absolutely. Right. Let me get into the final series of questions, and I am probably gonna do more of the talking here. But, Andrew and Sean, you you fill any gaps. Yeah. So one from Bruce, taking a three to five year view, what size, shape might REACT become, and what are the major actions required by the company to get there? So we have talked about this before, and I hope I'm being consistent with what you've said before because our plan and strategy has been, you know, pretty much unchanged. Those 25 or so big reactive companies that we scratched the surface of in terms of the potential revenue in probably 19 to 20 of them.

42:46 What we're trying to do is what we've done with the other five, which is to grow out our relationship with those companies, and we believe there is a massive organic growth opportunity there that we aim to punch a big hole in over the next three to five years. It just it just takes time. You know, it's about relationship building and and so on and so forth. But we we see, you know, material organic growth available there, so that's a key part of the strategy. With with Fidelis, they've got a great win rate, got a great reputation. It's much more about the contract maintenance business and therefore long term visibility, and we see their organic growth continuing in the way it has done before. So organic growth is obviously gonna be important. There may be, you know, little bumps in the road when you're talking about such a long period, but, you know, we're confident that the potential is there, and we've got the right sort of set to be going for it. So you can imagine if our run rate at the moment in terms of our forecast is for a 10 going on £11,000,000 turnover business generating, you know, 1,200,000 ish of EBITDA.

43:53 With the operational gearing we've got, you know, if we were to double the revenue over the next three years, you know, you could see a a fair chunk of that gross margin that would be generated dropping the bottom line. So so that's one component is the organic growth. The second component is think that this business over the last two and a bit years has gone through two of the three stages. The first stage is, you know, complete rebuild and and turnaround. And those of you who've been following the story will will know what that's been like. The team have now built a much more robust platform on which they're showing they can sustain, you know, this this this performance and the and the the revenue growth. This third phase is about continue to build on the organic side, but now looking at buy and build. There's no doubt there's a key opportunity for us to buy and build in a very accretive way. We've always said any acquisition would be accretive and earnings enhancing and relevant to us in terms of our strategy.

44:54 And Fidelis was exactly that. I hope that that's given people confidence that we've got the ability and the skill to do it. I would say to you that the Fidelis deal came as a result of us just doing some background work in the in the background of of being busy with with with building the company, and therefore, could argue that Fidelis was a was a was somewhat serendipitous. It came to us as one of multiple opportunities that we turned down, and we we we we we we bought very well. They're a great team. You know, love the owner that's, you know, still on board and working with us, Lloyd Azimoz and and his team. And there's lots more out there like that, but that's where I'm dedicating perhaps more of my time now because the operational side of the business is is is is working well. And I do see m and a as being a a key feature. And we have we have some professional help now looking to help us build our pipeline of opportunities.

45:54 And so I am hopeful that, there'll be more stories around this. But remember, you know, accretive, we bought to Dallas 4.75 times earnings. It's cash generative, and it's been completely earnings enhancing. So, you know, I think that know, the opportunities are in front of us, we believe, mean that in the next three to five years, this company could be going on a similar pathway, maybe not quite as big, maybe not quite as valuable as as the company Sean mentioned early earlier about like Marlowe, but we do think there's a big opportunity here. And I should also say that at some point, we will get to a size where somebody's gonna wanna buy the company, And and and that does opportune provide an opportunity for investors that wanna realize some of that value.

46:43 You know, I've no doubt that as we head where where we're now in market cap of, I don't $1,314,000,000, there's been a bit a retail sell off and of of profit taking since the announcement, but all the institutions are still, you know, very, very supportive of the story here. And, you know, we we we could we could easily see and it's not fantasy. We could easily see organic growth on the current business, meaning we double our revenues and and get bigger profits over the next three years. But m and a could mean we could be three, four, five times bigger than that, you know, with all the operational gearing set in. So a a a you know, sort of a bit of verbal there, but hopefully, that explains to you that, you know, we're on a mission to get ourselves to be a much bigger company and create, you know, a tremendous amount of value for everybody, including ourselves, in that process. So, hopefully, Bruce, Bruce, say that answers that question.

47:45 Let me, go through the others. Dave r, you've asked a question about Fidelis hitting their their their full deferred consideration plus the implementation of announced contracts in Basically, you're asking me to forecast what we're going to do in revenue in 2022. And I think your thinking is about right, but I'm not going to, nor is anybody else, we're not going to talk about forecasting next year at the moment. So forgive us for not answering that at the minute. We we we we're absolutely and if you look at our track record, we're absolutely focused on being conservative and transparent at the same time. We're not trying to talk up anything. We're just saying what it is and where we are. And hopefully, you've seen the tone of our our announcement that we've been honest and said, look, you know, a couple of months, we're soft for our REACT GROUP PLC business. And exactly the same thing happened last year, and you've seen the results since. So we're very open, very transparent, but we're not going to go trying to set the share price alight with statements that we, right now, cannot guarantee. And we want to be certain to set our expectations at the level where we can exceed. So hopefully, you understand that, Dave.

49:08 Greg W. Says, are you still confident meeting the full year forecast published by Allenby Capital? The answer to that question has to be if we thought any otherwise, we would be changing it. And it's not a smug remark. It's just a fact we're not allowed to say anything more than that's the forecast, and it will change if we believe it should. PLC, is there a prospect of a dividend? At the moment, Paul, what a picture we're painting is one of a company that wants to grow capital rather than provide income. And I I often think, and there's a bit of a conflict when a when an organization is saying that it's about capital growth, then getting some of that money back to shareholders that they wanna invest in accretive acquisitions or or in incremental growth. So at the moment, no plans to provide a dividend, and we've not got institutional holders that need a dividend, you know, and there are people in the wings waiting as we grow in size to come in. So I don't see the imperative need to to generate a dividend, but that's not to say never. You know?

50:19 But again, hopefully, you understand the strategy there. You know, we think we should be preserving cash to focus on growing the asset value. Where are we? I think I've answered the question that was here before about level of profitability and market cap we're aiming for. I think and and what time frame I've answered that one. And then what do you see as the major barriers to growth and what do you need to do to reduce them? Again, I'll just answer that. In in terms of we, like any company, need need a bit of luck. I'd never say that it's it's all down to the brilliance of the team we've got. You know, we always need a bit of luck, but I think it's about continuing to be humble, not wanting to be egocentric and and and an ivory tower and just focus on customer success. And if we focus on the customer success, we'll get the results come through. That sounds a little bit cliched, but the barriers in our way are just time and resources. Now we could go out and invest an awful lot more and an awful lot more salespeople, but I think we've got it about right.

51:33 You know? I think that if we can carry on growing at these sorts of levels as I say, you know, there will always be bumps in the road over a five year period, but the market is there. Our underlying growth is there. The security in that underlying growth is backed up by, you know, some fairly long term contracts. It's a recurring revenue play. I mean, you know, if this was you know, maybe it's a bit facetious to say, if this is a software company, you know, it would be probably differently rated. It's not. But, you know, if you look at the recurring nature of our revenue, the income, the gearing that's now available because our operational head office costs are so small, but and all the net fee income sorry. All the the gross profit tends to trickle down to the bottom line. You know, I think we're in a in a good place. What could we do more?

52:20 I think we've got the levers within our grasp at the moment. That might change as the market changes, but right now, unless either of you disagree, I think we're in a good place. Yeah. Agree. You got anything to add? Any barriers that you want us to try and reduce? Maybe just the customers. Maybe just customers need to understand what we do and and give us more work, but that's what we're trying to do with the sales team. Yeah. Yeah. No. It's nothing to add to it, Mark. I think you hit the nail on the head. Brilliant. Well, look, I think, Paul, I think we we're done. Can I we've we've answered all the questions, those that we can answer? Is there I I think that's about it. That's fantastic. Thank you very much indeed, Mark, Sean and Andrea. As usual, you've answered every single question, so I'm sure it's greatly appreciated by the attendees. So thank you very much indeed.

53:08 Sean, perhaps before we redirect investors to give you guys some feedback, may I just have a final few words, please? Yeah. Just, you know, thanks for taking the time out today to to watch the presentation. The questions have been quite extensive and covered a broad brochure of of items, so useful to be able to answer them. And, you know, thanks so much for your time. It's fantastic. Mark, Sean, Andrea, thank you again for updating investors today. Could I please ask investors not to close this session and should be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations? It's only take a few moments to complete and is greatly appreciated by the team. On behalf of the management team of REACT GROUP, thank you very much for attending today's presentation.