Shearwater Group (LSE:SWG) — Final results for the year ended 31 March 2020

0:04 Good afternoon, ladies and gentlemen, and welcome to SHEARWATER GROUP PLC's Investor Presentation for the Final Results Year Ended 03/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Me company dashboard.

0:35 I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I would now like to hand over to Phil Higgins, CEO Paul McFadden, CFO of SHEARWATER GROUP PLC. Good afternoon, guys. Good afternoon. Thank you and welcome everybody to our very first retail and publication of our full year annual results. I just want to introduce myself. I'm Phil Higgins. I'm CEO. And also online, you have Paul McFadden, my CFO. We're gonna be turning off our cameras to preserve our bandwidth, and we will try and rejoin with the the cameras towards the end of the presentation if available.

1:23 So this is me just turning off. Don't think that we're gonna be losing anything further, and we would carry straight on with the the presentation. So if I could just

1:42 draw you through to the the disclaimer. And as I said, today's presenters are myself, Phil Dickens. I've been in the industry for many years. I've been there since the birth of the PC, and I've worked in the commercial side of IT ever since. And with me today are Paul McFadden, who you'll get to meet during the the presentation. I'd also like to introduce you to other board members who can't be with us today and and just give you a little bit of reason as to why Brookhorn is part of this organization and why the shareholders of Brookhall decided to actually sell to this organization. So SHEARWATER is got a very prestigious board. From the from the bottom there, you'll see Marcus Willett.

2:29 He's the ex deputy director of GCH chip, first senior adviser for cyber. So you can appreciate for a company that specializes in security and cyber. It's a very attractive opposition in proposition in having someone like Marcus be able to direct us and help us in their strategy. And also on that, to help us from a an experience perspective, we have Lord Reed. Lord Reed, obviously, is working for Tony Blair's government, and he's got a fantastic insight into the government's local workings and and also a large scale and development of large corporates. And they together form our advisory panel. Above that, we've got our board of directors. You can see Dave Williams there. He's a former Ned and founder of Green Group.

3:18 It's a billion pound organization. And David comes with a a thirty year pedigree of working within Citi, raising funds for major corporations and building them up to significant insights. And myself, as I mentioned, thirty years plus inside the IT industry. Paul McFadden, ten years plus experience working in senior financial positions. Charles Blitz, non executive director and CFO of IT design, PLC. So obviously, very well versed in corporate governance and finance. Robin Southwell, ex former CEO UK of Airbus, and Stephen Ball, former CEO of Lockheed Martin UK.

4:04 Together, these, board of directors actually do help, advise and consult, and they're interested in what we do. So they're not a board of directors to simply sit back and sign off the accounts each year. They're actually involved in the business. I'm glad to say the business also talks to them on a regular basis. We hold events where we can share time with them, gain their experiences, and they assist us in terms of our development for the company. Moving on. So what is SHEARWATER? Why are here? SHEARWATER is a group PLC. It's a it's a walk in the organization resilience group. We provide cybersecurity, advisory, and managed security services to help SHEARWATER and secure businesses in connected global economy. What that means to us is we we believe that people, processes, and technology all go together and to create organizational resilience.

4:56 Having great technology and having poor processes could obviously be it can be very damaging To simply just go out there and have all the technology in place without having it tested and through the correct process can also be damaging. So this is why we we bring the three together. So moving on. To give you a little bit of overviews to what the company is about and and how we position it. So as I said, we're we're an organization company, and we have a we divide that company into into two areas of interest. One is our software site where we own IP, we own patents, and we deliver our our own technology through a either direct or through a global distribution of reseller networks.

5:48 And then we also on the other side, we have our service business where we collectively, for our service companies, we we provide solutions and consulting advisory services. So first of all, going back to the software side, there, we we develop a our platforms of secure identity. This is the authentication, and it's a very old process of of logging on. And I'm glad to say and then you're on this deck, I'll be able to give you some updates on what we've done with that product since acquiring. But what it is, it's there to allow you to log on to your corporate network and and gain access to your your corporate data and facilities. And as you can appreciate with the environment today, all of those those those staff and team members were instructed to work from home due to COVID.

6:38 And so this type of technology becomes quite relevant in today's environment. Good thing about software when you own it is obviously the recurring revenues. And we have circa 90% recurring revenues against our established offerings,

6:52 which is obviously, you know, very impressive stat which we would look towards building upon as as we go through the course of next twelve months. With inside those that division, we've got two brand names there, Secure Envoy and GROUP. Both of these are well established inside the industry, and they contribute to and we keep their brand names there because we do believe there is brand value in in having their logos still available. So they're not all gonna suddenly become SHEARWATER GROUP PLC. They they work underneath and part of SHEARWATER GROUP. On that service side, as I mentioned, we bring together service solutions and governance risk and compliance. And there we have a circa 25% recurring revenue.

7:40 We have a lot of managed services and third party support services, which we renew on a regular basis. We had consulting engagements, which which reoccur every single year. And that blended gives us a 25% recurring position. Then we do all this through around about 90 employees across seven offices in UK and US. We focus purely on the Fortune 500, government and SMEs. We do not do them at this stage b to b to c. And one of the purposes of of this group is obviously to offer our customers an end to end organization resilience solution. We are looking to be able to service all of their needs from one single point.

8:28 Also, we from our companies that we we acquire, we obviously look for adding a POC status to an organization and actually helping them to unlock the value which they may have not have seen before or may not have been able to reach before due to their size and and financial resources.

8:47 Moving on, I'm just going to take you through just a few a couple of slides before I introduce Paul to actually take you through the numbers. I thought it's important in today's environment to talk about COVID. Prior to the government sending us all home, we tested our facilities with one of our divisions. We gave minimum minimum notice. We asked them to to go home, and I'm pleased to report that they reestablished connectivity within four hours of that instruction, during which time we didn't lose any customer continuity. All service levels were maintained. And so we're very pleased with our ability. We sell resilience to organizations, so therefore, we also practice our own resilience. Part of the organization has business continuity qualifications.

9:37 Other parts follow the simple process of doing so. But in the main, our company is well geared adjusted extremely quickly to being being sent home and working from remote locations. We have seen some impact on clients. We had saw a an uptick in our remote software identity authentication software during the month of March. And at the same time, we saw softness in our consulting business. As the consulting is typically engaged on a face to face basis across the desk, obviously, there is a pause and a slowdown and no cancellations, simply a slowdown in deferral of activity. I'm glad to say since then, the process has worked itself out. We're now delivering more consultancy over Webex or FaceTime, those types of engagements as opposed to across a desk. So we have seen an impact from from COVID.

10:36 Also, from main one of the main reasons for SHEARWATER is obviously it's an investment. So part of our opportunities are to acquire organizations. And we're talking to to a number of companies and both big, large, and small, and we will be able to give you a little bit more detail through the stack. But needless to say, COVID has has impacted that also. Some of the larger systems integrators that we talked to have decided to defer m and a conversations until towards the end of this year. They're either looking to rebuild their the revenues because of COVID or their profitability because of that. Some of them are looking for opportunities themselves now, and they think that that may appear itself. And what we're seeing here also is, you know, some of the smaller companies are coming forward, and they we're seeing some consulting organizations and software organizations, and they're looking for a safe harbor during this difficult period. So COVID across the board has an impact on us. And where and in certain places, it's had a a negative effect. In others, it's it's actually assisted.

11:42 If I can now hand over to Paul, who's gonna take us through a few slides on our financial achievements. Paul? Great. Thanks, Phil, and good afternoon, everyone. Okay. Slide number nine states the key metrics that we use to manage the business, which our group for our overall revenues, adjusted EBITDAs and adjusted profits before tax. For the year to March 20, it's pleasing to see that revenues have increased on a reported basis by 41% to £33,000,000 with significant, a obviously, strong organic growth within our software's division as well as obviously there's incorporation of a full twelve months of performance from Brookhawk, which was acquired in October 18.

12:34 Adjusted EBITDA of $3,400,000 again represents a significant improvement on a year on year basis of $4,800,000 and leaves us with an adjusted EBITDA margin of 10%. Factored in within here, we're seeing pleasing profit growth within both our software division and our services division, as well as obviously the addition of the the savings that the group made as part of the reorganization program, which started in April 19 and and this was not predominantly finished by by the end of the first half of last fiscal year. Adjusted profit before tax of $2,200,000 again, it incorporates the adjusted EBITDA improvements year on year, but then deducts finance charges, depreciation, which this year incorporates the IFRS 16 leases adjustment, which is 200 k, and the amortization of computer software equipment, which has come from our internally developed software businesses.

13:48 If I can move you on to the next slide, slide number 10. Okay, again it's been significant improvement year on year with as discussed revenue growth within within the software division, both Secure Envoy and Geolang have have reported good year on year improvements in in revenues. We have, obviously, had some additional revenues generated from our PenTest acquisition, which was acquired in April 19. Yes. This business has had some amounts of revenues deferred at the year end. But please and say, in most cases, this revenues have been deferred rather than canceled. And we'd hope to see, obviously, this the these these engagements have been fulfilled in in the current year.

14:37 Obviously, I've mentioned the full year impacts of Brook Court to the numbers, which obviously does has pushed services that reported year on year improved revenues up to 41%. On an organic basis, we have seen some reductions within our services business, which is due to two main factors. Firstly, we we have noticed a change in in the revenue mix within our services businesses, whereby we're seeing low margin, high revenue sales replaced with slightly lower revenue, but higher margin sales, which obviously is a sign that we're improving our our our profitability.

15:19 And secondly, within our advisories businesses, we have seen, obviously, some reductions from the previous year where we had obviously the benefits of the GDPR introduction, as well as obviously at the end of the fiscal year, deferments of some engagements that we that have been deferred to the the current financial year. If I can move down to our gross profit margin, we have seen improvements from 29 to 31% year on year. What was part of the the reorganization took place at the start of last fiscal year? We did review some of our sales and marketing functions within our services and software businesses, and we've been able to reduce that cost of sale.

16:05 The introduction of our cross selling program, we hope will will will drive that further in the future. Administration expenses have reduced from 8,200,000 down to 6,800,000. And of this 1,400,000 year on year saving, circa 600 k comes from savings made at the head office function, so circa 28% with the balance being made from administrative functions for within all of the trade trading entities across the group. So just examples of some savings made incorporates reduction in consultants cost year on year and, obviously, the consolidation of some office space. Again, the adjusted EBITDA margin of 10% represents a significant improvement year on year.

16:54 And moving forward, we feel there is some possibly some room for improvements on this number, which we can we can come to in a bit. If I can just move move you on down to depreciation, amortization charges have increased from a 100 k to 600 k year on year with with the main variations being as a result of the the instruction of IFRS 16 leases, which takes into account probably about 200 k of additional depreciation and additional amortization, which has been brought about from our internally developed software products, which have been released recently. The finance charge is during during the year incorporates free free loans that the business have, which pleasing to say is we we have made repayments in in the current fiscal year.

17:50 And by the half year, we expect to be in a position where the when all of the the loans that's currently due within twelve months will will be settled, which further will strengthen our balance sheet and give us some flexibility and some to substantially consider some debt financing for our next acquisition. If I just move you past the adjusted profit before tax of 2,200,000. Amortization of acquired intangibles has increased significantly year on year as a result of a four year's worth of amortization from the Brookhorts acquisition as well as nearly twelve months of amortization for the Pentest acquisition that was acquired in April 19. Exceptional items of 700 ks incorporates 300 ks of of acquisition costs related to the Pentest acquisition and and circa 350 k from our reorganization exercise that we're that's replacing the first half of last fiscal year.

18:56 If I move on to the impairments of legacy assets. So before SHEARWATER was SHEARWATER, it was a mining and exploration business. In the last fiscal year, we impaired the remaining assets held on books for that legacy mining business. So we had an impairment of £1,000,000 And very finally, we have seen we had charges for contingent consideration and an adjustment to the the fair value of deferred consideration, which both both items are representative of a deferred and contingent share consideration, which has been settled in in the year to the exons of GLM Holdings Limited.

19:43 This leaves a loss before tax of 1,300,000, which is a significant improvement from the prior year.

19:55 If I can move you on to the next slide. So this slide just details the group's cash flow for the year. Very pleasing to report, that's obviously firstly achieving our first underlying EBITDA profits as an organization. We've been able to post some strong cash numbers as well. We've found our free cash flows of circa 3,800,000 and cash conversion of well over 100%. It's worth mentioning that what efforts have been made during the year to maintain and look to improve the group's working capital management with the focus being laid towards the group's credit control process.

20:41 And very pleased to say that we have seen some good results there, as well as bad debts, which has been absolutely minimal in the year to March 20. Just moving on down during through the cash flow forecast statements, sorry, investing activities of one point four predominantly represents the capitalization of some internal development costs throughout the group within our software businesses. And financing activities of 1,100,000 represents incorporates a 1,300,000 repayments of a legacy invoice discounting facility that was settled before the end of the fifth financial year. So it this leaves, obviously, a positive position and a cash and cash equivalents balance of 3,300,000 at the end of fiscal year's March 20.

21:37 Obviously, post the year end, we have looked to strengthen our position so that we're well positioned for our next phase of growth. Within this, we have a placing at the end of April, which raised circa 3,750,000, as well as we shortly after that, we've finalized a three year RCF with with Barclays for £4,000,000, which is there to to support further organic growth across the group.

22:10 It's also worth mentioning that, the year end, we have repaid a significant chunk of loans. So we we we move forward in a position where with us a healthier balance sheets, whereby when when we look at acquisitions, we have the additional potential facility to incorporate some debt financing into future acquisitions. Okay. If I can hand over to Phil, who will go through the operations trash can. Thank you very much for that, Paul. Hopefully, I'll be able to give you a little bit more color on some of those points that Paul brought up during the the remaining set of slides I have here for you.

23:00 So moving on. One of the things we did in the early part of last year was establish SHEARWATER shared services. It's a it's an area inside our business where we can bring together our HR and legal marketing strategies and start reducing costs, start leveraging the business. It's important for us to actually get control in that cost and not see this as the best place to do it with finance setting that up. So we put all these measures in there simply to actually assist internally, first of all, but also prepare ourselves for the future. As we acquire companies, we see this platform as being key to our the bringing in an organization and quickly realizing cost synergy savings. It also provides a a standard model which we can communicate across the group with.

23:50 It also provides facilities for standards and control and quality. And Paul briefly mentioned our cross selling program. And one thing I noticed when I I I took the seat as CEO is that we weren't extracting all of the opportunities out of the group. And to to counter this, what we decided to do on our services side of the business was to look to see how we could, you know, share our contacts and contracts and also understand what sister companies were doing. For example, Brookwood would historically go into a customer, talk about Brookwood's solutions and services, and then walk away. What they do now is they they're incentivized to actually not only talk about the Brookhaw components, but also talk about the other sister companies.

24:38 And and now what we find is that between the groups, the salespeople, because they're incentivized, they don't lose out through any introduction or any additional work. And we find now that we are is contributing to our our profit. And if we consider that extracting this additional profit will obviously give us an opportunity in the future to to make sure that we become more entrenched by client base and being able to deliver more of a a service. So we're constantly looking for that untapped value that we can actually bring out and where we can facilitate additional introductions. Obviously, on our service on our software side of the business, because they sell through distribution and then through a team of research, we don't look to touch their their clients. However, if in our marketing, we're able to go out and and talk to our existing client base about the the products and services, we certainly do. We And have done that, and I'll be able to explain a little bit more about that later on in the presentation.

25:42 One of the other key components inside of SHEARWATER as an investment is obviously our development in terms of our software. It's a very key component for us, and what we're looking to do there is to and we have a a very large reseller network that spans globally. It allows us to provide our products through that network. It's been resold by, obviously, research. And if the more features that we can actually add to our software, obviously, the the the more use of the software becomes. It we can upsell to our existing client base. And when you consider we have circa 1,100, 1,200 end user corporates buying this software through north of 350 resellers, you'd appreciate if they've already got our platform and they're already using our technology, if we add more features, it allows us to upsell those customers.

26:39 Also, because of we having a a more enriched product set allows us to attract new customers in. So we're looking to tap new markets as well. Moving on. So one of the things that we did is obviously create this platform and and organize ourselves effectively. And we believe now that we have got this platform for growth in place. We believe that we spent a lot of time tuning our business, getting it in the right shape to move forward. And we're looking obviously to increase our software sales. It's high margin, it's reoccurring revenues, It's very stable and very predictable. And more features that we can add to this and there is potential opportunities with current COVID on how that affects people. It may present us an opportunity in the in the future to to to gain more sales.

27:33 On top of that, we we will continue to develop our software in house. And but at the same time, we're still looking for software companies to acquire. If there's a feature software company that can be ingested into the organization and their their features be added to our existing platform, that may be a quicker route to market. So we know where we want to be. We want to be a a a company that can provide from a service perspective from a software perspective, a platform that will service today's and tomorrow's on prem and cloud technologies. As Paul mentioned, we we went out and we did a a small raise in back in April, and we've also got an RCF in place. And both of those funds are there for to actually assist the business in in its development. Obviously, the the the raise is there for give us some mobility to take advantage of any opportunities of small companies that come to Vadle during this COVID period.

28:33 It's also there we we did unfortunately lose an opportunity just before Christmas where we didn't have the strength and the balance sheet that we wanted at the time. And because the company that we're looking to acquire had a a shareholder who wanted to retire. And he was looking more for his money out. And, obviously, we didn't have that that that position available at the time. So one reason for getting the the the rates in place was so that we didn't come across that problem again. On top of that, obviously, to fund the business, we get involved in some very large projects, which are historically been very capital intensive. They're long programs. We get involved in lots of critical networks, a lot of critical systems and services, and they all need funding. And some of those can without payment cycles with our customers, large corporates do take slightly longer than the smaller ones. And so it's the the RCF is there to actually assist and help in that that flexibility.

29:35 And one of the things, obviously, that we is part of our duty is, obviously, to make sure we're running efficiently. So this is why the shared services has got control on the budgets and the purse strings, and that's why we're aiming to actually reduce a lot of the loans and a lot of the legacy challenges that the group has had. And we've now got the the company into a position where we're we're comfortable. We got strong controls and visibility across the group. We have regular meetings with with group heads, which allows us to keep a good favor on the pot, especially during these times of COVID where we are looking for any any slight adjustments in the behavior of our customers and or our organization. And so we can adjust it quickly and efficiently. One of the key things being the people's industry is keeping the staff motivated and incentive and incentivized.

30:27 Within shared services, what we delivered was also a leveling of some of the packages in terms of the benefits. So, for example, you know, staff can get Uber if if they so desire. And not all the employees have that re originally. So now they do. We are bringing together other programs, which will be launched later this year, which will once again, will be a benefit to staff. We believe that patches now are are attractive. And and if I look back at what we have gone through over the last few months, we haven't furloughed anyone. We haven't made anyone redundant. We're we're a resilience company, so we sell resilience and resilient ourselves. And it's important that we try and maintain that as much as possible. And during the COVID period, we have been recruiting staff.

31:13 Historically, we would go out for an advert, maybe get two dozen CVs come through. Now we put in an advert, and we're getting three, four dozen CVs come through. And part of that is because of, obviously, some of the devastation that's taking place at moment. But others is because of we are giving, you know, very good incentivized programs and contracts to to future stock. We're trying to retain the best. We're trying to attract the best. Also, mentioned at the very beginning, this is the the strength of our of our board. It was the main reason for me as a cofounder of of Brookhort of for joining SHEARWATER is the strength and the purpose of that board. They are there. They help. They get involved very hands on. And, obviously, they deliver to us many relationships that we could never have dreamed of obtaining ourselves as a small Lindsay company, but as part of the bigger group, part of the value is what we we got from them.

32:12 Talk to me if you want. So coming on to best strategy, what what's the purpose of all of this? So this pilot strategy has has not changed. This is the from the original statements that we are a buy focused grower, and we are looking to acquire companies. But before we could, we we had to get ourselves in the best possible shape. Last year, we we made some adjustments inside the organization. We had some duplication services and offerings. We were able to trim some of that down. So that focus, first of all, was actually looked on that at ourselves and how we actually manage ourselves. We also looked on how we actually drive a greater internal ROI against our our deliverables as an organization.

32:59 So first of all, we we we turned the the spotlight on ourselves and to get our platform in place. And now, of course, we're ready for that to move into the acquisition mode, which we had a number of acquisitions available. I'll come into our strategy on acquisitions very shortly. If I can move you on. So it's important to understand what we do when we acquire a company. And what I wanted to overview to our investors was the is is two case studies against Secure Envoy and GOLAC, which are two of our, obviously, our prize companies for our software division. So when Secure Envoy was acquired, it's a a non premise point solution offering multi factor authentication. It's a it's a must have.

33:50 There's obviously back in the day, it was not such a compliance or regulatory requirement as it is today. So it's becoming more important. But then it's just an on prem. So what have we done? The focus has been to evolve that into a cloud as well as an on prem so we can address new markets. We've noticed a lot of people come into the market space today simply just go to the cloud. Some of the older companies in that space simply staying with their on prem. I'm glad to say we have a foot in both camps. So we can address both markets, and we're looking to map maximize our position there. What we also did was looked at Secure Envoy in terms of its multifactor authentication. And last year, the the team there produced and leased a a platform. So it's a centralized software platform now. And on top of that, multi factor authentication sits there as a feature, and that's an important point for us. Is what we have done also, when you start looking at GeoLang next door there, they were a small point solution with limited direct sales reach.

34:56 And so they had had needs as well.

34:59 And what they do have is a very good product set for data discovery, data extraction. So now, whereas before, GeoLAN could only reach a small small audience, Secure Envoy have an audience through 350 plus resellers, what we're able to do now is take Geoland's technology and put that technology on top of the authentication secure identity platform. And what that allows us now is to offer new features. So instantly, we can take Geoland's technology, which could only reach a small area, and now we can take it global. And I'm glad to admit announce that the this product will be coming available this quarter. We'll be making announcements, so please do look out for that.

35:48 What that means is that we're we're getting through accretive value now. We're actually looking at ourselves and seeing how one side of our software company can help another. Geovang still have their their own focus reseller channel who specialize in key components, but also now part of their software can be made available and used by Secure Envoy to reach a global footprint.

36:11 Also, there's a a need inside Secure Envoy where they need support and funding to and and structure to to support their team. So they they took on a a senior, a industry veteran, and very well qualified, and an excellent asset to the group. As I mentioned earlier, we we do focus on our in house development. We know where we want to be and where we have active programs to actually create our own code and develop internally. And what we're looking to do there is put our our our software right in the center of the authentication and regardless of which cloud you are or which product you are. And we're looking at, obviously, those the different strengths of of being able to connect to the the network.

36:57 But at the same time, you know, in developing those extra features that can be driven by compliance or the security threats, we're also looking at some of the software companies that that may be able to be acquired, and we can speed that process up. So we've got a two pronged approach on that, and that's exactly the same with GeoLANK.

37:16 And when you start looking at the addressable markets today for something like Secure Envoy, depending on who you talk to, and in this example here, we're referring to a Grandview Research, But I talk about 24,000,000,000 market space by 2025. And, of course, you know, depending on who you talk to, the only thing I can say, it's a big market space. And the more features that we add to that market space is, obviously, that market space will grow. So our opportunities can grow as we require software related companies can sit alongside or on top of and support Secure Envoy. And from a GeoBank perspective, what it does, as I mentioned, we go from a handful of local resellers to now over 350 globally.

38:01 So you can appreciate there's extra value that we can actually get from from these organizations with the right support and help. Moving on. Looking a little bit at that demand and that growth and that opportunity. The UK government estimate that the The UK's cybersecurity industry is now worth 8,300,000,000.

38:26 It's significant, and that's all I can say. It's it's a very significant market. It's a must have. It's in the press. It's discussed on every form, every platform. The bad people come out when there's political unrest and financial insecurities, economical risk. This is their playground. This is when they come out. So, you know, that that space is likely to increase. We've got Brexit happening at the end of the year and so on and so on. So these people are driving our market space. And so we expect that numbers to potentially actually increase as as time goes on. One of the things inside that we have noticed and you probably have as well as investors that it's a very fragmented market. And we're looking obviously to help consolidate some of that in our acquisition strategy, which I'll talk about shortly.

39:15 And, of course, COVID.

39:17 If you listen to the CEO of of Microsoft, they've seen this two years of digital transformation in two months. And I don't know if the social appetite will be for people to work from home on an ongoing basis, if corporate UK will change the way it addresses this business. And for us, we're looking internally. We've reduced one of our offices where the lease was available to do so. During last year, we we managed to move a couple of offices, which once again is a has had a huge saving and impact to our our bottom line. So we will continuously review that, and we will continuously monitor how our customers actually develop themselves with COVID in mind. Moving on. Just to take you through now just some of our strategy on acquisitions.

40:05 I suppose the foremost point is obviously our organic priorities. And so as a group, as we are today, we'll continuously, you know, target those large corporate organizations. Be it domestically or internationally, we we have a a wide deep breadth of different sector of corporate from oil companies, telcos, banking, and retail. We we have a a complete suite. We also look to actually leverage our our client base where we possibly can. We will look to share our contract. We look for joint propositions going to these customers. We look for asking the right questions that will allow us to take additional projects off the table. And obviously, we're going to be looking to actually build also our internal service offerings. And there's a number of service offerings that we had successful in in a big pen test, big Xena or Brookhull. And those service offerings, we're going to look to to make those more widely available, and they're being redeveloped.

41:07 And they will they will allow us then to obviously produce greater revenue streams into the organization. I suppose more importantly for me now is the selective acquisitions and, you know, what are we gonna do there. I think it's important to to understand that we we want to buy companies that are cash generative and profitable. Or realist in a realistic short term time frame, there's a path to profitability. For example, what I don't want to do is where we acquired Geolank, for example, which is a a pre rev company. I don't want to walk away from a company like that if we can actually see where there is a path of profitability through their platform or their technology being enhanced by what we do today.

42:02 When you look at companies like Brookhill, however, obviously, there, we'll be looking for some very, very clear profitability, cash generative indicators to before we've actually progressed any further. It's gotta be a clear fit. We we have a clear definition of what we want to be and where we want to go. What we don't want to do is move too widely to the left or right of that line. What we're looking for is to working with inside the security, with inside the cyber and the advisory space relating to that. What we don't want to be doing necessarily is is PC desk side support. So rest assured, we're not going out there just because we got money to spend on acquisitions. We're not just gonna buy the first thing that comes along. We will be very selective.

42:48 We're looking for feature rich companies. We're looking for companies that can add value, accretive value. We're looking for large integrators, research that can actually add client base to us so that we can then leverage our cross selling facilities. So these are all the sort of things that we're looking for with the shareholder in mind as to how can we actually improve SHEARWATER's position. After all, I am one of the largest shareholders of the of the group. So for me, I don't see any dilution. I wanna see accretive value come through, and that's what I'm hunting for. The diagram that hopefully goes some way in actually sort of trying to bring the picture of what we're actually trying to do. As you can see, the on the bottom right hand corner there, those larger customer base ones, they would typically be representative of solution integrators, consulting houses.

43:37 And those ones where they have large customer bases, they're very interested to us. And there, we have a very strict rule about the the who we're selecting. We do have a number of those in conversations. And as I mentioned earlier, with my COVID statement, what we are seeing is that our some of our large customers large targets are deferring those conversations till later in the year. The picture which some software add ons up on the top left hand corner, those for us are coming through. There's a number of those that we're looking at. And we'll continue to actually evaluate the suitability of that any acquisition there. So moving on to the outlook. Our current trading has seen positive momentum. We have we concluded last year, and I'm I'm pleased to say, so far, we're on plan.

44:28 And we are approaching COVID very cautiously. We are watching to see what happens. We have got yesterday, I I invited staff to reattend the workplace on a voluntary basis should they choose to. Some of our staff have a preference of being inside that that work environment, and others are still working from home as I am today. Our platform has helped contribute to our our positive momentum. It's given us greater control and visibility into the business. And now now that we've we're pleased to report that we've we finished these this last year with good strong numbers. We still got some more work to do. We still look for some more savings we've decided at the groups and greater efficiencies.

45:23 And, of course, as we call as and when we acquire companies, we'll be looking to get the synergy savings then straight away. We're also gonna be focusing obviously on sales and marketing, making sure that we can offer solutions for today's environment. Obviously, with the of recent weeks and months, there is a potential opportunity with inside the the employee working from home. How that adjusts and how that transpires will will pay itself out. We've also seen a shift in some of the consulting. GDPR slowed down, and what we're seeing now is more conversations around business continuity as you'd expect. So we will be looking to adjust ourselves as and when the market requires.

46:09 But fundamental and underlying to all of that, we're looking to actually deliver strong organic growth in comparison to our our competitors. And that organic growth is, at this moment in time, it's, as I say, wrong plan, and we're keeping a very steady hand on the tiller. We will continue to focus on those those cost management. We are reviewing ourselves as to what we do with our offices. We, as I mentioned, we have seven, and there may be an opportunity to reduce that further. We will not do that necessarily at the the the cost of the business. We've been monitoring our productivity to date and during the lockdown, and we'll continue to do so. And whilst we've been tracking very well, I am a little bit nervous to think that I do not want to be a pioneer about reducing all the offices just yet. I wanted to wait and see what happens with corporate UK.

47:15 Put it on that business. We get we get a number of opportunities presented to us each each month. We're continuously reviewing and going through NDAs and signing these NDAs, understanding what these these potential acquisitions look like. And as I say, we're being very selective. We do have a number that we're talking to on a more regular basis and who are more interesting to us. And we hope that COVID won't interfere too much with our plans there. We would like to think that we'll be doing acquisitions in the not too distant future. I'll come up with a timeline against it as you appreciate. There's an awful lot to get through before then. But needless to say, we are very active in that space. So what we see at the moment is, you know, we have a a strong financial position.

48:05 And the the placing there was for a purpose and so is the bank facility. Those funds are still there today, and they are we're sitting there actively reviewing our our acquisition pipeline and also the the needs of the business cash flow to make sure that we can actually service it. We are now a cash generative company. We're very pleased to to be contributing to to to the bottom line. We hope to be able to resolve all of our some of our legacy debt pretty quickly and, you know, return to full strength. Moving on. So why invest? There's a very experienced management team.

48:57 We have part of the acquisition process for us is also to to bring on those management the management teams that make those companies good. Also, the underlying management, if they're not directors, they the the senior management teams. Below those two, it's important to get those because they all contribute to the success of that company. And it's very important for us to actually enhance the value of the organization. We're not looking to take it all over and and strip out the teams for the sake of the financial savings because then we lose the the value of that company. So for us, we need to keep those teams. These are the teams that actually build those companies in the first place, and that's what we we strive to do. Of course, with some of our our shareholders and the the founders of these companies, they they will move on. They will want to retire and and go do other things. And we're we're perfectly happy with that. And the way the process works for us is to once again, we we as these organizations come into us, just to use our our shared services quickly and help organize ourselves and to then, obviously, cross train our management teams into what we do as a group and what our sister companies do. And and with that, it gives us some resilience in terms of, you know, our our management process.

50:17 So on top of our board, we have, obviously, a a very strong advisory. Very pleased that they're actively engaged, and that was one of the main reasons in terms of their their structure and what they do and the people they have there is why Brook Court was a very good fit inside the SHEARWATER and why we believe that SHEARWATER itself is a very good model for moving forward. The business strategy for us is proven. We are better organized as a result of it. We believe that we're in a good position to consolidate some of that market space. We believe that there is a need for that. We want to build a UK based leading organization that addresses key components of the security, cyber, and advisory space. We have good proposition, be it at local level as well as a group level.

51:08 We're in a high growth market. The cyber risk advisory, it's it's growing. And we're looking to try and do better this year in actually addressing more of that market space. So you certainly got our commitment to that we will we'll be pushing hard to get our fair share of that high growth market. As I mentioned earlier, our board, we have a fantastic advisory board, and it's very key that we we keep them fully engaged and fully advising us, and they help us today with everything we do. And I'm very pleased to actually have them on there. We will during the course of the year, as COVID releases itself, there's plenty of opportunities for our our panels to present and meet with our our staff. They talk with them on a on a regular basis on on presentations and so forth. And we look to actually increase the frequency of that so that our board can be very well aware of the services offerings that we deliver. And obviously, we'll be looking for there is for them to introduce us into the context of ANA.

52:18 As I mentioned, it's a very highly fragmented market. And what we're looking for is to do some of that consolidation. We have a strong blue chip customer base, very diverse sectors, so we have an element of resilience in that ourselves. We haven't had too much loss of client due to the current situation. We are cautiously looking and reviewing those clients. And so far, we I'm glad to say our our large corporates are functioning okay, and they're still continuing with their projects. We have we're slightly different from it from us. We we're we're pushing for this organizational resilience. It because we believe, as I say, it's more than just the technology. It's also about people in the process. And that's what we're trying to address with our consulting and our our management.

53:14 And, also, on top of that, we are award winning. We have independently, we've and through the group, we have two queens awards. We have run about 25 industry awards from solutions to quality of service and so forth. So all in all, we see SHEARWATER is moving into a space where there's very few people. We're very, very few with the same type of quality of of management teams and board, solution set, and opportunity. And this is why we feel that we are a good investment. That's fantastic. Phil, Paul, thank you very much for giving that presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated in the right corner of your screen. I would like to remind you that a 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.

54:14 I am slightly conscious of time guys but lastly before I go back to Phil and Paul, I'd like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you will be redirected to the opportunity to provide feedback in order that the company can better understand your views and expectations. Phil, Paul, I guess we've had a number of questions through. I wanted to ask you just a selection of these as we go through. Obviously, you can review everything post meeting. I think we've answered some of them throughout the presentation. But perhaps, Phil, I could start with you if possible. What kind of businesses are you actually looking to acquire? Can you give us a little bit of more depth on that, please? Yes. Maybe I'll I'll drag back up this slide. So in terms of the the companies that we're wanting to acquire, we we want to buy systems integrators similar to a a Brookhall for their large blue chip client base. That's one of the the the top request. It's also a quicker one to acquire.

55:18 We're also looking for the consultants as well where we have a more rounded offering or a wider offering of consultant services, be it through specialist technologies or through advisory. So there that's very much of a of a big want for us. On the software side, we're looking for some of those smaller companies where they have a unique feature that we could ingest onto our secure identity platform. And I would like I prefer them to be just turning profitable as opposed to prerev. I would like them, you know, to be at that scale as opposed to what we had with Secure Envoy was obviously the largest scale acquisition where they're very well developed, very big established system, and that's what you're paying for. And and but if we go for the smaller ones, they are more affordable and we get more accretive value from them.

56:19 Does that answer your question? Yeah. I think, that's fantastic. Thank you very much. We had a couple of questions just regarding, I guess, cross selling, but, again, perhaps if I can address this one to you, Phil, it really is now. How are you encouraging cross selling across the group and and what sort of methods are you using there? Certainly. Sorry. Wrong slide. So as I mentioned here, what we what we have done, we did penalize any of the salespeople for introducing a salesperson from one of the sister companies. We in fact, we we decided that we would then reward them both to actually help encourage the the interaction. What we have found is that the salespeople now realize that if they go into a new opportunity together, they've got a a greater opportunity themselves.

57:05 And we can also speed up the time to market. We can also reduce their their workload when it comes down to sales and marketing because we're taking them into a hot lead already, a trading customer, and they're gonna get paid on that along with the introducing salesperson. So it's a very much of a win win for both of them. So it's we we're trying to actually extract all the value at our service customers from day one, and that program has been extended even further. We've now opened it up even to to some of our back office staff because it's the people that they know that we're interested in as well as the people that we trade with today. So, yeah, it's coin operated. It's it's it's money. It's cash. It's it's incentive.

57:50 Fantastic. Thank you very much. I guess one for Paul just to, you know, around margin. What sort of scope is there, Paul? Can you give us some idea as margin improvement, further margin improvement, what you can do there? Yes, absolutely. So obviously adjusted EBITDA margins of 10% for the year to March 2020. Is opportunities for us to push this margin a number of points, certainly into the the low teens in our opinion. And how how do we get there? Obviously, Phil's already mentioned the cross step selling program across the the group, which so basically, this will push our margins for two two purposes. One, obviously, that cost of sale is it it is reduced in terms of the time it takes to get into a client, get to a preferred supplier list. So that's time. And and also, lots of the speed that we can actually finalize sales will mean we're to realize those benefits a lot quicker.

58:52 Additionally, use within our advisory businesses, There is obviously scope for us to put to improve on our utilization of of our advisory businesses. So there absolutely is some opportunities to to push push margins in in in excess of the the 10% we've seen today. And very finally, I'd like to mention that the cost synergy side of things, we are always reviewing our business. As as we grow as as an organization, it does present further opportunities and where this is where the shared services team comes and has their benefits. Things such as review of the preferred supplier list, looking at consolidation of some of our suppliers across the group.

59:37 And and we've we've had some successes to date with our telecommunications and some of our our soft sort of staff benefits. And there's also there are additional cost of sales and suppliers costs that we are working with. And we are looking to to account for further savings in the year ahead. Thank you very much. I've got a question here. I guess it's a two part question, one that's probably very topical and COVID related. So Phil, I'll probably just address this to you if that's okay in two parts. How do you see COVID-nineteen playing out over the long term? Is it just a short term boost in terms of remote working? I guess we're all very familiar with that or is it more long term consequences around it? Well, obviously, we we don't know where COVID's going, and we are reviewing that position on a on a weekly basis. We're listening to the government guidance and and also seeing the reaction of our clients as well as our own needs.

1:00:38 We have seen some head turning positions over the last few months. The way it's affecting us is it potentially shows an opportunity for us to offer more secure network connection, corporate land activity monitoring, and those types of things. These are these all help give the the information to the management teams at the corporate to to help control and keep secure their business. So if people do start to work from home, your risk footprint has increased. At SHEARWATER, we have seven offices. Pre COVID, we have to look after seven offices and the security around that. And now we've got circa 90 employees working from circa 90 locations.

1:01:30 So we've got a lot more to secure against, and that goes for every corporate. So what we're looking at now is obviously how does the the the society respond against that. So we do see COVID potentially slowing down, not necessarily stopping, but changing the landscape on how we engage in acquisitions, on how we deliver our business services to customers. And we'll be looking obviously for those hidden opportunities where we can quickly adapt and move in to take advantage of. Fantastic. Thank you. And I guess just conscious of time, we've a few more bits to get through. But I will assure investors that you guys will review all questions that are submitted. But what what issues are come companies actually coming to you with, you know, re cybersecurity?

1:02:20 I guess, Phil, again, I put that one to you? Yeah. So well, that's that's a that is a big question. We have obviously, we we we have a lot of banks. We have a lot of technology companies. We have some of our technology companies in The US come to us because they see our skill set as being superior in in what we do. Some of our banks are talking to us because of the need for compliance based security. You wanna make sure that your payments are are secure. They need to put those systems in place. We get involved in some of those threat feeds with real cyber programs, and we did it with those. We also got a lot of the regulation where they're requiring, you know, continuous regulatory audit, and we have a number of qualified staff inside the organization that provide that service.

1:03:16 And the proposition there is we are, you know, we are cheaper than than the big four. Our staff go out there with many years of live active practice behind them, and that's what you get. What you don't get is the the the grad student who's just come out and you're being charged 2,000 a day for. So what we're trying what we're being asked for is providing those advisory services for a reasonable fair price, good quality work. With that, we've been asked to test the networks by our client base. We're also being asked to provide resilient solutions to help protect the the business. On the software side, we do get, obviously, a a a demand.

1:04:02 As soon as you give a a the the team a a new feature to sell, they they're off and running, and they they go and sell that, but then they're coming back asking for more features because their clients are looking to consolidate down some of the activity, some of those point solutions, and bring them all together. So what we're seeing from the software side is the opportunity to do some of consolidation, to bring more features together and to address that client need. That's great. Thank you both to Phil and Paul. I think you've answered it and addressed a number of the questions from investors today. Of course, the company will review all questions submitted by investors today. We'll publish those answered on the investor.me company platform. Phil, perhaps I could just touch back to you just for a final quick wrap up before I direct investors to give you some feedback, please.

1:04:50 Certainly. Well, this the this is the first time we have done this retail presentation. We spend a lot of time, obviously, talking with the institutions. We're very pleased. It's something we wanted to do for some time. SHEARWATER is a is a company we're very passionate about. It is a an organization that is is an investment vehicle, and below that is some very good, strong, solid organizations with some very strong solid propositions and and technology. We're very much in that space. The people are the best asset, and I believe that we have some great people. It is a good company. It it's now getting itself into a very strong financial position, and we're now looking to to start delivering on the the shareholder and actually going out there to acquire companies.

1:05:43 We do want to grow this company of of make it into a company of size and magnitude and and purpose, and then that's my remit to make sure that that happens. If if I didn't wanna do that, I would have I retired years ago when we first sold the company, but I'm in it. And I'm very pleased to be here. I've got great team around me. I've got great support, and I really do appreciate the support of our shareholders. And if this if this was enjoyable for you, we will look to do this more frequently and invite you into some of the stories and some of the things that we're doing. We will try and keep you more informed and updated through regulatory news and wherever we possibly can and as the regulations will permit.

1:06:28 Outside of that, do keep coming back to us on our websites and looking at some of the new advancements we're doing. But we announced those at a local level. And by all means, at the tail end of this this presentation, I'll just put this back up on the screen for you. By all means, please do if you have any more questions. We will get around to them all, and we will come back to you. And but if you do have any more, please feel free after this event to to email SHEARWATER@almapr.co.uk. And with that, I'd like to thank you for your time. Phil, thank you very much for wrapping up today. As I say, will review the questions that submitted throughout the presentation today. Could ask investors not to close the session as you will be automatically redirected for the opportunity to provide your feedback to the company.

1:07:13 If you've accessed the meeting via the website, the feedback page will appear in front of you. If you've accessed it via the link in the email, you're asked to be looked in and to provide your feedback. On behalf of SHEARWATER GROUP PLC investor me company I would like to thank you for attending today's presentation. Thank you very much and look forward to speaking to you again soon. Thank you. Thank you.