Staffline Group (LSE:STAF) — Half Year Results

0:01 Good morning, and welcome to the STAFFLINE GROUP PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be spent at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll.

0:28 And I'd now like to hand you over to Albert Ellis, CEO. Good morning to you, sir. Thank you, and good morning, everyone. We're to to be here this morning. We've released our results, as you know, Very resilient set of first half results in what I would call a very challenging market. I don't think that's news to anybody. But most importantly, we've got some tremendous customer wins and extension of our market share that we've announced, and we've also announced a buyback. While the macroeconomic backdrop has been challenging, the group's first half profits have been in line with expectations. We've increased market share in many of our customers. All three divisions have remained profitable. Daniel here with me is going to go through the and the main headlines of the of the RNS.

1:19 So with that, over to you, Daniel. Thank you, Albert. Good morning, everyone. To present to you again today

1:28 for our half one twenty twenty three results. So I'm just gonna take you through the financials and and the headlines as we have them. And as Albert's just mentioned, we believe the results shows resilience in a challenging market as the headline on this slide says, with for us a key factor being the fact that net debt has reduced by £6,200,000. Revenue starting at the top has been broadly flat despite the decline in the market, and our underlying operating profit for H1, although below prior year, is in line with the expectations, the market expectations as well as we're projecting for the full year at an underlying operating profit level as well. All three of our divisions profitable, again, in in this challenging market. And as I said, one of the key the key results of h one is that our cash at the end of June twenty twenty three is better than expected, with cash generation or net debt reduced by £6,200,000.

2:33 That leaves net debt at 3,500,000 at half year. Some of you, recall we had net cash at the end of, December 22. It's that's the seasonal, reality of our our cash and debt, so improvement year on year. And very critically, banking facility headroom of £58,700,000, that's improved by 12,000,000 from £46,700,000 last year. All those factors that I've just outlined have enabled us to launch a share buyback program this morning of £4,000,000, which we believe is an opportune moment to do this. And then, of course, regarding people, we've got very appropriate and focused attraction and retention plans in place to ensure that we're keeping talent in what is a very, very competitive market. So a set of headlines there that I think represent a resilient half of the year. Now moving on to some of the financial result details.

3:33 Gross sales value, which represents everything all our delivery across the group, that's up four and a half percent to 496,400,000, again driven by new wins in our managed service provider division, of Recruitment GB. Revenues, I've already said, broadly flat, with the full half year of our BMW contract, in h one twenty three, compared to h one twenty two when that contract had just started towards the end of the half in q two twenty twenty two, and that has offset some of the reduction in hours in our consumer facing customers, which Albert will talk to a little bit later on. Gross profit has been impacted by softer permanent recruitment that as know many no doubt many of you would have read is in line with the wider recruitment sector, along with some of our higher margin employability contracts just terminating at the end of h one last year. So those haven't flown through this year.

4:35 And underlying operating profit down from 4,000,000 to 2.4. I would emphasize that that 2.4 includes 0.6 of losses attributable to our skills business within People Plus, and as Albert will reference later, we've made the decision to close the in person section of that business for appropriate tight labor market reasons and now, but we'll talk to that a little bit later. So just moving on to where we see activity going forward And and the headline here, we we all you know, we look forward to economic recovery with some reduction in inflation, and and many of us would have already seen lowering of energy costs with the the price cap having been adjusted at the beginning of July.

5:26 So we do believe that STAFFLINE GROUP is excellently positioned for opportunities going forward in the market. To remind you of our strategy, and this has started to manifest and we've announced that this morning, a focus on organic growth, expansion of market share with existing major customers, existing contract expansion, and winning new business. And you would have seen in the RNS this morning that we've been given 14 new distribution centers with GXO, one of the largest, if not the largest logistical player in the world, as well as a renewal of our MNS contract and now sole supply, an increase in that supply. We were joint supplier AM Fresh, one of the largest producers of fresh produce in the country, in The UK, and we've now sole supplier at that customer and that's been announced in the RNS as well.

6:18 Of course in these times, we've got a laser sharp focus on transformative reductions in costs and that's across our entire group. It's really, really laser focused on that. At the same time investing in one of our key strategic pillars in Ireland, specifically in The Republic Of Ireland, but also including Northern Ireland where we do see opportunities as the governments have said, the Windsor agreement means that Northern Ireland is perfectly positioned with open access to the UK Union as well as the European Union. So having over 20% of the market there positions us well there. But as we've said before, we're also looking to expand into Republic Of Ireland, that has, borne some fruits and offset some of the softening in permanent recruitment across the islands of Ireland in h one. And, of course, growing profitability in all three of our divisions and fundamentally generating cash to further strengthen the balance sheet as we have done over the last few years, and and I will illustrate that in a slide in a moment. So and and finally, as I've already alluded to in a previous slide, retaining our talent and management absolutely fundamental to the future delivery of the group.

7:29 Just moving on to half one to half two directions and themes that we see as important that underpin why we're holding underlying operating profit in line with the market expectations. Organic growth, GXO Logistics, again, the item that's already been announced, the 14 new distribution centers with the, prospect of 2,000 new additional workers and 100 drivers, and the sole supplier m Fresh. Those are two pieces of evidence that our our strategy is, starting to to bear fruit. And, of course, it's been a a a challenging h one, but with the the peak naturally occurring in h two in STAFFLINE GROUP, especially in our recruitment GB division, we see those two new pieces of, additional work with current clients, significant additional work as very important not only for h two of this year, but, of course, beyond into 2024 and afterwards.

8:30 So we as I've just mentioned, the traditional seasonal peak uplift in h two, and we're hoping that benefits we've already seen a little bit of benefit by the the various World Cup events going on in in in the remainder of this year. And as well as that in People Plus, the exit from the in person skills business, will contribute towards a restructuring plan that will deliver £1,000,000 worth of of cost upside. Some of that's starting to come through in the second half of this year, and as I've already mentioned, the hope that inflation continues to decline as well as the energy costs which many of us have hopefully already seen in in a reduction in in our costs coming through from July. So important underpins to the movement from our results in h one through to the full year by delivery in h two.

9:22 Just moving on, to a few further more detailed financials eventually onto the balance sheet. Net finance costs, although up, I would remind you that we are protected by our interest rate cap, and and therefore that £600,000 increase in interest costs is being kept protected at that level and into the the extent it to q four in 2024 when that's how far our interest rate cap goes through to, and obviously, we'll be working to to manage those numbers as we go through the rest of this year. The loss after tax of 3.2, as I've mentioned, includes the provision for the exit from the skills business. And on a post tax basis, that includes a one off provision of £1,700,000, pretax 2.3, post tax 1.7 within that 3.2. So the the movement year over year isn't as significant as it seems based on that one off movement. And finally, very importantly, net debt from the thirtieth of June last year 2022 to this year 2023 has improved by 6,200,000 on a pre IFRS 16 basis, so down from 9.7 to 3.5.

10:32 And and three very important KPIs from a financial perspective, financial covenant perspective. I've already mentioned that our our banking facility headroom has increased by 12,000,000 to 58,700,000, but our leverage financial covenants with our lenders at 0.5 at the half year, and that's versus a covenant maximum of times four, so really a significant amount of headroom there. And in addition to that, interest rate cover at 4.7 times versus a covenant max of 2.25. So or covenant minimum shall I say of 2.25. So really great position to be in, and just on this next slide here, you'll see how we delivered the net debt improvement of 6.2, very much underpinned by strong underlying EBITDA and this is over the last twelve months just to emphasize that. This is not six months of H1 but it's the June 30 to June 30 movements of twelve months 13.8 of EBITDA. And also just to point out here a really strong focus on just what's really adding value from a capital expenditure perspective, tight control on interest paid even in an environment where interest rates have increased from 1.25 at the 06/30/2022 to now 5%.

11:50 We've been able to keep a lid on our interest costs as a result of the interest rate cap, and and then tight control on on working capital allowing us to deliver that £6,200,000 of improvement in net debt. And finally from me, just the last slide here, a bit of background to the launch of our share buyback program that was announced this morning of £4,000,000. We believe there's been three drivers or there are three drivers as to why we're launching that this morning. You'll see here, firstly, that we've generated £32,000,000 of cash over the last three years, 40,000,000 of EBITDA within that, 18,000,018 million of working capital efficiency since Albert and I joined, and that's obviously offset by 11,000,000 of CapEx and 15,000,000 of net finance cost, but that's delivering a net £32,000,000 worth of cash generated over three years. Secondly, two years already of, consistent profit generation, with underlying operating profit in line with market expectations, which would therefore deliver a third year, of that in 2023.

13:00 And finally, as I've mentioned already, 58,700,000 worth of banking facility headroom improved by 12,000,000 versus last year. We believe those three pillars underpin our share buyback program and we firmly believe in that. So just to conclude before I hand over to Albert for the operational review, we believe resilient set of finances. It's a tough market out there, but we've got the plans in place for a good H2. Of course, that is subject to all the various consumer trends I've spoken about inflation and energy costs continuing to decline in appropriate levels, but we're absolutely laser focused on that as well as ensuring that the cost base of the business is absolutely efficient and delivering for shareholders. So with that, I will hand back to Abbott.

13:54 Thank you, Daniel, and really good bridge there on the cash flows over the last twelve months and also the detail since the beginning of COVID. Moving on to the operational review now. I'm not going to repeat the points that Daniel has made, but I will pick out just a few elements of of the the results which are relevant and important to know. I mean, ours are down 12% in core food retail. I mean, this is a market that has to survive because people have to eat, people have to live. And therefore, it just shows you the pressure on the consumer, particularly in the first quarter of this year in the middle of winter with all of the inflationary pressures bearing down. So ours have been down.

14:43 That's a productivity measure that affects our revenues and our profits, mainly GB, the largest business. But, of course, because of our win at BMW, we were able to Now looking at Ireland, Ireland is really more white collar than blue collar. The proportion of white collar has been rising in line with our strategy, and so therefore, you'd expect permanent recruitment to be affected as it has right across the sector. However, that 10% across the group is really quite respectable when you look at the wider sector, but in Ireland, it's it's a little bit more in Northern Ireland where the public sector has been really in in in in a sort of stagnated situation with all of the politics and the problems of of of the storm on assembly.

15:31 We've seen, however, that the Republic The Republic Of Ireland has really delivered some real growth and some stability in the permanent side and shows that it's a very attractive market. So Ireland has been mainly affected by a reduction in permanent recruitment mainly in the North, but also we've been investing in Ireland and in The Republic to make sure that we have capacity for when the recovery comes. So that's really important to understand why the Irish results are what they are. This is a strategic decision by us taken to keep our infrastructure and our capability for when the the the recovery comes. And then finally on People Plus, Daniel's picked up on the on the on the skills side. Look. The market is tight for labor at the moment. It's easing, yes, but it is tight.

16:19 And therefore, people don't wanna be they don't present themselves for training. The volumes are down. So skills, and I'll go into that in more detail just in a moment or two, is not viable in this scenario. But we've had line with the comments that we've made on our organic expansion, we've actually extended the prison education contract or the Ministry of Justice has extended that contract with us in in a number of prisons.

16:45 We've got good market share there, and we've moved from cost plus, which was the COVID model, to a full commercial contract. So whilst it has its downsides and its penalties potentials, it also has the potential for us to improve margins. So we see that as a positive. So all in all, this is a set of resilient results in a very challenging market. Yes. Profits are down, but the there there are operational strategic reasons for that.

17:13 Just wanted to go through the three names that I think are most important in terms of what it says about what our business, particularly in BlueColly, is doing. First of all, GXO Logistics is a $9,000,000,000 US listed global logistics firm. It's one of the largest pure play in the world, and we have been granted an additional 14 sites. They are growing in The UK very, very strongly through acquisition and by and through organic growth. And as their lead partner,

17:44 we can grow with them, and this shows the power of of excellence in delivery and strengthened customer relationships. We we will be possibly one of their most important suppliers going forward, and we look forward to those revenues coming in in the next six months. Of course, it's not doesn't all come in at once. We we we have started the process of moving of moving temps across onto our payroll, but that will continue right up until October.

18:12 Looking at Aim Fresh, this is The UK one of The UK's largest fruit and fresh flowers business supplying into Marks and Spencer's and Tesco's in a really, really large business based just outside Peterborough and based on the solutions and the partnership approach that we've had and our, you know, one to one strategy sessions that we've been able to have with the management, we've worked out a sole supplier ship, which will benefit both parties. It's a win win.

18:42 Shows the confidence they have in us meeting their labor requirements and also shows our commitment to that group in terms of delivery. And then, you know, last but not least, Tesco is a is is a wonderful client of ours. Many, many years. We've got extremely good KPIs and stats to support our fulfillment there. Tesco is a demanding but fair customer, and they've given us another three year contract extension,

19:07 which was hotly contested. Certainly, nothing was taken for granted, and I'm delighted in the management teams, you know, in in what they've achieved there with Tesco. We also have been offered additional market share. This is unlikely to affect this year, but we look forward to making those gains in the first quarter or the early part of twenty twenty four. Now I promised you some more detail on the skills business, and, essentially, we're looking at an annualized cost saving of over 1,000,000 just over £1,000,000. We've closed our skills operation from the July 31. That is from yesterday, it it officially is closed. And we're pivoting to what is a very compelling service, which is digital and remote learning.

19:55 Learners are not interested any longer in face to face. It's very difficult to generate volumes. They're attracted by jobs. The cost of living crisis has driven lower volumes in in in in person classroom based traditional training. And, of course, digital is the only way

20:13 forward. It's very flexible as you'd expect, and therefore and and its cost and and the cost of digital is slightly different. So looking at the background and rationale, you you might remember the European social fund see social fund funding ceased in March, and the successor program, which has been announced, really, don't have too many details, It's not come on stream yet. It's highly fragmented. It doesn't represent the scale and the opportunity that the European Social Fund represented. So we've looked at the way that it's being devolved and the fragmentation of these these awards, and, really, there's no economies of scale. Participant volumes are much lower than expected. And then on top of that, because it's classroom based, skills training, you know, requires infrastructure like offices and tutors and inflation in energy costs to to heat and light and and light officers and also the the the the cost of attracting tutors is really much higher than the general index the the general level of inflation.

21:16 Unfortunately, none of the commissioners have recognized inflation linked indexation in these contracts, so it's simply not viable. We will push on and focus on our digital delivery, which we have two very strong offerings, Way Out TV and our prison services, and, of course, Learning Plus, which is an online digital delivery system. So our strategy is really a focused approach to an annuity business with diverse revenues, but focused on employability and prison education.

21:49 I'd like to just touch on on on some of the the stats coming out of the market. You know, you you've heard about the you've you've read the headlines, and you've heard about the doom and gloom in the recruitment market. No doubt. However, there's still a million vacancies,

22:07 you know, out there, and that is well above pre pandemic levels. It's the problem is, as Michael Page and also Robert Walters have pointed out, is that candidate confidence has has been much more subdued. Candidates are concerned about moving, whereas before in the in the COVID in in in the dynamics that we saw in COVID, in the job dynamics, Candidates were moving and had confidence, and there was the so called great resignation going on. That has somewhat cooled, and candidates are, you know, accepting offers to stay or counter offers, and and there's a lot of friction in the system. So what you get is a sort of extended period of an appointment of of a hire, which then obviously affects productivity.

22:52 But if you look at payroll figures, they're above the 30,000,000, well above pre pandemic levels, and this is good because, you know, the pie is larger, gets larger every month and every quarter. Productivity, however, remains relatively flat. And if you actually take the productivity, the number of hours, and you divide it out through the payroll, you'll see that on average, people are working less hours at the moment, and so that sort of supports our results. But I will say the labor market is easing. My conclusion is, you know, let's have a Goldilocks labor market where we do have demand. There are vacancies. There are million

23:29 vacancies, but actually the supply is getting easier, and recruiters need candidates to to to generate revenue.

23:39 We we've picked out some points on the competitive landscape just to sort of remind you why we have announced such a a good set of organic wins. And firstly, competitors in our sector, particularly in in blue collar, largely weak. They don't have the sufficient scale and reach, or they have major compliance issues.

24:04 The quality of service and fulfillment we we constantly hear is not not as good. But what what we've heard increasingly in the last six to twelve months is that there are a number of players in the private sector who are reporting cash shortages, who are asking customers for payroll, advances on payroll. Well, that's not sending the right message. And, of course, they will also be affected by higher borrowing costs. So this is the competitive landscape. It's a landscape that STAFFLINE can take advantage of. There's a flight to quality, no doubt.

24:38 Customers are streamlining their labor chain. We've talked about why Datum's important to us. Datum is our managed service brand, and we we talked last year about Sainsbury's, for example. Sainsbury's Argos taking on Datum to help them with transparency and high levels of compliance audits in their labor supply chains. Essentially, customers want people. They want labor delivered on time and excellence in delivery with high performance stats. But, ultimately, they're also focusing on pricing, on wage growth, and on inflation, and we're helping them as their strategic partner to to to to solve these challenges. So the competitive landscape, I would say, is much more beneficial for large companies like STAFFLINE. You've got strong balance sheets and have got a transparent operating model.

25:29 And now finally, just onto the outlook. You know, I don't wanna repeat the background. I mean, it's quite clear that these headwinds will be with us for the rest of '23. However, we've got some real stepping stones in this challenging market. Mainly, it's the organic growth, none of which has really played out in terms of operating profit in the first six months yet. We've had costs in in in implementation incurred in the first six months, so we will see the the the value coming in the second half. We've also got a cost, as as Daniel said, a cost reduction program of which we'll see the bulk of it in people plus the skills division. That will come through in the second half as the business is closed and separated out.

26:16 And, therefore, we we will see, as Daniel said, upwards of 600,000 or 500,000 of of of cost savings just in the first half and more to come in the second second half, and we will set out that in our full year. We're not ignoring costs across the rest of the business, whether it's Ireland and and or or The Mainland. There there's a strong focus on costs and ongoing focus on operational streamlining to improve performance. We're a performance business.

26:47 The worst is behind us, I believe, in Ireland in terms of their perm fees. The first three months of this year was, you know, was typical in terms of a bad market, customers sitting on their hands, you know, roles being put on hold. But we are starting to see in Ireland, particularly in the North, a slight thawing of that situation. I think it's cyclical, and it's temporary. I think we'll see a flattening of that towards the second half of the year, but it I I believe the worst is behind us. So with those sort of stepping stones, the board is is confident that our full year results should be in line with market expectations.

27:25 So with that, thank you for listening. As always, Daniel and I are delighted to be able to answer any questions. We've got a couple that have preceded the set this morning, and we might go straight into those, Daniel, if if if you like.

27:41 Yeah. Sure. So a couple of questions that we've received pre the presentation this morning. First question is how much debt is left to pay and why has share price gone down? So a two part question. So in terms of debt left to pay, so as you saw we have pre IFRS 16 debt of £3,500,000 but you'll recall at year end we actually had net cash of £5,000,000 So we've oscillated during those periods between small amounts of net cash and small amounts of net debt. Remember this our net debt there is driven by receivables facility, and so it's very much a working capital facility of debt. I expect us to be ahead of where we were last year from a net debt perspective at the end of the year. So very small amounts of net debt and that moves on a daily basis because it's a moving receivables facility. Second part of the question, share price going down.

28:41 You'll see there have been there have been other sector results published this morning, and the wider sector obviously is is found has had a very challenging time over the last six, twelve, eighteen months. So our share price has gone down in line with the rest of the sector, and I think that's the general direction for that. If I can just add to the question on debt, I I I can see where that's coming from. We've announced a share buyback, and I just wanted, you know, to ensure that the message landed that we're we're buying these shares out of trading cash flow, not out of debt. We have a working capital facility, which which oscillates, as Daniel said, for positive, negative over the over the over the year. Season is is is a big driver of that, but it's simply working capital facility.

29:30 We are using our trading cash flows when determining the amount of the share buyback, the scale and the duration, we're using our expected trading cash flows to use for that. So I just wanted to make sure that that was well understood. Thank you, Albert. Second question was would you be paying dividends soon? We've just launched share buyback this morning. We don't see paying dividends at the moment for the foreseeable future and that's the current position on that. Third question, Albert. Yes. The BMW contract is a very complicated contract. It's, you know, they have the it's a it's a large workforce. All manufacturing, particularly in automotive, is highly complex, And our team have done a fantastic job along with the HR team at BMW to effect a successful transition last year and also

30:25 to iron out the inevitable inevitable challenges and unexpected issues that that one faces in any transition of scale, but we're we're really pleased with where we've got to. We I think we and the BMW team will agree that that process has now settled in and bedded in. And and, you know, the only sort of the only sort of regret everybody has is that hours have been affected even in the automotive industry, and therefore, you know, we we await, you know, the upturn that that that, you know, should be coming from the current downturn that we're seeing, which will boost hours, and that that's really important for everybody, for staff and for both our customer and ourselves.

31:12 I have the next question for you as well. So the question is, can you expand on the opportunity you see in The Republic Of Ireland, which is of strategic importance? What investment is required here, and why would you not consider expanding internationally? Well, I've been involved in all of my recruitment life with international businesses, and, you know, they have their benefits. And as an investor, that's the beauty of a market is you can take your choice. What I believe in in in the situation that we're in now, we have tremendous opportunity to leverage our scale in The UK and The Republic Of Ireland. And so therefore, that is of my view that in the short to medium term, STAFFLINE investors are best served with the additional incremental profit growth that comes from leveraging our immediate strengths, which is our market scale and reach and our geographic coverage.

32:06 Why we like The Republic Of Ireland is it has a slightly it's on a slightly different lane in terms of economic growth. It's, you know, posting better growth figures than The UK. It still remains within the Euro Zone and therefore benefits in in in some respects from what's happening in the core of the markets in the in the Euro Zone. It's a great market for recruitment. It's a highly attractive market. It's higher margin, to be frank, and it's less competitive. So, you know, we we're opening offices there. We're hiring consultants. We're winning customers, and much of many of the customers that we mentioned this morning have Republic Of Ireland operations, and we're helping and assisting them in that area as well. So the the The UK and Ireland is of of great importance to us, our number one priority. We've got plenty of market share to go for. Of course, we we shouldn't forget Scotland where we're the number one, and the drinks industry, which is so important to Scotland and which has been a source of resilient trading for us too. So, you know, this is our market. This is our geographic strategic decision. It's just staying within our lane here in The UK and Republic Of Ireland.

33:14 We would we would prioritize an expansion of organic growth with existing and new customers and indeed expansion of our services, managed services, our engineering, and and and automotive manufacturing, you know, white collar business called Omega, and, of course, our other sort of white collar white collar recruiters across the island the island divided. So, yeah, that's the that's the short answer to to the question. And as I said, we've got plenty to go for. In The Republic Of Ireland, we've got very little market share. Thank you, Albert. Next question is the new contract extension is very welcome, but what's the underlying gross margin trend up or down relative to the average recruitment GP percentage?

33:59 So two parts to my answer to that question. Firstly, we just need to remind ourselves, and I think I've mentioned it a few times, that gross margin percentage is affected by pay increases, so national living wage increases and therefore any other pay increases because the salaries of our temporary workers, the pay of our temporary workers goes through the revenue line. Our fees go through the gross profit line and therefore because we charge pounds per hour, etcetera, and not necessarily percentage of base salary, then when there has been an extremely high increase in national living wage, which therefore drives wages generally, and we have seen in the news over the last six months that wage increases have been at least 7.3, 7.5%.

34:51 In fact, probably in our world, 9%. I think national living wage was up 9% in April 23 versus April 22. That naturally depresses the GP percentage margin a little bit. But my second answer to the question is in terms of these new, these new contract wins is the gross profit as a quantum, and by that, I mean, our pound signs, that will drive forward, and and that is what generates the cash. So you've just gotta differentiate sometimes between the gross margin percentage and the actual quantum of gross profit. Is driven by that mathematical calculation when pay rates are exceptionally high as we know they have been in the last year. I would also add the gross margin percentage is affected where we have strong permanent recruitment.

35:41 So the last year, we've seen growth in our gross margin percentage because permanent recruitment has grown. Obviously, I've mentioned like other recruiters, we've seen a softening in h one. That has also slightly lowered the gross margin percentage. So, hopefully, that helps with, the answer to that question. Next question is are there any other blue collar areas you are targeting to expand the recruitment GB business? Yes. I mean, we we announced that we were pushing into permanent recruitment. We've had lots of interest from many of our customers, Amazon being one of them. The the business did a great job of fulfillment on the Amazon sites just before Christmas in the last peak, and I'm sure that we'll be doing that for them again in the next six months.

36:28 So permanent recruitment is important in Blue Collar, and so that's important. In terms of our engineering, it's it's actually been very interesting to see that automotive and sorry, aerospace, which we've actually mentioned in the statement, has been gearing up for the post pandemic world, and there's a there's a backlog of of work and projects in that sector. Defense is very firm. I mean, Omega hasn't seen any softening of demand of engineers and and the sort of white collar white collar recruitment that they do. They're they're moving into some some some IT, And so, you know, we're looking at IT as a sort as as a sort of adjacent market.

37:17 So, you know, we feel that the world is our oyster in that sense. We've got a strong brand. We've got tremendous market capability, reach, and geographic spread. So, you know, we feel that the services can be expanded. In terms of other areas, we are actually putting quite a big effort into aviation, which is actually based around the airports. But it is slow. The processes have been challenging, you know, tight labor market, all all of the things that you've heard, DBS checks, etcetera. There's lots of friction in the system. And so, you know, we're pushing forward with that, but we haven't seen the return that we were hoping for. But I'm sure that that that is only a matter of time. Overall, you know, one of our one of our strategies is to go into medical and health care, and we're trialing this in in Ireland in the in the North and this and The Republic in the second half of this year. We're we we're ensuring that we're on the freight the requisite frameworks, and we're preparing the way for initially health care professionals, including nurses and also consultants.

38:22 And so we're we're we're looking forward to that. So we are expanding all the time both our services and also our markets. Thank you, Albert. Next question is what is the LTIP requirement for new shares in the next six to twelve months? I think I wouldn't add too much more detail on that apart from seeing, you know, what we've announced previously in previous LTIP schemes will be replicated, we believe, you know, in a real democratization amongst our management and incentivizing our top senior management who have really delivered over the last three years. That £32,000,000 worth of cash generation has been, you know, significantly delivered by them, and therefore the principles and the structures already exhibited in previous LTIP schemes, two of which announced over the last two years, will continue.

39:13 I think that's the best answer to that. Next question, are there M and A opportunities to widen your customer base from within your UK peer group? Alex, good question. We get asked regularly and quite right too. The you know, as as you've seen, we've our capital allocation part is very disciplined. Our chairman is the is our largest shareholder, and so we have a really, really good owner owner culture on the board, and capital allocation is one of the disciplines that the board as a culture has adopted very much so. And so we've made the decision in favor of buybacks at this time. We feel that customers are are relatively relatively not easy, but in terms of moving customers from one supply to another is relatively straightforward at the moment. Customers are open to new opportunities, to new strategic partnerships, and they want solutions.

40:16 And so our you know, we feel that organic growth is the best way forward for our shareholders, you know, to be frank. Organic growth is the most valuable in terms of shareholder value. That's, you know, that's a science. That's science and that's fact. That's been evident. So but that that doesn't mean that if we don't come across a real opportunity where and it's all based on cost synergies where, you know, revenues and customers can be best served through a larger organization and there's some significant cost synergies and the numbers work. You know? That doesn't mean to say we're not we're going to ignore that. We'll we'll do our due diligence. But it'll all be within the framework tight framework of a strong balance sheet, cash strong trading cash flows, and a capital allocation policy that's highly disciplined. Thank you, Albert. Next question. Why is it that net debt went down by 6.2, but finance costs went up by 600,000?

41:06 Hopefully, a relatively simple answer to this question. I've mentioned before that we have our interest rate cap, but that protects approximately against two thirds of our debt exposure against interest rates. So with interest rates having gone up from 1.25 to 5%, we still are exposed to a little bit, of of that act that activity. So even though net debt went down, under underlying reality of net debt was exposed to higher interest rates, and therefore that, did drive a bit of an increase in finance costs. Next question on the new on the three new contract wins GXO and Fresh and M and S, when do they start to generate revenues? Well, GXO has already, started to be introduced in the last six weeks to eight weeks, albeit it's on a growing, projection into q three and q four.

42:02 M and S is is a renewal, that's that's a a a continuation. And AM Fresh, the the salt supply is start is starting, I would have thought, in h two h two twenty twenty three. So but these should very much, especially GXO, Air and Fresh, be ready to deliver for what many of you will know is our core peak trading season from September to December of this year. Next question. Do you expect to open elsewhere in the EU? Don't think Short short answer is no, except for Ireland, of course. Republic Of Ireland is in the EU, so we'll continue our investment there. Yeah. And even Northern Ireland, as Rishi Sunak has said, is perfectly positioned in being open to The UK and EU unions.

42:48 Next, it looks like potentially final question. If the wage cost has increased by 8% to 9%, is that the sort of revenue growth you need to maintain our market share? I don't think the revenue growth in terms of market share is not sorry, in terms of the wage increases is not necessarily either an indication or of the driver of market share. I think the fact that we've spoken about a circa 12% reduction in in hours and it is is a key factor in our sector and Albert's comments on flight to quality, compliance, regulation, scale, delivery, I I think those are gonna be the key drivers behind market share. I think the best illustration of growth in market share is that a company, either a world leader or the world's leading logistics company GXO has transferred to us from another supplier 14 distribution centers.

43:50 I don't think there's any better sign of market share growth than that. And with that, I think that's the last question and therefore the last answer and we will end the presentation there. Thank you for listening to us. Albert, Daniel, thank you very much. I think you actually managed to address every single question from investors and of course the company will review all questions submitted today and we'll publish those responses on the investor meet company platform. But just before redirecting investors, provide you with their feedback, which is particularly important to yourselves. Albert, could I just ask you for a few closing comments? Yes. Just remember, you know, we've been through this before. Daniel and I have got over thirty years of experience in the sector. You know, investing in recruitment is about timing, and the recruitment sector is a cyclical sector.

44:36 And, you know, the the time to to to look at recruitment in a very interesting way is when the market is actually down and when the cyclical and the economics are are are not in are adverse or not in favor. And that's when good recruitment companies can keep their staff, attract new staff, you know, look at the overheads, look at the costs, transform the business, and actually then position themselves extremely well for the recovery. And when the recovery comes, there are there are fewer players. The the players that are left have have been, you know, in some ways gone gone through a tough time. So if you've actually prospered through that time, you can be well ahead of your competition in terms of gaining market share. So I would only just say that, you know, good recruits recruitment business always prosper and improve during downturns so that when the recovery comes, they're in excellent shape to to to benefit from it.

45:33 Albert, Daniel, thanks once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, so I'm sure it'll be greatly valued by the company. On behalf of the management team, STAFFLINE GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.