Vianet Group (LSE:VNET) — Results for the six months ended 30 September 2022

0:01 Good morning, and welcome to the VIANET GROUP PLC Investor Presentation for the six month results ended 09/30/2022. That is a recorded presentation. Investors will be in listen only mode. Questions are encouraged. You can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Just click q and a, scroll to the bottom, type your question, and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted and published responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to James Dixon, Executive Chairman and CEO, Mark

0:32 Foster, CFO. Good morning. Good morning. Thank you for all for joining us. We've got a good set of results that really underline the resilience in the business and demonstrate the progress we made to achieving our growth ambitions. Mindful that some of our audience may be new to VIANET, I wanted to go through a quick overview view of the business. Basically, install hardware and do real time data capture of operational data. And then we create dashboards, alerts, and insights that allow our customers to transform their business performance. The hardware, we either sell or rent to customers, and we have a SaaS model.

1:22 My software as a service model really that's for service packs, licenses, and data services that we enter into three to five year contracts with our customers, and those are for weekly or monthly payments.

1:41 Our our smart machines division now really is comprehensive vending management solutions and contactless payments for the vending industry and other verticals. And SmartDraft is the product of our smart machines division, which real is really a comprehensive beverage and bar management solution.

2:07 Our customer base are pretty significant blue chip customers that have been long term, you customers of VIANET. If we turn over and look at the reasons why why would you invest in VIANET. We've got leading products and positions in significant markets and growth levers that really work for us. If we look at the vending industry, we got fifty two fifty two thousand connected devices in 34,000 machines. And in The UK, there's a a machine park of about 300,000 machines, In Europe, 3,000,000 and rest of the and globally, there's about 15,000,000 machines.

2:56 And amongst those 15,000,000 machines, the the very the very large proportion of those, in fact, the vast majority are not intelligent or connected machines. So that's a fantastic opportunity for us to go at. And within that group, the intelligent machines, their compound annual growth rate is in the region of 5%, which would take it to be an $11,000,000,000 market within five years. The other factor that works in our favor is the growth of coffee within the vending sector and that we lead in coffee. Our other market is the smart machines core Smart Zones core market, which is the pub sector. And in The UK, there's been the region of 45,000 pubs and bars.

3:51 It's split about 11,000 each for managed and leased and tenanted, and another 23,000 for independents. Our business is predominantly within the leased and tenanted, although we do have a number of managed outlets in France and The USA and in The UK. In terms of the, the growth drivers, the levers that are really, you know, working in our favor, contactless payment growth and the introduction of QR code payment that works in our favor because we got, you know, market leading award winning contactless payment solutions. And the whole unattended retail sector, you being driven by, you know, people costs and the need for convenience, you know, twenty four hour serves and also the technology. There's much more sophisticated technology in vending nowadays than there's ever been that allows, you know, much more, I guess, much more sophisticated products to be vended to a much higher quality.

4:57 And that again works in our favor. The the whole remote asset management piece, a light was shown on that through COVID when, you know, when, you know, people when engineers, people could not access their remote assets, And that's driven a lot of interest in, you know, the products that we have because that's our, I guess, our sweet spot in terms of the technologies that we have. And the whole sort of demand for data and the, you know, I guess the digital integration and the hospitality sector in particular where they've started to embrace the digital age is working in our favor as well.

5:44 And if we then look at the reasons to invest, we have very strong earnings visibility, quality of recurring income with high margins and strong cash generation. So taking that all into account, look at the markets that we operate in, we've got we tick the boxes on the markets, we tick the boxes on the products that we take to market and we've got a strong customer base that we can grow with.

6:19 And importantly, we've got a great team. They're motivated. Culturally, we're in a sound place instinctively. Our people do the right thing. They treat others the way they're going to be treated themselves. And, you know, it's a really strong team. Next, turning over the page and look at the progress that we've made. I guess during the pandemic, through the two years or so of the pandemic, continue to invest in our product, our infrastructure, our people and our customers creating a bank of goodwill and the revenues that we're starting to the revenue recovery now sort of demonstrates that we're going to return a dividend on the investment we've made through COVID.

7:09 Hospitality is back in full billing and importantly, there's much more desire at a senior level to have the data visibility that we can provide on pubs and bars in the SmartZones area. And within smart machines, strong pipeline of contracts, 44 new contracts in the period that fills our pipeline, which is great news for the future. I think that whole sort of data demand, the demand for data and contactless payment, that's a sweet spot for us because that impacts our core markets and gives us access to new verticals. We're demonstrating that the key elements are in place to really provide the growth platform that we need and want to take the business forward.

8:03 I don't want to steal Mark's thunder, but we'll look at some financial highlights. Now I'm really encouraged by the good good performance. I I think, you know, since COVID, we moved from our focus on cash is king and continuing to invest to a real focus on growing the top line and sustaining that recurring income growth. That's so important to us. Now looking at we tick the box in the revenue growth, tick the box in the recurring revenue growth, which is now 86% of turnover and continues to grow as we feed the pipeline by installing more hardware in our in the machine parks.

8:54 Gross margins, really pleased with the gross margin, particularly given the backdrop of much higher component prices, temporary increases due to the global supply chain pressures and that impacted smart machines margins. But overall, we came in with a gross margins being leveled. So really pleased with that. So ticked a number of boxes there and strong operational cash generation. And the I think the other factoring, I guess, during the period, it was our last payment of GBP 178,000 for the VNET acquisition write down.

9:39 Otherwise, we'd have been the loss per share would have been positive. Importantly, we've got a line of sight to growth and cash generation that gives the board confidence that we can return to paying a small dividend next summer in July 2023. Return over onto smart machines. I'm not gonna dwell on this too long, but what I did want to do was sort of give you a feel for our vending market and what we do for our customers and why they continue to invest in our services.

10:25 Now what you've got to look at is a vending machine is in effect a small supermarket, it's just remote. Yeah. If you look around the boxes there, now the machine contactless payment, it's that financial integration. We help analyze the revenue share for customers and do all the reconciliation, revenue share, rebates, you name it, we do it. And then you look at a supermarket, all supermarkets have planograms for all their aisles. We have planograms that we help our customers create for the vending machines. That's the products, the facings, and also the mix. And then the the whole insights and analytics piece, you know, what sells when and for how much and brand owners, you know, want to know want to know that want their hands on that information.

11:21 I think importantly, down the left hand side there, if you look at efficient stock management, well, that's really about ensuring availability in the vending machines because you don't want to go into a supermarket and see empty shelves. And likewise, you don't want see an empty rack on the in a column on a vending machine. And then the whole sort of, you know, optimizing the route planning, that's about making sure it's the right stock, not overloading vans, the service, the maintenance, helps them significantly reduce costs and also reduces the carbon footprint. And it really drives those compelling returns that you see in the middle box there. Now we got a major customer who had an in excess of 20% operational savings and that's before you start to look at the sales uplift. So fantastic opportunity for our customers to continue to drive their businesses forward.

12:19 And what we find is that there's a real differential between the customers who are out there and driving the installation of telemetry and contactless payment have been real winners and when they embrace the technology. So how does that translate into smart machines performance?

12:42 I guess investment that we made in the product, the people and customers during the pandemic is really paying dividends. Now that four to four new contracts on three to five year terms really feeds the pipeline. And for us, it's really about a case of making sure that the pipeline flows quickly. And we're continuing to do work on that. And then 6300 new device connections in the period give us a 24% year on year growth in the state to over 52,000 connected devices and that's in 34,000 machines. Strong profit improvement and really got achieved despite the fact that we've invested heavily in sales force and commercial and continue to invest to drive that growth. The profits were ahead of our pre pandemic levels, which was really encouraging.

13:46 And again, strong recurring revenues that only continue to grow. The on the right there, SmartVend, our vending management platform was launched last month. Now it's feature rich. It's great news for existing customers who are migrating to as we speak. It's probably twelve month program program to migrate everyone across to the smart vent program. But now it gives them real incentive to, you know, have even more installations of telemetry and contactless payment to drive more data into the into the management platform. And that feature rich rich platform is streets ahead of anything else that's available in the marketplace and that's going to attract new customers to to VIANET.

14:36 And that that that that whole growth in our connected devices and the data lake that we're creating allows us to then look at developing our our market insights revenue as well. So, you know, we know how the market leading, you know, vending management platform to go along with the award winning contactless payment solutions and website. Now turn over to Zones now. Again, to give you a flavor and some color to the best benefits that really allow our customers to have a compelling return on investment.

15:15 I guess the way I look at it is that, you know, by by measuring and acting on, you know, some of these key areas, it allows customers to reduce waste, allows them to improve margins. That means that they don't then cut corners and they can clean the lines at the regular intervals that they're supposed to, which again in turn reduces the waste, helps sales improve and again, you know, creates a beneficial beneficial circle rather than the vicious circle. And if if you just look at the post post shrinkage piece, you know, we got some some big clients in the state where that purely the the installation of our equipment and integrating integrated to the the the EPOS.

16:06 Now that that variance analysis just as simply the act of putting our kit in saw a 7% increase in sales purely from staff start to ring in sales rather than pop at the money. So all in all, we provide a really compelling return for customers. Now if we look at the performance over the past six months, I guess, our whole SmartZones business has been very resilient through COVID other than when we negotiated discounts with our customers during the initial lockdowns.

16:53 But we've had a full re opt in back to 100% billing in over 9,900 sites,

17:02 an 18% increase in the number of new system sales. And that again, those four new contracts and three contract renewals, that really underpins the solid recurring income that we have in the SmartZones division. And we believe that we can actually maintain that, which gives us a baseline that will sustain the Smart Zones contribution over coming years. And with the launch of Smart Draft that will allow us to access adjacent markets that will allow us to get the Smart Zones business into growth. Just in the period, turnover was up 12% at CHF4.18 million and operating profit was up 38%, which was a good jump.

17:50 But importantly, it's that recurring revenue. That's what we're wanting to drive and continue to grow. SmartDraft, during COVID we did a lot of work in reengineering both from a hardware perspective, but also in terms of the software to actually reduce the cost of our installations, less of a barrier to customers want to invest and give them a feature rich platform with features that they asked us to develop for them. Those features being left in K, so they don't have to go down into the cellar and shake a keg to figure guess how much is it, we can tell them how much is left in the keg. The whole no till variance analysis, making sure that every pour is being rung through the till and that the whole feeding into stock systems as well. And that's what we've been developing as well over the last sort of twelve, eighteen months is our ability to actually, I guess prompt orders.

18:57 So, you know, our new our new sort of smart draft launch, it's been launched in The UK in January. That's going to give a site manager everything he needs in seconds, you know, every day, which good news and should allow us to start to drive some further growth in adjacent markets. I'll hand you over to Mark now. Good morning, everyone. I'll just do some key headlines on the main P and L. Turnover is up 13% year on year and is around about 85% of the pre pandemic level of performance. Recurring revenue remains strong at 86% and over £6,000,000 in terms of actual revenue. Gross margin was up 14%, around about £570,000 with a consistent margin percentage, as Jim referred to earlier on.

19:47 Our EBITDA grew by 38% year on year, Now our operating profit was up 48% to $1,210,000 which was a good step forward from last

19:56 year. And I'll come on to that to talk about in the divisional performance. The divisional point of view, SmartZones turnover was up $460 year on year, 12%. As Jim said, we're back to full billing in that state. The contracted recurring revenue remained strong at over 90%, around about $3,900,000 The gross margins were very resilient and our operating profit was up $05,000,000 38% year on year, the full billing obviously helping that and that's around about 80% of the pre pandemic level. As Jim referred to, there was four new contracts, three re signs, a 179 new systems, and the estate is about 9,900 sites today. In smart machines, we had 44 new contracts on three to five year terms, over 6,300 new connected devices compared to 5,990 the year before, which is just over 5% year on year growth.

20:55 And the estate is now over 52,000 connected devices compared to around about 42,000 last year, 24% year on year growth. All of that combines to mean that turnover, recurring revenue and operating profit were all were all up ahead year on year and importantly ahead of the pre pandemic period. So these are the best set of smart machines results we've seen to date. Turnover was up three eighty one grand for 14% year on year and $300 11% on the pre pandemic period. Operating profit was up 14% year on year

21:30 and ahead of the pre pandemic period as was recurring revenue. The margins there you can see took a little bit of a dive, but that was purely due to the stock premiums that Jim referred to earlier on over the last six, twelve months. But those levels of premiums we're not seeing today, so that will start to improve as we go through H2 and into the new financial year. From a cash perspective, we've seen a return to cash conversion that we used to enjoy pre pandemic. The EBITDA conversion to cash was over 104%. The operating profit conversion to cash was 114%. So overall, we have good cash generation pre working capital akin to the normal pre pandemic performance we used to enjoy, and that's where we should be.

22:16 From a working capital point of view, that was largely impacted by the investment in stock that we made to ensure we had continuity of supply and we incurred those stock premiums. And we saw the full return to billing in smart zones. Year on year, the trade debt position went up and they were the two main factors that caused the draw of around about $700 on working capital. In h two, we expect that to normalize a bit more and some of that will unwind. So we should be in a better position than we are today from by the time we get to the year end. We've obviously spent a bit of time investing in SmartVend and the technology roadmap, which you'll have heard historically. So what we'll see in H2 is the investment in the intangible costs will start to come down compared to what you see here in H1 and the loan repayments have started to come down slightly. We don't have the Vennman acquisition loan anymore, which finished in April.

23:12 Turning to the balance sheet. The balance sheet remains pretty resilient as ever. Main changes obviously were in the working capital as discussed. We continue to pay debt down. There's no stock surprises coming that we are aware of today in H2, so it's a strong basis to grow the business from as Jim has been describing. Thanks, Mark. I hope we've gone some way to demonstrate a clear line of sight to how we're going to accelerate growth and earnings. We're in the right markets and the trends are working in our favor. SmartVend with SmartVend and the rest of our portfolio for the vending sector, we've got the leading end to end solution, clear blue water compared to the various competitors.

24:05 And within the zones division, smart draft will enable us to break out of our, I guess, predominantly leased and tenanted estate. And we're going to continue to invest. You know, the bottom line is that we want to drive the top line. For for for too long this business has been about, you know, purely focused on the bottom line. Since COVID, we've made all the investments. We put everything in place. We have all the components in place to really drive the business. So it really is about continuing to invest to drive that top line because that driving that top line will build a substantial recurring income stream.

24:51 And our core platform, it's we have our two divisions which we will have in growth, but we'll also support entry into new verticals. And in particular, we look at the four corp sector with almost 10,004 corp, best part of 10,000 car washes, jet washes and also air and vac. So there's a lot to go go at in terms of contactless payment solutions putting our telemetry in to pull the data back in and give the dashboards back to the operators in the forecourt sector. And that's an area that we're targeting.

25:40 And that quality recurring revenue really is important to us and we're delivering that growth and we'll continue to do that and we're going to be generating an increased cash as those sales increase, which is allow us to pay down debt and puts us in a pretty damn strong position. And I guess just the bottom there, getting back to it really is about having the right people who are motivated and that we've got a better team than we've ever had. I guess in the time I've been with the business, I've never felt more confident than where we are today. If we look at our aspirations, our top line growth agenda, like, we have ambitious aspirations for the next two and a half years.

26:29 And then if we focus on doing the right things well, we we've gotten a fair crack at hitting some of those targets and objectives down there. And there is nothing built into our numbers for The US, all the new verticals, but we're going to deliver against them. I guess, you've heard a lot about, you know, from Mark and I about what we're doing, but I want to finish with what others think of us, our customers, our own people, our teams and the industries that we serve.

27:09 If we look at the best payment system award for our trio in the vending industry awards, best supplier website and the corporate social responsibility, you know, highly commended. It's important to us because we're part of community in in the areas that we operate. And, you know, the the recognition from our people through independent surveys and then the fact that they were PCI compliant. Now that sets us apart from pretty

27:40 much the competition, our biggest competitors in the payment cards, in the conductless payment sector in vending. And there's just a couple of testimonials from from customers, but I was talking to one customer a couple of weeks ago and he said, the last thing I would turn off in my pub would be the VIANET, you know, draft management system. That's it from me. I'll hand you back to Paul. Fantastic. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated in the right hand corner of your screen. But just while the team take a few moments to review those questions we've had submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the progress q and a could be accessed via your investor dashboard. James Martin, we did receive a number of questions come through as you can see here. Perhaps I could just start with the first one.

28:37 It reads as follows. The company has a lot of new and exciting verticals it's trying to enter, including environment, catering, full course, tank monitoring. It's great to see successful field trials and initial orders, but it seems as if VIANET has been knocking on this door for a while now. Would it be fair to say the initial orders have been slow to come through in these areas? And if so, what are the reasons? Is it due to competition or higher barriers to entry, for instance?

29:01 Well, I guess from where I sit, in normal times, it probably takes twelve to twenty four months to enter a new vertical. I know you've got the initial commercial evaluation, you have prototyping, you've got the product development, you've got to determine what the machine protocols are to, you know, talk to the or the machines to talk to machines. And then they've got the technical proof of concept, any certifications required and then extensive testing and field trials. So there's a lot to do. The pandemic clearly didn't help. That held us back. On the one hand, it held us back, but on the other hand, it gave us the opportunity to adapt some of our existing technology. And if you look at, you know, we're in most of these markets, it's not it's about displacing competition as well. So there's there's contracts that, you are up.

29:52 We pride ourselves on the level of customer experience we give customers and in terms of the quality of our products and our people. So it's we think we've got the we tick all the boxes in terms of winning contracts against the competition. And I'm expecting the next six months and full year 2024 to see a breakthrough in this area. Fantastic. Thank you very much indeed. Next one we've got here, you state that 2023 will be a definitive year for the VIANET's American division. The opportunity for growth there is exciting. How do you intend to capture this future growth? Do you have an office in The U. S. And staff for instance? Well, The US is a substantial market. Now there's something in the region of 70,000 bars and nightclubs and there's 25,000 fast casual dining chains.

30:48 And they're the sweet spot for us because they've got between six and ten taps, which is a good number for putting our hardware in and pulling the data and giving them a good return on investment. And then you got a whole host of independents and hotel chain bars. So it's a substantial market that's worthwhile hanging in. Full year 2020, we were pretty near breakeven in full year 2020, just to the end of March two thousand and twenty. And then, of course, COVID hit with 300 sites, 250 of those were AMC theaters, and we all know what happened to theater chains in The States and indeed, you know, worldwide. It wasn't good for them. So that was that set us back a bit, but we continue to get revenue from a couple of fast casual chains where we've been developing additional product features on the smart draft product that's going to apply to them. And of course, the fact that we've actually reengineered the hardware to take cost out and the ease of installation improves and reduce maintenance costs. So we've got a much better proposition to take to those customers in the new year when we look to kick start again.

32:04 You think how do we go to market? We pretty much deal the the data management, data processing from here in The UK. We have Micromatic as our field engineering and installation partner on the ground in The States, then they've got nationwide coverage. And we're going after chains, so, you know, that that means it's more it's more akin to key account selling. So we've got a couple a couple of people that help us with the key account selling, but it's really about how you get access and warm leads at senior decision making level. And that's something that in the last, you know, in the last sort of twelve months been making some inroads in terms of, you know, establishing some partners that we can work with from a sales commercial perspective where they have products that are complementary to ours and the smart draft fills a gap in, I guess, that they're offering.

32:58 So it's a case of watch this space at this moment in time. 2023 will be now a definitive year and and I think that's what I said twelve months or so ago or six months ago, can't remember what it was, but it will be a definitive year, but it remains an exciting opportunity and I'm personally invested in making it work. Thank you very much indeed. Next question we've got here is on dividend, I know which we have covered off throughout the presentation, but a bit more of a statementquestion. Just to say, as a small investor, dividends are important to me. However, I fully understand and appreciate and support the reasons for suspending that. So obviously, the financial health of the company is far more important. I look forward to return to a dividend and dividend growth policy as soon as practical and reasonable just in case there's anything further to add there.

33:47 Think all I'd add is that when we withdrew the dividend, it was at the time 75% of my income. And so I've got a personal interest in it being reinstated at some level. And the business growth should support reinstatement of the dividend. That's why as a board, we're relatively sort of comfortable with stating that. That's fantastic. Thanks, James. Next one we've got here is, will The UK's planned shutdown of the three gs network in '23 and '24 have any impact on you and your customers? It certainly will. I guess the first thing to say is that the shutdown of three gs and I guess four gs and five gs are better, they're faster, they're more reliable. So from a company that is wants to have continuity and integrity of data, that four g and five g and and are are really where we want to be.

34:50 So it's it's it's ultimately a good thing, but logistically there's going be a challenge because there are a lot of, you know, customers out there, you know, in pretty much every industry where the, you know, that has connectivity using, you SIMs are gonna have three g and that's all between, I guess, it's I think Vodafone start to switch off in Beijing stock in Beijing stock in February 23. And and through to the end of twenty four, the other operators will look to be shutting off as well. So it's happening. Good news for us is that it creates opportunity. We have a product suite that is now all four gs, five gs and LAN enabled.

35:37 And the shutdown in The UK and The USA, it's going to provide an opportunity for us to work with existing and new customers to basically migrate them to four g with upgraded technology. We will probably want to get creative in terms of, you know, giving them some long term deals low at low low hardware cost so so that we can nail down, you know, the the recurring income streams going forward. So it creates an opportunity. And I think it's it's up to us to be creative and work with our customers to actually, you know, do right by them. Thank you. That's fantastic. And just to say, that's a bunch of the questions I've picked off, but if you could just click on that q and a tab, just in case there's any further questions that you wish to address before Yeah. Looking for a few words to wrap up. We've got some additional questions here. We'll I'll let Mark answer the first one. It's a finance one. Yeah. So I don't know if everyone can see it. I'll read it out. It's from Leo.

36:36 Borrowings due for repayment within a year, excluding overdrafts seem to exceed cash plus any undrawn overdraft. Please, could you detail the timings of debt repayments and any other loan facilities you have? In essence, we've got a mortgage in our building that's got about $120 left to pay. That will be done by June 2023. And today, we've got just shy of 2,500,000 left of a coronavirus business interruption loan, and that will be repaid by June 26. If we needed other loan facilities, we could go and get them. But as we believe with the plans we have, we then the cash generation will will deliver. We don't believe we need to do anything around that. And as as you've seen in the balance sheet, the trade debt level continues to increase. We don't have a problem with bad debts, and the cash keeps coming in and they and the the profit converts to cash.

37:28 Okay. Another question here from Sam E. It's a very large market. Who are you competing with? And how do you get greater penetration? And how easy is it for a client to switch to you? I guess if we take the smart machines market, the vending market first, it is a very large market and there are numerous competitors. We're I think no. But they they tend to do different parts of the end to end solution. In payment terms, someone like NIACs who are listed on Nasdaq would be our biggest biggest competitor. But we we happily go two to two with them despite their scale because we figured that we, you we give a very competitive deal.

38:24 We have, you know, good rates. We turn our cash around in twenty four to forty eight hours whereas their cash goes out of the country and can take a week or two weeks to get back into customers' accounts. So that's the whole payment piece. You've then got the ERP piece where the introduction of SmartVent will really be a game changer in that respect because it is so feature rich that it's so much better than anything else that's available in the marketplace right now. And our competitor in The UK, biggest competitor is probably a business called SP Soft. And smart vendor is gonna allow us to actually, I guess, make some real real inroads.

39:15 There there are various smaller competitors in Europe that, you know, we've sort of gone to to to with on contracts and, you where we've competed with them, we've actually won the contracts. We figured that no. No. We figured that we we we try to ensure that we give a better customer experience than anyone else. I So think from a product features and usability, the user experience, we we tick the box there from and whether that's our smart VN platform or whether it's the the the contactless payment solutions hardware we have or whether it's just the people in our whole customer experience team in back in the ranch in in in Stockton and Tees.

40:00 And in The States, Cantaloupe, and I think I believe they're probably no. I think they're listed now. They they they're almost, you know, other than the payment piece, they're they're almost end to end, but I would see them as being the the competitor in The States. But, you know, we're certainly the leader in in in Europe and we're the leader in coffee, which is the the high margin area. So in that respect, now in terms of how easy it is to switch, I think we'll always find a way to to do a deal to secure the recurring income stream. So that's where I come from, and it gets to the stage where price isn't everything, and sometimes it comes down to customer experience is is is important when these decisions are made.

40:45 And we we we have all the big boys. This is another one for Mark. Yes. From Leo again. Capitalized development costs have been consistently running at 2,000,000 per annum over the last three years. How much of this is required to maintain competitiveness? And do you have any large development projects that are coming to an end? There's probably two parts to that question. One is what we're working on now, which I'll probably pass to Jim. But initially, yeah, we've been running at 2,000,000 run rate over the last few years. As I mentioned in the presentation, we've launched SmartVend. So some of the development commitment in terms of cost will will start to come down. So that run rate will be near at 1.5, 1,600,000 as the as the months unfold going forward.

41:32 But we're a technology business. We've got to invest in what products and services we have, and we continue to work on some of the projects we have, which Jim can probably talk about. Well, think Mark has just about answered the the questions there, but now we'll continue to smart work in the smart vent piece. We'll continue to work on developing an inventory solution that we can bring to market in The UK and Europe and also in The States the hospitality sector. And we'll continue to, you know, work on the, I guess, the market and data insights piece as well. But our overall r and d, you know, spend, you know, should stay relatively, you know, stable at the lower levels that we've been achieving in the last in the last couple of months. Yeah.

42:20 There's no more questions that we can see here. Fantastic. Now you've covered every single question off. So thank you very much indeed. Of course, any further questions that do come through, the team will be able to review those, and we'll publish responses on the investor meet company platform. Oh, we've got one late question, Paul. Go for it. Go for it. For Mark. Yeah. From Chrissy, CapEx is reducing due to launch of SmartVend, but is that cost out or does this CapEx now return to become OpEx? Well, it's an intangible asset. It's the people investment in developing the technology in smart vans and and others that we're working on. So that becomes an intangible asset in the balance sheet, and that will be amortized over current policies five years. So it becomes a p and l item below the operating profit, but ultimately is a cost net in PBT.

43:13 Fantastic. And again, thank you for taking that last. And James, before redirecting investors to provide you with their feedback, I know is particularly important to you, could I just ask you just for a few closing comments, please? Yeah. I guess, I think, you know, I think it is about the fact that, you know, we've now got, you know, all the components in place and, you know, I guess I my personally, I've never felt more confident about our ability to deliver, you know, in the short, medium, and long term, the sustained growth and and earnings growth. And just achieving just achieving some of the, you know, I guess the aspirations that, you I took you through in the in the presentation just to achieve the portion of those is gonna see the, you know, our our valuation improved dramatically.

44:08 It really is about us starting to demonstrate that the growth potential that's always been there is being delivered. So I look forward to reporting back to you in six months' time. That's fantastic. James, Mark, thanks indeed for updating investors today. Can I please ask investors not to close the session as we automatically redirect it to provide your feedback, nor the team can better understand your views and expectations? This will only take a few moments to complete, and that is greatly valued by the company. On behalf of the management team of VIANET GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.