Mind Gym plc (MIND) Earnings Call Transcript & Summary

Good morning, and welcome to the Mind Gym plc investor presentation. Throughout the recorded presentation, investors will be in the listen-only mode. [Operator Instructions] Before we begin, I'd like to put the following poll. I'd now like to hand you over to Octavius Black, CEO. Good morning, sir.

Hello, and thank you very much indeed. I'm joined today by my collaborator in arms Dom Neary, our Chief Financial Officer. I am the CEO and Co-Founder of Mind Gym, which we started 23 years ago. Now, I'm absolutely thrilled to be telling you more about our strategy and even more excitingly, the progress we're making in delivering it. But before I do that, I'm going to just talk through the agenda for what we're going to be covering in our time together. First of all, the highlight, we've got double-digit revenue growth. We'll return to profitability, and the business is in good shape and Dom in a few moments will talk through the FY '23 highlights. But more exciting than that is our strategy, our opportunity to create a really transformational business and redefine the marketplace. And I want to share with you, for those who are regular viewers and followers, it will be a repeat of the overall direction because we've been consistent in where we're heading and the opportunity ahead but there's also great updates on what we've done and what we are doing to deliver on that strategy. And I'll finish up with a brief outlook for the year ahead. So over to Don and our FY '23 highlights.

Thank you very much, Octavius and good morning. It's a pleasure to be here. As we step into our financials, we are very pleased to announce that our FY '23 results are in line with expectations. So we have revenues of GBP 55 million, which is 13% growth. This business continues to be an extremely digitally focused business. We have 68% of our revenue, which comes from digitally enabled revenues primarily virtually -- a virtual delivery of live sessions. Now that is down a little bit from last year as we expected and we've said in the past and that's because as we've emerged from COVID, people have started to do a bit more face-to-face delivery. That is in line with expectations. It does seem to have stabilized. We don't anticipate it changing significantly, although we are agnostic as to whether that happens. And our digital revenues -- pure digital revenues have increased somewhat, and we're seeing improved growth of eWorkouts there. But probably the biggest news this year is the return to profitability. So profit of GBP 3 million is up on the GBP 0.4 million loss we had last year and EBITDA is doing the same thing. So what we're seeing here is we're starting to see both leverage -- normal leverage on our revenues but increasing leverage and return on investment on some of our investments to make the business more efficient and more scalable. And we'll touch on that in a slide later on. And we remain a very -- in a strong net financial position. Our cash at the bank is GBP 7.6 million. And we also have a GBP 10 million loan facility that remains untouched. You'll see CapEx has fallen versus last year. So as part of an initiative, a restructure to make the technology organization more efficient, we integrated it into the business. And that has increased the pace of the digital pipeline, and we'll be talking about that in the strategy section. But one of the impacts of that is that cost has come down as well. And then finally, we'll come back to this later, but we've acquired the rights to our diagnostics platform. And that's very exciting because it speeds up some of our digital pipeline significantly, something like 18 months. And it's also significantly cheaper than we were anticipating. We would have to be investing in the next few years. So our expectations for CapEx spend is that the CapEx will go up but the level won't be as high as we had anticipated in the past. As we break down into the regions, you can see there, the U.S. is growing at 8%, and that largely reflects the impact of FX. But you can really see a step-up in the EMEA region there and that's underlying growth, but it's also the impact of an energy framework, which we've talked about in the past, which will particularly drive growth in the second half this year and will have a significant impact on revenues. When we start to look at our clients, you can see that we're not heavily reliant on 1 client. The largest client there is 5.5%, just under 6% of our business. So -- and we also have a very broadly based client base. So lots of different industries. So for example, when technology suffers a little bit, we still got strength in pharmaceuticals. We've still got strength in the financial services and many other industries. And finally, when we look at the product breakdown, there is quite a significant growth in our design and advisory services, up from 12% to 19%. And that's largely the impact of the frameworks that we've announced in the past and particularly the energy framework, which we're seeing coming through there. That will move around a bit from year to year. But what's interesting is that, that design and advisory work will often lead to a strong tail of delivery and deliveries where a lot of our profits are made. So that's very positive. And we -- as we said, we anticipate that particularly driving growth in the second half. And the final one is to put point to make here is about the operating margin improvement. So you can see that we've made significant progress from 3% last year to 10% this year. And we're targeting for the first time an EBITDA margin of between 15% to 20% in the medium term. And the reason we're so confident in that is because some of the investments we made a couple of years ago, which we have talked about in the past are now starting to show an ROI. So we've taken -- we've improved our systems, we've improved our processes and that's enabled us to set up, for example, a new shared service center in Newcastle that was done in the second half of the year. And the impact of that is better service for our clients, and it's also more efficient and more scalable. And that's why we have confidence in that target, which we set for the first time. And there's a strong pipeline of automation coming down in the next couple of years. Co-sourcing, session booking, you can see those bullets there. And that's going to help drive towards that 15% to 20% margin target we set ourselves. So strong growth, as you can see, a real turnaround in profitability and a strong profit growth going forward with some strong drivers behind it. And now we're going to get to come back to the strategy section, and Octavius is going to take you through that.

Don, thanks very much indeed. And I think the reason as investors, you choose to back Mind Gym is above all for the enormous opportunity we have, the potential hockey stick that will at some stage emerge based on our very clear strategy about how we understand what the market is operating now and how it can change to deliver greater value for our clients in the future. And the overall market size is in the region of 370 billion, that's just learning and development and it's the size of the larger than the GDP of most countries around the world, and it's spent in this extraordinary way. It's extraordinary because it's very silo. Almost all organizations have a range of different human performance challenges from leadership and management to diverse inclusion well being much else precise. And each of these tends to be run by a single budget holder or a collection of budget holders who are working to design programs to address that particular issue or priority. And then they in turn collect 3 or 4 or half a dozen different providers who may provide different services as part of the mix that they're creating in order to deliver impact. Now across the whole business, this had lacked coherence. So you're getting messages that are duplicated and messages that are inconsistent. It also creates waste because things are overlapping and things are constantly removed, then restart to deliver again. And most importantly, there's no consistent data. So our future -- the future for business, how do you make the total more than the sum of the past is to integrate, particularly to integrate the content. So what I learn in onboarding fits in what I'm learning in manager development, which is linked to what I'm learning in well being and inclusion. That if there are certain core psychological principles like how to increase agency up to think slightly longer-term up that help in one area, they used to apply across all the areas because they have an exponential effect. And so what we imagine is organizations moving from spending, let us say, imagine $50 million a year with 100-plus providers to save them some money because the integration will they can do at less cost but also a far greater impact for spending with 1 or 2 providers. And that integration isn't just about content but also about the distribution channels. And here, we built not just on the 23 years of IP development, but also the 23 years of working out how to affect change in people who work in organizations. We've got 5 million people who've now been to one of our one-to-many programs. Our bite-sized workshops, we run up to 500 a week in 40 countries around the world. So we're really good at one-to-many, and that's a great route for learning. We learned from peers, we learned from colleagues, and it actually caused us to engage in content and solving problems. But sometimes you just need something to go to solve right now, by myself, on the way into work or when I go [indiscernible] when I got a particular problem to address. And so 5 years ago, we developed our eWorkouts, which are asynchronous digital assets that are on demand. And those are a really great way of getting your heads [indiscernible] have a tough conversation or set goals that really drive performance or whatever else it may happen to be you just see from [indiscernible] 10% plus of our revenue. Then there are times where actually, we need to speak to someone, but I need to do it alone. I need to speak to somebody about my particular challenge. And the great thing here is we've launched a unique performer one-to-one coaching offer off the back of our proprietary platform. And I'll talk a bit more about that in just a second. Then on top of that, we are building diagnostics, and I talk about a lot more about that, too, which helps me work out as an individual. What is it about me that I can most focus on that will give me the best chances of success and organizationally, where should I target my investment to maximize my return and then also [indiscernible] learning in the flow of work that's happening as and when we're doing things in our daily working lives. And all of this comes together fueled by dense data and integrated so that we are learning in one place or discovery somewhere is also replicated and built on and reinforced in the other channels and other routes, the jigsaw puzzle that you saw before. So this is the vision that we're heading on. And this we believe is where organizations will drive significantly greater value. Certainly, when we tested it with clients, the CHROs of many of the world's most impressive companies, they love the idea of this. They're just like how soon can we have it. So I wanted to share a bit more about the progress we're making in each of these areas, not the ones and many of them on demand because we've been doing those for many years. It's going next to the area of one-to-one. Now we actually held a summit at the Roll Opera House a few weeks ago where we had the almost 200 CHROs of many of the world's leading companies from Shell to Channel, Rolls-Royce, the British Aerospace and many more others Kingfisher, [indiscernible] and so on and so forth. And we asked them, what do you think is the single most important thing when deciding for coaching to get the right coaching solution? And 90% said the most important thing was coach chemistry, the relationship between the coach and the person that they are coaching. We then revealed what the research shows, which is only 8% of the performance improvement from coaching is derived by the chemistry between the coach and the coachee, and actually the vast majority of the impact is derived by having a consistent proven coaching methodology. And that's a big shift in the market because only 14% of people when they are commissioning coaching even consider the coaching methodology as one of the criteria. So a fantastic opportunity to reeducate the market and you'll see on the side of this chart, our new research paper, precision coaching and better for us to always whatever your goal, which we launched at the CHRO summit, which is part of our process of redefining the market and recalibrating the way clients choose and commission coaching. And we're able to do that uniquely because we have the coaching methodology, which we've developed called precision coaching as it makes it better. We've managed to organize that in a very precise way of recycles of 4 x 45-minute one-to-one sessions, which are proven to deliver significant goal improvements. I'll come to that data in just a second. And that uses people's time more effectively and gets more guaranteed results. And on top of that, we're able to do it consistently. And this doesn't exist anywhere else in the market. We are the only provider in the whole marketplace who qualifies all our coaches in our proprietary methodology to ensure they deliver consistent quality. So yes, there's a shift in the market from thinking all about coach chemistry and finding exceptional coaches to realizing it's almost all about the coaching methodology and making sure coaches are trained in those but the evidence is unequivocal that, that is the direction to go. And that puts us in a unique and leading place for the one-to-one coaching offer. To give you an illustration of how that's already working in practice. And we're delighted about our partnership with Burberry, a tremendously successful fashion business, where we are running their leadership development program, integrating the live bite-sized workshops for leadership development with performa, the one-to-one coaching. And one of the ways that's most accurate to measure performance improvement is what the manager thinks of the first is going through the coaching of the program because we often sell from the hearts ourselves, but the management tends to have a relatively good idea and 85% of managers are actually seeing an improvement off the back of this program. So that's a tremendous result. Then we're also seeing that goal attainment has gone from around 40% to around 80% of the ability to achieve the goal. So I guess just a tremendous shift. So one-to-one coaching in a really good place, how quickly the market recognizes and appreciates that the key is to have a consistent methodology and therefore, [indiscernible] we don't yet know. But we obviously know this is the direction it's heading in and therefore, there's a fantastic opportunity even just with the one-to-one coaching, but also even more so as an integrated solution. We're not stopping at one-to-one coaching. Really pleased to share with you the progress we're making with diagnostics. Diagnostic market at the moment is quite interesting. In the by and large, the people who run the diagnostics aren't the same as the people who provide the solutions. And that leads to a big delay. So I get the results from my employee survey, allow me to spend ages understanding and analyzing one of the benchmarks and one of the datasets about this or that. And then often we're dancing on [indiscernible], there's not a lot of difference but we're not focusing our attention on the thing that really matters, which is the solution what to do about it. And eventually get around to try to commission a solution, but the people who provide the solutions are not necessarily aligned with what the data providers have produced and then as a whole trying to get the 2 to work together. And they can take 6 months or even a year if we've actually got program touching people that addresses the results from your survey and also a result you got ready to do another survey, not much has changed. We're tying out on its head because we're integrating the diagnostic with the solution. Our diagnostics come with in light of what research says, here is a program that helps solve it. And that means you can then quickly and easily reuse the diagnostic to measure impact. So the whole thing becomes a single flight, which is transformational. A transformation in the sense of the speed with which you can get a tailored solution to solve the problem you identify and we're also excited about building our own platform in order to service our clients to do this. So rather than relying on third party and the vagaries and wins on how they've signed their platform for a customer to use quite apart from the cost we've actually got our own. When I say build, we've done some building, but we've also critically done some buying. We brought the instance of a very effective diagnostics platform, and we're using that and adapting it for our particular needs. And that as Dom said, has accelerated the road map, so that we're able to deliver diagnostics 12 to 18 months sooner than we had anticipated and also means we're spending less CapEx than we thought we would need to if we had to build it ourselves. So we're in a good place to have the ability to deliver at a great pace with the strategy, but we're also in a fantastic place for developing of content. So to give you an illustration of this, you going to talk a bit about well-being, which is a massive market opportunity, $50 billion a year spent on corporate wellbeing programs, destined to go to $100 billion. And here, we've built our own Mind Gym proprietary diagnostic with a combination of our psychologists, our psychometricians and our data team. And what we've done here to explain the chart on the right is we separated illbeing from wellbeing. So illbeing just because I haven't got a broken leg, doesn't mean I can run a marathon. So illbeing is the lack of broken leg and well-being is the fitness to run a marathon. And what we've discovered here using Mind Gym's benchmark data is that people sit in different categories. So there are flourishing high on well-being, low in illbeing. We've also got 2 other interesting categories. One is the fragile thrivers, who are high on well-being, but also quite high on illbeing. They look [indiscernible] whether you're high flyers, you really admire them, give a busy person more to do to get a job done. But underneath, they're under pressure. They're exhausted, they get overwhelmed, they're not sure how long we can keep up this front. On the other end, you've got people who are boring out. These people are not overworked. They're not really stressed but they haven't got a [indiscernible] they're doing either. And they can be energy sucking on the organization in the way the fragile thrivers can have a much higher risk of leaving. What happens is the solution for the fragile thriver might well be to give them less work or more resources, do that as a person is boring out and you'll only make the situation worse. So the first thing is to diagnose what the problem is and then to come up with a solution that fits them. And we've got 3 programs that at the basic level will cover these 3 needs. So the first one is to recover, that's about reducing illbeings. So if you've got people who are higher on illbeing that's what you need give them. Reignite is for those who are low on well being and increasing that and then reinforce is to stop anybody from getting worse on either wellbeing or illbeing, how you spot your own arm pulls and trip wires to spot your risk of going down either of those axes. So not only do we have the overall programs for these, which we can then customize to suit particular needs but we've also got the solution. These are existing proven Mind Gym assets that have been run all over the world countless times, the squares and go larges, there are virtual ted talks but faster, longer, more interactive. The green circles are our Mind Gym workouts, those are 90-minute smaller groups, 16 virtually, 20 in person, the addresses are more committed to behavioral change and the other simple [indiscernible] other kinds of product the orange circles are eWorkouts that I mentioned earlier. So you can see you've got the instant programs and your diagnostics might tell you that your digital marketing team is in need to reignite whereas your full-stack engineers are in need of recover. And then if we can go straight away with here's the answer, here's the solution that you can give them that [indiscernible] turnaround. So the business, there's a massive cost saving here, all our time and effort trying to move from the results of the diagnostics to the solution. There's also a big opportunity cost, the time delay to get answers out there. So we're really thrilled this is another part of our building an integrated solution and creating the behavioral change platform. For those who have really good memories, you will remember that the last part of that slide what I shared was in the flow of work. How do you give people answers they can address immediately. And so the early stages here of using AI and in particular, in the instance of a ChatGPT [indiscernible] and we've taught it Mind Gym content, because the challenge with AI is it [indiscernible] anodyne solutions and often ones that aren't actually quite accurate. So what we've done is teach it the content that we've developed over 21 years and tested with 5 million people. And as a result, we created what we call Sigmund Freud, who is our coach bot, if you like, equipped with Mind Gym content and you ask Sigmund Freud questions and Sigmund Freud can give you answers that are far more likely to be the sorts of things that you need that will work than if you just went directly to the open source AI. And this is only for internal use now, we're developing it, but you can see how this can go and how this can become part of the solution where it complements the one-to-one coaching, the one-to-many group sessions, the eWorkouts and so on and so forth and becomes in the flow away of learning. So we're really thrilled about our product pipeline. We think this is absolutely consistent with the strategy that we shared over the last few years. We can see the market opportunity there, and we can see a route to make and already making significant progress to deliver on it. So hopefully, that gives you a good sense of the overall strategy where we're heading and how we're getting that. I'm going to just finish off now by sharing the highlights of our outlook for FY '24, what we think are the direction to give you which is that the digital share will continue to increase, and we'll continue to make progress with the launch of the diagnostics, margins are in a better place and heading in the better place still. CapEx is probably going to be slightly lower than we had previously set as expectations, thanks to this acquisition of the digital diagnostic platform. And we're seeing further progress for growth in FY '24. It will be skewed very much to the second half. We can see that from the big framework agreements that we signed, but it will take to come to fruition. But we still feel really good about the growth on both top and bottom line for Mind Gym plc. But above all, what we feel excited about is the medium to longer term. But the opportunity here is colossal. And at some moment, we will have a hockey stick and we don't know when that will come, but we're absolutely confident that as we build these assets and continue to work with most of the FTSE 100, most of the S&P 100 with these great organizations who find Mind Gym is a well-proven solution to their human capital needs, but they will increasingly come to us and see the value of this integrated data-driven approach. So thank you for your time. I'm now very happy to open up to questions.

Octavius, Dominic, thank you very much for your presentation. [Operator Instructions]

Thank you very much. So we'll start off with the first question, which is what level of cash generation is the company capable of achieving over the next few years? So as you -- you will probably have seen in the results, we utilized about GBP 2.5 million of cash in FY '23, which were significantly down on the year before. The -- when we start to look ahead, our market expectations are for our cash generation to start probably from the second half of this year and then to build as the years progress. We are not dropping all of our cash generation down to the bottom line because we are reinvesting some of that in our digital strategy. But again, if you look at expectations, whilst you see CapEx going up, you're also seeing cash generation over the next few years, growing by GBP 1 million to GBP 3 million, depending on which year you're looking at. So our focus is on building the behavioral change platform that Octavius has taken you through because our clients really want it. We're making great progress with that, it's a huge opportunity. But at the same time, this is a profitable underlying business, which is investing in digital. And you're going to start to see those -- that cash coming through in the next couple of years.

That is fantastic. The second question. I love this. What is your USP? And how does that differentiate you to your competitors? A tremendous question, and I've got quite a long answer to this, so I should try and keep it short. USP #1 is granted in behavioral science. So the evidence of what works. 10 years ago, we said, unconscious bias training didn't work, everyone actually fairly ignored this and now they've come around to our point of view. Hopefully, our new findings on wellbeing won't take 10 years for people to come around. But we're happy to tell the truth. I often speak truth to power or treat to orthodoxy and say, this is what does work. This is what doesn't work and this is what you should do. We published the market-leading research white papers on areas like performance management, leadership, coaching, well-being, divested inclusion and so forth. So we're absolute leaders in the field on the thinking of what to do to get it right. Secondly, we productize behavioral science and we are the only business in the world that delivers the scale of live either in person or virtual one-to-many sessions. So that's a really strong USP that we have. And we deliver, as I said, 4 million to 5 million people. We've got a really strong base of proven ability. And on top of that, we also got an amazing library of proprietary IP, all the content that we developed and delivered over 23 years as that. On top of that, we have a really strong team of psychologists and instruction designers, we designed for customer solutions and barrier adapt solutions. So we're not just a product business. We can also flex and deliver more custom solutions to our clients. We've got this global network of coaches, and they're all certified in our methodology, both for the one-to-many which is a nice standard methodology and in precision coaching, which is the one-to-one for the performer. So I think they are just a few of the USPs we have and more I can go to -- but hopefully that gives you a sense of what's different and in particular, this ability to integrate across all those distribution channels. So you have diagnostic providers, you've got one-to-one coaching providers, you've got people who run programs and courses. What you haven't got is anyone who brings it all together. And so we do better in each of those than the competition, but we certainly think that we're much better as the sum of the parts versus the individual parts. Next question, in your results, you referenced building a standalone psychometric assessment into our diagnostics platform. What other features would you like to add to the acquired diagnostics platform moving forward? That is a tremendous question. And there's quite a lot to answer that. One of the areas that we bought, one of the reasons why we like this platform is that it allows you to have a personal individual one-to-one relationship with the recipient. So [indiscernible] I think this is all complete utter nonsense, your strategy is rubbish, you can write back and so have you been to any of the sessions on the strategy development? Or what bits of the strategy do you think or do make sense or wherever and you can start to have a conversation with. So I'm not just getting a blanket data, but you're getting that personal relationship. And what that will move on to is us being able to give personal programs and solutions to individuals. So I fill in myself on well-being. And only the results go at an aggregated level, to the people who run the business and the people to run my division. But personally, I get a report saying this is where your state of well-being is. And these are the things that are getting in the way. And frankly, you've got really high sense of belonging. So I wouldn't worry too much about that, but you've got a really low level of certainty. So you either have to get more comfortable with your uncertainty or find ways to get more certainty. And these are ways to do practical program, for example, eWorkouts to have that. So there's an awful lot we can do with the diagnostics platform that personalizes the insights of the content. We'll also integrate it into the performa platform, which delivers the one-to-one coaching. So you start a build a whole person view of people who are coming to my Mind Gym whichever experiences they're coming to hopefully [indiscernible] to all of them. So there's enormous upside potential. Next question is the CHRO some of the biggest event in Mind Gym's annual calendar. And can you describe your sales team follow up on this event to lock in new business wins for the coming year? How confident are you in how that sales process is rolling out this year? The first answer to that question is yes. It is the biggest event in Mind Gym's annual calendar, it's actually the biggest gathering of senior HR people anywhere in the world this year, we believe. So it's a massive place event out. It helps on a number of fronts. So we have clients who are already keen to buy from us. But actually, what it does is not only reinforce that they should go with us, but it's helped them think in larger and more specific ways, for example, case studies, we had [indiscernible] case study on culture change and how we've been helping with them and other clients who wanted to work with us saw that case study and were like oh, I'd like a bit of that, yes, please. I now know what I want to do with you. Let's see if you can accelerate to make that happen. We've got clients who didn't know us at all before. We are now having follow-up meetings. All our sales team at the conference, everybody who came to the conference and [indiscernible] reason didn't make it either have follow-ups with them. Many of them have already led to meetings or meetings are in the calendar. So there's a field sales team that is driving that. And they are allocated by industry expertise. And then there's how confident are you in the sales process rolling out this year. I'm never completely confident about the sales process. I always think it could be better. There is always more we can do. But we have streamlined the way in which needs have been dealt and handled through our CRM and increasingly marketing adjunct to that, which is going to come live in the next month or so. We've also got much better at managing the processes. And I think in EMEA, we are in a better place of how we generate these -- generate opportunities, follow those opportunities through and indeed convert. I think in the U.S., we are in a slightly less strong place for all sorts of reasons mainly to do with COVID and I certainly wasn't able to be over there, wasn't as close to the business during that period. I think we've made some changes in leadership there, and I'm really confident that our new leader knows exactly what to do, but it will take a bit longer to get there. I think I'll hopefully be very honest in all these conversations, is that we are an entrepreneurial business, we know where we want to be in 5 years' time. We're really confident in getting that. But will there be bumps on the road, will there be crossing and headwinds between now and then? For sure, they will. In the past, we've had great growth in U.S. and EMEA hasn't been so strong. Now like we've got great growth in EMEA. U.S. unfortunately isn't so strong. Soon, get them both growing at the same pace, but there will continue to be challenges in the sales process, and that's very much where we are focused at the moment. Another good question, how do you find the impact of a weaker economy on client demand and interest? I think the biggest challenge with the weaker economy is the restructuring clients do, which then means that everything is put on hold while the stakeholders move around, some of them leave and exit. So in the end, yes, companies absolutely need to address these sorts of challenges. There might be doing slightly less on divest inclusion and slightly more on productivity or performance management. But you made -- for sure 100%, companies realize they need to cherish and look after their talent. And the ability to completely reinvent the time, I can fire all these people, bring in new people is just the myth that has been exploded. A, there aren't all these brilliant, fantastic people waiting to come and join our company; b, there's a high risk that they may not work out; c, there's a long time elapse to get there. So companies increasingly recognize and appreciate they need to make the most of the talent they've got, help grow, nurture, engage and development. And the agency with employees to be able to move and transition to other places is far greater. And therefore, companies are very focused on how to make the most of the people that they have got. What happens is that with the restructure, you find that which individuals are responsible for what or who knows which budget becomes obfuscated for a while. And that then delays the sales process. It doesn't stop it or prevent it, but it certainly delays it and we are certainly seeing things being delayed at the moment. So whilst I'm obviously confident of growth, knowing exactly when, where and how is harder to do with the economic headwinds, and we are obviously noticing that with our clients. Are you seeing [indiscernible] having to operate within flat or reduced annual budgets for training given the economic climate. I think so far, it may be flat, but it doesn't seem to be declining. And I think that's actually a really good thing for us because it forces our clients to think differently about how they spend their money. And when we -- clients are very happy with how things are, they don't go to the pioneer, the disruptor, [indiscernible]. Well, things are fine. But actually, when budgets are under pressure, then the [indiscernible]. So I need to do things differently is that necessity is the mother of invention. And we are that source of pioneer and invention difference that can give a much greater return on investment. But you have to be willing to give us another go. And so yes, I think we'll see budgets flat line potentially. But as I said before, the market size is $360 billion, that is much larger than the GDP of New Zealand. So if the market goes up or down the size, that shouldn't affect us. Our job is to increase our representation and the depth and breadth of our relationships and clients. Are you paying to bring the dividend back anytime soon. Dom, do you want to talk to that?

Yes, absolutely. So histology, this has been a business that's made strong profits. And we then back in FY '20, '21, '22, made this decision to invest significantly in digital. And we talked to you today about a lot of the progress that we've really seen coming through. And you can see that starting to come through in the numbers. At the moment, we're not paying a dividend but over the coming years, next few years, you'll see cash generation starting to increase. And once we get to a cash-generative position, the Board will then continue to look at that dividend policy and assess whether it makes sense to pay a dividend. So as I said earlier in the cash question, we're generating -- we're anticipating returning to cash generation. That's where market expectations are rather. And assuming that comes true, that provides an opportunity to look at the dividend again.

What are you finding as the biggest obstacles to progress right now? Is it more about you having the time to build out the assets? Or is it more about market coming around your offering? Wow, estimable, exceptionally good question. And the answer is just [indiscernible] perhaps but the truth is it's both. We do need to build out these assets and show the work. We've got the diagnostic out there. We will be trying with one client, but they want to be to try with more clients. These things just take time, so we've got to have clients that are willing to give it a go and then that takes time for how you build out your assets. So both of those are challenges. I think the harder challenge is getting the market, the clients to think if I come back to one-to-one coaching. I think it's very clear what the answer is to deliver consistent one-to-one coaching, but it's also very different from how people have been buying and choosing coaching in the past and how long it takes to educate the market, how long it takes for clients to come with us, I think, is the bigger obstacle. But we're also clear to get on building the products and proving that they work. Dom said delivery is where a lot of the profits are made, can you expand on that, how do gross margins for delivery compare with other lines? Dom, over to you.

Yes, absolutely. So obviously, delivery is a very large proportion of our business. You can see that in the numbers. So of course, that's where a lot of the profits made. It's also -- there are aspects of our business, which are whilst they make profits, they make less profit because we're investing in generating delivery. So for example, our design and advisory areas whilst they're profitable, they tend to be -- involve a lot of sort of scientific and almost consulting services. And in the design element, they don't make us strong profit margins but what they tend to do is then lead to a strong delivery tail. So when our DNA design and advisory mix of the business increased this year to 19%, that's why we're talking about a very strong edge to which is driven by delivery. The other aspect to think about would be our digital business, and there are aspects of that, which are like eWorkouts, which are almost 100% margins because they obviously a pure digital product. And then increasingly, there are new products coming out, which, depending on how we sell them could also have that kind of profile. And finally, one of the other things to think about is cash generation. As you grow our digital business, a lot of those services will be paid for upfront. So there is a cash benefit there as well. But yes, I think that's a...

Are clients committing any spend on development and features that they want? I think at the moment, that is not the case. We're not asking them to fund features because I think we'd rather create a product that's going to work across the full suite of clients, and therefore, we'll make the investment in that but they are very much part of the discussion about what those features should be. So we're listening to clients and they're aggregating what they tell us, and then we're learning from that what is and what isn't working so well and therefore, what to adopt and shape. So performa. We've already had a soft launch for that. We've got great client feedback on that. And we know from the collection of clients, what are the things that matter most and we might go to particular -- so we've got a single sign on, but we're going to particular cloud for them [indiscernible] single sign on first and then work out how to expand it to others. So we're listening to clients and building features that they want. What's the expectation for CapEx over the next 2 years?

Yes. Actually market expectations are, we had about GBP 5.5 million of CapEx in FY '23. Market expectations are for that to increase to something like GBP 8.5 million over the next couple of years. And that will take us a long way towards building our existing pipeline of products. So depending what might come after that, that might change. But for the moment, that's what our expectations are.