REACT Group PLC (REAT) Earnings Call Transcript & Summary

Good afternoon, and welcome to the REACT Group PLC Interim Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to put the following poll. I'd now like to hand you over to CEO, Shaun Doak. Good afternoon, sir.

Thank you very much. Thanks for joining us today, guys. So my name is Shaun. I head up the group as our Group CEO. We've got Spencer Dredge, who's our Group CFO; and also Mark Braund, our Group Chair, on the call today. I'll give you an overview of the REACT Group. A lot of you have probably seen this slide before or a similar version of it. So I'll not go into too much detail. Just a quick overview. We've got 4 trading divisions within the group. We've got a mix of indirect and direct models. So we've got REACT Specialist Cleaning, which is a core business, emergency decontamination work, tend to be on site in a lot of instances within 4 hours. Very strong in health care. We do a lot of de cleans in hospital trusts. We do a lot of void cleans, emergency decontamination such as fatalities on the railway and a lot of work within [indiscernible] around the U.K. for various customers. Next, we've got Fidelis. So Fidelis is our hygiene and maintenance business, so recurring revenue. Typical commitments from the customers are usually between 3 and 5 years. Very strong in industry, very strong in health care and also education. And that business was our maiden acquisition just to give us the recurring revenue to allow us to grow the rest of the group. Next on the list is LaddersFree. That's our commercial windows and cladding business. That's an indirect model. So we have a membership model, cover the whole U.K., got around about 300 members, some of them have teams of 10 or 15. It allows us to scale up the business when we win new work. And we work with a who's who customers. Typical commitments from customers in that space are anything from 12 months through to 36 months. And then the final component is 24hr Aquaflow. That's our recent acquisition that we completed back in October of '24. Fantastic business, operates south of Milton Keynes, very, very strong coverage within the M25 London and the Southeast. Again, recurring revenue, and they work with mainly FM companies in that part of the world. So in summary, we provide specialist support services mainly to the facilities management sector. We operate across the whole U.K. We're focused on markets with typically nondiscretionary requirements, usually complex demands and quite often on a nationwide basis. We continue to build out an increasingly valuable proposition in terms of our scale and our range of services and our geographical delivery as we've continued to grow the business. And our strategy is very much focused on building out our business in what is very sizable and fragmented markets with market-leading performance, and we aim to achieve a minimum of GBP 5 million worth of free cash flow within the next 3 years. Over to you, Spencer.

Thanks, Shaun. So just looking at the performance summary just for a moment. I think it's worth saying that many people, like Shaun said, would have been following the story for a while. But the back story here is of a successful turnaround, and that's clearly evident in the graphs below. And what the group is now is the profile is strong recurring revenues. It's profitable and it generates cash. Diving into the KPIs. This is obviously reporting for our interims up to March '25 this year. We've done revenue of GBP 12.1 million, which is 14% up on this time last year. Much of that revenue is recurring in nature. And this is in a period where we've had some notable economic headwinds. And really, the focus has been on customer retention and helping customers get through some of their challenges effectively. Looking at gross profit, we've had GBP 3.9 million for the 6 months, which is 35% up on the prior period. And importantly, for us, it's 32% gross margin, and that's significantly up from last year, 490 basis points higher than last year. So Aquaflow has helped with the contribution of that increased margin. And we've had a couple of contracts that have been paused in the period, which have kind of had a negative impact on that performance. Looking at EBITDA, we've got GBP 1.43 million for the half year, which is 12% up on the prior year. And this is during a period where we're comparing against last year where we hadn't made some of the investments that we've made in the group now. So as we strengthened the back office, both operationally in the finance function and also in sales. From a free cash flow point of view, we've generated GBP 200,000 for the interim period, and that is after paying for the deal costs in the acquisition of Aquaflow. We've invested in Project Sparkle, which we'll touch on as we go through the presentation and after settling some taxes. So we look at this interim performance is a robust performance in what we see as a very challenging U.K. market. And we've had great contribution from Aquaflow, which is obviously, as Shaun mentioned, our latest acquisition, which is trading very strongly. So just turning the slide. What this slide does, it looks to give a little bit more detail around our gross profit from interim period to interim period. So if you start at the left-hand side of the slide, we've done -- we reported GBP 2.9 million of gross profit for the last half year. And what you see here is some of the step-downs where we've been challenged by the conditions of the U.K. market. We've exited some contracts in the period for GBP 291,000 gross profit. We've had some contracts that are paused outside of our own control, but they're not lost, but they've just been paused, which has again impacted the performance of the business. We've had to work with some of our customers as they've had challenges. And what that means is we've had some margin erosion on some contractual arrangements. We've also had some changes in some of the frequency of our services. So again, as a result of the economic headwinds that the country has had post budget, et cetera, so we've had to work with our partner with our clients carefully on that. More positively, we've had some contract wins. And we've had some great successes in cross-selling and upselling. So obviously, the introduction of Aquaflow has helped that with its increased service components, increased customer base. This business has been built on very successful cross-selling and upselling historically, and we've continued that story. I touched on it in the slide before, but Aquaflow, it's been a great addition to the group. It's traded very positively. And again, that's really helped the half year result. So again, I would say that this is a challenging market. We've had notable headwinds, but we've traded quite well through that. And clearly, the addition of the acquisition of Aquaflow has helped with its increased margins and its new customers and new services to the group. The next slide is here really because we often get asked a lot of questions about what sits within our administrative expenses line. For the interim period, we reported just short of GBP 4 million, GBP 3,977,000 worth of admin expenses. The table below breaks down some of that detail. And what we focus on in -- as a management team is the operational overhead of running the divisions in the group, which is GBP 2.4 million of that GBP 4 million. A large component of that cost is an amortization on intangible fixed assets, which are assets that are recognized as a result of acquisitions, which is noncash. It's a noncash expense. We report under IFRS as a public company, so we're obliged to account this way. We've got depreciation in the period of GBP 193,000 and exceptional costs of GBP 220,000, which are in relation to the acquisition of Aquaflow. So those expenses are one-off in nature. And then we have a share-based payments charge, which is another IFRS charge, which is noncash in nature in relation to some employee share option scheme. So hopefully, that gives a little bit of flavor as to what really sits within that GBP 4 million expense line. It is made up of some operational overheads as well as some IFRS noncash elements.

Thank you, Spencer. So just moving on to strategy. So our strategy remains unchanged really. We want to build out a market-leading position in this specialist support services space. And we want to concentrate on focusing our attention on the facilities management sector across the entire U.K. We've got high recurring revenue, as Spencer touched on earlier, high sector margins and strong cash conversion and profit. And we just want to continue driving that organic growth piece, which we've done for 5 out of 6 years. Spencer touched on it, we've had some economic headwinds this year. We haven't stopped selling. The pipeline continues to improve. There was a little bit of slowdown in Q4 of last year and indeed Q1, but we've certainly got signs of green shoots. If we look at the pipeline and the [indiscernible] in Q2 and so far in Q3. Just moving on to our customers. We work with who's who of customers across the U.K. Some of them are blue-chip customers, many of them are large facilities management companies and also midsized FM companies as well. As before, we continue to work in a very diverse and resilient range of market sectors. We typically seek out customers with -- who have a bias towards nondiscretionary services for obvious reasons. Low customer concentration. We got around about 1,260 customers now, 251 of them are material. Our top 10 is around about 42% of revenue and no single customer accounts for more than 7% of the revenue. Those who have seen this presentation before, you'll notice some new logos on the slide there. It's just a small snapshot of some of the customers that we work with across the U.K. On sales performance, we've had robust sales performance in what has been a challenging market on the back of change in government and obviously, the challenges of the budget, but we've ultimately had success across all divisions. I'm not going to walk you through each and every one of these, but I'll just tease out a few. So Fidelis, we've very much been focused with our sales activity on retaining customers and being proactive in having conversations with them and some instances being pragmatic. So Fidelis, we've got 3 large customers who have renewed on long-term contracts, represents GBP 800,000 a year. So a fantastic result from the whole sales team and all the people across the group who are involved in that. [ Chris Ryan ] who runs that business, is doing a fantastic job and works very closely with our Group Commercial Director, Sam Haywood, and it's been instrumental in renewing those contracts. And we've got LaddersFree. So LaddersFree is our commercial window cleaning business, as I touched on earlier. We've had 40 new customers added to the mix, two of them are national contracts with well-known brands. And Dave Rudge, the leader of that business, has done a fantastic job, getting incremental revenue from existing customers, and we've had some success there with 68 incremental new sites being onboarded with existing customers. And then we've got REACT Specialist Cleaning side of the business, 18 incremental new customers, gives us a mix of contracted and ad hoc work worth around about GBP 0.5 million a year. Again, Sam Haywood instrumental in helping drive that growth. And Debbie and [ Abbas ] who work in the sales function of that business did a fantastic job. So in summary, we've had robust sales performance in what is a challenging market. And I'll pass you over to Spencer.

Thanks, Shaun. So Aquaflow. So I think the first statement we would like to make is the fact that I think we're very pleased with this acquisition. It's traded very well in the first half year in what has been a notable challenging U.K. market. It's a growing business. It contributes very well and it's cash positive. Looking at some of its KPIs -- and we bought the business -- it's worth noting that we bought the business at the end of October. So it hasn't got a full 6 months contribution. It's 5 months and a few days. KPI-wise, revenue is down GBP 2.8 million for the period. Again, it has a profile of revenues that are very high recurring revenues, GBP 1.48 million gross profit and an excellent EBITDA conversion of GBP 870,000. So yes, this business is continuing to trade very well. Culturally, it's been a pleasure to work with the management team. It's slotted into the group really well. And Shaun will attest to some of the successes that we've had across the group as a result of Aquaflow being part of our group.

Yes. Thanks, Spencer. Absolutely. I think the founders of that business and the management team of that business are fantastic individuals, very committed to what we are doing here across the group. We've had some cross-sell and upsell activities from very, very early on post acquisition, which has led to some incremental revenue and profit, multiple small- and medium-sized projects across the board. It's not hard to believe that when you go in and do a drainage job, often there's a make good requirements post that work and REACT Specialist Cleaning has assisted on many occasions, and that continues to work very well. We've had 3 new FM customers secured within that business. One of them is the first response contract for 167 sites. And if we look at the spend for last year and the year before, it works out around about GBP 100,000 per year, not GBP 100 per year [indiscernible], so apologies for that mistake. We've also secured a GBP 100,000 annual contract for a prestigious site within London to do interceptor cleans and some PPM was preplanned maintenance. So in summary, we've had strong performance from a very high-quality and quickly integrated strategic acquisition.

So just looking at project Sparkle. Many of you will be aware of what we're doing with LaddersFree, but just as a quick recap, LaddersFree is an indirect business. It was acquired a few years ago back in '22, and it's fully manual. So what we've got at the moment is a project ongoing to invest in digitalizing it. And this will benefit the customers. It will have a positive environmental impact, and it will also enable us to scale. In the last 6 months, we've built the system. It's now deployed, and we're rolling it out across our base. We're already seeing some invoices to active customers from it. We're already billing ourselves from our member community in terms of the work that they do on our behalf. And yes, we're already beginning to see the impact. So system now exists, and we'd like to think that we're going to be fully deployed over the summer months. So yes.

Thanks, Spencer. So I was just trying to find the mute button. Yes, just moving on to the next slide, please, Mark. So just on the summary outlook, as I touched on earlier, we've had robust performance in H1. It's been impacted clearly by some challenging market conditions and certainly when you compare it to an exceptionally strong prior year H1. But it has been lifted by strong performance from the strategic acquisition of 24hr Aquaflow, I just mentioned. 85% of our revenue is recurring. As I said earlier, high sector margins, strong cash conversion. And we've got continued demand for our integrated specialist services across the U.K. And we've proven that we can sell. We've got a great track record of growing business organically, 5 out the 6 years. And looking at pipeline, the signs of green shoots there, we're confident that we can return to where we were in terms of the numbers. And we ultimately remain well positioned to achieve that 3-year goal of GBP 5 million worth of free cash flow. That's it.

Mark, Shaun, Spencer thank you so much for your presentation. [Operator Instructions] And Mark, at this point, I'm going to hand over to you to share the Q&A, and then I'll pick up from you at the end, if that's okay.

Thank you very much, and thank you to everybody for listening. Right. I'll go through the questions. First one -- the first two actually were pre-submitted, so they don't have a name against them. The first one, I think, is for you, Spencer. How have you been able to -- sorry, not for you, Spencer, it's for Shaun. How have you been able to pass the minimum wage requirements, and we should add, by the way, the NI cost to contractors -- sorry, to customers' contracts and prices?

Basically, by having proactive conversations with our customers. As we said before, we don't lock our sales team or our operational team in a room where they're just focused on tenders. So we are very close and upfront with our customers. In terms of the contracted element, so the contract maintenance work, the contracts do have uplift baked into the contracts, albeit we've had to go through an education piece again this year to just reiterate to some customers that this is a government activity or legislation, and it hasn't been imposed by us. And yes, that's it really.

And it is right to say that this is the second year on the trough, obviously, minimum wage and living wage has gone up. And we're not really a minimum wage payer, are we, which I think is a testament to why we have very low churn amongst our employees. But clearly, the statutory costs are things that we contractually have ability to pass on through the contract, but we've been sensitive this time around. I think two years on the trough, some customers have been experiencing 25% increase in cost.

Yes, exactly that.

Yes. And then in terms of the noncontracted work, that's just priced at the point of time. So therefore, we price it into every contract, yes.

Yes. I think it's important just to remind people who haven't seen the presentation before that all of our sales activity is linked to GP. We're not -- we don't pay on revenue. So we've always got two eyes firmly focused on protecting margin, if not improving it.

Yes. And we should add our margins, because of the specialist nature of the work we do, our margins are very much in the upper quartile for the industry. Second question, I think, is largely for you, Spencer. It is pre-submitted again, so no name. What synergies have been realized so far from the integration of 24hr Aquaflow services beyond the financial contribution?

Yes. I mean, look, just to take a step back, I mean, it was never about cost synergies, the acquisition. It's always about adding new services, adding new customers to the group, services of a specialist nature. But I would say that synergistic thing, we've got the benefit of an excellent management team and an organization that culturally fits our group. Really, what that's enabled us to do, and we've got some track record historically of doing this before the acquisition is to cross-sell and upsell successfully. And we've seen that already in the first half year. So I would say those are the key synergies.

Brilliant. Thank you. Next question, I think, is going to probably be answered by me. It's from George S. It says, I believe your spend on acquisitions is larger than your current market cap. What does that say about M&A activity? Well, on the face of it, it might say that, that M&A activity was quite challenged. But actually, I think it's really important that everybody understands the story here. When we got involved as a management team in this business 6 years ago, the business had a turnover of GBP 3.7 million, GBP 3.8 million and was losing GBP 1.3 million. It had a great service offering that customers loved and it gave us sort of engagement with customers but the business couldn't make money. Shaun and his team turned that business around and started to make some money, but we knew we also had to change the financial model, which we've done dramatically since then because that business was all about project work only. We now have 87% of our business running that's recurring and the financial model is completely transformed. We've got a business that generates good cash. It's on upmarket margins, and we convert nearly 40% of our GP into profit and 12% of our revenue into profit. In our sector, that's pretty much leading. So that's the first thing. I think the second thing is to say is that looking at the market cap on AIM right now is not really a great measure. It's not a measure of success. It's a measure of what the markets are doing. And I think everybody is very well aware, and this affects pretty much every stock, the market has completely rerated over the last 4 years and has done so again just recently. Our first acquisition was 4 years ago. At a time when it was different. And by the way, when we bought it, everybody thought it was a great purchase. It was absolutely accretive and absolutely earnings enhancing, as has been every deal we've done so far at the point of the acquisition, it's been accretive and earnings enhancing. So we've transformed the business as a result of both the hard work that Shaun and his team have done in terms of cross-selling and upselling, what they've done it with a product that now has a fantastic financial model. And I think it's really worth recognizing that. And therefore, from my point of view, it's not about the market cap because that's something that's out of our control. It's based on what the market is doing at any one point in time. What is in our control is running the operational business really, really well, which I think this team does extremely well. And what the value of that business is in terms of a go forward -- on a go-forward basis and what the enterprise value is. And so I think the M&A strategy has been absolutely superb. And it's been superb for one reason that a lot of companies get wrong. And if people know my background, they'll know that I've been involved in a lot of companies where I've been asked to come in and work with a team where acquisitions have actually gone wrong. There have been too many and they haven't been accretive. And I can say to you here, what's happened here is every deal not only been accretive and earnings enhancing, but we've massively impacted the performance of that business we've acquired. Fidelis, we acquired 4 years ago, we've more than doubled the revenue and doubled the profit. With LaddersFree, we've grown the revenue by about 50% inside the first 18 months, shrunk a bit because of circumstances right now, but it will go back into growth. And with 24hr Aquaflow, we've seen growth inside the first 5 months. So sorry, it sounds a bit defensive, but I think our M&A strategy has been tremendous in terms of creating value, but measuring it just on the yardstick of an AIM market that is completely depressed and after the lowest point in our history in terms of market conditions. I don't think that's a sensible value. And the final point I'll make on this is that our business is very, very resilient. And this is a credit again to Shaun and his team. We've had 6 years, and you heard Shaun say, we've grown organically, forget the acquisitions, organically by greater than 20% every year for the last 5 years, but not this year. And in that period, we've been through COVID, which did us no favors other than put our name on the map. We've been through the invasion by Russia in Ukraine. We've been through the cost of living challenges. We've been through the challenges in and around the Middle East and the largest sort of geopolitical challenges that take place. And then the final thing that really was the straw that bent the camels back rather than break it was a change in government policy and a change in government. And this is not a political statement. It's just a fact. The market stopped, not just here, I have visibility of other industries. The market stopped after the election because there was no real clarity over what was going to happen. And then on the 31st of October, 3, 4 days after we acquired 24hr Aquaflow, we all got shocked by the increases to both minimum and living wage and employers' [ NOI ]. And that impacts not us so much, the impact on us financially is less than GBP 30,000 a year, which is de minimis in terms of the overall scheme of things. It impacts our customers. What Shaun has done with his team has gone on the front foot to go out there and retain customers. Our churn is less than 2.5%. That's lower than anybody we know in our sector, and that's because we do a great job. And so I think at the end of the day, again, sorry for sounding too defensive, but M&A is what's been part of the value creation here. And we've just been through a very tough time over the last year, having been through a tough time for the last 5 or 6 years, and I think the team have done very well. So I think our M&A strategy has been spot on, frankly. So moving on, Theodore T. Now Theodore I'm going to read your question out, but it makes some assumptions. I don't think the team are going to agree with. But anyway, [indiscernible]. Based on 24hr Aquaflow service margins and numbers at the time it was acquired, I expected more value to be added in the first half. However, it seems free cash flow and EBITDA have been affected by the acquisition short term. Did Aquaflow shrink in business since last year? Or does it hide a more shaky situation in the rest of the group? Well, I don't think we need to work the rest of the group, I think I just have. It's been a challenge, but we are working our way through that extremely well in the circumstances. But Spencer, could you answer the first part of that question, which says, did it shrink?

No. Aquaflow is a growing business, and we're very pleased with the way it's traded in the first 5 months of ownership. We've talked about the headwinds in the market. I think that answers the question.

Yes. Brilliant. Thank you, Theodore. The next question is from [ Jesus ]. We've got a couple of questions from [ Jesus ]. Excluding 24hr Aquaflow, revenues are down, but EBITDA and FCF have decreased notably. Do you still hold to your target of GBP 5 million FCF per year? And if so, have you already seen a reduction of those headwinds? Let me answer part of that and then pass to Spencer and Shaun. We absolutely do still hold to our target over the next 3 years of getting to GBP 5 million of free cash flow. We think we can see that trajectory within our scope and based on our track record and trend to date. So the answer is absolutely, that's not changed. That's why we made sure it was still on the slide. Spencer, do you want to cover some of what Jesus is asking here?

Yes. Look, again, we talked about the headwinds. Hopefully, they're beginning to -- we'd like to think that they're not going to last forever. Shaun will talk a bit about some of the sales activity that we're beginning to see. And we've had a great success in the past of growing this business. I think the headwinds have caused a challenge to us. If they dissipate, then I don't see any reason we can't get back to the growth curve that we've enjoyed in the past. And that's what we're all hoping for.

Shaun, expand?

Yes. Yes, I think I touched on it earlier in the presentation. There was definitely a slowdown in terms of deal age. So the jobs were staying in the pipeline a lot longer in Q4 and then Q1 of this year. Certainly, when we compare it to Q2 and Q3, the pipeline has increased and also the dealer edge has come down. So there are signs that things are moving along. And I hope and we believe that, that trend has bottomed. So yes, I mean we're out there and we're selling. We've made a few tweaks to the sales team, repositioned just activities more than anything, just to try to make sure that we're as slick and as efficient as possible. But I'm confident that we've got the right team. You might have said it before, we've been here through adversity in difficult times before, and we've always come good, and I have absolutely no reason to think that, that won't happen again.

Yes. And I think it's important we recognize that we have not lost business. I think we've actually gained market share, because I think the industry has been challenged, the standards have dropped. And that's the issue here. We have services that are nondiscretionary. You do have to clean. But you could -- in certain parts of the business, you could clean rather than once a day, you could clean maybe once every other day. And that's what's created the impact here. And it is the impact on the end customer that we've been responding to. But as things come through, it will come through. And I think the key thing to recognize is we are a large player in a very fragmented market. We're a small company, but a large player in the market we serve. And our value proposition is actually very attractive. I think the one thing we can say that we've got smarter about is who we're trying to sell to. I do think that we did spend a bit of time trying to sell to very large customers outside of the FM industry. And I think we just saw that's where it slowed down the most. Repivoting into the mid-market, which is where we are strong, freed some of that up. And I think our focus now richly around what FM companies need, and they need a consolidated player. If they don't use us, they're probably going to use 10s, if not 100 different individual subcontractors. I think that's an attractive proposition that has a price point where we are. So yes. Right. Moving on. Jesus again, can you please expand on the loss of customers and the decrease in the frequency of our service use? Has this trend bottomed out? So we have talked about this. I mean it's really us exiting from Hitachi over a year ago. And they're still a customer, but we exited from a certain part of the work. And in terms of frequencies, Shaun, what's your view? Do you feel that, that we've made the adjustments that are needed and now that has really slowed to a stop where we've seen the bottom of that sort of activity?

Yes, I think so. I think so. I mean, look, no one has a crystal ball, but we've had no one reach out to us or conversations that give us any indication that that's going to go any further. And we haven't had conversations on that for some time. So I'll go back to the pipeline. The pipeline is increasing. So it does look like things are on the turn.

Yes. Thank you. Next question is from Theodore T. Have you experienced capacity constraints in the recent years given your specialist needs in terms of experienced employees? Or is capacity not really a bottleneck for the business? Shaun?

So we've got no issues in terms of capacity. So we got -- like I said earlier, we've got a direct model and an indirect model. On the indirect model, we have more than enough members who have been members subcontractors for many, many years. We provide the work. They're happy with that arrangement. So there's no issues there at all. In terms of the contract maintenance work, when we win new contracts, we GP over the clean and [indiscernible] or if it's a new site, then we'll just recruit from the start. So there's no issues there. On the Specialist Cleaning side, we split it. We've got some of the work done by a direct model, some of it's done by indirect model. That was something that we put in place. If anyone has followed the story back in COVID, just to give us the scalability to deal with larger projects without adding cost base to the business. And then they recently acquired Aquaflow. It's a direct model. As we continue to grow, yes, we will have to look at adding new engineers into the mix. But at the moment, we're certainly not constrained or have any bottlenecks.

I must say, Shaun, and this is not me being patronizing. You make it sound easy. It's not easy. That's something we've built up over the last 6 years. And Aquaflow built up over 15 years or more. And the business we have acquired have built up over a period of time. So we've reached a point where we have got capacity. We don't have high churn for reasons that we think we know why. We're a very good employer. We focus on the right things, and we pay them the right amount of money. And so we don't have the challenges that maybe many of our competitors do. And we are very much aware of some of the challenges they do, but they don't seem to exist here and haven't done for the last sort of 5 or 6 years. Not to say it won't change, but I think it's because you're doing something right. Next question, Neil B. Is the GBP 2.8 million Aquaflow revenue in 1H entirely in the Contract Maintenance division? There was a comment that it has contributed to Contract REACT, which I think is the reference that we -- the REACT's business has actually been benefiting from some of the work that's available, yes. So entirely contract maintenance, Spencer?

The profile of the business is the contract maintenance is about 50% of their revenue roughly. But let me be clear, that GBP 2.8 million is Aquaflow's contribution to the group. Where we've had cross-sell and upsell successes that sits elsewhere in the group. But -- and Aquaflow will get a lot of revenue from their contracted clients in addition to those contracted amounts. They're very successful at that, and we're benefiting from that.

And we should add, although it's not in the question, and I know it was said in the presentation, but they've been opening the door for the rest of the group into their customers for REACT and specifically for Winter Cleaning. And you, Shaun and the team have been opening the door to at least 3 relationships that I'm familiar with that we've actually got a material things happening with that they didn't used to have, which is creating some growth on their side. And what people should recognize is that depending on which business we're talking about, there is a time to revenue from a contract being signed. It doesn't happen overnight. So we have a win, but actually that revenue actually mobilizing and getting the revenue coming through the door is different depending on what type of product we're talking about. Okay. On to another question from Jesus. Can you provide an estimate completion date on the Project Sparkle and the estimated cost and cost savings? I'm going to pass this to you, Spencer. But what I would say just in general is that Project Sparkle's priority was not cost savings. It will generate a small amount of cost savings, but it's far, far greater value than that. So Spencer, do you want to [indiscernible].

Original external build cost for project or the actual solution was about GBP 300,000. We're a smidge over that, a few percentage points over that. So it's pretty much aligned to budget. As I said on the slide where we covered Sparkle, the system exists. It's been built and we're rolling it out. We will be a little bit careful how we roll that out. It's a huge task. And let's not forget that the LaddersFree business has less than a dozen people in it. To come back to your point on cost benefit, there isn't actually any cost to come out of that business really, Mark, because there isn't much cost in it in the first place. That's that indirect model. It's the benefit of that indirect model. In terms of timing to complete the rollout, I'd like to think in the next 3 to 4 months, [indiscernible] is on getting it right as opposed to just getting it in. And there is some handholding to do with both clients and members. So we have to step through it in a pragmatic and considered way, but we are fully focused on getting across to that platform.

And just to finish on the value proposition here, 2 or 3 things. One is that sophisticated customers now are demanding a digital approach rather than signing bits of paper on site. So basically, we've got some customers that probably would walk away if we didn't move in this direction at some point. And we've got customers that would like it and therefore, represent themselves as going forward. Secondly is that just the sheer weight of paperwork and processes when all this is done manually was huge and that paperwork had to be retained somewhere, which was a risk and the traceability was extremely difficult and [indiscernible]. And that meant that any growth that we put into that business had to be labor-intensive. And because it was -- you could say, well, okay, the cost of labor is not that much. We've only got 9 or 10 people in there. But it would take 3 to 4 months to get somebody to understand exactly every step they needed to go through to make that system work. So it was a real constraint on scalability. And that's why I think we only grew it by 40% or 50% in the first couple of years is because we couldn't run that fast. So with Sparkle in place, it opens the door to 2 or 3 things. One is that we're one of the very, very few players at our scale, if any, that have a digital platform such as this, which will be important to customers. The second thing is that it does free us up to then scale really, really rapidly. And then I think the third thing, which we have our eye on, which is more about potential than a forecast is, we think that these customers will buy other things down the same platform. Think of things like pest control or all sorts of different services that they might acquire or consume, we would have a ready-made platform to push that down through. So that's why we've gone ahead with this project. And to get it done within budget, I think, is an achievement. And it just is -- we're just trying to make sure we don't fall over ourselves, especially right now in the current climate as we do it well. Okay. Jonathan D. with the recent share price drop, do you see an opportunity for the company to repurchase shares? Possibly. It's not something that immediately comes to mind. We want to make sure that we are around able to meet all of our commitments, which we are with a degree of comfort. But yes, right now, that's a question for us to think about, not something that's immediately coming to mind. Neil B, in which sectors have been -- sorry in which sectors have been the reductions in frequency of cleaning and where contracts have been lost? Just to make sure that -- I know you're going to answer it, Spencer, Shaun, but I just want to say the key thing about loss isn't like we've exited. We exited a very large contract where the requirements become of a lower specification and the margins, therefore, became unviable for us. That's the bulk of it. The rest of it is small beer. But on reduction of frequencies, Shaun, industry sectors?

Yes, namely retail and hospitality. We have had one where we work with a counsel, that did reduce its services whilst they were dealing with obviously internal items within the council, but that's come back online now.

Brilliant. Thank you. Next question from Jonathan D. Do you see opportunities within AIM market for acquisitions? You've mentioned REACT is being undervalued by the market. Are there other companies with similar or lower share prices? I'm absolutely certain there are, whether any would be suitable for the kind of metrics that we look at in terms of acquisition or not is another question and not really something that we're taking a close look at right now. Would we look? Yes, when the time is right. But remember that I think the reason the team have been really successful with the M&A they have done is that they're not only looking at the numbers in terms of is it earnings enhancing and accretive. They're also looking at, is there a good cultural fit because that's when we know we can motor ahead and add value. A lot of acquisitions are done, just don't add value beyond the acquisition. In fact, they lose value. And I think we've kind of highlighted that that's quite the reverse here. So yes, there might well be. In fact, I'm pretty certain there will be, because I think the market is underwater at the minute. But unfortunately, that's not something that we're focusing on right now. That leads into the next question. Are you still looking at M&A? Or right now, are you focusing, this from Jesus? Are we focusing on digesting Aquaflow? How is the status of the bidding and pipeline? So are we still looking for M&A? We still think that M&A is in our future between now and that sort of GBP 5 million free cash flow objective. And we also think that there are plenty of opportunities that are out there. Are we looking at them right now? No. Will we in the future? Yes. We need to get through the market conditions we're in at the minute. We need to demonstrate further that we can add lots of value together with Aquaflow, which we are absolutely confident we can for all the reasons that the team have talked about. And therefore, yes, M&A will come back on to the agenda, but not until we got the performance back where we need it to be. And clearly, the share price needs to reflect that. Now we've got some fantastic shareholders. I think most people on this call will know who they are. And they are understanding and positive in terms of us as a business. So yes, we will be returning to the road, but not before we next report for certain. I think it would be a little while yet. Anything to add on that, guys?

No. I mean just on the -- how is the status of bidding and pipeline, I think I've covered it in the presentation. I'm happy with where we are in terms of pipeline numbers and the deal age reducing. The sales team are all hands to the pump working extremely hard as they always do. I'm now involved in the channel sales. So yes, we've got some good opportunities in the pipeline.

Yes. Question from Neil B. And apologize, Neil, I'm not sure I understand the question, but maybe one of my colleagues does. What is the split of Aquaflow's GBP 2.8 million H1 revenues between the 3 divisions? We don't split it, do we?

No. The GBP 2.8 million mark is from Aquaflow, it's purely the revenues they've generated from their customers selling their contracted services and the revenues they get on the back of being an incumbent provider. Any other revenues from cross-sell where it's an Aquaflow customer would sit elsewhere and it will be reported elsewhere in the group.

And vice versa, if we...

Yes.

So hopefully, Neil, that clarifies or answers the question. And then the final question for now is from Theodore T. Following up on the buyback question, that was one earlier from Jonathan D. Following up on the buyback question and capital allocation in general. Right now, after less than a year post a quite big acquisition, how open are you to a new one? What would be the general buffer period? I think I did answer that a question or 2 ago, I hope, Theodore, to your satisfaction. We've basically always swallowed one acquisition at a time. That's not to say in the future, the company couldn't be more than one. But right now, it's not just about how quickly can we integrate with 24hr Aquaflow because actually, I think that's done. We have integrated. It's working really, really well, great people, and we all seem to get on extremely well. So it's now more a matter of getting over this market-induced challenge that we've had. And that's not to say that we can't do things better. Of course, we can. We've pivoted in a few ways. But I think it's about getting the business back to a performance level and with it, hopefully, the confidence of predominantly private investors to see an opportunity here. And I would say, I think it's a fantastic opportunity. If you look at how the share price reacted to our results, I think it was overdone, to say that of course. But I go back to the point I make about the financial model of the business, its track record through difficult times. What it's done in the last 6, 7 months, I actually think as you look underneath the detail, is really good quality work to retain customers from which we will continue to grow. And I think this is a great business that people should think about investing in. So on that note, that's the last question. We pass back.

Thank you for answering those questions from investors. Of course, the company can review all the questions submitted today. We will publish those responses on the Investor Meet Company platform as usual. Just before redirecting investors to provide you with their feedback, which is particularly important to the company. Shaun, can I just ask you for a few closing comments?

Yes, absolutely. Look, thanks for taking the time on a Thursday afternoon to jump on and watch the presentation. As always, if there's any questions, we're always approachable. But as Mark said, we've got a great business here. We've been affected by external forces. And we think this is a great opportunity for people to either buy some more shares or if you're not invested just yet to get involved. So yes, thanks for your time, and we look forward to speaking to you soon.

That's great, Mark, Shaun, Spencer, thank you once again for updating investors today. Can I please ask investors not to close this session. I should now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. On behalf of the management team of REACT Group PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.

Thank you.