Ten Lifestyle Group Plc

is remains always has been to become the world's most trusted service. And sometimes we say the world's most trusted service platform because we play behind other people's brands. And a brief reminder, when our business has really reached its potential, we'll be booking the dining, organizing the travel, booking the entertainment, helping with the premium shopping for a huge chunk of the world's high net worths and mass affluent. Those markets are absolutely vast. Over the immediate next few years, our job is to continue to be the market leader for lifestyle concierge services behind long-term contracts with big brands, particularly today in financial services, that gives us a base of high net worth members. And the better we serve them, the more we get paid by our corporate clients. That gives us growth. And also as we scale and we put more tech into our business and better processes, efficiency follows that drives our EBITDA, cash generation and so on. And those things combined are what we think of as our growth engine. So as our service proposition improves, we deliver better value to the corporate clients that pay us to look after our members. That increasing money allows us to invest more into tech and proposition, which drives profitability, but also drives member satisfaction that then drives more engagement from our corporate clients and more budget there too. That's the journey of the next few years and beyond. I would say, before we come on to our results for this last period, some of the analysts on the call, I'm guessing that every travel... leisure or hospitality company that you can think of or look at in the markets will have taken on new debt or issued significant amounts of new equity over the last 12 months. And very few will have managed to develop their business and invest discretionary funds into business improvement whilst also not needing to raise new cash into the business through debt or equity. So we are very pleased that that is what we were able to do. So although our core revenues, our core dining, eating out, live entertainment did decline, and so that led to a decline in net revenues, we still maintained good levels of activity with our members, and we made our business more efficient that meant that our EBIT margin actually went up marginally, albeit the absolute number of EBIT fell a little. We kept a good level of cash in the business. We took only a million of long-term debt in the US that was government backed. And we think that may be forgiven. But even as we came through this period with a healthy cash position, we maintained a high level of investment in technology and some other things as well. And that investment helped the digital transformation of the business, helped drive greater efficiencies, helped us put our digital platform into more markets and behind more brands. David Olusoga, And overall improved the level of service that we give to our Members, we were also we had a very good period for renewal of key contracts and we want some new mandates as well, so we are overall and given coven pretty pleased with our results from the last six months. Now, some of you haven't seen or won't have seen the video that's on our website about the growth engine. That's in the investors section. But essentially, that's what I've just talked about. So starting from the top, as our service levels improve, members use us more, our corporate clients do better, invest more with us. We invest that back into tech, content, supplier partnerships, which improves both our member proposition, but also improves cash generation and margin, as well as the speed of the service. Before we move on to Alan's financial review, I'm just going to play a 60 second video, which will really remind us all what we do for our members. It's basically a 60 second advert for the business.

If you believe that life is for living, it's time to start living times 10. Our experts on the ground will show you a world tailored to you with local and global partners to guarantee exclusive rates and upgrades. Our box office contacts will get you into every entertainment event you're into and into the seats of your choice. And when it comes to dining, we make unbookable tables bookable with prime time reservations in your favorite and future favorite restaurants. As a 10 member, you'll have our personalized platform at your fingertips, our team of lifestyle managers at your side, and access to exclusive offers from the world's top brands. RealMate, living a life filled with unforgettable experiences, effortless. And because we've got the buying power of 250,000 members, we'll do it all at a price that you'll love. This is Living x 10.

Great. So I hope you enjoyed that. I'm going to hand over to Alan for our numbers.

David Sloan- Thank you Alex and can move on to the next slide, and this is just a reminder of our revenue model on the left hand side, we have a pie chart for this this period revenue so. David Sloan- As you can see, we are the majority of our revenue for corporate clients who pay us to look after their customers. David Sloan- And then we make about 5% on supplier revenue, which is majority from travel hotel and flight commissions. Now, in a normal year, that split would be about 88% corporate, 12% supplier revenue. However, because of the impact of the pandemic, our supplier revenue has gone well down due to the travel restrictions. On the right-hand side, this is the makeup of our typical contract, where we get paid by high-touch request through talking to one of our lifestyle managers, either email or phone, or through our digital platform, the low-touch request, where we get lower-touch fee, and that gets us to our corporate revenue. Now, most of our contracts are long term, three years is the norm, and some of them have got agreed guaranteed minimums. So of our corporate revenues today, about 60% is on guaranteed minimum. In terms of highlights, as Alex said, net revenue down by 20% and lower than pre-COVID levels. The split of that between corporate is down 25%. So, you know, we've held up well, we've kept activity going and been relevant to members through this period. Of course, supplier revenue has been the hardest hit because of the travel restrictions down 66%. Offered expenses, we have managed that to try and manage our EBITDA number. And that's been a combination of things, as you say, continued efficiencies through our model, some FD reduction, and then specific cost savings. For example, we do have a salary sacrifice scheme where employees gave up sacrifice salary in lieu of share options to support the cash business through this period. And also, we took advantage of government funders' COVID-19 initiatives across the globe. And that turns into an EBITDA of 1.7 million, which is slightly below last year at 2.1. Our margin did improve by 1.1% year on year. The loss coming out at 3.6 is slightly higher. And as I say, we ended the period with healthy cash levels at 9.2 and a long-term debt of 1 million in the US, but I'll come back to that later and explain where we are there. Our income statement for the period. I won't go through everything. I'll just pull out a couple of points here. Our depreciation did decrease by half a million and actually just due to we've renegotiated or we've downsized a lot of our leases across the world and that's resulted in our right of use asset coming down. and then that's reduced our depreciation going through the P&L and increased share based payments through the salary sacrifice scheme I talked about. And then we did have a further review of our database and we've impaired a further 0.4 in addition to the 0.4 we did at the year end as due to the COVID-19 crisis. Okay, move on to the next slide, Alex. And then this is just a breakdown of our net revenue. And that's the 6.7 win drop between our pre-COVID H120. As you can see, supply revenue impacted by travel restrictions, I've said, and then because our core dining, travel and library and technical categories have been impacted, we're down 4.4 on corporate revenue. But that would be a lot worse if we hadn't come in with our virtual events and stayed relevant to our members through this period. We did lose one contract, which we signposted at full year, which moved to an affiliate model that was from September 2020 in EMEA. And we have one new business, but it has been subdued through the period. And we hope to grow that as we come out of the crisis. And this is a breakdown of our region. In summary, the hardest hit region has been America. It's down 35%. That's been impacted most by the pandemic in North America and South America. APEC has stabilized and that will probably not return to growth until travel returns because it's very tight travel restrictions across Asia, as we know. And then adjusted EBITDA by region, I would say, whilst EMA has been impacted by a reduction of EBITDA by 0.9 we actually improved the margin by 1% up to 34% over the year. America's adjusted EBITDA loss is slightly higher. We did make the conscious decision in America's that we would maintain some of our key resources in there. So when activity returns, we're ready to get the bounce back. And then in APAC, we've actually moved from a loss of 0.3 to a profit of 0.4. And that's been driving operational fixations I've talked about, and some of the cost control measures as well. This is the normal slide we put in for looking at our technology investment. We invested five and a half million on our platform communications infrastructure in the half year. And why do we do that? Well, it creates competitive advantage. It drives efficiency, service levels, revenues, and ultimately margin. And then last but not least, cash. We manage cash, and it's been a key number that we've been managing. So as you said, we ended the year at 9.2 on a cash that was an outflow of 1.8 million a year. And that's because we still invest in our technology. And that's important to us to drive our competitive advantage and only come out of the crisis for a stronger proposition back to our members. And lastly, as I said, we do have a loan in the US we took out last year, a Parent Protection Programme loan. We are awaiting confirmation whether we get that forgiven. Our bank, our lending bank, has approved the application. We're just waiting for final approval from the SBA, the US government agency, which we hope to hear about in the second half of the year. I'll hand back to Alex now.

Thank you very much. So I will talk through the operational update. Really, we're happy that we got good renewals. We had expansion into some new markets and spread our digital onto new brands as well. We've got record member satisfaction. So that's the second six month period of record member satisfaction because we've been improving the service quality, both digitally and high touch. And we've seen improvements because of our investment in technology in the business. Again, the growth engine, can't stress enough that if you haven't seen that video, it really does give great insight. It's only about 12 minutes long and it's on our platform, but I won't go through it right now. So this shows our record MPS. So it's quite a significant step up in the last six months. And H2 2020 was just a record as well by half a percentage point previously. And that's because we've been delivering better service than ever. Importantly as well, we've also been increasing memory engagement. The reason for that is that we've been essentially emailing. There are other ways we reach our members as well, but it's predominantly what we call eCRM, so emails personalized to members that go out, that offer them when to use the service, how to use the service, offer them articles, guides, offers, and so on. They have got very good open rates, very good click-to-open rates as well. Now, to put that in some context, an open rate for an email from 10 it could be typically 50 60 as high as 70 percent whereas when a bank sends something out about comments on a budget or something like that they are glad to have open rates of three or four percent so really very very um exciting for our banking brands to have something that people are so interested in and that's because the quality of the content the relevance of the content and the level of personalization But what this also shows that the chart on the right hand side shows that the number of emails going out is increased. And the reason that's important is this shows that our corporate clients want to market our service. They sign off on this level of engagement. And actually through the pandemic, because we've demonstrated that we can be relevant, at a time when many other loyalty services haven't been, things like airport lounge access, travel insurance, these things have become largely redundant. Corporate entertainment become largely redundant as well. We've become very relevant and it compounds by the fact that we've got the digital platform out in market. Our competitors that are largely just email and phone based companies It's harder for them to promote the service because you're promoting a phone line and an email address that people can reach out to. We're promoting a platform, which is the gateway to our service, on which sits the ability to book things yourselves, browse content, see offers, search and personalise the service to yourself. It makes it much easier to promote. All of this level of engagement really makes a huge... It gives us a great platform for growth as we come out of the pandemic. And how we sell to corporate partners, we've improved as well in the last six months. So we've improved our B2B processes, how we do lead generation through the funnels, how we use content marketing. We've got a load of lead magnets, which are essentially content that describes things that's relevant for our B2B buyers. So the people at banks that decide to buy a concierge service or decide to move from a competitor to us. And again, you can see that on the platform, but it's miles ahead of where we were just six months ago. And again, that's us getting ready to win and develop contracts as we come out of COVID. Now, in the period on the left hand side, normally our contracts average out in about three years. So given that we've got 20, just under 24 contracts that are medium, large and extra large, you'd expect about six to renew in a six month period. But we've actually, sorry, yes, so you'd expect a good number to review in the period. And we've actually delivered to that. One of our extra large contracts renewed, three large, two mediums. On the right-hand side, I'm pleased to say we have actually won and launched some new contracts as well. However, it is important to say that most banks that we're talking to who want to launch a concierge service want to do it just as they get very clear that COVID has gone and that people are traveling again. So whilst people are excited about what we can do for them, many of the people in our pipeline are saying, let's launch, but let's launch later after COVID has disappeared and when our core proposition around dining, travel, live entertainment is really speaking to people again. Very proud of our corporate client base. It's blue chip, it's solid, and we do very well operating our service behind these brands. And as I said, we continue to grow our digital adoption. So we've got our platform in front of more people behind more brands. One I'd call out is the fact that we've launched with the Amex Centurion and now the Platinum card as well. But if I focus on the Centurion, those card members in Switzerland are very high spending, as you can imagine. And we operate there, despite the fact that the people that run American Express in Switzerland could have chosen a program from American Express and a digital platform from them. Instead, they chose to go with our digital platform. Now, I think that says a lot about the quality of our digital platform, given that American Express, on some measures, is the world's most valuable service brand. We also launched into the Nordics. We've recently launched with SEB, a Swedish bank, where we took over a contract from one of our analog competitors. And we've launched with other brands around the world as well. Our investment in tech directly helps engage members. When members are engaged, they use the service more. When they use the service more, we're a few steps down the road to becoming the most trusted service and it grows net revenues. Some of the ways that we've done that is better digital onboarding. We inspire people and excite people when they first join. We've got better personalization. We gather preferences better that we then use to be proactive to our member. And we do some really smart stuff around machine learning and automation. So for instance, if you book a flight to New York, then our system will automatically remind you to book restaurants two or three weeks before you go. And we'll automatically prompt you if you haven't booked hotels with us to book hotels on our platform or by contacting a lifestyle manager as well. That kind of automation is really helpful for engaging people, making sure that people get the best from our service. And we've also done some smart automation that again drives member satisfaction, but it also drives efficiency. So we've done some stuff that we probably should have done before, abandoned basket automation. So if somebody on our platform is browsing around a holiday for seven days to the Seychelles, until this last six month period, we weren't contacting them if they didn't book on the platform. We now do that on many of our programmes and that should be on all of our programmes as soon as we roll it out. Bullseye call routing means that when somebody calls in, emails in or live chats, we can make sure the lifestyle manager that's most appropriate to deal with them is the person they're dealing with, either because they've got a live request on the system with us or because they've got a preferred lifestyle manager. And chatbots also help us automate the service and better for the member as well. Content, again, where many, many companies involved in travel, hospitality, eating out and so on have gone into hibernation or have really cut to the bone in terms of the costs they've had to cut, we've actually invested more into content. So we've got travel magazines, dining magazines, home cooking magazines that may or may not survive post-lockdown, but it's actually been incredibly popular. We write about fashion as well. And we've also pre-prepared, again, to be ready to come out of lockdown, a hundred destination guides and another hundred guides as well that are useful and relevant and crucially up to date for our members. And of course, one person's holiday destination guide is another person's in-market staycation guide. Also very, very helpful. And we know from our own data, but it's common sense, that when people read our guides, they're more likely to use our service and grow revenues as well. This slide... If any of you are checking your emails or looking at anything else on your phone or your PC, please stop now and check this slide out. Because we are very pleased to be showing this to you today. The number of fully automated requests, which was zero not long ago, and certainly in living memory just a few years ago, and quite close to low when we IPO'd, is now a fifth of all of our requests. And three quarters of our requests are fully or partially automated, which is great for our members because it gives them the opportunity to use things digitally and it makes things quicker. But of course, it's also great for our profit margins. And we see that in the improved margin, despite the fact that our revenues are down. And you know from our growth engine that higher revenues, more scale improves our margins as well. So our investment in tech is something that I'm really pleased that we've continued and we're seeing that flow through into how members use our service that benefits them and benefits us. We've also been improving our core proposition. So we've used the fact, never waste a good crisis. We've used the fact that the travel industry need us more than ever to get more contracts with more airlines around the world, get better deals with hotels around the world. And we've improved not just our content, but the range and depth of the service that we provide. And we do that in retail offers and benefits as well as travel and dining. And we do it in entertainment as well. I'm going to talk about the book club because it's one example of many about where we've invented something during COVID that will continue afterwards. So book club is we offer people to take a complimentary book and then eight weeks later to meet the author in an intimate Zoom call, which we host where the author is interviewed and then our members can ask them questions. That started off in the UK with one corporate client. It's now on multiple clients around the world in APAC, in the Americas, North and South America, and going very well here in Europe as well. And we've now extended that for film discussions and also music discussions and with well-known celebrities and personalities as well. Really works. And we think that that kind of thing is going to survive post-lockdown, albeit not everything we've done during COVID will be relevant moving forward. But it's not just about improving our tech and our content and our service levels. It's also about investing in our people. So whilst our people did take some pain during the last 12 months. So we took out bonuses, we had a salary freeze, and many people, including every member of our senior leadership team, every single member of our senior leadership team took a salary sacrifice in return for share options. So whilst our people reduced their costs to the business in various ways, we also continue to invest in the future. The easiest thing to cut would have been our training, our coaching. It would have been a very easy thing to put a line through, but actually we maintained that. So our global leadership program has continued to strengthen our leaders in the business. Our 10 Academy continues to help our lifestyle managers deliver better service and actually working virtually has really helped us there as well. We have taken steps towards improving our DE&I, some of which we already did well, some of which we've really needed to step up. And we've attracted more talent and more inquiries from direct and indirect competitors and retained all of our top team. And that's resulted in the best ever employee engagement scores that we've had in our employee survey. So where from here? Essentially, as you know, we grow our business by growing the run rate of our current clients, by growing usage per client, the number of users and winning new contracts from current clients and then winning new contracts as well in existing and new markets. And this next slide is taken verbatim from our R&S, from our report to the stock market earlier on this morning. But essentially, request volumes have reduced, mostly because our core propositions have been less relevant. And although we've replaced a lot of that with new propositions, that still affected our net revenues. However, recently, the level of inbound requests has been increasing, particularly in EMEA and North America, where social restrictions and travel restrictions have been eased. And so we're seeing inbound requests increase, which then leads to an improvement in revenue from our longstanding and new corporate clients in the midterm. So essentially across the balance of this year and beyond, we should see an improvement there, given that COVID continues to reduce. Supply revenue is a really important thing to talk about. We have got, as Alan pointed out, supply revenue has been very low during COVID because most of our supply revenue comes from hotels, a little bit from airlines, but that is already coming back. So in the last six months that we've reported, it was improved on the previous six months, but since the end of February, it's doubled. And that is led by the places where people can think about traveling again. So although people are cautious about traveling, we've seen that really start to ease quite rapidly amongst our high net worth customer group. Furthermore, easing of restrictions will help convert the very healthy pipeline of new business, potential new business that we've got in our sales pipeline. And then crucially, the ongoing improvements in servicing and content and efficiencies will continue to give us positive EBITDA and mean that we'll retain a healthy cash position. Although, and this is something which we are messaging here, we are expecting a net cash outflow in the second half of the year because we're going to continue to make the investments in some of the areas that we've talked about today to further drive that growth engine. And those investments will pay out in future improvements to service levels and efficiencies that drive EBITDA and cash generation. So overall, we're happy with the improvements we made to the business and our member proposition and to our technology. We think that leaves us really well positioned for the post-COVID world and us taking advantage of the business and the services we're delivering today and then the return of what were pre-COVID our core areas of dining, travel and live entertainment. And I'd love to move to questions. So whiz through that exactly half an hour, so as promised, but definitely we've got time for questions.

Great, so we've got James Lockyer.

Yes, thank you. Good morning, guys. Three questions from me, please. So on digital requests, I guess this is a two-parter, but as I understand it, digital requests generally have or have zero 10 lifestyle staff intervention if they're fully automated. Whereas partially automated have a certain level of staff involvement. Can you just help us understand what portion of the partially automated ones are say unnecessarily partially and might require education on the part of the member to push it to fully automated? and what strategies do you have in place to improve that? And then I guess just secondly, there would have been a certain amount of shift to digital in the period that was due to the types of requests in the period. Could you give us a breakdown of the underlying switch to digital that we could expect going forwards? That's the first one, I'll do them one at a time, thanks.

Okay, great. Well, I'll take that, Alan. So you're right that some of the partial requests could be done digitally. So a good example there would be that a partially automated would be where our lifestyle managers have got an allocation of tickets for an Ed Sheeran concert, for instance. And because we've got that inventory management system in our business, that process, instead of being the old fashioned way of member calls in for Ed Sheeran tickets, lifestyle manager kind of runs around by phone and organizes those tickets just for that one member. Partially automated means we've got a digital allocation of tickets that we can pull from and solve that request immediately online. Now, that digital allocation can also be bought on the digital platform. And so it's true to say that we will educate our members to think digital first. However, it's not the case that we necessarily need or want all of our members to move from partially automated to fully automated. Most of our high net worth brands or the brands that have got a high net worth customer base wants us to have really good tech so that people are happy to self-serve, but they're also happy to invest in members that want to talk to somebody to solve something out. They're happy to invest in that. However, in the mass affluent space, budgets are smaller per person. Our corporate clients have got less money to spend in the mass affluent space than high net worth. And so there, we will do more to actually encourage people to book digitally. And there are opportunities to do that. I would also say that when we launch a new program, the marketing really leads with the digital platform. So ironically, new programs kickstart with a higher proportion of people going to digital than existing programs. So if you look at Coots, a well-known brand in the UK, they had more than 10 years of using our service with no digital platform. So many people are quite set in their ways. But when we launch new, let's say to Royal Bank of Canada, because we launched with the digital platform, that's how they've grown up. That's what they're used to. So the shift to digital, launching new contracts will help that shift to digital. The ongoing engagement through those emails also helps shift people to digital. And frankly, improving the speed and the quality of the digital platform has also made a big advantage. It's true that the percentage of business that's fully automated That has benefited a little from some of the types of requests that we do during lockdown. However, it's a really marginal difference. So we do expect the percentage under digital. The next six months, it might move from being one fifth fully automated to a tiny little bit less, but then we'd expect it to grow again and get beyond one fifth really quite rapidly. And partially automated again should continue to grow.

Okay, that's great. Thank you. So second question, and we've spoken about this before, but can you just remind us why 10 doesn't have an app and whether there's an opportunity through the investments you're making to maybe work closer with existing apps of your corporate clients themselves?

This is a really interesting question. So Most people on the call will have apps on their phone. And you only really keep apps on your phone if you use it a fair amount. One of the challenges we've got for our corporate clients is that the digital platform we've got today, because it's a website that doesn't take up any space on your phone and it doesn't really take any time to log into, it's very quick and frictionless. You get a higher proportion, if we market to 100,000 people, you get a higher proportion of people joining a digital platform, a website, than you would downloading an app, because it's a bigger decision to download an app. So let's say that we would do some marketing and get 10,000 people using our digital platform. We might only get 1,000 people using an app. Then what we've got is the thousand people that use the app because there are push notifications and it can intrude into your life in ways that could help us. Those thousand are likely to use it more than the average of the 10,000 that would use the digital platform. And so although that usage might be good, that gives a little bit too much concentration. So we have a very small percentage of a user group using it a lot. So that's why we've always prioritized having a digital platform over an app. It ties in with our strategy and the strategy of our corporate clients better. However, and I'm really glad you asked this, James, this is crucial. We are very excited about apps, but not our own app. We're excited about getting into the apps, particularly of our banking clients. So let's take, well, all of you can think about your bank. And for most people on this call, you'll use Amazon, you'll use a few, maybe a couple of travel apps. You might use a supermarket, a couple of other things. But probably if you've got 20 apps on your phone, one of them will be your bank. And we want to integrate in with that app. So we are rebuilding, or we've actually three quarters of the way through this, rebuilding our platform so that we can integrate it into the apps of the retail banks that we work with. so that when you go to your banking app to check your balance or make a payment, we can say, depending on your profile and what we know about you, by the way, did you know? What about this? Can we help you with that? Personalized, useful interventions announcing how we can help you. That is amazing because that gives us the opportunity to interact with you. It helps the banks with their digital transformation. And it helps them connect with their high net worth clients. But it gets us in front of people with an app that should be and is already on their phone.

Okay, excellent. Thank you. The final question, I guess, just in advance of the 17th of May in the UK, the world will be looking to book tables, you know, amongst other things, which might mean there might be a level of over demand versus supply if everyone's looking to book tables. Could you just give us an idea of your level of supply at this stage and whether because of your relationships, you might drive incremental demand if things aren't available in the normal way?

Super. So let me give you a great example of this. So in the last lockdown that was eased or when we opened up this lockdown right now. So a few weeks ago, they allowed outdoor dining at restaurants. And the number one demand from our members, because they've got so many outlets, is the Ivy, which is a chain of very aspirational, high quality restaurants in the UK. The Ivy gave us priority booking for all of the outdoor spaces at every Ivy in the UK. And that led to a huge amount of demand from our members and allowed us to tell our banks would you like us to tell your customers they can book outdoor spaces at the ivy which were at a huge premium before the public most of our banking partners said yes please tell them that because we know they'll love it that's what we did now why did the ivy do that because our average member at the ivy is drinking more expensive wine they're tipping better and they're ordering more expensive food. It's mostly about the wine, then about the food is last. And so that gives you some insight into the fact that the restaurants, because so many of them have got not just a lot of demand, but limited supply because busy restaurants have got more spacing between tables than they had previously. So it's crucially important for them to rebuild their balance sheets, their cash, that they fill those tables with people that are high spenders. And our members, on average, spend almost twice what an average member of the public spends. So we are matching the increased demand with increasing supplies from our restaurants. And our restaurants have really loved the support that we've given them in this really awful year for them.

Thank you.

I don't have any other questions.

I do have another one, if there's no other one. Anyone else out there asking for a question? Go ahead. Just what it'd be good to understand if you're able to maybe one for Alan in terms of the costs and then the sort of the bridge, if you could bridge us maybe between the costs that you saw in say H120 to H220 to H121, just to give us an idea of how, you know, what should we expect going forwards, that'd be useful please.

Yeah, I think as you can see in our presentation, we saved about 6.2 million half year to half year. So, you know, the H120 was pre-COVID and then this year. So as I said, we have taken advantage of government schemes across the world, be it furlough in the UK or Kurzweil and EMEA and APAC as well. There were wage subsidy schemes across the world. so we took advantage of that and we also did our salary sacrifice so i think of the 6.2 million um saving we made year on year uh just under 40 percent of that came from what i call government grants or salary sacrifice schemes which are one-off in nature and so that's how and the rest has been really operational efficiencies ft reduction and and really just you know tightening the belts I mentioned, you know, on the tech side, we've offshored to lower cost countries in some aspects and other functions as well. So we've just got smarter at how we manage our costs. And that will stay, continue as we come out of COVID. And then from a margin point of view, the way I look at this is that whilst we've got government support in the last year, that's really replaced our supply revenue. So when supply revenue comes back, we re-employ people back in, that will level off and actually we'll get less FTE coming back in because of the improvement in our platform and digital growth in terms of number of requests.

Does that make sense? I did have a question around competition that we were asked, so let me just address that. Essentially, we think that one of, we've always been more focused on member satisfaction. We've always believed that the happier we can make our members, the bigger the total market is for our service because people are more likely to use us than the other alternatives available to them. But technology has been absolutely crucial now. So we've invested since IPO over 40 million in communications, in our technology platform and in content. and what we've got our competitors are left in this very difficult position whereby if they don't invest into technology we believe that it will be very very hard for them to win decent new corporate contracts because there isn't a corporate contract that we come across that doesn't want digital to sit at the heart of the proposition they want to put in front of their customers and we've got that So if they don't invest in tech, we win. However, if they do invest in tech, they've got to invest. Let's say that they would choose to invest something in the region of 20, 30, 40 million to catch up. They would only get up to where we are today we're going to be further ahead because by the time they do that it'll be two years time we'll have invested if we carry on at the current rates another 20 million into all of those elements and who are they going to sell that digital platform to because in the meantime the big contracts that come up we've either already got or we're hoping to pitch for and win and that whilst there are many things we think we do very well on culture we think we do very well on management focus, how well designed our business is, our supplier integration, our global reach. But technology is something that really helps us. And it's not just the technology on the member platform that our members can use. It's also the technology that our lifestyle managers use that make them more efficient. And that also means that you can't compete with us easily and in a sustainable way on price just by having cheaper lifestyle managers working very hard. that might give you a low cost of service delivery, but it doesn't give you as low a cost of service delivery as slightly better paid lifestyle managers using technology, using pre-prepared content and allocations and so on that really make them more efficient on a per request basis. So there's just a couple of insights into how we see the continuing evolvement of our competitive situation.

We've got a question from Keith Hiscock from Harman.

Hi, guys. I just wanted a bit more detail around the supplier payments. I know they're a small part of the revenue historically, but two questions. One is, what's the nature of those contracts? How do you get paid? What's the longevity of the contracts? And the second question is, when we're through all the effects of the pandemic, what would you aim for that to be as a proportion of revenues?

Shall I take The overview, Alan, and then you talk about how the cash flows work and so on. So the majority of that, what is today just 5.5% of our net revenue is what normally is 12% is hotels. And most of the revenue that we make, we get a best price, which is as good as any in the market, as good as the best prices in the market. And then we add benefits on. So free breakfast, early check in, late check out, room upgrades, spa vouchers and so on. And then we still make, let's say, 10 percent would be a starting point. Now that 10% on five-star hotels is the single biggest ingredient in that supply revenue. In some other areas, so restaurants, we don't take a margin, mostly because we want restaurants to just give us their best availability. We want to be their favorite channel choice. With tickets for music, theater, and sport, We very rarely take a margin because it's more important that we just get the availability for our members. And when it comes to airlines, we do make a margin, but it's less than hotels. Now, what's really important is we're not looking to get the percentage of our net revenues, the supplier commission, up to 25%. because we're more likely to take the margins that we could make and pass it through to our members as a benefit. So for instance, let me give you a good example. We've integrated Expedia, Booking.com, Agoda, and other sources of hotels for three-star, four-star hotels. And on many of our programs, we pass through the best prices that we get such that we're 10% cheaper than Booking.com and Expedia. Now we could just match booking.com and Expedia and make more money, but we choose to focus on doing what's offering the best deal for the member. So you might ask, Keith, why didn't you do that for the Four Seasons and the Ritz-Carlton's and so on? And the answer is quite simple, we're not allowed to. So ironically, that 12% that we normally make, we kind of have to make that because our contracts with the Four Seasons and the Ritz-Carlton's, Shangri-La's, et cetera, mean that if we pass that through, we'd be offering better prices than American Express, for instance, and that puts them in breach of their understanding with those people. But we only make a margin after we've got a great value proposition. So don't think that we're trying to drive that secondary revenue stream to become much higher than the 12% that it is today. It could become 15%. But I don't think that it's likely, I can't imagine it getting to 25% for as long as our mission remains to become the most trusted service in the world. And that is our mission and will be for as long as the current management team around, which we hope and expect to be for many years to come.

I think just to add to what Alex said is that what we do have an opportunity is that, you know, our penetration of travel and certain clients isn't as high as other clients. So with, you know, the pandemic and issues with various travel sectors is that we've got an opportunity to then become relevant to those clients that maybe, you know, are members who haven't used us for travel before, to use us as a trusted service. So we've got a room to expand within our existing portfolio of clients. Thank you.

Thanks Keith. So we've got a couple of questions from Nicholas Payne. First is to Alex and then a question to Alan on the balance sheet. So Alex, TEN leveraged its customer base and deep customer relationships with the new book club. What other examples of building new services or businesses off the hard-won TEN customer relationships?

Yeah, it's a really interesting question. We could do we could do more here. So we're very happy with the book club. We're very happy with some of the other things that we've launched. And we kind of tend to stick with things that are related to our existing services. So live entertainment, dining, we think of the book club as really being an extension of entertainment and culture. We have historically looked at other verticals, for instance, healthcare, elder care. We've looked to doing more around the whole wellness area, and we've looked to doing more things in home. So we know that many of our members, for instance, would like help thinking about how they green their house, for instance. Can they get a ground source heater? Are hydrogen boilers ever going to happen? And who do they turn to for advice and trust on that? It can be something a little bit more immediate, like video doorbells that they can activate remotely or use, things like that. We haven't gone into those areas yet because we we wanted to focus on our core areas. But what we're finding is that as we get to a bigger critical mass of members around the world, we can become a very good channel for new technologies, new services to those members. We know for the vast majority of our members where they live, how to contact them, their age. And of course, once they've engaged with us, another 10, 20 personalized bits of data about them as well that allow us to really become the best way to market an existing or new product or service to high net worths around the world. If I had to put me on the spot and I would say that I think retail, luxury retail, the top end of retail is gonna be a really good space for us over the next few years. A good example of that where we've dabbled, but where I think that we've got more opportunities is luxury brands and auto brands as well. So for instance, we've already got in various parts of the world, the opportunity for us to lend cars to our members So if you want to try a particular car, normally you've got to go to a car dealership, drive it around with somebody from the car dealership sitting next to you if you're really unlucky. Whereas because our members are more likely to be real buyers and not tire kickers, many car brands will allow us to organise for them to deliver a car to your house for you to drive and borrow for a couple of days. Similarly, luxury brands will give our members late shopper events. They'll give us particular access to their experts to talk about their wines or particular deals. So we're probably about to relaunch. It was not on there already. Last spring, we did a launch for Whispering Angel Rose, the top luxury premium rose brand in the world. We've also got deals on Cloudy Bay and things like that. And they'll do those offers for our members Because it's a closed user group, it's not visible to the public, but it actually generates some pretty good volumes for them and in a premium setting. So I think retail is an immediate area for us. Other areas we'll look at. But over the next 18 months, we're going to continue to focus on things that are related to dining, travel, live entertainment and increasingly retail. That will be the biggest area of growth.

Thanks, Alex. And Alan, some questions on the balance sheet. So firstly, how much cash buffer is required for comfort? And secondly, on the modest cash flow, cash outflow expectations of H2, is this roughly at the level from H1? And lastly, are you willing to ramp up investment as you see light at the end of the tunnel for COVID? Or is this a reasonable run rate for the midterm?

Okay, thanks, Nick. I mean, from a cash point of view, I think we're comfortable. We have a net cash of 8.2 million at the end of the year. I would say in terms of the cash out for the second half of the year, it's going to be at similar levels of H1, maybe a tad higher. But then, you know, if we get the forgiveness on the loan, then that reduces our net cash number. I think it all depends on, you know, how the coming out of COVID. And I'm saying that because supplier revenue, we are, as Alex said, we are starting to see quite a big uptick on travel. Now if that continues, that will support. But we are looking to, you know, from the start of the new financial year next year, with what we're seeing is that we get back to, you know, the inflection point we were at just before COVID, where we were going to go into a sort of break-even cash generative position. And so, you know, COVID paid to that, but we're hoping to get back up to that in the start of the new financial year. In terms of investment going forward, I think we're probably at the level of investment we need to do. I think if there was anything we wanted to do, we thought that would generate revenue margin, we'd look at it. But I think the levels that we're at now is probably we're comfortable with in terms of what we need to deliver.

Just add one thing to that. As we get more discretionary spend available to us by generating decent cash flows, historically, we put that into tech. And we definitely expect to maintain marginally increase our tech spend across next year as cash returns. But we're likely to ramp up our sales. We've still got a lot of clients that should be launching with us around the world who haven't heard about our service yet. We're very underinvested in sales. Now, the last year has not been the right time to be selling. It looks like the next year, particularly probably from September, October, would be a good time to be doing that. So if things continue to look like they're improving, then we will want to invest more into sales. But we'll only do that after we've got enough cash to continue the current level of investment in tech.

Right. Has anyone else got any questions?

Well, thank you, everybody, for coming on this morning. And we appreciate people dialing in from various different parts of the world. And for your support, we've got a few shareholders on the call and some analysts that take the time to understand our business and report on it. We appreciate all of that. And we're looking forward to continuing to grow and develop the business. And looking forward to seeing you in six months' time when we'll report our full year in November towards the end of this year.