Ekf Diagnostics Holdings (LSE:EKF) — Preliminary Results

0:01 Good afternoon, ladies and gentlemen. Welcome to the EKF DIAGNOSTICS HOLDINGS PLC Preliminary Results Investor Presentation. Simply type in your questions at any time and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company review your questions submitted today and publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And if you could give that your attention, I'm sure the company

0:31 would be most grateful. It gives me great pleasure to hand over to Julian Baines, executive chair. Good afternoon. Good afternoon, everyone. Thanks for joining the call to give you an update on EKF Diagnostics. I'd like to begin the meeting by going straight to Slide four, where we talk about the equity story. And I truly believe that at the moment, EKF is got a is a really strong opportunity for shareholder returns. The reason I say this is that I do believe that a lot of investors have forgotten who we are as EKF because of all the smoke and mirrors of the pandemic. There's a lot of, people out there thinking that, you know, I've forgotten about the core business, and the core business is fundamentally and always has been revenue generating, operationally profitable, cash generative, dividend paying with recurring revenues from our point of care business.

1:30 And unlike 2019, we also offer a huge upside in twenty twenty four and twenty five with our new fermentation business. So at the moment, we're currently trading at about seven times 2024 EBITDA forecasts. So as a company, we are in a very, very strong position with zero long term debt, and we're in a and we'll show today later on that we're in a really strong position to grow. Looking at this slide, we just thought we'd summarize almost the whole business in one slide. So our 2022 financial performance, which you will have all read this morning, shows a 66,600,000 revenues, 48% increase in sales from pre pandemic levels, net cash of 11,400,000, and we've taken strong actions to realign that business, which Mark will talk about a bit later on. But we've acted very, very quickly in realigning the business to make comparisons and to grow according to the where the business was in 2019.

2:37 I was at pains over two years of presenting to say that the pandemic would end, and we always focused on this really, really strong core business. To add to this, we have a strong established core, but we actually have invested quite a lot of time and effort over the last three years, and we've seen a 13% year on year growth in point of care in central lab. Strong demand for our EKF products is certainly in hematology and diabetes, which I'll talk about a little later. And also, as we said, there's recurring revenues of a minimum 35 to 40,000,000 a year purely on the razor razor blade scenario with with that part of the company, with the point of care part.

3:23 Life sciences has grown by 60%, and that's before we talk about the investment that we've made in South Bend, which I will come on to in great detail later on in this conversation. But during the time of the pandemic, the cash we made was reinvested very, very strongly into this business, into the core, and into a big growth opportunity. So in 2019, we are offering a five to 6% year on year growth as a point of care life science business. Now this year, we're offering a significantly higher growth because we've invested, as I say, in fermentation in South Bend, which will reap rewards from 2024 onwards, and I will come on to talk about that. And that's also mentioned an attractive platform for growth. So overall, this business is in a very strong position.

4:17 It's looking to grow exponentially next year, but we've also got a very, very strong year ahead in 2023. The last point I'll make on this, we do do comparisons with 2019, the last time we purely had the core business. We had a we achieved in 2019 45,000,000 revenue and 12,100,000 EBITDA. This year, without the upside of South Bend, we're forecasting just under 57,000,000 and 14,100,000 EBITDA. So we're showing really strong growth, this year alone without the upside of next year. So on to the next slide. We are going to simplify the story, but at the moment, the company is made up in three areas of point of care, central lab, and life sciences.

5:11 What we will be doing moving forward is converting the business into just two sections, which will be point of care and life sciences. And BHB will be put into the life science side of the business, and we'll be splitting the business into two, which will have revenues of around 33,000,000 in point of care and 20 around 20,000,000 in life sciences going forward. Obviously, that's due to grow. Going back to the position where I think people have forgotten who we are and what we achieved up until 2019 pre pandemic. We sold 15,000 of care analyzers last year. We manufactured over 80,000,000 tests, and we sell into over a 120 countries.

6:02 We have a very, very strong, partnerships with a number of major players such as Fresenius Kabi, McKesson Diagnostics, Humana,

6:15 Cardinal in The US, and one other major player in The US. So we have very, very strong partnerships with companies that just is setting us up to grow even more throughout the next two to three years. So I've mentioned this before, but the simplified story will be moving forward from our interims just concentrating on point of care and life sciences, producing the revenues and EBITDA from each side, with the, overarching company of EKF. And that's something that we'll be reporting to make sure that everyone is aware of the growth on both sides of the business. So if we look at the point of care products, we are, if not the number one, number one or number two in hemoglobin testing, worldwide.

7:08 HemoQ being our only, major competitor, and we're taking a lot of market share from HemaQ at the moment because of our capability in having all manufacturing in house and our flexibility since HemaQ was sold to Danaher. So our 2022 revenues were 30,800,000, a growth of 14% versus 2021, but even more importantly, a growth of 12% compared to 2019 pre COVID. So we're now moving into double digit growth in our point of care business. As you can see, our key products, hema control grew by 37%. Hematostat, which is a centrifuge that we sell into blood banks in The mainly in The United States, grew by 31%.

7:59 Our diabetes analyzer, QoLab, grew by 23%, and our other diabetes business, in BioSEN grew by 15%. Huge growth in our point of care business and the belief within EKF is that this will continue to grow because point of care has become more established now globally, and today it's worth 45,400,000,000. It'll grow to 75,500,000,000 in 2027. The reasons behind this, there are a number of reasons why we are growing so much. There's more move towards virtual wards where you can remotely monitor patients. We have introduced something that we announced recently called EKF LINK, which is mentioned again in this slide.

8:50 EKF LINK has proven to be a very, very successful product for us in certainly in terms of winning tenders. It is a software system that connects to laboratory information management systems and also to patient data. So this allows us to

9:07 control patients moving control that's the wrong word, to monitor patients moving forward. I've already mentioned our key partnerships with global leaders, and we are very, very much more responsive compared to our competitors. Also in, point of care, our DIASPEC device, which is the which is a device that also for hemoglobin, it's a handheld device, that sort of flatlined recently. But the the reason for that is that we have got supply issues from a supplier as in we they can only maximum only produce a maximum amount of tests for us. What we've actually been able to do with that is that we are gonna be manufacturing those tests in house from next month with and we're also opening a new facility in Leipzig from the end of this year. And the last thing I'd like to say on point of care, we've also raised our prices because of inflationary pressures by an average of 7%. So we should start to see our margins grow again by one or two percentage points.

10:17 And, also, we had a very onerous contract with Fresenius, which is a ten year contract, which was to do with the acquisition of DIAGNOSTICS ten years ago. That contract came to an end last year when we managed to increase the cost per test of the DIAGNOSTICS cuvette by over 50%. So we should see a significant return on those tests from Fresenius. Our central lab business revenues grew to 14,500,000, 11% versus 2021, 9% versus 2,019. The most important part of this slide is that we are the number one supplier globally of something called beta hydroxybutyrate, BHB.

11:06 For those of those of you who are new to this company, back in 2014, there was an issue in diabetes where if you had a hypoglycemic attack, about five percent of people had ketoacidosis, and ketoacidosis is a very, very serious reaction to COVID, to COVID to die in diabetes. And, what the FDA did was decree that all people in The US should be tested for beta hydroxybutyrate. We had a product, immediately ready for market at that time. We were turning over $50,000 a month with it, and now we turn over £12,000,000 and increased by 10%. We have own label contracts with Cardinal and another one of the major distributors in The US, and that business is growing year on year.

12:02 We also have a very close relationship with Ortho who are actually growing the PHP business outside of The US, mainly in Latin America and Asia Pacific. So there is a very strong growth opportunity with minimum competition within The US for this product. And so, you know, this is a very, very important product for the company that is growing. So we continue to grow, as I mentioned, hence the growth prospects on this slide. In life sciences, life sciences is our enzyme manufacturing capability. At the moment, all we do is manufacture out of Elkhart, Indiana, but we saw and that's mainly for companies like Roche, Sikosui. But we have been doing this for nearly thirty years, and we're very, very experienced in producing enzymes.

12:54 We saw a growth of 60% versus 21, and that's just the Elkhart capacity only. So we decided, which I will talk about in a lot more detail later on in this presentation,

13:07 we'll talk about the investment we've made in growing capacity and why it is so critical to do this and the advantages of doing this for next year. So we will talk about that later, but we are expecting significant revenue growth expected in 2024. How are we gonna feed that new facility? Well, we're gonna leverage, obviously, our existing relationships with the likes of Roche, but we've already got a significant number of companies wishing to use our new fermentation capability when it comes online in very many areas, including food areas, molecular enzymes, agricultural enzymes. But again, I will talk about this a little later.

13:51 So and I say a little later. It's the very next slide. One thing that when we made our trading update, the feedback that we were getting, I think we missed people misunderstood what we have done in South Bend when we mentioned that the 14 and a half thousand liter fermenter was delayed. That is actually wasn't as critical as people perceived it to be. In our new facility in South Bend, we are increasing our capacity to through a number of fermenters. So we've got a 65 liter fermenter going in, 300 liter fermenter, 1,500, 3,000, and four 14,500. Why have we done this? Well, every customer every customer we take on board will begin at 65 liters, then they'll want us to grow through the fermentation.

14:46 And so the if you start at 65 liters, you hopefully will end up at 14 and a half thousand liters. We have one customer, a significant customer at the moment,

14:56 who are going to produce very high volumes for us. We've done a 175 liter fermentation for them at the moment. They're spending themselves over a million dollars inserting equipment into this facility just to it's a storage tank just so that they can rapidly increase to 14 and a half thousand liters as soon as possible. Why is this so important? Well, believe it or not, there is many small university level fermentation companies in The United States and many very, very large ones like Roche and Abbott.

15:34 There's literally nothing in between that can do mid range fermentation to grow to 14 and a half thousand liters. So this company at the moment are having their manufacturing done in Asia and Europe, and they're not happy with that. They want a US based, and we're getting more inquiries for this business than which is, you know, a really positive side that we are doing the right thing. In terms of timing, this facility will be complete by the end of August. But what people have misinterpreted, we'll be able to manufacture from early June in the small scale, scaling up to 14 and a half thousand meters. It'll certainly be revenue generating this year, but Mark and I have only built in 2,000,000 revenue extra revenue this year, increasing to 10,000,000 next year. And that 10,000,000 will only be 50% maximum 50% capacity for this facility. But judging by the inquiries we're receiving at the moment, we are confident that we can deliver this growth. So coming back to the beginning of this presentation, it's not only are we giving you the razor razor blade core business, solid growth, double digit at the moment growth story, but we're giving investors significant upside in 2024 and '25 in opening South Bend and offering these fermentation services

17:04 at what will normally be between 60 to 80% margin dependent on product mix. On that note, I will hand over to Mark who will give you the financial review of the business. Thank you, Julian. So quickly just introduce myself, Mark Davis, the chief financial officer of EKF. I'm now gonna take you through the financial highlights of the RNS announcement that we announced this morning. So starting off with revenue, we announced that we delivered 66,600,000

17:35 of revenue, a drop from 81,800,000 in 2021, largely due to the decrease in COVID revenues, that dropped off in quarter one twenty twenty two, as as expected. I think it's important to look at the revenue excluding COVID. So if you if you calculate the amount of revenue that we did in '21 relating to COVID nineteen, it was 38,100,000. And in 2022, it was 15,400,000. So a decrease of COVID related revenue of 22,700,000. So if look at non COVID revenue, we actually had a 17% growth in non COVID revenue, taking revenue from 2021 of 43,800,000 to 51,300,000.

18:24 So again, highlighting the strong growth in the core underlying business.

18:29 Looking at our gross profit before taking out the exceptional costs that I'll come on to talk about in a bit, we delivered GBP 30,800,000 versus GBP 39,400,000, and again, the delta there is as a result of the drop off in COVID activity. Pleasingly, when you look at the gross profit percentage, we maintained a similar level of gross profit percentage, albeit a small drop from 48% to 46% in in '22. Within '22, there was a negative contribution from some of the business units that we've since dealt with. So I'd certainly be hoping that we would see some improvements in gross percent gross profit percentage in 2023. We delivered an adjusted EBITDA performance of 14.9% versus 26.5% in 2021.

19:19 And again, I think this demonstrates the robust underlying performance in the business that was there before the COVID pandemic and as we move forward. There's a loss before tax of 8,900,000, so a large loss for the year as a whole. However, within that was 17,500,000 of one off exceptional items, which, as I said, I will come on to talk about in more detail. We ended the year with net cash of GBP 11,400,000 versus GBP 19,600,000. I think what's important to talk about is the strong cash generation, that comes from our operations of 12,700,000 versus 14,200,000 in '21. And the primary reason for the drop in cash during the year was the significant CapEx that we made and a number of non trade investments that I will talk about a couple of slides on.

20:19 So we spent a lot of this presentation talking about the core business being point of care, central lab, and life science, and I'm gonna go into more detail on this slide. Because I do think when you are considering the performance of the business, it is worth considering the business excluding COVID because that shows the underlying growth in the business that we are taking into 2023.

20:42 So 2019, which was exclusively non COVID, was forty four point eight million. Pleasingly in '21, we delivered non COVID performance of forty three point eight, so getting us back to the position recovering fully from the pandemic. And then in 2022, we pushed on further to deliver 51.3. So overall, a fourteen percent increase from 2019. And what is also pleasing is when you look at the three constituent parts, you see

21:13 a 13% growth from 2019 in point of care, 9% in central lab, and 19% in life sciences. So consistent growth throughout all three areas. I touched upon the seventeen point five million of exceptionals that we recorded in the results announced this morning, and I think it's important to go through them in some more detail because they're very significant. So it's been a year of transition and restructuring in 2022, and what we were very keen to do as a management team was to perform that restructuring in '22 and record as much of the impact of that restructuring in the '22 results that we put out, this morning. So I'll go through each of these six boxes.

21:59 The first one being the business unit rationalization, and this does take up a significant part of the 17,500,000. So the first, point which we announced last week was the disposal of ADL Health and effectively the disposal of the lab testing parts of our business that we've spoken about in previous presentations. It was announced last week, and we've taken the full impairment of that disposal in the 22 results that were released this morning. We also made the decision to close down The UK production facility, which was a difficult decision, but I think the right decision to make for the business going forward. This was the part of the company that was set up in 2020 exclusively to deliver the COVID opportunity.

22:50 So there will be an impact that's likely to fall into 2023, and we expect that to be significantly less than the impact of ADL. So, I would be estimating that the total cost of that restructuring is going to be less than 250,000. And by rationalizing the business units, that allows us to focus on the core business, which was the theme within, Judith's part of the presentation. We also had a significant amount of COVID inventory as we started and went through the first quarter of twenty twenty two. And we announced in June last year that we agreed a payment from our US customer in relation to the COVID inventory that we had in The US, and that was a payment of $5,500,000 and a clean exit from that particular arrangement.

23:41 Towards the end of the year, we looked at the remaining COVID inventory that we had in the business, and it really was a quick shift in the dynamic of supply and demand. And we took a prudent view around the value of the inventory that remains in the business and is around about GBP 4,000,000 of the 17,500,000, which relates to inventory provisions that have been taken. We still believe that there is potential to realize some cash for that inventory, albeit that, that hasn't been modeled into our forecast. We've looked at the property footprint within the business. So as we were focused on delivering COVID, we took on a number of new properties that, soon became redundant for our purposes moving forward. So we took a quick action last year to reduce the number of sites overall. So we've taken down the overall sites from 12 to the eight that was mentioned in Julian's part of the presentation, and this includes sites in The US and The UK.

24:40 And I do believe that there's potential for maybe rationalizing a little bit more in 2023, but this won't come with exceptional cost. This is just a rundown of leases that won't be renewed. It's not just rationalizing the property footprint, but we've looked at the the property that we have within the business, to make it fit the purpose for the growth that we're expecting. So this includes South Bend that we've spoken about and the level of investment that's been made in South Bend. But I'd also like to mention that we have been investing into our established German businesses as well, and this includes investment into the production process in our Baarleben site that we own and also within the Leipzig facility, and we'll be moving to a new Leipzig facility at the end of this year.

25:29 And the expectation is that that will provide additional efficiencies, which will enhance gross margin, but also help from a capacity point of view. We've looked at operational, organizational improvements in in the business, and some difficult decisions have been made particularly around the workforce that we have. So right at the peak, of quarter one last year, we employed over 550 people within the company. And as the demand for COVID business dropped off, we quickly scaled that back by just under 200, as we, reduced that level of of activity. Subsequently, in the year, we also looked at other roles within the business and took the view on how we look to move forward and roles that are going to be required, and unfortunately, those roles that, would not be required. So we made a number of difficult decisions in those areas which reduced the cost base.

26:27 We explored a number of non core and low profit commercial arrangements that we have, and those that were deemed non core or not commercially attractive. Where we could, we exited them so that they will no longer be a burden moving forward. And inevitably, that requires a certain cleanup of remaining contract commitments, the provisions for for those have been taken in 2022.

26:56 And finally, we looked at our development cleanup. So this has been a balance sheet cleaning up where we looked at the intangibles that had been recognized, and we took the view around whether we are likely to achieve value in the future. And where we didn't believe that we would achieve value, we took the appropriate impairment. So as I said, a large number of exceptionals that's gone through in the year, but the expectation is apart from those that I've mentioned and certainly wouldn't expect too many more in '23.

27:30 And finally, for me on cash flow. So I have a bridge here showing the main cash usages due during 2022, taking us from a gross cash position of 20.3% to 11.6% at year end. I want to highlight the strong cash generation from the underlying business and to the operating activities, and and the cash generation from from those of 12.7. During the year, there was 6,800,000 that was used on the share buyback around about this time last year and a number of external investments that were made. We're not expecting to be making any new external investments as the focus is clearly on investing into the core business currently. We made 4,400,000 of capital, investment during the year, which includes increasing the life sciences capacity in South Bend and also the improvements that I spoke about in Leipzig and Baalaben.

28:29 We will continue to make significant CapEx in 2023 as we bring South Bend online, and those have been modeled into our forecast. We should highlight that we continue to suffer with the restrictions on the cash that we have in Russia, which at year end was $2,400,000 and that is constantly under review. And when we are considering the company's net cash position, it is net cash excluding the cash that we have in Russia. And then finally, towards the end of the year, we paid the 2021 dividend of 5,500,000 to 1.2p per share. And today, we announced that we are maintaining that dividend at 1.2p per share, and that will be paid in December 2023.

29:18 Thank you. Okay. Thanks, Mark. So finally, what I would like to do before we go on to questions is just to say, I'd like to reiterate that I do believe people have forgotten who we are, and I just want to say at the end of this presentation that the outlook is, you know, let's not forget this is a recurring revenue business, which is operationally profitable. It's cash generative. We do pay a dividend every year. I think we've demonstrated today the upside potential in 2024 and '25 in point of care, but more importantly in South Bend and the opportunity we're creating in this Rolls Royce fermentation facility in South Bend. And at the moment against twenty twenty forecasts, we're at seven times EBITDA.

30:15 And as a business that offers all of this, I think that it's a value proposition for all future shareholders. So, you know, as it says on that final slide, we're offering strong controlled growth as a business with a fast growing core business and a very big upside in 2024 and '25. So thank you very much for listening, and we'll hand over to the well, do we hand back to Mark? That's great. Yeah. That that's great. Julian, thank you very much indeed. And let me just bring up your cameras, if I may. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. I just want Julian and Mark to take a few moments to review your questions submitted already. I'd like to remind you the recording of this presentation, along with copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard.

31:07 Mark, if I may just hand back to you. You can see you've received a number of questions both ahead of today's event and during the presentation itself. So firstly, thank you to you all for your engagement today. If I may just ask you, Mark, to read out the questions and, obviously, where appropriate to do so and give a response, and I'll pick up from you at the end. Thank you, Mark. So the first question, which was pre submitted, will you be able to turn this company around, or will you look to take us private? Something that I've also suffered with other investments. So this was a reference. I'll I'll be a bit more open is I think that because of the shareholding we have within the company, we've been asked, we take this company private as would happen with Source Bio? I'm going to say now, categorically, no. We will not take this company private.

31:57 And secondly, the reason there's many reasons why. One, we don't think that this company would be suited to be taken privately considering the growth opportunities we have in front of us. But secondly, Source Bio is mainly 85% owned by three investors. EKF has a vast range of very strong institutional investors, and so it would not be the right thing to do to take this company private. So at this moment, we have we've got too much opportunity for investors moving forward, and we would never consider taking this company private. Okay. The next question, which is also presubmitted. Has the agreement with Your Gene Health been transferred to ADL Health, or will the agreement with Your Gene continue with EKF and or be amended accordingly?

32:49 The Your Gene Health agreement has gone completely with ADL. Health ADL is testing company. We're no longer in testing, so we've handed that over completely to ADL. For us, it was a pretty low margin business anyway because ADL were working mainly directly with your genes, so we handed that over. Okay. And another pre submitted question, which I can take, and I think I've already referred to it in the presentation. Can we have at least a guide as to the restructuring costs associated to the closure of The UK contract manufacturing business? So just to reiterate what I said, we are still continuing to fully calculate the cost, but I certainly expect it to be less than £250,000.

33:38 The next question from Sam m. What is the current status of the partnership with Mount Sinai? Do you feel Trellis and Renelytics were IPO ed too early? To answer that question, the current relationship with Mount is still very strong. But where we are today and the focus we have on the core business, we have no intention at the moment of doing any further investments in Mount Sinai companies. Mount Sinai are perfectly happy with this. They understand the situation globally that everyone is in. So, the the relationship remains remains strong, but we will not be, doing any more investments in new Mount Sinai companies. To answer the question regarding Trellis and Renalytics, taking Renalytics first, absolutely not because as was proven twelve to eighteen months ago, renal analytics is completely in the right place in terms of kidney, reject sorry, kidney testing and and DKD.

34:43 So I think that it's without being IPO ed. The benefit to people in getting end stage renal disease would have been a lot longer in materializing. They have a test where the data is absolutely outstanding. They should start now to really be driving that product into the market. It's very commonly known they're waiting on FDA, but the recent update on FDA, I think, is also very positive because if they're writing a protocol just to let you all know how the FDA works, if the FDA thought they were not gonna pass this test, then they would have said, I suggest you withdraw your application. They actually said we're writing a protocol, which is a totally different way of looking at it, but I'll leave it to all of you to judge that wording.

35:34 With regards Trellis, that is a more difficult one, and I'm going to be honest. I think Trellis is where health care is going. I think it's a tremendous business run by a really, really competent I b well, one of the globe world's global IBD experts. And it's the way health care is going. Remote monitoring is is the way it's going to to be. And I think, again, if it hadn't of IPOs, people with IBD wouldn't have access to this. The problem is where the markets are and where the cost of living crisis is. It could be argued at the moment. Is it, you know, is it gonna grow as fast as we thought it was? But I also do not believe that, Trellis IPO too early either.

36:22 But you could probably gonna say I'm bound to say that. But I really do believe that there's a huge opportunity with Trellis, for people suffering from IBD and IBS in the market, and it's run by, as I say, if anyone can make it work, Mala can make this work. Okay. Thank you. I think I can answer the next one, which is a question submitted by John Dee. Two parts. Will there be any material cash outflow such as restructuring or life science ramp up program in 2023? So in 2023, we are still expecting costs relating to the CapEx program in life sciences of around around around about £4,000,000. There will be ramp up costs of recruiting new people to to join the business, but, clearly, the hope is that they will be quickly balanced out by the new contribution that comes from that facility.

37:18 And restructuring wise, I've spoken about, what we've been doing in in UK contract manufacturing, and, you know, I'm not expecting any significant restructuring outside of what we've discussed today. The second part of the question, life science capacity shown as being fully operational in September 2023. You indicate currently ISO 13,485 accreditation. Is there additional accreditation of new equipment and process? Does the plan include the appropriate amount of contingency and risk in terms of time and cost? I think in terms of contingency and risk in time of cost, we have published today in this presentation a timeline, and it's a timeline that we hope we come to an end of, in in August with, the full site being up and ready in quarter three this year. I think we have enough visibility around the timing of the audit, which is booked in, plus the commitment from the supplier in relation to the 14,500 liter fermenter.

38:19 So I think we've we've got to the situation with this project now where we're comfortable in terms of the the risk of of delivery as we look to get to the end of the project. ISO thirteen four eight five, as as you mentioned, we we we require that in in order to, you know, to deliver the plans that we have in life sciences. Julian, in terms of whether anything else is required? I mean, that that's No. There's nothing else required. We have an audit of the facility in April. That will, and we don't need to have the site fully up and running for that to be for that to take place. So as Marcus to reiterate totally what Marcus said, by August, September certainly in September, the whole site will be fully up and running. And as I said earlier, I think it was what we said in January about the delay to 14 and a half thousand liter adds actually quite irrelevant to the overall timing of the, facility being online, and we'll see revenues from September onwards.

39:22 Question from Sam M. And and I think we covered this off, but I think this is in a wider context. Does the management board see any benefit in delisting care from AIM? No. Next. Quick one. Okay. This this is this is a good good one from Jonathan c, not not Julian b. Any chance of Julian taking on the long term CEO role? Next. Question from Paul h. Will there be any synergies between the two divisions, I. E, life sciences and point of care? If not, then does the new structure offer the board flexibility, optionality with regard to future corporate structure? Which one is that?

40:09 HOLDINGS. Oh, okay. It's 5501. It was submitted. Sorry. Okay. Let me just share it on the screen there. Yeah. Sorry about that. It was me. I was I was not concentrating. Okay. No problem. Yes. It does. In in all honesty, a very, very good question, Paul. I think that is something it does give us flexibility going forward to to have two businesses working side by side, both with, double digit growth opportunities.

40:57 So in terms of future corporate structure, I think that this really does offer us flexibility. It's not just simplifying the story, but it offers us flexibility in terms of moving forward and the options that we will have in front of us. So the answer to that whole question is yes. So, you know, it's a very good question and one of the main reasons why Mark and I are doing this. Okay. Questions are coming in thick and fast now. So I'm trying to review them as quick as quickly as I can. Question from Salim H. No. Tim, do the Tim work above. How do you see your gross margin? H. Do you see your gross margin developing over the next twelve to twenty four months with increasing contribution from fermentation business?

41:43 Do you wanna take that one? Because we see it increasing pretty well. Yeah. I mean, the expectation in the life science business, certainly from what we see with the current business, is that it is a higher margin than the average margin in the group. So the expectation would be dependent on mix. But I think overall, we'd expect to see that the life science additional contribution will be margin enhancing. And as I said, depending on mix will be depend on how margin enhancing it will be. But even in the fairly prudent levels that we've modeled with regard to mix, we do see a gross margin benefit. I think also with the restructuring restructuring that Mark has been at the forefront of and done an incredible job, We will see a one to two percentage point increase in gross margin as well on our point of care business back to 2019 levels as those changes and restructuring changes take place.

42:40 Can we read Salim's one? Yeah. Salim H. It's nice to see NASA North Atlantic, our shareholder, providing finance in the future. How will this facility be used? If so, where do you anticipate using this? Any particular growth areas? Anyway, Celine, the answer to that is we don't anticipate, funny enough, using the facility. We put it in place because the 2,400,000 cash that we have got stuck in Russia and with no short term sign of us being able to access that cash. But now we've got the cost base back under control. We fully believe that our own cash generation will mean that we don't need to use the NASA facility, but it was very supportive of NASA to put that in place for us. But it's just a precautionary measure rather than a measure that we believe that we will need to utilize.

43:36 Okay. Pick me up if there's any you want me to cover, but, I'm skipping over because there are a lot. I'm I'm gonna pick up the next question from Tim H. Again, which I think is a really good question. Can you talk about the regional strength of The US business with respect to share of revenues and how this will develop over the next one to two years? And will there be a point where it could make sense to switch to be in a US business? I think, Tim, The US business is about 60% of our revenue currently. And, obviously, with South Bend comes online and becomes a success that we believe it is, then that will be a big time to make a decision. Because I would say 60 per 80% of that 60% is actually in life sciences in The US, and then there's a little bit of point of care, whereas most of our point of care business comes out of Germany. So I think decisions will be made. But I think you'll also agree until our market cap gets back to somewhere near the strength that it should be, we will not consider a US being a US business just yet, but it's certainly something that was discussed, early on in the pandemic.

44:52 Okay. We've got a number of questions in relation to ADL Health, so I think this is a good summary for for this question. What was the original rationale for ADL, and what has changed? Well, the original rationale for ADL was that Mike Souter felt quite strongly that it would be complementary to our COVID business. And, also, it was an opportunity in fairness to Mike that we could move post COVID into other testing areas. As it's turned out, we feel that whilst there was potentially an opportunity over the next three to five years in testing, we'd have to invest a significant amount to get the panels up to the level that was needed to, create a successful testing business of which it's not our core expertise.

45:50 And so the board was faced with a very clear decision. Do we invest in a testing business where competition is incredibly high within The United States, or do we invest in our enzyme business in South Bend where there is very minimal competition and much higher margin. So we made a decision to, move towards the enzyme business, but the rationale was pretty sound at the time, but turned out post pandemic that there would be too much investment required to get that business to break even. And in the meantime, as Mark mentioned earlier, it was having a quite considerable, detriment to our cash generation. So we made a very quick and sensible decision to opt out of testing, especially with the competition that there is.

46:43 Okay. I think I'm gonna pick up two more. The first is easy to answer from Andrew r. Luke Dorm has announced a new career. Has the company appointed a new chief scientific The answer to that is no. And then finally, a long one, but from Rick S. I think the company was consistent that COVID was a temporary boost of which it would make the most of, but by which it would not lose its focus on the core into which it would invest surplus free cash flow generated from the COVID revenues. With hindsight, listening to some of the measures and costs incurred with closing down COVID inspired initiatives and unwinding acquisitions made recently, Does the business feel that it has managed the business in line with its own analysis, or did it make some mistakes in overcommitting?

47:30 Just wonder if when the CEO chairman says the market has forgotten who EKF is, whether at any point the management might have been accused of forgetting to. Thank you. I think the answer to that question is no. I don't think the management has ever forgotten where we are because for the first two years of the pandemic, all I did was present the core business and the importance of the core business, of EKF. Naturally, one of the areas where, it was a challenge is you don't go from zero revenue to 37,000,000 in one year and not have to make some very fast and sharp decisions, which we did do. And I feel, personally very successfully.

48:15 We actually implemented a system, a manufacturing system incredibly quickly to meet demands required of EKF, and we were successful in that outcome in terms of creating a business that has allowed us to utilize the spare cash to invest in something that can bring bring a lot more long term high margin stable growth in South Bend. So, overall, I don't believe AR messaging was ever off paced in terms of the core business. The other thing that will tell you that is that many other of our peers during COVID, their share price went, exponentially higher, you know, hundreds and hundreds of percent higher. Ours didn't. And then when the market dynamics changed, we still got punished as much as everybody else, whereas we had always been talking about the core business. So, no, I don't think we ever lost sight, and I certainly never lost sight of, the core business. Hence, being able to utilize first and foremost when everything was shut down, all GPs offices, all hospital groups, was lack of access. Our core business still only declined by circa 15%, which we presented two or three times during the pandemic.

49:36 And then the recovery, because we kept focused on it and kept very decisive on it, our recovery has been pretty phenomenal over the last twelve months because we never ever lost sight of the core business. But I think that the investment in companies that were, producing COVID related products, it, in my personal opinion, got out of hand and that this was always going to come to an end. And we always stated that in all our our releases. That's great. Mark, Julian, thank you very much indeed for your engagement this afternoon and taking those questions from investors. If any if the questions do become available, we'll we'll send those on to you post today's call. Julian, Mark, I know investor feedback is important to you, and I'll shortly redirect those on the call to give you their feedback. But I wonder before doing so, if I may, Julian, just ask you for a few closing comments to wrap up with.

50:31 Firstly, I'd like to say thank you to everyone on the call today and the really interesting questions. You know, they're testing questions, which we feel we should be answering. And I thank you for that because, you know, we are very focused on the business. So I'd like to thank you all for your your input and your interest. It's really important to Mark and I that we maintain your interest in this business. But I do think where we are today and the valuation we are today, I know I've repeated it three or four times, but compared to a lot of companies on AIM, I think where our position is and the fact that we are we've got a strong growth story, and we're only seven times twenty twenty four EBITDA. I think there's a value proposition there as well, and I hope you continue to support us as you have. We don't take it lightly, and I look forward to meeting a lot of you in person in the future, but also on, calls like this, which I hope you have found helpful today, and we appreciate all your feedback.

51:34 That's great. Julian, Mark, thank you once again for updating investors, this afternoon. Could I please ask investors not to close this session as we'll now automatically redirect investors to provide their feedback in order that management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of EKF DIAGNOSTICS HOLDINGS PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.