Ekf Diagnostics Holdings (LSE:EKF) — Preliminary Results

0:02 Good afternoon, ladies and gentlemen, and welcome to the EKF DIAGNOSTICS HOLDINGS Preliminary Results Investor Presentations and our apologies for the brief delay in starting this afternoon. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. We'll notify you by email when

0:34 they are ready for your review. Before we begin, we would like to submit the following poll, and I'm sure the company would be most grateful for your participation. And I'd now like to hand over to Mark Davis, CFO, and Mark Sorter, CEO from EKF DIAGNOSTICS. Good afternoon. Good afternoon, everybody, and welcome to our 2021 results presentation. My name is Mike Sorter, and I took over as CEO of EKF in October the first last year.

1:00 As you know, there's been some changes to the exec board, and I'd like to introduce Mark Davis, our new CFO who took over on January 1. Mark, would you like to introduce yourself? Good afternoon, everybody. So I'm Mark Davis. I joined the business around three months ago. Prior to joining the business, I was the group finance and operations director of a global private medical devices company called FlexiCare Medical. And prior to being in industry, I was an adviser for fifteen years with a focus on capital markets and corporate finance. Thanks, Mark. So

1:35 what we'd like to do now is basically to talk about where the company is today as regards to where it was pre COVID in 2019. So how do we see the business? Well, we see the business as basically five business segments. So, basically, we're creating a global diagnostics business. So we have the point of care business, the central laboratory business, and the life science business. And for the investors out there who know EKF remote, this is basically the pre COVID business. This is what we would refer to previously as the core business. Throughout COVID, we basically formed a contract manufacturing business that was driven by demand for sample collection and for transport media for sample collection kits for COVID.

2:24 But, also, in 2021, last year, we acquired a testing facility, a CLIA certified testing facility in San Antonio called ADL Health. And you can see at the bottom there the revenues associated with those companies in 2021. So I'd like to now move on to the journey that we've been on from 2019 to 2021 where we've created this new sort of five segmented business.

2:56 So when COVID kicked off in 2020, we were basically asked to manufacture sample collection kits, and and you know this from presentation from last year. We didn't think that was gonna continue into '21, but it did. So we basically built our contract manufacturing capabilities during that time. And moving forward, this is gonna be a growth area for us. We're gonna leverage what we've built in 2021 for non COVID manufacturing. Also, during the two years of COVID, we invested in our life sciences business. We invested $10,000,000 in building out the new fermentation facility for enzyme manufacturing, and we will go into that in a bit more detail as we go through the presentation.

3:45 Also, as I mentioned, we acquired ADL, a testing service in in San Antonio. Now this was very focused around COVID testing at the time, but we have a road map to move from COVID test to non COVID testing. And, again, I'll move, through that, slide as we move through the presentation. So, basically, what's happened during COVID was it generated a lot of revenue for us that's allowed us to accelerate the growth of the company and allowed us to create two new segments of COVID manufacturing and testing. And this will be those those areas would be basically the areas for growth moving forward. So I'll hand over to Mark to talk about the results, the 2021 results. Thank you, Mike. So I'm I'm now going to take you through a summary of the f y twenty one results that we released this morning.

4:41 So starting off with revenue, revenue grew at the highest rate to the highest level ever from 65,300,000 in 2020 to 81,880,000 in 2021. So that's a 25% increase. Gross margin increased by 5% to 39,400,000, adjusted EBITDA was up by 4% to 26,600,000 to 26,500,000. To answer the question regarding the growth of revenue versus the growth in profit, it's worth considering that in 2020, we had a very high margin customer within the contract manufacturing part of the business. And in 2021, we did 13,000,000 less in relation to that customer.

5:29 In addition, with the extra extra revenue coming from contract manufacturing, contract manufacturing is at a lower margin associated with the cost base that we have in contract manufacturing, which includes the use of temporary staff. So temporary staff are more expensive than staff that you would have on a permanent basis. However, it does provide the flexibility to scale up and scale down, which we have taken advantage of of of recent times. We've also seen certain cost increases within raw materials and logistics as is expected and as seen in other parts of the market. If I look at profit before tax, we generated 21,400,000 versus 15,400,000 in 2020. And the difference mainly with the EBITDA is the addition of depreciation and amortization and also the effect of share based payments.

6:23 Basic earnings per share increased to 3.47p from 2.45p, and that also includes the increase in share capital during the year following the acquisition of ADL and the release of new shares. And the net cash, as we announced in the trading update in January, finished at 19,600,000 versus 21,400,000 in 2020. Looking at the operational highlights, I'd like to draw your attention to the chart on the right hand side of the page. So it's important to consider the growth from 2020, and I'm pleased to say that when you look at all the business segments that Mike took you through in the earlier slides, we've seen growth from 2020 in all of those business segments.

7:09 However however, it's also important to look at the development of the business from 2019 when contract manufacturing, particularly related to COVID, didn't exist. So I think it's an important measure to judge the performance versus last year, but also to look back in the previous year. And you can see from the dotted line that's been added onto this slide that the level of revenue in f y twenty one, excluding contract manufacturing, is back to the level in f y nineteen, which shows a real strong recovery within the core business segments in the company. Going across to the bullet points, again, to highlight what I mentioned about all areas increasing, We saw an 18% increase in point of care revenues, a seven percent increase in central laboratory revenues, and a 3% increase in life science revenues.

8:01 Looking at the parts of the business where there is pandemic related revenue, so so contract manufacturing and testing. We saw a growth in the contract manufacturing business to 38%, so a significant increase in in that part of the business. Then we've also got a £1,000,000 contribution from ADL, which is a three month effect following the acquisition of ADL on the twenty seventh of September last year. And what's been a key focus for us is we have benefited from growth in the core business over the last year, but also growth within contract manufacturing, which we we've done by leveraging the COVID opportunity. What's important for us is to take the value that's been generated through core business and also through pandemic related activities and to ensure that we utilize that that cash through investments in the core business, but also through ways of returning value to shareholders.

9:00 So Mike will come on to talk about some of the investment decisions that have been made, in particular, the significant investment in life sciences. And then to touch on post period end, so we announced on the March 8 the the status of our investment in life sciences and the development of capacity in enzyme fermentation, which which Mike will cover in in a few slides. The 2,500,000 investment into the Vorici place subsequently announced the intention to distribute in in species subject to shareholder approval at our annual general meeting. And today, we announced the share buyback of up to 9,000,000 shares funded from surplus cash requirements. I can see a question's come through on that, so I think now is a good opportunity to to pick up on that.

9:49 The the 9,000,000 shares is a similar level of shares that were released that were issued at the time of the ADL acquisition. So assuming the share buyback is successful, we're effectively taking shareholders back to the position that they were prior to the ADL acquisition. So we've got the benefits of the ADL acquisition and the revenue growth opportunity that that brings, but shareholders are taken back to a pre pre ADL level from a a dilution point of view.

10:25 I'm gonna finish off the financial review section by by looking at cash. And, again, I draw your attention to the slide, to to the chart on the right hand side, which shows the development of cash from the beginning of twenty twenty one to the end of of twenty twenty one. And the blue bar shows the significant cash that was generated from trading activities. And the red the red parts of the graph as well show some of the use of the cash as well. So working capital, we invested 6,700,000 in working capital in in 2021, and this was primarily to be able to deliver the COVID opportunities that had generated the the the increase that that you saw in in the previous slide. That included ensuring that we had the inventory levels ready to ramp up activity when when was required.

11:14 I I would expect, following the announcement today regarding a reduction in activity in in contract manufacturing that we would probably see a reversal in the working capital position as I look ahead to to this year. There's also the effect of the share based payments that were made during the year, taxation, and then the the spend relating to our investment activity. So the 5,700,000 that we've recorded for capital expenditure, 4,300,000 of that is is taking out the effect of IFRS 16 leases, and part of that 4,300,000 is the investment in the fermentation capacity increase, which Mike will talk to you about. And then finally is the dividend. So we paid a £5,100,000 dividend towards the end of twenty twenty one.

12:02 And today, we have announced the intention to pay a 1.2p per share dividend towards the end of twenty two. Thank you. Thanks, Mark. So I'm just gonna take you through the global revenue breakdown and the revenue as regards to our businesses and our products related to those businesses. So if we have a look at the the global, basically, revenue breakdown. So if we take APAC first, we saw a growth of over £500,000 in APAC. This is really driven by a strong return of the a one c business, the the diabetes testing business in The Philippines, and significant wins in other areas and other regions such as India for DIAGNOSTICS HAM analyzers and cuvettes.

12:52 EMEA, you can see a huge increase there of 17,000,000. This is really due to a lot to the COVID testing business and the COVID sample collection business. So we won some major opportunities in The UK and in Europe for the manufacture of COVID sample collection devices. And, basically, that's accounted for the majority of this of the growth in that region. In LatAm, we've seen an increase of nearly a million. This is due to some of the government tenders coming back. In Peru, for example, they were basically shut down in 2020 in the first part of twenty twenty one. But with, basically, the country opening up, the one of our major distributors in that region, DIAGNOSTIC PERIWANA, have come online, and they they win in a lot of anemia tenders. They win in business from one of our competitors.

13:48 And also in the region as well, we win in a lot of clinical chemistry business. And in Mexico and other areas in Latin America, pregnancy testing has actually gone up as well. And the reason for that is one of our major competitors, Quidel, actually exited the market and focused on COVID testing, so we saw an opportunity there to gain some market share. In UScan, you can see a drop of £2,000,000 there.

14:18 From last year, you may remember that we did over 21,000,000 in revenue from the manufacture of molecular transport media in The US in 2020. That business didn't materialize in 2021. Basically, a lot of companies switched from molecular transport media to PBS, phosphate buffered saline. So the dynamic for our organization changed. So from bulk media, we moved to PBS sample collection kits. And what I'm actually pretty pleased about is that we filled that $21,000,000 gap almost and only had a 2,000,000 drop in revenue in from last year. So if I move to the next slide, and we just talk about some of the products.

15:09 So in diabetes then, in our point of care portfolio, so the revenues were up 30% in that area driven by biocin at 10%, COLAB up 15%, COTES up 18%. Biocin really driven by growth in Eastern Europe to do with diabetes monitoring. The CoLab, we had growth in Saudi Arabia, India, Tunisia. We actually won our first ever tender in Sweden for CoLab for the end of last year as well, and new markets have opened up for us in Egypt and Tanzania. With quote test, the majority of the grosses growth has come from The Philippines. And as the testing is opening up in The UK as well, we've seen an increase in business from that as well. And we'd expected further growth in all these regions as we go through 2022.

16:04 If we look at hematology then, DIAGNOSTICS TM revenues up almost 1,000,000. This is really down to strong performances by McKesson. I think we announced nearly two years ago now that we did a private label deal with McKesson on the DIAGNOSTICS TM. Unfortunately, during 2020, the McKesson reps, you know, weren't they couldn't go into hospitals or clinics. But in 2021, that opened up again, and we've seen a huge growth from McKesson as a private label product. And why this is a good initiative with distributors? Because when they have a private label product, the sales guys are incentivized to sell the product. So instead of having a small direct EKF sales team selling it, now we have over a 100 McKesson sales reps selling it. Also, the agreement we had with Fresenius actually delivered over £500,000 in growth as well, also driven by tenders in South Africa, India, and Malaysia again.

17:08 In hemo control and hemopoint of 70%,

17:12 I think I mentioned this on the previous slide, really driven by anemia screening programs in Peru and tenders in other countries. What we will see this year is the opening up again of Wix, women's health, infants, and children. That that that they were closed all throughout COVID, and they reopened in in June. So we should see some growth in this business from Wick moving forward. Hematostat is a basically a microcentrifuge use in plasma and blood banks. This business grew 29% last year. The US actually provides over 80% of the world's plasma. We actually work with two of the largest plasma centers in The US, and we will see over 20% growth in this business moving forward.

18:05 So this is a big growth area for us.

18:11 In point of care, again, looking at lactate and pregnancy, again, 27% growth. Lactate scout basically is is growing because of the return to competitive sport. So so that's where that revenue came from. Pregnancy test, and I alluded to earlier that we've gained market share from Quadel who exited the market. So that accounts for the 26 growth there, and it's really driven by Latin America. If we look at central laboratory, revenue's up 7%. Our one of our largest selling products, BHP, which is a liquid color reagent for diabetes monitoring, that grew by 8%. That's that generates over $12,000,000 worth of business for the company, and that's gonna continue to grow.

19:02 We also launched last well, just before COVID, in fact, a glycated albumin, and this was from an exclusive distribution agreement we had with EKF DIAGNOSTICS in Japan. We actually launched it just before COVID took off. So a lot of the big reference labs are focused on COVID, so it really didn't take off at that stage. But during that time, we managed to get two of the major reference laboratories in The US. They were validated on GA. So moving forward, we will see significant growth in this business. Then life sciences. So as you know, life sciences is the area that we're looking at future growth. This is the this is the business which we basically invested $10,000,000 in last year, and I'll go through it in a little bit more detail later. But revenues were only up 3%.

19:58 That's because of the switch of the products and the contracts we were working on. In 2020, we were working with a company called Auragenyx, and they basically stopped that antibiotic

20:10 program in 2020. And in 2021, they focused on a new vaccine. So we saw a drop off of Auragenyx. But to replace that revenue loss, we started working with a lot of new companies who want to move to the new facility where that's up and running in 2023. So the investment is on plan. The build is on plan. We are envisaging going live at the beginning of twenty twenty three. We use two companies, Eppendorf and EKF, to build this state of the art facility, and we're building a nice funnel of opportunities to move it into that facility when it's up and running.

20:57 Contract manufacturing. Well, as Mark alluded to, there was huge growth there, £10,000,000 from, 2020. Obviously, the revenue generated by this business allowed us to invest and accelerate the growth of the company. The we used that money to invest in and acquire ADL. We used the money to invest in a new facility for life sciences.

21:23 We saw a switch from molecular transport media to to PBS, and I'm really pleased how the team basically pivoted from that into PBS related kits. So we will see a a drop off, obviously, in contract manufacturing as we move forward as COVID drops off, but we will be leveraging the, basically, the skills and the facilities that we've built for contract for future growth of the company. And I'll give you an example of that is that we're working with a number of molecular companies or companies in the molecular space on non COVID manufacturing. These are genomics and forensic space kits, and we will see growth in that moving forward. Lab services.

22:10 So ADL is the company we acquired in, in 2021. When we acquired them, they were primarily focused on COVID nineteen test testing,

22:23 and that demand is actually continuing. We just did the Oscar ceremony. The well, that was on yesterday. That was in the news a lot for the wrong reasons, but we we did that. We've got a lot of COVID based contracts going through this year, but you will see from a slide I'm gonna show in a second what our road map is from moving

22:47 ADL tested from COVID to nonrelated COVID. So they they basically generated 1,000,000 in revenue for us for last year. So let's focus now on the growth strategy. So where are we gonna go with this newly created EKF business? So the strategy that we presented last year, basically, it it is the same. We are going to still look at complement complementary earnings enhancing acquisitions. We are looking for further acquisitions in this space.

23:25 The acquisitions that we will be looking at will potentially be expanding our existing point of care capabilities, the potentially in the molecular business, but they're gonna fit with the strategy and the business as we have today. And how I view our business is we're a product and service provider for the diagnostic industry as simple as that. We will continue the expansion of our clear testing lab. I will go into that in more detail in a second. And the investment that we put into life sciences and contract manufacturing, we're gonna leverage for the future as well. We haven't taken our

24:06 focus off the point of care business. We are looking at investing more into r and d and and more into the development of new products. If we can't do that internally, we will look externally as well. We're looking for new technologies, new products we can bring into the company to real to basically relife our point of care business. We've also launched EKF Link, which is basically a data management system, which we're attaching to some of our existing products. And this is gonna add a lot of value to our products and allow us to be much more competitive. And last year, we won two tenders in The US around sort of data management. So we don't so we are looking at our point of care portfolio.

24:55 So I'll talk a little bit about the ADL Health and the lab services business for those, who are not really aware of it. So it's based in San Antonio, fifteen minutes away from our, head office in The US. 29 staff. It was really focused on COVID testing for travel, sport, entertainment, and industry. The testing of COVID is not gonna drop off as quickly with our testing lab as we've seen in other areas. What's really impressive about ADL is they're basically their IT track and trace system that they have and their online customer support. And we're gonna utilize that in house capability, especially in q four this year when we're looking at launching a home testing business out of ADL.

25:47 But if you look at what we're gonna do in q one, end of the at the end of this quarter, We put announcement out about partnering with Your Gene PLC on introducing NIPT test into The US. We've actually installed now all the equipment to do that. It's fully validated, and The UK Your Gene Team now is just completing the training of our staff. That's gonna go live in April, so that's a good example of non COVID testing. Also, in April, we're launching drugs drug of abuse testing. We're launching cannabinoid testing, and we're launching medication monitoring. In q two, we're gonna be focused on inflammatory bowel disease. We're gonna be focusing on calprotectin testing, CRP testing, and we're working with one of our partners on that. And we've actually developed a new blood sample collection and assay workflow for this to be able to collect the remote samples.

26:46 In q three, we're gonna focus on next generation sequencing. As part of the NIPT workflow that we

26:53 installed, we installed an Illumina next, Sig five fifty next gen sequencer. So we're gonna be looking at utilizing that for basically cancer based testing on oncology testing, and we're looking at the list of tests that we're gonna be launching now in q three. Something to take onboard here is that the AGL lab is ISO one five one eight nine accredited. This means that it's a worldwide recognized accreditation where we can take samples from 45 different countries around the world and do the testing in our facility in San Antonio. So ADL is gonna be a a is gonna be a very focused growth area for us for this year.

27:41 Life sciences. So we so when Julian went through the acquisition trail to create EKF as it was pre COVID, they acquired a business in Elkhart, Indiana, and that business is going for over thirty years. So it's a fairly well established, have a good skill set there in enzyme fermentation. But the capacity there, the massive capacity was 1,600 liters. We're gonna be using that site moving forward as a tech transfer site, a development site, and a pilot scale site. And then we're gonna move then customers from that facility into our new facility in Indiana when that comes up and running in 2023. This facility is ISO thirteen four eight five accredited, FDA registered.

28:30 We've spent a lot of money over the last four years since I've joined the company in upgrading that site and and introducing new fermentation technology. So the fermentation build and plan is on track. We worked with EKF up until up to 3,000 liter fermenters in to build and validate the facility up to 14 and a half thousand liter fermenter. That is all on plan to finish at the end of this year. So we're looking to generate revenue from that site in 2023. The announcement of us investing in fermentation created a lot of awareness, and companies have reached out to us, and we've built a nice pipeline of new accounts that we're working on now as part of a tech transfer program and pilot scale program, as I say, to move into that new facility in 2023.

29:28 Something else that we're gonna look at now we have this new facility. It's not just off a contract manufacturing, but to build a portfolio of EKF enzymes, and that's where the real value is going to be. So that's could potentially be PCR enzymes, enzymes for, you know, the health food market, but we would be looking at that as we move forward. So Mark is gonna go through this partnership we have in Monk with Mount Sinai. Thank thank you, Mike. So so to take you through the partnership that we have with with Mount Sinai and and the benefit it it provides to to shareholders in terms of an alternative way of giving money back to to to the shareholder base outside of a traditional cash dividend.

30:13 So we've had this partnership. It's a preferred partnership. We we get access and opportunities to innovative, interesting businesses that come out of the Mount Sinai stable. As you can see at the bottom, there are some examples of some success stories that have been generated through this relationship where a liquidity event has occurred with the businesses that you see below, Rinalytics, Vorici, and Trellis. And as part of the strategy of the business, which is to consider the distribution in specie of the shareholdings that we develop in these entities back to shareholders, over the time that we've had this relationship with Mount Sinai, we've returned to shareholders over 40,000,000 of value. And when you consider that alongside the cash dividend that we are paying, we've developed over recent years in terms of the returns that we we provide back to shareholders.

31:07 Recently, we announced the £2,500,000 investment in the Ritchie Place Inn, and we've also announced our intention, subject to shareholder approval, to distribute those shares to shareholders as soon as reasonably practical. Okay. So this is the last slide. So the 2022 outlook then. So our q one revenues are in line with q one twenty twenty one. So we started off the first quarter of the year, you know, actually the same as we did in 2021. So but we do see the pandemic revenues dropping off as we go through the year. Also, we've had the effect of the unfortunate war with Russia and Ukraine, and we are actually taking those numbers into account as well when we look at 2022 revenue and outlook, and we're expecting that revenue to decline. And, you know, just to let you know, we're we're looking at about 3,000,000 to 3,500,000 revenue affected by by that by that by by that war, basically.

32:20 We're looking at point of care center lab and life sciences to grow beyond prepandemic levels. Obviously, ADL is gonna continue to grow, and it's a great question if I take this opportunity now, which has come through and, basically, you know, it's to do with ADL. It's and and, basically, at face value, it says that the price paid appears very high compared to the opportunities it brings. So we acquired ADL not for the COVID business that it brings to us, but for the non COVID. And it did only generate £1,000,000 for us in q four because we only had the effect of q four. We only acquired them in October 1. But this year, they we're looking to contribute over £6,000,000 to the business this year with continued growth.

33:10 So to answer your question, do we regret doing the deal? Not at all. There's actually a lot of synergies with that testing. When we look at some of the molecular companies we're working with, we'll be using some of those kits to do testing, but, also, there's a relationship as well between ADL and the testing with our enzyme business where we'll be making enzymes to go into those kits, which will be going into ADL, and we will be doing testing. So so we feel it is actually a very, very good acquisition. And depending on how it works out, you know, to will we be launching another lab in the near future in The US? That we will wait to see about that. But as regards to investment then, obviously, the the investment and the build will be completed in South Bend, our new fermentation site at the end of this year.

34:04 We will continue to invest in our contract manufacturing capabilities for non COVID applications. And as I said, we do have a healthy pipeline of non COVID customers that we're working with at the moment. Innovation, I touched on. We have to sort of relife our portfolio. I mentioned the launch of EKF DIAGNOSTICS. We're looking at diversifying our point of care portfolio, seeing where we can play in different markets. We're just going to launch at the end of this month a lactic vet product that's gonna go into the veterinary market, and that's building on our lactic portfolio. And we are going to look at launching a range of molecular, not only testing kits, but actually assay kits as well, and, obviously, the innovation and the new products in ADL and the new services out of ADL.

34:59 So that concludes the presentation today. I'm happy to take any any questions. That's great, Mike, Mark. Thank you very much indeed for updating investors this afternoon. 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. That's why Mike and Mark take a few moments to review those questions submitted during today's presentation. I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard. Guys, you see that investors have submitted quite a few questions in addition to the ones that you received ahead of today's event. And I wondered, if I may, if I could just hand back to you to read out the questions and where appropriate to give a response, and then I'll pick up from you at the end.

35:47 Yeah. I I I just pick up this one here. It's how do you see the current state of your relationship with your global industry partner? Are you still optimistic about non non COVID business? That's a great question. So with this global partner, well, I can't mention who they are. We're actually working with two parts of their business. One part was actually in building test kits for their internal distribution network, and one was for DTC for their new sort of home test collection business. But we're also working with them, another division of them, in the enzyme field for their new molecular kits for their new diagnostic business that I think we mentioned last year.

36:32 So that is still progressing. So in our life sciences fermentation business, that side of the business is still moving ahead and still going very, very well. As regards to the non COVID business, I think that for our global partner, a couple of things happened in The US, which basically their business dropped off very rapidly. One was the announcement of the Biden administration of supplying 500,000,000 lateral flow tests out there so people could basically go on a website and order free kits. So the demand for their DTC kit basically dropped off. And, also, the Supreme Court in The US didn't support Biden's testing mandate.

37:18 So, Biden's mandate was that any company with over a 100 employees had to test, their employees if they weren't vaccinated. Well, you know, well, that wasn't supported. So a lot of companies said, okay. We don't have to do the testing now. So the global partners saw a rapid drop off in COVID, so hence why we're seeing that rapid drop off as well. Are still focused on their non COVID plan, and they are regrouping on that, and we will wait to see where they go on that. Okay. So I hope that answered that question. Let's have a look. Yeah. I'll I'll pick up the question relating to to Russian operations. So so you you will see in the RNS, the segmental report in, and we have a Russian subsidiary.

38:17 Within the RNS, it it states that there was 3,300,000 in 2021 relating to revenue generated from Russia and 981,000 relating to the EBITDA that that's been generated. Relating to the horrible situation that that's going on in that part of the world, we do have other other customers via distributors both in Belarus and and Ukraine. So as as a management team, when we look ahead, we're we're taking a fairly prudent view in terms of the ability to continue to do trade in those areas. We are a business that supplies medical devices, and we are not currently under under any sanction regime. But, clearly, it is an evolving situation and something that we need to assess every time that that we are having conversations about that part of the world.

39:11 I take a question I can see here. It's regarding the type and diversity of the customer base for contract manufacturing collection kits, private labeling, and molecular and forensic kits. So pre COVID, we actually started working with a lot of smaller companies in the California area in The US, and they were very focused on gene sequencing, gene editing, CRISPR technology, forensic genomics. And those small companies, one was acquired by a very large company in the San Francisco area, and we're working with them now, and they're gonna push that business forward. Another company in San Diego on forensic genomics, a very large life science company is taking onboard their products and going for global distribution.

39:59 So, you know, the plan was was to manufacturing with these smaller companies. And as they grow, we will grow as well. So a lot of the non COVID business is around sort of molecular, basically sample prep, gene editing, etcetera. As regards to private label, a lot of the private label there's a lot of private label in our point of care business. So with McKesson, for instance, we did a private label DIAGNOSTICS TM. We'd also look in a private label, BHP as well. And we had a successful partnership with one of the largest distributors in The US where, again, their sales guys are incentivized to do that. What we wanna do moving forward, we want to leverage our distribution network a lot more and introduce more private label so we have the the distribution sales guys really pushing the business moving forward.

40:55 As regards to collection kits and COVID versus non COVID, a lot of the companies that we've been working with, especially some companies in The UK who have been supporting Lloyd's, Boots, etcetera, are looking at how they can leverage their relationships with these pharmacy chains to do other, basically, home testing. So we're working with those companies now on different types of of home testing kits, and and and we can give you an update of that as we move forward in some of those areas. So let's Yeah. Just If I if I pick up a question here, which is can all of the investments and expenditure be delivered from existing and future cash resources without the need to raise additional funds or a significant increase in debt or investors incurring substantial dilution?

41:43 So everything that we've discussed today is able to be funded through the existing resources we have in the business. And as we mentioned earlier, the benefit of the increased revenues that we've had in recent years has been an increased generation of cash. And, you know, what we've discussed today is about putting that cash to work in the business and the initiatives that we've discussed. So, everything that we've talked about today, we are confident that we have the resources within the business to deliver those opportunities. Great. And there's a question here about who are the major competitors to ADL and how is ADL differentiated. Another great question. So in The US, a lot of lab based testing is dominated by LabCorp and Quest, but it's a multibillion dollar market.

42:29 And how is ADL going to compete in that market? Well, we're based in San Antonio, which is the seventh largest city in The US, and we're we're collaborating with a lot of local hospitals, a lot of local clinics, and doctors' offices. And our value add is that we're looking to turn around results within twenty four hours. Whereas I I'm not sure of you know The US testing business out there, but, you know, LabCorp Quest can take a week to get a result back to you or longer. And with this turnaround of twenty four hours, we believe it's a real, real value add for us. So that's really what we're looking at there as regard to some of the competition with ADL. Mark, got a question?

43:14 Yeah. So I I've I've seen a number of questions relating to our appetite for for mergers and acquisitions. So let let me read out the one that I can see here. So in the light of the more recent dramatic fall in the share price decision to buy back shares, is it correct to assume that organic growth and not acquisition led growth will be the main priority for management in in the next twelve months? So so the strategy that that Mike announced as part of this presentation, that there is a link to that relating to looking at an acquisitions. So it is certainly not the case that as a management team, we have taken acquisitions off the table, and we are reviewing acquisitions as we are reviewing organic opportunities as well. Clearly, when you look at the range of acquisitions, they could be big acquisitions, they could be small acquisitions.

44:03 There's a variety of ways to fund acquisitions as well. So what is important for us is to consider acquisitions to make sure that if we do move on an acquisition, it's the right acquisition for the business. It fits into our strategy, and more importantly, we make sure that it is in is enhancing from a shareholder point of view. There's another question I'll just take here. It's it's related to our life science business and our expansion of our fermentation capabilities. And it says, has investment in expansive fermentation capabilities been increased as as it now also includes an 8,000 liter media preparation system? So absolutely. So I think I alluded to the fact that our existing fermentation facility, the maximum capacity of fermentation is 1,600 liters.

44:53 This new facility that we are installing and building out is going to give us a range of of fermenters from 80 liters to 500, 1,600, 3,000, 5,000. We're gonna have 10,000 liter holding tanks, and then the largest is a 14 and a half thousand liter fermenter. The demand for this there there's not much competition in The US at the moment for this level and this capacity of fermentation. So I hope that answers the question. The we're actually going up to 14,000 liter fermentation, so way beyond the 8,000 liter mentioned there.

45:39 Another thing about having a second fermentation facility is basically for business continuity and security of supply. At the moment, with our facility with a 1,600 liter fermenter, we we manufacture enzymes for some of the biggest diagnostic companies in the world. And for security supply, we'll we'll now have two sites that we can basically manufacture the same product from. Okay. Mark, you got another question? Yeah. Again, a theme that's come up in a number of questions, which I'll summarize in in a question that I have here, which is, are you currently reviewing any further potential ventures with Mount Sinai? So, clearly, when a decision is made, an announcement will be made. But as mentioned earlier, it's an important relationship for us, and there are always conversations going on. There is clearly a different market dynamic than there has been in in recent years, and that needs to be considered as well in relation to, when you look at the track record of being able to bring, businesses to market with with a liquidity event. So it is part of the strategy. It is something that we are constantly, considering.

46:45 And as and when the time is right to inform shareholders, we we will do that. K. We're just looking through the questions that have come in. Let's have a look. I think I'll I'll have to pick up this question relating to the the the share buyback. So can you explain the logic behind the share buyback r and s this morning where it stated that up to 9,000,000 shares would be bought on the market for some of of $44,000,000? So as I mentioned, do during the presentation, this is a mechanism so that shareholders who had a hold in prior to the ADL deal effectively reverses the the dilution.

47:40 If you think about it as well, as part of the the ADL deal, I'm referring to to the share price reduction. The ADL deal was done at a share price in excess of ATP. If the buyback is successful at a at a lower price, effectively, are converting an equity deal at a value to a cash deal at a significantly lower value. So the opportunity is there. It's a an effective use of the resources that that we have within the business. And, you know, subject to it being successful, it delivers on on those points. Mark, we can hand back to you, I think. That's great. Thank you very much indeed both to Mike and to Mark. And obviously, if any further questions do come in, we'll make those available to you. I know investor feedback will be particularly important to you both, and I will shortly redirect investors to give you their thoughts and expectations.

48:38 But I wondered if I may, Mike, before doing so, if I could just hand back to you just for a few closing comments, after which, as I say, I'll redirect investors so they can give you their thoughts and expectations. Yeah. Thanks, Mark. First of all, I have to say I'm very proud of our EKF staff and the and the work they did during the COVID pandemic. It it wasn't easy, you know, to be working. They were all classed as essential workers. They had to come to work every day. And what they did to support, you know, the COVID pandemic, you know, we'll always be thankful for. We never lost sight of the core business, the point of care business during COVID, and we actually also invested wisely in the business to position us, you know, the company for future growth. So we're looking forward to this year. We're looking forward to not focusing on COVID related business, and, really, we're looking forward to delivering on our strategy, which we presented to you earlier.

49:36 Yep. That's great. Mike, Mark, thank you very much once again for your time this afternoon and for updating investors. Ladies and gentlemen, please do not con close the session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can really better understand your thoughts and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of EKF DIAGNOSTICS HOLDINGS, we'd like to thank you for attending today's presentation. That concludes today's session. Good afternoon to you all.