Inspiration Healthcare Group (LSE:IHC) — Company update

0:01 Good afternoon, ladies and gentlemen, and welcome to the INSPIRATION HEALTHCARE GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press end. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, if I may, I would

0:33 like to submit the following poll. And I would now like to hand you over to CEO, Neil Campbell. Good afternoon, sir. Good afternoon, everybody. Thanks very much for joining us today. Today, I'm with Alan Alby, who joined us as CFO a couple of weeks ago. We're going to run through the results from our financial year ending 01/31/2023.

1:01 Firstly, a little bit about the the products we sell in the market we operate in. We deal with medical equipment primarily aimed at premature and sick babies. These babies can weigh as little as three hundred and fifty grams being born twenty three, twenty four weeks gestation. So it's over three months premature. I'm putting into context the market size, around fifteen million babies are born premature every year. That number is rising. And it's around ten percent of the annual global birth rate. Different markets, different countries have different issues around prematurity. In the developed countries, it may be more around in vitro fertilization, stress, very defensive forms of obstetric care for for moms to be. And perhaps in the developing world, low middle income countries, it might be due to access to health care, maternal diets, and other socioeconomic conditions.

1:57 But either way, the rates of prematurity are about one in ten of all live births, and the complications from preterm birth are responsible for approximately one million deaths a year. And it's the largest cause of infant mortality in children under the age of five in the world today. We have a broad range of neonatal intensive care products in our portfolio designed to support the most vulnerable of patients in the first few moments of life. And it's important to note that our products don't only reduce mortality, but they aim to improve the outcomes to give these children and their families the very best opportunity in life. As we move through the presentation, hopefully, you'll gain an insight into the company, what we do a little bit further, as well as our financial results for the year.

2:47 A bit about our history. When we started, I started the company with three very good friends back in 2003 as a private business. We were a distributor in The UK and Ireland with a very small amount of export. Over the next ten, twelve years, we grew the company, and we got to around revenues of £10,000,000, still with no external investment, no external borrowings. When we found a company to acquire, we reversed onto AIM in June 2015. Subsequently, we invested in regulatory compliance and r and d and then started our acquisition journey where we acquired two British companies, Viomedix in September 2019 and SLE in June 2020 July 2020. Since then, we've reengineered the company for further growth.

3:36 And today, we stand as a company with revenues over £40,000,000, just over 200 employees, and we distribute our products to over 75 countries around the world across Mainland Europe, The Middle East, Japan, China, The United States, Canada, and and into Latin America. O over 55% of our product our revenues now come from our own branded products. Either products we control the IP or we manufacture and design in house. And over 55% of our revenue well, about 55% of our revenues now come from exports outside of The UK. Our achievements in our group, we have two companies in the group, INSPIRATION HEALTHCARE LIMITED and SLE LIMITED, both holding Queen's Awards, one for innovation and one for export achievement.

4:25 And we have five of our product groups in the company where we control the patents. On our journey to become a world leader, we have groundbreaking technologies, world class support and education. We're still a leading distributor of medical technology in The UK and Ireland in other fields away from neonatology such as infusion therapy. If we look at the investment case, building on solid foundations, we address the critical need. You can see that the birth rate is is for premature babies is increasing, and it's a large and accessible market, well funded market in the developed world for our products. We have strong leadership with proven commercial track record. I've been involved in medical equipment sales and marketing for some thirty odd years, and we have a a lot of experience in our second tier management group.

5:18 We have world class expertise, best in class portfolio of innovative products that serve that critical need. And because of our relationship and our longevity, the relationships we develop with our customers, be those direct customers in The UK and Ireland, neonatologists, neonatal intensive care nurses or distribution partners around the world, we've established and maintained deep relationships over a number of years. That means we're well positioned for future growth with an established commercial footprint and a clear and focused commercial strategy. Additionally, we've got proven M and A and organic growth over the last twenty years.

6:00 Now we're gonna come on to our highlights of our last financial year ending January 2023. I shall run over the first highlights, and then Alan will go through the financial highlights. Obviously, it was a relatively difficult year for many companies with the war the in Ukraine and continuing lockdowns in China as we still battle COVID-nineteen. But we saw significant growth in our domestic business areas. Domestic for us is The UK and Ireland. And we also saw growth in our branded products, up 8%. We completed the transformational investment in our manufacturing and technology center in Croydon, and we've started the rationalization of our property portfolio, bringing more and more of our activities into the Croydon main facilities.

6:48 We've continued to progress our strategy to become carbon neutral. We'll talk a little bit about how we're doing that and why is that important for us. We prioritized our R and D team to look ahead for the MDR submissions. MDR is medical device regulations in Europe. And in order to make sure that we meet the timetable that the EU were demanding, we made sure that we focused our R and D team to prioritize doing the testing, redeveloping and making sure we submitted those technical files on time. I'm pleased to say that major products have all been submitted. We invested in inventory to secure long term supply chain and meet customer demand. Supply chains are still fragile in the world, and we took a prudent view to secure those that inventory when it was available.

7:38 We saw growth in our infusion therapies business. We also learned that Project Wave finished its clinical outcome clinical trial, and the recruitment has finished, and we're now waiting for the data to be analyzed to be able to determine our next opportunity and pathway for for Project Wave. And we've launched a number of additional products in the acute care area. Post year end, we've returned to being cash generative, and we also launched a range extension of our SLE 6,000 flagship ventilators. I'll now pass over to Alan to look at the financial highlights. Thanks, Neil. So just going through the financial highlights. This is for the financial year ended January 2023.

8:26 Reported revenues for the group were essentially flat, showing very small growth of naught point 4% and reported at just over £41,000,000. The group experienced quite significant impacts from global macroeconomic factors. As Neil said, there are important distribution arrangements in both China and Russia, and sales into those customers actually declined during the year when the group had expected to see quite a contribution of of growth from in those markets. At the same time, gross margins declined by six basis by six percentage points to 44%. This is due to the mix of products sold and the geographic mix across sales made in the year. It's important to note that this is not linked to increases in cost of goods, but just products and geographic mix in sales, and we can explain a bit more about that in a minute.

9:26 The group is profitable at the EBITDA level. We reported 4,000,000 of EBITDA in thousand in the last financial year, down from 6,400,000 in the prior year due to the lower gross margin achieved on sales. Admin expenses were actually almost flat in the year, which is a a good result in a high inflation environment. And so the reduction in EBITDA is is just down to to lower margins. Net debt at the end of January stood at 3,800,000. There was a £13,000,000 cash outflow in total across the year. The bulk of this was down to the investment in the new manufacturing technology center in Croydon, which is now housing the bulk of those activities for the group and is providing a very solid foundation for the group's future growth.

10:18 That investment is now complete, and so there's no further investment in this site in the current and future years. There was an increase in inventories, as Neil alluded to, as we look to secure supply of raw materials to ensure we could manufacture and meet customer demand, and there has been an increase in receivables due to the weighting of sales in the last couple of months of the financial year. Both of those are expected to normalize over the course of the current financial year, and we expect to see positive working capital contribution in in the current financial year. There was also some important acquisition costs and a couple of exceptional items contributing to the the cash outflow. Towards the end of the year, there was a new financing facility put in place secured against the company's invoices, which gives us total borrowings of £10,000,000 as as we move into the current financial year.

11:18 At the end of January, that gave us £6,000,000 of overall headroom on our debt facilities. And as highlighted a minute ago, we were cash generative in the first quarter, so headroom has has now improved. Final point is that the there's a there's a proposed final dividend of naught 0.4 p for the financial year, which will be which is being put to vote at the AGM next week. Just a bit of illustration around the revenue and the moving parts in revenue and EBITDA EBITDA here. Importantly, we grew branded product sales by 1,900,000 in the year. That's an 8% growth rate on the core branded products within the group's portfolio. And the infusion business, which is aimed at adult patients, also grew by £2,100,000.

12:12 Infusion sales are a 100% distributed sales. Against that, there was some there was a loss of distributed revenue for ventilators, which was a planned exit of certain distribution arrangements following the purchase of SLE back in 2020 and now having our own ventilator sales. And on the back of that, technology support revenues also decreased as we handed that responsibility back to the distributors on those distribute ventilators that we're no longer selling. Those are all higher margin sales, and it's the loss of those distribution rights and loss of that technology support that has weighed on the gross margin in the last financial year.

13:00 Looking at EBITDA, the illustration here shows that, actually, operating costs were essentially flat, increasing by just £100,000 for the year, and it was the loss of gross margin of £2,500,000 linked to the mix of sales revenues as discussed that resulted in the EBITDA decreasing from just over 6,000,000 to £4,000,000 for for the last financial year. As far as cash flow is concerned, as I've discussed a minute ago, there was just over £6,000,000 of working capital outflows linked to investing in inventory and securing supplies to the critical components to secure our revenues and an increase in receivables given the weighting of sales that we saw in a very busy final six weeks of the financial year. We expect to see a normalization of those levels over the course of the current financial year and to return that to positive working capital situation.

14:05 We also have capitalized development costs linked to some of our r and d and clinical trial activities. And as explained at the beginning, just over £6,000,000 invested in the new manufacturing and technology center in Croydon. Again, those costs ended during the course of the last financial year, and and there's no further investment in this facility for next year. On the financing side, as I said, we have £10,000,000 in overall debt facilities. There's a £5,000,000 revolving credit facility and a £5,000,000 invoice discounting facility, which gives us across the piece quite significant amount of flexibility in terms of how and when we use those we use those facilities to meet up with our working capital and cash flow requirements.

14:57 In terms of the balance sheet, the only important or the material movement here is the increase in property, plant, and equipment following the investment in the manufacturing facilities here and the movement in next cash, which was which we've analyzed and and explained on the previous tab. Just moving on to give a bit more color on the revenue splits and the geographic split of revenue over the next couple of slides. We look at our revenue in a couple of different ways. Firstly, in terms of product ownership, as Neil said, we've got just over 55%, close to 60% of our revenues on company owned branded products where we have the IP. There's 33% of the revenues from distributed products and then the balance of technology support, which declined, as we said, because of the handing back of some of the distribution rights to to certain ventilated products.

15:56 In terms of the market sectors, the acute care, the neonatal division of the business is by far the largest. We're almost at £30,000,000 of sales now. That's over 70% of revenues. The infusion therapy division, which grew nicely in the last financial year, now contributes just over 22% of sales.

16:20 On a geographic basis, UK and Ireland, which is our domestic division, accounts for almost 50% of group revenues in the last financial year, and the next largest contribution comes from Asia Pacific region, including China, but also important distribution arrangements into Japan, Taiwan, and Australia and Indonesia in particular. Slight decline from the prior year because of the impacts of lockdowns in China and, therefore, the inability to get product into China last year. Europe represents 13%. Middle East and Africa, a similar proportion. And then lastly, The Americas, just 3%. And this is one one region in particular, which is underrepresented for the group at the moment.

17:10 The US represents a very significant opportunity, and this is a region that we expect to see some quite significant growth from in the coming years. And I'll now hand you back to Neil just to look at the rest of the slide deck. Thanks, Simon. So if you look at our our business model next, it's a relatively simple business model. We have our in house r and d and innovation at the top. That then feeds into manufacturing and supply. And on top of that, we actually have complementary distribution technologies partnerships with companies where we where we will sell their products to add value to our sales call, either that's directly in The UK and Ireland, or sometimes we'll sell them overseas if they add value to the the products we're exporting.

18:00 That then goes through our route to market to our distributors directly in The UK and Ireland, as I said, or distributor partners around the world. Distributors will then take those products and engage with customers and offer them both with education and technology support to be able to make sure that the products have as much value added to them as possible. That then further moves around to our revenue and profit, and then we reinvest back into r and d. So we're actually a relatively relatively simple business model for the company.

18:35 We mentioned our portfolio of products and the best in class specialist neonatal products. And we have a blend of products that are both capital equipment and consumables. So we benefit from from capital one off revenues and recurring revenues. As we look on the right hand side of the slide, we have the first three there, the LifeStart, the unique CFM, and the SLE ventilators. They're all very much capital equipment. They'll retail for for anything from 5 or £6,000 up to the top of the range. So these ventilators would be in the right in the low to mid £30,000 as capital equipment. And the life expectancy of those those products would be probably seven years or or seven years plus. That then allows us to benefit from the tech support revenues, planned preventive maintenance, and spare parts as part of recurring revenues for those particular products.

19:28 So the the middle of the left hand side, we have some disposable products. We have various breathing circuits. These this is the products that would the tubing that will take the vent the air and oxygen mixture from the ventilator towards the interface for the patient, and then you'll see the first breath and INSPIRA nasal CPAP devices that will actually interface with the patient and allow that air and oxygen to be delivered to the patient to meet their respiratory needs. And we also have our INSPIRA R PAP device, which gives the first breath of life. So with the lifestyle and resuscitation platform with the R PAP, allowing to give them the first breath of life, and then the the mixture of the other products, we we support the patient from actually the moment they're born, hopefully, to the the time they can actually leave the intensive care unit.

20:19 That gives us a mix of about two thirds capital and one third recurring revenues. And so we're not reliant purely and simply on on capital capital budgets around the world. When we look at focusing on accelerating our growth, we have significant market growth, due to the market that we're in. The neonatal market is growing around about 6.5% a year, year on year. And in 2023, it's estimated that that would be a market of about $7,700,000,000. But we've also got an existing footprint and commercial pathway into 75 countries around the world. And where we have existing products and existing markets, so through where we've already got regulatory clearance in The EU, our ventilates, some of our ventilators are cleared in China and Japan, for example, we need to optimize the opportunity for selling those into those countries, working well with our distribution partners to maximize the opportunity there and leveraging those route to markets in where we do have that regulatory clearance.

21:30 On top of that, our plan is to expand our geographic footprint by gaining further regulatory clearance of products that they that are perhaps not already available in those markets yet or going getting more all all of our products some of our products into new markets. At the moment, we do very little in The United States, so none of the none of the SLE brand of ventilators are sold in The United States. So it makes sense for us to look at regulatory clearance in The US, for example. We've got a strong r and d team. We've unfortunately, over the last couple of years, we've had to use that the r and d team here to either do the MDR work for product compliance and regulatory compliance in the European Union or to switch components from where we couldn't find components going out of production in various supply chains around the world. So but our R and D team are now starting to get focused back on bringing new products to into those existing markets, and we continue to invest in R and D.

22:34 And on top of that, we will look at the inorganic growth of strategic acquisitions, where we'll look to acquire IP through either a corporate transaction or strategic alliance through licensing agreements.

22:48 If we look now at the investments we've made from our own balance sheet over the last twelve months, fifteen months or so. When we acquired SLE in July 2020, it was a very typically British manufacturing company that had grown and added various buildings along the way. And it was functional but relatively inefficient. We found a site less than two and a half miles away from that site. We wanted to keep the staff very talented and loyal workers that we we'd acquired with the acquisition. And we refurbished a site in Croydon to around 50,000 square feet, 4,200 or so square meters, and state of the art manufacturing and manufacturing and office space.

23:35 We've increased our now we've increased our capacity, we've also increased our capability. We've got better r and d facilities. We've better laboratories for the r and d team to design, develop, test new new ideas that they're having and working on the new products. We've got a new technology support center where we've got greater space for for plant and preventive maintenance or repairs that need to come back into the into the manufacturer ourselves to be up to be fixed before they can be turned around and sent away. And we've also got better education center for both clinical education and for biomedical engineering training. So we can have more of our distribution partners, the sales team, the technicians, or customers come from the from the UK NHS coming to actually be trained on our products.

24:26 The facilities have been designed with a low carbon footprint. We have green spaces in the buildings. We have palm trees, for example, that absorb a lot of carbon dioxide. So we have less air changes, which keeps up cost of our ventilation and heating down. They've been designed for staff well-being. We sit stand workbenches and sit stand desks for all staff to make sure that the staff can can be comfortable while whilst they work. And, we've designed that to optimize efficiency of getting components into the building through manufacturing in a in a proper thought out process and out to our to our main warehousing to to be as as quickly and as effectively and efficient as we can do rather than moving moving across buildings as we were before. So we really have invested the state of the art manufacturing and technology center here in Croydon.

25:25 And just here, we've got some some photos of our staff in various parts of the building. In the top left, the top center, we've got some people, Laura and a colleague looking at a new ventilator. I've got colleagues on in customer service, and the customer service office finishing at the top top row. And then at the bottom, you see some of our clinical education facilities and our warehousing and manufacturing facilities based here in Croydon.

25:57 Talking a little bit about r and d and regulatory. We've touched on these already. It's important to make sure that we we were fully compliant with The UK the EU's timetable, sorry, for the technical file submission to be submitted. The EU just at the beginning of this year has actually extended the timetable for MDR because they realized exactly how difficult it was for companies to be pushing every product through the the new processes. We're very pleased that our team managed to get all of our technical files into the into our notified body before before the end of 2022. So we feel in very good shape to to make sure that we'll be compliant to those new EU regulations this year.

26:46 The U. S, we've started engaging with the FDA to determine the pathway for submissions for our products. And we have to have some further news on where we are with FDA submissions over the forthcoming months. Actually, on R and D itself, we've already made progress to improve the portfolio, and we've expanded that portfolio. We've launched one range extension to the SLE-six thousand range, taking it into more noninvasive modes, so being able to treat less less sick children or perhaps the babies are getting better and on their way progressing out of the out of the intensive care unit, and that should open up an opportunity for further sales for us.

27:31 And Project Wave, our novel respiratory support device, has completed the trial recruitment, and the analysis is underway as to the trends as to what we were we were gonna expect to see the effectiveness of that device. It's important to note that we were only looking at 17 babies in this study, so we were not looking to to see whether the trial to to tell us a a completely binary outcome of yes or no. But we do know that the product was accepted well by the babies. They didn't cry. They weren't they weren't grumbling. Nums and dads accepted the the the the product on the baby, didn't get stressed about seeing their baby in with a a novel device on them. And the nurses were were more than happy to to put the device on the baby and keep it on the baby. So we know that there's good acceptance.

28:20 We just now need to see the results of the trends of of whether we whether it did reduce or how much it reduced apnea with prematurity and intermittent hypoxia. And I've mentioned the post year end launch of the SLE range already. Looking at our environmental and social strategy. The NHS has determined a a net zero requirement for suppliers for 2035, and we're running ahead of the NHS requirements. So 2014, I believe, 2035 because of Scotland NHS. Our new manufacturing technology center uses only renewable energy, and we have solar thermal systems and natural ventilation built into the building to reduce our carbon footprint here as well as those internal green spaces.

29:13 Our carbon emissions scope one and two and three start to put emissions in place,

29:21 although we were actually so we've got the tier one suppliers into scope three at the moment. As we go down our supply chain, we will we will use put more measurements into the tier two, tier three suppliers. Our current car fleet is 66% fully electric and 34% hybrid as we encourage our staff to to move away from petrol and diesel cars.

29:45 We use adopting a recycling reuse scheme for our supply chain packaging where we we use less and less cardboard, and we send back boxes to be refilled by our by our supplier. And we've been investing in sit and stand desks for for staff comfort as I've already mentioned mentioned. So we've made quite strong progress on our environmental and social strategy. In summary, we've had a resilient financial performance in an unprecedented year of challenges. Revenues were broadly flat year on year. Adjusted EBITDA was down year on year. Our cash, we used to invest

30:25 in our building and supply chain. And our cash headroom at the end of the year was $6,200,000 As I mentioned, we were cash generative in the first quarter. And therefore, our cash headroom at the end of the first quarter was about $8,000,000 Manufacturing and technology centers already delivering efficiencies. We'll get further efficiencies as we move more of our activities into the Croydon facility here. Our products have been submitted for MDR to ensure long term revenues and competitive advantage. I've seen growth in The UK through our infusion therapies business and growth in our own branded products. We've invested in inventory levels to secure our supply chain. And as mentioned, we're well ahead on our carbon neutral journey. Quarter one finished in line with management plans, and we continue to explore strategic opportunities.

31:17 And following a strong fourth quarter and the end of our financial year 2023, the year has commenced in line with our plans. And whilst uncertainties remain, we are cautiously optimistic that we'll return to our usual growth patterns. Thank you. Now open up for questions. Neil, Alan, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that situates on the top right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Alan, Neil, as you can see there in the q and a tab, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions.

32:12 But, guys, if I may just hand back to you to respond to those where it's appropriate to do so, then I'll pick up from you at the end. Thank you. Thanks very much. We're just looking looking at the questions as we go through. Alan, do you wanna talk a bit about CapEx allocation or for me to share relatively new to the company? Well, I'll I'll I'll talk about that a little bit. But as Neil said, I've just joined the company a couple of weeks ago, and, you know, so I'm I'm still learning about priorities and and getting to know certain parts of the business. But I think, obviously, the the capital allocation last year was very significantly skewed towards investment in the new facility and to provide this fantastic base that we have that gives us the capabilities and the capacity we need to take the group to its its next level and and to have the capacity to grow and increase production over future years.

33:09 Going forwards, capital investments will be significantly lower and will be focused towards r and d and investment in in the products. So and we have a separate r and d process where all projects are analyzed and reported on on a monthly basis. And I think looking at capital allocations for those is is something that we will get into or, you know, I will get into in the coming months. Okay. Thanks, Alan. There's a question about cost inflation on components and inventory. Do want me to Yeah. I'll I'll I can't answer that one yet. I'm sorry. What we what we did a couple of probably about eighteen months ago, we started securing long term contracts with our suppliers at fixed prices.

34:01 Therefore, all the time we took the took the products, the or the components, the inventory onto some of those contracts, we we maintain those the prices on the components that we were buying. So we had a choice earlier in the year. Do we do we slow down our inventory rates, but then actually have to renegotiate price, or do we do we keep our inventory rates going up, but get better margins? So we we've had a bit of a mixture of that. Most of them, we actually took some extra stock, and you can see in our our balance sheet, we've actually increased the working capital through our inventory. That has meant we've had lower inflationary pressures on our components.

34:47 We have had some, and that's linked to another question about price increases. And we were we have we have had some cost increases, and we we actually did increase our prices to our customers. We did a couple of small relatively small price increases of low middle middle low middle percentages twice. We've we've had a we've did that over the last twelve months or so. So we have actually passed on price increases where we actually have had them to our customers.

35:24 So the margin in, as Alan said, the margin effect of going from 50% down to 48%, 44% was really driven purely by product mix and not by not being able to recover inflationary pressures.

35:42 The next question we've got is about Project Wave, and it's assuming the forthcoming Project Wave trial data meets its target clinical goals, I. Positive, then how does INSPIRATION HEALTHCARE plan to commercialize the technology and over what time scale, what's the extra investment will be required?

36:02 Well, we still don't know quite the outcome. We're we're waiting for the the medical research team to actually show us the the data. That's still with them as they analyze it. The way the clinical trial was set up, this was blinded to us. Although we do know we do know that it's safe, the the data committee has shared the safety data with us. So if it if it does meet its clinical goals, then we'll be able to launch the product. We we've got a product that would meet the the regulatory requirements, but we'd have to submit it for CE marking. At the moment, CE marking will probably take somewhere between twelve and eighteen months. That's probably a three or four month lead time for us to be able to submit, and then the notified body review time.

36:50 At the moment, unfortunately, is is somewhere around twelve months or so because of the press the the backlog of pressures in the in the EU. So we're probably a couple of years away from being able to see to see good revenues generated from Project Wave, but that obviously is dependent on what the outcomes will be from the trial. The the amount of investment we would need to make, I suppose we'll look at how the product actually the feedback from the nurses of how the product actually worked and how easy it was to to put on the babies and how easy it how well it stayed in place and how easy it was to use and look at some refinements in in the the application and the human factors usability type of type of work.

37:42 So that may that may need several tens of thousands. Hopefully, it won't need huge amounts of capital, but the submission for CE marking, obviously, will be potentially significant depending on what the external tests we have to do on the device before we can actually finalize the technical file. Just looking through some of the other questions, trying to answer all of them as we go through. Question about our key USPs versus larger competitors like GE, Philips, and Medtronic. Guess this one's another one for me. We're very much focused on on the innate and intensive care. We're a relatively small company with a with a relatively strong focus.

38:38 We look at the baby from, say, 20 three weeks gestational age through to through to term and see the changes in in that baby. So we really focus on how we can support the the neonatologist, the neonatal intensive care nurse, and the the clinical team looking after those babies with a greater understanding and empathy of of how they're actually working day by day to see the physical changes, physiological changes in that in that child. So I think our USP is the way we approach the customer. We're very much focused on that neonatal intensive care, that first few months, few hours, few days, few weeks of life, as opposed to perhaps our larger competitors who have a broader brand of range of products and sell into different areas of the hospital.

39:31 Our sales team is very focused, our distributors are very focused on neonatal intensive care and trying to have a broad portfolio to to to look at how the the baby or to support the the customer as the baby develops, as the lungs develop and surfactant comes into the lungs or as the the the brain develops and the the cortex joins up with the subcortex. Having that understanding and that knowledge about and and empathy with the with the neonatologist and the neonatal intensive care team is really our USP. There's a question on China. After a tough 2022 regarding China and Russia, how is the demand picture pipeline and sales conversion progressing so far in 2023?

40:24 Do you want me to answer that one again? Much we can really say about that in the current financial year is that beyond what we've said in the the outlook statement. Yeah. With the in China, we have we have seen a slight return to activity, which is positive. So, hopefully, that will actually continue to grow. But, obviously, we're we're very cautious about what revenues we'll get out of China and Russia this year. The last question is our year to date 23 gross margins tracking back to historical levels, I. E, 50% versus 44% last year.

41:11 So, Adam. Again, we can't give out any financial data on on current year trading and and current year performance, but I think it is safe to say that there is the margins of 44% last year were function of the the sales mix delivered in in FY 2023. In the current financial year, we do expect to see a more favorable sales mix, which should see margins recover. I'm not gonna put a number on on the level or or where it's at year to date, but our expectation certainly is that margins will be recovering and and improving on on what was reported last year.

41:58 I think that's the last of the questions we've had. So I'll summarize by saying thank you very much for for coming and listening to us present today. The I think that probably the most important thing for us to say is that we had following that strong quarter of the end of last year, this year has commenced in line with our own plans. And while those uncertainties remain, we remain we are cautiously optimistic that we'll return to our usual growth patterns. Thank you. Neil, that's great. And Alan as well, thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations?

42:50 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 INSPIRATION HEALTHCARE GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.