Inspiration Healthcare Group (LSE:IHC) — Preliminary Results Presentation

0:01 Good morning, and welcome to the INSPIRATION HEALTHCARE GROUP PLC Preliminary Results Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time by the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a petition to answer every question received 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, I'd like to submit the following poll. And I'd now like to hand you over to Neil Campbell, CEO, and Jonathan Ballard, CFO.

0:33 Good morning to you both. Good morning. Good morning. And thanks everyone for for joining us this morning as we give you a run through of our results for the year ending 01/31/2022.

0:48 Just going to go through I won't read the disclaimer, and we'll move on to just a little bit about our focus and what what we do. For those of you who are new to the story, INSPIRATION HEALTHCARE GROUP really focuses on the neonatal intensive care market. So we deal with some of the most vulnerable and fragile patients that that come into hospitals, and they come in, obviously, at any time of day or night, any day of the year, and always pretty much unexpected. The sort of patients we deal with are premature babies down to 23 gestational age weighing three hundred and fifty grams and all the way up to sort of term patients who've had a difficult start in in life.

1:35 Our our range and product portfolio caters for patients from even before the first breath of life. So even the first resuscitation breath and while the patient's being assessed, our products can support those kids throughout their journey into the world. A quick timeline of where we are where we came from and where we are today. I set up the company in 2003 with with three very good friends of mine where we met in a company that sold neonatal intensive care equipment. In 2003, we were a distributor in The UK and Ireland. We found some amazing technology around the world and brought it into The UK, sold to the NHS. And we developed a small export business, really focused on a a product that protected the newborn brain if the baby had a lack of oxygen at the time of birth, and that was for term babies.

2:27 That gave us an appetite for further and further export and further expansion. And in 2015, we found a company to acquire on AIM, and we did a reverse acquisition. The company was called IndyTerm. They had some interesting technology that we still sell today. And after that acquisition, we started reinvesting in the company in r and d and in our regulatory compliance. And when we felt the company was at the right size and shape, we made started making a couple of acquisitions. In 2019, we acquired Viamedics Limited, a company making respiratory disposable products for premature and sick babies down in East Sussex. And in 2020, we we acquired SLE Limited. SLE are one of the leaders in in making neonatal ventilators. So these are the life support equipment that will actually drive the gas into the baby's baby's lungs and take away the the the c o two.

3:25 And from that point, we've actually been reengineering the company over the and now have have a strong platform for growth. Where we are today, we and we'll run through the the exact numbers of the from the financial point perspective, but we're turning over over £41,000,000. We have over 200 employees, all but one working in The UK, where we manufacture neonatal intensive care equipment and supply that around the world under our own brand. And our own brand products now cater account for over 55% of our revenues with exports, again, over 55% of our revenues. We have patents on five groups of our products, and we are well on our way to being a world leader in neonatology.

4:17 We support ourselves going and support our customers both presale and postale with world class education. We provide excellent tech support, and we also still are a distributor in The UK and Ireland where it adds value to our company and to our customers.

4:37 Now go through a little bit more about the highlights over the last twelve months. We've been concentrating very much on our exports, and this is obviously a strategic growth part of our business, especially from the synergies we identified when we acquired Viomedics and SLE. The the acquisitions were really around a one plus one equals three model rather than taking cost out. We felt that there was actually an ability to drive greater revenues. And we're now seeing that across the across our export markets where traditional distributors are now selling the whole of the the group's products and vice versa. Traditional INSPIRATION HEALTHCARE GROUP PLC selling the whole of whole group's products. And we're seeing opportunities arising to put put those portfolios together and sell in larger quantities into some export markets. And that's what we want to continue going forward.

5:30 We've successfully integrated SLE and BioMedics into the group. So we now actually have one sales team, one marketing group, one r and d group where we have engineers who were traditionally employed by SLE designing, developing products that are under the INSPIRATION HEALTHCARE GROUP PLC and vice versa. We have one regulatory and compliance team, and we really are now one one group. And therefore, we also see some of the synergies in the enlarged group from the back office side. So where we've managed to to be more efficient with us with our staff resourcing, we've been able to use that that savings in different areas of our business to to drive growth. And those synergies are are ongoing. We've making investment in a new manufacturing and technology center in The UK. We're moving effectively from the SLE site in South Croydon across and just up the Pearly Way about two and a half miles where we've we're gonna have a new manufacturing site for our ventilators and other capital equipment and also an r and d center focusing on medical technology and neonatal especially around the neonatal intensive care.

6:40 And we'll explain a little bit further our philosophy as to what we're investing and why later in the deck. We had some registrations in China and Japan for the SLE 6,000, our flagship ventilator. And not only do we have those registrations, I'm very pleased that our distributors between them placed stocking orders for around just under £2,000,000 worth of ventilators. And our distributor in China has has followed that up with repeat orders since then. So exciting to to move the the top of the range ventilator in our fleet into those markets. And pay project wave, our disruptive technology has started recruiting in the trial, the first trial we've actually had ourselves under our own steam, and we'll update you a little bit further on the deck as to where we are with Project Wave.

7:32 Onto the operational highlights. We've strengthened and expanded our management. So as as we've looked at the resources we have, we've we've strengthened from it internally, and we've also taken on an external candidate as a as a new group head of marketing. And we've been integrating our branding across the group. So Laura has been instrumental in pulling pulling all the brands together, We're giving them keeping some of their identity. Obviously, we've got strong brands such as SLE. We don't want to lose that. But but but making sure they are seen as part of the the larger group. We're very pleased to to have been awarded a Queen's Award in for us through SLE for their oxygeny software based algorithm.

8:18 This is an algorithm that looks at the saturation of the baby's blood as prescribed by the the physician by the bedside. So the the the neonatologist would say they want the baby to be at 95% or higher saturation of of oxygen through a pulse oximeter. And then the the ventilator within safe limits will servo control the amount of oxygen that's delivered to the baby in order for the baby to to maintain that targeted oxygen level. Just a word of on on this. It was developed by professor Peter Dargaville and his team down at the University of Tasmania. And following on from the I've already mentioned project wave, that was licensed from professor Ron Harper and his team at the University of California in Los Angeles. And to just put those two things in perspective for a company of our size and shape, we do really work with global leaders, not just selling products to them, but these thought leaders have trusted their ideas with within our group, and we're making those a commercial success.

9:24 We've rolled out the group's ERP system into Viomedics and SLE, and that gives better management reporting, better data, better visibility of what's coming down the pipeline, and and makes us more efficient. And John can talk a little bit more about some of that. We've introduced a new and improved electronic quality management system throughout the group. We were heavily regulated industry, as you can imagine. And making sure that we've got all the data for regulatory filings and compliance is also equally important from the from the medical device regulations that we have to to adhere to. And having a new electronic quality management system and document control system actually helps with the efficiencies of maintaining that compliance. We're also able to link that system to our ERP system, and therefore, we'll see see greater efficiencies when when we bring in change of components and when we sign off new new products between being able to our supply chain being able to buy forward with one set of documents that are all all compliant.

10:30 We've had a long term relationship with a company called Macrell. Macrell are a Greek manufacturer of infusion products, pumps, and disposable products for therapy

10:40 such as parental feeding, chemotherapy, delivered chemotherapy drugs, etcetera. And we've renewed that long term relationship through a new distribution agreement signed up this year. Last year, we talked about a charitable giving initiative that we launched and implemented, and that's now up and running. And we've adopted a number of well-being initiatives through our employees, and we'll talk about those a bit later. Post year end, some of you may have may know of a company called GeneDrive PLC. They make diagnostic point of care diagnostic equipment. And one of their products was looking at antibiotic induced hearing loss. This is for babies who have a genetic predisposition against a certain antibiotic.

11:26 And antibiotics are commonly given on admission into neonatal intensive care to protect the baby from any infection that might be in the intensive care unit. Unfortunately, about one in five hundred of these of of children given this given this antibiotic can can become deaf. And this is an exciting test that actually can within a within a few minutes of of admission into the intensive care unit, can actually determine whether or not the baby is at risk from that from that particular antibiotic and allows the the neonatologist to change the prescription and give the baby a different drug. So exciting times for us when we launch that at the end of March, and we look forward to to to seeing the results in due course.

12:14 I'm now gonna hand over to John to to go through the financial highlights. Thank you, Neil, and good morning, everyone. So financial highlights for our year ended 01/31/2022. As you can see, revenues totaled 41,100,000. That's an increase of 11% on last year. When mentioning last year, it's important to note that the group did benefit from $7,300,000.01 off COVID nineteen related revenue. And we also acquired SLE during July 2020. We therefore only had SLE for half a year in the group last year. So if you wanted to look at our growth on a pro form a basis, the revenue received from COVID nineteen as a one off almost replaces SLE for the remainder of the other half year.

13:04 So like for like, the group the group on a pro form a basis would have grown at 11% also. Down to gross margins, despite cost pressures on components that the the group is coming again up against and as is everyone in in the world market due to COVID nineteen. It's pleasing to see that gross margins increased to 50.2% from 48.7 in the prior year. Now that really is a function of product mix. The group has moved more towards its branded products, now totaling 56% of our total revenue. The important thing about our branded products is that we control these 100%. We can sell these worldwide, and, of course, we we achieve better margins.

13:52 Our adjusted EBITDA was 6,400,000, an increase of 14 year on year with a margin of 15.6%. And our adjusted operating profit stood at 4,300,000. In the current year, we did experience some higher depreciation and amortization charge, twofold. One, we we had a four years amortization in relation to the acquisition of SLE. And as Neil mentioned, the group is moving to a new manufacturing and technology center in Croydon. Therefore, we're experiencing greater cost and depreciation in terms of the that site. Our underlying diluted EPS was 6.1p. Prior year, 7.57p. Prior year, it was higher due to the one off COVID revenues of 7,300,000 and the adjusted weighted average of shares in relation to the acquisition of SLE.

14:47 And the the group has always been cash generative. At the peer at the year end, we stood at 9,300,000 of cash. We also have an a 5,000,000 revolving credit facility available to us, which is currently undrawn. During the year, we looked at ways which we can we can spend our capital. And through that, we've been investing further in facilities, r and d, and our IT systems, as Neil mentioned. Our current r and d spend totals 9% of revenue across the group. And as I'll take you on to later, we spent 2,200,000 in terms of capitalized r and d spend. And we we took the decision, given our capital on the balance sheet, cash that we'd we'd spend a greater amount on r and d in order to fast track some of our product developments.

15:36 The final point on here is that our we propose a final dividend of 0.41p per share. Over onto the next slide. It's a consolidated income statement. I've already spoken to all these points. One point to note is that our income tax, our corporation tax is is effective rate of 9%. We benefit from two things here. One, we achieve a 230 percent allowance on all our on all our r and d spends. And secondly, the group went the group acquired around 15,000,000 of tax losses brought forward on the acquisition of Indytherm and SLE, and we've currently started to utilize those tax losses.

16:23 So this slide gives you an idea. I mentioned we had supply chain cost increases, component issues with components. So this slide really takes you through how we the problems we've been facing and what we've been doing to mitigate those issues. So challenges we've seen, electrical components, obviously, if there's worldwide disruption there, things such as chips, electrical chips, we've found it difficult to to obtain. Same for silicon moldings and the battery supply, all the things which go into our branded products. Things we've been doing to mitigate these impacts, we've been partnering greater with our suppliers, placing forward orders on products and advanced orders, looking at dual supply between different suppliers. We've also deployed our r and d team into looking at the older components, and they've been working hard in looking swapping these components out so we're not fully reliant on older and unavailable components.

17:19 Shipping costs also, as with everyone, globally have increased. But as the group is now bigger, we've been able to tender for better rates, we've been looking at consolidating freight between the companies where we can. The revenue breakdown slide gives you a snapshot of our revenue as at the year end between product ownership, the top line, and our market sectors, the bottom line. Within each section, the top line in the figures is this current year, gray, and the blue line is the prior is the prior year. So important things to pull out from here is that our branded products, as as mentioned earlier, stand at 56%, giving us greater control, greater margins selling worldwide. The group started as a distributor. These now stand at 33% of our revenue.

18:08 And the technology support area, that relates to service, and we've also started offering a rental program in relation to our branded product, the AlphaCore system, which has started to gain some traction in The UK.

18:22 Going down to the bottom line, the thing to pull from here is really the acute care markets. The company's ambition is to become a world leading neonatal critical hair company, and it's pleasing to see that 73% of our revenue now comes from this area, the acute care area. Our service element of the business stands at 10%, and the infusion is at 17%. That's a growth of 16% year on year. Now the infusion is in relation to the parenteral feeding products, and this relates to the MICREL contract that Neil spoke to earlier. The next slide gives you an idea of our revenue breakdown by geography. So as you can see, we're 43% domestic, 57% international.

19:10 Domestic still being a very important market for us. However, following the acquisition of SLE and the cross synergies and being able to leverage up SLE's distribution networks. Asia Pacific now stands at 25%, Europe at 15, and Middle East and Africa at 13. You can see The Americas are at 4%. This is the single largest biggest market for us and the biggest opportunity. We are strategically looking at how to enter The Americas, and we're currently registering a number of our own branded products for sale in The Americas. We currently do have a an a couple of products that the group is selling and branded into that area.

19:53 Consolidated balance sheets. Key things to put out here is our intangible assets. These were increased due to the r and d expenditure and the capitalization of that against development projects. Our PP and E has increased in relation to further investment across the group in terms of our IT infrastructure and also the new medical, sorry, the new manufacturing and technology center in Croydon. Right of use assets offset by lease liabilities have increased due to the leasing of the new Croydon sites. And as I mentioned earlier, we've started to utilize our tax losses brought forward. So as such, we've recognized a 500,000 deferred tax assets on the balance sheet. Net cash strong at 9,300,000, no borrowings in the group, and net assets at 90 34,900,000.

20:44 Finally, the the cash flow. Again, you can see that we've generated cash from operating activities. As I mentioned before, the group has always been cash generative, 3,600,000 generated. Halfway down, you can see the 2,200,000 spend in relation to capitalized development costs for r and d and the increased spends on the PP and E. And also, we've had a full year payout of dividends of 400,000. So despite this continued increased investment in the group to enable future growth, we still have that strong cash position of 9,300,000. So with that, I'll pass you over to Neil.

21:23 Thanks, John. So just here's a a little graphic illustration of of, I suppose, what John was just highlighting there at the end about our growth. We've always been cash generative. We've had the only two times we've actually raised money externally was was through the acquisitions of Viomedics and and SLE where we raised approximately £22,000,000, both of which were oversubscribed. And we had about £2,000,000 net that that we put onto the balance sheet from those from those raises. All of the the rest of the the growth in the business has been self funded from the original £20,000 that we we started with back in 2003.

22:10 So this is a very simple model for us that we we invest in new products and new markets. We we have acquired products and and acquired access into new markets through our existing products and our existing markets. We grow that generates profit, generates cash. And through that cash, we reinvest in our new products, new markets, and to acquire. And that model served us served us well throughout the last the last nineteen years.

22:43 So where's that where's what's driving that that growth? Well, the market's growing itself. The neonatal world market for for intensive care equipment is growing around about a 6.5% compounded annual growth rate. So it's it's allowing us to piggyback on a growing market, which is which is a nice situation to find ourselves in. We're also doing that market penetration through optimizing the opportunity for all of our products where we've got regulatory clearance. So for example, in the the European Union, all of our products are able to be sold in into the EU. I mean, we're now looking at the best distributors between in the group or the right size distributor in in the group to absolutely maximize the the different product opportunities we've got. And leveraging that route to market, working with our distribution partners is allowing greater market penetration in the markets where we currently can sell sell our products.

23:38 Onto a market development. I've mentioned that we're a heavily regulated industry, which is which is right. So considering the the perform where our products perform in saving saving lives. And we're expanding the markets for our existing products through regulatory clearances. Many different jurisdictions have different regulatory requirements, although they're all on the same premise of safety. And we we test it sometimes submit those in slightly different formats with slightly different emphasis on different things. The United States looks very much diff on biocompatibility, human factors compared to Europe, for example. So we have to do a little bit more paperwork, a little bit more testing, and then we we submit the products for regulatory clearances.

24:24 And that will allow us new market development. Just to touch on The US, obviously, COVID has been a bit of a problem for for travel around the world. And, unfortunately, The US was virtually closed for us to be able to get to for a couple of years. And now we're starting to to see that that's opening up and but that will allow us to to prioritize which products go through the regulatory clearance and and work with our distribution partner out into The States to to launch those products over the next twelve to eighteen months. John's also mentioned product development. It's important for us to invest in product in new product development for our existing markets through our r and d team. And currently, we're spending around about 9% on on new product development, some of which is that's capitalized, probably about 50 to to 60% is capitalized.

25:14 But that new product development is important to make sure that we stay ahead of our competitors. And also, we we've looked to acquire we still look to acquire either through a corporate transaction or through strategic alliances. And we do have talked to some companies about looking at branding some of their products that that perhaps they're not focused on it. They need an equal intensive care unit towards us, and we can have a strategic alliance with that with those companies rather than doing a a full corporate transaction. We're very open to the way that we can acquire new products from other companies. Just going forward. Here, we sort of have a a a graphic illustration of of the world market. And you can see for our products in the light blue in the center, the the world market for our products is around $7,700,000,000.

26:07 So a company of our size, we've got plenty of headroom. It's it's still a large and attractive market, and it's growing. I just put some other dynamics and some numbers on this. Every year around fifteen million babies are born preterm. There's a hundred and fifty million babies born worldwide, and about ten percent of those are are preterm. Prematurity is the largest single killer of children under the age of five in the world today, but it's not just reducing mortality rates that's important. It's actually improving the more mortality morbidity, making sure these children who do survive come out in much better condition and can go on and and have a a full and healthy life. The costs for neonatal intensive care in The UK, and it's not dissimilar in other parts of the world, just to give you a flavor, it's around about 1,500 per day per baby per day.

26:58 That £1,500 is an intensive care where the baby will have full life support and where the most fragile and premature babies will will spend the first few weeks, maybe even months of their life. There is a a step down to high dependency. That's around nine hundred pounds a day. And when they're better and and stronger, they can even step down to special care, which is which is around five to six hundred pounds per day. So this is a very, very expensive these patients become very expensive, and it's not just the the cost to society in terms of pounds, shilling, and and pence as it were, But it's also that emotional roller coaster ride for the parents, the siblings, and, of course, the child themselves that we we want to improve to make sure that they come out of of hospital and lead a full and healthy life.

27:53 So, again, a little bit about our investment for the future. In r and d, we we talk about new product development. These are products that are really synergistic to what we've got. So the next generation of products in the ventilation disposables. But although we are looking and we've talked about project wave as our disruptive technology, but where where we do find technologies that could really be a game changer. We've mentioned the investment in regulatory, our new document management system and and investing for market access in The US, Japan, India, China, etcetera. And also, we're now increasing our market exposure into The US to make sure that we are fully understanding the market dynamics and what may have changed over the last couple of years for the products we want to launch into The United States.

28:42 Just going to touch briefly on our acquisition strategy. We can't just grow a company through acquisitions. So this is this is to the side of our our our ongoing growth strategies. But we'd look to target companies that are revenue generating. That could be an early or established brand, but we don't want to be buying pre pre revenue companies. And what we'd really like for to look for is key features that would add to our product portfolio, fill the gaps, and extend our range. So where we have where we have products that that don't quite have the full range that we know that if we had an extra couple of pieces in the jigsaw, it would actually add value to our sales call. And those those companies that could add capability to increase revenues through a sales or service channel or reduce costs, maybe have manufacturing in house.

29:35 So if we were looking at an example of targeting companies perhaps in The United States where we would where we where we would look to see whether we can actually drive our business. We look to find a company that's got products that that similar to ours, synergistic to ours, fill the gaps and and add value to us, Also, that we could take their products and expand their revenues through our European and and Middle East and Asian distribution network. But, also, we're booked to make to see whether we can add how we can add through their sales and service channel. And if they're a manufacturer, maybe we can actually manufacture some of our products inside The United States to reduce the cost of freight, which would have not just benefits in in terms of reducing the financial cost, but also the environmental costs.

30:25 Just gonna talk a little bit about Project Wave. Project Wave is very exciting, although it's frustrating that it's it slowed down over the last couple of years for due to to COVID. Project Wave works on a premise of something that goes back into, you know, very primal reaction in our bodies that actually, I believe, was first reported in race horses in the seventeen hundreds in France where a trainer noticed the race horses were breathing heavy more heavily, but were actually before they really got running hard and weren't and weren't heavily heavily sweating. And that that reaction seemed to say that there was something that was triggering their breathing prior to their prior to their running very, very hard.

31:15 I mentioned professor Ron Harper from UCLA. Ron's work as a neurobiologist looked at the at the different receptors in the body and the different triggering mechanisms of the body towards the lungs. And he found that these these prep what's known as proprioceptors in the body, and they can be triggered by by vibration. So these racehorses going back to the the seventeen hundreds, as they started running, they're causing different vibrations through their feet. That sent a signal to their brain to instruct the lungs to take more oxygen out through the alveoli because the the heart needed to pump the oxygenated blood to the to the muscles to move the to move forward in the race. And that's very much the set the the setup that that Ron investigated with the with premature babies and the group out in Los Angeles.

32:05 So by putting a a little vibrating motor on the hand and the feet, we can stimulate the those proprioceptors, and they and the the the thoughts are that that will actually trigger breathing in the lungs. This is targeted at premature babies and a little bit of physiology. Babies of premature suffer from a condition called apnea or prematurity. This is just because their their their brains and their bodies aren't fully wired the same way as a term baby would be. And and they just stop breathing. They can have these periods of intermittent hypoxia for five, six, seven, ten seconds or full blown apneas for twenty, fifteen, twenty, or thirty seconds at a time, and then they'll start breathing again. That's not good for the developing brain.

32:53 And what we believe is that by this stimulus, we can reduce this intermittent hypoxia. There was a small study done in California by a group in in Los Angeles that that looked at this early stage technology and found that intermittent hypoxia could be reduced by up to forty percent in premature babies.

33:14 We've taken the device and and Ron's work and the and the work from Sri Kasavan in in Los Angeles and made it into a a a medical device under under proper regulated conditions. And we're now doing a clinical trial at the Royal Sussex County Hospital in Brighton looking to repeat the work that Sri Kasavan and her team did in Los Angeles. When we we had to stop because of COVID, the trials were all paused, all stopped. And when we came back to starting, we've we've realized that there was probably a need to do further education and and to to restart the trial properly. We then spoke to professor, the principal investigator, and agreed that actually to we would move the increase the scope and move the gestational age from 27 down to 24. The more premature the baby, the greater the the the risks of apnea or prematurity.

34:10 We did all of that work through the MHRA, through ethics committees, etcetera. And in autumn twenty twenty one, we were approved to to restart the trial. We could then go back and do the training. So recruitment restarted late in 2021. And as of the beginning of April, we'd got 27 patient sorry, seven patients recruited into that trial. We now with the momentum going forward, we hope to conclude the trial. We hope that the team in Brighton conclude the trial late this summer or early autumn this year. We're only looking to recruit 20 or so patients in total. Excitingly, another part of our investment is a new manufacturing and technology center in Croydon. We're investing about 4,500,000 in a in a site that's 4,200 square meters. That's just under 50,000 square feet in old money.

35:05 And we really are wanting to create a state of the art facility. We make life support technologies, and we've and this will really be a technology leading center for for manufacturing. We've taken the the view that as we're refurbishing this whole building, we'll do this properly and make sure it's a low carbon footprint from from the get go. So we've we've got some initiatives here for putting solar thermal panels on the roof. So all of our hot water and some of the heating will come through through solar thermal. We've got passive ventilation.

35:40 We've got green spaces in the building. So we've we've got some trees inside the building that will actually absorb the carbon dioxide that the that the people who are working in the building will breathe breathe out. Those will absorb that. C o two gets absorbed, so we don't have to do less air changes to maintain a healthy environment for for working. That obviously reduces the the amount of of heating or cooling on on the the air that's going into the building.

36:11 The building's about nine meters to the east, obviously, slightly sloping roof. And with with that, we've we've kept the the roof the way it is, and we've put a mezzanine floor in to try and use as much light from the from the skylights and the roof across the whole of the working environment. So we've got a very natural, well lit environment with with big windows now being put into the the building as well and low energy LED lighting, electric car park parking spots with with electric charging. And all of the electricity is being used in there as we go back, so it's environmentally friendly generation. And we've decided to take the view that there'll be no gas in the building at all, so we're not using any natural gas for heating. So very low carbon footprint design.

37:02 We've also designed it for staff well-being. So the say the screen spaces, putting we're new furniture in, including sit stand desks, etcetera, to make sure that the staff can feel as comfortable as they can when they when they come to work. It's been optimized for efficiencies. We've got automated warehousing systems in there so we can scan barcodes and the the parts can be robustly delivered to the the warehouseman to to to pick and put them onto the production line. And we've taken the opportunity to look at improved customer education facilities both pre presale and post sale so we can bring our distribution partners into the into the facility, have classroom sessions and hands on practical sessions in the in the center.

37:53 And even we can bring in doctors and nurses if to to do the same thing on a slightly different slant than just talking about the sales opportunities. It's very exciting. At the moment, we're we're just about to to have our soft start. We're moving moving things in this week. And then later in the next couple of weeks, we'll have BSI, the the auditors come in to to sign off the the facility. And then during June, we can really start manufacturing our our products there. It's a very exciting time to be a real exemplar of what British manufacturing technology can can achieve. It's important to mention ESG.

38:38 We'll talk a little bit about the environmental side first. The NHS has net zero targets for requirements for suppliers going forward over the next twenty years or so, and we're running well ahead of those requirements for suppliers where where we are today. Our new manufacturing and technology center, as I've already mentioned, has got a lot of of environmentally friendly features in there, and that actually also helps us meet those NHS targets. We've been measuring scope one and two emissions already. We'll be reporting on those. We're working with our manufacturing partners and distribution partners around the world to measure our scope three emissions over the next twelve months or so.

39:29 We've taken some simple initiatives on environmental. We've we decided a couple of years ago that we would actually have an electric car fleet. 52% of our car fleet now is fully electric, 44% is hybrid. Some of our colleagues who live in more rural areas asked for hybrid cars just in case there was an issue charging charging the car. And we've we've made good progress, we think, of of having 96% of our car fleet either fully electric or hybrid. And as the infrastructure rolls out, we expect the the number of fully electric percentage to increase and the hybrid to decrease. We're also looking at introducing a recycling reuse scheme for supply chain packaging, extending to all of our partners over the next couple of years. So really making some some good progress on the environmental side of of ESG.

40:20 And that's not to take anything away from the social side. Internally, on the social side, we really look at look at our employees and see how we can actually improve their their working environment. And one thing that I think a lot of us have have benefited from over the last couple of years is working from home. But we're a manufacturer, so we can't we can't all work from home. We have, obviously, shop floor where we make goods. It has to be we have to have employees working in the in the factory, in the warehouses. But we're we're allowed, we've said to our colleagues, that up to 40% of the working week can be working from home. So some of our more administrative roles, we have 40% of this of the team at home on any one any one time.

41:10 We've also said that we're as a factory, we can't just allow people to always have the same day working from home. We need to make sure that from a health and safety perspective that we've got full coverage for for all disciplines. And so therefore, people do change which days they work from home on a flexible basis. But when we considered other aspects, we we also thought, well, some people can't work from home in the in the shop floor, but they would they may benefit from a different style of working. So what we've also offered is all of our staff the opportunity to have a compressed four long day week. So Monday to Thursday, approximately six eight in the morning to six in the evening, and then get a a three day weekend. And around a third of our staff have have adopted that that four day week, which they're finding finding beneficial to have a nice three day weekend, save some money and time on a commute, save some some time around the house so that when they they get the full weekend of Saturday and Sunday a bit more relaxed.

42:13 And for those of us who work in the five day weeks still in the normal hours, Fridays become quite a nice relaxed day, less meetings. I can finish things up that you would you were wanting to finish up by the end of the week. And, again, going into the weekend a little bit more relaxed. We've had a lot of discussions around, I suppose, like every company about mental health and how we can support the mental health and and well-being of our staff. And we've adopted an app from a group called EveryMind to provide support and well-being just in general well-being to all of our our staff. So they can move go on the app and and have a look at some support material that they may find useful. Last year, we also had a wellness day. We actually decided we'd shut the factory, shut the whole place, shut the whole company for a day. Not an extra day's holiday, but we actually closed everything for one day.

43:06 No emails, no phones, and to give our staff a very much deserved long weekend. And that was very beneficial for for everybody concerned. We've also looked at what benefits we've got in the group. We've we've adopted new parental leave provisions with prematurity benefits. We thought it was appropriate for us to be leading the the way with prematurity. So benefits of if any of our staff do have premature babies, they get extra benefits whilst whilst that baby's in hospital. We're also very aware of the the the cost of living rises. We've brought in things such as salary sacrifice to buy electric cars and cycle to work schemes so our colleagues can actually save save money on national insurance.

43:55 We've also got shopping apps where through reward gateway, our staff can save 4% on shops such as Tesco's and Sainsbury's and a little bit more at Marks and Spencer's and Curry's, those sort of things. Very much trying to make sure that we give give our team the benefits that we can afford, but but also benefits that will help them mostly. Externally, we've also been looking at our charity initiative. Last year, we we set that up by donating 2.5 £2,250,000 to the to CAF, the charity. I can't remember what's off what what CAF stands for. I'll have to ask John that. But they effectively Charities ave Charity Aid Foundation. Sorry. Thanks, John. Charity Aid Foundation. They effectively administer money to charities on on our behalf.

44:50 We wanted to do very much this to be a a an employee initiative as well. So we've set up a a committee chaired by doctor Peter Reynolds, who's a consultant neonatologist who works for us 50% of his time. And for for other employees, see the applications from different charities. They discuss those and decide which ones of those charities we should donate to. So John and I and Brooke Nelson, our COO, will sign off the check and ask the ask CAF to make that donation on our behalf, but it's very much a a staff a staff initiative as to who we should be paying or who should be be supporting. And then finally, our outlook and summary.

45:41 We've had a strong performance this year, 11% growth year on year. John's given you the metrics for where that built up from. But what is nice to see is that cash at hand is still 9,300,000 despite the significant investment made during last year. And that cash is is is all but all generated internally. We we've never raised money for operations. So we had a couple of million extra from when we did placings that were oversubscribed. But apart from that, all of the the cash and the growth has been driven from our own our own profits. The integration of SLE and BioMedics have been finalized. Those synergies are now ongoing both in terms of the the the efficiency savings and the sales synergies.

46:28 We've we've faced logistical challenges, and we recognize those will be going and we've been managing those well, as John's already already said. We've deployed our capital in core areas of business for long term growth, new product development, manufacturing technology center, and our IT support systems. All of these areas we feel will give long term growth benefits to the company, and it was right to deploy our capital in these areas. And we've made good progress on ESG. Our environmental reduction of reporting is is moving ahead very, very well, and we've adopted several well-being initiatives for for our team. I suppose we're leaving one thought here. We've we've always been agile in approach to managing challenges that we've faced such as back in the day, such as swine flu, the the banking crisis, and more recently COVID.

47:21 And because of that and the investment in the the new products manufacturing tech technology center and IT, we remain confident in our growth prospects. That concludes the formal presentation, and we can now go on to some questions. Neil, Jonathan, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just using the Q and A tab situated on the top right hand corner of your screen. But just want Neil and Jonathan to take a few moments to review those questions submitted today. I'd like to remind you that recording this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Neil and Jonathan, as you can see, we've received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. Could I just ask you to read out those questions and give responses where it's appropriate to do so? And then I'll pick up from you both at the end.

48:11 Okay. Well, there's there's one that's probably there's a couple of questions on a on a not dissimilar theme about acquisitions. So if I cover those questions such as how do we identify potential targets, and is our growth coming from organic or or acquisitions. So just on on acquisitions, how we how we identify. I've been involved in neonatal intensive care medical technology since 1991. So we do know an awful lot of companies. So my colleagues and partners, senior management have also been in in the industry for a long time. So we do know a lot of of potential targets from just knowledge of the industries. We haven't we we we don't retain corporate finance house to to look for targets for us.

48:58 That's something we may have to if we if we want something very specific. But we do look at look at companies we know, look at their products, look at their their size and fit, and decide whether or not we would like to to try and talk to them. Having said that, we also get offered targets from corporate finance organizations of which we will look on a on a more speculative basis. So so it's a bit of both a pull and a push. Market knowledge, I think, is is the key one for for us. And although we we still look to to acquire companies, we very much want to grow by grow organically as well. We think we've got an amazing platform with the product portfolio we have with the opportunities we have. We've hardly scratched the surface in The United States. As John's mentioned, that's the certainly the land of opportunity for us.

49:54 And if we can get the right regulatory clearances with the right support in place, we feel there's a huge opportunity to grow organically. And therefore, acquisition opportunities will supplement that growth rather than underpin that growth. Looking at another question about the costs. There's a question about experiencing different costs through through increased regulation in Europe for medical devices. Other opportunities to buy products that competitors won't be able to complete the European regulations. I think, yes, I think everybody in our industry is feeling the the pain of increased cost of regulation.

50:40 It's unfortunate that the European Union have have decided that all products that were on the market will have to go through through reregistration by 2024 or come off the market. And that's given a a big squeeze on the resources in the notified bodies who who allow us to place products on the market, the test houses who have to do the independent testing, and also the companies like ourselves who have to put all of that together for submission. So, yes, there are there are increased costs. We're managing those as we go through, and we're looking to see which ones which products of ours are actually in end of life or close to end of life where we might say, actually, it it doesn't make sense to to have those costs, and we'll move on to the next generation product sooner than than than later.

51:31 And rather than having the regulatory costs, we'll we'll put the the investment into the sales and marketing activities to to drive adoption quicker. The first and second part of that question touches on on acquisitions about are there opportunities to buy products from competitors. Yes. We've seen that. We have seen a few large larger companies looking to say that some of these products are now orphan or legacy and and look to divest them. We haven't actually taken any of those up, but we we have looked at a couple of opportunities that that, unfortunately, felt that they didn't give us the right the right value. But if they came along in the future, we certainly would we certainly would look at them. Let's click through some of the other questions.

52:25 Can we talk a little bit, John, about project wave? Do you want to to talk about project wave and then the next next things? There's a question here that assuming the project work trial is successful, what would be the next steps? And and we need to conduct a larger trial, etcetera. Sure. So put it away, as Neil mentioned, we're we're currently going through clinical trial for the device. That's that's expected completion probably during the summer, I would suggest, as we depending on the the rate of recruitment for those neonates. It wouldn't be until that point that we we get the results of the clinical trial. We don't know the results as the trial's completing.

53:11 So assuming that the trial assuming that the trial is is positive, at that point, we will then look to to see how we can further commercialize the product. I don't believe, Neil, and correct me if I'm wrong, that we will require any more clinical trial at that point in order to to move further and commercialize the product. In terms of interpret in terms of time scale, we're probably not looking at this financial year in terms of the commercialization of the of the device. It would more than likely be into the following financial year. Yeah. So a good summary of where we are, John. Hopefully, the trial will will give positive results, and there'll be a step change in the way we can treat these treat these poor babies who have difficulty breathing.

54:05 There's a couple of questions on on gene drive, and I'll cover those. There's one about update on early distribution, another one about how sales are going. Just as a a a point of information on how the NHS we're distributing this product in The UK and how the NHS actually works. Whether whether it's frustration frustrating or or part of the charm of dealing with the NHS, it moves it tends to move quite slowly. So even when you see a novel technology that's reported in literature, there's still a large element of sales and marketing that has to be done before before orders come in. And that's regardless of the of the technology. It's not something published and instantly the NHS finds money.

54:52 Departments have to write business plans, to look at the the amount of equipment they need, how many patients they're gonna be treating, what's the cost of it, what's the is there gonna be a saving elsewhere, etcetera, etcetera. Just just like in any other in any other business. So since we launched the product at the end of end of March, our sales team have been out and about talking to talking to neonatologists and talking to the the clinical staff about the opportunity. And we're we're starting to see interest in in looking for those demonstrations. It's too early to talk about sales opportunities. It is literally just been four or five weeks, and and, obviously, that was interrupted by Easter. So we are seeing interest in the products, but it's too early to talk about actually when sales will come in and at what level. But we are excited by the opportunity that GeneDrive gives us. It's always interesting to sell something new and novel that has potentially a profound effect on patient outcomes.

55:54 So very exciting product, but a bit early to talk about sales opportunities today. Just looking at the last couple of questions is one of why are we so focused on reducing our carbon footprint. I don't think we're so focused on it. I think it's the right thing to do. I think when you have an opportunity to to redevelop a a factory and move to somewhere new, it makes sense to put in the the best technology you can afford to put in at the moment. There is a greater need to for reducing carbon footprints in health care. If you remember if you think about it, the NHS is the single largest employer in the country.

56:41 Over a million people work for the NHS. All of those all of those staff have their own views on on the environment and how that we should be reducing costs of of environmental costs and reducing wastage. And so what we're doing is actually picking up with doing the right thing wherever we can. It's important to to not only be seen to be doing the right thing, but to actually be doing it. So we're not doing this as a tick box ticking exercise. We're very much doing this because we believe that we can actually reduce the the the impact on the environment, and that will actually reduce our costs in the long term as well. Just trying to think. Is there any other questions, John, that you can see that we we haven't covered? One Competitors?

57:35 Yeah. Oh, yeah. There's one of competitors. And how do we differentiate against the largest the larger players? The the bigger players in our industry are names that you're probably all familiar with. GE, Philips, Fisher and Paykel are a big competitor to to us as well. Draeker, there's a large German company. A large Swedish company. They're probably the main brand names that we would see as competitors. And how do we differentiate? I think we just do things differently. We have we have a focus on on the patient. We have a portfolio of products that are on that are synergistic and allows us allow us and our distribution partners to constantly talk to our customers about about our products.

58:24 We don't just sell capital equipment. We also sell consumables. So we have a a different approach to to customers. If a hospital isn't refurbishing the neonatal intensive care unit, it might not be looking for for ventilators. But, well, that that would stop some of our competitors being so close to our customer. For us, we would we've got a lot of disposables that we can still talk to our customers about and build that relationship and really get their trust and be in a position to to to talk to them at the earliest possible opportunity when they are going to invest in in capital products like ventilators. So the differentiation, I suppose, is is more about the the approach, the the the breadth of the product range, and the the focus on neonatology rather than rather than a a focus on on a specific technology.

59:19 And that's that's how we've certainly been able to drive our business so far. There's one, I think, about what's most exciting over the next twelve months. I'll I'll answer this, and I think John perhaps can give his view of what's exciting. I think the the the really exciting thing for us is is the opportunity in the new due to the moving into the new facility, new new production lines, greater efficiencies. That's really exciting to to really position ourselves for for long term growth. In the short term, that's that's very, very exciting. But then really over the next twelve six, twelve, eighteen months, getting more of our products into into new markets, getting registrations of our products. We've got a great product portfolio.

1:00:08 This this really is the envy of of quite a lot of our competitors, the the breadth of our portfolio. And as we go go through with the regulatory clearances and give these products to our distribute distribution partners, so that that's really quite exciting to see how we can how we can grow with the products we've got. That's not taking away the the other things like like Project Wave, which is also exciting to find out whether whether we've we've got a product that that that works the same way as we think it works. But I think the the for me, the the really exciting things over the next six, twelve, eighteen months are moving into the new facilities in Croydon and then getting more of our products into the hands of our distribution partners to drive to drive growth.

1:00:54 John, is there anything that's I'd I'd echo, you know, I think during this the past financial year '22 and going into '23, we've we've invested heavily in the company both through systems, through the through the new site in Croydon, through our personnel. And we really have given this company a good platform for scale and and moving forward. So it is really exciting to be now in that that sort of launch pad position moving forward so we can gain those efficiencies through the group having integrated SLE and biometrics completely. And, also, to echo Neil, we have we have a lot of exciting products. We have a great product portfolio, and we have some exciting products coming through our r and d team in terms of our own branded products. So it will be it's it's gonna be really exciting and busy next couple of years in terms of the group, but very much looking forward to it.

1:01:53 Thanks, John. I think there's I was gonna just one last question that someone has asked about considering a a share buyback moving forward. I think for for me, we're we're too much of an company's got too much growth potential to use its cash rather than doing a share buyback. We're not big enough for for that in my in my opinion. I think we're it's nice to have a strong balance sheet. It means that if there are rocky times ahead, especially over the next couple of years, I think there'll be some not not necessarily caused by anything other than the macroeconomic effects of of COVID in the past two years and the war in Ukraine at the moment. So I think there's gonna be some bumpy times ahead. So having a strong balance sheet is is very important for us. But being able to deploy that capital in long term growth projects is is really, really important rather than doing a share buyback.

1:02:53 So I'd I'd say that share buyback is not on not on the cards anytime soon. We look forward to finding strong ways to deploy our capital in in terms of growth opportunities for the for the company. Neil, Jonathan, thank you very much for that. I think you've addressed all those questions you can from investors. And, of course, the company will review all questions submitted today and will publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Neil, could I just ask you for a few closing comments? Yeah. Thanks very much. And thank everybody for for spending the time listening to us today. It's always a pleasure talking about the company.

1:03:38 I've been involved since the start in 2003, and I hope now then pinch myself to see how far we've come. But what really excites me is is the next few years. We've got a fantastic platform. We've got a strong product portfolio, a great team behind us, and we really are excited by by the future for for what we can what we can achieve. It's been a great a great few years building the company to this stage. And I think there's there's a really huge a really exciting opportunity for us to become a true world leader in neonatology. Neil, Jonathan, thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

1:04:31 This will only take a few moments to complete, and I'm sure be greatly valued by the company. On behalf of the management team of INSPIRATION HEALTHCARE GROUP PLC, like to thank you for attending today's presentation, and good morning to you all.