Surgical Innovations Group (LSE:SUN) — Annual General Meeting 2023

0:01 Good morning, ladies and gentlemen. Welcome to the Surgical Innovations Group PLC Annual General Meeting twenty twenty three. I'd now like to hand over to Nolik's Chief Chairman, Nigel Rogers. Good morning, sir. Good morning. Thank you, Mark. Thanks for the introduction, and welcome, everybody. Welcome to those in the room and also those joining us online.

0:30 I'd like to start off, if I may, by just introducing the board members. But firstly, apologies for absence from professor Mike McMahon, who's unable to make the meeting today as he's traveling. But many of you will know professor McMahon was one of the original founders of the business just over thirty years ago and has been a a very, very valuable servant to the business over many years. And I'd just like to play tribute on behalf of the board and thank him for for his very enthusiastic participation throughout that entire period. And as many will know, professor McMahon has decided to step down with a vector in this AGM. I will just introduce a couple of people in the room while we're on the subject of founders, though. We have founding shareholders, one a founding director in the room, Melvin Windburn and Colin Glass. Thank you very much for coming today, guys. Nice to see you.

1:19 Introducing the rest of the board from this end here, we have Paul Hardy. Paul's been a non executive director on the board since early two thousand and sixteen. David Marsh, chief executive, who will have an opportunity to take us to a trading update shortly. David has been chief executive of the company for four years now. Next to me, I have John Glenn. John has relatively recently joined the board in the last few weeks, and I'm delighted to have him on board after a very comprehensive process to identify a successor to me as chair. And then after the end of the room, Charmaine Day, Charmaine, CFO and company secretary. As I have just said, many will have read in the notice of meeting that I have decided to step down from the board over the course of the coming year, and I'll be handing the chair over to John in September whilst we seek a new nonexecutive independent, nonexecutive director to join the board to replace me.

2:15 So with the board introduced, I'd now like to just hand over to David who will take us through a brief trading update. And then after he's done that, we'll take questions before we start the formal resolutions.

2:28 The trading update was published online at 7AM this morning. Many of you will have seen it already, but David will talk you through the highlights. David? Thank you very much, Nigel. Good morning, everybody, and thank you for joining us today. I'm going to take you through a relatively quick answer on the highlights, and then we'll address your questions. So we finished the first half year, or we will do as of Friday, an extremely, strong order book. It's looking very positive going into the second half of the year, and we're really confident for the business, that we'll more than heat well, we'll meet our, financial obligations, that are in the marketplace. We had strong, we had a strong performance in The UK, in Japan, and our European business is back above pre pandemic levels and doing really well, and that's continued throughout the first half of this year.

3:24 We continue to make excellent progress in our transition towards MDR. That has been, quite a long and arduous process over the last four or five years, and, we've invested a lot of money to get to that point. We have our QMS is approved, and two of our three product groups are also approved as well. And the the final group should be within the next couple of months. We have seen a little bit of slowdown in momentum as a consequence of the extension of the CE mark under MDD, and that has slowed the momentum somewhat. But that's that's more in in terms of the bandwidth of the notified bodies. So we we should be in good shape come the end of quarter three. We've also been recertified for MD SAP, and we have our certification for UK CE Mark.

4:23 Some of the headwinds we faced in this first half of the year have affected some of the plans that we had, particularly in India and The US, around supply chain issues, around some slight delays in in regulatory and registration. But the the supply chain issues are the big reason that we carry a back order into the second half of the year. So we've had sort of some suppliers have doubled their lead times, and we're seeing that those are causing a few problems in meeting the lead times for products. We've managed this quite effectively by maintaining a higher level of stock, and you'll see that our inventory levels remain high.

5:10 And that's a deliberate policy at the moment, and that's obviously taken some of our cash available cash as well. But as we go through the second half of the year, we'll begin to reduce our inventory levels, and we'll see those gradually returning to a more normalized level going forward. So as I said to start with, we are the Board is really confident that we are heading in the right direction, that we will meet our forecasts for this year and in the longer term as well. So we see a a very positive future for the business. We're in good shape. We have good momentum in sales.

5:45 We have good opportunities with our OEM partners and also moving into new geographical territories as well. So happy to take any questions people may have. I'm going to, first of all, open up to any questions in the room, and then I'm going to see what's available online in terms of Q and A. So first of all, any questions in the room, Gon. Thank you very much. Perhaps we could have a look and see if any questions have been raised on the online platform, please. Nigel, there's a question from a shareholder, John, who's asked, can you give an update in more detail about the supply chain issues that you've mentioned? I appreciate that you've talked about this previously, but if there's any more information, that would be appreciated.

6:34 Yes. So the the supply chain issues, it's it's they kind of for want of a better word, they evolve over a a period of time. So you deal with one, and then something else crops up and and you have to deal with that. And that's why, you know, we we are heavily overstocked at the moment to enable us to make sure we can mitigate those delays in lead times. So I I can give you an example. There is one component that we have that normally we we buy in. It had a a lead time of about six weeks. That lead time is now extended to between twelve and eighteen weeks, and the minimum order quantity has doubled. And so, you know, sort of we're trying to manage those.

7:21 And, you know, sort of if you if you're buying on a sort of just in time effectively, so you're buying, you know, as you're going stock out, then you run real danger of running out of stock and the problem occurs that you can't you know, you you you end up with extended lead times. So there there isn't one specific product that is necessarily causing Us issues. It can be that today, it might be scissor blades, for example. Tomorrow, it might be the peak that we use for making the cannula. And so it kind of changes depending on supply chain throughout the world.

7:57 Thank you, David. Those are the only questions we have online, Nigel. Obviously, if shareholders after this meeting want to email us, they can email us on si@wallbookpr.com. But at the moment, there are no more questions. Okay. Thank you very much. In that case, I'm gonna proceed with the resolutions, and I'm going to read the shortened form of those with with your permission. And I think under the circumstances not necessary to have these proposed and seconded, I'll I'll take a note of the meeting as right if I may and run through the resolutions and put them immediately to a vote. We have proxy information available. I'm gonna initially be doing a vote on a show of hands, and if necessary, we can resort to the proxies if if that's required. Otherwise, the proxy votes will be available on the company website shortly after the meeting.

8:47 So I'm now gonna proceed with the ordinary resolutions. Ordinary resolution number one is that the audited accounts for the year ended 12/31/2022 together with the report of the directors, the report of the auditors, and the strategic report be and are hereby received and adopted. All those in favor, please. Any against? Thank you. I declare carried. On resolution number two, that Saffrey Champanus LLP be and is hereby reappointed as the company's auditors until the conclusion of the next general meeting at which the council lay before the company. All those in favor? Any against? Thank you. Carried. Thirdly, that the directors be and are hereby authorized to fix the remuneration of Saffry Champness LLP as the auditors of the company. All those in favor?

9:38 Any against? Thank you. Carried. Fourthly, that Nigel Rogers be reelected as a director of the company. Clearly, I'll abstain. All those in favor? Any against? Thank Thank you. Fifth, that Paul Hardy be reelected as the director of the company. All those in favor? Any against? Thank you. Sixth, that David Marsh be reelected as the director of the company. Those in favor? Any against? Thank you. Seven, that Charmaine Day be reelected as a director of the company. Those in favor? Any against? Thank you. And eight, that Jonathan Glenn be reelected as a director of the company. Those in favor? Any against? Thank you.

10:27 I'll move to resolution number nine. Resolution number nine is the authority to loss ordinary shares at last annual general meeting of the company on the 06/27/2022, the directors were given authority to allot ordinary shares in the capital of the company up to a maximum nominal amount of approximately £3,100,000, representing a third of the company's issued share capital. That authority expires at the conclusion of this meeting. The board considers appropriate that a similar authority be granted to a loss of ordinary shares up to a maximum of approximately one third during the period to the conclusion of the next annual general meeting. At the date of this notice, the company does not hold any ordinary shares in the capital. So this is a special resolution to renew that authority. Those in favor, please?

11:17 Any against? Thank you. Carried. The next two resolutions are special resolutions and were dependent upon resolution number nine being passed, which it has. So resolution number 10 will empower the directors to allot ordinary shares in the company for cash with this application of statutory preemption rights in connection with the rights issue or the pro rata offer to existing shareholders and otherwise in connection with the rights issue up to a maximum nominal value representing approximately 5% of the current company's issued share capital. I'd like to ask for those in favor of special resolution number 10, please. Any against?

11:59 Thank you. Special resolution number 11 extends that this application of statutory preemption rights to permit an additional 5% of issued ordinary share capital up to a maximum nominal amount of 5% to be used for the purposes of an acquisition or specialized special capital investment. Those in favor?

12:19 Any against? Thank you very much. I declare all of the resolutions carried and close the meeting. Thank you very much. Your attendance. Can I just say one word or a few words? I just want to thank Nigel for the workings dinner's chairman. I remember when he came in, the company was in dire straits and quite frankly, teaching on the brink. And Nigel was introduced since then. As we've seen, it's been stabilized and hopefully going forward to better things. And so, you know, I'm glad you're staying on board as a director, and thanks to you and all the team that has been created around you for that. So thank you all.

13:14 Yeah. That's totally unexpected and very kind of you. Thank you very much, Colin. All of us as as public company directors, you know, we don't own our companies. We only borrow them for a while and do the best we can and

13:27 then try and pass them on to another generation of directors in a better shape than we inherited them. It's fair to say in many respects that wasn't a tough task here because, you know, there there was some things needed to be done, which were done very quickly. But I'm very happy with the state that I I have the company on to the next generation of board, and I think that we've been very diligent in our selection of the new chair, and I know that he and the other directors are taking very seriously how to ensure that the board structure and composition continues to help the the business to evolve and do well. And I'm sure that'll happen. So So I will I will look on with interest. Chairman, there is another question online. Would you be prepared to take take the question? Of course.

14:13 It says question from Martin Hall, who's a small shareholder. He's He's mentioned that you're well positioned with MDR compared to some competitors. Are you seeing increased activity or queries from buyers because of this? Does this throw up an m and a opportunity? Think I'll pass that to David, please. Yeah. I I think we what we are seeing is a number of companies that are dealing with implantable devices that are putting themselves up for sale because they don't want to go through the the MDR process, whether that is the type of company that we would want to acquire bearing in mind that implantables under MDR is all manner of headache.

15:04 In terms of where we we do see MDR because it's such a complex and clinically driven process. We do see it that it is a barrier to entry for some of the cheaper copy items that are coming from the Far East, for example. And, you know, sort of whilst they have got a sort of a bit of a reprieve with the extension of MDD, there is no doubt that on tenders now, having MDR will be more important to us on framework agreements and throughout our business in in the Europe in in European Union to be able to say that we've got MDR as a real bonus for us and will put us above the competition that we currently face.

15:51 That's the end of the online questions, Nigel. Okay. Thank you very much, and thank you, everybody, for your participation. Thank you very much indeed, Nigel, onto the board from SURGICAL INNOVATIONS. Could I please ask investors online not to close the session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the Board can better understand your views and expectations. This may take a few moments to complete, but I'm sure it be greatly valued by the company. On behalf of the Board of SUNTIAGAL INNOVATIONS GROUP PLC, we'd like to thank you for attending today's Annual General Meeting. Good morning to you all.