Surgical Innovations Group (LSE:SUN) — Interim Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the Surgical Innovations Group PLC Interim Results Investor Presentation. Thank Please The morning,

0:31 participation. I'd now like to hand over to CEO, David everyone. Marsh. Good morning, afternoon. Good afternoon, everyone. Thank you for joining us today. We're going to run through our presentation, and we'll try to go through reasonably quickly so that there's plenty of time for question and answers. Of course, as Mark said, you know, you can submit your questions on the right hand side. To start with, we're going to go through our financial results, and I'll hand you over to our group CFO, Charmaine Day. Good afternoon, everybody. I'm gonna start on the financial highlights.

1:11 So in terms of where we ended the first half of the year, we're at 5,414,000. That's 28% up on that 2021 year on year number. And we look at the previous year to the pre pandemic of two thousand nineteen just to show that comparative really and we're 6% up above that. And we've seen strong sales in The UK and Japanese market that's really bumping those sales up and showed really good growth. In terms of those underlying margins, 45.3% up on the prior year at 2.9% compared to that 42.4%. I want to talk a little bit about those margins in a few slides down. Overall, returning to profitability at point two nine above that 2021 number where we're making a loss, and then just close to breakeven at the adjusted operating loss level.

2:15 Sorry. There was a slight delay in moving the slides. Let me just go back a second. There we go. Apologies. There's a slight lag. There we go. So in terms of revenue analysis, looking at the segmentals, we've got the SI brand in green, distribution in the white section, and we've got the OEM in blue. So the SI brand, we're back to relatively normal levels, kind of trading around 95%, and we'll see that increasing in the second half of the year. The distribution, we've really shown strong strides of growth up to about 35%, and again, that's continuing into the second half as well. And then the OEM segment, we have had kind of early on in the year some supply chain issues and started to improve.

3:06 We have got also some new collaborations, which David will touch on later on with some significant orders in the first half of the year and continue to see them coming into the second half as well. Our overall momentum is continued into the second half. So we look at July and August, we're up around 13% on that 2021 number and 16% on 2019 number. And we go into the second half as well with a back order of about 700 k. Obviously, we've got some supply chain issues, which I've mentioned just previously on the OEM front, but also in the SI brand as well. Geographical split, David will cover on in a few slides down. Okay. Looking at the margin analysis, and I talked about about 45.34 on my underlying gross margin, and that is within our target range of about four to 45%.

4:07 We have had supplier increases towards the end of last year, and we have mitigate that mitigated that really and passed on that where possible and increase that prices as necessary towards the beginning of the year. And we anticipate again to review that towards the end of this year as well as all the costs have increased. In terms of the net cost of manufacturing, so this is essentially overhead base that hasn't been effectively absorbed due to reduced productivity. So we've had a few issues throughout the period. So we've had supply chain lead times extended and shortage of skilled labor, which has impacted the overall productivity.

4:52 So costs have been under recovered. And we've also had, obviously, inflationary pressures in the in the labor market really from that macro environment. We are looking at strategies to improve those efficiencies, and David will talk about our four day week, which was implemented. And also we've got some additional plant and machinery to increase capacity and also bring some of the, items that we've had to subcontract back in house. So we will see improvement in those, margin levels towards the half second half of the year. Overall contribution margin of 34.6% with slight uplift on that 2021 number, but will improve towards the to get back to that 40% level, which we really want to achieve.

5:45 Moving to operating expenses. We just look at the adjusted operating expenses, so we exclude the depreciation, amortization, and share based payments. We won some exceptional items just to kinda see that underlying cost of the business and see where that is. So overall, on the gray section of 2021, we can see that uplift in go to 2022 in that first half of the year, we've had a 17% increase on those costs towards the 1,880,000. We have had incremental changes over the first half of the year in terms of investment in sales and marketing support and that will really kind of support that future growth as we go towards the end of the year and back into 2023. And we've got inflation with pressures across the board again, so we've had to increase our cost of employment with compensations going up, but an NI uplift obviously in April and we've got to look at different ways to kind of review those benefits and to help retrain and then attract staff really.

6:49 The full impact of those incremental increases, obviously, it's over a period of time. We'll expect that to uplift in the second half in the green section there, 10 to 15% in that second half of the year.

7:08 Just looking at the overall net results, so just to kind of reiterate where we kind of started on those financial highlights. So the blue section the light blue section, sorry, is in the is the adjusted operating expenses. So you can see over a period of time, we are coming back to those 2,019 levels. And obviously, returning to profitability at that adjusted EBITDA level, coming back up online and then looking at those operating losses again at that breakeven point. We will expect to maintain profitability going into the second half of the year. And as we continue to improve those margin efficiencies, it will support the the future of the business and become a bit more profitable as we go through the second half of the year.

8:03 Looking at the financial position of the business, so it's a few key points relative to take out. So we we've been maintaining a high inventory level towards the end of last year, and we continue to do so and keep those levels high just to mitigate some of the supply chain risk that we have. The overall cash generated from operations of 220,000, And if you look at last year comparing to that, we were using cash in operations as we the working capital kind of increased throughout the year. So we're we're starting to generate cash, and that will continue to go into the second half of the year and into next year as well. Overall net cash position at the end of the half year was 1,530,000, excluding the right of use leases against December 31 of 1,760,000.

8:54 We have increased investment in capital expenditure. We talked about the plant and machinery investment. So some of the machinery has come in already, but we've had delays in terms of parts that we've been waiting for, and we expect some to come in as well at in the second half of the year and they've probably been delayed about three or four months. Overall, those improvements in capital expenditure should improve efficiency and capacity overall. And then back in March, we refinanced the business. So we had an existing loan of about 300,000 and then we had an RCF of 500,000. And this has been replaced with an invoice discount facility of 1,000,000. This is currently undrawn at the moment, so we've got plenty of headroom within the business if we needed to access this facility.

9:46 As I said before, we continue to generate cash and that will only improve into the next year as we look to reduce those inventory levels as everything else stabilizes. If those improvements and efficiencies will provide ample headroom further down the line to operate business and further invest. I'm gonna hand you over to David to go through the commercial and operational report. Thank you, Charmaine. So just moving on to the highlight slide. So the benefits of the investments that we've made in the business over the last eighteen months or so are threaded through the rest of this presentation, and you can see the benefits that we we have obtained from making these investments in the time we did.

10:34 So we enter the second half of the year with a, strong demand for the portfolio of products, particularly in The UK and and Japan, and we're beginning to see that, growth is coming back in some of our other key markets as well. We've invested heavily in our sales and marketing, and I'll touch on throughout the slides, I'll touch on where those that investment is is paying dividends with some of the new initiatives that we've got going forward. Charmaine alluded to some of the improvements in manufacturing capacity and the investment in plant in the in the workshop, and we're beginning to see some real improvements in efficiencies and reductions in costs. So for example, with the new injection molded when that comes online, there's the potential to save up to 26 on every valve that we make. So that that's that will help improve our gross margin as well.

11:31 The partnerships we've utilized the partnerships that we have across the globe both with manufacturers, distributors, and suppliers to help us expand our geographical footprint. And some of this is through sales activity and the new international people getting around the world a lot more freely in this year and developing contacts. And some of it is working with the likes of CMR and PETER SURGICAL INNOVATIONS And they're really that's really be putting us in a good position for 2023. Investment in new product is always the lifeblood of any company, and we've continued to launch products throughout this year and will continue in, quarter four and into next year as well.

12:16 And I will touch on the the products that we have already introduced. Investment in people for the MDR for compliance has been an important factor for this year. Investment in people and processes. And it's key that we remain on track for the pathway to MDR, and there's some some good news stories around that as well later on.

12:46 So first of all, we'll look at some of the challenges we faced in the first half of the year. And these are challenges which, any companies that you have involvement in or, you you you may speak speak to people running businesses. They will all, regardless of the industry, have similar, challenges to us. There is a huge issue around recruitment and retention of key personnel. Supply chain disruptions continue, and then, of course, the regulatory burden, particularly for med tech companies. So what have we done about these challenges? First off, from recruitment and retention, we have introduced a four day week. We've introduced a number of other key factors as well. So we've increased salaries above the original budget.

13:37 We we've introduced some loyalty bonuses. And what we're seeing now is that the the package of initiatives that we've introduced are actually they've actually stemmed the tide of people leaving the business. So in the first three or three or four months of the year, we were, like many other companies, losing quite a lot of staff. Now these initiatives have stemmed that tide, and we're also able to attract key people into the business, which I think is is is a really crucial point. From a supply chain disruptions, a number of factors that we've done, we are carrying a higher level of inventory than we would normally expect to. But this is a lot of this is in work in progress and raw materials to address the back order and to ensure we can continue to supply our customers.

14:29 So that's a deliberate policy. We've also moved from single source vendors to dual source and in some cases, triple source vendors. One case in point is around a product called Tyvek, which is used by all medical device companies in their packaging, and it allows you to sterilize the product while it's in its plastic container. Now there's a global shortage of Tyvek, and we've moved from one potential supplier to three. And we are taking whatever they can offer at the moment to ensure that we don't have any disruption to, to our supplies to to our customers. From a regulatory point of view, we have as I've mentioned before, we've continued to invest in people and processes, and we will continue to do that to meet the challenges of MDR.

15:21 And we're because we're slightly ahead of most companies, we are sort of trailblazing, if you like, alongside BSI. And so there is a lot of there is there is a lot of sort of joint, what's the word I'm looking for? Joint consultation between ourselves and BSI as to the route to MDR. So we are getting there, and we still remain on track, which is good.

15:55 So if we look at the markets now, and we'll start with The UK. As Charmaine indicated, the The UK has had a really strong first half of the year and that's continued into the second half. We're surpassing pre pandemic levels, and you have to note that the NHS has yet to reach pre pandemic capacity for elective surgery. So we are growing the business through our sustainability messaging and through the investments in the sales and marketing resource. Part of that has been to employ a national accounts manager to work with the private sector who are picking up some of the the workload from the NHS, but also to form closer bonds with NHS supply chain and some of the procurement

16:43 collaborative organizations that are dotted around the country. And we're seeing some really good progress there. Elemental has had supply chain issues as well in terms of orders from our suppliers, and and we've seen a fair bit of this sort of across the globe, but they are beginning to ease now, and we're seeing that revenue come through in in the second half of the year. Overall, we have a positive order book for quarter three. It's continued through July and August and in September, and we expect that to continue throughout quarter four. So The UK is in a really strong position at the moment.

17:31 In terms of The US, we had a slightly slower start to The US because it was impacted by COVID and then hospital staffing levels as we have seen across the globe actually. And then there have been some significant logistic issues in in The US too where sort of moving freight around as it came into the docks. So we had a lot of product tied up in in on the dock side for a while. So we've seen that improve through this through the second quarter and into the second half of the year, and we expect that business to continue to improve. We've done a lot of work with our dealer networks, with Adler who carry the scissors and then their, consortium of dealers. We have continued to roll out training through the second half of the year.

18:20 The new sales team that we have in place for international are beginning to co travel a lot more with them, and we're gonna see that ramp up during, quarter four. MicroLine will have a full launch of the yellow portal lead five mil and optical trocars, during quarter four. And again, that will involve a lot of co traveling with with their teams. We have had some initial success, with the Yellow Port Elite evaluations in some what they term as early adopter accounts. So they're small hospitals dotted around The US, and they've managed to convert a small handful of those. If we look at the other markets, so the European Union for starters, We saw that impacted by COVID at this in quarter one, but we're seeing activity increase quite quickly in the in the second half of the year.

19:18 We invested a lot in our international team, as I've mentioned, and part of that was a dedicated sales resource for Europe. And they're beginning to have a really positive impact, particularly in new areas like Poland and Germany, but also in previously underperforming areas like Spain. We're seeing a real growth in those markets, which is, encouraging to see. And a lot of that is based on the sustainability agenda that we have. Quarter four, we'll also see the launch of the yellow port elite and optical trocars in key markets. So that will put us in good stead for quarter one in '23 and going forward. So we're we're very positive about the way Europe is beginning to move back to normal activity, which is good.

20:07 In terms of APAC, a successful region for us, but underpinned by Japan. That that business continues to grow, every time we report, and we are encouraged by the fact that they're taking on more of the surgical innovations portfolio. So in quarter four, we will be launching the logic range of reusable instruments. And that that, again, will that replaces an existing range they already have. So they have existing business there, and we should be able to pick up some of that as we go forward. And then we will complete registration on the yellow port elite five mil and the optical trocar. Both products were prime part of the design process was around the requirements for that market. So we we hold a a lot of hope for that in the second half of the year.

21:00 For rest of the world, visibility is still remains lower than than we would like, but we are evaluating a number of new partnership options there. And we believe that, some of the new product launches that we have will provide a good opportunity for us to refocus, activity in the region as we move into next year.

21:27 Moving on to the OEM business. We have seen a number of challenges in the first half of the year, but we have a very strong order book, which was deferred from h one into h two. And we're working our way through that order book, and and, we have additional orders to add to it as well. We are exploiting some of the design and manufacturing expertise that we believe we have with to explore partnerships with both new and existing, OEM partners. A lot of this is around robotics and jaw design and things like that. And so we are continuing to to work very closely with our partners to see, alternative areas of of, development that we can, progress with them.

22:16 But overall, you know, sort of the OEM business is very strong. The CMR business has been very profitable for us and continues to be so into the second half of the year. And some of the new products that sorry. Some of the the the new products that we have with CMR have opened opportunities elsewhere, which I'll touch on in the next slide.

22:42 So new market opportunities. And these these sort of highlights some of the ways that we've leveraged our relationships with companies like CMR and PETER Surgical. So if you take India, for example, there's a a significant installed base of CMR versus robots in India. And CMR are providing those hospitals with the hardware from Surgical Innovations. And then we are utilizing the pizza sales organization in India to provide the disposable element to the product. And then we can roll that transition throughout the whole of the hospital, not just robotic cases. So we should achieve registration and product training in quarter four, and that will put us in a good position for the beginning of 2023.

23:32 Again, in Germany, we're leveraging the installed base of CMR versus robots to give us an initial introduction to a number of accounts, and those evaluations will start in October. We are developing a partnership with a specialist distribution company, and we see that as a real opportunity for us going forward in a market that is the largest market in in Europe, but also sort of the the one of the best funded as well.

24:06 So I I want to talk very briefly about our, the evolution of our environmental messaging. And as this message has evolved, we're learning from experiences that we found in The UK. So the first thing we did was to create the environment by working closely with key opinion leaders, nurses groups, surgeon surgeon colleges, procurement groups, and sustainability organizations. And then we had to provide and validate the data for to to back up our claims around that, which we've done working with these organizations. And then the sales team in The UK who worked very closely during that process automatically carried that into their sales conversations with hospitals and procurement departments. But what we what we missed and have have put right in the early parts of this year and continuing to do so is that with our distribution partners, we haven't necessarily taken them along on that journey. So we've then delivered them with the data and all of that, but not necessarily train them in how to use it and how to sell it, and also to work with their, key opinion leaders in their in their relative, relevant countries. So we're helping them go back to hospital groups. We're helping them go back to surgeon colleges and and sustainability groups to create that environment.

25:28 And so we're kind of doing it from the other way to the way we achieved it in The UK, but it's part of that evolving messaging. And one of the ways that we've done this, so we've recently won a UK a major UK NHS trust for their business. And you'll see on the the slide that this is part of the business case that we've provided to the hospital. So we've gone through all of the elements of how we you know, the number of cases they do, the cost of their current ports, initial capital cost, the cost of using us using YellowPort, but also the sustainability benefits as well. And this has been a really effective tool for us to be able to sit down with with a hospital and pull all of this data together working with their teams and then present to the financial

26:22 departments of of the hospitals. And they can see the benefits around all of that. So we're now utilizing these tools business cases further afield. Onto new product development. I talked at the year end results about a two stage strategy, and that still stays in place. So we're doing product extension lines under MDD. We saw the launch of Yellowport Elite, which was designed in conjunction with the Versus robot, but also has applications in all laparoscopic surgery. So it's a real opportunity for us. This month, we launched the optical trocar to go with that, and that opens up some key markets like The US and Japan when we've achieved registration.

27:10 And we hope at the end of this year to launch the LOGICIM instruments, which are the the sector and grasp, but to go alongside the Lodging scissors, and that will complete that range. Looking further forward, we're looking at extending our disposable portfolio. So at any given moment in time, there are thousands of single use products being used in the operating room. And we believe that there are opportunities for us to bring our disposable messaging to these products, providing high quality, low cost, and, sustainable products, and we believe we can build a market

27:46 on the back of that. We also have an an initiative to, look at and explore opportunities with sustainable materials, to see whether we can, introduce those into our manufacturing processes, and further enhance our sustainable credentials. And as I mentioned earlier, we're leveraging our existing expertise in IP, particularly in robotics, but with other OEM manufacturers as well. So we we have an opportunity to, see if we can, extend the life of those, IPs that we have.

28:24 In terms of compliance and regulatory, we mentioned the number of occasions, investments in people and process, and we're seeing the real benefits of that. We I I won't say we successfully sailed through audits because that would be complacent, but we we have gone through a number of audits this year. We have passed them. We've had recertification in in the SAP. We had an unannounced audit from the FDA, which we passed. We had our first stage of our MDR quality management system reviewed and successfully completed. And currently, our technical files have been submitted for review, and we're working with them now to to process that and move that along. So we we remain on track for MDR, which is March 23 for us, and we will continue to invest where needed to ensure that we we achieve those goals.

29:23 So in summary, the business that the demand for the our portfolio is is very robust, and we have a strong order book going into the second half of the year, and we see that continuing. In key markets, we see activity can returning, and that's coming back to sort of near normal levels, still a little bit behind pre pandemic levels, but we're we're making up for that with market share that we're taking. We've taken a number of measures to mitigate the supply chain and people challenges, and these are producing positive results. And we see those easing going into the second half of the year. Like I said earlier, you know, sort of we're not having the same people churn that we had in the first half of the year, and we think that, you know, sort of SI is now a very popular place to come and work.

30:10 So we're we are beginning to recruit key people for key positions, which is helping the business. So we have a strong order book. We have key initiatives to to provide opportunities for us, and we are very optimistic for the second half of the year and going into 2023. So that concludes the presentation. We're happy to take questions as we go forward. That's great, David and Charmaine. Thank you very much indeed for updating investors this afternoon. I'll just bring up your cameras as well as requested. And gentlemen, please do continue to submit your questions using the Q and A tab Just situated on the right hand corner of your screen, by David and Charmaine take a few moments to review questions submitted already. I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, will be available on your Investor Meet company dashboard.

31:01 David, as you can see, there's a number of questions from investors. And I think, you know, you have touched on some of the items around here, particularly on the latest slides. And I think some of the questions around new product pipeline and the impact on revenue, I think you may have touched on. But if I could just ask you to read out any questions where you think you can add a little bit more color, and then I'll pick up from you at the end. If I could ask you to read out the questions, though, in full, that'd be great. Okay. So so if if we look at the the first question, so let's talk about our product pipeline, which which I did do, and the potential impact on revenue. Potential impact on revenue is always a slightly tricky one as you're launching a product, but the the opportunity and the market opportunities are so so significantly huge compared to our market share that there's there's so much potential upside for us and as we develop into key markets. So I think we've been a little bit more strategic in developing new products, for some of our key markets. So the elite product is for robotics.

32:08 It's also specifically designed for The US market where they require a slightly larger five millimeter diameter access device. And the same in Japan as well where they use slightly larger diameter five millimeter instruments. Sounds strange to say that they're you get a larger than five millimeter instruments, but we all make them to slightly different variants. And so we can now compete with that and then along with the optical trocar as well. On the next question, firstly, thank you for your kind comments at the start of that. Please, can you talk in more detail where you can specifically on progress in The US and Japan? So I did I did touch where we were and and bring everybody up to date.

32:55 The US as we go forward. So it was slow in the first half of the year. But as we go forward, we are seeing momentum restore. We're seeing us as a business gradually come back to more normalized levels, and we expect that to continue to grow. The dealers, you know, sort of we're working more closely with them than we ever have before, and we're training and co traveling with them, and that will continue, you know, sort of going forward now and into next year. From a Japanese point of view, as I mentioned, you know, they're taking on more of our portfolio. They're taking on the logic range of reusable instruments to replace an existing range that they carried from another manufacturer. So that's a real opportunity for us. And then again, the YellowPort Elite and the YellowPort sorry, the optical trocar are real benefits for those markets.

33:50 Next question. Sorry. Just gone too far. Can you quantify staff turnover changes? As you did talk about this, but I feel you could have been more transparent and about the challenges you are facing. As this could leave shareholders concerned about workers leaving, for example, in production, which could be an issue. And it and it it was an issue, you know, sort of we I don't you know, I I apologize if you don't think we've been transparent, but we we have said all along that the the challenges we've had in the first half of the year and the reason why we deferred the revenue stream from the first half to the second half of nearly 700,000 is down to supply chain challenges and our capacity in the workshop. You know, we lost a number of skilled workers over a period of time, not just during this year, and it's been a real challenge to recruit them.

34:41 However, the new initiatives that we've put in place, this the four day week, for example, is allowing us to attract some good high quality high caliber skilled workers, and we are beginning to see that pay off. And, you know, we will see a much better manufacturing facility in the second half of the year and clearing the backlog of the the back order that we carried forward. So just just to sort of reassure you, we we are we are confident now that we we have measures in place that will help us mitigate staff losses. That's not to say that people still won't leave the business. You're always gonna have a a churn, but we we think we have overcome those initial challenges where people were leaving at at quite a high rate.

35:37 Are you looking to expand internationally, and are you considering new geographies? I think I've answered that with our approach to, in particular, to India and Germany, but we are reviewing other areas too, and obviously, as they arrive. Can you discuss further resources directed at private operators in The UK? Are you to ask, are you able to estimate and quantify this potential? Also, would you say that this resource is new, additional, or pivoted away from the NHS? If so, will this affect sales? So it's it's again, it's always difficult to quantify the potential benefit other than we are now in dialogue with the likes of Spire and Ramsey and Nuffield Groups at a level that we've never been before. So we're talking to them about sustainability.

36:31 We're talking to them about quality of product and costs. And so they're very interested in the custom kits that we produce for routine procedures like gallbladder and hernia. And that business, we are already seeing growing as the NHS or as the private sector shoulder some of the NHS burden. Does this affect so this is a new role. So we haven't taken resource away from the the normal NHS business. And in fact, this role also plays a part in supporting that by working more closely with NHS supply chain. And I think we probably have a a better relationship than most companies now with with supply chain, and they are actively helping us get introductions at a sort of a high level for sustainability in in in in an NHS hospital. So it's a real benefit all around.

37:34 Picking up on the injection molding machine you just mentioned, when do you expect this to be deployed? Can you illustrate a lead time you had are experiencing on this? So like all things at the moment, you know, sort of you place your order and there's a delay. I think we ordered this in February, and we expected delivery June around June time, and then it was August, then it was September. We're now expecting it in the first part of next month. We obviously have to validate the processes that we put through that, and that takes a couple of weeks. But we expect that to be fully up and running certainly by November. But like all companies, we are experiencing extended lean lead times on anything that we are looking through to to acquire.

38:24 And that goes for the tooling that goes with it as well. So I appreciate you've mentioned this, but could you discuss what you have done with sales resources in more detail? For example, have you doubled headcounts? Do you think that the positive momentum in some areas will merit additional resources, e. G, staff, etcetera? Because you can see the new leads can be successfully turned into sales. Yes. I'm a salesman, so I always believe you invest in your sales and marketing organization. And if you can invest ahead of the curve slightly, then that's a good thing. So what we've done this year, we've we've recruited a new marketing team, and you will begin to see on things like LinkedIn and Twitter and all of those a whole variety of new videos, new information coming out from the company, and we've sort of increasing our social media presence. We're also increasing improving our website, and you'll see that in the coming months that new pages to the websites will be developed.

39:31 We're improving our training for both our direct team and also our international teams as well, and also for internally as well for customer service and any employees of Surgical Innovation so they get a better understanding of what it is that we do. So we've now got a marketing manager, communications manager, and a product manager in that department. We announced last year the appointment of Damian Don Donnelly as sales and marketing director, and he's done a really good job building an international team. So we have two heads in international at the moment, and we have added two additional heads to the UK direct sales team as well. And, you know, you can see from the results that that, you know, sort of they are paying dividends.

40:19 So we will continue to invest where we see the need. I personally would like to see some some further investment in our international team, and I suspect that some at some point during next year, we will add to that. Are you able to quantify the installed base in Germany and India and therefore help our shareholders understand the potential early positive and longer term revenue benefits? Unfortunately, I'm not allowed to share the installed base data with you because that's confidential for CMR, and they're they want to release that as strategic points on fundraisers and things like that. However, what I can tell you is that typically a hospital or a robot will be used for a 120 to a 150 cases per year.

41:11 And sort of the the disposables for that will be about 55 to 60 per case, but that's not the that's not the interesting bit for us. What's interesting for us is that that opens the door to the hospital. So a hospital will typically do around a thousand cases a year, sort of the large ones. Some of them will do much more than that. And what what that gives us is is an opportunity to extend the use of yellow port into right across their laparoscopic cases. And then we can add on the back of that, LOGICALT scissors and FAST CLAMP and all of our other products. And so it what it does is it opens opportunities that we wouldn't necessarily get as quickly.

42:01 And so that's that's why we're partnering so closely with SUMR at the moment. I would like to hear details of your four day week. Is it optional? Does it affect your workers' earnings and so forth? So in terms of earnings, no. It it doesn't. So we've moved from a thirty seven hour week a thirty four hour week. So they work longer hours four days a week. We're very, very early into this. So we launched it in August. So it's very difficult to provide any key performance indicators as how how it's working, but we'll be able to do that towards the end of the year, I think.

42:47 Is it optional? Not really. But so we don't turn someone down from working five days a week if that's what they choose to do. But I think it it's been embraced very positively. And like I said, it's been a major indicator for people joining the business or staying with the business when they were considering an alternative career. So the next one is for Charmaine. I appreciate you have discussed this. However, I'm not account an accountant, me neither. Please, could you explain r and d tax credit credits? And when do you think that SI will look to actually use these, not defer it in the company's results? I hope this makes sense. Thanks. Yeah. Okay.

43:32 So r and d tax credits, as we invest in product development, we can take a portion of those costs and decide to either put it through our current tax losses and add that to our loss pile, or we can actually choose to take those tax credits and turn that into cash, which we tend to do. So you can get about 14 and a half percent back. There's obviously different calculations in the background on how you achieve that. We can decide out of our current year losses that will take that back as a a cash input back into the business. So we as we kind of go into the second half of the year, we are submitting our claims slightly earlier than normal. So we would anticipate that, that cash would actually come in towards the second half of the year rather than into the following year. That's great, Charmaine. David, I may jump in at that point, seeing as you've been very generous and answered every single question from those on today's call. So thank you for your engagement this afternoon.

44:26 David, Charmaine, know investor feedback is important to you both. I'll shortly redirect investors to give you their feedback. But I wonder before doing so, David, if I may, ask you for a few closing comments. Yeah. So I think we find the the company coming into the second half of the year and particularly into quarter four with a very robust and positive order book. We see that continuing going into 2023 as markets return to normal activity. Encouragingly, our sustainability messaging still resonates across the globe, and we're seeing real opportunities both in existing and new countries that I've mentioned earlier. We're we we've worked really hard to mitigate some of the challenges that we've had in supply chain and recruitment, And we see those as now beginning to ease and, you know, sort of the potential for a good second half of the year is is really encouraging.

45:23 And we are working very closely with our our key suppliers in in all areas, our key partners in all areas, stakeholders in the business to develop new opportunities as well all of the time. So we leave you today with a, you know, a positive story. We've got a strong order book. There's a huge pent up demand for our product range. We're putting our strategies in place to deal with the manufacturing issues that we had in the first half of the year, and we're working hard to manage the supply chain challenges as well. So, you know, sort of a strong order book for quarter four, and we're looking in a good place. So thank you very much for your continued support in Surgical Innovations, and I look forward to talking to you shortly. That's great. That's great. David, Charmaine, thank you very much indeed for updating investors this afternoon.

46:10 Can I please ask investors not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of SURGICAL INNOVATIONS GROUP PLC, we'd like to thank you for attending today's presentation. Good afternoon to you all.