EKF Diagnostics Holdings plc

Ladies and gentlemen, and welcome to the EKF Diagnostic Holdings Premier Results investor presentation. Throughout today's recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Please simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'd now like to hand over to Executive Chair, Julian Baines. Good afternoon.

Good afternoon, everyone. Thank you very much for joining the EKF Diagnostics final results presentation. I'm joined here today by our new CEO, Gavin Jones, and by our CFO, Stephen Young. and I will start the presentation straight away. So in terms of the business, I think that the business has performed really well against what the board tasked us to do over the last year. We've had revenues of £50.2 million and that reflects the removal of any legacy products we had in our portfolio, which we've done very successfully. And this is demonstrated by the fact that our gross margin now has increased to 48% from 45% last year. showing that this move was the correct move for us. In addition, our adjusted EBITDA has increased to 11.3 million, which is slightly ahead of what we forecast in January when we forecast 11 million. So 11.3 million adjusted EBITDA. which shows a 9.9 million growth in adjusted EBITDA over the past year, again reflecting lower revenues but higher margin and EBITDA. Profit before tax of 6.3 million against 2.4 last year. Cash generated from operations, 12.2 million, which was very, very successful, resulting in group cash at the end of the year of 14.3 million. And cash today is at over 17 million as a company. So we've really restored the cash of the business into a very, very healthy state. So in 2024, the board gave us four expectations that we needed to deliver. The first one was a realignment of the cost base, which we've achieved really well, hence reflected in the EBITDA, etc. We managed to reduce the cost base by a further 1.6 million in 2024. which was very successful. Stabilize the cash position. Well, obviously, from my statement just now, we are now back into the position of being an incredibly strong cash generative business and with over 17 million in cash. Removal of low margin products. This is a job that the senior management team did really, really well. It's very difficult to remove low margin products from a portfolio where only a small team And they had to go around all the distributors, explain our decision, arrange on how we were going to slowly remove those products from their portfolio, support them in finding new suppliers for that portfolio. And they achieved that really, really quickly and really well over the time scale. And the fourth area of expectation is to capitalize on life sciences. This is an area where it's ongoing as a company. You'll see when Gavin speaks a bit later, we are now very focused on investing in people in the life sciences business, especially on the commercial side and some on the technical side so that we can demonstrate the growth in that business. It has taken us, and I do appreciate quite a long road to get here, but now we're showing real signs of growth in the life sciences area, but we have a long way to go, which is why that's ongoing and is demonstrated when Gavin presents his five-year plan later in the presentation. So in the past, we always talk about the point of care side of the business. Last year, we sold over 13,000 point of care instruments. This is nearly the most we've ever sold in the history of the business. We sold 10,000 in haematology. And what we're finding is that we're in the enviable position at the moment, but something we need to invest in of having Demand outstripping supply. Q1 of 2025 has continued where Q4 of 24 left off. The demand for our haemoglobin analyzers across the portfolio is increasing every month. We are literally... at the far end of supplying this as we struggle to supply the products, but that has been dealt with by our new strategy of investing in that Barleben site to make sure that we can supply these products. But it's a very positive sign because we're managing these customers and they really are coming to us like we haven't seen before in the haemoglobin business. As I mentioned in my chairman's statement, the diabetes HbA1c portfolio declined by 10%. That is driven by two things, but the main reason it has declined so far is reimbursement. Reimbursement across the globe is being reduced all the time on HbA1c, which is having a real effect on company supply and point of care, HbA1c. Our feeling is that there is a drive throughout the markets to drive this product back into the central lab. We still see some encouraging signs in certain parts of the world, certainly in Africa, and we're seeing recovery again in the Middle East after a big downturn. So we're looking at this product as something that we can maintain at a certain level and we'll invest in in terms of product improvement. However, this will not be the core focus going forward. where our core focus in point of care will be haemoglobin. Point of care tests sold. We sold over 100 million point of care tests last year, but as you can see for the second time, this slide demonstrates where we can see a huge opportunity for growth. We only sold 11 million tests in the Americas last year. That is way below what we would expect, and we are putting in place a strategy to really deliver significant growth in the Americas over the next three to five years. That is already beginning to happen now. In Europe, Middle East and Africa, as you can see, our strategy there is working. We sold 74 million tests in EMA, especially in well in all areas of the europe middle east and africa and in apac we sold 20 million so our focus going forward will definitely be on driving the american market where we can see a demonstrable opportunity for us to grow in that territory so um you will see some negatives throughout this presentation a lot of this being uh the uh reduction in legacy products and getting rid of the legacy products across the market. So we saw a 4% growth in the United States, but we did see 7% growth in beta hydroxybutyrate, our number one product as a company. So we continue to see high single digit growth in that business and we are investing in that to grow it further. We saw 11% decline in Africa, but this was mainly in Middle East, where we saw a big reduction in diabetes testing, but we actually saw a 17% growth in haemoglobin testing, which is, you know, well into double digit growth. And then in APAC, we saw a 45% growth in haemoglobin testing. So our focus on the point of care side will definitely be on haemoglobin testing, and then on the life sciences is growing both fermentation and BHB. On that note, I will hand over to Gavin, who will actually, over the last eight months, the senior management team, myself and Gavin, have been working on a five-year plan. And I'll hand over to Gavin to go through that five-year plan and the growth opportunity that we're now going to invest in over the next five years.

Thanks, Julian. And I wanted to say thank you to you and the board. You've been really supportive in the step up to the CEO position for me. But more importantly, what I'm looking forward to more than anything is to building on the strong foundations we have at EKF and build something bigger, better and stronger. And to do that, we think that the opportunity has never been better than now. We do need to drive organic growth within the business, and we have put together a plan for how to do that. So the board has set expectations for 2025. Some of that is going to be about capital deployment. We do know that we need to spend money. focus how we spend that money and unlock some of the unrealized potential that is currently out there within the market. So first of all, we do need to focus on our operational excellence, improve some of our capacity, And I'll talk a little bit more about that on a further slide. But we do need to extend and try to drive some efficiencies there in our operations. And then we've got a number of different opportunities on how to do that. We do need to expand and extend our commercial team, both from a marketing and sales focused on the key products we have, certainly within fermentation, hematology and beta hydroxybutyrate. And we also need to, and this is something that really is important to me, certainly in my previous position as CPO, but now even more so as CEO, we need to spend more time and more investment on product development. It's a must for us to be able to survive and to be able to move forward as a business. We will also be implementing a share buyback. scheme to improve our earnings per share and that's something that we will be talking about more in the future when it comes to the five-year strategy we think it's really important for us to put out some strong targets for us so we do want to be showing significant growth by 2029 hitting revenues over 80 million with adjusted EBITDA of over 20 million to do this we are going to need to invest in our commercial team to divide to drive that organic growth in our existing product lines and in underserved markets some of those are markets that we're already in but actually it's changing up the product mix that we currently have and trying to push into that in new ways certainly haematology will be a big part of that haematology in the us so it is our target to by 2029 to be the number one point of care haemoglobin provider in the world and in order to deliver on that we need to continue to invest in our production capacity increase our cost reduction activities and improve gross margins You already know us as the number one provider of BHB in the US, which essentially makes us the number one provider of BHB in the world. But that's very much within the lab testing space. And in order to move forward, we think we can really galvanize our abilities in point of care with what we have in BHB to develop some new products in that area and become number one in this area, too. And that's why a lot of our product development and improvement, both internally and with external development partners, is going to be focused in this area. We have mapped out our five year strategy for sustainable growth against the key areas that we've already talked about in terms of operational investment, the commercial investment, and then also our product development and improvement. And we know that that is going to deliver benefits in terms of our revenue and adjusted EBITDA. And we've also mapped out exactly what those investments will look like over that five year period. We have again set milestones throughout that five year plan. First of all, we want to look at our life sciences division. We know that there's a lot of expectation in this space and we know that we haven't necessarily delivered exactly where we want to be in the timeframe we want. So we looked at what we need to do there and we know that we need to realign that business, ensuring that we have the right commercial team in place and the right technical resources to be able to move into some of the higher value customers and we reckon we can do that by 2026. We will continue to update our existing product portfolio We should have new products in haematology and an updated beta-hydroxybutyrate product, our BHB product, by 2027. And we will be implementing a new product in the market focused on multi-analyte point of care by 2028. All of this will lead to us becoming number one in the market for haematology point of care testing by 2029. In terms of the operational excellence and what we want to do, we certainly want to continue to provide year on year growth. We've already seen a 32% increase from 23 to 24 in terms of the analyzer production that we were bringing from our main point of care analyzer facility in Germany. If you look at the graph, Shown here, you'll see that in Q1 2023 through to Q1 2024, the growth looks pretty flat. But actually, by the year end, we have seen significant growth in Q4 2024. And that has followed through into Q1 of 2025. This really demonstrates the capacity, not issues that we have, but the need to really support the increase in capacity. We've seen already in Q1 2025, a 43% increase in the analyzer build against Q1 2024. And at least 21% of that has been in the haematology area. So we have implemented some short term capacity improvements, but we want to look at longer term capacity improvements. And the way to do that really is to invest. We started some of that investment last year, but we will be continuing that this year and into next year to make sure that we can deliver on our ambitious growth targets. We've already talked a little bit about some of the commercial spend we want, certainly in the life sciences area. We did not necessarily have the right sales force to deliver on the opportunities that we are seeing within life sciences. The pipeline was somewhat narrow, could certainly be wider. So we've made investments there. We brought in new people who are already widening the pipeline moving forward. But beyond that, we want to also invest in our BHB sales. I know a lot of the way in which we structure our businesses, we talk about life sciences and we talk about that in the same vein with BHB and fermentation. all under the life sciences category, and that's entirely correct. The BHB product does come out of our life sciences division, but in terms of sales, it's actually sold through the same salespeople that sell into our point of care division. So what we are looking to do now is to produce two dedicated sales teams in those areas. One focused entirely on BHB to continue the excellent growth we've seen in that space. And then another to really focus on the point of care opportunities, certainly within the US market. with a dedicated focus on haematology. This is really where we see the greatest opportunity for growth in VKF and certainly within the bud bank market in the US. I think it's important for us to continue to restate our strong growth targets. These aren't going to be the easiest things to achieve, but that's why they're growth targets. We know that we've got a good, strong plan to get there. There may be some changes along the way, but we believe we have that strategy in hand to be able to deliver robust and strong growth, which we will be able to guide and will help with our decision making moving forwards. So from an outlook point of view this year, We certainly need to spend some money in the correct areas to push the commercial development and to build the foundations of the five year growth strategy. will look like straight you know we will be strengthening our commercial teams we've already done some of that within our life sciences division but we will continue on that road certainly within life sciences and point of care we will add to our technical resources to serve new customer demand and we will be continuing on our strong new product development strategy We will be driving organic growth in our point of care haematology business within the US and LATAM. And we will be working with partners, both external and a little bit wider, to really build the profile of our haematology product supported by a dedicated point of care sales force. And as I've already suggested, we will be leveling up our production capacity to deliver significant growth and increase demand for our haematology products. We will continue to review the options we have in place in the short term, but already long-term plans are in place to continue and support that growth.