EKF Diagnostics Holdings plc (EKF.L) Earnings Call Transcript & Summary

Ladies and gentlemen, and welcome to the EKF Diagnostic Holdings Preliminary Results Investor Presentation. [Operator Instructions] 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 publish 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 and 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 GBP 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 GBP 11.3 million, which is slightly ahead of what we forecast in January when we forecast GBP 11 million, so GBP 11.3 million adjusted EBITDA, which shows GBP 0.9 million growth in adjusted EBITDA over the past year, again, reflecting lower revenues but higher margin and EBITDA. Profit before tax of GBP 6.3 million against GBP 2.4 million 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 GBP 14.3 million. And cash today is at over GBP 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 4 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, et cetera. We managed to reduce the cost base by a further GBP 1.6 million in 2024, which was very successful. Stabilized the cash position. Well, obviously, from my statement just now, we are now back into a position of being an incredibly strong cash-generative business and with over GBP 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. We're 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 5 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 Hematology. 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 hemoglobin analyzers across the portfolio is increasing every month. And 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 South Bend 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 hemoglobin business. As I mentioned in my Chairman's statement, the diabetes HbA1c portfolio declined by 10%. That is driven by 2 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 supplying 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 hemoglobin. 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 3 to 5 years. That is already beginning to happen now. In Europe, Middle East and Africa, we -- as you can see, our strategy there is working. We sold 74 million tests in EMEA, 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 you will see some negatives throughout this presentation, a lot of this being the 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 #1 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 hemoglobin testing, which is well into double-digit growth. And then in APAC, we saw a 45% growth in hemoglobin testing. So our focus on the point-of-care side will definitely be on hemoglobin testing. And then on the Life Sciences is growing both fermentation and B-HB. On that note, I will hand over to Gavin, who will actually over the last 8 months, the senior management team, myself and Gavin have been working on a 5 year plan. And I'll hand over to Gavin to go through that 5 year plan and the growth opportunity that we're now going to invest in over the next 5 years.

Thanks, Julian. And I want to say thank you to you and the Board. You've been really supportive in the step up to the CEO position for me. And -- 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, and we need to 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 that 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, focus 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 5-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 GBP 80 million with adjusted EBITDA of over GBP 20 million. To do this, we are going to need to invest in our commercial team 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, Hematology will be a big part of that, Hematology in the U.S. So it is our target to, by 2029, to be the #1 point-of-care hemoglobin 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. We also -- I mean, you already know us as the #1 provider of B-HB in the U.S., which essentially makes us the #1 provider of B-HB 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 B-HB to develop some new products in that area and become #1 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 5-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 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 5-year period. We have again set milestones throughout that 5-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 time frame 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 -- we can do that by 2026. We will continue to update our existing product portfolio. We should have new products in Hematology and an updated Beta-Hydroxybutyrate product, our B-HB 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 #1 in the market for Hematology 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 are 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 Hematology 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 won. 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 B-HB sales. I know a lot of the way in which we structure our business is we talk about Life Sciences, and we talk about that in the same vein with B-HB and fermentation all under the Life Sciences category. And that's entirely correct. The B-HB 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 2 dedicated sales teams in those areas, one focused entirely on B-HB to continue the excellent growth we've seen in that space and then another to really focus on the point-of-care opportunity certainly within the U.S. market with a dedicated focus on Hematology. This is really where we see the greatest opportunity for growth of EKF and certainly within the blood bank in the U.S. 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 forward. 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 5-year growth strategy. That will look like strength. 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 developing -- sorry, driving organic growth in our point-of-care Hematology business within the U.S. and LATAM. And we will be working with partners, both external and a little bit wider to really build the profile of our Hematology products 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 increased demand for our Hematology products. We will continue to review the options we have in place in the short-term, but already the long-term plans are in place to continue and support that growth.

So that completes the -- thank you, Gavin. That completes the presentation. So I'll hand over to Paul or Mark.

Yes, that's great, Julian. Thank you. Ladies and gentleman thank you Julian and the team, thank you for your presentation. [Operator Instructions] I'd just like to remind you that a recording of this presentation, along with a copy of the slides will be available on your Investor Meet Company platform. Apologies as well. I did mention in the intro for the short delay in today's presentation. Paul, if I may hand back to you, you've received a number of questions from investors. Thank you to everybody for your engagement this afternoon. Paul, if I could just ask you to moderate us through that Q&A, if I could ask you to read out the questions, and I'll pick up from you at the end.

Thank you, Mark. Thank you. Thanks for all the questions. There's a few areas to tackle. The first were some questions regarding growth and future growth. So one was from Mark suggesting -- asking the question, will the business return to growth in 2025? And what's the continued product pipeline to achieve that growth? And then there's another question about growth targets, and I'll come back to that afterwards.

Yes. Certainly, we certainly anticipate that I think we've already talked about that, but we will continue to grow, and we will return to growth in 2025. We do have the product pipeline. Like I said already, we've already got more orders for our hematology products, certainly our analyzers than we've ever had before. And that really will drive consumable pull-through. It won't be instantaneous. It won't be in the next month. Obviously, as we're building more and more analyzers, it takes time for that to build up. We talked about this last -- at the last interims where we were saying that we were building more analyzers and that will start to deliver on that growth, and we're already starting to see that. So yes, we will be delivering.

I also think that the removal of the legacy products took a few million out of our revenue over the past 2 years. So the growth certainly in hemoglobin has been seen and the discontinued products took out -- sorry, GBP 2.3 million in our revenue, but now we've got a focused team. And that's exactly the reason we've got a new CEO and a management team driven to deliver this 5-year plan. This 5-year plan wasn't written in a month. It took 8 months to look and focus on where our core competencies were and the 3 main areas. We also wanted to simplify the business to those 3 main areas of fermentation, B-HB and hemoglobin so that people can see the growth in those areas because fundamentally, those areas are the parts that are growing. So a return to growth is actually getting more efficient and growing in those 3 areas.

Linked to growth. One of the other questions we had was, are there targets that the Board has set for growth and internal targets in terms of the key performance measures? And would you be able to share those with shareholders?

The only thing I can say with the key performance measures, there are most definitely internal targets, but the only reference we can really give is an analyst note on where those growth targets are and what we're trying to achieve because I think information to that level would be difficult to say as a public company. But they both -- most definitely as the Board being -- we have to remember, we've got an incredibly strong Board with Jenny Winter and Chris Rigg, Christopher, they all are very driven on getting us to grow this business and KPIs that we've all been given to deliver. Hence, we had a target in 2024, we've got a renewed target in 2025 to deliver that growth.

So in short, you'd be looking to meet and exceed expectations over the year and manage those expectations?

Exactly. Yes.

Can we just talk about cash? There's a few questions about how you should deploy cash and what you should use it for. One question asks about cash being used. Given that there's a tricky track record with M&A, there's always risk involved. There was lots of money invested in fermentation. Is it just more sensible to build the business organically and simply return the surplus cash via dividend? So that's one of the questions that...

Right. One thing that I will say is that the 2 years I've been back, which was initially 1 year was to replenish that cash base. We are not actively looking at M&A. If the right opportunity came along, we would look at it, but it would have to be accretive, cash generative and profitable. Our track record, believe it or not, up until 2016 was very strong in M&A. And then I agree with you all there that the 2 acquisitions we've done since then have less than worked out. So we certainly intend to retain our cash. Also, operationally, we need to retain at least GBP 10 million in cash in the bank at all times with the new ways that audits work and everything else, we need to maintain GBP 10 million. So a dividend policy also is not on the horizon for us because of the way audits work these days and going concern, et cetera, et cetera. So we would look to maintain at least GBP 10 million in the bank. So in -- briefly to say, we are literally putting all the cash that we have spent in organic growth. Organic growth is the #1 target. The 5-year plan. We believe we've got huge opportunities in hemoglobin, fermentation and B-HB. We're going to invest in commercial growth. We're going to -- so we can deliver for shareholders. This is the first time we've had the ability to produce a 5-year plan for a long time. So the cash will be deployed #1 on organic growth.

So you've mentioned it there. If you could just clarify what somebody asked, what is your dividend policy for this year? It's as it is?

It's as it is. Yes.

Also in terms of cash, the inevitable question about the share buyback has come up. Gavin obviously said that it's on the cards, and you may be able to say more soon. One of the questions was quite direct. Why as a Board are you not introducing it immediately? So what are your views on share buyback? Is it just a case of watch this space? So you will be saying more soon, right?

More soon as in...

Sooner rather than later.

Very, very soon. So you're taking on board [indiscernible] an immediate share buyback would be a good idea. We think that's a great idea. Just a couple of other points on fermentation. So this will answer quite a few questions that people have. Gavin has already mentioned it hasn't gone as he'd hoped. And I think one of the shareholders said they felt a little bit left down because a lot of money has been invested into Life Sciences. We hope things have been turned around.

Why has it taken so long? How is it only now that you know to do this? And should we have appointed a commercial director or have a different strategy for Life Sciences 12 months ago rather than now that you're outlining in [indiscernible]?

I think that's a very fair question. But when you're tasked with -- by the Board with growing the cash, increasing the margins, taking further costs out of the business, investing further last year was not a priority of the Board. Secondly, we are acutely aware that we'd spent way over budget on the South Bend site and investing significantly further in that site, even if it was in people would maybe be perceived as running before we can walk. And thirdly, we really needed to understand the site. We built the site a few years ago and understanding exactly what we need has taken quite a while because we didn't want to press go on further investment on that site without knowing exactly what we required, exactly what we needed, exactly the type of customer we needed to grow that business. It is also slightly incorrect to say that, that the business isn't doing well because it is doing well. It's just not delivered what we have promised yet. We all, as a Board accept that. But you have to remember that we had the Elkhart site, which needed GBP 6 million spending on it. We decided to build a bigger site for future growth. And we still manufacture for our B-HB enzyme there. We still manufacture for Roche, Sekisui, Ortho. That site is very profitable and cash generative today. What it does give us, which we have said for 2 or 3 years, we totally admit this, that it's a huge opportunity for growth. It still is. That capacity is still there. We have employed 2 experts in the field, one in contract manufacturing and one in fermentation. And we now hope to start to deliver on that growth. It is a fair question, but we felt putting this 5-year plan together and really focusing on what exactly we required on that site was the main priority rather than rushing into another investment that turned out not to be as beneficial as we originally thought.

Yes. I mean, I think we do have -- obviously, last year, we did have a pipeline that we were looking at. We were delivering on some of the fermentation goals that we had, but some of that business started to fall away, not for any fault of our own. It just wasn't necessarily the right business, a lot of R&D focus. What we're doing differently now is we are approaching a much wider customer base and some of that is coming to us. It's not just what we're going out and finding, but it is also coming to us. I think the message is getting out there. And now it does feel like the right time to really make those investments. Obviously, we're going from a much stronger base. And let's not forget that investment that we've already made is there. Yes, the return on investment may be taking longer than anticipated, but it's not going anywhere. It's going to still be there, and we will make sure that we capitalize on it throughout this year and the coming years.

Two more on cash or comes from cash. One has come up since your question that you answered about share buyback. If you have cash, why share buyback rather than dividends?

Because you can control share buyback in terms of the amount of shares you buy back. And secondly, the dividend, if you have a dividend policy, it's -- it did cause us damage a few years ago, and we don't want to be there. It's simple as that. The dividend policy is a multimillion pound policy that, as I mentioned earlier, due to the way accounting procedures go these days, we need to keep a minimum of GBP 10 million cash in bank. So could it return? We never say never, but at the moment, it's certainly investing in the organic growth and investing partially in share buyback is the way we think is the best return for now.

You talked about that minimum level of cash. Maybe this answers the question, but from -- Murray has asked, given your strong cash position and generation, but the investment requires that you've got requirements that you have, what would you see as your low point for cash?

I don't -- by the way, the unusual thing is I still think we'll end the year at over GBP 20 million in cash despite the investment. So we're very cash generative. So I think everyone will be asking the same question in the interims and the final results because we are exceedingly cash generative and the implementation of Gavin's strategy is not tens of millions. We're talking people, people that need to be employed this year. I think you'll see a minimal impact, maybe a bit more in 2026, but we need to put in that infrastructure because we've only just started it with the 2 people in fermentation sales.

We get the question every time. So we might deal with it. Is the lowball from Harwood ...

Actually, I want to say something now is I'm a passionate advocate of AIM. And everyone knows I've had my highs and lows, but I am a real advocate that this is the economic center of growing small businesses in the U.K. I think it's the only market of its type globally. I think it's a crying shame that it's in the position it is now, and it shouldn't be because without opportunities provided by AIM, so many great companies would not have made it. EKF is an example in kind. And I feel that while so many -- and all the companies even AIM in general are the really good companies, I think there's an opportunity for EKF to stay there if we deliver on this organic growth and really be sort of one of the main players on AIM. I think that to take it off AIM now would be a travesty. I think a low ball would be a travesty. I think that we're on the cusp of something really good. I fully accept and apologize for some of the things that have happened over the last few years. But coming back 2 years ago, everyone in the team is so united and driven at the prospects we have in front of us, a really ambitious new CEO. We're bringing in a much younger senior management team who are hungry, driven and really want to drive this business. And it's my pleasure to hand it over to Gavin, but I really do feel that staying on AIM is the right thing to do, is the right thing in current markets to stick it out and deliver. And hopefully, we will see AIM back to where it should be and deserves to be. And hopefully, we'll start to see some cash inflows coming in and support for companies like that. So I'm sorry, it's a long-winded way, but you can see how passionate I am at not letting Harwood lowball offer for this company.

So you have it, no... A few questions about what risks there may be around the business. Are there any risks about U.S. tariffs?

Yes, I'll take it. I mean obviously, we're looking at it, we continue to look at it. We do have U.S. manufacturing capabilities. We do have the ability to transfer product to those U.S. facilities. At the moment, we aren't necessarily impacted if you look at the -- exactly how the tariffs are structured. It isn't really focusing in our area, but that's not to suggest that it couldn't do in the future, and we need to be able to respond to that quickly and effectively. What we don't want to do is put an infrastructure in the U.S. that is unnecessary, especially as we have it already within Germany. But if we do need to make changes, we can do that, but we have to do it sensibly. We do have to do it and make sure that we are meeting any levels of build that were required by the tariffs to kind of circumvent those tariffs. So we would still continue to manufacture in Germany and see what we would have to do to fill and finish in the U.S. to meet the requirements of any tariffs. It's the devil in the detail I'd say. Without jumping the gun, the South Bend site could prove to be very beneficial to us because the pipeline is growing quite rapidly, and there's a lot of incoming European and Asian businesses asking if we can manufacture for them in the fermentation site in the U.S. So from a U.S. fermentation perspective, it could actually be very advantageous to EKF. EKF is 53% of our revenue is in the United States. So we are in a very good position to manage any shocks that are coming out of the U.S. government.

Other risks. Question about what are the risks of the B-HB business?

I mean, I think the B-HB business is pretty secure, to be honest with you. We are the #1 provider of this. I'm not going to pretend there aren't small elements of competition out there, but we've got the number -- the 2 biggest distribution channels exclusively with us. We have ambitions to get all the other distribution channels exclusively with us. That's really going to set us in a very strong position. But we are also investing in that product to ensure that we have a best-in-class product. We're continuing to improve upon that product. We do believe that there aren't going to be too many new competitors into the market, at least there is a bit of a barrier to entry. They need to go through FDA approval. They need to ensure that their product is better than ours, and they need to revalidate. So we would never say that there is no risk. There's obviously risk, and we would never be -- we would never try and hide away from that, but we do believe we have a strong product and that we are covering off all the areas to ensure that we maintain that.

On the question of risk, one of the investors asked about where your competitors manufacture their products. Is that a risk in terms of lower product -- lower-priced products or lower-priced manufacturing?

Certainly, within certain areas, I mean, I think if we talk about the diabetes products, we are seeing a lot of low-cost analyzers enter into the market, and that's one of the challenges we have seen there. There's been something of a fragmentation in that market. From a hemoglobin analyzer point of view, less so, although there are some low-cost devices, but really, what people are looking for here is quality. You need to make sure that you're hitting the right quality standards. What we're seeing more of a risk in that is kind of moving back to lab testing from point-of-care, and that's really been driven by reimbursement levels going down and quality standards going up. There's not a huge amount you can do if they're moving towards lab testing over point-of-care, but we can look at different options there.

You just mentioned diabetes. I have a couple of questions on that. What does the Board see -- do you expect to see an accelerated decline in point-of-care? At the moment, there seems to be a pattern of 10% decline. Do you expect to see that? And then the other question because you'll answer it all together would be, can you sustain or what would sustain diabetes, keep it flat or prevent it from declining? Would that be -- need to be a change in use or whether there was a different trend to longer monitoring?

I think with diabetes, we have seen, obviously, a downturn. We've been very open about that. Some of the challenges there, as I've already mentioned, have been the changes in reimbursement and changes in technology choices, the lower cost competitors by the markets. And we're very much aware of that. We do think that's flattened out now, and we do actually -- we are actually seeing some growth this year, and we anticipate growth in further years. It really does depend on the different markets in which we're in. We've seen certain markets drop off and then come back over the last couple of years, partly because they've moved away to lower-cost devices and then found that actually the quality is not there and they've come back to us, which is obviously good for us. Other markets where we've traditionally been strong, for example, Germany, where we were selling our more premium product in diabetes, the reimbursement rate has been reduced there. And what we're actually starting to see now is people starting to move to a more manual product. So the benefit is at least we do have other options in that area. We do see it as something we're probably not going to invest a huge amount in. The market is changing somewhat, and we will see further change in that space, certainly as continuous glucose monitoring starts to take hold. It is going to be more and more about timing range. That's going to be more important. I don't think HbA1c testing is ever going to go away entirely because it is about managing a patient over a longer period of time, but it may not be quite as prominent as it has been in the past.

On a completely different subject, is the company adopting AI as part of your 5-year strategy to deliver those stretch targets? And if so, what are the best use cases?

So there are some elements of AI that we're looking at within our device development. I can't actually really talk about product development because I don't want to give anything away to any competition. And implementing AI within diagnostics is challenging. It's certainly the way the market is going. And so it's certainly a way to look forward and to ensure that we continue to have state-of-the-art products out there. But yes, I don't really want to say too much about what we're talking about.

I'll ask these questions then, but on that theme, I suspect you might [indiscernible] because there are a few questions about your new product development. So if you are focusing on organic growth, what is the new product development going to be done and what specifically it may well be -- that's very similar question that I have from another investor. Will the company be developing your own products or acquiring other companies or technologies?

Certainly, some of that is within our existing products, so updating, improving and putting better versions of our current products out there, new features, new thing. We listen to the market. We listen to our customers, understand what their changing needs are and try to implement those within our product development and improvement programs. We will be bringing new products to the market, which implement technologies that we've been working on for quite some time. And we are also working with external, say, partners who could potentially develop new products for us in new areas. It's not necessarily something that we are pushing hard at, but we do speak with partners all the time. And we're also outsourcing some of that development in order to kind of keep the cost low on product development and make sure that we're getting the skill set that we need without making huge investments.

One of the big growth areas in 2028 is the launch of a product that we've developed in-house for quite some time, which is what Gavin was alluding to. So we're certainly going to step up our R&D expenditure, whether that's internally or externally because we do understand the need for new products. The difficulty we have compared to the good old days is you could launch a product and launch in 2 years. These days with IVDR and FDA, it takes a minimum of 5 years to get a product from start to finish to the market. But we fully recognize now that we're in a long-term plan, and therefore, we need to invest in R&D, and we hope to be launching a pretty game-changing product in 2028.

I've got some questions to the financials, which I'll come to in just a moment for Steve. But just while we're still talking to Gavin about the growth and investment, how many people would you need to add to the sales team and which markets and business areas will they be serving?

So we're not talking huge numbers actually in the sales team. So over that 5-year strategy, there are -- we are adding each year in specific areas. So for example, we need -- we want a person in Africa dedicated to growing that business. We want to restructure the U.S. team so we've got support in both sides in terms of the Life Sciences, the B-HB and then also the point-of-care. But we are talking single-digit numbers for each area. We're not talking huge numbers. We're not overdoing it, and it will be progressive. It's not going to be checking a whole load of sales people at the problem and assuming that's going to solve it. We know that's not the case. It will be having 1 or 2 here in this area dedicated to focus in certain growth in that space.

Thank you. There was a question, Steve, on the financials regarding, you've detailed the revenues of point-of-care and Life Sciences. Are you able to provide investors with a breakdown of what the costs are across those divisions? Or is that not public information?

It's not as detailed as that. We can't really provide that in that much detail. There is segmental analysis in the annual report, which will come out. But yes, we don't break it down to that level of detail by individual sort of product lines.

On profit margins, how much more could you improve profit margins? And have you set a realistic target for where you want to go?

Well, our aim will be to get back to -- we think a very successful area in a business of our nature is to get gross margins up to 53%, 54%, and that will be our aim. It wasn't that long ago, we were at 38%. This year, we're at 48%, and we'll continue to focus on that. And we do think 52%, 53% is achievable. But anything beyond that, EKF in its history hasn't achieved margins higher than 53%. So that is our aim, which for a company like ours is an extremely good gross margin.

Great. Question from an investor here is, could you explain a little bit more about why Hematology is exciting? Why is that a growth market? Why is it suddenly an opportunity maybe more so than it had been previously? Is it about market share gain?

Yes. I mean it's a fair question. And I think obviously, we are seeing new opportunities, there's new types of testing coming out where hemoglobin testing is added to that. For example, one of the areas we've seen significant growth in is Brazil. This is a market we've never really sold into previously. We are selling into now alongside dengue fever testing. And that has certainly driven significant growth in Q4 last year and Q1 this year. We're also -- we do have an opportunity within the U.S. market, something that wasn't necessarily there before. Previously, the blood bank market in that space was owned by another partner. They weren't really developing that space. We've taken that back. And at the same time, there have been some technology improvements and some changes in that space, which allow us greater access to the blood bank market. So we're certainly going to go after that hard.

Julian, I've got a final question. Somebody has commented that during your chat, you said earlier that the 5-year plan was Gavin's, or how confident are you that the 5-year plan can be achieved? And do you take ownership of it as well?

I will correct my statement slightly and say that over the last 8 months, Gavin and I have been working on this 5-year plan. We just -- we spoke to the Board about this nearly a year ago saying we need to have a plan over the next 5 years. Gavin and the team, Steve's team as well and the operations team have been integral in putting this together. We've gone into line-by-line detail on delivering this plan. So I totally co-own it. But as the new CEO, I didn't want to take away his thunder and say that it was all down to me, which, of course, it was. But no, it's been -- the refreshing thing about this has been a complete senior management team effort. Everyone has worked at this and everyone has bought into it. And everyone believes it because they were asked how should we grow EKF after quite a few years of putting things right, et cetera, et cetera, a couple of years of stagnation. How do we really drive this opportunity, especially presenting an opportunity with a lot of cash and I think an AIM market that will be very responsive to any growth strategy we have. So yes, very long-winded way of ending this by saying, yes, I do co-own it with Gavin.

But I mean, what I would like to say is that the Board and the senior management team have been incredibly supportive in putting this plan together. Everyone is behind it. We all know what we need to do. It's been very, very clear. And if it's successful, then it's all down to me. And if it's not successful, then it was all down to Julian.

Thank you. I'll hand over back to you, Mark.

That's great. Julian, Steve and Gavin, thank you very much indeed for updating investors. If I could please ask investors not to close this session as we'll now automatically redirect you to the opportunity to provide your feedback in order the company can better understand your views and expectations. This will only take a couple of moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of EKF Diagnostic Holdings plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.