Animalcare Group (LSE:ANCR) — Investor Presentation

0:01 Good morning and welcome to the ANIMALCARE GROUP PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd just like to submit the following poll. I'd now like to hand you over to Jenny Winter, CEO. Good morning.

0:32 Good morning. And you're very welcome to this is the first time we've done one of these, so I'm hope hopeful that we we hit the mark. But if not, please do as as you've been instructed to add some questions. So, I'm Jenny Winter, and you can also see Chris. Chris and I will manage this between us, and hopefully cover off all the end areas that you're particularly interested in. So Chris is moving the slides. So if we go to slide three, that's it. I know that many of you are familiar with animal care, but some of you may not. So we've just popped a a slide in, just to enable us to give a bit of introduction so that you can get to know us a bit better. So we are listed on AIM. We're predominantly we're an international business.

1:18 We're a veterinary sales and marketing organization. We also bring new and innovative products to market through r and d, including our own development team, but also we, set up partnerships and we in license products from other parties. We operate directly. And what we mean there when we talk about our direct markets, that's where we have our own sales and marketing operations. And we operate in seven countries. So clearly in The UK, Belgium, Netherlands, Germany, Italy, Portugal, Spain. Hopefully, I've not forgotten anybody there. But we also run what we call international partners, and that's effectively our export business. And on the whole, that export business is exporting businesses to those countries where we don't have our own sales marketing team.

2:08 Occasionally, we also have a distributor in a market where, for whatever reason, it's not appropriate or it's not relevant or it doesn't make any sense for us to sell a product. But mostly, those international markets are where we don't have a sales marketing operation. Okay. Just another point in terms of summary. Those of you who follow animal health will know that it really splits into three segments. We're gonna talk about those segments, companion animal, production animal, and equine. And Northern European countries just have companion animal and equine, and Southern European countries have companion animal, production animal, and equine. So just a slightly different for historical reasons. Happy to explain those if you're interested.

2:57 So just in terms of, you know, what what we see as our summary, we're a profitable cash generating business, got healthy margins, got strong cash resources, and the financial firepower to do some growth, m and a and growth. And you'll hear that as a theme coming through. If you on the next slide, we talk about what our strategic priorities are. And in effect, what we're doing is focused on organic growth. Organic growth, we talk about is any product that is already launched and in our in our portfolio. Inorganic growth, we're gonna talk a little bit more about that, but that's driving mergers, acquisitions, and and in licensing. So external opportunities that we can either put into the purple box into our new product pipeline or put into our existing sales and marketing operations.

3:50 So the underpin for those three strategic pillars, strong finances, a good team in place, and operational excellence. And those for us are really important to enable us to do those three boxes on the top. Just sharing a little bit about the highlights in that same structure. I'm gonna talk additionally through the presentation about three things that have actually happened post the year end 2023, all of which have been announced, obviously. But these are mostly the highlights from '23. We have a dental product called Plactiv, which is growing really healthily. It's only been launched. This will be its second full year. Did really well in '23.

4:36 Daxacox is a product that we have. We own the intellectual It's a once weekly nonsteroidal, and that's also growing healthily predominantly in our markets where we have direct sales and marketing operations. And our equine portfolio benefited in in '23 because we did have a product in The UK that was on distribution by somebody else. We brought that into our pipeline oh, sorry, into our portfolio. And, of course, we've seen the benefit of the sales and the margin. We're gonna talk about all those in a little bit more detail. In terms of inorganic growth, we're really focused on finding those good external opportunities, partnering m and a. But we're also very disciplined about what we bring in. So we're very careful about, what we do.

5:23 I referred to some things that had happened after the end of twenty three. The next bullet point on that blue slide is one of these. We disposed of our IdentiCare business in February this year. So it's post year event. And, really, we'll talk about that, but it was absolutely part of our strategy, as it was noncore to the rest of the business, but has given us some great firepower. In terms of new product development, couple of years ago, we did a deal with a Dutch company, Orthros Medical, who have some really nice, antibody assets. And they're very early in the pipeline, so we're gently nurturing those through. And and if they come to fruition, there'll be great transformational growth, but not until sort of the '27 timeline.

6:10 Okay?

6:13 The other the second of the two post year end events that we'll talk about in a bit more detail is we sold our equity stake in our joint venture, which was called STEM, and we'll come on to that. That gives us a bit more firepower. So in terms of the strong finances, they are really strong now. And so we're very excited about what that will enable us to do. In terms of people, we've got a great team. We're about 220 people. About 60% of those are customer facing. So this business has sales teams who go out and call on individual vets, and that's the business model. It's the most successful model. It's the same as everybody else in this in this business. So about 60% of our team are customer facing. The other big groups are people in r and d and the technical area, which is a really important piece of the business.

7:03 Most of our products, about 75, 80% of our products are prescription only. So that means the vet has to write the prescription, and then the vet either dispenses the prescription or it goes through a a a very formal, logistics flow because everybody has to be licensed in that chain. Okay? In terms of people, the third event that we announced after year closed was a change in chair. Historically, our chair or in fact, still until the AGM, our chair is a guy called Jan Boon who runs and owns a lot of Lotus Bakeries about very successful Belgian company. And Jan has been a great chair. He's been hugely supportive.

7:48 But after seven years, he felt his time had come to to move, particularly because of that blue box where whenever you're doing m and a and acquisitions, the chair needs a bit more time. And so Ed Tore has now taken over as chair. Ed has got a great history in animal health with DECCRA. And even in the last couple of weeks when Ed has simply been chairman elect, we've noticed that he's inputting a lot to help that blue box. So we're we're pleased. We we're Yam is great. I'm sure Ed's going to be great too. Operational excellence because of our the way that we manufacture with third parties and then the way that our logistics framework works and the regulations around its supply chain is really important for us both in terms of inventory working capital, but also in demand management.

8:41 Demand tends to be, driven by the wholesaler ordering pattern in most of our businesses. And in international partners. So our export business, it tends to be quite bumpy because our export partners buy large amounts at once. And so you'll hear a bit of a theme about that not being very predictable, and it makes a big difference if somebody buys in a December because they might not buy for the whole of the next year. So you see some lumps. And so we've brought in a really superb supply chain leader who's ex Colgate, ex GSK OTC. And so that will really help us in terms of the operational effectiveness. Okay.

9:28 Just on the next slide, one of the things we struggle with is getting accurate data about whether the market's growing, declining, and we see all sorts of numbers floating around. And so these are just the best the best guess at the time that we were putting the presentation together. The animal health market is still showing growth. If you look at the different segments within animal health, there's some bumps. So where we see most of that growth coming from is, pharmaceutical prescription products that are more novel and and work in a in a more sustainable way. So different products that are coming and maybe changing the effectiveness, changing the safety, changing the formulation. So we see the growth in the market in that area.

10:16 We also know that there's continued high levels of pet ownership. We see headlines about, you know, pets being rehomed, but we don't see that coming through in the number of pets. There's definitely fewer puppies than there were during lockdown, but now we're starting to see the increases of puppies age and, you know, they need they need medication. Okay? We see that individuals are spending more on their pets. They're more humanized, And and, you know, you only need to wander into some of the pet stores and see what people are buying. But, you know, pets are becoming a really a big part of of household spend. I mentioned the point about novel. One of the things we do see is a growing influence of veterinary corporate sense, particularly in The UK.

11:05 And those of you who have seen that the CMA is deciding whether or not to hold a full inquiry into this area may have some questions about that. Where we are on that is that we we see it mostly focused on the corporate ownership of vet practices. We work with corporates. We work with the independents. But we see most of that CMA review looking at the veterinary corporates.

11:30 What we do is if if our cost of goods increases, we think very carefully before we pass any of that on. And so we believe that the manufacturer's prices into that business are very competitive, and and we will obviously participate in the in the review if required. But at the moment, we don't see it as we see it as neutral for us. The other point, and we'll talk more about m and a in a minute, is we're feeling and seeing more of an appetite for m and a than we have in probably in 2122. So we're starting to feel that come through. Okay. Because this is our year end results, Chris is now gonna talk about the highlights of our financials.

12:16 Morning, everyone. Just on the the financials, I've got a couple of summary slides. Then what we'll do on revenue in particular is I'll cover that in each of the three product categories that Jenny talked about earlier, which was companion animal, production animal, and equine. So, I'll just use this slide to kind of summarize last year, if that's okay. From our perspective, we're really pleased with the financial performance last year. We saw a return to revenue growth, following a particularly strong second half. Continued progression on gross margins, so they've improved probably year on year for the last five years. I'll come on to some of the drivers of that. Underlying cash conversion, this is really so this is operating cash conversion, the firepower that we need to invest in, research and development.

13:08 So that improved year on year. And, what you can see on the right hand side is our our kind of net debt cash. So at the end of the year, excluding IFRS 16 leases, we're into a net cash position. Jenny has talked about a couple of transformational things post year end being the sale of IdentiCare and then the sale of our equity in STEM, on Friday. I think we had a question submitted before the presentation about how much cash we have on our balance sheet now. So it's about 30,000,000, as of today. So we've got a real, really large amount of firepower that we're gonna deploy to execute the strategy, and I've got a slide later on on capital allocation.

13:55 On EPS, I don't go into any more detail later on. This is really a story of tax, the exciting area of tax. So if you look at our EBITDA, that's slightly up. Operating profit and profit before tax are about the same as last year. So this is on tax, and it's deferred tax.

14:11 And very simply, so we recognized some tax losses last year where there's a a credit to the p and l, and then we've utilized those issues so you lose that benefit. So you you'll see it's mostly deferred tax. I'll come on to the bottom up dividend. I'll come on to later when we look at capital allocation, but the the headline there is that we've increased the final dividend to to 3p.

14:41 So on so companion animals to start with. So this is the biggest area of our business. It's about 70% of turnover, so that grew by about 4%. Just touching on some of the drivers, it picks up some of the brands that Jenny's talked about. So our dental portfolio, grew really well. So Plaptic, which is the the range of products that come out of the STEM JV for a license, so that stays the same. So the equity sale doesn't impact on this. That grew really well, by about a million,

15:16 because it was launched last year. And it also had pulled along some of our other dental products, and now our largest brand is one of our really long established dental, products called Aurazyme, which is an enzymatic toothpaste. So really pleased with the dental range. We'll continue to drive that forward. We've got some new product development coming, on that side. Daxacox grew really well in our own operations. I'll come on to a bit more the investment that we've made in the business. So Jenny's talked about operational excellence, but we've definitely invested in sales and marketing excellence in '23. That will be a theme in '24. And what we can really see is when we put focus on that, we can really start to see the the fruits of that through the revenue line on on growth.

16:02 ADENTICARE, which was the business we sold. So this is the microchipping and, subscriptions based business. That's in here. That grew by around 30%. So had a really good year with subscription growth. Obviously, that's out from '24, but, again, we're really pleased with the way that business performed, and, obviously, that's reflected in the valuation that we achieved for that. Inevitably, there's always lots of positives in the year, but there's some things that kind of, you know, sometimes kinda hit hit hit the business. Key one on there, kinda linked so there's a couple of things. One is we have a a generic portfolio typical with most of the animal health companies. It's probably about 75%. There's always some ups and downs on some pricing, competitive behavior, etcetera, but, you know, they're the things that we deal with.

16:50 I think coupled with, the recruitment of the supply chain director, we, we did see some, disruption, later on in in '23. And this was really around centered around a manufacturing transfer of a a range of products in The UK. So we saw a few teething issues with that transfer of manufacture, but we're through that now. So, supply is back to normal in '24.

17:19 On production animals, as Jenny said, so this sits in our South European operations, so Spain, Portugal, and Italy. And we also sell some brands through our international partner network, and international partners is our export part of our business. So direct sales through seven operations, and then we sell to different countries across the world. You can see revenue there is broadly flat, but two very different dynamics between our internal operations and the export partner operations. So our internal operations grew by around 10%, particularly strong growth in Spain. Couple of reasons. One is that we launched a, a new distribution product.

18:05 We'll come on to the definition of that, but they're sourced from partners. And that did really, really well in the year. That was launched in the year, and we'll see growth through that. And, also, there were certain core brands across the portfolio that grew in the year. Little bit of return from to to antibiotic sales, which kind of in from '21 to '22 dropped off to almost zero. And and then under legislation, there was never meant to be kind of zero uses, and we've seen some come around on that. So really pleased with the way our internal operations are are going. On on international partners, so this is obviously down year on year, and a couple of reasons for that. One is, when we sell to customers, it might be one sale a year of a a of a big batch. So they typically take a full a full batch.

18:54 So this particular one was where we sold quite a big, lot of sales to to to New Zealand, and that was in December 22, and there was no order in '23. So we do see some kind of choppiness in terms of phasing of orders. And we note there some generic competition.

19:11 That was a gay that was against one of our key brands, notably in Germany where there was a competitor launch, and, they went in at a much lower price than those. So we've responded through some pricing, measures, not not to the extent of the competitor, but we have lost some volume there. So overall, you know, a small amount of growth there. And that direction is is is kind of strategically we're saying under that how we see the segment. We want to maintain that really important part of our our business. It's it's profitable at gross margin. It's profitable at EBITDA margin. It generates good levels of cash, which we know we need to fund the pipeline. So, the strategic goal there is to at least maintain that sales of that roughly 16,000,000 mark.

20:00 On equine, this is a small but growing part of the portfolio. Strategically, then we'll come on to, you know, greater focus, we feel, on this, going forward. I think there's some opportunities there. The story here is Danilon. So Danilon is a is a is a very strong brand in the equine market, and that grew by so the the overall portfolio here grew by 11%. Danilong was was a lot higher than that. And the reason for that is we we bought that back into our own sales marketing control, during '22. So that used to be distributed in The UK by, Elanco. And as we bought that back in so two things. One is our sales and marketing focus is a key brand for us. It's our top five brand one of our top five brands.

20:47 So that that drove the sales. And then secondly, a little bit linked to the margin evolution. When you bring those back in, then you you obviously gain the margin that the distributor used to make.

20:59 So two two good things there. And, as I we'll we'll continue to focus on, this area going forward. I just wanted to take the opportunity to to, highlight two of our key brands that will be growth drivers for the future. On the left, you have Daxacox. This is a product of our own that came out of a business that was we bought a few years ago in twenty fifteen, sixteen. It's a once weekly nonsteroidal for dogs with osteoarthritis, and it's a great great product. I think we always say that we we over, anticipated how well it would do at launch for a number of reasons, predominantly that we launched it at the same time as we we had COVID lockdown. And one of the things we know is that for vets to change their behavior in a therapy area where they've been using the same product for many years, that in order to do that, they need confidence, and they need to see their rep, and they need to understand the product. So we believe we've addressed those things now.

22:00 This is a a growing

22:02 segment of the market, dogs with OA as dogs age. There are some good treatments out there. The benefit of this is it makes life easier for the pet, for the vet owner, and also for the vet because it's once weekly. It's a tablet, once weekly. So this is a this is a a lovely product. Our reps are now fully engaged behind it, and, it's a really big focus of us moving forwards. Couple of other things that we're doing in terms of longer term. At the moment, this product has a license only in osteoarthritis.

22:33 A lot of the competitors have broader licensing lance licenses, and so we're now going through the process of broadening the license. I think the, you know, the first two indications, will be launched in 2025. Also doing some work on making sure that we have the right dose forms and formulation. So that's an interesting and exciting opportunity.

22:53 We are also expanding the number of territories. At the moment, it's launched around Europe. It has a European regulatory file, and we're currently applying for or going through the process for another 10 countries to get a regulatory file. In countries where we don't have our own sales marketing operation, this product is sold by Vrbac. And so we're excited about seeing what Vrbac can do as we move forwards into the rest of the world. Plaptive, as Chris and I both said, this is the product that came out of the STEM joint venture, and, it's a great product. Our reps love selling this product. It's a growing area. The the vets are really interested because of the link between dental disease and other health care conditions.

23:41 Clearly, their pet owners are very interested because it, it helps solve the problem for them, and, hopefully, the pets like it too. It's a rapidly growing segment. We're very competitive.

23:55 One of the things that people like about this is there's a range of different products as you can see on the little slide here. And we're continuing to do some new product development, and we have distributions agreements in countries where we don't operate with some really big players. So we're very excited about expanding the stem other Plaktiv products outside of Europe.

24:19 So these are two really important drivers for us. Okay? Just a couple of words about the portfolio. Anybody who's been following us for for a while will know that during 2019, we focused very much on reducing the number of tail products we have, so products without the sort of margin that we we like to have. And now we've got a a good portfolio that matches if you look at that little left schematic, as the pet ages, then, obviously, more things happen to them. We don't operate in in that broad vaccine parasitology area, but our products are shown on the lower of those two schematics. And you can see that we operate in that area where, you know, increasing lifetime value, increasing chronic conditions.

25:07 And so we now look at our portfolio and see that it's very well adapted to where the growth is coming from in this market. So we're we're very confident about that. One of the questions that we have had historically, and Chris talked about distribution. And when we first started the journey in 2019 to really make the portfolio better, we had a lot of distribution products, and we lumped them all together as distribution products. What's really clear now is there are good distribution products and not so good distribution products. And the the the criteria for those two groups, good distribution products are ones that have a good margin, have good growth, have long term agreements, and really robust agreements, and also that they are in several of our markets.

25:57 The ones that we got rid of were predominantly very low margin and, also somewhere the contract was not great. So the originator took it back, etcetera. So we now are very confident that the distribution products we have are in that good distribution product. So, you know, there's a there's a there's two questions, the quantity of distribution products, which is now, lower than 40%. It was higher than 50% when we started, But more importantly, the quality of those contracts. So that quality is improving. The quantity is is going down. Okay. So we've got about a 150 brands at the moment. Is that the right or wrong number? Is it it's it's really hard to tell. What we do is constantly look at solar products, the tail products, and take those off as we have more of a focus on the top brands that continue to grow.

26:48 So the quality is continuing to evolve and strengthen, which is great. We've talked a little bit about IdentiCare, and I just wanted to use this opportunity to just position what we did. In '21, we took a decision to carve out IdentiCare. And that was really strategically because we recognized it was a noncore asset. Whilst it operates in health care, it's really a reunification business based on the microchip and using the database as a subscription based business. And Chris and I realized that that wasn't our our backgrounds and experience, that it needed a different a different lens around it. And we brought in a gentleman called Robert Diamond who has experience of digital specialist businesses, and he came into the business in '20 early twenty two. And the the business has fundamentally changed now. It's really robust. It's subscription based. It's a great business.

27:48 What happened in '23 was we started talking about it a bit more because it was it was a good business, and it was a a really important part of our business. And what that did was generate some inbound and interest, particularly from private equity, which we'd always thought that we might sell the IdentiCare business as a unit. We'd probably thought in a couple of years' time, but we'd sort of set ourselves a target for what we thought we should realize. And and in '23, we ran a short process and realized that target. And I think IdentiCare has gone to a good home. It will, I'm sure, continue to grow under the leadership of Robert Diamond. And what that 24,900,000 that we got, will really help us to drive our future growth in the core of our business of prescription medicines for vets.

28:42 Okay? Okay. So I'll just do a a run through on the the cash side of the of the financials. I am going to focus on the on the top right, and I'll touch on that on the on the bottom one. So if you just look at cash conversion, so as I said early on, we we targeted to improve on year on year, and we delivered that. So there's around a million more, what we call underlying net cash flow from operations. You can see some of that's through working capital, and and also some other some around the, non underlying, cash items. In terms of direction of travel, so, again, we're targeting to improve on the '23 performance. So we set ourselves a target of 90% cash conversion this year.

29:40 Touching a little bit on what Jenny mentioned earlier around operational excellence supply chain. So, we see some opportunities there, particularly around smoothing out, some of the, cash the cash generation from from our stock holdings. So 90% target for this year. And then secondly, phasing. For those that have seen the kind of history, we tend to have a very, a lower cash conversion in the first half versus second half. We expect that again to happen in '24. Candidly, you know, the business and I really want to kind of try and smooth that out during the year so we kinda don't see this, you know, the kind of hockey stick. So that that's the focus of of that, particularly around supply chain. But so targeting again to improve.

30:28 The the the bottom bridge just kinda shows, where we started and ended the year in terms of kinda net debt. So this has got IFRS 16 in. You can see, the the theme of the net capital expenditure. So, linking to the portfolio, so we tend most of that expenditure tends to be on r and d, and we'll come on to that, a bit more detail with with Allcross. And and then also, we've invested a lot in the past kind of three, four years in our IT infrastructure. We're probably up to $2.53000000. So this is making sure that we've got common systems, common platforms across the whole business. We've got SAP everywhere. We've got Viva, which is our kind of CRM system.

31:13 So, again, we're continuing to to invest in that area in '23, and we little bit of a drop off in '24, but really wanting to have that, what we call, strong platform in terms of all those systems that that really give the business information to make, you know, on time to make, you know, key decisions as we as we move forward. The on the bottom bullet, involved on the revolving credit facility. So our current banking facilities, mature on 03/31/2025, so next year. And as we said in the public domain, we're we're renewing those now. We have two facilities, a revolving credit facility and an acquisition facility. We will renew the revolving credit facility broadly on the same kind of level that we've got now. Their acquisition line, we're going to let fall away, albeit conversations with the banks last year when we were looking at some m and a targets.

32:13 We know it will be there if we need to, so our syndicate of four banks are really supportive of our strategy. But because we've got the cash in the bank now, then the view was that that facility is not required at the moment. I'll move. Okay. Sorry. I have to speak really quickly to fit it in with the slide. So moving on to talk a little bit about how the business is gonna grow in the future. What we've done here is a schematic of the areas that we're particularly looking at, and we'll talk in a little bit more detail about BD and m and a on the next slide. So, clearly, our organic growth is really important.

32:58 When you look at DAXCOTS and Plattive, both of which are really high margin products, the more dominant those products become in our portfolio, we'll continue to see margin improvement, and we'll see that revenue growth from from Plativ and and Daxacox. Within the rest of the portfolio, there were also some really good products. I think Chris mentioned Oryzyme, which is, you know, growing at double digit and despite being about 20 years old. So the organic growth will come from that, and we'll focus on making sure that revenue margin, etcetera, is is being driven there. In organic growth, there's there's roughly three areas that we're looking at. We recognize that we have businesses in seven markets. Chris has already talked about where we have our own Salesforce. Dan along's a good example.

33:43 Is another good example. When we have our own Salesforce, we know we do a good job. And we also know that there are some areas of the globe that we are not currently present in. But in importantly, there are some areas in France. So, clearly, if you look at our our map, we're not present in France. We're not present in Eastern Europe. We're not present in Scandinavia. And, actually, in some of our countries, we're slightly subscale. Spain is definitely at scale. It's probably number seven in the in the ranking in businesses there. It's a good good business with the right scale. Probably Germany and Italy and The UK, we're looking at bolt ons to just create some more scale. We're looking to see whether we can put an operation in France.

34:29 The French business is for two reasons. One is, obviously, it's a big veterinary pharmaceutical market, so it's an important market in Europe. But, also, when we're doing the next stage, the next blue box in licensing late stage assets, one of the questions we're always asked is, well, how will you manage France? And And at at the the moment, we manage that shoot through distributors who we've worked with for a long time, and they're very good. But it would be we believe it'd be more attractive to partners if we had a French business. So looking for that. And we're looking to acquire brands and companies. So this might be the bolt on in Germany. It might be a product that is launched in The US but not in Europe. It might be all of those sorts of things. So there's a lot of work going on in these these three boxes.

35:16 The US is a big market, and it's growing healthily and always does. It's also a really tough market to penetrate on our own. So we are constantly looking at whether there's an opportunity to partner with somebody in The US, whether we could find a business around our size to go in JV. So we're we're always looking at that. We haven't got anything on the table at the moment. The other area, excuse me, Asia Pac, Asia Pacific, again, we recognize there's growth opportunities there, but, we also recognize that we need to be careful how we go through. For an animal care company, I'm very sorry, but my dog's just decided to go and bark. So, apologies for that. Living the dream with her. So she was snoring earlier. I don't know if you heard that as well. But so those are the three boxes that predominantly we're working on. We will look at the Asia or Australia.

36:10 We will look at The US. But our main focus is building scale, building footprint, and in licensing products in Europe. Couple of questions on the right hand side on the purple boxes on new product development. We have the orthorost portfolio, which I'm gonna talk about in a minute. This is the VHH antibodies. We're not looking to in license early stage assets until we've got more confidence about where those will end up. So at at the the moment, moment, we're not very active in that area. We keep an eye on it, and we do some in house innovative new product development, which is generally smaller products, tweaking formulations, those sorts of things. So this is how we see the growth drivers for ultimate EBITDA growth. On the next slide, we talk a little bit more about some of the specifics.

36:59 We are seeing increasing openness to explore, deal making options. In particular, for a while, we've recognized because of our scale, our big products are the sort of four to 5,000,000. Because of our scale, there are things that exist in the really big companies' portfolios that we could make really successful. Historically, they were kinda like, no. You know, that's that's too much hassle. We're now seeing them come forward with products that we think we could make great success of that fall out of their portfolios. We've strengthened our internal resources. We freed myself and Chris up a bit more for getting out there, talking to people, knocking down doors, opening opportunities up. We're highly active. We're ambitious, but the word I used earlier and I'll use again is disciplined.

37:47 We know that the deal has to be right. Strategically, it has to be immediately or very quickly revenue and EBITDA accretive. So we're very focused on that. So we're we're really clear. We also have for any product, whether it's a small distribution product or small licensed product, we've set margins, margin criteria and revenue criteria to make sure that anything we bring doesn't add complexity or bring our margin down. So we're very clear on what we will and won't bring in to the business. So I've talked about these strengthening the pipeline. Not not our big focus at the moment, but we've got the all products, geographic footprint, and sustainable growth.

38:35 The final point on the left hand side, happy to answer questions about the stem deal that we announced on Friday. Lost track of my days. Thursday, actually. So we we set out with that joint venture with Caine Biotech. We had a 33 point something share, and the equity gave us certain contractual rights. Also gave us a an evergreen sort of lifelong license for the Plattive products and the technology that goes into the Plattive products. And so when Kane announced last year that they wanted to sell their two thirds share, we focused on making sure that we retained some of the things that were good about that deal.

39:22 And so we're very happy with the deal that we ended up with with DECRY buying our equity, but we also get the license for Europe and the rest of the world outside The Americas for vets. We get that in perpetuity. We also have the rights in Europe for for not only the vets, but also all the other channels, which we didn't have before. So that's good. We also have an opportunity to influence and benefit from any product development that DEQ would choose to do. We also have the opportunity to do our own product development. So from from our perspective, this is a great deal, and we got a superb return on the equity investment that we made, and we're really happy about that. And so that that cash that we got for our equity will go into the pot to do more deals and to drive future growth.

40:16 Just on the right hand side, we've talked about velocity increased. And in the last year, as other elements of the strategy have played through, as the platform has strengthened, as margins have strengthened, we've put much more energy, time, and people into the inorganic growth portfolio. So we've screened about 450 products and companies. We've got about 40 that we've decided are of interest. Today, some of the other four fifty are interesting, but maybe not for tomorrow or they're too big for today or they don't want to sell today, all sorts of reasons. We've about 40 that we're following up. We've got seven that we're in discussion. We did three new deals last year, and we did one big NBO. And and although we weren't we're ultimately not able to land that one, we know from that from that opportunity that we were in the right ballpark. We had enough cash. We have the support of the banks. All of those good things, ultimately, we didn't get it for reasons that we couldn't influence and that weren't in our control.

41:16 So there's a lot of activity going on here. But just to reinforce that word that you're seeing on the top in the title, really disciplined about what we do. This won't be a, oh, we think this might be interesting. We'll just bolt it on. It'll be really disciplined, and we have a process in place. Okay. Orthros, which is the VHH antibody based agreement, this is a Dutch company. We did the agreement a couple of years ago. Really, really early stage, but very exciting. And, actually, since we did the deal, we've seen many more competitors trying to get into this field. Originally, we were focused on just the dog indication, and that's because you can see how big the dog osteoarthritis market is, and it is a big market. It also will be a very competitive market.

42:03 This year, one of the things that we've done is it, is initiate studies in horses. And that's for a couple of reasons. One is for us, the equine portfolio and the equine business is really it's the right sort of size and scale. We're smaller than the big guys, but the vets who manage, horses, you can it's a smaller group. It's a more focused group. And so for us, that's really good. Might not be such an enormous opportunity, but it's a really clear opportunity. And we know that these products should be effective. So we can never tell till we've done the studies. That's why we took the decision to go into equine as well. There is a chance, although no guarantee, that the regulatory process might be a bit quicker as well. And so what we'd like to do is get get moving, really, and we'll go into dogs later in the year. Dogs will be a little bit more complicated because of the route of administration, but it's a huge market. And we're really excited, but we're also really clear that these are today, if they are in the clinic, they're only just in the clinic. So they're really preclinical.

43:09 So there's a long way to go before these actually launch in '28, '27, '28. But we have the license for two targets at the moment that we're working on. We also have the option to license other targets that Orthros come up comes up with. So Orthros, you know, the potential is enormous. It could be cancer. It could be, you know, any range of things. So we have the option to license those. We're not gonna do that and exercise it until we know the first two. So that's that's what we're doing with the antibody based agreement. And the reason why we did this was because the later stages that drugs get to, the more expensive it is to buy into. So we thought we'd start nurturing early, and we've also the funding is built on that premise. So early funding's small, and it grows as you become certain of the outcome.

44:03 So this is exciting, but we're really careful about it. We'll see see what happens. Back to Chris. Thanks, Johnny. So as you can imagine, as we were going through our, roadshow last week, every single meeting, I have the question of how how are we going to spend all this money that we have, so the 30,000,000 that we talked about earlier. So what I'll do is I'll run down the the capital priorities on the on the left hand side. And then as I said earlier, we can touch on dividend while we're on this slide. So the organic growth piece is actually a couple of things. So, clearly, from an organic growth perspective, this is really around centering on driving that top line revenue growth, and we have a target of growing at or above market. Jenny noted that, you know, the global animal health market's grown about 5%.

44:58 So, you know, that's a, you know, broad indication is that, you know, that at that level or more is where we're targeting. We've covered the, I think, the areas that of investment. So a lot set lot centered around people. To give you a feel, about two thirds of our people base is commercial. So sales, marketing, you know, vets that are in the field, etcetera. So we we you know, significant investment in them. We'll continue to do that. And the, you know, operational excellence of the sales, marketing, and supply chain. The other part of overhead investment really, centers around I think you've heard us talk about the word strong platform or strong foundations. We recognize that as we increase the velocity on, inorganic growth, that that comes with risk.

45:48 And and what we've been really focused on is making sure that we've got the breadth and depth of talent across our organization that enables the business to continue to grow organically while we also focus on the the inorganic part of the growth strategy. So inorganic growth, so these are the kind of blue blocks, the building blocks that Jenny talked about before. So it talks about debt and equity capacity here. Clearly, that's now including the cash that sits on our balance sheet. So we so all of that all of that funding is for what we call accretive m and a. So we're so this is late stage assets. It could be, that some of the big pharmaceutical companies, we can't starting to see some movement on tail rationalization.

46:41 So are there some opportunities there for, you know, acquiring some some of the their products that are small, which would large for us. You know, our biggest product is probably, you know, in the 4 to 5,000,000 mark, so some opportunities there. But really around driving revenue, profitability, so EBITDA in particular, and also generating cash. Jenny's talked about this notion of discipline. The the way we apply that, here is that we have a a a peak leverage of two times EBITDA. And and so, and we've had that for a number of years, and that that's where we feel comfortable in terms of leveraging up. We'll come on to later on. The business has a great track record of deleveraging, so we're really comfortable. We're going up to two x. Our bank covenants are three and a half x, before leveraging down.

47:37 If you go to the bottom, part of that where it's talking about funding capacities, how much money do we feel is is is available, this was prior to the stem, transaction on Friday, which I think added, you know, another $33,000,000 ish to the to the balance sheet. So that 50,000,000 comes from two times the pharma business EBITDA for '23. So Identity Care, was 1.7 of the 13,300,000 that's sold. And then we add on the cash. So so at least 50,000,000. We can obviously leverage anything we acquire, as well. So so that's the type of so, you know, the funding capacity that we feel we've got to invest. So a significant amount of money, that we want to deploy.

48:25 Third part is on new product development. Real reason or key underpin of that cash conversion KPI is that this is, we will use operating cash and operating cash only to fund new product development, particularly if it's early stage like Hawk Ross. Second bullet on there is we've we we've we've probably I think we've been, you know, candidly, we'd probably like to invest a bit more in the pipeline over the last five years, so really, know, focus on that. So we've probably invested two to 3% of of our sales in that area, and what we're targeting there is an increase to something around five. And so, you know, you'll start to see that, particularly through the CapEx line. I think Jenny mentioned that we won't have a pipeline full of early stage assets where, you know, there's high risk that, you know, the before proof of concept. So key theme here is to make sure we've got balanced pipeline of kind of early, you know, middle and late stage assets. So that's what we're looking for there.

49:28 On the dividend, so I think I touched on earlier. So we increased our dividend for the first time in about three years, to so it's so the focus really at the board meeting was on the total dividend of 5 p rather than the final. So we can see on that right hand side that the cash cost of that is relatively small, about 400,000. The underpin of that increase was the trading performance, the balance sheet position before, the sale of IdentiCare. As I said, we were into net cash, anywhere on a normalized business basis. Strong levels of cash and clearly confidence in the future, hopefully, that you've heard throughout this presentation that we feel we're in a really good position now to kinda move forward. If you take those 12,000,000 return to shareholder over the last five years, just a demonstration of the the strong cash generation, In that same period, we reduced our debt by over 20,000,000.

50:24 So the free cash flow of this business is is is really strong. Thanks, Chris. Before we give a little summary at the end, it's probably worth going to questions now if you're happy to do that. Yes. Of course, Jenny, Chris. Thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do that just by using the q and a tab, which is situated on the top right hand corner of your screen. But just so Jenny and Chris take a few moments to review the questions that have been submitted today. I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we have received questions throughout today's presentation. And, Jenny and Chris, if I could just hand back to you just to read out the questions where appropriate to do so, and I'll pick up from you at the end. Yep. I'm just gonna go through them in order because I think some of them we have been able to address.

51:12 The first one was how much cash is currently on the books, and is the company looking to in Europe, Asia, or America? I think as Chris has said, we're about 30 something million on cash, so that's that's the number there. And Europe is the priority. We're looking at Asia and The US, but not as the highest priority, we'll but we'll keep our eye open. Next one, steps have been undertaken to increase margins or profitability. Again, I think I covered that in terms of rationalizing the portfolio and bringing in higher margin and more sustainable products and inorganic strategies as well. Yes. Yeah. I was quickly asking. Yeah. So if we look at the theme of them, of kind of how the margins evolved, it's really around product mix.

51:59 So so that's so from a gross margin perspective, I think there's a there's a question later on. So we have we have a target of 60% gross margin. We think that's, you know, that's good in our industry, so that's where we're we're targeting. And that's gross margin on EBITDA margin. Obviously, we've seen that that's relatively flat, because of the overhead investment. But target wise, we're looking at 20% there. That will be more through leveraging the revenue line than accrete accretion on gross margin. So, hopefully, that covers that area. Okay. I think that's covered a few of them, actually, so we should be okay. The next one was about the VHH opportunity, and we've talked about going into horses.

52:45 It's a it's a good opportunity. It's good for our size of the business, but also, hopefully, we may be able to get to launch quicker. Margin improvement, I think Chris covered that, but the segments that have been impacting us, actually, it's impacted on all segments. We've seen margin improvement in all segments. Yes. Yeah. And percentage of sales coming from Daxacots and Plactiv in '23, how does the margin of these profile products differ from the other products? Chris, do you want to? Yeah. So those combined are probably around 5% of revenues. How does the margin profile of these products differ from other products in the portfolio? And so if you look at our average margin, it's 58.

53:32 Both of those are are above that, and DAXICOX well above that. So so, yeah, so both very strong DAXICOX because it's novel, it's our own product, and that's that's a very high margin product. I'm just checking that we've actually answered those. I think we probably have. Yeah. So there's a question. What are the strategic initiatives that you see pushing both margin and sales? Will you look at inorganic strategies too? So I think we've covered that. So I think, obviously, there's all the work we're doing internally around the margins. And then as we've talked about, really, the, from an inorganic perspective, I think I covered that on the capital allocation. That's really around driving, you know, the top line, the EBITDA, and the operating cash generation. So accretive m and a is the absolute theme on that side.

54:26 Thank you. Perfect. I'm just just gonna comment. There's there's a a comment which thank you very much for making it. I'd just like to say it's great to finally see ANIMALCARE presenting to private investors. We recognize that we have been a bit remiss. I think it's a it's also a a function of the confidence we have in the business and the excitement that we have while we're here today. And so, you know, really appreciate you joining. I really appreciate the questions, and thank you very much. I don't think there's No. Jenny, Chris, I think you've actually managed to answer all all the questions from investors. And, of course, the company can review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors, provide you with their feedback, which I know is particularly important to the company, Jenny, if you had any further closing comments, that'd be great.

55:17 Yeah. I'll just reflect a few closing comments. We we delivered our revenue targets. We've increased sales across the products. We're continuing to focus the portfolio on those larger products that have better margins. IdentiCare was good news. It It was was strategically aligned with what we were trying to do. The same thing with the STEM piece. Orthros, early stage. If it happens, it will be really exciting. But if not, we'll do something else. We'll see how that goes, and we'll get more news over the next eighteen months. And we will continue to look for profitable growth and cash generation. So we'll step up some our investment in organic and inorganic opportunities where it makes sense. And now with the sale of IdentiCare and the divestment of our equity in STEM, we believe we've got the fine line oh, can't say that. Financial firepower we need.

56:09 So I'd just like to reiterate my thanks to everybody for joining, and, hopefully, that's helped, and I'm sure if there are more questions, they'll flow through. So thank you very much, everyone. Perfect. Jenny, Chris, thank you for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations? This will only 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 ANIMALCARE GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all. Thank you very much. Thank you.