EKF Diagnostics Holdings (LSE:EKF) — Interim results for the six months ended 30 June 2026

0:01 Good afternoon, and welcome to the EKF DIAGNOSTICS HOLDINGS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. 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 questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Gavin Jones, CEO. Good afternoon, sir.

0:32 Thank you very much. Good afternoon, everyone, and thank you for joining us. As already said, I'm Gavin Jones, CEO at EKF, and I'm joined today by Helen Jones, our new CFO. We're pleased to walk you through a solid set of interim results for the first half of twenty twenty six and update you on the progress we're making against our five year strategy. For anyone newer to the EKF story, we operate across two complementary divisions, point of care, where we manufacture diagnostic devices and tests that deliver rapid, accurate results right where they're needed at or near the patient. This is distributed through our global partner network reaching over a 120 countries.

1:23 Our life sciences division supplies high quality reagents, enzymes, and contract manufacturing services that help companies out there bring their own products to market across pharma, biotech, and health care. Both divisions are growing, and both sit at the heart of our five year strategy, which I'll come to shortly. Briefly on us, I joined EKF in 2013 and served as chief product officer before stepping into the CEO role

1:55 in March 2025. So I do bring a real continuity on product regulatory and commercial execution. Helen joined as CFO in April 2026, and I'll allow Helen to introduce herself. Thank you, Gavin. So good afternoon, everybody. My name is Helen. And as Gavin said, I'm the CFO of EKF since end of April twenty twenty six. So just in terms of my way of background, I started my twenty year career at PLC, qualified there as a chartered accountant. And and for the last ten years, I've worked within a number of different aim listed businesses. And I was formerly CFO of aim listed company Intelligent Ultrasound for five years. I'm experienced across all areas of financing, including tax transfer pricing, fundraising, m and a, restructuring.

2:43 And I'm excited to bring my skills and knowledge to EKF in leading the finance function and helping Gavin and the team drive forward the five year strategy. Thanks, Alan.

2:55 So in terms of the agenda, here's how today is going to run. First, we'll go through the h one twenty twenty six highlights, then an update on our five year strategy, commercial and operational progress. Helen will then take you through the financial detail, and we'll close with a summary before opening up for questions.

3:16 So I'll let Helen take the financial element of the twenty twenty six h one highlights. Yeah. Thanks, Gavin. So financially, we delivered a strong first half and, importantly, in line with expectations. Group revenue was broadly flat flat at 25,000,000, but the quality of that goes in has improved with gross margin up 2.8 percentage points 53% and adjusted EBITDA up 2.4% to 5,900,000, and basic EPS up 26%. Net cash flow in the period was broadly neutral, and we ended the period with 16,000,000 times in cash while continuing to invest for future growth in the business and return capital to shareholders. And to date, the share buyback program has returned more than 5,000,000 times. On the commercial and operational progress, our point of care revenue was 15,000,000 for the period, just down just 3%.

4:11 But most of this was very much timing related effect, not a demand issue. We do have a very strong order book for h two, and I'll unpack that on the next slide. Life sciences grew by pleasing 8% to 10,000,000. We've fully exited our Elkhart facility. So we're now just dealing with one facility in South Bend for our life sciences division. We we've added now digital capability through our BEAT INSIGHTS acquisition for our sports performance portfolio. Again, I will go into more detail on that in a little second. And continued investing in our commercial capacity, including an uplift in our sales function, which we do believe is is a big part of delivering on our full year 2026 expectations.

5:03 From a strategic point of view, we've made real progress. Over the year, we are up 4% on our BHB growth, and year to date, that's 9%. On contract manufacturing and fermentation, that revenue is up 20%, partially on new contract wins and partially on growing organically within the already existing business that we have there. We signed earlier on in the year in March a an agreement with the Blood Centers of America, which is really helping us and supporting us to deliver the DIAGNOSTICS and opening up The US blood bank opportunity for us. And, you know, our investment now is really focused on growing the the capacity that we have and developing the the priority markets for our strategy.

5:55 So I go in a little bit deeper in terms of the revenue by division. You can see that point of care came in at 15,000,000 against 15.4 the previous year on a like for like basis. That's a 3% difference that that is fully explained by two factors we've we've already resolved. So we had some key tender closures that simply pushed order deliveries into h two from h one. We've got a full order book there, so we're very comfortable, confident that that will improve in h two. We did have some production timing issues on our lactate deliveries, but, again, that is now fully fixed and on track for the second half. I think it's important to state that this is deferred revenue, not lost revenue, and we expect to see it come through fully in the second half.

6:43 Life sciences delivered strong growth, 10,000,000 versus 9.3, up 8% underpinned by structural changes that we made previously to our BHP sales team, which are already paying off with a 4% growth there, and excellent execution in the fermentation and contract manufacturing facility, which is now up 20% against the same period last year. If we go a little bit deeper again into revenue by product portfolio, hematology was relatively flat at 7,800,000. But, again, this was down to that timing shift. We do have full visibility on sort of our larger tender orders, like the Egyptian business, for example.

7:32 Hema control is remaining to be the largest contributor in this area with DIASPEC TM, a close second, and it's really encouraging to see the hematostat two up 9% as full availability returns to that product range. Diabetes was broadly flat overall, although that's not the full story there. We do see the BioSyn grew significantly, and we are seeing some changes in the h b a one c market as the QUOLAB has gained share from the quo test. This was fully expected as now reimbursement dynamics reset in the market. So it's it's it's helpful for us that we had a portfolio that is able to flex well with the market rather than losing ground in that space.

8:19 In life sciences, obviously, the biggest contributor here was BHB at 7,400,000. We did have some changes in the market dynamics there, which meant some of our partners' inventory management held back some orders in the first half. But we have seen that change already, and we are seeing full development in h two, meaning that we are moving back to a normal type of usage. I I think it's important to say this is not a drop in the amount of product being used just in terms of how much inventory was being stored at our distributors. Contract manufacturing was up 25% to one point sorry, 1,000,000, and fermentation was up 40% to 1,600,000 with a strong order book supporting h two.

9:10 I mentioned before that we fully exited the Elkhart site as of the June 30, which is a clean simplification of our operating footprint moving forward. Coming back to our five year strategy, everything we do ties back to the three pillars that we have well established, the becoming number one point of care hemoglobin business, becoming number one in ketone testing both for laboratory, which we already are, and then also point of care adding that end, built on our existing BHB product, and then transforming our life sciences division into a true standard CDMO. For 2026, that means we've been very much focused on delivering our BCA contracts in The US blood bank market.

10:01 We're getting much better visibility there. We've been investing in our commercial and marketing capability across many of our regions, but certainly the priority markets for us have been Africa, The US, and LatAm, and then Europe. We have continued to grow our BHB liquid color market share, and we look to complete our claims support studies this month so that we're able to make a submission for a new and updated BHB product, which will due to launch next year. The third part then from a life sciences, we will be going for a rebrand of our contract manufacturing and fermentation offering.

10:47 I will talk about that a little bit more in the next couple of slides, and we are continuing to expand and develop the next generation of our diagnostic enzyme portfolio. All of this builds towards our 2029 target, which is to deliver revenues above 80,000,000 and adjusted EBITDA above 20,000,000, roughly double where we are today. We believe the building blocks are firmly in place to deliver on that strategy. So I think from a commercial and operational progress point, we do have some concrete proof points here. So in hematology, we we've delivered three US blood banks now live with DIASPEC and three more coming online in the second half. And we're in active negotiation with members of BCA for 2027 onboarded,

11:42 pipeline that's building well. In BHB, we posted a 106% growth in h one with a third one of our third distribution partners who's certainly expanding our reach into more of the integrated delivery network market. They've grown in ways that we've let's say, we didn't really fully expect that, but it is fantastic to see, and we really fully support them in that. You can see two of our other distributors. Those are the ones who are engaging that inventory management, but we're very confident now that they're going to return to the same ordering process that we had previously in h two. So, operationally, we acquired BEAT INSIGHTS asset in April 2026.

12:36 This was to strengthen our sports performance portfolio. Really, this offers a way for our users to manage their LACI threshold testing much more conveniently on their mobile phones, and we are adding additional AI elements to that to really drive that forward and move move into the future of sports performance measurements. Additionally to that, we will now rebrand our life sciences contract manufacturing and fermentation offering as Nexus Bioworks. The idea behind this is to make our service offering far easier for clients to understand and engage with. I move into, you know, the introduction of Nexus Bioworks. We are genuinely excited about this rebrand.

13:28 It gives our life sciences business a distinct identity from EKF DIAGNOSTICS point of care portfolio whilst keeping a legacy association with our long standing clients which which they already trust. So Nexus really signals the convergence at the heart of what we do. Bioworks makes it immediately clear what that means in practice. It's a small change with real commercial purpose. Clearer positioning makes for easier, faster client conversions. If we go into the next slide, you can see here on the I'm just it's on the right hand side for me. This is a a breakdown of our new dedicated Nexus Bioworks website.

14:16 I think, you know, what we're not losing here is any of the experience that we already have in the industry. We've got over forty years experience there. This rebrand reflects business with deep proven capability, not a starter. We do want to make sure that people can find us, and it's a lot clearer what our service offering is. And we do believe that this is a compelling proposition already reflected here in our new client facing website. So outlook for the rest of the year, we certainly are extremely confident in being able to deliver point of care growth. We've got a full committed order book, significant tenders due to finalize within a renewed focus on blood banks and production back to full speed. We do fully expect point of care to bounce back into into growth. Secondly, we've already demonstrated that BHB is continuing to grow, and we expect double digit growth by year end.

15:18 Or it's all you know, order patterns are already normalizing, so we we do have a lot of confidence there. We do have that one partner who's due to do more than double what they had done in the prior year. All of that combined does lead us to be in a strong confident position to hit full expectations for 2026 full year. I'll now hand it over to Helen to go through some of more of the financial detail. Thank you, Gavin. So the headline for the first half of twenty twenty six is that we delivered resilient revenue, we improved margins, and EPS

15:59 while continuing to invest in growth and return capital to shareholders. So firstly, solid revenue of 25,000,000, down just 1%. And as Gavin explained, that was largely timing related on the point of care side of the business rather than any weakening in demand. Second, gross margin strengthened by three percentage points, 53%, and adjusted EBITDA grew to 5,900,000. Operating cash flow was 3,300,000 with the debt reduction mainly relating to higher US tax payments rather than any particular weakening in trading or material shift in working capital. Balance sheet remains strong with 16,000,000 of cash, supporting our funds, capital investment plans. And so basic basic EPS increased by 26% helped by the share buyback program.

16:47 So in short, although the first half has been seen a flat top line overall, we have achieved stronger profitability and better returns

16:54 per share, and we've got a strong financial position to continue the focus on the five year plan. So I'll walk through the profit loss in a bit more detail on this slide. Revenue was 25,000,000, as I've already said, against, 25.2 last year, so essentially flat. Gross profit rose 4.8% to 13,300,000 with margin up three points to 53%, which was driven by a favorable mix of higher VHB sales and consumable sales on the point of care side of the business. And administrative expenses, went up to 9,700,000. That's around just under a 6% increase for exceptional items. And this reflects our planned investments across sales and marketing to support the revenue growth anticipated in the five year plan.

17:39 So during the period, we recruited three new commercial leaders to support The Americas, which includes Latin America, Europe, Middle East, and Africa. Those are three of our key focus geographical markets. Alongside that, we strengthened product management capabilities and implemented a more focused marketing strategy centered on our highest growth opportunities and our key product platforms and the priority geographic markets. So even with higher operating expenditure, adjusted EBITDA increased 2.4% to 5,900,000 with the margin improving by naught point seven percentage points to 23.6%.

18:18 We did incur a naught 300,000 exceptional charge in relation to the early settlement of the Elkhart lease, The US lease there, reflecting a one off payment that closed out all our remaining lease obligations on that side a year ahead of the original expiry. The tax charge, that reduced to naught 900,000, and that includes a naught 700,000 tax provision release on the rest of the parts of our German tax audit that's still ongoing. So the underlying rate of 4.460.5% reflects US tax normalizing now that our historical US tax tax losses have all been fully utilized, which was flagged at the half year at the full year last year, as well as the losses we've got in The UK.

19:05 However, with profit weighted to the second half, we expect the full year underlying effective tax rate to be below the h one level. So profit for the period increased by 18.2% to 2,500,000. So on the next chart, I'm especially pleased to show this, and it does show that the h one adjusted EBITDA of 5,900,000 was up 2.4% year on year year. But more importantly, it marks the fourth consecutive year of this half growth. So from 4,400,000 in 2023 up to 5,900,000 now in 2026. So this isn't a one off improvement. It's consistent multiyear trend.

19:44 And the 23.6% margin shows the benefit of stronger gross margins more than offsetting the additional investments we've made in sales and marketing especially. Because the business is typically weighted to the second half, we expect that momentum to continue. It just gives that confidence we're going to achieve that market expectations for the full year. So our investments we've made across OpEx and CapEx is very targeted and closely linked to our growth plan. So on the operating side, that's been focused very much on our senior commercial hires in The US and Europe and Africa, as I previously mentioned, supported by the product management, teams and the targeted marketing campaigns they now are doing. On the balance sheet side, the CapEx investments have been directed to more into practical capacity, and that includes a 30% expansion of our human controlled production line, which is expected to cost around 4,000,000 over the next eighteen months.

20:44 We're also investing in new sensor production line of around 2,000,000 over the next eighteen months and continued ongoing development of our next generation analyzers and the connectivity as well as a small ERP upgrade that we've done in the first half of this year. We need to invest in these areas to achieve our growth plans with capacity and capability needed to support our 80,000,000 targets for 2029. So the balance sheet on the next slide. Thanks. So this puts us in a very strong position with total assets increasing to 82,000,000 from 81 last year. Still very robust balance sheet, and supported by retained earnings of 53,600,000. Working capital was 10,300,000 at the end of June, of which 9,000,000 was inventory, which is is higher mainly because we were holding finished goods. We'd originally expected to ship in the first half of the year, but these ship, moved to second half of the year. Receivables and payables largely balance each other out. So, overall, the balance sheet gives us enough capacity to continue to fund our growth investment plans while maintaining appropriate financial headroom.

21:58 We ended the half year with 16,000,000 of cash. That does include 2,400,000 of restricted cash held in Russia, but we are maximizing the amount of cash we are able to extract from from Russia through dividends, ongoing dividends. And we have had 300,000 in dividends in the first half of of the year. So that cash position supports continued capital investment, lease payments, and 900,000 of buyback returns in the period. Our free cash flow was 1,100,000 from 3,700,000 last year, but that movement is very well explained due to the one over 1,000,000 of higher tax payments we're now making in The US following the utilization of those tax losses last year, plus 900,000 of higher CapEx.

22:47 Working capital also has absorbed some cash of us, as I've said, with the higher inventory, but I'm expecting that to normalize by the end of the year. So just an update on the share buyback. So this continued to be an effective way of returning capital to shareholders. And to date, we bought back 23,500,000 shares equal to around 5% of the share capital we had at the start of the program. We've returned over five more 5,900,000 at an average price of 25.2p per share. This also helps support our earnings per share growth with basic EPS growing at maybe 26% to 0.54¢ up from 0.43p in the first half of last year. So that's it for the financial update. I'll come back to Gavin to do a summary.

23:37 Yeah. Thanks a lot, Helen. So I I think to bring it together, we delivered a solid first half. We expect a strong return to point of care growth in h two, and we remain confident that full year '26 will be in line with expectations. We're going to continue to drive that BHB expansion. Very confident again that that will come in in h two. We remain focused on delivering our five year strategy. Our strategy already showed some tangible progress this half for the BCA agreement, next Spireworks rebrand to record BHP growth. We're building a bigger, more profitable, more diversified EKF, and h one twenty twenty six shows that we will continue on that path.

24:35 That's great. Thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the top right hand corner of your screen. Just while the company take a few moments to review those questions 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 a number of questions throughout today's presentation. And, Paul, if I could just hand over to you just to read out the questions to share with the team, and I'll pick up from you at the end. Thanks very much. The first question was about how much operating leverage do you expect as point of care revenues recover, particularly given the investment already made in sales and marketing? Yeah. Look. I mean, we we do expect that to improve as we do get higher volumes through office and manufacturing facilities. We already have, like I said, good visibility on a number of different orders, and we do expect to be having particularly high volumes going into h '2 with those large tenders. So, yeah, we will see an improvement in.

25:43 Just staying on revenues, a question from one of your shareholders was that what percentage roughly of EKF's revenue would you consider to be recurring? Oh, that's a good question. We do have a lot of run rate business. It it's a challenging one because, you know, it's probably around about 50%, should we say. The difficulty bit in terms of answering that question in a a very open and clear way is that a lot of our business is tender driven. And tenders, they don't they don't last forever. They're, you know, anywhere from one to five years until they make sure. So although it might be recurring for three years, it may then go away if that tends to if they decide, for example, to go to a different type of technology or they go to a competitor.

26:29 So we've gotta be careful about what we consider to be recurring. But given that, you know, the whole our whole business plan, certainly when it comes to point of care, is that we put devices out there and really then we get most of our margin and revenue from the consumables. Say that, yeah, everything in point of care really is recurring business. We do have a significant amount of recurring business in the life sciences part as well, certainly with BHB and and then also with some of our larger contract manufacturing and implementation customers. Thank you. Another question here was regarding how large do you think The US US blood bank opportunity could become for DIASPAT following the BCA agreements and the transition of legacy ultra crypt customers?

27:20 Yeah. So we we we believe that the the total market size there for the blood bank US market is around about $60,000,000. 40% of that is already taken up by the American Red Cross, so we can't really access that business. The rest is the independent blood bank businesses, and the majority of those are come under the BCA umbrella. Not all. There are some outliers there, but really that's the the market we're trying to attack. Well, I think your r and s in your presentation must have covered everything because those are the only questions we have. That's good. So there are no more questions, but thank you very much. And I'll hand you back to Lily at IMC. That's great. Thank you for answering those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform.

28:11 Just before redirecting investors to provide you with their feedback, which now is particularly important for the company, Gavin, could I please just ask you for a few closing comments? Sure. I I think I just wanna reiterate that, you know, we we had a solid first half, but we have and we anticipate a much stronger h two. And when I say anticipate, we are very confident in that. We do have significant orders already in house. We know that we can deliver the product. We know that payment will be coming through. We know that BHP is going to continue to grow. We've got good visibility on new contract manufacturing opportunities. So I think we are very confident being able to deliver full year '26 in line with market expectations.

28:59 That's great. Thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you