EKF Diagnostics Holdings (LSE:EKF) Q2 2026 Earnings Call

0:00 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&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.

0:30 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 2026 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 120 countries our life sciences division supplies high quality reagents enzymes and contract manufacturing services Julian Huw Baines, Briefly on us, I joined EKF in 2013 and served as Chief Product Officer before stepping into the CEO role in March 2025. So I do bring a real continuity on product regulatory and commercial execution.

2:02 Helen joined as CFO in April 2026 and I'll allow Helen to introduce herself.

2:08 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 2026. So just in terms of by way of background I started my 20th career at PwC, qualified there as a Chartered Accountant and for the last 10 years I've worked within a number of different aim listed businesses and I'm 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&A, restructuring and I'm excited to bring my skills and knowledge to EKS in leading the finance function and helping Gavin and the team drive forward the five-year strategy.

2:52 Thanks Adam. So in terms of the agenda here's how today is going to run. First we'll go through the H1 2026 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. So I'll let Helen take the financial element of the 2026 H1 highlights.

3:21 Yeah thanks Gavin. So financially we delivered a strong first half and importantly in line with expectations. Group revenue was broadly flat at £25 million but the quality of those innings improved with gross margin up 2.8% to 2.53% and adjusted EBITDA up 2.4% to 5.9 million and basic EPS up 26%. Net cash flow in the period was broadly neutral and we ended the period with 16 million pounds in cash while continuing to invest for future growth in the business and return capital to shareholders and to date the share buyback programme has returned more than 5 million pounds.

3:59 On the commercial and operational progress, our point of care revenue was 15 million for the period, just down just 3%. But most of this was very much timing related effect, not a demand issue. We do have a very strong border book for H2 and I'll unpack that on the next slide. Life Sciences grew by a pleasing 8% to 10 million. 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've added now digital capability through our Beat Insights acquisition for our sports performance portfolio and 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 a big part of delivering on our full year 2026 expectations.

5:02 from a strategic point of view we've made real progress over the year we are up four percent on our bhb growth and year to date that's nine percent on contract manufacturing and fermentation that revenue is up 20 percent Julian Huw Baines, Helen Mary Kinsey Jones, Helen Mary Kinsey Jones, Julian Huw Baines, We had some key tender closures that simply pushed order deliveries into H2 from H1. We've got a full order book there so we're very comfortable and confident that that will improve in H2. 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.

6:33 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. Life Sciences delivered strong growth 10 million versus 9.3% up 8% underpinned by structural changes that we made previously to our BHB sales team which are already paying off with a 4% growth they're an 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 the revenue by product portfolio hematology was relatively flat at 7.8 million but again this was down to that timing shift.

7:24 We do have full visibility on some of our larger tender orders like the Egyptian business for example. 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 2 up nine percent 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 bias and grew significantly and we are seeing some changes in the HbA1c market as the QoLab has gained share from the QoTest. This was fully expected as now reimbursement dynamics reset Julian Huw Baines, Helen Mary Kinsey Jones, Helen Mary Kinsey Jones, 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 H2 meaning that we are moving back to a normal type of usage 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

8:55 Contract manufacturing was up 25% to 1 million and fermentation was up 40% to 1.6 million with a strong order book supporting H2. I mentioned before that we fully exited the Al-Qa'at site as of the 30th of June which is a clean simplification of our operating upgrade 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 haemoglobin business, becoming number one in ketone testing both for laboratory, which we already are, and then also point of care, adding that in, 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 and we're getting much better visibility there.

10:02 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 colour market share and we look to complete our claim 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 science is we will be going for a rebrand of our contract manufacturing and fermentation offering. 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 All of this builds towards our 2029 target, which is to deliver revenues above £80 million and adjusted EBITDA above £20 million, roughly double where we are today. We believe the building blocks are firmly in place to deliver on that strategy.

11:17 So I think from a commercial and operational progress point, we do have some concrete proof points here. So in hematology, we've delivered three US blood banks now live with DioSpec and three more coming online in the second half. And we're in active negotiation with members of BCA for 2027 onboarded, a pipeline that's building well. uh in bhb uh we posted 106 growth in h1 with a third one of our third distribution partners who's certainly expanding our reach into more of the integrated delivery network market um they've grown in ways that we 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 We're very confident now that they're going to return to the same ordering process that we had previously in H2.

12:26 So operationally we acquired Beat Insights asset in April This was to strengthen our sports performance portfolio really this offers a way for our users to manage their lactate threshold testing much more conveniently on their mobile phones and we are adding additional AI elements to that to really drive that forward and we 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.

13:18 I move into the introduction of Nexus Fireworks. We are genuinely excited about this rebrand. 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 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 to the next slide, you can see here on the right hand side for me, this is a breakdown of our new dedicated Nexus Biowork website.

14:15 I think what we're not losing here is any of the experience that we already have in the industry. We've got over 40 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 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 finalise with a renewed focus on blood banks and production back to full speed. We do fully expect point of care to bounce back into growth. Secondly, we've already demonstrated that BAB is continuing to grow and we expect double digit growth by year end.

15:17 Order patterings are already normalising so we do have a lot of competence there and 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 all year. I'll now hand over to Helen to go through some more of the financial detail.

15:48 Thank you Gavin. So the headline for the first half of 2026 is that we delivered resilient revenue, we improved margins and high EPS while continuing to invest in growth and return capital to shareholders. So firstly, solid revenue of £25 million 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 3 percentage points, 53%. and Adjusted EBITDA grew to £5.9 million. Operating cash flow was £3.3 million with a reduction mainly relating to higher US tax payments rather than any particular weakening in trading or material shift in working capital. The balance sheet remains strong with £16 million of cash supporting our planned capital investment plans and basic EPS increased by 26% helped by the share buyback programme.

16:46 So in short although the first half has seen a flat top line overall we have achieved stronger profitability and better returns per share and we've got a strong financial position to continue the focus on the five-year plan. So I'll just walk through the profit loss in a bit more detail on this slide. Revenue was £25 million as I've already said against £25.2 last year so essentially flat. Gross profit rose 4.8% to £13.3 million with margin up three points to 53%, which was driven by a favourable mix of higher VHB sales and consumable sales on the point of care side of the business. Administrative expenses went up to 9.7 million, that's just under a 6% increase for exceptional items. And this reflects our planned investment across sales and marketing to support the revenue growth anticipated in the five year plan.

17:38 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. And alongside that, we strengthen 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 5.9 million with the margin improving by 0.7% to 23.6%. We did incur a 0.3 million exceptional charge in relation to the early settlement of the LCART lease, the US lease there, reflecting a one-off payment that closed out all our remaining lease obligations on that site a year ahead of the original expiry.

18:35 The tax charge that reduced to 0.9 million and that includes a 0.7 million tax provision release part of our German tax audit that's still ongoing. So the underlying rate of 46.5% reflects US tax normalising now that our historical US tax losses have all been fully utilised which was flagged at the full year last year as well as the losses we've got in the UK. However, with profit weighted to the second half, we expect the full year underlying effective tax rate to be below the H1 level. So profit for the period increased by 18.2% to 2.5 million. So on the next chart, I'm especially pleased to show this and it does show that the H1 adjusted EBITDA of 5.9 million was up 2.4% year on year.

19:28 But more importantly, it marks the fourth consecutive year of first half growth. so from 4.4 million in 2023 up to 5.9 million now in 2026 so this isn't a one-off improvement it's consistent multi-year trend 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 Julian Huw Baines, Gavin Joseph Jones, Helen Mary Kinsey Jones On the balance sheet side the CAPEX investments are being directed more into practical capacity and that includes a 30% expansion of our haemocontrol production line which is expected to cost around £4 million over the next 18 months.

20:43 We're also investing in a new sensor production line of around £2 million over the next 18 months and continued ongoing development of our next generation analysers 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 million 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 million from 81 last year, still very robust balance sheet and supported by retained earnings of 53.6 million. Worker capital was £10.3 million at the end of June of which £9 million was inventory which is higher mainly because we were holding finished goods we'd originally expected to ship in the first half of the year but these shipped moved to the second half of the year.

21:43 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. We ended the half year with 16 million of cash. That does include 2.4 million of restricted cash held in Russia, but we are maximising the amount of cash we are able to extract from Russia through dividends, ongoing dividends, and we have had 0.3 million of dividends in the first half of the year. So that cash position supports continued capital investment, lease payments and 0.9 million of five-hour returns in the period. Our free cash flow was £1.1 million from £3.7 million last year, but that movement is very well explained due to the over £1 million of higher tax payments we're now making in the US following the utilisation of those tax losses last year, plus £0.9 million of higher capex.

22:46 Working capital also has absorbed some cash, as I said, with the higher inventory, but I'm expecting that to normalise by the end of the year. So just an update on the share buyback. So this has continued to be an effective way of returning capital to shareholders and to date we've brought back 23.5 million shares equal to around 5% of the share capital we had at the start of the programme. We've returned over 5.9 million at an average price of 25.2 pence per share. This also helps support our earnings per share growth with Basic EPS growing at maybe 26% to 0.54 pence. up from 0.43 pence in the start of last year. So that's it for the financial update. I'll hand back to Gavin to do a summary.

23:37 Thanks a lot Helen. So I think to bring it together we deliver a solid first half. We expect a strong return to points of care growth in H2 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 H2. We remain focused on delivering our five-year strategy. Our strategy already showed some tangible progress this half from the BCA agreement to Nexus Bioworks rebrands to record VHP growth. We're building a bigger, more profitable, more diversified EKF and H1 2026 shows that we will continue on that path.

24:36 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&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&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.

25:05 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? We do expect that to improve as we do get higher volumes through our facility manufacturing facilities. We already have good visibility on a number of different orders. and we do expect to be having particularly high volumes going into H2 with those large tenders so yeah we will see an improvement. Just staying on revenues a question from one of your shareholders was what percentage roughly of EKF's revenue would you consider to be recurring?

25:50 Ooh, that's a good question. We do have a lot of run rate business. It's a challenging one because it's probably around about 50%, shall we say. The difficulty bit in terms of answering that question in a very open and clear way is that a lot of our business is tender driven. And tenders, they don't last forever. They're anywhere from one to five years in terms of their term. So although it might be recurring for Julian Huw Baines, Helen Mary Kinsey Jones Everything in point of care really is recurring business.

26:49 We do have a significant amount of recurring business in the life sciences part as well, certainly with BHV and then also with some of our larger contract manufacturing and fermentation customers. Another question here was regarding how large do you think the US Blood Bank opportunity could become for Diaspact following the BCA agreement and the transition of legacy UltraCrypt customers? Yeah so we believe that the total market size there for the Blood Bank US market is around about 60 million dollars 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 come under the BCA umbrella. Not all, there are some outliers there but really that's the market we're trying to attack.

27:50 Well I think your R&S and your presentation must have covered everything because those are the only questions we have 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 will publish those responses on the InvestorMeet company platform. Just before redirecting investors to provide you with their feedback which knows particularly important to the company, Gavin could I please just ask you for a few closing comments.

28:18 sure i think i just want to reiterate that you know we we had a solid first half uh but we have we anticipate a much stronger h2 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 a payment will be coming through we know that bhp is going to continue to growth 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. 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 may take a few moments to complete and I'm sure 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