Fortis Frontier (LSE:FORF) — Interim Results June 2024

0:00 Good morning, and thank you for joining us to listen to our update on My Health Checks. As most of you know, I'm Penny McCormick. I'm the CEO of My Health Check PLC, and I've actually been here now. It'll be five years in November. And I've led on the health and wellness at retail strategy. And really want to just set the scene first and foremost, just so we recap on this really, really early stage category, which we've been focused on. The category is in its infancy and our aim at My Health Check is to really lead retail through awareness and education, initially with testing, but we've got this fantastic platform that we've invested in significantly. And we need to really understand that our digital platform will really underpin a lot of great growth opportunities for us, starting with the testing now, but with a strategy to then grow the business further. So, we've started well, as you'll have seen from the information shared this morning.

1:01 We've sold over 55,000 wellness tests since we've launched. We work very closely with retail to plan strategies and really educate customers and encourage trial in this new area. And our digital platform really presents an opportunity for retailers to target new shoppers and existing customers with products and really build out potentially enhanced services and associated products through the platform. We've learned that at home tests have a low barrier to purchase and this is when they're positioned appropriately. And it's why our focus at My Health Check has always been on the retail space. Those lateral flow test products are priced very well. They're reasonably priced for the end user and they offer a great entry point.

1:48 And in 2023 and 2024, whilst we've been really focused on key promotional levers that will bring us a return, we're all about really building out that platform and growing that opportunity further. So moving on now to our next slide and just to talk about what we're doing now in marketing. As we've said, these tests at the market now are a starting point for us and we've invested in really building out awareness and also looking to increase conversion of our products around the at home testing space. So you'll see on the left there some examples of some of the PR coverage that we've achieved and some great titles. We really want to build credibility with our audience and really become part of the dialogue when we increasingly hear about how the NHS is struggling and over time there are going to need to be services that can really give the customers better choice, so that they can really self select and also make choices that will help them prevent having a healthcare condition.

2:55 So as we grow our PR strategy, we've been working with our agency partner now for well over a year. We'll be really working with them to increase awareness of at home testing through the coverage that we achieve. On the digital side, we've been really focused on conversion. And we've learned that Google Shopping has been the best place for us to really grow that conversion. And in quarter three this year, we've really put our focus there. And we've also really looked at new strategies with Meta to improve our customer conversion. Engaging with our customers through weekly marketing newsletters is really important. We know that our customers like hearing relevant news stories and informative articles. They don't really like us emailing them about price promos.

3:42 That's much, much better placed for the retail space. Moving on there to look at that retail space, we want to increase our impact and exposure. So, we work very closely, specifically with Boots around what we can do there to really help with customer signposting in store. As we've said, this is a new category. So, we really need to help customers understand where they need to go, what's on offer and what they need to do. So we focused on on shelf trays to improve merchandising in store. We've done that from we've had some new trays going in from May this year. And we've also looked at secondary sites within stores as well to really help customers encourage trial and put products alongside vitamins. So we've had some great promotional activity there, where for the first time we've really set testing next to the vitamins that would be required for certain tests, should the result indicate that the customer needs to take some supplements.

4:43 We've increased some store distribution in quarter three for our blood and DNA tests. Boots has evolved its stores a lot, as have a lot of retailers. There's a big change going on in retail and how we reinvent healthcare has been really important. So we'll see stores evolving and we'll see the positioning of our tests changing as we learn much, much more about the customer and how they shop. And we've also been able to test additional pricing promotion with Boots as well. So, in the more recent part of this year, we've had promotion with 20% off male health tests. We also had a three for two earlier this year. So whilst sharing some of those details of how those pieces of activity have performed, we wouldn't be able to do that because it's sensitive proprietary information.

5:37 We can learn from that and inform activity moving forward. And just looking ahead to the next slide, just very, very briefly, here's a snapshot of our plan year to date. It just shows that we are covering a number of bases. It's a blend of digital, of PR and of retailer activity that's really informing us. It's allowing us to test assumptions and make better decisions moving forward. We've invested over £270,000 in H1, which is up 18% on the same period last year. We do carefully manage our marketing because we're in a new category and to go out and invest a huge amount where we don't know how the customer's interacting. We need to really learn from them and keep trialing new initiatives and build that up over the next twelve months.

6:30 So, if we look ahead now onto the next slide, what the results of our activity show is that wellness tests have performed well in year one for this brand new category. So, we're pleased that we've sold over 55,000 wellness tests year to date. And when we look at this chart and how we performed for the eight month period last year since launch, so they launched in May eight months last year versus the first eight months of this year, we can see a 37% increase in terms of volume sales. We see that as really positive. And again, I reiterate though, we're in the early stages of taking tests out to market. We've added to our range with the distribution of the Newfoundland HIV test. This is a Newfoundland branded product for various reasons, one of which being it's a class four medical device, so an extremely rigorous technical file process and one that Newfoundland have committed to a great deal. It's not something that we've been able to put our brand on.

7:39 But we've got some additional listings for our own products as well. We've had the promotions that I've talked about. We've had the display trays we've discussed, and we've got that new product launching. On that note, we will look at third party products where we see there's a real benefit, where we can really add value to the customer and bring that product to market. And that's why we've taken that. There was an opportunity there with Boots to put that in. It's an excellent product with an inbuilt lancet and it comes in at a price point that's affordable. So, where we identify an opportunity that may not be ours, but one where we really see it allowed customer value, then that's something that we will absolutely look at. And I'll give you another example of that as we move through the slides. And just to add there with Pharma CTU, we have secured a listing in Pharma CTU.

8:31 They're quite early in their testing development plans, but they're an organisation with a really ambitious digital strategy. They've got hundreds of thousands of prescriber customers and they've got lots of digital health initiatives that they will be working through. So we are excited to be launching with them. So the products have just gone in in the last few weeks. So what have we learned? Moving on to the next slide and thinking about some of those key takeaways that are going to really help to inform us without putting too much out into the public domain, because we are at that advantage where we are learning more than many, because we've got that retail position. Our customer base is almost two thirds are between 30 and 59 years and also two thirds female.

9:23 So this has really driven our decisions when we think maybe we may have investors asking, why aren't we on social media all the time? Well, actually our primary base is slightly older. We will be looking at social media and we're really just adjusting our resource plan around that from quarter four onwards. But this is why we've selected PR, retail and direct mail, as well as some digital activity to really focus on, so that we can really be having the right conversations with those customers. The rapid tests are best sellers. I've mentioned that already. Know, we've got very low barrier to entry. And as a starting point for somebody on their testing journey, they offer a really, really good solution for that first foray into testing, if this is the first time that customers have done this since COVID.

10:13 So we're really looking at how we can bring customers into the wider testing sphere. We've got QR codes on pack that we can really use that as a link through to communicate with customers. And that's something that we're going to be really working on to really bring them into that journey. And also our three for two promotions in Q1, as I mentioned already, have gone live there. So really testing when we put the tests for the first time ever directly next to the supplements. We're really understanding how customers interact. And I will always come back to our customer reviews and how important they are to us. We need to always understand and we always ask ourselves the question, are we providing a great service and can customers locate our products and really access them well?

11:02 The consumer healthcare space is significantly governed first and foremost by trust. It's so important in everything that we do. And in the event that ever there is an issue, we must always ensure that problems are remedied very efficiently. So we work really hard in this space. We have a Trustpilot score of 4.4, and we've got over 7,600 reviews, and we get some great feedback. I'm going to touch on compliance a little bit later, but actually we look at all of our customer reviews, we record it and we review it as part of our post market surveillance under 13,485. So this is really, really important to us. We are listening and learning all the time. So as we move on, just to summarize in terms of our marketing highlights, we've got that PR focus.

11:54 We've had some investment in Google paid ads, where we are learning all the time. And we use that to really rationalize our investment whilst we go through this learning period. We have invested in retail point of sale, but again, we're testing that all of the time. And we're really taking our key learnings from customers' email marketing and using that to evolve the content we have on our site, the language that we use, and the additional kind of marketing that we put out into the space. And that data that we bring really helps to inform us moving forward, but also around our future portfolio as well. It's incredibly valuable. So, we always talk about cost control. We've really effectively managed our marketing investment and really monitored that ROI and been extremely focused. We are quite ruthless where at this stage, we won't focus on activity where we aren't convinced at this point that the value is going to be there and that return for us, because there's so much more to come with testing, this, as I've already said, is just the starting point.

13:04 So moving on now for just from wellness testing, we're going to briefly just talk about COVID test as our last piece on this slide deck on the tests. So, if we look at the chart on the left, we can see there that we've looked at sales out to end users for the full year 2023 and also year to date, including post period on the chart there. What you'll see quite interestingly is that actually for the same period last year, we're running at just a 24% reduction on that period last year in terms of COVID test sale volumes. I mean, that's significant. We're now in 2024 and year to date that reduction is just 24%.

13:51 So the gap may open in quarter four, it may not. We have the XCC COVID variant around, and actually we've seen volume demand from end users increasing in the last three weeks. So we will track this, but actually, you know, for we've been hearing for a number of years, of course, how COVID's just going to disappear and it hasn't. We've repeatedly reiterated that there will be a seasonal recurring revenue. It will come down year on year is our expectation. But actually, as we enter our fifth calendar year of COVID supply, we started in the COVID supply business in 2021. And actually the numbers there are still strong. We're in a position now this year where we've to date received orders for 3,000,000 tests for the second half of this year.

14:42 We had a big stock up last year by retail and that meant that where we had this high summer demand in 2024, it actually pulled through a lot of that previous stock. So the sales in the first half of this year have been very, very low. But as we go into the winter season now, we're really pleased to confirm that we are in receipt of orders so far for 3,000,000 tests. That may be our limit. We may have more orders to come. It will depend on how the COVID market moves and how the virus spreads for the remainder of this year. So just moving on, we've talked about testing quite a bit already in this session, but actually testing in isolation isn't going to be the future of testing.

15:31 And we've been consistent here. It's the start, it's where we are today, but everything we do is underpinned by our digital platform, which is where we've seen quite a bit of investment, particularly last year as we geared up for launch. But we've been really focused in 2024 on really optimizing and improving our platform, our architecture and our code base. Because by doing this, we can really optimise our customer journey in the future. It really opens up opportunities for us and for our retail partners. So if we're working with retail, if we're putting tests out into the space, and if we're enabling the connection with other services and products through our platform, which is always what we've wanted to do, because testing in isolation isn't what customers need or expect, they actually need guidance around it, and they need recommendations, and they need to know what to do, and they also need somewhere they can go back to time and again. Then those retailers are going to require fast, reliable, and scalable systems, and they need to be secure, and they need to be really, really well optimized so that there's minimal threats to their information.

16:49 So we're pleased with the starting point of the testing journey, And actually, we've continued then through this year to really strengthen and improve our platform. We need to be ready to handle growing traffic, and we want to expand our customer base. So for us as a business from 2025 and beyond, when we think about our retail customer base, our ambitions there, in addition to testing, will really enable us to grow. And also So, with our digital platform, just moving on to the next slide, we also need our platform to allow us to connect through to new technologies if that should be required. I'm really pleased to share again, you'll have seen in the RNS this morning that we have an agreement in place with POC Doc, which is a fantastic test. Here it is, it's just a little microfluidic assay that works with a cloud based AI diagnostics.

17:49 And in nine minutes, it gives end users a result for their heart health, a six marker lipid panel, primarily around cholesterol, but it also gives them a BMI indication and a Q risk score. It's an over the counter product that can be done at home, and it can also, it can be attached to healthcare professional guidance as well. You know, heart health is massive. This is a great example of how technology is really finding, is really presenting solutions to the problems that we have. When it comes to heart health, the British Heart Foundation states that for 75, we are at a fourteen year high for deaths through heart and circulatory issues.

18:35 And in March 2024, there were over four hundred thousand patients waiting for a cardiology procedure. That's six percent of the population in March 2024 that were waiting for a procedure. This is a huge problem. It's been recognized widely by the NHS as an issue. And this is the sort of technology that's going to make a difference there. So we are working with POC Doc and we are prioritising the biggest pharmacy retail opportunities to really take this out into market and make a difference. It's very complementary to what we do and it's also a revolutionary test and we we have the ability to connect that through to our platform as well and sort of connect it through to other products and services. So we'll be able to provide more of an update on this. We'll be looking to take it to market in 2025.

19:30 But this is such an exciting time to be in the testing space. And as you say, this is very, very complementary to what we do. It's not an instead of, it's an as well as, and it's bringing that product into that ecosystem that we can really help customers at different stages of their life. So moving on, when we think about the big difference that we're making, that these are real health checks as well as wellness, It's essential that we are exactly where we need to be in terms of our compliance and governance. You're all very well aware of the importance that we place on our quality management system. So it's been a big year for us. We've achieved our ISO thirteen thousand four and eighty five, which is the highest standard around medical devices.

20:17 We work to this and we ensure that our suppliers meet our requirements for our customers as well. So this has been a significant undertaking by the small and very effective team that we have at My Health Check, but it's been really essential for us in achieving our goals today and our future goals. And also coupling that then with 27,001, which is around information security management, and also Cyber Essentials Plus, which guards us, protects us against cyber attacks. So we put the highest standards of information security and quality on our products and services. And we're really delighted that we've achieved those milestones this year. So moving on and just to very briefly summarize the highlights for us.

21:06 We have sold over 55,000 wellness tests sold to consumers in the first half of this year. We have an ongoing strong relationship

21:20 relationship with Boots, who we've been working with now since 2021. But also those wider distribution channels and how we will work through those with our digital platform as we continue to develop there. COVID-nineteen still here, it's a seasonal second half and we will have those backloaded sales for this year. And that really will help us to continue self funding our ongoing digital enhancements, which have always been a huge part of our investment plan. We've achieved the compliance certifications that we set out to do and that we committed to delivering. And we're also onboarding new technology that will enhance the portfolio.

22:05 As we move through next year, I'm sure we'll be updating you on additional technologies that will come in and will fit very nicely amongst our range with our own products and also sit there on our digital platform. So just moving on now to the financial overview, we achieved revenue of 900,000 and we've got that the gross margins come down to a loss of $2.86 and this has been directly attributed to the COVID revenue. That demand for end user tests like for like last year, it's not as far off as we may think, but we didn't see the direct benefit because of the retail intake in 2023. But what we do know is that moving forward, we will have that ongoing COVID business, which will support the fixed overhead that we have. We manage it extremely carefully whilst we continue to develop our wellness offering.

23:02 In terms of the margin, we've reported a 20% margin, but we fully expect that to grow with increased sales volumes through planned marketing initiatives. So we continue with a very, very good cash position, demonstrating again our management around that. Strong working capital and cost base management is something that's always a priority for us. And with that position will really help us to self fund our growth. Our spend on our digital platform has been a major reduction on the same period last year. We've invested, whilst we've achieved all of the evolution of our platform, it's all on track. We've spent £193,000 in the first half of this year to deliver those enhancements for scalability.

23:49 So we expect to, we will continue to be self sufficient in terms of our cash position. And we've also updated shareholders on the contingent VAT reclaim that we've submitted. It isn't guaranteed, but actually we are hopeful that that 1,670,000 would come through, be expected it to come through in H1 and would further enhance our cash position there if we are successful. So to finalize the presentation and my time with you today and looking at the outlook for us, we've got good volume sales for a brand new category, but so much more to go after. We are in the early stages of doing so.

24:37 We will continue to carefully create new technology where it's range enhancing and where we see there's fantastic opportunities there to help people and potentially then integrate through with our digital platform as well. We've built out that digital strength to really underpin those retail growth opportunities and unlock those. We understand how retail works. We understand what the requirement is. And that's what we've been very, very focused on delivering and will continue to do so. We have secured COVID supply for business that's ongoing and a potential VAT rebate that will further support our continued robust cash position, which will allow us to support our strategic developments moving forward. So we believe we've had a solid and consistent first half of twenty twenty four, and we look forward to updating as we see how COVID plays out, as we continue to grow our wellness business and deliver on our digital and testing strategy for next year, and also keep you abreast of new developments that will be complementary to our strategy, which we're really satisfied is working well for us.

25:51 And that concludes my interim update, on behalf of the board of Health Checked. Thank you for your ongoing interest, and your time invested in My Health Checked. Thank you very much.