Inspiration Healthcare Group (LSE:IHC) — Interim results presentation

0:01 Good morning, and welcome to the INSPIRATION HEALTHCARE GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using 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 received during the meeting itself. However, the company will review all questions submitted today and publish responses where appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you

0:32 over to CEO, Neil Campbell. Good morning to you, sir. Good morning. Thank you, and good morning, everybody. Thank you for joining us today, where we're going to present our interim results for the six months ending the 07/31/2023. With us today, I have Alan Olby, our CFO, who will cover some of the highlights and the some of the financial metrics. And then towards the end of the presentation, I will cover some of the operational highlights of the of the last six months and what we're looking forward to doing over the the next six months. Excuse me. Alan, just for introduction, Alan joined us at the beginning of the summer in June.

1:22 And I'll let Alan introduce himself when he starts talking about the highlights. But very pleased that Alan's joined us and already making his mark in the company. A little bit of a reminder about the group. We're a British based manufacturer of medical technology. We design of R and D in The UK. We design, manufacture and take products to market around the world where we distribute through independent distributors in about 75 countries, including Japan, China, India, through Latin America, The Middle East and Europe. We employ just over 200 employees in The UK. And we are focused on making life saving equipment and improving the outcomes of patients from the very first breath of life. Our products that we design and develop and manufacture here in The UK are arranged for premature and sick babies, weighing as little as three fifty grams and being twenty three, twenty four weeks of gestation, so over three months premature.

2:28 We also have a distribution business in The UK, which is for infusion therapies. And we'll talk a little bit about the split between those two businesses as we go through the presentation today. And without further ado, I will pass you over to Adam.

2:47 Thanks, Neil, and good morning, everybody. Very pleased to be here today for the first time presenting INSPIRATION's results for the first half of current financial year. Just a very quick background to myself if we haven't spoken before. I trained as an accountant, and I've spent over twenty years working in pharma and biotech companies, mostly in the sort of public company listed environment. Prior to joining INSPIRATION, I worked for a company called Sinclair Pharma for over sixteen years. I was CFO at Sinclair for twelve. Sinclair was aim listed for majority of that time prior to being taken private by a Chinese parent company in late twenty eighteen.

3:35 And like INSPIRATION, Sinclair sold medical devices both domestically through our own Salesforce and using distributors on a worldwide basis. So many similarities with INSPIRATION and a lot of experience that I hope to bring to the company as as we move forwards. Turning to the results for the first half. These are presented on a slightly different basis. We are going to revise the way that we report our revenues moving forwards, and I hope you will find this slightly more intuitive and and clearer. We are simplifying that to talk about neonatal and infusion therapies. And and service revenues, technology support is consumed within each of those two divisions.

4:27 Neonatal is by far the largest part of the group and where we focus our energies and research and development activities and investment. And infusion therapies are products that we have the rights to distribute in The UK only, and form a smaller part of the the business and come with a a lower gross margin because we are just distributing another company's products. Revenue for the first half of the year was flat on an overall basis, but, there are strong underlying growth metrics that have come through in both of the neonatal and the infusion therapy businesses, and I'll go into that in a little bit more detail when we talk about the revenue. We've been very busy on the, regulatory side during the first part of the year applying for the MDSAT medical device single organ program certification, which will significantly simplify our regulatory activities as we move forwards, but also give us access to a number of countries with just one single audit program.

5:31 In particular, that opens up The US and Canada to us markets that we are not currently selling in. We have extended the SLE 6,000 product range to add noninvasive protocols to the SLE ventilator, which gives us a a wider patient population that we can access, and and Neil will talk a little bit more about that later on. We have streamlined the property portfolio, having invested very significantly in the new manufacturing technology center in Croydon last year. The company has now closed its offices in Crawley and Leicestershire, making Croydon site sorry. The Croydon site, the the group headquarters, and bringing all functions under one roof. That gives us a small amount of cost savings as we eliminate the the leases for those properties, but most importantly, some significant operational efficiencies and those intangible benefits from having everybody under one roof all all on one site.

6:30 And there've been a couple of changes to the board as well during the period. I joined at the beginning of June, and Marley Janssen also joined us in June, as a nonexecutive director. She has very significant amounts of medical technology operational experience, in The US. And I think that's a real positive addition to the board as as we look to expand the business and open up The US market over the next year to eighteen months. And after the end of the period, we've managed to submit the SLE 6,000 ventilator for approval in The US using a five ten k approach. Those applications were filed in August, and we hope to have news on approval sometime in the second half of, next calendar year, so second half of twenty twenty four.

7:26 Turning to the financial highlights for the first half. As I said a minute ago, revenues were essentially flat compared with the same period last year, and I will go into that in a little more detail in a second. Encouragingly, the gross margins have improved quite significantly. We are three and a half percentage points better than the same period last year at 48.6%. So margins and profitability therefore moving in in the right direction. Adjusted EBITDA has fallen slightly due to increase in overheads, and that's largely driven by wage inflation but also an increased level of travel as international markets reopen, regulatory costs from a lot of the work that we've done during the first half and a little bit of the impact of foreign exchange rates.

8:20 But still EBITDA positive for the period, and the expectation is very much that the second half will be more profitable as the margins are maintained, and we expect to see revenue growth during the second half. And our overheads are obviously more evenly split, and therefore, we expect to see higher EBITDA margins as we move through the second half of the year. Also, on financials, we've been pleased to see positive operating cash flow during the first half, which has managed to reduce our net debt from 3,800,000 at the end of the last financial year to just over 2,000,000 at the end of July. And the interim dividend has been maintained at at the same level as last year, naught 0.2p per share.

9:10 So looking a little bit more detail on revenue now, and you can see in the bottom chart here just the allocation between the two parts of the business that we're reporting now. The neonatal business is by far the largest part of the portfolio, 79% of revenues in the last six months, and infusion just 21%. And looking at the bridge between performance last year and this year, I wanted to draw out two significant one off headwinds that we were dealing with during the first half of the year, one in each part of the business, in fact. In the neonatal portfolio, we lost the rights to sell a particular product that was we were distributing in The UK.

10:02 The our partner withdrew that from sale during last year and were not able to achieve their CE marking for the follow on product, which meant that we were unable to to sell the new product. We were expecting that to come through earlier in the year, but it's been delayed. And in fact, it probably won't happen until we move into the next financial year at best, and that's certainly what we're planning for right now. That product had achieved a million pounds in revenue during the first half of last year, and and we were unable to obtain any revenues, obviously, this year. So that that has been a significant headwind during the first half. The rest of the neonatal portfolio has encouraged me growing quite well. You'll see neonatal growth of 1,600,000.

10:53 That's 11% on a like for like basis. So the core of the portfolio is actually growing quite strongly and that's been driven by sales in particular of the ventilators which are our highest margin products on the whole. In the infusion business, our leading customer was actually, unbeknownst to us, overstocked as at the end of last year. And so we've been through a period of destocking during the first half whilst they've been managing their inventory levels back to to a more normal level. That was a significant customer to the infusion business, and and that's had a quite a significant impact on on the headline revenues. The rest of the infusion business has actually grown at 18% on a like for like basis compared to last year, demonstrating that the growth achieved in infusion last year has actually continued if we look through the destocking.

11:47 Encouragingly, the major customer has come back during September and restarted ordering on a on a normal basis. We have a purchase order for the next twelve months, and so we've got very good visibility around sales from from that business during during the rest of the year, and we're confident that the infusion business will now show growth during the second half of this year. Just looking at the the geographical split of sales, both of those revenue headwinds that we encountered in the first half were linked to our domestic business in The UK. And so the proportion of UK revenues as as the whole has fallen to just under 50% in the first half.

12:37 The rest of the revenues are relatively evenly split with the exception of The Americas, which is where we're significantly underrepresented. Only 6% of revenue from The Americas in the first half of the year, and that's all outside of The US. It's number of countries in in South America. And that really is one of the main opportunities and it's very significant potential growth driver for the business as we move forwards. Just a couple of comments around margins and the gross margin is is really the one to focus on. As I said earlier, that's recovered by three and a half percentage points compared to last year. That's driven by, in particular, a change in the sales mix with lower infusion product sales and stronger neonatal sales, in particular, from the SLE ventilators.

13:33 As we go through the rest of the year, we're expecting that margin to maintain at around the 48, 49% level. Obviously, a recovery in the infusion business will reduce the margin slightly. But on the basis that we expect the neonatal division to continue its growth, we expect overall margins for the year to be around 48, 49%, which will be a significant step up on the full year last year. And I've already discussed EBITDA, which is down slightly due to overhead increases, but we expect our overheads to be fairly evenly split and therefore a stronger EBITDA margin in the second half.

14:15 Turning to cash flow and net debt, very pleased to be able to demonstrate positive operating cash flow during the first half. The business obviously went into net debt for the first time at the end of last year, but we've reduced that to just over 2,000,000 as at the end of July through underlying profitability and managing to take out 1,800,000 from working capital. There were the group saw quite a significant increase in working capital last year, and receivables have been reduced by almost or I think slightly over £2,000,000 during the first half of this year. The inventory levels remain quite high and increased slightly in the first half.

15:02 I think that's certainly an opportunity for us in the medium term, and we hope to to manage to demonstrate some improvement in that as we as we go through the rest of the year and and into 2024. The CapEx that was invested in the Croydon site last year has come to an end. That project is finished. And so we've only seen very small amounts of cash outflow from from CapEx and lease and interest payments during the first half of this year.

15:37 And at that point, I will pass you back to Neil. Thanks very much, Alan, for that overview. And we'll now look at the some of the operational highlights and the around our strategic market where we invest in R and D and regulatory affairs to be able to sell worldwide. Our neonatal intensive care market is a large market for us. It's around about $7,700,000,000 as a global market. Some metrics there at the bottom of the slide will show costs around about £1,500 per day to keep a baby in intensive care. And around fifteen million babies every year worldwide are born prematurely across the world. And that's around about ten percent of the global birth rate.

16:31 The market's growing. And if you look on the right hand side of the slide, you can see that actually in the geographic regions that Alan has just mentioned where our sales are, the markets are growing almost uniformly with slightly higher growth in The Americas and The Middle East, just over 8%. But across Asia Pacific, Europe and The United Kingdom, still 7% plus growth. And the key drivers for that global growth are around the increase in health care infrastructure. So investments made in health care, that will naturally grow the neonatal side. There is an increase in premature birth. I've said there's around about ten percent of all babies are born prematurely.

17:21 And that is actually an increasing trend around the world for various reasons in various different countries. In some geographies, it might be due to in vitro fertilization where you have more multiple births and multiple births would tend to be to be delivered early. Defensive medicine from obstetricians. If they think there's a complication going to be happening around the time of birth, they'll have a cesarean section and and deliver the baby early again. And in certain parts of the world, there's malnutrition, access to health care infrastructure, and overall social economic drivers that cause premature birth. There's also a driver for growth for technological advancements, obviously, as we develop technologies and the ventilators and products that we sell now are different to those in terms of technologies to the ventilators and products that were sold ten, fifteen, twenty years ago. And those technological advancements are typically at a higher price, premium price, which is growing the overall market.

18:30 And finally, on a macroeconomic level, there's an overall increase in affordability. Although it does cost £1,500 per day to keep a baby in intensive care, And if a baby is born three months prematurely, they might be in intensive care for fifty to a hundred days, and then they have complications when they go home. So therefore, being born prematurely could cost the health system $101,150, £200,000 or more per baby. As those economies grow around the world, there is an increase in affordability and therefore a driver for intensive care medicine to save these children's lives and also to give them a better outcome when they do leave hospital.

19:20 Our portfolio, which is our own brand of products that we sell around the world, It consists of both capital equipment and disposables. If we work from the right to the left, the the lifestyle product is a product that actually changes the dynamic around resuscitating a baby at birth. Historically, babies would be born, the cord would be clamped to the doctor if the baby needed resuscitation. The doctor would be moving the baby to a resuscitation platform in the corner of a room where they would provide resuscitation. The lifestyle design allows resuscitation to happen next to mom and birthing partners. Mom and dad can actually be next to the baby when the baby is resuscitated.

20:09 And that resuscitation can actually happen while the cord is still intact so the doctor can be making a decision before they even clamp the cord and therefore deliver the first breath of life next to mom and dad. We have a a cerebral function monitor, which is a a variant of the amplitude integrated electroencephalogram, and that will look at the baby's brain. Especially useful for term babies if they've had a difficult birth and decide whether or not they may need cooling to prevent further brain damage. And we move across to our ventilators. The ventilators are true life support equipment and the top of the range ventilator from from our stable, the SLE 6,000, with all the features, specialist software algorithms, and and the like to provide the the cutting edge life support, Those ventilators will retail for for around about £35,000 around the world.

21:12 The the ventilator will be connected to breathing circuits, and this will take the gas, the air, and oxygen from the ventilator and deliver it towards the baby. The gap, the air and oxygen coming out of the the ventilator from originally from the wall would be cold and dry. And those breathing circuits allow the that that air and oxygen to be conditioned to 37 degrees and humidified so that baby will be breathing warm, wet gas, which is obviously good for their airway than their lungs. That could be delivered through our first breath nasal CPAP system or our INSPIRATE nasal CPAP system and allow the baby to breathe easily to support its respiratory function. And then far left, we have our INSPIRA R PAP product.

22:00 The R PAP product goes hand in glove with the LifeStart to deliver the first breath of life. So we have a broad range of products. Approximately two thirds of our revenue will come from the sale of the capital equipment, and about one third of our revenue comes from the sale of the consumables, tech support, and spare parts to keep the ventilator and the other products working efficiently and effectively. So that gives you a flavor as to our market and our products. Moving on, we'll look at some of the strategic progress we've made over the last six months. The growth drivers for us are listed on the left hand side. And the first one is to maximize revenues from existing products and markets.

22:45 We're in a strongly regulated industry, and therefore, we need to maximize the revenues where we've already got regulatory clearance, such as Europe and some of the countries in The Middle East and the countries in the Far East. The progress that we've made, as Alan showed, the neonatal revenues have grown overall by 4% and outside of The UK grew further, which was very pleasing. And we've also had that therapy area for increasing new therapy areas for infusion that have also driven some growth. And we've also launched new websites to give us our customers a better interaction with company, and we've seen lots more leads developed from our customers in that that area.

23:35 But looking forward, we we need to develop our website further to get further access and benefits from that to give a better interface for our customers, especially around access to training material to be able to use our products more efficiently and looking towards ecommerce as well. We also need to improve our distributor management and work more closely with our partners in key countries to develop the sales and improve forecasting, improve visibility of our pipeline. Although we have around about an eighteen month visibility of opportunities, it's much more important for us to be working closely with our distributors to be able to plan production and actually improve our working capital. So improving our distributor management is a focus for us over the next few months.

24:25 Looking at geographic expansion, this is for for approvals in different geographic regions through regulatory clearance. Adam mentioned that we've initiated the medical device single audit program. This gives us access through through one single audit into six six jurisdictions and will allow us to have our quality management system audited to the the requirements of The United States, Canada, Europe, Australia, and Japan. And so opening up two key markets for us in The United States and Canada, which will give us opportunities to to access the world's largest single market.

25:11 We also applied for our FDA clearance for the SLE 6,000 ventilators. We applied for that in August. It's typically a six to nine month process depending on the questions that the FDA ask and the the information that we can provide back to the FDA in a timely manner. And we expect to be having clearance or be able to inform shareholders of clearance over the next sort of middle to the end of the summer next year. If it's earlier, then that's great, but we're really being pragmatic to say sort of early second half of next year. Going forward, we need to finalize our audits from DSAP to gain our certificate.

25:58 That will allow us to register the products in Canada and also get our FDA clearance. We also invest quite a lot in product development. And we have a team of engineers and scientists working to extend the range of products we have as well as work on new products. And in the first half of financial year this year, we extended the range of the SLE 6,000 products to add more noninvasive modes of ventilation. This allows us to target a wider population with the same ventilator and access further

26:38 markets for hospitals that perhaps don't deal with the very, very sick and very, very premature infants, but still need to give them good quality respiratory support. We also launched a US model of our lifestyle product. It's got some features on there that allow some US branded products to be attached to it for for being able to deliver resuscitation. And we've relaunched that into the second half of this year. The trial for Project Wave is now completed. Project Wave is a novel non invasive respiratory device that we believe will help reduce apnea of prematurity and intermittent hypoxia associated with apnea. Apnea is periods where the babies will just stop breathing and can be very short periods or actually prolonged periods of time.

27:40 The lack of oxygen when the baby stops breathing can actually be harmful to the developing brain. And being able to stimulate the baby but without affecting their sleep architecture is very important, and we believe that Project Wave addresses that market. The study was completed in Brighton earlier in the year, and we're waiting for them to announce the results. Going forward with our product development, we're also pleased that last week we showed our a new respiratory device to our sales team. It's a further it targets yet another market for us. Babies who perhaps are closer to term or actually already term babies who just need a very low level support for their respiratory needs, perhaps, and they're giving a little bit of extra flow and a little bit of extra pressure to to support them breathing for a for a short period of time.

28:46 That device is now out with our UK sales team to be able to do some post market clinical feedback before we actually launch it more widely around the world. That's the first new respiratory device that we've launched since we acquired a totally new device we've launched since we've acquired SLE. We're also finalizing our our commercial plans for project wave. Now that we've had some feedback from the trial about its acceptability and from both parents, nursing staff, and ultimately, the the baby, we are starting to look at how we can commercialize that device going forward. I thought it'd be just a bit interesting to look at the infusion therapies area of our business in a bit more detail.

29:37 We started in this area of medicine in about 2010, where we became a distributor of infusion devices. The infusion devices consist of pumps, so small levels of capital equipment, and then dedicated consumables. These are the plastic giving sets that go from the pump to the patient. And we have various accessories and, obviously, some tech support around servicing and maintaining the pumps. Our customers include home care providers. These are large

30:14 companies who look after NHS patients in the home. So companies like HEALTHCARE GROUP PLC, etcetera. They would have a contract with the NHS to to look after patients in their home. The core part of that business was parental feeding. And we also, though, sell to the acute NHS hospital trusts and air ambulance services, so we're broadening our customer base. The therapy areas that we now include are parenteral nutrition. This is where patients can't feed can't process solid food. They have a line into the body and a syrup, a gloopy syrupy liquid, is pumped into the

31:05 patient, typically overnight, to allow them to get the nutrition that they need. That's predominantly done at Hope. That was the core part of our infusion therapies business. However, we have developed further sales into other areas such as palliative care, chemotherapy for oncology treatments, immunoglobulin therapies, and also looking more and more at pain management, both through regional anaesthesia and post operative pain. We support these areas of therapy with dedicated trainers. We believe that the way to grow this business is certainly to add value by training and making sure that the end users and the the nurses and clinicians who support those end users have access to to full understanding of the products that that they're using. And we really do support those those customers properly. And that's what's driven the growth of the business over the last few years.

32:14 Alan's already mentioned we had a customer destocking, which reduced revenues this year, but in other customers, our revenues have actually been growing. We've taken on some several business initiatives. We're expanding into new areas, we've employed

32:31 additional resources and business development staff have joined our team to look in areas such as postoperative pain, regional anesthesia, epidural. And we've already seen the fruits of that investment coming to the company. We've actually had orders and revenues

32:50 from those new areas, which is very pleasing to see. We've also managed and continue to exploit a gap in the market caused by a competitor that had some technical and regulatory challenges. And as that product has

33:08 not been able to be used, we've been able to put our products in place and take some business from a competitor. We're seeing the NHS strategy to discharge patients to home for continued care. It's better for the NHS to get patients home quickly to free up beds for more patients. It's also better for the patients as well. We will recover better when we when we're at home than in a than in a hospital ward. But the patients obviously need to be looked after properly. And with new pumps that we're launching from our supplier that have things like RFID, Wi Fi enabled, remote monitoring, It allows the NHS clinicians who do discharge these patients home to be able to monitor the patients to make sure they're receiving the right treatments, the right drugs at the right time through the pumps.

34:02 And that will help the NHS

34:06 going forward. So some exciting things happening in infusion therapies. Just summing up, looking at where we've been and what we're going to be doing going forward. Obviously, the financials we've run through revenues were flat. But as Alan said, we believe that the underlying

34:29 growth in the neonatal business and infusion business, we believe that we've got good opportunities to grow in the second half. Margin is improving, which was important for us. And that's down to the mix of products we've been selling. And that's actually helped drive our cash generation and reducing our debt. We've made good progress with product development and regulatory applications, launching two products and the range extension of the SLE 6,000 and launching the new respiratory device into The UK, which will continue to drive growth when we launch it more widely after the post market clinical feedback.

35:16 The FDA submission and the MDSAT are exciting for the company because that will open up

35:23 sales into The United States and Canada and gives access to around an additional 50% of the world market. We've strengthened our Board, and we've also rationalized our property, restructured some of the company to give us greater operational efficiencies. And so overall, we feel we will return to growth in the second half, gain benefits from those operational efficiencies and drive the company further coming forward. At that point, I will stop for any questions. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

36:21 Neil, Alan, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Thanks so much. I'll I'll probably pick up the the couple that I can see, which certainly seems to have a financial bias. There's a question about invoice discounting and that that fact that that tends to be expensive and how does the cost of this compare with the with the RCF facility that we have in place. I think it's what I can say is that both of those facilities are based on variable interest rates. They're based on price with a margin over the base rate, But the margin differential is actually comparatively small. It's less than naught point five percentage points.

37:19 And so the the marginal increase cost for the invoice discounting is is not significant, but it does give us quite a lot of additional flexibility in terms of how we use that facility. So it's it it's not particularly more expensive when the overall ex expense is is seven point something percent. There's also a question about overhead growth and and how this is being restrained. I think it's important to note that the large part of the overhead increase that we've seen in the first part of the year is down to wage inflation and and general inflationary pressures. The company awarded a 7% pay increase to the staff at the start of this financial year, and we're certainly very aware of the impact that that is having on the overall level of operating expenses in the business.

38:15 We will certainly not be increasing pay by that level as we go into the next financial year. And there's obvious and there was also quite a significant focus on overall overall level of operating expenses and and operating expense growth, which I think will certainly moderate in the second half of the year compared to the the first part of the year. There was also a pre submitted question around capitalized development costs linked to the this £5,000,000 of capitalized development costs on the balance sheet, which are not really being amortized historically. And does that indicate that there are a number of product launches coming down the pipeline? Neil has talked about the new ventilation device that was just prelaunched to sales team last week, which is one of the products that has costs capitalized.

39:13 There are costs linked to our US market entry project. And as that will hopefully become live during next year, that is something that will start to be amortized. And there are costs linked to other projects that that we have not yet talked about. So I think it's you know, the message there is that there will be a higher level of amortization charge coming through with as we launch the new ventilation device. And as we go into next year as as we hope to launch products into The US. And there are some other projects under development that we hope to be able to talk about in in in coming results presentations. Thanks, Alan. Shall I cover a couple that that I can see?

40:04 There's a couple that relate to sales in of the lifestyle of The US and sales in The US in general as well as Canadian registration. So if I try and cover those in in in one in one go. Canadian registration is is done through the MDSAT program. If you haven't got MDSAT, you can't register your products in in Canada. Once you have that certificate, you it's then a relatively quick way of registering products into the Canadian market through Health Canada. So it's it's a lot quicker than the process for CE marking and for the FDA once you have MD SAP. So that's an important way of opening up that market in Canada.

40:51 But in The United States, when we have the five ten ks, we need to we've been looking very much at how we support the the sales of those products. Obviously, it's a big market. It's around about 45% of the world market. So with Canada, North America almost represents 50% of the opportunity for us. We've got to support those products adequately. We we don't have salespeople on the ground in The United States because we don't have any sales there at the moment. And we're not looking at putting a a full sales team into The US. I've seen companies do that before when it it can cost an awful lot of money and and not get you very far. So we're looking at various options as to how we support the distributors that we'll have in The US, and we're gonna be using that distribution model going forward with with better distributor manager management to make sure that we are supporting the the their sales teams more adequately and and getting the the right level of return on the on the products that we're selling into The US.

41:57 Certainly, we can sell off the lifestyle. There are approximately 1,100 or so neonatal intensive care units in The United States. There's around about 3,800,000 babies born every year. Every about one in ten babies will need some sort of resuscitation around the time of birth. So it's around four hundred thousand babies that will be needing some sort of resuscitation at birth. And therefore, in that 1,100 hospital market, we see there's a significant opportunity to tackle the life with the lifestyle. And we've got some good opportunities already from from customers who have seen it and help us talk about what product what accessories they want to see on to for us to be able to put on to the lifestyle.

42:50 And we we see that as a as a big opportunity for us. There was another question about there was a question about investment in Croydon, Alan. Do you want to to cover that one? Is there any further investment plans into the new site in Croydon? So no investment in the Croydon facility has now ended, and that's why CapEx fell to just 300,000 during the first half of the year. So we're now back to a sort of maintenance level of of CapEx as we move forwards. What level of savings will this deliver? The there was a note in the release on Tuesday about savings of £200,000 on an annual basis from closing the Leicestershire and the and and the Crawley sites, which are comparatively modest. But I think the the important thing is about the operational efficiencies that the business can have from having all of those teams under one roof rather than spread across three different sites.

43:58 And certainly in the case of Croydon across a number of different sites all on one business park, which which was very inefficient. So the new site is is more efficient, and it gives us significant additional capacity to manage growth as as we go into, you know, the next phase of the company's development. There is significant level of capacity to achieve higher revenues in the business and significantly higher output of ventilators and other products compared to the previous site, which was, I think, significantly capacity constrained by the time the business left just in the middle of last year. Thank you. There's a question about Russia. And are we showing Russia we're showing Russia as part of Europe, and are we selling to Russia?

44:54 Simple answer to that is is, yes, we are selling to Russia. We we looked at our products, especially the SLE 6,000 ventilator, where we have demand from Russia. The ventilator can't be used or can only be used on babies and small children. It was looked at during COVID, and it can be scaled for adult intensive care applications. And so we took the decision that as it was a humanitarian product for premature and sick babies, we would sell that product into Russia. The key problem that we have in Russia is regarding being paid, as you can imagine. The sanctions the banking sanctions are are very strict. We have done diligence around the company we are working with in Russia, and that company is doesn't have any ownership through through any sanctions.

45:47 We're very cautious about being paid for the products we sell. And in Russia, we are only taking we're only selling products where we have been prepaid. So we haven't got any financial risk in Russia. As those sanctions get tougher and tougher, the banks get tougher and tougher to on on those sanctions, we may stop selling to Russia just purely and simply on the the commercial side of being paid. But at the moment, when we do get paid, we will ship to Russia. Just going through looking at some of the the other questions. There's a question about margin in The United States. Do we think we'll get the same percentage margin if we send it to The US?

46:39 We don't think it's going to be vastly different. There is a we we use a distributor model around the world anyway, so we have a we have a distributor margin in our sales into countries such as France, Germany, Japan, etcetera. And having the distributor model in The United States would be we probably could get similar margins. There are some other pressures in The US such as group purchasing organizations, but also there are opportunities for us to reset the price. We've done some market research on pricing. We believe that the prices we can sell the ventilators at would allow us to get a similar margin in The United States to other countries around the world.

47:29 I'll go through some some more more questions. I saw a question around receivables and whether the reduction in receivables is linked to invoice discounting or or other factors. It's just worth clarifying that although we are using an invoice discounting facility, we do not derecognize any of our receivables on the balance sheet. So the receivables are still presented at a gross level to the extent we borrow money against the invoice discounting facility that's included within the borrowings figure on the balance sheet. So the reduction in receivables in this last period is down to an absolute collection better collections and the different phasing of sales compared to the end of the previous financial period.

48:26 There's a couple of questions here. One on techatherm or replacing the TECHERM, which was a cooling device we had, and one on Project Wave. If I just cover those off together. The TECHERM cooling device, we have had a product in development, and that's still ongoing. It's been it's not been as quick as we thought it would be, and the regulatory changes from MDD to MDR have actually caused us to stop and evaluate some of some of the things we were doing and with and how we actually tackle that project going forward. It is something that we're still working on. And over the next few months, our r and d team are is expect to be making good progress, and we we can perhaps share a bit more of plans going forward.

49:19 Project Wave, there's a question about patient acceptance and how it could be commercialized and what's the potential. The device effectively causes a vibration on the hand and the feet. And one thing that that babies need to do when they sleep, and so when you stimulate the baby to make sure that they don't stop breathing, we don't want to be waking them up. Certainly not waking them up with a start to be able to be able to re breathe or or start re breathing. So actually keeping this this buzzing, vibrating sensation on the hands and feet allowed the baby to sleep and therefore the patient seemed to accept it very, very readily. How we can commercialize it is that it's actually, we believe, it's a class one device in The United States. It's a very low risk device.

50:13 Therefore, The US registrations and regulations around the world are adopted in some countries like The UAE, which you can if you've got FDA clearance, you can actually sell sell your products. We're looking to see to do to do some initial sales and marketing market research to to be able to to price point it and look at the the total potential. It's still early stages with that. The clinical trial, we haven't seen the results. The academics haven't shown us the results of the actual clinical trial, apart from the data safety committee, have given us the go ahead from there were no patient related safety concerns.

51:09 So we're starting to do that market research now and build that out with to to develop those commercial plans going forward. So there's a question, Alan, more of an observation about concentrating on rebuilding our balance sheet rather than by organic growth rather than attempting to pursue acquisitions and also with a view to not raising money where dilution of capital might be needed. Do you have a a view on on those sort of acquisitions and dilution raising money? Well, I don't wanna wouldn't really wanna discuss that now. There's there's no suggestion that we're gonna be raising any money.

52:04 We're demonstrating positive operating cash flow during the first part of the year and and a reduction in net debt. And, certainly, it's management's aim and target to reduce net debt further as as we go through the rest of the year. Thanks for that. There's one question here around GeneDrive. There's no mention of it today. What's the what level of contribution which we expect it to make to our revenue? It's a distributed product for us. It's and we we have a revenue of of over 40,000,000. It's a distributed product we can only sell in The UK and Ireland, and therefore, we don't expect it to be something that we would be reporting on in as an individual distributed product.

52:52 We don't discuss other distributed products that that we we have apart from in the infusion business where, obviously, that's a significant part of our business. So we expect it to to to contribute, but we don't expect it to be to be we don't expect to be making any specific comments about GeneDrive as a as a contribution to our business. Neil, Alan, that's great. And I think you have been very generous with your time in addressing those questions for investors today. And, of course, the company can review all questions submitted today, and we'll publish those responses on the investor meet company platform. But before we direct investors to provide you with their feedback, which I know is particularly important to the company, Neil, could I please ask you for a few closing comments?

53:44 Thank you very much for listening and the questions. It's fascinating to hear what investors and shareholders ask and view as important. I think overall, we are we've made great progress for returning improving the margins and returning to being cash generative after the investments we made last year. There's room to improve further. And certainly, Alan is looking at ways of improving our working capital, getting receivables down even further. And we're looking to see how we can reduce our inventory whilst maintaining the levels of customer satisfaction for deliveries that we need to. The exciting opportunities for us going forward are in North America, and we hope that next year we'll be able to announce good progress with the regulatory clearances of our products into North America.

54:42 Thank you very much. Perfect. Neil, Alan, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations? This will only take a few moments complete, and I'm sure will be greatly valued by the company. On behalf of the management team of INSPIRATION HEALTHCARE GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.