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| That in turn increases sustainable EBITDA of our businesses |
| And these initiatives should lead to a significant improvement to the operating margin and cash flow generation profile of our Haemoglobins business |
| In that context, many of the key operational transformation programs we initiated over the past 12-24 months are now starting to deliver significant benefits and we projected to deliver increased and recurring cashflow benefits while allowing us to target growth in certain lower price markets, all while maintaining target margin |
| Recurring diabetes consumables revenue rebounded strongly in Asia in the quarter, increasing approximately 70% over Q1 |
| We feel confident about our sequential revenue profile going forward, both -- and not only that, but we also feel confident about our COGS profile going forward |
| Our approach to improving cash flow through operational transformation and organic growth in our core business areas should also play a key role in providing cash flow for investment and availability to incrementally improve financing |
| In other product lines, Clinical Chemistry, Chromsystems and Syphilis product lines continue to show positive revenue momentum despite key raw material backorders in some Clinical Chemistry product lines |
| But you -- I would think that when these initiatives such to kick in, you do expect to be cash flow positive over the next 18 to 24 months? Aris Kekedjian We expect significant improvement in both our HIV franchise as these orders for TrinScreen come in and the initiatives John kind of outlined, play through |
| We are in a regulated industry, but we felt both the combination of positive momentum from a commercial standpoint and improvements that have been -- had been implemented over the last 24 months from a COGS standpoint, we believe we're actually approaching an inflection point |
| Significant commercial reorganization, customer engagement initiatives and service quality improvements have positioned the core Haemoglobins franchise for a strong second half 2023 revenue performance |
| We have made strategic instrument placements and focused on maximizing instrument utilization, these are gaining traction toward building an expanding, recurring revenue profile for the business |
| This is a very exciting opportunity and we expect it will deliver savings from May 2024 and is now a key priority for the operations team |
| The launch of the new column and reagent will be the first step in a multi-generational product development plan aimed at expanding the target market into higher throughput segments, driving lower service downtime and cost, while significantly expanding operating margins |
| The Premier Resolution System builds on our Ion Exchange technology reputation of excellence and a market leading combination of accuracy, speed and value |
| We are prioritizing investing and the delivery of recurring savings or recurring revenue as they should deliver increased sustainable EBITDA and thus increase capital value within each of our core business areas |
| The final redeveloped system is expected to feature an improved, backward compatible column and reagent formulation that should feature up to 3 times the current injection capacity, reduced calibration frequency, improved user interface and better lab system integration |
| Our improved design, combined with significant overhaul of supply chain strategy are expected to yield significant reductions in instrument cost |
| In addition, if these savings can also allow our products to become more cost competitive and deliver growth through accessing new market segment, that then delivers an additional benefit to shareholders |
| In addition, order backlogs have increased substantially to approximately $1 million which is broadly double the run rate for the first half of 2023 |
| The company continues to see significant potential in its proprietary Sjogrens bio-marker lab developed tests, despite limited commercialization activities to date, with have had 20% average annual growth since 2020 |
| In addition, this lower cost of production should allow us to competitively target growth in segments of the Diabetes A1c testing market that are lower price but much higher volume than our traditional focus segments, this would allow us to significantly scale our business in terms of revenue while maintaining target margin |
| Our initial assessment indicates that such a program could well deliver several million of annual cash flow savings while providing the company with additional manufacturing capacity to meet the increased and expected demand for TrinScreen as we roll the product out in additional countries |
| Our core franchise diabetes consumables revenues increased 10% over Q1 2023 |
| Subject to this validation, we expect to launch this new reagent column system in early 2024 and estimate that this system should deliver recurring annualized incremental cost of goods cashflow savings of over $1 million, while again facilitating us more importantly to competitively targeting growth in segments of the A1c testing market that are lower price but much higher volume than our traditional focus segments |
| That's cash flow positive and it should be on a recurring basis |
| These changes are already delivering a working capital benefit in terms of lower inventory costs and expected EBITDA impact to begin in late 2023 or early 2024 as inventory is converted into sold product |
| And so at the level it went at, I think we felt confident we had better opportunities |
| In addition, diabetes revenue grew by over 10% collectively over the quarters in our direct distribution markets, namely the U.S |
| Based upon current run rate of production, this is estimated to deliver over $1.5 million recurring annualized cash flow savings once we have fully transitioned to the revised manufacturing process and should allow our Premier 9210 A1c testing system to be more competitive in lower price/high volume segments of the market |
| These cost competitive actions are aimed at significantly expanding our total addressable market in the high growth diabetes space |
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| However, in early 2023 that health care provider informed the company that it was moving to a different service provider and this resulted in lost revenues for the laboratory since the beginning of quarter two 2023 |
| In particular, the loss of the transplant testing services at our Buffalo lab has had a negative gross margin impact |
| It was a difficult business to scale |
| Here we are seeing the sales price and cost saving initiatives that we have implemented in the last year have been offset by lower revenue over a significantly fixed and semi-fixed cost base and by an unfavorable sales and exchanges |
| As a result, Immco’s value in use has fallen below the carrying amount of its relevant assets |
| has not materialized |
| This has been an ongoing effort, but in Q2 and Q3 2023 management accelerated headcount reductions as a result of process simplification initiatives that have been ongoing for the past number of quarters, the implementation of new software tools in quality/regulatory compliance as well as production planning, and to reflect the lower than expected revenues, particularly in light of the delays around the Kenyan HIV roll-out |
| This was 3% lower than in Q1 2023 |
| Thirdly, within SG&A there was an FX loss of $26,000 for Q2 2023 compared to an FX gain of $0.6 million in Q2 2022, resulting in an unfavorable variance of approximately $0.6 million |
| As I mentioned above, financial assets have decreased by $1.5 million as a result of our impairment of the investments in imaware |
| Given the uncertainty over the future of imaware’s performance and thus the value of this investment, management have decided to impair the entire $1.5 million of committed investments |
| The aforementioned items have resulted in an operating loss for Q2 2023 of $14.9 million compared to an operating loss of $1.9 million reported in Q2 2022 |
| We had seen some declines in this, so it's not hugely material |
| Included within the Immco impairment is a full impairment of the financial assets associated with the company's $1.5 million investment in imaware |
| Now turning to the operational transformation issues as we outlined in today's press release and as discussed by Aris |
| The impairment test performed as of June 30, 2023, identified an impairment loss in two cash generation units, namely Immco Diagnostic and Trinity Biotech Do Brazil with the majority of the impairment charge relating to Immco |
| These risks include, but are not limited to those set forth in the risk factor statements in the company’s annual report on Form 20-F filed with the Securities and Exchange Commission |
| And that's actually what I was going to ask next, the regulatory hurdles |
| We, along with the Kenyan government are addressing legal challenges to the HIV testing algorithm and related process changes introduced |
| Similarly, Trinity Biotech's Brazil value in use as end of June is below the value of its relevant assets |
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