Animalcare Group plc (ANCR) Earnings Call Transcript

Good morning, and welcome to the Animalcare Group plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Jenny Winter.

Good morning, and welcome to -- this is the second of a series of these presentations we're doing. So delighted to share with you our interim results up to the end of June 2024. There's -- myself, the CEO and Chris Brewster, and we'll try and handle any questions. We'll walk through the presentation. And hopefully, that answers some of the questions you may have as we go through. But as Alessandro says, do feel free to add questions on to the Q&A session. So just for those of you who aren't that familiar with Animalcare, we've just popped in a slide to make sure that we share with you a little bit about ourselves. So we are listed on AIM. We're an international veterinary pharmaceutical sales and marketing organization. And what we focus on is bringing new and innovative products to market through both our own development pipeline, partnerships with third parties, but also via acquisitions, and we'll talk a little bit more about that. We actually operate in 7 countries. And when we talk about operating in 7 countries, that means we have our own sales and marketing operations in those countries. So we actually have a footprint we have -- and we sell our products to our own teams. And then we have an export business where we take our products and export them around the world to about 40 countries. Some of those are in Europe where we don't have a footprint and the majority of those are around the rest of the world. Just in summary, we're a profitable cash-generative business, got healthy margins. We've got strong cash resources. And in the first 6 months of the year, we moved to a position where we've got the financial means. We've always had the ambition to invest in organic and M&A growth. So we believe that we're in a really good place to maximize the footprint that we have, maximize the structure that we have and scale. So this is our strategic -- this is how we express our strategic priorities. So 3 big areas. Those of you who joined us last time will know these. They haven't changed. So our organic growth, we've got a great portfolio of products that we sell through our sales and marketing organization. Where inorganic growth, this is looking for external opportunities in business development, licensing, M&A. We're going to talk a little bit more about that. And then new product development. We have a small new product development team. We work a lot with contract research organizations. And so we are developing our own pipeline. Strong balance sheet. We've got a great team of people, about 220 people. And we've got a lot of people who are customer focused. So about 60 people -- sorry, 60% are customer focused. That means they're talking to our customers who are predominantly the vets and so we have a lot of vets ourselves and veterinary nurses. So it's a really capable team. And we focus on operational excellence. We are relatively small, but we want to make sure that we have the right capabilities and also the right processes to exploit all the opportunities that we find in front of us. If we just look at the highlights for the first half. We're delighted with our delivery in terms of our organic growth. We had strong growth from Plaqtiv and Daxocox. You'll hear a lot about these 2 products. They really are our kind of flagship products. They're the ones that are going to move us forward in the future. Equine, we took a product back that was on distribution in the U.K., and that's actually driving the Danilon business -- driving the U.K. business, the growth of Danilon. It's an Equine pain product. And our production animal business, which is predominantly in our Southern European countries, so Spain, Portugal and Italy, grew at 14.3% in the first half of the year, which is great. And we're looking to further develop all 3 of those areas, particularly Equine and production animals for the future. So we've got a balanced kind of portfolio. We're very active in the inorganic area. And the 2 things that happened that were really important in the first half was the disposal of Identicare, which was a microchipping business in the U.K., and that was a very successful disposal. And we were delighted we met our target in terms of cash value, but also timing. We were ahead of our timing, in fact. And STEM was a business that we had a minority share in Canada. And we had a very strong license as part of that STEM minority stake. And we sold our minority stake actually to Dechra, but we retained all of the aspects of the license that we already had. New product development, we're continuing to move through. We've got some very exciting antibodies. The animal health market is moving towards these sorts of biologic products, the VHH antibodies, continuing with some work on those, expanding the indications and territories for our key products, Daxocox and Plaqtiv, and we're preparing a couple of new launches for 2025. Balance sheet transformed by those disposable -- disposal, sorry. We've just tweaked resources a bit because now we've got that financial power. We want to make sure that we're maximizing our opportunities in mergers and acquisitions and business development. And in June, we changed our Chair. So Ed Torr is now our Non-Executive Chair, which is good from our perspective because Ed's background was at Dechra -- and at Dechra, he led a lot of the business development and M&A activities. And what we found working closely with Ed is there's very few people in animal health that he doesn't know. Continuing to build and enhance all those commercial capabilities as well. Okay. Just a very brief reminder, the animal health market continues to be a good market to operate in. It's a competitive sector, but it's got attractive long-term fundamentals. So we see -- it's really difficult to get consistent and good data on the growth of this market. There's lots of things that sit in the animal health market overall. But we see an average of about 5% sales growth reported by the top 10 animal health companies in the first half. Companion Animal sector remains the main driver of growth. The other 2 are very positive, but Companion Animal is driving a lot of that growth with novel products. Pet ownership continues to be high. People spend on pets continues to be positive. We're seeing changing customer base with different demands, which means that we need to be agile to respond. We know particularly in Companion Animals that novel and innovative products are driving the growth, and they do tend to command higher margins. The veterinary corporates, those of you who may have familiarity with CVS, others, including IBC or particularly from a U.K. perspective, you may have familiarity with the commission, the mergers and acquisitions -- CMA review, sorry, the words will get muddled, where they're actually looking at the corporate veterinary sector. And we've had quite a lot of questions as we've talked to investors about this. We see it as neutral. It doesn't necessarily impact us directly. But we have seen on a different topic, we've seen an increased appetite for mergers and acquisitions of all types. So that's people who are looking to sell, people who are looking to buy. So it's quite energized. It's quite a dynamic environment at the moment, which is great. Over to Chris.

Thanks, Jenny. Good morning, everyone. Just to kind of set the scene for the figures on this slide. So you'll have seen in the RNS that all of these figures relate to our pharma business. So anything that related to Identicare is now classified as discontinued. For those of you have been on to this deck without the kind of overview slides on our website, at the back, what we've done to help guide in terms of what the full year will look like is we've given an FY '23 P&L on the same basis at the half year. So everyone can kind of see what last year looked like without Identicare. So just some headlines. So from an organic growth perspective, we grew at 5% at actual exchange rate. As Jenny noted, if you look at the top 10 animal health companies, that's at least in line with those peers, those large peers. And actually, our CER growth was higher at 7%, and we'll come on to that. As historically, we've continued to focus and see good progression on gross margins. That's largely through sales mix. Cash conversion has improved at the first half. We set ourselves a target this year of 85% to 90% for the full year. So we can see that we're well on track to deliver that. Jenny has noted about the transform or change in the balance sheet at the first half of the year, we had about GBP 33 million of cash in the bank, and we'll come on to how we're planning on allocating that. And just linked to that funding capacity, you'll have seen that we refinanced our bank facilities in the run-up to the half year. And there now those facilities are now out to 31st of March 2029. So the cash and those undrawn facilities are really the firepower that we're talking about in terms of M&A execution. And then finally, we talked about continuing positive momentum in trading post the half year-end. I'll come on to that in particular when we talk about Companion Animals. But in terms of kind of expectations in the market, we're expecting to deliver those for the full year. And while I'll cover revenue down to EBITDA in more detail. So the only thing I'll touch on here is EPS, just to kind of confirm that. So what we have seen is that notwithstanding our profits are slightly up on a before tax level, the EPS is down, and that's really driven by the tax and the effective tax rate, which was 27%, which was a bit higher than we expected. Two reasons for that is the increase in the U.K. tax rate. And that's a twofold increase, obviously, the absolute increase, but also Jenny noted, our U.K. business is doing very well. So the mix of profits in the U.K. is a bit higher. And then we've got lower innovation, so R&D relief there. We're expecting that effective tax rate to be there at the full year, and that will be in line with what we saw last year. So just a high level. So as I said, revenue is up 5% to around GBP 37 million. We -- when we've been talking, it's the first time for a while that we've seen, I'd say, some quite significant variances between actual and constant currency rates. And this is really around the continuing strength of GBP-euro. Those who follow it, it's still hanging around the 120 mark. So my -- our expectation is that, that variance of 2% ARC will probably be around. It may be a little bit higher by the end of the year. And just to give you a feel of kind of what FX does to our results because about over 80% of our sales are from -- denominated in euros. For every cent movement in the GBP-euro, that impacts revenue by around GBP 1 million. So GBP strength will negatively impact revenues. Euro strength will be the converse and a little -- relatively small impact on EBITDA of about GBP 0.2 million. So hopefully, that gives you a kind of feel for where we are on that. In terms of overall sales growth, we'll come on to it but it's broadly 50-50 between price and volume at constant currency and the volume incorporates around GBP 1 million of revenues from new and recently launched products, and that's predominantly in Companion Animals. On margin, as I said, this is really driven by sales mix. We'll come on to some of our biggest products, so Plaqtiv and Daxocox later. Jenny will cover those. They're high-margin brands. They're growing quickly. So obviously, they've had an additive effect to our margins. To briefly touch on inflation, we continue to see COGS inflation. Certain of that is what that we've actually agreed to improve surety of supply. We'll come on to some comments later on about some supply disruption. And as historically, where possible, we're mitigating this inflation through price increases. On underlying EBITDA, you can see that's a nudge above last year, which really reflects the continuing investment in the business. So overheads are up around 8%. So that's about GBP 1 million. Around 50% of that was people. So there's been some -- we have some mandatory inflation across certain countries in Europe, notably Spain this year. There's been a catch-up post COVID. We expect that to normalize last year. And also investments -- continued investments in people, in particular in commercial excellence and supply chain. And then marketing, we've invested a lot more this half, the first half versus last half. And again, we'll see that -- we can see that in the -- in particular, in the Daxocox and Plaqtiv revenue trajectories. And those investment areas, commercial excellence, in particular, they'll continue to be a main focus for the remainder of this year and into next. So on Companion Animals, I think if we look at the overall how we grew in the first half, I think the overall level of growth was as we expected. However, the mix was not as we expected. And really, that kind of -- that's really centered around here in Companion Animals because what we can see is it's broadly flat. So if we talk about the good news, so we've seen that Daxocox and Plaqtiv have grown really well, both strong double digit. Jenny is going to come on to some more details on that a bit later. Where we kind of position that success is really about some internal changes we've seen -- we've done in our business rather than external factors. So the market for where these are operating -- Daxocox market is broadly flat. The dental market is growing really well, probably a little bit higher than that 5% that we talked about. But notably Daxocox, it's really around these commercial excellence changes that we've made into the business. Those positive contributors to the revenue, we also touched on there's around GBP 1 million of new product revenue as well in there. They've been offset by what we've kind of termed as supply disruption, bringing everything together. And openly, that's centered around one particular supplier where we've had a few issues that have either affected sales in our own operations. So we've had some out of stock sales in our international partner operations. So this is the export business where we might send 1 batch per year, so delays in sending those out half year 1 versus half year 2 can have an impact. And then we've had some new product delays as a result of some issues. The good news is that we said on the bottom of that bullet is that these headwinds were expected to ease and have. So Companion Animals, we're guiding for the full year to be at around mid-single-digit revenue growth rather than flat versus half year, and that's where we are broadly today. So the good news is that this has returned to growth as expected. On Production Animals, this has grown really well in the first half. Jenny noted that most of our sales are coming from the Southern European operations and some international partners as well. We sell to New Zealand in particular. So the 14% growth was driven by quite a few of our kind of key brands. But also notably, we've seen a little bit of phasing and also some benefits from competitor out of stocks. So the converse of what I was talking about earlier with Companion Animals, whereas that was flat, and we're expecting that to have some mid-single-digit growth at the full year. I'm expecting this to come down to broadly mid-single-digit growth by the full year because of those phasings or that competitor benefits starting to normalize. But on the whole, I think we feel it's a really good performance from Production Animals. And I think you can see on that bottom bullet on the right-hand side, we are conducting a review at the moment because we think we've got some real expertise to build on this going forward. On Equine, so really good growth, 20%. Notably, it's a small, but the theme -- large theme here is Danilon, which Jenny mentioned. So that's one of our largest brands. I think it's in the top 5. 90% of the sales of Danilon are in the U.K. So it's a really big market. And we bought that back in-house from one of our partners a couple of years ago, and we're seeing really good growth in that product. There are some other products that are growing as well into the Equine market. So -- and again, just to kind of finish off the first half, second half dynamics, the expectation is that we'll probably see revenue growth in Equine similar to what we've seen in the half year. So everything is relatively normalized from that perspective. Jenny, I think this is your turn.

So in terms of our overall portfolio, one of the things that is helping to drive that growth of our organic business is the quality of that portfolio. So we've got some really important key brands, and they're operating in growing markets. Chris referred to a few of the markets where we're seeing good growth. Dental is a fine example. And we've got a lot of differentiation or strong and strong brands. So whilst they're mature products, they're pretty strong, and we've seen in our top 5 brands, for example, continued positive growth. The percentage of those products that we now either own outright or have very long-term licenses, and we use this as a measure of sustainability really. It's now about 65%. I think in the last 5 years, it's moved from about 50% up to 65%. And that's great. And that gives us that confidence that, that organic portfolio will continue to deliver. And the other important thing is that we're moving the percentage of those products in the portfolio that is generic, i.e., it's something that the patent has expired and others have similar products. We're moving that percentage towards a lower percentage of generic and a higher percentage of novel. And things like that, got some Plaqtiv, are obviously having a big impact on that. The other good thing is we know that we're always going to see some products come out of our portfolio. In this environment, that's usually because technology advantages, efficacy advantages, safety advantages, sometimes price, other people choose to compete on price. So what's really important is that we continue to launch new products into the market. And one of the benchmarks is that you should have at least 10% of your recent launches, that's in the last 3 years, accounting for -- 10% of your revenue accounted for by those products. And we're about at the 10%. Over the next few years, we anticipate that percentage will continue to increase. So we're looking to continue to refresh the portfolio, but actually, the basic portfolio is also good. On the right-hand side, -- this is really to say that if you think about the age of the pet and the lifetime value, we're seeing increased life expectancy in pets. We're seeing increased pet population. And so there's actually more opportunities for the use of drugs. And as the pet ages and they have arthritis, thyroid disease, heart disease, et cetera, we are very active in that area. We're much less active in the vaccines in the sort of large-scale vaccines, but we really are active in the long-term chronic indications that we see are increasing. As Chris mentioned earlier, I'll just make a few extra comments on Daxocox and Plaqtiv. Daxocox is our product. We have the patent on it. It's growing very healthily for all those good reasons. It treats osteoarthritis, you give it once a week instead of most competitors are given daily. So this is a real advantage. It's a really simple dosing, convenience, et cetera. We're also continuing to develop Daxocox and looking at some new indications. So we're ready to submit on some more acute indications early '25. And this year, we got approval for some different dose strengths. And that's really helpful because it makes sure that for whatever size of dog you have, there's an easy tablet strength that you can use. So it makes it a very simple offering. The other thing that we're doing, we partner with [ Virbac ] in countries where we don't have a big representation. And we're starting to expand the regulatory approvals for Daxocox around the world, and that's a very active process at the moment. With Plaqtiv, we again saw great growth. Dental disease is growing. We're continuing to add to the range. What we know from feedback from our customers is what they like about Plaqtiv is they can give it in a number of different ways. And we're continuing to increase the ways that they can give Plaqtiv, which treats the plaque in its name, but it works by breaking down the biofilm, which is a very successful way of treating gum disease and dental disease. We're also starting to now sign global distribution agreements across the rest of the world. This is a slightly quicker process for Plaqtiv because it doesn't need to go through a full regulatory process, but we're starting to expand in other areas. I mentioned earlier that the sale of our minority stake in STEM, which was the company that originated these. And part of that, we now have the opportunity to sell Plaqtiv in all sales channels in Europe, which we didn't have before. We only had the veterinary channel. So now we're starting to maximize that exciting opportunity, which is a really good thing for pet owners and vets.

Okay. Just on the slide, I think I covered the -- most of the things on the highlights. So we covered cash conversion, talked about the increase versus first half of this -- the target of 85% to 90% for the full year. That target will be really driven by, in particular, whether we make some strategic stock build decisions. We talked about some supply disruption and sometimes carrying a little bit of safety stocks -- we view that as a good investment to protect sales into next year. So we'll see where we get to, but the 85% to 90% target in the moment remains. If you look at the bottom chart, so what you can see is that there's GBP 28 million there from M&A, predominantly most of that was Identicare, about GBP 24 million of that after fees. And the balance was from the disposal of STEM. I think just to add to what Jenny said, so the disposal was of our minority equity stake in STEM Animal Health as an entity, which essentially had a retail operation in Canada and America. What you have seen on Jenny's before is that the value that is really driven from the STEM relationship comes through our license, and that's our license to sell Plaqtiv. And so actually what we did in that deal is not only did we kind of get a really good return on our initial equity investment, it was probably 2 to 2x. We've also managed to enhance the license. So we think that was a great deal for Animalcare. Just I think we'll come on to later on, we put free cash flow on there. I think that's a really important measure. Obviously, operating cash flows is a really key measure for us in terms of our wherewithal to fund our business. But also you can see there some really strong free cash flows in the first half.

So the question lots of people are asking us is how are we going to spend the money. We've got the top 2 blue boxes are really our areas of focus. And what we're trying to do here is to describe what we're trying to do. So geographic footprint, focusing on Europe, U.S. and selected rest of world markets. And here, we're looking for companies or brands, but mainly companies that will drive an immediate additional revenue and EBITDA. So that's one of the priorities. The second priority is to acquire license or licensed brands and companies. And this is really looking to find brands or companies that we could bring into the portfolio of companies that may be bolt-ons to an existing country. So Germany or Italy is -- they're quite small or brands that we can launch across all our markets. So any products that strengthen the existing portfolio. And if I just talk about those 2 for a minute, on the right-hand side, we're just trying to give a scale for what we're trying to do. So we've got one, the NBO nonbinding offer. We've got one offer out there. We're in due diligence, and that extends our geography. It also brings some other benefits, but the main thing is it extends the geographic reach. And we've got 3 that are in relatively early discussion, things that we'd like to have a bit of a better look at. In terms of companies and brands, we've got 6 in-depth discussion. And this is something that we know how much it's worth. We know how much we can make from it. We're going through some fine details about what either these products or companies look like. And then one we've got an early stage. If you look at the 6, I think 4 of those are brands and 2 of them are companies. So give you a bit of a feel for how that breaks down. If you look at the value of these things, they're spread from tens of millions to GBP 1 million. So there's a whole variety in terms of value as well as in terms of type of deal we're looking at. So very active on those. Just in the purple -- we are interested, but keeping a look -- keeping a watching eye on in-licensing things that are relatively early stage that need some development spend and some probably development activities and regulatory files. These products, if we're looking at something like that, we're looking for game-changing growth. So something that's up in the GBP 20 million, GBP 30 million, not in the GBP 1 million to GBP 2 million. But we are got one pretty in-depth conversation going on there. We've got some early discussion. We're not focusing too much on this because we have in our new product development pipeline, we've got the VHH products that we brought in a couple of years ago. So we're trying to manage not getting into too high-risk territory. But we keep an eye on what's out there, whether there's some good assets that would really -- and it really has to be game changing. And then within our own new product development team, we are looking -- we're in launch planning of 6 areas. So there's 2 new products that are coming through that we'll launch next year, 2 line extensions of Daxocox and 2 other products that we're in launch planning. So this is to keep that portfolio fresh. And then we've got another 4 that we internally are talking early about the new life cycle management, then new formulations, et cetera. So a busy agenda looking at making sure that, that pipeline for the future comes through. Okay. So when we talk about that, this is just a little bit more detail on what we're trying to do. We're focused on new products that meet a need in an established market with a high probability of success, extending existing products to the comments I made about Daxocox and Plaqtiv, adding indications or formulations that expand usage and the novel products that are game changing are those ones down in that purple line. So they'll take a bit more time to develop. They're a bit higher risk because they're novel and new and different to what's out there at the moment. So what we're working hard to do is to get a balance. We don't want to have too much of our investment in any one of these 3 areas. This is the area that I mentioned. This is novel. It's different. It would be game-changing if we can do it. We've got some preclinical studies and some small proof-of-concept clinical studies ongoing. We're looking at Equine indications. These are particularly suitable for Equine indications. And we're looking at other indications, other species as we move forward. So this is an exciting development program, but it's really early stage, and we're taking it very carefully and managing the risk and opportunity. If these come through, yes, of course, that will be game changing and fantastic. The keyword is if they come through, and we're managing the investment very carefully to make sure that we know where we're going and that we have clear milestones in place, but exciting.

So this slide, I don't think there's been any fundamental changes to what we presented in April for those that we spoke to at the full year, but I'll run down the left-hand side. So on organic growth, I think we've talked about the continuing the focus is particularly around people and operational excellence. And people, it's again, the usual things of we're really looking at increasing expertise and capability as well as the number of resources over time. And operational excellence is really centered around that commercial and supply chain that we've talked about earlier. There's some really nice projects that we're looking at in terms of investment in that area. The OTC dental franchise that we've now got the rights for -- from the license that we talked about earlier with STEM, that's one area of fairly substantial investment that we're looking at now. On inorganic growth, so really, what we're saying is that -- so the debt capacity that we've got with the cash on the balance sheet, really, we're reserving for what we would term as accretive M&A. So this is really around businesses that have already got revenues and are profitable and cash generating and obviously EPS accretive. We are maintaining what we call a disciplined approach to balance sheet management. We've got a covenant of 3.5x EBITDA. We feel leveraging to 2x kind of gives us some room for contingencies if events happen, but also leave some firepower for some smaller opportunities. If we look at -- if we talk a bit about the allocation, I've got on the bottom there. So if we think about the cash on our balance sheet, we leverage our current EBITDA, which was pro forma about GBP 11.6 million last year with the Pharma business, we can also leverage 2x of anything we're buying. We've got at least GBP 50 million of firepower to fund inorganic and in-licensing late-stage assets, which is really exciting. I think the way we're looking at it is that the ideal outcome for us that we do something transformational. So that's in the kind of tens of millions of size deal that Jenny noted earlier. But also, we want to make sure that we reserve some of the debt capacity in particular, for some smaller bolt-ons. So the ideal outcome is transformation and probably 3 or 4 smaller bolt-ons, some of them might be in-licensing late-stage assets. And to give you a feel of kind of where we're trying to get to, we've talked to investors for quite a while about getting to the target of GBP 100 million. I kind of feel at that level of revenues with the continuing improvements to gross margins, 60% is kind of a good benchmark in the animal health industry. That's where we kind of -- we feel that we'd start to see real drive in operating leverage. So a good benchmark again on EBITDA is probably 20% to 25%. And then importantly, the scale of that business means that we come on to the next piece is that we're going to be generating some pretty significant operating cash flows, and that's what we use from a capital allocation perspective to fund the pipeline. Openly, if we look back over the 5 years, we've under-invested versus where we want to be, so probably 2% to 3% of revenues. We're targeting at least 5% of revenues going forward to build this balanced pipeline. And a range there is probably 5% to 10% benchmark. Some companies like Dechra, if you follow them, they are the private equity, is investing hundreds of millions in innovation. So we haven't yet got that firepower, but we really want to kind of build that pipeline because we think that's where some game-changing organic growth can come from. And then finally, on dividends, we continue to pay a dividend. We declared a dividend of 2p at the interim. You can see on the right-hand side that over the last 5 years, we've paid about GBP 12 million to shareholders. That includes the dividend that we paid in July. I think just to demonstrate that free cash flow again, over that time, we've returned GBP 12 million to shareholders, but we've also reduced our debt by GBP 20 million. So I think for me, the business is a really good cash engine, which obviously helps for some of the strategic things that we're doing -- wanting to do going forward.

So just to summarize what Chris and I have talked through and more than happy to answer questions. We're delivering revenue from our continuing operations across all the 3 segments. We're seeing nice growth in Equine and Production Animals. And as Chris mentioned, we're seeing improved growth in the second half. So the growth of Daxocox and Plaqtiv, really happy with that. That's a good result given our investment in the sales and marketing focus there. Underlying EBITDA, reflecting improved gross margins. Identicare and STEM gives us the firepower for the next stage in our growth story. The VHH antibody project is developing and ongoing. So really from our perspective, we've had a good first half, really positive, pleased with the results and looking forward to the second half, and we've got confidence that, that will be a positive outcome as well. So at that point, that concludes the formal presentation part of the session. I can see some...

Perfect. If I could just jump in, I'd just like to thank you for the presentation. [Operator Instructions] 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 already throughout today's presentation, and I'd just like to thank investors for their participation in submitting those. Jenny, at this point, if I could hand over to you to chair the Q&A, that would be great, and then I'll pick up from you at the end.

That's great. Thanks, Alessandro. I can see 2 questions at the moment. I think we may have touched on both of them, but let's review. So the first question, what are the top priorities for your R&D investment? So I think we referred to what we call our balanced pipeline. So our top priorities are in 3 main areas, one of which is finding products and opportunities that meet a currently unmet need that may be in terms of formulation, it may be in terms of new uses for an older product, that kind of area. The second one is with our own products, things like Daxocox and Plaqtiv, really building the life cycle management. So adding to those products with new indications and new ways of using them, new -- maybe new species. So that's the second priority is really life cycle management on our existing portfolio. And the third one is the one I referred to where the VHH antibodies currently fit is really looking for novel game-changing projects. So these are things that really will meet an unmet need and probably change the expectation for treatment in that particular therapy area. So those are the 3 things that we're trying to do. Hopefully, that's answered the question. The second question, how do you plan to increase sales outside the U.K. and Europe? So currently, we do this with partners, distribution partners. And so we have pretty long-standing distribution partners in most of the key animal health markets. And so that's the way that we're currently selling outside of Europe. And what we're planning to do is to gradually, over time, build our geographic footprint, either by working with another company more closely in a country that we're not currently represented or through acquiring businesses in new geographies. So all of those things will continue to increase our sales. And -- we are really looking to also increase within Europe. So currently, we're not very -- we're not represented in France with our own footprint, so we'd like to do that. So all of those things will build that overall global picture. One of the things to note is that that's really important for us because things like Daxocox, Plaqtiv is everywhere but North America, but Daxocox is global. And so where we're developing products where we have the rights globally, it's really important for us to start building a bigger footprint. And so it's getting the balance between working with great distribution partners plus building our own footprint. So that's the plan there.

There are some -- there's a few other questions, Jenny. So I'll read down. So good question. Do you plan to distribute any of the free cash to shareholders? I think that's probably referring to the cash on our balance sheet. The short answer is no, not yet. We've had some discussions at the Board around capital buybacks, for example, and obviously, the special dividends. I think where we're all at is we see some really value-accretive opportunities in deployment of that capital. If I look at a capital buyback and what we could do because obviously, it's relative to volumes, you're talking kind of very low single-digit millions and the EPS accretion is less than 1%. So we feel really the best use of our cash and our debt. in terms of growing value for shareholders is through the -- all the things that we've talked about, particularly on that Slide 14.

I think there's another question, which is a geographic one. Are you too stretched geographically? We've been very cautious about expanding too quickly geographically. And we feel that the scale and the stability that we have in our existing portfolio of countries is good and it's stable. And so we think now is the time to start looking at expanding geographically. And we'll do it carefully, and we'll do it with partners if appropriate, and we'll do it with small acquisitions. But certainly, the infrastructure and the platform that we have is built specifically to enable expansion around good markets. So I think we're in a good place to do that. We will be careful, but we're in a good place. Things like our financial platform, our regulatory platform, all of those things were put in place with a view to being able to expand them.

Jenny, was a question before on CMA investigation. Do you want to -- what will it have -- do you want to pick that one up?

Yes. So the CMA, which is the U.K. investigation into the work of the corporates and the vet practices, we think it's pretty neutral for us. We're continuing to work with the corporates in the way that we've always worked with the corporates. We've seen pricing pressures from buying groups and corporates, and we continue to see those. But we're not seeing any really impact either way for us. So we remain pretty neutral, but watching carefully.

Okay. And next question, when do you expect M&A investments to actually happen? Are we looking at '25 or '26? So I could tell you when we hope it will happen, which is within the next kind of year, 18 months, so '25. What you'll know is that there's always kind of risk on these. We've had some things that have come right to the wire and then we've lost out to private equity, for example, because they decided that they didn't need to do any due diligence. And obviously, that's not where we are in terms of making sure we manage risk. So within the next 12 to 18 months, we're really hoping that some of those things on Slide 14 we will execute. Next one was...

Net cash position.

Yes, insights into the types of M&A and partnering opportunities. We probably covered that one.

Yes. I think we've covered that. Maybe the author can just pop another question if we haven't covered that. I think the next one is important, which is the share price. I'm happy to have a go at that. And our share price is always a mystery to me. So why when we've got such a strong record of performance. I think there's some pieces about liquidity. What we do notice is that our share price responds more to other people's news than it does to our own news, but that may just be my opinion on it. Chris, do you want to say anything else about the share price?