Trinity Biotech PLC (TRIB) 2008 Q4 法說會逐字稿

Good afternoon. My name is Brandy, and I will be your conference operator today. At this time I would like to welcome everyone to the Trinity Biotech Q4 financial results conference call. (Operator Instructions). Mr. Tansley, you may begin your conference.

Hello, this is Ronan O'Caoimh from Dublin. I would like to welcome you to the Trinity Biotech year-end and quarter four conference call. I'm joined today by Kevin Tansley, our CFO, and by Rory Nealon, our COO.

Firstly, Kevin is going to bring you through the results for the quarter and the year. And then I'm going to give you an update on sales and operations, at which time we will open up the call to questions to the three of us.

So without further ado, I will pass to Kevin to do the Safe Harbor provision and the results.

I'm obliged to point out that the provisions of the Safe Harbor code applies to this call. Specifically this call contains certain forward-looking statements, including statements concerning plans and objectives of management, expectations about future financial performance, and strength in the economic and market conditions, and market positioning and opportunity.

These statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including those identified in our most recent report on SEC Form 20-F and other periodic reports and registration statements filed with the SEC.

You should not place undue reliance on any forward-looking statements which are current only as of today. You should not expect these forward-looking statements will be obtained or supplemented as a result of change in currency or otherwise. And Trinity Biotech declaims disclaims any obligation to do so.

I will now move on to take you through our financial performance for the last quarter, which specifically includes our view of the income statement for quarter four 2008 and the key movements in the balance sheet from December 2007 to December 2008.

Starting with our revenue performance. Looking at the revenues for the quarter you will note that this quarter's revenues were $34 million. This represents a 4.8% decrease over quarter four 2007 revenues compared with the quarter three 2008 overall revenues fell from $35.6 million to $34 million. However, during quarter four in 2008 there were significant exchange rate movements which need to be taken into account.

As you can see from the press release, on a constant currency basis these revenues in fact remained flat quarter on quarter. Within this there was a decrease of 4.7% in Clinical Laboratory revenues to $27.6 million. This is reflective of seasonal factors, principally the lower level of Lyme related product sales, which tend to peak in the middle two quarters of the year and then drop off in quarter four. Meanwhile, our Point of Care have increased by over 25% to $6.4 million during the same period, which is a very strong result.

Rather then get into the details and the movement of our product category, I will move on to our gross margin performance, and Ronan will shortly take you through a more detailed analysis of this quarter's revenues.

Our gross margin for the quarter was approximately 44%. This compared to 47% in quarter four 2007. The lower gross margin reflects the impact of lower sales of Uni-Gold HIV products. These products tend to generate higher margins.

I would like to take this opportunity to give you another perspective on our gross margin. Many companies in our industry record instrument servicing costs as part of SG&A expenses, rather then in cost of sales, as we do. This has resulted in the impression that our gross margins are lower than other participants in the market.

As a result, and in order to provide greater comparative information, you will see from the press release that if we were to follow this practice it would result in a gross margin of 48% this quarter.

Moving on to our indirect expenses, our R&D expense at $1.9 million, but slightly off on last quarter, remains at approximately 5% of revenues.

Again, our SG&A expenses have come in lower than the comparable period. This quarter SG&A expenses were $11.2 million versus almost $13.3 million in quarter four last year. Indeed our SG&A costs for the last four quarters have been $12 million in quarter one, $11.8 million in quarter two, again in quarter three $11.8 million, and $11.2 million this quarter, giving an average per quarter for 2008 of $11.7 million. This compares to an average of $12.4 million per quarter in 2007, so a substantial reduction.

As I have mentioned in previous calls, this is where you are seeing some of benefits of the group restructuring that we announced in December 2007. Also, this quarter for the first time we have actually benefited from favorable impact of exchange rate movements on costs.

You will no doubt have seen from the press release that we have recognized once-off charges totaling $87.9 million this quarter. Of this the vast majority, $85.8 million, relates to an impairment charge arising out of our annual impairment review required under international financial reporting standards.

In performing these reviews we are required to compare the carrying value of our net assets with the market capitalization of the Company. Due to the low market capitalization of the Company at the end of 2008, this resulted in a significant difference between these two values, and consequently we are required to take an impairment adjustment to bridge the gap.

I would like to point out that the SEC has recently given guidance on this matter, and hence we are seeing a lot of companies taking adjustments of this nature, given the current state of equity markets.

Before moving away from this item, I would like to reiterate this is essentially an accounting adjustment, which has absolutely no cash impact on the Company. Actually on a positive note, this will result in a reduction in depreciation and amortization charges going forward, as assets now impaired will no longer be required to be written off. The gain from this is expected to be of the order of $1.5 million in 2009.

The remaining once-off items include a $1.5 million charge in relation to the departure of our previous CEO, and also a $600,000 redundancy charge in relation to the headcount reductions which we announced last December.

Moving on to our net financial costs, these had continued to decline due to lower debt balances as we continue to repay our bank debt, and also to the impact of lower interest rates.

Regarding the tax charge, this quarter quarter's effective tax rate includes the impact of the once-off items I mentioned. Excluding these items, the tax charge for the quarter would have been $282,000, which represents an effective tax rate of 16%. This is similar to levels experienced in previous quarters.

Our operating profits for the quarter amounted to $2.2 million, which compares to under $2.3 million for quarter four last year. Meanwhile for the same period, profits before taxes increased from $1.7 million -- $1.5 million to $1.7 million, an increase of 16%. Obviously, those items are stated without the benefit -- or without the impact rather of the once-off charges that I discussed.

Similarly in relation to EBITDA, our EBITDA for the quarter was $4.4 million, which brings or EBITDA and share option expense for the year to $17.3 million.

In terms of EPS, the earnings for the quarter, again excluding the once-off charges, were approximately $0.07, bringing total earnings for the year to $0.27.

Now let's talk about our balance sheet. And again the comparison will be between the end of 2008 and to the end of 2007. Starting with our property plants and equipment, in net terms these assets have decreased by $14.6 million since the beginning of year. This movement is largely explained by the combination of net asset additions of $3.2 million, of which $1.6 million is made up of instruments placed with customers; depreciation of $4.4 million, which offsets those additions. And the remaining movement then largely is impacted by the $13.1 million of the impairment adjustments taken to this caption.

Our goodwill and intangible balances decreased by $66.4 million since the beginning of year. And again obviously the largest element of this relates to the goodwill and other intangibles written off as part of the impairment adjustment that I spoke about earlier.

During the year there were also additions $8.9 million on development projects and other intangibles. The main projects are TRI-stat and obviously Destiny Max, which was launched towards the end of 2008. These additions are partially offset by an amortization charge for the year of $3.6 million, which has been recognized in the profit and loss account.

Moving on to the inventory next. Inventory has fallen by approximately $2.1 million for the year. This is largely attributable to the running down of former bioMerieaux inventory earlier in the year, and the continued management of our inventory levels thereafter.

The most recent quarter we have seen a decrease in overall inventory levels of approximately $0.3 million, notwithstanding that in our previous call we had stated that the inventory levels would likely increase towards the end of year, as we made preparations for the production of Destiny Max.

Our trade and other receivables balances comprise trade receivables and prepayments. Since the end of 2007 we have seen an increase in the trade and other receivables of approximately $2.7 million. This is primarily due to a slow down in payment levels, which I believe is connected with the general economic environment, for cash flows everywhere have been impacted. Debtor day terms, our trade receivables have increased from 58 days to 63 days at the end of 2008, which we still regard as favorable compared to a number of competitors in our industry.

It is also worth saying that we remain very happy with the quality of our trade receivables book, and the level of bad debt remains low.

Finally on the balance sheet I would like to address our bank debt. Interest-bearing debt at the end of December stood at $36.1 million as compared to $42.1 million at the end of December 2007, a reduction of almost $6 million. This includes bank loan repayments of $5.2 million during the year.

Debt due to be repaid in 2009 consists of a loan repayment of $2.1 million, which has already been paid in January 2009, followed by a further loan repayment of $3.2 million due in July.

Before I finish, I would like to discuss our cash flows. Our cash balances stands -- at the end of December stands at $5.2 million, a decrease of $3.5 million since the beginning of the year. The principal movements which have arisen during the year are as follows. Cash generating from operations for the year to December 2008 was $15.5 million, which after working capital movement amounted to almost $13 million.

We invested $8.9 million on developing new products, and a further $3.9 million on purchasing plants and equipment, including instrument placements of over $1.6 million.

We made the final payments to bioMerieaux for the purchase of their hemostasis business, and that amounted to $2.8 million. We also repaid bank borrowings of $6 million, of which $5.2 million were bank loans and $0.8 million were made on leases taken out by the Company. We also paid net interest of approximately $2.6 million. Offsetting these outflows were approximately $7 million of equity raised in quarter two.

In terms of cash movements this quarter, cash increased by $1.7 million during the quarter. The main features of which were cash generated from operations of $3.1 million, plus working capital movements of $2.1 million, offset by expenditure of $1.1 million on new product development, and a further $1.2 million on plant and equipment, which as I said includes instrument placements at customers. We also repaid leases and bank interest of $0.7 million. I would like to point out that these cash movements were broadly in line with expectations.

Before I hand back to Ronan, I would like to address a couple of other matters. First is in relation to the procedure for calling an extraordinary general meeting of the Company. In order for an EGM to be called by shareholders, the shareholders in question must have at least 10% of the ordinary share capital of the Company. This is a requirement of Irish company law.

In the event that we allowed shareholders who had less than this number of shares, or indeed held shares in a different format, to call a EGM this would result in such a meeting being improperly constituted, with the result that any decision taken by such a meeting will be invalid.

Secondly, in relation to the conversion of ADRs to ordinary shares, this process is managed by our ADR agent, Bank of New York Mellon. The Company has no role in administering this program. And any brief delays which may have occurred in the conversion process were in no way attributable to the Company.

I would like to hand back now to Ronan.

I'm just going to talk about, firstly about the results for the quarter and the year and sales. Our sales for quarter three of last year were $35.6 million, while our sales for quarter four were $34 million, a decrease of $1.5 million.

As Kevin has previously discussed, and on the face of it this would look like a very poor result; however, on a constant currency basis, the sales are actually level, in fact, marginally up. This arises due to the fact that there was significant strengthening in the dollar between quarter three and quarter four, with an average of 1.5 used in quarter three and 1.26 used in quarter four to convert European sales into dollars.

And to still kind of expand on that, moving forward into 2009 we need to realize that we have approximately EUR40 million of sales, which last year at a rate of 1.5 would have been reported as EUR40 million multiplied by 1.5 as $60 million. However, this year that EUR40 million of sales will be converted into dollars at a rate of approximately 1.25, which will result in $50 million in sales, or a loss of $10 million in revenues.

If the dollar stays around the 1.25 rate, this will result in approximately $10 million worth of loss revenues during 2009 for Trinity, or a rate of $2.5 million loss revenue per quarter. While this sounds negative, the overall impact of a change in the currency rate would be positive, because the reduction of $10 million in sales would be counterbalanced by a reduction in approximately $12 million in costs, giving a net benefit to the Company of approximately $2 million. And this arises because of the fact that the company has a large euro cost base in terms of both its Irish and its German factory.

Moving on to a review of 2008 revenue numbers. You'll see that our 2007 revenues were $143.6 million and our 2008 revenues were $140.1 million, showing an overall decrease of 2.4%.

Looking at the components, we had an 18% increase in HIV sales in the USA, with a 40% decrease in HIV sales in Africa, giving an overall of 22% decrease in HIV sales. In addition, we had a 4.8% decrease in coag sales, and an 8% increase in infectious disease, and a 9% increase in Clinical Chemistry sales.

Dealing with these components individually, you'll see that HIV in Africa and coagulation have been the problem areas for us. With HIV in the USA, infectious disease and diabetes performing extremely well for us.

HIV/AIDS in the USA continues to perform well for us. As I said, it got an 18% increase last year, and we expect it to get a bigger increase this year based on the resources we are allocating to it, increased government spend, increased market size, and a significant false positive problem for our competitor product.

Moving on to Africa, our sales have dropped by approximately $6 million in 2008, or by 40%. This clearly was an extremely disappointing result. But is partially explained by the fact that sales in quarter one and quarter two of 2007 were unusually high, with $2 million of sales falling into quarter one 2007, rather than quarter four 2006 as a result of a shipping factor.

However, the fundamentals of the business are sound. We know that our product is regarded as the best quality product available in the market, with an instantly recognizable brand. Along with one competitor product, we -- both companies dominate the market. And with ever-increasing funding from PEPFAR and other programs, the HIV spend in Africa will inevitably continue to increase.

We have positioned three new reps in Africa. And have in the past two months won a significant contract, which for a competitive reasons I am unable to elaborate on. You'll notice, however, that our quarter four HIV numbers are up 25%. And the combination of this and the other factors that I have mentioned, make us extremely confident about the future of our African HIV business.

In addition, I should state that in the past month we have allocated significant resources to the development of our HIV business in China, India, Russia and South America.

Moving on to coagulation. I mentioned earlier that our revenues are down 4.8% during 2008. This situation arises for one reason alone, and that is that our bioMerieaux installed base of MDAs are very old. And that when customers come to retire the instrument that up to now we have not had a replacement instrument to offer the customer. As you know, there have been delays in developing the Destiny Max, which has given rise to this problem.

However, on the 16th of December we received our CE Mark for the Destiny Max. And on the 23rd of December we filed a 510k for the Destiny Max with the FDA, and hope to receive FDA approval sometime probably late in quarter two of this year.

Since then we have placed 12 Destiny Max instruments in the non-US market as we announced last week, and are confident of achieving our target of between 100 and 120 Destiny Max placements during 2009.

The first instrument in each country is always the hardest to sell. And we were particularly glad to have placed three instruments in the extremely important US market in the past number of weeks.

We have been demonstrating the Destiny Max around the United States, prior to its FDA approval, and the response is extremely enthusiastic. This response confirms our confidence in its success in the United States.

The instrument has many unique features which differentiate it from its competitors, including the fact that it is the only analyzer that gives results both mechanically and optically. The software system is extremely flexible and user-friendly. The analyzer is extremely robust, as it has been designed with this in mind. With separate computer systems for both the user interface and throughout the actual hardware on the instrument, thereby we believe, reducing the number of interventions or services required.

Other benefits include our patented cap piercing, which maximizes our risk of bubbles or false detections, which is a significant issue for competitors. Continuous loading while the instrument is working. The ability to use micro volumes when using the mechanical mode. Integrity in checking with blue dye concept, etc., etc.

In summary, our excellent reagents, combined with our excellent midsize Destiny Plus instrument, combined with the new Destiny Max, give us a coagulation offering that will enable us to grow market share significantly.

However, during this year while we launched the new instrument, and await FDA approval, we will be satisfied with maintaining our coag revenue levels at their existing levels, with the intention of growing the business substantially in coming years.

Moving then on to infectious disease. This business increased 8% last year. And we expect it to continue to perform strongly during 2009. Our Lyme Western Blot has dominated -- has a dominant market share in the United States. And our broad range of infectious disease that ELISA tests are selling extremely well throughout the United States in smaller laboratories, where we continue to grow market share. We continue to seek out additionally esoteric reagents to add to our product offering in both the United States and in our other markets.

Lastly, our Clinical Chemistry division achieved 9% growth last year. And we would expect that this division will comfortably exceed this level of growth in 2009.

A major focus for us has been the neonatal variant testing market, where we continue to make gains at the expense of a dominant player. So far we have won four states. And a further five states are evaluating our products at this time, and that is in the United States. In the past month we've experienced significant success in the Asian market with this product range.

Finally, you have noted that yesterday we announced the commencement of Tri-Stat CLIA trials with the FDA. This comes after a long and very difficult re-engineering of the product over the past year. Having performed exhaustive internal and external independent trials in the product prior to the CLIA submission, we're confident of a successful outcome.

We're now concentrating our efforts on securing a partner, both in the United States for the marketing of this product into the doctor's office and point-of-care market, and also in Europe.

Before I hand to the question-and-answer session, I'm was just going to say since last October, five months ago, the Board of Trinity Biotech met and decided a change was needed in the running of the Company. I was asked to return as CEO, and immediately undertook a strategic review, which included the appointment of William Blair. And also undertook a full review of the operations of the Company.

Since then a lot has happened. We got CE Marking for Destiny Max in December, and filed our 510k with the FDA. And since then have sold 12 instruments around the world. We have completely developed the Tri-Stat, which is our HbA1c rapid test. And yesterday, as I just mentioned, announced the commencement of our CLIA trials on the product.

During our review it quickly became clear that our costs and revenues had become nonaligned. In December the Company laid off approximately 10% of its workforce, which resulted in an annual saving of $6 million. These savings did not, we believe, adversely impact either our ability to manufacture or to sell product, with much of the cost savings concentrated in support areas like IT and accounting.

We decided additionally to change the way the US sales and marketing operation was run. Previously we operated two separate salesforces, one for point-of-care and the other for clinical laboratory. In December we integrated the two salesforces, which is resulting in a more cost-efficient and more effective operation.

Moving in the opposite direction in Africa we decided to increase our sales and management spend with an additional three new sales reps in that region. And I [addressed] that already. In the US in addition we have merged the accounting function of a number of locations with consequent cost savings.

During February the 50 top earners in Trinity Biotech agreed to a new salary structure, which would more closely align earnings with the success of the Company. As a result, all 50 employees have taken a 10% salary cut in their basic pay, plus will receive bonuses in the event of the Company meeting or exceeding its budgets. In the event of the Company not meeting its budgets in 2009, this measure will result in a saving of just under $1 million.

We continue to aggressively seek cost efficiencies throughout the organization. And then as an example recently our freight carrier in the United States was changed, with an annual saving attaching of $300,000.

As another example, we recently brought cleaning services in Ireland in-house with a saving of $70,000. All of these measures have served to significantly increase the profitability of the business.

This is not seen in the results for the current quarter, as the first of the cuts were only implemented on the second of December. However, the full benefit of these savings will be seen in the quarter one results, which we will be presenting I believe in this day six weeks time.

As I mentioned earlier, we conducted a strategic review of our operations, and during this review considered the possibility of selling one or more of the components of our business.

Following the completion of the review, it was decided that we would not sell any of the business divisions, due to the fact that there are many synergies and interdependencies between the divisions. And that the loss of any one of these businesses would reduce the efficiencies at both our factories and our direct selling organizations.

Furthermore, it was decided that given that the Company is absolutely confident of its cash position and its ability to pay its bank debt as it falls due from its existing resources, that it made no sense whatever to sell any part of the business in the middle of the worst recession in living memory.

In addition, we wanted to supplement the strength of our Board with expert operators in key areas of our core business. As a result, Clint Severson, who is the CEO of NASDAQ-listed Abaxis, and Jim Merselis, who is CEO of Alverix, and previously CEO of HemoSense, have joined the Board of the Company.

They are both strong company operators in their own right, with point-of-care and hemostasis expertise. Clint Severson who joined the Board in November, has contributed significantly to the strategic review and decisions made. Both Clint and Jim will bring important strength to the Board as we move forward. There is now accountability oversight and focus across the Company.

Thank you very much. I would now like to hand the call over to questions and back to Brandy.

(Operator Instructions). Matt Dolan, Roth Capital.

First question, on a constant currency basis, I think you gave us the sequential numbers, but I didn't hear anything year-over-year. It looks like Europe in US dollars was down about $2 million year-over-year. Can you give us what that growth, or what that rate looked like year-over-year?

You're talking twelve-month 2008 versus --?

Three months, Q4 2008 over Q4 2007.

I beg your pardon. The figure will be -- if you were to restate quarter four 2007 in the same currency, you would be talking about $34.3 million, which is similar enough to the $34 million we are seeing.

What we are saying is quarter three and quarter four, although there is a $1.5 million drop, in fact, on a constant currency basis the revenues were virtually identical at $33.973 million compared to $34.008 million.

I was just trying to do the same thing year-over-year. Perfect. Ron, it looks like you are still looking for 100 to 120 Destiny Max placements in '09. Can you talk about the reagent pull through there? How long does it take a unit once placed to get up to a $40,000 to $45,000 annual runrate that you're targeting?

It will get there immediately, I suppose. But if an instrument is placed on the first day of July, obviously it will only have a half-year impact. But bear mind here that in most instances, certainly say 70% of the instances -- I am estimating with 70% -- but in 70% of the cases we would be placing -- we would be replacing an existing MDA. So in fact what you're doing is you are actually -- you are basically -- you are securing your business for another five or six years. In that instance of course when it is a new placement, you're actually growing the business.

Maybe just a general question here on your outlook. You have obviously provided no intention of selling any divisions. Can you give us some commentary on 2009? We've got a number of variables at work between currency, Destiny Max, the economic environment, restructuring.

It seems like based on your segment remarks here going forward that on a reported basis that maybe a flat year in revenue makes sense. With the currency headwinds, obviously underlying business showing some growth. So maybe some commentary there, considering what you have seen in the broader economy in the first couple of months here.

And then secondly, if that is the case, with the restructuring should we expect a $6 million increase in pretax income?

You know we don't -- we have decided not to give guidance. But having said that, for example, the numbers that you're guiding at the moment, which I think are $8 million pretax -- $8 million post tax.

Pretax.

Pretax. We would be extremely comfortable with, Matt. And maybe you'll address -- maybe we will talk over the next few days and see to whatever extent you may want to actually modify those numbers.

There is a number of factors to take into account. There is a currency headwind, as I mentioned, so therefore the revenues will be down, but actually they could be more than counterbalanced by better profit.

In terms of the economy there is no doubt but that instruments aren't -- it is that bit more difficult now to convince a customer to actually change his instruments for obvious reasons in the current economy. So that bit more difficult to sell instruments. Having said that, it is that it is easier for us to hold onto our MDAs, which is a counter side to that argument, to that situation.

The dollar is certainly -- it is a headwind in our favor. You can see this -- we have made significant cost cuts. So, for example, if you just thought about it logically, if you were to -- and I'm not giving guidance on our revenues -- but for example, if our revenues were on a constant currency basis to be the same as last year. I'm not suggesting -- I'm not giving guidance on where they will go. But clearly, given the cost cuts that we have brought in-place, plus the dollar headwind, the profit would be significantly $6 million, $7 million, $8 million higher.

Double-digit pretax income is not unreasonable.

But what I think would make sense will be maybe, we would appreciate it if you would -- if we talked over the next few days, and based on what you hear from us, you could maybe give some revised guidance.

The other thing to bear in mind also is that the impairment today, by the way for which we apologize, and that actually explains the delay in the -- the last couple of hours delay in the results, because this all happened really at the eleventh hour and somewhat surprised as. But in any event, the impairment will also give rise to an additional profit as a result of reduced amortization. So we need to take that into account also.

Kevin, final question. On the balance sheet, it looks like you have got $5.2 million in cash today. You have got a similar number of debt payments coming up. You generated $3 million in cash from operations in Q4. What are we looking at for CapEx here in 2009, especially as we place new systems, etc.?

Obviously that is going to be a key component of our CapEx going forward. I think that in overall basis our CapEx will obviously -- will be down compared to 2008. If we include our development expenditure, we had a -- particularly had the expenditure there in association with the development of Destiny Max.

What was it in 2008 then?

In 2008 with our development expense you are close to $9 million. And we would have had property, plants and equipment of approximately $3 million. You would see those figures coming down in the year ahead. It is also going to be assisted by the fact that a lot of the instruments that we have placed would likely be on the back of lease arrangements. So it will not be required to be funded.

Maybe $9 million of CapEx?

In NAS terms, if you take the two, you probably wouldn't be too far out.

You would expect the cash flow from operations -- I know working capital helped a little bit there -- are you going to see more improvements from balance sheet maintenance?

Yes, absolutely. We're going to continue managing our inventory levels. The one area we will continue to watch as well is our debtor levels. We have seen somewhat of a slow down during 2008. Obviously, we will be seeking to hold fast at the current levels. But largely due to I suppose more global economic factors. But our aim will be to hold those reasonably constant.

Killian Murphy, Goodbody.

Just a few questions. In terms of the write-down for the goodwill and the intangibles, could you maybe break out what portion of this was goodwill? And then going forward the impact of this write-down, what do you expect amortization and depreciation to be due to that?

And then just on the tax charge of $4.5 million or $4.49 million, and the tax credit in the year, could you maybe just give a bit more color around that please?

I will take the second one first there. The large tax credit is very much relating to the impairments, with a lot of deferred tax liabilities which were attached to the assets which are written-off. Once the assets were impaired that resulted in the deferred tax asset -- liability being released, hence causing a credit to the P&L. So essentially it is deferred tax you're seeing going through the P&L.

As I said earlier in the call, there would have been about $280,000 of a current tax charge, given the effective rate of 16%, and that is the best way of looking at the results for the quarter.

In relation to the goodwill element, you obviously have seen in the press release $71.7 million is the goodwill and other intangibles. And within that goodwill would be approximately $36 million, $37 million.

In terms of the impairment then the impact on amortization and depreciation going forward, obviously assets which are now impaired will not be required to be depreciated, so there is an upside next year approximately $1.5 million.

Then just in terms of your DSOs, which you have highlighted, do you have any credit insurance? And if so, when does it expire?

We don't have credit insurance. You have had an extremely low instance of bad debt historically. We've got a very high-quality customer base, so we don't use insurance. So the issue of expiry doesn't arise.

Jack Gorman, Davy.

A couple of questions if I may. Firstly, just on Destiny Max, you talked about the 100 to 120 placements target for '09. Just two points on that. Firstly, of that have you disclosed, or can you give us a sense for how many of those you would aim to be new, as opposed to replacement instruments?

And secondly, you talked, I think, previously on one of the questions about reagent prices -- or sorry, reagents -- and what the pull through may be. Do reagent prices on Destiny Max differ very significantly from their equivalent prices on the MDAs?

And my final question is a separate one, maybe for Kevin. Just in relation to the charges that you took in Q4 numbers today, I am just wondering if that has any -- or will they have any impact in terms of your own existing banking relationships or covenants just to be associated with those?

It is Rory here. I might answer the Max question, and then Kevin will jump in. As Ronan would have mentioned on the call, about 70% roughly -- and this is just an estimate -- of Max's that we will place this year will be actually replacement of MDAs, so the remaining 30% we anticipate will be new.

The other question is an interesting one, how did the pricing stack up. It is not too dissimilar. If anything, there is definitely some volume pressures or pressures to keep the price down when you come to high throughput customers. However, the key point and the most important point, is that it is the high throughput customers are the ones who buy the specialty reagents.

Just give you a feel for it, you can typically sell a routine reagent to a customer in this sphere for about somewhere $0.40, $0.50. But you can sell a specialty reagent for $5 to $8. So where you make your profit typically is in the specialty reagent.

So they while there might be downward pressure on the high volume routine reagents, the reality is these types of customers, i.e., the high throughput ones, buy significantly more of the specialty reagent, which is where the high margins are. And that is how you make your profit.

Combined with the fact that these instruments typically have less service, or don't need to get visited as frequently relative to the size of the revenues you are generating from them, you all makes for a more profitable proposition.

Just as a follow-up on that, I think you mentioned $40,000 to $45,000 as a pull through. For a MDA at the moment would it be -- how would that compare?

It will be similar. Bear in mind the pull through is dependent not so much on the instrument, but on the hospital, the numbers of people that go through that hospital. So if we replace an MDA with a Max it will be fairly similar.

Just in relation then to your question then on the impairment adjustment, which is obviously by far the largest element of the once-off charges, because that is a non-cash once-off it has no impact on the banking covenant. Actually those type of items are specifically excluded, which just shows you, I suppose, the nature of an adjustment of this type is very much just an accounting adjustment. It doesn't affect the cash in the business. It doesn't affect our banking arrangement. It doesn't affect our profitability going forward, other than the fact that we have got a bit of an upsides.

And we have already informed the banks, by the way.

Yes. The banks are very much up to speed as to (inaudible) issues.

Neal Goldman, Goldman Capital Management.

First of all, going forward what should be the normalized tax rate for the Company?

I may be thinking we are going to anticipate midteens last quarter and say 16% was about 13% to 14% for the previous three quarters, and it is of that sort of order.

Ronan here. Having said that, the amount of tax paid is negligible. I mean, this is all deferred tax movement.

We've got significant losses in the group which will shield us in relation to future profits in certain jurisdictions, so that helps us.

Because of the write-off of the goodwill or --?

Yes, but the other factors is that Ireland has a 12.5% tax rate. In addition to that, for any incremental R&D spend, I think after 2002 there is multiples apply basically in terms of tax credit.

In Ireland you'll have a 12.5% tax charge, but that will be reduced by the tax credits relating to incremental R&D spend. So the result is for a company like us, we virtually have no [wires] tax to pay whatsoever.

Now we would have tax to pay in other jurisdictions if profits arise in those jurisdictions. And up to now there really hasn't been a lot of tax in the other jurisdictions. So the summary of the entire thing is that in reality Trinity pays virtually zero tax. So that all the tax charges you see every month, it is just all deferred tax movements.

You said if you adjust for everything, you had $17.3 million of EBITDA this year?

Yes.

Right now what is our rate of increase on our debt?

We are currently paying, including margin, we're paying approximately 2.7%.

And your net debt is what today, $31 million? 31?

The bad debt is approximately -- debt is about $32.7 million net of our cash balances, which typically speaking tends to be around $3 million.

So that is $32.7 million net of the cash balance? Okay. So round numbers you are paying 3% on $30 million or $1 million of interest a year now?

Yes. That's right, on the lease -- we have also some leases as well.

Your CapEx, in the last question you said is still going to say about $9 million this year?

Yes, of that order, because we will still continue our development activities. And obviously we will have the instrument placements continuing, albeit we will from those via leases in a lot of environments.

How much do you think will be capitalized on the various products in R&D this year and how much will be depreciated on that side?

Take the second, the first -- the depreciation will be significantly down because the number of those projects are now being impaired. The last year we would have had the order of about $1 million -- between one $1 million, $1.5 million in relation to development type projects. There have been some reduction in relation to that as part of the $1.6 million I was talking about earlier.

In terms of the development expenditure on projects, because of the number of project that are still ongoing and further activities with (inaudible) coming down, albeit from the $8.9 million this year may be closer to the sort of $7 million.

And overall depreciation and amortization this year should run us approximately?

Depreciation and amortization and share option expense, which I suppose is another similar type charge typically speaking (multiple speakers).

Forget the stock option expense, because that is not -- I'm looking at an EBITDA number so.

Okay, well, depreciation and amortization typically run about $8 million per annum. We would have had some upward movement on that but for the impairment, so we would probably stay probably reasonably close to that number next year.

Even if you had flat earnings or flat EBITDA this year, right, you would add another $6 million plus in terms of the savings you have implemented, right?

Yes, I think (multiple speakers).

It was a little lower interest rate and a little lower depreciation, so the $17.3 million is going to be like $22 million EBITDA or something (inaudible)?

This is Ronan here. On a constant currency bases, imagine -- just imagine, I'm not saying that will be the case. Imagine if your revenues were flat, what you ought to be getting is you're $17 million plus your $6 million, plus a kicker from your dollar, plus $1.5 million from your depreciation and amortization.

But that is in the EBITDA. From an EBIT standpoint.

So, sorry. You would be -- basically you would be getting your $17 million plus your $6 million, plus about $2 million. I'm so sorry. So it another half or two-quarters from reduced interest as well. (multiple speakers).

On a EBIT basis. Okay. The answer is we should -- it would look to me conceptually, and I'm not trying to put numbers -- it would look like a $0.50 earnings potential this year, assuming a 15% tax rate, assuming currency stays around $1.25 US on the euro.

Certainly on flat revenues that would absolutely be the case. Yes.

But overall, with the one issue being hemostasis, you're looking for up numbers this year?

Absolutely, yes. And we believe that in hemostasis that we can hold it, or at worst lose a very, very small amount -- a very small percentage. It is holding up. Ironically in the distributor territories the business is up. It is down in the States. It is flat in the UK. And it is down marginally in France and Germany.

But if you did that, if you were able to generate round numbers, $10 million of after-tax profits, we're talking about inventory not rising much, right? You're talking about hopefully getting your paybles up a little, or your DSOs down a little, right? So you're going to generate close to $10 million in cash, or am I off somewhere in some area? (multiple speakers).

I think that would actually understate it.

$10 million of cash generation would be understated on that?

Yes.

On my assumptions.

I think so, yes.

So by sometime in the course of this year people will gain confidence that this balance sheet is starting to really improve now?

I think you even saw it in quarter four. I think between the end of October and -- beginning in quarter three and in quarter four, there was the increase in cash balances, wasn't there? (multiple speakers) And that was before the cost cuts came through.

Okay. All right guys. Thank you.

There are no further questions at this time. Do you had any closing remarks?

Just to say thank you very much to everybody. And it won't be such a long break [like this because] I think in six-week's time we will be presenting quarter one. And we really do believe that there will be -- that the wait will be worth it, and that they're going to start saying the benefits then.

So just thank you very much for your support, and talk to you soon. Bye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.