Essential Products
= recurring income and stable revenue growth

The Group comprises a number of high quality, specialised businesses which design their individual business models to make them essential to their customers.

Our businesses focus on supplying essential products and services funded by customers’ operating rather than capital budgets and supplied across a range of specialised industry segments.

The majority of the Group’s revenues are generated from consumable products. In many cases, the products will be used in repair and maintenance applications and refurbishment and upgrade programmes, rather than supplied to original equipment manufacturers.

These characteristics all contribute to the Group’s record of stable revenue growth over the business cycle.

Life Sciences, Case study on smoke evacuation in Electrosurgery

Operating room ("OR") nurses and other members of the surgical teams are becoming increasingly aware of the hazards of inhaling surgical smoke.

In 90% of laparoscopic and open surgical procedures, an electrosurgery device is used to cut and coagulate tissue. This creates a plume of surgical smoke which can contain toxic gases, bacteria and viruses. In tests, inhaling the plume created by using such an electrosurgery device on one gram of tissue, is equivalent to smoking six unfiltered cigarettes.

Through regular exposure, the inhalation of surgical smoke is harmful to hospital staff including surgeons, anesthesiologists and in particular, OR nurses. The plume can also be hazardous to patients undergoing laparoscopic procedures, when the contaminants of surgical smoke can be absorbed into the patient's vascular system.

Our DHG Healthcare businesses in Canada and Australia supply a range of smoke evacuation products which remove and filter the surgical smoke. Our businesses supply the smoke evacuation pumps at little or no charge to hospitals and sign up multi-year contracts to supply the consumable products, including tubing, filters, shrouds and patented surgical devices which combine the functions of both electrosurgery and smoke evacuation.

Once smoke evacuation has been introduced to a hospital and promoted through our education programmes, its use quickly becomes an essential requirement in operating rooms and is written into policies and procedures. Our experience has been that the usage of smoke evacuation only increases over time – once hospital staff have experienced the benefits, they are reluctant to carry out procedures without this protection. Our products over time become an accepted and essential part of the hospitals' operating budgets.

Life SciencesLife Sciences

Life Sciences

Single-use, patented electrosurgical electrode with integrated smoke evacuation device

Seals, Case study on Aftermarket seals

Our Hercules business in North America is a one-stop source for replacement seals used in hydraulic cylinders in heavy mobile machinery.

The products are used wherever hydraulic power is employed to move heavy loads in applications such as construction, agriculture, logging, refuse disposal, material handling etc.

A typical piece of heavy mobile machinery, such as a large bulldozer or excavator, will have on average 4–6 hydraulic cylinders with an average of 8 seals per cylinder. If any one of these 30–50 seals fails in operation, a very expensive piece of machinery is out of action and losing the operator money.

We do not normally supply the seals and seal kits used in the first three years of the equipment life, when the original manufacturer's warranty is still in place or the equipment is leased. During this period, the terms of the warranty or lease will normally require that spare parts from the original manufacturer are used. However, once the equipment is sold into the second-hand or pre-used market, or the lease term for the equipment expires, Hercules becomes the supplier of choice with its range of sealing products for all main brands of machinery, its next day delivery service and its competitive pricing.

Hercules clearly benefits during periods of strong growth in end-use markets, when equipment useage rates are high and repairs are quickly carried out whenever a failure occurs. However, Hercules is also insulated from the worst effects of a downturn in end-use markets, when capital spend on new equipment is typically cut back. Initially operational spend will also be reduced as equipment is not repaired immediately, but after a period of adjustment, expenditure on repair and maintenance is required to keep older equipment operational.

SealsSeals

Seals

Seals products used in the repair of hydraulic cylinders in a broad range of heavy mobile machinery

Controls, Case study on wiring harnesses for Aerospace

Complex wiring harnesses are used to control a range of functions in technically demanding applications such as Aerospace and Defence.

We do not typically supply to the new build programmes of aircraft, tanks, submarines and other major defence platforms. This initial supply is managed direct by the manufacturers whose business model is tailored to the design-in and supply of large quantities of their products. Our IS-Group business will supply products to these major new build projects when order quantities have been under-estimated and smaller quantities are required quickly from stock, or for certain prototype or initial build stages where smaller volumes are required.

The main market for IS-Group's products is in the refurbishment and upgrade programmes for equipment in service. For example, in Civil Aerospace applications, we will be the preferred supplier in replacement/upgrade programmes for aircraft seating or in-flight entertainment systems. In Defence applications, we would be involved in the up-grade of weapons systems on military platforms, as well as operational maintenance programmes.

With this focus on in-service applications, the market driver for IS-Group revenues is the level of operational spending in sectors such as Aerospace and Defence. Revenues are much less impacted by cutbacks and postponements to major capital programmes. Again, we are supplying essential products funded by customers' operating budgets rather than capital budgets.

ControlsControls

Controls

Wiring and harness components used in Aerospace and Defence application