Full Year 2026 Healius Ltd Earnings Call

August 19, 2026

Operator 2: Thank you for standing by, and welcome to the Healius Limited FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Paul Anderson, MD and CEO. Please go ahead.

Operator: Thank you for standing by, and welcome to the Healius Limited FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Paul Anderson, MD and CEO. Please go ahead.

Speaker #1: If you wish to ask a question, you will need to press the star key, followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Paul Anderson, Managing Director and CEO.

Speaker #1: Please go ahead.

Speaker #2: Great. Thank you, and good morning, everyone. We're here today to announce our full-year results, provide you with some additional financial information and commentary on the performance of each of our business units, and, of course, answer your questions.

Paul Anderson: Great. Thank you, and good morning, everyone. We are here today to announce our full-year results, provide you with some additional financial information and commentary on the performance of each of our business units, and of course, answer your questions. With me today is Andrew Thomson, our Chief Financial Officer, who you will hear from shortly. Turning to slide 4 in terms of our group results. This slide summarizes the group's FY26 performance. Group underlying revenue increased by 2.1% to AUD 1.37 billion, while pathology revenue increased by 1.8% to AUD 1.33 billion. Agilex revenues grew strongly with growth of AUD 5.4 million or 14.1% to AUD 43.6 million. Group underlying EBITDA increased by 8.1% to AUD 258.6 million, and underlying EBIT increased to AUD 30.2 million. Pathology EBITDA increased by AUD 15 million to AUD 247.9 million.

Speaker #2: With me today is Andrew Thompson, our Chief Financial Officer, who you will hear from shortly. Turning to slide 4, in terms of our group results, this slide summarizes the group's FY26 performance.

Paul Anderson: This slide summarizes the group's FY26 performance. Group underlying revenue increased by 2.1% to AUD 1.37 billion, while pathology revenue increased by 1.8% to AUD 1.33 billion. Agilex revenues grew strongly with growth of AUD 5.4 million or 14.1% to AUD 43.6 million. Group underlying EBITDA increased by 8.1% to AUD 258.6 million, and underlying EBIT increased to AUD 30.2 million. Pathology EBITDA increased by AUD 15 million to AUD 247.9 million.

Speaker #2: Group underlying revenue increased by 2.1% to $1.37 billion, while pathology revenue increased by 1.8% to $1.33 billion. Agilex revenues grew strongly, with growth of $5.4 million, or 14.1%, to $43.6 million.

Speaker #2: Group underlying EBITDA increased by 8.1% to $258.6 million, and underlying EBIT increased to $30.2 million. Pathology EBITDA increased by $15 million to $247.9 million, and Agilex EBITDA increased by $4.3 million to $10.7 million.

Paul Anderson: Agilex EBITDA increased by AUD 4.3 million to AUD 10.7 million. Healius had net debt of AUD 32.8 million at year-end and remained well within its banking covenants at 1.2 times. Now turning to slide 5. This slide focuses on pathology, where revenue growth has been driven by changing the revenue mix, which combined with flat costs, has helped improve margins. Strategically, the business is focused on margin recovery through improved revenue quality and strict cost discipline. This slide also highlights that Fair Work Commission labor cost increases are having an an impact, but network and labor optimization have helped reshape the cost base, resulting in flat costs in FY26. Importantly, the major phase of our digital technology program has been completed, and this has become an important value driver for the business alongside AI and automation.

Speaker #2: Healius had net debt of $32.8 million at year-end and remained well within its banking covenants at 1.2 times. Now, turning to slide 5—this slide focuses on Pathology, where revenue growth has been driven by changing the revenue mix, which, combined with flat costs, has helped improve margins.

Speaker #2: Strategically, the business has focused on margin recovery through improved revenue quality and strict cost discipline. This slide also highlights that Fair Work Commission labour cost increases are having an impact, but network and labour optimization have helped reshape the cost base, resulting in flat costs in FY26.

Speaker #2: Importantly, the major phase of our digital technology program has been completed, and this has become an important value driver for the business, alongside AI and automation.

Speaker #2: Operationally, pathology revenue growth was attributable to changes in revenue mix, including growth in genomic diagnostics, B2B clinical trials, and veterinary pathology. GP attendance has reduced by 0.9% over the past 12 months, while specialist attendances increased by 2.9%.

Paul Anderson: Operationally, pathology revenue growth was attributable to changes in revenue mix, including growth in Genomic Diagnostics, B2B clinical trials, and veterinary pathology. GP attendances reduced by 0.9% over the past 12 months, while specialist attendances increased by 2.9%. GP attendances have, however, grown in three of the last four months. Significant technology progress has been made this year and includes the new Medway Collectors portal, an upgraded Medway Results portal for referrers that includes education and CPD opportunities for diabetes, skin, and cervical cancer, along with a shortly to be released patient app. Artificial intelligence is being used, as we set out previously, to improve productivity with fast payback or ROI and low running costs. AI co-workers, Reva and Julie, have been launched with two additional co-workers now live in production, supporting high volume transaction environments and workforce planning. Turning to slide 6.

Speaker #2: GP attendances have, however, grown in three of the last four months. Significant technology progress has been made this year, and includes the new Midway Collectors Portal, an upgraded Midway Results Portal for referrers that includes education and CPD opportunities for diabetes, skin, and cervical cancer, along with a shortly-to-be-released patient app.

Speaker #2: Artificial intelligence is being used, as we set out previously, to improve productivity with fast payback or ROI and low running costs. AI coworkers Reba and Julie have been launched, with two additional coworkers now live in production.

Speaker #2: Supporting high-volume transaction environments and workforce planning. Turning to slide 6, this slide covers Agilex Biolabs and highlights the strategic decision that was made to boost Agilex's participation in the growing large molecule market.

Paul Anderson: This slide covers Agilex Biolabs and highlights the strategic decision that made to boost Agilex's participation in the growing large molecule market. Along with the pivot to large molecule work, the decision to exit the toxicology business has contributed to improved performance and allowed business development resources to be reallocated to other geographies, including Europe, which are showing traction. The opening of a new bioanalytical laboratory in Brisbane focused on flow cytometry is a significant milestone and a benchmark operating model for future network sites as Agilex plans to expand its national footprint across Brisbane, Melbourne, and Sydney. The order book or won work for Agilex is strong and supports our FY27 targets. On the sale process, as we previously advised, Healius has engaged UBS to explore a sale of Agilex Biolabs.

Speaker #2: Along with the pivot to large molecule work, the decision to exit the toxicology business has contributed to improved performance and allowed business development resources to be reallocated to other geographies, including Europe, which is showing traction.

Speaker #2: The opening of a new bioanalytical laboratory in Brisbane, focused on flow cytometry, is a significant milestone and establishes the benchmark operating model for future network sites, as part of Agilex's plans to expand its national footprint across Brisbane, Melbourne, and Sydney.

Speaker #2: The order book, or 'One Work' for Agilex, is strong and supports our FY27 targets. On the sale process, as we previously advised, Healius has engaged UBS to explore a sale of Agilex Biolabs.

Speaker #2: The business has received strong interest from a number of potential acquirers, and we will continue to keep shareholders updated as required. Now, turning to Slide 7, this slide provides a performance update on the T27 program and shows some of the detailed progress we have made across the key pillars.

Paul Anderson: The business has received strong interest from a number of potential acquirers, and we will continue to keep shareholders updated as required. Now turning to slide 7. This slide provides a performance update on the T27 program and shows some of the detailed progress we have made across the key pillars. A couple of call-outs, as this is a very busy slide. Investment in digital technology with Medway and Pathway as our two modern technology systems, has strengthened our national capability across customer services and laboratory modernization. The business has made strong progress in digitizing collections, with more than 80% of ACC episodes now processed through Medway. E-referral volumes were 28% higher than the prior corresponding period, and 220,000 patient appointments were booked through that new capability from August 2025. We have also significantly improved our contact center response times and are imminently launching a new patient app.

Speaker #2: A couple of call-outs, as this is a very busy slide. On investment in digital technology, with Midway and Pathway as our two modern technology systems, has strengthened our national capability across customer services and laboratory modernization.

Speaker #2: The business has made strong progress in digitizing collections, with more than 80% of ACC episodes now processed through Midway. E-referral volumes were 28% higher than the prior corresponding period, and 220,000 patient appointments were booked through that new capability from August 2025.

Speaker #2: We have also significantly improved our contact center response times and are imminently launching a new patient app. With regard to laboratory modernization, Pathway has enabled digital anatomical pathology with Ibex AI for sharing cases nationally, new track automation for microbiology, digitized workflows for faster genomics processing, and enhancements in clinical reporting.

Paul Anderson: With regard to laboratory modernization, Pathway has enabled digital anatomical pathology with Ibex AI for sharing cases nationally, new track automation for microbiology, digitized workflows for faster genomics processing, and enhancements in clinical reporting. This slide also highlights regional lab optimization, including a 24.3% reduction in FTEs compared to FY25, as well as productivity gains made in the main lab optimization. In emerging diagnostics, genomic revenue increased by 16.9%, with 15 new products launched and a focus on hereditary cancer detection. Clinical trials revenue increased by 92.9%, and Vetnostics has digital courier and consumables ordering fully in place. Looking ahead in digital technologies with build complete on our further Pathway core lab services and currently being rolled out nationally. We are well-positioned to leverage our systems to unlock the next wave of structural efficiencies.

Speaker #2: This slide also highlights regional lab optimization, including a 24.3% reduction in FTEs compared to FY25, as well as productivity gains made in the main lab optimization.

Speaker #2: In emerging diagnostics, genomic revenue increased by 16.9%, with 15 new products launched and a focus on hereditary cancer detection. Clinical trials revenue increased by 92.9%, and diagnostics has digital courier and consumables ordering fully in place.

Speaker #2: Looking complete on our further pathway core lab services, and currently being rolled out nationally, we are well-positioned to leverage our systems to unlock the next wave of structural efficiencies.

Speaker #2: These include centrally shared staff for scientific tasks, automation of data entry, and the consolidation of volumes for further lab footprint reductions. Finally, in people and ways of working, the slide notes $24.4 million in annualized corporate cost savings, more than 600 collectors graduating from the new National Collector Training Academy, and flat FY26 labour costs, despite the Fair Work Commission decision.

Paul Anderson: These include centrally shared staff for scientific tasks, automation of data entry, and the consolidation of volumes for further lab footprint reductions. Finally, in people and ways of working, the slide notes AUD 24.4 million in annualized corporate cost savings, more than 600 collectors graduating from the new National Collector Training Academy, and flat FY26 labor costs, despite the Fair Work Commission decision. The slide also highlights AI workers supporting finance transactions, workforce planning, and priority operational areas. With that, I will hand over to Andrew.

Speaker #2: The slide also highlights AI workers supporting finance transactions, workforce planning, and priority operational areas. And with that, I will hand over to Andrew.

Speaker #3: Thanks, Paul. So, on slide 9, firstly, I'll move to discussing the financial performance at a group level. FY2026 was a year of disciplined execution on cost control and tangible improvements across the group.

Andrew Thomson: Thanks, Paul. On slide 9, firstly, I will move to discussing the financial performance at a group level. FY26 was a year of disciplined execution on cost control and tangible improvements across the group. Our underlying revenue grew by AUD 28.7 million, or 2.1%, bringing total revenue to AUD 1.37 billion. This growth was driven by a stronger fee mix in Pathology and robust revenue expansion in Agilex. It is a clear sign that our strategic focus on higher-margin services is delivering results. Group EBIT rose to AUD 30.2 million, in line with previous guidance, and up from AUD 17.1 million last year, a significant improvement. Pathology EBIT came in at AUD 23.8 million, reflecting strong cost control and operational discipline in a challenging environment. Agilex EBIT more than doubled to AUD 6.4 million, supported by revenue growth and tight cost management, which together drove that margin expansion. We also recorded AUD 27.1 million in non-underlying items.

Speaker #3: Our underlying revenue grew by $28.7 million, or 2.1%, bringing total revenue to $1.37 billion. This growth was driven by a stronger Phoenix in pathology and robust revenue expansion in Agilex.

Speaker #3: It's a clear sign that our strategic focus on higher-margin services is delivering results. Group EBIT rose to $30.2 million, in line with previous guidance and up from $17.1 million last year.

Speaker #3: A significant improvement. Pathology EBIT came in at $23.8 million, reflecting strong cost control and operational discipline in a challenging environment. Agilex EBIT more than doubled to $6.4 million, supported by revenue growth and tight cost management, which together drove that margin expansion.

Speaker #3: We also recorded $27.1 million in non-underlying items. Of that, less than a quarter, or just over $6 million, was in the second half, and primarily related to restructuring costs to right-size the business and expenses related to our digital program in the first half of the year.

Andrew Thomson: Of that, less than a quarter or just over AUD 6 million was in the H2, and primarily related to restructuring costs to rightsize the business and expenses related to our digital program in the H1 of the year. These are strategic investments that position us for future efficiency. As required under accounting standards, we recognize a non-cash pre-tax impairment of AUD 332 million against goodwill. It is important to note that this is a non-cash item. It does not impact our operating performance or cash flow. In the results this year, we also made an adjustment to derecognize a deferred tax asset of AUD 31.5 million related to prior periods. We also did not recognize AUD 14 million of deferred tax assets related to the FY26 loss.

Speaker #3: These are strategic investments that position us for future efficiency. As required under accounting standards, we recognize a non-cash, pre-tax impairment of $332 million against goodwill.

Speaker #3: It's important to note that this is a non-cash item. It doesn't impact our operating performance or cash flow. In the results this year, we also made an adjustment to de-recognize a deferred tax asset of $31.5 million, related to prior periods, and we also did not recognize $14 million of deferred tax assets related to the FY2026 loss.

Speaker #3: While we've de-recognized these items from the balance sheet, we do retain access to these carried-forward losses and remain confident that these losses will be used to offset taxable income in the coming financial periods.

Andrew Thomson: While we have derecognized these items from the balance sheet, we do retain access to these carry forward losses and remain confident that these losses will be used to offset taxable income for upcoming financial periods. Interest costs reduced significantly this year, thanks to lower average debt levels. On the cost side, we exceeded our support cost savings target of AUD 15 to AUD 20 million, achieving AUD 24.4 million in annualized savings. That includes AUD 7.3 million realized in FY25 and AUD 17.1 million additional savings in FY26. We expect the full run rate benefit from these initiatives to flow through from FY27 onwards, and we are continuing to execute further savings opportunities. In summary, we have strengthened the core, improved margins, and built a leaner cost base. These results demonstrate that our transformation is delivering, and we are well-positioned for sustainable growth heading into FY27. Turning on slide 10, focus on the core Pathology business.

Speaker #3: Interest costs reduced significantly this year, thanks to lower average debt levels. On the cost side, we exceeded our support cost savings target of $15 to $20 million, achieving $24.4 million in annualized savings.

Speaker #3: That includes $7.3 million realized in FY25, and an additional $17.1 million in savings in FY26. We expect the full run-rate benefit from these initiatives to flow through from FY27 onwards, and we're continuing to execute further savings opportunities.

Speaker #3: In summary, we've strengthened the core, improved margins, and built a leaner cost base. These results demonstrate that our transformation is delivering, and we're well positioned for sustainable growth heading into FY2027.

Speaker #3: On slide 10, focus on the core pathology business. As I said already, we delivered steady revenue growth and continued margin improvement through disciplined cost management.

Andrew Thomson: As I said already, we delivered steady revenue growth and continued margin improvement through disciplined cost management. Revenue grew 1.8%, benefiting from a stronger mix across specialists, hospitals, and B2B channels. This improved mix led to higher average fees and underpinned the overall growth. Genomic Diagnostics continues to perform exceptionally well, up 16.9% on the prior corresponding period. Clinical trials also showed outstanding momentum, almost doubling year on year, supported by a solid pipeline and growing demand. Labor costs were held flat compared with last year. The benefits from our labor optimization program in the H2 offset enterprise agreement rate increases and the Fair Work Commission's decision on gender undervaluation for pathology collectors. Consumable costs were also well controlled, down 3.8% in absolute AUD terms and reduced as a percentage of revenue from 16.2% last year to 15.3% this year.

Speaker #3: Revenue grew 1.8%, benefiting from a stronger mix across specialists, hospitals, and B2B channels. This improved mix led to higher average fees and underpinned the overall growth.

Speaker #3: Genomics continues to perform exceptionally well, up 16.9% on the prior corresponding period. Clinical trials also showed outstanding momentum, almost doubling year on year, supported by a solid pipeline and growing demand.

Speaker #3: Labour costs were held flat compared with last year. The benefits from our labour optimization program in the second half offset Enterprise Agreement rate increases and the Fair Work Commission's decision on gender undervaluation for pathology collectors.

Speaker #3: Consumable costs were also well controlled—down 3.8% in absolute dollar terms—and reduced as a percentage of revenue, from 16.2% last year to 15.3% this year.

Speaker #3: Network costs, including property, AASB 16 depreciation, and finance costs, trended slightly higher as a percentage of revenue, mainly due to timing differences between new site openings and site exits.

Andrew Thomson: Network costs, including property, D&A, and finance costs, trended slightly higher as a percentage of revenue, mainly due to timing differences between new site openings and site exits. The ramp-up of these cost-saving initiatives over the year contributed to stronger EBITDA and EBIT margins in the H2 of FY26. Overall, pathology continues to demonstrate resilience and operational discipline. Moving to slide 11, Agilex. Agilex continues to deliver strong growth and margin expansion, underpinned by a clear strategic pivot and disciplined execution by the team. Revenue growth has directly contributed to margin improvement. The EBIT margin of 14.7% this year reflects the shift in business mix as we move away from small molecule work towards large molecule programs. This transition has strengthened profitability and positioned Agilex for sustainable growth. Closure of the loss-making toxicology business at Agilex has also supported this margin uplift.

Speaker #3: The ramp-up of these cost-saving initiatives over the year contributed to stronger EBITDA and EBIT margins in the second half of FY26. Overall, Pathology continues to demonstrate resilience and operational discipline.

Speaker #3: Moving to slide 11, Agilex. Agilex continues to deliver strong growth and margin expansion, underpinned by a clear strategic pivot and disciplined execution by the team.

Speaker #3: Revenue growth has directly contributed to margin improvement. The EBIT margin of 14.7% this year reflects the shift in business mix, as we move away from small molecule work towards large molecule programs.

Speaker #3: This transition has strengthened profitability and positioned Agilex for sustainable growth. The closure of the loss-making toxicology business at Agilex has also supported this margin uplift.

Speaker #3: At the same time, the national footprint has expanded, with the new Brisbane Bioanalytical Laboratory performing ahead of expectations—a great example of the investment translating into operational success.

Andrew Thomson: At the same time, the national footprint has expanded, with the new Brisbane Bioanalytical Laboratory performing ahead of expectations. A great example of the investment translating into operational success. The Agilex pipeline heading into FY27 remains strong, and we expect continued revenue growth to translate into further EBIT margin expansion. The fundamentals of the industry remain solid, and Agilex is well-placed to capture that momentum. As we outlined on our 13 May 2026 announcement, Healius is exploring a potential sale of Agilex Biolabs following several unsolicited approaches from credible parties. This forms part of the ongoing program to optimize shareholder value. In summary, Agilex continues to perform strongly with clear strategic direction, competitive advantages, and industry fundamentals that support ongoing growth and value creation. On slide 12, we can look at the capital expenditure and capital management for the year.

Speaker #3: The Agilex pipeline heading into FY27 remains strong, and we expect continued revenue growth to translate into further EBIT margin expansion. The fundamentals of the industry remain solid, and Agilex is well placed to capture that momentum.

Speaker #3: As we outlined in our 13 May '26 announcement, Healius is exploring a potential sale of Agilex Biolabs, following several unsolicited approaches from credible parties.

Speaker #3: This forms part of the ongoing program to optimize shareholder value. In summary, Agilex continues to perform strongly, with clear strategic direction, competitive advantages, and industry fundamentals that support ongoing growth and value creation.

Speaker #3: On slide 12, we can look at the capital expenditure and capital management for the year. Maintenance capex for FY26 was $16.5 million, down from $31.3 million in FY25.

Andrew Thomson: Maintenance CapEx for FY26 was AUD 16.5 million, down from AUD 31.3 million in FY25. This primarily covered the replacement of older laboratory equipment and IT hardware, essential investments to maintain operational reliability. Growth CapEx totaled AUD 26.8 million, compared with AUD 34.6 million last year. These investments focused on select large-scale collection centers, equipment for new hospital contracts, including Grampians Health and Northwest Tasmania, and ongoing AI development. These initiatives are driving future capability and efficiency across the business. CapEx spend was partially offset by proceeds from the sale of property, plant, and equipment, helping balance the overall investment profile. From a capital management perspective, we moved from a net cash position of AUD 57.2 million in FY25 to net debt of AUD 32.8 million this year.

Speaker #3: This primarily covered the replacement of older laboratory equipment and IT hardware—essential investments to maintain operational reliability. Growth CapEx totaled $26.8 million, compared with $34.6 million last year.

Speaker #3: These investments focused on select large-scale collection centers, equipment for new hospital contracts, including Grampian’s and Northwest Tasmania, and ongoing AI development. These initiatives are driving future capability and efficiency across the business.

Speaker #3: Capex spend was partially offset by proceeds from the sale of property, plant, and equipment, helping balance the overall investment profile. From a capital management perspective, we moved from a net cash position of $57.2 million in FY25 to net debt of $32.8 million this year.

Speaker #3: The shift was partially due to one-off payments, including a settlement with the ATO, payments related to the divestment of Lumus Imaging, restructuring costs, digital investment, and working capital requirements.

Andrew Thomson: The shift was partially due to one-off payments, including a settlement with the Australian Taxation Office, payments related to the divestment of Lumus Imaging, restructuring costs, digital investment, and working capital requirements. Importantly, as Paul said, we remain well within our banking covenants for both gearing and interest cover, reflecting strong financial discipline. In summary, our capital investments are targeted and strategic, supporting growth while maintaining the prudent balance sheet. We continue to manage capital efficiently to ensure flexibility and resilience as we move into FY27. I will hand back to you, Paul.

Speaker #3: Importantly, and as Paul said, we remain well within our banking covenants for both gearing and interest cover, reflecting strong financial discipline. In summary, our capital investments are targeted and strategic, supporting growth while maintaining a prudent balance sheet.

Speaker #3: We continue to manage capital efficiently to ensure flexibility and resilience as we move into FY27. I'll hand back to you, Paul.

Speaker #2: Thank you. So, the last slide in terms of outlook: we expect our FY27 EBIT to be in line with consensus of $39.7 million.

Paul Anderson: Thank you. The last slide in terms of outlook. We expect our FY27 EBIT to be in line with consensus of AUD 39.7 million. We anticipate that volumes are going to grow in line with MBS on a like-for-like collection center basis, in addition to modest increases in profitable collection sites. Non-MBS volumes are expected to see the benefit of the full year of new commercial and hospital contracts and the continued growth in Genomic Diagnostics, Vetnostics, and B2B, including clinical trials. Disciplined cost control and pathology is expected to contain our cost growth to 3.5% in FY27, inclusive of the impact of the Fair Work Commission costs related to gender undervaluation and the 4.75% increase linked to modern awards.

Speaker #2: We anticipate that volumes are going to grow in line with the MBS on a like-for-like collection center basis, in addition to modest increases in profitable collection sites.

Speaker #2: Non-MBS volumes are expected to see the benefit of a full year of new commercial and hospital contracts, as well as continued growth in genomic diagnostics, vetnostics, and B2B, including clinical trials.

Speaker #2: Discipline cost control in Pathology is expected to contain our cost growth to 3.5% in FY27, inclusive of the impact of the Fair Work Commission costs related to gender undervaluation, and to a 4.75% increase linked to modern awards.

Speaker #2: And due to the significant impact of the Fair Work Commission cost and reduced GP attendances, Healius expects that, to achieve its T27 target of mid- to high-single-digit EBIT margins, this will be by approximately December 2028.

Paul Anderson: Due to the significant impact of the Fair Work Commission cost and reduced GP attendances, Healius expects to achieve its T27 target of mid to high single-digit EBIT margins by approximately December 2028. In terms of Agilex Biolabs, as we said before, the order book and revenue conversion remains strong and in line with our expectations. With that, I will hand back and open to questions.

Speaker #2: In terms of Agilex Biolabs, as we said before, the order book and revenue conversion remain strong and in line with our expectations.

Speaker #2: With that, I will hand back and open to questions.

Speaker #1: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.

Operator 2: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Lyanne Harrison with Bank of America. Please go ahead.

Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Lyanne Harrison with Bank of America. Please go ahead.

Speaker #1: If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Liane Harrison with Bank of America.

Speaker #1: Please go ahead.

Lyanne Harrison: Morning, Andrew. I might start with that last slide in terms of 2027 outlook. I just wanted to understand and just clarify, when you say modest increase in profitable sites, is that ahead of the MBS or likely to be below the MBS growth rates?

Speaker #4: And Andrew, I might start with that last slide in terms of the '27 outlook. I just wanted to understand, and just clarify, when you say a modest increase in profitable sites, is that ahead of the MBS, or likely to be below the MBS growth rates?

Speaker #2: Sorry, so by that we mean collection centers. We have a very focused plan to increase our volumes next year through profitable collection centers.

Paul Anderson: Sorry. By that we mean collection centers. We have a very focused plan to increase our volumes next year through profitable collection centers.

Lyanne Harrison: Okay.

Speaker #2: We have a chunk of those that have already been completed in July.

Paul Anderson: We have a chunk of those that have already been completed in July.

Speaker #4: Okay, fantastic. And just to give us an indication, what proportion would still be sites which are below your profitability threshold?

Lyanne Harrison: Okay, fantastic.

Paul Anderson: Yeah.

Lyanne Harrison: And just to give us an indication, what proportion would be still sites which are below your profitability threshold?

Speaker #2: Look, I think there's a marginal number of sites. I mean, we have 100 fewer sites now than we did at the start of last year.

Paul Anderson: Well, I think there's a marginal number of sites. We have 100 less sites now than we did at the start of last year. So our footprint has been rationalized quite significantly. I think part of that is sites that you were talking about there, Lyanne, in terms of ones that are either not profitable or don't meet our threshold. And there's clearly other ones that we would have preferred to have kept as well that we've lost. So, the plan is to expand with profitable revenue.

Speaker #2: So, our footprint has been rationalized quite significantly. I think part of that is sites that you were talking about there, Liane, in terms of ones that are either not profitable or don't meet our threshold.

Speaker #2: And there's clearly other ones that we have that we would have preferred to have kept as well, that we've lost. So it's the plan is to expand with profitable revenue.

Speaker #4: Okay, and just a final question then. You mentioned you want to grow in line, or you anticipate you will grow in line, with MBS volumes.

Lyanne Harrison: Okay. And just a final question. You mentioned you want to grow in line or you anticipate you will grow in line with MBS volumes. I guess, given what you're doing and what Healius is doing with all its initiatives, why do you think it limits your ability to grow above market?

Speaker #4: Given what you're doing, and what Healius is doing with all its initiatives, why do you think that limits your ability to grow above the market?

Speaker #2: I don't think we're saying that it limits. I think our wording there—what we were trying to get across—is that our like-for-like ACC collection centers, which are primarily through medical centers, will grow in line with MBS volumes.

Paul Anderson: I don't think we're saying that it limits. I think our wording there, what we were trying to get across is that, our like-for-like ACC collection centers, which, primarily, through medical centers, will grow in line with MBS volumes. Where we hope to grow further than that, which we've demonstrated this year, is through Genomic Diagnostics, through Vetnostics and through our B2B sector.

Speaker #2: Where we hope to grow further than that, which we've demonstrated this year, is through genomics, through vets, and through our B2B sector.

Speaker #3: And the incremental sites that we would open this year.

Lyanne Harrison: Okay.

Paul Anderson: And the incremental sites that we would open this year.

Speaker #2: Yeah.

Speaker #3: Yeah.

Speaker #4: Okay, great. Thank you very much. I'll leave it there.

Lyanne Harrison: Okay, great. Thank you very much. I will leave it there.

Speaker #2: Thank you.

Paul Anderson: Thank you.

Speaker #1: Your next question comes from Devin Phil and Nathan with Goldman Sachs. Please go ahead.

Operator 2: Your next question comes from Davin Thillainathan with Goldman Sachs. Please go ahead.

Operator: Your next question comes from Davin Thillainathan with Goldman Sachs. Please go ahead.

Speaker #5: Thanks. Morning, Paul. Morning, Andrew. Just wanted to touch on your revenue initiatives. Outside of the MBS, I believe the strategy there was to grow exposure to hospital contracts, and also just thinking about tests that are unfunded by the MBS at this point—so, private tests.

Davin Thillainathan: Thanks. Morning, Paul. Morning, Andrew. Just wanted to touch on your revenue initiatives outside of the MBS. I believe the strategy there was to grow exposure to hospital contracts. Also just thinking about tests that are unfunded by the MBS at this point, so private tests. Could you give us a sense of how initiatives on those two fronts are going, please?

Speaker #5: Could you give us a sense of how initiatives on those two fronts are going, please?

Speaker #2: So look, I think on the hospital front, around two-thirds of our revenue is bulk billed, and one-third of our revenue is non-MBS related.

Paul Anderson: Well, look, I think on the hospital front, around two-thirds of our revenue is bulk billed and one-third of our revenue is non-MBS related. A big chunk of that does relate to both public and private hospitals. In terms of the hospital network, we have had Western Health and Victoria revert back to the public system this year, so those are revenues or episodes that kind of disappeared out of the system. We obviously announced that we have renewed our deal with Ramsay, and that included Joondalup Hospital in WA for a long term. Then we have renewed the Grampians Hospital out to 2034. So the hospital network and public hospitals in particular, I think, over the past 12 months have actually shown quite strong growth. I have forgotten the second part of your question.

Speaker #2: A big chunk of that does relate to both public and private hospitals. In terms of the hospital network, we've had Western Health in Victoria revert back to the public system this year.

Speaker #2: So those are revenues or episodes that kind of disappeared out of the system. We obviously announced that we have renewed our deal with Ramsay, and that included Junee, Dulwich Hospital, and NWA.

Speaker #2: For the long term. And then, we've renewed the Grampians Hospital out to 2034. So the hospital network, and public hospitals in particular, I think over the past 12 months have actually shown quite strong growth.

Speaker #2: I've forgotten the second part of your question.

Speaker #3: The tests that aren't funded.

Davin Thillainathan: The tests that are not-

Speaker #2: Oh, the tests. Yeah. So, look, I think, similar to probably some other commentary, that’s easier said than done. We were forced down that route last year with B12 and urine changes.

Paul Anderson: Oh, the tests. Yeah. Well, look, I think, similar to probably some other commentary, that is easier said than done. We were forced down that route last year with B12 and urine changes. I think what we have proven is that we are charging for B12 and urine tests, and that is broadly accepted. As for charging out-of-pocket fees for other tests that are either unfunded by MBS or do not cover the cost of actually doing the test. I think, we are making some progress on that front. It is difficult. It is difficult from an acceptance point of view from referrers. I think it is difficult, and you need to be cautious in the way that you are actually charging patients so that they understand the impact, and you can actually collect the revenue. So, I would say, look, we have made progress on that. B12 and urines was a really good test case.

Speaker #2: I think what we've proven is that we are charging for B12 and urine tests, and that's broadly accepted. As for charging out-of-pocket fees for other tests that are either unfunded by the MBS or don't cover the cost of actually doing the test, I think we are making some progress on that front.

Speaker #2: It's difficult. It's difficult from an acceptance point of view from referrers. And I think it's also difficult, and you need to be cautious in the way that you are actually charging patients, so that they understand the impact and you can actually collect the revenue.

Speaker #2: So, I'd say, look, we have made progress on that. B12 and urines was a really good test case, but it's also difficult.

Paul Anderson: But it is difficult.

Speaker #5: Yeah, okay. And my next one was just on your cash flows. If I look at the EBIT performance of the business, it is improving.

Davin Thillainathan: Yep. Okay. My next one was just on your cash flows. If I look at the EBIT performance of the business, it is improving, but the cash flows seem to be going the other way. I think some of the drivers, perhaps you could help us understand that disconnect. One of the drivers appears to be this Lumus divestment payment. Perhaps if you could just explain what that is, and then also just help on the other moving parts, please. Thank you.

Speaker #5: But the cash flows seem to be going the other way. Now, I think some of the drivers—perhaps you could help us understand that disconnect?

Speaker #5: One of the drivers appears to be this Loomis divestment payment. So perhaps if you could just explain what that is, and then also just help on the other moving parts, please.

Speaker #5: Thank you.

Speaker #2: Yeah, perhaps I'll just see if I can make an overarching question first, and then Andrew can talk you through some of the quite large one-offs and FY26.

Paul Anderson: Yeah, perhaps if I could just make an overarching question first, and then Andrew can talk you through some of the quite large one-offs in FY26. We have obviously given guidance for next year, in terms of EBIT. We have talked about the cessation of the digital investment program, which was non-underlying, and obviously did impact cash. What we are saying is that, we have given you consensus numbers. The business, on that basis, is cash flow positive, in FY27, which is different from what you have seen in that slide today and the change in cash for this year, which was impacted by a combination of things, including some of those one-offs. Maybe I will just get Andrew to answer some of that.

Speaker #2: So, we've obviously given guidance for next year. In terms of EBIT, we've talked about the cessation of the digital investment program, which was non-underlying and obviously did impact cash.

Speaker #2: So what we're saying is that we've given you consensus numbers. The business, on that basis, is cash flow positive in FY27, which is different from what you've seen in that slide today. And the change in cash for this year was impacted by a combination of things, including some of those one-offs. Maybe I'll just get Andrew to answer some of that.

Speaker #3: Yeah, so look, I won't go into every single line, but I think the key items, maybe, that you were asking about—there was an ATO settlement for a historic claim.

Andrew Thomson: Yeah. Look, I will not go into every single line, but I think the key items maybe that you were asking about, there was an ATO settlement for a historic claim. Look, that was AUD 20 million, give or take. The Lumus number that we were talking about earlier that you referenced, there was a true-up on the settlement of the Lumus transaction. I think we talked about that, maybe just at the H1 numbers, and that was just over AUD 22 million. We had CapEx, and we talked about CapEx during these results of AUD 42 million. Then the digital transformation costs and the restructuring costs that came through non-underlying. So those items all sort of sit outside the EBIT number you were referencing.

Speaker #3: And look, that was $20 million, give or take. The Loomis number that we're talking about earlier, that you referenced—there was a true-up on the settlement of the Loomis transaction.

Speaker #3: I think we talked about that, maybe just at the half-year numbers, and that was just over $22 million. We had capex, and we talked about capex during these results, of $42 million.

Speaker #3: And then the digital transformation costs and the restructuring costs that came through non-underlying—so those items are also set out outside the EBIT number you were referencing.

Speaker #5: Okay. Thanks, Paul. Thanks, Andrew.

Davin Thillainathan: Okay. Thanks, Paul. Thanks, Andrew.

Speaker #1: Your next question comes from Craig Wong-Penn with RBC. Please go ahead.

Operator 2: Your next question comes from Craig Wong-Pan with RBC. Please go ahead.

Operator: Your next question comes from Craig Wong-Pan with RBC. Please go ahead.

Speaker #3: Good morning. I just wanted to understand that $15 million Fair Work case amount. Just to clarify, is that the actual amount of increase in FY27, or is that an annualized run rate number?

Craig Wong-Pan: Good morning. Just wanted to understand that AUD 15 million Fair Work case amount. Just wanted to clarify, is that the actual amount of increase in FY27 or is that an annualized run rate number?

Speaker #2: So that is the actual cost that we will incur in FY27, and it's made up of three different amounts. So it's made up of, effectively, the 4.75% variation between what's traditionally been kind of circa 3.5%.

Paul Anderson: That is the actual cost that we will incur in FY27, and it is made up of three different amounts. So it is made up of effectively the 4.75 variation between what is traditionally been kind of circa 3.5%. That is a relatively small piece. It is the changes to the scientists from 1 October, and it is the additional increase for collectors on 1 January, which is the second tranche of their increase that they received back on 1 April this year. So it is a combination of those three things.

Speaker #2: That's a relatively small piece. It is the changes to the scientists from the 1st of October, and it's the additional increase for collectors on the 1st of January, which is the second tranche of their increase that they received back on the 1st of April this year.

Speaker #2: So it's a combination of those three things.

Speaker #3: Okay, great. Thanks for clarifying. I just wanted to tease out the cost savings that you expect to derive in FY27, over and above what you've already achieved in '26.

Craig Wong-Pan: Okay, great. Thanks for clarifying. I just wanted to tease out the cost savings that you expect to derive in FY27 or over and above what you have already achieved in 2026. Could you help me out with understanding what benefit that is?

Speaker #3: Could you help me understand what benefit that is?

Speaker #2: Look, I think it's twofold. It's the full run-rate of the changes that we have made this year, and broadly, that is the changes in our workforce.

Paul Anderson: Well, I think it is twofold. It is the full run rate of the changes that we have made this year. Broadly, that is the changes in our workforce, up front in the customer commercial area. It is the changes that we have made to both our main laboratories and our regional laboratories, in terms of workforce. It is changes to our couriers. Then it is the reduction in cost just generally right across the business. So those are the main factors. I think a lot of these things are gradually being unlocked with technology. I know, we all as a group, internally, externally, talk about one laboratory information system. We will have that fully in place by the end of FY27. A chunk of that is already in place. So, our histopathology, we have one LIS for that. So we share work all around the network and clearly get efficiencies from that.

Speaker #2: Upfront, in the customer and commercial area, it's the changes that we've made to both our main laboratories and our regional laboratories. In terms of workforce, it's changes to our couriers.

Speaker #2: And then it is the reduction in cost just generally right across the business. So those are the main factors. I think a lot of these things are gradually being unlocked with technology.

Speaker #2: I know we all, as a group—internally and externally—talk about one laboratory information system. We will have that fully in place by the end of FY27.

Speaker #2: A chunk of that is already in place. So, for our histopathology, we have one LIS for that. We share work all around the network and clearly get efficiencies from that.

Speaker #2: That is the same for cytology. And genomic diagnostics will have that capability by the end of next month, which will be a major step-change for the way that their workflows work. Their capacity constraints that they have at the moment will no longer be there.

Paul Anderson: That is the same for cytology. Genomic Diagnostics will have that capability by the end of next month, which will be a major step change for the way that their workflows work. Their capacity constraints that they have at the moment will no longer be there, which obviously enables them to do more work, and process faster turnaround time. So it is a combination of all of those things.

Speaker #2: So, which obviously enables them to do more work and process faster turnaround time. So it's a combination of all of those things.

Speaker #3: Are you able to put a number to the amount of savings? Because I guess I'm just struggling a little bit with what you've earned for '26. Then you're facing the increased cost from the Fair Work cases and just general inflation, with kind of modest sort of volume.

Craig Wong-Pan: Are you able to put a number to the amount of savings? Because I guess I am just trying to struggle a little bit with what you have earned for 2026, then you are facing the increased cost from the Fair Work cases and just general inflation with modest volume.

Speaker #2: Yeah, without trying to give you a reconciliation, if you take the $15 million out of pathology labor costs for next year, costs are broadly flat again year-on-year.

Paul Anderson: Yeah, without trying to give you a reconciliation. If you take the AUD 15 million out of pathology labor costs for next year, costs are broadly flat again year-on-year. If that helps.

Speaker #2: If that helps.

Speaker #3: Okay. All right. Thank you.

Craig Wong-Pan: Okay. All right. Thank you.

Speaker #1: Your next question comes from Andrew Goodsall with MST Marquee. Please go ahead.

Operator 2: The next question comes from Andrew Goodsall with MST Marquee. Please go ahead.

Operator: The next question comes from Andrew Goodsall with MST Marquee. Please go ahead.

Speaker #4: Oh, thanks very much for taking my questions. The first one, just if you could characterize the second half in terms of the movements of, sort of, how you fared against MBS, and noting that you've got the ADF contract, I think, started at the same time you may have had movements with your Victorian contracts.

Andrew Goodsall: Oh, thanks very much for taking my questions. First one, if you just characterize the H2 in terms of the movements of how you fared against MBS and noting that you have the ADF contract, I think, started and at the same time you may have had movements with your Victorian contracts. I think that probably came to an end. Western Health.

Speaker #4: I think that probably came to an end at Western Hospital.

Speaker #2: Yeah, look, it's good. That's, I think, all of those things that you spoke of make a bit of a messy reconciliation. So, Western Health obviously finished; that contract was delayed, and their pricing went up across that period.

Paul Anderson: Yeah. Look, I think all of those things that you spoke of make a bit of a messy reconciliation. Western Health obviously finished. That contract was delayed, and their pricing went up across that period. We obviously did start the new ADF contract, so that started from 1 April and ramped up. I think mixed in all of that is just the movement in ACCs. I think the movement in ACCs or the CCS or the reduction in ACCs, combined with GP attendances, which were up and down. So, I think there are a lot of moving parts in that H2.

Speaker #2: We obviously did start the new ADF contract, so that started from the 1st of April and ramped up. I think mixed in all of that is just the movement in ACCs.

Speaker #2: I think that the movement in ACCs or the CCs, or the reduction in ACCs combined with GP attendances, which were up and down. So I think there's a lot of moving parts in that second half.

Speaker #2: I think the one thing I would say is that, from a customer and commercial or sales point of view, we have a very clear idea of that ACC footprint that we have.

Paul Anderson: I think the one thing I would say is that, from a customer and commercial or sales point of view, we have a very clear idea of that ACC footprint that we have, now which is reduced from what we had at the start of the year. We have a very clear picture of the hospital environment we have now with Western Health out, Joondalup renewed the new Grampians contract. Plus a range of other public hospitals that have had price increases across that period, which we will benefit from, have benefited from in H2, but will benefit more from in FY27. So there are a whole lot of moving pieces.

Speaker #2: Now, which is reduced from what we had at the start of the year. We have a very clear picture of the hospital environment we have now, with Western Health out in June, due to the renewed New Grampians contract.

Speaker #2: Plus a range of other public hospitals that have had price increases across that period, which we have benefited from in H2, but will benefit more from in FY27.

Speaker #2: So, there's a whole lot of moving pieces.

Speaker #4: Yeah, just trying to get a bit of a run rate, but it's really the fourth quarter that was sort of probably when you stabilized, is my guess, just based on the movement of those contracts.

Andrew Goodsall: Yeah, just trying to get a bit of a run rate, but it is really our Q4 was sort of probably when you stabilized is my guess, just based on movement of those contracts.

Speaker #2: Yeah, it has. And I think, look, we've given you guidance for next year, so I think that's probably a pretty good indicator of where we think revenue is heading from MBS, hospitals, and so forth.

Paul Anderson: Yeah, it has. I think, look, we have given you guidance for next year. So I think that is probably a pretty good indicator of where we think revenue is heading from MBS hospitals, and so forth.

Speaker #4: And my follow-on would just be, in terms of all of those contracts, I guess that they seem to have settled now in the sense that you haven’t—there’s no other sort of cliffs or anything you’ve got coming up.

Andrew Goodsall: My follow-on would just be in terms of all of those contracts. I guess they seem to have settled now in a sense that there's no other sort of cliffs or anything you've got coming up, is there?

Speaker #4: Is there?

Speaker #2: No, there's no other from a hospital perspective. There's not really any other. I think for us, it's mostly upside in terms of pricing contract renewals.

Paul Anderson: No, from a hospital perspective, there's not really any other. I think for us it's mostly upside in terms of pricing, contract renewals. As you said, there's no other cliffs out there.

Speaker #2: There's no—yeah, as I said, there's no other cliffs out there.

Speaker #4: And then just a final one for me, just on the regulatory front. I know you've talked previously about some lobbying efforts in Canberra. Just any thoughts, yeah, any sort of update that you've got that might be positive or negative on the sovereign risk piece?

Andrew Goodsall: Just final one for me, just on the regulatory front. I know you've talked previously to some lobbying efforts in Canberra. Just any thought, any sort of update that you've got that might be positive or negative on that sovereign risk piece?

Speaker #2: Look, no update, other than we continue to put our case that, in particular with the additional costs of Fair Work—so I think that's probably an additional element that we didn't have this time last year to talk about.

Paul Anderson: Look, no update other than we continue to put our case, in particular with the additional costs of Fair Work. I think that's probably an additional element that we didn't have this time last year to talk about. I think everyone's fully aware that the limited indexation that we received last year was offset probably twofold by the changes to B12 and urines. Having the Fair Work costs added on top of that just exacerbates the situation. So, no update other than we continue to mount our case forcefully with what we think is a very constructive argument.

Speaker #2: So, I think everyone's fully aware that the limited indexation that we received last year was offset, probably twofold, by the changes to B12 and urines.

Speaker #2: So having the Fair Work costs added on top of that just exacerbates the situation. So, no update other than we continue to mount our case forcefully with what we think is a very constructive argument.

Speaker #4: All right. Thank you.

Andrew Goodsall: Great. Thank you.

Speaker #1: Your next question comes from David Stanton with Jefferies. Please go ahead.

Operator 2: Your next question comes from David Stanton with Jefferies. Please go ahead.

Operator: Your next question comes from David Stanton with Jefferies. Please go ahead.

Speaker #5: Good morning, team, and thanks very much for taking my questions. I just want to go back to guidance and the number that you've given—a wee bit of, call it, $40 million.

David Stanton: Good morning, team, and thanks very much for taking my questions. I just want to go back to guidance and the number that you have given of EBIT of, call it AUD 40 million. I just want to be 100% clear. Does guidance include an impact from the AUD 15 million of Fair Work cost impulse that you have got? If you did not have that, would you be guiding to, would you be happy with a number around the AUD 55 million number or not?

Speaker #5: I just want to be 100% clear. So, does guidance include an impact from the $15 million of Fair Work cost impost that you've got?

Speaker #5: I.e., if you didn't have that, would you be guiding to — sort of, would you be happy with a number around the $55 million number?

Speaker #5: Or?

Speaker #2: Yeah, it's.

Speaker #5: Or not?

Speaker #2: It's fully included. It's fully included, David. Yep.

Paul Anderson: It is fully included. It is fully included, David. Yep.

Speaker #5: Okay. So it's fully included. So, on that basis, if you didn't have the $15 million, then you'd be looking at, sort of, you'd be happy with consensus around the $55 million.

David Stanton: Okay. So it is fully included. So on that basis, if you did not have the AUD 15 million, then you would be looking at, you would be happy with consensus.

Paul Anderson: Correct

David Stanton: around the 50, 55. Okay. Very good.

Speaker #5: Okay, very good. And that was very clear. My second question: on Capex, can you give us some idea around maintenance or growth Capex for '27, please?

Paul Anderson: Yeah.

David Stanton: And then very clear. Then, second question. CapEx, can you give us some idea around maintenance or growth CapEx for, and growth CapEx for 2027, please? What you are thinking?

Speaker #5: What are you thinking?

Speaker #2: Yeah, look, I think the number in FY26 was obviously higher than where we’ll be in FY27. We’ve spent more this year on replacing some of the equipment.

Paul Anderson: Yeah. Look, I think the number in FY26 is obviously higher than where we will be in FY27. We have spent more this year on replacing some of the equipment. I think we are through that. Some of the AI spend that we have done this year is around setting things up, and we expect next year to be a lower number is the best way to say it.

Speaker #2: I think we're through that. Some of the AI spend that we've done this year is around setting things up, and we expect next year to be a lower number, is the best way to say it.

Speaker #5: Fair enough. And then I guess on that basis then, so how do you get can you sort of give us a bit more color on how you get to a positive cash flow in F27?

David Stanton: Fair enough. On that basis then, can you give us a bit more color on how you get to a positive cash flow in FY27?

Andrew Thomson: I think, Luke, without giving a step-by-step guidance, I think the important thing to think about is the shape of the H1 and H2 numbers this year, which obviously from a revenue perspective, normally we see that phasing skewing more towards H2 on the revenue side. I think this year, as Paul's talked about with Western, with Hollywood, and then with the new contracts ramping up, the revenue in the second half this year was lower. If you look at the cost base, normally what we see is the cost base is about the same between H1 and H2, except for the working days. Paul and I have both talked a lot about the cost resetting this year. You can see that in the cost base for H2 this year versus H1.

Speaker #2: I think, look, without giving a sort of step-by-step guidance, I think the important thing to think about is the shape of the half one and half two numbers this year, which obviously from a revenue perspective, normally we see that phasing skewing more towards H2 on the revenue side.

Speaker #2: I think this year, as Paul's talked about with Western, with Hollywood, and then with the new contracts ramping up, the revenue in the second half this year was lower.

Speaker #2: Now, if you look at the cost base, normally what we see is the cost base is about the same between H1 and H2, except for the impact of working days.

Speaker #2: Paul and I have both talked a lot about the cost resetting this year. You can sort of see that in the cost base for H2 this year versus H1.

Speaker #2: And if you take that sort of cost run rate and project that forward, and then think about the ramp-up of some of the revenues that Paul’s talked about, and the other revenue initiatives, and kind of ACC growth, that’s sort of how we get to that.

Andrew Thomson: If you take that cost run rate and project that forward, then think about the ramp-up of some of the revenues that Paul's talked about and the other revenue initiatives and of ACC growth, that is how we get to that. Also, the cash impact, as we talked about earlier, is partly driven by things like the non-underlying and the digital spend. We had AUD 21 million of non-underlying in H1 and AUD 6 million in H2. Digital spend has moved into the underlying business and it has not gone away, but it is less as business as usual now. Overall, the cash component in the second half is better, and that is what we expect to continue.

Speaker #2: Also, the cash impact, as we talked about earlier, is partly driven by things like the non-underlying and the digital spend. And we had sort of $20 million of digital—well, $20 million of, $21 million of non-underlying in H1 and $6 million in H2.

Speaker #2: Digital spend has moved into the underlying business, and it hasn't gone away, but it's less. It's business as usual now. So overall, the cash component in the second half is better, and that's what we expect to continue.

Speaker #5: Understood. Thank you very much.

David Stanton: Understood. Thank you very much.

Speaker #1: Your next question comes from Shane Ponraj with Macquarie. Please go ahead.

Operator 2: The next question comes from Shane Ponraj with Macquarie. Please go ahead.

Operator: The next question comes from Shane Ponraj with Macquarie. Please go ahead.

Speaker #6: Good morning, everyone. Thanks for taking my questions. Firstly, you called out an underlying pathology volume growth of 0.3%, excluding changes in hospital contracts. Just wondering if that also excludes the 100 net closures?

Shane Ponraj: Good morning, everyone. Thanks for taking my questions. Firstly, you called out an underlying pathology volume growth of 0.3%, excluding changes in hospital contracts. Just wondering if that also excludes the 100 net closures.

Speaker #2: No, there you go, Paul. No, no, it didn't. So that was a no—it didn't is the answer. So that was supposed to just set out the impact of those major changes from a contract point of view.

Andrew Thomson: No, that. Do you go, Paul?

Paul Anderson: No, it did not. No, it did not, is the answer. That was supposed to just set out the impact of those major changes from a contract point of view to volumes across the year. No, it does not.

Speaker #2: To volumes across the year. So no, it doesn't.

Speaker #6: Great. And as a follow-up, are there any comments you can make on what happens with those two material hospital contract losses, and if you see net closures stabilizing this year?

Shane Ponraj: Great. As a follow-up, any comments you can make on what happened with those two material hospital contract losses, if you are seeing net closures stabilizing this year?

Speaker #2: Yeah, sure. So Western Health was a large hospital in Melbourne that's gone back into public hands, which we could talk about forever. The pathology has, rather.

Paul Anderson: Yeah, sure. Western Health was a large hospital in Melbourne that has gone back to the public hands, which we could talk about forever. The pathology has, rather. The other one was Hollywood Private Hospital in Perth, which has gone to one of our competitors, gone to Sonic Healthcare. Outside of that, Joondalup, we renewed that hospital along with a change in or a consolidation of contracts for all the Ramsay Health Care hospitals that we have. There are no other major changes, or major changes coming, I should say.

Speaker #2: And the other one was Hollywood Hospital in Perth, which has gone to one of our competitors—gone to Sonic. So outside of that, Joondalup, we renewed that hospital along with a change in, or a consolidation of, contracts for all the Ramsay hospitals that we have.

Speaker #2: So there's no other major changes, or major changes coming, I should say.

Speaker #6: And just on net closures stabilizing—sorry.

Shane Ponraj: Just on net closures stabilizing. Sorry.

Speaker #2: Pardon?

Paul Anderson: Pardon?

Speaker #6: Just on the net closures.

Shane Ponraj: Just on the net closures.

Speaker #2: Of the hospital contracts?

Paul Anderson: Of the hospital contracts?

Speaker #6: No, sorry, of ACCs. You had about—

Shane Ponraj: No, sorry, of ACCs. You had about 100.

Speaker #2: Oh, the ACCs.

Paul Anderson: Of the ACCs.

Speaker #6: Yeah.

Shane Ponraj: Yeah.

Speaker #2: Yeah. Look, that 100 is across the year. So I think the point we're trying to make now is that our ACC footprint is significantly less.

Paul Anderson: Well, that 100 is across the year. I think the point we are trying to make now is that our ACC footprint is significantly less, so 5% less than what it was. Did we or are we seeing a 5% reduction in episode volumes? No. It is significantly less, so that kind of tells us that our rationalization piece is working. Are there some ACCs in that 100 that we would have liked to have kept? That is just natural competition, and we know there is more competition out there in ACC land. That is our starting point. We see the number of ACCs, as we said in our release, will grow modestly across this current financial year.

Speaker #2: So, 5% less than what it was. Did we, or are we seeing, a 5% reduction in episode volumes? No. Significantly less. So that kind of tells us that our rationalization piece is working.

Speaker #2: Now, are there some ACCs in that 100 that we would have liked to keep? That's just natural competition. And we know there's more competition out there in ACC land.

Speaker #2: But so that's our starting point. We see the number of ACCs as we sit in our release will grow modestly across this current financial year.

Speaker #6: Okay, great. Thanks. And just lastly, thinking about the growth of telehealth—you sort of mentioned that as a headwind to the T27 target. Just wondering what difference you're seeing between referrals from telehealth versus face-to-face, and do you see that gap narrowing in the future?

Shane Ponraj: Okay, great. Thanks. Just lastly, thinking about growth of telehealth, you mentioned that as a headwind to the T27 target. Just wondering what difference you are seeing between referrals from telehealth versus face-to-face, and do you see that gap narrowing in the future?

Speaker #2: Look, I think that's a very good question. So, telehealth represents around 18% of all GP attendance numbers. That's based off Medicare data as of June.

Paul Anderson: Look, I think that is a very good question. Telehealth represents around 18% of all GP attendance numbers. That is based off Medicare data at June. I think over the last two years or three years, it has kind of gone from 15% to 18%. It is not growing exponentially. The work that we have done on looking at referral patterns for telehealth versus face-to-face visits is that telehealth visits generally have referrals slightly less than half of what a face-to-face visit would have. That is kind of a point in the sand, I guess. They are facts. It is also an environment I think that is changing quite rapidly as well. It is something that I think we monitor.

Speaker #2: I think over the last two or three years, it's kind of gone from 15 to 18. So it's not growing exponentially. The work that we've done on looking at referral patterns for telehealth versus face-to-face visits is that telehealth visits generally have referrals slightly less than half of what a face-to-face visit would have.

Speaker #2: So that's kind of a point in the sand, I guess. They are facts, but it's also an environment, I think, that's changing quite rapidly as well.

Speaker #2: So it's something that I think we monitor. The good thing, in terms of GP attendances, is if you look at the last four months of the financial year—March, April, May, and June—all had growth in GP attendances.

Paul Anderson: The good thing in terms of GP attendance is if you look at the last four months of the financial year, March, April, and June, all had growth in GP attendances, both for face-to-face and total attendances. That is a trend that we hope continues.

Speaker #2: Both for face-to-face and total attendances. So that's a trend that we hope continues.

Speaker #6: Great. Thanks very much.

Shane Ponraj: Great. Thanks very much.

Speaker #1: Your next question comes from Sasha Crane with Evans & Partners. Please go ahead.

Operator 2: Your next question comes from Sacha Krien with Evans and Partners. Please go ahead.

Operator: Your next question comes from Sacha Krien with Evans and Partners. Please go ahead.

Speaker #7: Hi, good morning, Paul and Andrew. This question on your pathology outlook. So you're expecting three to four percent sorry, three and a half percent pathology cost growth, which I assume implies around a three to four percent pathology revenue growth next year to get to that EBIT number.

Sacha Krien: Good morning, Paul and Andrew. Just a question on your pathology outlook. You are expecting 3.5% pathology cost growth, which I assume implies around a 3% to 4% pathology revenue growth next year to get to that EBIT number. Just hoping you can provide a bit of a breakdown of how you get there. Are you expecting better growth from MBS or non-MBS into FY27?

Speaker #7: Just hoping you can provide a bit of a breakdown of how you get there. Are you expecting better growth from MBS or non-MBS into FY27?

Speaker #2: Look, I think as we look at our revenue pie, two-thirds of it is MBS. So we are hoping to grow in line with MBS volumes.

Paul Anderson: Look, I think as we look at our revenue pie, two-thirds of it is MBS. We are hoping to grow in line with MBS volumes. We have a pretty structured, focused plan on how we grow our footprint, and grow those revenues, at least in line. I think our two-thirds of the remainder of the commercial, we hope to grow well ahead of that as we did this year. Vetnostics is now growing quite consistently. Genomic Diagnostics is growing, as we said, almost 17% this year. We think the hereditary cancers, the reproductive testing and hematology testing, which is the other growth engines in that business, will continue to grow at those levels or higher with our changes to our Pathway, our digitization of their workflows.

Speaker #2: We have a pretty structured focus plan on how we grow our footprint and grow those revenues, at least in line. I think our two-thirds of the remainder of the commercial, we hope to grow well ahead of that, as we did this year.

Speaker #2: So this is now growing quite consistently. Genomics is growing, as we said, almost 17% this year. We think the hereditary cancers, the reproductive testing, and hematology testing, which are the growth engines in that business, will continue to grow at those levels or higher with our changes to our pathway and our digitization of their workflows.

Speaker #2: And there's a lot of work out there in terms of B2B or B2B2C, which is the telehealth businesses, and then all of your normal drug and alcohol testing.

Paul Anderson: There is a lot of work out there in terms of B2B or B2B2C, which is the telehealth businesses, and then all of your normal drug and alcohol testing, the Australian Defence Force is a growth part of our business for next year, and so forth. So it is kind of two components.

Speaker #2: The defense forces are a growth part of our business for next year, and so forth. So it's kind of two components.

Speaker #7: Okay. So, it sounds like probably stronger growth from non-MBS, but are you—yeah. Are you seeing some—it sounds like maybe you're seeing some green shoots on the MBS side, or is it more hope at this point?

Sacha Krien: Okay. So it sounds like probably stronger growth from non-MBS.

Paul Anderson: Yeah, it is. Yes.

Sacha Krien: Yeah. Sounds like maybe you are seeing some green shoots on the MBS side, or is it more hope at this point?

Speaker #2: No. Well, I think, if you look, I think specialist attendances have been growing. We're very aware that that's a part of the revenue pie that we need to increase.

Paul Anderson: No. Look, I think specialist attendances, they have been growing. We are very aware that that is a part of the revenue pie that we need to increase. We think we have a very good plan to try and do that. Just as I spoke about there, three of those last four months in terms of GP attendances have been more encouraging than the previous 8 months.

Speaker #2: And we have a we think we have a very good plan to try and do that. And just as I spoke about there, there's those three of those last four months in terms of GP attendances have been more encouraging than the previous eight months.

Speaker #7: Yeah. Okay. Thanks. And then just so I get this right, and then layer on top of the we should be layering on top of that, continue drag from ACC closures.

Sacha Krien: Yep. Okay, thanks. Just so I get this right, we should be layering on top of that continued drag from ACC closures. Is that the right way to think about it?

Speaker #7: Is that the right way to think about it?

Speaker #2: No, I think our view is that our ACC footprint will grow this year, and in a profitable way, but not necessarily in a conventional way either.

Paul Anderson: No. I think our view is that our ACC footprint will grow this year, and in a profitable way. But not necessarily in a conventional way, either. I think when we talk about ACC footprint, I think people normally think about medical practices. There's clearly been a push to independence, which take longer to ramp up but are more profitable. But I think there are other ways to do that as well. We think our footprint will grow overall.

Speaker #2: So I think when we talk about ACC footprint, I think people generally think about, normally think about, medical practices. So there's clearly been a push to independence, which takes longer to ramp up, but are more profitable.

Speaker #2: But I think there are other ways to do that as well, so we think our footprint will grow overall.

Speaker #7: Okay, thanks. And last question, please. Just in terms of some of the non-MBS growth of the industry, it looks like the industry is pushing pretty hard on upfront billing and commercial contract pricing increases.

Sacha Krien: Okay, thanks. Last question, please. Just in terms of some of the non-MBS growth that the industry is seeing, it looks like the industry's been pushing pretty hard on upfront billing and commercial contract price increases. Do you think there's much scope to keep going with that and driving that non-MBS growth?

Speaker #7: Do you think there's much scope to keep going with that and driving that non-MBS growth?

Speaker #2: Yeah, absolutely, there is. And I think the commercial growth is easier than the kind of out-of-pocket growth. But the industry is being forced down that route.

Paul Anderson: Yeah, absolutely there is. Yep. I think the commercial growth is easier than the out-of-pocket growth. But the industry is being forced down that route, so I think everyone's pushing with that.

Speaker #2: So, I think everyone's pushing with that.

Speaker #7: Okay.

Sacha Krien: Okay. Thank you.

Speaker #2: Just on the contractual growth, I think it's important to think about not just price and price pressure or price increases—a lot of it is around the stuff that Paul's talked about: the investment in our business that makes the service offering, as we go into those commercial contracts, better and better value.

Andrew Thomson: Just on the contractual growth, I think it is important to think about not just price, and price pressure or price increases. A lot of it is around the stuff that Paul has talked about, the investment in our business that make the service offering as we go into those commercial contracts better and better value.

Speaker #7: Okay. Great. Thank you.

Sacha Krien: Okay, great. Thank you.

Speaker #1: Your next question comes from David Kingston with K Capital Group. Please go ahead.

Operator 2: Your next question comes from David Kingston with K Capital Group. Please go ahead.

Operator: Your next question comes from David Kingston with K Capital Group. Please go ahead.

Speaker #8: Good morning, Paul. How are you? Look, I've got a fairly simple question. Paul, it's nearly three years since Healius did the $1.20 emergency rights issue.

David Kingston: Good morning, Paul. How are you?

Paul Anderson: Thank you.

David Kingston: Look, I have a fairly simple question. Paul, it is nearly three years since Healius did the AUD 1.20 emergency rights issue. Clearly, you then paid out AUD 0.41 special dividend, no other dividends. Let us just say the adjusted price is AUD 0.80 ex the special dividend. Yet now you are in the low AUD 0.40s, three years later. Look, clearly, you are also pushing out the guide for mid to high single-digit margin for another year, which is obviously disappointing the market. My simple question, Paul, is probably your most direct peer is Australian Clinical Labs has in the last year to date, 1 January, it was around AUD 2.80. It is currently AUD 2.80, Paul. Whereas Healius, 1 January this year was around AUD 1, it is now low AUD 0.40s. Just appreciate if you could give us a macro view as to what has gone wrong.

Speaker #8: Now, clearly, you then paid out a $0.41 special dividend—no other dividends. But let's just say, the adjusted price is $0.80, excluding the special dividend.

Speaker #8: And yet now you're in the low 40s, three years later. Look, clearly, you're also pushing out the guide for mid- to high-single-digit margin.

Speaker #8: For another year, which is obviously disappointing the market. But look, my simple question, Paul, is probably your most direct peer is ACL. In the last year to date, 1 January, it was around about $2.80.

Speaker #8: It's currently 280, Paul. Whereas Healius, on 1 January this year, was about $1. It's now in the low 40s. I'd appreciate it if you could give us the macro view as to what's gone wrong.

Speaker #8: Why are you underperforming ACL in share price terms so dramatically? Because obviously, it's hurting shareholders. There's no dividend apart from the special, and it's just more pain and more pain.

David Kingston: Why are you underperforming Australian Clinical Labs in share price terms so dramatically? Because obviously it is hurting shareholders. There is no dividend apart from the special, and it is just more pain and more pain, and obviously the result today is a bit disappointing. Appreciate if you could explain why Australian Clinical Labs is performing far, far better than Healius. Thank you.

Speaker #8: And obviously, the result today is a bit disappointing. But I'd appreciate it if you could explain why ACL is performing far, far better than Healius. Thank you.

Speaker #2: Thanks, David. Look, it's a bit hard for me to respond to a comparison to ACL. I think what we're trying to do today is set out what we're doing.

Paul Anderson: Thanks, David. Look, it is a bit hard for me to respond to a comparison to Australian Clinical Labs. I think what we are trying to do today is set out what we are doing. There has clearly been some headwinds in the past 12 months that have impacted this sector, whether they be GP attendances, changes to B12 and urines, or Fair Work. I think the important thing for us is what are we doing about it? We have set out today what we are focused on in terms of the collection centers, driving profitable revenue through non-MBS revenues, which we are making good progress on. I think we have demonstrated that we have kept labor costs flat. Have we got more to go? Absolutely, we do.

Speaker #2: I think there's clearly been some headwinds in the past 12 months that have impacted this sector, whether they be GP attendances, changes to B12 and urines, ES, or Fair Work.

Speaker #2: I think the important thing for us is, what are we doing about it? So we've set out today what we're focused on in terms of the collection centers.

Speaker #2: Driving profitable revenue through non-MBS revenues, which we are making good progress on. I think we've demonstrated that we've kept labor costs flat. Have we got more to go?

Speaker #2: Absolutely, we do. And an unlock of that is, one, lab information system. That is something that ACL have had and built from the ground up, whereas we have come from the other direction, with four systems.

Paul Anderson: An unlock of that is one LIS, and that is something that Australian Clinical Labs have had and built from the ground up, that we have come from the other direction with four systems, and building that into one, which we have partially done. Look, I think our focus is on positive cash generation. We have given you guidance on that. We have given you guidance around the cash positive nature of this current year. I think that is probably all I can add, David, is that we are here to say that we have a plan, and we believe that plan is starting to work.

Speaker #2: And building that into one, which we've partially done. So, look, I think our focus is on positive cash generation. We've given you guidance on that.

Speaker #2: We've given you guidance around the cash-positive nature of this current year, so I think that's probably all I can add, David. We're here to say that we have a plan.

Speaker #2: And we believe that plan is starting to work.

Speaker #8: Following up, Paul, we all accept that the industry has challenges—that's a given. But the beauty of comparables, with peers, is that both of them have got the same macro challenges.

David Kingston: Following up, Paul, we all accept that the industry has challenges, so that is a given. The beauty of comparables with peers is that both of them have got the same macro challenges, so Australian Clinical Labs has got the same challenges. Really it is a very stark issue, Paul, that in the last eight months or so, you have lost around 60% of shareholder value according to the market price today, whereas Australian Clinical Labs has lost nothing. So there has got to be some macro reasons why you think they are performing dramatically better than Healius.

Speaker #8: So ACL has got the same challenges. But really, it's a very stark issue, Paul, that in the last eight months or so, you've lost around 60% of shareholder value, according to the market price today.

Speaker #8: Whereas ACL has lost nothing. So there's got to be some macro reasons why you think they're performing dramatically better than Healius.

Speaker #2: Oh, yeah. Look, I completely understand there's a comparable there, so I think we're not disputing that. I think what we're saying is that we are coming from a different starting point.

Paul Anderson: Look, I completely understand there is a comparable there. I think we are not disputing that. I think what we are saying is that we are coming from a different starting point. We have got a plan to close that gap. That is what we have set out.

Speaker #2: And we've got a plan to close that gap, so that's what we've set out.

Speaker #8: Well, as I said, Sonic's a different beast. It's global. But ACL is a direct comparable. And at the moment, Paul, to be frank, Healius's performance is embarrassing.

David Kingston: Well, as I said, Sonic's a different beast, it's global, but Australian Clinical Labs is a direct comparable and, at the moment, Paul, to be frank, Healius' performance is embarrassing relative to Australian Clinical Labs. If Australian Clinical Labs was down 30%, 40%, fine, but it's constant year to date. Anyway, leave it with you guys, but the comparable's indicating that Healius is not performing properly. Thank you.

Speaker #8: Relative to ACL: if ACL was down 30 or 40 percent, fine. But it's constant year-to-date. But anyway, I'll leave it with you guys. The comparables indicate that Healius is not performing properly.

Speaker #8: Thank you.

Paul Anderson: Thanks, David.

Speaker #2: Thanks, David.

Speaker #1: Your next question comes from Sol Haddasson with Barron Joey. Please go ahead.

Operator 2: Your next question comes from Saul Hadassin with Barrenjoey. Please go ahead.

Operator: Your next question comes from Saul Hadassin with Barrenjoey. Please go ahead.

Speaker #9: Yeah, thanks for taking my one question. Just wanted to ask, just noting the debt and the net debt going up slightly by the end of FY26.

Saul Hadassin [Director of Research: Yeah, thanks for taking my one question. Just wanted to ask, just noting the debt and the net debt going up slightly, by the end of FY26. As it relates to the net interest cost into FY27, can you just give us a sense of what that could look like versus the AUD 48 million for this year?

Saul Hadassin: Yeah, thanks for taking my one question. Just wanted to ask, just noting the debt and the net debt going up slightly, by the end of FY26. As it relates to the net interest cost into FY27, can you just give us a sense of what that could look like versus the AUD 48 million for this year?

Speaker #9: As it relates to FY27, can you just give us a sense of what that could look like versus the $48 million for this year?

Speaker #2: Yeah. So I think, Sol, obviously the $48 million includes the allocation of the lease interest under the accounting standards—just sort of like for like on the bank interest.

Andrew Thomson: Yeah. I think, Saul, obviously the AUD 48 million includes the allocation of the lease interest under the accounting standards. Just like for like on the bank interest. I guess the assumption is that the bank, the drawn debt will stay, let's call it approximately where it is, and we pay a market interest rate, so the interest will be proportional to the time we have drawn the debt. On the bank debt side, I think you can draw your own conclusions on what that number is like with the deal. But let's call it roughly AUD 0.5 million a month in interest, and then there is also a kind of an undrawn facility fee. On the lease costs, it will not be materially different from what you have seen this year.

Speaker #2: I mean, I guess the assumption is that the bank—the drawn debt—will stay, let's call it, approximately where it is, and we pay a market interest rate.

Speaker #2: So, the interest will be proportional to the time we've drawn the debt. On the bank debt side, I think you can draw your own conclusions on what that number is likely to be.

Speaker #2: But let's call it roughly $500,000 a month in interest. And then there's also kind of an undrawn facility fee. And then, on the lease costs—look, they won't be materially different from what you've seen this year.

Speaker #9: I guess, if I've understood that correctly, in totality, the net interest should go up a bit because of the interest cost on the debt—on the bank debt.

Saul Hadassin [Director of Research: Hey, guys, if I have understood that correctly, in totality, the net interest should go up a bit because of the interest cost on the bank debt.

Saul Hadassin: Hey, guys, if I have understood that correctly, in totality, the net interest should go up a bit because of the interest cost on the bank debt.

Paul Anderson: Yeah.

Speaker #9: And so, again, if I think about where the business will land on a profit-before-tax basis, I mean, effectively, all of that EBIT—if you're guiding to consensus EBIT—all that EBIT is lost through that net interest line.

Saul Hadassin [Director of Research: Again, if I think about where the business will land on a profit before tax basis, effectively, all of that EBIT, if you guide into consensus EBIT, all that EBIT is lost through that net interest line. I just wanted to make sure that that is the case.

Saul Hadassin: Again, if I think about where the business will land on a profit before tax basis, effectively, all of that EBIT, if you guide into consensus EBIT, all that EBIT is lost through that net interest line. I just wanted to make sure that that is the case.

Speaker #9: So I just wanted to make sure that that's the case.

Speaker #2: Yeah, I mean, I think you're right on the costs. And then you have to work out from there. But, yeah, look, somewhere north of $7 million on the bank interest is the right number.

Andrew Thomson: Yeah. I think you are right on the costs, and then you have to work it out from there. But yeah, somewhere north of AUD 7 million on the bank interest is the right number.

Speaker #9: And so, maybe not to ask for guidance for fiscal '28, but, Paul, maybe for you: do you think the business can actually generate positive net profit in FY28?

Saul Hadassin [Director of Research: Maybe not to ask for guidance into FY28, but Paul, maybe one for you. Do you think the business can actually generate positive net profit in FY28?

Saul Hadassin: Maybe not to ask for guidance into FY28, but Paul, maybe one for you. Do you think the business can actually generate positive net profit in FY28?

Speaker #2: Positive net profit. I mean, I guess the question is always at what line you're talking about. We certainly expect to be generating—yes, we expect to be generating positive cash this year.

Paul Anderson: Positive net profit? I guess the question is,

Saul Hadassin [Director of Research: After tax.

Saul Hadassin: After tax.

Paul Anderson: At what line you are talking about. We certainly expect to be generating.

David Kingston: Yes

Saul Hadassin: Yes

Paul Anderson: Yes, we expect to be generating positive cash this year.

David Kingston: That should be a number.

Saul Hadassin: That should be a number.

Speaker #2: Yes.

Paul Anderson: Yes.

Speaker #9: Yeah. Because obviously, the issue is all of it is even more than eliminated by your interest expense, which is a combination of lease costs and bank debt.

Saul Hadassin [Director of Research: Yeah. Because obviously the issue is all of the They are even more than eliminated by your interest expense, which is a combination of lease costs and bank debt.

Saul Hadassin: Yeah. Because obviously the issue is all of the They are even more than eliminated by your interest expense, which is a combination of lease costs and bank debt.

Speaker #9: So, if bank debt is going up into fiscal '27, the question then is, into FY28, are you finally in a position where your net debt then reduces again?

Paul Anderson: Yes.

Saul Hadassin [Director of Research: If bank debt is going up into FY27, the question then is, into FY28, are you finally in a position where your net debt then reduces again, your lease costs do not rise materially, and your operating profit is significant enough to then be able to generate positive net profit and positive EPS? Because that is what the market is waiting to see.

Saul Hadassin: If bank debt is going up into FY27, the question then is, into FY28, are you finally in a position where your net debt then reduces again, your lease costs do not rise materially, and your operating profit is significant enough to then be able to generate positive net profit and positive EPS? Because that is what the market is waiting to see.

Speaker #9: Your lease costs don't rise materially, and your operating profit is significant enough to then be able to generate positive net profit and positive EPS.

Speaker #9: Because that's what the market is waiting to see.

Speaker #2: Yes, the answer to that is yes. And look, we're talking about an increase in interest costs that, compared to the increase in earnings, is not as material.

Paul Anderson: Yes. The answer to that is yes. Look, we are talking about an increase in interest cost that is, compared to the increase in earnings, not as material.

Speaker #9: Sure. Thanks, guys. That's all I had.

Saul Hadassin [Director of Research: Sure. Thanks, guys. That is all I had.

Saul Hadassin: Sure. Thanks, guys. That is all I had.

Speaker #2: Thank you.

Paul Anderson: Thank you.

Speaker #1: Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Steve Wayne with Jarden.

Operator 2: Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Steven Wheen with Jarden. Please go ahead.

Operator: Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Steven Wheen with Jarden. Please go ahead.

Speaker #1: Please go ahead.

Speaker #10: Yeah. Good morning, and thanks for taking my questions. Apologies if you've explained this before, but I just wanted to understand why the true-up for working capital for Lumis happens so long after the transaction.

Steven Wheen: Yeah, good morning. Thanks for taking my questions. Apologies if you have explained this before, but I just wanted to understand why the true-up for working capital for Lumus happened so long after the transaction. As we start to prepare for the sale of Agilex, I am just interested to understand what the stranded costs might look like for Agilex, bearing in mind that was the case with Lumus when it was sold.

Speaker #10: And then, as we start to prepare for the sale of Agilex, I'm just interested to understand what the stranded costs might look like for Agilex, bearing in mind that was the case with Lumis when it was sold.

Speaker #2: I think they're two different beasts. So, look, the Lumis settlement took a little bit longer than normal because there was just the general wrangling that happens with a true-up at the end of any of these sales processes.

Paul Anderson: I think, Steve, they are two different beasts. The Lumus settlement took a little bit longer than normal because there was just the general wrangling that happens with the true-up at the end of these sales processes. That is, I think, a relatively easy question to answer. I think on Agilex, it is completely separate, for all intents and purposes, from Healius. The tie-up between the two is almost nonexistent in terms of if you are talking about systems and costs and so forth. There is very limited overlap. I think with Lumus, clearly they were on the same systems. There was co-location. I think with Agilex, it is a completely separate business. Very limited input operationally from the center, let us call it.

Speaker #2: So, sales processes. That's, I think, a relatively easy question to answer. I think, on Agilex, it is completely separate, for all intents and purposes, from Healius.

Speaker #2: So the tie-up between the two is almost nonexistent, in terms of, if you're talking about systems and costs and so forth. There's very limited overlap.

Speaker #2: I think with Lumis, clearly, they were on the same systems; there was co-location. I think with Agilex, it's a completely separate business.

Speaker #2: Very limited input, operationally, from the center—let's call it. Yeah.

Speaker #10: Yeah, okay. So it's going to be a fairly clean separation. I mean, when I think back to the two other sales that Healius have done—the sale of the medical centers—that came with an obligation around leases for the imaging business.

Steven Wheen: Yeah. Okay. So it is going to be a fairly clean separation. When I think back to the two other sales that Healius have done, the sale of the medical centers, that came with an obligation around leases for the imaging business. There was obviously some stranded costs associated with the Lumus business when it was sold, that all sort of resided in the business that was left behind. So you are saying that when you sell Agilex, we will not be inheriting some costs that are part of Agilex now.

Speaker #10: And then there were obviously some stranded costs associated with the Lumis business when it was sold. That all sort of resided in the business that was left behind.

Speaker #10: So you're saying that when you sell Agilex, we won't be inheriting some costs that are part of Agilex now within the stub of the business.

Paul Anderson: No

Steven Wheen: within the stub of the business?

Speaker #2: No, no. So, look, I think Lumis, to be fair, had things like digital and storage and systems and that kind of stuff that just naturally had to be separated over a period of time.

Paul Anderson: No. None. Look, I think Lumus, to be fair, had things like digital and storage and systems and that kind of stuff that just naturally had to be separated over a period of time. So those things now, for all intents and purposes, are fully complete. All of those costs that were left behind with Lumus and the way that the group was set up, they have all been taken out as well. You are right. The second part of your question around Agilex is that it is very clean, and there would be nothing left behind.

Speaker #2: So those things now, for all intents and purposes, are fully complete. And all of those costs that were left behind with Lumis, and the way that the group was set up, have all been taken out as well.

Speaker #2: But you're right. The second part of your question about Agilex is that it is very clean, and there would be nothing left behind.

Speaker #10: Excellent. Okay. And just a very quick clarification question—within your profit and loss detail, there's 'Other Expenses', which I've never actually known what it was.

Steven Wheen: Excellent. Okay. Just a very quick clarification question. Within your profit and loss detail, there is other expenses, which I have never actually known what it was, of AUD 95 million. Are you able to just help me understand what that is? It is obviously a pretty chunky component of your cost base.

Speaker #10: Of the $95 million, are you able to just help me understand what that is? It's obviously a pretty chunky component of your cost base.

Speaker #2: Yeah. Look, there's a mix of things. I think the easiest way to think about it, though, is everything else that isn't listed out separately, right?

Andrew Thomson: Yeah. Look, there is a mix of things. I think the easiest way to think about it, though, is everything else that is not listed out separately, right? So everything that is not labor, lease costs, et cetera. So there are a lot of cost categories in there that I do not want to go through line for line, but the best way to think about it is broadly everything that is not labor, rent, or consumables.

Speaker #2: So, everything that's not labor, lease costs, etcetera. There are a lot of cost categories in there that I don't want to go through line by line.

Speaker #2: But the best way to think about it is, broadly, everything that isn't sort of labor, rent, or consumables.

Steven Wheen: Can you give me an example of one or two?

Speaker #10: Can you give me an example of one or two?

Steven Wheen: Can you give me an example of one or two?

Speaker #2: Yeah. Look, insurance is one. There are other costs around—we've had some consultant and advisory costs that sit in there as well. But insurance is certainly a relatively chunky cost, given insurance on motor vehicles, properties, etc.

Andrew Thomson: Yeah. Look, insurance is one. There are other costs around, we've had some consultant and advisory costs that sit in there as well. But insurance is certainly a relatively chunky cost, given insurance on motor vehicles, properties, et cetera. I think the next

Speaker #10: I mean, insurance is called out separately. Insurance is the...

Steven Wheen: I mean, insurance is called out separately. Insurance is a

Speaker #2: Yeah. And then, look, there's also probably the biggest individual line item: property management fees. So we have an external property management advisor. But...

Andrew Thomson: Yeah. Then, look, there's also probably the biggest individual line item is property management fees. So we have an external property management advisor.

Speaker #10: Yeah. Okay. All right.

Steven Wheen: Yeah. Okay. All right.

Speaker #2: Yeah. Then logistics, external logistics that don't sit some of them don't sit within the career costs.

Andrew Thomson: Yeah. Then logistics, external logistics, some of them don't sit within the courier costs.

Speaker #10: Okay. Right. Thanks for your help.

Steven Wheen: Okay. Great. Thanks for your help.

Speaker #1: Thank you. There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator 2: Thank you. There are no further questions at this time, and that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Thank you. There are no further questions at this time, and that does conclude our conference for today. Thank you for participating. You may now disconnect.