Full Year 2026 EBOS Group Ltd Earnings Call
Speaker #1: Thank you for standing by, and welcome to EBOS Group Limited FY26 full-year results conference call. At this time, all participants are in listen-only mode.
Operator: Thank you for standing by, and welcome to EBOS Group Limited FY26 Full Year Results Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one one on your telephone keypad. You can cancel your request by pressing star one one again. I must advise you that this conference is being recorded today, the 19 August 2026. I'd now like to hand the call over to your first speaker today, Mr. Cameron Sinclair, Head of Investor Relations, EBOS Group. Please go ahead, Cameron.
Speaker #1: There will be presentations followed by a question-and-answer session. At that time, if you wish to ask a question, you will need to press star 1-1 on your telephone keypad.
Speaker #1: You can cancel your request by pressing star 11 again. I must advise you that this conference is being recorded today, the 19th of August, 2026.
Speaker #1: I would now like to hand the call over to your first speaker today, Mr. Cameron Sinclair, Head of Investor Relations at EBOS Group. Please go ahead, Cameron.
Speaker #2: Good morning, everyone, and thank you for your attendance today. My name is Cameron Sinclair, Head of Investor Relations. I am joined today by Adam Hall, our Group CEO, and Alistair Gray, our Group CFO.
Cameron Sinclair: Good morning, everyone, and thank you for your attendance today. My name is Cameron Sinclair, Head of Investor Relations. I am joined today by Adam Hall, our Group CEO, and Alistair Gray, our Group CFO. Before commencing, I'd like to draw your attention to the disclaimer on page 2 of the presentation. The results are expressed in Australian dollars unless otherwise noted, and the presentation refers to both statutory and underlying results. The commentary this morning is predominantly based on our underlying results, and a reconciliation is included in the appendix. I'll now hand over to Adam to take you through today's presentation.
Speaker #2: Before commencing, I'd like to draw your attention to the disclaimer on page 2 of the presentation. The results are expressed in Australian dollars unless otherwise noted, and the presentation refers to both statutory and underlying results.
Speaker #2: The commentary this morning is predominantly based on our underlying results, and a reconciliation is included in the appendix. I'll now hand over to Adam to take you through today's presentation.
Speaker #3: Thanks, Cameron. Good morning, everyone. There are three messages to take away from today's results. First, we delivered on our commitments while completing a major phase of investment.
Adam Hall: Thanks, Cameron. Good morning, everyone. There are three messages to take away from today's results. First, we delivered on our commitments while completing a major phase of investment. Revenue increased 9.9% to AUD 13.5 billion, and underlying EBITDA increased 5% to AUD 614 million, both within guidance. We also completed our multi-year AUD 360 million distribution center renewal program, with all facilities now in operation. Second, each division has clear growth opportunities in FY27. Across Symbion and Healthcare Distribution, Retail Pharmacy Brands, Medical Technology, and Animal Care, we have identified initiatives that support continued earnings growth. Each of these initiatives is underpinned by two common macro themes. Strong underlying growth in care for an aging human and pet population, and EBOS's competitive advantages of scale and sector leadership.
Speaker #3: Revenue increased 9.9% to $13.5 billion, and underlying EBITDA increased 5% to $614 million, both within guidance. We also completed our multi-year $360 million distribution center renewal program.
Speaker #3: With all facilities now in operation. Second, each division has clear growth opportunities in FY27. Across Symbion and healthcare distribution, retail pharmacy brands, medical technology, and animal care, we have identified initiatives that support continued earnings growth.
Speaker #3: Each of these initiatives is underpinned by two common macro themes: strong underlying growth in care for an aging human and pet population, and EBOS's competitive advantages of scale and sector leadership.
Speaker #3: As we laid out at Investor Day, 85% of our EBITDA is derived from businesses where we are number one or number two in our sector.
Adam Hall: As we laid out at Investor Day, 85% of our EBITDA is derived from businesses where we are number one or number two in our sector. Third, we are not pausing. We continue to improve the portfolio with two great bolt-on acquisitions in the last six months, and the capacity for more. You may recall over the last few years, we've deliberately shifted the portfolio towards higher growth, higher return businesses. In FY26, we continue this theme with eight bolt-on acquisitions that improve the quality of our portfolio. Importantly, with about 30% lower capital requirements going forward, we have greater flexibility to continue investing in these attractive growth opportunities. Taken together, we enter FY27 with earnings momentum, a completed investment cycle, and additional capacity to deploy capital. The team have confidence in their ability to continue creating value for shareholders.
Speaker #3: Third, we are not pausing. We continue to improve the portfolio, with two great bolt-on acquisitions in the last six months—and the capacity for more.
Speaker #3: You may recall, over the last few years we've deliberately shifted the portfolio towards higher-growth, higher-return businesses. In FY26, we continue this theme, with eight bolt-on acquisitions that improve the quality of our portfolio.
Speaker #3: Now, importantly, with about 30% lower capital requirements going forward, we have greater flexibility to continue investing in these attractive growth opportunities. Taken together, we enter FY27 with earnings momentum, a completed investment cycle, and additional capacity to deploy capital.
Speaker #3: The team have confidence in their ability to continue creating value for shareholders. Let me turn to Slide 4, and our financial guidance and metrics.
Adam Hall: Let me turn to slide 4 and our financial guidance and metrics. At the start of the year, we set clear financial targets across EBITDA, CapEx, depreciation and amortization, financing costs, and leverage. We delivered on these as a group and in each division. Despite fuel cost and foreign exchange headwinds during the year, we delivered against our stated guidance ranges, noting that EBITDA guidance was revised in April following the disruption in the Middle East. Just as importantly, we continue to make progress against the strategic priorities we outlined at our Investor Day. In Symbion Healthcare Distribution, we have now completed the distribution center renewal program, with all facilities operational. In Retail Pharmacy Brands, we expanded the network with the acquisition of MedAdvisor, which strengthened healthcare services capabilities, and continued to improve digital transactions, where we are up 30%, and our own brand performance.
Speaker #3: At the start of the year, we set clear financial targets across EBITDA, capital expenditure, depreciation and amortization, financing costs, and leverage. We've delivered on these as a group and in each division.
Speaker #3: Despite fuel cost and foreign exchange headwinds during the year, we delivered against our stated guidance ranges, noting that EBITDA guidance was revised in April following the disruption in the Middle East.
Speaker #3: Just as importantly, we continue to make progress against the strategic priorities we outlined at our Investor Day. In Symbion and healthcare distribution, we've now completed the distribution center renewal program, with all facilities operational.
Speaker #3: In retail pharmacy brands, we expanded the network with the acquisition of MediAdvice, we've strengthened healthcare services capabilities, and continue to improve digital transactions, where we're up 30%.
Speaker #3: And our own brand performance: in Medical Technology, we broadened our therapy and product portfolio with 18 new supply partnerships, and we grew the business both organically and through targeted acquisitions.
Adam Hall: In Medical Technology, we broadened our therapy and product portfolio with 18 new supply partnerships, and we grew the business both organically and through targeted acquisitions. In Animal Care, we expanded innovation, manufacturing, and product development, including Kiwi Kitchens' triumphant return to the US market. The next slide explains the key earnings movement during the year. You can see here that underlying EBITDA increased by 5%, despite approximately AUD 22 million of fuel and foreign exchange headwinds. Importantly, the underlying performance of the business remained solid, generating AUD 50 million more in EBITDA. The fuel headwinds we called out during the H1 were contained through operational improvements, fuel levy pass-through, and active contract management. The impact was about AUD 5 million, which was at the lower end of our previous expectations.
Speaker #3: And in Animal Care, we expanded innovation, manufacturing, and product development, including Kiwi Kitchen's triumphant return to the US market. The next slide explains the key earnings movement during the year.
Speaker #3: You can see here that underlying EBITDA increased by 5%, despite approximately $22 million of fuel and foreign exchange headwinds. Importantly, the underlying performance of the business remains solid, generating $50 million more in EBITDA.
Speaker #3: The fuel headwinds we called out during the half were contained through operational improvements, fuel levy pass-through, and active contract management. The impact was about $5 million, which was at the lower end of our previous expectations.
Speaker #3: Also, during the half, you'll have seen the Australian dollar strengthen against many currencies and hit a 13-year high against the New Zealand dollar. This had a meaningful effect on translated earnings for the Group, and on purchasing costs, predominantly within the Medical Technology division.
Adam Hall: Also during the H1, you will have seen the Australian dollar strengthened against many currencies and hit a 13-year high against the New Zealand dollar. This had a meaningful effect on translated earnings for the group and purchasing costs predominantly within the Medical Technology division. Across the portfolio, Healthcare grew EBITDA by a net 3.2% and Animal Care by a net 11.6%. While external factors affected the reported growth rate, they did not change our underlying trajectory, and that gives us confidence as we enter FY27. On the next slide, I would like to highlight one of the most significant strategic milestones we achieved during the year. With the DC Renewal program, I want to pay tribute to the teams across the business, and particularly the Symbion Healthcare and Distribution division, who have successfully brought this program to completion and done so seamlessly.
Speaker #3: Across the portfolio, healthcare grew EBITDA by a net 3.2%, and animal care by a net 11.6%. So, while external factors affected the reported growth rate, they didn't change our underlying trajectory.
Speaker #3: And that gives us confidence as we enter FY27. On the next slide, I'd like to highlight one of the most significant strategic milestones we achieved during the year.
Speaker #3: With the DC Renewal Program, I want to pay tribute to the teams across the business, and particularly the Symbion Healthcare and Distribution division, who have successfully brought this program to completion and done so seamlessly.
Speaker #3: Our $360 million distribution center renewal program is the largest infrastructure investment in EBOS's history. Think of this as a long-term investment in the capability, capacity, and efficiency of our network, positioning us to serve the need for medicines across Australia and New Zealand for years to come.
Adam Hall: Our AUD 360 million distribution center renewal program is the largest infrastructure investment in EBOS's history. Think of this as a long-term investment in the capability, capacity, and efficiency of our network, positioning us to serve the need for medicines across Australia and New Zealand for years to come. Just as importantly, the focus now shifts from investment to benefits. We are already seeing productivity gains at Kemps Creek, with the site currently operating around 20% more productively than Greystanes, the facility it replaced. Just to give you a sense of magnitude of what Kemps Creek does, every morning, it converts about 16,000 SKU lines in storage to 8,000 daily customized totes, and then delivers in hours to pharmacies and hospitals across New South Wales. There is more productivity opportunity ahead.
Speaker #3: Just as importantly, the focus now shifts from investment to benefits. We're already seeing productivity gains at Kemps Creek, with the site currently operating around 20% more productively than Greystanes, the facility it replaced.
Speaker #3: Just to give you a sense of the magnitude of what Kemps Creek does: every morning, it converts about 16,000 SKU lines in storage to 8,000 daily customized totes, and then delivers within hours to pharmacies and hospitals across New South Wales.
Speaker #3: But there's more productivity opportunity ahead. We continue to target a 30% productivity uplift by the end of FY27, and I was glad many of you got a chance to meet the Kemps Creek team at the recent Investor Day and see this opportunity up close.
Adam Hall: We continue to target a 30% productivity uplift by the end of FY27. I was glad many of you got a chance to meet the Kemps Creek team at the recent Investor Day and see this opportunity up close. The completion of this program also materially lowers our capital requirements, and CapEx is expected to normalize around AUD 100 million in FY27. That matters because lower CapEx supports stronger free cash flow, improving returns, and greater balance sheet flexibility. A good example of that flexibility is in contract logistics. Over several years, we have invested in building a national Healthcare Logistics network. That capability is now supporting customer wins, share gains, and double-digit goal growth. I am delighted that the Perth HCL facility is now up and serving our customers. With the distribution centers now complete and operational, we close the chapter on this program, and we look ahead.
Speaker #3: The completion of this program also materially lowers our capital requirements, and CAPEX is expected to normalize around $100 million in FY27. Now, that matters because lower CAPEX supports stronger free cash flow.
Speaker #3: Improving returns and greater balance sheet flexibility. A good example of that flexibility is in contract logistics. Over several years, we've invested in building a national healthcare logistics network.
Speaker #3: That capability is now supporting customer wins, share gains, and double-digit core growth. I'm delighted that the Perth HCL facility is now up and serving our customers.
Speaker #3: With the distribution centers now complete and operational, we close the chapter on this program, and we look ahead. Speaking of looking ahead, the final point I'd like to touch on before moving into the divisions is M&A.
Adam Hall: Speaking of looking ahead, the final point I would like to touch on before moving into the divisions is M&A. On the next slide, you can see that disciplined capital allocation remains a core part of the EBOS strategy. During FY26, we deployed approximately AUD 121 million across eight bolt-on acquisitions that strengthened capability, expanded market positions, and increased our participation in attractive growth categories. In the last six months, the two acquisitions were Kalinga Pet Foods and Catalyst. Feringo expands our presence in premium pet nutrition and gives us exposure to the fast-growing fresh and chilled pet food category. We have a great track record of bringing our strong brands like Black Hawk and VitaPet to new formats, and this continues that theme. Catalyst is another great example of bolt-on M&A in action.
Speaker #3: On the next slide, you can see that disciplined capital allocation remains a core part of the EBOS strategy. During FY26, we deployed approximately $121 million across eight bolt-on acquisitions.
Speaker #3: That strengthened capability, expanded market positions, and increased our participation in attractive growth categories. Now, in the last six months, the two acquisitions were Peringipet Foods and Catalyst.
Speaker #3: Peringipet expands our presence in premium pet nutrition and gives us exposure to the fast-growing fresh and chilled pet food category. We have a great track record of bringing our strong brands, like Black Hawk and VitaPet, to new formats, and this continues that theme.
Speaker #3: Catalyst is another great example of bolt-on M&A in action. We had an existing supplier relationship that was very strong, and with the benefit of this Catalyst acquisition, it's extended that into new markets across Southeast Asia and Hong Kong, particularly in aesthetics and reconstruction.
Adam Hall: We had an existing supplier relationship that was very strong, and with the benefit of this Catalyst acquisition, it has extended that into new markets across Southeast Asia and Hong Kong, particularly in aesthetics and reconstruction. What is pleasing is that these acquisitions are consistent with our strategy of high growth, high return markets, and expected to be both EBITDA and EPS accretive. Looking ahead, our approach continues unchanged. We will stay disciplined, but where we see privileged access to attractive opportunities, supported by our market positions, relationships, and balance sheet capacity. We have about AUD 150 million of additional capacity to support our bolt-on M&A agenda. Let me now take you through the divisional highlights and financial performance. On slide 9, you can see that healthcare delivered another resilient result. Revenue increased 8.5% to AUD 12.6 billion, and EBITDA increased 3.2% to AUD 516 million, despite fuel and foreign exchange headwinds.
Speaker #3: What's pleasing is that these acquisitions are consistent with our strategy of high-growth, high-return markets, and are expected to be both EBITDA and EPS accretive.
Speaker #3: Looking ahead, our approach continues unchanged. We will stay disciplined, but where we see privileged access to attractive opportunities—supported by our market positions, relationships, and balance sheet capacity—we will look to pursue them.
Speaker #3: We have about $150 million of additional capacity to support our bolt-on M&A agenda. Let me now take you through the divisional highlights and financial performance.
Speaker #3: And on slide 9, you can see that Healthcare delivered another resilient result. Revenue increased 8.5% to $12.6 billion, and EBITDA increased 3.2% to $516 million, despite fuel and foreign exchange headwinds.
Speaker #3: Now, this result was supported by growth across community pharmacy, hospital medicines, medical technology, and contract logistics. As I mentioned, this result is underpinned by an aging population, which increases healthcare demand, growth in specialty and high-value medicines, and a larger role for pharmacy and primary care.
Adam Hall: This result was supported by growth across community pharmacy, hospital medicines, Medical Technology, and contract logistics. As I mentioned, this result is underpinned by an aging population, which increases healthcare demand, growth in specialty and high-value medicine, and a larger role for pharmacy and primary care. Sales of high-value medicines and GLP-1 demand also continued to grow at double digits. While FY26 was an important year of execution, we believe each of our divisions are well-positioned for the next phase of growth. Let us start with Symbion and Healthcare Distribution. Here we delivered another solid result while completing a significant period of operational change, as I just mentioned. While the team has successfully executed multiple site transitions, they continued to grow the business. What you may not realize is that Symbion now serves 1 million units a day to Australians, the vast majority through our automated Eastern Seaboard facilities.
Speaker #3: Sales of high-value medicines and GLP-1 demand also continued to grow, at double digits. So, while FY26 was an important year of execution, we believe each of our divisions are well positioned for the next phase of growth.
Speaker #3: Let's start with Symbion and Healthcare Distribution. Here, we delivered another solid result while completing a significant period of operational change, as I just mentioned.
Speaker #3: While the team has successfully executed multiple slight transitions, they continue to grow the business. What you may not realize is that Symbion now serves 1 million units a day to Australians, the vast majority through our automated Eastern Seaboard facilities.
Speaker #3: Within community pharmacy, revenue increased 10.2%, and Gore increased 4.3%, supported by continued growth in GLP-1s and other high-value medicines. Margin pressure remained a feature of the market, but Gore margins were stable across the second half at 8.6%.
Adam Hall: Within community pharmacy, revenue increased 10.2%, and GOR increased 4.3%, supported by continued growth in GLP-1s and other high-value medicines. Margin pressure remained a feature of the market, but GOR margins were stable across the H2 at 8.6%. Looking forward, increased CSO funding should provide some support, although it needs to be netted against the medicine tiering changes as well as continued competitive conditions. Hospital medicines, consumables, and other also delivered growth, supported by record hospital sales, expansion in aged care and healthcare channels, and continued momentum in medical consumables. Contract logistics was once again a standout performer. Our GOR increased 13.1%, reflecting customer growth and the benefits of the investments we have made over several years in our Healthcare Logistics capability. The priorities in FY27 are straightforward. Increase utilization, improve productivity, and leverage on our national footprint within contract logistics. Moving now to Retail Pharmacy Brands.
Speaker #3: Looking forward, increased CSO funding should provide some support, although this needs to be netted against the medicine tiering changes, as well as continued competitive conditions.
Speaker #3: Hospital medicines, consumables, and other products also delivered growth, supported by record hospital sales, expansion in aged care and healthcare channels, and continued momentum in medical consumables.
Speaker #3: Contract logistics was once again a standout performer. Our gross operating revenue increased 13.1%, reflecting customer growth and the benefits of the investments we've made over several years in our healthcare logistics capability.
Speaker #3: The priorities in FY27 are straightforward: increased utilization, improved productivity, and leveraging our national footprint within contract logistics. Moving now to retail pharmacy brands.
Speaker #3: Here, we've had another strong year, where we continue to expand both our scale and capability. Network sales reached almost $2.9 billion, supported by like-for-like growth of 7.6% across the TerryWhite Chemmart network and dispensary sales growth of 8.5%.
Adam Hall: Here, we have had another strong year where we continue to expand both our scale and capability. Network sales reached almost AUD 2.9 billion, supported by like-to-like growth of 7.6% across the TerryWhite Chemmart network and dispensary sales growth of 8.5%. Importantly, this growth reflects the quality of the network and the performance of existing stores, not just network expansion. Total network stores increased to 780, driven by the addition of MedAdvisor and continued growth across our other banner groups, including Cincotta. Healthcare services remained a key differentiator. During FY26, care clinics delivered more than 1.2 million health services, reinforcing the network's leading position in pharmacy-delivered healthcare. We are also seeing encouraging progress across our own brands, digital engagement, and retail media. The myTWC app is a great demonstration of this, with the app processing 1.7 million transactions. That is up 37% on the prior year.
Speaker #3: Importantly, this growth reflects the quality of the network and the performance of existing stores, not just network expansion. Total network stores increased to 780, driven by the addition of Medi-Advice and continued growth across our other banner groups, including Symbion.
Speaker #3: Healthcare services remained a key differentiator. During FY26, care clinics delivered more than 1.2 million health services, reinforcing the network's leading position in pharmacy-delivered healthcare.
Speaker #3: We're also seeing encouraging progress across our own brands, digital engagement, and retail media. The MyTWC app is a great demonstration of this, with the app processing 1.7 million transactions.
Speaker #3: Now, that's up 37% on the prior year. Network sales of our own brand increased 11% during the year, and these initiatives are helping broaden the earnings base for both the network and our pharmacy partners.
Adam Hall: Network sales of our own brand increased 11% during the year. These initiatives are helping broaden the earning space for both the network and our pharmacy partners. Looking ahead, our focus remains on improving store margins, increasing health service participation, growing digital engagement, and expanding our own brand penetration. I turn now to Medical Technology, and here revenue increased 5.5% or 8.4% on a constant currency basis, supported by a combination of organic growth and acquisitions. Growth was broad-based across the portfolio and reflected higher procedure volumes, therapy expansion, and ongoing innovation. Across ANZ, we saw strong growth in neurosurgery, neurovascular intervention, and urology. In Southeast Asia and Hong Kong, growth continued across spine, orthopedics, cardiology, and ophthalmology, partly offset by softer capital equipment activity compared with a strong prior year. Biologics remains one of our most attractive growth opportunities.
Speaker #3: Looking ahead, our focus remains on improving store margins, increasing health service participation, growing digital engagement, and expanding our own brand penetration. I turn now to medical technology.
Speaker #3: And here, revenue increased 5.5%, or 8.4% on a constant currency basis, supported by a combination of organic growth and acquisitions. Growth was broad-based across the portfolio and reflected higher procedure volumes, therapy expansion, and ongoing innovation.
Speaker #3: Across ANZ, we saw strong growth in neurosurgery, neurovascular intervention, and urology. In Southeast Asia and Hong Kong, growth continued across spine, orthopedics, cardiology, and ophthalmology.
Speaker #3: This was partly offset by softer capital equipment activity, compared with the strong prior year. Biologics remains one of our most attractive growth opportunities. During the year, we expanded solution development activity and extended into adjacent procedures, which creates additional pathways for growth.
Adam Hall: During the year, we expanded solution development activity and extended into adjacent procedures, which creates additional pathways for growth. Across EMT, we also completed four acquisitions that expanded coverage across oncology, orthopedics, plastics, and aesthetics. These acquisitions continue our strategy of building capability in attractive growth markets. Looking forward, we see significant opportunities to expand therapy participation, increase Biologics exposure, and selectively grow across Southeast Asia. Now let me turn to Animal Care, which once again delivered a strong result and continues to outperform many of the markets in which it operates. Revenue increased 34.6% to AUD 907 million, and EBITDA increased 11.6% to AUD 138 million. The result was supported by the SVS acquisition, but also by continued growth within Lyppard and ongoing share gains across branded products. In fact, branded revenue increased 6.7%, supported by innovation, premiumization, and new product development.
Speaker #3: Across EMT, we also completed four acquisitions that expanded coverage across oncology, orthopedics, plastics, and aesthetics. These acquisitions continue our strategy of building capability in attractive growth markets.
Speaker #3: Looking forward, we see significant opportunities to expand therapy participation, increase biologics exposure, and selectively grow across Southeast Asia. Now, let me turn to animal care.
Speaker #3: Which, once again, delivered a strong result and continues to outperform many of the markets in which it operates. Revenue increased 34.6% to $907 million, and EBITDA increased 11.6% to $138 million.
Speaker #3: The result was supported by the SVS acquisition, but also by continued growth within Lipard and ongoing share gains across branded products. In fact, branded revenue increased 6.7%, supported by innovation, premiumization, and new product development.
Speaker #3: On the next slide, you can see the clear linkage between our manufacturing capability and new product development across our hero brands, driving the organic growth within the branded portfolio.
Adam Hall: On the next slide, you can see the clear linkage between our manufacturing capability and new product development across our hero brands, driving the organic growth within the branded portfolio. Wholesale performance also continued to benefit from greater scale and customer growth, with SVS growth accelerating under EBOS stewardship. GOR increased 13.1%, showing the quality of growth across the portfolio, and margins were arithmetically affected by the addition of the lower margin wholesale business, SVS, but the segment continued to deliver strong earnings growth. A strategic focus during FY26 was increasing our participation in the premium pet nutrition categories. The acquisitions of Next Generation Pet Foods and Paringa did this by expanding our manufacturing capability and our exposure to the higher growth segments, including fresh and chilled pet food and air and freeze-dried treats.
Speaker #3: Wholesale performance also continued to benefit from greater scale and customer growth, with SVS growth accelerating under EBOS stewardship. Growth increased 13.1%, showing the quality of growth across the portfolio.
Speaker #3: And margins were arithmetically affected by the addition of the lower-margin wholesale business, SVS, but the segment continued to deliver strong earnings growth. A strategic focus during FY26 was increasing our participation in the premium pet nutrition categories, and the acquisitions of NextGen Pet Foods and Peringa did this by expanding our manufacturing capability and our exposure to the higher-growth segments, including fresh and chilled pet food, and air- and freeze-dried treats.
Speaker #3: As we move into FY27, our animal care priorities remain centered on innovation, vet channel growth, premium nutrition, and extracting value from our recent acquisitions.
Adam Hall: As we move into FY27, our animal care priorities remain centered on innovation, vet channel growth, premium nutrition, and extracting value from our recent acquisitions. I will now hand over to Alistair, who is going to take you through the key movements in the group financials.
Speaker #3: I'll now hand over to Alistair, who's going to take you through the key movements in the group financials.
Speaker #1: Thank you, Adam. I will cover the details of the next few slides, but at a headline level, FY26 was another solid result and consistent with the guidance we provided to the market.
Alistair Gray: Thank you, Adam. I will cover the details of the next few slides, but at a headline level, FY26 was another solid result and consistent with the guidance we provided to the market. Revenue increased 9.9% and underlying EBITDA was up 5% to AUD 614 million. That growth delivered despite the macroeconomic headwinds Adam mentioned earlier. This resilient growth speaks to the ongoing strong demand for care needed for an aging human and pet population, and EBOS's competitive advantage of scale and sector leadership. Underlying NPAT was AUD 250 million, reflecting the completion of the DC renewal program investment. At a statutory level, EBITDA was up 7.8% and NPAT was up 4.7%. Importantly, the balance sheet remains in good shape. Leverage finished the year at 2.1 times within our target range, and the board has maintained the final dividend at AUD 0.615 per share.
Speaker #1: Revenue increased 9.9%, and underlying EBITDA was up 5% to $614 million. With that growth delivered despite the macroeconomic headwinds Adam mentioned earlier, this resilient growth speaks to the ongoing strong demand for care needed for an aging human and pet population, and EBOS's competitive advantage of scale and sector leadership.
Speaker #1: Underlying impact was $250 million, reflecting the completion of the DC renewal program investment. At a statutory level, EBITDA was up 7.8%, and impact was up 4.7%.
Speaker #1: Importantly, the balance sheet remains in good shape. Leverage finished the year at 2.1 times, within our target range, and the Board has maintained the final dividend at 61.5 cents per share.
Speaker #1: Now, turning to our earnings performance in more detail. As previously mentioned, revenue grew strongly at 9.9%, driven by growth in both Healthcare and Animal Care, including the positive contribution from accretive bolt-on acquisitions.
Alistair Gray: Now turning to our earnings performance in more detail. As previously mentioned, revenue grew strongly at 9.9%, driven by growth in both healthcare and animal care, including the positive contribution from accretive bolt-on acquisitions. Underlying EBITDA increased 5% to AUD 614 million despite fuel and foreign exchange headwinds. This result demonstrates the resilience, diversity and strength of positions across the portfolio. EBITDA margin improved in the H2, ending the full year slightly down at 4.6%, largely due to the product mix and competitive dynamics in community pharmacy. Below EBITDA, the movements are consistent with guidance and reflect the completion of the four-year capital investment cycle. On a statutory basis, EBITDA and NPAT growth was stronger than underlying, with lower one-off costs in FY26 than in FY25. Consistent with the communication at our H1 results, restructuring and site transition costs reduced in the H2.
Speaker #1: Underlying EBITDA increased 5% to $614 million, despite fuel and foreign exchange headwinds. This result demonstrates the resilience, diversity, and strength of positions across the portfolio.
Speaker #1: EBITDA margin improved in the second half, ending the full year slightly down at 4.6%, largely due to the product mix and competitive dynamics in community pharmacy.
Speaker #1: Below EBITDA, the movements are consistent with guidance and reflect the completion of the four-year capital investment cycle. On a statutory basis, EBITDA and impact growth were stronger than underlying, with lower one-off costs in FY26 than in FY25.
Speaker #1: Consistent with the communication at our first half results, our structuring and site transition costs reduced in the second half. These results are as expected, and the renewed DC network provides the capacity and capability to support future growth.
Alistair Gray: These results are as expected, and the renewed DC network provides the capacity and capability to support future growth. Importantly, as the capital investment cycle is now complete, from FY27, CapEx drops materially and the focus shifts to increasing utilization, productivity, and cash generated from those assets. In summary, the FY26 result demonstrates that the underlying growth fundamentals remain strong across the group, and with the infrastructure upgrades now in place, we are increasingly well-positioned to turn that growth into stronger cash flow and better returns. Moving to capital allocation, our framework remains unchanged and is centered around a disciplined approach of capital across four priorities: preserving a strong balance sheet, maintaining operational resilience, delivering sustainable shareholder dividends, and investing in attractive growth opportunities. In FY26, we allocated AUD 145 million to capital expenditure, AUD 121 million to bolt-on acquisitions, and returned AUD 128 million to shareholders by way of dividends.
Speaker #1: Importantly, as the capital investment cycle is now complete, from FY27 CapEx drops materially, and the focus shifts to increasing utilization, productivity, and cash generated from those assets.
Speaker #1: In summary, the FY26 result demonstrates that the underlying growth fundamentals remain strong across the Group, and with the infrastructure upgrades now in place, we're increasingly well-positioned to turn that growth into stronger cash flow and better returns.
Speaker #1: Moving to capital allocation, our framework remains unchanged and is centered around a disciplined approach to capital across four priorities: preserving a strong balance sheet, maintaining operational resilience, delivering sustainable shareholder dividends, and investing in attractive growth opportunities.
Speaker #1: And for FY26, we allocated $145 million to capital expenditure, $121 million to bolt-on acquisitions, and returned $128 million to shareholders by way of dividends.
Alistair Gray: Importantly, given the strength of cash generated, we have been able to maintain dividends through the peak capital investment cycle while also investing in accretive growth opportunities, including programmatic bolt-on acquisitions. That said, as CapEx normalizes in FY27, we expect greater flexibility and capacity to deploy capital into attractive growth opportunities and improved returns. Now turning to the balance sheet, leverage finished FY26 at 2.1 times, comfortably within our target range of 1.7 to 2.3 times. Given the seasonal nature of our working capital and cash flows, like prior years, we expect leverage to increase modestly in the H1 of FY27 before easing in the H2. This provides approximately AUD 150 million of available capacity to invest through the year, up to the leverage of 2.3 times.
Speaker #1: Importantly, given the strength of cash generated, we have been able to maintain dividends through the peak capital investment cycle, while also investing in accretive growth opportunities, including programmatic bolt-on acquisitions.
Speaker #1: That said, as CapEx normalizes in FY27, we expect greater flexibility and capacity to deploy capital into attractive growth opportunities and improve returns. Now, turning to the balance sheet.
Speaker #1: Leverage finished FY26 at 2.1 times, comfortably within our target range of 1.7 to 2.3 times. Given the seasonal nature of our working capital and cash flows, like prior years, we expect leverage to increase modestly in the first half of FY27 before easing in the second half.
Speaker #1: This provides approximately $150 million of available capacity to invest through the year, up to a leverage of 2.3 times. Moreover, our debt remains strong, with $726 million of undrawn committed facilities and a weighted average debt maturity of more than three years.
Alistair Gray: Moreover, our debt position remains strong, with AUD 726 million of undrawn committed facilities and a weighted average debt maturity of more than three years. With lower capital expenditure, stronger cash flow and continued earnings growth, we are well-placed to steadily reduce leverage whilst continuing to fund growth investments. I will now step through the cash flow results. Net working capital remained well controlled, increasing by just AUD 7 million despite 10% revenue growth, while cash conversion days were stable at an average of 20 days. This reflects a disciplined focus on working capital, as well as the favorable timing of year-end payments and receipts. Reported free cash flow was AUD 204 million, representing the final year of elevated CapEx and site transition costs related to the DC renewal program. On a normalized basis, our reported free cash flow improved slightly compared to the prior year.
Speaker #1: And with lower capital expenditure, stronger cash flow, and continued earnings growth, we are well placed to steadily reduce leverage, while continuing to fund growth investments.
Speaker #1: I will now step through the cash flow results. Net working capital remained well controlled, increasing by just $7 million, despite 10% revenue growth, while cash conversion days were stable at an average of 20 days.
Speaker #1: This reflects a disciplined focus on working capital, as well as the favorable timing of year-end payments and receipts. Reported free cash flow was $204 million, representing the final year of elevated CapEx and site transition costs related to the DC renewal program.
Speaker #1: On a normalized basis, our reported free cash flow improved slightly compared to the prior year. With the capital investment cycle now complete, CapEx is expected to fall materially to approximately $100 million in FY27, compared to $145 million in FY26.
Alistair Gray: With the capital investment cycle now complete, CapEx is expected to fall materially to approximately AUD 100 million in FY27 compared to AUD 145 million in FY26. That lower CapEx should drive a meaningful improvement in free cash flow in FY27. Important, as it enables additional investment to drive growth. I will now hand back to Adam, who will share our perspective on the year ahead.
Speaker #1: That lower CapEx should drive a meaningful improvement in free cash flow in FY27, which is important as it enables additional investment to drive growth. I'll now hand back to Adam, who will share our perspective for the year ahead.
Speaker #2: Thanks, Alistair. When I look ahead to FY27, across every division, we have clear operational priorities focused on growth, productivity, and returns. In Symbian and healthcare distribution, our focus is on putting our new capacity to work.
Adam Hall: Thanks, Alistair. When I look ahead to FY27, across every division, we have clear operational priorities focused on growth, productivity, and returns. In Symbion and Healthcare Distribution, our focus is on putting our new capacity to work. In Retail Pharmacy Brands, we drive store dollar growth. In Medical Technology, we expand our scope and reach. Finally, in Animal Care, our focus is on new product development and customer momentum. Collectively, these initiatives support our expectation of delivering mid-single-digit EBITDA growth as we laid out at Investor Day in April. Importantly, FY27 is more than earnings growth. Our multi-year investment cycle is complete. Capital expenditure since 30 June has dropped to approximately AUD 100 million, well below the FY26 levels, which in turn supports stronger free cash flows and improving returns.
Speaker #2: In retail pharmacy brands, we drive store dollar growth. In medical technology, we expand our scope and reach. And finally, in animal care, our focus is on new product development and customer momentum.
Speaker #2: Collectively, these initiatives support our expectation of delivering mid-single-digit EBITDA growth, as we laid out at Investor Day in April. Importantly, FY27 is more than earnings growth.
Speaker #2: Our multi-year investment cycle is complete. Capital expenditure since 30 June has dropped to approximately $100 million, well below the FY26 levels. This, in turn, supports stronger free cash flows and improving returns.
Speaker #2: Depreciation and financing cost growth will remain elevated as we annualize recent investments, particularly in the first half of FY27. But the more important point is the cycle's complete, the assets are in place, and increasingly, are being put to work.
Adam Hall: Depreciation and financing cost growth will remain elevated as we annualize recent investments, particularly in the H1 of FY27. But the more important point is the cycle's complete, the assets are in place and increasingly are being put to work. I want to share with you this final slide to bring together what we've tried to communicate through today's presentation. As we said at Investor Day, EBOS is very different than the business that we had five years ago. We've increased our exposure to higher growth, higher return businesses. Today, more than 70% of group EBITDA comes from those high-growth businesses, including Animal Care, Medical Technology, and Retail Pharmacy Brands, alongside platforms such as Contract Logistics and Medical Consumables. Our resilience is born of our market position with around 85% of group EBITDA coming from businesses ranked number 1 or number 2 in their sectors.
Speaker #2: I want to share with you this final slide, to bring together what we've tried to communicate through today's presentation. As we said throughout Investor Day, EBOS is very different than the business that we had five years ago.
Speaker #2: We've increased our exposure to higher-growth, higher-return businesses. Today, more than 70% of Group EBITDA comes from those high-growth businesses, including animal care, medical technology, and retail pharmacy brands.
Speaker #2: Alongside platforms such as contract logistics and medical consumables, our resilience is born of our market position, with around 85% of Group EBITDA coming from businesses ranked number one or number two in their sectors.
Speaker #2: And that gives us scale, customer relevance, and a strong competitive base. Importantly, we now move into the next phase with a completed investment cycle.
Adam Hall: That gives us scale, customer relevance, and a strong competitive base. Importantly, we now move into the next phase with a completed investment cycle, stronger free cash flow prospects, and additional capacity to invest, which will drive returns despite cost pressures and competitive dynamics. The messages to take away from today are simple. We've delivered on our commitments. Our investment cycle is complete. We are excited to continue driving value for shareholders. I want to thank you for listening this morning, and I also want to thank our teams across Australia, New Zealand, Southeast Asia, and Hong Kong for everything they've delivered through FY26. I am now going to hand back to the operator who is going to open the call for Q&A. Thank you.
Speaker #2: Stronger free cash flow prospects and additional capacity to invest, which will drive returns despite cost pressures and competitive dynamics. So, the messages to take away from today are simple.
Speaker #2: We've delivered on our commitments. Our investment cycle is complete. We are excited to continue driving value for shareholders. I want to thank you for listening this morning, and I also want to thank our teams across Australia, New Zealand, Southeast Asia, and Hong Kong for everything they've delivered through FY26.
Speaker #2: I'm now going to hand back to the operator, who is going to open the call for Q&A. Thank you.
Speaker #3: Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Operator: Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please limit yourselves to two questions at a time. Once again, that's star 1 1 for questions. A moment for our first question. Our first question comes from the line of Stephen Ridgewell from Craigs Investment Partners. Please ask your question. Stephen, your line is open.
Speaker #3: To withdraw your question, please press star-one-one again. Please limit yourselves to two questions at a time. Once again, that's star-one-one for questions.
Speaker #3: We'll pause for a moment for our first question. Our first question comes from Steven Ritual from Craigs Investment Partners. Please ask your question, Steven.
Speaker #3: Your line is open.
Speaker #4: Hey, good morning. Just wondering if you could please give us a split of FY26 EBITDA growth between kind of organic and inorganic for the group overall, and then for the two segments?
Stephen Ridgewell: Yeah, good morning. Just wondering if you could please give us a split of FY26 EBITDA growth between kind of organic and inorganic for the group overall and then for the two segments. Then, if maybe just turning to the guidance, if you could comment on how much of the 5% EBITDA growth at the midpoint, for 2027 is driven by acquisitions and how much is organic? Then, which segment are you expecting to deliver the lion's share of the organic EBITDA growth in FY27, please? Thank you.
Speaker #4: And then maybe just turning to the guidance, if you could comment on how much of the 5% EBITDA growth at the midpoint for '27 is driven by acquisitions and how much is organic, and then which segments are you expecting to deliver the lion’s share of the organic EBITDA growth for FY27, please.
Speaker #4: Thank you.
Speaker #2: Yeah, Steven, thanks very much for the question. I'm going to start with the second part, and Alistair is going to jump in as needed.
Adam Hall: Yeah. Steven, thanks very much for the question. I am going to start with the second part, and Alistair is going to jump in as needed. When we look ahead and provide that guidance, the AUD 635 million to AUD 655 million for FY27, we are incorporating in that all the businesses that we have today. We are not assuming any acquisitions are included in that. I have to say, we are pretty excited for contributions from all of our divisions, roughly in proportion to how we indicated at Investor Day with the higher growth divisions of Medical Technology, Animal Care and RPB really coming to the fore. Just a reminder, the assets that we have got there to put to work is Australia's largest dog food brand, Australia's largest pharmacy network, and Southeast Asia and Australia's largest independent medical distributor. So we have got plenty of market position to find opportunities during FY27.
Speaker #2: When we look ahead and provide that guidance—the $635 to $655 million for FY27—we're incorporating in that all the businesses that we have today.
Speaker #2: We're not assuming any acquisitions are included in that. And I have to say, we're pretty excited for contributions from all of our divisions—roughly in proportion to how we indicated at Investor Day—with the higher growth divisions of MedTech, Animal Care, and RPB really coming to the fore.
Speaker #2: Just a reminder, the assets that we've got there to put to work are Australia's largest dog food brand, Australia's largest pharmacy network, and Southeast Asia's and Australia's largest independent medical distributor.
Speaker #2: So, we've got plenty of market position to find opportunities during FY27. If I now come back to your question on FY26, I think you're referring to the first substantive chart that we have in the deck.
Adam Hall: If I now come back to your question on FY26, I think you are referring to the first substantive chart that we have in the deck. You can see there that we have added AUD 50 million of EBITDA to the group. Across the last 10 years, we have grown about 10% and roughly equally between organic and inorganic. In that AUD 50 million, I think it is probably slightly skewed to inorganic. But I think one thing we have been pretty heartened by is the synergistic nature of many of the transactions. For example, SVS Veterinary Supplies was a great business growing at a fair clip when we bought it. But growth has really accelerated under our stewardship, which we are really pleased by. Alistair, would you add anything to those comments?
Speaker #2: You can see there that we've added $50 million of EBITDA into the group. Now, across the last 10 years, we've grown at about 10%, and roughly equally between organic and inorganic.
Speaker #2: Of that $50 million, I think it's probably slightly skewed to inorganic. But I think one thing we've been pretty heartened by is the synergistic nature of many of the transactions.
Speaker #2: So, for example, SBS was a great business growing at a fair clip when we bought it. But its growth has really accelerated under our stewardship, which we're really pleased by.
Speaker #2: Alistair, would you add anything to those comments?
Speaker #4: No, I think you've covered it well. It's Steven. It's very consistent with what we outlined at the Investor Day. So, if you're looking for our sort of segmental view of growth into FY27, I'd use that as the basis.
Alistair Gray: No, I think you have covered it well, Adam. Steven, it is very consistent with what we outlined at the Investor Day. So if you are looking for our segmental view of growth into FY27, I would use that as the basis.
Speaker #4: So can I just clarify that? So when we're talking about sort of 5% year-on-year EBITDA growth, you've obviously made acquisitions during FY26, and there'll be some annualization of those acquisitions.
Stephen Ridgewell: Can I just clarify, though? When we are talking about 5% year-on-year EBITDA growth, you have obviously made acquisitions during FY26, and there will be some annualization of those acquisitions. That is really what I am trying to get at. Rather than future acquisitions, how much of the 5% growth is driven by acquisitions you have already made in the FY26 year, partway through the year? And how much is driven by organic growth?
Speaker #4: That's really what I'm trying to get at. Rather than future acquisitions, how much of the 5% growth is driven by acquisitions you've already made in the FY26 year, partway through the year?
Speaker #4: And how much is driven by organic growth?
Speaker #2: Steven, it's tough for us to give the split because a lot of them are very synergistic. So the EBITDA that we bought might be significantly higher in our hands.
Adam Hall: Steven, it is tough for us to give the split because a lot of them are very synergistic. The EBITDA that we bought might be significantly higher in our hands, given the ability to extract value with our existing businesses. I think we are comfortable with the guidance we have provided.
Speaker #2: Given the ability to extract value with our existing businesses, I think we're comfortable with the guidance we've provided.
Alistair Gray: Potentially, the only other color I would add, Steven, is clearly there is a lot of moving parts in the group and informing guidance, and it is probably important to note that we have considered a number of, I guess, reasonably possible outcomes as they relate to FX and fuel, informing that guidance range as well.
Speaker #4: Potentially, the only color I would add, Steven, is that clearly there's a lot of moving parts in the Group and in forming guidance. It's probably important to note that we have considered a number of, I guess, reasonably possible outcomes as they relate to FX and fuel.
Speaker #4: In forming that guidance range as well. Okay, no, thanks, Alistair. Second question, also on the guidance—really two parts. So just following up on your comment there, Alistair, on fuel cost.
Stephen Ridgewell: Okay. No, thanks, Alistair. Second question also on the guidance, or really two parts. Just following up on your comment there, Alistair, on fuel cost. At the low end of the range, are you assuming that fuel costs remain at current levels for the rest of the year? And perhaps at the top end of the range, you are assuming they come down. Like some sense of the assumptions and providing what is a reasonable range. Are you taking a worst case outcome at the low end? And then have you assumed mitigation of fuel costs in the numbers you provided?
Speaker #4: I mean, at the low end of the range, do you assume that fuel costs remain at current levels for the rest of the year?
Speaker #4: And perhaps at the top end of the range, you assume they come down? Some sense of the assumptions and providing what's a reasonable range, but are you taking a worst-case outcome?
Speaker #4: At the low end. And then, have you assumed mitigation of fuel costs in the numbers you provided?
Speaker #2: Thanks, Steven. Now, that's question number three and four, but that's okay—we're not counting for friends. And Alistair, do you want to start on the fuel costs?
Adam Hall: Thanks, Steven. That is question number 3 and 4, but that is okay. We are not counting for friends. Alistair, do you want to start on the fuel cost?
Alistair Gray: Yeah.
Speaker #2: And then the mitigation?
Adam Hall: Then the mitigation.
Speaker #4: Yeah, absolutely. To talk about fuel holistically, we did come out with some updates or guidance in April as a result of the conflict in the Middle East.
Alistair Gray: Yeah, absolutely. To talk about fuel holistically, we did come out with an update to our guidance in April as a result of the conflict in the Middle East, and at that point, called out a 5 to 10 million AUD impact across the 4 months. Of course, at that point, as now, it is actually difficult to predict the outcome and where fuel prices may track in the market. I think what has been pleasing through the 4 months of FY26 has been the team's ability to mitigate
Speaker #4: And at that point, called out a $5 to $10 million impact across the four months. Of course, at that point, as now, it's actually difficult to predict the outcome.
Speaker #4: And where fuel prices may track in the market. I think what's been pleasing through the four months of FY26 has been the team's ability to mitigate.
Adam Hall: Yeah
Speaker #4: These costs, both pre-operational improvements and pricing actions, were taken through that period. So, I would say that the 5% for the four months is fairly representative of our run rate.
Alistair Gray: these costs, both through operational improvements and pricing actions taken through that period. So I would say that the 5% for the 4 months is fairly representative of a run rate, noting that fuel prices are currently lower than the average that they were for that 5 months. So yes, at the low end, we have assumed an improvement on fuel prices, and at the top end, we have assumed a worsening.
Speaker #4: Noting that fuel prices are currently lower than the average that they were over that five-month period. So, yeah, at the low end, we have assumed an improvement in fuel prices.
Speaker #4: And at the top end, we've assumed a worse sign.
Speaker #2: Thanks, Steven.
Adam Hall: Thanks, Steven.
Speaker #1: Thank you. We will now proceed to take our next question. Our next question comes from the line of Adrian Albon from Jordan. Please go ahead, Adrian; your line is open.
Operator: Thank you. We will now proceed to take our next question. Our next question comes from the line of Adrian Allbon from Jarden. Please go ahead, Adrian. Your line is open.
Speaker #4: Oh, good morning, team. I'm just wondering, in the healthcare region—hey, how are you going? In the healthcare division, when we look at page 27, or slide 27, I'm just wondering if you can help bridge for us.
Adrian Allbon: Oh, good morning, team. Just wondering in the healthcare division.
Adam Hall: Hey, Adrian.
Adrian Allbon: Hey, how you going? In the healthcare division, when we look at page 27 or slide 27, I am just wondering if you can help bridge for us. I think the New Zealand and Southeast Asia revenue is up 10%, but the EBITDA is down 10. Can you just give us a bit more detail what is going on there?
Speaker #4: I think the New Zealand and Southeast Asia revenue is up 10%, but the EBITDA is down 10%. Can you just give us a bit more detail on what's going on there?
Speaker #2: Yeah, absolutely, Adrian. It's a fair question. I'm going to start, and Alistair's going to chime in. So, two different pressures here in terms of, firstly, forex, and then the Southeast Asian capital items.
Adam Hall: Yeah, absolutely, Adrian. It is a fair question. I am going to start, and Alistair is going to chime in. So two different pressures here in terms of, firstly, Forex and then the Southeast Asian capital items. So I know that there was a lot going on in last year's full year announcement, but we did point to the H2 of FY25 having an absolutely outstanding half in terms of capital item sales in Southeast Asia. So if you think of that as being well above the norm, and then the number of capital items in the H2 of FY26, probably slightly below norms for Southeast Asia. So that plays into it. But also, with the AUD at 13-year highs against the NZD, that has a big influence on our New Zealand earnings. And Alistair, would you add to that?
Speaker #2: So, I know that there was a lot going on in last year's full year announcement, but we did point to the second half of FY25 having an absolutely outstanding result in terms of capital item sales in Southeast Asia.
Speaker #2: So, if you think of that as being well above the norm, and then the number of capital items in the second half of FY26, probably slightly below norms for Southeast Asia.
Speaker #2: So that plays into it. But also, with the Australian dollar at 13-year highs against the New Zealand dollar, that has a big influence on our New Zealand earnings.
Speaker #2: And, Alistair, would you add to that in Adrian's question?
Alistair Gray: Yeah
Adam Hall: for Adrian's question?
Speaker #4: Yeah, I mean—no. I mean, in terms of the drivers of the EBITDA, the other two large forces at play, just to put it into context, are the capital sales, perhaps, and in the second half, capital sales were more than double in FY25 than in the prior corresponding year.
Alistair Gray: No, in terms of the drivers of the EBITDA, they are the two large forces at play. Just to put into context the capital sales, perhaps, in the H2. Capital sales were more than double in FY25 than the prior corresponding year. FY26 was more akin to FY24. So that did have a material impact. As Adam called, FX is clearly at an unusual high. I would view, absent not being certain of where FX prices, FX may go, to be temporary factors, Adrian. There is nothing underlying or systemic in the outcome. Then the second. Sorry. Go on, Adrian.
Speaker #4: And FY26 was more akin to FY24, so that did have a material impact. And then, as Adam called out, FX is clearly at an unusually high level.
Speaker #4: I would view, absent not being certain where FX prices—FX may go—to be 10 pre-factors, Adrian. There's nothing underlying or systemic in the outcome.
Speaker #4: And then the second—sorry, go on, Adrian. Well, can I just tidy this up a little bit? So, in constant currency terms, which you have sort of introduced for this part, do you have a sense of what the EBITDA would have been, or would it have been closer to—I think you said constant currency was more like 8% growth.
Adrian Allbon: Oh, can I just tidy this a little bit up? So in constant currency terms, which you have sort of introduced for this part, do you have a sense of what the EBITDA would have been? Or would it have been closer to, I think you said constant currency was more like 8% growth, wasn't it? I know that is for the
Speaker #4: I know that's for the I know that's for the division including Australia, but what would be the constant currency kind of equivalent?
Alistair Gray: Medtech
Adrian Allbon: I know that is for the division including Australia. But what would be the constant currency kind of equivalent?
Speaker #2: Yeah. I mean, the delta would...
Alistair Gray: Yeah. The delta would be several. The FX is at the material impact in terms of how we translate earnings back into AUD from Southeast Asia. So both are the entirety of the reason. Typically, we would expect that region to grow, given the weighting to Medical Technology, it is sort of into high single digits on a sustainable track. Underlying, that is what happened. It may be helpful to maybe reference outside of capital sales, we did continue to see low double-digit growth in our Medical Technology business. So again, there is not anything fundamental in that. It is temporary. But I am conscious here the second part of the question is then is why revenue 10% off as well.
Speaker #4: The delta would be, we said, a lot of the FXs are the material impacts in terms of how we translate earnings back into AUD from Southeast Asia.
Speaker #4: So both are the entirety of the reason. Typically, we would expect that region to grow, given the weighting to MedTech. It's sort of mid to high single digits on our sort of sustainable track.
Speaker #4: Underlying, that’s what happened. It may be helpful to reference, outside of capital sales, that we did continue to see low double-digit growth in our MedTech business.
Speaker #4: So there isn't—again, there isn't anything fundamental in that. It is temporary. But I'm conscious you're—the second part of the question is then, why is revenue 10% up as well?
Speaker #4: We did mention at the half. We did have our—because it was a similar distortion at half one. We did have a change in one of our contract logistics customers from 3PL to 4PL in the first half, which increased revenue, but not gross or EBITDA.
Alistair Gray: We did mention at the half, because it was a similar distortion at H1, we did have a change in one of our contract logistics customers from 3PL to 4PL in the H1, which increased revenue but not core or EBITDA. So that is distorted the margin. Again, that is a temporary factor. So we should expect that to normalize as we go forward.
Speaker #4: So that's distorted the margin. Again, that's a temporary factor, so we should expect that to normalize as we go forward. Okay, thank you for that.
Adrian Allbon: Okay. Thank you for that. Capital sales, big swank on the comparative, particularly for the H2 and then in the revenues, a change in customer recognition, 3PL to 4PL, and FX being the other bridge in that explanation.
Speaker #4: So, capital sales—big swing on the comparative, particularly for the second half. And then, in the revenues, a change in customer recognition—3PL to 4PL—and FX being the other bridge in that explanation.
Speaker #2: Well, summarised, yes.
Adam Hall: Well summarized, yes.
Speaker #4: Yeah, good summary. Okay, just a second question—just staying in Medical Technologies. Look, it feels to me like, arithmetically, the group returns there are more like 7%.
Alistair Gray: Yeah. Good summary.
Adrian Allbon: Okay. Just a second question, just staying in Medical Technology. It feels to me, arithmetically, the group returns there are more like 7%. When you think about you've spent AUD 1.6 billion out of the AUD 2 billion out of the last five years. And the earnings number doesn't look like it's, call it, sort of 120-ish, 130-ish. What is the license to kind of keep deploying money into that space? What sort of returns are you actually targeting from the bolt-ons? And how do you kind of lift the group returns against that kind of arithmetic starting point?
Speaker #4: When you think about it, you've spent $1.6 billion out of the $2 billion over the last five years, and the earnings number doesn't look like it's—yeah, call it sort of $120-ish, $130-ish.
Speaker #4: How do you, kind of, what is the license to keep deploying money into that space? What sort of returns are you actually targeting from the bolt-ons?
Speaker #4: And how do you, kind of, lift the group returns against that kind of arithmetic starting point?
Speaker #2: Yeah, fair question, Adrian. I think we'd go back to Investor Day, and we start with the tested calculation that we made around the return on capital deployed in M&A over the last—I believe it was five years.
Adam Hall: Yeah. Fair question, Adrian. I think we go back to Investor Day, and we start with the tested calculation that we made around the return on capital deployed in M&A over the last, I believe, it was five years.
Adrian Allbon: Yes.
Speaker #2: Of 16%. So we're confident that the deployment of capital really creates value for the group there. What we're observing on the ground is the, I would say, the critical mass that we're achieving in Southeast Asia, and the products—excuse me, and the solutions—that are coming to market in our graphs.
Adam Hall: Of 16%. We are confident that the deployment of capital really creates value for the group there. What we are observing on the ground is, I would say, the critical mass that we are achieving in Southeast Asia and the solutions that are coming to market in Allografts. The critical mass that we are hitting in Southeast Asia is we now have the backbone of a leadership position across the region, and we are seeing more and more that gives us access to franchise expansions. Suppliers are choosing to come to us with their new products for the region. Great example is actually Catalyst, where we had an existing relationship with that supplier in Australia. They were really pleased with the work that we have done for them there. Then we went through this acquisition.
Speaker #2: So, the critical mass that we’re hitting in Southeast Asia is that we now have the backbone of a leadership position across the region. We’re seeing more and more that gives us access to franchise expansions, which means suppliers are choosing to come to us with their new products for the region.
Speaker #2: A great example is actually Catalyst, where we had an existing relationship with that supplier in Australia. They were really pleased with the work that we'd done for them there.
Speaker #2: And then we went through this acquisition and extended that supplier relationship throughout Southeast Asia, and we think we've got a lot more growth opportunities.
Adam Hall: We then extended that supplier relationship throughout Southeast Asia, and we think we have got a lot more growth opportunities. So that is in terms of the MedTech distribution, sort of leveraging that growth position and that scale. Within Allografts, we brought the acellular dermal matrix to market. We talked a bit about it at the Investor Day. It was a new approach, a new solution to helping people with breast reconstruction. That has caught on really well because it has got a tremendous impact on patient recovery. So we keep getting drawn into more and more procedures. I think that will also continue to be a great opportunity for the group. So, really pleased with MedTech and looking forward to more growth.
Speaker #2: So that's in terms of the MedTech distribution. Sort of leveraging that growth position and that scale, within our graphs we brought the acellular dermal matrix to market.
Speaker #2: We talked a bit about it at the Investor Day. It was a new approach, a new solution to helping people with breast reconstruction. That's caught on really well, because it's got a tremendous impact on patient recovery.
Speaker #2: And so, we keep getting drawn into more and more procedures. I think that will also continue to be a great opportunity for the Group.
Speaker #2: So, really pleased with MedTech and looking forward to more growth.
Adrian Allbon: But just to halt you there, is the maths right? If you look at the capital employed to date, are you returning about 7% out of that vertical?
Speaker #4: Just to halt you there. As to the maths, right? If you look at the capital employed today, are you returning about 7% out of that vertical?
Speaker #2: I think that I don't—I have not had the opportunity to go back and look over the Life Healthcare acquisition, which was over five years ago now.
Adam Hall: I have not had the opportunity to go back and look over the LifeHealthcare acquisition, which was over five years ago now.
Speaker #4: That's right.
Alistair Gray: That is right.
Speaker #2: It was in 2021.
Adam Hall: It was in 2021.
Speaker #4: I think, yeah, I think, Adrian, what we have seen certainly in recent years is a continued improvement of the return on capital employed from the division, which speaks to both the, I guess, the organic growth potential, particularly of the markets in Southeast Asia, but also in New Zealand, as well as their creative bolt-on acquisitions, which, as we've talked about, are both of synergistic value and provide access into further high-margin, high-growth geographies and therapy areas.
Alistair Gray: Yeah. I think, Adrian, what we have seen, certainly in recent years, is a continued improvement
Adam Hall: Yes
Alistair Gray: of the return on capital employed from the division, which speaks to both, I guess, the organic growth potential, particularly of the markets in Southeast Asia, but also in the NZ, as well as the accretive bolt-on acquisitions, which as we've talked about, both of synergistic value and provide access into further high margin, high growth geographies and therapy areas. I think, are we targeting a higher return on capital at the group? Absolutely. We continue to be focused on driving towards 15% of the group and Medtech will continue to increase as part of that.
Speaker #4: So I think we'd be like, are we targeting a higher return on capital at the group? Absolutely. We continue to be focused on driving towards 15% at our group, and MedTech will continue to increase as part of that.
Speaker #4: Okay. So if I summarise that, you sort of regard this sort of the establishment of MedTech, which is a sizable amount of money as a sort of a sunk investment, and the activities that you're doing now are quite a creative off that platform.
Adrian Allbon: Okay.
Adrian Allbon: If I summarize that, you sort of regard the establishment of Medtech, which is a sizable amount of money, as a sort of a front investment, and the activities that you're doing now are quite accretive off that platform.
Speaker #4: That's correct.
Adam Hall: That's correct. We certainly think that it's accretive on the platform.
Speaker #2: We certainly think that it's creative on the platform.
Speaker #4: It certainly is a creative.
Alistair Gray: It certainly is accretive.
Speaker #1: Thank you. Our next question comes from the line of Laura Sukle from Citi. Please ask your question, Laura. Your line is open.
Operator: Thank you. Our next question comes from the line of Laura Siqueira from Citi. Please ask your question. Laura, your line is open.
Speaker #5: Hello. Thank you for taking my question. Firstly, can I ask if you've got any can I ask if you've got any remaining inventory work done or systems cut over left to do related to the DC program now that Camps Creek is up and running?
Laura Siqueira: Hello. Thank you for taking my question. Firstly, can I ask
Adam Hall: Hi, Laura.
Laura Siqueira: if you have got any remaining inventory work down our systems cut over left to do related to the DC program now that Kemps Creek is up and running? I am thinking about the kind of tail work that you do to finish off the shutdown of the old pieces.
Speaker #5: I'm thinking about the kind of tail work that you do to finish off the shutdown of the old pieces.
Speaker #2: Yeah, that's a great question, and I'm delighted that when we say the chapter's closed, the chapter's closed. So all of the impact of the startup and inventory trend transition is captured within the FY26 results.
Adam Hall: Yeah. That is a great question. I am delighted that when we say the chapter is closed, the chapter is closed. So all of the impact of the startup and inventory transition is captured within the FY26 results. We would not be expecting that to hit us in FY27. Laura, just for those who may not recognize your point, during the year, we were forced to run, for example, two facilities at the same time in parallel as we brought up Kemps Creek. I believe that Laura is referring to the fact that that is a heavy load on us. But now that is behind us, and we are now putting them to work and getting the utilization up.
Speaker #2: We wouldn't be expecting that to hit us in FY27. Laura, just for those who may not recognise your point, during the year, we were forced to run, for example, two facilities at the same time, in parallel, as we brought up Kim's crew.
Speaker #2: And I believe that Laura’s referring to the fact that that’s a heavy load on us. But now that’s behind us, and we're now putting them to work and getting the utilisation up.
Speaker #5: Great, that's very clear. And then my second question is, in the community pharmacy setting, do you find that you're having to compete for patient spend on high-priced, out-of-pocket drugs?
Laura Siqueira: Great. That is very clear. My second question is, in the community pharmacy setting, do you find that you are having to compete for patient spend on high-priced, out-of-pocket drugs? GLP-1s in the weight loss setting will be the obvious example. Or do you just get the market share that you would expect without too much extra effort and the TerryWhite positioning as it is?
Speaker #5: So, GLP-1s in the weight loss setting will be the obvious example, or do you just get the market share that you would expect without too much extra effort and the TerryWhite positioning as it is?
Speaker #2: Yeah, I think what we see is the GLP-1 space is fierce, in the sense that it's a real flashpoint for competitive dynamics. And we probably index slightly low in GLP-1s in terms of our share.
Adam Hall: Yeah. I think what we see is the GLP-1 space is fierce in the sense that it is a real flashpoint for competitive dynamics. We probably index slightly low in GLP-1s in terms of our share. Still very respectable, but slightly less than what you might expect. However, in high-value medicines, which are, high-value medicines are, of course, priced higher than GLP-1s. They are more than AUD 1,000 a dose. That is where we probably tend to over-index in our share. That is, again, a result of the reliability of the Symbion network and the care focus of TerryWhite. So I think that is consistent with our positioning in the market.
Speaker #2: It's still very respectable, but slightly less than what you might expect. However, in high-value medicines, which are high-value medicines are, of course, priced higher than GLP-1s, they're more than $1,000 a dose.
Speaker #2: That's where we probably tend to over-index in our share, and that's, again, a result of the reliability of the Symbion network and the care focus of Terry White.
Speaker #2: So, I think that's consistent with our positioning in the market.
Speaker #5: Perfect. Thanks very much.
Laura Siqueira: Perfect. Thanks very much.
Speaker #1: Thank you.
Operator: Thank you.
Speaker #2: You're welcome.
Adam Hall: You are welcome.
Speaker #1: We will now proceed to take our next question from the line of Stephen Hudson from Macquarie Securities. Please go ahead, Stephen, your line is open.
Operator: We will now proceed to take our next question from the line of Stephen Hudson from Macquarie Securities. Please go ahead, Stephen. Your line is open.
Speaker #2: Hi, Stephen.
Adam Hall: Hi, Stephen.
[Analyst] (Macquarie): Hi. It's actually Nick from Macquarie. Steve's just tied up on another call. I was asking
Speaker #4: It's actually Nick from Macquarie. Steve's just tied up on another call, so I was asking a couple of questions on his behalf. Firstly, just in terms of the first month of the new 1PWA and the inclusion of the high-value medicines versus the sort of lower-margin ones—on a net basis, what are you guys watching out for?
Adam Hall: No problem.
[Analyst] (Macquarie): a couple of questions on his behalf. Firstly, just in terms of the first month of the new 1PWA, and the inclusion of the high-value medicines versus the sort of lower margins sort of on a net basis, where are you guys washing out?
Speaker #2: Yeah, that's a really great question. So, in the first month of trading, we've seen three different factors at work. First is, exactly as you say, the change in the tiering of medicines from three tiers to four tiers.
Adam Hall: Yeah, that's a really great question. So in the first month of trading, we've seen three different factors at work. First is exactly as you say, the change in the tiering of medicines from 3 tiers to 4 tiers. We've then seen increased or continued competitive dynamics. But offsetting that, we've then had the CSO come through. Literally one month of trading. I think we'd say it's as expected, and the impact's included in the guidance that we provided for the year. But more data to come as that trading shakes out. And I think over time, moving from that 3-tier system to the 4-tier system is a net benefit for us. But in the short term, a little less so. And why do I say that? Because the cap changes from AUD 54 to AUD 223.
Speaker #2: We've then seen increased or continued competitive dynamics. But offsetting that, we've then had the CSO come through. Literally, one month of trading—I think we'd say it's as expected, and the impacts are included in the guidance that we provided for the year.
Speaker #2: But more data will come as that trading shakes out. And I think over time, moving from that three-tier system to the four-tier system is a net benefit for us.
Speaker #2: But in the short term, a little less so. And why do I say that? Because the cap changes from $54 to $223. So, with the continued rise of high-cost medicines and complex medicines, that will tend to work to our benefit in the Symbion division.
Adam Hall: With the continued rise of high medicines and complex medicines, that will tend to work to our benefit in the Symbion division.
Speaker #4: Great. And then just in terms of the CSO pool, are you guys still on track to capture the 29% share that you previously talked about of the funding uplift?
Alistair Gray: Great. Then just in terms of the CSO pool, are you guys still on track to capture the 29% share that you previously talked about of the funding uplift?
Speaker #2: We're absolutely on track, on a gross basis, to capture 29% of the $78 million. Again, those two other factors that I've just called out—the offsetting impact in the short term of three tiers moving to four tiers, which is probably a mild headwind—and then, of course, continued competitive dynamics in the space.
Adam Hall: We're absolutely on track on a gross basis, to capture 29% of the AUD 78 million. Again, those two other factors that I've just called out, the offsetting impact in the short term of three tiers moving to four tiers, which is probably a mild headwind, and then, of course, continued competitive dynamics in the space. As you pointed out, Nick, we're just in the first month. It's going to take a little while to settle in. But again, our best expectation contained in that guidance number we've provided.
Speaker #2: As you pointed out, Nick, we're just in the first month. It's going to take a little while to settle in. But again, our best expectation is contained in that guidance number we've provided.
Speaker #4: Great. Thank you.
Alistair Gray: Great. Thank you.
Speaker #1: Thank you. We will now take our next question from the line of Marcus Colley from UBS. Please ask your question, Marcus. Your line is open.
Operator: Thank you. We will now take our next question from the line of Marcus Coley from UBS. Please ask your question. Marcus, your line is open.
Speaker #2: Hi, Marcus.
Adam Hall: Hi, Marcus.
Speaker #4: Good morning, team. Just adding—I just wonder if you could be drawn a little bit more on maybe a divisional view on that guidance.
Marcus Coley: Good morning, team. Adam, I just wonder if you could be drawn a little bit more on maybe a divisional view on that guidance, in terms of the relative growth rates. Are you expecting, in particular, higher or lower than 5% in healthcare?
Speaker #4: In terms of the relative growth rates, are you expecting, in particular, higher or lower than 5% in healthcare?
Speaker #2: Yeah, if I go back to our four divisions, the expectation is bang on the investor day. So we'd expect slightly slower growth from Symbion Healthcare distribution, slightly higher growth from retail pharmacy brands, animal care, and medical technology.
Adam Hall: If I go back to our four divisions, the expectation is bang on Investor Day. So we would expect slightly slower growth from Symbion Healthcare distribution, slightly higher growth from Retail Pharmacy Brands, Animal Care, and Medical Technology. Again, the opportunities there are real. They are accruing from our current leadership positions in each of those sectors. That is what gives us the confidence despite some of the cost pressures in front of us.
Speaker #2: And again, the opportunities there are sort of real. They're accruing from our current leadership positions in each of those sectors, and so that's what gives us the confidence, despite some of the cost pressures in front of us.
Marcus Coley: Great. I suppose you have mentioned competition a few times when it comes to community pharmacy. Maybe if you could just elaborate a little bit in terms of, is this sort of the rolling impact as you contract more and more of your third-party distributors? Or maybe give just a little bit more context in terms of how that competition is playing out at the moment.
Speaker #4: Great. And I suppose you've mentioned competition a few times when it comes to community pharmacy. Maybe if you could just elaborate a little bit in terms of, is this sort of the rolling impact as you contract more and more of your third-party distributors, or maybe just give a little bit more context in terms of how that competition is playing out at the moment?
Speaker #2: Yeah, Marcus, absolutely. And forgive me if I repeat what I think we've spoken about before, but the change of the single largest wholesale customer two years ago kicked off a period of market flux.
Adam Hall: Yeah, Marcus, absolutely. Forgive me if I repeat what I think we have spoken about before. But the change of the single largest wholesale customer 2 years ago kicked off a period of market flux. During that period, we also happened to see an increase in contract renewals during FY25. That really kicked off a period of competitive intensity. I would say that competitive intensity accelerated and increased during FY25, but then I would say has stabilized. It has not reduced, but I would say it is stabilized during FY26. So we would expect that competitive intensity to continue during FY27, and that is what we have baked into the guidance. But fair question, Marcus.
Speaker #2: And during that period, we also happened to see an increase in contract renewals during FY25. So that really kicked off a period of competitive intensity.
Speaker #2: I would say that competitive intensity accelerated and increased during FY25, but then I would say it has stabilized. It hasn't reduced, but I'd say it's stabilized during FY26.
Speaker #2: So, we would expect that competitive intensity to continue during FY27, and that's what we've baked into the guidance. But fair question, Marcus.
Speaker #4: Can you just describe it more as it's more of an annualization of where margins have got to, as opposed to, or rebates as opposed to, incremental reductions?
Marcus Coley: So you describe it more of an annualization of where margins have got to as opposed to, or rebates, as opposed to incremental reductions.
Speaker #2: I'd say a little bit of both. I'd say, because—remember, excuse me—the average tenor length is in the region of three to four years.
Adam Hall: I would say a little bit of both. I would say, because remember the cycle, excuse me, the average tenure length is in the region of 3 to 4 years. So you have got the annualization of the ones you refer to, but you have also got some new ones coming in at the more competitive rate.
Speaker #2: So you've still got some—you've got the annualization of the ones you refer to, but you've also got some new ones coming in at the more competitive rate.
Speaker #4: Sure. And then secondly, if you call it a second question, I just wonder if you could talk a little bit of perspective, yeah. Well, it might be two and a half.
Marcus Coley: Sure. Then secondly, if you call it a second question, I just wonder if you could give a little bit of perspective.
Adam Hall: Sure. For friends. Sure. No problem.
Marcus Coley: Well, it might be two and a half. Could you just give us a little bit of perspective in terms of where you saw market growth in the two big markets being community and hospital last year, and where you think market growth is going this year, I suppose, kept being your overall level of spend and medicines?
Speaker #4: Could you just give us a little bit of perspective in terms of where you saw market growth in the two big markets, being community and hospital, last year?
Speaker #4: And where do you think market growth is going this year? I suppose market being, I suppose, your overall level of spend in medicines.
Speaker #2: Sure. I'm going to throw to Alistair in just a moment to speak to both of those in community pharmacy and in hospital. But I'd say the theme here is, of course, GLP-1s, but also high-value medicines.
Adam Hall: Sure. I am going to throw to Alistair in just a moment to speak to both of those in community pharmacy and in hospital. But I would say the thematic here is, of course, GLP-1s, but also high-value medicines. So we are seeing the continued emergence of a couple of oncology blockbusters that continue to also be high value and making a difference in the market. Alistair, what would you add to that?
Speaker #2: So we're seeing the continued emergence of a couple of oncology blockbusters that continue to be high value and are making a difference in the market.
Speaker #2: Alistair, what would you add to that?
Speaker #3: Yeah, I mean, that's certainly an important dynamic, which is obviously driving the growth. I mean, GLP-1s are still continuing to grow quickly, and in dollar terms, they're obviously beginning to cycle a higher base.
Alistair Gray: Yeah, that is certainly an important dynamic, which is obviously driving the growth. GLP-1s are still continuing to grow quickly, in dollar terms. They are obviously beginning to cycle a higher base. So, we saw in the H2, slightly slower high growth, from GLP-1s. I would expect that to continue unless there is a change in format for GLP-1s. What I would say, in addition to that, in community pharmacy, somewhat tied to my previous comment, we did see very high growth in FY25, and in particular on the H2, it grew revenue at 20%. There is some cycling impacts in 2026, but I think as we look forward, I think the two drivers of growth will continue to be high-value medicines and GLP-1s.
Speaker #3: So we saw in the second half slightly slower, high growth from GLP-1s. I would expect that to continue unless there is a change in format for GLP-1s.
Speaker #3: What I would say in addition to that, in community pharmacy—somewhat tied to my previous comment—we did see very high growth in the second half in FY25.
Speaker #3: And in particular, in the second half, it grew revenue at 20%. So there are some cycling impacts in '26, but I think as we look forward, the two drivers of growth will continue to be high-value medicines and GLP-1s.
Speaker #2: Did we answer your question there, Marcus?
Adam Hall: Did we answer your question there, Marcus Coley?
Speaker #4: Well, I suppose when you look at the PBS data, in the last five months the overall level of Section 95 medicine spenders' growth is zero.
Marcus Coley: Well, I suppose when you look at the PBS data, in the last five months, the overall level of Section 85 medicine spend growth is zero. So I take your point. There is a lot of growth in high value, but it does seem like there are other things offsetting it. I am not sure if you are necessarily seeing that because obviously, PBS data is not quite the full picture, but it does feel like the level of overall growth in medicines is starting to plateau.
Speaker #4: So I take your point—there's a lot of growth in high value, but it does seem like there are other things offsetting it. I'm not sure if you're necessarily seeing that because obviously PBS data is not quite the full picture, but it does feel like the level of overall growth in medicines is starting to plateau.
Speaker #3: Yeah.
Alistair Gray: Yeah.
Speaker #2: I think on the PBS, that's absolutely right. Again, what we're seeing is in the high-value, in the private scripts, in the GLP-1s, that's what's continuing to flow through for us.
Adam Hall: I think on the PBS that is absolutely right. Again, what we are seeing is in the high value, in the private scripts, in the GLP-1s, that is what is continuing to flow through for us. Also that is probably thematically consistent with the continued rise of complex medicines and more advanced medicines that are coming ahead.
Speaker #2: And also, that's probably thematically consistent with the continued rise of complex medicines and more advanced medicines that are coming ahead.
Speaker #3: The only other point I'd sort of reiterate on that, Marcus, is that there is an element of cycling of very high growth rate in the second half and more broadly across FY25.
Alistair Gray: The only other point I'd sort of reiterate on that, Marcus, is that there is an element of cycling of very high growth rate in the H2, and more broadly across FY25. I think it's in part, it's as much about that as about the ongoing trajectory of growth in the industry. It's just one to bear in mind, cycling a very high FY25.
Speaker #3: I think in part it's as much about that as it is about the ongoing trajectory of growth and the industry. So it's just one to bear in mind.
Speaker #3: Cycling of very high FY25.
Marcus Coley: Sure. Does that count as two and a half, Marcus?
Speaker #2: Sure. So, does that count as two and a half, Marcus?
Speaker #4: Well, this is an extension. You don't know off the top of your head what private script would be of your community pharmacy business in your hospital business?
Marcus Coley: Well, it's an extension. You don't know off the top of your head what private script would be of your community pharmacy business and your hospital business?
Speaker #2: I think, Eric, it's contained in the guidance we've provided. Marcus, I will let you go.
Adam Hall: I think our expectations are contained in the guidance we've provided, Marcus. I will let you
Marcus Coley: Oh, no. Just as a level of what is the relative size of private script versus government funded? Just to give us a feel of the magnitude of what each of them contribute. Is it
Speaker #4: Oh, no, no. Just as a level, what is the relative size of private script versus government-funded, just to give us a feel for the magnitude of each of them?
Speaker #2: Yeah, I think we won't be sharing that today, but I appreciate the theme, and we'll think about it for future discussion.
Adam Hall: I think we won't be sharing that today, but I appreciate the theme.
Marcus Coley: Okay.
Adam Hall: And we'll think about it for future discussion.
Speaker #4: Okay. Thank you.
Marcus Coley: Okay. Thank you.
Speaker #1: Thank you. We will now take our next question from Dan Hearn from MST Marquee. Please go ahead, Dan. Your line is open.
Operator: Thank you. We will now take our next question from Dan Hearn from MST Marquee. Please go ahead, Dan. Your line is open.
Speaker #2: Oh, good morning. Thanks very much. I just want to go back to the wholesale agreement again and understand—you were talking about those three T's there.
Dan Hearn: Well, good morning. Thanks very much. I just want to go back to the wholesale agreement again. I understand you are talking about those three tiers there. I think originally you were talking about, the changes to markup and so forth across those tiers would be managed to be relatively neutral, and the CSO uplift would sort of come through as the benefit. Has it played out that way?
Speaker #2: I think originally you were talking about the changes to markup and so forth across those tiers would be managed to be relatively neutral, and the CSO uplift would sort of come through as the benefit.
Speaker #2: Has it played out that way?
Speaker #5: Yeah, it's been one month of trading. Dan, very fair question. I would say it's been a mild negative on the change from the three tiers to the four tiers.
Adam Hall: Yeah, it has been one month of trading, Dan. Very fair question. I would say it has been a mild negative on the change from the three tiers to the four tiers in that first month of trading. So it is going to be an offset for us. I think long term it is very helpful. Again, it is one month, and it is straight after the financial year end. So it is tough to get a comprehensive read that we think will continue. Certainly, I think our bias would be a slight negative in the short term.
Speaker #5: In that first month of trading, so it is going to be an offset for us. I think long term, it's very helpful. But again, it's one month, and it's straight after the financial year ends.
Speaker #5: So, it's tough to get a comprehensive read that we think will continue. But certainly, I think our bias would be a slight negative in the short term.
Speaker #2: Okay, understood. So just on that basis, and looking at the uplift in the CSO, which is pretty significant—I mean, it makes the EBITDA, underlying EBITDA growth you've got through to FY27 look pretty modest, especially when you consider some of the acquisitions from last year that are contributing to that.
Dan Hearn: Okay. Understood. So just on that basis, and looking at the uplift in the CSO, which is pretty significant. It makes the underlying EBITDA growth you have got to FY27 look pretty modest, especially when you consider some of the acquisitions from the last year that are contributing to that. So, are you implying that there is softness in the underlying business, or is that CSO benefit smaller than we are imagining?
Speaker #2: So, I mean, are you implying that there's softness in the underlying business, or is that CSO benefit smaller than we're imagining?
Speaker #5: I think that you’ve mentioned tiering, which is absolutely fair. And one of the other callers mentioned the ongoing competitive challenges within community pharmacy. And as we mentioned there, there’s continued rollover of contracts into the new pricing regime, or softer pricing regime, as well as annualizing what’s occurred before.
Adam Hall: I think you have mentioned tiering, which is absolutely fair. One of the other callers mentioned the ongoing competitive challenges within community pharmacy. As we mentioned there is continued rollover of contracts into the new pricing regime or softer pricing regime, as well as annualizing what has occurred before. I think the net expression, we are very confident with the guidance. That reflects both a slower growth in Symbion Healthcare Distribution, but also great gains in the other divisions.
Speaker #5: So I think on the net expression, we're very confident with the guidance, and that reflects both a slower growth in Symbion and healthcare distribution, but also great gains in the other divisions.
Speaker #2: Okay. Thank you very much.
Dan Hearn: Okay. Thank you very much.
Speaker #5: Thanks, Dan.
Operator: Thank you.
Adam Hall: Thanks, Dan.
Speaker #1: We will now proceed to the next question. From the line of Ben Crozier from Forsyth Barr, please go ahead. Ben, your line is open.
Operator: We will now proceed to the next question from the line of Ben Crozier from Forsyth Barr. Please go ahead, Ben. Your line is open.
Speaker #6: Good morning, guys. Just a quick one on the Symbion network. You've hopefully given some realization for contract logistics over in Australia. Where does utilization sit for the Symbion network in Australia?
Ben Crozier: Morning, guys. Just a quick one on the Symbion network. You've helpfully given a realization for contract logistics over in Australia. Where does utilization sit for the Symbion network in Australia? Obviously, you've put a bit of capacity on that side of the business at the moment, and how many years of growth do you need to grow into that capacity, do you think?
Speaker #6: Obviously, you've put a bit of capacity on that side of the business at the moment. And, sort of, how many years of growth do you need to grow into that capacity, do you think?
Speaker #2: Oh, that's a great question. Look, I'd be disappointed if we were busting at the seams having just finished, like literally, in the last half.
Adam Hall: Well, that's a great question. Look, I'd be disappointed if we were busting at the seams having just finished like literally in the last half. I think we've got a number of years of growth ahead of us, and it also, I think there's two layers to that. One is just straight up more rack space that we can deploy now, but also, the smaller and more efficient slugs of incremental CapEx if we want to re-rack or add more incremental capacity later on. So I think we've got plenty of years of growth in front of us. The focus today is productivity. Let's take the volume that we do have and pump it through as most efficiently as possible.
Speaker #2: I think we've got a number of years of growth ahead of us. And also, I think there are two sort of layers to that.
Speaker #2: One is just straight-up more rack space that we can deploy now, but also the sort of smaller and more efficient slugs of incremental capex if we want to re-rack or add more incremental capex later on.
Speaker #2: Excuse me, intermittent incremental capacity later on. So, I think we've got plenty of years of growth in front of us. The focus today is productivity.
Speaker #2: Let's take the volume that we do have and pump it through as efficiently as possible. So, the three automated facilities that we have—Keysborough, Acacia Ridge, and Kemps Creek—they account for the vast majority of our million doses a day that we supply to Australians.
Adam Hall: The three automated facilities that we have, Keysborough, Acacia Ridge, Kemps Creek, they account for the vast majority of our million doses a day that we supply to Australians. Every time that we can drive out productivity, that really impacts the labor cost base. In Kemps Creek, I think we've set a target of 30% productivity over gray stains to be achieved by the year-end. Certainly the team are charging ahead on getting to that productivity.
Speaker #2: And so every time that we can drive up productivity, that really impacts the labor cost base. So, in Kemps Creek, I think we've set up a target of 30% productivity over grace days to be achieved by year-end.
Speaker #2: And certainly, the team is charging ahead on getting to that productivity.
Speaker #6: Maybe just to stick one on capex, you're pulling capex back quite a lot next year. Sort of, how much of that $100 million is maintenance or ongoing capex versus how much is available for growth?
Ben Crozier: Maybe just a second one on CapEx. You are pulling CapEx back quite a lot next year. How much of that AUD 100 million is maintenance or ongoing CapEx versus how much is available for growth? Are you going to have to stick to that AUD 100 million and turn away attractive growth projects if a lot of your divisions come to you with attractive investment opportunities well above your cost of capital hurdle, and you are saying no. Is that how we should read it?
Speaker #6: And, sort of, are you going to have to stick to that $100 million and turn away attractive growth projects if you get a lot of your divisions coming to you with attractive investment opportunities well above your cost of capital hurdle and you're saying no?
Speaker #6: Is that how we should read it?
Speaker #2: Ben, I'm not sure if one of the divisional CEOs got to you and has been asking you to ask me that question, but certainly, there's no shortage of great growth opportunities in front of us. But we are very disciplined about what return they can provide.
Adam Hall: Ben, I am not sure if one of the divisional CEOs got to you and has been asking you to ask me that question. There is no shortage of great growth opportunities in front of us, but we are very disciplined about what is the return that they can provide. In terms of the overall maintenance versus growth within the AUD 100 million budget, I would say a little more than half is connected to maintenance and safety. That leaves a healthy clip for growth opportunities. We will not be held back if there is an incremental opportunity to deploy capital to, I do not know, serve a customer. It is interesting you mention it, Ben, because one of the divisions actually had an opportunity come up in the last month where a customer came to them with an urgent request for a little extra capital, but a very attractive contract extension, which we have done.
Speaker #2: In terms of the overall maintenance versus growth within the $100 million budget, I'd say a little more than half is connected to maintenance and safety.
Speaker #2: And so that leaves a healthy clip for growth opportunities. And we won't be held back if we won't be held back if the if there's an incremental opportunity to deploy capital to, I don't know, serve a customer.
Speaker #2: It's interesting you mentioned it, Ben, because one of the divisions actually had an opportunity come up in the last month where a customer came to them with an urgent request for a little extra capital, but a very attractive contract extension.
Speaker #2: Which we've done. Now, I've talked about capital in terms of capital expenditure, but of course, the other thing that I think we're pleased about with the reduction in capex is it just gives us a little more room for bolt-on M&A as well.
Adam Hall: Now, I have talked about capital in terms of capital expenditure. Of course, the other thing that I think we are pleased about with the reduction in CapEx is it just gives us a little more room to bolt on M&A as well. Again, with that privileged access to deal flow, I think there is going to be some opportunities there that we are pretty interested in.
Speaker #2: And again, with that privileged access to deal flow, I think there are going to be some opportunities there that we're pretty interested in.
Speaker #6: All good. Thank you. That's all from me.
Ben Crozier: All good. Thank you. That is all for me.
Speaker #1: Thank you.
Adam Hall: Thanks, Ben.
Speaker #2: Thanks, Ben.
Speaker #1: We will now take our next question from Saul Hardison from Barrenjoey. Please ask your question, Saul. Your line is open.
Operator: Thank you. We will now take our next question from Saul Hendl from Barrenjoey. Please ask your question, Saul. Your line is open.
Speaker #7: Thanks, and good morning, Adam and Alistair. Morning, Saul. Apologies if I missed this on the call, Adam, but was there any commentary you made around the outlook for the Chemist Warehouse New Zealand wholesaling contract?
Saul Hendl: Thanks.
Adam Hall: Thanks, Saul.
Saul Hendl: Good morning, Adam and Alistair.
Adam Hall: Good morning, Saul.
Alistair Gray: Hi, Saul.
Saul Hendl: Apologies if I missed this on the call, Adam, but was there any commentary you made around the outlook for the Chemist Warehouse New Zealand wholesaling contract?
Speaker #2: Yeah. Well, Saul, that's a very fair question. So let me mention again what we said at Investor Day. We don't love commenting on individual contracts, but this one has been mentioned before.
Adam Hall: Yeah. Good, Saul. Very fair question. Let me mention again what we said at Investor Day. We don't love commenting on individual contracts, but this one has been mentioned before. It's well understood that the contract's scheduled to roll off at the end of calendar 2026, and the team have known that for a long time. They're expected to redeploy or reduce the cost base to match changes in their contract base, including this contract. The two things probably to add, one is, structurally, the New Zealand pharmacy wholesale market is significantly less attractive than the Australian pharmacy wholesale market. It's a much lower margin base. The loss of any contract in New Zealand is less meaningful in terms of group-wide EBITDA. That probably helps to explain why the magnitude of this contract would be mid to high single-digit EBITDA millions.
Speaker #2: It's well understood that the contract is scheduled to roll off at the end of calendar '26, and we as a team have known that for a long time.
Speaker #2: And they are expected to redeploy or reduce the cost base to match changes in their contract base, including this contract. Now, two things probably to add: one is structurally, the New Zealand pharmacy wholesale market is significantly less attractive than the Australian pharmacy wholesale market.
Speaker #2: It's a much lower-margin base, so the loss of any contract in New Zealand is less meaningful in terms of group-wide EBITDA. That probably helps to explain why the magnitude of this contract would be mid- to high-single-digit millions in EBITDA.
Speaker #2: So, 1% of group EBITDA. The other thing to mention is—and maybe we haven't done a good job of really pointing this out—that our New Zealand colleagues have done a great job over the last few years of consolidating and modernizing the asset base so that they absolutely are aware of commercial dynamics in New Zealand and have been tailoring our asset base to suit.
Adam Hall: 1% of group EBITDA. The other thing to mention is, and maybe we haven't done a good job of really pointing this out, but our New Zealand colleagues have done a great job over the last few years of consolidating and modernizing the asset base. They absolutely are aware of commercial dynamics in New Zealand and have been tailoring our asset base to suit. I think we're comfortable that, again, that contract is scheduled to roll off at the end of calendar 2026 and that the team will deal with it appropriately. Does that give you a little bit more background on that one, Saul?
Speaker #2: So I think we're comfortable that, again, that contract is scheduled to roll off at the end of calendar 2026, and that the team will deal with it appropriately.
Speaker #2: Does that give you a little bit more background on that one, Saul?
Speaker #7: Yeah, it does. So just to follow up, the guidance that you've given for fiscal '27, does that assume half a year's worth of that contract, and then the second half it expires?
Saul Hendl: Yeah, it does. Just to follow up, the guidance that you've given for FY27, does that assume half a year's worth of that contract and then the second half it expires? Is that how we should read that?
Speaker #7: Is that how we should read that?
Speaker #2: It certainly includes our best understanding of that contract for FY27.
Adam Hall: It certainly includes our best understanding of that contract for FY27.
Speaker #7: Okay, that's all I had. Thanks.
Saul Hendl: Okay. That's all I had. Thanks.
Speaker #2: Oh, thanks, Saul.
Adam Hall: Oh, thanks, Saul.
Speaker #7: Thanks, Saul.
Alistair Gray: Thanks, Saul.
Speaker #1: Thank you. We will now take our next question from Tom Godfrey from Odd Minette. Please go ahead, Tom. Your line is open.
Operator: Thank you. We will now take our next question from Tom Godfrey from Ord Minnett. Please go ahead, Tom. Your line is open.
Speaker #2: Hey, Tom.
Adam Hall: Hey, Tom.
Speaker #7: Oh, good morning. Good day, Adam. Good morning, guys. Thanks for taking my questions. I just had a quick one for Alistair, actually, just around the restructuring and transition costs taken below the line.
Tom Godfrey: Good morning. Good day, Adam. Good morning, guys. Thanks for taking my questions. I just had a quick one for Alistair, actually, just around the restructuring and transition costs taken below the line. It looked like another AUD 16 million in the second half. Now that we're through the DC renewal program, does that sort of go to zero into 2027, or just any comments around the outlook for one-off costs and cash conversions next year?
Speaker #7: It looked like another $16 million in the second half. Now that we're through the DC renewal program, does that sort of go to zero into '27—or just any comments around the outlook for one-off costs and cash conversions next year?
Speaker #3: Yeah, no, thanks. Good question, Tom. As I mentioned on the call, the vast majority of the one-off costs, or the restructuring and state transition costs at least, were connected to the DC renewal program.
Alistair Gray: Yeah. No, thanks for the question, Tom. As I mentioned on the call, the vast majority of the one-off costs or the restructuring and site transition costs at least were connected to the DC renewal program. That has obviously now concluded. So we wouldn't expect any other site-related transition costs associated with that program as we look forward. That and the reduction in CapEx will both support stronger cash flows as we look forward to FY27, which we're obviously pleased about because that provides further capacity and flexibility to invest in growth. So, looking forward to that in 2027.
Speaker #3: That has obviously now concluded. So we would expect that we wouldn't expect any other site-related transition costs associated with that program as we look forward.
Speaker #3: That, and the reduction in capex, will both support stronger cash flows as we look forward to FY '27, which we're obviously pleased about because that provides further capacity and flexibility to invest in growth.
Speaker #3: So, looking forward to that in '27.
Speaker #7: Right, that's all I had. Thanks, guys.
Tom Godfrey: All right. That's all I had. Thanks, guys.
Speaker #2: Thanks, Tom.
Adam Hall: Thanks, Tom.
Speaker #3: Thanks, Tom.
Alistair Gray: Thanks, Tom.
Speaker #1: Thank you. That's the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to Adam for his closing comments.
Operator: Thank you. That is the end of the question and answer session. Thank you all very much for your questions. I will now turn the conference back to Adam for his closing comments.
Speaker #2: Thank you all for dialing in today. We really appreciate the time you've taken, and we also very much value the questions that have been asked.
Adam Hall: Thank you all for dialing in today. We really appreciate the time you have taken, and we also very much value the questions that have been asked. Importantly, as you just heard Alistair mention, FY26 was an inflection year for EBOS. It is now behind us. Looking forward, if you think that humans will continue to age and continue to love their pets, then the EBOS portfolio is well positioned to deliver this care productively and in partnerships with others. Thank you for your ongoing support, and we look forward to updating you on our progress throughout the year.
Speaker #2: Importantly, as you just heard Alistair mention, FY26 was an inflection year for EBOS. It's now behind us. Looking forward, if you think that humans will continue to age and continue to love their pets, then the EBOS portfolio is well positioned to deliver this care productively and in partnerships with others.
Speaker #2: Thank you for your ongoing support, and we look forward to updating you on our progress throughout the year.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
