Ebos Group Limited

Thank you for standing by and welcome to the eBoss Group Limited FY25 four-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 11 on your telephone keypad. You can cancel your request by pressing star 11 again. I must advise you that this conference is being recorded today, the 27th of August, 2025. I would now like to hand the conference over to your speaker today, Mr. Adam Hall, CEO, eBoss Group. Please go ahead, Adam.

Good morning, everyone. Thank you for joining us for the eBoss Group's FY25 results presentation. I'm Adam Hall, the Chief Executive Officer of eBoss Group, and I'm joined today by Alastair Gray, our Chief Financial Officer, and Martin Krapskoff, our Chief Strategy and Corporate Development Officer. I'd like to say it's an honor to lead the eBoss team, and I've taken the opportunity to get to visit many of our businesses in Australia, New Zealand, and Southeast Asia since joining last month. I'm excited for how eBoss's capabilities are well suited for the opportunities ahead. Turning to the results, FY25 was another solid year for eBoss, reflecting the quality, scale, and leadership positions we hold across the various businesses within the portfolio. We delivered solid organic growth, which was supported by new customer wins in pharmacy wholesale, where we added over 320 stores nationally, particularly across both New South Wales and Victoria. Continued expansion of our pharmacy store network with 34 net new TWC stores added. We also expanded our medical technology business, including adding the Pacific Surgical Team in the Philippines. We also saw steady performance from our pet brands business, despite a softer market. We also maintained a sharp focus on cost management, delivering a 20 basis point reduction in operating expenditure through labor productivity, procurement savings, and animal care ingredient costs. By the end of FY26, we will have concluded our distribution center renewal program, which will have delivered eight new sites and enhanced existing systems over four years. These facilities enable us to serve more customers more efficiently. Alistair will talk about the benefits this program has brought later in the presentation. Our bolt-on acquisition strategy also continues. In July 2025, we purchased Next Generation Pet Foods, which enhances our manufacturing capability and expands our route to market through the exciting channels of hardware and club retail. Our ongoing growth prospects remain strong, with advantage positions in each of our major divisions, community and hospital pharmacy wholesale, retail pharmacy, medical technology, and animal care. The stage is set for growth, but first, how did this translate into the 2025 results? Turning to slide four and the financial performance. On an underlying basis, excluding the Chemist Warehouse Australia contract, revenue grew by 12% to $12.3 billion, and underlying EBITDA increased by 7.5% to $585 million. This is within the guidance reaffirmed in April 2025 of between $575 and $600 million in EBITDA. On a half-by-half basis, our second half was slightly ahead of the first half at $294 million versus $291 million. This growth was achieved in a pharmacy wholesale market that has been highly competitive since the CWA contract transition and also has seen softening discretionary consumer spend within animal care. Underlying EPS was $131.3 per share, and we declared a final dividend of $61.5 per share, bringing total dividends for FY25 to $118.5 per share, unchanged from the last year and reflecting the Board's continuing confidence in the future growth of the group. Our leverage ratio remains well within our target range at 1.9 times, and our ROCE was marginally down 20 basis points to 13%. This reflects a period of significant investment in long-lived DC assets, and this program will continue in 2026. As we flagged before on a statutory basis, our results are down on the prior corresponding period, reflecting the loss of the CWA contract. It is important to note that the commentary this morning is predominantly based on our underlying results excluding the impact of the CWA contract in the prior year. We have included a reconciliation between statutory and underlying numbers in the appendix of the presentation. Now, turning to the performance of the divisions, I'd like to start on slide five with an overview of the highlights. First, within the community pharmacy, we are pleased with the new wholesale customer wins. which equate to approximately $540 million of revenue on an annualized basis, and that the continued store rollout of the TWC network led us to 626 stores. In addition, the outcome of the first pharmacy wholesaler agreement, together with the new CSO accord, will provide better medication availability to all Australians and provide far more sustainable industry funding. Secondly, institutional healthcare was again a major growth driver for the group. Hospital medicines, particularly oncology products and the Southeast Asian medical technology business, maintained their growth momentum from the first half. This growth was also supplemented by several strategic acquisitions, as previously announced. Alistair will expand on these later. Thirdly, contract logistics delivered customer growth across both New Zealand and Australia, enabled by our new warehouse capacity completed in this area last year. These new warehouses were timely with the additional refrigeration capacity supporting increased GLP-1 prescriptions. Please note that the New Zealand business also saw a decrease in earnings as certain COVID area programs ramped down. And finally, in animal care, our branded products delivered ongoing growth supported by new product developments. We also completed two acquisitions with SVS establishing a leading position in the New Zealand vet wholesale sector and Next Generation Pet Foods providing an entry point for new high-growth, high-value products, including air-dried treats. In the second half in particular, Animal Care continued to face headwinds from consumers under cost of living pressure, choosing to delay or downside premium discretionary purchases, including puppy purchases. The team did a terrific job to offset part of this trend by continuing to grow our branded revenue through share gains. Now turning to page six, I'd like to provide an update on the near-term growth objectives that were established in FY25. I'm pleased to report that the team have achieved all near-term objectives. Specifically, they have delivered base business growth within both the animal care and healthcare segments. We won approximately $540 million of annualized sales from new pharmacy wholesale customers. We achieved cost savings of $30 million against our target of $25 to $50 million per annum by FY26. And we also executed five strategic investments across medical technology and animal care, deploying capital to strengthen our segment positions and diversify earnings. This slide completes our report out on these four initiatives. On the next slide, we have an overview of our ESG commitments. I'm pleased the group continues to make sound progress on its ESG program. During the year, the group advanced several environmental initiatives that focused on improving renewable energy generation, offsetting our carbon footprint, and transitioning grocery brand packaging to recyclable materials. EVOS also enhanced its safety standards for high-risk activities. Our efforts have reflected our commitment to improving health outcomes and supporting our communities. I'd also like to add that I have found the eBoss team to be focused on safety. There's always more to be done, but my experiences with our frontline colleagues demonstrate their commitment to keeping themselves and their teammates safe at work. Now, I'd like to move to how our individual businesses performed. I'm first going to share healthcare, and then within healthcare, the highlights of community pharmacy, TWC, institutional healthcare, and contract logistics. Then I'll move to our second reporting segment, animal care. Turning to slide nine in our healthcare segment. Our healthcare segment delivered a solid performance with revenue growth of 11.8% and EBITDA growth of 6.9%, again, excluding the CWA contract. You'll notice that EBITDA growth was lower than revenue growth, driven by two factors. First, a rise in the proportion of high value medicines, which are profitable for us, but come with lower percentage margins. For example, an increasingly popular oncology drug has a sale price of approximately $3,700, but effective profit margin of around 1.5%. And secondly, with recent CWA changes, the competition for pharmacy wholesale customers is strong. We expect the tighter margins that we have seen in pharmacy wholesale in 2025 to continue through FY26 as wholesale providers and customers realign. Healthcare's performance was well supported by Community Pharmacy, Terry White Care Mart and the institutional healthcare business. But turning to a geographic perspective, our underlying Australian healthcare business grew revenues in EBITDA by 12.9% and 5.9% respectively. Whereas our New Zealand and Southeast Asia business grew revenue in EBITDA by an impressive 8.1% and 10.8% respectively, driven by a strong year from Transmedic in Southeast Asia. Now, drilling down within healthcare, how did community pharmacy perform? On slide 10, you can see that the business has responded well to the changes in industry dynamics, achieving meaningful share gains and benefiting from continued demand for high-value medicines, such as GLP-1s. Cumulatively, this has seen the underlying business grow both revenue and gore by 15.8% and 7%. As I mentioned earlier, 2025 saw both an increase in high-value medicines and a period of tighter EBITDA margins as the market went through a period of heightened competition. This industry went through a similar process in 2019 when EVOS won the CWA contract. We expect this to be the last period of such competition as the largest single retailer has backward integrated into the wholesale pharmacy chain. I'm very proud of the way that the EVOS team has very methodically prepared for this transition. From the physical challenge of overnight restocking when the contract ended, to the cash conversion challenge of ensuring working capital release, to the commercial challenge of securing an alternate customer base. Our business has managed this transition well. The goal margin improved by 40 basis points to 9.1%, reflecting a positive shift in both product and customer mix, new business wins, and enhanced service revenue. The increased CSO funding relating to the first pharmacy wholesaler agreement commenced in the second half of 2025. and we expect a further step up in FY27. Now, one part of the community pharmacy business that's worth further expanding on is Terawight Chem Mart, which is Australia's leading health service-focused, excuse me, leading health-focused pharmacy network. On slide 11, you can see two key dynamics for TWC. First, network size increased. During the year, 34 net new stores joined the network, growing our total to over 620 locations nationwide. These stores are frequently existing community pharmacy customers, so we understand their performance well and are happy to have them on board. We expected net store growth to moderate in FY26. Next, network performance also improved. Here, we delivered 2.6 billion in sales, representing total sales growth of 10.2%, or 8.5% on a same-store basis. I'm delighted that our care clinic service continue to scale, delivering approximately 976,000 vaccinations administered across the network through the year. Our understanding is that's more vaccinations administered than anyone in Australia, but I'd be glad to be corrected. Clearly, our customers want to be engaged with their Terry White Kenmart pharmacist on health. Not only that, but they want to keep that engagement going online. Over 1.2 million prescription transactions were placed online in FY25 through the MyTWC app. reflecting strong customer engagement and digital adoption, generally initiated from an in-store interaction with our knowledgeable TWC team. There's more to come in this space, but what about institutional healthcare? Turning to slide 12, our institutional healthcare business was again a significant growth driver for the group. This division delivered revenue and gore growth of 8.4% and 11.4%, respectively. This positive operational leverage was driven by particularly strong growth across Southeast Asia and also in allografts and oncology. Our Symbian hospital business maintained its growth momentum largely due to the ongoing demand for high-value oncology medicines. Growth in medical consumables was partly offset by a normalization in vaccine activity post-COVID. Transmedics performance was particularly pleasing, and I was glad to meet some of our team in Indonesia and Singapore. The improvement of gore margin by 40 basis points to 15.7% reflects the ongoing expansion of the medical technology business within institutional healthcare, which is high margin. Looking beyond community and institutional healthcare, what about contract logistics? On slide 13, you can see our contract logistics business delivered a solid overall performance with gore of 154 million in the period, up 3.3%. Both the Australian and New Zealand businesses were able to grow their customer base with Australian Gore up 15.3% as the new warehouse capacity was completed in FY24. The New Zealand business was down overall as we had previously flagged, which is due to the result of the progressive ramp down of the COVID-19 related contract. We are continuing to invest in our footprint systems with a new facility in Perth expected to open in FY26 and further cold storage expansion in Sydney, which will support continued demand growth for GLP-1 and other specialty medicines. And Alastair will talk more about this shortly. Beyond healthcare, we have a wonderful second reporting segment, animal care. And how did that perform in FY25? On slide 15, we can see animal care revenue and EBITDA increased by 16.3% and 10.4% respectively. This was due to the resilient performance of the branded business and the acquisition of SVS. The performance of the branded business reflects the leadership positions of our flagship Blackhawk and Vitapet brands, as well as investments in new partnerships and new product developments. Consumers have been affected by cost of living pressures And we saw a flattening of the Australian puppy cohort, particularly in the last six months of the year, as consumers defer adding a companion pet to their family. I'm pleased that this has been partially offset by share gains for eBoss brands. In the affordable premium space in the specialty channel, we've seen consumers trade into the Blackhawk brand. And in New Zealand, we've seen some consumers trade into our value-focused but high-quality Chunky and Possum dog roll brands. The vet wholesale business also grew significantly, largely due to the acquisition of SVS in April of this year. I'm pleased to report that the acquisition has performed in line with our expectations and reflects our disciplined approach to capital allocation. The SVS team are great additions to the eBoss ecosystem. and we look forward to continuing to build opportunities together. Due to the acquisition of this lower margin wholesale business, the Gore margin for the segment was down 170 basis points to 32%. However, excluding SVS, Gore margin was up 90 basis points on the prior period. In addition to the SVS acquisition, on July the 1st, 2025, we purchased Next Generation Petfoods, And on slide 16, you can see details of the business, including photos of the two dedicated facilities focused on the manufacturing and packing of premium pet products. This acquisition is a strategic expansion of our pet brand business into new high-growth, high-value products, including air-dried treats. It also gives us an entree into the club retail and hardware channels through the Evolution brand. That's what you can see in the photos, by the way. The air dryer is in the top right, and allows us to introduce new BlackRock air-dried trees, which you can see on the bottom left. The transaction was fully funded from our balance sheet, and we expect that the transaction will be marginally EPS accretion in its first full year. With that, I'll now hand over to Alasdair to take you through the group's financial performance in more detail.

Thank you, Adam. As Adam has mentioned, on an underlying basis, the group delivered a solid financial performance for the year, despite the significant loss of volume associated with the CWA contract. Revenue was up $12.3 billion, up 12% on an underlying basis, supported by both of our segments. Underlying EBITDA was $585 million, an increase of 7.5%. with group EBITDA margins improving to 4.8%. This result reflects a successful delivery of all our near-term growth objectives and disciplined capital allocation. Our depreciation and amortization costs increased to 120 million. This reflects the ongoing capital investment in the DC renewal program. I will talk further to this shortly. Finance costs were up 12 million due primarily to higher lease interest costs associated with the same program. Now turning to cash flow. The group generated strong cash flows with underlying cash flow before capex of $448 million, up $81 million compared to the prior corresponding period. Networking capital reduced compared to the prior year, and cash realization was strong at 109%. This strong cash generation supported our organic and inorganic growth investments and distributions to shareholders. Capital expenditure was $146 million for the period, up $27 million on FY24. Turning to slide 20, over the past several years, eBoss has made substantial investments in our healthcare infrastructure. to support long-term growth and improve operational efficiency over the next 10 to 15 years. From FY23 to the end of FY26, we have invested approximately 360 million in our distribution network and systems across both Australia and New Zealand. At completion, this program will have delivered eight new sites, representing a 20% net increase in our network capacity. The DC renewal program has already delivered additional refrigeration storage, supporting the significant growth in GLP-1 and other temperature-sensitive medicines, expanded automation, driving productivity and lowering our cost to serve, and enhanced system integration with customers, improving service delivery and scalability. We expect that the organic capital program will conclude in FY26 following commissioning of the remaining three sites. From FY27 onwards, annual capital expenditure is expected to reduce approximately 30% on a light for light basis, reflecting the completion of this strategic program. Now moving to inorganic investments in the period. Consistent with our strategy, acquisitions have continued to deliver value to the group. We completed five acquisitions across both the medical technology and animal care businesses. Collectively, these accounted for approximately $210 million of capital, with the investments being small to medium in size. We expect that each investment will be EPS accretive immediately and will support return on capital employed expansion in the short to medium term. Now turning to slide 22. The group balance sheet and liquidity remains strong. Net debt reduced to $918 million following the successful capital raise in April this year. The leveraged ratio of 1.92 times is consistent with the prior year, remaining conservative and within our target range. This provides significant capacity to fund further growth investments Earlier this year, our debt facilities were successfully refinanced, and our weighted average debt maturity is now 2.9 years. Moving on to shareholder returns and earnings growth. Underlying earnings per share were 131.3 cents, down 26.6 cents when compared to the prior corresponding period, reflecting growth of the underlying business partially offsetting the conclusion of the Chemist Warehouse Australia contract. Reflecting the board's confidence in the future growth prospects of the group, the boards have declared a final dividend of New Zealand 61.5 cents per share, bringing the full-year dividend to New Zealand 118.5 cents per share. This represents an underlying payout ratio of 83.8%, and will be imputed to 25% for New Zealand tax resident shareholders and fully frank for Australian tax resident shareholders. The group's dividend reinvestment plan, which has been strongly supported by shareholders previously, will be available for the FY25 final dividend. Shareholders can elect to take shares in lieu of dividends at a discount of 2.5% to the volume weighted average share price. I will now hand back to Adam to conclude today's presentation.

Thank you very much, Alistair. On slide 25, you can see our outlook for FY26. I'd like to share this for the year ahead before we open the call up for Q&A. I believe that EBOS is exceptionally well positioned for long-term growth. We continue to benefit from positive industry tailwinds across both healthcare and animal care sectors, supported by increased spending, demographic shifts, and evolving customer preferences. However, we remain mindful of near-term macroeconomic pressures in FY26. The wholesale pharmacy environment remains highly competitive, hospital capital expenditures have softened, and discretionary categories are being impacted by subdued customer sentiment. With this context, the group is targeting underlying EBITDA of $615 to $635 million in FY26, representing a 7% uplift on FY25 at the midpoint. We expect growth in both the healthcare and animal care segment. This rate of growth would be broadly consistent with FY25. It will also be based on similar drivers to the FY25 result. Continued focus on winning new customers in pharmacy wholesale and driving animal care sales, while also taking full advantage of our new distribution centres across New Zealand and Australia. As I noted earlier in the presentation, FY26 will also mark the end of our major distribution center renewal program. We anticipate capex of $130 to $140 million this year, which is a small step down from the $146 million of capex in FY25. Future annual capex should reduce by approximately 30% on a like-for-like basis. Our DNA expense is expected to be approximately $140 to $150 million in FY26. reflecting these recent capital investments. Our balance sheet remains strong, with leverage to remain in our targeted range and ample headroom to support future growth through existing liquidity and financing capacity. FY26 net finance costs are expected to be about, excuse me, approximately $110 to $120 million, which assumes there are no additional debt funding requirements. And in addition, the effective tax rate could be approximately 28%, Finally, we are planning to host an Investor Day in Q4, where we will provide deeper insights on our strategic priorities, our long-term growth drivers, and our capital management framework. We will share further details in due course. Thank you for listening this morning. I will now hand back to the operator for Q&A.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone keypad and wait for your name to be announced. Please have one question and one follow-up per person. If you have more questions, please re-queue. To withdraw your question, please press star one and one again. Please stand by as we compile the Q&A roster. First question comes from the line of Sol Hudson from Baron Joey. Please go ahead.

Yeah, good morning, Adam and Alastair. Can you hear me?

Yes, we can. Good morning, Saul.

Great. Thanks for taking my questions. Maybe just the first one. It seemed like operating costs was the surprise in the second half, 25. A couple of the cost lines stepped up pretty materially in growth versus the previous period and also as a percentage of revenues. And I'm thinking here, what's booked as other expenses in the profit and loss? We don't get a lot of detail. Can you talk out of maybe two what you're seeing in terms of those operating costs that potentially presented as more of a challenge in the second half and how we should think about growth and operating costs in FY26, please.

I'm going to let Alastair start and then I'll add a comment at the end.

Yeah, thanks for the question, Saul. I recognize that it is fairly difficult to interpret given the number of moving parts and the result. We touched as part of the presentation on delivering the savings of $30 million. It's worth recognizing that $22 million of that was in OPEX and $8 million of that was in Go. On a light-for-light basis, excluding CWA, cost as a percentage of sales has decreased by 20 basis points, which is probably the cleanest read in terms of the cost performance in both the half and the full year. On the same basis, cost dollars has increased with the growth in the base business. It's worth recognizing that CWA was a low cost to serve customer given both the scale and the medicines only nature of that contract. So reported costs have increased as a consequence of the change in the customer mix there. By and large, the sort of bridge in terms of costs are really these three simple things. It really is the base growth and the revenue of 12% contributing to the cost base, the savings performance across the business, and then the exit of the CWA costs. What I would say is that the FY25 cost position is probably representative of the go-forward position, recognizing the fact that we still remain focused on optimizing the cost base. There has been a tremendous amount of change to the operations of the business in FY25. And as we've mentioned through this call, we are continuing to progress with our strategically important DC renewal program, which again, operationally creates challenges and change across the business. I think it'd be fair to say once we have landed that program through FY26, we feel really positive about the productivity benefits that we expect to unlock as part of that program. And as I've said, we remain focused on costs as an organization.

Yeah, I just want to echo Alistair's comments on the DC renewal program. So when they go forward, a number of the projects are in commissioning at the moment. As they come online, as the team gets six to 12 months of running those DCs under their belt, they'll be able to choreograph the activities in an ever more optimal way and shave some costs out at the margin. Saul, did that answer your question?

Yeah, it did. Thank you for that. Maybe just as a follow-up, Adam, you've flagged some sort of softening in some of the end markets. You caught out animal care and also that competition in community pharmacy. I think as you look again, as you look into FY26, cognizant that your guidance is EBITDA below, but I guess from a revenue perspective, can you give us sort of any Any thoughts on how you see revenue progressing into 26 across the two key segments, both healthcare and animal care?

I think the way I'd characterize it would be we see the trends of the second half of 2025 broadly continuing through FY26. I don't see at this point any material change. Obviously, we'll update you at the half, if not before, on that. Thank you. That's all I had. Thanks, Saul.

Thank you. Next question comes from Adrian Ullivan from Jarden. Please go ahead.

Good afternoon, team. Just wondering if I could come back to, I guess, the delivery of the full year EBITDA, because I guess when we look at the growth objectives that were achieved on slide six, and particularly even if you go back to the first half, they look like the business was kind of achieving ahead of kind of the initial plan. And then you sort of add in the SOS acquisition, which I'm assuming is sort of maybe four odd, four or five million of EBITDA. And I'm just sort of wondering what would have been required to sort of hit the top end of that range, if you can sort of phrase it back to us in that sense.

Yeah, I think the themes that were pointed to in the half one call, we reaffirmed the guidance of 575 to 600, I think in part because we were seeing the competition of infirmary wholesale. And that has transpired. Alastair, in terms of a breakdown of the range, did we provide any guidance on that between the 575 and the 600?

No, we didn't necessarily break that down. But Adrian, just to sort of pick up the explanation. I think the themes that Adam touched on in the call really are the driver of that second half performance. We did see the animal care market soften within the second half, which while we feel really pleased with our ability to grow share through that period, the reality is that has subdued growth in the second half. We've obviously started to see some green shoots in terms of the easing of monetary policy flowing through consumer confidence as to how quickly they manifest in a more buoyant market remains to be seen. We remain sort of cautious about that, but equally confident about our ability to perform well in that kind of environment. We have also seen some capital sales slowing within the ANZ business. It's probably a less material factor in truth, but they're probably the contributing factors.

Okay. I was wondering if I could ask a slightly different question, maybe this is for you, Ellis, that like just in terms of, I know, like in terms of the outlook, like the net interest costs are stepping up quite materially, like to the tune of 30 million. Can you sort of explain why, It doesn't feel like the debt is necessarily moving a lot year on year. Can you explain the drivers in that?

Yeah. Thanks for the question, Adrian. By and large, the financing cost growth into FY26 is driven almost exclusively by lease interest costs as a consequence of the continued implementation of the DC renewal program. We are actually expecting, subject of course to acquisitions and net debt movements as a consequence, we are actually expecting the bank financing costs to remain broadly consistent year on year. So it really is the contribution of the DC renewal programme, which I'd I'd kind of go back to, I mean, that is a long-dated series of investments that we've made that will support growth over the next 10 to 15 years. But in the short term, that will be our impost in both interest and depreciation. Does that answer your question, Adrian? Okay.

So, sorry, just to go back. So, like, your net interest cost or net finance cost was sort of 82 for this year. They're going up to sort of mid-point 115, I think it is, in the guidance statement. So you're saying all of that bridge is pretty much in the higher lease costs. The actual bank side of it is kind of...

Yeah, no, sorry, Adrian, just to pick up. I think we may have potentially confused you. The net financing costs is 106 in the year. So the 82 you reference is simply the bank financing, so that excludes lease interest costs. So it's moving from $106 million up to $110 to $120, and that movement is driven by lease interest costs. Did that help, Adrian?

Okay. Yeah, yeah, that's good. And then just, sorry, just finally, just in terms of like, I guess the stay in business with the BAU CapEx, once you roll off 26, seems, I guess, higher than history, I suppose. Is that a consequence of, of inflation, plus it's a bit more sophisticated in terms of maintaining these facilities?

I think you've hit the nail on the head there, and the sophistication of the facilities and the efficiency gains is what drove much of the investment. So again, the pressure will be on the team to really put those to work and drive the highest productivity from each of those facilities. Okay. Thanks, Adrian.

Thank you. Just a moment for our next question, please. Next, we have Matt Montgomery from Force of Bar. Please go ahead.

Hi, guys. Good afternoon. Just want to pick up on pharmacy, if that's okay. I mean, you're clearly, I guess, calling out pressure on margins. Just interested if you could, I guess, provide a bit more detail behind, you know, what you're factoring in in FY26 in terms of pharmacy gore margins. It sort of feels like they need to be coming down somewhat notably lower to get to your guidance. And then maybe any comments you can provide on EBITDA margins within pharmacy, what's happened in FY25 and then what's incorporated into guidance?

Sure. Thanks for that question, Matt. Firstly, in terms of the industry dynamics, we've seen this movie before. So back in 2019, when EVOS picked up the CWA contract from another player, we saw a period of around 18 to 24 months following that transition where there was a realignment of that spare capacity in the competitor that was created with the market demands. We're seeing that again now, and this will be the last time because, of course, there's now integration between CW and another player. And again, we're seeing that take that 18, probably to 24 months after the changeover. So we would expect that period to continue all the way through 2024. In terms of the overall margins, with the increase in high-cost medicines, that has an impact on pharmacy wholesale margins. You heard me mention that on the call. Alastair, I think it would be fair to say that the gore, we would expect to be at roughly the same level in 26S25 in terms of percentage.

Yeah, that's absolutely right. We've seen both in community pharmacy and institutional healthcare, sales being supported by the growth and the high-value medicines. And as Adam outlined, I mean, these are a material contribution to the top-line growth, and as such, They're having an impact on the shape of the P&L. because higher sales, same gore, same EBITDA, so the margins are being compressed naturally. We have seen that trend. This isn't something new, as I'm sure you would appreciate, Matt. We have seen that trend continue. At present, we don't see that trend abating. Certainly, our expectation is that that will continue into FY25. So, I'd expect the shape and growth within that segment to remain broadly consistent with what we've seen in the half, recognising Adam's comment about heightened competition.

And Matt, maybe just a place to end there. In terms of GLP-1s, the prior rationing regime has come to an end in Australia. And in New Zealand, the launch of GLP-1s only happened on the 1st of July. So there is still future runway in high-priced medicines across both Australia and New Zealand.

Okay. That makes sense. I mean, just if we step back from your guidance a little bit more, your first question is... Is it fair to assume that organic growth within your guidance is about 4% year on year? You're acknowledging SVS plus presumably the small next-gen contribution. And then I suppose I think some more colour would be appreciated as to divisional drivers and behind that. I mean, I know you don't. typically give color, but I'm just cognizant that there's some reasonable downgrades likely to consensus here, and that organic growth rate is lower than what you would have typically delivered over the last five, ten years. So I think it would be appreciated just a little bit more color if we could step through your divisional comments a bit more.

Yeah, I think, so let's go back to FY25. as the starting point. So in FY25, 7.5% growth, and we're guiding to 7% growth in 26. So I guess that's 50 basis points up.

Yes, I'm just more meaning organically, like if we strip out the impact of acquisitions, it looks like your guidance for 26 is for your 4% organic growth. which is lower than what you've typically delivered historically. I think I'm just looking for colour on more divisional comments and behind that.

I think you're broadly accurate, but given the headwinds that we've outlined, including the increased competition and the currently soft animal care market, I think that's to be expected.

And is there anything else you'd want to call out and say, you know, institutional health care or contact logistics?

Look, as Alistair mentioned, there's probably a slightly soft hospital capital expenditure outlook. We've seen that through 25. That probably impacts our Southeast Asian business more than our Australian business, but that remains a sort of third driver, but the top two would be pharmacy wholesale competition and discretionary spending in animal care.

Thank you very much, Matt.

Thank you. Just a moment for our next question, please. Next, we have David Lowe from J.P. Morgan. Please go ahead.

very much just with the lease costs i mean clearly um i've missed how much they were going to lift i was just wondering alistair if you could give us some rules of thumb because obviously there's other dc's coming on and you know three yet to come on yeah how do we think about converting the capex spend to the likely lease costs as i think beyond fy26 you know that's a that's that's a great question thank you um and and as a

I would start by saying I recognise that it's been challenging to predict, given the step-up investment that we've made. It's really why we've been deliberate about being transparent about the guidance into FY26 for both depreciation and financing costs. We wanted to provide that clarity as we go through. Clearly, as we continue to invest in FY26, I would expect that there would be a less material increase in D&A and financing costs into FY27. I won't get into the permutations. The longer we get out, the more subjective that becomes. But really what I'd point you to is the guidance we've given in FY26. that will then be a reasonable base to go off. We are, and Adam noted that in his overview, like we would expect the CAPEX to materially reset down post completion of this DC renewal program in 26. And then I would expect these levers to move in a more consistent format to what we've seen previously. Does that help, David?

Yeah, no, it does. I mean, it would be nice to have some rules of thumb in terms of the capex and the timings of openings, but we can talk about it offline when I've done a bit more review of my numbers. But thanks very much.

No problem. Thank you, David.

Thank you. Next, we have seventh. Rich Weil from Craig's Investment Partners. Please go ahead.

Good afternoon. Just a couple of questions on the divisional results and outlook. First of all, on the medical technologies business, I don't want to sort of split it out, but back of the envelope, I think it's been that the core margins may be around 55%. Just on the result you've delivered, it might have softened a little bit. Just given the strength of revenue growth in Southeast Asia, are you able to talk to gore margin for the medical technologies business in that market? Does it tend to be a little bit lower than Australia, or was that just sort of business mix and acquisitions perhaps driving that?

Thanks. Look, Stephen, I'm very sorry we don't provide any additional colour on that because it is commercially sensitive. We have to be in the market winning partners, selling new products every day. So we don't provide additional guidance on that. What I can say is that we were really pleased with the transmedic performance in the second half. I think they did a great job. And other than potentially some slight softness in hospital sales just at the very back end of the year, in Southeast Asia. The rest of the half was a strong half for that business.

I appreciate you don't split it out specifically, but at a high level, is that market typically a lower margin market for the industry than perhaps what's achieved in Australia? Because I guess the consideration is the growth is a lot faster in Southeast Asia going forward, and we've obviously seen that the year just gone. It might be that the market needs to think about some dilution of core margins going forward from that segment.

I appreciate you coming through. I think you can assume it's broadly similar, and then if it ends up growing in a different direction, we'll let you know. But at the moment, a broadly similar assumption would be out there.

And the only point I'd make, obviously we group MedTech within the institutional healthcare segment, and you would have noted that the goal margin has expanded at a healthier rate in the full year. That really talks to the pleasing growth that we've seen in the transmedic business in particular in the second half, which is obviously, as you rightly noted, margin accretive to the rest of the portfolio.

Okay, all right, we'll move on. And then just in terms of animal care, Adam, you kind of called out in terms of the outlook consumers are trading down. I understand that eBoss has access to scan data, which gives you a pretty good sense of market share. Are you just able to confirm, just to provide a bit of comfort, that EVOS's branded products aren't losing share? It's sort of a year to date, and therefore 26, and you're not assuming share loss? Because there's a new trend that's been a strong performer, and obviously the like for like is a little bit softer, or again, it's a little bit softer at the moment.

Oh my gosh, Stephen. So it's been such a great performance by the team. So the puppy cohort is definitely flat. But the Blackhawk share of that cohort has definitely increased at the margin. And so if you think about what the team had to do, the team had to make sure that every consumer in Australia that's trying to take care of their furry member of their household has seen Blackhawk as the affordable premium option for that member of their family. And it's worked. So their share is up. And our understanding is that it's been a great partner to the channel as well, and the channel enjoys bringing Blackhawk to market. Don't want to forget the different position, but still share up in dog roll in New Zealand at the margin. Again, just at the margin, but seeing strong performance in the chunky and posse on brands. which are just a high quality product, but at a very reasonable price for the consumer. And New Zealand consumers feeling the cost of living pressure at the moment, seeing both those brands as great options. So I'm glad you asked the question. I'm sorry if we weren't clear before, but the branded products within the animal care portfolio are doing well, and we expect that to continue in 26.

Okay, now that is helpful. Thanks, Adam. And then I guess just in terms of the market move which you've called out, which is consumers trading down a little bit to low-value brands in the prepared remarks, I guess from an e-boss perspective, is there a different margin structure between the premium brands and the more value brands in the mix that we should keep in mind?

I don't believe so. I think we're very comfortable that, you know, obviously the cost base adjusts with the price and that overall the margin... I wouldn't... I can see what your question is, Stephen. You're concerned about if the value brands were to surge, does that mean a change in the margin percentage? I wouldn't see that at the moment.

OK, thanks. And maybe just one last one for me on the... Again, on the guide, I just... Beyond the... Factors you've called out, there are also BAU cost pressures that are elevated in terms of what you're expecting for FY26, for example, wage cost pressures or freight pressures, for example, that you take into consideration with the outlook statements that perhaps haven't been called out yet.

I'll let Alastair comment in just a moment, but in general, we expect inflationary pressures on our cost base every year. I think it is comparatively visible that we have 3% to 5% sort of cost growth backed into EBAs and so on. We expect the teams to offset that every year as well through productivity or through other means to protect the margin. Alice, did you have any comment on that?

I've got nothing to add to that. That was a good summary.

Thank you.

Thank you very much, Stephen.

Thank you, management. As a reminder, please have one question and one follow-up per person. If you have more questions, please re-queue. Just a moment for our next question, please. Next, we have Leanne Harrison from Bank of America. Please go ahead.

Good morning, Adam and Alistair. You mentioned a couple of times pharmacy competition being a little bit of a headwind. Can you talk through, you know, how you've seen that present itself? And also, can you talk to that in light of, you know, you've won something like 320 new store customer contracts this year. Can you give us some color on whom or where you're winning that from and reasons for the win?

Yes. Leanne, thank you for your question. Your line came through just a little bit faint for us, but my understanding is that you're asking about community pharmacy, what the nature is of the competition, and how Symbian manages to win despite the competition. Is that right, Leanne?

Yes, that's correct. And do you think you're winning your share of the new store customers? Yes.

Yeah, you heard me reference this in the opening remarks. We believe our market share in pharmacy wholesale is up slightly, excluding CW. And the reason for that is the power of this Indian value proposition to pharmacists across Australia. That value proposition is built on a team at Symbian that has a huge amount of experience and relationships in the industry. That means they're seen as very reliable. And of course, you need to meet the market price. So I think in a market where there's heightened competition, pharmacists are going to look and test the options that they have for their wholesale. they're going to rank them up. But if we can meet the market price, then I think Symbian becomes a very compelling proposition to that pharmacist. Did that answer your question, Leanne? Again, you were just a little faint on the first one.

Yep, no, that's fine. Thank you. And just a second question. You talked about some cost savings, your guide range for 25 of about 25 to 50 million. Do you have a similar... target range for 26 that you can share with us? And where do you think some of those cost savings might come from?

Yeah, thanks for the question, Leanne. The 25 to 50 million was actually by the end of FY26. So the target that we outlined was for next year. We've obviously delivered $30 million of that in year one and feel really positive about being able to achieve that. And cost, I mean, what I would say is we continue to be focused across the entire cost space, looking for opportunities, both for efficiency enhancement and also from procurement benefits. So I would say that it is something we'll continue to be focused on. And I would expect that there to be some inflationary offsetting savings as we look forward into FY26. As Adam said in answer to a previous call, from a management perspective, we do look to try and negate the impact of inflation as we look forward and set targets and investments across the organisation, and that's something we'll continue to do.

Thank you very much. I'll leave it there.

Thanks, Leanne.

Thank you. Next question comes from Daniel Huron from MST Marquis. Please go ahead.

Oh, good morning. Thanks very much. A lot of the earlier questions were kind of dancing around the same issue today and about the industry outlook. So I was hoping you might be willing to say what you expect for community pharmacy system growth in FY26 within your guidance and if you expect to be below or above that.

Dan, thank you for your question focusing on community pharmacy. I heard that you're asking about community pharmacy and that you're asking about FY26, but I just didn't catch the last part. Would you mind just saying it one more time?

Sure. My question is, you know, what do you expect for community pharmacy system growth in FY26 within your guidance and if you're expecting it to be above or below that?

Did I hear you right say system growth, meaning the market growth? Yes. Yes. So you're asking, are we expecting to gain or hold market share or lose market share in community farms in FY26? If that's the question, I think that we are assuming steady state in terms of market share through FY26. Yes.

Yes, and what do you expect that pharmacy growth to be in 2016, your guidance? What is your assumption there with all these headwinds you've been talking about with high-cost drugs and so forth? What is your assumption for market growth?

Yeah, thanks, Daniel. We won't go into spreading out the segment by segment, business by business. I think we've provided a relatively tight range in terms of our EBITDA guidance. What I can say is, though, that I would expect the dynamics that we've seen in FY25 to be broadly consistent with those in FY20 things.

One thing I'd add, though, Dan, just looking back at FY25, you heard us mention that we had a slight tick up in our market share in pharmacy wholesale. That was a pretty good result, given not just the change in CW, but also that it doesn't include CW in that base, given CW is growing swiftly.

Okay, thanks. And last question, looking forward, Chemist Warehouse New Zealand, will that be negotiated in FY26? Do we need to consider that during the guidance period?

I don't think we're going to comment on any individual contracts other than the CWA contract, which has come to an end. Everything else, I think, would be baked into the guidance range that we've given.

Okay, thank you.

Thanks, Daniel.

Thank you. Next, we have Stephen Hudson from Macquarie Securities. Please go ahead.

Oh, hi, Adam and Alistair. Just two quick ones from me. Just on the DC renewal program, did I hear you correctly when you said that that should give you 10 to 15 years of capacity headroom in both animal care and health care?

Stephen, I would love for that to be the case. I think that's probably just a bridge too far. So firstly, the DC renewal program was only in healthcare. It did not cover animal care. So let me put that one to the side right away. And then within healthcare, each of the assets has a 10 to 15 year life. I will be encouraging the team to create a high quality problem as swiftly as possible by driving utilization as quickly as possible. So the extent to which we need additional capex will be the extent to which the team succeeds. So if we happen to have a high-quality problem shorter than 10 to 15 years, I think that'll be welcome at the time.

That's useful, Adam. Where does it leave you versus your key competitors, do you think, in terms of headroom and cost to serve? Can you give us some broad brush comments there?

Look, I think one of the, when I look at each of those eight facilities, the underlying, the teams were intimately involved in designing the DC refreshes. And so they're well suited for each of the businesses. So just for example, one of the HCL facilities that came on, in New Zealand arrived just in time with the additional refrigerated capacity to serve the GLP-1s that were released in New Zealand on the 1st of July. So I see each of these facilities as generating a return for each of their individual business units, and again, something that we'll be pushing each of the teams to focus on. Did you have any add to that, Alastair?

I think you answered it well, Adam. The only other example I'd probably direct you to, Stefan, is we're investing in a distribution centre in Sydney, which really step changes the productivity of that site, and again, provides fuller capacity for future growth. As Adam said, these are sort of site-by-site, business-by-business investments where we've wrapped up as a renewal program. But we feel very confident in the productivity and service that these new facilities will give us relative to competition.

Okay, very good. I'll just sneak in a second one. I think that's the second one. The 95 million go-forward capex that you've provided us, can you just break down that into some basic buckets?

Probably, I'll take that one. Stefan, thank you for the question. I probably won't break it down at this point. I think what I'd like to do is take that question and notice and share more on our capital management framework and how we think about capital of the investor there that we've outlined. I think there's a bit to unpack, so I'd rather do that then, if that's okay, Stefan?

Yep, no problem. Thanks, Ellis.

Thank you, Stefan.

Thank you. Our last question comes from Marcus Curley from UBS. Please go ahead.

Good morning. Lucky last.

Can we just start with any colour you can provide and what you think the community pharmacy market growth was in FY25?

Thank you for the question, Marcus. I'll let Alistair lead on that, and then I'll follow on.

Yeah, so just to clarify, Marcus, you're asking about the market growth in community pharmacy in Australia?

Correct, yeah, in the last financial year.

Yeah, in the last financial year. Yeah, I mean, at a revenue or value perspective, the growth in the community pharmacy market has been relatively elevated compared to the long-term average. As we've talked about, the driver of that in reality is the distorting factor of high-value medicines, which have been a feature for some time and continue to be. The growth in these medicines continues to be propelled most recently by the introduction of GLP-1. I think the PBS growth was low double digits in the year, which is probably as good a guide as I'd be able to provide in terms of that market goal.

And then, Marcus, in addition, I would say the – oh, sorry, did you have a follow-up?

Oh, no, you finished.

Sorry. In addition, I would say just on those high-value drugs, those are not just GLP-1s. There's also continuing growth in high-cost oncology drugs and other Section 100s that are coming through as well.

And fair enough to assume that the market growth for the distributors is less than the low double digits.

Sorry, I didn't catch the question. Marcus, do you mind just saying that again?

Yes, so at the distribution level, the revenue growth would be less, given that obviously the payment against high-value drugs is obviously different at the distributor level.

No, it generally correlates. What we are seeing though is the gore margin is being compressed as a consequence of that mix. We delivered a light for light revenue growth in our community pharmacy business of 15.8%, which is higher than the aforementioned PBS growth. So we feel very comfortable with the with the performance of the community pharmacy business, particularly in light of the change in the business.

Okay, thank you. Sorry, you first, Marcus.

No, no, I was going to ask a second question, but happy for you to finish.

Yeah, I was just going to say, the important point to note with PBS is you can publicly observe the dollar spend under PBS that translates slightly differently into the wholesale because it's the number of units carried that benefits the wholesaler in that case. But back to you for your follow-on question.

My second question was just on the operating costs, which have been spoken about a couple of times, but there was quite a large difference, and this is in the healthcare business, quite a large difference between the second half and the first half. Would it be right in assuming that we should be using the second half as the base going forward as opposed to the year as a whole? The difference was sort of $30 million or so.

Yeah, I think that's right, Marcus. I think the second half better represents the forward look in terms of the cost profile.

And I think that is consistent with the guidance on the continuing themes of pharmacy competition and high-priced medicines.

Okay, great. And maybe, seeing I'm last, I've got maybe the liberty of actually asking another one. When you do the maths around the acquisition of SVS, it does look like the EBITDA contribution was a shade below $6 million, I believe it was only for three months. Yeah, that sort of implies circa $23 million on an annualized basis versus the acquisition talked about $15 million Australian. So is there any seasonality or is it just simply that it's traveling a lot better than you thought?

Oh, look, great questions. So one of the things that's actually pretty fun about the SBS acquisition is that it's about 50% companion animal business and 50% industrial animal exposure in New Zealand. And look, it's actually a pretty interesting addition because we don't have that in the Lippard business in Australia. As a result, that leads to what you put your finger on, Marcus, the seasonality. So I would not, unfortunately, just multiply out. But the four-year impact of SVS is in the guidance range that we provided.

Perfect. Thank you.

Thank you.

Thank you very much.

Thank you, Marcus.

This concludes our Q&A session. I will now hand back to Adam.

Thank you all very much for your questions and your time this morning. I'm looking forward to engaging with shareholders and analysts in the coming days. To conclude this presentation, I just want to turn to slide 26 and reaffirm the EBOS investment proposition. Healthcare and animal care continue to experience sustained increases in consumer and institutional spend, driven by demographic shifts, innovation, and evolving customer preferences, and a desire for a longer health span. These macro opportunities are well matched by EBOS's core capabilities. In a growing, complex market, we are trusted to connect with care, notably in wholesale distribution and nutrition. For investors, this means we are levered to ongoing healthcare spend, but we don't have the exposure to large clinical practitioner bases. It's this exposure that's yielded a track record of consistent EBITDA growth. Over the past decade, eBoss has outperformed the broader market, and I'm excited to build on this momentum. As CEO, I'm committed to further strengthening our leadership, unlocking new growth opportunities, and continuing to deliver sustainable returns for our shareholders. The team and I are excited by the challenge. Thank you for your time this morning.

This concludes today's conference call. Thank you for participating. You may now disconnect.