AFT Pharmaceuticals Limited (AFT) Earnings Call Transcript & Summary

Thank you for standing by. Welcome to the AFT Pharmaceuticals FY '25 Half Year Results Analyst Briefing. [Operator Instructions] I would now like to hand the conference over to Dr. Hartley Atkinson, CEO. Please go ahead.

Good. Thank you very much, and welcome, everyone, to this morning's presentation. I'm just going to flick through the pages of the presentation. The first being the title page, we are detailing the first half of 2025 financial results, which is the period until 30th of September this year. And then flicking to the second page, Page #2, important notice. We will take this as read. Thank you. It's just the various important disclaimers. And then flicking to Page #3. Today, we just want to go through the highlights, strategic progress financial performance outlook, and then have time to take some questions at the end of the presentation. That's Page #3. And moving to Page #4 to start to get into the meat of things. This is entitled Record Revenue and Investment for Growth. So basically, we did increase sales, overall, we increased them 4%. The actual sales from products and royalties were up 6%. We've got good strong growth in Australia and good strong growth in New Zealand. We had a couple of 2 specific one-off events, which meat of things in the first half for Asia and also for international. Basically, where -- in international, some of our major customers decreased their inventory days as supply chain outlook improved. I mean, typically, with pharma, we've seen ongoing problems after COVID, that they seem to now be resolving. I know AFT itself is successfully cutting down the inventory days. And we are seeing that quite aggressively from some of our export -- major export customers. The important thing though is when we look behind it and get their sales figures to see whether this is related, it is unrelated to their sales. It is purely related to their inventory holdings. Like I'll give you one example, one of our major customers has a number of AFT products had about 10 months inventory for a period of about 3 years, discussed it with him for quite a while. And then he suddenly started to cut back on his inventory with literally no orders at all this first half. But this is a kind of one-off impact. And then also in Asia as well, a major part of our business is presently in Korea, and there has been a significant event there in terms of a doctors strike, which went on for many months, and that certainly did impact -- or totally stop the sales of that particular product in the Korean market. But now the doctors have gone back to work and they're operating again and sales have resumed. So both these events have hit the first half in terms of Asia or international. So we do expect a strong recovery in the second half. Will also be assisted by product launches in all of our markets across Australia, across New Zealand, across Asia and across international, which will see certainly a good recovery in that second half. You can see the graph on the bottom on the left, that's the first half year sales. We do always make more sales in the second half. It's kind of usually about a 60-40 split with 60% being the first half. And then on the far right, you can see that we have got a small operating profit loss really due to those 2 factors we've just discussed. We could -- maybe we could have slashed spend and everything like that. But really, we were wanting to continue to invest because we still see a lot of potential to significantly grow our business. So really, we didn't want to do that. So that's that graph on the far right bottom. That's Page #4. And moving on to Page #5, the Australian market. I mean, last year, we did talk a bit about we received additional chunk of licensing income from Hikma, and we did rather than put this in the balance sheet, we did invest this in further growing the business. One of the things we were chasing was increased marketing to boost our local Australian and New Zealand sales. And if you look at that, we're very pleased to see there was a good response revenue despite what we read is fairly muted economic conditions. We grew revenue by 19% in the Australian market. And a new product launch program, we've mentioned before, we have about 60 products we're launching over kind of a 2 year time window, and that is progressing nicely and roughly as planned. So we're seeing that kind of roll out. And also too, we talked a bit about this last year. Our operating profit last year was a little bit muted in Australia. But look, a good increase this year from $0.5 million to $4 million as these investments that we made and also the additional sales team do deliver upon our expected growth. If we look at that little pie graph thing on the far right, you can see sort of much of a muchness in terms of product split. OTC is still the predominant chunk of our business, about 2/3s in the Australian market, had a bit of slight growth and the hospital part has become a bit bigger and prescriptions kind of stay roughly the same or slightly decreased. So yes, look, that was our Australian result, and we were pleased. Everything we planned progressed well. The question we do get asked sometimes too, is that we talk about new product launches and people say to us, yes, but is all your growth coming just from existing product launches. When Malcolm analyzes that, we see that really the predominant amount of the growth is actually coming from existing products. A lot of products when you launch unlike OTC products is, it does really take a good 3, 4 years for them to bed down and then they in turn start to add to the growth in those further out years. But yes, they do contribute to growth, but they're not the primary driver of the short-term growth that we're looking at now. That's Page #5. And moving to Page #6, which is our second largest market presently, New Zealand. Revenue grew by a pretty reasonable 14% to $26 million, and that was primarily led by the OTC and actually prescription channel also made an impact. And there were a number of product launches as well that started to make an impact on this financial year, and we were able to also improve our operating profit in the New Zealand market. You can see once again on that bottom graph with the half year cuts in the sales growth, we are generally also selling more in the second half of the year than the first half. This is partly due to product mix as well, actually. And then on the far right, the pie graph, again, you can see New Zealand does predominantly the majority of sales are in the OTC section. And then prescription actually is relatively bigger than Australia and New Zealand, and then also hospital as well. But no major changes other than a bit probably more growth relatively in the OTC market, which we have been targeting. That's Page #6. And now moving across to Page #7, OTC -- sorry, Asia. We've got good growth in Asia in our OTC segment and also online. If you can recall back to last year, we were also using some of the additional funds we got from Hikma to invest more heavily in our cross-border e-commerce into the China market. And look, that's sort of roughly up about 80%, 90% presently from the prior year. So we are seeing some reasonable growth in our China cross-border growth -- sales rather and also seeing some growth in our OTC sales as well. As we previously discussed and mentioned, definitely any gains in the first half were diluted by doctors strike in South Korea, and that did also drop consequently the operating profit. But as we've said, the doctors strike is finished. The doctors are back at work, and we see that, that part of our business will recover. And then we have a number of events happening such as our first launch into China for Crystaderm. And that, as you probably know, is the second largest pharma market in the world. And long-term, we see that could be very interesting, but still early days. But we see our partner, I received photos overnight of a big display they had at one of the major China pharma events, and they had a lot of stuff about Crystaderm on their stand. So it's certainly working hard on it. The stock presently has been shipped and should get to them just prior to the end of this calendar year. So that's Asia, Page #7. And moving on to Page #8. International, as we have mentioned, we've seen some significant cutting of inventory from a number of our larger customers, and that was certainly very noticeable on the sales line. But yes, we do operate with forward orders. There's usually 3, 4 month lead time for most of our products, sometimes going up to 6 months. But we've seen -- we've got a good forward order book of orders. So we do see the sales making significant recovery in the second half based upon the orders that we've already booked. International does carry the various R&D costs as well. So that did have an operating loss in the first half of about $4.6 million, and we look for that loss to reduce, as I mentioned, as trading normalizes. And also, we have got a lot of launches as well, which we're looking at. A lot of them do actually come in the latter part of the second half of the financial year, which will certainly be good news for next year, but they do start to contribute this next half as well anyway. We are slowly increasing the number of countries where we're launching our Maxigesic. I should just point out too, though, it would -- it isn't just Maxigesic, we're selling across all these markets. And as well, we invested last year to pick up a number of products for Europe, which will further diversify and grow our channel. So we do show you the Maxigesic number of countries, but it's certainly -- if you just apply that to international sales, there is more to the business than that. And certainly, long-term going forward with the pipeline that feeds into it, there will be more. So that's Page #8. And moving on to Page #9, which is the global map. Presently, our medicines are available in nearly 80 countries around the world. How we do this map is yellow is where we have already launched. So you can see there's reasonable swathes of yellow across the globe, which will continue to fill in. We haven't actually put China as yellow yet because the stock is still on route literally. But that will become yellow by the next reporting period. Now blue is where we're still in registration, sometimes some places can take a long time. So those in time should turn yellow. But presently, they're in blue. There are some white areas where nothing yet has happened. You'll see in South America, for instance, that white space corresponds to Venezuela. We're not strategically intending to expand the business to Venezuela. We also have India and Bangladesh as well. Presently, we're not really targeting those countries. They're well served by a strong local industry, and we're kind of staying away from them. Philippines still in registration actually. We haven't actually put that as blue. We are probably going to launch ourselves or we use a local partner, but we've just left that at the moment. We don't have any firm agreements. Papua New Guinea, the other bit sitting above Australia, which again is not really a target. The key target though that isn't white is the Japanese market. So at the moment, we've licensed Maxigesic in some 9 out of the world's top 10 pharma markets. The only one left is Japan. So we have completed recently a Japanese pharmacokinetic study for Maxigesic IV comparing them to Caucasian patients. And we are having discussions with a number of parties in Japan and would be hopeful at some stage in the next kind of 6 months, we will be able to add something in the Japanese market. So look, that's our -- sorry, the other important bit, too, is those red circles and dots. What we have been busy with, and this has taken quite a bit of investment as well, which we did flag last year when we were spending the Hikma upfront money, which I think you remember was about $6 million. So Australia and New Zealand are both red circles. We've always had offices in Auckland and Sydney. Also we have red circles in Singapore and Kuala Lumpur, Malaysia, where we are expanding our business. Singapore is growing quite nicely presently and is still quite a significant part of our Asian business presently. We have an office in Hong Kong, where our Asian manager works, and it's pretty important that geographication because it's close to China, and she can commute literally, easily as required into China to help us with our business meetings in China. We purchased a company in South Africa, and that's based -- going to be based out of Cape Town. So that's kind of underway, a lot of work going on there. And then looking across to North America, we have a U.S. office in Detroit. And primarily, that's going to help to run our distributors for the U.S. market, but we do also have a number of OTC products that we currently sell some on Amazon, but we will be beefing up physical distribution in the U.S. market. That will be run out of our Detroit office. And then we also have an office in Toronto in Canada. We have sold product in Canada since 2018 through distributors and licensees, but we will launch our first product being Maxigesic IV. We're anticipating that to be March '25, maybe April '25. So we have someone -- people employed, well, person employed there, we will be employing further people in the Canadian market. In Europe, we have a number of projects going on in Europe, and that's run out of Ireland. And then in the U.K., we have an office just near the financial district in the U.K. and we have a number of staff based in our office there, and we're running our own launches there, which we'll talk about more in a moment. So look, that's our global kind of reach. And flicking on then to the next page, Page #10. Just about very quick about expanding this, what we're talking about, the global footprint. So the U.K., which is 70% owned by AFT. We've launched in a number of markets, the United States and Europe, usually Maxigesic is called Combogesic because the regulator won't let us use the word Maxigesic. So we've launched Combogesic IV and also the tablets, and we're making good progress with those 2 products. We do have a growing -- it is a major focus. We have a growing pipeline of products, which actually are in registration or have been registered and then a big pipeline after that. We are now an NHS accredited supplier. It is quite involved like, for example, there was a 500 questionnaire that we had to complete about the ESG part of our business, and we quite happily sailed through that, which was pleasing. We have actually been involved in a couple of bids for business for the NHS, and we've had -- to date, we now have 100% success rate. And this business starts at early in 2025 being the 1st of February. So yes, there's quite a lot of progress being made in the U.K. market. In Europe as well, look, there's a lot of progress being made there. We told you last year, and this is spending the Hikma money, we purchased products from a German company that was bankrupt. We acquired EU rights for an important niche drug. It's not really available, but very important for very sick patients with cardiovascular conditions. And we have been doing a lot of work to upgrade the dossier, get it approved, do various agreements. And the first sales for those would be expected also, we've got the orders would be expected in the first -- sort of maybe middle part of the second half. So made a lot of progress and certainly very good return on investment. I mean pharma, it often takes these sort of things a couple of years to get the sales going, but we would expect next year, we would recoup our investment within a 2 year window, which is pretty positive from our perspective. United States, progress with Combogesic IV sales are underway through Hikma as our licensee in the hospital market. They secured quite an important thing called Medicare reimbursement code, J-code that makes funding a lot simpler. But there's still a bit of work to be done in the U.S. It's really important to have major hospital formalities, but this always does take a while. It's not something that happens straight away, and that's still a work in progress. And once those get secured, then that will start to make a more major difference in the U.S. market, but that's still a work in progress. For our tablet, we've appointed distributors presently, a company called Alexso, which will handle one significant chunk of the market. Hikma as well that will handle a lot of -- that will handle the hospital, various outpatient clinics, ambulatory clinics, things like that. And pretty important because it ties in with Maxigesic or Combogesic IV, where you have an IV to oral switch strategy is important. But we will also see other distributors to further widen our distribution network, and that's presently underway. And as I mentioned before, we will be increasing our OTC offerings and spread in the U.S. market. Flicking on to the next page, Page #11, just real quickly, AFT Pharm Canada, also 70% owned by AFT. So we have launched Combogesic tablets a while ago for a partner. We're launching Crystaderm for a partner, but we're launching the IV ourselves, as I mentioned, at the kind of end of the financial year. And we're also working on doing filings to boost our pipeline in the Canadian market. South Africa, we purchased a company with an existing SAHPRA license that says 2 years. We have got a good pipeline of products that we actually acquired, and we're going to start launching those into the private hospital market in next financial year. South Africa is still a very good market, especially the private hospital market, like when we place it with our various operations, it sits pretty much level with Australia in terms of the size of the opportunities that we're chasing. So we're certainly very enthusiastic about South Africa as well. And then Singapore, Hong Kong, look, it's very much business as usual. We're starting to work harder on really expanding our pipeline. We got a number of launches happening in Singapore and then following on later, more like next year, a number of launches happening in Hong Kong. So we will work to significantly build both of those markets as well. And flicking on to Page #12. R&D. The thing I know some people say to me, the problem about R&D is you spend money on it. That's true, of course. But we are funding this all ourselves out of internal profits. We're not raising capital. And we are doing a lot of R&D actually. And long-term, this will really be the big value driver, we believe, in our business. Having said that, though, we do also have a pretty active commercialization process, which is pretty important to generate money now than everything being on R&D in future. So this is actually a very busy time, I've never seen anything like it. We have literally 18 agreements presently under discussion. And as you would have seen, for example, we did this year a couple of our big agreements in China, and we are seeing a lot of interest out of China. And we are looking to secure a further full drug distribution deal in China, which we're waiting for the final signature on it. Maxigesic is mostly developed, a little bit still underway, and that is still being commercialized. There still are some spare places that we're looking to launch and sort things out. But generally, there is still additional upfront and money to come from that. Crystaderm, that's our proprietary antibacterial cream, slow release hydrogen peroxide. We're getting good interest in that. A lot of sort of wins are moving in our favor with global concern about antibiotic drug resistance. And Crystaderm is one way to avoid that, and that's what is also helping to generate the interest. So we've got a number of discussions underway with the first one to kick off being the China launch of Crystaderm. Micolette, we're getting actually good interest in that. That's a product we purchased a couple of years ago, and we're selling it ourselves in our markets, but we're getting good interest. Kiwisoothe is a new product for gut discomfort, and we are also getting some good interest for that and looking at our first launches in the second half of this financial year. And Capsaicin is an analgesic cream also have good interest in that, and are making some sales presently in the U.K. But we're looking at a number of other agreements, and that's part of the things which I mentioned up there in the 18 agreements that are underway. On the right is our R&D budget. You can see -- we spent close to a couple of million more on R&D. So yes, there will be some ongoing expenditure. It's not going to go crazy, but that is certainly something that's important to advance our R&D portfolio. So Page 12, and then moving on to Page 13, just quickly to flick through this. Yes, we're pleased we've got a really strong R&D pipeline, and we've used our cash flows and staff to do more R&D. This is probably about it at the moment. We want to sort of land a few of these before we look to any other projects. But we've got a good chunk of projects here. A lot of these treatments that -- a lot of these drugs we're developing don't have any treatments in this therapeutic category. They are covering multibillion-dollar categories. So basically, we've got a number of areas that fit in with our current product strategy with therapeutic areas. So dermatology is one of our key areas. So we have Pascomer, which we're expecting next year, sometime maybe late next year to get an approval. Then strawberry birthmarks is a topical treatment for children with basically large raised red colored bumps on them often the face. And there aren't any topical approved treatments for strawberry birthmarks. And this is certainly quite a common condition, and we believe it has a good commercial opportunity as well as therapeutically being very worthwhile. Keloid scars is something where scars grow. They don't just stop and heal, they actually keep on growing. There aren't any registered treatments for keloid scars, and we are developing a topical treatment. We have license and technology from Gillies McIndoe and Massey Ventures here in New Zealand, and we're working on that. Another one, we're doing a joint development with a company called Hyloris, and it's for a nasty female condition called vulvar lichen sclerosis. This is a pretty serious condition affecting the sufferers. There aren't any registered approved specific treatments for it, and we're developing that presently with Hyloris. In eyecare, where we have a big position in the Australian market, we have an antibiotic eye drop for drug-resistant eye infections. This particular product is widely compounded in places like the U.S., but there are no approved treatments. So we've been to FDA, done a lot of preliminary work. We're now doing some additional work. We're looking to start our first clinical trials next year and should be able to develop it relatively quickly once we start our clinical studies. So that's our eyecare project. With pain, we have another project, topical treatment for something called burning mouth syndrome. This [ is more ] common than you may think. It does disproportionately affect postmenopausal women, where patients have a burning feeling in their mouth. And this is underway as a development with Hyloris. NasoSURF is a drug delivery system for a number of different uses. We're firstly targeting conscious sedation. It's been a very difficult technical project, but we're pretty confident we're coming to the end of it where we can now go into our first big clinical study going to planning to start that the start of next calendar year 2025. We do, do some non-patented products. We have some projects underway with a partner we work very closely with on the manufacturing side. These are things that do have actually good commercial potential, and they're more developing the manufacturing side rather than true R&D, but the important thing is they will generate money. We can feed them out around our different business hubs and also license them out in markets like Europe, where we have a number of existing customers. The other big one -- one of the biggest ones probably on the whole of our portfolios, we have licensed in an NCE or new chemical entity. Presently, it is confidential because our partners don't want to disclose the exact details. It requires one additional clinical study being a large 1,000 patient study to complete the development. We posted down to have a meeting with the U.S. FDA to clarify the study protocol and get that started next year. But that's certainly a product that sits in about a $3 billion market, presently forecast to grow to over $7 billion by 2033. It's a very popular sort of therapeutic area that's really growing presently. And we do see that as being a very interesting project and one that we want. Yes, we've actually already got interest in licensing it. So out of those 18 projects, there's interest from at least 2 or 3 areas to license it in. So that can help -- if we can conclude that, that can help to generate some money to fund the R&D project. So that's Page #13. And flicking on, I can -- to Page 14, I can hand this over to our CFO, Malcolm Tubby.

Thanks, Hartley. So top line revenue, total revenue up 4% to $86.7 million. Gross profit of $36.2 million with a margin of 41.7% compared to 43% margin last year. The difference there is the change in license income, which was $2 million in last year and $200,000 this year. Operating expenses, as we've talked about, a couple of extra mill into R&D. So there has -- as we've alluded to before, these new projects are under the accounting standards, more of it gets expensed than capitalized, which, of course, means it hits the profit. And then the other increase in spend is the market development costs. So that generates the operating loss of $1.8 million compared to $3 million last year. And if we move down to the bottom, we show the revenue without -- from sales and royalties. So we exclude the license income just to demonstrate the underlying gross profit of the business, which stays the same at 41.6%. So turning on to the next Slide 15, the balance sheet. Main feature here is the net debt of $18.9 million at September compared to $30 million at the same time last year, sorry, $30 million was at March, it was lower than that at last September. The other main feature, I think, is the inventory days, which is we're bringing those levels down. We're now at around about 5 months worth of cover, and equity increasing to $83 million from $74 million. Next slide 16, on the cash flow. Operating activities, $4.3 million, down a bit from the one-off demand disruptions that we've alluded to. A reduction in the spend in investing activities, and that's the switch we just talked about with the R&D going more to expense than being capitalized. So that leaves us with a cash position of $10.6 million at the end of September. I can pass back to Hartley now to go through the outlook.

Yes. Look, thank you, Malcolm. So Slide #17, the outlook. So look, I think as we've tried to allude to, we do expect a strong recovery in the second half. I mean, we do see, in general, greater sales anyway in the second half, but we do see the 2 factors we've alluded to is essentially being completed. So there is a strong program of new product launches, especially in international markets, but also in Australia and New Zealand. We do see -- we're starting to build up some more momentum in the new markets, which won't be apparent from that first half result. But looking at the second half and then also into next year, we see that as getting -- growing momentum. And the important thing, I think, last then is what we have, so I just mentioned previously was resumption of normal trading following the 2 significant unexpected events in the first half being the doctors strike, and then also the destocking. So basically, though, given those one-off challenges, we see that we would have a guidance in the $15 million to $20 million range as opposed to our prior guidance. We don't expect anything significant to change such as declaring a dividend for the full year. But clearly, it's a little bit early to talk about that, and that would be decided by the Board closer to time. We just wanted to flag, we don't see anything changing our dividend intentions. And we believe we're getting -- we are very well positioned to further extend the company's long-standing record of growth. And you look at it in the last 10 years, we roughly quadrupled sales. Last 3 or 4 years, we doubled sales, and we don't really see that as going away. And that's why we've been investing the money and doing all these different things. So we set our sights really on a target, the sales target of $300 million, which we've previously mentioned before, and we'd be looking to achieve this by the end of FY '27. So just to give you a bit more context in terms of timing. So look, thank you very much for your attention. I hand it back to -- for any questions that you want to ask myself or Malcolm. Thank you.

Thank you. [Operator Instructions] Your first question comes from Matt Montgomerie with Forsyth Barr.

You've got a comment in there that October international and Asia sales were up 100% versus the prior year. I'd just be keen to understand what you've factored into your guidance in terms of the second half international and Asia sales growth.

Yes. I guess, I mean the reason for putting that in, I suppose, is just to give people -- I mean, obviously, we said we expect that to improve based upon a number of factors. So we thought it was still useful to put that figure in to give an indication that there was something behind it. I mean, we are looking to get Asia sales up past last year in terms of sales. So we're looking at them probably being Malcolm white up about even maybe...

Possibly up to about 30%.

25% to 30% greater than last year because we did get a strong recovery. International, probably it's only really line ball, just because of the first half result, it might be slightly under something like that. But we certainly are seeing that expected recovery, but that's the sort of international why we don't think it will be greater. And Asia, we think it will be greater than last year.

And just to clarify, those 2 numbers are FY '25 versus FY '24?

Yes, you're correct.

At a full year level.

Yes.

Yes. Second one for me, if that's okay. Just on gross margins, they're roughly flat versus the last year if we strip out licensing. Does this just reflect the ongoing product mix less discounting impacts that you called out in the second half of last year? And then secondly, how should we be thinking about gross margins from here?

Yes. We see a little bit of an uplift in the second half in the margin.

Yes. We have still been digesting -- we have mentioned this before, and it's taken quite a long time to digest it. We had an amount of overstocking with some products, and we still had to heavily discount those and do various actions. And that has had an impact in Australia and partly in New Zealand right the way up to literally about now. I think December, we finally clear them all. So it's surprising it has taken quite a long time to clear through that, and that does help once those one particular problems have gone and we can then move forward, which is roughly about now as well as an amount.

Yes. Okay. That makes sense. And then just in your guidance, what's factored in, in terms of licensing? Or is that an ex-licensing number?

There's about $1 million in there for licensing, so $800,000 in the second half.

And one more for me. Just on the U.S. sort of comments were relatively few and far between. Could you maybe just talk in more detail around reception from surgeons, how you're going, getting on to formulary lists, if you are on any of the larger hospitals in the U.S. and just general reception, I guess, thus far, albeit I acknowledge it's early days.

Yes. I mean the Americans are still very much looking for alternatives to opioids. That side of it has been positive. Securing that J-code, Hikma certainly tell us is something pretty significant. So that helps. Most of the immediate early progress has been in a number of outpatient settings like there's a lot of ambulatory surgery and things like that in the U.S. They've made really good progress in those places. And it's really moving on now to tackle the larger institutions, which are pretty bureaucratic actually. So I think that's going to be the thing that AFT is watching. And we are waiting in now to help Hikma too, around those major institutions with applications and things like that. That part of it, to be honest, is still a work in progress.

So is it fair to say that Hikma have tried and not have much luck so far in terms of the...

No, they'd still be in SAHPRA. They're still in the preparation phase. There haven't been any hospital submissions gone in yet. I mean January does take at least a year to get to that point. So they launched sort of the end of February. So they'll be having various meetings and getting things prepared and building up [Technical Difficulty], which is sort of -- it's a steady but slow process, and that's underway.

[Operator Instructions] Your next question comes from Adrian Allbon with Jarden.

Just a couple of questions. If I just come back to the current year, would it be fair to sort of say that as we -- as you sort of gave your initial guidance at the '24 result, would you have been kind of expecting EBIT including the licensing around $26 million and sort of a first half, second half split of maybe $4 million sort of to $22 million. So like I'm just trying to wrap my arms around like how big these one-off factors are. It feels like it's like a sort of a $10 million revenue hit and a sort of $6 million profit hit in the first half. Is that sort of fair?

Probably close to that.

Malcolm I think [indiscernible] I mean, we would normally expected to have grown in those 2 specific markets. And in fact, we went backwards. And you can see that what we're seeing and what we believe will happen going forward in sort of Asia, where we're still managing, we believe we'll manage to finish ahead of last year. Now there is a good recovery, but of course, that very much got dented in the first half.

Okay. So that sort of -- so sort of $6 million miss in the first half and maybe it's a $2 million sort of rebasing for the second half relative to ingoing estimates as you started the year?

Sorry, [indiscernible] Adrian?

So like just my sort of back of the envelope would have been when you gave your guidance at the last result, so you would have been kind of midpointing around $26 million of EBIT, including the license income. And you probably -- and your split might have been $4 million in the first half and $22 million in the second half. And so with the one-off factors, you generated a $2 million loss in the first half. And I presume there's some rebasing that means you're kind of probably rebasing the second half by about $2 million as well.

Yes. So what's your question then? Sorry. You just [indiscernible]

Okay. Just a second, like just coming back to your rolling $300 million revenue target. As you -- you've obviously been through the presentation and explained like there's lots of moving parts and lots of countries that make it up. But essentially, you're aiming to put on $100 million of revenue in sort of 2 years or 2 and a bit years. Are you able to sort of just broadly attribute where that comes from?

Yes, it comes from lots of places. It comes from all our business segments like Australia, you saw was about 19%. So we're not expecting that to go away and stop growing. So Australia will grow over those 2 years. Same in New Zealand, but we do see significant growth in both international and Asia. I mean we spend a lot of money and time on investing in various things that a lot of them are only just starting in the back end of this financial year, so don't contribute much and then contribute going forward. I mean, certainly like we were trying to communicate the business has moved on quite a bit from just Maxigesic. There's a lot of other bits within the business that haven't contributed yet, but will start to contribute.

Okay. But would like, say for the home markets, if I say, Australia and New Zealand, would you -- of that $100 million of increment, would you kind of be expecting those to do sort of $25 million or $30 million and most of it coming from -- I'm presuming most of it comes from international and to a less...

Yes, [indiscernible] quite a lot comes from Australia and New Zealand, it still grows [indiscernible] decent double-digit growth.

Okay. But let's say, of the $100 million, sort of you're expecting $25 million to $30 million of that $100 million to come from the Australia and New Zealand markets.

Yes, we're growing -- yes, we think that Australia is going to grow in the late teens, around [ $20 million ], and New Zealand looks like it will keep growing in the double-digit. So New Zealand has picked up more than we -- going back a couple of years, New Zealand is going really well.

Okay. And then like in the international market, is there any sort of -- like is it Maxi IV that you'd expect to do most of the listing? I know there's like you've recently gone into South Africa and there's all these other different markets. But is there any sort of larger sort of items that we should kind of be thinking about in terms of like giving us confidence in the sort of, if you like, the extra $70 that sort of come from those markets?

There's a lot of extra -- it's not all banked on one thing. There's a lot of different bits, which is how we're generally trying to do it because we're just nervous about backing everything on sort of a one hit opportunity. So there's actually a lot of bits like even those products that we purchased in and different things like that. I mean they're part of it, but they're not a whole amount of it, but they certainly help. But there's just lots of different bits really. We build it up line by line. We put in sort of different sensitivity things depending on risk. So we certainly are recognizing international and Asia with more risky because it's more new with Australia and New Zealand, there's more certainty around it.

Okay. And then just my final question which kind of relates back to the margin sort of one that sort of Matt was asking a little bit, but like stretching it forward. If you achieve $70 million or $80 million of revenues in those international markets, presumably, the operating leverage at the EBIT level, you wouldn't have the same sales and marketing investment as if you were trying to generate them in the ANZ markets. Is that correct?

Yes, we see that margin improving as well, yes.

Yes.

Yes, if we get [indiscernible]

And so like at that sort of $300 million mark, would you be expecting like your operating margin to kind of like put on a couple of points? Like is it sort of a 14 to sort of 16 kind of lift? Is that the sort of right -- when you model it?

I think on the gross margin, if you're round that sort of level, I think that's about a couple of points. I think we'd be good, yes.

And then -- but then coming down, like obviously, the R&D investment is separate because that's kind of keeping the whole business sort of moving forward as you kind of outlined. But the sales and marketing is less intensity relative to what -- if you're trying to generate the same amount of money in the Australia and New Zealand markets. Is that's correct?

Yes, there will be some investment, and that's already been happening in markets like Canada and the U.K. there will have to be some investments. Of course, at the moment, it's all -- you're looking at it short-term, it's all a negative thing because it's expensed without significant income. But yes, there will have to be some investment in Canada and the U.K. especially, and less in South Africa because of the scope of the business.

There are no further questions at this time. I'll now hand back for closing remarks.

Yes. No, look, thank you very much. So look, we're just continuing to focus on growing the business, investing in the business. Clearly, the first half has been quite tough due to a couple of events, but yes, we're really looking through that and past that and making sure that we deliver in the medium to long-term. And I guess we come back to the fact we have quadrupled sales in the last 10 years. We have significantly grown them in the last 3 or 4 years, gone from $100 million to $200 million, and that $300 million for sure is something that we're very laser-focused on presently. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.