EBOS Group Limited (EBO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the EBOS Group Limited FY '20 Full Year Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, the 28th of August 2020. I would now like to hand the conference over to your first speaker today, Mr. John Cullity, CEO of EBOS Group. Please go ahead, John.

Thank you, Christian, and welcome, everyone, to the EBOS 2020 full year results presentation. My name is John Cullity, the CEO of EBOS, and I'm joined this morning by Leonard Hansen, our acting CFO; and also Martin Krauskopf, our GM for Investor Relations. Before we start, I should point out that the results are expressed in Australian dollars, unless otherwise noted. We also refer in the presentation to both statutory results and underlying results. The underlying results for FY '20 exclude the impact of IFRS 16 leases as well as some one-off costs the group incurred on M&A activity. The commentary this morning will be predominantly based on our underlying results, excluding the impacts of these 2 items. I'm very pleased to report that EBOS has had a record financial performance in 2020, a year that has had its challenges, but one that saw the group demonstrate its leading position across both health care and animal care. Financially, the key headlines were: our revenues increased by $1.8 billion to a total of $8.8 billion, which is a 26.5% increase on the prior year. Underlying EBITDA was up 13.4% to just under $297 million, and our underlying NPAT at $168.3 million was up 16.5%. Underlying earnings per share increased 10.6%, representing a lower growth rate than NPAT, primarily due to the increase in the number of shares following the May 2019 capital raising. In light of the group's performance, the Board has declared a final dividend of NZD 0.40, taking full year dividends to NZD 0.775, representing an increase on last year of 8.4%. Not only did the group record a significant increase in revenues and profits. It also had an excellent operating cash result, which Leonard will take you through later. Pleasingly, both Healthcare and Animal Care contributed strongly to the performance, demonstrating again the strength and benefits of our diversified portfolio of assets. We had a strong performance in Community Pharmacy, continuing on from the first half, and this was due to a number of factors, including the scale of our wholesale business has increased significantly upon commencement of distributing pharmaceuticals to the Chemist Warehouse Group. We were able, as a result of this increased scale, to yield further productivity benefits from our distribution network, and we had a very strong performance from our TerryWhite Chemmart franchisee network with impressive store and like-for-like sales growth. Pleasingly, we also saw strong performances from our Institutional Healthcare and Contract Logistics businesses. We also made our initial entry into the Australian and New Zealand medical device industry with the acquisition of LMT National Surgical, and this business is performing in line with our expectations. Our key animal care brands had another strong year, and our Lyppard vet wholesaling business recorded strongest growth rates since EBOS has owned the business. Our M&A strategy is unchanged, and we have a very healthy pipeline of potential acquisitions. As a result, we are very confident of the M&A opportunities that we believe will present themselves during the current economic cycle. I'll spend some time now talking about the impacts of COVID-19, and I'd like to provide a general overview of what we have seen and are seeing as a result of COVID and its impact on our business. As an overall statement, however, COVID-19 has had a broadly neutral impact on our financial performance. There were periods up to 30 June where we saw huge swings in demand and activity, and that may occur again at some point in FY '21. However, the products and services that the group supplies are essential and consumer staple items. People will always need to take their medications, and pets will always need to be fed. We expected our performance to be resilient during this COVID-19 period and, to date, that has proven correct. The breadth of our operations across the many aspects of health care has seen some areas reduce, like parts of our consumables business with the lower visitations to GPs that occurred during the height of the pandemic. However, on the counter, we picked up business with the increased demand for PPE and hospitals increasing their inventory holdings. During this period of uncertainty, we had benefit from our industry-leading distribution network, the defensive nature of our products and services as well as our scale, business diversity and strong balance sheet. Importantly, all of our critical sites that distribute medicines and consumables across Australia and New Zealand have remained open. Our operations across both countries are critical to the uninterrupted supply of medicines and consumables into the community. As a result, we have not reduced headcount due to COVID-19 nor have we received any government assistance during this period. We have focused on protecting our employees' safety and their jobs, and we have not forced our employees to take leave. We are a growing business, and we need all our employees to assist us on that journey. I won't go through all the individual areas where COVID-19 has impacted on our business, but the key message here is that the financial impact of it is broadly neutral on our FY '20 results. I'd also like to spend some time on the great work our business does into the community where we have natural disasters. As a result of the breadth of our operations and our integral role in the region's medical supply chain, our people and business play an important role when our region experiences natural disasters. So while it's important we achieve our strategic and financial goals, it's also important that our business steps up when we are faced with emergency situations. FY '20 was a year we hope will never be repeated. Our group has contributed to the relief efforts, whether that be measles outbreaks in New Zealand or the Pacific, the terrible eruption of the White Island volcano and the disastrous bushfire emergencies that Australia encountered over its summer period. It's important that our investors in the wider community are aware of the tremendous work that our business and our people do in going above and beyond to assist both the community and emergency service workers to keep essential medicines and services flowing no matter what conditions we find ourselves in. In respect to more details, look at our financial performance for FY '20. This slide provides more details on both a reported and underlying basis. The increase in underlying EBITDA of just under $35 million or 13.4% comprised growth in Healthcare of 14.8% and growth in Animal Care of 8.3%. We finished the year with a reduction in net debt of just under $40 million, and our net debt-to-EBITDA ratio closed the year at 1.1x. The profit and cash flow result, together with our strong balance sheet, have placed us in a very strong position for FY '21. Moving now to the Healthcare segment where, in aggregate, we had a 27% rise in revenue and a 14.8% lift in EBITDA. This was led by our Australian business, where we had a really strong performance with revenue growth of 33% and EBITDA growth of just under 20%. As mentioned before, the performance in Australia was led by our Community Pharmacy wholesaling business, but we also had strong contributions from Institutional Healthcare, TWC and our Contract Logistics businesses. In New Zealand, we had good revenue growth of 8.5% but didn't convert that into profit growth predominantly due to the integration issues we encountered in the first half upon opening our new manufacturing and warehousing facility in Auckland. EBITDA margins for the Healthcare segment reduced from 3.46% to 3.12%. These reductions are consistent with what we saw in the first half and are explained by multiple factors, with the main ones being the change in the sales mix from the significantly higher ethical volumes and revenue within our Australian pharmacy wholesaling business. The impact of PBS reforms also had a negative impact on margin. We also saw increased cost of operations as a result of COVID-19 in March and beyond as a result of increased social distancing to apply in warehouses, increased freight, security and cleaning costs. We also had a reduced profit contribution from our higher-margin Consumer Products business as it suffered from the slowdown in the daigou channel and the integration cost of opening its new facility in Auckland. Moving to Community Pharmacy. We occupy leading market positions in both Australia and New Zealand in Community Pharmacy wholesaling. The Community Pharmacy channel recorded a 37% increase in revenues and just under a 20% increase in GOR. Our wholesale business was able to successfully execute the onboarding of the Chemist Warehouse volumes from the 1st of July 2019 in a seamless manner, with excellent service levels being achieved for all of our loyal customers. Our wholesale business has also benefited from growth in our existing customer base and particularly, the performance of our TWC business and the expansion of their store network was very pleasing. We continue to realize productivity improvements across the Symbion distribution network, further justifying the investment we made in prior years to automate a number of our distribution facilities. You will also notice the decline in our GOR margin, which is really a reflection of the substantial change in sales mix for the pharmacy business upon servicing the Chemist Warehouse group. As most of you would appreciate, we are servicing Chemist Warehouse pharmaceutical volumes and not their FMCG volumes, which are undertaken at higher gross margins. Another highlight of the result was that we've been able to reignite the growth in TerryWhite Chemmart. We grew the network by 26 stores, which is far greater than achieved in prior periods. Importantly, the TWC network partner stores' trading performance was also strong, with a 4.1% like-for-like sales growth and 6% like-for-like prescription sales growth during the year. TWC has implemented a number of initiatives over the last 12 months, and these are gaining real traction in the market. We have significantly increased the amount of advertising and marketing on behalf of the TWC network via that's real chemistry advertising campaign, and we have also developed strategic alliances with Qantas Frequent Flyer, Bupa and Afterpay. These initiatives are resonating with TWC's customer base and is an important factor in attracting new members and stores to the brand. We have a goal to take the network to more than 500-plus stores. And based on our momentum, we are confident that we can achieve this growth in the medium term. Institutional Healthcare had a very strong year and recorded full year growth rates stronger than what we have seen in the first half. Sales and GOR growth above -- are above historical norms due to a number of factors, including the increased sales of specialty medicines; the additional volumes as a result of hospitals responding to the COVID-19 situation benefiting both our pharmaceuticals and consumables business; and the first time inclusion of our recently acquired medical devices business, which performed in line with our expectations despite the COVID-19 situation resulting in the cessation of elective surgeries. We occupy leading market positions in both Australia and New Zealand, and our medical consumables, HPS and medical devices businesses all made strong contributions to the results. Contract Logistics had a very strong year with revenue and GOR growth of 37% and 16%, respectively. We had solid growth across both Australia and New Zealand, and we are now realizing the financial benefits of the prior year's investment in our distribution facilities. We continue to have strong demand for our services, and we will continue to make future investments in our distribution network. This business now operates on the one ERP environment, and so we are able to provide manufacturers with a consistent offering across both Australia and New Zealand. We are the market leader in health care contract logistics in New Zealand, and we see further upside for our Australian business. The full year result from our Consumer Products business was below expectations as a result of the weak first half performance. Importantly, we were able to improve the performance of this business unit in the second half as we corrected the transition issues which arose upon the opening of our new warehouse and manufacturing facility in September 2019. The decline in sales to the Asian export markets by virtue of the softening in the daigou channel did negatively impact the performance of this business unit, and that did continue in the second half. The strategic rationale, however, of the Consumer Products business is compelling given our ability to leverage our distribution and retail strengths to the benefit of our diverse portfolio of brands. Moving now to the Animal Care segment, which had another very good year with revenue growth of 11% and EBITDA exceeding $50 million for the first time with growth of 8.3% on the prior year. We had strong growth from our brands portfolio as well as our Lyppard vet wholesaling business, which did benefit from the recent acquisition of Therapon undertaken in the prior year. Black Hawk continued to register strong sales growth of over 12% for the full year. Its growth is across both Australia and New Zealand, with a stronger growth rate in New Zealand as it continues to take market share in that country. Vitapet is also a key brand for us in the treats market, and it had a strong year with growth of over 15%, benefiting from increased ranging of its treats products within the Woolworth grocery stores. Both Black Hawk and Vitapet are leading pet food and treats brands in their respective channels. I'll now hand over to Leonard to cover the financial information.

Thanks, John. Statutory cash flow from operations for FY '20 was $229.2 million, inclusive of the cash -- sorry, inclusive of the impact of the changes in treatment of leases under the new lease accounting standard, IFRS 16. The impact of this change was to increase the operating cash flow by $32 million, with the offset being in repayment of lease liabilities now a financing cash flow as required under the standard. Capital expenditure for the year was $28.9 million and primarily comprised of spend on our new purpose-built warehouse and manufacturing facility in the Consumer Products business in Auckland, IT spend associated with the -- continuing to monetize -- modernize IT platforms across the group and other capital projects. We also invested $44.6 million on acquisitions in FY '20, inclusive of the cash payment to acquire LMT in October 2019. Moving on to working capital. Working capital remains a key focus for the group with a cash conversion cycle of 15 days as at June 2020. Net working capital days have improved on FY '19, benefiting from the significant increase in sales volumes recognized during the year, while net working capital only increased by $23.2 million. Debtors have increased by $119 million as a result of the increase in sales but partially offset by a reduction in overdues of $28 million from the prior year. Trade payables have increased by $109.9 million. However, creditor days have reduced in line with the decline in inventory days from FY '19, with FY '19 reflecting the stock build for the supply to Chemist Warehouse pharmacies that commenced in July 2019. ROCE for the year at 17.1% is well above both our 15% return on capital employed target and last year on the back of our strong earnings growth and cash results. Net debt for the group was $327 million as at June 30, 2020, down by $39 million on the prior year as a result of the strong cash performance of the group for the year. Our net debt-to-EBITDA ratio was 1.11x, a further improvement on June '19. We continue to assess a number of strategic acquisition opportunities, and we estimate we currently have between $400 million and $450 million of headroom for future acquisitions within our target gearing range. As highlighted at the half year announcement, we have agreed with our banks to adopt a frozen GAAP approach with respect to the new IFRS 16 lease accounting standard. Therefore, we will continue to report our net debt-to-EBITDA ratio on a pre-IFRS 16 basis. During the year, the group extended the maturity of $250 million of term debt facilities for a further 3 years to March 2023. Subsequent to the balance date, we've also extended the maturity date of our $400 million securitization facility in August for a further 3 years to August 2023. These facility extensions provide the group with balance sheet security, with the weighted average maturity of our combined facilities now at 2.5 years. Turning to EPS and dividends. Underlying EPS for the year is $1.042 per share, growth upon FY '19 of 10.6%. The EBOS Board has declared a final dividend of NZD 0.40 per share. This will be imputed at -- to 25% for New Zealand resident tax shareholders and fully franked for Australian tax residents shareholders. The total dividends for the year are therefore $0.775, up 8.4%, with a payout ratio for the year on an underlying basis of 17.9%. The group's dividend reinvestment plan will be in operation for the upcoming final dividend, and shareholders can elect to take shares in lieu of a cash dividend at a discount of 2.5% to the volume weighted average share price. Thank you, and I'll now hand you back to John.

Thank you very much, Leonard. So in respect of current trading conditions, and in conclusion, we've recorded a very strong financial performance in FY '20 across both our Healthcare and Animal Care segments. We've pleasingly recorded strong organic growth rates, which, combined with the group's balance sheet position and strong cash flow, provides us with confidence to continue on our proven strategy of building out our existing business streams. Our M&A pipeline is strong, and we continue to diligently work through these opportunities. Prior to the most recent government restrictions, we had seen an improvement in recent trading conditions, with group revenue and underlying EBITDA growth for July of 6.9% and 6.5%, respectively. We recorded stronger revenue growth in our Animal Care segment than for our Healthcare segment. As we know, since the end of July, the Victorian government and the New Zealand government have both announced heightened restrictions with respect to COVID-19. These announcements continue to highlight that the COVID-19 situation remains evolving and unpredictable across both Australia and New Zealand and will be with us for some time. Given the group's scale and market-leading positions in stable industries as well as our strong balance sheet, we are well placed to respond to the challenges and opportunities ahead. We reiterate our dividend policy of declaring dividends of not less than 60% of NPAT. EBOS has a history of paying dividends that are 25% imputed for New Zealand shareholders and 100% franked for Australian resident shareholders. And with that, I'll conclude the formal part of the presentation, and we'll hand back to Christian, the operator, to facilitate any questions. Thank you.

[Operator Instructions] Your first question today comes from the line of Chelsea Leadbetter from Forsyth Barr.

I guess maybe if I can start with the actual sort of supply chain side of things. I mean if we think back to March, you've managed a pretty significant uplift quite quickly in terms of what's going on. So I guess I'm interested in terms of your view on the DCs, how they've responded, what, if any, additional investment might be required. Or are you more than happy that you're almost, I guess, through that investment cycle and can continue to respond as required to the monthly volatility or weekly volatility you might be seeing?

Look, the whole supply chain, DC network and our ability to manage that, that's the strength of the business, right? That's where we believe we have a real competitive advantage in respect of our management of all of that. Certainly during the times of the pandemic, it was -- it would stretch our operations in certain areas, but there were quite unique times where demand was really through the roof. But when you come back to a normal operating cycle, then we're certainly very comfortable with where we are. What we continue to do is look forward. We continue to believe that we can achieve growth in the market. And therefore, the business will always adjust to whatever investment it needs to make to cater for that growth, which you can see further growth in our Contract Logistics businesses. So there'll be an investment there coming forward. But that's -- they're investments, of course, for the right reasons because it's catering for the growth. So I think that's the main point I'd put across -- I'd make, too.

Okay. No, I appreciate the color. And I guess, just narrowing that down in terms of the current year ahead, how should we be thinking about the CapEx budget outside of any M&A that comes across?

Leonard, do you want to answer that one?

So Chelsea, Leonard here. I think at a group level, we're at a size now that I think given where we are, it's probably sort of circa $35 million going forward is where we are as far as CapEx are sort of the short to medium term, just to keep the lights on. And also, there's always just obviously continual CapEx needs to keep the improvements of the business going.

Okay. Perfect. And just last one for me. I mean, clearly, there's a lot of moving parts in terms of the outlook at the moment, and I appreciate it's somewhat hard to answer questions around it. But I guess, I'm interested in terms of just at a high level, how you guys are thinking about the year, ahead. But most importantly, I guess, the stockpiling and sort of, I guess, the nature that we saw back in March or whenever that was in each country. I'm just interested in what you think consumer stock levels might look like or pharmacy stock levels in particular. And do you think that's been worked through? Or is there some potential still to come? Just interested in some comments around that and maybe just how you're thinking about the growth outlook across each piece of the puzzle versus what you usually are thinking and what may have changed.

Okay. Well I suppose why don't we start with the growth outlook, Chelsea. We've really limited our comments to what's happening -- what we've seen in July. And we don't have, as you'd appreciate, crystal balls as to what's -- what the future holds for us in this environment. But that said, we're very -- we're quietly confident going forward in terms of what the business can continue to achieve in the medium term, right? We position it as a growing business. We think there's further growth in the markets we're in, in both health care and animal care. We're very wary of the potential future economic conditions we can face, and that wariness is when potentially the government support for job seeker payments cease and what sort of economic conditions we really face. I'm surprised on the upside, really, with the July performance on the strength of that. We weren't anticipating that back in March when we were doing our budgets. So that has surprised us. But I don't -- as I say, I think we've got a good breadth of products and consumer staple items, et cetera, that are resilient in poor economic cycles. So I expect our performance still to be measured with those backdrops, but still to be okay. But yes, I can't get too much flavor other than that. In terms of consumer stockpiling or customer stockpiling, I think what we've seen in pharmacy, I think we're basically through that cycle. We -- depending on what happens, I don't think we'll get those sudden spikes again that we saw in March that was really a one-off event. What we have seen from the hospital network is, though, that they have increased their inventory holdings out of prudence for the situation. So I'd see that probably continuing, right, in terms of them continuing to hold increased inventory levels throughout this whole COVID-19 situation.

Your next question comes from the line of Andrew Paine from MST Marquee.

Actually, sorry, it's Andrew Goodsall, but that's okay. I was just going to -- sorry, can you hear me?

Yes, Andrew.

Great. Great. I think I might have come under Andrew's code. So too many Andrews, sorry. So I suppose just going to -- just going to -- obviously, great results and congratulations on the execution in a really challenging environment. I guess this is probably more for the sort of forward-looking, but just thinking about margins. Obviously, pretty much across the board, sort of a lot of pressure on margins. Some of that, obviously, taking on with some of the contracts and so on. But just -- yes, just trying to get a feel for how you're thinking about margins going forward and sort of initiatives you might have there.

Yes. Andrew, I think if I look at health care, overall, there's numerous parts within health care. I think if anything, they're probably steady going forward. And maybe if they increase, it's a couple of points -- minor points increases in terms of the margins. We may get more contribution in the year from things like our medical devices business and expect a better performance from our Consumer Products business in FY '21. But then there are increased costs that come through from COVID that I sort of referred to in my opening comments in the presentation in running the facilities and as a result of social distancing measures and increased cleaning and things like that. So if you put it all together, I think I'd expect our margin probably to hold or be a little slightly up in FY '21. The EBITDA margin, that is.

Yes. Got it. That's great. And I presume some of those COVID -- hopefully, when we're beyond all this, they might ease. But I guess, you don't sort of see them being anything continuing as such.

No. They should ease, Andrew. But at the moment, we -- I'm in the office at Auckland, and we've got masks on. I don't at the moment because I'm speaking. But you know what, it's just -- our employees have been working in warehouses with masks on and social distancing. So it's -- the environment is not easy from that perspective, but that's a cost to keep everyone safe. It's a necessary cost, and that's what we'll incur while we go through all of this.

And then just in terms of the CSO, which was a couple of months back now, when I say -- when the deal was done. But I think there was a sort of little first year step-up just to, I guess, cover a period before it transitions to a different pricing situation. Just any sort of tailwind do you think would come from that or in the FY '21.

Yes. We -- look, in terms -- if you just looked at that item on its own, that would provide a little tailwind for us for FY '21. But what I would encourage you to -- the people to think about is that might be a tailwind, but we probably have a more conservative view, depending which way you look at it, on the impact of PBS reforms in FY '21. We think they're more significant than what other people have probably got factored into their thinking. FY '20 wasn't a bad year for the impact of PBS reforms. It's probably one of the largest years we've had, but we're expecting a more significant impact in '21. So that acts as an offset to it.

And is that mainly driven by a step-down in increased generic products and the automatic step-down in pricing? Is that...

Yes. There's about 15 items, right, that we've identified that we're expecting further margin compression on into FY '21 coming in from basically October. So we get some upside right from the CSO, and there's an offset coming through from PBS reforms.

Your next question comes from the line of Saul Hadassin from UBS.

Leonard, just a quick one from me. Just looking at the working capital improvement in FY '20, particularly the cash conversion days. I'm just wondering how sustainable you guys think that is into FY '21, noting FY '20 was somewhat of an abnormal year. But just your ability to continue to drive that strong cash conversion. And do you think that 15 days, that you can hold that into FY '21?

Leonard, do you want to answer...

Yes, I will. Thanks, John. Well I think 15 days has obviously benefited from somewhat this year by the improvement on the overdues. So I think that's probably more likely to be a little bit up on next year. I think on the go-forward, though, what I'm thinking is from an investment and a working capital perspective, sort of the $25 million mark year-on-year is what I'm thinking regarding what the business should be investing in working capital each year. And so that's what I'm sort of thinking as the go-forward position for the group.

Our next question comes from the line of Stephen Ridgewell from Craigs.

Just first of all, encouraging to hear the July EBITDA up 6.5%. Just interested in whether you think that was boosted perhaps by another round of consumer stockpiling in Victoria. Obviously, we'd expect it to be less than the first round. But just interested if you felt there was an effect washing through the year. Or would that -- or would you consider that month to be pretty reflective of normal months to the extent that we have normal months at the moment?

I think it's the latter, Stephen. It -- we didn't see any real impact of stockpiling from Victoria. There was a day or 2 where demand was a little bit higher, where we thought as a result of the restrictions placed in Victoria it might be about to take off again. But I'd like to -- yes, whatever is a normal month in this environment, that's -- July is probably a normal month. And the other point was we saw quite strong numbers in the Animal Care business as well. So it wasn't just across pharmacy. It was across hospitals, it's across our Animal Care business. So you looked at all that and thought it's actually the sales conditions, as I say, well exceeded our expectations for the environment we're in. So I hope it is the new normal. Can't say. It'd be nice if it was.

Yes. No, that's very helpful. And then just on consumer brands. You did mention in the prepared remarks, it was a bit tougher during the year. It's been fairly flat the last few years and you called out the daigou trade unwind. Just wondering what's your thinking on the extent to which the group's earnings are still exposed to daigou now. I mean it was a feature going back a few years now, but is that downdraft largely washed through?

We -- there's probably still a little bit more to come, I recon, Stephen. We're seeing -- we think the daigou sales or sales in those export markets, it's fallen again, we've noticed, in, say, probably June, July. And what we think -- and we're seeing that across both wholesale. We're seeing it across our TerryWhite business, and we're seeing it in our consumer brands portfolio. And what we put this latest fall-down to is really the lack of tourism into both Australia and New Zealand and also the lack of overseas students. So we're seeing within Australia and New Zealand a drop again in that particular market. It's what we've seen. So -- but that decline, that was in the July performance as well.

I understand. And then just -- do you have a broad sense of what kind of the EBITDA exposure might be to that trade for the group now, even broadly?

No. I couldn't quantify that, to be truthful, right, across all the elements, right? I mean, no, I couldn't give you a number, Stephen.

Okay. All right. I'll move on. And then just on the Community Pharmacy agreement. Just wondering if you could talk to the benefits that you sort of see from that outcome to the way the group operates. And if you could touch perhaps on, is that sort of a driver of the expectation for flat OpEx, slightly improved EBITDA margin year-over-year?

Sorry, what was the last point? Was that a driver for...

The -- what you had said to Andrew's question before about that you'd expect EBITDA margin to be perhaps flat in FY '21 or even up a little bit.

Yes. I think, if anything, it would be a driver for the margin coming up, right, because there's a net benefit to us, a net profit benefit to us from the new CPA. And in context, you got to realize that we hadn't had an increase in CSO funding for about 10 years. So this year, we'll get some increase in CSO funding, which is good. I think also the change that we haven't spoken about on this call is the change to the floor and putting a full price into the agreement and reduction of the ceiling. And that gives the business some certainty going forward. Because of the impact of PBS reforms, there were more and more items going into the lower pricing bracket. So it was important for the whole -- not just us, but for the whole industry to achieve a PBS floor price, which we have. So that's a floor price of $5.50, which equates to $0.41. In order to achieve that certainty, we've had to sacrifice some margin by reducing the ceiling price, right? So we did that. So -- but that -- the impact of that is more medium to longer term, Stephen, right? So that gives the -- that won't -- that will have actually a negative profit impact in FY '21, but should provide the business with more business into the medium and longer term, and that was why that was important. So from our perspective, we got a positive outcome of the 7 CPA, right? We got some additional CSO funding, which we believe was well overdue. And we've got some certainty for the business model going forward into the medium, longer term, right?

Your next question comes from Mathieu Chevrier from Citi.

Just on the -- sorry, I missed the CapEx number. Was that $35 million?

That's correct, Mathieu. Yes, that's the sort of number we've got in our minds going forward in the short to medium term.

Excellent. And just on the D&A, would you be able to provide some kind of guidance for FY '21?

I think we might expect a little bit of decrease just with the unwind of the acquisition accounting amortization that came through from the Symbion acquisition. So not material, but a little bit of an unwind from that, that should start to cease in the next couple of years.

All right. In terms of the M&A contribution to revenue and EBITDA for FY '20, would you be able to quantify it?

On revenue, it was negligible, right, in terms of the growth rate. But on the EBITDA, it's about 1%, wasn't it, Leonard?

Yes.

About 1% in growth. About 1% of the growth, right?

Yes. Got you. And in terms of the Animal Care margins, obviously, they've come off as well in FY '20. I was wondering if you could give us a bit of color as to why and what you're expecting also in FY '21.

I think there was a slight decline in FY '20, Mathieu. But that was largely as a result of the strong performance from Lyppard, which is a lot -- is a wholesaling business, which is a lower margin to the branded portfolio, right? So that was the main driver there. But we'd expect those margins to be pretty constant going into FY '21.

All right. That's helpful. And just on the Chemist Warehouse contract, you were expecting revenue of circa, I guess, $1 billion. Is that largely in line with your expectations? And when it came to the growth that you've seen throughout the year, was that also, I guess, in line with your expectation?

Yes, it was. Just broadly speaking, we said we'd get revenues of approximately $1 billion from Chemist Warehouse, and we get returns commensurate with our group threshold return levels. And at the end of the year, we've basically achieved that. So we're comfortable with the contribution that we made there and the returns that we were able to generate from that contract.

Great. And just finally, you saw one of your competitors has done a sale and leaseback of one of its facilities. Is that something that you would eventually look into?

Not necessarily, Mathieu. I think we're in very different capital positions to others and very different businesses, if you like, as well and different cash flow ability. So the group is not capital constrained at this point in time, so that's not something on the near-term horizon for us.

[Operator Instructions]

I think, Christian, if we've got no further questions, we may end it there.

Okay. There are no further questions from the phone at this time.

Okay. All right. Well thank you, everyone, for your participation this morning. Thanks for your interest in EBOS Group. And with that, we'll say farewell. Goodbye.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for participating. You may now disconnect.