EBOS Group Limited (EBO) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the EBOS Group Limited Fiscal Year '26 Half Year Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, the 25th of February 2026. I would now like to hand the call over to your first speaker today, Mr. Martin Krauskopf, Chief Strategy and Corporate Development Officer, EBOS Group. Please go ahead, Martin.

Good morning, everyone, and thank you for your attendance today. My name is Martin Krauskopf, Chief Strategy and Corporate Development Officer. I'm joined today by Adam Hall, our Group CEO; and Alistair Gray, our Group CFO. Before commencing, I'd like to draw your attention to the disclaimer on Page 2 of the presentation. The results are expressed in Australian dollars, unless otherwise noted, and the presentation refers to both statutory and underlying results. The commentary this morning is predominantly based on our underlying results, and a reconciliation is included in the appendix. I'll now hand over to Adam to take you through today's presentation.

Thank you, Martin. I'm pleased to walk you through EBOS Group's half year '26 results and the momentum we're building for FY '27 and beyond. I have 3 key themes I want to focus on today. First, our FY '26 guidance is reaffirmed. We said at the start of the year that we expected cost stabilization through the first half, and that's exactly what we're seeing. The group underlying EBITDA increased to $300 million, consistent with the guidance range we set and 48% of the midpoint of the reaffirmed FY '26 guidance range. Within that, Healthcare EBITDA was up 1.3% to $254 million, driven by strong revenue growth and disciplined cost management, even with mix pressure from continued growth in high-value medicines and the DC renewal program. Animal Care EBITDA grew 15.1% to $68 million, reflecting branded strength in new product innovation as well as the contribution from recent acquisitions. Second, we've maintained our disciplined approach to capital allocation. The DC renewal program is progressing to plan. Kemps Creek is our largest and most complex site in the program. We're pleased it's now fully operational and performing well with productivity continuing to ramp up. The remaining Perth, HCL and Auckland Onelink sites are on track to come online in the coming months. Our balance sheet remains strong with leverage within our target range. With our current capital cycle coming to an end, leverage is expected to reduce in FY '27 as EBITDA is expected to grow and CapEx steps down by about 30%. We also deployed $70 million in the half in bolt-on acquisitions, strengthening medical technology and expanding our pharmacy reach with our majority investment in the MediAdvice pharmacy franchise. We're pleased with the early trading results on each of these as well as their future prospects. And finally, my third and last focus area this morning is that we remain well positioned for FY '27 and beyond. Our revenue momentum continues through network growth, innovation and regional expansion. Our margin outlook is positive, driven by the productivity uplift as the new DCs reach steady state, ongoing new products and these synergistic acquisitions. From FY '27 with peak investment behind us, cash flow is expected to improve. As I said, CapEx is expected to be around 30% lower and D&A and interest normalizing on a more stable asset base, we create the headroom to both delever and reinvest for growth. Let me turn to Slide 4 and bring the numbers together for you at a glance. As I touched on earlier, our FY '26 EBITDA guidance of $615 million to $635 million remains unchanged. I'll step through the detail on the next couple of slides. Our revenue grew 13% to $6.8 billion in the half, reflecting continued momentum across Healthcare and Animal Care. We're seeing strong volume growth, sustained customer demand and contributions from the investments we've made. Underlying EBITDA increased $300 million, up 3.2% and underlying NPAT was $125 million, down slightly as expected given the DC capital renewal program and the timing factors we've called out. At the statutory level, NPAT was also $125 million, which is up 13%. Our leverage sits at 2.2x within our target range. This remains a comfortable position for us, especially as we reach the end of the current capital cycle and as I said, CapEx steps down next year. Underlying EPS came in at $0.614, reflecting the transitional impact of our current investment. And we're pleased that the Board has maintained the interim dividend at NZD 0.57, consistent with last year and supported by the underlying strength of our business. Finally, ROCE is 12.9%, impacted by the important investment in DC renewal program and driving ROCE remains a key priority for the entire team with a long-term target of 15%. Now let me turn to the operational performance behind those numbers on Slide 5. Community Pharmacy had pleasing revenue growth, driven by demand for GLP-1s and high-value medicines. Retail pharmacy brands continue to expand the network and enhance in-store experience with more digital screens, more in-store care delivery and healthy same-store trends. In Institutional Healthcare, we continue to broaden our offering of medicines and consumables, adding the latest high-value medicines and supporting ongoing growth across hospitals and specialist care. Medical Technology also had another strong half, supporting more than 4,000 spinal cases across ANZ, expanding into new therapy areas and delivering strong growth in biologics through new solutions launched as well as our expanded platform. Our Contracts Logistics business delivered excellent growth was up double digits, supported by new principal wins in both Australia and New Zealand and the progressive uplift in capability and capacity from the DC renewal program, including further cold chain storage. And finally, Animal Care again showed why it's such an important part of the group. Branded products performed well, particularly Black Hawk, VitaPet and our Chunky Dog Roll in New Zealand, which was supported by new product development and compelling customer propositions. In Vet Wholesale, we continue to see share gains and solid progress integrating SVS, which is tracking as planned. Let me now speak to our guidance and how the half positions us for the full year on Slide 6. As I've mentioned a few times now, underlying EBITDA for the half was $300 million, and we remain on track for delivery of the full year guidance of $615 million to $635 million. Underlying D&A came in at $67 million, which is in line with our expectations, and it reflects the investments that I've referred to. Net finance costs were $58 million, and our expectation is that we'll finish the year at the very top end of the guided range, reflecting the higher Australian cash rate, plus $1 million to $2 million of additional funding costs associated with bringing new M&A into the fold. Our effective tax rate was 27.5% and in line. CapEx was $70 million for the half, and our full year view on CapEx is unchanged for the initial scope. The only adjustment this year is a workplace health and safety uplift to harmonize our approach to push through risk across our warehouse fleet. Bringing this together, all guidance metrics are marked as on track, and that's how we feel about the year. We've stabilized costs in the first half. We're seeing utilization improve, and we're reinforcing the operational momentum we need to deliver the full year result. If I look ahead to the next half and to 2027, I can summarize it on Slide 7. Starting on the left, the second half of FY '26 is very much about growth acceleration. We'll annualize the impact of the acquisitions we completed in the first half, and we expect ongoing growth in GLP-1s and high-value medicines. Retail Pharmacy Brands is expected to keep expanding the network, and we're seeing more momentum in contract logistics with new principal wins. On margin, we're expecting continued productivity uplift as our new DCs ramp up and come online. Kemps Creek, in particular, is already showing productivity gains, and our customers are excited for the new Perth HCL facility to come online. We're also benefiting from growth in higher-margin businesses like Medical Technology, which have now fully integrated the Pacific Surgical and MLex acquisitions made last year. Interest D&A growth remains elevated in the second half as the current capital renewal cycle comes to an end. From a cash perspective, we're just a few months away from completing the peak investment phase in the next half. Working capital cadence should also begin to normalize as the transition activities ease. So for the second half specifically, we remain comfortable with the underlying EBITDA outcome of $315 million to $335 million. Now the second column on this slide is about the ongoing growth momentum and improved cash flows. Revenue growth remains a key priority for the business. And the call-outs here are sets of our divisional strategies, which I'll expand upon later as well as forming the basis of our upcoming Investor Day. Margin improvement should continue through FY '27 as the DC network reaches steady state. This means better throughput, lower labor intensity and more efficient logistics. We're also expecting to see mix and CSO uplift benefits in Community Pharmacy, supported by disciplined commercial execution. On the P&L, we are also expecting that FY '27 marks the point where D&A and interest begin to normalize. The heavy capital lifting is done, and we'll be operating on a more stable asset base. CapEx reduces by roughly 30%. That's a major shift and a key driver of improved cash flow. Together with EBITDA growth, this supports deleveraging and gives us the capacity to reinvest in high-return opportunities in a disciplined way. Let's move now into the Healthcare segment on Slide 9, which delivered another solid and disciplined half. Revenue was up 11.1% and GOR grew 7.3%, which is a pleasing result, reflecting new customer growth, ongoing demand for GLP-1 and high-value medicines, expansion across retail pharmacy brands, continued growth in medical technology and contributions from the acquisitions we completed last year. On margins, high-value medicines continue to accelerate. This is -- there is a slide in the appendix that lays out the rapid rise in this category. Due to the higher revenue associated with high-value medicines, there's an arithmetic decline in GOR percentage margin, but in an absolute sense, we gained GOR dollars. There's also been ongoing competition in community pharmacy through the half. These margin headwinds were partly offset by continued strength in medical technology and in the TWC network. A real highlight in the half was cost discipline. OpEx increased with volume. But importantly, OpEx as a percentage of revenue was flat with PCP and improved by 30 bps compared to the second half of FY '25. This is a pleasing result given we're still in the ramp-up phase of the major facility at Kemps Creek. EBITDA increased 1.3% to $254 million. That reflects a very solid top line performance balanced against the temporary commissioning costs and competitive dynamics in Community Pharmacy. As we move through FY '27, we're expecting the FY '26 cost impacts to unwind and the productivity picture to strengthen. Let's move into Community Pharmacy detail on Slide 10. Here, revenue grew 14.8% and GOR increased 7.5%. This was driven primarily by sustained demand for GLP-1s, which continue to -- and high-value medicines, which continue to reshape volume and mix across the sector. The corollary of the demand growth for these medicines is that core margin was lower, declining 60 basis points. When we set our FY '26 guidance, we were clear that competition in the pharmacy wholesale market was likely to remain elevated. What's pleasing is that we've also retained key customer contracts in what is a competitive landscape. That reflects Symbion's service, the reliability of our network and the service levels the team delivers. So despite the competitive settings, the fundamentals in the business remain solid, and we feel well positioned ahead of the CSO uplift, which is just a few months away. Turning now to Retail Pharmacy brands on Slide 11. This was another standout performer in the half. The network continues to grow and same-store performance remains strong. Across the TerryWhite Chemmart network, sales reached $1.5 billion. That's up 9.8% on the prior half. What's particularly pleasing is the like-for-like growth of 8.8%, showing that existing stores are performing strongly and consistently. There are other pharmacy networks with other value propositions, but it's clearly that the TWC care focused proposition is one that customers love. Dispensary sales were a real highlight, up 11.5% with like-for-like growth of 10.4%. This is a very strong signal of customer trust, pharmacist engagement and the strength of our care-focused model. During the half, we also acquired a majority interest in MediAdvice, a pharmacy management group with around 80 pharmacies in New South Wales. They are a terrific set of pharmacists, who have a similar set of values to TWC. We bring them enhanced expertise in merchandising, in-store and out-of-store media. We're pleased that one additional store joined post acquisition as well in Tasmania. I should add those 80 pharmacies are predominantly in New South Wales. When you add everything together, our retail pharmacy networks now include 782 stores, and we grew by 89 net new stores in the half. A big part of what differentiates us is our role in community care. TerryWhite Chemmart delivered a 20% growth in flu vaccinations and now has 104 pharmacist prescribers across the network. That represents about 1/3 of all full scope pharmacist prescribers in Australia. It's an important capability for us, and it continues to grow. Our Consumer brands also had a very good half. The range now includes over 300 products, and our value-focused offering continues to resonate strongly with customers, especially as households look for dependable, high-quality options. On the digital side, we're seeing great traction. The TWC Connect, Retail Media program ramped up significantly with 200 new screens installed across 100 pharmacies, and our digital engagement continues to grow. We saw 817,000 online transactions in the half, up about 39% over the prior comparable period. Overall, retail pharmacy brands continues to be a real strength at EBOS. Let's turn now to Institutional Healthcare on Slide 12, which delivered a solid result for the half. Here, revenue grew 3.4% to just over $2.2 billion, with GOR up 5.8% Core margin expanded 30 basis points to 15.6%, reflecting the growth in Medical Technology. And in Medical Technology, revenue was up 12.1%, supported by sustained momentum across spine and implant channels, urology, neurosurgery and neurovascular procedures. And acquisitions played a strategic role, which I'll talk about shortly. We also saw resilient demand for capital equipment in ANZ, even as some markets in Southeast Asia saw softer capital sales. Biologics continued to grow well. Our allograft solutions have seen strong organic demand, and we're now building momentum in the United States through the Origin platform. On the medicines and consumables side, revenue grew 2% with high-value hospital medicines contributing positively, offset by softer conditions in consumables during the half. This is what we've been seeing across the sector and aligns with our expectations. We've also continued to strengthen the division through selective acquisitions. AlphaXRT expanded our presence in radiation oncology and Precision Surgical deepened our spine offering in the New South Wales Central Coast region. Together with organic growth, these bolt-ons broaden our footprint and enhance the clinical capability that we bring to surgeons and patients. Let's turn next to Contract Logistics on Slide 13, which delivered a very strong performance for the half. Here, GOR grew 13.5%, reflecting strong principal wins across both Australia and New Zealand. This is a business where our investment in infrastructure and systems is really showing up in customer outcomes. We're demonstrating reliability, speed, temperature control and healthcare-specific compliance, which are all differentiators for us. In Australia, GOR was up 26.3%, driven by meaningful net new principal wins, a further expansion of our cold chain storage, which remains a critical capability and ongoing investment in our DC footprint and systems. In New Zealand, we also had a very strong half. We also secured new principal wins supported by the capabilities we've built into the network, including our unique temperature-controlled unloading facility, which continues to resonate with customers. Let's now turn to Animal Care on Slide 15, which delivered another strong half and continues to be one of the group's most exciting growth engines. Here, revenue was up 48.3% to $451 million, reflecting the combination of strong branded performance and the contribution from SVS. Even if we strip out SVS, revenue grew 5.5%, which shows the underlying momentum in the portfolio. On the branded side, revenue grew 5.8%, supported by successful new product development, including the new Black Hawk freeze-dried and air-dried ranges, which are performing ahead of expectations. Black Hawk and VitaPet both continue to gain incremental shares, and we're seeing good traction across multiple channels. Our dog roll categories also performed well, led by the Chunky brand as our consumers are looking to feed their dog quality, nutritious, affordable food. Wholesale revenue doubled in the half and GOR grew by 17% as we integrated SVS, and we're also seeing share growth across the part. SVS is performing as expected. It's added scale to our portfolio and strengthened our offer to veterinary customers. It's worth noting that this acquisition has changed the margin profile of the Animal Care business, limiting the direct comparability to H1 of '25. EBITDA grew 15.1% to $68 million, supported by acquisitions, those share gains and innovative new product development, which is enhanced by our in-house manufacturing capabilities. I'm now going to hand over to the EBOS CFO, Alistair Gray, to talk through the financials in more detail.

Thank you, Adam. I'll now take you through the group financials for the half. Group revenue increased 13% to $6.8 billion, and GOR increased 8.6% to $868 million. This reflects continued strong organic growth across both Healthcare and Animal Care as well as the positive contribution from acquisitions. Underlying operating expenditure was well controlled and increased in line with higher volumes with some impact from transition activities. As a percentage of revenue, OpEx improved by 30 basis points compared to H2 FY '25 and 10 basis points compared to H1 FY '25. Underlying EBITDA increased 3.2% to $300 million, with both Healthcare and Animal Care delivering solid growth. Depreciation and amortization increased to $67 million. This is consistent with guidance and reflects the capital investment in the DC renewal program, which I will return to shortly. Net finance costs increased to $58 million with higher lease interest and funding costs associated with the DC renewal program. Underlying NPAT was $125 million compared with $131 million in the prior period, in line with expectations and reflective of transitional impacts. Statutory NPAT, however, increased 13% due to a reduction in net nonrecurring costs compared to last year. Now turning to capital management on Slide 18. Overall, our capital position remains strong with significant liquidity available. Capital allocation continues to be disciplined, aligned to our growth strategy and with a focus on opportunities to improve return on capital employed. I will talk to each of these key elements on the following slides. As mentioned, the group balance sheet and liquidity remains strong with approximately $930 million of undrawn committed bank facilities and ample covenant headroom. The leverage ratio was 2.2x, which remains within our target range and is consistent with the investment in the DC renewal program. In FY '27, as CapEx falls and with the anticipated growth in earnings, we would expect leverage to reduce. During the period, we also successfully refinanced part of our debt facilities, extending the weighted average maturity to 3.3 years. Now turning to cash flow on Slide 20. Net working capital continued to be tightly managed, increasing by $84 million in the period, broadly in line with the strong growth in revenue with some impact from DC transition activities, which are expected to moderate in the second half. Cash flow in the half is lower than is typical due to prior period one-offs. This impact is temporary in nature with cash flows in the second half expected to revert to normal levels. Capital expenditure was $70 million, in line with previous guidance. This is expected to reduce by circa 30% in FY '27 on conclusion of the DC renewal program. Now turning to the DC renewal program on Slide 21. As previously shared, the DC renewal program will deliver capacity expansion, automation efficiencies and improved national coverage. Moreover, as the sites reach steady state, we expect to see reductions in duplication, improved throughput and lower labor costs. In terms of program status, 6 of the 8 distribution centers have now been completed with the largest and most complex site, Kemps Creek, operational from October. This site was delivered both on time and on budget and is performing in line with expectations. The remaining 2 sites are on track to be operational by the end of FY '26 with optimization work expected to continue into the first half of FY '27. In summary, the DC renewal program is nearing completion with the focus shifting from successfully commissioning the assets to optimizing productivity and maximizing utilization. I'll now provide an update on our organic investments. Consistent with our strategy, acquisitions continue to deliver value for the group. During the half, we completed several transactions, all aligned to our core segments and growth priorities, strengthening our presence across Medical Technology, Animal Care and Retail Pharmacy Management. Collectively, these accounted for upfront payments of approximately $70 million with each transaction expected to be EPS accretive immediately and will support ROCE expansion in the medium term. The acquisition pipeline remains active, and we will continue to apply a disciplined approach to any future investments. Now turning to Slide 23. Reflecting the Board's confidence in the future growth prospects of the group, the Board have declared an interim dividend of NZD 0.57 per share. This represents an underlying payout ratio of 82% and will be imputed to 25% for New Zealand tax resident shareholders and fully franked for Australian tax resident shareholders. The group's dividend reinvestment plan, which has been strongly supported by shareholders previously, will be available for the FY '26 interim dividend. Shareholders can elect to take shares in lieu of dividends at a discount of 2% to the volume-weighted average share price. I will now hand back to Adam to conclude today's presentation.

Thanks, Alistair. On Slide 25, we lay out some perspectives, both for the remainder of FY '26 and as we move into FY '27 and beyond. In the near term, our focus is clear. We've reaffirmed our EBITDA guidance for the year, and we expect further improvement in the second half as productivity lifts and utilization continues to build in the new DCs. The final stages of the DC renewal program are progressing well and each site and as each site reaches steady state, we benefit from better throughput, lower duplication and improved reliability. Looking further ahead, we have strong sector dynamics and aligned digital strategies that support, firstly, a more efficient, high reliability Healthcare distribution network; second, continued network expansion and margin opportunities in retail pharmacy brands; third, a growing portfolio in medical technology across ANZ and Southeast Asia as well as new allograft solutions coming to market. And finally, a scaled, branded manufacturing-based animal care business that's positioned to keep delivering. Our margin outlook from FY '27 is positive. That reflects 3 things: First, improved productivity as the DCs reach steady state, increased utilization across the network and a favorable margin mix from our businesses. A key milestone for us is that FY '26 represents the peak of the current investment cycle. From FY '27, as I've mentioned, CapEx will reduce by around 30%. D&A and interest will begin to normalize, and we expect a much stronger conversion of earnings to cash. That, in turn, creates real headroom. That allows us in turn to delever, to keep investing prudently and support shareholder returns over time. When we bring it all together, the picture is clear. EBITDA -- excuse me, EBOS remains a defensive growth company, supported by long-term sector fundamentals, a diversified portfolio and a terrific set of growth opportunities. We're focused on care, productivity and partnerships that underpin our role across the Healthcare and Animal Care ecosystem, and all of this drives strong and sustainable returns for shareholders. If I could finally bring together the strategic foundations on Slide 26 that support our medium- and long-term growth outlook. It's a good reminder that the momentum that we're seeing isn't accidental. It's driven by the favorable sector dynamics and deliberate strategies for each of our key divisions. Across our markets, we continue to benefit from favorable sector dynamics that are both durable and broad-based. We're seeing populations aging, increased pharmaceutical and medical spend and greater complexity in Healthcare that requires reliable, specialist partnerships. In Animal Care, the trends are equally supportive. Pet ownership remains high and the humanization of pet care continues to drive growth in premium nutrition and specialist supply chains. And importantly, funding frameworks in Healthcare remain stable, providing a solid demand backdrop. Each division is tightly aligned to these sector trends and is executing a clear strategy to capture the opportunities they create. In Symbion & Healthcare Distribution, the focus is being on a highly efficient cost leader. In Retail Pharmacy brands, our strategy is to grow and enhance the network while steadily improving margin. In Medical Technology, the strategy is to keep building out our ANZ and Southeast Asia presence across priority therapy areas while strengthening our differentiated biologics offering. And in Animal Care, we're scaling our hero brands across Australia, New Zealand and Asia while expanding our manufacturing footprint and accelerating our presence in vet wholesale. We're looking forward to unpacking each of these strategies for you in detail at our Investor Day on the 30th of April as well as the critical role of the corporate center. The key message here is that we're operating in sectors with long-term momentum, and our strategies are tightly aligned to capture that growth. This makes EBOS well positioned for the years ahead. I thank you all very much for listening this morning. I'll now hand back to the operator to open up the line for questions.

[Operator Instructions] Our first question comes from the line of Matt Montgomerie with Forsyth Barr.

Just checking, you can hear me okay?

We can hear you loud and clear, Matt.

Perfect. Maybe just first one for you, Alistair, around the EBITDA in the first half. And I note, I think on Slide 32, 33, there's $20 million of restructuring and site transition costs that have been added back to EBITDA versus $10 million in the first half of last year. So I guess my follow-up to that is twofold. One, I guess, what do these costs actually relate to? And then secondly, to what extent should -- are these factored into the second half and the guidance that was reiterated this morning?

Yes. Thank you for the question, Matt. And I believe you're talking about the one-off costs. So at a total level, we had a one-off gain in the period of $2 million. Within that, there was a few elements. The restructuring and site transition costs you referenced, they have increased from $10 million in the prior period to $20 million this year. And these really reflect the continued delivery of the DC renewal program and in particular, the largest of the DCs, which were delivered in the period of Kemps Creek. As we look forward, we would expect some reduction in the second half post completion of the Kemps Creek transition, then we would expect them to materially reduce from FY '27 and conclusion of the DC renewal program.

Yes. Okay. So they mainly relate to sites transitioning presumably on the back of Chemist Warehouse contract change, et cetera, as opposed to out and out restructuring?

They relate to the DC renewal program. That's right, Matt. So it relates to the site closing and opening. So for example, with Kemps Creek, we have make good costs associated with the exit of the existing site and costs associated with the setup of the new site. So that's absolutely right. That's what they relate to.

Cool. And then just one more on recent trading. I sort of appreciate the slide that you've given around second half and then into '27, which is more qualitative in nature. I was just wondering if you could comment maybe a bit more quantitatively, Adam, in terms of I guess, the step-up in growth that's going from circa 3% at the EBITDA line to around 10% at the midpoint of your guidance. Like is there anything you can call out December, January, February? And then specifically, I guess, the margin profile within that, which does assume a reasonable step-up in Healthcare margins from the first half?

Yes. I really appreciate the way there, Matt. You've referred to Slide #7 and the second half of 2026 in the left-hand column. That's where we've tried to lay out why we're so confident in reaffirming full year guidance of $615 million to $635 million. We acknowledge that it is a step-up H1 to H2. But we do get the benefit of the Kemps Creek facility for a full half and productivity continues to ramp week by week there. We also get the benefit of the full half of the -- the acquisitions that we made late in the half just gone. We also start to see a continued support from the high-margin businesses like EMT and Animal Care, including the recent freeze-dried, air-dried treat launch in Black Hawk, which has gone very well. And then finally, we continue to be heartened by the level of cost discipline and cross-divisional opportunities in the business. We're seeing again and again the different EBOS divisions able to cooperate in order to get a better outcome in operating their warehouses.

Our next question comes from the line of Adrian Allbon with Jarden.

Just within Community Pharmacy, I was just wondering, can you give us an update like in terms of -- like do you have any -- I think in the second half of '25, you had a decent amount of sort of repricing activity that you undertook. Have you got any major groups that are repricing, I guess, or have repriced in the first half and are due to reprice in the second half, like including the TerryWhite Group stores?

Yes. Thank you very much for the question. We signaled at the full year results that we had seen FY '25 have a surprisingly high or disproportionately high number of recontracts in FY '25. In the first half of '26, the contrast has been true. We've seen a fewer number of recontracting. Competition has continued, but our market share has been stable. There's been some wins and losses around that, but it's been stable and there's no major changes in H1 of '26, and we would see that continuing through the second half of '26. Importantly, what I think we are looking forward to is, of course, what I think you were alluding to, the 1st of July when the CSO uplift kicks in. So that's a pool margin of $78.6 million that's available to the pharmacy wholesalers. -- split on their share of PBS units, which our share is about 29%.

Okay. Just related to that one is what's the strategy for this new group in New South Wales? Is it -- do you leave in a stand-alone sort of banner? Or are you going to shift them to TerryWhite?

That's a great question. So MediAdvice is a terrific banner that has sort of -- and the pharmacists have a very similar set of values to the TerryWhite system, but they are also probably a little more independent in how they relate to their communities. The opportunity between the 2 groups is really interesting. We're able to bring merchandise expertise such as deals with suppliers. We're able to bring in-store merchandising like end caps, out store marketing such as retail media. And so that's a real synergistic opportunity for the 2 groups to work together. I don't think that we'll change the -- we're not going to convert those pharmacies, but rather think of it as an additional care-focused offering in our portfolio to the community.

Okay. That's helpful. Just maybe the next question just for Alistair. In terms of the Healthcare segment, the noncore OpEx, which I think was $490 in the first half, and that was like a major -- it was a surprise factor, I guess, for us in the second half of '25. Like are you able to isolate or help us isolate what sort of productivity improvements you are expecting like on a 12-month view in that sort of number? Like is it that you sort of avoid -- you offset inflationary type stuff? Or do you expect the number to go down? Or are you expecting -- just give us a sense of what that looks like?

Yes. Certainly, Adrian. I mean, as we touched on through the presentation, OpEx continues to be tightly managed and as a percentage of revenue has improved in the period. What we are still seeing is some impact from transition activities and our fairly typical level of inflation. The improvements period-on-period are somewhat related to the phasing of the transition activities, and we still think that -- or we believe that the productivity improvements are still to come by and large. So we would expect to see them continue to improve through the second half of this year and then continue into FY '27. So our focus very much shifts from deploying the assets and commissioning the assets to optimization. And as I said, we expect to reach steady state through FY '27.

Okay. And just -- I mean just for Albina. Am I still there?

You're still on, Adrian. I think I'm confident you might be more than 2, but why don't you finish off?

I just have this one in terms of like maybe as a percentage of sales is the right way to think about that cost bucket, would you -- there was obviously a reasonable time series of it sort of in the low 7s and then it jumped to 8 at the second half '25. Are you -- like should we expect that to sort of moderate down into the low 7s in terms of that OpEx bucket as you hit this productivity and you move to a more steady state kind of environment?

All I can say at this point, Adrian, is we're coming to the end of the DC renewal investment period. There is a material uplift in productivity that is expected as an outcome of that program, and we'll no doubt more to say on that as we move forward.

Our next question comes from the line of Stephen Hudson with Macquarie Securities.

Just a couple from me. You've commented there on the changes to the -- or the increase to the cap for high-value medicines from July this year. I know there's some other changes going on in the CSO funding pool and the actual percentage margin as well. It looks quite complex, but I just wondered sort of your overarching view on whether or not that's a meaningful boost to your GOR margin moving into FY '27 for Community Pharmacy?

Yes, that's a terrific question. So as you've just mentioned, on the 1st of July, there will be a series of changes to the different parameters that lie within the funding pool. So for example, as you've just mentioned, the cap on high-value medicines will increase, but some of the tiering of the medicine categories will change and the reimbursement for some of those tiers will also change. The important thing to take away is mathematically, those parameters should all tread water they should all offset each other with the addition being around the CSO funding pool that I mentioned earlier of $78.6 million. That's the key focus of, if I can call it, new money available to the pharmacy wholesalers. And it's intended by the federal government to do that to reflect the investments that the pharmacy wholesalers have made to support high-value medicines and support the investment in cold chain and Section 100 supply that we've had to make. Importantly, that $78.6 million is linked to inflation. So that gives us -- or CPI that gives us confidence going forward. So Stephen, I apologize, that was a long explanation, but coming back to the number of your question, the right way to think about the GOR margin impact from CSO is to model out the impact of the $78.6 million into the industry.

That's super helpful. Just a follow-up, if I may, for Alistair. Just on working capital, it looks like inventory sort of built half-on-half by about $100 million. I'm conscious that the investment in your DC network is sort of in the 3PL space. So presumably assets that don't hold your inventory, if you like. Could we expect a sort of a release of working capital into the second half from the sort of elevated levels that we've seen this half?

Yes, it's a great question, Stephen. Thank you. So you're right. Net working capital increased by $84 billion. which was broadly in line with revenue, but there was some impact from transition activities. So net working capital days increased slightly in the period. These are temporary in nature, and we would expect them to unwind in the second half and expect to see an improved net working capital position in the second half versus the first.

Our next question comes from the line of Daniel Hurren with MST.

Look, just looking at pharmacy in particular, our pharmacy revenue 15%, TerryWhite 10%. I was just hoping you could talk to organic growth across the entire organic -- across the entire Community Pharmacy segment. Just trying to understand the acquisition contribution and I guess also the performance of TerryWhite against the broader market. And I guess the background here is Priceline sort of in the -- sorry, in the Wesfarmers Priceline gave some sort of like-for-like. So we're thinking about that as a bit of a benchmark.

Sure. I think we're focused on a slightly different value proposition, which is the care-focused value proposition. You saw that like-for-like store sales 9% and Alistair, I believe it's 11% for the dispensary or might be 10.5% for the dispensary. I think that indicates continued strength in of that TerryWhite positioning on care. Maybe if I could add one point, it would be around myTWC. So we've seen, as we sit here today in February, 1 million transactions in the financial year-to-date. And I think what's interesting is we're seeing the number of repeat purchases grow. So once people start entering the myTWC app, they really enjoy it, they stick with it. They're using it to help manage their care for themselves or their family. So I think that proposition is resonant with the consumer. It's something that I think will continue to yield benefit in the future that as Healthcare gets complex, as we have an aging population, people are going to continue coming to TerryWhite, both online and offline to support their care.

Understood. And just going back to the 15% pharmacy segment, TerryWhite 10. So I mean, what's the acquisition contribution there? I guess we're trying to understand what's your Pharmacy business growing at overall ex acquisitions?

Okay. So the acquisition of MediAdvice in the half, I don't think was a meaningful change in the overall growth rate. That was not a contributor. Otherwise, we would have broken it out. So I think I'm now understanding your question, I'm sorry. The growth rate that you see there, I think that is accurate. You shouldn't necessarily need to adjust that for MediAdvice.

Our next question comes from the line of Stephen Ridgewell with Craig Investment Partners.

First question is just on -- just to follow up on the comments you made, Adam, on the level of price competition in the pharmacy business in response to Adrian's question. I mean just to be clear, did you see any evidence of those price pressures kind of easing as you exited the half and perhaps early into this year, are they about the same? Are the signs are getting better? And then I suppose, relatedly, is the full impact of those competitive pressures on your core margin in the numbers in first half '26? And should we be expecting kind of core margin to decline from here? It's really the question because I guess the concern would be you've seen some of the book roll off in 2025, there's obviously been more competition post Chemist Warehouse and EBOS gaining market share and others trying to win those accounts, partly also related to the step-up in CSO subsidy. As we see the book roll over, as some of these contracts expire, are we going to see continued price pressure as some of these other older contracts expire and reprice, if you like? Or do you think we're done here in terms of those competitive pressures coming through in the numbers?

Yes. I think the -- we can only speak to our own book. We saw, as I mentioned before, less turnover in the book in H1 of '26, and I think less turnover in H2. So our market share is stable at the moment. The competition is ongoing. I think the -- so in terms of degradation of percentage margin from some major change in our contract book, no, that didn't occur in H1. I think importantly, the customers that we are winning, they are drawn to the Symbion reputation for reliability and quality of service. And I think the opportunity for us going ahead is actually productivity. Kemps Creek is now online. We're ramping up productivity pleasingly. And I think that gives us an offset against any sort of competitive margin pressures in the future. Alistair, is there anything that you would add to that?

I think you've covered it well. Like we take a very disciplined commercial approach to any contract renewal or contract bid, and we've continued that unabated through the half and clearly intend to do so as we look forward.

Okay. And then just maybe on the contribution from acquisitions, some of which seem kind of relatively new. I guess just on the back of those acquisitions, did you consider perhaps either upgrading the EBITDA guidance range or at least bringing up the bottom end of the range. Otherwise, it's possible to interpret the guidance reiteration is a slight downgrade at the midpoint on a like-for-like organic basis. And perhaps you could split out for us within that FY '26 guidance, how much organic growth you're expecting across the group and then the contribution from acquisitions that have been announced to date?

Alistair, do you want to start and then I'll finish up.

Of course. While it might not feel like it to you, Stephen, I think we would see the EBITDA guidance range is quite narrow, ranging between 6% and 8%. We do remain confident in achieving that range, it should be said. As we've discussed, half 2 will benefit from clear locked-in drivers such as the H1 acquisitions that you mentioned, improved productivity and reduce transition-related costs. It must be said, our forecast for the full year EBITDA remains materially unchanged from when we set the guidance in August. There's clearly a lot of moving parts in the network, and that really is a testament to the way that the team have been able to execute through this transitional period. We are confident in our guidance. We're confident in the uplift in H2. And as I said, we haven't materially changed that outlook.

Yes. What I'd add to that, well said, Alistair, is the incremental change in capital since we last spoke is $27 million. So it's not a particularly meaningful change on the capital deployment. And so I don't think there needs to be any change to the guidance. Again, $615 million to $635 million, 6% to 8% underlying EBITDA growth, we remain comfortable with that.

Our next question comes from the line of Lyanne Harrison with Bank of America.

Can I come back to core margin again? I acknowledge what you said about the CSO uplift kicking in and supporting core margins in fiscal '27. But with the increases there matched to CPI, but high-value medicines growing faster than that. If we look further than that, that's going to place downward pressure on core margins. What can EBOS do to counter that deterioration further on?

Yes. I appreciate that question. I appreciate also that you're looking at that -- the CSO uplift coming towards us. As I mentioned in answer to a prior question, I think the response is twofold. Firstly, productivity. So that we spent a significant amount on the capital for the new DC facilities. Our best defense is to make sure that we are very much at the forefront of a productive way to dispense high-value medicines across the community. The second is the ongoing reputation that we have in the market for high quality and high service levels, preserving that, making sure that the pharmacists of Australia know that they can rely on Symbion as their premier distribution partner, that tends to give us an edge as well. So I don't think that we can say there's no competition expected, but I think what we can say is we are set up as well as we could be given our commitment both to service levels and the ability to put our new DCs to work.

Great. And can I ask -- this is probably a question for Alistair on operating costs and also the DC transition costs. So when you spoke about underlying OpEx at $491 million, you mentioned that there were some transition costs in there that will start to fall away. But then when you spoke about the, I guess, the bridge to underlying earnings, there was the add-back of transition costs. What's the difference between the 2? And what's the quantum? And how should we think about that going forward?

Yes. No, thank you for the qualifying question, Lyanne. So there are 2 components to the cost of transition. One are where we can separately identify costs. So there are specific one-off costs such as make good of sites or commissioning costs of sites, which we can quantify, we would then classify them as one-off costs and extract them. What we don't do is where you've got a site that's ramping down and a site that's ramping up, that will have an impact on overall productivity. It's that impact on productivity that is included in the underlying results. So as we get through -- or as we begin the second half and then in particular, into FY '27, that, of course, will end, and we would expect to get to steady state productivity in all of our sites.

Our next question comes from the line of Saul Hadassin with Barrenjoey.

Adam, can I just get you to touch on in the slides at the back, it talks about the non-PBS GLP-1 spend, and it's been commented on that, that is a significant part of retail pharmacy growth at the moment. You mentioned it as a significant growth opportunity. I was wondering if you could talk to the economics of a wholesaler and maybe a bit about the contract logistics as it relates to that -- the non-PBS part of that spend.

Yes. So look, -- let's talk about the past, let's talk about the future. As GLP-1s have hit the market, the ramp-up has been amazing. They're pulled through. There's obviously keen interest by consumers in GLP-1s. My understanding is that, broadly speaking, the U.S. penetration of GLP-1s is in the order of 2 to 3x the penetration of -- in Australia and certainly much higher than New Zealand, where GLP-1s were only introduced on the 1st of July 2025. So I think there's still a runway for consumer demand for those GLP-1s. Now at the moment, the GLP-1s need to be carried in cold chain. And this is where the DC renewal cycle has been fortuitous in the pre-wholesale stage, that's Healthcare, Logistics or Contract Logistics. We do have exceptional cold storage available. We've been a great partner to GLP-1 providers in Australia and New Zealand there. And we would see that ongoing into the -- then the wholesale stage, where, again, we have good cold chain availability and have been a good partner and have seen that category grow dramatically. On the far horizon, there's sort of 2 trends that I would see. I think there's an interest now in other metabolic medicines, which will also continue to use that cold chain capacity. There's also interest in a non-cold chain GLP-1 that's still multiple periods away. I don't think that's in front of us now, but we'll be ready for it when it occurs.

And can I just ask a follow-up to a previous question. Just to be clear, on the back of -- on the back of the acquisitions that were announced effectively today that were made at the back end of calendar year '25 and the move to consolidate Origin, just to confirm that the EBITDA contribution in second half is expected to be effectively immaterial from those businesses?

So it's probably not right to say that the EBITDA contribution is immaterial. But I mean, that clearly will underpin our stronger second half performance. What I would say though is really, as Adam said, we've deployed $27 million worth of capital. So that contribution isn't necessarily significant.

Our next question comes from the line of Marcus Curley with UBS.

Just going back to Community Pharmacy first, please. Could you just articulate how many new customer wins contributed to the revenue in the first half? I think you previously talked about a run rate number last year at about $540 million. I just wondered how much of that or if you can provide an update in terms of that number that contributed into the first half result.

I think the best way to think of it, Marcus, is that we held that. There were some minor wins, some minor losses, but we've held that number and the share has been held in the half, which we're happy with. The team have done a nice job to keep serving those customers.

Okay. And within the institutional business, one of your major competitors talked about losing the Ramsay contract, which is phasing out this half. Is that a contract which you've picked up? And if so, could you provide any comments on what that could mean for the business or that division in the second half?

Yes. We don't comment on individual contracts or customers. What I can say, and this is just echoing what I've said to some of the other questions, the customers in wholesale pharmacy, these are repeat customers and with a comparably sophisticated outlook. They balance price, service and reliability. And so if we were to win customers, it will be on the basis of those 3 together as a package rather than just one particular lever.

Maybe I can just rephrase that then. Have we seen any new competitors come into the wholesale distribution space for hospitals in the last 6 months or the next 12 months?

Yes. Thank you for clarifying that question. There's no -- there's been no change in the competitive dynamics in the hospital wholesale space.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Adam for closing comments.

If I could encourage you all just to turn back to Slide 7 of the materials as I sum up. In the second half of 2026, the firm sees the opportunity to accelerate the EBITDA growth on the basis of not just the growth in GLP-1s and high-value medicines that you've heard us talk about just now, but also continued expansion of our pharmacy network, principal wins in contract logistics and the handy contribution of the acquisitions we've made in the first half. We also see margin opportunity that comes through productivity. It comes through mix support as well as a reduced amount of one-off transition activities and the cost discipline programs that we have in place. In particular, we're able to reoptimize our pallet stack against the warehouse assets that we have in order to try and create a lower cost to serve from our facilities. Importantly, we're in the last months of our capital cycle. The multiyear capital cycle is coming to an end with the launch of the Perth HCL facility and the Onelink Auckland facility, and we'll be delighted when they are operating and serving customers, and we'll be looking ahead to a great FY '27. We thank you all very much for your attendance today.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.