EBOS Group Limited (EBO) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to EBOS Group Limited FY '26 Full Year Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, the 19th of August 2026. I'd now like to hand the call over to your first speaker today, Mr. Cameron Sinclair, Head of Investor Relations, EBOS Group. Please go ahead, Cameron.

Good morning, everyone, and thank you for your attendance today. My name is Cameron Sinclair, Head of Investor Relations. I'm joined today by Adam Hall, our Group CEO; and Alastair 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.

Thanks, Cameron. Good morning, everyone. There are 3 messages to take away from today's results. First, we delivered on our commitments while completing a major phase of investment. Revenue increased 9.9% to $13.5 billion and underlying EBITDA increased 5% to $614 million, both within guidance. We also completed our multiyear $360 million distribution center renewal program with all facilities now in operation. Second, each division has clear growth opportunities in FY '27 across [indiscernible] health care distribution, retail pharmacy brands, Medical Technology and Animal Care we have identified initiatives that support continued earnings growth. Each of these initiatives is underpinned by 2 common macro themes: strong underlying growth in care for an aging human and pet population, and EBOS' competitive advantages of scale and sector leadership. As we laid out at Investor Day, 85% of our EBITDA is derived from businesses where we are #1 or #2 in our sector. Third, we are not pausing. We continue to improve the portfolio with 2 great bolt-on acquisitions in the last 6 months and the capacity for more. You may recall over the last few years, we've deliberately shifted the portfolio towards higher-growth, higher-return businesses. In FY '26, we continue this theme with 8 bolt-on acquisitions that improve the quality of our portfolio. Now importantly, with about 30% lower capital requirements going forward, we have greater flexibility to continue investing in these attractive growth opportunities. Taken together, we enter FY '27 with earnings momentum, a completed investment cycle and additional capacity to deploy capital. The team have confidence in their ability to continue creating value for shareholders. Let me turn to Slide 4 and our financial guidance and metrics. At the start of the year, we set clear financial targets across EBITDA, capital expenditure, depreciation and amortization financing costs and leverage, and we've delivered on these as a group and in each division. Despite fuel costs and foreign exchange headwinds during the year, we delivered against our stated guidance ranges noting that EBITDA guidance was revised in April following the disruption in the Middle East. Just as importantly, we continue to make progress against the strategic priorities we outlined at our Investor Day. In Symbion and Healthcare Distribution, we've now completed the distribution center renewal program with all facilities operational. In Retail Pharmacy brands, we expanded the network with the acquisition of [ Mediavice ] we strengthened health care services capabilities and continue to improve digital transactions where we're up 30% and our own brand performance. In Medical Technology, we broadened our therapy product portfolio with 18 new supply partnerships, and we grew the business both organically and through targeted acquisitions. And in Animal Care, we expanded innovation, manufacturing and product development, including [ Kiwi Kitchens Triumph ] and return to the U.S. market. The next slide explains the key earnings movement during the year. You can see here that underlying EBITDA increased by 5% despite approximately $22 million of fuel and foreign exchange headwinds. Importantly, the underlying performance of the business remains solid, generating $50 million more in EBITDA. The fuel headwinds we called out during the half were contained through operational improvements, fuel levy pass-through and active contract management. The impact was about $5 million, which was at the lower end of our previous expectations. Also during the half, you'll have seen the Australian dollar strengthened against many currencies and hit a 13-year high against the New Zealand dollar. This had a meaningful effect on translated earnings lever and purchasing costs predominantly within the Medical Technology division. Across the portfolio, health care grew EBITDA by a net 3.2% and Animal Care by a net 11.6%. So while external factors affected the reported growth rate, that didn't change our underlying trajectory, and that gives us confidence as we enter FY '27. On the next slide, I'd like to highlight one of the most significant strategic milestones we achieved during the year. With the DC renewal program, I want to pay tribute to the teams across the business and particularly the [ Symbion ] Healthcare and distribution division, who have successfully brought this program to completion and done so seamlessly. Our $360 million distribution center renewal program is the largest infrastructure investment in EBOS's history. Think of this as a long-term investment in the capability, capacity and efficiency of our network, positioning us to serve the need for medicines across Australia and New Zealand for years to come. Just as importantly, the focus now shifts from investment to benefits. We're already seeing productivity gains at Kemps Creek with the site currently operating around 20% more productively than [indiscernible], the facility it replaced. Just to give you a sense of magnitude of what Kemps Creek does, every morning, it converts about 16,000 SKU lines in storage to 8,000 daily customized types and in deliveries in hours to pharmacies and hospitals across New South Whales. But there's more productivity opportunity ahead. We continue to target a 30% productivity uplift by the end of FY '27 and I was glad many of you got a chance to meet the Kemps Creek team at the recent Investor Day and see this opportunity up close. The completion of this program also materially lowers our capital requirements and CapEx is expected to normalize around $100 million in FY '27. Now that matters because lower CapEx supports stronger free cash flow, improving returns and greater balance sheet flexibility. A good example of that flexibility is in contract logistics. Over several years, we've invested in building a national health care logistics network. That capability is now supporting customer wins, share gains and double-digit core growth. I'm delighted that the Perth HCL facility is now up and serving our customers. With the distribution centers now complete and operational, we closed the chapter on this program, and we look ahead. Speaking looking ahead, the final point I'd like to touch on before moving into the divisions is M&A. On the next slide, you can see that disciplined capital allocation remains a core part of the EBOS strategy. During FY '26, we deployed across approximately $121 million across 8 bolt-on acquisitions that strengthened capability, expanded market positions and increase our participation in attractive growth categories. Now in the last 6 months, the 2 acquisitions were [indiscernible] Foods and Catalysts. [indiscernible] expands our presence in premium pet nutrition and gives us exposure to the fast-growing fresh and chilled pet food category. We have a great track record of bringing our strong brands like Black Hawk and [indiscernible] new formats and this continues that theme. Catalyst is another great example of bolt-on strategy -- excuse me, bolt-on M&A in action. We have an existing supplier relationship that was very strong. And with the benefit of this catalyst acquisition, it's extended that into new markets across Southeast Asia and Hong Kong, particularly in aesthetics and reconstruction. What's pleasing is that these acquisitions are consistent with our strategy of higher growth, higher return markets and expected to be both EBITDA and EPS accretive. Looking ahead, our approach continues unchanged. We will stay disciplined, but where we see privileged access to attractive opportunities supported by our market positions, relationships and balance sheet capacity. We have about $150 million of additional capacity to support our bolt-on M&A agenda. Let me now take you through the divisional highlights and financial performance. And on Slide 9, you can see that health care delivered another resilient result. Revenue increased 8.5% to $12.6 billion, and EBITDA increased 3.2% to $516 million, despite fuel and foreign exchange headwinds. Now this result was supported by growth across community pharmacy, hospital medicines, medical technology and contract logistics. As I mentioned, this result is underpinned by an aging population, which increases health care demand, growth in specialty and high-value medicine and a larger role for pharmacy and primary care. Sales of high-value medicines and GLP-1 demand also continued to grow at double digits. So while FY '26 was an important year of execution, we believe each of our divisions are well positioned for the next phase of growth. Let's start with [ Symbion ] and Healthcare distribution. Here, we delivered another solid result while completing a significant period of operational change, as I just mentioned. While the team has successfully executed multiple site transitions, they continue to grow the business. What you may not realize is that Symbion now serves 1 million units a day to stoustralians, the vast majority through our automated Eastern seaborne facilities. Within Community Pharmacy, revenue increased 10.2% and [ GOR ] increased 4.3%, supported by continued growth in GLP-1s and other high-value medicines. Margin pressure remained a feature of the market, but gold margins were stable across the second half at 8.6%. Looking forward, increased CSO funding should provide some support -- whether needs to be netted against the medicine tiering changes as well as continued competitive conditions. Hospital medicines, consumables and other also delivered growth, supported by record hospital sales, expansion in aged care and health care channels and continued momentum in medical consumables. Contract Logistics was once again a standout performer, [ GOR ] increased 13.1%, reflecting customer growth and the benefits of the investments we've made over several years in our health care logistics capability. The priorities in FY '27 are straightforward, increased utilization, improved productivity and leverage on our national footprint within contract logistics. Moving now to Retail Pharmacy brands. Here, we've had another strong year where we continue to expand both our scale and capability. Network sales reached almost $2.9 billion supported by like-for-like growth of 7.6% across the [indiscernible] network and dispensary sales growth of 8.5%. Importantly, this growth reflects the quality of the network and the performance of existing stores, not just network expansion. Total network stores increased to 780, driven by the addition of [ medidvice ] and continued growth across our other banner groups, including [indiscernible]. Healthcare services remained a key differentiator. During FY '26, Care Clinics delivered more than 1.2 million health services, reinforcing the network's leading position in pharmacy-delivered health care. We're also seeing encouraging progress across our own brands, digital engagement and retail media. My TWC app is a great demonstration of this with the app processing 1.7 million transactions now that's up 37% on the prior year. Network sales of our own brand increased 11% during the year, and these initiatives are helping broaden the earnings base for both the network and our pharmacy partners. Looking ahead, our focus remains on improving store margins, increasing health service participation, growing digital engagement and expanding our own brand penetration. I turn now to medical technology. And here, revenue increased 5.5% or 8.4% on a constant currency basis, supported by a combination of organic growth and acquisitions. Growth was broad-based across the portfolio and reflected higher procedure volumes, therapy expansion and ongoing innovation. Across ANZ, we saw strong growth in neurosurgery, neurovascular intervention and urology. And in Southeast Asia and Hong Kong, growth continued across spine, orthopedics, cardiology and ophthalmology, partly offset by softer capital equipment activity compared with the strong prior year. Biologics remains one of our most attractive growth opportunities. During the year, we expanded solution development activity and extended into adjacent procedures, which creates additional pathway for growth. Across EMT, we also completed 4 acquisitions that expanded coverage across oncology, orthopedics, plastics and aesthetics. These acquisitions continue our strategy of building capability in attractive growth markets. Looking forward, we see significant opportunities to expand therapy participation, increased biologics exposure and selectively grow across Southeast Asia. Now let me turn to Animal Care, which once again delivered a strong result and continues to outperform many of the markets in which it operates. Revenue increased 34.6% to $907 million and EBITDA increased 11.6% to $138 million. The result was supported by the SVS acquisition, but also by continued growth within [indiscernible] and ongoing share gains across branded products. In fact, branded revenue increased 6.7%, supported by innovation, premiumization and new product development. On the next slide, you can see the clear linkage between our manufacturing capability, and new product development across our [indiscernible] brands, driving the organic growth within the branded portfolio. Wholesale performance also continued to benefit from greater scale and customer growth. With SBS growth accelerating under EBOS Stewardship. GOR increased 13.1%, showing the quality of growth across the portfolio and margins were arithmetically affected by the addition of the lower-margin wholesale business, SBS, but the segment continued to deliver strong earnings growth. Our strategic focus during FY '26 was increasing our participation in the premium pet nutrition categories and the acquisitions of NextGen Pet Foods and [indiscernible] did this by expanding our manufacturing capability and our exposure to the higher growth segments, including fresh and [indiscernible] food and air and freeze-dried treats. As we move into FY '27, our animal care priorities remain centered on innovation, vet channel growth premium nutrition and extracting value from our recent acquisitions. I'll now hand over to Alistair, who's going to take you through the key movements in the group financials.

Thank you, Adam. I will cover the details of the next few slides, but at a headline level, FY '26 was another solid result and consistent with the guidance we provided to the market. Revenue increased 9.9% and underlying EBITDA was up 5% to $614 million. With that growth delivered despite the macroeconomic headwinds Adam mentioned earlier. This resilient growth speaks to the ongoing strong demand for care needed for an aging human and population and EBOS's competitive advantage of scale and sector leadership. Underlying NPAT was $250 million, reflecting the completion of the DC renewal program investments. At a statutory level, EBITDA was up 7.8% and NPAT was up 4.7%. Importantly, the balance sheet remains in good shape. Leverage finished the year at 2.1x, within our target range, and the Board has maintained the final dividend at [indiscernible] per share. Now turning to our earnings performance in more detail. As previously mentioned, revenue grew strongly at 9.9%, driven by growth in both Healthcare and Animal Care including the positive contribution from accretive bolt-on acquisitions. Underlying EBITDA increased 5% to $614 million despite fuel and foreign exchange headwinds. This result demonstrates the resilience, diversity and strength positions across the portfolio. EBITDA margin improved in the second half, ending the full year slightly down at 4.6%, largely due to the product mix and competitive dynamics in community pharmacy. Below EBITDA, the movements are consistent with guidance and reflect the completion of the 4-year capital investment cycle. On a statutory basis, EBITDA and [indiscernible] growth was stronger than underlying with lower one-off costs in FY '26 than in FY '25. Consistent with the communication at our first half results, restructuring and site transition costs reduced in the second half. These results were as expected, and the renewed DC network provides the capacity and capability to support future growth. Importantly, as the capital investment cycle is now complete from FY '27, CapEx drops materially, and the focus shifts to increasing utilization, productivity and cash generated from those assets. In summary, the FY '26 result demonstrates that the underlying growth fundamentals remain strong across the group. And with the infrastructure upgrades now in place, we're increasingly well positioned to turn that growth into stronger cash flow and better returns. Moving to capital allocation. Our framework remains unchanged and is centered around a disciplined approach of capital across 4 priorities: preserving a strong balance sheet, maintaining operational resilience, delivering sustainable shareholder dividend and investing in attractive growth opportunities. In FY '26, we allocated $145 million to capital expenditure, $121 million to bolt-on acquisitions and returned $128 million to shareholders by the way of dividends. Importantly, given the strength of cash generated, we have been able to maintain dividends through the peak capital investment cycle while also investing in accretive growth opportunities, including programmatic bolt-on acquisitions. That said, this CapEx normalizes in FY '27, we expect greater flexibility and capacity to deploy capital into attractive growth opportunities and improve returns. Now turning to the balance sheet. Leverage finished FY '26 at 2.1x, comfortably within our target range of 1.7 to 2.3x. Given the seasonal nature of our working capital and cash flows, like prior years, we expect leverage to increase modestly in the first half of FY '27 before easing in the second half. This provides approximately $150 million of available capacity to invest through the year up to the leverage of 2.3x. Moreover, our debt to remain strong. with $726 million of undrawn committed facilities and a weighted average debt maturity of more than 3 years. And with lower capital expenditure, stronger cash flow and continued earnings growth we are well placed to steadily reduce leverage, whilst continuing to fund growth investments. I will now step through the cash flow results. Net working capital remained well controlled increasingly -- increasing by just $7 million despite 10% revenue growth, while cash conversion days were stable at an average of 20 days. This reflects a disciplined focus on working capital as well as the favorable timing of year-end payments and receipts. Reported free cash flow was $204 million, representing the final year of elevated CapEx and site transition costs related to the DC renewal program. On a normalized basis, our reported free cash flow improved slightly compared to the prior year. With the capital investment cycle now complete, CapEx is expected to fall materially to approximately $100 million in FY '27 compared to $145 million in FY '26, that lower CapEx should drive a meaningful improvement in free cash flow in FY '27. Important as it enables additional investment to drive growth. I'll now hand back to Adam, who will share our perspective in the year ahead.

Thanks, Alistair. When I look ahead to FY '27, across every division, we have clear operational priorities focused on growth, productivity and returns. In Symbion and health care distribution, our focus is on putting our new capacity to work. In Retail Pharmacy brands, we drive store dollar growth. In medical technology, we expand our scope and reach. And finally, in Animal Care, our focus is on new product development and customer momentum. Collectively, these initiatives support our expectation of delivering mid-single-digit EBITDA growth as we laid out at Investor Day in April. Importantly, FY '27 is more than earnings growth. Our multiyear investment cycle is complete. Capital expenditure since the 30th of June has dropped to approximately $100 million, well below the FY '26 levels, which in turn supports stronger free cash flows and improving returns. Depreciation and financing cost growth will remain elevated as we annualize recent investments, particularly in the first half of FY '27, but the more important point is the cycle is complete, the assets are in place and increasingly are being put to work. I want to share with you this final slide to bring together what we've tried to communicate through today's presentation. As we said through at Investor Day, EBOS is very different than the business that we had 5 years ago. We've increased our exposure to higher-growth, higher-return businesses. And today, more than 70% of group EBITDA comes from those high-growth businesses, including animal care, medical technology and retail pharmacy brands, alongside platforms such as contract logistics and medical consumables. Our resilience is born of our market position with around 85% of group EBITDA coming from businesses ranked #1 or #2 in these sectors, and that gives us scale, customer relevance and a strong competitive base. Importantly, we now move into the next phase with a completed investment cycle, stronger free cash flow prospects and additional capacity to invest, which will drive returns despite cost pressures and the competitive dynamics. So the messages to take away from today are simple. We've delivered on our commitments. Our investment cycle is complete. We are excited to continue driving value for shareholders. I want to thank you for listening this morning, and I also want to thank our teams across Australia, New Zealand, Southeast Asia and Hong Kong for everything they've delivered through FY '26. I'm now going to hand back to the operator, who's going to open the call for Q&A.

[Operator Instructions] And our first question comes from the line of Stephen Ridgwell from Craigs Investment Partners.

Just wondering if you could please give us a split of FY '26 EBITDA growth between kind of organic and inorganic for the group overall and then for the 2 segments? And then maybe just turning to the guidance, if you could comment on how much of the 5% EBITDA growth at the midpoint for '27 was driven by acquisitions and how much is organic? And then what segments are you expecting to deliver the lion's share of the organic EBITDA growth in FY '27, please?

Yes. Stephen, thanks very much for the question. I'm going to start with the second part, and Alister is going to jump in as needed. When we look ahead and provide that guidance, the $635 million to $655 million for FY '27, we're incorporating in that all the businesses that we have today. We're not assuming any acquisitions are included in that. And I have to say, we're pretty excited for contributions from all of our divisions roughly in proportion to how we indicated at Investor Day with the higher growth revisions of Medtech animal care and RPV really coming to the fall. Just a reminder, the assets that we've got there to put to work is Australia's largest dog food brand, Australia's largest pharmacy network and Southeast Asia and Australia's largest independent medical distributor. So we've got plenty of market position to find opportunities during FY '27. If I now come back to your question on FY '26, I think you're referring to the first substantive chart that we have in the deck. You can see there that we've added $50 million of EBITDA into the group. Now across the last 10 years, we've grown at about 10% and roughly equally between organic and inorganic. In that $50 million, I think it's probably slightly skewed to inorganic. But I think one thing we've been pretty heartened by is the synergistic nature of many of the transactions. So for example, SBSS was a great business growing at a fair clip when we brought it. But it's really -- growth has really accelerated under our stewardship, which we're really pleased by. [indiscernible] would you add anything to those comments?

No, I think you've covered it well, Adam. Stephen, it's very consistent with what we outlined at the Investor Day. So if you're looking for -- sort of segmental view of growth into FY '27. I use that as the basis.

So can I just clarify, though. So we're talking about sort of 5% year-on-year EBITDA growth, you've obviously made acquisitions during FY '26 there'll be some annualization of those acquisitions. That's really I'm trying to get it like rather than future acquisitions, how much of the 5% growth is driven by equations you've already made in the FY '26 year partway through the year. and how much is driven by organic growth.

Stephen, it's tough for us to give the split because a lot of them are very synergistic -- so the EBITDA that we bought might be significantly higher in our hands, given the ability to extract value with our existing businesses. So I think we're comfortable with. The guidance we've provided.

Potentially, the only color I would add, Stephen, is clearly, there's a lot of moving parts in the group and informing guidance. And it's probably important to note that we have considered a number of I guess, reasonably possible outcomes as it relates to FX and fuel and forming that guidance range as well.

Okay. And second question also on the guidance, really 2 parts. So just swung up on your comment there, Alistar on fuel cost. I mean at the low end of the range, are you assuming that fuel costs remain at current levels for the rest of the year and perhaps at the top end of the range, you're assuming they come down like some sense of the assumptions and providing what's a reasonable range, but are you taking a worst-case outcome at the low end and then have you assumed mitigation of your costs in the numbers you provided.

Thanks, Stephen. That's question #3 and 4, but that's okay. We're not counting for friends. And Alistair, do you want to start on the fuel cost and then the mitigation.

Yes, absolutely. Like to talk about fuel politically, we did come out with and update our guidance in April as a result of the conflict in the Middle East. And at that point, called out a $5 million to $10 million impact across the 4 bonds. Of course, at that point, as now, it's actually difficult to predict the outcome and where fuel prices may track in the market. I think what's been pleasing through the 4 months of FY '26 has been the team's ability to mitigate these costs, both through operational improvements and pricing actions taken through that period. So I would say that the for the 4 months is really representative of our run rate, noting that fuel prices are currently lower than the average that they were from that 5 months. So yes, at the lines, we have assumed an improvement on fuel prices. And at the top end, we've assumed our worsen.

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

I'm just wondering in the health care division -- in the health care division, when we look at Page 27 -- Slide 27, I'm just wondering if you can help bridge for us. I think the New Zealand and Southeast Asia, revenue was up 10%, but the EBITDA is down 10%. Can you just give us a bit more detail what's going on there?

Yes, absolutely, Adrian. It's a fair question. I'm going to start and Alistair is going to chime in. So 2 different pressures here in terms of -- firstly, ForEx and then the Southeast Asian capital items. So I know that there was a lot going on in last year's full year announcement, but we did point to the second half of FY '25, having an absolute absolutely outstanding in terms of capital items sales in Southeast Asia. So if you think of that as being well of the norm. And then the number of capital items in the second half of FY '22, probably slightly below norms for Southeast Asia. So that plays into it. But also with the Australian dollar at 13 years highs against the New Zealand dollar, that has a big influence on our New Zealand earnings. And Alistair, would you add to that in Adrian's question.

I mean -- no, I mean, in terms of the drivers of the EBITDA, the other 2 large foresees at play, just to put into context, the capital sales perhaps in the second half, like capital sales were more than double in FY '25 than the prior corresponding year. FY '26 was more I can say FY '24. So that that type of material and [indiscernible] is clearly at an unusual high. I would view absent not being certain of where FX prices, FX [indiscernible] to be temporary factors, Adrian. There's nothing underlying or systemic in the outcome. And then the second sorry...

Can I just tie this a little bit up. So in constant currency terms, which you have sort of introduced for this part like do you have a sense of what the EBITDA would have been or would have been closer to -- I think you said constant currency was more like 8% growth I know that's for the -- but I know that's the division including Australia. But what would be the constant currency kind of equivalent?

Yes. I mean the delta would be several of the faces of the mention part in terms of how we translate earnings parkin AUD from Southeast Asia. So like both are -- they are the entirety of the reason. Typically, we would expect that region to grow given the weighting to Medikit sort of mid- to high single digits on a sort of sustainable truck underline, that's what happened. And may be helpful to maybe reference outside of capital sales, we did continue to see low double-digit growth in our [indiscernible] business. So there isn't -- again, there isn't anything fundamental on that as temporary. But I'm just -- I'm conscious here of the second part of the question is then is why revenue 10% up as well. we did mention at the half. We did have our -- because it was a similar distortion in half 1. We did have a change in one of our contract logistics customers from 3 to 4 in the first half, which increased revenue but not core or EBITDA. So that's distorted the margin. Again, that's a temporary factor. So we should expect that to normalize as we go forward.

Okay. So capital sales, [indiscernible] on the comparative, particularly for the second half in the revenues change in customer recognition, 3PL out to 4PL and FX being the other bridge and that explanation?

We'll summarize. Good summary.

Just the second question just staying in Medical Technologies. Like look, it feels to me like [indiscernible] like the group returns there are more like 7%, like when you think about like $1.6 billion out of the $2 billion over the last 5 years. And the earnings number doesn't look like it's call it sort of 120, 130-ish. Like, how do you kind of -- what is -- what is the license to kind of keep deploying money into that space? Like what sort of returns are you actually targeting from the bolt-ons? And how do you kind of lift the group returns against that kind of arithmetical starting point?

Yes. Fair question, Adrian. I think we go back to Investor Day and we start with the tested calculation that we made around the return on capital deployed in M&A over the last, I believe it was 5 years of 16%. So we're confident that the deployment of capital really creates value for the group there. What we're observing on the ground is the -- I would say, the critical mass that we're achieving in Southeast Asia and the product -- excuse me, and the solutions that are coming to market in other graphs. So the critical mass that we're hitting in Southeast Asia is we now have the backbone of a leadership position across the region. And we're seeing more and more that gives us access to franchise expansions that means sort of suppliers are choosing to come to us with their new products for the region. Great example is actually a catalyst where we have an existing relationship with that supplier in Australia. They were really pleased with the work that we've done for them there. And then we went through this acquisition, we've then extended that supplier relationship throughout Southeast Asia, and we think we've got a lot more growth opportunities. So that's in terms of the Medtech distribution, sort of leveraging that growth position and that scale. Within allografts, we brought the acellular Derma matrix to market. We talked a bit about it at the Investor Day. It was a new approach, a new solution to helping people with breast reconstruction, that's caught on really well because it's got a tremendous impact on patient recovery. And so we keep getting drawn into more and more procedures, and so I think that will also continue to be a great opportunity for the group. So really pleased with Medtech and looking forward to more growth.

But just to hold you there, like is the maths right, like if you look at the capital employed to date, are you returning about 7% out of that vertical?

I think the I don't -- I have not had the opportunity to go back and look over the Life Healthcare acquisition, which was over 5 years ago now. It was in 2021.

Yes. I think, Adrian, what we have seen certainly recent years as a continued improvement of the return on capital employed from the division, which speaks to both the, I guess, the organic growth potential, particularly of the markets in Southeast Asia, but also in ANZ as well as the accretive bolt-on acquisitions, which as we've talked about both of synergistic value and provide access and to further high-margin, high-growth geographies and therapy areas. So -- would we like sorry, are we targeting a higher return on capital at the group? Absolutely. We continue to be focused on driving towards 15% of our group and medtech will continue to increase as part of that.

Okay. So the -- so if I summarize that, like you sort of regard the sort of the establishment of Medtech, which is a sizable amount of money as a sort of a sunk investment and the activities that you're doing now are quite accretive off that platform?

That's correct.

We certainly think it's accretive on the platform. It certainly as accretive.

Our next question comes from the line of Laura Sutcliffe from Citi.

Firstly, can I if you've got any -- can I ask if you've got any remaining inventory work down our systems cut over left to do related to the DC program now that Caps Creek is up and running. I'm thinking about the kind of tail work that you do to finish off the shutdown of the old pieces?

Yes, that's a great question. And I'm delighted that when we say the chapters closed, the cap is closed. So the -- all of the impact of the start-up and inventory trend inverse transition is captured within the FY '26 results. we wouldn't be expecting that to hit us in FY '27. Laura, just for those who may not recognize your point, during the year, we were forced to run, for example, 2 facilities at the same time in parallel as we brought up [indiscernible]. And I believe it was referring to the fact that that's a heading line on us. But now that's behind us, and we're now putting them to work and getting the utilization now.

Great. That's very clear. And then my second question is in the community pharmacy setting, do you find that you're having to compete patient spend on high-price out-of-pocket drugs. So GLP-1s in the weight loss setting will be the obvious example. Or do you just get the market share that you would expect without too much extra effort and the [indiscernible] positioning as it is?

Yes. I think what we see is the GLP-1 space is fierce in the sense that it's a real flashpoint for competitive dynamics. And we probably indexed slightly low in GLP-1s in terms of our share. It's still very respectable, but slightly less than what you might expect. However, in high-value medicines, which are high-value medicines are, of course, priced higher than GLP-1s than more than $1,000 a dose. That's where we probably tend to over-index in our share. And that's, again, a result of the reliability of the Symbion network and the care focus of Terry wide. So I think that's consistent with our positioning in the market. .

We will now proceed to take our next question from the line of Stephen Hudson from Macquarie Securities.

It actually, Nick from Macquarie Steve, just tied up on another call. I was asking questions on his behalf. Firstly, just in terms of the first month of the [indiscernible] of the high-value medicines versus the sort of lower margins on a net basis where are you guys watching out.

Yes, that's a really great question. So in the first month of trading, we've seen 3 different factors at work. First is the -- exactly as you say, the change in the tiering of medicines from 3 tiers to 4s. We've then seen increased or continued competitive dynamics. But offsetting that, we then had the CSO come through. literally 1 month of trading. I think it's -- we'd say it's as expected and the impacts included in the guidance that we provided for the year. But more data to come as that trading shakes out. And I think over time, moving to that -- from that 3-tier system to the 4 tier system is a net benefit for us. but in the short term, a little less so. And why do I say that? Because the cap changes from $54 to $223. So with the continued rise of high medicines and complex medicines that will tend to work to our benefit in the Symbion division.

Great. And then just in terms of the CSO pool. Are you guys still on track to capture the 29% share that you previously talked about of the funding uplift?