Healius Limited (HLS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Healius Limited 1H '25 results. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Anderson, MD and CEO. Please go ahead.

Good morning, everyone, and welcome to our 2025 half year results call. Since our full year results in August last year, we have announced the sale of Lumus Imaging for $965 million, and the management team have been focusing all efforts on embedding our new pathology strategy and operating models. Whilst it is taking time to implement such wide-ranging changes, we have made significant progress on both fronts. Our transformation plan forms the backbone of the changes we are making in the business, and we will be providing more information on our plans and how these are very important building blocks for the future at our Investor Day in March. This morning, we have announced our 1H '25 results, which were in line with guidance provided at the Annual General Meeting. Group revenue was up 10%, which comprised Pathology revenue growth of 7%, Agilex revenue down slightly by 1.1% and Lumus Imaging revenue growth of 13.3%. Underlying results for the period saw EBITDA up 3.3% and EBIT up by 51% to $23.7 million. We note that Lumus Imaging is now accounted for as discontinued operations due to the pending sale. However, the underlying numbers above include their results for this year. Turning to Slide 5. In terms of Pathology, excluding Agilex, our revenues grew by 5% -- 7% on volume growth of 5%. And EBIT for the period was $4.1 million or broadly in line with last year as we set out at the AGM. Pathology volumes have been more consistent in the past 6 months and growth has been coming from both improving GP referrals and a small increase in our average fees. Genomic Diagnostics and B2B revenues have grown substantially as set out over the page, and they will continue to be focus areas of strong revenue growth potential as part of our emerging diagnostics strategy. Whilst we have seen 7% growth in revenues, as foreshadowed at the AGM, this has not yet translated into earnings due to the deliberate investment in labor to reduce collection center closures, staff our call centers appropriately and improve our pathologist remuneration model. With the addition of Anthea Muir heading up our Customer and Commercial business, our focus is now on productivity and profitability in our collection centers, growing specialist revenues in a structured way and continuing to push the high-growth areas of Genomic Diagnostics and B2B revenue streams. Indexation remains a major issue for our industry, and we are united with Australian Pathology and our Keep Pathology Bulk Billed campaign, which has now recommenced. This is particularly important as we approach a federal election. On Slide 6, a large part of our early transformation work and a key plank in the pathology strategy has been keeping our collection centers staffed and open and improving our customer service levels for doctors and patients in our contact centers. The graphs on this slide show ACC closures have reduced by 50% from approximately 800 to 400 per week or 160 to 80 centers per day. Contact centers post the introduction of CX1 technology have reduced calls by 1/3 or 65,000 calls per month, and we have reduced call abandon rates from approximately 15% to less than 5% over a 6-month period. This is an important step in improving our customer referral proposition. We operate 1,978 collection centers and our target is to further reduce closures through a combination of workforce planning and optimizing our footprint and opening hours, significantly improving productivity. Whilst our collection center footprint may change to more profitable sites, the absolute number of sites is estimated to remain static in the near term. The chart on the right demonstrates the growth in our Genomic Diagnostics business. Revenue grew by 45% in 1H '25, and we are starting to see the real financial benefits of our new emerging diagnostics strategy with a dedicated management and sales team, investment in systems and focus on high-growth areas such as reproductive health, oncology and hematology. The next 2 slides are a reminder of our pathology strategy as we've set out to you. This is now fully embedded across our business and working well with a unified national approach to everything we do under our new operating model. We are guided by our Clinical Advisory Council, who are all pathologists and are an integral part of the day-to-day operations and commercial decision-making in the business. Our focus is simple: making life easier and more efficient for our collectors, improving the service and touch points for our referrers and improving the efficiency in our laboratories. We've already set out some of the improvements we've made in our collection and contact centers through technology and more effective workforce management. Our next step change in performance will come from digital health technology, which continues to be a key enabler across the 3 pillars of customer service, laboratory modernization and emerging diagnostics. On Slide 9, the performance of Agilex Biolabs for the first half of the financial year has been impacted by the U.S. elections, which have created uncertainty in the global drug development market. Revenue was broadly flat on 1H '24 and EBIT reduced to $1.1 million. The business has planned around this uncertainty with cost reductions undertaken ahead of the slowdown to reduce the impact. We have since seen an improvement in the business development pipeline for 2H '25 with an improving outlook. We estimate that EBIT improves in the second half of '25 to be in line with FY '24. On Slide 10, Lumus Imaging, despite the ongoing sale process, has performed strongly again and ahead of the market. Gross revenue was up 13.3% with EBITDA up 23.7% and EBIT up 50% to $26.4 million for 1H '25. This performance was due to the continued investment in large-scale comprehensive clinics, improved modality mixes and pricing initiatives. Community sites, hospitals and medical centers have all improved performance across the first half of the financial year. With the sale of Lumus Imaging -- as you all know, we announced the sale of Lumus to Affinity Equity Partners on the 23rd of September 2024. This was for an enterprise value of $965 million, with net proceeds estimated to be in excess of $800 million. We anticipate completion to take place in 2H '25 once all the conditions have been met. The majority of those conditions have now been satisfied, and we will announce full details regarding the sale proceeds once this transaction is complete. I will now hand over to our Chief Financial Officer, Steve Humphries.

Thanks, Paul. As you can see on the slide, when it comes up, the group underlying EBIT was $23.7 million, which is in line with consensus. Overall revenue growth of 10% reflects growth in GP referrals, B2B and genomics in Pathology and strong exam growth in Lumus Imaging. Agilex revenue was marginally down on PCP because of activity in the clinical -- because activity in the clinical trial sector has been negatively affected by the U.S. elections. The revenue growth in Pathology did not translate into higher margins because of a deliberate investment in labor, which Paul has touched on and which I will also talk about on the following slide. Non-underlying items reflect the costs of our digital health program, plus further restructuring as we continue to streamline the business. In terms of the overall results presentation, as Paul noted, accounting standards require that Lumus Imaging results are classified as discontinued operations. However, in the 4D and review of operations, we presented Lumus' financials within underlying results for clarity and ease of comparison with prior periods. Looking at Pathology, excluding Agilex, revenue increased by 7% with volumes up 5%. GP attendances improved 3.6% on PCP, and the business also experienced significant growth in B2B and genomics. However, labor costs also increased due to previously signaled investment needed in 3 areas, being collection center labor, where the number of FTEs grew by 3.5%, staffing our call centers appropriately and realigning our pathologist remuneration structure, plus the impact of EBA outcomes in Queensland and WA. On a pre-AASB 16 basis, property costs, and that's including ACC and laboratory lease rentals, were flat with PCP and comprised 19.1% of revenue compared to 20.4% in the prior comparative period. Consumables were 16.6% of revenue, reflecting a marginal increase on PCP. This reflects a slight shift in test mix and procurement cost pressures generally. Turning to Agilex. Agilex business was significantly affected by a slowdown of activity in the clinical trial sector in the United States during Q2. This was brought on by uncertainty in the lead up to and post the elections -- or the election. The business had initially geared up for significant revenue growth. However, management were quick to respond to the downturn with a 13% reduction in the workforce during October. As indicated on the slide, market fundamentals and Agilex's competitive advantages remain. With the pipeline of new work already improved for the second half, we expect demand to recover and for the business to at least match its FY '24 EBIT in FY '25. On Slide 16, Lumus Imaging had a strong first half, which has continued into January and February. Revenue growth of 13.3% against PCP was above market and reflects exam volume growth of more than 16%. EBITDA grew by 23.7% and EBIT by 50%. The investment in new equipment and modalities, opening of 3 new clinics and continued recruitment of radiologists puts the business in a strong position as it transitions to new ownership in the near future. Turning to Slide 17. Managing cash flows is a constant focus for the team. Cash conversion reflects strong control over working capital and the collection of some commercial receivables which were overdue at 30th of June 2024. We expect capital expenditure in the second half to be broadly consistent with the first half. Although there will be lower CapEx for Lumus, CapEx for Pathology is weighted towards the second half. At 31 December, both gearing and interest cover ratios were within covenants. On completion of the sale of Lumus Imaging, we will use the proceeds to repay debt and return surplus cash to shareholders. We will also refinance and rightsize our borrowing facilities to reflect the smaller business and lower capital requirements. I'll now hand back to Paul to talk about the FY '25 outlook.

Thanks, Steve. So Pathology has continued its growth trajectory during January and early February with volume and revenue growth consistent with that of the first half of 2025. Our pathology strategy and transformation plan continue to mature and add value, with collection center productivity, both labor and workforce management, a major focus for us in the second half of 2025. As we set out above, Agilex is expected to deliver full year earnings in line with FY '24 and Lumus Imaging exam volumes and revenue continues to perform ahead of the market. We are also well advanced in our planning for the business post the sale of Lumus Imaging, and we'll be providing further detail around this at our Investor Day in March. So that is the end of today's presentation. So I will now hand over for Q&A.

[Operator Instructions] The first question is from the line of Lyanne Harrison from Bank of America.

Can I start with where margins sat for this period? So obviously, doing a lot of work around productivity initiatives and cost out, but margins were fairly flat. When can we expect those initiatives to come through to the margin line?

Look, we think they will progressively come through. We've set out over the past 10 months that our priorities have been keeping our collection centers open and answering our phones by manning our call centers. So what that has resulted in is clearly additional labor costs. So whilst revenue has improved by 7%, clearly, that has come at a cost initially. So the next phase of this is the productivity of those collection centers and over time reducing the labor cost in contact centers through technology. So I can't give you an exact answer in terms of the timing other than to say it is an ongoing process and workforce management is one of the things that we are heavily focused on in the second half of the financial year.

Okay. And then if I think about costs, the stranded costs post the sale of Lumus, do you have a sense of what that might be in terms of quantum and the plans in terms of how to reduce those?

Yes. Look, we do. And we will have more to say about that at our Investor Day. Suffice to say that we want to have 2 parts of this, that there will be natural costs that we just don't have once Lumus is -- the completion happens. We will have a bunch of costs that we have as part of our transition services agreement that will go on for some time, which broadly are mostly pass-through costs. And -- but there will come a time at the end where from a staffing perspective, you will have people that are split across different functions. So the answer to your question is, yes, we have a very good idea of what that number is, and we will set out far more detail about that at our Investor Day.

Okay. And just one more from me. There was some press recently about potential merger being reconsidered between Healius and Australian Clinical Labs. Can you comment on that?

Look, that was complete news to us, Lyanne. So there is no -- there is nothing that we're aware of that is happening.

Next question is from the line of David Stanton from Jefferies.

Look, in terms of the expected seasonality in Pathology, we saw some or quite a deal in second half F '24. I wonder if I could push you to sort of talk to EBIT margin in terms of seasonality in second half F '25. Should revenue growth continue in the second half like it has in the first half in Pathology? Should we think an EBIT margin in line with second half F '24 might be relevant for second half F '25, please?

So if I can start at the other end. So you're right. So we've said that January and early February have continued on at the same volume and revenue growth. What we are -- so what we've -- if I go back to -- sorry, if I go back the other way to say -- so revenue and volume growth have continued on in January and February. We anticipate that we will be able to reduce some of our costs in the second half. Clearly, I know Sonic talked about this, this morning, too, in terms of the split between the 2 halves. And I think they said 48, 52. And we are kind of broadly the same. I think we've said in the past that if you think about that and you think about the majority of our business is a fixed cost base, then you're right that the bottom falls to the bottom line. So it then becomes a question around what we can do with our costs in the second half. And as we've said that there's a lot of focus from us in terms of the labor cost. So if we get that right, then that clearly translates to margin. But it does take time. Sorry, that was a bit of a meandering answer, David.

Yes. So maybe to say -- maybe to paraphrase you a little bit, maybe a stretched target might be an EBIT margin in Pathology in the second half of F '25 in line with second half F '24 in percentage -- percentage margin I'm talking here.

Yes. Look, that's, yes -- the ambition here for us is to get all of these building blocks in place so that margins increase over time. So trying to time box these things in kind of 6-month blocks is actually hard. So yes, that's the ambition. Clearly, we're trying to grow revenue both through our collection centers and our normal GP referrals. We're trying to increase our specialist revenue, which is much higher value and contributes to EBIT in a far greater way, and get our labor costs in line with revenue. So -- and labor costs are kind of almost half of our cost base. So it is the most important thing that we're focused on.

Understood. My second and final question, you've talked to being increasingly focused on genomics, preventative screening and B2C and B2B offerings within pathology. I'd just like to understand where you sit vis-a-vis your peers in terms of being able to deliver those services. That sounds like sort of high-end specialist style work. And frankly, Healius has sort of been focused on the GP side. So what added resources do you need potentially to do more genomics and the like?

Look, I slightly disagree with that to a certain extent. We have a very successful genomic diagnostics business in Victoria. And as I said, they are growing at close to 50% half-on-half. We have a very granular plan in terms of how we're growing that business. It doesn't require enormous amounts of capital. We have been very successful in -- as has other parts of the industry in reproductive health, genetic carrier screening and so forth. But there is a range of other new tests around oncology and hematology that provide very strong growth potential for us. So I think we've got a very good base. We have some work to do on systems. We have now got specialist business development teams already in place. And we have a very good management team down there running that business, so.

David, do you have any follow-up questions?

No, that's it.

Next question is from the line of Steven Wheen from Jarden.

Paul, I must say I'm a little bit confused with the cost that are sitting within Pathology. I mean you've had a half where you've done very good growth at 7%. The mix is favorable in that half. You've been closing collection centers -- I think it was like 150-odd -- through FY '24. And yet the margin -- the EBITDA margin is down by, I think, 170 basis points and the EBIT margin is flat to maybe slightly down. What -- I mean you're talking about investment in labor, but is the labor offsetting all operating leverage and all of those savings?

Okay. So there's 2 parts to that. I think the collection centers -- I think if you look in the past 12 months, we've -- our collection centers reduced by about 50, which is, I think exactly the same as Sonic, and that was a bunch of collection centers last year that we had exited that were unprofitable. So they've remained relatively flat. The point around labor that -- we had, call it, 160 to 170 collection centers a day that were just shut. So they were not staffed. And the way that we have been rostering our collection team has been not as good as it should be. So the first thing that we have had to do is staff those collection centers. The labor -- so whilst -- keeping those collection centers open is cash positive. Over time, the revenue will grow once our -- you have consistency of opening at each of those centers. And then we need to refine the way that we actually staff them so that they are staffed by permanent people. You're not paying overtime or doing that inefficiently from a financial sense. So there's a lot of things mixed up in there. And that's the kind of -- the reason that the labor costs are higher in this first half. And as I said before, we now have a forensic approach to each of those collection centers to ensure that we have the right staff at the right rates; that we have the right opening hours, because I don't believe that we've got our opening hours right; and over time, using SA 3 planning and other tools to make sure that our collection centers are where they should be. Now that's not saying we're going to reduce them. The aim is just to make -- keep the same number, but make them more profitable over time.

Okay. Understood. And I totally expect that the labor costs would have gone up and addressing the closures. It's just curious that on the flip side, the Imaging business has gone up, its margins increased dramatically. And I'm just -- I mean, one potential explanation that might be missing here is, are you shifting costs across to the Pathology business now that you're selling Lumus, because that's representative of some of the stranded costs that exist for functions like HR or IT?

No, absolutely not. I'm not -- that's just completely consistent with the way that we've always done it. What I would say about radiology is that they are far more advanced and far better at the way that they roster their staff and share their work around. The business -- the Pathology business is clearly far more complex with collection centers and laboratories and the like. So we are not doing as good a job as the Imaging business is in terms of managing your workforce. But we know what we have to do. And as we've set out, that is our key priority in the second half for Pathology.

Okay. And the final part to this question is, so when you do reveal to us what the stranded costs look like within this business once you've sold Lumus, you're not expecting to see a step down in the costs that will be allocated to the remaining business as a result of that because you're being able to pass all of that on to the acquirer.

I'm not sure what I know. I think the way that we have explained this in the past is that if you look at our segment note, you have Imaging, you have Pathology and then you have corporate costs. So it stands to reason that once Lumus completes and is sold, then the corporate costs or that value of corporate costs needs to be eliminated so as to not dilute the margins in the Pathology business. Does that make sense?

Yes, it does. And so by eliminating them -- you can do that through -- I mean, the reference that I'm making is to your comment that you're able to pass through those costs to the acquirer, I assume. Is that what you mean?

Yes. Look, I mean, what we're saying to you is that, one, we're not -- there's kind of no transfer of costs just because Lumus is exiting. So that's our first point. The second point is that the corporate costs that exist at the moment -- clearly, there's some of those corporate costs such as Board costs that will not eliminate post the sale of Lumus. So those costs need to come out from somewhere else. So from our perspective, we have a very granular list of costs that will come out post Lumus going. And part of those will just be natural things that will reduce such as insurance or some IT costs that we will just not require. And then Affinity and Lumus will decide on their own account what cost they have in that regard. So hopefully, that makes sense.

The next question is from the line of Saul Hadassin from Barrenjoey.

Just maybe a clarification. You discussed the return of proceeds from the sale of Lumus in terms of special dividend as the most likely form of capital return. Can you give any color as to -- yes, you also referenced reduction in debt. I'm trying to get a sense is -- have you reached a view in terms of where you want your sort of pro forma gearing to be? Are you effectively saying you want the business to be 0 net debt? Or are you likely to carry a bit of debt? Any color on just the quantum of proceeds that are likely to be returned to shareholders relative to debt pay down?

Look, I think what we've said is that we will refinance and that we will be -- carry little or no debt, for a start, until we have consistency of earnings. And we will tell you straight away once completion happens what the value of those proceeds being returned to shareholders will be.

Next question is from the line of David Low from JPMorgan.

Paul, just on the uplift in labor costs for collection centers and call centers, et cetera, sort of where are we at in terms of that uplift? Is it sort of largely now in place and will flow through in the second half? Or is there more to be done?

Look, it's largely in place now. As I think we been at pains to point out, our focus now is on reducing those costs. I think this year -- just to put it into perspective, we have come out of a period of high inflation where we have had a combination of not just our contact centers and collection centers those additional costs, but we've also had some EBAs that have been significantly above 3% or the kind of long-term labor costs. And on top of that, we've obviously -- we have changed our -- or been far more transparent with our pathologists around the way that they are remunerated. So the combination of those things. So what I would say is there's kind of 2 things. There's the productivity piece going forward, and that is literally collection center by collection center, making sure that we are staffed by the right number of collectors at the right rate and stay open for the right opening hours. And secondly, as -- we've got 2 EBAs that we are negotiating at the moment, and we know that inflation has moderated. So there's a combination of new deals going forward that hopefully will be done at more normal rates. And also some of the EBAs that we have negotiated in the past year or 18 months do fall back to normal levels from next year onwards. So it's a combination of things, David.

Okay. The only other question I had was just on the nonrecurring items and what we should be expecting in the remainder of the year for those.

Look -- so we're going to talk a lot more about the digital health or the transformation program at the Investor Day. So we would envisage that -- and I think we guided to this at the full year results, that we would have around kind of $20 million this year. So we would assume in the second half that we would probably have around the same level.

Okay. And the other items that we see presumably shouldn't reoccur given transaction costs, et cetera, shouldn't be that material going forward?

Yes. So most of those -- yes, we would hope that they all disappear, correct.

Next question is from the line of Andrew Goodsall from MST Market.

Just starting with the underlying growth. Just relative to MBS, which I know can be a bit choppy, obviously you're below. Just wondering in your view sort of where you are in terms of holding share. And if you've lost share, sort of where that's been? Has it been more in the specialty referrals outside of the hospital setting?

So yes. So look -- I mean, this question comes up a lot. And it was obviously -- I've seen a couple of the notes from Sonic's results this morning as well. So their growth at 9%, when they are far more heavily skewed to specialist revenues compared to ours at 7%, would suggest it's very difficult to marry up with the MBS numbers, which is something that we all struggle with. So I think you're right, is that us increasing our specialist revenue would help us to increase our market share. We think that our market share overall for the past 6 months has been kind of broadly flat. And you're right, MBS jumps around a lot. I think we saw in September and October last year, there were some big jumps and then big corrections the following months. So the way that we look at that is on a -- normally on either a 6- or 12-month rolling basis. So we feel like on a 6-month basis, we're kind of broadly in line. We think that -- we try and work out, which is quite difficult, our share of the GP market, which we think is relatively strong, and we know that we need to increase our specialist revenues. So I think you overlay that with the GP attendance growth over the past 3-, 6-month periods, where December last year, it was back 3.9%; at June half, it was up 0.8%; and then December '24, it was up 3.6%. So it's improved a lot, which I think shows in some of our numbers. Specialist attendances over those 3 half years of 3.1%, 2.3% and 3.3%. So they've been steadier. And obviously, lack of coning for specialist referrals is attractive from a whole lot of perspectives.

And sorry, just on that final point, do you think you've sort of held share in that piece?

In specialists?

Yes, in your non -- yes, outside of the hospital...

I think, yes -- look, as far as we can work out, we think we are broadly the same. But that's -- we know that, that is an area that we need to be better at. And we, under Anthea starting with us, have now got some more specific structures and targets around growing that share of the market.

And I've lost track a little bit of it, but a couple of the Victorian public sector contracts, I know they may have come and gone already. But I think there's one still with the Western Health District. Just...

Correct.

And I know that was delayed. But I -- or that [ Monish ] was taking it and then been delayed. But where has that got to? Sorry.

Correct. Yes. And that continues to be delayed. So the Western Health -- so that is being in-sourced to the public system, which we believe is kind of flawed for a whole bunch of reasons. So that is happening. And it's kind of the time of when it's going to happen. We think it will be either later this year. Having said that -- I think that's one, and we've won or renewed 3 or 4 other hospitals in Victoria. So it's something -- I think especially in Victoria, where there seems -- where there's predication to in-source pathology at something like 3x the cost doesn't kind of make sense. But Western Health is the only one that directly impacts us at the moment.

Yes, you're 100% right it doesn't make sense. But yes, I'll leave that one there. Yes. So when you say later this year, would it be financial year or calendar?

Calendar.

Calendar, yes. Calendar, yes. It's a moving piece.

Probably more a '26 story.

I think so. Correct.

Financial year -- okay.

Yes.

And just final one for me. I asked a similar question to Sonic. But we did see last week that data sharing act got passed. And just if you had any thoughts about what that might mean. I think their end game is to try and reduce duplication.

Look, I don't really have enough of an informed view on that at the moment. So I might have to take that offline.

Next question is from the line of Craig Wong-Pan from RBC.

Just with the Pathology revenue growth exceeding volume growth, could you talk about what has been the key drivers there? And then notwithstanding the indexation that comes through from 1st of July, do you expect the revenue growth to continue to exceed volume growth?

The short answer to that is yes. So part of that is some of the B2B business that we have. Clearly, genomics is part of that. Our strategy in terms of effectively increasing average fee so that your revenue grows hopefully further ahead of volume growth is to increase our share of that specialist market. So it's a combination of those things. The short answer to that question is yes. The value -- sorry, the indexation piece is -- we think the impact of that this coming year is kind of relatively small. We're more worried about the B12 and vitamin year-end changes that the government currently have legislated for the 1st of July.

Okay. And then just moving to Agilex, that expectation for at least a flat EBIT. I mean what gives you comfort that you can achieve that just given the performance that was achieved in the first half?

So pipeline. Though Steve McIntyre and the team down there -- I mean, I think naturally there's some uncertainty with any election in any country and the run-up to it, clearly more so in the United States. And from what we've seen post the election, there's obviously a fair bit of trauma in a bunch of industries. So as Steve said, they took out 13% of their staff costs in November or end of October and have just redefined their -- just their BD activities. So we see the pipeline for H2. We've got some big clients that are trying to work out how they get their work done in the second half. And some of that's been locked in. So it's probably been -- it's been more volatile than we anticipated. But when you look at the work orders that are locked in for the second half, that's where we get our comfort from.

Okay. And then last question on Pathology CapEx. There was a comment there that it should be second half weighted. Could you just outline what are the major CapEx pieces you're looking to spend on in the second half?

Yes. So it's a bunch of things, Craig. So digital IP, that's one. Spend on ACCs in the labs. And we've got a new contract in the Grampians, so we have to fit that out. Genomics. A bunch of analyzers for cost per reportable. And then we've got some instrument connection licenses which aren't cheap, which goes to our laboratory information systems and automating that. So all of those altogether sort of -- were always planned for the second half, and they'll happen.

Next question is from the line of Mathieu Chevrier from Citi.

Just one on the collection centers and the staff that you've added. I was just wondering if you're able to share any sort of stats on your uptime, for the lack of a better word, across your collection network as a result.

I think, Mathieu, it's -- the reduction of those -- having 160 collection centers closed a day, reducing that to 80 or less than 80 now is probably the best way to describe that. Clearly, if we have 1,978 collection centers, we would like them to be all open every day and for them all to be contributing a positive margin so that they contribute towards the fixed cost base of the laboratory network that we have. We're not the only industry that's competing for staff around those wage levels. So I think we have not been great at the way that we've been recruiting and having an eye for the future recruiting ahead. So I think we are getting a lot better at training and retaining staff. We've got some quite significant advancements coming from our digital technology that we use in collection centers, and we'll talk about that at our Investor Day. And we think that is not only a step change for us in terms of making our collectors' lives easier and a better place for them to work, but also helping us right through the whole value chain right through laboratories. So I think we know -- we have a tiered system in terms of the most -- the collection centers that have the most value. So when we do require centers to be shut, it's actually quite a complex workforce planning exercise to make sure that you've got your most valuable collection centers open all of the time. So we would like that number to be less than 3% going forward. The flow-on effect from that, too, is obviously -- if you're in a collection center in a doctor's surgery, not being open is actually a problem for the doctors in that surgery. So it's a customer service thing at the same time.

Yes, absolutely. And just on corporate costs, what should we expect in the second half?

Yes, just the same as the first half, Mathieu.

And so then does that mean that any sort of changes you make post the sale of Lumus will be kind of offset by increases in other places? Or there won't be much actual impact from the sale of Lumus in the second half?

In the second half, there probably won't be depending on when the completion happens. And we're all hoping that, that's kind of end of -- around the end of Q3, that the impact on FY '25 won't be that great. So as we said before, that will form part of our stranded cost exercise to make sure that Pathology margins increase and are not impacted by those corporate costs that remain once Lumus goes.

Next question is from the line of Charles Kingston from K Capital.

Just first -- I've got a few questions. The first question on the dividend amount. At the AGM, you said that you're going to return the majority of proceeds after repaying debt. And I think you said today that debt is probably going to be repaid in full, if not holding a little bit of debt. But that still implies that you'll have over $400 million in net cash retained. You also said you've got $161 million in franking credits. And clearly, you're going to hope to return the majority, if not all of those. But that implies well over a $300 million dividend. Can I just confirm that in line with those AGM comments, is that a fair quantum for us to think about the dividend, well over $300 million? Or all of those franking credits you hope to return with these -- the return that we can expect, please?

No. Look, I think what we said was -- I think all of those facts are correct. We didn't put a number on what we were going to return. And we've said we've got franking credits. We said we want to have little or no debt. And hopefully, we're not too far away from completion. So we will -- once we know the exact proceeds, then we will tell you exactly what we will be handing back to shareholders.

Okay. But when you say the majority, that implies at least over $200 million. Is that a fair expectation? Or is that...

You're trying to draw me to a number. Look, I think we're just sticking to those facts. And hopefully, we're not too far away from completion. So we'll tell you the exact number.

And then the second question, you've also cited some of the cash is going to be used to support strategic execution in Pathology. I know you've got the Strategy Day coming up. But just noting Healius has spent a very large amount on IT. And it has changed names many times, the various iterations of what you've called these investments. But I think it's well over $250 million now, and we still haven't -- well, basically, 0.6% I think was our last EBIT margin. But can you give any guidance as to what sort of investment you think is required to finally restore profitability for the Pathology segment, please?

So look, I think -- so we are very cognizant of the digital transformation program. We are going to set out at the Investor Day exactly how we're going to complete that because we all know that there needs to be a finishing line on that. And what we are saying is that there is not an enormous amount of capital to be spent to rebuild the laboratories. So we will set that out. And our ambition, I think, as we've said quite often, is that we need to get back to having digital and IT as a normal part expense in the business rather than having it as non-underlying. So there'll be a lot of details provided about that at our Investor Day.

Okay. And then just a final question. I know you were asked about ACL earlier, but you said that was news to you. But I suppose when they did propose the merger -- from memory, it was 0.74 ACL shares for Healius. And I know that they were trading at a different price at that time. But based on the current prices, that would imply a near doubling of the Healius share price from now $1.37. So I'm guessing that would be a very great result for shareholders and well supported. But I know you haven't heard anything and -- but are you actually pursuing something like -- given where the stock is trading, $1.37. It's a very low enterprise value, roughly $600 million. And ACL, their enterprise value is over $700 million. We've got 80% more revenue for them, albeit we're not making any money on that revenue, but we can clearly turn that around. But is it something that you're actually pursuing to create that value? I think there was $90 million -- or over $90 million of synergies that they were putting forward with that merger. But if not ACL, is there somebody else that may take a longer-term view of the value of Healius, because clearly at the moment, the market is putting us on a very, very low enterprise value at around about $600 million.

Yes. So look -- I mean, I think we said that, that article was complete news to us. So that's the first thing. I think there's one thing doing the financial math around -- a theoretical exercise. The reality, I think, is the issue that it didn't happen, which was the competition issue. So that is something I think that the -- ACCC have published their thoughts on that. And then we all know that there's been subsequent pronouncements from the ACCC and they have a new regime in place. So that's kind of the -- I guess, the reality of the situation. And then as far as creating shareholder value, all of the things that we are doing is trying to create organic shareholder value from just being better at what we do, not looking externally.

Okay. So notwithstanding that -- and great result on the Imaging sale. Clearly, that was a very good multiple and much more than what the market was expecting. But it's something you're not investigating really, potentially selling the Pathology division, notwithstanding all the potential...

No.

Interest from ACL and historically all the corporate activity with Healius. No? Okay.

No.

Next question is from the line of David Kingston from JAG Capital Group.

Look, I just got a couple of general comments. There's been a lot of good specific questions today, so well done to the questioners. But just some general comments. Look, number one, every time you talk, Paul, at the AGM, the share price fell dramatically. And today, you've disappointed the market again significantly and the stock has fallen another 7%. So the market really is becoming very skeptical, and it's -- the clock is ticking. Really we need some good news very urgently from this company because the malaise has been going on for so long. Fully appreciate that really Malcolm put in a terrible job a few years ago. Maxine did okay. But you're the new guy. But really, the clock is ticking and the market is very skeptical about Healius. But let's look at it briefly. You are the second largest pathology entity. It's a fundamentally core business. Yet you really are the dunce of the class at the moment, Paul. ACL is performing pretty well. Sonic is performing pretty well. And the Bateman start-up that shot the lights out, they made a lot of money. So how long can Healius remain at the bottom of the class? Let's look at the emergency rights issue at $1.20 probably 1.5 years ago. The stock actually is worse today, Paul, than it was then if you adjust for, number one, 1.5 years of no coupons. Secondly, and credit to you and the team. You did a great sale of Lumus. Everyone accepts that's well over what was expected. And thirdly, part of the market pricing at the moment, Paul, is being supported because you are going to do the right thing and use the majority, if not all, of the franking credits to pay out a franked coupon. And that adds value to the share price. And smart people look at that and adjust the price accordingly. But if you adjust for those 3 factors, where the market is rating you at the moment, Paul, is actually worse than at the peak of the gloom in the emergency rights issue 1.5 years ago. So look, I really don't have any questions, Paul. It's just a comment that the clock is ticking. Yes, you're the new guy. But the market is getting very skeptical about the excuses and the delays in returning to a proper EBIT margin on the Pathology business. So it's just a comment, Paul. But good luck. And -- but really, the market is looking for some good news from you very soon.

Thank you.

As there are no further questions at this time, I would now like to hand the conference back to Mr. Anderson for closing remarks.

That's all. Thank you very much.

Thank you very much. That concludes today's conference. Thank you for participating, and you may now disconnect your lines. Thank you.