Uniphar plc (UPR) Earnings Call Transcript & Summary

Good morning or good afternoon all, and welcome to the Uniphar 2024 Results Conference Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to Allan Smylie to begin. So Allan, please go ahead when you're ready.

Good morning, everyone, and welcome to Uniphar plc's full year results presentation, which covers the period from the 1st of January '24 to 31st of December '24. I'm Allan Smylie, and I look after IR here at Uniphar plc. Presenting our results today is Ger Rabbette, our CEO; and Tim Dolphin, our CFO. We're also joined on the call today by Brian O'Shaughnessy, our Chief Commercial Officer; and Dermot Ryan, our Chief Operating Officer. Before we begin, I'd like to remind everyone that you can access the presentation either on our website under Latest Results and Presentations or via the link sent to you when you register for the conference call. The results presentation will last approximately 20 minutes and will be followed by Q&A. Please note, the full year results presentation may contain certain forward-looking statements, beliefs or opinions, which are based on current expectations and projections about future events. Actual results may differ materially from those expressed or implied in such forward-looking statements. I'd now like to hand you over to our CEO, Ger Rabbette.

Thanks, Allan. Good morning, everyone, and thanks for joining us. Just for the benefit of those who don't know us that well, I just want to start by introducing Uniphar on Slide 5. Uniphar is a health care services company. And what we mean by that is we solve problems for health care companies and health care professionals. If you are a pharma, med tech or biotech manufacturer, the good news is that the development of new specialty products is creating big opportunities. But the challenge is that their increased complexity is making it harder to unlock these big opportunities. And that's where we come in. We sit in the middle between the manufacturer and their stakeholders. We help them both to overcome the problems of this new, more complicated health care environment. We've built long-term relationships with manufacturers and a deep understanding of the challenges of getting new specialty products to market. We've been talking for years about building platforms. This is what we mean by it. We're building our capabilities and our relationships to allow us to solve the problems that health care is facing. And as we see it, our strong financial performance last year clearly shows that the investments that we made in our platforms are now delivering a good return. If you move to Slide 6, you can see that as a business, we came on a journey. We've evolved from a low-margin business to a higher-margin business, from 4% to 15%. We've gone from local to global. We now have a global presence and serve 160-plus countries worldwide. We've gone from a focus on mass market to a focus on specialty across all our divisions. And this shows in our results. We've increased our EBITDA almost tenfold in many years. Basically, as we see it, we're in the right place at the right time with the right service offering. In an industry where complexity is overwhelming, where to get a proper return for your investment in developing a high-tech gene therapy or a med device, you need to go beyond the big markets like the U.S. and the EU for, Uniphar is here to help as your trusted partner. We've built the platforms that allows us to solve the push problems of manufacturers, who are seeking to push their new products into the global marketplace. At the same time, the pull problems of health care professionals, as they seek to pull these new medicines into the local marketplace for their patients. On Slide 7, we show what the strategy is now driving for us in financial terms. Last year, the group generated revenue of EUR 2.8 billion, gross profit of EUR 428 million and EBITDA of EUR 123 million. And what is most pleasing for us was a strong organic gross profit growth of 8% or EUR 32 million. This was delivered by a strong performance by each division, with Supply Chain & Retail delivering EUR 5 million, Medtech EUR 9 million; and Pharma EUR 18 million, a huge result for us, thanks to our amazing teams. On Slide 8, we show the group's financial highlights. As you can see, we're making great progress towards our medium-term EUR 200 million EBITDA target. Last year, we delivered organic gross profit growth of 8%, return on capital employed of 15%, earnings per share grew by 12%. Free cash flow conversion landed at 106% with year-end leverage of 1.5x, all ahead of target. In addition, we have today launched a EUR 35 million share buyback scheme, which is approximately 5% of our market cap. And this reflects the recycling of the proceeds from the recent sale of Inspired Health and our view that our share price at its current levels is materially undervalued. On Slide 9, you can see that we continue to make great progress in sustainability, maintaining or improving our score with independent rating agencies. If you move to Slide 11, we take a closer look at the progress of each division. Supply Chain & Retail is our legacy business, serving retail and hospital pharmacy in Ireland. It's a vertically integrated infrastructure play, and it represents 46% of our gross profit. Our Pharma division is high growth. It's a global business. It's focused on specialty products, and it now represents 28% of the group's gross profit. Medtech is also high growth. It is also specialty focused, but has a European footprint, and it now represents 26% of the group's gross profit. If you move to Slide 12, we outlined how we win in Supply Chain & Retail. This business is an integral part of Ireland's health care infrastructure. We've grown market share every year since IPO. We are vertically integrated, making the manufacturer to the health care professional with a world-class service offering. The business has a strong competitive moat, huge barriers to entry, and we have a clear blue water between ourselves and our competition in terms of infrastructure and future readiness. Working with both retail and hospital pharmacy, our market share today is 54%, and we're moving up the value chain into our own brand consumer partnerships and in-licensing. We own directly or have franchised 28% of the retail channel currently, and that's the largest network in the country with 445 stores. On Slide 13, we outlined the division's financials. Supply Chain & Retail delivered 5.5% growth in gross profit to EUR 197 million on a revenue base of EUR 1.844 billion, with 56% of gross profit coming from retail. This division again outperformed market. The market growth of 5%, as we continue to gain share. Wholesale grew across both Rx and Consumer that was helped by the addition of 16 new pharmacies into our network. In retail, we successfully integrated the 2023 McCauley Group acquisition. But what we're most proud about is the fact that all 4 of our pharmacy brands sit in the top 12 consumer brands in Ireland. From our perspective, our Supply Chain & Retail business is a strong cash-generative business, which provides infrastructure, resources and skills to other parts of our business, and we believe we will continue to grow low single digits in the years ahead. On Slide 14, we outlined how our pharma business wins. And as we see it, we've built a global platform, leveraging our capabilities across our Irish pharma business to deliver high-value solutions to manufacturers and hospitals. Working on the push side with pharma and biotech manufacturers, we focus on providing an integrated range of services for specialty medicines, both pre and post approval. And on the pull side, our key relationships are with our global hospital channel, helping health care professionals to access or source the treatments they need for their patients across early access to specialty, unlicensed medicines and medicine shortages. On Slide 15, we outline the Pharma division's strong financial performance with gross profit growing by 18% to EUR 122 million on a revenue base of EUR 659 million. The division delivered double-digit organic growth across both on-demand and pharma services with a 60-40 split. In On-demand, our market-leading global sourcing platform had a very busy year, servicing a strong demand for unlicensed medicines, clinical trial supplies and medicine shortages. In Pharma Services, we delivered a record number of 70 new exclusive access programs, cementing our position as a clear market leader in cell and gene therapy. At the same time, the build-out of our European commercialization platform is progressing to plan, and we're making really good progress in the U.S. So we remain confident that this business will continue to grow double digits in the years ahead. If you go to Slide 6 (sic) [ 16 ] we outlined how Medtech wins. This division has had another great year. This is a high-margin, high-growth business with very sticky relationships. We provide a full-service commercialization model to 7 of the top 10 medtech manufacturers. And just like in pharma, we focus on specialty. We focus on high-value specialisms like diagnostic imaging, orthopedics and interventional. We've built out this business from an Ireland and U.K. base into Continental Europe. We have very strong relationships throughout the European hospital channel with hospital consultants, who are increasingly the buy decision-makers for these ever complex med devices coming to the market. On Slide 17, we outline Medtech's strong financial performance with gross profit increasing by 9% last year, which is all organic to EUR 109 million on a revenue base of EUR 268 million. We saw growth across all specialties. And during the year, we entered the Swiss market organically. We continue to see great opportunity for ourselves to leverage our strong manufacturer relationships to enter new geographies with existing partners, leveraging our existing platforms. And proof of this is that we now work with over 74 manufacturers in 2 or more geographies. Medtech is now 26% of the group's gross profit, and we are confident that Medtech will continue to grow high single digits in the years ahead. If you go to Slide 19, we give an update on our investments as well as our flagship investment in Supply Chain & Retail in Ireland. We've invested in our Pharma and Medtech platforms in the Netherlands, where we've built a world-class distribution hub to help us scale this business in Europe. At the same time, we've invested in a world-class facility in North Carolina to help us grow our pharma services, specialty offering in the U.S., and we plan to operationalize a similar facility in the U.K. next year. What these facilities do is it gives us the capacity to grow, and we need this to hit our 2028 target of EUR 200 million EBITDA with 80% of that target being delivered organically. On Slide 20 and 21, we give more detail on our flagship distribution facility in Ireland, which we call Greenogue 2. As we see it, this significant investment future-proofs our strong market position in Ireland. It transforms our cost base and enables the pharmacy of the future. The project is on track to deliver 15% return on capital employed within 5 years, growing strongly from there as we utilize the significant additional capacity that it delivers. This is a huge project for us. We have 40 of our best people on it, which is a serious drain on our management resources. However, we remain confident of a successful go-live date in July of next year. I'll now hand over to Tim to talk you through the financials.

Thanks, Ger. I would now like to take you through the financial highlights for 2024. I'm pleased to say that the group has delivered a strong performance during the period with gross profit growth across all 3 divisions. At an overall group level, we generated a gross profit of EUR 427.6 million, up 9.6% from 2023. The group delivered strong organic gross profit growth of 8.2%. EBITDA has increased by 6.4% to EUR 123.5 million, demonstrating the underlying strength of the business. Adjusted EPS is up from EUR 0.183 to EUR 0.205, representing an increase of 12%. This has resulted in a return on capital employed of 15.2% at the top end of our medium-term guidance of 12% to 15%. And leverage for the period was just at 1.5x. Moving on then to look at gross profit. Gross profit and gross margin percentage are the key financial metrics we use to track profitability at a divisional level. Uniphar Supply Chain & Retail performed in line with its divisional guidance with reported growth of 5.5% and organic growth of 2.7%. This division has strong recurring revenues, plus a stable and robust gross profit profile. In terms of volume, we once again outperformed the market. This division represented 46% of group gross profit for the period. Its gross margin was broadly stable compared to prior years at 10.7%. Uniphar Medtech delivered a strong outturn for FY '24. The division delivered reported gross profit growth of 9.1%, all of which was organic. This was at the top end of our high single-digit growth guidance range over the medium term. This performance reflects the strength of our business, the deep expertise of our teams and the diversity across our service offerings. This division contributed 26% of the group's gross profit for the period. And its gross profit margin increased during the period from 40.1% to 40.6%. Uniphar Pharma delivered reported gross profit growth of 17.8% and organic growth of 17.6%. This reflected a very strong performance across both our On-demand and our Pharma Services business. The divisional gross profit margin increased from 17.4% to 18.5%, reflecting our continued move into higher-margin activities. Then just moving on to Slide 25 to have a look at net bank debt. At a high level, we finished the period with a net bank debt position of EUR 147.7 million, driven by opening net debt of EUR 149.9 million, strong EBITDA of EUR 123.5 million, a working capital inflow of EUR 49.5 million, driven by prepayments in Uniphar Pharma. CapEx included strategic CapEx of EUR 68.1 million. Acquisition and deferred consideration payments of EUR 17.9 million and other items of EUR 38.9 million, which includes the purchase of our Citywest premises for EUR 33.8 million and asset disposals during the period. Our strategic CapEx reflects the significant multiyear investments we are making in our new distribution center, Greenogue 2 and our new SAP platform. Our reported free cash flow for the period was EUR 130.3 million, and I'll take you through the details of that on the next slide. Here, we outline our free cash flow generation and free cash flow conversion for the year. We have updated our definition of free cash flow and now define it as EBITDA less investment in working capital, less maintenance CapEx, less lease payments. We have also updated our guidance for free cash flow conversion and expect to achieve 60% to 70% by 2028 at EUR 200 million EBITDA. For 2024, this translates into free cash flow conversion of 105.5%, helped by the inflow of working capital, I referred to earlier. Moving now to Slide 28. Capital allocation has and remains a key focus for the group, as we adopt a very disciplined and balanced investment approach to creating shareholder value. As we have always said, we will invest in organic and inorganic opportunities across each of our 3 divisions, which support our strategic objectives and deliver a return on capital employed at or above our hurdle rate of 12% to 15%. We maintain a prudent approach to leverage and aim to keep our net bank debt to EBITDA below 2.5x over the medium term. In addition to a progressive dividend policy, we will also look at share buybacks subject to market conditions. Just moving on then to Slide 29, having a look at our priorities for M&A. We have a strong track record on completing M&A with 17 acquisitions completed in the last 6 years across all 3 divisions. We tend to work with people before we engage in M&A discussions and now have a reputation for being a responsible owner in the market. So we provide competitive auction processes. We can buy off market and get good value. Our pipeline is mainly focused on pharma. We are looking for acquisitions across areas like market access as well as commercialization platforms and specialist distributors. With respect to previous M&A, we had a number of moving parts in our deferred considerations last year. BModesto in our On-demand segment has performed materially ahead of expectations, and this is reflected in an upward revision. Some of our U.S. pharma assets, in particular, our early-stage research and consulting business are still recovering from the impact of weaker biotech funding in the U.S., which has pushed our profit expectations for these businesses to the right. During the period, we also divested of Inspired Health, a great business and management team. But by mutual agreement, we felt there were better owners for the business. We generated a return on capital employed in excess of our 12% to 15% target on the transaction. The disposal will have no impact on group growth expectations for 2025. I'll now hand you back to Gerard to finish off on our investment case.

Thanks, Tim. If you move to Slide 30, we outlined our ambitious target to deliver EUR 200 million EBITDA by 2028. We will achieve this target through robust organic growth across all 3 divisions, made possible by our investments in technology and infrastructure, complemented with strategic M&A. Our expected organic, inorganic split is now 80-20, as we leverage our platforms, and we remain confident that we will deliver. Slide 31 shows our strong track record as a listed company. We've more than doubled our gross profit and EBITDA. We've increased our margins, and we delivered a very substantial growth in earnings per share. And finally, on Slide 32, we outline our investment case. We're going into this next stage of development of growth, armed with a much greater number of capabilities than we had at IPO. We have demonstrated a strong track record of delivery. We know this industry well, and we will follow the money. There is a compelling market opportunity for ourselves, a very favorable market backdrop and plenty of scope for growth in each of our 3 divisions. Each division has an attractive competitive moat, and we have a concrete plan in place to grow and deliver on our ambitions. Thanks for listening. I will now hand back to the operator for Q&A.

[Operator Instructions] And our first question comes from Colin Grant from Davy.

I have a couple of questions. Just firstly, to do with your organic growth, which is really strong in 2024 and again, a strong outlook for growth going forward. I'm just wondering, in particular, with the Pharma and Medtech divisions, are there any parts of the business or geographies where you feel you're winning market share, given the scale of growth you're seeing there? And if so, what's kind of driving those market share gains? That's kind of the first question. And secondly, you mentioned on the call there, the stickiness of some of your customer relationships and the recurring nature of some of your revenues. And just the lower cyclicality that you have in the earnings compared to many other businesses in other sectors is quite notable. And I'm just wondering if you could give a bit more color on the share of recurring revenues and earnings that you have and how that shapes your ability to hold a kind of a level of debt that might be different to more cyclical businesses.

Colin, I grab that. So listen, I think when you look at the results, we're very fortunate to have 3 strong divisions, both performing really well. I think the answer to us is all about why we're growing and why we're gaining share is all about the quality of our people and the investments that we've made in our infrastructure and in our technology. And that's the core right across our 3 divisions. It's all about the quality of our people and the investments we're making. I think basically, when we look forward, we do believe there's opportunity for us across each of our 3 divisions, but we're very comfortable with the guidance we've given the market with regards to the gross profit growth across the 3. Obviously, Pharma Services is, we see, our biggest opportunity. And obviously, we'll talk later about that. From a recurring income stream perspective, I think we're very fortunate to have 90-plus of our income coming of a recurring nature. You can see we've gone through financial crisis. We've gone through COVID and the business has managed to continue to grow and perform well throughout that. So that means that we see the quality of earnings at a much higher level than other industry and other companies. And that's why we're very comfortable with leverage in around the 2.5x because of the strength of our recurring income. And the compelling market opportunity we have for ourselves and the structural demographics and the new innovations coming through in health care today and the fact that we're very well placed to harvest those opportunities.

The next question comes from Charles Weston at RBC.

Three, please. First of all, given that this year and next year, you'll start to see a lot more of your free cash flow dropping to the bottom line. Can you provide a bit more color on how you'll think about buybacks versus M&A in the future? And perhaps what your target leverage is rather than your sort of maximum leverage? I'll pause there for a second.

Charles, we've very well-articulated M&A strategy, and that really hasn't changed. We -- it's all about strategic -- doing good acquisitions to enhance our service offering for our specialty customers and growing our skill set within the business. And that really hasn't changed, and we still see a very active pipeline and a lot of opportunity for ourselves in M&A. We rarely, as you know, get involved in big process. We like to do it. Most of our deals are off market that we get to know the guys well, and we've been very successful in getting -- doing good M&A. I think when you look at the share buyback issue for us is we fundamentally believe that our shares are materially undervalued. It's opportunistic. We hope at some point, Charles, that the market corrects itself and that opportunity goes away. But as we stand today, that is a very compelling market -- a very compelling opportunity for Uniphar and our shareholders.

I see. Okay. And then my second question is on the organic growth contribution. You said it's going to be at least 80% of your doubling of your EBITDA from '22 to '28. And that means you have to average 10% effectively organic growth over the 6 years. You did a bit less in '23. You got 8% in 2024, but that means you still have to leverage -- sorry, you have to deliver some of the low double -- very low double digits over the next 4 or 5 years. So that's a bit of an acceleration again. Can you just help us understand what gives you the confidence here and how you expect the sort of cadence of growth to look over the next few years?

Good question, Charles. I mean you see the guidance we've given the gross profit, making really good progress there. And ultimately, you see the investments we're making in our infrastructure, in our technology platforms. I think basically, as they wind and they start to give us a return on the investments, that's when you see the EBITDA kick in. And I think it will start to come through post Greenogue 2 next year, you start to see an uptick in our EBITDA performance as we go through over the next number of years.

Okay. So somewhat back-end loaded sort of '26 to '28 because of the CapEx that you put in and delivering. Is that summary?

I think so, Charles. Obviously, we hope to outperform that, but being conservative, I think that's a fair comment.

Great. And just last question, please. You've won a lot of new EAPs in 2024. And I remember you hired some Fingen people a couple of years ago. So can you just give us a bit of color on the competitive landscape in that segment and your visibility over the next couple of years?

Brian, you might take that? will you?

Yes, Charles. So I suppose it continues to be a competitive landscape, Charles, with some of our competitors being in the market a lot longer than us. But we believe we have a best-in-class service that we've been investing in over the last 5 years, both organically and inorganically. A good example of the strength of this service is the increased number of programs being 17 won this year. If you go back 5 years, that would have been 10 and has been growing every year. And some of which these programs are being won with clients that have historically worked with our competitor. And specifically on the EAP around, we have an extreme strength on cell and gene being the only provider to have delivered a global expanded access program for cell and gene therapies -- with increased number of cell and gene therapies working with Uniphar. So we have a strong pipeline, incredible team, best-in-class service, and we're seeing the benefit of that combined strength of our capability, which gives us confidence in the positive outlook for the business.

The next question comes from Paul Cuddon from Deutsche Bank.

Just one question, please. Just on Pharma Services, obviously, H1 '24 was a sort of breakout kind of period for pharma. H2 has delivered strong growth as well. If you could just elaborate on any potential sort of one-offs in there things that we should be aware of that were exceptional contributors in 2024 that may not recur in 2025? Or is it another picture where actually a lot of the work that you've done is just getting started within Pharma Services, cell and gene therapy programs, et cetera, that you can continue to support into 2025 and beyond?

Brian, do you want to take this, please?

Thanks, Paul. So suppose parts of the Pharma Services business are multiyear contracts such as expanded access, clinical development or bespoke distribution. But the nature of some of the services are one-off, but the opportunity for us is to build on these relationships and work with these clients for more services within that segment or a big focus is offering -- expanding on the client relationships into new services. So there'll be nothing to call out, Paul, it's beyond the nature of the business. But there is a mix of recurring, but also the big opportunity is to build on the relationships in other services.

Super. And maybe just one other question. I mean we've talked a lot about organic gross profit growth and acquisitions as being the bridge to the EUR 200 million of EBITDA. But perhaps you can talk about any potential cost savings through your investments on that journey as well, please?

I think, Paul, we really focused on cost savings as a reason to do an acquisition to go forward. Now there is exception that probably Greenogue 2 being our biggest exception. So I think as we see towards the EUR 200 million EBITDA target, Greenogue 2 and the cost savings will be material as we move on. Dermot, do you want to comment?

Yes. I think it's coming from -- obviously, with Greenogue 2, it's the investment in the automation and the robotics. We're moving from a business today that's 48% automated to 80% automated, and that obviously drives a lot of savings. I think we've said previously that we will reduce our pure pick cost by 50% through that investment, and that still holds today.

The next question comes from Christian Glennie from Stifel.

Three questions then. I guess starting with Medtech, just be interesting to hear a little bit more about expanding into new markets. You called out sort of Switzerland and Austria. Does that -- how does that happen? Are you taking -- is it sort of one product for one customer into the markets? Or is it on a sort of multiple basis? And then related to that, just the phasing of growth in '25. Obviously, you had a big swing to second half -- strong second half growth last year. What should we think about the balance of growth in '25 for Medtech? And I have a follow-up.

Brian?

Yes. So thanks a lot, Christian. So we've always spoke around the growth opportunities for Medtech, is to take existing relationships into new geographies, and that's exactly what we're seeing. So the idea for us is that we take existing portfolios and not just individual products, and that's what we're seeing in the growth opportunity set that we have called out. And we've got a very strong pipeline and we've continued effort in terms of the focus on expanding those supply relationships into geographies. So in terms of the split for the Medtech business, I don't think there's anything specific to call out, but obviously, it's the nature of winning new business for new clients, new opportunities that tends to have a ramp-up. So the more successful we are in landing new business, we would hope to have a stronger second half, but nothing specific to call out in terms of the phasing.

Yes, I'd say it would be similar to last year.

Okay. That's helpful. And then on Pharma, I guess a couple here. So just maybe some background on talk since you sold Inspired Health, just some -- maybe how that process came about. I mean, maybe slightly surprising on one hand to be selling an asset you've acquired, but maybe obviously, it ticks some boxes elsewhere. So -- and does it mean that you might consider other business disposals? Or is this pretty much a one-off?

I would say it's a one-off, Christian. So we're very happy with where we are today, but it's a one-off. Brian, do you want to give more color?

Yes. Well, we highlight and consistent around -- our discipline around acquisitions in terms of strategic fit, cultural fit, return on capital employed. But that's not just a pre-acquisition process. We're also disciplined performing post-investment reviews to ensure the acquisition is delivering against the -- I suppose, the purpose in which it was originally acquired. So the Inspired disposal was by mutual agreements with the founders, as we both felt it was a better owner for the business. And it's important to highlight, Christian, that we did deliver, I suppose, on the target return on capital employed. Actually, we -- it was in excess of 12% to 15%. But as Ger said, it's a one-off, but it's just reinforcing that discipline over how we actually go about our acquisitions.

Makes sense. And then on the EAP, sorry if I missed it, was the 17 new wins, was that a sort of record year? Does that set maybe -- you talked about a good pipeline, you're typically looking at sort of 10 to 15, I guess, historically -- 10 to 15 wins in any given year. Are you trending a little bit ahead of that? And maybe if I can on just that -- maybe some context for sort of how you see your market share in terms of EAP, either on a new win basis or on an overall contract win -- contracts you're working on?

Christian, it was a record year. So Brian, you might just give a bit more color.

Yes. I suppose it's just a reflection of the investment we've made there, Christian, over the last 5 years. So we've got the best-in-class team, we say best of industry team on expanded access, best-in-class service, and that's been reflected in that number of wins. As I mentioned earlier on, I suppose what's reinforcing the fact that we believe it's best-in-class service is that some of those wins are coming from clients that have traditionally worked with our competitors, specifically around cell and gene, like we are the only provider to have delivered an outsourced global expanded access program in cell and gene. So I suppose we've invested and focus in the right areas, which is now delivering returns for us. And we're very positive about the outlook for that business, very strong pipeline that we can continue to convert.

Maybe one more, if I can, on supply chain. I mean, just for context, the potential doubling of capacity, as you step through delivering that, that starts to come on stream in '26 and then fully up and running in '27. What are your sort of ambitions, I guess, ultimately in terms of how we should think about market share gains and/or potential actually maybe a nudge ahead of your low single-digit growth that you've typically guided for that business based on that capacity -- significant capacity increase?

Dermot?

I think when we look at supply chain, we've obviously outperformed the market again. As Ger mentioned earlier, we've outperformed the market every year since we've IPO-ed. So that gives us a huge amount of momentum going into the Greenogue 2 project. I think the investment really supports that momentum. Obviously, we're looking to enhance and transform our market offering. And I think this will really transform the customer experience, not just in terms of our pick efficiency, but also in terms of our digital core that we're building. And that whole customer experience for -- will be much, much better for both our manufacturers and our retail pharmacy customers. So that gives us a really good position and foundation to continue to build on the market share gains. And obviously, there's an efficiency piece in terms of reducing our pure pick costs in half from where they are today. So when you look at all that coming together over the next sort of 2 years, I think it leaves us really well positioned to continue to deliver in supply chain.

The next question comes from Brian White from Shore Capital.

A couple of questions on pharma. Just a commentary regarding what I guess everyone knows about the more difficult or challenging financing environment for biotechs and the impact that, that's had in some of your businesses. Given that circumstance, does it make sense perhaps to double down here and to invest as an opportunity to take share where whereas some of your competition may retrench? And then also -- and apologies for asking another EAP question, but just trying to think a little bit more about this leadership position you have in cell and gene therapy. Is -- have you been able to dig a little bit deeper? Is there anything you're offering different there in comparison to your competition that you can capitalize on and can be transferred into or just more broadly in your product offering?

So I might just -- so health care for us is long term. So we're making long-term investments. To talk about Greenogue 2, it's been 4 years in the planning and 4 years in the implementation. It's a pure long-term investment. Same with the early access program. We started this business pre-IPO and it's -- now we're harvesting the return on our investment. So these are all very long-term investments -- the long-term investments for us. So that's -- the beauty with that is it build very strong competitive moat around your business, as you go forward. Brian, do you want to comment?

Yes. So specifically around the cell and gene piece, fundamentally -- again, it just comes back to how we set our strategies looking at the macro trends within the environments we operate in. And cell and gene was a clear one for us that we focused on in terms of targeting from a business development perspective. So where that has led now is we are the only provider that's delivered a global cell and gene expanded access program, which has the benefit, I suppose, of when a cell and gene expanded access program is being launched. We almost have to be engaged. So there is certain capabilities and complexities that come with cell and gene versus non-cell and gene expanded access programs that Uniphar has the experience to deliver and can give confidence to our clients. And in terms of what we're doing there around expanding on that expertise into other services, it's the same as the entire pharma division, which is trying to leverage our existing relationships and expertise and transfer that into other opportunities. So we've officially launched our Cell and Gene business unit within Access, and that's not just an expanded access offering, that's a launch offering so -- where we're talking to our clients around how we can support them in their ex U.S.A. launch, be it through discrete services or through some form of exclusive relationships. So early, but a big focus and looking at some positive potential wins that we're close to signing.

The next question comes from Sam England from Berenberg.

First one is just on pharma and another one on EAPs. I was wondering if you could give us a sense for how much the recent wins contributed to your 2024 growth. So where are we in the ramp-up of the recent contracts that you've won? And maybe if you could give some comments on the typical sort of time lines around win to sort of hitting maturity in EAPs? And then second one on net debt. Can you just talk a bit about the breakdown of growth? And I suppose how much of the growth is being driven by deepening existing relationships with partners you're already working within other areas or product categories versus adding new partners that you weren't working with previously?

Brian, you might take those 2, please?

Yes. So I suppose in terms of the contribution of the new programs for this year, it'd be a smaller portion of the overall delivery of growth. So it provides really strong momentum for us in terms of the growth for 2025 as well as converting our strong pipeline. So they typically tend to be 3- to 5-year programs with year 1 being the smallest year, obviously, depending when it actually ramps up. From a Medtech perspective, there is -- we've always talked about the leveraging our existing relationships into new geographies, and that's exactly what we're doing. And I think Sam you're calling out just the difference between new relationships are going into new modalities. So they're both big opportunities. To date, we probably focused more on our existing portfolios into new geographies rather than expanding the relationship we have with existing clients into new product portfolios. So in some ways, the latter is an untapped opportunity, which is a focus for us, but it just goes through the strength of the opportunities within that division.

[Operator Instructions] the next question comes from Zoe Karamanoli from Goodbody.

First of all, on the same of EAPs again, can you provide an example on how an on-demand client or an EAP program has transitioned successfully into the pharma service engagement? And what that might imply in terms of long-term margin or revenue expansion? That's the first question. I'll pause here.

Brian?

I suppose the first thing to highlight is the crossover in infrastructure between the 2 businesses, on-demand and EAP. So fundamentally, the EAP business depends on the infrastructure built within the On-demand business in terms of its supply chain capability, quality, IT, finance support, but probably the most important piece is the regulatory support and the understanding of being able to bring unlicensed medicines into different markets around the world. So in terms of the connectivity from a relationship perspective, it's a big focus of us in terms of building out an integrated platform. The biggest benefit we get from that is leveraging relationships for new opportunities. And the most tangible example is when we look at the opportunities within our long-term medical team, 60% of that -- their pipeline is coming from EAP opportunities. So it's a big focus to make sure that our key management have visibility over pipelines. And we're making sure that we're maximizing the opportunity within a pipeline of clients, but also managing existing clients from a key account perspective. So in terms of what this means for long term, it's a very positive outlook in terms of like we're delivering on what we said, the benefit of the integrated platform. So we'll be very positive around this business.

Great. And just on the current investment and the uptick on margin, do you still anticipate a significant uptick in EBITDA margin post '26? And is it possible to provide a range of what might that look like?

Well, as we say, like our big change in 2026 will be the efficiencies coming from our G 2 rollout. So it's hard to predict exactly what the range will be, but we're expecting substantial uptick in the EBITDA margin at that point in time, given the synergies that will come through both from a gross margin perspective and from a cost synergy perspective.

The next question comes from [indiscernible] from Alliance.

I was just wondering if you could provide some clarity about the working capital development. I think you indicated that was temporary. I was just wondering when that was going to reverse.

Well, hopefully, [ Cornelius ], it will be something that will be there for a long time. As you know and as we always said to you guys, our focus here is to really make sure that from a working capital perspective, we are as optimal as possible. So in our Pharma division, we've been able to get that an element of the prepaid that will be there for at least this year, we hope, and hopefully into next year. So -- and as we roll out new agreements, we would hope to continue with that type of structure.

The next question comes from Charles Weston, RBC.

Two follow-ups, please. First of all, on Medtech, are you currently seeing a tailwind in the market from waiting list reduction efforts by health care systems? And secondly, in terms of the write-ups and write-downs this year and last year, what have you learned from the various deals you've done since the IPO in terms of what has worked and what has not worked and also in terms of the deal structures that you can apply?

I'll take the second question, Charles, first and the deal structure. So we have learned a lot. And as we grow, the bigger deals have been easier for us to integrate because they plug into our existing platforms. If you look at the retail pharmacy acquisition of BModesto, they plug into 2 very big platforms as we move on. The smaller acquisitions are on earnouts, you have to wait, take your time before you can fully integrate onto your platforms. But by and large, that -- probably what we've been very good at is delivered on our financial targets. And ultimately, as we go forward, we try to do less deals with earnouts so that we can integrate into our existing platforms going forward. So we absolutely you learn -- keep you learn every day, Charles, you keep moving on. But we're broadly happy with where we are from an M&A perspective. Brian, Medtech.

Sorry, Charles, I missed the tailwinds from -- I just missed a couple of words after that.

From waiting list reduction efforts or extra investment by health care systems?

I think that's settled down. I suppose post-COVID, we would have seen that. But it certainly demands within hospitals in every market that we service. But I think a lot of our -- some of the growth coming from organic, but also just our ability to win market share. So I think there's stress in the hospital systems continue. I don't think we've seen a material investment in any of the markets we're in, that would be worth calling out as contributing to our growth.

[Operator Instructions] we have no further questions, so I'll hand the call back to the management team for closing remarks.

Thanks for listening to us this morning, guys. Another strong set of numbers, and we look forward to meeting again at the interim stage, but the business is in good shape, and we look forward to delivering another strong set of numbers in the current year.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.