Revenue: Increased by 9.5% to just under $6 billion. Underlying EBITDA: Increased by just over 7% to $291 million. Underlying Earnings Per Share: $0.675. Leverage Ratio: 2.1 times, consistent with the prior period. Interim Dividend: $0.57 per share, same as last year. Healthcare Segment Revenue Growth: 9.7% increase. Community Pharmacy Revenue: $3.1 billion, up 12%. Community Pharmacy GOR Margin: Increased to 9.2%. TerryWhite Chemmart Store Network: 616 stores. TerryWhite Chemmart Total Sales Growth: 11% with like-for-like sales growth of 9.3%. Institutional Healthcare Revenue Growth: $191 million, up 9.7%. Animal Care Revenue Growth: $18 million, up 6.3%. Animal Care EBITDA Growth: $4 million, up 7.2%. Cash from Operations: $205 million, up $90 million from the prior period. Capital Expenditure: $64 million, consistent with the prior year. Net Working Capital: $384 million, down $89 million from the prior period. Net Debt: Just over $1 billion, consistent with the prior year. Net Debt-to-EBITDA Ratio: 2.07%. Cost Savings: $15 million in the half, on track for $25 million to $50 million per annum by FY26.

Warning! GuruFocus has detected 6 Warning Sign with EBOSF.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ebos Group Ltd (EBOSF) reported a 9.5% increase in revenue to just under $6 billion for the first half of FY25. The company achieved a 7% growth in underlying EBITDA, reaching $291 million. Ebos Group Ltd (EBOSF) maintained its interim dividend at $0.57 per share, reflecting confidence in future growth. The company realized $15 million in cost savings in the first half and is on track to achieve $25 million to $50 million per annum by FY26. Ebos Group Ltd (EBOSF) successfully executed three investments in Southeast Asia, strengthening its presence in the region.

Negative Points

Statutory results were down compared to the prior period due to the loss of the Chemist Warehouse Australia distribution contract. The community pharmacy segment experienced a margin decline due to a shift in product and customer mix. The Australian MedTech business faced supply issues, impacting growth in the segment. Contract Logistics in New Zealand was affected by the winding down of a legacy COVID-19 product contract. There were $10 million in restructuring and transition costs related to the exit of the Chemist Warehouse contract.

Q & A Highlights

Q: Can you explain the impact of new business wins on the gross operating revenue margin in the community pharmacy segment? A: The EBITDA margin for the group remains stable, but the gross operating revenue margin has been affected by a shift in product and customer mix. Strong sales in community pharmacy, particularly high-value drugs and GLP-1 medicines, which have lower margins, are the key drivers of this change. - John Matthew Cullity, CEO

Story Continues

Q: With the change in leadership, will there be any shifts in the company's M&A strategy or focus areas? A: There will be no change in strategy. The focus remains on growth in healthcare and animal care, with opportunities in MedTech, animal care, and Southeast Asia. The new CEO, Adam Hall, has a growth mindset, which aligns with the company's objectives. - John Matthew Cullity, CEO

Q: Can you provide more details on the weakness in the Australian MedTech business? A: The MedTech business faced headwinds due to a reluctance from hospitals to spend capital and supply issues with a specific product. These issues are being resolved, and the product is back in stock as of January. - John Matthew Cullity, CEO

Q: What are the expectations for the TerryWhite pharmacy rollout in the second half? A: The target is to grow TerryWhite to 700 stores, with an expectation of adding around 15 new stores in the second half. The last 12 months saw stronger growth than usual. - John Matthew Cullity, CEO

Q: How should we think about the cost savings target of $25 million to $50 million by FY26? A: The $15 million achieved in the first half is part of the annualized cost reduction target. The focus is on achieving a $50 million reduction by FY26, with savings coming from various areas, including freight, labor, and administrative costs. - Alistair Gray, CFO

Q: What is the expected contribution from recent acquisitions in the second half? A: Acquisitions added about 1% to the EBITDA growth rate in the first half. The company continues to explore inorganic opportunities that make sense for shareholders. - John Matthew Cullity, CEO

Q: Can you comment on the trading performance for the current half? A: The company reiterates its guidance for underlying EBITDA between $575 million to $600 million. No additional comments on trading performance beyond the released material. - John Matthew Cullity, CEO

Q: What is driving the 9.3% like-for-like sales growth in TerryWhite? A: The growth is largely driven by dispensary sales, particularly high-value medicines and strong PBS growth. TerryWhite is growing above market rates. - John Matthew Cullity, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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