Ebos Group Ltd (ASX:EBO) (FY 2026) Earnings Call Highlights: Revenue Surges 9.9% to $13. ...

Negative Points

• Ebos Group Ltd ( ASX:EBO ) faced approximately $22 million in fuel and foreign exchange headwinds during FY26, which dampened reported EBITDA growth, particularly in the Medical Technology division.

• Community pharmacy margins remain under pressure due to competitive dynamics, with gross margins stable at 8.6% in the second half but overall EBITDA margin slightly down at 4.6%.

• The transition to a 4-tier medicine pricing system has been a mild negative in the first month of FY27, partially offsetting the benefits of increased CSO funding.

• The Chemist Warehouse New Zealand wholesaling contract is scheduled to roll off at the end of calendar 2026, which will impact EBITDA by mid- to high-single-digit millions, though it is only about 1% of group EBITDA.

• Medical Technology's EBITDA in New Zealand and Southeast Asia declined 10% due to FX translation and softer capital equipment sales, which were unusually high in the prior year.

• Depreciation and financing costs are expected to remain elevated in the first half of FY27 as the company annualizes recent investments, which will pressure near-term earnings growth.

Q & A Highlights

Q: Can you provide a split of FY26 EBITDA growth between organic and inorganic, and how much of the FY27 mid-single-digit EBITDA growth guidance is driven by existing acquisitions versus organic growth? A: Adam Hall (Group CEO) stated that the FY27 guidance of $635 million to $655 million incorporates all current businesses and does not assume any new acquisitions. He expects contributions from all divisions, with higher growth from Medtech, Animal Care, and Retail Pharmacy Brands. For FY26, the $50 million EBITDA increase was slightly skewed to inorganic growth, but many acquisitions, like SVS, have accelerated growth under EBOS stewardship. Alistair Gray (Group CFO) added that providing a precise split is difficult due to the synergistic nature of the deals.

Q: Can you elaborate on the FY27 guidance assumptions regarding fuel costs and the potential impact of the Middle East conflict? A: Alistair Gray (Group CFO) explained that the guidance range considers various outcomes for fuel and FX. The company updated guidance in April due to the Middle East conflict, calling out a $5 million to $10 million impact. The team mitigated costs through operational improvements and pricing actions. The low end of the guidance assumes fuel prices worsen, while the top end assumes an improvement, noting current fuel prices are lower than the average during the conflict period.

Q: In the Healthcare division, revenue in New Zealand and Southeast Asia was up 10%, but EBITDA was down 10%. Can you bridge this gap? A: Adam Hall (Group CEO) attributed the decline to two main factors: foreign exchange headwinds, with the Australian dollar at 13-year highs against the New Zealand dollar, and a significant drop in capital equipment sales in Southeast Asia, which had an exceptionally strong second half in FY25. Alistair Gray (Group CFO) added that these are temporary factors, with no underlying systemic issues. The change of a contract logistics customer from 3PL to 4PL also increased revenue but not EBITDA, distorting margins.

Q: Given the significant capital deployed in Medical Technologies, what returns are you targeting from this division, and how do you justify continued investment? A: Adam Hall (Group CEO) referenced the Investor Day calculation showing a 16% return on capital deployed in M&A over the last 5 years. He highlighted the critical mass achieved in Southeast Asia, which provides access to new supplier franchises, and the success of the acellular Derma matrix product in biologics. Alistair Gray (Group CFO) added that the division's return on capital employed is improving, and the group is focused on driving towards a 15% return, with Medtech contributing to that increase.

Q: Are there any remaining inventory write-downs or system cut-over costs related to the DC renewal program that will impact FY27? A: Adam Hall (Group CEO) confirmed that the chapter is closed on the DC program. All impacts of start-up and inventory transition costs are captured within the FY26 results, and no further costs are expected in FY27. The focus now shifts to increasing utilization and productivity at the new facilities.

Q: In community pharmacy, are you having to compete for patient spend on high-price out-of-pocket drugs like GLP-1s, or do you get market share without extra effort? A: Adam Hall (Group CEO) noted that the GLP-1 space is fiercely competitive, and EBOS indexes slightly low in that category. However, the company over-indexes in other high-value medicines priced over $1,000 per dose, which is a result of the reliability of the Symbion network and the care focus of Terry White Chemmart. This positioning is consistent with their market strategy.

Q: What are your expectations for the first month of trading under the new medicine tiering changes and the CSO funding uplift? A: Adam Hall (Group CEO) stated that the first month of trading has shown three factors at work: the change from a 3-tier to a 4-tier medicine system, continued competitive dynamics, and the CSO funding. The impact is as expected and included in the guidance. He noted that the 4-tier system is a net long-term benefit due to the cap change from $54 to $223, which favors high-value and complex medicines. On the CSO pool, the company is on track to capture 29% of the $78 million uplift on a gross basis.

Q: Can you provide a divisional view on the FY27 growth guidance, specifically whether Healthcare will grow higher or lower than 5%? A: Adam Hall (Group CEO) indicated that the expectations align with the Investor Day guidance: slightly slower growth from Symbion and Healthcare Distribution, and slightly higher growth from Retail Pharmacy Brands, Animal Care, and Medical Technology. He emphasized that the opportunities are real and accrue from the company's leadership positions in each sector.

Q: How is competitive intensity playing out in community pharmacy, and is it stabilizing or continuing to increase? A: Adam Hall (Group CEO) explained that the loss of a major wholesale customer two years ago kicked off a period of market flux, which was exacerbated by an increase in contract renewals during FY25. Competitive intensity accelerated in FY25 but stabilized during FY26, though it has not reduced. This ongoing intensity is baked into the FY27 guidance, with some contracts still rolling over at more competitive rates.

Q: Where does utilization sit for the Symbion network in Australia, and how many years of growth are needed to grow into the new capacity? A: Adam Hall (Group CEO) stated that there are several years of growth ahead before the network is at full capacity. The focus is currently on productivity, with the three automated facilities accounting for the vast majority of the 1 million doses supplied daily. The target is a 30% productivity uplift at Kemps Creek by the end of FY27, which will significantly impact the labor cost base.

Q: How much of the $100 million FY27 CapEx is maintenance versus growth, and will you turn away attractive growth projects to stick to this budget? A: Adam Hall (Group CEO) said that a little more than half of the $100 million budget is for maintenance and safety, leaving a healthy amount for growth opportunities. He confirmed the company will not be held back from deploying capital for attractive opportunities, citing a recent example where a customer requested extra capital for a contract extension. The reduced CapEx also provides more room for bolt-on M&A

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