Good morning, everyone. On behalf of ACL, I'd like to start by acknowledging the traditional custodians of the land on which we meet today. I'm based in Sydney, on the lands of the Wangal people, one of the 29 tribes of the Eora Nation. Melinda and Lana are joining us from the lands of the Wurundjeri and Bunurong peoples of the Kulin Nation. We acknowledge the traditional custodians of country throughout Australia, and the places from which our participants join us on this webinar, and their connections to land, sea, and community. We pay our respects to their elders, past and present, and extend that respect to Aboriginal and Torres Strait Islander peoples here today. Welcome to the investor webinar for Australian Clinical Labs FY 2024 financial results. My name is Eleanor Padman, and I am the Company Secretary at ACL.
I'm joined today on this webinar by our Group CEO and Executive Director, Melinda McGrath, and our Deputy CFO, Lana Hudson, and our National Marketing Director, Jo Gearen. Today's webinar will run for approximately an hour and will be recorded. A copy of the recording will be made available on ACL's website after the event. By choosing to attend, you are providing your consent to participating in the recording. If you would like more information, a copy of our privacy policy can be found on our website. During the webinar, you will hear presentations from Melinda and from Lana, and then we will have time for Q&A.
To ask a question, you may raise your hand if you would like to ask your question live during the webinar, or if you'd prefer to submit a written question, which I will then read out, you can type it into the Q&A function you'll see at the bottom of the screen. Once we move to Q&A, we will focus on the more frequently asked questions, and we will try to get through as many as possible in the time available. I'd now like to hand over to our Group CEO, Melinda McGrath.
Thank you, Ellie. Thank you all for your attendance. As Ellie mentioned, I have with me today our Deputy CFO, Lana Hudson. Thank you, Lana, for contributing today and for stepping up over the last three months. Financial year 2024 has been a year of transition as COVID becomes endemic. While we anticipated and quickly responded to the change in the external environment the previous year, this year we had to replace the loss of COVID revenue, and we are pleased with the result we achieved, given the environmental dynamics we were dealing with. As we moved out of the pandemic, it became evident that border closures had created an issue with medical and nursing workforce supply, which affected all healthcare providers.
This was due to the lack of immigration when borders were closed, workforce retirement through the pandemic, and billing practice changes, leading to reduced GP hours nationally. The lag in recruitment affected half one 2024 throughout the industry, and I'm pleased to say we saw it improve in half two as medical and nursing practitioners returned to the city and regional areas, and bottlenecks into hospitals were removed. In addition, GP availability has improved greatly, and we're starting to see a return to more normal ordering patterns. As a result of the external environment, our results this year are a tale of two halves, and the resilience and diversification of our business, and how our teams have again successfully steered the company through an unpredictable and changed external environment. On to slide three, please, Jo.
In financial year 2024, ACL achieved revenue of AUD 696 million and an EBIT of AUD 62.6 million, in line with guidance, and noting in half two, our EBIT margins returned to double digits, circa 11%. The revenue was in line with the financial year 2023, despite a 59% decline in COVID revenue. Non-COVID revenue was AUD 646.7 million, which is up 5.4% on financial year 2023. Underlying EBITDA was AUD 191 million, which is up 1.3% of financial year 2023, noting the decrease in COVID revenue. The EBIT was in line with guidance, with half two at an 11% margin and half one at a 7% margin.
The first half was where we saw the acute shortage of referrers within centers, and hence the decreased volume over the fixed cost base. Underlying EBIT margins were 9% for the full year. Adjusting for the decline in COVID revenue, financial year 2024 underlying EBIT grew by 24%. Our underlying NPAT was $3.6 million , and free cash flow before interest, tax, and financing was up 4% on financial year 2023. And today, the board declares a final fully franked dividend of AUD 0.09 per share, which is AUD 0.12 per share for the full financial year. This represents a 4.6% fully franked dividend yield based on the share price of AUD 2.63 on the 27th August. The full-year dividend of AUD 0.12 represents 77% of underlying NPAT.
In financial year 2024, non-COVID MBS outlays grew 6.4% for Clinical Labs. We continue to remain really focused on a national expansion of profitable revenue to preserve our margins. We chose not to drastically reduce our footprint, as we were consistent in our review of margin-producing revenue. We continued to replace lower performers with better performers, and that didn't result in a reduction in collection center numbers, but an improvement in our mix. It was in our regional and big practices where we saw the biggest issue in half one with medical recruitment. We saw this approach as an investment in future growth, and we worked with our doctors on recruitment. Our new collection center portfolio will benefit into 2025. This approach did affect the EBIT line in the first half, with the reduced volumes through all centers.
At an EBITDA level, we managed well in both halves. Our operating cash flow conversion from EBITDA was 101%, and we continue to demonstrate efficient cash management, with free cash flow up on financial year 2023, despite the COVID earnings drag. We have a strong balance sheet, and as a result, the board announces today an on-market share buyback program of 20 million, up to 20 million shares, and I'll talk a little about that later. Next slide, please, Jo. On to slide four. We've continued our focus on operational improvement, and we've had our margins constant in financial year 2023, despite the challenges I mentioned earlier. Culturally, we have a laser focus on performance, and that cascades throughout the organization, and it aligns with the needs of our patients, referrers, and our shareholders.
Our project management office has a range of operational improvements underway, and we're able to roll them out nationally due to our one laboratory information system. This is a differentiator, as we are the only national lab in Australia with one version of its LIS interconnected across the country, allowing pathologists and scientists to work in a borderless manner. It allows us to design and implement operational efficiency and revenue-enhancing programs and roll them out seamlessly across the country. It enhances our agility, it negates size differential, and it enhances our operational leverage. It will be noted that we have a relatively low CapEx. For us, AUD 8 million-AUD 10 million per annum as usual. We're a little bit below that just due to timing this year. But our PMO, and IT, and digital projects are part of our OpEx.
LIS and digital upgrades are BAU, and as an example, this year, we've completed many projects, including upgrades to blood banking and life-saving emergency medicine, machine learning, and automation of our blood film production, which improves hematologist productivity, cybersecurity upgrades, upgrades to our electronic results platform, improving visibility of results, notification of critical results, and clinical continuing professional development participation. We've finalized a major network upgrade for the Clayton Laboratory in Victoria. We've deployed a cloud-based dictation system for pathologists, and we've made improvements to our telehealth platform for patient electronic requesting. From an efficiency point of view, we've also focused on centralization and enhanced productivity of many key back-office functions.
We rolled out new projects via our investment in other technology to support courier route optimization, digitization of consumables, inventory management, and reduction in laboratory labor, which will continue to pay benefits into 2025. Over the next year, we'll continue to progress our feasibility of the Lab of the Future program, as well as piloting AI initiatives to reduce support function labor costs. And we'll also have a project on improving manual billing processes. Key strategic growth initiatives progressed over the last year include innovative testing, working closely with GeneSeq on its tissue and plasma genomic tests, with commercialization expected to begin soon. Excuse me, I'm just having a bit of a technical problem here. We have 21% of the market for newly Medicare reimbursed carrier screening tests, and we progress a partnership with clinical trials and research-based testing.
We have a key project underway to digitize our private billing system. Next slide, please, Jo. On to slide five. We are in our fourth year of execution of our ESG strategy, and it continues to deliver strong performance. There are a few listed here. I'll also highlight on this that we've reduced our carbon dioxide per episode further. We have an automated SMS patient feedback system, which is currently 4.7 out of 5 satisfaction rating, and here I note that we also measure turnaround times in our hospitals right down to the episode level. Our lost time injury frequency rate continues to improve at 2.25%, and we have board female representation at 43%, which is up from 33%. Next slide, please, Jo, and I'll hand over to Lana Hudson, our Deputy CFO.
Thank you, Melinda, and good morning, everyone. Next slide, please, Jo. ACL achieved total revenue for the year of almost AUD 700 million, with non-COVID revenue up by AUD 33 million on FY 2023, almost offsetting the reduction in COVID revenues of AUD 37 million. For FY 2024, ACL generated an underlying EBIT of almost AUD 63 million, producing an underlying EBIT margin of 9% after a strong underlying EBIT margin performance of 11% in the second half. The latter part of FY 2024 saw a return to much more normal trading conditions, with volume levels consistent with pre-COVID, noting that there is still a lag on the long-term growth trend. COVID has only been included in this presentation due to its impact in FY 2023, with over 70% of FY 2023's COVID revenue occurring in the first quarter of FY 2023.
Consistent with half one, and noting that COVID is now included on the Respiratory Ladder, we have counted the total number of COVID tests and multiplied by the COVID-only fee to provide like-for-like treatment with the comparative. If we were to use our COVID-only revenue, this would be just over AUD 1 million in FY 2024. As COVID volumes are now BAU and part of the Respiratory Ladder going forward, we will stop highlighting COVID separately. In H2, we saw improvement in GP volumes and GP average fee through our 1,300 ACC network, compared to subdued volume-poor environment in the first half. From a market perspective, GP consults have had a CAGR of just 0.2% over the last four years, and specialist consults a CAGR of 2%.
Market average fee rates, excluding COVID, also improved year-on-year, and we saw this reflected in ACL's total average fee, which increased by approximately 3% in H2 compared to H2 of FY 2023. In terms of operating costs, labor costs were well managed at 43.6% of revenue, despite a number of headwinds on July 1, 2023, including the 5.75% modern award, increased workers' compensation rates across Victoria and New South Wales, despite improvement in our lost time injury frequency rate, the superannuation increase of 0.5%, and the COVID levy in Victoria, adding approximately 0.8%. We reduced our total FTE by 2.6% through our ongoing focused KPI improvement program.
As a result of our operational improvement programs, we were able to hold our total labor costs increase to only 2.5% from the prior period. Rent expense prior to the AASB 116 adjustment was up 4% compared to FY 2023 due to inflationary pressures. During the year, we exited 170 ACCs and replaced with 165 ACCs, which are performing well. We managed rent and collection center contribution on an ongoing basis and have therefore continued to be able to improve contribution margin per collection center. Consumables improved by 100 basis points to 17.1% of revenue, due to the combination of the reduction in COVID testing and procurement savings throughout the period.
Throughout FY 2024, we incurred over AUD 9 million of non-recurring costs, with over 75% of these costs incurred in H1, which predominantly related to the Healius transaction, as previously reported. This focused management of all aspects of the business resulted in an underlying EBIT of AUD 62.6 million, generating an underlying EBIT margin of 9% after a strong EBIT margin performance of 11% in the second half. Moving to slide eight. Thank you, Jo. We have continued our focus on strong cash management throughout FY 2024, generating over AUD 54 million of free cash flow and a cash conversion rate of 101%. Non-cash items of AUD 4 million predominantly related to share-based payments. Working capital throughout the year was well managed. Capital spend of AUD 6.5 million was approximately 1% of revenue.
ACL's annual CapEx spend, excluding major growth and acquisition spend, has remained consistent in recent years, demonstrating a sustainable level of investment. Aside from major projects and acquisitions, in the future, we expect our CapEx to be in the order of AUD 8 million-AUD 10 million, as Melinda has previously mentioned. During the year, we were able to pay down on our borrowings by a net AUD 11 million, and we paid over AUD 20 million in dividends, while still retaining over AUD 26 million in cash at year-end. Next slide, please, Jo. ACL has a very clean and strong balance sheet. The business is very conservatively leveraged, with net debt excluding lease liabilities, being less than AUD 29 million and materially below our banking covenants.
The main drivers in the balance sheet included increases in trade and other receivables and trade and other payables compared to prior periods due to higher trading activity in Q4 compared to Q4 of FY 2023. A reduction in plant and equipment due to CapEx being lower than annual depreciation, and a reduction in borrowings due to a net repayment of AUD 11 million, as mentioned earlier. A fully franked final dividend of AUD 0.09 per share has been declared, which results in a full year dividend for FY 2024 of AUD 0.12 per share and a dividend yield of 4.6%. Thank you, and I'll hand back over to Melinda.
Thanks, Lana. On to slide 11. Thank you. Our growth strategy is centered on six strategic pillars. Firstly, a disciplined approach to network expansion. I spoke a little bit about this earlier. We focus on quality and sustainable and profitable services growth. I spoke about approach to this, and this year, we'll see a natural growth of our existing footprint, with new referrers into our existing sites and new sites at an attractive footprint cost. Our Medlab investment has continued to grow revenue over the asset acquired, which, aside from COVID testing, was depressed as it was in a key outbreak area when we first acquired it. We're applying our collaborative approach to service development, working with the Medlab referrers.
Across the group, we work with our referrers on innovative service models and education of practitioners, which we see as part of our role as a specialist medical practice. We have and expect to see benefits in our average fee as well as our volumes. The business is quite diversified, with no one customer group, aside from the government, of course, producing more than 2%-3% of revenue. As more GPs come into the system, this will be enhanced. On the patient-facing side of things, we've invested in patient channels and education, particularly via targeted social media. As an example, STI testing, which was down on previous years post-COVID, obstetric and gynae testing, and testing targeted to chronic disease management are a focus.
Secondly, the industry indexation campaign has resulted in indexation in 1/3 of the schedule from the first of July 2026, which has been partially offset by fee cuts on certain tests. While the industry appreciates the indexation, this is not the result we were after, and we're continuing the campaign to educate and advise patients that their rebate has not been increased in almost 25 years. We have excellent community engagement, and as an industry, we provide service to more than 1.2 million people per week. We have a number of strategic businesses we are growing. ACL and Genosec are to launch our tissue and melanoma tests, with commercialization commencing in 2025. I've spoken about these tests before, and I've included a slide in the back of the pack.
We have a couple of small issues to cross with the regulators, and then we'll be ready to go. Just as a reminder, in Australia, there are 2 million biopsies of melanoma per annum, and around 2 million patients are considered high risk for melanoma. Screening or testing 5% of these biopsies has the potential to generate revenue in the region of 100 million per annum and materially reduce the costs associated with melanoma. We estimate the U.S. market is $2 billion and the EU market $1 billion. This testing fits strategically well with our SunDoctors business as well as our surgical referral businesses. We're also focused on developing a pipeline of new tests and service opportunities through investment in partnerships to support growth, and I'll provide more about these as they progress further.
We're seeing good growth in our carrier screening market share and further penetration of the non-invasive prenatal testing market. We'll continue to evaluate potential acquisitions, but we will only progress with appropriately priced and accretive acquisitions. Key targets include domestic pathology, strategically aligned domestic adjacencies, as well as international pathology. We expect to advance some SunDoctors acquisitions as well this year. Another key focus is our billing enhancement initiatives. At present, most private bills are invoiced post-service, which makes collection difficult. We are digitizing the billing process to enable upfront billing to reduce bad debt and debt write-off. As part of this, we have various initiatives to support non-MBS test fees and trials of expanded private billing opportunities on MBS items. Our final pillar is our focus on operational improvement.
We're developing a roadmap to step change improvements in automation and AI initiatives, particularly in our data entry area and code, manual code-based billing practices. We also have an active watch on AI developments in the diagnostics and laboratory area, and they're very exciting. Our balance sheet is in a position to enable investment, but we will only be investing where we see a near-term payoff and the ability to bill either patients or Medicare, or to make our professional staff more productive. We continue to design and scope our lab of the future, which will leverage our one lab information system. Onto page 12. We've included this chart previously, and while the chart shows that the lag is improving, it is still below its low historical trend of 12%, and that implies a 60% revenue shortfall for ACL.
This shortfall is reducing, and we do expect volumes to return to trend over time, particularly as the GP shortage eases. Next slide, please, Jo. Onto slide 14, our guidance. Despite ongoing inflationary pressures, we expect a stronger EBIT result in financial year 2025 compared to financial year 2024, as market volumes continue to catch up to pre-COVID trend. We expect financial year revenue of AUD 725 million-AUD 752 million, with an underlying EBIT of AUD 65 million-AUD 73 million, based on revenue growth assumptions of between 4% and 8%. The market has not yet returned to its predictable growth, and volumes remain a little difficult to predict, and we still face some ongoing inflation, and including state government-imposed additional labor costs, resulting in margin pressure.
We continue to expect that the business is well positioned to achieve double-digit EBIT margins under the return of normal operating conditions. Half two 2025 is expected to be stronger than half one again, with seasonally higher volumes on a well-managed cost base. Financial year 2025 has started strongly, with revenue per working day at 7.6% growth in July, and August has continued a strong trend. We'll be able to provide a further update at the AGM. On to slide 15, please, Jo. Today, the board has also announced a 12 month on-market share buyback program of up to 20 million ACL shares, which is approximately 10% of the company's outstanding share capital.
The board believes, based on a strong balance sheet and cash conversion, that the share buyback program may be an opportunity to enhance shareholder value without compromising our capital position or our ability to execute on our growth strategy. The buyback is expected to reduce the shares on issue with a resulting improvement in earnings per share, dividends per share, and return on equity. The board believes that, given the company's outlook, the buyback may provide an effective opportunity to enhance shareholder value and is a sensible use of our balance sheet capacity. On to slide 16. In summary, we're an essential service at the forefront of new technological advancement. We see ACL benefiting from the development in technology, including pharmaceutical and treatment developments that require ongoing outcome monitoring, population and demographic changes, and the aging population.
20 years of growth trend has been disrupted during and immediately post-COVID, and while still behind trend, we're seeing above trend growth in the last few months. But the market and ACL still have a gap to be made up. We expect to be able to return to double-digit growth as we return to growth trend and inflation normalizes. We have a strong balance sheet and are capital light. Just as a summary, to remind, we have a fully franked dividend with a yield of 4.6% and the share buyback program of up to 10% of shares outstanding. I'd like to finish by thanking clinical lab staff across the country for their unwavering focus on our vision, our values, and our customers. Thank you to shareholders for their support. I'll pause now for questions. Early thanks.
Thank you, Melinda. So I'm gonna go first to the participants that have their hands up to ask a question. And, Gretel, I'm going to speak with you, start with you. So, please go ahead, Gretel.
Hi, can you hear me okay?
Indeed, yes. Please go ahead.
Thanks. Good morning. So just on the guidance, firstly, it implies the margin will be slightly under that 10% mark. So I understand the seasonality in the business, but I guess, what is stopping the strength that you've seen in second half 2024 from continuing into first half 2025? Are there any particular cost pressures you wanna call out at this point?
Hi, Gretel, thanks for the question. The way we've done the forecast is using half one, half two skew from last year. So that was a pretty abnormal skew, actually. But based on not knowing, you know, not having further information, that's how we've done it. So prior to COVID, the skew wasn't that great. It will depend what happens in half one with volumes. We're tracking pretty well so far, but it's only been, you know, seven weeks or so. So, depending on where revenue goes, will probably be the determinant, and it's particularly half one that we'll be watching. So that skew being copied probably gives you an indication of where that is.
Lana did mention some of the cost pressures. They're primarily in some of the labor costs, particularly the state government-imposed levies, which obviously came in over the last year or two, that come straight off the bottom line. And rents have gone up a little bit. I think they're about 4%. So we anticipate those will start to taper off into the next half, but it does depend on the revenue for the first half.
Yep, understood. And then just in terms of your ACC network, so exiting 170 ACCs and replacing it with 165, what was the rent saving that you achieved on that? And I guess, like, should we expect kind of the full year benefit of those savings into 2025?
I don't know what the rent saving was. Lana, do you have that?
I think if you say 4% growth on the previous, it would be fine. Is that right, Lana?
Yeah. So we're at 4%. Our rent expense went up by 4%, which I think, you know, was part of those movements, that we're able to contain it to that 4% in a fairly steep inflationary pressure on rent at this point in time in the market.
Okay, understood. And then just final question, just on the balance sheet and capital management. Now that you're starting the buyback, I guess what is your kind of medium-term target gearing range?
If we went to the whole amount, we'd still be around one, one-ish time. So it's not. We've got pretty strong cash conversion, so it's not up anywhere near the level that you would expect to be, you know, worried about.
And so, like, longer term, are you trying to stay around the one, one and a half times?
The board hasn't come to a final position on that, but that would be, 1 and 1/2 would be a good number to be thinking about.
Great. Thanks. That's all I had.
Thanks, Gretel. So next on my screen is Lyanne Harrison from Bank of America. So please go ahead, Leanne. Leanne, please go ahead. Okay, you may need to take yourself off mute. I'm going to put you back in the queue. I'll come back to you. So next is Andrew Goodsall from MST Financial. Andrew, please go ahead.
Thanks very much. Just maybe starting with dividend policy, obviously a big step up there in the second half divvy. So just wondering sort of what your thoughts are around divvy going forward.
We have got, since we listed, we had a policy of 50%-70%. I don't think we're indicating that we're changing that, but we will be reviewing that this year, given our capital requirements. So when we've finalized that, we'll come back to you, to the shareholders with a decision. But that's, I wouldn't say that's an indication of how we'll go into the future. It depends on where we're at capital-wise.
Okay. Just within the mix of a buyback as well.
Yeah.
And then just on, so I'm just doing housekeeping, the tax rate. Previously, I think you've sort of said around 30%, but just, how the Victorian tax, the COVID tax fits in with that? Does that put it up slightly in terms of the way you think about the overall tax?
No, we'd still be around the 30% mark. So the COVID tax levy was in relation to our sort of more, payroll tax and employment taxes.
Oh, okay, so it's collected through payroll and not a separate.
Right.
Okay, got it. And then, I guess just in terms of market share, I think, you know, with the way in which we're sort of looking at it, it's pretty raw, but against the MBS data, obviously with the shake-up in your collection centers, you came up a little bit. But going forward, do you sort of expect now you'll hold that share and grow? And yeah, just trying to characterize how you're thinking about that sort of baseline.
Yeah. The way we think about it is, well, you know, the headline number doesn't indicate whether the growth is profitable. So, I think I've said this before. You know, you can grow in this business, you know, but not have any profit attached to the growth. So we focus on profitable growth. So I don't. We don't really say market share is based on the growth numbers. It's, we need to have profitable growth, Andrew, so it's not kind of probably what you're, what you're looking at. We're looking at, we're looking at every, every bit of revenue we've got, we look to make sure it's got a, a suitable profit attached to it.
Yeah. No, that makes 100% sense. So I guess it's from a model, modeling perspective, we're trying to make our lives easy, but what you're trying to do is actually make a profit. So I get that. That makes sense. So yeah, I guess we'll sort of, well, I guess we'll try and think of sort of largely in line with market, but obviously based on what you might be doing with your collection centers. The final one for me, just labor costs. I was scratching my head, but obviously the reason you were able to hold that so well was the 2.6% employment cut. Where are you now? Are you, you're right-sized in terms of that labor, or is there more to go?
With labor, we manage labor. We've actually forecast and managed labor and rosters in advance. So we've got a tool that enables us to predict volume and then manage our labor before we incur the cost, which is we're still learning how to use that and still getting benefits from that year on year. From a labor point of view, obviously, we've got a fixed footprint that we, you know, we've had over the last few years, plus we're growing that footprint. We've replaced poorer performing collection centers with better performing collection centers. So that labor's already in place there. So as the volume comes back, we don't expect to be putting on too much extra labor.
Most of the labor increase will be in collection centers and labor that's attached to revenue or volume growth. So I see that as the volume grows, our labor as a percentage of revenue will continue to reduce. We don't go around, you know, picking bunches of FTEs and saying, "We're going to cut that out," because we manage on process improvement and improving productivity so it's sustainable. And so I think, as I mentioned, a couple of the projects that we've got this year, which will be changing process of how people work, which will then have labor benefits to it, but as a rule, we'll be reducing our labor and increasing the revenue over a proportionately reducing labor cost.
Yep , I can see that. That's great. Thank you.
Thanks, Andrew. I'm going to head back to Leanne. Leanne, are you able to- Leanne, are you able to go ahead? I'm still not hearing you, unfortunately. Okay, moving on to Craig Wong-Pan from RBC Capital Markets. Craig, go ahead.
Hey, you in May, you expected to be at the lower end of the AUD 60 million-AUD 65 million range. You've come in above that. Just wanted to understand, what were some of the things that were different to what you expected, to drive that better-than-expected performance?
Mainly, the volume improved, Craig, over the last couple of months and into the first two months of this financial year, so it's mainly volume. Some of the projects that we've got going, from a labor point of view, improved the labor line as well, and I think rents have been very well managed. So I think there's a combination of all of the drivers there that have helped that.
Okay, understand. And then with your trading update, you said that revenue per working day was up 7.6, volume was up 5.9. That kind of mix or price benefit, could you just talk to where that's coming from?
Yeah. You know, pathology referral, referrers, referrals aren't just a passive process. You know, there's a clinical decision-making involved in how doctors provide care to patients. And we work with our doctors a lot on their ordering patterns versus clinical guidelines, versus college guidelines. And we have a lot of programs that benefit their patients that we work to develop their practices with them. So it's not a passive process. It's a very collaborative process with our referrers and our doctors in the hospitals and our customers. So, you know, we see our role as educating as well, being a specialist medical practice. So, that does have an impact on average fee.
Okay. And then my last question, just on CapEx. You mentioned, I forget if it was Lana or Melinda, but the CapEx was a bit lower this year. Does that mean that for this year, for FY 2025, that might be a little bit higher than that AUD 8 million-AUD 10 million range? Or if you're able to, could you provide what your expectations are for CapEx this year?
No, it'll still be eight to 10. I listed some of the things we did within that, within our OpEx. From a CapEx point of view, this year was mainly, there was some upgrades to some equipment and mainly cars and collection center upgrades. So, I don't think. I think, I mean, we've been very consistent saying it's AUD 8 million-AUD 10 million a year. It's been very consistent for a long time. It's not that big a deal to, you know, we've got heaps of capacity within the labs. We've just done a project concertinaing our labor to match volume, so that we can match the capacity on the instrumentation to when the match the labor to when the capacity can be at its almost its max.
So that has good impact on labor, but it also means that from a CapEx point of view, we can just bolt on another box to the track, and we can increase our capacity without too much cost. So we would anticipate eight to ten outside of, you know, a significant acquisition or some other different thing that would be a, you know, a business subject to a business case and have its own extra revenue.
Okay, thank you.
Thank you, Craig. I'm gonna have one last crack at getting Leanne onto the line. Leanne, if you can go ahead. All right. Okay, I think I've tried my level best there. We might move on. Next, Mathieu Chevrier from Citibank, please go ahead.
Yeah. Good morning. Thanks for taking my questions. Just on the revenue growth of 4%-8%, could you just help us unpack that in terms of the volume versus the average fee increase that you're expecting?
I don't have that information, Craig, sorry. Matt, sorry. It's normally around 2-3% average fee, normally. We have been seeing good growth in our average fee, though, as well. So I'm, as I said before, the revenue patterns and the volume patterns are a little bit hard to predict just because of the change in, you know, we can't. It's a little bit difficult to predict the growth, and growth's ahead of where we thought it would be, but the average fee is doing well as well. But normally it's about, it's around 2-ish%.
Got it. And then in terms of the COVID testing, so you expect that to be a base level and to grow with the rest of the non-COVID revenue going forward?
Yeah, we've just, we're just assuming that COVID is part of the Respiratory Ladder, and it's just that it's normal pattern that it has always been.
Got it. Got it. And then do you have anything in that revenue guidance for those billing initiatives that,
No.
you've spoken to?
No.
Okay. So you would expect that to come into FY 2026?
Yes. Yeah.
Okay. And then-
We have got internal targets for that, but I'm not, because it's not in the guidance, I'm not going to elaborate on those yet, 'cause we just want to see where they go. But we have got internal targets for that, that we'll move into 2026, yeah.
Understood. And then I think you said that you're continuing to design and scope the Lab of the Future. Could you give us a sense of the magnitude of that potential investment and the timings?
It won't be in the next year or two. What we're doing with that is we're looking at all of the opportunities for downsizing our current footprint and upsizing in one mega lab environment that's highly automated, including all of the automation that's potentially possible, including microbiology automation, and other emerging level emerging opportunities for automation, and doing a cost benefit of that versus the logistics footprint that we've got with major labs in each state. But as we review this, it's kind of offsetting the cost of logistics versus the cost of the highly automated lab. As we're finding information out, we're implementing it at the same time.
As I mentioned, the concertinaing of the labor hours to match the capacity and the instrumentation across the country, that project has reaped benefits and will reap benefits into this year without any capital cost, just because we're seeing. We're getting a lot better insight into the instrumentation and what it can, what its potential is. So I'm not, if you're, I guess your question's a CapEx question. I'm not anticipating a huge CapEx for that. I would anticipate it'd be maybe a little bit more than our normal CapEx, but not a huge amount. Depends on how we decide to do the laboratory side of the equation.
Understood. Okay. Thank you.
Thanks, Matt.
Thanks, Matt. So that's all the questions that we've received today. So thank you, Melinda and Lana, for your presentations, and thank you to all of our participants for attending and showing such an interest in ACL. We hope to see you at our next investor webinar next year. Thank you and goodbye.
Thank you, everybody.