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' Full Year Financial Results. My name is Eleanor Padman. I'm the Company Secretary here at ACL. I'm joined today on this webinar by our Group CEO and Executive Director, Melinda McGrath, our CFO, Matthew Cordingley, and our National Marketing Director, Joe Geran. 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're providing your consent to participate in the recording.
If you'd like more information, a copy of our privacy policy can be found on our website. During the webinar, you'll hear presentations from Melinda and from Matt, and then we'll have time for Q&A. To ask a question, you can raise your hand if you'd like to have your question live during the webinar, or if you'd prefer to submit a written question, which I can then read out, you can type it into the Q&A function that you'll see at the bottom of your screen. Once we move to Q&A, we'll focus on the more frequently asked questions, and we'll 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.
Thanks, Ellie. On to slide four, thanks. Welcome to our financial year 2025 result presentation. ACL is now entering its fifth year post-listing on the ASX. In that time, we've delivered improved performance in the underlying business year on year. The increase in earnings and cash flow that are presented today are the result of a whole of team focus. Our work over several years to integrate disparate systems and combine them into one operating platform sets ACL apart from competitors and ensures we're uniquely positioned to capitalize on opportunities and manage any external challenges in the current environment. Despite a challenging external environment, which saw slower market growth in the second half of financial year 2025, the second half performance delivered our earnings guidance. We saw revenue growth of 6.4%, with our MBS outlies growing more than almost 8%, just ahead of market.
Despite market growth slowing in the second half, with Q3 growth at 2.3% and Q4 at 1.6%, our underlying EBIT is up 8.7%, with a full year EBIT margin of 9.2%. We had a strong EBIT margin in half two of 10.9%, continuing the skew we saw in previous years. Our underlying EPS was $0.178 per share, up 13.4%. Free cash flow before interest, tax, and financing was up 30%. We retain a strong balance sheet, noting that we purchased $19 million of ACL shares as part of a buyback program. In financial year 2025, we've paid almost $25 million in dividends, and combined with the share buyback, we will have returned $44 million to our shareholders. In addition, we are announcing a financial year 2025 final dividend of $0.09. The full year dividend, including the interim dividend already paid, will be $0.125 per share.
On top of that, we've invested in our business and reduced our net debt, excluding lease liabilities, by $8.4 million. Our core strategy remains focused on driving margin-accretive top line through discipline network expansion, investment in strategic new business, and implementation of revenue and billing enhancements. Overlaying this, we'll continue to invest in and apply innovation to our operations. Slide five, thank you, Ellie. I'd like to present some operational highlights. We have an outcomes-focused culture. We expect the things we say we will do to be done, and we also expect them to show up in the numbers and be visible to shareholders as we progress so they can have confidence in us. As I mentioned, we are now entering our fifth year post-listing, and we have a good evidence-based track record. This slide highlights some of our outcomes that have contributed to our results this year.
Our sustainable competitive advantage is that ACL is the only national pathology provider with a single national laboratory information system. That is our operating system, which reduces duplication, drives cost efficiencies, and enhances customer services. Our pathologists and scientists' workflows are designed into one system across the country, and it links to our billing system and interacts at the front end with medical practices and the back end with automated results delivery to referrers. Having one version of the lab system reduces duplication: IT effort, management staff, professional staff, duplicated rosters, compliance on accreditation costs, etc. It enables the first to market on efficiency projects and also on revenue maximizing activities. This is most evident in our labor as a percentage of revenue, which improved 60 basis points to 43% this year, despite the slow growth.
A few of the other outcomes from our work this year: lab operational efficiency rose 12.3%, logistics efficiency increased 8%. We're leveraging a national shared services operation. We have a patient NPS score of + 79, and we're commencing the rollout of AI, which I will talk about a little bit later. From a revenue point of view, in our human genetics service, our carrier screening testing grew 102%. Oncology and pharma testing has seen significant revenue and volume increases, with revenue rising over 50% year on year. We had a positive specialist private inpatient growth of 0.2% against a market decline of 2.3%. We had strong GP growth, with volume up 6.4% and average fee up 2.1%. Of note, our five-year non-Medicare funded revenue CAGR is 12%. We've invested in e-commerce and digitalization to collect upfront payments. On to slide six, please, Ellie. We continue our ESG journey.
I'll highlight a few achievements. The full report is available on our website. Our work with our fleet of cars has yielded 1 million kilometers less travel than the previous year. Our cold chain logistics has led to a reduction of 32,000 kg of packaging. We've reached our target of 40/40/20 with four female and three male directors. We have also launched our reconciliation action plan. I'll hand over to you now. Thanks, Matt. Matt, you're mute.
Sorry, everyone. Okay, thanks, Melinda. Good morning, everyone. We're now on page eight of the presentation, and I'll run you through some more detail on our financial results. As you review them, you'll also see that there is not a material difference between our underlying statutory earnings for the year. ACL has delivered growth across all of our key financial metrics. Revenue was $741.3 million, up by 6.4% on FY 2024, and we generated an underlying EBIT of $68 million, up 8.7% on 2024. Our underlying EBIT margin, as Melinda said, was 9.2%, a 20 basis point improvement on the prior year, and the underlying net profit after tax was $34 million, 7.7% higher. When combined with our share buyback program, it contributed to a 13.4% increase in our underlying EPS.
Melinda just described the factors contributing to our performance, but clearly we've delivered a result here that again demonstrates the first half, second half skew comfortably landing within our guidance range. Despite the overall pathology market softening in the second half relative to the first half, ACL was able to grow volumes and revenues and leverage operational efficiencies that delivered a nearly 11% underlying EBIT margin in half two. Our average fee was just over 2% higher than the prior year. There was a strong focus from management in the second half of FY 2025 on portfolio optimization, ensuring that we were pursuing growth at profit margins we saw as being attractive over the longer term. To that end, we saw a net reduction of 34 ACCs during FY 2025.
In terms of operating costs, as Melinda mentioned, labor was well managed and showed improvement, reducing by 60 basis points to 43% of our revenues. This is despite cost of inflationary pressures, including the increase in wages linked to modern awards and one new enterprise bargaining agreement. Cash rent expense pre-AASB 16 came in at 20.1% of revenue, which was just a tick higher than last year, but really reflects the new ACCs that were released in the first half, as well as rent escalation. Consumables were 17.3% of revenue, only slightly up on the prior year, and this is due to higher volumes in respiratory and carrier screening tests, which are a more expensive test to provide. AASB 16 depreciation was 7% higher this year, but in line with FY 2024 as a percentage of our revenues. Fixed assets depreciation was 3.3% lower than the prior year.
Slide nine, thanks, Ellie. ACL generated strong cash flows this year and returned a material portion of it to our shareholders. Free cash flow before interest, tax, and financing was $70.8 million, up over 30%, driven by our operating leverage and a positive working capital benefit. Conversion of operating cash flow to EBITDA was 113.6%. The positive outcomes are partly informed by our strong focus on improved debt collection, specifically across our commercial and bulk bill debtors, and we're enlivening further strategies to improve this in FY 2026. As Melinda noted, we returned $44 million to shareholders via dividends and our share buyback this year. This is the equivalent to approximately 9% of our market capitalization, and added to that, we reduced borrowings by $13 million.
Capital expenditure was $8.4 million, and consistent with our historical and ongoing capital expenditure requirements, which are in the vicinity of $8 million- $10 million per annum. Next slide, thanks, Ellie. ACL has a strong balance sheet, and it affords us business and financial flexibility. We're conservatively leveraged with net debt, excluding lease liabilities, of $20.5 million, equivalent to a net debt-to-cash EBITDA ratio of just 0.3x . This represented a reduction of $8.4 million from the prior year, and we're well within our banking covenants. To that end, we, in the first half, refinanced our banking facilities, extending them to the 31st of July 2027. A few other key highlights worth noting in our balance sheet include a net reduction in working capital, primarily driven by an $8.6 million reduction in trade and other receivables on the back of increased collection of debtors that I just referred to.
Our right-of-use assets showed a decline of $6.5 million, primarily driven by a higher AASB 16 depreciation. Plant and equipment was also lower as a result of depreciation being higher than our CapEx during the year. Finally, just restating that we've declared a fully franked final dividend of $0.09 per share, payable on the 23rd of September of this year. Back to you, Melinda.
Thanks, Matt. On to slide 12. Thanks, Ellie. Slide 12 provides an overview of our growth strategy, which has five areas of focus. We have a disciplined approach to network expansion. Our team is very focused on profitable growth. We've restructured our collection center portfolio, as Matt mentioned, and as well as withdrawn from some contracts that would have become underperforming this year to maintain our margins. The effect of this, even in the face of lowered market volumes, has been a lowering of the point at which we achieved operational leverage's half. I noted earlier, our labor as a percent of revenue is a great result. We've also invested in some group practices that are growing strongly through their own turnaround strategies via acquisition of underperforming smaller practices.
These are typically practices that we have a long-term relationship in several sites with that are performing well, who approach us to partner with them, and as they grow, we grow. They're a little bit of a drag for us until they mature, which usually takes around 12 months. This approach of disciplined revenue growth is a large contributor to our margin performance. In addition, across the country, KPIs and incentives are aligned with an EBIT focus, which also extends to lab managers and sales teams. Strategic partnerships. We have a number of partnerships and pilot programs underway aimed at diversifying our revenue and focusing on high-value, high-volume testing and innovative arrangements with pharma, CROs, biosciences, and health funds. As an example, Geneseq Biosciences is a company we invested in in 2018.
Together, we've developed a world-first micro-RNA melanoma that uses tissue biopsy and liquid biopsy via plasma to diagnose melanoma at all stages of cancer. This year, we've achieved regulatory approval for both tests and have started a soft launch of both products. We have Australian exclusivity for these tests, and we anticipate that the trajectory of the demand will be similar to non-invasive prenatal testing, that is, via customer demand for the test. Patents have been issued in Australia, Japan, and South Korea. The U.S. is approved, just waiting one fee to be paid, I should add, and patents are pending in the EU and Canada. An explanation of the test is in the appendix. If investors would like further information, we can arrange this. We are planning the next stage of commercialization this financial year.
These strategies will contribute to growth in future years, and most of them are not in the forward-looking numbers at this stage. On the M&A front, we remain focused on domestic acquisitions and adjacencies that are accretive. We've looked at a couple of interesting opportunities, although found them unattractive from an accretion point of view. Our intention is to continue to grasp some doctors' business via acquisition, as well, of course, organic growth. Onto revenue initiatives. We have a key project to digitalize our billing process to enable upfront billing of patients. This is a project we commenced in financial year 2025 and will pay off into this and future years. The project required reprogramming parts of the laboratory information system to enable the upfront billing process.
We are targeting tests we already bill, in addition to those that are currently unfunded via the MBS or have changed patient rebate funding rules within the MBS and now flow through to debtors or write-off. Most of these tests we currently complete for free, absorbing the cost over many years. To quantify this, I just point out a study that Australian Pathology commissioned in 2020 that estimated approximately 25% of testing we do is unfunded by the Medicare schedule. This project involves a range of revenue-enhancing activities, including digitalization of the billing process to recover unfunded patient testing, targeted upfront patient billing, targeted billing of unfunded tests, non-Medicare billing, and pricing enhancement, other funding enhancement, and we have indexation for part of the schedule from this financial year. We are also applying AI to manual billing practices for greater billing accuracy. Lastly, operational efficiency.
Over the years, we've implemented a range of tools and automation that continue to provide year-on-year benefits. In part, our labor ratio is a result of continued refinement of our forecasting tool. This tool was complex to implement, and we continue to refine its use year on year. It assists us to forecast volume and match labor at the lowest cost roster for the skills required to do the work. It really assists with volatile volumes and downtimes. We have an AI roadmap that we're progressing, which applies AI to OCR, machine learning, and other tools and manual processes. We are anticipating applying these further to our operations, including relating to our robotic laboratory instrumentation. This year, for example, we've undertaken a pilot project to reduce manual data entry using OCR and AI combined at an accuracy rate that started at 50%, but is now better than humans.
This is being implemented this financial year. We've also applied machine learning that we use in biochemistry to haematology for improved diagnostic accuracy and less reliance on manual intervention, saving pathologists and scientific time. The lab of the future design is progressing to a business case and shows it will add benefits into the future. This takes the learnings of COVID, where we were able to move our work efficiently around the country in a borderless manner, enabled by having the same laboratory information system in each state and reducing our footprint. Matt mentioned our CapEx earlier. I'll just talk a little bit about CapEx again here. We have a consistent CapEx requirement of $8 million- $10 million per year, which includes lab, vehicle, BAU, new collection center, capital requirements, amongst others. IT and digital costs are embedded in our P&L as operational costs.
The lab of the future cost will be part of a business case and will demonstrate a return on any investment, but well within our envelope given our balance sheet. We anticipate the revenue opportunities and lab of the future projects will add at least $8 million to EBIT in 2027. Next slide, thanks, Ellie. On to slide 13. This slide shows longitudinal GP and pathology attendance trends. Of note, the trend pathology gap is closing, although it's still 6% below historical trend, which implies a $35 million revenue shortfall for ACL. The ongoing shortfall to trend is driven by continued softness in GP attendances, which are still lagging at 24% below historical trend. There will be a targeted expansion of the tripling of the GP bulk bill incentive in November. Slide 15, thanks, Ellie. On to guidance.
We guide for 2026 to revenue of $760 million- $780 million, with an underlying EBIT of $67 million- $73 million. The guidance range for financial year 2026 is informed by factors noted on this slide, primarily the impact of initiatives focused on offsetting the negative impact of patient rebate cuts, restructuring our revenue to remove underperforming sites and contracts. At the lower end of guidance reflects the potential for slower pathology market growth compared to financial year 2025, noting the slowdown in half two, 2025, I mentioned earlier, has continued into July and August on strong comps last year. In addition, we have several initiatives in development that contribute to a positive outlook beyond financial year 2026, which I mentioned in detail earlier, and are expected to generate at least $8 million of EBIT in financial year 2027.
I'd like to conclude by taking the opportunity to thank our pathologists and scientists for their leadership and all Clinical Labs team members for their focus on excellent patient care. Thank you to our shareholders for your support of ACL. I'll pause now, Ellie, for questions. Thanks.
Thanks, Melinda. We've had a number of analysts put their hand up. I'll go in order. Andrew Goodsall from MST Marquee, I think you were the first out of the blocks, so I'm going to take your mute. Go ahead.
Thank you very much. Just checking you can hear me.
Yes.
Yeah, excellent. Just with the guidance and just thinking about the bottom end, I think you indicated that if you saw the second half, 2025, conditions continue, that's sort of where you think you're going to land. Just going to ask, within that, what are you thinking around the impact of the B12 and urine test cut? And then just anything you can indicate in trading financial year 2026 to date, just if there's any signals out of that.
Yes, Andrew. The slowed growth has continued, as I said, into August, noting that it was on very high growth last year. July and August last year were really high. The B12 cuts, we are dealing with several ways, including patient billing, and so far going fairly well, but it's a little bit early to be commenting too much on that, but we're pretty happy with that. The guidance includes that that will be pretty much net net.
When you say net net, against the indexation and any other?
Yes, including indexation. Yeah.
Before any other clawback or just including?
Including indexation and clawback.
Okay, got it. The buyback, I assume that's ongoing, just to clarify.
That's still on for Andrew?
Yeah, I think you sort of bought $5 million- $6 million and your target was $20 million?
Yeah, we bought six million shares. We've spent just under $20 million in the buyback. The buyback is due to expire mid-September, and we'll consider refreshing that as part of an ongoing capital management plan that we'll take to the board.
Andrew, it wasn't a target of $20 million. It was up to $20 million. We weren't trying to. It's a bit hard to do it when you've got blackout periods, etc.
No, I understand. Just the final one for me, in terms of being able to sort of pick up out of pockets and so on. How's that journey going? I mean, in terms of reaction you're getting from referring doctors and patients?
We put a lot of effort last year into this digitized upfront patient billing process so that the patient pays before they receive the test. Most of these tests are not funded by Medicare. If the patient walks out the door and goes to a competitor, they're not going to be funded by the competitor at the competitor's shop either. We're currently doing the work for no revenue. So far, it's been pretty good. It's been targeted. We've had experience of trying billing before, and we learned a lot out of that, and it's been targeted. The digitalization process at the front end is really the big difference to that. That's going pretty well. We're tracking it, volume drop-off, and so far doctors have been pretty good with it. They weren't happy with the B12 fee cut and changes at all.
July had a lot of management of general practitioners and education of general practitioners, so they were not happy with the fee cut, actually with the patient rebate fee cut.
Just to clarify, with out of pockets, it's credit card upfront, just like diagnostic imaging or others where you're paying upfront, which is making a big difference.
Like what we did in COVID , same as what we, same system that we did in COVID , except we're applying it to other tests.
Terrific. Thank you very much.
Thanks, Andrew. Next on my list is Lyanne Harrison from Bank of America. Lyanne, please go ahead.
Hello all. Can you hear me okay?
We can hear you.
They're doing credit card upfront.
Andrew, please hold mute, please.
Andrew, we can hear you.
Okay, some others aren't doing it. There we are, which is quite good.
We did put a lot of work into that last year, so we foresaw that we might have to do this. Lyanne, we can hear you.
Sorry, can you hear me okay?
Yes, we can.
Okay, fantastic. I might start with labor costs. Obviously, you've got some very good improvements in labor costs as a percent of revenue for the second half. Can you comment on your expectations going into 2026 in terms of, you know, how much more you can go and what else we can expect in terms of percent of revenue improvement there?
I'll let Matt.
Go and take that.
A bit more detail on that. All of the projects, the operational improvement projects that I mentioned earlier, have got a labor impact, and it's really important to note that we match volume to labor. Behind the scenes, it's not cost cutting. It's actually the staff getting the labor they need when they need it based on how many widgets they should be able to put through per hour or whatever the metric is. The staff have got the resources they need to do the work. What we are doing, and this is with the contribution of staff coming up with ideas as well, is changing the way we do the work, the way it's automated, or the way we use AI. There's quite a lot of energy within the business about how we improve, knowing the challenges that the industry might have into the future.
That 43% has continued into July, but I'll just pass over to Matt, and he can talk about how that fits in with guidance.
Yeah, I mean, it's embedded in the guidance, Lyanne. Look, I won't go line by line through the P&L other than to say our expectation is that we should be able to increase efficiencies in labor, and that should drive our percentage down. The only outworking of that is we've got a couple of EBAs in Victoria that are coming up for renewal, and they're still outstanding. In terms of any inflation or price increase in labor, we'll just need to take that into account. That's unknown at this stage, but I probably can't add much more than what Melinda said in terms of the improvement in the efficiency of labor.
To add one more, just Lyanne, the lab of the future project would have a step change in our labor management.
Okay, but that comes through more in 2027, is that right?
Yeah, that's more the fixed year.
Okay. Can we talk then again, you know, some of these conversations around efficiency feeds into your EBIT margin? If I look at guidance, you know, at the high end, you're guiding to, by my calculations, an EBIT margin of about 9.6% or mid-9%. You certainly finished the second half quite strong in terms of delivering double-digit EBIT margin. Why is it that you think that some of that can't carry over and carry through into fiscal 2026?
I'm smiling because I actually, it's quite an art to give guidance because it's not as straightforward as you think. We do want to give guidance so that we can, you know, we give investors some kind of direction. Matt might just go into a bit more detail with that.
Yeah, I mean, you understand the skew. From 1 July, we've got an increase in labor costs, we've got an increase in rent costs, and from 1 July, we've got a fee reduction for B12 and urine, which is not offset completely by the indexation of a third of the schedule. From 1 July, you're obviously basically working into a year to catch up with some impostor cost, which is partly why we see the skew, also because we have some stronger months in the second half. I'm not sure I can say too much more beyond that, other than the guidance reflects all of those things that we've called out. You know, but for the fee cuts, I think we would have been very, very, very happy with how we're going to perform in 2026.
Okay, great. Just one more from me. With obviously volume starting to slow or slowing, as you've seen in July and August of this year, are you seeing any change in the competitive dynamics as you compete for volume?
As I mentioned earlier, Lyanne, we're not just competing for volume at any cost. There is a portion of the market that is totally unprofitable. I know we all have market growth. When we say market growth, that's the number we're looking at, but there's a lot that we don't want to be part of because it's just not worth it. As I mentioned, we've withdrawn from some collection centers. I can't remember the number. Matt, it was 30 something, I think, or 40 collection centers because they just do not add to the bottom line. We're very judicious with how we approach revenue growth, and we don't want to just grow for the sake of growing. It's not going to the bottom line. From a competitor point of view, we still have the same, you know, obviously [Foresight] is growing very, very fast.
I won't really comment too much on them except to say that we're not competing for sites that are negative or don't work for us.
Great, thank you very much. I'll leave it there.
Thank you.
Thanks, Lyanne. Next I have Davin Thillainathan from Goldman Sachs. Davin, please go ahead.
Yes, hi. Thanks, Melinda, and thanks, Matt. I guess just trying to get some perspective here on some of the comments that you were making on making patient billing a bit better for your business. If I look at your accounts, it looks like the allowance of expected credit loss has increased about 30% in FY 2025 and 2024. Could you give me some perspective on what's driven that increase, please?
Yeah, there's a formulaic approach in terms of providing for doubtful debts, Davin. The longer they're outstanding, they move through a continuum in terms of the provision. It's also a reflection of higher revenue as well. The provision relative to total revenue is a factor that would influence that as well. I think what I would say going into FY2026 is the initiatives we've got in terms of upfront billing, I think, will show positive growing shoots in terms of arresting debts. We've got, and the automation of billing for tests that we struggle to recover sometimes will help that as well.
Yeah, thanks, Matt. It is quite a material number if I think about the dollars because I guess by making the business better from a collection perspective, that could sort of notch up your guidance towards the top end, I assume, if it actually comes through.
We book the revenue, obviously, Davin, and then we raise a provision. The revenue is there, so it's a credit loss only when it, if and when we decide we have to write it off.
That's historically, but into the future, we would hope that that's not the case, and you're correct, that we'd be doing a better job of collecting upfront and not having the debtor issue at the end.
Okay, thanks. My next question is on the Fair Work Commission review. I understand the guidance excludes it, but the sort of numbers that we're seeing being put out by the commissioner, I guess, would suggest some decent increases to wages. Could you give us a sense of how you're thinking about it for your business, either from sort of percentage increases that it could be, it could be an impost into your business into 2027 as an example, and then maybe also some mitigation strategies that you could be employing today to dilute that impact?
Yeah, all of those growth, well, most of those growth things I went through earlier are going to be able to mitigate some of whatever happens with the Fair Work Commission. It's too early to be giving numbers. We don't know the quantum, particularly who is affected. There's a bit of confusion over that and also the timing. My view is that if phlebotomists receive large increases, it will make more collection centers unviable, and there'll be a reduction in collection center numbers. If that happens, obviously the revenue isn't affected, but the collection center numbers would be affected. I think there could be just a different way of approaching the business and a bit of restructuring in the collection center area from a phlebotomist's point of view. We have a lot of projects underway to offset anything that happens from other angles.
Yeah, that's interesting because my final question is if I look at your lease liabilities on your balance sheet, it looks like it's reduced year on year. I would suspect then just thinking about what you're doing for the business, you would expect another reduction in FY 2026?
It will depend on what we do, whether we grow or whether we net reduce those ACCs, Davin. We don't guide in terms of in that way, but your observation is correct, and we closed 34 centers during FY 2025.
Yeah, sorry, one last one, Matt, just so we get the numbers in the P&L right. Could you give us a sense of what your interest costs would look like in 2026, just given you've given EBIT?
Yeah, it'll be similar to what I did this year.
Okay, just a bit of variability in terms of how you manage that part of your business over the next 12 months.
I don't expect there to be much variability. At the moment, we're generating solid free cash flow. As I said earlier, we'll put a new capital management plan up to the board shortly, which will inform what we're doing with that capital.
Okay, thanks, thanks, Matt. Thanks, Melinda.
Yes.
Thank you.
Thanks, Davin. Tom Godfrey from Ord Minnett is next. Please go ahead, Tom.
Good morning, Melinda and Matt. Thanks for taking my question. I was just keen to sort of understand the incremental $8 million EBIT benefits from the revenue and cost initiatives you've outlined. Just how we think about the phasing of that. Will some of that be captured in that FY 2026 guidance, or is a lot of it sort of incremental in 2027?
Sorry, some of this is for 2027. This year we will be implementing the processes that can lead to that. It's mainly focused on 2027, Tom.
Got it. That was all I had. Thank you.
Thanks, Tom.
Thank you. Moving to Craig [Tenenbaum] at LBC Capital Markets. Please go ahead, Craig.
Thanks. Yes, just wanted to understand about those EBIT initiatives. You said that those processes will be implemented. Is there any kind of costs, like one-off costs, implementation costs that might come through that might affect the P&L, or is that sort of taken below the line?
No, we've already, this is a combination of revenue and operational improvements. The revenue initiatives we've already started piloting now. The system's been developed and we're piloting, so there's no additional costs for that. The only thing that will be a bit of a step change will be the lab of the future project, which is really looking at having one mega lab and downsizing some of the other labs. That will be part of a separate business case and have its own benefits from that. Other than the lab of the future, there's no major cost associated with that $8 million.
To be clear, Craig, on that lab of the future project or any other project, we won't be putting them below the line. There's not underlying, they'll either be embedded in the P&L or if there's CapEx associated with it, we'll call that out.
With that $8 million, you've called out a few different factors there or sort of initiatives. Is there any weighting to particular ones like that that account for the majority of that $8 million, or is it all kind of spread throughout the different ones?
We've already risk-rated that before we've said the $8 million. There'll be timing associated with some of them, but we've already taken that into account.
Sorry, I mean, from our perspective, is the $8 million more factored, is that kind of driven by a few, is that more weighted to some of those factors than others?
If I take it as a whole, the revenue initiatives are all reliant on the upfront patient billing process and targeting of upfront billing of patients, pretty much. They're not going to, they're going to be, the risk or the variability is in whether particular billing processes for particular tests work effectively or not, probably more than anything else. There are a range of other projects within the operational efficiencies, but they're all part of the same approach of refining our footprint and matching labor to volume.
Okay. Just my last question, just wanted to ask you your thoughts around the industry. We have seen a lot of the listed pathology players, or all of them, sorry, have reported a slowing growth in that second half. Could you kind of provide an explanation for what you think has caused that slowing?
We noticed it around when the election was called, but that was also the same time as tariffs, and also just looking at the GP attendance numbers, they're still pretty slow. It could be sentiment around gap payments with GPs, but it's pretty hard to put your finger on. I think there's a little bit in that the volume last year was really quite strong, particularly in July and August, as we go into July, August, and September started to slow off. The comps are pretty strong from the previous year. We did notice a slowdown around April.
Okay, thank you. That's helpful. That's all my questions.
Thank you. Moving to Sasha Cream from ENP. Sasha, please go ahead.
Good morning. Can you hear me okay?
You can indeed.
Okay, thank you, Melinda and Matt. I'm just wondering if you can give some color on how much price mix contributed to growth in the second half and whether that's been one of the factors behind the slowdown you're seeing in your own growth and market growth.
No, I don't think. You mean patient demand decreasing pricing?
I just mean the shift towards higher price tests and input.
Yeah, with the GP market, our content growth was about 2%. It's not, I mean, it's there, but it's not astronomical. It's still solid, but not astronomical.
Okay. In terms of the contract withdrawals and the closure of some ACCs, is that been, in any way, you sort of can quantify the drag from that, both in the second half into the new year?
It's actually a positive on the bottom line.
Yeah.
And a drop-off a little bit in revenue. I don't think, I don't know the number from quantification, Matt.
Oh, we wouldn't quantify the drag specifically. I mean, it's a moving piece. We're constantly looking at our portfolio and optimizing it.
Yeah, okay.
It's just an anomaly. It's hard to understand if you're new to the industry that not all, there's a portion of the market that is totally unviable. Not all revenue is good revenue. I've got an internal view on how much it is, but I can't really give a direction as to what the number is. It's a relatively large number that's not really worth even being in, actually negative to be in, yeah.
Okay. In terms of the urine and vitamin B12 changes, are you seeing any sort of change in behavior by physicians to work around it? Perhaps, you know, the impact may not be as bad as feared by the time we get to the end of the year.
Yes, I think what you've just said is correct. I think it won't be, for us, I don't know what other people are doing, but for us, it won't be as bad as we originally thought. Doctors are working with different ways of having a good diagnosis for B12 deficiency, which has actually been positive from a patient care point of view. I think what you said for us is correct.
Okay. I think it's my last question, just on your hospital contracts. Any way you can provide a bit of color on your exposure to Healthscope, and is there anything we need to be concerned about there going forward?
We don't normally talk about our customers, but because Healthscope issues are very public, I'll just make a comment. We expect to remain with Healthscope hospitals, but obviously, that's still a little bit to be played out there. That said, our business is really diversified and we don't have one customer that impacts in a way that we can't deal with, except, of course, the federal government as a customer. Other customers, we're generally able to either work with them or work around whatever outcome we get. Sometimes this doesn't apply to HealthScope, but sometimes you get an environment where you actually want to withdraw from a contract because it becomes no longer viable, maybe because there's no indexation in it or the original pricing wasn't right or the costs have escalated more than you're being compensated for or some pricing competition comes in.
That doesn't apply to Healthscope, but I just will make that comment.
Okay. Last question, just in terms of the bulk billing incentives that are changing in November, how meaningful do you think that's going to be for pathology volumes?
I don't know. I'm just going by anecdotes. We're hearing some of our big practices are going to go, you're going to use the bulk bill incentive instead of private billing, but you get various, it's more anecdotal, so we won't know until it happens. Just back onto the hospitals, I might make another comment. There's been some insourcing of public hospitals in Victoria, some of the smaller ones, which I'm sure analysts are aware of. I want to make a comment that all of our other large public hospitals have got at least two years more to run on them. A couple of them have signed up early so they didn't have to insource. That was good. Just while I'm thinking of it, I'll make that comment.
Okay, that's all for me. Thank you.
Thanks, Sasha. That's all the questions we've received. If there are any other questions those investors would like to raise, please feel free to email us at investors@clinicallabs.com.au, and you'll find that email address on our ASX releases as well. Thank you, Melinda, and thank you, Matt, for your presentations.
Thank you, [crosstalk].
Ellie, just before you stop, I might just say, I didn't get a question on this, but just while I'm thinking of it, there was an article yesterday that said that we had bought and sold Healius shares, and that wasn't correct. I just take the opportunity to clarify that.
Thank you.
Sorry to interrupt you.
All good, all good.
Thank you to everyone for coming, and we hope to see you at our next investor webinar later, earlier next year. Thank you very much. Goodbye.
Thank you. Bye.