Thank you for standing by, and welcome to the Australian Clinical Labs AGM. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I will now hand the conference over to Mr. Stephen Roche, Chair. Please go ahead.
Good afternoon, everyone, and welcome to Australian Clinical Labs 2026 AGM. My name is Stephen Roche and I have the privilege of being the Chair of your Board. We, Australian Clinical Labs, would like to acknowledge the traditional Aboriginal and Torres Strait Islander custodians of their unceded land on which we work and deliver our services. We pay our respects to elders past and present as the holders of memories, culture, and tradition, and extend that respect to Aboriginal and Torres Strait Islander peoples here today. We acknowledge the multiple and complex factors impacting Aboriginal and Torres Strait Islander peoples as the original peoples of this country, and value their connections to the land, sea, and community. I have been informed by our Company Secretary that we have a quorum present, and I now declare the meeting open.
Before we begin with today's agenda, I would like to introduce my fellow Board members and key executives who are present at the AGM today. Here in Sydney, I am joined by the Chair of our People and Culture Committee, Christine Bartlett, the Chair of our Audit and Risk Committee, Mark Haberlin, and also my fellow Non-Executive Directors, Sarah Butler and Dr. Amandeep Hansra. In addition, our Group Chief Executive Officer and Executive Director, Greg Horan, our Chief Financial Officer, Matthew Cordingley, and our Company Secretary, Eleanor Padman, also join us from Sydney. Joining us virtually from Melbourne is ACL's auditor, Mr. Ben Powers from Pitcher Partners. Ben will be available to answer questions that shareholders may have in relation to the 2026 financial statements and the conduct of the 2026 audit.
I will now take a moment to explain the interactive features of the webcast platform that we are using today. A virtual meeting online guide was sent to shareholders with the notice of meeting, and I will now run through the key features. To vote, you will need to register by clicking on the Get A Voting Card button and providing your security holder number and postcode. If you are an appointed proxy, please enter the proxy number issued by MUFG in the proxy details section. Once you have registered, your voting card will appear with the resolutions to be voted on by shareholders during today's meeting. You may need to use the scroll bar to review all resolutions. On your voting card, you will see an option to enter a full vote or partial vote. To vote, you can click for, against, or abstain.
If you wish to submit a partial vote, please enter the number of votes you wish to lodge from the total you see displayed at each resolution. Once you have finished voting on all resolutions, please click Submit Vote. At the end of the meeting, a countdown timer will appear, and voting will end five minutes after the close of the meeting. Please ensure you get your votes in on time. To ask questions, shareholders can simply click Ask a Question. Depending on the volume of questions, we will focus on answering the most frequently asked questions. I would also ask that you confine your questions and comments to the business of the AGM. The notice of meeting for the AGM was made available to all shareholders, and I propose that it be taken as read.
The notice of meeting can be found on our website under the Investor Center tab, and there is also a link on the AGM platform if you wish to download it from there. Today, I will begin with my Chair's address, then I will invite our Group Chief Executive Officer and Executive Director, Mr. Greg Horan, to provide an overview of the FY 2026 financial and operational achievements. We will then move to the formal part of the meeting. The notice of meeting that was sent to shareholders contained six resolutions. We will take questions as we address each item of business, and I will try to move at pace to ensure that we complete the agenda in our allocated time. This year, we enter our sixth year since Australian Clinical Labs listed on the ASX.
FY 2026 was a year of significant change for our company and another demanding year for the Australian pathology sector. Industry funding reductions, inflationary cost pressures, and subdued market growth all affected the operating environment. Medicare fee reductions for vitamin B12 and urine testing, subdued general practitioner consultation volumes, and lower respiratory and HBV testing contributed to a challenging industry backdrop. Despite these conditions, ACL delivered a resilient financial performance. Underlying EBIT increased to AUD 69.2 million. Earnings per share increased year- on- year by 8.5%. Return on invested capital improved to greater than 25%, and the company generated strong operational cash flows, AUD 64 million. ACL also returned AUD 47 million to shareholders through dividends and an on-market share buyback.
Financial year 2027 progress will be provided later in the CEO update. These results demonstrate the strength of ACL's national operating platform, the discipline applied across the business, and the commitment of our people. The Board remains firmly committed to disciplined capital allocation. Increase and further gender undervaluation wage adjustments. The Board assists healthcare professionals in the timely diagnosis on healthcare leadership experience to the excellence and accountability is strongly aligned, returned value.
Thank you, Stephen. Good afternoon, and thank you for participating in our AGM for 2026. It is a privilege to address shareholders as Chief Executive Officer of Australian Clinical Labs. I would like to begin by acknowledging the contribution. First is disciplined network and contract growth. We will expand our collection center network and pursue new contracts where we can deliver appropriate returns. Growth for its own sake is not our objective. New locations and contracts must meet clear strategic service and financial criteria. Second is strategic new business. We will pursue opportunities in commercial pathology, research partnerships, genetics, specialized diagnostics, and melanoma-related services. This area allows ACL to build on capabilities already within the organization while increasing the diversity and quality of our revenue base. Third is disciplined acquisitions. We will continue to assess pathology and adjacent acquisition opportunities, including opportunities associated with SunDoctors.
Each opportunity will be evaluated against clear strategic and financial thresholds. We will remain disciplined in determining where ACL can create value through capability, scale, integration, and synergies. Fourth is improved revenue quality. Improving the completeness, timeliness, and quality of revenue capture is a significant area of focus. Our initiatives include digitized billing, upfront payment processes, improved recovery of non-Medicare and unfunded tests, contract pricing, and continued advocacy for appropriate industry funding. These initiatives are designed to ensure that ACL is appropriately compensated for the services it provides while maintaining a clear and transparent experience for patients, referrers, and customers. Fifth is furthering operational improvement. We will continue to progress Lab of the Future, the National Skin Laboratory, artificial intelligence, automation, procurement initiatives, and route optimization. Our aim is to improve productivity and service delivery while reducing unnecessary complexity and cost.
We will assess execution across those priorities by focusing on margin, revenue diversification, scale and synergies, revenue quality, and cost per test. The strategic direction Which has been stronger in the early part of FY 2027 compared to the year prior. After a subdued FY 2026, when growth in pathology volumes slowed across the major states, Medicare data for the first two months of the financial year shows national market volumes up 5.8% on the same period last year. Growth has been broad-based across most states. Most of this recovery has come from an increase in GP attendances. These green shoots of growth in primary care are flowing through to pathology referrals, and ACL is seeing similar levels of recovery. ACL specialist pathology referrals have also increased so far on the year prior.
For FY 2027, ACL is targeting revenue of between AUD 745 million and AUD 765 million, and an underlying EBIT of between AUD 67 million and AUD 73 million. With the improved growth, we are expecting to be at the higher end of the guidance. This represents an implied EBIT margin of approximately 9%-9.5%. The guidance reflects continued wage pressure and known funding settings. The final increase in wages related to the gender undervaluation outcome for pathology collectors is to be finalized on the 1st of January 2027, and this will be absorbed within our stated guidance range. The guidance also incorporates anticipated benefits from initiatives already underway, including upfront episode billing, pricing changes for non-MBS funded tests, Lab of the Future, artificial intelligence, initiatives and closer alignment between the workforce capacity and activity. Our FY 2027 priorities are clear. Maintain margin stability through known headwinds.
Execute the initiatives within our control. Improve the quality and diversity of revenue. Strengthen productivity and service delivery, and pursue sustainable returns-focused growth. Share buybacks will continue to be assessed with regard to the company's funding requirements, strategic investment opportunities, and ongoing capital expenditure. ACL has a strong national platform, committed people, and a clear opportunity to improve performance through disciplined execution. We will remain focused on operational excellence, accountability, earnings quality, cash generation, and sustainable shareholder returns. I would like to thank the Board for the confidence it has placed in me, our people for their contribution, our customers and healthcare partners for their continued support, and our shareholders for your ongoing investment in ACL. I look forward to working with our teams across Australia to deliver the next phase of ACL strategy. Thank you, and back to you, Stephen.
Thank you, Greg. I would now like to proceed with the formal business of the meeting. The first item of business is to table and consider the financial statements for the year ended 30 June 2026, together with the Director's report and the Auditor's report, which are included in our 2026 annual report, and which we have published on our website. I formally table the 2026 financial statements of ACL for the financial year ended 30 June 2026, the Director's report, and the Auditor's report. I will take all of these reports as read. We will now take any questions submitted via the virtual meeting platform. Are there any questions for Greg or myself in relation to the company's performance or any matters raised by Greg in his address?
Stephen, we have a few questions from Stephen Mayne. The first relates to AI. How many full-time equivalent staff do we currently have, and is this likely to fall over the coming 12 months with the rapid roll out of AI? Which parts of our business and operations are the most prospective for AI productivity gains, and how energetically are we affecting those opportunities? Also, to what extent do we allow third party AI agents into our systems for bookings and the like, and to what extent do we block agents?
Thank you, Eleanor. I'll ask part of that, or answer part of that question, Stephen, and then throw to Greg for some of the detail around the AI elements that you described. ACL has a workforce of approximately 4,000 people. In relation to the question around what level of impact then will AI have on that number, there will be some minimal reduction in that over the coming year. But let me then just emphasize that that will be also supplemented by other redeployment of those individuals across the business. We are looking at ways operationally that AI can improve and improve our productivity across every element of our business as it can. I'll probably now pause and throw to Greg in relation to some of the other activity around that.
Thanks, Stephen. I would say in terms of our focus, as Stephen said, we are looking at the obvious productivity opportunities, but also how AI can help us grow. I'd say in terms of how energetically we're looking to embrace those opportunity, we are certainly taking an approach of develop the governance and security first, before we continue to roll out broadly across the business. That is our main focus at the moment. To your point, in relation to allowing AI agents into our system, again, security here is the biggest issue for us and making sure we have a secure platform. That is where we'll continue to focus before rolling out a broader program into FY 2027.
Thank you. Eleanor, are there other questions?
Yes. There's another question in relation to merger and IPO activity. Again, from Stephen Mayne. Australia is currently in the midst of an unprecedented deluge of takeovers that has contributed to listed entities on the ASX dropping by 11% since January 2023 to 2,044 on September 30, 2026. Why do the Chair and CEO believe this is happening? There's a clear mispricing between public markets and private markets, but is there also a problem with the scrutiny and extra regulation of being listed? Does the Chair agree this is a problem for the nation, particularly with so few new floats replenishing the ASX ranks?
Thank you for your normal detailed question, Stephen. Let me say from the outset, it is not my view nor my position to comment on market conditions necessarily and other elements of it. Let me just reinforce that whether it is a public or a private market, the price will be the price. What we need to focus on is that we are maximizing the performance of the business and improving returns to shareholders as consequence, and the market will price us accordingly with the circumstances and the environment that we operate within. Next question, Eleanor.
There are no other questions on this item of business.
Thank you, Eleanor. Are there any questions in respect of the 2026 financial statements for the auditor?
No, there are no questions.
Thank you. The next item of business is the non-binding shareholder resolution to consider the adoption of ACL's 2026 Remuneration Report. The Remuneration Report is contained within the 2026 Directors report and forms part of the 2026 financial statements and reports. Displayed now on the screen are the proxies that have been received to date in relation to this. Any votes from Directors, key management personnel, and their associates have been excluded from this resolution. Are there any questions in relation to this resolution?
Stephen, we have another question from Stephen Mayne. Which of the proxy advisors covered us this year? Did any recommend a vote against any of today's resolutions, including this Remuneration Report item? If so, what reasons did they give, and did this translate into any material protest votes?
Thank you, Stephen. The answer to your question is that the majority of proxy houses canvassed us during the reporting season. Ownership Matters, Glass Lewis, ACSI, all reported in relation to our reports and all resolved favorably to each of these resolutions. On that basis, we didn't have a protest vote or any non-compliance in relation to the proxy advisor's position on ACL. Are there any other questions, Eleanor?
No, there are no other questions on this item of business.
Thank you. I'll now move for members to consider and, if in favor, to pass the resolution now displayed on the screen. It's not my intention to read the wording of each resolution for consideration today out loud, given that they have not changed since our notice of meeting was sent to shareholders. In each instance, I will give you all a minute to review the relevant resolution and take a moment to cast your vote. Thank you. The second resolution is to consider the re-election of Dr. Amandeep Hansra in accordance with the Corporations Act and ACL's constitution. Amandeep is our newest Director and was appointed to the Board as a casual vacancy on the 1st of July 2026. In accordance with ACL's constitution, Amandeep now stands for formal re-election by shareholders at this, the first AGM following her appointment.
The Board is delighted that Dr. Amandeep Hansra has agreed to join ACL's Board, given her more than 20 years of clinical experience as a general practitioner, as well as extensive executive experience in digital health leadership and government engagement. Since joining the Board, Dr. Amandeep Hansra is considered to be an Independent Director. The Board, with Dr. Amandeep Hansra, unanimously recommends that shareholders vote in favor of her re-election. Are there any questions in relation to this resolution, Eleanor?
No, Stephen, there aren't any questions in relation to this resolution. We have had a couple of questions come in relation to the previous resolution that I might take a moment now to draw your attention to. The first is from Mr. Wayne Arthur. "I'm puzzled by the Chair saying EPS increased by 8.5%. In the profit and loss statement, the EPS declined from AUD 0.16 per share to AUD 0.12 per share.
I think we can take that on notice. I'm more than happy to speak and contact Mr. Arthur following the meeting. I'm not certain whether we're dealing with the difference between underlying and statutory, but I'm happy to contact Mr. Arthur post the meeting.
Okay. Thank you, Stephen. Another question from Mr. Arthur. "Re share buybacks. Do you think it is a bit odd that you are paying money to people who no longer want to be shareholders? Isn't it a time for a reset and just to concentrate on paying franked dividends to loyal shareholders?
Can I thank Mr. Arthur again for the question. I will only reinforce that that is a deliberation that the Board has regularly, and it is clearly in relation to the balance between returns to shareholders via capital efficiency and buybacks or via dividends and franking amounts. I can only assure Mr. Arthur that we will continue to consider that and balance that in the most appropriate way moving forward.
Thank you, Stephen. There are no other questions in relation to the resolution in respect of Dr. Amandeep Hansra's re-election.
Thank you. The third resolution is then to consider the re-election of Christine Bartlett in accordance with the Corporations Act and ACL's Constitution. Christine was first elected to the Board by shareholders in October 2023, and having completed a term of three years, now stands for re-election. Christine has held roles with national and global responsibilities and has a strong commercial perspective, particularly in fostering innovation and leveraging new emerging technologies. In addition, Christine is currently a non-executive director of Reliance Worldwide Corporation Limited, Firmus Technologies Proprietary Limited, and is the Chair of NSW Ports and CEDA. Christine is the Chair of ACL's People and Culture Committee and has also served as a member on our Audit and Risk Committee during the FY 2026 financial year. Christine is considered to be an independent director. The Board, with Christine, unanimously recommends that shareholders vote in favor of her re-election.
Are there any questions in relation to this resolution?
No, Stephen, there are no questions in relation to this resolution.
Thank you. Displayed now on the screen are the proxies that have been received to date. As chair, I intend to vote all undirected proxies in favor of the resolution. I now put the resolution shown on the screen to a vote. Please take the next minute to review the resolution and submit your vote. Thank you. Can I now just ask shareholders to bear with me as I go back to the formal resolution around Dr. Amandeep Hansra. Can I now just intend to display on the screen the proxies that have been received to date. As chair, I intend to vote all undirected proxies in favor of the resolution. I now put the resolution displayed on the screen to members for consideration and a vote. I will pause for a minute to allow you to review the resolution and cast your votes. Thank you.
We now move to the fourth resolution, which is to consider the approval to grant an issue of performance rights to Greg as part of his remuneration for FY 2027 under ACL's Long-Term Variable Remuneration plan. ACL's LTVR plan has been designed to facilitate the company adopting modern best practice remuneration and equity structures for executives. A key component of effective remuneration for executives is equity interests in the form of the LTVR to drive shared performance objectives, link remuneration to company performance, and align interests with sustainable value creation for shareholders. This year, and in response to shareholder feedback, the Board has amended the vesting conditions applicable to the grant by removing any service requirement and instead using three quantitative performance metrics being total shareholder return, earnings per share, and return on invested capital.
The performance rights are also subject to a number of other terms and conditions, which are set out in the explanatory memorandum to the notice of meeting. A voting exclusion also applies to this resolution. The Board, with Greg abstaining, unanimously recommends the shareholders vote in favor of this resolution. Are there any questions in relation to this resolution?
Stephen, we have a question from Stephen Mayne. What are the material differences between the incentive arrangements for the new CEO and those which applied to his predecessor? Also, retail voting sentiment on REM issues is often different from the 10 largest shareholders who control public company voting outcomes. Will you disclose the headcount data on all resolutions to the ASX to make public retail voting sentiment and the chronically low retail participation rate evident? Even 2% of shareholders vote by proxy ahead of this meeting.
Thank you, Stephen. Let me firstly describe the difference between Melinda's and Greg's contract arrangements. Notwithstanding base remuneration, which is also significantly different between the two individuals, the short-term incentive program for Greg has a balance of 50%-70% of his fixed base remuneration, compared to Melinda's, that was 100%-150% stretch on that particular item. On the question of LTVR, Greg's arrangement is 100% of his fixed remuneration with the framework as we've displayed in the notice of meeting and within the annual report. Melinda's was not a LTVR plan, but was essentially a service requirement over time for her LTI participation in the last two years of her contract. On the question then of, let's take it in some order here, what level of proxy advisors have voted in the last 48 hours? Was that the question, Eleanor?
The question was did even 2% of shareholders vote by proxy ahead of this meeting? I think what Stephen means is retail shareholders. I'm making that assumption. But, 73% of issued capital voted in total, as shown in the proxy slides.
Stephen, I don't have a live analysis of that particular statistic, but I would think that it's unlikely that 2% of shareholders have put proxies in within the last 48 hours. The next part of your question was in relation to whether we are intending to disclose and segment, if I can use that language, the difference between institutional holders and retail holders on the register and their voting. As you've heard me say this in other places where you've asked similar questions, I understand the question. Let me take it on consideration. But I think what I would say is it's unlikely that we would change our position unless there is a substantial level of segmentation there that suggests that it's worthy of some disclosure.
Thank you, Stephen. We have no other questions on this item of business.
Resolution four. Displayed now on the screen are the proxies that have been received to date. As Chair of the meeting, I intend to vote all undirected proxies in favor of the resolution. I now invite members to vote on the resolution displayed on the screen, and I will pause for a minute to give you time to review it and cast your vote. Thank you. Our fifth resolution for today's meeting relates to the renewal of the proportional takeover provisions that are contained in ACL's constitution and which are required to be renewed by shareholders every three years. The proportional takeover provisions were contained in the constitution that was adopted by the company as part of its admission to the official list of the ASX on May 14, 2021, and were last approved by shareholders on 22nd of October 2023 , and have therefore expired.
Resolution five therefore seeks to reinsert the proportional takeover provisions in identical terms for a period of three years from the date of today's AGM. If the proposed resolution is approved by shareholders, the proportional takeover provisions will be reinserted into the constitution and have effect on exactly the same terms as the previous provisions until 28th of October 2029 . A proportional takeover bid involves a bidder offering to buy a proportion only of each shareholder's shares in the company. This means that control of the company may pass without shareholders having the chance to sell all their shares to the bidder. It also means that the bidder may take control of the company without paying an adequate amount for gaining control.
In order to deal with this possibility, the constitution contains proportional takeover provisions that require shareholders to vote on such a bid and decide collectively whether or not to accept it, with the majority decision binding all shareholders. Further information on the mechanics of the provisions and their advantages and disadvantages are set out in the explanatory memorandum that was sent to shareholders with the notice of meeting. As Resolution five relates to ACL's constitution, it is a special resolution which requires at least 75% of the votes cast by shareholders entitled to vote must be in favor of this resolution. The board unanimously recommends that shareholders vote in favor of this resolution. Can I just check, Eleanor, are there any questions in relation to this resolution?
No, Stephen, no questions in relation to this item of business.
Displayed now on the screen are the proxies that have been received to date. As Chair of the meeting, I intend to vote all undirected proxies in favor of this resolution. I now ask members to consider and vote on the resolution displayed on the screen, and I will allow a minute for you to review the wording and cast your vote. Thank you. Our sixth and final resolution relates to the appointment of a new auditor, Deloitte, to the company. Pitcher Partners has been the company's auditor for more than 10 years. The company's Audit and Risk Committee therefore considered that it was good corporate governance to put the company's audit services to tender and to seek proposals from a number of providers. As a result of that tender process, the Board resolved to appoint Deloitte as its new auditor.
The Board also wishes to thank Pitcher Partners for the services they have provided to the company. Section 328B(1) of the Corporations Act requires that written notice of nomination of a new auditor be received from a member of the company. The company has received such a nomination from Mark Haberlin, the Chair of the Audit and Risk Committee, in his capacity as a shareholder of the company. A copy of the nomination was annexed to the notice of the meeting. Pitcher Partners has tendered a notice of resignation to ASIC under Section 329(5) of the Corporations Act, and Deloitte has given its written consent to act as the new company auditor.
Since sending the notice of meeting to shareholders, I can confirm that ASIC has granted its consent to the resignation of Pitcher Partners, and accordingly, if Resolution six is passed, the appointment of Deloitte as the company's new auditor will take effect at the close of the AGM. If Resolution six is not passed, then the company will need to appoint a new auditor other than Deloitte. The Board unanimously recommends that shareholders vote in favor of this resolution. Are there any questions in relation to this resolution, Eleanor?
No, Stephen. No questions.
Displayed now on the screen are the proxies that have been received to date. As Chair of the meeting, I intend to vote all undirected proxies in favor of the resolution. I also now move for members to consider, and if in favor, to pass the resolution now displayed on the screen. I will give you all a minute to review the resolution and take a moment to cast your vote. Fellow shareholders, that now concludes the formal part of the meeting. Voting is about to end, so please take a moment to ensure that your votes have been submitted. Once all the votes have been reconciled by our share registry, MUFG, the results will be published on the ASX later today. Can I thank everyone for attending our AGM and for those that put questions forward, and for your continued support of our company.
Thank you again, and goodbye.