Thank you for standing by, and welcome to the Healius Limited conference call. I would now like to hand the conference over to Janet Payne, Group Executive Corporate Affairs. Please go ahead.
Morning, everyone, and welcome to the Healius Capital Structure Reset and Equity Raise Investor Presentation. Due to legal restrictions, we are unable to discuss any details around the equity raise other than the basic terms referred to in the offer announcement and presentation released to the ASX on Monday. Please refrain from asking questions beyond the specific details of the equity raise, as we are legally restricted from answering those questions on this call. We'll use the ASX on Monday on this call, and refer to various slides in the presentation. With that, I'll hand you over to Maxine Jaquet, our CEO and MD, to start the presentation.
Thank you, Janet, and good morning, everyone. I'm gonna refer to a couple of slides from the presentation, specifically slide six and slide seven, before we turn to questions. On Monday, Healius announced a capital structure reset and $ 187 million equity raising via a fully underwritten, non-renounceable entitlement offer. The new shares under the entitlement offer were issued at an offer price of $ 1.20 per share, which represents a 29.3% discount to the theoretical ex-rights price of $ 1.70 per share. The proceeds from the entitlement offer will be used to reduce Healius' net debt. As we've outlined before, pathology and imaging market volumes were disrupted by the impact of COVID-19 pandemic, and post-COVID has been recovering for all industry participants.
Furthermore, elevated levels of inflation and interest rates have continued to drive a material increase in costs, while pathology MBS benefits have not been indexed for the last 25 years. In this environment, the management team at Healius has, and continues to, undertake an extensive reset of our cost base post the COVID environment. This week's equity raising resets Healius' capital structure with an appropriate gearing for the current environment. As you can see on this slide, we also announced that we have received support from our debt providers in the form of an agreement to waive Healius' Net Debt to EBITDA gearing covenant for the first half of FY 2024. Our lenders have also agreed to temporarily increase the covenant from 3.5 x to 4 x for the full year FY 2024, testing date on 30 June 2024.
This covenant support is provided in conjunction with a commitment from Healius to reduce its total bank facilities from $ 1 billion to $ 750 million, and to reduce its drawn debt by at least $ 150 million by 30 June 2024. The entitlement offer will allow Healius to satisfy this commitment to reduce its drawn debt. We are also not paying any dividends in this financial year. Following the completion of the entitlement offer, Healius expects to have sufficient financial flexibility and liquidity to navigate the near-term cost pressures in a post-COVID recovery market. We also have the flexibility to undertake some disciplined investment in our core businesses, including on growth opportunities, primarily in the imaging division.
This capital structure resets also Healius' position to take advantage of the recovery in the healthcare sector over the medium to longer term, which we believe continues to be underpinned by strong underlying drivers. Turning to the next slide, which is slide seven, balance sheet reset. As I mentioned on the prior slide, the proceeds from the entitlement offer will be used to reduce Healius' net debt and reset its balance sheet with an appropriate gearing. At 30 June 2023, Healius' net debt was $ 450 million, and its net debt to EBITDA gearing ratio was 3.5 x. Following completion of the entitlement offer on a pro forma 2023 basis, Healius' net debt would reduce to $ 263 million, before costs of the capital raising, which would imply a gearing ratio of 2 x underlying EBITDA.
Healius would have pro forma undrawn bank facilities of $ 372 million, with the first maturity event due in March 2025. As a result, we expect to have sufficient financial flexibility and liquidity following completion of the entitlement offer. Turning to the next slide, slide eight, positioning for recovery. As mentioned earlier, we have implemented extensive cost and capital restructure initiatives to address the challenging market trading conditions. We already undertook an extensive cost reset program through the course of FY 2025... 2023, sorry. This included rapid removal of COVID costs from the business, first phase, right-sizing the labor in our laboratories, significant procurement savings across consumables and other categories, and management of divisional back office and corporate costs. This year, we continue to focus on ongoing cost efficiency and revenue reviews in light of continued trading conditions.
These programs include pricing and revenue assurance initiatives, footprint optimization, and ongoing general cost management to offset inflationary pressures. Collectively, these initiatives have been designed and implemented to make Healius a leaner and stronger underlying business. Together, with the announced capital structure initiatives and equity raising, they position Healius to capitalize on the expected recovery in underlying industry volumes over time. I will now hand to Paul to take you through the trading update and forecast. Thanks.
Thanks very much, Maxine. So I'm just going to go through both slides 10 and 11 in the pack, which is the trading update and the outlook FY 2024. So slide 10 summarizes our trading for the first quarter of FY 2024. In terms of pathology, core volumes for the quarter, excluding COVID-only testing, are up 6% on the prior corresponding period. Notably, since the end of the first quarter, we've seen weekly pathology volumes steadily improve across October, and that's the first three weeks of November. We've maintained our market share of pathology benefits paid under the Medicare Benefits Scheme, which has remained constant on a rolling six-month and 12-month basis. This is a solid outcome given the lower growth and lower value of GP-received MBS benefits paid when compared to growth and value of specialist benefits.
COVID-only testing revenues are now negligible, with volumes down over 90% on the prior corresponding period. Agilex has continued to perform well, with growth momentum continuing from its run rate in Q4 FY 2023, and it remains on track for a much stronger FY 2024 EBIT contribution. Lumus Imaging is continuing to see growth in volume and price, benefiting from positive modality mix shifts and indexation. The Lumus Imaging business is supported by a footprint of large-scale, comprehensive community sites and a strong hospital portfolio. In the first quarter of FY 2024, gross revenue for Lumus Imaging was up 9% from its community and hospital sites on the prior corresponding period. This was in line with growth and growth and total MBS benefits paid to imaging market participants. In terms of the outlook for FY 2024, which is on slide 11.
So based on trading conditions that we've seen in the year to date for FY 2024, we've provided guidance for the first half and for the full year. For the first half of FY 2024, Healius now expects underlying EBITDA to be in the range of $ 158 million-$ 161 million, and underlying EBIT to be in the range of $ 14 million-$ 17 million. It's important to note that the prior comparable period benefited from COVID-related PCR testing revenues of $ 57 million, which equated to an EBIT benefit of approximately $ 24 million. For the full year FY 2024, we expect underlying EBITDA to be in the range of $ 383 million-$ 393 million, and underlying EBIT to be in the range of $ 95 million-$ 105 million.
This guidance is based on various assumptions. Firstly, revenue is historically weighted towards the second half, driven by, mainly by greater pathology volumes and revenue. Given our predominantly fixed cost base, this results in a more significant earnings skew to the second half. You will see that the midpoint of our guidance range gives a first half, second half, EBITDA skew for FY 2024 of 41%, 59%. Secondly, our guidance range is based on the assumption that the second half FY 2024 pathology volumes are expected to grow between 6% and 8% relative to the prior corresponding period. You will understand that we are a predominantly fixed cost base business in pathology, so if the additional, revenues in H2, so of the additional revenues in H2, 85% of those fall through to EBIT. We triangulated this range based on several factors.
The first quarter of FY 2024 pathology volume growth was 6% on the prior corresponding period. We have observed an upward trend in pathology volume growth in the market in October and November weeks. Pathology revenue is expected to be approximately $ 600 million for the first half of FY 2024. This is approximately a 5% growth on 1H 2023 revenues. For each 1% change in pathology volume growth in the second half of FY 2024 compared to the prior corresponding period, results in approximately $ 5 million of additional EBIT impact. Our FY 2024 guidance range includes a net benefit of $ 15 million EBIT in the second half from the cost efficiency and revenue initiatives Maxine talked about earlier. There are no material redundancy or other costs associated with these.
Finally, the improving trends in both Lumus Imaging and Agilex Biolabs will drive second half skews in revenue and hence performance for both of these businesses, as well as pathology. All of the above is part of our full year guidance range of $ 95 million-$ 105 million. A combination of the traditional revenue and performance weighting to the second half, higher volume, growth expectations for pathology in that half, and our revenue and efficiency reviews. All of these have a significant impact on earnings for the second half of FY 2024.... Thank you.
Thank you, Paul, and thank you to everyone on the call for joining us and for your support. That's the end of the presentation. We've got time left for questions. If we can, I'd like to limit each respondent to one major question and of course, we are more than happy to answer any questions you have following this call. So with that, I'll pass over to the moderator. Thank you.
Thank you so much. If you do wish to ask a question, you can register by pressing star then one on your phone, and if you wish to cancel at any time, you can do so by pressing star then two. If you are on a speakerphone, please pick up your handset before asking a question. Your first question today comes from David Lowe at J.P. Morgan. Please go ahead.
Thanks very much. Paul, you just confirmed that there's no not material additional costs from the efficiency programs that are due to deliver of $ 15 million in the second half. Can we understand what's happening? You know, one, just to clarify what costs will be associated, and two, if you could talk a little bit about corporate costs. My understanding was corporate costs were gonna rebound this year over last because short-term incentives were gonna be accumulated. Presumably, that's much less the case. Just a little bit of a sense as to what's happening with corporate costs would be helpful. Thank you.
Sure. So look, two things. On the fifteen million dollars, it's predominantly made up of two parts. First is just reducing overall annual leave balances across the business. We had significant annual leave balances post the COVID period, where there wasn't a lot of people on leave, so managing those in particular across the kind of December, January, and then out to December to June 2024 period. So that's a big chunk of it. The second part is pathology labor and costs, and that is around using our advanced rostering system. So we have uniformity across each of our major operations and the major workforce groups to ensure that we're being consistent with overtime, with casuals, and the part-times, et cetera.
So we just have, you know, a more efficient way of basically rostering our, you know, what is a largely, you know, a workforce that is across, you know, the collectors, couriers, and then our laboratories. So those are the two major parts of the costs. In terms of corporate costs, I think we have said that they were kind of circa $ 20 million, that there wasn't going to be a tick up this year because, you know, we are not accruing for short-term incentives across FY 2024.
Thanks for that. I'm just gonna squeeze in one more. I mean, I think just would like to understand why you're doing the call now and not, you know, before the market opened, when, when frankly, we would have published. It just seems unusual not to have given a briefing at a time when everyone could get the information at the same point.
Look, James, I think that was purely just a timing and logistics thing, in the, you know, just how the process bore out. So, the intention was to do a call earlier, but it was just a timing logistics issue.
Yeah. I don't think you've done shareholders any favors doing it that way. But look, I'll, I'll leave it at that. Thanks so much.
Thank you. Your next question comes from Craig Wong-Pan at Royal Bank of Canada. Please go ahead.
Thanks, and good morning. My question was just trying to understand that sharp fall in sort of earnings, EBITDA and EBIT, in the first half, given that you know, at your full year result, you'd kind of reset the cost base. You know, you have been achieving base business revenue growth, and I understand that COVID revenues have dropped a bit from the second half, but just trying to understand that magnitude of that earnings coming through, because that was a real surprise for the market.
Look, I think there's two parts to that. One, as we set out, for H1, obviously had $ 24 million of COVID-related earnings in the first half last year. The second part of it is, yes, you know, we have reset our cost base. The things that were not included in that cost base as we went into 2024 was obviously wage inflation. We've got, you know, inflation associated with our collection centers and rents. That first half did have the expansion in the collection centers, which is not ongoing now, but did happen in the back half of 2023. So there was a net, you know, increase in collection centers across that period.
We have additional radiologist costs in the cost base in the first half, which, while the costs go up, the revenue associated with that, you know, goes up quite significantly as well. And also, you know, if you're comparing H2 to H1, there's various cost timing differences as well across those periods. And the last thing I'd say is, you know, we have, as you know, in pathology, a fixed cost-based business that, you know, gets spread equally over both halves. The second half, you know, when volumes increase, it's obviously leveraged, you know, the EBIT is leveraged to the second half quite significantly.
Then just to sort of follow up on that, the improved rostering that you expect for the second half to drive earnings and those efficiencies, is that just a new system or a new way of doing things? I'm just trying to understand how you're gonna get that improved efficiencies.
So this is like it's a second phase of the system. And it's you know it's completing the advanced part of the rostering software that we have. Putting in place you know experienced and dedicated rosterers rather than having you know managers rostering staff. So it's quite a significant change to the organization.
Okay, thank you.
Fully implemented and then automated, so.
Thank you. Your next question comes from David Bailey at Macquarie. Please go ahead.
Good morning. Sorry I'm in a cab . Just one question from me. I mean, talking about core pathology, something we haven't really seen before. As we start to model out fiscal 2024, the first half and the second half, I'm just interested if you can give us the, those, the numbers that would have been recorded in the PCP. So, you know, your core pathology, or what we're calling core pathology, in the first half of 2023, and the core pathology in the second half of 2023. So then we can sort of figure out what revenue looks like and backfill the operating costs.
Sorry, I didn't really catch all of that, David.
I think I've got it, David. So, it's Janet here. So yeah, in terms of the forecast and the percentages that Paul's been triangulating for the forecast, we've basically taken all pathology revenues. So 2H is effectively the 587 BAU and the 20 of COVID. So it gets you to 600 as your base for the 2H 2023, or 600+. And the first half, as you know, we've got 57 of fewer COVID from the old COVID codes in the first quarter, but most of the rest of it goes into BAU. So in terms of the forecast, we're using all the volumes there. In terms of what we're doing in actuals, we've said to you that first quarter, but we're just going for the midpoint.
So brokers are using a range of either putting these new COVID codes all into BAU or all into COVID. We're taking the midpoint, which is just the COVID-only code, will be COVID from now on. And that's what gave you the 6% volume growth in the first quarter. So yeah, just to recap, that you're basically looking at a base of the 587 and the 20 for the second half of 2023 for the triangulation.
Thanks, Janet.
Thank you. Your next question comes from Steve Wheen at Jarden Group. Please go ahead.
Yeah, thanks very much. I also just wanted to talk to the first half number, particularly in light of your comments that were made at the full year result. You indicated that the EBITDA for second half 2023 was a good base for us to use going into 2024, which, you know, two months later, that no longer looks like the case. I just, what has changed within the last two months to actually drive this, you know, change of stance, and for it to be so weak in the first half, particularly when you're looking at the margin? The margins go down in first half relative to what was achieved in second half quite considerably.
And I know there is COVID PCR testing in second half, but even if you adjust for that based on the margins that you've indicated COVID testing gets, there is still a significant reduction in EBITDA margin. So I'm just trying to understand what has happened in that first half of the year, particularly when you said in second half, that was a good base for us to use.
Well, Steve, I'm not sure that that was exactly what we said. So I think what we were trying to demonstrate, and if I think I understand what you're saying, is when we were demonstrating the cost reset, as I explained before, that was at a point in time once the cost reset had been done and the operating cost asset program was complete. What has happened since then, so obviously volumes, despite, you know, being up 6% for that first quarter, we still have this fixed cost base, and we have had wage inflation, rent inflation, the expansion of the ACC, and those additional radiologist costs in H1, which have impacted, you know, earnings for that half. Hopefully that makes sense.
Yeah, yeah, that—I mean, that, that does, and that helps explain the margin. But, I mean, weren't those sort of costs anticipated back then? I mean, there are EBAs that are driving the wage inflation. I would have thought that that had been very well known and could have been called out at that point.
We did actually grown up . Steve, that said very clearly that if we didn't get the volumes through, we'd have to wear that EBA inflation. I mean, it's, at the end of the day, as Paul's always said, it's, it all comes down to the volume.
Yeah. Thanks, Steve. It's the, you know, the flip side of that is actually, you know, purely pathology volumes, which make the difference to your margin, so.
Yeah. But, but also, your volumes for the first quarter are kind of the sweet spot of growth that you're looking for for the full year, they're in the 6%-8%.
Well, I don't think it's a sweet spot because the volume in the second half, Steve, are higher than the first half. So the pure math on that is if you get the same percentage increase in the second half of a higher volume base in PCP, then, you know, the result in revenue from that, 85% of that falls straight to the bottom line.
Yeah. Okay.
volume-
Okay. Thank you.
... Thank you. Your next question comes from Tina Vu at Morgan Stanley. Please go ahead.
Thanks for taking my question. Just in terms of seasonality for pathology-based business revenue, so from fiscal 2016 to 2019, it was about 49% in the first half. Is it reasonable to assume a similar seasonality or something more skewed?
Are you talking about- Sorry, Tina, are you talking about volumes for pathology?
Yeah, just pathology-based business revenue. Just looking at, I guess, the seasonality, it's been consistently across 2016 to fiscal 2019, about 49% in the first half. So I'm just wondering, is it reasonable to assume a similar seasonality as well in fiscal 2024?
I just that, you know, looking at seasonality, pre-COVID, you know, what we've seen right across, not just, you know, our sector, is that it has changed. So, you know, there is a split between H1 and H2, and it's probably, in terms of pure volumes, a little bit greater than 49%, in terms of the first half. Sorry. Yeah, sorry, less than 49% in the first half.
And if you could just squeeze in one more question, and, you guys shared that your six months and twelve months rolling share of MBS benefits paid was about 24%. Could you also share what market share has been in the last few months, not on a rolling basis?
Well, I think on that, Tina, it's the reason that we do it on a six and 12-month rolling basis is because the volumes are so volatile, you know, on a monthly basis, as you guys know. So, you know, the best way to look at these is to, you know, do it on a six and 12-month basis.
Okay, great. Thank you.
Thank you. Your next question comes from Andrew Goodsall at MST Marquee. Please go ahead.
Good morning, and apologies, bit of a croaky voice here. But, just on the growing number of ACCs that you've got, I would have thought they would have been investing in that sort of ACCs and taking a higher margin on those. Is there, has there been a sort of slower margin in the ramp-up or any other expectations changed there, maybe rents are up or anything like that?
No, I'll answer that. In terms of what we've cycled in the last year, Andrew, we have our gross margin on the new ACCs has been 55%, and what has come out of the portfolio has been 35%. So we have got a greater gross margin on the cycling of our ACCs. What Paul was talking about was some independent ACCs, which obviously have the startup cost and the startup phase, and we're looking forward to the 24 years of that to come through in terms of the.
Right. So they're new sites or, or sites you've taken over?
Yeah, so we had a net 57 new sites in across FY 2023. So, yeah, we just have the full year cost of that coming through in 2024. And, you know, they're obviously impacted with volumes the same as, you know, to the other sites we have across the country.
Your question on rent, though, is a good one, and rents have definitely been higher than what we have ever seen, I think, in this sector.
Okay.
which I think, you know, when in a world where capacity there is too much capacity for essentially in the market, there has definitely been more competition around rents. And, you know, what we've been focused on is exactly what we have been doing before, which is focusing on our gross margins. So looking at securing obviously bigger sites and cycling out smaller sites.
What would be the magnitude of the sort of annual rent increase that you're seeing?
About between four and five.
Sorry, one final one from me. Just, indexation's come up a few times now. What's your... Give us sort of any updates or any response from government on that one?
I can. I can't give you a dollar number at this point in time. There are sort of two streams of activity that are going on with working with the government through Pathology Australia and directly with the government at the moment, both at the department level and also with the health minister and their advisors. The response has been: "We understand the issue. It's a credible claim," and we're working directly with them on what that may look like, but no answers until we get a number in the budget, I think, and we won't know that till probably March of next year.
Great. Okay, thank you very much.
Thank you. Your next question comes from Trang Tran at Airlie. Please go ahead.
Hi, thanks for taking my question. Can you guys hear me okay, over?
Yeah.
Yes.
Yeah. Just a quick question. On page 11 of the great presentation, you called out the COVID impact for the first half 2023 last year was about AUD 24 million. Now, if I compare that to the group EBIT of about $ 40 million and work backwards, that's basically implying that for this pretty much 12-month period, core pathology on an EBIT level is pretty much close to breakeven. You know, that would be the implication based on the guidance for the first half 2024. Is that correct?
... Well, look, it's better than breakeven, but look, your theory's right, which goes back to, you know, the predominantly fixed cost base in pathology that's spread, you know, across the year.
So can I just get one more question as well? So if I, if I take the position of where we are today and then roll forward to a couple of, like, half years, you know, going into 2024, 2025, you have, very, you know, elevated fixed cost base inflation running through with things like rents going up five, your labor two and three, and, you know, as volume comes back, you have to add more FTE and headcount back. What's the trajectory of the EBIT margin you think this business, like the core pathology, can get to? Because if I look back in 2019, it used to be a 10% margin business, and we are nowhere near that level. So I just wonder, what's changed? Like, what's the, what's the difference here?
Look, you're exactly right. I mean, we're in a period where we've had very little BAU volume growth, and we're in a different inflationary environment that this sector has ever seen. I think Paul's explained the differences between H1 and H2, but he's also explained that this is a fixed cost base. So, while we continue to look for efficiencies, we are not expecting to add the FTE Paul is talking about is in radiology, as we grow that business, and that's revenue generating people. Adding ACC and adding people in those ACC is revenue generating. When it comes to the core of the operation, there is no intention to add FTEs.
We've published before the FTE reduction that has been taken, particularly in the pathology business, and we intend, and are working on, at this point in time, having a look at what our infrastructure looks like for the pathology business in the short to medium term, and looking at how can we restructure some of that infrastructure to deleverage this business. Because you are, you are right, the fundamental industry economics are more challenging than what they were in FY 2019. We will come back to the market in February with more details on that.
All right. Thank you.
Thank you. Your next question comes from David Stanton at Jefferies. Please go ahead.
Morning, team, and thanks very much for taking my question. Look, I'm just wondering, in second half FY 2024, whether you're assuming any contract wins that will lead to revenue growth and hopefully profit growth as well in either pathology or DI?
Yes, we are. We have one which is just about to be announced next week, which is additive to the budget that we've set out for imaging for the full year, and potentially another one in imaging as well. So a bit more detail to come on that when they are signed. They've been agreed, but... And in addition to that, you would know, David, that we have the Bupa contract for tuberculosis screening. There was a, this has been a long-standing contract that we've had in this year. For the last seven months, the government had reduced the amount of TB screening, that program, which impacted the imaging business. That has been reversed now by them, and we are back to our original contract level.
So we expect that to be a significant pickup in the next half. There is also an additional contract, which will be announced next week with Agilex.
So just to summarize then, please, so maybe up to three wins, I guess, in inverted commas in DI and, and one in Agilex, is the way we should think about it for the second half?
Correct.
Okay. Thank you.
Thank you. Your next question comes from Saul Hadassin from Barrenjoey. Please go ahead.
Yeah, thanks. Good morning. Paul, I think you kind of touched on this earlier about the drop through of revenue to EBIT in pathology, sort of 80%-85% based on the math you've given. So just to confirm then, if we look at your guidance for full year for EBIT, is the assumption there that effectively you're assuming maybe about AUD 100 million of sequential revenue increase in second half 2024 versus first half?
It's not. No, look, it's not that much, Saul. But look, you're right. Now, what we've guided is that 6%-8% on BAU volume be PCP, which, we're happy to go through some more detailed numbers after this. But, look, yes, you're right, but no, it's not as much as AUD 100 million in terms of additional revenue in H2 based on that.
I've got my follow-up with you guys afterwards.
Yeah.
Okay, yeah. But along those lines, I guess, sort of playing devil's advocate for the second half, you know, if the EBIT uplift is maybe not as significant as what you're expecting, and knowing the position of where net debt would get to with, you know, the pay down post the raise, are there any additional contingencies that you might have as it relates to gearing ratios as a sort of, yeah, I guess, contingency as to what might happen in second half?
... Well, I think we're always, you know, that's in the back of our mind. You know, we've and I think we've talked about this before in terms of just our general capital management, you know. We are, you know, pulling right back on things like CapEx across the business. Yeah, there's lots of things that we are doing in the business in terms of efficiencies with technology, with our, you know, rostering our labor force, in particular. But, you know, as we kind of have set out for you across that second half, you know, part of that increase is pathology volumes, you know, in that 6%-8% range.
You know, a big chunk of the tick up in the second half is related to imaging and, you know, to a lesser extent, Agilex as well, which, you know, both of those businesses are tracking well.
Dave, I'll just squeeze one last one in, and that's where I was going, just that CapEx expectations in the second half. Can you give us any sense of what you're thinking in terms of, you know, the dollar value, that you might see, that we might see?
Look, not really. Yeah, I think we've guided $ 40 million-$ 50 million of growth CapEx for the year. That's going to be, you know, significantly at the lower end of that range. You know, I'm not going to put a dollar number on it.
Okay. Thanks, guys.
Thank you. Your next question comes from Mathieu Chevrier from Citi. Please go ahead.
Hi, good morning. Thanks for taking my question. Just on, the wage inflation that you've seen, what kind of level is that at the moment? And then what share of your labor cost, is on EBAs, modern awards, and I guess market rates?
So look, I think the broad range that we had, 11 EBAs that were renegotiated in 2023, which applied to 2024, and they were kind of just a touch under 3.5%. Overall, we've got 3 left to renegotiate this year by the end of the year. In terms of the absolute percentage of, you know, our labor costs that fall under that pool, can we come back to you on that? Give you the split across against total labor.
Yeah. Okay. And then in terms of the cost inflation that you've been seeing, I guess in the first half, it's really been on people being added in the radiology business rather than just inflation being high on a per unit basis.
Yeah, I think, I think we had 25 new radiologists, that Phil Lucas added, to the business in FY 2023. We've added four new ones so far this year, and he's got another five, you know, in train. So, whilst that adds to the cost base, it, it's obviously, you know, we're running at, end of last year, 85% capacity in terms of those permissions. So yeah, Dave, it's, that's, you know, there's a, just a direct margin uplift comes from those guys because they're revenue generators.
And Matthew, don't forget that we're also moving radiologists from contracts onto being employed. So there, if you're looking at pure cost, you know, you're going to get an increase in the labor costs purely just from the moving from a contract to being employed. There's no impact on it.
Yeah. Thank you.
Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect your lines. Thank you.