Great. Welcome, everyone. We're a couple of minutes late. I think we're still missing a few people. Welcome and good morning. My name is Paul Anderson. I'm the Chief Executive Officer and Managing Director at Healius. I have been with the business for two years. I started in March 2023 as the Group Chief Financial Officer and have been the Chief Executive Officer since the 5th of March last year. Also with us today in the room, our senior management team from Healius, including our Chief Medical Officer, Renu Vohra. They have name tags on, so you can identify them, and they'll be more than happy to have a chat to you at our halftime break, morning tea, and after the session as well. The purpose of today is to talk you all through our strategy and the real actions that are actually happening within our business.
We want to do that in a structured way. You're going to hear from the leaders in our business with some practical examples of actually what is happening across each part of our business. We obviously talk to a lot of our existing investors, normally at our half and full-year results. We talk normally about the performance of the business and some of the things that we are doing. We are acutely aware that we have a business that writes around AUD 1.2 billion of revenue a year. We have 50% of our cost base is labor, and that is our major challenge in terms of our workforce planning, efficiency, and reducing that labor cost, which obviously improves our margins. You're going to hear a lot today about the various parts of our business and what we are doing. There are two timelines today that are important.
The first one is December 2025, which is the completion of the original phase of our digital transformation. You are going to hear from Prasad, who will talk to you about the eight things that we are going to complete by December 2025. The important thing there is obviously the non-underlying costs that sit within our profit and loss account at the moment that will not be there from the 1st of July 2026. The second thing we are going to talk about today in terms of timing is June 2027. T27 is the term that we use internally to describe our plan to return or return this business to high single-digit margins. Each of the speakers today will be talking you through a timeline, so things that we have done over the past 12 months.
Ironically, T27, there is 27 months until June 27, so plotting out those things that we are doing across the spectrum. In terms of our agenda, this is today's run sheet. We do plan to have a short 15-minute break after Dora and our Emerging Diagnostics part of the presentation. It would be great if we could keep all of our questions until the end; otherwise, we will end up running over time, and we aim to wrap up and have things done by midday. I think it was worth having a recap of actually what has happened over the past 12 months. We have refinanced and reduced our debt facilities in April 2024. We completed the operating and strategic review, which culminated in the start of Lumus Imaging in September last year.
We developed our new pathology operating model and our strategy, and that's a lot of what we are going to be talking about today. We've obviously got a new management team capability, including a Chief Executive Officer, and we also have a refreshed board and a new chair in Kate McKenzie, who are a terrific support to the management team at Healius. We now expect the Lumus sale to complete by the 1st of May. There are some remaining conditions to be satisfied, but we can confirm that FIRB approval has been received by Affinity. We've also announced this morning that we intend to pay a special dividend of approximately AUD 300 million post the completion of the Lumus sale. That equates to AUD 0.413 per share fully franked, with franking credits of AUD 0.177 or around AUD 128 million.
Following the completion of that sale, we will repay our existing debt facilities, and Steve is going to talk to you a little later on around our plans for our new debt facilities. We talked about T27, so that's our detailed strategic plan out to June 2027, and that is going to be the thematic for today. Steve will also talk to you later on about our trading update just in terms of how our volumes are going, up 4% financial year to date to February and revenue up 6.2%. We want to spend some time talking about costs. There's two parts to that.
There is the costs that we want to take out of the business post the start of Lumus Imaging, so when we are just a pathology and clinical trials business, and then there is the remainder of the costs or efficiencies that will come out of the business across that period to June 2027. I think the one thing that we do want to get across today, there are a lot of AUD 15 million numbers running around, so we want to be very clear about which is which, and Steve is going to set those out. One of the things that we thought it would be useful to do, and this is really my perspective or reflections over the past 12 months, the good and the things that we need to focus on as a business.
We believe now that over the past 12 months, with our strategy, our ways of working, that we have the major building blocks in place to deliver what we have set out to do. We will be a much simpler business, being pathology and clinical trials. You're going to hear from a bunch of the management team today and hear directly from them about their plans for their parts of the business. Our new operating model now, which is a national model with still having a local focus, is now, for all intents and purposes, complete and from our perspective seems to be working very, very well. We believe that we have a really strong asset base. We have amazing clinical expertise right across our organization with circa 200 of Australia's leading pathologists.
We have the largest or equivalent largest ACC footprint in the country, and we have the largest presence in rural, regional, and remote Australia. We have very strong pathology brands across each of our states: Dorevitch, Laverty, QML, and WDP. In the case of QML, I think it is, has been around for 100 years. Strong healthcare fundamentals is something that I think I probably do not need to explain too much to everyone in this room and online. There is an increasing need for healthcare services as the population ages. Government support is important, and we have seen in the past 48 hours or drip-fed over the past couple of weeks, the government's intention to keep bulk billing and their investment of circa AUD 8 billion into Medicare and recruiting new GPs into the space, which should be a very good thing for us.
Emerging diagnostics is obviously going to play an ever-increasing role, and you're going to hear a lot of detail from Dora today on that. In terms of the focus areas and the things that we're working on, you know, we understand, as I said before, we have a AUD 1.2 billion revenue base that we generate each year. We know that through our workforce planning and efficiencies, through digitization, automation, the leverage that we can generate if we get that right is the significant potential there. Two things that we talk about a lot in our business is that it either has to generate more revenue, and that can either be core revenue or new revenue streams, and we will talk about some of those today, or it's about reducing costs and reducing costs through smarter ways of working.
Digitisation plays a big part in our future, and Prasad is going to talk a lot about that today. One of the hardest things in most organisations is getting your workforce all to do the same thing, so going fast enough. We execute at pace. I'm sure that is not a new concept to anyone in this room in any of your businesses. We have 9,000 people in our pathology business, so trying to get everyone on the same page and going at the same speed isn't easy, but we've spent a lot of time and effort over the past 12 months making that, we think, better, and that's part of our national operating model.
Industry alignment on indexation is very important, and I guess one of my reflections two years ago coming into this industry, it was not really aligned on what was in the best interest of the industry as a whole. I think that has got a lot better. You've seen now Australian Pathology, which all of the members are right behind, leading the charge in terms of indexation. The campaign has stepped up a new level over the past couple of weeks. We've been campaigning hard in terms of trying to get indexation for this industry, which has not had it since 1999. We know we have a very good case. We know that pathology actually plays a really important role in healthcare in this country. It is 1.5% of the total healthcare spend.
If you get the pathology right upfront, then the savings you can make in secondary healthcare are huge. We are really cognizant that when we are putting our case forward for indexation, there are a bunch of other things that all of the pathology companies in this country have to offer that have benefits to the healthcare system and in turn for all Australians. Look, this slide really is just to demonstrate that this business has real scale. We process 18 million episodes each year. We serve 7.6 million unique Australians. We have 1,978 collection centers. Our footprint is extremely broad, 95% of all people that live in metro Australia are within 15% of one of our collection centers.
That is not to say that our collection centre footprint is perfect, and I am going to talk about that today, but that demonstrates our coverage right across the country. We have almost 9,000 employees across our business. We have 1,978 collection centres. We have four major laboratories in each of the states. We have 70-odd other smaller laboratories spread throughout the country. What that says is that we have significant capacity without major investment. The opportunity for us to both increase revenue and become more efficient means that there is significant leverage there to be obtained. Industry fundamentals. I am probably preaching to the converted here. You guys know most of this. We have healthcare spend in this country that continues to grow, and that has been demonstrated by the government in the past 48 hours.
We have an aging population, so the plus 65-year-olds, that increases by 2% over the next 10 years. Doctor attendances, which is obviously very important to us, have returned to long-term historical trends. I think if we look back to December 2023, I think for the six months prior to that, GP attendances were down 3.9% and specialist attendances were up. As we fast forward to December 2024, doctor attendances are up 3.6% and specialists are up 3.3%. Specialists have been relatively stable between kind of 2%-3%. GP attendances have just slowly got better and better back to those more normal levels. That is a good thing for us. As I said before, pathology is 1.5% of the total healthcare spend, so it is a small part.
If any of you have listened to any of our indexation requests of the government, we're not asking for an enormous amount of money. We believe that the benefits from that actually have major impacts on not only bulk billing, which pathology is the last bastion of bulk billing in this country, but it has secondary benefits to the healthcare system as well. To the investment case, which is a follow-on, we believe that pathology is a critical component of the Australian healthcare system. As we've said, the trends in terms of attendances and volumes are returning to those long-term historical trends pre-COVID. We know that we've got a growing and aging population. There's a prevalence of chronic disease and the benefits of those additional tests, of which there were seven additional tests added to the MBS schedule this week in the budget.
We genuinely believe that we do have the right ingredients to succeed in this market. We know that we have first-class clinical capabilities. We know that we are the second largest player in the market, and the gap between us and the next player is significant. The footprint that we have in terms of our collection centers, the laboratory footprint that we have around the country, the capacity that we have, that is very, very difficult to replicate. We are going to talk today about our strategy and our Pathway. You are going to hear that from each of your speakers today to get back to high single-digit EBIT margins. We do think there are multiple opportunities for us to grow revenue outside of MBS.
Some of the things that we will talk to you about today are genomic diagnostics, vet pathology, clinical trials, and of course, Agilex Biolabs. Post the completion of the Lumus sale, we will have a debt-free balance sheet with the potential to increase those shareholder returns as we get back to a consistency of earnings. If we talk about our strategy for a minute, you will have all seen this slide a couple of times already. I think we talked about it at the AGM last year. We talked about it at the half-year results. Internally, we talk about this ad nauseam. It's simple.
We need every single person in our organization to actually understand this, and we have cards printed that we send out to our management team so that people can actually have that sitting on their desk and should be able to tell us what our strategy is. As I said, we've got 9,000 people in this organization. The leadership team might be nine people. We need a lot more than nine people to make this stuff happen. We are acutely aware that for us to make changes in a laboratory or for us to make changes in a collection center, it needs to be those people, one, that are doing it, but they're not going to do it if they don't believe it. We have spent a lot of time talking about this in our town halls.
We will continue to show it to everyone, all our investors, and we think it's a very good, simple guiding light to all of the things that we should be doing. On the left-hand side, we are a customer business for our patients and our doctors. We have these amazing laboratories with laboratory staff that just need to be more efficient, and we need to be able to enable them to do that through technology and better ways of working. We have the growth part of our business, which is Emerging Diagnostics. Of course, all of those things have to happen or cannot happen without having the right digital technology to enable everyone to do their jobs better and easier.
We have lots of examples that we're going to show you today where we have invested time and money to actually make life easier for people in our collection centers, in our laboratories, and for the referrers who send us their work. On the far right-hand side is our people and ways of working. This is our national operating model, and as I said, we have 9,000 staff. We need all of those staff to understand what we're doing and have a purpose in what they do day to day. This is our visual representation of our T27 strategy. Our 27 months from where we are today out to June 2027. Our little blue triangle there, this is where we are today. The things in the green triangles are the things that we have done over the past 12 months.
Anthea, Arjun, and Dora and myself are going to go through each of those blue boxes, talk about the things that we have done, and then plot out the grey boxes that go out to June 2027. Now, clearly, there are a lot more small grey diamonds within our business that people are working on. One of the important things to point out here is that all of those grey diamonds on the right-hand side of that dotted line are not theoretical. They are, in the majority of cases, all well underway. The idea today is for the team to actually be able to explain to you the things, one, that we are doing, how much of them that we have done, and the benefits in practical terms as to what you are going to get out of that. We talked a little bit about our simplified operating model.
This is really just to demonstrate kind of what we had on the left-hand side and the way that we operate now. Our old model, we had four standalone businesses. We had four different systems. We had four different ways of doing things. We had four lots of pricing. We had four lots of ways that we did our procurement. We had clearly four different ways of working. We did not have great communication across the business units. The model on the right now is where we have a national operating model. Standardisation is the first cab off the ramp for us. Standardisation and uniformity across everything we do. Now, we understand that there are local-focused things that we need to be aware of in each market, and we have lots of discussions around those.
This is not a case of having a head office which says, "This is the way that we will be doing everything." We have worked very hard at incorporating Renu, who is our Chief Medical Officer, and our medical directors across the business that we work hand in hand with the management team in this organization. That is something that I think we have not had before that has worked in a meaningful sense. Our clinical advisory council is our Chief Medical Officer, our medical directors in each state, and our heads of disciplines. They are our key clinical brains in the organization. Clearly, the results that we send back to doctors have a pathologist's name on the bottom of them.
Having the clinical part of our business and our business or commercial part of our business working hand in hand is critical, and it's something I think that we have worked very hard on over the past 12 months and is working—you can ask Renu afterwards—a lot better now. We are having very honest conversations around things like pricing, new tests, how we operate our laboratories. Of course, we are going to have different views. We are also going to have different views across different states in our organization, which is a historical fact of the way that we've worked before. We take it that having those good old honest conversations, and we come out of them at the end of the day, and we're all still talking to each other is a really positive thing for our business.
Lastly, down the bottom there, we've just got our brands. One thing we have done over the past 12 months is we've aligned our brands. I'm sure you've all had experience in trying to make your business brands all look and feel the same, and you've all had discussions around names like Laverty and Dorevitch, which have long legacies within our business. This is trying to keep our look and feel the same. We've still got a couple of brands down the bottom that haven't quite made it yet, but Healius is a relatively new brand, and we want people to be able to recognize the symbol when they see it. Lastly, before I hand over, this is really our roadmap for today. You're going to hear from Anthea, Arjun and then you're going to hear briefly from myself, and then Dora on imaging diagnostics.
There really are kind of three focus areas in each of their parts of the business. We have numbered them, so it is nice and easy for everyone to follow them. They will go through and give you some very practical examples and also talk about the roadmap out to June 2027. With that, I will hand over to Anthea Muir, who is our Group Executive of Customer and Commercial.
Thanks, Paul. Yes, I'm Anthea Muir. I'm Head of Customer and Commercial. I'm new to the Healius executive team, but I do bring with me an entire career in health retailing, particularly in very large multi-site, multinational organizations. I've just recently come as the EVP of APAC from Amplifon. Prior to that, I was in a KKR business, Laser Clinics Australia, and I spent 20 years in Luxottica Group, known mostly in Australia as OPSM and Sunglass Hut. I am new to this business, and I am really excited about the journey ahead, and particularly my role in it in terms of customer service and the things we need to do. As Paul says, we have a pretty simple strategy, really.
If we want to win market share and increase our number of referrers, we need to be focusing on the service we provide, whether that is the end patient or customer or whether that's the referring doctor. It doesn't really matter. We need to get the service right across all streams. As you can see on the left-hand side, we've broken that work really into the three things that matter in these three groups of areas. The first focus is about driving revenue through both volumes and value. We do have a big piece of work around our acquisition of new referrers and also our retention of existing referrers. I'm going to delve into that a little bit later. On this slide, I'm just going to spend a moment on our pricing and revenue assurance parts.
Because when we see a patient in our ACCs and we collect the tests, we have to make sure we get paid for them. We have been focusing kind of in two ways. One, heavily on the back end. Post-test, what happens to ensure we get paid through the systems? There are lots of things that we have been working on to ensure we get that, that either we need to clean up upstream or work on downstream. We are a long way through that. Now we have been really focusing on how do we get the revenue upfront. Last year, we launched into all of our ACCs a Square Terminal so we can take payments. That has been working for us. We now have an opportunity to get better at taking payments upfront and therefore assuring the revenue at both ends, right?
Now, once we've kind of done that, we have an opportunity to fix our pricing upfront as well across the country. Because as Paul said, we used to have four different business units doing four different things. The goal here is to standardize the pricing and to simplify the pricing for the consumers and allow us to take more revenue upfront from the patients in the ACCs, which obviously has a higher revenue assurance than managing it downstream as it flows through the business. We're working really hard on those things, and we are doing pretty well in that space. The second area of focus on the screen here around better networks and collections productivity, I'm going to deep dive into that in a slide later, so I won't speak about that now.
The third pillar that we're working on is around the enhanced customer experience. This is kind of in twofold. One, our contact centers, so all of the kind of communication that happens outside of the ACCs and all of those touchpoints. I'm also going to talk about that later. Just to touch on the other sides of parts of this area around our websites and our Medway Doctors Portal, we're using technology here to really improve that customer experience. We have upgraded all of our websites. We've aligned the branding, as Paul said before, nationally to a common color and common fonts. We've improved the usability of our websites and our customer experience for those people who are looking for information via search. We do have exciting plans around our patient digital capabilities, which is on our worklist.
Let's get into the three topics of the day. The first one is around our referrer value proposition. There are lots of things on the slide that we have already done. I'm going to touch on a few that we're right in the midst of now. As you know, a large part of our revenue comes from referrers talking to their patients and advising them to come into one of our ACCs. To grow those referrals and to retain the referrals, we need to work very closely with that medical referrer community to ensure that we provide for them what they need, which are the right tools, the right services, the right test availability with the appropriate turnaround times that they need to make their lives easier so they can provide high-quality care to their patients.
To do this, we've been spending a lot of time talking to these groups of referrers to understand what it is that we can do to help. How can we relieve pain points and how can we simplify their lives? One of the important initiatives that we're working on at the moment is around CPD capture. We can do this using our already best-in-class doctors' Medway portal. This is really important because a GP needs to get a certain amount of CPD points every year, and it takes a lot of time. As we all know, GPs are really busy. They're already doing work. If they send within certain arenas their patients to us for their tests, and we capture those tests using digital tools, we can determine the requirements that are needed to meet those CPD requirements.
We can produce reports, and we can send those back to the doctors. The doctors then can simply apply for their CPD points. This makes their life easier, takes time out of their day, but it's a huge benefit of why they send their referrals to us, right? This is working very well, and we have some plans to increase the number of CPD requirements that we can meet for our doctor community. Other digital enhancements we're working on are around self-service. This is trying to provide doctors a way of working within their day more efficiently. They don't need to be making a call to us if they don't need to or waiting for reports. They can log in and self-serve on the things that matter to them.
This is useful to the doctors, but it's also useful to us because we remove volumes out of our call centers. We also need to support the doctors on the ground. To do this, we have all the right teams in the right places. We have doubled our group of people who work in the specialist communities. That means we can get to more specialists to talk to them about the great things we do at Healius, which means more referrals coming from the specialist community, which is high value to us. We already have a team focused solely on GPs. In addition, we have a medical liaison group who deal with practice management issues and service issues and build very strong relationships with practice managers who are very important in the GP world.
We have plans for a mobile team of technical people who will deal with any tech support and help with all these digital tools that we're rolling out to make sure that, A, they're working, and B, that they're used, because these are the things that will keep the doctors sticky to us. By working collaboratively with our medical community, listening, adapting, and just really adapting to the ever-changing needs that the doctors are facing, I feel really confident we can improve our referral rate as well as retain the referrals that we have today. Just by improving retention, we believe we have at least AUD 5 million-AUD 7 million in extra value created here. It is a very important part of our business. The next area I want to talk to you about is our network.
Paul's talked somewhat about this, but it's a really important part of Healius's strengths because we are extremely well distributed across Australia, nearly 2,000 sites. We believe that we need to retain this as a strength. We have 15 minutes' drive from any of our metro parts of Australia, if we call Metro Australia. We will retain that, but we just need to spend the money in the right places to get it right. Sorry, just lost my notes. Sorry. I must have missed a point here. We also understand that we need to get our ACCs look and feel right because we want people to be able to find us. We need to get our wayfinding and all of the branding right so we don't lose customers because they walk past us and can't find us.
When they walk in, we want to make sure that look and feel of those ACCs are looking good. As well as getting the network in the right place, we need to also make sure we look good. To do all of this, we've done a deep dive into our internal data and using external data like SA3s to determine what is the ideal network in the country. We're pretty close. We're broadly where we need to be. We do have some areas that we will continue to work on as we evolve our leasing arrangements. When we have those in the right place with all the wayfinding and the branding right, with a bit of work we're doing now where we've gone and understood every single ACC around the country, what we need to do. Do we need to fix some signage?
Do we need to change some chairs? We will just take a methodical and targeted approach to clean up the network as we go. In addition to all of that, we need to get our labor right. This really starts with getting the right hours and the right rostering in place. As you know, we've been focused on unplanned closures, and we've really successfully reduced that by half in the last year or last six months, really. I'm really confident we'll reduce that by half again in the coming months. However, this increased opening rate of ACCs means we've increased our labor costs. We now need to work on ensuring that those costs are optimized as we don't want to be paying labor when we don't need to be. It's a really high cost. It's about half of our cost base.
Therefore, we are working to match our opening hours and our labor hours to that patient demand. The next big opportunity we have in this space is using our new Medway Collections Portal, which we are in the process of building and nearly ready to roll out, to capture patient demand by knowing who's coming in and when they're coming in, matching that to our rostering and our labor hours so we can optimize the cost so we have the right person at the right time servicing our patients. Once we get all of that in place, the other thing we are working on is improving the quality of the service we actually provide in every one of those ACCs. This tool, the digitization project around this tool, which Prasad's going to talk to you about, will also enable us to do that.
Because by having this tool live in every ACC, which, by the way, will be rolled out in July, it will smooth the process and the customer experience because it leads the collector through the process. Which tube do I need to take? How many do I need to take? What do I need to do with that tube, etc.? We reduce waste. We improve quality. Importantly, we improve the experience for the customer through that journey. It has significant downstream benefits to the labor network that Aj will talk about later on. This Medway Collections Portal that we're in the middle of rolling out is going to take us a large step forward in our customer journey. I have to say, as a leader of that pillar, I'm very excited about this project.
This pillar is a really big piece of work at the moment. We expect that if we focus on all these things, we get the right leases around the country, we get the right formats of the ACC with the wayfinding rights so people can find us, the right labor at the right time, we will absolutely improve our customer service, which will help enormously with retention and improve our profitability. Finally, the last topic is about our contact center experience. This is a really exciting part of work for us because it's where we start to leverage digital technologies with great people and good processes. We've completed phase one, which really had a pretty simple objective: answer our phones.
We're actually really proud of this result because we have now reduced our abandonment rates by fourfold, and we've reduced the time it's taking to answer by 70%, which has now put us in line with customer standards. A lot of that work was really about standardizing. It seems a common theme we're going to talk about today, the processes across all of our contact centers and putting good measures in place. If it's not measured, it's not done. We can now do that by monitoring all of those metrics live in every single one of our contact centers. We've now got the tools in place that will also allow us to measure the call quality. We can automate forms for our B2B customers. As a result, we've taken out 65,000 calls a month.
We are moving on to the second phase, you can see on the right-hand side of the chart, which is about using technology to help us. We are going to be using digital tools to encourage self-service for practitioners and patients who need and want to access the information in their own time, which then frees up the contact center operators to have high-quality conversations with people who need extra support. We have automated the repetitive queries, and that now means we can manage all of the calls that are currently being taken in our ACCs will now move into the contact centers, which will free up the time of the collectors and the ACCs to provide a higher quality service to our patients. We are working towards a personalization product using digital tools, again, to allow the medical community who call us. We can identify who they are.
We can pull up their files rapidly. We can predict what they're going to ask us and need, and we can make those calls shorter, more efficient, and more personalized for them. Also, as we have a distributed network across the country of contact centers, we've conducted national cross-skilling and upskilling, and we can now, across the nation, manage our demand in different contact centers where we need to. For example, in the recent cyclone in Queensland, we can shift all of that work immediately to another part of the country and manage demand and keep up a high quality of service. All of these things using technology will improve the customer experience that occurs outside of the ACCs on top of everything we're doing inside of them.
We think this will create value between AUD 6 million-AUD 8 million a year to go in our contact center alone. That is it for me. I am going to hand over to Arjun, who is going to talk about what happens once all the tests are done in the ACCs. I just want to leave you with the knowledge that I have a strong team. We have a good plan. We know what we have to do, and we are doing it. Thank you.
Thank you, Anthea. Good morning, everyone. My name is Arjun Narang. I am the Group Executive for Operations. I have been now at Healius for three years. I started three years ago in a role as General Manager for Operations Transformation. A lot of that work was in the labs, and I have transitioned to my new role about a year ago.
As far as career background, I spent 25 years. Most of it has been across operations and business transformation type work. In the course of that time, I've also built up a number of different businesses in different industries. The operations pillar that I head up in Healius, we've got a number of kind of big functions in that. The biggest is our laboratories. All of our laboratories sit in that pillar. We also have a courier network, which basically picks up our specimens from the collection center that Anthea runs back into our labs. We also have procurement and warehousing and logistics. It is the biggest and the most complex part of our business. What you see on the board there is the initiatives that we've planned. What we have the focus in operations is on laboratory modernization.
The overall objective is to reduce cost through automation and simplification of our processes, while at the same time optimizing our turnaround time, which is really important for our referrers, but also either improving or maintaining the quality outcomes that we deliver. We're known in the industry for very good quality work, and we definitely want to maintain that. What we have there, nine major initiatives. What I'm going to do over the next 15 odd minutes is to walk you through each one of those, tell you a bit about a bit of color in terms of what they're about, what the benefits we expect. In three of those, I'm going to go and do a bit more detail to give you some bit more color in terms of the detail in terms of what we're trying to do.
Now, the first two that you see there, microbiology and anatomical pathology. Now, those two departments are the two most labor-intensive departments in our laboratory. The processes are very manual. In microbiology, what we're planning to do is to roll out large-scale automation to take a lot of the labor out. I'll do a bit of a deeper dive into that in a subsequent slide. In anatomical pathology, anatomical pathology is primarily about cancer detection. We have manual processes in the lab. When a piece of tissue comes in, that's processed by lab staff. The objective there is to convert it into and create a number of slides, which have got tissue, which the pathologist can then look at under a microscope, basically to do their diagnosis and the reporting on the back of that.
It's manual all the way in the lab, and then all the pathologist work is manual as well. Now, pathologists are expensive. Their time is very precious. There's also a scarcity of pathologists in Australia. Using their time well is really, really important for the economics of the business. What the digitization of anatomical pathology is looking to do is, once a slide is created, we take a high-resolution image of that slide. That enables us to do a number of things. The first is we can actually ship cases digitally between pathologists. We can actually have a pathologist in a different geography, in a different part of the country. The slides could have been cut in a different state, and we can kind of share these and share the workload and actually get specialization of pathologists as well. That's one part.
The other thing that digitisation allows us to do is to apply AI. AI tools can actually assist significantly in improving the productivity of pathologists. There have been a number of external studies that have been done, which show that productivity enhancements of over 30% for certain tissue types are available through the use of AI. This is not something we are starting, in a sense, now. In anatomical pathology, we have been using digitisation for a period of time. We rolled it out about two years ago in our vets business. The vet pathologists have been using it for quite a bit of time. What we are doing now is scaling it up to the human side.
In the digital section, which Prasad's going to cover, he's going to give a lot more color in terms of what we're doing and show you a demonstration of kind of the tools that we've actually built and are using today. The next big area is looking at process efficiency. Now, given our legacy and what kind of Paul's described, we've come from four separate businesses across states that kind of ran differently. They're kind of doing the same thing, but different ways of doing it. They had different systems, different approaches. The challenge was always trying to get them to work together. For certain things, it just made sense to try and consolidate things in one lab as opposed to doing it across four labs. We were able to do it, but it came at the expense of complexity.
As you know, complexity just adds cost to the business. It is not necessarily trying to do new things. It is actually trying to find ways to actually reduce the complexity and to take that cost out. What we are trying to do is, through our new operating model, get to a common way of doing things across the entire business. What that will mean is, when we have to make a change, we do not have to do it four different times. We can just do it once. That should get us some efficiencies and take costs out of the business. To try and get a common way of working and get kind of the process efficiencies, we need to make changes to systems, processes, people, ways of working, behaviors. Everyone has their own way. They are used to it. They have been doing it for so many years.
The way we're enabling that is, on the system side, one of the key pieces of software or digital infrastructure we're rolling out is the Instrument Manager. What the Instrument Manager is going to do is enable us to connect all of our instruments across all of our labs around the country onto the same platform. I'm going to go and talk in a bit more detail around some of the benefits we'll get from being able to do that. If there's a silver lining to the complexity we had of kind of four different ways of working across different states, it's that when you do things in four different ways, there's generally one which is slightly better than the others. It gives us a basis of having proven methods of doing the same thing in slightly different ways.
One of the things we've initiated to try and harness that diversity is to get our people working together. This is scientists in our labs working together, sharing ideas. They've been incentivized. We've put an incentive program in place. We've given them training. We've introduced them to lean tools so that as we redesign processes, it's done with a lean mindset. It's based on frontline ideas coming from them to say, "I see they do it this way. We do it slightly differently. We think that is better. If you do it this way, we'll get these kind of savings." There's a raft of ideas that are already on the table. More are coming in all the time. We're developing them and executing them as we go. We are already starting to see a lot of benefits.
Just by example, literally a week ago, we were talking with our haematology network, so scientists across haematology, across all of the different labs. Just sharing ideas, we've already gotten savings in both quality control, QC material cost, reagent cost, as well as instrument cost. Those savings are starting to land straight away. The next project on that list that we've got on is blood bank. We run blood bank services to support our hospitals. A key bit of software there is a transfusion medicine module. There have been some regulatory changes, which has meant that what we've got is not fit for purpose. We can't really upgrade it. We have to replace it. We are in the process of doing that. That's the main driver, regulation. The second order effect is it actually makes us a bit more efficient. It reduces patient risk.
There are additional benefits that we'll get by actually doing that. Moving on from kind of the lab side of things into logistics optimization. What we've got, and I think Paul has touched on this, Anthea has touched on this, is the people we've got. Labour is our biggest cost. Across operations, we've got 3,400 people between our labs and our couriers. On any given day, one of the traits of the labs is that we do not know what volume we're going to process. We only know the work comes in. Often, if you get more than what you had expected, you end up with putting on more overtime just to be able to clear the work. Other days, you have more people. You do not have sufficient work coming in. You get this variability on a department-by-department basis, because that's how we staff up.
It comes down to specializations and on benches, do we have the right number of people to deal with the work that's coming? We work off forecasts. We've already deployed rostering tools. They're already in place. People are using them. We are getting better at forecasting. That's really important for us to roster properly. The other thing we're doing is building flexibility, both vertically in terms of the different levels we've got in each department, so lab assistants, scientists, senior scientists, but also horizontally between departments, so multi-skilling scientists across departments in our main labs, which allows us to be a bit more flexible when you get these variations on a daily basis where you have a certain expectation, but the volumes end up being different. The next initiative is around our lab network.
As Paul's already described, we've got four main labs in Western Australia, Victoria, New South Wales, and Queensland. We have a national genomics laboratory in Victoria. We've got 72 small hospital and regional labs for short turnaround time requirements. This changes, not very often, but changes on a reasonably regular basis. For example, we're adding three new labs over the next six months, two of them in Northwest Tasmania, where we won a contract off the incumbent who'd been running those services for the last 30 years. That's been a really good win for us. Now, as I said, we regularly review our lab footprint.
In that review, we look at which labs do we keep open, what are the opening hours, what are the services we offer, what the staffing levels need to be, so we can actually match what the demand is in those labs with the staffing and the physical infrastructure that we have actually got in place. Moving on to our couriers. We have, as I have already kind of gone over, 2,000-odd collection centers, 77 labs. We collect specimens in our ACCs, and it is the responsibility of the courier network to carry it from those collection points back into our labs. We run a hub-and-spoke model, and we have a number of milk runs, which we regularly go. These are the regular places we pick up that we know we need to pick up from every day. However, we also have a lot of ad hoc requests.
These need to be factored into the courier runs. We will actually do multiple pickups from any collection point, typically on any given day. This is for turnaround time requirements. It is for clinical requirements. It is urgent. It needs to come back. We need to report back in a certain amount of time. We will do multiple pickups as well. As you can imagine, it is actually quite complex in terms of what happens on the day in terms of just the sheer volume of runs and the additional requests that we can actually get. To get savings at the end of the day, what we need to do is to optimize how we operate this on a day-to-day basis. We will get savings only if we can actually get drivers and cars off the road.
That is reducing the overall number of stops we do and optimizing the stops that we do have by actually having more stops per run, right? That way, we reduce the total number of runs. This needs to be done kind of on an ongoing basis. The approach we've taken to that is we've got tools. Again, digital tools. We've got a third-party piece of software, which helps us do this. That requires us, we're digitizing our runs. We're kind of 50% on the way to actually doing that. We've done that across all of New South Wales Metro and Victoria Metro. We're starting with Western Australia next month and Queensland the month after that. We're going to digitize our runs first.
That allows us to collect a lot more data in terms of real time, what's required, how long it takes to get from point A to point B, how much time they're spending in each collection center, what is the time that's wasted. We are going to use that to then use the optimization tools we've already got to try and get more kind of optimize those routes a bit better. Moving on to external spend. After labor and property, consumables are our third largest expense. We have a very good procurement team. They've done an outstanding job. If you look last year, last year was the year before, they've been able to hold our consumable cost as a % of revenue steady in the face of the inflationary pressures we've had over the year. We believe there's a bit more that we can actually do.
I'll touch on that in a bit more detail in a subsequent slide. The last initiative on this list is around inventory management. Given the distributed nature of our business, 2,000 ACCs, 77 labs, we've got inventory in all of them. In our labs, in particular, we have things like reagents, which are both expensive and often have very short shelf life. Managing those actively on a near real-time basis is really important for us to be able to keep costs under control and actually get costs down. There's a certain amount, quite a bit of wastage that happens. By having a near real-time management solution, we can reduce that wastage and then also look to optimize things like freight and inventory holding. I'll go in and talk a little bit more about the Instrument Manager.
I guess first question, what is the Instrument Manager? As I touched on, it's a piece of software. It's a piece of middleware. It connects our instruments to a laboratory portal. A laboratory portal is where you have a referral from a doctor. It's basically you've got a barcode on the tube. That's the episode identification. There's a number of tests to be done. They go into the lab portal. Effectively, what the Instrument Manager does is takes that order and sends it to the instrument that is capable of actually doing that test. Once the instrument's finished, you get the results. The results is, again, the Instrument Manager takes those results and actually feeds it back in the lab portal. There's a whole bunch of other stuff it does, but simplistically, kind of that's the purpose of the Instrument Manager.
As I said before, the key thing that we're doing is putting all of our instruments across all of our labs onto the same Instrument Manager. That allows us to initiate a test in one laboratory or geographical location and have the physical specimen being tested on an instrument in a different location. It makes it quite simple for us to do that. The benefits that are going to come from Instrument Manager come from sort of two big, sort of two different categories. One is from the fact that we've got everything on the same platform. What that allows us to do is to get more economies of scale. There's a number of tests. We run lots of tests, right? There's a number of tests which are low volume. At the moment, we run some of these in multiple labs.
If the tests are not turnaround time sensitive, this gives us an easy way to consolidate into one laboratory and not have instruments and staff working in multiple laboratories doing what is effectively a low number of tests. Interestingly, by doing this, we can actually potentially, despite moving specimens from one place to another, we can actually improve our turnaround times as well. Because sometimes when we batch things, we do not have enough volume to run every day. If we start batching things across the entire network, we can actually potentially run some of those tests on a daily basis, improving turnaround times. The other thing that allows us to do is to build more centers of excellence. This is where we can leverage pockets of clinical expertise that we have in certain parts of a network.
Obviously, the obvious advantage of having everything on the same platform and things that are standardized is ease of ongoing management. Whether we want to update manuals, whether we want to put on a new analyzer, that process is a lot more simplified. We don't have to do the same thing four different times. We just need to do it once. The second set of benefits that come from the Instrument Manager is from the enhanced functionality of what we've got today. Two such examples would be things like what is moving averages, where you have on the fly a moving average being computed for a particular analyte, all the results that are coming out. What that allows us to do is to identify drifts in instrument or a failure of an instrument very, very quickly and not have to wait for the next QC to detect it.
Obviously, this improves QC. It reduces our overall QC costs. Another example of a new feature would be delta checks, where a particular result can be compared with historical results for the same patient if you have them. The value of being able to do that is if you have an anomaly, typically, if you have a very high reading, often for validation, it will go to a scientist that needs to look at it. Very often, what they will do is say, "Let me look at, have you seen this patient before? Is this patient suffering from something which explains why it is anomalous?" That can be automated. It reduces auto-validation, increases the amount of auto-validation we can do, and reduces scientist cost.
The other thing it allows us to do, especially if you're looking at comparing results, not just from that test, but across other tests in the episode, is the ability to enhance the commentary we send out with our results to our referrers. The Instrument Manager is already starting to yield results. On the next slide, the left-hand side just shows you what I've spoken about in terms of the role that the Instrument Manager plays in sitting between instruments and the lab portal. The right-hand side, just an example. This is an existing instrument used for diabetes, testing for diabetes. The existing process, the current middleware was limited in terms of the values it could feed back to the lab portal. Those had to be noted down by hand and then transcribed and input into the lab portal manually.
Using the Instrument Manager, all of that is automated. A simple example, but shows that we're already starting to get benefits from the rollout of the Instrument Manager. Now, in totality, in terms of the Instrument Manager project, 50% of our instruments are already on it. We are well on the way to getting all of our instruments on it by the end of the year. The next thing I'm going to talk in a bit more detail about is microbiology automation. A big part of microbiology is identifying what bacteria is making someone sick and then finding out what's going to be required to be able to kill it. The process that's involved in doing that is very manual. You get a specimen that comes into a lab. It gets cultured onto an agar plate. You actually need to grow the bacteria.
You culture it, you incubate it. After the appropriate incubation period, which is depending on what you suspect it to be, depending on which part of the body it comes from, what the clinical symptoms are, a scientist looks at it and makes a call in terms of what to do next, whether there is growth, no growth. If there is bacteria that has been identified, you have colonies. They need to be isolated. Further work may need to be done. All of that process is entirely manual. The automation we are looking to put in automates the streaking. Excuse me. Automates the streaking, automates incubation. It then takes, after the appropriate time, the plate, once it has been incubated and the colony is grown or not grown, an image is taken.
AI acts on that image to be able to classify it into likely no growth or growth of different types into different categories, which is then available for a scientist to look at and report on. Scientists can work remotely. It significantly reduces the amount of labor required. It increases just because of consistency, because now you have automation as opposed to a human doing the streaking. It reduces the need for rework. There are just benefits right across the chain in being able to do this. This technology is not new. It has been around for quite some time. It has been cost-prohibitive, or it does not make economic sense for us to deploy. The reason was partly vendor pricing. The bigger reason was that in laboratories like ours, like in our main labs, we have sufficient scale. We batch it.
We have very, very well-trained staff. They are super efficient. If you go into labs and look at them operating, it is actually just awe-inspiring just how quickly they can actually get through it. We could actually never make the business case stack up until we found kind of a way kind of around it. The way around it was, if you look at the we do different types of specimens, right? Urine is a lot. Urines are our largest specimen type that come in. When we did the analysis, about 30% of our urines are positive, as in they actually show an infection. There is a bacteria. We can add 60% or 65% actually negative. We developed a technique to be able to pre-screen the urines into positive and negative. That is not definitive. That is high probability of positive and negative.
Just put the positives through the automation. What that has meant is we have been able to scale back the amount of infrastructure we need to deploy for the automation. That has allowed us to get the business cases stack up. What we have also done for the negative parts, so the ones that we go probably negative, is to have a slightly different process, which is again automated. It is a much simpler process just to confirm that what we thought a negative is actually a negative. That project is well on its way. We are going to implement it in one of our labs first. It is a big change in the way we do microbiology. We are going to install it in one place.
We believe there's a lot of further optimization we can do in terms of the process because going from the manual world to an automated world, the constraints are different. The thinking needs to be different. Speaking to people who've implemented it before, they often try to just replicate what they've done manually into the automated world. We believe by doing things differently, we can get significantly more benefit than what a lot of the other labs have been able to do. The last topic I'm going to talk about is the work that we've been doing in terms of reducing our consumable cost. As I mentioned, we've got a very good team. They've done great work in this space.
We believe with the work that we've got planned, we've got another AUD 8 million-AUD 10 million in terms of EBIT impact that we can make in consumable spend by FY 2027. It has all what you would call the kind of traditional procurement levers. One of the things we're trying to do here, especially on the instrument side, is to extend the life of our instruments. We're doing this through a combination of kind of using data analytics, but also really good relationships with our vendors. We've been working hard to actually get work in kind of partnership with them. They understand our challenges.
A lot of them are coming and working with us, where either we make a small investment or they make a small investment, extend the life of those instruments without compromising on quality or getting maintenance costs to go through the roof. We are actually doing that in a very structured, deliberate, kind of planned way. We will get significant savings out of being able to do that. Other than that, we have just gotten a lot more discipline around the way we do procurement, as in we actually now do winter management a lot better than we used to. We are standardizing on instruments. We are consolidating our spend. It is just the usual things that you would do in kind of a good procurement department. That is starting to bear fruit.
We're also doing work on the demand side, which is the volume of consumables we use and the types of consumables we use. The approach we're taking here, again, the fact that we got four different businesses doing things slightly differently has meant that we can actually compare across the four. We're using data analytics to identify those discrepancies. For example, why does this cost so much more here compared to there? They're starting to yield some pretty interesting insights and opportunities for reducing costs. By example, we've recently saved AUD 500,000, AUD 500,000 a year on our flow cytometry reagents just by looking at adopting the best practice from one of our labs and extending it to the others.
In addition to all of these initiatives, and especially when it comes to things like process efficiency, one of the pain points in the lab always is mistakes that are made in pre-analytics at the front end. If there is an error made on the front end, for example, a doctor's name is missing, right? It creates work in the laboratory. What Anthea mentioned about the Medway Collections Portal, once we have that in place, we expect the amount of pre-analytic errors to drop significantly, which is going to have a big flow-on impact in terms of laboratory costs and the amount of time people spend in the lab just chasing up things which were a mistake made somewhere else earlier on in the process. In conclusion, we have set up a robust performance improvement program across operations.
We believe we will be able to make a significant impact across performance just going through that. I will now hand over to Paul to talk about Emerging Diagnostics. Thank you.
Gotcha.
Thanks, Arjun. As you can see from that presentation, there is an awful lot in there. For any of you that have been to our laboratories, the major ones, they are big, complex operations. I think the way that Arjun has described, there are some big manual parts of what we do, where we are a long way through making some quite significant changes. Look, I just wanted to start off and talk about the first two parts of our Emerging Diagnostics. Really, the first two parts that I want to talk about are really specialist diagnostics. Dora is going to talk to you about genomics. These first two, veterinary pathology and clinical trials, are two areas that are very important to us. Both of them are fast-growing. They are very high margin. Importantly, they are non-MBS revenues as well.
In terms of our vet pathology, this is a business that we have had for some time. It has not had the focus that it probably deserves. We have, late last year, refreshed our strategy. We have looked at the market, where we sit in the market, our proposition, and what our strengths are, and worked out then what should we be doing. We will talk a little bit about that in a second. Clinical trials is another part of our pathology business, not to be confused with the bioanalytics part of clinical trials, which Steve McIntyre will talk about in a minute. We have built a bespoke capability that we believe is the best in the market. We are now the preferred partner of Nucleus Networks, which is the largest CRO in Australia. We won that work off one of our competitors.
If we can just talk perhaps first about vet pathology. Whilst it is small in terms of the overall turnover of the whole pathology business, it does present us with a significant opportunity. You can see on the left-hand side there, this is a market that is actually growing significantly faster than human pathology. We used to have five vet brands. They have now, in the last year, all been consolidated into one brand. We are now Vetnostics Pathology right across the country. We have the largest number of vet pathologists in Australia. We have 20-25 of those. We have an established business in an attractive market, clearly, that we have not perhaps focused on to the level that we should have and plan to do so now.
We have the ability to do urgent testing via our large human courier pathology network right around the country. That is something that we have not leveraged. We have a large courier network. We have a lot of regional laboratories that we can use as part of our vet pathology business to ensure that our turnaround times, that we can process urgent work. Our focus is on companion animals, so primarily cats and dogs. I think you've probably all read about the explosion in companion animals during COVID and what that means. Clearly, the graph or the charts on the left-hand side demonstrate that whole market, of which we're playing, obviously, in a small part. We do not play in the point-of-care testing space. We are a premium reference test laboratory operator in that space. One of our plans is also to expand our digital pathology.
As Arjun just said, ironically, digital pathology for vets has actually preceded the human pathology in a digital sense by a couple of years. We actually already have some of that machinery in the organization. We also have an expanded vet liaison team to go out there and renew work. Our proposition is that we have NATA-accredited laboratories right across the country. We are a highly specialized reference testing laboratory and can offer that service to vet groups and vet clinics that we believe we can do that job for them, which is not their core offering. We can do that, we believe, better with our expertise. We can do it more efficiently or probably, more importantly, cheaper than they can do themselves by the time they have to administer the machines and everything else in their vet practices.
The other thing that we should say is that we do have the largest number of vet pathologists right across the country. Within that vet cohort, we have a lot of subspecialty expertise that we can leverage as well. That is something that we are now focusing our efforts on. Whilst a small part of overall pathology turnover, it is an important one. It is high margin. It is non-MBS. Secondly is our clinical trials business. As I said before, this is the safety testing of bloods for CROs as opposed to the bioanalytics that Steve McIntyre is going to talk to you about after the break. We have built in-house a comprehensive service offering for the unique offering or the unique needs of the clinical trials community.
Historically, whilst we've done some of this work, we've really been restricted because what we haven't been able to do is we didn't have a dedicated team to this. We also didn't have the ability to provide customised reports to our clients. That, by the very nature of clinical trials business, is very important. We now have Medway Clinical Trials. We believe that is the market-leading software or program in the market. We are, as I said, the preferred provider to Nucleus Networks. That has gone from a very small revenue pie to something that has actually grown quite significantly over the past 12 months and something that we are very proud of. We have a unique selling proposition in that we have an end-to-end electronic and ordering and result system. What that means. Intervention.
Some of the things that Arjun talked about before, if you have humans involved, you're inputting information, then clearly you get errors. You get retests. In a clinical trial setting, obviously, time is critical. Having something that is fully digitized, you can do from the bedside and then get back the results on an iPad is something that is extremely attractive. We have a dedicated team. We have Matt Brumby here today, who heads up that clinical trials team, an unusual combination of someone who is commercial and a scientist at the same time. He's not the only one of those. That is something that is actually very attractive to our clients. As I said before, on the right-hand side there, we are able to have customized reference ranges. This is something in clinical trials that is very important.
Our ability to highlight protocol-specific results, on the right-hand side there, you can see the red boxes. For a clinical trial that's being undertaken, they want a specific reference range and they want flags put on it, then that is developed by our team for that specific trial. It's obviously a big selling point. Two of the other things that we can do, we can do automated blinded results, which go back to the sponsor. If you think about clinical trials, you have sponsor, you have a CRO, and then you have us doing the safety bloods. Automated blinded results means that we can do the testing. We can provide the results straight back to the sponsor that are not provided to the CRO. We can also provide flexible data extracts, which is a big selling point to our clients.
I think when you set that out, that once again, it's a non-Medicare revenue stream. It's something that we have developed in-house. We leverage, obviously, our laboratories. And clearly, it is a perfect companion offering to Agilex Biolabs as well. With that, I would like to hand over to Dr. Dora Papamakarios , who is our Head of Genomic Diagnostics. Post Dora's presentation, we will have a quick 15-minute break and then get back to technology. Thank you.
Wonderful. Thank you all. Good morning and thank you for your time. As Paul mentioned, my name is Dora Papamakarios. I've been with Healius for just over two years. I have an extensive background in healthcare across pathology, hospitals, life sciences, and molecular diagnostics. I lead our Genomic Diagnostics business, which is the national genomics testing facility for Healius. Why genomics and what role does it play? Genomics is the study of all of a person's genes, which we know as the human genome, including interactions of those genes with each other and the person's environment. Variations in an individual's genome can lead to genetic disease by interrupting the body's normal bodily processes. It is well known now that genomics can provide a personalized approach and is leading the way in healthcare via a particular stream of medicine called precision medicine. Why is precision medicine now possible?
Precision medicine is now possible because we have an enhanced understanding of the role that genetics plays in human disease. It is also possible because laboratories have now implemented new technologies and new instrumentation to be able to enable them to have fast, large-scale, low-cost DNA sequencing solutions. It is also possible because our government is heavily investing in research and clinical trials. There has also been significant drug development via our pharmaceutical industries for targeted therapies listing new drugs onto the PBS for all of Australians to access. What are the implications for precision medicine? We know that precision medicine allows for tailored treatments. This is really important in areas such as cancer care. We also know that precision medicine enables the prediction of disease risk, for example, in chronic diseases such as type 2 diabetes and cardiovascular disease.
It also enables rapid and accurate diagnosis and early disease detection. This is really important when we think about the prognosis for patients as we're now able to also monitor disease. It results in better patient outcome and an overall cost-benefit to our healthcare system. We're also able to now conduct population screening, which is really important for the development of new therapies and interventions. What is the size of the Australian genomics market? In 2023, it was estimated that the Australian genomics market was worth around AUD 1 billion. As we head towards 2030, it is estimated that the potential market size is up to AUD 2 billion. As we can see, the genomics market is growing rapidly. What are the key drivers for this?
The key drivers are new technologies, new targeted therapies, a significant investment by our government to add on an annual basis new genetics tests to the Medicare Benefits Schedule. That was evident this week when the new budget was delivered. In addition to that, we now know that there's been a shift in Australians' appetite for wanting to drive their own healthcare outcomes in the last few years. There is a willingness for patients to pay privately for tests. That has been shown via the large revenue that has been spent for online genetic testing. All those drivers, along with clinicians now having a greater understanding of how to utilize genetic testing in clinical practice, are really the key drivers that will promote the growth in the years ahead.
What I'd like to share with you today is that Healius is exceptionally well placed to realize those revenue growth opportunities. We have established key product categories, and you can see those on the bottom right-hand corner of the slide. We have been able to develop and procure products in line with those product categories where the revenue is coming from in the upcoming years. In addition to that, we are mindful and understand what that patient healthcare journey looks like and what the continuum of care is for that patient. Our product categories are representative of those. In terms of continuum of care, we are focusing on risk prediction right through to disease diagnosis and disease monitoring. Which are the five key areas that Healius will be focusing on to realize that revenue growth? Our first key focus area is oncology germline.
Now, germline refers to inherited diseases. Some of the products that we offer in this category include breast and ovarian cancer gene panels, prostate gene panels, pancreatic, gastrointestinal, and expanded gene panels. We are continuing to provide a depth and breadth of product offerings in this category. This is mainly driven by Medicare-related funds, but there also is an opportunity for privately built offerings in this space as well. When we focus or look at oncology somatics, somatic is referring to tumor profiling. There is also quite a large opportunity to be able to grow in this area. We are currently offering gene tests and gene panels for lung, colorectal, breast, melanoma, and gastrointestinal, but we will continue to expand our offerings in line with new items coming onto the schedule.
This is a really, really important focus area for us because for any patient to be able to get access to a PBS-listed drug, it needs to be shown that the particular tumor that they have has a particular variant in line with the indication of that drug. As you can see, it's really important that we provide these services to our referrers and clinicians. Another key focus area is reproductive health. This is a particular category that has a large focus for privately billed tests in addition to government-funded tests. That is well known because there is a particular product that's been had in the last 10 years, great uptake by a lot of females with regards to pregnancy. It's called non-invasive prenatal testing. This is an example of how privately billed tests can really generate significant revenue for the pathology industry.
There's also been, again, a significant focus by our government thinking about family planning and the reproductive health of Australians. Most recently, which was the end of 2023, a new item came on board here for genetic carrier screening. Again, it's one of our key focus areas to continue to provide expanded offerings in this space. Another key area is haematology. Unfortunately, a number of Australians are continuing to be diagnosed with haematological malignancies and disorders, and that's increasing year on year. Healius is well placed here because we have a breadth of offerings with regards to gene panels to be able to diagnose those diseases. Another key focus area is personalised medicine. This is a really large area for us. It's predominantly focused on privately billed tests.
As I mentioned earlier, Australians are really wanting to drive the outcomes of their own health and are willing to pay for tests in this area. One of the key areas of focus is pre-disease risk assessments. Patients are wanting to know whether they are at high risk for things like type 2 diabetes or cardiovascular disease, as well as breast, prostate, and colorectal cancer. There are a number of solutions that look at a vast array of areas. In addition to that, we offer pharmacogenomic testing. This, again, is a privately billed test. It focuses on how an individual's makeup influences how that individual metabolizes medications. Currently, most patients will, I guess, enter into a trial-and-error approach for their medications where they will be given a particular drug. They have to test whether it works for them.
They have to look at whether they've possibly got side effects to that drug before their clinician then changes that course of action. What pharmacogenomic testing enables is for that patient to be able to have a test beforehand to identify which medications work best for them at which dose the first time. That is a really, really key driver for us in this market. How do we achieve this? We achieve this by leveraging off-supply innovation by using TGA-registered products. We also develop our own in-house new genomic assays via our dedicated product development team.
That, together with targeted commercial partnerships to leverage off IP for specific solutions that we procure to provide breadth to our product offerings, as well as working with third-party providers that offer genomics tools in terms of analysis and software for reporting, allows us to provide comprehensive, interpretable results and reports to our clinicians. What I'd like to share with you today is that it's important for me to relay that Healius is exceptionally well positioned to be able to capture that additional market share and the revenue opportunity that is available to us. We have planned in terms of our strategy exceptionally well, and we've been able to execute on that. We've done that by developing new products in addition to implementing new technologies and procuring the most advanced and state-of-the-art instrumentation to be able to conduct that testing.
Most importantly, to ensure that we have the necessary planning in place from a testing capacity perspective to be able to manage those volumes as they come through year on year. In addition, we've developed new fit-for-purpose go-to-market sales and marketing channels because we understand that we need to not only educate our clinicians, but we need to educate our patients. We have made sure that we have the strategies in place to be able to do that. In addition to that, understanding the importance of genomics as a specialisation, we've implemented a genomics-focused business development sales team where they're highly trained and specialised to be able to have those conversations with clinicians to discuss our products and services and how they can be used in their practice.
That, together with the clinical and scientific expertise in our lab from our pathologists, our clinical scientists, and our analytical team, as well as our support services and our dedicated customer care team, we feel that we are exceptionally well placed to realise that opportunity. We know that this strategy works, and we know that it works because we've been able to deliver 45% profitable revenue growth, H1 2025, FY 2025 in comparison to H1 2024. As such, we are very confident that we'll be able to realise threefold that growth in the next couple of financial years. Thank you.
With that, we might just have a quick 15-minute break. I think we'll start back at 10:50 A.M.
Where do you go today? Something is lying behind your eyes. What do you want today? I dreamed a little bit for a while. You want to stay.
We might just start again. Our apologies to those people online who did not get the chance to have coffee and muffins. I think the obvious question from Dora's last presentation is her slide where she had revenue growing 3x by 2027. Maybe I will just hit that one off at the pass. We would expect that the Genomic Diagnostics part of our business should be circa 10% of our overall revenues by 2027. I would like to now introduce Prasad Arav, who is our Head of Digital and Technology . We are going to have a presentation from Steve McIntyre on Agilex Biolabs and then our Chief Financial Officer, Steve Humphreys. Prasad.
Thank you, Paul. Good morning, everyone. I am Prasad Arav. I am the Group Executive for Digital and Technology for Healius.
I've been with the company for about three years now, and then in the beginning of last calendar year, joined the Refresh Management team when Paul Anderson took over as CEO. As a career background, I've got about 20 years of experience in large-scale digital service modernization and heading up technology functions and doing CIO roles across healthcare and in banking as well. Prior to that, in very past lives, I also used to head up strategy and M&A functions for Big Four banks. Today, I'm going to give you an overview of the digital agenda, particularly in the context of how it is a major enabler for the margin aspiration that we have as well. Everything we're doing from a technology perspective is either aligned to a revenue growth opportunity or to help drive cost efficiency through our process automation.
Over the last year and a half, we've made significant progress in terms of where we're at in terms of the digital agenda. There are eight products that are focused on, and I'll talk to each of them in a minute, to the point where by the end of this calendar year, we would no longer see the need to continue any non-underlying investment as a capital-driven method to continue building. We will continue to move the digital technology work more into a BAU function and manage the products we've got as well. There are two large categories of digital products that we have. One is operating under our Medway brand. It is more externally facing, focused on services for patients and doctors. The other is the PathWay brand of products, which is more internally oriented around modernizing our lab services across clinical workflows.
There are eight major products that are the focus of our digital agenda. I'm going to talk to three of them in a bit more detail and actually show you examples of practical things we've built. Before that, just a quick overview across the product set. From a website point of view, not all of them are big, but I'll talk to them anyway. We've gone from having really poor experience, fragmented design, sitting on legacy technologies that were not even supported, to a contemporary platform that has become a digital frontier for our patients and doctors. On the referral hub, we had no capability to get electronic referrals from referring partners. Now we've gone from there to being integrated into every large practice management software and/or hospital EMRs that have the provision to be able to order referrals electronically.
That to us, not just from a telehealth point of view, but simply keeping a sustainable level of volumes and not losing them is a big priority for us as well. On the patient side of it, there are some kind of big products underway for us to start directly engaging patients in the market into using a single digital identity through which they can access services across all our businesses. I'm not going to talk about that in more detail till we launch it in the market. Before we go into the collector portal, the lab portal, and the doctor portal, all of which have been touched by Anthea and Arjun across the previous two pillars, just on the clinical trials, that is an example of where we have built a completely modern standalone digital platform that powers our clinical trial safety testing proposition to Nucleus.
That's a big part of the basis on which we won the contract, and we continue to use that as a platform to start getting more volumes in that clinical trial space as well. It was done by putting together products we've started building around how we do collections, how we manage results, and be able to extend that offering to help a clinical trials company protocol tests that they need more in a bespoke way. That's an example of how we're actually leading the market in our capability from a digital point of view to be able to unlock value from a revenue growth perspective. I'm going to talk to you now about the kind of three major products. You heard from Anthea about our focus on the collections.
The collection service is the single biggest engagement point that we have with our patient when they walk into one of our sites. It is also the largest frontline cost base from a workforce perspective, with plenty of opportunity for us to improve efficiencies. Historically, we've relied on completely paper-driven processes in all our sites for our collectors. That causes a whole lot of manual effort, downstream data entry, and errors, and so on. Whilst we've heard more about the collections portal, I'd like to clarify that it is a product that is now live in 1,400 sites already. What we're doing now is to add very specific functionality for us to solve further business problems in order to drive efficiencies as well as improve the patient experience as well.
I'm going to use the opportunity now to just give you some really practical examples of the types of problems we're solving that are directly linked to either driving a cost efficiency or improving a service for a patient or a doctor. It's just easier to bring to life rather than describe some of the things we're doing. Equally also to say how we are now in a position of leveraging all the things we have built in digital over the last two years to actually bank for the benefits over the next 6-12 months to 18 months. We are in a very different place to where we were two years ago, where it was very heavy build mode. Now we're in a place where we can actually leverage the products to create financial value as well. I'm going to talk about the collections portal.
There is an increasing amount of usage for appointment bookings. We're all patients in a sense. When you want to do a Holter monitor or a diabetes glucose test, you end up making an appointment. We did not have any functionality for that. What we're doing is being able to let the patient do the booking online or through a call center and simply pass through that episode that's coming up to the collectors in any given site. When you or I arrive at a collection center, our collector can simply click into the appointment and start serving them rather than having to go through a whole process of who are you, how do I identify you when you're coming in. It's both a patient experience as well as being able to drive time savings for them as well.
Same thing on being able to search for a patient. I know it sounds really simple, but when I go into a collection center over and over again, if you're relying on a paper-driven process, every time I go in there, I have to pull out my Medicare card. Someone has to type in or write my name, my date of birth, my Medicare number. They make mistakes, causes a lot of problems in the lab. We create duplicated records of patients. We're overcoming all of that by being able to search, very simple, search for a patient so that you don't have to make them wait and solve downstream errors. We're also working on certain aspects of having almost a digital pass in your phone wallet.
The next time you go into a collection center, the collector will literally scan the barcode and we will know who you are. They're examples of how we want to drive the patient experience. Next one, test matching. Doctors write test referrals by calling tests in so many different ways. Some of them are literally free text. They type up how they want to describe a test. It takes a collector time as well as mistakes in matching that to the right test. We have actually got an AI algorithm now that actually matches what a doctor has said to what is a structured test in our lab. Another example of how we want to make things easier from a collector point of view, but save time as well. Billings. Relying on completely paper-driven systems.
A lot of billing errors that happen for us when we go to Medicare to bill is either we do not have the Medicare number or we have the wrong Medicare number. We have automated APIs that work directly with the Department of Health, which test if the Medicare number is valid. Second, I think Anthea touched on this. We do not want to chase invoices. There is an increasing amount of usage for payments being made upfront. When I have gone into a collection center, it is a non-rebated test. I am paying for it out of pocket. Particularly, the genomic categories of testing will go more and more off that.
Being able to have Square terminals, which we partner with in all our collection centers, to be able to take the payment upfront in a really quick way, that's a huge delta for us in terms of our ability to not lose the revenue downstream and chase invoices. Errors. Arjun talked about how things work inside a lab. Everything starts in the beginning in the collection center. If we have not collected the right tubes with the right samples, it causes rework in the lab. Sometimes we have to get the patients back in to do the test. Simple things like if a collector has chosen the test that they want to do, being able to say, "These are the number of tubes you have to collect. This is the amount of the sample you have to collect.
This is what you have to do with the sample once you've collected it," makes a difference to us on how well our lab processes work downstream. It's not any one thing, but a series of these types of things that add up to going, "Here's how we're going to unlock efficiency values," both in the collection side as well as the lab side. Part of that is also making it easier for our collectors. We have, in any given year, a material amount of new collectors who join us, who have a lead time to become competent. How do we actually use our software to almost provide contextual help and training is another part of how we want to improve our collections value proposition.
If I step back, across the close to 2,000 collection centers we have, and for the largest patient engagement service and the largest labor workforce in the distribution, being able to digitize that process end to end for the investments we've made in building a product for that, which is now in 1,400 plus sites, and by the end of the calendar year, will become the default way in which we do collections, is a huge area for us to be able to unlock an efficiency benefit. That's what I mean. I want to start giving you examples of what we've built so far lets us unlock value over the coming 27 months to pause for you on the T27 timeline. That's one major product. The second thing I'd like to talk to is about our lab portal. Arjun talked about the microbiology automation and the Instrument Manager.
Perhaps a way for you to relate to pathology is almost two categories of testing. One is anatomical, and the other is clinical. Anatomical pathology is all about tissue, skins, breast, prostate, which is largely focused on diagnosing cancer. The other category of pathology is clinical pathology, which is around blood, urine, swabs, which is more high volume. They largely go through an instrument. The tissue-based work, the anatomical pathology work, is very manual, both in the lab to be able to process that tissue as well as for a pathologist to look through microscope through 10s and sometimes 20s and 30s of glass slides to be able to report against this. What we are doing from a lab portal perspective is integrate AI into our reporting and also digitize the way in which that whole process works from an image to slide scanning mechanism as well.
To Arjun's elaboration earlier, we have done this already in our vet business. It has been done at scale across the whole country, and we're already seeing the types of uplift we can get there in terms of efficiency. World over, we have studied examples where organizations using this at scale, including with AI, are able to get 20-30% efficiency in their anatomical pathology reporting side of it. To bring to life, we no longer have impediments around what we are not able to do from our legacy lab information systems around being able to change the workflows, integrate automation into it, use AI, add tests more easily. We have a national modern platform that we want to use as the basis for everything going forward. Practical examples of anatomical pathology and cash sharing nationally.
What the digital pathology and the AI allows is, before a pathologist starts, we can actually prioritize all the cases for them. It can screen through all the cases, tag all the cases that have cancer. What that does is allows the pathologist to prioritize what do I need to put my focus on. The AI also goes to the level of slides to say, "Here's all the slides." Just think glass slides usually go under a microscope. You have to traverse everything, measure it, understand it, identify the cancer, and do a lot of manual work.
Being able to have screened all that and tag all the slides for where the cancer is, and being able to allow a pathologist to get heat maps of the types of cancer they are, where they are, what they should worry about, is a huge time saving for them to go, "This has done a lot of my starting point." AI will never replace a pathologist. It is a tool that will make their life easier. That to us is a big deal in terms of how we approach digitizing the anatomical pathology space, including being able to automatically zoom into areas where they should be studying deeper. A lot of their time goes into measuring the margins of a cancer, identifying certain things that are called Gleason scoring, which inform prognosis for a patient.
Not only does the AI save the time for the pathologist to be able to do the measurements and the reporting, it actually enhances the clinical value proposition to our referring doctors. We are going to be using this as a major mechanism to target certain specialties to say, "Here is the level of insight that we can bring back at speed that allows you to make better decisions for your patients as well." To us, it is not just efficiency. It is actually improving the value proposition for clinical referring doctors as well, mainly in oncology. Cancer is a kind of large problem for Australia.
We've also made it easier for our scientists and pathologists to be able to access historical information on the patients because a big part of them finishing a report is being able to know all of the data around a patient's historical test results, be it blood tests or anatomical tests. They're the types of things we're solving for from a lab portal perspective. This allows us to digitize and automate really big clinical departments. Microbiology was an example, and high volume biochemistry and hematology through the Instrument Manager is another area, and digitizing anatomical pathology is another area. If you look at these two or three big areas, it's a big opportunity for us to unlock the value of digitization. We've also got much more granular insights into how we're operating as a business through the lab portal.
We have dashboards around what processes are happening in the lab, how well are they going, who is reporting, how fast are they reporting, what continuous improvement measures can we take informed by real-time data that is available to our managers makes a big difference to being able to leverage a system that is no longer going to limit it by archaic aspects. The third one I'll talk to you about is the doctor portal. We have covered the collections portal, talked about the lab portal. The doctor portal, at the heart of it, we're a clinical business. Our purpose is to get diagnostic test results, insights back to referring doctors so they can make medical decisions. That's basically how doctors view our role in this. Everything else that we do is a means to the end.
We're investing quite heavily in differentiating ourselves to the service, to referring doctors. We had a legacy doctor system that was completely unsustainable. We have replaced that, launched a national platform. We have tens of thousands of referrers and users across the country on a day-to-day basis. That has given us a platform to continue to add differentiating features that make the service better for doctors, but also do things like drive more self-service that reduces kind of calls back into our call center, which Anthea talked about as well. Can I give you some really practical examples of what that involves from a product perspective? This is our doctor portal. Some of the things we want to do is, how do you reduce the cognitive burden for doctors? They all have legacy systems.
Some of them are kind of old practice management softwares, electronic medical records in hospitals. They leave those systems to go into standalone portals, diagnostic portals that are provided by providers like us and our competitors to tap into certain functionalities that are not otherwise available for them to make medical decisions. Reducing the cognitive burden for them by much better visualization, being able to act on what is wrong, what is critical, what is urgent is a big part of it. We're also enhancing the reports that we want them to get back. Pathology reports haven't changed much since perhaps I was born, but being able to enhance what type of insight they get, what is the synthesis of the summary they get, what information do they have about their patients is a really big part of what we're doing. Anthea touched on self-service for doctors.
One of the reasons why doctors call us is because they've looked at a report or they're looking for a report and they have questions about it. If they've got the report, being able to have a virtual channel that allows them to ask a query, "Hey, I've looked at this report. I've got a question about the diagnosis, or I need to do a follow-up testing, or I need to find out where the other result is." Being able to ask that question is not only a service proposition that improves our attractiveness to doctors, but also reduces a whole bunch of calls to our call centers, which drives a lot of our costs up in terms of the amount of service we have to provide there. They're the types of things we're working on.
Specialists is another area of focus for us, as we've disclosed to the market in the past. Being able to have biomarkers that are very specific to referers. It's not complicated to understand. If I'm a cardiologist or a gastroenterologist or an endocrinologist, what I'm interested in is different to what the other doctors do. Being able to provide information around biomarkers, very customized trend analysis around certain biomarkers that are relevant for them are all important things we're working on that allows us to use our doctor platform to continue to differentiate and actually go after specific doctor segments as well. Part of the self-service, one of the reasons why they call us is, "Where's my report?" We don't want them to call us for that.
We want them to provide a self-service channel that allows them to just get access to it, resend the report, share the report with a colleague or a patient, download it into their practice management software. That is an ability for us to be able to simplify things. Anthea also touched on continuing professional development, or CPD, as it's called. If you study the medical sector enough, one of the big pain points for GPs is, "Every year I have to stay accredited. I have to do a whole bunch of process tasks in order to get certain accreditation points through learning mechanisms." What we're doing is using our services, particularly around skin cancer, cervical cancer, and in future, other test categories as well, to say, "You've done the test.
Here are mechanisms for us to give you reviews about how you've done and what you can learn from it," and create automated reports, which they can just simply download and submit to their college in order to claim points. That's a big barrier for GPs. It takes up a lot of their administrative time, which they don't have. As an automated value proposition for us to be able to offer that via our doctor portal to the GPs is another area of a proposition where we go, "Here's one more major reason why." With all things being equal, rather than sending your tests over there, sending it to us gives you this benefit as well. They're the types of things we're working on from a doctor portal perspective. Someone also made the point about practice managers being really important in medical centers.
We also want to make their life easier. A lot of our interactions with practices are about how you're ordering your consumables. Do you have the referral pads? Do you need vaccines? Not only are we creating almost an e-commerce-like mechanism for them to do that, but it actually is a mechanism for us to also control our consumables expenditure as well, to get a much better tab on it and be able to know who is using what and how do we control that and know how we manage the costs around that.
These are very practical examples of how we're leveraging the digital products that we've already built and are continuing to work on over the rest of this calendar year to go after either this has got to make a difference to the referring doctor, a GP or a specialist to help drive growth, or it has a very clear link to driving an efficiency in one of our workflows. We're pretty clear on our strategy. The heavy lifting that has happened over the last two years is what I want to call out because it now puts us in a place where we can start banking the benefits coming out of it. We will continue to keep improving our products, but we are in a place where we're able to unlock the value of the work that's been done so far.
On that note, I will finish up and invite Steve McIntyre, the Chief Executive Officer of Agilex Biolabs, for a session. Thank you.
Hi. I'm Steve McIntyre, the CEO of Agilex Biolabs. I've been the CEO at Agilex for just over two years. I joined about a year after it was purchased by Healius. My background includes running some science-based health businesses, including Dorevitch Pathology and Monash IVF, just after it privatized out of the university. Agilex provides bioanalytical services to the drug development industry. Just to frame up what I mean by that and what we do, there are a range of activities in drug development. If you like, it's commonly called CRO, Clinical Research Organizations, is the market that services drug development. Within that, bioanalytics is around 4% of that activity globally. Best estimate is it's around AUD 5 billion market globally.
There are three streams in bioanalytics that we address: preclinical, which includes the academic work in terms of getting up towards in-human testing; the ethics work, which includes approvals for animal testing and human testing; and the phases of drug testing. At Agilex, we focus on the preclinical work, the toxicology work, which is aimed at the safe levels to apply for in-human testing of drugs. As you can imagine, there's an enormous amount of work and regime that goes into that prior to the first in-human trials. Phase I is the area that we focus on. It's grown at Agilex as a consequence of the Australian government's strategy to become a favored phase I provider around the world.
Just to give you some context on that, the government's been running for about 30 years a program for quality, speed of approval, and a 43.5% tax rebate for all money spent on phase I research in Australia to give us a competitive advantage. Just a couple of contextual notes on that. Australia conducts the third largest number of phase I clinical trials in the world. Last year, at the largest bio conference in the States, the Australian ambassador, Kevin Rudd, with the FDA in America announced that since 2019, 70% of all drug applications to the FDA in America contain data generated in Australia. At various points of the drug development cycle, Australia is a significant player, not a tiny player globally.
In terms of the market, BioA is around 4% of the total drug development size, which gives it a rough global scale of about AUD 5 billion. About half of that work is done by large pharma, who do it all in-house, and about half is by medium and small pharma. In Australia, we at Agilex would bid on around AUD 300 million of work a year. We estimate the market in Australia, reverse engineering our competitors' revenue and ours, to be about AUD 120 million at the moment. The gap between the amount that we bid on that companies are looking at doing their phase I in Australia and the amount that's actually happening is that about half of them decide to do it in other countries or don't proceed. Therefore, we think our market share is 35%-40% of the market.
That gives you some context on that. This year, we had a strong year for growth. Last year, we were set for a strong growth year this year. We ran into the American election. Leading up to the American election in October, the leadership team and myself at Agilex decided that it was going to be very choppy waters for our clients, small and medium biotechs, for the next 6-12 months. 75% of our clients are U.S. and Chinese, and they were the two markets greatly affected by the uncertainty that is still pervading the US in health. We took 10% out of our cost base. We had done a previous adjustment the previous year, so we did another one to protect our margins on the way through.
I'm happy to say that we're seeing positive signs again in the market, which is really good, and I think we're in good shape now for that to wash through, but it's taking time, and the uncertainty in America is still extremely high. I want to talk briefly about some of the things we've done this year to build our capability and other services. Whilst there's uncertainty going on, we're building our capability to provide new services and stay in front of the market. Whilst I'd call Agilex a capital-light business, some of the things we have applied our capital to this year include three new Cytek flow cytometers, which really give us a broader range of testing available for large molecules. That adds to our current fleet of flow cytometers. We've upgraded mass spectrometry, which is mainly applied to our small molecule business, about half our revenue.
We have a fleet of 17 mass spectrometers. The oldest three have been replaced with the latest models, and our overall server and software is now gone from 20 years old to the latest. We are right at the leading edge of the tech that is required in mass spectrometry. Polymerase chain reaction, which is commonly called PCR, has always been a constant in genetic testing and in large molecule complex testing, but it is becoming more frequent, and the need for greater accuracy within that is becoming increased. We have introduced robotics and automation this year to our PCR testing, which has dramatically changed the range and the way we can do it. What it effectively does is denudes and denatures and elongates strands of RNA and DNA to allow them to be easily tested. We are right at the cutting edge of that capability now at Agilex.
We are constantly looking, given that we're around 200 staff, and we've got a lot of high-end scientists. We are trying to tap into their brains and try to constantly improve because our external market is constantly developing, and we're at the cutting edge of it. We have introduced an AI-assisted innovation system to have a constant dialogue with our staff about issues within our business, to continue to drive our cost base down, to continue to offer better services. The platform for that that we've taken is the Taiwanese model that they've used, which was introduced by quite a famous minister over there called Audrey Tang. They have been doing that for the last 10 years. We have modified it for our purposes. In Taiwan, it is called the Sunflower Movement.
We call our sunflowers science, but we're using AI, and we're getting complex issues down very quickly within a matter of weeks and then finding common positions to keep moving forward rather than have constant meetings and never getting anywhere. That is really speeding up the innovation within our business, which has been a really good development. Finally, in terms of you've heard the clinical trials portal be referred, and you've heard the innovation that's going on and actual delivery in the IT area within Healius. One great benefit for us this year was we were able to bid for Nucleus Networks. You've heard that referred to a few times. That cutting-edge portal for the safety bloods gave me the strategic advantage I was looking for to build a relationship with Nucleus Networks, who were mainly involved with our competitors previously.
That has been an absolute fantastic development for us. Healius and Agilex working together to do that has been brilliant and to the point where we're opening—it's fully operational within two weeks—a laboratory in Queensland in the Queensland Institute of Medical Research. That is right in the middle of the biggest boom in biotech in Australia, which is Brisbane. The Queensland government have been actively seeking investment. As an example, Sanofi are moving their entire global vaccine development from Atlanta, Georgia, to Brisbane over the next year. That's going to bring around AUD 4 billion of investment over the next 10 years alone to Queensland. We'll be located in the QIMR in the floor between the beds that Nucleus Network conducts. We're right there on spot. We wouldn't have got that opportunity if it wasn't for the Healius portal.
That's been a good example of us working together. Overall, it's been a really interesting year. Like the Chinese curse, may have been interesting times, but the general dynamics in our market are still fantastic, still moving forward. We've been really concentrating on running a tight ship, offering more, responding to the market, and I think we're in a very good place. Thank you.
Now I'll hand over to Steve Humphreys, the CFO of Agilex, who's going to talk about the results of everything you've heard today.
Thanks, Steve. Hello, everyone. I think I know most people in the room, but for those who don't know me, my name is Steve Humphreys. I am Chief Financial Officer at Healius. I've been in this role for 12 months. Prior to that, I was Deputy CFO.
I'm going to summarize the financial implications of everything that's been presented this morning and how we plan to achieve that high single-digit EBIT margins in FY 2027. In the next 27 months, we expect current trends in revenue growth to be maintained, supported by an improved customer service proposition that you've heard about this morning from Anthea. GP attendances and referred volumes have reverted to long-term trends, and these should be supplemented by the various bulk billing initiatives recently announced by the government, including in this week's budget. We also expect continued strong growth in genetics, in B2B, and other non-MBS specialist work. From a cost perspective, workforce planning and digital enablement, about which you've already heard from Anthea and Prasad, will sustain planned efficiencies in the cost base.
In addition, we have a robust cost out program planned, which will quickly gain momentum and reflect the more simplified business model following completion of the sale of Lumus Imaging. As you all know, we currently have unallocated corporate costs of AUD 15 million per annum. However, we're going to take out AUD 15-20 million of cost, and most of that will come from those unallocated corporate costs and the rest from pathology costs. In addition, as part of our T27 plan, we're working on achieving significant efficiencies and therefore further cost savings in four areas. Firstly, labor efficiencies through the improved rostering across our ACC network that you heard about this morning, and skill mix standardization and optimization across all of our laboratories. We're targeting significant savings from procurement and better inventory management, and you heard Arjun talk about that.
We know that automation and digitization of our call centers and data entry operations, plus optimization of our courier routes, will significantly reduce our labor costs. Finally, in our laboratories, as Arjun has explained, we will be automating microbiology and anatomical pathology to, again, significantly improve efficiency. Importantly, in terms of non-underlying costs, as Prasad has already explained, our digital program will complete by the end of this calendar year. We will therefore have no non-underlying cost relating to the digital program in our results from January 2026. Although we deliberately invested in labor during the first half of 2025, we recognize that at 49.5% of revenue, our labor costs are too high. On the other hand, they present significant opportunity for Healius going forward. On the previous slide, I talked about the actions we are taking to reduce our labor costs through efficiency initiatives and reduction of support costs.
In addition, better rostering will reduce overtime costs and penalty rates, as well as ensuring our ACCs are open when they should be. EBA increases are moderating as CPI reduces. In Queensland and Western Australia, our EBAs are locked in at 3% for FY 2026. Although we have negotiations coming up in New South Wales and Victoria, we're confident of keeping our overall EBA increases for FY 2026 in the range of 3.5-4%. One unknown is the outcome of Fair Work's review of gender undervaluation. This is an industry-wide issue, and currently, there is little indication of how this might play out in terms of minimum wage rates, the period of any increase, and impact on future increases. Our ACC and laboratory rent costs are in a good place. We've reduced the cost from over 18% of revenue in FY 2024 to 17% in the first half of FY 2025.
Approximately two-thirds of our leases have option periods, and most of these are linked to CPI. This is an area of constant focus. Our consumable costs are also pretty good, and you've heard a bit about that from Arjun. Notwithstanding which, we're targeting to take out another AUD 8 million-AUD 10 million from our circa AUD 230 million annual expense through better procurement and inventory management, as well as the efficiencies in the laboratory, which Arjun touched on. Sorry. Together, labor, rents, and consumables comprise around 83% of our cost base. We are, however, also focused on achieving further savings from the remaining 17% of those costs. Turning to trading and capital management, year-to-date February, our volumes were tracking at 4% ahead of PCP and revenues at 6.2% ahead.
We expect marks to be lower than this because of the impact of ACC and lab closures in Queensland and northern New South Wales during Cyclone Alfred earlier in the month. However, since then, volumes have recovered well and are tracking at probably around 6% ahead of PCP. That is in a two-week period. Going forward, we do not expect any large one-off capital expenditure and for annual CapEx to equate to depreciation at around AUD 35 million per annum. As we have already said, our digital program will be all but complete by the end of the current calendar year. This means that no non-underlying items from this program will be in our results from January 2026. This does not mean, however, that digital enhancements will cease. Instead, they will become part of our overall IT program in the underlying business.
Turning to the sale of Lumus Imaging, subject to satisfaction of all CPs, we expect completion to happen on the 1st of May. Our intention is to pay a special dividend of approximately AUD 300 million or AUD 0.413 per share. This will be fully franked with a franking credit of AUD 0.177 per share or AUD 128 million. On completion, we will repay all drawn debt and cancel our current syndicated borrowing facility, which is AUD 680 million. Simultaneously, we'll enter into a smaller AUD 300 million facility with better pricing. In the near term, we'll operate with a conservative balance sheet until we are confident in the sustainability of our earnings going forward, including the ability to return to normal distributions to shareholders. I'll hand back to Paul for Q&A.
Thanks, Steve.
Hopefully, this morning has given you all a much better and deeper understanding of what is going on in our business that you've got to hear from some of the other business leaders. To summarize, I think you all understand the fundamentals of healthcare that mostly are positive. Despite indexation, which we understand, we know that we are getting one-third of the schedule indexed on the 1st of July this year. There is a range of other things that we have been lobbying for. I was remiss to say before that Mark Nevin, who is our Head of Government Relations sitting in the front row, is here today. For those of you that would like to know more about what's been going on in Canberra this week, he is your man. Look, you've heard about each of the individual parts of our business.
For those of you that come to talk to us post-results, we talk a lot about the customer experience. We've talked about keeping our collection centers open and answering our phones, which are a critical part of that customer proposition so that referrers want to do business with us. They need our collection centers to be open. They need to be easy to find. They need to have a pleasant experience. They need to be able to get the results back in a timely manner, and as Prasad has set out, in a manner that's easy to read and for them to get those results anywhere and anytime. The one thing that I think both Anthea and Prasad have talked about is Medway Collections Portal. That is something that we have now, and they've described the upgrades that are coming.
That should be the single biggest thing in our business that makes a difference to our collectors. We talk a lot about making life easier. Everything that we are doing, whether it's our people, it's the digital technology, we're trying to make life easier for our collectors. We're trying to make life easier for our patients. We're trying to make life easier for our lab people, and we're trying to make life easier for our doctors. It's a pretty clear thing. If we are spending money or developing technology or trying to change our processes, we need to be making someone's life easier along the way. Arjun talked about lab efficiency and our lab operations. As you can see, that is an enormous piece of work, and we have made great strides.
There is a lot of manual things that we do day-to-day that we now have a plan to automate those where we can. We have also heard about our emerging and specialist diagnostic pieces, so our non-MBS revenues. A great presentation from Dora. That is a really important part of our future. We are asked constantly internally about, "Yep, so you are fixing the core part of your business to make life easier for everyone, but this industry is moving at a rapid pace." We have seen that in the budget this week with a bunch of new tests that primarily relate to cancers and genomics. We have a plan for the future. Prasad's hopefully very practical explanation as to what we are doing with our digital and automation program. It has been talked about a lot.
In my two years here, especially in my time as CFO, we have been asked endlessly about that program. Clearly, having non-underlying costs is cash that go out of the business each year. We have drawn a finish line under those at the end of this year. It is very specific, the eight things that we are doing. You will see some of those things have been done, and there are some really big chunky things that will make a real difference to the patients, our lab people, or our referrers. Lastly, we have had a couple of examples today where we have talked about we are winning work. We won the Department of Health tender in Tasmania. We have won the clinical trials business with Nucleus Networks. I would say 12 months ago, those things were not happening.
That goes to we know we have a long way to go. We are rebuilding, and we are resetting this business. All of those things go to confidence in us being able to deliver and credibility. With that, I will pause and happy to take questions either from the floor or online along with the rest of the team.
Thanks. Dave Stanton from Jefferies. Thanks very much for the presentation. Two questions from me. Could you give us some idea about what percentage of PATH revenue is vet work at the moment and where can it get to for 2027? I guess the same for clinical trials, please.
I knew someone was going to ask that. Look, we do not split out our kind of revenue pie, if you like. I understand that there is an interest in we are talking about growth in those areas.
They are non-MBS. The vet % of revenue probably is in low single digits currently. We're not going to give you a target as to where we go. I think we've given you the size of the pie. That's an industry that has, I think, changed quite significantly with some overseas players. We are in a unique position to be able to increase that, we think, quite significantly. Clinical trials, that is a relatively small part of our business. That's something that we've kind of gone from a standing start of predominantly zero to having been the preferred provider for the largest CRO in the country. The way I think that we look at that is that we've got several parts of our business. We've got a GP part of our business where we are holding share.
All of the things that we've talked about, collection centers answering our phones, we believe we can grow that. With the government initiatives and backing with bulk billing, we believe that that's a good thing for us. We know we've got a lot of work to do in specialist revenues. On the specialist and emerging piece, we've talked about Dora's Genomic Diagnostics business and given you a little bit of guidance around our ambition there. I think importantly for us is it's about those one-percenters that are non-MBS that we actually can continue to grow.
Hi, Craig Wong-Pan from RBC. Just on that size of the Tasmanian contract, could you provide any context for that? Is that sufficient to offset the Western Health that is being internalized?
Look, the answer to the question is no, we can't tell you the size of the contract.
Look, I think the important thing about that contract is that gives us a foothold into northwest Tasmania. We have not had a presence there, a significant presence for a long period of time. The associated benefits that should come along with that contract, we think, are quite significant. The size of Tasmania is one thing, but we are a national player, and that's actually, we think, just significant that we have won that contract, full stop.
I guess, does that sort of help offset the Western Health part, or is it?
Oh, look, it does. Yeah. Partly, look, I think we haven't said definitely what that Western Health contract is. What we have said is that we also have other public hospital contracts in Victoria that have either been renewed or coming online in the next year that will also do that.
Then second question, just on the AI in anatomical pathology, just was not clear. Is that being developed yourself, or are you partnering with someone for that AI capability?
No, we are partnering with someone. I think I am allowed to say the name of the company, are not I? Ibex. Ibex. Correct. Yeah. No, we are not developing that in-house.
Last question, just on the revenue update, it seems like the rate of growth might have slowed in that sort of second-half period. I am just trying to understand what might have caused that.
I think it is a choppy period. I think you have got kind of two parts of that. There is a number of working days. I think there is an extra two in the first half and one for the year to date to the end of February.
I think the trend, whilst you get kind of post in January, that kind of Christmas period, the trend changes, acknowledging that it is a PCP thing. I think importantly, what Steve said in the last few weeks, we're kind of trending above that. There are ups and downs, but it has been far more consistent in the past 12 months than we've seen for a long period of time.
Yeah, thanks, Paul. Steve Wheen from Jarden. Just wanted to, you've been talking in the past a lot about the collection centers and staffing up to make sure that there are no closures or unexpected closures during the day.
Just wanting to understand where you're at with staffing them to the level that you're more comfortable and how much of that additional labor cost have we already seen in the first half and what might it look like in the second half, I guess. I'm just trying to get a run rate for that labor cost.
Yeah. Look, I mean, I think we've been very upfront to say we have reduced those closures by 50%. Our ambition is to get that down to under 3%. We've gone from, I think, 8% at some stage at the early stage. We had done that in somewhat of a blunt way, keeping them open at all costs. Yes, is that cash flow positive? Yes. Are we optimizing the way that we actually are paying for those additional opening hours? The answer to that is no.
Anthea's number one KPI is to work out what perfect looks like. Now, that's a very difficult thing to do in 2,000 collection centers, but we do know our contracted or current opening hours. We know in a perfect world, if we can recruit people and have them all open at the right rate and not paying overtime and penalty rates, what that should be. That's a very theoretical exercise, and we're not the only industry that's trying to recruit and train people that are in that cost per hour bracket. That's a long-winded way of saying, yes, we've kept them open. All focus now is on making them more efficient.
That is a combination of the state collection managers who are responsible for keeping them open and the state rostering managers, making sure that they are working together to make sure that we're actually getting a much better outcome from our workforce planning. It's a big piece of work, and it's 4,500, I think, collectors overall, but it is an extraordinarily important piece of work for us. We have heard loud and clear, post their half-year results, and you guys see what our labor cost is across our business. That is an area that's firmly within. Are we going to see a better result in H2? I think was your last.
Okay. The second part to the labor question is the EBAs.
Again, just trying to understand the reporting halves, how much of the EBAs are embedded in the labor cost in first half, and when would you be expecting sort of the New South Wales and Victorian EBAs to hit?
They have been negotiated, and I think start from next calendar year. We have the remainder of this year to go. We have been through a period over the past two or three years where minimum wage rates in each state have been going up 5-odd %, in some cases higher, on the 1st of July.
When you have a workforce that is around, a large part of your workforce is around that level, you have to design your EBAs so that, one, your EBA gets through Fair Work for a start, that you do not get kind of caught out halfway across your period by increasing rates, and also pricing those competitively. We know our competitors are trying to attract staff. Some of those EBA increases have been brought forward, so that has been part of the—there is a long way of saying they have been above 3%. From next year, they revert back to that more normal kind of 3-4% range, which is the target.
Okay. Final question for me.
I wonder if you could give us a quick update as to where the government is at or Medicare is at with the B12 and urine tests and what sort of efforts you're going to have potentially with the coalition to maybe change
some of that. I think I can put words in Mark Nevin's mouth. We are campaigning very hard. Look, I think Australian Pathology has a very well-thought-out, coordinated campaign to both the government and the opposition for different reasons. Almost all of the clinical groups have backed this. We see it that it is just a financial cut and it doesn't have a genuine clinical reasoning why they're reducing those rebates to patients.
Yeah. It's not a qualification where the eligibility for that test is going to be reduced. It's more just the price is cut.
They are reducing the rebate to patients. I think I'm right in saying that the definitions have been changed as well, the criteria. The unknown is what happens on the 1st of July when a patient goes to see a doctor and how a doctor, so we obviously can't speak to that. On the face of it, they would say that there's AUD 356 million of cuts coming from the 1st of July 2025 over the three-year period, I think.
Yep. Got it. Thank you.
Yeah. Good morning. Mathieu Chevrier from Citi. Just to stay on the topic of indexation, what have you baked in your longer-term targets as it relates to indexation and/or private pay?
In terms of our forecast going forward, we have not baked in an expectation that we are going to have our pricing increased.
All of our internal forecasting going forward is on an as-is basis with what we're doing now. We've obviously talked about a bunch of non-MBS revenues going forward. That forms part of it. The rest of it, the forecast going forward, is a cost thing. There is no indexation as part of our plan going forward.
Okay. Just talking about overall revenue, you mentioned previously the industry's grown at about 5% longer term. Do you think you can grow above that going forward, or do you think you're going to grow broadly in line with where the industry used to grow?
I mean, I think there's two parts to that. There's looking at just what the industry has grown at long term. The slide that we had on industry fundamentals, that's got to be our base case.
We look at what is happening with GP attendances, what is happening with specialist attendances. We look at what is happening with government incentives. Clearly, there has been this AUD 8 billion incentive package, if you like, to increase bulk billing and increase the number of GPs. I think we look at that for a start and say, does that give us confidence that volumes increase and then over time, average fee increases on top of that? The next piece is up to us. It is the non-MBS revenues. I think you have seen today we have got a plan around vets. We have got a plan around clinical trials, and we have got an ambitious plan around genomic diagnostics.
Great. Thank you.
Thanks. David Low from JP Morgan. Paul, can we just talk on the stranded costs?
I see the commentary is that they'll be gone by the end of next financial. Just what the PathWay there is and how much will be borne in the rest of this year and into next year?
That is the AUD 15 million-AUD 20 million. Is your question around sort of how quickly they come out? First cab off the rink is obviously the completion of the Lumus transaction. We expect that is going to happen on the 1st of May. It's a staged thing. There are some things that will disappear overnight, which are just costs that will be borne when Lumus leaves. It's going to be a gradual thing across that period.
I think the way that we've set it out is that if you look at our segment note, we have Lumus, we have pathology, and we have AUD 15 million of, call it, unallocated corporate costs. There are lots of AUD 15 million running around here. They happen to be AUD 15 million. The way that we look at it is to say that those costs disappear in terms of they will be absorbed within the pathology business. Going forward, we will have one pathology business that does not have a corporate cost element. Now, clearly, all of those corporate costs at the moment, board costs and some insurance costs do not disappear. They get absorbed within the pathology business.
The high single-digit margin is for the group. We are not talking the pathology division.
It is one and the same.
It is one and the same. Going forward, correct.
Okay. In terms of the Lumus process, will they be buying services from Healius for some time that helps offset that?
No. We just know there is a transition services agreement, which in theory goes for 12 months. It can go for longer. That is a pass-through mechanism. Clearly, they will want to be a standalone entity as quickly as they can. They'll be restricted by some things, mainly technology changeover, as well as they will take on their own accounting and HR and so forth over time. Just on that, the answer to that question is no, long term.
Okay. Just on the sale proceeds, the deal's not far away. I mean, we've been given a gross number. I mean, is the net number significantly different?
We haven't completed yet. You're a bit closer. That will be.
Yeah, we are. I know. There's obviously we don't think that number is going to be materially different from what we said before. We won't know the final number until we have the square up with working capital, CapEx that has been spent, not spent, etc., etc.
Okay. I guess the last one, and I guess perhaps one that there's a lot of focus on now with the numbers that you've put out there and the guidance on a three-year view, sort of cautious that we've seen long-term guidance from Healius in the past that's been challenging given how things change. The PathWay to that margin target, I mean, is it particularly back-end weighted? Is there anything, milestones that you think we should be thinking about through the period?
Look, we're not giving you targets along the way.
Look, I think it's important for us to be able to set out a target in June 2027 because it gives us something to talk to you about when we present our results each six months and the progress that we are making. It is not going to be linear. Are we trying to go at 100 miles an hour now? Yes is the answer. I think you've seen a bunch of the things that have been done over the past two or three years, especially in terms of the digital investment, now we should be able to leverage. It is not going to be linear. There are maybe, I don't know, 30 different parts of that program over time.
If we just choose procurement or we choose data entry and our call centers, we can have a specific program that says, "Here we are on the 31st of March, 2025. Here is our plan across that." Internally, what we want is a bunch of those mini projects that we can then monitor and all roll up to the answer in 27 months' time.
Sorry. One more from me. I mean, when we look at the peers, I mean, where we can see disclosure, I mean, we can see much higher margins. Is Healius working towards sort of matching the efficiencies of competitors, or do you think you can leapfrog them and become a better operator? I guess I know the answer that you're going to give, but I'm trying to understand what is the differential today and how much.
You give me the answer first, and I'll tell you whether I agree with you.
I would be surprised if you said that you had said that you weren't going to be ahead of them in due course. I guess perhaps today, is a lot of this about bringing this business to where the competitors are?
Look, I mean, I think that has to be our ambition. In terms of what we're, so part of what we're doing, whether it's people, whether it's digitization or automation, there's kind of three parts. There's part table stakes that you just need to have in order to go and talk to a doctor and win their business. There's part of what we do which just makes our business more efficient.
Instrument Manager, all of the things that we are doing internally, we want to be as good as anyone else in Australia or around the world for that matter. I think we are now at a point where we can actually pick and choose things where we want to be as good as anyone else in the world. I think there is investment to be, and I think Prasad would probably say that there are elements of what we are going to deliver with our Doctors Portal that are as good, if not better, than our competitors. I think there are elements of what we're building that absolutely we can be as good, if not better, or the best in the country. It's not a one-size-fits-all. I think internally, we have to have an ambition overall to deliver those high single-digit margins.
We have to break that down into all those individual components. Some we will be better than everyone. Others, that may not be the case. Overall, that has to be our ambition.
Great. Thanks very much.
Rhys Collyer from MST. Firstly, could you just speak to the impact of the Queensland cyclone and just elaborate upon any impact to operations or to the group or otherwise for the year?
Look, that's a good question. In terms of infrastructure and that we do not really have any lasting or major damage, this is one of those things as I think we look across all of our competitors and then everything from schools to GPs to hospitals, everyone was in the same boat. We were sitting there on Wednesday morning planning for something to hit on a Friday morning.
Working back from that, we knew we had to start shutting collection centers at a certain point in time and shut our main lab on that Wednesday evening, I think it was. Look, we think tha]t we, I think we lost around 40,000 episodes in those days that we were shut. Our main lab was back up and running, I think, on the Saturday and amongst some pretty ordinary weather. Some of those episodes we got back, and we're trying to work through now the financial implications that go with that with insurance and so forth. The silver lining with all of that, I think, was that we had a situation where business continuity plans and organizations kind of really get tested when there's something serious about to happen.
For us, we had a bunch of people in our organization that really stood up across that period.
Beautiful. Just another one. Could you just talk to the franking credits and tax implications with the special dividends? Is there any prospect of using any of the capital losses in the sale of the Lumus?
They do get used in that. I think the short answer to that is there's no tax leakage in the sale process.
Cool. Last question. The use of proceeds from the sale of that particular business, obviously, you're retiring the debt and granting special dividend. Are you expecting the capital position will leave any capacity for any other initiatives more broadly?
Two parts to that. If you're asking, are we going to go and spend money either on a capital nature or acquisition, the answer to that is no. I think Steve's been quite categoric in terms of what we're spending on CapEx. There's kind of no big one-off CapEx investments. I think the way that we've talked about this quite a bit is that we intend to have a conservatively positioned balance sheet, at least in the interim, until we get consistency of earnings. That allows us to resume dividends over time. Clearly, once you've got consistency of earnings, you can then gear your balance sheet appropriately, which is just good capital management.
One last question. I think we're just about out of time. We could?
Yeah. Thanks, Dave Stanton from Jefferies.
I just want to confirm that just because I had a query from one of my clients, that high single digit EBIT target, is that post AASB 16?
Yes.
Thank you.
Great. Thank you very much for your time this morning. We appreciate everyone coming out in person and hearing from the team and also everyone online. Thank you very much.