Good morning, everybody. My name's Carmen Riley. I'm Chief Executive Officer of Paragon Care. I've been in the company for about 15 years. Prior to taking over the role on the 1st of July, I was Chief Operating Officer and obviously I'm a Director of the company. Just to touch on our strategic overview, we've never actually changed our strategy of what we want to do in being a leading distributor across healthcare. We've now just expanded that out into the Asia region by joining with Paragon Care Group. Bringing the businesses together, we're very excited about the opportunity of continuing our growth across that region. Just on to the next slide, I thought I'd touch on introducing the board. Just a brief introduction to our board members: David Collins, Managing Director. David will stay Managing Director until June next year.
At that point in time, I will take over the role as Managing Director and CEO of the company. Peter Lacaze is the Chairman, Major Shareholder. John Walstab, Non-Executive Director. This year we welcomed Peter Eggleston, a Non-Executive Director but also Chairman of the Audit and Risk Committee. OK, just on to the next slide. Underlying financials, which will go into a + $3.6 billion in revenue, underlying EBITDA of $95.2 million, return on invested capital a little soft at 13.3%, and free operating cash of - $11 million. As you can see from this slide, our business is very vast and quite complex with a very broad customer and supplier base. What I'd like to do is actually take you through how we've restructured that business over the last 12 months, and that's by regrouping our channels to market.
We've put these into four channels to market, which are now Wholesale, Medical Technology, Contract Logistics, and Clinical Manufacturing. When you lift the hood on that, you can see underneath it is quite complex and quite diverse. We have a number of sales streams, and that is supported by dedicated people in each one of those streams, and we remain having a shared service structure. Just on the next slide, I thought I would touch on some of our key highlights of the year and our key achievements. Whilst we've been going through a very complicated and difficult year in terms of transition because we have been bringing our three businesses together, which has been the Oborne Health Supplies business, then the merger of CH2 with Paragon Care, that's what launched our 3-2-1 strategy, which was three businesses, two years to complete, all in one team.
During that time, even though it's been incredibly busy, we've managed to sign new agencies such as CMR Surgical and CLASSYS. We've signed our first contract manufacturing agreement at the Mount Waverley site. We've signed a large Contract Logistics customer through Owens & Minor , which is a great partnership to have. We've launched business units in Aesthetics, Robotics, and Dental in Australia and New Zealand. We've continued to expand Aesthetics throughout all of Asia. We've continued to expand all our distribution partners across our whole network. We've commissioned our new site in Brisbane, so that's expected to be opened in FY 2026 at Willawong. We've consolidated six sites within our network. We've acquired a small business in New Zealand called Image Space. We've also acquired a small dental business in Australia, AHP Dental. A small note on integrating the amount of ParagonCare businesses onto our JDE platform.
We've also completed our new debt facility with ScotPac. I'll just take you through the top level of key financials before I hand over to Marcus. With the FY 2025 result, just to be clear, for FY 2025 in these figures, both the underlying and statutory financials for the group are presented, each reflecting a full 12 months of trading for Paragon Care, CH2, and Oborne businesses. I'm really pleased with the result because, as I've stepped you through, we've had such a complicated year, but the teams have been fabulous in bringing together a result to deliver to our shareholders: $3.6 billion in revenue, $95.2 million in EBITDA, and $31.2 million in net profit after tax, which is a great result. Our statutory result: $3.6 billion, $88.5 million EBITDA, and $20.6 million in net profit after tax.
I'll hand you over in a moment to Marcus Crowe and he's going to take you through more detailed analysis of the P&L and the balance sheet. As you can see, I think this is a terrific result for a business that has gone through a difficult transition, difficult economic conditions in some of our markets, and really to bring this together to complete a good, solid first year of our combined businesses. Over to you, Marcus.
Thank you, Carmen. Good morning, everyone. It's a pleasure to present the FY 2025 results. Before I commence, I'd like to outline the basis of the financial information that will be presented today. For FY 2025, both underlying and statutory financials for the group are presented, each reflecting a full 12-month trading for Paragon Care, CH2, and the Oborne businesses. A brief refresher to provide some context around the FY 2024 numbers. While still a private company, CH2 acquired Oborne Health Supplies on the 28th of February 2024. Subsequently, on the 3rd of June 2024, Paragon Care acquired 100% of the shares of CH2. This latter acquisition was accounted for as a reverse acquisition whereby CH2 is classed as the accounting parent. Resultingly, the reported financials for the comparative 2024 financial year are presented in two separate formats.
Firstly, the statutory results, which include 12 months from CH2, four months contribution from Oborne, and one single month from Paragon Care. Secondly, the pro forma results, which reflect the full 12 months trading from CH2, Paragon Care, and Oborne, as if all three businesses had operated for the full FY 2024 year together. The presentation of the pro forma results remains consistent with the disclosures in the original merger notice of meeting and explanatory memorandum, and we believe represents the best like-for-like comparison when assessing the performance of the business. Moving on to the next slide. As Carmen's just outlined, underpinning the result was an 8.3% increase in total revenue to $3.6 billion for the year. Underlying EBITDA of $95.2 million was achieved. This was up $2.8 million, or about 3% on the prior year.
This was primarily driven by a $25 million increase in GM dollars, up to $324 million, an 8% increase. Margin rates were relatively consistent across the channels to market year on year. Expenses of $229 million were up $10 million on the prior year. We observed some easing on inflationary pressures, however, increased insurance freight due to volume and wage pressures continues. Completion of the reverse acquisition should also see some easing in fees for professional services moving forward. The underlying result excludes one-off impacts of $3.9 million, where the group could not apply hedge accounting to historical CH2 hedges, and $2.8 million associated with integration costs. Despite those integration costs, which comparatively were $5.5 million in FY 2024, the group still recognized its target of $5 million in P&L synergies and remained confident of achieving our internal target of $12 million in FY 2026.
Finalization of purchase price accounting for both Oborne and the reverse acquisition resulted in $109 million in separately identifiable intangible assets being recognized on the opening FY 2024 balance sheet, which will amortize over the next 20 years. The non-cash amortization cost of these intangibles in FY 2025 was $5.6 million, which is excluded from underlying but evident in the table below within the statutory result. Whilst we've executed a favorable refinancing, which I'll talk to in a moment, finance costs were up year on year due to higher intramonth debt levels. As we invested in stock weight during transition, we experienced an increase in debtor days, which I'll discuss further shortly. Within interest costs, $22.8 million related to interest on debt, with 8.4% our average cost of funds. Now go to the next slide.
Moving to balance sheet, which is presented in statutory format, the opening FY 2024 balances incorporate the completion of PPA accounting for both Oborne and the reverse acquisition. Working capital increased to $125.6 million and was significantly impacted by $57 million owing by a group of 103 pharmacies. We've entered into a subsequent payment arrangement with the group, and despite the drag on cash flow, we expect to recover all monies owed. Stock levels remain slightly elevated but are expected to moderate, whilst payables have partly offset the increase in total working capital. From FY 2024, $358 million of goodwill and intangibles were recognized, including $249 million in goodwill alone. Moving on to debt. In June 2025, the group executed a refinancing with ScotPac, its primary financier, resulting in a total $400 million financial covenant-free facility secured only by Australian assets.
This change not only increased our local borrowing capacity by a further $70 million, but also encompassed reduced rates, no line fees, and is expected to deliver $2 million in interest savings year- on- year. The new facility also provides us with funding optionality for both organic and inorganic growth, both in Australia and overseas moving forward. Of the $400 million facility limit, there's a mandatory $200 million minimum drawdown at all times. The point-to-point closing debt of $215 million was up $38 million to last year, and average net debt across the year was $251 million. Moving along to the next slide. Finally, from a statutory cash flow perspective, net cash from operating activities of - $11 million is significantly impacted by the pharmacy group receivable of $57 million. We do expect this to normalize in FY 2026.
Finance costs reflect a full year of the merged group, and as previously mentioned, $22.8 million of this cost relates to borrowings and an average cost of funds of 8.4%. Available funds from debt facilities and cash at year-end was a healthy $209 million. CapEx spend was predominantly weighted towards our investment in the new Brisbane site and our continuing investment into IT infrastructure supporting the merged group. With that said, I'll now hand back to Carmen.
Thanks, Marcus, for going through that detail. I thought I would finish off by going through our two business segments, Australia and New Zealand, overview, which was a solid result. Revenue growing to $3.5 billion this year, up 8%. Gross margin in line with expectations, growing to $277.9 million, up 5%. Growth in Australia and New Zealand has been solid in pharmacy, even though hospital pharmacy has been fairly flat in the market. Capital and services experienced some headwinds, particularly with government pulling back on their spending. You'll see this heavily in New Zealand. Underlying a terrific result from that team to go through those challenges. Orthopaedics struggled because they had the loss of the Avanos business being withdrawn from the market. Vision had a mixed year, but I think that's steadied now, and we should have some opportunity for future growth.
Clinical Manufacturing was exciting because they signed their first contract manufacturing agreement this year. Strong Complementary Medicines growth, which is on the back of the Oborne acquisition, of course, but that has continued to perform very well. As I touched on earlier, we've launched the new dental business unit in the last quarter, but we've coupled that with the acquisition of AHP Dental, and that was on 1st of July . We should see the benefits of that in FY 2026. To go over the Asia overview, they've had a fantastic year as well, going from $84.2 million in revenue to $101 million, up 20% on last year, which is incredible. The gross margin, $46.1 million, up on last year by 30%. Most of that revenue has had strong growth out of Thailand, which continues to do exceptionally well in its Aesthetics division. We've pushed that out through Vietnam as well.
The imaging business was solid. Again, some headwinds in that market, but still continues to perform well. By country, Japan, Thailand, Vietnam, good solid growth. Korea, they had the doctor's strike, and that's had some challenges for them, but they've continued to be OK. The Philippines, modest growth because they've got some declining contracts there, predominantly based around the service revenues. From an upside perspective, we see some opportunities in all of those markets. One thing I will touch on here and we'll talk about further is that we have an absolute razor focus on growing the Asian markets. You'll hear more about that as we get closer to the AGM.
Just on the synergy slide, I won't go through all the detail with you all, but we did achieve our annualized synergies of $5 million in FY 2025, and we're fully on track to achieve $12 million in synergies in FY 2026. We have gone from putting our businesses onto one platform into JDE, and we're most of the way through that in Australia. We've closed sites. We've got the new site, as I mentioned earlier. We've gone on to ISO 14001 on all of our sites. Still ISO 9001 accredited. We're working on GMP accreditation on the Mt Waverly facility. We plan to execute the balance of the sites during FY 2026 onto JDE, and we'll continue to monitor and expand on our IT platform throughout the year. To round off the presentation, our key outlook for FY 2026.
Without a doubt, we're focusing on our 3-2-1 strategy because that is the final year on bringing the teams together so that everybody's very clear on our future and our vision around Paragon Care. We're investing into our people, and we'll continue to execute our integration strategy. While we're doing that, we have a very strong focus on organic growth through our strong sales team, investing into our people in our sales team, and also investing into new business opportunities, which we've done in Dental, Robotics, Aesthetics, and other OEM opportunities. For the mergers and acquisitions, we have a very strong pipeline, and particularly emphasizing around our growth in Asia and our opportunities around our growth in Asia. We want to ensure that we've got a strong proactive focus on this. Operational efficiencies. We're going through our lean way of doing business.
We've always operated the business in that way, and we will continue to do that through a shared service structure to support our sales team. Our systems and infrastructure are critical to us, and so is our data analytics, and we'll continue to invest into that space. We'll continue to focus on simplifying our business structure. Revenue and profit for the year ahead is expected to remain positive in terms of growth. Profitability is expected to improve as we realize our full synergies and look for other opportunities. Last but not least, I'm pleased to say that the directors are committed to revisiting our dividend policy in FY 2026 as well. Thank you, everyone, for your time this morning. I'll open up the session now for a bit of Q&A if anyone has any questions.
Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name and company to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tom Godfrey from Ord Minnett. Your line has been opened.
Oh, thanks very much. Good morning, Carmen and Marcus. Thanks for taking my questions. Maybe if I can just start on the outlook commentary just around revenue and profit for next year, just the line that revenue is expected to remain at FY 2025 trend rates. Do we take that as sort of the 8% revenue growth you've recorded this year as sort of a reasonable assumption for 2026?
I wouldn't take it as the exact trend rate. It's more of a positive rate. I think it'd be more around your single mid-digit rates.
Got it. No, that's helpful. Maybe just tacking on to that, I mean, you guys had a really strong retail pharmacy growth rate for FY 2025. Just any comments around the competitive landscape there and sort of expectations into FY 2026?
Oh, the competitive landscape, over the last few years, it's been difficult to actually push out and predict that because, as you can see, the market has evolved immensely with particularly the Sigma Chemist Warehouse merger and what's falling out of that. Obviously, we've seen upside ourselves in that from the other wholesalers, and we hope to continue to trend that way. We'll have to measure it over the next quarter or so.
Got it. Thanks, Carmen. Maybe just one on sort of the underlying EBITDA and cost base. Am I reading that slide correctly that there is $2.8 million of integration costs sitting in that underlying OpEx number?
Hi, Tom. Yes, you are.
Great. Okay. Stripping out integration costs, we sort of bump up the EBITDA up around $98 million for 2025.
Oh, sorry, Tom. Apologies. It's sitting within the statutory. It's not sitting within the underlying. It's been carved out.
Okay. Got it. No, that's helpful. Thanks, Marcus. I mean, just last one from me, just wanting to touch on the commentary around the M&A pipeline, just in the context of your current sort of debt-to-EBITDA ratio. Where would you guys be happy taking that up to and sort of how imminent is the pipeline or active is the pipeline at the moment?
We'll take it up as far as the opportunities allow us to, that's for sure. Over the next couple of months, we'll give some more color around that. As I said, we're very focused on the outcome of that up in Asia at the moment. Maybe take that as what I'm trying to say without actually saying it. Yeah, we're using debt for it, that's for sure.
Great. Okay. No, I really appreciate you taking my questions. Congrats on a solid FY 2025.
Thanks, Tom.
Thanks, Tom.
Thank you. Our next question comes from a line of James Tracey with Blue Ocean Equities. Your line is now open.
Hi, Carmen. Hi, Marcus.
Hi, James.
Hi, James.
The first question is on that synergy number, the $12 million of synergies. Is that incremental synergies above and beyond the $5 million? I also wanted to clarify around this $2 million of cost saving on the debt refinancing. Is that additional to the $12 million, or is it included in the $12 million?
Yeah, no problem. Thanks, James. What we're saying is we've achieved net synergies this year of $5 million. That's inclusive of the $2.8 million one-off. In other words, that would gross out to $7.8 million. What we're saying is that next year we expect the total synergistic benefit to increase to $12 million on a net basis. From a borrowings perspective, the facilities that we've transitioned away from this year and rolled into ScotPac come at a lower cost of debt moving forward than we hold at the moment. The rate's reduced by almost 1%. We also have no line fees on the total facility moving forward. It just allows us a little bit more flexibility to pivot up and down based on our cash flow requirements.
That $2 million saving is not counted within the $12 million.
That's correct. Yeah, it's a good question. The $2 million is within the $12 million.
Okay, $10 million excluded. Yeah, $10 million from operating.
At EBITDA, yeah, it's at impact $12 million.
Okay. Got it. Would you please be able to give a bit more detail on some of the acquisitions that you've made? It sounds like particularly the Dental one occurred maybe after the, there was one before the year-end, and there was also another one after the year-end. Could you give us a bit of color on the profitability or the expected profitability in FY 2026 of some of the things that you've acquired recently?
Yeah, no problem, James. If I talk about AHP Dental, which is a business that we acquired subsequent to year-end, that's not a business that has brought with it a huge turnover or a significant material contribution to EBITDA. However, what we do see in that business is it provides us the opportunity to organically roll out Dental on a broader scale across the Australian network. AHP currently procure about 7,000 products across 50 brands. The opportunity for us moving forward, whilst we're not, I guess, leading with guidance around contribution, this is really our step off into the Dental space. We're confident that with the brands that stand behind and our existing footprint, this is an area of growth for us moving forward.
Okay, that's fantastic.
If you're asking me to punt it in, I'd suggest probably around $1 million EBITDA for next year.
That's fantastic. Thank you, Marcus.
As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from the line of Stewart Oldfield of Field Research. Your line is now open.
Good idea, Carmen. And Marcus, Carmen, you made that reference to having a laser focus on growth opportunities in Asia. The Quantum merger originally was all about sort of bringing the Europeans and Americans into Asia. Is that the sort of activity you'd expect to make further progress on before the AGM?
We'd like to make further progress before the AGM, so we can update you further. The acquisitions activity that we're reviewing at the moment would be in line with our current operations that we do. They'd be opportunities that aren't completely foreign to our current business.
Got it. Just for my ignorance, the CLASSYS business in Asia is such a wonderful opportunity. How big do you see the move down in Australia and New Zealand?
Oh, I was very excited to get that business in Australia and New Zealand. Obviously, we do pretty well out of it in Asia at the moment. I'd like it to be at least the size of the Asian business. I don't want to commit to anything, of course, around that, but it is a really good opportunity for us. The other thing to add on, it's not the only Aesthetics contract that we picked up. We've invested into that team as well, as well as the other new business units that I did talk about. I do see a really promising sales channel for that area.
Got it. The Robotics initiative is time where you what sort of appetite or ability did you have to take some of this expensive kit onto the balance sheet?
Look, we're okay about that because we've got to have both a short-term and a long-term view of the business. As you all know, Robotics is a very changing market at the moment. If you're not in Surgical Robotics, it can be problematic longer term. The only confidence that I can give you around it at this point in time is that the investment that we've made into those new businesses, the synergies are net of that. The $12 million in synergies are net of the investment into the other areas. We're comfortable around what we're doing. Depending on what it is in the stream, we're taking one step at a time. The Aesthetics, we've rolled out a full team. We're pretty comfortable about the space that we operate in because we've got a lot of experience within the network.
Obviously, we're bringing some of the Asian experience into the Australian market and New Zealand market, of course. Whereas Robotics, we've got experience in pockets, but we've invested into an experienced team to help us speed that up. It will be, you know, they're big capital pieces of equipment that are lumpy at the best of times anyway, and they can be a little bit slower to get started. You've got to be in it. We're in.
Got it. With your focus on Asia, you know, the elephant in the room back here is the future of your rival Device Technologies. Do you see any scenario that you could do a deal there?
You never say never, but not at this point in time. Not with other things that we're looking at, but you don't know. You never know where the market leads. I'd hate to rule it out altogether, but it's not something that we're looking at at this point in time. I can be open about that.
Got it. Perhaps finally, for me, just on the ScotPac relationship, maybe for Marcus, but is this seen as sort of in a, does it have any time horizon that you're speaking to in your review of financing arrangements, in three years' time or something, and for the appetite of commercial banks?
Yeah, absolutely. Look, we're committed to achieving the lowest possible cost of funds in a manner that can serve the businesses we need. As a lot of people will be aware, there were some recent taxation changes that, depending upon the nature and the structuring of your underlying debt facilities, could see significant portions of interest become non-deductible.
We pivoted pretty quickly to work with ScotPac on what we think is a really flexible facility that allows us to, I guess, achieve our working capital needs and our day-to-day debt, sorry, our day-to-day financing within Australia, but then also affords us the opportunity where we are looking at other opportunities in different parts of the globe to leverage the significant earnings that we've achieved, both in Asia and New Zealand as well. That deal goes out for three years with a minimum term of two. Again, like I said, we're committed to ensuring the lowest possible cost of debt and optimal capital structure.
All good. Thank you.
I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the.