I would now like to hand the conference over to Mr. Paul Anderson, MD and CEO. Please go ahead.
Great. Thank you, and good morning, everyone. We are here today to announce our full-year results, provide you with some additional financial information and commentary on the performance of each of our business units, and of course, answer your questions. With me today is Andrew Thomson, our Chief Financial Officer, who you will hear from shortly. Turning to slide four in terms of our group results. This slide summarizes the group's FY 2026 performance. Group underlying revenue increased by 2.1% to AUD 1.37 billion, while pathology revenue increased by 1.8% to AUD 1.33 billion. Agilex revenues grew strongly with growth of AUD 5.4 million or 14.1% to AUD 43.6 million. Group underlying EBITDA increased by 8.1% to AUD 258.6 million and underlying EBIT increased to AUD 30.2 million.
Pathology EBITDA increased by AUD 15 million to AUD 247.9 million. Agilex EBITDA increased by AUD 4.3 million to AUD 10.7 million. Healius had net debt of AUD 32.8 million at year-end and remained well within its banking covenants at 1.2 x. Turning to slide five. This slide focuses on pathology, where revenue growth has been driven by changing the revenue mix, which combined with flat costs, has helped improve margins. Strategically, the business is focused on margin recovery through improved revenue quality and strict cost discipline. This slide also highlights that Fair Work Commission labor cost increases are having an impact, but network and labor optimization have helped reshape the cost base, resulting in flat costs in FY 2026.
Importantly, the major phase of our digital technology program has been completed, and this has become an important value driver for the business alongside AI and automation. Operationally, pathology revenue growth was attributable to changes in revenue mix, including growth in Genomic Diagnostics, B2B clinical trials, and veterinary pathology. GP attendances reduced by 0.9% over the past 12 months while specialist attendances increased by 2.9%. GP attendances have, however, grown in three of the last four months. Significant technology progress has been made this year and includes the new Medway Collections Portal, an upgraded Medway Results Portal for referrers that includes education and CPD opportunities for diabetes, skin, and cervical cancer, along with a shortly to be released patient app. Artificial intelligence is being used, as we set out previously, to improve productivity with fast payback or ROI and low running costs.
AI co-workers, Riva and Julie, have been launched with two additional co-workers now live in production, supporting high-volume transaction environments and workforce planning. Turning to slide six. This slide covers Agilex Biolabs and highlights the strategic decision that made to boost Agilex's participation in the growing large molecule market. Along with the pivot to large molecule work, the decision to exit the toxicology business has contributed to improved performance and allowed business development resources to be reallocated to other geographies, including Europe, which are showing traction. The opening of a new bioanalytical laboratory in Brisbane focused on flow cytometry is a significant milestone and a benchmark operating model for future network sites as Agilex plans to expand its national footprint across Brisbane, Melbourne, and Sydney. The order book or won work for Agilex is strong and supports our FY 2027 targets.
On the sale process, as we previously advised, Healius has engaged UBS to explore a sale of Agilex Biolabs. The business has received strong interest from a number of potential acquirers, and we will continue to keep shareholders updated as required. Now turning to slide seven. This slide provides a performance update on the T27 program and shows some of the detailed progress we have made across the key pillars. A couple of call-outs as this is a very busy slide. On investment in digital technology with Medway and Pathway as our two modern technology systems has strengthened our national capability across customer services and laboratory modernization. The business has made strong progress in digitizing collections, with more than 80% of ACC episodes now processed through Medway. E-referral volumes were 28% higher than the prior corresponding period, and 220,000 patient appointments were booked through that new capability from August 2025.
We have also significantly improved our contact center response times and are imminently launching a new patient app. With regard to laboratory modernization, Pathway has enabled digital anatomical pathology with Ibex AI for sharing cases nationally, new track automation for microbiology, digitized workflows for faster genomics processing, and enhancements in clinical reporting. This slide also highlights regional lab optimization, including a 24.3% reduction in FTEs compared to FY 2025, as well as productivity gains made in the main lab optimization. In emerging diagnostics, genomic revenue increased by 16.9%, with 15 new products launched and a focus on hereditary cancer detection. Clinical trials revenue increased by 92.9%, and Vetnostics has digital courier and consumables ordering fully in place.
Looking ahead in digital technologies, with build complete on our further Pathway core lab services and currently being rolled out nationally, we are well-positioned to leverage our systems to unlock the next wave of structural efficiencies. These include centrally shared staff for scientific tasks, automation of data entry, and the consolidation of volumes for further lab footprint reductions. Finally, in people and ways of working, the slide notes AUD 24.4 million in annualized corporate cost savings, more than 600 collectors graduating from the new National Collector Training Academy, and flat FY 2026 labor costs despite the Fair Work Commission decision. The slide also highlights AI workers supporting finance transactions, workforce planning, and priority operational areas. With that, I will hand over to Andrew.
Thanks, Paul. On slide nine, firstly, I'll move to discussing the financial performance at a group level.
FY 2026 was a year of disciplined execution on cost control and tangible improvements across the group. Our underlying revenue grew by AUD 28.7 million, or 2.1%, bringing total revenues to AUD 1.37 billion. This growth was driven by a stronger fee mix in pathology and robust revenue expansion in Agilex. It's a clear sign that our strategic focus on higher-margin services is delivering results. Group EBIT rose to AUD 30.2 million, in line with previous guidance, and up from AUD 17.1 million last year, a significant improvement. Pathology EBIT came in at AUD 23.8 million, reflecting strong cost control and operational discipline in a challenging environment. Agilex EBIT more than doubled to AUD 6.4 million, supported by revenue growth and tight cost management, which together drove that margin expansion. We also recorded AUD 27.1 million in non-underlying items.
Of that, less than a quarter or just over AUD 6 million was in the second half, and primarily related to restructuring costs to rightsize the business and expenses related to our digital program in the first half of the year. These are strategic investments that position us for future efficiency. As required under accounting standards, we recognize a non-cash pre-tax impairment of AUD 332 million against goodwill. It's important to note that this is a non-cash item. It doesn't impact our operating performance or cash flow. In the results this year, we also made an adjustment to derecognize a deferred tax asset of AUD 31.5 million related to prior periods. We also did not recognize AUD 14 million of deferred tax assets related to the FY 2026 loss.
While we've derecognized these items from the balance sheet, we do retain access to these carry-forward losses and remain confident that these losses will be used to offset taxable income for upcoming financial periods. Interest costs reduced significantly here, thanks to lower average debt levels.
On the cost side, we exceeded our support cost savings target of AUD 15 million-AUD 20 million, achieving AUD 24.4 million in annualized savings. That includes AUD 7.3 million realized in FY 2025 and AUD 17.1 million additional savings in FY 2026. We expect the full run rate benefit from these initiatives to flow through from FY 2027 onwards, and we're continuing to execute further savings opportunities. In summary, we've strengthened the core, improved margins, and built a leaner cost base. These results demonstrate that our transformation is delivering, and we're well-positioned for sustainable growth heading into FY 2027. On slide 10, focus on the core pathology business.
As I said already, we delivered steady revenue growth and continued margin improvement through disciplined cost management. Revenue grew 1.8%, benefiting from a stronger mix across specialists, hospitals, and B2B channels. This improved mix led to higher average fees and underpinned the overall growth. Genomic Diagnostics continues to perform exceptionally well, up 16.9% on the prior corresponding period. Clinical trials also showed outstanding momentum, almost doubling year-on-year, supported by a solid pipeline and growing demand. Labor costs were held flat compared with last year. The benefits from our labor optimization program in the second half offset enterprise agreement rate increases and the Fair Work Commission's decision on gender undervaluation for pathology collectors. Consumable costs were also well controlled, down 3.8% in absolute dollar terms and reduced as a percentage of revenue from 16.2% last year to 15.3% this year.
Network costs, including property, AASB 16 depreciation, and finance costs, trended slightly higher as a percentage of revenue, mainly due to timing differences between new site openings and site exits. The ramp-up of these cost-saving initiatives over the year contributed to stronger EBITDA and EBIT margins in the second half of FY 2026. Overall, pathology continues to demonstrate resilience and operational discipline. Moving to slide 11, Agilex. Agilex continues to deliver strong growth and margin expansion, underpinned by a clear strategic pivot and disciplined execution by the team. Revenue growth has directly contributed to margin improvement. The EBIT margin of 14.7% this year reflects the shift in business mix as we move away from small molecule work towards large molecule programs. This transition has strengthened profitability and positioned Agilex for sustainable growth. Closure of the loss-making toxicology business at Agilex has also supported this margin uplift.
At the same time, the national footprint has expanded, with the new Brisbane bioanalytical laboratory performing ahead of expectations. A great example of the investment translating into operational success. The Agilex pipeline heading into FY 2027 remains strong, and we expect continued revenue growth to translate into further EBIT margin expansion. The fundamentals of the industry remain solid, and Agilex is well-placed to capture that momentum. As we outlined in our 13th of May 2026 announcement, Healius is exploring a potential sale of Agilex Biolabs following several unsolicited approaches from credible parties. This forms part of the ongoing program to optimize shareholder value. In summary, Agilex continues to perform strongly with clear strategic direction, competitive advantages, and industry fundamentals that support ongoing growth and value creation. On slide 12, we can look at the capital expenditure and capital management for the year.
Maintenance CapEx for FY 2026 was AUD 16.5 million, down from AUD 31.3 million in FY 2025. This primarily covered the replacement of older laboratory equipment and IT hardware, essential investments to maintain operational reliability. Growth CapEx totaled AUD 26.8 million, compared with AUD 34.6 million last year. These investments focused on select large-scale collection centers, equipment for new hospital contracts, including Grampians and North West Tasmania, and ongoing AI development. These initiatives are driving future capability and efficiency across the business. CapEx spend was partially offset by proceeds from the sale of property, plant, and equipment, helping balance the overall investment profile. From a capital management perspective, we moved from a net cash position of AUD 57.2 million in FY 2025 to net debt of AUD 32.8 million this year.
The shift was partially due to one-off payments, including a settlement with the ATO, payments related to the divestment of Lumus Imaging, restructuring costs, digital investment, and working capital requirements. Importantly, and as Paul said, we remain well within our banking covenants for both gearing and interest cover, reflecting strong financial discipline. In summary, our capital investments are targeted and strategic, supporting growth while maintaining the prudent balance sheet. We continue to manage capital efficiently to ensure flexibility and resilience as we move into FY 2027. I'll hand back to you, Paul.
Thank you. The last slide in terms of outlook. We expect our FY 2027 EBIT to be in line with consensus of AUD 39.7 million. We anticipate that volumes are going to grow in line with MBS on a like-for-like collection center basis, in addition to modest increases in profitable collection sites. Non-MBS volumes are expected to see the benefit of the full year of new commercial and hospital contracts and the continued growth in Genomic Diagnostics and B2B, including clinical trials. Discipline, cost control, and pathology is expected to contain our cost growth to 3.5% in FY 2027, inclusive of the impact of the Fair Work Commission costs related to gender undervaluation and a 4.75% increase linked to modern awards.
Due to the significant impact of the Fair Work Commission cost and reduced GP attendances, Healius expects to achieve its T27 target of mid to high single-digit EBIT margins by approximately December 2028. In terms of Agilex Biolabs, as we said before, in terms of the order book and revenue conversion remains strong and in line with our expectations. With that, I will hand back and open to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick out a handset to ask your question. Your first question today comes from Lyanne Harrison with Bank of America. Please go ahead.
[audio distortion] Andrew, I might start with that last slide in terms of 2027 outlook. I just wanted to understand and just clarify, when you say modest increase in profitable sites, is that ahead of the MBS or likely to be below the MBS growth rates?
Sorry. By that we mean collection centers. We have a very focused plan to increase our volumes next year through profitable collection centers.
Okay.
We have a chunk of those that have already been completed in July.
Okay, fantastic. Just to give us an indication, what proportion would be still sites which are below your profitability threshold?
Look, I think there's a marginal number of sites. I mean, we have 100 less sites now than we did at the start of last year. So our footprint has been rationalized quite significantly. I think part of that is sites that you were talking about there, Lyanne, in terms of ones that are if they're not profitable or don't meet our threshold, there's clearly other ones that we would have preferred to have kept as well, that we've lost. So the plan is to expand with profitable revenue.
Okay. Just a final question then. You mentioned you want to grow in line, or you anticipate you will grow in line with MBS volumes. I guess, given what you are doing and what Healius is doing with all its initiatives, why do you think it limits your ability to grow above market?
I don't think we are saying that it limits. I think our wording there, what we were trying to get across is that our like-for-like ACC collection centers, which primarily through medical centers, will grow in line with the MBS volumes. Where we hope to grow further than that, which we have demonstrated this year, is through Genomic Diagnostics, through Vetnostics, and through our B2B sector, and the incremental sites that we would open this year. Yep.
Okay, great. Thank you very much. I will leave it there.
Thank you.
Your next question comes from Davin Thillainathan with Goldman Sachs. Please go ahead.
Thanks. Morning, Paul. Morning, Andrew. Just wanted to touch on your revenue initiatives outside of the MBS. I believe the strategy there was to grow exposure to hospital contracts. Also just thinking about tests that are unfunded by the MBS at this point, so private tests. Could you give us a sense of how initiatives on those two fronts are going, please?
So look, I think on the hospital front, around 2/3 of our revenue is bulk billed and 1/3 of our revenue is non-MBS related. A big chunk of that does relate to both public and private hospitals. In terms of the hospital network, we've had Western Health and Victoria revert back to the public system this year, so those are revenues or episodes that kind of disappeared out of the system. We obviously announced that we have renewed our deal with Ramsay, and that included Joondalup Hospital in W.A. for a long term. Then we've renewed the Grampians Hospital out to 2034. So the hospital network and public hospitals in particular, I think over the past 12 months have actually shown quite strong growth. I've forgotten the second part of your question.
The tests that are unfunded.
Oh, the tests. Yes. Look, I think, similar to probably some other commentary that's easier said than done. We were forced down that route last year with B12 and urine changes. I think what we've proven is that, we are charging for B12 and urine tests. That's broadly accepted. As for charging out-of-pocket fees for other tests that are either unfunded by MBS or don't cover the cost of actually doing the test, I think we are making some progress on that front. It's difficult. It's difficult from an acceptance point of view from referrers. I think it's difficult and you need to be cautious in the way that you are actually charging patients so that they understand the impact, and you can actually collect the revenue. I'd say, look, we have made progress on that. B12 and urine was a really good test case. But it's difficult.
Yep. Okay. My next one was just on your cash flows. If I look at the EBIT performance of the business, it is improving. But the cash flows seem to be going the other way. I think some of the drivers, perhaps you could sort of help us understand that disconnect. One of the drivers appears to be this Lumus divestment payment. Perhaps if you could just explain what that is, and then also just help on the other moving parts, please. Thank you.
Yes. Perhaps if I could just make an overarching question first, and then Andrew can talk you through some of the quite large one-offs in FY 2026. We've obviously given guidance for next year, in terms of EBIT. We've talked about the cessation of the digital investment program, which was non-underlying, and obviously did impact cash. What we're saying is that, we've given you consensus numbers. The business, on that basis is cash flow positive, in FY 2027, which is different from what you've seen in that slide today and the change in cash for this year, which was impacted by a combination of things, including some of those one-offs. Maybe I'll just get Andrew to answer some of that.
Yeah. Look, I won't go into every single line, but I think the key items maybe that you were asking about, there was an ATO settlement for a historic claim. That was AUD 20 million, give or take. The Lumus number that we were talking about earlier that you referenced, there was a true-up on the settlement of the Lumus transaction. I think we talked about that, maybe just at half year numbers, and that was just over AUD 22 million. We had CapEx, and we talked about CapEx during these results at AUD 42 million.
The digital transformation costs and the restructuring costs that came through non-underlying. Those items are also outside the EBIT number you were referencing.
Okay. Thanks, Paul. Thanks, Andrew.
Your next question comes from Craig Wong-Pan with RBC. Please go ahead.
Good morning. Just wanted to understand that AUD 15 million Fair Work case amount. Just wanted to clarify, is that the actual amount of increase in FY 2027 or is that an annualized run rate number?
That is the actual cost that we will incur in FY 2027, and it is made up of three different amounts. It is made up of effectively the 4.75% variation between what is traditionally been kind of circa 3.5%. That is a relatively small piece. It is the changes to the scientists from the 1st of October, and the additional increase for collectors on the 1st of January, which is the second tranche of their increase that they received back on the 1st of April this year. So it is a combination of those three things.
Okay, great. Thanks for clarifying. I just wanted to tease out the cost savings that you expect to derive in FY 2027 over and above what you have already achieved in 2026. Could you help me out with understanding what benefit that is?
Look, I think it is twofold. It is the full run rate of the changes that we have made this year. Broadly, that is the changes in our workforce, upfront in the customer and commercial area. It is the changes that we have made to both our main laboratories and our regional laboratories. In terms of workforce, it is changes to our couriers.
Then it is the reduction in costs just generally right across the business. So those are the main factors. I think a lot of these things are gradually being unlocked with technology. I know, we all as a group, internally, externally, talk about one laboratory information system. We will have that fully in place by the end of FY 2027. A chunk of that is already in place. So, our histopathology, we have one LIS for that, so we share work all around the network and clearly get efficiencies from that.
That is the same for cytology. Genomic Diagnostics will have that capability by the end of next month, which will be a major step change for the way that their workflows work. Their capacity constraints that they have at the moment will no longer be there, which obviously enables them to do more work and process faster turnaround time. It is a combination of all of those things.
Are you able to put a number to the amount of savings? Because I guess I am just trying to struggle a little bit with what you have earned for FY 2026. Then you are facing the increased cost from the Fair Work cases and just general inflation with kind of modest volume.
Yeah. Without trying to give you a reconciliation, if you take the AUD 15 million out of pathology labor costs for next year, costs are broadly flat again year on year, if that helps.
Okay. All right. Thank you.
The next question comes from Andrew Goodsall with MST Marquee. Please go ahead.
Oh, thanks very much for taking my questions. First one, if you just characterize the second half in terms of the movements of how you fared against MBS and noting that you've got the ADF contract, I think, started and at the same time you may have had movements with your Victorian contracts. I think that probably came to an end. The Western Health.
Yeah, look, I think all of those things you spoke of make a bit of a messy reconciliation. Western Health obviously finished. That contract was delayed, and their pricing went up across that period. We obviously did start the new ADF contract, so that started from 1st of April , and ramped up. I think mixed in all of that is just the movement in ACC. I think, the movement in ACC or the CT or the reduction in ACC, combined with, GP attendances, which were up and down. So, I think there's a lot of moving parts in that second half. I think the one thing I'd say is that, from a customer and commercial or sales point of view, we have a very clear idea of that ACC footprint that we have, now, which is reduced from what we had at the start of the year.
We have a very clear picture of the hospital environment we have now with Western Health o ut, Joondalup renewed, the new Grampians contract. Plus a range of other public hospitals that have had price increases across that period, which we will benefit from, have benefited from in H2, but will benefit more from in FY 2027. So there's a whole lot of moving pieces.
Yeah, just trying to get a bit of a run rate, but it is really our fourth quarter was sort of probably when you stabilized is my guess just based on movement of those contracts.
Yeah, it has. I think, look, we have given you guidance for next year. I think that is probably a pretty good indicator of where we think revenue is heading from MBS, hospitals, and so forth.
My follow-on would just be in terms of all those contracts, I guess they seem to have settled now in a sense that there is no other sort of cliffs or anything you have got coming up. Is there?
No, there is no other. From a hospital perspective, there is not really any other. I think for us it is mostly upside in terms of pricing, contract renewals. As I said, there is no other cliffs out there.
And then just final one for me, just on the regulatory front, I know you have talked previously to some lobbying efforts in Canberra. Just any thought, any sort of update that you have got that might be positive or negative on that sovereign risk piece?
Look, no update other than we continue to put our case that, in particular with the additional costs of Fair Work. I think that is probably an additional element that we did not have this time last year to talk about. I think everyone is fully aware that the limited indexation that we received last year was offset probably twofold by the changes to B12 and urines. Having the Fair Work costs added on top of that, just exacerbates the situation. No update other than we continue to mount our case forcefully with what we think is a very constructive argument.
Okay. Thank you.
The next question comes from David Stanton with Jefferies. Please go ahead.
Good morning, team, and thanks very much for taking my questions. I just want to go back to guidance and the number that you've given of EBIT of call it AUD 40 million. I just want to be 100% clear. Does guidance include an impact from the AUD 15 million of Fair Work cost in costs that you've got? If you didn't have that, would you be guiding to sort of, would you be happy with a number around the AUD 55 million number or not?
It's fully included. It's fully included, David. Yes.
Okay. So it's fully included. On that basis, if you didn't have the AUD 15 million, then you'd be looking at sort of, you'd be happy with consensus.
Correct.
Around the AUD 50 million, AUD 55 million. Okay. Very good.
Yeah.
Very clear. Second question. CapEx, can you give us some idea around maintenance or growth CapEx for, and growth CapEx for 2027, please? What you are thinking.
Yeah. Look, I think the number in FY 2026 is obviously higher than where we will be in FY 2027. We have spent more this year on replacing some of the equipment. I think we are through that. Some of the AI spend that we have done this year is around setting things up, and we expect next year to be a lower number is the best way to say it.
Fair enough. I guess on that basis then, how do you get, can you sort of give us a bit more color on how you get to a positive cash flow in FY 2027?
I think, look, without giving step-by-step guidance, I think the important thing to think about is the shape of the half one and half two numbers this year, which obviously from a revenue perspective, normally we see that phasing skewing more towards H2 on the revenue side. I think this year, as Paul has talked about with Western Health, with Hollywood Private Hospital, and with the new contracts ramping up, the revenue in the second half this year was lower. Then if you look at the cost base, normally what we see is the cost base is about the same between H1 and H2, except for kind of the working days. Paul and I both talked a lot about the cost resetting this year. You can sort of see that in the cost base for H2 this year versus H1.
If you take that sort of cost run rate and project that forward, then think about the ramp-up of some of the revenues that Paul's talked about and the other revenue initiatives and kind of ACC growth, that is sort of how we get to that. Also the cash impact, as we talked about earlier, is partly driven by things like the non-underlying and the digital spend. We had sort of AUD 20 million of digital, well AUD 20 million of, AUD 21 million of non-underlying in H1 and AUD 6 million in H2. Digital spend has moved into the underlying business and it has not gone away, but it is less, it is business as usual now. So, overall the cash component in the second half is better, and that is what we expect to continue.
Understood. Thank you very much.
The next question comes from Shane Ponraj with Macquarie. Please go ahead.
Good morning, everyone. Thanks for taking my questions. Firstly, you called out an underlying pathology volume growth of 0.3%, excluding changes in hospital contracts. Just wondering if that also excludes the 100 net closures.
[inaudible], Paul?
No, it did not. So that was a, no, it did not, is the answer. So that was supposed to just to set out the impact of those major changes from a contract point of view to volumes across the year. So no, it does not.
Great. As a follow-up, any comments you can make on what happens with those two material hospital contract losses, and if you see net closures stabilizing this year?
Yeah, sure. Western Health was a large hospital in Melbourne that has gone back to public hands, which we could talk about forever. The pathology has rather. The other one was Hollywood Private Hospital in Perth, which has gone to one of our competitors, gone to Sonic Healthcare. Outside of that, Joondalup, we renewed that hospital along with a change in or a consolidation of contracts for all the Randwick hospitals that we have. There is no other major changes, or major changes coming, I should say.
Just on net closures stabilizing. Sorry.
Pardon?
Just on the net closures.
Of the hospital contracts?
No, sorry, of the ACCs. You had about 100.
Of the ACCs.
Yeah.
Yeah. Look, that 100 is across the year. I think the point we are trying to make now is that our ACC footprint is significantly less, so 5% less than what it was. Are we seeing a 5% reduction in, if so, volumes? No. It is significantly less. So that kind of tells us that our rationalization piece is working. Are there some ACCs in that 100 that we would have liked to have kept? That is just natural competition, and we know there is more competition out there in ACC land. So that is our starting point. We see the number of ACCs, as we said in our release, will grow modestly across this current financial year.
Okay, great. Thanks. Just lastly, thinking about growth of telehealth. You sort of mentioned that as a headwind to the T27 target. Just wondering what difference you are sort of seeing between referrals from telehealth versus face-to-face, and do you see that gap narrowing in the future?
Look, I think that's a very good question. Telehealth represents around 18% of all GP attendance numbers. That's based off Medicare data at June. I think over the last two years or three years, it's kind of gone from 15% to 18%. It's not growing exponentially. The work that we've done on looking at referral patterns for telehealth versus face-to-face visits is that telehealth visits generally have referrals slightly less than half of what a face-to-face visit would have. That's kind of a point in the sand, I guess. They are facts. But it's also an environment I think that's changing quite rapidly as well. It's something that I think we monitor.
The good thing in terms of GP attendance is if you look at the last four months of the financial year, March, April, and June, all had growth in GP attendances, both for face-to-face and total attendances. That's a trend that we hope continues.
Great. Thanks very much.
Your next question comes from Sacha Krien with Evans & Partners. Please go ahead.
Good morning, Paul and Andrew. Just a question on your pathology outlook. You are expecting 3%- 4%, or sorry, 3.5% pathology cost growth, which I assume implies around a 3%-4% pathology revenue growth next year to get to that EBIT number. Just hoping you can provide a bit of a breakdown of how you get there. Are you expecting better growth from MBS or non-MBS into FY 2027?
Look, I think as we look at our revenue pie, two-thirds of it is MBS. We are hoping to grow in line with MBS volumes. We have a pretty structured, focused plan on how we grow our footprint, and grow those revenues, at least in line. I think our 2/3 of the remainder of the commercial, we hope to grow well ahead of that as we did this year. Vetnostics is now growing quite consistently. Genomic Diagnostics is growing, as we said, almost 17% this year. We think the hereditary cancers, the reproductive testing and hematology testing, which are the growth engines in that business, will continue to grow at those levels or higher, with our changes to our Pathway, our digitization of their workflows.
There is a lot of work out there in terms of B2B or B2B2C, which is the telehealth businesses, and then all of your normal drug and alcohol testing. The defense force is a growing part of our business for next year, and so forth. It is kind of two components.
Okay. It sounds like probably stronger growth from non-MBS. Are you.
Yeah, it is. Yeah.
Yeah. It sounds like maybe you are seeing some green shoots on the MBS side, or are you? Is there more hope at this point?
No. Look, I think specialist attendances, they have been growing. We are very aware that that is a part of the revenue pie that we need to increase. And we think we have a very good plan to try and do that. And just as I spoke about there are those three of those last four months in terms of GP attendances have been more encouraging than the previous eight months.
Yep. Okay. Thanks. And just so I get this right, we should be layering on top of that continued drag from ACC closures. Is that the right way to think about it?
No, I think our view is that our ACC footprint will grow this year, and in a profitable way. But not necessarily in a conventional way, either. I think when we talk about ACC footprint, I think people normally think about medical practices. There's clearly been a push to independence, which take longer to ramp up, but are more profitable. But I think there are other ways to do that as well. We think our footprint will grow overall.
Okay, thanks. And last question, please. Just in terms of some of the non-MBS growth that the industry is seeing, it looks like the industry's been pushing pretty hard on upfront billing and commercial contract price increases. Do you think there's much scope to keep going with that and driving that non-MBS growth?
Yeah, absolutely there is. Yeah. I think the commercial growth is easier than the out-of-pocket growth. But the industry is being forced down that route, so I think everyone's pushing with that.
Okay. Thank you.
Just on the contractual growth, I think it is important to think about not just price, and price pressure or price increases. A lot of it is around the stuff that Paul has talked about, the investment in our business to make the service offering as we go into those commercial contracts better and better value.
Okay, great. Thank you.
Your next question comes from David Kingston with K Capital Group. Please go ahead.
Good morning, Paul. How are you?
Good, thank you.
I have got a fairly simple question. Paul, it is nearly three years since Healius did the AUD 1.20 emergency rights issue. Clearly, you then paid out AUD 0.41 special dividend, no other dividends. Let us just say the adjusted price is AUD 0.80 ex the special dividend.
Yet now you are in the low AUD 0.40s three years later. Look, clearly, you are also putting out a guide for mid to high single-digit margin for another year, which is obviously disappointing the market. My simple question, Paul, is, probably your most direct peer is ACL has, in the last year to date, 1 January, it was around about AUD 2.80. It is currently AUD 2.84. Whereas Healius, 1 January this year, was around about AUD 1.00. It is now low AUD 0.40s. Just appreciate if you could give us some macro view as to what has gone wrong.
Why are you underperforming ACL in share price terms so dramatically? Because obviously it is hurting shareholders. There is no dividend apart from the special, and it is just more pain and more pain, and obviously the result today is a bit disappointing. Appreciate if you could explain why ACL is performing far, far better than Healius. Thank you.
Thanks, David. It is a bit hard for me to respond to the comparison to ACL. I think what we are trying to do today is set out what we are doing. I think there has clearly been some headwinds in the past 12 months that have impacted the sector. Whether they be GP attendances, changes to B12 and urine or Fair Work. I think the important thing for us is, what are we doing about it? So, we have set out today what we are focused on in terms of the collection centers, driving profitable revenue through non-MBS revenues, which we are making good progress on. I think we have demonstrated that we have kept labor costs flat. Have we got more to go? Absolutely, we do.
An unlock of that is one lab information system, that is something that ACL have had that built from the ground up, that we have come from the other direction with four systems, and building that into one. Which we have partially done. Look, I think our focus is on positive cash generation. We have given you guidance on that. We have given you guidance around the cash positive nature of this current year. I think that is probably all I can add, David, is that we are here to say that we have a plan, and we believe that plan is starting to work.
Following up, Paul. We all accept that the industry has challenges, so that is a given. But the beauty of comparables with peers is that both of them have got the same macro challenges. So ACL has got the same challenges. But really, it is a very stark issue, Paul, that in the last eight months or so, you have lost around 60% of shareholder value according to the market price today, whereas ACL has lost nothing. So there has got to be some macro reasons why you think they are performing dramatically better than Healius.
Look, I completely understand there is a comparable there. I think we are not disputing that. I think what we are saying is we are coming from a different starting point, and we have got a plan to close that gap. So that is what we have set out.
Well, as I said, Sonic Healthcare is a different beast. It is global. But ACL is a direct comparable, and at the moment, Paul, to be frank, Healius's performance is embarrassing relative to ACL. If ACL was down 30%, 40%, fine, but it is constant year to date. Anyway, leave it with you guys. But the comparable is indicating that Healius is not performing properly. Thank you.
Thanks, David.
Your next question comes from Saul Hadassin with Barrenjoey. Please go ahead.
Yeah. Thanks for taking my one question. Just wanted to ask, just noting the debt and the net debt going up slightly by the end of FY 2026, as it relates to the net interest cost into FY 2027, can you just give us a sense of what that could look like versus the AUD 48 million for this year?
Yeah. So I think, Saul, obviously the AUD 48 million includes the allocation of the lease interest under the accounting standards. Just like for like on the bank interest, I guess the assumption is that the bank, the drawn debt will stay, let's call it approximately where it is, and we pay a market interest rate. So the interest will be proportional to the time we've drawn the debt. So on the bank debt side, I think you can draw your own conclusions on what that number's like with EBITDA. Let's call it roughly AUD 0.5 million a month in interest, and then there's also an undrawn facility fee. Then on the lease costs, it won't be materially different from what you've seen this year.
Okay. If I have understood that correctly, in totality, the net interest should go up a bit because of the interest cost on the debt, on the bank debt.
Yeah.
So again, if I think about where the business will land on a profit before tax basis, effectively, all of that EBIT, if you guide into consensus EBIT, all that EBIT is lost through that net interest line. I just wanted to make sure that that is the case.
Yeah. I think you are right on the costs, and then you have to work it out from there. But yeah, if you look at the somewhere north of AUD 7 million on the bank interest is the right number.
So maybe not to ask for guidance in for FY 2028, but, Paul, maybe one for you. Do you think the business can actually generate positive net profit in FY 2028?
Positive net profit.
After tax.
At what line you are talking about. We certainly expect generating.
Yes.
Yes. We expect to be generating positive cash this year.
That should be the number. Yes.
Yeah. Because obviously, the issue is all of the interest is more than eliminated by your interest expense, which is a combination of lease costs and bank debt.
Yes.
If bank debt is going up into FY 2027, the question then is, in FY 2028, are you finally in a position where your net debt then reduces again, your lease costs don't rise materially, and your operating profit is significant enough to then be able to generate positive net profit and positive EPS? Because that's what the market is waiting to see.
Yes. The answer to that is yes. And look, we're talking about an increase in interest cost that is, compared to the increase in earnings, not as material.
Sure. Thanks, guys. That's all I had.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Steve Wheen with Jarden. Please go ahead.
Yeah, good morning. Thanks for taking my questions. Apologies if you've explained this before, but I just wanted to understand why the true-up for working capital for Lumus happened so long after the transaction. Then as we start the repair for the sale of Agilex, I'm just interested to understand what the stranded costs might look like for Agilex relative to, bearing in mind that was the case with Lumus when it was sold.
I think, Steve, they are two different beasts. The Lumus settlement took a little bit longer than normal because there was just the general wrangling that happens with a true-up at the end of these sales processes. That is I think a relatively easy question to answer. I think on Agilex, it is completely separate for all intents and purposes from Healius. The tie-up between the two is almost non-existent in terms of if you are talking about systems and costs and so forth. There is very limited overlap, I think. With Lumus, clearly they were on the same systems. There was co-location. I think with Agilex, it is a completely separate business, very limited input operationally from the center, let us call it.
Yeah. Okay. It is going to be a fairly clean separation. When I think back to the two other sales that Healius have done, the sale of the medical centers, that came with an obligation around leases for the imaging business. Then there was obviously some stranded cost associated with the Lumus business when it was sold, that all sort of resided in the business that was left behind. You are saying that when you sell Agilex, we will not be inheriting some costs that are part of Agilex now.
No.
With the stub of the business?
No. Look, I think Lumus, to be fair, had things like digital and storage and systems and that kind of stuff that just naturally had to be separated over a period of time. Those things now, for all intents and purposes, are fully complete. All of those costs that were left behind with Lumus and the way that the group was set up, they have all been taken out as well. But you are right. The second part of your question around Agilex is that it is very clean, and there would be nothing left behind.
Excellent. Okay. Just a very quick clarification question. Within your profit and loss detail, there is other expenses, which I have never actually known what it was, of AUD 95 million. Are you able to just sort of help me understand what that is? It is obviously a pretty chunky component of your cost base.
Yeah. Look, there is a mix of things. I think the easiest way to think about it, though, is everything else that is not listed out separately, right? So everything that is not labor, lease costs, et cetera. So there are a lot of cost categories in there that I do not want to go through line for line. But the best way to think about it is broadly everything that is not labor, rent, or consumables.
Can you give me an example of one or two?
Yeah. Look, insurance is one. There are other costs around, we have had some consultant and advisory costs that sit in there as well. But insurance is certainly a relatively chunky cost given insurance on motor vehicles, properties, et cetera.
I think insurance is called out separately. Insurance is a.
Yeah. Then, look, there's also probably the biggest individual line item is property management fees. So we have an external property management advisor.
Yeah. Okay. All right.
Yeah. Then logistics, external logistics, some of them don't sit within the carrier costs.
Okay. Great. Thanks for your help.
Thank you. There are no further questions at this time, and that does conclude our conference for today. Thank you for participating. You may now disconnect.