I would now like to hand the conference over to Dr. Hartley Atkinson, CEO. Please go ahead.
Good. Thank you very much, and welcome everyone to this morning's presentation. I'm just going to flick through the pages of the presentation, the first being the title page, where detailing the first half of 2025 financial results, which is the period until the 30th of September this year, and then flicking to the second page, page number two, important notice. We will take this as read. Thank you. It's just the various important disclaimers, and then flicking to page number three, today we just want to go through the highlights: strategic progress, financial performance, outlook, and then have time to take some questions at the end of the presentation. That's page number three, and moving to page number four, to start to get into the meat of things, this is entitled Record Revenue and Investment for Growth. So basically, we did increase sales. Overall, we increased them 4%.
The actual sales from products and royalties are up 6%. We got good, strong growth in Australia and good, strong growth in New Zealand. We had a couple of two specific one-off events which entered things in the first half for Asia and also for international. Basically, in international, some of our major customers decreased their inventory days as supply chain outlook improved. I mean, typically with pharma, we've seen ongoing problems after COVID, but they seem to now be resolving. I know AFT itself is successfully cutting down our inventory days, and we are seeing that quite aggressively for some of our major export customers. The important thing, though, is when we look behind it and get their sales figures to see whether this is related. It is unrelated to their sales. It is purely related to their inventory holdings. I'll give you one example.
One of our major customers has a number of AFT products, had about 10 months inventory for a period of about three years, discussed it with him for quite a while, and then he suddenly started to cut back on his inventory with literally no orders at all this first half, but this is a kind of one-off impact, and then also in Asia as well, a major part of our business is presently in Korea, and there has been a significant event there in terms of a doctor strike, which went on for many months, and that certainly did impact or totally stop the sales of that particular product in the Korean market, but now the doctors have gone back to work, and they're operating again, and sales have resumed, so both these events have hit the first half in terms of Asia or international.
So we do expect strong recovery in the second half. We'll also be assisted by product launches in all of our markets across Australia, across New Zealand, across Asia, and across international, which will see certainly a good recovery in that second half. You can see the graph on the bottom on the left. That's the first half year sales. We do always make more sales in the second half. It's kind of usually about a 60/40 split, with 60% being the first half. And then on the far right, you can see that we have got a small operating profit loss, really due to those two factors we've just discussed. We could maybe slash spend and everything like that, but really we were wanting to continue to invest because we still see a lot of potential to significantly grow our business. So really we didn't want to do that.
So that's that graph on the far right bottom. I said page number four, and moving on to page number five, the Australian market. I mean, last year we did talk a bit about we received an additional chunk of licensed income from Hikma, and we did, rather than put this in the balance sheet, we did invest this in further growing the business. One of the things we were chasing was increased marketing to boost our local Australian and New Zealand sales. And if you look at that, we're very pleased to see there was a good response. Revenue, despite what we read as fairly muted economic conditions, we grew revenue by 19% in the Australian market. And our new product launch program we've mentioned before, we have about 60 products we're launching over kind of a two-year time window, and that is progressing nicely and roughly as planned.
We're seeing that kind of roll out. And also too, we talked a bit about this last year. Our operating profit last year was a little bit muted in Australia, but look, a good increase this year from NZD 500,000 to NZD 4 million as these investments that we made and also the additional sales team do deliver upon our expected growth. If we look at that little pie graph thing on the far right, you can see sort of much of a muchness in terms of product split. OTC is still the predominant chunk of our business, about two-thirds in the Australian market. Had a bit of slight growth in the hospital. Part has become a bit bigger, and prescriptions kind of stay roughly the same or slightly decreased. Yeah, look, that was our Australian result. We were pleased. Everything we planned progressed well.
The question we do get asked sometimes too is that we talk about new product launches, and people say to us, "Yeah, but is all your growth coming just from existing product launches?" When Malcolm analyzes that, we see that really the predominant amount of the growth is actually coming from existing products. A lot of products when you launch in OTC products, it does really take a good two, three, four years for them to bed down, and then they in turn start to add to the growth in those further out years. So yes, they do contribute to growth, but they're not the primary driver of the short-term growth that we're looking at now. So that's page number five, and moving to page number six, which is our second largest market presently, New Zealand.
Revenue grew by a pretty reasonable 14% to NZD 26 million, and that was primarily led by the OTC and actually prescription channel also made an impact. There were a number of product launches as well that started to make an impact on this financial year, and we were able to also improve our operating profit in the New Zealand market. You can see once again on that bottom graph with the half-year cuts and the sales growth, we are generally also selling more in the second half of the year than the first half. Yeah, this is partly due to product mix as well, actually. Yeah. Then on the far right, the pie graph again, you can see New Zealand does predominantly the majority of sales in the OTC section. Then prescription actually is relatively bigger than Australia and New Zealand, and then also hospital as well.
But no major changes other than a bit of probably more growth relatively in the OTC market, which we have been targeting. So that's page number six. And now moving across to page number seven, OTC, sorry, Asia. We've got good growth in Asia in our OTC segment and also online. If you can recall back to last year, we were also using some of the additional funds we got from Hikma to invest more heavily in our cross-border e-commerce into the China market. And look, that's sort of roughly up about 80%-90% presently from the prior year. So we are seeing some reasonable growth in our China cross-border growth sales, rather, and also seeing some growth in our OTC sales as well.
As we previously discussed and mentioned, definitely any gains in the first half were diluted by doctor strike in South Korea, and that did also drop consequently the operating profit. But as we've said, the doctor strike is finished. The doctors are back at work, and we see that that part of our business will recover. And then we have a number of events happening, such as our first launch into China for Crystaderm, and that, as you probably know, is the second largest pharma market in the world. And long term, we say that could be very interesting, but still early days. But we see our partner. I received photos overnight of a big display they had at one of the major China pharma events, and they had a lot of stuff about Crystaderm on their stand. So they're certainly working hard on it.
The stock presently has been shipped and should get to them just prior to the end of this calendar year. So that's Asia, page number seven. And moving on to page number eight, international. As we have mentioned, we've seen some significant cutting of inventory from a number of our larger customers, and that was certainly very noticeable on the sales line. But yeah, we do operate with forward orders. There's usually a three- to four-month lead time for most of our products, sometimes going up to six months. But we've seen we've got a good forward order book of orders, so we do see the sales making significant recovery in the second half based upon the orders that we've already booked. International does carry the various R&D costs as well.
So that did have an operating loss in the first half of about NZD 4.6 million, and we looked at that loss to reduce, as I mentioned, as trading normalises. And also we have got a lot of launches as well, which we're looking at. A lot of them do actually come in the latter part of the second half of the financial year, which will certainly be good news for next year, but they do start to contribute this next half as well anyway. We are slowly increasing the number of countries where we're launching our Maxigesic. I should just point out too, though, it isn't just Maxigesic. We're selling across all these markets, and as well, we invested last year to pick up a number of products for Europe, which will further diversify and grow our channel.
So we do show you the Maxigesic number of countries, but it's certainly, if you just apply that to international sales, there is more to the business than that. And certainly long term going forward with the pipeline that feeds into it, there will be more. So that's page number eight. And moving on to page number nine, which is the global map. Presently, our medicines are available in nearly 80 countries around the world. How we do this map is, yellow is where we have already launched. So you can see there's reasonable swathes of yellow across the globe, which will continue to fill in. We haven't actually put China as yellow yet because the stock is still en route, literally, but that will become yellow by the next reporting period. Now, blue is where we're still in registration.
Some places can take a long time, so those in time should turn yellow, but presently they're in blue. There are some white areas where nothing yet has happened. You'll see in South America, for instance, that white space corresponds to Venezuela. We're not strategically intending to expand the business to Venezuela. We also have India and Bangladesh as well. Presently, we're not really targeting those countries. They're well served by strong local industry, and we're kind of staying away from them. Philippines is still in registration, actually. We haven't actually put that as blue. We are probably going to launch ourselves or use a local partner, but we've just left out at the moment. We don't have any firm agreements. Papua New Guinea is the other bit sitting above Australia, which again is not really a target. The key target, though, that is in white is the Japanese market.
At the moment, we've licensed Maxigesic in some nine out of the world's top 10 pharma markets. The only one left is Japan. We have completed recently a Japanese pharmacokinetic study for Maxigesic IV, comparing them to Caucasian patients. We are having discussions with a number of parties in Japan and would be hopeful at some stage in the next kind of six months we will be able to add something in the Japanese market. Look, that's our sorry, the other important bit too is those red circles and dots. What we have been busy with, and this has taken quite a bit of investment as well, which we did flag last year when we were spending the Hikma upfront money, which I think you remember was about NZD 6 million. Australia and New Zealand are both red circles.
We've always had offices in Auckland and Sydney. Also have red circles in Singapore and Kuala Lumpur and Malaysia, where we are expanding our business. Singapore is growing quite nicely presently and is still quite a significant part of our Asian business presently. We have an office in Hong Kong where our Asia manager works, and it's pretty important that geographic location because it's close to China and she can commute literally easily as required into China to help us with our business meetings in China. We purchased a company in South Africa, and that's going to be based out of Cape Town. So that's kind of underway, a lot of work going on there. And then looking across to North America, we have a U.S. office in Detroit, and primarily that's going to help to run our distributors for the U.S. market.
But we do also have a number of OTC products that we currently sell some on Amazon, but we will be beefing up physical distribution in the U.S. market. That will be run out of our Detroit office. And then we also have an office in Toronto, in Canada. We have sold product in Canada since 2018 through distributors and licensees, but we will launch our first product being Maxigesic IV. We're anticipating that to be March 2025, maybe April 2025. So we have some people employed, well, a person employed there, and we will be employing further people in the Canadian market. In Europe, we have a number of projects going on in Europe, and that's run out of Ireland.
And then in the U.K., we have an office just near the financial district in the U.K., and we have a number of staff based in our office there, and we're running our own launches there, which we'll talk about more in a moment. So look, that's our global kind of reach. And flicking on then to the next page, page number 10, just about very quick about expanding. This is what we're talking about, the global footprint. So the U.K., which is 70% owned by AFT. We've launched in a number of markets, United States and Europe. Usually, Maxigesic is called ComboGesic because the regulator won't let us use the word Maxigesic. So we've launched ComboGesic IV and also the tablets, and we're making good progress with those two products. We do have a growing it is a major focus.
We have a growing pipeline of products, which actually are in registration or have been registered, and then a big pipeline after that. We are now an NHS accredited supplier. It is quite involved. For example, there was a 500-question questionnaire that we had to complete about the ESG part of our business, and we quite happily sailed through that, which was pleasing. We have actually been involved in a couple of bids for business for the NHS, and we've had a, to date, we now have a 100% success rate, and this business starts early in 2025, being the 1st of February. So yeah, there's quite a lot of progress being made in the U.K. market. In Europe as well, look, there's a lot of progress being made there. We told you last year, and this is for spending the Hikma money.
We purchased products from a German company that was bankrupt. We acquired E.U. rights for an important niche drug that's not really available, but very important for very sick patients with cardiovascular conditions, and we have been doing a lot of work to upgrade the dossier, get it approved, do various agreements, and the first sales for those would be expected. Also, we've got the orders would be expected in the first sort of maybe middle part of the second half, so made a lot of progress and certainly very good return on investment. I mean, pharma often takes these sort of things a couple of years to get the sales going, but we would expect next year we would recoup our investment within a two-year window, which is pretty positive from our perspective.
United States, progress with ComboGesic IV sales are underway through Hikma as our licensee in the hospital market. They have secured quite an important thing called a Medicare reimbursement code, a J code. That makes funding a lot simpler, but it's still a bit of work to be done in the U.S. It's really important to have major hospital formularies, but this always does take a while. It's not something that happens straight away, and that's still a work in progress. Once those get secured, then that will start to make a more major difference in the U.S. market, but that's still a work in progress. For our tablet, we've appointed distributors presently, a company called Alexso, which will handle one significant chunk of the market. Hikma as well, that will handle a lot of the hospital, various outpatient clinics, ambulatory clinics, things like that.
And pretty important because it ties in with Maxigesic, ComboGesic IV, where you have an IV to oral switch strategy is important. But we will also seek other distributors to further widen our distribution network, and that's presently underway. And as I mentioned before, we will be increasing our OTC offerings and spread in the U.S. market. Flicking on to the next page, page number 11, just real quickly, AFT Pharma Canada, also 70% owned by AFT. So we have launched ComboGesic tablets a while ago through a partner. We're launching Crystaderm through a partner, but we're launching the IV ourselves. As I mentioned, at the kind of end of the financial year. And we're also working on and doing filings to boost our pipeline in the Canadian market. South Africa, we purchased a company with an existing SAHPRA license that says two years.
We have got a good pipeline of products that we actually acquired, and we're going to start launching those into the private hospital market in next financial year. South Africa is still a very good market, especially the private hospital market, like when we place it with our various operations. It sits pretty much level with Australia in terms of the size of the opportunities that we're chasing. So we're certainly very enthusiastic about South Africa as well. And then Singapore, Hong Kong, look, it's just very much business as usual. We're starting to work harder on really expanding our pipeline. We've got a number of launches happening in Singapore, and then following on later, more like next year, a number of launches happening in Hong Kong. So we will work to significantly build both of those markets as well. And flicking on to page number 12, R&D.
The thing I know is some people say to me, "The problem about R&D is you spend money on it." That's true, of course, but we are funding this all ourselves out of internal profits. We're not raising capital, and we are doing a lot of R&D, actually, and long term, this will really be the big value driver, we believe, in our business. Having said that, though, we do also have a pretty active commercialization process, which is pretty important to generate money now rather than everything being on R&D in future, so this is actually a very busy time. I've never seen anything like it. We have literally 18 agreements presently under discussion, and as you would have seen, for example, we did this year a couple of big agreements in China, and we are seeing a lot of interest out of China.
And we are looking to secure a further full drug distribution deal in China, which we're waiting the final signature on. Maxigesic is mostly developed, a little bit still underway, and that is still being commercialized. There still are some spare places that we're looking to launch and sort things out, but generally, there is still additional upfronts and money to come from that. Crystaderm, that's our proprietary antibacterial cream, slow-release hydrogen peroxide. We're getting good interest in that. A lot of sort of winds are moving in our favor with global concern about antibiotic drug resistance, and Crystaderm is one way to avoid that, and that's what is also helping to generate the interest. So we've got a number of discussions underway, with the first one to kick off being the China launch of Crystaderm. Micolette, we're getting actually good interest in that.
That's a product we purchased a couple of years ago, and we're selling it ourselves in our markets, but we're getting good interest. KiwiSoothe is a new product for gut discomfort, and we are also getting some good interest for that and looking at our first launches in the second half of this financial year. Capsaicin is an analgesic cream. We also have good interest in that, and are making some sales presently in the U.K., but we're looking at a number of other agreements, and that's part of the things which are mentioned up there in the 18 agreements that are underway. On the right is our R&D budget. You can see we spent close to a couple of million more on R&D. So yeah, there will be some ongoing expenditure. It's not going to go crazy, but that is certainly something that's important to advance our R&D portfolio.
So page 12, and then moving on to page 13, just quickly to flick through this. Yeah, we're pleased. We've got a really strong R&D pipeline, and we've used our cash flows and stuff to do more R&D. This is probably about it at the moment. We want to sort of land a few of these before we look to any other projects, but we've got a good chunk of projects here. A lot of these treatments that a lot of these drugs we're developing don't have any treatments in their therapeutic category. They are covering multi-billion dollar categories. So basically, we've got a number of areas that fit in with our current product strategy with therapeutic areas. So dermatology is one of our key areas. So we have Pascomer, which we're expecting next year, sometime maybe late next year, to get an approval.
Then strawberry birthmarks is a topical treatment for children with basically large raised red-colored bumps on them, often the face, and there aren't any topical approved treatments for strawberry birthmarks, and this is certainly quite a common condition, and we leave it as a good commercial opportunity as well as therapeutically being very worthwhile. Keloid scars is something where scars grow. They don't just stop and heal. They actually keep on growing. There aren't any registered treatments for keloid scars, and we are developing topical treatment. We have licensed some technology from Gillies McIndoe and Massey Ventures here in New Zealand, and we're working on that. Another one we're doing a joint development with a company called Hyloris, and it's for a nasty female condition called Vulvar lichen sclerosus. This is a pretty serious condition affecting the sufferers.
There aren't any registered approved specific treatments for it, and we're developing that presently with Hyloris. In eye care, where we have a big position in the Australian market, we have an antibiotic eye drop for drug-resistant eye infections. This particular product is widely compounded in places like the U.S., but there are no approved treatments. So we've been to FDA, done a lot of the preliminary work. We're now doing some additional work with looking to start our first clinical trials next year and should be able to develop it relatively quickly once we start our clinical studies. So that's our eye care project. With pain, we have another project, topical treatment for something called burning mouth syndrome. This is certainly more common than you may think. It does disproportionately affect postmenopausal women. It's where patients have a burning feeling in their mouth.
This is underway as a development with Hyloris. NasoSURF is a drug delivery system for a number of different uses. We're firstly targeting conscious sedation. It's been a very difficult technical project, but we're pretty confident we're coming to the end of it where we can now go into our first big clinical study, going to plan to start that at the start of next calendar year, 2025. We do use some non-patented products. We have some projects underway with a partner we work very closely with on the manufacturing side. These are things that do have actually good commercial potential, and they're more developing the manufacturing side rather than true R&D. But the important thing is they will generate money. We can feed them out around our different business hubs and also license them out in markets like Europe, where we have a number of existing customers.
The other big one, one of the biggest ones probably on the whole of our portfolio, is we have licensed in an NCE or new chemical entity. Presently, it is confidential because our partners don't want to disclose the exact details. It requires one additional clinical study, being a large 1,000-patient study to complete the development. We're poised to have a meeting with U.S. FDA to clarify the study protocol and get that started next year. But that's certainly a product that sits in about a $3 billion market presently, forecast to grow to over $7 billion by 2033. It's a very popular sort of therapeutic area that's really growing presently, and we do see that as being a very interesting project and one that we want. Yeah, we've actually already got interest in licensing it.
So out of those 18 projects, there's interest from at least two or three areas to license it in. So that can help if we can conclude that, that can help to generate some money to fund the R&D project. So that's page number 13. And flicking on to page 14, I can hand this over to our CFO, Malcolm Tubby.
Thanks, Harley. So top line revenue, total revenue up 4% to NZD 86.7 million. Gross profit of NZD 36.2 million with a margin of 41.7% compared to 43% margin last year. The difference there is the change in license income, which was NZD 2 million last year and NZD 200,000 this year. Operating expenses, as we talked about, a couple of extra mill into R&D. So as we've alluded to before, these new projects are under the accounting standards.
More of it gets expensed than capitalized, which of course means it hits the profit. And then the other increase in spend is the market development costs. So that generates the operating loss of NZD 1.8 million compared to three million last year. And if we move down to the bottom, we show the revenue from sales and royalties. So we exclude the license income just to demonstrate the underlying gross profit of the business, which stays the same at 41.6%. So turning on to the next slide, 15, the balance sheet. Main feature here is the net debt of NZD 18.9 million at September compared to 30 at the same time last year. Sorry, 30 million was at March. It was lower than that last September. The other main feature, I think, is the inventory days, which is where we're bringing those levels down.
We're now at around about five months' worth of cover, and equity increasing to NZD 83 million from NZD 74 million. Next slide 16, on the cash flow, operating activities, NZD 4.3 million down a bit from the one-off demand disruptions that we've alluded to. A reduction in the spend in investing activities, and that's the switch we just talked about with the R&D going more to expense than being capitalized. So that leaves us with a cash position of NZD 10.6 million at the end of September. I can pass back to Hartley now to go through the outlook.
Yeah, look, thank you, Malcolm. So slide number 17, the outlook. So look, I think as we've tried to allude to, we do expect a strong recovery in the second half.
I mean, we do see in general greater sales anyway in the second half, but we do see the two factors we've alluded to as essentially being completed. So there's a strong program of new product launches, especially in the international markets, but also in Australia and New Zealand. We do see we're starting to build up some more momentum in the new markets, which won't be apparent from that first half result, but looking at the second half and then also into next year, we see that as getting growing momentum. And the important thing, I think, last then is what we have sort of I just mentioned previously was resumption of normal trading following the two significant unexpected events in the first half being the doctor strike and then also the destocking.
So basically, though, given those one-off challenges, we see that we would have a guidance in the NZD 15 million-NZD 20 million range as opposed to our prior guidance. We don't expect anything significant to change, such as declaring a dividend for the full year, but clearly it's a little bit early to talk about that, and that would be decided by the board closer to the time. We just wanted to flag we don't see anything changing our dividend intentions. And we believe we are very well positioned to further extend the company's long-standing record of growth. And you look at it in the last 10 years, we roughly quadrupled sales. Last three or four years, we doubled sales, and we don't really see that as going away, and that's why we've been investing the money and doing all these different things.
So we set our sights really on a target, a sales target of NZD 300 million, which we've previously mentioned before, and we'd be looking to achieve this by the end of FY27. So just to give you a bit more context in terms of timing. So look, thank you very much for your attention. I'll hand it back to, for any questions that you want to ask myself or Malcolm. Thank you.
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're on a speakerphone, please lift up the handset to ask your question. Your first question comes from Matt Montgomerie with Forsyth Barr. Please go ahead.
Hi guys, good morning.
You've got a comment in there that October international and Asia sales were up 100% versus the prior year. I'd just be keen to understand what you factored into your guidance in terms of the second half international and Asia sales growth.
Yeah, I guess, I mean, the reason for putting that in, I suppose, was just to give people I mean, obviously, we said we expect that to improve based upon a number of factors, so we thought it was still useful to put that figure in to give an indication that there was something behind it. I mean, we are looking to get Asia sales up past last year in terms of sales, so we're looking at them probably being up about even maybe possibly up to about 30%. 25%-30% greater than last year because we do get a strong recovery.
International, probably it's only really line ball just because of the first half result. It might be slightly under, something like that. But we certainly are seeing that expected recovery, but that's the sort of international we don't think will be greater, and Asia we think will be greater than last year.
And just to clarify, those two numbers are FY25 versus FY24?
Yeah, correct.
At a four-year level.
Yeah.
Yeah.
Four years.
Second one from me, if that's okay, just on gross margins. They're roughly flat versus the last year if we strip out licensing. Does this just reflect the ongoing product mix/discounting impacts that you called out in the second half of last year? And then secondly, how should we be thinking about gross margins from here?
Yeah, we see a little bit of an uplift in the second half in the margin.
And, sort of continuing from yeah, we have still been digesting. We have mentioned this before, and it's taken quite a long time to digest it. We had an amount of overstocking with some products, and we still had to heavily discount those and do various actions. And that has had an impact in Australia and partly New Zealand right the way up to literally about now. I think December we finally cleared them all. So it's surprising it has taken quite a long time to clear through that, and that does help once those one particular problems have gone and we can then move forward, which is roughly about now as well, isn't it, Malcolm?
Yeah.
Yeah. Okay, that makes sense. And then just in your guidance, what's factored in in terms of licensing, or is that an ex-licensing number?
There's about NZD 1 million in there for licensing, so NZD 800,000 in the second half.
One more for me, just on the U.S., just on the U.S., sort of comments were relatively few and far between. Could you maybe just talk in more detail around reception from surgeons, how you're getting onto formulary lists if you are on any of the larger hospitals in the U.S.? Any just general reception, I guess, thus far, albeit I acknowledge it's early days.
Yeah, I mean, the Americans are still very much looking for alternatives to opioids. So that side of it has been positive. Securing that J code, Hikma certainly tell us is something pretty significant, so that helps. Most of the immediate early progress has been in a number of outpatient settings, like there's a lot of ambulatory surgery and things like that in the U.S.
They've made really good progress in those places, and it's really moving on now to tackle the larger institutions, which are pretty bureaucratic, actually. So I think that that's going to be the thing that AFT's watching, and we are wading in now to help Hikma too around those major institutions with applications and things like that. That part of it, to be honest, is still a work in progress.
So is it fair to say that Hikma have tried and not had much luck so far in terms of the?
No, no, that's still being prepared. That's still been the preparation phase. There haven't been any hospital submissions gone in yet. I mean, it generally does take at least a year to get to that point, so they launched sort of the end of February.
They've been having various meetings and getting things prepared and building up the leaders, which is sort of a steady but slow process, and that's underway.
Yep. Okay. Makes sense. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Adrian Allbon with Jarden. Please go ahead.
Good morning, team. Just a couple of questions. If I just come back to the current year, would it be fair to sort of say that as you sort of gave your initial guidance at the 2024 result, would you have been kind of expecting EBIT, including the licensing, around NZD 26 million and sort of a first half, second half split of maybe NZD 4 million - NZD 22 million?
I'm just trying to wrap my arms around how big these one-off factors are. It feels like it's like a sort of a NZD 10 million revenue hit and a sort of NZD 6 million profit hit in the first half. Is that sort of fair?
Well, we're close to that,
isn't it, Malcolm? I think,
yeah.
Because, I mean, we would normally have expected a growing in those two specific markets. In fact, we went backwards, and you can see that what we're seeing and what we believe will happen going forward in sort of Asia, where we're still managing, we believe we'll manage to finish ahead of last year. There is a good recovery, but of course, that very much got dented in the first half.
Okay.
So, sort of NZD six million missed in the first half, and maybe it's a NZD two million sort of rebasing for the second half relative to ingoing estimates as you started the year.
Sorry, say that bit again, Adrian.
So just my sort of back of the envelope would have been when you gave your guidance at the last result, so you would have been kind of mid-pointing around NZD 26 million of EBITDA, including the license income, and your split might have been four million in the first half and 22 in the second half. And so with the one-off factors, you generated a NZD 2 million loss in the first half, and I presume there's some rebasing. That means you're kind of probably rebasing the second half by about two million as well.
Yeah. So what's your question then? Sorry. Just to confirm that.
Yeah.
Yeah, that's about right. Yeah. I agree with that. Yeah. Yep. Right.
Okay. Just a second. Just coming back to your rolling NZD 300 million revenue target, as you've obviously been through the presentation and explained, there's lots of moving parts and lots of countries that make that up. But essentially, you're aiming to put on NZD 100 million of revenue in sort of two years or two and a bit years. Are you able to sort of just broadly attribute where that comes from?
Yeah, it comes from lots of places. It comes from all our business segments. Like Australia, you saw is about 19%, so we're not expecting that to go away and stop growing. So Australia will grow over those two years. Same in New Zealand, but we do see significant growth in both International and Asia.
I mean, we spend a lot of money and time on investing in various things that a lot of them are only just starting in the back end of this financial year so they don't contribute much and then contribute going forward. I mean, certainly, like we were trying to communicate, the business has moved on quite a bit from just Maxigesic. There's a lot of other bits within the business that haven't contributed yet, but we'll start to contribute.
Okay. But say for the home markets, if I say Australia and New Zealand, of that NZD 100 million of increment, would you kind of be expecting those to do sort of 25 or 30? And most of it coming from I'm presuming most of it comes from international and to at l
east the U.S.?
Yeah, quite a lot of Australia and New Zealand too.
What's that? Sorry?
Quite a lot comes from Australia and New Zealand, though, because that still grows fairly double digits.
Yeah, yeah.
That's a decent double digit growth.
Okay. But, say, of the 100, sort of, you're expecting 25-30 million of that 100 to come from the Australia and New Zealand markets?
Yeah, we're growing those. Yeah, we think Australia's going to grow in the late teens, around the 20 mark, and New Zealand looks like it will keep growing in the double digit. So New Zealand has picked up more than we've gone back a couple of years. New Zealand's grown really well.
Okay. And then in the international market, is there any sort of, is it Maxigesic IV that you'd expect to do most of the listing?
I know you've recently gone into South Africa and there's all these other different markets, but is there any sort of larger sort of items that we should kind of be thinking about in terms of giving us confidence in that sort of, if you like, the extra 70 that's going to come from those markets?
There's a lot of extra. It's not all banked on one thing. There's a lot of different bits, which is how we're generally trying to do it because we're just nervous about backing everything on sort of a one-hit opportunity. So there's actually a lot of bits, like even those products that we purchase then and different things like that. I mean, they're part of it, but they're not a whole amount of it, but they certainly help. And there's just lots of different bits, really. We build it up line by line.
We put in sort of different sensitivity things depending on risk. So we certainly are recognizing international and Asia are always more risky because it's more new, where Australia and New Zealand, there's more certainty around it.
Okay. And then just my final question, which kind of relates back to the margin sort of one that sort of Matt was asking a little bit, but stretching it forward. If you achieve NZD 70 million or 80 million of revenues in those international markets, presumably the operating leverage at the EBIT level, you wouldn't have the same sales and marketing investment as if you were trying to generate them in the ANZ markets. Is that correct?
Yeah. We see that margin improving as well. Yes.
Yep.
Yeah, we get things like that.
And so at that sort of NZD 300 million mark, would you be expecting your operating margin to kind of put on a couple of points? Is it sort of a 14% to sort of 16% kind of lift? Is that the sort of right when you model it?
Yeah. I think on the gross margin, if you're around that sort of level, I think that's about a couple of points. I think we'd be good. Yep.
But then coming down, obviously, the R&D investment is separate because that's kind of keeping the whole business sort of moving forward, as you've kind of outlined. But the sales and marketing is less intensity relative to if you're trying to generate the same amount of money in the Australia and New Zealand markets. Is that correct?
Yeah.
There will be some investment, and that's already been happening in markets like Canada and the U.K. There will have to be some investment. Of course, at the moment, if you're looking at a short term, it's all a negative thing because it's expense without significant income. But yeah, there will have to be some investment in Canada and the U.K., especially, and less in South Africa because of the scope of the business.
Okay. All good. Thank you.
Thank you.
There are no further questions at this time. I'll now hand back for closing remarks.
Yeah. No, look, thank you very much. So look, we're just continuing to focus on growing the business, investing in the business.
Clearly, the first half has been quite tough due to a couple of events, but yeah, we're really looking through that and past that and making sure that we deliver in the medium to long term, and I guess we come back to the fact we have quadrupled sales in the last 10 years. We have significantly grown them in the last three or four years, gone from 100 to 200, and that 300 for sure is something that we're very laser-focused on presently. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.