must advise you that this conference is being recorded today, 17th February 2021. I'd now like to hand the conference over to you for a speech today to Mr.
John Cullherty, CEO of EBOS Group. Please go ahead, John.
Thank you, Kevin, and welcome, everyone, to EBOS Group's Half Year twenty twenty one results presentation. My name is John McCulloughty. I'm the CEO for EBOS Group and I'm joined this morning by Leonard Hanson, our acting CFO and Martin Krauskopf, our GM for Investor Relations. I'm very pleased to report that EBOS' strong performance has continued with another record result and double digit earnings growth, driven by both our Healthcare and Animal Care segments. Before we go through this morning's presentation, I should point out the following points.
The results are expressed in Australian dollars unless otherwise noted. The presentation refers to both statutory and underlying results. The underlying results exclude one off costs related to M and A activity. Both statutory and underlying results include the impacts of IFRS 16 for both the reporting period and the prior comparative period. The commentary this morning is predominantly based on our underlying results.
For those that closely follow our company, you will note that this period we focus on EBIT as our preferred measure of operating earnings, which is a departure from our historic focus on EBITDA. This change has been made as a result of the move to IFRS 16 reporting. The appendix to this presentation contains additional disclosures and reconciliations to assist you. Now moving to the key financial headlines for our first half, which are revenue increased by 6.3 percent to $4,700,000,000 underlying EBIT increased 11.5 percent to approximately 148,000,000 dollars Underlying NPAT increased 14.2 percent to $94,000,000 and underlying earnings per share increased 12.7 percent to $0.578 In light of the group's performance, Board has declared an interim dividend of $0.425 that's New Zealand $0.425 representing an increase of 13.3%. We are very pleased to continue to deliver strong and increasing dividends to our shareholders in a low yield environment.
The group's double digit earnings growth was driven by strong performances from both the Healthcare and Animal Care segments. This again demonstrates the benefits of our diversified portfolio of market leading businesses and our strategy of investing for growth. Our Healthcare segment increased underlying EBIT by 11.2 percent driven by our community pharmacy, Terry White ChemMART, Institutional Healthcare and Contract Logistics businesses. The key highlights were really above market growth from our major community pharmacy wholesale customers. The 7th community pharmacy agreement did provide the group with increased CSO funding.
The Terry White Kenmart network continued to grow its network with 22 new stores added in the period and our institutional healthcare business benefit from increased demand for specialty medicines and medical consumables. Our Animal Care segment had an outstanding result increasing EBIT by 26% driven by the continued strength of our key brands BlackHawk and Vita Pet as well as our Australian vet wholesale business Lipard. Each of these businesses achieved double digit revenue growth and were supported by very strong tailwinds in the Australian and New Zealand pet care market due to established trends that were further accelerated by COVID-nineteen restrictions. At the group level, we recorded an excellent cash flow result, a record return on capital employed and we further strengthened our balance sheet. Leonard will take you through each of these points later in the presentation.
Consistent with our strategy of investing for growth, we completed 2 acquisitions during the period for an aggregate investment of approximately $23,000,000 In November 2020, we acquired the Veth distribution business of CH2. This business has been successfully integrated with our Lipard business and further consolidates our position in the Australian vet wholesale market. As previously announced at our annual meeting in October last year, we also acquired Cryomed, which is our 2nd medical devices acquisition. We are now generating annual revenue of approximately $60,000,000 in the sector and we intend to continue to expand our presence with the objective of creating a significant new business division for the group. Both of these acquisitions are EPS accretive to EVOS shareholders in their 1st year.
We have an active M and A pipeline and we will continue to explore opportunities for inorganic growth across our businesses. Some comments now on ESG. As flagged in our 2020 annual report, EBOS is progressing the implementation of a formal ESG program. We acknowledge that as Australasia's leading health care and animal care company, we have a responsibility to our stakeholders and the community to conduct our business in a socially responsible manner and act as a good corporate citizen. Our ESG program will measure and report our progress across a range of ESG areas that are important to EBOS.
The areas listed on the page have been identified through a comprehensive international benchmarking and stakeholder engagement process. Our work is ongoing in this area and we look forward to providing a further update at the time of our FY 2021 annual results announcement. This slide provides more details on our group financial performance for the half on both a reported and underlying basis. The increase in underlying EBIT of $15,000,000 or 11.5 percent reflects an increase in revenue of 6.3% and an expansion of our EBIT margin to just under 3.2%. With respect to the impacts of COVID-nineteen, there are a range of positive and negative impacts across our businesses.
On an overall basis, we estimate that the impact on the earnings was positive by just under 2% at the EBIT line. Our strong balance sheet with net debt of 1 times EBITDA places us in a flexible position to pursue our growth strategy for the remainder of FY 2021 and beyond. This slide illustrates that each of our businesses with the exception of consumer products contributed to the group's earnings growth. Institutional Healthcare, Community Pharmacy and Animal Care were the primary drivers of increased earnings and contract logistics also grew at double digit levels. This slide illustrates that our first half growth was very strong by historic standards.
Group underlying impact growth of 14.2 percent builds upon our previous record result in FY 2020 and was approximately double the compound average growth rate recorded in the 3 prior half year period. Healthcare's double digit earnings growth this period is particularly pleasing as it cycles the significant step up in earnings we recorded in FY 2020 on the back of significantly increased wholesale revenues. As you can see from the chart, Animal Care has undergone a step change in its growth this period as a result of our market position supported by strong tailwinds in the pet care market. And I'll provide further comments on those dynamics later in the presentation. We now move to the individual segment performances in Healthcare.
Healthcare generated revenue growth of 5.9% and underlying EBIT growth of 11.2%. Our Australian and New Zealand Healthcare businesses contributed equally to this earnings growth in relative terms. Our New Zealand performance is pleasing as it represents a rebound following a softer result in FY 2020. At a high level in reviewing the performance of our Healthcare business, Dennis growth was primarily driven by increased wholesale and CSO revenues, continued growth within our TWC business, strong demand for specialty medicines and medical consumables and further productivity improvements within our operations. EBIT margins for the Healthcare segment expanded to 2.92% from 2.78% with improved margins across both Australia and New Zealand.
Moving now to the specific components of Healthcare. We occupy the leading market position in community pharmacy wholesaling in both Australia and New Zealand. The community pharmacy business recorded a 4.8% increase in revenues and a 4.7% increase in gross operating revenue or GORE. This result cycles a full period of the Chemisware Health Medicines distribution contract, which commenced on 1 July 2019. Key drivers of the result were continued above market growth by our major customers and productivity improvements across all of our wholesale distribution sites, reflecting the benefits of the capital investments made in our networks in prior years.
The result also reflects increased CSO funding as a result of the commencement of the 7th CPA agreement, partially offset by PBS pricing reforms. Terry White Chem Mart business, which is reported within our community pharmacy result has further strengthened its position as one of Australia's leading community pharmacy networks. It's over 2 years since we acquired full ownership of TWC and the strategic initiatives investments since then are enabling excellent performance by our store network partners. Pleasingly, we welcomed a further 22 new stores to the TWC network during the period. With the majority of these stores migrating from competitive banners, reflecting the attractive proposition TWC offers pharmacists.
Network sales increased by 5.8% and like for like sales grew by 4.2%. This performance was driven by new store growth, continued increases in media spend, which was up by 40% in the first half and continued improvement in promotional and category initiatives. As recently announced by the government, Australian pharmacists will play an important role in vaccinating the community against COVID-nineteen. TWC is proactively supporting its network partners to prepare for this program and it represents an excellent opportunity to further endorse our capabilities. Our Institutional Healthcare business has continued its strong performance and was the largest contributor to group earnings growth in the first half.
Within this business, we occupy the leading market position in hospitals wholesaling in both Australia and New Zealand and we further increased our market share during the period. The Institutional Healthcare business recorded an 8.7% increase in revenues and a 15.5% increase in Gall. Key drivers of the result were increased sales of specialty medicines, continued strong growth in the medical consumables market and our growing medical devices business, which is the key driver of the increase in GORE margin. Moving to Contract Logistics, which had another strong period with GORE growth of 12%. Growth during the period was primarily driven by existing customer growth and increased volumes in New Zealand, mainly for protective equipment.
In this business unit, we are an important part of the medical supply chain for over 160 pharma manufacturers. We occupy the leading market position in New Zealand. Our Australian business is a more recent entrance where we see market share upside over the medium to long term. Our Consumer Products business, which represents 4% of group goal, continues to be impacted by COVID-nineteen as a result of both lower demand and product supply issues. Revenue and gore decreased by 10.1% and 6% respectively.
Demand for our consumer products has been impacted by COVID-nineteen in a range of ways. For example, a number of our products including Red Seal toothpaste are exposed to the Daigou channel, which has softened due to border closures. Other products have suffered reduced revenues, this half due to stay at home and social distancing practices, such as our Pharmacy Choice cold and flu medicines and our quickness headlight treatment. Despite these challenges, we are pursuing a range of measures to turn around performance including expanded product ranging in Asia, investments in marketing and new product development as well as optimizing our manufacturing and supply chain to drive additional improvements. Turning now to our Animal Care segment.
The market strength of our key brands, Blackhawk and Vodafet and our Australian vet wholesale business, Lipard, ideally positions us to take advantage of very strong tailwinds in the pet market. As a result, there has been a step change in earnings for the segment with EBIT growth of 26% more than $30,000,000 for the half. Globally, there are tailwinds in the pet care market, which are well established due to factors such as the humanization of pets and premiumization of products. Our Animal Care segment has been benefiting from these trends for several years now. However, it has been evident that COVID-nineteen has further accelerated these trends as restrictions have resulted in people spending more time at home with their pets.
Each of our Blackhawk, VidaPet and Lipard businesses generated double digit sales growth for the period. BlackHawk remains the leading dog fed dog food brand in the pet specialty channel in Australia and continues to increase its market share in New Zealand. VidaPet remains the leading dog treats brand in the grocery channel in both Australia and New Zealand and further increased its market share in both countries. Both of these brands continue to benefit from substantial marketing investment. Our Lipard business also experienced strong growth from customers in the vet and online channels.
The acquisition of CH2's vet distribution business has made a contribution for approximately 1 month during the half. So this concludes the commentary on our segment performance. I'll now hand over to Leonard to cover off on the financial information.
Thank you, John. Statutory cash flow from operations for the 6 months to December 2020 was $98,700,000 This represents an improvement of $24,500,000 on the prior on the prior corresponding period due to earnings growth while maintaining our disciplined approach to working capital management. Capital expenditure for the period was 10,100,000 and this comprises spend on minor capital projects. CapEx for the half is down on our own internal expectations attributable to operating in the COVID environment and seeking to restrict access of non essential workers to our facilities across the group. We've also invested approximately $23,000,000 for the first half of FY 'twenty one on acquisitions.
Both of the acquisitions undertaken during the period only commenced trading under EBOS ownership in the last month of the period. Working capital management remains a key focus for the group. Our investment in working capital of $339,000,000 is up $34,000,000 from June but consistent with our debt reported at December 2019. Our cash conversion cycle of 16 days as at December 2020 is also consistent with December 2019 and similar to that reported at June 2020 which was 15 days. Return on capital employed as at 31 December 2020 of 17.5% is a record for the group and well above our internal target rate of 15%.
The improvement in return on capital employed from the 17.1% reported at June 2020 is attributable to a continuation of our strong earnings growth and disciplined capital management. Net debt for the group, excluding IFRS 16 leases, was 309,000,000 as at 31 December 2020, favorable to both December 'nineteen and June 'twenty by 83,000,000 and 18,000,000 respectively, as a result of the strong cash performance by the group for the period of 31 December 2020. Our net debt to EBITDA ratio was 1.0 times, a further improvement on the 1.11 times we reported at June 2020. Our load gearing also provides significant capacity for further acquisitions and growth investments. In August 2020, we also extended the tenure of our $400,000,000 securitization facility by a further 3 years.
Subsequent to 31 December 2020, we've also refinanced $443,000,000 of current debt facilities, increasing the finance facilities to $465,000,000 E BOS now has no debt maturities until the second half of FY 'twenty three and has achieved an improvement in our maturity profile spread from our existing debt facilities with this refinancing. Underlying EPS for the half is $0.578 per share, growth upon the same period for FY 'twenty of 12.7 percent. The EBOS Board has declared an interim dividend of NZ 0.425 dollars per share. This will be imputed to 25% and fully franked for Australian Tax Residence shareholders. The FY 'twenty one interim dividend is an increase of 13.3% on the FY 'twenty interim dividend and represents an underlying payout ratio for the period of 69%.
Reflecting on the group's operating performance, cash flow and balance sheet, the DRP will not be available for this interim dividend. Thank you and I'll now hand you back to John.
Thank you, Leonard. So in conclusion, we have recorded a strong financial performance in the first half with double digit earnings growth, excellent cash flow and returns on capital and a further strengthening of our balance sheet. The robust trading conditions that drove our first half FY 2021 performance remain in place. In January of 2021, we recorded group earnings growth at levels consistent with our first half FY 2021 growth. We continue to closely monitor COVID-nineteen developments.
However, the group is not presently experiencing any associated material negative financial impacts. Given our scale and market leading positions in stable industries as well as our strong balance sheet, we are well placed to respond to any challenges that may arise. So with that, I'll conclude the formal part of the presentation. I'll hand back to the operator, Kevin, to facilitate any questions.
Thank you very much. We have multiple questions in queue. Our first question is from Chelsea Leibbetta from Paul Safar. Please ask your question Chelsea.
Hi, John and team. I guess just starting off with the margin side of the result, obviously, a pretty good period. And if I think back 6 months ago, you were sort of, I guess, guiding to fairly stable or flat margins through the period. Just kind of interested in one, what's changed versus then? And I'm guessing some of this or at least most of it may be volumes, certainly surprising on the upside.
But also interested in the sustainability or I guess how you're thinking about the outlook from margins going forward particularly in the Healthcare segment for the second half?
Okay. So I'll refer to EBIT margins Chelsea, which I think you're referring to. We did have an expectation at FY the conclusion of FY 2020 results that we would hopefully see some margin expansion. So that's not it's not unexpected for us. The key drivers are really there's a benefit to the EBIT margin from both health care and animal care.
But if I concentrate say on the health care part of the business, Then you can see the benefit of the extra volumes coming through from our devices business is assisting in that margin. We've also been able to improve our margins or get some margin growth from volume growth in the medical consumables side of things. Our HPS business has also made a contribution to that margin expansion. And we also within our operations, we've also had further benefits from the economies of scale. So we continue to generate additional productivity improvements throughout the operations network, which is pleasing.
So all of those factors are really contributing to that margin expansion you see.
So if I'm kind of hearing you right, these all sound like relatively sustainable benefits. And therefore, I guess, is there still upside to come from here? Is that the way I should be taking that or thinking about things?
We certainly think the margin is stable from here. We'll always drive for further margin improvement, as you know. So that's but that will depend upon if we can continue to generate the growth in those particular categories that I just referred to. And we're confident we can. We're confident we can continue to build that.
So certainly as a management team, we'll certainly be striving for further margin improvement.
Okay. No, that's clear. And then just in terms of the corporate costs line in this particular result, just interested in what's driven the uplift. It is still a substantial on a percentage basis. And also, how should we think about the second half run rate?
Is this sort of a new normal level to think about?
I'll probably defer to Leonard on that one. Are you okay to handle that, Leonard?
Yes. I'll say that, John. So yes, the increase really is in relation to a couple of factors, Chelsea. If I break it down, there's some additional insurance costs that are coming through. Insurance markets, as our broker describes at the moment, a bit of a bloodbath, particularly the D and I market.
So there's been an increase in insurance costs that have come through. We've also expanded our RTI program to more participants within the group. More employees are now participating in that, and it's coming through in those results. And we've also introduced an employment sorry, an employee share scheme to all employees across the group, as well as contributing with included or resized, I think, the corporate team structure and also looked as part of that support initiatives such as ESG. So if you're looking forward to the full year, I think the first half probably is probably going to be consistent with the second half, maybe a little bit down with the profile of the costs that's incurred in the corporate area in the first half.
I wouldn't expect it to be any higher, noting also that the second half, I think last year was a bit higher as well. So I wouldn't expect the same sort of increase in the second half, but that the cost should be broadly in line, if not a little bit lower in the second half.
Okay. I appreciate the color. And just last kind of question for me for now. In terms of the balance sheet and obviously the free cash flow is all very strong through the period. I'm just kind of appreciate you like to keep headroom and firepower for M and A and you have said this is an active pipeline, but it is getting quite low in terms of your gearing profile.
And how are you thinking about that, I mean, in terms of your acquisition outlook? But also, is there a potential here that we start to think about lifting the dividend payout further if you don't manage to find sort of big opportunities?
Yes. Chelsea, it's a good question. As you know, we're very and have historically been very acquisitive. And so we see no change to that strategy. There are always a number of opportunities that we work upon in the pipeline.
We recently over the last 12 months, we've added another 2 people into our M and A team within the corporate team. So we're confident that we continue to add to the business.
And at this point in time,
we'd like to just prefer to keep that firepower up our sleeve. And at a point in time, if it if due to the ongoing strength in the cash flows of the business, we can combine both with an active M and A, continued M and A program as well as a higher dividend, then that would be a nice outcome for shareholders. But we're probably not at that point right now.
Okay. Thanks. Appreciate the color.
Thank you. Thanks, Chelsea.
Our next telephone question comes from Andrew Payne from MST Marquee. Please ask your question, Andrew.
I actually think it's might have been myself, Andrew Goodfellow.
I don't know if you can hear me.
Sorry. You got the 2 Andrews. But I was just going to quickly ask just on one of the standouts I thought was the GOR on your institutional sales. Just trying to understand there's a big gap between sort of top line sales and your GOR was just sort of what the driver of that was? Was it I'm guessing it was sort of volume based purchasing and being able to get better pricing.
Is that the right way to think about that?
There's that type of businesses like devices, our devices business and also our HPS and consumables business sort of can generate other what we call other income, Andrew?
Right.
Right. And that's the key driver in that particular line item.
And is that delta likely to continue? I guess, I mean, with the volume is a factor or not, is the structure likely to continue where you can outpace your top line there?
We'd like to think so. Yes, we'd like to think so. But I suppose each period is going to be different. So it's a bit hard to forecast that, but we certainly like to think so.
And then I was
just going to ask you around just getting a bit of flavor on the second half. Just sort of you mentioned that Terry White is getting ready for vaccination, but I imagine that's just vaccination at the shop front. Just whether you're involved in either Australia, New Zealand or any other countries on the vaccination distribution chain. I know DHL had a star role, but with AstraZeneca one whether you've got a role and just any other flavor in the next 6 months that are perhaps different this time last year's possible stockpiling quite significantly. Just whether you sort of just any thoughts around those sort of trading items?
Yes. So on the vaccine, so in New Zealand, we do have involvement in the distribution of vaccine. However, that's subject to fairly strict confidentiality. So we can't expand more upon that. In Australia, at this point in time, we have no direct involvement in the distribution of the vaccine other than what I mentioned on the call with being our pharmacy customers.
We'll have, of course, a role in the administration of the vaccine. And so that's a positive for our Terry White Kemah network members and increase hopefully the footfall traffic that goes into those stores. So we benefit indirectly from that. But no, to answer your question, no direct involvement in the distribution of the vaccine in the Australian market at this point in time. And then your latter question was I think was on the hospitals and the stockpiling themes or trends.
So certainly, what we have seen over the last 2 years really, Andrew, it's very strong performance in the hospital segment and that continued in the first half. Although towards the end of the first half, we did see that starting to come down, so off its highs. And that sort of decline also came through in January as well. So not it's too early to tell what that means for the next half or into even FY 'twenty two. But certainly, in the most recent months, the hospitals business hasn't been in terms of revenue hasn't been as strong as what it was in the first the majority of the first half.
Okay. Yes, I guess we'll try and think of that in the sequence of sort of stockpiling for COVID recovery from COVID. And then the final question for me.
I was going to say that's probably what it was. It's probably that stockpiling thematic and maybe that's winding down a bit.
And then just on the outlook for PBS. I mean you called out some $39,000,000 worth of impact. Just I imagine that obviously that's ongoing, but just whether there's any sort of big name drugs that you think you're going to be sort of coming through that price reduction process this second half or any other movements in PBS or thoughts around underlying PBS?
Yes. No, I think in terms of trying to get insight into that, it's always very difficult in terms of what the actual numbers are. The impact of PBS reforms, so the benefit of everyone on the call, the impact of PBS reforms had a negative impact on revenues of about $40,000,000 We'd expect that to continue into the at that rate into the second half. So we'd expect a full year impact of performance of about $80,000,000 which of course offsets the benefit we're getting through the additional CSO funding that came as a result of the 7 CPA. There's no single item that I'm aware of or drug, Andrew, that I'm aware of that's sort of leading to that.
That's that $80,000,000 impact. It's on a broad range of drugs.
And if I sort of look at government outlook for PBS, you sort of think roughly sort of similar in terms of the outlook just for the underlying growth?
Always hard to determine. You always ask me and I never really enlighten you much. I don't think on that.
The $1,000,000 question for all. And for the government.
I don't think I do. But look, we've been getting we have been in our business and as you can see in the numbers, we've been quite pleased with the ethical volumes we've been getting in that wholesale business and a lot of that's driven by our major customers. And some will think that's just CW, but it's not just CW. We've got a lot of major customers and they've all been getting driving fairly strong ethical growth. So look, we would like to think that that can continue into the second half at around about the 3% to 4% mark.
And if we can do that, then we'll be happy with that. I can't really share with you any insights beyond that. No, that's fair.
3% or
4% is sort of where we were and I think even at those levels I get the sense you take over share. So that's great. Thank
Our next telephone question is from Saul Hadasson from UBS. Please ask your question, Saul.
Yes, thanks. Good morning. John Leonard, John, just a quick question on the gross margin in community pharmacy, just noting that it's been pretty stable this period versus last. You obviously called out the PBS price reforms versus the benefits you're getting through the CSO. So just a I mean in essence in terms of outlook for that division, do you think that gross margin effectively is now sort of fairly stable as you look out?
Do you see any potential either upside or downside risk to that margin from anything in particular?
Hi, Sol. Yes, look, that has been as you know, that has been stable and the expectation is it would be stable. So there's so many sort of moving parts in respect to that margin as you pointed out. So we've got increased CSO funding, we've got the impact of peak, which is a positive, the impact of performance, which is a negative. What we've seen in our business though is this particular period has had a high proportion of the revenue growth has been based on the ethical lines and not on the FMCG goods.
So as you know, we learn a lower margin on the ethical lines and gross margin than what we do on the FMCG. And so the FMCG was particularly impacted by the decline in volumes across the cough and cold segment. So that was sort of like an industry impact. And that acted as a major decline, if you like, on that core margin. So you might have reasonably been expecting the GAUL margin to go up, but with those two impacts PBS reforms and the lower cough and cold and other FMCG categories because of COVID, it's been relatively stable.
So our expectation is hopefully we can hold that at the current levels.
Thanks, John. And just one last one for me. On the consumer business revenues, just noting that decline into 1H21, do you think that revenue base has now reached some sort of 4? Or do you see that revenue continuing to decline sequentially because of those pressures that you've called out?
I'd like to think that it's reached its base. Again, it's hard to tell in this COVID environment. Some of our as I said on the call, some of our products say in Pharmacy Choice and QuickNitz have been affected by COVID and supply chain difficulties, etcetera, as well as the fall off in the daigou. I think we probably got the full impact of the daigou in the numbers. But if there are other impacts as a result of supply chain disruptions, etcetera, then that could impact it further.
But I'd like to think that it won't going forward. I'd like to think we've reached the base.
Great. Thank you, John. That's all I had.
Okay. Thanks, all.
Our next telephone question is from Adrian Alborn from Jarden. Please ask your question, Adrian.
Good morning, John. Just wondering if you can comment on given your recapturing, I guess, above system growth and your ROCE is at a record level. Can you just sort of help us understand like what sort of level of investment is required on the I guess the facility side for the next sort of while that that trend continues?
Adrian, you're very hard to hear. I think your question was on ROCE and the level of investment required, if I interpreted that correctly. So I think Adrian,
look, was
that right? Yes. And
against the backdrop of capturing the buses as well. I didn't catch that part
of the question. I'm sorry. You're very unclear. But if I can talk about at least ROCE level of investment in our warehouses, then in the first half, we had a relatively low CapEx spend of 10,000,000 dollars As Leonard pointed out in his call, that was probably under our expectations because of mainly because of COVID restrictions and having people access sites, etcetera. So you probably see an increased spend in the second half and maybe some catch up spend into FY 'twenty two.
Look, we continue to evaluate the whole network across both Australia and New Zealand and cater for the significant growth in the business that we have generated particularly over the last couple of years. So, suffice to say that it's a point where we will we'll continue to monitor, but any investment that we have to make in the future then we certainly look to have that investment at least target our internal return on capital of 15%. And then I think your question might be and if I'm talking about just I'm assuming here you talked about I think the system being above market growth and apologies if I haven't interpreted this correctly, but we have in our view we have and what's backed up by the data, we have generated market share gains in both our community pharmacy business and also our hospitals business over the first half. So that's been pleasing that we have continued to grow our market share. As you know, we've got significant presence in both markets and the alignment of that customer base is continuing to grow.
So if we can continue that growth in the second half, then we're well placed. So I trust that's the answer to your questions.
Yes, it does. Is that easier to hear? That's a
bit better, Adrian. Yes.
Perfect. I'll pass it back.
No, that's okay.
Can I ask a follow-up question? Just on the Terry White key market side effects? Obviously, you called out in the presentation record network adds. How much more opportunity do you see for that network?
On network growth? Well, we see very look, the whole Terry White Kmart growth is really important to us. It's a key strategy for the group. Since we took as I mentioned in the call, since we've moved to full ownership, we really invested heavily into that business. It's about network stores at about 450.
We have a target to push through 500 stores. We believe we can do that within the next 12 months. If we look out 3 years, we have a target to get to 600 stores. I believe the business can do that. We continue to invest in the business.
In terms of the media spend, in terms of the promotions, in terms of the category. And I think it's starting to resonate really strongly now within the industry. The like for like sales are very strong when you compare it to our competitors. So it's a key fundamental strategy for the group and we're very positive on it. So the numbers are heading in the right direction for us.
So there's no reason why we can't readily go through 500 stores. And there's no reason sitting here today why in 3 years' time we can't go through 600 stores, right? So there's plenty of growth in our view still to come there.
There. The next telephone question is from Stephen Ridgewell from Craig. Please ask your question.
Good morning, guys, and congratulations on a good result. Just following up on Adrian's questions on clearly what came up. Each store went, I mean, roughly how much kind of revenue does it add to the wholesale business and then approximately kind of EBITDA? Like how material is those store wins to the broader group performance?
I can't talk EBITDA, Stephen. But in terms of revenue, each store probably adds somewhere between well, depending on the size of the store, of course, and they're all varying sizes. But depending on the size of the store, it might add $1,000,000 to $2,000,000 in terms of wholesale revenue annually, sometimes more than that.
Okay. That's helpful. Thanks. And then just a bit of a commentary on
Sorry, go
on. Sorry. Just kind of different kind of tech. There's been a bit of discussion about kind of COVID already. But in a group level, do you have an estimate for perhaps how much the first half results benefited from COVID?
There's obviously some parts of the business with others, perhaps some with unders. But on a kind of a net basis, do you see the group as a beneficiary from COVID? I know the second half last year you thought it was net 0. And then I guess that sort of speaks to do you expect a bit of an unwind for the group as we come out the other side of COVID?
Yes. I said on the call, Stephen, that it did when you add up all the ups and downs of it and that's not an easy exercise because it does impact on so many parts of the group. But in essence, we thought it probably added up to somewhere probably just under the 2% in terms of the growth, right, on the EBIT growth, right, for the period. So what we have EBIT growth of 11.5% or so. So we think probably about 2% of that was or just under 2% was probably related to COVID, right?
Now the benefits are we handled some PPE equipment through the period. We certainly got some significant growth coming out of also the Animal Care business. But then areas like consumer products, a lot of this decline is due to COVID. And also, as I mentioned earlier about the fall off in the cough and cold category, which is a high margin category within our community pharmacy business, that had a really substantial decline. So it's not a precise science, but that's what we that's our view, just under the 2% mark.
Yes. No, that's helpful. Thanks. And then just last one for me. Just interested in whether you can call out whether the contract logistics business in Australia saw share gains in particular and life is on the high profile challenges one of your competitors has faced and whether you're optimistic to see some share growth into the second half?
We didn't see any share gains in the first half. We came off quite a solid period of growth in FY 2020. So we didn't see any share gains in FY in the first half of FY 2021 and probably won't in the second half. What we're seeing is a result of the environment we're in that manufacturers are generally reluctant to change service providers, just from a risk perspective. But we certainly expect that business to start taking further share gains into FY 'twenty
2. Our next question is from Matthew Chabria from Citi.
Good morning, John and Leonard. Thank you for taking my question. I just had a big picture question for you on community pharmacy side of things. We saw the other players reporting kind of, I guess, above historical average growth in their distribution businesses and retail pharmacies. And I was just wondering what do you think is the sustainable kind of growth level going forward?
Because it used to be around 1% to 2% a year, and it seems like the whole market is growing faster. And I just wanted to know whether you had a view on that and how long it's going to last for?
Yes. Hi, Matthew. No, look, that's a fair question. I think really, I think we're all probably different in terms of our businesses. And it really is reflective of your customer base that you've got that's going to drive the overall growth in that particular category.
So what we have seen is an uptick in our revenue growth in that particular area because of largely because of the alignment we have with our major customer groups. So and within that, of course, is the performance increasing performance and improved performance of Tellur White Chemar. So we would expect to see sort of like above market growth in that particular market segment. We know we've improved our market share there in the first half. So we would expect to see that continue.
Now does that mean that market grows at 1 to 5s or 1 to 2s into the future? That's always very difficult to tell. But what we would have an expectation is that we would always or we would like to think that we will generate above market growth because of that alignment we have with those our customer base, whether it's our major customers or whether it's our independent customers. We'd like to think that we can generate above market growth there.
Yes. Understood. And I guess a similar question on the Animal Care side of the business. Obviously, you're seeing extraordinary growth. How long do you think that can last for?
Because it will become hard at some point to grow your market share given that you have such a high market share in some of those businesses.
Yes. No, it's the question. I'm very positive on what we can do in Animal Care. I think if you look at its track record, what we have been able to do over the last 5 years or so, we've had strong growth. There's no doubt that business as a result of COVID has gone to a new level.
So, certainly not sitting here today expecting that business to continue growing EBIT at 25%, but we still expect probably higher growth coming out of Animal Care, a higher growth rate than what we see out of our Health Care business going forward. I still think there's some really fantastic opportunities for us to embark upon in Animal Care into the future. And therefore, while there might be a slowing in terms of the headline growth rate, I once again, we've got real confidence what we can do in this particular market segment.
All right. Thanks very much.
Okay. Thank you. I think that concludes the questions, Kevin.
That's correct. Please go ahead.
So thank you everyone for your participation in the call today and listening to us and your ongoing support for the group. And we look forward to catching up with you all in the near future. Thank you very much. Bye bye.
Thank you. Ladies and gentlemen,
that does conclude the call for today. Thank you for all participating. You may all disconnect. Have a great day.