Good afternoon, ladies and gentlemen. My name is Liz Coutts, and I am the Chair of EBOS Group Limited. I am delighted to welcome you to today's annual meeting in Auckland. Today's meeting is held in person and online via Computershare online meeting platform. This allows shareholders, proxies, and guests who could not join us to watch live webcast of the meeting and read the company documents associated with the meeting. Welcome to you all. For those of you attending the meeting virtually, if you have a question to submit during the meeting, please select the Q&A tab at any time and type your question. If you need assistance, please also use the Q&A tab for help, and a Computershare representative will respond directly to you.
Please also note that your questions may be moderated, or if we receive multiple questions on one topic, amalgamated together, and I will address questions at the relevant time of today's meeting. We will also take questions from the floor here in Auckland. As required under the NZX listing rules, voting today will be conducted by way of poll on all items of business. To provide you with enough time to vote, I will shortly open the voting for all resolutions. Those eligible to vote can do so on the voting forms provided. Alternatively, you can cast your vote using the Vote tab on the Computershare online meeting platform. Shareholders viewing online can also vote via the platform. To vote via the platform, simply click on the Vote tab and select your voting direction from the options shown. Your vote has been cast when the tick appears.
You can change your vote up until when I announce voting is closed. I am advised that a quorum is present. I therefore declare the meeting open and that voting is open on all items of business. As the notice of meeting has been circulated to all shareholders, I will take it as read. There are no apologies. Now to the business of the meeting. My first duty today is to introduce your directors and executives. Today, we have all directors and our CEO and CFO here in Auckland. Joining me are our fellow directors, Stuart McLauchlan, Tracey Batten, Mark Bloom, Matt Muscio, Coline McConville, and Julie Tay. Julie is seeking re-election today, and she will address the meeting later. Also seated on the stage is Chief Executive Officer Adam Hall and our Chief Financial Officer, Alistair Gray.
Also in attendance today is Mike Hoshek with our auditors, Deloitte, he is on the front row here, and Roger Wallace from our legal advisors from Chapman Tripp, who is also in the front row. So great to have you join us today. Today's meeting is comprised of three parts. Firstly, I will provide shareholders with a summary of the highlights from the past year, and then Adam will provide you with further details on the group's financial performance and activity over the last year, and that will be followed by the formal business. We have two resolutions for approval this year. Turning now to our highlights for the year. We will begin with a short video.
The video captures the breadth of our operations, the dedication of our people, and the key role we play in supporting healthcare and Animal Care customers and communities across New Zealand, Australia, Southeast Asia, and Hong Kong. As you have just seen, FY 2026 was another year of significant activity and progress across the group. The year was particularly important as we refreshed our strategic direction, sharpened our focus on the higher growth and higher return segments within healthcare and Animal Care, and further positioning EBOS for long-term sustainable growth. At its core, EBOS is built on a clear and repeatable model grounded in care, productivity, and partnership. These principles guide how we operate, how we invest, and how we create value. Our care-based portfolio has been curated over many years and is defined by our four operating segments.
Symbion and Healthcare Distribution supplies medicines, consumables, and logistics services to pharmacies, hospitals, government, and healthcare partners across Australia and New Zealand. Retail Pharmacy Brands helps independent pharmacies grow by providing store brands, services, digital tools, and retail support across a large network. Medical Technology works in hospitals and alongside surgical teams to support specialist medical technology and biologics solutions across Australia, New Zealand, Southeast Asia, and Hong Kong.
Animal Care makes and markets pet food and distributes vet products and animal health brands through retail and wholesale channels. Importantly, each of these businesses holds a leading position in its markets. In most cases, we are number one or number two. That scale and leadership is a real strength, and it underpins the resilience of the EBOS portfolio. Together, our businesses connect people, pets, and communities to care anywhere. FY 2026 was a year of solid growth for EBOS, with an 8% increase in statutory EBITDA and a 5% increase in underlying EBITDA. It also marked an important milestone. Over recent years, the board has backed a significant program of investment to modernize our network and strengthen our portfolio.
That facility investment cycle is now complete. As a result, EBOS goes into FY 2027 a stronger business. We have modern facilities, a balance sheet with capacity, and the flexibility to keep investing in growth. The board is confident there are further opportunities to build value for shareholders, both through our existing businesses and through disciplined complementary acquisitions. Adam will take you through the results and priorities in more detail shortly. Over the long term, EBOS has delivered an approximately 10% EBITDA compound annual growth rate, supported by a balanced contribution from organic expansion and carefully selected acquisitions aligned with our strategy.
We have complemented this growth with a strong capital allocation framework, generating attractive returns from bolt-on investments while maintaining stable dividends for shareholders, guided by a long-standing payout ratio target. Our balance sheet remains robust, and our strong operating cash flows continue to provide EBOS with capacity to reinvest in its businesses, pursue growth opportunities with discipline, and deliver returns to shareholders. Turning now to sustainability, where our focus during the year was on practical action and clear reporting. We published our third climate statement in mid-September with a refreshed assessment of our climate-related risks and opportunities and their potential impacts on the group. We continue to invest in renewable energy and energy efficiency, and our grid purchase electricity efficiency improved, largely reflecting the opening of newer, more efficient facilities.
Rooftop solar installations increased our renewable energy generation, and planning progressed on two large-scale ground-mounted solar arrays at our Parkes facility. In New Zealand, we have matched all of our electricity consumption with renewable energy certificates since FY 2024. Our contribution to our long-standing partner, Greenfleet, increased again this year, taking our support since 2007 to more than AUD 2.9 million, supporting its work in restoring native biodiverse forests across Australia and New Zealand. In rural Victoria, we have also partnered with Greenfleet on a reforestation project at a former dairy farm. Approximately 98,000 native trees and shrubs were planted, with native wildlife already returning to the area. We are equally committed to our inclusive and supportive workplace, where we believe that people do their best work when they feel safe, respected, and valued.
In FY 2026, we refreshed our diversity, equity, and inclusion policy to ensure it aligned with that commitment and with our broader strategy. During FY 2026, we continued to identify and strengthen safeguards in our warehouse operations through targeted engineering improvements and investment in critical risk management, which continues into FY 2027. We also progressed the rollout of the EBOS Life Savers program, reinforcing a consistent group-wide framework for the management of high-risk activities. Through our safety leadership walks, your board and the enterprise leadership team engage directly with employees to understand how risks are managed and identify opportunities to strengthen safety performance. Together, these initiatives reinforce the importance of visible leadership, accountability, and open communication, all of which support a strong safety culture. This commitment is reflected in the simple but important safety matters mantra: work safe to get home safe.
We also introduced a new training, including a respect at work module, giving our people practical tools to look after one another and to foster safe, respectful, and inclusive workplaces across the group. The success of EBOS is made possible by the contribution of our people, and their health, safety, and wellbeing is a fundamental priority for the board. Retaining and motivating our people also remains a key priority for the board. In FY 2026, we completed a comprehensive review of our executive remuneration framework.
The changes which apply from FY 2027 strengthen the link between executive reward and EBOS's medium and long-term performance. They include deferring part of the short-term incentive into equity, adding market-priced options alongside performance rights in the long-term incentive, and introducing a minimum shareholding requirement for executives. The board also adopted a minimum shareholding policy for non-executive directors, and each of us bought shares during FY 2026.
Together, these steps strengthen the alignment of your board and executives with you as shareholders. Our responsibilities extend beyond our commercial operations to the community. As you can see from this slide, EBOS businesses continue to support a range of partnerships and initiatives that improve the health and wellbeing outcomes in the communities we serve. These contributions include fundraising, strategic partnerships, employee participation, and the provision of products and services. They are closely aligned with our purpose of connecting people, pets, and communities to care anywhere and reflect the values of our employees, many of whom contribute their own time and energy to supporting local organizations and causes. Turning now to shareholder returns, your board declared a final dividend of NZD 0.615 per share, which was paid to shareholders last month.
This brings the full-year dividend to NZD 1.185 per share, representing a payout ratio of 84.5% of underlying net profit after tax. In determining dividends, the board carefully balances the importance of providing shareholders with a reliable income stream against the need to maintain financial flexibility and invest in attractive growth opportunities. The final dividend reflects the board's confidence in the resilience of EBOS's earnings, the strength of its cash flow generation, and the group's long-term growth outlook. Our approach will continue to be guided by the sustainability of earnings and cash flows, the strength of the balance sheet, and the long-term interests of shareholders. On behalf of the board, I would like to thank Chief Executive Officer Adam Hall, the enterprise leadership team, and all of EBOS employees across New Zealand, Australia, Southeast Asia, and Hong Kong for their leadership, commitment, and contribution throughout the year.
Their dedication, expertise, and care underpin our success and enable us to continue serving our customers and communities. I also thank our customers, suppliers, pharmacy partners, healthcare professionals, and other business partners for the trust they place in EBOS, and to you, our shareholders, for your continued support and confidence. We are proud of what we've achieved in FY 2026 and look forward to building on that momentum as we deliver on a refreshed strategy and create long-term value for our stakeholders. Together, we will continue to build a stronger, more resilient EBOS, delivering meaningful outcomes for the communities we serve. I will now invite Adam to provide a more detailed review of the group's operational performance and outlook. Thank you.
Thank you, Liz, and good afternoon. Thank you for joining us, whether you are here in the room or online. I'd like to cover three things this afternoon. First, our FY 2026 performance. Second, how FY 2027 has begun across our four divisions. Third, the opportunity to bring those divisions closer together and create further value across the group. Let me start with FY 2026. Revenue increased 9.9% to AUD 13.5 billion, while underlying EBITDA, our measure of operating earnings, increased 5% to AUD 614 million. I want to acknowledge the bottom line. Our underlying net profit was AUD 250 million, down 3.1%, and underlying earnings per share declined by 7.3%. This largely reflects the depreciation and interest costs associated with our distribution center investment program that Liz mentioned. Importantly, as of the 30th of June 2026, the major facility investment cycle of recent years is now complete, with all eight facilities operational.
Those investments have strengthened the group's capabilities and capacity, and our focus now is firmly on execution, improving productivity, realizing the benefits of that investment, and converting our structural advantages into stronger returns and sustainable growth. Following completion of this once-a-generation major facility investment cycle, we have an immediate one-third step down in our capital expenditure in FY 2027, and that tracks with what we've seen to date this year. Our balance sheet remains in good shape. Leverage was 2.1 x, comfortably within our target range of 1.7 x- 2.3 x, and our return on capital employed was 12.8%. While we made important operational and strategic progress during the year, the board and the executive team are very aware that EBOS's share price performance has been disappointing for shareholders. We recognize that progress within the business must ultimately translate into sustainable earnings growth and long-term shareholder value.
As we demonstrate our daily operational performance, and as we post consistent financial results, we believe that shareholders will appreciate the value of our high-quality EBOS portfolio, and that will grow with our aging population and the wealth of new medicines and new medical technologies coming to market. Part of that consistency I mentioned is delivering on our guidance. In FY 2026, we achieved our financial guidance metrics, EBITDA, CapEx, depreciation amortization, net finance costs, and leverage. This was despite elevated fuel and broader energy costs, which led us to update EBITDA guidance soon after the Iran conflict began. The divisions also delivered against the growth priorities we set out at our Investor Day in April. Symbion grew in line with its industry, and Retail Pharmacy Brands delivered high single-digit growth. Medical Technology also delivered high single-digit growth, and Animal Care delivered mid to high single-digit growth.
As noted in the full-year result, macro headwinds such as foreign exchange rates and fuel costs directly impacted our earnings. But pleasingly, we were able to mitigate some of the fuel costs across our various businesses. Let me now turn to the first quarter of FY 2027. The key message here is that positive growth has continued to build throughout the quarter, and we're reaffirming our existing FY 2027 guidance despite the persistent foreign exchange and fuel cost headwinds. As we previously indicated, we expect to continue to. We continue to expect earnings growth to be weighted to the second half of the year. What is pleasing is the growth momentum is broad based. Kemps Creek is ramping up in our Symbion business, and the Chemist Warehouse New Zealand contract has been extended. Retail Pharmacy Brands is expanding its store network and own brand sales.
In Medical Technology, our supplier partnerships continue to grow, and our recent acquisitions are performing. In Animal Care, Black Hawk and Vitapet sales increased mid to high single digits, and Kiwi Kitchens has made a promising start in the United States. You'll be able to see some of that product later over in the corner. There is also an important change in our financial position. As I mentioned, our eight new facilities are now operational at the end of FY 2026, and that's thanks to the hard work and commitment of the teams leading these large capital projects. CapEx was approximately AUD 145 million in FY 2026, and it remains on track to step down this year to AUD 100 million in FY 2027. Now, that lower capital intensity supports stronger free cash flow.
Within our target leverage range, it also creates approximately AUD 150 million of capacity for disciplined bolt-on acquisitions. At the same time, we are beginning to unlock the benefits of operating more effectively as one group. We expect these initiatives to provide incremental financial benefits from FY 2028, as well as organizational opportunities, and I'll discuss this further shortly. I'll now talk to each of our divisions and then outline this group's strategy, synergy opportunity, and finish with our FY 2027 guidance. Let me begin with Symbion and Healthcare Distribution. The priority here is clear. It is to put our recently installed capacity to work. We have spent several years renewing this distribution network, and with that program now complete, the focus is on using those assets to lift productivity and support growth without further major investment. Kemps Creek is a great example.
Warehouse productivity is already approximately 20% higher than at the former predecessor Greystanes site. We expect that improvement to reach around 30% by the end of FY 2027 as the automation benefits are realized and volumes continue to ramp up. The first quarter run rate is on track. Community Pharmacy has also had some supportive structural tailwinds. Although competition to serve Community Pharmacy remains elevated, the government's Community Service Obligation funding pool increased from the 1st of July, with earnings from that tracking in line with our expectations. Demand for GLP-1s and high-value medicines continues to remain strong and consistent with our growth outlook. In Contract Logistics, the team secured 20 new principals in FY 2026, and our new Perth facility is now live and serving customers, which enables us to offer full Australia-wide coverage.
Here in New Zealand, the CWNZ wholesaling contract has been extended by agreement and will now ramp down progressively through to the end of FY 2028. This agreement represents a modest component of group earnings, and the extended timeframe gives us the opportunity to adjust the cost base in a disciplined way. Three sites have already been exited with a fourth transition, the Dunedin site into Christchurch, now announced. Importantly, the remainder of our New Zealand business continues to perform well, and we recently renewed a separate major customer contract as well. Turning to Retail Pharmacy Brands, the priority here is to drive store dollars. Put simply, when our pharmacy partners perform well, we perform well. We have seen a meaningful challenge to customer spend as the cost of living impacts their wallet.
As a result, our investment is therefore focused on helping stores attract more customers and expand the services they provide and increase sales. We see five practical levers to help achieve this. First, network growth. We now support approximately 790 stores with around 10 net additions in the quarter. This includes TerryWhite Chemmart, Cincotta, and MediAdvice, in which we acquired a majority interest during FY 2026. A larger network creates further scale across our brands, buying, and services. Second, broadening care. 61% of all Australians live with an ongoing medical condition, and 38% of all Australians live with two or more. These figures are expected to increase as the population ages. Against this backdrop, TerryWhite Chemmart's commitment to care continues to resonate with customers. During the FY 2026 flu season, our network delivered 24% of all pharmacy flu vaccinations. This is not just a measure of vaccination volumes.
It also reflects the expanding scope of practice in community pharmacy and its increasingly important role as a front door to healthcare, creating more opportunities to support our customers with their health over time. Third, a digital ecosystem. Units through TerryWhite Chemmart's online channels increased by 25%. Customers increasingly expect to engage with us both in-store and online, and the team is enhancing that capability. Fourth, partnering with consumer brands. Campaigns that were delivered through our in-store screens generated a 35% uplift in unit sales for the promoted products. That creates immediate value for our supply partners and our pharmacy owners, while also developing a higher margin income stream for the group. Fifth, owned brand. Retail sales increased at a low double-digit rate. Owned brands provide customers with good value and support stronger margins for pharmacy owners and the group. Moreover, these levers reinforce each other.
More stores create more opportunities for more health services, online engagement, and owned brand sales. Greater customer traffic also increases the value of our retail media platform. There is always more to be done, but the division has solid momentum as we move through FY 2027. In Medical Technology, our priority is to expand scope and reach. It is worth briefly explaining the business model. We connect the world's leading medical technology manufacturers and donor networks with the hospitals, clinics, and healthcare practitioners who use their products. We have more than 400 supply partnerships. We serve more than 4,500 hospitals and clinics, and we engage approximately 2,000 practitioners each year through professional education programs. This is not just a distribution business, this is a trusted partnership. We believe we are the leading independent distributor in Australia and New Zealand and Southeast Asia.
We are also the largest biologics provider in Australia. We strengthened that platform in FY 2026 through four acquisitions, each continuing to build out our scale presence. Precision Surgical, which is a spine and orthopedic distributor on the east coast of Australia. alphaXRT, which provides oncology radiation solutions here in New Zealand and in Australia. K-Talyst, which works in aesthetics and reconstruction across Southeast Asia. Finally, by consolidating Origin, a U.S.-based allograft JV in which we have a majority interest. Pardon me. Each of these broadens the range of procedures, customers, and clinicians we can support. As with FY 2026, there remains continued pressure from Forex and fuel charges, in addition to the customer market dynamics that we must respond to. Overall, Medical Technology provides exposure to attractive long-term growth in specialist healthcare. It is also a natural destination for our disciplined bolt-on investments that our balance sheet can support.
Finally, Animal Care, where the focus is on new products and customer momentum. The branded portfolio is performing well in the current climate of elevated cost of living concerns. Across July and August, Black Hawk and Vitapet delivered mid-high single-digit value growth compared to the prior corresponding period, significantly ahead of the category. While cost inflation and the phasing of marketing investments is expected to subdue first half EBITDA growth, these pricing actions will accelerate the second half performance. At a time when household budgets remain under pressure, this demonstrates the strength of the brands and the trust of pet owners. The second growth engine is international expansion, particularly the export of Kiwi Kitchens to the United States. Sales of our Kiwi Kitchens products continue to accelerate in the U.S., albeit off a relatively small base right now.
The brand is now ranged across California, and we have the ambition of expanding our presence in more regions. The United States is the world's largest pet food market, so even a modest position represents meaningful opportunity over time. Our branded Animal Care business has two distinct sources of growth, strong brands with manufacturing capability and increasing reach internationally. Whilst not mentioned on the slide, our leading vet wholesale business also continues to perform well, supported by structural growth in pet ownership and an aging pet population. As pets live longer, they typically require more frequent, more sophisticated care, and that in turn supports sustained demand across veterinary medicines, consumables, and other clinical products. With our broad range, established network, and trusted customer relationships, vet wholesale remains well-placed to support veterinary practices as that demand continues to grow.
We are also seeing more and more opportunities to swap best practices between human and animal health in distribution and warehousing. These practical examples point to a much broader opportunity across the group, bringing together the capability, the expertise, and the scale that already exists across EBOS. This now brings me to an important value frontier for EBOS, the opportunity to continue to work more efficiently across the group. EBOS has four strong divisions that have historically operated with a high degree of independence. Over the past year, our leadership team has established a strong shared purpose and common group strategy. That work has identified three practical opportunities to collaborate to lower our cost base, each at a different stage of development. First, combine support office costs. This work is well underway across finance and IT, with a disciplined focus on centralizing, standardizing, and automating activity, and partnering where appropriate.
These changes have already begun, and we expect modest run rate benefits beginning by the end of FY 2027, which will then positively impact FY 2028 onwards. Second, scale negotiation. Group-wide visibility and analysis of our external spend has identified opportunities to use our scale to drive better negotiating leverage. Value creation is expected to kick in as legacy contracts start to renew towards the end of FY 2027 and into FY 2028. Third, supply chain efficiency.
This opportunity is at the scoping stage, but it involves evaluating our network on how to use our facilities to best serve customers across all our divisions, building on the network that we have just renewed. This will be a multi-year program, carefully sequenced to protect customer service, with an opportunity for proof of concept in FY 2027. Together, these initiatives are expected to deliver incremental financial benefits from FY 2028 and unlock opportunities in the organization.
We will provide further detail, including the size of the opportunity, with our half year results in February. Turning to the outlook, the resilience of the divisional performance we have outlined is particularly important given those significant foreign exchange and fuel headwinds affecting the business. The Australian dollar has continued to appreciate against the New Zealand dollar, up another circa 2% in the period, while the average diesel price has increased by approximately 20%. Together, these movements have created a material headwind to earnings and distribution costs, and we expect both drivers to remain volatile through FY 2027. Despite this, I am pleased to reaffirm our FY 2027 guidance.
We continue to expect underlying EBITDA of AUD 635 million -AUD 655 million, representing mid-single digit organic growth, CapEx of around AUD 100 million following the completion of the investment program, depreciation and amortization of AUD 152 million -AUD 162 million, and net finance costs of AUD 138 million -AUD 148 million. As noted, similar to last year, EBITDA and NPAT growth are expected to be weighted to the second half.
The confidence in our guidance is supported by the group's resilient market positions, disciplined execution, and the benefits of the investment program completed in recent years. Let me close by bringing the key themes together. First, approximately 85% of the group's EBITDA is generated by businesses where we are number one or number two with market positions. Second, we have redeployed approximately AUD 2 billion of capital over the past five years into higher growth areas, including Medical Technology and Animal Care.
These higher growth businesses now represent more than 70% of group earnings. Third, the major facility investment cycle is now complete. Each division has a clear growth agenda, and we are beginning to realize the benefits of operating more effectively as one group. We also have the balance sheet capacity to continue investing while maintaining the discipline on returns that shareholders should expect from us. None of this is possible without our people, and I would like to thank our EBOS teams across Australia, New Zealand, and Asia for all their hard work, care, and commitment that they show every day, and our customers and partners for their continued trust. Thank you also for your continued support. I now hand back to Liz.
Hi. Thank you, Adam. We will now proceed with the formal business of the meeting. The first item of business is to consider and receive the annual report. The annual report contains the financial statements, director's report, and the auditor's report for the year ended 30th of June, 2026. A formal resolution is not required. We will then move on to the other matters to be put to a vote. We have two ordinary resolutions to deal with today. Resolution 1 is a reelection of Julie as a director. Julie is required to retire by rotation, is now required to be put forward for reelection by shareholders at this meeting. Resolution 2 is to authorize the directors to fix the fees and expenses of the auditor. Shareholders will have an opportunity to ask questions on each resolution as each resolution is proposed.
If you wish to ask a question online, I ask that you follow the directions previously advised and use the Q&A tab on Computershare platform. Your question will come through immediately, and may I request your patience as questions are sent through. Those attending here in Auckland can either use the app or raise your hand and a member of our team will hand you a microphone. I remind you that only shareholders and valid proxy holders are permitted to vote or ask questions. Those of you who are shareholders in the room today will have been given a sticker on registration. Please show the sticker to our team members prior to asking a question. The directors holding proxies representing 135,733,520 shares in respect of all resolutions. Where directors hold an undirected or discretionary proxy, they intend to vote those proxies in favor of the resolutions.
The annual report and financial statements were subject to audit by Deloitte, who gave an unqualified audit opinion. The annual report and financial statements were audited and lodged prior to the annual meeting, and there was no formal resolution required to be put to the meeting. I will, however, take questions on the annual report and financial statements and any other aspects of the business you may want to discuss. The auditors Deloitte are represented here today.
Are there any questions on the annual report? Questions in the room. I can't see any questions online coming up yet. No, there appear to be no questions. We will now move to Resolution 1 relating to the reelection of Julie Tay, a director. The resolution is, it is resolved that Julie Tay be reelected as a director of the company. I now invite Julie to make a statement to the meeting. Thanks, Julie.
Thank you, Liz. Well, good afternoon, everyone. Thank you for joining us today, and thank you, Liz and the board, for the opportunity to stand for reelection at this AGM. I'm Julie Tay. I'm Singaporean, based in Singapore. Today, I'm seeking your support for my reelection as an Independent Non-Executive Director of EBOS. Like many of you, I am a shareholder of EBOS, and over the past three years on the board, I have valued the opportunity to contribute to the company's progress. I would welcome the chance to continue supporting its growth in Australia, New Zealand, and throughout the Asia Pacific region. I'm a seasoned Executive with more than 30 years of experience across Asia Pacific, leading medical device businesses in both B2B and B2C business models.
I began my career in sales management, moved into marketing, commercial excellence, new business development, strategic planning, and ultimately into full P&L leadership roles. I have held executive positions at Johnson & Johnson Diversey, Bayer, and most recently served as Senior Vice President at Align Technology and a member of its global executive committee. These experiences have given me deep strategic, operational, and commercial expertise, with a strong focus on growth. I'm also passionate about building strong organizational cultures and engaged workforces by developing talent. Currently, I serve as the Independent Non-Executive Director of Sonova Holdings AG, a publicly listed company in Switzerland, where I sit on both the remuneration and nomination committee and the audit committee.
Driven by my commitment to developing the next generation of leaders in MedTech, I also contribute my time as pro bono mentor with Asia Mentors Circle and act as an executive advisor to Signature Leaders. In terms of qualification, I hold a Bachelor of Arts in Psychology and Political Science, earned an MBA from Curtin University of Technology in Australia. I also hold a certificate in International Directors Programme Board and Corporate Governance from INSEAD, and I'm a member of YPO, the Young Presidents Organization, and also accredited member of the Singapore Institute of Directors.
EBOS is an outstanding company with a strong foundation and significant opportunities ahead. Having served on the board for the past three years, I have seen firsthand the quality of its people and the potential of its businesses across the region. If reelected, I bring my commercial experience, international perspective, and my commitment to good corporate governance, always with the interest of all shareholders at heart. I will be honored to continue serving as your Independent Non-Executive Director, and I respectfully ask for your support for my reelection. Thank you. Over to you, Liz.
Thank you, Julie. Are there any questions from the floor on this resolution? Doesn't appear to be. There is a question online from Stephen Mayne. He's got, "Nothing much happens at Kiwi AGMs. Part of the standard auditor remuneration resolution today, we've gathered to vote on a single resolution, the reelection of Singapore-based Director, Julie Tay. In 2019, ASX-listed Treasury Wine Estates voluntarily moved to annual elections for directors in line with best practice that occurs in both the U.S. and the U.K. Dual-listed companies like News Corp and Rio Tinto also did this due to the laws in the U.S. and the U.K., and BHP has continued doing it even after its U.K. dual listing ended in 2021.
Can the Chair and candidate, Julie Tay, comment on whether our company should or would follow this TWE and BHP lead and move to annual elections of directors at next year's AGM? At least that would make our thin AGM agendas a bit more interesting." Well, first of all, not always, but I can have some very interesting AGMs. I'm not so sure about that in New Zealand. So no. First of all, just on seriousness, we note that, look, this is not standard practice in Australia or New Zealand, and we do not have any plans to introduce this for EBOS next year. So Julie, do you want to comment on that? No. Okay. So are there any other questions on Julie's resolution? Does not appear to be so. I now move the adoption of Resolution 1. The second resolution relates to the auditor's remuneration.
Deloitte is the current auditor of the company and is automatically reappointed in accordance with the Companies Act. It is proposed that the directors be authorized to fix the fees and expenses of the auditor. The resolution is, it is resolved that the directors of the company be authorized to fix the fees and expenses of Deloitte as auditor of the company. Are there any questions from the floor on this resolution, please? Yes, we have a gentleman in the back row. We've just got a microphone for you so that you can be heard both in the room and online. Thank you.
Just a query, how often is the auditor's contract put up for tender?
The auditor's contract was put up for tender three years ago. Is that right, Mike? The audit partner stays in the position for five years and must rotate by their own rules. But it is generally practice that we would put them out for tender at least within 10 years. But we actually do review it each year to see whether we think that this might be a good time to put it out. And some of that we take into account where there has been a change of management, just what is actually happening in the business at the time.
But anyway, it was last done at EBOS three years ago. Any other questions at all? No. And there are no questions online. I now move the adoption of Resolution 2. Before we move on to the voting, does anyone have any other business? Yes. The gentleman here in the yellow shirt. Can- Sorry?
And a green dot.
And a, and a green dot. Could someone just bring the microphone closer, please? Again, we just need to make sure that people both online and in the room can hear your question. Thank you, Bronwyn.
Thank you.
That is it. No.
Yes. Good afternoon. Colin Upchurch, shareholder. I assumed there was going to be general business later, but this is general business?
This is general business.
Okay. Thank you. I think the board and management can be pretty happy that they've organized a fairly well organized company with good assets and good results so far, apart from the share price, but I understand that that's not within your wheelhouse. My question is: What strategies can we change to win back Chemist Warehouse business in New Zealand and Australia?
I'll give that to Adam. Would you like to answer that?
Thank you very much, Colin. Can you hear me well through the microphone, Colin? Okay. Colin, your question was, what strategies can we change to improve our results competing against another major competitor in the market in both Australia and New Zealand. In New Zealand, we're present at the pharmacy wholesaling stage and in Australia pharmacy, excuse me, at the wholesaling stage and retail, so I'll start with New Zealand. In New Zealand, we are pleased to announce today the extension of the Chemist Warehouse New Zealand contract. That allows us to resize our position in the market to suit, as they exit, we will have a changed cost base that will allow us to continue to serve the New Zealand market profitably.
In fact, we have just won a different, or renewed a different, major pharmacy wholesale contract, which we are pleased with. We also see in New Zealand continued opportunities well outside pharmacy wholesaling, including contract logistics, which is a wonderful business for us here in New Zealand. The team here do a terrific job. I think in New Zealand, the opportunity is scale with the market. It is a very competitive market in pharmacy wholesale, and focus on other businesses that are higher margin, including contract logistics. That is the summary in New Zealand. In Australia, we are present at the wholesaling stage and the retail stage, and the strategy is a little bit different.
At the wholesaling stage, that is what has driven the investment that you have seen, increasing the productivity and the automation that we have at our sites, culminating in particular, the facility called Kemps Creek, which is just outside of Sydney. We did not show it today, but online on our website, there is a video of Kemps Creek and how automated it is. It is that additional productivity and capacity that will allow us to compete going forward at the pharmacy wholesaling stage. I should add, because my colleagues would be furious with me if I did not mention it, that there are two other facilities that are similarly automated like Kemps Creek, Keysborough in Melbourne and Acacia Ridge in Brisbane.
That network of three sites serves roughly one million doses of medicine a day through highly automated facilities, and that is, I think, what our key competitive advantage is there. At the retailing stage, I think what is clear is there is another major player with higher sales per store that is focused very much on the discount segment of the market. In contrast, TerryWhite, MediAdvice, Cincotta are focused on care. We have a higher number of, I actually have a larger network of pharmacists across the country, across those three brands, and those pharmacists represent about 12% of Australia's pharmacies, but as you saw in the slides, 25% of the pharmacy vaccinations that were delivered. I think that speaks to the fact that these retail pharmacy brands are seen as the destination for care.
It is not random. Our value proposition being based on care is because Australians and New Zealanders are getting older. They need more care. They need more medicine. They need more support. Our value proposition through our pharmacy brands speaks loudly to that need, and that is what the shoppers tell us. They like coming into TerryWhite because we give them the care that we need. To recap, in New Zealand, pharmacy wholesaling will continue to be very competitive, but we have opportunities in other areas, including contract logistics. In Australia, the investment situates us well in terms of efficiency at the pharmacy wholesaling stage, and at the retail stage, we will continue to focus on those care-oriented customers.
Thank you, Adam. Answer your question? Thank you. There is a question online, and it says, "Please expand on your objectives for Kiwi Kitchens in the U.S. What distribution channels are being used?" Well, Adam and I were in Sydney last week meeting with the Animal Care team, and they were pretty excited about this, but I 'll pass over to our CEO, Adam, to respond to that.
Thank you. As an Australian, I didn't realize just how deeply valued New Zealand provenance is to people around the world. If we go to, and the question was specifically about the United States. If we go to California and we say, "Oh, we have some fabulous pet food. It was manufactured in Australia," the Californians are complimentary. That is nice. That is good. But if we tell them that it was made in New Zealand, if it is New Zealand in a bottle, that is a very powerful message for them. They are excited to share that provenance, New Zealand's heritage of purity, of high-quality ingredients with their family member, because that is how people see their pets, their furry family member. And so, I believe the question was on the channels.
We have partnered with grocery chains, excuse me, specialty pet chains notably in California. You can't really take a nationwide perspective in the U.S. You have to do it region by region. But we are partnered with a specialty chain in California. We are looking to add specialty chains down the West Coast in the other regions of the U.S. there. And so far, the reaction has been extremely positive. Shoppers really appreciate, again, this New Zealand provenance. As an Australian, I didn't appreciate it before, but I have learned to appreciate it now, and I think it is something that the Kiwi Kitchens brand will continue to build on, and I think it is a really great opportunity for EBOS and for Animal Care.
Thank you, Adam. Are there any more questions in the room? Yes. In the front here.
My question is—
We'll just bring you a microphone so everyone can—
Thank you very much.
Thank you.
My question is towards Adam Hall. I believe I have been told that Chemist Warehouse has moved into London. If that is the case, they will be needing more EBOS product, and that is good use.
Could you just I caught the first part of the question, that Chemist Warehouse is moving into London, but I am sorry, I did not catch the second part.
They are already in London. They moved quite a few months ago.
into London with the idea of expanding beyond London, but this is the first step. Do you know very much about it?
You are talking about London, U.K.?
Yeah. Mm.
Yeah. I have to say, the board keep me very focused on Australia and New Zealand, I am less familiar with how competitors in the U.K. are operating, but I will take your question.
Yeah. Well, if that's the case, they'll be needing more EBOS product.
Yes. Well said. Okay. So yeah, expansion opportunity.
Oh, it is.
Yes.
Yeah.
Well, we're very proud of the selection of brands that we have, and you'll see many of them over here. Our strongest pharmacy brands are the TerryWhite Chemmart brand. If you go into a TerryWhite Chemmart in Australia, you will see the green crosses covering off a huge number of private label products. Those are the ones that are most appealing to consumers, but they are probably not going to be carried by Chemist Warehouse, who will not want to advertise a different chain. That said, we do have a number of other brands, and it is a fair challenge to us. We should be aware of export opportunities for our brands, and we will continue to keep that in mind.
Very good.
Thank you.
Thank you, Adam.
Thanks, Stuart.
Thank you.
Right. Thank you.
Thank you. Riki Manarangi from the Shareholders Association. Nice to meet you, Liz, and thanks for having that conversation with Oliver earlier in the week. Apologies I couldn't make it with you. Just building on perhaps some of the things that Oliver might have touched on, couple of questions. One question is, there's emphasis around putting capacity to work across the DC network, and management have described the shift as moving from investment to consolidation and productivity. Does the board see the next phase as primarily integrating recent acquisitions, so likes of SVS, MediAdvice, et c, etc , into the existing platform, or is the pipeline still skewed toward new bolt-on acquisitions? How does the board weigh the risk of integration complexity across the four divisions against the return portfolio of further acquisitions?
Do you want to answer that, Adam?
Sure. If we look back across the last 10 years, and we actually had a really nice chart that Alistair presented at the Investor Day in April, you'll see that we've had a roughly 10% EBITDA growth, but it's been contributed roughly equally between organic and inorganic growth, including those bolt-ons that you mention. I think that's the opportunity in front of us now with the additional capacity that you've correctly mentioned from the DC renewal program. We can get continued growth by putting capacity to work. You heard me mention earlier, the Perth facility that we've just opened. That is great, because not only is it more rack space for us to sell to the global medicine manufacturers, but it also gives us, for the first time, a nationwide presence in this value chain, and that opens up a whole new set of contracts for us.
The capacity additions were meaningful. They've unlocked growth opportunities. You've also heard me mention that we have roughly AUD 150 million of spare capacity for continued bolt-ons. Again, at Investor Day, we have tested the last five years of bolt-ons, and the average return is 16% return on capital deployed, which we think is very healthy, and it continues to build the scale in our businesses. You could see how it applied in Medical Technology. I would see that roughly equal contribution from organic and inorganic growth continuing, and I think that's a good thing. I think it helps keep us at the forefront of new developments, for example, in Medical Technology therapy areas. It also means that we are absolutely putting the existing assets we have to work and getting the very most out of each of those assets.
Thank you, Adam.
Here. Another question.
Sorry. Yeah. Just a final question. Our analysts have suggested a private equity buyer could break everything up and realize the sum of everything in terms of its parts. Does the board periodically review the portfolio composition to assess whether all four divisions are better off under common ownership. Would the board ever consider divestment or separation if the division returns fall below the cost of capital on a sustained basis?
I will start with that. The board really reviews all of its operations, and that we review them with the view that what is the growth prospects, what investment do they need, is it still appropriate to be there? So that is constant. We are, I say, constantly assessing whether growth would be organic or growth needs to be by way of acquisition. There is never any sacred cows as such. You know, you really have to come into everything all the time with open eyes and not be blinkered. So Adam, would you like to—
The only thing that—
—add to that?
The only thing that I would add is that in addition to the KPIs that you mentioned, Riki, we also continually test incremental return on incremental capital, which is a way to, as Liz said, make sure there's no sacred cows. It's not what you have historically. It's today, what are you doing with the shareholder funds, and are you maximizing value? And that's a lens we'll continue to take.
Thank you.
Thank you. Thank you for. Grateful for your questions. We got any other questions in the room, please? Yes.
Thanks. I am Bruce Clark, Shareholder. The speculation in the press that you are a good takeover target now, have you had any approaches?
No, we have had no approaches, and as you know, we have to comply with the listing rules, and if we did, we would have to let you all know. But no, that is, we have not. Thanks for the question. We had another question over here.
Oh. Yes, sorry if it is in the annual report, but I was just wondering, how many full-time R&D staff you have, what the total expenditure is on R&D, and how that compares with similar companies of a similar size in a similar field.
Thank you. That's a good question about R&D, Adam.
Yeah. The EBOS core competency and specialty is really oriented around supply chain, and to some extent, manufacturing. True sort of pure R&D, sort of discovering a new molecule, would probably be something that we would not be particularly good at. What instead we have is a series of employees that are good at product development. So probably not like a new molecule or a new therapy, but rather bringing a new or tweaked product to market. A great example is in Animal Care, where we have a strong track record of going into new categories based off the Black Hawk brand. For example, a year ago, we bought a business called Next Generation Pet Foods. They do freeze-dried and air-dried treats. Think of it as sort of like beef jerky for dogs, and that business was wildly underutilized.
They didn't have the right brand for the right product. So we've come in, we've tweaked the product with that, with those R&D team members, and we have then brought that to market, and we got 5% market share in six months. In terms of the sheer number of humans who are working on that across the organization, I would estimate that there are in the region of 50 humans that would do it at least part-time in their job. But again, it would be more around commercialization and product development and less around true basic R&D. Have I addressed your question, sir?
Yes. Sort of. I mean—
Sorry. We'll just wait for the mic—
Sorry
—so that everyone can hear you. Thank you.
I mean, it, one of New Zealand's major productivity problems is lack of R&D. I mean, you go back to Callaghan, you know, I mean, there's been so much written about it, and yet, you know, none of the politicians, no one seems to be addressing it. It's interesting. I've never looked at other annual reports to see what the focus is on R&D, but I would have thought a company this size should have a team, particularly in the medical application that's totally focused on R&D and nothing else because, you know, you look across New Zealand, I mean, kiwi fruit, apples. I mean, we've introduced so many great products that nobody. Plus all the HamiltonJet and all the others. Nobody's sort of saying, "Well, you know, we've done so well out of all of those. Why don't we invest more?" I mean, you know, rather than building roads of national significance, we should be pouring money into R&D. I mean, it's just, it's not rocket science from my view. Anyway. Sorry, that's enough.
No, no. That is a good comment. Thanks. Thank you. Thank you. Are there any other questions in the room? Oh, yes, we do. Great.
Hi. My question is, I see that in the last 10-year, first time book value per se has been a bit lower, and I see that the dividend yield has increased. So is not the company worried about if the interest rates go very high, then they will be paying higher interest expenses, and why the company is not thinking of raising the equity? Even the price is low, but Fletcher Building did it.
Yeah. If I understand you correctly, you are asking is now an opportune time to raise equity in order to change the leverage base, particularly with an increasing interest rate?
Yeah. My worry is that debt to equity was around 2-point on the higher side. So do not you think if the interest rates go high, we will be forced to pay higher interest to the banks because we are not raising the debt in the market, and we are just taking the loans?
Yeah. Thank you very much. Our good CFO, Alistair, keeps us very much in check on this point. The net leverage range that we refer to of 1.7x - 2.3 x is part of the capital allocation framework that we laid out at the Investor Day. All of the investors are aware that between 1.7 and 2.3 is our target net debt to EBITDA. Furthermore, the forecasts that we've given this year include very much an awareness that we're in a different interest rate environment, and Alistair and the team have worked very hard to provide a thoughtful forecast on interest. I think we sit open-eyed on the additional interest charges that might come towards us. Against that context, we've reaffirmed the guidance today. I might just ask Alistair if he has any additional comments that he would like to make.
No, look, I think you've covered it. It's something we are open to, and we do monitor, the interest rate environment and the leverage that we have. We do evaluate whether we deploy capital to paying down debts or investing in growth acquisitions, and that's always a balance that can shift over time as the cost of funding shifts.
Okay, are there any other questions? There do not appear to be so, and I do not have any more online. I'll now move on to the conduct of the poll. As I advised earlier, today's vote is conducted both online via the Computershare meeting platform and by voting cards. I'll leave this a moment just for you to attend to your voting. Ladies and gentlemen, that concludes the discussion on the items of business. In a minute, I will close voting. Please ensure that you have cast your vote on all resolutions, all two of them.
I will just pause while you allow you time just to finalize your voting. Voting is now closed. The voting papers in the room are being collected. Please ensure that you have signed your voting paper. After the votes have been counted and confirmed, the results of the poll will be released to the NZX and ASX later today and will be displayed on the company's website. I now declare the meeting closed, and I sincerely thank you for your attendance, and I invite those who are here in Auckland with us to join us for afternoon tea. Thank you very much. Your attendance is much appreciated. Thank you.