EBOS Faces Margin Pressure Despite Strong Growth, Eyes Strategic M&A
EBOS Group Limited posted robust interim results for H1 FY25, with underlying EBITDA rising 7.1% excluding the Chemist Warehouse Australia contract, driven by strong organic growth and strategic investments. The company maintained its dividend and reiterated FY25 EBITDA guidance between $575 million and $600 million.
- Underlying EBITDA up 7.1% excluding Chemist Warehouse Australia contract
- Revenue growth of 9.5% ex-CWA driven by Healthcare and Animal Care segments
- Strong cash flow generation with $205 million underlying cash from operations
- Strategic acquisitions in Southeast Asia completed, increasing Transmedic stake to 100%
- Interim dividend maintained at NZ 57.0 cents per share with DRP operational
Robust Financial Performance Amid Market Transition
EBOS Group Limited has reported a strong set of interim financial results for the half year ended 31 December 2024, underscoring the resilience and diversification of its business model. The Group’s underlying EBITDA rose 7.1% to $291 million when excluding the impact of the Chemist Warehouse Australia (CWA) contract, which concluded in the prior period. Revenue grew 9.5% on the same basis to nearly $6 billion, reflecting solid organic growth across its core Healthcare and Animal Care segments.
Despite a 9% decline in statutory revenue and EBITDA due to the non-renewal of the CWA contract, EBOS maintained a stable leverage ratio of 2.07x and improved its return on capital employed (ROCE) by 10 basis points, signaling operational efficiency gains and disciplined capital management.
Segment Highlights and Strategic Expansion
The Healthcare segment, which includes Community Pharmacy, TerryWhite Chemmart (TWC), and Institutional Healthcare, delivered a 9.7% increase in revenue excluding CWA, with underlying EBITDA up 7.0%. TWC expanded its store network by 52 stores to 616, supported by strong like-for-like sales growth and increased consumer engagement through digital channels and loyalty programs.
EBOS’s Institutional Healthcare business saw growth driven by oncology and specialty medicines, alongside double-digit expansion in Southeast Asia. The Group completed two bolt-on acquisitions in Malaysia and the Philippines, strengthening its orthopaedic device distribution and increasing its stake in Transmedic to 100%, further cementing its footprint in the region’s fragmented healthcare market.
The Animal Care segment also posted solid results, with revenue up 6.3% and underlying EBITDA rising 7.2%, fueled by strong performances from branded products such as Black Hawk and Vitapet. New product launches in 2024 broadened the portfolio, while vet wholesale revenue returned to steady growth.
Operational Efficiency and Cash Flow Strength
EBOS’s focus on cost management yielded $15 million in savings during the half, contributing to an improvement in underlying operating expenditure as a percentage of revenue to 8.6%. The Group generated $205 million in underlying cash from operations, a $90 million increase year-on-year, supported by improved working capital management following the CWA contract exit.
Capital expenditure remained disciplined at $64 million, aligned with strategic investments to support growth initiatives, including new distribution facilities and technology upgrades.
Dividend and Outlook
The Board declared an interim dividend of NZ 57.0 cents per share, maintaining the payout level from the prior year and reflecting confidence in the Group’s growth trajectory. The dividend is partially imputed and fully franked for Australian and New Zealand shareholders, with a dividend reinvestment plan available at a 2.5% discount.
EBOS reaffirmed its FY25 guidance, expecting underlying EBITDA between $575 million and $600 million, representing 5-10% growth excluding the CWA contract. The Group continues to pursue strategic M&A opportunities and organic growth initiatives across its diversified portfolio.
Bottom Line?
EBOS’s strong H1 performance and strategic investments position it well for sustained growth, but investors will watch closely how the Group navigates evolving market dynamics and integration of acquisitions.
Questions in the middle?
- How will the conclusion of the Chemist Warehouse Australia contract affect long-term earnings stability?
- What impact will Southeast Asia acquisitions have on EBOS’s growth and profitability in FY26 and beyond?
- Can EBOS sustain its cost reduction momentum while investing in new product development and market expansion?
