McPherson’s Faces Rising Losses as Operating Model Transformation Costs Mount

Transformation Amid Challenging Conditions

McPherson’s Limited (ASX – MCP) has released its FY25 results, highlighting a year marked by strategic transformation and operational recalibration. The company’s revenue from continuing operations fell 3.9% to $139 million, primarily reflecting the deliberate exit of lower-margin, non-strategic brands. However, its core portfolio of health, wellness, and beauty brands grew by 1.9%, underscoring resilience in a tough trading environment.

CEO Brett Charlton emphasised that FY25 was a foundational year focused on embedding a new operating model. This model replaces the legacy direct-to-store distribution with partnerships involving specialist wholesalers and a third-party logistics provider, creating a more asset-light and scalable platform. The shift aims to sharpen McPherson’s focus on sales and marketing capabilities while improving service delivery to customers.

Financial Performance and Brand Dynamics

Underlying EBITDA declined 5.3% to $7.3 million, with the EBITDA margin holding steady at around 5.2%. The company reported a statutory net loss after tax of $16.6 million, widened from $11.4 million the previous year, largely due to $19.7 million in material items. These included impairments on brand assets such as Dr LeWinn’s and goodwill, as well as costs related to the operating model transition.

Among core brands, Manicare and Fusion Health showed notable growth, supported by increased distribution and promotional activity. Dr LeWinn’s faced headwinds internationally, particularly in China, where aggressive discounting and competitive pressures led to a significant impairment. The international segment overall saw a 45% revenue decline, reflecting ongoing challenges in expanding McPherson’s footprint beyond Australia and New Zealand.

Operational Shifts and Capital Management

Key wholesale agreements with Sigma, Symbion, and Clifford Hallam Healthcare underpin the new distribution approach, covering a substantial portion of McPherson’s annual revenue. The Kingsgrove warehouse was sub-let to Excel Logistics, which now manages warehousing for most channels, further reducing fixed asset exposure.

Despite the transformation costs, McPherson’s generated positive operating cash flow of $2.2 million and maintained a net cash position of $8.8 million at year-end. The company has also rightsized its working capital facility and is pursuing refinancing ahead of March 2026 maturities. No final dividend was declared, reflecting retained losses and the need to support ongoing investments.

Looking Ahead – Growth and Investment

Management expects moderate underlying EBITDA growth in FY26, with results weighted towards the second half. Incremental benefits from the new operating model will be reinvested into brands, customer engagement, and capabilities to drive sustainable growth. The company’s focus remains on unlocking the potential of its core brands while carefully managing costs and capital allocation.

McPherson’s FY25 results illustrate the complexities of transforming a traditional consumer staples business in a competitive market. The coming year will be critical to validate the new operating model’s effectiveness and to regain momentum, particularly in international markets.