ParagonCare FY26 Revenue Rises 1.8% with Underlying EBITDA Up 2.1%, Statutory Loss Due to Credit Provision

Underlying Growth Masks Statutory Loss Driven by Infinity Group Debt Provision

ParagonCare Limited (ASX:PGC) reported a mixed FY26 financial performance, with revenue edging up 1.8% to $3.68 billion and underlying EBITDA climbing 2.1% to $97.2 million. However, a statutory net loss after tax of $16 million sharply contrasts the underlying earnings growth, primarily due to a significant expected credit loss (ECL) provision of $38 million related to debts owed by the insolvent Infinity Pharmacy Group.

The credit loss provision reflects ongoing uncertainty around recovery from Infinity Group, where ParagonCare holds a gross receivable of $48.5 million. Directors estimate a probable recovery of $9.3 million based on administrators’ scenario modelling, representing approximately 19% of the gross exposure. This estimate remains subject to significant judgement and potential material variation pending the final outcome of the administration process.

Strategic Expansion and Integration Complete 3-2-1 Merger Plan

FY26 marked the completion of ParagonCare’s 3-2-1 integration strategy, encompassing the merger of Clifford Hallam and ParagonCare and a series of acquisitions across Australia, New Zealand, and Asia. The company invested $51.4 million in acquisitions, including notable deals for Indonesian aesthetics leader Haju Medical, Somnotec Group in Southeast Asia, and several ANZ-based businesses such as AHP Dental and Fisher Biotec.

These acquisitions contributed $61.3 million in revenue and $8.6 million in EBITDA for the year, bolstering ParagonCare’s footprint in medical technology, contract logistics, and clinical manufacturing. The Asia segment saw a 58% revenue increase to $160 million, driven by $45.4 million from acquisitions and 13.2% organic growth, despite a $15.5 million adverse foreign exchange impact.

Segment Performance Highlights Resilience Amid Market Challenges

The Australia & New Zealand segment delivered flat revenue growth of 0.2% despite the loss of Infinity Group and the exit of the Ramsay contract, with normalised revenue growth of 6.1% after adjusting for these impacts. Wholesale revenues declined 5.2%, but margins improved slightly due to a focus on higher-margin categories. Contract logistics and clinical manufacturing posted strong double-digit revenue and margin gains, with contract logistics revenue up 47% and margin by 52%.

Medical technology in the ANZ region faced headwinds in orthopaedics and vision markets but maintained solid performance in medical devices, with aesthetics businesses expanding as planned. The Asia segment’s margin contribution rose 43.4%, albeit with a slight margin contraction due to diversification across products and geographies.

Balance Sheet and Cash Flow Reflect Acquisition Funding and Working Capital Discipline

Net debt increased 31% to $307.7 million, pushing the net debt to underlying EBITDA ratio to 2.5x, in line with management’s target. This leverage supports the company’s acquisition-fuelled growth strategy. Capital expenditure of $31.6 million included investment in a new Brisbane distribution centre featuring integrated automation technology.

Operating cash flow improved significantly, with net cash from operating activities rising 317% to $29.1 million, driven by strong working capital management and improved collections. Net working capital decreased by 25% to $94.1 million, excluding deferred contingent consideration.

Outlook Focuses on Asia Expansion, Operational Excellence, and Shareholder Returns

ParagonCare enters FY27 with a clear growth agenda focused on expanding its Asia Pacific presence, leveraging acquisitions, and pursuing organic growth through product and service enhancements. The company plans to launch a wholesale channel in New Zealand and continue strategic M&A activity.

Operational initiatives include a strategic review of the Sydney warehouse, further investment in technology, and offshoring administrative functions to Asian shared services. ParagonCare also announced the establishment of an Employee Share Trust and a share buyback program for FY27, signaling a focus on shareholder value amid ongoing integration efforts.

Management refrained from providing full-year guidance due to economic uncertainties but expects mid-single-digit revenue growth. Dividend decisions will be revisited following clarity on the Infinity Group debt recovery.