Retail pharmacy growth, revenue decline from PBS reforms

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EBOS Group reports solid first half having acquired Terry White Group and anticipating start of its $1 billion Chemist Warehouse contract in July

EBOS Group has released its financial results for the half year ending 31 December 2018.

It announced “solid growth” in underlying earnings for the first half of the 2019 financial year (FY19), with underlying EBITDA of $131.4 million (up 4%) and underlying Net Profit After Tax of $72.7 million (up 4%).

Highlights for the half included the signing of a contract with Chemist Warehouse Group (CWG) for exclusive wholesale distribution of pharmaceutical products to more than 450 Chemist Warehouse and My Chemist stores across Australia—a deal that will kick off on 1 July 2019.

It estimates that sales to CWG stores will generate approximately $1 billion in revenue in the 2020 financial year (FY20).

During the half EBOS Group opened a new pharmaceutical distribution centre in Brisbane and a contract logistics facility in Sydney.

It completed strategic acquisition of all minority shares in Terry White Group for $46.7 million in December 2018, and also acquired medical/surgical supplies wholesaler Warner & Webster, veterinary distribution business Therapon, and head lice products business Quitnits.

EBOS CEO John Cullity said while the animal care segment was the group’s lead performer during the half, the healthcare business also performed well despite some setbacks.

“Our healthcare business also performed well notwithstanding the softer trading performance in our Australian pharmacy wholesale business due to the combined impact of PBS reforms and general market dynamics,” said Mr Cullity.

“These dynamics make our investment in the new Brisbane facility all the more important. This investment will lead to further gains in productivity and position the business to benefit from the extra volumes generated by the CWG contract, which will materially add to earnings from FY20.

“The half was also highlighted by several strategic acquisitions as we continue to build our healthcare and animal care businesses. The total value of first-half investments was $92.5 million and included a move to 100% ownership of Terry White Group, along with another three small-to-medium sized bolt on acquisitions,” Mr Cullity said.

Total revenue during the first half of FY19 was $3.5 billion, down 2.7%.

This decrease was driven by lower hepatitis C medicine sales and the impacts of PBS reforms in Australia.

Excluding these impacts, revenue growth was $153 million or 4.6%.

Revenue growth in EBOS Group’s community pharmacy segment excluding the impact of lower Hepatitis C sales and PBS reforms was 1.8%.

Commenting on the regulatory environment, Mr Cullity said: “We are pleased with the Australian government’s recent decision to maintain the Community Service Obligations (CSO) strict service standards and reporting obligations as these were essential in providing the community with access to medicines in accordance with the National Medicines Policy.

“Importantly the updated CSO Deeds prevent distributors from undertaking new exclusive-direct distribution arrangements and participating in the CSO.

“However, falling medicine prices, rising operational costs across the industry and a failure to fully resolve the issue of equal access for the distribution of PBS medicines have had an impact on our performance.”

EBOS says that together with other members of the National Pharmaceutical Services Associations, it continues to actively engage with the Federal government and Minister for Health on these matters.

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