Healius Limited (PHCRF) Shareholder/Analyst Call Transcript

2025-10-30 16:56:41 ET

Healius Limited (PHCRF) Shareholder/Analyst Call October 29, 2025 8:01 PM EDT

Company Participants

Kathryn McKenzie
Paul Anderson - MD, CEO & Director
Gillian Nairn

Conference Call Participants

Charles Kingston

Presentation

Kathryn McKenzie ...

Good morning. My name is Kate McKenzie, and I am the Chair of Healius Limited and the Chair of this Annual General Meeting. On behalf of your Board, I welcome you to Healius' 2025 Annual General Meeting, both those of you using the virtual online platform and those of you who are here in the room at the Wesley Conference Center.

As you may have heard in the news, users across the world are reporting problems with multiple Microsoft services. Just to make things interesting, the issues have impacted the Computershare platform this morning. We think that it is now all resolved and stabilized. But in the event that there are any issues with the online platform, the Group Company Secretary will notify me as Chair, and we will call a short adjournment if the number of shareholders impacted is significant to allow the issue to be addressed. We're hopeful that, that won't be necessary, but we wanted to make sure that we had a plan.

I would like to begin by acknowledging the traditional owners of the land in which we are meeting today, the Gadigal people of the Eora Nation and pay my respects to elders past and present. I also recognize the traditional owners of the various lands on which our online attendees are attending today and the Aboriginal and Torres Strait Islander people present in this meeting.

I will now introduce the Board and management present today. Alongside me is our Managing Director and CEO, Paul Anderson; and our Non-Executive Directors, Sally Evans, Charlie Taylor, John Mattick, Kathy Ostin and Chris Hall. Also alongside me, our General Counsel and Company Secretary, Kylie Brown at the end of the table there. And joining us today in person, we also have our Chief Financial Officer, Andrew Thomson; and Katrina Zdrilic, who is representing our external auditor, EY. Katrina is available to respond to any questions regarding the audit of Healius' financial statements and the auditor's opinion.

I am advised that there is a quorum present, and therefore, I declare this meeting open. Please note that this webcast is being recorded. I will be taking the notice of meeting dated the 30th of September 2025 as read. The notice was made available to shareholders via the ASX Market Announcements Platform and dispatched to shareholders electronically or by post, depending on our shareholders' communication preferences.

The agenda for today's meeting is shown on the screen. We will start with my Chair address, and then Paul will provide an update on the business. After Paul's address, I will invite general questions on the management of the company. We will then move to the formal business of the meeting. A copy of my address and Paul's presentation slides were lodged on the ASX prior to the start of today's meeting. There is one conditional item of formal business, which is a Spill Resolution. This resolution will only be put to the meeting if at least 25% of the votes cast on Item 2 are cast against the adoption of the 2025 remuneration report.

For each item of formal business, there will be an opportunity for shareholders to ask questions before the item is formally put to the vote. A few brief housekeeping points. If you need assistance in the room, please raise your hand and one of the Computershare team will assist you. For those of you joining via the online platform, please note down the telephone number shown on the screen. If you experience technical difficulties during the meeting, please dial that number. In relation to questions, all shareholders will have the opportunity to ask questions in respect of the items of business, whether you are present in the room, online or wish to ask a question by phone. The order in which we will take questions will be, first, questions asked by shareholders who are physically present at the Wesley Center; second, any questions submitted online; and third, questions submitted via the phone line. If you are in the room and wish to ask a question, please raise your blue or yellow attendance card, and I will invite you to ask your question. If you are attending online, you will need to select the Q&A icon at the top right of your screen, select the item of business your question relates to, type your question in the box at the bottom of the screen and then send. You are able to submit questions on any item of business at any time. However, these will be answered when we get to the relevant item. Gillian Nairn will be our online question moderator and will read out any questions submitted online. If you're attending online and prefer to ask a question verbally, please follow the instructions detailed below the broadcast. You will be provided with a phone number and meeting ID to dial on your phone. When prompted by the Chair, the operator will unmute your line and ask you to introduce yourself to the meeting and ask your question. Voting on each of the resolutions at this meeting will be conducted by a poll, and the results of the poll will be released to the ASX as soon as possible after the meeting. I now declare the polls in relation to all items of business open. Shareholders in the room and online can now cast their votes and can do so until I announce that the polls are closed.

I'd like to begin today with some reflections on the Australian pathology sector. Pathology is integral to modern medicine. Each day, doctors and patients depend on pathology results to make vital health care decisions. Through analysis of blood, urine and tissue samples, pathology assists in diagnosing, treating and managing diseases like cancer as well as infections and many other illnesses. Pathology testing also reduces the burden on secondary and acute care systems through the early diagnosis of disease.

Healius has proudly supported the health and well-being of the Australian community for over 35 years by providing quality, affordable and accessible pathology services. Healius continues to be a leading provider of pathology and bioanalytical services. Healius is the second largest provider of Australian pathology services and the largest provider of pathology services to regional, remote and indigenous communities. The industry has been challenged in recent years, particularly by the growing gap between Medicare rebates and rising costs due to inflation.

Similar to companies in other disrupted industries, we have needed to examine new ways to ensure that our essential services can continue to be provided in a sustainable way. Paul will say a little more about how we are responding shortly. This year was a milestone year for Healius as management completed the sale of Healius' imaging business, Lumus Imaging, achieving a sale price of $965 million. This was a pleasing result that exceeded expectations and enabled Healius to fully repay debt of $515 million and pay a special dividend to shareholders of close to $300 million with $128 million in franking credits.

With an improved balance sheet and more sustainable capital structure, Healius is focused on executing its pathology strategy and T27 plan with the goal of delivering high single-digit EBIT margins by FY '27. Over the past 12 months, the Board has appointed 4 new non-executive directors. Kathy Ostin joined the Board in December 2024, bringing invaluable experience as a former partner of KPMG and strengthening the Board's finance, accounting, audit, governance and strategy expertise.

We note that some concern has been raised regarding the number of Board positions that Kathy holds. The Board is confident that Kathy is able to manage her responsibilities and fulfill her duties as a Healius Director and as Chair of Healius' Audit Committee based on her contribution to Healius to date and having regard to her 7 years as a professional Non-Executive Director. Kathy has not missed any Board or committee meetings for any companies of which she is a director, and Kathy has also indicated an intention to modify her portfolio over the next 3 to 6 months.

Neil Vinson joined the Board in March 2025, bringing valuable experience in private equity and public market investing, M&A, business development and optimizing operational performance. Neil resigned as a director in September 2025, following his resignation as an investment manager of Tanarra Capital. The Board is grateful to Neil for his contribution as a director during his tenure.

The Board appointed Chris Hall to the Board in September 2025, following his nomination for appointment by Tanarra Capital, which holds a significant interest in Healius. Chris brings to the Board extensive experience across asset management, superannuation and more recently, biotechnology. His current roles include being a Non-Executive Director of AMP Superannuation and a Non-Executive Director of Funds SA, the investment management partner for South Australian Public Sector Superannuation funds and approved authorities. Chris is also the Chair of BiomeBank, a clinical-stage biotechnology company.

At the time of welcoming Chris to the Board, we farewelled and thanked Dr. Michael Stanford, who resigned from the Board in September 2025, having served as a Non-Executive Director since September 2023. Our fourth appointment to the Board was Steven Rubic. The Board is looking forward to welcoming Steven to the Board on the 1st of December. Steve will bring to the Board 25 years of executive leadership in health care, having held CEO positions at St Vincent's & Mater Health, Sydney, I-MED Radiology Network and Healthscope.

Board succession planning and refreshment remains a key focus area as your Board continues to consider the right size, balance of skills and experience to guide Healius through its next chapter as a streamlined pathology business. The Board is also pleased with the refreshed executive team being led by Paul Anderson. The team are performing and transforming the business at pace. In FY 2025, we welcomed Anthea Muir, Group Executive Customer and Commercial; and Kylie Brown, Group General Counsel, Company Secretary and Chief Risk Officer. Anthea has brought a wealth of commercial experience to the team and Kylie's legal and governance expertise has brought enhanced rigor to Healius' governance practices.

As shareholders are aware, Steve Humphries recently announced his intention to retire. Steve retires after nearly 6 years with Healius having held a number of roles, his most recent role being that of Chief Financial Officer. I would like to take the opportunity to thank Steve for his incredibly valuable contribution and dedication to Healius. The Board was pleased to announce the appointment of Andrew Thomson as Healius' new Chief Financial Officer. Andrew joins us from BIS Industries, where he held the role of Chief Financial and Commercial Officer. Andrew is an experienced transformation and commercial finance leader and has previously held leadership roles at Pacific National, Broadspectrum, formerly Transfield and BHP. Andrew commenced on the 13th of October, so not long ago, and is working alongside Steve to ensure a smooth transition.

Now to the business of this meeting. Professor John Mattick is submitting himself for reelection this year. John is a much valued member of the Board. Kathy Ostin and Chris Hall are also submitting themselves for election as new directors appointed by the Board. Other items on the agenda include the adoption of the 2025 Remuneration Report and the Conditional Spill Resolution.

The Board was disappointed to receive a strike against the 2024 Remuneration Report at last year's AGM. Your Board has since engaged extensively with shareholders, proxy advisers and other stakeholders to listen to and understand the key concerns with our executive remuneration strategy and framework. We believe we have made significant progress in addressing your concerns by improving our qualitative disclosures in this year's remuneration report and making amendments to the bespoke incentive plan to incorporate equity and 12-month deferral components.

In terms of KPI 1, the company conducted a successful strategic review and achieved an excellent result with the sale of Lumus Imaging. KPI 1 delivered a much improved balance sheet and enabled Healius to reduce its debt and pay shareholders a significant fully franked special dividend. The Board actively considered and heard feedback on the company's remuneration structure and incentive plan. KPI 2 and KPI 3 of the bespoke incentive plan are explicitly aligned to the company's T27 strategy and shareholder outcomes and represent pay for performance.

The targets for the removal of corporate costs under KPI 2 will continue to contribute to the strengthening of pathology margins and KPI 3 incentivizes and rewards executives for growth in EBITDA, both of which are expected to create sustainable value for sustainable shareholder value. As we have done this year, we will continue to work to ensure that remuneration is aligned to T27 and to shareholder outcomes. On the topic of the CEO's fixed remuneration, the Board considers this to be appropriate for Healius' size and specific circumstances, noting that external benchmarking was undertaken as part of the process, which took into consideration broadly comparable ASX organizations.

Your Board has placed significant performance expectations on the CEO to transform the business over a short period of time and is very happy with the direction of the company under Paul's leadership. I would like to conclude by acknowledging the dedication of the entire Healius team who have faced several challenging years and to thank them for their unwavering effort and commitment to our patients and referrers. I also wish to thank my fellow Board members and the executive team for their hard work and dedication. I also thank you, our shareholders, for your continued support of Healius. I look forward to the year ahead and to delivering to our shareholders on the outcomes of the T27 plan. I will now hand over to Paul for his presentation.

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