EBOS Group Limited (EBOS, the Group, ASX: EBO) is a wholesaler and distributor of healthcare, medical and pharmaceutical products throughout Australia and New Zealand. It is also a leading distributor of recognised animal care brands. The Group employs 5,200 people in 115 locations across Australia, New Zealand and Southeast Asia. EBOS shares are listed on the Australian and New Zealand security exchanges.

Diversified and defensive business portfolio

EBOS operates in an attractively structured marketplace and owns a diversified portfolio of businesses that include retail pharmacies, medical consumables, animal care products, and medical technology.

Competition in the pharmacy market is moderately concentrated with the four largest market participants accounting for 60 percent of industry revenue. Through its 600 stores under the Terry White Chemists brand, EBOS owns Australia’s largest health advice community pharmacy network. The Group provides full product lines through its Contract Logistics business in Australia and NZ under an agreement with the Commonwealth Government to distribute Pharmaceutical Benefits Scheme medicines.

The EBOS medical technology business (EBOS Medtech) manufactures and distributes products across therapeutic areas including spine, orthopaedics, cardiology, ophthalmology and radiation therapy. These products are distributed throughout Australia and New Zealand, and the Group is now making inroads into the Southeast Asian markets and Hong Kong through strong and trusted surgeon and partner relationships.

EBOS’ animal care business continues to grow market share as pet parents place a premium on the health of their pets at every stage of their animal’s life. The Group’s pet food manufacturing plant in Parkes, NSW, produces quality pet food that is sold through leading pet specialty retailers and vet clinics.

These favourable industry dynamics combined with EBOS’s strong market position and diversified revenue sources largely explain the Group’s 10.3 percent earnings per share compound annual growth rate over the past 10 years.

Positive earnings outlook

FY25 earnings guidance is for Underlying EBITDA of between $575 million and $600 million, representing EBITDA growth of between 5 and 10 percent. This estimate is supported by the 7.5 percent growth in EBITDA for the 3 months to September 2024, compared to the prior corresponding period. The September 2024 EBITDA outcome is after excluding the earnings from the $2 billion wholesale supply contract to supply Chemist Warehouse Australia which ceased from 30 June 2024.

The favourable dynamics of Australia’s community pharmacy industry enables the Group to announce that is targeting $300 million in new pharmacy revenues and is making solid progress in achieving cost efficiencies of between $25 million and $50 million over FY25 and FY26.

EBOS continues to invest in its supply chain capabilities by increasing the storage capacity for medicines and consumables to meet the demands of an expanding and ever-changing healthcare market in Australia and NZ. Notably EBOS’ Healthcare Logistics business opened a new state-of-the-art pharmaceutical grade Contract Logistics facility in Sydney. This facility can store 38,000 pallets of products of all types of scheduled medicines. A new Healthcare Logistics distribution centre also became operational in NZ recently. These investments represent significant barriers to entry in the tightly regulated pharmaceuticals distribution market and explain the defensive nature of EBOS’ earnings.

Discussions are underway with the Australian Government on the first Pharmacy Wholesaler Agreement, which is a side arrangement with the industry alongside the long-running Community Service Obligation for Pharmaceutical Wholesalers funding pool guidelines. EBOS remain confident that the upcoming agreement will fully reflect the value of the Group’s Symbion wholesale business which supplies essential medicines to the Australian community.

Meanwhile, EBOS’ balance sheet is strong and leaves the Group well positioned to pursue bolt-on growth opportunities to boost revenue in FY26 and beyond.