• Revenue: $106.2 million, up 1.7% year-over-year.
• Gross Profit: Increased by 0.1%.
• Underlying EBITDA pre-AASB 16: $10.8 million, relatively in line with the prior period.
• Net Loss: Reported net loss of $1.5 million due to an impairment charge.
• Interim Dividend: $0.01 per share, consistent with the prior period.
• Clinical Vet Services Revenue: Down 1.7% year-over-year.
• Companion Animal and Mixed Animal Clinics Revenue: Up 3.2%, adding $2.5 million.
• ACE Laboratory Diagnostics Revenue: Down 60% due to reduced demand from China.
• Intensive Animal Vet Services Revenue: Up 15%.
• Operating Expenses: Like-for-like OpEx in clinical vet services down 3.1%.
• Net Debt: $65.7 million, slightly down from $66.8 million.
• Cash Flow Conversion Rate: 99%.
• CapEx on PPE: Increased by $1.1 million for new laboratory project.
• Divestment Impact: Expected revenue decrease of $2.3 million, EBITDA increase of $1 million.
• Acquisitions: Expected to deliver $8.9 million in revenue and $1.1 million in EBITDA.

• Warning! GuruFocus has detected 3 Warning Signs with ASX:AHX.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Apiam Animal Health Ltd (ASX:AHX) reported a revenue increase of 1.7% to $106.2 million, showcasing resilience in its diversified portfolio.
• The intensive animal vet services segment saw a significant revenue growth of 15%, driven by strong performance in the beef feedlot and pig industries.
• Cost management efforts resulted in operating expenses tracking in line with the prior period, with a 3.1% reduction in like-for-like OpEx across clinical vet services.
• The company is actively managing its portfolio by divesting underperforming assets, which is expected to increase EBITDA by $1 million despite a revenue decrease.
• Apiam Animal Health Ltd (ASX:AHX) is leveraging AI and technology to enhance operational efficiencies and customer engagement, showing promising early results in driving volumes.

Negative Points

• The reported net loss of $1.5 million was impacted by a $4.5 million impairment charge related to the divestment of underperforming clinics.
• Clinical vet services revenue was down 1.7%, affected by a significant reduction in ACE Laboratory diagnostic revenues due to halted exports to China.
• Equine clinic revenues declined by 11.5% due to softening in equine markets and reduced horse breeding activities.
• The company faces challenges in the companion animal veterinary services segment, with industry revenue down approximately 7% due to cost-of-living pressures.
• Apiam Animal Health Ltd (ASX:AHX) still has four Greenfield clinics that are currently loss-making, impacting overall profitability.

Q & A Highlights

Q: Do you have any insights into the broader vet clinic spend across the companion and pet animal markets, and what sort of underlying industry growth rates are you seeing in the current economy? A: Christopher Richards, Managing Director, noted that the companion animal veterinary services are facing challenges due to cost-of-living issues and a low point in the life cycle of pets. The industry is seeing a 7% revenue decline, but Apiam's investments in people and standards of care are helping to outperform the industry.

Q: Could you please quantify the cost savings you estimate flowing into the second half from some of the efficiency measures you've outlined? A: Matthew White, CFO, stated that they expect similar cost savings in the second half as seen in the first half, with a 3% reduction on a like-for-like basis in clinical vet services, which is the best opportunity for efficiency.

Q: Given APM's mixed history with acquisitions, what criteria and hurdle rates do the board use when considering acquisitions? A: Christopher Richards explained that acquisitions must be compelling and add value, with growth opportunities and good succession plans. They also consider the additional costs when private businesses join Apiam, ensuring a compelling growth story and regional synergies.

Q: Are there now all profitable clinics that are left, or are still some losing money? A: Christopher Richards mentioned that there are still four Greenfield clinics that are losing money, impacting about a million dollars a year. The focus is on improving EBITDA margins across clinics, with opportunities to enhance earnings.

Q: How do you see the impact of softer equine markets flowing through into the second half? A: Christopher Richards noted that the majority of equine revenue comes from the breeding season, which occurs in the first half of the year. Therefore, the softer equine markets will not significantly impact the second half.

Q: Has APM's new director, Bruce Dixon, expressed his views on why he's invested in APM and what input suggestions has he made to date? A: Christopher Richards stated that Bruce Dixon invested because he sees significant growth opportunities in the business. Dixon has contributed valuable insights on business operations.

Q: Are you looking to expand pathogen detection services using emerging technologies as part of growth and utilization of resources at ACE Laboratories? A: Christopher Richards confirmed that they are expanding pathogen detection services, developing new diagnostic kits, and investing in next-generation sequencing to enhance pathogen diagnostics and antimicrobial usage monitoring.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.