Sigma Pharmaceuticals Aktie

Good afternoon. My name is Michael Sammells and as Chairman of the Board of Sigma Healthcare Limited, I would like to welcome you to today's AGM, including those joining us online for this hybrid meeting. This is only our second AGM as a merged entity, and a lot has been achieved in that relatively short time frame, which we will talk about shortly.

First, I wish to acknowledge the Wurundjeri people of the Kulin Nation, the traditional custodians of the land on which we are gathered today. We pay our respects to their elders past and present.

I formally declare the 2026 Annual General Meeting of Sigma Healthcare open. All presentations and a recording of today's meeting will be available on our website for later viewing. Voting in today's meeting will be conducted by a poll. All polls will remain open until the conclusion of today's meeting. As we move through the items of business, I will respond to questions from shareholders and proxies. As this is a hybrid meeting, we will provide opportunities for questions from those in the room and those participating online. For online participants, instructions on how to ask a question are set out in the online guide provided to shareholders and available on our website.

Today's agenda comprises 6 items of business covering 11 resolutions, as outlined in our Notice of Meeting: the Chairman's and CEO's addresses; the financial statements and reports; the remuneration report; the reelection of directors; and several resolutions concerning remuneration arrangements for certain key executives.

Before we proceed, I would like to introduce the members of the Sigma Board and management who are present today. Starting from your left: Dr. Chris Roberts is Chair of the Risk, Compliance and Sustainability Committee and a member of the Audit Committee. Danielle Di Pilla is an Executive Director and our Chief People Officer. Dani is a member of the Risk, Compliance and Sustainability Committee and is also a qualified pharmacist. Jack Gance is a member of the Nomination and Remuneration Committee, the Audit Committee, and the Risk, Compliance and Sustainability Committee.

Jack is a qualified pharmacist and a Co-Founder of the Chemist Warehouse Group. Annette Carey is Chair of the Nomination and Remuneration Committee and a member of both the Risk, Compliance and Sustainability Committee and the Related Party Independent Board Committee. Neville Mitchell is Chair of the Audit Committee and a member of both the Nomination and Remuneration Committee and the Related Party Independent Board Committee. Damien Gance is a member of the Risk, Compliance and Sustainability Committee and is a qualified pharmacist. Mario Verrocchi is an Executive Director and serves in the critical role of CEO Retail as well as being a member of the Risk, Compliance and Sustainability Committee. Mario is a qualified pharmacist and a Co-Founder of the Chemist Warehouse Group.

Vikesh Ramsunder, our Managing Director and Chief Executive Officer, whom you will hear from shortly and Kara McGowan, who is our Chief Legal Officer & Company Secretary. We are also joined by our senior executives, who will be available to speak with shareholders at the conclusion of the meeting as well as Alison Milner from the company's auditors, PricewaterhouseCoopers, and representatives of our share registrar, MUFG. I would just also like to acknowledge that Sam Gance is with us in the audience today.

The first item of business is effectively an overview of the past 12 months and a general business update, which I will cover now before introducing Vikesh. FY '26 was a defining year for Sigma. It was our first full 12-month period operating as a merged group, and the results demonstrate both the strategic logic of bringing Sigma and Chemist Warehouse groups together and the strength of the platform we are building. We have combined leading retail, brand and merchandising and marketing capability with national wholesale, distribution and logistics expertise to create an integrated health care business of significant scale, reach and resilience.

Group revenue increased by 15.5% to $10.8 billion, whilst normalized EBIT rose 20.6% to $1.09 billion. To put that into context, the prospectus released ahead of the merger disclosed pro forma EBIT for FY '24 of $605 million, demonstrating the strategic logic of the merger. Importantly, this performance was delivered with balance sheet discipline. Net debt of $663 million represents a conservative 0.57x normalized EBITDA at year end. We also paid fully franked dividends totaling $0.04 per share for the year.

Turning to our operational execution, we are clear on our strategic priorities. First, we will sustain growth in Australia through network expansion, like-for-like sales growth and stronger performance across the Chemist Warehouse, Amcal and Discount Drug Stores brands. Second, we will keep -- we will expand internationally with discipline, applying our proven capabilities selectively in markets where we see attractive long-term returns. Third, we will continue to differentiate our brands and selectively grow our own and exclusive label portfolio. Finally, we will unlock further operating leverage through integration, synergy benefits and the scale of our distribution network.

These results achieved during the year speak to the execution of our strategy. We continue to grow store numbers in Australia and New Zealand. Store numbers in Ireland are growing and performance is improving. In May this year, we announced our measured entry into the United Kingdom through a joint venture with Greenlight Pharmacy. We expect to open 2 stores in London before Christmas, with a further 3 planned for 2027, and we are progressively closing our physical presence in China.

As publicly reported, we participated in the due diligence regarding the potential acquisition of the Boots business. As the largest pharmacy group in the United Kingdom, it was prudent for us to participate in the structured sale process. However, following a disciplined assessment, we made the commercially driven decision not to proceed. A business like Boots rarely comes to market so we felt obliged to have a look at it and regardless of where that may have taken us, it also provided an interesting insight into the UK market.

We are pursuing growth, but not growth at any cost. New investment will be supported by a clear strategic rationale, disciplined execution and an appropriate return on capital. At the same time, we will continue strengthening our core domestic platform, integrating systems and processes and investing in the capacity, resilience and efficiency of our supply chain. It has been only 18 months since the merger, but the Board is pleased with our operational progress, strategic execution and the effectiveness of our governance processes.

Strong governance is fundamental to delivering our strategy. Throughout FY '26, the Board continued to oversee the integration of governance frameworks across the combined group, with a focus on integrity, transparency, accountability and disciplined decision-making. From the outset, the Board put in place robust safeguards: all Board committees are chaired by independent non-executive directors; clear protocols govern conflicts and related-party matters; and the Related Party Independent Board Committee, which I personally chair, provides dedicated independent oversight. We also continue to operate within the regulatory framework established through the merger approval process, including compliance with the ACCC undertakings and reporting requirements.

Related-party transactions are a significant and distinctive feature of our business and have contributed to the historical growth and success of Chemist Warehouse. We intend to preserve these benefits whilst maintaining strong governance, oversight and financial rigor. From my own perspective, these governance practices are delivering as expected.

From my experience chairing the IBC, I would make the following observations: The IBC has no materiality threshold. Any related-party transaction that departs from the agreed standard commercial terms offered to non-related parties requires IBC consideration and approval. All new arrangements considered post-merger have been on the same consistent terms for related and non-related parties. Our franchise agreements are standardized. There are no preferential agreements in place for founders. Any property lease arrangements with related parties are supported by independent valuation reports.

Finally, the Board, including related-party directors, is aligned in its commitment to growing our business and network for the benefit of all shareholders. Achieving our stated goal of 900 Chemist Warehouse stores across Australia will require an increase in non-related-party franchisees. Accordingly, we expect the proportion of related-party transactions will decline over time as the network grows.

Focusing further on ESG, FY '26 marked Sigma's first mandatory climate-related financial disclosures under AASB S2. The Board retains overall accountability for sustainability strategy and climate-related risks and opportunities, supported by the Risk, Compliance and Sustainability Committee, chaired by Chris Roberts, and the Audit Committee, chaired by Neville Mitchell. Climate risks are considered within our enterprise risk management framework and inform strategy and decision-making.

I continue to receive a range of questions as to the composition of the Board, and acknowledge that a majority of directors are not currently independent and that we do not yet meet gender diversity expectations of some. However, what I do have to say is that the current Board is the result of a shareholder vote at the Sigma AGM in February 2025, just some 20 months ago. We consider that we are still a relatively new Board and it remains early days in the merger of Sigma and Chemist Warehouse.

I remain confident that the current Board brings the skills, expertise, experience and knowledge required at this stage of our journey. As the business evolves, there will be appropriate opportunities to consider changes to the Board's balance and composition. Our ESG approach is also reflected in practical outcomes. During FY '26, our Australian operations diverted 5,570 tonnes of waste from landfill, which is over 80% of the waste generated. We maintained our commitment to the Australian Packaging Covenant, strengthened modern slavery risk assessment and supplier engagement, and invested more than $7.5 million across Australia and New Zealand in supporting the communities we serve.

We remain equally focused on our people. A safe, inclusive and capable workforce is central to reliable execution and sustainable performance. Health and safety measures form part of executive performance assessment, alongside core operational delivery and merger synergies, reinforcing the connection between performance and the care for our people.

Looking ahead, Sigma enters FY '27 with stronger foundations, a larger operating platform and a clear pathway for growth. The Board's priorities are to capture the remaining integration benefits, sustain domestic momentum, expand internationally in a measured way and maintain financial discipline. We will invest where returns are compelling, preserve balance sheet strength and uphold the governance standards expected of a leading ASX-listed health care company.

On behalf of the Board, I thank Vikesh and the executive team and all Sigma team members for their commitment and professionalism throughout a demanding and successful year. I also thank our pharmacy partners, suppliers, customers and communities for their trust and our shareholders for their continued support. I also need to thank my fellow Board members for the hard work, expertise and experience that has played an important role in our achievements thus far. FY '26 has shown what the combined Sigma can achieve. Our task now is to build on that progress with focus, discipline and a clear commitment to sustainable value creation.

Thank you, and I will now hand over to Vikesh.

Thank you, Michael, and good afternoon, everyone. Michael has already outlined our financial results for the year, so I will focus on our operational performance and progress on our synergy program, before providing a trading update for the current year.

During the year, we made significant progress in simplifying the combined business, growing and expanding our network, lifting supply chain productivity and converting greater scale into stronger returns. We also expanded our global pharmacy network, which now exceeds 950 stores. Australia remains our core market, with 561 Chemist Warehouse stores at 30th June, and continues to deliver above-market growth.

During the year, our domestic Chemist Warehouse network added 24 stores and refurbished a further 18. We also reinvigorated the Amcal and Discount Drug Stores brands, positioning them for growth in FY '27. We achieved sales growth of 16% in Chemist Warehouse, as more customers purchased more products, with further support from the enduring GLP-1 tailwind.

Chemist Warehouse has consistently delivered above-market growth, achieving a compound annual growth rate of 11% over the last 10 years. Our international business continued to expand. Sales increased by 23% and we added 20 stores, with New Zealand leading the growth. We intensified our efforts in Ireland, which is now profitable and better positioned to accelerate growth, as we prepare to launch in the United Kingdom.

Our supply chain underpins our operations. In Australia, we distributed more than 579 million units, that's 35 million more than in the prior year. While each additional unit carries a cost, our automation capability and scale provide operating leverage that will continue to flow through in earnings.

Turning now to synergies. We achieved $32 million in annual synergy benefits during the year at a one-off cost of $26 million, in line with expectations. We consolidated our support centers in Preston and closed the standalone e-commerce distribution center to now deliver from stores. In Western Australia, we consolidated distribution centers with volume being absorbed into our Canning Vale DC and since year end, we have also transferred South Australian volumes into Sigma's Pooraka DC. This represents tangible progress in streamlining our supply chain.

While some financial benefits have already been realized, we expect further benefits to flow through on an annualized basis. Importantly, this is not just about consolidation. We have mapped the change management required to deliver our integrated technology solution. We are rationalizing technology applications and integrating them into Sigma's established SAP platform, an important enabler for faster decision-making and the next phase of synergies. Importantly, this work does not affect our store systems. While still at an early stage, we are slowly introducing AI capabilities across the business to support decision-making and drive further efficiencies.

Turning now to the trading update. Trading this financial year to date has been solid across our Chemist Warehouse branded stores in Australia and international markets. Our Australian Chemist Warehouse stores have maintained strong momentum with sales up 12.1% to 16th October, which is above our 10-year CAGR growth of 11.3%. Like-for-like sales for the same period are up almost 10.0%. Consistent with our FY '26 results presentation, some discretionary categories such as ladies fragrances, vitamins and supplements are experiencing softness as consumers adjust their buying behaviors in line with cost-of-living pressures.

Our business model, however, is very defensive and resilient. Chemist Warehouse, with the breadth and depth of its discount offer, provides increased opportunities through the cycle. This is seen in strong performances in other less discretionary categories, such as beauty, healthcare, GLP-1 supporting products. Growth is encouraging as we have now cycled the initial structural uplift from the introduction of GLP-1 sales. We anticipate oral GLP-1 formulations to enter the market in the second half of the 2027 financial year to further enhance accessibility for patients and sales growth for our network.

Our international growth has also maintained good momentum, with sales for the 3 months to September up 30.2% and like-for-like sales up 15.8%. We also continue to execute our growth strategy, strengthen our global network and drive further operational efficiencies. Importantly, our market position continues to strengthen. The global pharmacy network is approaching 1,000 stores, while the Australian Chemist Warehouse network still represents less than 10% of the country's more than 5,900 pharmacy licenses. Together with the revitalization of Amcal and Discount Drug Stores, there is a meaningful runway for domestic growth. In the first half, we remain on track to onboard 14 Chemist Warehouse stores and 42 Amcal and Discount Drug Stores in Australia, together with a further 19 stores internationally.

We now enter the important Christmas trading period, and our retail network is well prepared to execute with excellence. For the balance of the first half, we expect Chemist Warehouse branded store sales to deliver double digit sales growth consistent with this trading update. We have a clear plan, strong momentum and significant opportunities still ahead. Our job is to keep executing our strategy, and to turn that execution into sustainable value for shareholders.

Thank you, and I will now hand over to Michael.

Thank you, Vikesh. Before we move on to the remaining items of business, we did receive one question from a shareholder in advance of today's meeting. The question was, what responsibility does Sigma Healthcare accept for ensuring Chemist Warehouse stores to not cause unreasonable and ongoing noise impacts on neighboring residents?

As an overarching comment, we are conscious of supporting our franchisees to operate sustainably. We've passed this very specific question on to our operational team, who I understand have been trying to achieve a resolution with the landlord.

Gary, I think we had 2 other questions. I can deal with it if you like. I think we had another question come in, in relation to why this venue today? Is that correct, Gary?

Yes. We have a question from Stephen Mayne. Firstly, thanking you for once again running a best practice hybrid AGM unlike major companies in Australia. Next is why we actually shifted the AGM from the Sofitel to the tennis center, and are we seeing a much bigger turnout this year?

Thank you, Mr. Mayne, for the question. We're not wedded to any particular venue for this. We think this venue is a high-quality facility, very accessible and suitable for an AGM.

Okay. We will now move on to the next 4 items of business, which are the financial statements and reports, the remuneration report, the reelection of directors and remuneration arrangements for certain key executives. All eligible proxy votes were required to have been received by 2:00 p.m. on Monday, 19 October. All voting will be conducted by way of a poll. I will be voting any undirected proxies appointing the Chairman as proxy in favor of all resolutions. We have numerous resolutions to go through today, so we will provide an opportunity for questions at various intervals along the way rather than after each resolution. We will show the votes for the resolutions, then go to the questions from the floor first, then online, then from the phone.

Item 2 on the Notice of Meeting is consideration of Sigma's financial reports, sustainability report and the directors' and auditors' reports for the financial year ended 30th of June 2026, which I will take as received and read. This matter does not require a resolution. The company's audit partner, Ms. Alison Milner from PwC, who was the auditor for the relevant period, is available to take any questions on the auditors' report and on the conduct of the audit.

Are there any questions from the room with respect to the company's financial report, sustainability report and the directors' and auditors' report? I think we have here. Have we got microphones?

Good afternoon, Mr. Chairman. My name is [ Mike Robey ] from the Australian Shareholders Association. And may I start by thanking you and Ms. Carey for taking the time to meet us in advance of this AGM to discuss a number of matters. I'm a volunteer monitor and hold about 1.5 million proxies. I have a few questions -- general questions about the business. Would this be the appropriate place to ask those?

So the first comment is we're very pleased to see Mr. Verrocchi has bought an additional large package of shares, particularly as I think the rumors in the market was that there was this overhang from the escrow. So we see that as a wonderful endorsement of his support for the business and very strongly supportive of retail shareholders. So thank you for that.

And look, as a general rule, the Australian Shareholders Association understands and appreciates the knowledge of the founders and family on the Board. And so there's nothing like owning a slice of the company to be focused on improving its performance in our view, even though that goes against many of the independent director sort of guidelines. We would, however, like to see an externally assessed skills matrix for the Board. I think I mentioned in our meeting that your self-assessed skills metrics was refreshingly honest, not everybody got 10 out of 10, which is unusual for ASX-listed companies. Generally, everybody rates themselves as expert in everything, and you were actually very fresh and honest. But we'd quite appreciate if there was an external assessment done by a specialist in this sort of nature and a bit more granularity in that matrix.

The main reason being that shareholders only get to vote on a couple of things. And one of them is actually the recruitment of people to the Board. So the more kind of information that they can actually use that's fact checked is quite useful. And look, just one observation. This may be completely unprofessional. But when I looked at your skills matrix, there didn't appear to be mergers and acquisitions mentioned as a key skill. And when we look at your adventures abroad, I would have thought that somebody -- having somebody on the Board and you have advised me that you have got people on the Board that it would be useful to have that listed as a key skill because when you're going off to Ireland and England and so on to sort of build new businesses, it would be useful to have somebody that actually understood those markets well.

And look, on the organization and Board structure, I mentioned before that and I understand this is heavily loaded with founders, and we're quite happy about that. However, there will come a time, and it comes a time with all founder-led companies when succession takes place. And it's not just television show on Netflix, but there is a succession process by which Board founders are rotated off for experienced and professional people outside. So that usually requires effectively a planning process in the succession planning. So I would like to ask whether you have got one in operation or whether you intend to start a succession process for key Board and executive members. Two more questions, but if you want to do those in...

Let me deal with...

All right. Sure.

So I think it's an obligation of the Board to think about succession, not only for Boards but executives. We have a succession plan process in place. But as I noted in my speech, at this point in time, we still -- we consider we're quite a new Board, like the fact Sigma and Chemist Warehouse have been around for a long time. We're only 20 months into this journey. But obviously, as we look forward, succession is obviously one of the responsibilities that we take on Board seriously.

Excellent. And look, it sometimes takes a long time to find appropriate people, particularly when you've got such talent as you do on the Board. And look, this is a bit left wing, but you did actually mention the softness in the cosmetics market. But we note the rapid increase in interest in Australian and Korean beauty products, making it the fastest overseas market -- growth overseas market for this K-Beauty range. And I'd have to say I'm not an expert in this thing, but looking at sort of discount cosmetic image that Chemist Warehouse presents, have you got a plan for actually dealing with what looks like is going to be a fairly lucrative new market segment in the cosmetic range?

Without going into the detail, Mr. [ Robey, ] I think it's probably fair to say that one of the strengths of the Chemist Warehouse model is their ability to identify products that consumers want. And that's an all day everyday exercise. So rest assured that they take a pretty wide view of the landscape in working out what products will sell now and into the future.

And look, the last one, a question we asked last year, given that this is an integration of a highly entrepreneurial founder-led company with a very organizationally competent distribution company effectively, we asked how the cultural integration was going. And I think you mentioned that there's a few misalignments with pay scales and so on, which have all been kind of addressed. But do you do a staff engagement survey? And if you do, have you thought to break out the initial 2 groups to see whether, in fact, they're both equally engaged or one perhaps more so than the other?

So what I'd say to you is we're 20 months into integration. We're 1 company, not 2. I think that's a selling -- we do, do staff engagement surveys. I think as we think about integration and culture, our job is to preserve what works. And I think the entrepreneurial flare from the Chemist Warehouse business is something to be admired and preserved along with putting some structure and process into other elements of the business, which we talked about in our meeting. So that's the way we think about it. Like the opportunity of putting 2 companies into one is to pick the best out of both and make it work.

As long as the staff come on board. Look, that's all I've got. Thank you very much and thank you for a good year. And I can't see how -- when somebody declares to the stock market that they've had such big increases in sales and profit that the share price should drop, but go figure.

Thank you, Mr. Robey. Are there any other questions from the floor? Yes.

Good afternoon. My name is Peter Colleiro. And I've got a couple of follow-ups, one to Mike's question and one to a comment made by our Chief Executive Officer's report. Follow-up to Mike's question, you mentioned that you did do a staff engagement process. What were the findings and what benefit has come out of doing those staff engagement reports? I'm all in favor of them, but I just want to know the benefits that we found from doing them.

Without staff, we don't have a business. So at any one point in time, we invest a lot of energy in understanding the mood of our staff. You would appreciate internally, there's a fairly large change management program goes on. So as you work through those programs, feedback from staff is a really important ingredient to being successful.

Okay. My second question was to a comment that our CEO mentioned. And that was to do -- in his speech, he mentioned about early stages of artificial intelligence. What are we doing to improve the skills of our staff, our executive and our Board in dealing with this new artificial engagement because it will affect every single business on the planet basically. So how are we improving the skills and the experience with all 3 aspects? And is there a Board member who we've assigned artificial intelligence expert or a go-to person if other members have issues with artificial intelligence?

I think it's fair to say the adoption of AI is early days for us. I think we've paid a lot of attention to putting good guardrails around the safety and security of using AI. Developing the skills and experience of staff in AI remains work in progress. So think about it as an early but cautious adoption. Are there any other questions from the floor? Are there any other questions online?

No questions online on this matter.

Are there any questions on the phone?

Chair, there are no phone questions.

Okay. Thank you. That concludes our consideration of financial statements and reports. We now come to Item #3 on the Notice of Meeting to adopt the company's remuneration report for the year ended 30th of June 2026. The Corporations Act requires an advisory nonbinding resolution to be put to shareholders for the adoption of the remuneration report. I will now put on the screen the valid available votes received from shareholders for this resolution.

Okay. Thank you. We now come to item 4 of the Notice of Meeting, the reelection of 3 directors. In accordance with Rule 3.6(b) of the company's constitution and Listing Rule 14.5 and being eligible, myself, Mario Verrocchi and Damien Gance all offer ourselves for reelection as a director. For context, no Board members were due to stand for this election this year in accordance with our constitution, noting all directors have been elected or reelected in the last 3 years. The listing rules require at least one director to stand at an AGM. And given I was next in line from the legacy Sigma directors, I have put myself forward for reelection. Four new Board members were appointed at the time of the merger in February 2025, some 18 months ago. Mario and Damien have put themselves forward for reelection ahead of time to assist with smoothing the spread of directors for reelection in future years.

No other nominations have been received in accordance with Rule 3.5C of the company's constitution. As this resolution relates to my reappointment, I will hand to Annette Carey, Chair of the Nomination and Remuneration Committee, to lead this aspect of the meeting.

Thank you, Michael. So first up is Item 4.1 relating to the reelection of Michael Sammells. Michael was appointed to the Sigma Board in February 2020 and became Chairman of the Board in August 2022, including following the merger. Michael is currently the Chair of the Related Party Independent Board Committee and a member of the Audit Committee as well as the Nomination and Remuneration Committee. Michael's experience is set out in the Notice of Meeting. From the Board's perspective, Michael brings a wealth of industry and financial experience as well as corporate governance expertise. He's a vital leader and contributor to our Board, and he led the merger negotiations with Chemist Warehouse from a Sigma perspective.

I'll now hand over to Michael to address shareholders.

Thank you, Annette. I have to say it's currently a privilege to be the Chairman, and I'm pleased to be able to offer myself up for reelection to the Board of Sigma. I was appointed to the Board of Sigma in February 2020, and back then, Sigma was a very different company. Following the tragic and unexpected passing of our previous Chairman, Ray Gunston, I was asked by the Board to take on the role of Chair in August 2022. Since that point, I have been part of an amazing ride for Sigma. First, the company secured the Chemist Warehouse supply contract, then helping lead the Sigma Board through the complexity of the merger negotiations with Chemist Warehouse completion through to today where we have been able to demonstrate the value we have delivered to Sigma shareholders. I believe I've made a valuable contribution to this journey, but could not have done so without the hard work and support of my fellow directors. I believe I have more to offer Sigma and bring my significant experience in the health care sector, along with skills in finance, M&A and governance to complement the skills and experience of other Board members. Our growth and integration journey with Sigma Chemist Warehouse remains work in progress, and it would be a privilege, if reelected, to continue to be part of this amazing company. Thank you.

Thank you, Michael. All directors have voted in favor of the resolution, and I now move that Michael Sammells be reelected as a director of the company. I'll put up on the screen details of the valid available votes received. Are there any questions in the room in relation to this resolution? Gary, anything?

Yes, we have a question from Stephen Mayne. Thanks to Michael Sammells for competently chairing the Related Party Transactions Committee and opting for very high levels of transparency. As part of his reelection, could Michael please summarize the types of related party transactions that have been phased out since the merger and also identify areas where the size and quantum of ongoing related party deals are expected to decline over the coming years?

Thank you, Mr. Mayne, for the question. I will touch upon related party transaction and its governance a bit later in the meeting. What I would say is that the related party arrangements have been quite constant. They are very standardized across franchise agreements, supply agreements. So there hasn't effectively been a phasing out. The thing I would say, which I'll say later is as we continue to grow the presence of Chemist Warehouse stores, the proportion of related party transactions as a total of the pool will naturally decline. And I'm really comfortable that we have strong governance, complete transparency and good reporting surrounding them.

Any other questions?

No further questions.

Any questions on the phone?

There are no phone questions.

Well, I congratulate you, Michael, on your reelection, and I'll now hand back to you to chair the remainder of the meeting.

Anne, thank you. Next item is Item 4.2 relating to the reelection of Mario Verrocchi. Mario was appointed to the Board in February 2025 at the time of the merger with Chemist Warehouse. Mario was one of the early pharmacists and founders establishing My Chemist with Mr. Jack Gance and Mr. Sam Gance in 1997 and then subsequently, the Chemist Warehouse chain in 2000. Mario is a passionate and dedicated executive who is currently the CEO of Retail and a member of the Risk, Compliance and Sustainability Committee. Mario continues to perform a critical executive role, driving retail growth across the consolidated business. Mario's background and experience is set out in the Notice of Meeting. From the Board's perspective, Mario brings extensive knowledge of the pharmaceutical industry, tremendous entrepreneurial and retail know-how and has been a value contributor to the Board since joining last year.

I will now hand over to Mario to address shareholders.

Thank you, Michael. Good afternoon, fellow shareholders. I am Mario Verrocchi, and I'm seeking reelection as a director to the Sigma Healthcare Board. For those that don't know my story, it's pretty simple. I've basically worked here, here being My Chemist and Chemist Warehouse my entire working life. It's been my one and only job in pharmacy. I'm proud to say that I've been involved and led most of the facets of the Chemist Warehouse Group over 44 years, and that includes warehousing, accounting, marketing and more importantly, most importantly, the retail function, which is the engine room of this business. And I think the results speak for themselves.

We use a term in our business, and it's evolution, not revolution. Nature takes its time, but everything gets done. And the last 20 months or so, this business has evolved, and it keeps on evolving. And the future is very, very bright. To be honest, I actually enjoy the evolution from private organization to publicly listed life. Thanks to Vikesh and his team.

But we're only just beginning this exciting journey, and we've got a lot of things to do, and that is to deliver our promise to our shareholders, and that's to become a truly international health care powerhouse. And I've gone on record. Firstly, I have no intention of selling down my shares in the foreseeable future. And as already mentioned, in fact, I've actually bought extra in the last month or so. Secondly, I want to stay on. I want to see the full integration of these 2 businesses complete. And then I want to push this dynamic company into the future and realize its destiny. I seek your approval to allow me to continue this evolution into what will become a global health care powerhouse. Thank you.

Thanks, Mario. All directors have voted in favor of the resolution. I now move that Mario Verrocchi be reelected as a director of the company. I will now put on the screen details of the valid available votes received. Are there any questions from the floor with respect to this item? No questions from the floor. Are there any questions online?

No questions online.

Are there any questions on the phone?

There are no phone questions.

I congratulate Mario on his reelection. Next item is Item 4.3 relating to the reelection of Mr. Damien Gance. Damien was also appointed to the Board in February 2025 at the time of the merger with Chemist Warehouse. Damien was the first Chemist Warehouse franchisee opening the first Chemist Warehouse Pharmacy in June 2000. He continues to operate a number of pharmacies and is a qualified pharmacist. Damien is also a member of the Risk, Compliance and Sustainability Committee. Damien's background and experience is set out in the Notice of Meeting. From the Board's perspective, Damien brings a strategic mindset, retail acumen and detailed knowledge of the regulatory landscape and pharmacy industry. Damien also played a key role in the Sigma Chemist Warehouse merger. The Board values the extensive time, attention and contribution Damien brings to the Board. I now hand over to Damien to address shareholders.

Thank you, Chair, and good afternoon, everyone. My name is Damien Gance, and I'm standing for reelection as a Director of Sigma Healthcare. My connection to this business goes back to the very beginning. From a time as a toddler standing in the dispensary as my parents dispensed in the group's first-ever pharmacy to being the pharmacist to open the first ever Chemist Warehouse store to driving the Chemist Warehouse merger with Sigma, I have literally grown up with this company, and I've seen it grow, grow from the single store into what it is today. But my experience goes beyond simply working in our pharmacies because for around 20-odd years, I was the Chief Commercial Officer at Chemist Warehouse.

Among my many responsibilities in this role, a substantive one was designing our franchise structure. That meant working closely with our franchisees and with the pharmacy boards in each state and territory to find a model that worked for everyone, for our pharmacists, for the regulator and importantly, for our business. These relationships are the very foundation of our network. And I believe that I have the experience of bringing these groups together. I understand their needs, their desires and how to keep them aligned. I think this is one of the most valuable things that I'm able to bring to our Board.

More recently, I led the negotiation and implementation of the merger with Sigma from the Chemist Warehouse side and helped steer it through to completion. So I know the combined business. I know the thinking behind it. What I hope to achieve now is to see the full potential of that merger delivered. I want our franchise partners and pharmacists to keep thriving, and I want this company to stay one of Australia's most trusted for generations to come.

So why does this matter to me? Because for me and my family, this isn't just any company. It's something that we have helped build and something we have chosen to stay heavily invested in. Our interests sit right alongside yours. And I'll always ask whether any decision that we make makes a stronger business for every shareholder, not just today, but into the long term. Thank you.

Thanks, Damien. All directors have voted in favor of the resolution. I now move that Damien Gance be reelected as a director of the company. I will now put up on the screen details of the valid available votes received. Are there any questions from the floor in respect to this item? Are there any questions online in respect to this?

We have one question from Stephen Mayne. Could Damien please comment on the biggest cultural and operational shifts that he has encountered since transitioning to be an ASX 50 director 18 months ago?

Damien, I'm okay if you're answering it

Sorry?

I'll repeat the question if you like.

Yes.

Could Damien please comment on the biggest cultural and operational shifts that he has encountered since transitioning to be an ASX 50 director 18 months ago?

I think that the cultural evolution within our business well predicated the actual merger. We've been trying to establish better governance within the Chemist Warehouse business whilst it was privately held. So whilst there has been some changes, I think as Mario pointed out before, the change has really been one of evolution and certainly not one of revolution. Revolution, I think, usually ends up with bloodshed revolution. Evolution usually ends up with a better business. And I think that what I've learned and what I've seen is that there is lots of external smarts about governance and the like that we can learn and bring into the Chemist Warehouse business that I think in the long term will make this a more sustainable, better business for all of our shareholders.

The only thing I'll add, Mr. Mayne, is I've said this openly before, I take my hat off to the Chemist Warehouse folks about the way they have embraced the changes as part of being a large ASX-listed company. Are there any questions on the phone in relation to this item?

Chair, there are no phone questions.

I congratulate Damien on his reelection. That now brings us to Item 5 and Resolutions 5, 6 and 7 regarding the remuneration arrangements for the Managing Director and Chief Executive Officer. A full explanation of this agenda item and the 3 supporting resolutions is set out and explained in the Notice of Meeting. As an overarching comment, over the last 18 months, the Board has reviewed the remuneration frameworks in place to ensure greater alignment with the breadth and depth of our business, the increased scale and complexity, our updated strategy and appropriate growth metrics. In relation to the 2026 long-term incentive plan, Sigma has taken external advice in establishing our remuneration structure to align with more market standard structures and in setting performance targets that are appropriate for an ASX top 20 high-growth company.

We note that 2 proxy advisers recommend that shareholders vote for the grant of LTI rights and 2 have recommended voting against the grant of LTI rights to the 3 executives today on the basis that they believe the 2026 LTI earnings per share hurdles are insufficient. For context, in FY '26, the Board increased the lower end of the EPS growth range to 10% per annum, up from 7.5% per annum in FY '25 for 50% vesting whilst retaining the 15% per annum growth hurdle for 100% vesting. Over a 3-year period, these hurdles required cumulative EPS growth at approximately 33% threshold and 52% for maximum vesting. While this change was acknowledged as an improvement, there is still a concern that the revised range may be insufficiently challenging relating to the normalized EPS growth of 23.1% in FY '26 and current broker consensus. The Board does not believe that delivering 15% compound EPS growth over a 3-year period should be viewed as unchallenging simply because management has delivered strong performance over the past year, and the market has high expectations of management implied in consensus.

Rather, the market's expectation of this growth reflects conviction in management's ability to consistently deliver above-market returns, not an absence of stretch in performance hurdles themselves. I would also make the point that whilst we remain very confident in the EPS growth prospects over the next 3 years, it's clear that at the same time, the Australian economy is struggling, consumer discretionary income is challenged and retail is a tough market in these conditions. But at the same time, the Chemist Warehouse business has shown itself to be an incredibly resilient business in tough times.

With that introduction, I will now move to each resolution, and we will take questions at the end of these 3 resolutions. Item 5.1, Resolution 5, relates to the grant of 1,084,167 rights to the Managing Director and Chief Executive Officer under the 2026 long-term incentive plan. I will now put up on the screen details of the valid available votes received.

Item 5.2, Resolution 6, relates to the grant of performance shares to the Managing Director and Chief Executive Officer under the company's short-term incentive rights plan. Participants in Sigma's STI plan are assessed against predefined financial and nonfinancial performance metrics. The Board retains discretion to amend aspects of the plan as a last resort, such as to reflect achievements beyond the predefined measures or events beyond executives' control. The Board believe it continues to demonstrate its commitment to rigorous performance hurdles evident through increased transparency in our STI disclosure and remains confident in its ability to strike the right balance in setting achievable but challenging targets to ensure executives continue to deliver improved shareholder returns. I will now put on the screen details of the valid available votes received.

Item 5.3, Resolution 7, relates to shareholder approval for the potential retirement benefits to the Managing Director and Chief Executive Officer in accordance with Section 200B and 200E of the Corporations Act. The Board has sought shareholder approval at this time to provide Sigma shareholders and our CEO with certainty regarding terms that may apply if a relevant accelerated event were to occur and to ensure that such arrangements, which are considered appropriate by the Board and in the best interest of shareholders are able to proceed in a timely manner. I will now put on the screen details of the valid available votes received.

I will now open up for questions in relation to resolutions 5, 6 or 7. Are there any questions from the floor on this item? Yes.

Peter Colleiro again. First of all, my apologies to Vikesh Ramsunder. I forgot your name when I asked my earlier question. So apologies for that. Second point, this 5.3, are we looking at things such as potential takeover of the company, that sort of thing?

In principle, yes, if there was an event that the Board considered and part of that consideration was the Board felt it appropriate on behalf of shareholders to deal with on-foot LTIs, it gives the Board the ability to do so in a timely fashion without having to revert to the process of an AGM for shareholders.

Okay. Thank you. Just one other point I forgot to mention earlier. Thank you for holding a hybrid meeting. I actually find it very useful even when I'm -- particularly when I'm not here. Thank you.

Okay. Thank you, sir. Are there any other questions from the floor? Are there any questions online?

One question from Stephen Mayne. It would have been better if you disclose the proxies to the ASX along with the formal addresses to more promptly inform the market and allow for a fully informed AGM debate. Will you do that next year?

Thank you, Mr. Mayne. We're comfortable with our process at this stage. We respect your views entirely. We haven't made a decision about what this meeting looks like next year, but we understand your view.

And the second part of his question related to proxy adviser recommendations, which you've already answered.

Okay. Thank you. Any other questions online, Gary? Any questions from the phone?

There are no phone questions.

That concludes considerations of resolutions 5, 6 and 7. And again, we thank you for your support. We now move on to resolutions 8 and 9. And again, I will take any questions at the end of these 2 resolutions. Before I go to the detail of the next 2 resolutions, I've been asked by some shareholders and stakeholders why we are introducing an LTI offering for our Chief Executive Officer, Retail, and Chief People Officer. In short, as part of the people integration of Sigma Chemist Warehouse, we've been in the process of putting in place a formalized and structured remuneration framework to be standardized across senior executives of the business. As part of that, it's clear that these 2 roles should be on a standardized STI and LTI entitlement.

Item 6.1, Resolution 8, relates to the grant of 349,060 rights to the Chief Executive Officer, Retail, under the 2026 long-term incentive plan. I will now put up on the screen details of the valid available votes received.

Item 6.2, Resolution 9, relates to the shareholder approval for the potential retirement benefits to the Chief Executive Officer, Retail, in accordance with Section 200B and 200E of the Corporations Act. I will now put on the screen details of the valid available votes received. Are there any questions with respect to resolutions 8 or 9, starting with the floor. Any questions online?

No questions online.

Any questions on the phone?

Chair, there are no phone questions.

That concludes resolutions 8 and 9, and we thank you for your support. We now move on to Resolutions 10 and 11. And again, I will take questions at the end of these 2 resolutions. Item 7.1, Resolution 10, relates to the grant of 157,572 rights to the Chief People Officer under the 2026 long-term incentive plan. I will now put up on the screen details of the valid available votes received.

Item 7.2, Resolution 11, relates to shareholder approval for the potential retirement benefits to the Chief People Officer in accordance with Section 200B and 200E of the Corporations Act. I will now put on the screen details of the valid available votes received. Are there any questions with respect to Resolution 10 or 11? Any questions from the floor? Any questions online?

No questions online.

Any questions on the phone?

There are no phone questions.

That now brings us to the end of items of business, and I now formally close the meeting. Voting will remain open for a further 5 minutes to enable shareholders to complete and submit their votes. The results of voting from today's meeting will be announced via the ASX and placed on the company's website. Finally, I thank you for joining us today, whether in the room or online. For those in the room, I now invite you to join us for refreshments.

Thank you for standing by, and welcome to the Sigma Healthcare Full Year Results Announcement. [Operator Instructions] I would now like to hand the conference over to Mr. Vikesh Ramsunder, Managing Director and CEO. Please go ahead.

Good morning. I'm Vikesh Ramsunder, the Chief Executive of Sigma Healthcare, and welcome to our full year results presentation for the 12 months ending June 2026. I'm joined here today by Mark Conway, our Chief Strategy Officer; and Gary Woodford, our Head of Corporate Affairs and Investor Relations. Richard Murray, our CFO, is unable to join us today as he had a medical procedure on Tuesday and is recuperating at home. We wish him a speedy recovery and expect him back at work next week. Mark Conway, who was Sigma's CFO pre-merger, will fill in for Richard today, and we are fortunate to have the management bench strength in the business.

In terms of today's agenda, I will provide an overview of the group's performance. Mark will then go into the financial performance in more detail, and I will then provide you with an overview of our operational highlights, strategic insights and priorities for the year ahead.

Firstly, the strength and strategic execution of our business model is continuing to deliver strong results. We have a network approaching 1,000 pharmacies globally, with a solid pipeline of growth in each market. This brings significant scale that leverages our existing infrastructure capabilities and expertise and is underpinned by defensive industry characteristics. With most of the infrastructure in Australia already in place and a clear runway for growth, we are confident the model will continue to compound value.

Let me start with the headline numbers for the year. Group revenue grew 15.5% to $10.8 billion. That flowed through to stronger EBIT growth, which increased over 20% to almost $1.1 billion. To put that in context, in the prospectus ahead of the merger, pro forma EBIT for FY '24 was $605 million. This demonstrates that the merger is working and strong value is being created for our stakeholders.

Net profit after tax increased 22% to $732 million. Importantly, we delivered this while maintaining a conservative balance sheet with a net debt to normalized EBITDA ratio of just under 0.6x. And our capital-light model in Australia continued to convert growth into strong return on invested capital, which is over 19% for the year. For shareholders, that translates into normalized EPS of $0.064 per share, up 22% and a final dividend of $0.02 per share, representing a payout ratio of approximately 63%. This brings total dividends for FY '26 to $0.04 per share.

The financial highlights I've just outlined are an outcome of the disciplined execution of our four strategic pillars. Domestically, the Chemist Warehouse branded network sales reached $10.2 billion, up 16%. This was driven by the addition of 24 new stores, combined with like-for-like growth of 13%.

GLP-1s have provided a structural tailwind, which we expect to continue. GLP-1 units sold were up over 75% for the year, contributing to sales and EBIT growth. This category is, however, dilutive to gross margin percentage.

Whilst not benefiting us in this year's results, we are also progressing with a clear program to reinvigorate the Amcal and DDS network. The international store network sales grew 23% to $1.6 billion, also driven by the addition of 20 new stores and like-for-like sales growth of 12%. The distribution center in Ireland is now fully functional and supporting growth, and work is progressing to open a New Zealand DC by September to support growth in that market.

The product differentiation strategy continues to build momentum. With more than 470 owned and exclusive label products launched this year, sales are approaching $1 billion, which is around 10% of Chemist Warehouse branded store sales, directly enhancing both customer value and margin.

And in our fourth pillar, volume was up 6.5% through the DCs with our cost per unit distributed down 2%, reflecting disciplined cost management. We have combined our support centers in Preston and rationalized our DC network. The $100 million per annum synergy program remains on track with a $32 million contribution in this financial year. Overall, in a short time as a merged group, there has been significant progress made in delivering on our strategy.

I will now hand over to Mark to discuss the financial performance in more detail.

Thanks, Vikesh. I will now take you through the financial results, the segment drivers, the balance sheet and cash flow. The central point is that broad-based revenue growth converted into faster EBIT and NPAT growth.

Turning to group performance. As Vikesh outlined, revenue grew 15.5% to $10.8 billion. And importantly, revenue growth outpaced expense growth. Gross profit rose 15.2% to $1.96 billion, with gross margin holding at 18.1% for FY '26.

In the context of strong growth in GLP-1 sales, which is dilutive to margin percentage, this is a strong outcome from our buying team. Our share of profits from associates and joint ventures was up 25.7%, reflecting the continued strong growth and performance of our New Zealand stores.

The result flowed through to the bottom line. Normalized EBIT was up 20.6%, with EBIT margin expanding 43 basis points as we captured scale benefits and efficiencies across the business. Statutory NPAT was $708.7 million and on a normalized basis, NPAT grew 22.3% to $732.3 million. In summary, we have grown the top line, protected margin and delivered a strong result.

This year, we are providing expanded segment disclosure for Australia and International. Australia remains the earnings engine, while international is beginning to contribute at scale. Three points before we get into the detail.

First, our growth is broad-based. Revenue of $10.8 billion is up 15.5% or nearly $1.5 billion. Australia grew 14.9% for the year and 15.7% for the second half. Australia delivered almost 93% of the revenue growth for the group, showing continued strong performance in our core market.

Second, we held total margin while continuing to invest. Gross profit is up 15.2%, whereas cost of doing business grew 9.4%. This highlights pleasing operating leverage with our cost of doing business improving 47 basis points to 8.6% of sales. Third, that leverage drops through to earnings with our normalized EBIT margin up 43 basis points to 10.1%, and both segments expanding margin. For the year, international EBIT grew 91% to $56 million, with particularly strong performance in the second half with Ireland contributing positive earnings for the first time.

With that, let me take you through the detail. Starting with Australia, which remains the core engine of this business. Revenue of $10.4 billion is up 14.9%, and this has converted into EBIT of $1.03 billion, up 18.3%. Earnings is growing faster than revenue.

Total cost of doing business grew 7.7% against revenue growth of 14.9%. Cost of doing business improved 52 basis points to 7.8% of sales. Despite a step down in gross margin to 17.6%, EBIT margin lifted 28 basis points to 9.9%.

Briefly on the cost lines. Warehouse and distribution rose 7.7% on higher volumes, but unit economics continue to improve. The network saw increased activity during the period, driven by both integration activities and bringing a strategic supplier into our DC network from direct to store.

Marketing and sales expenses were up 8.2% and admin and general expenses were up 9.5%. Employee expense growth was only 2.7%. The key drivers were investment in business and customer acquisitions, including Tilley Soaps now being consolidated into the group results.

Other costs included IT and marketing subscriptions and license fees related to private label. There was also a one-off FX loss of $3.7 million incurred during the period. As with the group numbers, these are normalized and exclude $33.8 million of integration and PPA costs. In short, we have a cash-generative core still compounding with productivity, brand mix and synergies still ahead of us.

Now to international, which is moving from an investment phase towards meaningful earnings contribution. Revenue of $421.4 million is up 33%. Gross profit was up 47.6% and EBIT of $55.8 million has nearly doubled. EBIT margin expanded 400 basis points to 13.2%.

The Chemist Warehouse offer is resonating with more customers across more markets. We have contributions from new and recently opened stores. Retail network sales across the international business was up 23.3%.

Two things drove the margin. Gross margin lifted 303 basis points to 30.6% on margin and supplier support, and revenue growth of 33% outpaced total expense growth of 23.7%. With increased scale, we now saw cost of doing business down 200 basis points to 26.5% of sales.

On the cost lines, warehouse and distribution fell 9.3%, which includes the closure of China. Marketing and sales were up 29% and admin and general, up 17.6%, reflecting employee growth in new international stores and the operating expenditure needed to support expansion. This is the cost of building the network. International is now delivering genuine scale benefits and efficiencies in distribution and supply arrangements, which we expect to continue as the network grows.

Turning to the balance sheet. Our balance sheet provides flexibility while we continue to fund integration and growth. Net assets grew 7.1% to almost $5 billion. We reduced debt facilities to $1.4 billion while keeping ample headroom and adding tenure to the book. Net debt fell to $663 million, down from $752 million a year ago.

Our disciplined approach to capital management is reflected in our leverage. Net debt to normalized EBITDA improved to a conservative 0.57x, comfortably below prior year. We had capital expenditure in the year of $56.7 million, investing in store rollout and distribution center infrastructure. Our model remains capital-light in Australia with spend aligned to our growth agenda.

We are also funding a final dividend of $0.02 per share for FY '26, payable on the 22nd of September, taking the full year dividend to $0.04 per share. Overall, we have a resilient, well-capitalized balance sheet to support our strategic ambitions.

Now to cash flow. Firstly, I note that the prior period reflects just 4.5 months of Sigma cash flows, so the statutory comparison isn't like-for-like. Net cash flows from operations was $574 million. It was impacted by an investment in working capital, which I will talk to shortly.

Income tax paid of $114 million reflects timing differences that will normalize in the first half of the year. Free cash flow was $500.4 million, and net debt is down to $663 million. In short, we have a strong operating cash generation, disciplined capital allocation and a balance sheet that gives us flexibility to fund growth and returns.

And finally, to working capital position, which is our clearest opportunity to further improve. Net working capital increased to $1.6 billion and the cash conversion cycle extended by 7.1 days to 54 days.

Inventory levels increased 22% for three key reasons. Firstly, growth in owned and exclusive label products, including Wagner. Secondly, the transition of a significant supplier away from direct to pharmacy into our supply chain. And thirdly, overall growth in sales. Days sales outstanding is up marginally, reflecting timing of store receipts that were settled in July.

We see working capital management as an opportunity to further drive cash flow with a 1-day improvement in CCC days equating to around $30 million, and we have plans in place to realize these benefits. Overall, we have a balance sheet with low leverage, a refinance facility with strong lender support and further opportunities to increase cash flow.

I will now hand back to Vikesh.

Thank you, Mark. I will start by again reminding you of the four pillars of our growth strategy. Our business is built off the defensive nature of the health care industry where demand is less discretionary and as a discounter, Chemist Warehouse is also best placed to traverse economic cycles. That resilience is reinforced by the following structural trends.

Positive domestic demographics and an aging community that steadily lifts prescription volumes, a stable and supportive regulatory environment, deep and long-standing supplier partnerships and the scale benefits that make us a critical link in the pharmacy supply chain.

On that stable base sits our four clear pillars of earnings growth. Firstly, in Australia, where we continue to build our market leadership, drive like-for-like sales growth and expand our pharmacy franchise network. Second is international, where we are focused on pursuing profitable growth in existing operations while we carefully assess and seed new markets.

Third, relates to product differentiation. By expanding our own and exclusive label ranges, we enhance customer loyalty and margins. Fourth is operating leverage. As we integrate, expand and execute our synergy program, we better leverage the combined scale of the business to convert revenue growth into stronger returns.

This is a compelling investment case, a defensive market-leading position that generates dependable cash flows paired with multiple levers that compound earnings. For investors, that means resilience when conditions are uncertain and genuine upside as we execute our plans.

Our first pillar is domestic growth, where the runway remains strong and is built through the execution of our three brand strategy. Our three brands, Chemist Warehouse, Amcal and Discount Drug Stores now let us enter underpenetrated locations that a single brand may not serve as effectively.

Chemist Warehouse is the leading discount pharmacy operator in Australia, and I will talk to this brand on the next slide. The Amcal and Discount Drug Stores brands have been through a natural transitionary phase, with member numbers declining over the last 2 years as we progress through the merger and integration program.

With the brands now rebased, the focus is on executing our growth plans, supported by stronger retail execution, strategic investments, marketing, improved supplier confidence and a renewed customer proposition. Encouragingly, we have 82 new Amcal and DDS members who have committed to be onboarded through FY '27.

Continuing with the domestic network, where Chemist Warehouse has delivered more than 10 years of double-digit sales growth. The Chemist Warehouse branded network grew to 561 stores and generated a milestone $10 billion in network sales at a 10-year CAGR of over 11%. Beyond opening new stores, like-for-like growth provides a strong quality signal.

The CW branded network delivered like-for-like sales growth of 13.4%. That came from three clear drivers: our unwavering commitment to great everyday prices, a focus on product newness and a strong demand in health care categories, including GLP-1 medicines. Pleasingly, Chemist Warehouse was once again recognized by our suppliers as the #1 pharmacy retailer in Australia.

Looking ahead, the pipeline remains strong. In half 1 '27, we anticipate opening 13 Chemist Warehouse branded stores and refurbishing a further 12. The strategy for domestic growth is clear, more stores, more productive stores and a multi-brand runway.

Turning to international, which is both an established and an emerging story, delivering real scale, real momentum and a clear growth pathway. New Zealand is a great example of our international expansion capabilities, with the store network up to 75 stores and sales up 20%. In Ireland, sales grew 45% for the year, with Ireland now a net contributor to profit for the first time. And in the UAE, where we are in an early stage, we have grown to three stores and are seeing positive trends.

Across our core international markets, we opened 20 stores this year, taking our network to 98 stores, with total international store sales of around $1.6 billion, up 23% and like-for-like sales growth of 12%. As previously announced, the focus on profitable growth led our shift to an online-only strategy in China. We expect to complete our store closure program by FY '28. This helps ensure that our capital and energy are directed to the markets with the strongest prospects and returns.

And as announced in May this year, we have entered an agreement with the Green Light Pharmacy Group to enter the U.K. market. We anticipate opening two stores prior to Christmas, with plans underway for a further three next year. This is a great opportunity to learn and adapt in an attractive market with a population of around 70 million people.

Looking at the first half of FY '27, we expect to open a further 19 stores in our international markets. Our third pillar is product. This is where product differentiation provides a structural margin lever and the opportunity to drive customer brand loyalty.

Firstly, I would like to reaffirm that Chemist Warehouse is and will remain a house of brands. We are not displacing the brands customers love. We are building brands alongside them and expanding category growth. This protects our supplier relationships, but still allows us to build differentiation versus our competitors.

Owned and exclusive label sales grew 15% and is now approaching $1 billion, which is around 10% of the CW branded store network sales. We do not have a specific target for own label penetration, but our merchandise team tactically executes opportunities that benefit the business over the long term.

Owned and exclusive label carries structurally higher margin and newness is important for growth, with over 470 new product lines added in FY '26. One example is Wagner generics, which achieved 88% customer adoption. That's customers using our brand at scale, and it points to a strong end-to-end execution capability across the franchise network.

Turning to pillar four, operating leverage. Our supply chain is world-class. We executed over 600,000 deliveries and distributed 579 million units of pharmacies during the year, with volume up 6.5% on last year. That's an additional 35 million units for the year.

This is where the benefits of scale, automation and our fixed and variable cost structure make a difference to the bottom line. And we are not standing still. We are rationalizing our footprint to drive further optimization.

The South Guildford DC in Western Australia closed in May, and our Port Adelaide DC will be consolidated into our Pooraka DC in the first quarter of FY '27. We are also upgrading our Townsville and Hobart distribution centers to strengthen service in those markets. On logistics, we are optimizing routes, consolidating providers and leveraging automation to take cost out of every unit we move.

Importantly, for our wholesale customers, we are maintaining our high service standards with delivery in full above 99% and on-time delivery above 97%. Our performance has been recognized by an independent supplier survey, which recently ranked Sigma the #1 wholesaler in Australia.

A key part of pillar four of our strategy is our focus on synergies, with the $100 million annualized target is clear, achievable and firmly on track. The $32 million of synergies that we achieved this year will also benefit FY '27. The one-off cost of $26 million to achieve the synergies is in line with expectations.

Importantly, this is not just about consolidation. We have mapped the change management required to deliver our integrated technology solution. It is important to note this is not an SAP implementation. It is an SAP upgrade and integration of the Chemist Warehouse Group onto existing IT architecture. We are also introducing AI capability across the business to support decision-making and drive further efficiencies.

So let me close on why I'm confident about the year ahead and the value we're building for our stakeholders. Sigma enters FY '27 structurally stronger than ever. We have four proven growth pillars, a strong balance sheet and the ability to continue driving operating leverage from integration. We expect our positive sales momentum to remain strong across every market in which we operate, and the start to FY '27 supports this.

Including the annualization of GLP-1s, like-for-like sales across the CW Australian store network is continuing in double-digit growth. Consistent with previous years, I will provide a trading update at our AGM in October.

Growth will come from four places. Domestically, we expect to onboard 13 Chemist Warehouse stores and 42 Amcal and DDS stores in the first half. A further 19 stores will also be added internationally in half 1, including our entry into the U.K. market. We are also focused on supporting margins with ongoing investment in our own and exclusive label products and maintaining our relentless pursuit of cost efficiencies.

GLP-1 demand and the pending introduction of the oral form in Australia also continues as a structural tailwind for the business. Importantly, our $100 million per annum synergy target is still largely to be captured by FY '29, and our conservatively geared balance sheet lets us fund both growth and dividends.

The investment case is clear. Sigma has a defensive and differentiated health care platform that is compounding double-digit earnings with proven growth levers and margin opportunities still to be captured. We have the scale, the balance sheet and execution capability to continue delivering value for shareholders.

Thank you for listening, and we will now take your questions.

[Operator Instructions] Today's first question comes from Shaun Cousins with UBS.

I've got two questions. Maybe first around administration costs. They were up some 17% in the first half and only up 10% in the full year. Can you just talk a little bit about how you managed to slow the growth rate down in that administration cost line and how we should think about how that cost line grows over -- going forward, please?

Look, in terms of that, there was no sort of standout big driver of that coming down. All I'll say is we're starting to see some of the benefits of removing the duplication and some of the efficiency measures that we're putting in place.

And was that where a lot of the synergies were landed?

I wouldn't say a lot of it, but there was definitely some benefits of duplication being removed in that line, correct.

If I can add to that, I would say to you, it was just quite timing. If you consider the merger last year, there were some costs that had slowed down and that had lifted this year. So you're starting to get the normalization of cost spend come through. And that's why you're trying to -- you're seeing the trend go downward in terms of expenditure.

Yes. Okay. Great. And so maybe then secondly, just around cash conversion and the cash conversion cycle you'd call out sort of stepping up to 54 days. I guess how much of that was the onetime just related to the bringing in -- I think you mentioned Tilley Soaps into the DC and how much of it's broader growth?

Because I'm just assuming that your working capital intensity will increase, one, because you're a growth business. But secondly, it should also increase as the New Zealand DC is operating as well, if that -- I just want to get an idea around how we should think about cash conversion cycles going forward. Is 54 doesn't appear the right number, but 46.9 might not be the right number either as you're a growth business and you're making some changes.

Yes, that's right. The increase in inventory was due to a strategic supplier. Tilley Soaps was more an acquisition we made during the period that we're now consolidating. So that was more through the -- an impact of the P&L rather than the balance sheet.

I think you're right. The answer is somewhere in between that number as we continue to grow. Obviously, you've got higher costs like GLP-1s coming in, but a further benefit down the track of when we get to one system, we'll be able to optimize the inventory a lot better.

I might just squeeze one quick one in. New Zealand, your CapEx, your guidance is flat. You had $40 million of New Zealand DC CapEx. How much of that was in '26? And then maybe does your guidance of flat CapEx '27 or similar '27 or '26, does that also include most all of the residual $40 million coming in, in '27, please?

Yes, it does. We had very negligible CapEx in FY '26. A lot of the IT costs, SaaS costs are expensed. So that's right, Shaun, it will flow into FY '27. Broadly, we expect the CapEx number to be pretty consistent year-on-year.

And as well at the same time, Shaun, the way the build will begin is the automation will probably only take about 18 months to kick in. So you will have the CapEx dripping in over probably 2 years for the New Zealand DC.

The next question comes from Adrian Lemme with Citi.

My first question was relating to the federal budget. So we understand that the vitamin market actually fell materially post the budget in May, with multivitamins down double digits. Can you talk to how vitamins and other discretionary categories like fragrances, for example, performed in the fourth quarter and how they're tracking now, please?

I'm not sure I can directly link it to the budgets, but there's no doubt there's a category that's probably come under a little bit of pressure. I would say to you, it's the vitamin market. And at the same time, what we're seeing in, let's just say, ladies fragrances is probably a bit of trade down because volume is still up, right? But men's fragrances are doing exceptionally well.

So if I look at most of the categories, quite frankly, they're all performing really, really well. So I would say to you, I can't really say we're feeling the impact, right, of the consumer pressure at the moment. But certainly, categories like vitamins or ladies fragrances, which tend to be a little bit more discretionary, we can probably see a little bit of impact there.

But then we're picking it up in hair care, in health care and a whole lot of other categories. So it's balancing it out.

That's helpful. And could I ask a second question? We talked in February about the opportunity to improve the process and how you, the pharmacist co-recommend other products like protein, fiber, et cetera, with GLP-1 scripts. I'd just be interested to see if much progress has been made with franchisees in recent months on that and just how meaningful you think the upside to the business is from this?

I think that's an ongoing process because we call them our SRS team, right, our store team that focuses on working with franchisees and execution in stores. So if I just look at the impact on the cross-sell, for example, protein in our stores, that is exceptionally high growth. If I look at hair care and the complementary products that effectively a consumer would be looking for, right, digestion, et cetera, those categories are performing exceptionally well.

So I would say to you, I think that is an ongoing process in our stores. And a key metric that I provided in May, and that continues, the basket size of a GLP-1 customer is 40% larger than a non-GLP-1 customer. So that trend has continued, which is obviously encouraging for the cross-sell. And the cross-sell opportunities will continue in stores.

The next question comes from Peter Marks with Goldman Sachs.

I just wanted to drill down into that Australia sales growth trends over the half and then into the trading update. It looks like May and June sort of slowed to 8%. Can you give us like a bit more color on what you think has driven that? Is there anything in there on the flu season and then also like the bounce back in FY '27?

Yes. It was slightly softer in May and June. There were two reasons for that. Actually, the comps were really big to last year, and that's obviously seasonality kicking in. And the cold and flu season certainly started later this year.

But as you can see, I've stated that we've got double-digit growth like-for-like in the new financial year. So that trend has turned at the moment. That's really -- it's probably two things, right, big comps in last year and a later start to the cold and flu season for this year.

Okay. That's great. And then on the cost base in Australia, like I think you've called out -- are there any one-off costs that we should be thinking about? Like is that 3.7% FX, is that in those numbers? And then how big is that like Tilley Soaps acquisition? Is that like you taking on some of the losses there? Are there any like -- I guess I'm trying to get at is, are there any like one-offs that we might adjust for as we look into '27?

Yes, that's right. I think there are quite a few. I mean if I start with warehousing costs, we did have -- we were transitioning our Tier 1 suppliers across from February, which meant we incurred some additional employee costs there and temporary labor. As you're transitioning, you ramp up before you ramp down. So there's certainly -- and that transition is now complete. We also obviously brought on a strategic supplier, and we did have EBA negotiations. So we did carry some extra labor during some of those periods.

Yes, Tilley Soaps was consolidated in from about December. I think that's around $6.5 million. And then yes, the FX loss was certainly one-off. So yes, there is -- the business is going through a lot in terms of integration. So there is kind of some costs. We normalize some of them, but obviously, you can never normalize everything.

Yes, that's great. Just on the Tilley Soaps, like does that go to -- how does that look into '27? Would you be looking to like improve that? Or does it -- can you get it to 0? How should we think about that?

I mean it's flowing through each of the P&L lines. So you'll sort of see it annualizing into that number through December. But I mean, it's not a meaningful EBIT contribution at this point. It's more just that the costs have started to flow through.

The next question comes from Tom Kierath with Barrenjoey.

Just on Ireland and the U.K., it's great to see Ireland profitable. I think you're rolling out a bunch of stores over the next kind of 12 to 18 months. Should we expect like the profit to potentially go to a loss as you do that and you invest in those stores? Or can you just maybe help us understand what the trajectory looks like a bit in Ireland, please?

So I think the good news is Ireland's made a profit, and it's been quite a good turnaround for the year. And we expect that momentum to continue because you really needed the scale to absorb the fixed costs and the overheads of the office. And once we have done that, right, and you can see Ireland is up 45%. So you're getting really good growth momentum from the existing stores as well, which means we expect Ireland to continue being profitable and growing in profitability.

The U.K., of course, will be loss-making, right? You're opening two new stores. We'll probably open another three in FY -- second half of FY '27. So we expect that business to be loss-making for a period of time as we grow scale in that market.

Great. And just on GLP-1s, I know it throws around the sales a lot. Can you maybe just talk through what trends you're seeing there in terms of volumes and also the ASP. I understand that people are kind of trading up going to heavier doses as they're on their GLP-1 journey. But can you just talk through what you're seeing in GLP-1s, please?

I mean, to be fair, I think we always knew that the GLP-1 trend would continue. What we find really encouraging is that it's kind of maintained a growth momentum. You can't think really big numbers in last year. So you can't expect that kind of level of growth to flow through, right? But what I think is good is -- I'll give you the average price.

We're averaging around $300 of the mix of products because, as you can understand, some products are funded by the PBS, a very small portion. Most of it is private. So I actually find GLP-1s as a category will continue to grow.

What's interesting for me is when the oral dose will be registered in Australia. I truly believe that's a real tailwind for the business. We don't know what the pricing could be or anything like that. But there's probably two big and important things in that medicine category.

If the government puts it on to the PBS, which is obviously still being negotiated, and the oral dose comes into Australia, I think the market size starts to grow materially. And if you look to then the cross-sell opportunities, that lifts our front shop. So this category for me, I think, will continue to give us a tailwind into the future.

The next question comes from Brian Gilbert (sic) [ Ben Gilbert ] with Jarden.

Just following up from that GLP-1 question. Just if we did see the old doses coming in and the cheaper pricing, do you expect that there's going to have to be a bit of a reset. So say price is half or more than half, do you think there's going to be a bit of a reset period for 6 to 12 months when comps to take a hit? I'm just trying to think about how we sort of ready for that if it does come and you see participation goes into [ 3 to 6 ].

Potentially, yes, because it's a really high value item. But I'm probably expecting a proportion of that to be offset by the increase in volume, right? With the market size increasing, the sales uplift on other products could probably offset that. If it's slightly cheaper, the margin percentage kind of moves up. So we're all hypothesizing that because we have no idea what price is going to be registered at in the country.

But it's probably the best negative comp I'm happy to take, right? Because there's extra -- if you recognize what you're looking for is long-term volume consumption. And if the market size increases and customers are buying complementary products, then that's better for the business over the long term.

Yes. Intuitively, if you took a hit from say it's adding 3% or 4% comp at the moment and say goes to 0 for a period, but you get that 40% basket uplift and penetration doubles, your net after 12% is materially higher, right?

Yes, absolutely.

And just thinking about the Australian composition of comps, I appreciate you don't want to break it down explicitly for us. But if we look at the double-digit run rate that you're at, I'm just trying to get a bit of a feel for what of it is GLP-1 versus going to larger store sizes versus just core more productivity out of your front of store. Is it a relatively even mix that's flowing through in terms of that double digit?

And as we look forward, I know you've been sort of talking to GLP-1 impacts starting to wane, but it doesn't seem like it. How are you thinking about your ability to maintain that double-digit comp rate through fiscal '27?

So I would say to you, there's no doubt, right? If you look at the long term, the 10-year run rate of growth at about 11%, the CAGR and the fact that we have been outstripping that over the past kind of, say, 18 to 24 months, it actually means that GLP-1s are helping drive that. So it's not normal to expect us to be growing at 16%, right, on an ongoing basis.

So what we aim for on a consistent basis in the company is double-digit like-for-like sales growth. Now that gets harder over time, right? The laws of gravity start to catch up with you as the base gets bigger, et cetera.

But the ambition and the way we target growth in the organization is at least aiming for double-digit like-for-like sales growth. And you're seeing the 13%, really, that's been driven by GLP-1s. So that's slightly above the norm. But we would be very happy with, let's just say, high single-digit, double-digit like-for-like sales growth.

Okay. And then obviously, feeling comfortable around that for fiscal '27, given how you sort of talked to the trading up in the outlook for the first half.

And that's the thing. We're in the middle of seasonality at the moment, right? We're slap bang in the middle of cold and flu season, and it's very dependent on what happens with script demand over that period. It drives footfall and consumption of cold and flu medicines. So that's really why I'm feeling comfortable that we probably had a later cold and flu season start, and we've gotten into double-digit growth now.

The next question comes from Bryan Raymond with JPMorgan.

Just back on GLP-1s again. Just it's helpful to get that ASP on the -- I assume that's just on the GLP-1s themselves at $300. Just wondering, you've talked about 40% -- sorry, 40% higher, I think it's units per basket for those on GLP-1s. I'd just be interesting to get the sort of overall basket size, if it's possible to sort of dimension the degree to which you're getting those additional sort of add-on sales, those adjacent products in terms of dollars, like how that might look relative to that $300 ASP?

So we don't give the basket size mix. As you can understand, that's information we'd love to keep away from our competitors, right? But what I would say to you, what's interesting, if you think of the category mix in that additional 40%, it's -- I would break them down into actually more medicines, OTC products. So the consumer that's dispensing the script is also buying more analgesics. I cannot tell you why, but that, you can see that in their basket, right?

They're buying more beauty products. They're certainly buying more protein. So you can actually see that these are complementary products to support their health care for taking the GLP-1 medicine. So that trend, I think, just continues.

Internally, Mario has called it Fit Beauty. So it's really about the fact that we're selling products linked to individuals who are taking these medicines, that they probably feel better, so they're buying more kind of beauty products and more health care-related vitamins and supplements.

Okay. That's interesting. And then just going back on the U.K., I understand it's small and going to be loss-making for a little while. But can you just talk more broadly about the opportunity there? Obviously, you explored the boots side of things. You're now going forward with the JV partner. Is there potential for more JV partners outside of London? Is there -- how do you think about sort of the long run in the U.K. beyond this year where I think you mentioned only a couple of stores is the plan?

Yes. I actually think the model that we're entering the U.K. with is actually a very interesting model because one of the most challenging things when you enter a new market is how do you attract new scripts. And if you look at the density of footfall in pharmacy in the U.K., it's actually double that of Australia. So that means the density of people entering pharmacy is twice that of Australia.

So if you have a JV partnership and effectively, you're opening a store and moving a license, you're opening day 1 essentially with the script volume and the people coming into your stores. And in the U.K., the front shops tend to be really small, right, in independent pharmacy compared to the prescription base.

So what we will be offering actually opening up is immediately you have customers who are coming and dispensing the scripts and a much larger front shop offering. So if this model works, we can certainly duplicate this with other partners in the U.K. and accelerate our growth there. But we've got to test and learn initially.

And just as a follow-up to that, would you prefer other JVs or maybe other acquisitions if that's the way to go, if there's others on offer that obviously be smaller than Boots, I'm sure.

We'll certainly look at all opportunities that come our way. But the way we also look at that is how we allocate capital, right? So that would be a key consideration in making any of these decisions.

[Operator Instructions] In the meantime, I would like to pass to management for any questions that have arrived via webcast.

Okay. We have a question from Dave Stanton. Please explain the generic opportunity with Wagner. What could that get to? And what does that mean in terms of percentage EBIT margin uplift? Is Wagner for OTC and for prescription meds?

Let's answer the last part of that first. At the moment, it is. But I would say on OTC, we're moving more to creating stand-alone brands, and you've seen some of that come through recently. But on the generic side, we've got about 278 Wagner generic medicines. It makes up roughly 1/3 of our preferred range of generic medicines in the network.

And the margin profile of that is obviously stronger. So what I expect to continue is probably another 40 new products because we're getting to the tail of new products in Wagner. But as we grow new stores, on average, 20 stores a year, and this continues to be rolled out in Australia, we expect Wagner growth to continue.

Okay. Another question from Dave Stanton. Can you give us more color on synergies? Can you break out the specifics of what you are doing in terms of hitting the $100 million synergy target in terms of buckets of business?

Yes, sure. So yes, I'll start off with saying we're really pleased with the progress of integration, reporting the $32 million of synergies today. I mean, obviously, roughly half the synergies will come through the efficiencies in our supply chain.

The next phase, which Vikesh talked to in his presentation, was bringing the back office together. It is a SAP upgrade, not a transformation project. So it's about bolting the legacy Chemist Warehouse systems onto the existing Sigma network. And then there will be layers of duplication there across ERP and various applications that will be able to take out. Then obviously, lastly, it will be both sort of buying terms with our suppliers and indirect procurement.

And another question on both. I think you've already answered this, Vikesh, but in case there's anything you want to add, using the April update from Sigma, Australian CW like-for-like sales were growing at 14.4% year-to-date. Today, we report 13.4%. This implies like-for-like slowdown in Q4 to 8% to 9%. Is this correct? And if so, I'd like to understand the change.

It's really the comps on last year and the later start to the cold and flu season, that's really it.

And one more question from Stephen Galati. The best country to practice or build a pharmacy career overseas is Canada. Will you target Canada?

Well, it's not in our framework at the moment, but never say never.

That's all from online.

The next question comes from Craig Woolford with MST Marquee.

Can I just ask a question? I'm looking at Slide 8 on the Australian segment and the gross margin performance of that. You've called out this significant supplier that has been moved into the DC. Did that have an impact on gross margins? Can you sort of give us a sense of the impact that GLP-1 had on gross margins as well? Just trying to get a feel for the trajectory going forward there on the gross margin line for Australia.

Yes, you're right. The gross margin did decline slightly. I wouldn't say it was related to that supplier coming on. It was really consistent with what Vikesh was talking about before. Obviously, the GLP-1s are dilutive to margin percentage. And then obviously, there was that seasonality impact that flowed through that as well.

Right. So the other question that I had was the strong growth that you'll have in Australia in FY '27, with the Amcal opening as well as obviously Chem Warehouse. How does the Amcal side impact, say, the margin structure that we look at, given it's more of a wholesaling arrangement? Is there any difference in how that may flow through to contribution across the gross margin and operating profit side for the Australian business?

I'd say it's very small at the moment. And obviously, as we open these stores, they'll take time to build up in volume scale. And really, that flows through our warehousing and distribution. So it really is a very small mix. That's where we spend a lot of our energy calling out the Chemist Warehouse network, which is the biggest driver of earnings.

The next question is from Caleb Wheatley with Macquarie.

I just had a question on sort of the broader competitive environment. We've obviously got sort of a couple of relatively large competitors now looking at growth in the second half. But just keen to get your thoughts on sort of where you're seeing competitive intensity kind of across your major categories and then how you're sort of thinking about maintaining or continuing to grow market share, both from a dispensary and front of store point of view, please?

Caleb, I would say that the competitive tension has probably remained the same. I can't say to you that the market has probably become any more, any less competitive. What -- we always keep an eye on our competitors. We never become complacent and we respond accordingly. But a rising tide lifts all ships, right? So there's no doubt that the GLP-1 category has lifted all the groups.

But when I look at our market shares, we continue to gain market share, which means we're performing really well, particularly in the kind of let's call them health care categories and beauty categories. So I feel confident that our strategy is working and will allow us to continue taking share into the future.

I dare say, particularly where there's cost of living pressures, without a doubt, we are a very value-centric consumer-faced organization, and we will remain the customers' friend. So we will be very competitive and we'll continue to be very competitive moving forward.

And sort of the strategic levers around that, Vikesh, I mean, clearly, value has sort of been a big focus, kind of obviously ranging from a front store point of view, but just where you're seeing that sort of ongoing competitive advantage from a strategic point of view?

Well, if you think about it, right, it's back to the four levers once again. So value will be -- will continue to be driving value. And as we get the efficiencies on the fourth pillar, if we need to continue reinvesting that to take share, we will do that. That's the levers we have at the moment as an example.

We certainly have differentiation as we build more private label products. We also have penetration. So if you consider we're opening an average 20 Chemist Warehouse stores a year. And the base of pharmacies and community pharmacy tends to be pretty static, roughly 6,000 pharmacies. So you're getting more penetration. And now with, say, 82 Amcal and DDS is opening, you're getting further penetration.

So if you think of the Australian market, right, that continues driving penetration and scale for us. And all of that goes back into our wholesale business, quite frankly, which adds further operating leverage on the back end. So you can see this picture, right? It's scale, scale, scale, penetration, market share gain and then obviously ultimately balancing what falls to the bottom line.

Okay. Great. That makes sense. And then just a final one, if I could. Just on the openings, I appreciate you've called out sort of expectations going into the first half. But I guess I just wanted to get a sense on the velocity of those stores.

And when I say velocity, I think historically, kind of Amcal has not always, but sometimes acted as sort of a pipeline into Chemist Warehouse. Just how we should sort of think about the relatively higher amount of Amcal at least in the near term and then how that sort of flows into a sort of Chemist Warehouse banner perhaps at some point in time in the future?

I think the ones that we're bringing -- these are franchisees who are choosing, right, to come across to us as owners of those pharmacies. So effectively, they will be an Amcal or DDS because they make sense. Where a Chemist Warehouse has to open, I think we'll make a decision related to the location and the size of shop, and that would be for that owner to pick up.

So we don't see massive conversions from an Amcal or a DDS to a Chemist Warehouse, by the way. We see them actually as a multi-brand strategy, fitting a particular segment or location, which is actually the power of having three brands over the long term.

The next question is from Phil Kimber with E&P Capital.

My question is on the breakdown of the revenue line. If I go into the accounts, there's a line called services revenue, and it's gone from $687 million to $570 million, even though you've got the additional, whatever it was, 4.5 months for the old Sigma business.

So within that, franchise fees has gone up significantly, and it's actually -- I think it's gone up 30 basis points as a percent of network sales, but your marketing and advertising like come right down. What's driving those lines? Because I assume they drop pretty well straight to the bottom line. So I just wanted to understand that a bit better.

Without sort of going into too much detail, I think that's more around the accounting policy alignment with the merger. So I wouldn't probably read too much into that, Phil.

Can you say, though, so I mean the franchise and related fees, I mean, are they pretty well all in relation to the Chemist Warehouse business? Or do they also encapsulate the other old Sigma business as well?

Yes, predominantly, and New Zealand growth.

Right. So that would be in there, not in the -- I would have thought the New Zealand business would sit in the equity accounted line rather than in the revenue line.

It's our fees to them. So you're right, the stores do sit in the equity line. But our fees to them sit in that line, as in group fees to the New Zealand stores.

Okay. And then my second question was just you mentioned that supplier basically has moved from direct store delivery into the store. Can you give us a rough sense, and maybe of the Chemist Warehouse network, given it's the main driver, how much direct store delivery is there? And how big is that opportunity to be able to take a lot less direct stores and actually put it through your distribution center. It's obviously good for your DC economics, but I assume it also improves efficiencies at the store level.

That's probably about 20%. If you really look at the mix of products that the stores buy from our distribution centers, it's roughly between 70% to 80%, right? But not all the suppliers would ever come into our network. The suppliers that have their own infrastructure that's very hard to move, et cetera. The suppliers -- we've had a list of top 10 suppliers that we think we'd like in our network. And to be fair, where we've seen the benefit of the supply coming into our network has been the availability of stock.

So the turnover, quite frankly, in our stores have grown significantly by bringing the supply in because we were able to supply our network of stores through wholesale far more effectively than they could themselves. So it's more strategic and tactical rather than just trying to bring all the suppliers in to manage ourselves.

Sure. Are there a number of others?

There's probably a few others that we are certainly looking at. And where we have done it, we can immediately see the difference, right, in the turnover because the service levels out of our network is just far superior.

The next question comes from John Hester with Bell Potter.

A sensitive topic, but I want to cover it nevertheless. Can you comment on the end of the escrow that happens today? And what, if anything, we should expect about ownership transition?

I think it's very difficult for me to comment. We put out an ASX announcement probably a couple of months ago describing the intentions of the founders. Mario has made it very clear that he is holding on to his stock. And Jack and Sam has said they would potentially sell up to 20%. And that's really dependent on those individuals. The company really doesn't get involved in that.

I just want to clarify, though, is although the escrow arrangements end today, our trading policy only allows for that to end tomorrow evening. So if there's anything that's probably going to happen, it's probably going to happen next week that the market would see.

Okay. Fair enough. A couple of follow-ons. The changes to the wholesale margin arrangement, so from about 7.5% down to about 4.5%. What impact do you expect to have that to have on your margin going forward?

Overall, it just moves it from a markup and then it comes back into the pool. And then it's obviously picked up in what happens to the overall funding envelope. So it shouldn't impact overall margin.

Do you feel though is it an advantage for you in terms of volume? Or is it a disadvantage? So therefore, can you give us some sort of direction of where you think the margin is going to go based on those changes?

I mean I think it's -- yes, it's pretty neutral. It's really what -- I mean, how we view it is just what happens to the overall funding envelope, which I think was positive.

Fair enough. Finally, Vikesh, the Grattan Institute report, which came out several months ago, talked a lot about potential for deregulation in the industry. Is this something you'd support? And do you think it's likely?

Well, firstly, it's very hard for me to hypothesize, right? That's dependent on the industry and the government engagement in that. What I would say to you is that we trade in an industry where -- like Australia, where we can't own the network and we work with our franchisees. And then we also own stores in other markets. So we literally work in those type of legislative environments.

Ultimately, in the end, we prefer the one that drives the lowest cost to consumers and the best patient care. But quite frankly, that's a much larger decision. And if it does come out to a debate, we'll then provide our views on that. But today, our view is just focus and trade within the regulations that exist.

There are no further questions at this time. I'll now hand the call back to Mr. Ramsunder for closing remarks.

Thank you, everyone, for listening, and thank you for your questions. And we'll meet some of you on our roadshows over the next couple of weeks. And thank you, and goodbye from Gary, Mark and myself.

That does conclude our conference for today. Thank you for participating. You may now disconnect your lines.