Healius (ASX:HLS) reported first-half FY2026 results that management said showed early benefits from cost reduction initiatives and progress on a multi-year strategy focused on customer service, network modernization, and higher-value diagnostics growth areas.
Group performance and balance sheet
Managing Director and CEO Paul Anderson said the company delivered revenue growth despite “lower than normal episode volumes” and an environment of flat Medicare Benefits Schedule (MBS) volumes. For the half, group revenue rose 3.8% to AUD 688.1 million. Pathology revenue increased 3.5%, while Agilex Biolabs revenue grew 16% to AUD 21.8 million.
Healius ended the period with net cash of AUD 11.6 million at 31 December, down from AUD 57.2 million earlier in the year. Thomson said the movement was largely driven by “non-operational issues,” including a large Australian Taxation Office (ATO) payment, digital program costs, and restructuring costs. Management said the company remained well within bank covenants and expected to stay that way for the rest of FY2026.
Pathology: mix-led growth and labor focus
Management emphasized that Pathology revenue growth came amid flat MBS volumes. Operationally, GP attendances were down 1.5% versus the prior corresponding period, while specialist attendances increased by 2.5%. The company said total operating cost growth in Pathology was held to 1.9%, supporting improved operating leverage.
Anderson highlighted mix improvement, particularly growth in B2B areas such as genomic diagnostics, veterinary pathology, and clinical trials. Thomson said the improved mix across specialist, hospitals, and B2B revenues helped lift the average fee. The company pointed to continued strength in genomics, with revenue up 21.6% versus the prior corresponding period, and clinical trials revenue growth of 118.6% off a low base.
Labor remained a major area of focus. The company said labor costs, as a percentage of revenue, improved to 49.3% in the second quarter as its labor optimization program progressed, and Anderson said the majority of the program is now complete. Thomson said labor increased 2.9% versus the prior period, primarily due to enterprise agreement rate increases, partly offset by reductions in headcount across the organization.
Consumables declined to 15.8% of revenue, and management said consumables were below first-half FY2025 in absolute dollar terms. Thomson added that consumable costs were 1.8% lower than the prior period in absolute terms despite higher volumes, reflecting both contract negotiations and reduced usage, with some CapEx supporting more efficient equipment.
Digital modernization and workflow changes
Healius said it has built “substantial digital capability” through a multi-year modernization program and that from 1 January 2026 digital expenditure would be treated as business as usual rather than as a non-underlying charge. In the first half, non-underlying items totaled AUD 20.8 million, which Thomson said was predominantly the digital transformation program, plus restructuring costs across regional labs, main lab optimization, and the contact center.
Anderson outlined several workflow and customer-service initiatives, including:
- About 2 million episodes collected digitally in the first half, with 12% fully digital through e-referrals.
- Deployment of new pricing infrastructure across private tests, introduction of upfront charging for criteria-based MBS tests (including B12 and urines), and introduction of informed financial consent.
- Approximately 480,000 informed consents provided since October, mostly through digital channels, which management said reduced billing risk and improved transparency.
- Appointment booking for complex tests, enabling around 100,000 bookings to manage peak demand and reduce waiting times.
- Use of real-time data and AI to optimize collection center opening hours and improve service availability.
Healius also said it simplified its field structure by combining business development, medical liaison, and collection teams into a single national team intended to create a single point of contact for referrers. In laboratories, the company reported headcount reductions and labor changes tied to workflow and rostering: main laboratory headcount reduced 2.2%, and broader regional and network labor reduced by about 6% as work was rebalanced and the footprint optimized.
Anderson said the company has deployed two “AI co-workers,” Riva AI and Julie AI, which he described as part of the organizational structure and currently focused on improving cash flows and workforce planning. He also said AI capabilities are live in accounts receivable to improve speed to cash and in rostering to match collector availability with network demand.
Agilex growth, contracts, and FY2026 outlook
Agilex Biolabs delivered first-half revenue growth of 16% and EBIT growth of 145.5% to AUD 2.7 million, with EBIT margins expanding to 12.4%. Management attributed the performance to three strategic decisions: enhancing capability, focusing on large molecule development, and exiting toxicology. Thomson said the closure of the loss-making toxicology business occurred during the first half.
Management also discussed the new Brisbane Bioanalytical Laboratory, which Anderson called a “significant milestone” and Thomson said was performing ahead of expectations and would serve as a blueprint for future lab openings. Anderson said Agilex’s order book had returned to more normal levels and management expected continued growth in both revenue and margins through the remainder of FY2026.
In Pathology, Healius highlighted the Australian Defence Force (ADF) contract commencing in April 2026, which Anderson described as a major win with approximately AUD 60 million of revenue over the initial five-year period. In Q&A, management said the contract would be a “standing start from zero to a hundred” rather than ramping gradually, and indicated the AUD 60 million could be considered on a straight-line basis across the term.
Looking ahead, Anderson said Healius expected FY2026 earnings to be in line with current consensus, clarifying in Q&A that this referred to EBIT. Management reiterated it was on track to deliver AUD 20 million of targeted annualized support cost savings over the year, following AUD 7.3 million of annualized savings achieved in FY2025 and an additional AUD 10.7 million of annualized savings achieved in the first half of FY2026. Management said the full run-rate benefit is expected from FY2027 onward.
Healius also flagged the financial impact of the Fair Work Commission decision on gender-based undervaluation, saying a circa AUD 1.8 million impact was expected in 4Q FY2026 for the collective workforce. In Q&A, management said the AUD 1.8 million comprised approximately AUD 1.2 million for collectors and around AUD 600,000 as a one-off increase related to annual leave or on-costs, while noting uncertainty remains around future periods and impacts for health professionals. Management said it was working with Australian Pathology and the Department of Health, Disability and Aging to find a solution through the MBS to support wage increases.
About Healius (ASX:HLS)
Healius Limited provides specialty diagnostic services to consumer and practitioners in Australia. The company operates through three segments: Pathology, Imaging, and Others. It offers diagnostic imaging services, private medical laboratory, and pathology services. It also provides cataract surgery, colonoscopy, gastroscopy, plastic and cosmetic surgery, skin cancer removal, IVF egg collection, and gynaecological surgery services under the Laverty Pathology, Dorevitch Pathology, QML Pathology, Western Diagnostic Pathology, Genomic Diagnostic, Vetpath Laboratory, Vetnostics, QML Vetnostics, TML Vetnostics, ASAP Laboratory, Abbott Pathology, TML Pathology, IQ, Pathology, Kossard, Gastrolab, and Agilex Biolabs; Lumus Imaging; and Montserrat brands.
