Apiam Animal Health Limited (AHX.AX) Earnings Call Transcript

We will start with the company presentation, after which there will be an opportunity to ask questions by the Zoom Q&A functionality. You should see at the bottom of your screen. I'll now hand over to Chris and Matt to commence the presentation.

Thank you, and welcome to the Apiam Animal Health FY '21 results presentation. Today, I've got Matt White with myself, my name is Chris Richards, and we'll present the FY '21 results. We'll give an overview of the drivers behind this growth and outlook for FY '22. This year has been a standout year for Apiam. It's been a year where we've seen the benefits of the previous investments that we've made, the strength and the resilience of our diversified business, the growth of our people. And all these have set us up for an exciting period ahead. I'll turn to our financial snapshot. So in FY '21, we posted revenue of $126.2 million, which was up 6.6% on the previous year. This flows through to gross profit of $71.1 million, which was 11.2% on our previous year. We're continuing to have our gross profit growth faster than our revenue. Our reported EBIT of $8.1 million was up 11.7%, and our net profit after tax of $5.1 million was up 24.1% versus FY '20. We also showed some strong operating cash flow, which is funding our growth and investment in the company with our operating cash flow of $13.7 million up 82.5% compared to FY '20. The Board has also declared a final dividend of $0.012 per share, which brings our total dividend for FY '21 to $0.024 per share, which is 20% higher than in FY '20. If I look at an overview of FY '21, there's really 3 stories to the last financial year. The standout has been the excellent growth performance that we've achieved in our dairy and our mixed animal clinics. These clinics are the ones out in the rural areas that service the dairy industry, companion animals, equine and other animals. Then what you know as a typical vet clinic where animals are being brought into the clinic, and vets going out on farm and it's predominantly a service-based business, some diagnostics and some products. This segment for us delivered 23.7% revenue growth in -- compared to FY '20. On an acquisition basis, it showed 12.5% revenue growth. So this has now made our dairy and mixed animal segment, our largest revenue and earnings contributor, which is driving up our gross margin. And so this is occurring from the additional services that we're providing through the Best Mates program and ProDairy as well as the contribution from the acquisitions. What's really important here is we're getting strong operating leverage in our dairy and mixed animal clinics, and that 23.7% revenue growth is falling down to 44.2% EBIT growth in the segment. So the second part of our business this last year is that has been the impact of market cycles on our feedlot and pig business, and these have offset some of the gains that we've achieved through the dairy and mixed animal clinics. The rebuilding of the national cattle herd -- cattle breeder herd, has reduced cattle numbers that were available for feedlots in FY '21. In 2020, it was the lowest number of breeding cattle in Australia in 20 years. But we've seen early signs of recovery in the last quarter of FY '21 with cattle availability in feedlots are now beginning to increase. The other part of our feedlot and pig business that we've seen in the last 12 months is that Apiam is really taking the leadership program when it comes to antimicrobial stewardship and leading the industries in adopting proper antimicrobial stewardship practices, and what this has resulted in a strategic transition from some of the antibiotic products that were traditionally being used to new and innovative antimicrobial and vaccine products. So this has had an impact on our wholesale business of our lower-margin traditional products during this transition period. However, we have continued to invest in these new products in new vaccines, other non-antibiotic antimicrobials and private-label products, and we have started bringing those to market in the latter part of the year as well as into FY '22, and we expect these to leverage growth as these industries rebound as part of the market cycle. The third story for FY '21 has really been capitalizing on the changing veterinary market dynamics that is providing us with a very strong acquisition pipeline. In FY '21, our regional expansion included adding 10 new clinics to the fleet. that included 8 that we acquired and 2 greenfield clinics. We've been taking a disciplined approach to the use of capital to best deliver growth opportunities and carefully balance whether we acquire or whether we undertake a greenfield development. The greenfield developments that we have done in the year, there was 2 that we -- new clinics that we built in the second half of the year and these do have start-up costs and -- in the first 12 months of operation. And these start-up costs in the second half of the year had a $700,000 impact at an EBIT level. But we are expecting them to deliver a higher return on capital estimate to be about 30% over 5-year period. If I then just give an over -- a big -- high level overview of what's happening in the business. Our vet clinics have grown from 52. We added 10, but we [indiscernible] the 2 in Dubbo as a result of the acquisition of Don Crosby vets. And this has added 50 veterinarians to our team. And as I said, this is we're really seeing a change in the company where 60% of the revenue is coming -- is contributing from the dairy and mixed animal segment clinics. And as we continue to grow those businesses through organic drivers such as the Best Mates program, which is -- we had 76% growth, and our ProDairy program, where we had 108% growth, we would expect that, that will push further towards 65% to 70%. I'll now pass over to Matt White to drill into the financials.

Okay. Thanks, Chris. Good morning, everybody. I'm now on Page 6. So FY '21 saw Apiam record strong growth at EBIT level with 11.7% growth on reported EBIT and 24.1% on reported NPAT. And it was also pleasing to see operating leverage come through at the EBIT level as well. In regards to revenue growth of 6.6% over the prior year was recorded, and that was recorded in the face of varying conditions across animal segments, driven by a strong dairy and mixed animal clinic performance with 23.7% growth in that segment over the prior year. Like-for-like revenue growth fell 0.5%, and this was impacted by market segments cycles in pig and feedlot segments. And pig and feedlot like-for-like revenue declined 12.3% while dairy mixed animal clinics lifelike revenue was up 12.5%. Our gross margin and gross profit continued to increase with 11.2% increase in gross profit and 2.3% increase in the gross margin. And this was due to stronger revenue capture across clinics and the continuing impact of business mix changes. Our reported operating expense growth was affected by increased employment costs, but this was associated with a strong dairy mix segment growth, acquisitions and also greenfield clinic openings. On a like-for-like basis, our employment costs increased 4.8% and our general expenses were flat with FY '20. I'll now turn to Page 7. So this is just a snapshot of our growth over the past 4 financial years. And what we're seeing here is resilient revenue growth despite challenging industry conditions in many agriculture areas, and also an investment in systems and targeted change in Apiam business mix to focus on higher value products and services is driving gross margin improvement with the gross margin shifting from 48% over that period to 56.3% and the gross profit growing from $51.6 million to $71.1 million at a faster rate than what revenue is. I'll now turn to Page 8. So now we look at the dairy and mixed animals performance analysis. And as Chris mentioned, this segment now makes up 60% of revenue with 12.5% like-for-like growth in FY '21 over the prior year. Employment costs in this segment was 5.3%, and -- but that is driving significant operating earnings and leverage across dairy and mixed animal clinics. And at revenue -- at EBIT level, growth was 28%, ex acquisition, but that included the impact of the greenfield expenses, which we'll look at in a minute, which was $700,000 for the period. Regional demographics are changing rapidly with the significant increase in animal ownership and an ongoing vet spend in regional and peri-urban growth corridors, and we're seeing the dairy industry rebound strongly after drought in FY '19, FY '20 years. There's been excellent growth of animal subscription programs being the Best Mates and the ProDairy programs. And it's also important to mention that we did divest a low-margin ear-tag business in FY '21, which will have $700,000 impact at the revenue level in FY '22 and eventually 0 impact at EBIT level. Turning to the next page, on beef and -- feed and pigs performance analysis. So beef feedlots segments revenue was affected by the low point of the industry cycle. And specifically, the national beef herd during FY '20 was at the lowest point in 20 years. With early -- there has been early signs of improvement in cattle on feed though in Q4 FY '21. If you look to the bar graph on the right, you'll see the light green and you see that the national herd is starting to increase in FY '21. At the end of FY '21, there were 1.17 million cattle on feed, and industry capacity has increased to 1.45 million in anticipation of future growth. And it's important to note that the fix in this business segment -- the fixed costs in this business segment are largely fixed and growth does generally fall straight through to the bottom line. In regards to pigs, there's been a strategic transition to new and innovative antimicrobial and vaccine products in intensive animals and a reduced wholesale sales of lower-margin traditional products during the transition period. Also in the U.S., we saw pig industry challenges in FY '21, which impacted the Zoono rollout. And this was effectively a result of COVID, which caused the closure of abattoirs over there and led to a large increase in the supply of pigs. And also, we'll continue to roll out private label products, autogenous vaccines and there'll be new services developed to support industry growth. Regards to our earnings and expense analysis, on the left-hand side, you see the impact of the greenfield clinics that were rolled out in FY '21. In H2, the clinics obviously opened and there was a $700,000 impact over that period. The first those 6 months of the life span of those clinics is obviously the most heaviest from a cost perspective with revenue picking up and all the fixed costs in place. On the right-hand side of this page, we see our operating expense analysis for the business, and expenses were well contained with limited growth in H2 FY '21, and that was related to acquisitions, increased travel, client visits and conferences which were effectively activities delayed from H1 into H2 as a result of COVID restrictions. Employment expense increased, and that was due to resourcing the staff related to the growth in the dairy and mixed animal clinics and obviously, the new greenfield clinics mentioned previously. We turn now to the next page, the balance sheet. The key point here is the management of working capital. We saw inventory levels contained and reduced from prior periods, which resulted in a much better cash flow and continued good management of receivables and payables. In relation to borrowings and gearing. Our net debt is at $37.2 million, slightly up on the prior period, and that was the result of our cash components outlay for the acquisition of $11.7 million, strong cash flow and a $6 million capital raise that was done in -- completed in April 2021. Our operating leverage ratio remains at 2x with a covenant of 3, and we've got significant debt facility headroom available to continue with our acquisition program. I'm on Slide 12 now. And looking at cash flow. $13.7 million was the net cash provided from operating activities, which is a great result for the business. That resulted in an EBITDA conversion of 117% for the period, and that was largely due to the improved management of inventory and the reduced reduction of the strategic inventory that was built up in FY '20. In relation to CapEx of $4.7 million, underlying CapEx was at $2.5 million, which was controlled well. And then we had a further $2 million, which is in relation to the rollout of new greenfield clinics. Apiam -- as Chris mentioned, Apiam will be paying a final dividend of $0.012 per share, which brings the current year dividends declared to $0.024 which is a payout ratio of approximately 60%. And the last day to participate in the DRP is 27th of September 2021, and the dividend will be paid on the 22nd of October 2021. I'll hand it back to Chris.

Thanks, Matt. So now what I'll do is I'll just go through a bit more detail on some of our activities as well as look at where our strategy is going and what we intend to do into FY '22. So as you would all be aware, the regional veterinary markets are very strongly. And at the moment, there's a very attractive market opportunity that Apiam are targeting. Population rates are surging in regional growth corridors. We're seeing people move out of the cities into the regional areas. And as they're doing that, they're moving out of smaller properties in the cities into larger properties in the rural and regional areas where they're starting to take on pets. And in some cases, they're moving on to properties where they're getting livestock as well. So we've seen significant increase in pet ownership, which -- as a result of COVID, but that's continuing also post COVID and there's some data out there that's supporting that. So these are -- these animals that are now post COVID, what does it look like? Well, there's -- certainly, the price of animals increased significantly. And these animals are really a part of the family. In fact, there was some recent work research published by the AMA, which showed that there was a high percentage of people during COVID that really relied on their pets for companionship and to get them through the stresses of COVID and it's continuing to happen. So they're really becoming a part of the family, and that means that we're seeing further investment in care of those animals in veterinary care. We're seeing the uptake of the high-quality specialized diets, and we're seeing an increase in preventative care as animals are being treated similar to humans and undergoing more diagnostic tests, more preventative care around dentistry and a number of other procedures. And so Apiam is really benefiting from this, and we're really trying to capture the benefits of this changing demographic. We've also seen the drought break at the start of 2020. And as a result of that, we're seeing strong growth in the pasture-based livestock industry, the dairy industry, but also in the pasture-based beef industry. And as Matt mentioned, and I mentioned earlier, we've seen a rebuilding of the national herd in beef, which means that there's been an increasing in breeding animals and then that will flow through to having more progeny that will flow through over the next 2 to 3 years. Apiam has deep skills and experience in rural and regional vet care across all these different species of animals, and we think that we're extremely well aligned and have these expertise that we can really capitalize on this regional vet offering that is happening, which is very different to a metro-focused model, which is mainly dealing with cats and dogs and other companion animals. The growth in our mixed animal clinics is driving higher margin opportunities than what our traditional intensive animal livestock clinics, which when we listed only 6 years ago, made up the majority of our revenue. So we see that there is -- there are some real opportunities to capture these regional veterinary markets. So if I just come back to Apiam strategic plan, and we're continuing our longest plan, which was developed a couple of years ago. So where we've really invested over the last 2 years was in our operations, processing capacity. We put a practice management system in place across the clinic network. From that, we've seen the margin uplift. We've been able to capture mischarges, and we're seeing some efficiencies that are starting to flow through, which is why we're really getting that leverage at the EBIT line. We've also been able to build a cost base, which will continue to deliver margin expansion as we increase revenue, and that cost base will be able to continue to support the growth that we're continuing to undertake. The second part of our strategy was to increase the services and the products that we provide, and we've been doing that over the last couple of years with our private label strategy. We developed and registered some new products, which have started to flow into FY '21, and they'll be leveraged further as those intensive animal industries rebound. We've also got some new product distributions and we've got some more to come. And our investment in acquiring a vaccine company, ACE Laboratories at the end of 2019 is seeing specialist vaccine and diagnostics operations in place, which we're starting to leverage across our network. The plan to drive growth in FY '22 and beyond is to increase our footprint of animals, and we've been doing this in 3 main ways. One is we do have an ongoing acquisition program, which I'll talk to in a minute. We are doing some greenfield clinics when the circumstances are right and the underlying fundamentals make it a very attractive offering or opportunity. And we're also gaining more animals and new customers through our subscription model program. So our Best Mated program and Prodairy as well as some others that we're going to launch into other species. So I'll just drill into these 3 areas. In terms of our acquisition program, the key to that is the word strategic. So we're not just out there buying every veterinary clinic that comes across our desk. We're very strategic in our acquisition program, and it's got to be aligned to our strategy. We do have a strong acquisition pipeline. And this has really been as a result of a change in the market in the last 6 months in the veterinary industry. We've seen veterinary clinics grow. And as a result of that, while they've been growing, they've also come under challenges in terms of recruitment of staff and other work like balance issues. And they've been coming to Apiam to -- for assistance to join our network where we can support these clinics and really help them go through this growth program. We have a disciplined approach for -- and we've got a strong record in M&A execution, but also in integration of these clinics. And these programs were able to integrate them into the clinics within 3 to 4 months. We've made 8 acquisitions in the past 3 years, 11 clinics as well as laboratory. But we do have -- as I mentioned, we have a strict acquisition criteria. We've got deep skills and experience in regional veterinary services. That is where our wheelhouse is and we're using these to make the best decisions on which clinics. So when we buy clinics, we're looking for clinics that will expand our regional footprint. They've got to have an attractive animal species exposure. We're looking for a large percentage of companion animals, but also clinics that have specialized services that we can use it as a hub or we can take those services and leverage them across the rest of our business. The clinics must also have strong financial metrics, but where we've identified that there are improvement opportunities. They must also have material synergy benefits. So it takes the same amount of time and dollars to integrate and manage a large clinic is what it does a small clinic, but there's far more opportunity to get material synergy benefits with the larger clinics, which is where we are really targeting. And of course, none of this can be integrated and -- none of this can be implemented, our growth strategies, unless there's an excellent team culture, and that's really the main thing that we look at when we look at potential clinics for acquisition. So in FY '21, we've really expanded our Queensland and New South Wales clinic presence with 19 clinics there as of the end of FY '21, which will add on an FY '21 pro forma basis, about $20.2 million of revenue. So those clinics are all bought for specific reasons, the Don Cosby Vet clinic enabled us to consolidate 2 clinics in a very strong growth location. The Clermont clinic, which is located in Central Queensland, it services large agricultural holdings in the region. In fact, it covers an area about the size of Tasmania. But as it has revenues that are split, not just in those production animals but equally between companion, equine and cattle. The Samford Valley Vet Hospital, that's really a peri-urban clinic. It's 25 kilometers northwest of Brisbane. When it was built many years ago, it was 70% production animals, 30% companion. It's now switched around the other way. And it also has a equine facility as well and a specialist veterinarian. The Knox Veterinary Clinic, which is located in Dalby. That brought 2 clinics to us. We already have a couple of clinics in that region, and this gives us the opportunity to get some real synergies between those clinics and increase our footprint on the Darling Downs. Scenic Rim Vet Services. So this is a large equine clinic. It's -- for us, it's a real hub for Queensland. It's located in Beaudesert, and it provides services to one of the largest breeding regions, the standard breeding regions in Queensland. It's also a referral hospital for performance horses throughout Queensland and Northern New South Wales for surgical procedures as well. So the skill sets that are in that clinic are starting to be leveraged across our other clinics that we have in Queensland. If I look at greenfields -- and again, our greenfields clinics are -- basically, these are clinics that we build from scratch. And it's something that we've done a couple over the years, but now there's a real -- we've got a real focus on doing these where we can't acquire other clinics or where we find a gap in the veterinary market in what a high-growth regions. So this is a program that's really focused on expansion in high population and peri-urban growth corridors. In FY '21, we opened 2 of these clinics. We did one at Torquay North as part of our joint venture with PETstock, and we also opened another one in Shepparton. Both of those are fast-growing regional areas. And in July, we opened another one at Highton in Geelong. So we've got further clinics that are in the planning stage. We expect that these will open in the second half of FY '22, and there's probably going to be 2 or 3 of those for sure. But it's got about 4 that are currently in a planning stage. So in terms of how do we choose these locations? Well, we're looking for places that are fast growing. And a place like Torquay is amongst the fastest-growing regions in Victoria. And the key to them being fast-growing regions is that we want to get to that breakeven as quickly as we can. So what these regions tend to look like is they tend to be within daily commute of a capital city, so people might be working from home a couple of days a week and then traveling into the capital cities when -- obviously, when lockdowns are over. They -- some of them will have a species mix, so they're not just companion. And Shepperton is a good example of that of where we're operating a ProDairy clinic out of that same facility. And they tend to be in areas where we can leverage our existing staff services and infrastructure. So in terms of -- Matt mentioned that it had a $700,000 impact on FY '21. I mean we were expecting being on the rate that we that we intend to do these -- majority of our growth will be through organic and through acquisitions. But we do expect that there may be up to $1 million expense impact in FY '22 depending upon when these clinics come through. I'll now just turn to our organic growth strategy. And we're continuing to grow these services and roll out new services in our other segments of our business. The 2 that I'll talk to today that are really delivering growth are Best Mates and ProDairy. So the Best Mates program is an annual subscription animal wellness program. We've had membership growth of 76% at the end of FY '21 compared to where it was at the end of FY '20. We've got about 7.3% of our active patients that were Best Mates members at that time. So we've still got a fair bit of opportunity to increase that. And we're getting immediate synergies in acquisitions in greenfield clinics. It takes us 3 to 4 months with an acquisition clinic to put our systems in place and roll this out. But once we do, we've been getting exceptional uptake in those clinics. And we've been able to build it up to now near on -- at the moment, it's nearly on 6,000 Best Mates members. The second program is a ProDairy program. And this is a program that was developed really to drive our antimicrobial stewardship for the industry as well as developing a consultancy model that is suitable for both the corporate farms in which there is a fair bit of consolidation in the industry, but also being able to meet the needs of smaller farms. This year, we had exceptional growth. We had 108% growth in our dairy farm enrollments in FY '21, and that has continued into FY '22. At the end of FY '21, we had 11.2% of Australia's dairy cows had enrolled in the program, and we saw further opportunities for expansion into Tasmania and New South Wales and that expansion into Tasmania has continued in FY '22, and we're up to about 14% of the Australian dairy industry today. So our strategy is to continue to increase our market penetration in our other geographical areas. As part of that, we've set up 2 new ProDairy satellite clinic locations in regions that -- where we didn't have traditional clinics. So in terms of other species, we're also -- in the next few months, we'll be launching similar programs into other species within our business. I'll now just turn to and talk a little bit about a couple of product initiatives that we expect to drive future growth. So as many of you will be aware, Apiam is the exclusive distributor in various markets around the world for the Zoono disinfection technology. The vet market is a highly regulated market and certainly, needs industry-specific data. And since we got those rights at the start of last year, that's what we've been investing in, creating that industry-specific data. As part of that, we've been working with Iowa State University for the last 12 months, and Iowa State is one of the most reputable universities for pig research in the world, particularly in relation to viruses that cause significant economic damage to global pig industry. So our real focus has been looking at these 2 viruses. So those 2 viruses are a PED virus or porcine epidemic diarrhea virus. And the porcine reproduction respiratory syndrome viruses. And they are the 2 main viruses that certainly devastate the U.S. industry as well as parts of Europe. So we -- about 6 months ago, we did release results in relation to testing this product on a surface to see whether we can get a 7-day residual and whether we could kill these viruses 7 days after we put the disinfectant onto the product. The most recent trial has really been looking at do we still get the duration of efficacy at 21 days, and 21 days is a pretty critical period because it's about the time that pigs are susceptible in the various stages of production to these viruses. So that period when they're on their mothers in the farrowing shed that is about a 21-day period where they're susceptible to the PED virus. And they're also susceptible to that same virus for about 3 weeks after they get weaned. So that's really what we've been -- that's why we've been aiming at that 21 days. So our recent trials at Iowa State that we're really looking at the effectiveness of this product on a rubber surface, which is a very common surface in piggeries. So put the disinfectant on and then leave it there and then put the virus on 21 days later and see whether the disinfectant continues to kill that virus. One extra thing that we did with some of those surfaces is we actually washed them at 7 days and at 14 days really to simulate what would happen if there were pigs in the pen and they were providing abrasion on that surface. So what the results have shown is that with both of those viruses with PED and PRRS, that there was a significant reduction in those viruses, 21 days after the Zoono Microbe Shield was applied to the surface. And quite remarkably, that was equally effective on both washed and non-washed surface. So we've got the data now that shows that this product wipes to the surface and it will kill these viruses 21 days after it's been applied to the surface. So that's data that really supports the commercial application in the production systems in the pig industry. So what we're doing with that product is we're continuing to do at the moment some other field trials. The PRRS virus is currently starting to devastate the U.S. pig industry. There's a new type of the PRRS virus that's out called the PRRS 1C. And even though it's summer over there, it's causing issues with the pig industry. And certainly, they're looking for solutions to assist them as they enter the risk period, which is really winter and spring. So we're working with some producers over there, trialing this product against the PRRS virus in a production setting. We're also been working with a U.S. pharmaceutical company to relaunch this product as part of their portfolio of products, and we're expecting that to happen in the second quarter of FY '22. So we've got a -- quite an exciting opportunity here, but in terms of where this market size might go, it's really about -- I won't comment on that directly, except to say that we need to get the label registered, which we expect to take 3 or 4 months. We are doing some additional field work, and we'll certainly make some announcements in the next couple of months in relation to how we're going to commercialize this product and where we see the most opportunities. The second product that I'll talk about is Data Pig. So Data Pig is a platform that Apiam has developed over the last 4 years to enhance any microbial stewardship in the pig industry to monitor pig health better to ensure that there's compliance with treatments and all this being done in real time. So this is a program that we believe will get adopted over various parts of the pig industry. We undertook a pilot program in Western Australia for a 12-month period to get through all the bugs that might have been happening. And now that product is currently being commercialized across the Australian pig industry. We've gained some support from the federal government's agri features program to assist in technology adoption in Western Australia, and we're also rolling it out at the moment on the East Coast. We also expect that pilot programs that were expected to commence in the U.S. We've been chosen by the U.S. pig industry as 1 of 2 platforms that will be piloted in order to -- as part of their antimicrobial stewardship program and to record the use of antimicrobials. So that pilot program is expected to start by December this year and go for about 12 months. It won't stop our ability to roll out into the industry. but it will certainly provide some good endorsements at the end of that program. So in terms of -- and we're also -- we've also got some farms in Europe that we are starting to put that program into as well. In terms of revenue for that, we're only expecting a small contribution in revenue in FY '22. But from FY '23, we're expecting that, that will contribute significantly to the revenue of the company. But again, it will really depend upon our ability to execute on this opportunity. If you have any interest in looking at this program, there is a QR code there that will take you through and give a bit of an overview of the Data Pig program. So if I move to FY '22 outlook. Apiam is expected to continue to deliver revenue and earnings growth in FY '22. We'll continue on our ongoing strategy to capture the rapid regional veterinary market growth through organic initiatives, through acquisitions and where it makes sense, the roll out of greenfield clinics. We're going to continue the commercialization of our recent investments in new services, technologies and products to underpin recovery in the intensive animal business as the market cycle correction is expected to continue. And our business reinvestment will be carefully balanced against return on capital thresholds. So with that, I'm quite happy to open it to any questions.

Thanks, Chris and Matt. The line is now open for Q&A. [Operator Instructions] The first question is from [ Jeremy Butterworth ]. Chris, do you have a broad view on revenue growth? And what will that look like over the next 3 years?

Yes. Thanks for that question. So what I can discuss here is, obviously, we've made a number of acquisitions this year and also in FY '21, I should say, and also early in FY '22. So with the contribution from those acquisitions in the FY '22 period, if you just look at the revenue that will flow through from those, you should see a further $21 million in FY '22 as a contribution of those acquisitions. And then the underlying business, we'd expect just to continue to grow as it has in the past at similar rates with companion animal around that 5% to 7% and probably 3% to 5% for pigs and feedlot potentially been higher as it continues to recover from the lower numbers of cattle on feed this year.

Thanks, Matt. The next question is from [ Alfred Chan ]. Is there a specific state or region you will target for further acquisitions?

Yes. I probably won't disclose exactly where they are, just from a hereditary point of view. But certainly, we've been pretty open in saying that we're targeting large regional cities, and we're also targeting the growth corridors. So that's where you should expect to see us either growing organically, doing acquisitions or building greenfield clinics.

The next question is from [ Bert Angle ]. He asks what is the impact of the current lockdowns?

Yes. So Veterinary services is an essential service, and we've continued to provide our full services during COVID, right from back in March last year. So yes, we continue to operate. And to date, there hasn't been any real negative impact on our revenue as a result of the lockdowns.

Next question comes from [ Kieran East ]. What is the plan with the real estate of greenfield sites after operations commence?

So in relation to the actual site, so we -- so Apiam doesn't own any of the -- any of our clinics at all. So all our clinics are leased from landlords. When it comes to greenfield clinics, we've been taking the same approach. So we'll work with developers, and they will do the build for us, including -- more recently, they've been doing the fit out as well. So really, if you look at our capital expense, it really just comes down to the equipment, which is about $300,000, $350,000 on each clinic.

The next question is from [ Cameron Brown ]. With acquisitions, will there be a greater focus on share allocation rather than cash consideration?