Health & Aged Care

A shortening of the net working capital cycle by over a week, primarily driven by reductions in DSO and DIO.

The Health & Aged Care sector in FY25 was shaped by rising demand for services, cost inflation in labour and consumables, and regulatory reform in aged care funding.

Average revenue increased by 9%, with 88% of our sampled companies reporting top-line growth due to increased demand for pathology, diagnostics and aged care services. While inflationary cost pressures remained, 80% of our sample were able to convert higher revenue into increased EBITDA, with operators also focussing on improved procurement, accelerating efficiency programs and digital adoption to better control costs.

Working capital performance improved, with average DWC falling by 7.9 days to 73.2 days. DSO reduced by 2 days to 59.6 days, reflecting greater billing discipline and tighter debtor collection processes. DIO decreased by 4.6 days to 106.1 days, although performance at a company level was mixed, with medical equipment companies increasing specialised stock holdings to meet elevated demand, whilst some healthcare service operators focussed on supply chain optimisation as a way to reduce inventory on hand. DPO increased by 0.3 days to 65.5 days, noting that the supplier payment cycle has remained relatively stable over the last three years.

The large gap between the “best” and “worst” operators in our sample (> 700 days variance in DWC) highlights the mix of services and business models in this sector.

Internationally, our Australian sample maintained a shorter net working capital cycle than their Asian and European peers, however US operators had lower inventory holdings and shorter customer collection cycles.

Looking ahead, sustained working capital discipline will remain critical in FY26 as demand continues to rise and funding reforms progress, particularly for healthcare service providers where funding may move to payment in arrears.