Health & Aged Care

Inventory reductions drove a modest improvement in working capital performance, although outcomes remained mixed at an individual company level.

The Health & Aged Care sector remained one of the more resilient sectors in FY26, with 91% of sampled companies reporting revenue growth. However, stronger revenue did not consistently translate into margin expansion, with only 41% of the sample improving gross margins. Demand remained robust across diagnostic, medical device and healthcare distribution segments, although pathology and imaging volumes remained below historical levels for parts of the sample. Despite margin pressure, disciplined overhead management and merger synergies supported EBITDA growth for 68% of sampled companies.

Average DWC improved marginally by 0.2 days to 62.2 days in FY26, driven by lower inventory holdings. However, this masks a mixed picture, with 55% of sampled companies recording higher DWC. The largest deteriorations (>20 days) were concentrated among operators building inventory ahead of anticipated demand or carrying higher stock levels following acquisitions.

Debtor performance was slightly weaker, with average DSO increasing 0.3 days to 55.0 days. Average DIO improved by 5.3 days to 84.8 days, although results at an individual company level remained mixed, reflecting differing acquisition, integration and inventory management strategies. Average DPO increased by 0.2 days to 53.6 days, however only 36% of sampled companies extended supplier payment terms. As a result, inventory reductions remained the primary driver of the sector’s working capital improvement.

Average DWC remains below all international metrics, reflecting a structurally shorter cash conversion cycle. Lower DSO and materially lower DIO support this position, while DPO is broadly consistent with the US and Asia but lower than Europe, where supplier terms are typically longer.

Looking ahead, efficient revenue-to-cash conversion will become increasingly important for Health & Aged Care operators. As funding and payer arrangements become more complex, working capital performance will increasingly reflect operational efficiency, with improvements in billing, coding and claims processing helping reduce DSO and strengthen cash flow.