BlackRock MuniVest Fund, Inc. Price & Performance (MVF)

We achieved a revenue increase of 11.6% versus the PCP and our underlying EBITDA increased 10.7% to $35,600,000 and pleasingly our EBITDA margins were steady at 25%. With a positive outlook, we are able to declare an increased fully franked interim dividend of $2.6 per share. As we move to Slide four, touching our key operational highlights. All of our businesses including domestic ARS ultrasound and international delivered robust growth in revenue and earnings during the first half of FY twenty twenty five. Of critical importance, we have continued to drive better outcomes for our patients with clinical success rates improving another 1.2% over the last year. In Australia, we had further growth in our IRS market of market share of 0.6% with a slight increase in stimulated cycles of 0.5%, which was above the moderate industry decline of 2.1%. Our WA business being the recent Pivot Futurity North acquisitions performed really well with this state now comprising 12% of our Australian stimulated cycles. Our ultrasound business continued to consolidate and achieved earnings improvement whilst delivering scan growth of 0.1% in the first half of FY twenty twenty five. This is on the back of solid growth in the previous couple of years.

We continue to see the benefits of the strength of our doctor partnerships and being a destination of choice for specialists. We welcomed another 10 fertility specialists through organic recruitment in FY twenty twenty five to date, including six in the recently entered Perth market. IVF industry demand drivers remain compelling despite some short term oscillations in some markets and segments over the last twelve months, which followed twelve months of strong industry growth in the calendar year of 2023. Our clinical infrastructure and expansion projects are nearing completion in Australia, gaining strong presence in every Mainland capital city with day hospital expansion allowing greater diversity and strengthen revenue as they ramp up. It's worthwhile calling out that our geographical and service diversification brings financial resilience for the group, particularly in light of the short term industry volatility. Internationally and specifically in Southeast Asia, our stimulated cycles increased 8.1% versus the PCP with the international segment underlying EBIT increasing by 74.1%. Our Kuala Lumpur clinic performed well and we invested in a new Singapore clinic building capacity and a special patient experience to drive growth in that market. We have a current platform of four clinics in the region now that we have exited an under performing clinic in Jakarta.

We continue to be focused on executing on the pipeline of opportunities in Southeast Asia. On Slide five, I wanted to touch on the compelling underlying structural tailwinds in our industry to support volume growth into the future despite some short term volatility. The Australian IVF market is 21% above pre COVID levels reflecting the non discretionary and resilient demand for IVF services despite prolonged cost of living pressures and a decline in the Australian birth rate. The five year CAGR for Stimulating Cycles industry growth is 4%, again demonstrating the resilience of our industry. The traditional demand drivers including advanced maternal age, improving pregnancy rates and favorable government funding remain strong. However, the cost of living pressures has continued with slow demand for elective egg freezing, which is more discretionary in nature. New demand drivers with new services, growing patient segments and new channels indicate that over time the industry growth trajectory could trend towards 3% to 5% with new demand drivers supplementing traditional drivers. So in summary, whilst the attractive industry fundamentals continue to support growth, growing patient segments and new services are also expected to be growth drivers going forward. It is also worth noting that short term volatility in industry volumes can occur for various reasons.

However, this does not reflect any underlying shift in future demand for IVF services. We meet in Slide six to focus on the broad IRS Australian market where demand for services in Australia continues at historical high levels. The left hand graph shows half yearly growth in stimulated cycles. Despite the challenging macro environment, the Australian IVF industry only contracted 1.3% in calendar year 2024. This was a very strong comparables as the calendar year 2023 Australian industry stimulated cycles were close to all time highs. There was significant variability between stakes in the first half of twenty twenty five with the weaker state based markets being Victoria, South Australia and Queensland. And these are our three largest volume stakes. Although there can be some short term volatility evident in industry volumes, the industry is sustainably well above pre pandemic levels and our diversification of revenues across the mesh in all Mainland capital cities, ultrasound and Southeast Asia limits any impact from localized short term volatility in particular markets. The right hand graph shows the number of Australian cycles per month, noting that a step change in volume in FY twenty twenty one, which was post COVID and maintaining those volumes into the outline years up to calendar year 2024.

Moving on to Slide seven on market share. Our simulated cycle activity performed better than industry as we continue to grow market share in the first half of FY twenty twenty five, which has now occurred over a sustained period of five years. Our market share in Australia grew by 0.6% to 21.5% during the first half as we continued with the momentum gained from the previous years. We had market share gains in South Australia, WA and New South Wales whilst we faced into challenging conditions in Victoria, which is our largest operational state. We We are happy with our introduction into WA that commenced in June 2023 through the Pivot and FertilityMiles acquisitions. They are both tracking really well and providing us with meaningful market share in what is a new market for us. With 11.1% growth in our frozen MBO transfer cycles, we also accelerated our market share to 21.5% for frozen MBO transfers. As you can see from the graph on the bottom right, we have sustainably built market share by 4.3% over the last five years as we continue to build a strong track record in the Australian market. I would now like to welcome our CFO, Malik Jedidine, which will take us through the details of our financials.

Thank you, Michael, and good morning everyone and thank you for listening. So if you're looking at Slide nine, it shows an illustration of the buildup of our revenue in the first half. I think the main takeaway around that is it's ultimately a pretty solid result. Many challenges in there, but our strategy over the last six years has continued to diversify our revenue streams and this half has been really good illustration of this very fact. Revenue grew up grew by 12% in an environment whereby the industry declined by 2% as Michael suggested. And importantly, the Fertility North acquisition that occurred in March 2024 contributed to 4% of the revenue growth and that asset is doing really well. And in conjunction with the pivot business that we bought in 2022 in Perth, WA now contributes approximately 8% of the group's total revenues. Patient price increases drove 4% of the growth, falling approximately 4% to 5% price increases across all service lines in the IVS business, which largely offset unit costs across the domestic business. Going into FY 2026, still early to call, but we still believe that and can anticipate that patient price increases will most likely reflect inflation over the next coming months.

The international business, as Michael said again, had a reasonable first half with KL growing its stimulated cycles by 12%, Singapore by 8% and noting that Singapore was disrupted for around six weeks due to the relocation of the new clinic that we've built over November and December. But what is ultimately encouraging is that the revenue in the international business grew by 25%, but some of it driven by average revenue per cycle increasing by close to 30%, particularly in our tail business through both price increases and mix. Ultrasound again contributed a further 1% of revenue growth or $1,500,000 as our Melbourne Ultrasound business continued its strong Whilst our Sydney business was somewhat benign or mixed with the Western Suburbs doing really well, but the Eastern Suburbs a little bit slow in terms of its uptake of the demand. Day hospitals becoming a bigger revenue driver in our business contributed to 2% of the revenue growth and we are doing close to 8,000 episodes in our Melbourne, Sydney, Adelaide and Gold Coast hospitals and an average revenue of just over $1,000 per episode. With Brisbane opening next year, with utilization increasing across most of the hospitals, I think day hospitals will continue to grow and generate further earnings for the business.

Genetics revenue, again, important cog in our strategy in terms of growth going into the future. RGS testing, small numbers, but again grew by circa 80% in terms of activity that generated close to $400,000 or more revenue. If you look at our standard genetics type activity, particularly around PGS testing, which is testing for embryos for chromosomal abnormality, increased revenues by almost $500,000 as well. If you go over to Slide 10, just a quick bridge on EBITDA contribution, much of it driven on the back of revenue performance that we spoke about. But we've ultimately increased EBITDA by 11% to $36,000,000 And again, this includes the impact from the industry, which essentially had a 5% negative impact on earnings, but we were still able to increase earnings by 11% at the EBITDA line. Domestic IVF business, including acquisitions generated additional EBITDA of $1,900,000 or 6% of the growth. I think what's important in this result as well is the management of the cost base, particularly in the domestic IVF business, heavy focus on optimization of this cost base, which is occurring in most parts of the business. There is pressure in parts of the business. On the back of that industry decline, we saw 1% negative impact on our margins.

But again, the cost base and growth in other parts of the business has been able to maintain EBITDA margins at 25% compared to last year. As noted, the Fertility North business tracking well added $1,400,000 of EBITDA, which is exactly where we had it planned and it's exactly how it's played out. Our international business EBITDA increased by $800,000 driven by both KL and Singapore. In percentage terms, EBITDA grew by 74% in Asia, which is solid, but to be honest, it still has room for more improvement. Ultrasound and day hospitals added $700,000 of EBITDA, providing us with more diversification in our earnings pool. If you go over to Slide 11, just quick summary of the profit and loss, pretty self explanatory, revenue up by 12%, underlying EBITDA up by 11% and NPAT up by 6% and noting that margins were maintained. What we haven't spoken about is just reported EBITDA is actually stronger than the underlying results. And that's on the back of the insurance recovery regarding the class action, which flows straight to the bottom line, which resulted in NPAT actually growing by 35% compared to last year. Reported depreciation and amortization was up by $1,700,000 I think that was again very much expected due to the new Melbourne and Gold Coast clinics that we had a full six months of that depreciation come through, as well as non cash related lease accounting impact of around $500,000 post tax, again, non cash on our premises.

Interests up by $800,000 again expected. You would have seen that our borrowings have gone up by $20,000,000 really because of class action settlement payments that occurred in the first half. Slide 12, which has a summary of our cash flow. Again, generation was reasonably solid, class action payments of $20,000,000 plus the $5 odd million of non cash benefit on the settlement of the insurance proceedings related to the class action impacted our conversion. But if you strip it all back, conversion was pretty solid at just under 90%. And I think that underlying conversion by the time we get to the end of the year should be closer to 100%. Tax installments going to be low for the rest of the year. Those class action payments will become deductible in 2025. So a timing difference doesn't impact profit, but impacts taxable income in 2025. CapEx for the year was $8,000,000 We spoke about Singapore, that was circa $2,500,000 of spend. Patient management system, we haven't spoken about it a lot previously, but it is a big transformational project in our business that we're very excited by and it will have an impact on our business going forward. CapEx going into the second half should be pretty consistent with the first half.

We still have to finish Brisbane or start Brisbane and finish it towards the start of next year. And you'll see that the borrowings payments were $20,000,000 all related to the class action. Just over to Slide 13, which is the balance sheet. Again, leverage is pretty well contained. Leverage ratio at 1.3 times post class action settlement payments that occurred in the first half and we still have another 36,000,000 to pay in the second half, which will be partly funded through insurance proceeds of $17,500,000 And we think the leverage ratio will probably sit around $1,600,000 1 point 5 million dollars by the time we get to 30. So again, plenty of room available for both organic and non organic growth expectations going into next year. Just over to Slide fourteen, first time that you would have seen some criterion cost optimization plans in our business that has been occurring for the last twelve months. It's about optimization, it's about efficiencies. Our patient management system is a serious key driver of it to eliminate certain blockages in our processes across our business, enhance workflows in our business. And also ultimately, we see it as a real driver for improvement in patient experience and our doctor experience within our business.

And that's both day to day use of the system as well as how we communicate with our patients, both digitally and through other means in the future. You roll all that up, including standardization of our workflows, consolidation of some of our clinics, optimization of some of our smaller clinics that have high fixed costs in those businesses. With a focus on all of those levers, we really do believe we can drive 2% margin improvement going into the next couple of years. And if you look at that, if you overlay the type of leverage benefit that you can get in this business with volumes going up, we can see margins improving by more than that 2%. And alternatively, if we see some issues in certain parts of our business like we have this year, this will just go a long way to protecting margin with some fluctuations in the short term across some of our jurisdictions as we've seen in this second half or first half. Thanks, Michael. Back to you.

Thank you, Malek. As we move on to the Slide 16, start to work through some of the details of our Australian IRS operation operational performance. We'll start with the essential pillar and we've had a lot of great progress with this over recent years and that is doctor partnerships. Our success in recruiting new doctors reflects the compelling doctor value proposition and the attraction of joining a group of highly engaged doctors across fertility and ultrasound services. We're continuing to collaborate with existing and prospective clinicians to ensure the doctor value proposition is tailored to their individual needs and promotes long term career progression. We continue to gather momentum in our doctor recruitment through direct recruitment, having welcomed a total of 73 new clinicians over the last four point five years or four point five years. These results can only be achieved when you have a highly engaged doctor group being advocates for Monash IVF. As a result of the experience and service quality they and their patients are recipients of. Our focus remains on attracting and onboarding new and experienced fertility specialists in areas where we are underrepresented or where opportunities exist to complement our diverse geographic footprint.

The specialists we target must have a suitable cultural fit, outstanding clinical competencies and industry reputation. Beginning Slide 17, a focus on scientific leadership. We have a continuous unrelenting focus on investing and building scientific ability to ensure we are giving our patients the best possible outcomes and differentiating our value proposition to patients and doctors. The chart at the bottom left of this slide represents the continuous improvement in our clinical pregnancy rates across the group with clinical pregnancies in 2024 increasing by a very significant seven point six percent as compared to calendar year 2018 with strong incremental improvement in every single year. That is nearly eight babies to 100 treatments, an achievement we are extremely proud of. It is worthwhile calling out some of the initiatives that will drive further improvements in our science programs and further improvement in our success rates into the future. We will continue to partner innovative organizations to advance new technologies and systems. And a few examples of this are wearable fertility tracker, rolling out of a single step embryo culture across the group and implementing a new electronic witnessing system. Partnerships and technology is backed up by an ongoing research focus through our various research bodies will ensure we continue to evolve and improve our success rates and the patient experience as our history demonstrates.

Moving on to the clinical infrastructure slide on Slide 18, with our investment creating state of the art facilities across fertility, day surgery and ultrasound services. Our infrastructure transformation is almost complete with the last new flagship site in Brisbane to be completed later this calendar year. Our flagship facilities will be instrumental in attracting new doctors and patients to Monash IVF, providing a best in class experience and the convenience of a co located day surgeries. The returns from the new facilities are in various ramp up phases as utilization builds. However, they are on track to meet our minimum twenty percent ten year return on investment criteria. As we enter the tail of our significant recent investment in infrastructure, those clinics will support market share gains and provide premium best in class experiences for our patients, our clinicians and our people. As I take you to Slide 19 and we'll look at the progress of our recent day surgery investment. In the first half of FY twenty twenty five, the day surgery revenue was up $2,800,000 and EBITDA was also up by $300,000 as our utilization is improved across all of our sites. If new specialties building and with new specialties building and improved uptake from current specialists for our dining surgical cases, we will continue to improve capacity utilization of our state of the art day surgeries.

Furthermore, with some structural changes providing greater coordination and management between the day surgeries, a better, stronger and more financially successful service will be generated in the future. As we take a look at Slide 20, our substantial strategic marketing investment and campaigns are driving market share gains in both traditional and emerging patient segments. We have launched innovative specialized campaigns. Our egg and sperm donor campaigns are an example of that and more recently we have launched a campaign around our best in class success rates. Moving on to our people, we lead the industry having recently been approved as a registered training organization. This initiative marks a pivotal step in our commitment to fostering professional development and enhancing the skills of our employees nationwide, whilst also enriching our employer value proposition. Our value proposition ensures we are leading the market in areas of reward and recognition, employee benefits and a culture that is represented by well above benchmark engagement that will continue to go from strength to strength. If we take a look at our women's imaging performance on Slide 21, our women's ultrasound business continued to consolidate on the growth and improvement of business in the previous two years, generating increased earnings for the half.

Furthermore, we generated volume growth of 0.9% for the business with a favorable high value mix of scans contributing to the earnings growth. Onto genetic carrier screen testing, we are seeing good signs in patient uptake through the Medicare numbers and also our line testing increase in volumes of 80% in the first half of FY twenty twenty five. However, this strong demand is yet to flow through to industry IVF cycles. We believe in the value that carrier screen testing and managing disease risk has in our community and the lead indicators through testing and the growth in the initial feasibility test all indicate solid penetration of these tests since the introduction of Medicare funding in November 2023. We continue to learn more around the conversion rate from the initial carrier screen test to managing the risk through IVF treatment. We have a view that it takes approximately two years. However, we will learn more in the fullness of time. As we move abroad to our ARS International operation performance, which is on Slide 22, We delivered first half stimulated cycle growth of 8.1% driven by our KL clinic and Singapore and Bali, which reflected the momentum we carried forward from the second half in FY 2024.

This contribution to an excellent earnings outcome sorry, this contributed to an excellent earnings outcome with EBIT increasing 74.1%. And the key drivers were being the leverage that we benefited from the KL volume growth and the improved performance in Singapore. Singapore delivered really good volume growth of 7.9% despite a disruption caused by moving the new clinic in November 2024. The expanded state of the art Singapore clinic is performing well and expected to attract new doctors and patients. The decision was made to exit an underperforming joint venture in Jakarta, Indonesia. Our minority ownership meant it was challenging to have operational and clinical insurance in the joint venture and there is some clear learnings for future investments. Our immediate focus is to optimize our existing clinics and in particular drive KO fertility and leverage the recent new clinic investment made in Singapore. We will also continue to explore new opportunities of scale in the region. Our Vision 2026 strategic roadmap is on Slide 26. Many of you will be familiar with our Vision '26 strategic roadmap as it continues to remain consistent regarding our objectives and aspirations. We have made significant progress in our strategic pillars and our outcome metrics continue to trend favorably and this is off the back of compelling improvement over the previous five years.

This is quite an achievement and demonstrates the significant progress and momentum we have to ensure we achieve our Vision 2026 objectives. However, there is still more to achieve. As we edge closer to 2026, we will be updating our strategic framework to ensure we continue on our journey to be the most admired reproductive care provider in the world. As we move on to the all important outlook statement on Slide '25, The Australian ART or Assisted Reproductive Technology sector and Monash IVF will continue to benefit from evolving underlying structural demand drivers, particularly from emerging services such as genetics, donor and egg freezing. Advanced maternal age and growing patient segments such as the LGB TQIA plus community will continue to drive growth in the art sector in the medium to long term. Short term volatility in the domestic art sector is not uncommon and the volatility is expected to subside in the near term supporting and aiding the ongoing resilience and sustainability of the ART sector that has grown by 4% CAGR over the last five years. In financial year twenty twenty two to financial year twenty twenty four, we made significant investments in future growth including recent acquisitions, the traction of new fertility specialists, further expansion into Southeast Asia and day hospitals.

Notwithstanding recent volatility in new patient IVF registrations in certain jurisdictions in Australia, these investments and focus on cost optimization are supporting stability in financial year 2025 and growth in the long term. Accordingly, our financial year twenty twenty five underlying group NPAT is expected to be between $30,000,000 and $31,000,000 compared to $29,900,000 in the prior comparative year. That completes the formal part of our presentation, Segar. So I'm happy to move to questions now.

Thank Your first question comes from David Stantung from Jefferies. Please go ahead.

Good morning, team and thanks very much for taking my questions. I've got a couple. So with forward registrations down about 180 basis points in first half FY twenty twenty five, what does this mean do you think for your volume growth that we should expect for FY '20 '20 '5? Does that mean it will be flat to down or flat or slightly up?

Hi, Dave. So best way to look at new patient registrations and obviously they're quoted as the domestic numbers. That is our new patients that will cycle through our business say for the next six months. And that's 50% of our total cycles domestically. So new patients in theory will be around 1.8 down is what that implies. But the returning patient pipeline was stronger in the second in the first half compared to the prior year or around the mark. So I don't think they correlate directly. But yes, an assumption around cycles being flat is a reasonable assumption.

Understood. Thank you. Very clear. And then I guess you're saying as well, look, further out that notwithstanding the issues that we're seeing in terms of cost of living pressures for '26 plus I guess or just for '26, we should be thinking that two percent to three percent volume growth for the market at least?

Yes, yes. I expect we'll probably fall back closer to 3% to 5%, particularly as we start to get some leverage through the volume from the carriers for in testing as well as seeing the market somewhat recover with some relief.

Understood. And final one before I get back in the queue. You've talked to a 2% margin increase by 2027, just because I'm not very clever. Is that EBITDA, EBIT and Pat?

Good question Dave, yes, EBITDA.

EBITDA and that is on a volume basis of what should that we should be thinking about. I mean even if there's what I'm trying to ask is even if there's flat volumes in that year, God forbid, are we talking of volume, are we still talking about 2% margin increase being possible or more?

Yes. So two percent on a revenue base, for example, of $300,000,000 or close to it for a full twelve month period.

Understood. That's the basis not the forecast of revenue next year, Dave.

Sure, understood. Yes. Now I won't put that in. Thanks a lot.

Thank you. Your next question comes from Craig Huang Pan from RBC. Please go ahead.

Good morning. Just wanted to touch on the challenging conditions you've called out in Victoria. Could you just elaborate a bit more on that and whether you've been holding share there?

Yes. The Victoria market has become really, really competitive. There's been some breakaway groups and the pricing positions of some of those are a little bit variable to the premium providers. So they've had some reasonably sort of strong initial uptake in numbers. Our market share is just slightly off market in Victoria, not too significantly. And we're competing pretty well against some of those players, but the overall market is also down worse than others in the actual state. So yes, we're putting a lot of effort and focus in moving towards gaining market share and so we've got some strategies in place and some demand creation activities to that we're implementing now.

Okay. Thanks. That's helpful. And then just on the cost base reduction, the $1,700,000 benefit in this half, just trying to understand what the annualized savings from those initiatives are, like how much might sort of be derived in the second half?

Yes. Craig, most of that was largely executed back half of last year. So I wouldn't expect to see a similar type of delta as a difference compared to second half last year, but it will be somewhere in between zero in that number.

Thanks. And then just D and A that sort of increased a little bit this year. Could you help us with how we should think about the second half D and A number?

It should be consistent with the first half, right.

And then last question, just on that timeframe between carrier screening and then conversion to IVF treatment, I think you called out Michael about two years, like could you just walk us through like how you came to that number or how you're thinking about that timeframe?

Yes. Look, it's still early days, but with carrier strain testing, it's often couples that actually don't have fertility issues. So they do have time on their side. So there's no sense of urgency. But from when they get the test, they understand the implications, they go through the counseling, they come up with a treatment plan to mitigate the risk of the disease and work through the appropriate timing for them. It looks like it's going to be around about two years. But look, we're only a year and three months in from when the test became Medicare funded. So we're selling a lot more about that in the next twelve months as well. But that's the early indications.

Okay, great. Thank you.

Thank you. The next question comes from Rachel Howard from Macquarie. Please go ahead.

Yes. Hi, Michael and Malik. Thanks for taking my questions. Hi, Michael. Just a follow on, just on that carrier screening test, I guess, how are you seeing people upgrade from that Medicare test to the full panel test? And do you have an update on bringing that maybe onshore to get the funding?

Yes, we do. First of all, it's still maintaining at fiftyfifty, which is a really good outcome and people are clearly seeing the benefit of doing the full panel disease testing even though it's not Medicare funded. As far as bringing the capability onshore and partnering with a partner, we're expecting that to happen in the next couple of months. So that we'll have that capability that will be Medicare funded through a strategic partner in about two months' time, which will make it so much more affordable and we'll see a stronger shift towards the full panel of disease testing.

Yes, that's great. And just I guess you touched on the mix a little bit, but just those frozen cycles doing particularly well, are you noticing much of a shift between new and returning patients?

I think, hey, Rachel, I think the growth in frozen embryo transfers is obviously returning patients that are coming back into the network. And it can be different year to year depending on the quantum and growth in new patients that accessed in cycles in the prior number of years. So we've had a good year of sets. If you look back in history, you'll have one good year, you'll have one average year, you'll have one good year and we're in that good year at the moment. So it's generally just a reflection of what new patients look like for the last two to three years. So it's just catching up. If you look at the market share, for example, our market shares with sets have always been well below stimulated cycles and this is the first time it's caught up in about three years, I reckon.

That's great. Thanks a lot.

Thank you. Your next question comes from Martin Jacobs from Bell Potter Securities. Please go ahead.

Good morning, guys. Well done in a tough operating environment. So just a couple for me. The chart EBITDA or revenue chart says you're down $3,300,000 from industry decline. Can you say how much of that was due to Victoria?

A big number in there is Victoria Martin. I think there's So more than half?

Yes, more than half, no secrets in that. The big market is a tough market for us.

Yes. And moving on to ultrasound, so scan growth only 0.9%, but revenue per scan up 7%. Can you just give me a little more color on the 0.9% volume growth, which looks low compared to prior periods if I'm not mistaken?

Sorry, Manu. Might have missed the start of it, but Michael, did you?

Yes, I got it. In regards to the volume dose, yes, it's a little bit softer. It's probably reflecting a little bit of the birth rate, which is what the high bulk of our scans represent. But the reason why the revenue and the earnings still grew really well was because of pricing and also the mix of the buyer value scans that was done during that period, which tend to be the more essential scans.

Right. Okay. And is that sustainable or have you got more price increases coming through beyond the inflation?

Yes. We review our pricing every twelve months across our whole business. And that's July.

And on the day surgeries sorry, go on.

Yes, it is sustainable.

Okay. And on the day surgeries, so you're getting growth coming through. I think the incremental margin there is around just over 10%. What should the natural margin of the day surgery business be? And how do you rate how much spare capacity you've got at the moment given relatively new facilities?

Yes. On fifteen percent to 20% should be pretty standard. That's assuming you're getting your utilization in your hospitals or at least our hospitals at circa 75%. Breakeven is around 65%. So the comment about 75% is where our utilization is, it's slightly below that. So answering your question about where it can go, there's still a lot more capacity across the majority of our day hospitals, particularly the Gold Coast, which is the multi discipline, particularly Melbourne, where we're only utilizing one or two theaters. And Sydney and Adelaide are single theater units that are just utilized for IVF procedures primarily and a little bit of gynae work to top up with available capacity.

And just a final one from me. So you put through price increases. Did you get any resistance from customs?

I think our doctors are the best gauge for whether we can put prices up and our doctors are very supportive. Our decisions on price increases are very much based on inflation. Patients are converting as they normally do once they're aware of what the true price is for them. Our new patient registrations at that time is probably the first time they're fully aware of the price for them. And new patient registrations are converting like they always have. So the answer is no resistance.

Okay, terrific. Thanks for that.

Your next question comes from Menjameng Nguyen from OTS.

You mentioned the margin expansion before. I was just wondering what you would consider your biggest drivers there and how we should think about the phasing of that?

Hey, Tom. The patient management system is going to be the primary driver. There's a lot of other things happening in the business, but if you're asking what is the one that's really going to transform, how we do things in our cost base, it's going to be the patient management system. Just the evolution of how we practice in our business needs to come up and be a little bit more contemporary, whether that is engaging with our patients and how we do that, how we interact with each other in the business, how we manage cycles through technology in the business, whether that's in lab or nursing. It's all of those elements that are super important, but how we just do things in our business. And we think technology is a big player there, because we think we're a little bit behind the eight ball in that sense. So we do have a long list, Tom. I'm happy when we see a face to face, we can explore that in more detail.

Great. Makes sense. If we can talk about pricing, should we be expecting similar quantum and timing as to last year?

I mean, it's early to call, but I don't think it will be 4% or 5% to be honest. I think inflation as quoted publicly is around 2% to 3%. So that's probably the best proxy for it.

And the timing will be in line with one July, our new financial year, which also coincides with the timing of the Medicare rebate indexation.

Brilliant. Understood. And just the last one from me. In regards to your clinical infrastructure utilization, how has the specialist recruitment been going? How much more do you have to go? And if you could explain the calculation behind the twenty percent ten year ROI hurdle?

Yes. So the question on doctors, it's not always just relative to doctor numbers, although they are important. It's about their priority in doing fertility treatments and fertility services and consulting and our doctors tend to mix between obstetrics and gyne as well. So, but in saying that, yes, absolutely. There's some really good capacity opportunities across our whole network as far as inviting doctors into our network and having a fixed cost base that is ready to build or do further treatments and deliver or create more babies. So that's certainly something we're prioritizing. We don't have an absolute number, but we search the market, scan the market. We have some really long relationships with doctors outside of our group as well that we continue to pursue and we'll be sort of unrelenting in recruitment of doctors. And I think the value proposition that we have for doctors is quite unique and special. So we will make sure that continues to happen.

Brilliant. And just the last bit of that question, the 20% ten year ROI hurdle, could you?

Yes. So I'll take that one. So the 20% out return on investment hurdle, that is a ten year metric that we use for major investments in our organization and that is over the ten year period. So we're early in the infancy of the clinical infrastructure and generating that sort of 20% return on investment. Obviously, it's a lot stronger in the outline years as you continually build and evolve. But certainly, we're pleased that the investments that we're making with what we know today are trending in the right direction.

Right. That's it for me, Ross. Thank you.

Thank you.

Thank you. Your next follow-up question comes from David Stanton from Jefferies. Please go ahead.

Thanks, team. Just want to add two more if that's okay. I still don't quite understand why compared to other states, Victoria is down industry wide. I know you called out competition within that. I would have thought that would have driven more volume. So why are we seeing 20% plus on Medicare data volume declines in Victoria?

I think there's a level of resilience in our industry, absolutely, and the essential service that we provide. But I think Victoria is made no secret that it's been the most affected economic state. And if you lived here during COVID and witnessed what we witnessed and the a financial turmoil that followed COVID, it has been affected. So, elective egg freezing, for example, is down more than in any other state, which is probably the most discretionary service that we have. So, I think it is the most impacted or be less impacted elsewhere state regards to the affordability element, particularly when it comes to elective accretive tracing, David.

Understood. And to that end then, second question, you've talked to that slow demand for elective egg freezing. When we've spoken in the past, it's been about circa 10% to 15% of volume in Australia. Is that still correct? Is that the number we should be thinking about?

Yes, that's right, David. And then when you dissect that, it's a question of what is truly elective versus medical in nature. And that's a hard thing to gauge, but we think around forty percent of that ten percent to fifteen percent is true elective patients. If you do the math, we think around five percent of the industry is true elective in nature.

Understood. Thanks. Very clear.

Thank you. There are no further questions at this time. I'll now hand back the conference to Mr. Kinath for closing remarks.

Thanks, Seyda. Look, thank you everyone for your time and interest in the Monash IVF Group. We look forward to meeting many of you and having a more detailed chat over the oncoming week. Thanks very much.