Sigma Healthcare Ltd · ASX:SIG
Sigma Healthcare — Investor Day (November 2019)
62 slides from Sigma Healthcare's investor day presentation, Nov 26, 2019
Slide 1: Sigma Investor Day
Strategy | Efficiency | Growth Sigma Investor Day 26 November 2019
Slide 2: Overview of the Day
Overview of the Day Gary Woodford, Corporate Affairs Manager 1. Welcome 2. Safety, security, amenities 3. Agenda 2
Slide 3: Sigma Executive Team
Sigma Executive Team Mark Hooper Iona MacPherson Jeff Sells CEO & Managing Director Chief Financial Officer EGM Retail Pharmacy Jackie Pearson Richard Church Martin Hawkins EGM Business Transformation EGM Operations Chief Information Officer (commences January 2020) 3
Slide 4: Strategy & Regulatory environment
Strategy & Regulatory environment Mark Hooper, CEO & Managing Director 4
Slide 5: Overview of our fundamental approach
Overview of our fundamental approach Strategy Efficiency Growth ▪ Organic growth in our existing core ▪ Investment to establish a more efficient and ▪ Building a stronger outcome focused and effective platform for operations accountable business with sustainable ▪ Scaling our existing adjacent busin
Slide 6: Investing in a strong and sustainable future
Investing in a strong and sustainable future 3. Technology 1. Infrastructure 4. People 2. Brands & Services Investment in Investment in Investment in Empowering an our National our network of critical our people to DC network to pharmacy integrated IT enhance improve brands and solutions to operatio
Slide 7: Sigma market positions today
Sigma market positions today Community Medication Medical Devices Hospital Pharmacy 3PL / 4PL Services Pharmacy Management and Consumables ▪ Growing well above ▪ 3rd largest service ▪ Market leader ▪ Significant growth ▪ Small market market provider with market through MPS opportunity presence since
Slide 8: Chemist Warehouse contract update
Chemist Warehouse contract update ❖First-line agreement for FMCG products ❖Second-line agreement for PBS products ❖Expect full run rate from 1 July 2020 – annualised revenue expected to be $700-$800 million ❖Acceptable return on invested capital ❖Volume can be efficiently absorbed into DC network wi
Slide 9: Update on 7CPA
Update on 7CPA ❖Current 6CPA runs until 30 June 2020 ❖Negotiations with Department of Health and Minister are ongoing via NPSA* ❖Our objective is to ensure ▪ Sustainability of medicines supply ▪ Affordability of medicines for consumers ▪ Equitable access to medicines for patients, incl. rural and re
Slide 10: Project Pivot update
Project Pivot update Jackie Pearson, EGM Business Transformation 10
Slide 11: Background to Project Pivot
Background to Project Pivot Program activity Financial launched: Announced to market on 21 March 2019 Objective February 2019 Achieve $100+m efficiency gains Operational Timing: Objective 18 – 24 months Transform Sigma, reset cost base & free up capital for growth 11
Slide 12: Structured Program to manage the process
Structured Program to manage the process 12
Slide 13: Project Pivot – MC/CW stream
Project Pivot – MC/CW stream ❖ Transition of PBS medicines occurred on 1 July 2019 ❖ Transition of FMCG was in 5 tranches from Nov18 to Oct19 ❖ Achieved labour reduction of $31M - 315 team members and 200 agency labour ❖ Actions taken to optimise distribution routes ❖ Stock management was a key focu
Slide 14: Project Pivot – Operating efficiencies stream
Project Pivot – Operating efficiencies stream ❖ Planning and design phase concluded ❖ Implementation delayed, pushing more benefit to be realised in to FY21 ❖ Organisational realignment currently being rolled out ❖ Activities underway to improve ranging and product lifecycle management ❖ Confident o
Slide 15: Project Pivot – Smart spend stream
Project Pivot – Smart spend stream ❖ Focusing on areas such as printing, travel, utilities, lease rental ❖ Initiatives are a combination of changing behaviours and improved indirect procurement practices ❖ Some quick wins identified and action taken to capture the benefits ❖ The timing of full imple
Slide 16: Project Pivot – Delivering on target
Project Pivot – Delivering on target ❖ Action already taken on $57.6 million of realizable benefits ❖ On target to deliver $100+m of benefits ❖ Some timing delays will push more in to FY21 ❖ Now anticipate realisation to be 55% in FY20 and 45% in FY21 ❖ Reinvestment to occur to support the return of
Slide 17: Sales update
Sales update Jeff Sells, EGM Retail Pharmacy 17
Slide 18: Our value proposition
Our value proposition ❖Our role is to efficiently connect Suppliers and Customers ❖We have over 600 brand members operating in one of our 6 brands ❖Our brands are achieving well above market growth ❖We have a strong pipeline of opportunities for both independent and branded customers ❖A more efficie
Slide 19: Healthy pharmacy partners support healthy communities
We believe that healthy pharmacy partners support healthy communities 19
Slide 20: Who we represent
Who we represent I amcai* arias sons (oanereme ® mm retail turnover $800m Premium Brands retail turnover $466m Turnkey solutions National Marketing Campaigns retall timnover 376m Increased Brand Standards retail turnover $45m Banners retail turnover $235m ai cia * Flexibility: core+optional modules
Slide 21: Three Key Pillars
Three Key Pillars Purpose: To act as an enabler and promoter of trade between customers and suppliers to grow value for both. Capabil * Making it easy for customers and suppliers to transact * OTC, Rx supplier engagement * Wholesale ranging * Commercial framework * Facilitate mar Purpose: To be the
Slide 22: Sales Performance
Sales Performance ❖In 1H20 we grew non-CW sales at 6.9% ❖Our brands and key partners such as Pharmacy Alliance are growing at a higher rate ❖Our growth in 2H20 has accelerated as momentum has built ❖Going into next year our pipeline for both independent wholesale customers and new branded opportunit
Slide 23: How we are innovating
How we are innovating Amcal+ Life Clinic ❖ A premium health services ‘end to end’ business model with a clear focus on delivering improved patient health outcomes and business profitability ❖ An expanded health services offer and allied health services with a proven track record of being sustainable
Slide 24: How we are innovating continued
How we are innovating continued WholeLife Pharmacy & Health Foods Doctors on Demand ❖ Innovative model combining traditional retail ❖ Amcal, Guardian and DDS partner with pharmacy with an extensive range of health food Doctors on Demand “InClinic” to provide virtual GP Consults in pharmacy, suited t
Slide 25: DC Optimisation Program & 3PL / 4PL Strategy
DC Optimisation Program & 3PL / 4PL Strategy Richard Church, EGM Operations 25
Slide 26: Distribution Centre Optimisation Program
Distribution Centre Optimisation Program ❖ The reinvestment in our logistics network enables us to drive operational efficiency and reduce our costs to better service our growing customer network ❖ All new DC business cases were developed considering the exclusion of the Chemist Warehouse business ❖
Slide 27: Transforming our DC Network
Transforming our DC Network 6 # Distribution Centres State 1 Eastern Creek (CHS) NSW 2 Erskin Park (CHS) NSW 11 3 Newcastle NSW 4 Seven Hills NSW 5 Kemps Creek NSW 9 6 Darwin NT 7 Berrinba QLD 8 Mansfield QLD 10 8 9 Rockhampton QLD 12 7 10 Toowoomba QLD 11 Townsville QLD 3 12 Yatala (CHS) QLD 2 54 1
Slide 28: Transforming our DC network
Transforming our DC network Berrinba QLD Canning Vale WA Pooraka SA ▪ Fully operational in April 2018 ▪ Fully operational in February 2019 ▪ Fully operational in October 2019 ▪ 15,000 square metres with further ▪ 15,000 square metres with further ▪ 15,000 square metres with further automation expans
Slide 29: Kemps Creek DC, NSW
Kemps Creek DC, NSW ❖ Already operational with 3PL customers ❖ Fully operational in January 2020 ❖ 40,000 square metres with further automation expansion capability ❖ Will stock our full range of SKU’s ❖ Goods to person (GTP) and automated storage and retrieval system (ASRS) ❖ Project delivered on t
Slide 30: Automation
Automation ❖ Very high density automated storage and retrieval systems (ASRS) ❖ Goods to person (GTP) stations are 4+ times more efficient than manual warehouse operations ❖ Robots pick orders at 1000+ units per hour ❖ Automated box making, lidding and labelling SCALE CAPACITY EFFICIENCY 30
Slide 31: Summary
Summary ❖Our DC Optimisation Program is well advanced ❖Business Case Key Performance Indicators (KPI’s) and productivities are already exceeding expectations and will improve further with additional new business ❖Once complete, no significant capital investment is required for 20+ years ❖We have suc
Slide 32: 3PL/4PL Strategy
3PL/4PL Strategy
Slide 33: What is 3PL/4PL?
What is 3PL/4PL? Third Party Logistics (3PL) Third party logistics in supply chain management is an organisation's use of a third-party business to outsource elements of its distribution, warehousing, and fulfillment services Fourth Party Logistics (4PL) Fourth party logistics represents a higher le
Slide 34: Background
Background ❖In line with our strategy to develop income streams alternate to the PBS, we have identified 3PL/4PL as a significant growth opportunity for the Sigma Group going forward ❖Whilst Sigma Healthcare is a major player in the Pharmaceutical wholesaling market, our 3PL/4PL business is in its i
Slide 35: The size of the market
The size of the market ❖ The Australian Healthcare market requiring 3PL/4PL services is forecast for 2020 to be $36.6 bn ❖ Over the last decade, spending on health has been growing ❖ Revenues for warehousing and logistics services to this market are estimated to be ~2.5% of sales revenue or over $80
Slide 36: Current state and Outlook for 3PL/4PL
Current state and Outlook for 3PL/4PL ❖ We have recruited a dedicated Business Development team and Quality Assurance (QA) and Compliance team ❖ We now have ISO 9001 accreditation and are working on ISO 13485 and Good Manufacturing Practice (GMP) ❖ Implemented a dedicated 3PL Warehouse Management Sy
Slide 37: Sigma Hospitals & MPS update
Sigma Hospitals & MPS update Peter Nolan, General Manger Hospitals 37
Slide 38: Target Wholesale Market by State
Target Wholesale Market NT* by State 1% | $28m ❖ Total Wholesale Market of $2.7b ❖ Sigma Hospitals market share approaching 10% QLD* 24% | $657m ❖ Vic and WA - approx. 20% market share ❖ NSW – recent market entrant ❖ SA and QLD – new opportunities NSW* 27% | $735m WA* 11% | $304m VIC* 27% | $734m SA
Slide 39: Strategy Moving Forward
Strategy Moving Forward 2019 2020-21 2020-23 Consolidate VIC, SA, QLD & Privates; grow NSW, WA Consolidate & Grow VIC Tenders Innovate & - Consolidate and grow - Maintain and grow VIC - Enter SA & QLD Differentiate base business key accounts - Target private hospitals - Innovate for growth - Become
Slide 40: Our commitment to a customer-centric culture
Our commitment to a customer-centric culture ❖ Our Voice Of Customer (VOC) program measures our performance against customer expectation. A mix of relationship and transaction based surveys provides us insights in terms of the customer experience relating to: ▪ Partnership health ▪ Value we provided
Slide 41: How do you win Hospitals market share?
How do you win Hospitals market share? The hospital pharmacy market is a tender based business predominantly serviced by Ebos, CH2 and Sigma Individual hospitals or As tender listed For products not listed health districts can Wholesalers seek to products are the same State governments issue on tend
Slide 42: Current state and outlook
Current state and outlook ❖Through a well considered strategy and customer-centric culture, Sigma Hospitals has experienced strong growth, which is already being rewarded by customer loyalty. ❖With continued geographic expansion and consolidation of existing market share, this growth will continue w
Slide 43: MPS
MPS
Slide 44: What does MPS do?
What does MPS do? ❖The leading Dose Administration Aid (DAA) business in Australia ❖Three TGA approved facilities providing the highest quality assurance standards available in the market ❖Supports community and aged care facility patients to better manage their multiple medication requirements ❖Int
Slide 45: MPS services
MPS services The numbers speak for themselves MPS Packettes are the most trusted way to manage medication. 3,600,000 1,010,562 50,000 820 Pills packed per week Packettes packed per week More than 50K MPS Customers Aged Care Facilities and Community Pharmacy using MPS Packettes Simple, Safe, Secure a
Slide 46: DAA market and growth opportunities
DAA market and growth opportunities ❖ Significant market opportunity exists to grow the MPS business. ❖ Government estimates have the number of patients receiving DAA’s from pharmacies to more than triple in the next 8 years. Managed Care Only 25% of potential • Patients receiving formal managed car
Slide 47: MPS strategy in the DAA market
MPS strategy in the DAA market Connecting People to Achieve Better Health Outcomes Managed Care Independent Living Care Provider Pharmacy Resident Health Partner Pharmacy Patient 1.Reduce risk of 1.Reduce risk of 1.Reduce risk of 1.Pharmacy network 1.Script volume 1.Pharmacy location Medication erro
Slide 48: Differentiator #1: MPS Accreditation Program
Differentiator #1: MPS Accreditation Program Accreditation provides Care Providers quality assurance for service delivery and helps them mitigate compliance risks. Accreditation provides the MPS-Approved Pharmacy a way to stay ahead of their competitors. Policies, procedures, templates, tools Key Be
Slide 49: Differentiator #2: TGA Quality Standards
Differentiator #2: TGA Quality Standards As part of the Department of Health, the TGA safeguards and enhances the health of the Australian community through effective and timely regulation of therapeutic goods. Key Benefits ▪ Establishes a quality safety net – goods produced by MPS comply with strin
Slide 50: Differentiator #3: Customer Software Suite
Differentiator #3: Customer Software Suite The MPS Software Suite provides an integrated approach to managing Dose Administration Aids (DAA) workflows. The MPS system has multiple solutions supporting business growth. Key Benefits ▪ Integrates with all major pharmacy dispensing systems. ▪ For Manage
Slide 51: Differentiator #4: Continuous Improvement Culture
Differentiator #4: Continuous Improvement Culture TGA quality standards drive a culture of continuous improvement, which is unique to MPS in the DAA market. The MPS team takes pride in our ‘can-do’ attitude. We continuously improve our processes and systems to Achieve Better Business Outcomes Key Ou
Slide 52: Current state and outlook
Current state and outlook ❖With industry leading quality standards and service offering, MPS is uniquely placed to service the needs of an ageing population ❖Whilst being an established business, there are multiple market segments yet to be explored, which will open up further opportunities ❖This va
Slide 53: ERP Replacement Project
ERP Replacement Project Jackie Pearson, EGM Business Transformation 53
Slide 54: Project Background
Project Background Rationale Progress ❖Sigma’s current application landscape is 12+ months of detailed planning has culminated in cluttered the Board approved Business Case ❖4 existing ERPs* that are highly customized and Current State and Future State IT Architecture Analysis not integrated Functio
Slide 55: Product Selection
Product Selection ❖ Following a comprehensive market scan three ERP Products were shortlisted for RFP: ▪ SAP S/4 HANA ▪ Oracle ERP Cloud ▪ Microsoft Dynamics 365 ❖ Each RFP response was assessed across multiple dimensions: ▪ Compliance to functional requirements ▪ Compliance to non-functional requir
Slide 56: System Integrator (SI) Selection
System Integrator (SI) Selection Procurement Process Rationale for Selecting Accenture ❖Market scan to form a shortlist of three SI’s ❖Market leader - SAP’s number one strategic (Accenture, EY and Tata Consulting and global implementation partner Services) ❖Competitive fixed price ❖Formal RFP proces
Slide 57: Business Case
Business Case Investment Benefits ❖Total capex costs are expected to be around Financial: $65M including contingency and capitalized ❖Cost avoidance by decommissioning 19 labour legacy applications ❖60% of the budget is fixed, main variable cost ❖Reduced lost sales is project labour ❖Improved DIO an
Slide 58: Key Risks & Mitigants
Key Risks & Mitigants ▪ Detailed planning and analysis has led to 60% of costs being fixed Budget Overruns ▪ Contingency calculated at item level, enabling more contingency for items with higher risk profile ▪ Robust Governance processes, including rigorous Change Control protocols to manage scope c
Slide 59: Next Steps – Implementation Plan
Next Steps – Implementation Plan 2020 2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun July Aug Sept Oct Release 1 Go-Live Sigma Mobilisation Group Design Detailed Design, Build & Validate System Integration Testing & User Deploy Hypercare Acceptance Testing (UAT) Release 2 G
Slide 60: Mark Hooper
Mark Hooper CEO & Managing Director 60
Slide 61: Overview
Overview ❖ Project Pivot on track to deliver $100+ million efficiency gains, with some realization delayed in to FY21 Strategy | Efficiency | Growth ❖ Some reinvestment to support return of CW FMCG contract ❖ Sales and Pharmacy brands have continued to grow stronger than market through 2H20 ❖ Strong
Slide 62: Thank you
Thank you