Sigma Healthcare Ltd · ASX:SIG
Sigma Healthcare — H1 FY2021 Earnings Presentation
32 slides from Sigma Healthcare's earnings presentation, Sep 10, 2020
Slide 1: Sustained momentum delivering results
Sustained momentum delivering results Half Year Results 10 September 2020
Slide 2: Important notice
Important notice This presentation for Sigma Healthcare Limited and its subsidiaries (Sigma Group) is designed to provide: • an overview of the financial and operational highlights for the Sigma Group for the half year period ending 31 July 2020; and • a high level overview of aspects of the operati
Slide 3: Agenda
Mark Hooper CEO & Managing Director 1. Overview 2. Financial Performance 3. Operational Update 4. Capital Management 5. Business Transformation and Investment 6. Outlook 3
Slide 4: Overview
Overview Financial Operational Business Capital People and Performance Update Transformation Management Culture Wholesale Sales (ex-CW Team member 1H21 Underlying & Hep-C)** up 15.1% Project Pivot – has Sale and leaseback of EBITDA* of $34.1m delivered $86.8m two Distribution Centres engagement cont
Slide 5: Financial Performance
Financial Performance
Slide 6: Resilient 1H21 through challenging environment
Resilient 1H21 through challenging environment NEW ACCOUNTING STANDARD Impact of AASB16 OLD ACCOUNTING STANDARD REPORTED UNDERLYING REPORTED UNDERLYING 1H21 1H21 1H21 1H20 % Change 1H21 1H21 Sales Revenue 1,642,162 1,642,162 1,877,598 -12.5% 1,642,162 1,642,162 o Total Revenue down only 12.5% Gross
Slide 7: Sustainable revenue growth across a more diversified business
Sustainable revenue growth across a more diversified business Monthly volume (incl-CW) o COVID-19 related volume spike in March of over 80%, which was largely offset in the period through to June Volume growth from a broader customer base Including CW in both years, o Total wholesale sales up 15.1%
Slide 8: Chemist Warehouse FMCG contract
Chemist Warehouse FMCG contract Transition complete o FMCG portfolio fully transitioned back to Sigma from June 2020 o Sales run rate from June onwards is in line with expected $800M annualised sales o Further sales upside once COVID-19 restrictions are removed o Strong and collaborative relationshi
Slide 9: Establishing a more efficient operating cost base
Establishing a more efficient operating cost base Total Reported Operating Costs $147.9m A number of activities undertaken to 1H21 also impacted by a number of one-off improve ongoing efficiency: elements including o Four new DC’s now operating with o Reduction in costs relating to CW PBS volume aut
Slide 10: Operational Update
Operational Update
Slide 11: Sigma Retail Momentum continues
Sigma Retail Momentum continues Strong pipeline for growth Support to ~ 600 Brand Pharmacy Members provided remotely Expanded Like for Like Independent Sales up 9.5% Pharmacy offering >18% of Electronic consumer Prescriptions pharmacy enabled spend is in our brands* * IBIS World Industry Report Sigm
Slide 12: Expansion Businesses Diversified growth
Expansion Businesses Diversified growth Hospitals Contract Logistics (3PL) 22% Sales growth* - well above market New market o Sigma national market share circa o A number of new service contracts 10% and growing, with operational agreed and commenced over the past progress in all States and expansio
Slide 13: Expansion Businesses continued
Expansion Businesses continued Diversified growth Medication Packaging Services (MPS) Medical Industries Australia (MIA) o Three TGA approved facilities o Business acquired by Sigma in early 2018 o Process under way to upgrade integrated o Strong sales growth across all PPE categories, with a softwa
Slide 14: Regulatory update Agreements finalised
Regulatory update Agreements finalised 7th Community Pharmacy Agreement Community Service Obligation Deeds (7CPA) (CSO) o New five year agreement that runs until June o New four year agreement running to June 2025 2024 o The introduction of a pricing floor, combined o Provides increased funding to h
Slide 15: COVID-19 Impact Assessment
COVID-19 Impact Assessment Overall, the net effect of higher sales of medical consumables via CHS and MIA, outweighed the reduced merchandise and marketing income, higher doubtful debts provision and other operational impacts. Positive Neutral Negative Self sustained: No requirement for Wholesal
Slide 16: Capital Management
Capital Management
Slide 17: Working Capital Management
Working Capital Management Cash Conversion Cycle (Days) Cash Conversion Cycle (CCC) 70 60 o Anticipate CCC to stabilise just below 30 days 50 40 30 o Has been a sustained focus on efficient working capital 20 management 10 - Jul'11 Jul'12 Jul'13 Jul'14 Jul'15 Jul'16 Jul'17 Jul'18 Jul'19 Jul'20 Retur
Slide 18: Investment program nearing completion
Investment program nearing completion Capex o Fundamental business transformation – drives 120 operational efficiency, adds capacity and reduces our 100 costs to serve 80 60 o The new DC’s provided the infrastructure to efficiently 40 absorb the spike in demand due to COVID-19 20 0 o $48 million cap
Slide 19: Sale and Leaseback Generating shareholder value
Sale and Leaseback Generating shareholder value o Transaction announced on 10 August 2020 o Realised $80 million above original investment cost (7.5 cents per share value created through the development process) o $172 million cash received 21 August 2020 o Initial annual lease cost of $8.0 million
Slide 20: Net debt reduced as investment program nears completion
Net debt reduced as investment program nears completion o Net Debt $179 million at 31 July 2020 Net Debt 300.0 o Proceeds from the Sale and Leaseback received on 250.0 20 August 2020, reducing Net Debt to $33.6 million at 31 August 2020 200.0 150.0 o Anticipate Net Debt at 31 January 2021 of 100.0 a
Slide 21: Business Transformation and Investment
Business Transformation and Investment
Slide 22: Project Pivot Delivering on target
Project Pivot Delivering on target o Actions taken to achieve $86.8m of targeted annualised benefit at 31 July 2020 o On track to deliver $100m annualised benefits by the end of FY21 as originally announced o Has delivered a fundamental improvement in ongoing business efficiency and effectiveness Cu
Slide 23: Completing a generational upgrade of our DC Network
Completing a generational upgrade of our DC Network o New Distribution Centre (DC) at Truganina in Victoria - $80m investment Truganina VIC o Well advanced, on track and on budget - $60m spent to date on Truganina o Minimal impact from COVID-19, with COVID-19 work safe plans in place o Will commence
Slide 24: Investment in critical IT Infrastructure
Investment in critical IT Infrastructure Complements DC investment to drive business efficiencies, customer engagement, and growth ERP Enterprise CRM o Project kicked off in February 2020, and is expected to o Salesforce solution deployed to the Community Pharmacy conclude in FY22 business units (80
Slide 25: Outlook
Outlook 25
Slide 26: Outlook
Outlook o 1H21 momentum has carried forward into the start of the second half o Underlying business remains strong and CW volume now fully transitioned o Project Pivot benefits to reach $100 million annualised by the end of FY21 o We continue to work with and support our pharmacy brands, customers,
Slide 27: Appendix
Appendix
Slide 28: Reported to Underlying Reconciliation (EBITDA/EBIT)
Appendix 1 Reported to Underlying Reconciliation (EBITDA/EBIT) 31 July 2020 31 July 2019 $000 $000 Reported EBIT 11,852 12,688 Add: Reported depreciation and amortisation 14,548 12,606 Reported EBITDA* 26,400 25,294 Add back: Restructuring, transformation and dual operating costs before tax 7,788 18
Slide 29: Reported to Underlying Reconciliation (NPAT)
Appendix 2 Reported to Underlying Reconciliation (NPAT) 31 July 2020 31 July 2019 $000 $000 Reported NPAT attributable to owners of the company 4,711 2,519 Add back: Restructuring, transformation and dual operating costs after tax 5,452 13,045 Due diligence, integration and litigation costs / (benef
Slide 30: Cashflow
Appendix 3 Cashflow Cash from the Sale and Leaseback transaction was received post balance date on 21 August and is not included in this cash flow graph. Net Debt subsequently reduced to $33.6m at 31 August. 0 (20,000) (40,000) (60,000) (80,000) (100,000) $’000 (120,000) (140,000) (160,000) Net Debt
Slide 31: COVID-19: Sigma self sustained with robust plans
Appendix 4 COVID-19: Sigma self sustained with robust plans • Business recognised as an Essential • COVID-19 Working Group introduced in • No Covid-19 related financial support Service March to implement policies, programs and required to maintain operations – no Job changes to pro-actively manage t
Slide 32: Thank you
Thank you