Sigma Healthcare Ltd · ASX:SIG
Sigma Healthcare — H1 2019 Earnings Presentation
26 slides from Sigma Healthcare's earnings presentation, Sep 6, 2018
Slide 1: Half Year Results
Sigma Healthcare Limited Half Year Results to 31 July 2018 Announced 6 September 2018 ASX Ticker: SIG
Slide 2: Important Notice
Important Notice The material provided is a presentation of general information about Sigma’s activities, current at the date of the presentation. It is information given in summary form and does not purport to be complete. No representation or warranty is made as to its completeness, accuracy or re
Slide 3: Overview
Overview Mark Hooper, CEO and Managing Director
Slide 4: 1H19 Results Overview
1H19 Results Overview • R evenue steady despite competitive environment Sales Revenue (Excluding Hep C) up 3.2% to $1.8bn • Revenue growth largely from lower margin Sigma Hospitals • P BS pricing reform continues to bite Underlying EBITDA down 16.4% to $40.3m • Additional rebates paid to MC/CW Group
Slide 5: Business Update - our pivot point begins
Business Update - our pivot point begins Sigma now has a significant opportunity to re-engineer our business, sharpen our focus, enhance our growth profile, and drive operational and functional improvement. Through all levels of the business, we are aligned and committed to delivering that outcome.
Slide 6: Financial Performance
Financial Performance Iona MacPherson, CFO
Slide 7: Group Financial Performance
Group Financial Performance REPORTED UNDERLYING 1H2019 1H2019 1H2018 Variance Change $m $m $m $m % • Other Revenue Sales Revenue 1,957.6 1,957.6 1,998.2 -40.4 -2.0% includes a full period of MPS Sales Revenue (Ex Hep-C) 1,819.7 1,819.7 1,763.0 +56.7 3.2% • Key difference Gross Profit 135.1 135.1 141
Slide 8: Revenue and Gross Profit Drivers
Revenue and Gross Profit Drivers Sales Revenue (ex Hep-C): Up 3.2% to $1.82bn • Largely driven by growth in Sigma Hospitals • Also includes sales from the aquisition of Medical Industries Australia (MIA) Other Revenue: Up 24.0% to $48.9m • Reflects full year contribution from MPS • Partly offset by
Slide 9: Operating Costs under control
Operating Costs under control Warehouse and Delivery: Up $15.0m to $82.5m • Excluding one-offs, operating costs are flat • Includes costs relating to MPS and MIA ($8.2m) • One-off redundancy and transition costs due to closure of Mansfield ($7.0m) Sales and Marketing: Down $0.8m to $33.2m • Operatin
Slide 10: Cash conversion cycle remains strong
Cash conversion cycle remains strong • 1 Day improvement from July 2017 • R OIC continues to be a strong focus • Expect this to remain steady in FY19 • R eduction reflects current investment cycle and lower earnings Cash Conversion Cycle Days (Excl. Hep-C) 55 50 Underlying ROIC# - remains a core foc
Slide 11: Cash Flow – remains strong
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Slide 12: Capital Investment Program
Capital Investment Program – improving efficiency and capacity Pooraka SA Approx $20m spend Construction is net Berrinba QLD $52m spent with facility $220m commencing now opened in February 2018 Kemps Creek NSW Approx $110m spend investment Canning Vale WA $52m spend Construction progressing Expecte
Slide 13: Debt Position – gearing into long-term assets
Debt Position – gearing into long-term assets • $179.2m net debt at 31 July 2018 • 1H19 net interest expense $5.0m - reflects increased investment • Expect net debt to be around $260m at FY19 (subject to any acquisitions) Capex Debt $m $m 70 350 60 300 50 250 40 200 30 150 20 100 10 50 0 0 ) ) ) ) )
Slide 14: High Dividend Payout Ratio maintained
High Dividend Payout Ratio maintained • Interim dividend of 1.5 cents per share (fully franked) • Payout ratio 80% of Underlying NPAT (119% of Reported NPAT) • Board reconfirms intention to retain a high dividend payout ratio Cents Payout Per Share Dividend History Ratio 7.5 100% 6.0 80% 4.5 60% 3.0
Slide 15: Business Update
Business Update Mark Hooper, CEO and Managing Director 1. MC/CW contract update 2. Business Re-engineering program 3. General Business Update 4. Outlook
Slide 16: Chemist Warehouse contract update
Chemist Warehouse contract update • Contract continues until 30 June 2019 • Some FMCG supply may transition prior to 30 June • Approximately $300m working capital will be freed up • Major strategic planning and business re-engineering work now commencing We stand by our decision to not renew the MC/
Slide 17: Business re-engineering program commencing
Business re-engineering program commencing • Accenture appointed to support efficient exit of MC/CW business and execution of restructuring initiatives • R estructuring applies a ZBx discipline (zero based approach) on a whole of business approach • Initial program will run for 8 weeks with ongoing
Slide 18: Sigma’s retail brands – providing flexible solutions
Sigma’s retail brands – providing flexible solutions • Tailored solutions to meet various owner requirements • The largest retail pharmacy network • Like for like sales – Amcal up almost 2.0%, Guardian up 5.3%, and DDS up 3.0% • Guardian member numbers up 10% this calendar year • Pipeline of new mem
Slide 19: MPS and MIA – meeting expectations
MPS and MIA – meeting expectations • Strong alignment with Sigma’s broader DISPENSING SOFTWARE healthcare strategy and government objectives • MPS has three TGA approved facilities servicing Australia wide • Software solutions supporting pharmacists and patients • MIA expanding medical consumables a
Slide 20: Sigma Hospital Services – strong growth outcome
Sigma Hospital Services – strong growth outcome • Continued strong growth in Western Australia and New South Wales • Extended key contracts in Victoria • Revenue up 67% year on year excluding Hep-C (up 35% including Hep-C) • Focussed on leveraging national presence to further accelerate growth 20
Slide 21: Our way forward – Organic growth supported by disciplined investment
Our way forward – Organic growth supported by disciplined investment Organic growth Brand members, independent, wholesaling, hospitals, 3PL/4PL Cost efficiency program commencing Operating costs continue to be extracted under a structured program Disciplined acquisitive growth Investment in aligned
Slide 22: Outlook
Outlook • FY19 – On track to deliver in-line with guidance of Underlying EBIT of $75m. • Continue to target FY20 Underlying EBIT of $40m - $50m • Future focus will be on EBITDA as a better indicator of business performance due to DC investment • Ongoing investment (including DC) will continue to dri
Slide 23: Thank you
Sigma Healthcare Connecting health solutions Thank you
Slide 24: Appendix – ROIC Reconciliation
Appendix 1 – ROIC Reconciliation $m 31/7/2014 31/7/2015 31/7/2016 31/7/2017 31/7/2018 Net Assets 568.8 550.1 551.0 532.9 501.2 Less: Cash and cash equivalents -34.7 -45.6 -40.8 -23.2 -21.6 Add back: Interest bearing liabilities 0.6 60.5 96.0 96.0 200.8 Adjusted for One-Off Items including 0.0 0.0 0.
Slide 25: Appendix – Reported to underlying reconciliation
Appendix 2 – Reported to underlying reconciliation 31 July 2018 31 July 2017 $’000 $’000 Reported EBITDA 31,519 46,773 Less depreciation and amortisation -6,199 -4,018 Reported EBIT 25,320 42,755 Add: Restructuring and dual operating costs before tax 8,700 431 Add: Litigation and due diligence costs
Slide 26: Appendix – Reported to underlying reconciliation
Appendix 2 – Reported to underlying reconciliation 31 July 2018 31 July 2017 $’000 $’000 Reported NPAT attributable to owners of the company 13,397 27,808 Add: Restructuring and dual operating costs after tax 6,090 302 Add: Litigation and due diligence costs after tax 386 770 Underlying NPAT attribu