Sigma Healthcare Ltd · ASX:SIG
Sigma Healthcare — H1 FY2018 Earnings Presentation
30 slides from Sigma Healthcare's earnings presentation, Sep 7, 2017
Slide 1: Half Year Results to 31 July 2017
5 Sigma Healthcare Sigma Healthcare Limited Half Year Results to 31 July 2017 Announced 7 September 2017
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 rel
Slide 3: Overview
Overview Mark Hooper, CEO and Managing Director Overview Financials and Capital Management Acquisition and Business Development Outlook - ON =
Slide 4: Market Update
Market Update * Acquisition of the MPS business - important step in Sigma’s broader healthcare strategy * Hospital services - recent tender success in Victoria ¢ Department of Defence contract now in operation ¢ DC investment program - ahead of schedule and under budget ¢ Reorganising structure to i
Slide 5: Challenging 1H18 but ROIC Maintained
Challenging 1H18 but ROIC Maintained A& Revenue - 5.0% CAGR 2,000 1,800 $1.78 1,600 billion 4,400 1,200 1,000 Down 1.4% sm ant Ky ve wh (Excluding High Cost Hep-C) » Underlying EBIT* - 11.5% CAGR 60,000 $44.2 te 50,000 million 40,000 Down 30,000 8.7% 20,000 10,000 0 $000's s s ef vi sh Underlying NP
Slide 6: Our Promises
Our Promises & Promise petvered Grow EBIT by at least 5% for the next two years Grow non PBS earnings Maintain strong balance sheet Improve capital management Reward shareholders 1H18 Underlying* EBIT down 8.7% Impacted by Hep-C, softer consumer spend and exit of a customer group x Cycling above mar
Slide 7: Financial Performance
Financial Performance lona MacPherson, CFO
Slide 8: Group Financial Performance
Group Financial Performance * Headline sales revenue largely impacted by pull back of Hepatitis C sales ($105m reduction) + Ex Hep-C, sales down 1.4% reflecting softer consumer spend and the exit of a customer group Sales revenue Gross Profit Other revenue Operating costs Depreciation and Amortisati
Slide 9: Revenue and Gross Profit Drivers
& Revenue and Gross Profit Drivers Sales Revenue: Down 1.4% to $1.78bn (excluding Hep-C) * Impacted by market wide softer consumer spend * Hepatitis C sales down $105m (down 31%) * Like for like sales in key brands slightly up despite softer general market conditions Other Revenue: Up 0.8% to $39.5m
Slide 10: Operating Costs — Investment in Growth
Operating Costs — Investment in Growth 1% Warehouse and Delivery: Up $3.3m to $67.5m * Costs well contained to absorb - EBA increases, partly offset by productivity gains - Expanded operations (new CHS sites) Sales and Marketing: Down $1.1m to $34.0m * Maintained investment in ongoing programs to su
Slide 11: Continued Strength in Working Capital and CCC Performance
Continued Strength in Working Capital ~ and CCC Performance » * ROIC remains a strong focus as we move through our current investment cycle. * CCC influenced by ramp up in inventory in preparation for new supply contracts. ROIC 1 ~~ 1 % & “> © ont N gv on es y s ys ys ys Excludes Capital WIP ' Cash
Slide 12: Cash Flow - Rewarding Shareholders and Investing for Growth
Cash Flow - Rewarding Shareholders ~ and Investing for Growth » 80,000 60,000 40,000 20,000 "! (20,000) (40,000) ——— (60,000) _. — ~ a (80,000) (100,000) ra ? @ Ss i 2 N , eo Ss “ ys xo & oi & e $O000's Ss FE BE Re gel - Ke x tgs Wie Q Rs RN OS Re eS ea a s F PS ° RR we og Fes FPF FE Ky x RS CF ROS
Slide 13: Other Financial Metrics
Other Financial Metrics & Capex * $36m in 1H18, and expect $80m for FY18 * Construction of Berrinba QLD almost complete, with construction of Canning Vale WA underway * FY19 capex expected to reach $100m with ongoing construction of Canning Vale Forecast Capital Expenditure (A$m) 100 FY18 rae ts FY2
Slide 14: Continuing to Reward Shareholders
& Continuing to Reward Shareholders Interim Dividend Dividend History + Maintained at 2.5 cents per share (fully franked) * Payout ratio 92% of Underlying* NPAT (96% of Reported profit) “ + Equates to a yield of over 6.5%", fully franked =n 2.0 " ; | 0.0 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 IB
Slide 15: Business Development Initiatives
Business Development Initiatives Mark Hooper, CEO and Managing Director
Slide 16: Acquisition of MPS - Strong Strategic Fit
& Acquisition of MPS - Strong Strategic Fit * Natural adjacency with growth potential + Important step in Sigma Healthcare’s broader healthcare strategy * Scalable platform creates opportunities to optimise our capabilities and expand our horizons + Leverage capabilities for growth + Scale up new bu
Slide 17: Acquisition of MPS - Natural Adjacency
Acquisition of MPS - Natural Adjacency ¢ Medication management solutions and dose administration aids (DAA) for residential aged care (RAC) facility residents and community patients ¢ The leading player in DAA market, servicing over 37,000 RAC beds (almost 20% market share) * Strategic growth opport
Slide 18: Sigma Logistics Services
Sigma Logistics Services ¢ Australia wide infrastructure now in place to support growth ¢ Includes 3PL and 4PL * Department of Defence fulfilment contract now operational with scope for growth - Supply of PBS, OTC and private label products - Annual sales expected to be $24m-$30m - Looking to expand
Slide 19: DC Investment Update - Berrinba, QLD
DC Investment Update - Berrinba, QLD Construction almost complete ¢ Ahead of schedule and under budget — total spend circa $55m (original est over $60m) * Payback expected to be above business case ¢ Dual operating costs will be incurred in 2H18 AE al ar 2
Slide 20: DC Investment Update — Canning Vale, WA
& DC Investment Update — Canning Vale, WA Construction underway * Approx $55m investment (including land) ¢ Strong payback metrics ¢ Anticipated completion late 2018 * Ground works completed, and structure now being formed
Slide 21: Sigma Hospital Services
Sigma Hospital Services >. Above market national growth * Pharmaceutical hospital wholesaling market exceeds $3.3bn* (including Hep C) « Above market growth — Sigma Moving Average Turnover (MAT) growth of 32% compared to 7.7% market MAT growth* ¢ Strong progress in all markets: - Vic — successful te
Slide 22: Amcal Online — Extending Our Reach
Amcal Online — Extending Our Reach a Amcal China site AE RONAN neon ROPERS Te * Partnership with Azoya just over 1 - a year young ¢ Sales to China have more than doubled initial expectations ¢ Over 50% of site visits each month are repeat customers ¢ Strong growth in product categories outside of th
Slide 23: New Customer-Centric Model to Support Our Strategy
New Customer-Centric Model to Support Our Strategy Customer Management Community Health Service Level Agreements Enterprise Wholesale Operations Distribution processes and technology are standardised across the Group to enable maximum productivity and efficiency. The most appropriate infrastructure
Slide 24: Outlook
Outlook Mark Hooper, CEO and Managing Director
Slide 25: Sustained Pipeline of Growth
Sustained Pipeline of Growth > Core business Organic Growth | New business | Hospitals/3PL growth Acquisitions and expansion into adjacencies
Slide 26: Outlook
Outlook 1% * FY18 — Confirming current guidance of Underlying EBIT of $90m ¢ ROIC will remain a strong focus e Share buy-back remains in place * High Dividend Payout Ratio expected to be maintained ¢ Reorganisation to improve customer focus and support strategy * Continue to actively seek acquisitio
Slide 27: Thank you
Thank you Sigma Healthcare
Slide 28: Appendix — ROIC Reconciliation
Appendix 1 — ROIC Reconciliation & $m 31/07/13 31/07/14 31/07/15 31/07/16 31/07/17 Net Assets 573.0 568.8 550.1 Sani] {0) 532.9 Less: Cash and cash equivalents -151.9 -34.7 -45.6 -40.8 -23.2 Add back: Interest bearing liabilities 125.0 0.6 60.5 96.0 96.0 Adjusted for One-Off Items including 0.0 0.0
Slide 29: Appendix — Reported to underlying reconciliation
Appendix 2 — Reported to underlying reconciliation & 31/07/17 31/07/16 $000 $000 Reported EBIT 42,755 37,297 Add: Restructure Costs (before tax) 431 - Due Diligence Costs (before tax) 1,100 - Litigation settlement expense (before tax) - 11,368 Underlying EBIT 44,286 48,665 Less: Non-controlling inte
Slide 30: Appendix — Reported to underlying reconciliation
Appendix 2 — Reported to underlying reconciliation & 31/07/17 31/07/16 $000 $000 Reported NPAT attributable to owners of the Company 27,808 23,693 Add: Restructure Costs (after tax) 302 - Due Diligence Costs (after tax) 770 - Litigation settlement expense (after tax) - 7,958 Underlying NPAT attribut