Sigma Healthcare Ltd · ASX:SIG
Sigma Healthcare — FY2019 Earnings Presentation
30 slides from Sigma Healthcare's earnings presentation, Mar 21, 2019
Slide 1: Full Year Results
Sigma Healthcare Limited Full Year Results to 31 January 2019 announced 21 March 2019
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 1. Key Highlights 2. Financial Performance 3. Business Transformation 4. Outlook
Slide 4: Key Highlights - building a better future
Key Highlights - building a better future Results are ahead of current guidance High Dividend Payout Ratio maintained Our strategy and future direction is clear $100+ million efficiency gains identified to be delivered over 18-24 months Roadmap for FY23 EBITDA to be around the same level as FY19 Inv
Slide 5: API Merger Proposal - background
API Merger Proposal - background Proposal received from API - 0.31 API share plus $0.23 cash for every Sigma share. API announced in December 2018 they had acquired 12.96% of Sigma shares eciprocal high level due diligence completed - validated the $60 million of potential synergy R benefits aving n
Slide 6: Project Pivot Transformation Underway
Project Pivot Transformation Underway Project Pivot – major business transformation program which commenced in Sep 2018 ill transform Sigma by resetting the operating cost base to make Sigma more efficient and free W up funds for growth This also incorporates the efficient transition of MC/CW 100+ m
Slide 7: Project Pivot – a structured program to transform our business
Project Pivot – a structured program to transform our business Sigma Board Project Board Sigma’s Transformation Management Office Project Management and Reporting Change Management & Communications Benefit Tracking Pivot Workstreams – $100+ million efficiency gains from program being implemented by
Slide 8: Financial Performance
Financial Performance Iona MacPherson, CFO
Slide 9: Group Financial Performance
Group Financial Performance REPORTED UNDERLYING $m FY2019 FY2019 FY2018 Variance Change Sales Revenue 3,976.8 3,976.8 4,094.4 -117.6 -2.9% Gross Profit 273.2 273.2 284.4 -11.2 -3.9% Other Revenue 99.5 99.5 83.5 16.0 19.1% Operating Costs -296.2 -282.2 -268.1 -14.0 5.2% EBITDA 76.5 90.5 99.8 -9.3 -9.
Slide 10: Revenue & Gross Profit Drivers
Revenue & Gross Profit Drivers Sales Revenue (Ex Hep-C): Up $108.5m to $3.75bn otal Sales revenue benefited from a full year contribution from MPS and MIA, growth in Sigma T Hospitals, and wholesale customer account growth achieved in 2H19 ales excluding MC/CW were slightly ahead of prior year despi
Slide 11: Operating Costs - investment in growth
Operating Costs - investment in growth Warehouse and Delivery: Up $22.6m to $167.7m Half of increase reflects full year inclusion of MPS and MIA emaining increase largely due to dual operating costs during DC transitions, and redundancy R costs with closure of Belmont and Mansfield DC’s Sales and Ma
Slide 12: Working Capital Management
Working Capital Management ROIC continues to be a strong focus as we move through our current investment cycle. Half of reduced ROIC driven by transition to new DC’s FY19 FY18 Underlying ROIC# Trade Debtors (Excl. Hep-C) 553,426 510,841 Inventory (Excl. Hep-C) 336,018 332,354 20 Trade Creditors (Exc
Slide 13: Return of MC/CW Working Capital
Return of MC/CW Working Capital round $300 million working capital is expected to be progressively released as the MC/CW A contract winds down Full unwind should be finalised by October 2019 R elease should see (subject to new business): - Debtors reduce by approximately $320 million - Inventory red
Slide 14: Cash Flow - Rewarding Shareholders & Investing for Growth
$ 000’s N 0 50,000 100,000 150,000 200,000 250,000 300,000 31 et Ja De n bt 20 at 18 EB IT D A W C or ha ki ng ng e C in ap ita In l co Pa m ym e T en ax t Sh OPERATIONS / WORKING CAPITAL ar e bu y ba D ck iv id en d Pa ym en Em N t pl c e t oy o Sc e st he e S of m ha e re C REWARDING SHAREHOLDERS
Slide 15: DC Investment Program On Track & Under Budget
DC Investment Program On Track & Under Budget Berrinba - QLD $52m Canning Vale - WA $52m 15,000 square metre footprint 15,000 square metre footprint Stocks our full range of 14,000 stock Will stock our full range of 14,000 SKU’s keeping units (SKU’s) emi-automated, goods to person (GTP) S Semi-autom
Slide 16: Capex and Debt Profile
Capex and Debt Profile Capex Program largely completed by end of FY21 - including all known potential investments FY19 Net Debt of $243m to reduce to circa $100m by end of FY20 Net Debt is expected to fall further beyond FY20 (in the absence of any growth initiatives) Approved debt facilities in pla
Slide 17: Dividend & Share Buy-back Program
Dividend & Share Buy-back Program Dividend Final dividend of 2.0 cents per share fully franked (total of 3.5 cents per share for the year) Payout ratio of 80% of Underlying NPAT (102% of Reported NPAT) Board committed to maintaining a high dividend payout ratio Share Buy-back Program less active dur
Slide 18: Business Transformation
Business Transformation Mark Hooper, CEO and Managing Director
Slide 19: Project Pivot - providing the platform for growth
Project Pivot - providing the platform for growth Pivot Workstreams – $100+ million efficiency gains from programs being implemented by Sigma team members, Accenture and EY. Will begin to ramp up in 2H20. MC/CW Transition 60% Operating efficiencies 25% Smart spend program 15% Implementation will of
Slide 20: MC/CW Transition
MC/CW Transition Transition team has been in place for 6 months, supported by EY Good relationship with MC/CW team, transition timelines agreed - All scheduled medicines transition on 1 July 2019 - FMCG transition progressively from April 2019 - Expect all transition to be complete by August 2019 Pr
Slide 21: DC Network Update
DC Network Update The transition of the MC/CW volume has lead to the following decisions, which were announced to our teams in March rd quarter 2019 - closure of our Shepparton, Newcastle and Launceston DC’s, with services to 3 be picked up by our remaining DC network Labour reductions in remaining
Slide 22: Costs of Achieving $100+ million Efficiency Gains
Costs of Achieving $100+ million Efficiency Gains ne-off costs of $30-$35 million will be progressively incurred to achieve the step change in O ongoing costs Includes consultancy costs, redundancy, outplacement services, DC closure costs Will be reflected in Reported not Underlying earnings 22
Slide 23: Our Retail and Wholesale Network
Our Retail and Wholesale Network Like for like sales up almost 1% across our brands igma’s retail brands have almost 20%* market share of consumer spend - S second to MC/CW Launched new DDS WholeLife brand to expand the category Amcal+ Life Clinic launched this month - go live in May DS – winner of
Slide 24: Strong Growth Opportunities
Strong Growth Opportunities Sigma Hospitals xcluding Hepatitis C, Sigma Hospitals market share at 8.7% E (up from 7.2%) Revenue growth excluding Hepatitis C up over 20% Pipeline of potential contacts identified MPS Market Opportunity MPS 75,000 hree TGA approved facilities servicing Community Pharma
Slide 25: Outlook
Outlook Mark Hooper, CEO and Managing Director
Slide 26: EBITDA Guidance
EBITDA Guidance Includes: Expected EBITDA 95 $ 100+ million per annum efficiency gains achieved 90 progressively over FY20 and FY21 85 Project Pivot $ 300m working capital release reducing debt 80 - 2 year program At least 10% $ MIllions 75 delivering $100+ per annum A llowance for new Vic DC if req
Slide 27: Outlook - a better future
Outlook - a better future Progress already made on our Project Pivot transformation program Confident on delivering $100+ million efficiency gains over the next two years C/CW exit will impact 2H20 results partly offset by the commencement of cost savings from M Project Pivot Our investment program
Slide 28: Thank you
Sigma Healthcare Connecting health solutions Thank you
Slide 29: Appendix 1 – ROIC Reconciliation
Appendix 1 – ROIC Reconciliation $m 31-Jan-15 31-Jan-16 31-Jan-17 31-Jan-18 31-Jan-19 Net Assets 573.1 553.7 538.6 515.3 514.3 Less: Cash and cash equivalents -34.3 -17.5 7.7 -82.2 -72.6 Add back: Interest bearing liabilities 0.6 74.1 1.0 195.8 315.8 Adjusted for One-Off Items including 0.0 0.0 -26.
Slide 30: Appendix 2 – Reported to underlying reconciliation
Appendix 2 – Reported to underlying reconciliation FY19 FY18 $’000 $’000 Reported EBITDA 76,550 92,834 Add back: Restructuring and dual operating costs before tax 13,115 3,715 Litigation and Due Diligence costs before tax 863 3,199 Underlying EBITDA 90,528 99,748 Less: Non-controlling interests befo