Consolidated results H1 2011 Warsaw, 29 August 2011
Market data Company
NEUCA S.A.
Number of shares
4 433 236 shares
Capitalisation
PLN 257.1 mn conversion rate PLN 58.00 per share for 26.08.2011
Free Float
43.92%
Index
WIG, WIGdiv
Market
basic
Ticker
NEU
Management Board
Piotr Sucharski – President of the Board
Grzegorz Dzik – Vice-President of the Board Robert Piątek Vice-President of the Board Jacek Styka – Vice-President of the Board Website IR Contact
www.neuca.pl 2
Q2 2011 – according to the plan market slowdown in Q2 2011, after a very dynamic Q1
sales profit growth dynamics in line with the market
financial results compliant with the plan, high net profit dynamics after H1 2011
restructuring activities continuation – central warehouse in Gądki near Poznań opening (July 2011), closing down of further 3 warehouses
preparation for legal changes entering into law from 2012 3
MARKET SITUATION
NEUCA’s market position Quarterly market value and y/y dynamics in quarters Q1 2010 – Q2 2011* [PLN bn]
2010
Market shares in Q2 2011*
2011
NEUCA revenues and market shares in quarters in Q1 2010 – Q2 2011 [PLN bn]
revenues growth in Q2 2011 compliant with the market trend market shares drop by 1 p.p. y/y 2010 * IMS data, own estimates
2011
a result of an aggressive struggle for margin
5
FINANCIAL RESULTS
Revenues growth y/y Sales revenues [PLN mn]
NEUCA Group revenues growth at
the entire market level in Q2 2011,
+6.4%
however in H1 2011 above the market (market growth 5.9%)
NEUCA Group higher sales
+1.5%
regardless of on-going restructuring processes and „difficult” decisions concerning the trade offer
7
EBIT EBIT [PLN thousand]
EBIT excluding incidental events [PLN thousand]
+19%
-2%
dynamic EBIT growth in H1 2011 y/y
+29%
-3%
8
Net profit Net profit [PLN thousand]
Net profit excluding incidental events [PLN thousand]
+51%
+30%
+28%
+18%
net profit growth both including and excluding incidental events
9
2011 net profit prognosis realisation* PLN 44 mn net profit prognosed for 2011
* excluding incidental events
H1 2011 results at the 57% total year’s prognosis level 10
Consolidated results (PLN mn)
H1 2011
H1 2010
change % y/y
Q2 2011
Q2 2010
change % y/y
revenues
3 289.2
3 092.2
6.4%
1 519.4
1 495.7
1.6%
268,1
262.7
2.1%
126.5
133.9
-5.5%
EBITDA
52.2
46.0
13.5%
21,9
22.2
-1.4%
EBIT
41.5
34.9
18.9%
16.3
16.6
-1.8%
Net result
23.0
17.7
29.9%
7,6
5.9
28.8%
Gross profit on sales
8.15%
8.50%
-0.35 p.p.
8.33%
8.95%
-0.62 p.p.
EBITDA
1.59%
1.49%
+0.10 p.p.
1.44%
1.48%
-0.04 p.p.
EBIT
1.26%
1.13%
+ 0.13 p.p.
1.07%
1.11%
-0.04 p.p.
Net result
0.70%
0.57%
+0.13 p.p.
0.50%
0.40%
+0.10 p.p.
Gross profit on sales
% sales revenue
6.4% sales increase in the 1st half up to PLN 3.3 bn lower margin due to VAT increase in 2011 for the drugs with the government-set price and growing share of pharmacies with higher sales discount cost effectiveness amelioration due to logistics and back office restructuring processes high net profit dynamics, according to the plan
11
Cons. res. excluding incidental events (PLN mn)
H1 2011
H1 2010
change % y/y
Q2 2011
Q2 2010
change % y/y
revenues
3 289.2
3 092.2
6.4%
1 519.4
1 495.7
1.6%
268.1
262.7
2.1%
126.5
133.9
-5.5%
EBITDA
54.8
45.2
21.2%
23.4
23.9
-2.1%
EBIT
44.1
34,1
29.3%
17.7
18.4
-3.8%
Net result
25.0
16.5
51.5%
8.6
7.3
17.8%
Gross profit on sales
8.15%
8.50%
-0.35 p.p.
8,33%
8.95%
-0.62 p.p.
EBITDA
1.67%
1.46%
+0.21 p.p.
1.54%
1.60%
-0.06 p.p.
EBIT
1.34%
1.10%
+0.24 p.p.
1.17%
1.23%
-0.06 p.p.
Net result
0.76%
0.54%
+0.22 p.p.
0.57%
0.49%
+0.08 p.p.
Gross profit on sales
% sales revenue
INCIDENTAL EVENTS DESCRIPTION – affects net result H1 2011
H1 2010
Q2 2011
Q2 2010
-0.6
-2,5
-0,6
-
dismantling liquidation costs
0.9
-
0.9
-
severence payments (logistics mainly)
1.4
0,9
0.7
0,9
payment in lieu of leave
0.3
0.5
0,1
0,5
TOTAL
2.0
-1.1
1,1
1.4
Incidental events (PLN mn) negative company value
12
Restructuring activities continuation Sales and overhead costs [PLN thousand] % rev enues
114 867 111 382
112 700
110 972
108 673
108 311 6.98%
7.42%
7.28%
7.26%
7.15% 6.49%
-0.27 p.p.
-0.49 p.p.
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Sales and overheads costs fall in relation to revenues in H1 2011 y/y evident effects in warehouse and transport logistics
sales costs and overheads costs ratio to revenues lowering, equal to PLN 12 mn in H1 2011 vs. H1 2010 13
Restructuring activities continuation Warehouse logistics: warehouses closing down in: Pruszków, Janki, Sady, Łódź PSP, Szczecin PSP according to the plan another Prospers offices’ incorporation in representational model (Łódź and Szczecin) - 137 posts reduction/downsizing third central warehouse opening in Gądki near Poznań (concession and stocking May, first clients servicing June/July))
Telemarketing: call centre’s architecture choice finalised with contract signing and execution of first installations (complete implementation by the end of Q3 2011) telemarketing centres locations limitation from 41 to 24 (target model is 13 locations by the end of 2012 with the option to further centralise in the future years) Active Sales Department consolidation – 28 posts reduction along with the new quality structure and working standard unification in the Group 14
NEUCA Group - warehouses merger with the Prosper CG
regional warehouse in Katowice opening
regional warehouse in Ołtarzew opening
regional warehouse in Gądki opening
Logistics reorganisation schedule executed according to the plan last central warehouses in Gądki opening in July restructuring process completion by the end of 2012 (closing down of further 13 warehouses)
15
Indebtedness and asset rotation interest rates indebtedness growth due to financial leasing mainly (automatics Gądki) and seasonal worsening of receivables rotation lower share of long-term indebtedness due to last year of payment of a more expensive 2year loan in one of the banks
stock rotation increase due to lower than expected sales value receivables rotation extension due to undertaken activities with producers (2 days) and bigger purchase scale at the end of the quarter (golden shots) cash conversion cycle extension up to 20 days
Financial liabilities [PLN
30.06.2011
31.03.2011
31.12.2010
30.09.2010
> long-term
101 930
145 399
148 275
149 101
> short-term
343 581
265 486
257 297
279 891
TOTAL , including:
445 511
410 885
405 572
428 992
leasing
95 268
73 912
75 457
75 523
long-term share
22.9%
35.4%
36.6%
34.8%
thousand]
Current assets rotation [days]
Q2 2011
Q1 2011
Q4 2010
Q3 2010
1. stock rotation cycle
44
40
52
50
2. receivables rotation cycle
52
46
47
53
3. operational cycle(1.+2.)
96
86
99
103
4. liabilities rotation cycle
76
70
82
85
5. cash conversion cycle (3.-4.)
20
16
17
18
16
Financial revenues and costs Financial revenues and costs for H1 2011 [PLN mn]
2,1 -0,8 -0,7
0,9 11,5
0,4
12,2
-1,2
fin. revenues/costs balance H1 2010
WIBOR
indebtedness increase
other fin. costs exchange rate maragins difference improvement
decreased fin. loan revenues revenues/costs balance H1 2010
financial costs increase y/y caused by interest rates indebtedness growth and WIBOR growth (+0.5 bp) evident margin amelioration due to entire credit portfolio terms negotiation (PLN -1.2 mn) => expected yearly effect at the level of PLN – 3.0 mn exchange rate difference positive influence and lower financial costs 17
Receivables rotation in sales channels Rotation (days)
H1 2010
H1 2011
3 092 171
3 289 167
713 179
773 075
Rotation (days)
41.7
42.5
Rotation (days)
H1 2010
H1 2011
Traditional market segment
36.6
36.8
including Świat Zdrowia
25.8
26.0
Chain market segment
49.3
49.9
Hospital market segment
49.1
52.8
Total
41.7
42.5
Sales value Total of accounts receivables
* Average daily receivables status
18
Receivables vs. client structure Stand for 30.06.2011
TRADITIONAL
CHAINS *
380
360
8 087
2 213
47
163
TRADITIONAL
Share
8 087
100%
including partnerships
7 650
94.6%
including corporations
437
5.4%
CHAINS
Share
2 213
100%
including partnerships
1 665
74.8%
including corporations
558
25.2%
Receivables balance (mn) ** Number of clients (pharmacies) Average balance value/pharmacy (thousand)
SEGMENT Number of clients (pharmacies)
SEGMENT Number of clients (pharmacies)
* Chains and business clients ** average daily receivables balance
• Lower receivables balance for traditional clients – lower risk
• Bigger percentage of partnerships in the traditional market segment – bigger chance of recovering receivables through fulfilling of partners’ asset claims
19
Provis. for acc. receiv. vs. pharm. liquidation Provisions for accounts receivables
2010
30.06. 2011
Created and liquidated provisions balance in mn
1.56
-0.72
TRADITION
0.76
-0.72
CHAINS
0.80
0.00
0.05%
-0.02%
% provisions/total sale
Number of closed pharmacies SEGMENT
2010
30.06. 2011
TRADITION
490
246
CHAINS
80
32
TOTAL
570
278
• Strict credit policy => limited scale of created provisions regardless of a big number of closed down and opened pharmacies
• Actual value of provision for claims is a result of cooperation with shut down pharmacies/pharmacy stations and equals PLN 170 thousand.
20
PHARMACIES SITUATION VS. THE NEW DRUG REIMBURSEMENT ACT AND NEUCA MARKET PROGRAMMES
Pharmacies situation in Poland assessment before the Drug Reimbursement Act: aggressive marketing policy in the refundable drugs area executed by the pharmacy chains (drugs for a penny, prescriptions subventions etc.) – most of the producer’s budgets annexed for the sales support (price lowering) refundable drugs discount – around 7% (40-45% sales) pharmacy’s activity advertisement – mostly pharmaceutical chains after the Drug Reimbursement Act: prohibition on any refundable drugs sales support, fixed margins and prices – no competitiveness in that sales area prohibition on discounting – margin lowering by the distributor’s discount (40-45% sales) prohibition on pharmacy’s activity advertisement
Important weakening of pharmaceutical chains advantage vs. traditional pharmacies, importance growth of market programmes executed in NEUCA Group – Świat Zdrowia, ADC and LPM 22
NEUCA market programmes – 2011 plans Number of pharmacies in NEUCA programmes 2010-2011 [items]
Number of pharmacies in the Programmes for 30.06.2011 Partner 336 Pharmacies
Standard Standard 1 199 Aptek 1 199 Pharmacies
ADC 1 280 Aptek 1 280 Pharmacies
LPM 1 410 Aptek 1 410 Pharmacies
Plan 31.12.2011
+146 Partner Partner 500 Aptek 500 Pharmacies
0+
+270
Standard Standard 1 200 Aptek 1 200 Pharmacies
ADC 1 550 1 550 Pharmacies Aptek
+90 LPM LPM Aptek 1 500 ?? Pharmacies
AIM market programmes development is NEUCA CG’s strategic answer to the changes resulting form the Drug Reimbursement Act
23 *Apteki Partner, Standard and ADC may simultaneously profit from LPM benefits
PHARMACEUTICALS PRODUCTION AND ADVERTISEMENT
Synoptis Pharma Sustaining sales growth dynamics 50 % sales growth to the pharmacies in H1 2011
Strong growth of economy brand Apteo
Pharmacies partnership programmes in over 3 thousand pharmacies Over 3 thousand pharmacies annexed to the long-term partnership Synoptis sales support programmes
Nursea brand’s new promotional forms Consumer campaign’s continuation in media in Q2 2011 In Q2 2011 further 3 Apteo products launched (currently 7 products): fibre with pineapple, cod liver oil, pregnancy test By the end of the year 20 products are planned
Nursea Vita Kic Kic good market results Launched in January vitamin jellies for children reached in Q2 vice leader’s position in the market category (according to IMS)
Selected, expert website created www.urexpert.pl with advertising campaign Nursea Urextra in the Internet, a films’ series explaining urinary system’s infections Nursea Urextra and Nursea Vita Kic Kic product mini starters for consumers – a sample with a leaflet to be promoted in partnership pharmacies and doctors’ practises
25
NEKK Over PLN 4.7 mn cumulated sales revenues in H1 2011, 10%of all the projects executed outside the NEUCA Group
Group internal orders Group internal orders Apteo brand packagings Sales activities for Synoptis Pharma + website and internet campaign UREXPERT.PL Design and implementation of loyalty programmes and sales programmes - Pharma Elite Club and Sztuka Składania (The Art of Composing) Regular publications development, magazines offer including „Świat Zdrowia”, „Moje Zdrowie” and „Magazyn Aptekarski” enlarged by „Pharmacy&Bussines”
Group external orders New business rapid development – new Clients: Healthcare market: KRKA, Biofarm, Europlant, Novo Nordisk, Polfarmex Others: GDDKiA, SGH, Kompania Piwowarska, Makro Cash&Carry, Adidas, Termy Maltańskie, Karlik, Millano, Berlitz, Miasto Gniezno, Woj. Warmińskomazurskie
26
Nearest quarters 2011
Further quarters of 2011 continuation of restructuring activities (closing down of 5 warehouses by the end of 2012, incorporation of further Prosper offices into the trade offices model) further steps of call centre project
further Synoptis Pharma products market launch
preparation of a flexible activity plan as an answer to the legal setting changes for 2012
28