Consolidated results H1 2011

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 m...
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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

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