1H17 Results Presentation 9 February ASX ticker: PGC

Transcription

1 1H17 Results Presentation 9 February 2017 ASX ticker: PGC

2 Highlights Record revenue and earnings growth with positive outlook for full year FY17 Revenue (1H16: $38.4m) $55.0m 43% Gross profit (1H16: $14.8m) $21.3m 44% EBITDA (1H16: $4.6m) $6.7m 46% NPAT (1H16: $2.6m) $3.7m 42% Dividend per share (1H16: 0.8c ff) 1.1c ff 38% 1H17 Financial performance vs. 1H16 Long-term growth FY17 guidance Revenueof$55.0m,up43%over1H16 Underpinned by strong organic EBITDA growth of 14% on a like for like basis over the prior corresponding period which includes a full half year contribution from Western Biomedical, Designs for Vision and Meditron Second half expected to be stronger than first half given historical trends and the seasonal nature of hospital procurement EBITDA of $6.7m, up 46% over 1H16; EBITDA margin in excess of 12% maintained as integration of recently acquired businesses continues Fully franked dividend of 1.1c, representing a 48% payout of NPAT Continuing to provide significant earnings upside through successful acquisitions Now in a position to fund acquisition opportunities internally through operating cashflows,subjecttosize,whichcontinuetodeliverstronggrowthinepsanddps Recent acquisitions in 1H17, Electro Medical and MIDAS, were funded internally through strong operational cash flows and scrip respectively FY17 expected revenue: $115m-120m, driven by strong double digit organic growth and successful integration of recent acquisitions FY17 expected EBITDA: $15.7m-16.7m, leveraging platform economics as marginal revenue drives stronger EBITDA to revenue margins 2

3 1H17 Results 1H17 driven by strong organic growth with additional upside from acquisitions Financial highlights Record half year results across all key metrics Revenue up 43% to $55.0m, driven by strong organic growth across all businesses including a full half year contribution from Western Biomedical, Designs for Vision and Meditron EBITDA up 46% to $6.7m, with EBITDA margin in excess of 12% maintained as integration of recently acquired Electro Medical Group and MIDAS continues NPAT up 42% to $3.7m, with a stronger second half expected given the seasonal nature of hospital procurement cycles Fullyfrankeddividendof1.1crepresentsa48%payoutofNPAT,whichistowardsthetopendofthetargetpayoutratioof40-50% Half year dividend up 38% over the prior corresponding period Revenue ($m) EBITDA ($m) NPAT ($m) Dividend per share (c) 1H 2H FY17 guidance $ m 1H 2H FY17 guidance $15.7-$16.7m 1H 2H 1H 2H FY14 FY15 FY16 1H17 FY14 FY15 FY16 1H17 FY14 FY15 FY16 1H17 FY14 FY15 FY16 1H17 3

4 1H17 Results Strong underlying growth in operating cash flow Review of 1H17 operating cash flow Several one-off timing factors resulted in a reported net operating cash flow number which was lower than the underlying result 1H17 saw underlying net operating cash flow of $4.6m with the expectation that the reported operating cash flow of $0.9m for thefirsthalfwillbemuchstrongerinthesecondhalf.cashasatthe31 st December2016was$11.7m Cash generation largely impacted by timing factors with increases in working capital also a factor: 1 Taxtiming:switchfromquarterlytomonthlytaxpaymentsresultedinanadditional2months taxpaymentsinthehalf 2 Inventory investment: strong demand in growth portfolios such as aged care, ophthalmic and Rubbermaid required an increase in inventories 3 4 Payables effects: agreed payments with several suppliers to take advantage of early payment discounts on offer R&D effects: reflects a number of products under development that are expected to be released in FY18 Net operating cash flow ($m) Underlying net operating cash flow Tax timing Inventory investment Payables effect R&D effect Reported net operating cash flow 4

5 1H17 Results Strong balance sheet supportive of future strategy Balance sheet supportive of organic and inorganic growth During 1H17, the strength of Paragon s balance sheet facilitated two acquisitions, funded investment in R&D to support organic growth and enabled strong growth in dividends Paragon s balance sheet can continue to support small, valueaccretive acquisitions Achieving this balance sheet strength and flexibility is an important milestone for Paragon, which should facilitate further strong growth in earnings and dividends for shareholders Management expects the cash balance of $11.7m at 31 st December2016willincreaseoverthesecondhalfofFY17asa result of strong expected operational cash flows underpinned by a stronger financial performance for the half 5

6 FY17 Outlook Paragon expects a strong FY17 full year result, with guidance showing double digit earnings growth Paragon expects a strong FY17 full year result Second half of FY17 has started positively with continued growth expected across all key metrics Reaffirming expectations of double digit earnings growth for FY17 driven by: Increased penetration into aged care sector with two new blue chip customers recently added Strong growth in the ophthalmic product offering Successful integration of recent acquisitions Underpinned by the high levels of contracted consumable revenues Strongbackorderpositionforthesecondhalf FY17 full year result guidance subject to completion of the accounts by Paragon Care s auditors and Board approval, the Company expects: FY17 (F) FY16 (A) Change Revenue $115m-$120m $93.4m 23%-28% EBITDA $ m $12.1m 30%-38% EBITDA Margin % 13.6%-13.9% 12.9% 5%-8% FY17 marks the first full year contribution of Western Biomedical, Designs for Vision and Meditron, which are all performing ahead of expectations Integration process largely complete Cross marketing across products and territories showing promising early signs and expected to drive growth over coming years 6

7 Update on 1H17 Acquisitions The recent acquisitions of MIDAS and Electro Medical were funded via share issue and cash respectively and represent significant upside potential to Paragon s long term earnings Acquisitions of MIDAS and Electro Medical demonstrate continued successful execution of strategy Acquisition completed on 7th October 2016 Acquisition allows Paragon to capitalise on the growing demand for the provision of preventative service and maintenance throughout the sector Integration is a low cost process and is progressing well All of Paragon s existing service capabilities are being merged with Electro Medical s to create a unified service& maintenance offering Currently looking at IT solutions to provide further operating efficiencies going forward Strong organic growth across the group expected driven by the opportunities available across hospital groups and occupational and environmental medicine services Paragon sees servicing as a strong area for organic growth and the acquisition is expected to be modestly EPS accretive in FY17 Acquisitioncompletedon6 th July2016 Acquisition allows Paragon to capitalise on the growing demand for health technology solutions MIDAS is generating modest revenues at this early stage from its completed software modules All ultrasound modules are now complete The products are being evaluated by potential customers and accounts Cross selling opportunities as the products are highly complementary to Paragon s existing customer base and sales channels ProgressonR&Disaheadofscheduleforthenewmodules FocusofR&DisonCTandMRImodules Solid contribution to Paragon expected from FY18 onwards 7

8 Product Update Exciting new products in FY17 should continue to drive additional new revenue streams Rubbermaid Recently added Rubbermaid Healthcare is a recognised leader in the development and manufacture of medical carts The products open up new markets for Paragon Rubbermaid has not had a material impact on first half FY17butisexpectedtointhesecondhalfandbeyond Aged Care portfolio Stralus Aged Care Beds are class-leading aged care beds developed internally following an extensive R&D program Several key accounts secured for FY17 set to deliver exciting growth for FY17 and beyond Two large, blue-chip customers added during the half expected to drive ongoing growth Recently added products Recently added products are experiencing strong uptake with growth expected to continue Includes the Acero Examination Couches, NeuroCom, and Thermi products 8

9 Growth in FY17, FY18 & Beyond Paragon s vision is to be Australia s leading supplier of medical equipment, devices and consumables Strategy To create a healthcare platform with a valuable range of products and services to successfully service the primary, acute and aged healthcare sectors We do this by: Driving efficiencies by leveraging platform economics Growing organically and inorganically to reach a critical mass that best serves our customers Growth opportunities Highly fragmented industry, characterised by a large number of smaller, privately owned businesses Significant administrative burdenwhen procuring for hospitals and other health care providers Opportunity for a single supplier of high quality products and services to improve the quality of care and deliver efficiencies for its customers Target revenue $250m Aspirational target driven by strong double digit organic growth and value accretive M&A Target EBITDA margin 15% Aspirational target leveraging platform economics as marginal revenue becomes increasingly profitable Target stock turnover 1 5-6x Aspirational target driven by strict working capital management initiatives 1. Stock turnover calculated as revenue /(0.5 x opening inventory x closing inventory) 9

10 Proven Execution Paragon has a strong track record of buying sensibly and integrating successfully to support longterm growth Paragon s management team has a proven track record acquiring and integrating 13 businesses over the last 7 years Acquisitions have supported growth in a highly fragmented industry Share price (A$) Volume (m) 100 August 2015 July Already successfully acquired November 2013 September September

11 Share Price Catalysts Continued operational outperformance underpins potential for attractive risk-adjusted returns SYNERGIES Platform economics Continue to leverage platform economics to drive organic revenue growth by accessing new geographies, extending market reach and pursuing additional cross-selling and bundling opportunities NEW PRODUCTS New revenue streams Paragon s product portfolio is constantly evolving through new agreements with current and new distribution providers New products drive long-term revenue growth and strengthen customer base FY17 RESULTS First full year of earnings M&A ACTIVITY Value accretive FY17 will be the first full year of earnings capture from the Western Biomedical, Designs for Vision and Meditron acquisitions Expectation for double digit earnings growth with strong growth from new and existing products, particularly the ultrasound division Paragon has a demonstrated track record of buying sensibly and integrating successfully, which should continue to provide significant earnings upside Acquisition opportunities, subject to size, can now be internally funded through operating cash flows, delivering strong growth in EPS and DPS CORPORATE Positioned for growth Paragon has invested in central distribution centres with excess office space and warehouse capacity, which supports and magnifies future growth Current team in excess of 230 people supports strong growth profile 11

12 Company Highlights A low-risk exposure to a rapidly growing health care company Paragon is one of the premier medical equipment, device and consumables suppliers on the ASX Platform economics, valuable distribution networks and a customer-centric business model Favourable macro tailwinds given the ageing population and increasing investment in health care Well-capitalised balance sheet to pursue additional growth opportunities, with a conservative approach to debt finance and ability to use scrip for acquisitions Highly aligned Board and management team with supportive institutional shareholder base Shareholder returns will continue to be driven by strong growth in earnings, targeting $250 million in revenue, which supports increasing fully franked dividends to shareholders 13 value accretive acquisitions over the last 7 years have supported strong organic and inorganic growth in a highly fragmented industry 12

13 Corporate Overview Highly aligned Board and management team with a long term, supportive shareholder base Financial Information Share price (8-Feb-17) $0.815 Number of shares (m) Market capitalisation $134m Cash(31-Dec-16) Interest Bearing Debt (31-Dec-16) Source: IRESS Top Shareholders % First Samuel 7.1 JMT Investment Group 6.3 Board, managementand associates (other than JMT Investment Group) $11.7m $37.3m Enterprise value $160m 6.3 Note: Combined Board, management and associate holdings, which includes the founders and directors of businesses acquired, is 12.6% Board of Directors Shane Tanner Non-Executive Chairman Chairman of Funtastic and Zenitas Healthcare, and former Chairman of Vision Eye Institute Extensive commercial and financial experience Michael Newton Non-Executive Director Experienced operator specialising in the industrial chemical sector with previous executive roles with both Unilever and ICL PLC Geoff Sam OAM Appointed 3 June 2016 Non-Executive Director Over 35 years experience in the health sector Board positions with ASX-listed companies and for profit and not-for-profit hospital groups including Healthe Care, CML Group, Money3 Corporation and Nova Health Mark Simari Managing Director / Chief Executive Officer Extensive corporate and management experience and prior experience integrating multiple acquisitions Strong business acumen and hands on management philosophy Brett Cheong Executive Director Over 35 years experience in the durable medical equipment industry Founder and Managing Director of Axishealth Michael Rice Alternate Director / Chief Operating Officer Founder and Managing Director of GM Medical: April June 2011 Over 30 years experience in the healthcare sector 13

14 THANK YOU DISCLAIMER Some of the statements in this presentation constitute forward-looking statements that do not directly or exclusively relate to historical facts. These forward-looking statements reflect Paragon Care Limited s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside Paragon Care Limited s control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from Paragon Care Limited s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this presentation with caution. 14