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1 AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED THURSDAY 30 JANUARY

2 Important information The material in this presentation is of general information about API s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. Nothing in this presentation should be construed as a recommendation or forecast by API or an offer to sell or a solicitation to buy or sell shares. It does not take into account the investment objectives, financial situation or needs of a particular investor. These should be considered with or without professional advice when deciding if an investment is appropriate. 2

3 Welcome Admittance Cards Blue for voting shareholders Yellow for non-voting shareholders White for visitors 3

4 Introductions API Board Dr Michael Wooldridge apology Mr Rob Millner Mr Miles Hampton Ms Lee Ausburn Mr Peter Sanguinetti, Company Secretary& General Counsel Mr Stephen Roche, CEO & Managing Director Mr Gerry Masters Ms Carol Holley Mr Paul McDonald - KPMG 4

5 Notice of Meeting 1. Receive and consider Financial Report to 31August Adopt Remuneration Report 3. Re-election of Gerard Masters 4. Re-election of Carol Holley 5. Grant of Performance Rights to MD & CEO 6. Increase sum available for Non-Executive Director Remuneration

6 Financial Report to 31 August 2013 Chairman s Address Managing Director and CEO s Address 6

7 CHAIRMAN S ADDRESS Mr Peter Robinson 7

8 The current operating environment Depressed consumer sentiment persisted, exacerbated by protracted Federal election campaign But our results show those with the right retail offering can prosper in the new norm Worst impacts of PBS are only now hitting home: $450 million reduction in wholesalers revenue pool in calendar year 2013 a further $575 million decline in wholesalers revenue pool in 2014 calendar year to date Further reductions in operating costs and customers discounts are therefore unavoidable 8

9 FY 2013 results API s operational and profit result highly creditable Improved underlying performance driven by unwavering focus on strategic priorities Statutory NPAT $24.3m Underlying NPAT up 9.6% on prior year Full year dividend of 3.25 cents per share, up 8.3% on prior year Underlying EPS up 11% on prior year 9

10 Progress on our retail strategy Retail strategy delivering shareholder value and key to the future Priceline Pharmacy network now stands at 370 stores Bounce in retail sales post-election maintained: Retail sales (excluding dispensary) up 9.0% Like-for-like sales (excluding dispensary) up 6.3% 10

11 Progress on our retail strategy Retail sales provide a solid base for our half year profit result Sales increase driven by lift in consumer sentiment and increased investment in Priceline Pharmacy brand But consumer sentiment remains fragile and API s plans reflect this reality 11

12 Update on pharmacy distribution API will implement further operational improvements covering systems, warehousing and transport Further discount reductions to pharmacists will also offset reduced PBS revenue API will maintain a strong focus on building our programs for banner customers and independent pharmacists 12

13 CEO & MANAGING DIRECTOR S ADDRESS Mr Stephen Roche 13

14 2013 PERFORMANCE REVIEW - OVERVIEW 2013 results demonstrate our strategic priorities remain aligned to sustainable profit growth Underlying net profit growth of 9.6% particularly pleasing given weak consumer sentiment and ongoing impacts of PBS reform All areas of the business made a strong contribution to improved result: Pharmacy distribution New Zealand Retail operations Financial management and functions 14

15 2013 Performance review Pharmacy distribution Maintained leadership in Pharmacy distribution Grew the Soul Pattinson and Pharmacist Advice networks Expanded the Club Premium program for independent pharmacists Together with Priceline Pharmacy, have over 1,000 pharmacies aligned to API as preferred supplier 15

16 2013 Performance Review - Priceline Pharmacy For five years, Priceline Pharmacy has delivered a top quartile retail performance Increased momentum since Federal election was maintained: Like-for-like front-of-store sales up 6.3% Like-for-like sales including dispensary up 4.6% FY13 saw a net increase of 14 Priceline Pharmacy stores Since FY end we have added another 7 Priceline Pharmacy stores to take total Priceline and Priceline Pharmacy stores to 370 We continue to meet or exceed our franchisees expectations on all critical dimensions 16

17 The year ahead for Priceline Pharmacy Our view on the fundamentals remains unchanged Consolidation in community pharmacy will continue, driven by: Contracting dispensary revenue Increased competition from supermarkets and discounters Rising rents and operating costs Priceline Pharmacy has highly attractive front-ofstore growth options for independent pharmacists: One of the best health and beauty ranges in the country Unrivalled loyalty programme in our sector with 4.3 million members Sister Club members typically spend 50 per cent more and account for 55 per cent of front-of-store sales We expect to maintain our rate of network expansion in 2014 with a minimum of 20 stores 17

18 The growing importance of clicks and bricks Our on-line store will increase sales beyond $1.8 million in 2014 Visitations of one million in December suggest value of strong online presence goes way beyond on-line sales It is a base expectation of consumers that they can research online before they visit a store With 12,000 products online now and a network of 370 stores we have a superior offering to our direct competitors 18

19 Building front-of-store profits We are boosting our investment in our own in-house range of beauty products and moving into sun care, healthcare and vitamins These products deliver superior profit margins for both API and pharmacists Following successful trial, now embarking on a national in-store roll-out of multi-media consumer connectivity A combination of in-store screens and consumers mobile phones will highlight special offers and boost in-store engagement and front-of-store spending 19

20 Priceline Sisterhood is now integral Our research shows our Priceline Sisterhood is increasing engagement with Sister Club members We have now raised more than $800,000 to help charities that matter most to Australian women Our commitment to the Priceline Sisterhood community program will be reflected in our 2014 marketing activity 20

21 Priorities for pharmacy distribution The combination of operational improvements and reduced discounts will continue to ameliorate PBS reform It is important that API continues to take a leadership position and help customers manage discount reductions as the worst impacts of PBS reform hit home We expect to see a formal framework for negotiations on the next Community pharmacy agreement to emerge shortly The Government is aware of our view that wholesalers must be engaged early if it wants to achieve further savings and maintain equity of access to medicines 21

22 In summary We will cement our advantage in retail pharmacy by expanding further our Priceline Pharmacy network and investing in the brand We will maintain our leadership in pharmacy distribution and proactively address PBS reform Continue to deliver operational and financial management improvements Assuming no deterioration in external environment, we anticipate a further lift in earnings 22

23 ORDINARY BUSINESS 23

24 Business of Meeting Reminder Blue Admission card vote and ask questions Yellow admission card - ask questions but cannot vote White Admission card - cannot ask questions or vote 24

25 Financial Report To receive and consider the Financial Report of the Company and its controlled entities and the reports of the Directors and the Auditor for the year ended 31 August

26 Remuneration Report To adopt the remuneration report for the year ended 31 August

27 Remuneration Report Proxies Received Proxies Received For: 263,224,070 (81.18%) Against: 60,288,625 (18.59%) Open usable: 757,403 (0.23%) Abstain: 1,699,258 Exclusions: 1,281, ANNUAL GENERAL MEETING

28 Remuneration Report Voting outcome 28

29 Re-election of Directors Mr Gerard Masters Ms E Carol Holley 29

30 Re-election of Gerard Masters Ordinary Resolution: To re-elect a Director. Mr Gerard J Masters retires by rotation in accordance with the Company s Constitution, and being eligible, offers himself for reelection 30

31 Re-election of Gerard Masters Proxies Received For: 323,267,221 (98.82%) Against: 1,076,156 (0.33%) Open usable: 2,787,659 (0.85%) Abstain: 119,655 31

32 Re-election of E Carol Holley Ordinary Resolution: To re-elect a Director. Ms E Carol Holley retires by rotation in accordance with the Company s Constitution, and being eligible, offers herself for reelection 32

33 Re-election of E Carol Holley Proxies Received For: 250,146,765 (76.47%) Against: 74,194,841 (22.68%) Open usable: 2,784,424 (0.85%) Abstain: 124,661 33

34 Grant of Performance Rights That the grant of performance rights under the API Long Term Incentive Plan to the Company s Chief Executive Officer & Managing Director, Mr Stephen Roche, in the manner set out in the Explanatory Notes to Notice of 2013 Annual General Meeting be approved for all purposes, including for the purpose of ASX Listing Rule

35 Grant of Performance Rights Proxies Received For: 252,381,820 (77.28%) Against: 61,685,013 (18.89%) Open usable: 12,500,548 (3.83%) Abstain: 683,310 35

36 Increase in sum available for NED Remuneration In accordance with Rule 10.2 of the Company s Constitution and for the purposes of ASX Listing Rule 10.17, that the maximum aggregate amount of Approved Fees (within the meaning in the Company s Constitution) available for payment to the Directors of the Company (other than the Managing Director) as remuneration for their services as Directors of the Company be increased by $255,000 from $595,000 to $850,000 36

37 Increase in sum available for NED Remuneration Proxies Received For: 240,330,256 (73.91%) Against: 72,334,130 (22.25%) Open usable: 12,486,075 (3.84%) Abstain: 827,229 Exclusions: 1,273,001 37

38 THANK YOU FOR ATTENDING 30 JANUARY