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2 ▪ New Ch Chie ief Exec ecutiv ive Offic icer: Phil Nicholl appointed An exp xpansive e revie iew of of op operations and str trategy th that t Foc ocused on on sustain inable e gr growth in initia itiatives: CEO in November 2019 (CEO of acquired device deliv elivered th the e foll ollowing: ▪ Cost structures reduced in line with business business) ▪ Simplified business model that better aligns product requirements delivering improved profitability, positive ▪ New Ch Chie ief Fin inancia ial Offi ficer: Stephen Munday was portfolios into 4 working pillars and remove low cash generation in the second half and ensuring appointed as CFO in December 2019 margin products dividends again become part of our shareholder offering ▪ ▪ ▪ Lea Leadership Tea eam: Newly created comprising all Identified previous ERP implementation was Restructured banking facilities to enable growth senior managers of product portfolios ineffective requiring a re-focus on business support initiatives notwithstanding current economic headwinds functions and re-aligning requirements for the future caused by COVID-19 ▪ Boa Board Ch Changes: Mark Simari (former Managing ▪ ▪ Director and co-founder) re-joined the Company as Re-worked previously initiated cost-out program is Senior leadership team focused on driving organic a Non-Executive Director in November 2019. delivering sustainable savings without losing focus on growth of existing higher margin product portfolios Michael Newton retired (June 2020) & Bruce Bian our core product portfolios resigned (August 2020) Paragon Care Limited (ASX:PGC) 2
3 Paragon Care Limited (ASX:PGC) 3
4 • • • • • 28.2 231.7 236.1 6.2 22.9 5.4 2.8 18.2 17.1 136.7 117.2 -21.2 Paragon Care Limited (ASX:PGC) 4
5 The Company quickly initiated cost Management replaced much of the Post the Strategic Review the scope of Revenue from continuing operations for the management strategies in response to elective surgery lost revenue with new the revised cost-out program was year reached $231.7m (2019 $236m). the COVID-19 pandemic. These include income streams (e.g. PPE sales). extended much wider. This was well ahead of the Company’s salary and fee reductions (between 20% However gross margins were lower during However this necessitated significant internal forecasts when COVID-19 first for staff and 30% for the board and the final quarter. The Company’s gross implementation costs and asset write-offs impacted, given suspension of elective leadership teams during the final margin for FY20 was still a respectable surgery quarter), rent reductions and travel bans 37.5% (FY19 40.3%) nonetheless. even before state border closures The pandemic resulted in several abnormal expenses being incurred (refer slide 7) Jobkeeper also contributed $3m during the period Paragon Care Limited (ASX:PGC) 5
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7 Paragon Care Limited (ASX:PGC) 7
8 The Company completed its Strategic Review in FY20 under the new • management team. • o The outcome of the review, along with the o impact of COVID-19, resulted in the o Company simplifying its strategy and o • closing many non-core projects initiated • over the last 18 months. • • o o o o • Paragon Care Limited (ASX:PGC) 8
9 Paragon Care Limited (ASX:PGC) 9
10 Assets • Trade debtors down from $46.0m in Dec-19 and $44.1m in Jun-19 to $31.6m after restructure of collections process • Inventory down from $53.6m in Dec-19 and $51.4m in Jun-19 to $46.7m as part of the product and warehouse rationalisation program • Non-current assets down from $258.9m in Dec-19 and $246.3m in Jun-19 to $185.9m as a result of goodwill impairment and asset write-off due to COVID- 19 and the business rationalisation program Lia iabili lities • Trade and other creditors down from $46.3m in Dec-19 and $47.9m in Jun-19 to $26.9m as a result of the group reducing inventory purchases in late FY20 to reduce inventories and pressure from creditors to pay within trading terms • Derivative financial instruments increase of $4.6m due to an interest rate swap being impacted by long term reduced interest rates • Increased vendor conditional payable by $5.6m 1. Normalised EBITDA before abnormal items; Dec-19 based on 2 times HY20 Normalised EBITDA Paragon Care Limited (ASX:PGC) 10
11 Operations • Improved debtor collections in 2HY20 has seen a $10m improvement in cash flow. • Income tax refunds received due to overpayments in prior years of $5m in FY20 Investing activ In ivities • Reduced capital expenditure in 2HY20 as projects were closed as part of the new simplification strategy. • Acquisitions in FY20 represented payments of earnouts, which were much lower than the purchase price payments in FY19 Fin inancin ing activ ivit ities • No new equity was raised in FY20 compared with $42.3m raised in FY19 • No dividend payments FY20 compared with $8.7m in FY19 Paragon Care Limited (ASX:PGC) 11
12 Paragon Care Limited (ASX:PGC) 12
13 In Augu In gust 2020, th the e Co Company rec eceiv ived approval l A number of of cos ost-out in initia itiatives im implemented ed: Mee eetin ing in increa easin ing dem emand for new products: fr from its its bankers for or an amen endment to o its its banking facil cilit ities es deliv eliverin ing: • • Significant restructure of business operations Sourcing of new products (devices & and cost base consumables) for both Australia and New • Relaxation of the Company's obligation to Zealand to meet unprecedented demand due • Property rationalisation comply with the existing facility covenants to global pandemic • Closures of numerous non-core projects through to September 2021 • Sourcing of PPE products to substitute for lost • Introduction of LEAN principles that will • Deferment of the Company's quarterly sales due to elective surgery closures deliver increased productivity and further facility repayments until December 2021, reductions in inventory totaling $6 million Paragon Care Limited (ASX:PGC) 13
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15 7.1% 5.0% 4.0% 3.3% Paragon Care Limited (ASX:PGC) 15
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17 • • • • • • • • • • Paragon Care Limited (ASX:PGC) 17
18 Paragon Care Limited (ASX:PGC) 18
19 Non on-Exec ecutiv ive Ch Chairman Non on-Exec ecutiv ive Di Director • • Co-founder of Paragon Care Over 35 years’ experience in the health sector • • Extensive commercial and financial experience Board positions with ASX-listed companies and for- profit and not-for-profit hospital groups including • Chairman of Zenitas Healthcare, Rhythm Biosciences Healthe Care and CML Group Limited and Cronos Limited (appointed 27 November 2019) Non on-Exec ecutiv ive Di Director Non on-Exec ecutiv ive Di Director • • 25 years’ experience in a number of senior executive Former Managing Director and co-founder of Paragon and board roles Care • • Professional background includes a wide range of Professional background includes over 12 years’ experience in marketing, technology and strategic experience in ASX listed entities, mergers & planning at both domestic and international levels acquisitions, equity capital markets and business development Paragon Care Limited (ASX:PGC) 19
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