Sigma Healthcare : Annual Review 2024

Annual Review 2023/24

Contents

02 04 08 10 14 16

Overview	Chairman's	CEO's Report	Wholesale	Franchise Brands	Third Party
	Report				Logistics (3PL)

17 18 19 20 21 22

MPS Connect	Chemist Warehouse	Chemist Warehouse	Technology	ESG	Board of Directors
	Supply Agreement	Merger Proposal

23 26 27 28 29

Key Corporate	Consolidated	Consolidated	Five-year Summary	Contact
Contacts	Statement of	Balance Sheet
	Comprehensive
	Income

ABN 15 088 417 403  |  Sigma Healthcare Limited  |  Annual Review 2023/24

Sigma Healthcare has a long and proud history spanning over 112 years in Australia. At our core is the provision of full line pharmaceutical wholesale and distribution services to community pharmacies across Australia. We support our customers and franchise brand members through an engaged team, world-class infrastructure, and a commitment to operate sustainably.

Sigma's foundations are built on honesty, integrity and respect. Values we never compromise. Our direction is clear, customer excellence is our focus, and the aim is consistency.

Sigma Healthcare Limited  |  Annual Review 2023/24

01

Overview

National Presence	Financial Year - 1 February 2023 to 31 January 2024
~230m Units
per annum		$3.32b
	Revenue down 9.2%
	NT
WA	QLD	$4.5m
Net Profit After Tax up ~150%

SA

NSW

Operations

Business Support Centre

Distribution centres/Warehouses

VIC$356.5m

Net Cash on Balance Sheet

TAS

Units distributed this year	>230m

MPS TGA licensed packing facilities

02 Sigma Healthcare Limited  |  Annual Review 2023/24

Strategic Objectives

Sigma is focused on driving a performance culture that has customers at the heart of everything we do. An essential element

is to ensure we take a holistic approach, supported by strong governance,

risk management, leadership, and uncompromising delivery and service capabilities and standards.

Our aim is to ensure Sigma is resilient, strong, enabled, and sustainable. We have invested in infrastructure, systems, processes and our people to drive performance standards and consistently deliver customer excellence. We are seeking opportunities to grow and diversify our business, and to deliver optimal cost-benefit outcomes for Sigma, our shareholders, customers and the community.

Group Strategy

Create long term shareholder value, through a diversified health, beauty and wellness offering.

Strategic

Objectives

EBIT of 1.5 - 2.5%

Wholesale

Grow scale and profitable market share

Franchise	Diversify earnings	Supply	Third Party
network	streams
Enhance customer value	Expand into health,	Chain	Logistics
proposition and build our	beauty and wellness	Deliver best in class	Grow profitable
franchise brand network	categories	supply chain	3PL offer

Enablers

People	Efficiency	Information Technology	ESG
Create a pipeline of talent	Simplify & optimise processes	Implement enabling	Ensure robust ESG
to support sustainable growth	to reduce cost to serve	IT tools	practices

Sigma Healthcare Limited  |  Annual Review 2023/24

03

Chairman's Report

I am pleased to present the Sigma Healthcare Limited Annual Review for the financial year ended 31 January 2024.

The renewal and transformation that I outlined in last year's report has been further built on and extended, and we have made significant progress in delivering on our strategic objectives.

Our operational performance has improved, which has flowed through to our financial performance. These are addressed in the CEO report that follows. I will focus on:

1. Our strategic progress
2. Completion of our equity raise
3. Shareholder returns
4. Governance and sustainability.

Our Strategic Progress

The foundational work undertaken over the last few years to renew our infrastructure and simplify our operations has paved the way for what I consider to arguably be the most transformational opportunity in Sigma's 112-year proud history.

Firstly, with our business operations performing at a sustainably high level, it created the opportunity for Sigma to secure the new five-year supply contract with the Chemist Warehouse Group (CWG), which we announced in June 2023.

This is a $3.0+ billion annual revenue contract to supply PBS medicines and FMCG products to CWG for five years commencing from 1 July 2024. As the first key pillar in our strategy, we will utilise latent capacity by better leveraging our world-class infrastructure and systems. We are now well advanced in our planning for the commencement of the contract.

Secondly, in December 2023 we announced to the Australian Securities Exchange (ASX) a proposal to merge with CWG. Whilst this remains subject to regulatory and shareholder approval in the year ahead, this proposed transaction will significantly transform Sigma by:

• Creating a full-service wholesaler, distributor and retail pharmacy franchisor
• Combining Sigma's extensive and state- of-the-art distribution infrastructure with CWG's leading retail know-how
• Delivering aggregated annual historical EBIT of >$495 million per annum before synergies
• Unlocking potential cost synergies in the order of $60 million per annum
• Bringing together a highly experienced management team and Board.

Grow Scale

Grow scale and profitable market share in the wholesale business.

Customer Service

Deliver best in class supply chain customer service.

Franchise Growth

Execute a sustainable franchise brand growth strategy via Amcal and Discount Drug Stores.

Diversify Income

Diversify income streams through expansion into health, beauty and wellness categories.

Employees

Create a pipeline of talented employees to support sustainable growth.

ESG

Ensure robust environmental, social and governance practices.

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If the merger proceeds, we will significantly improve our balance sheet strength to better support our pharmacy customers and ultimately enhance the services and value offered to consumers. This proposal also creates domestic and international growth opportunities. The announcement has already created significant investor interest in the potential for the merged entity, with Sigma expected to become an ASX100 company should the merger proceed.

The merger is an exciting transformation, but of course, there is no guarantee the proposed transaction will proceed. Whilst this plays out, we are steadfastly focused on ensuring the standalone Sigma business continues to deliver.

Equity Raise Completed

On a standalone basis, Sigma's investment thesis remains compelling. Our core business has been strengthened, which has been further bolstered by the completion of a $400 million, fully underwritten, equity raise entitlement offer in January 2024. The equity raise fast-tracks our ability

to execute our strategy, including:

• Supporting the inventory build as we prepare to commence the new CWG supply contract, which is independent of the merger proposal
• Providing funding for the execution of our franchise brand strategy focused on the Amcal and Discount Drug Stores brands
• Enabling investment in our pipeline of private and exclusive label product ranges which will help drive margin improvement for our pharmacy customers and Sigma, while also delivering value to consumers.

In addition, the equity raise strengthens our balance sheet and eliminates any evaluation of a potential sale and leaseback of our Distribution Centres (DCs) in Truganina

in Victoria, and Canning Vale in Western Australia.

Shareholder returns

Pleasingly, the execution of our strategy and our stronger operational and financial performance over the last two years has translated into improved shareholder returns. For the 12-months to 31 January 2024, Sigma's share price is up 65%, which follows a 36% increase in the FY23 year.

Sigma 12 Month Share Price Performance

1.10

1.00

0.90

0.80

0.70

0.60

0.50 01/02/2301/03/2301/04/2301/05/2301/06/2301/07/2301/08/2301/09/2301/10/2301/11/2301/12/2301/13/2301/01/24

We have also declared $0.01 cents per share in total dividends during FY24.

Governance and sustainability

Concurrent with our business transformation, we have also strengthened our governance practices and renewed our Board.

We announced during the year the appointments of Mr Neville Mitchell,

Ms Annette Carey and Dr Chris Roberts to the Board.

Mr David Manuel and Ms Christine Bartlett retired from the Board during the year, and we thank them for their significant contribution to Sigma over many years.

Whilst our Board composition has transitioned, our focus on executing our strategy and remaining true to our values does not change. With the business foundations improving, we can also build on our existing ESG framework to ensure we continue to improve the operational sustainability and governance of our business.

We have made significant progress, but there remains greater opportunities ahead. We are intently focused on ensuring our Sigma standalone business continues to be strong and strives for growth. Concurrently, we will progress our strategic growth opportunity through the potential merger with CWG.

Finally, I want to thank our team members, customers and shareholders for your support and engagement. The Board and I believe that Sigma is now in a strong position with avenues for growth, and we look forward to sharing our progress with all stakeholders.

Mr Michael Sammells

Chairman

Sigma Healthcare Limited  |  Annual Review 2023/24

05

With the completion of our two-year turnaround plan, Sigma has improved it's financial performance and is significantly stronger as we now focus on strategic growth to further drive stakeholder value. Our strong results with statutory profits up ~150% for the year go towards validating our strategy to build a simpler and more efficient Sigma and provide

a catalyst for our current and future financial performance. With the infrastructure investment program finished,

we are now moving forward on executing multiple plans to drive growth and margin expansion.

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Sigma Healthcare Limited  |  Annual Review 2023/24

07

CEO's Report

With two years at Sigma now behind me, I am pleased to report on the progress we have made in turning around the business performance. We have strengthened the core wholesale business, strengthened our leadership team, and expanded our growth opportunities.

The strategy we outlined last year is being executed effectively and improved outcomes are beginning to be achieved. This year has seen Sigma move forward as we have once again improved our profit position and made good progress in simplifying our business, making Sigma easier to do business with.

We also improved our quality control standards and achieved the internationally recognised ISO 9001 accreditation.

As already highlighted by our Chairman, a key highlight for the year was winning the CWG supply contract in July and in December, we outlined a potential merger with the CWG, that if approved, will truly transform Sigma for the long term.

Financial Performance

Pleasingly, our financial performance for the year ended 31 January 2024 has materially improved, having delivered:

• Revenue of $3.32bn down 9.2%, largely reflecting the sale of our hospital distribution business and some loss of sales as we re-setour retail strategy

• NPAT (attributable to owners) is up ~150% to $4.5m, after absorbing $8.2m in transaction costs relating to the proposed merger with CWG
• Net Cash at year-end of $356.5m.

The financial results have been pleasing, particularly in a year where we have consolidated our franchise brands

to focus on Amcal and DDS into the future. We have delivered world-class operational performance, sold our hospital distribution business and launched a merger proposal with CWG that will fundamentally transform Sigma if it proceeds.

Operational Performance

Operationally, we have made significant progress during the past year in executing our strategy and improving our customer service levels. We remain focused on continuous improvement.

A major highlight for the year was achieving ISO 9001 accreditation across our DC network. ISO 9001 is an internationally recognised quality standard, and reflects the significant progress made in not only building our infrastructure but implementing operational processes and procedures that are world-class.

This accreditation will pave the way for further growth opportunities in third party logistics.

For our customers, we have sustained our Delivery in Full (DIF) and Despatch on Time (DOT) metrics over 99% for the year,

an important achievement as we continue to pursue world-class delivery and service standards in a highly competitive market. We have also optimised our routes to improve our delivery on time to customers, resulting in a reduction of 1.7m (annualised) kilometres travelled, with more opportunities available as we extend the program. This is a great outcome not only for our customers, but also for our cost to serve and in reducing our impact on the environment.

Inventory management has been a major focus for the business this year and is another area where we have made significant improvements. With the implementation of an enhanced supply planning solution, combined with the sale of our hospital distribution business, we have reduced stock on hand from $325 million at the start of the year to $221 million at 31 January 2024. At the same time, the stock availability measure for pharmacy customers has increased to above 93%. The outcome is that we have more of the stock that our customers want, less wastage, and less holding costs.

We have made strong progress in executing our pharmacy brand strategy and strengthened our commitment to supporting their growth. As part of this strategy, we made the difficult decision to discontinue the Guardian Pharmacy brand. We thank our former Guardian members for their commitment to the brand and their community and are here to support them in whatever path they have chosen for their pharmacy.

08 Sigma Healthcare Limited  |  Annual Review 2023/24