Future focused healthcare

Annual Review 2018/19 Our Vision The preferred partner for connecting health solutions

Contents

01 Our Strategy for the Future 22 Supporting the Community 02 Chairman’s Report 24 Supporting the Environment 04 CEO and Managing Director’s Report 26 Board of Directors 06 Retail Pharmacy Services 28 Executive Leadership Team 09 Initiatives 29 Key Corporate Contacts 10 Distribution Centres Infrastructure Build 30 Consolidated Statement of 13 Supply and Logistics Services Comprehensive Income 14 Sigma Hospital Services 31 Consolidated Balance Sheet 17 mps 32 Five Year Summary 18 Supporting Our Team 33 Contacts

ABN 15 088 417 403 Sigma Healthcare Limited Our Strategy for the Future

Connecting Health Solutions We continue to invest in and expand our for Customers professional service offerings and support for our network of branded and independent At Sigma, we aim to leverage our national pharmacies to help them become better footprint of Distribution Centres to supply businesses, including TGA approved products and services to over 5,500 medication management solutions to community pharmacies, to public and help better manage health outcomes private hospitals, and to institutional health for all Australians. providers. We offer 3PL and 4PL logistics services to support our manufacturing In all markets where we operate, we partners bring products to market. are customer-centric, benefits driven, and outcome focused. We look for opportunities to grow our core business, extend our reach into new markets, and enhance the efficiency and effectiveness of our business, and our customers’ businesses.

+1.0m +$250m ~20 % Dose Administration Aids medication invested in an efficient and effective of consumer spend in pharmacy packettes packed each week Distribution Centre network to is at one of our branded stores enhance customer support

Sigma Healthcare Limited Annual Review 2018/19 01 Chairman’s Report

Prudent management of our capital remains a strong focus of the Board, with Return on Invested Capital continuing to be a critical factor in our investment criteria.

The past year has been an important • Underlying Return on Invested Capital 3. Capital management – Ensuring an period for Sigma. Whilst we have had our of 12.2% ongoing disciplined focus on return challenges, significant decisions and actions • Earnings per share of 3.8 cents on capital employed; and have been taken to pivot our business for • Total dividends per share of 3.5 cents 4. People and Culture – Ensuring we future long-term success. have the right organisational structure, • A dividend payout ratio of 80.1% alignment, and intellectual capital to Financial Performance of underlying NPAT take us forward. The financial results we delivered this year Consistent with our strong emphasis on slightly exceeded our updated guidance Transformation Program aligning senior management remuneration provided to the market July 2018 and to shareholder value, performance incentives In October 2018, Sigma management confirmed in September. The results were not paid in respect of the current year commenced a broad and far reaching review however did not meet our own expectations (other than those relating to safety). of our business. The review was prompted at the start of the year. This was due to by the decision not to renew the My Chemist/ several contributing factors, including softer What has gone to plan this year is our Chemist Warehouse (MC/CW) contract, retail sales conditions and the ongoing attention to the initiatives that will sustain however we are also taking the opportunity impact of PBS price reform, which was much our future success. They are: to fundamentally transform and reposition larger than anticipated. As a result, Sigma the Sigma business. Whilst much of the has delivered: 1. Transformation program – Setting a findings from this review are commercially clear roadmap to pivot Sigma to a more • Revenue of $3.97 billion, down 2.9% sensitive, it has given the Board tremendous efficient version of ourselves with strong confidence that: • Underlying EBITDA of $89.7 million, and targeted growth aspirations; down 9.7% • The core of our strategy remains 2. Investment focus – Ongoing investment appropriate but will be supported by more • Underlying NPAT of $46.3 million, in critical infrastructure to support our targeted implementation; down 13.7% growth and the growth of our customers;

02 Annual Review 2018/19 Sigma Healthcare Limited • We have the levers to achieve a step the coming year, with construction well In December 2018 we agreed a new $500 Our Future change in our operating costs to better advanced on our new DC at Kemps Creek million debt facility which includes a three- At the time of writing, Sigma had formally reflect our future business operations. in New South Wales and Pooraka in year, $250 million facility with the balance rejected a merger proposal put forward by Indeed, the review has identified over South Australia. an overdraft facility and short-term debt Australian Pharmaceutical Industries (API). $100 million of efficiency gains to be with timing linked to the release of working This decision was made after a thorough captured from targeted improvement On completion, this investment is an capital at the end of the MC/CW contract. assessment, with Management, the Board programs across the business; important component of our ability to drive and our advisors united that it was not in step change in our operations, with the Sigma also has a long history of paying a • We can better leverage our existing the best interests of shareholders. capabilities and capacities to organically program providing strong payback on the high percentage of profits as a dividend, automation, even with the loss of volume and this year is no exception. We are pleased grow our core, and in particular to pursue More importantly, our recently completed from the end of the MC/CW contract. to reward shareholders with a final dividend new business opportunities; and business review has validated that Sigma of 2.0 cents per share, bringing the total in has a very clear and strong future as a stand- • We have the financial capacity, capability, We are also embarking on an IT respect of the year to 3.5 cents per share, alone business with growth opportunities willingness and opportunity to expand infrastructure upgrade that will see the which represents a payout ratio of 80.1% providing further upside. our operations including through implementation of an ERP system that of underlying NPAT. targeted acquisitions. enables the integration of core processes. We remain focused on improving our Meanwhile, the step up in our investment business, driving operational efficiencies, This transformation program is fully Importantly for our customers and cycle over the last 12-months has meant a and looking for opportunities to organically supported by the Board and will be a major shareholders, the DC and IT system more tempered approach to our share buy- and acquisitively grow Sigma’s business. initiative over the coming 18-24 months. investments enhance our operating efficiency back program. The share buy-back program and bolster our capacity to target new does however remain an open option for As we embark on a transformational Investment Focus business opportunities, including organic the Board and management to consider. year for Sigma, I would like to take this growth and potential acquisitions. Over the past three years, Sigma has opportunity to thank our loyal shareholders. implemented a program to upgrade our People and Culture We understand it has at times been difficult network of Distribution Centres (DC) across Capital Management Perhaps not surprisingly during this period to hold, however we are very focused the country. This investment has seen the Prudent management of our capital remains of significant challenge and change, our on driving business improvement and successful opening of facilities at Berrinba a strong focus of the Board, with Return on engagement and culture surveys have sustainable shareholder value. I would also in Queensland and Canning Vale in Western Invested Capital continuing to be a critical highlighted the need for greater clarity of like to thank my fellow Directors and our Australia. This program will continue over factor in our investment criteria. purpose and direction, to maintain efforts wonderful team members at Sigma, who are to build a climate of trust and respect, and collectively going through some challenging Whilst our net debt position has increased enhancements to meaningful two-way times but stand as one as we forge a path to $243 million at year end, this is the result communication. Management is actively to truly becoming the preferred partner of a deliberate strategy to leverage into our responding. Several initiatives have been for connecting health solutions. investment in physical DC infrastructure. implemented, including the refinement of Sigma’s strategy and future direction, which was rolled out across the business in February 2019, and structured and regular communications across the business. Brian Jamieson Chairman

Sigma Healthcare Limited Annual Review 2018/19 03 CEO and Managing Director’s Report

Our focus is less on trying to replace the quantum of revenue, but very much on profitably growing sales, expanding our customer base and reach, and continuing to diversify our risk away from a reliance on PBS medicines.

The challenges we have faced and review, which identified the opportunity Given what has happened to What progress has been made the decisions we have made during the for a structural reduction in operating costs the share price, do you regret to re-shape the Sigma business 2018/19 year have set the platform for by over $100 million. This is significant, not renewing the Chemist to be ready for the exit of 2019/20 and beyond. with efficiencies to be achieved from Warehouse contract? Chemist Warehouse? reducing costs associated with servicing Our decision to not renew the contract MC/CW, restructuring our DC network, To decide to not renew an existing We initially completed a diagnostic review with MC/CW for commercial reasons has better integration and leveraging of contract is not an easy decision, especially in late 2018 to better understand what been widely publicised. This became our recent acquisitions and a general for a customer we have supported for over our future business will look like, and a catalyst to re-evaluate our business improvement in our operating cost base. 40 years. What was critical in this decision what is possible in terms of structurally and identify opportunities to become were the questions “do the terms of the realigning our way of operating. This was more efficient but with a growth mindset. With that backdrop, Sigma embarks on contract make commercial sense and does a critical piece of work, as it drove a new our transformational year with a sharpened it provide adequate returns for shareholders approach to thinking, particularly around Concurrently, we were also presented with focus on the opportunities and a resolve for the capital invested?” The answer to the costs of doing business, which we are an unsolicited merger offer from API which to execute. these questions for Sigma was no and now implementing. The business review we have rejected as not being in the best renewing on the terms required would have identified the opportunity for a structural interests of shareholders. Now I will address some of the more also impacted the share price. Whilst the improvement in our operating costs of over common questions that have been asked decision to not renew was the more difficult $100 million. The outcome from this In February 2019, we released a market during the year. of the choices, we are confident it is the work has already commenced and will update following the finalisation of the right decision to free up capital and capacity be progressively delivered over the first phase of our Project Pivot business to drive longer term sustainable shareholder next two years. returns. The completion of our recent business review has validated that decision.

04 Annual Review 2018/19 Sigma Healthcare Limited Does the decision to build these Sigma. The new debt facility is structured new Distribution Centres still to support our current investment cycle make sense? and short term operating needs, whilst taking into consideration the upcoming Absolutely. Our decision to invest in our release of the working capital. The release DC network was always made cognisant of approximately $300 million working of the possibility that the MC/CW contract capital at the end of the MC/CW contract may not be renewed. Our DC network is at will very quickly return Sigma to a position There have been numerous challenges, The analysis work has proven particularly the heart of what Sigma does, so is critical of minimal debt with capacity for growth. including consultation on the processes valuable, with over $100 million of infrastructure in delivering our services and surrounding high cost drugs, and efforts efficiency gains identified and externally growing our business. What the investment Has your strategy changed, to ensure the high standards currently benchmarked. Findings from this review program does is provide a step change required to be a CSO Wholesaler are are being implemented now, with the improvement in operating costs, significantly and are there acquisition opportunities you have in sight? retained, despite efforts of others to savings to ramp up as we move through improve efficiency and effectiveness in have these standards reduced potentially the calendar year and beyond. This means servicing our customers, and provides We re-launched our strategy to the broader to the detriment of patients. we can approach the next stage of Sigma’s capacity to pursue our growth aspirations. business in February 2019. This is not a history with renewed confidence that we fundamental change in direction for the Why did Sigma decide to not control our own destiny. How will you recover the business, but a sharper focus, with a more pursue the proposed merger? revenue and profits that you targeted strategy to support diversification It is not only the cost out opportunity that have now lost? of our business away from a heavy reliance For us, this was always a question of what gives me optimism. We have a sharper focus on income related to distribution of is in the best interests of our shareholders, on driving operational enhancements and Our focus is less on trying to replace the PBS medicines. We continue to actively team members, and our customers. Having expanding our business into targeted growth quantum of revenue, but very much on assess several opportunities. What we recently completed the original diagnostic areas to accelerate our transformation. profitably growing sales, expanding our are doing however is narrowing the field review as part of Project Pivot, we now have customer base and reach, and continuing of what we will look at, and targeting the a great understanding and confidence how Above all that, I am extremely pleased with to diversify our risk away from a reliance growth areas that are a strong fit with our Sigma will look as a stand-alone business how the teams within Sigma have embraced on PBS medicines. We have made good business direction and will accelerate our at the end of the MC/CW contract. the changes we are implementing. Major progress to date but are targeting an diversification ambitions. change creates challenges and the need acceleration of those opportunities while What gives you reason to be for some difficult decisions along the way. maintaining a focused approach What is happening with regulation optimistic about the future I sincerely thank our team members for their to investment. of your industry? of Sigma? support, and the way they have embraced the challenges and opportunities with vigour Obviously, this is a core part of our business, I see a very strong future for Sigma. We have Why did Sigma sign a $500 million and enthusiasm. It is this collective effort that so we heavily engage with Government actively decided to use the events of the debt facility when you will have gives me the greatest reason for optimism. around $300 million returned and the Department of Health both past 12-months as a catalyst to re-engineer from Chemist Warehouse? directly and through our membership our business and drive a growth mindset. of the National Pharmaceutical Services This is a critical piece of detailed work, Firstly, it was pleasing that Westpac, Association (NPSA). It’s important to ensure sharpening our focus on our future strategy having done their due diligence on we have a strong voice in the debate on and direction, better targeting the our business during this period of the regulatory framework. opportunities for investment, and identifying Mark Hooper transformation, committed to supporting the areas where we can significantly improve CEO & Managing Director our operating efficiency.

Sigma Healthcare Limited Annual Review 2018/19 05 Retail Pharmacy Services

We believe that healthy pharmacy partnerships are vital for healthy Our new generation B2B engagement platform, Sigma Connect, communities. It’s our mission to achieve this by helping pharmacists to run better has significantly improved customer ordering and day to day businesses, and to provide solutions to the broader healthcare community. essential communication with Sigma.

Professional Services Our professional services programs have integrity of data quality systems to allow PSA Refresher Conference, industry analyst again been far reaching, making it easier improved benchmarking, standardisation Bruce Annabel stated “Amcal and Guardian for many Australians at risk of health and reporting for our pharmacy customers. are the only national banners that have conditions to navigate the healthcare This builds trust in the data and improves developed and are implementing…a system, speed up diagnosis and once the quality of the information we provide change management program that offers diagnosed effectively manage their to our clients and partners. their pharmacists innovative practices conditions with their health professional. that have the patient as the focus and not NostraData’s focus on innovation also led the process – this is LEAPP”. This type of One program going from strength to strength to the successful launch of the CarePro pilot recognition is very humbling and confirms is the Sleep Health Check run in partnership program into Amcal pharmacies. CarePro that the LEAPP Dispensary Excellence with Australian Pharmacy Sleep Services is a platform that leverages NostraData’s Program is setting a new industry standard (APSS). This partnership creates Australia’s collective intelligence and systems to in pharmacy training and support. largest Pharmacy Sleep Network and for the support pharmacies in better identifying 1.8 million undiagnosed Australians living patients that may be at risk of health Not only has the LEAPP Dispensary with sleep deprivation and exhaustion, this deterioration and intervening as early as Excellence Program demonstrated proven risk assessment offers a fast and effective way possible to deliver better health outcomes. benefits to patient health outcomes, it has to determine whether the individual is at risk The program has been well received and also increased profits and business outcomes. of sleep apnoea. Tests can be completed initial results are promising with many trial Currently a LEAPP vs non-LEAPP pharmacy overnight in the comfort of a patient’s own sites reporting positive patient responses generates on average $77,840 higher in home which also highlights the many ways to pharmacy health intervention and Gross Profit and 3x greater growth in script we can offer high-quality health services that improving patient relationships. volume. This year alone, LEAPP pharmacies benefit the local community. achieved a 3.8% script growth compared LEAPP Dispensary Excellence to 0.9% for non-LEAPP pharmacies. We are CarePro Program committed to rolling out this program to more of our network during the coming year. Continuing to support our retail pharmacy With a focus on improving the health offering is NostraData. NostraData enjoyed outcomes of patients, our LEAPP Dispensary Private Label a solid year with a focus on “Better Before Excellence Program is producing outstanding Greater growth in script Bigger”, which included cloud migration results. The program’s ‘Care Counselling’ Sigma’s private and exclusive label portfolio volume in LEAPP vs and database re-engineering to improve sees the pharmacist use specific questioning is a leading offering to pharmacy and non-LEAPP pharmacies. customer experience and enabling better technique(s) and tools that encourage a consumers alike, and we are committed 3x system stability. Significant resources and pro-active and expanded holistic health to the long term sustainable future. new talent were allocated to boost the conversation with patients. At this year’s

06 Annual Review 2018/19 Sigma Healthcare Limited To achieve this, we have broadened Sigma Rewards Program our pharmacy distribution base by the This year we relaunched our B2B loyalty introduction of the Pharmacy Care brand program – Sigma Rewards. This exclusive accross our pharmacy network. Our Amcal program is designed to reward and recognise private label range remains our flagship our pharmacy customers and now has three brand and will benefit first hand from key tiers including a free option which is open innovations in the market place in 2019. to all customers. Pharmacy customers have Additionally, and in line with a renewed access to exclusive membership benefits focus on customer centricity we have across many categories including automotive, designed a program for independent travel, utilities and services. pharmacies that includes our private label offering. The Gold Elite tier allows pharmacies to earn reward points for Sigma and CHS spend. Looking internationally, we have successfully Sigma Rewards points can be redeemed registered Ferrosig in New Zealand and on an incredible suite of products, services launched it in the market in December 2018. and experiences. Pharmacy customers even We are also working with our commercial have the ability to redeem reward points partners on opportunities to distribute on whatever they want with My Choice. products in the Asia-Pacific region. Redeeming points has been made easier WholeLife and pharmacy owners can now divide Sigma Connect points amongst individual owners within In further evidence of Sigma’s commitment to Our new generation B2B engagement a pharmacy. driving innovation in pharmacy and enhancing platform, Sigma Connect, has significantly the customer experience, we have recently improved our pharmacy customer ordering Roy Morgan Customer Satisfaction launched the new format – WholeLife. and day to day essential communication Award for 2018 with Sigma. This technology initiative The WholeLife brand is a new approach has been embedded across our entire We congratulate the members of our to pharmacy that combines the full pharmacy customer base, with stage one Discount Drug Stores network on winning traditional pharmacy offering and holistic, now fully operational. During 2019, based the Roy Morgan Customer Satisfaction whole-health solutions to help customers on customer feedback gathered via our Award for 2018 for the Chemist/Pharmacy improve, maintain and sustain better health Voice Of Customer program and other category. Across the year, Discount Drug outcomes. This Sigma pharmacy model is channels, we will complete extensive Stores won seven monthly awards, six responding to a new way of thinking and is development to further enhance Sigma months consecutively! The Customer aligned to the wellness trend in Australian Connect’s functionality, ensuring Sigma Satisfaction ratings are collected from culture. By design, it casts the net wide, becomes the wholesaler of choice for Roy Morgan’s Single Source survey of attracting those who seek the comfort and service and ease of doing business. approximately 50,000 Australians annually trust of a pharmacy, and have a need for and we are very proud to see this brand healthy living and nutritional support. rating so well with customers. We have trialled the new format in This is great recognition for our DDS brand Queensland over the past two years and members and the consistently outstanding are now ready for a broader roll-out across level of service and support they provide to the country. their customers.

Sigma Healthcare Limited Annual Review 2018/19 07 08 Annual Review 2018/19 Sigma Healthcare Limited Initiatives

Project Pivot is more meaningful for our team members We measure our performance against three Technology and other key partners. We began rolling customer KPIs: Project Pivot is Sigma’s major business Our Microsoft Office (MOE10) project saw this out to the broader team in February transformation program. With the decision • Net Promoter Score (NPS) – this score Sigma migrate to the Microsoft Windows 10 2019 to provide a clear direction for all to not renew the MC/CW contract, we is a trusted methodology used to platform, enabling team members to take team members. identified the opportunity to accelerate predict customer loyalty or allegiance advantage of the latest features available growth whilst also reviewing our operations to the company by asking if they would via this platform. Following the initial Sigma We commenced implementation of the to ensure our cost base is as efficient as recommend us to a friend or colleague; migration our IT team then concentrated on overall recommendations identified through possible moving into 2019 and beyond. Our the successful integration of Discount Drug Project Pivot early in 2019, with the total • Overall Satisfaction (OSAT) – the OSAT contract with MC/CW ends 30 June 2019. Stores, Pharmasave, Chemist King and CHS program expected to be phased in over the is an indication of the customers’ overall Given the size and scale of MC/CW and our within Sigma’s technology environment. next couple of years and deliver efficiency satisfaction, rating us on a 10 point scale 40-year history servicing them, we have been gains in excess of $100 million, freeing up and expressed as an average; and actively planning for a smooth transition Now operating on the same modern capacity to invest in growth initiatives. since announcing our decision to not • Net Easy Score (NES) – the NES is an and supportive End User Compute (EUC) renew the contract. indicator of how easy it is to do business infrastructure, all team members across Voice Of Customer Program with us and helps to identify areas that these businesses can collaborate and In late 2018, we appointed Accenture to During 2018 we invested in the are high effort for the customer. work closely with each other. assist with an initial diagnostic review of our implementation of an enterprise wide Voice entire operations. Accenture is one of the Of Customer (VOC) program measuring From the insights we receive, the organisation Another major initiative launched in the 2019 leading global management consulting our pharmacy customer relationship health, is adding a ‘customer dimension’ to strategic financial year is our Enterprise Resource firms and has significant experience in the value we provide, and our execution planning and decision making by: Planning (ERP) Replacement Project. The key business re-engineering. This work is now on the promises we make. • Thinking in terms of impact to the focus of this project is to replace multiple progressing via ‘Project Pivot’. customer experiences – effort, emotion, legacy ERP systems across our entire Our VOC program provides measurement benefits and outcomes; business with a single platform to support Our goal for Project Pivot is to transform in how well we are doing in meeting our and drive Sigma’s growth strategy and in • Collaborating and acting as single team our business by developing a vibrant customers’ expectations and allows early turn, better service our customers’ needs. supporting end to end process; culture focused on delivering healthcare intervention where required. solutions in partnership with suppliers and • Positioning our capabilities in terms of Implementing a standardised ERP customers through: The VOC program plays an important part benefits and solutions to solve challenges system will enable the integration and in developing a customer-centric culture with faced by our customers; standardisation of core processes required • Creating a more efficient and effective every team member having a line of sight to to manage our warehouses, supply chain, core business while profitably growing • Holding ourselves accountable for how they influence the customer experience. sales, and financial activities across the volume and margin; and delivering on the promises we make; and The insights we receive help us to identify group. A preferred product will be selected • Building additional revenue streams innovative programs that benefit our • Measuring ‘success’ from the customer in the first half of 2019, along with a Systems that align with our core. pharmacy customers and the community. point of view. Integrator, who will partner with Sigma to By listening to the challenges pharmacy implement the solution. Our vision and strategy have also been owners and their staff face, we will develop fine-tuned as part of the Project Pivot work. tools to support outcomes for their business This is a great example of our commitment While our core strategy is not new, it has which reinforce our focus to help pharmacy to investing in critical projects that drive been refined to bring it to life in a way that owners run better businesses. future business performance and enable our growth aspirations.

Sigma Healthcare Limited Annual Review 2018/19 09 Distribution Centres Infrastructure Build

We are committed to reinvesting in our With the delivery of these two projects, logistics network, to enable us to drive our focus is now on investment in operational efficiencies to better service South Australia and New South Wales. Berrinba – QLD Canning Vale – WA our growing customer network. Development of our Pooraka Distribution • 15,000 square metre footprint • 15,000 square metre footprint Centre in South Australia is currently running The 2018/19 financial year saw the successful to time and under budget. This facility • Stocks our full range of 14,000 • Will stock our full range opening of our Berrinba Distribution will be our third automated Distribution stock keeping units (skus) of 14,000 skus Centre in Queensland. The project was Centre delivering over 60,000 units daily to • Semi-automated, goods • Semi-automated, goods commissioned on time and under budget the South Australian and Northern Territory to person (GTP) system to person (GTP) system with the site now performing ahead of markets. We expect this facility to be • Site fully operational from • Site fully operational from expectations. The facility delivers over operational in the last quarter of 2019. April 2018 February 2019 200,000 units daily and is efficiently servicing the Queensland and northern New South Meanwhile, construction of our largest facility Wales markets. in Kemps Creek, New South Wales is well advanced and is on target to go live with our The completion of our new Canning Vale 3PL / 4PL operations in the third quarter of Pooraka – SA Kemps Creek – NSW Distribution Centre in Western Australia 2019, and to be fully operational in the first • 10,000 square metre footprint • 40,000 square metre footprint was also delivered on time and under quarter of 2020. Development of this 40,000 budget. This is the second of our new square metre site will bring an even greater • Commenced construction • Construction on time and automated Distribution Centres and will see capacity for future growth in Australia’s in September 2018 under budget the consolidation of the Western Australian highest populated state. • Construction on time and • Semi-automated, goods Sigma and CHS operations into the one under budget to person (GTP) system facility. The operational efficiencies and Importantly, Sigma is just as committed to • Semi-automated, goods • Site is planned to be synergies created by this expansion will reducing its environmental footprint and every to person (GTP) system operational with 3PL / 4PL be beneficial with over 100,000 units to new site includes a number of environmentally activities in Q3 2019 be delivered daily across the West Coast friendly design initiatives including solar • Site is planned to be of Australia. power, an environmental monitoring system, operational in Q4 2019 LED lighting, water retention and a waste management program.

The 2018/19 financial year saw the successful opening of our Berrinba Distribution Centre in Queensland. The project was commissioned on time and under budget with the site now performing ahead of expectations.

10 Annual Review 2018/19 Sigma Healthcare Limited Sigma Healthcare Limited Annual Review 2018/19 11 12 Annual Review 2018/19 Sigma Healthcare Limited Supply and Logistics Services

Sigma is committed to future focused These initiatives will further drive safety healthcare backed by an optimised supply improvements, overall operational Our Supply Chain team has and logistics network. efficiencies, and improved customer outcomes within the network. maintained their focus throughout Sigma’s wholesaling network continues to support over 4,000 community pharmacies In the second half of the 2018/19 financial the year on continuous performance in addition to hospital pharmacy and third- year, CHS commenced servicing several party logistics customers. major contracts as part of our expanding improvement, cost reduction logistics capability. As the exclusive Our Supply Chain team has maintained their distributor of pharmaceuticals and medical initiatives and improving overall focus throughout the year on continuous and dental consumables to the Australian performance improvement, cost reduction Department of Defence, CHS has extended service for our customers. initiatives and improving overall service for Sigma’s logistical reach to include a our customers. Year on year there has been specialised service model for the Australian sustained improvement in a number of key Navy. CHS now provides logistics services performance areas, notably advancements to supply products directly to Navy sites and in customer order fulfilment across all product vessels. Additionally, CHS implemented categories, with Generics being the standout, storage and distribution of Department 280m as well as a reduction in overall inventory/ of Defence contingency inventory at its working capital investment requirements. Dandenong South Distribution Centre. units distributed per annum from our These improvements have been achieved Sigma and CHS Distribution Centres. in conjunction with two major Distribution CHS has also commenced managing Centre transitions completed during the Trividea Health’s products to its customers year. With the relocation of our Queensland under an exclusive 3-year 3PL agreement. and Western Australian Distribution Centres, Trividea Health is a global consumer health the Sigma Supply Chain team successfully and wellness company based in Fort maintained optimal inventory balances Lauderdale, Florida. It is also a leading 4,000 whilst minimising any impact on existing developer, manufacturer and marketer pharmacy customers supported customer service levels. of advanced performance products for across Australia. people with diabetes, including a broad Our strong national supply and logistics portfolio of blood glucose monitoring footprint offers tailored solutions to a variety supplies and technologies. of different customer segments. In addition to our ongoing investment in the Distribution Sigma is continuing to invest in infrastructure Centre Infrastructure Build program, Sigma to enhance our capacity and capability in continues to invest in systems and tools that the 3PL/4PL services area. underpin core functions across all sites.

Sigma Healthcare Limited Annual Review 2018/19 13 Sigma Hospital Services

Sigma Hospital Services has continued The 2018/19 financial year saw revenue In addition, our medical device and to achieve market share growth across and market share growth across Australia, consumable business, Medical Industries the country, especially in Western Australia with revenue up by over 20% this year, Australia (MIA), has also made a positive and New South Wales. against a backdrop of declining Hepatitis contribution to the health care sector this 20% C sales, which dropped by around year. Proximate, our falls and wandering Revenue increase We were pleased to implement the 35%. Pleasingly when this is taken into monitor, alerts staff when an at-risk patient continuation of the unique clinical consideration, our base business excluding is attempting to move unsupervised. This pharmacy service with Peter MacCallum Hepatitis C has grown by over 50%. wholly owned product is the adopted system Institute Victoria. This service supports of choice in a number of major hospitals, post discharge chemotherapy patients Looking to the immediate future, the including The Alfred, St Vincent’s and on oral glucocorticoids at risk of glucose opportunities include continued geographic Eastern Health. The latest innovation 50% disturbance. Following an initial trial period, expansion, with a focus on South Australia in Proximate is the development of a Business growth the program has been expanded to now and Queensland. Discussions are underway sophisticated annunciator that improves (excluding Hepatitis C) include additional enrolled patients who with key government and hospital the identification of a moving patient. can benefit from this service. A milestone stakeholders to establish a comprehensive of 100 enrolled patients was recently market entry strategy that will support MIA has also expanded its extensive range reached, with 72 undertaking continuity customers and create further competition of products with additions to their Women’s of care in a community pharmacy setting. in the market place. Health, Platinum Surgical and Paper Products lines. These developments have led to an The findings of the program were presented We are also actively pursuing strategic increase in customer sales and offers into at the November 2018 Society of Hospital partnerships with national private hospital our community pharmacy network. Pharmacists of Australia (SHPA) Conference. groups, expanding our direct to ward SHPA is the national professional organisation imprest service to customers in New South Sigma Hospital Services and MIA will for more than 5,200 pharmacists, pharmacist Wales and further developing innovative continue to leverage the Sigma and CHS interns, students, technicians and associates supply chain solutions that leverage supply chain to expand and create further working across Australia’s health system. technology to enhance service levels market opportunities. We are proud to work with the public health for our customer network. institutions on these initiatives and to have the opportunity to share our findings with their strong member base practising in the public and private hospitals sector. Discussions are underway with key government and hospital stakeholders to establish a comprehensive market entry strategy that will support customers and create further competition in the market place.

14 Annual Review 2018/19 Sigma Healthcare Limited Sigma Healthcare Limited Annual Review 2018/19 15 16 Annual Review 2018/19 Sigma Healthcare Limited mps

mps continues to grow and complement We were excited to see the development the broader Sigma Healthcare business. of the mps app, MyMedLink during 2018 The MyMedLink app enables aged which will be launched to the market in 2019 mps is a leading provider of dose to support aged care residents and their care residents and their families to administration aid service, systems and carers. The MyMedLink app enables aged support to aged care residents, community care residents and their families to access access their medication profile and pharmacy and patients in the home. their medication profile and order directly from their pharmacy. It also provides other order directly from their pharmacy. mps operates three TGA approved packing useful information such as the patient’s facilities with advanced risk management medication history, including medication systems and processes to deliver the highest changes and any changes to the brand industry standards to our customers. of medication supplied.

In the 2018/19 financial year,mps continued Other key developments this year included: their upward trend with growth in community 1,010,562 • Connecting Pharmacy to Patient Strategy pharmacy and a number of key contract mps packettes packed per week which will integrate mps’ software suite wins including Uniting Care QLD to their with all major pharmacy dispensing systems Blue Care residential aged care facilities and to provide the pharmacy and their patients residents, AnglicareSA and TriCare QLD for with multiple dose administration aid the provision of Medication Management options through the one system. and Accredited Pharmacy Services to residential aged care and community patients • Developing e-scripts on file, reducing 99.9973% throughout Queensland and South Australia. the time spent managing prescription administration in community pharmacy Industry leading product accuracy Throughout the year, mps also focused on by enabling access to our mps Quantum growing their strategic initiatives including dispensary efficiencies. forming a partnership with Stockland • Revising the mps Accreditation Program to Benefits Plus Program in December 2018, meet the new Aged Care Quality Standards to provide Stockland Retirement Village and continue providing care providers residents education and access to the mps quality assurance for service delivery. Medication System. This partnership will support better health outcomes through Medication compliance and management improved medication adherence, making is a critical issue for Australia’s health care it easier to take the right medication, system. The high quality and compliance at the right time, regardless of lifestyle standards that MPS provides represents and care needs. a unique opportunity for growth through delivering positive health outcomes to the community and aged care providers to help reduce medication related hospital readmissions.

Sigma Healthcare Limited Annual Review 2018/19 17 Supporting our Team

At Sigma we believe success is a team effort, new Sigma Frontline Leadership Program and that our people are our greatest asset. in 2018. A total of 43 frontline managers Our focus for the 2019 financial year has have already completed the program. We are committed to creating a safe and Complementing this, a series of Leadership been in preparing and supporting our rewarding place to work and to attracting Labs was developed, designed to upskill and retaining a team that is passionate managers and provide them with tools team to lead and manage change and about performing and delivering on our and confidence to lead their teams promises to customers and shareholders. through change and to be their best. deliver business transformation. • To demonstrate we live by our values, Our focus for the 2019 financial year has we overhauled our performance review place for teams who are working at a fast Our three predominant incident types been in preparing and supporting our team framework, introduced a balanced pace to transform the business. Despite throughout the 2019 financial year were to lead and manage change and deliver scorecard approach, and a rating system the challenges we’ve faced over the 2019 falls from height–items, impact with objects business transformation. We’ve also invested with equal emphasis on outcomes financial year, 68% of our team said that – mobile plant against fixed items, and significantly in developing event-driven achieved and behaviours demonstrated. people processes to make working here “On Balance, Sigma is a Truly Great Place cuts/lacerations. Regular analysis of these easy, and free up our team to focus • To improve consistency and quality of to Work”, up 17% from previous year. incident types identified key themes and on what’s important – our customers. communication, we introduced a new This is testament to our culture of a team opportunities for reduction, which were approach to communicating with our that rallies and unifies under pressure. implemented and are ongoing. They include: team, through videoed messages from Culture and Engagement • redesigned forklift operating induction leaders across the business on key issues Health and Safety Performance A number of initiatives were implemented of importance, screened at team events for new team members; over the year to support a culture of across the country on a regular basis. Sigma continues to build on our commitment • trialling of projected blue light safe transformation. A key area of importance to creating and maintaining a robust • Introduction of a CEO Blog, Message operating distance indicators for for our team following a year of change operational safety culture and environment from Mark, to improve communication forklifts; and and uncertainty was to have clarity on for all team members. We believe that to team members by delivering timely, purpose and direction for the company providing a safe and healthy workplace • a focus on housekeeping and hazard targeted and relevant content about our and to understand the contribution they empowers team members to be their reporting, specifically sharp edge organisational direction, key initiatives can make. In response, we refreshed Sigma’s best, creating a win for the company, team identification on fixtures, fittings, and projects and other pertinent news vision and invested in senior leadership members, and our customers. containers and plant/equipment. items to help team members stay informed. workshops and associated communications tools to upskill them in communicating As in previous years, safety focus, culture Other key programs for the year, building We once again partnered with external the vision consistently to their teams and and performance were linked to incentives. on our physical and mental health and partner, Best Practice Australia in November aligning their priorities to it. Our Board receives monthly activity and wellbeing approach, included: to conduct a pulse check survey to measure metrics reporting for our key performance • the continued delivery of our Mentally our progress on engagement and culture Other initiatives included: areas, programs, training and campaigns, Healthy Workplaces program, in since our inaugural survey in 2017. Pleasingly, including both physical and mental health conjunction with Medibank Health; • Recognising our frontline leaders are in the context of a disruptive and challenging and wellbeing outcomes. paramount to our team’s experience year, 68% of our team participated in • extending our drug and alcohol and engagement with the workplace, the survey, which saw our engagement awareness and testing program to all we made a significant investment in a score rise slightly by 2.9% taking us into a our subsidiary groups; and Culture of Consolidation, which is a typical • continuing our delivery of free workplace influenza vaccinations.

18 Annual Review 2018/19 Sigma Healthcare Limited This year, Sigma also transitioned to Whilst a disappointing outcome, the results a completely smoke free workplace include newly added facilities and sites environment. The change program included and the removal of closed locations. Our an awareness and consultation period, comparative audit result for the year, against quit smoking information sessions, free the previous year, is 90.25%. With a renewed quit programs, one on one consults with focusacross the Group for management our professional services pharmacists, systemcompliance, we are confident of and nicotine replacement products for seeing improvement throughout the 2020 participants. Post implementation, our financial year. previous designated outdoor smoking areas were redeveloped as outdoor areas LTI/LTIFR in line with feedback surveys undertaken across the Group. The Group recorded 14 lost time injuries (LTIs) for the year, four more than the previous year. (LTI = one or more lost shifts/days Health and Safety Management following the incident). Of these, two System Audits injuries resulted in greater than five lost days. Each year we undertake management system compliance auditing at each of our sites, Our lost time injury frequency rate for the as part of our reporting and governance year was 5.07, a slight increase on the FY2018 activity. The internal audits are undertaken result of 4.91 and commensurate with the by accredited auditors within our Health and increase in LTIs. It is however on average Safety team. a decrease in LTIs per million hours against our FY2017 result. This year’s results were lower than the previous year, with a result of 86.56%, Each LTI is investigated and used as a down from the 2018 results of 93.09%. learning opportunity for both the related site and the Group as a whole.

6

5

4 LTIFR

3

2 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

LTIFR 16–17 LTIFR 17–18 LTIFR 18–19 LTIFR Target

Sigma Healthcare Limited Annual Review 2018/19 19 Supporting our Team continued

Shine at Sigma Sandra won the award due to her We believe it is important to recognise the efforts of our team members who outstanding commitment to ensuring demonstrate Sigma’s values in an outstanding way. This year saw 57 team our customers are receiving the highest members nominated by peers for Shine Awards. 16 of those nominees were selected possible service and strong demonstration as Shine at Sigma winners during the year. of our value of being a united team. This year our overall Shine at Sigma winner was Sandra Jones (Customer Service Operations Manager). Sandra won the award due to her outstanding commitment to ensuring our customers are receiving the highest possible service and strong Due to such deserving nominees, a runner Sandra chose to donate her $3,000 allocation Geoff’s chosen charity was Fight MND, demonstration of our value of being a up award was also presented to Geoff Law to Dolly’s Dream, which was set up in which was established in 2014 with the united team. (Financial Controller) for his demonstration memory of Amy ‘Dolly’ Everett, aged 14, purpose of finding effective treatments of our value of accountability. Throughout the who took her own life after an extended and ultimately a cure for Motor Neurone Sandra was nominated as a result of a supply year, Geoff absorbed a significant amount period of bullying and cyberbullying. Dolly Disease. Motor Neurone Disease (MND) is issue of a specialty baby formula in Tasmania. of work, including the rebuilding of the left behind her parents Tick and Kate and her the name given to a group of diseases in A customer with 6-week-old twins was trying financial report model functions, supporting sister Meg, who are now focused on using which the nerve cells (neurones) controlling to purchase the formula but was told it was the business transformation program, and the money that has been kindly donated the muscles that enable us to move, speak, not in stock. Sandra worked closely with the providing analytical analysis to the business. by the community to help prevent other swallow and breathe fail to work normally. pharmacist and our supply chain to obtain Group Financial Controller, Nathan Caldwell families going through the same devastating With no nerves to activate them the muscles the formula and ensure it was delivered to commented that “not only has Geoff experience. The money donated will be gradually weaken and waste. There is the pharmacy as soon as possible so the done a fantastic job, but his enthusiasm used to continue to act as a voice for those currently no truly effective treatment and twins were not without their specialty formula. and positivity has shone through and he who cannot speak for themselves and create no known cure. has demonstrated just how capable and change by: General Manager of Wholesale Operations, important he is to our team”. 1. Raising awareness about the seriousness David Bennett commented “Sandra’s of bullying and its devastating effects, commitment to customer service We congratulate both Sandra and Geoff demonstrates just how important teamwork on receiving these awards and in line with 2. Working to address bullying and is to our success. Sandra simply took the Sigma’s philosophy of supporting the cyberbullying issues in regional Australia, responsibility herself to achieve a positive communities in which we operate both 3. Delivering advice on mitigation to outcome on behalf of the entire team”. were eligible as part of their awards to schools, and select a charity of their choice to which Sigma would make a donation. 4. Changing culture to help prevent bullying from happening.

20 Annual Review 2018/19 Sigma Healthcare Limited Sigma Healthcare Limited Annual Review 2018/19 21 Supporting the Community

Sigma is committed to managing our business in a socially responsible and ethical manner and contributing The Summer Foundation towards building healthy and On a corporate level, Sigma continued to support the Summer Foundation. The Summer Foundation aims to create, sustainable communities. lead and demonstrate long-term sustainable changes that stop young people with acquired brain injury from being forced to live in nursing homes because there is nowhere else for them. Today in Australia, more than 6,000 younger As Australia’s largest pharmacy-led people (under 65) with disability are forced to live in nursing homes. The majority of these young people acquired their network, we have extensive reach disability as adults. Almost half are in partner relationships and more than one in four are parents of school-aged children across the nation which puts us in at the time they move to aged care. We are pleased to be in the position to assist the Foundation continue their amazing a unique position to support the work in the community through the donation of $55,600 which was presented at our annual Supplier Gala Dinner held broader community. in July 2018.

“Summer Foundation value the relationship, support and opportunities of our partnership. We’re just about to sign off on our next strategic plan, and this being my tenth year at Summer Foundation, it’s a great opportunity to reflect on how far we’ve come in addressing the issue of young people in nursing homes. I’m really excited about our next three year phase, and look forward to sharing that journey with Sigma. We thoroughly enjoyed the opportunity to share the work of the Summer Foundation with your suppliers, thank you so much for nominating Summer Foundation as beneficiaries of this fabulous event.” – Carolyn Finis, Chief of Staff

Carers Australia We also pleased to continue to support Carers Australia, the national peak body representing Australia’s unpaid carers. Carers Australia works collaboratively with partner and member organisations, the network of state and territory Carers Associations to deliver a range of essential national carer services. In December we donated $30,000 to this worthy organisation.

The money donated was put to good use in supporting our nation’s young carers who are under the age of 25 and care for a parent, partner, sibling, their own child, relative or friend. The Young Carers Network is a program that was established to assist those young carers engage with each other and help support them to stay in school. Whilst many young carers emphasise that caring is a positive experience, research clearly indicates that when inadequately supported, their own health, mental health, wellbeing and education can be seriously affected.

22 Annual Review 2018/19 Sigma Healthcare Limited Assistance Dogs Australia Discount Drug Stores have again been very active in supporting the community with the donation and sponsorship of over $40,000 this year to its charity partners Free2Be and Assistance Dogs Australia. Discount Drug Stores sponsored two new assistance dogs during the 2019 financial year and was excited to receive the news that assistance dog, Coco had fully qualified and been placed with a very deserving recipient, Linda.

Linda, a former GP requires a wheelchair as a result of an autoimmune disease. Coco is excellent company and is a wonderful help to Linda but most of all has given the gift of confidence which makes Linda feel much less vulnerable in public.

“Having an Assistance Dog is life-changing. Each day I wake up to Coco by my side, giving me the courage and a reason to bounce into another day. I would like to thank you for your generosity and inspiration in sponsoring an Assistance Dog.” – Linda

Guardian Angels 2018 marked 20 years of the Guardian Angel Knitting Program, an initiative of Guardian Pharmacy which in its lifetime has provided over two million garments for those facing hardship each winter.

This year, Guardian Pharmacy partnered with St Vincent de Paul Society for the second consecutive year. The program donated more than 50,000 garments in a bid to provide the 116,000 Australians experiencing homelessness and the three million living in poverty with warm winter wear.

Beaconsfield Guardian Pharmacist, Chris Warne has been passionately leading his team of Guardian Angels since the program began 20 years ago and has watched the campaign evolve into what it is today. “I’ve watched the Guardian Angels program help so many different people in need over the last 20 years but its core has always stayed the same – it’s about our community helping each other – our knitters don’t favour who they can help as long as it goes to someone that needs it,” Mr Warne said.

St Vincent de Paul Society Western Australia Chief Executive Officer Susan Rooney said they were grateful to continue the partnership with Guardian Pharmacy and were proud to be part of an initiative that has helped Australians in need. “Homelessness has risen by almost 14 per cent in the last five years and it doesn’t discriminate – it affects people of all ages and backgrounds,” Ms Rooney said. “While homelessness can look different for many Australians, winter can be a tough time no matter the circumstance, and the Guardian Angels program helps us support those who need it most.”

Sigma Healthcare Limited Annual Review 2018/19 23 Supporting the Environment

Sigma Healthcare is committed to reducing Energy In addition, as part of our major IT equipment our environmental footprint. and systems upgrade project, we diverted At our Rowville site, an LED lighting upgrade large quantities of redundant electronic is forecast to save 983MWh of electricity per We are pleased to report that this year devices such as desk top computers, laptops, year, providing at least a 70% reduction we have continued to improve our waste monitors, printers, televisions, servers, mobile in lighting energy use, equating to over diversion program. With the appointment phones and other sundry items to industry a 1,000 tonne reduction in CO . of a new waste management provider, 2 best-practice disposal channels to maximise Sigma has embarked on a new national recycling and material recovery according Our new distribution centres also include program for waste management aimed at to ISO14001 standards. a number of energy saving features such further increasing our diversion from landfill as LED lighting, solar hot water and and delivering better overall sustainability solar power which will contribute to the Packaging and cost outcomes. sustainability of the communities in which One of our packaging improvements we operate. In Canning Vale, we have also Our national program for waste management included implementing changes to our first incorporated 100% redundancy for power initiatives included: aid range packaging. The change reduced so if there is a power outage in the local the number of plastic seals required by • Energy area, our DC will continue to operate with 231,000 per annum. • Waste no impact to our customers. Furthermore, we eliminated the usage • Packaging Waste of traditional plastic bubble wrap by over 17,000 lineal metres per year by introducing We diverted 1,074 tonne from landfill and a paper based, earth friendly alternative eight tonnes were recovered out of a total to plastic bubble wrap and air pouches waste amount of 1,680 tonne through a for outbound product dispatch. network wide Waste Diversion and Recovery program this year. 70% Projected reduction in lighting energy use at our Rowville site Sigma has embarked on a new national 17,000 program for waste management aimed Lineal metres of plastic bubble at further increasing our diversion from wrap per year eliminated via the introduction of alternative solutions landfill and delivering better overall sustainability and cost outcomes.

24 Annual Review 2018/19 Sigma Healthcare Limited Sigma Healthcare Limited Annual Review 2018/19 25 Board of Directors

Mr Brian Jamieson Mr Mark Hooper Mr David Bayes Ms Kathryn (Kate) D Spargo (Chairman) (CEO & Managing Director) FAICD LLB (Honours), BA, FAICD FCA, MAICD BBus (Acc), CPA, FFTP, MAICD Non-Executive Director, Chairman of the People Non-Executive Director, Member of the Risk Non-Executive Chairman and Director Executive Director and Remuneration Committee, Member of the Management and Audit Committee Risk Management and Audit Committee

Appointed a Director of Sigma Healthcare Appointed Managing Director of Sigma Appointed a Director of Sigma Healthcare Appointed a Director of Sigma Healthcare Limited in May 2003, and Chairman of Healthcare Limited in August 2010. Limited in June 2007. Mr Bayes has held Limited in December 2015. Ms Spargo Sigma Healthcare Limited in June 2010. Mr Hooper has a broad range of experience a variety of board and executive positions holds a Bachelor of Law with Honours, Mr Jamieson is also a Director of Highfield in finance, commercial and operational including former Chief Executive Officer an Arts degree from the University of Resources Limited and the Bionics Institute. matters primarily in the mining and of Choice Hotels Australasia, Chief Adelaide and is a fellow of the Australian He is a former Managing Partner of Minter pharmaceutical industries. Mr Hooper is a Operating Officer of Mortgage Choice, Institute of Company Directors. She has Ellison Lawyers Melbourne, former Chief former Chief Financial Officer and Executive Chief Executive Officer and Director of gained broad business experience as both Executive of KPMG Australia, former Director of PaperlinX Limited. From 2006 Bakers Delight, former Non-Executive an advisor, having worked in private practice Chairman of Mesoblast Limited and former to 2008 Mr Hooper was the Chief Financial Director of Chiquita Brands South Pacific and government, and as a director of listed Director of Bank of Western Australia Officer and Chief Operating Officer for Ltd, former Non-Executive Director of and unlisted companies. Ms Spargo is Limited, HBOS Australia Limited, Tigers the Pharmacy and Consumer business North Western Healthcare Network and currently Non-Executive Director at Sonic Realm Coal Limited, Oz Minerals Limited, for Symbion Health Limited. Prior to that former Vice President and Director of Healthcare Limited, Adairs Limited, CIMIC Tatts Group Limited and CareAustralia. Mark was Chief Financial Officer of Sigma McDonald’s Australia. Mr Bayes is a Non- Ltd and Xenith IP Ltd. Ms Spargo has held a Mr Jamieson has over 30 years’ experience from 2001 to 2006. Mr Hooper has not Executive Director of the Australian Institute Directorship in a listed entity over the past in providing advice and audit services held a directorship of any other listed of Company Directors and is the current three years as Chairman in UGL Limited to a diverse range of public and large entity during the last three years. President of the Victoria Council, Australian and Non-Executive Director in Fletcher private companies. He has not held any Institute of Company Directors. Mr Bayes Building Limited. In addition, Ms Spargo’s directorships of listed entities in addition has over 35 years’ experience in multi-outlet current directorships in unlisted companies to those set out above during the last retail business. Mr Bayes has not held any include Director of Colnvest Limited, the three years. directorships of listed entities in addition Geelong Football Club and Future Fuels to those set out above during the last Cooperative Research Centre. three years.

26 Annual Review 2018/19 Sigma Healthcare Limited Mr Raymond M Gunston Mr David G Manuel Ms Christine Bartlett B.Comm (Hons), DipEd, FCPA, FTA, GAICD BPharm, MPS, MAICD BSc, MAICD Non-Executive Director, Chairman of the Risk Non-Executive Director, Member of the People Non-Executive Director, Member of the People Management and Audit Committee, Member and Remuneration Committee and Remuneration Committee of the People and Remuneration Committee

Appointed a Director of Sigma Healthcare Appointed a Director of Sigma Healthcare Appointed a Director of Sigma Healthcare Limited in July 2010. Mr Gunston is a Limited in October 2009. Mr Manuel is Limited in March 2016. Ms Bartlett holds Non-Executive Director and Chairman a community pharmacist and an active a Bachelor of Science (Pharmacology and of the Board Audit and Risk Committee participant in industry affairs with a Physiology) from the University of Sydney of Hotel Property Investments Limited. special interest in cognitive services and has completed the Harvard University He has over 35 years of extensive corporate such as Opiate Dependency treatments, Advanced Management Training and Global and financial services experience in the Compounding, and Aged Care pharmacy Executive Program. As an experienced CEO public and private sectors, specialising in services. Mr Manuel is a Director of Black and senior executive, Ms Bartlett has broad finance, treasury, mergers and acquisitions, Swan Healthcare Ltd (formerly Perth North commercial expertise, with a particular and accounting. He is a former Chief Metro Medicare Local Ltd). He is the focus in areas of financial discipline, risk Financial Officer of Tatts Group Limited, current Western Australian representative management, innovation, technology, and and a former director of many of the Tatts on the Amcal Guardian National Council strategy execution. Ms Bartlett’s current Group’s subsidiary and associate companies, (AGNC). He is a current Branch Committee directorships in listed entities include Non- and the former Interim CEO for the Member of The Pharmacy Guild of Executive Director at Mirvac Group and Essendon AFL Football Club. Mr Gunston is Australia (WA Branch). Mr Manuel has GBST Ltd. Ms Bartlett has not held any other currently General Manager – Infrastructure, not held a directorship of any other listed directorships in listed entities over the past Major Projects and Investment of the entity during the last three years. three years. In addition, Ms Bartlett’s current Australian Football League. Mr Gunston directorships in unlisted companies include has not held any directorships of listed Non-Executive Director of Clayton Utz, entities in addition to those set out above iCare and TAL, and Chairman of The Smith during the last three years. Family. Ms Bartlett is a member of UNSW Australian School of Business Advisory Board, Chief Executive Women, and the Australian Institute of Company Directors.

Sigma Healthcare Limited Annual Review 2018/19 27 Executive Leadership Team

Mr Mark Hooper Ms Iona MacPherson Mr Jeff Sells Mrs Jackie Pearson (CEO & Managing Director) BAdmin (Acc), CA, GAICD BBus (Acc), CA, MAICD, Harvard Business BAppSc (Psych) (Hons), MBA BBus (Acc), CPA, FFTP, MAICD Chief Financial Officer School – Advanced Management program Executive General Manager Business Executive Director Executive General Manager Retail Pharmacy Transformation

Appointed Managing Director of Sigma Ms MacPherson was appointed Chief Mr Sells rejoined Sigma Healthcare Limited Mrs Pearson commenced with Sigma Healthcare Limited in August 2010. Financial Officer of Sigma Healthcare as CFO in August 2010 having previously Healthcare Limited in August 2005, Mr Hooper has a broad range of experience Limited in November 2016 and also assumed worked for Sigma as Group Treasurer from spending much of her time as Executive in finance, commercial and operational responsibility for business development and 2001 to 2004. In 2016 he moved into the General Manager Human Resources. matters primarily in the mining and strategy from March 2018. In August 2017, new role of Executive General Manager In May 2016 she was appointed Executive pharmaceutical industries. Mr Hooper is a she joined the Board of NostraData Pty Ltd, Strategy and Business Development General Manager Business Transformation former Chief Financial Officer and Executive a data & analytics company, and became where he had responsibility for strategy and is responsible for delivering complex Director of PaperlinX Limited. From 2006 their Chairman in October 2017. Before development activities, as well as the cross-functional business transformation to 2008 Mr Hooper was the Chief Financial joining Sigma, Ms MacPherson held CFO strategic and operational leadership for solutions from concept and design through Officer and Chief Operating Officer for & Company Secretarial roles at UXC Limited the CHS business. Mr Sells was appointed to deployment and benefit measurement. the Pharmacy and Consumer business (2015-2016), Boom Logistics Limited (2007- Executive General Manager Retail Pharmacy Mrs Pearson holds a Bachelor of Applied for Symbion Health Limited. Prior to that 2014) and Australian Air Express (2003-2007). in March 2018. From September 2008 to Science – Psychology (Honours) and a Mark was Chief Financial Officer of Sigma Prior to this she worked with KPMG for August 2010 Mr Sells was CFO of Citadel Master of Business Administration. from 2001 to 2006. Mr Hooper has not 13 years in their Edinburgh, Hong Kong Resources Group Ltd, and for a four-year held a directorship of any other listed and Melbourne offices. Ms MacPherson period from 2004 to 2008 he was the CFO entity during the last three years. is a highly experienced executive with the for Oxiana Limited. combination of financial, commercial and operational acumen and a demonstrated ability to execute transformational change.

28 Annual Review 2018/19 Sigma Healthcare Limited Key Corporate Contacts

Mr Richard Church Ms Paula Jeffs Mr Sam Lawson Mr Gary Woodford FCILTA BA (Psych & Media), Grad Dip Business BCom, LLB (Hons – 1st Class) Barrister BBus (Acc), CPA Executive General Manager Operations (HR/IR), GAICD and Solicitor (VIC), High Court Executive General Manager Human Resources Corporate Affairs Manager General Counsel and Company Secretary

Mr Church joined Sigma Healthcare Limited Ms Jeffs was appointed Executive General Mr Lawson commenced with Sigma Mr Woodford rejoined Sigma as General Manager Logistics in November Manager Human Resources of Sigma Healthcare Limited in January 2016. Healthcare Limited in February 2012, and was subsequently appointed Healthcare Limited in February 2017. Before joining Sigma, he was a 2014 as Corporate Affairs Manager Executive General Manager Operations Prior to joining Sigma, Ms Jeffs was Senior Associate at Minter Ellison having previously worked for Sigma in March 2018, responsible for future Executive Director HR at Austin Health for over six years, specialising in from 2001 to 2006 as General Manager network design, development and (2011-2017) and spent the previous 15 years mergers and acquisitions, corporate, Tax and Investor Relations. From implementation, and day to day supply with ANZ Banking Group Ltd in various securities transactions and contracts. September 2006 to May 2013, chain, logistics and inventory. Prior to human resource roles including with Retail Mr Lawson has also worked for Mr Woodford was the General joining Sigma, Mr Church held a number and Commercial Banking, and leading Slaughter and May in London Manager Investor Relations at Tatts of roles with Wesfarmers, including General ANZ’s Group Talent and Succession and Freehills (now Herbert Smith Group Limited. Mr Woodford is a Manager Logistics Operations Vic/Tas/SA/ portfolio. Ms Jeffs brings to Sigma strong Freehills) in Melbourne. senior finance executive with over WA and Programme Manager DC Network experience as a HR Executive Leader 30 years commercial experience Optimisation. Prior to this Mr Church held including aligning cultures to business which also included Fosters Brewing Senior Supply Chain and Retail roles with strategy, building organisational capability Group and Ansett Airlines. Sainsburys Supermarkets, in the UK. and driving transformational change.

Sigma Healthcare Limited Annual Review 2018/19 29 Consolidated Statement of Comprehensive Income For the year ended 31 January 2019

2019 2018 $’000 $’000 Sales revenue 3,976,774 4,094,440 Cost of goods sold (3,703,580) (3,810,077) Gross profit 273,194 284,363 Other revenue 99,454 83,478 Warehousing and delivery expenses (167,696) (145,055) Sales and marketing expenses (64,799) (64,343) Administration expenses (63,603) (65,609) Depreciation and amortisation (13,522) (9,087) Profit before financing costs and tax expense (EBIT) 63,028 83,747 Finance income 776 1,462 Finance costs (11,846) (6,474) Net finance costs (11,070) (5,012) Profit before income tax 51,958 78,735 Income tax expense (14,917) (23,349) Profit for the year 37,041 55,386 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Net change in fair value of financial asset (750) 833 Exchange differences on translation of foreign operations 83 (139) Income tax relating to components of other comprehensive income 200 (208) Other comprehensive income/(loss) for the year (net of tax) (467) 486 Total comprehensive income for the year 36,574 55,872 Profit attributable to: Owners of the Company 36,520 55,059 Non-controlling interest 521 327 Profit for the year 37,041 55,386 Total comprehensive income attributable to: Owners of the Company 36,053 55,545 Non-controlling interest 521 327 Total comprehensive income for the year 36,574 55,872 Earnings per share (cents) attributable to owners of the Company Basic earnings per share 3.8 5.6 Diluted earnings per share 3.6 5.2

30 Annual Review 2018/19 Sigma Healthcare Limited Consolidated Balance Sheet As at 31 January 2019

2019 2018 $’000 $’000 Current assets Cash and cash equivalents 72,610 82,249 Trade and other receivables 577,367 577,870 Inventories 343,272 350,469 Income tax receivable 3,034 3,819 Prepayments 7,926 6,376 Assets classified as held for sale - 9,123 Total current assets 1,004,209 1,029,906 Non-current assets Trade and other receivables 6,306 868 Property, plant and equipment 224,141 128,515 Goodwill and other intangible assets 125,514 125,371 Investments 3,025 - Other financial assets 1,542 2,292 Net deferred tax assets 19,117 17,775 Total non-current assets 379,645 274,821 Total assets 1,383,854 1,304,727 Current liabilities Trade and other payables 528,252 565,292 Borrowings 115,003 195,014 Provisions 17,573 17,530 Deferred income 2,487 3,159 Total current liabilities 663,315 780,995 Non-current liabilities Other payables 183 344 Borrowings 200,787 788 Provisions 4,468 4,777 Deferred income 821 2,564 Total non-current liabilities 206,259 8,473 Total liabilities 869,574 789,468 Net assets 514,280 515,259 Equity Contributed equity 1,207,794 1,200,755 Reserves 13,832 14,272 Accumulated losses (708,372) (701,919) Non-controlling interest 1,026 2,151 Total equity 514,280 515,259

Sigma Healthcare Limited Annual Review 2018/19 31 Five Year Summary

2019 2018 2017 2016 2015 $m $m $m $m $m Operating results Sales revenue 3,976.8 4,094.4 4,366.2 3,461.1 3,142.1 EBITDA 76.5 92.8 89.2 90.3 85.6 EBIT 63.0 83.7 81.0 80.4 78.0 Profit/(loss) before tax 52.0 78.7 76.7 76.8 75.6 Profit/(loss) after tax 37.0 55.4 53.5 50.5 52.8

Financial position Working capital 406.2 378.8 387.1 490.4 455.6 Fixed assets (including intangibles) 349.6 253.9 180.6 160.1 156.0 Other assets/(liabilities) 1.7 (3.8) (20.4) (40.2) (72.2) Capital employed1 757.5 628.9 547.3 610.3 539.4 Net debt/(net cash) 243.2 113.6 8.7 56.6 (33.7) Net assets 514.3 515.3 538.6 553.7 573.1

Shareholder related Dividend – ordinary per share 4.0c 5.5c 5.5c 5.0c 2.0c – special per share - - - - 1.0c – total dividends ($ million) 42.4 58.8 59.2 54.0 32.8 Earnings/(loss) per share 3.8c 5.6c 5.4c 5.0c 5.1c Dividend payout ratio 116% 106% 111% 107% 62% Net tangible asset backing per share 37c 37c 41c 42c 43c Market capitalisation (balance date) ($ million) 572 949 1,302 885 875

Ratio and returns EBIT margin2 1.5% 2.0% 1.9% 2.3% 2.5% Gearing3 32.1% 18.1% 1.6% 9.3% n/a Interest cover4 6.9x 18.5x 20.8x 26.0x 34.8x 1. Net assets plus borrowings less cash and cash equivalents. 2. EBIT / sales revenue. 3. Net debt / capital employed (year-end). In 2015 the Group had cash and cash equivalents over and above total debt. 4. Reported EBITDA / Net financing costs (times).

32 Annual Review 2018/19 Sigma Healthcare Limited Contacts

Company Details Sigma Healthcare Sites CHS Sites Recent Dividends 3 Myer Place Sigma Healthcare Limited 8–12 Ordish Road Dividend Date Paid Cents Per Share Rowville VIC 3178 Australia Registered Office Dandenong South VIC 3175 Australia Tel + 61 (0)3 9215 9215 2019 Final 29 April 2019 2.00 3 Myer Place Tel +61 (0)3 9545 9100 Fax +61 (0)3 9215 9188 2019 Interim 29 October 2018 1.50 Rowville VIC 3178 Australia 12 William Dean Street 2018 Final 20 April 2018 2.50 www.sigmahealthcare.com.au 24–26 Watson Street Eastern Creek NSW 2766 Australia Shepparton VIC 3630 Australia Tel +61 (0)2 9435 0625 2018 Interim 5 October 2017 2.50 Tel +61 (0)3 5821 4255 2017 Final 21 April 2017 3.00 Corporate Head Office 14 Access Avenue Fax +61 (0)3 5831 3006 2017 Interim 3 October 2016 2.50 3 Myer Place Yatala QLD 4207 Australia Rowville VIC 3178 Australia 1 Distribution Place Tel +61 (0)7 3330 2401 2016 Final 21 April 2016 3.00 Tel +61 (0)3 9215 9215 Seven Hills NSW 2147 Australia 2016 Interim 7 October 2015 2.00 10 Hugh Edwards Drive Fax +61 (0)3 9215 9188 Tel +61 (0)2 9837 9001 Fax +61 (0)2 9837 9052 Perth Airport WA 6105 Australia Directors and Senior Management 31 Glenwood Drive 10 Craft Street Canning Vale WA 6155 Australia Shareholder Calendar* Refer to pages 26 to 29 Thornton NSW 2322 Australia of this review or visit Tel +61 (0)2 4966 5444 2018/19 AGM 15 May 2019 Discount Pharmacy Retail Group www.sigmahealthcare.com.au Fax +61 (0)2 4966 5600 Half-Year results 5 September 2019 56–58 Jephson Street 16–20 Bell Street Ex-dividend date 19 September 2019 Toowong QLD 4066 Australia Company Secretary Townsville QLD 4810 Australia Record date 20 September 2019 Tel +61 (0)7 4771 2022 Tel +61 (0)7 3720 5500 Sam Lawson Interim dividend payment 4 October 2019 Fax +61 (0)7 4772 3454 Level 7 Chadstone Tower One General Counsel and Full-Year results 26 March 2020 Company Secretary 53-101 Wayne Goss Drive 1341 Dandenong Road Ex-dividend date 9 April 2020 3 Myer Place Berrinba QLD 4117 Australia Chadstone VIC 3148 Australia Rowville VIC 3178 Australia Tel +61 (0)7 3801 6961 Record date 10 April 2020 mps Sites Final dividend payment 24 April 2020 227 South Road 2019/20 AGM 13 May 2020 Auditors Ridleyton SA 5008 Australia 8 Clunies Ross Court Eight Mile Plains QLD 4113 Australia Deloitte Touche Tohmatsu Tel +61 (0)8 8346 9561 * Dates may be subject to change. Fax +61 (0)8 8340 1448 Tel (within Australia) 1800 003 938 Share Registry Details 3/2205 Coonawarra Road, 29 Connell Road Link Market Services Winnellie NT 0820 Australia Oakleigh VIC 3166 Australia Locked Bag A14 Tel +61 (0)8 8984 4025 11 Spireton Place Sydney South Fax +61 (0)8 8984 3875 Pendle Hill NSW 2145 Australia For investor, media or government NSW 1235 Australia 26 Wheeler Street, enquiries in relation to Sigma Tel (within Australia) 1300 554 474 Belmont WA 6104 Australia Medical Industries Australia Sites Gary Woodford Tel (international) +61 (0)2 8280 7111 Tel +61 (0)8 9478 9700 Corporate Affairs Manager Email [email protected] 87 Mars Road Fax +61 (0)8 9478 9788 Lane Cove West NSW 2066 Australia www.linkmarketservices.com.au Tel +61 (0)3 9215 9215 +61 (0)2 9490 6200 McKay Avenue Grove Estate Tel Email [email protected] Glenorchy TAS 7010 Australia Fax +61 (0)2 9490 6298 Tel +61 (0)3 6272 3211 Fax +61 (0)3 6272 3232 17–19 Windsor Street Invermay TAS 7248 Australia Tel +61 (0)3 6331 2011 Fax +61 (0)3 6331 6470 Sigma Healthcare Limited Annual Review 2018/19 33 Sigma Healthcare Limited

Registered Office 3 Myer Place Rowville VIC 3178 Australia www.sigmahealthcare.com.au