liability and carrying on business in hong kong as
TRANSCRIPT
Annual Results
2016
* The Company is registered as a non-Hong Kong company under the Hong Kong Companies Ordinance
under its Chinese name and the English name “Sinopharm Group Co. Ltd.”. March 2017
(A joint stock limited company incorporated in the People’s Republic of China with limited
liability and carrying on business in Hong Kong as 國控股份有限公司)
C A R I N G
F O R L I F E
AT T E N D I N G
TO H E A LT H
Disclaimer
This presentation may contain forward-looking statements involving risk and uncertain factors. these statements
may be identified by some forward-looking words such as "believe", "expect", "anticipate", "forecast", "plan",
"estimate", "aim", "may", "would" and other similar expressions, reflecting the expected measures or results from
such measures in the future. The related parties cannot be excessively reliant on these forward-looking statements,
which is only expected to be used in this presentation, to make the judgment for future plan.
Agenda
R e s u l t s H i g h l i g h t s
I n d u s t r y a n d Po l i c i e s
B u s i n e s s R e v i e w a n d F u t u r e D e v e l o p m e nt S t r a t e g i e s
Q & A S e s s i o n
1 2
3 4
Results Highlights
Income Statement Review
RMB (Million) For year ended 31 December
2016 2015(restated) Change
Revenue 258,387.69 228,672.93 12.99%
Gross profit 20,670.67 18,720.31 10.42%
Operating Profit 10,213.72 9,227.32 10.69%
Earnings before interest and tax 10,856.64 9,456.98 14.80%
Profit for the period 6,891.60 5,740.91 20.04%
Profit attributable to equity holders 4,647.34 3,772.22 23.20%
Earnings per share (RMB) 1.68 1.36 23.53%
RMB (Million) For year ended 31 December
2016 2015(restated) Change
Pharmaceutical distribution 246,458.82 217,457.92 13.34%
Retail pharmacy 10,238.51 8,729.37 17.29%
Other business 4,440.88 4,734.74 -6.21%*
Revenue structure analysis
94.38%
3.92% 1.70%
94.17%
3.78% 2.05%0
20
40
60
80
100
Pharmaceuticaldistribution
Retail pharmacy Other business
2016 2015
Percentage of revenue from each segment
+0.21p.p.
-0.35p.p.+0.14p.p.
*mainly due to disposal of manufacturing assets
Key profitability and operation indicators
For year ended 31 December
2016 2015(restated) Change
Gross margin 8.00% 8.19% -0.19p.p.
Operating margin 3.95% 4.04% -0.09p.p.
Profit margin attributable to equity holders 1.80% 1.65% +0.15p.p.
SG&A expense ratio 4.15% 4.26% -0.11p.p.
Financial expense ratio 0.75% 0.87% -0.12p.p.
Overall expense ratio 4.90% 5.13% -0.23p.p.
Trade receivables turnover (days) 95 104 -9
Inventory turnover (days) 37 37 0
Trade payables turnover (days) 94 97 -3
Cash conversion cycle (days) 38 44 -6
Cash flow
RMB (Million) For year ended 31 December
2016 2015(restated) Change
Net cash from operating activities 9,257.96 13,412.33 -30.97%
Net cash from investing activities -1,606.45 -1,643.32 -2.24%
Net cash from financing activities -2,026.96 -7,159.75 -71.69%
Capital expenditure 1,464.49 2,135.42 -31.42%
Cash and cash equivalents at end of period 25,572.76 19,966.05 28.08%
Gearing ratio at end of period 71.76% 70.68% 1.08p.p.
Industry and Policies
China’s macro economy was stable in general with improving quality of economic growth
in 2016.
GDP growth further slowed down to 6.7%*, downward pressure of economic growth
increased, indicating that the current economy is going through a relatively difficult time.
Despite slowdown of economic growth and frequent release of industry policies, the rigid
demand of healthcare industry continued, the industry growth continued to exceed the
macroeconomic growth. As more healthcare companies go public, the pharmaceutical
distribution and retail industries have entered a stage of merger, acquisition and expansion,
highlighting the importance of economic scale.
Stable economy in general with continuous rigid demand
*Source: National Bureau of Statistics
10.6%
9.5%
7.9% 7.8%7.3% 6.9% 6.7%
0%
2%
4%
6%
8%
10%
12%
2010 2011 2012 2013 2014 2015 2016
GDP Trend
Opportunities and challenges brought along with frequent release of healthcare policies
The industry was challenged by policies such as “two-invoice system”, drug tender and
rigorous regulation of pharmaceutical distribution, contributing to facilitate the survival of
the fittest and a quicker consolidation within the industry, large-scale enterprises with
superior control and management will win out. The concentration ratio of the industry is
bound to increase in the future.
The separation of medical treatment and drug sale will bring along challenges for
hospitals, but will bring along enormous opportunities for the drug retail business. With
firm support from the government for the pharmaceutical e-commerce, traditional
pharmaceutical firms appealed to the Internet for new growth drivers, where enterprises
with strong platforms and offline resource edges will have high potentials.
In the long run, with the contribution from the aging population, urbanization, increase in
chronic diseases, rise in household income and the wider coverage of medical insurance,
we believe China’s healthcare industry will be filled with opportunities and featured with
rapid growth.
Fiercer competition and stricter regulations will accelerate the industry consolidation,
and the sustained deepening of healthcare reforms will make China’s healthcare system
more complete and regulated. We believe that enterprises like us, with leading network
advantages, compliant operations and superior corporate governance, will greatly
benefit from such reforms.
Business Review and Future Strategies
19.9%
14.3% 13.0%
27.8%31.2%
23.2%
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014 2015 2016
Revenue growth Growth of net profits attributable to parent company
Realise the transition from “scale-oriented” to “efficiency-oriented”
Manifest excellent operation and management abilities of the Group
Continue to benefit from the consolidation of pharmaceutical distribution industry
Revenue growth above industry average, net profit growth substantially higher than revenue growth continuously
Continuous growth in distribution network and number of customers
14,231
119,931
79,839
13,310
104,508
68,264
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Hospitals (only referring toranked hospitals)
Small health service end-customers
Retail outlets
2016 2015
The distribution network
covered 31 provinces,
municipalities and
autonomous regions
across China
4 logistics hubs
38 provincial logistics centers
185 municipal level logistics outlets
24 retail logistics outlets
251 logistics outlets in total
94.38%
3.92% 1.70%
94.17%
3.78% 2.05%0
20
40
60
80
100
Pharmaceuticaldistribution
Retail pharmacies Other business
2016 2015
Retail sales accounted for
6.59% of total sales,
representing a year-on-year
increase of 0.47 percentage
point
Steady growth in the
percentage of retail sales
Steady growth in the percentage of retail sales and further optimization of revenue structure
Revenue from retail business
accounted for 3.92% of total
revenue, representing a
year-on-year increase of
0.14 percentage point-0.35p.p.+0.14p.p.
Changes of customer structure in distribution business
Percentage of revenue from each segment Further optimization of
revenue structure
61.78% 62.09%
9.60% 9.39%6.59% 6.12%
22.03% 22.40%
0%
20%
40%
60%
80%
100%
2016 2015
National and provincialsub-distributors
Retail pharmacies
Primary healthcareinstitutions
Class-two and -threehospitals
+0.21p.p.
Continue to lead in retail scale and significant expansion of retail pharmacy network
947
1,394
1,773 1,795 1,917 2,096
3,080
3,502
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2009 2010 2011 2012 2013 2014 2015 2016
No. of retail store
Aiming to establish an integrated wholesale-retail distribution model, the Group set up
a network of retail chain pharmacies that are either directly operated by the Group or
through franchises in major cities throughout China
The number of retail pharmacies was 3,502 (only referring to those operated by
Guoda Drugstore), covering 18 provinces and cities across the country, among which
2,503 were directly operated and 999 were operated by franchisees, sustaining
industry leading position in sales scale in China
Operation risks further reduced, growth quality further improved
Trade receivables turnover decreased by 9 days YoY
Percentage of trade receivables balance decreased by 1.68 p.p. YoY
Cash & Cash equivalents increased by 28.08% YoY
ROE increased by 1.89 p.p. YoY
27.11%
15.01%
28.78%
13.12%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Percentage of trade
receivables balance
ROE
2016 2015
-1.68p.p.
+1.89p.p.
95
255.73
104
199.66
0
50
100
150
200
250
300
Trade receivables turnover Cash & Cash equivalents(RMB 100 million)
2016 2015
-9
+28.08%
Further utilisation of platform advantages
The Group continued to advance marketing transformation and further explored innovative service
models in marketing service capitalising on the business platform advantages, the Group achieved
substantial growth in agent businesses.
Through actively exploring the financial and capital market, and integrating the philosophy of “combination of industry and
finance” into the process of corporate transformation, the Group forged stronger competitive edges in the industry chain.
The financial leasing business grew rapidly and profit increased significantly. Sinopharm-CICC (Shanghai) Medical &
Healthcare Investment Management Co., Ltd. was established, industry and capital are aligned to drive the consolidation
of distribution and retail industries as well as to advance Sinopharm’s strategic expansion.
Based on alignment of pharmaceutical and medical device, hospital medical services such as
cleaning, sterilization and post-sale maintenance were actively promoted and achieved rapid growth
in scale.
Adapting to the “Internet +” trend, the Group grabbed the developing opportunities of pharmaceutical e-
commerce and promoted the combination of traditional businesses and the Internet. As a result,
businesses such as B2C and O2O achieved substantial growth.
Capitalising on the policy opportunity to actively promote third-party logistics and national integrated cold-
chain logistics service system, satisfactory progress was achieved.
The Group will continue to vigorously promote the retail business to forge a pharmaceutical
terminal retail network with national layout, vertical development, reasonable structure,
integration of wholesale and retail, various profit growth drivers, risk defense, global
perspective and overall leading position.
Future strategies
The Group will further improve capital efficiency and control operation risk through measures
such as capital management and control, low-efficiency businesses removal, investment
strategy adjustment and assessment strengthening, so as to realise healthier sustainable
development.
Innovative businesses based on main business are critical for optimising the Group’s revenue
structure and profitability. The Group will continue to vigorously drive marketing transformation,
promote financial services such as financial leasing and industry investment, promote hospital
medical services such as cleaning, sterilization and post-sale maintenance, and actively
advance the progress of e-commerce.
The Group will continue to advance the descending of distribution network and optimise
network layout, further utilizing scale and network advantages and continuously solidifying
industry leading position. The Group will further advance regional integration with the aim to
build regional enterprise groups with integrated management and control, various services,
synergy and versatility, and high operation efficiency, so as to lay a foundation for a national
integration.
Continue to solidify
leading position in
distribution business
Continue to promote
rapid growth of
retail business
Improve capital
efficiency and
control operation risk
Continue to advance
and foster innovative
businesses
Accelerate
internationalisation
process and expand
international business
The Group will take advantage of capital and channel advantages to promote international
business. Besides, the Group will strengthen international communication, possess
international vision and cultivate international talents.
Questions are welcome.Thank you!