Paragon Care (ASX:PGC) 1H21 results & outlook

Interviews

by Katrina Bullock

Paragon Care Limited (ASX:PGC) CEO Phil Nicholl provides an update on the company's 1H21 results, discussing the increase in elective surgery and higher margin sales following COVID disruptions.

Katrina Bullock: Hello. Katrina Bullock for the Finance News Network. And joining me in the studio today from Paragon Care (ASX:PGC) is CEO Phil Nicholl. Phil, welcome to FNN.

Phil Nicholl: Thanks, Katrina. Nice to be here.

Katrina Bullock: Absolute pleasure. Now, first up, for those who might be unfamiliar with the company, could we start with a bit of an introduction?

Phil Nicholl: Paragon Care is a leading provider of medical equipment and devices to the healthcare markets in Australia and New Zealand. We've established long-term relationships with over a hundred manufacturers of medical equipment around the world. We supply the majority of hospitals and healthcare facilities in Australia and New Zealand.

Our business model is to be the preferred local distributor for overseas manufacturers of medical equipment. We've got around 400 staff and strong capabilities across sales, marketing, regulatory, logistics and service. We've grown rapidly over the past five years through acquisition, which we've now organised into four pillars.

These are devices, such as eye care and joint replacement, diagnostics, such as blood-testing products and COVID test kits, capital and consumables, such as ultrasound equipment, and service and technology, which includes patient monitoring and aged care and equipment maintenance.

So, in summary, we have access to the world's best technology through our well-established relationships with global manufacturers, and we supply the majority of healthcare facilities in Australia and New Zealand.

Katrina Bullock: Thanks, Phil. Now to results. What were the key highlights in the first half?

Phil Nicholl: In our recent first half results we were very pleased to see our focus in streamlining our operations have been successful in driving improved profitability and cashflow. Our EBITDA was up 63 per cent year-on-year to $14.7 million, and our net profit after tax was up nearly 300 per cent to $5.2 million.

Over the past year, we've been very focused on our internal operations and improving our efficiency. These initiatives, when combined, have generated around $7 million in annualised cost savings. The significant turnaround in our operating cashflow to positive $15.5 million was driven in part by an improvement in our working capital cycle. In Q1, we paid out over $14 million in earn-outs relating to previous acquisitions, and we now have only $1 million of earn-out payments remaining.

So in summary, our profitability, our cashflow, our balance sheet is in a much stronger position than it was 12 months ago.

Katrina Bullock: And now, can you tell us about your growth strategy?

Phil Nicholl: Sure. We're now focused on driving organic growth through internal cross-selling and adding new agency agreements. We're also leveraging our buying power across the different pillars. We're seeing increased collaboration between the pillars to supply a greater product range to a single customer. So, our growth strategy is really to have a great product portfolio in combination with an efficient operating model to deliver sustainable growth.

Katrina Bullock: And, Phil, what is the outlook for the next half?

Phil Nicholl: Our operating performance continues to improve in Q2, and we're seeing signs that the economy is slowly getting back to a COVID normal environment. Our focus for the second half is on business as usual, continuous improvement. With a stronger customer focus, we're now improving this model to grow revenue and continue increasing our margins.

Katrina Bullock: And, Phil, before we let you go, is there anything else you'd like to add?

Phil Nicholl: Yes. We operate in a $4.4 billion market across Australia and New Zealand, and we only have a relatively small market share. So our lean operating model and our clear competitive advantage, we're very well-positioned for future growth.

Katrina Bullock: Phil Nicholl, thank you so much for the update. Looking forward to chatting to you again at the next full year results or sooner.

Phil Nicholl: Great. Thanks for having me, Katrina.

Katrina Bullock: Pleasure.


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