Investor Presentation Q1 2018 Audited Results
IV Appendix
A significantly complex industry with high barriers to entry
Inventory
Management
Highly complex inventory
management to maintain
healthy levels without over
stocking or running short in a
large number of branches
A Variety of
SKUS
9k unique drug therapies
with a variety of handling
requirements including
fragile containers, liquids,
and refrigerated products
Working Capital Management
Dealing with a large client base, with
significant geographic disbursement,
emphasizes the complexity of credit
control management. Pharmaceutical
distributors must aggregate client credit
history to be able to minimize bad
debts, which requires significant on the
ground experience
Ease of Operations
Both manufacturers and
pharmacies prefer to deal
with few distributors which in
return significantly reduces
order processing and
management costs; large
distributors then redistribute
to the smaller players
ibnsinapharma
Barriers to Entry
Operational Complexity
High Variability of
Demand
Short-notice, short-turn
deliveries occur frequently
and require rapid response
from distributers
ibnsinapharma
A number of factors protect Ibnsina
Pharma from new market entrants
Economies of Scale
A human resource based
business accustomed with a large
workforce leads to significant
fixed costs. Additionally, the
aggregation of delivery volume
reduces delivery costs therefore
the total cost per shop does not
increase significantly with volume.
Source: IMS, Bloomberg, Company Management
Labor Intensive
Business
To become a nationwide
distributor, new entrants
need to recruit, train, and
manage a workforce of over
5,000 personnel
Time to Build Scalable
Operations
8+ Years
Nationwide distributors require a
minimum of 50 sites and over 500
vehicles. New entrants will not be
able to manage opening more
than 6 branches a year
Difficulty Contracting
with Suppliers
350+ suppliers with
rigorous contracting
requirements, including
quality audits, disables new
entrants from obtaining
credit lines
Investment
EGP1.5bn+
The business requires
a significant amount of
infrastructure to be
able to cater to
geographically
dispersed clientele.
Geographically
Dispersed Client Base
Over 60k outlets and
locations are geographically
disbursed across the
Country
Low Margin Business
1.6%
Both developed and
emerging market peers have
an average net profit margin
of 1.6%; reducing the
attractiveness of venturing
into this market space
A Crowded Market
Space
A large number of players
targeting different segments of
the market (in terms of client
quality and demand size) with
the three largest players
controlling 68% of the market
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