A ‘milestone result’ for Sigma

pharmacists standing by upward graph made of pills

Sigma Healthcare has returned to issuing dividends after it announced a “strong” increase in sales and profit, including to Chemist Warehouse

Sigma announced reported earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $94.2 million for the 2021 financial year, up 289.2% on the previous year, and despite challenges posed by the COVID-19 pandemic, it says.

The wholesaler reported underlying EBITDA of $81.1 million, also up, by 39.2%. This is slightly higher than the guidance provided in February.

Sigma CEO and Managing Director Mark Hooper called this a “milestone” result and says the organisation is entering a period of sustainable growth and improved returns for shareholders.

Significantly, Sigma has navigated the challenges of the COVID-19 pandemic without any reliance on direct government support such as Job Keeper,” Mr Hooper said.

“We have the building blocks in place to underpin our target of 10% per annum growth in Underlying EBITDA for the next two years and around $100m by FY23.

“We are also pleased to announce to our shareholders that the Board has declared a dividend of one cent per share fully franked, with a targeted dividend payout ratio of at least 70% of Underlying NPAT for the future.”

Sales to Chemist Warehouse reached their full annualised run rate by June 2020, and remains on track to achieve $80 million in sales over a 12-month period, Sigma said.

It also experienced “organic” growth from core wholesale sales and pharmacy brands, as well as new business.

Net debt finished the year at $50.3 million, down from $146 million the same time last year, which mainly reflects the net effect of capital expenditure and the $172 million received from the sale and leaseback of two distribution centres (Kemps Creek and Berrinba) concluded during the year.

Sigma said that it had “proactively” managed the challenges posed by COVID-19.

A cross-functional COVID-19 working group was established to update business continuity plans, implement COVID-safe plans to help protect team members, and accelerate actions to support front-line pharmacy members, the wholesaler said.

Sigma also said it actively worked with government agencies and suppliers to help to shore up the medicine supply across the nation through the height of demand.

“Whilst COVID-19 presented challenges during the year, overall, the net effect of strong sales of medicines and medical consumables at the peak of the pandemic outweighed the margin impact on our MPS business, merchandise and marketing income, higher doubtful debts provision, and other location or product specific impacts,” Mr Hooper said.

The results also highlighted the performance of the wholesaler’s pharmacy brands – Amcal, Discount Drug Stores, Guardian, Pharmasave, Chemist King and WholeLife – which it said was ahead of average market growth rates at 9% for the year, on top of the 11.7% growth rate of the 2020 financial year.

“Total sales grew by 4.8% in FY21, with wholesale sales (excluding CW) up 11.4% compared to average market growth of 3.1%,” it noted.

Growth was strongest in PBS sales, up 12.4% compared to 5.5% market growth; while OTC sales at Sigma grew 4.9% in a market which declined overall by 2.8%.

The wholesaler said this largely reflected lower export demand as well as the impact of COVID-19 on some categories, such as cough and cold, and some specific pharmacy locations.

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