How Chemist Warehouse loss hit Sigma


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Sigma has revealed a more than 50% drop in profit following the loss of its contract with My Chemist/Chemist Warehouse

The company has released its first-half financial results in which it has revealed a 50.6% drop in net profit after tax, down to $13.8 million.

CEO Mark Hooper remains buoyant regarding Sigma’s future, stating that “while the exit of MC/CW will of course impact the business, we are confident that we have the pipeline to grow organically across retail pharmacy, hospital pharmacy, 3PL and through services such as MPS”.

“We will start to see benefits from our investment in efficient infrastructure and have the options to grow from M&A activity, which we are actively pursuing in the knowledge that $300 million working capital will be released,” he said.

“The major business re-engineering program is an important feature over the remainder of this calendar year as we set our path beyond June 2019.

“It will be a detailed and measured program that we need to go through over the next 12 to 18 months to ensure we maximise the cost efficiency and revenue growth opportunities that are in front of us.”

The existing supply arrangement between Sigma and My Chemist/Chemist Warehouse will cease on 30 June 2019.

Shortly after the 2 July announcement that the two organisations had not been able to reach an agreement, Sigma shares had plunged to seven-year lows. Following the announcement of the 2018 first-half results, they dropped to 52 cents, a drop of 8.76%.

Sigma also announced Underlying EBITDA of $40.3 million for the first half of 2018, down 16.4%, with Reported EBITDA impacted by one-off redundancy and restructure costs.

Sales revenue for the six months was down 2% to $1.96 billion, which Sigma says was largely impacted by the decline in low-margin Hepatitis C medications, as well as some impact from the 1 February 2018 upscheduling of low-dose codeine products.

Excluding Hepatitis C alone, sales revenue was up 3.2% to $1.82 billion.

Mr Hooper said that the twin impacts of ongoing PBS pricing reform and the continuation of manufacturer exclusive direct distribution continue to weigh on the industry and on Sigma’s results.

“Whilst we are encouraged by engagement with government, resolution and certainty is needed more than ever.”

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