‘Impossible to predict’ how demand will unfold

Uncertainty thanks to the COVID-19 pandemic means Sigma won’t give full guidance as to earnings, but the wholesaler has achieved “outstanding” results, it says

In a statement to the ASX on Wednesday, the wholesaler announced reported EBITDA of $24.2million for the financial year to 2020, with the result mainly impacted by the one-off costs of transforming the business.

Underlying EBITDA of $46.7million was in line with updated market guidance provided in December 2019, it said.

“It is pleasing to report a result that is in line with guidance, built upon a period of significant change as we continued to successfully implement our structured Project Pivot transformation program through FY20 and continued our investment program,” said CEO and managing director Mark Hooper.

“We expect strong growth for the year ahead which has been initially boosted by abnormally high demand flowing from the COVID-19 pandemic.

“However, given the uncertainty caused by COVID-19 we are not giving full year guidance for FY21”, Mr Hooper said.

“It has been a challenging time with the bush fire crisis and nowCOVID-19, placing significant pressures on the supply chain.

“While we have seen a significant increase in demand for medicines and FMCG products for the first seven weeks of this financial year, it is impossible to predict how this will unfold for the remainder of this year.

“One thing I am certain of however, is the determination of our team, suppliers and pharmacists to continue to serve the community during this difficult period.”

There will be no Final Dividend in respect of the year ended 31 January 2020, with the interim dividend in respect of the financial year to 2021 also suspended.

Sigma said its underlying business has continued to perform strongly, with the wholesale team achieving “outstanding results in a challenging market”.

Excluding Chemist Warehouse and high cost Hepatitis-C sales, revenue from the remainder of Sigma’s ongoing business was up 8.5%, with growth from the customer base helping to overcome the ongoing impact of PBS price disclosure reform, it said.

Price disclosure reform had a 1.6% price impact over the course of FY20.

Sigma said that its pharmacy brands have continued to perform above average market growth, with like for like sales across brands up 11.7% (excluding Hep-C).

“Our strategy has focused on helping our customers run better businesses. This in turn has led to great results from our Voice of Customer engagement, which is translating into improved business performance.

“Sales to franchise partners has performed strongly, and our brand member pipeline is healthy. We have also continued to innovate with the launch of the Amcal+ Life Clinic model, and the national expansion of the WholeLife brand,” said Mr Hooper.

Since November Sigma has allocated additional resources to begin incrementally servicing the significant FMCG volume requirements of Chemist Warehouse.

This contract brings approximately $800 million revenue per annum to Sigma under a 4.5-year agreement that further diversifies its earnings away from the PBS, it says.

Sigma also noted that it has signed a new five-year agreement to service the Pharmacy Alliance Group, with a five-year option. PAL is expected to continue to contribute over $500 million revenue per annum.

“I have been particularly proud to lead an organisation that, in partnership with our branded and independent pharmacy customers, has not only ensured the distribution and supply of medicines through the worst bushfires in Australia’s memory, but also now facing up to the challenges created by COVID-19,” said Mr Hooper.

“I would like to thank all our team members, suppliers and our frontline pharmacy network for their ongoing efforts.”

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