Sigma is entering a “growth phase where we have few business constraints” following the end of its contract with Chemist Warehouse
Sigma has announced its financial results for the six months to 31 July 2019, saying its business transformation is on track to deliver $100 million or more in efficiency gains a year.
It reported EBITDA of $25.3 million for the second half of last financial year. This was down 19.8% on the first half and reflected the net impact of one-off restructuring costs, which were offset by a favourable litigation settlement and changes to the lease accounting standard. Underlying EBITDA of $31.9 million was down 21.7%.
Sigma also delivered an interim dividend of 1.0 cents per share.
Its pharmacy brands achieved like-for-like growth of 7.8%, and Sigma says member numbers have remained steady, with a “strong pipeline” of prospective members.
“These results are in line with our expectations,” said Sigma CEO and managing director Mark Hooper.
“Sigma’s fundamentals remain in strong shape as we continue to implement the changes to deliver sustainable benefits for our business medium to longer term.
“We have made good progress on our business transformation program, and we are on track to deliver the $100+ million efficiency gains in line with previous guidance.
“The 1H20 Reported EBITDA results include sales to the CW group for only five months, and even less for some products, whilst also bearing some of the one-off restructuring costs from the commencement of our Project Pivot transformation program, the benefits of which will flow in 2H20 and into FY21.”
Excluding Chemist Warehouse and Hep-C, revenue from Sigma’s ongoing business was up 6.9%.
Total Sales Revenue excluding Hep-C was down 0.5% for the six months to $1.81 billion, with customer growth across the business largely overcoming the impact of one less month’s sales to CW and the ongoing impact of PBS price disclosure adjustments.
Other Revenue of $46.4 million was down $1.5 million compared to the same period last year, largely reflecting a reduction in wholesale supplier rebates due to the loss of CW volumes.
Operating costs, including warehousing and delivery, sales and marketing and administration, were down 2.7% to $148.4 million against a back drop of volumes decreasing 10.0%.
“The hospital pharmacy market as well as the dose administration services market continue to be focus areas for Sigma,” Mr Hooper said.
“We have invested in capability to expand our service offering and push for national market growth and are committed to bringing value add services to market,” said Mr Hooper.
“Sigma is entering a growth phase where we have few business constraints. Our sales and pharmacy banner pipelines are strong, and our investment cycle is delivering an efficient and effective DC network with significant capacity and capability to better service our customers.
“As a result, we are now well placed to actively pursue further 3PL/4PL opportunities, hospital pharmacy and retail pharmacy customers,” said Mr Hooper.
Following the announcement, he spoke to the Sydney Morning Herald and The Age and said he believed there would be no changes to pharmacy regulation in the Seventh Community Pharmacy Agreement.
“The whole debate around ownership and location laws, if you think about it, it comes up every time a pharmacy agreement is up for grabs. Last time it was Coles and Woolworths,” he told the papers.
“There are always people with different commercial agendas” which they are attempting to further, he said.
“I do think that in the context of things like location and ownership rules, the mainstream political parties have been very supportive of the [Pharmacy] Guild position in the past. I can’t see that necessarily changing.”
Mr Hooper said that deregulation of the ownership rules would be of benefit to Sigma, he supported the existing rules.