Despite having entered formal negotiations with CWH/My Chemist Group, the healthcare provider has been affected by “challenging” industry conditions
When Sigma first announced it was taking legal action against CWH over supply arrangements, its shares plummeted from $1.185 before the announcement, to $0.755—a drop of 36% within less than two days.
Since then, Sigma’s shares have not regained their former traction, even though in late July the group announced it had dropped the legal action and entered into a formal negotiation period.
While the positive news saw Sigma shares go up to $0.975, they plummeted again this week as the group advised its profit would be less than expected—down 8% to 85.5 cents by 4.25pm (AEST) on Friday.
“Sigma has previously advised that current year sales are more challenging given general industry conditions and our ongoing focus on enforcing consistent brand standards to improve brand performance,” the group said in a statement.
It said it expects an underlying EBIT figure for the first half of the 2018 financial year to be around $44 million, with the full year figure expected to be around $90 million.
This is compared to a current market consensus of approximately $95 million.
The company says steps have been taken to enhance sales performance and market share growth in the second half of the financial year, to help overcome the impact of general market conditions and provide momentum into the next financial year.
“Sigma delivered above guidance growth in FY17 and remains confident that our business strategy and increased investment in infrastructure will deliver growth and efficiency improvements beyond the current year,” says Sigma CEO and Managing Director Mark Hooper.
The result for Sigma Healthcare Group coincides with a disappointing financial year for another pharmaceutical group—Australian Pharmaceutical Industries (API).
Just last week API announced revised profit guidance for the financial year ending 31 August 2017, due to a “further decline in consumer sentiment”.
It now expects a full year net profit after tax to be approximately 5% up on the 2016 financial year, though previous guidance had been for a minimum of growth of 10%.
This compares to API’s underlying net profit after tax of 18% at the end of the 2016 financial year.
CEO and managing director Richard Vincent said that while the company had forecast soft demand, sentiment had weakened again – leading to the revision in full-year profit expectations.
“While we continue to see good market share results, solid growth in transactions across our network at 4% up on FY16 and the roll-out of new stores has remained on track, overall like-for-like sales has weakened due to consumers spending less per basket and on lower value items,” said Mr Vincent.