Australian pharmacy distribution business Sigma Healthcare Ltd (ASX: SIG) publicly released its 2018 half-year financial report this morning showing a 2% fall in revenue to $1.96 billion and a profit of $13.8 million, down 51%.
Sigma’s board resolved to declare a half-year dividend of 1.5 cents per share, down from 2.5 cents per share a year earlier.
Sigma Healthcare is a wholesale and distribution business to pharmacies. It’s also the name behind brands like Amcal and Guardian pharmacies.
Sigma pointed to lower sales of Hepatitis C medications and codeine-based products. Excluding Hepatitis C products, Sigma’s sales would have risen 3.2% over the prior year, the company noted.
Commenting on the result, Sigma’s CEO Mark Hooper said, “The twin impacts of ongoing PBS pricing reform and the continuation of manufacturer exclusive direct distribution continue to weigh on the industry and our results.”
However, Hooper said Sigma expects to achieve its 2019 underlying operating profit guidance.
“We are on track to meet FY19 guidance of Underlying EBIT of $75 million, with the 2H19 set to benefit from cost savings already achieved in the business.”
Sigma’s first-half underlying EBIT result was down 23% to $25 million, implying a stronger second half. Click here to learn what EBIT means.
Chemist Warehouse Contract Loss Looms
Earlier this year, Rask Media reported that Sigma Healthcare would lose the supply deal with Chemist Warehouse, arguably one of the most important supply contracts in Australian pharmacy today. The current supply contract will remain in effect through June 2019.
Read next: Sigma falls on Chemist Warehouse loss
Despite Sigma’s loss of the contract, Hooper was upbeat about the company’s prospects. Previously, Sigma had said an additional $300 million of capital is due to be released by foregoing the Chemist Warehouse supply deal.
“…we are confident that we have the pipeline to grow organically across retail pharmacy, hospital pharmacy, 3PL and through services such as MPS,” Hooper added.
“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.”
So far in 2018 Sigma Healthcare shares have fallen from $1 to their current price of $0.60, according to Google Finance.
Australia’s Best* Investors Podcast
The Rask Group’s Australian Investors Podcast is fast becoming Australia’s #1 podcast for serious investors. It provides unique insights from Australia’s best investors, entrepreneurs, authors and financial thinkers. Download the latest episode free on iTunes, Castbox, YouTube or wherever you choose to listen. Here’s a timeless interview with leading stockbroker, Charlie Aitken.
*as voted by us