Today Sigma Healthcare Ltd (ASX: SIG) shares jumped nearly 5% after it reported its full-year results for the period ending 31 January 2019, citing $100 million in efficiency gains as it reasserts the rejection of a takeover proposal by Australian Pharmaceutical Industries Ltd (ASX: API).

Sigma is a pharmacy distribution business and the name behind Amcal, Chemist King, Discount Drug Stores, Guardian and PharmaSave. In 2018, Sigma announced it would lose its contract to supply Chemist Warehouse. However, it remains a multi-million-dollar company with chemists dotted throughout the country.

Key Results

Sigma reported:

  • Revenue down 2.9% to $3.98 billion
  • EBITDA down 17.5% to $76.5 million
  • Net profit after tax (NPAT) down 33.1% to $37 million
  • A final dividend of 2 cents per share (cps) fully franked at a payout ratio of 101.5%.

Sigma cited sales in the low margin Hepatitis C medicines as being down $226 million as the major reason for its revenue decline.  Hepatitis C medicine sales also impacted its EBITDA and NPAT, along with restructuring costs.

Chemist Warehouse, Savings, Share Buybacks

After the company’s contract with Chemist Warehouse comes to an end in June 2019, the company expects to be able to free up working capital and deliver $100 million in efficiency gains over the next two years. It expects part of the savings to come directly from ceasing the delivery of services to Chemist Warehouse and additional savings from cost restructures.

Sigma also said it has not bought back any shares in the financial year ended, but “it remains a live option looking forward”.

Rejection of API Takeover

API made a non-binding indicative proposal to Sigma in December 2018 offering 0.31 API shares and $0.23 cash for every Sigma share, implying a value of $0.686 per Sigma share at the time. A key part of this offer was the $60 million in synergies,

However, in March 2019 Sigma received a revised offer with a waiver of the condition precedent relating to confirmation of cost synergies. Sigma Healthcare has now decided such a takeover is not in the best interests of shareholders.


The company has guided for $55-60 million EBITDA in FY20 with CEO and Managing Director, Mark Hooper saying, “We are confident … [in savings] over $100 million, but just as importantly [we] will free up capacity for growth. Our investment program is well advanced to provide the physical capacity for growth, and by FY20 our Balance Sheet will have financial headroom for growth.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclaimer: At the time of writing, Andrew does not own shares in any of the companies mentioned.