Sigma Healthcare shares have slumped after the pharmaceuticals supplier revealed a slump of more than 50 per cent in first-half profit to $13.4 million, partly due to restructuring costs following the loss of its contract to supply Chemist Warehouse in July.
Sigma, which owns pharmacy brands Amcal, Guardian, Discount Drug Store, and Chemist King, says net profit for the six months to July 31 fell 51.8 per cent after $6.1 million of restructuring costs.
A two per cent fall in revenue to $1.96 billion was attributed to falling sales in Hepatitis C medication, and the continued impact of the rescheduling of codeine as a prescription-only drug.
Pricing adjustments to the Pharmaceutical Benefits Scheme in February, which has generally made supplying drugs less profitable for wholesalers, also offset a one per cent increase in Sigma’s volumes and a lift in sales in the Sigma Hospitals business.
But chief executive Mark Hooper said investment in new distribution infrastructure in NSW, Queensland, WA and SA is on schedule and under budget, and Sigma has hired financial services firm Accenture to help oversee its continued restructure following the loss of the Chemist Warehous Contract.
Sigma shares had recovered 37.5 per cent since the July contract loss, with Mr Hooper declaring the move off the Chemist Warehouse deal a “pivot moment” for the company, with $300 million in working capital set to be freed up,.
“The reason we talk about this moment as a pivot point is that Chemist Warehouse were 35-40 per cent of our revenue base,” he said.
“So it is an opportunity to completely review how we’ve got the business structured.”
However, he signalled a patient approach with regard to any potential mergers and acquisitions.
“The $300 million is really about flexibility, we’re not saying we’re going to rush out and buy a whole sake of things just for the sake of it,” he said.
“But it means we have a lot of options where we can invest and our M&A activities.”
Mr Hooper said pushing further into hospitals – particularly in areas outside the company’s established market in Victoria – would be crucial.
Sigma has over 600 pharmacies operating as one of the five Sigma brands, accounting for around 20 per cent of consumer spend in pharmacy.
At 1200 AEST, Sigma shares were down 5.57 cents, or 9.5 per cent, at 54.75 cents.
SIGMA HY PROFIT HIT BY RESTRUCTURE
* Net profit down 51.8pct to $13.4m
* Revenue down 2pct to $1.96b
* Interim dividend down one cent to 1.5 cents, fully franked