Sigma Healthcare Ltd (ASX: SIG) has just reported its result for the first half of its 2020 financial year.
Sigma Pharmaceuticals 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.
Sigma’s HY20 Result
Sigma’s revenue declined by 4.1% to $1.88 billion, revenue excluding Hep-C was down 0.5% and ‘ongoing revenue’ for the continuing business was up 6.9%.
Customer growth across the business largely overcame one less month of sales to Chemist Warehouse and the ongoing impact of PBS (Pharmaceutical Benefits Scheme) price disclosure adjustments.
Reported EBITDA (click here to learn what EBITDA means) fell by 19.8% to $25.3 million and underlying EBITDA declined by 20.8% to $31.9 million.
The EBITDA declined due to sales to Chemist Warehouse for only five months and also some of the restructuring costs from its transformation program – the benefits are expected in the second half of FY20 and in FY21.
These one-off transformation costs were expected to amount to $30 million to $35 million for consulting, redundancies and outplacement services. In this half $17.3 million was incurred with the total now expected to be $33 million for FY20 and $35 million to $40 million overall.
Reported net profit plunged 81.2% to $2.5 million and underlying net profit declined 43.7% to $12.2 million.
Sigma Dividend
The Sigma Board decided to declare an interim dividend of 1 cent per share, a 33% decrease on the half year dividend paid a year ago.
Is The Sigma Share Price A Buy?
Sigma’s share price has fallen another 5% in reaction to the result.
Underlying EBITDA for FY20 is expected to be at the low end of the previous guidance of $55 million to $60 million, with at least 10% growth in FY21.
Sigma is going through a transition. It may be cheap compared to where it’s at in a couple of years’ time, but it’s not the type of business I’d buy for my own portfolio. I would rather invest in the shares in the free report below instead for more reliable long term growth.
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