Despite falling revenue and a sharp decline in net profit, Sigma Healthcare is optimistic and claims to be on track with restructuring initiatives.
The results for the six months to 31 December 2018 are better than Sigma forecast and broadly speaking the market has supported them since they chose to walk away from Australian Pharmaceuticals Industries’ (API) purchase offer.
Sigma revenue has fallen 2.9 per cent to $3.98 billion while net profit after tax has dropped by a third to $37 million. Much of that drop is attributed to ‘Project Pivot’, the company’s business transformation plan which is now underway.
When Sigma walked away from API’s purchase offer, consulting group Accenture had identified more than $100 million in potential savings and efficiency gains within Sigma over the next two years. That figure that is far above the $60m of savings tabled by API in their December purchase offer.
Asked about the latest results, Sigma CEO and Managing Director Mark Hooper told Retail Pharmacy Magazine the company has taken some difficult, but well considered decisions over the last 12 months.
“We are confident the decisions are in the best interests of our shareholders and our customers. The decisions will improve what we do and how we do it, which ultimately helps us better service our customers,” he said.
“We have outlined a clear and robust roadmap ahead of us and are freeing up capacity and capital to continue to invest in the services and programs to help pharmacists build better businesses.”
Mr Hooper said the roadmap includes adjusting Sigma’s operations to bring a more efficient cost base with increased capacity for growth following the cessation of the contract with Chemist Warehouse this coming June.
Additional savings will be created through restructuring within Sigma including changes to the company’s distribution centre network.
Mr Hooper has confirmed that Sigma’s Shepparton, Newcastle and Launceston distribution centres will close in the second half of 2019, and that there will also be staff cuts among the company’s remaining distribution centre network.
“Sigma has a growth mindset to capture the emerging opportunities we see for the business,” he said.
Following Sigma’s rejection of their offer, API have said they will reconsider their position with regard to the 85 million Sigma shares they acquired late in 2018.
Despite Sigma shares climbing since the rejection of API’s bid, if API were to sell those shares at today’s market rate, the total loss to API would be above $10m.