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Results: Sigma share price slips on FY 2020 guidance update

This morning Sigma Healthcare Ltd (ASX: SIG) released its results for the half-year ending July 31, 2019. Below is a summary of the results with comparisons to the prior corresponding half-year period.

  • Sales revenue $1,878b, -4.1%
  • Reported EBITDA (operating income) $25.3m, -20%
  • Underlying EBITDA $31.9m
  • Adjusted EBIT $23.98m, versus $34.57m
  • Reported net profit after tax $2.5m, versus $13.4m
  • Adjusted NPAT (backing out restructuring / litigation costs) $11.2m, versus $19.9m
  • Underlying ROIC 12.2%
  • Basic EPS 0.3cps, versus 1.3cps
  • Interim fully franked dividend 1cps, versus 1.5cps
  • Net debt of $192.3 million at 31 July 2019
  • Underlying EBITDA for FY20 at the low end of the $55-60 million previous guidance
  • FY21 expect underlying EBITDA growth of at least 10% for next 3 years
  • The growth forecasts are in part due to a plan to deliver $100m in annualised cost savings

Sigma is a wholesale pharmaceutical drug supplier and as such has reasonably defensive revenue streams thanks to the strong ongoing demand for its products.

It supplies independent, franchised, and hospital brands such as Amcal, Chemist King, Sigma, Guardian, and Discount Drug Stores. The business is also in the middle of selling its Chemist Warehouse business.

Shares last closed at 61 cents and the market may be disappointed by the updated guidance for fiscal 2020 earnings to come in at the lower end of previous forecasts.

Some of the operating income growth is also coming about via cost savings, which is a sensible strategy in the short term, but over the long term investors will want it to grow its top line.

In December 2018 Sigma also received a takeover bid from rival API Pharmaceuticals (ASX: API), although Sigma’s board knocked-back the bid as insufficient in March 2019.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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