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Sigma (ASX:SIG) share price rises on half year results

drug capsule opening up to reveal dollar signs signifying rising sigma share price
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The Sigma Healthcare Ltd (ASX: SIG) share price is rising today as the company released its half year results. At the time of writing, the Sigma share price is up 3.91% to 66.5 cents.

Sigma is a full line wholesale and distribution business to pharmacy. It is the owner of well-known Australian pharmacy retail brands Amcal Max and Discount Drug stores.

How is Sigma performing so far this year?

Financially speaking, Sigma has been resilient through the challenging 1H21 environment. The company reported half year sales revenue of $1.64 billion which was down 12.5% on the prior half year. However, thanks to prudent cost saving measures, the company’s net profit after tax (NPAT) fell by significantly less. Sigma’s NPAT was down only 5.1% to $4.7 million, despite the effects of COVID-19. This result was aided by expansion as Sigma’s businesses continue to grow as a proportion of total earnings, with some one-off benefits in 1H21. This assisted in absorbing the negative impact of the pandemic.

It must be noted that the impact of the sale of two of Sigma’s distribution centres at a profit for $172 million is not considered in this report and will be reflected in the 2H21 report.

In positive news for the company, volumes in July 2020 were above the same month last year with the trend showing no signs of slowing down. Additionally, Sigma has seen its net promoter score increase significantly since the restructure in early January. Fundamentally, this means that customers are becoming more loyal to Sigma’s brands. This metric can also be a good predictor of business growth so is a positive sign for the Sigma share price.

Outlook for the Sigma share price

Since Sigma has restructured its business, the drug company has been on a solid road to recovery. There is evidence of this in the company’s half year report. Net debt is expected to significantly reduce by $100 million to ~$75 million by 31 January, 2021. However, given the influence of the pandemic, no formal guidance is being provided for FY21, with dividends also being reviewed.

The stock has come a long way in turning around investor sentiment and COVID-19 may be helping. In the volatile environment created by the pandemic, Sigma’s relatively stable income stream could be seen as more highly prized than ever before.

The Sigma share price is currently trading nearly 17% higher since the start of the year. Outpacing the return of the All Ordinaries Index (ASX: XAO), currently sitting at -10%, by a huge 27%.

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Motley Fool contributor Daniel Ewing 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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