Sigma Healthcare believes it is in the final phase of its remaking and ready to show that it has overcome distribution and sales problems from a new centre and software SNAFUs.
The company said in its 2021-22 annual results yesterday that despite a weak result – a statutory loss on a small rise in revenue for the year to January, it was now in the last stage of an investment cycle that will reboot the company.
Incoming CEO, Vikesh Ramsunder said in the earnings release “Sigma has navigated an extended period of transformation and investment that has resulted in world-class infrastructure to sustain and support business growth over the long-term.”
“These investments have however disrupted our business and customers short-term.
“Our focus now is to overcome these challenges quickly, and to be obsessed with servicing our customers and winning back their trust, to simplify our business and to leverage our assets for growth.”
To help focus shareholder thinking the company has matched its 1 cent a share interim with a final dividend of the same size.
That’s even though the 1.3% rise in revenue to $3.4 billion for the year and the $7.2 million statutory loss doesn’t seem to support a payout.
“The financial performance was impacted by costs incurred to strengthen the Sigma business for sustained growth and operational efficiency in the years ahead, including the commencement of operations at Sigma’s new Truganina Distribution Centre (DC, in Melbourne) in January 2022 and the new ERP system implemented in the second half of 2022. The result is in line with updated guidance provided on 3 March 2022, directors said.
“Sigma’s wholesale operations experienced a contrasting period of two halves. Whilst revenue was up 5.5% in the first half, the second half bore the brunt of lost sales from our core customer base due to the challenges experienced during the ERP implementation and move to the new Truganina DC in Victoria.
“The negative sales impact was cushioned by high volume growth in sales of Covid-19 Rapid Antigen Test kits in January 2022. This volume growth has extended into the early months of the new financial year, but current demand has slowed in line with lower rates of infection.”
“Following previous periods of sustained growth, including 1.9% growth in the first half, wholesale sales to our pharmacy brands were down 2.0% for the year, reflecting the second half disruption.
“Sigma’s Hospital business grew stronger than the market, with revenue up 5.6% during the year, overcoming headwinds from Covid-19 restrictions and the price impact of some high-cost drugs coming off patent. Sigma currently has a 10% share of the hospital pharmacy distribution market.
“Over the last four years is ending with the expansion of the Truganina DC and building of a new DC to support our Tasmanian customers. This will collectively see around $40 – $45m invested in FY23, with capital expenditure to then return to more normal operating levels of $5m to $10m per annum,” the company told the market.
But as upbeat as the company and CEO sounded in the release, there’s no actual earnings figures guidance, more the prospect of a “return to profit.’
“Against a backdrop of entering the final stage of our investment cycle, progressively stabilising and optimising our operations, and a strategic review of the business, Sigma is not providing specific guidance for FY23 at this stage, but expects to return to profit,” the CEO said in the release.
That convinced investors who pushed the shares up 1.9% to 53 cents, though still well under the 55.5 cents a week ago.
