Sigma Healthcare share price falls despite company’s return to profit

The Sigma Healthcare Ltd (ASX: SIG) share price is down 1.63% after the company released its FY23 full-year results today.

Meantime, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.59%, largely due to the United States Federal Reserve’s latest interest rate rise.

Let’s see what the pharmaceutical distributor, wholesaler, and franchisor revealed to the ASX today.

Sigma Healthcare share price down but EBITDA up 65%

Sigma Healthcare reported a return to profit in FY23 with “capacity for growth” from here.

The highlights for the 12 months ending 31 January 2023 are:

• Net revenue of $3.66 billion, up 6.2% on the prior corresponding period (pcp) of FY22
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $49.6 million, up 65.3% pcp
• Net profit after tax (NPAT) of $1.8 million, up from a $7.2 million loss pcp
• Net debt of $67 million, down 55% pcp
• Final fully franked dividend of 0.5 cents, payable on 18 April.

What else happened in FY23?

In a statement, Sigma said it had simplified its business operations and processes, stabilised its ERP [enterprise resources planning] systems, and completed its DC [data centre] infrastructure rebuild.

Sigma reduced its five pharmacy franchise brands to two — Amcal and Discount Drug Stores — and commenced phasing out the other brands, which include Guardian.

In a statement, the company said:

Whilst this may lead to some disruption in the current year, the merger of brands will provide critical mass to drive customer engagement and support our longer-term strategy.

It referred to a renewed strategy and leadership team “to deliver a sustainable business” moving forward.

What did management say?

Sigma CEO Vikesh Ramsunder said:

Following 12-months in the role, I am pleased to report that we have returned to profit, strengthened our balance sheet and made significant progress in the transformation of the company.

We now have a much stronger operational platform to improve service delivery to customers, which underpins our pursuit of growth opportunities and will incrementally deliver improved financial outcomes for shareholders.

The sale of Sigma’s unprofitable CHS Hospital distribution business for $44 million will be finalised on 31 March, subject to regulatory approval.

Ramsunder commented:

This is the fourth transaction as part of our strategy to simplify our business and focus on our core community pharmacy operations.

The sale will release $35 million to $40 million of cash for the business.

Sigma will rename its CHS business ‘Sigma Healthcare Logistics’ and pursue opportunities in third-party logistics from here.

What’s next?

Ramsunder stopped short of providing specific FY24 guidance. But he said operational improvements and a strengthened balance sheet should lead to reported EBIT of between $26 million and $31 million.

The board has also approved a new dividend payout policy of between 50% and 60% of reported NPAT.

Sigma Healthcare share price snapshot

The Sigma Healthcare share price is up 10.5% over the past 12 months.

This compares to a 6.6% fall in ASX All Ords shares and a 4% climb in the S&P/ASX 200 Health Care Index (ASX: XHJ).

The post Sigma Healthcare share price falls despite company’s return to profit appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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