Good news for shareholders at yesterday’s AGM of pharmacies supplier and drug distributor Sigma Pharmaceuticals (SIP) which says it is looking for a 10% jump in underlying earnings for the first half of 2016-17.
The company also told the meeting on Wednesday that its full-year guidance for the current fiscal year remains unchanged.
At the release of its full-year results for 2015-16 in March, Sigma said it was confident of delivering growth in earnings before interest and tax (EBIT) of at least 5% a year for the next two years.
The shares rose 0.4% to $1.115.
SIP 1Y – Sigma shares higher on brighter outlook
Sigma chief executive Mark Hooper told shareholders that Sigma’s performance in the first three months of the current fiscal year had reinforced the group’s belief that investing in initiatives that were not related to the Pharmaceutical Benefits Scheme (PBS) was the right strategy.
He said Sigma was benefiting from the acquisitions of CHS, Discount Drug Store, Pharmasave and Chemist King, which were performing well ahead of expectations.
Buying the trio had seen more than 300 pharmacies added to the Sigma network, which had helped lift sales from its wholesaling operations.
Mr Hooper said the CHS pharmaceutical wholesaling business has just started supplying the hospital pharmacy market in NSW – the largest hospital pharmacy market in Australia.
Sigma’s Amcal and Guardian pharmacy brands were also looking more consistent and delivering more consistent products and services.
Professional service programs in pharmacies, such as coeliac testing, kidney check programs, and healthcare and weight management solutions, were gaining traction.
Profits were also being boosted by good growth in Sigma’s range of private and exclusive label products, and improvements in brand member fees, merchandise and marketing income, commission revenue and other service fees.
"These all fit within our strategy of diversifying away from our reliance on PBS revenue," Mr Hooper said.
Mr Hooper said that while PBS volumes were growing through market share gains and organic growth returns to Sigma were falling.
Mr Hooper explained tha government reforms to the PBS were driving the price of medicines down, and as a wholesaler, Sigma was paid based on a percentage of the value of what it delivered, hence the lower returns.
"In addition, our remuneration is capped when it comes to the new and more expensive medicines that are being listed on the PBS,” he told the meeting.
