Sigma swings back to profit, resumes paying dividends

Sigma is upbeat as it prepares to administer Covid-19 vaccine doses across its pharmacy network, with most stores signed up to the program.

Sigma Pharmaceuticals chief executive Mark Hooper. Picture: Stuart McEvoy

Millions of Australians will be able to be vaccinated against COVID-19 at their local pharmacy, with Sigma Healthcare confirming it is deploying its network to help the federal government administer more than 50 million doses of the AstraZeneca COVID-19 vaccine.

Sigma — which owns five pharmacy brands including Amcal, Guardian, Chemist King, Discount Drug Stores and PharmaSave banners in addition to its pharmaceutical wholesale business — said it was working with its community pharmacy partners to administer the coronavirus vaccine in a similar way to the seasonal flu jab.

It comes as Sigma has resumed paying dividends after swinging back into the black, reporting net profit of $59.76m in the 12 months to January 31, versus a $12.33m loss the previous year. Revenue meanwhile rose 4.8 per cent to $3.4bn.

Health Minister Greg Hunt said community pharmacies will be “an important partner” in the government’s COVID-19 immunisation program, which was bolstered late on Sunday after Therapeutic Goods Administration approved CSL manufacturing the AstraZeneca vaccine in Melbourne.

Sigma has originally been one of the parties vying to distribute the vaccine on behalf of the government — given it can deploy pharmaceutical products anywhere in Australian within 24 hours — but missed out on the contract, which went to DHL and Linfox.

Still, it said it would receive doses of the vaccine across its network at pharmacies which have signed on to administer it.

“We are working quite proactively though at the moment with our pharmacy brands to support them as they prepare for the rollout of the AstraZeneca vaccine. Most pharmacies have put their hand up to be involved in that. It’s a very logical thing to do, given the track record of the flu vaccine,” Mr Hooper said.

“There are 50 million doses that have got to be delivered to the Australian public and pharmacies are a great and safe option to help deliver that.”

Mr Hooper said the administration of the AstraZeneca COVID-19 vaccine — which CSL is producing under contract in Melbourne — would be “just like a version of the flu vaccine program”.

“Obviously the government has got the centralised booking program for the doctors at the moment. I’m not sure they are looking to do the same thing for pharmacies, but the easiest way to think about it is a version of what’s happening with flu vaccines, obviously supported by specific training.

“You can just see from the general press around this that people are keen to at least have the option of vaccinating sooner rather than later, so having a broad network, which has established a track record in things like flu vaccination, is a very logical network to use.”

Pharmacies normally run their own booking system for the seasonal influenza vaccine which people can access online.

In regard to the COVID-19 vaccines, this week more than 1000 GPs joined the vaccination program as it moved into Phase 1B, which is aimed at inoculating six million vulnerable people including those aged over 70, Aboriginal and Torres Strait ­Islanders aged over 55, and healthcare workers. More than 200,000 doses have been allocated to GPs across the country, with another 50,000 sent to respiratory clinics.

Pharmacists and pharmacy assistants will be vaccinated as part of Phase 1B, but they will not start inoculating Australians until phase 2A of the rollout. Phase 2A will include up to 15.8 million doses and involve vaccinating Australians aged over 50, other critical and high risk workers, as well as Aboriginal and Torres Strait Islander adults.

The balance of Australia’s adult population will be vaccinated in phase 2B, with up to 16 million doses allocated. Young Australians aged under 16, will not be vaccinated until phase 3, with up to 13.6m doses allocated.

In regard to Sigma’s full-year earnings, Mr Hooper said 2020 was a “milestone result” in the company’s transformation. He said Sigma was now on track to deliver annual earnings growth of 10 per cent in the years ahead.

The company’s shares closed 4.5 per cent higher at 70c, compared with a slight fall across the broader sharemarket.

“We’ve delivered on our promise of transforming our business and improving our earnings as we enter a period of sustainable growth and improved returns for shareholders,” Mr Hooper said.

“Significantly, Sigma has navigated the challenges of the COVID-19 pandemic without any reliance on direct government support such as Job Keeper. We have the building blocks in place to underpin our target of 10 per cent per annum growth in underlying EBITDA for the next two years and around $100m by the 2023 financial year.”

The earnings result benefited from the first full year of Sigma resuming its contract with Chemist Warehouse, which Mr Hooper said “remains on track to achieve $800m” in annual sales.

Sigma lost a third of its revenue in 2018 after it ­walked from its exclusive pharmaceutical distribution deal with Chemist Warehouse.

Chemist Warehouse has since reinstated half of its contract with Sigma.

The company has also slashed its net debt to $50.3m after it sold two of its distribution centres in Sydney and Brisbane for $172m under a leaseback arrangement. The move was aimed at cutting debt to below $100m.

It has also stripped out more than $100m in costs via its “project pivot” transformation.

“Project Pivot was run in parallel with our investment cycle and was an important program in re-setting the business operations and costs of doing business. Having now reached over the $100m-plus target set and achieved the operational efficiency gains through the program, the benefits are now embedded in our ongoing ways of working,” Mr Hooper said

Chairman Ray Gunston said the company had accumulated enough franking credits to resume investor payouts.

“We have taken significant strides to transform our business, upgrade our infrastructure, improve our operating performance, and enhance our culture. At the same time, we have reduced net debt to $50m at year end,” Mr Gunston said.

“Collectively, it means we are now in an improved position to execute our strategy and actively pursue opportunities for sustainable growth including in our expansion businesses,” he said.