Health care group, Sigma Healthcare Limited (ASX: SIG) has provided a market update in which the company has announced a strong outlook after conducting an extensive review of its operations. The review process was started after the company decided not to renew the supply contract with MyChemist/Chemist Warehouse. The contract with MyChemist/Chemist Warehouse is going to expire in June 2019. Following the release of this update, the share price of the company increased by 5.357% as on 11 February 2019 (AEST 3:22 PM).
As per the company’s announcement, the review has identified more than $100 million per annum of cost savings. The company has confirmed its FY 2019 Underlying EBIT guidance of around $75 million, and it is expecting to deliver FY 2020 Underlying EBITDA in the range of $55 Mn – 60 Mn.
As per Managing Director Mark Hooper, the management of the company is very encouraged by the outcomes of the review. He further informed that the Accenture initially suggested that a significant opportunity can be realized from restructuring the business and now the company has recognized cost efficiencies of more than $100 million per annum, which will be delivered over the course of next 18-24 months.
According to Mark Hooper, the Financial Year 2020 is going to be challenging for the company due to the uncertainty of the exact timing for the MC/CW business to fully exit. He further told that the company would start implementing the changes which were recognized in the review, however, the benefits from the review program will lead the FY 2023 EBITDA (Earnings before interest, tax, depreciation and amortization) return to a similar level of FY 2019.
In December 2018, after acquiring a substantial shareholding in Sigma, the Australian Pharmaceuticals Industries (API) proposed a merger transaction. According to Sigma’s Chairman, Mr. Brian Jamieson, the management of the company is open to continuing discussions to identify potential merger opportunities and he further added that the company is having a clear vision of where the company is heading as a standalone business. He further told that the company is committed to implementing the transformation program to capture the benefits for its shareholders. The company is expecting to announce its FY 2019 results on 21 March 2019.
For the first half of FY 2019, the company announced the Underlying EBITDA of $40.3 million which was 16.4% lower than the previous corresponding period (pcp). While, Reported EBITDA came in at $31.5 Mn in 1HFY19, signifying decline of 32.6% on PCP basis. Further, the company earned NPAT of $13.8 million in 1H2019 which was 50.6% lower than pcp.
Meanwhile, in the last six months, the share price of the company decreased by 13.13 percent as on 8 February 2019. SIG’s shares traded at $0.590 with a market capitalization of circa $539.29 million as on 11 February 2019 (AEST 3:22 PM). It has 52 weeks high of $0.985 and 52 weeks low of $0.405.
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