Sigma shares slide after profit drop, delay in merger approval
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More news: Shares in Sigma Healthcare fell 5.5% to $1.34 in early trading on the ASX after the pharmacy wholesaler reported a 67% slump in its half-year profit.
It also said the competition regulator had further delayed a decision over its proposed $8.8 billion merger with retail chain Chemist Warehouse, with a decision now expected by 24 October.
The Australian Competition and Consumer Commission (ACCC) has previously raised competition concerns against the deal.
Sigma H1 profit drops on Chemist Warehouse merger costs
The news: Pharmacy wholesaler Sigma Healthcare has reported a sharp drop in its half-year profit on the back of deal costs related to its impending merger with retail chain Chemist Warehouse.
The numbers: Sigma said net profit for the six months to 31 July, 2024, slumped 67% to $3.7 million. The drop was weighed down by non-recurring merger and acquisition costs, preparation costs for onboarding its new Chemist Warehouse supply contract and offset by net gain on sale of non-core assets.
Revenue was up 9.4% at $1.84 billion and it will pay an interim dividend of 0.5 cents a share.
Separately, it announced the full-year numbers for Chemist Warehouse, whose net profit for the year to 30 June rose to $540 million from $302 million in FY23.
The context: Last month, the Australian Competition and Consumer Commission (ACCC) delayed its decision over the proposed $8.8 billion merger between the two companies. A decision is now expected by 24 October.
Sigma announced a merger in December that wouldbring together its wholesale pharmacy business, Amcal, and Discount Drug Store pharmacy brands with larger rival Chemist Warehouse’s nearly-600 strong network of stores.
Sigma CEO Vikesh Ramsunder said the company had begun a large new supply contract during the half year, which “will underpin Sigma’s growth for the next five years and provide strong fixed cost absorption".
Even after including the new supply contract volumes, Sigma will have approximately 35% available capacity in wholesale to absorb future growth ambitions without the need for major capital investment, Ramsunder said.
The sources: ASX announcement, ASX announcement
