Why the Sigma share price is on watch today

The Sigma Healthcare Ltd (ASX: SIG) share price will be on watch today after the company released a market update this morning.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Sigma Healthcare Ltd (ASX: SIG) share price will be on watch today after the company released a market update this morning. The update was in relation to Sigma's FY20 EBITDA guidance and franking credit position.

At the time of writing, there appears to be minimal market reaction to the announcement, waith the Sigm share price marginally down by 0.51% to $0.587.

What does Sigma Healthcare do?

Sigma Healthcare is a wholesale and distribution business of pharmaceutical products through the pharmacy and grocery sales channels.

The company has the largest pharmacy-led network in Australia with over 1,200 branded and independent pharmacies. These include well-known pharmacy retail brands such as Amcal, Guardian, PharmaSave, Chemist King and Discount Drug Stores.

What did Sigma Healthcare announce?

Sigma Healthcare confirmed it remains on target to deliver FY20 underlying EBITDA guidance of approximately $46 million to $47 million. This is elevated to $57 million to $58 million when the benefit from the adoption of the new accounting standard AASB 16 Leases is included in the calculation.

Despite this, Sigma Healthcare noted that one-off costs associated with transforming its business will result in generating insufficient franking credits to pay a fully franked final dividend in FY20.

The company commented that the depleted franking credit balance was due to a lag effect of the costs of transforming its business. Sigma will review this franking credit position as it progresses through the next financial year, FY21.

Sigma Healthcare's management further commented it believes the underlying business is performing strongly, with FY20 financial results remaining on track. The company continues to expect accelerated underlying earnings growth in FY21 from its core business.

Recent activity

In mid-December last year, Sigma Healthcare's share price declined after Australian Pharmaceutical Industries Ltd (ASX: API) sold off its shareholding in the company. The operator of Priceline, Soul Pattinson Chemist and Pharmacist Advice built up a sizeable shareholding in Sigma Healthcare in 2018 ahead of proposing a merger of the two companies. The deal ultimately fell through after the Sigma board concluded the merger was not in the best interests of shareholders.

Around one month ago on January 8, 2020, Sigma Healthcare announced the resignation of the company's CFO Iona MacPherson. In the interim, former CFO and retail pharmacy general manager Jeff Sells has stepped into the role.

Guidance for FY21 will be provided at Sigma's FY20 results announcement, which is now scheduled for Wednesday 25 March 2020.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Unsure man analysing data on laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured a rough day of trading this Tuesday.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Market News

ASX 200 takes the latest RBA interest rate verdict in stride

The ASX 200 looks to have shaken off today’s RBA interest rate call.

Read more »

A mature-aged couple high-five each other as they celebrate a financial win and early retirement
Share Gainers

Why this ASX 300 stock is soaring 12% after a disastrous year

This company has had a dramatic reversal of fortunes this Tuesday...

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Core Lithium, Imugene, Lifestyle Communities, and Mineral Resources shares are charging higher

These shares are having a good session. What's going on?

Read more »

A miner stands in front oh an excavator at a mine site
Broker Notes

Broker says buy the dip on ASX 200 uranium share with 69% upside

Shaw and Partners says this ASX uranium stock is trading at an attractive price point right now.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Domino's, Lynas, Paladin Energy, and St Barbara shares are sinking today

These shares are having a tough session. What's going on?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

4 ASX All Ords shares up 315% to 682% in a year!

Investors have sent these ASX All Ords shares flying higher. But why?

Read more »

Woman on a swing at a beach, symbolising passive income.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Let’s unearth some other passive income opportunities.

Read more »