The Sigma Healthcare Ltd (ASX: SIG) share price is out of form on Tuesday. This follows the release of its half year results this morning.
In early trade, the pharmacy chain operator and distributor's shares dropped as much as 7% to 58.5 cents.
The Sigma share price has recovered a touch since then and is now down 3% to 61 cents.
Sigma share price tumbles on guidance downgrade
- Revenue up 5.5% to $1.73 billion
- Like for like pharmacy sales up 8.7%
- Underlying EBITDA up 14.7% to $39.2 million
- Underlying net profit after tax up 23.7% to $14.1 million
- Fully franked interim dividend of 1 cent per share
- Net debt of $82 million
- Outlook: FY 2022 underlying EBITDA guidance now 5% (from ~10% previously)
What happened during the first half?
For the six months ended 31 July, Sigma reported a 5.5% increase in revenue to $1.73 billion. Management advised that this was driven by a combination of above market organic growth across its pharmacy brands and independent network, a full run rate of sales to Chemist Warehouse, and the incremental on-boarding of a number of new customers.
PBS sales were up 14% for the half, with over the counter sales up 32%. However, excluding Chemist Warehouse, over the counter sales were down 5.4%. This reflects general market conditions including the softer cold and flu category.
On the bottom line, the company's underlying net profit after tax increased 23.7% to $14.1 million. Management advised that this reflects its positive sales performance and operational platform efficiency.
What did management say?
Sigma's CEO and Managing Director, Mark Hooper, was pleased with the half.
He commented: "It is pleasing to navigate a challenging operating environment and still deliver a strong set of results for the half. Our community pharmacy brands have again delivered industry leading like-for-like growth of 8.7%, with our upgraded infrastructure easily absorbing a 13% increase in wholesale volumes for the half."
"Just as pleasing, we are now emerging from a period of significant investment and transformation which has set the business up for the next wave of growth, including the pursuit of acquisition opportunities," he added.
Outlook
While management is confident on the medium and long term, it has warned that near term trading conditions remain tough due to COVID-19 restrictions.
As a result, underlying EBITDA is only expected to grow 5% in FY 2022. This is a sharp slowdown on its first half growth and means it is behind on its two-year growth target. That target is for a CAGR of 10% for underlying EBITDA growth in FY 2022 and FY 2023.
Mr Hooper concluded: "We have emerged from the challenges of the last 18 months to deliver a strong first half result and have the business in good shape. However, with the increased impact of COVID-19 restrictions that are expected to stretch well into the 2H22, we are now expecting FY22 Underlying EBITDA growth to be closer to 5%."
