SIG - Sigma Healthcare

[qldfrog]

Trading Update

Sigma Healthcare Limited (Sigma) has today updated its earnings guidance for the financial year
ending 31 January 2022 (FY22). With 10 months of FY22 complete, Sigma now anticipates FY22
Underlying EBITDA to be down around 10% versus FY21. This follows the most recent update
provided in September this year of 5% growth.
This update reflects a challenging second half of the financial year, which has been impacted by
shorter-term operational issues resulting from the roll-out of our Enterprise Resource Planning
(ERP), with Sigma switching to the live SAP environment on 29 August 2021. These issues were
compounded further by the protracted COVID-19 impacts.
Interim Chief Financial Officer Jeff Sells commented: “A total ERP upgrade is a significant change
management program for any company, and whilst we reached go-live on this project broadly on
budget and on time through a pandemic, we have faced additional challenges in the context of
completing implementation through the height of COVID-19 restrictions. Unfortunately, this has
had some significant impacts on our customers, and we are rectifying these issues as quickly as
possible.”
The combination of these factors in the second half of FY22 have materially impacted sales and
resulted in an unexpected increase in operating costs through the transition. One-off and nonoperating costs are likely to be higher at around $25-$30 million. As a result of all these outcomes
the peak net debt will be commensurately impacted.
Mr Sells commented: “We are confident the actions already taken and in progress will see the
technical challenges with our ERP implementation largely confined to FY22. However, these
issues have affected sales in FY22 which will flow through to FY23 sales, with the impact
expected to abate as we progress through FY23.”
Chairman Ray Gunston commented: “Notwithstanding this set-back, we remain confident in the
future growth profile for Sigma, which was further underlined with the Sigma Board recently
approving the extension to our new Victorian Distribution Centre in Truganina. This will see $20m
invested to double existing capacity to 40,000 square metres to accommodate the growth pipeline
ahead. The extension is expected to be completed over the next 18-months.”
“Sigma has undertaken an extensive transformation program over the past four years that puts the
company on a strong footing for our incoming CEO Vikesh Ramsunder to execute our strategy,
focussing on actions to accelerate our long-term growth and improve margins.”
“We remain focused on growing our core business, whilst continuing to build on business
expansion opportunities across areas such as Hospital Services, Contract Logistics and medical
devices and consumables, to leverage our strategic advantage across our automated DC
network.” Mr Gunston concluded.
Sigma has also updated it’s reporting date and is now is expected to announce its FY22 results on
Tuesday 29 March 2022.

courtesy of Bell Direct
==========================================================================================================

DYOR

i hold SIG

will this be a top up opportunity ( for me ) since it is probable the API holding
will be taken over in time and i am playing this niche as a 'safe-haven'

Bought too early...

 

[divs4ever]

have been nibbling cautiously

bought some in November , before that December 2018 and several more earlier

i normally resist big parcels but have been buying medium size ( for me ) in other stocks this year ( RMS , FMG , WOR , RRL ,MGX ,EVN )

more about increasing the position AND averaging down , here , seems to regularly have stumbles , that MIGHT be a good thing for long term holders ( plenty of top up opportunities )

 

[divs4ever]

another full year pick for the comp.
i will need to bulk up on SIG to partly offset the API takeover ( which will probably go through , i just don't know who the winner will be )

i have two small orders in for SIG currently one @ 41c and one @ 39c

a recent ( negative ) turnaround of the forecast .. i read it as 15% worse than the previous guidance

so putting a 12 month 'thumb of doom ' on this would help balance the portfolio nicely

 

[Sean K]

another full year pick for the comp.
i will need to bulk up on SIG to partly offset the API takeover ( which will probably go through , i just don't know who the winner will be )

Good timing I think. Once they get over the short term issues, will be in the frame for consolidation, unless Chemist Warehouse are the next target.

 

[divs4ever]

well API seem to have got away ( unless WOW make a total mess of that acquisition , and is back for-sale at basket-case rates in a few years )

there are some kinda related companies SIG could go after if adventurous ( COO isn't the only company in the 'pharmacy support ' game )

and they might be unlisted but i suspect SIG could find something earnings accretive businesses lurking around say a smaller health food supplier , maybe medical aids or smaller fitness gear maker/seller

it will depend on how hungry SIG is

they might be happy to bunker down , and buy stuff from the administrators ( all that debt has to bite eventually , i just don't know where , don't know when )

 

[divs4ever]

just in case the previous post doesn't qualify my SIG pick for the yearly comp.

two reasons why SIG MIGHT rise is folks speculating the API take-over loser will consider SIG as a take-over target

OR the API take-over is successful and SIG is the only pharmaceutical distributor left listed on the ASX , inspiring a few extra buyers

but i think SIG is more likely to come under pressure from increased costs , holders hoping SIG will try to force growth ( two chances at a miss disappointment if the take-over plays are unsuccessful , or reduced shareholder participation if the attempt a capital raise

( but i still have those low buy orders in the market a year is a l-o-n-g time in the market , and hitting a buy-order can happen in minutes )

DYOR

 

[frugal.rock]

Have had my own thoughts about SIG and API merging as @barney might recall. ?

Would be a great business move from API in my opinion.
To my knowledge, SIG pharmacies are generally the smaller ones. A pharmacy, and not a lot more.
For API to be able to grab all those smaller outlets of SIG's, and consolidate and or fix em up so to speak, would represent a good piece of the overall pie.
If merged, there will be API, Chemist Warehouse and Soul Patterson. A Triopoly.

One API Priceline pharmacy I know of has beaten it's previous daily sales record twice (by over 50% !) in the week leading into Christmas. Not a great data set I know, but a little indicative overall.

 

[divs4ever]

SIG did put in an offer to buy API ( in a scrip deal ) which would have suited me better than the current two all cash deals , but then SIG backed off , from memory SIG actually manufacture some pharmaceuticals ( probably under licence )

since SOL did an agreement with WES early in the game i am guessing SOMEBODY will acquire API , all API management seem to be worried about is the price , so unless an international player comes in and invokes FIRB oversight , API will become a small arm of a retail giant ( at least for a short while )

so my guess is SIG will have to stand alone , but will it acquire , or be acquired that seems to be the question ( SIG could always buy a company with a useful drug patent and manufacture it , probably not MSB , but there are a few small companies that might have a successful drug in the works )

 

[bk1]

Three days out from the next earnings report, massive volume today, volume contraction preceding this..

 

[divs4ever]

currently up about 21% on this which is a shame because i am trying to accumulate

my target price for more is somewhere around 42-43 cents a share

maybe the coming report will disappoint ( or all the buyers already have their seat on the train )

 

[qldfrog]

currently up about 21% on this which is a shame because i am trying to accumulate

my target price for more is somewhere around 42-43 cents a share

maybe the coming report will disappoint ( or all the buyers already have their seat on the train )

Or reports leaking...and good news coming

 

[redsmartie]

Good stock, at times felt like it was struggling. I like accumulating on gentle up slopes. Don't want to damage my average buy ins. ?

 

[divs4ever]

i was preferring API , but WES came along a changed that

 

[redsmartie]

SIG chart, not looking like a ski jump.? I got WES as a long term holder so API is in the bag with that one.

i was preferring API , but WES came along a changed that

 

[divs4ever]

i held WES as well ,but would still bather have API as a stand alone company

it is liable to get lost in the mix as just another part of WES

even a bigger SIG would have been OK but a bit messy ( SIG and API were held in different accounts )

 

[redsmartie]

SIG chart, not looking like a ski jump.? I got WES as a long term holder so API is in the bag with that one.

My very choppy week and day bar chart with some doodle done on mobile, sorry PC too far away. Could do sideways motion for god knows how long, annoucement pls.

I'm long on SIG.

 

[divs4ever]

SIG has disappointed from time to time IF the SIG-API offer had of succeeded that would have been 'transformational '

now you have SIG competing with the WES war-chest

time will tell but i don't see SIG multi-bagging in the next 5 years .. now MAYBE if it acquired some CBD products ( to manufacture and distribute , am not a CGD fan , but maybe some ACTUAL research will swing me over )

i hold FIJ but i can't see SIG rushing to sell Kava by agreement ( but since FIJ are targeting retail food outlets and health-food shops .. i would LOVE to be wrong , but i don't think so )

but sideways if they can keep paying divs , isn't a bad place to be , you could nibble in the dips like i try to do

 

[redsmartie]

I missed the swing this morning but it hit 0.83 before lunch and dropped back to about 0.78 .... Sigma awarded Chemist Warehouse Supply Contract

 

[Dona Ferentes]

The contract is worth $2 billion annually and would triple Sigma’s existing Chemist Warehouse contract from $1 billion.

Sigma would pay Chemist Warehouse across new shares and a right to acquire some non-core assets that have a $24.5 million value. It would issue about 10.7 per cent of its share base at 64.2¢ a pop to the pharmacy owner at the start of the supply contract. (Sigma shares closed at 63.5¢ on Monday)..

Sigma’s largest shareholder is David Di Pilla’s HMC Capital, which owns 19.07 per cent. HMC Capital, in turn, is backed by Chemist Warehouse’s owners ..

It is a major blow for the New Zealand and ASX listed EBOS, which has a $7.25 billion market capitalisation and was halted from trading on both exchanges on Tuesday morning.

 

[Dona Ferentes]

And some speculation arises.

There is a relationship between Chemist Warehouse, owned by wealthy Melbourne businessmen Jack Gance and Mario Verrochi, and Sigma. In particular, could Sigma be the vehicle to finally get Chemist Warehouse onto the ASX?

That idea was explored by Credit Suisse hedge fund sales trader Sujit Dey, who told his clients in an email that the deal “could be the start of a two-stage process” that would end with Chemist Warehouse on the bourse.

“Stage 1 was to bring the entire contract under one umbrella,” he wrote. “Stage 2 could involve [Chemist Warehouse] using [Sigma] as a reverse listing vehicle. It could then rename the company, ‘Chemist Warehouse’ and it would probably be one of the best stocks to own on the ASX.”

The company would* “rerate materially”, he added, easily becoming a 25-times price-to-earnings stock from the 10-times odd that it’s at now..

*could?