CHS/DDS strong for Sigma
August 11, 2015
Sigma Pharmaceuticals will pay
an additional $8m-$10 m to the
vendors of the Central Healthcare
Services (CHS) and Discount Drug
Stores (DDS) businesses, after they
exceeded expectations announced
at the time of their acquisition by
Sigma.
CEO Mark Hooper said initially
the deals had been expected to
boost revenue by $400 million and
$8m-$10m in EBITDA, however the
first 12 months had proven more
successful than anticipated “due to
the continued commitment of the
CHS, Pharmasave and DDS teams”.
CHS and DDS were acquired for an
initial investment of $49.9 million
(PD 09 Sep 14, 27 Mar 14) with
the potential for an “earn-out”
payment effective 30 Jun 15.
Early estimates in the Sigma
accounts allowed for a further
$37.4 million payment, but “given
the sustainable success of these
businesses, the actual final earnout
payable is likely to increase to
between $45.4m and $47.4m,” the
company said in an ASX statement
issued yesterday.
That means the additional earnout
of $8m-$10m must be written
off as a one-off adjustment to the
first half accounts for Sigma.
“It is counter-intuitive to write
off the additional consideration
paid as a result of the investment
being more successful than
anticipated, but this is the quirk of
the accounting standards we need
to deal with,” Hooper said.
“More importantly, the CHS,
Pharmasave and DDS businesses
continue to perform well and
contribute to the growth of Sigma,”
he added.
The final figure is subject to audit
review and sign off by the board,
with Sigma’s first half results set to
be announced on Thu 10 Sep.
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