Sigma takes its medicine
September 29, 2010
SIGMA Pharmaceuticals’s new
managing director Mark Hooper
has cleared the decks with the
company’s half year result, with
one-off inventory write-offs and
restructuring costs amounting to
$24.7m, and devaluing the
Pharmaceuticals division by $220
million (PD breaking news).
The writedowns have seen Sigma
report a net loss after tax of $218.5
million - compared to a $32.2m
profit for the same period last year.
The impairment of the
Pharmaceutical division is due to its
proposed $900m sale to Aspen
Pharamcare, which is for a price
lower than the carrying value in the
Sigma accounts.
The company said it had
continued its negotiations with
lenders in respect to the breach of
banking covenants, with “certain
one off adjustments” meaning
Sigma’s finances are secure.
Sigma confirmed that on 30 Aug
it repaid $40m of its syndicated
bank loan liability, with the
payment funded via working capital.
As far as the outlook is
concerned, Sigma said it’s
maintaining previous guidance of
“underlying EBIT” of between
$140m and $150m for the year to
31 Jan 2011, subject to the
successful sale of the
Pharmaceuticals division and
“assuming a continuation of a
normal operating environment”.
The healthcare division’s sales
revenue was up 8% to $1.34b, but
earnings before interest and tax
was down 17% to $28.6m.
“Growth in sales revenue was due
to PBS growth and strong support
from our customers...we have also
been working with these customers
to reduce the extended settlement
terms to a more sustainable basis
that reflects current credit
conditions,” the company said.
For the pharmaceuticals business
revenue growth was weaker, up just
1.8% to $275m, and an underlying
EBIT of $40.2m before writedowns
amounting to $238m in total.
Sigma said there were lower sales
for its generics and consumer
business units, while continued
aggressive discounting in the
generics market also reduced profit.
“Future marketing initiatives
within the consumer business are
expected to raise the level of brand
awareness within our direct grocery
channel,” the company said.
Hopper said the company’s
challenges “are well documented
and of disappointment to the Board,
management and shareholders.
“While there is much more to do
to reconfigure the business for a
stronger future, in the few weeks
since I started as MD I have seen
encouraging signs of stability
returning to the business,” he said.
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