Join our daily newsletter At The Bell to receive exclusive market insights
- Sigma Healthcare’s (SIG) CEO, Mark Hooper, has released a letter to shareholders outlining the company’s current position
- ‘Project Pivot’ is underway, and has already realised more than $62 million in annualised efficiencies
- A recent FMCG supply contract with Chemist Warehouse was also signed, and is expected to generate between $700 million and $800 million in revenue
- The company is also streamlining its distribution centres by decommissioning old ones and introducing automation capabilities
- Sigma Healthcare is trading 0.85 per cent down on the market today, with shares selling for 58 cents each
Sigma Healthcare’s (SIG) CEO, Mark Hooper, has released a letter to shareholders outlining the company’s current position.
The address was given as part of Sigma’s Annual General Meeting, and offered insights into key business drivers that Mark said would lead back to a position of sustainable growth.
It began with what the company calls ‘Project Pivot’, an initiative introduced in February 2019 as a major business transformation program. Supported by Accenture and EY, Sigma has identified in excess of $100 million in potential efficiencies that could be realised over the next two years.
At the end of January this year, the company had flagged total efficiency gains of $62 million, and while the bushfires and COVID-19 pandemic have led to some delays, Mark said the company is still on track to meet its targets.
Mark also noted one positive complication to Project Pivot in an FMCG product supply contract with Chemist Warehouse. As announced in November last year, at full run-rate, the deal is expected to generate $700 to $800 million in revenue.
To date, 80 per cent of the work on the contract has been completed, with full operations due to be seen by June 30, 2020.
Further to this, Sigma has taken steps to optimise its distribution centres. Much of this has been ongoing over the last four years, and has involved automation investments, four new facilities, and the decommissioning of less efficient centres.
While Mark acknowledged that the recent bushfires and COVID-19 outbreak are “tragic in every sense of the word,” he said that the events have led to a significant uptick in business. At its peak in March, total sales volumes were up an average of 70 per cent, with some weeks hitting a top of 80 per cent.
Even in its wholesale sector, Sigma’s sales volumes and revenue were both up 30 per cent for the first three months of the year.
However, despite the strong performance, Sigma has still not provided any definite earnings guidance.
“What I can say is that the combination of actions we have taken,” Mark said, “such as the efficiencies from Project Pivot, our DC investments, our various sales programs, and our expanding 3PL and medical consumable businesses has already produced a strong platform for earnings growth.”
“The return of some of the Chemist Warehouse contract and the opportunities created as we emerge from the COVID-19 pandemic will further enhance this,” he concluded.
Sigma Healthcare is trading 0.85 per cent down on the market today, with shares selling for 58 cents each at 1:15 pm AEST.
