Sigma to cut 500 jobs
Takeover rejection leads to profit plunge
SIGMA Healthcare has reported a 33 per cent profit fall, a reduced dividend and confirmed 500 people will lose their jobs as the pharmaceutical company goes it alone after rejecting a recent merger offer.
Despite only a 3 per cent fall in revenue to $3.9 billion for the year to January 2019, the company’s net profit plunged by one third to $37 million, while earnings before interest, tax and depreciation were down 17.5 per cent to $76.5 million.
Sigma chief executive Mark Hooper said the modest fall in revenue had a “disproportionate effect on the company’s bottom line”.
After stripping out restructuring costs of about $9 million, the company said its underlying net profit was $46.3 million, down 23 per cent on last year.
Mr Hooper also confirmed its Shepparton, Newcastle and Launceston distribution centres would close before the end of the year and that there would be significant job cuts at its two largest centres in Melbourne and Sydney.
All up, 500 people are to lose their jobs this year, including 300 full-time staff and 200 casuals employed through labour hire companies. The sackings are part of the company’s plan to reduce costs by $100 million over the next two years, after it lost a major distribution contract to supply My Chemist and Chemist Warehouse outlets.
Late last year, Sigma knocked back a takeover offer from rival Australian Pharmaceutical Industries. Sigma chief executive Mark Hooper reflects on the company’s drop in profits after rejecting a merger bid
API, which is also now a major shareholder of Sigma, owning about 13 per cent of Sigma, said yesterday the latest profit result was expected.
A spokesman for API yesterday cited its previous statement about Sigma, that it believed the best interest of the company was to accept the takeover.
However, Mr Hooper said yesterday the loss of the supply contract would free up about $300 million a year in working capital for new uses and debt reduction.
“The recent events have provided the catalyst for us to undertake a detailed review of our operations to ensure we have a sustainable business operating efficiently but, importantly, one that adopts a growth mindset to capture the emerging opportunities we see for the business,” Mr Hooper said.