Sigma can see beyond loss to better days

AFTER two years of hefty losses, Mark Hooper is confident he can make the ailing drugs wholesaler Sigma Pharmaceuticals profitable again. Since taking the chief executive role in September Mr Hooper has cleared its hefty debts and halved its full-year loss to $235.4 million. Sigma's shares soared more than 15 per cent yesterday following the results for the year, which also included a special 15¢ dividend. Some of that initial rise was dissipated and the shares closed 4.5¢, or 10.8 per cent, higher at 45¢. Advertisement: Story continues below Despite the warm market reaction and being well on his way to achieving his ambitious goal, Mr Hooper said he did not deserve any pats on the back. ''I hope what we'll be talking to about in six to 12 months is the level of profitability.'' ''But while we are reasonably positive about the future, to be honest I'd prefer the credit once we got the runs on the board.'' In 2009-10 Sigma posted a $398.28 million net loss and was faced with the US dynamo Pfizer selling its prescription drugs to pharmacies directly, bypassing wholesalers. But Mr Hooper said the sale of its pharmaceuticals unit to South Africa's Aspen Pharmacare in January relieved its $1.09 billion debt burden and allowed the special dividend. And it was that special payment to shareholders that fuelled the spike in the share price, a Wilson HTM analyst, David Arter, said. ''The fact that they have declared it now rather than later is a positive for shareholders,'' he said. ''We were more of the view that a capital management announcement would be made at the time of the upcoming'' annual meeting. But Mr Arter said uncertainty still shrouded the healthcare sector, but Sigma's results were encouraging. ''Sigma has not provided specific forecasts for the year ahead but has provided the market with some insight into the strategy to both protect revenue and also reduce costs to elevate margins in the healthcare business.'' Mr Hooper said Sigma, which owns the Australian pharmacy retail brands Amcal, Amcal Max and Guardian, would increase its private label market share, to counter a likely erosion of profits from the federal government's Pharmaceutical Benefits Scheme reform, which affects generic medication. ''Growing retail brands' presence is quite important for us, but there are also opportunities in private label. It's typically about 4 to 5 per cent of what a pharmacy does. But if you look at models offshore, like Boots [in Britain] and others, it can be anything up to 35 to 40 per cent of what they sell. ''There is clearly an opportunity to grow that private label piece beyond what we are doing today.'' For the healthcare business annual sales revenue rose 6.6 per cent in 2010-11 to $2.9 billion and underlying earnings before interest and tax was $46.7 million.