Sigma Pharmaceutical is planning moreĀ acquisitionsĀ after sealing its second takeoverĀ for the year on Monday.
The deal will see Sigma buy a Queensland chemist chain for $26.7 million and add another 121 pharmacies to Sigma’s network, which includes Amcal, Guardian, PharmaSave and Chemist King.
The acquisition will add another 141 pharmacies to Sigma’s network.Ā Photo: Bloomberg
It comes after Sigma bought smaller rival Central Healthcare last March for $24.5 million and the company signed a 10-year wholesale and service agreement with Pharmacy Alliance last month.
The purchases were Sigma’s first since a restructure in 2010, which saw the company hive off its struggling generic-drug-manufacturing business.
Sigma chief executive Mark Hooper said the takeovers also aimed to offset losses from the federal government’s cuts to its $9 billion Pharmaceutical Benefits Scheme.
“Obviously, the PBS reforms are putting the handbrake on the growth I guess historically we would have had. So acquisitions come into the frame,” Mr Hooper said.
“But we are looking at organic growth in the business as well. It’s not just going to be a case of buying things to get the business to grow.”
The extra pharmacies in the latest acquisition all trade under the Discount Drug StoresĀ brand, which began in Queensland in 2001 and now operates across Australia.
Mr Hooper said the DDS deal was a “natural fit”, and combined with the Central Healthcare acquisition, would add $400 million to the company’s sales revenue in the first year of operation.
“This acquisition brings to our group another strong pharmacy brand with a great operational format and consistency of retail offering,” he said.
In March, Sigma said its net profit had surged 187 per cent to $53.5 million in 2013-14, while it had $67.5 million in net cash.
Mr Hooper said the DDS deal, which would be funded from existing cash resources, would not hinder Sigma’s balance sheet or ongoing capital management initiatives, including share buy-backs.
“The addition of DDS will be immediately earnings accretive, and is expected to be ROIC [return on invested capital] accretive.
“Our cash position is still very strong. Ultimately, unless it’s a really significant acquisition, we’re likely to continue to do these bolt-on acquisitions and still reward shareholders through the buy-backs and dividends.”
The company has begun offering more professional health services ā such as initial screenings for a range of conditions, blood-pressure checks, and advice on how to manage chronic illnesses ā across its pharmacy network.
Mr Hooper hoped this would deliver “organic growth” by differentiating it from its more downmarket competitors.
“It’s one of those great areas that help pharmacies combat some of the negative impacts that PBS reform has had.
“Hopefully we will be able to continue to grow that [professional services] to provide a significant income platform for pharmacies in the medium term.”
Sigma shares shed 15Ā¢, or 1.8 per cent, to 83Ā¢ in afternoon trade on Monday.