Class action, PBS change carve a wedge out of Sigma profit

The settlement of a class action by Sigma Pharmaceutical shareholders has taken a $48 million chunk out of the company's full-year profits.

The settlement of a class action by Sigma Pharmaceutical shareholders has taken a $48 million chunk out of the company's full-year profits.

The leading healthcare company, which makes and distributes prescription and over-the-counter drugs to pharmacies, reported a net profit of $18.7 million - 64 per cent less than it would have without the December settlement.

The class action by retailers involved disclosures during the financial crisis, and forced Sigma to pay $57.5 million in settlement fees.

Sigma said its result was affected by one-off costs, such as the settlement, as well as refrigeration issues at its Newcastle site. It also said changes to the Pharmaceutical Benefits Scheme had hit its bottom line, and would continue to be a challenge in 2013.

"Sigma has delivered continued improvement on its key financial metrics against the backdrop of the toughest era of PBS reform in more than a generation," Sigma chief executive Mark Hooper said.

The federal government last year moved to cut the amount it pays for 180 drugs listed under the PBS by at least 23 per cent.

Sigma, which owns the Amcal chemist brand, delivers many of the generic drugs listed in the PBS. Changes to the scheme mean Sigma and its competitors earn a smaller margin on the wholesale distribution of PBS drugs to their pharmacies.

Sigma shares closed 2¢ higher at 65.5¢.

Analysts said they were concerned about the lack of provisions on Sigma's balance sheet that would secure it against tough times.

UBS analyst Dan Hurren said the pharmacy industry was still under considerable stress due to PBS changes reducing their margins.

"[Sigma] could be viewed as being a little bit aggressive given the rest of the industry is certainly expecting bad debts," he said.

Sigma maintained its dividend, fully franked, of 2¢ a share.

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