Sigma Healthcare's FY25 EBIT Surge: Navigating Merger Costs to Highlight Operational Strength

Sigma Healthcare has delivered a remarkable 183.5% rise in Normalised EBIT for its fiscal year 2025 (FY25), reaching $68 million. This robust performance, reported for the year ending 31 January 2025, underscores the company’s ability to execute its strategic goals amid significant one-off merger-related costs. While the press release emphasizes the full-year results, the 9-month Normalised EBIT growth aligns with the first half of FY25, reflecting consistent momentum in Sigma’s core operations. However, the merger with Chemist Warehouse Group (CWG) introduced complexities that investors must parse to assess the company’s long-term trajectory.

The Numbers Behind the Narrative

The Normalised EBIT figure excludes $43.5 million in merger-related expenses, $2.8 million in CWG supply contract onboarding costs, and an $8.2 million deferred tax write-off—all factors that dragged the Statutory EBIT down to $21.7 million and caused a statutory net loss of $13.8 million. This stark contrast between Normalised and Statutory metrics highlights Sigma’s reliance on exclusionary accounting to showcase its operational resilience.

The revenue story is equally compelling. Normalised net revenue surged 50.9% to $4.8 billion, driven by a 40% volume increase and an 8.5% like-for-like wholesale sales growth from its Amcal and Discount Drug Stores divisions. A new 5-year wholesale agreement with the National Pharmaceutical Services Association (NPSA) further bolsters Sigma’s supply chain dominance, ensuring steady funding for medicine distribution.

The Merger’s Dual Impact

The CWG merger, effective 12 February 2025, marks a pivotal shift for Sigma. While the deal’s upfront costs weighed on statutory results, it positions the combined entity to capitalize on synergies. The next financial report, covering the 12 months ending 30 June 2025, will integrate CWG’s operations, offering clarity on cost savings and revenue synergies. Investors should monitor how the merged entity’s EBIT margins evolve post-integration.

Dividend Policy and Market Perception

Sigma’s post-merger dividend policy targets a 50–70% payout ratio of NPAT, signaling a commitment to shareholder returns once profitability stabilizes. However, the merger’s integration risks and the statutory loss in FY25 may temper near-term dividend expectations. Analysts will scrutinize how swiftly Sigma can convert CWG’s scale into bottom-line growth without recurring one-off charges.

Conclusion: A Strategic Turning Point

Sigma Healthcare’s FY25 results are a testament to its operational execution, with Normalised metrics validating its growth narrative. The 183.5% EBIT surge, driven by volume gains and contractual wins, suggests underlying strength that merger-related costs have obscured. While the statutory loss is a concern, the exclusion of CWG’s integration expenses paints a clearer picture of Sigma’s intrinsic value.

Looking ahead, the merger with CWG presents both opportunities and challenges. The new NPSA agreement and the expanded supply chain network provide a solid foundation, but the merged entity’s ability to eliminate redundancies and leverage synergies will determine its long-term success. Investors should prioritize Normalised metrics and monitor Sigma’s FY26 results—the first full year of combined operations—to assess whether the merger delivers on its 50–70% NPAT payout promise.

With a normalized revenue base of $4.8 billion and a proven track record of margin expansion, Sigma’s fundamentals remain sound. However, the market’s patience will be tested until the CWG integration’s financial benefits become evident. For now, the 9M FY25 growth trajectory signals Sigma’s operational resilience, but the true test lies in the years ahead.

In summary, Sigma Healthcare’s FY25 results are a mixed bag—operationally strong but financially strained by one-time costs. The merger with CWG is a high-stakes gamble that could redefine Sigma’s position in the healthcare sector. Investors should remain cautiously optimistic, focusing on normalized metrics and future synergies to navigate this pivotal phase.