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Sigma says staff cuts part of $100 million cost savings

Sigma Healthcare has identified over $100 million in cost saving opportunities after conducting an extensive review of its business following the loss of its contract with Chemist Warehouse.

Sigma chief executive Mark Hooper confirmed to the AFR that some of these savings would come from personnel cuts across the business, with positions to be reviewed once the impact of the Chemist Warehouse contract is realised.

While the pharmaceutical retailer expects to deliver approximately $75 million in underlying EBIT for FY19, it is forecasting an EBITDA of $55 to $60 million for FY20.

“FY20 will have its challenges given the uncertainty of the exact timing for the MC/CW business to fully exit and as we begin to implement the changes identified in the review,” Hooper said in a statement to investors.

“However, capturing the identified benefits from this program will see FY23 EBITDA return to a similar level as in FY19.”

According to Hooper, this outcome is achievable without assuming any upside from the potential acquisition by Australian Pharmaceutical Industries (API).

Chairman Brian Jamieson noted that, independent of the API proposal, Sigma now has a clear vision of where it is heading as a standalone business.

“We are open to continuing discussions on identifying potential merger opportunities, but this needs to be assessed in the context of what is in the best interests of Sigma shareholders,” Jamieson said.

API expects deal to go through “shortly”

API chairman Mark Smith recently told shareholders he expects to sign a non-disclosure agreement with Sigma shortly, kicking off a due-diligence process to commence the merger, which would provide significant benefit for consumers, shareholders and the independent pharmacy community.

“In the face of slowing revenue growth and compressed margins in the wholesaling sector, this would provide scale and volume, giving greater scope for the ongoing investment in technology,” Smith told investors at API’s AGM.

“Such investment would ensure a more competitive, sustainable and more efficient wholesaling model.”

API offered a 69.3 per cent premium on the Sigma share price on December 14, 2018, in an effort to bring the Priceline Pharmacy, Pharmasave, Soul Pattinson Chemist and Chemist King under one roof

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