Sigma Healthcare has completed a reverse acquisition merger with Chemist Warehouse, reporting $6 billion in revenue and declaring a fully franked dividend. The merger reshapes Australia’s pharmacy landscape with ambitious synergy targets and operational shifts.
- Reverse acquisition merger completed February 2025
- Annual revenue surged 82% to $6 billion
- Net profit after tax slightly down 2.1% to $530 million
- Synergy target upgraded to $100 million per annum
- Three distribution centres slated for closure post-year-end
Merger Creates New Healthcare Powerhouse
In a landmark deal finalized on 12 February 2025, Sigma Healthcare Limited legally acquired Chemist Warehouse, though accounting standards treat Chemist Warehouse as the acquirer in a reverse acquisition. This complex transaction has forged a dominant player in Australia’s pharmaceutical retail and wholesale sector, combining Sigma’s wholesaling prowess with Chemist Warehouse’s retail footprint.
The consolidated financial statements for the year ended 30 June 2025 reflect this integration, incorporating a full 12 months of Chemist Warehouse’s results and nearly five months of Sigma’s post-merger operations. The newly merged entity reported a substantial 82.3% increase in sales revenue to $6 billion, underscoring the scale and market reach achieved.
Financial Performance and Synergy Ambitions
Despite the revenue surge, net profit after tax attributable to owners edged down 2.1% to $529.9 million, reflecting merger-related costs and integration expenses. Statutory earnings before interest and tax (EBIT) rose 32% to $767.9 million, while normalised EBIT, adjusting for one-off merger costs, climbed 41.4%.
Management has raised its synergy target from $60 million to $100 million per annum, aiming to unlock efficiencies within four years. This ambition comes alongside a $95–105 million investment in integration costs, signaling a commitment to operational excellence and cost discipline.
Operational Changes and Network Expansion
The merged group now operates 967 stores across Australia and international markets including New Zealand, Ireland, and the UAE. The Chemist Warehouse retail network delivered a 14.1% increase in total sales, with like-for-like growth of 11%, driven by strong performances in key categories such as beauty, vitamins, and healthcare products.
Supply chain capabilities have scaled accordingly, with 14 distribution centres handling approximately 530 million units annually. However, following a strategic review, the group announced plans to close three distribution centres in Australia, aiming to optimize logistics and reduce costs.
Governance, Dividends, and Executive Remuneration
The merger has prompted significant governance updates, including the establishment of an Independent Board Committee to oversee related party transactions, which are material given the involvement of key executives and family members in franchise ownership and leasing arrangements.
Directors declared a fully franked final dividend of 1.3 cents per share, payable in September 2025, reflecting confidence in cash flow and shareholder returns. Meanwhile, the executive remuneration framework is undergoing a comprehensive review to align incentives with the merged group’s strategic objectives, including extended performance periods for short- and long-term incentives.
Looking Ahead
With a strong balance sheet boasting $4.7 billion in net assets and net debt well below initial forecasts, Sigma Healthcare is positioned to self-fund growth and reward shareholders. The integration journey, however, remains ongoing, with key accounting valuations still provisional and operational restructuring underway.
Bottom Line?
As Sigma Healthcare navigates post-merger integration and operational shifts, investors will watch closely for synergy delivery and strategic execution.
Questions in the middle?
- How will the closure of distribution centres impact operational costs and service levels?
- What are the implications of extended STI and LTI performance periods on executive incentives?
- How will the Independent Board Committee manage potential conflicts in related party transactions?