Shares in chemist wholesaler Australian Pharmaceutical Industries have risen as investors focus on strong underlying earnings and ignore a series of writedowns that have led to a net loss.
The owner of the Priceline, Soul Pattinson and Pharmacist Advice brands suffered a $90.8 million net loss for the year to August 31, a major U-turn on the $24.3 million profit in 2012/13.
API’s underlying net profit after tax came in at $31.65 million, up from $23.9 million last year and exceeding the company’s guidance issued in early September.
It’s underlying profit excludes $131 million in writedowns announced in April, which are primarily linked to changes to the value of its retail brand, loans to pharmacies and impairment of hospital wholesaling business Clifford Hallam Healthcare (CH2).
API expected stronger earnings this financial year on the back of operational efficiencies and the expansion of its Priceline Pharmacy chain to include at least 20 more stores.
Investors appeared impressed, with API’s share price lifting 2.75 cents, or 4.1 per cent, to 69.75 cents, while the wider market was down about 0.18 per cent at 1225 AEDT.
CMC Markets chief market analyst, Ric Spooner, says the upbeat guidance and strong sales growth are likely behind the lift.
“This positive reaction indicates that investors are pleased underlying earnings came in a fraction above guidance,” he said.
“Sales growth was also good given the difficulties with the Pharmaceutical Benefits Scheme being cut in areas.”
API reported overall sales growth of 11.1 per cent for its Priceline and Priceline Pharmacy network, and like for like sales growth of six per cent on the previous year.
Revenue for the year rose slightly, to $3.3 billion, from $3.2 billion.
CEO, Stephen Roche, says the solid performance came during a time most retailers had experienced a slowdown in spending.
“The result is unquestionably strong. Our core assets have delivered in improved sales and assets,” he told an analyst briefing on Thursday.
“When taken in the context of the overall economy, the generally tough times faced by retailers and particularly industry dynamics of the PBS reforms, the results are even more pleasing.”
He attributed the strong performance to financial discipline and brand strength.
However, he described the impairment charges as “regrettable” but a prudent and conservative action by the board.
He said API would look at selling CH2 within the next 12 to 18 months.
API to expand Priceline brand:
*Net loss of $90.8m, down from $24.3 m profit in 2012/13
*Revenue $3.3b, up 5.7 pct from $3.2b
*Fully-franked final dividend of 2.0 cents per share, up 14.3 per cent from 1.75 cents
AAP
