Profits hit by COVID lockdowns

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API has released half-yearly results showing a 29% drop in net profit, with big drops in profit at its two largest CBDs

Australian Pharmaceutical Industries has released its results for the half year ending 28 February 2021, showing a 25.2% drop in Reported Earnings before Interest and Tax (EBIT) to $29.4 million.

The organisation’s underlying EBIT was $32 million, down 26.5% on the prior corresponding period (PCP).

Reported net profit after tax (NPAT) was down 29.3% on the prior corresponding period, to $15.9 million, while underlying NPAT dropped by 30.3% on the PCP to $17.7 million.

API also announced an interim dividend of 1.5c, representing a payout of 47% of NPAT.

“These results reflect the impact of pandemic-related lockdown restrictions and lower CBD foot traffic on API’s retail businesses in Australia and New Zealand compared to the pcp, which was unaffected by COVID,” said API CEO and managing director Richard Vincent.

“Priceline Pharmacy’s like-for-like sales were down significantly in its two largest CBDs with Melbourne down by 65% and Sydney down by 51%.

“Our trading result is in line with the level indicated at our AGM in January. The Melbourne lockdown persisted into early November and we had further lockdowns in December in parts of Sydney and Auckland.

“While CBD foot traffic is slowly recovering, it was well below the prior period and consequently first half retail trading results are significantly below last year’s COVID-free result.”

However he said that the fact that revenue is only down 2.6% on the prior period “points to the resilience of our business model”.

Mr Vincent said a recent investment in the Priceline Sister Club loyalty program has begun to pay dividends, with about $300 million in front-of-shop sales in the half coming from members.

“Retail register revenue from Sister Club members increased to 56.1% compared to 54.3% in the previous half.

“Before COVID hit we also invested in improving our health offering via intelligent machine health checks and eScripts, and we can see the benefits of that investment through spend on scripts moving into positive territory,” Mr Vincent said.

Overall, at Priceline Pharmacy retail register revenue was down 10.7% to $526 million, with gross profit dropping 8% to $103 million.

“Priceline’s large CBD footprint is impacting the speed of our recovery but we are confident in the business model, the strength of which is evident in strong like-for-like sales growth in suburban stores and in those states that were largely COVID-free, and in the fact that we held our market share despite a reduction in the market demand for cosmetics,” said Mr Vincent.

“We continue to re-negotiate leasing agreements with our CBD landlords and these negotiations are helped by our proven determination to close stores where we cannot achieve satisfactory rental agreements.

“Total network revenue, which includes dispensary revenue, was down by a lesser factor of 4.1%.”

While store network numbers remained unchanged at 474 stores, API expects store numbers to grow in the second half.

However, “With the shift in consumer foot traffic there may be further closures of non-pharmacy company-owned stores.”

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