“Strong” position has led to investments

Despite facing PBS reform and intense competition, API reports $25 million net profit after tax and $2 billion in revenue in its half-year results for 2019

Australian Pharmaceutical Industries (API) has this week reported its half-year results, with total revenue for the six months up 6.6% to $1.98 billion after adjusting out the impact of Hepatitis C medicines and PBS reforms.

Underlying net profit after tax was $26.8 million, in line with the previous corresponding period, and earnings before interest and tax were $44.4 million, up 5.8%.

Net profit after tax was $25 million, up 0.2% on the previous corresponding period, including the impact of financing costs associated with the Sigma Healthcare Limited share purchase.

In December last year API lodged a substantial shareholder notice to confirm it was now holding 12.95% of shares in Sigma.

API had made a non-binding indicative proposal to Sigma’s Board of Directors a few months earlier to acquire 100% of the shares in Sigma, via a scheme of arrangement, however this was turned down in March this year.

API this week confirmed that discussions ceased in March regarding the proposal, and says it continues to review its shareholding.

“We remain focused on delivering our core strategy,” says API CEO and Managing Director Richard Vincent.

“The combination of our highly cash generative pharmacy distribution business with an attractive portfolio of growth businesses means we are well positioned to continue to deliver better returns for shareholders.”

API’s reported pharmacy distribution revenue excluding Hepatitis C and PBS reform was up 8.8% on the previous corresponding period at $1.4 billion.

“Despite the impacts of PBS reform and intense competition across the sector, pharmacy distribution delivered a creditable result,” says Mr Vincent.

“It generates strong and predictable cashflows, which enables API to continue to invest behind its growth assets.”

Priceline Pharmacy total network sales for the period were up slightly at $1.1 billion, with total network like-for-like sales up 0.3%.

Compared to the last financial year when total network like-for-like sales were down 0.2%, this is a positive shift that “reflects a strong performance given prevailing retail conditions”, says API.

“Retail trading has remained variable however the fundamentals of our business remain in good condition and we expect to deliver positive growth again in the second half,” says Mr Vincent.

“Our plans to drive sales and profitability are delivering positive results, with further major product launches and category development initiatives coming in the second half.

“Despite increased competition in the health and beauty market we held market share, whilst delivering an increase in register gross profit margin.”

Mr Vincent says API’s consumer brands performed “exceptionally well”, with revenue up 20.7% to $34.1 million compared to the previous corresponding period.

Its 2018 acquisition Clear Skincare also saw a revenue increase of 21% on the prior half, which was before ownership.

The business has had “a solid performance”, says Mr Vincent.

“API’s financial position remains strong and has allowed us to make an investment in Sigma Healthcare, acquire Clear Skincare and provide additional inventory to capitalise on sales opportunities during the half.”

API declared an interim dividend for the first half of 2019 of 3.75 cents per share fully franked, up 7.1% on the previous corresponding period, with the continued increase reflecting the confidence of the API Board in the future performance of the company.

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