Priceline delivers the goods: API

Rebecca Urban
October 26, 2012
The Australian

AUSTRALIAN Pharmaceutical Industries has trumpeted the performance of its Priceline and Priceline Pharmacy businesses as a key factor in its return to profit over the past financial year.

The pharmacy wholesale and retail business has posted a $30.3 million profit for 2012 — a significant turnaround from last year’s $23.3m loss — in the face of multiple challenges, including a difficult retail environment, increased competition from discounters and changes to the way the nation’s Pharmaceutical Benefits Scheme is funded.

As a result, sales revenue across the group fell 6 per cent to $3.2 billion during the 12 months to the end of August.
But API managing director Stephen Roche said the company had been able to offset lost sales from its pharmacy distribution business by clawing back discounts to pharmacy customers, trimming costs from the business and, significantly, through the solid performance of Priceline.

He said Priceline and Priceline Pharmacy stores, excluding the dispensary business, had reported retail sales growth of 3.5 per cent throughout the year and comparable-store sales growth of 2.3 per cent.

The above-market performance firmly placed Priceline among the top tier of Australian retailers, comparable to the industry giants, Woolworths and Wesfarmers, Mr Roche said.

The result saw API shares hit a two-year high yesterday, as the price rose more than 5 per cent to 50c. “I think the reality is we’ve shown we can continue to adapt to the structural changes in pharmacy,” Mr Roche told The Australian, pointing to the recent momentum in the growth of the company’s network of stores.

Priceline added a further 20 stores during 2012, taking its total store numbers to 350, and is in advanced discussions with an additional 20 potential franchisees.

The expansion is noteworthy given the network has remained relatively stable over the preceding two years, despite the company’s growth aspirations and an active recruitment campaign.

And while several retailers have recently expressed a view that the prolonged retail downturn might be coming to an end, Mr Roche was reluctant to join the chorus.

“I’m not that brave,” he said. “I still see a lot of fragility.”

Mr Roche said most Australian households were continuing to struggle to balance the cost of living, including rising utility bills, and he would be keeping a close eye on interest rates to see whether any further cuts eased those pressures.

Despite this, the company is relatively bullish on its outlook for the year ahead, predicting a further increase in underlying earnings on the back of continued improvements in operational efficiencies, further expansion in the Priceline chain and greater revenue from the pharmacy distribution business.

API has declared a final dividend of 1.5c per share, lifting its full-year distribution to 3c a share.