Priceline set to grow despite sales fall
Pharmacies operator and health and beauty products retailer Australian Pharmaceutical Industries is looking for acquisitions to boost its retail operations, and says it will continue to open more stores despite challenging consumer sentiment.
API operates Priceline health and beauty stores, and supplies Priceline, Soul Pattinson and Pharmacist Advice pharmacies.
Chief executive Richard Vincent says the company is looking for modest acquisitions that it can readily fund, and which will enhance the group’s retail operations.
“We’re looking for things that are linked to our core competencies, which are retail, we’re looking for areas that can leverage our key assets such as the Sister Club (loyalty program) and our relationship with women, and of course we’re looking for businesses that have high growth potential and high profit potential, and in the health and beauty space,” Mr Vincent said on Thursday.
“It’s less likely to be around consumer brands.
“”It’s more likely to be around a retail acquisition.”
API made a net profit of $24.9 million in the six months to February 28, down 14.4 per cent on the same period a year earlier.
Total sales from Priceline Pharmacy and Priceline stores were up 2.1 per cent, as there were 16 stores added to the network from a year ago, taking the total stores to 466.
Sales in dispensary and over-the-counter health products grew, but that was offset by falls in the more discretionary beauty products.
Comparable store sales, excluding dispensary, were down 1.7 per cent.
API said that fall reflected challenging consumer sentiment and increased competition.
Nonetheless, Mr Vincent said API expects to continue to expand the Priceline Pharmacy network during the year, but is prepared to close stores if landlords hold out for unrealistic rents.
API said the underlying performance of its drugs distribution business was strong, taking into account the decision by some manufacturers of more profitable Pharmaceutical Benefits Scheme medicines to sell those drugs directly rather than through drug distributors operating under the Community Services Obligation.
The aim of the CSO for pharmaceutical wholesalers is to ensure all Australians can access the full range of PBS medicines via their community pharmacy within 24 hours.
Mr Vincent said the federal government needs to ensure that if a medicine is listed on the PBS, CSO distributors such as API should be able to supply that product.
API expects its underlying result in its 2018 fiscal year to be marginally above the prior year, assuming current trading conditions do not deteriorate further.
API shares were down 4.25 cents, or 2.8 per cent, lower at $1.4625 at 1235 AEST.
CHALLENGING CONSUMER SENTIMENT, COMPETITION CRIMP API PROFIT
* Half-year net profit down 14.4pct to $24.9m
* Revenue down 0.3pct to $2bn
* Interim dividend unchanged at 3.5 cents per share, fully franked