Investors just loved the earnings upgrade from Australian Pharmaceutical Industries (API), owners of a number of chemist chains including Priceline and Soul Pattinson.
The company told the ASX that it is looking at a sharp improvement in 2013-14 earnings after ruling off its books for the year on August 31.
API said it now expects to make an underlying profit of between $31 million and $31.5 million for the latest year, up from the $28 million to $30 million range in the previous guidance, and a 31% jump on what the company earned in 2012-13.
The underlying result does not include $131 million in write-downs announced by the company in April, which were primarily linked to changes to the value of the company’s loans to pharmacies.
Those write-downs saw API make a net loss of $115 million for the first half of its 2013-14 financial year, more than offsetting the 29% increase in underlying profit.
The market ignored those details and focused on the upgrade, sending API shares 17% higher, to end the day on 68.5 cents.
That was the highest they have been for more than two years.
API 3M – API shares soar on upgrade
API said it had recorded same store sales growth of 6% during the year.
The improvement has been due to the "continued strong sales results from its Priceline and Priceline Pharmacy stores combined with the solid performance from its Pharmacy Distribution business.
"This sales growth has been achieved by a core focus on the customer, despite a challenging retail sector in which the company has also been able to maintain store margins.
"There has also been net growth of 27 stores during the year, lifting the Priceline network to 390 stores," the company said yesterday.
It said it had an 11.9% rise in underlying sales growth of pharmaceuticals, excluding the impact of pricing changes to the Pharmaceutical Benefits Scheme.
The company also said it had delayed the introduction of a new company-wide computer system to make sure the sales momentum going into Christmas isn’t impacted adversely by any problems.
"The company has decided to safeguard the current sales momentum during the Christmas period and delayed the go-live date to the first quarter of calendar 2015. The company has taken a conservative view in relation to the timing of the roll out to ensure no disruptions to this important trading period for both API and its Franchise Partners," directors said yesterday.
"Details of the additional project costs, and expected benefits in future earnings periods, will be provided in the company’s full year earnings announcement in October. This change does not impact the overall benefits expected from the new system."
