Australian Pharmaceutical Industries (API), which is one of the Sydney companies around Washington H Soul Pattinson, has completed what was an upbeat interim reporting season for the group.
New Hope, TPG and Brickworks all reported solid rises in revenue and earnings, with higher dividends. API did likewise with a one cent lift in interim payout to 3.5 cents a share off the back of a 27.2% jump in net interim earnings for the six months to February 28 to $29.1 million.
API says total network sales rose 7.2% in the half (but comparable store sales were only up a weak 0.4%) to $2.2 billion While describing trading conditions in retail as tough (and acknowledging the impending arrival of Amazon) API is still looking to grow and plans to boost its Priceline Pharmacy network by at least 20 stores during the current financial year and to lift its full-year net profit by at least 10%.
"We anticipate that consumer sentiment is likely to remain more challenging than in previous years, however we remain confident in our retail store pipeline and in reducing operational costs as a consequence of our prior capital investments," API chief executive Richard Vincent said in a statement.
"API expects another year of record full-year net profit after tax, a minimum 10 per cent up on FY16, assuming the current trading conditions persist."
Mr Vincent said that in the first half, the company had managed to lift profit and returns to shareholders through organic growth in its Priceline network, despite slower retail conditions.
API said it lifted market share in the health and beauty sector, with gains in the dispensary, skincare, over-the-counter health, and colour cosmetic segments.
Revenue from pharmacy distribution grew by 18%, reflecting the effect of the new high-value hepatitis C medicines (which rival Sigma also reported).
Excluding the effect of the hepatitis C medicines and reforms to the Pharmaceutical Benefits Scheme, underlying growth was 5.9%.
Amazon’s entry into the Australian health and beauty market will also not be underestimated, according to Mr Vincent. “What we’ve done already, in terms of the new store format, and creating playgrounds and creating that in-store experience, is critical to our customers remaining loyal to us,” he told the media yesterday.
API has been focused on improving the operational efficiency of its health and beauty stores, and says it will now turn to investing in customer experience to improve satisfaction and service.
The look of Priceline stores will be updated and API has relaunched its Sister Club loyalty program, which has 6.7 million members, to provide greater rewards and more personalised offers for higher spending members.
The move to improve the personal experience of shoppers is a direct reply to the growth on online businesses and the arrival of Amazon.
API shares one cent higher at $2.05 at the close yesterday.
