Takeover target Australian Pharmaceutical Industries is making sure both its putative bidders understand how it is well it is performing at the moment with a surprise earnings upgrade ahead of the release of its full year results later this month.
API, which operates the Soul Patts and Priceline pharmacy chains, as well as a growing chain of skincare clinics yesterday lifted its full year earnings guidance, telling the ASX it expects underlying earnings before interest and tax to be $70 million.
The company had told the market back in July it expected this figure to be between $66 and $68 million, but stronger than expected sales through suburban (stand alone, not mall-based) pharmacies and online channels had boosted that figure.
““API recorded a stronger trading performance through our suburban and regional Priceline Pharmacies as well as online. We also experienced elevated volumes through our Pharmacy Distribution business that we were not anticipating,” API’s CEO Richard Vincent said in Monday’s statement.
API expects reported earnings to come in at $28 million for the full year ending August 2021. The business expects to complete its sale of its New Zealand pharmaceuticals segment in the first quarter of the 2022 financial year.
API is currently being pursued by two suitors: Wesfarmers, which purchased a 19.3% stake in API last week and has a $1.55 cash proposal on the table, and pharmaceuticals wholesaler Sigma Healthcare which has a cash and shares offer that was valued at $1.57 a share when made last month.
API has also told the ASX on Monday that it will “vigorously defend” a class action brought against it by Priceline franchisees.
As has been reported in the media, current and former franchisees have taken action against the pharmacy wholesaler with allegations it asserted too much control over their pharmacies.
The dispute relates to the fees that pharmacies had to pay as part of their franchise agreements with API as well as the level of control Priceline had over the operation of pharmacy stores.
“API denies the plaintiffs’ allegations and will vigorously defend the action. API said that it remains focused on supporting Priceline Pharmacy franchisees through these difficult COVID-19 times,” the company told the ASX.
The upgrade and defence of the legal action saw API shares edge up to $1.515 yesterday.
