ASX Spotlight Series in Hong Kong: Australian Pharmaceutical Industries Limited (ASX:API) CEO and Investor Relations Manager, Stephen Roche


API Limited (ASX:API) runs one of Australia’s leading health and beauty brands in Priceline Pharmacy. And we’re one of three major pharmaceutical distributors in Australia. The Priceline Pharmacy brand has over 425 stores and sales in excess of $1.7 billion. This all results in the fact that we currently have a market capitalisation of over $900 million. We’ve got revenues in excess of $3 billion and we’re on the ASX 200.

You can probably split that into some component pieces to understand the business. So let me describe Priceline Pharmacy firstly. So that’s clearly about growing our footprint. As I said, we’ve already got 425 stores and we see the fact that we can grow that into 500-plus stores, in the medium term. We can do that because there are 5,400 pharmacies in the country, and we clearly think that there is a space for us moving forward. We have grown it somewhere in the order of 20 to 30 stores per annum, over the last three years. So that growth rate is not unachievable – in fact, it is arguably conservative.

Similarly with the Priceline Pharmacy brand, how do we do it? We connect with our customers. So we build on a brand that clearly means that she can shop and have a woman’s playground, for all her health and beauty needs. That comes about by making sure that we deliver to her the most and the widest most famous brands possible, at the best prices. And combine that with an in-store service with professional and a personal touch that can’t be matched. I have to say that we’re investing further in that personal touch, by training and developing our own beauty advisers and health professionals accordingly.

And then I get to pharmacy distribution, which really is a super competitive environment. We’re just trying to simply make sure that we maintain our internal investment, from that part of the business and generate the cash for the organisation. It is a competitive environment, so we just need to make sure that we focus on delivering that best offer to our customers. And also where we can, just assist them in their own business planning requirements.

So we think the biggest opportunity for growth in our industry is simply again, developing our Priceline Pharmacy footprint. Currently with 425 stores, we see an ability to be at 500 stores in the short to medium term as more than achievable. Similarly we see like-for-like growth amongst our existing network of in excess of 3 per cent, being absolutely achievable. So the combination of those organic assets delivering will result in improved shareholder returns.

We just released our first half results for the current financial year, where underlying net profit after tax was up 18 per cent on an underlying basis to $25.3 million. Revenues were up 4 per cent. We moved that to earnings before interest and tax of 15 per cent, which demonstrates the operational productivity that we have in the business. We have done and achieved that through the infrastructure investment we’ve made over the last few years, which generates that operational productivity.

That means that we have a strong focus on costs. So our cost of doing business has reduced in the last four reporting periods and that is something we’re quite proud of. As we have leveraged that investment, we have given the shareholders something quite tangible. Our return on equity is up 210 basis points to now 9.5 per cent. And dividends, more importantly, are also up 25 per cent to 2.5 cents per share. I think 66 per cent up on the two years prior.


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