The owners of the Priceline and Priceline Pharmacy network remain confident of expanding to 500 stores despite reducing expectations of growth.
Pharmacies supplier and health and beauty retailer Australian Pharmaceutical Industries (API) said on Wednesday that it had reduced its expectations of store rollout by 100 stores as the pharmacy sector underwent a structural change partly due to reforms to the federal government’s Pharmaceutical Benefits Scheme (PBS).
“While we have adjusted our internal modelling to reflect a more conservative and historical network growth rate, management still has confidence that reaching approximately 500 stores over the next five years is very achievable as pharmacists transition to a retail brand to compensate them for dispensary margin pressures,” API chief financial officer Graeme Fallet said in a briefing for market analysts on Wednesday.
“Priceline Pharmacy is very well positioned to benefit from that transition.”
API on Wednesday booked a loss of $115 million for the first six months of its fiscal year, after major asset writedowns.
The loss for the six months to February 28 compares to a $12.9 million profit for the same period in the prior fiscal year.
API, which owns the Priceline, Priceline Pharmacy, Soul Pattinson and Pharmacist Advice brands, announced asset writedowns of $131 million earlier in April, mainly related to changes to the value of its loans to pharmacies and a review of the expected growth of its retail network.
API’s underlying profit, which excludes the writedowns, rose 29 per cent to $16.2 million.
API chief executive Stephen Roche said the impairment charges were regrettable, but the underlying result was very strong and strategic initiatives were gaining traction.
API expects its underlying net profit for the full year to be in the range of $28 million to $30 million.
In the first half, API’s network of Priceline health and beauty stores and Priceline Pharmacy stores, which combine health and beauty products with pharmacy services, lifted sales by 11.5 per cent to $395.3 million and lifted gross profit by $6.2 million.
The number of Priceline and Priceline Pharmacy stores grew to 373, from 363.
Online sales in the six-month period reached $2.2 million, nearly a threefold increase on the same period last year.
API said the inclusion of health and beauty products in Priceline Pharmacy stores was helping pharmacists sustain sales and profits, compared to independent pharmacists who were feeling the pressure from reforms to the PBS, and competition from supermarkets and discount operators.
API said its pharmaceuticals distribution business performed well, with sales up two per cent to $1.17 billion.
Shares in API were 2.5 cents higher at 56 cents at 1552 AEST.