In morning trade the Australian Pharmaceutical Industries Ltd (ASX: API) share price has edged 2% higher to $1.61 following the release of its FY 2017 results.
Key takeaways from the release include:
- Revenue increased 5.8% to $4,061 million.
- Priceline sales up 5% to $2,100 million.
- Total retail like-for-like store sales down 0.4%.
- Underlying net profit after tax of $54.2 million, up 5.4% on FY 2016.
- Underlying earnings per share of 11.1 cents.
- Final dividend of 3.5 cents per share fully franked. Full-year dividend of 7 cents per share, up from 6 cents per share in FY 2016.
- Outlook: Trading conditions unlikely to improve in the near-term, but expects to continue to deliver growth in organic earnings in the coming years.
Overall I felt this was a reasonably solid result given the weak trading conditions being experienced in the Australian retail industry.
While it still fell well short of its original guidance of net profit after tax growth of at least 10%, it did beat the revised full-year profit growth guidance of 5% it gave in August.
A key driver of this growth was its Pharmacy Distribution business. Segment revenues grew by 7.3% year-on-year to reach $2,956 million.
Elsewhere, the addition of 20 new Priceline stores helped take its Retail sales 5% higher to $2,100 million.
This brought its Priceline network to a total of 462 stores. Management expects to add another 20 stores in FY 2018.
Looking ahead, management doesn't expect the weak trading conditions to improve in FY 2018. Because of this and its guidance miss this year, it appears as though it is reluctant to give any formal FY 2018 guidance.
Instead, the company's vague outlook includes the statement that it expects "to continue to deliver growth in organic earnings for shareholders in the coming years."
Should you invest?
Based on today's result, Australian Pharmaceutical Industries' shares are changing hands at a little over 14x earnings and provide a trailing fully franked 4.4% dividend.
I think this is good value and would suggest investors consider snapping up shares on any weakness today.
Whilst trading conditions are weak now, the company continues to win market share and grow its footprint. When the retail industry improves again, I expect Australian Pharmaceutical Industries will be in a solid position to grow earnings at a strong rate again.
In light of this, I would choose it over rival Sigma Healthcare Ltd (ASX: SIG).
