In morning trade the Australian Pharmaceutical Industries Ltd (ASX: API) share price has drifted lower following the release of its full year results.
At the time of writing the pharmacy chain operator and wholesale distributor's shares are down 2% to $1.68.
Here is a summary of how the company performed in FY 2018 compared to a year earlier:
- Revenue fell 0.9% to $4,026.3 million.
- Priceline Pharmacy total network sales grew 2.1% to $2,110 million.
- Underlying EBITDA was down 1.5% to $118.7 million.
- Underlying net profit after tax up 0.9% to $54.7 million.
- Total dividend up 0.5 cents to 7.5 cents per share.
- Outlook: Earnings growth expected in FY 2019
Overall, I felt this was a soft result from Australian Pharmaceutical Industries and I can't say I'm surprised to see its shares drift lower today.
Management explained that total revenue fell slightly in FY 2018 due to a drop in demand for Hepatitis C medicines of approximately $155 million.
If you were to exclude Hepatitis C medicines from the equation, revenue would have increased by 3.3% on the prior corresponding period.
The decline in Hepatitis C medicines sales for its Pharmacy Distribution business offset the growth of its Priceline Pharmacy business. Priceline Pharmacy sales rose 2.1% to $2,110 million thanks to the addition of 13 new stores to its network. Like-for-like sales were down 0.2% during the period.
In respect to its decline in EBITDA, management has advised that this was due primarily to the impact of an increased number of price reduction cycles in the PBS during FY 2018 and exclusive direct distribution arrangements.
Looking ahead, management advised that it expects earnings growth in FY 2019. CEO Richard Vincent believes the business is positioned with the right assets to achieve that.
He said: "We are confident in the prospects of our different, complementary businesses and we have the management team and financial strength to accelerate the Clearskincare network, expand the scale of Consumer Brands, and develop our Priceline Pharmacy offer and the services to our independent network."
However, he has held back on giving any real guidance for FY 2019 with this release. Instead, he intends to wait for the conclusion of the Christmas trading period and the outcome of the CSO review before providing further guidance.
Should you invest?
Given the challenges that it faces and its low growth expectations over the coming years, I don't think Australian Pharmaceutical Industries' shares offer value for money right now.
Because of this, I intend to avoid them along with industry peers EBOS Group Ltd (ASX: EBO) and Sigma Healthcare Ltd (ASX: SIG).
