Australian Pharmaceutical Industries Ltd (ASX:API) shares sink lower on soft full-year result

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).

Instead, I would sooner buy the shares of this top dividend stock .

OUR #1 dividend pick to grow your wealth now is revealed for FREE here!

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!