Ferret's Stock to Watch: AUSTRALIAN PHARMACEUTICAL IND. 09:01, Wednesday, July 25, 2007
COMPANY SHAKES OFF DISAPPOINTMENTS AND SEEMS IN TURNAROUND MODE
Sydney - Wednesday - July 15: (RWE Aust Business News) ******************************************************
OVERVIEW ********
Shareholders of Australian Pharmaceutical Industries (ASX:API) have been through some disappointments in the last year or two.
Its grand marketing plan called the House brand failed to produce the goods and the shares became stuck around $2.
The sale process for the House brand has progressed faster than expected and API has agreed to sell the business to Global Retail Brands Pty Ltd, a member of a specialist industry retail group.
The transaction, valued at $8.5 million (subject to completion accounts), is expected to be completed by July 31.
Directors say API will show a profit on the sale.
The evaluation process regarding API retaining or selling the Price Attack business is continuing.
Dispatch of House Brand was signalled in June.
Meanwhile at different times, the company was in the speculative arena for all or part of the group but it all came to nothing.
Directors now appear to be on the right track with hopefully better prospects ahead.
The company yesterday announced it will be concentrating its focus on further developing its leading health and beauty business following the sale of its House franchise brand.
Managing director and chief executive officer, Stephen Roche, said that completing the sale of House was part of API's aim to concentrate more on its core growth assets.
"The opportunity for API is to build on our unique position in Australia's health and beauty market, where we have a number of industry leading positions," Mr Roche said.
"The House brand operates in a highly competitive market, primarily driven by suppliers, and it wasn't going to provide us with material growth opportunities in the future.
"It also wasn't aligned with our strategic plan to build the leading pharmacy, health and beauty presence by 2010-11.
"We had taken the House brand as far as it could go in API without significant further investment and we believe it is a better use of shareholder funds to focus on core business opportunities." Mr Roche declared.
SHARE PRICE MOVEMENTS *********************
Shares of API yesterday edged up 1c to $2.01. Rolling high for the year is $2.74 and low $1.63. Dividend is 3c to yield 1.5pc. EPS and p/e ratio were in negative. The company has 257.3 million shares on issue with a market cap of $514.6 million.
In another development this month that should benefit the company, PharmX Pty Ltd, a Corum Health Services joint venture company which facilitates electronic ordering between pharmacists and their suppliers, have agreed to allow Australian Pharmaceutical Industries to use the PharmX ordering gateway to streamline its ordering process for customers.
Graham Cunningham, PharmX chairman, said, that API understands the importance of supply chain efficiency in delivering benefits to both pharmacists and the supplier.
Last month, shareholders were rattled over the results for the full year ended April 30, which showed a net loss of $11.3 million.
Earnings before interest, tax, depreciation (EBITD) and significant items were $53.1 million for the year but after significant items EBITD was $22.6 million.
As advised on June 26, the EBITD for the second half was $36.4 million before significant items of $6.2 million.
Sales for the year were $2.649 billion, up 2.6 per cent on the prior year.
The Board of directors will be looking for further improvement in the trading position.
Mr Roche, said that the company was now positioned to push forward with the development of its strategy.
BACKGROUND **********
Australian Pharmaceutical Industries Ltd joined the stock exchange list in 1997 and was founded in 1910.
It has become one of Australia's leading health and beauty companies.
API's pharmacy business provides wholesale distribution, business and marketing services to community pharmacies across Australia.
The retail division is a leader in the health and beauty market managing retail brands such as Priceline.
The consumer division is a niche player in over-the-counter pharmaceuticals and is based in New Zealand.
API's heritage is in the pharmacy market and today it is one of the most well known participants in that industry through it's Pharmacy division activities in wholesale distribution, marketing and retail services.
In May API's major shareholder, Washington H Soul Pattinson, was rumoured to be selling its shares in the company.
API has been advised by Washington H Soul Pattinson that it has received a number of approaches but it is not marketing its shareholding in API and has had no firm offers for its holding from any third parties.
