As gloom grips Australia's retail sector, business is improving for Australian Pharmaceutical Industries (API), with the health, beauty and pharmacy products retailer reporting solid profits and foreshadowing significant expansion.
API on Thursday booked a net profit for the first six months of its fiscal year of $18.3 million, compared to a $35.1 million loss in the prior corresponding period.
The result included the recovery of $9.1 million from an insurance claim arising from damage caused by the Queensland floods to API's Ipswich distribution centre.
Underlying net profit rose 10.3 per cent to $11.8 million.
API expects earnings to continue improving in the second half.
And it also plans to expand its network of Priceline stores, but would not provide a figure on the number of new outlets.
"We think that between now and 2015 ... we'll grow quite significantly if we're to retain customer relevance," API chief executive Stephen Roche told analysts and reporters during a briefing on Thursday.
However, Mr Roche would not provide a number.
Mr Roche said API had worked hard to become "the leading health and beauty retailer to women in this country", which he said was reflected by the fact that there were 3.7 million holders of a Priceline loyalty card - up 8.8 per cent on one year ago.
Mr Roche referred to beauty, health and pharmacy chain Shoppers Drug Mart in Canada, which he said had about 1,000 stores across a population of about 30 million people.
"That's much more than the 332 that we (API) have now," he said.
Mr Roche also said API was also on track to offer the full range of Priceline products online by the middle of the year.
"We do recognise the importance of an on-line presence for our customers. They want it. Through our current browse-on-line capability page, views have increased to 1.7 million views in March of this year," he said.
API's first half revenue fell 12.5 per cent to $1.6 billion as pharmacy distribution sales dropped $249 million, largely as a result of drug maker Pfizer deciding to distribute directly to pharmacists.
Mr Roche described the first half result as solid.
Much of API's profit was driven by its health and beauty retail chain Priceline, which lifted sales by 3.1 per cent, aided by the opening of five new stores.
Same-store sales rose 2.8 per cent.
Mr Roche said the significant impact of the April 1 price cuts to the federal government's drugs subsidy scheme, the Pharmaceutical Benefits Scheme (PBS), would hit a year from now.
The Pharmacy Guild of Australia had suggested that the April 1 price cuts would reduce PBS costs to the federal government by eight per cent.
Mr Roche said pharmacists would need to diversify their sources of earnings, following the PBS reforms, which made adding a Priceline health and beauty offering to a pharmacy attractive.
"We do have a team mobilised, with a national recruitment program under way," Mr Roche said.
He also said competition from discounters and supermarkets for non-dispensary items was intensifying.
API declared a fully-franked interim dividend of 1.5 cents per security.
Shares in API were 2.5 cents higher at 36.5 cents at 1235 AEST on Thursday.
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