Shares of Australian Pharmaceutical Industries Ltd (ASX: API) jumped almost 2% today following the release of its 2015 financial year profit results, before trending slightly lower.
For the year ended 31 August 2015, API said net profit after tax climbed to $43.1 million, up a blistering 37.6% on last year's underlying profit.
"The sustained earnings growth is coming from strong operational execution and financial management in line with our strategic plans," API's CEO and Managing Director, Stephen Roche, said. "Our focus on the customer and financial management over many years is delivering consistent growth in our capital returns for shareholders."
Retail sales were again the crown in the jewel for API with Priceline's retail sales, which exclude prescription sales, rising 10.4% to $1.05 billion for the period. "We continue to expand the Priceline Pharmacy network which means our growth strategy remains on track," Mr Roche said.
Group return on capital employed (ROCE) jumped to 13.5% for the period, as the Priceline pharmacy network grew to 420 stores and experienced like-for-like sales growth of 4.5%.
Investments in technology, brand and new stores bode well for increased returns for Priceline's retail business, Mr Roche said. "Overall, the substantial investments we have made in supply chain, systems and the Priceline Pharmacy brand place us in a very competitive position and will continue to drive additional value for shareholders."
Priceline distribution, API's wholesale business, continued to remain under pricing pressure as a result of PBS reforms and competitor activity. Revenue was marginally lower year-over-year, but the business' gross profit margins remained intact the company said.
Across the Tasman, API's New Zealand business grew sales 17.5% year-over-year, with earnings before interest and tax (EBIT) rising to $2.8 million, from $0.97 million.
Dividend
A strong group performance enabled API's board to declare a final dividend of 2.5 cents per share, fully franked. Up from 2 cents per share last year and payable on 4 December 2015. The final payment takes the full year dividend to 4.5 cents and places API shares on a yield of 2.63% fully franked.
Outlook
API said it expects to post profit growth as expansions and operational efficiencies continue. "We anticipate environmental conditions to remain challenging across the retail and pharmacy sectors, however we are well positioned to continue our growth," Mr Roche said. "We expect to further expand our Priceline Pharmacy network in 2016 by at least another 20 stores, see further organic sales growth, extract benefits from oneERP and generate consistent earnings from the pharmacy distribution business."
Buy, Hold or Sell?
In my opinion, API's 2015 financial year marks another stellar one for shareholders. However, while I wouldn't be prepared to bet against it, I think its shares are fully valued at this time and, therefore, do not deserve a buy rating. However, any meaningful retreat in share price could be a sound buying opportunity.
