Pharmacybrands shares at three-week high after 52% profit rise

Shares in Pharmacybrands rallied to a three-week high after the retail pharmacy and medical centre company lifted first-half profit 52%, bolstered by a full six-month contribution from Radius Pharmacy and Radius Medical, acquired in 2011.

Net profit rose to $6.2 million, or 5.11 cents per share, in the six months ended September 30, from $4.1 million, or 3.85 cents, a year earlier, the Auckland-based company says in a statement.

The 2011 earnings were eroded by a $1.1 million charge from write-downs and acquisition costs, it says. Sales inched up 0.1% to $54.2 million.

The stock rallied 3.4% to $1.22, adding to its 46% gain this year. That values the company at $150.2 million.

"In the current six months we have also seen cost savings due to central office consolidation following last year's Radius acquisition," the company says.

"The strength of our pharmacy franchise group remains a big focus and we have developed further services to assist franchisee pharmacy revenue growth."

Shareholders agreed to a dividend reinvestment plan, which would let them forgo a cash return in favour of receiving more shares, to let majority shareholders Cape Healthcare and LPL Trustee participate without breaching Takeovers Code requirements.

Cape Healthcare and LPL Trustee each hold a 30.4% stake in Pharmacybrands and based on the company paying a similar dividend over the next five years, could potentially increase their respective stakes to 35.1%.

The dominant shareholders came out of a 2009 deal when NZX-listed Life Pharmacy, whose brands included Life Pharmacy, Life Metro and Care Chemist, made a $20 million all-scrip offer for Pharmacybrands, the country's then-biggest retail pharmacy group with the Amcal and Unichem brands.

Pharmacybrands' board declared a first-half dividend of 2 cents per share.

The stock rose 2.6% to $1.18 yesterday and has climbed 46% this year. That values the company at $145.3 million.

Chief executive Alan Wham says the company has been investing in information technology infrastructure to consolidate its e-commerce platforms and plans to target customers based on their purchasing history.

"This will allow the company to increase the electronic component of its marketing mix over time." 

The retail trading environment is still tough, and same-store sales edged lower in the period, he says.

"We expect to see the focus placed on cost control to flow through in the form of savings in the second half." 

(BusinessDesk)