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Wednesday 25th November 2009 |
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Life Pharmacy, the chain of chemists that merged with rival Pharmacybrand to snare 21% of the New Zealand market, posted a 1.9% drop in first-half profit on costs of the merger and a decline in sales.
Net income fell to $1.16 million, or 2.86 cents per share, for the six months ended Sept. 30, from $1.19 million, or 2.93 cents a year earlier, the company said in a statement. Costs associated with the merger of the companies totaled $271,000.
The enlarged company is treating the merger as a reverse takeover for accounting purposes, meaning the numbers published today reflect the performance of Pharmacybrands. Chief executive Alan Wham gave no guidance for earnings from the combined group, whose shares last traded yesterday at 24 cents, giving the company a market valuation of $37.6 million.
“The cost benefit of the merger is expected to flow through to the second half” Wham told BusinessWire. “We’ve had 3% growth in retail to date, and we expect the impact of prescriptions to continue to grow.”
Sales at retail chemists lagged behind overall growth in retail sales in the third quarter, according to Statistics New Zealand. Sales in the sector fell 1.5% in the three months through Sept. 30, versus total sales growth of 0.5%.
Chemists reap a fee of $2.30 per prescription from district health boards, a market for pharmaceuticals not open to non-chemists. For non-prescription products, chemists compete with supermarkets and discount retailers, who are typically able to undercut traditional standalone pharmacies.
Life Pharmacy, originally made up of 52 Pharmacy, Life Metro, Life Outlet and Care Chemist retail outlets acquired an additional 128 Unichem and 75 Amcal chemists in the merger with Pharmacybrand. There are about 1,190 pharmacies operating in New Zealand, according to a Deloitte report.
Had the merger occurred on April 1, 2009, the estimated combined revenue of both organizations would have been $10.5 million with a consolidated profit of $1.3m prior to the one off costs associated with the merger of $3.5 million, according to today’s statement.
Businesswire.co.nz
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