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Pharmacybrands posts 17 percent gain in first-half profit, notes foot traffic impact

Wednesday 27th November 2013

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Pharmacybrands, the retail pharmacy and medical centre owner, posted a 17 percent gain in first-half profit after restating revenue in line with new accounting rules and noting the impact of changes to the way the government funds pharmacists.

Profit rose to $8.97 million in the six months ended Sept. 30, from $7.55 million a year earlier, the Auckland-based company said in a statement. Sales rose 3.6 percent to $127.9 million.

"The profit improvement was driven mainly by improved margin and cost control at our pharmacies and the impact of prior period acquisitions in both our pharmacy and medical divisions," said executive chairman Peter Merton.

Same store sales fell 1.9 percent in the first half and the company said this reflected a reduction in repeat prescription numbers under a new government contract, "leading to lower foot traffic" as well as the effects of a very mild winter and increased activity from rivals.

Pharmacybrands is New Zealand's only listed pharmacy group, operating under the Unichem, Amcal, Life Pharmacy, Radius and Care Chemist brands. It has 301 outlets, of which 74 are partly or fully owned and 227 are owned by franchisees. It also has interests in 11 Radius medical centres.

Its shares rose 1.6 percent to $1.29 today, valuing the company at about $165 million, and have gained 8.6 percent this year. Pharmacybrands will pay a first-half dividend of 3.5 cents imputed to 28 percent on Dec. 20 with a record date of Dec. 10. That's up from 2 cents, partly imputed, a year earlier.

As part of government efforts to expand primary medical workforce roles and free up doctors, pharmacists are being encouraged to take a greater role in the care of patients with long-term conditions. Under an agreement between pharmacies and district health boards that came into effect in July last year, funding for pharmacists has shifted from solely on a per-prescription basis, to a patient-focused payment mechanism.

One result has been a drop in repeat prescriptions, because the majority of patients don't require close monitoring and could be prescribed their drugs monthly, for example, rather than fortnightly. Health Minister Tony Ryall says the number of long-term condition patients that are registered with pharmacies is expected to rise to as many as 200,000 in the next two years from 128,301 as at May 31.

Under NZ IFRS reporting, Pharmacybrands has reclassified results of its pharmacy stores to consolidate those that are only part owned rather than treating them as associates. As a result, revenue for the first half of 2012 was restated to $123 million from $52 million, while operating expenses almost doubled to $40 million.

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