Could the Australian Pharmaceutical Industries Ltd (ASX: API) share price be worthwhile considering as a turnaround play?
API, as the name may suggest, is a pharmaceutical business with several divisions including Soul Pattinson Chemists, Priceline Pharmacy and Clear Skincare.
AGM update
Firstly, the company reminded investors how it had performed during the 2020 financial year, which was obviously heavily affected by the COVID-19 pandemic. The API result was previously reported on Rask Media. API reminded investors that it has seen huge demand for Clear Skincare services after the lockdowns. Management suggested that this shows the treatments aren’t discretionary and this should give shareholders some confidence.
The company then went on to give a trading update and expectations about the rest of FY21.
Trading update
API said that the retail conditions are challenging with the long Melbourne lockdown and the recent lockdown in Sydney. First half retail trading results are expected to be below last year’s result, which didn’t have COVID-19 impacts. However, it’s tracking in line with internal company forecasts.
As long as there are no more major government restrictions, API is expecting a solid improvement in the retail performance in the second half. The size of the recovery will depend on the roll out of the COVID-19 vaccine.
API management said that a key question for the economy’s strength will be when emergency economic support, such as jobkeeper, ends in March 2021.
The company said that while still marginally negative, Priceline’s like for like sales through the Christmas trading period improved, despite the ongoing challenges in the major city CBDs. It has seen a strong rebound in communities that have emerged from COVID-19 effects.
Overall script numbers are in positive growth territory and are growing month on month. It’s also expecting to be able to announce some international brands and well-known products that will be available exclusively in Priceline.
The company said that Clear Skincare experienced growth of more than 20% in December.
The Pharmacy Distribution business is continuing to experience underlying revenue growth, which is expected to accelerate with the 777 Pharmacy Group coming on board.
Summary thoughts
It’s good to see that API is expecting Priceline Pharmacy and Clear Skincare to see more growth later this year. It’s planning to roll out more Clear Skincare networks this year to meet demand.
The API share price is now back to where it was before COVID-19. It sounds like API is expecting profit growth can come back during the 2021 calendar year and FY22. So I suppose it could be counted as a recovery play, but I’m not sure how much growth we can expect.
There are other ASX growth shares in the retail space I’d rather buy like EML Payments Ltd (ASX: EML) or City Chic Collective Ltd (ASX: CCX).
