Pharmacybrands AGM

20 July 2010

BY RAJESH KUMAR

Listed pharmacy group Pharmacybrands Limited (NZX: PHB) wants to provide a broader range of pharmacist-led primary health care services through its network of 257 pharmacies.

Addressing the shareholders at the company’s Annual General Meeting yesterday, the company chairman Peter Merton said it is widely recognised pharmacy can contribute a lot more to primary care than simply providing a funded dispensary service.

“We believe the establishment of integrated electronic health records (EHR) will be an important step towards realising the potential of pharmacy,” Mr Merton said.

“For pharmacists who are able to participate in large scale programmes, it will improve the efficiency of our service delivery and provide us with opportunities to better serve our customers. So, it is part of our current strategy to be involved in appropriate parts of the EHR system.”

Pharmacybrands represents 28% of the country’s total pharmacies under Unichem, Amcal, Life and Care Chemist brands and boasts of sizable purchasing power and a countrywide geographic spread. Mr Merton said the group’s experience, credibility and physical presence will also allow it to make a “significant and considered contribution” to the changing pharmacy environment.

“Whilst part of our income is dependent on government funding [the dispensing fee], the retail spend in pharmacy is where the greatest proportion of our head office investment is focussed – on improving the retailing results in our pharmacy franchises and partner stores.”

The company claimed a 1.3% retail growth in the last financial year, against a 5.2% decline in the retail segment in rest of the pharmacy sector. The MAT (minimum alternate tax) level growth came primarily in the health categories, where the company’s “focus on weight management, core health areas such as analgesics and natural health products paid off.”

However, this growth was offset by decline in the sales of beauty products due to the recession and the resultant drop in consumer spending in November 2009 and erratic sales continuing well into 2010.

Mr Merton said part of the company’s focus is to develop retail models that will serve it into the future.

“Developing these models includes international benchmarking, analysing local market data, developing new product categories and making better use of an important resource: our experienced, successful New Zealand retail pharmacists.”

Citing the highly successful example of Life Pharmacy’s loyalty programme called the Life Pharmacy Living Card programme that now has 300,000 members, an increase of 25% on last year, he said average transactions by Living Card members are 2.2 times greater than non-members ($60 v $27).

“Last year, Living Card accounted for 35% of our transactions and 55% of total retail sales, 4 points up on the previous year,” he said.

Although the company has a robust balance sheet, with $10 million in cash reserves from capital raising, Mr Merton said the money was to be used for its expansion plans and not to be redistributed in dividends as the money did not come from profits.

“This decision should not be interpreted as saying we will never pay a dividend in the future. It is a decision based on the current position of our business,” he said.

The company’s share was trading at 30c, down from 60c in August last year, but up from 20c in February.

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