An overview of API & PRICELINE'S COVID-19 response in the media.

Updated: May 21, 2020

API AND PRICELINE SHOWCASE A “HAVE YOUR CAKE AND EAT IT TOO” STANCE TO COVID-19, AS THEY WITHHOLD DIVIDENDS AND ASK FOR RENT REDUCTIONS DESPITE STRONG HALF YEAR TO FEB, 2020.



SUPPLY CHAIN RESILIENT & STRONG HALF YEAR TO FEBRUARY 29, 2020. While COVID-19 has resulted in lower consumer sentiment; the pharmaceutical industry is one of the few industries that has seen an uptake in revenue. This is particularly true of Priceline revenue is up 2.8% to $2.0 billion. API boss, Richard Vincent, said pharmacy distribution had experienced a significant boost since COVID-19 shutdowns, "I've never seen our supply chain stretched the way it has been in the past seven weeks - and it's absolutely shown resilience." Priceline pharmacies and all company-owned stores are open, while online sales are up about 300 per cent as shoppers take advantage of click-and-collect and click-and-deliver options. Further, whilst foot traffic has slowed, basket size has gone up by about 4 per cent or 5 per cent with women doing more targeted shopping for personal care products such as hair colour. See below extract from the API Financial Report 2020:

“The Group’s financial position remains strong, and our net debt position reduced significantly over the period as a result of both the proceeds from the sale of Sigma Healthcare shares and from improved working capital being applied to debt reduction. Despite challenging retail conditions and consumer sentiment, Priceline held market share and Pharmacy Distribution reflected growth from new business gained. Consumer Brands outlook remains positive with a pipeline of new business, and Clear Skincare was accelerating its expansion prior to COVID-19." And yet, API seems determined to take advantage of every COVID-19 related write-off; withholding interim dividends and seeking rent reductions from landlords - despite COVID 19 related revenue boost and a solid half-year to February 29, 2020.


NO INTERIM DIVIDEND DESPITE “SOLID OUTCOME”

– Australian Financial Review, April 23, 2020


Australian Pharmaceutical Industries boss Richard Vincent said of the decision to suspend its interim dividend,"We were being prudent around [cutting our interim dividend]. The board could have paid the dividend but choose a conservative view because there is so much uncertainty about the future."

AFR reported that the update came as API revealed that underlying earnings before interest and tax (EBIT) fell 6.1 per cent to $41.7 million in the half-year to February 29 or tumbled 11.5 per cent on a reported basis. Underlying net profit, excluding new lease adjustments, fell 1.9 per cent to $26.3 million. Reported NPAT was down 9.9 per cent.

Vincent said API remained well placed amid a low growth environment but declined to give firm guidance for the year given impacts of the COVID-19 pandemic. Mr Vincent called the first half "a solid" outcome in challenging conditions.





VINCENT IDENTIFIES MORE CONTROL & LESS REGULATION AS THE MOST DESIRABLE CONDITIONS FOR THE PHARMA GIANT.


“As things move back in terms of government controls around retail, the board would be in a position to talk about any payment of a final dividend.”


This is bad news for franchisees’ who are already subject to a franchise agreement, which contains controlling provisions alleged to contravene State Legislation. API Boss Vincent is effectively announcing API and Priceline’s intention to push for additional control over the retail arm of your pharmacy.

API WITHHOLDS INTERIM DIVIDEND AND SEEKS RENT RELIEF DESPITE COVID-19 REVENUE BOOST

- Australian Financial Review, April 21, 2020

- Sydney Morning Herald, April 23, 2020


Priceline have stunned their landlords by proposing massive rent reductions despite being one of the few retail groups to trade strongly during the pandemic.

AFR reported that Veteran Ray White leasing agent Anthony Harris said landlords were keen to help genuinely affected retailers but said groups like Priceline and Chemist Warehouse were "taking the piss out of the system".

Ray White's Mr Harris said he had heard from multiple Priceline landlords that their tenant, which is a subsidiary of ASX-listed Australian Pharmaceutical Industries, had withheld rent in April and sought rent relief.

"My understanding is Priceline is trading really well so why withhold rent?" Mr Harris said.

A spokesman for API, which reports its half-year results on Thursday, said it was having "constructive discussions with landlords”



API LABELED DISGRACEFUL OVER ATTEMPTS AT RENT RELIEF

Link to fulll article


David Kobritz, executive chairman of Melbourne property developer DealCorp, has labelled the behaviour of some large corporates "disgraceful" in seeking rent relief amid the COVID-19 pandemic.

DealCorp rents offices in Camberwell, Melbourne, to Australian Pharmaceutical Industries, and Mr Kobritz alleged they had not paid rent and outgoings for April and did not respond to phone calls and emails until he contacted the chairman directly over the issue.

Mr Kobritz said the company behind the Priceline Pharmacy chain had since paid half its April rent. "After the threat of legal action, it said it would pay in full, but we have yet to receive [the balance]", he told The Australian Financial Review.


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