Unichem resists pressure on prices to raise turnover

UNICHEM, the pharmaceutical wholesaler and retailer, has pushed underlying profits up by nearly a fifth despite pressure from government and other health-care providers keen to reduce costs.

Pre-tax profits were 27 per cent higher at pounds 37.5m for the year to 31 December. However, the comparable pre-tax figure was depressed by losses incurred on businesses sold. Ignoring this distortion, operating profits rose 17 per cent to pounds 40.1m from pounds 34.2m.

Unichem is best known as a wholesaler. In 1993, turnover topped pounds 1bn, rising 10 per cent to pounds 1.07bn. Operating profit rose from pounds 28.4m to pounds 32m.

The operating profit margin widened from 2.9 to 3 per cent. The increased efficiency resulted from the introduction of automated warehouse equipment.

Unichem has become a retailer more recently, aggressively acquiring high street chemists since the company was floated in 1990, and owned 253 at the end of the last financial year. Helped by the acquisition of 55 outlets in 1993, profit from retailing jumped from pounds 4.9m to pounds 6.6m. However, operating margins in retailing fell as newly acquired outlets sold more lower-margin prescription drugs than high-profit, over-the-counter supplies.

Jeff Harris, chief executive, said: 'Our growth in market share and profits represents an outstanding performance during a year of challenging market conditions.'

Mr Harris said he remained confident of wholesaling and retailing despite government efforts to restrain the drugs bill. He said the ageing population underpinned prospects for a growth in demand for pharmaceuticals.

Earnings per share rose from 13.4p to 17.3p.

Unichem has promised to pay a 4.3p final dividend, making a total for the year of 6.5p, up 15 per cent. Shares reacted positively to the strong profit and dividend news, closing up 6p at 310p.

Since the former co-operative was floated on the Stock Exchange, shares have almost tripled in value and outperformed the market average by 70 per cent.