Special Report: Along with strong growth in Q1 revenue, the company also reported improved operating margins.

Animal health company Apiam (ASX:AHX) had some good news for the market yesterday, announcing a strong start to the 2021 financial year.

The company reported quarterly revenue of $29.6 with strong operating margins, which flowed through to gross profits of $16.6m – a gain of 21 per cent from Q1 FY20.

Shares in AHX rose by 12 per cent to a new multi-year high of 70c following the update.

Commenting on the result, MD Dr Chris Richards said the topline figure was driven by the strong performance of Apiam’s companion animal business, as well as the dairy division.

 

Pet ownership surges

The Q1 result reflected the fact that Apiam has benefited directly from a post-Covid tailwind in consumer behaviour, where strict lockdown measures helped prompt a surge in pet ownership.

As well as companionship, analysts say the sector is growing via a diversion of resources in the absence of other spending measures such as travel and entertainment.

Apiam has positioned itself to take full advantage of that trend with the rollout of new initiatives such as its Best Mates platform – a subscription-based service to allow members to gain frequent access to the company’s network of veterinary clinics.

Increased pet ownership has supported “rapid momentum” in new memberships, Apiam said, with quarterly growth rates of more than 50 per cent through the 2020 calendar year.

The willingness of customers to spend more on their pets has resulted in “increased demand for many of Apiam’s more specialised services such as diagnostics, where the company has invested heavily in first-class equipment”, Richards said.

He added that in the current environment, Apiam’s 2019 acquisition of ACE Laboratories – a specialist diagnostic and vaccine business – is paying huge dividends for the company.

“We have seen significant success in cross-selling these specialist services both across our large production animal base and into other industry sectors,” Richards said.

The company also announced it’s been selected as a finalist in three categories at the 2020 Australian Human Resources (HR) Awards, including Employer of Choice (100-999 employees) and Best Graduate Development Program.

And having already laid the groundwork with a multi-year capital investment program, Apiam is ideally positioned to scale up and grow margins as top line sales improve.

The company said it looks forward to providing a more detailed update to shareholders at its annual general meeting on November 26.

This article was developed in collaboration with Apiam, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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