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Aspen CEO defends earnings amid post-Steinhoff share jitters

Jan 10 2018 10:11
Janice Kew, Bloomberg

Johannesburg - Aspen Pharmacare Holdings [JSE:APN] Chief Executive Officer Stephen Saad said full-year earnings are "completely clear" and the South African drug maker has nothing in common with scandal-hit retailer Steinhoff International Holdings NV [JSE:SNH].

Responding to a slump in the share price, the company said earlier on Tuesday it was aware of speculation that Viceroy Research, a group of investors who published a report into Steinhoff’s accounts last month, is preparing a similar dossier on Aspen.

The drug maker has had no contact with Viceroy and "is not aware of any information of a price-sensitive nature that requires communication to shareholders," the Durban-based company said in a statement.

The shares pared losses and closed 4.6% lower at R250.13 in Johannesburg, the lowest since February 2016. The stock had earlier slumped as much as 10%, the most on an intraday basis in 16 months.

"It is sad that unscrupulous operators can abuse the fear in the market for their own greed," Saad said in a phone message that elaborated on the company’s statement. "Steinhoff is as similar to Aspen as A is to S in the alphabet."

Sensitive market

Steinhoff shares have slumped almost 90% since the company said in early December that it had uncovered accounting irregularities and CEO Markus Jooste quit. "The market is very sensitive" in the wake of the scandal, according to Petri Redelinghuys, founder of Johannesburg-based stockbroker Herenya Capital Advisors.

Investors are going through the accounts of all companies they don’t fully understand and are looking for warning signs that Steinhoff isn’t an isolated case, he said.

Aspen has expanded aggressively through acquisition and has operations in more than 150 countries. Most recently, it agreed to buy rights to anaesthetic medicines from UK-based AstraZeneca for at least $555m.

"We have been loath to issue shares and have repaid all acquisitions through cash earnings," Saad said. "We have a two-decade track record of cash earnings matching operating earnings."

In a July interview, Saad said the company had decided to change the way it reports earnings by categorizing performance based on type of pharmaceutical and geography. That followed criticism from the analyst community, he said at the time.

Trading in the current fiscal year is in line with the prospects reported in the full-year earnings statement published on September 14, Aspen said in Tuesday’s statement.

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