EDINBURGH — Like Steinhoff, Aspen has been one of South Africa’s global business success stories. A large pharmaceutical company listed on the Johannesburg Stock Exchange, Aspen has a global network spanning about 50 countries. It has more than 10 000 employees. This week, the Aspen share price suddenly fell, taking many investors by surprise. Since then, speculation has developed that Aspen is about to be exposed for questionable accounting – just as Steinhoff was before its share price collapsed and the company went into intensive care. Viceroy Research, which published a report into Steinhoff’s accounts, is rumoured to be preparing a similar study on Aspen. But Aspen CEO Stephen Saad insists there is no price-sensitive information that needs to be communicated to shareholders. Nevertheless, like Steinhoff, Aspen has been expanding aggressively through acquisition and questions have been asked about the way it reports earnings. In an environment in which auditors of South African companies have routinely turned a blind eye to dodgy accounting, it stands to reason that some investors are erring on the side of caution. – Jackie Cameron
Bloomberg – Aspen Pharmacare Holdings Ltd. Chief Executive Officer Stephen Saad said full-year earnings are “completely clear” and the South African drugmaker has nothing in common with scandal-hit retailer Steinhoff International Holdings NV.
Responding to a slump in the share price, the company said earlier 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 drugmaker 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 percent lower at 250.13 rand in Johannesburg, the lowest since February 2016. The stock had earlier slumped as much as 10 percent, 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.”
Steinhoff shares have slumped almost 90 percent 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 anesthetic medicines from U.K.-based AstraZeneca Plc for at least $555 million.
“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 Sept. 14, Aspen said in Tuesday’s statement.