Hard to believe how quiet this thread is.
Possibly some kind of earnings multiple re-alignment or earnings momentum play in here somewhere - but not my game.
Looked at this recently enough and, as a long-term investment, I put a line through API.
Pharmaceutical businesses (including any of manufacturing, distribution and shop-face) are a tough gig. Working capital demands are usually high and API is no exception to this rule (they also have added bonus of needing more P & E to manufacture some of their products). There are also government legislation changes to worry about from time to time (see SIP in particular, these two share a few similarities).
EBIT in this company has not gone any where for 10 years. It's in a cyclical range. The business survives, but there is no competitive advantage. Note the low Return on Capital, Return on Equity, Return on Assets and the profit margins... any of its metrics, they all tell a similar story. I am not convinced that there is an underlying reason for this to change dramatically in the future.
For the last half underlying EBIT is still within this range and hasn't moved much on the pcp ($29.9m vs 28.9m).
Cash flow was higher in the 1H13 vs pcp because there was reduction in working capital of about $26m. There is no evidence that there working capital requirements will be continually reduced in the future (unless the business winds down).
Don't forget that their costs of maintaining the current business (maintenance capex etc) have to come off cash flow before have a true picture of the cash that this business generates.
It would appear that this often trades to a fairly large discount to its net tangible assets due to low returns on capital invested vs their cost of capital. There is no point paying a full dollar if every dollar that they keep in the business could lose its purchasing power in the future.
Cheers - feeling a lot fresher after a break.+1
And welcome back.
I sold one bloody share at 57.5c WTF
View attachment 54889
And it closes at 56c......
Hope it is a good report.
Does reading the announcement on 2 October 2013 help? My understanding is that they loaned money to their franchisee pharmacies and this was not repaid under the initial terms (this amount is in the long-term receivables). As a big chunk of this money could not be repaid immediately a much later payment date was arranged with the pharmacies (1 October 2018, I believe).Does anyone understand what's going on with the financial guarantees (note 20)? I'm struggling to follow it. As I understand, API issues guarantees to its customers, these are recognised as a fair value liability initially and then amortised over the life of the guarantee. Where I get confused is that API recognised a provision for ~$28m because, presumably, a guarantee was about to be exercised by a bank. However, it then turned out that it wasn't so they reveresed the provision and transferred it to provision for doubtful debts. Why is the full amount being transferred?
Maybe I've been staring at this for too long but I've really got no idea how to follow this.
Anyone?
Does reading the announcement on 2 October 2013 help? My understanding is that they loaned money to their franchisee pharmacies and this was not repaid under the initial terms (this amount is in the long-term receivables). As a big chunk of this money could not be repaid immediately a much later payment date was arranged with the pharmacies (1 October 2018, I believe).
As these amounts have to be recognised at fair value (taking into account factors influencing probability of repayment as explained in notes 20 and 22) they made a provision in the 2012 accounts tto recognise that these receivables were worth less than the full dollar owing. In the 2013 financial year this was reversed / moved to the assets side of the balance sheet (see note 9) rather than showing as a separate provision on the liabilities side. You can see that $24.784m is still reducing the assets under this note. The balance of the $28.650m (an amount of $3.866m), well this is a mystery to me. I assume it ended up in the current trade debtors provision.
Let me know what you think?
Upon consideration of the current guarantees outstanding at 31 August 2013 it was determined that it was unlikely that guarantees
would be called in the foreseeable future, so the balance of the financial guarantee provision was reversed and transferred to
the provision for impairment losses in respect of trade and long term receivables associated with the guarantees (refer note 22).
Thanks I didn't think of it along those lines.
I don't really understand why they would guarantee the third party loans of their franchisees, that sounds like a fairly desperate situation?
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