Aspen trading update, tricky, but market OK with it!

wonderful performer, a great company with exceptional leadership. We know that. Their timing from an acquisitive point of view has also been nothing short of very good, and the praise should be laid directly at the desk of management. But one must learn to never get married to a company. Stockholm syndrome in a way, you know, believing yourself and being captured by a specific investment at the same time.


The company gives three ranges of earnings, so it looks a little messy. But they put diluted normalised HEPS from continuing operations as "adjusted for transaction costs, restructure costs and forex gains on transaction accounting". On that measure, earnings are expected to increase between 18 to 24 percent for the full year to end June 30. HEPS are expected to increase between 21 to 27 percent, whilst earnings per share are expected to increase by 4 to 10 percent. Why not as big an increase? The footnote explains it as follows: "The growth in earnings per share has been reduced as a result of capital profits on the disposal of discontinued businesses and products in the present year being lower than in the prior year."


On these three measures expect diluted normalised HEPS to be in the 595 cents per share region, EPS should measure 529 cents and HEPS should come in at 633 cents per share. No matter which way you look at the stock at 143 Rands a share, this is stretching it a little. BUT, as I am often reminded, people have been paying up for this company for a long time. In part because their acquisition history and timing is very good, the earnings do come through. Turnover for the last five years has grown on average by 35 percent, whilst the bottom line has increased by a more impressive 38 percent. Cash generated per share has also increased by 34 percent. Operating profit margins have been maintained at the 25 percent mark. The market is suggesting that at this point Aspen can keep up the current run rate. Of course this becomes a whole lot more difficult as the company continues to expand. But expand rapidly they still do, Byron wrote about this just a few weeks ago: Aspen buys a business from Glaxo. This type of relationship will continue to exist. We do not have to wait long, results are expected not next Wednesday, but the one thereafter, the 12 of September.