"whereas API has the bank breathing down its neck."
and that is because the bank is currently breathing down the necks of some highly leveraged entreprenerial pharmacists who paid too much!!!!! The banks revaluation of many pharmacies may perhaps precipitate some loan defaults. from Ferrier Hodgson
Just to clarify what asf was perhaps refering to....
"17/3/11 ASX ANOUNCEMENT ? MARKET UPDATE Accounting treatment of financial guarantee contracts API has reviewed its Financial Guarantee program to pharmacists? banks and has determined that its accounting treatment of the program will change. In accordance with the company?s accounting policy to recognise as a liability the value of any expected payments under the guarantee contracts, the financial guarantees will now be placed on balance sheet from their historical contingent liability treatment. This change will mean a pre-tax charge of $50m to the forthcoming half year accounts. This change has no impact on the ongoing operational performance of API."
The company has been informed by one of the banks, which is party to some of the financial guarantees, that following a review, it will require a cash reserve for financial guarantees to be provided by API. On reviewing these changed circumstances and also considering receivables due by pharmacies for whom guarantees have been given and the valuation of underlying security, the Board determined that the company?s accounting treatment will now reflect financial guarantees on balance sheet. This change will result in a breach of API?s earnings related covenants with its financiers.
API has initiated discussions with its banks and preliminary discussions indicate a satisfactory outcome should be achieved."
"1/4/11 Market Update ACCOUNTING TREATMENT OF FINANCIAL GUARANTEE CONTRACTS - CONSENT TO WAIVE BREACH OF COVENANT Australian Pharmaceutical Industries Limited (API) today announced that they have received unconditional financier consent to waive all breaches of covenants following the $50m accounting charge announced on 17 March 2011."
It is a generalisation, but it is about time that a certain strain of Pharmacy owners started to think more about their professional roles instead trying to discount business away from the true professionals and screw out of the Wholesalers every last cent out of the already miserly margins. Service levels down the line from Wholesaler to Pharmacy customers suffers. Pharmacy again is its own worst enemy. Bloody stupid half educated fools!
SIP Price at posting:
33.5¢ Sentiment: Hold Disclosure: Held
