The fine will cut headline earnings per share by 33,9c. A percentage of profits is generally paid to shareholders in the form of dividends.
The group, which reported profit of R1bn for the half-year to March, said yesterday headline earnings per share grew 14,7% to 756,5c from 659,5c, but would have grown 19,8% without the fine. This is the second time a fine for anticompetitive practices has bitten into its headline earnings per share.
Tiger Brands agreed last year to pay a R99m administrative penalty imposed by the Competition Commission after the group admitted involvement in bread and milling cartels. The fine “adversely affected” headline earnings per share, which grew only 6%.
The group said that, stripping out the effects of the fine and unbundling Adcock, headline earnings per share would have shown a 15% improvement in the full year to 1382,9c compared with the previous period's.
The second fine, yet to be agreed to by the Competition Tribunal, knocked 33,9c off headline earnings per share.
Shareholder activist Theo Botha said shareholders would pay for the fine indirectly as it came out of profit, and could otherwise have been paid to shareholders in the form of dividends.
CEO Peter Matlare said the group would consider returning capital to shareholders subsequent to a 10% empowerment deal after Adcock Ingram was listed separately. Matlare said the group would work to rebuild its “slightly tarnished” reputation.
Tiger Brands, which has a market capitalisation of R27,5bn, admitted this month that Adcock Ingram Critical Care was involved in bid rigging.
The fine (8% of Adcock Ingram Critical Care yearly turnover) was the highest in percentage terms yet imposed by the commission for collusive behaviour. The previous high of 6% was levied on the New Reclamation Group this year after it agreed to pay R166m.
The Tiger Brands subsidiary admitted bid rigging after an internal investigation in February. It was being unbundled from Tiger Brands when the investigation was announced.
The commission initiated an investigation after being told of collusive tendering in the private hospital market on the part of AICC, Fresenius Kabi SA, Dismed and Thusanong.
Karl Leinberger, chief investment officer at Coronation Fund Managers, said stakeholders were paying for management “errors” as the fine hit group profit. The effect was a cut of 33,9c per share in headline earnings, or 5% of headline earnings per share growth.
Key staff were leaving, and managers implicated in the scandal faced curtailed careers. Paying the fine out of cash would affect Tiger Brands' bank balance and balance sheet. “Tiger Brands has taken a big reputational knock." It had to rebuild its image.
Leinberger said the group did not seem to have an anticompetitive culture. Now it was trying to root out any delinquent staff, he said.
Source: Business Day
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