Aspen increases revenue by 33 percent.
Johannesburg – JSE Ltd listed Aspen Pharmacare Holdings Limited (Apn), Africa’s largest pharmaceutical manufacturer, has announced pleasing results for the interim period ended 31 December 2010.
- Headline earnings from continuing operations increased by 35 percent to R1.147 billion.
- Revenue from continuing operations rose by 33 percent to R5.990 billion (R4.519 billion).
- Operating profit from continuing operations improved by 28 percent to R1.614 billion (R1.260 billion).
- Headline earnings per share (HEPS) from continuing operations increased by 15 percent to 265.3 cents (230.8 cents).
- The rise in headline earnings per share was diluted by an increase in the weighted average number of shares in issue as a consequence of the issue of shares on 1 December 2009 in settlement of the transaction with GlaxoSmithKline (“GSK”) concluded on that date.
Stephen Saad, Aspen Group Chief Executive said, “The South African pharmaceutical division’s consistently good performance ensured that Aspen retained it position as the leader in the South African pharmaceutical market. The successful integration of the GSK business has further contributed and Aspen is now also ranked first in the branded product segment. Aspen’s international and sub-Saharan Africa businesses also performed well, delivering increased revenue and operating profit across the Group”.
South African Business
The South African business increased revenue by 29% to R3.300 billion and improved operating profit by 23% to R0.996 billion. The pharmaceutical division led the growth in revenue raising sales by 36% to R2.682 billion. Consumer division sales were up 8% to R0.618 billion. Profit margins benefited from production efficiencies, procurement savings and the strength of the Rand. The higher insurance compensation received in the prior period inflated the comparative profit margin for that period.
The pharmaceutical business grew ahead of the market in the private sector, increasing Aspen’s share as measured by IMS to 16.7%. Sales of the GSK products for the six months to 31 December 2010 were R463 million against R53 million from one month of sales in the prior period. In the recently adjudicated anti-retroviral (“ARV”) tender, Aspen was awarded 41% by value of the anticipated ARV requirements of the South African government over a two-year period. This validates the cost competitiveness of the Group’s production capabilities.
There has been ongoing investment in the manufacturing capabilities of the Group in South Africa. Most capital projects are well advanced. The focus of these projects has been adding capacity, enhancing technical standards and improving efficiency.
Sub-Saharan Africa Business
Revenue in the sub-Saharan Africa business more than doubled from R279 million to R666 million due to the full period contribution from the GSK Aspen Healthcare for Africa collaboration. Operating profit followed a similar trend, growing from R41 million to R119 million. Performance at Shelys, Aspen’s 60% owned subsidiary in East Africa, improved on the unsatisfactory showing in the second half of the 2010 financial year.
The international business increased revenue by 39% to R2.423 billion. Revenue benefited by R600 million (2009: R108 million) from the inclusion of the brands and the German-based Bad Oldesloe production facility acquired from GSK in December 2009 for the full period. Asia Pacific revenue was up 28% to R957 million, Latin America revenue increased 20% to R599 million and revenue in the Rest of the World region rose 76% to R867 million. Operating profit before amortisation and once-off items was up 27% to R551 million.
The AUD 900 million (approximately R6.3 billion) acquisition of the pharmaceutical business of Sigma, Australia’s largest listed pharmaceutical company, completed on 31 January 2011. Integration of this business with Aspen Australia is well underway and is progressing to plan.
The South African pharmaceutical business has strengthened its position as the market leader over the past period. Performance in the second half of the year will however be affected by the reduced value of the recent ARV tender award. The Minister of Health has announced that no consideration will be given to an increase in the Single Exit Price before the end of 2011.
The South African consumer business will be adversely affected by the ending in April 2011 of the Pfizer infant milk license agreement, which generated annual sales of approximately R250 million. Pfizer has taken the decision to enter the South African market itself following the acquisition of the infant milk franchise as part of its take-over of Wyeth. Aspen has expanded its own infant milk offering with the introduction of the Infacare Gold range in order to replace the Pfizer brands.
The sub-Saharan Africa business is on a firm footing and the positive performance of the first half of the year should be maintained in the second half.
The Asia Pacific region of the International business is set for strong growth as the Sigma pharmaceutical business is integrated into Aspen Australia. The earnings per share impact for this financial year is likely to be close to neutral due to the expensing of transaction fees, stamp duties and restructuring costs expected to exceed R100 million. In years thereafter the transaction is anticipated to be earnings accretive as synergistic benefits are realised.
The International business will continue to transition products acquired from GSK to the Aspen global distribution network. Once complete, the Group will be well positioned to realise procurement and marketing opportunities with these brands.
The Group remains well placed for growth into the medium term. The launch of new products from the extensive product pipeline will provide organic growth across all major markets. The expanded business in the Asia Pacific region is expected to provide further growth momentum. Latin America remains a core focus area for the Group as a region with great potential. Opportunities to add to the portfolio of global brands will be actively pursued.
Issued by: Shauneen Beukes, SBC
Tel: +27 (012) 661-8467 : Cell: +27 82 389 8900
On Behalf Of: Stephen Saad, Aspen Group Chief Executive
Tel: +27 (031) 580-8603
Gus Attridge, Aspen Deputy Group Chief Executive
Tel: +27 (031) 580-8605
Roshni Gajjar, Aspen Investor Relations
Tel: +27 (031) 580-8649 : Cell: +27 82 879 1826