Johannesburg – JSE Ltd listed Aspen Pharmacare Holdings Limited, the leading pharmaceutical manufacturer in the southern hemisphere, has produced excellent results for the year ended 30 June 2011.
- Revenue from continuing operations increased by 29% to R12.4 billion (R9,6 billion).
- Operating profit from continuing operations improved by 25% to R3.1 billion (R2.5 billion).
- Normalised headline earnings from continuing operations rose 29% to R2.4 billion (R1.8 billion).
- Diluted normalised headline earnings per share (NHEPS) from continuing operations grew by 20% to 523.3 cents (437.7 cents).
- A capital distribution of 105 cents (70 cents) per ordinary share by way of a capital reduction has been declared.
Stephen Saad, Aspen Group Chief Executive said, “The Aspen results are a reflection of the Group’s efforts across all of our key geographies. We had stellar performances in Asia Pacific, Sub-Saharan Africa, Latin America and South Africa. The South African performance was particularly pleasing given the headwinds in the market, namely a 0% increase in selling prices, but cost increases in salaries, wages and electricity. This vindicates our strategic investment in manufacturing infrastructure. The acquisition of the Sigma pharmaceutical business has performed ahead of plan and has contributed to the improved performance in the second half of the year. Next year this impact will be for the entire period.”
Revenue from the South African business increased by 13% to R6.3 billion and operating profit grew 17% to R1.9 billion. The Pharmaceutical division led growth, increasing revenue by 15% to R5.2 billion. This was achieved despite its two biggest brands, Seretide and Truvada, coming under generic competition for the first time, as well as reduced pricing and lower than expected off takes in the new anti-retroviral (ARV) tender which commenced in January 2011. ARV tender volumes have been well below expected levels as Government has used substitute donor funded product. Aspen’s successful strategy to defend the Seretide molecule by launching its own generic, Foxair, has more than compensated for volume declines in Seretide. The Pharmaceutical division is fundamentally in good shape with a strong underlying growth rate. In particular, the Generic division continues to perform, fuelled by the industry’s strongest organic pipeline. This is further validated by Aspen retaining its 2011 Campbell Belman Confidence Predictor Results ranking as the leading pharmaceutical company in South Africa.
Revenue from the Consumer division increased 3% to R1.1 billion in a slow retail market. The division responded to the fourth quarter loss of the Pfizer infant milk formula license, which generated annual sales of approximately R250 million. In response, Aspen launched Infacare Gold as a substitute product range as well as Melegi acidified, a specialist infant formula brand. Aspen participated in the Government tender for infant nutritionals for the first time and was awarded the vast majority of the volume of the products for which it competed. This three-year tender covers eight of South Africa’s nine provinces and will assist in closing the gap left by the Pfizer brands.
The Group has continued to invest in its manufacturing capabilities in South Africa in order to increase capacity, enhance technical standards and improve efficiency. Projects are underway at the Port Elizabeth, East London and Cape Town production sites. Aspen’s production competitiveness continues to be validated by the successes achieved in recent tender awards by the Government for ARVs, tuberculosis, anti-biotics and infant nutritionals where the Group competed with manufacturers from across the world.
The Group’s gross revenue in Sub-Saharan Africa advanced by 43% to R1.3 billion and operating profits almost tripled from R66 million to R182 million. A full year’s contribution (prior year 7 months) from the GSK Aspen Healthcare for Africa collaboration assisted in this substantial step-up in results. Wider margins have contributed toward improved performance of East African-based Shelys.
The International business increased revenue by 56% to R5.6 billion. Operating profit before amortisation, adjusted for one-off non-trading items, grew 35% to R1.4 billion.
The acquisition of the Australian-based Sigma business was completed with effect from 31 January 2011 for a purchase consideration of AUD 863 million. The addition of the Sigma business was the primary driver in the Asia Pacific region increasing revenue by 122% to R3.1 billion. The original Aspen Australia business also performed strongly, raising revenue by 33% to R1.7 billion. Synergies between the Sigma business and the Aspen Australia business are expected to yield cost of goods reductions from improved procurement and lower manufacturing costs achieved through the Aspen global network.
Aspen’s Latin American businesses generated a 19% increase in revenue to R0.9 billion. Revenue from the Group’s businesses in the rest of the world was up 12% to R1.6 billion.
The disposal of Onco Laboratories was completed in February 2011, realising a profit on disposal of R368 million. This was the largest contributor to profits from discontinued operations.
Borrowings net of cash were R6.3 billion despite the R5.9 billion investment in the Sigma business, with gearing at 34%.
During the forthcoming year, revenue and profit contributions from the Group’s International businesses are expected to exceed that of the South African business for the first time.
It is anticipated that the Sigma business will lead growth in the Asia Pacific region. The Group’s pipeline for Australia has been further augmented by the conclusion of an agreement with Cipla, the leading Indian generic company, to work together for Aspen to launch Cipla developed products in Australia. Aspen’s representation in the region has taken a further step forward with the commencement of the process to incorporate a subsidiary in the Philippines.
Demographics in South Africa continue to support growth in the utilisation of medicines that could be further accelerated by the introduction of the Government’s National Health Insurance programme.
The South African Department of Health (“DoH”) is presently considering the promulgation of new regulations to implement a process of international benchmarking of originator pharmaceutical products and to cap the logistics fees paid in the distribution of pharmaceuticals. Aspen has been an active participant in the formulation of industry submissions on these proposals. Both proposals are with the DoH for reconsideration. Revised proposals can be anticipated in the year ahead.
The Sub-Saharan African business is well placed to extend its position as the leading supplier of quality pharmaceuticals in that region.
Leadership structures have been strengthened in Latin America and improved focus has been achieved in Brazil with the disposal of non-core products. Aspen continues to regard this region as having significant potential and opportunities are being sought to improve the critical mass of the product offering.