Johannesburg – JSE Limited listed Aspen Pharmacare Holdings Limited (APN), a global multinational specialty pharmaceutical company, has announced reviewed provisional Group financial results for the year ended 30 June 2019. Stephen Saad, Aspen Group Chief Executive said, “Despite the challenging environment, we have achieved most of our short-term goals, including the completion of the disposal of our Nutritionals business and a portfolio of products distributed in Asia Pacific. We delivered strong second half cash flows with the proceeds from these disposals resulting in a reduction in net borrowings to R39.0 billion. We will continue with active assessment of value realisation opportunities to accelerate deleveraging our balance sheet.” COMMENTARY GROUP PERFORMANCE (CONTINUING OPERATIONS) Aspen increased revenue by 1% to R38.9 billion while normalised EBITDA declined 2% to R10.8 billion, influenced by a lower contribution from the Manufacturing business. Commercial Pharma delivered an increase in revenue of 3% to R33.1 billion. Normalised headline earnings per share (“NHEPS”) was 7% lower at R14.14. Strong cash flows in the second half allowed the Group to achieve a cash conversion ratio of 107% for the year. In the closing six months Aspen also completed the disposals of its Nutritionals business and a portfolio of products distributed in Asia Pacific, realising cash proceeds before tax of R12.3 billion and a combined profit on disposal of R5.4 billion. The positive cash flows and the proceeds from the disposals have enabled net borrowings to be reduced from R53.5 billion at 31 December 2018 to R39.0 billion at financial year end. A leverage ratio of 3.62x was achieved, comfortably below the covenant level of 4.0x. Rigorous impairment testing of tangible and intangible asset values was once again performed, resulting in total impairments of R 3.1 billion of which R 2.4 billion related to intangible asset impairments. Relative movements in exchange rates had an impact on financial performance, as is illustrated in the table below, which compares performance in the prior comparable period at previously reported exchange rates and then at constant exchange rates (“CER”). The CER results for the year ended 30 June 2018 re-state performance for that period using the average exchange rates for the year ended 30 June 2019. Year ended 30 June 2019 Continuing operations ReportedFY 2019 R’million Restated FY 2018^ R’million % Change at reported rates FY 2018 CER R’million % Change at CER Revenue 38 872 38 314 1% 39 856 (2)% Normalised EBITDA* 10 824 11 031 (2)% 11 219 (4)% NHEPS** (cents) 1 414.3 1 518.4 (7)% 1 536.6 (8)% ^ FY 2018 has been restated for the adoption of IFRS 15 and IFRS 9 as well as discontinued operations. *Operating profit before depreciation and amortisation adjusted for specific non-trading items as defined in the Group’s accounting policy. ** NHEPS is headline earnings adjusted for specific non-trading items, being transaction costs and other acquisition and disposal-related gains or losses, restructuring costs, settlement of product related litigation costs, net monetary adjustments and currency devaluations relating to hyperinflationary economies and significant once-off tax provision charges or credits arising from the resolution of prior year tax matters. From this point forward in the commentary, (1) all performance references are to continuing operations and (2) all June 2018 financial information is stated in CER and all related percentage changes in revenue between June 2019 and June 2018 are based on June 2018 CER financial information revenue in order to enhance the comparability of underlying performance. GROUP PERFORMANCE Revenue for the Group declined 2% to R 38.9 billion and normalised EBITDA was 4% lower at R 10.8 billion with weaker Manufacturing results being the most material unfavourable influence on both results. Higher net financing costs contributed to an 8% decline in normalised headline earnings to R6.5 billion. SEGMENTAL PERFORMANCE Sterile Focus Brands Sterile Focus Brands, comprising the Anaesthetics and Thrombosis portfolios, delivered improved gross profit up 3% to R 8.4 billion despite revenue declining 2% to R 15.3 billion. The gross margin percentage improvement was driven by lower Thrombosis manufacturing costs. Anaesthetics Brands Revenue from Anaesthetics was 2% lower at R 8.7 billion as ongoing supply constraints weighed on performance. China (+5%), Latin America (+7%) and MENA (+12%) achieved good revenue gains, but these were offset by Europe CIS (-8%) and Australasia (-9%) which suffered the most from supply limitations. Japan ended the year flat (0%) as volume gains offset pricing decreases. Thrombosis Brands Thrombosis revenue was down 3% to R 6.6 billion, negatively impacted by Europe CIS (-6%) which contributes 80% of Aspen’s Group Thrombosis revenue. The decline in Europe CIS was exacerbated by the once-off impact of switching from a wholesaler model to Aspen’s own distribution channel in Russia. Collectively, the other regions grew revenue by 14%, supported by a 34% increase from China. Regional Brands Regional Brands revenue was flat at R17.8 billion vs the prior year, despite the impact of the strike at our South African manufacturing facilities which has now been resolved, and a reduced contribution from the oncology portfolio in Europe CIS. The downward pricing pressure on the oncology products also affected gross margins. Australasia grew 5% supported by the OTC business which grew 8% and Latin America delivered 6% growth due to a strong performance from the domestic brands. Manufacturing Manufacturing revenue was down 11% to R 5.8 billion, with contributing factors to this being a major third party customer losing a material tender in the prior year, the suspension of sales of heparin to third parties due to limited global availability and strike action undertaken at our South African manufacturing facilities. At Aspen Oss, sales of active pharmaceutical ingredients (APIs) are generally contracted in advance and tend to be stable with a relatively even spread over the year, but there can be margin variability dependent on the mix of products ordered. In particular, the mix effect was such that the margin earned was higher in the first half of the year than in the second.… Continue reading Aspen generates strong second half cash flows, reducing borrowings
