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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

Johannesburg – JSE Limited listed Aspen Pharmacare Holdings Limited (APN), a global multinational specialty pharmaceutical company, has been approved for a secondary listing on A2X Markets with effect from 1 April 2019. Stephen Saad, Aspen Group Chief Executive said, “We continually strive to identify ways to increase value for our shareholders and the complementary A2X listing offers investors trading benefits while simultaneously providing the prospect of increasing our shareholder base. We will retain our primary listing on the Johannesburg Stock Exchange and our issued share capital will be unaffected by the secondary listing.” A2X CEO, Kevin Brady said, “A2X is thrilled to have South Africa’s largest pharmaceutical company on board.  No doubt that Aspen will reap the benefits of a secondary listing, including the opportunity to attract potential new investors through A2X’s lower-cost trading structure and broadening their shareholder base.” A2X is a licensed stock exchange which provides a secondary listing venue for companies. It is regulated by the Financial Sector Conduct Authority and the Prudential Authority (SARB) in terms of the Financial Markets Act. A2X began trading in October 2017 and has nine approved brokers that account for about 50% of market activity.

Johannesburg – JSE Limited listed Aspen Pharmacare Holdings Limited (APN), a global multinational specialty pharmaceutical company, has announced interim financial results for the six months ended 31 December 2018 in line with management’s expectations. Stephen Saad, Aspen Group Chief Executive said, “Revenue increases from Anaesthetics in China and Latin America of 6% and 22% respectively have been very encouraging, despite the supply constraints experienced. China also delivered  strong revenue growth in the Thrombosis portfolio.” “The disposal of our Nutritionals business is nearing completion which will enable us to put all our focus on pharmaceuticals. We are conducting a strategic review of both our European and South African Commercial Pharma businesses and have already decided to split the latter into two distinct divisions to achieve heightened product and customer focus. The second phase of the South African review will focus on developing strategies specific to each division to optimise value delivery.” GROUP RESULTS Aspen’s earnings for the six months ended 31 December 2018 are in line with management’s expectations.  A good performance from Commercial Pharma in Emerging Markets is offset by a decline in revenue from Manufacturing (as guided in the September 2018 result announcement).  Earnings are diluted by higher financing costs. The published results record the impact of recent transactional activity and changes in accounting standards, namely:- In September 2018 Aspen announced that it had reached an agreement to divest of its Nutritionals Business to the Lactalis Group (“Lactalis”). Positive progress has been made in satisfying of the conditions precedent and all but one of the conditions which are reliant on third party consent had been fulfilled before the end of February 2019.  The outstanding third party condition relates to approval by New Zealand’s Overseas Investment Office for Lactalis to invest in that country.  The remaining conditions precedent are within the control of the parties. The parties are mutually committed to working towards a closing date for this transaction of 31 May 2019. The Nutritionals Business has accordingly been classified as discontinued and the related assets transferred to assets held for sale; The Group has concluded various agreements relating to the divestment and discontinuation of a non-core pharmaceutical portfolio in the Asia Pacific region. These products have also been classified as discontinued operations and the assets relating to this portfolio have been transferred to assets held for sale; and Aspen has adopted two new accounting standards, IFRS 9 (Financial instruments) and IFRS 15 (Revenue from contracts with customers) which have resulted in the re-statement of the disclosed comparable financial information for the six months ended 31 December 2017 and the year ended 30 June 2018. 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 six months ended 31 December 2017 re-state performance for that period using the average exchange rates for the six months ended 31 December 2018.     Six months ended 31 December   Continuing operations   Reported 2018 R’billion Reported 2017^ R’billion Change at reported rates % CER 2017^ R’billion Change 2018/2017 at CER     % Revenue 19 673 19 509 +1 19 743 0 Normalised EBITDA* 5 535 5 712 -3 5 616 -1 NHEPS (cents) 743 814 -9 792 -6 *Operating profit before depreciation and amortisation adjusted for specific non-trading items as defined in the Group’s accounting policy. ^ Restated for IFRS 9 & 15 implementation. In order to enhance comparability of relevant underlying performance, in this commentary, (1) all performance references are to continuing operations and (2) all December 2017 revenue numbers are stated in CER and all percentage changes in revenue between December 2018 and December 2017 are based on December 2017 CER revenue. SEGMENTAL PERFORMANCE Sterile Focus Brands Sterile Focus Brands, comprising the Anaesthetics and Thrombosis portfolios, delivered revenue in line with the prior comparable period at R7,8 billion. The gross profit from Sterile Focus Brands of R4,3 billion was at an improved gross margin percentage benefitting from lower Thrombosis manufacturing costs. Anaesthetics Brands Revenue from Anaesthetics was 1% lower at R4,4 billion. This is a sound performance given ongoing supply constraints affecting all major territories other than Japan. China (+6%) and Latin America (+22%) are the material regions driving growth. Supply limitations have adversely impacted sales in Europe CIS and Australasia.  Price decreases in Japan offset strong volume gains.  Supply is expected to improve from the commencement of the 2020 financial year and should be unconstrained midway through that year. Thrombosis Brands Thrombosis revenue of R3,4 billion is unchanged from the prior comparable period. Emerging Markets are up 7%, propelled by a strong performance in China, which offsets the declines in Developed Markets. Other Pharmaceuticals Other Pharmaceuticals, comprising Regional Brands and Manufacturing, deliver revenue of R11,9 billion, flat with the prior comparable period. Regional Brands Regional Brands, which comprise 45% of Group revenue, have shown growth of 3%.  The High Potency & Cytotoxic Brands have been reclassified under Regional Brands in line with a change to regional management of this portfolio. Revenue growth has been recorded in most territories, but this has been partially offset by pricing pressure on the oncology portfolio in Europe that also dilutes the margins. Manufacturing Manufacturing revenue declines 10% to R3,0 billion, primarily due to a tender lost in the prior year by one of Aspen’s major third party customers, as reported in the results announcement for the 2018 financial year, and the suspension of sales of heparin to third parties due to limited global availability.  Resultant lower volumes weigh on margins. FUNDING Borrowings, net of cash, has increased by R6,7 billion to R53,5 billion. R1,0 billion of this increase is the consequence of Rand weakness relative to foreign currency denominated loans.  Payments relating to acquisitions of R4,9 billion and capital expenditure of R1,5 billion have been the main other drivers of the higher debt levels.  The gearing ratio covenant measure is 4,43… Continue reading Aspen’s encouraging Emerging Market growth