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 2020. COMMENTARY RESHAPING OF THE GROUP The recently announced agreement to divest the assets related to the commercialisation of Aspen’s Thrombosis business in Europe to Mylan (refer SENS announcement of 8 September 2020) marks the end of the process to reshape the foundation of the Group. Following the completion of this transaction, Aspen’s Commercial Pharmaceuticals business will be heavily weighted towards territories where we have demonstrated capabilities and a strong performance record, largely in Emerging Markets. A higher proportion of our business will be exposed to the private sector and will be better positioned to benefit from the expanding middle classes in Emerging Markets, where our trusted and proven brands are well placed to support the increasing medical demands of these growing populations. The receipt of the proceeds from the aforementioned transaction with Mylan will again give us scope for acquisitive investment to support initiatives aimed at enhancing value in areas of strength. Our significant investment in capital expenditure to build our sterile manufacturing capacities has been slightly delayed by the COVID-19 pandemic. This investment is planned to peak in the year ahead before reducing rapidly in subsequent years as the projects reach their end. The complex and niche production capabilities installed will allow us to reduce cost of goods within our existing portfolio. It also allows us to leverage this sought after capacity, particularly with big pharma, to further expand our global presence in steriles thus enhancing our offering of quality, affordable medicines. As a result of our reshaping of the Group and our significant investment in sterile manufacturing, Aspen is highly differentiated from our peer group as it is the most Emerging Market-focused specialty pharmaceutical company and a global leader in the production of sterile products. COVID-19 IMPACT The COVID-19 pandemic has created great uncertainty and many challenges for people and companies across the globe. Despite this, Aspen’s business model has proven resilient. Our relevant product portfolio, effective business continuity plans and safety measures to protect our employees have enabled us to remain in full operation throughout this period. We are most proud of the commitment shown by all of Aspen’s employees, with special gratitude to those at the production sites, for ensuring we have been able to maintain the supply of essential medicines to COVID-19 and other patients around the world under these circumstances. The volatility associated with the pandemic has had an adverse impact on our results in the second half of the 2020 financial year. This impact has varied by timing and region. The hard lockdown in China significantly restricted sales of medicines there for at least three months. Conversely, early in the first wave we experienced a spike in demand for certain of our medicines, most notably in South Africa, Australia and Mexico. This was followed by the predicted drop in demand as the resultant abnormally high inventory in-market levels were normalised. In Europe, there was a significant need for our sterile products required to treat COVID-19 patients during the height of infections, but a decline in orders for products related to elective surgeries. The period after the first wave has been characterised by continued social distancing, leading to reduced infection rates in non-COVID-19 communicable diseases and a slow and uncoordinated resumption of elective surgeries which has adversely impacted our performance. Despite the many challenges experienced during the second half of the financial year, we have made great progress against each of our medium-term priorities, while maintaining the supply of our medicines to patients in need around the world. GROUP PERFORMANCE (CONTINUING OPERATIONS) Group revenue increased 9% to ZAR 38,6 billion and Normalised EBITDA increased 7% to ZAR 11,0 billion for the 12 months ended 30 June 2020. The increase in Group revenue was supported by growth from Commercial Pharmaceuticals (+6%), despite the difficult trading conditions, and a pleasing performance from Manufacturing (+22%). Normalised headline earnings per share (NHEPS) increased 9% to ZAR 14,65, favourably impacted by lower financing costs. Strong second half cash flows resulted in a positive cash inflow from working capital for the 12 months ended 30 June 2020 and supported a cash conversion rate of 142%. Net borrowings declined ZAR 3,8 billion to ZAR 35,2 billion. The strong cash generation was offset by ZAR 5,6 billion in unfavourable currency movements. The leverage ratio in terms of the Facilities Agreement of 2.89 times is comfortably below the covenant leverage ratio of 3.5 times. Testing of intangible and tangible assets for impairment has resulted in impairments of ZAR 1,5 billion arising primarily from a decline in the outlook for the affected products. Discontinued operations include the Nutritionals Business, the Asia Pacific non-core pharmaceutical portfolio, both divested in the 2019 financial year, as well as the Japanese Business and the Public Sector ARVs. The Japanese business divestment became effective on 31 January 2020. The South African Public sector ARV transaction with Laurus, a leading Indian producer of ARV APIs, became effective in June 2020. Material relative movements in exchange rates in the last four months of the financial year have had a positive 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 12 months ended 30 June 2019 restate the performance for that period using the average exchange rates for the 12 months ended 30 June 2020. For the 12 months ended 30 June 2020 Continuing operations Reported FY 2020R’million Restated ReportedFY 2019^ R’million Change at reportedrates % Restated CER FY2019 ^ Change at CER % Revenue 38 647 35 514 9% 37 320 4% Normalised EBITDA * 10 968 10 277 7% 10 699 3% NHEPS ** (cents) 1 464,6 1 344,8 9% 1 397,7 5% ^ FY 2019… Continue reading Aspen increases revenue by 9% to R38,6 billion
