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APN
APN
APN - Aspen - Reviewed preliminary group financial results: year ended 30 June
2007
Aspen Pharmacare Holdings Limited
("Aspen")
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
Reviewed Preliminary Group Financial Results for the year ended 30 June 2007
Revenue
+17%
- 2007: R4,026 billion
Operating profit
+20%
- 2007: R1,077 billion
Headline earnings per share
+13%
- 2007: 210,1 cents
GROUP INCOME STATEMENT
Audited
Reviewed Restated
% 30 June 30 June
change 2007 2006
Rm Rm
Revenue 17 4 025,9 3 449,3
Cost of sales (2 084,2) (1 789,0)
Gross profit 17 1 941,7 1 660,3
Selling and distribution costs (536,9) (462,3)
Administrative expenses (208,3) (195,8)
Other operating expenses (133,3) (109,7)*
Other operating income 13,4 2,2
Operating profit 20 1 076,6 894,7
Investment income C# 139,8 72,9
Net financing costs D# (207,0) (113,7)
Net profit before tax 18 1 009,4 853,9
Tax (291,7) (216,4)*
Net profit after tax 13 717,7 637,5
Attributable to:
Equity holders of the parent 717,4 637,7
Minority interest 0,3 (0,2)*
13 717,7 637,5
Weighted average number of shares in 348 850 344 128
issue (`000)
Earnings per share - basic (cents) 11 205,7 185,3
Earnings per share - diluted (cents) 13 201,8 179,2
*The income statement for the year ended 30 June 2006 has been restated due to
the finalisation of the Generix International (Pty) Ltd ("Generix") business
combination, which was accounted for on a provisional basis in the prior year.
Refer to the basis of accounting for detail.
#See notes on Supplementary Information.
HEADLINE EARNINGS
Reconciliation of headline earnings
Net profit attributable to equity 717,4 637,7
holders of the parent
Adjusted for:
- Deferred tax asset in respect of
Nutricia (Pty) Ltd ("Nutricia")
assessed loss raised - (15,6)
- Goodwill in respect of - 0,5
acquisition of Nutricia written
down
- Loss on disposal of property, 0,4 -
plant and equipment (net of tax)
- (Profit)/loss on disposal of (3,4) 0,1
intangible assets (net of tax)
- Investment in Fine Chemicals
Corporation (Pty) Ltd ("FCC")
written down to fair value (net of - 14,2
tax)
- Impairment of intangible assets 8,2 1,9
(net of tax)
- Profit on sale of investment - (0,7)
property (net of tax)
- Adjustment to writedown on 10,5 -
disposal of 50% of FCC
Headline earnings 15 733,1 638,1
Headline earnings per share (cents) 13 210,1 185,4
Headline earnings per share - 15 206,1 179,3
diluted (cents)
CAPITAL DISTRIBUTION
Capital distribution per share 13 70,0 62,0
(cents)**
** The capital distribution relates to the distribution declared after year end.
The policy of Aspen is to recommend a final distribution to shareholders when
the preliminary results for each financial year are released.
GROUP BALANCE SHEET
Audited
Reviewed Restated
30 June 30 June
2007 2006
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 855,1 613,1
Goodwill 295,0 270,4*
Intangible assets 844,7 803,4*
Preference share investment 376,8 376,8
Non-current financial assets 6,0 11,9
Deferred tax assets 15,1 34,4
Total non-current assets 2 392,7 2 110,0
Current assets
Inventories 936,8 798,3
Receivables and prepayments 870,9 721,9
Other current assets 0,3 5,3
Cash and cash equivalents 3 331,2 625,2
Total current assets 5 139,2 2 150,7
Total assets 7 531,9 4 260,7
SHAREHOLDERS` EQUITY
Share capital and share premium 746,4 954,4
Treasury shares (598,9) (623,0)
Share-based compensation reserve 47,8 31,2
Non-distributable reserves 267,8 191,2
Retained income 1 757,3 997,2*
Ordinary shareholders` equity 2 220,4 1 551,0
Equity component of preference shares 162,0 162,0
2 382,4 1 713,0
Minority interest 7,0 6,7*
Total shareholders` equity 2 389,4 1 719,7
LIABILITIES
Non-current liabilities
Preference shares - liability component 403,5 403,3
Borrowings 25,9 49,0
Deferred - payables and other non-current 10,6 28,6*
financial liabilities
Deferred tax liabilities 65,3 99,1*
Retirement benefit obligations 7,2 7,3
Total non-current liabilities 512,5 587,3
Current liabilities
Trade and other payables 648,1 712,7*
Borrowings 3 801,8 1 173,8
Deferred - payables and other current 65,3 4,8
financial liabilities
Current tax liabilities 114,8 62,4*
Total current liabilities 4 630,0 1 953,7
Total liabilities 5 142,5 2 541,0
Total equity and liabilities 7 531,9 4 260,7
Number of shares in issue (net of treasury 350 634 347 449
shares) (`000)
Net asset value per share (cents) 633,3 446,4
*The balance sheet as at 30 June 2006 has been restated due to the finalisation
of the Generix business combination, which was accounted for on a provisional
basis in the prior year. Refer to the basis of accounting for detail.
GROUP CASH FLOW STATEMENT
Audited
Reviewed Restated
30 June 30 June
2007
2006
Rm Rm
Cash flows from operating activities
Cash operating profit 1 322,0 1 127,5
Changes in working capital (353,0) (487,5)
Cash generated from operations 969,0 640,0
Net financing costs paid (193,8) (128,7)
Investment income received 139,8 72,9
Tax paid (206,4) (182,2)
Net cash from operating activities 708,6 402,0
Cash flows from investing activities
Replacement capital expenditure - property, (67,2) (50,2)
plant and equipment
Expansion capital expenditure - property, plant (220,5) (118,7)
and equipment
Proceeds on disposal of tangible assets 0,8 5,1
Replacement capital expenditure - intangible (2,8) (9,2)
assets
Expansion capital expenditure - intangible (144,3) (123,2)
assets
Proceeds on disposal of intangible assets 8,5 1,0
Acquisition of subsidiaries and joint ventures, (0,1) (267,6)
net of cash acquired
Disposal of 50% of FCC, net of cash - 120,8
Increase in non-current financial assets (6,0) -
Net cash used in investing activities (431,6) (442,0)
Cash flows from financing activities
Proceeds from borrowings 2 477,3 1 762,1
Repayment of borrowings (2 351,1) (1 736,4)
Repayment of deferred-payables (12,3) (49,7)
Proceeds from deferred-payables 24,3 4,2
Net capital distribution paid (216,0) (166,0)
Proceeds from issue of ordinary shares 27,0 33,7
Net cash used in financing activities (50,8) (152,1)
Movement in cash and cash equivalents before
exchange rate changes 226,2 (192,1)
Effects of exchange rate changes 9,0 14,8
Cash and cash equivalents
Movement in cash and cash equivalents 235,2 (177,3)
Cash and cash equivalents at the beginning of 262,3 439,6
the year
Cash and cash equivalents at the end of the 497,5 262,3
year
For the purposes of the cash flow statement, cash and cash equivalents comprise
cash-on-hand, deposits held on call with banks less bank overdrafts which form
an integral part of Aspen`s cash management. Bank overdrafts are included within
borrowings under current liabilities on the balance sheet.
SEGMENTAL ANALYSIS
SOUTH AFRICA
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of Rm* of
total total
Primary segments:
Geographical
Gross revenue 3 275,4 77,4 2 848,6 80,0
Less: Intersegment sales (9.1) -
Revenue 3 266,3 81,1 2 848,6 82,6
Normalised operating profit 1 052,6 87,9 912,6 89,2
before amortisation***
Adjusted for:
- PLIVA dd costs - - (21,3) 100,0
- Goodwill in respect of - - (0,5) 100,0
acquisition of Nutricia
written down
- Investment in FCC written - - (13,9) 100,0
down
Operating profit before 1 052,6 87,9 876,9 88,8
amortisation
Amortisation - intangible (71,4) 58,9 (60,1) 64,9
assets
Operating profit 981,2 91,1 816,8 91,3
SEGMENTAL ANALYSIS
AUSTRALIA
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of total
Primary segments: Geographical
Gross revenue 508,5 12,0 396,1 11,1
Less: Intersegment sales - -
Revenue 508,5 12,6 396,1 11,5
Normalised operating profit 71,2 5,9 52,8 5,2
before amortisation***
Adjusted for:
- PLIVA dd costs - - - -
- Goodwill in respect of - - - -
acquisition of Nutricia written
down
- Investment in FCC written - - - -
down
Operating profit before 71,2 5,9 52,8 5,3
amortisation
Amortisation - intangible (11,5) 9,5 (9,3) 10,0
assets
Operating profit 59,7 5,5 43,5 4,9
SEGMENTAL ANALYSIS
ASIA
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm** of total
Primary segments: Geographical
Gross revenue 189,8 4,5 66,6 1,9
Less: Intersegment sales (90,3) (25,5)
Revenue 99,5 2,5 41,1 1,2
Normalised operating profit 21,0 1,8 13,6 1,3
before amortisation***
Adjusted for:
- PLIVA dd costs - - - -
- Goodwill in respect of - - - -
acquisition of Nutricia written
down
- Investment in FCC written down - - - -
Operating profit before 21,0 1,8 13,6 1,4
amortisation
Amortisation - intangible assets (8,7) 7,2 (3,7) 4,0
Operating profit 12,3 1,1 9,9 1,1
SEGMENTAL ANALYSIS
UNITED KINGDOM AND UNITED STATES
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of
total
Primary segments: Geographical
Gross revenue 256,8 6,1 248,5 7,0
Less: Intersegment sales (105,2) (85,0)
Revenue 151,6 3,8 163,5 4,7
Normalised operating profit 52,9 4,4 44,0 4,3
before amortisation***
Adjusted for:
- PLIVA dd costs - - - -
- Goodwill in respect of - - - -
acquisition of Nutricia written
down
- Investment in FCC written down - - - -
Operating profit before 52,9 4,4 44,0 4,5
amortisation
Amortisation - intangible assets (29,5) 24,4 (19,5) 21,1
Operating profit 23,4 2,2 24,5 2,7
SEGMENTAL ANALYSIS
TOTAL
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of total
Primary segments: Geographical
Gross revenue 4 230,5 100,0 3 559,8 100,0
Less: Intersegment sales (204,6) (110,5)
Revenue 4 025,9 100,0 3 449,3 100,0
Normalised operating profit 1 197,7 100,0 1 023,0 100,0
before amortisation***
Adjusted for:
- PLIVA dd costs - - (21,3) 100,0
- Goodwill in respect of - - (0,5) 100,0
acquisition of Nutricia written
down
- Investment in FCC written down - - (13,9) 100,0
Operating profit before 1 197,7 100,0 987,3 100,0
amortisation
Amortisation - intangible assets (121,1) 100,0 (92,6) 100,0
Operating profit 1 076,6 100,0 894,7 100,0
SEGMENTAL ANALYSIS
Pharmaceutical
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of total
Secondary segments: Business
Revenue 3 031,7 75,3 2 562,1 74,3
South Africa 2 397,3 2 053,7*
Australia 393,3 310,0
Asia 99,5 41,1**
United Kingdom and United 141,6 157,3
States
Normalised operating profit 948,9 79,2 794,5 77,7
before amortisation***
South Africa 838,8 711,6*
Australia 39,0 26,1
Asia 21,0 13,6**
United Kingdom and United 50,1 43,2
States
Operating profit before 948,9 79,2 764,7 77,5
amortisation
South Africa 838,8 681,8*
Australia 39,0 26,1
Asia 21,0 13,6**
United Kingdom and United 50,1 43,2
States
Operating profit 842,5 78,3 688,9 77,0
South Africa 780,8 636,8*
Australia 27,9 18,3
Asia 12,3 9,9**
United Kingdom and United 21,5 23,9
States
*With effect from January 2006, 50% of FCC was sold. 100% of the FCC
results was included in Group results for the six months to 31 December
2005.
**The Astrix Laboratories Ltd ("Astrix") business commenced operations from
January 2006.
***In 2006 operating profit before amortisation was adjusted for PLIVA dd
costs, the writedown of the investment in FCC to fair value and the
writedown of the Nutricia goodwill. No adjustments were made in the 2007
financial year.
SEGMENTAL ANALYSIS
Consumer
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of total
Secondary segments: Business
Revenue 994,2 24,7 887,2 25,7
South Africa 869,0 794,9
Australia 115,2 86,1
Asia - -
United Kingdom and United 10,0 6,2
States
Normalised operating profit 248,8 20,8 228,5 22,3
before amortisation***
South Africa 213,8 201,0
Australia 32,2 26,7
Asia - -
United Kingdom and United 2,8 0,8
States
Operating profit before 248,8 20,8 222,6 22,5
amortisation
South Africa 213,8 195,1
Australia 32,2 26,7
Asia - -
United Kingdom and United 2,8 0,8
States
Operating profit 234,1 21,7 205,8 23,0
South Africa 200,4 180,0
Australia 31,8 25,2
Asia - -
United Kingdom and United 1,9 0,6
States
*With effect from January 2006, 50% of FCC was sold. 100% of the FCC
results was included in Group results for the six months to 31 December
2005.
**The Astrix Laboratories Ltd ("Astrix") business commenced operations from
January 2006.
***In 2006 operating profit before amortisation was adjusted for PLIVA dd
costs, the writedown of the investment in FCC to fair value and the
writedown of the Nutricia goodwill. No adjustments were made in the 2007
financial year.
SEGMENTAL ANALYSIS
Total
Audited
Reviewed Restated
30 June 30 June
2007 % 2006 %
Rm of total Rm of total
Secondary segments: Business
Revenue 4 025,9 100,0 3 449,3 100,0
South Africa 3 266,3 2 848,6*
Australia 508,5 396,1
Asia 99,5 41,1**
United Kingdom and United 151,6 163,5
States
Normalised operating profit 1 197,7 100,0 1 023,0 100,0
before amortisation***
South Africa 1 052,6 912,6*
Australia 71,2 52,8
Asia 21,0 13,6**
United Kingdom and United 52,9 44,0
States
Operating profit before 1 197,7 100,0 987,3 100,0
amortisation
South Africa 1 052,6 876,9*
Australia 71,2 52,8
Asia 21,0 13,6**
United Kingdom and United 52,9 44,0
States
Operating profit 1 076,6 100,0 894,7 100,0
South Africa 981,2 816,8*
Australia 59,7 43,5
Asia 12,3 9,9**
United Kingdom and United 23,4 24,5
States
*With effect from January 2006, 50% of FCC was sold. 100% of the FCC
results was included in Group results for the six months to 31 December
2005.
**The Astrix Laboratories Ltd ("Astrix") business commenced operations from
January 2006.
***In 2006 operating profit before amortisation was adjusted for PLIVA dd
costs, the writedown of the investment in FCC to fair value and the
writedown of the Nutricia goodwill. No adjustments were made in the 2007
financial year.
SUPPLEMENTARY INFORMATION
Audited
Reviewed Restated
30 June 2007 30 June 2006
Rm Rm
A. Capital expenditure
Incurred 434,8 301,3
- tangible assets 287,7 168,9
- intangible assets 147,1 132,4
Contracted
- tangible assets 96,3 91,9
- intangible assets 4,3 21,1
Authorised but not contracted for
- tangible assets 330,9 282,7
- intangible assets 1,0 -
B. Operating profit has been arrived at
after charging
Depreciation of property, plant and 60,3 47,5
equipment
Amortisation of intangible assets 121,1 92,6
Share-based payment expenses - employees 29,4 27,6
C. Investment income
Preference share dividends 29,3 25,3
Interest received 110,5 47,6
Total investment income 139,8 72,9
D. Net financing costs
Interest paid (174,0) (93,2)
Net foreign exchange gains/(losses) 22,7 (7,1)
Fair value (losses)/gains on financial (19,4) 14,8
instruments
Notional interest on financial instruments (3,8) (0,1)
Preference share dividends paid (32,5) (28,1)
Net financing costs (207,0) (113,7)
E. Other commitments
During the 2003 financial year Aspen
entered into a 12-year agreement with
GlaxoSmithKline South Africa (Pty) Ltd to
distribute and market a range of their
products. In terms of this agreement Aspen
is committed to pay the following
amounts to GlaxoSmithKline South Africa
(Pty) Ltd:
- payable within one year 17,7 21,6
- payable thereafter 62,6 80,3
80,3 101,9
During the 2005 financial year Aspen
Australia Pty Ltd entered into a 10-year
agreement with Novartis Pharmaceuticals
Australia Pty Ltd to distribute and market
a range of their products. In terms of this
agreement Aspen is committed
to spend the following amounts on promotion
of the products:
- payable within one year 9,0 8.0
- payable thereafter 45,6 48,2
54,6 56,2
F. Contingent liabilities
There are contingent liabilities in respect
of:
Additional payments in respect of the Quit 7,1 6,6
worldwide intellectual property rights
Guarantee covering potential rental default 1,1 2,5
relating to sale of discontinued operations
Guarantees covering loan and other 20,4 5,4
obligations to third parties
STATEMENT OF CHANGES IN GROUP EQUITY
Share-
based Non-
Share Treasury compen- Distri-
capital sation butable
and premium shares reserve reserves
Rm Rm Rm Rm
Balance as at 1 July 2005 1 100,8 (641,7) 16,3 52,6
Fair value movement on
available-for-sale
financial assets - - - (0,6)
Currency translation - - - 63,8
differences
Net profit for the year - - - -
Capital distribution (184,7) 18,7 - -
Acquisition of subsidiaries - - - -
Cash flow hedges realised - - - (4,7)
Cash flow hedges recognised - - - 5,2
Issue of ordinary share 38,3 - - -
capital
Share options and - - 23,0 -
appreciation rights awarded
Transfer from share-based - - (8,1) -
compensation reserve
Non-distributable portion - - - 74,9
of earnings
Balance as at 30 June 2006 954,4 (623,0) 31,2 191,2
Fair value movement on
available-for-sale
financial assets - - - 0,7
Currency translation - - - 69,2
differences
Net profit for the year - - - -
Capital distribution (240,1) 24,1 - -
Cash flow hedges realised - - - (5,2)
Cash flow hedges recognised - - - (0,1)
Issue of ordinary share 32,1 - - -
capital
Share options and - - 24,2 -
appreciation rights awarded
Transfer from share-based - - (7,6) -
compensation reserve
Non-distributable portion - - - 12,0
of earnings
Equity portion of tax
claims in respect of
share schemes - - - -
Balance as at 30 June 2007 746,4 (598,9) 47,8 267,8
STATEMENT OF CHANGES IN GROUP EQUITY
Equity
component
Retained of Minority
preference
income shares interest Total
Rm Rm Rm Rm
Balance as at 1 July 2005 426,3 162,0 - 1 116,3
Fair value movement on
available-for-sale
financial assets - - - (0,6)
Currency translation - - - 63,8
differences
Net profit for the year 637,7 - (0,2) 637,5
Capital distribution - - - (166,0)
Acquisition of subsidiaries - - 6,9 6,9
Cash flow hedges realised - - - (4,7)
Cash flow hedges recognised - - - 5,2
Issue of ordinary share - - - 38,3
capital
Share options and - - - 23,0
appreciation rights awarded
Transfer from share-based 8,1 - - -
compensation reserve
Non-distributable portion of (74,9) - - -
earnings
Balance as at 30 June 2006 997,2 162,0 6,7 1 719,7
Fair value movement on
available-for-sale
financial assets - - - 0,7
Currency translation - - - 69,2
differences
Net profit for the year 717,4 - 0,3 717,7
Capital distribution - - - (216,0)
Cash flow hedges realised - - - (5,2)
Cash flow hedges recognised - - - (0,1)
Issue of ordinary share - - - 32,1
capital
Share options and - - - 24,2
appreciation rights awarded
Transfer from share-based 7,6 - - -
compensation reserve
Non-distributable portion of (12,0) - - -
earnings
Equity portion of tax claims
in respect of
share schemes 47,1 - - 47,1
Balance as at 30 June 2007 1 757,3 162,0 7,0 2 389,4
BASIS OF ACCOUNTING
The consolidated preliminary results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IFRIC interpretations, the
Listings Requirements of the JSE Limited and Schedule 4 of the South African
Companies Act (Act 61 of 1973, as amended).
These results have been reviewed by Aspen`s auditors, PricewaterhouseCoopers
Inc.
Their unqualified review report is available for inspection at the company`s
registered office.
The accounting policies used in the preparation of these preliminary results are
consistent with those used in the annual financial statements for the year ended
30 June 2006.
The comparative figures have been restated due to the finalisation of the
Generix business combination, which was accounted for on a provisional basis in
the prior year.
The table to the right reflects the changes from provisional accounting in the
prior year:
FINALISATION OF GENERIX ACQUISITION ACCOUNTING
The accounting for the acquisition of Generix was made on a provisional basis in
terms of IFRS 3 for the year ended 30 June 2006.
In terms of IAS 8, Accounting policies, Changes in Accounting Estimates and
Errors, the adjustments to finalise the Generix acquistion was corrected
retrospectively.
The comparative figures have been restated to present the prior year figures as
if the acquisition accounting was finalised in the prior year.
Audited
Audited Restated
2006 Adjustments 2006
Income statement Rm Rm Rm
Other operating expenses (108,9) (0,8) (109,7)
Tax (216,6) 0,2 (216,4)
Net profit after tax 638,1 (0,6) 637,5
Attributable to:
Equity holders of the parent 638,0 (0,3) 637,7
Minority interest 0,1 (0,3) (0,2)
Audited
Audited Restated
2006 Adjustments 2006
Balance sheet Rm Rm Rm
ASSETS
Goodwill 262,1 8,3 270,4
Intangible assets 820,5 (17,1) 803,4
Total assets 4 269,5 (8,8) 4 260,7
EQUITY
Retained income 997,5 (0,3) 997,2
Minority interest 12,5 (5,8) 6,7
Total equity 1 725,8 (6,1) 1 719,7
LIABILITIES
Non-current liabilities
Deferred-payables and other non-
current
financial liabilities 25,8 2,8 28,6
Deferred tax liabilities 103,9 (4,8) 99,1
Current liabilities
Trade and other payables 713,6 (0,9) 712,7
Current tax liabilities 62,2 0,2 62,4
Total equity and liabilities 4 269,5 (8,8) 4 260,7
COMMENTARY
GROUP
Aspen increased revenue by 17% to R4,026 billion whilst operating profit grew by
20% to R1,077 billion for the financial year ended 30 June 2007. A higher
effective tax rate of 28,9% (2006: 25,3%) reduced growth in net profit after tax
to 13% at R718 million. Headline earnings per share was 13% higher at 210,1
cents (2006: 185,4 cents).
SOUTH AFRICAN OPERATIONS
The South African business remains the key driver of Group performance and
produced a solid set of results. Revenue grew by 15% to R3,266 billion and
earnings before interest, tax and amortisation ("EBITA") increased by 20% to
R1,053 billion.
The Group retained its leadership position in the private generic market with an
unchanged market share of 35% despite increased competition and for the first
time attained the top position in the total private pharmaceutical market. The
Pharmaceutical Division underpinned the performance of the South African
business, growing revenue by 17% to R2,397 billion. Adjusting for the effect of
the sale of 50% of FCC midway through the prior financial year, revenue
increased by 20% on a like-for-like basis. Finished dosage form ("FDF")
pharmaceuticals reported an increase in revenue of 19%. Continued strong growth
in the private market for generic medicines and the momentum of recently
launched products were material contributors to this growth.
FDF sales of anti-retrovirals ("ARVs") grew by 65% to R439 million. This has
been influenced by public health services in South Africa and African export
territories continuing to improve capacity to reach those in need. Aspen
increased its ARV offering towards the end of the financial year with the
introduction of Viread and Truvada, originator products distributed on behalf of
Gilead Life Sciences Inc., which are considered amongst the leading treatments
available for HIV/AIDS today.
Aspen has also gained an increased share of the over-the-counter market,
although growth in this market as a whole remains pedestrian. In the second year
of the two-year public sector tender cycle (excludes ARVs) revenue has been
flat. FCC, the niche active pharmaceutical ingredient ("API") manufacturer, had
an excellent year.
The Consumer Division recorded satisfactory growth in revenue of 9% to R869
million. Pleasing growth was achieved in the toothpastes and infant nutritional
brands.
Aspen continues to invest in its production capabilities, with the total
investment since 2003 set to pass R1 billion in the financial year ahead. The
construction of the Sterile facility is reaching completion. Validation
procedures should commence within the next six months with commercial production
scheduled in the second half of calendar 2008. An upgrade project on the Port
Elizabeth heritage general facility has commenced, which will add capacity and
technology to this plant. An extension to the OSD facility has also been
approved in terms of which increased bottle packing capacity will be added to
cater for the increasing demand for this packaging format for ARVs.
INTERNATIONAL OPERATIONS
The international business increased revenue by 26% to R760 million and raised
EBITA by 31% to R145 million. These results benefited from a full year of
contribution from the Astrix joint venture (2006: contribution for six months).
Aspen Australia was the leading contributor to the international business.
Revenue of R509 million showed growth of 28% with EBITA increasing by 35% to R71
million. This was achieved in a difficult trading environment marked by
regulatory intervention. Selective expansion of the product portfolio has been a
primary growth driver and a 19% strengthening of the Australian dollar relative
to the Rand has also boosted results.
Aspen Resources, the UK-based intellectual property and sourcing company,
also benefited from relative Rand weakness in growing EBITA by 40% to
R56 million. Co-pharma, the Group`s other UK-based company which trades in
the commodity generics sector, extended its run of poor performance with a
negative contribution to EBITA of R4 million. Aspen`s USA business is focused
on assessing market opportunities in that territory and trading activity was
not material.
Astrix, the Indian-based manufacturer of ARV APIs which is 50% owned by Aspen,
experienced reducing margins in the second half of the year as competition in
this market intensified. Supply of the ARV APIs to Aspen accounted for almost
half of the Astrix revenue.
INVESTMENT INCOME, FINANCE COSTS AND CASH FLOWS
Interest paid, net of interest received, has increased by R18 million to R64
million. The higher cost of borrowing, as well as increased investment in
capital expenditure and working capital are the main reasons for this increase.
Higher borrowing costs have also given rise to higher notional interest on
financial instruments and increases in preference shares dividends, both
received and paid. Foreign exchange gains net of fair value losses on financial
instruments amounted to R3 million (2006: R8 million).
Net cash from operating activities amounted to R709 million, almost on parity
with earnings of R717 million. Working capital increased by R353 million.
Increases in stock and debtors were in line with increased trading activity,
however creditors decreased by R83 million to sustainable levels. Factors
influencing the decrease in creditors were the move to 50%-owned Astrix as the
supplier of ARV APIs and various arrangements which had allowed for extended
trading terms coming to an end or not recurring.
PROSPECTS
The Group is well set to maintain its leadership position in the South African
pharmaceutical market. Continuous nurturing of the product pipeline is expected
to be rewarded in the forthcoming year by a high volume of new product launches.
Aspen`s sales and marketing teams have proven to be the best distributors of
product into this market. Announcement of the public sector tender awards for
the next two years is imminent. Based upon extensive planning and preparation
for the tenders, Aspen is optimistic that it will secure an increased share of
this business. The ARV tender is due for submission later this year for award
early in 2008. Increased competition will be encountered, but with an expanded
product offering and increasing capacity in the public health sector to service
demand, Aspen expects to remain an important supplier of ARVs to the South
African government.
The legislative environment for pharmaceuticals remains uncertain. This is by no
means a circumstance confined to the South African market. The responsibility
for delivery of healthcare which is borne by governments throughout the world
inevitably give rise to interventions by the regulator which can influence
business prospects. Aspen continues to engage actively with the Department of
Health on matters such as international benchmarking and the annual price
review. The nomination of pharmaceuticals as a strategic industry by the South
African government is taken to be an extremely positive development. Aspen looks
forward to working with government in building the industry in South Africa.
The investment that has been made and continues to be made by the Group in its
manufacturing facilities is of great strategic importance. This investment has
allowed Aspen to raise its manufacturing standards which is particularly
pertinent with South Africa`s entry into the Pharmaceutical Inspection
Convention ("PIC") with effect from 1 July 2007. The manufacturing standards and
capacity being established by Aspen have positioned the Group to reach export
markets and to enter into manufacturing and trade partnerships with leading
multi-national pharmaceutical companies.
Aspen has achieved strong growth in the export of ARVs into Africa and is one of
the leading suppliers of ARVs on the continent, reaching some 500 000 patients.
The growth momentum in ARVs is expected to be maintained. This will however be
dependent on African governments continuing to build capacity to deliver to
those in need. The Group has the production capacity and the product offering to
deliver to the increased demand for ARVs as the World Health Organisation works
towards its target of universal access by 2010. Building on the success of its
ARV business, the Group is actively assessing opportunities to grow its business
into Africa.
In an increasingly competitive global pharmaceutical market, Aspen will seek to
utilise the strength of the business it has developed in South Africa to
establish partnerships and create opportunities to extend its business in
international markets.
Growth prospects for the year ahead are positive, with the investment made in
the product pipeline and the production facilities expected to give added
momentum to the Group`s performance.
CAPITAL DISTRIBUTION
Taking into account the earnings performance for the year ended 30 June 2007,
notice is hereby given that, in terms of a general authority to distribute the
company`s capital granted by shareholders at the annual general meeting held on
16 November 2006, a capital distribution of 70 cents per ordinary share (2006:
62 cents) has been declared, payable
to shareholders recorded in the share register of the company at the close of
business on Friday, 21 September 2007.
This represents an increase of 13% over the previous year`s capital distribution
and is covered 3 times by headline earnings per share.
In compliance with IAS 10, Events after the Balance Sheet Date, the capital
distribution will only be accounted for in the financial statements in the year
ending 30 June 2008.
In compliance with STRATE, the company has determined the following salient
dates for the payment of the capital distribution:
Last day to trade cum capital distribution Friday, 14 September 2007
Shares commence trading ex capital Monday, 17 September 2007
distribution
Record date Friday, 21 September 2007
Payment date Monday, 24 September 2007
Share certificates may not be dematerialised or rematerialised between Monday,
17 September 2007 and Friday, 21 September 2007, both days inclusive.
By order of the board
SB Saad MG Attridge HA Shapiro
(Group Chief Executive) (Deputy Group Chief Executive) (Company Secretary)
Woodmead: 20 August 2007
DIRECTORS:
AJ Aaron (Chairman)*, MG Attridge, MR Bagus*, L Boyd*, JF Buchanan*, NJ
Dlamini*, P Dyani*, M Krok*, CN Mortimer*, DM Nurek*, SB Saad, D Thomas*
(alternate to P Dyani), S Zilwa*.
* Non-executive directors
COMPANY SECRETARY:
HA Shapiro
TRANSFER SECRETARIES:
Computershare Investor Services 2004 (Pty) Limited
(Registration number 1987/003382/06)
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
REGISTERED OFFICE:
Building 8, Healthcare Park, Woodlands Drive, Woodmead
Date: 20/08/2007 13:00:01 Produced by the JSE SENS Department.
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