| Tue 8 Sep 2009, 14:01 | | APN - Aspen Pharmacare Holdings Limited - Aspen`s revenue increases by 80 |
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APN
APN
APN - Aspen Pharmacare Holdings Limited - Aspen`s revenue increases by 80
percent as international business expands
Aspen Pharmacare Holdings Limited ("Aspen")
(Incorporated in the Republic of South Africa)
(Registration Number 1985/002935/06)
(Share code APN ISIN: ZAE000066692)
Aspen`s revenue increases by 80 percent as international business expands
Johannesburg - JSE listed Aspen Pharmacare Holdings Limited, Africa`s largest
pharmaceutical manufacturer, has produced excellent results for the year ended
30 June 2009. Prevailing global economic conditions did little to deter the
strength of the Group`s performance, with the South African and Australian
businesses continuing to perform well. Aspen`s international expansions resulted
in substantially increased contributions from the offshore businesses,
delivering an operating profit of R1.076 billion.
GROUP PERFORMANCE:
- Group revenue increased by 80% to R8,450 billion (R4.881 billion).
- Group operating profit improved by 82% to R2,183 billion (R1.298 billion).
- Group headline earnings per share (HEPS) grew by 68% to 389.4 cents (231.3
cents).
Stephen Saad, Aspen Group Chief Executive said, "The Group`s international
operations delivered positive results, delivering an increased contribution to
earnings of 47% up from 15% last year. The South African business has achieved
excellent growth and has increased its contribution to earnings by 14%, while
retaining its position as the market leader in the pharmaceutical sector and
improving its market share in all market segments.
SOUTH AFRICAN OPERATIONS RETAIN MARKET LEADERSHIP
Aspen`s South African business remains the market leader in the total private
pharmaceutical market, the private generic market, the public sector
pharmaceutical market and in the supply of anti-retrovirals (ARVs) to both the
private and the public sectors. Campbell Belman`s independent Confidence
Standing Survey of 42 over-the-counter (OTC) companies by 146 top retail
pharmacies, again ranked Aspen as the top OTC company for the fourth time in the
past six years.
The South African business increased revenue by 30% to R4,868 billion amidst
difficult trading conditions. Notwithstanding margin pressure, EBITA grew by
R149 million to R1,208 billion. Restrictive factors such as accelerated raw
material prices, production inflation and legislated fixed Single Exit Prices
(SEP) impacted returns in the first half. A margin improvement was seen in the
final quarter as a consequence of the Department of Health`s 13.2% increase in
SEP in February 2009 and the implementation of the state tender price adjustment
mechanism.
An impressive performance was delivered by the pharmaceutical division, with
revenue increasing by 34% to R3,767 billion. These results were driven by
organic volume growth and the successful launches of Truvada, Viread, Vectoryl
and Aspen Efavirenz. The consumer division`s 16% revenue increase to R1.101
billion was positive given the depressed retail sector. Leading brands such as
Lennon Dutch Medicines, Infacare, S26, Guronsan C and Hamburg Tea delivered a
credible performance. Prospects for the ophthalmic portfolio were enhanced with
the addition of Eye-gene and Murine, while Melegi, a new infant milk formulation
was launched and exported into selected African countries.
Additional oral solid dose (OSD) manufacturing capacity was realised in Port
Elizabeth with the completion of more packing lines. This provided relief to
production pressure driven by unprecedented public sector demand. The new OSD
tabletting production plant, presently undergoing validation, will provide
further capacity before the end of 2009. The Sterile Facility`s eye-drop suite
has commenced exporting Clear Eyes and Murine to Prestige Brands in the United
States, while trials have been initiated in the hormonal suite.
An explosion in the drying tower at Aspen`s Nutritionals Facility on 18 August
2009 caused extensive damage to that section of the production site. Blending
and packing areas were unaffected and production in the drying tower should
recommence before the end of the 2010 financial year. Contingency plans have
been implemented to ensure continued supply of infant milk formulations to the
market.
INTERNATIONAL OPERATIONS DELIVER PLEASING RETURNS
Over the past 18 months, the Group`s international expansion has been driven by
acquisitions in Brazil, Mexico, Venezuela, Tanzania, Kenya and Uganda. With
effect from 30 June 2008, the Group`s intellectual property portfolio in
international markets was significantly enhanced by the acquisition of four
globally branded products, Eltroxin, Lanoxin, Imuran and Zyloric from GSK for
GBP 170 million. The global product range was also supplemented by two licensing
transactions for branded products with US-based Iroko Pharmaceuticals. Aspen
products are now distributed to more than 100 countries across the world.
This expansion has resulted in a substantial increase in the contribution from
international operations to the Group. Revenue of R3,869 billion was achieved,
up from R1,123 billion and EBITA from continuing operations was R1,071 billion,
up from R209 million. The global brands comprised R1.438 billion of revenue.
Transition of distribution arrangements for the global brands to the Aspen
network has already commenced, with the remainder of the transition scheduled in
the 2010 financial year.
Aspen Australia`s positive performance yielded a 29% increase in revenue to R915
million, despite legislated price cuts. These results were driven by effective
product promotions and expanded product offerings.
Aspen`s Latin American business recorded revenue of R841 million, but the
potential of this territory remains to be realised. Initiatives receiving active
attention include the strengthening of management, increasing representation in
the private sector, launching new products and establishing a medium-term
product pipeline.
The Group`s East African business reported revenue of R373 million in a year in
which political unrest in Kenya had a negative impact upon trade.
Aspen disposed of its 50% shareholding in the ARV active pharmaceutical
ingredient manufacturer, Astrix, for USD 39 million, with effect from 31 May
2009.
GSK TRANSACTIONS
On 12 May 2009 Aspen announced that it had agreed terms on a series of strategic
interdependent transactions ("the GSK transactions") with GSK, being:
- the acquisition of the rights to distribute GSK`s pharmaceutical products
in South Africa;
- the formation of a collaboration arrangement between Aspen and GSK in
relation to the marketing and selling of prescription pharmaceuticals in
sub-Saharan Africa;
- the acquisition by Aspen Global of eight specialist branded products
(Alkeran, Leukeran, Purinethol, Kemadrin, Lanvis, Myleran, Septrin and
Trandate) for worldwide distribution;
- the acquisition of GSK`s manufacturing facility in Bad Oldesloe, Germany;
and
- Aspen to issue 68.5 million shares to GSK as consideration for the
transactions.
The completion of the transactions was subject to the fulfillment of a number of
conditions precedent. Certain of these conditions precedent have now been
fulfilled, amongst these the approval of the South African Competition
Authorities and the German Competition Authorities. The material conditions
precedent which remain to be fulfilled are in respect of the approval of the
Exchange Control Department of the South African Reserve Bank and competition
filings in international markets. It is anticipated that the GSK transactions
should complete before the end of 2009.
PROSPECTS
Aspen`s business in South Africa remains well positioned. Completion of the
transaction to acquire the rights to distribute GSK products in South Africa
will strengthen Aspen in the branded products segment of the market. Growth will
be complemented by the increase in SEP, currency stability and the excellent
product pipeline. Aspen will remain competitive in public sector tenders. The
retail sector remains subdued, but Aspen`s strategy to maintain focus on its
core brands is expected to put the consumer division in a positive position when
this market improves.
The Group expects to be able to add a number of new products to the
collaboration with GSK in sub-Saharan Africa should the GSK transactions
complete. GSK`s strong presence and effective distribution network in sub-
Saharan Africa will be supplemented with Aspen`s pipeline of relevant products
to provide for increased access to quality healthcare across this region.
As a consequence of the Group`s exposure to a wide number of currencies,
exchange rate fluctuation could influence future results. Investment
opportunities to support the growth of the international business will continue
to be explored. In the event of the GSK transaction completing, eight specialist
products will be added to the global brands portfolio, which will allow for
additional extraction of value from Aspen`s international distribution network.
Excellent progress has been made in developing a product pipeline to support the
international business. The benefits of this should become apparent in two to
three years. Aspen intends to exercise its call option to acquire the remaining
49% of the Latin America businesses in Brazil, Mexico and Venezuela
Having given consideration to the Group`s existing debt service commitments and
future possible investments, Aspen`s Board of Directors has resolved that there
will be no distribution paid to shareholders this year.
Issued by: Shauneen Beukes, Shauneen Beukes Communications
Tel: +27 (012) 661-8467 : Cell: +27 82 389 8900
On Behalf Of: Stephen Saad, Aspen Group Chief Executive
Tel: +27 (031) 580-8603
Gus Attridge, Aspen Deputy Group Chief Executive
Tel: +27 (031) 580-8605
Roshni Gajjar, Aspen Investor Relations
Tel: +27 (031) 580-8649 : Cell: +27 82 879 1826
8 September 2009
Sponsor: Investec Bank Limited
Date: 08/09/2009 14:01:01 Produced by the JSE SENS Department.
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