| Tue 8 Sep 2009, 14:00 | | APN - Aspen Holdings - Reviewed preliminary Group financial results for the year |
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APN
APN
APN - Aspen Holdings - Reviewed preliminary Group financial results for the year
ended 30 June 2009
ASPEN HOLDINGS
Aspen Pharmacare Holdings Ltd ("Aspen")
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
HEALTHCARE FOR LIFE
Aspen - making a difference through every stage of your life, from beginning to
end.
www.aspenpharma.com
Reviewed preliminary Group financial results for the year ended 30 June 2009
R8,5bn
REVENUE AN INCREASE OF 80%
R2,2bn
OPERATING PROFIT AN INCREASE OF 82%
379,5 cents
HEADLINE EARNINGS PER SHARE FROM CONTINUING OPERATIONS AN INCREASE OF 68%
GROUP INCOME STATEMENT
Reviewed Audited
30 June 30 June
% 2009 2008
Change Rm Rm
CONTINUING OPERATIONS
Revenue 80 8 450,3 4 682,5
Cost of sales (4 564,1) (2 511,2)
Gross profit 79 3 886,2 2 171,3
Selling and distribution expenses (997,7) (665,3)
Administrative expenses (588,6) (272,3)
Other operating expenses (121,0) (126,5)
Other operating income 4,1 89,1
Operating profit B# 82 2 183,0 1 196,3
Investment income C# 224,2 263,4
Financing costs D# (699,2) (280,7)
1 708,0 1 179,0
Share of after-tax net losses of (3,3) (1,1)
associates
Net profit before tax 45 1 704,7 1 177,9
Tax (362,0) (333,1)
Net profit after tax from continuing 59 1 342,7 844,8
operations
DISCONTINUED OPERATIONS
Profit for the year from E# 10,9 19,7
discontinued operations
Profit for the year 57 1 353,6 864,5
Attributable to:
Equity holders of the parent 1 340,4 862,9
Minority interest 13,2 1,6
57 1 353,6 864,5
Weighted average number of shares in 357 860 351 792
issue (`000)
BASIC EARNINGS PER SHARE (CENTS)
From continuing operations 55 371,5 239,7
From discontinued operations 3,1 5,6
53 374,6 245,3
DILUTED EARNINGS PER SHARE (CENTS)
From continuing operations 53 360,0 234,8
From discontinued operations 2,9 5,3
51 362,9 240,1
#See notes on Supplementary information.
HEADLINE EARNINGS
Reconciliation of headline earnings
Net profit attributable to equity holders of 1 340,4 862,9
the parent
Adjusted for:
CONTINUING OPERATIONS
- Loss on disposal of property, plant and 3,1 0,5
equipment (net of tax)
- Loss/(profit) on disposal of intangible 0,7 (37,0)
assets (net of tax)
- Impairment of intangible assets (net of 24,8 8,2
tax)
- Profit on sale of 51% of Co-pharma Ltd - (16,6)
- Profit on sale of Shimoda shares (net of - (4,3)
tax)
- Reversal of impairment losses on 0,1 -
intangible assets (net of tax)
DISCONTINUED OPERATIONS
- Loss on the sale of Astrix Laboratories 24,1 -
Ltd (net of tax)
- Loss on disposal of property, plant and 0,3 -
equipment (net of tax)
Headline earnings 71 1 393,5 813,7
HEADLINE EARNINGS
From continuing operations 71 1 358,2 794,0
From discontinued operations 35,3 19,7
71 1 393,5 813,7
HEADLINE EARNINGS PER SHARE (CENTS)
From continuing operations 68 379,5 225,7
From discontinued operations 9,9 5,6
68 389,4 231,3
HEADLINE EARNINGS PER SHARE - DILUTED
(CENTS)
From continuing operations 66 367,5 221,7
From discontinued operations 9,2 5,3
66 376,7 227,0
GROUP BALANCE SHEET
Restated
Reviewed Audited
30 June 30 June
2009 2008
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 2 373,5 1 685,7
Investment in associates 22,4 25,8
Goodwill 398,4 603,0
Intangible assets 4 103,6 3 705,7
Non-current financial receivables 5,2 4,7
Deferred tax assets 17,8 1,0
Total non-current assets 6 920,9 6 025,9
Current assets
Inventories 1 434,6 1 447,0
Receivables and prepayments 2 080,2 1 876,7
Cash and cash equivalents 2 065,3 1 522,2
Total current assets 5 580,1 4 845,9
Total assets 12 501,0 10 871,8
SHAREHOLDERS` EQUITY
Share capital and share premium 509,8 493,8
Treasury shares - (571,6)
Share-based compensation reserve 53,3 62,5
Non-distributable reserves (170,3) 462,0
Retained income 3 627,9 2 649,0
Ordinary shareholders` equity 4 020,7 3 095,7
Equity component of preference shares 162,0 162,0
4 182,7 3 257,7
Minority interest 80,3 61,1
Total shareholders` equity 4 263,0 3 318,8
LIABILITIES
Non-current liabilities
Preference shares - liability component 392,2 402,1
Borrowings 3 433,8 75,9
Deferred-payables and other non-current financial 9,4 11,9
liabilities
Deferred tax liabilities 203,0 148,5
Total non-current liabilities 4 038,4 638,4
Current liabilities
Trade and other payables 1 301,7 1 034,6
Financial liability for products acquired - 2 653,0
Borrowings 2 670,3* 3 103,5*
Deferred-payables and other current financial 36,8 12,2
liabilities
Derivative financial instruments 120,0 -
Current tax liabilities 70,8 111,3
Total current liabilities 4 199,6 6 914,6
Total liabilities 8 238,0 7 553,0
Total equity and liabilities 12 501,0 10 871,8
Number of shares in issue (net of treasury shares) 360 666 352 411
(`000)
Net asset value per share (cents) 1 114,8 878,5
*Bank overdrafts are included within borrowings under current liabilities.
Finalisation of PharmaLatina Holdings Ltd acquisition accounting
The accounting for the acquisition of PharmaLatina Holdings Ltd was made on a
provisional basis in terms of IFRS 3 for the year ended 30 June 2008.
In terms of IAS 8, Accounting policies, Changes in Accounting Estimates and
Errors, the adjustments to finalise the PharmaLatina Holdings Ltd acquisition
have been 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.
Balance sheet Restated
Audited Adjustments Audited
30 June 30 June
2008 2008
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1 744,6 (58,9) 1 685,7
Goodwill 589,9 13,1 603,0
Intangible assets 3 723,1 (17,4) 3 705,7
Current assets
Trade and other receivables 1 331,1 86,4 1 417,5
Total assets 10 848,6 23,2 10 871,8
LIABILITIES
Non-current liabilities
Deferred tax liabilities 155,1 (6,6) 148,5
Current liabilities
Trade and other payables 1 004,8 29,8 1 034,6
Total liabilities 7 529,8 23,2 7 553,0
Total equity and liabilities 10 848,6 23,2 10 871,8
GROUP CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30 June 30 June
2009 2008
Rm Rm
Cash flows from operating activities
Cash operating profit 2 668,3 1 494,0
Changes in working capital (507,7) (435,9)
Cash generated from operations 2 160,6 1 058,1
Net financing costs paid (759,3) (347,5)
Investment income received 224,2 263,4
Tax paid (333,4) (321,6)
Net cash generated from operating activities 1 292,1 652,4
Cash flows from investing activities
Capital expenditure - property, plant and (626,7) (379,3)
equipment
Proceeds on disposal of tangible assets 9,1 3,2
Capital expenditure - intangible assets (3 279,9) (166,0)
Proceeds on disposal of intangible assets 15,5 55,2
Acquisition and disposal of subsidiary and (211,3) (1 374,4)
joint ventures, net of cash
(Increase)/decrease in non-current financial (0,4) 1,2
receivables
Redemption of investment in preference shares - 376,8
Payment of outstanding Oncology business (103,5) -
purchase consideration
Net cash used in investing activities (3 556,7) (1 456,3)
Cash flows from financing activities
Net movement in borrowings 3 121,6 1 497,8
Net movement in deferred payables (12,2) (55,0)
Dividend paid (0,8) (1,5)
Net capital distribution paid - (246,0)
Proceeds from issue of ordinary shares 20,4 15,3
Net cash generated from financing activities 3 129,0 1 210,6
Movement in cash and cash equivalents before 864,4 406,7
exchange rate changes
Effects of exchange rate changes (486,4) 40,7
Cash and cash equivalents
Movement in cash and cash equivalents 378,0 447,4
Cash and cash equivalents at the beginning of 944,9 497,5
the year
Cash and cash equivalents at the end of the 1 322,9 944,9
year
The above includes discontinued operations of:
Net cash generated used in operating (8,1) (7,6)
activities
Net cash used in investing activities (5,7) (11,4)
Net cash generated from financing activities 24,3 25,9
Effects of exchange rate changes (0,1) (0,7)
Movement in cash and cash equivalent 10,4 6,2
Cash and cash equivalents at the beginning of (10,4) (16,5)
the year
Cash and cash equivalents per the cash flow - (10,4)
statement
Reconciliation of cash and cash equivalents
Cash and cash equivalents per the balance 2 065,3 1 522,2
sheet
Less: bank overdrafts (742,4) (577,3)
Cash and cash equivalents per the cash flow 1 322,9 944,9
statement
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.
ACQUISITIONS AND DISPOSALS
ACQUISTIONS
The Group made the following acquisitions during the 2009 financial year:
- On 1 July 2008, the Group acquired an additional 1% of PharmaLatina Holdings
Ltd (Latin American businesses).
This additional 1% gave the Group 100% effective control of the Latin American
businesses.
- On 31 May 2009, the Group acquired the remaining 50% shareholding in Fine
Chemical Corporation (Pty) Ltd.
Fair value recognised for the acquisitions were:
PharmaLatina Fine Chemicals
Holdings Ltd Corporation Ltd Total
Rm Rm Rm
Property, plant and equipment 248,4 43,5 291,9
Intangible assets 66,5 14,1 80,6
Current assets 634,8 76,2 711,0
Non-current liabilities (21,9) (5,7) (27,6)
Current liabilities (336,2) (29,1) (365,3)
Fair value of assets acquired 591,6 99,0 690,6
Minority interest (4,8) - (4,8)
Fair value of assets acquired - 586,8 99,0 685,8
Aspen`s share
Deferred receivable converted (440,1) - (440,1)
to consideration
Goodwill acquired (124,8) 90,4 (34,4)
Purchase consideration 21,9 189,4 211,3
Cash and cash equivalents in (286,9) (27,3) (314,2)
acquired companies
Total cash (inflow)/outflow on (265,0) 162,1 (102,9)
acquisition
DISPOSALS
The Group disposed of 50% of its shareholding in Astix Laboratories Ltd on 31
May 2009. The net assets disposed of were as follows:
Astrix
Laboratories Total
Ltd
Rm Rm
Property, plant and equipment 62,5 62,5
Intangible assets 61,1 61,1
Current assets 238,3 238,3
Non-current liabilities (19,4) (19,4)
Current liabilities (137,7) (137,7)
Fair value of assets disposed 204,8 204,8
Loss on sale (19,9) (19,9)
Goodwill disposed 139,5 139,5
Purchase consideration received 324,4 324,4
Cash and cash equivalents in 1,9 1,9
acquired companies
Cash inflow on disposal 326,3 326,3
SEGMENTAL ANALYSIS
Reviewed year ended Restated audited
year ended
30 June 2009 30 June 2008 %
Rm % of Rm % of Change
total total
SEGMENTAL ANALYSIS
Revenue
South Africa 4 867,5 56% 3 758,4 77% 30%
International 3 868,9 44% 1 122,9 23% 245%
Gross sales 3 961,6 1 205,1
Less: intersegment (92,7) (82,2)
sales
Total revenue 8 736,4 100% 4 881,3 100% 79%
Less: revenue - (286,1) (198,8)
discontinuing
operations
Total revenue continued 8 450,3 4 682,5 80%
operations
Operating profit before
amortisation, disposals
and impairment on
intangible assets from
continuing operations
South Africa 1 226,6 53% 1 067,2 85% 15%
Operating profit 1 169,7 1 036,6
Amortisation of 37,8 68,2
intangible assets
Profit on sale of - (5,0)
Shimoda shares
Profit on sale of - (40,8)
Formule Naturelle range
Impairment on 19,1 8,2
intangible assets
International 1 076,2 47% 192,8 15% 458%
Operating profit 1 013,3 159,7
Amortisation of 57,2 49,7
intangible assets
Profit on sale of 51% - (16,6)
of Co-Pharma Ltd
Impairment on 5,7 -
intangible assets
2 302,8 100% 1 260,0 100% 83%
ENTITY WIDE DISCLOSURE
Geographical analysis
of revenue
South Africa - 3 766,6 43% 2 807,6 58% 34%
pharmaceutical
South Africa - consumer 1 100,8 13% 950,9 19% 16%
East Africa 372,8 4% 46,7 1% 698%
Asia Pacific 915,4 10% 709,0 15% 29%
Latin America 841,3 10% 82,9 2% 915%
Global brands 1 438,0 16% 11,8 0% 100%
Rest of the world 301,5 4% 272,4 5% 11%
Total revenue 8 736,4 100% 4 881,3 100% 79%
Less: Discontinued (286,1) (198,8)
operations
Total revenue 8 450,3 4 682,5 80%
continuing operations
SUPPLEMENTARY INFORMATION
Restated
Reviewed Audited
30 June 30 June
2009 2008
Rm Rm
A. Capital expenditure
Incurred 3 906,6 545,3
- tangible assets 626,7 379,3
- intangible assets 3 279,9 166,0
Contracted
- tangible assets 87,3 62,6
- intangible assets 5,8 -
Authorised but not contracted for
- tangible assets 226,9 457,5
- intangible assets 12,1 0,8
B. Operating profit has been arrived at after
charging
Depreciation of property, plant and equipment 115,7 70,9
Amortisation of intangible assets 95,0 117,9
Share-based payment expenses - employees 29,5 32,9
C. Investment income
Preference share dividends received - 33,3
Interest received 224,2 230,1
Total investment income 224,2 263,4
D. Financing costs
Interest paid (614,9) (318,4)
Net foreign exchange (losses)/gains (0,9) 62,4
Fair value (losses)/gains on financial (52,4) 3,5
instruments
Notional interest on financial instruments 7,3 9,9
Preference share dividends paid (38,3) (38,1)
Financing costs (699,2) (280,7)
E. Profit for the year from discontinued
operations
Profit for the year from discontinued operations 35,0 19,7
Loss on sale of Astrix Laboratories Ltd (19,9) -
Capital gains tax on sale of Astrix Laboratories (4,2) -
Ltd
Profit for the year from discontinued operations 10,9 19,7
F. 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 8,0 15,1
- payable thereafter 24,7 47,5
32,7 62,6
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 7,0 10,5
- payable thereafter 26,3 46,8
33,3 57,3
G. Contingent liabilities
There are contingent liabilities in respect of:
Additional payments in respect of the Quit 2,3 7,8
worldwide intellectual property rights
Guarantees covering loan and other obligations 23,8 23,2
to third parties
Tax duty contingencies 17,0 -
STATEMENT OF CHANGES IN GROUP EQUITY
Share-based Non-
compensation distributable
Share Treasury
capital
and premium shares reserve reserves
Rm Rm Rm Rm
Balance at 30 June 746,3 (598,9) 47,6 267,8
2007
Currency translation - - - 117,3
differences
Amounts retained in - - - 87,6
equity due to hedge
accounting of
acquisitions
Profit for the year - - - -
Dividend paid - - - -
Capital distribution (273,2) 27,3 - -
Acquisition of - - - -
subsidiary
Disposal of 51% of - - - (10,8)
shares in Co-pharma
Ltd
Cash flow hedges - - - 0,1
realised
Issue of ordinary 20,7 - - -
share capital
Share options and - - 27,6 -
appreciation rights
awarded
Transfer from share- - - (12,7) -
based compensation
reserve
Equity portion of tax - - - -
claims in respect of
share schemes
Balance at 30 June 493,8 (571,6) 62,5 462,0
2008
Currency translation - - - (383,3)
differences
Profit for the year - - - -
Dividend paid - - - -
Acquisition of - - - -
subsidiary
Interest rate swap - - - (136,5)
obligation
Issue of ordinary 21,4 - - -
share capital
Treasury shares (5,4) 571,6 - -
cancelled
Share options and - - 28,5 -
appreciation rights
awarded
Transfer from share- - - (37,7) -
based compensation
reserve
Reversal of - - - (112,5)
accumulated losses in
subsidiary
Equity portion of tax - - - -
claims in respect of
share schemes
Minority adjustment - - - -
Balance at 30 June 509,8 - 53,3 (170,3)
2009
STATEMENT OF CHANGES IN GROUP EQUITY
Equity
component
Retained of preference Minority
income shares interest Total
Rm Rm Rm Rm
Balance at 30 June 1 757,6 162,0 7,0 2 389,4
2007
Currency translation - - - 117,3
differences
Amounts retained in - - - 87,6
equity due to hedge
accounting of
acquisitions
Profit for the year 862,9 - 1,6 864,5
Dividend paid (1,5) - - (1,5)
Capital distribution - - - (245,9)
Acquisition of - - 52,5 52,5
subsidiary
Disposal of 51% of 21,7 - - 10,9
shares in Co-pharma
Ltd
Cash flow hedges - - - 0,1
realised
Issue of ordinary - - - 20,7
share capital
Share options and - - - 27,6
appreciation rights
awarded
Transfer from share- 12,7 - - -
based compensation
reserve
Equity portion of tax (4,4) - - (4,4)
claims in respect of
share schemes
Balance at 30 June 2 649,0 162,0 61,1 3 318,8
2008
Currency translation - - - (383,3)
differences
Profit for the year 1 340,4 - 13,2 1 353,6
Dividend paid (0,8) - - (0,8)
Acquisition of - - 4,8 4,8
subsidiary
Interest rate swap - - - (136,5)
obligation
Issue of ordinary - - - 21,4
share capital
Treasury shares (566,2) - - -
cancelled
Share options and - - - 28,5
appreciation rights
awarded
Transfer from share- 37,7 - - -
based compensation
reserve
Reversal of 112,5 - - -
accumulated losses in
subsidiary
Equity portion of tax 55,3 - - 55,3
claims in respect of
share schemes
Minority adjustment - - 1,2 1,2
Balance at 30 June 3 627,9 162,0 80,3 4 263,0
2009
COMMENTARY
GROUP PERFORMANCE
Aspen has produced excellent results for the year ended 30 June 2009 despite the
difficult economic conditions which characterised the period. The Group recorded
growth in headline earnings per share of 68%, to 389,4 cents. The increase in
earnings per share of 53% was lower than the increase in headline earnings per
share due mainly to the exclusion of non-recurring capital profits and losses
from the determination of headline earnings per share. Revenue from continuing
operations was up 80% at R8,450 billion and operating profit improved by 82% to
R2,183 billion.
The expansion of the Group`s international operations has yielded positive
returns. Contribution to Group earnings before interest, tax and amortisation
("EBITA") from the international operations increased 47%, up from 15%. The
South African business also performed well, increasing contribution to EBITA by
14%.
SOUTH AFRICAN OPERATIONS
Aspen retained its pharmaceutical market leadership and improved market share
over the year in all of the market segments. Aspen has the greatest market share
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. Furthermore, Aspen`s over-
the-counter ("OTC") unit was rated first in the Campbell-Belman Confidence
Standing survey of 146 top retail pharmacies which evaluated 42 OTC companies.
Revenue from South African operations increased 30% to R4,868 billion,
demonstrating resilience in a difficult trading environment. EBITA, although
constrained by margin pressure, grew by R149 million to R1,208 billion. Raw
material prices and production inflation accelerated in the first half of the
year whilst prices remained fixed under the Single Exit Price ("SEP")
legislation in the private sector and under state tenders. Margins improved
during the final quarter following the award in February 2009 of a 13,2%
increase in SEP by the Department of Health and with the implementation of the
state tender price adjustment mechanism. Higher than scheduled demand from the
public sector also increased the weighting towards lower margin business.
Revenue growth was led by pharmaceuticals which recorded an increase of 34% to
R3,767 billion. This gain was achieved through organic volume growth and the
successful results from recent product launches such as Truvada, Viread,
Vectoryl and Aspen Efavirenz. Given the depressed retail environment, the
improvement of 16% in revenue from the consumer portfolio to R1,101 billion was
positive. Leading brands such as Lennon Dutch Medicines, Infacare, S26,
Guoronsan C and Hamburg Tea all performed well. The ophthalmic range was
strengthened with the addition of the Eye-gene and Murine brands to Aspen`s
established eye-drop products, Safyr Bleu and Oculerge. A new infant milk label,
Malegi, was successfully launched and exported into selected African countries.
During the second half of the year further oral solid dose manufacturing
capacity came on line in Port Elizabeth with the completion of the capital
project to add more packing lines. This relieved production pressure which had
arisen primarily as a consequence of unscheduled increases in demand from the
public health sector. Further oral solid dose capacity will be unlocked before
the end of 2009 with the completion of the new tabletting production plant which
is presently being validated. The eye-drop suite in the Sterile Facility was
also completed during this period and exports of Clear Eyes and Murine have
commenced to Prestige Brands in the United States. Trials have been initiated in
the hormonal suite of the Sterile Facility.
An explosion, induced by the combustion of dust particles, occurred in the
drying tower of the infant milk factory at Clayville on 18 August 2009. The
explosion and resultant fire caused extensive damage to this part of the
production site. However, production in the blending and packing areas remains
uninterrupted. It is expected that the drying tower will recommence production
before the end of the 2010 financial year. A contingency plan utilising
outsourced production has been implemented which is designed to ensure continued
supply of infant milks to the market. Aspen is fully insured against damage and
loss of profits arising out of this incident.
INTERNATIONAL OPERATIONS
The Group has significantly expanded its international operations over the past
18 months. Businesses were acquired in Brazil, Mexico, Venezuela, Tanzania,
Kenya and Uganda in the second half of the 2008 financial year. 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 GlaxoSmithKline ("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 returned another set of positive results despite legislated
price cuts. Revenue increased by 29% to R915 million. This was achieved by
effective promotion of the product range and the expansion of the product
offering.
In Latin America the focus is on building a growing business in the private
sector whereas third party distributors and public sector tenders have
previously been the primary source of revenue. Results for the past year, in
which revenue of R841 million was recorded, do not reflect a realisation of the
potential that exists in this region. Initiatives receiving active attention
include the strengthening of management, increasing representation in the
private sector, bringing new products to the market 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. A strong Rand-Dollar exchange rate at the time of completion of this
transaction resulted in a loss on sale of R20 million.
GSK TRANSACTIONS
On 12 May 2009 Aspen announced that it had agreed the terms on a series of
strategic, interdependent transactions with GSK ("the GSK transactions"), 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.
The completion of the transactions is subject to the fulfillment of a number of
conditions precedent. Certain of these conditions precedent have been fulfilled,
amongst these 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.
FUNDING
The level of borrowings has risen materially over the past year, primarily due
to the raising of a five-year loan facility of USD 385 million from a consortium
of banks in October 2008. The facility comprises a five-year amortising loan of
USD 255 million and a five-year non-amortising loan of USD 130 million. Under an
interest rate swap, the cost of this funding has been fixed at 6,11% per annum
over 90% of its term.
The Group`s borrowing position has improved since 31 December 2008 as a
consequence of positive operating cash flows and favourable currency movements.
Borrowings, net of cash, amounted to R4,039 billion at 30 June 2009, down from
R4,937 billion at 31 December 2008.
Interest paid, net of interest received, amounted to R391 million and was
covered six times by earnings before interest, tax, depreciation and
amortisation. Losses on foreign exchange and forward cover contracts amounted to
R53 million (prior year gains R66 million) primarily as a result of the
strengthening of the Rand after taking out forward cover.
PROSPECTS
Aspen`s business in South Africa remains well positioned in all market segments
and has recorded excellent revenue growth over the past year. 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. After a
period of margin weakening in the pharmaceutical business, there should be scope
for improvement in margins in the year ahead as the benefits of the SEP increase
are realised. This will be dependent upon the Rand remaining relatively stable
at existing levels. The Group`s excellent product pipeline will continue to add
momentum to growth. Public sector tenders, including ARVs, are scheduled for
award again over the forthcoming year. Aspen expects to be competitive in these
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 product launches to the
collaboration with GSK in sub-Saharan Africa should the GSK transactions
complete. GSK has already established a strong presence and effective
distribution network in sub-Saharan Africa. The supplementation of GSK`s
existing portfolio with Aspen`s pipeline of relevant products should allow the
collaboration to increase access to quality healthcare across this region.
The Group will continue to seek investment opportunities that will enable the
growth of its international business. In the event of the GSK transactions
completing, eight specialist products will be added to the global brands
portfolio, 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. Specific
attention is being given to the development of the Group`s business model in
Latin America. Aspen intends to exercise its call option to acquire the
remaining 49% of the Latin America businesses in Brazil, Mexico and Venezuela.
Final financial adjustments to the purchase consideration payable by Aspen for
the Latin American businesses remain to be settled. Indications are that Aspen
will not be required to make a further payment in this regard.
In the year ahead the South African business is expected to again perform well.
Margins should improve provided the Rand does not weaken materially. The Group
now has exposure to a wide number of currencies, in addition to the Rand and the
US Dollar, with the most material being the Euro, the Australian Dollar, the
Brazilian Real, the Tanzanian Shilling, the Mexican Peso and the Japanese Yen.
Relative exchange rates between these currencies could influence results in
future.
Completion of the GSK transactions, subject to fulfillment of conditions
precedent, will further support the Group`s strategies in South Africa, sub-
Saharan Africa and internationally.
DISTRIBUTION
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.
By order of the board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
8 September 2009
DIRECTORS
NJ Dlamini* (Chairman), AJ Aaron*, RJ Andersen*, MG Attridge, MR Bagus*, JF
Buchanan*, CN Mortimer*, DM Nurek*, SB Saad.
*Non-executive directors
Company secretary
HA Shapiro
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd
(Registration number 1987/003382/06)
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107
REGISTERED OFFICE
Building 8, Healthcare Park, Woodlands Drive, Woodmead
Sponsor: Investec Bank Limited
DISCLAIMER
We may make statements that are not historical facts and relate to analyses and
other information based on forecasts of future results and estimates of amounts
not yet determinable. These are forward-looking statements as defined in the
U.S. Private Securities Litigation Reform Act of 1995. Words such as "believe",
"anticipate", "expect", "intend", "seek", "will", "plan", "could", "may",
"endeavour" and "project" and similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying such
statements. By their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and there are risks that
predictions, forecasts, projections and other forward-looking statements will
not be achieved. If one or more of these risks materialize, or should underlying
assumptions prove incorrect, actual results may be very different from those
anticipated. The factors that could cause our actual results to differ
materially from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements are discussed in each year`s annual
report. Forward-looking statements apply only as of the date on which they are
made, and we do not undertake other than in terms of the Listings Requirements
of the JSE Limited, any obligation to update or revise any of them, whether as a
result of new information, future events or otherwise. All profit forecasts
published in this report are unaudited.
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 Ltd,Schedule 4 of the South African Companies
Act (Act 61 of 1973, as amended) and the presentation and disclosure
requirements of IAS 34 - Interim Reporting.
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 2008. The comparitive figures have been restated due to the finalisation
of the acquisitions of Shelys Africa Ltd, PharmaLatina Holdings Ltd, Onco
Therapies Ltd and Onco Laboratories Ltd, which were accounted for on a
provisional basis in the prior year.
Date: 08/09/2009 14:00:02 Produced by the JSE SENS Department.
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