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APN
APN
APN - Aspen Pharmacare Holdings Limited - Interim financial results for the
six months ended 31 December 2009
Aspen Pharmacare Holdings Limited ("Aspen")
(Registration number 1985/002935/06)
Share code: APN ISIN: ZAE000066692
Interim financial results for the six months ended 31 December 2009
PROFIT FROM CONTINUING OPERATIONS increased by 31% to R889 million
HEADLINE EARNINGS PER SHARE FROM CONTINUING OPERATIONS increased 27% to 242,3
cents
OPERATING CASH FLOW PER SHARE increased by 40% to 215,5 cents
www.aspenpharma.com
Healthcare. We Care.
Commentary
GROUP PERFORMANCE
Aspen raised headline earnings per share from continuing operations by 27% to
242,3 cents for the six months ended 31 December 2009. Operating profit of
R1,314 billion was up 16% and revenue increased by 10% to R4,576 billion.
Lower net funding costs and a tax charge reduced by the section 12G industrial
incentive allowance resulted in profit after tax from continuing operations
increasing by 31% to R889 million. An excellent performance from the South
African business underpinned the results.
COMPLETION OF THE GLAXOSMITHKLINE ("GSK") TRANSACTIONS
With effect from 1 December 2009, Aspen completed a series of strategic,
interdependent transactions with GSK ("the GSK transactions") which had been
announced on 12 May 2009. The GSK transactions comprise:
The acquisition of the rights to distribute GSK`s pharmaceutical products in
South Africa;
The formation of a collaboration agreement 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
The issue by Aspen of 68,5 million ordinary shares to GSK at R66,80 per share
amounting to a total value of R4,576 billion.
SOUTH AFRICAN BUSINESS
The South African business grew revenue by 23% to R2,550 billion. Operating
profit from the South African business increased from R484 million to R806
million. Other operating income includes an amount of R145 million received as
insurance compensation for the loss of profits and asset replacement, arising
from the explosion which occurred at the Nutritionals facility in August 2009.
Profit margins improved after the contractions in the previous two years which
were caused by a weak Rand and delays in the passing of an increase to the
regulated single exit price ("SEP") in the private pharmaceutical market.
Ultimately a 13,2% increase in the SEP was awarded in February 2009. The
margin improvement was a consequence of improved manufacturing efficiencies, a
stronger Rand, procurement savings, as well as a contribution from the
increase in SEP. The pharmaceutical division led growth in the South African
business with revenue rising 30% to R1,975 billion. The Group maintained its
leadership position across the private and public sectors of the
pharmaceutical market. Aspen`s robust growth in pharmaceuticals was
characterised by volume gains across the extensive product offering.
The consumer division increased revenue by 6% to R575 million in a retail
environment struggling to overcome the effects of recession. Under the
challenging trading conditions this was a creditable outcome, particularly
given that sales of infant milk formula were negatively affected by the
temporary unavailability experienced in certain products due to the damage
incurred at the Nutritionals manufacturing facility.
The Group`s South African manufacturing facilities achieved impressive
efficiency gains as the benefits of the significant capital expenditure
programme of the last few years begin to be realised. The second oral solid
dose manufacturing facility, and the eye-drop suite of the Sterile Facility,
are in production. The hormonal suite of the Sterile Facility is scheduled to
commence commercial production before the end of the 2010 financial year.
Capital projects in progress include the addition of increased tabletting
capacity and the installation of suppository and dutch medicines manufacturing
at the East London site. Reconstruction of the drying tower damaged by the
explosion at the Nutritionals Facility is well advanced and production is
expected to recommence within the next six months.
SUB-SAHARAN AFRICA BUSINESS
In anticipation of the future materiality of this region, Aspen has
established a separate management and reporting structure for the sub-Saharan
Africa business. Included in this business segment are exports into sub-
Saharan Africa from South Africa, the Shelys Africa business based in East
Africa and the GSK Aspen Healthcare for Africa collaboration.
Revenue from the sub-Saharan Africa business declined from R464 million in the
prior period to R279 million and operating profit decreased from R99 million
to R45 million. The steep reversal in results in this region was due to export
business lost resulting from the genericisation of patented ARV molecules
marketed by Aspen. Sales by Shelys Africa were also reduced as this business
shed low margin tenders in accordance with the strategic plan for the
operation, without affecting profits. GSK Aspen Healthcare for Africa began
operations on 1 December 2009 and will in future be the most material
contributor to the region.
INTERNATIONAL BUSINESS
Revenue in the international business increased by 12% to R1,797 billion.
Gains from global brands, the Asia Pacific domestic brands, the oncology
business and the additional revenue from the GSK transactions were partially
offset by reversals in Latin America. Operating profit declined from R554
million to R463 million largely as a consequence of losses in Latin America
and a strengthening of the Rand against most of the underlying trading
currencies.
Revenue from the global brands was up 18% to R824 million. The greatest
portion of this revenue came from Eltroxin, Lanoxin, Imuran and Zyloric which
were acquired with effect from 30 June 2008. Worldwide sales from these four
global brands achieved double digit growth in USD. The balance of the growth
in the global brands came from the addition of Aggrastat and the introduction
of the eight products acquired from 1 December 2009 under the GSK
transactions.
The Asia Pacific domestic brands showed an 8% increase in revenue to R522
million. This business, largely Australian based, has again performed well
considering the downward pricing pressure being experienced in the territory.
Aspen has exercised its call on the remaining 49% shareholding in the Latin
American businesses. Given that Aspen already has full rights to the economic
performance of these businesses there is no further purchase consideration
required for the acquisition of this remaining shareholding.
Revenue from domestic brands in Latin America declined by 15% to R345 million.
The primary underperformer was the Brazilian business, Aspen`s largest
operation in the region. Aspen has assumed full operational control of the
Brazilian business from February 2010 and has implemented a restructuring plan
to shape this operation in accordance with the business model which the Group
has planned for Brazil. Key actions include:
Disposal of selected assets, including the Campos Facility and related
products to Strides Arcolab ("Strides"). Consideration receivable from Strides
amounts to approximately USD 75 million;
Right sizing of business structures and reshaping of sales teams to take
account of the new business model; and
Identification and pursuit of opportunities to increase the private market
product portfolio, some of which are at an advanced stage of negotiations.
The disposal of the Campos Facility will complete as soon as the requisite
regulatory approvals are met. In the interim, Strides have been engaged to
manage Campos and will assume the risks and rewards of its operation. An
improvement in the performance of the Brazilian business is anticipated over
the next six months as the restructuring plan takes effect.
The oncology joint ventures which Aspen has with Strides concluded a license
and supply agreement with Pfizer in December 2009 in terms of which Pfizer has
exclusive rights to market the oncology products in the United States. An
upfront non-refundable license fee of USD 12 million was brought to account in
the six month period to December 2009 of which 50% has been recognised, being
Aspen`s share under the joint ventures.
FUNDING
Borrowings, net of cash, have been reduced from R4,0 billion at 30 June 2009
to R3,5 billion at 31 December 2009. Strong operating cash flows and
favourable exchange rate movements were the biggest contributors to this
reduction. The lower debt levels and the additional share capital in issue
following the GSK transactions has resulted in gearing in the Group improving
from 51% at 30 June 2009 to 29%.
Interest paid, net of interest received, of R190 million was covered seven
times by earnings before interest, taxes and amortisation. Gains on foreign
exchange and forward cover contracts amounted to R32 million (2008 : R27
million loss) as underlying currencies strengthened against USD denominated
obligations.
PROSPECTS
Aspen has established a leadership position in the South African
pharmaceutical sector through more than a decade of unparalleled achievement
in the industry. The Group is positively positioned to maintain this
leadership with an excellent product pipeline set to add to the most extensive
product offering in the market and backed up by an outstanding team. The
recently awarded public sector tenders again verified Aspen`s production
competitiveness with the Group continuing as the largest supplier of
pharmaceuticals to government. The ARV tender remains to be awarded. The ARV
tender documents are yet to be published, although expectations are for an
award to be made before the end of this financial year. The recently announced
support for local manufacturers under the South African Government`s
Industrial Policy Action Plan is encouraging as is the focus on developing the
pharmaceutical industry in South Africa.
The fundamental growth drivers of the South African pharmaceutical market
remain intact. This growth is however likely to be tempered by a delay in the
annual SEP price increase by the Department of Health. The last award was in
February 2009. South African pharmaceutical companies will therefore absorb
the net effects of exchange rate fluctuations and inflation from February 2010
until the date of the award.
The consumer business in South Africa has proven resilient in the difficult
trading environment, but growth is likely to be constrained by the economic
circumstances. Full supply of the infant milk products has been restored
through the importation of product from Europe. Overall performance indicators
will continue to be distorted until full production is resumed by the
Nutritionals Facility and the insurance payments are settled.
The sub-Saharan Africa business has excellent prospects. The supplementation
of GSK`s existing portfolio with Aspen`s pipeline of relevant products and
supported by GSK`s proven distribution network should allow the GSK Aspen
Healthcare for Africa collaboration to increase access to high quality
medication in the region. Shelys Africa has an active product launch plan for
the remainder of the financial year as this operation becomes more focused on
private sector business.
The transition of global brands acquired in prior years to the Aspen
international distribution network ("the network") is well advanced. The Group
is in a position to influence promotional activities in respect of the
products which have transitioned to the network. Third party distributors in
the network are expected to absorb in the order of 10% of the existing revenue
of the global brands. Continuation of the growth achieved to date in the
global brands will be required to counteract this. Projects have been
implemented which will result in significant cost of goods savings for the
global brands in the medium term. Opportunities to supplement the global
brands portfolio will continue to be sought.
The Asia Pacific operation is anticipated to continue its excellent record of
growth by adding to the range of products under distribution. The Group has
established a company in Hong Kong to manage the third party distributors
deployed in South East Asia. Prospective investments in the region are also
under investigation. Implementation of the restructuring plan in Brazil is
expected to yield positive results before the end of the financial year,
improving the performance in the Latin American region. Investment in the
international product pipeline continues to be a major Group focus area. This
will create growth momentum for all markets over the forthcoming two to three
years.
The completion of the GSK transactions will promote the Group`s strategies in
South Africa, sub-Saharan Africa and internationally. Over the balance of the
financial year, growth in South Africa will be restrained by the absence of an
increase in the SEP whilst a turnaround in the Latin American business should
contribute to an improved performance from the international businesses in the
second half. Relative exchange rate movements will continue to influence
results.
By order of the Board
N J Dlamini S B Saad
Chairman Group Chief Executive
Woodmead - 3 March 2010
Group statement of financial position
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 2 952,3 2 289,7 2 373,5
Investment in associates 21,3 23,8 22,5
Goodwill 688,2 677,7 398,4
Intangible assets E# 7 849,8 4 635,2 4 103,6
Non-current financial 5,3 45,2 5,2
receivables
Deferred tax assets 46,8 1,9 17,8
Total non-current assets 11 563,7 7 673,5 6 921,0
Current assets
Inventories 2 169,2 1 495,0 1 434,6
Receivables, prepayments and 2 424,1 2 093,5 2 100,9
other current assets
Cash and cash equivalents 1 959,5 1 560,1 2 065,3
Total current assets 6 552,8 5 148,6 5 600,8
Total assets 18 116,5 12 822,1 12 521,8
SHAREHOLDERS` EQUITY
Share capital and share 5 097,4 507,9 509,8
premium
Treasury shares - (571,6) -
Share-based compensation 68,8 75,0 53,3
reserve
Non-distributable reserves (212,5) 319,0 (170,3)
Retained income 4 511,0 3 333,2 3 627,9
Ordinary shareholders` equity 9 464,7 3 663,5 4 020,7
Equity component of 162,0 162,0 162,0
preference shares
9 626,7 3 825,5 4 182,7
Minority interests 85,9 66,8 80,3
Total shareholders` equity 9 712,6 3 892,3 4 263,0
LIABILITIES
Non-current liabilities
Preference shares - liability 389,6 399,4 392,2
component
Borrowings 3 051,5 4 206,0 3 433,8
Deferred-payables and other 183,9 172,4 9,4
non-current financial
liabilities
Deferred tax liabilities 195,7 193,6 203,0
Total non-current liabilities 3 820,7 4 971,4 4 038,4
Current liabilities
Trade and other payables 1 814,5 1 351,9 1 300,2
Borrowings * 2 427,6 2 291,4 2 670,3
Deferred-payables and other 170,6 174,8 179,1
current financial liabilities
Current tax liabilities 170,5 140,3 70,8
Total current liabilities 4 583,2 3 958,4 4 220,4
Total liabilities 8 403,9 8 929,8 8 258,8
Total equity and liabilities 18 116,5 12 822,1 12 521,8
Number of shares in issue 431 591 359 652 360 666
(net of treasury shares)
(`000)
Net asset value per share 2 193,0 1 018,6 1 114,8
(cents)
*Bank overdrafts are included within borrowings under current liabilities.
# See notes on supplementary information.
Group statement of comprehensive income
Unaudited
Unaudited restated Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
% 2009 2008 2009
change Rm Rm Rm
Continuing
operations
Revenue 10 4 576,0 4 142,3 8 450,3
Cost of sales (2 441,0) (2 232,6) (4 564,1)
Gross profit 12 2 135,0 1 909,7 3 886,2
Other operating 150,7 4,4 4,1
income
Selling and (538,3) (470,0) (997,7)
distribution
expenses
Administrative (371,3) (253,9) (588,6)
expenses
Other operating (61,9) (54,0) (121,0)
expenses
Operating profit B# 16 1 314,2 1 136,2 2 183,0
Investment income C# 90,6 115,4 224,2
Financing costs D# (264,0) (355,0) (699,2)
1 140,8 896,6 1 708,0
Share of after-tax (1,4) (1,9) (3,3)
net losses of
associates
Profit before tax 27 1 139,4 894,7 1 704,7
Tax (250,8) (217,9) (362,0)
Profit after tax 31 888,6 676,8 1 342,7
from continuing
operations
Discontinued
operations
Profit for the - 12,9 10,9
period/year from
discontinued
operations
Profit for the 29 888,6 689,7 1 353,6
period/year
Other
comprehensive
income
Amounts recognised - - (126,5)
in equity due to
hedge accounting
of acquisitions
Amounts recognised - (151,9) 6,5
in equity due to
hedge accounting
of interest rate
swaps
Currency (37,1) 8,9 (399,9)
translation
differences
Cash flow hedges (5,1) - 4,8
realised
Total 846,4 546,7 838,5
comprehensive
income
Profit for the
period/year
attributable to:
Equity holders of 883,0 684,0 1 340,4
the parent
Minority interests 5,6 5,7 13,2
29 888,6 689,7 1 353,6
Total
comprehensive
income for the
period/year
attributable to:
Equity holders of 840,8 541,0 824,1
the parent
Minority interests 5,6 5,7 14,4
55 846,4 546,7 838,5
Weighted average 367 037 355 617 357 860
number of shares
in issue (`000)
Basic earnings per
share (cents)
From continuing 28 240,6 188,7 371,5
operations
From discontinued - 3,6 3,1
operations
25 240,6 192,3 374,6
Diluted earnings
per share (cents)
From continuing 25 229,6 183,3 360,0
operations
From discontinued - 3,4 2,9
operations
23 229,6 186,7 362,9
#See notes on Supplementary information.
Headline earnings
Unaudited Unaudited
Unaudited restated Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
% 2009 2008 2009
Change Rm Rm Rm
Reconciliation of
headline earnings
Profit attributable 883,0 684,0 1 340,4
to equity holders of
the parent
Adjusted for:
Continuing operations
- Profit on disposal 1,6 0,5 3,1
of property, plant
and equipment (net of
tax)
- Impairment of 0,7 2,4 -
property, plant and
equipment (net of
tax)
- Loss on disposal of 0,1 - 0,7
intangible assets
(net of tax)
- Impairment of 11,1 2,2 24,8
intangible assets
(net of tax)
- Capital gains tax 20,6 - -
on transfer of
intellectual property
rights
- Insurance (27,7) - -
compensation -
capital component
- Reversal of - - 0,1
impairment losses on
intangible assets
(net of tax)
Discontinued
operations
- Loss on the sale of - - 24,1
Astrix Laboratories
Ltd (net of tax)
- Profit on disposal - - 0,3
of property, plant
and equipment (net of
tax)
Headline earnings 29 889,4 689,1 1 393,5
Headline earnings
From continuing 32 889,4 676,2 1 358,2
operations
From discontinued - 12,9 35,3
operations
29 889,4 689,1 1 393,5
Headline earnings per
share (cents)
From continuing 27 242,3 190,2 379,5
operations
From discontinued - 3,6 9,9
operations
25 242,3 193,8 389,4
Headline earnings per
share - diluted
(cents)
From continuing 25 231,2 184,7 367,5
operations
From discontinued - 3,4 9,2
operations
23 231,2 188,1 376,7
Group statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm Rm Rm
Cash flows from operating
activities
Cash operating profit 1 482,0 1 327,4 2 668,3
Changes in working capital (316,5) (296,9) (507,7)
Cash generated from 1 165,5 1 030,5 2 160,6
operations
Net financing costs paid (280,1) (416,1) (759,3)
Investment income received 90,6 115,4 224,2
Tax paid (185,2) (184,1) (333,4)
Net cash generated from 790,8 545,7 1 292,1
operating activities #
Cash flows from investing
activities
Replacement capital (62,8) (41,3) (97,0)
expenditure - property,
plant and equipment
Expansion capital (181,1) (302,9) (529,7)
expenditure - property,
plant and equipment
Proceeds on disposal of 1,0 1,3 9,1
tangible assets
Replacement capital (0,6) (0,3) (0,1)
expenditure - intangible
assets
Expansion capital (154,8) (2 987,2) (3 279,8)
expenditure - intangible
assets
Proceeds on disposal of - 1,1 15,5
intangible assets
Acquisition and disposal of - (22,7) 429,2
subsidiary, businesses and
joint ventures
Cash balances acquired in 32,4 312,1 -
subsidiary, businesses and
joint ventures
Increase in non-current (0,1) (37,9) (0,4)
financial receivables
Consideration for GSK (4 575,8) - -
transactions
Payment of outstanding (9,2) (69,2) (103,5)
Oncology business purchase
consideration
Net cash used in investing (4 951,0) (3 147,0) (3 556,7)
activities
Cash flows from financing
activities
Proceeds from borrowings 1,9 6 523,7 6 256,2
Repayment of borrowings (67,5) (3 105,9) (3 134,6)
Repayment of deferred- (0,7) (4,0) (12,2)
payables
Dividend paid (0,8) (0,8) (0,8)
Proceeds from issue of 12,0 13,2 20,4
ordinary shares
Shares issued to GSK 4 575,8 - -
Net cash generated from 4 520,7 3 426,2 3 129,0
financing activities
Movement in cash and cash 360,5 824,9 864,4
equivalents before exchange
rate changes
Effects of exchange rate (42,6) (298,5) (486,4)
changes
Cash and cash equivalents
Movement in cash and cash 317,9 526,4 378,0
equivalents
Cash and cash equivalents at 1 322,9 944,9 944,9
the beginning of the
period/year
Cash and cash equivalents at 1 640,8 1 471,3 1 322,9
the end of the period/year
Operating cash flow per 215,5 153,5 361,1
share (cents)#
Growth in operating cash 40%
flow per share on prior year
The above includes
discontinued operations of:
Net cash used in operating - (1,5) (8,1)
activities
Net cash used in investing - (5,6) (5,7)
activities
Net cash (used in)/generated - (19,9) 24,3
from financing activities
Effects of exchange rate - (1,4) (0,1)
changes
Movement in cash and cash - (28,4) 10,4
equivalents
Cash and cash equivalents at - (10,4) (10,4)
the beginning of the
period/year
Cash and cash equivalents - (38,8) -
per the statement of cash
flows
Reconciliation of cash and
cash equivalents
Cash and cash equivalents 1 959,5 1 560,1 2 065,3
per the statement of
financial position
Less: bank overdrafts (318,7) (88,8) (742,4)
Cash and cash equivalents 1 640,8 1 471,3 1 322,9
per the statement of cash
flows
For the purposes of the statement of cash flows, cash and cash equivalents
comprise cash-on-hand, deposits held on call with banks less bank overdrafts.
Group statement of changes in equity
Share-based
Share Treasury Compen-
capital sation
and premium shares reserve
Rm Rm Rm
Balance at 30 June 2008 493,8 (571,6) 62,5
Total comprehensive income - - -
Profit for the year - - -
Other comprehensive income - - -
Dividend paid - - -
Issue of ordinary share 21,4 - -
capital
Treasury shares cancelled (5,4) 571,6 -
Share options and - - 28,5
appreciation rights expensed
Transfer from share-based - - (37,7)
compensation reserve
Transfer of accumulated - - -
losses in subsidiary
Equity portion of tax claims - - -
in respect of share schemes
Contribution by minority - - -
Balance at 30 June 2009 509,8 - 53,3
Total comprehensive income - - -
Profit for the period - - -
Other comprehensive income - - -
Dividend paid - - -
Issue of ordinary share 4 587,6 - -
capital
Shares issued - share schemes 11,8 - -
Shares issued - GSK 4 575,8 - -
transaction
Share options and - - 16,4
appreciation rights expensed
Transfer from share-based - - (0,9)
compensation reserve
Balance at 31 December 2009 5 097,4 - 68,8
Group statement of changes in equity (continued)
Equity
Non- component
distributable Retained of preference
reserves income shares
Rm Rm Rm
Balance at 30 June 2008 462,0 2 649,0 162,0
Total comprehensive (519,9) 1 340,4 -
income
Profit for the year - 1 340,4 -
Other comprehensive (519,9) - -
income
Dividend paid - (0,8) -
Issue of ordinary share - - -
capital
Treasury shares cancelled - (566,2) -
Share options and - - -
appreciation rights
expenses
Transfer from share-based - 37,7 -
compensation reserve
Transfer of accumulated (112,4) 112,4 -
losses in subsidiary
Equity portion of tax - 55,4 -
claims in respect of
share schemes
Contribution by minority - - -
Balance at 30 June 2009 (170,3) 3 627,9 162,0
Total comprehensive (42,2) 883,0 -
income
Profit for the period - 883,0 -
Other comprehensive (42,2) - -
income
Dividend paid - (0,8) -
Issue of ordinary share - - -
capital
Shares issued - share - - -
schemes
Shares issued - GSK - - -
transaction
Share options and - - -
appreciation rights
expensed
Transfer from share-based - 0,9 -
compensation reserve
Balance at 31 December (212,5) 4 511,0 162,0
2009
Group statement of changes in equity (continued)
Minority
interests Total
Rm Rm
Balance at 30 June 2008 61,1 3 318,8
Total comprehensive income 18,0 838,5
Profit for the year 13,2 1 353,6
Other comprehensive income 4,8 (515,1)
Dividend paid - (0,8)
Issue of ordinary share capital - 21,4
Treasury shares cancelled - -
Share options and appreciation rights - 28,5
expensed
Transfer from share-based compensation - -
reserve
Transfer of accumulated losses in subsidiary - -
Equity portion of tax claims in respect of - 55,4
share schemes
Contribution by minority 1,2 1,2
Balance at 30 June 2009 80,3 4 263,0
Total comprehensive income 5,6 846,4
Profit for the period 5,6 888,6
Other comprehensive income - (42,2)
Dividend paid - (0,8)
Issue of ordinary share capital - 4 587,6
Shares issued - share schemes - 11,8
Shares issued - GSK transaction - 4 575,8
Share options and appreciation rights - 16,4
expensed
Transfer from share-based compensation - -
reserve
Balance at 31 December 2009 85,9 9 712,6
Segmental analysis
Unaudited
six months ended
31 December 2009
%
Rm of total
Revenue from continuing operations
South Africa 2 549,9 55
Sub-Saharan Africa# 279,2 6
International 1 797,2 39
Total gross revenue 4 626,3 100
Adjustment* (50,3)
Total revenue 4 576,0
Operating profit before amortisation, disposals and impairment of
intangible assets from continuing operations
South Africa 802,7 60
Operating profit 805,7
Amortisation of intangible assets 21,2
Insurance compensation - capital component (38,5)
Impairment of intangible assets 14,3
Sub-Saharan Africa 45,4 3
International 488,7 37
Operating profit 463,1
Amortisation of intangible assets 25,6
Impairment on intangible assets -
1 336,8 100
Entity wide disclosure - revenue
Analysis of revenue in accordance with
customer geography
Domestic brands
South Africa - pharmaceuticals 1 975,4 43
South Africa - consumer 574,5 13
Sub-Saharan Africa 279,2 6
Asia Pacific 521,6 11
Latin America 345,3 8
Rest of the world 106,7 2
Total gross revenue from domestic brands 3 802,7 83
Adjustment* (50,3)
Total revenue from domestic brands 3 752,4 82
Global brands
Asia Pacific 226,5 5
Latin America 154,4 3
EMENA 413,8 9
Rest of the world 28,9 1
Total revenue from global brands 823,6 18
Total revenue 4 576,0 100
# In anticipation of the future materiality of the sub-Saharan
Africa region, Aspen has established a separate management and
reporting structure for this region and the segmental analysis has
been amended and restated to include the additional segment.
*The profit share from the GSK Aspen Healthcare for Africa
collaboration has been disclosed as revenue in the statement of
comprehensive income. For segmental purposes the total revenue
for the collaboration has been included to provide enhanced
revenue visibility in this territory.
Europe, Middle East and North African territories.
Segmental analysis (continued)
Unaudited restated
six months ended
31 December 2008
%
Rm of total
Revenue from continuing operations
South Africa 2 066,4 50
Sub-Saharan Africa 464,1 11
International 1 611,8 39
Total gross revenue 4 142,3 100
Adjustment* -
Total revenue 4 142,3
Operating profit before amortisation, disposals and impairment of
intangible assets from continuing operations
South Africa 512,0 43
Operating profit 484,1
Amortisation of intangible assets 27,9
Insurance compensation - capital component -
Impairment of intangible assets -
Sub-Saharan Africa 98,6 8
International 573,2 49
Operating profit 553,5
Amortisation of intangible assets 19,7
Impairment on intangible assets -
1 183,8 100
Entity wide disclosure - revenue
Analysis of revenue in accordance with
customer geography
Domestic brands
South Africa - pharmaceutical 1 524,9 37
South Africa - consumer 541,5 13
Sub-Saharan Africa 464,1 11
Asia Pacific 483,6 12
Latin America 407,9 10
Rest of the world 24,6 -
Total gross revenue from domestic brands 3 446,6 83
Adjustment* -
Total revenue from domestic brands 3 446,6 83
Global brands
Asia Pacific 158,5 4
Latin America 110,1 3
EMENA 393,2 9
Rest of the world 33,9 1
Total revenue from global brands 695,7 17
Total revenue 4 142,3 100
# In anticipation of the future materiality of the sub-Saharan
Africa region, Aspen has established a separate management and
reporting structure for this region and the segmental analysis has
been amended and restated to include the additional segment.
*The profit share from the GSK Aspen Healthcare for Africa
collaboration has been disclosed as revenue in the statement of
comprehensive income. For segmental purposes the total revenue
for the collaboration has been included to provide enhanced
revenue visibility in this territory.
Europe, Middle East and North African territories.
Segmental analysis (continued)
Audited restated
year ended
30 June 2009
% %
change Rm of total
Revenue from continuing
operations
South Africa 23 4 309,1 51
Sub-Saharan Africa# (40) 931,2 11
International 12 3 210,0 38
Total gross revenue 12 8 450,3 100
Adjustment* -
Total revenue 10 8 450,3
Operating profit before amortisation, disposals and impairment of
intangible assets from continuing operations
South Africa 57 1 102,0 48
Operating profit 66 1 045,1
Amortisation of intangible 37,8
assets
Insurance compensation - -
capital component
Impairment of intangible assets 19,1
Sub-Saharan Africa (54) 178,4 8
International (15) 1 022,4 44
Operating profit (16) 959,5
Amortisation of intangible 57,2
assets
Impairment on intangible assets 5,7
13 2 302,8 100
Entity wide disclosure -
revenue
Analysis of revenue in
accordance with customer
geography
Domestic brands
South Africa - pharmaceutical 30 3 208,3 38
South Africa - consumer 6 1 100,8 13
Sub-Saharan Africa (40) 931,2 11
Asia Pacific 8 915,4 11
Latin America (15) 841,3 10
Rest of the world 334 15,3 -
Total gross revenue from 10 7012,3 83
domestic brands
Adjustment* -
Total revenue from domestic 9 7012,3 83
brands
Global brands
Asia Pacific 43 336,1 4
Latin America 40 196,2 2
EMENA 5 826,0 10
Rest of the world (15) 79,7 1
Total revenue from global 18 1 438,0 17
brands
Total revenue 10 8 450,3 100
# In anticipation of the future materiality of the sub-Saharan
Africa region, Aspen has established a separate management and
reporting structure for this region and the segmental analysis has
been amended and restated to include the additional segment.
*The profit share from the GSK Aspen Healthcare for Africa
collaboration has been disclosed as revenue in the statement of
comprehensive income. For segmental purposes the total revenue
for the collaboration has been included to provide enhanced
revenue visibility in this territory.
Europe, Middle East and North African territories.
Supplementary information
Unaudited
Unaudited restated Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm Rm Rm
A. Capital expenditure
Incurred 399,3 3 331,7 3 906,6
- tangible assets 243,9 344,2 626,7
- intangible assets 155,4 2 987,5 3 279,9
Contracted
- tangible assets 172,2 88,3 87,3
- intangible assets 100,0 - 5,8
Authorised but not
contracted for
- tangible assets 301,8 279,5 226,9
- intangible assets 421,2 - 12,1
B. Operating profit has
been arrived at after
charging/(crediting)
Depreciation of property, 73,3 53,2 115,7
plant and equipment
Amortisation of intangible 46,8 47,6 95,0
assets
Share-based payment 13,3 14,4 29,5
expenses - employees
Deferred incentive - 3,1 - -
employees
Insurance compensation (144,7) - -
C. Investment income
Interest received 90,6 115,4 224,2
D. Financing costs
Interest paid (280,9) (310,9) (614,9)
Net foreign exchange 25,1 (28,2) (0,9)
gains/(losses)
Fair value gains/(losses) 7,0 1,5 (52,4)
on financial instruments
Notional interest on (0,9) 3,5 7,3
financial instruments
Preference share dividends (14,3) (20,9) (38,3)
paid
Financing costs (264,0) (355,0) (699,2)
E. Intangible asset
movement
Opening balance 4 103,6 3 705,7 3 705,7
Net acquisitions of - 79,2 19,5
businesses, subsidiary and
joint ventures
Additions - GSK 3 808,4 - -
Additions - Other 155,4 344,2 626,9
Disposals - (1,1) (16,4)
Amortisation (46,8) (52,7) (104,4)
Effects of exchange rate (161,7) 553,8 (106,2)
changes
Impairment of intangible (14,3) (2,2) (24,8)
assets
Other movements 5,2 8,3 3,3
Closing balance 7 849,8 4 635,2 4 103,6
F. Contingent liabilities
There are contingent
liabilities in respect of:
Additional payments in 7,4 9,3 7,7
respect of the Quit
worldwide intellectual
property rights
Guarantees covering loan
and other obligations to
third
parties 5,7 3,0 23,8
Tax duty contingencies 11,3 - 17,0
Acquistions
The Group concluded a series of interdependent transactions with GSK in the
reporting period to promote its strategic objectives in South Africa, sub-
Saharan Africa and internationally. These transactions will be accounted for
as a business combination in terms of IFRS 3 revised.
The effective date of the transactions was 1 December 2009.
The acquisitions being:
the acquisition of the rights by Pharmacare Ltd to distribute GSK`s
pharmaceutical products in South Africa;
the formation of a collaboration between Pharmacare Ltd 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
The issue by Aspen of 68.5 million shares to GSK at a value of
R 66.80 per share.
Rm
Cost of the acquisition:
Shares issued 4 575,8
Fair value of assets acquired (4 282,1)
Fair values recognised for the acquisitions were:
Goodwill 293,7
Property, plant and equipment 403,7
Intangible assets E# 3 808,4
Current assets 268,2
Non-current liabilities (174,7)
Current liabilities (23,5)
Fair value of assets acquired 4 282,1
Goodwill acquired 293,7
Purchase consideration 4 575,8
Shares issued to GSK (4 575,8)
Cash and cash equivalents in acquired companies 33,4
Total cash inflow on acquisition 33,4
The net book values of all assets and liabilities acquired in the combination
immediately before the combination equals the fair values as stated above.
The initial accounting for the business combination has been reported on a
provisional basis in respect of intangible assets and goodwill and will only
be finalised in the year ending 30 June 2011, as the effective date of the
transaction was 1 December 2009.
Goodwill
The goodwill arising on the transaction has been allocated to Pharmacare Ltd
as this is where the Group expects to realise synergistic benefits from the
transactions. These synergies include cost savings, building Aspen
Pharmacare`s ethical brand credibility with specialists and optimising process
efficiencies.
The total amount of goodwill recognised is not tax deductable.
Basis of Accounting
The condensed interim financial results have been prepared in accordance with
IFRS, IAS 34 - Interim Financial Reporting, the Listings Requirements of the
JSE Ltd and Schedule 4 of the South African Companies Act (Act 61 of 1973, as
amended).
The accounting policies used in the preparation of these interim results are
consistent with those used in the annual financial statements for the year
ended 30 June 2009. The acquisition of the GSK transactions were accounted for
on a provisional basis and will only be finalised in the year ending 30 June
2011.
The interim information has been prepared in accordance with the IFRS and
IFRIC interpretations as adopted for use in South Africa at the time of the
preparation of the information. As these standards and interpretations are
subject to ongoing review, they may be amended between the date of this report
and the finalisation of the annual financial statements for the year to June
2010.
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",
"indicate", "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 materialise, 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 Ltd, 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.
DIRECTORS
N J Dlamini (Chairman)*, A J Aaron*, R Andersen*, M G Attridge,
M R Bagus*, J F Buchanan*, S A Hussain*, C N Mortimer*,
D M Nurek*, S B Saad, S Zilwa*.
TRANSFER SECRETARY
Computershare Investor Services (Pty) Ltd (Registration number
2004/003647/07), 70 Marshall Street, Johannesburg, 2001
(PO Box 1053, Johannesburg, 2000).
REGISTERED OFFICE
Building no 8, Healthcare Park, Woodlands Drive, Woodmead
Company secretary H A Shapiro
*Non-executive director
Aspen - making a difference through every stage of your life, from beginning
to end.
Date: 03/03/2010 13:30:01 Produced by the JSE SENS Department.
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