| Wed 15 Sep 2010, 14:00 | | APN - Aspen Pharmacare Holdings Ltd (Aspen) - Reviewed preliminary Group |
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APN
APN
APN - Aspen Pharmacare Holdings Ltd ("Aspen") - Reviewed preliminary Group
financial results for the year ended 30 June 2010
Aspen Pharmacare Holdings Ltd ("Aspen")
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
Reviewed preliminary Group financial results for the year ended 30 June 2010
Headline earnings up 39% - R1,9 billion
Headline earnings per share up 24% - 482,9 cents
Operating cash flow per share up 40% - 505,7 cents
Capital distribution per share recommenced 70 cents
Group statement of comprehensive income
Audited
Reviewed Restated
Year ended Year ended
30 June 30 June
% 2010 2009
change Rm Rm
Continuing operations
Revenue 20 10 146,6 8 441,4
Cost of sales (5 542,3) (4 564,1)
Gross profit 19 4 604,3 3 877,3
Selling and distribution expenses (1 189,4) (997,7)
Administrative expenses (736,0) (587,5)
Other operating income 179,9 3,6
Other operating expenses (243,9) (121,0)
Operating profit B# 20 2 614,9 2 174,7
Investment income C# 187,9 224,2
Financing costs D# (558,3) (699,2)
2 244,5 1 699,7
Share of after-tax net losses from (1,7) (3,3)
associates
Profit before tax 32 2 242,8 1 696,4
Tax (467,5) (358,9)
Profit after tax from continuing 33 1 775,3 1 337,5
operations
Discontinued operations
Profit for the year from discontinued E# 203,2 16,1
operations
Profit for the year 46 1 978,5 1 353,6
Other comprehensive income
Amounts recognised in equity due to - (1 26,5)
hedge accounting of interest rate swaps
Cash flow hedges realised (4,8) 6,5
Currency translation differences (25,1) (399,9)
Acquisition of additional 1% - 4,8
shareholding in PharmaLatina Holdings
Ltd
Disposal of Onco Therapies Ltd 0,8 -
Total comprehensive income 1 949,4 838,5
Profit for the year attributable to:
Equity holders of the parent 48 1 989,6 1 340,4
Non-controlling interest (11,1) 13,2
46 1 978,5 1 353,6
Total comprehensive income for the year
attributable to:
Equity holders of the parent 1 969,3 824,1
Non-controlling interest (19,9) 14,4
1 949,4 838,5
Weighted average number of shares in 401 987 357 860
issue (`000)
Basic earnings per share (cents)
From continuing operations 20 444,4 370,1
From discontinued operations 50,5 4,5
32 494,9 374,6
Diluted earnings per share (cents)
From continuing operations 19 427,0 358,7
From discontinued operations 47,7 4,2
31 474,7 362,9
#See notes on Supplementary information,
Audited
Reviewed Restated
Year ended Year ended
30 June 30 June
% 2010 2009
change Rm Rm
Headline earnings
Reconciliation of headline earnings
Profit attributable to equity holders of 1 989,6 1 340,4
the parent
Adjusted for:
Continuing operations
- Loss on disposal of tangible and 2,5 3,8
intangible assets (net of tax)
- Net impairment of intangible assets (net 68,4 24,9
of tax)
- Impairment of property, plant and 25,3 -
equipment (net of tax)
- Impairment of deferred receivable (net of 17,1 -
tax)
- Insurance compensation - capital (27,7) -
component
- Capital gains tax on transfer of 20,7 -
intellectual property rights
Discontinued operations
- Profit on the sale of Onco Therapies Ltd (154,7) -
(net of tax)
- 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 39 1 941,2 1 393,5
Headline earnings
From continuing operations 40 1 892,7 1 353,0
From discontinued operations 48,5 40,5
39 1 941,2 1 393,5
Headline earnings per share (cents)
From continuing operations 25 470,8 378,1
From discontinued operations 12,1 11,3
24 482,9 389,4
Headline earnings per share - diluted
(cents)
From continuing operations 23 452,0 366,1
From discontinued operations 11,4 10,6
23 463,4 376,7
CAPITAL DISTRIBUTION
Capital distribution per share (cents) 70,0 -
The capital distribution relates to the distribution declared after year-end. In
compliance with IAS 10, Events After Balance sheet date, the annual financial
statements do not reflect this distribution. The capital distribution will only
be accounted for in the year ending 30 June 2011.
Group statement of financial position
Reviewed Audited
30 June 30 June
2010 2009
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 3 012 4 2 373,5
Goodwill 456,1 398,4
Intangible assets F# 8 609,9 4 103,6
Non-current financial receivables 34,4 27,7
Deferred tax assets 65,5 17,8
Total non-current assets 12 178,3 6 921,0
Current assets
Inventories 2 041,4 1 434,6
Receivables, prepayments and other current 2 359,5 2 100,9
assets
Assets classified as held for sale 260,1 -
Cash and cash equivalents 2 939,8 2 065,3
Cash restricted for use 21,8 -
Total current assets 7 622,6 5 600,8
Total assets 19 800,9 12 521,8
SHAREHOLDERS` EQUITY
Share capital and premium (including treasury 5 089,0 509,8
shares)
Reserves 5 580,0 3 515,3
Ordinary shareholders` equity 10 669,0 4 025,1
Equity component of preference shares 162,0 162,0
Non-controlling interest 55,2 75,9
Total shareholders` equity 10 886,2 4 263,0
LIABILITIES
Non-current liabilities
Preference shares - liability component 386,6 392,2
Borrowings 2 260,2 3 433,8
Retirement benefit obligations 15,4 9,4
Deferred revenue 159,4 -
Deferred tax liabilities 263,2 203,0
Total non-current liabilities 3 084,8 4 038,4
Current liabilities
Trade and other payables 1 913,9 1 300,2
Borrowings 3 720,8 2 670,3
Derivative financial instruments 143,2 178,4
Other current liabilities 52,0 71,5
Total current liabilities 5 829,9 4 220,4
Total liabilities 8 914,7 8 258,8
Total equity and liabilities 19 800,9 12 521,8
Number of shares in issue (net of treasury 431 407 360 666
shares) (`000)
Net asset value per share (cents) 2 473,1 1 116,0
*Bank overdrafts are included within borrowings under current liabilities.
Segmental analysis
Reviewed
Year ended
30 June 2010
% of
Rm total
Revenue from continuing operations
South Africa 5 652,1 53
Sub-Saharan Africa# 910,0 9
International 4 053,3 38
Total gross revenue 10 615,4 100
Adjustment* (468,8)
Total revenue 10 146,6
Operating profit before amortisation, disposals
and impairment of assets from continuing
operations
South Africa 1 632,2 58
Operating profit 1 587,9
Amortisation of intangible assets 45,3
Insurance compensation - capital component (38,5)
Impairment of assets 37,5
Sub-Saharan Africa 72,3 3
Operating profit 66,4
Amortisation of intangible assets 4,2
Impairment of assets 1,7
International 1 114,0 39
Operating profit 960,6
Amortisation of intangible assets 52,4
Impairment of assets 101,0
2 818,5 100
Entity wide disclosure - Revenue
Analysis of revenue in accordance with customer
geography
Domestic brands
South Africa - pharmaceutical 4 391,2 43
South Africa - consumer 1 160,8 12
Sub-Saharan Africa# 910,0 9
Asia Pacific 1 015,6 10
Latin America 813,3 8
Rest of the world 316,9 3
Total gross revenue from domestic brands 8 607,8 85
Adjustment* (468,8)
Total revenue from domestic brands 8 139,0 80
Global brands
Asia Pacific 452,6 5
Latin America 336,7 3
EMENAC 1 036,4 10
Rest of the world 181,9 2
Total revenue from global brands 2 007,6 20
Total revenue 10 146,6 100
Segmental analysis (continued)
Audited restated
Year ended
30 June 2009
% of
Rm total % change
Revenue from continuing operations
South Africa 4 309,1 51 31
Sub-Saharan Africa# 931,2 11 (2)
International 3 201,1 38 27
Total gross revenue 8 441,4 100 26
Adjustment* -
Total revenue 8 441,4 20
Operating profit before amortisation,
disposals and impairment of assets from
continuing operations
South Africa 1 102,0 48 48
Operating profit 1 045,1 52
Amortisation of intangible assets 37,8
Insurance compensation - capital component -
Impairment of assets 19,1
Sub-Saharan Africa 178,4 8 (59)
Operating profit 173,2 (62)
Amortisation of intangible assets 5,2
Impairment of assets -
International 1 014,1 44 10
Operating profit 956,4 0
Amortisation of intangible assets 52,0
Impairment of assets 5,7
2 294,5 100 23
Entity wide disclosure - Revenue
Analysis of revenue in accordance with
customer geography
Domestic brands
South Africa - pharmaceutical 3 136,3 37 40
South Africa - consumer 1 100,8 13 5
Sub-Saharan Africa# 931,2 11 (2)
Asia Pacific 915,4 11 11
Latin America 841,3 10 (3)
Rest of the world 6,4 -
Total gross revenue from domestic brands 6 931,4 82 24
Adjustment* -
Total revenue from domestic brands 6 931,4 82 17
Global brands
Asia Pacific 318,9 4 42
Latin America 302,8 4 11
EMENAC 771,7 9 34
Rest of the world 116,6 1 56
Total revenue from global brands 1 510,0 18 33
Total revenue 8 441,4 100 20
#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 reflect 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, North African territories and Canadian territories.
Group statement of changes in equity
Share capital
and premium Equity
(including component of
treasury Reserves preference
shares) shares
Rm Rm Rm
Balance at 30 June 2008 (77,8) 3 173,5 162,0
Total comprehensive income - 824,1 -
Profit for the year - 1 340,4 -
Other comprehensive income - (516,3) -
Dividend paid - - -
Issue of ordinary share capital 21,4 - -
Treasury shares cancelled 566,2 (566,2) -
Share options and appreciation - 28,5 -
rights expensed
Equity portion of tax claims in - 55,4 -
respect of share schemes
Contribution by non-controlling - - -
interest
Balance at 30 June 2009 509,8 3 515,3 162,0
Total comprehensive income - 1 969,3 -
Profit for the year - 1 989,6 -
Other comprehensive income - (20,3) -
Dividend paid - - -
Issue of ordinary share capital 4 592,8 - -
Shares issued - share schemes 17,0 - -
Shares issued - GSK transactions 4 575,8 - -
Treasury shares purchased (13,5) - -
Treasury shares sold (0,1) 0,1 -
Share options and appreciation - 25,4 -
rights expensed (including
deferred incentive bonus)
Equity portion of tax claims in - 56,2 -
respect of share schemes
Hyperinflationary adjustment - - 13,7 -
Venezuela
Balance at 30 June 2010 5 089,0 5 580,0 162,0
Group statement of changes in equity (continued)
Total
attributable
to equity Non-
holders controlling
of the parent interests Total
Rm Rm Rm
Balance at 30 June 2008 3 257,7 61,1 3 318,8
Total comprehensive income 824,1 14,4 838,5
Profit for the year 1 340,4 13,2 1 353,6
Other comprehensive income (516,3) 1,2 (515,1)
Dividend paid - (0,8) (0,8)
Issue of ordinary share capital 21,4 - 21,4
Treasury shares cancelled - - -
Share options and appreciation 28,5 - 28,5
rights expensed
Equity portion of tax claims in 55,4 - 55,4
respect of share schemes
Contribution by non-controlling - 1,2 1,2
interest
Balance at 30 June 2009 4 187,1 75,9 4 263,0
Total comprehensive income 1 969,3 (19,9) 1 949,4
Profit for the year 1 989,6 (11,1) 1 978,5
Other comprehensive income (20,3) (8,8) (29,1)
Dividend paid - (0,8) (0,8)
Issue of ordinary share capital 4 592,8 - 4 592,8
Shares issued - share schemes 17,0 - 17,0
Shares issued - GSK transactions 4 575,8 - 4 575,8
Treasury shares purchased (13,5) - (13,5)
Treasury shares cancelled - - -
Share options and appreciation 25,4 - 25,4
rights expensed (including
deferred incentive bonus)
Equity portion of tax claims in 56,2 - 56,2
respect of share schemes
Hyperinflationary adjustment - 13,7 - 13,7
Venezuela
Balance at 30 June 2010 10 831,0 55,2 10 886,2
Group statement of cash flows
Audited
Reviewed Restated
Year ended Year ended
30 June 30 June
% 2010 2009
change Rm Rm
Cash flows from operating activities
Cash operating profit 3 269,5 2 668,3
Changes in working capital (344,4) (507,7)
Cash generated from operations 2 925,1 2 160,6
Net financing costs paid (427,1) (535,1)
Tax paid (465,0) (333,4)
Net cash generated from operating 2 033,0 1 292,1
activities#
Cash flows from investing activities
Capital expenditure - property, plant (632,0) (626,7)
and equipment
Proceeds on disposal of property, plant 9,8 9,1
and equipment
Capital expenditure - intangible assets (660,5) (3 279,9)
Proceeds on disposal of intangible 0,3 15,5
assets
Acquisition and disposal of 307,5 429,2
subsidiaries, businesses and joint
ventures
Increase in non-current financial (27,1) (0,4)
receivables
Payment of outstanding Oncology business (18,7) (103,5)
purchase consideration
Net cash used in investing activities (1 020,7) (3 556,7)
Cash flows from financing activities
Net (repayment)/proceeds from borrowings (478,0) 3 121,6
Repayment of deferred-payables (0,7) (12,2)
Dividend paid (0,8) (0,8)
Proceeds from issue of ordinary share 16,1 20,4
capital
Acquisition of treasury shares (13,5) -
Increase in cash restricted for use as (21,8) -
security for borrowings
Net cash (utilised)/generated from (498,7) 3 129,0
financing activities
Movement in cash and cash equivalents 513,6 864,4
before exchange rate changes
Effects of exchange rate changes (23,8) (486,4)
Cash and cash equivalents
Movement in cash and cash equivalents 489,8 378,0
Cash and cash equivalents at the 1 322,9 944,9
beginning of the year
Cash and cash equivalents at the end of 1 812,7 1 322,9
the year
Operating cash flow per share (cents)
From continuing operations 35 490,3 363,6
From discontinued operations 15,4 (2,5)
40 505,7 361,1
The above includes discontinued
operations of:
Net cash generated from/(used in) 61,8 (8,8)
operating activities
Net cash used in investing activities (62,3) (43,0)
Net cash generated from financing - 54,8
activities
Effects of exchange rate changes 0,2 7,4
Movement in cash and cash equivalents (0,3) 10,4
Cash and cash equivalents at the 0,3 (10,4)
beginning of the year
Cash and cash equivalents per the - -
statement of cash flows
Reconciliation of cash and cash
equivalents
Cash and cash equivalents per the 2 939,8 2 065,3
statement of financial position
Less: bank overdrafts (1 127,1) (742,4)
Cash and cash equivalents per the 1 812,7 1 322,9
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
Acquisitions and disposals
Acquisitions
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; and
- the acquisition of GSK`s manufacturing facility in Bad Oldesloe, Germany.
The acquisitions were funded by the issue of 68,5 million Aspen shares to GSK at
a value of R66,80 per share.
2010
Cost of the acquisition: Rm
Shares issued 4 575,8
Fair value of assets acquired (4 514,2)
Goodwill 61,6
Fair values recognised for the acquisitions
were:
Property, plant and equipment 402,9
Intangible assets 4 054,9 F#
Deferred tax asset 7,4
Current assets 268,2
Non-current liabilities (174,7)
Current liabilities (44,5)
Fair value of assets acquired 4 514,2
Goodwill acquired 61,6
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 book values of the tangible assets (excluding deferred revenue which arises
on the acquisition) does not differ materially from the fair values stated
above. The values of intangible assets (including deferred revenue) has arisen
as a result of the transaction and has no book values on acquisition.
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 Pharmacare Ltd`s
ethical brand credibility with specialists and optimising process efficiencies.
The total amount of goodwill recognised is not tax deductible.
Disposals
During the year, the Group entered into conditional agreements for the disposal
of its 50% shareholding in the Oncology business (Onco Therapies Ltd and Onco
Laboratories Ltd). From 1 January 2010 the results for these joint ventures were
not consolidated and net asset values of the companies were transferred to
assets held for sale. The conditions precedent were fulfilled on 10 May 2010 for
the sale of Onco Therapies Ltd and the profit on the sale of this joint venture
has been recognised as set out below. Various conditions precedent remain to be
fulfilled in respect of the sale of Onco Laboratories Ltd at year-ended. These
conditions are expected to be fulfilled during the year ahead.
Property, plant and equipment 130,7
Deferred tax liability (2,6)
Current assets 11,8
Current liabilities (16,5)
Fair value of assets disposed 123,4
Profit on sale 154,7
Goodwill disposed 4,8
Purchase consideration received 282,9
Cash and cash equivalents in disposed company (8,8)
Cash inflow on disposal 274,1
Supplementary information
Audited
Reviewed restated
year ended year ended
30 June 30 June
2010 2009
Rm Rm
A. Capital expenditure
Incurred 5 750,3 3 906,6
- tangible assets 632,0 626,7
- GSK transactions (tangible and intangible assets) 4 457,8 2 653,0
- intangible assets 660,5 626,9
Contracted
- tangible assets 61,4 87,3
- intangible assets 20,9 5,8
Authorised but not contracted for
- tangible assets 502,8 226,9
- intangible assets 33,6 12,1
B. Operating profit has been arrived at after
charging/(crediting)
Depreciation of property, plant and equipment 167,8 115,7
Amortisation of intangible assets 101,9 95,0
Share-based payment expenses - employees (including 29,8 29,5
deferred incentive bonus)
Impairment of property, plant and equipment 37,6 -
Impairment of intangible assets 85,5 24,8
Insurance compensation (162,4) -
C. Investment income
Interest received 187,9 224,2
D. Financing costs
Interest paid (553,0) (614,9)
Net foreign exchange losses (19,1) (0,9)
Fair value gains/(losses) on financial instruments 37,9 (52,4)
Notional interest income on financial instruments 3,8 7,3
Preference share dividends paid (27,9) (38,3)
Financing costs (558,3) (699,2)
E. Profit for the year from discontinued operations
Profit for the year from discontinued operations 48,5 40,2
Profit on sale of Onco Therapies Ltd 154,7 -
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 203,2 16,1
F. Intangible assets movement
Opening balance 4 103,6 3 705,7
Net acquisitions of businesses, subsidiaries and - 19,5
joint ventures
Additions - GSK 4 054,9 -
Additions - other 660,5 626,7
Disposals (0,1) (16,4)
Amortisation (101,9) (104,4)
Effects of exchange rate changes 14,6 (106,2)
Impairment of intangible assets (85,5) (24,8)
Transferred to assets classified as held for sale (51,8) -
Other movements 15,6 3,5
Closing balance 8 609,9 4 103,6
G. Contingent liabilities
There are contingent liabilities in respect of:
Additional payments in respect of the Quit 7,6 7,7
worldwide intellectual property rights
Guarantees covering loan and other obligations to 3,4 23,8
third parties
Tax duty contingencies 8,3 17,0
H. Guarantees to financial institutions
Material guarantees given by Group companies for
indebtedness
of subsidiaries to third parties 2 874,9 3 098,0
Commentary
Group performance
Aspen achieved a 39% increase in headline earnings to R1,941 billion for the
year ended 30 June 2010. Headline earnings per share increased by 24%, to 482,9
cents after taking into account the increased weighted number of shares in issue
over the year. A capital profit on the sale of Onco Therapies contributed in
raising earnings per share to 494,9 cents, up 32%. From continuing operations,
both revenue and operating profit grew by 20%, to R10,147 billion and to R2,615
billion respectively. The South African business was the leading driver of the
growth achieved.
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
Revenue in the South African business was 31% higher, at R5,652 billion. The
pharmaceutical division raised revenue from domestic brands by 40%, to R4,391
billion and the consumer division increased revenue by 5%, to R1,161 billion.
Operating profit increased from R1,045 billion to R1,588 billion. Profit margins
recovered after the contractions of the previous two years as improved
production efficiencies and procurement savings were supported by a stronger
Rand, which lowered the cost of imported materials.
Ongoing organic growth was instrumental in the Aspen maintaining its position as
the leading supplier of pharmaceuticals to both the private and public sectors.
The integration of GSK`s South African pharmaceutical business was successfully
executed and has immediately yielded positive results reflected in an increase
in share of the branded products sector.
Growth in consumer revenue was achieved in a sluggish retail sector battling to
emerge from recession. Performance was also negatively affected by an
interruption in supply of infant milk formula due to the explosion at the
Nutritionals manufacturing facility last year. Insurance compensation of R162
million was received during the year, covering the consequent loss of profits
and the restoration of the facility and has been reported under "other operating
income".
The Group`s capital investment programme which has resulted in extensive upgrade
and addition to the South African manufacturing facilities over several years
continued to yield positive returns with meaningful further gains in production
efficiency. Further tabletting capacity came on line with the commissioning of
Unit 2 in Port Elizabeth whilst the new areas for production of suppositories
and dutch medicines were completed in East London. The hormonal suite of the
Sterile Facility will commence production in the year ahead. The Nutritionals
facility will be back in full production shortly following replacement of the
drying tower damaged in the explosion. Capital projects in progress will
significantly add to oral solid dose capacity in Unit 1 and enhance packing
capabilities.
Sub-Saharan Africa business
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 for the sub-Saharan African business declined 2% to R910 million and
operating profits decreased from R173 million to R66 million. The GSK Aspen
Healthcare for Africa collaboration commenced on 1 December 2009 and met all
performance expectations.
The loss of export business resulting from the genericisation of patented anti-
retroviral molecules marketed by Aspen gave rise to substantial reversals in
revenue and profits. Ineffective implementation of the business strategy at
Shelys Africa, stock write offs and the recognition of a contingent liability in
respect of a contested tariff charge led to losses in the second half of the
year. This precipitated a complete change in management of this business, an
intervention which has already yielded favourable results.
International business
The international business increased revenue by 27% to R4,053 billion whilst
operating profit before amortisation and impairments was 10% higher at R1,114
billion. Operating profit was diluted by the reduced contribution from the Latin
American ("Latam") operations and the reduction in profits resulting from the
transition of the global brands to the Aspen distribution network.
Revenue from global brands grew by 33% to R2,008 billion. Eltroxin, Lanoxin,
Imuran and Zyloric, the four global brands acquired from GSK with effect from 30
June 2008, comprise the greatest portion of this revenue. These four global
brands were largely transitioned to the Aspen distribution network during the
course of the year and achieved double digit revenue growth in US dollars. The
balance of the growth in the global brands came from the products added to this
portfolio during the year.
The Asia Pacific domestic brands increased revenue by 11% to R1,016 billion.
This was achieved despite regulated price reductions in Australia, the most
material territory in this region.
Revenue from domestic brands in Latam declined by 3% over the year to R813
million. However, performance in the second half of the year was much improved,
achieving revenue growth of 8%. This turnaround in performance was stimulated by
the successful implementation of a restructuring plan in the Brazilian business.
This has aligned the business model with Group strategy and returned the
business to profitability. As part of the reshaping of the Brazilian operation,
agreement was reached to sell the Campos manufacturing facility and related
products to Strides Arcolab ("Strides").
The Group also restructured its oncology arrangements with Strides. Aspen has
entered into agreements to sell its interest in the Onco Therapies and Onco
Laboratories joint ventures to Strides for USD 117 million. Aspen has in turn
secured a license for existing and future oncology products from Strides in
specified territories. The sale of Onco Therapies was completed prior to 30 June
2010, giving rise to a profit on disposal of R155 million. Conditions precedent
relating to the sale of Onco Laboratories remain to be fulfilled, completion
being expected during the year ahead. The Onco Laboratories assets have been
classified as "held for sale".
Funding
Borrowings, net of cash, were reduced by R1 billion to R3,019 billion through
strong operating cash flows. The reduction in debt and the additional share
capital raised in undertaking the GSK transactions has resulted in the gearing
of the Group improving from 51% at 30 June 2009 to 24%. Operating cash flow per
share increased by 40% to 505,7 cents.
Interest paid, net of interest received, of R365 million was covered eight times
by earnings before financing costs, taxes and amortisation.
Proposed acquisition of the Sigma Pharmaceutical business
On 16 August 2010, Aspen announced that the board of directors of Sigma
Pharmaceuticals Limited ("Sigma") had agreed to support an offer by Aspen to
acquire the pharmaceutical business conducted by Sigma ("Sigma pharmaceutical
business") for a cash consideration of AUD 900 million. Completion of this
transaction is conditional upon, inter alia, requisite regulatory approval and
the approval of Sigma shareholders. Work is ongoing on the fulfilment of these
conditions.
The Sigma pharmaceutical business manufactures and markets an extensive product
portfolio of well-known and trusted Australian brands which recorded revenue of
over AUD 600 million in the year to 31 January 2010. The Group sees the
following opportunities from the alignment of the Sigma pharmaceutical business
with Aspen`s highly successful subsidiary in Australia:
- Synergies out of the consolidation of the two businesses;
- The Sigma pharmaceuticals business provides an established point of entry to
the Australian generics and OTC sectors for the introduction of Aspen`s pipeline
of generic and OTC products;
- It will provide a strong foundation for further development of Aspen`s
business in the Asia Pacific Region; and
- The Australian manufacturing presence will supplement Aspen`s global
manufacturing capabilities.
Prospects
The addition to Aspen`s business in South Africa of the GSK brands and the
people who promote and support these brands has served to strengthen the Group`s
national leadership in pharmaceuticals. Aspen has the most extensive product
offering, the greatest representation and is the biggest supplier of
pharmaceuticals in the private and public sectors. The business is supported by
a substantial product pipeline and manufacturing facilities which are the most
advanced as well as offering the largest capacity in the southern hemisphere.
The fundamental dynamics of South Africa indicate a sustained increase in demand
for medicines. Aspen`s South African pharmaceutical business is well set to
continue to thrive, assisted by the recent period of regulatory stability and
government`s stated intention to support the local pharmaceutical industry.
The difficult trading environment in South Africa for consumer products has
necessitated a focus on efficiency of structures which should stand Aspen in
good stead when the retail cycle improves.
Initiatives being undertaken in the sub-Saharan African region should result in
an increased contribution to Group profits in the year ahead. An upswing in
results in Latam, continued organic growth in Asia Pacific and the benefit of a
full year of contribution from the global brands acquired over the last year
will be growth drivers for the international business in the year ahead.
Completion of the acquisition of the Sigma pharmaceutical business will add
further growth momentum.
The Group has the fundamentals in place to enjoy a 13th consecutive year of
uninterrupted real growth in 2011.
Capital distribution
Taking into account the earnings and cash flow performance for the year ended 30
June 2010, existing debt service commitments and future proposed investments,
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
4 December 2009, a capital distribution of 70 cents per ordinary share (2009:
zero) by way of a capital reduction has been declared, payable out of share
premium to shareholders recorded in the share register of the company at the
close of business on Friday, 8 October 2010. Future distributions will be
decided on a year-on-year basis.
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 2011.
In compliance with the requirements of Strate, the company has determined the
following salient dates for the payment of the capital distribution:
Last day to trade cum
capital distribution Friday, 1 October 2010
Shares commence trading
ex capital distribution Monday, 4 October 2010
Record date Friday, 8 October 2010
Payment date Monday, 11 October 2010
Share certificates may not be dematerialised or rematerialised between Monday, 4
October 2010 and Friday, 8 October 2010.
By order of the Board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
15 September 2010
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 2009.
Directors
NJ Dlamini* (Chairman), AJ Aaron*, RC Andersen*, MG Attridge,
MR Bagus*, JF Buchanan*, SA Hussain*, CN Mortimer*, DM Nurek*, SB Saad,
SV Zilwa*
*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
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 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 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.
www.aspenpharma.com
Date: 15/09/2010 14:00:03 Produced by the JSE SENS Department.
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