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APN
APN
APN - Aspen Pharmacare Holdings Limited - Unaudited interim financial
results for the six months ended 31 December 2011
Aspen Pharmacare Holdings Limited ("Aspen")
(Registration number 1985/002935/06)
Share code: APN ISIN: ZAE000066692
Unaudited interim financial results for the six months ended
31 December 2011
- Revenue from continuing operations increased 31% to R7,5 billion
- Operating profit from continuing operations increased 28% to
R2 billion
- Normalised diluted headline earnings per share from continuing operations
increased 22% to 308,1 cents
- Offshore businesses contribution to profits 61%
Group statement of financial position
Unaudited Unaudited Audited
31 December 31 December 30 June
2011 2010 2011
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 3 915,3 2 833,0 3 651,5
Goodwill 5 263,7 456,4 4 626,6
Intangible assets G# 10 223,5 7 918,9 8 916,7
Other non-current financial 41,4 38,8 11,8
receivables
Deferred tax assets 200,2 69,5 216,5
Total non-current assets 19 644,1 11 316,6 17 423,1
Current assets
Inventories 3 046,4 2 140,2 2 628,1
Receivables, prepayments and 3 701,5 2 774,9 3 263,8
other current assets
Cash restricted for use 22,3 43,6 28,7
Cash and cash equivalents 3 330,5 3 809,5 3 039,2
Total operating current assets 10 100,7 8 768,2 8 959,8
Assets classified as held for - 558,2 414,5
sale
Total current assets 10 100,7 9 326,4 9 374,3
Total assets 29 744,8 20 643,0 26 797,4
SHAREHOLDERS` EQUITY
Share capital and premium 4 322,2 4 773,4 4 776,2
(including treasury shares)
Reserves 11 215,4 6 263,0 8 288,0
Ordinary shareholders` equity 15 537,6 11 036,4 13 064,2
Equity component of preference 162,0 162,0 162,0
shares
Non-controlling interests 71,4 63,8 61,1
Total shareholders` equity 15 771,0 11 262,2 13 287,3
LIABILITIES
Non-current liabilities
Preference shares - liability 378,9 383,9 381,3
component
Borrowings 6 449,4 2 446,4 4 249,0
Retirement benefit obligations 18,8 15,4 18,8
Deferred revenue and other non- 148,5 152,6 148,2
current liabilities
Deferred tax liabilities 518,2 262,8 504,9
Total non-current liabilities 7 513,8 3 261,1 5 302,2
Current liabilities
Trade and other payables 2684,9 2 314,9 2 830,8
Borrowings 3 473,1 3 510,5 5 138,0*
Derivative financial instruments 32,1 91,9 65,6
Other current liabilities 269,9 202,4 142,6
Total operating current 6 460,0 6 119,7 8 177,0
liabilities
Liabilities associated with - - 30,9
assets held for sale
Total current liabilities 6 460,0 6 119,7 8 207,8
Total liabilities 13 973,8 9 380,8 13 510,1
Total equity and liabilities 29 744,8 20 643,0 26 797,4
Number of shares in issue (net of 436 541 433 300 433 883
treasury shares) (`000)
Net asset value per share (cents) 3 559,3 2 547,1 3 011,0
#See notes on Supplementary information.
*Bank overdrafts are included within borrowings under current liabilities.
Group statement of comprehensive income
Unaudited
Unaudited restated Audited
six months six months year
ended ended ended
31 December 31 December 30 June
% 2011 2010 2011
change Rm Rm Rm
CONTINUING OPERATIONS
Revenue 31 7 504,9 5 744,6 12 383,2
Cost of sales (3 929,1) (3 195,1) (6 769,7)
Gross profit 40 3 575,8 2 549,5 5 613,5
Selling and distribution (953,0) (663,7) (1 460,7)
expenses
Administrative expenses (553,5) (328,5) (827,3)
Other operating income 99,1 85,0 192,8
Other operating expenses (167,9) (78,9) (369,3)
Operating profit B# 28 2 000,5 1 563,4 3 149,0
Investment income C# 115,2 127,8 193,2
Financing costs D# (386,6) (250,3) (605,3)
Profit before tax 20 1 729,1 1 440,9 2 736,9
Tax (383,1) (316,5) (582,1)
Profit after tax from 20 1 346,0 1 124,4 2 154,8
continuing operations
DISCONTINUED OPERATIONS
Profit after tax for the 157,5 42,6 434,0
period from discontinued
operations E#
Profit for the period 29 1 503,5 1 167,0 2 588,8
OTHER COMPREHENSIVE
INCOME
Currency (losses)/gains (54,4) - 81,2
on net investment in
Asia Pacific
Amounts recognised in - 95,7 150,7
equity due to hedge
accounting of
acquisitions
Currency translation 1 452,0 (631,7) (223,0)
gains/(losses) F#
Cash flow hedges - 4,6 4,6
realised
Unrealised cash flow 19,4 47,2 59,7
hedges recognised
Total comprehensive 2 920,5 682,8 2 662,0
income
Profit for the period
attributable to:
Equity holders of the 1 495,3 1 154,8 2 577,8
parent
Non-controlling 8,2 12,2 11,0
interests
29 1 503,5 1 167,0 2 588,8
Total comprehensive
income for the period
attributable to:
Equity holders of the 2 909,5 672,5 2 655,3
parent
Non-controlling 11,0 10,3 6,7
interests
2 920,5 682,8 2 662,0
Weighted average number 435 143 432 354 432 914
of shares in issue
(`000)
Basic earnings per share
(cents)
From continuing 20 307,4 257,2 495,2
operations
From discontinued 36,2 9,9 100,3
operations
29 343,6 267,1 595,5
Diluted earnings per
share (cents)
From continuing 20 296,5 246,7 476,5
operations
From discontinued 34,7 9,3 95,5
operations
29 331,2 256,0 572,0
Capital distribution
Capital distribution per 105,0 70,0 70,0
share (cents)
The capital distribution of 105,0 cents relates to the distribution declared
on 13 September 2011 and paid on 17 October 2011 (The capital distribution
of 70,0 cents relates to the distribution declared on 15 September 2010 and
paid on 11 October 2010).
#See notes on Supplementary information.
Group statement of cash flows
Unaudited
Unaudited restated Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
Rm Rm Rm
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash operating profit 2 308,2 1 808,4 3 845,0
Changes in working (497,0) (875,0) (463,2)
capital
Cash generated from 1 811,2 933,4 3 381,8
operations
Net financing costs (302,4) (119,3) (401,3)
paid
Tax paid (298,2) (126,7) (534,6)
Cash generated from 1 210,6 687,4 2 445,9
operating activities#
CASH FLOWS FROM
INVESTING ACTIVITIES
Capital expenditure - (237,0) (309,5) (651,5)
property, plant and
equipment
Proceeds on disposal of 1,7 11,0 2,8
tangible assets
Capital expenditure - (381,3) (78,1) (188,7)
intangible assets
Proceeds on disposal of 11,6 32,9 197,5
intangible assets
Acquisition of - (2,6) (5 893,2)
subsidiary and
businesses
Proceeds on disposal of - - 628,1
subsidiary and
associate
Proceeds on disposal of 250,1 - 10,3
assets held for sale J#
(Increase)/decrease in (29,6) (6,6) 25,1
non-current financial
receivables
Advance proceeds on - 616,1 290,2
held for sale assets
Net investment hedge in - 69,1 (66,1)
Asia Pacific
Settlement of prior (42,5) - -
year acquisition of
subsidiary
Settlement of sale and
leaseback agreement in
Asia Pacific (102,2) - -
Cash (used (529,2) 332,3 (5 645,5)
in)/generated from
investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Net (repayment (239,4) 430,7 3 567,8
of)/proceeds from
borrowings
Capital distribution (457,6) (302,9) (302,9)
Dividend paid (2,0) (1,7) (1,7)
Proceeds from issue of 22,0 7,4 10,0
ordinary share capital
Acquisition of treasury (18,6) (20,1) (20,1)
shares
Decrease/(Increase) in 6,4 (21,8) (6,1)
cash restricted for use
as security for
borrowings
Cash (used (689,2) 91,6 3 247,0
in)/generated from
financing activities
Movement in cash and (7,8) 1 111,3 47,4
cash equivalents before
translation effects of
foreign operations
Translation effects on 253,4 (174,1) (107,3)
cash and cash
equivalents of foreign
operations
Cash and cash
equivalents
Movement in cash and 245,6 937,2 (59,9)
cash equivalents
Cash and cash 1 752,8 1 812,7 1 812,7
equivalents at the
beginning of the period
Cash and cash 1 998,4 2 749,9 1 752,8
equivalents at the end
of the period
%
change
# Operating cash flow
per share (cents)
From continuing 82 278,2 152,8 554,8
operations
From discontinued - 6,2 10,2
operations
75 278,2 159,0 565,0
The above includes
discontinued operations
of:
Cash generated from - 26,9 44,2
operating activities
Cash and cash - 26,9 44,2
equivalents per the
statement of cash flows
Reconciliation of cash
and cash equivalents
Cash and cash 3 330,5 3 809,5 3 039,2
equivalents per the
statement of financial
position
Less: bank overdrafts (1 332,1) (1 059,6) (1 286,4)
Cash and cash 1 998,4 2 749,9 1 752,8
equivalents 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 headline earnings
Unaudited
Unaudited restated Audited
six months six months year
ended ended ended
31 December 31 December 30 June
% 2011 2010 2011
change Rm Rm Rm
HEADLINE EARNINGS
Reconciliation of
headline earnings
Profit attributable to 1 495,3 1 154,8 2 577,8
equity holders of the
parent
Adjusted for:
Continuing operations
- Impairment of property, 3,6 - 7,4
plant and equipment (net
of tax)
- Profit on disposal of (0,1) (2,1) (11,8)
tangible and intangible
assets (net of tax)
- Net impairment of 35,7 21,5 83,8
intangible assets (net of
tax)
- Insurance compensation - (3,6) (11,5)
- capital component (net
of tax)
Discontinued operations
- Profit on the sale of (121,9) - -
the Campos facility and
related non-core hospital
products in Brazil (net
of tax)
- Profit on the sale of - - (367,9)
the Oncology business
(net of tax)
- Profit on sale of Co- - (7,4) (7,4)
Pharma Ltd (net of tax)
- Profit on disposal of (35,6) (16,1) (18,1)
personal care products in
South Africa (net of tax)
20 1 377,0 1 147,1 2 252,3
Headline earnings
From continuing 22 1 377,0 1 128,0 2 211,7
operations
From discontinued - 19,1 40,6
operations
20 1 377,0 1 147,1 2 252,3
Headline earnings per
share (cents)
From continuing 21 316,4 260,9 510,9
operations
From discontinued - 4,4 9,4
operations
19 316,4 265,3 520,3
Headline earnings per
share - diluted (cents)
From continuing 22 305,2 250,1 491,4
operations
From discontinued - 4,2 8,9
operations
20 305,2 254,3 500,3
NORMALISED HEADLINE
EARNINGS
Reconciliation of
normalised headline
earnings
Headline earnings 1 377,0 1 147,1 2 252,3
Adjusted for:
Continuing operations
- Restructuring costs 9,3 - 23,1
(net of tax)
- Transaction costs (net 4,1 14,5 121,7
of tax)
Discontinued operations
- Restructuring costs - - 3,7
(net of tax)
20 1 390,4 1 161,6 2 400,8
Normalised headline
earnings
From continuing 22 1 390,4 1 142,5 2 356,5
operations
From discontinued - 19,1 44,3
operations
20 1 390,4 1 161,6 2 400,8
Normalised headline
earnings per share
(cents)
From continuing 21 319,5 264,3 544,3
operations
From discontinued - 4,4 10,2
operations
19 319,5 268,7 554,5
Normalised headline
earnings per share -
diluted (cents)
From continuing 22 308,1 253,3 523,3
operations
From discontinued - 4,2 9,7
operations
20 308,1 257,5 533,0
Supplementary information
Unaudited
Unaudited restated Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
Rm Rm Rm
A. CAPITAL EXPENDITURE
Incurred 618,3 387,6 840,2
- tangible assets 237,0 309,5 651,5
- intangible assets 381,3 78,1 188,7
Contracted
- tangible assets 156,5 52,1 134,2
- intangible assets 75,3 25,1 49,0
Authorised but not contracted for
- tangible assets 19,6 164,4 275,3
- intangible assets 9,2 - 58,1
B. OPERATING PROFIT HAS BEEN
ARRIVED AT AFTER
CHARGING/(CREDITING)
Depreciation of property, plant 125,1 96,1 215,0
and equipment
Amortisation of intangible assets 103,2 51,5 143,0
Impairment of property, plant and 4,8 - 10,0
equipment
Impairment of intangible assets 46,6 27,4 97,3
Share-based payment expenses - 15,1 12,1 30,6
employees
Transaction costs - 18,8 86,1
Restructuring costs 12,1 - 32,6
Insurance compensation (63,0) (62,3) (156,5)
C. INVESTMENT INCOME
Interest received 115,2 127,8 193,2
D. FINANCING COSTS
Interest paid (374,3) (265,1) (611,1)
Capital raising fees (5,4) - (33,2)
Net foreign exchange (30,8) 39,7 60,8
(losses)/gains
Fair value gains/(losses) on 34,5 (13,4) 1,2
financial instruments
Notional interest on financial 1,7 1,4 3,3
instruments
Preference share dividends paid (12,3) (12,9) (26,3)
(386,6) (250,3) (605,3)
E. PROFIT AFTER TAX FOR THE PERIOD
FROM DISCONTINUED OPERATIONS
Profit after tax for the period - 19,1 40,6
from discontinued operations
Profit on the sale of the Campos 121,9 - -
facility and related non-core
hospital products in Brazil
Profit on sale of personal care 35,6 16,0 18,1
products in South Africa
Profit on sale of Co-Pharma Ltd - 7,4 7,4
Profit on sale of the Oncology - - 367,9
business
157,5 42,5 434,0
F. CURRENCY TRANSLATION MOVEMENTS
Currency translation movements on the translation of the international
businesses is as a result of the difference between the weighted
average exchange rate used for trading results and the closing
exchange rate applied in the statement of financial position. For the
reporting period the weaker closing ZAR translation rate significantly
increased the Group net asset value.
G. INTANGIBLE ASSETS MOVEMENT
Opening balance 8 916,7 8 609,9 8 609,9
Acquisition of subsidiaries - 22,4 1 083,9
Additions - other 381,3 78,1 188,7
Disposals (11,6) (17,1) (179,0)
Amortisation (103,2) (52,4) (144,4)
Translation of foreign operations 1 079,8 (717,1) (547,2)
Transferred to assets held for - - (29,4)
sale
Software projects implemented 7,1 22,5 31,5
Impairment of intangible assets (46,6) (27,4) (97,3)
10 223,5 7 918,9 8 916,7
H. CONTINGENT LIABILITIES
There are contingent liabilities
in respect of:
Additional payments in respect of 8,1 6,6 6,7
the Quit worldwide intellectual
property rights
Contingency arising from product 21,1 - 17,6
liability claim
Contingencies arising from labour 24,8 - 24,8
cases
Guarantees covering loan and other 17,2 15,0 1,7
obligations to third parties
Tax duty contingencies 11,7 8,3 10,3
I. GUARANTEES TO FINANCIAL
INSTITUTIONS
Material guarantees given by Group 3 659,5 2 201,8 5 787,6
companies for indebtness of
subsidiaries to financial
institutions
J. NET ASSETS CLASSIFIED AS HELD
FOR SALE
Onco Laboratories - 226,9 -
Campos facility and related - 331,3 348,5
products in Brazil
Personal care products in South - - 35,1
Africa
- 558,2 383,6
Campos facility and related products in Brazil
An agreement was reached in June 2011 for the sale of the Campos facility
and related products in Brazil to Strides Arcolab Ltd as the specialised
manufacture of penicillins and penems, primarily for the public sector and
contract manufacturing business is not considered to be core to the product
offering of the Brazilian company. The conditions precedent were fulfilled
in December 2011.
Personal care products in South Africa
The sale of the South African toothpaste business to the Unilever group was
concluded in September 2011.
Group statement of change in equity
Share capital Equity
and share component of
premium (Including preference
treasury share) Reserves shares
Rm Rm Rm
Balance at 30 June 2010 5 089,0 5 580,0 162,0
Total comprehensive - 2 655,3 -
income
Profit for the year - 2 577,8 -
Other comprehensive - 77,5 -
income
Capital distribution (302,9) - -
Dividend paid - - -
Issue of ordinary share 10,0 - -
capital - share schemes
Treasury shares purchased (20,1) - -
Share options and - 26,3 -
appreciation rights
expensed (including
deferred incentive bonus)
Deferred bonus shares 0,2 (0,2) -
released
Equity portion of tax - 23,6 -
claims in respect of
share schemes
Hyperinflationary - 3,0 -
adjustment - Venezuela
Balance at 30 June 2011 4 776,2 8 288,0 162,0
Total comprehensive - 2 909,5 -
income
Profit for the period - 1 495,3 -
Other comprehensive - 1 414,2 -
income
Capital distribution (457,6) - -
Dividend paid - - -
Issue of ordinary share 22,0 - -
capital - share schemes
Treasury shares purchased (18,6) - -
Share options and - 13,3 -
appreciation rights
expensed (including
deferred incentive bonus)
Deferred bonus shares 0,2 (0,2) -
released
Hyperinflationary - 4,8 -
adjustment - Venezuela
Balance at 31 December 4 322,2 11 215,4 162,0
2011
Group statement of change in equity (continued)
Total
attributable to Non-
equity holders controlling
of the parent interests Total
Rm Rm Rm
Balance at 30 June 2010 10 831,0 55,2 10 886,2
Total comprehensive income 2 655,3 6,7 2 662,0
Profit for the year 2 577,8 11,0 2 588,8
Other comprehensive income 77,5 (4,3) 73,2
Capital distribution (302,9) - (302,9)
Dividend paid - (1,7) (1,7)
Issue of ordinary share 10,0 - 10,0
capital - share schemes
Treasury shares purchased (20,1) - (20,1)
Share options and 26,3 - 26,3
appreciation rights expensed
(including deferred incentive
bonus)
Deferred bonus shares - - -
released
Equity portion of tax claims 23,6 - 23,6
in respect of share schemes
Hyperinflationary adjustment 3,0 0,9 3,9
- Venezuela
Balance at 30 June 2011 13 226,2 61,1 13 287,3
Total comprehensive income 2 909,5 11,0 2 920,5
Profit for the period 1 495,3 8,2 1 503,5
Other comprehensive income 1 414,2 2,8 1 417,0
Capital distribution (457,6) - (457,6)
Dividend paid - (2,0) (2,0)
Issue of ordinary share 22,0 - 22,0
capital - share schemes
Treasury shares purchased (18,6) - (18,6)
Share options and 13,3 - 13,3
appreciation rights expensed
(including deferred incentive
bonus)
Deferred bonus shares - - -
released
Hyperinflationary adjustment 4,8 1,3 6,1
- Venezuela
Balance at 31 December 2011 15 699,6 71,4 15 771,0
Segmental analysis
Unaudited
six months ended
31 December 2011
%
Rm of total
REVENUE FROM CONTINUING OPERATIONS
South Africa 2 908,2 36
Sub-Saharan Africa 835,3 10
Asia Pacific 2 858,9 36
International 1 443,2 18
Total gross revenue 8 045,6 100
Adjustment* (540,7)
Total revenue 7 504,9
OPERATING PROFIT BEFORE AMORTISATION FROM
CONTINUING OPERATIONS
Adjusted for specific non-trading items
South Africa 840,6 39
Operating profit 798,8
Amortisation of intangible assets 33,4
Insurance compensation - capital component -
Restructuring costs 3,4
Impairment of assets 5,0
Sub-Saharan Africa 135,8 6
Operating profit 135,3
Amortisation of intangible assets 0,5
Profit on sale of non-current assets -
Asia Pacific 735,8 34
Operating profit 677,3
Amortisation of intangible assets 49,8
Profit on sale of non-current assets -
Transaction costs -
Restructuring costs 8,7
International 455,0 21
Operating profit 389,1
Amortisation of intangible assets 19,5
Transaction costs -
Impairment of assets 46,4
2 167,2 100
ENTITY WIDE DISCLOSURE - REVENUE FROM
CONTINUING OPERATIONS
Analysis of revenue in accordance with
customer geography
South Africa - pharmaceuticals 2 430,7 30
South Africa - consumer 477,5 6
Sub-Saharan Africa 835,3 10
Asia Pacific 2 892,4 36
Latin America 543,9 7
Rest of the world 865,8 11
Total gross revenue 8 045,6 100
Adjustment* (540,7)
Total revenue 7 504,9
*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.
Segmental analysis (continued)
Unaudited restated
six months ended
31 December 2010
% %
Rm of total change
REVENUE FROM CONTINUING OPERATIONS
South Africa 3 268,3 54 (11)
Sub-Saharan Africa 666,1 11 25
Asia Pacific 840,5 14 240
International 1 368,6 21 5
Total gross revenue 6 143,5 100 31
Adjustment* (398,9)
Total revenue 5 744,6 31
OPERATING PROFIT BEFORE AMORTISATION
FROM CONTINUING OPERATIONS
Adjusted for specific non-trading
items
South Africa 1 013,5 62 (17)
Operating profit 981,1 (19)
Amortisation of intangible assets 24,1
Insurance compensation - capital (4,6)
component
Restructuring costs -
Impairment of assets 12,9
Sub-Saharan Africa 110,8 7 23
Operating profit 118,6 14
Amortisation of intangible assets 1,4
Profit on sale of non-current assets (9,2)
Asia Pacific 133,1 8 453
Operating profit 121,6 457
Amortisation of intangible assets 11,5
Profit on sale of non-current assets -
Transaction costs -
Restructuring costs -
International 389,9 23 17
Operating profit 342,1 14
Amortisation of intangible assets 14,5
Transaction costs 18,8
Impairment of assets 14,5
1 647,3 100 32
ENTITY WIDE DISCLOSURE - REVENUE FROM
CONTINUING OPERATIONS
Analysis of revenue in accordance
with customer geography
South Africa - pharmaceuticals 2 681,7 44 (9)
South Africa - consumer 586,6 10 (19)
Sub-Saharan Africa 666,1 11 25
Asia Pacific 900,0 15 221
Latin America 442,5 7 23
Rest of the world 866,6 13 0
Total gross revenue 6 143,5 100 31
Adjustment* (398,9)
Total revenue 5 744,6 31
*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.
Segmental analysis (continued)
Restated
year ended
30 June 2011
%
Rm of total
REVENUE FROM CONTINUING OPERATIONS
South Africa 6 296,2 48
Sub-Saharan Africa 1 300,9 10
Asia Pacific 3 003,5 23
International 2 613,5 19
Total gross revenue 13 214,1 100
Adjustment* (830,9)
Total revenue 12 383,2
OPERATING PROFIT BEFORE AMORTISATION FROM
CONTINUING OPERATIONS
Adjusted for specific non-trading items
South Africa 1 934,1 55
Operating profit 1 857,4
Amortisation of intangible assets 51,1
Insurance compensation - capital component (14,3)
Restructuring costs 11,3
Impairment of assets 28,6
Sub-Saharan Africa 177,4 5
Operating profit 182,4
Amortisation of intangible assets 3,7
Profit on sale of non-current assets (8,7)
Asia Pacific 641,7 18
Operating profit 551,1
Amortisation of intangible assets 51,2
Profit on sale of non-current assets (6,4)
Transaction costs 24,5
Restructuring costs 21,3
International 735,4 22
Operating profit 558,1
Amortisation of intangible assets 37,0
Transaction costs 61,6
Impairment of assets 78,7
3 488,6 100
ENTITY WIDE DISCLOSURE - REVENUE FROM CONTINUING
OPERATIONS
Analysis of revenue in accordance with customer
geography
South Africa - pharmaceuticals 5 177,6 39
South Africa - consumer 1 118,5 9
Sub-Saharan Africa 1 300,9 10
Asia Pacific 3 090,9 23
Latin America 924,9 7
Rest of the world 1 601,3 12
Total gross revenue 13 214,1 100
Adjustment* (830,9)
Total revenue 12 383,2
*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.
Commentary
Group performance
Aspen increased revenue from continuing operations by 31% to R7,5 billion
and grew operating profit from continuing operations by 28% to R2,0 billion
in the six months to 31 December 2011. Operating profit before amortisation,
adjusted for specific non-trading items ("EBITA"), was up 32%. Normalised
headline earnings, being headline earnings from continuing operations
adjusted for transaction and restructure costs, were 22% higher at R1,4
billion. Diluted normalised headline earnings per share from continuing
operations increased 22% to 308,1 cents. Growth in earnings was affected by
higher funding costs on the debt raised to acquire the pharmaceutical
division of Sigma Pharmaceuticals Limited in Australia ("the Sigma
business") in January 2011.
In accordance with previously communicated expectations, the South African
business recorded negative growth and the Group`s strong showing for the
period was the result of excellent performances across the other territories
with Asia Pacific leading the way. The Asia Pacific region increased its
contribution to Group EBITA from 8% to 34% in the current period.
South African business
Revenue in the South African business was 11% down at R2 908 million with
the Pharmaceutical division declining 9% and the Consumer division declining
19%. Despite the headline results, the underlying performance of the
Pharmaceutical division was good. Annualised revenue growth measured by IMS
at 31 December 2011 indicated Aspen`s generic products increased by 16,2%.
The contributing factors to the performance reversal were largely one-off in
nature and, where appropriate, mitigating actions have been taken which will
benefit the business going forward. These factors have been well
communicated and are as follows:
- The Pharmaceutical division`s two biggest products, Seretide and Truvada,
both came under pressure from generic substitutes for the first time in the
second half of the 2011 financial year;
- Offtakes under the antiretroviral ("ARV") tender were significantly lower
than expected during 2011 as the South African government used donor
sponsored products rather than accessing the tender awarded;
- Aspen retained its leading stake in the recently awarded public health ARV
tender which commenced in January 2011. Aspen has both the lower volume
share of this tender and reduced pricing on the prior tender. Given the
supply of donor funded stock to date, these sales decreases have not been
mitigated by the anticipated increases from expanded coverage;
- The license with Pfizer for a range of infant milk products which had
contributed revenue of approximately R250 million per annum to the Consumer
division expired; and
- Production for most of July was lost due to a union led strike.
EBITA was 17% lower at R841 million. Profit margins came under pressure due
to reduced production volumes as a result of the poor ARV tender offtake,
the cost of production lost through the strike, inflationary increases in
wages and energy as well as the weaker Rand.
The revenue lost on the genericisation of Seretide has been recovered by
Aspen`s own generic, Foxair. The December 2011 launch of Tribuss, the first
generic triple combination ARV to market, provides the opportunity to regain
lost revenue incurred on Truvada`s genericisation.
The Consumer division performance was disappointing. It was hoped that
securing the major portion of the public healthcare tender for infant milk
formula would help offset the loss of the Pfizer license. However, volumes
ordered by the state since the tender award have been erratic and
sustainable demand has yet to be established.
Investment in capital projects at the production facilities is ongoing.
Major projects underway include adding tableting capacity in Port Elizabeth,
moving liquids manufacture to East London and introducing new technologies
in Cape Town.
Asia Pacific business
As anticipated, the Asia Pacific business was the leading growth driver for
the Group. Revenue of R2 859 million is more than three times greater than
the comparative period whilst EBITA has grown from R133 million to R736
million. The EBITA achieved in the past six months is 15% greater than that
achieved in the full 2011 financial year.
The acquisition of the Sigma business has clearly played a material role in
the exponential growth recorded by the region. The successful merger of the
Sigma business with the pre-existing Aspen business in Australia has been
fundamental to this achievement. The merged business is operating as a
single unified structure allowing the realisation of synergies and
efficiencies. Together with the delivery of the first procurement savings,
this has translated into a steady improvement in operating profit margins.
The strong market position of the Australian business has assisted it in
concluding a co-marketing agreement with Lilly for its market leading
psychotic disorder product, Zyprexa, and the generic of the molecule,
Olanzapine. The consolidation and rationalisation of the Australian
facilities has continued. The Tennyson site has been sold. The Croydon and
Noble Park sites are in the process of phased closure. Production is now
centred at the Dandenong facility and supported by the Baulkham Hills
facility.
Expansion of Aspen`s presence in South East Asia is receiving attention from
the regional management team. The newly established business in the
Philippines is in full operation with close to 100 sales representatives
deployed.
International business
The International business increased revenue by 5% to R1 443 million and
raised EBITA by 17% to R455 million. Latin America was a leading contributor
to the growth with sales to customers in that region rising 23% while
revenue in the Rest of the World territories remained unchanged on the prior
year. The widening of profit margins can be attributed to a favourable
position in the cycle of transitioning global brands to Aspen distribution
as well as the realisation of the first savings in the global brands cost of
goods reduction programme.
Sub-Saharan Africa
Gross revenue improved by 25% to R835 million and EBITA added 23% to R136
million in Sub-Saharan Africa. The primary driver in these positive results
was the GSK Aspen Healthcare for Africa collaboration which performed
strongly in Nigeria and French West Africa.
Funding
Borrowings, net of cash, were R6,592 billion at 31 December 2011, up from
R6,348 billion at the beginning of the period. Operating cash flows remained
strong. Cash generated from operating activities increased by 76% to R1,2
billion but increased investment activities, the capital distribution of
R458 million and an unfavourable exchange rate effect on foreign currency
denominated debt of R470 million combined to cause the increase. Gearing was
31% at the period end.
Interest paid, net of interest received, of R259 million was substantially
higher than R137 million in the comparative period due to higher debt levels
arising from the funding of the acquisition of the Sigma business.
Prospects
Although the South African business will continue to face the influence of
unfavourable events in the second half of the 2011 financial year, it is
anticipated that further progress will be made in overcoming these factors
in the second six months of this financial year. A sound platform is
provided by double digit growth expectations for generic and over-the-
counter products. Foxair continues to gain market share, diminishing the
losses experienced since the genericisation of Seretide. The first to market
status of Tribuss will place Aspen as a leader in the provision of triple
combination ARV therapies, helping to compensate for Truvada`s
genericisation. With the exhaustion of donor funds, the demand for ARVs
under the public sector tender has returned to expected levels. The greater
production volumes flowing from this will improve cost effectiveness of
production. Profit margins will be further assisted by the 2,14% increase in
the single exit price allowed by the Department of Health which becomes
effective in March 2012. In the Consumer division, a re-organisation of
management is aimed at achieving improved focus.
The demographic growth drivers present in South Africa are expected to
continue to underpin an increasing demand for medicines in the country. As
the market leader in both the private and public sectors, Aspen has a
pivotal role to play in meeting this demand. Aspen is well equipped to meet
this responsibility with a strong pipeline of new products to increase
choice and accessibility to medicines in South Africa. Government also
remains committed to supporting local manufacture which should benefit the
Group as the country`s leading pharmaceutical manufacturer.
In Asia Pacific, the Australian business will continue to focus on
delivering improved cost of goods through various projects already underway.
The Australian regulator`s price disclosure cuts come into effect from 1
April 2012 and will lead to price reductions on products which were
previously discounted by more than 10%. The effect of this legislation on
Aspen will be more than offset by realisation of cost of goods savings and
new product launches. The revenue Aspen will gain under the
Zyprexa/Olanzapine agreement with Lilly, which is at low margins, will
distort revenue growth and profit margins until the effect of this product`s
genericisation has stabilised. Further expansion of Aspen`s representation
in the region is planned with Thailand among the countries presently under
consideration.
The International business will continue to benefit from savings realised in
cost of goods on a phased basis over several years. There is ongoing
assessment and consideration of opportunities to support the growth momentum
in the International business with a particular focus on Latin America. An
assessment of market prospects for the introduction of Aspen`s infant milk
formula products in this region is underway.
The good performance in Sub-Saharan Africa will be supported by the
commencement of new product launches from the Aspen pipeline in the next six
months. The Group has reached agreement with the minority shareholder in
Shelys, Aspens East Africa business, to acquire their 40% shareholding for
USD 24,5 million. The transaction remains subject to exchange control
approval.
The results of the Group over the past six months have again proven Aspen`s
resilience. Earnings contribution is now spread across a number of
geographies, demonstrating the evolution of Aspen into a diverse
pharmaceutical group with growing businesses across the globe. Management
intends to continue to seek opportunities to widen the extent of the Group`s
territorial reach and to increase the depth of its product offering.
By order of the Board
N J Dlamini S B Saad
Chairman Group Chief Executive
Woodmead
7 March 2012
Basis of accounting
The consolidated interim financial results have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), IAS 34 - Interim
Financial Reporting, the Listings Requirements of the JSE Ltd and the South
African Companies Act (2008).
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 2011.
The statement of comprehensive income, statement of cash flows and the
segmental analysis for the six months ended 31 December 2010 were restated
to exclude the discontinued operations.
Operations classified as discontinued include the following:
- The South African personal care products disposed of during the previous
and current period;
- The products acquired from GSK for the territories of India, Pakistan,
Bangladesh, Sri-Lanka and Afghanistan; and
- The Campos facility and related non-core hospital products in Brazil.
The results of the Sigma business are included for the full six months with
no comparative in the prior period. The segmental analysis for the year
ended 30 June 2011 was restated to disclose the Asia Pacific region as a
separate segment due to the increased materiality of this region to the
Group.
DIRECTORS
N J Dlamini (Chairman)*, R C Andersen*, M G Attridge, M R Bagus*,
J F Buchanan*, S A Hussain*, C N Mortimer*, S B Saad, S V Zilwa*
*Non-executive director
COMPANY SECRETARY
R Verster
REGISTERED OFFICE
Building no 8, Healthcare Park, Woodlands Drive, Woodmead
TRANSFER SECRETARY
Computershare Investor Services (Pty) Ltd
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001.
(PO Box 1053, Johannesburg, 2000)
These interim financial results were prepared under the supervision of the
Deputy Group Chief Executive, M G Attridge, CA(SA), and approved by the
Board of directors.
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
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Date: 07/03/2012 13:00:02 Produced by the JSE SENS Department.
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