Johannesburg – JSE Limited listed Aspen Pharmacare Holdings Limited (APN), the sixth largest generic company in the world, has announced excellent results for the year ended 30 June 2015. These results benefitted from the contribution of acquisitions concluded during the prior year.
GROUP PERFORMANCE
- Revenue increased by 22% to R36.1 billion.
- Operating profit rose by 14% to R8.4 billion.
- Normalised headline earnings, being headline earnings adjusted for specific non-trading items, increased by 15% to R5.6 billion.
- Normalised headline earnings per share improved by 15% to 1 219 cents.
- Borrowings, net of cash, increased R0.2 billion to R30.0 billion. R2.5 billion of this arose from unfavourable relative foreign exchange rate movements.
- Group operating cash flows remained strong and cash generated from operating activities increased by 26% to R4.8 billion.
- A capital distribution of 216 cents per ordinary share was declared.
Stephen Saad, Aspen Group Chief Executive said, “The excellent results were led by the International business which remained the largest contributor to the Group, delivering 49% of gross revenue. Sales in Asia jumped 39% to R1.3 billion due to a combination of organic growth and recent acquisitions led by strong advances in Japan. The results were achieved despite an unfavourable exchange rate environment affecting the Group’s principal trading currencies, particularly relative to the US Dollar, which resulted in a devaluing of revenue flows and an increase in cost of goods.
INTERNATIONAL BUSINESS
In the International business, revenue climbed 46% to R18.6 billion and operating profit before amortisation, adjusted for specific non-trading items (“EBITA”), advanced 42% to R5.2 billion. The International business performance was assisted by the inclusion of the significant transactions completed during the prior year and contributed more than half of Group EBITA. The disposal of the rights to commercialise the fondaparinux products (being Arixtra and the authorised generic thereof) in the United States to Mylan, for a consideration of USD 300 million, became effective during the first half of the 2015 financial year with the consequential loss of contribution.
Revenue from customers in Europe and the Commonwealth of Independent States (“Europe CIS”) increased 45% to R10.5 billion. Finished dose form pharmaceutical sales to healthcare providers comprised R6.9 billion of the total sales. The acquisition in the second half of the year of Mono-Embolex, an anti-coagulant with almost all of its sales in Germany, further strengthened Aspen’s offering in this therapeutic area. The largest part of the balance of the sales in the region was from active pharmaceutical ingredient (“API”) sales. Relative weakness of the Europe CIS currencies to the Rand reduced reported revenue from this region.
Sales to customers in Latin America (excluding Venezuela) grew 44% to R3.4 billion, supported by the infant nutritionals acquisition in the prior year. Performance was constrained due to poor supply by contract manufacturers of certain key pharmaceutical products. In Venezuela, sales to customers were up 143% to R2.7 billion. The results in Venezuela have been influenced by the application of hyper inflationary accounting principles and a change in the rate of exchange applied in the translation of local currency results from the prior year. The net effect of these entries on EBITA is not significant.
Sales to customers in the Rest of the World were down 10% to R1.6 billion, influenced by the disposal of the fondaparinux products for the United States to Mylan.
Capital expenditure projects remain underway in the Netherlands at Aspen Oss (Netherlands) and in France at Aspen Notre Dame de Bondeville (“Aspen NDB”). At Aspen Oss, the projects are focused on the repurposing of facilities and at Aspen NDB, the addition of a new pre-filled syringe filling line is well advanced.
SOUTH AFRICAN BUSINESS
Revenue in the South African business increased by 16% to R8.6 billion. Private sector pharmaceutical sales improved 12% through a combination of organic growth and new product launches. Public sector sales grew 14% led by demand under the antiretroviral (“ARV”) tender. The consumer division raised revenue by 23% due to a strong performance from infant nutritionals, with Infacare making impressive gains in its share of this category. Revenue from manufacturing for third parties also showed a good increase.
The increase in the ARV tender revenue coupled with the ongoing weakening of the Rand relative to the US Dollar and high wage and energy cost inflation has placed pressure on EBITA margins.
Expansion projects continued at the Port Elizabeth finished dosage form manufacturing site and at the API manufacturing site in Cape Town (“Fine Chemicals”). In Port Elizabeth, the building of the high containment facility is nearing completion and manufacturing trials in the hormonal suite have commenced. The packing facility upgrade is complete. Construction of the additional specialist sterile manufacturing facility has commenced. At Fine Chemicals, production is underway in certain of the newly constructed suites, while other parts of this expansion and upgrade project remain in progress.
ASIA PACIFIC BUSINESS
Revenue in the Asia Pacific business was 5% lower at R8.1 billion and EBITA declined by 10% to R1.7 billion. In Australasia sales to customers were 8% lower at R7.2 billion. The key focus areas of branded pharmaceuticals and infant nutritionals both showed positive growth. This was, however, reversed by the effect of disposals as well as the termination of licenses and contract manufacturing arrangements in the second half of the prior financial year. These were undertaken in accordance with the strategy to achieve greater focus in this business. Cost of goods in Australia increased due to the weakening of the Australian Dollar against the US Dollar in which many input costs are denominated.
Sales to customers in Asia accelerated by 39% to R1.3 billion through a combination of organic growth and recent acquisitions, led by strong advances in Japan.
SUB-SAHARAN BUSINESS
In Sub-Saharan Africa, revenue was 1% higher at R2.8 billion. A disappointing performance from the GSK Aspen Healthcare for Africa Collaboration, which was hampered by supply problems, limited performance in the region. Weakening in-market currencies contributed to narrowing margins and a reduction of 6% in EBITA to R313 million.
PROSPECTS
Strategically, the Group is aiming for sharper focus in key therapeutic areas with the objective of delivering improved return on investment. Consequently, a broad range of non-core products distributed in Australia and in South Africa have been divested in transactions which close in the first quarter of the new financial year. The revenue from these divested products in 2015 was R1.7 billion.
The global pharmaceutical industry continues to adjust to changing demands in patient needs, heightened regulation and evolving economic circumstances. This has been marked by significant merger and acquisition activity as companies seek to strengthen and refocus their strategic positions. Aspen remains alert to the potential for value-creating opportunities aligned to the Group’s development plans. The Group has a proven capability to successfully execute complex multi-territory transactions which makes it a strong candidate for such opportunities. The Group has been seeking opportunities to expand its infant nutritionals business and has recently been engaged in negotiations to explore such an opportunity. Although these negotiations have not progressed to a satisfactory conclusion, Aspen will continue to investigate prospects to build its infant nutritionals franchise.
Currency volatility has weighed on the results of the past year. The Group remains exposed to the strength of the US Dollar against its primary trading currencies. Indications are that this will again be an influential factor in the overall results achieved in the year ahead. Developments in Venezuela will be carefully monitored due to the risks presented by the economic conditions in that country.
Considerable activity has been undertaken during the past year in the continuation of activities to harness synergies arising from recently completed transactions. Due to the highly regulated nature of the pharmaceutical industry, the execution of these plans has long lead times. Meaningful progress has been achieved in this regard during the year. Areas of focus include lowering the cost of goods for the anti-coagulant portfolio, improving margins in the infant nutritionals business, bringing new manufacturing capacity and technologies on-line, building the third party API business and leveraging acquired intellectual property. It is expected that Aspen will experience the initial commercial benefits from these synergies towards the end of the 2016 financial year. The value created by these initiatives is expected to grow progressively thereafter and Aspen is targeting an additional R2.5 billion in EBITA from these synergies by the 2019 financial year.*
* This sentence has not been reviewed or reported on by Aspen’s external auditors.
Issued by: Shauneen Beukes, Shauneen Beukes Communications
Tel: +27 (012) 661-8467 : Cell: +27 82 389 8900
On Behalf Of: Stephen Saad, Aspen Group Chief Executive
Tel: +27 (031) 580-8603
Gus Attridge, Aspen Deputy Group Chief Executive
Tel: +27 (031) 580-8605
Nondyebo Mqulwana, Aspen Investor Relations Manager
Tel: +27 (031) 580-8631 : Cell: +27 72 830 0600
About Aspen:
Aspen has a proud heritage dating back more than 160 years. The Group is committed to sustaining life and promoting healthcare through increasing access to its high quality, effective, affordable medicines and products.
South African-based JSE Limited listed Aspen continues to increase the number of lives benefiting from its products, reaching more than 150 countries across the world. The extensive basket of Aspen products provides treatment for a broad spectrum of acute and chronic conditions experienced throughout all stages of life.
Aspen has an extensive global presence and is represented in 47 countries including South Africa, Australia, Hong Kong, Malaysia, Philippines, Taiwan, Japan, Kenya, Nigeria, Tanzania, Uganda, Ireland, United Arab Emirates, Germany, France, the Netherlands, Mauritius, Brazil, Mexico, Venezuela and the United States. Acquisitions announced in 2013 further extended the Group’s emerging market presence to the Commonwealth of Independent States (“CIS”), comprising Russia and the former Soviet Republics as well as to Central and Eastern Europe. The Group has 26 manufacturing facilities at 18 sites on 6 continents and approximately 10 000 employees.
For more information about the Aspen Group, click on www.aspenpharma.com
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