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ASPEN HEALTHCARE HOLDINGS LIMITED
("ASPEN")
(FORMERLY MEDHOLD LIMITED)
(REGISTRATION NUMBER 85/02935/06)
HIGHLIGHTS
- ACQUISITION OF SAD PHARMACEUTICAL BUSINESSES COMPLETED
- INTEGRATION OF BUSINESSES ON TRACK
- ATTRIBUTABLE EARNINGS OF R55,0 MILLION
- ANNUALISED HEADLINE EARNINGS FROM
CONTINUING OPERATIONS - UP 138%
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 1999
COMMENTARY
ASPEN IS AN ENTREPRENEURIAL SOUTH AFRICAN PHARMACEUTICAL BUSINESS, MARKETING,
MANUFACTURING AND DISTRIBUTING A DIVERSIFIED PRODUCT RANGE TO THE PUBLIC AND
PRIVATE SECTORS. THE YEAR WAS MARKED BY A NUMBER OF SIGNIFICANT MILESTONES,
WHICH TRANSFORMED ASPEN INTO THE SECOND LARGEST PLAYER IN THE LOCAL
PHARMACEUTICAL SECTOR. THESE INCLUDED THE REVERSE LISTING INTO MEDHOLD ON 1
JULY 1998, THE CHANGE OF THE COMPANY'S NAME TO ASPEN HEALTHCARE HOLDINGS
LIMITED IN FEBRUARY 1999, AND THE ACQUISITION OF THE SA DRUGGISTS
PHARMACEUTICAL BUSINESSES, INCLUDING PHARMACARE, ON 1 MARCH 1999.
FINANCIAL
THE NATURE AND SIZE OF THE BUSINESS HAS CHANGED TO THE EXTENT THAT RESULTS OF
ASPEN TO 30 JUNE 1999 ARE NOT COMPARABLE WITH THE PREVIOUS FOURTEEN MONTH
PERIOD. IN LINE WITH THE GROUP'S ACCOUNTING POLICY, INTELLECTUAL PROPERTY
AMOUNTING TO R843,0 MILLION ACQUIRED DURING THE YEAR HAS BEEN CHARGED AGAINST
SHARE PREMIUM AND OPENING DISTRIBUTABLE RESERVES. THE TAX EXPENSE IN THE INCOME
STATEMENT INCLUDES A CHARGE OF R24,1 MILLION IN RESPECT OF THE PROPORTIONAL
REVERSAL OF THE DEFERRED TAX ASSET CREATED AS A RESULT OF THE GROUP'S
ACCOUNTING POLICY FOR INTELLECTUAL PROPERTY. IT IS WORTHWHILE NOTING THAT THE
ASPEN COMPANIES, PRIOR TO THE ACQUISITION OF THE SAD BUSINESSES, MADE AN
OPERATING PROFIT OF R37,4 MILLION OFF A TURNOVER OF R141,5 MILLION. THIS WAS IN
LINE WITH PROFIT PROJECTIONS FOR THESE BUSINESSES. OPERATING CASH FLOWS WERE
STRONG. MANAGEMENT IS TAKING STEPS TO REDUCE THE DEBT ARISING FROM THE
FINANCING OF THE SA DRUGGISTS DEAL, WHICH WILL STRENGTHEN THE BALANCE SHEET IN
FUTURE.
THE GROUP HAS CREATED A GENERAL PROVISION OF R50,0 MILLION TO COVER ANY
UNFORESEEN AND/OR UNQUANTIFIABLE RISKS ASSOCIATED WITH THE ACQUISITION OF THE
SA DRUGGISTS PHARMACEUTICAL BUSINESSES AND SUBSEQUENT DISPOSAL OF CERTAIN
COMPONENTS THEREOF. THIS PROVISION HAS BEEN CREATED AS A PRE-ACQUISITION
ADJUSTMENT ON CONSOLIDATION, THE EFFECT OF WHICH RESULTS IN AN INCREASE IN
GOODWILL AND PROVISIONS OF R50,0 MILLION. THE GROUP HAS BEEN UNABLE TO
SUBSTANTIATE TO ITS AUDITORS, PRICEWATERHOUSECOOPERS INC., THE NECESSITY FOR
AND THE VALUE OF THIS PROVISION. ACCORDINGLY, THE REPORT OF THE AUDITORS TO
MEMBERS WILL BE QUALIFIED AS FAR AS THE EFFECT OF THIS PROVISION ON THE GROUP'S
ANNUAL FINANCIAL STATEMENTS IS CONCERNED.
OPERATIONS
DESPITE A LOWER THAN NORMAL INCIDENCE OF WINTER INFLUENZA, THE ASPEN
BUSINESSES, PRIOR TO THE ACQUISITION OF THE SAD PHARMACEUTICAL BUSINESSES, HAVE
PERFORMED IN LINE WITH EXPECTATIONS.
PHARMACARE, ACQUIRED IN MARCH 1999, PRESENTED MANAGEMENT WITH A UNIQUE
CHALLENGE IN UNLOCKING THE UNDOUBTED VALUE OF THE EXISTING BRANDS, IN CHANGING
THE CULTURE FROM MANUFACTURING TO A MARKETING FOCUS AND IN REDIRECTING NEW
BUSINESS DEVELOPMENT. AS SOON AS EFFECTIVE CONTROL HAD BEEN GAINED, NEW
MANAGEMENT WAS APPOINTED. THE FOCUS OF THE RESEARCH EFFORT WAS CHANGED IN ORDER
TO ASSIST PHARMACARE TO CAPITALISE ON ITS CORE STRENGTHS OF GENERIC PRODUCT
DEVELOPMENT. THE MARKET REACH OF THE SALES TEAMS HAS BEEN BOLSTERED AND A
PROGRAMME OF RE-SKILLING IS IN THE PROCESS OF IMPLEMENTATION.
A SIGNIFICANT AGREEMENT WAS CONCLUDED IN JUNE 1999 WITH APOTEX, CANADA'S
LARGEST MANUFACTURER OF OFF-PATENT PHARMACEUTICALS. IN TERMS OF THIS
TRANSACTION ASPEN HAS ACQUIRED THE EXISTING AND PENDING GENERIC REGISTRATIONS
OF APOTEX IN SOUTH AFRICA AND ACCESS TO THE EXTENSIVE APOTEX DEVELOPMENT
PIPELINE OF NEW GENERIC MEDICINES. THIS DEAL HAS REINFORCED ASPEN'S POSITION AS
THE LEADING PROVIDER OF GENERIC PHARMACEUTICALS IN SOUTH AFRICA.
A STRATEGY IS CURRENTLY BEING IMPLEMENTED TO ADDRESS THE SERIOUS
UNDERPERFORMANCE OF THE OFFSHORE BUSINESSES ACQUIRED FROM SA DRUGGISTS. THE
BUSINESS RETURNED A COMBINED OPERATING LOSS OF R1,0 MILLION FOR THE FOUR MONTHS
TO 30 JUNE 1999. OPTIONS INCLUDE DISPOSAL, DOWNSIZING AND CLOSURE. IT IS
EXPECTED THAT IMPLEMENTATION OF THIS STRATEGY WILL BE COMPLETED BY MARCH 2000.
PROSPECTS
A PRIORITY OF MANAGEMENT IS TO REDUCE DEBT. THIS WILL BE ACHIEVED THROUGH THE
REALISATION OF VALUE FROM NON-CORE ASSETS IN THE SHORT TERM, THE RESTRUCTURING
OF DEBT, AND THROUGH INCREASED POSITIVE CASH FLOWS FROM OPERATIONS.
THE SOUTH AFRICAN AND AFRICAN HEALTH CARE MARKETS OFFER EXCELLENT OPPORTUNITIES
FOR COMPANIES SUCH AS ASPEN WITH STRONG BRANDS AND AN ENTREPRENEURIAL, TRADING
CULTURE. A NEW PRODUCT PIPELINE HAS BEEN PUT IN PLACE TO COMPLEMENT IMPROVED
PROMOTION OF EXISTING BRANDS. ASPEN EXPECTS TO IMPROVE MARGINS THROUGH BETTER
OVERALL MANAGEMENT OF PROCUREMENT AND PRODUCTION.
IT IS ANTICIPATED THAT PERFORMANCE OVER THE NEXT TWELVE MONTHS WILL BE STRONGER
IN THE SECOND HALF OF THE FINANCIAL YEAR. THIS IS AS A CONSEQUENCE OF A
SEASONAL WEIGHTING TOWARDS THIS PERIOD, THE EFFECT OF DEBT REDUCING OVER THE
COURSE OF THE YEAR AND INCREASING BENEFITS BEING FELT FROM THE POST-ACQUISITION
STRATEGIES.
DIVIDEND
NO ORDINARY DIVIDEND HAS BEEN DECLARED.
YEAR 2000 COMPLIANCE
ASPEN IS SATISFIED THAT ALL REASONABLE STEPS HAVE BEEN UNDERTAKEN TO ENSURE THE
GROUP IS Y2K COMPLIANT.
BY ORDER OF THE BOARD
A J AARON S B SAAD
(CHAIRMAN) (JOINT CHIEF EXECUTIVE)
H SHAPIRO
(COMPANY SECRETARY)
DURBAN
27 SEPTEMBER 1999
TRANSFER SECRETARIES:
MERCANTILE REGISTRARS LIMITED
(REGISTRATION NUMBER 87/03382/06)
10TH FLOOR, 11 DIAGONAL STREET, JOHANNESBURG 2000
(PO BOX 1053, JOHANNESBURG, 2000)
GROUP INCOME STATEMENT
FOURTEEN
YEAR MONTHS
ENDED ENDED
30 JUNE 30 JUNE
1999 1998
R'000 R'000
TURNOVER 522 406 118 602
OPERATING INCOME 83 853 (3 723)
NET INTEREST PAID (14 365) (3 165)
LOSS ON DISPOSAL OF SUBSIDIARIES - (12 106)
NET INCOME BEFORE TAXATION 69 488 (18 994)
TAXATION (11 514) (512)
EARNINGS AFTER TAXATION 57 974 (19 506)
DIVIDEND PAID TO PREFERENCE
SHAREHOLDERS IN SUBSIDIARY
(1998: OUTSIDE SHAREHOLDERS' INTEREST) (2 978) (1 866)
EARNINGS ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 54 996 (21 372)
WEIGHTED AVERAGE NUMBER
OF SHARES IN ISSUE (000'S) 285 778 61 343
EARNINGS PER SHARE (CENTS) 19,2 (34,8)
HEADLINE EARNINGS PER SHARE FROM
CONTINUING OPERATIONS (CENTS) 19,5 9,6
RECONCILIATION OF HEADLINE EARNINGS
EARNINGS ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 54 996 (21 372)
DISCONTINUED OPERATIONS 1 080 14 920
LOSS ON DISPOSAL OF SUBSIDIARIES - 12 106
(PROFIT)/LOSS ON SALE OF FIXED ASSETS (396) 255
HEADLINE EARNINGS FROM
CONTINUING OPERATIONS 55 680 5 909
GROUP CASH FLOW STATEMENT
FOURTEEN
YEAR MONTHS
ENDED ENDED
30 JUNE 30 JUNE
1999 1998
R'000 R'000
CASH OPERATING PROFIT 96 435 (454)
MOVEMENT IN WORKING CAPITAL 56 356 (1 336)
CASH GENERATED FROM OPERATIONS 152 791 (1 790)
NET INTEREST PAID (14 365) (3 165)
TAXATION PAID (10 808) (78)
CASH AVAILABLE FROM OPERATIONS 127 618 (5 033)
DIVIDENDS PAID (17 478) (2 248)
NET CASH INFLOW FROM OPERATING ACTIVITIES 110 140 (7 281)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (1 729 670) 35 821
NET CASH INFLOW FROM FINANCING ACTIVITIES 1 569 324 (4 618)
MOVEMENT IN NET CASH RESOURCES (50 206) 23 922
NET CASH RESOURCES AT BEGINNING OF THE YEAR 3 852 (20 070)
NET CASH RESOURCES OF SUBSIDIARIES AND
BUSINESSES ACQUIRED AND DISPOSED 162 357 -
NET CASH RESOURCES AT END OF THE YEAR 116 003 3 852
GROUP BALANCE SHEET
30 JUNE 30 JUNE
1999 1998
R'000 R'000
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 164 908 20 836
OUTSIDE PREFERENCE SHAREHOLDERS' INTEREST 20 000 20 000
TOTAL SHAREHOLDERS' FUNDS 184 908 40 836
LONG-TERM INTEREST BEARING DEBT 350 081 124
DEFERRED TAXATION (212 587) -
322 402 40 960
EMPLOYMENT OF CAPITAL
TANGIBLE FIXED ASSETS 265 440 959
GOODWILL (1998: PATENTS AND TRADEMARKS) 397 181 217
LONG-TERM INTEREST BEARING LOAN 20 000 20 000
CURRENT ASSETS 640 241 35 804
INVENTORIES 238 089 8 954
ACCOUNTS RECEIVABLE 286 149 20 070
BANK BALANCES AND CASH 116 003 6 780
TOTAL ASSETS 1 322 862 56 980
CURRENT LIABILITIES 1 000 460 16 020
ACCOUNTS PAYABLE AND PROVISIONS 484 512 11 300
SHORT-TERM INTEREST BEARING DEBT 515 948 4 720
322 402 40 960
NUMBER OF SHARES IN ISSUE (000'S) 367 312 61 343
SUPPLEMENTARY INFORMATION
FOURTEEN
YEAR MONTHS
ENDED ENDED
30 JUNE 30 JUNE
1999 1998
R'000 R'000
CAPITAL EXPENDITURE:
INCURRED 41 344 3 193
CONTRACTED 8 700 -
AUTHORISED NOT CONTRACTED 15 412 -
DEPRECIATION 13 147 3 014
INTEREST
INTEREST RECEIVED 15 244 1 728
INTEREST PAID (29 609) (4 893)
NET INTEREST PAID (14 365) (3 165)
OPERATING LEASE COMMITMENTS: PROPERTY
- PAYABLE IN ONE YEAR 8 613 -
- PAYABLE THEREAFTER 42 965 -
INTEREST BEARING LIABILITIES
LONG-TERM 350 081 124
SHORT-TERM 515 948 4 720
866 029 4 844
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