Wrap Text
ASPEN PHARMACARE HOLDINGS LIMITED
("ASPEN PHARMACARE")
(FORMERLY ASPEN HEALTHCARE HOLDINGS LIMITED)
(REGISTRATION NUMBER 1985/002935/06)
HIGHLIGHTS
OPERATING PROFIT UP BY 194% TO R250,8 MILLION
- HEADLINE EARNINGS PER SHARE UP BY 73% TO 33,8 CENTS
- NET DEBT REDUCED TO R262,7 MILLION
COMMENTARY
FINANCIAL
THE YEAR ENDED 30 JUNE 2000 REPRESENTS THE FIRST FULL YEAR OF TRADE FOR ASPEN
PHARMACARE SINCE THE ACQUISITION OF THE SA DRUGGISTS PHARMACEUTICAL BUSINESSES
("THE SAD BUSINESSES") ON 1 MARCH 1999. RESULTS ACHIEVED FOR THIS YEAR ARE AT
THE UPPER END OF MANAGEMENT'S TARGETS AND REFLECT THE FIRST TANGIBLE BENEFITS
OF POST-ACQUISITION STRATEGIES. ALL PERFORMANCE MEASURES SHOW SUBSTANTIAL
IMPROVEMENT ON THE PRIOR YEAR. STEPS TAKEN TO IMPROVE OPERATING EFFICIENCIES
ARE EVIDENCED IN THE IMPROVEMENT OF THE PERCENTAGE OF OPERATING PROFIT TO
REVENUE FROM 16% TO 21%. HEADLINE EARNINGS PER SHARE HAVE INCREASED BY 73% TO
33,8 CENTS.
THERE HAS BEEN A SUBSTANTIAL REDUCTION IN BORROWINGS DURING THE COURSE OF THE
YEAR. THIS HAS BEEN ACHIEVED THROUGH THE PLANNED DISPOSAL OF NON-CORE ASSETS
AND THE GENERATION OF STRONG OPERATING CASH FLOWS. INTEREST BEARING DEBT, NET
OF CASH, HAS BEEN REDUCED TO R262,7 MILLION. INTEREST PAYMENTS AT THIS LEVEL OF
DEBT ARE COVERED MORE THAN SEVEN TIMES BY THE OPERATING PROFIT FOR THE PAST
YEAR. THE PRINCIPAL DEBT FACILITY HAS BEEN RE-NEGOTIATED AND IS REPAYABLE OVER
THE PERIOD TO 31 DECEMBER 2003. MANAGEMENT IS SATISFIED WITH THE CURRENT LEVEL
OF GEARING AND BELIEVES THAT FUTURE OPERATING CASH FLOWS SHOULD BE RE-INVESTED
IN GROWING THE GROUP WHERE OPPORTUNITIES WHICH REPRESENT VALUE CAN BE
IDENTIFIED.
THE REDUCTION IN INTANGIBLE ASSETS FROM R397,2 MILLION TO R80 MILLION ARISES
PRIMARILY AS A CONSEQUENCE OF GOODWILL, ACQUIRED AS PART OF THE INITIAL
ACQUISITION OF THE SAD BUSINESSES, BEING DISPOSED OF DURING THE YEAR UNDER
REVIEW.
DOMESTIC OPERATIONS
THE PAST YEAR HAS BEEN COMMITTED TO THE INTEGRATION OF THE SAD BUSINESSES INTO
ASPEN PHARMACARE AND THE IMPLEMENTATION OF THE STRATEGIES OF MANAGEMENT.
BENEFITS OF SUCH STRATEGIES ARE EXPECTED TO BE ON-GOING. SIGNIFICANT
ACHIEVEMENTS OVER THIS PERIOD HAVE BEEN:
- IMPLEMENTATION OF CONSISTENT GROUP-WIDE TRADING POLICIES
- STANDARDISATION AND INTEGRATION OF IT SYSTEMS
- RATIONALISATION AND REFOCUSING OF SALES FORCES
- MERGING OF THE ASPEN AND PHARMACARE OPERATING COMPANIES
- IMPLEMENTATION OF THE CLOSURE OF THE CLAYVILLE PRODUCTION FACILITY
- RATIONALISATION OF MANUFACTURING PROCESSES AT THE PORT ELIZABETH AND EAST
LONDON FACILITIES
TRADING PERFORMANCE WAS SATISFACTORY ACROSS ALL SEGMENTS OF THE BUSINESS. THE
GROUP'S DOMINANT POSITION IN THE GENERICS SECTOR AND STATE TENDER BUSINESS WAS
RETAINED. PARTICULARLY STRONG PERFORMANCE WAS ACHIEVED IN THE OTC SECTOR WHERE
THE LEANOR, CELLULEEN AND QUIT BRANDS HAVE TAKEN LEADERSHIP POSITIONS IN THEIR
RESPECTIVE PRODUCT CATEGORIES.
ASPEN PHARMACARE'S RELATIONSHIP WITH PROVIDER GROUPS AND MULTI-NATIONAL
PHARMACEUTICAL COMPANIES CONTINUED TO HAVE A POSITIVE INFLUENCE ON THE GROUP.
ASPEN PHARMACARE HAS CONCLUDED A CO-MARKETING AGREEMENT WITH ASTRAZENECA,
PRODUCT ACQUISITIONS FROM ELI LILLY AND A LICENSE AGREEMENT WITH STIEFEL DURING
THE COURSE OF THE YEAR.
KINESIS WITH EFFECT FROM THE BEGINNING OF JUNE 2000, ASPEN PHARMACARE CHANGED
IT PRIMARY DISTRIBUTION CHANNEL TO THAT OF KINESIS LOGISTICS (PTY) LIMITED
("KINESIS"). KINESIS IS A DIRECT DISTRIBUTOR WHICH IS CO-OWNED EQUALLY BY ASPEN
PHARMACARE AND FOUR MULTI-NATIONAL PHARMACEUTICAL COMPANIES. ASPEN PHARMACARE
ACQUIRED THE OBLIGATION TO PARTICIPATE IN KINESIS AS A RESULT OF THE PURCHASE
OF THE SAD BUSINESSES. FOLLOWING A RULING BY THE COMPETITION TRIBUNAL, THE
CO-OWNERS OF KINESIS HAVE BEEN ORDERED TO SUPPLY THEIR PRODUCTS TO WHOLESALERS
ON SIMILAR TERMS TO THOSE WHICH EXISTED PRIOR TO KINESIS COMMENCING TRADE. THE
RULING OF THE COMPETITION TRIBUNAL IS CURRENTLY UNDER APPEAL.
INTERNATIONAL OPERATIONS
IN LINE WITH ITS STATED OBJECTIVE TO DISPOSE OF NON-CORE OPERATIONS, ASPEN
PHARMACARE HAS DIVESTED OF ITS INTERNATIONAL BUSINESSES DURING THE COURSE OF
THE YEAR. THESE BUSINESSES, ACQUIRED AS PART OF THE SAD TRANSACTION, WERE NOT
INTEGRATED WITH THE DOMESTIC OPERATIONS AND DID NOT PRESENT REALISTIC
VALUE-ADDING PROPOSITIONS. THE DISPOSAL OF THESE BUSINESSES IS DISCUSSED
FURTHER UNDER DISCONTINUED OPERATIONS BELOW.
MANAGEMENT IS OF THE OPINION THAT THE DOMESTIC INTELLECTUAL CAPITAL ASSETS OF
THE GROUP PROVIDE A SIGNIFICANT OPPORTUNITY FOR EXPANDING OFFSHORE.
OPPORTUNITIES ARE BEING INVESTIGATED ON THE PRINCIPLE THAT ASPEN PHARMACARE
WILL ESTABLISH A PLATFORM COMPANY IN AN APPROPRIATE FOREIGN TERRITORY WITH A
VIEW TO USING THE GROUP'S INTELLECTUAL CAPITAL AS A BASIS FOR EXPANSION. SUCH
INVESTMENTS WILL ENDEAVOUR TO EXPAND ON EXISTING RELATIONSHIPS WITH
MULTI-NATIONAL PHARMACEUTICAL COMPANIES AND TO HARNESS THE SYNERGIES
REPRESENTED BY JOINT RESEARCH, DEVELOPMENT, PROCUREMENT AND MANUFACTURING
INITIATIVES.
DISCONTINUED OPERATIONS
THE FOLLOWING OPERATIONS WERE DISCONTINUED DURING THE COURSE OF THE YEAR:
- LAGAP, THE UK GENERICS OPERATOR, WAS DISPOSED OF IN OCTOBER 1999 FOR R310
MILLION CASH.
- THE INFANT NUTRITIONAL BUSINESS WAS DISCONTINUED IN TWO TRANSACTIONS. THE
LICENSES FOR THE INFANT NUTRITIONAL PRODUCTS WERE RETURNED TO AMERICAN HOME
PRODUCTS IN A TRANSACTION WHICH ALSO SECURED THE EXTENSION OF LICENSES IN OTHER
PRODUCT CATEGORIES. THE INFANT NUTRITIONAL ASSETS AND TRADEMARKS WERE
SEPARATELY DISPOSED OF TO NUTRICIA. THE COMBINED PROCEEDS OF THESE TRANSACTIONS
WERE R75 MILLION.
- IN DECEMBER 1999, THE PHASED CLOSURE OF THE CLAYVILLE MANUFACTURING FACILITY
BEGAN. COMPLETION OF THE CLOSURE PROCESS IS ANTICIPATED BY OCTOBER 2000. COSTS
OF THE CLOSURE AMOUNTED TO APPROXIMATELY R14 MILLION. SAVINGS GENERATED FROM
THE RATIONALISATION OF THE MANUFACTURING SITES ARE EXPECTED TO COVER THESE
COSTS WITHIN THE FIRST YEAR.
- CAPRICORN, THE USA PRODUCTION FACILITY WHICH HAD NOT BEEN COMPLETED AT THE
TIME OF ITS SALE, WAS DISPOSED OF IN APRIL 2000, TOGETHER WITH ONEROUS
CONTRACTUAL COMMITMENTS, FOR A NOMINAL VALUE.
- PHARMATEC, THE SPECIALIST TECHNOLOGY MANUFACTURING BUSINESS LOCATED IN ITALY
WAS DISPOSED OF IN JUNE 2000 FOR R77 MILLION, WITH A MAXIMUM OF A FURTHER R6,5
MILLION PAYABLE ON THE SATISFACTION OF VARIOUS WARRANTIES. PROSPECTS
ASPEN PHARMACARE IS WELL PLACED FOR FURTHER GROWTH. IT'S LEADERSHIP POSITION IN
SOUTH AFRICA'S GENERICS MARKET ENABLES IT TO TAKE ADVANTAGE OF INITIATIVES TO
IMPROVE THE AFFORDABILITY OF MEDICINES. PRESSURE ON COSTS OF MEDICINES IS BEING
EXERTED BY BOTH GOVERNMENT AND HEALTH CARE FUNDERS. ANY MOVE TOWARDS REGULATED
GENERIC SUBSTITUTION WOULD CLEARLY BE MOST BENEFICIAL TO ASPEN PHARMACARE.
ASPEN PHARMACARE HAS ESTABLISHED A STRONG PIPELINE OF NEW PRODUCTS. IN EXCESS
OF TWENTY-FIVE NEW PRODUCTS ARE PLANNED FOR LAUNCH DURING THE NEXT YEAR. TEN OF
THESE PRODUCTS ARE NEW GENERICS COMING TO THE MARKET, WHICH INCLUDE THREE OF
THE INDUSTRY'S TOP EIGHT PHARMACEUTICAL MOLECULES BY SALES VALUE. WITH PRODUCTS
CURRENTLY GENERATING R900 MILLION OF TURNOVER COMING OFF PATENT IN SOUTH AFRICA
IN THE NEXT FIVE YEARS, EXCELLENT OPPORTUNITIES EXIST FOR GENERIC PRODUCERS.
ASPEN PHARMACARE'S GROWTH IN THE OTC MARKET IS EXPECTED TO CONTINUE AND WILL BE
SUPPORTED BY FIFTEEN PRODUCT LAUNCHES SCHEDULED DURING THE NEXT YEAR.
THE BENEFITS OF THE RATIONALISED MANUFACTURING PROCESS WILL BE REFLECTED IN
IMPROVED OPERATING MARGINS. ASPEN PHARMACARE WILL CONTINUE TO EXAMINE
OPPORTUNITIES FOR INCREASING PRODUCTION EFFICIENCIES, INCLUDING INVESTIGATING
THE FEASIBILITY OF MANUFACTURING FOR FOREIGN MARKETS. IN ADDITION THERE IS
ONGOING FOCUS ON THE OVERHEAD STRUCTURE IN ORDER TO MOVE TO AN OPTIMAL LEVEL OF
OPERATING EFFICIENCY AND GLOBAL COMPETITIVENESS.
GENERAL PROVISION
AS REPORTED IN THE PRIOR YEAR, A GENERAL PROVISION WAS CREATED BY THE GROUP IN
THE FORM OF A FAIR VALUE CONSOLIDATION ADJUSTMENT TO COVER CERTAIN RISKS
ASSOCIATED WITH THE ACQUISITION OF THE SAD BUSINESSES. THE EFFECT OF THIS
ADJUSTMENT IS TO INCREASE THE GROUP'S GOODWILL AND PROVISIONS BY R50 MILLION.
THE DIRECTORS ARE OF THE OPINION THAT THE PROVISION SHOULD REMAIN IN PLACE FOR
THE FORESEEABLE FUTURE UNTIL IT CAN BE ESTABLISHED, BEYOND REASONABLE DOUBT,
THAT RISKS RELATING TO THIS ACQUISITION NO LONGER EXIST. THE REPORT OF THE
INDEPENDENT AUDITORS, PRICEWATERHOUSECOOPERS INC., WILL AGAIN BE QUALIFIED IN
THIS REGARD, AS THE GROUP HAS BEEN UNABLE TO DEMONSTRATE THAT A LEGAL OR
CONSTRUCTIVE LIABILITY EXISTS AT YEAR END.
EMPLOYMENT EQUITY
ASPEN PHARMACARE HAS FORMULATED AND TIMEOUSLY SUBMITTED ITS EMPLOYMENT EQUITY
PLAN TO THE DEPARTMENT OF LABOUR FOR APPROVAL. THE GROUP IS POSITIVELY
COMMITTED TO THIS PROCESS WHICH IS CONSISTENT WITH ITS PHILOSOPHY IN RESPECT OF
EMPLOYEE DEVELOPMENT.
DIVIDENDS
NO DIVIDEND HAS BEEN DECLARED DUE TO THE GROUP'S FUNDING REQUIREMENTS IN
RESPECT OF ITS DEBT REPAYMENT SCHEDULE AND THE FINANCING OF FURTHER GROWTH.
BY ORDER OF THE BOARD
SB SAAD MG ATTRIDGE
(GROUP CHIEF EXECUTIVE) (GROUP CHIEF FINANCIAL OFFICER)
HA SHAPIRO (COMPANY SECRETARY)
JOHANNESBURG 14 SEPTEMBER 2000
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
YEAR ENDED YEAR ENDED
30 JUNE 30 JUNE
2000 1999 %
R'000 R'000 CHANGE
REVENUE 1 205 522 522 406 131
CONTINUING OPERATIONS 984 385 522 406
DISCONTINUED OPERATIONS 221 137 -
OPERATING PROFIT 250 802 85 396 194
CONTINUING OPERATIONS 219 919 85 396
DISCONTINUED OPERATIONS 30 883 -
NET FINANCING COSTS (86 634) (17 343)
NET PROFIT BEFORE TAXATION AND
EXCEPTIONAL ITEMS 164 168 68 053 141
EXCEPTIONAL ITEMS (29 725) (1 543)
NET PROFIT BEFORE TAXATION 134 443 66 510
TAXATION (29 919) (11 514)
NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 104 524 54 996 90
WEIGHTED AVERAGE NUMBER OF
SHARES IN ISSUE (000'S) 367 312 285 778
EARNINGS PER SHARE (CENTS) 28,5 19,2 48
HEADLINE EARNINGS PER SHARE
(CENTS) 33,8 19,5 73
RECONCILIATION OF HEADLINE EARNINGS
NET PROFIT ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 104 524 54 996
PROFIT ON SALE OF FIXED ASSETS (2 057) (396)
EXCEPTIONAL ITEMS 21 798 1 080
HEADLINE EARNINGS 124 265 55 680
EXCEPTIONAL ITEMS
LOSS ON DISCONTINUED
OPERATIONS (13 973) (1 543)
RESTRUCTURING COSTS (15 752) -
EXCEPTIONAL ITEMS
BEFORE TAXATION (29 725) (1 543)
TAXATION 7 927 463
EXCEPTIONAL ITEMS
AFTER TAXATION (21 798) (1 080)
GROUP BALANCE SHEET
30 JUNE 30 JUNE
2000 1999
R'000 R'000
ASSETS
NON-CURRENT ASSETS 451 472 895 208
PROPERTY, PLANT AND EQUIPMENT 158 402 265 340
INTANGIBLE ASSETS 80 011 397 181
INVESTMENTS AND LOANS 144 20 100
DEFERRED TAXATION ASSET 212 915 212 587
CURRENT ASSETS 508 973 640 458
INVENTORIES 166 947 238 089
ACCOUNTS RECEIVABLE 187 506 286 149
CASH RESOURCES 140 238 116 003
TAXATION PREPAID 14 282 217
TOTAL ASSETS 960 445 1 535 666
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
SHAREHOLDERS' FUNDS 248 643 164 908
NON-CURRENT LIABILITIES
INTEREST-BEARING BORROWINGS 280 300 370 081
528 943 534 989
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND PROVISIONS 308 914 484 729
INTEREST-BEARING BORROWINGS 122 588 515 948
TOTAL EQUITY AND LIABILITIES 960 445 1 535 666
NUMBER OF SHARES IN ISSUE (000'S) 367 312 367 312
NET ASSET VALUE PER SHARE (CENTS) 67,7 44,9
GROUP CASH FLOW STATEMENT
YEAR ENDED YEAR ENDED
30 JUNE 30 JUNE
2000 1999
R'000 R'000
CASH OPERATING PROFIT 245 853 96 435
MOVEMENT IN WORKING CAPITAL 113 350 56 356
CASH GENERATED FROM OPERATIO 359 203 152 791
NET FINANCING COSTS (86 634) (17 343)
TAXATION PAID (32 697) (10 808)
CASH AVAILABLE FROM OPERATIONS 239 872 124 640
DIVIDENDS PAID - (14 500)
NET CASH INFLOW FROM OPERATING
ACTIVITIES 239 872 110 140
BALANCE OF ACQUISITION
CONSIDERATION PAID (125 519) -
NET CASH INFLOW/(OUTFLOW)
FROM INVESTING ACTIVITIES 401 666 (1 729 670)
NET CASH (OUTFLOW)/INFLOW FROM
FINANCING ACTIVITIES (483 141) 1 569 324
MOVEMENT IN NET CASH RESOURCES 32 878 (50 206)
NET CASH RESOURCES AT BEGINNING
OF THE YEAR 116 003 3 852
NET CASH RESOURCES OF SUBSIDIARIES
AND BUSINESSES (DISPOSED)/ACQUIRED (8 643) 162 357
NET CASH RESOURCES AT END OF THE YEAR 140 238 116 003
SUPPLEMENTARY INFORMATION
YEAR ENDED YEAR ENDED
30 JUNE 30 JUNE
2000 1999
R'000 R'000
CAPITAL EXPENDITURE:
INCURRED 32 373 41 344
CONTRACTED 10 868 8 700
AUTHORISED NOT CONTRACTED 1 275 15 412
DEPRECIATION 32 863 13 147
NET FINANCING COSTS
INTEREST RECEIVED 16 580 15 244
INTEREST PAID (103 214) (32 587)
(86 634) (17 343)
OPERATING LEASE COMMITMENTS
- PAYABLE IN ONE YEAR 8 774 8 613
- PAYABLE THEREAFTER 30 989 42 965
STATEMENT OF CHANGES IN GROUP EQUITY
YEAR ENDED YEAR ENDED
30 JUNE 30 JUNE
2000 1999
R'000 R'000
SHAREHOLDERS' FUNDS AT BEGINNING
OF YEAR 164 908 20 836
ISSUE OF SHARE CAPITAL - 705 211
INTANGIBLE ASSETS WRITTEN OFF (23 068) (850 526)
CURRENCY TRANSLATION DIFFERENCES (2 202) (6 609)
ATTRIBUTABLE PROFIT 104 524 54 996
DEFERRED TAX ASSET RECOGNISED 4 481 241 000
SHAREHOLDERS' FUNDS AT END OF YEAR 248 643 164 908
SEGMENTAL ANALYSIS**
YEAR ENDED 30 JUNE 2000
R'000
REVENUE OPERATING
% PROFIT %
BY BUSINESS SEGMENT
PHARMACEUTICAL 615 479 51,1 142 334 56,8
CONSUMER 368 906 30,6 77 585 30,9
DISCONTINUED OPERATIONS 221 137 18,3 30 883 12,3
1 205 522 100,0 250 802 100,0
**COMPARATIVE FIGURES HAVE NOT BEEN PRODUCED AS THE ACQUISITION OF THE SAD
BUSINESSES WITH EFFECT FROM 1 MARCH 1999 RESULTED IN A 4 MONTH REPORTING PERIOD
TO 30 JUNE 1999 FOR THOSE BUSINESSES. ACCORDINGLY THE CURRENT YEAR'S SEGMENTAL
ANALYSIS IS NOT COMPARABLE WITH THE PRIOR YEAR AND IT WOULD BE IMPRACTICAL TO
RESTATE PRIOR YEAR FIGURES IN THIS REGARD.
DISCLOSURE OF SEGMENTAL BALANCE SHEET INFORMATION HAS NOT BEEN PRODUCED AS THE
GROUP'S ASSETS AND LIABILITIES ARE COMMON TO ALL SEGMENTS. ANY ATTEMPT AT
ALLOCATION IN THIS REGARD WOULD BE ARBITARY AND NO MEANINGFUL ADDITIONAL
INFORMATION WOULD BE DERIVED.
Sharenet Sites 
