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APN - Aspen Holdings - Reviewed preliminary Group financial results for the

Release Date: 16/09/2008 13:25
Code(s): APN
Wrap Text

APN - Aspen Holdings - Reviewed preliminary Group financial results for the year ended 30 June 2008 and capitalisation issue Aspen Pharmacare Holdings Ltd ("Aspen") (Registration number 1985/002935/06) Share code: APN ISIN: ZAE000066692 Revenue +21% 2008: R4,9 billion 2007: R4,0 billion Net profit before tax +20% 2008: R1,2 billion 2007: R1,0 billion Headline earnings per share +10% 2008: R231,3 cents 2007: R210,1 cents Reviewed preliminary Group financial results for the year ended 30 June 2008 GROUP INCOME STATEMENT Reviewed Audited 30 June 30 June Change 2008 2007
% Rm Rm Revenue 21 4 881,3 4 025,9 Cost of sales (2 658,5) (2 084,2) Gross profit 14 2 222,8 1 941,7 Selling and distribution (668,3) (536,9) expenses Administrative expenses (276,0) (208,3) Other operating expenses (136,3) (133,3) Other operating income C # 90,3 13,4 Operating profit 14 1 232,5 1 076,6 Investment income D # 263,4 139,8 Financing costs E # (287,1) (207,0) 1 208,8 1 009,4 Share of after-tax net (1,1) - losses of associates Net profit before tax 20 1 207,7 1 009,4 Tax (343,2) (291,7) Profit after tax 20 864,5 717,7 Attributable to: Equity holders of the 862,9 717,4 parent Minority interest 1,6 0,3 20 864,5 717,7 Weighted average number 351 792 348 850 of shares in issue (`000) Earnings per share - 19 245,3 205,7 basic (cents) Earnings per share - 19 240,1 201,8 diluted (cents) #See notes on supplementary information. HEADLINE EARNINGS Reconciliation of headline earnings Net profit attributable to equity 862,9 717,4 holders of the parent Adjusted for: - Loss on disposal of property, 0,5 0,4 plant and equipment (net of tax) - Profit on disposal of (37,0) (3,4) intangible assets (net of tax) - Impairment of intangible assets 8,2 8,2 (net of tax) - Profit on sale of 51% of Co- (16,6) - pharma Ltd - Adjustment to write down on - 10,5 disposal of 50% of FCC - Profit on sale of Shimoda (4,3) - shares (net of tax) Headline earnings 11 813,7 733,1 Headline earnings per share 10 231,3 210,1 (cents) Headline earnings per share - 10 227,0 206,1 diluted (cents) CAPITAL DISTRIBUTION Capital distribution per share (cents) 13 70,0 62,0 The capital distribution of 70,0 cents per share paid in the year ended 30 June 2008 relates to profits earned in the 2007 financial year. No capital distribution is proposed in respect of the earnings for the year ended 30 June 2008. GROUP BALANCE SHEET Reviewed Audited 30 June 30 June 2008 2007
Rm Rm ASSETS Non-current assets Property, plant and equipment 1 744,6 855,1 Investment in associates 25,8 - Goodwill 589,9 295,0 Intangible assets F # 3 723,1 844,7 Preference share investment - 376,8 Non-current financial assets 4,8 6,0 Deferred tax assets 1,0 15,1 Total non-current assets 6 089,2 2 392,7 Current assets Inventories 1 447,0 936,8 Receivables and prepayments 1 331,1 871,2 Deferred receivable 459,2 - Cash and cash equivalents 1 522,2 3 331,2 Total current assets 4 759,5 5 139,2 Total assets 10 848,7 7 531,9 SHAREHOLDERS` EQUITY Share capital and share premium 493,8 746,4 Treasury shares (571,6) (598,9) Share-based compensation reserve 62,4 47,5 Non-distributable reserves 462,0 267,8 Retained income 2 649,2 1 757,6 Ordinary shareholders` equity 3 095,8 2 220,4 Equity component of preference shares 162,0 162,0 3 257,8 2 382,4 Minority interest 61,1 7,0 Total shareholders` equity 3 318,9 2 389,4 LIABILITIES Non-current liabilities Preference shares - liability component 402,1 403,5 Borrowings 75,9 25,9 Deferred-payables and other non-current 2,5 10,6 financial liabilities Deferred tax liabilities 155,1 65,3 Retirement benefit obligations 9,4 7,2 Total non-current liabilities 645,0 512,5 Current liabilities Trade and other payables 1 004,8 648,1 Financial liability for products acquired 2 653,0 - Borrowings 3 103,5 3 801,8 Deferred-payables and other current 12,2 65,3 financial liabilities Current tax liabilities 111,3 114,8 Total current liabilities 6 884,8 4 630,0 Total liabilities 7 529,8 5 142,5 Total equity and liabilities 10 848,7 7 531,9 Number of shares in issue (net of treasury 352 411 350 634 shares) (`000) Net asset value per share (cents) 878,5 633,3 GROUP CASH FLOW STATEMENT Reviewed Audited year ended year ended 30 June 30 June 2008 2007
Rm Rm Cash flows from operating activities Cash operating profit 1 492,7 1 322,0 Changes in working capital (434,9) (353,0) Cash generated from operations 1 057,8 969,0 Net financing costs paid (347,5) (193,8) Investment income received 263,4 139,8 Tax paid (321,6) (206,4) Net cash generated from operating 652,1 708,6 activities Cash flows from investing activities Replacement capital expenditure - (79,3) (67,2) property, plant and equipment Expansion capital expenditure - property, (300,0) (220,5) plant and equipment Proceeds on disposal of tangible assets 3,2 0,8 Replacement capital expenditure - (5,2) (2,8) intangible assets Expansion capital expenditure - intangible (160,8) (144,3) assets Proceeds on disposal of intangible assets 55,2 8,5 Acquisition of subsidiary and joint (1 357,5) (0,1) ventures, net of cash acquired G # Disposal of 51% of Co-pharma Ltd, net of 10,1 - cash Increase/(decrease) in non-current 1,2 (6,0) financial assets Redemption of investment in preference 376,8 - shares Net cash used in investing activities (1 456,3) (431,6) Cash flows from financing activities Proceeds from borrowings 5 004,3 2 477,3 Repayment of borrowings (3 506,5) (2 351,1) Repayment of deferred-payables (64,5) (12,3) Proceeds from deferred-payables 9,5 24,3 Dividend paid (1,5) - Net capital distribution paid (246,0) (216,0) Proceeds from issue of ordinary shares 15,4 27,0 Net cash generated from/(used in) 1 210,7 (50,8) financing activities Movement in cash and cash equivalents 406,5 226,2 before exchange rate changes Effects of exchange rate changes 40,8 9,0 Cash and cash equivalents Movement in cash and cash equivalents 447,3 235,2 Cash and cash equivalents at the beginning 497,5 262,3 of the year Cash and cash equivalents at the end of 944,8 497,5 the year Reconciliation of cash and cash equivalents Cash and cash equivalents per the balance 1 522,2 3 331,2 sheet Less:Bank overdrafts 577,4* 2 833,7* Cash and cash equivalents per the cash 944,8 497,5 flow statement *Bank overdrafts are included within borrowings under the current liabilities on the balance sheet. For the purposes of the cash flow statement, cash and cash equivalents comprise cash-on-hand, deposits held on call with banks less bank overdrafts which form an integral part of Aspen`s cash management. SEGMENTAL ANALYSIS South Africa Reviewed Audited
30 June 30 June 2008 % 2007 % Rm of total Rm of total Primary segments: Geographical Gross revenue 3 759,7 73,3 3 275,4 77,4 Less: Intersegment (1,3) (9,1) sales Revenue 3 758,4 77,0 3 266,3 81,1 Operating profit before amortisation and disposals 1 059,1 81,6 1 049,2 87,9 Profit on sale of 40,8 - Natural products Profit on sale of 5,0 - Shimoda shares Profit on sale of - - 51% of Co-pharma Ltd Profit on sale of - 3,4 Avid Brands Operating profit 1 104,9 81,2 1 052,6 87,9 before amortisation Amortisation - (68,3) 53,5 (71,4) 59,0 intangible assets Operating profit 1036,6 84,1 981,2 91,1 SEGMENTAL ANALYSIS (CONTINUED) Australia Reviewed Audited
30 June 30 June 2008 % 2007 % Rm of total Rm of total Primary segments: Geographical Gross revenue 709,0 13,8 508,5 12,0 Less: - - Intersegment sales Revenue 709,0 14,5 508,5 12,6 Operating profit before amortisation and disposals 95,7 7,4 71,2 6,0 Profit on sale of - - Natural products Profit on sale of - - Shimoda shares Profit on sale of - - 51% of Co-pharma Ltd Profit on sale of - - Avid Brands Operating profit 95,7 7,0 71,2 5,9 before amorisation Amortisation - (14,2) 11,1 (11,5) 9,5 intangible assets Operating profit 81,5 6,6 59,7 5,5 SEGMENTAL ANALYSIS (CONTINUED) India
Reviewed Audited 30 June 30 June 2008 % 2007 % Rm of total Rm of total
Primary segments: Geographical Gross revenue 281,0 5,5 189,8 4,5 Less: (82,2) (90,3) Intersegment sales Revenue 198,8 4,1 99,5 2,5 Operating profit before amortisation and disposals 47,3 3,6 21,0 1,8 Profit on sale of - - Natural products Profit on sale of - - Shimoda shares Profit on sale of - - 51% of Co-pharma Ltd Profit on sale of - - Avid Brands Operating profit 47,3 3,5 21,0 1,8 before amorisation Amortisation - (9,8) 7,7 (8,7) 7,2 intangible assets Operating profit 37,5 3,0 12,3 1,1 SEGMENTAL ANALYSIS Latin America Reviewed Audited 30 June 30 June 2008 % 2007 %
Rm of total Rm of total Primary segments: Geographical Gross revenue 82,9 1,6 - - Less: - - Intersegment sales Revenue 82,9 1,7 - - Operating profit before amortisation and disposals 2,4 0,2 - - Profit on sale of - - Natural products Profit on sale of - - Shimoda shares Profit on sale of - - 51% of Co-pharma Ltd Profit on sale of - - Avid Brands Operating profit 2,4 0,2 - - before amorisation Amortisation - (1,4) 1,1 - - intangible assets Operating profit 1,1 0,1 - - SEGMENTAL ANALYSIS (CONTINUED) East Africa Reviewed Audited 30 June 30 June 2008 % 2007 %
Rm of total Rm of total Primary segments: Geographical Gross revenue 46,7 0,9 - - Less: - - Intersegment sales Revenue 46,7 1,0 - - Operating profit before amortisation and disposals 10,6 0,8 - - Profit on sale of - - Natural products Profit on sale of - - Shimoda shares Profit on sale of - - 51% of Co-pharma Ltd Profit on sale of - - Avid Brands Operating profit 10,6 0,8 - - before amorisation Amortisation - (0,6) 0,5 - - intangible assets Operating profit 10,0 0,8 - - SEGMENTAL ANALYSIS (CONTINUED) Rest of the world Reviewed Audited 30 June 30 June 2008 % 2007 %
Rm of total Rm of total Primary segments: Geographical Gross revenue 250,4 4,9 256,8 6,1 Less: (164,9) (105,2) Intersegment sales Revenue 85,5 1,8 151,6 3,8 Operating profit before amortisation and disposals 82,7 6,4 52,9 4,4 Profit on sale of - - Natural products Profit on sale of - - Shimoda shares Profit on sale of 16,6 - 51% of Co-pharma Ltd Profit on sale of - - Avid Brands Operating profit 99,3 7,3 52,9 4,4 before amorisation Amortisation - (33,5) 26,2 (29,5) 24,4 intangible assets Operating profit 65,8 5,3 23,4 2,2 SEGMENTAL ANALYSIS (CONTINUED) Total Reviewed Audited 30 June 30 June 2008 % 2007 %
Rm of total Rm of total Primary segments: Geographical Gross revenue 5 129,7 100,0 4 230,4 100,0 Less: (248,4) (204,6) Intersegment sales Revenue 4 881,3 100,0 4 025,9 100,0 Operating profit before amortisation and disposals 1 297,8 100,0 1 194,3 100,0 Profit on sale of 40,8 - Natural products Profit on sale of 5,0 - Shimoda shares Profit on sale of 16,6 - 51% of Co-pharma Ltd Profit on sale of - 3,4 Avid Brands Operating profit 1 360,2 100,0 1 197,7 100,0 before amorisation Amortisation - (127,8) 100,0 (121,1) 100,0 intangible assets Operating profit 1 232,5 100,0 1 076,6 100,0 SEGMENTAL ANALYSIS (CONTINUED) Pharmaceutical Reviewed Audited 30 June 30 June 2008 % 2007 %
Rm of total Rm of total Secondary segments: Business Revenue 3 785,9 77,6 3 031,7 75,3 South Africa 2 807,5 2 397,3 Australia 585,1 393,3 India 198,8 99,5 Latin America 77,8 - East Africa 46,7 - Rest of the world 70,0 141,6 Operating profit before amortisation and disposals 1 053,1 81,1 948,9 79,5 South Africa 853,0 838,8 Australia 70,9 39,0 India 47,3 21,0 Latin America 2,1 - East Africa 10,6 - Rest of the world 69,2 50,1 Operating profit 1 074,7 79,0 948,9 79,2 before amortisation South Africa 858,0 838,8 Australia 70,9 39,0 India 47,3 21,0 Latin America 2,1 - East Africa 10,6 - Rest of the world 85,8 50,1 Operating profit 964,4 78,2 842,5 78,3 South Africa 798,7 780,8 Australia 56,7 27,9 India 37,5 12,3 Latin America 0,9 - East Africa 10,0 - Rest of the world 60,6 21,5 SEGMENTAL ANALYSIS (CONTINUED) Consumer
Reviewed Audited 30 June 30 June 2008 % 2007 % Rm of total Rm of total
Secondary segments: Business Revenue 1 095,4 22,4 994,2 24,7 South Africa 950,9 869,0 Australia 123,9 115,2 India - - Latin America 5,1 - East Africa - - Rest of the world 15,5 10,0 Operating profit before amortisation and disposals 244,7 18,9 245,4 20,5 South Africa 206,1 210,4 Australia 24,8 32,2 India - - Latin America 0,3 - East Africa - - Rest of the world 13,5 2,8 Operating profit 285,5 21,0 248,8 20,8 before amortisation South Africa 246,9 213,8 Australia 24,8 32,2 India - - Latin America 0,3 - East Africa - - Rest of the world 13,5 2,8 Operating profit 268,1 21,8 234,1 21,7 South Africa 237,9 200,4 Australia 24,8 31,8 India - - Latin America 0,2 - East Africa - - Rest of the world 5,2 1,9 SEGMENTAL ANALYSIS (CONTINUED) Total
Reviewed Audited 30 June 30 June 2008 % 2007 % Rm of total Rm of total
Secondary segments: Business Revenue 4 881,3 100,0 4 025,9 100,0 South Africa 3 758,4 3 266,3 Australia 709,0 508,5 India 198,8 99,5 Latin America 82,9 - East Africa 46,7 - Rest of the world 85,5 151,6 Operating profit before amortisation and disposals 1 297,8 100,0 1 194,4 100,0 South Africa 1 059,1 1 049,2 Australia 95,7 71,2 India 47,3 21,0 Latin America 2,4 - East Africa 10,6 - Rest of the world 82,7 52,9 Operating profit 1 360,2 100,0 1 197,7 100,0 before amortisation South Africa 1 104,9 1 052,6 Australia 95,7 71,2 India 47,3 21,0 Latin America 2,4 - East Africa 10,6 - Rest of the world 99,3 52,9 Operating profit 1 232,5 100,0 1 076,6 100,0 South Africa 1 036,6 981,2 Australia 81,5 59,7 India 37,5 12,3 Latin America 1,1 - East Africa 10,0 - Rest of the world 65,8 23,4 SUPPLEMENTARY INFORMATION Reviewed Audited
30 June 30 June 2008 2007 Rm Rm A. Capital expenditure Incurred 545,3 434,8 - tangible assets 379,3 287,7 - intangible assets 166,0 147,1 Contracted - tangible assets 62,6 96,3 - intangible assets - 4,3 Authorised but not contracted for - tangible assets 457,5 330,9 - intangible assets 0,8 - B. Operating profit has been arrived at after charging Depreciation of property, plant and equipment 74,6 60,3 Amortisation of intangible assets 127,7 121,1 Share-based payment expenses - employees 32,9 29,4 C. Other operating income Profit on sale of Natural products 40,8 - Profit on sale of Shimodo shares 5,0 - Profit on sale of 51% of Co-pharma Ltd 16,6 - Profit on sale of Avid Brands - 3,4 Other 27,9 10,0 Total other operating income 90,3 13,4 D. Investment income Preference share dividends received 33,3 29,3 Interest received 230,1 110,5 Total investment income 263,4 139,8 E. Financing costs Interest paid (322,8) (174,0) Net foreign exchange gains 60,4 22,7 Fair value gains/(losses) on financial 3,5 (19,4) instruments Notional interest on financial instruments 9,9 (3,8) Preference share dividends paid (38,1) (32,5) Financing costs (287,1) (207,0) F. Intangible asset movement Opening balance 844.7 803.4 Acquisition of subsidiary and joint ventures 153.3 - Additions - GSK 2 655.8 - Additions - other 176.3 146.7 Disposals (14.2) (5.1) Amortisation (127.7) (121.1) Effects of exchange rate changes 43.3 31.5 Net impairment of intangible assets (8.2) (10.8) Closing balance 3 723.1 844.7 G. Acquisition of subsidiary and joint ventures, net of cash acquired Shelys - East Africa 231,5 - Powercliff Ltd - Oncology franchise 124,4 - Onco Therapies Ltd - Oncology franchise 69,1 - Lakerose Ltd - Latin American businesses 1 065,5 - Total purchase consideration 1 490,5 - Cash and cash equivalents in acquirees (133,0) - Cash outflow on acquisition 1 357,5 - H. Other commitments During the 2003 financial year Aspen entered into a 12-year agreement with GlaxoSmithKline South Africa (Pty) Ltd to distribute and market a range of their products. In terms of this agreement Aspen is committed to pay the following amounts to GlaxoSmithKline South Africa (Pty) Ltd: - payable within one year 15,1 17,7 - payable thereafter 47,5 62,6 62,6 80,3 During the 2005 financial year Aspen Australia Pty Ltd entered into a 10-year agreement with Novartis Pharmaceuticals Australia Pty Ltd to distribute and market a range of their products. In terms of this agreement Aspen is committed to spend the following amounts on promotion of the products: - payable within one year 10,5 9,0 - payable thereafter 46,8 45,6 57,3 54,6 I. Contingent liabilities There are contingent liabilities in respect of: Additional payments in respect of the Quit 7,8 7,1 worldwide intellectual property rights Guarantee covering potential rental default - 1,1 relating to sale of discontinued operations Guarantees covering loan and other 23,2 20,4 obligations to third parties STATEMENT OF CHANGES IN GROUP EQUITY Share capital Treasury Share-based Non- compensation distributable and premium shares reserve reserves Rm Rm Rm Rm
Balance as at 954,4 (623,0) 31,2 191,2 30 June 2006 Fair value - - - 0,7 movement on available-for- sale financial assets Currency - - - 69,2 translation differences Profit for - - - - the year Capital (240,1) 24,1 - - distribution Cash flow - - - (5,2) hedges realised Cash flow - - - (0,1) hedges recognised Issue of 32,1 - - - ordinary share capital Share options - - 24,2 - and appreciation rights awarded Transfer from - - (7,9) - share-based compensation reserve Non- - - - 12,0 distributable portion of earnings Equity - - - - portion of tax claims in respect of share schemes Balance as at 746,4 (598,9) 47,5 267,8 30 June 2007 Currency - - - 112,8 translation differences Amounts - - - 92,1 retained in equity due to hedge accounting of acquisitions Profit for - - - - the year Dividend paid - - - - Capital (273,3) 27,3 - - distribution Acquisition - - - - of subsidiary Disposal of - - - (10,8) 51% of shares in Co-pharma Ltd Cash flow - - - 0,1 hedges realised Issue of 20,7 - - - ordinary share capital Share options - - 27,6 - and appreciation rights awarded Transfer from - - (12,7) - share-based compensation reserve Equity - - - - portion of tax claims in respect of share schemes Balance as at 493,8 (571,6) 62,4 462,0 30 June 2008 STATEMENT OF CHANGES IN GROUP EQUITY (CONTINUED) Equity
component Retained of preference Minority income shares interest Total Rm Rm Rm Rm
Balance as at 997,2 162,0 6,7 1 719,7 30 June 2006 Fair value - - - 0,7 movement on available-for- sale financial assets Currency - - - 69,2 translation differences Profit for 717,4 - 0,3 717,7 the year Capital - - - (216,0) distribution Cash flow - - - (5,2) hedges realised Cash flow - - - (0,1) hedges recognised Issue of - - - 32,1 ordinary share capital Share options - - - 24,2 and appreciation rights awarded Transfer from 7,9 - - - share-based compensation reserve Non- (12,0) - - - distributable portion of earnings Equity 47,1 - - 47,1 portion of tax claims in respect of share schemes Balance as at 1 757,6 162,0 7,0 2 389,4 30 June 2007 Currency - - - 112,8 translation differences Amounts - - - 92,1 retained in equity due to hedge accounting of acquisitions Profit for 862,9 - 1,6 864,5 the year Dividend paid (1,5) - - (1,5) Capital - - - (246,0) distribution Acquisition - - 52,5 52,5 of subsidiary Disposal of 21,7 - - 10,9 51% of shares in Co-pharma Ltd Cash flow - - - 0,1 hedges realised Issue of - - - 20,7 ordinary share capital Share options - - - 27,6 and appreciation rights awarded Transfer from 12,7 - - - share-based compensation reserve Equity (4,2) - - (4,2) portion of tax claims in respect of share schemes Balance as at 2 649,2 162,0 61,1 3 318,9 30 June 2008 BASIS OF ACCOUNTING The consolidated preliminary results have been prepared in accordance with International Financial Reporting Standards ("IFRS"), IFRIC interpretations, the Listings Requirements of JSE Ltd and Schedule 4 of the South African Companies Act (Act 61 of 1973, as amended). 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 2007. The acquisitions of Shelys, Lakerose Ltd, Onco Therapies Ltd and Powercliff Ltd were accounted for on a provisional basis and will only be finalised in the year ending 30 June 2009. COMMENTARY INTERNATIONALISATION OF THE GROUP The group has evolved into an international pharmaceutical business through considerable corporate activity during the past twelve months. The following major transactions were concluded by Aspen: - Effective 28 December 2007, the acquisition of a 50% stake in a global oncology franchise ("Onco/Powercliff") which Strides Arcolab ("Strides") had initiated as a greenfield venture. Specialist manufacturing capabilities in oncological injectables, semi solids and solids have been established in India. Onco/Powercliff have the rights to 32 oncology products in development. The total investment in this joint venture is USD 43 million. - Effective 1 March 2008, the acquisition of a 50% interest in Strides` Latin American business comprising operations in Brazil, Mexico and Venezuela for USD 152,5 million. As announced today, the acquisition of a further 1% in the Latin American business has now given Aspen a controlling interest. - Effective 1 May 2008, the acquisition of a 60% shareholding in Shelys Africa Ltd ("Shelys") for of USD 39 million. Shelys operates in Tanzania, Kenya and Uganda. - Effective 30 June 2008, the acquisition from GlaxoSmithKline ("GSK") of the international rights to four established, branded pharmaceutical products, Eltroxin, Imuran, Lanoxin and Zyloric ("the GSK brands") for GBP 170 million. The products are distributed in more than 100 countries. - On 23 July 2008, the finalisation of a licensing and supply agreement with GSK in terms of which Aspen will license intellectual property and supply finished dosage form pharmaceuticals to GSK. - The disposal of a 51% interest in its UK subsidiary, Co-pharma Ltd, and 80% of its South African natural products business, both to Strides. A profit before tax of R57 million was realised from these two transactions. Further to its leadership position in the South African market, the Group now has an increased presence in emerging markets and a particular strength in the southern hemisphere. In addition, Aspen`s worldwide product portfolio has been expanded by the addition of the GSK brands and the investment in the oncology franchise. GROUP PERFORMANCE The Group recorded a 21% increase in revenue to R4,881 billion whilst operating profit improved by 14% to R1,233 billion and profit after tax increased 20% to R865 million. Earnings per share was up 19% to 245 cents and headline earnings per share ("HEPS"), was up 10% to 231 cents. SOUTH AFRICAN OPERATIONS The South African business grew revenue by 15% to R3,758 billion. The pharmaceutical division, in spite of a decline in the active pharmaceutical ingredient ("API") business, achieved satisfactory revenue growth of 17% at R2,808 billion. The consumer division did well to increase revenue by 10% given the unfavourable retail environment. Revenue performance was also inhibited by an unacceptable level of out of stocks which arose as the public sector placed orders substantially ahead of its forecasts. This was compounded by the inability to procure many APIs because of a worldwide chemical shortage caused by the closure of facilities in response to an environment clamp down in China in advance of the Beijing Olympics. Earnings before interest, tax and amortisation ("EBITA") increased by 5% to R1,105 billion. After excluding the gains made from disposals, normalised EBITA increased by 1% to R1,059 billion. The significant factor influencing operating profit was a contraction in operating margins. The major causes were: - the delay by the Department of Health ("DoH") in granting a price increase under the single exit pricing legislation despite rising costs and a weakening currency. The price increase expected in January 2008 was only granted in May 2008. The 6.5% increase granted was less than the rise in costs of goods; - the worldwide shortage in APIs resulted in extraordinary price increases. The DoH has consented to an increase in prices in the public sector to compensate for the surge in API costs, but this only became effective after the year end. Application for an extraordinary price increase in the private sector is still under consideration by the DoH. Aspen has continued to make loss making products available in the public interest, but this is clearly not sustainable; - the re-scheduling of products containing ephedrine from schedule 2 (over-the- counter) to schedule 6 (the highest schedule, prescription only) by the DoH without any phasing provisions. This has necessitated a substantial stock write off as the restricted access arising from the re-scheduling has resulted in a significant reduction in demand; and - a decline in the profits of Fine Chemicals Corporation ("FCC"). The Group`s investment in manufacturing capabilities in South Africa continued during the year with capital expenditure of R334 million. The primary projects are the upgrade of the heritage General Facility, the completion of the Sterile Facility and the addition of packing capacity to the Oral Solid Dose Facility. The adoption of the Pharmaceutical Inspection Convention ("PIC") standards by the South African Medicines Control Council ("MCC") has resulted in an elevation of standards which has seen other domestic producers suspended from manufacture. Aspen is committed to maintaining and improving standards of production at its South African sites in line with the PIC standards and its other international accreditations. This will entail an ongoing programme of investment. Despite the challenging environment, Aspen retained its position as the leading supplier of pharmaceuticals in the private and public sectors. The excellent results achieved in the South African government`s anti-retroviral ("ARV") tender awarded in June provided further evidence of Aspen`s international competitiveness. Aspen was awarded 72% by forecast volume of the entire ARV tender. INTERNATIONAL OPERATIONS The international businesses performed extremely well with revenue increasing 48% to R1,123 billion and normalised EBITA rising 65% to R239 million. Whilst acquisitions have contributed to the results, strong growth was achieved from existing operations. The international business made up 23% of the Group`s revenue and 19% of the Group`s EBITA. Aspen Australia continued its impressive record of growth with revenue up 39% to R709 million and EBITA up 34% to R96 million. The growth was driven by the pharmaceutical division which expanded its product offering over the course of the year. The consumer business was negatively impacted by supply issues with its deodorant brands which have since been resolved. Aspen Resources also reported solid growth, raising EBITA by 35% to R75 million. In an internal restructuring exercise with effect from 30 June 2008, the Aspen Resources business was sold to Aspen Global which has been established in Mauritius as the Group`s international holding company and trading business. Aspen Global is the acquirer of the GSK brands and is in the process of establishing an extensive worldwide distribution platform that will allow the Group to effectively leverage its international intellectual property. Astrix reported a strong improvement in performance despite a small decline in sales to Aspen. The Group`s 50% share in this joint venture recorded a doubling in revenue at R199 million with EBITA growing even more strongly to R47 million. The first four months of Aspen`s 50% holding in the Latin American businesses contributed revenue of R83 million and EBITA of R2 million. Improved operating margins should be forthcoming with the opening of the Campos production facility before the end of the calendar year. Shelys was part of the Group for the final two months of the year during which time revenue of R47 million and EBITA of R11 million was generated. FUNDING During the course of the year the Group invested R1,5 billion in the investments in the oncology franchise, in Latin America and in East Africa. These investments were funded by the Group`s cash resources. Available cash at year end was augmented by the redemption of an investment in preference shares which realised R377 million. At year end the Group carried a liability to GSK of R2,7 billion in respect of the acquisition of the GSK brands. This has since been settled by means of a bridging loan. Negotiations are substantially complete for the replacement of this bridging loan with 5 year US Dollar denominated funding. Net Group debt, inclusive of the GSK liability, was R4,3 billion at year end. Although Aspen is substantially more geared than it has been for a number of years, the strong cash flow capabilities of the South African business and the GSK brands acquired by Aspen Global provide the Group with sufficient capacity to service and reduce this level of debt. In view of the higher gearing levels of the Group and the ongoing capital expenditure programme, the Board has resolved that no capital distribution will be paid to shareholders in respect of the current year. In terms of the proposed new banking arrangements to fund the acquisition of the GSK brands, payment of future cash distributions to shareholders may not be declared without the prior consent of the banks providing this funding. PROSPECTS The transformation of the Group which has taken place during the past year will change the balance of contributions to future operating performance. In the forthcoming year it is expected that earnings from outside of South Africa will be approximately 40% of the Group`s total. In spite of the disappointing performance from the South African business in 2008 the fundamental drivers to growth remain strong. The pharmaceutical division is favourably positioned as the market leader in both the private sector and the public sector. An outstanding product pipeline has the potential to accelerate performance once a consistent flow of product registrations is forthcoming from the MCC. In a market with a growing demand for quality generics Aspen provides the most extensive product offering, manufactured at proven and trusted standards. Aspen is pro-actively confronting the margin contraction experienced in the past year by inter alia intensifying efforts to lower costs by more effective procurement and more efficient production methods. Aspen also continues to engage constructively with the South African government on pricing and on a number of regulatory issues. Statements from government and the identification of the pharmaceutical sector as a strategic industry have been encouraging. The award of the ARV tender almost exclusively to local manufacturers augurs well for future support of the sector. Steps have been taken to sharpen the focus of the consumer division and improved profitability is expected despite the down turn in retail sentiment. Performance in the opening months of the new year suggests that the South African business is responding well to the measures taken to improve profitability. Aspen Australia has consistently out-performed the market. The Australian industry is confronting newly implemented legislation which has reduced the prices of many products. This will provide a challenge to the excellent Australian management team in the forthcoming year. Astrix succeeded in expanding its customer base over the past year and the continued demand for ARV APIs from these customers will dictate the success of this business. Aspen`s investments in Latin America and East Africa bring to the Group established businesses with regional management expertise in emerging markets with exciting growth potential. These businesses have established development plans which should see improvement in performance in the year ahead. The addition of a pipeline of products leveraging off the Group`s intellectual property portfolio is planned to add growth once these products complete the regulatory process and start coming to market in two to three years` time. The Group`s investments in the GSK brands and in the oncology franchise were undertaken to build Aspen`s portfolio of differentiated products with global demand. Aspen Global is in the process of developing an international distribution network which will ensure the GSK brands continue to be made available to patients in over 100 countries. This distribution capability provides Aspen Global with extensive reach into world markets which can be utilised as new products are added to its range. The oncology franchise has a substantial pipeline of specialist products, the first of which are expected to be launched into multiple global markets in 2010. The above product range will also supplement the balance of Aspen`s intellectual property offering in the licensing and supply arrangement with GSK. There is considerable focus within Aspen on a successful introduction of the licensed products into the GSK marketing network. This roll out has the potential to materially enhance Aspen`s revenue and profit streams for the next decade. The first products to market under this deal are also expected in 2010. Since 1999, the year in which Aspen was transformed by means of the acquisition of the South African Druggists pharmaceutical business, it has delivered an unbroken growth trajectory in both revenue and HEPS at a compound annual growth of 28% and 34% respectively. The Group has been set on a path of internationalisation by the completion of a number of carefully selected transactions over the past year. The acquired businesses and products add immediate value to Aspen`s earnings and provide enhanced capabilities to allow a continuation of growth into the next decade. Together with an improved performance from the South African business this should enable the Group to sustain the compound annual growth rate in earnings achieved since 1999 until the end of this decade. CAPITALISATION ISSUE The Board has resolved to issue fully paid ordinary shares in the company as a capitalisation issue to ordinary shareholders. The number of capitalisation shares to which shareholders are entitled will be determined as follows : 1,75 ordinary shares for every 100 ordinary shares held The capitalisation issue ratio is based on the 5-day volume weighted average price (VWAP) for Aspen shares for the week ended 12 September 2008. Fractions and fractional entitlements Trading in the Strate environment does not permit fractions and fractional entitlements. Accordingly where a shareholder`s entitlement to new ordinary shares calculated in accordance with the ratio mentioned above gives rise to a fraction of a new ordinary share, such fraction will be rounded up to the nearest whole number where the fraction is greater than or equal to 0.5 and rounded down to the nearest whole number where the fraction is less than 0.5. Tax implications Participation in the capitalisation issue may have tax implications for resident as well as non-resident shareholders. Shareholders are therefore encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take. For purposes of the South African Capital Gains Tax (CGT)regime, the base cost for CGT purposes of any capitalisation shares issued is zero. This may result in a taxable capital gain rising on the future disposal by a shareholder of capitalisation shares issued. Capitalisation of share premium The capitalisation issue will be made by way of application from Aspen`s share premium account. Salient dates and times In compliance with Strate, the company has determined the following salient dates for the capitalisation issue: Friday, 3 October 2008 Last day to trade to participate in the capitalisation issue Monday, 6 October 2008 Shares commence trading ex the capitalisation issue Monday, 6 October 2008 Listing of the maximum number of new ordinary shares to be issued in terms of the capitalisation issue Friday, 10 October 2008 Record date to participate in the capitalisation issue Monday, 13 October 2008 New shares issued and posted or CSDP or broker accounts credited Wednesday, 15 October 2008 Number of shares in issue to be adjusted Shares may not be dematerialised or rematerialised between Monday, 6 October 2008 and Friday, 10 October 2008, both days inclusive. Changes to the Board Since the annual general meeting held in November 2007, the following Board changes have taken place: 19 February 2008 Resignation of non-executive director, Maxim Krok 27 March 2008 Passing of non-executive director, Leslie Boyd 26 August 2008 Appointment of Roy Andersen as an independent non-executive director. By order of the board SB Saad (Group Chief Executive) MG Attridge (Deputy Group Chief Executive) HA Shapiro (Company Secretary) Woodmead: 15 September 2008 Directors NJ Dlamini* (Chairman), AJ Aaron*, RJ Andersen*, MG Attridge, MR Bagus*, JF Buchanan*, P Dyani*, CN Mortimer*, DM Nurek*, SB Saad, D Thomas* (alternate to P Dyani), S 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 have made 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, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. There are risks or uncertainties that predictions, forecasts, projections and other 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 will be 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 JSE Ltd, 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 announcement are unaudited. Woodmead 16 September 2008 Sponsor: Investec Bank Limited Date: 16/09/2008 13:25:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). 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