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APN - Aspen`s revenue increases by 20 percent to exceed R10 billion
Aspen Pharmacare Holdings Limited ("Aspen")
(Incorporated in the Republic of South Africa)
(Registration Number 1985/002935/06)
(Share code APN ISIN: ZAE000066692)
Aspen`s revenue increases by 20 percent to exceed R10 billion
Johannesburg - JSE Ltd listed Aspen Pharmacare Holdings Limited, Africa`s
largest pharmaceutical manufacturer, has produced excellent results for the
year ended 30 June 2010. The South African business was the leading driver
of the growth achieved.
GROUP PERFORMANCE:
- Group revenue increased by 20% to R10.147 billion (R8.441 billion).
- Group operating profit improved by 20% to R2.615 billion (R2.175
billion).
- Group headline earnings rose 39% to R1.941 billion (R1.394 billion).
- Group headline earnings per share (HEPS) grew by 24% to 482.9 cents
(389.4 cents).
- Group earnings per share increased by 32% to 494.9 as a consequence of
a -capital profit on the sale of Onco Therapies.
- A capital distribution of 70 cents per ordinary share (zero) by way of
a capital reduction has been declared.
Stephen Saad, Aspen Group Chief Executive said, "The South African business
delivered pleasing results and retained its position as the market leader
in the pharmaceutical sector. Ongoing organic growth was instrumental in
Aspen maintaining its position as the leading supplier of pharmaceuticals
to both the private and public sectors in South Africa. The Group`s
international business continued to perform well and all of the strategic
investments undertaken with GlaxoSmithKline ("GSK") have bedded down well.
COMPLETION OF THE GSK TRANSACTIONS
With effect from 1 December 2009, Aspen completed a series of strategic,
interdependent transactions with GSK ("the GSK transactions") which had
been announced on 12 May 2009.
The GSK transactions comprise:
The acquisition of the rights to distribute GSK`s pharmaceutical products
in South Africa;
- The formation of a collaboration agreement between Aspen and GSK in
relation to the marketing and selling of prescription pharmaceuticals
in sub-Saharan Africa;
- The acquisition by Aspen Global of eight specialist branded products
(Alkeran, Leukeran, Purinethol, Kemadrin, Lanvis, Myleran, Septrin and
Trandate) for worldwide distribution;
- The acquisition of GSK`s manufacturing facility in Bad Oldesloe,
Germany; and
- The issue by Aspen of 68.5 million ordinary shares to GSK at R66.80
per share amounting to a total value of R4.576 billion.
GROUP PERFORMANCE
SOUTH AFRICAN BUSINESS
Revenue from the South African business increased 31% to R5.652 billion.
The pharmaceutical division raised revenue from domestic brands by 40% to
R4.391 billion and the consumer division increased revenue by 5% to R1.161
billion. Operating profit increased from R1.045 billion to R1.588 billion.
Profit margins recovered after the contractions of the previous two years
due to improved production efficiencies and procurement savings supported
by a stronger Rand, which lowered the cost of imported materials.
The integration of GSK`s South African pharmaceutical business was
successfully executed and has immediately yielded positive results
reflected in an increase in share of the branded products sector.
Growth in consumer revenue was achieved in a sluggish retail sector
battling to emerge from the recession. Performance was also negatively
affected by an interruption in the supply of infant milk formula due to the
explosion at the Nutritionals manufacturing facility last year. Insurance
compensation of R162 million was received during the year, covering the
consequent loss of profits and the restoration of the facility, and has
been reported under "other operating income".
SUB-SAHARAN AFRICA BUSINESS
Revenue for the sub-Saharan African business declined 2% to R910 million
and operating profits decreased from R173 million to R66 million. The GSK
Aspen Healthcare for Africa collaboration commenced on 1 December 2009 and
met all performance expectations.
Aspen has established a separate management and reporting structure for the
sub-Saharan Africa business. Included in this business segment are exports
into sub-Saharan Africa from South Africa, the Shelys Africa business based
in East Africa and the GSK Aspen Healthcare for Africa collaboration.
INTERNATIONAL BUSINESS
The international business increased revenue by 27% to R4.053 billion
whilst operating profit before amortisation and impairments was 10% higher
at R1.114 billion. Operating profit was diluted by the reduced contribution
from the Latin American ("Latam") operations and the reduction in profits
resulting from the transition of the Global Brands to the Aspen
distribution network.
Revenue from Global Brands grew by 33% to R2.008 billion. Eltroxin,
Lanoxin, Imuran and Zyloric, the four Global Brands acquired from GSK with
effect from 30 June 2008, comprise the greatest portion of this revenue.
These four Global Brands were largely transitioned to the Aspen
distribution network during the course of the year and achieved double
digit revenue growth in US dollars. The balance of the growth in the Global
Brands came from the products added to this portfolio during the year.
The Asia Pacific domestic brands increased revenue by 11% to R1.016
billion. This was achieved despite regulated price reductions in
Australia, the most material territory in this region.
Revenue from domestic brands in Latam declined by 3% to R813 million.
However, the successful implementation of a restructuring plan in the
Brazilian business resulted in improved revenue growth of 8% during the
second half of the year. As part of the reshaping of the Brazilian
operation, agreement was reached to sell the Campos manufacturing facility
and related products to Strides Arcolab ("Strides").
The Group also restructured its oncology arrangements with Strides. Aspen
has entered into agreements to sell its interest in the Onco Therapies and
Onco Laboratories joint ventures to Strides for USD 117 million. Aspen has
in turn secured a license for existing and future oncology products from
Strides in specified territories. The sale of Onco Therapies was completed
prior to 30 June 2010, giving rise to a profit on disposal of R155 million.
Conditions precedent relating to the sale of Onco Laboratories remain to be
fulfilled, completion being expected during the year ahead. The Onco
Laboratories assets have been classified as "held for sale".
PROPOSED ACQUISITION OF THE SIGMA PHARMACEUTICAL BUSINESS
On 16 August 2010, Aspen announced that the board of directors of Sigma
Pharmaceuticals Limited ("Sigma") had agreed to support an offer by Aspen
to acquire the pharmaceutical business conducted by Sigma ("Sigma
pharmaceutical business") for a cash consideration AUD 900 million.
Completion of this transaction is conditional upon, inter alia, requisite
regulatory approval and the approval of Sigma shareholders. Work is
ongoing on the fulfillment of these conditions.
The Sigma pharmaceutical business manufactures and markets an extensive
product portfolio of well-known and trusted Australian brands, which
recorded revenue of over AUD 600 million in the year to 31 January 2010.
The Group sees the following opportunities from the alignment of the Sigma
pharmaceutical business with Aspen`s highly successful subsidiary in
Australia:
- Synergies out of the consolidation of the two businesses;
- The Sigma pharmaceuticals business provides an established point of
entry to the Australian generics and OTC sectors for the introduction
of Aspen`s pipeline of generic and OTC products;
- It will provide a strong foundation for further development of Aspen`s
business in the Asia Pacific Region; and
- The Australian manufacturing presence will supplement Aspen`s global
manufacturing capabilities.
PROSPECTS
Aspen`s South African pharmaceutical business is well set to continue to
thrive as a consequence of the addition of the GSK brands and the people
who promote and support these brands, the regulatory stability and
government`s stated intention to support the local pharmaceutical industry.
South Africa`s difficult consumer trading environment has necessitated a
focus on efficiency of structures which should stand Aspen in good stead
when the retail cycle improves.
Initiatives being undertaken in the sub-Saharan African region should
result in an increased contribution to Group profits in the year ahead. An
upswing in results in Latam, continued organic growth in Asia Pacific and
the benefit of a full year of contribution from the Global Brands acquired
over the last year will be growth drivers for the international business in
the year ahead. Completion of the acquisition of the Sigma pharmaceutical
business will add further growth momentum.
The Group has the fundamentals in place to enjoy a thirteenth consecutive
year of uninterrupted real growth in 2011.
15 September 2010
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
Roshni Gajjar, Aspen Investor Relations
Tel: +27 (031) 580-8649: Cell: +27 82 879 1826
Date: 15/09/2010 14:01:01 Supplied by www.sharenet.co.za
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