Wrap Text
Aspen Financial Results and Capital Distribution
Aspen Pharmacare Holdings Limited ("Aspen")
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
Reviewed preliminary Group financial results for the year ended 30 June 2012
Revenue
up 23% to
R15,3 billion
Operating profit
up 25% to
R3,9 billion
Normalised diluted headline earnings per
share from continuing operations
up 22% to
636,2 cents
Capital distribution
up 50% to
157,0 cents
Offshore contribution up
80% to 59%
of Group operating profit
Commentary
Group performance
Aspen raised revenue by 23% to R15,3 billion and grew operating profit from continuing operations by 25% to R3,9 billion in the year
ended 30 June 2012.Normalised headline earnings from continuing operations, being headline earnings from continuing operations adjusted for restructuring costs,
transaction costs and a foreign exchange gain on transaction funding, increased by 22% to R2,9 billion. Normalised diluted headline
earnings per share from continuing operations was 22% higher at 636,2 cents.
The Group's positive performance was led by exceptional growth in the Asia Pacific business. The International business and the sub-Saharan
Africa business also achieved strong gains. The South African business had a positive second half, but consistent with previously communicated
expectations, showed negative growth for the year as a whole.
South African business
The South African business returned to growth in the second half, as projected. A number of well documented once-off factors unfavourably
influenced results, particularly in the first six months of the year. The effect of the difficult first half is evident in full year revenue
being 2% lower at R6,2 billion and operating profit before amortisation, adjusted for specific non-trading items ("EBITA"), being down 9% at
R1,8 billion.
Revenue in the Pharmaceutical division was up 9% in the second half resulting in the full year revenue coming in flat at R5,2 billion. This creditable
result was achieved against a backdrop of a strike, government procurement of anti-retrovirals ("ARVs") from donors in preference to accessing the
awarded tender and the two biggest products in the Pharmaceutical division, Seretide and Truvada, facing generic competition for the first time. These
set-backs were mitigated over the course of the year through Aspen's success with Foxair, the generic of Seretide and by the launch of Tribuss, the
first generic once-a-day triple combination ARV in South Africa. Furthermore, with the depletion of the donor funds, the tender offtake regularised in the
second half of the year. IMS, the independent measure of market share, reported growth in Aspen's generic product range of 13%. Positive performance from new
product launches, volume increases and the Group's powerful distribution capabilities as the leader in the pharmaceutical sector underpinned this division's
resurgence in the second half. Profit margin percentages were reduced for the year, affected by energy costs and wage inflation rising considerably more
rapidly than the 2,14% increase in the single exit price granted by the Department of Health. Lower pricing in the ARV tender also contributed to the margin
squeeze. Fortunately, Aspen managed to offset most of the margin pressure through efficiency gains in production.
The Consumer division suffered a contraction in revenue of 11% to R1,0 billion. The major factor was the expiry towards the end of the 2011 financial year of
the license with Pfizer for a range of infant milk products which contributed approximately R250 million to revenue on an annual basis. Growth of over 20% in
Aspen's infant milk brand, Infacare, has been effective in reducing the impact of the reversal.
The Group has continued to invest in capital projects to upgrade and expand production capabilities. During the course of the year additional tableting capacity
has been added in Port Elizabeth and a new liquid production facility has been completed in East London. A major refurbishment of the active pharmaceutical
ingredient facility in Cape Town is also underway which will reposition the Fine Chemicals business into a more vertically integrated role within the Group.
Rapson Papola, a 29-year old contractor from Polokwane, lost his life on 28 May 2012 as a result of an accident at Aspen's Infant Nutritionals facility. The thoughts of
the Board and management are with the Papola family.
Asia Pacific business
The Asia Pacific business, bolstered by the acquisition of the Sigma pharmaceutical business ("the Sigma business") in Australia in the second half of the 2011
financial year, delivered exceptional results. This region has increased its contribution to Group revenue from 23% to 37%. Revenue doubled to R6,0 billion and
EBITA grew by 128% to R1,5 billion.
The business acquired from Sigma has been fully integrated with Aspen's pre-existing business in Australia. Synergies have been gained in the establishment of a
single business platform. However, the biggest benefits have come through reduced cost of goods which have been realised by taking advantage of Aspen's competitive
manufacturing and procurement competencies. Aspen is well on track to achieve its target during the 2013 financial year of doubling the operating profit before
interest and taxation which was delivered by the Sigma business immediately prior to Aspens offer to acquire it. This despite the Australian regulator continuing
to cut pharmaceutical prices in terms of its price disclosure legislation.
The lower cost of goods achieved for products acquired in terms of the Sigma business acquisition has resulted in a widening of margin percentages. These advances have
been tempered by the conclusion of an important co-marketing arrangement with Eli Lilly & Company ("Lilly") which, by its nature, is at a low margin percentage. Under
this arrangement Aspen co-promotes Zyprexa, Lilly's market leading psychotic disorder product, which has just come off patent, as well as promoting generic versions of
the molecule,Olanzapine.
The consolidation and rationalisation of the Australian manufacturing facilities acquired from Sigma is progressing well. The Tennyson site was sold in 2011.
The Croydon and Noble Park sites are in the process of phased closure. Dandenong and Baulkham Hills are the remaining production sites.
Aspen Philippines commenced trade during the year and has approximately 100 sales personnel actively deployed.
International business
The International business recorded a 3% reduction in revenue to R2,5 billion, but nevertheless raised EBITA by 28% to R0,9 billion. Customer sales in
Latin America increased 11% to R1,0 billion buoyed by strong performances in Brazil and Venezuela. In Mexico sales were flat, but revenue was sacrificed to
third party distributors of global brands in the balance of the territory. The overall reduction in revenue in the International business was as a consequence of the
transitioning of certain global brands to third party distributors and the elimination of low margin sales to third parties. Profit margins benefitted from the ongoing
projects to reduce the cost of goods of global brands.
Sub-Saharan Africa business
In Sub-Saharan Africa, gross revenue increased by 27% to R1,7 billion and EBITA improved 40% to R248 million. Growth in profit was achieved by each of the three
elements of the business. The GSK Aspen Healthcare for Africa collaboration advanced revenue strongly with increased representation and new product launches.
The Shelys operation, based in East Africa, achieved excellent margin gains through improved business efficiency. Exports into the region also increased.
Funding
Borrowings, net of cash, increased from R6,3 billion to R7,1 billion over the year. Operating cash flows remained strong with cash generated from operating
activities improving by 19% to R2,9 billion. Investing activities, strongly influenced by the expansion of the product portfolio and production enhancements,
utilised R2,7 billion of the cash generated. The capital distribution (R458 million) and the effect of a weakening Rand on foreign denominated borrowings
(R527 million) were the other material factors in the increase in net borrowings. Gearing was 29% at year end, reduced from 34% a year ago.
On 28 June 2012, black economic empowerment shareholder, Imithi Investments (Pty) Ltd, converted 17,6 million preference shares into an equivalent number of
ordinary shares. This increased Aspen's ordinary shares in issue at 30 June 2012 to 454 779 million.
Interest paid, net of interest received, was R0,5 billion (2011: R0,4 billion) reflecting higher average borrowing levels and was covered nine times by operating
profit before amortisation.
Prospects
Aspen has withstood the challenges of the last year and has remained the top supplier of medicines in South Africa. One in four prescriptions dispensed in the
country in the private sector is for an Aspen product. The Group's leadership position in the public sector was endorsed with the recent award of the oral solid
dose tender with Aspen once again receiving the largest allocation of 25%. The Group is well positioned in a market where demographic factors and the need to
improve accessibility to medicines will drive expansion. Elimination of the one-off events which affected the South African Pharmaceutical division in 2012 and
the benefits of a strong product pipeline will see increased growth momentum in the 2013 financial year. A number of legislative changes remain under consideration by
the regulator, including international benchmarking and the capping of logistics fees. The timing and consequences of the resolution of these matters remain uncertain.
The South African government's policy decision to support domestic manufacturers in future public sector tenders is welcomed and will be of assistance to Aspen in the
upcoming ARV tender due for award in December 2012. The Consumer division is targeting an improved performance supported by innovation in the infant nutritionals range.
The Asia Pacific business is destined to become Aspen's biggest contributor to revenue once it commences distribution of the portfolio of 25 established
pharmaceutical brands which the Group has agreed to acquire from GlaxoSmithKline ("GSK"). Completion of this transaction is conditional upon the approval of
the Australian competition authorities. A decision in this regard is expected in the last quarter of 2012. Aspen is uniquely positioned in the Australian market with
the most extensive product offering which spans branded, generic, over-the-counter ("OTC") and consumer products. This strengthens the Group's trading capacity and has
made Aspen an obvious candidate for co-marketing arrangements such as that concluded with Lilly for Zyprexa. Further improvements in cost of goods, new product launches
and opportunities arising from the unique positioning of the Australian business are expected to more than offset the effects of the legislated price cuts in the year
ahead. Prospects for future growth in the region from South East Asian markets are being actively explored. Trade has commenced in Aspen's newly established
subsidiary in the Philippines and the feasibility of expansion into Thailand, Taiwan and Malaysia is presently under investigation.
The Group continues to see Latin America as the area of greatest growth potential within the International business. Aspen will seek opportunities to establish a
presence in further Latin American territories in addition to the existing operations in Brazil, Venezuela and Mexico. Expansion of its portfolio of global brands
remains a focus area for the Group in the year ahead. In the past year this portfolio was complemented by the addition of a range of OTC brands acquired from GSK
with an excellent fit to Aspen's geographic footprint.
There are a number of new product launches planned in sub-Saharan Africa over the next year to support growth initiatives. The region does however remain vulnerable
to political instability. Elections are scheduled in Kenya and Ghana during the course of the next year.
The past year has seen Aspen increase its diversity in product offering and geographic exposure. This has served the Group well in extending its record of growth for
a fourteenth consecutive year. The Group will continue to focus on strengthening existing businesses, extending territorial coverage and increasing the product
offering in areas which offer good future growth potential.
Capital distribution
Taking into account the earnings and cash flow performance for the year ended 30 June 2012, existing debt service commitments and future proposed investments,
notice is hereby given that a capital distribution of 157 cents per ordinary share (2011: 105 cents) by way of a capital reduction has been declared, payable out
of share premium to shareholders recorded in the share register of the company at the close of business on Friday, 12 October 2012. The directors are of the opinion
that the company will satisfy the solvency and liquidity requirements of Sections 4 and 46 of the Companies Act, 2008. Future distributions will be decided on a
year-to-year basis.
In compliance with IAS 10: Events After Balance Sheet Date, the capital distribution will only be accounted for in the financial statements for the year ending
30 June 2013.
Last day to trade cum capital distribution Friday, 5 October 2012
Shares commence trading ex capital distribution Monday, 8 October 2012
Record date Friday, 12 October 2012
Payment date Monday, 15 October 2012
Share certificates may not be dematerialised or rematerialised between Monday, 8 October 2012 and Friday, 12 October 2012.
By order of the Board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
12 September12
These results have been prepared under the supervision of the Deputy Group Chief Executive, MG Attridge, CA(SA) and approved by the Board of Directors.
Mr Kuseni Dlamini was appointed to the Board of Directors on 1 April 2012.
Basis of accounting
The consolidated preliminary results have been prepared in accordance with International Financial Reporting Standards, IFRIC interpretations,
the Listings Requirements of the JSE Ltd, South African Companies Act, 2008 and the presentation and disclosure requirements of IAS 34 - Interim Reporting.
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 2011.
The results of the Sigma business are included for the full 12 months with a five month comparative in the prior year. The segmental analysis for the year ended
30 June 2011 was restated to disclose the Asia Pacific region as a separate segment due to the increased materiality of this region to the Group.
Audit review
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.
Group statement of financial position
At 30 June 2012 2012 2011
Notes R'million R'million
ASSETS
Non-current assets
Property, plant and equipment 3 807,0 3 651,5
Goodwill G# 5 343,9 4 626,6
Intangible assets H# 11 869,8 8 916,7
Other non-current financial receivables 31,5 11,8
Deferred tax assets 234,4 216,5
Total non-current assets 21 286,6 17 423,1
Current assets
Inventories 3 292,0 2 628,1
Receivables, prepayments and other current assets 3 825,2 3 263,8
Cash and cash equivalents 3 313,5 3 039,2
Cash restricted for use 1,2 28,7
Total operating current assets 10 431,9 8 959,8
Assets classified as held-for-sale - 414,5
Total current assets 10 431,9 9 374,3
Total assets 31 718,5 26 797,4
SHAREHOLDERS' EQUITY
Share capital and share premium (including treasury shares) 4 703,1 4 776,2
Reserves 12 686,3 8 288,0
Ordinary shareholders' equity 17 389,4 13 064,2
Preference shares - equity component - 162,0
Non-controlling interests 8,7 61,1
Total shareholders' equity 17 398,1 13 287,3
LIABILITIES
Non-current liabilities
Preference shares - liability component - 381,3
Borrowings 6 254,1 4 249,0
Deferred revenue 143,6 148,2
Deferred tax liabilities 536,0 504,9
Retirement benefit obligations 66,4 18,8
Total non-current liabilities 7 000,1 5 302,2
Current liabilities
Trade and other payables 2 929,2 2 830,8
Borrowings 4 127,1 5 138,0*
Other current liabilities 241,9 142,6
Derivative financial instruments 22,1 65,6
Total operating current liabilities 7 320,3 8 177,0
Liabilities associated with assets held-for-sale - 30,9
Total current liabilities 7 320,3 8 207,9
Total liabilities 14 320,4 13 510,1
Total equity and liabilities 31 718,5 26 797,4
Number of shares in issue (net of treasury shares) (000) 454 186 433 883
Net asset value per share (cents) 3 828,7 3 011,0
#See notes on Supplementary information.
*Bank overdrafts are included within borrowings under current liabilities.
Group statement of comprehensive income
For the year ended 30 June 2012 % 2012 2011
Notes change R'million R'million
CONTINUING OPERATIONS
Revenue 23 15 255,8 12 383,2
Cost of sales (7 979,5) (6 769,7)
Gross profit 30 7 276,3 5 613,5
Selling and distribution expenses (1 967,4) (1 460,7)
Administrative expenses (1 101,8) (827,3)
Other operating income 218,9 192,8
Other operating expenses (485,4) (369,3)
Operating profit 25 3 940,6 3 149,0
Investment income C# 275,4 193,2
Financing costs D# (776,0) (605,3)
Profit before tax 26 3 440,0 2 736,9
Tax (772,3) (582,1)
Profit after tax from continuing operations 2 667,7 2 154,8
Discontinued operations
Profit after tax for the year from discontinued operations E# 159,2 434,0
Profit for the year 9 2 826,9 2 588,8
OTHER COMPREHENSIVE INCOME, NET OF TAX
Currency (losses)/gains on net investment in Aspen Asia Pacific (53,3) 81,2
Net investment hedge profit/(loss) on capital reduction in Aspen Asia Pacific 6,8 (66,1)
Net gains from cash flow hedging in respect of the Sigma transaction - 216,8
Cash flow hedges realised - 4,6
Currency translation gains/(losses) 1 494,4 (223,0)
Unrealised cash flow hedges recognised 32,6 59,7
Total comprehensive income 4 307,4 2 662,0
Profit for the year attributable to:
Equity holders of the parent 2 817,8 2 577,8
Non-controlling interests 9,1 11,0
2 826,9 2 588,8
Total comprehensive income attributable to:
Equity holders of the parent 4 295,4 2 655,3
Non-controlling interests 12,0 6,7
4 307,4 2 662,0
Weighted average number of shares in issue (000) 436 303 432 914
EARNINGS PER SHARE
Basic earnings per share (cents)
From continuing operations 23 609,3 495,2
From discontinued operations 36,5 100,3
8 645,8 595,5
Diluted earnings per share (cents)
From continuing operations 23 588,2 476,5
From discontinued operations 35,0 95,5
9 623,2 572,0
CAPITAL DISTRIBUTION
Capital distribution per share (cents) 105,0 70,0
The capital distribution of 105,0 cents relates to the distribution declared on 13 September 2011 and paid on
17 October 2011. (The capital distribution of 70,0 cents relates to the distribution declared on 15 September
2010 and paid on 11 October 2010).
#See notes on Supplementary information.
Group statement of headline earnings
For the year ended 30 June 2012 % 2012 2011
change R'million R'million
HEADLINE EARNINGS
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 9 2 817,8 2 577,8
Continuing operations
- Impairment of goodwill (net of tax) 43,6 -
- Impairment of property, plant and equipment (net of tax) 25,2 7,4
- Net impairment of intangible assets (net of tax) 107,9 83,8
- Profit on the sale of tangible and intangible assets (net of tax) (0,7) (11,8)
- Insurance compensation - capital component (net of tax) - (11,5)
Discontinued operations
- Profit on the sale of the Oncology business (net of tax) - (367,9)
- Profit on the sale of Co-Pharma Ltd (net of tax) - (7,4)
- Profit on the sale of the personal care products in South Africa (net of tax) (35,6) (18,1)
- Profit on the sale of the Campos facility and related products
in Brazil (net of tax (121,9) -
26 2 836,3 2 252,3
Headline earnings
From continuing operations 28 2 834,6 2 211,7
From discontinued operations 1,7 40,6
26 2 836,3 2 252,3
Headline earnings per share (cents)
From continuing operations 27 649,7 510,9
From discontinued operations 0,4 9,4
25 650,1 520,3
Diluted headline earnings per share (cents)
From continuing operations 28 626,9 491,4
From discontinued operations 0,4 8,9
25 627,3 500,3
NORMALISED HEADLINE EARNINGS
Reconciliation of normalised headline earnings
Headline earnings 26 2 836,3 2 252,3
Continuing operations
- Restructuring costs (net of tax) 52,0 23,1
- Transaction costs (net of tax) 24,8 121,7
- Foreign exchange gain on transaction funding (net of tax) (34,5) -
Discontinued operations
- Restructuring costs (net of tax) - 3,7
20 2 878,6 2 400,8
Normalised headline earnings
From continuing operations 22 2 876,9 2 356,5
From discontinued operations 1,7 44,3
20 2 878,6 2 400,8
Normalised headline earnings per share (cents)
From continuing operations 21 659,4 544,3
From discontinued operations 0,4 10,2
19 659,8 554,5
Normalised diluted headline earnings per share (cents)
From continuing operations 22 636,2 523,3
From discontinued operations 0,4 9,7
19 636,6 533,0
Segmental analysis
For the year ended 30 June 2012 Restated
2012 2011 %
R'million % of total Rmllion % of total change
REVENUE FROM CONTINUING OPERATIONS
South Africa 6 159,9 38 6 296,2 48 (2)
Sub-Saharan Africa 1 651,7 10 1 300,9 10 27
Asia Pacific 6 021,0 37 3 003,5 23 100
International 2 522,9 15 2 613,5 19 (3)
Total gross revenue 16 355,5 100 13 214,1 100 24
Adjustment* (1 099,7) (830,9)
Total revenue 15 255,8 12 383,2 23
OPERATING PROFIT BEFORE AMORTISATION FROM
CONTINUING OPERATIONS
Adjusted for specific non-trading items
South Africa 1 768,4 40 1 934,1 55 (9)
Operating profit 1 616,2 1 857,4 (13)
Amortisation of intangible assets 66,8 51,1
Insurance compensation - capital component - (14,3)
Restructuring costs 3,4 11,3
Impairment of assets 82,0 28,6
Sub-Saharan Africa 247,9 6 177,4 5 40
Operating profit 241,9 182,4 33
Amortisation of intangible assets 4,2 3,7
Profit on sale of non-current assets - (8,7)
Restructuring costs 1,7 -
Impairment of assets 0,1 -
Asia Pacific 1 460,2 33 641,7 19 128
Operating profit 1 291,6 551,1 134
Amortisation of intangible assets 100,2 51,2
Profit on sale of non-current assets - (6,4)
Transaction costs - 24,5
Restructuring costs 68,4 21,3
International 938,5 21 735,4 21 28
Operating profit 790,9 558,1 42
Amortisation of intangible assets 41,1 37,0
Transaction costs - 61,6
Impairment of assets 106,5 78,7
4 415,0 100 3 488,6 100 27
ENTITY WIDE DISCLOSURE - REVENUE FROM
CONTINUING OPERATIONS
Analysis of revenue in accordance with
customer geography
South Africa - pharmaceuticals 5 161,7 32 5 177,6 39 0
South Africa - consumer 998,2 6 1 118,5 9 (11)
Sub-Saharan Africa 1 651,7 10 1 300,9 10 27
Asia Pacific 6 088,8 37 3 090,9 23 97
Latin America 1 023,7 6 924,9 7 11
Rest of the world 1 431,4 9 1 601,3 12 (11)
Total gross revenue 16 355,5 100 13 214,1 100 24
Adjustment* (1 099,7) (830,9)
Total revenue 15 255,8 12 383,2 23
*The profit share from the GSK Aspen Healthcare for Africa Collaboration has been disclosed as revenue in the statement of comprehensive income.
For segmental purposes the total revenue for the GSK Aspen Healthcare for Africa Collaboration has been included to provide enhanced revenue
visibility in this territory.
Group statement of cash flows
For the year ended 30 June 2012 2 012 2 011
Notes R'million R'million
CASH FLOWS FROM OPERATING ACTIVITIES
Cash operating profit 4 746,0 3 845,0
Changes in working capital (869,6) (463,2)
Cash generated from operations 3 876,4 3 381,8
Net financing costs paid (513,9) (401,3)
Tax paid (454,1) (534,6)
Cash generated from operating activities* 2 908,4 2 445,9
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure - property, plant and equipment (469,6) (651,5)
Proceeds on the sale of property, plant and equipment 36,5 2,8
Capital expenditure - intangible assets (2 148,8) (188,7)
Proceeds on the sale of intangible assets 2,8 197,5
Acquisition of subsidiaries and businesses M# (315,6) (5 893,2)
Disposal of associate and joint ventures - 628,1
(Increase)/decrease in other non-current financial receivables (19,7) 25,1
Proceeds on the sale of assets held-for-sale L# 250,4 10,3
Advance proceeds on assets held-for-sale - 290,2
Net investment hedge in Aspen Asia Pacific 6,8 (66,1)
Capital funding from non-controlling interests 0,9 -
Cash used in investing activities (2 656,3) (5 645,5)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings 138,3 3 567,8
Dividends paid (2,0) (1,7)
Proceeds from issue of ordinary share capital 25,1 10,0
Acquisition of treasury shares (19,3) (20,1)
Capital distribution (457,6) (302,9)
Decrease/(increase) in cash restricted for use as security for borrowings 27,2 (6,1)
Cash (used in)/generated from financing activities (288,3) 3 247,0
Movement in cash and cash equivalents before translation effects of foreign operations (36,2) 47,4
Translation effects on cash and cash equivalents of foreign operations 273,2 (107,3)
CASH AND CASH EQUIVALENTS
Movement in cash and cash equivalents 237,0 (59,9)
Cash and cash equivalents at the beginning of the year 1 752,8 1 812,7
Cash and cash equivalents at the end of the year 1 989,8 1 752,8
*Operating cash flow per share (cents) % change
From continuing operations 20 666,2 554,8
From discontinued operations 0,4 10,2
18 666,6 565,0
THE ABOVE INCLUDES DISCONTINUED OPERATIONS OF:
Cash generated from operating activities 1,7 44,2
Cash and cash equivalents per the statement of cash flows 1,7 44,2
Reconciliation of cash and cash equivalents
Cash and cash equivalents per the statement of financial position 3 313,5 3 039,2
Less: bank overdrafts (1 323,7) (1 286,4)
1 989,8 1 752,8
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash-on-hand, deposits held on
call with banks less bank overdrafts.
#See notes on Supplementary information.
Group statement of changes in equity
For the year ended 30 June 2012 Share capital and
share premium Preference Total attributable
(including shares - equity to equity holders Non-controlling
treasury shares) Reserves component of the parent interests Total
R'million R'million R'million R'million R'million R'million
BALANCE AT 1 JULY 2010 5 089,0 5 580,0 162,0 10 831,0 55,2 10 886,2
Total comprehensive income - 2 655,3 - 2 655,3 6,7 2 662,0
Profit for the year - 2 577,8 - 2 577,8 11,0 2 588,8
Other comprehensive income - 77,5 - 77,5 (4,3) 73,2
Capital distribution (302,9) - - (302,9) - (302,9)
Dividends paid - - - - (1,7) (1,7)
Issue of ordinary share capital - share schemes 10,0 - - 10,0 - 10,0
Treasury shares purchased (20,1) - - (20,1) - (20,1)
Deferred incentive bonus shares excercised 0,2 (0,2) - - - -
Share options and appreciation rights expensed (including deferred incentive bonus) - 26,3 - 26,3 - 26,3
Equity portion of tax claims in respect of share schemes - 23,6 - 23,6 - 23,6
Hyperinflationary adjustment - Venezuela - 3,0 - 3,0 0,9 3,9
BALANCE AT 30 JUNE 2011 4 776,2 8 288,0 162,0 13 226,2 61,1 13 287,3
Total comprehensive income - 4 295,4 - 4 295,4 12,0 4 307,4
Profit for the year - 2 817,8 - 2 817,8 9,1 2 826,9
Other comprehensive income - 1 477,6 - 1 477,6 2,9 1 480,5
Capital distribution (457,6) - - (457,6) - (457,6)
Subsidiary capital reduction - 1,0 - 1,0 - 1,0
Acquisition of non-controlling interests in subsidiaries - (117,3) - (117,3) (64,3) (181,6)
Capital funding from non-controlling interest - - - - 0,9 0,9
Dividends paid - - - - (2,0) (2,0)
Issue of ordinary share capital 401,9 - - 401,9 - 401,9
Issue of ordinary share capital - share schemes 25,1 - - 25,1 - 25,1
Issue of ordinary share capital - conversion of preference shares 376,8 - - 376,8 - 376,8
Treasury shares purchased (19,3) - - (19,3) - (19,3)
Deferred incentive bonus shares excercised 1,9 (1,9) - - - -
Share options and appreciation rights expensed (including deferred incentive bonus) - 24,5 - 24,5 - 24,5
Equity portion of tax claims in respect of share schemes - 30,6 - 30,6 - 30,6
Conversion of preference shares - 162,0 (162,0) - - -
Hyperinflationary adjustment - Venezuela - 4,0 - 4,0 1,0 5,0
BALANCE AT 30 JUNE 2012 4 703,1 12 686,3 - 17 389,4 8,7 17 398,1
Group supplementary information
For the year ended 30 June 2012 2012 2011
R'million R'million
A. CAPITAL EXPENDITURE
Incurred 2 618,4 840,2
- Tangible assets 469,6 651,5
- Intangible assets 2 148,8 188,7
Contracted 94,5 183,2
- Tangible assets 81,8 134,2
- Intangible assets 12,7 49,0
Authorised but not contracted for 3 602,2 333,4
- Tangible assets 345,0 275,3
- Intangible assets 3 257,2 58,1
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING)
Depreciation of property, plant and equipment 252,7 215,0
Amortisation of intangible assets 212,3 143,0
Impairment of property, plant and equipment 32,3 10,0
Impairment of intangible assets 112,7 97,3
Impairment of goodwill 43,6 -
Share-based payment expenses - employees 31,5 30,6
Transaction costs - 86,1
Restructuring costs 73,5 32,6
Insurance compensation (63,0) (156,5)
C. INVESTMENT INCOME
Interest received 275,4 193,2
D. FINANCING COSTS
Interest paid (754,7) (611,1)
Capital raising fees (26,8) (33,2)
Net foreign exchange gains 2,5 60,8
Fair value gains on financial instruments 24,0 1,2
Notional interest on financial instruments 2,1 3,3
Preference share dividends paid (23,1) (26,3)
(776,0) (605,3)
E. PROFIT AFTER TAX FOR THE YEAR FROM DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations 1,7 40,6
Profit on the sale of the Campos facility and related non-core hospital
products in Brazil 121,9 -
Profit on the sale of the personal care products in South Africa 35,6 18,1
Profit on the sale of Co-Pharma Ltd - 7,4
Profit on the sale of the Oncology business - 367,9
159,2 434,0
F. CURRENCY TRANSLATION MOVEMENTS
Currency translation movements on the translation of the offshore
businesses is as a result of the difference between the weighted average
exchange rate used for trading results and the closing exchange rate applied
in the statement of financial position. For the year the weaker closing Rand
translation rate significantly increased the Group net asset value.
G. GOODWILL MOVEMENT
Opening balance 4 626,6 456,1
Acquisition of subsidaries 104,3 4 029,0
Impairment of goodwill (43,6) -
Translation of foreign operations 656,6 141,5
5 343,9 4 626,6
H. INTANGIBLE ASSETS MOVEMENT
Opening balance 8 916,7 8 609,9
Additions 2 148,8 188,7
Disposals (2,8) (179,0)
Amortisation (212,3) (144,4)
Acquisition of subsidiaries 4,2 1 083,9
Software projects implemented 22,2 31,5
Impairment (112,7) (97,3)
Hyperinflationary adjustment - Venezuela 0,4 -
Transferred to assets held-for-sale - (29,4)
Translation of foreign operations 1 105,3 (547,2)
11 869,8 8 916,7
I. CONTINGENT LIABILITIES
There are contingent liabilities in respect of:
Additional payments in respect of the Quit worldwide intellectual property rights 8,1 6,7
Contingency arising from product liability claim 21,3 17,6
Contingencies arising from labour cases 4,2 24,8
Guarantees covering loan and other obligations to third parties 3,3 1,7
Import duty contingency 10,8 10,3
J. TAX CONTINGENCY
Following an audit, the South African Revenue Services ("SARS") notified Aspen
by way of letters of findings of its intention to impose tax on various South
African companies relating to prior years. The letters of findings deal mainly
with corporate income tax and employees tax issues. Aspen has responded to
these letters of findings and believes that all issues raised by SARS are
defendable and that Aspen has sufficient evidence in support of its views and
treatment of these tax matters. Due to the uncertainties inherent in the
process, particularly in the early stages, the quantum of the amounts claimed
by SARS and the timing of resolution of these matters cannot be determined.
K. GUARANTEES TO FINANCIAL INSTITUTIONS
Material guarantees given by Group companies for indebtedness of subsidiaries
to financial institutions 5 003,0 5 787,6
L. PROCEEDS FROM SALE OF ASSETS HELD-FOR-SALE
Campos facility and related products in Brazil 175,0 -
Personal care products in South Africa 75,4 -
Beta facility in Kenya - 10,3
250,4 10,3
Campos facility and related products in Brazil
An agreement was reached in June 2011 for the sale of the Campos facility and related
products in Brazil to Strides Arcolab Ltd as the specialised manufacture of penicillins
and penems, primarily for the public sector and contract manufacturing business, is not
considered to be core to the product offering of the Brazilian company. The conditions
precedent were fulfilled in December 2011.
Personal care products in South Africa
The sale of the South African toothpaste business to the Unilever group was concluded in
September 2011.
M. ACQUISITIONS OF SUBSIDIARIES AND BUSINESSES
2012
-Aspen Pharmacare Holdings Ltd acquired the remaining 40% non-controlling interest shareholding in Shelys
Africa Ltd effective from 14 April 2012. This increases the ownership in Shelys Africa Ltd to 100%.
-Aspen Pharmacare Holdings Ltd acquired a further 42,5% shareholding in Brimpharm SA (Pty) Ltd
effective from 31 May 2012. This increases the ownership in Brimpharm SA (Pty) Ltd to 92,5%.
Total
R' million
Shelys Africa Ltd purchase consideration 141,8
Brimpharm SA (Pty) Ltd purchase consideration 39,8
AHN Pharma (Pty) Ltd purchase consideration* 45,4
Sigma business# 88,6
As per the statement of cash flows 315,6
Formule AHN Pharma Sigma
Naturelle (Pty) Ltd business
Restated (Pty) Ltd Total
2011 R'million R'million R'million R'million
Fair value of assets and liabilities acquired in subsidiaries and businesses
Property, plant and equipment - 2,6 471,0 473,6
Intangible assets 20,2 31,5 1 036,4 1 088,1
Inventories 3,5 18,8 521,3 543,6
Trade and other receivables 6,7 29,3 338,5 374,5
Current tax assets 0,2 3,8 - 4,0
Cash and cash equivalents 6,1 22,3 - 28,4
Non-current borrowings - (12,0) - (12,0)
Deferred tax assets/(liabilities) 2,3 (15,2) 35,0 22,1
Trade and other payables (2,0) (35,7) (391,3) (429,0)
Fair value of net assets acquired 37,0 45,4 2 010,9 2 093,3
Goodwill acquired - - 4 133,3 4 133,3
*Deferred consideration paid in 2012 financial year - (45,4) - (45,4)
#Payment of pre-acquisition liabilities identified during the 2012
financial year - - (88,6) (88,6)
Decrease in investment in associate (2,0) - - (2,0)
Purchase consideration paid 35,0 - 6 055,6 6 090,6
Net gains from cash flow hedging in respect of the Sigma business - - (169,0) (169,0)
Cash and cash equivalents in acquired subsidiaries (6,1) (22,3) - (28,4)
Cash outflow/(inflow) on acquisition 28,9 (22,3) 5 886,6 5 893,2
The initial accounting for these business combinations has been finalised in the year ended 30 June 2012.
Distinguishing the post-combination earnings of the Sigma business from earnings of the combined entity is
impracticable as significant estimate of amounts are required which are not reasonably determinable, given that
the operations of Sigma have been intergrated with those of the Aspen Australia operations.
Subsequent events
A multi-territory agreement was concluded with GSK in April 2012 for the acquisition of a portfolio of established
OTC products in selected territories including South Africa, Australia and Brazil for a consideration of R2,1 billion.
The leading products include recognised household brands such as Phillips Milk of Magnesia, Dequadin, Solpadeine, Cartia,
Zantac and Borstol. The deal was effective 1 May 2012 except for certain markets which required competition authority
approval: South Africa, Swaziland, Namibia, Kenya, Tanzania and the product, Zantac, in Australia. Competition authority
approval was granted in Australia, South Africa and Swaziland during July and August 2012. Kenya, Tanzania and Namibia are
the only markets for which competition authority approval have not yet been granted.
A selected territory agreement was concluded in May 2012 with Novartis Pharma AG for the acquisition of two pharmaceutical
products, Enablex and Tofranil, for a total consideration of R442 million. The principle territories for Enablex include Brazil,
South Africa, Mexico and Turkey and for Tofranil include Brazil and Mexico. The transaction was subject to suspensive conditions
which were fulfilled and closed on 31 July 2012.
An agreement was concluded with GSK in August 2012 for the acquisition of a portfolio of 25 established pharmaceutical products
distributed in Australia for a consideration of R2,2 billion. The transaction is subject to competition authority approval, the
decision on which is expected in the last quarter of 2012. The products include well recognised brands such as Amoxil, Augmentin,
Imigran, Kapanol, Lamactil, Mesasal, Timentin, Valtrex, Zantac and Zofran.
Directors: NJ Dlamini* (Chairman), RC Andersen*, MG Attridge, MR Bagus*, JF Buchanan*, KD Dlamini*, SA Hussain*,
CN Mortimer*, SB Saad, SV Zilwa* *Non-executive directors
Mr Kuseni Dlamini has been appointed to the Board of Directors subsequent to the interim results for the six months
ended 31 December 2011.
Company secretary: R Verster
Registered office: Building 8, Healthcare Park, Woodlands Drive, Woodmead
Sponsor: Investec Bank Ltd (Registration number 1969/004763/06). 100 Grayston Drive, Sandton
Transfer secretaries: Computershare Investor Services (Pty) Ltd
(Registration number 1987/003382/06). 70 Marshall Street, Johannesburg 2001.
PO Box 61051, Marshalltown 2107
Disclaimer
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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", "indicate","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 statments. By their
very nature forwardlooking statements involved inherent risks and uncertainties, both general and specific, and there risks
that prodictions, forecasts, projects 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 are 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 the JSE Limited. 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 report are unaudited.
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