Wrap Text
Reviewed provisional Group financial results for the year ended 30 June 2013
Aspen Pharmacare Holdings Limited (Aspen)
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
Reviewed provisional Group financial results for the year ended 30 June 2013
- Revenue from continuing operations increased 27% to R19,3 billion
- Operating profit from continuing operations increased 28% to R5,0 billion
- Offshore contribution increased to 63% of Group operating profit
- Normalised diluted headline earnings per share from continuing operations increased
31% to 836,2 cents
- Diluted cash flow per share from continuing operations increased 37% to 874,1 cents
- Headline earnings per share increased 21% to 788,0 cents
- Earnings per share increased 20% to 773,0 cents
- Total distribution to shareholders of 157 cents per share
Commentary
Group performance
Aspen achieved revenue growth of 27% to R19,3 billion and increased operating profit by 28% to R5,0 billion in the
year ended 30 June 2013. Normalised headline earnings, being headline earnings adjusted for specific non-trading items,
advanced 32% to R3,8 billion and normalised diluted headline earnings per share was up 31% at 836,2 cents. All business
segments recorded growth in revenue and operating profit with the International business leading the way.
South African business
In the South African business, revenue improved by 20% to R7,4 billion and operating profit before amortisation,
adjusted for specific non-trading items (EBITA) increased 11% to R2,0 billion.
Revenue in the Pharmaceutical division rose 20% to R6,2 billion. Organic growth was complemented by a strong
contribution from new product launches in the private sector. In the public sector expanding demand for antiretrovirals (ARVs)
added to the growth momentum although the greater weighting of revenue from low margin ARVs was the largest factor in the
contraction of margin percentages. The weakening of the Rand and rising inflation in administered costs also put pressure on margins
although this was partially relieved by gains in production efficiency and procurement savings.
The Consumer division delivered an 18% increase in revenue with nutritionals the biggest growth driver. Innovative new
products, growing-up-milk and ready-to-feed infant milk, were launched expanding Aspens offering in the nutritional
sector.
Capital expansion projects have continued according to plan at all of the South African sites. In Port Elizabeth, land
was acquired immediately adjacent to Aspens site. Part of this land is already under construction with the
commencement of the building of the high containment suite while the remaining land remains available for future projects. The
upgrade of packing capabilities is also underway in Port Elizabeth. The expansion and enhancement of manufacturing capabilities
is continuing at Fine Chemicals in line with the strategy to achieve greater vertical integration of this site with Group active
pharmaceutical ingredient (API) demands. The projects underway in East London and at Clayville are nearing completion.
Asia Pacific business
The regions continuous record of growth since the business was established in this territory in 2001 continued with a
gain of 26% in revenue to R7,6 billion and with EBITA increasing by 30% to R1,9 billion.
Rand-denominated performance was enhanced by the relative strengthening of the local currencies. The Asia Pacific region was the
largest contributor to revenue in the Group for the first time, accounting for 37% of total gross revenue. This was achieved despite
the mandated price cuts in Australia imposed by existing legislation. Revenue growth was supported by acquired products and
pleasing progress in the Asian territories. EBITA advances benefitted from the continuation of the project to source more
competitive product costs including the migration of production to the Port Elizabeth site in South Africa. The newly
established subsidiary in Malaysia commenced trade in July 2013 and a further subsidiary has been established in Taiwan.
Distribution in Australia of the classic brands portfolio acquired by the Group from GlaxoSmithKline (GSK) in December
2012 and the infant milk products acquired by the Group from Nestlé in May 2013, have been successfully taken on.
International business
The International business showed strong growth with revenue increasing 48% to R3,7 billion and EBITA rising 59% to
R1,5 billion. Latin America showed the biggest advance where sales to customers in this territory climbed 53% to R1,6
billion. A combination of organic and acquisitive growth propelled the Latin American performance despite the impact of the
currency devaluation in Venezuela. The global brands portfolio was an important contributor to the growth achieved in
the International business and the margin improvement projects for these products continued to yield favourable outcomes.
Contributions from certain territories in this business have also benefitted from relative currency strength against the
Rand.
Sub-Saharan Africa business
Gross revenue in sub-Saharan Africa increased 26% to R2,1 billion driven by expanded promotional support. The negative
growth in EBITA during the first six months was reversed with an increase of 16% in EBITA in the second six months
bringing the result for the year to R252 million, an increase of 2%.
Funding
Borrowings, net of cash, increased by R4,0 billion over the year to R11,1 billion. R5,6 billion was spent on business
and product acquisitions while a further R0,7 billion was invested in capital projects. The Group continued its record
of strong cash flow generation with cash inflows of R4,0 billion from operating activities. Gearing moved up to 33% at
year end from 29% a year prior. Financing costs, net of interest received, were covered 10 times by operating profit
before amortisation.
The Group is presently engaged in a major debt raising and restructure exercise to support the impending transactions
(see below).
Impending transactions
Aspen has undertaken extensive corporate activity over the past year and the following transaction, certain of which are subject
to suspensive conditions, are being progressed by Group companies:
- The acquisition of an API manufacturing business, primarily in the Netherlands, from MSD for approximately
36 million plus the value of inventory, to be effective 1 October 2013. Further details appear in the SENS announcement of
27 June 2013.
- In a related agreement with MSD, Aspen has an option to acquire a portfolio of 11 branded finished dose form molecules
covering a diverse range of therapeutic areas for approximately US$600 million. The most likely date for the acquisition of
this portfolio through the exercise of the option is 31 December 2013. Further details appear in the SENS announcement of
27 June 2013.
- A binding, irrevocable offer submitted to GSK to acquire the Arixtra and Fraxiparine/Fraxodi brands worldwide
(excluding China, India and Pakistan) together with the specialised sterile production site which manufactures these brands
for approximately £700 million. In terms of the offer the date of acquisition of the brands would be 31 December 2013 and
the date of acquisition of the site would be 30 April 2014. Further details appear in the SENS announcements of 18 June 2013
and 24 July 2013.
- The acquisition from Nestlé of certain licence rights to infant nutritional intellectual property, net assets including
a production facility in Mexico and shares in infant nutritional businesses in several countries in Latin America
with a proposed effective date of 28 October 2013. Further details appear in the SENS announcement of 7 August 2013.
- The acquisition from Nestlé of certain rights to intellectual property licenses and net assets in the infant nutritionals
business presently conducted by Pfizer in certain southern African territories, including South Africa, remains subject to
the approval of the South African competition authorities. Further details appear in the SENS announcement of 18 April 2013.
Prospects
The completion of the impending MSD and GSK transactions will transform the Group, expanding the global brands
portfolio with the addition of established products which have strong market acceptance and widening the geographic reach of
Aspen. This will enable Aspen to establish its own business units in Russia, other former Soviet republics and across Europe as well
as extending its influence in Latin America and Asia. Significant management attention is being devoted to the development and
implementation of the plans necessary to successfully execute these acquisitions. It is expected that synergies will be realised
between these two transactions in addition to the focus Aspen will place on pursuing opportunities to achieve greater
market penetration with the brands and improving production efficiencies.
The International business will be the greatest beneficiary of the completion of the impending transactions and this
will add further momentum to the impressive growth achieved by this region in the past year.
Growth in the Asia Pacific territory will be supported by the impending transactions and the development of Aspens
footprint in Asia.
As the market leader in the private and public pharmaceutical sectors in South Africa, Aspen is well positioned to
extend the solid performance achieved in the past year through organic growth. An entire new management team has been
installed in the Consumer division with further impetus pending the approval by the competition authorities of the infant
nutritional transaction with Nestlé.
In sub-Saharan Africa the focus will be on continuing the progress made in the second half of the past year. This
territory remains vulnerable to geo-political volatility.
Provided there are no material changes in the prevailing macro-economic conditions, in the forthcoming year it is expected that
the solid growth platform already established in all all regions will be strongly supplemented by contributions to the
International and Asia Pacific territories from the take-on of the impending transactions, particularly in the second half
of the year. Debt levels in the Group will initially be close to Aspens self-imposed limits,
but this gearing is expected to reduce quite rapidly through strong operational cash flows.
Cash dividend and capital distribution
Taking into account the earnings and cash flow performance for the year ended 30 June 2013, existing debt service
commitments and future proposed investments, notice is hereby given that the Board has declared a total distribution of
157 cents per share (2012: capital distribution of 157 cents per share), comprising:
- a cash dividend out of income reserves of 131 cents per ordinary share. The dividend carries STC credits equivalent to
131 cents per ordinary share and no dividends withholding tax will therefore be payable by shareholders who are not exempt from
paying dividends withholding tax on this portion of the distribution; and
- a capital distribution of 26 cents per ordinary share (2012: 157 cents) by way of a capital reduction payable out
of share premium.
The total distribution is payable to shareholders recorded in the share register of the company at the close of
business on 4 October 2013.
Shareholders should seek their own tax advice of the consequences associated with the total distribution.
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.
The income tax reference number of Aspen is 9325178714.
The Share Capital in issue at present is 455 738 785 shares.
In compliance with IAS 10: Events After Balance Sheet Date, the total distribution will only be accounted for in the
financial statements in the year ending 30 June 2014.
Last day to trade cum total distribution Friday, 4 October 2013
Shares commence trading ex total distribution Monday, 7 October 2013
Record date Friday, 11 October 2013
Payment date Monday, 14 October 2013
Share certificates may not be dematerialised or rematerialised between Monday, 7 October 2013 and Friday, 11 October 2013.
By order of the Board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
11 September 2013
Group statement of financial position
2013 2012
at 30 June 2013 Notes Rmillion Rmillion
ASSETS
Non-current assets
Property, plant and equipment 4 342,6 3 807,0
Goodwill G# 5 973,2 5 343,9
Intangible assets H# 18 933,0 11 869,8
Other non-current assets 26,7 31,5
Deferred tax assets 369,2 234,4
Total non-current assets 29 644,7 21 286,6
Current assets
Inventories 4 100,9 3 292,0
Receivables, prepayments and other current assets 5 657,5 3 826,4
Cash and cash equivalents 6 018,6 3 313,5
Total current assets 15 777,0 10 431,9
Total assets 45 421,7 31 718,5
SHAREHOLDERS' EQUITY
Share capital and share premium (including treasury shares) 3 989,2 4 703,1
Reserves 18 804,6 12 686,3
Ordinary shareholders' equity 22 793,8 17 389,4
Non-controlling interests 5,1 8,7
Total shareholders equity 22 798,9 17 398,1
LIABILITIES
Non-current liabilities
Borrowings 8 923,5 6 254,1
Deferred revenue 139,5 143,6
Deferred tax liabilities 600,5 536,0
Retirement benefit obligations 94,0 66,4
Total non-current liabilities 9 757,5 7 000,1
Current liabilities
Trade and other payables 4 174,6 2 929,2
Borrowings* 8 152,7 4 127,1
Other current liabilities 533,8 241,9
Derivative financial instruments 4,2 22,1
Total current liabilities 12 865,3 7 320,3
Total liabilities 22 622,8 14 320,4
Total equity and liabilities 45 421,7 31 718,5
Number of shares in issue (net of treasury shares) (000) 455 208 454 186
Net asset value per share (cents) 5 007,3 3 828,7
#See notes on Supplementary information.
*Bank overdrafts are included within borrowings under current liabilities.
Group statement of cash flows
2013 2012
For the year ended 30 June 2013 Notes Rmillion Rmillion
CASH FLOWS FROM OPERATING ACTIVITES
Cash operating profit 5 960,1 4 746,0
Changes in working capital (590,1) (869,6)
Cash generated from operations 5 370,0 3 876,4
Net financing costs paid (584,6) (513,9)
Tax paid (799,3) (454,1)
Cash generated from operating activities 3 986,1 2 908,4
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure - property, plant and equipment (667,1) (469,6)
Replacement (161,7) (102,9)
Expansion (505,4) (366,7)
Proceeds on the sale of property, plant and equipment 10,7 36,5
Capital expenditure - intangible assets (3 654,9) (2 148,8)
Proceeds on the sale of intangible assets 3,5 2,8
Acquisition of subsidiaries and businesses L# (1 578,6) (315,6)
Increase in other non-current financial receivables - (19,7)
Proceeds on the sale of assets held-for-sale M# - 250,4
Prepayment in anticipation of acquisition N# (394,7) -
Stamp duty on acquisitions (2,1) -
Net investment hedge profit in Aspen Asia Pacific - 6,8
Capital funding from non-controlling interests - 0,9
Cash used in investing activities (6 283,2) (2 656,3)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings 4 336,0 138,3
Dividends paid (0,2) (2,0)
Proceeds from issue of ordinary share capital 9,6 25,1
Treasury shares purchased (21,1) (19,3)
Capital distribution (714,9) (457,6)
Decrease in cash restricted for use as security for
borrowings 1,3 27,2
Cash generated from/(used in) financing activities 3 610,7 (288,3)
MOVEMENT IN CASH AND CASH EQUIVALENTS BEFORE TRANSLATION
EFFECTS OF FOREIGN OPERATIONS 1 313,6 (36,2)
Translation effects on cash and cash equivalents of foreign
operations 112,8 273,2
CASH AND CASH EQUIVALENTS
Movement in cash and cash equivalents 1 426,4 237,0
Cash and cash equivalents at the beginning of the year 1 989,8 1 752,8
Cash and cash equivalents at the end of the year 3 416,2 1 989,8
Change
Diluted operating cash flow per share (cents)
From continuing operations 37% 874,1 638,6
From discontinued operations - 0,4
37% 874,1 639,0
THE ABOVE INCLUDES DISCONTINUED OPERATIONS OF:
Cash generated from operating activities - 1,7
Cash and cash equivalents per the statement of cash flows - 1,7
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents per the statement of financial
position 6 018,6 3 313,5
Less: bank overdrafts (2 602,4) (1 323,7)
3 416,2 1 989,8
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 comprehensive income
2013 2012
For the year end 30 June 2013 Notes Change Rmillion Rmillion
CONTINUING OPERATIONS
Revenue 27% 19 308,0 15 255,8
Cost of sales (10 077,3) (7 979,5)
Gross profit 27% 9 230,7 7 276,3
Selling and distribution expenses (2 343,5) (1 967,4)
Administrative expenses (1 366,0) (1 101,8)
Other operating income 104,2 218,9
Other operating expenses (582,1) (485,4)
Operating profit B# 28% 5 043,3 3 940,6
Investment income C# 298,8 275,4
Financing costs D# (852,7) (776,0)
Profit before tax 31% 4 489,4 3 440,0
Tax (975,3) (772,3)
Profit after tax from continuing operations 3 514,1 2 667,7
DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations E# - 159,2
Profit for the year 24% 3 514,1 2 826,9
OTHER COMPREHENSIVE INCOME, NET OF TAX*
Currency losses on net investment in Aspen Asia Pacific (133,3) (53,3)
Net investment hedge profit in Aspen Asia Pacific - 6,8
Currency translation gains 2 675,7 1 494,4
Cash flow hedges recognised 20,3 32,6
Remeasurement of retirement benefit obligations (4,7) -
Total comprehensive income 6 072,1 4 307,4
Profit for the year attributable to
Equity holders of the parent 3 520,1 2 817,8
Non-controlling interests (6,0) 9,1
3 514,1 2 826,9
Total comprehensive income attributable to
Equity holders of the parent 6 078,2 4 295,4
Non-controlling interests (6,1) 12,0
6 072,1 4 307,4
Weighted average number of shares in issue ('000) 455 397 436 303
Diluted weighted average number of shares in issue ('000) 456 027 455 161
EARNINGS PER SHARE
Basic earnings per share (cents)
From continuing operations 27% 773,0 609,3
From discontinued operations - 36,5
20% 773,0 645,8
Diluted earnings per share (cents)
From continuing operations 31% 771,9 588,2
From discontinued operations - 35,0
24% 771,9 623,2
CAPITAL DISTRIBUTION
Capital distribution per share (cents) 157,0 105,0
The capital distribution of 157,0 cents relates to the distribution declared on 12 September 2012 and paid on
15 October 2012. (The capital distribution of 105,0 cents relates to the distribution declared on
13 September 2011 and paid on 17 October 2011).
* Remeasurement of retirement benefit obligations will not be reclassified to profit and loss. All other items
in other comprehensive income may be reclassified to profit and loss.
Group statement of headline earnings
2013 2012
For the year ended 30 June 2013 Change Rmillion Rmillion
HEADLINE EARNINGS
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 25% 3 520,1 2 817,8
Adjusted for:
Continuing operations
- Impairment of goodwill (net of tax) - 43,6
- Net impairment of property, plant and equipment (net of tax) 9,5 25,2
- Net impairment of intangible assets (net of tax) 60,4 107,9
- Profit on the sale of tangible and intangible assets (net of tax) (1,6) (0,7)
Discontinued operations
- Profit on the sale of the personal care products in
South Africa (net of tax) - (35,6)
- Profit on the sale of the Campos facility and
related products in Brazil (net of tax) - (121,9)
27% 3 588,4 2 836,3
Headline earnings
From continuing operations 27% 3 588,4 2 834,6
From discontinued operations - 1,7
27% 3 588,4 2 836,3
Headline earnings per share (cents)
From continuing operations 21% 788,0 649,7
From discontinued operations - 0,4
21% 788,0 650,1
Diluted headline earnings per share (cents)
From continuing operations 26% 786,9 626,9
From discontinued operations - 0,4
25% 786,9 627,3
NORMALISED HEADLINE EARNINGS
Reconciliation of normalised headline earnings
Headline earnings 27% 3 588,4 2 836,3
Adjusted for:
Continuing operations
- Restructuring costs (net of tax) 106,2 52,0
- Transaction costs (net of tax) 82,0 24,8
- Settlement of product litigation (net of tax) 36,6 -
- Foreign exchange gain on transaction funding (net of tax) - (34,5)
32% 3 813,2 2 878,6
Normalised headline earnings
From continuing operations 33% 3 813,2 2 876,9
From discontinued operations - 1,7
32% 3 813,2 2 878,6
Normalised headline earnings per share (cents)
From continuing operations 27% 837,3 659,4
From discontinued operations - 0,4
27% 837,3 659,8
Normalised diluted headline earnings per share (cents)
From continuing operations 31% 836,2 636,2
From discontinued operations - 0,4
31% 836,2 636,6
Group statement of changes in equity
Share capital and
share premium Total attributable
(including Preference shares - to equity holders Non-controlling
treasury shares) Reserves equity component of the parent interests Total
For the year ended 30 June 2013 Rmillion Rmillion Rmillion Rmillion Rmillion Rmillion
BALANCE AT 1 JULY 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 interests - - - - 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 - preference shares 376,8 - - 376,8 - 376,8
Treasury shares purchased (19,3) - - (19,3) - (19,3)
Deferred incentive bonus shares exercised 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
Total comprehensive income - 6 078,2 - 6 078,2 (6,1) 6 072,1
Profit for the year - 3 520,1 - 3 520,1 (6,0) 3 514,1
Other comprehensive income - 2 558,1 - 2 558,1 (0,1) 2 558,0
Capital distribution (714,9) - - (714,9) - (714,9)
Stamp duty on acquisitions - (2,1) - (2,1) - (2,1)
Dividends paid - - - - (0,2) (0,2)
Issue of ordinary share capital - share schemes 9,6 - - 9,6 - 9,6
Treasury shares purchased (21,1) - - (21,1) - (21,1)
Deferred incentive bonus shares exercised 12,5 (12,5) - - - -
Share options and appreciation rights expensed
(including deferred incentive bonus) - 20,0 - 20,0 - 20,0
Equity portion of tax claims in respect
of share schemes - 23,8 - 23,8 - 23,8
Hyperinflationary adjustment - Venezuela - 10,9 - 10,9 2,7 13,6
BALANCE AT 30 JUNE 2013 3 989,2 18 804,6 - 22 793,8 5,1 22 798,9
Group segmental analysis
2013 2012
For the year ended 30 June 2013 Rmillion % of total Rmillion % of total Change
REVENUE FROM CONTINUING OPERATIONS
South Africa^ 7 376,8 35 6 159,9 38 20%
Asia Pacific 7 590,5 37 6 021,0 37 26%
International@ 3 726,1 18 2 522,9 15 48%
Sub-Saharan Africa 2 081,5 10 1 651,7 10 26%
Total gross revenue 20 774,9 100 16 355,5 100 27%
Adjustment* (1 466,9) (1 099,7)
Total revenue 19 308,0 15 255,8 27%
OPERATING PROFIT BEFORE AMORTISATION FROM CONTINUING OPERATIONS
Adjusted for specific non-trading items ("EBITA")
South Africa 1 965,3 35 1 768,4 40 11%
Operating profit# 1 867,5 1 616,2 16%
Amortisation of intangible assets 60,5 66,8
Transaction costs 31,3 -
Restructuring costs - 3,4
Impairment of assets 6,0 82,0
Asia Pacific 1 894,0 34 1 460,2 33 30%
Operating profit# 1 608,2 1 291,6 25%
Amortisation of intangible assets 128,0 100,2
Transaction costs 6,0 -
Restructuring costs 151,8 68,4
International 1 488,7 27 938,5 21 59%
Operating profit# 1 321,7 790,9 67%
Amortisation of intangible assets 60,8 41,1
Settlement of product litigation 43,0 -
Impairment of assets 63,2 106,5
Sub-Saharan Africa 252,3 4 247,9 6 2%
Operating profit# 245,9 241,9 2%
Amortisation of intangible assets 6,4 4,2
Restructuring costs - 1,7
Impairment of assets - 0,1
Total EBITA 5 600,3 100 4 415,0 100 27%
ENTITY WIDE DISCLOSURE - REVENUE FROM CONTINUING OPERATIONS
Analysis of revenue in accordance with customer geography
South Africa - pharmaceutical 6 201,9 30 5 161,7 32 20%
South Africa - consumer 1 175,0 6 998,2 6 18%
Asia Pacific 7 697,6 37 6 088,8 37 26%
Sub-Saharan Africa 2 123,7 10 1 651,7 10 29%
Latin America 1 567,3 7 1 023,7 6 53%
Rest of the world 2 009,4 10 1 431,4 9 40%
Total gross revenue 20 774,9 100 16 355,5 100 27%
Adjustment* (1 466,9) (1 099,7)
Total revenue 19 308,0 15 255,8 27%
^ Excludes intersegment revenue of R43,0 million (2012: R29,6 million).
@ Excludes intersegment revenue of R1 201,5 million (2012: R432,3 million).
* The profit share from the Aspen GSK Healthcare for Africa collaboration has been disclosed as revenue in the statement of
comprehensive income. For segmental purposes the total revenue for the Aspen GSK Healthcare for Africa collaboration has
been included to provide enhanced revenue visibility in this territory.
# The aggregate segmental operating profit total of R5 043,3 million (2012: R3 940,6 million) agrees to the statement of
comprehensive income.
Group supplementary information
2013 2012
For the year ended 30 June 2013 Rmillion Rmillion
A. CAPITAL EXPENDITURE
Incurred 4 322,0 2 618,4
- Tangible assets 667,1 469,6
- Intangible assets 3 654,9 2 148,8
Contracted 651,8 171,5
- Tangible assets 525,5 158,8
- Intangible assets 126,3 12,7
Authorised but not contracted for 1 242,2 3 713,6
- Tangible assets 1 052,0 456,4
- Intangible assets 190,2 3 257,2
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER
CHARGING/(CREDITING):
Depreciation of property, plant and equipment 294,5 252,7
Amortisation of intangible assets 255,7 212,3
Net impairment of property, plant and equipment 9,6 32,3
Net impairment of intangible assets 59,6 112,7
Impairment of goodwill - 43,6
Share-based payment expenses - employees 31,2 31,5
Transaction costs 37,3 -
Restructuring costs 151,8 73,5
Insurance compensation - (63,0)
Settlement of product litigation 43,0 -
C. INVESTMENT INCOME
Interest received 298,8 275,4
D. FINANCING COSTS
Interest paid (842,3) (754,7)
Capital raising fees (51,9) (26,8)
- Transactions (49,5) (26,8)
- Trading (2,4) -
Net foreign exchange (losses)/gains (34,3) 2,5
Fair value gains on financial instruments 77,5 24,0
Notional interest on financial instruments (1,7) 2,1
Preference share dividends paid - (23,1)
(852,7) (776,0)
E. PROFIT AFTER TAX FOR THE YEAR FROM DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations - 1,7
Profit on the sale of the Campos facility and related products in Brazil - 121,9
Profit on the sale of the personal care products in South Africa - 35,6
- 159,2
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 5 343,9 4 626,6
Acquisition of subsidiaries 176,5 104,3
Impairment of goodwill - (43,6)
Translation of foreign operations 452,8 656,6
5 973,2 5 343,9
H. INTANGIBLE ASSETS MOVEMENT
Opening balance 11 869,8 8 916,7
Additions 3 654,9 2 148,8
GSK pharmaceutical products* 2 196,6 -
Novartis pharmaceutical products# 459,5 -
GSK OTC products^ 586,1 1 589,2
Other 412,7 559,6
Disposals (0,5) (2,8)
Amortisation (255,7) (212,3)
Acquisition of subsidiaries 1 246,1 4,2
Software projects implemented 14,0 22,2
Impairment (94,5) (112,7)
Impairment losses reversed 34,9 -
Hyperinflationary adjustment - Venezuela 0,8 0,4
Translation of foreign operations 2 463,2 1 105,3
18 933,0 11 869,8
* The transaction relating to the acquisition of a portfolio of 25 established pharmaceutical
products from GSK for the Australian market became effective on 1 December 2012.
# A selected territory agreement with Novartis Pharma AG for the acquisition of two pharmaceutical
products, Enablex and Tofranil, became effective on 1 August 2012.
^ 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. 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. Namibia, Kenya and Tanzania received competition authority approval in
September 2012, October 2012 and February 2013 respectively.
2013 2012
Rmillion Rmillion
I. CONTINGENT LIABILITIES
There are contingent liabilities in respect of:
Additional payments in respect of the Quit worldwide
intellectual property rights - 8,1
Contingency relating to product litigation 25,9 21,3
Contingencies arising from labour cases 4,3 4,2
Import duty contingency 10,4 10,8
Other contingent liabilities 2,0 3,3
J. TAX CONTINGENCY
Following an audit, the South African Revenue Services (SARS) has issued
tax assessments on various South African companies relating to prior
years. Aspen has objected to these assessments and has filed a review
application to have the assessments set aside. Aspen is confident that
it will succeed in this dispute based on the outcome of recent court
cases dealing with similar matters. Due to the uncertainties inherent in
the process, the timing of the resolution of the dispute and the outcome
thereof cannot be determined.
K. GUARANTEES TO FINANCIAL INSTITUTIONS
Material guarantees given by Group companies for indebtedness of
subsidiaries to financial institutions 5 600,6 5 003,0
L. ACQUISITION OF SUBSIDIARIES AND BUSINESSES
2013
Aspen Global Incorporated and Aspen Asia Pacific (Pty) Ltd concluded agreements
with Nestlé on 29 April 2013 in respect of the acquisition of certain rights to
intellectual property licenses and 100% of the shares in the infant
nutritionals business previously conducted by Pfizer which distributes a
portfolio of infant nutritional products in Australia.
Total
Rmillion
Fair value of assets and liabilities acquired in subsidiary
Property, plant and equipment 1,7
Intangible assets 1 246,1
Deferred tax 9,9
Inventories 74,2
Trade and other receivables 294,5
Trade and other payables (274,3)
Fair value of net assets acquired 1 352,1
Goodwill acquired 176,5
Purchase consideration 1 528,6
Deferred receivable 50,0
Cash outflow on acquisition 1 578,6
The initial accounting for this business combination has been reported on a
provisional basis and will only be finalised in the year ending 30 June 2014.
Post-acquisition revenue included in the statement of comprehensive income was R137.3 million.
The estimation of post-acquisition operating profits is impracticable and not reasonably determinable
as the operations of the infant nutritionals business have not yet fully transitioned to Aspen.
The determination and disclosure of historical audited revenue and operating profits for the 12 months
preceding the effective date is not possible as the information for the full period is not available.
Goodwill
The goodwill arising on acquisition of the infant nutritionals business recognises:
- the future benefits of rebranding rights on the existing and future infant milk
product range; and
- the synergies from the consolidation of the infant milk business with Aspens
existing Australian consumer business including cost savings and increased
sales force coverage benefits.
The total amount of goodwill recognised is not tax deductible.
2012
Aspen Pharmacare Holdings Ltd acquired the remaining 40% minority shareholding in
Shelys Africa Ltd effective from 14 April 2012. This increased 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 increased the ownership in Brimpharm
SA (Pty) Ltd to 92,5%.
Total
Rmillion
Shelys Africa Ltd purchase consideration 141,8
Brimpharm SA (Pty) Ltd purchase consideration 39,8
AHN Pharma (Pty) Ltd purchase consideration 45,4
Final payment for the Sigma business 88,6
As per the statement of cash flows 315,6
2013 2012
Rmillion Rmillion
M. 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
- 250,4
N. PREPAYMENT IN ANTICIPATION OF ACQUISITION
Aspen Pharmacare Holdings Ltd concluded agreements with Nestlé S.A. in respect of the acquisition of certain rights to
intellectual property licenses, net assets and shares in the infant nutritionals businesses previously conducted by Pfizer
which distribute a portfolio of infant nutritional products in Australia and certain southern African territories
(South Africa, Botswana, Namibia, Lesotho, Swaziland and Zambia). The consideration for all territories was paid following
approval by the Australian competition authorities on 29 April 2013. The approval from the South African competition authority
remains pending and consequently the purchase consideration payment relating to the southern African territories has been classified
as a prepayment.
Basis of accounting
The reviewed provisional Group financial 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 reviewed provisional Group financial results are consistent with those used
in the annual financial statements for the year ended 30 June 2012.
* These reviewed provisional Group financial results have been prepared under the supervision of the Deputy Group Chief Executive,
MG Attridge, CA (SA) and approved by the Board of Directors.
Audit review
These results have been reviewed by Aspens auditors, PricewaterhouseCoopers Inc. Their unqualified review report is
available for inspection at the companys registered office. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the companys auditor.
Directors: N J Dlamini (Chairman)*, R C Andersen*#, M G Attridge, M R Bagus*#, J F Buchanan*#, D K Dlamini*#,
S A Hussain*, C N Mortimer*, S B Saad, S V Zilwa*# / *Non-executive director / # Independent
Company Secretary: R Verster
There have been no changes in the directorate and company secretary of Aspen during the reporting period
Registered office: Building number 8, Healthcare Park, Woodlands Drive, Woodmead
PO Box 1587, Gallo Manor, 2052
Telephone 011 239 6100
Telefax 011 239 6144
Transfer secretary: Computershare Investor Services (Pty) Ltd / (Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001. (PO Box 1053, Johannesburg, 2001).
Disclaimer
We may make 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 "prospects", 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 statements. By their very nature,
forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks 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 are discussed in each years 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 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 report are unaudited.
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