Wrap Text
Unaudited interim financial results for the six months ended 31 December 2014
Aspen Pharmacare Holdings Limited
(Registration number 1985/002935/06)
Share code: APN
ISIN: ZAE000066692
(“Aspen” or “the Group”)
Unaudited interim financial results for the six months ended 31 December 2014
COMMENTARY
GROUP PERFORMANCE
Aspen increased gross revenue 47% to R19,0 billion and raised operating profit 50% to R4,3 billion in the six months
ended 31 December 2014, supported by the contribution from acquisitions concluded in the prior year. Profit for the
period and earnings per share each advanced 27% to R2,5 billion and 539 cents respectively. Normalised headline earnings,
being headline earnings adjusted for specific non-trading items, and normalised headline earnings per share were both 22%
higher at R2,6 billion and 569 cents respectively. The strong results were achieved despite foreign exchange losses of
R343 million caused by the US Dollar strengthening relative to the Group’s major trading currencies. This is estimated
to have reduced earnings per share by 67 cents.
INTERNATIONAL BUSINESS
Revenue in the International business was 158% higher at R8,8 billion and operating profit before amortisation,
adjusted for specific non-trading items (“EBITA”), was up 127% to R2,5 billion. The International business performance
was boosted by the inclusion of the significant transactions completed during the previous financial year and delivered 46%
of Group gross revenue and 53% of Group EBITA. The disposal of the rights to commercialise the fondaparinux products (being
Arixtra and the authorised generic thereof) in the United States to Mylan for a consideration of USD300 million became
effective during the period, with the consequential loss of contribution.
Europe CIS revenue climbed 229% to R5,1 billion. Sales of finished dose form pharmaceuticals to healthcare providers
comprised R3,4 billion of the total sales with the greatest portion of the balance being from active pharmaceutical
ingredient (“API”) sales. Currency weakness relative to the Rand in Europe CIS diluted results in this region.
Revenue from customers in Latin America advanced 118% to R2,6 billion, largely driven by the recent infant milk
formula acquisition. Results from Venezuela have been consolidated using hyper-inflationary accounting principles. In
addition, given the economic uncertainty in this country, an average exchange rate of 10,0 Bolivars to the US Dollar
has been adopted despite the exchange rate for supply of medicines being set at 6,30 Bolivars.
Sales to customers in the Rest of the World were up 36% to R0,9 billion despite the disposal of the fondaparinux
products for the United States to Mylan.
Capital expenditure projects are continuing at Aspen Oss and Aspen Notre Dame de Bondeville (“NDB”). At Aspen Oss
investments are being made in support of the sustainability of the site and at Aspen NDB additional capacity is being
added.
ASIA PACIFIC BUSINESS
Revenue in the Asia Pacific region was 3% higher at R4,4 billion. EBITA declined by 1% to R1,0 billion. Positive underlying
growth in the Australian business countered the consequences of disposals and licence terminations second half of
the previous financial year. The Nutritionals products led the way with strong double-digit growth. Legislated price
cuts have continued in Australia, but were largely negated by product launches, pricing strategies, reduction of
discounts and improved cost of goods.
Sales to customers in Asia continued on an impressive growth trajectory, doubling to R0,6 billion.
SOUTH AFRICAN BUSINESS
Revenue in the South African business grew by 12% to R4,3 billion. Private sector pharmaceutical sales increased 10%
through a combination of organic growth and new product launches. Sales in the public sector were flat. The consumer
division raised revenue by 30%, led by the Nutritionals products, with Infacare achieving an increase in its share of
this category. There was also an improvement in revenue from manufacturing for third parties.
EBITA continued to be negatively affected by the weakening of the Rand relative to the US Dollar as well as high wage
and energy cost inflation. Consequently EBITA only increased by 4% to R1,0 billion.
The capital expenditure projects at the Port Elizabeth finished dosage form manufacturing site and the Cape Town API
manufacturing site are progressing well. In Port Elizabeth, the building of the high containment facility is nearing
completion, after which validation of the facility will commence. The packing facility upgrade is also approaching
finalisation and construction of the additional specialist sterile manufacturing facility is underway. This additional
specialist sterile facility will provide enhanced security of supply for Arixtra and Fraxiparine as an alternate
manufacturing source to Aspen NDB. At Fine Chemicals, production has started in certain of the newly constructed
suites while other parts of this expansion and upgrade project remain in progress.
SUB-SAHARAN BUSINESS
In Sub-Saharan Africa, revenue improved by 5% to R1,5 billion. Supply constraints, particularly relating to Augmentin,
a leading product in the region, limited growth. Margin improvement initiatives yielded positive results and lifted
EBITA 12% to R210 million.
FUNDING
Borrowings, net of cash, reduced by R1,2 billion over the 6 months to R28,6 billion despite relative foreign exchange
movements adding R1,5 billion to the closing balance. Group operating cash flows were again strong and cash generated
from operating activities accelerated 128%. Gearing declined to 49% at the period end. Net interest paid, was covered
six times by operating profit before amortisation.
Net foreign exchange losses of R343 million were incurred, largely as a result of the strengthening of the US Dollar
against Aspen’s primary trading currencies during the course of the six months.
PROSPECTS
The results for the first six months have been unfavourably affected by relative currency movements. Aspen remains
vulnerable to a continued strengthening of the US Dollar against its primary trading currencies of the Euro, the Australian
Dollar and the Rand.
Recent acquisitions have enabled the Group to achieve end-to-end integration of the supply chain for injectable
anti-coagulants. The effective integration of this supply chain and the harnessing of the resultant economies of scale are the
focus of a number of profit- enhancement projects. Improved procurement and production efficiencies are being targeted for
Aspen’s key anti-coagulant portfolio. This portfolio will also benefit from the completion of the transaction which adds
Mono-Embolex to the product offering in Germany. Positive advances have been made in the technical work being
undertaken, which is focused on securing increased production of the API for Orgaran, an effective treatment for
heparin-induced-thrombosis, with significant growth prospects once supply is unrestricted. The transition of the recently
acquired products from GSK and Merck is nearing completion, which allows for better co-ordinated promotion and control of these
products. Work is also proceeding favourably to improve the cost of goods for the Nutritionals products and strategies to
increase share in Nutritionals in Latin America have been implemented.
These projects should particularly benefit the International region, the largest contributor to Group profits. This
segment is, however, also exposed to political and economic instability in Venezuela and Russia, two countries in which
Aspen had been expecting material growth. Remittance of funds to pay for products supplied to Venezuela has become
significantly constrained. The sharp devaluation of the Ruble in recent months has significantly diminished the value of
the business undertaken in Russia.
In the Asia Pacific region, the anticipated decline in performance due to the disposal of certain non-core products in
the prior year and the exit from licence arrangements was substantially covered by a strong performance in the first
half. However, Australia will remain exposed to these consequences, a weakening currency and a further regulated price cut
into the second half. The recent formation of Aspen Japan, in which GSK has a 25% shareholding, is an important step
towards the Group establishing itself in that country, which is ranked second in the world by value of pharmaceutical
sales. Aspen Japan is scheduled to commence trade in July 2015.
Aspen continues to lead the industry in South Africa. The positive momentum established in private sector performance
in the first six months should be maintained. The Department of Health awarded a 7,5% increase in the single exit price
which will benefit the last quarter. Together with ongoing growth in volumes, this should provide some relief to the
pressure on margins created by currency-influenced increases in imported materials and sharp rises in administered costs.
The award of the anti-retroviral and other material public sector tenders recently provides guidance on volume expectations
for supply to Government and should assist in production planning.
In spite of political uncertainty, particularly in Nigeria and Tanzania where elections are scheduled, the business in
sub-Saharan Africa has potential for improved performance based on Aspen’s strong positioning in the region and the
underlying growth dynamic. However, continuation of the supply constraints experienced in the first half may prevent this
potential from being fully realised.
The restructuring and consolidation which is currently prevalent in the global pharmaceutical industry is creating a
number of acquisitive opportunities as businesses are re-sized and re-shaped. Aspen is well placed to participate in this
process and executive management is actively engaged in assessing possibilities. The Group has a proven capability to
successfully execute complex multi-territory transactions, which makes it a strong candidate for such opportunities.
By order of the Board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
5 March 2015
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2014 2013 2014
Notes Change R’million R’million R’million
Revenue 51% 18 033,3 11 976,3 29 515,1
Cost of sales (9 562,3) (6 398,7) (15 793,2)
Gross profit 52% 8 471,0 5 577,6 13 721,9
Selling and distribution expenses (2 809,7) (1 474,4) (4 401,3)
Administrative expenses (1 184,1) (932,2) (1 652,5)
Other operating income 168,7 51,5 692,4
Other operating expenses (327,5) (342,4) (935,7)
Operating profit B# 50% 4 318,4 2 880,1 7 424,8
Investment income C# 188,3 132,0 278,1
Financing costs D# (1 395,2) (537,9) (1 346,4)
Profit before tax 26% 3 111,5 2 474,2 6 356,5
Tax (653,4) (544,3) (1 351,0)
Profit 27% 2 458,1 1 929,9 5 005,5
OTHER COMPREHENSIVE INCOME , NET OF TAX*
Net investment hedge profit in Aspen Asia Pacific - 23,9 23,9
Net gains from cash flow hedging in respect of business acquisitions - 115,9 75,1
Net losses from cash flow hedging of prepayment in respect of
business acquisition - (41,0) -
Currency translation movements E# 282,6 1 066,0 1 829,3
Cash flow hedges recognised 8,7 4,3 3,0
Remeasurement of retirement and other employee benefits - - (25,3)
Total comprehensive income 2 749,4 3 099,0 6 911,5
Profit attributable to
Equity holders of the parent 2 460,3 1 930,6 5 007,6
Non-controlling interests (2,2) (0,7) (2,1)
2 458,1 1 929,9 5 005,5
Total comprehensive income attributable to
Equity holders of the parent 2 751,6 3 101,4 6 915,4
Non-controlling interests (2,2) (2,4) (3,9)
2 749,4 3 099,0 6 911,5
Weighted average number of shares in issue (‘000) 456 346 455 944 456 116
Diluted weighted average number of shares in issue (‘000) 456 449 456 574 456 219
EARNINGS PER SHARE
Basic earnings per share (cents) 27% 539,1 423,4 1 097,9
Diluted earnings per share (cents) 27% 539,0 422,8 1 097,6
DISTRIBUTION TO SHAREHOLDERS
Capital distribution per share (cents) 188,0 26,0 26,0
Cash dividend per share (cents) - 131,0 131,0
20% 188,0 157,0 157,0
The capital distribution to shareholders of 188,0 cents relates to the distribution declared on 10 September 2014 and
paid on 13 October 2014. (2013 distribution: the total distribution of 157,0 cents relates to the distribution declared
on 11 September 2013 and paid on 14 October 2013).
# See notes on Supplementary information.
* 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
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2014 2013 2014
Change R’million R’million R’million
HEADLINE EARNINGS
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 27% 2 460,3 1 930,6 5 007,6
Adjusted for:
- Net impairment/(reversal of impairment) of property, plant and
equipment (net of tax) 1,0 0,1 (5,8)
- Net impairment of intangible assets (net of tax) 10,4 0,5 112,6
- Loss/(profit) on the sale of tangible and intangible assets
(net of tax) 0,2 3,0 (478,7)
Headline earnings 28% 2 471,9 1 934,2 4 635,7
Headline earnings per share (cents) 28% 541,7 424,2 1 016,3
Diluted headline earnings per share (cents) 28% 541,6 423,6 1 016,1
NORMALISED HEADLINE EARNINGS
Reconciliation of normalised headline earnings
Headline earnings 28% 2 471,9 1 934,2 4 635,7
Adjusted for:
- Restructuring costs (net of tax) 24,2 8,1 29,4
- Transaction costs (net of tax) 101,0 201,1 435,9
- Net foreign exchange (gains)/losses from hedging of business
acquisitions (net of tax) - (9,3) 1,7
- Foreign exchange gain on settlement of transaction funding liability
(net of tax) - - (248,9)
Normalised headline earnings 22% 2 597,1 2 134,1 4 853,8
Normalised headline earnings
Normalised headline earnings per share (cents) 22% 569,1 468,1 1 064,2
Normalised diluted headline earnings per share (cents) 22% 569,0 467,4 1 063,9
GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
2014 2013 2014
R’million R’million R’million
ASSETS
Non-current assets
Property, plant and equipment 7 547,9 6 058,3 7 150,8
Goodwill 6 289,1 6 182,6 6 641,8
Intangible assets 38 615,6 36 333,7 35 698,9
Contingent environmental indemnification assets 699,2 724,8 727,1
Other non-current assets 450,3 26,7 298,9
Deferred tax assets 831,4 415,0 817,1
Total non-current assets 54 433,5 49 741,1 51 334,6
Current assets
Inventories 10 124,1 9 273,7 10 275,2
Receivables and other current assets 10 413,5 11 113,9 9 661,2
Cash and cash equivalents 10 935,7 10 425,6 8 225,6
Total operating current assets 31 473,3 30 813,2 28 162,0
Assets classified as held-for-sale - - 3 050,8
Total current assets 31 473,3 30 813,2 31 212,8
Total assets 85 906,8 80 554,3 82 547,4
SHAREHOLDERS’ EQUITY
Share capital and treasury shares 3 006,4 3 865,3 3 867,9
Reserves 27 734,9 21 300,0 25 006,3
Ordinary shareholders’ equity 30 741,3 25 165,3 28 874,2
Non-controlling interests 1,5 2,7 1,9
Total shareholders’ equity 30 742,8 25 168,0 28 876,1
LIABILITIES
Non-current liabilities
Borrowings 30 324,4 31 545,3 29 915,5
Contingent environmental liabilities 699,2 724,8 727,1
Unfavourable and onerous contracts 2 412,7 2 943,3 2 638,7
Other non-current liabilities 2 439,9 2 390,2 2 499,3
Deferred tax liabilities 1 411,6 596,9 1 351,1
Retirement and other employee benefits 501,7 148,7 497,6
Total non-current liabilities 37 789,5 38 349,2 37 629,3
Current liabilities
Trade and other payables 7 131,7 10 856,6 6 884,0
Borrowings* 9 230,1 5 111,1 8 075,3
Unfavourable and onerous contracts 324,8 336,4 335,3
Other current liabilities 687,9 733,0 747,4
Total current liabilities 17 374,5 17 037,1 16 042,0
Total liabilities 55 164,0 55 386,3 53 671,3
Total equity and liabilities 85 906,8 80 554,3 82 547,5
Number of shares in issue (net of treasury shares) (‘000) 456 041 455 781 455 914
Net asset value per share (cents) 6 740,9 5 521,4 6 333,3
*Includes bank overdrafts.
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2014
Total
Share capital attributable to
net of treasury equity holders Non-controlling
shares Reserves of the parent interests Total
R’million R’million R’million R’million R’million
BALANCE AT 1 JULY 2013 3 989,2 18 804,6 22 793,8 5,1 22 798,9
Total comprehensive income - 3 101,4 3 101,4 (2,4) 3 099,0
Profit for the period - 1 930,6 1 930,6 (0,7) 1 929,9
Other comprehensive income - 1 170,8 1 170,8 (1,7) 1 169,1
Capital distribution and dividends paid (118,6) (597,6) (716,2) - (716,2)
Issue of ordinary share capital - share schemes 1,6 - 1,6 - 1,6
Treasury shares purchased (22,3) - (22,3) - (22,3)
Deferred incentive bonus shares exercised 15,4 (15,4) - - -
Share options and appreciation rights expensed
(including deferred incentive bonus) - 7,0 7,0 - 7,0
BALANCE AT 31 DECEMBER 2013 3 865,3 21 300,0 25 165,3 2,7 25 168,0
BALANCE AT 1 JULY 2014 3 867,9 25 006,3 28 874,2 1,9 28 876,1
Total comprehensive income - 2 751,6 2 751,6 (2,2) 2 749,4
Profit for the period - 2 460,3 2 460,3 (2,2) 2 458,1
Other comprehensive income - 291,3 291,3 - 291,3
Capital distribution and dividends paid (857,3) - (857,3) (0,3) (857,6)
Issue of ordinary share capital - share schemes 0,2 - 0,2 - 0,2
Treasury shares purchased (21,7) - (21,7) - (21,7)
Deferred incentive bonus shares exercised 17,3 (17,3) - - -
Share options and appreciation rights expensed
(including deferred incentive bonus) - 8,1 8,1 - 8,1
Acquisition of non-controlling interests - (13,8) (13,8) 2,1 (11,7)
BALANCE AT 31 DECEMBER 2014 3 006,4 27 734,9 30 741,3 1,5 30 742,8
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2014 2013 2014
Notes R’million R’million R’million
CASH FLOWS FROM OPERATING ACTIVITIES
Cash operating profit 4 916,9 3 278,3 7 911,2
Changes in working capital (655,1) (1 113,6) (2 187,5)
Cash generated from operations 4 261,8 2 164,7 5 723,7
Net financing costs paid (1 029,8) (296,7) (709,1)
Tax paid (544,9) (691,7) (1 178,3)
Cash generated from operating activities 2 687,1 1 176,3 3 836,3
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditure - property, plant and equipment A# (809,2) (808,9) (1 328,9)
Proceeds on the sale of property, plant and equipment 13,0 6,7 106,3
Capital expenditure - intangible assets A# (764,1) (255,4) (700,4)
Proceeds on the sale of intangible assets 184,5 11,9 898,8
Acquisition of subsidiaries and businesses H# 4,3 (10 806,8) (19 764,2)
Acquisition of non-controlling interests (11,7) - -
Increase in other non-current assets (161,9) - -
Proceeds on the disposal of assets classified as held-for-sale 2 790,4 - -
Net investment hedge profit in Aspen Asia Pacific - 23,9 23,9
Net losses from cash flow hedging of prepayment in respect of
business acquisition - (41,0) -
Prepayment in anticipation of acquisition - (3 316,4) -
Payment of deferred consideration relating to prior year
business acquisitions (359,1) - (85,9)
Cash generated from/(used in) investing activities 886,2 (15 186,0) (20 850,4)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings 90,9 20 445,6 20 183,3
Capital distribution and dividends paid (857,6) (716,2) (716,2)
Proceeds from issue of ordinary share capital 0,2 1,6 2,7
Treasury shares purchased (21,7) (22,3) (22,3)
Cash (used in)/ generated from financing activities (788,2) 19 708,7 19 447,5
Movement in cash and cash equivalents before effects of exchange
rate changes 2 785,1 5 699,0 2 433,4
Effects of exchange rate changes (241,3) 517,5 312,2
Movement in cash and cash equivalents 2 543,8 6 216,5 2 745,6
Cash and cash equivalents at the beginning of the period/year 6 161,8 3 416,2 3 416,2
Cash and cash equivalents at the end of the period/year 8 705,6 9 632,7 6 161,8
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents per the statement of financial position 10 935,7 10 425,6 8 225,6
Less: bank overdrafts (2 230,1) (792,9) (2 063,8)
8 705,6 9 632,7 6 161,8
Change
Operating cash flow per share (cents) 128% 588,8 258,0 841,1
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.
GROUP SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
six months ended six months ended year ended
31 December 2014 31 December 2013 30 June 2014
R’million % of total R’million % of total Change R’million % of total
REVENUE
International^ 8 803,8 46 3 408,2 26 158% 12 724,8 40
Asia Pacific@ 4 422,7 23 4 291,4 33 3% 8 517,2 27
South Africa+ 4 306,7 23 3 836,7 30 12% 7 446,3 24
Sub-Saharan Africa 1 466,6 8 1 393,8 11 5% 2 744,3 9
Total gross revenue 18 999,8 100 12 930,1 100 47% 31 432,6 100
Adjustment* (966,5) (953,8) (1 917,5)
Total revenue 18 033,3 11 976,3 51% 29 515,1
OPERATING PROFIT BEFORE AMORTISATION
Adjusted for specific non-trading
items (“EBITA”)
International 2 452,1 53 1 081,4 33 127% 3 636,1 47
Operating profit# 2 269,0 932,1 143% 3 633,1
Amortisation of intangible assets 115,4 87,2 180,4
Transaction costs 34,3 55,3 255,0
Loss/(profit) on sale of assets 1,1 - (522,0)
Restructuring costs 32,3 6,8 -
Impairment of assets - - 89,6
Asia Pacific 981,8 21 988,1 31 (1%) 1 944,6 25
Operating profit# 912,5 915,5 0% 1 811,6
Amortisation of intangible assets 67,5 61,9 138,2
Transaction costs - 6,8 7,0
Restructuring costs 3,2 3,9 42,1
Reversal of impairment losses - - (5,8)
Profit on the sale of assets (1,4) - (48,5)
South Africa 993,1 21 955,8 30 4% 1 816,5 24
Operating profit# 930,3 848,1 10% 1 652,7
Amortisation of intangible assets 45,8 26,7 65,1
Transaction costs 5,2 80,4 -
Loss on the sale of assets 0,2 - 77,4
Impairment of assets 11,6 0,6 21,3
Sub-Saharan Africa 209,7 5 187,4 6 12% 333,6 4
Operating profit# 206,6 184,4 12% 327,4
Amortisation of intangible assets 3,1 3,0 6,2
Total EBITA 4 636,7 100 3 212,7 100 44% 7 730,8 100
ENTITY-WIDE DISCLOSURE - REVENUE
Analysis of revenue in accordance
with customer geography
Europe CIS 5 068,3 26 1 540,8 12 229% 7 200,1 23
Asia Pacific 4 645,0 24 4 297,8 33 8% 8 798,7 28
South Africa 4 310,0 23 3 840,3 30 12% 7 451,4 24
Latin America 2 618,0 14 1 202,7 9 118% 3 484,6 11
Sub-Saharan Africa 1 470,9 8 1 397,4 11 5% 2 752,6 9
Rest of the World 887,6 5 651,1 5 36% 1 745,2 5
Total gross revenue 18 999,8 100 12 930,1 100 47% 31 432,6 100
Adjustment* (966,5) (953,8) (1 917,5)
Total revenue 18 033,3 11 976,3 51% 29 515,1
^ Excludes intersegment revenue of R921,8 million (2013: R914,4 million).
@ Excludes intersegment revenue of R8,5 million (2013: nil).
+ Excludes intersegment revenue of R47,5 million (2013: R47,6 million).
* 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.
# The aggregate segmental operating profit total of R4 318,4 million (2013: R2 880,1 million) agrees to the statement of comprehensive income.
GROUP SUPPLEMENTARY INFORMATION
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2014 2013 2014
R’million R’million R’million
A. CAPITAL EXPENDITURE
Incurred 1 573,3 1 064,3 2 029,3
- Property, plant and equipment 809,2 808,9 1 328,9
- Intangible assets 764,1 255,4 700,4
Contracted 2 156,1 765,7 477,2
- Property, plant and equipment 512,1 635,8 425,7
- Intangible assets 1 644,0 129,9 51,5
Authorised but not contracted for 2 302,5 1 100,5 2 967,1
- Property, plant and equipment 2 100,9 723,4 2 652,9
- Intangible assets 201,6 377,1 314,2
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER CHARGING:
Depreciation of property, plant and equipment 288,2 188,0 433,9
Amortisation of intangible assets 231,8 178,8 389,9
Net impairment of assets 11,6 0,6 105,1
Share-based payment expenses - employees 20,8 15,5 47,5
Restructuring costs 35,5 10,7 42,1
Transaction costs 39,5 142,5 339,4
Hyperinflationary reduction in operating profit 2,2 - 80,9
C. INVESTMENT INCOME
Interest received 188,3 132,0 278,1
D. FINANCING COSTS
Interest paid (896,1) (459,4) (1 295,9)
Debt raising fees on acquisitions (65,8) (83,3) (154,7)
Net foreign exchange (losses)/gains (342,5) 48,9 80,7
Foreign currency gain on settlement of transaction funding liability - - 248,9
Fair value gains/(losses) on financial instruments 13,6 (8,3) (86,0)
Notional interest on financial instruments (88,2) (35,8) (131,4)
Net hyperinflationary adjustments (16,2) - (8,0)
(1 395,2) (537,9) (1 346,4)
E. CURRENCY TRANSLATION MOVEMENTS
Currency translation movements on the translation of the offshore businesses are as a result of the difference between
the weighted average exchange rate used for trading results and the opening and closing exchange rates applied in the
statement of financial position. For the period the weaker closing Rand translation rate increased the Group net asset
value.
F. CONTINGENT LIABILITIES
There are contingent liabilities in respect of:
Contingency relating to product litigation 30,0 27,3 27,6
Customs guarantee 14,2 14,2 14,8
Indirect tax contingent liability 24,4 10,4 36,1
Contingencies arising from labour cases 2,5 4,3 2,8
Other contingent liabilities 1,9 2,2 5,7
73,0 58,4 87,0
G. GUARANTEES TO FINANCIAL INSTITUTIONS
Guarantees given by Group companies for indebtedness of
subsidiaries to financial institutions 13 488,4 11 537,7 12 888,7
H. ACQUISITION OF SUBSIDIARIES AND BUSINESSES
2014
Set out below is the final accounting for the following June 2014 business combinations:
API business
On 1 October 2013, Aspen Pharmacare Holdings Limited acquired 100% shareholding of an active pharmaceutical ingredient
(“API”) manufacturing business from Merck which manufactures for Merck and the market generally and which is located in
the Netherlands, with a satellite facility and sales office in the US (“the API Business”) for a purchase consideration
of EUR 31 million (net of cash acquired).
The initial accounting for this business combination was reported on a provisional basis in June 2014 and was finalised
in the six months ended 31 December 2014.
Preliminary Adjustments Final
Fair value of assets and liabilities acquired R’million R’million R’million
Property, plant and equipment 589,1 - 589,1
Intangible assets 506,3 - 506,3
Contingent environmental indemnification assets 680,1 - 680,1
Deferred tax assets 47,0 (22,5) 24,5
Inventories 3 267,0 (119,2) 3 147,8
Trade and other receivables 392,5 160,8 553,3
Cash and cash equivalents 1 272,5 - 1 272,5
Contingent environmental liabilities (680,1) - (680,1)
Environmental liabilities (74,5) - (74,5)
Unfavourable and onerous contracts (2 791,1) (23,4) (2 814,5)
Trade and other payables (349,9) - (349,9)
Other non-current and current financial liabilities (1 146,2) 4,3 (1 141,9)
Purchase consideration paid 1 712,7 - 1 712,7
Cash and cash equivalents in acquired companies (1 272,5) - (1 272,5)
Cash outflow on acquisition 440,2 - 440,2
Merck products
Aspen Global Incorporated, a wholly owned subsidiary of Aspen Pharmacare Holdings Limited, exercised an option to acquire
a portfolio of 11 branded finished dose form molecules (“the Merck Products”) from Merck for a consideration of USD600
million effective on 31 December 2013. USD533 million of the consideration was paid on 2 January 2014, and the balance of
this consideration will be paid in five equal annual instalments commencing at the end of the first year after the
acquisition date.
The initial accounting for this business combination was reported on a provisional basis in June 2014 and was finalised in
the six months ended 31 December 2014, with no subsequent changes.
Latin America infant nutritional business
On 28 October 2013 Aspen Group Companies concluded agreements with Nestlé in respect of the acquisition of certain licence
rights to intellectual property, net assets (including an infant nutritional production facility located in Vallejo, Mexico)
and a 100% shareholding in the infant nutritional businesses presently conducted by Nestlé and Pfizer in Latin America,
predominantly in Mexico, Venezuela, Colombia, Ecuador, Chile, Peru, Central America and the Caribbean, for a purchase
consideration of USD180 million.
The initial accounting for this business combination was reported on a provisional basis in June 2014 and was finalised in
the six months ended 31 December 2014.
Fair value of assets and liabilities acquired Preliminary Adjustments Final
R’million R’million R’million
Property, plant and equipment 620,0 - 620,0
Intangible assets 736,2 12,4 748,6
Current tax assets 3,0 - 3,0
Inventories 520,6 - 520,6
Trade and other receivables 465,1 - 465,1
Retirement and other employee benefits (37,2) - (37,2)
Deferred tax liabilities (2,7) - (2,7)
Trade and other payables (549,5) (16,7) (566,2)
Fair value of net assets acquired 1 755,5 (4,3) 1 751,2
Goodwill acquired 14,3 - 14,3
Cash outflow/(inflow) on acquisition 1 769,8 (4,3) 1 765,5
Subsequent events
Aspen Global Incorporated entered into an agreement with Novartis AG for the acquisition of the rights to
Mono-Embolex®, an injectable anti-coagulant, for a consideration of USD142 million. The transaction was subject to the
approval of the German competition authorities, which condition has been fulfilled, and the transaction became effective
on 20 February 2015.
Basis of accounting
The unaudited interim financial results for the six months ended 31 December 2014 have been prepared in accordance
with International Financial Reporting Standards, IFRIC interpretations, the Listings Requirements of the JSE Limited,
South African Companies Act, 2008 and the presentation and disclosure requirements of IAS 34: Interim Reporting. The
accounting policies are consistent with those described in the Annual Financial Statements.
The entity-wide analysis included in the segmental analysis for the six months ended 31 December 2013 was restated to
disclose the Europe CIS region seperately due to the increased materiality of this region to the Group. South Africa was
restated to disclose only the total revenue in the entity-wide disclosure as the split between the pharmaceutical and
consumer businesses is no longer material to the total Group results.
These unaudited interim financial results were prepared under the supervision of the Deputy Group Chief Executive,
MG Attridge CA(SA), and approved by the Board of Directors.
Change in directorate
DS Redfern was appointed to the board with effect from 1 February 2015, following the resignation of SA Hussain with
effect from that date.
Directors
N J Dlamini (Chairman)*, R C Andersen*, M G Attridge, M R Bagus*, J F Buchanan*, K D Dlamini*, M M Manyama*,
C N Mortimer*, R S Redfern*, S B Saad, S V Zilwa* *Non-executive director
Company Secretary
R Verster
Registered office
Building Number 8, Healthcare Park, Woodlands Drive, Woodmead
PO Box 1587, Gallo Manor, 2052
Telephone 011 239 6100
Telefax 011 239 6144
Sponsor
Investec Bank Limited
Transfer secretary
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07),
70 Marshall Street, Johannesburg, 2001.
(PO Box 61051, Marshalltown, 2107)
www.aspenpharma.com
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 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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