Wrap Text
Reviewed provisional Group financial results for the year ended 30 June 2015 & withdrawal of cautionary announcement
Aspen Pharmacare Holdings Limited (“Aspen Holdings” or “The Company”)
(Registration number 1985/002935/06)
Share code: APN / ISIN: ZAE000066692 and its subsidiaries (collectively “Aspen” or “the Group”)
Reviewed provisional Group financial results for the year ended 30 June 2015 and withdrawal of cautionary announcement
COMMENTARY
GROUP PERFORMANCE
Aspen raised revenue 22% to R36,1 billion and grew operating profit 14% to R8,4 billion in the year ended 30 June 2015.
The results benefited from the contribution of acquisitions concluded during the prior year. Normalised headline
earnings, being headline earnings adjusted for specific non-trading items, and normalised headline earnings per share, were
both 15% higher at R5,6 billion and 1 219 cents respectively. This positive outcome was achieved despite an unfavourable
exchange rate environment in which the US Dollar was particularly strong, devaluing revenue flows and increasing cost of
goods in the Group’s principal trading currencies.
INTERNATIONAL BUSINESS
In the International business, revenue climbed 46% to R18,6 billion and operating profit before amortisation, adjusted
for specific non-trading items (“EBITA”), advanced 42% to R5,2 billion. The International business performance was
assisted by the inclusion of the significant transactions completed during the prior year and contributed more than half 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 first half
of the 2015 financial year with the consequential loss of contribution.
Revenue from customers in Europe and the Commonwealth of Independent States (“Europe CIS”) increased 45% to R10,5 billion.
Finished dose form pharmaceutical sales to healthcare providers comprised R6,9 billion of the total sales. The
acquisition in the second half of the year of Mono-Embolex, an anti-coagulant with almost all of its sales in Germany,
further strengthened Aspen’s offering in this therapeutic area. The largest part of the balance of the sales in the region
was from active pharmaceutical ingredient (“API”) sales. Relative weakness of the Europe CIS currencies to the Rand
reduced reported revenue from this region.
Sales to customers in Latin America (excluding Venezuela) grew 44% to R3,4 billion, supported by the infant
nutritionals acquisition in the prior year. Performance was constrained due to poor supply by contract manufacturers of certain
key pharmaceutical products. In Venezuela, sales to customers were up 143% to R2,7 billion. The results in Venezuela have
been influenced by the application of hyperinflationary accounting principles and a change in the rate of exchange
applied in the translation of local currency results from the prior year. The net effect of these entries on EBITA is not
significant.
Sales to customers in the Rest of the World were down 10% to R1,6 billion, influenced by the disposal of the
fondaparinux products for the United States to Mylan.
Capital expenditure projects remain underway at Aspen Oss and Aspen Notre Dame de Bondeville (“Aspen NDB”). At Aspen
Oss, the projects are focused on the repurposing of facilities and at Aspen NDB, the addition of a new pre-filled
syringe filling line is well advanced.
SOUTH AFRICAN BUSINESS
Revenue in the South African business increased by 16% to R8,6 billion. Private sector pharmaceutical sales improved
12% through a combination of organic growth and new product launches. In the public sector sales grew 14% led by demand
under the antiretroviral (“ARV”) tender. The consumer division raised revenue by 23% due to a strong performance from
infant nutritionals, with Infacare making impressive gains in its share of this category. Revenue from manufacturing for
third parties also showed a good increase.
The increase in the ARV tender revenue coupled with the ongoing weakening of the Rand relative to the US Dollar as
well as high wage and energy cost inflation has placed pressure on EBITA margins.
Expansion projects continued at the Port Elizabeth finished dosage form manufacturing site and at the API
manufacturing site in Cape Town (“Fine Chemicals”). In Port Elizabeth, the building of the high containment facility is nearing
completion and manufacturing trials in the hormonal suite have commenced. The packing facility upgrade is complete.
Construction of the additional specialist sterile manufacturing facility has commenced. At Fine Chemicals, production is
underway in certain of the newly constructed suites, while other parts of this expansion and upgrade project remain in
progress.
ASIA PACIFIC BUSINESS
Revenue in the Asia Pacific region was 5% lower at R8,1 billion and EBITA declined by 10% to R1,7 billion. In
Australasia sales to customers were 8% lower at R7,2 billion. The key focus areas of branded pharmaceuticals and infant
nutritionals both showed positive growth. This was, however, reversed by the effect of disposals as well as the termination of
licences and contract manufacturing arrangements in the second half of the prior financial year. These were undertaken in
accordance with the strategy to achieve greater focus in this business. Cost of goods in Australia increased due to the
weakening of the Australian Dollar against the US Dollar in which many input costs are denominated.
Sales to customers in Asia accelerated by 39% to R1,3 billion through a combination of organic growth and recent
acquisitions, led by strong advances in Japan.
SUB-SAHARAN BUSINESS
In Sub-Saharan Africa, revenue was 1% higher at R2,8 billion. A disappointing performance from the GSK Aspen
Healthcare for Africa Collaboration, which was hampered by supply problems, limited performance in the region. Weakening
in-market currencies contributed to narrowing margins and a reduction of 6% in EBITA to R313 million.
FUNDING
Borrowings, net of cash, increased R0,2 billion over the year to R30,0 billion. R2,5 billion of this arose from
unfavourable relative foreign exchange rate movements. Group operating cash flows remained strong and cash generated from
operating activities increased by 26% to R4,8 billion. Gearing declined to 47% at the end of the financial year while net
interest paid was covered six times by operating profit before amortisation.
Net foreign exchange losses of R479 million were incurred, largely as a result of the strengthening of the US Dollar
against Aspen’s primary trading currencies, namely the Euro, the Rand and the Australian Dollar, over the course of the
year. This was partially offset by favourable hyperinflationary adjustments of R335 million arising in Venezuela.
PROSPECTS
Strategically, the Group is aiming for sharper focus in key therapeutic areas with the objective of delivering
improved return on investment. Consequently, a broad range of non-core products distributed in Australia and in South Africa
have been divested in transactions which close in the first quarter of the new financial year. The revenue from these
divested products in 2015 was R1,7 billion.
The global pharmaceutical industry continues to adjust to changing demands in patient needs, heightened regulation and
evolving economic circumstances. This has been marked by significant merger and acquisition activity as companies seek
to strengthen and refocus their strategic positions. Aspen remains alert to the potential for value-creating
opportunities aligned to the Group’s development plans. The Group has a proven capability to successfully execute complex
multi-territory transactions which makes it a strong candidate for such opportunities. The Group has been seeking opportunities
to expand its infant nutritionals business and has recently been engaged in negotiations to explore such an opportunity.
Although these negotiations have not progressed to a satisfactory conclusion, Aspen will continue to investigate
prospects to build its infant nutritionals franchise.
Currency volatility has weighed on the results of the past year. The Group remains exposed to the strength of the US
Dollar against its primary trading currencies. Indications are that this will again be an influential factor in the
overall results achieved in the year ahead. Developments in Venezuela will be carefully monitored due to the risks presented
by the economic conditions in that country.
Considerable activity has been undertaken during the past year in the continuation of activities to harness synergies
arising from recently completed transactions. Due to the highly regulated nature of the pharmaceutical industry, the
execution of these plans has long lead times. Meaningful progress has been achieved in this regard during the year. Areas
of focus include lowering the cost of goods for the anti-coagulant portfolio, improving margins in the infant
nutritionals business, bringing new manufacturing capacity and technologies on-line, building the third party API business and
leveraging acquired intellectual property. It is expected that Aspen will experience the initial commercial benefits from
these synergies towards the end of the 2016 financial year. The value created by these initiatives is expected to grow
progressively thereafter and Aspen is targeting an additional R2.5 billion in EBITA from these synergies by the 2019
financial year.*
CAPITAL DISTRIBUTION
Taking into account the earnings and cash flow performance for the year ended 30 June 2015, existing debt service
commitments, future proposed investments and funding options, notice is hereby given that the Board has declared a capital
distribution] of 216 cents per ordinary share as a return of contributed tax capital to shareholders recorded in the
share register of the Company at the close of business on 9 October 2015 (2014: capital distribution of 188 cents per share).
Shareholders should seek their own tax advice on the consequences associated with the 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.
In compliance with IAS 10: Events After Balance Sheet Date, the capital distribution will only be accounted for in
the financial statements in the year ending 30 June 2016.
Last day to trade cum capital distribution Friday, 2 October 2015
Shares commence trading ex capital distribution Monday, 5 October 2015
Record date Friday, 9 October 2015
Payment date Monday, 12 October 2015
Share certificates may not be dematerialised or rematerialised between Monday, 5 October 2015 and Friday, 9 October 2015.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 14 May 2015 (as renewed on 25 June and 5 August 2015)
and are advised that, as negotiations have not progressed to a satisfactory conclusion, caution is no longer required to
be exercised by shareholders when dealing in their securities.
By order of the Board
NJ Dlamini SB Saad
(Chairman) (Group Chief Executive)
Woodmead
9 September 2015
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.
* This sentence has not been reviewed or reported on by Aspen’s external auditors.
GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Audited
2015 2014
At 30 June 2015 R’million R’million
ASSETS
Non-current assets
Property, plant and equipment 7 916,5 7 150,8
Goodwill 5 026,0 6 641,8
Intangible assets 40 522,1 35 698,9
Other non-current assets 407,5 298,9
Contingent environmental indemnification assets 676,9 727,1
Deferred tax assets 1 131,2 817,1
Total non-current assets 55 680,2 51 334,6
Current assets
Inventories 10 791,5 10 275,2
Receivables and other current assets 10 390,2 9 661,2
Cash and cash equivalents 8 665,6 8 225,6
Total operating current assets 29 847,3 28 162,0
Assets classified as held-for-sale 2 889,8 3 050,8
Total operating current assets 32 737,1 31 212,8
Total assets 88 417,3 82 547,4
SHAREHOLDERS’ EQUITY
Share capital (including treasury shares) 3 006,8 3 867,9
Reserves 31 131,9 25 006,3
Ordinary shareholders’ equity 34 138,7 28 874,2
Non-controlling interests 22,8 1,9
Total shareholders’ equity 34 161,5 28 876,1
LIABILITIES
Non-current liabilities
Borrowings 25 491,6 29 915,5
Deferred tax liabilities 1 669,3 1 351,1
Retirement and other employee benefits 470,8 497,6
Contingent environmental liabilities 676,9 727,1
Unfavourable and onerous contracts 2 112,3 2 638,7
Other non-current liabilities 2 056,4 2 499,3
Total non-current liabilities 32 477,3 37 629,3
Current liabilities
Trade and other payables 6 785,2 6 884,0
Borrowings* 13 222,2 8 075,3
Other current liabilities 1 455,6 747,4
Unfavourable and onerous contracts 315,5 335,3
Total current liabilities 21 778,5 16 042,0
Total liabilities 54 255,8 53 671,3
Total equity and liabilities 88 417,3 82 547,4
Number of shares in issue (net of treasury shares) (’000) 456 055 455 914
Net asset value per share (cents) 7 485,7 6 333,3
* Includes bank overdrafts.
GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
2015 2014
For the year ended 30 June 2015 Notes Change R’million R’million
Revenue 22% 36 126,6 29 515,1
Cost of sales (18 872,4) (15 793,2)
Gross profit 26% 17 254,2 13 721,9
Selling and distribution expenses (5 614,4) (4 401,3)
Administrative expenses (2 817,5) (1 652,5)
Other operating income 542,8 692,4
Other operating expenses (915,2) (935,7)
Operating profit B# 14% 8 449,9 7 424,8
Investment income C# 382,7 278,1
Financing costs D# (2 294,6) (1 346,4)
Profit before tax 3% 6 538,0 6 356,5
Tax (1 338,6) (1 351,0)
Profit for the year 4% 5 199,4 5 005,5
OTHER COMPREHENSIVE INCOME, NET OF TAX*
Net investment hedge profit in Aspen Asia Pacific - 23,9
Net gains from cash flow hedging in respect of
business acquisitions - 75,1
Currency translation gains E# 916,0 1 829,3
Cash flow hedges recognised 22,2 3,0
Remeasurement of retirement and other employee benefits (5,5) (25,3)
Total comprehensive income 6 132,1 6 911,5
Profit for the year attributable to
Equity holders of the parent 5 201,4 5 007,6
Non-controlling interests (2,0) (2,1)
5 199,4 5 005,5
Total comprehensive income attributable to
Equity holders of the parent 6 134,1 6 915,4
Non-controlling interests (2,0) (3,9)
6 132,1 6 911,5
Weighted average number of shares in issue (’000) 456 347 456 116
Diluted weighted average number of shares in issue (’000) 456 453 456 219
EARNINGS PER SHARE
Basic earnings per share (cents) 4% 1 139,8 1 097,9
Diluted earnings per share (cents) 4% 1 139,5 1 097,6
DISTRIBUTION TO SHAREHOLDERS
Capital distribution per share (cents) 188,0 26,0
Cash dividends per share (cents) - 131,0
188,0 157,0
The capital distribution to shareholders of 188,0 cents relates to the distribution declared on 10 September 2014 and paid on
13 October 2014. (2014 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 and other employee benefits 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
Reviewed Audited
2015 2014
For the year ended 30 June 2015 Change R’million R’million
HEADLINE EARNINGS
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 4% 5 201,4 5 007,6
Adjusted for:
- Profit on the sale of intangible assets (net of tax) (58,4) (479,8)
- Net impairment/(reversal of impairment) of property, plant and equipment 7,8 (5,8)
(net of tax)
- Net impairment of intangible assets (net of tax) 162,3 112,6
- (Profit)/loss on the sale of property, plant and equipment (net of tax) (65,4) 1,1
13% 5 247,7 4 635,7
HEADLINE EARNINGS PER SHARE
Headline earnings per share (cents) 13% 1 149,9 1 016,3
Diluted headline earnings per share (cents) 13% 1 149,7 1 016,1
NORMALISED HEADLINE EARNINGS
Reconciliation of normalised headline earnings
Headline earnings 13% 5 247,7 4 635,7
Adjusted for:
- Restructuring costs (net of tax) 98,6 29,4
- Transaction costs (net of tax) 217,2 435,9
- Net foreign exchange gains from hedging of business acquisitions (net of tax) - 1,7
- Foreign exchange gain on settlement of transaction funding liability (net of tax) - (248,9)
15% 5 563,5 4 853,8
NORMALISED HEADLINE EARNINGS PER SHARE
Normalised headline earnings per share (cents) 15% 1 219,1 1 064,2
Normalised diluted headline earnings per share (cents) 15% 1 218,9 1 063,9
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015 Share capital Total
(including attributable to
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 - 6 915,4 6 915,4 (3,9) 6 911,5
Profit for the year - 5 007,6 5 007,6 (2,1) 5 005,5
Other comprehensive income - 1 907,8 1 907,8 (1,8) 1 906,0
Capital distribution and dividends paid (118,6) (597,4) (716,0) (0,2) (716,2)
Issue of ordinary share capital - share schemes 2,7 - 2,7 - 2,7
Treasury shares purchased (22,3) - (22,3) - (22,3)
Deferred incentive bonus shares exercised 16,9 (16,9) - - -
Share-based payment expenses - 21,8 21,8 - 21,8
Equity portion of tax claims in respect of
share schemes - 10,8 10,8 - 10,8
Hyperinflation adjustment - Venezuela - (132,0) (132,0) 0,9 (131,1)
BALANCE AT 30 JUNE 2014 3 867,9 25 006,3 28 874,2 1,9 28 876,1
Total comprehensive income - 6 134,1 6 134,1 (2,0) 6 132,1
Profit for the year - 5 201,4 5 201,4 (2,0) 5 199,4
Other comprehensive income - 932,7 932,7 - 932,7
Capital distribution and dividends paid (857,4) - (857,4) (0,3) (857,7)
Issue of ordinary share capital - share schemes 0,2 - 0,2 - 0,2
Treasury shares purchased (22,7) - (22,7) - (22,7)
Deferred incentive bonus shares exercised 18,8 (18,8) - - -
Share-based payment expenses - 24,8 24,8 - 24,8
Equity portion of tax claims in respect of
share schemes - (0,7) (0,7) - (0,7)
Contribution by non-controlling shareholders - - - 4,7 4,7
Acquisition of subsidiary - - - 16,4 16,4
Acquisition of non-controlling interests - (13,8) (13,8) 2,1 (11,7)
BALANCE AT 30 JUNE 2015 3 006,8 31 131,9 34 138,7 22,8 34 161,5
GROUP STATEMENT OF CASH FLOWS
Reviewed Audited
2015 2014
For the year ended 30 June 2015 Notes R’million R’million
CASH FLOWS FROM OPERATING ACTIVITIES
Cash operating profit 9 506,8 7 911,2
Changes in working capital (1 466,9) (2 187,5)
Cash generated from operations 8 039,9 5 723,7
Net financing costs paid (2 007,4) (709,1)
Tax paid (1 193,7) (1 178,3)
Cash generated from operating activities 4 838,8 3 836,3
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure - property, plant and equipment A# (1 592,8) (1 328,9)
Proceeds on the sale of property, plant and equipment 184,6 106,3
Capital expenditure - intangible assets A# (824,6) (700,4)
Proceeds on the sale of intangible assets 412,2 898,8
Acquisition of subsidiaries and businesses H# (2 156,5) (19 764,2)
Acquisition of non-controlling interests (11,7) -
Acquisition of joint venture (61,5) -
Increase in other non-current assets (65,8) -
Payment of deferred consideration relating to prior year
business acquisitions (495,7) (85,9)
Proceeds on the disposal of assets classified as held-for-sale 3 050,8 -
Net investment hedge profit in Aspen Asia Pacific - 23,9
Cash used in investing activities (1 561,0) (20 850,4)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments)/proceeds from borrowings (1 366,2) 20 183,3
Capital distribution and dividends paid (857,7) (716,2)
Proceeds from issue of ordinary share capital 0,2 2,7
Contribution by non-controlling shareholders 4,7 -
Treasury shares purchased (22,7) (22,3)
Cash (used in)/generated from financing activities (2 241,7) 19 447,5
Movement in cash and cash equivalents before effects of exchange rate changes 1 036,1 2 433,4
Effects of exchange rate changes (338,9) 312,2
Movement in cash and cash equivalents 697,2 2 745,6
Cash and cash equivalents at the beginning of the year 6 161,8 3 416,2
Cash and cash equivalents at the end of the year 6 859,0 6 161,8
Operating cash flow per share (cents) 1 060,3 841,1
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents per the statement of financial position 8 665,6 8 225,6
Less: bank overdrafts (1 806,6) (2 063,8)
6 859,0 6 161,8
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 SEGMENTAL ANALYSIS
Restated
2015 2014
For the year ended 30 June 2015 R’million % of total R’million % of total Change
REVENUE
International@ 18 567,4 49 12 724,8 40 46%
South Africa^ 8 602,6 23 7 446,3 24 16%
Asia Pacific 8 107,3 21 8 517,2 27 (5%)
Sub-Saharan Africa 2 768,6 7 2 744,3 9 1%
Total gross revenue 38 045,9 100 31 432,6 100 21%
Adjustment* (1 919,3) (1 917,5)
Total revenue 36 126,6 29 515,1 22%
OPERATING PROFIT BEFORE AMORTISATION
Adjusted for specific non-trading items (“EBITA”)
International 5 159,8 56 3 636,1 47 42%
Operating profit# 4 610,7 3 633,1 27%
Amortisation of intangible assets 249,9 180,4
Transaction costs 75,9 255,0
Restructuring costs 130,3 -
Profit on the sale of assets (60,7) (522,0)
Impairment of assets 153,7 89,6
South Africa 1 950,2 21 1 816,5 24 7%
Operating profit# 1 826,5 1 652,7 11%
Amortisation of intangible assets 93,1 65,1
Transaction costs 9,6 77,4
Profit on the sale of assets (19,6) -
Net impairment of assets 40,6 21,3
Asia Pacific 1 748,4 19 1 944,6 25 (10%)
Operating profit# 1 705,8 1 811,6 (6%)
Amortisation of intangible assets 137,7 138,2
Transaction costs - 7,0
Restructuring costs 1,5 42,1
Reversal of impairment of assets - (5,8)
Profit on the sale of assets (96,6) (48,5)
Sub-Saharan Africa 312,7 4 333,6 4 (6%)
Operating profit# 306,9 327,4 (6%)
Amortisation of intangible assets 6,3 6,2
Profit on the sale of assets (0,5) -
Total EBITA 9 171,1 100 7 730,8 100 19%
ENTITY-WIDE DISCLOSURE - REVENUE
Analysis of revenue in accordance with customer geography
Europe CIS 10 456,3 28 7 200,1 23 45%
South Africa 8 608,1 23 7 451,4 24 16%
Asia Pacific 8 504,1 22 8 798,7 28 (3%)
Latin America (excluding hyperinflationary economy) 3 424,3 9 2 371,7 8 44%
Sub-Saharan Africa 2 776,8 7 2 752,6 9 1%
Hyperinflationary economy 2 703,9 7 1 112,9 3 143%
Rest of the world 1 572,4 4 1 745,2 5 (10%)
Total gross revenue 38 045,9 100 31 432,6 100 21%
Adjustment* (1 919,3) (1 917,5)
Total revenue 36 126,6 29 515,1 22%
@ Excludes intersegment revenue of R1 806,5 million (2014: R1 691,8 million).
^ Excludes intersegment revenue of R107,3 million (2014: R91,5 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 is R8 449,9 million (2014: R7 424,8 million).
GROUP SUPPLEMENTARY INFORMATION
For the year ended 30 June 2015 Reviewed Audited 2015 2014
Notes R’million R’million
A. CAPITAL EXPENDITURE
Incurred 2 417,4 2 029,3
- Property, plant and equipment 1 592,8 1 328,9
- Intangible assets 824,6 700,4
Contracted 683,4 477,2
- Property, plant and equipment 600,8 425,7
- Intangible assets 82,6 51,5
Authorised but not contracted for 2 625,8 2 967,1
- Property, plant and equipment 2 405,4 2 652,9
- Intangible assets 220,4 314,2
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING):
Depreciation of property, plant and equipment 552,3 433,9
Amortisation of intangible assets 487,0 389,9
Net impairment/(reversal of impairment) of property, plant and equipment 11,0 (8,2)
Net impairment of intangible assets 183,3 113,3
Share-based payment expenses - employees 50,8 47,5
Transaction costs 85,5 339,4
Restructuring costs 131,8 42,1
Hyperinflationary reduction in operating profit 19,4 80,9
C. INVESTMENT INCOME
Interest received 382,7 278,1
D. FINANCING COSTS
Interest paid (1 832,2) (1 295,9)
Debt raising fees on acquisitions (142,0) (154,7)
Net foreign exchange (losses)/gains (479,4) 80,7
Foreign exchange gain on settlement of transaction funding liability - 248,9
Fair value losses on financial instruments (0,9) (86,0)
Notional interest on financial instruments (174,6) (131,4)
Net hyperinflationary gains/(losses) I# 334,5 (8,0)
(2 294,6) (1 346,4)
E. CURRENCY TRANSLATION GAINS
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:
Contingent consideration for acquired products 72,9 -
Contingency relating to product litigation 31,6 27,6
Customs guarantee 13,8 14,8
Indirect tax contingent liabilities 19,9 36,1
Contingencies arising from labour cases 5,1 2,8
Other contingent liabilities 3,3 5,7
146,6 87,0
G. GUARANTEES TO FINANCIAL INSTITUTIONS
Material guarantees given by Group companies for indebtedness of subsidiaries to
financial institutions 13 412,7 12 888,7
H. ACQUISITION OF SUBSIDIARIES AND BUSINESSES
2015
R’million
Cash outflow relating to current year business combinations 2 160,8
Cash inflow relating to a working capital purchase price adjustment (4,3)
2 156,5
Set out below is the provisional accounting for the following June 2015 business combinations:
Kama Industries Limited
On 1 May 2015, the Company acquired 65% of the issued share capital of Kama Industries Limited, a privately owned company
incorporated in Ghana for a purchase consideration of USD4,5 million.
Mono-Embolex business
Aspen Global Incorporated, a wholly owned subsidiary of the Company, acquired the rights to Mono-Embolex, an injectable
anti-coagulant, from Novartis AG for a consideration of USD142 million effective 20 February 2015.
Florinef and Omcilon business
Aspen Global Incorporated entered into an agreement with Bristol Myers Squibb Company for the acquisition of the rights
to two corticosteroids. Florinef, in certain countries (primarily Japan, the UK and Brazil) and Omcilon in Brazil, for a
consideration of USD41 million. Additional consideration of up to USD6 million is payable in the event of certain regulatory
approvals being obtained but it is not possible to ascertain the likelihood of these occurring at this time. The transaction
became effective on 1 November 2014.
Florinef
Kama and Mono-
Industries Omcilon Embolex
Limited business business Total
R’million R’million R’million R’million
Fair value of assets and liabilities acquired
Property, plant and equipment 38,9 - - 38,9
Intangible assets 12,2 446,5 1 660,0 2 118,7
Inventories 3,8 - - 3,8
Trade and other receivables 3,0 - - 3,0
Cash and cash equivalents 0,1 - - 0,1
Deferred tax liabilities (9,4) (13,4) (49,8) (72,6)
Trade and other payables (1,7) - - (1,7)
Fair value of net assets acquired 46,9 433,1 1 610,2 2 090,2
Non-controlling interests (16,4) - - (16,4)
Goodwill acquired 23,9 13,4 49,8 87,1
Purchase consideration paid 54,4 446,5 1 660,0 2 160,9
Cash and cash equivalents in acquired companies (0,1) - - (0,1)
Cash outflow on acquisition 54,3 446,5 1 660,0 2 160,8
The initial accounting for these acquisitions, which have been classified as business combinations, has been reported on a
provisional basis and will only be finalised in the year ending 30 June 2016.
Post-acquisition revenue included in the statement of comprehensive income was R465 million made up as follows:
Kama Industries Limited R2 million
Florinef and Omcilon business R155 million
Mono-Embolex business R308 million
The estimation of post-acquisition operating profits is impracticable and not reasonably determinable due to the immediate
integration of the businesses into the existing operations of the Group.
All transaction costs relating to the acquisition of these businesses have been expensed in other operating expenses in the
statement of comprehensive income and adjusted for in normalised headline earnings.
Goodwill
(1) The goodwill arising on the acquisition of Kama Industries Limited recognises:
- the benefit to the business of Aspen’s knowledge and expertise; and
- the synergies from the use of Kama as a platform to launch Aspen’s existing intellectual property in Ghana.
(2) The goodwill arising on the acquisition of the Florinef and Omcilon business recognises:
- the benefit to the products of Aspen’s additional promotional focus; and
- the synergies from the consolidation of the acquired business with Aspen’s existing business, particularly in Brazil and Japan.
(3) The goodwill arising on the acquisition of the Mono-Embolex business recognises:
- the benefit to the products of Aspen’s additional promotional focus;
- the synergies from the consolidation of the acquired business with Aspen’s existing anti-coagulant business in Germany; and
- the synergies from the vertical integration with Aspen’s existing heparin production capabilities.
The total amount of goodwill recognised is not tax deductible.
2014
API business
On 1 October 2013, the Company acquired 100% of the issued share capital in an API manufacturing business from MSD which manufactures
for MSD and the market generally and which is located in the Netherlands with a satellite production facility and sales office in the
US for a purchase consideration of EUR31 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 year
ended 30 June 2015.
MSD business
Aspen Global Incorporated exercised an option to acquire a portfolio of 11 branded finished dose form molecules from MSD 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 year
ended 30 June 2015.
GSK thrombosis business
The two components of the acquisition set out below are linked and have been classified as one cash generating unit for purchase price
allocation purposes.
Arixtra and Fraxiparine brands
On 31 December 2013 Aspen Global Incorporated acquired the Arixtra and Fraxiparine brands and related business worldwide from GSK,
except in China, Pakistan and India for a purchase consideration of GBP505 million.
Aspen NDB
On 30 April 2014, the Company acquired a specialised sterile production site in France which manufactures the Arixtra and Fraxiparine
products and the related inventory for a purchase consideration of GBP194 million.
The initial accounting for this business combination was reported on a provisional basis in June 2014 and was finalised in the year
ended 30 June 2015.
Latin American 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 100% of the
issued share capital 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 year
ended 30 June 2015.
South African infant nutritional business
The Company concluded agreements with Nestlé in the 2013 financial year in respect of the acquisition of certain rights to
intellectual property licences and net assets in the infant nutritionals business previously conducted by Pfizer which distributed a
portfolio of infant nutritional products to certain southern African territories (South Africa, Botswana, Namibia, Lesotho, Swaziland
and Zambia). The acquisition of the South African infant milk business from Nestlé was approved by the Competition Tribunal in
December 2013. The effective date upon which Aspen assumed control of the business was 27 January 2014.
The initial accounting for this business combination was reported on a provisional basis in June 2014 and was finalised in the year
ended 30 June 2015.
Set out below is the final accounting for the following June 2014 business acquisitions:
Latin South
American African Australian
GSK infant infant infant
API MSD thrombosis nutritional nutritional nutritional
business business business business business business* Total
R’million R’million R’million R’million R’million R’million R’million
Fair value of assets and
liabilities acquired
Property, plant and equipment 589,1 - 561,3 620,0 - - 1 770,4
Intangible assets 506,3 6 250,3 10 533,5 749,8 253,4 - 18 293,3
Contingent environmental
indemnification assets 680,1 - - - - - 680,1
Non-current financial receivables - - 267,1 - - - 267,1
Deferred tax assets 48,1 - 440,1 - - 19,5 507,7
Current tax assets - - - 3,0 - - 3,0
Inventories 3 142,1 - 1 688,3 520,6 57,3 (2,3) 5 406,0
Trade and other receivables 507,9 - 309,8 465,1 62,3 (21,3) 1 323,8
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 (2 756,3) - (215,9) - - - (2 972,2)
Retirement and other employee benefits - - (298,6) (37,2) - - (335,8)
Deferred tax liabilities - (187,5) (310,1) (2,7) (73,8) - (574,1)
Trade and other payables (370,2) - (376,0) (609,2) (57,0) 1,7 (1 410,7)
Non-current and current
financial liabilities (1 152,3) - (718,7) - - - (1 871,0)
Fair value of net assets acquired 1 712,7 6 062,8 11 880,8 1 709,4 242,2 (2,4) 21 605,5
Goodwill acquired - 187,5 164,3 56,1 172,7 (13,5) 567,1
Deferred consideration - (650,2) - - (20,8) - (671,0)
Prepayment set off against the
fair value of the assets acquired - - - - (394,1) - (394,1)
Purchase consideration paid 1 712,7 5 600,1 12 045,1 1 765,5 - (15,9) 21 107,5
Net gains from cash flow hedging in
respect of business acquisitions - - (75,1) - - - (75,1)
Working capital purchase
price adjustment - - - 4,3 - - 4,3
Cash and cash equivalents in
acquired companies (1 272,5) - - - - - (1 272,5)
Cash outflow on acquisition 440,2 5 600,1 11 970,0 1 769,8 - (15,9) 19 764,2
* The initial accounting for this business combination was reported on a provisional basis in 2013 and was finalised in the year ended
30 June 2014. As a result of working capital adjustments, the purchase consideration decreased by R15,9 million to R1 562,7 million.
I. HYPERINFLATIONARY ECONOMY
The Venezuelan economy is regarded as a hyperinflationary economy in terms of International Financial Reporting Standards.
There are three regulated exchange rates which are applicable in Venezuela:
- Official CENCOEX rate of VEF6.30 per USD for the importation of essential goods including infant nutritionals and pharmaceutical
medicines which was reconfirmed in terms of an announcement made by government in February 2015;
- SICAD 1 introduced in March 2013 at an initial rate of VEF12 per USD and currently trading at VEF13.50 per USD; and
- SIMADI introduced in February 2015 at an initial rate of VEF170 per USD and currently trading at VEF198.0 per USD.
During the 12 months to 30 June 2015 the Group received approximately USD18 million from Venezuela for transactions that were settled
at the official CENCOEX rate of 6.30 VEF per USD and has approximately USD47 million of intergroup liabilities pending approval for
future settlement at the official CENCOEX rate. At 30 June 2015 the Group had USD70 million (USD equivalent at the 6.30 official
CENCOEX rate) of net monetary assets in its Venezuelan entities, of which the large majority was cash.
The Group has not used the SICAD 1 or SIMADI mechanisms to settle any transactions and does not anticipate using either the SICAD 1
or SIMADI mechanisms to settle any transactions. Accordingly, the Group has concluded it is appropriate to apply the official
CENCOEX rate of 6.30 VEF per USD to report the Venezuelan business financial position, results of operations and cash flows for the
year ended 30 June 2015, since the nature of the operations in Venezuela (the importation and distribution of pharmaceutical and
infant nutritional products) qualifies for the most preferential rates permitted by law. For the year ended 30 June 2014 the Group
applied a rate of 8.50 VEF per USD which was higher than the official CENCOEX rate. The higher rate was used as there was considerable
uncertainty, at the time, regarding the risk of a potential devaluation of the official CENCOEX rate. The announcement by the
Venezuelan government in February 2015 which confirmed no change to the official CENCOEX rate eliminated this uncertainty.
If circumstances change such that the Group concludes it would no longer be appropriate to use the official rate, or if a devaluation
of the official CENCOEX rate occurs, it could result in a significant charge to the Group’s results.
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 Limited, 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 provisional Group financial results are consistent with those
used in the annual financial statements for the year ended 30 June 2014.
The entity wide analysis included in the segmental analysis for the year ended 30 June 2014 was restated to separately
disclose the hyperinflationary economy.
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. Any reference to future financial performance included in
this announcement, has not been reviewed or reported on by the Company’s auditors.
Subsequent events
Divestment of generics business and certain branded products to Strides entities
On 20 May 2015 certain of Aspen’s wholly owned Australian subsidiaries (collectively “Aspen Australia”) entered into
an agreement with Strides (Australia) Pharma Pty Limited in terms of which Aspen Australia divested a portfolio of
approximately 130 products for a consideration of approximately AUD217 million.
The portfolio of products in this transaction comprised a generic pharmaceutical business together with certain
branded pharmaceutical assets.
In a separate transaction, Aspen Global Incorporated (“AGI”) entered into an agreement with Strides Pharma Global Pte
Limited in terms of which AGI divested a portfolio of six branded prescription products for a consideration of
approximately USD79 million.
Both of the above transactions were completed on 31 August 2015.
Divestment of a portfolio of products in South African to Litha
On 11 May 2015, Pharmacare Limited (“Pharmacare”), a wholly owned subsidiary of the Company and the Group’s primary
South African trading company, concluded a set of agreements with Litha Pharma (Pty) Limited (“Litha”) (a wholly owned
South African subsidiary of Endo International Plc) in terms of which Pharmacare divested a portfolio of products from its
pharmaceutical division for a consideration of approximately R1,6 billion. The portfolio of products comprises
injectables and established brands.
The approval of this transaction by the South African Competition Authorities was obtained on 4 August 2015 but the
completion remains subject to certain conditions. This transaction is expected to complete on 30 September 2015.
Acquisition of Norgine (Proprietary) Limited
On 21 May 2015, Pharmacare concluded an agreement with Norgine B.V. and Norgine (Proprietary) Limited (“Norgine”) to
acquire the entire issued share capital of Norgine in South Africa for a consideration of EUR29 million. Norgine
commercialises a portfolio of branded gastro-intestinal products in South Africa and surrounding territories.
The approval of this transaction by the South African Competition Authorities was obtained on 25 August 2015 but the
completion remains subject to certain conditions. This transaction is expected to complete on 30 September 2015.
Changes in directorate
Abbas Hussain resigned and David Redfern was appointed as a non-executive director on 1 February 2015. Rafique Bagus
resigned as an independent non-executive director on 31 March 2015.
Directors
N J Dlamini (Chairman)*, R C Andersen*, M G Attridge, J F Buchanan*, K D Dlamini*, M M Manyama*, C N Mortimer*, D 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.
Date: 09/09/2015 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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