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ASPEN PHARMACARE HOLDINGS LIMITED
(Registration number 1985/002935/06)
Share code: APN / ISIN: ZAE000066692
Unaudited interim financial results for the six months ended 31 December 2015
AND ITS SUBSIDIARIES ('Aspen' or "the Group")
COMMENTARY
GROUP PERFORMANCE
For the six months ended 31 December 2015, the profit after tax increased by 35% to R3,3 billion. The factors set out below,
have significantly affected the comparability with the results of the prior period:
1. The completion on 31 August 2015 of the divestment of the generics business conducted in Australia as well as
certain branded products distributed in Australia to Strides group companies, the related termination of licence arrangements
in Australia and the completion on 1 October 2015 of the divestment of a portfolio of products distributed in South
Africa to Litha Pharma (collectively 'the Divestments'). The Divestments gave rise to a pre-tax profit on disposal of
R1,7 billion. However, as a consequence of the timing of these transactions, the contribution to the trading results by
the Divestments is substantially reduced in the current period. In the period from 1 July 2015 until the effective date of
divestment, revenue from the Divestments was R202 million whereas revenue from the Divestments for the six months ended
31 December 2014 was R1 148 million.
2. The economic situation in Venezuela deteriorated over the six months to December 2015 and the Venezuelan authorities
have increasingly limited authorisations to pay for pharmaceutical imports using the official CENCOEX rate during
this period of Venezuelan Bolivar ('VEF') 6,30 per US Dollar ('USD'). As a consequence of the limited payment approvals
and the uncertain economic and political situation in Venezuela, the Group has concluded that it would be more
appropriate to apply the SIMADI exchange rate of VEF200 per USD to report the Venezuelan business' financial position, results
of its operations and cash flows for the six months ended 31 December 2015. This has resulted in a one-off currency
devaluation loss on foreign denominated liabilities of R841 million.
The profit arising from the Divestments, the currency devaluation loss and the hyperinflationary adjustments relating to
Venezuela are excluded in determining normalised headline earnings per share ('NHEPS') which increased by 14%. In order to provide
meaningful comparability of the financial performance of the ongoing underlying business, a measure described as comparable NHEPS
has been determined by removing the contribution by the Divestments from NHEPS and including the results of Aspen's business in
Venezuela translated at VEF200 per USD in the prior reporting period. Comparable NHEPS for the six months ended 31 December
2015 was 640,9 cents, an increase of 21%. Applying the same principles, comparable revenue increased by 8% and comparable operating
profit increased by 8%.
INTERNATIONAL BUSINESS
The International Business improved revenue 2% to R9,0 billion and raised operating profit before amortisation, adjusted for
specific non-trading items ('EBITA'), 16% to R2,8 billion. Revenue was unfavourably affected by R836 million due to the devaluation
of the Venezuelan contribution. Excluding the effect of the devaluation, revenue increased 14% in the remainder of the
international business.
Revenue from customers in Europe and the Commonwealth of Independent States ('Europe CIS') increased 21% to R6,1 billion.
Finished dose from pharmaceutical sales to healthcare providers were up 20% to R4,1 billion. The acquisition of Mono-Embolex,
an anti-coagulant with almost all of its sales in Germany, in the second half of the previous year further strengthened Aspen's
offering in this therapeutic area and added to growth. However, the contribution from Russia fell sharply due to the significant
weakening of the Ruble. Active pharmaceutical ingredient ('API') sales continued to grow and were the largest part of the balance
of the revenue from Europe CIS.
Sales to customers in Latin America (excluding Venezuela) declined by 1% to R1,7 billion, unfavourably influenced by difficult
socio-economic conditions in Brazil. The nutritional products in the region maintained their positive growth momentum with revenue
rising 12%. Demand for Aspen's pharmaceutical products was strong, but performance has continued to be suppressed by unreliable
supply of certain key products by contract manufacturers. The devalued contribution from Venezuela is no longer material to the Group.
Sales to customers in the Rest of the World increased 4% to R922 million, led by a positive performance in the Middle
East North Africa territory.
The installation of a new high speed pre-filled syringe filling line at Aspen Notre Dame de Bondeville ('Aspen NDB')
was completed during the period and commercial production is about to commence. At Aspen Oss capital expenditure projects
are ongoing, focused on the sustainability of the site.
SOUTH AFRICAN BUSINESS
In the South African business revenue was 3% lower at R4,2 billion. Excluding the effect of the Divestments, revenue
improved by 4%. The nutritionals products were the leading performer, with revenue growing 15% to R402 million. In the
balance of the private sector, branded and generic pharmaceuticals performed satisfactorily. However, supply problems
severely undermined the performance of the over-the-counter ('OTC') products with a consequential decline in key OTC brands.
Sales in the public sector (excluding Divestments) were down 4% on the reduced value of the antiretroviral ('ARV')
tender award. Export revenue from finished dose products and APIs continued to expand, rising 16%.
EBITA in South Africa was down 4% to R952 million. Excluding the Divestments, EBITA increased by 6%.
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 in the
qualification process. Construction of the additional specialist sterile manufacturing facility is progressing to plan. While
much of the construction at Fine Chemicals is complete, expansion and upgrade projects remain underway.
ASIA PACIFIC BUSINESS
Revenue and EBITA in the Asia Pacific region were both 14% lower at R3,8 billion and R843 million respectively. The
decline was led by the Divestments. In Australasia, nutritionals continued to drive revenue growth with an increase of 7% with
branded pharmaceuticals also advancing. Sales to customers in Asia accelerated 41%, assisted by a positive contribution from Japan.
SUB-SAHARAN BUSINESS
Gross revenue in sub-Saharan Africa advanced 11% to R1,6 billion. However, currency weakness across the region and
unfavourable new VAT legislation in Tanzania squeezed margins, resulting in a 17% decline in EBITA to R174 million.
FUNDING
Borrowings, net of cash, increased R3,5 billion over the period to R33,5 billion. Retirement of foreign currency denominated
debt was more than offset by a R5,4 billion unfavourable currency translation effect on borrowings denominated in USD and
Australian Dollars as well as the R1,0 billion devaluation in the cash held in Venezuela. Group operating cash flows were
negatively affected by a R1,8 billion increase in working capital over the period. This increase is the consequence of an
unfavourable currency translation effect on foreign currency denominated working capital balances and planned stock builds
in South Africa and Europe CIS. Gearing improved to 44% from 49% in the previous year while net interest paid was covered
8 times by operating profit before amortisation.
Net foreign exchange losses reduced from R343 million to R15 million while fair value gains on financial instruments
increased from R14 million to R167 million, leading to a combined benefit of R481 million over the period.
A large portion of net debt reaches term before the end of the calendar year as is reflected by the shift in the value of
borrowings from non-current to current classification. The Group expects to refinance its debt this year.
PROSPECTS
The period under review has been marked by economic stress in many parts of the world and weakness in most emerging
market currencies. Aspen has continued to deliver solid growth notwithstanding this environment. The Group benefits from the
pharmaceutical industry's strong defensive qualities in such times, supported by the essential nature of medicines. Further
meaningful advances in the implementation of Aspen's strategic objectives have been made. The completion of the Divestments
marks an important step in achieving increased focus in the South African and Asia Pacific businesses. Aspen is seeking to
grow its business in targeted therapeutic categories and remains alert to opportunities to expand its product portfolio
in these areas of focus.
The Aspen business model delivers sustained annuity cash flows which is efficient in translating profits into cash.
For the balance of this financial year, necessary additions to inventory carrying levels will continue to weigh on cash
flows, but thereafter there is the potential to release working capital as stock builds are depleted. The Group trades in
a diversified mix of currencies which generally diminishes currency risk. The material currencies contributing to EBITA are
the Australian Dollar (30%), the Rand (27%) and the Euro and Euro-related currencies (21%). In South Africa, the public
sector has recently implemented quarterly price adjustments to take account of exchange rate variations. This, together with
Aspen's forward cover policy for procurement in Rand, will effectively neutralise the exposure to USD-denominated imports of
ARV APIs, a material factor to date. Consequently the Group has little exposure to USD at the EBITA level. The South African
private market business will nonetheless be unfavourably affected by raised cost of goods as a result of the sharp decline in
the value of the Rand in recent months.
In the 2015 final results announcement, Aspen identified a number of projects aimed at delivering synergies from
recent acquisitions, targeting an additional R2,5 billion in EBITA* from these synergies by the 2019 financial year. These
projects 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. Particular opportunities have been identified to build a niche business based on
supply of specialised APIs and finished dose forms to the United States. Significant progress has been made over this
past period in regard to the realisation of these synergies and Aspen is confident that this target will be achieved and
exceeded. A material value of the synergies is expected to be achieved in the next financial year*.
By order of the Board
K D Dlamini S B Saad
(Chairman) (Group Chief Executive)
Woodmead
3 March 2016
* This sentence has not been reviewed or reported on by Aspen's external auditors.
GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
2015 2014 2015
R'million R'million R'million
ASSETS
Non-current assets
Property, plant and equipment 9 323,1 7 547,9 7 916,5
Goodwill 6 207,1 6 289,1 5 026,0
Intangible assets 51 382,5 38 615,6 40 522,1
Other non-current assets 480,0 450,3 407,5
Contingent environmental indemnification assets 843,0 699,2 676,9
Deferred tax assets 1 262,0 831,4 1 131,2
Total non-current assets 69 497,7 54 433,5 55 680,2
Current assets
Inventories 13 267,7 10 124,1 10 791,5
Receivables and other current assets 11 964,1 10 413,5 10 390,2
Cash and cash equivalents 10 387,1 10 935,7 8 665,6
Total operating current assets 35 618,9 31 473,3 29 847,3
Assets classified as held-for-sale 200,5 - 2 889,8
Total current assets 35 819,4 31 473,3 32 737,1
Total assets 105 317,1 85 906,8 88 417,3
SHAREHOLDERS' EQUITY
Share capital (including treasury shares) 2 005,9 3 006,4 3 006,8
Reserves 41 168,4 27 734,9 31 131,9
Ordinary shareholders' equity 43 174,3 30 741,3 34 138,7
Non-controlling interests 24,5 1,5 22,8
Total shareholders' equity 43 198,8 30 742,8 34 161,5
LIABILITIES
Non-current liabilities
Borrowings 13 689,4 30 324,4 25 491,6
Deferred tax liabilities 1 912,2 1 411,6 1 669,3
Retirement and other employee benefits 588,2 501,7 470,8
Contingent environmental liabilities 843,0 699,2 676,9
Unfavourable and onerous contracts 2 460,1 2 412,7 2 112,3
Other non-current liabilities 2 444,3 2 439,9 2 056,4
Total non-current liabilities 21 937,2 37 789,5 32 477,3
Current liabilities
Trade and other payables 7 800,1 7 131,7 6 785,2
Borrowings* 30 205,8 9 230,1 13 222,2
Other current liabilities 1 807,9 687,9 1 455,6
Unfavourable and onerous contracts 367,3 324,8 315,5
Total current liabilities 40 181,1 17 374,5 21 778,5
Total liabilities 62 118,3 55 164,0 54 255,8
Total equity and liabilities 105 317,1 85 906,8 88 417,3
Number of shares in issue (net of treasury shares) ('000) 456 062 456 041 456 055
Net asset value per share (cents) 9 466,8 6 740,9 7 485,7
* Includes bank overdrafts.
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2015 2014 2015
Notes Change R'million R'million R'million
Revenue (3%) 17 512,3 18 033,3 36 126,6
Cost of sales (8 682,4) (9 562,3) (18 872,4)
Gross profit 4% 8 829,9 8 471,0 17 254,2
Selling and distribution expenses (2 670,8) (2 809,7) (5 614,4)
Administrative expenses (1 381,0) (1 184,1) (2 817,5)
Other operating income 1 826,8 168,7 542,8
Other operating expenses (516,5) (327,5) (915,2)
Operating profit B# 41% 6 088,4 4 318,4 8 449,9
Investment income C# 197,8 188,3 382,7
Financing costs D# (1 843,2) (1 395,2) (2 294,6)
Operating profit after investment income
and financing costs 4 443,0 3 111,5 6 538,0
Share of after-tax net profits of joint venture 9,3 - -
Profit before tax 43% 4 452,3 3 111,5 6 538,0
Tax (1 122,0) (653,4) (1 338,6)
Profit for the period/year 35% 3 330,3 2 458,1 5 199,4
OTHER COMPREHENSIVE INCOME, NET OF TAX*
Currency translation gains E# 6 706,3 282,6 916,0
Cash flow hedges recognised 20,0 8,7 22,2
Remeasurement of retirement and other
employee benefits - - (5,5)
Total comprehensive income 10 056,6 2 749,4 6 132,1
Profit for the period/year attributable to
Equity holders of the parent 3 317,9 2 460,3 5 201,4
Non-controlling interests 12,4 (2,2) (2,0)
3 330,3 2 458,1 5 199,4
Total comprehensive income attributable to
Equity holders of the parent 10 044,2 2 751,6 6 134,1
Non-controlling interests 12,4 (2,2) (2,0)
10 056,6 2 749,4 6 132,1
Weighted average number of shares in issue
('000) 456 349 456 346 456 347
Diluted weighted average number of
shares in issue ('000) 456 444 456 449 456 453
EARNINGS PER SHARE
Basic earnings per share (cents) 35% 727,1 539,1 1 139,8
Diluted earnings per share (cents) 35% 726,9 539,0 1 139,5
DISTRIBUTION TO SHAREHOLDERS
Capital distribution per share (cents) 216,0 188,0 188,0
The capital distribution to shareholders of 216,0 cents relates to the distribution declared on 9 September 2015 and paid on
12 October 2015 (2014 distribution: the capital distribution of 188,0 cents relates to the distribution declared on
10 September 2014 and paid on 13 October 2014).
* The annual 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.
# See notes on Supplementary information.
GROUP STATEMENT OF HEADLINE EARNINGS
Restated
Unaudited Unaudited Restated
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2015 2014 2015
Note Change R'million R'million R'million
HEADLINE EARNINGS
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 35% 3 317,9 2 460,3 5 201,4
Adjusted for:
- Net impairment of property, plant and equipment
(net of tax) 3,4 1,0 7,8
- Net impairment of intangible assets (net of tax) - 10,4 162,3
- Loss/(profit) on the sale of tangible and
intangible assets (net of tax) 1,0 0,2 (123,8)
- Profit on the sale of assets classified as
held-for-sale (net of tax) (1 411,2) - -
(23%) 1 911,1 2 471,9 5 247,7
HEADLINE EARNINGS PER SHARE
Headline earnings per share (cents) (23%) 418,8 541,7 1 149,9
Diluted headline earnings per share (cents) (23%) 418,7 541,6 1 149,7
NORMALISED HEADLINE EARNINGS*
Reconciliation of normalised headline earnings
Headline earnings (23%) 1 911,1 2 471,9 5 247,7
Adjusted for:
- Restructuring costs (net of tax) 92,9 24,2 98,6
- Transaction costs (net of tax) 138,4 101,0 217,2
- Net monetary adjustments and currency devaluations
relating to hyperinflationary economies (net of tax) 848,8 16,2 (334,5)
14% 2 991,2 2 613,3 5 229,0
NORMALISED HEADLINE EARNINGS PER SHARE* L#
Normalised headline earnings per share (cents) 14% 655,5 572,7 1 145,8
Normalised diluted headline earnings per share (cents) 14% 655,3 572,5 1 145,6
* The definition of normalised headline earnings was amended in terms of a change in accounting policy to exclude net monetary
adjustments and currency devaluations relating to hyperinflationary economies. Normalised headline earnings per share for
the six months ended 31 December 2014 and the year ended 30 June 2015 have been restated from the previously reported values
of 569.1 cents and 1 219.1 cents respectively.
# See notes on Supplementary information.
GROUP STATEMENT OF CHANGES IN EQUITY
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 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 year - 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-based payment expenses - 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
BALANCE AT 1 JULY 2015 3 006,8 31 131,9 34 138,7 22,8 34 161,5
Total comprehensive income - 10 044,2 10 044,2 12,4 10 056,6
Profit for the year - 3 317,9 3 317,9 12,4 3 330,3
Other comprehensive income - 6 726,3 6 726,3 - 6 726,3
Capital distribution and dividends paid (985,3) - (985,3) (10,7) (996,0)
Treasury shares purchased (35,6) - (35,6) - (35,6)
Deferred incentive bonus shares exercised 20,0 (20,0) - - -
Share-based payment expenses - 12,3 12,3 - 12,3
BALANCE AT 31 DECEMBER 2015 2 005,9 41 168,4 43 174,3 24,5 43 198,8
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2015 2014 2015
Notes R'million R'million R'million
CASH FLOWS FROM OPERATING ACTIVITIES
Cash operating profit 4 997,2 4 916,9 9 506,8
Changes in working capital (1 798,5) (655,1) (1 466,9)
Cash generated from operations 3 198,7 4 261,8 8 039,9
Net financing costs paid (839,0) (1 029,8) (2 007,4)
Tax paid (830,3) (544,9) (1 193,7)
Cash generated from operating activities 1 529,4 2 687,1 4 838,8
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure - property, plant and equipment A# (917,9) (809,2) (1 592,8)
Proceeds on the sale of property, plant and equipment 4,4 13,0 184,6
Capital expenditure - intangible assets A# (561,5) (764,1) (824,6)
Proceeds on the sale of intangible assets 22,6 184,5 412,2
Acquisition of subsidiaries and businesses J# (457,7) 4,3 (2 156,5)
Acquisition of non-controlling interests - (11,7) (11,7)
Acquisition of joint venture - - (61,5)
Increase in other non-current assets (8,3) (161,9) (65,8)
Payment of deferred consideration relating to
prior year business acquisitions (351,5) (359,1) (495,7)
Proceeds on the disposal of assets classified as
held-for-sale H# 4 799,4 2 790,4 3 050,8
Cash generated from/(used in) investing activities 2 529,5 886,2 (1 561,0)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments)/proceeds from borrowings (1 983,7) 90,9 (1 366,2)
Capital distribution and dividends paid (996,0) (857,6) (857,7)
Proceeds from issue of ordinary share capital - 0,2 0,2
Contribution by non-controlling shareholders - - 4,7
Treasury shares purchased (35,6) (21,7) (22,7)
Cash used in financing activities (3 015,3) (788,2) (2 241,7)
Movement in cash and cash equivalents before
effects of exchange rate movements 1 043,6 2 785,1 1 036,1
Effects of exchange rate movements 201,1 (241,3) (338,9)
Movement in cash and cash equivalents 1 244,7 2 543,8 697,2
Cash and cash equivalents at the beginning of the period/year 6 859,0 6 161,8 6 161,8
Cash and cash equivalents at the end of the period/year 8 103,7 8 705,6 6 859,0
Operating cash flow per share (cents) 335,1 588,8 1 060,3
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents per the statement of financial position 10 387,1 10 935,7 8 665,6
Less: bank overdrafts (2 283,4) (2 230,1) (1 806,6)
8 103,7 8 705,6 6 859,0
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
Unaudited Unaudited Audited
six months ended six months ended year ended
31 December 2015 31 December 2014 30 June 2015
R'million % of total R'million % of total Change R'million % of total
REVENUE
International@ 9 014,1 48 8 803,8 46 2% 18 567,4 49
South Africa^ 4 181,7 22 4 306,7 23 (3%) 8 602,6 23
Asia Pacific 3 820,1 21 4 422,7 23 (14%) 8 107,3 21
Sub-Saharan Africa 1 632,7 9 1 466,6 8 11% 2 768,6 7
Total gross revenue 18 648,6 100 18 999,8 100 (2%) 38 045,9 100
Adjustment* (1 136,3) (966,5) (1 919,3)
Total revenue 17 512,3 18 033,3 (3%) 36 126,6
OPERATING PROFIT BEFORE AMORTISATION
Adjusted for specific non-trading
items ("EBITA")
International 2 849,5 59 2 452,1 53 16% 5 159,8 56
Operating profit# 2 671,6 2 269,0 18% 4 610,7
Amortisation of intangible assets 166,9 115,4 249,9
Transaction costs 55,4 34,3 75,9
Restructuring costs 117,9 32,3 130,3
(Profit)/loss on the sale of assets (161,9) 1,1 (60,7)
(Reversal)/impairment of assets (0,4) - 153,7
South Africa 951,7 20 993,1 21 (4%) 1 950,2 21
Operating profit# 2 357,2 930,3 153% 1 826,5
Amortisation of intangible assets 48,5 45,8 93,1
Transaction costs 9,2 5,2 9,6
(Profit)/loss on the sale of assets (1 468,2) 0,2 (19,6)
Net impairment of assets 5,0 11,6 40,6
Asia Pacific 843,4 17 981,8 21 (14%) 1 748,4 19
Operating profit# 889,3 912,5 (3%) 1 705,8
Amortisation of intangible assets 65,2 67,5 137,7
Restructuring costs 9,9 3,2 1,5
Profit on the sale of assets (121,0) (1,4) (96,6)
Sub-Saharan Africa 173,8 4 209,7 5 (17%) 312,7 4
Operating profit# 170,3 206,6 (18%) 306,9
Amortisation of intangible assets 3,5 3,1 6,3
Profit on the sale of assets - - (0,5)
Total EBITA 4 818,4 100 4 636,7 100 4% 9 171,1 100
ENTITY-WIDE DISCLOSURE - REVENUE
Analysis of revenue in accordance
with customer geography
Europe CIS 6 130,4 33 5 068,3 26 21% 10 456,3 28
South Africa 4 178,7 22 4 310,0 23 (3%) 8 608,1 23
Asia Pacific 4 016,3 22 4 645,0 24 (14%) 8 504,1 22
Latin America (excluding
hyperinflationary economy) 1 724,9 9 1 738,4 9 (1%) 3 424,3 9
Sub-Saharan Africa 1 635,0 9 1 470,9 8 11% 2 776,8 7
Hyperinflationary economy 41,0 0 879,6 5 (95%) 2 703,9 7
Rest of the world 922,3 5 887,6 5 4% 1 572,4 4
Total gross revenue 18 648,6 100 18 999,8 100 (2%) 38 045,9 100
Adjustment* (1 136,3) (966,5) (1 919,3)
Total revenue 17 512,3 18 033,3 (3%) 36 126,6
@ Excludes intersegment revenue of R1 190,7 million (2014: R921,8 million).
^ Excludes intersegment revenue of R76,1 million (2014: R47,5 million).
* Only the Aspen portion of the profit share from the GSK Aspen Healthcare for Africa Collaboration has been recognised 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 R6 088,4 million (2014: R4 318,4 million).
GROUP SUPPLEMENTARY INFORMATION Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2015 2014 2015
Notes R'million R'million R'million
A. CAPITAL EXPENDITURE
Incurred 1 479,4 1 573,3 2 417,4
- Property, plant and equipment 917,9 809,2 1 592,8
- Intangible assets 561,5 764,1 824,6
Contracted 894,7 2 156,1 683,4
- Property, plant and equipment 642,2 512,1 600,8
- Intangible assets 252,5 1 644,0 82,6
Authorised but not contracted for 1 974,7 2 302,5 2 625,8
- Property, plant and equipment 1 758,6 2 100,9 2 405,4
- Intangible assets 216,1 201,6 220,4
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING):
Depreciation of property, plant and equipment 316,7 288,2 552,3
Amortisation of intangible assets 284,1 231,8 487,0
Net impairment of tangible and intangible assets 4,6 11,6 194,3
Share-based payment expenses - employees 16,9 20,8 50,8
Transaction costs 64,6 39,5 85,5
Restructuring costs 127,8 35,5 131,8
Profit on disposal of Divestments (1 728,3) - -
C. INVESTMENT INCOME
Interest received 197,8 188,3 382,7
D. FINANCING COSTS
Interest paid (963,7) (896,1) (1 832,2)
Debt raising fees on acquisitions (86,6) (65,8) (142,0)
Net foreign exchange losses (14,8) (342,5) (479,4)
Fair value gains/(losses) on financial instruments 167,3 13,6 (0,9)
Notional interest on financial instruments (96,6) (88,2) (174,6)
Net monetary adjustments and currency devaluations relating
to hyperinflationary economies K# (848,8) (16,2) 334,5
(1 843,2) (1 395,2) (2 294,6)
E. CURRENCY TRANSLATION GAINS
Currency translation gains 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 93,1 - 72,9
Contingency relating to product litigation 40,3 30,0 31,6
Customs guarantee 17,0 14,2 13,8
Indirect tax contingent liabilities 7,8 24,4 19,9
Contingencies arising from labour cases 5,2 2,5 5,1
Other contingent liabilities 1,5 1,9 3,3
164,9 73,0 146,6
G. GUARANTEES TO FINANCIAL INSTITUTIONS
Material guarantees given by Group companies
for indebtedness of subsidiaries to financial institutions 13 598,7 13 488,4 13 412,7
H. PROCEEDS ON THE DISPOSAL OF ASSETS CLASSIFIED AS HELD-FOR-SALE
Divestment of a portfolio of products in South Africa to Litha 1 722,6 - -
Divestment of generics business and certain branded products
to Strides entities 2 986,4 - -
Divestment of land and buildings in Australia 90,4 - -
Divestment of fondaparinux products to Mylan - 2 790,4 3 050,8
4 799,4 2 790,4 3 050,8
Divestment of a portfolio of products in South African to Litha
On 9 May 2015, Pharmacare Limited, the Group's primary South African trading company, concluded a set of agreements with
Litha Pharma (Pty) Ltd ('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 R1,7 billion. The portfolio of
products comprised injectables and established brands. The approval of this transaction by the South African Competition Authorities
was obtained on 4 August 2015.This transaction completed on 1 October 2015.
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 Ltd in terms of which Aspen Australia divested a portfolio of approximately 130 products for a
consideration of 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 USD79 million. Both of the above transactions completed on 31 August 2015.
I. DISPUTED INCOME TAX MATTER
The Aspen Group has been subject to an international tax audit by the South African Revenue Service and Aspen Pharmacare
Holdings Limited has received a revised assessment in relation to its 2011 fiscal year as a consequence of this audit.
Aspen has disputed the assessment and believes that it has appropriately dealt with its transactions in accordance with the law.
This position is supported by Aspen's legal and tax advisors.
J. ACQUISITION OF SUBSIDIARIES AND BUSINESSES
2016
R'million
Cash outflow relating to current year business combination 456,6
Cash outflow relating to a working capital purchase price adjustment 1,1
457,7
Set out below is the provisional accounting for the Norgine SA business combination:
Norgine SA
On 21 May 2015, Pharmacare Ltd acquired 100% of the issued share capital of Norgine in South Africa for a consideration of
EUR29 million. Norgine SA 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.
This transaction completed on 30 September 2015.
Norgine SA
R'million
Fair value of assets and liabilities acquired
Property, plant and equipment 1,5
Intangible assets 442,3
Deferred tax assets 0,5
Trade and other receivables 76,0
Trade and other payables (63,7)
Cash outflow on acquisition 456,6
The initial accounting for this acquisition, which has been classified as a business combination, has been reported on a
provisional basis and will be finalised in the year ending 30 June 2017.
2015
R'million
Cash outflow relating to June 2015 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 final 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 USD5 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 United Kingdom 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 occuring
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 were classified as business combinations in the prior year, were
reported on a provisional basis and was finalised in the June 2015 financial year.
K. 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 for the importation of high priority essential goods including infant nutritionals and
pharmaceutical medicines. This rate is Venezuelan Bolivar ("VEF") 10 per USD with effect from 17 February 2016.
The previous rate was VEF6,30 per USD;
- SICAD rate of VEF13,50 per USD whereby exchange rates are based on conducted auctions; and
- SIMADI rate of VEF200 per USD that permits individuals and entities to buy and sell foreign currency with fewer
restrictions than other exchange rate mechanisms in Venezuela.
During the six months to 31 December 2015 the Group received approximately USD4 million from Venezuela for transactions
that were settled at the official CENCOEX rate of VEF6.30 per USD. Aspen Venezuela, had approximately USD49 million of
intergroup liabilities and USD7 million of external liabilities pending approval for future settlement at the official CENCOEX
rate as at 31 December 2015.
During the six months to 31 December 2015 the economic situation deteriorated and the Venezuelan authorities have
increasingly limited authorisations to pay for imports using the official CENCOEX rate of VEF6,30 per USD which applied
during this period. Because of the continuing political and economic uncertainty in Venezuela the Group has concluded
that it would be more appropriate to apply the SIMADI rate of VEF200 per USD to report the Venezuelan business' financial
position, results of operations and cash flows for the six months ended 31 December 2015. This has resulted in a
currency devaluation loss on foreign denominated liabilities of R841 million. For the 12 months ended 30 June 2015, the Group
applied the CENCOEX rate of VEF6,30 per USD as circumstances at that time supported this rate. Aspen will continue to monitor
the development of payments received and the exchange rate mechanism. Should the payment rates improve or if it can no
longer be assumed that the SIMADI exchange rate is the relevant exchange rate for the translation this could lead to an
amended estimate, which in turn could trigger an amended currency translation.
The net sales generated by Aspen in Venezuela using the SIMADI exchange rate amounted to R41 million for the six months
ended 31 December 2015. For the six months ended 31 December 2014, net sales generated by Aspen in Venezuela using
the current SIMADI exchange rate would have been R44 million compared to the actual reported sales of R880 million. For
the six months ended 31 December 2014 the operating loss incurred by Aspen in Venezuela would have been R0,8 million
compared to the actual reported loss of R16 million.
L. COMPARABLE EARNINGS
The comparability of the reported results for the six month trading period to 31 December 2015 to the prior reporting period
has been influenced by the following factors:
- The completion on 31 August 2015 of the divestment of the generics business conducted in Australia as well as certain
branded products distributed in Australia to Strides group companies, the related termination of licence arrangements
in Australia and the completion on 1 October 2015 of the divestment of a portfolio of products distributed in South Africa
to Litha Pharma (collectively 'the Divestments'). The contribution to the Aspen results by the Divestments is consequently
substantially reduced in the current period. In the period from 1 July 2015 until effective date of divestment, revenue
from the Divestments was R202 million whereas revenue from the Divestments for the six months ended 31 December 2014 was
R1 148 million.
- The change in translation rate to report the financial position, results of operations and cash flows relating to Aspen's
Venezuelan business for the six months ended 31 December 2015 from the official CENCOEX rate of the VEF 6.30 per USD to the
SIMADI rate of VEF200 per USD.
To provide meaningful comparability of the financial performance of Aspen's ongoing underlying business, a measure described as
comparable normalised headline earnings has been determined which excludes the contribution from Divestments and includes the
results of Aspen's Venezuelan business translated at the SIMADI rate of VEF200 per USD for the prior reporting period.
Set out below are the comparable measures for revenue, operating profit, normalised headline earnings and normalised headline
earnings per share:
Unaudited Unaudited
six months six months
ended ended
31 December 31 December
2015 2014
Change R'million R'million
Comparable revenue
Reconciliation of comparable income
Revenue 17 512.3 18 033.3
Adjusted for:
- Revenue from Divestments (201,9) (1 148.3)
- Translation of Aspen Venezuela's revenue at the SIMADI exchange rate - (835.6)
Comparable revenue 8% 17 310.4 16 049.4
Comparable operating profit
Reconciliation of comparable operating profit
EBITA 4 818.4 4 636.7
Amortisation (284.1) (231.8)
Normalised operating profit 4 534.3 4 404.9
Adjusted for:
- Operating profit from Divestments (55.4) (289.7)
- Translation of Aspen Venezula's operating profit at the SIMADI exchange rate - 15.7
Comparable operating profit 8% 4 478.9 4 130.9
Comparable normalised headline earnings
Reconciliation of comparable normalised headline earnings
Normalised headline earnings 2 991,2 2 613,3
Adjusted for:
- Operating profit from Divestments (net of tax) (42,9) (213,8)
- Interest received from proceeds on Divestments (net of tax) (23,7) -
- Translation of Aspen Venezuela's earnings at the SIMADI exchange rate
(net of tax) - 12,4
Comparable normalised headline earnings 21% 2 924.6 2 411.9
Comparable normalised headline earnings per share
Comparable normalised headline earnings per share (cents) 21% 640,9 528,5
BASIS OF ACCOUNTING
The unaudited interim financial results for the six months ended 31 December 2015 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 applied in the preparation of the unaudited interim financial statements are in terms of International Financial
Reporting Standards and are consistent with those applied in the annual financial statements, apart from the change in accounting
policy related to normalised headline earnings. Aspen has amended its accounting policy to exclude net monetary adjustments and
currency devaluations relating to hyperinflationary economies from the definition of normalised headline earnings.
The normalised headline earnings and normalised headline earnings per share for the six months ended 31 December 2014 and the
year ended 30 June 2015 were restated to exclude net monetary adjustments and currency devaluations relating to hyperinflationary
economies.
These unaudited interim financial results were prepared under the supervision of the Deputy Group Chief Executive, M G Attridge
CA(SA) and approved by the Board of Directors.
Directors
K D Dlamini (Chairman)*, R C Andersen*, M G Attridge, J F Buchanan*, M M Manyama*, C N Mortimer*, D S Redfern*,
S B Saad, S V Zilwa*
*Non-executive director
N J Dlamini resigned as a non-executive director and Chairman of the Board with effect from 7 December 2015.
K D Dlamini was appointed Chairman with effect from that date.
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
Trifecta Capital Services Proprietary Limited
Trifecta Capital House
31 Beacon Road, Florida North, 1709
PO Box 61272, 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: 03/03/2016 01:30:00 Supplied by www.sharenet.co.za
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