JSE-listed Aspen Pharmacare increased its revenue by 9% to R38.6-billion for the financial year ended June 30, while normalised earnings before interest, taxes, depreciation and amortisation increased by 7% to R11-billion for the period.
The higher revenue was supported by growth from Commercial Pharmaceuticals, despite the difficult trading conditions, and a pleasing performance from the Manufacturing division.
Normalised headline earnings per share (NHEPS) increased by 9% to R14.65, favourably impacted by lower financing costs.
Strong second half cash flows resulted in a positive cash inflow from working capital for the period and supported a cash conversion rate of 142%. Net borrowings declined by R3.8-billion to R35.2-billion.
The strong cash generation was offset by R5.6-billion in unfavourable currency movements.
Testing of intangible and tangible assets for impairment resulted in impairments of R1.5-billion arising primarily from a decline in the outlook for the affected products.
Discontinued operations include the Nutritionals business, the Asia Pacific noncore pharmaceutical portfolio, both divested in the 2019 financial year, as well as the Japanese business and the Public Sector antiretroviral (ARV) drugs.
The Japanese business divestment became effective on January 31.
The South African Public Sector ARV transaction with Laurus, an Indian producer of ARV active pharmeceutical ingredients, became effective in June.
Taking into account the uncertainty created by the current Covid-19 pandemic, Aspen's board has decided that it would not be prudent to declare a dividend at this time.
The board will re-evaluate the circumstances regularly with a view to declaring a dividend when it is considered prudent to do so.
The recently announced agreement to divest the assets related to the commercialisation of Aspen’s Thrombosis business in Europe to Mylan marks the end of the process to reshape the foundation of the group.
Following the completion of this transaction, Aspen’s Commercial Pharmaceuticals business will be heavily weighted towards territories where the group has demonstrated capabilities and a strong performance record, largely in emerging markets.
A higher proportion of Aspen’s business will be exposed to the private sector and will be better positioned to benefit from the expanding middle classes in emerging markets, where the group said it is well placed to support the increasing medical demands of these growing populations.
The receipt of the proceeds from the aforementioned transaction with Mylan will afford Aspen scope for acquisitive investment to support initiatives aimed at enhancing value in areas of strength.
Aspen’s significant investment in capital expenditure to build its sterile manufacturing capacities has been slightly delayed by the Covid-19 pandemic. This investment is planned to peak in the year ahead before reducing rapidly in subsequent years as the projects reach their end.
The niche production capabilities installed are expected to enable Aspen to reduce the cost of goods within its existing portfolio. It also aims to allow the group to leverage this sought after capacity, particularly with big pharma, to further expand its global presence in steriles.
As a result of the reshaping and significant investment in sterile manufacturing, Aspen posited that it is highly differentiated from its peer group as it is the most emerging-market-focused specialty pharmaceutical company and well positioned in the production of sterile products.
Aspen said its business model has proven resilient despite the uncertainty and impact of Covid-19.
It noted that its relevant product portfolio, effective business continuity plans and safety measures to protect employees have enabled the group to remain in full operation throughout this period.
The volatility associated with the pandemic has nonetheless had an adverse impact on the group’s results in the second half of the financial year under review. This impact has varied by timing and region.
The hard lockdown in China significantly restricted sales of medicines there for at least three months. Conversely, early in the first wave, Aspen experienced a spike in demand for certain of its medicines, most notably in South Africa, Australia and Mexico. This was followed by the predicted drop in demand as the resultant abnormally high inventory in-market levels were normalised.
In Europe, there was a significant need for the group’s sterile products required to treat Covid-19 patients during the height of infections, but a decline in orders for products related to elective surgeries.
The period after the first wave has been characterised by continued social distancing, leading to reduced infection rates in non-Covid-19 communicable diseases and a slow and uncoordinated resumption of elective surgeries which has adversely impacted Aspen’s performance.
Despite the many challenges experienced during the second half of the financial year, Aspen said it has made great progress against each of its medium-term priorities, while maintaining the supply of its medicines to patients in need around the world.