Aspen generates strong second half cash flows, reducing borrowings

Johannesburg – JSE Limited listed Aspen Pharmacare Holdings Limited (APN), a global multinational specialty pharmaceutical company, has announced reviewed provisional Group financial results for the year ended 30 June 2019.

Stephen Saad, Aspen Group Chief Executive said, “Despite the challenging environment, we have achieved most of our short-term goals, including the completion of the disposal of our Nutritionals business and a portfolio of products distributed in Asia Pacific. We delivered strong second half cash flows with the proceeds from these disposals resulting in a reduction in net borrowings to R39.0 billion. We will continue with active assessment of value realisation opportunities to accelerate deleveraging our balance sheet.”



Aspen increased revenue by 1% to R38.9 billion while normalised EBITDA declined 2% to R10.8 billion, influenced by a lower contribution from the Manufacturing business. Commercial Pharma delivered an increase in revenue of 3% to R33.1 billion. Normalised headline earnings per share (“NHEPS”) was 7% lower at R14.14.

Strong cash flows in the second half allowed the Group to achieve a cash conversion ratio of 107% for the year.  In the closing six months Aspen also completed the disposals of its Nutritionals business and a portfolio of products distributed in Asia Pacific, realising cash proceeds before tax of R12.3 billion and a combined profit on disposal of R5.4 billion.  The positive cash flows and the proceeds from the disposals have enabled net borrowings to be reduced from R53.5 billion at 31 December 2018 to R39.0 billion at financial year end. A leverage ratio of 3.62x was achieved, comfortably below the covenant level of 4.0x. Rigorous impairment testing of tangible and intangible asset values was once again performed, resulting in total impairments of R 3.1 billion of which R 2.4 billion related to intangible asset impairments.

Relative movements in exchange rates had an impact on financial performance, as is illustrated in the table below, which compares performance in the prior comparable period at previously reported exchange rates and then at constant exchange rates (“CER”).  The CER results for the year ended 30 June 2018 re-state performance for that period using the average exchange rates for the year ended 30 June 2019.

Year ended 30 June 2019
Continuing operations Reported
FY 2019
  Restated FY 2018^
  % Change at reported rates   FY 2018 CER R’million   % Change at CER
Revenue 38 872   38 314   1%   39 856   (2)%
Normalised EBITDA* 10 824   11 031   (2)%   11 219   (4)%
NHEPS** (cents) 1 414.3   1 518.4   (7)%   1 536.6   (8)%

^ FY 2018 has been restated for the adoption of IFRS 15 and IFRS 9 as well as discontinued operations.
*Operating profit before depreciation and amortisation adjusted for specific non-trading items as defined in the Group’s accounting policy.
** NHEPS is headline earnings adjusted for specific non-trading items, being transaction costs and other acquisition and disposal-related gains or losses, restructuring costs, settlement of product related litigation costs, net monetary adjustments and currency devaluations relating to hyperinflationary economies and significant once-off tax provision charges or credits arising from the resolution of prior year tax matters.

From this point forward in the commentary,  (1) all performance references are to continuing operations and (2) all June 2018 financial information is stated in CER and all related percentage changes in revenue between June 2019 and June 2018 are based on June 2018 CER financial information revenue in order to enhance the comparability of underlying performance.


Revenue for the Group declined 2% to R 38.9 billion and normalised EBITDA was 4% lower at R 10.8 billion with weaker Manufacturing results being the most material unfavourable influence on both results.  Higher net financing costs contributed to an 8% decline in normalised headline earnings to R6.5 billion.


Sterile Focus Brands

Sterile Focus Brands, comprising the Anaesthetics and Thrombosis portfolios, delivered improved gross profit up 3% to R 8.4 billion despite revenue declining 2% to R 15.3 billion. The gross margin percentage improvement was driven by lower Thrombosis manufacturing costs.

Anaesthetics Brands

Revenue from Anaesthetics was 2% lower at R 8.7 billion as ongoing supply constraints weighed on performance. China (+5%), Latin America (+7%) and MENA (+12%) achieved good revenue gains, but these were offset by Europe CIS (-8%) and Australasia (-9%) which suffered the most from supply limitations. Japan ended the year flat (0%) as volume gains offset pricing decreases. 

Thrombosis Brands

Thrombosis revenue was down 3% to R 6.6 billion, negatively impacted by Europe CIS (-6%) which contributes 80% of Aspen’s Group Thrombosis revenue. The decline in Europe CIS was exacerbated by the once-off impact of switching from a wholesaler model to Aspen’s own distribution channel in Russia. Collectively, the other regions grew revenue by 14%, supported by a 34% increase from China.

Regional Brands

Regional Brands revenue was flat at R17.8 billion vs the prior year, despite the impact of the strike at our South African manufacturing facilities which has now been resolved, and a reduced contribution from the oncology portfolio in Europe CIS. The downward pricing pressure on the oncology products also affected gross margins. Australasia grew 5% supported by the OTC business which grew 8% and Latin America delivered 6% growth due to a strong performance from the domestic brands.


Manufacturing revenue was down 11% to R 5.8 billion, with contributing factors to this being a major third party customer losing a material tender in the prior year, the suspension of sales of heparin to third parties due to limited global availability and strike action undertaken at our South African manufacturing facilities. At Aspen Oss, sales of active pharmaceutical ingredients (APIs) are generally contracted in advance and tend to be stable with a relatively even spread over the year, but there can be margin variability dependent on the mix of products ordered.   In particular, the mix effect was such that the margin earned was higher in the first half of the year than in the second. This, together with the previous factors mentioned, weighed on gross profit percentages.


While the past year has presented its challenges, we have achieved most of our short-term goals. The completion of the disposals of the Nutritionals business and the non-core product portfolio has allowed us to fully focus on our core pharmaceuticals business.

In March 2019 we announced a strategic review of our European and South African commercial pharmaceutical businesses. Our review of the European commercial business is ongoing.  As a result of this review, we have adopted a more market focused approach, reallocating and restructuring existing resources. We are also continuing to explore mutually beneficial partnering opportunities in this territory. Our South African commercial business has been divided into two divisions, allowing heightened consumer focus, which is showing promising initial results. This completes the review of the South African commercial pharmaceutical business.

We made meaningful progress in our objective of de-leveraging the balance sheet over the past year.   In the 2020 financial year, positive free cash flows and significantly reduced deferred payables should contribute to a further reduction in net borrowings. Favourable outcomes from our continued active assessment of value realisation opportunities would result in accelerated deleveraging of our balance sheet.   These factors, together with a substantial decline in planned capital expenditure after the 2020 financial year will support our goal of achieving a leverage ratio of less than 3.0x in the medium term.   

We continue to build on our strength of producing high quality pharmaceuticals at affordable prices and on our reputation as a leading global producer of injectable steriles. Aligned to this, we are making good progress with our major capital projects in South Africa, France and Germany. These projects are aimed at building world class manufacturing facilities to in-source a significant portion of the production for our Anaesthetics business and at securing the supply of quality Anaesthetics medicines to patients across the world.  Full commercial production from all of these projects is expected to commence in the 2024 financial year.

We will continue to assess our operations to ensure our business is relevant to the changing macroeconomic environment. Adapting the business model to align with evolving circumstances has been a key strength of Aspen, moving us from a predominantly generics business to a business based on branded products with a focus on sterile injectables in recent years.

Increasing heparin prices, exacerbated by the outbreak of African Swine Fever in China, the world’s biggest supplier of porcine for heparin (a key API sourced from pigs) will dilute margins from the Thrombosis portfolio. The Group has managed to dampen this impact by a considered stock build of heparin and the benefits of being a producer of heparin. Aspen intends to pursue the commercial opportunity of re-commencing the sale of heparin to third party customers, given the pricing and the significant stockholding established.

Certain of our initiatives are expected to result in better outcomes in the second half of the 2020 financial year.  This, together with expected improving Anaesthetics supply in the second half, means that second half performance in the 2020 financial year is likely to be stronger than in the first half of that year.  While the diversity of the Group’s operations across many geographies and currencies, as well as exposure to an industry where regulators have significant influence on pricing and the costs of doing business, gives rise to many variables, we expect, based on current circumstances, the performance for the 2020 financial year to be broadly in line with the results reported for 2019.

Any forecast financial information above has not been reviewed or reported on by the external auditor.


Taking into account our prioritisation of deleveraging the balance sheet, existing debt service commitments during the 2020 financial year and the short term requirements of the ongoing capital projects, notice is hereby given that the Board has decided that it would not be prudent to declare a dividend at this time.  The Board will re-evaluate the relevant circumstances regularly with a view to declaring a dividend when it is considered prudent to do so.










Closed Period

Aspen is in a closed period from 1 January until the publication of our interim results on the JSE SENS platform scheduled to be released on 1 March 2023.

The live presentation will take place in Cape Town at 08h30 on 2 March 2023.