SGL - PE 7, hope I did the right thing.
APN - Read results - (something new to me) - future looks bright APN have to wear shades
If some1 would not mind reading it. give me your thoughts.
June 2014 Final estimated to be released on Thursday , 11 September 2014
Recent transactions
Aspen has recently undertaken extensive corporate activity which
will transform the group. The following is the status of the material
transactions involved:
c The acquisition of the API manufacturing business, primarily in
the Netherlands, from MSD for EUR31 million plus the value of
inventory, became effective on 1 October 2013.
c The acquisition of a portfolio of 11 branded finished dose form
molecules from MSD in a related transaction for USD600 million,
of which USD67 million has delayed payment terms, became
effective on 31 December 2013.
c The acquisition of the Arixtra and Fraxiparine/Fraxodi brands
worldwide (excluding China, India and Pakistan) from GSK for
GBP505 million became effective on 31 December 2013. In a
related transaction, a further GBP100 million and EUR113 million
has been paid into escrow in respect of the acquisition of the
specialised sterile production site in France which manufactures
these brands and the related inventory. This transaction is
scheduled to become effective on 30 April 2014.
c The acquisition of certain licence rights to infant nutritional
intellectual property, net assets, including a production facility
in Mexico, and shares in infant nutritional businesses in
several countries in Latin America from Nestlé for a purchase
consideration of USD180 million was completed with effect from
28 October 2013.
c The acquisition from Nestlé of certain rights to intellectual
property licenses and net assets of the infant nutritionals
business presently conducted by Pfizer in certain southern
African territories, including South Africa, has been approved
by the competition authorities and became effective on
27 January 2014.
Asia Pacific business
The region’s record of unbroken growth since inception in 2001 was extended with a rise of 27% in revenue to
R4,3 billion supported by products added as a consequence of acquisitions by the Group in the previous financial year.
EBITA was up by 4% to almost R1,0 billion as most of the products added to the portfolio were at the lower margins
available for distribution services and the ongoing mandated price cuts in Australia weighed on profits. The margin
percentage contraction was cushioned by savings achieved in the cost of goods and through a reduction in rebates
paid. In Asia, Aspen’s newly established businesses in the Philippines, Malaysia and Taiwan made impressive advances
albeit off a low base. Sales to customers in Asian countries increased by 22% to R311 million.
International business
The International business led growth in the Group with revenue increasing 94% to R3,4 billion and EBITA rising 79%
to R1,1 billion. The acquisition of the API business from MSD effective 1 October 2013 and the completion of the infant
nutrition transaction with Nestlé effective 28 October 2013 together added R1,3 billion to revenue at low margins,
boosting the sales growth and lowering overall margin percentages. These deals were also influencing factors in the
rise in sales to customers in the Latin American (up 60% to R1,2 billion) and Rest of World (up 147% to R2,2 billion)
territories. The global brands portfolio was an important driver of the growth achieved in the International business
and the margin improvement projects for these products continued to yield favourable outcomes. Contributions from
certain territories in this business have also benefitted from relative currency strength against the Rand.
Sub-Saharan Africa business
In Sub-Saharan Africa gross revenue advanced by 41% to R1,4 billion while EBITA climbed 53% to R0,2 billion as the
good momentum achieved in the second half of the prior year was maintained.
Funding
Borrowings, net of cash, increased by R15,8 billion over the period to R26,2 billion. Translation losses due to Rand
weakness against foreign currencies in which offshore borrowings is denominated added R0,4 billion to total
borrowings. In all, R14,1 billion was spent on investments in new subsidiaries and businesses during the six months
and an additional R1,1 billion was invested in capital expenditure. A further R5,6 billion was added to borrowings on
2 January 2014 with the settlement of the MSD products acquisition. Highly successful local and international debt
syndication processes were concluded during the period providing the Group with the necessary funding to support the
Commentary (continued)
Aspen – Unaudited interim financial results for the six months ended 31 December 2013 3
recent transactions. Group operating cash flows remained strong although this was tempered by a once-off increase
in debtor balances in the newly acquired infant nutritional business in Latin America. Gearing moved up to 51% at the
period end. Financing costs, net of interest received, were covered nine times by operating profit before amortisation
Prospects
The completion of the recent transactions with MSD and GSK will propel growth, expanding the global brands portfolio
with the addition of established products which have strong market acceptance and widening the geographic reach of
Aspen. These transactions have enabled Aspen to establish its own business units in Russia and across Europe as well
as extending its influence in Latin America and Asia. The Group’s presence in Latin America has been further supported
by the infant nutritional transaction with Nestlé which has facilitated the establishment of Aspen business units in
Colombia, Chile, Peru, Ecuador and Central America.
The International business is the largest beneficiary of the recent transactions and is set to become the Group’s
leading contributor to revenue and EBITA, adding further momentum to the impressive growth achieved by this region
in the past six months. Several margin improvement projects are underway aimed at improving competitiveness and
profitability of the global brands portfolio. Plans are well underway in developing a turnaround strategy for the infant
nutritional business in Latin America, but the benefits are likely to be felt in future years.
The largest contributor in the Asia Pacific territory, Australia, faces challenges in the absence of market growth drivers
and the ongoing mandated price reduction programme. Under these circumstances, Aspen management is focussed
on performance optimisation and reductions in the cost of goods. The regional leadership team is placing significant
focus on the development of the business in Asia, with Japan having been identified as an area for specific attention.
In South Africa, the Group expects to continue to perform well in the private sector supported by strong sales and
marketing teams. Ongoing organic growth and regular new product launches will underpin Aspen’s leadership position
in this sector. Public sector results will be dictated by state demand which can be difficult to predict. The 5.82% increase
in the single exit price by the Department of Health will not be sufficient to absorb the effects of the weaker Rand on
the cost of imports and domestic wage and energy cost inflation. The Consumer division is expected to continue its
recovery despite the difficult economic environment and the recently completed infant nutritional transaction with
Nestlé will provide added impetus.
Sub-Saharan Africa should continue to advance favourably provided political instability does not interfere with
performance in any of the material territories.
The second half will benefit considerably from the implementation of the recent acquisitions. High levels of attention
are being given to the operationalisation of the acquired businesses. Plans are being implemented in the pursuit of
opportunities to achieve greater market penetration with the expanded global brands portfolio and in the realisation
of improved production efficiencies which should enhance results in future years. Debt levels in the Group are high,
but gearing is expected to decline steadily due to the strong operational cash flows inherent in Aspen’s business model.
