Aspen Pharmacare Holdings Limited · JSE:APN
Aspen Pharmacare — H1 2016 Earnings Presentation
55 slides from Aspen Pharmacare's earnings presentation, Mar 4, 2016
Slide 1: Interim Results Presentation
Interim Results Presentation 4 March 2016 For the six months ended 31 December 2015
Slide 2: Highlights
Highlights +8% +8% Comparable gross revenue Comparable operating profit R'million R'million 18 447 4 479 17 016 4 131 H1 2015 H1 2016 H1 2015 H1 2016 +14% +21% Normalised headline EPS Comparable NHEPS cents per share cents per share 655 573 641 529 H1 2015 H1 2016 H1 2015 H1 2016 2
Slide 3: Abridged Group statement of comprehensive income
Abridged Group statement of comprehensive income For the six months ended 31 December Change R’million H1 2016 H1 2015 Change *(Comparable Business) Net revenue 17 512 18 033 -3% 8% Cost of sales (8 682) (9 562) Gross profit 8 830 8 471 4% 11% Net operating expenses (2 458) (3 921) EBITA 6 372 4 550
Slide 4: Underlying business fundamentals positive
Underlying business fundamentals positive Gross revenue growth +14% International +3% +11% Sub-saharan Africa +11% +4% South Africa -3% +1% Asia Pacific -14% +8% Group -2% -15% -10% -5% +0% +5% +10% +15% +20% change in comparable revenue change in reported gross revenue *Comparable business measures
Slide 5: Comparable EBITA margin
Comparable EBITA margin 32% International 31% 23% South Africa 22% 22% Asia Pacific 23% 11% Sub-Saharan Africa 14% 26% Group 26% 0% 5% 10% 15% 20% 25% 30% 35% H1 2016 H1 2015 *Comparable business measures exclude the contribution from Divestments and includes the results of Aspen's Venezuelan busine
Slide 6: Net funding costs
Net funding costs R’million H1 2016 H1 2015 Net interest paid (766) (708) Debt raising fees on acquisitions (86) (66) Net foreign exchange loss (14) (342) Fair value gains on financial instruments 167 14 Notional interest on financial instruments (97) (88) Net hyperinflationary adjustments(1) (849)
Slide 7: Reconciliation of earnings per share
Reconciliation of earnings per share For the six months ended 31 December Cents H1 2016 H1 2015 Change Basic earnings per share (EPS) 727.1 539.1 35% Net impairments 0.7 2.6 Net profit on sale of assets (309.0) - Headline EPS (HEPS) 418.8 541.7 -23% Restructuring costs 20.4 5.8 Capital raising fees
Slide 8: Key currency movements vs ZAR
Key currency movements vs ZAR Value of key currencies vs ZAR from July 2015 to December 2015 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.80 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EUR AUD MXN BRL RUB USD 8
Slide 9: Material currencies
Material currencies Revenue EBITA AUD 17% AUD 30% EUR (and related) 30% EUR (and related) 21% USD 10% USD -2% ZAR 21% ZAR 27% Other 22% Other 24% 9
Slide 10: Venezuelan devaluation
Venezuelan devaluation Deterioration in economic situation ◦ Fall in oil price ◦ Only USD 4 million remitted from Venezuela leaving USD 56 million due Adoption of VEF 200 = USD 1 (SIMADI) rather than official rate for pharmaceuticals of VEF 6.30 = USD 1 ◦ Treatment consistent with most multi-nat
Slide 11: Tax rate
Tax rate R’ million H1 2016 H1 2015 PBT Tax Rate PBT Tax Rate Normal operations 3 573 (781) 21.9% 3 128 (653) 20.9% Profit on Divestments 1 728 (341) 19.7% - - 0.0% (1) Net hyperinflationary adjustments (849) - 0.0% (16) - 0.0% Group Tax 4 452 (1 122) 25.2% 3 112 (653) 21.0% 1. Net monetary adjustme
Slide 12: PPE capital expenditure – Recent and planned
PPE capital expenditure – Recent and planned Major Projects ◦ New pre-filled syringe line and laboratory at Capex NDB 2500 ◦ Sustainability projects at Oss 2 151 ◦ Expansion and upgrade projects at Fine 2000 Chemicals 1 593 1 643 ◦ New high containment facility at PE 1500 1 329 1 233 ◦ New injecta
Slide 13: Working capital
Working capital R’million H1 2016 H2 2015 Net working capital 17 188 14 327 Net working capital excluding Oss 13 316 10 591 Working capital as % of revenue 49% 40% Less: Attributable to Oss -6% -8% Working capital excluding Oss as % of revenue 43% 32% Working capital at 1 July 2015 14 327 Exchange r
Slide 14: Borrowings
Borrowings For six months ended 31 December 2015 R’million H1 2016 H1 2015 Net borrowings of R33.5 billion Opening balance 30 048 29 765 Cash flow from operating activities (1 529) (2 687) International Capital expenditure 918 809 58% South Africa Proceeds from sale of assets (4 827) (2 988) 30% Acq
Slide 15: Borrowings
Borrowings Blended interest rates for borrowings as at 31 December 2015 Analysis of R33.5 billion net borrowings Debt denomination Weighted average rate p.a. ZAR 8.0% 28.6 Net borrowings AUD 4.8% 33.5 USD 3.2% 10.9 Cash 10.4 9.2 Key indicators Current 30.2 H1 2016 H1 2015 Interest cover ratio 8.3x 6
Slide 16: Group overview
Group Group overview Gross revenue by customer geography R’million H1 2016 H1 2015 Change International 8 778 7 694 14% South Africa 4 179 4 032 4% Asia Pacific 3 814 3 775 1% Sub-Saharan Africa 1 635 1 471 11% Comparable revenue 18 406 16 972 8% Venezuela 41 880 Divestments 202 1 148 Total gross re
Slide 17: International
Regional Review International Revenue by customer geography R’million H1 2016 H1 2015 Change Europe CIS 6 130 5 068 21% Spanish Latin America 1 343 1 325 1% Brazil 382 413 -8% North America 510 501 2% Middle East North Africa 413 387 7% Comparable Revenue 8 778 7 694 14% Venezuela 41 880 Total Reven
Slide 18: Europe CIS
International Europe CIS Revenue by customer geography R’million H1 2016 H1 2015 Change Commercial sales 4 113 3 415 20% Europe 3 753 2 850 32% -Anticoagulants 2 486 1 825 36% -Other 1 267 1 025 24% Russia CIS 360 565 -36% API and FDF sales 2 017 1 653 22% Total revenue 6 130 5 068 21% Positive cu
Slide 19: Europe CIS - Commercial operations
International Europe CIS- Commercial operations New leadership structure in place Dedicated team that is 80% field based Strong commercial strategy within anticoagulants ◦ Clear positioning and focus on key segments ◦ Full portfolio management (Anticoagulation, Women’s Health & Oncology) ◦ Ben
Slide 20: Europe CIS - Injectable anticoagulant market share
International Europe CIS- Injectable anticoagulant market share Market Share (Rolling 3 months Oct-Dec 2015)* Syringe Equivalent Units (1,000) Sanofi 56% Aspen 18% Pfizer 8% Pfizer Aspen Sanofi Markets volumes continue to grow at 1%-3% in spite of orals Aspen volumes stable France growing Frax
Slide 21: Spanish Latin America
International Spanish Latin America Revenue by customer geography R’million H1 2016 H1 2015 % change Nutritional sales 763 679 12% Pharmaceutical sales 580 646 -10% Comparable revenue 1 343 1 325 1% Venezuela 41 880 Total revenue 1 383 2 205 -37% Nutritional sales continue to show double digit gro
Slide 22: Spanish Latin America – Pharma global brands
Spanish Latin America – Pharma global brands Product sales performance - Spanish Latin America Product Sales performance - Spanish Latin America Mat MATUSD Nov13 Nov 13 Mat MATUSDNov Nov14 14 Mat MATUSD NovNov 1515 METICORTELONE SEPTRIN LANOXIN INDOCID EMSELEX / ENABLEX ALDOMET DECA-DURABOLIN IMURAN
Slide 23: Spanish Latin America - Nutritionals
International Spanish Latin America - Nutritionals Aspen Infant Milk Formulas –MAT Latam sales excluding Venezuela (Evolution after transition) Mar-14 Apr-14 May-14 Jul-14 Mar-15 Apr-15 May-15 Jul-15 Feb-14 Oct-14 Feb-15 Oct-15 Dec-13 Aug-14 Sep-14 Nov-14 Dec-14 Aug-15 Sep-15 Nov-15 Jan-14 Jun-14 Ja
Slide 24: South Africa
Regional Review South Africa Revenue by customer geography R’million H1 2016 H1 2015 Change Private sector 2 480 2 458 1% Public sector 787 817 -4% -ARV tender 464 546 -15% -Other tenders 323 271 19% Infant nutritionals 402 349 15% Finished form and API manufacturing sales 510 408 25% Comparable rev
Slide 25: South Africa Private sector
South Africa Private sector MAT ASPEN MARKET Total SA Private Market VALUE MAT GROWTH SHARE GROWTH MAT post Divestments Aspen 15% ASPEN 15.3% 6.6% 8.1% ETHICAL 9.3% 5.6% 6.8% Rest of market 39% GENERIC 27.1% 9.3% 8.5% Adcock Ingram 9% OTC 11.6% 1.7% 9.7% Aspen performance in generics has driven gr
Slide 26: South Africa Performance review
South Africa Performance review Generic performance continues OTC impacted by supply chain problems ◦ Includes API, reformulation, production and regulatory issues ◦ Receiving attention, some remedied SEP increase of 4.8% ◦ Additional SEP increase anticipated, timing uncertain Infant nutriti
Slide 27: South Africa Performance overview
South Africa Performance overview Export API and FDF sales ◦ Export significant volume growth ◦ Currency benefit Sharp deterioration of the currency in December ◦ Material impact on profitability ◦ Tenders also impacted NEW LAUNCH INCOME FROM PRODUCTS LAUNCHED IN LAST 24 MONTHS ◦ H1 profit % > s
Slide 28: Asia Pacific
Regional review Asia Pacific Revenue by customer geography R’million H1 2016 H1 2015 % change Australia and New Zealand 2 774 2 682 3% Asia 889 629 41% Base business revenue 3 663 3 311 11% Licences and contracts to be terminated 151 464 Comparable revenue 3 814 3 775 1% Divestments 202 870 Total Re
Slide 29: Australia and New Zealand
Asia Pacific Australia and New Zealand Revenue by customer geography Change vs Change vs R’million H1 2016 H2 2015 H1 2015 H2 2015 H1 2015 Owned pharma 1 982 1 624 1 915 22% 3% Nutritionals 554 456 518 22% 7% Owned products 2 536 2 080 2 433 22% 4% Continuing contracts and licenses 238 226 249 5% -4
Slide 30: Growth pre and post divestments - benefits of focus
Asia Pacific Growth pre and post divestments - benefits of focus 5.1% MAT Growth 3.2% 0.3% -0.3% Jun '15 Dec '15 Prescription OTC Prescription business directionally positive ◦ Overall Australian Rx market flat OTC business starting to gain sales momentum ◦ Chemical explosion in China impacted s
Slide 31: Australia - Pharma
Asia Pacific Australia - Pharma Addressed complexity and profitability ◦ Reduced over 2100 SKUs to less than 600 ◦ Retained over 80% of profitability ◦ Focus on managing higher margin own brands ◦ Numerous multinational licence agreements terminated Strides portfolio divestment announced May, ef
Slide 32: Australia - Nutritionals
Asia Pacific Australia - Nutritionals First sales of NZNM product in October 2015 New plant successfully commissioned at NZNM in December 2015 Stage 1 of transition complete ◦ NZNM now supplies all S26 Gold products to Australia Capacity has tripled ◦ Able to meet growth requirements for Asp
Slide 33: Australia - Nutritionals: Impact of switch to local manufacture
Asia Pacific Australia - Nutritionals Impact of switch to local manufacture 500 35% 450 32% 30% 400 350 25% 23% 300 20% 250 16% 15% 200 150 10% 100 5% 5% 50 0 0% Newborn Progress Toddler Junior Jul-Sep Oct-Dec growth Still early but trend is encouraging ◦ Overall sales growth of 16% for S26 Gold b
Slide 34: Asia
Asia Pacific Asia Asia Japan In Market sales contribution ◦ Started trading July 2015 Other − Impacted cost base 19% ◦ Authorised generics from GSK Japan 29% − Initial Marketing Authorisations recently approved, launch preparation underway Malaysia 6% − Strategy in-line with expected growth of the
Slide 35: Sub-Saharan Africa
Regional Review Sub-Saharan Africa Collaboration ◦ Margin losses due to increased opex investment Sales R1 635m (2015: R1 471m) ◦ Currency weakness – GBP supply ◦ Results impacted by: East Africa West Africa 55% 34% (+14% ) − Tough economic challenges in main market Nigeria (+11% ) − Persisting su
Slide 36: Strategic & Operational Review
Strategic & Operational Review Transformed from a regional to a multinational player ◦ Significant growth in operational infrastructure and expertise ◦ 1000s of Global product registrations & APIs, employees and numerous facilities ◦ Global operations set up in over 70 countries ◦ Over 100 technic
Slide 37: Growth outlook
Growth outlook Where and when will growth come from? ◦ Organic vs Inorganic growth Aspen historical performance largely typified by ◦ Strong organic growth base ◦ Acquisitions for cash rather than equity ◦ Transactions expensive but have been repaid − Increased Sales, Reduced costs − Created syn
Slide 38: Anticipated organic synergies - USA
Anticipated organic synergies - USA Opportunities for niche technologies in API and FDF ◦ Leverage unique APIs ◦ Acquire FDF Above opportunities material ◦ HPC to be launched in FY16 ◦ Additional agreements to follow − Material effect on FY17/18 Danaparoid ◦ Process characterisation underway t
Slide 39: Anticipated organic synergies - utilisation of capacity
Anticipated organic synergies - utilisation of capacity Aspen has invested heavily in capex The following capacities are immediately available ◦ Solids: − PE: Additional solid capacity for export ◦ Steriles − NDB: 70m pre-filled syringes − PE: 65m vials/amps and eyedrops − 135m sterile units at
Slide 40: Anticipated organic synergies - addressing cost
Anticipated organic synergies - addressing cost New line in NBD ◦ Validated and operational ◦ Delivers efficiency Oss sites repositioned ◦ Biochem capability enhanced - Increasing volumes, declining cost per unit ◦ Chemicals repositioned − Intermediates moved to FCC/India site ◦ IT enhanced - ef
Slide 41: Anticipated organic synergies - other commercial opportunities
Anticipated organic synergies - other commercial opportunities Danaparoid ex USA ◦ Registration in new markets ◦ Increasing supply in existing markets − Own allocation; supply constrained Chemical business ◦ Complex technologies with multistep reactions ◦ Substantial investment required ◦ Commer
Slide 42: Summary
Summary Performed in turbulent global markets ◦ In spite of large emerging market presence ◦ Retained margins Learned from prior periods ◦ Limited USD exposure ◦ USD targeted to be a positive contributor ◦ Key currencies, Euro, AUD and ZAR We are making headway on inorganic opportunities ◦ If
Slide 43: Q&A
Q&A TO REST IS TO RUST
Slide 44: Cautionary regarding forward-looking statements
Disclaimer Cautionary regarding forward-looking statements This presentation has been prepared by Aspen Pharmacare Holdings Limited based on information available to it as at the date of the presentation. This presentation may contain prospects, projections, future plans and expectations, strategy a
Slide 45: Appendices
Appendices Appendix 1: Group statement of financial position Appendix 2: Comparable Income Statement Appendix 3: Gross revenue by customer geography Appendix 4: Gross revenue bridge Appendix 5: Key currency movements vs ZAR Appendix 6: Segmental revenue and normalised EBITA Appendix 7: Extract from
Slide 46: Group statement of financial position
Appendix 1 Group statement of financial position As at 31 December 2015 R’million H1 2016 H1 2015 ASSETS Non-current assets 69 498 54 434 Property, plant and equipment 9 323 7 548 Intangible assets 51 383 38 616 Goodwill 6 207 6 289 Contingent environmental indemnification assets 843 699 Other non-c
Slide 47: Comparable Income Statement
Appendix 2 Comparable Income Statement For the six months ended 31 December R’million H1 2016 H1 2015 Change Net revenue 17,310 16,049 8% Cost of sales (8,565) (8,202) Gross profit 8745 7,847 11% Net operating expenses (3,982) (3,484) EBITA 4,763 4,363 9% Amortisation (284) (232) Operating profit 4,
Slide 48: Gross revenue by customer geography
Appendix 3 Gross revenue by customer geography +21% -14% -3% +11% -1% +4% -95% South Africa Sub-Saharan Africa Asia Pacific Europe CIS Latin America Hyperinflationary Rest of the World economy H1 2015 H1 2016 48
Slide 49: Gross revenue bridge
Appendix 4 Gross revenue bridge 25,000 1 046 20,000 19 000 836 602 125 166 18,649 15,000 R'million 10,000 5,000 0 H1 2015 International Venezuela Asia Pacific South Africa Sub-Saharan H1 2016 Africa 49
Slide 50: Key currency movements vs ZAR
Appendix 5 Key currency movements vs ZAR Value of key currencies vs ZAR from December 2014 to December 2015 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EUR AUD MXN BRL RUB USD 50
Slide 51: Segmental revenue and normalised EBITA
Appendix 6 Segmental revenue and normalised EBITA Gross revenue by region EBITA by region 9% 8% 4% 5% 20% 21% 22% 23% 17% 21% 21% 23% 59% 53% 48% 46% H1 2016 H1 2015 H1 2016 H1 2015 International Asia Pacific South Africa Sub-saharan Africa International Asia Pacific South Africa Sub-saharan Africa
Slide 52: Extract from group statement of cash flows
Appendix 7 Extract from group statement of cash flows For the six months ended 31 December 2015 R’million H1 2016 H1 2015 Change Cash operating profit 4 997 4 917 2% Changes in working capital (1 799) (655) Cash generated from operations 3 198 4 262 -25% Net finance costs paid (839) (1 030) Tax paid
Slide 53: Corporate activity - Divestments
Appendix 8 Corporate activity - Divestments Divested portfolio of products to Litha Pharma (Pty) Ltd (“Litha”) ◦ Portfolio comprising injectables and established brands ◦ R1.7 billion consideration ◦ Approval by South African Competition Authorities obtained on 4 August 2015. ◦ Transaction complet
Slide 54: Corporate activity - Acquisition
Appendix 8 Corporate activity - Acquisition On 21 May 2015, acquired 100% of the issued share capital of Norgine SA ◦ EUR 29 million consideration ◦ Norgine SA commercializes a portfolio of branded gastro-intestinal products in SA and surrounding territories. ◦ Approval of transaction by South Afr
Slide 55: Institutional Investors
Appendix 9 Institutional Investors 100% 90% 80% 70% 60% Middle East Asia Pacific 50% Europe North America 40% Southern Africa 30% 20% 10% 0% Dec '14 June '15 Dec '15 55
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