Aspen Pharmacare Holdings Limited · JSE:APN

Aspen Pharmacare — H1 2021 Earnings Presentation

50 slides from Aspen Pharmacare's earnings presentation, March 2021

  1. Slide 1: Interim Results Presentation

    Interim Results Presentation For the six months ended 31 December 2020

  2. Slide 2: Disclaimer

    DISCLAIMER CAUTIONARY REGARDING FORWARD-LOOKING STATEMENTS 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.

  3. Slide 3: Disclosure Note

    DISCLOSURE NOTE RESTATEMENT OF DISCONTINUED OPERATIONS  Discontinued European Business The discontinued European business comprises the European Thrombosis Assets divested to Mylan until the date of disposal, being 27 November 2020, the costs relating to its disposal, related Thrombosis product dis

  4. Slide 4: Financial Review

    [e] FINANCIAL REVIEW

  5. Slide 5: Financial Highlights

    FINANCIAL HIGHLIGHTS Revenue Normalised EBITDA +2% CER* +6% CER* CONTINUING +11% +17% 18 633 5 192 4 680 15 984 STRONG ORGANIC REVENUE GROWTH ROBUST EARNINGS GROWTH DESPITE H1 2020 H1 2021 H1 2020 H1 2021 CHALLENGES OF COVID-19 Normalised HEPS Net Borrowings ƚ & +7% CER* Leverage ratio ^ +16% -27% L

  6. Slide 6: Segmental Revenue

    SEGMENTAL REVENUE CONTINUING R’MILLION Regional Brands Positive outcome considering reduced +7% +1% CER * demand for acute medicines influenced by COVID-19 lockdowns Sterile Focus Brands Sound underlying performance boosted by +20% +7% CER * demand for COVID-19 treatments in certain territories Manu

  7. Slide 7: Gross Profit Percentage Bridge (CER)

    GROSS PROFIT PERCENTAGE BRIDGE (CER*) CONTINUING 52,7% -0,5% 52,2% -0,5% -1,7% 0,4% -0,6% 49,3% South Africa - ZAR -0,5% 23% International - EUR 69% Gross profit FX Gross profit Segmental mix Sterile Focus Brands Regional Brands Manufacturing Transaction-related Gross profit percentage - 31 percenta

  8. Slide 8: Gross Profit Percentage (CER)

    GROSS PROFIT PERCENTAGE (CER*) CONTINUING Regional Brands 64.7% Sterile Focus Brands 59.2% 59.0% 55.0% 55.8% Unfavourable mix 51.1% relative to H1 2020. Positive recovery of H2 2020 margin margin percentage to percentage maintained H1 2020 levels through with efficiencies targeted initiatives offset

  9. Slide 9: Normalised EBITDA

    NORMALISED EBITDA CONTINUING  Growth in Normalised EBITDA was diluted by % of % of % change the decline in Other operating income: R'million H1 2021 revenue H1 2020 revenue % change CER * » Excluding Other operating income, EBITDA Gross profit ǂ 9 186 49.3% 8 427 52.7% 9% 1% growth would have been

  10. Slide 10: Currency Volatility

    CURRENCY VOLATILITY 6 month average exchange rates indexed to 100 6 month average exchange rates (H1 2020 = 100) 120 Average to Market H1 2020 H2 2020 H1 2021 end of currencies 110 February 2021 EURZAR 16.30 18.37 19.19 18.94 100 AUDZAR 10.05 10.94 11.75 11.70 USDZAR 14.69 16.68 16.26 15.95 CNYZAR 2

  11. Slide 11: Normalised Headline Earnings Bridge

    NORMALISED HEADLINE EARNINGS BRIDGE CONTINUING R’MILLION +7% +16% -72 77 -62 3 086 -38 512 2 882 -213 2 669 South Africa - ZAR 23% International - EUR 69% Normalised Headline FX Normalised Normalised EBITDA Depreciation Amortisation Finance costs Tax Normalised Earnings (CER*) - 31 Headline Earnings

  12. Slide 12: Working Capital

    Manufacturing WORKING CAPITAL Net working capital % of revenue ^ 61% 60% 23% 50% 40% 30% 20% 10% 0% H1 2018 FY 2018 H1 2019 FY 2019 H1 2020 FY 2020 H1 2021 R16 408 R18 633 million million Total Excluding Oss Oss Commercial Pharma Net working capital Group revenue by segment % by segment % 39% Net wo

  13. Slide 13: Operating Cash Flow

    OPERATING CASH FLOW CONTINUING AND DISCONTINUED Operating cash conversion cycle R'million H1 2021 H1 2020 % change 200% Cash operating profit 4 823 5 577 -14% 150% Changes in working capital (1 411) (1 217) Cash generated from operations 3 412 4 360 -22% 100% Net finance costs paid ( 665) ( 889) Tax

  14. Slide 14: Borrowings

    BORROWINGS Net debt / EBITDA (x) Covenant 4.0x 3.53 H1 2021 FY 2020 H1 2020 Covenant 2.90 2.83 3.5x Gearing 29% 34% 40% 2.16 Interest cover ratio * 6.78x 6.53x 5.26x Effective interest rate for the period ** 3.24% 3.88% 3.90% H1 2020 FY 2020 H1 2021 H1 2021 (proforma) South Africa - ZAR  Net debt /

  15. Slide 15: Capital Allocation Prioritisation – Report Back

    CAPITAL ALLOCATION PRIORITISATION – REPORT BACK SUBJECT TO LEVERAGE CAP OF 3.0X (LEVERAGE RATIO H1 2021 = 2.83X; PROFORMA = 2.16X) PPE capex and Bolt-on acquisitions Dividends Larger Acquisitions & IP development of IP and businesses* Disposals R1 327 million R36 million net Commitment to R5 302 mil

  16. Slide 16: Group Performance Review & Strategy

    GROUP PERFORMANCE REVIEW & STRATEGY

  17. Slide 17: Introduction/Reflections

    INTRODUCTION/REFLECTIONS ASPEN HAS SUCCESSFULLY NAVIGATED A TURBULENT AND CHALLENGING 12 MONTHS A CLE AR STRATEGIC ANAESTHETICS PATHWAY FOR FOR WORLD FUTURE OPPORTUNITIES Resilient response from the team Opportunities created Relevant product portfolio Steriles capacity validated DEXAMETHASONE COVID

  18. Slide 18: Group Revenue

    GROUP REVENUE CONTINUING % change R'million H1 2021 H1 2020 Reported CER * Commercial Pharma Regional Brands 8 776 8 178 7% 1% Sterile Focus Brands 5 555 4 635 20% 7% Manufacturing 4 302 3 171 36% 17% Group revenue 18 633 15 984 17% 6%  Reshaped Commercial Pharma has increased exposure to growth te

  19. Slide 19: Commercial Pharma | Regional Brands

    COMMERCIAL PHARMA | REGIONAL BRANDS CONTINUING | REVENUE % change R’million H1 2021 H1 2020 Reported CER * Africa Middle East 4 004 3 867 4% 2% Americas 1 329 1 325 0% 4% Asia 336 277 21% 6% Australasia 2 082 1 719 21% 4% Europe CIS 1 025 990 4% -10% Regional Brands 8 776 8 178 7% 1%  Africa Middle

  20. Slide 20: Commercial Pharma | Steriles

    COMMERCIAL PHARMA | STERILES CONTINUING | REVENUE % change R’million H1 2021 H1 2020 Reported CER * Africa Middle East 260 222 17% 9% Americas 736 683 8% 11% Asia 2 262 1 950 16% 1% Australasia 397 374 6% -9% Europe CIS 1 900 1 406 35% 19% Sterile Focus Brands 5 555 4 635 20% 7%  Strong underlying

  21. Slide 21: Manufacturing Revenue

    MANUFACTURING REVENUE CONTINUING | REVENUE % change R’million H1 2021 H1 2020 Reported CER * FDF 1 051 628 67% 46% API - Biochem 543 389 40% 19% API- Chem 2 708 2 154 26% 9% Manufacturing 4 302 3 171 36% 17%  Sustained strong performance from both API and FDF » API Chem being driven by double-digit

  22. Slide 22: COVID-19 Impact to Cost Structures

    COVID-19 IMPACT TO COST STRUCTURES FACILITIES SUPPLY CHAIN  Protocols impacted operating environment  Disruptions to supply chain resulting in cost unfavourably increases  Efficiency of sites affected by » 80% of air fleet capacity affected » Shutdowns/cleandowns » Port closures » COVID-related a

  23. Slide 23: Strategic Outlook

    STRATEGIC OUTLOOK GROWTH FROM RESHAPED COMMERCIAL PHARMA FUTURE GROWTH DRIVERS FOR COMMERCIAL PHARMA Aspen has been reshaped and ORGANIC GROWTH clearly demonstrated  Geographical footprint » Playing to our strengths » Demonstrated capability » Critical mass  Increased demand for trusted brands and

  24. Slide 24: Strategic Outlook | Continued

    STRATEGIC OUTLOOK | CONTINUED GROWTH FROM RESHAPED COMMERCIAL PHARMA FUTURE GROWTH DRIVERS FOR COMMERCIAL PHARMA Leveraging our DISTRIBUTION FOOTPRINT  Big Pharma pipelines have a narrow therapeutic focus » Less relevance in many EMs - Insufficient critical mass - Complex and a distraction from foc

  25. Slide 25: Sterile Capabilities and Capacity

    STERILE CAPABILITIES AND CAPACITY ASPEN’S AMBITIOUS STERILE BUILD IT HAS ALSO CREATED  Total investment payback through R800 million reduction in  Globally needed niche capability Anaesthetics cost of goods  Security of both supply and quality provides confidence to harness  Increased capacity f

  26. Slide 26: Sterile Capabilities & Capacity

    S STERILE CAPABILITIES & CAPACITY CAPACITIES DETERMINED USING A 24/7/42 WEEKS MODEL VIALS CAPACITY: 700 million doses^ ^Measured in 1 dose = 1ml Alternate utilisation → lyophillisation* *One lyophilisation unit c. 3 doses CAPACITY AVAILABLE FOR THIRD-PARTY &/or FURTHER ASPEN PRODUCTION AMPOULES CAPA

  27. Slide 27: Sterile Capabilities & Capacity

    S STERILE CAPABILITIES & CAPACITY CAPACITIES DETERMINED USING A 24/7/42 WEEKS MODEL PREFILLED SYRINGE CAPACITY: 350 million Measured in 1ml syringes BLOW FILL SEAL/POLYBAGS: 150 million Measured in 5ml – 20ml NOTRE DAME DE BONDEVILLE CAPACITY AVAILABLE FOR THIRD-PARTY &/or FURTHER ASPEN PRODUCTION 

  28. Slide 28: Sterile Capabilities and Capacity | Continued

    STERILE CAPABILITIES AND CAPACITY | CONTINUED CAPACITY HIGH CAPACITY POTENTIAL ALLOCATION  Significant capacity available  Contract manufacture –  Utilization of strategically including lesser margins relevant global capability » Over 600 million doses » Given the significant  Thoughtful and str

  29. Slide 29: Summary and Guidance

    SUMMARY AND GUIDANCE WELL POSITIONED TO DELIVER SUSTAINED SHAREHOLDER VALUE R’billion H1 2021 H1 2019 Normalised EBITDA 5.2 5.5 Net borrowings 27.7 53.5 Adjusted for proceeds of discontinued operations 7.0* 14.2 Adjusted pro-forma borrowings 20.7 39.3  Effective maintenance of EBITDA despite recent

  30. Slide 30: Summary and Guidance

    SUMMARY AND GUIDANCE RESILIENT, COMMITTED, AGILE TEAM DELIVERING LIFESAVING MEDICINES TO PATIENTS  H1 2021 results reflect robustness of Aspen » Positive underlying organic growth - Revenue +6% (CER) - NHEPS +7% (CER) 30

  31. Slide 31: Summary and Guidance | Continued

    SUMMARY AND GUIDANCE | CONTINUED H1 GROWTH MOMENTUM EXPECTED TO BE CAPITAL ALLOCATION MODEL SUPPORTING MAINTAINED FOR FY 2021 SUSTAINED SHAREHOLDER VALUE  Growth in NHEPS (CER) in FY 2021, at least equal to H1 2021  Commitment to dividends » Subject to no unexpected headwinds from COVID  Strong a

  32. Slide 32: Appendices

    APPENDICES aspen Healthcare. We Care.

  33. Slide 33: Appendix 1: Strategic Positioning

    APPENDIX 1: STRATEGIC POSITIONING BRANDED, SPECIALTY COMPLEX MANUFACTURING EXTENSIVE COMMERCIAL PRODUCT PORTFOLIO CAPABILITIES FOOTPRINT Sterile & Regional FDF & API Covering more than 50 countries Ongoing portfolio renewal through Leverage of installed capacity creates Delivering predictable annuit

  34. Slide 34: Appendix 2: Strong Fundamentals for Organic Growth

    APPENDIX 2: STRONG FUNDAMENTALS FOR ORGANIC GROWTH RESHAPED ASPEN’S ENHANCED COMMERCIAL ORGANIC MANUFACTURING PHARMA GROWTH CAPACITIES MODEL DRIVERS & CAPABILITIES Commercial Pharma Fundamentals Manufacturing Fundamentals Focussed on territories with strong demographic Increasing demand for quality

  35. Slide 35: Appendix 3: Portfolio Management Model

    APPENDIX 3: PORTFOLIO MANAGEMENT MODEL Drivers of portfolio Aspen Portfolio strategy Build portfolio Maximise portfolio returns Reshape portfolio Sales & Supply Acquire Develop Collaborate Manufacturing Revitalise Collaborate Divest Marketing Chain Leverage Proactively seek intellectual & Leverage s

  36. Slide 36: Appendix 4: Abridged Statement of Comprehensive Income

    APPENDIX 4: ABRIDGED STATEMENT OF COMPREHENSIVE INCOME CONTINUING AND DISCONTINUED R’million H1 2021 H1 2020 % change FY 2020 Net revenue 20 545 19 993 3% 40 535 Cost of sales (10 870) (9 887) (20 442) Gross profit 9 675 10 106 -4% 20 093 Gross profit margin 47.1% 50.5% 49.6% Operating expenses (5 1

  37. Slide 37: Appendix 5: Abridged Statement of Normalised Comprehensive Income

    APPENDIX 5: ABRIDGED STATEMENT OF NORMALISED COMPREHENSIVE INCOME CONTINUING R’million H1 2021 H1 2020 % change H1 2021 CER* % change FY 2020 Net revenue 18 633 15 984 17% 17 503 6% 33 659 Cost of sales (9 447) (7 557) 25% (8 366) 13% (16 524) Gross profit 9 186 8 427 9% 9 137 1% 17 135 Gross profit

  38. Slide 38: Appendix 6: Net Funding Costs

    APPENDIX 6: NET FUNDING COSTS CONTINUING R’million H1 2021 H1 2020 FY 2020 Net interest paid ( 460) ( 647) (1 314) Foreign exchange (losses)/gains ( 104) ( 11) ( 8) Notional interest on financial instruments ( 103) ( 86) ( 182) Normalised net funding costs ( 667) ( 744) (1 504) Debt raising fees on

  39. Slide 39: Appendix 7: Effective Tax Rates

    APPENDIX 7: EFFECTIVE TAX RATES CONTINUING 30% 28.6% 25% 20.0%  The Group’s effective tax rate spiked in FY 2019 due to 19.5% 19.3% 20% higher impairments in that year 16.6% 17.0%  Normalised effective tax rate eliminates the periodic 15% 16.9% 16.8% 15.4% 15.3% 15.4% 16.4% spikes and other non-tr

  40. Slide 40: Appendix 8: Reconciliation of Reported NHEPS

    APPENDIX 8: RECONCILIATION OF REPORTED NHEPS CONTINUING AND DISCONTINUED Cents H1 2021 H1 2020 % change H1 2020 CER* % change FY 2020 Basic earnings per share (EPS) 558.4 576.0 -3% 622.5 -10% 1 021.8 Profit on sale of property, plant and equipment 0.4 1.1 0.0 0.0 Impairment of property, plant and eq

  41. Slide 41: Appendix 9: Reconciliation of CER NHEPS

    APPENDIX 9: RECONCILIATION OF CER* NHEPS CONTINUING Cents H1 2021 H1 2020 % change H1 2020 CER* % change FY 2020 Basic earnings per share (EPS) 498.8 410.8 21% 436.0 14% 740.5 Impairment of property, plant and equipment 0.3 1.7 2.3 1.8 Impairment of intangible assets 63.5 107.0 126.1 280.8 Reversal

  42. Slide 42: Appendix 10.1: Group Statement of Financial Position

    APPENDIX 10.1: GROUP STATEMENT OF FINANCIAL POSITION R'million H1 2021 H1 2020 TOTAL ASSETS Non-current assets 80 760 79 745 Intangible assets 58 101 60 153 Property, plant and equipment 14 336 12 612 Right-of-use assets 487 539 Goodwill 4 923 4 562 Deferred tax assets 1 624 1 161 Contingent environ

  43. Slide 43: Appendix 10.2: Group Statement of Financial Position

    APPENDIX 10.2: GROUP STATEMENT OF FINANCIAL POSITION R‘million H1 2021 H1 2020 EQUITY AND LIABILIITIES Shareholders equity 66 354 55 962 Non-current liabilities 37 770 39 039 Borrowings 29 259 31 470 Other non-current liabilities 4 419 3 762 Unfavourable and onerous contracts 670 874 Deferred tax li

  44. Slide 44: Appendix 11: Working Capital Reconciliation

    APPENDIX 11: WORKING CAPITAL RECONCILIATION R'million H1 2021 H1 2020 FY 2020 Net working capital - Reported 16 408 17 968 18 049 Less: Discontinued operations - (688) (1 108) Net working capital - Restated 16 408 17 281 16 941 Fx impact - 1 606 (1 429) Comparable base working capital CER* 16 408 18

  45. Slide 45: Appendix 12: Net Working Capital Bridge (CER)

    APPENDIX 12 : NET WORKING CAPITAL BRIDGE (CER*) R’MILLION 18049 -1519 +R1411 16530 168 -330 16408 564 -1203 679 FY 2020 FX FY 2020 (CER) Disposal related Inventories Trade debtors Trade creditors Non-cash H1 2021 * CER removes the currency effect on performance. H1 2020 has been restated at H1 2021

  46. Slide 46: Appendix 13: Capital Expenditure

    APPENDIX 13 : CAPITAL EXPENDITURE PPE capex* in R’million 2 442 2 400 H2 2020 2 145 12027 039 1 401 1 500 H2 2019 1 800 999 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Actual Planned  Expected first commercial production from strategic projects IP DEVELOPMENT CAPEX* » Port Elizabeth FY 2021  Comprisin

  47. Slide 47: Appendix 14: Net Borrowings Bridge

    APPENDIX 14 : NET BORROWINGS BRIDGE R’MILLION 35 228 -1 885 33 343 -5 302 27 682 90 -1 740 1 327 -36 South Africa - ZAR 23% International - EUR 69% Net borrowings as FX Net borrowings as Transaction related Cashflows from Bolt-ons (net disposals) Capex (IP Other Net Borrowings at at 30 June 2020 at

  48. Slide 48: Appendix 15: Leverage Ratio Calculation

    APPENDIX 15: LEVERAGE RATIO CALCULATION BASED ON MAJOR AGREED TERMS INCLUDED IN THE FACILITIES AGREEMENT WHICH HAS BEEN IN PLACE SINCE 2015 NET DEBT / EBITDA FACILITIES AGREEMENT CALCULATION Net debt = Gross borrowings - Cash + Lease liabilities + Non-contingent deferred payables* Adjusted for: diff

  49. Slide 49: Appendix 16: Disposal of European Thrombosis Assets

    APPENDIX 16 : DISPOSAL OF EUROPEAN THROMBOSIS ASSETS H1 2021 H1 2021 Guidance per SENS1 R'million EUR'million Proceeds receivable (A) 12 775 666 EUR642m + inventory Proceeds outstanding (7 473)* (389) EUR379m + amount due for inventory Cash flow for the period 5 302 277 Assets disposed Intangible as

  50. Slide 50: Aspen Healthcare. We Care.

    aspen Healthcare. We Care.

Aspen Pharmacare Holdings — H1 2021 Earnings Presentation on 6ix