Aspen Pharmacare Holdings Limited · JSE:APN
Aspen Pharmacare — H1 2017 Earnings Presentation
48 slides from Aspen Pharmacare's earnings presentation, March 2017
Slide 1: Interim Results Presentation
Interim Results Presentation For the six months ended 31 December 2016
Slide 2: Performance overview
Performance overview
Slide 3: Group revenue
Performance overview Group revenue Revenue by customer geography Entity-wide analysis R'million H1 2017 H1 2016 % change Commercial - pharmaceutical 15 069 12 622 19% International 7 052 5 784 22% Asia Pacific 4 568 3 101 47% Sub-Saharan Africa 3 449 3 737 -8% Commercial - nutritionals 1 632 1 785 -
Slide 4: International - Pharmaceutical
Performance overview International - Pharmaceutical Revenue by customer geography R'million H1 2017 H1 2016 % change Europe CIS 4 484 4 114 9% - Base business 3 699 4 114 -10% - Anaesthetics 785 - - Latin America 1 238 983 26% - Base business 1 023 983 4% - Anaesthetics 215 - - MENA 523 413 27% - Ba
Slide 5: International - Pharmaceutical
Performance overview International - Pharmaceutical Excluding anaesthetics, base business grew 1% Europe CIS ◦ Primary decline caused by change in distribution model and supply challenges − Impacts this period only ◦ Exchange rate effect of EUR 4 million − Brexit effect over EUR 6 million − Some
Slide 6: International - Pharmaceutical: H2 expectations
Performance overview International - Pharmaceutical H2 expectations ◦ Europe CIS base business above both H2 2016 and H1 2017 in EUR − Pricing pressures more than offset by • Normalised distribution and supply • Synergy realisation • Improved thrombosis performance ◦ Latam and MENA base growth to
Slide 7: Asia Pacific
Performance overview Asia Pacific Revenue by customer geography Australia & New Zealand R'million H1 2017 H1 2016 % change Continuing business 3 045 2 774 10% Base pharmaceutical business 2 294 2 220 3% Anaesthetics 323 - - Nutritionals 428 554 -23% Divestments & discontinuing operations 120 353 - T
Slide 8: Asia Pacific
Performance overview Asia Pacific Region most positively impacted by AZ anaesthesia acquisition Asia now 40% of regional sales ◦ Anticipated to exceed 50% in short term Australian base pharma business performing ◦ Challenging regulated market ◦ Benefitting from focus Decrease in divested and
Slide 9: Asia Pacific - Nutritionals
Performance overview Asia Pacific - Nutritionals Entire local market impacted ◦ Loss of informal export sales to China ◦ Change in Chinese regulatory environment Sales settling at 2014 levels ◦ Aspen less affected than most ◦ Stronger domestic underpin ◦ In-market sales stabilised over last 6 mo
Slide 10: Sub-Saharan Africa
Performance overview Sub-Saharan Africa Revenue by customer geography R'million H1 2017 H1 2016 % change Pharma revenue 3 449 3 737 -8% South Africa 3 022 3 275 -8% Other SSA 427 462 -8% Nutritional revenue 490 448 9% South Africa 447 417 7% Other SSA 43 31 38% Total commercial revenue 3 939 4 185 -
Slide 11: Sub-Saharan Africa - South Africa
Performance overview Sub-Saharan Africa - South Africa Revenue by customer geography R'million H1 2017 H1 2016 % change Pharma revenue 3 022 3 274 -8% Private sector 2 330 2 514 -7% Public sector 692 761 -9% ARV tender 383 465 -18% Other tenders 309 296 4% Nutritional revenue 447 417 7% Total commer
Slide 12: Sub-Saharan Africa – Other SSA
Performance overview Sub-Saharan Africa – Other SSA Other SSA regional contribution (ex-GSK) Sales: ZAR 424 million 10% 18% 72% West Africa Southern Africa East Africa Revenue by customer geography R'million H1 2017 H1 2016 % change Collaboration net revenue* 46 99 -53% Retained pharma 424 394 7% To
Slide 13: Therapeutic overview
Therapeutic overview
Slide 14: Nutritionals
Therapeutic overview Nutritionals Challenging half ◦ Australia – impacted by China ◦ Latam − Venezuela implosion impacted production − Mexican currency devaluation ◦ SA – performance sustained ◦ USA − Legislation introduced − Need for clinical trials Expectations for H2 ◦ Latam to turn around −
Slide 15: Anaesthetics portfolio
Therapeutic overview Anaesthetics portfolio Aspen will be the largest global player in anaesthesia ex-USA AZ brands included from 1st September 2016 GSK brands included from 1st March 2017 Good fit - high percentage of sales in emerging markets ◦ Performance in Asia Pacific central to succes
Slide 16: Anaesthetics portfolio - Australia
Therapeutic overview Anaesthetics portfolio - Australia Australia Anaesthetics Portfolio (MAT value) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 Products unpromoted – sales stable Aspen has a presence in this sector ◦ Recruited additional specialist heads ◦ Historically, promotiona
Slide 17: Anaesthetics portfolio - China
Therapeutic overview Anaesthetics portfolio - China Aspen team go live on 1 April 2017 Fully functional back office ◦ Shanghai, Beijing and Guangzhou Almost all employees transferring ◦ Confidence in Aspen focus ◦ Human capital loss mitigated China is a promotionally sensitive market ◦ AZ sa
Slide 18: Anaesthetics portfolio
Therapeutic overview Anaesthetics portfolio This is a difficult therapeutic area to enter ◦ Complex and varied delivery forms − Vials, ampoules, suppositories, prefilled syringes, jellies, creams, ointments, liquids, sprays, patches, towels and more ◦ Trusted brands and related devices GSK brand
Slide 19: Thrombosis portfolio
Therapeutic overview Thrombosis portfolio The Europe CIS market has grown by ◦ 0.5% in both volume and value Aspen continues to perform broadly in line with the market Pricing pressure across Europe of ± EUR 14 million annually ◦ Mono-Embolex − Impact of ± EUR 8 million annually − Appeal to be
Slide 20: Thrombosis portfolio
Therapeutic overview Thrombosis portfolio Strategically anticipating this event ◦ Unsure how more regulated markets will react ◦ Effect on market dynamics − Will hospital pricing increase? There are a few realities ◦ Brands are well respected ◦ Margins are already low ◦ Increasing pressures on h
Slide 21: Thrombosis portfolio
Therapeutic overview Thrombosis portfolio Aspen’s thrombosis business to date ◦ 90% from Europe CIS ◦ Balance of business showing strong growth − MENA and Asia From 1st January 2017 – acquired GSK's Chinese thrombosis portfolio ◦ 300 reps ◦ Single largest country for Aspen thrombosis ◦ Exciting
Slide 22: Thrombosis portfolio
Therapeutic overview Thrombosis portfolio Anticipate market shake out ◦ Hard to predict end result ◦ Next few years critical − Determine future shape − Tough channel for biosimilars − High attrition anticipated ◦ Aspen is braced for the challenge − Influence future market shape Aspen still has n
Slide 23: High Potency and Cytotoxic portfolio
Therapeutic overview High Potency and Cytotoxic portfolio Probably our most important therapeutic area of organic growth Through the acquisition of Oss APIs ◦ Niche capabilities ◦ Niche products Anticipate this therapeutic area, in particular, plus Danaparoid ◦ Form basis of Aspen’s entry into
Slide 24: Prospects
Prospects
Slide 25: Looking back
Prospects Looking back The last few years tough but transformational ◦ Focus on operational execution ◦ Built a new base − Global multinational Sustainable/optimised new base ◦ Incurred duplicate costs ◦ Negative working capital impact ◦ Incurred capex and inherited inefficiencies Best demonst
Slide 26: Outlook
Prospects Outlook SA forecast to exceed historic profitability levels ◦ Performance of last two periods have weighed on results Latam IMFs – Venezuelan discontinuation ◦ H1 recoveries affected by Venezuela ◦ H2 increased throughput plus gains in Mexico ◦ Positively impacts both sales and mostly
Slide 27: Summary
Prospects Summary For H1 ◦ Revenue 13% ◦ Gross profit 8% ◦ Normalised EBITDA 7% ◦ Anaesthesia largest contributor to gross profit percentage dilution − COGS mark up and royalty ◦ Working capital and cash flows turning positively For H2 ◦ Revenue growth even higher than H1 ◦ Gross profit percenta
Slide 28: Financial review
Financial review
Slide 29: Highlights
Financial review Highlights Revenue (R'bn) Normalised EBITDA* (R'bn) 19.8 5.5 17.5 5.1 H1 2016 H1 2017 H1 2016 H1 2017 *operating profit before depreciation and amortisation, adjusted for specific non-trade items Normalised headline EPS (R/share) Operating cash flow per share (R/share) 6.92 7.09 6.5
Slide 30: Abridged statement of normalised comprehensive income
Financial review Abridged statement of normalised comprehensive income R'million H1 2017 H1 2016 % change Net revenue 19 822 17 512 13% Cost of sales (9 994) (8 437) 18% Gross profit 9 828 9 075 8% Other operating income 184 40 Net operating expenses (4 514) (3 980) 13% EBITDA 5 499 5 135 7% Depreci
Slide 31: Net funding costs
Financial review Net funding costs R'million H1 2017 H1 2016 Net interest paid (771) (766) Debt raising fees on acquisition (60) (86) Net foreign exchange loss (52) (14) Forward exchange contracts (losses)/gains (101) 167 Notional interest on financial instruments (155) (97) Net hyperinflationary ad
Slide 32: Reconciliation of earnings per share
Financial Review Reconciliation of earnings per share Cents H1 2017 H1 2016 % change Basic earnings per share 618.6 727.1 -15% Profit on sale of property, plant and equipment 0.5 0.2 Net impairment of property, plant and equipment 0.3 0.7 Impairment of intangible assets 8.5 - Profit on sale of dives
Slide 33: Group Revenue
R'billion - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Financial Review Group Revenue 6.3 Europe 6.1 4.6 SSA 4.8 3.2 Australasia 3.1 2.0 Latin America 1.8 0.8 H1 2017 USA & Canada 0.3 0.8 Japan H1 2016 0.3 0.7 China 0.0 0.6 Other Asia 0.4 0.5 MENA 0.4 0.4 CIS 0.4 33
Slide 34: EBITDA margin
Financial review EBITDA margin Normalised EBITDA* margin by region 31.9% International 33.4% 20.0% Asia Pacific 22.7% Sub-Saharan 23.6% Africa 26.8% 27.7% Group 29.3% H1 2017 H1 2016 *operating profit before depreciation and amortisation, adjusted for specific non-trade items 34
Slide 35: Capex
Financial review PPE Capital expenditure Capex 3,000 2 439 2,500 2,000 R'million 1,500 1,000 918 736 500 317 345 - H1 2016 H1 2017 FY 2017F Capex Depreciation 35
Slide 36: Working capital
Financial review Working capital Working Capital (R'bn) 17.7 16.6 0.4 (1.5) Working capital as at Anaesthetics Exchange rate effect Working capital as at 30 June 2016 31 December 2016 R'million H1 2017 H1 2016 Net working capital 16 635 17 138 Net working capital - excluding Oss 12 375 13 337 Workin
Slide 37: Operating cash flow
Financial review Operating cash flow R'million H1 2017 H1 2016 % change Cash operating profit 5 496 4 997 10% Changes in working capital (689) (1 799) -62% Cash generated from operations 4 807 3 198 50% Net finance costs paid (915) (839) 9% Tax paid (658) (830) -21% Cash generated from operating act
Slide 38: Borrowings
Financial review Borrowings For six months ended 31 December 2016 Net borrowings of R35.6 billion R’million H1 2017 H1 2016 Opening balance 32 694 30 048 International South Africa Cash flow from operating activities (3 234) (1 529) 63% 30% Capital expenditure 736 918 Proceeds from sale of assets (1
Slide 39: Q&A session
Q&A session
Slide 40: Disclaimers
Disclaimers BASIS OF PREPARATION – ROUNDING OF NUMBERS The financial results in this presentation have been rounded and disclosed in R‘millions whereas the published unaudited interim financial results have been rounded and disclosed in R ’billions. Consequently there may be rounding differences bet
Slide 41: Appendices
Appendices Appendix 1: Abridged group statement of comprehensive income Appendix 2: Group statement of financial position Appendix 3: Europe CIS revenue Appendix 4: Latin America revenue Appendix 5: Asia Pacific revenue Appendix 6: Asia revenue Appendix 7: Institutional Investors
Slide 42: Abridged group statement of comprehensive income
Appendix 1 Abridged group statement of comprehensive income R'million H1 2017 H1 2016 % change Net revenue 19 822 17 512 13% Cost of sales (9 994) (8 437) 18% Gross profit 9 828 9 075 8% Other operating income ( 106) 1 594 -107% Net operating expenses (4 514) (3 980) 13% EBITDA 5 209 6 689 -22% Depr
Slide 43: Group statement of financial position
Appendix 2 Group statement of financial position As at 31 December 2016 R'million H1 2017 H1 2016 ASSETS Non-current assets 71 814 69 498 Intangible assets 53 610 51 383 Property, plant and equipment 9 654 9 323 Goodwill 5 716 6 207 Deferred tax assets 1 042 1 262 Contingent environmental indemnific
Slide 44: Europe CIS revenue
Appendix 3 Europe CIS revenue Revenue by customer geography R'million H1 2017 H1 2016 % change Pharma - Europe 4 117 3 753 10% Thrombosis 2 287 2 508 -9% Anaesthetics 672 - - Other brands 1 158 1 245 -7% CIS (including Russia) 367 361 2% Total commercial revenue 4 484 4 114 9% Manufacturing - API an
Slide 45: Latin America revenue
Appendix 4 Latin America revenue Revenue by customer geography R'million H1 2017 H1 2016 % change Pharma 1,238 983 26% Other brands 1,023 983 4% Anaesthetics 215 - Nutritionals 714 783 -9% Total 1 952 1 766 11% 45
Slide 46: Asia Pacific revenue
Appendix 5 Asia Pacific revenue Asia Pacific Revenue by customer geography R'million H1 2017 H1 2016 % change Pharma 4 567 3 102 47% Australia and New Zealand 2 484 2 372 5% Pharma 2 041 2 019 1% Anaesthetics 323 - - Divestments & discontinued operations 120 353 - Asia 2 083 730 185% Pharma 854 730
Slide 47: Asia revenue
Appendix 6 Asia revenue R'million H1 2017 H1 2016 % change Japan 797 280 184% Philippines 142 117 21% China 658 31 2044% Taiwan 91 63 44% Malaysia 73 51 43% Indonesia 112 56 100% Rest of Asia 210 132 59% Total 2 083 730 185% Regional sales mix 10% 5% Japan 4% Philippines 38% 4% China Taiwan Malaysia
Slide 48: Institutional investors
Appendix 7 Institutional investors 100% 90% 80% 70% Southern Africa 60% 50% North America 40% Europe 30% Asia Pacific 20% 10% 0% June 2015 December 2015 June 2016 December 2016 48
Aspen Pharmacare Holdings — H1 2017 Earnings Presentation on 6ix