Aspen Pharmacare Holdings Limited · JSE:APN

Aspen Pharmacare — FY2020 Earnings Presentation

43 slides from Aspen Pharmacare's earnings presentation, September 2020

  1. Slide 1: 2020 Annual Results Presentation

    2020 Annual Results Presentation For the year ended 30 June 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  Results separately disclose discontinued operations arising from the completed disposals of the Nutritionals business, Non-core pharmaceutical portfolio in the Asia Pacific region, Japanese business and Public sector ARVs.  Adoption of new IFRS 16 Leases » Retrospectively applied

  4. Slide 4: Financial Review

    Financial Review aspen Healthcare. We Care.

  5. Slide 5: Financial Summary

    FINANCIAL SUMMARY CONTINUING % Change vs PY R’million FY 2020 Reported CER* Net revenue 38 647 9% 4% Gross profit 19 333 4% 0% Gross profit margin 50.0% 52.3% 51.9% Normalised EBITDA 10 968 7% 3% Normalised EBITDA margin 28.4% 28.9% 28.7% Normalised tax (1 273) 14% 10% Normalised effective tax rate

  6. Slide 6: Segmental (CER)

    SEGMENTAL (CER) CONTINUING Regional Brands Sterile Focus Brands • Positive outcomes from commercial intervention in Europe and demand • Regional Brands grew 3% with lower demand in 4Q 2020, impacted by trends for brands used in the clinical management of COVID-19 were COVID-19. Gross profit percenta

  7. Slide 7: Normalised EBITDA

    NORMALISED EBITDA CONTINUING FY 2019 R'million FY 2020 % of revenue FY 2019 (CER) % of revenue % change % of revenue % change (Reported) Gross profit* 19 333 50.0% 19 364 51.9% -0.2% 18 584 52.3% 4.0% Sterile Focus Brands 8 040 20.8% 8 150 21.8% -1.4% 7 672 21.6% 4.8% Regional Brands 9 037 23.4% 9 4

  8. Slide 8: Currency Mix (CER)

    CURRENCY MIX (CER) CONTINUING Currency FY 2020 contribution to FY 2019* contribution to contribution Revenue Normalised EBITDA Revenue Normalised EBITDA EUR 32% 15% 32% 12% AUD 11% 19% 11% 19% CNY 8% 18% 8% 19% USD 7% -17% 7% -17%  ZAR contribution » Revenue: 18% (FY 2019*: 17%) » Normalised EBITDA

  9. Slide 9: Currency Volatility

    CURRENCY VOLATILITY 125  Uplift in reported over CER growth due to relative 120 weakening in ZAR: 115 » Revenue from 4% to 9% 110 » Normalised EBITDA from 3% to 7% 105 100 » Normalised HEPS from 5% to 9% 95 90 H1 2020 3Q 2020 4Q 2020 Aug-20 EURZAR AUDZAR CNYZAR USDZAR BRLZAR MXNZAR Average exchange

  10. Slide 10: Effective Tax Rates

    EFFECTIVE TAX RATES CONTINUING 30% 28.6%  The Group’s effective tax rate spiked in FY 2019 due to higher impairments in that year 25%  Normalised effective tax rate eliminates the periodic spikes and 20% 18.1% other non-trading items 17.0% 17.7% 16.6%  Normalised effective tax rate in FY 2020 is

  11. Slide 11: Reconciliation of CER NHEPS

    RECONCILIATION OF CER NHEPS CONTINUING Cents FY 2020 FY 2019 (CER)* % change Basic earnings per share (EPS) 1 010.1 342.2 195% Loss on sale of property, plant and equipment 2.8 4.0 Impairment of property, plant and equipment 1.8 98.6 Impairment of intangible assets 280.9 705.9 Reversal of impairment

  12. Slide 12: Normalised Headline Earnings Bridge

    NORMALISED HEADLINE EARNINGS BRIDGE CONTINUING R’MILLION -50 6 685 -176 437 228 6 380 -135 243 6 137 South Africa - ZAR 23% International - EUR 69% Normalised Headline FX Normalised Normalised EBITDA Depreciation Amortisation Finance costs Tax rate Normalised Headline Earnings - 30 June 2019 Headlin

  13. Slide 13: Working Capital

    WORKING CAPITAL CONTINUING R’million FY 2020 H1 2020 (CER)* FY 2019 (CER)* Net Working capital - comparable base 18 049 20 320 19 643 Net Working capital - excluding Oss 12 888 14 206 13 785 Working capital % of revenue 47% 53% 53% Less: Attributable to Oss -8% -11% -11% Working capital excluding Os

  14. Slide 14: Net Working Capital Bridge (CER)

    NET WORKING CAPITAL BRIDGE (CER) CONTINUING 19 643 -284 -917 700 -1 093 18 049 FY 2019 (CER comparable base) Inventories Trade debtors Trade creditors Other Rec / Pay FY 2020  Inventory levels influenced by » Increased sale of biochemical APIs out of Oss  Trade debtors favourably impacted by » Inc

  15. Slide 15: Capital Expenditure

    CAPITAL EXPENDITURE PPE CAPEX IN R’MILLION 2 442 2 400 H2 2020 2 145 12027 039 1 500 H2 2019 1 800 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022  Expected first commercial production from strategic projects Actual Actual » Port Elizabeth FY 2021  Planned capex reflects the influence of year end exchange

  16. Slide 16: Borrowings

    BORROWINGS R'million unless stated otherwise FY 2020 FY 2019 Net normalised funding costs^ (1 430) (1 854) Gearing (%) 33% 42% Net Debt/EBITDA (x)* 2.9x 3.6x Interest cover ratio (x)* 6.5x 4.7x Effective interest rate for the period (%)** 3.88% 3.81% Cash (7 093) (8 977) South Africa - ZARborrowings

  17. Slide 17: Net Borrowings Bridge

    NET BORROWINGS BRIDGE R’MILLION Operations related R4 947 million 44 639 -4 464 5 654 38 985 -8 260 35 228 759 -135 2 689 South Africa - ZAR 23% International - EUR 69% Net borrowings as FX impact Net borrowings as at Transaction related Cashflows from Capex (IP and PPE) IFRS 16 - lease Other Net Bo

  18. Slide 18: Key Cash Flow Commitment Trends

    KEY CASH FLOW COMMITMENT TRENDS R'million FY 2018 FY 2019 FY 2020 FY 2021 Future trend / Comments Capital expenditure - PPE 2 145 2 442 2 039 2 400 Peaking in FY 2021, refer to slide 15 Capital expenditure - Intangible 6 083 1 522 651 907 Opportunity dependent Software 267 256 284 633 Other IP 5 816

  19. Slide 19: Group Strategy and Performance Review

    Group Strategy and Performance Review

  20. Slide 20: Emerging Markets Weighted Specialty Pharma Company

    EMERGING MARKETS WEIGHTED SPECIALTY PHARMA COMPANY ANCHORED BY A MANUFACTURING PLATFORM WITH SIGNIFICANT STERILE CAPACITY INCREASED COMMERCIAL COMPLEX MANUFACTURING STRONG IN FOUNDATION TRUSTED BRANDS FOCUS CAPABILITIES TERRITORIES  We have reshaped the Commercial Pharmaceuticals platform with stro

  21. Slide 21: Divestment of Thrombosis Europe

    DIVESTMENT OF THROMBOSIS EUROPE TRANSACTION WITH MYLAN  Announcement of the transaction with Mylan signals the end of material commercial restructuring post the acquisitive period » Business reshaped  Mylan have significant synergies, economies of scale » Experienced Aspen sales team adds value to

  22. Slide 22: Commercial Pharma | Weighted to Foundation Territories

    COMMERCIAL PHARMA | WEIGHTED TO FOUNDATION TERRITORIES BUSINESS RESHAPED | POST DIVESTMENT OF THROMBOSIS EUROPE North America; Other Asia (DM); Europe & 3% 2% Developed markets^; 13% 41% LatAm; 11% Europe; 29% 66% China; 30% Foundation territories*; 87% 59% 34% Australasia; 7% Other Asia Africa & Mi

  23. Slide 23: Group Revenue

    GROUP REVENUE CONTINUING | COORDINATED EFFORT AMID THE CRISIS Manufacturing Commercial Pharma +22% (14% CER) +6% (+1% CER) R’million FY 2020 % change (Reported) % change (CER) * R7.5bn; 19% Commercial Pharma 31 144 6% 1% Regional Brands 16 881 7% 3% Sterile Focus Brands 14 263 5% -1% R31.1bn; 81% Ma

  24. Slide 24: Group Revenue | By Region

    GROUP REVENUE | BY REGION CONTINUING Aspen regions Europe CIS (excluding Europe CIS) -1% CER growth +3% CER growth R'million FY 2020 % change (Reported) % change (CER)* Commercial Pharma 31 144 6% 1% Europe CIS 32% Asia Pacific 8 550 3% -2% Aspen regions (excl. Europe Africa & Middle Eastƚ 8 499 9%

  25. Slide 25: Commercial Pharma | COVID-19 Impact

    COMMERCIAL PHARMA | COVID-19 IMPACT Aspen China monthly revenue for FY 2020* Jun-20 Feb-20 Beijing China in lockdown lockdown anticipated Jan-20 Wuhan in Dec-19 lockdown COVID-19 identified in Wuhan Apr-20 Wuhan lockdown lifted 0 Jul-19 Sep-19 Dec-19 Mar-20 Jul-20 220% 40% 170% 30% 120% 20% 70% 10%

  26. Slide 26: Commercial Pharma | All Regions

    COMMERCIAL PHARMA | ALL REGIONS CONTINUING | GOOD PERFORMANCE DESPITE THE CHALLENGING ENVIRONMENT R'million FY 2020 % change (Reported) % change (CER)* Europe CIS; Asia Pacific; 13% 25% Regional Brands 16 881 7% 3% Americas; 15% Asia Pacific 4 139 6% 2% Africa & Middle Eastƚ 7 911 8% 6% Africa & Ame

  27. Slide 27: Commercial Pharma | Regional Brands

    COMMERCIAL PHARMA | REGIONAL BRANDS CONTINUING | BENEFIT FROM STOCKPILING MORE THAN OFFSET BY LOWER DEMAND IN Q4 2020  SA +5%  LatAm +10% » Aspen +9% » Good growth sustained, but lower demand in Q4 2020 - Strong performance in OTC  Developed Europe -6% » Mybulen performance sustained – SA's large

  28. Slide 28: Commercial Pharma | Europe CIS Sterile Focus Brands

    COMMERCIAL PHARMA | EUROPE CIS STERILE FOCUS BRANDS CONTINUING | COVID-19 DEMAND OFFSET BY POSTPONEMENT IN ELECTIVE SURGERIES R'million FY 2020 % change (Reported) % change (CER)* Thrombosis 5 029 3% -4% Anaesthetics 2 851 15% 8% Total 7 880 7% 0%  Significant improvement to flat growth from -9% at

  29. Slide 29: Manufacturing | API & FDF

    MANUFACTURING | API & FDF CONTINUING | STRONG PERFORMANCE R’million FY 2020 % change (Reported) % change (CER)* FDF 20% API 6 115 24% 16% FDF 1 388 12% 5% API Total 7 503 22% 14% 80%  API +16% » Safety stock greatly assisted in weathering logistics challenges during COVID-19 lockdown Manufacturing

  30. Slide 30: Sterile Manufacturing | Adding Value

    STERILE MANUFACTURING | ADDING VALUE POSITIONED FOR GLOBAL MANUFACTURING OF HIGH QUALITY, AFFORDABLE STERILE MEDICINES  Aspen has proven high quality manufacturing expertise and global economies of scale with broad capabilities  Enhance our offering of quality and affordable medicines in a growing

  31. Slide 31: Outlook | COVID-19 Creates Uncertainty for FY 2021

    OUTLOOK | COVID-19 CREATES UNCERTAINTY FOR FY 2021 ASPEN TO PROVIDE GUIDANCE AS THE IMPACT OF COVID-19 BECOME MORE APPARENT FY 2021  Deliver on reshaped business  Focus on opportunities from sterile capex rollout  Critical review of cost structures to ensure future sustainability  Business well

  32. Slide 32: Appendices

    APPENDICES aspen Healthcare. We Care.

  33. Slide 33: Appendix 1: Abridged Statement of Comprehensive Income

    APPENDIX 1: ABRIDGED STATEMENT OF COMPREHENSIVE INCOME CONTINUING AND DISCONTINUED R’million FY 2020 FY 2019 % change Net revenue 40 535 42 341 -4% Cost of sales (20 442) (21 118) Gross profit 20 093 21 222 -5% Gross profit margin 49.6% 50.1% Operating expenses (10 103) (11 014) Net other operating

  34. Slide 34: Appendix 2: Abridged Statement of Normalised Comprehensive Income

    APPENDIX 2: ABRIDGED STATEMENT OF NORMALISED COMPREHENSIVE INCOME FY 2019 R’million FY 2020 FY 2019 % change % change (CER)* Net revenue 38 647 35 514 9% 37 320 4% Cost of sales (19 314) (16 930) 14% (17 956) 8% Gross profit 19 333 18 584 4% 19 364 0% Gross profit margin 50.0% 52.3% 51.9% Operating

  35. Slide 35: Appendix 3: Reconciliation of Reported NHEPS

    APPENDIX 3: RECONCILIATION OF REPORTED NHEPS CONTINUING AND DISCONTINUED Cents FY 2020 FY 2019 % change Basic earnings per share (EPS) 1 021.8 1 415.9 -28% Impairment of property, plant and equipment 1.8 92.5 Impairment of intangible assets 280.9 655.7 Reversal of impairment of PPE ( 0.4) ( 3.9) Imp

  36. Slide 36: Appendix 4: Reconciliation of Reported NHEPS

    APPENDIX 4: RECONCILIATION OF REPORTED NHEPS CONTINUING Cents FY 2020 FY 2019 % change Basic earnings per share (EPS) 1 010.2 367.8 175% Impairment of property, plant and equipment 2.0 92.5 Impairment of intangible assets 280.8 655.8 Reversal of impairment of PPE ( 0.4) ( 3.9) Reversal of impairment

  37. Slide 37: Appendix 5.1: Group Statement of Financial Position

    APPENDIX 5.1: GROUP STATEMENT OF FINANCIAL POSITION R'million FY 2020 FY 2019 TOTAL ASSETS Non-current assets 96 431 86 164 Intangible assets 73 040 66 468 Property, plant and equipment 14 232 12 065 Right-of-use assets 601 - Goodwill 5 375 4 649 Deferred tax assets 1 714 1 163 Contingent environmen

  38. Slide 38: Appendix 5.2: Group Statement of Financial Position

    APPENDIX 5.2: GROUP STATEMENT OF FINANCIAL POSITION R‘million FY 2020 FY 2019 EQUITY AND LIABILIITIES Shareholders equity 69 217 54 213 Non-current liabilities 45 873 48 064 Borrowings 36 019 39 713 Other non-current liabilities 4 957 3 702 Unfavourable and onerous contracts 927 1 055 Deferred tax l

  39. Slide 39: Appendix 6: Extract from Group Statement of Cash Flows

    APPENDIX 6: EXTRACT FROM GROUP STATEMENT OF CASH FLOWS CONTINUING AND DISCONTINUED R'million FY 2020 FY 2019 % change Cash operating profit 11 110 10 918 2% Changes in working capital 192 (1 378) Cash generated from operations 11 302 9 540 18% Net finance costs paid (1 631) (1 742) Tax paid (1 411)

  40. Slide 40: Appendix 7: Net Funding Costs

    APPENDIX 7: NET FUNDING COSTS CONTINUING R’million H1 2020 H2 2020 FY 2020 FY 2019 Net interest paid ( 591) ( 649) (1 240) (1 514) Foreign exchange (losses)/gains ( 10) 2 ( 8) ( 66) Notional interest on financial instruments ( 86) ( 96) ( 182) ( 274) Normalised net funding costs ( 687) ( 743) (1 430

  41. Slide 41: Appendix 8: Group Revenue by Region

    APPENDIX 8: GROUP REVENUE BY REGION CONTINUING R’million FY 2020 FY 2019 % Change FY 2019 (CER)* % Change Developed Europe 13 857 12 095 15% 12 964 7% Sub-Saharan Africa 7 880 7 341 7% 7 423 6% Asia Pacific 9 058 8 748 4% 9 257 -2% Latin America 3 412 3 083 11% 3 093 10% Developing Europe and CIS 2

  42. Slide 42: Appendix 9: Leverage Ratio Calculation

    APPENDIX 9: 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: diffe

  43. Slide 43: Appendix 10: Portfolio Management Model

    APPENDIX 10: PORTFOLIO MANAGEMENT MODEL Maximise portfolio Build portfolio Reshape portfolio returns Drivers of portfolio Aspen Portfolio strategy Sales & Supply Acquire Develop Collaborate Manufacturing Revitalise Collaborate Divest Marketing Chain Patients Needs Proactively seek Leverage Strategic

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