Aspen Pharmacare Holdings Limited · JSE:APN

Aspen Pharmacare — FY2022 Earnings Presentation

56 slides from Aspen Pharmacare's earnings presentation, 2022

  1. Slide 1: Annual Results Presentation

    Annual Results Presentation For the year ended 30 June 2022

  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 THE GROUP SEGMENTAL ANALYSIS  The Group has revised its reportable segments to reflect the newly updated operating model which aligns to the way in which the business is managed and reported on by the Chief Operating Decision Maker (“CODM”).  The business segments w

  4. Slide 4: Financial Review

    Financial Review Healthcare. We Care. © aspen

  5. Slide 5: Solid operational performance leading to increased ROIC

    SOLID OPERATIONAL PERFORMANCE LEADING TO INCREASED ROIC FINANCIAL HIGHLIGHTS SALES EBITDA EARNINGS 5% CERⱡ +13% CERⱡ +26% CERⱡ +2% +11% * +2.2 +24% 37 766 38 606 11 012 9 945 28.5% 1 628 26.3% 1 310 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 Revenue Normalised EBITDA Normalised

  6. Slide 6: Strong balance sheet underpins sustainable growth strategy

    STRONG BALANCE SHEET UNDERPINS SUSTAINABLE GROWTH STRATEGY FINANCIAL HIGHLIGHTS SALES EBITDA EARNINGS 137% 35 228 134% +24% 326 1.8 3.2x -2% 81% 262 16 326 16 064 2.1x 10.2m 1.9x 2.2% FY 2020 FY 2021 FY 2022 FY 2020 FY 2021 FY 2022 FY 2021 FY 2022 R’billion Shares Cash conversion rate % Net Borrowin

  7. Slide 7: Highest NHEPS and lowest net borrowings in five years

    HIGHEST NHEPS AND LOWEST NET BORROWINGS IN FIVE YEARS CONTINUING 1800 1 604.9 1627.6 1600 1 414.3 1 464.6 Share buy- 1 309.7 back 1400 R1.8 bn 1200 1000 FY 2022 46 780 2-year 800 CAGR 38 984 35 228 Revenue 600 +7% 28.2%* 28.4%* 28.5%* 27.8%* 26.3%* Normalised 400 16 326 16 064 EBITDA +7% 11 012 200

  8. Slide 8: Normalised EBITDA

    NORMALISED EBITDA CONTINUING % change R'million FY 2022 % of revenue FY 2021 % of revenue Reported CERǂ Revenue 38 606 100.0% 37 766 100.0% 2% 5% Gross profitⴃ 18 306 47.4% 17 789 47.1% 3% 5% Depreciation 1 167 3.0% 1 043 2.8% 12% 15% Operating expenses (8 539) 22.1% (9 124) 24.2% -6% -4% Net other

  9. Slide 9: Gross profit percentage

    GROSS PROFIT PERCENTAGE CER ⱡ AT YTD JUNE 2022 RATES Gross profit percentage adjusted to exclude low/no margin FDF TRS* ⱡ CER removes the currency effect on performance. FY 2021 has been restated at FY 2022 average exchange rates. *FDF transaction related supply ("FDF TRS") refers to revenue under s

  10. Slide 10: Normalised headline earnings bridge

    NORMALISED HEADLINE EARNINGS BRIDGE CONTINUING R’MILLION +23% +25% 227 -245 7 373 -156 355 29 1 245 5 978 5 918 -60 June 2021 Fx impact June 2021 Normalised Depreciation Amortisation Net interest Forex Tax June 2022 Reported CERⱡ EBITDA*  Double digit Normalised EBITDA* growth of +13% CERⱡ  Steep

  11. Slide 11: Working capital

    WORKING CAPITAL Net working capital % of revenue^  Increased investment in Manufacturing inventory in H1 2022 continued in H2 2022 to mitigate stock-out risk against the 43% 45% 45% backdrop of global supply disruptions and inflation 37% Total  H2 2022 cash flow conversion rate, albeit improved, e

  12. Slide 12: Net financing costs

    NET FINANCING COSTS SIGNIFICANT REDUCTION AUGMENTED NHEPS GROWTH R’million FY 2022 FY 2021  Reduced net borrowings and lower effective interest Net interest paid ( 468) ( 854) rates decrease net interest paid by R386m Effective interest rate for the period Ƶ 2.92% 3.39%  Forex gains a material mov

  13. Slide 13: Capital allocation YTD June 2022

    CAPITAL ALLOCATION YTD JUNE 2022 SUBJECT TO LEVERAGE CAP OF 3.0X PPE capex and Bolt-on acquisitions and Dividends and share Larger Acquisitions & IP development disposals of IP and buy-back Disposals businesses * R2 697 million invested R371 million net inflow R2 996 million No significant outflow E

  14. Slide 14: Financial medium-term guidance to FY 2024: halfway scorecard

    FINANCIAL MEDIUM-TERM GUIDANCE TO FY 2024 | HALFWAY SCORECARD SALES FINANCIAL METRICS ON TRACK EBITDA  Successful implementation of strategy EARNINGS » Improving return metrics TARGET ACHIEVED  Increase from rebased FY 2020 EBITDA margin of 25.8%  28.5% EBITDA margin  EBITDA growth > Revenue gro

  15. Slide 15: Performance Review

    Performance Review Healthcare. We Care. eo) aspen

  16. Slide 16: Trading environment

    TRADING ENVIRONMENT Margin growth through Pipeline of new Pharma is defensive sector disciplined cost management opportunities Volume growth but margins impacted Both at COGS and Opex level Both in Commercial Pharma by ability to pass on costs Material cost increases across the board and Manufacturi

  17. Slide 17: Operational performance

    OPERATIONAL PERFORMANCE RELATIVE PERFORMANCE H2 VS H1 Solid growth in Manufacturing  H2 revenue up R700m on H1  H2 recovered strongly from COVID induced headwinds experienced in H1 Commercial Pharma sales performed as guided in H1  Decrease in demand for COVID vaccine  R500m decrease from South

  18. Slide 18: Group revenue

    GROUP REVENUE CONTINUING % change R'million FY 2022 FY 2021 Reported CERǂ Commercial Pharma 27 658 27 874 -1% 1% Currency impact of Regional Brands 17 405 17 183 1% 3% over R1 billion Sterile Focus Brands 10 253 10 691 -4% -2% Manufacturing 10 948 9 892 11% 18% Group revenue 38 606 37 766 2% 5%  Re

  19. Slide 19: Commercial Pharma | Regional Brands

    COMMERCIAL PHARMA | REGIONAL BRANDS CONTINUING | REVENUE % change R’million FY 2022 FY 2021 Reported CERǂ Africa Middle East 7 878 8 157 -3% -3% Strong organic Australasia 4 464 4 113 9% 13% performance offsets divestment impact Americas 2 856 2 613 9% 8% Europe CIS 1 594 1 674 -5% 1% Asia 613 626 -

  20. Slide 20: Commercial Pharma | Steriles

    COMMERCIAL PHARMA | STERILES CONTINUING | REVENUE % change R’million FY 2022 FY 2021 Reported CERǂ Asia 4 503 4 491 0% 0% Europe CIS 3 143 3 518 -11% -6% Withstanding global Americas 1 439 1 393 3% 3% challenges Australasia 643 754 -15% -11% Africa Middle East 525 535 -2% 0% Sterile Focus Brands 10

  21. Slide 21: Manufacturing

    MANUFACTURING CONTINUING | REVENUE % change R’million FY 2022 FY2021 Reported CERǂ API Chemicals 4 737 5 154 -8% -2% Biochem/Viatris 3 186 2 721 17% 25% Strong revenue Biochem 778 1243 growth sustained Viatris 2 408 1 478 FDF 3 025 2 017 50% 57% Manufacturing 10 948 9 892 11% 18%  API Chemicals had

  22. Slide 22: Delivering on our ESG commitments

    DELIVERING ON OUR ESG COMMITMENTS Society The safe return of 25 students to South Africa from Ukraine - reflecting Ubuntu in practice Donation of life-saving anaesthetics for 240 000 patients in Lebanon, following devastating explosion in Beirut. In addition, Aspen donated anaesthetics to Ukraine fo

  23. Slide 23: Strategic Review

    Strategic Review Healthcare. We Care. @) aspen

  24. Slide 24: Commercial Pharma | Organic growth with improved margins

    COMMERCIAL PHARMA | ORGANIC GROWTH WITH IMPROVED MARGINS Relevant and resilient portfolio, driven by strong regional teams  Sustained positive momentum  Streamlined portfolio continues to deliver  Strong generator of cash flows Organic growth sustained, despite challenges  Divestments of product

  25. Slide 25: Commercial Pharma | Outlook

    COMMERCIAL PHARMA | OUTLOOK ANTICIPATED ORGANIC VOLUME GROWTH MOMENTUM TO BE SUSTAINED IN MID-SINGLE DIGIT Cushion inflationary impact  Passing on increases where possible  Further COGS reduction  Input costs to remain elevated  Expected GM% impact of less than 1%  Opex to increase in line with

  26. Slide 26: Manufacturing | Overview

    MANUFACTURING | OVERVIEW Split between API production and FDF sales Manufacturing continues to be a driver of growth  Investment in capacity focused on FDF  Vaccine delivery important demonstration of capability » Insourcing of Anaesthetics range and adding capacity  Stimulus for future growth op

  27. Slide 27: Manufacturing | COVID vaccines

    MANUFACTURING | COVID VACCINES Aspen has invested heavily in capacity  J&J contract is important as nearly 70% of costs are fixed  R1.4bn revenue in FY 2022 - H1 R800m and H2 R600m  Anticipate J&J sales H1 FY 2023 R200m  Assumed no further sales beyond this date » Sufficient stock levels at J&J

  28. Slide 28: Summary & Prospects

    Summary & Prospects Healthcare. We Care. (@) aSpen

  29. Slide 29: Summary FY2022

    SUMMARY FY2022 HIGHLIGHTS  Delivered strong financial results » In the face of significant supply and inflationary pressures • Well managed Opex, improvement from sourcing costs and other efficiencies  Manufactured over 225 million doses of COVID vaccines • Resulted in widened EBITDA margins to 28

  30. Slide 30: Prospects | Acquisitions and licenses

    PROSPECTS | ACQUISITIONS AND LICENSES Update from interims  Potential acquisitive and license opportunities raised » Latam, Africa, Australia and diverse Sterile opportunities Acquisition of ENTT » Some closed, continue to progress positively on others  Australia acquired ENTT » Closure of stated

  31. Slide 31: Prospects | China

    PROSPECTS | CHINA Realization of organic pipeline Interim period FY2027 - FY2030 Base business FY2023 - FY2026  Internal & external pipeline FY2017 » Non-VBP pipeline - » Long-term exclusivity FY2022  Uncertainty over VBP  Sales forecasts of pipeline material  Cushion potential exposure at Group

  32. Slide 32: Prospects | Broader African vaccine/sterile opportunities

    PROSPECTS | BROADER AFRICAN VACCINE/STERILE OPPORTUNITIES Commitment to African vaccine manufacturing  The African Union has called for at least 30% of all vaccines needed by the Continent to be manufactured on the Continent » Presently 99% are imported  Supply of these vaccines critical for futur

  33. Slide 33: Prospects | Serum transaction

    PROSPECTS | SERUM TRANSACTION Serum Institute of India (“SII”) is the largest producer of vaccines globally  SII will license IP to Aspen to register and manufacture for public and private sector markets in Africa » Pneumonia, Rota, Meningitis and Hexavalent vaccines » These vaccines represent some

  34. Slide 34: FY2023 prospects Commercial Pharma in CER

    FY2023 PROSPECTS COMMERCIAL PHARMA IN CER Revenue growth forecast to be sustained  Even after Russian business impact, SA divestments and China VBP impact  Resilient, branded portfolio  Acquisitions will be additive Gross margin contraction anticipated based on current inflationary environment 

  35. Slide 35: FY2023 prospects Manufacturing in CER

    FY2023 PROSPECTS MANUFACTURING IN CER Another year of strong Manufacturing revenue is forecast  Even with limited vaccine sales R200m J&J sales forecast for H1 only  FY 2022 J&J sales were at R1.4bn  Sales of Aspenovax would be material contributor, given fixed cost base Sales in Manufacturing al

  36. Slide 36: Prospects FY2023

    PROSPECTS FY2023 GROUP PERFORMANCE EXPECTATIONS  Led by Manufacturing REVENUE TO GROW BY » No Aspenovax sales assumed BETWEEN 3% AND 7%  Volume demand to remain strong GROSS MARGIN IMPACTED BY  Lower COVID vaccine volumes will cause decline in Manufacturing GM% due to high fixed costs SHIFT IN MI

  37. Slide 37: Prospects FY2023: Strategic focus areas

    PROSPECTS FY2023 STRATEGIC FOCUS AREAS  Our capacity and capabilities in Africa are unique » First mover advantage » Offering access and sustainability to partners STERILES FOR AFRICA  Serum license an important step forward in capacity fill initiative  Will offset likely impact of J&J lost volum

  38. Slide 38: Prospects | Next phase of our journey

    PROSPECTS | NEXT PHASE OF OUR JOURNEY FY 2013 FY 2018 FY 2022 FY 2023 + R5.9 bn R12.0 bn R11.0 bn Normalised EBITDA R11.1 bn R46.8 bn R16.1 bn Net borrowings ACQUISITIVE GROWTH PHASE CONSOLIDATION PHASE OPTIMISATION PHASE RESHAPED REFINED READY • From commodity generics to specialty pharma • Product

  39. Slide 39: Appendices

    Appendices Healthcare. We Care. OkeSjela!

  40. Slide 40: Appendix 1 | Delivering on our ESG commitments

    APPENDIX 1 | DELIVERING ON OUR ESG COMMITMENTS FTSE4GOOD CONSTITUENT MEMBER | FTSE/JSE TOP 30 RESPONSIBLE INVESTMENT INDEX | INTEGRATED REPORT ASSESSED AS “EXCELLENT” BY EY Society Environment Our people Patient  Access to affordable high-quality  Signatory to the UN Women  Level 4 B-BBEE accredi

  41. Slide 41: Appendix 2 | Strategic positioning

    APPENDIX 2 | 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 annui

  42. Slide 42: Appendix 3 | Strong fundamentals for organic growth

    APPENDIX 3 | 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 growth Increasing demand for

  43. Slide 43: Appendix 4 | Abridged statement of comprehensive income

    APPENDIX 4 | ABRIDGED STATEMENT OF COMPREHENSIVE INCOME CONTINUING AND DISCONTINUED R’million FY 2022 FY 2021 % change Net revenue 38 606 39 705 -3% Cost of sales (20 300) (21 515) Gross profit 18 306 18 190 1% Gross profit margin 47.7% 45.8% Operating expenses (8 539) (9 959) Net other operating ex

  44. Slide 44: Appendix 5 | Abridged statement of normalised comprehensive income

    APPENDIX 5 | ABRIDGED STATEMENT OF NORMALISED COMPREHENSIVE INCOME CONTINUING R’million FY 2022 FY 2021 % change FY 2021 (CERǂ) % change (CERǂ) Net revenue 38 606 37 766 2% 36 724 5% Cost of sales (20 300) (19 977) 2% (19 262) 5% Gross profit 18 306 17 789 3% 17 462 5% Gross profit margin 47.4% 47.1

  45. Slide 45: Appendix 6 | Reconciliation of NHEPS

    APPENDIX 6 | RECONCILIATION OF NHEPS CONTINUING AND DISCONTINUED Cents FY 2022 FY 2021 % change FY 2021 (CERǂ) % change (CERǂ) Basic earnings per share (EPS) 1 432.3 1 052.9 36% 1 050.7 36% Impairment of property, plant and equipment 1.9 29.1 28.2 Impairment of right-of-use assets 3.2 - - Impairment

  46. Slide 46: Appendix 7 | Reconciliation of NHEPS

    APPENDIX 7 | RECONCILIATION OF NHEPS CONTINUING Cents FY 2022 FY 2021 % change FY 2021 (CERǂ) % change (CERǂ) Basic earnings per share (EPS) 1 432.3 1 051.1 36% 1 050.0 36% Impairment of property, plant and equipment 1.9 29.1 28.2 Impairment of right-of-use assets 3.2 - - Impairment of intangible as

  47. Slide 47: Appendix 8 | Currency mix

    APPENDIX 8 | CURRENCY MIX FY 2022 FY 2021 FY 2022 FY 2021 Normalised Normalised Currency contribution Revenue Revenue Average rate % change EBITDA EBITDA EUR 31% 22% 29% 17% 17.14 18.36 -6.6% ZAR 17% 11% 18% 16% AUD 14% 18% 13% 21% 11.03 11.48 -3.9% CNY 10% 21% 10% 23% 2.36 2.32 1.7% USD 7% (13%) 7%

  48. Slide 48: Appendix 9 | Effective tax rates

    APPENDIX 9 | EFFECTIVE TAX RATES CONTINUING 20.2% 19.9% 19.9% 19.3% 17.7% 16.9% 16.4% 16.4% H1 2021 FY 2021 H1 2022 FY 2022 Group effective tax rate Group Normalised effective tax rate  Lower than anticipated FY 2022 Normalised effective tax rate due to contribution mix  Over the next two to three

  49. Slide 49: Appendix 10.1 | Group statement of financial position

    APPENDIX 10.1 | GROUP STATEMENT OF FINANCIAL POSITION R'million FY 2022 FY 2021 TOTAL ASSETS Non-current assets 76 814 76 979 Intangible assets 53 651 54 882 Property, plant and equipment 15 913 14 826 Right-of-use assets 311 400 Goodwill 5 007 4 621 Deferred tax assets 1 252 1 323 Contingent enviro

  50. Slide 50: Appendix 10.2 | Group statement of financial position

    APPENDIX 10.2 | GROUP STATEMENT OF FINANCIAL POSITION R‘million FY 2022 FY 2021 EQUITY AND LIABILIITIES Shareholders equity 70 942 65 627 Non-current liabilities 18 338 7 306 Borrowings 11 882 266 Other non-current liabilities 3 492 3 732 Unfavourable and onerous contracts 87 463 Deferred tax liabil

  51. Slide 51: Appendix 11 | Net working capital bridge CER

    APPENDIX 11 | NET WORKING CAPITAL BRIDGE CER R’MILLION +20% +R2 913m 17 262 +R2652m 261 Cash Outflow 559 2 169 226 302 391 Commercial Pharma Manufacturing 1 778 14 349 13 971 378 June 2021 Fx impact June 2021 CERⱡ Inventory Trade Trade payables Net other Non cash June 2022 Reported receivables payab

  52. Slide 52: Appendix 12 | Operating cash flow

    APPENDIX 12 | OPERATING CASH FLOW LOWER THAN EXPECTED H2 2022 CASH CONVERSION RATE R'million FY 2022 FY 2021 % change Operating cash conversion cycle Cash operating profit 10 023 8 874 13% 250% Changes in working capital (2 652) 648 >-100% 200% Cash generated from operations 7 371 9 522 -23% 150% Ne

  53. Slide 53: Appendix 13 | Capital expenditure

    APPENDIX 13 | CAPITAL EXPENDITURE PPE capexˠ in R’million 2 300 2 400 2 039 2 045 1 963 PPE CAPEX ˠ 700 800  FY 2022 includes capex for the rehabilitation of the Alphamed site in India of R200m which is expected to complete in August 2022  Vials capacity expansion project initiated as a strategic

  54. Slide 54: Appendix 14 | Net borrowings

    APPENDIX 14 | NET BORROWINGS Net borrowings# in R’million 16 326  IFC refinancing package of EUR 600m 7-year amortising loan completed in 16 064 H1 2022 and included in non-current borrowings. Repayments commence bi-annually from March 2024 onwards 10 365  Maturity date for the bulk of the Group's

  55. Slide 55: Appendix 15 | Net borrowings bridge

    APPENDIX 15 | NET BORROWINGS BRIDGE R’MILLION 16 326 16 077 -249 16 064 38 2 697 -5 373 1 800 1 196 -371 South Africa - ZAR 23% International - EUR 69% 30 June 2021 FX 30 June 2021 Cashflows Bolt-on Dividends Share Capex Other 30 June 2022 Reported CERⱡ from operating acquisitions buy-back (IP activ

  56. Slide 56: Appendix 16 | Net bolt-on acquisitions and disposals

    APPENDIX 16 | NET BOLT-ON ACQUISITIONS AND DISPOSALS R’MILLION R'million FY 2022 Proceeds on disposal to Acino 1 800 Proceeds on disposal of Intangible assets 325 Proceeds on disposal of European Thrombosis business 146 Net payment of deferred consideration relating to PY business acquisitions (1 53

Aspen Pharmacare Holdings — FY2022 Earnings Presentation on 6ix