Aspen Pharmacare Holdings Limited · JSE:APN
Aspen Pharmacare — FY2017 Earnings Presentation
62 slides from Aspen Pharmacare's earnings presentation, September 2017
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 30 June 2017
Slide 2: Highlights
Highlights 2 Delivery on guidance of strong H2 Revenue (R’ billion) *CER Growth Growth • Revenue growth even higher than H1 FY 2017 41.2 +16% +22% • Gross profit percentage impacted by increased anaesthesia H1 2017 19.8 +13% +14% • NHEPS growth more in line with revenue • Sustained improvements in w
Slide 3: Group revenue by customer geography
Group revenue by customer geography 3 Revenue by customer geography Performance in ZAR is determined by FY 2016 R’million FY 2017 FY 2016 % change (CER)* % change − Fluctuations in exchange rate; and Developed Europe 11 431 11 100 3% 10 161 13% − Underlying operational performance Exchange rat
Slide 4: Group revenue by business segment
Group revenue by business segment 4 Revenue by business segment R’million FY 2017 FY 2016 % change FY 2016 (CER) % change Commercial Pharma 31 437 25 403 24% 24 240 30% Anaesthetics* 7 065 114 >100% 114 >100% Thrombosis* 5 665 6 448 -12% 5 989 -5% High Potency & Cytotoxics* 4 687 5 030 -7% 4 696 0
Slide 5: The evolution of Aspen
The evolution of Aspen Commercial Pharma • Geographic diversity • Product portfolio Manufacturing Capacity and Capability • Finished Dose Form • API
Slide 6: Commercial Pharma geographic diversity
Commercial Pharma geographic diversity 6 FY 2000 FY 2013 FY 2017 Sales R1.0 billion Sales R18.6 billion Sales R31.4 billion South Africa South Africa Australia Australasia Japan Brazil Germany Latin America China Brazil SSA France Rest of Asia Italy Philippines United Kingdom South Africa only Jap
Slide 7: Commercial Pharma product portfolio
Commercial Pharma product portfolio 7 FY 2000 FY 2013 FY 2017 Sales R1.0 billion Sales R18.6 billion Sales R31.4 billion Anaesthetics Thrombosis High Potency & Cytotoxics Other Commercial Pharma Brands Other Commercial Pharma Brands Predominantly Other Commercial Pharma Brands with limited therape
Slide 8: Manufacturing FDF capacity & capability
Manufacturing FDF capacity & capability 8 FY 2000 FY 2013 FY 2017 FY2022 Tablets only Predominantly solids Dominant sterile platform Further evolution to with some Speciality with Speciality & Solids Sterile Manufacturing 3% 12% 32% 13% 58% 75% 7% Solids High Potency Solids High Potency Steriles S
Slide 9: Manufacturing API capacity & capability
Manufacturing API capacity & capability 9 FY 2013 FY 2017 Total Capacity 200 KvH Total Capacity 980 KvH Capabilities Added Capabilities Anaesthetics Netherlands- Oss High Potency & Cytotoxics Speciality chemicals Muscle relaxants 20% Steroids/Alkaloids/Heterocyclics Cape Town – FCC Cape Town - FCC
Slide 10: Commercial Pharma
HoL DINGS Commercial Pharma
Slide 11: Commercial Pharma revenue contribution by region & therapeutic category
Commercial Pharma revenue contribution by region & therapeutic category 11 22% 46% DM revenue contribution 45% 18% Developed Markets 54% EM revenue contribution 15% Anaesthetics Thrombosis Weighting towards Emerging Markets High Potency And Cytotoxic Other Commercial Pharma Brands − Maybe the on
Slide 12: Anaesthetic Brands
Anaesthetic Brands 12 FY 2016 Regional representation R’ million FY 2017 (CER) % change Developed Markets 3 885 7 >100% 55% DM revenue Emerging Markets 3 180 107 >100% contribution Total Revenue 7 065 114 >100% Emerging Developed Largest sector of therapeutic focused brands Markets Markets Broad
Slide 13: Anaesthetic Brands
Anaesthetic Brands 13 Complex supply chain − Global anaesthesia supply unstable − Demand unpredictable Competitor stock outs Sufficient capacity is an opportunistic success factor − Current supply chain has constraints Will acquire control over supply chain − Aspen has proven skill in supply
Slide 14: Anaesthetic Brands China
Anaesthetic Brands China 14 Significant operational structure established within China Geography of detailing head count Number of heads Fully operational offices in the following locations: Shandong / Henan 中原大区 30 − Beijing, Shanghai and Guangzhou Beijing 北京大区 20 Infrastructure established
Slide 15: Anaesthetic Brands Prospects
Anaesthetic Brands Prospects 15 The anaesthetics portfolio has positively impacted sales − Annualised effect will enhance FY 2018 performance Largely fits on existing infrastructure − Commercial and manufacturing synergies Critical mass to establish presence in China and Japan Structure of
Slide 16: Thrombosis Brands
Thrombosis Brands 16 Regional representation R ’million Developed FY 2017 FY 2016 (CER) % change 57% 3 255 3 861 (16%) DM revenue Markets contribution Emerging 2 410 2 128 13% Markets Total Revenue 5 665 5 989 (5%) Emerging Developed Markets Markets Thrombosis sales down R324 million − Developed E
Slide 17: Thrombosis Brands
Thrombosis Brands 17 Developed Europe Rest of World Developed Europe - 56% of sales China key driver of Asia growth − Decline almost equally attributable to pricing and change − Six months of sales in distribution model − Had declined 32% over 3 years prior to transition Pricing pressure impac
Slide 18: Thrombosis Brands | Prospects
Thrombosis Brands | Prospects 18 Challenging environment for injectables market due to biosimilar, generic and oral competitors Aspen well positioned strategically Fraxiparine & Orgaran Arixtra & Mono-Embolex Combined contribution > 60% of total thrombosis sales Arixtra CER growth of 7% for FY 2
Slide 19: High Potency & Cytotoxic Brands
High Potency & Cytotoxic Brands 19 Regional representation R ’million FY 2017 FY 2016 (CER) % change Developed Markets 2 671 2 971 (10%) 57% Emerging Markets 2 016 1 725 17% DM revenue contribution Total Revenue 4 687 4 696 0% Lead brands/molecules include: − Imuran, Ovestin and Levothyroxine bran
Slide 20: High Potency & Cytotoxic Brands Prospects
High Potency & Cytotoxic Brands Prospects 20 Existing portfolio stable − Niche growth opportunity for EMs − Onco ANDA launch estimated for December 2017 Progress made in stabilising synthetic esterified and conjugated estrogens − Facilitated/fast tracked entry into USA Exclusive licence agre
Slide 21: Other Commercial Pharma Brands
Other Commercial Pharma Brands 21 Regional representation R’million Total Revenue FY 2017 14 020 FY 2016 (CER) 13 441 % change 4% 34% DM revenue Sub-Saharan Africa 7 182 6 845 5% contribution Australasia 3 652 3 998 (9%) Latin America 1 187 1 124 6% Rest of world 1 999 1 474 36% Divestments & Discon
Slide 22: Other Commercial Pharma Brands | SSA
Other Commercial Pharma Brands | SSA 22 Sub-Saharan Africa South Africa R ’million FY 2017 FY 2016 (CER) % change R ’million FY 2017 FY 2016 % change Total SSA Revenue 7 182 6 845 5% Private sector 4 964 4 553 9% Southern Africa Revenue 6 543 6 123 7% -OTC 1 425 1 150 24% SA 6 435 6 003 - Prescripti
Slide 23: Other Commercial Pharma Brands South Africa
Other Commercial Pharma Brands South Africa 23 Private sector +9% Public sector +1% Private market growth rebounded in H2 2017 12 month extension to the ARV tender − H1 vs H1 -7% − From 31 March 2018 − H2 vs H2 +29% Aspen awarded increased share of the OSD tender Aspen has largest share of
Slide 24: Other Commercial Pharma Brands Australasia
Other Commercial Pharma Brands Australasia 24 R’million Divested/Discontinued FY 2017 FY 2016 (CER) % change − Related to products divested and licences that have been or will be discontinued at contract termination Total Revenue 3 652 3 998 (9%) − Sales will halve in FY 2018 and then fall to ze
Slide 25: Other Commercial Pharma Brands Latin America & Rest of World
Other Commercial Pharma Brands Latin America & Rest of World 25 Latin America Rest of World Improved performance in Brazil Asia up 10% − Particularly OTCs − Impact of authorised generic growth in Japan Improved supply chain HPC sales positively impacted the USA Double digit base organic
Slide 26: Other Commercial Pharma Brands Prospects
Other Commercial Pharma Brands Prospects 26 Aspen’s engine room − Largest sector within Commercial Pharma − Dominated by EMs and Australia Organic growth opportunity − Volume growth − Broad pipelines to support sustained growth − Strong market positions Performance critical to Group − SA per
Slide 27: Nutritionals
HoL DINGS Nutritionals
Slide 28: Nutritionals
Nutritionals 28 R’million FY 2017 FY 2016 (CER) % change Latin America 1 462 1 395 5% SSA 967 932 4% Australasia 795 1 004 (21%) Total Revenue 3 224 3 331 (3%) Challenging H1 − Venezuela implosion − Restriction of Chinese imports Decreased sales in Australia Overstocked Australian market Rec
Slide 29: Nutritionals Latin America & SSA
Nutritionals Latin America & SSA 29 Latin America SSA Strong H2 Aspen SA continues to grow in both volume and value − Market share increasing − H2 2017 vs H1 2017 +9% CER *Aspen Market Share Evolution - Volume − H2 2017 vs H2 2016 +16% CER 25.5% 26.0% 24.1% − Infacare penetration into mid-tier
Slide 30: Nutritionals Asia Pacific
Nutritionals Asia Pacific 30 Australia Starting to see first signs of rebound Australia: In-market sales -5% Volumes stabilising and now growing Q4 2016 Pricing pressures decreasing Q3 2017 Q4 2017 Transition of own brand underway − Australia in Q4 CY 2017 6% Capacity in NZNM − Increased
Slide 31: Operations & Synergies
HoL DINGS Operations & Synergies
Slide 32: Operations
Operations 32 Inordinate focus on operations R’million FY 2017 FY 2016 (CER) % change − Highest risk API 4 411 4 041 9% − Absorbed disproportionate amount of senior management time FDF 2 141 2 139 0% − Required our top skills and expertise Total Revenue 6 552 6 180 6% − Prioritised ahead of commer
Slide 33: Synergies
Synergies 33 Synergies have been critical to defending our profitability Future synergies remain meaningful and include − Collapse of Rouble − Cost Synergies Volume increases at NDB − Lost Pharma and Nutritional operating income from Venezuela FDF & API manufacture of Mono Embolex Reshaped
Slide 34: Summary & Prospects
HoL DINGS Summary & Prospects
Slide 35: Summary
Summary 35 Impressive results despite challenging global pharma environment Currency headwinds − More than offset by operational performance − Improved normalised operating profit to cash flow conversion rate − Delivery on promise of strong H2 − H2 2017 NHEPS up 27% (37% CER) vs H2 2016 Dealin
Slide 36: Summary
Summary 36 Testing and transformative period Business reshaped structurally − Clearly defined business units with focused, measurable objectives − Infrastructure established in China and Japan − European facilities nearly settled − Operations also settled with full focus now on commercial execut
Slide 37: Prospects
Prospects 37 Sales Profitability Annualised anaesthetic sales Exchange rate will always impact Base organic growth in Commercial Pharma Further extraction of efficiencies − Across each therapeutic sector − Margin and Cashflow positive − Developed Europe to improve Commitment to increased p
Slide 38: Prospects
Prospects 38 Worked extremely hard operationally on reconfiguring Aspen 19 years of sustained NHEPS growth − Transformation over last few years clearly demonstrated Half on half − Business de-risked Year on year 14.63 Geographically Product portfolio CAGR: FY ’98 –FY’17 FDF and API capabilit
Slide 39: Financial review
HoL DINGS Financial review
Slide 40: Financial performance headlines
Financial performance headlines 40 Margin % dilution due to Currency influence: Acquisitive and organic anaesthetic deal negative to earnings, revenue growth structure positive to debt Leverage ratio Strong Improved operating cash flows working capital position comfortable Capex Accretive Increased
Slide 41: Abridged statement of normalised comprehensive income
Abridged statement of normalised comprehensive income 41 R ’million FY 2017 FY 2016 % change FY 2016 (CER) % change Net revenue 41 213 35 559 16% 33 751 22% Gross profit 19 897 17 900 11% 17 161 16% Gross profit margin 48,3% 50,3% 50,8% EBITDA 11 416 10 105 13% 9 684 18% EBITDA margin 27,7% 28,4% 29
Slide 42: Currency impact FY2017
Currency impact | FY2017 42 26% Revenue Gross Profit Normalised EBITDA 28% 28% 36% 20% 20% 22% 27% 14% 18% 23% 20% 11% 8% 11% 5% 7% 9% 4% -11% -26% EUR ZAR AUD USD JPY CNY Other +16% +11% +13% 41 213 19 897 11 416 35 559 17 900 +16% 10 105 +18% +22% 739 1 808 421 R’million 33 751 17 161 9 684 FY 201
Slide 43: EBITDA Margin
EBITDA Margin 43 Contribution to change in Normalised EBITDA Margin -0,7pp 28.4% -0.1% 27,7% -1.4% 0.4% 0.3% 0.6% -0.9% 0.4% FY 2016 Therapeutic Other Nutritionals Selling & Administrative Net other Depreciation & FY 2017 Normalised focused brands Commercial Distribution operating Amortisation Norma
Slide 44: Reconciliation of NHEPS
Reconciliation of NHEPS 44 Cents FY 2017 FY 2016 % change Basic earnings per share (EPS) 1 123,4 945,4 19% Loss on sale of property, plant and equipment 5,4 0,2 Net impairment of property, plant and equipment 43,2 3,5 Impairment of intangible assets 93,5 198,3 Loss on sale of business 15,4 - Profit
Slide 45: Net funding costs
Net funding costs 45 R’million FY 2017 FY 2016 % change Net interest paid (1 531) (1 569) Notional interest on financial instruments (339) (190) Foreign exchange (losses)/gains (237) 36 Normalised net funding costs (2 107) (1 723) 22% Add: Normalised add backs 25 (1 143) Debt raising fees on acquisi
Slide 46: PPE capital expenditure
PPE capital expenditure 46 3 300 Specialist facility in construction at Oss PPE Capex – R ’million Projects planned at PE, NDB and BO to increase capacity in anticipation of future anaesthetic manufacture Planned R2.4 billion spend in FY 2017 not expended due to re-alignment of projects and de
Slide 47: Cashflow
Cashflow 47 109% FY 2017 10 817 -1 502 -1 913 6 487 79% R’million -915 1,421.4 706.7 101% FY 2016 FY 2017 9 794 FY2016 Cashflow conversion rate Operating cash flow -1 506 per share (cents) -1 682 R’million -3 381 3 225 Decreased investment in working capital has substantially benefited cash flow
Slide 48: Working Capital
Working Capital 48 R ’million FY 2016 FY 2017 Working Capital – R ’billion Net Working capital 17 741 16 716 17,7 Net Working capital – excluding Oss 12 852 12 465 Working capital as % of revenue 50% 41% Less: Attributable to Oss (10%) (8%) Working capital excluding Oss as 0.4 16,7 40% 33% a % of re
Slide 49: Borrowings
Borrowings 49 Net Debt: R37,1 billion Blended interest rates for borrowings Asia Pacific - AUD FY 2017 8% Debt denomination Weighted average rate p.a South Africa - ZAR ZAR 8.8% 23% AUD 3.8% EUR 2.1% Key Indicators FY 2017 FY 2016 Gearing 47% 44% 69% International - EUR Net Debt/EBITDA 3.2 3.3 Inter
Slide 50: Borrowings
Borrowings 50 R’ million FY 2017 FY 2016 Analysis of R37,1 billion net borrowings Opening balance 32 694 30 048 32.7 Net borrowings 37.1 Cash flow from operating activities (6 488) (3 225) 10.9 Cash Capital expenditure 2 632 2 818 10.7 Proceeds from sale of assets (929) (5 401) 10.9 Current 18.9 Acq
Slide 51: AstraZeneca transaction announcement
AstraZeneca transaction announcement 51 On 13 September 2017, entered into agreement with AstraZeneca under which Aspen Global Incorporated (AGI) will acquire remaining rights to the intellectual property and manufacturing know-how related to AstraZeneca’s anaesthetics portfolio − This follows com
Slide 52: Thank you
HoL DINGS Thank you
Slide 53: Appendices
HoL DINGS Appendices
Slide 54: Cautionary regarding forward looking statements
Cautionary regarding forward looking statements 54 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 and other
Slide 55: Appendices
Appendices 55 Appendix 1: Abridged group statement of comprehensive income Appendix 2: Group statement of financial position Appendix 3: Extract from group statement of cash flows Appendix 4: Key currency movements vs ZAR – 2017 vs 2016 Appendix 5: Key currency movements vs ZAR – H2 2017 vs H1 2017
Slide 56: Appendix 1: Abridged Group statement of comprehensive income
Appendix 1: Abridged Group statement of comprehensive income 56 R ’million FY 2017 FY 2016 % change Net revenue 41 213 35 559 16% Gross profit 19 896 17 900 11% Gross profit margin 48,3% 50,3% Net other operating income 345 1 888 Net operating expenses (11 920) (10 819) Operating profit 8 321 8 969
Slide 57: Appendix 2: Group statement of financial position
Appendix 2: Group statement of financial position 57 R' million FY 2017 FY 2016 TOTAL ASSETS Non-current assets 78 273 67 138 Intangible assets 60 006 49 068 Property, plant and equipment 9 749 9 670 Goodwill 5 940 6 021 Deferred tax assets 1 029 1 093 Contingent environmental indemnification assets
Slide 58: Appendix 2: Group statement of financial position (continued)
Appendix 2: Group statement of financial position (continued) 58 R' million FY 2017 FY 2016 EQUITY AND LIABILIITIES Share capital and reserves 43 138 42 535 Non-current liabilities 38 356 40 676 Borrowings 28 978 32 653 Other non-current liabilities 4 380 2 608 Unfavourable and onerous contracts 1 6
Slide 59: Appendix 3: Extract from Group statement of cash flows
Appendix 3: Extract from Group statement of cash flows 59 R' million FY 2017 FY 2016 Cash operating profit 10 817 9 794 Changes in working capital (915) (3 381) Cash generated from operations 9 902 6 413 Net finance costs paid (1 913) (1 682) Tax paid (1 502) (1 506) Cash generated from operating ac
Slide 60: Appendix 4: Key currency movements vs ZAR – 2017 vs 2016
Appendix 4: Key currency movements vs ZAR – 2017 vs 2016 60 GBP 17,27 -19% 21,38 EUR 14,84 -8% 16,11 USD 13,61 -7% 14,58 10.26 AUD 10.61 -3% 4.20 2017 avg rate BRL +6% 3.95 2016 avg rate 3.44 PLN 3.75 -8% 2.00 -11% CNY 2.26 0.70 MXN 0.84 -16% 0.22 RUB 0.22 +4% 0.13 JPY 0.13 -1% Annual Results Presen
Slide 61: Appendix 5: Key currency movements vs ZAR – H2 2017 vs H1 2017
Appendix 5: Key currency movements vs ZAR – H2 2017 vs H1 2017 61 16.91 GBP -4,7% 17.75 14.53 EUR -4,7% 15.24 13.28 USD -4,7% 13.94 10.07 AUD -3,6% 10.45 H2 2017 average rate 4.17 H1 2017 average rate BRL -2,6% 4.28 0.69 MXN -3,2% 0.72 0.23 RUB +5,0% 0.22 Annual Results Presentation for the year end
Slide 62: Appendix 6: Institutional investors
Appendix 6: Institutional investors 62 0.5% 4.4% 14.7% 17.1% 63.3% Southern Africa North America Europe Asia Pacific Middle East Annual Results Presentation for the year ended 30 June 2017
Aspen Pharmacare Holdings — FY2017 Earnings Presentation on 6ix