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Aspen gets debt under control
Aspen gets debt under control
Published Date: 2019-09-12 | Source: Stephen Gunnion | Author: Stephen Gunnion
The pharmaceuticals maker has slashed debt by more than a quarter after selling assets and increasing cash flow.
Aspen Pharmacare has slashed its debt after selling its Nutritionals business and a portfolio of products distributed in Asia Pacific. But the pharmaceuticals manufacturer has reported a fall in earnings from the businesses it's held onto due to impairments.
Releasing its annual results, the group said it realised cash proceeds before tax of R12.3 billion from the disposals and a combined profit of R5.4 billion. Together with positive cash flows for the year, it was able to cut its debt by 27% to R38.9 billion, taking its leverage ratio to 3.62 times, comfortably below its covenant feel of 4.0 times. The group's debt has concerned investors, particularly after the group had to ask its lenders for a temporary increase to its debt ceiling.
After rigorous impairment testing, it impaired its assets by R3.1 billion, of which R2.4 billion was related to intangible assets. This was due to expected pressure on its European oncology portfolio and the restructuring of some of its production facilities to align them with improved production process and expected future manufacturing requirements.
Marginal growth in Commercial Pharmaceuticals in its emerging market operations was offset by a small decline in developed markets. It said revenue was also impacted by underperformance in the Europe CIS region, constrained Anaesthetics supply, and a strike at its SA manufacturing sites. Manufacturing revenue was also impacted by a major third-party customer losing a big tender in the prior year and the suspension of sales of heparin to third parties due to limited global availability. These were offset by positive sales results in the Asia Pacific and Latin American regions.
Revenue from continuing operations increased by 1% to R38.9 billion in the year to end-June and normalised earnings before interest, tax, depreciation and amortisation (EBITDA) fell 2% to R10.8 billion. It said this was due to the lower contribution from its Manufacturing business.
While total earnings per share (EPS) rose 19% to 1,573.6c, EPS from continuing operations fell 52% to 595c and headline EPS were 11% down at 1,227.6c. On a normalised basis, HEPS from continuing operations declined by 7% to 1,414.3c due to higher net financing costs. Normalised HEPS are adjusted for non-trading items, including transaction and restructuring costs and a number of other once-off charges. It hasn't declared a dividend after paying out 315c per share last year.
The group said a review of its European business was ongoing and it continued to explore mutually beneficial partnering opportunities in this territory. In July, the group ended exclusive talks with a potential partner for its European Commercial Pharmaceuticals business without giving a reason for the breakdown in negotiations
Aspen said positive free cash flows in the year ahead would help it cut its net borrowings even more. It plans to reduce its leverage ratio to below 3.0 times in the medium term.
Its shares rose 1.3% to R84.93 yesterday. The results were released after the close of trade.
ASPEN Results for Year ended 30 Jun 19:-- JC Louw (@jc_louw) September 11, 2019
*#ASPEN SAYS NOT PAYING FY DIVIDEND (PAID 315 CENTS A YEAR AGO)
*TO RESUME PAYOUTS WHEN IT IS CONSIDERED PRUDENT TO DO SO
*NORMALISED HEPS FROM CONT. OPS DECREASED 7% TO 1,414.3C
*SEES 2020 PERFORMANCE `BROADLY IN LINE' WITH 2019 RESULTS pic.twitter.com/XzF9NvSpMy