Aspen rallies despite earnings decline


Aspen rallies despite earnings decline

Published Date: 2019-09-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

Aspen rallies despite earnings decline

The pharmaceuticals group expects to report a fall in annual earnings but has slashed debt following asset disposals.

Aspen's shares rose almost 14% at their best yesterday despite the pharmaceuticals group warning of a fall in full-year earnings. Analysts said the expected decline may have been lower than anticipated by the market. The group has also slashed its debt following the sale of its Nutritionals business.

In a trading statement, Aspen said revenue growth for the year to end-June was expected to be flat to 2% higher - but as much as 3% lower at constant exchange rates. 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. These were offset by positive sales results in the Asia Pacific and Latin American regions.

Apart from its Nutritionals business, which it sold to France's Lactalis Group for €740 million, the group discontinued or divested of a non-core pharmaceutical portfolio in the Asia Pacific region. The net profit after tax from the disposals amounted to about R5.4 billion.

It has used the proceeds to pay down debt, with net borrowings declining to less than R40 billion at the end of June from R53.5 billion in December.

The group impaired its assets by R3 billion 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.

Earnings per share (EPS) from total operations are expected to be 17% to 21% higher, but its continuing operations will report a decline of between 50% and 54% due to the impairments. Headline EPS will be between 13% and 17% lower, with HEPS from continuing operations down by 9% to 13%. Normalised HEPS from continuing operations will be 5% to 9% lower.

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. It didn't say what the partnership would entail but that it was on the lookout for new suitors.

Its results are scheduled for release on 11 September. Its shares retraced some of their gains to close 7.3% higher at R82.41.

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