2019 Interim Results For the six months ended 31 st December 2018 - PowerPoint PPT Presentation

2019 Interim Results For the six months ended 31 st December 2018

Financial Review

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. Private Securities Litigation Reform Act of 1995. Words such as “prospects”, “believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “indicate”, “could”, “may”, “endeavour” and “project” and similar expressions are intended to identify such forward looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, actual results may be very different from those anticipated. The factors that could cause our actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements are discussed in each year’s annual report. Forward looking statements apply only as of the date on which they are made, and we do not undertake other than in terms of the Listings Requirements of the JSE Limited, any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Any profit forecasts published in this report are unaudited and have not been reviewed or reported on by Aspen's external auditors. 3

DISCLOSURE NOTES • Results separately disclose discontinued operations arising from the pending and completed disposals of the Nutritionals business and a non-core pharmaceutical products portfolio in the Asia Pacific region • Adoption of new IFRS 9 (Financial instruments) and 15 (Revenue from contracts with customers) − IFRS 9 deals with expected loss provisioning − IFRS 15 addresses revenue recognition of customer contracts  Requires that revenue and the related costs are only recognised when performance obligation has been satisfied − Has resulted in restatement of H1 2018 in accordance with the new standards (see Appendix 4) • Segmental reporting structure at the overview level refined − In line with business strategy and focus  Sterile Focus Brands: Anaesthetics and Thrombosis  Regional Brands: Now includes High Potency & Cytotoxic Brands which have been de-prioritised for regional focus 4

FINANCIAL HIGHLIGHTS CONTINUING OPERATIONS % Change vs PY Reported * CER ** R’million H1 2019 Net r reven enue e 19 673 19 673 1% 1% 0% 0% Gross ss p profit 10 236 10 236 2% 2% 2% 2% Gross profit margin 52.0% 0.5ppt 1.4ppt EBIT ITDA 5 534 5 534 -3% 3% -1% 1% EBITDA margin 28.1% -1.2ppt -0.3ppt Net Financing Costs 902 20% 17% Tax 631 -8% -6% Normalised effective tax rate 15.7% 0.1ppt 0.1ppt NHEPS PS (cents) 743. 743.4 -9% 9% -6% 6% OCF per s share (cents) 317. 317.4 -45% 45% Disclosure notes: All information presented on a Normalised Basis *H1 2018 figures restated for IFRS 15 5 **CER = Constant exchange rate. H1 2018 results restated at H1 2019 average exchange rates

EBITDA MARGIN CONTINUING OPERATIONS Contrib ibutio ion t to c change in N Normalis lised E EBIT ITDA Ma Margin gin -0. 0.3% -0.9% 29.3% 2.3% -1.1% -0.9% 28.4% -0.2% 0.1% -1.4% 28.1% -0.5% -1.4% -0.9% H1 2018 FX impact H1 2018 Normalised Steriles Other Selling & Distribution Administrative Depreciation Net other H1 2019 Normalised Normalised EBITDA EBITDA Margin (CER) Pharmaceuticals operating income EBITDA Margin Margin (Reported) Increased spend Oncology price cuts Once-off in China & Lower manufacturing Lower Thrombosis COGS receipts in prior Japan volumes Anaesthetic residual year rights in prior year 6

CURRENCY IMPACT CONTINUING OPERATIONS Average FX Rates Contribution to Contribution to • ZAR contribution Normalised EBITDA H1 2018 FY 2018 H1 2019 to ZAR revenue − Revenue: 19% EUR 29% 8% 15.77 15.33 16.34 − Normalised EBITDA: 17% AUD 11% 19% 10.45 9.96 10.27 • Positive translation impact of relative ZAR weakness on revenue CNY 7% 15% 2.02 1.97 2.07 • Stronger USD and EUR impact on COGS USD 7% -17% 13.41 12.86 14.19 Currency impact i in H1 H1 2019 2019 1. 1.2% 2% -1.7% 7% Revenue ue Normalis lised E EBIT ITDA 7

RECONCILIATION OF CER NHEPS CONTINUING OPERATIONS Cents H1 2019 H1 2018 % change Basic ic e earnin nings gs p per er s share e (EPS) 628.9 628. 728. 728. 7 7 -14% 14% Profit on sale of property, plant and equipment 0.1 0.2 Impairment of PPE 1.6 2.3 Impairment of intangible assets 45.9 30.1 Reversal of impairment of PPE (0.1) - Loss on sale of intangible assets 0.1 0.6 Headlin dline e earnin nings gs p per er s share ( e (HEPS) 676. 676.5 761. 761.9 9 -11% 11% Capital raising fees 9.6 13.6 Restructuring costs 10.3 12.3 Redundancy costs 1.6 3.8 Transactions costs 38.3 24.4 Product litigation costs 7.1 14.8 Foreign exchange gain relating to acquisition - (38.8) Normalis lised ed H HEPS 743.4 743. 792. 792.0 0 -6% 6% 8

PPE CAPITAL EXPENDITURE Planned C Capex s spend – Anaes aesthetics (approx R R4. 4.5 b billio lion) PPE C E Capex - R'millio illion 5% 3 500 21% 3 000 H2 2019 2 500 1 800 2 600 2 000 2 145 74% PE NDB BO 1 500 1 500 1 484 1 200 1 000 H1 2019 • Construction of buildings nearing completion 1 168 • Equipment installation has commenced 500 • Expected first commercial production: 0 − Port Elizabeth FY 2021 FY 2017 FY 2018 FY 2019 FY 2020e FY 2021e FY 2022e − Bad Oldesloe FY 2021 Planned Actual − Notre Dame de Bondeville FY 2022 • Full commercial benefits expected in FY 2024 Main Ma intenance c capex g generally ly b between R R400m 400m – R500m 500m p p.a 9

WORKING CAPITAL CONTINUING OPERATIONS Workin ing C g Capit ital – R’millio illion • Inventory increased by stock builds 19 103 19 103 − Transfer of Mono-Embolex API and finished dose 664 664 manufacture to NDB 245 245 -3 − Heparin safety stock 1 086 086 − Serialisation 17 17 111 111 − Brexit • Settlement of long-standing accruals for restructuring and litigation • Increase in VAT receivables tied up by revenue authorities’ audits FY 2018 Inventories Trade debtors Trade creditors Other H1 2019 (restated) Rec/Pay R’million H1 2019 FY 2018 (CER) Net Working capital - comparable base * 19 103 17 111 13 870 12 338 Net Working capital - excl. Oss Working capital % of revenue 49% 43% Less: Attributable to Oss -10% -8% 39% 35% Working capital excl. Oss - % of revenue 10 * Refer to Appendix 10

NUTRITIONALS DIVESTMENT • Agreement reached with Lactalis in September 2018 • Both parties committed to closure on 31 May 2019 − Approval for Lactalis investment by New Zealand Overseas Investment Office the only outstanding external condition precedent − Remaining conditions precedent within the control of the parties • Gross consideration = EUR 740 million • Estimated net proceeds = EUR 635 million • Proceeds to be utilised to retire debt − Immediate and enduring reduction in interest payable 11

CASH FLOW CONTINUING OPERATIONS • H1 2019 operating cash flows constrained by working capital investment − Operating cash flow per share of 317 cents − Conversion rate of 47% • Strong H2 cash flows expected − FY 2019 operating cash flow conversion rate between 90% and 100% − Net proceeds from Nutritionals disposal estimated at R10.4 * billion • Positive medium term cash flow outlook − Bulk of deferred consideration now settled  R4 893 million paid in H1 2019  ~ R1 000 million payable in H2 2019  ~ R500 million payable in FY 2020 − PPE capex to decline from FY 2020 as anaesthetic capital projects come to completion 12 *Proceeds of EUR 635 million translated at EUR/ZAR 16.34

BORROWINGS 53 507 6 Movem emen ent i in Net et Borrowin ings gs - R’millio illion 4 943 -409 47 749 1 498 969 46 780 -1 711 1 431 South Africa - ZAR 23% International - EUR 69% Net Borrowings FX impact Net Borrowings Cashflow from Distribution to Capex Proceeds from Acquisition Other Net Borrowings at 30 June 2018 at 30 June operations shareholders sale of assets related payments at 31 December 2018 (rebased) 2018 13