Aspen Pharmacare Holdings Limited

And welcome to Aspen's Financial Year 2023 results. I'm Sbong Angkosi, Aspen's Investor Relations Manager. For today's program, we will have Stephen, who will do the performance highlights, and then he will hand it over to Sean, who will take us through the financials, and then hand it back over to Stephen before we open the floor up to Q&A. Thank you, Stephen.

Good morning, everyone. Good to be here. You sit back there and you suddenly see 25 years up there. 25 years. It's an irony, though, that I feel I've got as much energy today as I had on day dot. And I think that's the advantage of having a purpose-led organization and having the passion for it. And just reflecting a little bit from a really little house near Gravel Racecourse to having South Africa's most global company in 25 years. And you'll see the benefit of that. You'll see the tailwinds of the currency hedges that we've created. I think in those 25 years it's... Never been a straight road, and the road never is straight. But it hasn't been a roller coaster, because we've never gone back to base. And we've built a foundation, and we've consolidated on new foundations and built from there. And I'm hoping you'll see where we are in our journey at the moment, a very exciting part of our journey. You know, the thing with Aspen is you never get time to celebrate milestones. And it's simply, I mean, our motto is very simply that rest is rust. It's always been the way we've carried ourselves. We look forward. History belongs to those that write the books. And, I mean, if you speak to Russie and the Springbok team, yes, they beat the All Blacks convincingly last week, but it actually means nothing for their next game. So that is why people, why you can't have time to celebrate in times like this. But I tell you this because I'm worried because I've had a few comments been made to me in the last couple of days about celebrating or not celebrating. And there's been a particular concern from investors about that we're sort of treating ourselves here. And I want to be clear and categoric that this is not a reflection on the company or management. But there is no message in the fact that we have acquired both Munjarra and Viagra. So this is something that has been put out there. I mean, I had another expression, which I think is probably better used off camera. So on a much more serious note, I think what you should get out of these results is Aspen is a company you can go to war with. We take knocks, very big knocks. For those of you that remember H1, we were down nearly 20%. We got down, and we were down at the half, but we get up. We get up, we learn better from our experience, and what do we do? We produce the record H2 for you. Over 25 years, I would think that there's been no more than five occasions that I feel we're in the position we're in at the moment. It's a very exciting position that we're in. We've built that foundation, and it's not an accident. It's not by accident that we're here. We made calls. We made very bold calls at the time, years ago, and I think when it's far away, it's hard to conceptualize it, even when you've got there. And you've got the ideas. But where we are, I believe, is that we're in the position, and it's so tangible now, it's coming up in this next financial year, is we're starting to see the fruits of some of that labor. It's in our hands to make bold calls into exceptional calls. And that's something that we determined as a team to do. The most positive thing about the calls that we have is that really the destiny is in our own hands. We've got the assets. We've got the agreements. And it's a thin line between success and failure. And the thin line between success and failure is executing on everything we've achieved. So I think that's, if I can talk, if I can digress just for those 25 years, that's what I'd tell you. And so I'll move on to what I think most of you want to hear, and that's about our performance. As Simonga said, Sean will do finance, and I'll come back and talk about where we are after that. So when we speak about performance, we had a pretty bold guidance around EBITDA. We talked about the prior year performance. And in H1, we had EBITDA down 11%. So that was quite a big percentage to have to pull back on. And we had big losses from the prior year, you know, to take a COVID vaccine out of our business. And Sean will show you in the margins the impact it has in losing things like that. What you should also read into it when Sean talks is, If that's how badly it affects you when it goes out, what happens when you put products in? Because that's obviously the inverse, the converse. So this was a negative impact in China, and I don't have to tell you about what went on in Russia. And we had divestments, which affect EBITDA as well. And in spite of these challenges, we had increased normalized EBITDA to 11.1 billion, And we also got our revenue up on the prior year. So I'd like to just speak about the second half a bit because it's been a pretty important half for us to realize our ambitions and where we're trying to achieve. We achieved 21 billion in sales, which represents our highest achievement of H2 sales. Our normalized EBITDA for the period was also a record of over 6 billion. When we look at the figures, you'll see every area has grown considerably. Commercial pharma up 11%, manufacturing up 15%. And it was up 45% on H1, which was something we guided to you, was that we had some closures to make for our contracts, and so we were going to have a much stronger H2, and that's exactly what we had. And, of course, some strong currency wins. Now, when you think about manufacturing being up 15%, And in constant currency, it was relatively flat. Bear in mind that in the prior year, we had a COVID vaccine and we lost that. So as I say, we take our knocks, but we make our comebacks. Revenue in both manufacturing and commercial pharma are up on the prior year. And the gap has really been closed by strong organic performance and strong currency benefits as well. We look at the parts of our business. We've got, obviously, the group, and then we'll look separately at regional brands, sterile brands, and manufacturing. Before I hand over to Sean, lots of numbers on these slides, but I think that when you look at it, our revenue was boosted by a strong H2, resulting in commercial farmer moving up from plus two to plus six. To cover that gap, you've You've got to sort of double that to work out what we achieved in the second half. Manufacturing was bounced back in H2. We were, I remind you, we were at minus 10 and it's gone to plus 3 at a reported level. And the improved heparin product sales offset the COVID losses. We had a negative impact from the COVID vaccine loss, and of course we had positive tailwinds. And you can see that tailwinds between the difference between constant exchange rate and reported exchange rate. Regional brands, this is the biggest part of our business. And it's a business that it's sort of it's grown across all areas, which is really positive. And it's important for us to do well because this is sort of the heart of the business and our commercial farmer business. And it's shown resilience, stability and sustained growth in a tricky global environment. And if you run through it, you'll see Australia's up. Everywhere is up except Africa, Middle East, and really that's because of the impact of the divestment last year. We had products in South Africa we divested for 1.8 billion rand, and without that, if we adjusted for that, our regional brands would have been up 11%, and the Africa, Middle East would be up 3%. There was also impacts to our South African business of a SAP implementation, but the bigger adjustment was for the prior year divestment. The sterile branch had a really interesting and good bounce in the second half. And the reason for that is that in the first half, and even in the second half, obviously the Russian business fitted very largely into the steriles, and you'll see that impact in Europe, CIS. And the business in China had a very bad first half because of the COVID shutdown, so that bounced back too. So what you'll see here is... is the reported revenues up. H2 was particularly strong. You know, that's up 14% on the prior year. And even then, constant exchange rate was up 2%. Unfortunately, you know, Russia, which was a billion rand turnover business for Aspen, is significantly smaller than that. And our projection is that it will continue to decline, albeit now for much smaller base. And of course, Asia's up as a result of the China lockdowns being suspended. So a good, very strong comeback from steriles as well. Manufacturing. Manufacturing is probably going to be some of the more interesting parts of our business going forward. It's going to play a bigger part. It continues to grow as a part of our business and probably is anticipated to be a bigger and bigger contributor towards revenue and particularly profitability going forward. In the first half, we had revenue down 10% and 12% in constant exchange rate. And you can see where we are now. We're at 3% and a minus 6%. The heparin was key to our growth driver here. You know, we closed the heparin business. We had closed our facilities in the first half or closed off our French facility to upgrade for the manufacturing coming into that business, but we guided towards a much stronger second half. So that really was as guided. The other thing that's happening in the heparin business, and I'll talk a bit about it later, was during the year, it continued to increase in price. It just was It also relies on power and was treated as one of the commodities. The result was higher selling price, but also higher cost prices. But that also helped drive the revenue there. And of course, the finished dose form steriles is literally halved and a pretty big knock on profitability as well. And that was from the loss of the COVID vaccines. The positive, of course, is that other contracts, which are outside of these, contributed earlier contracts we signed in our french facility contributed to a 300 million rand offset from the steriles and with that i'll i'll see you now on the uh the broad the uh guidance and prospects and i'll hand over to sean to give you a financial review

someone gonna make it bigger okay no worries