Aspen Pharmacare Holdings Limited

Thank you, Andani. So I'm Roy Campbell. I have just recently joined Aspen Pharmacare and Investor Relations. I'm working very closely with Suneli Siwe and the management team. It's been an exciting journey so far and I do look forward into the future and looking forward to interacting with many of you as I have done over the years. Firstly to Rendani, thank you for hosting us today at your healthcare conference and we at Aspen wish you all the best over the next couple of days. So today we are presenting first half 2026 results. Mr. Steven Saad will take us through the period under review. Sean Capisario will take us through the financial highlights. And Steven then will go over the group strategy and the outlook. We will be taking questions from both the floor and over the webcast. So please submit them if you want and please just introduce yourself as you do. And I know that we'll be seeing a number of you over the next couple of days, but please feel free to get in touch if there's anything that you want to discuss. So with that, I'm going to welcome Mr. Stephen Sider. Good morning, Stephen.

Thank you, Roy. Morning, everyone. Good to be here. Thank you. It's amazing what can change in less than a year. Sometimes you need the darkest moments to give us some proper introspection and to shape and reset where you are and where you're going to. Just to remind you in terms of our reset, there were really three areas that we looked at. The first was And the hardest thing about introspection is being honest. It's the biggest, but it doesn't work unless you're incredibly honest with yourselves. And so when we looked at our business and where we were, there were really, I think, three things that we could see here. Firstly, we have a commercial pharmaceutical business that we've run for nearly three decades, and it's a great business. And it's grown almost in every single year. And it's a relevant business because the volumes also grow. And that there is a requirement for quality medicines in emerging markets, I think, is a well-understood concept, and we're well-positioned there. And together with that, we had made big investments and have made big investments in GLP-1s, which we thought was going to be a big growth area. And that, together with a base business that we understand well, gave us a clear indication that we need to keep doing more of what we do in commercial pharma and to make sure the GLP-1s become additive. We looked at our manufacturing business and we've got great assets, but somehow we just seem to stumble across one macro issue after another. This time last year it was tariffs, tariffs, lost contract, more tariffs, tariffs go away, tariffs could come back now depending upon how things work. It's a tricky macro environment. Before that, we battled in a regulatory environment. We also battled with COVID. COVID was going to be this big, and every donor company was going to pass billions of dollars, and it came and went. And at a point, you've got to stop saying, We've been a little unlucky and our luck will change. I think you need to take matters into your own hands and it's a painful decision, but you need matters in your own hand means let's get the thing profitable and let's play what we can see in front of us. Let's just do what we can see in front of us and you'll see a bit of that in the presentation today. And then the final area was dealing with the sum of parts of Aspen. I've never really dealt in those issues with shareholders, but the disjunct between the underlying value of the assets and the share price was so apparent that I felt I had to bring it up to shareholders, which I did in the last presentation. And so we had to think about and say, well, how do we unlock this value? And to have an underpriced share and to have a whole lot of debt didn't make a whole lot of sense to us. And we're waiting for the shareholder approval, but by May we hope that this transaction will be approved. And what it does do is it pins a value at an EBITDA level on what we've been telling you that we thought the value of the shares were and the type of multiples that the business commercial farmer deserves. And it also gives us financial flexibility. It seems crazy to push through this and to push through it and carry debt, to carry debt through this whole process with an undervalued share. So I think where we get to, hopefully by the end of May, the approvals is that you have a business that has no debt. has never asked shareholders for a share, an issue, and makes a ton of profit. And I don't know how all the formulas work on returns, but to me it seems like an incredible return. There's no money asked for either funders or from your shareholders. So I'll start with that. Sorry, I'll jump around a bit and talk with the subject. And I'll go straight into the presentation. And the presentation, I'm going to cover the performance under review and just take you through our key, what we're trying to do and what came out of our previous one. We really want to sustain and accelerate our earnings growth drivers. And we believe there's some big earnings growth drivers in the business. As I've said, in commercial pharma, we've got a sustainable-based business and we've got a GLP-1 rollout in manufacturing. I remind you we've got a chemical business and a sterile business. So any profitability that you see above minus $1.7 billion is coming out of the API business. Our sterile business is losing money, and we'll talk about how we reshape it. and the contracts that are coming and how they come on and how we commercialize them. So we'll talk about that. And you will see at the end of this, we've got some very strong earnings growth momentum ahead. In terms of the other part was the sum of parts, was to unlock the sum of parts and to also now focus very strongly on free cash flow. What is free cash flow? Well, Aspen's always had very strong operating cash flows, but then we spent a lot of money on buying assets or building assets and capex, and that's impacted our free cash flows. We're in a different cycle now with Aspen. declining capital expenditure, reduced working capital as we've built all of these assets, and we've got earnings, increased earnings. And so Sean will take you through the triggers for free cash flow. In terms of sum of parts, as I said to you at the beginning, we want to show you value. We want to unlock value for shareholders. We're absolutely clear that even at current valuations, the business is not getting the valuations it could. And I understand this confusion because if you make... 100 in one division and minus 10 in another, then you place a multiple on the 90. In our opinion, the minus 10 is not something that should have a negative value attached to it. And we also think it underappreciates the value of the branded emerging markets. And you'll see the relative growth of our emerging markets relative to our developed markets, for example, like Australia. For the period under review, just to remind you, last year we had really good earnings momentum in commercial farming. We had double-digit growth in constant currency, and we expect to sustain that growth into this period. And for this year, you'll see that the GLP-1s, the growth is now becoming evident in our numbers, and it will It should be increasingly, it become an increasing share of the Aspen business from here on in. We've managed to get expanded indications on Munjoro and the Quickpen. So those were quite big add-ons to the product, which have accelerated the growth of the product in the South African market. A reshape is always difficult, but we've done 90% of the reshape. It's never certain until it's done, but you can see from the restructuring expenses in this half that the majority of it's done. We started the insulin contract in South Africa, and we expect the approval from the regulator in March, but our contract is not with the regulator. It's with the buyer of the product, the owner of the IP, and so our contract with them has started. We had the contract dispute. I'm happy to say it's closed, and it really is the last period it will negatively impact earnings, and Sean will take you through the swing around in earnings in H2 as a result of having this out of the system. The RAND's been incredibly strong from an Aspen perspective in RAND results. The relative performance of the RAND against our basket of currencies has quite a big impact on how we perform. I mean, assuming it trips as much as it has in the past. And the RAND, you know, even if I go back five years, it's It was stronger today against Australian dollar than it was in the Euro than it was five years ago. So the RAND has been really, really strong for us and it obviously impacts our results. And Sean will take you through the free cash flows. So that's all I've got to say about performance for now. I'll come back and talk about strategy. But I'm going to get Sean up here to take you through the next part of the presentation, the financial portion. Welcome, Sean.

Thank you, Stephen. So nice to speak to real people. The last presentation, we spoke to a screen and a couple of people. We had to pay them to come and watch us, but they're happily obliged. But nice to see you all, and thank you for coming. Really appreciate the efforts to be alive, and also welcome to all the people online. We are very pleased to take you through these financial highlights, and as Aspen, we remain absolutely focused on executing on those strategic priorities that Stephen spoke about at the start. and with a razor focus on unlocking the sum of the parts value that underpins our investment case. So those are real drivers going forward. If we then get to financial highlights, in this first chart I've got three bars, the one talking to revenue, normalised EBITDA, and on the far right, normalised headline earnings. So if I start with revenue, we ended the period with revenue of around 21 billion rand, 4% down relative to the prior year. If you sort of look, and we'll cover the detail a little bit later, but commercial pharma had solid growth for this half, and the decline in the revenue was driven by the manufacturing segment with the loss of the MRNA contract that Stephen spoke about earlier. If we then look fast forward to the middle graph, which is our normalised EBITDA, we came in there at just over 5 billion rand, a 13% drop versus last year's 5.8 billion rand. Again, looking under the hood, commercial farming had positive double-digit EBITDA growth, and that decline was driven by the decline in the manufacturing segment. And interestingly, I think you might have read it in our commentary, if you take that 5.8 billion from last year, the full year EBITDA last year was 9.6, so we did 3.8 billion in the second half. And so that's really underpinning our guidance for a strong second half for H226 compared to the 3.8, and we've done 5.1 compared to the 3.8 in H2 2025. So we're very confident of driving a strong second-half performance in our business, and so we're very happy that we have a very positive offset in H2 and end the year with positive growth in EBITDA and all the other metrics. Looking to the right, on our normalised headline earnings, we ended the half year at 5.75, 21% down on the prior year, 7.24%. I sound like a stuck record, but again, the main driver of this was the loss of the contract. You'll also want to know why. Why are we sitting at minus 21% here and 13% on EBITDA? Why is the gap bigger? Well, this is really a mathematical problem because if you look at our depreciation, our amortization, our finance costs, our tax costs, they're all relatively flat. to the prior year. So effectively your EBITDA gap in absolute terms falls all the way through down to earnings and obviously has a bigger impact on percentage decline when you look at it on a percentage of earnings. The positive to that is obviously in the second half of the year when we have a positive delta to EBITDA, which will then translate to an expected full year delta positive to EBITDA, you're going to have the reverse effect where you're going to see Good EBITDA growth, but even stronger, and we have guided double-digit normalised earnings growth because of the fact that all of the other metrics below EBITDA are relatively flat or lower than the prior year. This is probably my favourite slide, and I know it's something that we've been putting a lot of focus on. We've had a lot of years of investment, and I think we're now in a cycle of generating strong positive free cash flow. So if we look At the grey shaded bars on the left, my left, that should be your left too, of the screen, I'll just explain the graph. But the light blue one is the cash that we generate from operations. The dark blue is our capex spend. And the other different colour blue is the net, is the residual balance, which is our free cash flow. So if we look to the first bars there of financial year 25, we generated just over R5 billion of cash from operations, but you can see we spent just under R5 billion on CapEx and very little free cash flow, about R166 million of free cash flow in FY25. If you go back to the half year last year when we were talking free cash flow, we generated $1.8 billion of cash from operations, but we spent $2.6. So we actually had a negative $0.8 billion of free cash flow last year. Fast forwarding to this year, we've generated a very, very strong cash flow from operations of $3.6 billion. You can see quite a significant increase. of that 3.6 when you compare it to the 1.8. And that's notwithstanding that EBITDA is 13% lower than last year. We've generated more cash. So cash has really been a key driver and focus for us. What are the key things underpinning that cash growth? It's obviously a much lower investment in working capital. We've also reduced our finance costs in cash terms and we've also managed our tax very, very closely and managed our provisional and tax payments to optimise those as well in compliance with law. So we take all of those together, that's what's driven the big increase in the cash flow from operations. On top of that, we've spent R1 billion less in CapEx. Last year, we spent R2.6 in the half, down to R1.6 this half. So if you take the combination of those two, we end up generating just under R2 billion of free cash flow for the half. So a really good achievement, and I know that's something that everybody's been looking for Aspen to start driving. What are the benefits of driving the strong free cash flow? If you go to the right and look at our net debt, and we're also being honest with ourselves here, we've put the net debt there in accounting terms, and we've also put the constant exchange rate net debt so that we don't take the credit for exchange rate movements. But if you look at the net debt, we ended the half year at $28.6 billion. That's down from $31.2 billion in June 2025. If you had to look at the June 2025 in CEO, it's around $30 billion. So even with the exchange rate out, we've generated a reduction in debt from the $30 down to the $28.6. And that also includes having funded a dividend of $0.9 billion in this half as well. So that's a really good achievement for us. That culminated us in ending with a leverage ratio of 3.4 times, and so slightly elevated from FY25. I've obviously got some slides later on to talk about the APAC divestment, but you won't see much in this bar when we talk to our full year results, assuming that we get completion of the APAC divestment. So this net debt will be pretty much eliminated, and we'll certainly talk about it in later slides. If I flick to the next slide, I've got the light blue shaded area on the left is our commercial farmer business, and the gray shaded area is our manufacturing business. So if we look to the left first, commercial farmer business. I've got revenue bars and EBITDA bars comparing to the prior half. And I'm going to talk CER in this chart because CER is what we measure ourselves on. And so if we look at revenue, a solid 4% growth in revenue for commercial farmer, constant exchange rate. If you then look to the right, that 4% revenue growth translates to an 11% growth in constant exchange rate EBITDA, growing up to $4.8 billion. A key driver of that is, and I think we spoke about this in our previous results, our reshape business in China, where if you remember we had quite a lot of expenses when we did the combination of the Sandos and the Aspen business, and we did guide that we went through a large reshaping process in China last year, and this is the year we get the benefit of that in both the first half and the second half. So that expense saving is a big driver of the EBITDA growth. And underlying then, I know we take it for granted at Aspen, but it's a real achievement, is our gross profit margins in our commercial farmers remain very, very stable. So with the leverage of expense savings and a stable gross margin, you get the increase in your EBITDA growth. And you can see that our EBITDA margin has gone from 28.3, which is in the shaded block there on the left, increasing to a healthy 29.2% EBITDA to sales ratio for this half, and we are very comfortable that's a very stable position that we can continue to drive going forward. On the right-hand side, on the manufacturing, turnovers down 26% in CER and EBITDA down 85%. Again, all impacted by the loss of the MRNA contract. If you look at the EBITDA, we ended the last year off at just under $1.3 billion, and this year we're coming in at $0.2 billion. If you remember last year, we had the benefit of the contract was around $1.5 billion, and we also then got the settlement that Stephen spoke about in his slide of about $500. If you net those two off, it's around a billion drop, and that's pretty much what you're seeing in the reduction in our EBITDA in this half one. And just bearing in mind that this is the last half of the impact of this contract, and we will see positive growth going forward. Looking to our group revenue, just to unpack some of the elements there. So this chart, what it does is it shows our commercial farmer revenue and our manufacturing revenue and then our group revenue, comparing the half 126 to the half 125. So if I look at the commercial farmer first, you can see, and I think we've covered this in the previous slide, a nice growth of 4%. in the green block, and then underneath that, those are all three of our segments, prescription, OTC, and injectables. You can see all in constant exchange rate, all showing positive growth. Obviously, the standout performer there is the injectables at 7%, and that is driven by the very strong demand that we've had for Monjaro, and the other OTCs showing a very healthy growth, and prescription also coming in there with 2% growth. So overall, we're very comfortable with the commercial farmer growth for the half. I did put FYI, if you take the Asia-Pacific region out of our sales growth, and you just look at our business, without APAC, that growth goes from 4% to 5%, because APAC had a slightly negative revenue growth in the first half of around 2%, I think. Manufacturing, again, they're down 26%, which then impacts the group revenue going down by 4%, and that's all impacted and affected by the loss of that contract in this half. I think then moving on to, I'll just explain this table because it is quite a busy table. This is our group EBITDA slide. So in the dark blue we're comparing, we're showing our income statement of revenue and gross profit right down to normalised EBITDA and we're comparing half 126 to half 125 and we've got the ratios to revenue next to each of those blocks and then we talk to the percentage reported in constant exchange rate. On the far right, there's a separate block there, and that's the FY25 full year numbers. And you'll see, I just wanted to put those down so that you can then compare H125 to FY25, and you can quite easily see that's the $3.8 billion that we generated last year in the second half, and gives you a sense of what growth we're going to drive in our second half of FY26. So talking to the revenue first, I think we've covered that, a 4% decline in revenue driven by the manufacturing, offsetting the commercial farmer. Coming down to gross profit margin, you'll see our gross profit margin for the group has dropped from 47.6% to 45.4%, a drop of 7% in constant exchange rate. Again, if you look at the underlying gross margins, commercial pharma has stayed very steady at a gross margin of 58.5%, and that dilution in the group gross margin is driven predominantly by manufacturing. Pleasingly, if we go down to the expense level, we ended the half with expenses of just under $5.3 billion. Last year, our expense base was just around $5.4, so a 2% reduction in expenses. I just wanted to point that expenses for Aspen, these are mainly for our commercial farmer business because most of your manufacturing expenses sit in cost of sales, not in expenses. So that drop of 2% there is what's driving the commercial farmer EBITDA margin growth. Obviously, when you put the total business together, because of the manufacturing revenue decline, the group expense ratio is elevated up a bit from 24.5 to 25, but that's just because of the manufacturing revenue decline. Then looking at normalized EBITDA, there we bended the half. It's just under 5.1 billion, 505.3 million, an EBITDA percentage of 24%. That's down on last year's EBITDA percentage of 26.5 and last year's EBITDA of 5.8 billion. If we look at the sort of moving parts there again, a commercial farmer, if you remember from the very, that slide I took you through on commercial farmer, they've had a very good increase in EBITDA margin and ending at 29.2%. And as I've said, we remain confident for that going forward. And the drop in the EBITDA margin is driven by the drop in the manufacturing EBITDA What I'd like to alert you to is if you look at the far right and you look at FY25 full year EBITDA margin, last year we ended there at 22%. So we're already above last year's full year EBITDA margin with more growth to come in that margin in the second half as manufacturing lifts in the second half and commercial pharma continues to perform consistently. So those are all the metrics that underpin our guidance for strong double digit EBITDA growth in H2 relative to the prior year half. Just moving to a different topic now, and I'm talking now around tax rates. You might say, why do I talk about tax rates? Well, for Aspen Tax, we respect tax because tax is the only expense that falls all the way through down to earnings. So if you don't manage your tax... It affects not just your pre-tax number, it affects your whole income statement. So it's not like an operating expense where you get a tax shield. Tax falls all the way through. So we've paid a lot of respect and we watch it very carefully in making sure we're compliant, but at the same time making sure we manage it in the most optimal way. What this graph does below, it looks at our normalised effective group tax rates from FY24 going through to FY25 and then H126. You'll note, and I'll take you through the two different bars in a minute, but you'll note there is quite a steep increase from 24 to 25, and that is a result of the global minimum tax legislation that we took you through in our previous results, and obviously that's now embedded in our base tax rates. So that's the driver of tax increases from 24 to 25. What we've also done in this chart is we've shown you the tax rate for total operations, which is this sort of the 22% and the 22.2% for H126s, So you can see our tax rate is relatively constant this half versus prior year. And then what we've also done is stripped out the APAC business and what is our continuing operations tax rate, and you'll see that jumps up to 22.7 in 2025 and 22.8. So again, stable year on year, but a slight uptick, and that's sort of where we think our tax rate will stabilize going forward, obviously dependent on profit mix. and how this global minimum tax is actually implemented when it gets to paying out the actual tax. I think that's all on the tax rate. I think then I'd like to just talk to you about the Aspen APAC divestment and an update there. Just a health warning that these dates I've put you are indicative only, but they are our best guess on what we know at the moment, and I think these dates are pretty consistent to what we presented when we had our call with all of you I think in, sure, it feels like a year ago, but I think it was in January sometime. And so, yeah, based on all our timelines, we expect to publish a circular to shareholders by the, I don't know, before 20th of March, which means then we'll have the shareholder vote on it before 22 April. And based on the contract, it will give us a completion date for the contract of end of May, and that's when we'll get the cash, the initial proceeds from this transaction. And then there will be a two- or three-month period where we will have some true-ups of working capital and all the other adjustments. But the big cash flows will happen at the end of May based on these timelines. Looking, for those of you who have got a bit of an accounting background, affiliation, the APEC divestment meets what we call IFRS 5 accounting rules. What does IFRS 5 say? It says if your business segment is material, and it has a high probability of being sold, you have to classify it as a discontinued operation. So when you look at our results, you'll see that we've got continued and discontinued split all over the place. So it's quite hard, I think, when you look at those results with a cold eye. And so you'll notice in our commentary, we've put a total operations table there just to help you sort of navigate the old, let's call it the total operations numbers to the continuing and discontinued operations. I think the important point here is that the balance sheet has been stripped down. So when you look at the balance sheet for Aspen for the half, you're going to see intellectual property going down quite heavily, and that's probably the main one going down because the APAC business was quite rich in intellectual property value. And all of the APAC value is now sitting in one line called assets held for sale, and the net book value sitting there is $21.8 billion, just under $22 billion. From a financial effects perspective, the gross consideration for this deal is 237 million Aussie dollars. In December, we got it in rands at to be 26, just under 26.5 billion rand. That was at an exchange rate of, I think, 11.05 to the Aussie dollar. As we sit now, if you look at today's exchange rate, we could be well north of 27 billion plus. So it depends on where exchange rates go. There could be a benefit from exchange rates, but we'll wait and see. From a net proceeds perspective, we're expecting net proceeds of over $25 billion. That's based on the $26.5 billion, so if we get more in range, then the net proceeds will also go up. Those proceeds will be used primarily to reduce debt. And for those of you that want to try and work out what the profit on sale is, I'll just give you one number, but the debt that's embedded in the APAC business is around $1.2 billion. You've got to subtract that off your $25 billion before you compare that to your net asset value if you want to work out a profit on sale. which we will be reporting in the second half of this year should this transaction go through. But it will be somewhere around 1.8 to 2 billion. I think that's the range that we would expect to come into our earnings per share in the second half. Impact from an income statement perspective. After-tax profits, the loss that we expect from APEC will be around 1.75 billion rand of after-tax profits. And that's a number you'll see in the results booklet for the 12 months ending June 25. So we've based this on June 25 numbers. If you take out, obviously there's an interest saving that's embedded or interest cost that's embedded in the APAC business itself. If you exclude that, the interest saving for the rest of the Aspen group, based on the reduction of debt, is around $1.2 billion pre-tax. which is around 0.9 billion after-tax. And if you net that off the 1.75, you get to about 0.85 billion of after-tax impact net of interest saving for the group, which is an earnings of circa 185 cents. Stephen will talk you through the historic profile of the APIC business and also will talk you through how we plan to recover our profit gap over the next two years. So I thought it would be quite interesting to show you this now and then you can see the plan how we're going to tackle that gap in the next period. I think it will be quite good for you to all see that. I think my last slide is just on ESG. It's something that we always focus on. It's part of our DNA, and we're passionate about it. And so we've got, if you remember, we've got our 16 goals under these four pillars that we published in our integrated report. And the four pillars is to remind you of patience, our people, society, and the environment. So on the patient side, that's probably our key driver or metric for Aspen from a DNA perspective, and that's to increase access to critical medicines in emerging markets. And I'm pleased to say at this stage we've had an 8% increase in volumes versus FY24 of critical medicines. Some of the call-outs here, obviously we've made some good progress in the insulin manufacture that Stephen spoke about earlier on. We're also making good progress on those aspirin serum vaccines, which I think Stephen will give you an update on as well. And our generic GLP-1 strategy will also help us in this patient access bucket. From a people perspective, our goal by 2030 is to get to equal gender balance. And I'm pleased to say that as we sit now relative to 2020, we're at 32% of women in top leadership positions, and that's an increase from 19% in FY20. So good progress there. We've still got to get to 50% by 2030, but we're well on track. From a societal perspective, there our focus is on group ethics and compliance, and our deliverable there was to complete that program by the end of FY25, and we've successfully done that and completed that 100%. And then very importantly on the environment, our target there is to reduce carbon emissions scope 1 and 2 by 50% by 2030. And if you look at the grey block, we're around 24% reduction at this stage relative to FY 2020 as our baseline. Some call-outs there, we've increased our renewable energy usage to 19%, with eight manufacturing facilities now using solar panels to supplement the energy. We also started to introduce water stewardship plans, and we started our facility in Cape Town. And with our partner, IFC, which is one of our development funding institutions, they've got expertise in this area, and together we've developed a decarbonisation roadmap project at our Cobef facility that we'll then use as a blueprint to drive down our carbon emission going forward. So I think some very good progress on our ESG. And on that note, I'd like to hand back to Stephen to take you through the more exciting part of the presentation, now that we've dealt with all the numbers. Thank you, Stephen.