Aspen Pharmacare Holdings Limited

Good morning and welcome to Aspen Pharmacare's 2026 annual financial presentation. Thank you all for joining us this morning. Just to quickly run you through the agenda, this morning Stephen Saad is going to give us an introduction and overview. He will then hand over to Sean Capazorio, our Chief Financial Officer, who will run through the financial performance for the year. and Stephen will then return to give us an overview of the operational update, strategic update and financial guidance for the next financial year. We'll conclude with a Q&A session, so please feel free to send questions through via the webcast. We'll get to as many as we can. We'll follow up with you over the next couple of days. With that, I'm going to welcome up Stephen Saad, our Chief Executive Officer, to give us an introduction. Thank you, Stephen. Thank you.

Thank you very much. Thank you, Roy. Thank you for that. Good morning, everyone. And sorry, my voice is a little croaky. I think it's because it's a cold, but it might also be because of some pretty solid support on Saturday for the rugby. But we'll see how far we get through this. So we've got a presentation for you. But, you know, en route here, I was just reflecting on You know, if I could pick five things and five hallmarks of really great businesses, what would I choose, either to run or to own? And I came up with five points, and I'm not sure these aren't in books, but these were my view. One, a dependable business. Two, a resilient business. Three, a business with a bit of sizzle. Four, a business that creates value. And five, a business that's enduring. and I try to see where Aspen positioned against those five key areas for me and you know in terms of a dependable foundation something that you can ground your business on you can be give you security over your earnings your cash flows our commercial pharma business in emerging markets has demonstrated that publicly for for more than two decades And if there was any confusion about how well positioned that business is both for now and in the future, I ask you to look at how many innovator multinationals, the biggest in the world, say Aspen, in your emerging markets, in some of your emerging markets, we're trusting you with our IP because we think you can do a better job In those territories than we could do by ourselves. So that is what I call a dependable foundation. And it's something that never varies too much. It doesn't shoot the lights out and grow 100% and it doesn't go to zero. And then a resilient business. And a resilient business... It's particularly important in the type of business, for example, that Aspen has, in that we have a global business. So every shock hits us. And, you know, if you think about where we started with a zero base in Durban and to move into a very high technology business like pharmaceuticals, really we'd sort of one of a kind. But the reality is we do difficult things, really difficult things. And in order to be successful, we have to challenge so many boundaries. We certainly take knocks, taken many knocks, more knocks than we would like to have. But I will tell you this much, although you battered and bruised at all of this, we simply never go away. And we try and learn a lesson from each knock, and we try and learn that lesson just once. And then we have to modify strategies from those learnings. I believe that if you've been watching our results over the last period, you'll see a demonstration in these results and you'll see the future as well, which shows how resilient this business is and how well we learnt and how we take those learnings to drive future growth. Talking of future growth, I come to sizzle. What is sizzle? That's something that wakes you up and gets you excited and positive. It's about your future growth. It's what you add on to your foundation in time as it matures. and we've invested for a long time in two areas and we're starting to see green shoots now and we'll see and we believe we'll build on these in the in the years to come and those two areas are steriles our sterile manufacturing business and our glp ones weight loss we took a bet on the weight loss category long before it was popular or the category to be in um you know and uh In terms of the GLP-1s, it is an exciting area for beers and you'll see it during the presentation. The steriles is particularly pleasing to be talking positively about. It was just over a year ago that we lost a contract and at the time I said to you we might have lost the milk but we didn't lose the cow and we're in a good neighborhood. Of course having all the tariffs Noise at that stage was also particularly amplified in pharmaceuticals. So it was a particularly, it was a period of quite deep despair. But you'll see it's come back and we'll talk about it in numbers and the future of it. But we're really comfortable and we're excited about where we've invested in both of them. Then creating value. This is often a very contentious area and I sometimes do it on a back of cigarette box and people give me lots of formulas and all sorts of other things and it's quite hard to work out what is and isn't there. But when we look at it, we've done many many transactions over the years at Aspen. We've made divestments of big, big assets. And in all instances, and you can go through the history, we've sold those assets. And this is going to come to what we think about sum of parts, etc. But we sold those assets for double digits. And for me it's a very simple story. If you're really unsure if Aspen's created value, I put this to you. We've never issued shares. I'm glad to say this is the first time I'm going to say this in 25 years. We don't have debt and we're going to deliver 9 billion, over 9 billion of earnings next year. So for me that's creating, to me that is value creation. The final point is an enduring business. An enduring business is one that's got to be able to last the distance. To be able to last the distance In my opinion, it has to be purposeful. You've got to contribute meaningfully to society. I fully respect and we fully respect and appreciate and focus on all those very important financial and commercial metrics. Without achieving those, it's very hard to be purposeful. But in equal measures, we focus on how we create access to medicines, access to patients. I think I think our track record is well known be it in ARVs, COVID and access to Africa but in this presentation I think we're on the cusp of increasing their contribution and being able to be able to assist those that are vulnerable even more and with a particular focus on Africa and we'll talk about that too So when I go through those five yardsticks and I look at where we are and where we're going to, I'm really comfortable. We've got a hallmark of a great business. So thank you. Thank you for that. And from here, let me click onto the presentation onto where we are. So let's start with a welcome. Thank you. Thank you for being here. Where is this? Here we go. Sorry. Apologies. And let's look at our performance and overview. So as Roy said, I'm going to just give you a quick snapshot of what we set out to do, what we've achieved, and then I'll hand it over to Sean and I'll come back for effectively the performance, the strategy and the guidance. So what were our six core objectives? And I encourage all of you to look back over the last couple of years as to the objectives we set ourselves. These are not new objectives. This is what we told you we hope to do last year. So in terms of a dependable foundation, our commercial farmer momentum, it endures. We had a 13% growth in constant exchange rate in EBITDA and that built on double digit growth in financial 25 as well. For 27, we expect to sustain organic growth, led by our emerging markets. We're starting to realize our GLP-1 investments. I'll show you some charts later as to the type of growth we're seeing in South Africa, how Monjaro powers the entire South African private market. And we've started a process of now registering in sub-Sahara. We're commencing our GLP-1 generic global rollout. We've got two products registered now in Canada and emerging markets will follow and Brazil we believe we're relatively close and is under review. Manufacturing growth engine. So this is what caused us a bit of a hiccup in the last period. What we guided you was that We lost a contract that cost us a billion and to get back to break even in steriles we needed to make 1.7 billion of EBITDA and we had to do that over two years, financial year 26 and 27, that's what we targeted ourselves. Sean will show you now, we achieved 1.2 billion of that in financial year 26. For 2027, we will raise that guidance from 1.7 billion to 2.2 billion. And that's a function of growing volumes, growing revenue, and reduced costs. And we'll give you a sense of where those revenues will get you and where the profitability, what drives it. But I'm very happy to say I think that this will be the primary driver of group growth. Of course, a rapid take on of GLP-1s could change everything, but right now if you look at where our budgets are, it's a primary driver of group growth. We also told you last year we would look to unvalue where we saw value beyond what we could achieve. We would look to the sum of parts and we believe that the sum of parts of our business is not represented in our share price. We invested the APAC business for 28 billion Rand. That was an 11.5 times EBITDA. People I know I'm going to be asked and have really been asked, you know, would you continue? Yes, we will respond to any opportunities to unlock values for the sum of parts where it makes sense for Aspen. Big focus from Sean and the financial team and the whole of the company on free cash flows and a really commendable performance. 3.8 billion of free cash flow generated. We had net cash of 0.8 billion, 800 million in the bank. I've got to say that slowly. I remember once somebody asked me, I think in the last presentation, what would you do? I said, I'm just going to look at it for a while. and in fact we've started a share buyback program which was at 0.5 billion at the end of the year but has now stretched to 2 billion or 3% of the company as of recently. The free cash flows will be driven, we'll be driving even stronger cash flows, I mean very simply we'll be showing you that our EBITDA is going up, our finance costs go away and we don't have, we have very stable capital investments. We've seen significant earnings growth, that's been a priority for us and we achieved 28% growth in continuing operations in NHEPs. We expect substantial future growth in NHEPs, more than 50% going into financial year 27 with more than $9 billion of EBITDA and obviously the interest savings will be whatever the finance costs were in this year which was about $1.2 billion. So those were six key commercial objectives and they were core to us and I believe we can tick the block on all of them. You will see in our results in this period flat revenue and a very big growth in NHEPs. And really it's an operating leverage that has driven these efficiencies. And it's also some of these efficiencies that will be annualized that leads to an increase in a raising of our guidance on the sterile finish dose form. So in this year you'll see in our commercial pharma the double digit EBITDA growth, outpaced sales growth. Manufacturing, we grow EBITDA despite a decline in revenue. We've got a reshaped sterile business, more than recovered a billion rand contract loss. So when I talk about resilient businesses, these are the things I'm referring to. And then we've put a lot of work into Heparin, and we've got this fantastic new streamlined process, which gives us cost debt reductions, lower inventory levels, both in value and volume. And you'll see that when we talk about Heparin, give you guidance later. The manufacturing has seen many sustainable benefits from the numerous restructuring processes. For financial year 27, as I said to you in the opening start, we raise our guidance for steriles by half a billion. And when I say guidance, it was in the last presentation we told you we were targeting 1.7 billion. So that's been raised. And the EBITDA will increase very strongly there because the costs are relatively fixed. So you've got increased volumes, increased value, or for lower cost base. and then there will be further cost reductions as we disentangle from out of the divestment that we made in the APAC region so with that thank you that's my introduction and with that Sean I'm going to hand over to you and you'll see me a little bit later thank you great thank you thank you Stephen

A very good summary of a very exciting year that's passed and you can see that we've delivered on all our key commercial, all six commercial objectives and that really marks an inflection point for us for sustained future growth and that you'll see that theme coming through in my presentation and back to Stephen's as we move through the discussions. On to the numbers. On the first slide, you'll note I've got a pyramid there. Those of you that have been following Aspen for a very, very long time will remember this pyramid from my inaugural presentation back in June 22. And I'm very, very pleased to say that the pyramid has returned this year and we are absolutely focused on retaining this pyramid. What does a pyramid mean? It means as you go down the pyramid, the growth gets bigger. So this year, if I start at the top in constant exchange rate, our revenue was flat. and I'll unpack that later but in that flat revenue we had growth in commercial pharma and a decline in the manufacturing If we go down to the EBITDA, we've grown our EBITDA at 14%, moving down to INEPS, growth of 28%, and very pleasingly, as you saw from Stephen Slider, 3.8 billion free cash flow, so significant growth in our free cash flow. So we're very happy with the shape of the pyramid, and as I say, we absolutely focused on its retention, and what's going to drive its retention is us continuing to realize these efficiencies in all of our value-enhancing and operational efficiency projects. What are the key takeaways from a commercial financial perspective for the year? Well, commercial pharma this year has been our primary organic growth engine. You'll see that coming through all the numbers with Monjora being a big underpin there, plus our organic growth in our emerging markets. On our manufacturing side, we've demonstrated operational improvement and you'll see that coming through in the numbers that I'll take you through. If you take the combination of those first two takeaways, that's given us operating leverage, which has driven the EBITDA and the NAPs growth above revenue, as you've seen in the pyramid on the left. In this year, we've also had lower CapEx and working capital investment, and that's generated a strong free cash flow of $3.8 billion. and that's given us the opportunity together with the APEC divestment to end the year with a very strong balance sheet in a net cash position of 0.8 billion after share buybacks of 0.5 billion and as we said I think as at two days ago we announced the 3% share buyback at 2 billion rand of investment so we continue to buy back. Moving on then to the group revenue. Overall, if you recall from my first slide, we ended with a flat position. If I have to unpack that into the two components and look at commercial pharma first and then manufacturing, commercial pharma, we grew the year at 5%. That 5% was, however, diluted by our reshape program in China where we had to... We identified a lot of unprofitable products that we discontinued. So you'll note that it doesn't affect our EBITDA, but obviously affected our top line, so that impacted our growth. If we take that out, our growth excluding China was 7% in constant exchange rate. Within our prescription division, the China discontinuations resulted in a minus 3% decline there. If I move then on to injectables, there we grew at 16% and Mojara, obviously the momentum in Mojara and South Africa was a key growth driver there and very pleasing. Next year you'll see the rankings change but injectables is now our biggest revenue generator. It's now outperformed the prescription division at 9.2 billion of turnover. OTC had a strong year. Unfortunately it was diluted by the impact of the Middle East where we have quite a strong OTC presence. So we grew at 3% but unfortunately the strong performance was diluted by the Middle East conflict. On the manufacturing side we had a 10% decline in revenue and that was driven by the loss of the MRNA contract that Stephen spoke about earlier on. Moving on then to our key segments in the business and what I've got on this slide is on the left I've got the commercial pharma revenue and normalized EBITDA comparing 25 to 26 and on the right I've got the manufacturing with the same comparators. So if we start with commercial pharma Revenue growth which I've taken you through already at 5% in constant exchange rate. A nice steady and strong growth of 13% in EBITDA and that was underpinned by good organic growth in our business. Very stable gross margins. We've been very proud to have kept our gross margins stable over the last 5, 6, 7 years and then obviously we also had the benefit of the reshape in our China business model and that gave us operating leverage to drive 13% and double digit EBITDA growth. Also pleasing to note that obviously resulted in an increased EBITDA margin so EBITDA margins in commercial pharma have hopped up from 25.6% to 27.1% in FY26. Moving then to the right to manufacturing, I think we've covered the revenue already. EBITDA a 21% increase in constant exchange rate. Moving from 647 EBITDA last year to 828, just under 200 million increase. Two moving parts there. We lost a billion rand of MRNA contract. However, through our reshape program in our FDF sterile, we were able to grow that EBITDA by 1.2 billion. So more than offsetting the 1 billion loss and resulting in just under a net 200 million increase in EBITDA. These are only the initial benefits and obviously going into FY27 we will see the annualized benefit of these reshape program benefiting the growth in the new year. Onto our group, Normalised EBITDA. I'll just quickly just talk you through the table so you can absorb it. So we've got, we take you through revenue, gross profit, right the way down to Normalised EBITDA. And I'm comparing FY26 to FY25 reported. And then on next year, I've got constant exchange rate, FY25, and then all the growth factors on the right. I'm going to keep to constant exchange rate trends. So what I'll start with is our gross profit. Gross profit grew 4% ahead of the flat revenue of zero and a nice jump in the gross profit percentage up from 41.6% to 43%. What drove this increase? Well certainly the key driver was our sterile FDF recovery that I've talked you through already in the previous slide. So there was a strong augmentation of the gross margin and then also underpinned by very stable commercial farmer gross profit percentages. So a nice overall trend there. When we look at operating expenses, we've enjoyed a decline in the operating expense base of 4% this year, driven by the reshape benefits. Expenses coming in at just under 25% of revenue as a ratio, so well below last year's 26%. And you can see if I flip then down to the normalized EBITDA, how you take the 4% gross profit and the savings and expenses, how that leverages you to a 14% growth in normalized EBITDA. And so that's a really pleasing result and EBITDA ending the year at 7.7 billion rand. Based on our guidance for FY27, we do expect our EBITDA margins to continue to increase well in FY27. Probably my favourite slide, we generated a very strong free cash flow this year of 3.8 billion and we look to sustain this growth in FY27 and I'll talk through that in a later slide. But just to sort of unpack this slide, if you look at the graphs, I've got a comparison from FY24, FY25 and FY26. The first bars are our cash generated from operations. The blue bar next to that is our capex spend and the very dark blue is our free cash flow that we've generated which is the net of those two numbers. So looking at our cash from generation you can see cash from operating You can see we took a dip in 25, we went down from 6 billion to 5 billion and this year we ended pleasingly at 6.8 billion, so a nice growth over the last two financial years from a cash from operating activities perspective. In terms of capex, a very nice trend there. You can see we started at 24, we were at 5.5 billion of capex, down to 5 billion in 2025, and this year we ended the year at 3 billion. So when you look at all of that from a free cash flow perspective, ending the year at 3.8 billion this year, last year almost a break-even free cash flow, and the previous year 700 million. So a significant leap in free cash flow, and certainly something that we're going to continue to drive going forward. What are the contributors to this strong free cash flow? Well, our strong EBITDA growth of 14% is a key underpin. We've also continued to drive more than 100% operating cash conversion. Our working capital ratio this year ended at 44% of revenue. Last year it was at 47%, so a nice drop in that ratio. Our finance costs were lower this year due to our better cash flow and the benefit of the APAC divestment in the last month and very importantly our capital expenditure was 2 billion rand lower than that of FY25 as you saw from 5 billion down to 3 billion. If you remember from the last previous two presentations, we were guiding capex of 3.8 billion. So we've managed to generate 800 million of capex savings this year. Of that 400 million is a real saving and 400 will be carried forward as capex into the new year. But all in all, when you put all of that together, you can see a very good trend there and obviously gives credence to the pyramid that we spoke about earlier on. Then moving on to the APEC divestment itself, really an intrinsic value unlock and moved us into a net cash position together with our strong fee cash flow. So just unpacking some of the elements here, this transaction was completed effective 31 May, 28 billion gross proceeds generated with a profit on sale of 2.4 billion which benefited our earnings per share. But the very important point I want to make, this is an indicator of the underlying asset value of the sum of our parts at 11.5 times multiple. So certainly a big indicator of what value we have created in this business and what value can still demonstrate if we continue to look at our sum of our parts value unlock strategies. From a financial effects perspective, The APEC divestment has resulted in a materially stronger balance sheet, also giving us flexibility for capital allocation opportunities, hence our movement into share buybacks. and I just wanted to alert you that we obviously will lose free cash flow with the divestment and that's around 600 million that we'll lose and that's a combination of losing 1.6 billion of after-tax earnings we do however save interest after tax of just under a billion and a little bit of capex so net net we're going to lose 600 million so when I talk about driving stronger free cash flow in 27 We've got to cover this 600 plus to get to a better landing next year and that's our target for 2027. Moving on, this year you will have noticed we had three different buckets of large earnings adjustments, be they in the normal earnings or the headline earnings or our normalized earnings. The three buckets are intangible asset impairments, our restructuring costs, and the profit on the sale of APAC. Coincidentally, all quite similar numbers in absolute terms. So maybe if I start with the intangible asset impairments, there we picked up a charge of 2.3 billion for the year, bearing in mind that there's no cash impact for this, this is an accounting entry. For this year specifically, the impairment was mainly as a result of increased discount rates because of geopolitical and macroeconomic volatility, so certainly something outside of management's control and a technical impairment. If you look at our overall intangible asset portfolio, we retain a valuation of more than 45% above carrying amount. But unfortunately in accounting terms, you only write down, you can't write up above carrying amount. So you have to take the impairment. And just important to note that this premium of 45% is supported by the sustainable organic growth in commercial pharma, which Stephen has spoken about and that we've demonstrated as part of our DNA and our deliverables over two decades. Moving on to restructure costs, there we've picked up a charge of 2.3 billion for the year, of which 1.4 billion is a cash impact and about 900 relates to impairments. And these instruction costs have been incurred to drive sustainable efficiency benefits. Not only we've enjoyed some of them this year, but also sustainable benefits into the future. And basically, based on the programs that we've already implemented, that's given us the confidence to raise our sterile EBITDA growth guidance that Stephen spoke about, where we're confident to now raise that by 0.5 billion to 2.2 billion, based on the efficiencies that we're going to be driving out of these restructuring projects. On the profit of APAC, profit on sale, that speaks for itself, it's 2 point billion and that's all cash and that came from the 28 billion proceeds unlock. So I think the two important takeaways from this slide are the one is that If you look at the net cash impact of those three buckets the cash outflow which is the 1.4 billion in the restructuring bucket is more than offset by the 2.4 billion so you've got a billion rand surplus there in terms of the three when you're looking at it from a cash perspective and very importantly the restructuring related costs have been incurred to drive sustainable returns not only for this year but for the future and Steve will unpack that in some of our outlook slides. Moving on to next year, we have guided substantial normalized earnings growth for next year for FY27 and stronger free cash flow. If we look at the two elements of that, what's going to drive that? Well, in our guidance, we've guided that we're going to get to a normalized EBITDA of at least 9 billion in 2027, which implies that you're going to grow your normalized EBIT of over FY27 by 1.3 billion, being the difference between the 7.7 and the 9. That is underpinned by our sterile growth being the main driver of growth and also solid and continuing organic growth in our commercial farmer business. On top of that, we're going to save interest. Obviously, we don't have debt anymore. We're going to have the interest saving of more than 1.2 billion. And if you just take the after-tax impact of those two elements together, that gives you an earnings benefit of over R4. So when you look to the right, I've got the stepped program of where we see our NFs progressing. So looking at FY25 to FY26. Moving from 625 cents to 802 cents, a 28% growth that we've spoken about earlier on, and we look to be driving substantial double-digit growth in FY27 of more than 50%, being more than 4 rand over the 8 rand that we did this year. Looking at the free cash flow, we look to drive stronger free cash flow in FY27. As you picked up from the previous slide, we've got to still recover the APAC free cash flow loss. And the underpins of this are going to be EBITDA growth, lower finance costs, stable capital investment, and really just continued discipline in our capital allocation. So we're very happy. We're confident that we will drive stronger cash flow and you can see again, just to repeat what I showed in an earlier slide, our free cash flow in 26 was 166 million, up to 3.8 billion this year and we're looking to drive stronger free cash flow into the new year. That is all on the profit and the cash flow metrics, but as Stephen said, we never take our eye off our very important ambitions in sustainability, our projects. And as you know, we've got 16 goals that we aim for across the group, and those have been published. Of those 16 goals, we've got four key pillars that we've put an absolute target on and progress that we want to maintain. And those are our patients, our people, A society and environment. On the patient aspect, we've now been able to quantify that we've been able to reach more than 165 million patients in emerging markets with our critical and essential medicines. And obviously our target is to grow that. Well, grow that to our end state point of 2030. Some of the little underpins there, we've obviously made good progress in our serum vaccines and on the human insulin manufacture. You've seen the progress that we're making on our branded and our generic GLP-1s, and there's also some good progress in the AOV space in terms of further licensing agreements for new AOV technology. So those are good green shoots to drive us for further growth in patient access. And patient access obviously is the DNA of Aspen. That's our key, our North Star. Looking at people, we're at a point where we're at 32% gender balance in our top leadership positions for women. And that's nicely up on 19% in 2020 and targeting well towards our 2030 objectives. On society, we've made good progress in our supply chain plan. We've actually screened over 2,000 suppliers from a responsible supply chain program perspective and we continue to achieve our growth ethics and compliance program goals. Last is the environment. At the moment for this year we are at 34% reduction in scope 1 and 2 carbon emissions with FY20 being our base year. And maybe one call out for this year which we are very proud of is we have increased our renewable energy usage to 26% from 19% in the prior year. So really a strong progress in the renewable energy space. I think that's all on the sustainability. We've got lots of other goals here but to show we're always very balanced in looking profit, cash flow and also our sustainability goals. I'd now like to hand back to Stephen who will take you through the performance overview and the outlook for the year ahead. Thank you, Stephen. Well done, Sean.