Aspen aims to reduce net borrowings and deferred payables in 2020

CAPE TOWN – Aspen Pharmacare aims to further reduce net borrowings in 2020 to achieve positive free cash flows and significantly reduced deferred payables, the group announced at its annual results presentation on Wednesday.

The pharmaceutical company said favourable outcomes from its continued active assessment of value realisation opportunities would result in accelerated deleveraging of our balance sheet. “These factors, together with a substantial decline in planned capital expenditure after the 2020 financial year, will support our goal of achieving a leverage ratio of fewer than 3 times in the medium term.”

In its annual results for the year to June Aspen increased revenue by 1 percent to R38.9 billion while normalised earnings before interest, tax, depreciation and amortisation (Ebitda) declined 2 percent to R10.8bn, influenced by a lower contribution from the Manufacturing business. 

Commercial Pharma delivered an increase in revenue of 3 percent to R33.1bn, while normalised headline earnings per share was 7 percent lower at R14.14.

The group did not declare a dividend, citing prioritisation of deleveraging the balance sheet, existing debt service commitments during the 2020 financial year and the short term requirements of ongoing capital projects.

“Notice is hereby given that the board has decided that it would not be prudent to declare a dividend at this time. The board will re-evaluate the relevant circumstances regularly with a view to declaring a dividend when it is considered prudent to do so,” the company said in a statement.

Aspen, which trades in multiple currencies across a number of geographies, said relative movements in exchange rates had an impact on financial performance, which was marginally positive.

Aspen reported that strong cash flows in the second half allowed the group to achieve a cash conversion ratio of 107 percent for the year. 

“In the closing six months, Aspen also completed the disposals of its Nutritionals Business and a portfolio of products distributed in the Asia Pacific, realising cash proceeds before tax of R12.3 billion and a combined profit on disposal of R5.4 billion. 

“The positive cash flows and the proceeds from the disposals have enabled net borrowings to be reduced from R53.5 billion at 31 December 2018 to R39 billion at financial year-end,” the group said.

Aspen said while the diversity of its operations across many geographies and currencies, as well as exposure to an industry where regulators had significant influence on pricing and the costs of doing business, gave rise to many variables, the group expected the performance for the 2020 financial year to be broadly in line with the results reported for 2019.

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