JOHANNESBURG - Aspen Pharmacare Holdings has resolved its six-year dispute with the SA Revenue Service (Sars) related to a revised tax assessment for the JSE-listed global pharmaceutical manufacturing company’s 2011 financial year.
The revised assessment followed Aspen being subjected to an international tax and transfer pricing audit by Sars.
Aspen has never disclosed the quantum of the assessment, but confirmed yesterday that discussions entered into with Sars with the assistance of its legal and tax advisers had resulted in the assessment being reversed by Sars.
The group previously indicated that it had responded to audit findings and believed that all issues raised by Sars were defendable and it had sufficient evidence in support of its views and treatment of these tax matters.
Aspen is still subject to separate investigations by both the European Commission and UK Competition and Markets Authority (CMA).
In May the European Commission opened a formal investigation into concerns that Aspen Pharma had engaged in excessive pricing concerning five life-saving cancer medicines and whether the group had abused a dominant market position in breach of EU antitrust rules.
The CMA opened an investigation in October against Aspen over allegedly anti-competitive conduct in the supply of blood pressure and arthritis drugs.
Aspen said yesterday that the outcome of both the European Commission and CMA matters was unknown at this stage and, therefore, no liability had been raised in its statement of financial position for the six months to December.
The group added that the commission's decision on whether to formally open a case was likely only to be made during the first quarter of next year after the conclusion of its investigation, while the CMA investigation was at an early stage and the authority had confirmed that at this time it had not reached any conclusion on whether competition law had been infringed.
Stephen Saad, the group chief executive of Aspen, said yesterday that the group had sustained positive momentum from the second half of its 2017 financial year and in the six months to December yet again delivered double digit growth in both revenue and earnings.
Residual rights
Aspen grew revenue by 11percent to R21.9billion from R19.8bn in the prior period.
Normalised headline earnings a share increased by 26percent to 871.9c from 692c.
The group’s gross profit margin improved to 51percent from 48.2percent.
Saad attributed this to the benefits from the acquisition of the residual rights to the Astra Zeneca Anaesthetics portfolio for $555m (R6.57bn) in October, the effect of synergies and higher volumes lowering the unit cost of goods.
He said significant influences on the groups performance in the reporting period included healthy growth driven by continued positive momentum in performance from the South African pharmaceutical business, and a strong result from the thrombosis brands as well as the reversal of foreign exchange losses incurred in the prior period.
Saad said the group results were inevitably influenced by relative currency movements given that 80percent of sales were not denominated in rand.
He confirmed that should the current strengthening in the rand against other trading currencies be maintained, sales from offshore territories would convert into a lower value of rand revenue.
“This potential unfavourable dilution will be partly offset by a weakening US dollar, given that a material portion of purchases are priced in US dollars,” he said.
Aspen expects to maintain sales achieved in the first half of its financial year in the second half, with operating cash flows anticipated to remain strong.
Shares in Aspen rose 1.83percent on the JSE yesterday to close at R261.70.