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Aspen shares rally on double-digit earnings growth

Aspen slashed its debt materially by almost half to R16.3 billion from R35.2bn last year, helped by proceeds from business in Europe. Picture: Bloomberg

Aspen slashed its debt materially by almost half to R16.3 billion from R35.2bn last year, helped by proceeds from business in Europe. Picture: Bloomberg

Published Sep 3, 2021

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Aspen Pharmacare’s share price rallied more than 5 percent in intraday trade to breach R200 per share on Thursday after the company announced double-digit annual earnings growth.

The global drug manufacturer said revenue for the year to the end of June increased by 12 percent to R37.8 billion from R33.7bn a year ago.

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Aspen’s headline earnings per share from continuing operations rose by 21 percent to 1 204 cents, up from 998c a year ago.

It said normalised earnings before interest, tax, depreciation and amortisation were 3 percent higher at R9.9bn, as a lower gross profit percentage and reduced other operating income were partially offset by well-controlled operating expenses.

The group also slashed its debt materially by almost half to R16.3bn from R35.2bn last year, helped by proceeds from business in Europe.

Aspen chief executive Gus Attridge said they were very pleased with the results and double-digit revenue growth, which showed a good outcome in challenging operating circumstances.

“In terms of our earnings perspective, we did very well. Our debt, which had a high level gearing, has been significantly reduced to low and manageable levels,” Attridge said. “This positive performance for the year shows the stability of the business.”

Aspen resumed paying dividends after a two-year hiatus, declaring a gross dividend of 262c per ordinary share paid from reserves.

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“We are happy to declare a dividend again. We have not paid a dividend in the last two years,” Attridge said.

“We are very happy with the prospects of the business. We invested a lot of money in capitalising the business, and this has proved to be a very sound strategy to pursue.”

Attridge confirmed that Aspen was in talks with Johnson & Johnson (J&J), including the evaluation of a licence to manufacture, market and sell a Covid-19 vaccine for Africa.

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If the licence is successful, Aspen will not only have manufacturing but also the rights to its own branded product.

“We have been supporting J&J in the manufacturing of vaccines, and we are having further discussions with them on further getting a licence under the Aspen brand,” Attridge said.

“We have an agreement in principle on what we seek to achieve. Both companies are seeking to achieve a better opportunity for vaccines to manufacture in Africa.

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“This would be a very complex set of discussions, so we still have a long distance to go.”

Aspen is also looking to expand its Covid-19 vaccine manufacturing under a contract with J&J, from 300 million doses to about 450 million doses by February next year.

Ashburton Investments chief investment officer Patrice Rassou said Aspen’s shares were rallying, as the market had received their results warmly, particularly the debt reduction.

“This is really on the back of the debt burden reducing to R16bn, so the market liked that,” Rassou said. “And they announced revenues from the filling and finish from the J&J vaccines, about 400 million in the third quarter, so benefiting from activity in their manufacturing operations.”

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