Earnings Call: H2 2021

Sep 2, 2021

Good morning, everyone, and welcome to Aspen's Results Presentation for the Year Ended 30 June 2021. Thanks so much for joining us. I'm going to begin the presentation. Please take note of the disclaimer and the disclosure notes at the beginning of the presentation. But now let's move to the presentation in detail, and I'm going to kick off with the financial review. If you look at the financial highlights from continuing operations for the year. It's been a really good year for Aspen. We've had solid double digit organic growth in our revenue. That's been backed up by really sound growth in earnings, a sharp downtrend in our debt to very much lower leverage levels, a reinstatement of our dividend at CAD 0.62 a share and all in all, a really satisfying year because we have delivered on the strategy we've set for ourselves and communicated with the market and It has been a year that we've achieved much, a lot of which is reflected in these results and a lot of other really positive things which have happened behind the scenes and will influence future results as well. I'm going to now in the next few minutes unpack these highlights into more detail. Let's start off with the segmental revenue. Our regional brands were up 3% in reported terms, 2% in constant exchange rates. So we've got 2 levels of exchange rate we're working with here. 1 is Year on year actually as reported and one converts last year's exchange rate to the same exchange rates that prevailed during the current year, which is a more comparative basis. So I'm going to stay with the constant exchange rates in discussing these outcomes. So the regional brands, Really resilient performance. We had some headwinds here from the mandated cut in the EU. EU mandated cut in oncology prices and also as a consequence of COVID where some of our products weren't in demand due to the COVID circumstances in the market. The sterile focus brands had an excellent year, 9% growth in constant exchange rate and converse from the regional brands, they did benefit to an extent from COVID related demand. But the underlying performance was nonetheless very, very sound. And then the biggest growth came from manufacturing, which was up 29%. There is a sub story here, which I'm going to unpack now. A large amount of that growth was driven by sales to counterparties of recently completed disposals, in fact, the European thrombosis disposal and the Japanese business disposal year previously. Now those sales were the biggest driver of the growth. If you take them out, that 29 percent constant exchange rate, 1.7% constant exchange rate growth. However, Just for noting as we move forward in the presentation, those sales are low to no margin, so it has an impact on our margin performance as Also notable under manufacturing was the commencement of the COVID vaccine sales in the second half of the year. So moving on to those gross profit percentages. If we look at regional brands on a half by half basis over the last two years, The first half of this year, we had some nice gains from cost of goods savings, but those were diluted with those EU mandated oncology price cuts in the second half. As there are focus brands, followed the trend of the last 3 halves with a lower mix influencing a lower margin than we achieved in the first half of twenty twenty. Manufacturing was affected by those transaction related sales that I referred to. What we've done here is put some shading on the chart to show the effect on the margin. So With the shading, you have the margin that would have been calculated excluding those sales. Higher margins excluding those sales and also weighing on the manufacturing margin was the high Production costs of operating under COVID circumstances where it has been a very Strong objective of ours is to keep our manufacturing sites running continuously through the pandemic, but that has come at additional cost. All of those factors obviously have influenced the group margin, but there's another element to just bear in mind. As you saw on the revenue slide, manufacturing has become a bigger part of the overall revenue relative to commercial pharma than it used to be. And as a consequence of the lower margins in manufacturing, that has also diluted the group margins a little. This is quite well illustrated in quantum terms on the gross profit bridge. There's not a lot of FX noise at the gross profit line. You can see The 1% effect of the lowest there are Focus Brands margin in the current year and then the better regional brands margin rectifying some of that. The 0.9% step down in manufacturing is really around those higher COVID costs and then the 1.6% is the effect of those transaction related supplies. And then the final point that I made about the mix moving towards manufacturing, that is the minus 0.7%. That's how we bridge our gross profit percent. Moving on to the normalized EBITDA line, this is quite a busy table, but let me pick out a couple of points for you. Firstly, operating expenses, very well controlled during the year, came in at 24.2% of revenue as opposed to 26.4 percent a year earlier, only 1% higher in constant exchange rate terms on 10% more of revenue. And the targeted initiatives that commenced in FY 2021 will continue into FY 2022. We aim to continue to keep those expenses well controlled. Also, I point out to you the 45% decline in net operating income. That's really heavily influenced by The item on the next line of detail, which is HPC. HPC is a product which is distributed on our on behalf in the United States. And we have received over the past few periods a series of milestones from the distributor, the last of which was in the financial year 2021. So there's no repeat of that milestone and Just from a comparability point of view, that has also affected margins. If you exclude other operating income From this calculation, EBITDA growth would have been 6% in reported terms and 3% in constant exchange rates. The normalized EBITDA 26.3 percent outcome is consistent with the December 2020 investor presentation we did with the pro form a base case there of 25.8%. And then just moving forward, we do expect the trend in the EBITDA margin percent to turn and to start improving in the year ahead. Drivers in the next year and years thereafter of EBITDA Margin percentage upside are, amongst others, continued tight control and implementation of particular initiatives about containing operating expenses. We have the anesthetics production starting to come in house and we expect increased commercial polymer GP as a A consequence of that and that really kicks in strongly in a couple of years' time. There will be an incremental contribution from new customers in our sterile capacity that's available. So as new customers come in, the incremental benefits will add to margin there. And in the production side, we have ongoing programs running, driving efficiency and production methods, which we expect to be already showing benefits in FY 2022. Currency is potentially quite an important and always a complex matter as far as Aspen's Concerned because we trade in many, many currencies across the globe, trading in more than 50 In more than 150 countries effectively, that's where our goods are supplied to. So many currencies involved And the variability one to another can have substantial effect. In past presentations, I've tended to try and map the way through those currencies with a range of comparisons of different exchange rates. This time around, I've decided to have a look at our key elements of our 2021 income statement and convert those to an outcome at the 27th August, so last Friday at those rates and see what happens. So we take our first half results, revenue, normalized EBITDA and normalized headline earnings per share would all have been less than reported. If we take the second half results, revenue would have been slightly down and the other two metrics would have been higher for the second half of last financial year, the reported financial year of 2021. And if you combine those all, at 27 August 2021 results, reported results would have been less than we actually reported. So you can see our exchange rate variability really does affect outcomes a lot. And for those of you who are looking to forecast Aspen's results, you need to keep a very careful eye on exchange rates. Not only are you dealing with current variability, but the variability in your starting position with each period having a different set of rates that apply to it. Moving further down the income statement, let's have a look at how we bridge normalized headline earnings per share. So we had an uplift this year in FX, moving from the left to the right, an uplift in FX, which gives us our constant exchange rate outcome. Normalized EBITDA made a nice contribution to the bottom line, but you can see that the HPC effect was offsetting on that, some small items on depreciation and amortization and then really good leverage out of lower finance costs off of a lower level of debt and then some tax effect as well, bringing us out of the 7% increase in constant exchange rate and perhaps 10% as reported. Moving to operating cash flow, it's really the Possibly the most important part of the performance of the business is the cash it generates and very interesting graph that we're displaying here. The blue zigzag line is Our operating cash flow conversion rate measured at each half year end. So operating cash flow conversion, operating cash flow generated over our headline earnings per share coming out of 1%. And our target is to get 100% of earnings converted cash, which is that dotted red line. The green line is the moving 12 month average, so it's averaging the 2 halves, the 2 consecutive halves as you move across. As you can see, there's a very defined cycle. In half 1, Our conversion rate is generally or almost always less than 100 and half to always better than SEK 100,000,000 and that's there's some structural influences around contracted payments, which influenced that and will continue to influence it. The outcome this year and then in H2 in particular was outstanding. In the year as a whole, we expected to I have some real consequences, which we did encounter from the uncommonly low debt balance at the end of last year, which those of you who follow Aspen on a regular basis would be aware of. Those balances were suppressed by an early buy in under COVID conditions in the 2020 financial year and consequently low debtors at the end of the year, releasing less cash than normal into the system during FY 2021. But despite that, The year end working capital revenue percent is at its lowest point since we transitioned to be a global multinational. So Working capital has released cash to the cash flow for the 2nd success of the year, which is a really gratifying achievement. And the ultimate outcome of that in a conversion rate, the 134% conversion rate, so you can see substantially above are 100% target. Into the year ahead, the excellent cash flows this year will put pressure On further improvement in the year ahead as well a few one off creditor payments of about ZAR620 1,000,000 at year end rates, which will cause outflows. But nonetheless, we do continue to target and aim at that 100% conversion rate and please expect that H1, H2 cycle to continue. So the half year results expect the conversion rate to be under 100%. Having a look at capital expenditure, this is a big investment area for the business. Building our property plant and equipment has been a strategic focus for us over the last few years, and we've been a big investor in our manufacturing sites and I believe Stephen will very adequately give you evidence of why that strategic investment has been so important and what value it's going to bring in his part of the presentation. In FY 2021, we fell about ZAR400 R1,000,000 short of the targeted spend for the year. There was some delays and difficulties and moving ahead with our big projects under COVID conditions. And so that spend has carried over into future years. So we're projecting a DKK2 billion spend for this year and then a lower spend next year. Of those anesthetics in house strategic projects, the first of the products have already begun commercial production both in South Africa and in Germany. France commercial production should start in 2023. We are considering some opportunities around increased Vaccine demand and dealing with opportunities in the vaccine space and there is some new capital expenditure, which is under assessment, which is related to that and Stephen will talk more about that as well in his presentation. Also part of CapEx is the IP side of CapEx and This is our in house product development and also effectively IT software. We're spending a lot on IT software as we digitalize the business at the moment. Also that program was delayed a bit through COVID and so we came up CHF200 1,000,000 short of our target. Again, there are carryovers into the new financial year and we expect a spend of about ZAR1 1,000,000,000 this year, most of which relates to IT or digitalization projects. The borrowing slide, a lot of information on the slide, all of it good news, I'm glad to say. So if we start with The top left hand corner, you can see over the past 12 months how our debt has declined. If you look at the 3rd bar of that top graph, you'll see that at year end, we are reporting all of our debt as current. That is because at the 30th June 2021, all of our debt was due within the next 12 months. But since that period, we have undertaken An extension of maturity dates on our existing commercial term debt facilities and those have been successfully extended to the 30th June 2023. And then we have also secured a financing package, which was arranged by the International Finance Corporation, €600,000,000 of debt there on a 7 year amortizing loan. Repayment only begins in 2024. It secures terms which are consistent with our pre existing term debt facilities for a lengthy period of time at attractive rates and is the first step of the longer term debt maturity rearrangement which we're undertaking. The bottom left hand corner of the slide shows how our bankers' covenant measure has declined over the past few reporting periods. Now it sits at 1.74, so Lots of headroom to the bank of the covenant. We're actually sitting just at halfway to full utilization of that covenant. And in the top right hand corner, you can see consistent with that declined hearing, increasing interest cover ratio and some effective interest rate information for your benefit. In the investor presentation we undertook in December 2020, we made a commitment to investors regarding capital allocation model and prioritization and our capital allocation fits under a prerequisite and an internal leverage cap of 3 times, so less than the 3.5 times imposed upon us by our bankers. So first priority for us, because of the importance in business sustainability Efficiency is the PPE and IP CapEx and We invested ZAR2.7 billion in those during the course of the last year. Next is an intrinsic part of our business model, which is bolt on acquisitions of RPM Businesses. Our business model involves Consistent review and renewal, review and renewal and that means disposing and acquiring of what we refer to as bolt on acquisitions. We have a definition of value there. And under these transactions, we had a net ZAR735 million outflow. Next priority is dividends, which we guided, we would be reinstating and we're very pleased to be confirming that those dividends are now resumed. Our undertaking is where dividends meet our criteria of that leverage cap, we will pay greater than or equal to 20% of NHIPs. We've kicked off at 20% of NHIPs and ZAR1.2 billion will be paid to shareholders at the end of this month. And finally, larger acquisitions and disposals, the 4th in the line of priorities and these are M and A transactions that are value accretive And sometimes depending on strategic direction and shift, maybe strategic disposals and we have had some large strategic disposals during the year, most notably in the European thrombosis business and the net proceeds of those disposals is just about ZAR13 1,000,000,000. So A really clear picture, I hope, for all of you of the capital allocation and our commitment to our model here. I'm almost at the end of my section now. It is the 46th time that I've stood in front of investors to present results for Aspen and it will be my last. And I'd like to introduce to you the man that will step into the shoes of Group Chief Financial Officer, Mr. Sean Capizzario. He will commence a role from the 1st January. Sean has been with Aspen longer than Aspen exists almost because he was in a company that we acquired in 1999. It's a druggist and he's really performed at the top of his game Every day of his service since then, he was made very early in that time frame the Financial Director of Aspen's South African business, which at that time was a dominant part of Aspen, and he served with distinction in that role between 1999 and 2004. We then persuaded him to join us in the corporate office. We had a title of Group Business Analyst really assisting us with the early stages of our internationalization and That role spanned 2,004 to 2,009. He was then ultimately Appointed Group Finance Officer in 2009 and serves on that post till today. He has been my right hand over that entire period. On all matters financial, he has been incredibly strong support and has had a lot to do with the strength of Aspen's financial performance over that period. Sean brings enormous corporate knowledge and Very high technical skills as well as a well developed business acumen to the position. I have every confidence that he will continue to take Aspen's financial custody from strength to strength. So I'd like to all of you to welcome Sean. And as I sign off, I'm going to just Give Sean a few minutes to greet you before we move on with the presentation. Thank you. Thank you, Gus for that introduction. It really has been an exciting journey working In the Aspen family for so many years and growing with it and seeing how it has globalized over the many years. It's really a pleasure to meet all of you and hopefully In the future, I can meet with you face to face and really build a strong relationship going forward. I look forward to working with The Aspen Group Executive and the Aspen team and the Aspen Board and together with all of Aspen stakeholders in Aspen's next exciting chapter of positive evolution in providing accessible, affordable and quality medicine to all and enhancing and saving patient lives, which is really the DNA of Aspen. So really good to meet all of you and look forward to working with all of you going forward. And On that note, I'm going to hand over to Steven Saad to take us through the operational performance. Good morning, everyone, and happy to be presenting again. I'm happy if I was seeing you all in person. Welcome, Sean. It's going to be lovely to have you here. And June. There's a common trend that I've noticed in Aspen while I was watching that our financial directors start with here and they go bold and I hope that I'm not responsible for what I'm seeing here. But for Gus, for those of you that Gus, it's been a real honor And all of you that know so well, it's been a real honor to work with Gus. The very big positive for me is that Gus stays with me. He stays with Aspen. The only difference is he's not going to be sitting around a board table and he's going to probably be sitting on the other side of the table during presentations. But All in all, it's happy to see how we've grown our own timber within Aspen, the talent we've got within and A pleasure to have our financing in such strong hands for so long and that's where it will stay. Maybe just a quick comment to just summary. Lots of numbers with Gus, but I think the clear what for me is clear when I look at The year that we've had, of course, it's been a positive year, but it's not just a year in isolation. It's been a period. And This year does close the loop in many areas and I will cover this discussion about what I mean about closing the loop a little bit later. But for me, there's 2 things that stand out That we've got a reshaped portfolio that's given us good organic growth. Strong organic growth is something that we've been trying very hard to get a Portfolio that we know we can sustain and grow and you will see every section within the business grows. And obviously, the obvious is we decreased our debt by under ZAR20 1,000,000,000 I think it's ZAR19 odd 1,000,000,000, if without nearly a similar reduction in EBIT or EBITDA. So that's For us, those are the 2 things that for me, if I took a one line summary, that's where I'd be looking and saying this is why it's such a positive year. But I don't think this year's results are about this year for me. And I'm hoping that when I talk to you today, you'll see it's a platform that we have laid And that gives us future growth and the future opportunities. And clearly, I think If we deliver on what we hope the best is really yet to come. In life, with the sport, no pain, no gain, no risk, no reward. If ever we thought or anyone thought that you could build a global manufacturing, global distribution, global commercial Platforms in Pharmaceuticals and it was going to be easy, well, then you've misguided. We never assumed that, But I will say this much, we have done it. And what we have done will be a catalyst for our future growth opportunities. So it's been a really busy period Within Aspen, and just in case those of you that thought that maybe for the last period we've been resting or resting, in our spare time, We have managed and with incredible pride have managed to deliver the first COVID vaccine out of Africa. So Let's go on with the presentation. Let's go into the words here. We've got I'd like to start with what we Sean almost finished and where we start. Aspen is all about access. It's been a core focus for us is how we get equitable access to quality affordable medicines. And we've really had a proud record of delivery. I think it's well known what we've done around ARVs, TB, dexamethasone, the Huge volumes of anesthetics that were called on us during COVID. And then we've now produced the vaccine for J and J and that goes with distribution to Africa and the world. And it has been core to addressing inequitable access to vaccines. It's the only COVID vaccine manufactured in Africa with the commitment for the majority of doses to be delivered to Africa And my understanding is post October, all doses will be delivered to Africa. Probably the most exciting news is having displayed these competencies, we've got a real potential now to accelerate African access. J and J working with ourselves are working to further collaborate with us to work at how we can increase COVID vaccine '19 production and I'll take you through some later slides about how that production might be enhanced. And One of the areas that we are talking about and there's complexity here, so there's a bit of work to be done, but we committed to work together to include the evaluation of a license to really manufacture market and sell a vaccine for Africa. And if successful with that license, Aspen will have been not only manufactured, but we'll also have our own brand. We would sell directly to the individual customers. And of course, Aspen being Aspen is licensed is for Africa to 100% of the production from the vaccine will come will go to Africa. It really is a responsibility to take on these ventures. I can't tell you how many sleepless nights so many, many people across Aspen have had to get to this position of delivery. And we are grateful that the opportunity that J and J afforded us and The fact that they have backed this broader in communications with a much broader initiative to even expand this relationship further. I also have got to pay tribute to the Aspen teams. They were not the first of the 9 manufacturers In the J and J network, we had many of the Europeans and American manufacturers come in first, but they certainly come out with lots of the best and they'd be the best And when there's a shortage of API, Aspen got it first because of ability to deliver. And Through this process, it's been a highly political process that we've been exposed to many global platforms that we've had to talk on everywhere and it's been incredible, the tremendous support From the entire African continent and its leaders. And I think what's absolutely clear is that Africans are speaking with one voice. We never want to be marginalized again. If we look at our ESG efforts, of course, access to medicines is fundamental to what we do And the capacities we've put into J and J, I'm going to just give you some inserts here around the J and J vaccine. We've had no recalls And we've been pretty reliable with supply in very challenging circumstances with volumes being pretty erratic out there. We've obviously being where we are, we've set our vaccination programs, we signed the women's empowerment principles And we've had 0 facilities since 2013. As I said, we've had a lot of there's been a lot of political Pressure and the political insights into what goes in around COVID. And so we've had huge engagements with governments all around the world, NGOs, partners and trying to work out COVID responses both in our own country and Africa. And I think Another highlight for us has been integrated report, where we were classed as excellent by the excellence and integrity in integrated reporting awards. We've also looked at environment. The environment is an important part for us. We've Spent quite a bit of time looking at electricity and water. The Eastern Cape has been suffering in a drought as well and you will see what under one of the pen you'll see some details around what we are doing in that area. Moving on to the numbers. Gus touched briefly on them. I think from a revenue point of view, pleasing to see the commercial pharma growth at 6% reported and 4% in constant currency and the entire group growing from growing at 12% in reported 10% in constant currency. What does reported in constant currency mean? Well, it means that if you look at these results Operationally, the way the operation, they delivered 10% and the effects of the movement of the exchange rate is what gave us that extra 2%. So it's separation performance for the your exchange rate effect, it's a difference between reported and constant exchange rate. What that tells you is that the rand has depreciated across the basket of currencies to give that 2% more. So what have been our key growth drivers in commercial pharma, the emerging markets in commercial pharma and the vaccine production in manufacturing. Two highlights of those that they are. So when we look at commercial pharma and this is interesting because it gives you some insight into exchange rates. Our commercial pharma excluding the EU oncology and I took that out, we took it out because in our investor presentations we've given guidance outside of the EU oncology portfolio, our emerging markets grew at 6%, yet actually operationally they grew at 8%, Which means that the South African rand generally has got stronger against the emerging market currencies. And then the next one is interesting because although the developed markets only grew at 1%, In reported terms, they actually end up growing at more than emerging markets. Gus has taken you through manufacture, where when we strip out the Supply related contracts, you see a 12% growth in reported earnings and a 7% in constant currency. From an Aspen perspective and the guidance we've given, we try to look at our internal measure of organic growth. For this, we take out those supply contracts, we take out the oncology and we come out with an 8% growth in reported and 6% in constant currency. For those of you that follow us, You would have seen in the first half, we had a much bigger delta between reported and constant exchange rate and Gus showed you the currency volatility and how the rand strengthened in the second half relative in the second half of last year and that's what closed the gap to this 12% and 10% we see. COVID has impacted revenue. The regional brands were negatively impacted, lots of coughs and colds, antibiotics, steroidal products, but we have seen some improvement in acute medicines, which positively impacted those in H2 relative to H1. We've had a mix to positive impact in sterile brands, which I'll take you through a little bit more and we've been Negatively impacted in manufacture where we battled 1 with output and the output we've got has been has come at a high expense. Just think you've had to put people in bigger spaces in labs, people being ill in the facility. So It's been a real challenge to keep those doors open, but we've managed it and but it has come at a cost, not just a cost on as an Operating costs, but also it has impacted output, particularly in our API business. So let's look at revenue. Let's look at the regional brands performance and a very pleasing performance here. They're pleasing because Our key components are here, what we do in South Africa and what we do in Australia, both those businesses came under pressure, having big portfolios of antibiotics and OTCs. But the bounce back came in H2 and South Africa, which was down 5% for those that might remember, at the half moved into positive to show the improvement in the second half and Australia to jump to 6%. And Australia continues to be underpinned by good growth in the OTC business. The Americas, Latin America has been a real outperformer for Aspen for many, many years and continues on that trajectory, having grown another 9% in constant currency. The Europe period, what I've done now is I've taken oncology out of this area so that can have a look at Europe. Europe in constant currency would have gone from minus 18% to minus 5% and our regional brands would have grown 4% in both reported and constant currency. So that's probably quite a nice proxy for growth rate, that last number. The sterile focus brands, really another strong performance of the strong performance in H1 and I'm just going to give you a little bit of history here because those of you that follow us will know that there's been Quite a switch between elective surgery and COVID products and they're often different products. So we different countries, different Different continents on different stages of COVID and so we're seeing different impacts everywhere. So some territories benefited from elective surgery, But there have been material impacts of COVID impacts in this portfolio. We're comparing these numbers with last year, so I'll Just remind you what was last year. Last year, China was in a very strict lockdown and we had we really battled to perform in China last year. The results were bad, but Europe was exceptionally high because it was hitting a massive COVID wave. So We've got to look at what this is relative. So the big growth here is out of Asia and that is China effectively and China grew off a low base and so It's back. It is back. The doors were open, elective surgery back, hospitals opened, Asia performed. Europe actually was down substantially. It doesn't show in these numbers and the reason in anesthetics and the reason it doesn't show in these absolute numbers is because we had a strong increase in the Russia CIs thrombosis portfolio in the current year. So that was what helped offset some of the negatives in Europe. But what you can see generally is a positive performance across all the other regions as well. So a really nice performance and strong performance from our sterile business in this year. The last area to cover the numbers on around performance review is manufacture. And here, I would be looking at the finished dose form, which has got massive growth report here. But if we take out those supply related contract, you will see it's grown at 29% in reported earnings and 23% in constant exchange. Our chemical business, which is a fantastic business and a real performance and one of the when I look at some things we're really proud of over the last period, It's what we've done in this API space. But we have had, as I mentioned earlier, problems getting stock out at the rate we'd like to get it out and it has come at quite a bit of incremental cost. The Biochem business continues to grow, but it's also it's a business That has a commodity input. Heparin is basically a commodity and the commodity cycle has not plateaued and I'm never sure when it is going to plateau and how fast it comes up or down on the but if there's one thing to take out of here, it's really the initiation of our COVID vaccine stream, revenue stream. We did over ZAR400 1,000,000 here and that was in spite of having a hiccup in the API supply out of the buyer from the U. S. Emergent. So a really strong performance and a strong driver of growth. Going to go now and talk and this is when I spoke to you at the beginning. I said, look, just let's understand what we've really done here. I guess we've reduced debt. We've got nice numbers. But what have we done to Create, what have we done differently? We just bought and sold, what have we done? So let's start, first of all, with the J and J vaccine. We have partnered with J and J here, they partnered with us and we produced a really effective vaccine. I don't have to take you through all the numbers and details and the positive is that 8 months down the line in testing how these vaccines are waning, etcetera, J and J continues to be highly effective. I think we've seen all the stats and the stats are up there for you. But maybe the one of the more interesting stats I've got here is anecdotal one. 1 of the CEOs of the Private pharma groups in South Africa gave feedback to Aspen to say in the waves of COVID before giving the J and J vaccine, They had 43 deaths amongst the healthcare workers, doctors, nurses, people working in the hospitals. So they lost 43 people. Subsequent to giving the J and J vaccine to the stock, they haven't had a single mortality. So Very big local pharmaceutical private hospital group and that just really makes all the effort worthwhile. It's Statistics like that, that drive you and keep you to want to keep pushing on and testing all sorts of frontiers, but A really wonderful feedback to get. I think as we've watched this whole vaccine process unfold. You can get quite upset, you can get angry, but what it has done to Aspen has given us an absolute steely resolve to capacitate Africa and to be part of a process we unlock global inequality access vaccines. We've seen nationalism. We've seen export restrictions, whether it's little filters that go into making products is just Everybody grabbed what was theirs and the border shut. And those people who had capabilities and manufacture got first access. And Africa is really in a bad position because Africa had money, they had money to buy vaccines. But actually, when you look at the vaccine landscape, 99% of all African vaccines are imported. Much came from India and then India, of course, had its own problems and they just ceased exporting. So capacitating Africa is an imperative. It's an imperative, I believe, a global imperative. And what does capacitate mean? Do we put more factories in? Yes, it's going to need putting more factories down. We've shown at Aspen that if you've got factories on the ground, you get stock. But also we've got to talk about human capital and how we build the human capital base. Unless we do this, we will never have supply security. And what does Africa have to give? At the end of the day, vaccines are a commodity product. It's 1 person, 1 vaccine, 2 vaccines, 3 vaccines, whatever it is, but it starts with 1 it starts the multiplier starts with 1. And Africa has got 1,300,000,000 people. What Africa is starting to realize in discussions is that In our procurement policies, in the way we see our continent, we've got potential to reshape demand. And we need to make sure that we reshape that demand such a way that it's not something that's the adjustable pandemics because we don't want to end up with World Cup Soccer Stadium. We've got these very expensive edifices and COVID comes and goes. So we need to get volumes outside of pandemics and we need to have capabilities to be able to make those volumes. So let's look at what Aspen is doing and where we are And we look at our vaccine footprint in South Africa and we've got a pretty ambitious goal here. We want to get ourselves into a position where we're producing One vaccine for 1 African. So we've got, as you know, vial capacity and we've got vial capacity and vaccines are made in vials, but not all our vial We can make vaccines and that is what we're in the process of doing now is converting some of our biocapacity that We haven't got it. It's not available to vaccines to be able to make vaccines as well. And that's a relatively Quick process and will be ready by February of next year, so what's another 5 or 6 months' time and that will take our capacities from 300,000,000 doses to 4 50,000,000 doses. And we will have over 700,000,000 doses available by January 2020 Now that is information we shared with you, the $700,000,000 doses at the interim presentation. And you might say, well, what are you going to do with that $700,000,000 Well, we've got a fairly solid pipeline here to get some pretty good capacity Utilization of the 700, we're pretty comfortable around that, not just COVID vaccines and seeing the expansion of our relationships, But the boosters clearly, the boosters are going to follow and there are other CMO opportunities. So a lot of people are coming to us Because our capacity in Africa is proving incredibly valuable. We can get to 1,350,000,000 doses, which is nearly a doubling of our capacity of our existing footprint. And that comes with limited incremental CapEx. Why is that? Because for those of you that have followed us for 20 years, we tend to build A big house and we fill a room. And then we create the space in case those volumes are demanded. I'm pretty sure that Those volumes are going to be needed, because we are in some pretty serious debates around the Current conversion commercial discussions around how volumes might be filled going forward. But we really need to Push that button. We need certainty around sustainable volumes. I think what we are seeing is donor funds, the big buyers are all saying, look, this is not just about pricing only, is about access. So how do we build this capacity? And I think there's little global pressure to manufacture in Africa for Africa. And I think that we are on the right side of where we should be and need to be in terms of having capacities. But mostly, you need the capabilities and that is what Aspen has demonstrated here. This is not something you can afford to make a mistake. In terms of the progress, of course, we've got the one leg of our business, which sits in South Africa, the big sterile plant and another big part of it, too, also sits in France. And here we told you at the interim presentation we had available capacity of 200,000,000 Doses available because although we're closer to $400,000,000 in total, some of it goes to Viatoris who purchased of much of our EU thrombosis business and we've also got internal volumes in the products that go to China and Russia and all of those other markets. So This is but it's a very high value add manufacturing process. And we've made significant progress. There is demand, Significant demand for sterile manufacture at every level, including in here where we've got pre filled syringes, local seal, poly bags And we've managed to sign since we last spoke with these 5 months, so we'd need a signature with CMO contracts with 3 multinationals. Also vaccines or vaccine related products and we've got volume commitments of about 80,000,000 doses already there and those volumes will come on during calendar year 20222023. Gus told you we've had some delay in the blow full seal line. And that's ironically not due to the fact that people are in lockdown and they couldn't see each other, but that they were in lockdown. So So many of our suppliers have backlogs and they're trying to catch up with and so we expect a delay of about 6 months in that area. But I think the take out here is pretty good to get this far this quickly. We've been lessened with 6 months since we've last spoken and it gives a sense of comfort about what might happen with the rest of the capacity there. We're going to go now into what we what I talked to you earlier about closing the loop and then What we've a quick summary of what we've done and then hopefully some insights into prospects. So a couple of years back, I put this presentation up in which I discussed the Aspen model and I said here's our model. We build portfolios, we try and maximize returns out of those We reshaped them. We generate cash flows and we realize proceeds on the sale of those assets and then we have available capital. And I think we did all of this with no equity. So it would be completely self funding. I maybe lost the audience a couple of years ago and didn't quite I don't know, I think everyone is looking at different metrics And I think we're waiting to see could Aspen actually deliver on such an ambitious model given where the debt where this would take the debt to. And so let's just have a quick summary of what we did. We acquired significant sterile assets from anesthetics and thrombosis And we put a substantial investments into buying those portfolios. I also told you at the time for those that may remember Please don't look at the products we buy. That's like having the furniture in the home. What those products managed to achieve for us is an ability to build a platform, a manufacturing platform and base that would create all the opportunities going forward. So that is Those words in this slide are being relatively prophetic now, Hope, because we've got an extended portfolio of branded products and that's given us a geographical footprint where we've got critical mass across emerging markets. And that's been very important for us and you'll see also later why leveraging both the manufacturing, the Distribution footprint of where the opportunities lie for Aspen going forward. We've got brilliant API capabilities. We've spoken about those in the past and we've built on them and each year you've seen that improvement on them. And then we divested. We divested from geographies and therapeutic areas and really a couple of areas. We either didn't have the capabilities, we felt we were too stretched And then also the many areas where others saw more value than Aspen could achieve standalone and so there was value for both parties. And That is what we did and let's see what that translated to. So the best way to look at this and bear in mind, so there's been No funding, no outs, no equity funding. And if I go back to 2013, which was the period before we We started this process of the acquisitions and building. We started with a business with net borrowings of about $11,000,000,000 and those have grown to about 16 So a relatively small increase in debt. But what have we achieved? The revenues have nearly doubled And the EBITDA has gone up by 68%. More importantly, I think so in numbers, There's no debt, there's no equity in there. It's a simple thing to look at and see. But from a what have we really done here that's really important to us is we've got a reshaped commercial footprint. We've got clear organic growth drivers, which you've seen and you continue to see through this portfolio. We've also through this whole process managed to take a business that was generic focused, commodity focused, under pricing pressure to one which had trusted brands with resilient margins. We had Apache Representation across 19 countries and we've now taken this to a global business. And we've become a league we've got leading global sterile assets. And those are all big achievements in a commercial footprint and a good platform to which to work. Of course, We have a fantastic API platform that we never had. But I think if you actually analyze and look, what we've really achieved here is we've got a world class sterile manufacturing platform. And once again, I don't want to say we've said it before, but we have. We said, one of the slides at Aspen, we are industrialists. And we've shown you so many times how manufacturers have been the initiator of broader opportunities and it will continue to be the initiate of opportunities. And maybe that is probably the least understood or well understood part of what Aspen does and does particularly well. We've got diverse capabilities. We can make life life products, vials, ampoules, blow full seal, Eye drops, poly bags, prefilled syringes and we've managed to create that. On top of all of that, we also have ability to manufacture vaccines, is something that you which obviously come to the fore in these results. It's really we were able to create we were only able to create this fantastic footprint with massive economies of scale because we were underpinned by those sterile assets. We always had underpinned for volume and utilization of cash because the sterile assets that we wide. That was a critical part of what we achieved. Yes, it was a stretch, but it was important because without that, we wouldn't be here today. So we do think the sterile capacities will become a material contributor to the group. I think 2 or 4 years ago, I put on a slide that we hope this would be Become the largest contributor to the group and we still hope so. And I think if anything, this has been the cornerstone of their current strategy and delivery on what we had the vision that we had 5 or so years back. So let's just have a quick summary of what we looked at in this year. We produced for J and J a COVID vaccine from Africa and it's for Africa and the globe. The manufacturer has really delivered strong growth. It's been very resilient. We kept our doors open. There were substantial costs in Bangor to achieve that And it was boosted by the vaccine manufacturing revenue. And I think we one key area as we've emerged as a very Globally relevant vaccine manufacturer. Every platform, whether it's WHO, WTO, Any global platform, any global initiative, Aspen are always a keynote speaker in all of those and our African capacity is definitely proving a huge strategic advantage with fantastic complementary capabilities at NDB. We're delivering on organic growth targets. We've reshaped our commercial pharma. We've solid organic revenue growth. COVID impact relatively neutral to revenue performance. 1 was a little up and one's a little down, we think. Sterile might be a little bit regional, A little bit down. And the rollout of our commercial platform is certainly offering opportunities. People are often saying, well, look, if we use this manufacturer, can we use your front end forces in countries because it's a pretty our focus in emerging markets is often a very it's a strength to us because many others don't have a dedicated focus in that area. We've spoken quite a bit about exchange rate. It has impacted positively couple of percentage points certainly on the revenue line. The debt has reduced significantly And that's really out of a strong operating cash conversion, really an unbelievable performance from our teams there and even surpassed our internal targets because as Gus had mentioned, we'd started with what we thought was a low data balance. And if you have a look at Aspen, that has always been probably why we've never really wanted to issue equity in the period is that In all the years that we've been standing up here and Gus said 46 appearance of that was quite a shocker, but in all those appearances, the one thing that's Almost consistent every single year has been delivery on cash operating cash conversion. Our working capital is being well managed and is obviously When your debt comes down, your finances come down and will continue to come down in the period ahead. Corporate activity, well, We've definitely got headroom and we continue to review our portfolio. We always will, Regardless of debt balances and we really look at what our strategic objectives, sometimes in life you just got to stay focused, you can't make too much noise. But objectives really are the strategic fit to our existing portfolio and how we leverage These assets we've built or these platforms that we've created both in distribution, which I'm talking about moving boxes, I'm talking about commercial people in field and manufacturing. If we have to look at one area, South Africa continues to actively refine its portfolio. We've done 2 recent disposals And we expect further transactions in the South African environment. What are our strategic considerations? We will always be financially disciplined. What is making it interesting and it's a real positive, I suppose, Is our growth hurdles are demanding and that's because we've got and we forecast for a strong base organic growth going forward. So Something has to be really accretive and really value adding just to try and match the growth rate that we see within our base business. We look at some of the prospects. The commercial pharma, we expect to sustain growth. We see, as I told you, the growth drivers might be a little bit inverse of last year. We've got strong growth in regional brands anticipated and that's just The rebound we've seen in H2 in both Australia and South Africa and hopefully coming through for the full year this year. The Sterile brands will be more modest. We do expect China to grow, but it could be and will be could be impacted by volume based procurement. Volume based procurement It's very hard to assess. Sometimes there are people that have grown their brands, even large after volume based procurement, but it was something that wasn't a reality in the sterile space historically, but it looks like it could increasingly encroach into sterile business as well. The unwinding of the COVID lockdowns, I think it's going to have it will have a positive impact on manufacturing costs. We've learned how to work better. We've learned how be more efficient even within COVID and it will improve EBITDA margins, but also in particular in the API business, it will also improve turnovers and we think it will be relatively neutral on our commercial pharma sales. If we look at our organic pipeline, We've got a good pipeline to sustain and enhance our commercial pharma growth. We're looking at a broader pipeline rollout into China and we're looking at those brands with limited risk of facing volume based procurement. I'm happy to say we're launching 2 products in this year. 1 is and you'll get a sense from the products we're dealing with here, there's a slight difference In the top of the nature of the product, we've got Avastin and Emla. These are both creams. One's an anesthetic cream, one's A woman's health product cream, a hormonal cream. And we've identified and we're going through our portfolio. You've got to see does the regular does Will it stand at what extra tests would need? Will it pass the registration in China, etcetera? So it's quite a long assessment that one needs to achieve here, but More than 10 products have been identified, 10 more have been identified for registration, expect more on top of that. And the idea really is To de risk the business, I mean China is a great market. It's a great market for Aspen. And it's got lots of people, Many, many people and they've got growing influence and so it's a market you can't afford not to be in. It has risks, but it's a market you can't afford not to be in And our strategy is to create a strong pipeline of products, base pipeline of products, carefully selected So that we have sustainable brands in that area. Some of them will include retail brands. So it's something like Emla can be sold in hospitals as an anesthetic It can also be sold in retail. We had to put our AUGORAN product on hold during COVID because It was unethical to do these tests during COVID on Ugaran and we're looking to reinitiate Those studies now together with a partner, we'd like to find a partner to work with us to reinitiate those studies. The conjugated estrogens in the U. S, we are awaiting feedback from the FDA on the bioequivalents and that's expected in the Q1 of calendar year 2022. Anesthetic savings, Gus mentioned, Bad Otterslo, that's our German facility and South Africa are on track to start delivering with a delay out of NDB of 6 months. I mean, if you want to put a number on it, plusminus ZAR100 1,000,000, I would guess, guys around about there. If we look at the prospects, continue with the prospects here, the exchange rates will impact results And probably you've got to start thinking about vaccines becoming a bigger part of our income and vaccines are sold in hot currency. So that makes That will also impact how we look at exchange. In fact, I think if I look at our South African business with the vaccines forecast for next year, We're likely to be hard currency positive even within our South African business, which remember imports products, APIs, etcetera, from our local business. So it's likely to be hard currency positive, even our South African business facility. So our vaccine rollout, we expect to gain momentum. We've got about 4 months sales in there. It was over $400,000,000 We should if you Annualize that, we should do that and some more, just having more steady supply of drug substance. On a business as usual basis for financial '22, we can't make assumptions. I mean, who knows where COVID might take us, who knows what license incomes might come in and how our space around the Delivering vaccines might change, but we are forecasting on a business as usual basis, high single digit revenue growth And even as Gus mentioned, even stronger EBITDA growth and we'll have we expect that 1 through more output in our manufacturer, but also These COVID related costs, I mean, that's been quite a big cost, particularly in our Manufacturing division. And of course, we expect even stronger in HIFs growth as our finance costs Well, they decreased strongly. This year will continue because a lot of the payments we received, we got to the end towards the end of and benefits we got towards the end of the last financial year. There's always potential impact from corporate activity within Aspen. I don't have to say that to you that you've been watching us for a while, But we told you how high some of those barriers might be. And really, I think we really want to work really hard to achieve access to a license We think it will be a massive catalyst. It's transformative on every metric. I think there's not an African country or is an African leader that is an incredibly supportive even world leaders, global leaders who are so supportive of achieving this. It is really most and foremost, think it will be a game changer for African control over access to know that who you're selling to, how you're selling, releasing your own product and having control over the whole process is something that would be transformative for access to Africa. And I think that together with everything else that's rolling out now has been a significant endorsement On the strategic vision we had 5 or 6 years ago and shared with you. And I think if anything out of this presentation, I hope There's 2 things about us. We haven't rested or rested, although we have many of you thought we might have, But we're in a really great position now to deliver extra on this great platform that we have built both at manufacturing and distribution level. So thank you. Thank you all for your attendance. I think we're going to go to Q and A now. Hi, everyone. So we have two questions that we're going to Take this morning. The first one is from Jonathan Du Toit at Oystercatcher Investments. Probably Does the HPC other net income come back in future years or is it permanently gone? Thanks, Jonathan. HPC milestones have reached their term now, so there will be no further milestones respect of HPC. And then we've got a question from Victoria Lambert from Bank of America. What percentage of debt is rand denominated versus foreign FX? Victoria, This is a target which is going to move as we apply proceeds of various structures to our debt. But at the moment, you can probably start with about 30% of debt being rand denominated, but that may well declined during the course of the year depending on what we do with cash inflows. We do try and seek the right balance of currency debt to our earnings and the other factors we take into consideration as well. All right. We'll take further questions in meetings throughout the day. But those are all for now. [SPEAKER JEAN FRANCOIS PRUNEAU:] Thank you. Thank you, everyone. It's been a great pleasure dealing with the investment community over A number of years, I don't think there are many of you that are around today that were there and I kicked off, but it has been great dealing with you. And of course, I'll still deal with you during the balances this year. But thank you all for the interactions over that period of time.