Aspen jumps most in 19 years as drugmaker trims debt
Aspen Pharmacare surged the most in more than 19 years on Tuesday after the drugmaker said it had reduced its debt and delivered strong cash flows in the second half.
The rally follows months of share declines as Aspen extended a deadline to close the sale of its infant-formula business, said talks to sell a European business had ended and offered to pay the UK’s National Health Service £8m (R146m) to settle claims.
In May, the company finalised the sale of its portfolio of prescription and over-the-counter drugs sold mainly in Australia and New Zealand to Mylan, for A$188m (R1.9bn).
In June, it finalised the sale of its nutritionals business to French company Lactalis, resulting in a net cash inflow of €635m (R10.6bn).
The market is “happy with the reported strong cash flow in the second half”, which is supported by working capital, said Sean Ungerer, a Johannesburg-based analyst at Arqaam Capital.
Aspen also reported gearing that was better than expected, he said. Its borrowings dropped to about R40bn at June 30, from R53.5bn six months earlier, the Durban-based company said in a statement. The leverage ratio is expected to be between 3.6 times and 3.7 times, compared to a covenant threshold of four times.
The stock climbed as much as 14% to R87.52, the most since January 2000. The stock ended the day trading at R82.41.
The high debt levels had been the biggest reason for the stock drop in 2019, said Lester Davids, an analyst at Unum Capital. “The market is pleased [with the lower debt and is] buying back into the story.”
The company warned that headline earnings per share for the year to June would fall by up to 17% as a result of litigation, restructuring and transaction costs, the company said.
Aspen said revenue would either be flat or fall 3% in the year to end-June at constant exchange rates.
Bloomberg, with Karl Gernetzky