SA’s biggest pharmaceutical manufacturer Aspen Pharmacare on Wednesday delivered news set to cheer shareholders, announcing that it would reinstate dividends after cutting debt to well below the levels required by its lenders.

It will pay shareholders a dividend of 262c a share, and will consider future distributions on a year by year basis, it said.

Aspen scrapped dividend payments in 2019, well before the coronavirus crisis struck, due to the huge debt pile it acquired during a series of acquisitions that diversified the company beyond its historic generics base. It continued to withhold dividends in 2020 as it refocused the business and sold assets to reduce its debt, and in common with companies across a wide range of industries sought to preserve capital in the face of the business uncertainty created by the coronavirus pandemic.

Aspen’s share price has lost almost half its value over the past five years, partially due to market scepticism about the scale of the debt it took on during its acquisition spree. Its stock fell to a low of about R65 in late 2019 when investor concerns about its debt were at their worst, and then began to recover as the company reduced borrowings. Aspen’s share price closed on Wednesday at R190.51.

Aspen’s net debt fell by more than half during the year to June 30 to R16.3bn, compared to R35.2bn the year before. The reduction in borrowings was driven by the sale of Aspen’s European thrombosis business, strong operating cash flows and a stronger rand relative to the euro and Australian dollar at year-end, it said in a statement after market close.

As a result, Aspen’s leverage ratio stood at 1.74 times at year end, well below the 3.5 times required by its lenders. The leverage ratio is a measure used by lenders to assess how well a company’s earnings can cover its debt.

Aspen reported a 12% increase in revenue to R37.8bn, compared to R33.7bn the year before. Normalised headline earnings per share, a profit measure used in SA that strips out certain one-off items, rose 10% to R13.10, compared to R11.94 the year before, partly due to reduced finance costs. Normalised earnings before interest, tax, depreciation and amortisation rose 3% to R9.9bn, as lower gross profit and reduced operating income were partially offset by controlling operating expenses.

Aspen said it had been able to provide a reliable supply of its medicines and products despite the challenges thrown up by Covid-19, but sales of its specialist anaesthetic products had been volatile because elective procedures were deferred when infections surged, even as demand for products used to treat Covid-19 patients rose when cases mounted.

Aspen said its investment in its sterile manufacturing facility in Gqeberha had positioned the company to play an important role in the provision of Covid-19 vaccines for Africa. Aspen secured a contract with Covid-19 vaccine manufacturer Johnson & Johnson in November 2020 to formulate, fill and finish its single-shot jab.  
“Aspen is hopeful that the current discussions between J&J and Aspen, including a possible licence for Africa, could make a meaningful contribution to improving equitable Covid-vaccine access for the continent,” it said.

Aspen said its Covid-19 vaccine sales began in the third quarter of its financial year, and generated revenue of about R400m, but did not disclose the margin on the jabs.



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