Aspen Pharmacare Holdings Limited (APN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Aspen 2020 results presentation. I've done over 40 of these presentations over the last 2 decades, and this is certainly the first one where I've had to come up in disguise. So that's got nothing to do with our results and everything to do with the world around us as we know. I'm going to start off the presentation with a financial review. And let me kick off by saying that it's been a very challenging time for all of us with the COVID-19 pandemic. Aspen is in a fortunate position as a company to be relevant in these times. But nonetheless, it has taken a great deal for us to keep operational. I'm very, very proud of all of our people who have managed to keep Aspen in full production and providing medicines around the world during these challenging times. We're also extremely pleased with the performance that we've achieved, although this has been somewhat diluted by the effect of the pandemic. We had 4 medium-term priorities, which we've been communicating to all stakeholders. And I think on reflection, we've made excellent progress towards achieving all of these in the last 6 months or so. On the performance side, we'd set ourselves the target of achieving organic growth. And with the organic growth we've delivered and which we'll look at, I think all can agree, we've ticked that box. We've also achieved our leverage ratio target of getting to less than 3x cover with our leverage ratio, which is excellent. Our other 2 priorities were around an increase in focus and building on our strengths. And I think we made good progress during the operating year with that and our transaction to dispose of the thrombosis products in Europe will certainly assist in those 2 priorities as well. And Stephen will concentrate on that in his presentation. But over to the financial results. And if we look at a summary of the headline numbers, on a reported basis, revenue was up 9%, which is an excellent outcome, given the offsets from operating under COVID conditions. Gross profit percentage fell a little, largely influenced by mix, but some other factors which we'll unpack. And normalized EBITDA was up 7%. A slightly higher effective tax rate was offset by a drop in finance charges. And NHEPS was 9% higher at ZAR 0.1465. On a constant exchange rate basis, the trends are largely similar, but a little lower. So NHEPS is up 5% compared to 9%, and that is reflective of the positive effect of the exchange rate relativity, particularly in the last quarter, where the rand was a fair bit weaker than all of the other currencies. As far as our debt and related headline metrics are concerned, we posted some excellent outcomes with an exceptional operating cash flow conversion at 142%, helping us to achieve 2.9% on the leverage ratio, which, as I said, meets our medium-term target of being less than 3% -- 3x. I'm now going to unpack some of the segmental performance elements. If we start with the regional brands, regional brands grew 3% despite some strong headwinds in the fourth quarter under COVID conditions. We have good performances from all of our key territories, Sub-Saharan Africa, Australia and Latin America. The gross profit percentage, however, was unfavorably affected by the higher cost of goods related to doing business under COVID-19. And that ranges from the special operating conditions under social distancing and manufacturing facilities to the difficulties in shipping products around the world under these circumstances. Other factors weighing on the GP percentage were the recall of Zantac in Australia, where we lost a high GP product and the ongoing pricing pressure on the oncology portfolio in Europe CIS. Turning to our Sterile Focus Brands. They were down 1% overall, and there was a balance of pros and cons here. We had positive outcomes from the interventions that we implemented in Europe CIS. And COVID-19 assisted our Anaesthetics portfolio, in particular, where the Anaesthetics were used extensively in the treatment of patients under high care. However, this was offset by a postponement of elective surgeries, which weighed on the products used generally in surgery in Europe in particular, but also elsewhere and the hard lockdown in China, where we lost about 3 months of normal trade. The gross profit percentage remains stable despite lower contributions from China, which is a higher-margin territory and also the increasing cost of heparin affecting the cost of goods for thrombosis products, which we've guided on previously. Manufacturing was a star performer for the period and was up 14%. APIs were the main driver behind that growth, and it was assisted by sales of heparin, which we reintroduced during the course of the year, an increase of around ZAR 668 million from those heparin sales, but also good sales from other API products and growth in the finished dose form business, supported this number at a better GP as we improve manufacturing efficiencies as well. The final quadrant on this page sets out the relative GP percentages between the 2 years. But I think I've given sufficient coverage to that in the segmental unpack. Having a look at normalized EBITDA, quite a busy slide this with both constant exchange rate and reported numbers for you to look at. I'll talk to the constant exchange rate numbers, but the reported numbers follow the same trends. So at a gross profit level, we were slightly down on a slightly diluted percentage of revenue at GP percentage. We've discussed the drivers there. And then one has to add back depreciation because depreciation within the Aspen world is all in the gross profit line. So all of your depreciation is already on cost of goods. So there's an add-back for depreciation to get to EBITDA. OpEx was exceptionally well controlled over the course of the year, on a constant exchange rate basis was actually down slightly. And then we had an uptick in net operating income over the prior year, which benefited from the payment of the last expected milestone from -- on the HPC product. That brought us in at a normalized EBITDA pretty much on a percentage basis, in line with last year. On a constant exchange rate basis and actually at a superior normalized EBITDA percentage on a reported level, a gain of 2.5% at constant exchange rate and 6.7% at reported. Currency, as I alluded to in the opening slides, has been a real factor this year. And we'll look at that in this slide and the next one. If we start by looking at the currency mix, you will see that there weren't significant changes during the course of the year. However, there were some -- and probably the biggest one was in the euro EBITDA contribution which was influenced by the strong manufacturing performance, which is substantially out of the European API manufacturing sites. So that was an influencing factor there. For those of you who are not regular Aspen watchers, it's worth noting that at an EBITDA level, the U.S. dollar is a negative contributor. In other words, we have net expenses in U.S. dollars. So it's a contra -- contributed to the other currencies. Other bit of information I can share with you regarding the thrombosis transaction in Europe, is that if we strip out that revenue, the European revenue contribution on a pro forma basis is about 27%. So it gives you some kind of idea how the thrombosis transaction will lower exposure to euros. Currency volatility was actually the big currency story though. And we've tried to depict that in the graph in the top left-hand corner. So just to unpack that a little. It starts with the H1 relative exchange rates all pegged to 100 and the rand remains at 100. And then you see the relative movements after December 2019 through March and then June 2020 and finally to August 2020. And what you can see on that graph is how many of Aspen's major trading currencies, the euro, the Australian dollar, the U.S. dollar and the Chinese renminbi, all sharply appreciated against the rand. It started in the third quarter, gathered momentum into the fourth quarter, and you will also notice that into August 2020, there's been a continued strengthening, in particular, of the Australian dollar and the euro. The U.S. dollar and the renminbi have declined a little. The Mexican pesos has been slightly appreciated, and the rand has been stronger than the Brazilian real. What that does is cause an uplift in net earnings, and you can see how that fourth quarter appreciation of our major trading currencies against the rand has uplifted the constant exchange rate performance relative to the reported number. So plus 5 percentage points on revenue, plus 4% on EBITDA and plus 4% on normalized HEPS. And if these prevailing exchange rates continue, you can expect uplifts in excess of this relative amount going forward, given that the first half and some of the beginning of the third quarter of last year were at much different exchange rates. And we provided some of that exchange rate information for you at the foot of the page. Looking at effective tax rates. And what we have here is a group effective tax rate and then the normalized effective tax rate. And you can see they track each other fairly closely with the normalized rate, a little lower than the overall effective rate. The deviation in 2019 is caused by the large write-off of -- or impairment of intangibles during that period, which are not tax deductible. So that causes an anomaly in the tracking of these 2 and caused that spike. The normalized effective tax rate this year has ticked up 0.6%. That is largely a consequence of mix between the currencies in which we trade. And going into the new year, we believe the effective tax rate will remain really pretty stable, although after the thrombosis transaction completes, it is probably going to be inclined to rise a little. We always give a lot of information on the reconciliation of our various earnings per share numbers. The one we're featuring here is constant exchange rate from continuing operations. In the appendices to the presentation, there are 2 other variations at reported continuing and reported continuing plus discontinuing. And the reason that we give prominence to this is just to give all users of this presentation, the opportunity to make their personal selection of the earnings per share basis on which they'd like to analyze and assess our company. As management, we use normalized headline earnings per share, because we believe that eliminates the most noise and gives you the clearest look through. But obviously, you're all at liberty to choose the metric which you believe works best for you. There's only one point really here to make, which is the very high increase in basic earnings per share is affected, again, by the impairment of intangible assets that also caused that spike in the group effective tax rate, where the much higher impairment last year gets written back to get to headline earnings per share. And as a consequence, basic earnings per share is a much higher percentage increase. This is a bridge of the normalized headline earnings. So if we start with June 2019, where we delivered 6.1% of normalized headline earnings. The FX effect has caused an uplift at this level of ZAR 243 million. So on a like-for-like constant exchange rate basis, that is ZAR 6.38 million (sic) ZAR 6.38 billion normalized HEPS. And then you will see that the positive contributors to normalized headline earnings over the year have been the EBITDA performance and the lower finance costs with increases in depreciation, amortization and a little bit on the tax rate. Bringing us out at the ZAR 6.685 billion that we closed the year with. Now I look at some working capital metrics and for those again, unfamiliar with Aspen, we consistently report working capital as a percentage of revenue. It's an indicator we use internally, and we have shared it externally to track our relative working capital investment. So you will note the improved performance into FY 2020 with the working capital as a percentage of revenue falling from 53% to 47% on an all-in basis, and excluding the working capital at Oss, which is our API site, which has much longer working capital cycles, we get to 38% as opposed to 41% a year ago. There's a little bit of a technical anomaly and the calculation in that revenue is measured at average exchange rates and working capital at closing exchange rates. So you're not really measuring like-with-like. And if you want to put them all on the same exchange rate, then you get to an even better outcome, which you'll see on the last line of the table. We're now going to look at a net working capital bridge. And what we've done here is to work in constant exchange rate to try and remove all the noise to do with exchange rates. And we're dealing with continuing operations and the factors that have influenced this bridge. We've had a decline in inventories. This is influenced by the increased sale of biochem APIs out of the Oss facility, mostly heparin, but others as well. Trade debtors have been favorably impacted by some impacts, in fact, of the COVID pandemic. At the end of the third quarter, as the first wave of the pandemic started to become apparent in some of our big trading territories like South Africa and Australia, there was panic buy-ins, a lot of stockpiling on people's shelves at home and also in the whole trade route through wholesalers and pharmacy. And so March was an incredibly high sales month. What inevitably happened as a consequence of that was that an overstock situation had to be eliminated, and there were very much softer sales months through the last quarter as inventory was normalized in the trade. And that meant that we had a much lower debtors figure at the end of the financial year than normally. And the benefit of that is a cash inflow on trade debtors. There's also some unwind from the Nutritionals transaction, which is a once-off benefit sitting in that. And then if we look at the benefits on the other receivables, we've been very successful in collecting some long outstanding VAT amounts due to us, and that final HPC milestone that we received is also reflected here. So a very good working capital outcome. I do need to just caution that in the year ahead, if we return to normal trading circumstances, normal trading conditions, normal cycle of debtors, this benefit from the debtors in the current period is likely to unwind and rebound leading to a growth in debtors into the new year. We will also be carrying higher values on an average basis of the cost of heparin due to the rising price profile of heparin in recent times. So that will influence inventories to a certain extent. Other information relevant is relating to heparin, we still are in the business of reducing our stockpiles of heparin. We have sufficient headroom and reserves in heparin to continue to be selling heparin. So we can expect and intend to continue to sell heparin when the pricing opportunities are sensible. And as far as the transaction with Mylan for the sale of the thrombosis business is concerned, we expect the working capital element of that transaction to be somewhere between 20% and 30% of revenue. On to capital expenditure. We ended up spending ZAR 2 billion of CapEx on property, plant and equipment in the current financial year. This was less than target. The pandemic did cause some slowdown in the projects and consequential low expenditure. So then our plan, FY 2020 was going to be the peak spend year in the major CapEx projects related to the Anaesthetics products. As a consequence of the slowdown, there's a lot of activity taking place this year to get the project back on track. So in fact, we expect a tick up in CapEx in the year ahead before it falls in 2022 and thereafter, as those projects come to fruition. And I'm pleased to be able to share with you that the projects, we do believe will be able to stay within their broad time frames. And so first commercial production is still slated for the current financial year both in Port Elizabeth and Bad Oldesloe and Notre Dame de Bondeville, it's slated for 2023 and full commercial benefits, we still expect to see by financial year 2024. Look at the borrowings metrics, makes for a very pleasing reading. The ratios are all headed in the right direction, gearing down from 42% to 33%. The leverage ratio down from 3.6 to 2.9. Interest cover, up from 4.7 to 6.5, so all headed in the right direction. Lower net borrowings, and we'll look at that on the next slide with a bit of a bridge. Comfort around our covenant levels and obviously, with the receipt of the proceeds of European thrombosis transaction, that leverage ratio is set to fall further. This is the net borrowings bridge. And this also is influenced by exchange rates. We have -- the biggest portion of our debt is in euros, and we also have an Australian dollar element, both of which you'll recall from the currency slide strengthened against the rand to a great extent into the closing. As a consequence of that, there's an FX effect of ZAR 5.65 billion on borrowings, which has offset the really good cash inflows during the year. At the end of the year, debt still came down by ZAR 3.8 billion. But this FX effect was an offset. ZAR 4.5 billion of the inflows were related to transactions, and the operating related cash flows were just under ZAR 5 billion with obviously, operating activities driving the cash inflows there. My final slide relates to a look forward to some key cash flow commitment trends. I'm pleased to say that this is a much less sensitive slide than it was when we first introduced it when we had some big forward commitments. All of those have largely washed out. CapEx will continue. Intangible CapEx also obviously continues. We have some ongoing IP projects and then other IP investments. And to an extent, IP CapEx is opportunistic as well. So that can vary dividends. We have agreed to defer for this reporting period. There are some deferred payments, but this category trends lower. We have fully provided for what we hope will be the commitments that have been shared publicly regarding a settlement on the European Commission investigation. So that sits in the pricing investigation number. We have some deferred receivables related to past transactions, which is an incoming amount, some of that was previously sitting in conditional payments and receipts, but has now become firm, and then in conditional future payments and receipts. These are payments and receipts, which have a contingent element to them. Net, there's ZAR 1 billion of net contingent payables. But by their nature, that amount and actuality will vary depending on events because by their nature as contingent payments. And then a final note here, there is no account taken of the thrombosis inflows, which are due. We expect some towards the end of this first half of the financial year and some into the second towards -- well, in June of 2021. So that's all from me. I'm now going to hand over to Stephen after the necessary sanitation process.

Good morning, everyone, and it's a real pleasure to be here today, particularly with the news we've got. I mean, hopefully, by the end of this presentation, you'll feel the same way we do. We feel like we really got onto the front foot finally, in Aspen, and we've got a very well reshaped business. I think before going into the details, it would be remiss of me not to just ask people to look at the objectives that we set historically, and we've put in all our historic presentations to understand why we feel on the front foot. We really have delivered on all of the objectives set. And what we've done has been absolutely consistent with everything that we've done historically because Aspen is a simple business to understand. We don't put equity into our business. So there's tremendous pressure on performance. Every asset we've built, we've had to build out of performance. And what is performance? Performance is both organic performance and also what you acquire and what you dispose of. And please look at this transaction and think about what we've done in the past when we bought assets in Australia, fixed them up. We've sold some because we need to sell a part of what we buy to be able to afford some of the acquisition prices that we paid. So when people say to me, "where are you?" I think it's sometimes good maybe to put it in terms, pharma maybe is not always well understood, but maybe property is better understood. And really, if you look at where we started from our home in Greyville and without inheritance, without big funders, with our parents' money, we've worked our way up. And we're now in a really upmarket neighborhood. And this is our vision. We're in a completely upmarket neighborhood, and we've built this fantastic home. It's fantastic infrastructure on strong foundations. Those foundations are the brands that we've built, the credibility we've built. The infrastructure has been extensive. You can see the CapEx that we've put into the -- and this is the base and the foundation we have that we, as a business, need to build off, and now we need to execute on. I think one should look at products within our business is furniture in the house. Sometimes you need a revamp, sometimes you need a reshape. But effectively, what we have achieved here, and we hope to achieve is we've created greater opportunities for ourselves as we've moved up the value chain. So let's just talk a little bit about that reshaped business. We have reshaped our pharma business, and we've got a strong weighting towards our growing territory. So we have -- now we have reshaped our business for growth, accelerated growth. And growth is important to Aspen for all the good reasons I've given you earlier. We've focused on our key foundation territories: Africa, Australia, China, Latin America. And I think for all of those that have followed us, we've shown capabilities in these markets. And we also have sufficient scale to capture future growth opportunities. And scale is quite an important word in our business. We've got trusted brands and categories, and this includes our Anaesthetics brands, which will benefit from growing populations and increasing medical aids. And well, because of the markets we're in, despite for what COVID does or doesn't do, they still enjoy a growing middle class and that middle class often has to pay for their own medicine. So we often -- we've got private sector investment, and people will pay out-of-pocket for our medicines. Because our medicines aren't expensive, but they have a very high quality. Our developed market platform has been streamlined. So if you look at our developed markets, where are they? We're strong in the manufacture. Why are we strong in manufacture in developed markets? Because our client bases tends to be Europe or U.S. facing multinationals. We've also streamlined, for example, our European business because we look at our European business, and we've told you, and you'll see we said we were going to come back to our internal reviews by September. We have delivered on the promising in spite of doing a very complex transaction across a computer. We've looked at our business and said, "What can we and what can't we compete with?" And we told you historically, we felt we were subscale. When you look at the 2 different portfolios and we look at Anaesthetics and we look at thrombosis, the thrombosis business not only needed a smaller force of key account managers who can walk into hospitals and do procurement, it also required an army of representatives. To truly make an impact, you had to grow that army and you had to put a big pipeline behind it, neither of which we felt we could achieve in thrombosis. In Anaesthetics, it requires key account managers only. So we streamlined it, and we have a good developed market presence. And that developed market presence is very important for us because bear in mind, we also have euro-based costs in some -- a lot of our facilities. And probably what is finally coming, you build and you wait and you wait and you -- it's like suppose watching your home being built, it never seems to finish, but we've built strategic manufacturing capabilities. And this will really help us to enhance our offering of quality affordable medicines. And we're really well positioned at Aspen. Steriles is an incredibly difficult area, maybe one of the most, if not the most complex area of manufacture. And we've got the specialty manufacturer. And as Gus showed you, some of our projects are coming on this year. And this gives us a wonderful opportunity also for partnership with multinationals, and I'll talk a little bit more about that later. So let's look at the divestment of the thrombosis business in Europe. I think what this transaction does do, it signals the end of the material commercial restructuring post the acquisitive period. And that was a -- I think that's a big statement to make. We've been going through this reshaping. It's been painful. Hasn't always been apparent, and we never been a -- no one can be 100% sure with any transactions, what will and won't happen. But now we are very comfortable. We've reshaped the business. We've exited Japan. We exited Merck and we've exited the thrombosis business in Europe, and we also reshaped our Australian business for growth. The logic to this transaction and why it really works is that Mylan have significant synergies. They're a very big business in Europe. They've got economies of scale, and they've got a good injectable portfolio, but they also have biosimilars, and they can leverage the experience we have in the Aspen teams to add value and to be able to get them market access they might not easily have had before. And so that -- and because of those synergies, they have a different entry multiple to the multiple that we have as an exit multiple. We've retained a long-term manufacturing supply agreement. So we retained these volumes within our facilities. And we at Aspen are very comfortable that we've achieved a very fair price for the business. And what these proceeds do, do is that will really help us reduce the debt significantly, as Gus said, it would bring us to levels I don't think we've been in the last 10 years. Even before this acquisitive period, I'm sure we probably get to levels at that level. And we've got headroom to support and invest behind our core territory. So a really positive outcome for ourselves. If I look at what reshaped means, people talk about reshaped and finally, let's really look at it in terms of numbers. So let's look at what the Sterile business we had last year versus where we sit now. And when you look at last year's numbers, you'll see nearly 60% of the business came from what we call Europe and developed markets. Now we've put Europe as one. We used to have developing -- the Central Eastern Europe under developing markets. But the reality of a European common market is that products sold in Poland and can end up and do end up in Germany. There's 3 parallel trade. So effectively, Europe is one. We also had Japan in there. And so 60% of our business was sitting in what we call Europe and developed markets. What we call our foundation markets was effectively Australia and our emerging markets was just 41% of that par. Because we are a lot stronger in the 40%. It obviously had an effect on our growth and will affect our growth going forward. What these transactions do is it now shifts 2/3 of our business into this growing market. So that's what we mean by reshaped business. You will still see Europe plays an important part in this business -- in the business, but to perform here and to perform in Steriles, we've got to keep doing what we've been doing historically, pre-lockdown in China, Latin America and our other emerging markets. So that is an important period. Then we've got our regional brands business. Now that really is the base business, a lot of the base business we have in South Africa and Australia. And those markets are key for us to keep performing in our regional brand business. And these -- they've -- we just keep becoming these foundation markets become a bigger and bigger portion of this pie annually. So it just keeps outperforming the rest of the pie. And so when you take this and you add it all together, our business is now shaped with nearly 80% of our business in these core markets that we can grow. And there's going to -- and that gives us the confidence to tell you, we're putting ourselves on a different growth trajectory as a business. So with all of this, I thank you, I just wanted to give you a quick update of where we were and how we'd reshape the business, but let's just focus a little bit on what was achieved this year. I think we could have achieved a lot more. We were really in a pretty good space, and these numbers have been impacted. But I think the words are coordinated effort amid the crisis really is an understatement. It's an understatement in that it took incredible effort for our people to go to work, deliver medicines in the heat when others are sitting in lockdown to deliver medicines. And when we see the value Aspen has delivered to humanity. Starting with where we were in antiretrovirals. You're probably aware of what we've done, for example, in dexamethasone, but probably the most stress we've ever had as a business. And it's stressful not only on manufacturer, but just the incredible pressure of human life is what we had to do in Europe at the heat of the pandemic in about April. I'd tell you that I was receiving calls from heads of state, asking us for their allocation of medicines, particularly the Anaesthetics. We'll show you a little bit of what that does in numbers. But as Gus said earlier, a really big thank you to those people who pulled out every stock to save as many lives as we could and an incredible performance. But going back to the numbers, but I think it was important, just gives you a context to these numbers. Our commercial business was up 6%, 1% in constant exchange rate, good growth in Anaesthetics, strong growth in our -- we had good growth in our regional brands as well. But thrombosis was up, although up 2%, in reported currency was down 5%. And that's a -- a lot of that's sold in Europe, so you get that quite big swing because the euro strengthened as Gus showed you earlier. The Manufacturing business has done really well. It's supported by heparin sales, but the -- we've had really good growth in the chemical businesses as well. And these businesses are very capital heavy and capital costs. So putting more volume through does change the gross profit percentages, and that was apparent in our results as well. Then when you look at it and you say, what is constant exchange rate? Constant exchange rate is really how you've operated in the markets and performed. Your reported results effectively shows you the exchange rate fluctuations. And you've got a 4% growth in constant exchange, so an operating performance with 9%. So there's a 5% differential there. And that really is the weakening of the rand against currencies. I think you can use the word rand hedge component of the Aspen business. And as Gus pointed out earlier, this fluctuation is really only coming in the last quarter. So you'd have your debt, you have your stock everything in the last quarter, but your earnings have been an average of the year. So if you got the last quarter and multiplied it by 4, you'd have significant uplift in here. So this becomes a discussion around currencies, which is beyond where I can go. Let's have a look at what we've -- our revenue by region. I'm going to break this out in a little more detail later for you. But let's have a look at where we are. So Asia Pacific is down 2%. That's from business that was up, and that is really the China effect, the lockdown effect. I think we -- in our last presentation, we told you all our reps were home. They were locked down, and I'll show you where China was then and where it is now. Africa and the Middle East really performed well. Up 7% in constant exchange rate. But could have been -- and could have and should have been a little -- or should been a lot stronger. The Americas are up with Lat Am, down with the North America, and that's a net position that we're in. And Europe CIS put a really pleasing performance and some of it driven by COVID. So I'm going to look through the -- we're going to have to talk a little bit about COVID. I'm sure you've heard it from so many, I'm not going to spend too much time of it. But to the extent it negatively affected Aspen, I think I've covered with you there with China. South Africa and Australia simply haven't had a winter. I cannot remember us not having a flu season, bellwether brands of Aspen like Augmentin, are down significantly. And that is the acute treatments that are battling, where we're battling with. So acute treatments are treatments, you get one-off. Chronic is something you have regularly. The chronic treatments have remained relatively steady. Thrombosis was also negatively affected, although the heparin was a big -- is being used for COVID. There's just no elective surgery and the empty beds waiting for COVID patients. We had some really positive impacts on these results, and that comes through -- came through in developed Europe, particularly in Anaesthetics and our Manufacturing business, and particularly for APIs. And I think we're seeing a bit of a shift here. We're introducing a lot more clients into our API business. A lot of people, I think, the scare and the closure of markets in the east have pushed people to say, "listen, do we really want to risk our supply chain for a smallish component of our cost of goods," and they are. And so we're seeing a shift into our API business in Europe. These -- I think there's nothing better than a few simple graphs to explain what COVID -- the COVID impact is. The top graph is really China. And you'll see where we were historically. And then by January 2020 in January, we've got Wuhan in lockdown. When we spoke to you about February and March, we're going down that steep cliff down, and that was a proper lockdown. And we couldn't -- no one could move. No one could -- there was just no trading and China dipped. Then the lockdown lifted in April, and we started to see a steady increase. And by June, it looks like it was almost to normal. I put July in as well because I think you should look somewhere between June and July to see where we're getting back to because in June, there was a Beijing lockdown anticipated. So there was a quick buy -- there was seem to be a buy in there because people anticipated it. But I think somewhere between June and July is where we are. So we're seeing really good upticks in growth in China, and we expect China to be back on these trends to where we were and beyond. Australia and South Africa tell similar stories, massive buy-ins in March and then decreases to markets which are probably 20% below. And we showed you some here, which were antibiotics, cold and flu, some of these are down 80% as we speak in Australia. In South Africa, the trend is quite disconcerting that the market is down, still down nearly 20% total market. And it's disconcerting in that the flow-through of patients, people are not going to their doctors as often. They are -- so when we canvass our doctors and their patient base, and they're still not seeing the number of patients that they used to see. And so the trend there is that chronics are stable, but acute medicines have some issues. Let's have a quick go through a little bit more detail some -- on some of the regions. And if you look at our regional brands, as I said to you earlier, these are predominantly in Africa and the Middle East and across Australia. Our Sterile Focus Brands, this is before the transaction with Mylan, heavily focused in Europe CIS, maybe more than a half of the sterile business comes out of that region. We dig down a little bit into Asia Pacific. You'll see that the regional brands are up. That is a positive performance from Australia, and the Sterile Brands are down, and that's very impacted by what happened in China. Africa and Middle East there are good performances across both. The America is solid across both. And Europe CIS, a really good performance, particularly if you compare these results where we were at the half year. So I think we can maybe just dig down a little bit. But if you have a look at Lat Am and MENA, these are growing markets. We -- South Africa and Australia had a bad Q4. It has improved a -- it is improving monthly, but it certainly isn't back to the levels that we had before. The commercial business, if we go into our regional brands, in South Africa, we're up 5%, and we've got our 2 divisions. Aspen in our branded division and Ethicare really a trading business. Our Aspen division had a very strong performance in OTCs. Mybulen grew dramatically pre COVID. And it's by far, South Africa's largest OTC pain product now. And we -- the growth has been assisted by consumer growth, which helped offset some of the low flu season, and we had double-digit growth in consumer. But brands like Mybulen now are battling, a lot of our pain products are battling, and a lot of our OTC cold and flu products are battling as well. Ethicare did really well to pull the business to flat. It's had some -- there's a lot of pricing pressure in the ARV market, which I mentioned in the interim. And we've -- but we've had a very strong performance from some of our clone portfolios. Australia is 2% up, and that includes the loss of Zantac. If we pull Zantac out, the growth is somewhere between 5% and 6%. A really good impact, a really good performance. It's a market where we have continued to perform in OTCs and in branded products. And we do it because we're #1. We're #1 sales team in the GP channel, and the Australian team continues to deliver as they have over nearly 2 decades. In Lat Am, double-digit growth, good sustained growth there. This is a region that we're doing so well in, and we expect to continue to do well in, and we are comfortable investing further in these regions. Europe too had a surprisingly good performance in regional brands, although a small number, small in the scheme of the regional brands. But if we take out fludrocortisone and oncology, performance is up 2% on our base business, we're very pleased, and hopefully, we can close the issues with the European Commission without the leveling of a fine. And to do this, we've made some commitments to close this matter and put these matters behind Aspen, and we're hopeful that by the end of this half, we'll be able to have some news for you on that. And we had good performances in MENA and Sub-Saharan Africa, these regions, just slowly tick up and build as they -- as we started in Australia, and we did in Lat Am, then they've got good potential those regions and well managed. We showed you -- we wanted you to have a look at our Sterile Focus brands. We showed you what we did in Europe in the first half. We were down 9% at the half. And we really said to you, we've restructured our business, and we showed you how quarter-on-quarter, we were building on this business. And a really -- and we were very comfortable and hoped that we could almost get to this performance that we had delivered. We have delivered the performance, but it didn't come exactly as we had thought because we have overperformed in Anaesthetics, where we were plus 8% versus minus 6%, and we had hoped to get thrombosis back to square too and that was down -- which was down 4%, where it was down 10% at the half. So a good -- also a good positive performance. There's no doubt the Anaesthetic portfolio was positively impacted by COVID. You can see developed Europe, which is a big portion of the business was up 14%. That was a big percentage to be up, particularly when you think that growth all came really in the second half. We also pulled out all the stocks around supply, and our business has -- we've had our hiccups in supply in Anaesthetics, they're not all over, but they've vastly improved. Thrombosis was a very good recovery in H2, but it was negatively impacted by elective surgery definitely, and this was due to government directives. So you've got governments going to hospitals, paying EUR 700-odd a day to keep a bed vacant, just in case COVID comes. We have seen sporadic returns of elective surgery -- when I say sporadic, territorially. So places like Switzerland have got growing elective surgery and others haven't. And of course, the wave now has come back in Europe. So we're not sure what impact that will have. But it seems to be that this wave has come back without increased hospitalizations, but that's sort of work in progress. We also told you that we really were battling on -- we, as a business, have an option to sell heparin, well, the heparin finished dose product. And some of the finished dose products, really were not making a lot of commercial sense, were subeconomic and we decided to decommercialize about EUR 30 million of those products we have decided. This, of course, impacted some of the sales, when we decommercialize they're often long-term tenders. And so it's a matter of unwinding those tenders. If I adjust for the decommercialized revenue on a pro forma basis, our thrombosis revenue was down 1% year-on-year. So a really good comeback in Europe. Manufacturer. Now Manufacturer has really been a stellar performer here, and we've really got fantastic teams, good management and with good strategies, and we are seeing more and more opportunities for the business. The API business has benefited. I know we've been -- often been on the other side of some nasty comments around the stock that we hold. We're very pleased with the stock that we've held. It's been very useful for COVID. It's been very useful with the heparin. And the -- we've seen growth from heparin. We continue to hold stocks of heparin. The price hasn't risen since COVID it is actually -- it sort of leveled off a bit, and that is -- I think there has been some reduced demand, but there is -- there are opportunities for Aspen in the market. We are one of the few players who have stock above our required need stock. The API, excluding heparin, that's up 4%. That's quite an important number because that chemical business of heparin is quite an important business in terms of generating profitability and growth there certainly does have improved recoveries and certainly give us higher returns to gross margin. The finished dose forms are up 5%, I think at the half, we were down 10% or 11%, I can't remember offhand. And that's been driven by a growth of nearly 20%. We did tell you that this would return to growth and it has. So this market really is a market that -- this business or the section is a business that is focused on mainly our multinational partners globally. And those relationships have been very important to Aspen historically, and I believe, might become even more important as we go forward. So little bit about some of the hopes and aspirations we have. We look at our sterile manufacturing business. And we're well positioned here. We've got a proven high-quality manufacturing expertise. And when I say that, I'll tell you that multinationals now talk about Aspen and our manufacturer, manufacturing quality and how they can engage with us. And we've got global economies of scale and very broad capabilities. We'll talk about some of those capabilities. But the importance of global economies of scale is that you want to know that you can compete sustainably. You can't just build on like little rabbit warranty. Here, you've got to build the whole facility. Steriles is a business that you simply can't be walking in and out of the facilities. We've -- and of course, it enhances our offering. It really does enhance our offering, and particularly into the hospital space of quality affordable medicines. And we believe this is going to be a very important segment for a long time to come. So we've given ourselves a headroom. And we've invested heavily in Sterile CapEx, and we've created opportunities for complex and niche. So I don't want to bore you with all our capabilities, but we can make plastic products, we can make glass ampoules and vials. We can have lyophilization so that it's freezed right. That's quite important for, say, things like vaccines, where you -- we're right now, if you look at a corona vaccine, it will all be in liquid. But in time, to make it easier to transport without having this -- it's always temperature check. Some of these have got to be kept at minus 20 degrees and lower. So to avoid that, one does allow lyophilization, which is a freeze drying, so it comes out as a powder. And we've also got prefilled syringes, a very important and a growing segment in the market and a very difficult manufacturing process to master. And what is our objective here? Our objective here is really to prove on our historical success by leveraging excess capacity to reduce the cost of our existing products, particularly our Anaesthetics are impacted here. That's what we did our payback on. So that is how we rationalize what we do. We said we're going to reduce our cost of goods. However, over and above that, we have a lot of excess capacity. And it's what -- it's how we leverage this excess capacity. And Aspen has been pretty -- has shown a good track record of partnering with multinationals and being able to access IP that you don't find any information memorandum and isn't ordinarily accessible. And this could include other Steriles and vaccine manufacturers. So there's products and manufacture that we can consider in here. If we look at our outlook. Outlook, there was a -- we had a look at our outlook, and we looked at the shape, and we're very excited about where the business was going. But we do have this cloud of COVID over us. But it's not -- I hesitate to use the word cloud when I see the impact on other businesses, and we should just be grateful for where we are and the position we are in. But in 2021, what do we want to deliver? We want to deliver on a reshaped business. We want to focus on the opportunities that come from our sterile rollout. Gus mentioned the benefits come to -- full benefits in 2024. But much of our capacity comes online in some of -- in Port Elizabeth, for example, in 2021, we're in a good position in this year to be able to try and leverage some of the CapEx we've got there. We've had to look at -- we've had a critical review. See OpEx is under -- has been under control, and we need to keep looking at -- we are, at the moment, reviewing all our cost structures to ensure our sustainability. We have to be competitive. We have to be in the top quartile and above in manufacture. Our business is really well positioned to continue the positive financial '20 momentum. And of course, it's subject to a COVID impact. COVID continues to impact our performance. It has affected our regional brands, Australia, South Africa. It continues to impact, although it is lessening. In our Sterile business, yes, if we look at this last period, Europe helped save this, and when China was in lockdown, we've got to hope that, that swings -- it swings if there's issues in Europe. We've got to hope that our Chinese business, which is going back up to full throttle, can help mitigate some of the potential risks that we have with the delayed elective surgery. And as -- I think it's important, we talk -- we give all our forecasts in constant currency, but there is a reality about Aspen. Aspen does have a very big rand hedge component. And there are very material swings in our numbers due to currency fluctuations. That is the reality of our business. So all in all, we're very excited going forward. Got ourselves into a good position here, and we really want to make sure that we deliver on the position that we now stand in. Thank you very much, and appreciate your interest in Aspen, and thank you. So there's so many of you that have tuned into our webcast. Thank you. How did the -- are we going to do a Q&A?

Yes. We have a couple of questions on the webcast that are starting to come through, and from Kane Slutzkin at UBS for Stephen. You acquired thrombosis 7 years ago. You are now selling it. In the past, there has always been a lot made of driving growth by plugging into Aspen's distribution footprint. But the thrombosis deal and the track record during the period of ownership may suggest otherwise, especially when considering declining return on capital. I guess what I'm asking is, what have you learned from this acquisition and subsequent sale? Will it mean a change to the way you approach M&A going forward, i.e., should we expect bolt-on investments or game changes like we've seen in the past? That's the first one from Kane.

Sure. Okay. So a really good question, and thank you for that question because I think it gives me an opportunity to deal with quite a few issues there. Yes, we have had a period of declining returns on capital. And that does come with a game changer if there was immediate returns on everything. It would be wonderful. That's what we hope to achieve. And of course, bolt-ons give you a much better opportunity to have those. But the reality of our business is we've invested billions in our manufacturing facilities. And we -- and those returns are going to start rolling out now. The divestments of the -- that we have made certainly will increase our returns on capital from a mathematical point of view. In terms of what we've learned, I sort of started by mentioning that we're in a business where we -- when we acquire, we have to dispose from there because we don't have -- we could issue equity, but we don't. The -- we buy a lot of assets. We see what works first. See where we can and can't perform. I cannot tell you that we perform to expectations in our internal expectation in Europe, we didn't. What we have -- and we accepted that. We acknowledged it early, and we've gone in. But as I said, historically, nothing for Aspen was a fire sale. And even when our debt was at its highest, we're very comfortable with the quality of those assets. So -- and we received a good price and a fair price for those assets. I think you should think about Aspen looking to play to all our strengths and we've learned. We've learned lessons along there. While we don't think our model works in Japan with automatic price decreases and very stringent -- we don't have the necessary research to go into Japanese market. So we learned a lot, Kane, in the process. And life is about learning, and you don't get it all right, but we certainly got most things right. And in terms of buying -- and we still have a thrombosis business in emerging markets, and we have our total Anaesthetics business. And we have these fantastic capital assets that are going to -- that we've built out of all of this these Sterile assets, which have the volumes in them, so we could afford the economies of scale. And now we've got -- created new opportunities in Sterile manufacture, not least an opportunity to enter the vaccine space.

Okay. Another question from Kane. Further to my prior acquisition-related question with respect to acquisitive comments made, is there any merit here to say we have deleveraged, but let's take some time to consolidate what we are left with. And in the interim, find other ways of driving shareholder value, such as reinstating the dividend? And would you consider share buybacks?

I think that's a fair point. Of course, acquisitions, acquisitive opportunities are what we would look at and continue to look at. I don't think you should expect any game-changing acquisition. But I mean, like we -- that's something I can't call. I think you should expect that Aspen with the divestments has an opportunity. I mean you can do the ratios yourself. I think you're doing a back a cigarette box. You shouldn't come to a debt-to-EBITDA of much different from 2. So we're really in a position where we've got a lot of headroom to be able to repay debt. But I think what we'd really like to do now is operationalize the assets that we bring onstream, starting with our Port Elizabeth assets this year and to also deliver growth on this reshaped business. Growth for us is a key, key component of what we want to achieve out of here. So I would think that consolidation, focus on efficiencies. We've got to restructure businesses as pieces move out in that. So we've got -- there's a lot of work that we have to do internally in this next period.

All right. I'm going to move on to the next question. Victoria Lambert from Bank of America. What is the revenue benefit Aspen has seen so far from dexamethasone sales? And what is the outlook for this? And is Aspen comfortable with the supply of APIs and inventories within the group?

So in terms of dexamethasone, just to put it into context. Dexamethasone, we've been -- we've supplied all that has been required of us. It runs into tens of millions of tablets. And -- but if you think about Aspen -- and the price is really low. Maybe 10 US/EUR cents a tablet. So it's certainly not massive amounts of revenue, although it's a tablet. But if you think about the Aspen business, we really are big volume business. And if we're supplying 1 million people a month in South Africa ARVs, it's -- this is just like another month's supply. So it's not a profound effect on top line. It's a profound effect on life. The second part, sorry, was the -- what was the second part, sorry?

Are you comfortable with the supply of APIs and inventories at Aspen?

Are we comfortable with the supplies? Yes, we are. We have held stock and certainly the API bump because there was quite a bit out of China and India that wasn't coming through. It seems to all have normalized. The Chinese particularly came online quite quickly. So I think we are very comfortable with where we are in the API and our inventory levels, and very comfortable with the strategies we have historically, and will continue in terms of being cautious around those areas.

All right. The next one from [ Nick Kreher ] at Signal Asset management. How much capital are Aspen investing in sterile manufacturing? And what paybacks are you targeting?

Yes. So the paybacks, as I might have mentioned earlier, are through the reduction in cost of goods in Anaesthetics. However, the payback can be very quick. I mean, the thing with our business is our CapEx relative to our turnover is small. We invest more in intellectual property. That's the heavy one. But I would think that if we utilize our excess capacity, those paybacks would be higher. I don't have the percentages on hand. Okay.

All right. Next question from [ Sinclair Sisuana ]. The President, Cyril Ramaphosa, is reported to have said that the CD-19 vaccine will be manufactured in South Africa once developed. What would this mean for Aspen? And would you be the frontrunners to manufacture?

I really -- I'm not in a good position to. I don't think it's fair for me to comment. Sorry, I think that would be a -- I would just -- I would say this, we have our capacities for filling and formulation online and ready, and we have very big global capacities. But I really don't want to comment beyond that. Thank you.

Next question from Roy Campbell at RMB Morgan Stanley. After receiving the proceeds for Europe thrombosis, what will the regional split of debt be? Given the move away from euro earnings as a result of the transaction, will debt and earnings be adequately matched? And how does the sale of the Europe thrombosis business impact working capital dynamics probably?

Yes. So I think Gus mentioned that. So maybe it was earlier, Gus. So just to repeat what Gus said. The working capital dynamics, we expect to be 20% to 30% of the revenue that was sold. In terms of the debt and the debt, it does help reshape our debt positively. You've seen how the ForEx impact of the euro-based debt has impacted sort of the cash flows, but -- I mean absolute rand values of debt. So this debt would be applied -- this -- the amounts received would be applied against our euro debt. And that would give us a -- I think, would give us a neat shape in terms of matching debt to earnings. You've seen the euros are still a very big chunk of our business.

The next question from Alex Comer at JPMorgan. What ongoing revenue will be retained from the supply of thrombotics to Mylan? I…

That's a good question. I would -- the -- it would be somewhere between EUR 100 million and EUR 120 million. I'd like to confirm that for you, Alex, but I would guess that's a -- that's probably a number that you could probably lock. Probably about EUR 120 million, I'd say.

Next question from [ Andre Devitt ], an independent media. What is Aspen's Africa growth strategy?

Yes. That's a -- thank you. Thanks for that question [ Andre ]. We don't get to these presentations, we could make them hours long. But our strategy in Africa has been to invest in Africa. We don't want to drop in and drop out and try and ship. And everybody has their own pride and their local commitments, and they like to see investment in their own countries. As a company, you'll see our Sub-Saharan African business has continued to grow organically, but it's also based off a foundation. We have facilities as Aspen in Dorsilon. We've got 2. We've got facilities in Nairobi, and we've got a facility in ACRA as well. So we really try and develop Africa. We're really trying to be part of the growth of the continent. I mean, of course, outside of South Africa, where I think we're well known. And what we have in the rest of Africa, we've got facilities that we have. And that's a big investment in infrastructure. And we feel that we're sort of pioneers there and we hope that, that will pay and is paying dividends, and hope it will pay further dividends.

All right. The next question from Shmuel Simpson at 36ONE Asset Management. I believe the first part of his question has been answered. Will you apply Mylan proceeds to reduce euro-based debt? The second part of his question is, post the deal, will you look to shift debt denomination to match revenue contribution?

Yes. I think, yes, we've learned a little bit about debt in this process. If you remember at the very start, we had it in dollars. And then we shifted it into euros. I think that we will, with the repayment -- using these proceeds to repay euros will help balance our profile. I think looking at those EBITDAs, there might be an argument that maybe we could have more Australian dollar debt, and so maybe there'd be shifts in that.

From Jonathan du Toit at OysterCatcher Investments, what is the growth outlook for the manufacturing division over the next 3 to 5 years? How much spare capacity will you have that you need to fill?

The Manufacturing business, it's -- heparin is commoditized. I think we've got, as Gus said, we've got some legs in that business still. But if I -- the API business is a business that has -- maybe it's at 60% capacity. So there's still some capacities there that can be used. I think the big capacities that are coming online are the sterile capacities. If I have to give it to you, it's very hard to discuss capacities because it depends with using a 1-ml, a 10-ml syringe. And there's all sorts of vials and ampoules. I would think that if I had to give you a -- just to try and give it something that maybe we can all relate to. Maybe we're sitting with 600 million or 700 million dosages of excess capacity. So that is a dosage form would be, say, 1 injection, 1 vaccine. It's a -- and you might make it in 10. So a multi-dose vial would have 10 and then you take this quantity out 10 times. But in terms of individual doses, that's something we'd probably have at a pretty full level. And we'd -- maybe there's a little more in the plastics, we can add 100 million more in terms of the plastics and the injectable forms, and eye drops. 100 million this is, sorry.