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

Good morning, everyone. Welcome to the Aspen Interim Results Presentation for the 6 months ended 31 December 2020, presented at the JPMorgan Healthcare Conference. A few important disclosure notes here for your later consideration at the front of the presentation. And I'm going to kick off with the financial review. To start with the financial highlights. We're very pleased with the strong organic revenue growth that we've generated over the first 6 months of this financial year, 6% constant exchange rate growth, 17% in full reported terms, up at ZAR 18.6 billion. That's been translated into really robust earnings growth when one considers all the challenges that we've encountered over the period with the COVID crisis around us. Normalized EBITDA is up 2% in constant exchange rate terms. But as we'll discuss later, the underlying growth in EBITDA at constant exchange rate is actually 5%, up 11% in reported terms. Normalized HEPS is up 7% in constant exchange rate terms at ZAR 6.76, a growth of 16% in reported normalized HEPS. The strength of our balance sheet has been something which has had a lot of scrutiny in recent years. And we're very happy to report that our continued good progress has been maintained during this period. Over the last 12 months, we've reduced the total borrowings by 27%, coming in at ZAR 27.7 billion for the period. And our leverage ratio is at 2.8%. On a pro forma basis, that's closer to 2%, and we'll discuss that later in the presentation as well. And that allows us in terms of our capital allocation model to be committed to a dividend declaration and the reintroduction of dividends in conjunction with our financial 2021 results. We unpacked the revenue at a segmental level. The biggest contributor is Regional Brands at ZAR 8.8 billion. And while growth at 1% in CER terms might seem modest, this segment was heavily affected by COVID. Acute medicines related to communicable diseases were in very low demand and big countries like South Africa and Australia, had particularly low sales compared to normal levels of these kind of medicines. So that 7% growth was actually a commendable outcome. Steriles had a knockout performance, up 20%, 7% in CER terms. They were on the flip side of the coin with COVID and some territories did benefit from demand, extra demand for COVID treatments during the period. At ZAR 4.3 billion, Manufacturing is the smallest contributor, but it was the fastest growing, growing at 17% in constant exchange rate terms. And all of our subcategories showed good growth there as well. Turning to the gross profit percentage and unpacking the gross profit percentage by way of this bridge. If we start with the reported gross profit percentage of 52.7% a year ago, one has to take out 0.5% in order to put it on constant exchange rate terms. Segmental mix. So that's really -- the biggest growing segment was the lowest gross profit segment. Manufacturing had that diluted a further 0.5%. Sterile Focus Brands had a decline year-on-year, and we'll discuss that later in the next slide, which brought the percent down further. Whereas Regional Brands actually raised their gross profit percentage. Manufacturing was also at a lower gross profit percentage and there's another component to Manufacturing, which is labeled transaction-related manufacturing. This will come up in my narrative on a couple of occasions as we go along. We have commitments in terms of recent transactions, supply contracts where supply is at very low to no margin. And consequently, we have revenue without any real margin attached, and that obviously dilutes gross profit. So that brings us out to the 49.3% gross profit percentage. Looking deeper into the gross profit percentage on a segmental basis. You can see that Regional Brands has ticked up nicely from the second half of last year, recovered to the same level as it was a year ago and some targeted initiatives paid good dividends there. In the Sterile Focus Brands, we've been stable more or less with the second half of last year. And the product mix has brought down the margin. Considering the amount of additional operating costs related to Manufacturing, these gross profit percentages are actually very satisfactory. In Manufacturing, there are a number of contributions to the lower margin. I've already mentioned the issues with the transaction-related manufacturing, which will obviously dilute margin. In addition to that, there is a move towards a low mix of margin amongst the products that were sold during the period. And also heparin, which is one of our big products, has a higher cost attached to it during this period than it did in the comparable period. So looking at the overall outcome, very stable position, actually up slightly on the second half of last year. As I mentioned, production costs have played a big -- have been affected by COVID to an extent. And given those circumstances, we're very comfortable with where the margin sits at the moment. Going further down the income statement to get to normalized EBITDA. And we've got an analysis here which starts with gross profit and then some of the main movements to get to normalized EBITDA. A couple of things that I'd like to highlight on this chart. The first is operating expenses, which this period were 24.7% of revenue, down from 27.6% of revenue a year ago. So while the gross profit margin has declined somewhat, we've recovered quite a portion of that through tight control over operating expenses. And if you look at operating expenses on a constant exchange rate basis, they're actually down 3% year-on-year. The other factor is net operating income. This period, it -- net other operating income. In this period, it contributed 0.5% of revenue. A year ago, it contributed 1.4%. The differential there is an HPC milestone we received a year ago. This is the end of a milestone stream from HPC as we see it. So that's a nonrecurring kind of income. So growth in normalized EBITDA was diluted by this other operating income, that's very clear. And had we calculated EBITDA on a line before other operating income, it would have been up 14% or 5% on a constant exchange rate basis. As similar to the gross profit level, normalized EBITDA is in line with H2 2020 at 27.9%. And just a note going forward, please note that in the second half of the year, we expect the EBITDA percentage to contract further, to be further diluted. And this is because one of the supply contracts at very low margins is related to the recent Mylan disposal. That Mylan disposal, we only supplied for 1 month during this period. It will have a full 6 months in the second half. And as alerted in our investor presentation we made in December 2020, this does have a dilutory (sic) [ dilutionary ] effect on EBITDA margins. We gave you some guidance in that presentation on the kind of base EBITDA margin, that was 25.8%. To remind you all that we would be seeking to grow from going forward. We have a number of growth initiatives to raise EBITDA margin over the medium term. To unpack these, we have targeted initiatives to drive the efficiency of our production and a number of projects there are actually operationalizing now. This will raise the gross profit percentage in both Commercial Pharma and in Manufacturing. As exhibited, we have learned through COVID, tight operating expense control. And once COVID declines and finally is under control, the additional costs that we're incurring in running our business under COVID conditions also gives us an opportunity which should lead to improvements, both the gross profit percentage and EBITDA percentage. We have major CapEx projects for Anaesthetics currently moving towards an end. And Anaesthetics production, which is outsourced largely at the moment is migrating in-house. That will take place -- well, it's already commenced and will take place through largely to the financial year 2023, which will raise Commercial Pharma gross profit percentages. And then we also have an incremental contribution potential from new customers for sterile capacity we already have in our manufacturing facilities. So any additional production we bring into those manufacturing facilities will give a lift to the gross profit percentage and manufacturing. And obviously, gross profit percentage increases, migrate down to the EBITDA percent line. And so we believe our objective to grow EBITDA more quickly than revenue over the 4-year period from 2021 to 2024 is well in sight. A quick note on currency volatility, just because it has affected our results between reported and constant exchange rate quite substantially in the 6-month period. The chart on the left gives you the movements in major currencies over recent half year periods and up to February 2021. And then on the bottom right-hand corner, you can see the uplift that we enjoyed as a consequence of generally the weakening of the rand against the major basket of currencies in which we trade. So revenue rate rising from 6% to 17%, normalized EBITDA 2% to 11% and normalized HEPS from 7% to 16%. The rates are quite erratic at the moment. We posted the average rate to the end of February 2021 in the top right-hand column. However, rates as we speak this morning, are considerably -- the rand is considerably stronger against currencies like the euro and the U.S. dollar right at the moment. Our expectation of rates remain around these sort of levels, as there's unlikely to be much exchange rate influence on the results in the second half of the year. Obviously, the first half the year has already had an influence. So just keep an eye on that. It is relevant in the reported results. Looking at the normalized headline earnings per share bridge. If we start with the constant exchange rate normalized headline earnings per share, which grew 7%, that was at ZAR 2.9 billion. To adjust to the normalized HEPS, our headline earnings a year ago, we need to take out that uplift. So that was ZAR 213-odd million worth of uplift. And then you can see that the main contributor to the growth in normalized headline earnings is through the normalized EBITDA. Small dilution from depreciation, amortization and tax and an uplift in finance costs were a lower rate. And lesser gearing and -- lesser borrowing assisted us to deliver lower finance costs despite some FX losses. Moving on to working capital. We've been measuring and reporting working capital as a percentage of revenue every reporting cycle. And I thought it was interesting to look at the progression. So the chart in the top left-hand corner, it tracks our total working capital to revenue. Then we exclude Oss, our AP business in the Netherlands, which has a very long working capital cycle and show it separately and then excluding Oss. Anyway, I think it's quite clear that the level of working capital is stable. It's trending a little down at the moment, but generally stable. And looking at the specifics in net working capital, you can see on a comparable basis. So the comparable basis has taken out the FX influence and also all discontinued operations. There is a slight rise in working capital. We'll discuss that more on the next slide. And then an interesting analysis here. If we look at net working capital by segment, ZAR 16.4 billion of net working capital, 61% of that is in the Manufacturing business, 39% of it in the Commercial Pharma business. Of the ZAR 18.6 million of revenue we generated, 23% was in the Manufacturing business and 77% from Commercial Pharma. So you can see working capital relative to revenue very heavily weighted in Manufacturing. This is the focus of attention that we need to give to any working capital reduction projects, and we have a couple underway, which were mentioned in that strategic investment presentation in December. Working capital, obviously, influences operating cash flow. And on the left-hand side of this slide, we've produced again over the various reporting periods in recent times. The cash conversion that we've reported, operating cash conversion, and show you the cycle. The blue line indicates the 6 monthly results, and there's a very, very clear cycle there with -- at the half year, we fall short of our target of 100% cash conversion rates. And then in the second half of the year, we have a serious outperformance. The green line measures are moving 12 month average, so that really takes out the spikes and troughs. As you can see, we've been going through a period of improving cash conversion over the last little while and really peaking at last year-end. Only in 1 period have we not met our target of 100%, which was in H1 2019. Relative stability to that operating cash conversion cycle, but a few things to unpack there. I did caution at last results presentation 6 months ago that we had a very uncommonly low debtors number at the end of the year, very high debtors collections because the seasonality of our sales have been affected by COVID and effectively have been pulled forward. And I fully anticipated that what has happened that there'd be an unwind of that debtors advantage during the course of the 6 months and, obviously, through for the full financial year. But I'm also equally confident that in the second half of this year, the cycle will continue, that blue line will again rise above 100% average line for the second 6 month cash conversion. If we look at cash operating -- or cash -- operating cash flow. Cash operating profit is down 14%. This is entirely due to lower cash operating profit from discontinued operations, which is nearly ZAR 900 million less this 6-month period than the comparative period. A number of contributing factors there. And obviously, that will knock on into cash generated over the 12-month period as well, just to note. Also, working capital, as said I would come back to it. You can see the increase there, ZAR 1.4 billion. A portion of that is as a result of the working capital, the low year-end debtors, which I've just spoken about. And then also, I mentioned earlier that the acute medicines had done really poorly in big countries like Australia and South Africa. And that has left inventory in our warehouses, which has built up more than one would expect as well as a higher cost of heparin. Then the other point to note is the tax paid that ticked up quite a bit. That was really a timing issue between 2 periods. And I don't expect to see a repeat of that into the second half of the year. There is a detailed operating cash flow appendix -- a working capital bridge appendix, I should say, at the back of the pack. Moving on to borrowings. You can see the good progress I was talking about earlier and demonstrating how the pro forma number, which is based on the collection of the amount, the second tranche of the European Thrombosis transaction, which is due before the end of June. With that calculated as collected at December 2020, we come out at the pro forma of 2.16. Net borrowings shows the same trend. So you can see moving there from ZAR 38 billion down to a pro forma of just over ZAR 20 billion over the period of 4 reporting cycles. Gearing metrics, interest cover ratio, all showing a similar trend. The effective tax rate is down. I mentioned a lower base rate and also there's a ratchet effect of getting below our covenant level, which has helped us. So I think all of this can be summed up in very consistent with our commitment to a stable balance sheet going forward. We've set a self-imposed leverage ratio cap of no more than 3x. And on the pro forma basis, you can see we've got a lot of headroom on that. And my final slide, I'm just going to do a report back on our capital allocation prioritization. Capital allocation, again, was something which we raised at the Strategic Investment Presentation in December and made a capital allocation commitment. The capital allocation model, subject to that leverage cap which is self-imposed, you see the ratios there. We're well under. So our first priority to ensure business sustainability and efficiency is to CapEx. CapEx on building manufacturing sites and the like and also in IP development. And combined, we invested ZAR 1.3 billion in that over the period. Second priority, an inherent part of our renewal of our product portfolio, which is obviously critical to a business like ours, is bolt-on acquisitions of our IP and businesses. And part of that renewal process also is minor disposals. And actually, the outcome was a net ZAR 36 million outflow for this period. I've spoken about our commitment to dividends. Dividends ranked third in the priorities. We committed to a declaration in line with our 2021 results announcement. And a payment of a dividend of no less than 20% of normalized headline earnings per share. And then behind dividends in priorities is larger acquisitions and disposals, M&A transactions that we believe are value-accretive for the business. And during this period, we didn't have any acquisitions, but we obviously had ZAR 5.3 billion of proceeds flowing into the business. That ends my presentation. I draw your attention to the appendices at the back of the pack. There are a number of very informative appendices there, which I'm sure you'll also find helpful in assessing the business. And I'm now going to hand over to Stephen, who will cover group performance and also the group strategy. Thank you very much for your time.

Good morning, everyone. Good to be here again. A pity not being able to see you all in person. I think really the past 12 months have unquestionably been extremely turbulent and challenging. [ It's face ] that the pandemic, caught the world off guard and subject us all to tests we never possibly could have imagined we'd ever have to confront. But there's a lot to be learned in times of adversity. And you find a lot about what you personally might be made of, but you also find out a lot of what organizationally you are made of. And reflecting on this, we have with Aspen rather, some very important conclusions. Firstly, the Aspen team has proven resilience and up to the challenge, ensuring we've been able to continue to operate through a range of lockdowns in the COVID infections. And for this, I thank each and every one of the members of this team. But really, most of all, I thank those people in the Aspen team who didn't have the option to work from home. I hear lots of people in Suburbia talking about, "Oh, it's so terrible, I can't go to a restaurant, I can't do this." The reality is there was no options for these people. And they bravely confronted the virus on a daily basis. And by reporting to our production sites, we were able to continue to produce life-saving medicines for the world. Now I just want to speak a little bit in setting our strategy. We developed a very ambitious vision for the future. And we've really been endorsed through the relevance of our product portfolio. I mean, question the strategy, but let's just look a little bit what it's done for us. We produced anesthetics for the world. To that end, I have many heads of state from Europe phoning me personally, direct on our organization to try and get their allocation of anesthetics out of Aspen facilities. Dexamethasone was one of the first breakthroughs, which once again, Aspen was a lead contributor of it post-COVID. Really pleased to be able to put this picture up as well a COVID vaccine. We're in the midst of our tech transfer and it's gone very positively, and that's an area which we will be contributing to shortly as well. And really a clear strategic path for future opportunities. We've created these new opportunities, and I will be taking those through you over the next few slides. This period really has given us a meaning for what we do, to what we do. But it's also validated our strategy. And we've opened up these future opportunities particularly around our Sterile business that we'll discuss. It's been a watershed period for us, no doubt. I've been up here many, many years couple of decades. And probably, these results are as important as many as some of the other key strategic changes we've made in Aspen over the period. We've really been unwavering in our commitment to our vision. Those of you that know, we had to put our heads down hard and we have put them down hard. And we've been absolutely unwavering in spite of very serious challenges confronted. And we continue to persevere so -- because it's worth persevering. When your vision is good and when you make a contribution to humanity. And it gives purpose to the work we do in Aspen all day every day. So if we just click on now to the operating performance. I've got 4 or so slides on here. As Gus took you through, we had a reported growth of 17%, constant exchange rate growth of 6% and that's -- we did ZAR 18 billion -- over ZAR 18 billion of sales in the half. It's easy just to see 4 or 5 numbers up there. But when you think about it practically and think about where we started from, that's over ZAR 100 million of turnover per day across 150 countries. Think about the infrastructure we've had to put in to drive that type of turnover and to make sure those patients across so many destinations get so many different products. What it does also demonstrate is our Commercial Pharma business has increased exposure to our growth territories and certainly helped change our growth trajectories. Over 80% of our sales now come out of emerging markets in Australia. And then if you look at our Sterile business, that has grown very well. It's a story of -- it's really a mix here. There's been where we've had high COVID demand and products have been on the COVID therapies. And I'm talking here, particularly in Russia where the thrombosis products were on the COVID therapies. We've experienced growth that certainly impacted the margins. And then, of course, we will see there'll be areas -- later, we'll show you where we have fallen short in acute treatment. So where there was elective surgery that got postponed, the Sterile Brands were negatively impacted. And manufacturing, this has been resilient. So we're very pleased -- sorry, just on the Regional Brands, I should mention, we're very pleased with the performance here. Regional Brands have very high proportion coming out of South Africa and Australia. And as Gus mentioned, both very negatively affected by decreases in acute performance -- acute medicine performance. Then on Manufacture, really we'll cover that in more detail. But increased performance across that. Our chemical business, across the biochemical, which is effectively our heparin business and the finished dose form business. And that's really driven by demand for quality and reliability. And it's been really good growth, as you can see, but we expect a lot of that growth to sustain because that, for example, is where vaccine turnover will contribute, et cetera, in our finished dose form area. If you look at our Regional Brands, and we look at a little bit more detail, we break it up geographically. You will see that we've grown across all territories in reported terms and only declined in constant exchange rate, as in Europe. Some of you might be surprised to see that Africa, Middle East is up and that really was a strong performance from the Middle East and the rest of Africa that sets up our COVID related declines in South Africa. So the benefit of a regional -- a broad global regional business was very helpful in this case. Europe, as the oncology declines. And then if we look at America and Australia -- the Americas and Australasia, the Americas is largely our Latin American business. We really have credible growth there. We've got 4% growth in constant exchange rate. And that's in spite of the negative impact on Australasia. And what Australasia did pick up was the growth underpinned by very good OTC results. What is also interesting to look at on this slide is when I looked at us, there's 4% growth in the Americas, 4% growth in Australasia. But when you look at the actual impact in rand, the Americas go from 4% down to 0 and Australasia, which is largely Australia, goes from 4% to 21%. So that is just the massive swings that you can have in currency. So decreases in the real against the rand actually decreased the growth rates in reported terms. And then you'll see the impact that a stronger Australian dollar had on our overall earnings -- reported earnings. So then we go into -- we have a look at Steriles. Really good, strong across the board growth here. We've had -- COVID has impacted positively in certain areas, Russia CIS, in particular, and Latin America. And you'll see the negative in Australia in constant exchange rate. And therefore, is the impact of elective surgery in that area. You see Asia up 1%, that we're talking largely about China there. And although it's -- and why it's probably one you might not want to mention, given it's 1% impact in constant exchange, but it was very important for those of you that followed us, remember, we've now caught -- we are now in line with where we were this time last year. In the second half of last year, so the last 6 months, we had a steep decline in China because of COVID. And so it's nice to see a strong rebound out of China, and we expect that rebound to continue. Manufacturing revenue. We've -- the Manufacturing revenue has been -- we've had good growth in this area and it continues to sustain both in API and finished dose form. Our chemical business has been driven by a double-digit growth at Oss. Oss, our API business just continues to keep performing, as does the increased heparin sales. The finished dose form sales will be up at 46%. If we take out those transactions that Gus referred to, both at Mylan and Sandoz, would mean finished dose form would grow 12% and Manufacturing overall without those transactions would have grown 10%. And so a very strong performance, and it's a performance that is one that we expect to continue in that area, too. It's a great -- as our sites continue to come on site. Let's have a look at costs a bit. I think the impact of cost, Gus is showing you the impact we had on gross profit and operating expense. And let's understand and unpack some of these costs. There's -- our facilities have been impacted. Protocols were impacted. Every time somebody was sick in laboratory, the whole laboratory closes or on the line, the line closes. There were shutdowns, there were clean downs. And then, of course, there was the impact of COVID itself. In some of our production sites, we had up to 30% absenteeism in our site. And that particular one related to our Port Elizabeth, to our Elizabeth facility. We look at supply chain. There were massive disruptions to supply chain. 80% of the air fleet's capacity is affected and a very high percentage of our products travel in passenger planes, in the cargo area of passenger planes. There were port closures, [ resources ] couldn't get through ports. All of this just put incredible upward pressure on pricing and some of those costs went up in multiples. Those with the -- those -- and these, as Gus said, we believe, are temporary. We're certainly hoping that our contribution with the vaccine will make it very temporary. So when we look at the permanent changes, we learned a lot in COVID. We -- our operating expenses reduced significantly. I think there's a greater acceptance that people don't have to travel more, even in a world where you can travel. It's more acceptable to talk to people on digitally and on a screen. And I believe that, that will be something that continues. And also talking to our client base digitally has been well received. So there's many operating expenses that we believe will be permanently changed. And certainly, we've been in the process of an organizational redesign. And we've had, as you see, the constant exchange rate drop in our operating expenses, and that's relative to a 6% growth in revenue. So a very big adjustment then. It's helped us accelerate our organizational redesign and also giving us confidence that we're moving in the right way. We've -- it's very hard to run facilities, benchmark them and run projects and run them operationally. We're in that phase now where we've benchmarked ourselves outside third parties, benchmarked us best-in-class manufacturer. And as we shift from operational -- from projects to operational, we push the -- and we really want to be excellent at everything we do. We want to get the highest quality and be the best we can be. But we have to be efficient. And so there's a lot of work going into that area, and our teams are working hard. And there's value to extract there. We've also restructured our commercial infrastructure around the divested businesses that have gone away. When you start a business from scratch, then you've got to put all these structures in a very -- in a hurry to get their products out to the -- to those 150 countries through many different structures. You don't get all your structures correct in the first place. There are duplications. There are many lessons you learn along the way. And we are in that process of looking at all of those costs and actually drawing out the synergies and harnessing those values where we say these costs can be run somewhere else. And that cost exercise is an important exercise because we've almost taken a zero-based approach in a lot of what we've done now. Because COVID has exposed some of this. Sometimes you have no reps in the field at all and your turnover stays the same. So we're looking very closely at cost. And so not just taking costs up, we don't want to cut cost to death -- cut yourself to death by cutting costs. But what we are looking is how we focus our cost behind growth drivers and the high-value add. So a lot of work going in this area. And so as Gus pointed out to you, we believe that the facilities and supply chain effects on GP percentage, which you've seen in this half and the half before are temporary in nature. But we do believe the trend in operating expenses and declining as a percentage of turnover is something that we intend to lock in. If we now just look at our strategy and what our strategic growth drivers for Commercial Pharma are. Let's start just in organic because we have reshaped our business. And the organic growth rate, I believe, has been clearly demonstrated. If you look even at prior presentations, we often would show you where our growth came from and where the -- what had weighed on our growth. We've moved -- we've managed to shape our business towards those where we've seen growth and we have clearly demonstrated it. And here, you will have a look at our geographical footprint. We really are playing to our strengths. These are areas we've demonstrated capability now. And we continue and we demonstrated it historically as well. And it's areas where we have critical mass. The markets that we play in are experiencing increasing demand for our brands, and we're very focused on brands and our Sterile products. The basic underlying growth from rising emerging markets, growing populations. And globally, the increased hospital admissions, have plussed almost to all markets, and we use that as a barometer, particularly for our Anaesthetics business. We've got a strong organic pipeline behind these areas. And it's not one product, don't see us that like one product that's going to come and do $1 billion. It's many, many products across multiple geographies. One of the real opportunities we've got, and you see the pictures on the right is we have so many differentiated Anaesthetics products and portfolio in different forms. And these molecules are products that we don't have registered across all our geographies necessarily, and there is an opportunity to reach them. And the opportunity has really come because in shifting these products to our own sites and manufacturing sites, we have to generate lots of data to be able to shift them. That same data is required to register products. So the data is ready and now we are able to select those products for broader geographies. So I think that is a real opportunity, and we've got a very extensive range of products and range of delivery ports. And those might not be massive individually. But collectively, they do add up. So one of those pictures there is a pre-filled gel syringe that you use before you insert catheters to lubricate. So there's many, many different products. And you'll see a spray there that is sprayed before you have an injection with a dentist or a throat operation. So differentiated, exciting and very nice to be able to have the data to be able to register them more effectively. Here's an interesting second opportunity for us. So besides our organic growth is leveraging our distribution footprint. We've got a very differentiated distribution footprint. Many people just have the U.S.A., Europe or developed world, and they just have rest of world. For us, the rest of world is our core. And their core countries are our rest of world. So we're leveraging our distribution footprint. And we think big pharma -- we've seen big pharma could really benefit in working with Aspen and talk to us to see how we can work together. The reality of big pharma, they've got narrow therapeutic focus, mostly focused on oncology. And these products are very expensive. And they got less relevance in emerging markets. And as a consequence, many of the multinationals have got insufficient critical mass or will have insufficient critical mass. And these territories are small. They're complex, and they really are a distraction from the focused territories that they have. So what does Aspen offer? Aspen offers distribution and partnering and we can -- we give increased focus to them. We can provide abilities, proven ability, in these emerging markets. And we've got world-class regulatory and governance structures, and that's a very critical point for multinationals. And what we also give them is a platform for growth and access to opportunities. And they require limited oversight over the partner because, one, we meet all the governance and regulatory hurdles; and two, we give growth and with limited input from them. So a real opportunity for Aspen as the market contracts for multinationals. Of course, Aspen has an opportunity around -- we've demonstrated this around acquisitions and disposals, and we'll always continue to reshape and refine our portfolio depending on market conditions and depending upon how we see our future opportunities to perform or not perform there. And we think there's a period now to capitalize on these therapeutic consolidations of these multinational portfolios. And we've really got an opportunity at the moment. It's certainly helped by the fact that we've reduced our debt burden, and we expect that once we get the second payment, the payment in this towards the end of June, that our EBITDA will start approaching about 2x -- our net debt-to-EBITDA would approach 2x. We've spent a long time building, and we spent a long time justifying building when we just had bricks in the floor with you. So it's a pleasure to actually show you now where we are in this process and as it starts to come to fruition and deliver. We had a very ambitious sterile build. Our total investment in it was rationalized through a payback, which we saw as a reduction of ZAR 800 million in our Anaesthetics cost of goods alone. And also, not only did we reduce cost, but we felt more confident, one, on the quality, but also the supply security that our production could provide. And it gave us confidence that -- if we had that confidence, rather, we would be able to harness future tenders. Because if you don't supply, there are very heavy penalties around supply. So in many instances, we don't tender because we are worried about the penalty. But over and above what we've seen and we've shown you, it also created a globally needed niche capability. I don't think we have to spell that out any further to you now as you've seen how this world has evolved. And this we're also in building, -- we've created increased capacity for future opportunities. And I want to just dwell on that over the next few slides. So when you see what capacities we have. And I've tried to do this graphically so that you can -- just gives you a sense of what it does. You've got the first, which is lyophilization. Lyophilization, as you'll see, has got solid at the bottom. So that starts as a liquid and it gets freeze-dried into that. Many vaccines are freeze-dried. Many of our COVID vaccines that you see today start as a liquid, and I'm sure, over time, will be lyophilized. It assists with transport, it doesn't have the same temperature issues. So lyophilization is a very, very important technology. Then you've got pre-filled syringes on the right. And those pre-filled syringes, many of you would no doubt take some of them yourselves at home. These are things that you can self-inject as well. And it's a big value add, and it's where I believe the technologies in sterile are moving to. We've got our eye drops in our Port Elizabeth facility and we've got glass ampules and vials. And there, those vials, which are to the right, are the storage that your current COVID vaccines are in. Then at the bottom left, you've got plastic blow fill seal and polybags on the right. Polybags are the big bags in hospital. The blow fill seal is a very interesting technology. You literally blow the plastic, you fill it and you see that it's absolutely sterile. Used -- some of you might use it for eyedrops, some of you might use it in nebules and nebulizers. In this instance in anesthetics, they are used and they are easier to transport and easier to take the -- often they're single dose usage, and they don't have preservative. So often, a big plus in a sterile environment, hospital environment. Let's have a look at the capacities. Let's start with our map of Africa. Effectively, our Port Elizabeth site's capacity. And I've tried -- it's so hard with capacity. You've got 1 ml, 10 ml, 20 ml, but I'll try to turn it into doses to make it sort of understandable for all of us. So when we look at our vial capacity, we've got about 700 million doses of vials. We've measured the dose as 1 dose equals 1 ml. The current COVID vaccines are less than 1 ml. So that would mean that you should have more than 700 million doses. In the same facility, you have an ability to lyophilize products as well. And the capacity for lyophilization is about 1 dose of lyophilization is 3 doses of vial. So it gives you -- cuts your capacity down by 1/3. So if you were selling capacity, you'd expect 3x the price for lyophilization as opposed to a single dose of -- a single dose of lyophilization you'd expect to charge the same price as 3 doses, if you were to get equal value for your capacity. The ampules are measured in 1 to 20 ml, and that's why you see this divergence between potentially 50 million to 150 million units. And then we've got large Diprivan vials. We're putting a lot of store on our propofol and -- sorry, propofol is the active ingredient in Diprivan. We think there's a real opportunity here. And these aren't very big syringes. They have 20 ml and 50 ml syringes. And although you're only getting 14 million vials, it's the equivalent of 500 million doses. And then we've got capacity in eyedrops for 75 million eyedrops. So that's our capacity in lay speak. And what do we have available? So they've created -- what do we have available for third parties and how are we going to apply this capacity? So we've got -- the key takeout here is that our ampules and large Diprivan vials are going to be really dedicated to Aspen and then hopefully to grow our Aspen product and product range in there. But the key area to take out of here is we've got 600 million doses from vials. So that is what our available incremental capacity is out of that 700 million area. There's 600 million of precapacity to fill there out of Port Elizabeth. Then we go to our second sterile site in France. And here, we have 3 capabilities. We have the prefilled syringe capacity and we've got blow fill seal and polybags. And the pre-filled syringe capacity is a very important capacity for us. And when we look at what capacity we have available, doing something similar to what we've done in Port Elizabeth, we've got maybe 200 million pre-filled syringes available. This is -- I should just note, this is a higher value add. So you would expect to get a lot more for 1 pre-filled syringe than 1 dose in a vial. The conversion is different. So it's a valuable capacity to us, and that's one we look at very, very closely. And we've got up to 75 million in our blow fill seal area. And that area right now is going to take on a lot of our vaccines -- sorry, apologies, our anesthetics, but there will be capacity at the end of all of that to either grow the anesthetics or to apply to third parties. So what have we got, in summary, around sterile capabilities and capacity? We've got significant capacity available. And I think the areas to look at are the 600 million doses of vials, from vials in Port Elizabeth and 200 million in doses of the pre-filled syringes. The COVID vaccine we make will utilize part of our vial capacity. What I should stress to you is that we could have built out in a certain way, our Steriles, but we made sure that when we built our facilities, they we're built with both these areas, we're built with the ability to manufacture vaccines. So we had to put certain isolators in place, certain areas had to be -- have to have certain isolation. And this is what we've put in over and above what we needed for Anaesthetics. So we have capacity and capability to make vaccines both in South Africa and France. So what is the potential of this capacity? Well, we can use it for contract manufacturer, for example, the vaccine. This gives you a lesser margin. But just bear in mind, we have all our fixed costs in place, highly mechanized. So these are significant volumes. When you take 800 million-odd units of opportunity, even small numbers, small returns will give you a material positive outcome. So if you make, for example, ZAR 4 a unit on 800 million, it will give you ZAR 3 billion. The opportunity is to collaborate with other players or to acquire IP. And here, you will have a higher-margin opportunity. And this could create material upside. For example, if we could get ZAR 15, $1 per unit, it would more than double the group's EBITDA. So this is the potential that we have to think very carefully about as we look ahead. So that takes me on to the point of capacity allocation. This is utilization of a strategically, very relevant global capability that is in short supply. So we have to be really thoughtful here. You might just want to fill it all tomorrow. But we have to be thoughtful and deliberate and very strategic in everything we do here. Manufacturing commitments are long-term in nature, and the decisions that we make today may impact the future. So a lot of thought going, a lot of planning, a lot of discussions as to how we maximize the opportunity that we have created through our sterile build. If we take -- come now to the summary and the guidance of where we are. I think we're really well positioned to deliver sustained shareholder value. I thought this was a really interesting slide. This shows where we were 2 years ago, where we had ZAR 5.5 billion in EBITDA, and now we have ZAR 5.2 billion. And why did -- why did our EBITDA come down? Well, it's because we ended up divesting many, many businesses along the way. The most material of which are Japan and the European Thrombosis. So we've had very little reduction in EBITDA over the last couple of years. And that really gives you a sense of the underlying growth from our continuous -- continuing operations that has managed to sustain it. And in doing that, in holding that EBITDA relatively steady, what did we do? We brought the debt down from ZAR 54 billion to ZAR 27 billion, we halved it. What we also did on the slide was adjust it, because we do have -- we did have sub payments for the milk business that were to come. And in this instance, the Thrombosis payment in the next few months. But any way you look at it, we've made a massive material reduction in the debt of the business. Sorry, I think I pushed buttons here. We've reduced the debt substantially. So when you look at a very limited loss of EBITDA, but a massive reduction in debt, it gives you the sense of the value that we have created in the period between '19 and '21. A quick look at the results. Well, H1 2021 reflects -- really reflects the robustness of Aspen. We have very positive underlying growth. Revenues at 6% and NHEPS at 7% growth. And there's pictures, those are pictures of the vaccines. Those are hopefully coming soon to a shoulder near you. Have a look closely at those, it's a very exciting opportunity and something we're so proud of and so proud of all our teams in terms of what they've done and what they're delivering to the -- not only the country, but to the world. If we look at our H1 growth momentum, it's expected to be maintained for financial 2021. So we continue to believe in the robustness of the growth. And we think it would be at least equal to what we've achieved to date. Of course, I mean, the subject here is always, we're not sure what COVID brings in its -- with each wave. The results will be impacted by relative exchange rate movements. I mean, there's a small percentage of our business that comes out of South Africa, really. So of course, exchange rates are going to be a major problem -- a major impact, sorry. Commercial production. The COVID vaccine will contribute results towards the end of financial 2021. That's a really big statement. That's a big statement, not because of what -- not only because of what it does commercially. I think what -- the big statement in there is that our tech transfer is going successfully. It's going well. And the fact that we expect it to contribute means that we will have vaccines in the not-too-distant future for production -- for use by patients. And we all know how critical those -- the need is for those vaccines. So very, very pleased with the teams and the contribution and the incredible compliments we have had around the technical expertise we have within the Aspen business. So really well done to our teams and thank you. We go to our capital allocation model. Gus has told you, it's a commitment to dividends. We've got a strong balance sheet, which gives us capacity for acquisitions. The pro forma leverage ratio has dropped very close to 2%, and our gearing has reduced to 29%. So that's the guidance, that's where we hope to be in the next few months. And let's just have a little look at some of our strategic growth drivers, where we focus forward from here. We've got -- we want to focus on underlying organic growth. We're very focused on now creating shareholder returns and the -- shareholder returns. And this is -- these are some of the returns that I'm going to be speaking to you about. So if we look at it and we say, well, what has Aspen done? We've created 2 critical areas, I believe, through some of the acquisitions that we've achieved. Those acquisitions have bought us products generally. Those products we've been able to create commercial footprints across the world. And we've created the supporting infrastructure for that. And we've learned many lessons along the way, some good, some bad, and we've learned equally from all. But we now know what we can and can't do and what we can and can't achieve. So if you want to put products or businesses on top of this commercial footprint, we would expect those additional costs to be variable in nature. In other words, improving returns. We've created a sterile. We've also used an opportunity to create a sterile platform. Now if we've come and said, "We want to build a sterile platform, and we're going to spend billions and billions of rand," everyone would look at us, and we wouldn't be here today. So what we did was we bought sterile products. If you remember in a presentation or 2 ago, I've always said, the products are the furniture. What we were really interested in is the capability and the capacities. We had to build to scale to become globally relevant. We needed economy of scale. We've learned that from our entire business model. We bought the products. We've created the scale. We've created the capacities. I've taken you through the opportunities the capacities represent. So there's an opportunity to fill but there's also -- we've created an opportunity in a vaccine space. It's an industry where it has been controlled by 3 or 4 major players, and there's opportunity to work with those players. But there is also disruptors in the industry. Biotech companies who disrupt us, but they don't necessarily have all the infrastructure. So they might not have a commercial footprint, and they might not have a manufacturing footprint and generally don't. And so we've created a lot of opportunities for Aspen with these new capacities and capabilities. And I'll ask you to reflect on those, and we are going to be working very hard over the next period, the next few years to be able to drive sustained shareholder value by adding onto the infrastructures that we have created and the growth vectors that we believe we've got an opportunity to push on. And that is why we said with some confidence during the investor presentation that we believe our EBITDA percentages would grow. And over the next 3 to 4 years, we expect double-digit growth in those EBITDA percentages. So that's our story. It's been a really, as I said, a watershed year for us. It's been a period. It's been very nice to see ideas, visions turning into operations. And now it's really about our execution. How well we will do will depend on our execution from here and strategies. Thank you, everyone. I think from here, we've got a video that we will play for a few minutes just to show you some of the people internally, and then we'll be a few minutes -- and then we'll be back for Q&A. Thank you. [Presentation]

Hello, everyone. Thank you very much for your attention this morning. There are -- I've got my mask on. Oh, there are no questions that we've received. So we're going to close the presentation down. I'm sure you'll have a productive day further at the conference. Thank you very much. Bye.