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

Great honor and privilege to stand in front of you. My name is Kuseni Dlamini. I am the Chairman of Aspen Pharmacare. We're really excited to have you all here. We thank you immensely for your interest in Aspen. We're very proud of the results that we'll be sharing with you; and also very, very pleased indeed with the very big announcement that we made yesterday of our partnership with Serum. Without further ado, I would like to introduce Sean Capazorio, who is going to come and do the presentation. And Stephen will follow after him. Thank you very much indeed for your interest in Aspen and for your continued support.

Good morning, everybody. It's great to be back in Joburg. I think the last time, if my memory serve me correctly, we presented here was 2019, so it was pre COVID, so really great to be back in Joburg. I always forget how cold Joburg is relative to Durban, but lucky I'm -- my roots were still in Joburg, so my Joburg genes kicked in and I kept warm but lovely to have all of you. Really proud to be presenting this set of results today. They've been achieved against, under very challenging trading conditions, a very volatile global landscape. And we've shown a really resilient performance, so really happy and proud to be presenting these results to all of you today. Just to draw your attention to the disclaimer slide and the disclosure notes. Those are just for reading and for taking note and to bear in mind as we go through the presentation, so I think really then, to dive straight into it, I'm going to start off with our financial highlights. It's been a really solid operational performance. We've driven good operating margins. We've really sweated our assets this year. And I'm very proud to say that we've shown improved return on invested capital, the way we calculate it. The trend is positive and really, really pleasing to see. I know that's something that we've been focusing on and we've been promising you, and this is the year we've delivered. So just to draw your attention to that. I think it's a very important metric. If I then skip to the highlights. If we look at our revenue: We've grown 5% in constant exchange rate, 2% in reported rate. So from an exchange rate perspective, around about ZAR 1 billion impact of the stronger rand on the currency relative to our constant exchange rate but a very pleasing revenue growth. If you look underneath that, it's a strong growth in Manufacturing, particularly in the second half after recovery from COVID in the first half. We did guide you that we'd have a much stronger second half, so we've met our guidance there. And secondly, on the commercial pharma, a resilient performance in the second half. And we also guided you that we would have a lower second half commercial pharma driven by the impact of volume-based procurement hitting us in the second half; the lockdown in China in the last quarter; the geopolitical challenges that we faced in Russia, Ukraine. And we've also had some product divestments in South Africa, and Stephen will unpack that in a lot more detail in his section. So if you throw all of that into the mix, I think we're quite proud of our revenue growth. And it's in line with where we did guide at the interims. From a normalized EBITDA perspective, we had pleasing double-digit growth of 13% in constant exchange rate. That's really driven predominantly by 2 factors. Our gross margins have been robust. I mean, despite all the challenges of inflation, we've managed to keep our gross margins ahead of last year. And if you look at the underlying segments, which I'll take you through a bit later, all the segments supporting the group gross margins have all shown improvement year-on-year. The real standout features while driving the double-digit growth is our operating expense management which has been very strong and focused this year. We've really -- we've shown resilience in keeping our costs in the right shape, and that gives you the leverage to drive a double-digit normalized EBITDA growth. And the fruits of all of those labors then come out in the normalized EBITDA margin, if you look to the third bar there or the third graph. We've grown our EBITDA margin percentage by 2.2 percentage points, so a really big quantum jump for the current year and above -- I think, above where we originally guided in 2020. Also we've managed our borrowings very strongly. Our borrowings have come down, and I'll take you through that in a subsequent slide. So as a consequence, we've had lower financing costs. And that, combined with the double-digit EBITDA growth, has given you this 24%, or 26% in constant exchange rate, growth in our normalized headline earnings per share, which is a really, really pleasing result and one that we're very proud of. I also want to just draw your attention. I thought I'll just make you recall. When we presented the numbers in March, we had this little triangle with sales at the top, EBITDA in the middle and earnings at the bottom. I'm very pleased to announce we've kept the shape for the full year. We kept the shape at half time and we managed to keep it in shape for the full year, so earnings growth ahead of EBITDA growth ahead of sales growth, so a very proud and pleasing operational performance amongst real challenging times. If we then look to the balance sheet, a very strong balance sheet which underpins our sustainable growth strategy. If you look at the metrics on a collective basis, they're really showing a positive performance and giving us quite a good foundation for future growth. Just going from left to right: Our cash conversion rate, we came in below 100%. If you look at historical performance, we've always achieved over 100%. This year has been a really challenging year. I think most companies have faced the same challenges we have. We've had global supply disruptions, the impact of inflation, so we've had to make sure that we stock up on all the right strategic inventory to make sure we run -- don't run out of stock and meet our patient needs. And we're comfortable that, going forward as things normalize, assuming that they do, which we hope, the new normal is always tricky -- that we will go above 100% in 2023. And I'll unpack a bit of that in some later slides. Looking at the borrowings, a really pleasing trend, you can see in 2020 we were sitting with borrowings at ZAR 35.2 billion, right down to ZAR 16 billion. Our leverage ratio is below 2x and comfortably below our targeted position of 3x, giving us a lot of headroom to take advantage of investment opportunities both within the business in terms of capital investment and any potential M&A, attractive M&A, opportunities. All of that is culminated in a dividend declaration of (sic) [ up ] 24%, which is in line with our normalized headline earnings growth, so I think that's a really good accolade for us to drive that. And so second year in a row we've declared dividends, a really important demonstration of our ability to drive strong cash flows. In addition, we've also been able to take advantage and invest in our own shares. And we've invested ZAR 1.8 billion in share buyback this year, just around 10.2 billion (sic) [ 10.2 million ] shares, 2.2% of issued share capital. So we put our money where our mouth is and we've also invested in our own shares, so we're very proud of that. This next slide is probably my favorite slide. So we thought we'd just take you on a history, a path through history. And this graph, this page is really showing you the NHEPS from 2018 to 2022, words and all, so it's got -- all the businesses were -- that were included in those particular years are embedded in those NHEPS numbers, likewise the debt number. And we've also got the EBITDA numbers in the green there and the EBITDA margin percentages. So if you sort of just scroll from left to right, you can see that in 2018 we had debt of just over ZAR 46 billion, just under ZAR 47 billion in fact; and EBITDA of around ZAR 12 billion; and a margin of 28.2%. If you then fast forward to 2022, our EBITDA now is at ZAR 11 billion, so slightly below that but bearing in mind the EBITDA in '22 doesn't have thrombosis. It doesn't have Nutritionals. It doesn't have the Japanese business. And we've managed to come very close to the EBITDA in 2018 with all of those businesses being disposed. From a debt perspective, a ZAR 31 billion drop in debt with the same level of EBITDA. And the real standout feature is our NHEPS coming in at 1,627 cents, which is a record high for the Aspen Group. And amongst all of this, we've also managed to do the share buyback, which has elevated the borrowings by ZAR 1.8 billion. So from -- just as a takeaway, it's our highest NHEPS in history and it's the lowest net borrowings in the last 5 years, so really a nice thing to just bear in mind. What we then did, if you recall, we've started benchmarking ourselves against our 2020 results. So in terms of that, we just did a CAGR, words and all. We took the last 2-year CAGRs from -- using 2020 as a base. And you can see our revenue over the 2-year CAGR is at 7%; our normalized EBITDA also at 7%, so matching turnover growth; and NHEPS coming in at a double digit of 16%, so a really nice overall trend from 2020. Right then, just getting on to the income statement. I know it's a lot to absorb, so I thought I'd just quickly just explain the chart. So this is our normalized EBITDA income statement sort of taking you down the roads from revenue, gross profit, down to normalized EBITDA. And the columns at the top are the numbers for '22, the percentage of revenue ratios, followed by the 2021 reported numbers. And that next column there is the reported percentage growths. And then we've got the -- in the last column on the right, we've got the constant exchange rate growth to -- which is how we measure ourselves in constant exchange rate. So just to unpack it, if we look at revenue, which I've already covered. We've shown a good, solid growth here of 5% driven by the Manufacturing and -- as we -- as I mentioned earlier, and very strong underlying growth in commercial pharma despite the volume-based procurement, the lockdown in China which we didn't anticipate, product divestments which we did guide and the Russia geopolitical situation which also reduced our second half sales. The standout feature for us is the gross profit, if you look at the blue circles. We've grown our gross profit by 0.3 percentage points; and in terms of growth, year-on-year growth, 5% CER, so we've matched the gross profit growth to the turnover growth of 5%. Underlying that, the segmental margins have all shown improvement, so that's a very pleasing thing for us. And if we look at our commercial pharma business, they've shown a really, really good margin improvement with portfolio optimization initiatives that we've undertaken, cost-saving initiatives, which include some of the site transfers of our anesthetic business. And that's provided us with a lot of protection against inflation and very abnormal freight costs. We incurred over ZAR 200 million of freight costs just in the second half alone, incremental freight costs. We've managed to absorb all of that and still come good on the margins. The only other big ticket thing to mention is that our mix of Manufacturing sales has increased year-on-year from 25% to 28%. And that -- obviously, because the Manufacturing margins are slightly -- or lower than the commercial pharma margin, that mix of sales would dilute your overall gross margin percentages, but as I said, the -- if you look at the underlying segments, all showing improvement. And I will take you through some detail on that in a moment. And then the operating expenses. You can see in the green we've managed to reduce our operating expenses by 4% from a constant exchange rate perspective. And you can see the leverage that's given us on our EBITDA growth. Growing your gross profit of 5% leverages your EBITDA growth to 13%; and on the margin side, growing your EBITDA margin up to 28.5% from 26.3% in the prior year, so we're very proud of that achievement. Then just to unpack the gross profit trends in a little bit more detail. And I'll start off here with the Regional Brands and perhaps just to explain the chart because I know it is a lot to absorb, but starting from the left, we've got our full year 2021 gross margin percentage. We've then shown you the half 1 and half 2 margins and then the full year margin for FY '22. So if you look at our Regional Brands, you can see a good percentage, a 1.9 percentage point, improvement year-on-year on the regional brands. And that's really the benefit of all of our portfolio optimization strategies despite all the inflationary and freight cost pressures that we've had to endure in the current year. Looking to sterile, which had a lot of headwinds in it, you can see sterile. Last year, we had a gross margin of 60%. This year, we've ended at 60.7%. You can see in the second half we had a drop in the margin from the first half. And that was driven by the volume-based procurement, but notwithstanding that, with the site transfer savings and other initiatives and also the freight costs which burdened the anesthetics more than the regional brands, we've managed to still grow our Sterile Focus Brands by 0.7 percentage points, from 60.7% versus 60% in the prior year. On the Manufacturing side. If you recall, our Manufacturing has got our base Manufacturing business. And it's also got what we call our finished dose form transaction-related revenue, which is at low or no gross margin, so when I -- if you look at the shaded bars, those are the bars which exclude the impact of the finished dose supply-related revenue which is at low or no gross margin. And you look at the trend there. You can see our Manufacturing margin has jumped up from 25.3%, up to 27.3% year-on-year. And that -- the 2 big factors there are the contribution from our vaccine, from our J&J vaccines, and coupled with a strong improvement in our API chemicals margin following a lot of transformational activity to improve the margins in our chemical business. And chemicals is a big driver of Manufacturing gross margin, so we're very pleased with that performance. If you throw -- look at it words and all, because of the mix of the transactional service revenue and we've had a full 12 months of that, you can see overall we've kept our margins flat on Manufacturing, but that's because of the mix. But underlying that, you can see the improvement. And then at a group level, you can see the same trends, if you look at the shaded bars, 49.8% last year, up to 51.1% in FY '22. So overall a good improvement, with -- under very challenging conditions, in gross margin. And Stephen will unpack some of the challenges in his presentation. I think then just flicking on to our normalized headline earnings. This bridge serves to reconcile or bridge the reported earnings from last year to the reported earnings for this year. So if we start from the left, you've got your reported earnings last year of ZAR 5.978 billion. You can see the impact of ForEx has not been massive this year, so around about ZAR 60 million. And then you -- if you look at the top, that gives you a 23% growth in your reported normalized earnings and a 25% growth from a constant exchange rate, so a 2% delta because of constant exchange rate. Looking at the key drivers of our 25% growth in normalized headline earnings. We've covered this already, but we've got the -- we had the benefit of the double-digit EBITDA growth of 13%. We've also -- if you look to the interest bar there, we've had an interest saving of ZAR 355 million. And that's come with lower borrowing levels, but I do guide that we will face upward pressure, as I think all companies will, in FY '23. And I'll unpack some detail on that a bit later. On the ForEx gains slide, we were also on the right side of the ForEx gains this year. We anticipate that a lot of that will potentially come into our revenue numbers next year but overall a benefit from foreign exchange. We are again not sure where that will be in FY '23 given the volatility of ForEx in the market and global conditions. And then I think, just to draw your attention, the last bullet that I've just put up. Our normalized headline earnings per share growth is actually 1 -- will be 1% higher than the 25% that you see there or the 23%, and that's because of the benefit of the share buyback giving you an accretive 1% benefit. And going through to FY '23, you're going to get the annualized benefit of the share buyback in your earnings per share growth next year. So there will be the delta between headline earnings and headline earnings per share. You will see some positive delta next year more than the 1% that we've picked up this year. All right, on to working capital, I just wanted to guide you through the slide. So I think, if you could cast your eyes to the top right of the presentation slide, we've got our net working capital there as a percentage of revenue. And we've trended it from FY '20 through to FY '22, so you can see that in FY 2021 we had quite a low ratio. And relative to H1 of this year, we came in at 45%; and if you exclude Aspen Oss, 38%. We were hoping that in half 2 we would show you some benefit in the working capital, but unfortunately with global conditions and wanting to protect our customer service levels and make sure that we've got all the right strategic stock in our manufacturing, we've had to continue to invest. We couldn't unwind that in the second half. And you will see that ratio has held firm from the first half through to the full year. If you look down to the bottom right, that just gives you the mix of our working capital investment. And you can see our mix is heavily weighted towards Manufacturing. And they've taken the most strain in this challenging period that we've come through in terms of global disruption. So I think, from an overall perspective, we've come in at around about 81%, if you go back to the first highlights, from a cash conversion perspective. And as I said, we did sacrifice that to protect customer service levels. We do expect our net working capital and our cash conversion ratios to improve in the new year if -- on the assumption that global volatility and the supply chain landscape starts to normalize, which we are starting to see some shoots. I think we're starting to -- seeing that freight costs are starting to stabilize in the near term, so we're hoping that, under normal trading conditions, we will go back to an over-100% cash conversion rate. And at this year, as you saw from the trend, is the first year out of many that we've gone below the 100%. And we will target to go above 100% next year. Financing costs, just to take you quickly through this table. We've had a significant reduction here, which you saw in a previous bridge has augmented our normalized headline earnings growth, but if you look at the overall financing costs if you cast your eye down to the first brown row there -- I mean the gray row, our financing costs, we ended this year on a normalized basis ZAR 476 million versus ZAR 1.1 billion in the previous, as you can see, a massive drop in financing costs. And then we've also just put the reported numbers therefore for the benefit of tying it up to our published accounts. So some of the standout features there, the -- obviously the new -- the reduction in our net borrowings. We've also -- you can see from the table we've also had the benefit of lower interest rates this year. Our effective rate for this year ended at 2.9% relative to 3.4% in the prior year, so we've had the benefit or -- and lower interest of ZAR 386 million. ForEx gains, we've had a material movement there, but as I said, that's something that we can't predict going forward, so it is what it is. And then I think, just to guide you on interest, as you know, our first half of the year is always more -- cyclically is a higher investment cycle in the first half and then we unwind in the second half. So just to guide you that our debt levels in the first half will be higher than what they are now because we've got to fund dividends, et cetera and some of our capital projects. So that coupled with the expected -- not expected. I think we've seen base interest rates climbing. We do see interest expenses jumping up in the first half, but you will then see that flattening down or coming down in the second half as our cash cycle improves in the second half. So overall there will be an increase in interest over the period but more, I think, weighted to the first half. So I just wanted to guide you there so that you've got that in your radar. We do expect -- we've had a look at our overall business. We expect our average effective base rate to increase between 50 and 100 basis points in FY '23. And just to alert you. Do -- we do have the benefit of the funding. If you recall, we did the funding with the IFC last year, EUR 600 million. And in terms of that funding, we were able to fix our base rate at 0%, so that gives us quite a nice portfolio protection against our overall effective interest rates going forward. From a capital allocation perspective. Obviously this is always subject to being below 3x, which we are. If you go to the first block: We've invested ZAR 2.7 billion in CapEx in this financial year. And I -- we haven't put the detail in here, but it is in the appendix. That includes ZAR 0.5 billion already that we've expended on the sterile and vaccine expansion project that we'll cover later. So that includes the start-up investment in that. On the bolt-on acquisitions, we've had a net inflow there of ZAR 371 million. There is an appendix on that as well to give you the breakdown, but the 2 big movers there, we've obviously -- if you recall, we got cash inflows for the Acino disposal of ZAR 1.8 billion. And then we've also had to make some deferred payments on some of the earlier deals of around about ZAR 1.5 billion. And I think that roughly gives you -- there are a lot of other moving parts. Included in that as well, we've also funded the acquisition called ENT, yes, in Australia, a nice niche portfolio of OTC products which Stephen will again guide you through in the detail there. So those have all been absorbed in that number and we still come out with a ZAR 0.4 billion inflow. And then as we said, we've been able to fund 3 -- just under ZAR 3 billion between share buybacks and dividends over this year. So four, we haven't had any big outflows there. And that's -- or M&A is always on the radar, and Stephen will talk you through that in his section. What we thought we'd do is just, from my perspective, give you the financial scorecard. So this is, if you recall, we -- in December 2020, we gave you guidance on all the financial metrics, so I thought we'd do a halfway scorecard match. I'm pleased to say that all the financial metrics are on track. There's been successful implementation of our strategy. The return metrics have shown good improvement. And then I thought I'd just like to take you through the metrics that we promised you and where they've headed and give you some view. So the first thing we promised, we said that we'd increase from an EBITDA margin which we rebased in 2020 of 25.8%. We rebased it at that time because we knew we were going to get this transaction flow of low-margin Manufacturing turnover coming in. So we rebased it at 25.8% and we said we will better that. And I'm proud to say that we came in at 28.5% on the EBITDA margin, so a very strong outperformance there at the halfway mark. From an EBITDA perspective, we said we'd grow EBITDA above revenue growth. And I'm proud to say our EBITDA growth is at 13%, well ahead of 5% revenue growth. These numbers, again, are all in constant exchange rate. On NHEPS, we said NHEPS growth would be stronger than EBITDA growth, and we've met our promise there. We've come in at 26% NHEPS versus an EBITDA growth of 13%. On the leverage ratio, which we said we'd be no greater than 3x. And as you saw from the highlights, we're at 1.9x, which gives us significant revenue; and provides us with capacity for value-enhancing investments, which I think you've seen the fruits of some of those coming through in our return on investment. On the cash flow side, we said we'd be driving improved free cash flow. I think, up until 2021, we kept to that guidance. And this year, you can see I put the arrow in orange. I think this year has been a bit of an abnormal year with the investment in inventory, but that was to protect our customer service levels. And we're hoping that, that will normalize in FY '23 as global supply chain starts to normalize and the landscape resumes to normality. On dividends, we promised that we'd recommence dividends. And we recommenced last year and we've again declared a dividend this year 24% up on the prior year. And on that note, I'd just like to thank you all for listening to me. It's really been a pleasure speaking to all of you. And I now want to hand over to Stephen to take you through the performance, the strategic and the prospects review sections of the presentation. So thank you. Stephen?

Thanks, Sean. Well done, Sean, well done.

Thank you.

So good morning, everyone. I had -- listening to Sean talk about 2019, I sort of go back to 1999 and a really big meeting here where we -- and I always love coming to Investec because it's actually where we closed the deal with South African Druggists. And it's hard sometimes. You look and you work. I was making notes, just some rough notes, while you were talking, Sean. And sometimes, you've just got to put these things into context from a start-up to doing ZAR 100 million of turnover a day every day in medicine. Somewhere around the world, somebody, whether they're in the Philippines, Sao Paulo, Nairobi, Paris -- somebody somewhere is getting an Aspen medicine as we speak, yes. And it looks a bit -- it's quite hard to comprehend sometimes. I just sit and look; and think, no, we can't possibly be doing that, but we are, so that's great. It's been, I think, really, really good businesses have a capacity to absorb shocks. I think that's a statement that I think most people would agree with, but I'm not sure that many businesses are designed to go what feels like probably 15 rounds with Mike Tyson. We took so many knocks, so, so many knocks. The numbers look fine and there's this great exterior, but we took so many knocks and really we stood firm and we've come out on top. And I think, Sean, the word you used was "resilient," and it is, yes. I think we have been -- we've really demonstrated incredible resilience. If I try and work out why we've had -- where our resilience comes from and why our business has grown today as it is, I think there's 3 things that one should bear in mind with Aspen. One is geographic spread. So yes, we've got a problem in Russia. And yes, we have a problem as -- in China perhaps, but Lat Am or Australia have come through on the other side. I think the other area is currency mix. We've got so many different currencies in our basket, and so we never -- we don't feel -- for currency mix, I'm never quite sure whether it's good or bad for us. It's there's all sorts of knock-on effects somewhere, but it sort of evens out across the business. And I think the third area is product portfolio. And people say, "Yes, you've got this," and -- but if you think about it -- and it's a really -- quite a good position to -- because people will fully understand that when I talk about it. During COVID, we had a sterile business that did well because a lot of people were going to hospitals, et cetera, et cetera. And we had a portfolio that did well. And our regional brands battled because people weren't getting sick; no antibiotics, no cold and flu. And then when the reverse happened and we started to come out of COVID and COVID-related lockdowns, et cetera, our regional brands have performed and our sterile brands are a little bit lower. So that gave us -- and if you think about that geographic, currency, product mix, hopefully, you'll see that come through in our performance, in our discussions around it. My second point on really good businesses are really good businesses react quickly to a fluid environment. I don't think I need to tell you any more than the demonstration of how we shifted into COVID and COVID vaccines from not even -- from people not even being aware we had a vaccine capability. The outlook for COVID vaccines, I really can't call. And you don't want to be in my position because, if you were in my position and you heard all the people that talk to me, the procurers, you could -- on one day, you could hear 0. And another day, you could hear, "1.2 billion vaccines is what we expect to buy from you," but what I think we mustn't forget is that we had a plan pre COVID. We didn't know about COVID, so we had a plan, and this plan was to fill our capacity. People might say, "Oh, it was a real downside for you to have followed a strategy around COVID." And I would say, yes, there was -- it interrupted our plans, probably delayed our plans from anything 12 to 18 months, but let's look at the upsides. I mean the first and fundamentally the biggest upside is that we provided 225 million doses to Africa, to African patients. And what more could one want to do in that period than do that? Bear in mind no one was supplying Africa, but there were other things. There are commercial ramifications for what's happened and what's transpired. We -- what COVID showed was it exposed the disparities. It showed the disparities to access to health and it's forced a rethink. The African Union said, "wow, we buy 99% of our vaccines" We import them. That's not a healthy situation to be in. We need to change it. We want 30% to 40%, as a minimum, coming out of Africa. The multilateral procurers, remember it's their job to manage global pandemics, were left -- they have found that the systems were flawed because people kept vaccines. Without that manufacturer, you had no control over your business. And then the multinationals that we deal a lot with, and this is an important point, is in their ESG commitments for sustainability -- what's critical for them to sustainability? It's access, creating access. And Aspen has provided that. We've done a lot with multinationals historically. We understand access. We focus on access and we can deliver for them. So in order to get health security, how do you do that? You go and you need regional manufacturer. And you want people that are dependable, capable and committed. Those are the 3 words I wrote here. And I think Aspen is -- has proven to be all 3 and more, and we want to be the flag bearers for the continent. And what I think you should see is our relationship with Serum is the first step in transactions that will follow. And understand, for a company like Serum that already supplies many of these markets to have partnered with Aspen, they too have seen this need for regional manufacturer and that commercially it is better to align with Aspen than to go -- to stand alone. So -- sorry. That was not quite part of the presentation, but let me get into that. That was just my sort of headline thoughts on where we are as an organization. So let's talk about the trading environment. It's been an absolutely challenging macro environment. And I'm not going to go through everything that you will know and I'm sure you hear from others, but through it all, we've also got to be grateful. We've got to be grateful that we're in the industry we're in because your volumes are unimpacted or generally relatively unimpacted regardless of the situations. We're in a -- we're basically in a defensive industry, but we're also in an industry where we aren't price makers generally, not across our whole portfolio. But governments set your prices, but there are OTC businesses where you might not -- you don't have the same restrictions on pricing. If we then look at the sort of Aspen specific. We really achieved our stated target to achieve an H2 in line with H1. And what we weren't -- the one thing we guided you and where we saw problems, we knew there was Russia, et cetera, but we didn't expect a full lockdown in China for at least half of that half. And China is an important part of the business, but fortunately, our other regions were there to offset it. And you'll look at us and say, "With all those costs in there, you still manage to improve your margins." And that's really the work we have been doing over the years: to create efficiencies in our factories, to insource our own production and to be really disciplined about OpEx. And actually COVID taught us a little bit about OpEx because sometimes we had to cut costs because you couldn't travel. You couldn't do this. And we didn't see an impact. So a lot of times, you worked out, "Do we -- are those expenses we really need?" And things that you would have been nervous to test in, say, advertising or promotion or whatever; or to go digitally instead of somewhere else. You were forced to test it, and it worked and so we were able to implement. And when you think about taking ZAR 200 million, ZAR 225 million of costs, I think, on freight, just incremental freight costs in the second half, against, say, ZAR 20-odd million turnover in that half, it's like 1% just in one expense. I'm not going to take you through the rest. I've told you what we've done on our -- the 225 million doses we've made for Africa, and for me that's the highlight of our year. And then there's a pipeline of new opportunities that I'm going to take you through some, but we really are seeing some new opportunities both in commercial pharma and our Manufacturing division. If I look at our performance. And I'd do H2 versus H1 because we gave you guidance in H1 of where we thought we were going to land. Our Manufacturing recovered. We had a -- quite a rough start in the first half with COVID, but we managed to just keep our doors open. We had lower absenteeism. And then we saw a decrease in the demand for COVID vaccine. Our commercial pharma business, we -- between divestments in South Africa, volume-based procurement in China, we guided you to ZAR 500 million in the half and it was of that order. The Russian sales in the first half were ZAR 500 million. They're down to ZAR 150 million. That's ZAR 150 million more than I thought we would do -- I told you I thought we might do at the half, so it wasn't a complete -- it didn't come a complete write-off. And it is recovering a little bit further. Of course, we've spoken about the lockdown in China, but it was offset by the better relative performances from the other regions. In terms of our revenue, Sean has taken you through the difference between our reported revenue and constant exchange. Just to point out that, had we had the same relative exchange rates, our turnover would have been ZAR 1 billion more. Costs and everything else would also be more, but on revenue standalone, it's ZAR 1 billion more. And that was just based on the relative strength. The Manufacturing, as I showed you, recovered in the second half. And we've had a very strong -- a resilient performance probably is the right word again to describe our commercial pharma business. When you look at our business. We've got regional brands. We've got sterile brands and our manufacturer. And the regional brands have recovered because of the less-restrictive environment we're in and very strong growth in Australia and Latin America and a lot -- that strong OTC growth as well. So I think you might be seeing that a bit, of globally you'd see OTC businesses have recovered. People are going around. People are breathing on each other. People are making each other sick and all the other things. So our African business was impacted by product portfolio divestments in South Africa. Of course, it would be, but we also had a lot of supply pressure in the Middle East in particular; and South Africa, not least a fire in our Alphamed facility. And that will be that we expect a lot of our volumes to come back in the second half out of that facility. We've had -- we had our challenges in Europe over the past. Some of you might remember, but certainly with our reshaped portfolio, and we got our teams right, it -- we've continued to get confidence in the team. And if you take the impact of what's happened in the oncology space, as the last period ever is impacted by oncology, take -- you take that out. It's grown 11% in Regional Brands, so a really nice performance. It's good performance, a lot of confidence building in what we're doing and what we're trying to achieve in Europe. And if you just make the adjustments for divestments and oncology, et cetera, our Regional Brands showed a growth of plus 5%. When I talk, I always talk in constant exchange rate. The sterile business. So the sterile business is down 2%. And my comments here is it's withstood some very big global challenges because, when you have a look at this business, it's very dependent on how we perform in China and how we perform in Europe CIS. The China business had volume-based procurement, but just to give you a sense: Asia is 0. So I mean we talk about lockdowns and all the other issues in China, so it gives you a sense of the underlying growth in the rest of the products to offset and to get it to 0. So yes. And it was something I think I told you maybe at the half or certainly at the year -- beginning of the year to say, yes, we expect impact from volume-based procurement, but we didn't -- we still expected China to not go into negative. And so a good performance out of China. With -- the lockdown was really unfortunate. And the lockdown -- because our products are largely sold in big city environments, so the places that had the lockdowns like Shanghai, we were particularly impacted. And interestingly, post lockdown, those volumes have still not returned to 100%. They're probably between 60% to 80%, with some of the 60% being in the bigger cities. The -- Europe. The whole of the Europe was impacted by Russia. Of course, you can see that clearly. It's not the European piece. The European piece has done very well. It was what happened in Russia. So yes. So that is the comments around withstanding global challenges. And bear in mind that performance is off last year's performance which was plus 9%. There was a 9% growth in this business, a lot of it COVID induced, but actually, ironically, probably our best -- if you look across the business, it probably is our best performance across any of the different divisions given the circumstances, of course. Manufacturing. Manufacturing has been a real growth driver in Aspen and continues. And we hope it will -- really hopeful that this is something that continues strongly and organically because, if you look at what we've done with a lot of our money, we've put money into our manufacturing. Yes, Sean has shown you we decreased our debt, but let me tell you we put a lot of money into CapEx as well. The API business had a strong H2. Remember we were 11% down in the first half, and we rebounded with an improved H2. We'd hope to get to better than even, but I'm still very pleased with where we got to there. I put Viatris and Biochem together. Why did I do that? Well, Biochem is our heparin business. And the Viatris volumes are increasing and continue to increase, and we've been battling to meet their demand. Much of the time, we had very high absenteeism. If you go to our first half, you'll see. We showed you a chart to how high absentee rate was in France, but the reason we put it together is, when they take volume from us, it was to take a lot of heparin from us. And when they take a lot of heparin, we've only got limited heparin to sell to third parties. So we are in a position now where they take -- their offtakes on heparin have increased substantially. So it makes sense to put it together because we are selling them both heparin -- they are, by far, our biggest customer and users of heparin. So we've put them together to give you an overall picture of what's happened. The growth in Viatris has resulted in a decrease in the sales of heparin. I mean it's as simple as that. Our finished dose form growth was driven by COVID vaccines. We had ZAR 1.4 billion, in this year, of turnover. It's gone ZAR 800 million then ZAR 600 million and -- in terms of halves and it was ZAR 400 million in the prior year. If I take out Viatris and the Biochem business, our business has grown about 15% in the manufacturing, so a very, very strong revenue that has sustained. We're really proud of what we do around ESG. We spend a lot of time -- I'd like to think that Aspen don't talk a story. We live it. You might not find us on the pickets around the rugby or cricket or soccer fields, but hopefully, you'll see us in areas where we think it really counts. So when our students were stuck in the Ukraine and have been treated quite badly, we brought them back from Ukraine. And I think what I said is that is Ubuntu as we understand Ubuntu and how we'd like to be. We had -- we've seen terrible things around the world, in the Lebanon. We saw problems in Ukraine, and we had nearly 400,000 patients across those countries that we supported. We're supplying a lot of essential medicines. People around the world are dependent on Aspen. I told you, at ZAR 100 million a day, you can imagine how many people are dependent on Aspen in low- and middle-income countries. At the same time, we've got to spend a lot of time in looking at our environment. I don't think -- I think we just have to look at your TV sets and see where things are going. And it -- and we've got to be -- we've got to look very carefully at how we manage things like electricity and water, particularly in the South African environment. We've become self-sufficient on water. We've also -- we're also looking at alternates for energy. We are fortunate in that we are a critical industry. So we are on the group, but that doesn't make it acceptable to not be looking more broadly. So hopefully, we're going to have some interesting -- we're looking at some very interesting opportunities there. And of course, a subject close to my heart, given that I have 4 daughters and a wife at home, is that we've -- we're increasing our representation of women in top management. So I mean they're really 100% in my house, but it's nice to see it at 34% at this level, so that's good. Let's just have a -- we're going to have a look at strategic review because I think the results speak for themselves. I think it's pretty clear, when you understand all the macro change, why those results were where they were. And let's look at our commercial pharma business. We've had organic growth with improved margins. And for me there's only one thing that -- it's, if I look at one thing and you said bring the results, I will say show me the organic growth. I just want to see organic growth. I'll -- because organic growth pays for everything. That's the bottom line. It pays for everything. When you've got organic growth, acquisitions on top gives you that -- accelerate you. So we've had -- people have questioned the model. "And is your portfolio good or bad?" I hope that we never have that question. Again, we've got a very relevant and a resilient portfolio. We've sustained positive momentum for a few years now on that. And I think it -- I think we've picked the right products that fit Aspen. We've picked the right geographies, and our portfolio continues to deliver. And you've got to understand this is a very strong deliverer of cash flow in the business. It doesn't come with a lot of stock. It comes with high margins, at stock values but -- and it comes with high margins, so it's a strong cash generator. When -- if I had someone who told me before this year started and said, "Listen. You've got divestments of products in South Africa. You've got a war in Russia where you're going to take quite a big knock. You're going to be 70% down in your second half. You're going to have VBP in China and you're going to have lockdowns on top of that. And you're going to have a fire in your facilities, which are going to impact your South African business," I would say, "Look. I'm not coming for this presentation." And I'm going -- you're going to -- sorry. Let's not forget the biggest, ZAR 1 billion adjustment for just exchange rates. I wouldn't be here. I'll say this: I'm not coming to talk to you about turnover growth or anything like it. In fact, I don't want to come, but we did it. And that's -- so of all the numbers that were on the thing, I know it looked better and -- but for me the revenue was the -- was for me the standout performance, believe it or not, of everything. And as I spoke to you, I think the one thing that was demonstrated to you and to us to an extent is how balanced our portfolio is even when you have a shift in COVID, et cetera. The standout performance for us for across the whole, this whole thing -- if there's one standout and you say, "What is your one standout performance here?" it has been the improvement in our margins. It's been an outstanding performance. There has been massive pressures. And we've done a lot of work in our factories. And all the stuff that we tell you we're good at had delivered for us when we needed them to deliver most. And of course, Sean and his financial team have done a fantastic job around OpEx too. He's got a black belt in budgetary control there, so well done, Sean. And it continues to decrease over the last couple of years, so thank you. If we look at the output -- the outlook going forward for commercial pharma, we've got organic growth. We expect organic growth across most of our regions. We'd like to see China rebound. And China has got a way of rebounding really quickly, but they can also just do draconian things. You sort of own your business in China, but you never control your business. And they might do things. They take different views just on lockdowns to others, for example, but we don't see -- this year going forward, we see limited VBP impact, some spillage from the prior year annualizing, but for us -- the big focus for us is get what -- post lockdown, when do you recover to 100%? We have assumed that our input costs will remain elevated. We think the OpEx will -- in commercial pharma is likely to move in line with sales growth, people moving around more and that we'd -- there's a point where you don't want to break your business by cutting too much expense. And the Australian, we expect the regulated price decrease in Australia may -- will impact us by about AUD 10 million. How do we -- we do have a cushion against these inflationary impacts. We're passing our increases where possible. So there's parts of our portfolio where we can and there's parts where we can't. And we expect further COGS reduction. Some of our cost reductions will from prior year annualize and we bring more products online, but with all of that, if the costs stay where they are and you're getting 2 halves of ZAR 225 million reduction in -- or increases in freight, et cetera, et cetera, we internally have budgeted for our gross margin impact to be of a -- of probably around 1%, close to 1%, to have a negative impact. The Russian business improved from interims. We're expecting sales may be at 50% of the 2021 levels. Remember we have elevated first half, lower second half, but we -- that -- it's sort of been picking up towards the end of the second half when we're getting slightly more visibility on that market together with some quite -- some improvements in the currency. So the ruble now is stronger now than it was before the war. It's crazy situation. It went from 100 to 200, when I did the last interims, that you thought it's gone. And it's now better than 100, yes, using 100 as a baseline. And I think we should be looking for some impact from some of the acquisitive opportunities that are out there. The manufacturer. Our manufacturer is split between API and finished dose form sales. And we've made a lot of investments in finished dose forms. And that was to insource the anesthetics range and also to add the capacity for the -- our type of opportunities you're seeing us rolling out now. Our anesthetic transfers were delayed. We decided to put vaccines, for example, on our vial lines, first, in the South African facilities. We had big COVID interruptions, even the people that were supposed to bring machinery. And they got COVID and they'd go and then they beat it. And we had very high absenteeism. And so what you end up doing is making your existing products or products that give you turnover before bringing on new products. And it delayed what -- bringing on products, you've got what's called validate them, so we delayed those validations. Our API business, as Sean told you, is a solid business. It's niche. It's steady. It's dependable. It's a key contributor to profitability, and our challenge there is to trying to pass on the costs that we've incurred. Sometimes we can and we are talking it. And there's generally some sympathy out there for full cost increases, but it's there's not a lot of sympathy for -- there's not a lot of sympathy anywhere. And I think -- if these costs continue to elevate, I think your ability to pass-on costing into the future is going to become harder and harder. Manufacturing is a driver of growth for us, and it continues now and we expect it to continue further. I think our vaccine capability was an important demonstration, as was the contracts that we're announcing, which gives you indication of the stimulus that it will be for future growth. Our finished dose form was driven by COVID vaccines. And 6 months ago, when I spoke to you and there was -- Africa was less than 20% vaccinated, I had different view on certainty around offtake. I'm not prepared to go out on a limb again on it, so I'll tell you it has an uncertain trajectory. The -- in the Biochem, Viatris business, I think you will see -- we've seen material increases in offtake. And we think that the growth there will continue to accelerate. So it's grown a lot and it continues to accelerate. And we also now -- in the time now we need to start doing all our tech transfers, for example, in our French facility, which really fell behind with -- because of the absenteeism, et cetera, and COVID, to bring on those 80 million doses that we've contracted with third parties. So COVID vaccines. This has been pretty topical and a lot of people spend a lot of time asking at me, so I think let me put it in numbers to you so you fully understand the impacts that the business -- that it has on our business and where it's going. The J&J contract is important. Sort of nearly 70% of the costs are fixed. So what does that mean? You put shifts in. You run lines. You've got people standing behind the lines. And a big part of those, the ZAR 1.4 billion of revenue we've got are fixed costs. The sales that I told you were ZAR 800 million, ZAR 600 million. We anticipate future sales of ZAR 200 million in H1, and then we're not assuming any sales beyond that date. Why aren't we assuming that? Because I think there are sufficient stock levels of J&J in the market. And I do believe that the type of people buying the J&J vaccine will now pivot into Aspenovax, so any future orders for that type of vaccine, where that's for the J&J, is likely -- I'm almost sure, will be a -- will be the Aspenovax vaccine. Aspenovax volumes are really hard to call. We've seen every expert call COVID waves and get them wrong. We don't know what COVID will do or won't do next. And I'm not prepared to go out on a limb, but what I can tell you, a severe strain of COVID will obviously influence demand. The reality right out there across Africa is the offtakes are anemic despite sufficient supply, so this is not a supply-driven issue. This is a demand-driven issue now, which is completely opposite to where we were not so long ago, but bear in mind, even at these lower levels, even -- these are potentially material to Aspen. As I said to you, both COVAX and AVATT -- COVAX is a global procurer. AVATT is African, a regional procurer, already committed to Aspen. I can't tell you anything else [indiscernible] they are in the -- and they are really looking at how they'll reduce their stocks and their commitments. So they're actually going up and saying, "Look, we ordered this many. How do we reduce our commitments so we can have an opportunity to place on Aspen?" From an Aspen internal position, we're focusing on we think there's an opportunity for us, in time, around the booster doses. So with all of that, where are we and what are our prospects? If we look at -- let's just summarize quickly in 2022 and we'll go through some of the prospects. We've delivered very strong financial results. The OpEx is well managed. We've managed tricky conditions. And we've shown the widening of the gross margin and -- the EBITDA margins, which Sean showed you. And even with all of that, better commercial pharma gross percentages are there. The reduction in finance charges is significant to the group and important. We were able to do a buyback. And a buyback is something one weighs to say, "What other opportunity? Is this the best opportunity we have out there of how we deploy capital?" And as Sean pointed out, we achieved our highest NHEPS in our history. We made 225 million doses of COVID vaccines for Africa, and that is obviously a standout highlight for us as well. Our relationship with Serum is an important first step, I believe. And I think it will give us more sustainable African volumes. It's nice to get an order for 1.2 billion. Then you've got to go and buy 8 machines. And how long are you going to keep them? And it's terrible to get nothing. You've got people looking at nothing, so this is factories like predictable -- everyone likes, not only factories, predictable volumes. And we continue to progress further opportunities there. Our organic growth is sustained and we've got an exciting pipeline of opportunities. And I'll try and talk through a few of those now, but I think that sort of wraps up financial year '22 for us. In terms of acquisitions and licenses. At the interim stage, I mentioned to you we were looking at acquisitive and licensing opportunities. It included Latin America, Africa, Australia and diverse sterile opportunities. Some, we closed. Some, we continue. And we continue to progress positively on others, so they're all still there. And I think, if we close a few of these stated, we will get a material increase in annualized sales and a knock-on in profitability as well. And once you've got your fixed costs in place, it's much better to put things on top. You get a much better return; and then saying, okay, where we were before, we're setting up this commercial platform. You've got to put on all your infrastructure all your costs, so the costs that we put into setting up China, for example, were massive. Now you just put a product on top of that. You get a lot more flow-through. The sterile manufacturing. We signed the transaction with Serum -- and the other multinational discussions progressing. A lot of multinationals is very interested in trying to access our capacity capability. We acquired a business called ENTT. Not surprising, when you look at the name, when you look at the type of products in there, the sales of about $10 million or so. The products are both sterile and OTC. OTC, as I told you, is not impacted by -- you can set your own pricing. And Australia has been a stellar performer. And we'll talk a little bit about China, but we see an opportunity, a retail strategy opportunity, for these brands in China as well. So often with Australian registered products and in this case some of these range, you can -- literally can launch in China without going through a regulatory process. You've got to put in a bonded warehouse, et cetera, but this could feed into some of the retail strategies which I'll talk about now in China. So let's talk about China because China is a really interesting business for Aspen. Aspen has performed very well there. If we look from 2017 to 2022, we've more than doubled the sales in China and just become bigger and bigger from being nowhere in Aspen. It's probably -- after South Africa and Australia, it's probably third country-wise in -- and it wouldn't surprise me to see Australia in -- I mean, China, in years to come, being the largest contributor to Aspen, but what we have seen is a -- we have a very good and strong team there. And they have been sustaining that momentum. As I showed you, even with all the implications, Asia was flat. And we started to put some initial pipeline registrations. We submitted them over that period. We now see the next period; and the next period, we think, is between '23 and '26. And there is uncertainty over volume-based pricing. Now we were told no injectables, no steriles will be in volume-based pricing, and then a few years later, there were, so our internal assumption is that everything will be volume-based pricing. That is how we work and how we think and we want to cushion that potential exposure. The thing with China is it has higher gross margins but also has very high expense. So you've got an army of people. We've got more reps in China than anywhere any other country, even more than in South Africa and Australia, than any other country, so there's a very high expense base in China, so -- but we want to keep that team together. So how do you do that? We're looking to acquire [indiscernible] products and licensed products. We -- just we concluded Baxter. They're an American company. We concluded a deal with them on anesthetic gas. So [ they are ] [indiscernible], but -- so we -- there are opportunities which we are performing. It's like anything. If you perform, people want to tag on and say, "Can you help us grow our products?" We put a -- we continue to introduce more products into the pipeline, and we've had a couple of launches into the end that -- those launches are -- were pretty impressive, if you look at the products we're going to launch. And they expect a turnover, relative to that brand, across the rest of the globe. And then we've got a retail strategy because we can register products quickly also not impacted by volume-based pricing. We see the years '27 to '30 to be important years for us because it becomes the realization of these pipelines. We learned, we've learned a lot. I wish I knew 3 years ago what we know now. Maybe our pipeline would have progressed further, but we were so worried about setting up, not failing, being able to get growth from -- if you remember, when we acquired these portfolios, China was declining by 19% in the multinationals' hands. So just to give you a sense of how we turned these products around. And what's going to give us -- what makes us excited for this period is we will have an internal and external pipeline. And we're looking at products that either have -- will not be impacted by volume-based pricing. So when you've got our EMLA cream, for example, which we've launched now, it can be used -- sure, it's used in hospitals before some of those anesthetics, but it can also be used as an anesthetic cream. It can also be used for tattoos, Botox; and is unlikely to be on any VBP, to be regarded that essential for VBP, et cetera. And then there are other products where we are looking where partners are coming to us which will give us long-term exclusivity. So see it as patented, in pharma terms, and those will give us strong growth trajectories. What's interesting about China is when we -- if we take product A and we go across our whole group and we say, "Okay, who wants it?" and if they all put up their hands. When -- China's volumes are so material. They're probably in many instances bigger than the rest of our world added up. Just to give you a sense, there's only a handful of products that are sitting here in China and this is the turnover it's already generated, so they're very material to our overall group. And so it's important for us to roll out these pipelines here for us, but they literally are bigger than -- their turnovers, their forecasts are larger than the rest of the group added up, so very important to get that plan right for China and to pick your products carefully to limit your future VBP exposure, et cetera. Because I think what we've got to learn -- and it's not just in China. It's in Australia. It's everywhere. When things get tight, all the promises made before, "This won't be in price [ or this way ]," it doesn't -- it's meant at the time. I don't think anyone is lying to you. It's meant at the time, but circumstances change and you get changed circumstances. So you don't want to learn lessons twice. You can learn it once. You don't want to learn it twice. If we look at the broader vaccine, moving on to some of the other prospects for us, the broader African vaccine opportunity. And this really relates to this first transaction with Serum is a good demonstration of this. I'm -- if I told you this without Serum, it wouldn't have been probably as clear, but the African Union has called for 30% -- more than 30% of the continent's vaccines to be made on the continent. And supply of these vaccines is critical for future manufacturing footprint because they -- if you're dealing with pediatric vaccines, for example, in Africa, it's the same vaccines, whether it's for pneumonia, meningitis, measles, mumps, whatever. There's a known quantity and it's repeated, so it provides predictability and it gives you certainty on being able to recover your overheads, et cetera. So as I mentioned to you earlier when I first talked, there's a real commitment to this regional manufacturer. And Gavi provided a white paper. And Aspen provided a neat solution for everybody. It gave Africa its independence. It gave its strength to talk. And for people like Gavi who are unaware of the capacity and capabilities we've had, it's also a very neat solution for them as well, so that -- no one needs to be at loggerheads over this. It's a solution for all parties. And it also gives one confidence to invest and more certainty on volumes and recovery of overheads. And it's given us comfort to be able to continue to expand our African manufacturing footprint because this is clearly a real opportunity for Aspen. We're looking at 2 additional lines. And the transaction with Serum, as I told you, is really a first step. And I think you should be looking, you should be thinking about further contract license flow. The positives with this is the volumes. It's -- the negative is it takes a while to bring products in. They're positive in it's not easy to get out as well, so you get the volumes locked in. And if we can build up a pipeline of opportunities here and bring them on year-on-year-on-year, it's something that, when the sort of -- when the host pipe turns on, it's -- when it finally gets to the end, we're going to have incremental earnings going forward. And I think you -- no one -- when you see people like the Gates Foundation endorsing what we do, understand they are big funders of global vaccines. They don't want to see prices going up. Everyone wants to help Africa. Everyone is a bit -- one thing we've learned is people talk a story at a time, but you have to be competitive. If you aren't competitive and you're relying on charity or, "We're going to give Africa 30% price allowance or 50%," I tell you that's not sustainable with donors. Nobody wants to pay more to cover these lives in spite of what people might say now about it, so -- but we've demonstrated a global competitive capability and a competence in the region. And this for us is a major strategic advantage and it's being amplified in all the discussions that we see and have now. And so it's -- we're very excited about the prospects across there. Of course, the Serum transaction, it leads logically on to this. The Serum is the largest producer of vaccines globally. And they're going to license the IP for Aspen to register and manufacture for public and private markets in Africa. We've got some key vaccines that are critical to Africa and to Gavi. And you must see this transaction, if I can explain it to you, in the sort of J&J terms. When we [ went ] for J&J, we were a CMO, a contract manufacturer. And they would provide a whole lot of things to us and we just -- we filled it and gave it to them. This is more like Aspenovax. And the way our base business normally works is we tend to buy APIs from third parties and we've got our own brands, so it's more akin to that than it is to a contract manufacturing operation. So they will supply the drug substance. They've got some of these registered with WHO, so the process is -- should be relatively speedy, where you take an exact copy of the dossier and all you do is you add Aspen as a manufacturer and you change the name. So it -- hopefully, there's not a lot of bureaucracy in that process, and we expect anything from 12 to 24 months. People say, "Well, how do you know you're going to get volume?" We don't -- why are you going to get volume? And the positive is that once you're on that list the African countries have the right to determine their brand. So why would Serum Institute partner with Aspen? Because African countries are going to choose the Aspen brand. We've got such unbelievable support across and from Africa and Africans are so proud of Aspen. You've got to see us on the global stages [ and the meeting that is everywhere ]. And so I think that's what gives everybody a huge amount of comfort. It's that they will decide where they want to place their demands. The contract, as I mentioned, is very important to Aspen and Africa. And it is worth repeating some of these. It really fast tracks the opportunity towards vaccine, health independence for the continent. And we've got security in our manufacturing. We've seen what insecurity looks like around COVID vaccines. Every day, we get a new story, but here we will get security through sustainable vaccine volumes and related capacity utilization as we continue to build and broaden the skills base because that's another thing that's important. It's that you've got people. Somebody can give you money, but some of these people aren't working. You've got to be -- you've got to have your skill base focused and doing something every day so it becomes a routine. It's not good to have breaks in anything. It's supported by the Gates Foundation and CEPI. And I think that's pretty big endorsements because it's, one, they're going to be funding future procurements. Two, CEPI are critical to future pandemics. And they're all desperate for share of Aspen capacity. Those are very heavy endorsements to Aspen and they are committed with grants. And we haven't agreed the total grants funding, but they want to give grant funding to Aspen to help us towards technology transfers, to -- some of the expenses we're accruing along the way, et cetera. So I really think it gives us a opportunity to -- for future vaccine, African vaccine initiative. I think you should see this as one. And then there might be other products that we need and we will look to others. I think a lot of other people want to piggyback on what we've achieved here. And I mean I know this is a very personal thing to say, but from an Aspen perspective, I think we deserve this breakthrough. We're showing incredible perseverance here and so I thought it was a deserved breakthrough. The financing and how this works. Well, we're now dependent on orders. We literally signed the deal not long ago -- I'm trying to work out if the days or hours so, but it's not long ago. We now need to go and sit with those procurers to understand -- and understand when our registrations will come through and what the volumes and the orders will be from those procurers, but once fully realized, we're going to have higher sales than the contract manufacturer that you see in our business from J&J because now we also sell, as I told you, Aspenovax-type sale where you'd sell at the -- a price. Of course, your costs are up now because you're paying for API. We didn't pay for APIs before, but we believe that the volumes coming out of here will more than compensate for any lost J&J recoveries that we might incur if we don't achieve Aspenovax orders. Let's sort of round off now with some of our prospects across the major areas for 2023 because 2023 is an important year for us. Our revenue growth is forecast to be sustained. That's -- and bear in mind we now have a full impact of Russian business, South African divestments and China VBP, but we expect that to be sustained. And any acquisitions obviously will be additive. We expect gross margins contraction. We -- it's, if the current inflationary environment continues and even accelerates -- and we are starting to see increased pricing still coming through across Europe, particularly around energy. And fortunately, as I said earlier, we can limit that, we believe, to no more than 1%. With OpEx, as I said, we expect to increase in line with sales. What is important is to look at our revenue out of this year. We had revenue of ZAR 14.3 billion and it dropped to ZAR 13.4 billion in the second half. So that's the base we start from, ZAR 13.4 billion. And so that is why our opportunities are very heavily weighted to H2, because we've got this good growth, underlying growth, in the business which will mean that, from the ZAR 13.4 billion base, we are going to get closer to ZAR 14.3 billion which we did in the first half than ZAR 13.4 billion, but we don't -- it's going to be hard to get back to the ZAR 14.3 billion in the half. However, in the second half of the year, we expect to go beyond the ZAR 14.3 billion we did in H1. And that comes from some -- the pipeline launches in South Africa, and we start recommencing supply out of our Alphamed facility. We also start to see the impact of EMLA and Ovestin launched in China. And I know this is a big call, but we're hoping this time we -- our second half of China has been impacted by lockdowns, and so we're making a bold assumption that maybe there won't be a lockdown in the second half of 2023. So a strong weighting towards the second half and growth across -- organic growth expected across the business. Manufacturer. In Manufacturing, it's quite a hard area for us to call, and you'll see why. We do -- at a revenue level, we're very comfortable we'll have another strong year. It's -- yes, of revenues forecast. And that's -- that excludes any Aspenovax sales and it's with -- it's limited vaccine sales. We'd limit -- we see ZAR 200 million in sales for J&J, as I told you afterwards -- I told you earlier. And of course, any sales of Aspenovax will be a material contributor to us, but we're not -- we want to give guidance ex Aspenovax. Sales in Manufacturing is also weighted heavily to H2 because we need to prioritize. We need to start doing our tech transfers in France and we need to start prioritizing Aspen production as well. The way China works is, when you move a registration, which we're in the process of, you have to build up a lot of stock. Now China has massive volumes, so we've got a big stock build coming for China which is needed, as I say, for that regulatory transfer. And that means -- and we're doing all of that in the first half. That's we're putting a lot of focus on trying to be in position to really roll in the second half. And we'll be doing that, the same thing, with the Serum vaccine, initiate as much as we can as soon as we can. Even with that, we once again are expecting very strong revenue growth, despite the potential vaccine impact. So even if we only get ZAR 200 million from J&J versus the ZAR 1.4 billion, we expect strong revenue growth. And we expect H1 to be in line with prior year H1 and H2 will provide a real growth kick. And it will come -- a lot of it will come from the third-party finished dose form sales. Our challenge here is to replace potential loss of COVID vaccine volumes. That's our challenge in this and that's the margin challenge that we will face in this business. So if we look at -- we summarize and look at all the -- our prospects for 2023. We see revenue growth between 3% and 7%, and it's led by Manufacturing; no Aspenovax sales. And we -- and that's driven by volume. Our volume demand is strong. It's buoyant. We're in good markets. Some of the emerging markets, we keep. You still see population growth, volume growth in many of those markets. Our gross margin will be impacted if we don't get COVID volumes in manufacturer because we've got people now sitting in the factory. They're now not doing revenue generator things. They might be there to transfer Serum vaccines and bring our anesthetics online, but that's not revenue generating. But it has costs. We -- and we've discussed our -- the synergies will limit where we are in the GM, the gross margin, percentage in commercial pharma. The inflationary effect on OpEx has to be contained. Understand that people in Europe are now wanting double digits and very high single-digit salary increases, et cetera. It's an environment we've never already worked in, in Aspen where you had developed markets under much more pressure, even inflationary pressure, than developing markets. And it's a very, very hard, tricky area we -- but we are confident that we can, we will be able to restrict them to less than the increase in revenue. We do expect strong cash flows. I'm so cautious, in COVID, to say anything, but if we -- even if we just stay where we are, we do expect the cash conversion to be strong, over 100%. And of course, rising interest rates will affect finance charges. We've put ourselves out on a 4-year target, as you know, 4-year target performance. We're on target to achieve the commercial pharma organic growth targets and revenue and EBITDA margins, which Sean shared with you. We also had a manufacturing EBITDA upside of ZAR 2.3 billion by 2024, and that included both anesthetic savings and it included capacity fill. And this still remains a target. This is unaltered in spite of where we may or may not be around COVID. I think closure of the capacity fill opportunities for us as a management team is the key deliverable in this financial year. And these take a long time. You've seen some of the things coming through from 6 months ago. I think I mentioned to you then that even Asian manufacturers were coming to us. Those were people like Serum. So it just -- it does take a little while to get all of that tied in. It's a lot of technical work. It's not, "Oh, yes, we want to move into your place. Have you got a compounding area?" What does the environment look like here, et cetera, et cetera, et cetera? Have you got the equipment? Does the machinery work quick? There's a lot of work that's done before you can say, "Yes, this is something we can do," but we are progressing many of those. And that's what gives us some comfort to tell you that this is an area we are comfortable that we will be delivering more than a Serum opportunity in capacity fills. I think our capacity and capabilities in Africa are unique as we are at the moment. We've really got a first-mover advantage and we offer access and sustainability to partners. And it's going to be very hard to compete with us in Africa from Africa because, in spite of what anybody says, as I told you, price is going to be an important factor. Serum is an important first step, and as I said, it will likely offset any impact of J&J volumes over time. As I also said earlier, the fixed costs will be retained, but our recoveries will be lost when the COVID vaccines decline as the licensing period -- so we've got a period when Serum -- and it's, between 12 and 24 months, we think we'll have licensed products. We also have used the opportunity in our lyophilized anesthetic product. It's quite a big product for -- from a capacity utilization point of view. It's called Ultiva general anesthetic. And we've done the -- we've started to do the validation batches. They've actually completed. When you complete them, now you go to the registration, say, in Europe. "Will you please put Aspen as a manufacturer on the dossier?" et cetera, et cetera. And then you bring commercial manufacturer. And we would expect some of our anesthetic commercial manufacturer to come online from H2 of 2023. And of course, Aspenovax intuitively will be immediately additive and would -- should that be achieved. We've got scope for investment. We're probably under-leveraged, and we've got potential for an industry unwind, and we've been positive, I will say, when supply risks stabilize. The extent of acquisitions, I mean I think you should expect acquisitive period. We've been in a period of divestments, and I think you should be thinking that Aspen would be in a period where there's likely to be some acquisitive opportunities looked at. And as I said to you earlier, if there's one takeout for us in 2023, it's getting the pipeline of opportunities that have been under discussion and settling them. And that will provide very clear clarity for ourselves and for investors of our path forward. And capacity, for us, is a real, real earnings enhancer. You've got your expenses in place. You've got all your CapEx in place. You're all dressed up and you're ready for the wedding, so yes, we -- that's where we are. We're ready to take a stride down. Sean touched on this briefly, but I think it's quite interesting because sometimes you watch the Aspen journey in 6 months and you don't necessarily always see the full picture, so I thought let me just show you a picture as we've seen it. If we go back to 2013, that was an important period for us. At that period, we said, whoa, we're really worried about generics and potential commoditization of generics; and we need to look at specialty pharma and with good manufacturers. And that's why the multinationals have been great, but we're very strong in our sales and distribution platforms, particularly across emerging markets. We are able to turn declining products from multinationals into growing products. So that was the acquisitive phase where we bought a whole lot of products to rationalize, building a very big sterile base. And that was debt funded. So what you see is our EBITDA going from ZAR 5.9 billion to ZAR 12 billion over that 5-year period, but our debt also went up, from ZAR 11 billion to ZAR 47 billion. So a period of acquisitive growth. Then we've been through a phase now over the last 4 years where you have seen a consolidation. We've got our products. We've seen where we're good. We know what markets we're good at. And we are able to -- what can we deliver organically out of what we've -- sustained organic growth out of what we've bought? And that took a little time for us, to work it out. For example, we thought Japan would be a great market for Aspen because there was limited competition, high regulatory barriers, et cetera. And then they had something called unilateral price decreases. Now you've got a differentiated product and you're going to be knocked down again and again with no regard to whether you have a margin. That didn't seem like a market that we really should be in. We made material investments in steriles. And if you look at the debt: You got ZAR 30 billion of debt reduction in here. We've also done buybacks and we've done a phase of CapEx there. There's probably about ZAR 40 billion more in cash generation in those 4 years that we generated, and we lost ZAR 1 billion of EBITDA. So of course, when you sell things, you're losing EBITDA. No one is paying for something that's losing. So yes, when they bought products -- so I think it's that's been an incredible period and just puts things into context. This was a period we grew. This was a consolidation phase. By the way, I did share all of those with you in 2014, '15, '16, '17. Not a lot of people believed us, so -- but we've delivered on exactly what we showed you. I suggest you go back and look at some of those presentations a long time ago. So now we are in a great position, I believe. We've got an opportunity to -- we're growing organically. We've got a portfolio that grows organically. We've got opportunities acquisitive, broader opportunities. We've got bigger platforms. We didn't have China before. You couldn't buy something for China. You didn't have a business in the Philippines, you can't add to it. But we've got all that infrastructure in place. Everything is growing organically. And we've got acquisitive growth that can be really -- bolted onto these platforms, can give good, superior earnings. And then of course, we spent a lot of time building facilities in an area that we think is going to be critical, that sterile biological area. You've seen it is critical. I don't have to persuade anyone, I hope. And it's really about how we leverage those manufacturing capacities. If we do nothing, you've got what you've got, but there's this fantastic potential upside as we fill those capacities. And of course, Aspen is very focused on cash flows, strong cash flows; return on investments. I'll remind you we don't issue shares. We've done this entire thing without issuing. We've been through this whole metamorphosis. We never issued a single share. And we -- so everything you see, everything there is transparent. You see the debt go up. You see the debt go down, but Aspen is a business that has always and will always continue to deliver very strong cash flows. So thank you. I think that takes us to Q&A. Thank you for your time. It was a long presentation, but there's quite a bit to tell you in the space. But thank you for your -- no one yawned, so that was good. No one left. So do we -- can we move to Q&A, [ Trisha ]?

Thank you. Thank you, Stephen and Sean. We will now open up [indiscernible] questions from the audience.

Letlotlo from Investec. Just I first have to introduce myself. 2 questions from me. The first one relates to your share buybacks. I just want to understand. Is that still a lever that's still available to the management team to push or to pull for the next -- over the next 12 months? And the second question is more around your COGS savings from your technology transfers. Can you quantify that, how much of that you've kind of realized to date? Because previously you had guided to a saving of around ZAR 800 million per annum. So how much of that ZAR 800 million kind of -- or what's the progression towards that number, in essence? Those are my 2 questions.

So on the story of share buybacks. I think share buybacks are -- have to be treated on their merits, looking at relative opportunities. Share back is no different to making any other acquisition. We didn't have that as a lever. You only can have that lever too if you've got the cash. I think that's the basis of it. So we would look at share buybacks relative to other opportunities of how we could deploy capital into the future. It's not a one-off event or an event we would go and we go back to the Board and say we think, yes, we can -- the best opportunity we've got out there is this. And this is we've got an opportunity with Aspen shares. So I think that's intuitive, probably, for share buybacks. In terms of savings, that's an interesting one because I don't think we've fully quantified it. And some of those gets annualized, but certainly you can think about it like this: If you're sitting with ZAR 300 million, ZAR 400 million more costs in a period, or more, and we have delivered improved margins, a lot of that came out of the cost savings. We don't sit in -- I mean we will deliver ZAR 800 million in vaccine savings once everything is through, but we have delivered quite a good chunk of that and quite a bit of efficiencies outside of vaccines. They've -- also bring some -- they bring shared costs, et cetera, which sometimes might help knock-on in Regional Brands. When you think that we have just oncology price reduction, it's absorbed, also absorbed, in those increased margins. But if I had to have a guess, it's -- if you want to give a guess, it's say ZAR 300 million coming like that, ZAR 300 million, ZAR 400 million, something, in the quarter.

Roy Campbell, RMB Morgan Stanley. Just in your Manufacturing business and the ramp-up or the increased offtakes from Viatris, 2 questions around that. Number one is the strong U.S. dollar versus the euro and impacts on that on your input costs. Is that passed on to Viatris? And then secondly is that you're obviously leaving a little bit of profitability on the table by not selling that heparin to the market. Is there a hurdle rate that, that contract becomes more profitable to recoup that profitability?

Yes, we passed that hurdle rate, Roy. So they -- we -- I think the assumption that we are selling to Viatris at below market price was correct in the initial phase. It will not be correct over here. We would be -- and our profit is -- it doesn't matter. We'd sell to a third party or Viatris. So that's what makes that contract better for us -- sorry. What was your first one, Roy? The...

[ Sort of currency ]...

The currency. Yes, look. The U.S. dollar, for us, is -- a strengthening U.S. dollar against all currencies is probably the most negative outcome. I told you I don't like to guess currency, but that is the most negative outcome for Aspen in that we don't have big sales in the U.S. Our contracts to sell vaccines are in euros. Our -- we do sell to U.S. quite a bit of APIs and all that. We do so, but I think Sean has got a currencies mix slide at the back and appendix...

[indiscernible] negative 13%...

Negative -- so it's not a great outcome for us if the dollar strengthens to -- relative to all others. [indiscernible] very important currency, maybe the most important currency, within the Aspen environment. And as you correctly noted, there's been a shift with the dollar even against the euro. I think, when I last looked, it was stronger than -- if it still is but not a lot [indiscernible] as it was -- Sorry, Sean, apologies. I'm jumping [indiscernible].

[indiscernible] probably just add on. If you -- we did an exercise where we took the current spot rates and we restated our numbers to current spot rate. Obviously the euro and the Aussie dollar have weakened against the rand, so that's not good for us, but all your emerging market currencies, the peso, the Brazilian real, the Chinese renminbi, they've all strengthened to the rand, so when you put them all together, you actually get a very balanced picture.

Yes. So we -- at spot rates today, we would deliver similar results to what you're seeing. That's really it.

Stephen, [ Kane Jose ] from the [ IFC ]. Congratulations on very impressive results.

Thank you, [ Kane ].

As you look to increase your manufacturing focus, one thing you identified is that offtakes have been anemic for some of the vaccines, but then as you do this Serum institute partnership, how will you secure offtakes so that you don't have the same sort of experience?

I think, [ Kane ], the -- there's a major difference between a pandemic vaccine which could have 0 or 1.2 billion -- someone says, "I can give you 300 million or 400 million doses a year every year because this is how many kids there are in Africa that need treatment." So that's what gives you -- that's why I always refer to Serum as sustainable volumes. It's you -- can you tell me tomorrow what COVID will look like over the next 12 months? No. Can I tell you how many vaccines kids will need in Africa over the next 12 months? I can get it to you within 10% or 15%. So that's the difference in -- there aren't wild fluctuations in kids needing pneumonia, yellow fever, whatever it is. These are standard vaccines that everyone needs to have.

Thank you. We may take 1 or 2 more questions.

I'm Anuja Joshi from Standard Bank. Congratulations on the Serum transaction, Stephen and Sean. So what is your latest capacity in South Africa? And how much of that capacity you plan to dedicate for those 4 vaccines under Serum transaction?

So our -- so let's -- if we go back to why we put capacity. And we put capacity in for anesthetics, okay, so that's got to come back into our plans, but we've got a -- we had a lot of extra capacity. And we had -- for J&J, we have one dedicated line, if you want to call, that 250 million, whatever, 275 million, whatever the number of doses in J&J was on that line. We would expect that, if we got in a world -- we're not sure about COVID, but in a world without COVID we would expect that line to be more than busy with just the 4 vaccines that we have from them. So it wouldn't be -- we'd need that capacity and probably a bit more for those, fully realized. And for the other opportunities that we see coming, we would require probably another couple of lines as well.

Stephen, just one more question, on your ability to pass on higher costs to customers. So can you just touch on how the negotiations have been with other stakeholders, regulatory bodies over the last 6 months or so in this regard?

Yes. So the ability -- we've got 2 areas. You've got your commercial area and your manufacturing area. In your commercial area, you are able in some products to pass on cost. A lot of emerging markets, so places like South Africa, Brazil, et cetera, have single exit price increases that take control of inflation and all of those things. So there is -- because those markets have always had inflation, there is a mechanism for price increases, but in developed markets, there is no mechanism because there wasn't any inflation. So that is where on your non-OTC portfolios it's quite tricky. Where Aspen is fortunate too is that it -- we have a sterile portfolio which is sold to hospitals. Now those don't necessarily have a list price. They're a tender-type arrangement, so you are able in those instances to change your price if needed, but often those contracts run 2 years, 3 years, et cetera. So our ability to pass on costs in commercial pharma is probably best told to you when we say we expect our gross margin to contract by 1%. So we can pass on some but not all. The Manufacturing business is a little different in that what we are seeing in the market at the moment are levies. So people say, "This is a bump, and we don't want you to give us an 8% price increase in euros. We'll pay you 2% price increase, but 6% we'll have as a levy for when this passes." That is sort of how people are selling vials to us or glass to us or whatever and what we are saying to customers as well. We have had relative success in passing on some of the manufacturing costs, but it's a levy. And I do not believe that -- if inflation stays elevated and accelerates, that there is much scope to continue passing on those prices, but it's up to those companies to start negotiating with regulators to try and get their price increases through. But given how tight money is and all the other things, I'd -- the easiest place to cut a budget, if you're government, is health. I mean price is down 5%. Okay, now I can fund something else. So I'm never too hopeful about how well negotiations would go around developed markets, except if they start having shortages, which would be a risk in some areas if there isn't -- if they aren't -- if you don't -- you say the heparin price is going up. A lot of products are commodity-based. There's the heparin you know with us, but there's stuff that comes from wheat and oil and all of those things, and those prices just keep pushing up. At some point, something has got to give. I think everyone is hoping that situation stabilizes and improves and we can get into a less-inflation environment. So I think a lot is going to -- the macro factors are going to have quite an important impact on that going forward. So...

Thank you. Thank you so much for the questions. Thank you, Stephen and Sean. Unfortunately, we've run out of time and -- yes.

I will come to you just now. Well, I could -- thank you...

Do you want to take one more question, but -- okay....

I'll take one more question. You've had your hand up for a while. Sorry, yes.

[indiscernible], [ IFC ]. Just to take you back quickly to the vaccine topic. You talked about your aspirations in investing further in vaccine manufacturing, which obviously is very dear to our hearts. And the aspiration for Africa is for end-to-end vaccine manufacturing, including drug substance eventually. How do you see the prospects for drug substance manufacturing in Africa? And what would Aspen play a role in this?

So Aspen makes a lot of drug substances around the world. We make -- in South Africa too, we make fine chemicals in Cape Town. And we have very big plants in the Netherlands and actually in the U.S. as well, so we understand APIs. APIs need volumes. You need volumes and you need certainty, no different to finished dose form outputs. And the more you make, the less costs, the less the incremental costs. Africa has got volumes. That's the advantage, Africa. When people were trying to force us to make API for COVID, what did I say? I said let's first see the volumes stabling and let's have a look. And everybody was on our house. "You must go and make this vaccine. You've got to go and do the API." And we're getting all sorts of political pressure. Thank god we never did it. So what you've got to do with APIs is find the right platforms, not the sexy platform. "I want to be an mRNA or whatever." That's great. You might want to do all that. But if I were to start in Africa, you just take the APIs that back those pediatric vaccines, show you can make APIs. You've got certainty on volume support. Make sure you are cost competitive. You cannot do this stuff and think you're not going to be because please give us 10 years to be, can't do it. So there are platforms that one can do and partner with. I would suggest partnering on that because there are people that already make these. And the leverage you have if you want to make APIs, I mean, is I've got the volumes because I'm in Africa and I'm getting support. That's your leverage. And then some would say either he gets it or he gets the volumes from Africa, so we better quickly partner him because -- and so that's your leverage here is can you control the demand. You can control the demand. You can make the finished form as -- and people will partner you, as you've seen. And then of course, once you've got the finished form certainty, you can then look at the API partnering, but it's not -- it's something we would -- we always look at all or any opportunity, but we want to do this one step at a time. From an Aspen perspective, we put our money down on finished form manufacturer. We want to see that fill. We'd be very happy to talk around APIs. In my opinion, though, to be -- to have a sustainable and a competitive platform, Africa or funders will need to help in the initial phase. So you need to have a plan, but they will need to be helped in the initial phase. You can't just sit in there and go and compete with China and India on day 1 and -- so you've got to be smart about how you do this, but it is absolutely doable. If you can do what Aspen did in Africa, and we're not close to any big markets globally, you can certainly make APIs for a market that you know you control.

Thank you. Thank you for the questions. Thank you to Stephen and Sean. Unfortunately, we have run out of time. We'd like to thank everybody for joining us at this presentation. We would also like to thank the participants who have joined the online webcast. Thank you very much, everybody. Thank you. Goodbye.