Group segmental analysis


For the year ended 30 June 2013 2013
R’million
  2012
R’million
 
A. CAPITAL EXPENDITURE        
Incurred 4 322,0   2 618,4  
– Tangible assets 667,1   469,6  
– Intangible assets 3 654,9   2 148,8  
Contracted 651,8   171,5  
– Tangible assets 525,5   158,8  
– Intangible assets 126,3   12,7  
Authorised but not contracted for 1 242,2   3 713,6  
– Tangible assets 1 052,0   456,4  
– Intangible assets 190,2   3 257,2  
B. OPERATING PROFIT HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING):      
Depreciation of property, plant and equipment 294,5   252,7  
Amortisation of intangible assets 255,7   212,3  
Net impairment of property, plant and equipment 9,6   32,3  
Net impairment of intangible assets 59,6   112,7  
Impairment of goodwill   43,6  
Share-based payment expenses – employees 31,2   31,5  
Transaction costs 37,3    
Restructuring costs 151,8   73,5  
Insurance compensation   (63,0)  
Settlement of product litigation 43,0    
C. INVESTMENT INCOME        
Interest received 298,8   275,4  
D. FINANCING COSTS        
Interest paid (842,3)   (754,7)  
Capital raising fees (51,9)   (26,8)  
– Transactions (49,5)   (26,8)  
– Trading (2,4)    
Net foreign exchange (losses)/gains (34,3)   2,5  
Fair value gains on financial instruments 77,5   24,0  
Notional interest on financial instruments (1,7)   2,1  
Preference share dividends paid   (23,1)  
  (852,7)   (776,0)  
E. PROFIT AFTER TAX FOR THE YEAR FROM DISCONTINUED OPERATIONS        
Profit after tax for the year from discontinued operations   1,7  
Profit on the sale of the Campos facility and related products in Brazil   121,9  
Profit on the sale of the personal care products in South Africa   35,6  
    159,2  
F. CURRENCY TRANSLATION MOVEMENTS        
Currency translation movements on the translation of the offshore b usinesses is as a result of the difference between the weighted average exchange rate used for trading results and the closing exchange rate applied in the statement of financial position. For the year the weaker closing Rand translation rate significantly increased the Group net asset value.        
G. GOODWILL MOVEMENT        
Opening balance 5 343,9   4 626,6  
Acquisition of subsidiaries 176,5   104,3  
Impairment of goodwill   (43,6)  
Translation of foreign operations 452,8   656,6  
  5 973,2   5 343,9  
H. INTANGIBLE ASSETS MOVEMENT        
Opening balance 11 869,8   8 916,7  
Additions 3 654,9   2 148,8  
– GSK pharmaceutical products* 2 196,6    
– Novartis pharmaceutical products# 459,5    
– GSK OTC products^ 586,1   1 589,2  
– Other 412,7   559,6  
Disposals (0,5)   (2,8)  
Amortisation (255,7)   (212,3)  
Acquisition of subsidiaries 1 246,1   4,2  
Software projects implemented 14,0   22,2  
Impairment (94,5)   (112,7)  
Impairment losses reversed 34,9    
Hyperinflationary adjustment – Venezuela 0,8   0,4  
Translation of foreign operations 2 463,2   1 105,3  
  18 933,0   11 869,8  
* The transaction relating to the acquisition of a portfolio of 25 established pharmaceutical products from GSK for the Australian market became effective on 1 December 2012.
# A selected territory agreement with Novartis Pharma AG for the acquisition of two pharmaceutical products, Enablex and Tofranil, became effective on 1 August 2012.
^ A multi-territory agreement was concluded with GSK in April 2012 for the acquisition of a portfolio of established OTC products in selected territories including South Africa, Australia and Brazil. The leading products include recognised household brands such as Phillips Milk of Magnesia, Dequadin, Solpadeine, Cartia, Zantac and Borstol. The deal was effective 1 May 2012 except for certain markets which required competition authority approval: South Africa, Swaziland, Namibia, Kenya, Tanzania and the product, Zantac, in Australia. Competition authority approval was granted in Australia, South Africa and Swaziland during July and August 2012. Namibia, Kenya and Tanzania received competition authority approval in September 2012, October 2012 and February 2013 respectively.
For the year ended 30 June 2013 2013
R‘million
  2012
R‘million
 
I. CONTINGENT LIABILITIES        
There are contingent liabilities in respect of:        
Additional payments in respect of the Quit worldwide intellectual property rights   8,1  
Contingency relating to product litigation 25,9   21,3  
Contingencies arising from labour cases 4,3   4,2  
Import duty contingency 10,4   10,8  
Other contingent liabilities 2,0   3,3  
J. TAX CONTINGENCY        
Following an audit, the South African Revenue Services (SARS) has issued tax assessments on various South African companies relating to prior years. Aspen has objected to these assessments and has filed a review application to have the assessments set aside. Aspen is confident that it will succeed in this dispute based on the outcome of recent court cases dealing with similar matters. Due to the uncertainties inherent in the process, the timing of the resolution of the dispute and the outcome thereof cannot be determined.        
K. GUARANTEES TO FINANCIAL INSTITUTIONS        
Material guarantees given by Group companies for indebtedness of subsidiaries to financial institutions 5 600,6   5 003,0  
L. ACQUISITION OF SUBSIDIARIES AND BUSINESSES 2013        
Aspen Global Incorporated and Aspen Asia Pacific (Pty) Ltd concluded agreements with Nestlé on 29 April 2013 in respect of the acquisition of certain rights to intellectual property licenses and 100% of the shares in the infant nutritionals business previously conducted by Pfizer which distributes a portfolio of infant nutritional products in Australia  
      Total
R‘million
 
Fair value of assets and liabilities acquired in subsidiary        
Property, plant and equipment     1,7  
Intangible assets     1 246,1  
Deferred tax     9,9  
Inventories     74,2  
Trade and other receivables     294,5  
Trade and other payables     (274,3)  
Fair value of net assets acquired     1 352,1  
Goodwill acquired     176,5  
Purchase consideration     1 528,6  
Deferred receivable     50,0  
Cash outflow on acquisition     1 578,6  
The initial accounting for this business combination has been reported on a provisional basis and will only be finalised in the year ending 30 June 2014.Post-acquisition revenue included in the statement of comprehensive income was R137,3 million. The estimation of post-acquisition operating profits is impracticable and not reasonably determinable as the operations of the infant nutritionals business have not yet fully transitioned to Aspen. The determination and disclosure of historical
audited revenue and operating profits for the 12 months preceding the effective date is not possible as the information for the full period is not available
Goodwill
The goodwill arising on acquisition of the infant nutritionals business recognises:
– the future benefits of rebranding rights on the existing and future infant milk product range; and
– the synergies from the consolidation of the infant milk business with Aspen’s existing Australian consumer business including cost savings and increased sales force coverage benefits.
The total amount of goodwill recognised is not tax deductible.
2012
Aspen Pharmacare Holdings Ltd acquired the remaining 40% minority shareholding in Shelys Africa Ltd effective from 14 April 2012. This increased the ownership in Shelys Africa Ltd to 100%. Aspen Pharmacare Holdings Ltd acquired a further 42,5% shareholding in Brimpharm SA (Pty) Ltd effective from 31 May 2012. This increased the ownership in Brimpharm SA (Pty) Ltd to 92,5%.
      Total
R‘million
 
Shelys Africa Ltd purchase consideration     141,8  
Brimpharm SA (Pty) Ltd purchase consideration     39,8  
AHN Pharma (Pty) Ltd purchase consideration     45,4  
Final payment for the Sigma business     88,6  
As per the statement of cash flows     315,6  
         
  2013
R‘million
  2012
R‘million
 
M. PROCEEDS FROM SALE OF ASSETS HELD FOR SALE        
Campos facility and related products in Brazil   175,0  
Personal care products in South Africa   75,4  
    250,4  
N. PREPAYMENT IN ANTICIPATION OF ACQUISITION        
Aspen Pharmacare Holdings Ltd concluded agreements with Nestlé S.A. in respect of the acquisition of certain rights to intellectual property licenses, net assets and shares in the infant nutritionals businesses previously conducted by Pfizer which distribute a portfolio of infant nutritional products in Australia and certain southern African territories (South Africa, Botswana, Namibia, Lesotho, Swaziland and Zambia). The consideration for all territories was paid following approval by the Australian competition authorities on 29 April 2013. The approval from the South African competition authority remains pending and consequently the purchase consideration payment relating to the southern African territories has been classified as a prepayment.