Transcription
Annual FinancialStatements 2021
Aspen Pharmacare Holdings Limited Annual Financial Statements 2021ContentsCertificate of the Company SecretaryIFCResponsibility statementIFCAudit & Risk Committee report1Statement of responsibility by the Board of Directors4Directors’ report5Independent auditor’s report to the shareholders ofAspen Pharmacare Holdings Limited8Group statement of financial position14Group statement of comprehensive income15Group statement of changes in equity16Group statement of cash flows17Notes to the Group statement of cash flows18Group segmental analysis22Group revenue segmental analysis25Notes to the Group Annual Financial Statements27Residual accounting policies104Company Annual Financial Statements111Illustrative constant exchange rate report – Annexure 1132Unaudited share statistics138Administration140Certificate of the Company SecretaryIn my capacity as the Company Secretary & Group Governance Officer, I hereby confirm, in terms of the Companies Act, that for the yearended 30 June 2021, the Company has lodged with the Companies and Intellectual Property Commission all such returns as are requiredof a public company in terms of this Act, and that all such returns are, to the best of my knowledge and belief true, correct and up to date.Riaan VersterCompany Secretary & Group Governance OfficerJohannesburg4 October 2021Responsibility statementIn terms of Section 3.84(k) of the JSE Limited Listings Requirements, the directors, whose names are stated below, hereby confirm that: the Annual Financial Statements set out on pages 14 to 131, fairly present in all material respects the financial position, financialperformance and cash flows of the issuer in terms of IFRS. no facts have been omitted or untrue statements made that would make the Annual Financial Statements false or misleading. internal financial controls have been put in place to ensure that material information relating to the issuer and its consolidatedsubsidiaries have been provided to effectively prepare the financial statements of the issuer. the internal financial controls are adequate and effective and can be relied upon in compiling the Annual Financial Statements, havingfulfilled our role and function within the combined assurance model pursuant to principle 15 of the King Code.Where we are not satisfied, we have disclosed to the audit committee and the auditors the deficiencies in design and operationaleffectiveness of the internal financial controls and any fraud that involves directors, and have taken the necessary remedial action.Stephen SaadGroup Chief ExecutiveGus AttridgeDeputy Group Chief Executive and Financial Director
Aspen Pharmacare Holdings Limited Annual Financial Statements 2021 \1Audit & Risk Committee reportThe full mandate, role and responsibilities of the Audit & Risk Committee in terms of its terms of reference have been detailed on the“Corporate Governance and Risk Management” page of Aspen’s website (www.aspenpharma.com).The table below reflects a summary of the activities undertaken by the Audit & Risk Committee during the year under review, in terms of itsterms of reference and in support of the Board, with the resulting material outcomes from these activities:ActivitiesOutcomeEngagement with theGroup’s externalauditor Compliance withCompanies Actrequirements Internal financialcontrols, internal auditand combinedassurance Oversight of riskgovernance and riskmanagement Ernst & Young Inc. (“EY”) recommended for reappointment as auditor, and Derek Engelbrecht as thedesignated auditor, having satisfied itself of the capacity and independence of this firm and thedesignated auditor;Ensured that there were no scope limitations in respect of audit work performed by EY and that therewere no factors that impacted the independence of EY as the external auditors;Determined the fees to be paid to the auditor and the auditor’s terms of engagement;Ensured that the appointment of the auditor complies with the Companies Act, the applicableJSE Listings Requirements, and any other legislation relating to the appointment of the auditor;Determined the nature and extent of any non-audit services that the auditor may provide to theGroup (during the year, R2 million was paid to EY in respect of the provision of non-audit services,which is approximately 4% of the external audit fee paid for the year);Pre-approved any proposed agreement with the auditor for the provision of non-audit services to theGroup, which are of a material nature as provided for in the Group’s non-audit services policy;Meets separately with EY (without presence of management) at least twice a year, or more regularlyas may be required;Called for the necessary reports and letters issued by the Independent Regulatory Board of Auditors(“IRBA”) of South Africa, a summary of the firm’s monitoring processes and outcome of any legal ordisciplinary proceedings which may have been instituted against the firm or designated auditor bythe IRBA and satisfied itself that there were no areas of concern in respect of the reports, letters andsummaries considered; andNoted that the external auditor had expressed an unqualified opinion on the Annual FinancialStatements for the year ended 30 June 2021.Prepared this report in compliance with section 94(7)(f) of the Companies Act. The full mandate, rolesand responsibilities of the Committee, as per its formally adopted terms of reference, may beaccessed online at: nd-riskmanagement/Stands ready to receive and deal with any concerns or complaints relating to the accountingpractices and internal audit of the Company and the Group, the content or auditing of the AnnualFinancial Statements, the internal financial controls of the Company and the Group or any relatedmatter; andMade submissions to the Board on matters concerning the Company and the Group’s accountingpolicies, financial controls, records and reporting.Confirmed that, based on the results of the formal documented review of the design, implementationand effectiveness of the Group’s systems of internal financial controls conducted by Group internalaudit, supported by approved outsourced internal audit service providers during the 2021 financialyear and, in addition, considering information and explanations given by management anddiscussions with the external auditor on the results of their audits, no material breakdowns in thefunctioning of the internal financial controls were noted during the year under review;Confirmed that the results of the audit tests conducted indicate that the internal financial controlsprovide a sound basis for the preparation of financial statements;Considered and confirmed its satisfaction with the effectiveness, competency, capacity andindependence of the internal audit function, as well as the expertise and experience of the ChiefAudit Executive; andEnsured that a comprehensive combined assurance model was applied to the Group’s key risks soas to provide a coordinated approach to all assurance activities and confirmed that there were nosignificant areas of overlap or assurance gaps and the levels of assurance were consideredappropriate.Monitored the implementation of the Group Risk Policy and Group Risk Plan as approved by theBoard;Reviewed and considered the activities and reports of the Group Executive Risk Forum and TaxCommittee;Reviewed and considered business unit risk reports presented to the Committee;Reviewed and considered the report by internal audit on the integrity and robustness of the Group’srisk management processes;Reviewed and recommended for approval the Group’s risk appetite framework;Reviewed and considered the status of financial, information technology and cybersecurity measuresand internal controls for the year under review, as reported on by the Group’s internal and externalauditors;Reviewed and approved the adequacy of the Group’s insurance cover; andConfirmed its satisfaction with the status and effectiveness of risk governance in the Group and theadequacy of mitigation plans for material risks, recommending this as such to the Board.
2\ Aspen Pharmacare Holdings Limited Annual Financial Statements 2021Audit & Risk Committee report continuedActivitiesOutcomeIntegrated reporting Assurance in respect offinancial expertise ofthe Financial Directorand finance function Information &Technology (“I&T”)Governance Will review the Group’s Integrated Report and the sustainability information as disclosed therein toevaluate the integrity of reported information and for consistency with the Annual FinancialStatements, prior to its release in due course; andConsidered financial-related tip-off reports and management actions to address these.Confirmed the expertise and experience of the:– Deputy Group Chief Executive, who performs the duties of the Company’s Financial Director; and– Group’s finance function and the senior members of management responsible for the Group’sfinance function, including the Group Finance Officer;Noted that Gus Attridge would retire as Deputy Group Chief Executive with effect from31 December 2021 and confirmed its satisfaction with the appointment of Sean Capazorio (thecurrent Group Finance Officer) as Group Chief Financial Officer, who will perform the duties of theCompany’s Finance Director, with effect from 1 January 2022.Reviewed the Group’s maturity in respect of Information & Technology (“I&T”) governance,considering reports from the Group Digital Technology function and assurance as provided by theinternal audit function in accordance with the approved internal audit plan;Performed a critical evaluation of the Group’s I&T governance framework to better evaluate, directand monitor Aspen’s I&T assets, as well as to align IT services with the Group’s current and futurebusiness needs; andMonitored the programme to mitigate infrastructure technology security risks and maturity beingcoordinated centrally and maintained oversight of the mitigation plans introduced to address the riskof material operational and disruptive incidents.COMMITTEE MEMBERS AND ATTENDANCE AT MEETINGSThe following table of attendance at Audit & Risk Committee meetings reflects the Committee’s meetings held during the year and theattendance of these meetings by its members during the year:AUDIT & RISKCOMMITTEE26August2020 (1)26August2020 (2)28August20208 September202021October2020 (1)2123October November2020 (2)20202326February February202120218March202121June2021Linda de BeerBen XXXXXXXXXXXSindi ZilwaXXXXN/AN/AN/AN/AN/AN/AN/AMs Zilwa stepped down as a member of the Committee with effect from 15 October 2020. Ms Zilwa served the Committee withdistinction during her tenure on this Committee and I speak on behalf of the entire Committee in thanking her for her dedicated serviceduring this time.The overall average attendance for the Audit & Risk Committee meetings held during the year was 100%.ANNUAL FINANCIAL STATEMENTS FOR THE 2021 FINANCIAL YEARThe Committee has reviewed the Annual Financial Statements as well as trading statements, preliminary results announcements andinterim financial information of the Company and the Group for the year under review and is satisfied that they comply with InternationalFinancial Reporting Standards. The Committee also considered the JSE’s report titled “Reporting back on the proactive monitoring offinancial statements in 2020”, dated 19 February 2021, and received management’s confirmation that the necessary and appropriateactions were taken to ensure the findings and recommendations of this report are implemented and adopted within the Groupas appropriate.Internal controls confirmationThe Committee has received assurance from Group internal audit on the work performed in the financial year under review to support theGroup Chief Executive and Deputy Group Chief Executive sign off on internal controls, as required by section 3.84(k) of the JSE ListingsRequirements. This section requires a statement by the Group Chief Executive and Deputy Group Chief Executive (in his capacity as theFinancial Director of the Company), confirming that internal financial controls are in place to ensure that material information has beenprovided to effectively prepare the financial statements. Furthermore, confirmation is to be given that the internal financial controls areadequate, effective, and can be relied upon in compiling the Annual Financial Statements, and if not, that the deficiencies in the design andoperational effectiveness of the internal financial controls have been disclosed to the Committee and the external auditors, and that thenecessary remedial action has been taken.
Aspen Pharmacare Holdings Limited Annual Financial Statements 2021 \3The Group undertakes a rigorous self-assessment process with the scope including all affiliates. The self-assessment review is formallysigned off by the financial head of each subsidiary as well as being reviewed and approved by the Group finance team. The selfassessment includes financial and disclosure controls, internal financial and operating controls, business performance relatedrepresentations and a detailed fraud assessment review. The positive assurance outcome provided strong support for meeting therequirements of section 3.84(k) of the JSE Listings Requirements.The Committee is of the view, based on the representations made by Group internal audit, the Group Chief Executive and the Deputy GroupChief Executive, as well as the other related processes mentioned, that the internal financial controls in place for the Group were adequateand effective during the period under review.Key audit mattersThe following key audit matters were considered by the Audit & Risk Committee in relation to these Annual Financial Statements:MatterOutcomeImpairment ofintangible assetsThe Audit & Risk Committee reviewed and interrogated all elements supporting the valuation andmeasurement of goodwill and indefinite life intangible assets, which included stress testing theprocess and key assumptions underpinning the valuations. The process of reviewing the classificationof intangible assets and the criteria for determining whether these assets met the definition ofindefinite life intangible assets was extensively reviewed and the Committee was satisfied that theclassification and valuation of indefinite life intangible assets was materially correct and fairlypresented. Rigorous impairment testing of intangible asset values was once again performed resultingin net impairments of R982 million.Divestment of theassets related to theEuropean ThrombosisbusinessOn 27 November 2020, the Group completed the divestment of the assets related to thecommercialisation of the European Thrombosis business to Mylan Ireland Limited (“Mylan”). In termsof the transaction, the disposal group included the inventory and related intellectual property. Thisdivestment arrangement also included underwriting certain inventory supply prices for a limitedperiod and performance incentives. The proceeds of the divestment were R12,4 billion resulting ina profit on disposal of R0,2 billion. The Committee was satisfied that the Group’s accounting treatmentin respect of this divestment, and related inventory, was appropriate and that all relevant additionaldisclosure requirements have been met.Materiality considerationOverall Group materiality, which was based on consolidated profit before tax from continuing operations and adjusted for non-recurringitems, was set at R313 million. Profit before tax was used since it is the benchmark against which the performance of the Group is mostcommonly measured by users and is a generally accepted benchmark in industry.Group scoping for external audit purposesThe scope of EY’s audit for the financial year under review took into consideration the structure of the Group, the respective accountingprocesses and controls and the industry in which Aspen operates. The assessment included consideration of financially significantcomponents, based on indicators such as their contribution to Group assets, revenue and profit before tax.Based on this assessment, 17 financially significant Aspen businesses (“Scope A Businesses”) were identified. These businesses weresubjected to full scope audits of their financial reporting information, which in aggregate account for a significant or material portion of theGroup’s revenue, profit before tax and total assets.From the remaining Aspen businesses, 11 (“Scope B Businesses”) were subjected to analytical reviews, while the balance of businessesand Group subsidiaries were deemed immaterial and subject to statutory audits, where applicable.In aggregate, the Scope A and B Businesses contribute 90% of Group profit before tax, 87% of Group revenue and 81% of total Groupassets.Going concernThe Committee has, for the year under review, considered the documented assessment by management of the going concern premiseof the Group and has, following this consideration and the combined assurance obtained, recommended to the Board that the Group is agoing concern and will remain so for the foreseeable future. As part of this going concern assessment, the Board considered the potentialimplications of COVID-19 in order to determine that it will not have a significant adverse effect on Aspen’s business. These potentialimplications are assessed on a continuing basis.Recommendation of the Annual Financial Statements for approval by the BoardAt its meeting held on 4 October 2021, the Audit & Risk Committee reviewed and recommended the Annual Financial Statements forapproval by the Board of Directors.The Audit & Risk Committee is satisfied that, for the year under review, it has complied with its statutory responsibilities and theresponsibilities assigned to it by the Board.Babalwa Ngonyama CA(SA)Audit & Risk Committee Chair
4\ Aspen Pharmacare Holdings Limited Annual Financial Statements 2021Statement of responsibility by the Boardof DirectorsThe Board of Directors (“Board”) is responsible for thepreparation, integrity and fair presentation of the Annual FinancialStatements for the year ended 30 June 2021 (“Annual FinancialStatements”) of Aspen Pharmacare Holdings Limited (“theCompany”) and its subsidiaries (collectively “the Group”).The Board considers that in preparing the Annual FinancialStatements it has used the most appropriate accounting policies,consistently applied and supported by reasonable and prudentjudgements and estimates, and that all International FinancialReporting Standards (“IFRS”) that it considers to be applicablehave been followed. The Board is satisfied that the informationcontained in the Annual Financial Statements fairly presents theresults of operations for the year and the financial position of theCompany and the Group at year-end. The directors furtheracknowledge that they are responsible for the content of theIntegrated Report and its supplementary documents, as well as itsconsistency with the Annual Financial Statements.The Board has responsibility for ensuring that accounting recordsare kept. The accounting records should disclose with reasonableaccuracy the financial position of the Group to enable thedirectors to ensure that the Annual Financial Statements complywith the relevant legislation.The preparation of the Annual Financial Statements in conformitywith IFRS requires management to make estimates andassumptions that affect the reported amounts of assets andliabilities at the date of the Annual Financial Statements and thereported expenses during the reporting period. Actual resultscould differ from those estimates.The Company and its subsidiaries operate in a well-establishedcontrol environment, which is documented and regularlyreviewed. This incorporates risk management and internal controlprocedures, which are designed to provide reasonable, but notabsolute, assurance that assets are safeguarded and the risksfacing the business are being controlled.The going concern basis has been adopted in preparing theAnnual Financial Statements. The Board has no reason to believethat the Group or any company within the Group will not continueon the going concern basis in the foreseeable future, based onforecasts, available cash resources and facilities. These AnnualFinancial Statements support the viability of the Company and theGroup. We have also considered the potential implications ofCOVID-19 in the assessment of the Group’s ability to continue asa going concern and we believe it will not have a significantadverse effect on our business.The Aspen Code of Conduct has been adhered to in allmaterial respects.The Group’s external auditor, EY, audited the Annual FinancialStatements, and its report is presented on page 8.The Annual Financial Statements were prepared under thesupervision of Deputy Group Chief Executive, Gus Attridge CA(SA),approved by the Board of Directors on 4 October 2021 and aresigned on its behalf.A signed copy of these Annual Financial Statements is availablefor inspection at the Company’s registered office.Kuseni DlaminiChairmanGus AttridgeDeputy Group Chief ExecutiveJohannesburg4 October 2021
Aspen Pharmacare Holdings Limited Annual Financial Statements 2021 \5Directors’ reportThe directors have pleasure in presenting their report for theGroup and the Company for the year ended 30 June 2021.NATURE OF BUSINESSAspen is a global specialty and branded pharmaceutical company,improving the health of patients across the world through its highquality and affordable medicines. Active at every stage of thevalue chain, the Group is uniquely diversified by geography,product and manufacturing capability.FINANCIAL RESULTS AND REVIEW OF OPERATIONSThe financial results of the Group are set out on pages 14 to110 and of the Company on pages 111 to 131 of the AnnualFinancial Statements. The segmental analysis is included onpages 22 to 24.The consolidated earnings attributable to equity holders of theCompany amounted to R4 806 million for the year, compared withR4 664 million for the previous year, an increase of 3%. Headlineearnings per share from continuing operations (“HEPS”) increasedby 21% from 998,1 cents to 1 204,3 cents.The financial results are more fully described in the AnnualFinancial Statements.SHARE CAPITALThere was no change to the authorised ordinary share capital ofAspen during the year. No changes to the issued share capitalwere effected during the year:Numberof sharesmillionSharecapitalR’million456,52 089Ordinary sharesBalance and the beginning and end of the yearFurther details of the authorised and issued share capital of theCompany are given in note 12 of the Group Annual FinancialStatements and note 9 of the Company Annual FinancialStatements.The unissued ordinary shares are under the control of thedirectors of the Company until the next annual general meeting.DIRECTORATE AND SECRETARYThe directors in office at the date of this report are as follows: Gus Attridge – appointed January 1999 Linda de Beer – appointed July 2018 Kuseni Dlamini – appointed April 2012 Ben Kruger – appointed April 2019 Themba Mkhwanazi – appointed April 2019 Chris Mortimer – appointed January 1999 Babalwa Ngonyama – appointed April 2016 David Redfern – appointed February 2015 Stephen Saad – appointed January 1999 Sindi Zilwa – appointed September 2006The further biographical details of the directors, the capacities inwhich they have been appointed to on the Board and relevantBoard committees they serve on are set out on the Group’swebsite at e Company Secretary and Group Executive: Governance &Communications is Riaan Verster. His business and postaladdresses are set out on the Group’s website In terms of the Company’s Memorandum of Incorporation,Kuseni Dlamini, Ben Kruger, Themba Mkhwanazi and BabalwaNgonyama retire by rotation, and being eligible, offer themselvesfor re-election.Sindi Zilwa will retire from the Board on 9 December 2021.The Board wishes to express its deep gratitude to Ms Zilwa for herdedication to the Group and for the immense and lastingcontribution she has made to it over the last 15 years.The Group Chief Executive and the Deputy Group Chief Executiveare employed on indefinite term service contracts subject to asix-month notice period by either party. It was announced, on10 February 2021, that Gus Attridge would retire as theDeputy Group Chief Executive and Finance Director with effect31 December 2021. It was also announced, on 5 August 2021, thatSean Capazorio will be appointed as Group Chief Financial Officerwith effect from 1 January 2022 and fulfil the function of theCompany’s Executive Financial Director from this date, in termsof paragraph 3.84(f) of the JSE Listings Requirements.Details of directors’ interests in the Company’s issued shares areto be included in the Remuneration Policy and ImplementationReport, to be included in the 2021 Integrated Report, anddirectors’ remuneration details are set out in note 25 of the GroupAnnual Financial Statements.There have been no changes in the interests of the directors inthe shares of the Company between 30 June 2021 and the date ofthis report.The Board has the following three sub-committees, each with itsown terms of reference: Audit & Risk Committee Remuneration & Nomination Committee Social & Ethics CommitteeFor more information on these committees, their members andmandates, please refer to the Corporate Governance and RiskManagement page on the Aspen website.GROUP SHARE TRADING POLICYIt is Group policy that directors, prescribed officers and theirassociates are not to deal in shares or otherwise transact in thesecurities of the Company for the periods from half year-end andyear-end to 24 hours after publication of the half year-end andyear-end results or when the Company is trading under acautionary announcement.TRANSACTIONSThe following notable transactions were effected during the2021 financial year (refer to note 24 of the Group Annual FinancialStatements):Divestment of assets relating to the EuropeanThrombosis businessIn September 2020 the Group concluded an agreement (subjectto conditions precedent which were fulfilled in November 2020)to divest the assets related to the commercialisation of Aspen’sThrombosis products in Europe to Mylan Ireland Limited (“Mylan”).Subsequent to this, Mylan also acquired the distribution rightsand related assets for the French commercial Thrombosis
6\ Aspen Pharmacare Holdings Limited Annual Financial Statements 2021Directors’ report continuedbusiness. The total purchase consideration (inclusive of inventory)was EUR680 million (R12 491 million) including an amountreceivable in July 2021 of EUR7,6 million (R140 million).Agreement to manufacture Johnson & Johnson COVID-19vaccinePharmacare Limited, a wholly-owned South African subsidiaryof the Company, entered into an agreement with JanssenPharmaceuticals, Inc., and Janssen Pharmaceutica NV, two ofthe Janssen Pharmaceutical Companies of Johnson & Johnson,for the technical transfer and commercial manufacture of itsCOVID-19 vaccine in order for Aspen to perform formulation,filling and secondary packaging of the vaccine for supply toJohnson & Johnson, with manufacturing capacity of up to300 million doses per annum being made available at theGroup’s Gqeberha site in South Africa.MEMORANDUM OF INCORPORATIONNo changes were made to the Company’s Memorandum ofIncorporation during the year ended 30 June 2021 and up untilthe date of this report in South Africa.DIVIDEND TO SHAREHOLDERSTaking into account the earnings and cash flow performance forthe year ended 30 June 2021, existing debt service commitments,future proposed investments and funding options, notice wasgiven that the Board declared a gross dividend of 262 cents perordinary share to shareholders recorded in the share register ofthe Company at the close of business on 23 September 2021(2020: no dividend declared or paid).A dividend withholding tax of 20% is applicable to shareholderswho are not exempt. The Company income tax number is9325178714. The issued share capital of the Company is456 451 541 ordinary shares. The dividend was paid from incomereserves. Shareholders were advised to seek their own tax adviceon the consequences associated with the dividend.The directors are of the opinion that the Company will satisfy thesolvency and liquidity requirements of sections 4 and 46 of theCompanies Act, 2008.Future distributions will be decided on a year-to-year basis.In compliance with IAS 10 – Events After Balance Sheet Date, thedividend will only be accounted for in the financial statements forthe year ending 30 June 2022.The salient dates in respect of the dividend were as follows:Last day to trade cum dividendShares commence tradingex dividendRecord datePayment dateMonday, 20 September 2021Tuesday, 21 September 2021Thursday, 23 September 2021Monday, 27 September 2021GOING CONCERN AND IMPACT OF COVID-19These Annual Financial Statements have been prepared on thegoing concern basis. Based on the Group’s reserves, positive cashflows and cash balances, the availability of unutilised fundingfacilities and the budgets for the period to June 2022, the Boardbelieves that the Group and the Company have adequateresources to continue in operation for the next 12 months. Wehave also considered the potential implications of COVID-19 in theassessment of the Group’s ability to continue as a going concernand we believe that it will not have a significant adverse effect onour business.SPECIAL RESOLUTIONSAt the annual general meeting of Aspen shareholders convenedon 9 December 2020, the following special resolutions werepassed by the Company: approval of remuneration for non-executive directors for theyear ended 30 June 2021 and for the period 1 July 2020 to thedate of the 2021 annual general me
2 \ Aspen Pharmacare Holdings Limited Annual Financial Statements 2021 Audit & Risk Committee report continued Activities Outcome Integrated reporting Will review the Group's Integrated Report and the sustainability information as disclosed therein to evaluate the integrity of reported information and for consistency with the Annual Financial
