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Aspen lowers debt, shares jump

Aspen says its debt levels are safely below a covenant threshold.
Aspen's debt levels fall below R40bn in June 2019 from a R53.5bn reported in December. Picture: Supplied

Aspen Pharmacare said on Tuesday its debt as of June 30 had fallen below R40 billion ($2.63 billion) and that levels were safely below a covenant threshold, sending shares in the South African drugmaker up more than 9%.

The firm, which has a market value of R35 billion, built up debt as it shifted from being a mainly generics business in a few countries into a multinational with specialist therapies, including for thrombosis.

Aspen’s debt stood at R53.5 billion at the end of 2018, more than six times than in 2013, when it went on an acquisition spree, snapping up blood-clot treatment brands, a manufacturing plant from GlaxoSmithKline and the rights to anaesthetics from AstraZeneca.

Investors have been concerned about Aspen’s rising debt for about a year, when levels moved close to breaching debt covenants.

Its shares have tumbled nearly 70% since September 2018, when the company said it was selling its infant formula business.

The leverage ratio, which assesses the ability of a firm to meet its financial obligations, is expected to end between 3.60x and 3.70x against a covenant threshold of 4.0x, it said in a trading statement.

Aspen shares jumped nearly 14% after its trading statement to a level last seen on August 5, before paring gains to trade 9.68% firmer at R84.27 as of 1339 GMT.

Aspen, which operates in Europe, said reported revenue for the year ended June 30 would either be flat or rise 2%, while on constant exchange rates revenue is expected to be flat or decline by 3% when it reports its annual results on September 11.

The largest pharmaceutical company in Africa said it performed a rigorous impairment testing of tangible and intangible asset values once again, resulting in total impairments of R3 billion.

“Contributing factors to these impairments are expected pressure on the oncology portfolio in Europe and the restructuring of certain production facilities to align these with production process improvements and expected future manufacturing requirements,” it said.

Normalised headline earnings per share from continuing operations is seen falling between 5% and 9% from a restated 1 518.5 cents.

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