Aspen share price breakout after FY21 results impress
Aspen Pharmacare has delivered a relatively strong set of results for FY21, highlighting robust revenue and earnings growth
Aspen Pharmacare
Aspen Pharmacare has delivered a relatively strong set of results for FY21, highlighting robust revenue and earnings growth, a significant reduction in debt, improved cash flow and the reinstatement of a full year dividend.
A summary of the results highlights are as follows:
- Revenue +12% year on year (y/y)
- Normalised Headline Earnings per Share (nHEPS) +10% y/y
- Net debt -54% y/y
- Dividend of 262c per share declared (reinstated)
Over the reporting period, Aspen used proceeds from the disposal of its European thrombosis business to lower the debt levels and improve its balance sheet. The resulting effect sees a deleveraging of the business to 1.74x Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) to net debt in FY21, from 2.90x in FY20.
A breakdown of Aspen’s three core segments namely: Regional Brands, Sterile Focus Brands and Manufacturing in terms of revenue is as follows.
Regional Brands
Regional Brands, the groups largest division (in terms of revenue) saw marginal turnover growth of 3%. Aspen attributed the muted growth within this segment to the negative impact of Covid-19 and its EU oncology divisions.
Sterile Focus Brands
The groups second largest segment, Sterile Focus Brands, saw some benefit across jurisdictions from Covid related demand for its products, with revenue having increased by 12% y/y.
Manufacturing
The Manufacturing segment was the clear outperformer for Aspen Pharmacare over the FY21 reporting period. This division has benefitted from supply agreements pertaining to recent disposals, as well as the Covid sales over the period, with the Johnson & Johnson (J&J) contract generating R400m in revenue for the group.
Forward guidance
Aspen Pharmacare expects the positive business momentum to continue into FY22. With the FY21 vaccine rollout only having included 4 months’ worth of production and sales, FY22 should further benefit from increased adoption particularly in Africa, particularly if further license for the content is obtained through J&J.
Revenue growth for the new financial year is forecast at a high single digit, slower than over the FY21 period, although EBITDA growth could accelerate with a lower cost base pertaining to Covid related products. The group expects to further benefit from lower financing costs due to the reduced debt burden to enhance normalized headline earnings going forward.
Aspen – Technical Analysis
The share price of Aspen is currently breaking resistance of the channel (dotted lines) within which it has been trading since October last year. The breakout suggests 23840 to be the next upside resistance target from the move.
Traders not already long into Aspen may hope for a second opportunity through a pullback from overbought territory, back towards the 18300 level. Only on a move below the 16700 support level would we consider changing our long bias to trades on the company.
In summary
- Aspen results have shown double digit growth in revenue and normalized headline earnings for FY21
- The group has significantly reduced its debt using proceeds from the disposal of its Thrombosis business
- A full year dividend has been reinstated
- Revenue growth over the period was led by the groups manufacturing division
- Lower Covid related and financing costs are expected to boost earnings over the FY22 period
The share price of Aspen currently looks to be breaking above channel resistance following the results update
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