Group Chief Executive’s Report
A REWARDING YEAR The excellent performance by Aspen over the past year was reward for past strategies implemented. Future performance will be influenced by the initiatives presently being introduced.
SB Saad (42) CA(SA) Appointed to the Board and as Group Chief Executive in 1999
Another excellent set of results Aspen’s results for the year ended 30 June 2006 were most pleasing. Stripping away the effects of once-off transactions, normalised earnings per share increased 32% to 182,1 cents. Principal growth drivers were new product launches, increasing generic volumes in the South African market and a strong showing from the consumer businesses. Worthy of individual mention are the contributions from the infant milk products and the improved performance from the fine chemicals business, both of which are recent additions to the Group.
Principal growth drivers were new product launches, increasing generic volumes in the South African market and a strong showing from the consumer businesses.
Deflationary pricing pressure The strong growth of the past year was achieved despite the deflationary pricing environment in Aspen’s most material business segment, South African pharmaceuticals. With the introduction of single exit pricing (“SEP”) by the regulator in 2004, pharmaceutical prices were frozen at 2003 average levels. In addition, robust competition amongst generic players has resulted in downward pricing pressure. The SEP legislation caters for an annual review of prices based upon the influences of inflation and currency fluctuations. South African pharmaceutical companies are currently in discussion with the Department of Health regarding a price increase to provide relief from the cumulative effect of three years of cost inflation. Shadow of legislative uncertainty Legislative uncertainty continues to afflict the South African pharmaceutical market. The quantum of the dispensing fee to be paid to pharmacists and doctors remains unsettled. The finalisation of this matter should strengthen the momentum of generic substitution. The possibility of international benchmarking and the capping of wholesalers’ fees are other issues within the legislative framework which may yet come into play. Increased development capabilities Aspen has launched a record number of new products into the South African market over the past two years. Aspen’s share of the total private pharmaceutical market is 11%. In continuing to build the future product pipeline for the Group, capacity has been increased by adding to the capabilities of the Pharmaceutical Research Laboratories at the Port Elizabeth site and by engaging with international development partners with specialist capabilities. 12
Aspen Annual Report 2006