Financial Review

STRONG ORGANIC GROWTH DRIVES EARNINGS Organic growth stimulated by volume gains and new product launches was the primary driver in boosting Group profits.

MG Attridge (45) CA(SA) Appointed to the Board as Chief Financial Officer in 1999 and as Deputy Group Chief Executive in 2001

Normalised earnings increase 34% Aspen’s published results for the year ended 30 June 2006 and the prior year comparatives have been affected by a number of material once-off transactions. In order to allow the reader of the annual report the opportunity to better assess the performance reflected by these results Aspen has adjusted for these once-off transactions, referring to the adjusted results as “normalised”. The most significant adjustments which have been made to earnings in arriving at normalised earnings are: • the write back to other operating expenses of the charge of R282,4 million in the prior year in respect of the BEE transaction concluded by Aspen in June 2005; • the increase of the tax charge for the current year by R31,9 million in respect of the claiming of the Strategic Industrial Programme tax allowance under section 12G of

Revenue growth was led by the South African businesses, 24% up at R2,849 billion.

the Income Tax Act relating to the investment by Aspen in its OSD Facility; and • the write back to administration expenses of R21,3 million being the costs relating to Aspen’s unsuccessful bid to acquire PLIVA dd, a Croatia-based generic pharmaceutical company, during the latter part of the year under review. The key elements of the normalised income statement are the following:

Change

2006 R’million

Revenue

+23%

3 449

Normalised EBITA

+22%

1 023

Normalised operating profit

+28%

1 004

Normalised earnings

+34%

627

Revenue growth was led by the South African businesses, 24% up at R2,849 billion. This growth was entirely organic, with volume growth in generics, the influence of new product launches, an acceleration in sales of ARVs and a strong performance in infant nutritionals being the main contributors. Gross profit margin declines Gross profit margins narrowed from 49,4% to 48,1% as pricing pressures in the South African generic market, increasing imported raw material costs and narrow margins on ARV products all came to bear. The increase in selling and distribution costs of 23% indicated the high level of variable expense in this category. Administration costs, after excluding the PLIVA dd bid costs, remained flat as set up costs in the infant nutritional business incurred in the prior year were not repeated.

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Aspen Annual Report 2006