Our sustainable business strategy

celebrating 20 years Our strategic business performance

A high level overview of our performance over the past year, the key opportunities, risks and challenges and the outlook is set out below. Further information on the application of our capitals, our sustainability objectives and performance against our KPIs is included in the “Creating value through our capitals” section.

Strategic objective     KPI     Performance highlights 2018

To enhance access to high quality, affordable medicines

Subject of engagement
    IMS value of total product
pipeline for the next five
USD3,4 billion
(2017: USD3,2 billion)
Number of product recalls
(2017: 7)
  • Provided affordable critical medicines, with proven efficacy and safety, to patients in more than 150 countries.
  • Implemented a more targeted approach to product development and licensing initiatives creating a product pipeline that is strategically aligned with the Group’s future growth plans.
  • Launched a total of 45 products in 20 countries, broadening access to high quality, affordable medicines and products.
  • Further developed structures in China and Japan to support expanding access to the global product portfolio.
  • Concluded an exclusive licence agreement with Teva to launch two products (Enjuvia and Cenestin) in the United States which will leverage our synthetic conjugated estrogen API business and enhance our women's health product basket.
  • Launched the new global infant milk formula brand, Alula, and initiated a strategy to access the Nutritionals sector in China.
  • Managed disruptions experienced in the anaesthetics supply chain to minimise the impact of the unavailability of products.
  • Increased the technical and compliance training of the sales and marketing teams, facilitated by the Aspen Learning Academy, to better serve customer requirements across all territories.
  • Progressed with the integration of the new sales representatives in China into Aspen with reinforcement of our way of doing business.
  • Maintained a strong quality culture achieving positive results from inspections undertaken by regulators and audits conducted by customers.
  • No product recalls represented a high patient risk requiring the implementation of a full market recall procedure. Specific focus on understanding the root causes underlying the increase in the number of product batch recalls.
Key opportunities, risks and challenges     Short to medium-term outlook
  • Increasing complexity of regulatory requirements and product regulations, requiring additional resources to maintain and upgrade our intellectual property.
  • Changing market and regulatory environments coupled with the complexity and greater costs associated with the development of differentiated products affecting the realisation of expected returns on new product developments.
  • Timing of new product launches is dependent on the speed of processing of the necessary registrations by the regulatory authorities in each country.
  • Inherent risk of batch rejection, product recall and/or disruption to supply as a result of the highly technical, complex and regulated nature of the manufacture and supply of pharmaceutical products.
  • Ensuring that geographically dispersed sales representatives are aligned with our business ethos.
  • Opportunities to extend the existing Anaesthetics portfolio into new geographies, notably China, and to further leverage the strategic fit with the Thrombosis portfolio.
  • Pipeline opportunities in high potency niche products (estrogens, conjugated estrogens, low dosage Estradiols and HPC) for the United States and geographic expansion of Orgaran, in the Thrombosis portfolio.
  • Development and refinement of the product pipeline in line with the Group’s targeted therapeutic categories for each region will be pursued on an ongoing basis to leverage the areas of expertise which we have developed.
  • The evaluation of opportunities in new territories which may justify the expansion of the Group's promotional footprint will be performed.
  • Sales structures are assessed on an ongoing basis to ensure that we are delivering the appropriate services to meet the demands of healthcare providers.
Strategic objective     KPI     Performance highlights 2018

To achieve strategic advantage through our integrated supply chain

Supply chain
    Normalised EBITDA margin
(2017: 27,7%)
Return on total assets 10,3%
(2017: 11,5%)
  • Acquired the remaining rights to the intellectual property and manufacturing know-how of the AstraZeneca Anaesthetics portfolio and completed the transition of the contractual relationship with third-party contract manufacturers from AstraZeneca to Aspen, increasing our control over the supply chain.
  • Initiated capital projects in excess of R4 billion in value at the Port Elizabeth, Notre Dame de Bondeville and Bad Oldesloe sites in order to create increased capacity and capability for the transition of the manufacture from AstraZeneca sites over the next five years.
  • Officially opened the high containment suite at our Port Elizabeth site that will produce niche high potency and hormonal products.
  • Reintroduced the production of conjugated and esterified estrogens at Oss, offering opportunities aligned with our strategy for the women's health product portfolio.
  • Progressed further product realignment projects increasing the production volumes in our own facilities, resulting in enhanced synergies.
  • Achieved further manufacturing efficiencies through continuous improvement projects and procurement initiatives.
  • Further strengthened our technical capability for complex pharmaceutical manufacturing, leveraging our Biochem and Steriles Centres of Excellence to achieve high technical standards across our facilities.
  • Made further significant investments to increase the integration of regulatory, manufacturing and IT processes and systems, achieving increased efficiency and the ability to manage risks across the complex supply chain more effectively.
Key opportunities, risks and challenges     Short to medium-term outlook
  • The manufacturing of pharmaceutical products is highly regulated and complex. Manufacturing facilities are subject to regular inspections by various regulatory authorities in order to maintain accreditation. Manufacturing facilities which do not comply with all regulated standards are required to take remedial action and in extreme circumstances, risk closure until remediation is complete.
  • We continue to be engaged in multiple projects to transfer production of certain pharmaceuticals to new lines within existing Aspen-owned facilities, alternative production facilities owned by Aspen and/or third-party manufacturers. These technical transfers, and the deployment of new technologies, frequently offer more cost-efficient and reliable manufacturing, but can pose execution risk.
  • There is a key reliance on specialised raw materials, some of which can only be sourced from a single supplier.
  • There is a key reliance on certain third-party contract manufacturers for the continued supply of products within specification and required timeframes.
  • Currency volatility impacts the cost of goods across the supply network.
  • Product registration times are unpredictable, which affects the supply chain readiness to launch products rapidly following registration.
  • Technical transfer of products that have been on the market for long periods of time may require technical upgrades before the transfer process can be completed.
  • The consolidation of anaesthetics manufacturing into Aspen sites will further increase our control over the supply chain enhancing security of supply and thereby allowing better access to these essential medicines.
  • The successful execution of our plans to increase production volumes by means of new product introductions and the realignment of production currently being outsourced to third-party manufacturers will increase production efficiency and result in improved cost of goods.
  • Our integrated supply chain matched with our global distribution capabilities places us in a position to enter into value creating partnerships.
  • SAP implementations recently completed, in progress and planned for the future are expected to increase overall supply chain efficiency.
Strategic objective     KPI     Performance highlights 2018

To provide a safe, challenging and rewarding environment for our employees

    Average staff turnover 12,3%
(2017: 14,0%)
Average training spend per employee
R6 742
(2017: R4 987)
Disabling injury frequency ratio ("DIFR")
(2017: 0,91)
Lost work
day frequency ratio (“LWDFR”)
(2017: 0,84)
  • Launched a new global human resources strategy, which focuses on talent, skills development, succession planning and the retention of key skills, and endorsed a Group-wide talent management framework.
  • Completed implementation of the global integrated human resources management system supporting effective human resource management processes across the Group.
  • Established the Technical Training Academy at the Port Elizabeth site and a Commercial Academy in our South African commercial businesses.
  • Strengthened the commercial leadership team and initiated further leadership re-alignment changes in certain business units.
  • Initiated further efforts aimed at the targeted restructuring of the workforce in selected operations to achieve operational efficiency.
  • Implemented a new three-year Employment Equity plan and established various forums to support diversity and inclusion initiatives.
  • Improved the female representation in our Middle Management and Junior Management Development Programmes and re-launched a Finance Graduate Programme for our talent pipeline.
  • Recognised the exceptional performance of selected employees across the Group through the Aspen employee recognition awards.
  • Maintained positive employee relations with zero disruptions to our operations globally.
  • Completed the multi-year plan to reduce the most significant safety, health and environment (“SHE”) risks at the Moleneind site in Oss, transferring the highest risk processes to alternate facilities.
  • Maintained our historically high safety standards with zero incidents of occupational fatalities.
Key opportunities, risks and challenges     Short to medium-term outlook
  • The ability to attract, retain and develop the diverse talent and specialist technical skills required to support the rapid growth and increasing complexity of the Group remains a focus area.
  • The successful integration of employees from acquired businesses into the Aspen culture and values remains a critical success factor and receives ongoing attention from senior leadership.
  • The inherent safety risks relating to the pharmaceutical and chemical industry will always be a key focus area for the Group, with standardised SHE processes embedded across all of our operations.
  • The launch of the new global human resources strategy, together with the new talent management framework, is intended to improve leadership and overall talent bench strength in the short to medium term.
  • The drive to improve gender (female) representation at key management levels remains a focus in the medium term.
  • Continued investment in growing our own talent through initiatives such as the Middle Management and Junior Management Development Programmes creates opportunities for our people to reach their potential while creating a talent pipeline to support our future growth objectives.
  • A bridging programme to fast track experienced employees who lack formal qualifications is being launched.
  • The consistent application of the Group SHE standards and the phased approach to ISO certification will receive ongoing attention.
Strategic objective     KPI     Performance highlights 2018

To practise good corporate citizenship

To practise good corporate citizenship

Scope 1 emissions
44 305tCO2e
(2017: 48 435tCO2e)
Scope 2 emissions
148 912tCO2e
(2017: 160 237tCO2e)
Electricity used
663 557 Gigajoules
(2017: 692 449 Gigajoules)
Water used
1 584 Megalitres
(2017: 1 667** Megalitres)
Waste recycled
80 973 tonnes
(2017: 76 577 tonnes)
Percentage of female employees
(2017: 49,4%)
Percentage of females in top 100 positions in the Group*
Percentage of black employees in South Africa
(2017: 81,0%)
Percentage of black employees in top 50 positions in South Africa*
BBBEE level
(2017: 4)
Significant legislative infringements
(2017: 1)
FTSE/JSE Responsible Investment score
(2017: 3,4)

* New KPI therefore no comparative available
** Restated from prior year
  • Continued participation in the UN Global Compact, the Carbon Disclosure Project and Water Disclosure Project.
  • Further strengthened the Group Ethics Programme through targeted interventions to embed our values and Code of Conduct implemented through a Regional Ethics Officer structure across our business operations.
  • Improved our ESG rating on the FTSE/JSE Responsible Investment Index.
  • Completed an extensive project to ensure our tax reporting meets the increasing regulatory requirements required under the Base Erosion and Profit Shifting project that has been endorsed by the Organisation for Economic Cooperation and Development ("OECD") which has been implemented by tax authorities in most countries in which we operate.
  • Increased the focus on achieving gender diversity across employment levels.
  • Continued to focus on targeted transformation initiatives in the South African business and the achievement of BBBEE objectives.
  • Supported more than 220 SED projects contributing to the well-being of the communities in which we do business.
  • Advanced loans amounting to R55 million as part of our enterprise development and enterprise supplier development programmes.
  • Effected an estimated 52% saving in our water consumption over 2016 levels at the FCC site in Cape Town in response to the "Day Zero" crisis and implemented further mitigations to protect the site from potential disruptions to water supply.
  • Provided full cooperation to the European Commission and the United Kingdom’s Competition and Markets Authority regarding their respective investigations into certain pricing aspects.
Key opportunities, risks and challenges     Short to medium-term outlook
  • Reporting and disclosure requirements in respect of our corporate citizenship and the application of international best practice remain onerous and require management focus and attention. We are committed to continue meeting these reporting requirements in a balanced and responsible manner.
  • Our operations span multiple territories, with complex regulatory frameworks. Changes in legislation can impact our operations or increase the risk of non-compliance.
  • We are dependent on stable and consistent water and energy supply and will be impacted by the future availability of these scarce resources.
  • A continued focus of the Group is to maintain a consistent ethical culture across our geographically and culturally diverse operations and offices.
  • Ongoing emphasis will be placed on ensuring an ethical and values driven culture throughout the Group, giving credence to our motto of Healthcare. We Care.
  • Continued investment in appropriate skills development and enterprise development initiatives in line with the increased targets and higher BBBEE recognition levels as a result of the updated BBBEE Codes revised in May 2015.
  • Our support of a number of SED projects in the countries in which we do business will be continued.
  • We are committed to complying with competition law requirements in the countries in which we operate and will continue our approach of full and constructive engagement with the relevant authorities in this regard.
  • Continued implementation of resource saving initiatives and projects to reduce our exposure to water scarcity risks.
Strategic objective     KPI     Performance highlights 2018

To create sustainable economic value for all our stakeholders

Sustainable economic value
    Growth in revenue
(2017: 15,9%)
Growth in NHEPS
(2017: 15,8%)
Growth in normalised EBITDA
(2017: 13,0%)
Return in ordinary shareholders’ equity
(2017: 12,2%)
Operating cash flow per share
1 537,3 cents
(2017: 1 421,4 cents)
Leverage ratio
(2017: 3,25)
  • Created R18 892 million in value, with R7 925 million being paid to employees, the generation of R1 533 million in revenue for governments, R24 466 million in payments to providers of goods and services and R17 million to support various SED initiatives.
  • Growth in revenue of 3,4% (4,7% at CER) to R42 596 million through a combination of organic growth in the base business and further acquisitive growth contributed by the Anaesthetics portfolio and Thrombosis sales in China.
  • Growth in NHEPS from 1 463,2 cents per share to 1 604,9 cents per share, achieved primarily through revenue growth at increased margins and reduced financing costs.
  • Focused working capital management has contributed to an improvement in operating cash flow, notwithstanding required strategic stock builds to manage risks within the supply chain.
  • Further delivery of an estimated R500 million in synergies through the value creation initiative projects.
  • Successfully concluded the “amend and extend” restructuring exercise in respect of the Group's debt portfolio with its primary lenders.
  • Initiated a strategic review of the Nutritionals business which was concluded with the announcement on 13 September 2018.
Key opportunities, risks and challenges     Short to medium-term outlook
  • Increased and sustained emphasis on managing rising healthcare costs and intensive examination of the pricing of pharmaceuticals by governments, health insurers and consumers in most countries.
  • Instances of extensive price cuts and changes in price referencing mechanisms implemented by certain regulators.
  • Evolving pharmaceutical regulations and application of increasingly stringent quality standards has led to raised costs of compliance across all territories. The high cost of doing business in this complex regulatory environment places pressure on achieving satisfactory returns on investment.
  • While the Group is exposed to currency volatility in specific countries, trading in a diversified mix of currencies diminishes the risk on a Group-wide basis.
  • Competition in the global pharmaceutical market remains fierce. Low-cost Asian pharmaceutical companies are active in all major territories with many competing generics being launched upon patent expiry of a molecule. There is also the risk of the potential introduction of biosimilars in certain territories.
  • Volatile geopolitical and economic conditions in many countries present a challenging trading environment, constraining organic growth in those countries.
  • The operationalisation of multi-site, multi-product and multi-territory acquisitions is complex and can place strain on the financial and human capital resources of the Group. The integration of the acquired businesses into the Aspen culture is a key success factor of these transactions.
  • China is a complex and challenging territory in which to do business with significant differences in culture, regulatory frameworks and commercial practices.
  • Strategic initiatives have been undertaken to diversify market risks, currency risks and product risks supporting sustainable growth prospects. Our globally competitive production capabilities and economies of scale help to mitigate pricing pressures.
  • As the acquired Anaesthetic portfolios are further integrated into our business, opportunities to leverage both the existing hospital focused sales force and potentially, in due course, our sterile manufacturing capabilities will be pursued.
  • The considerable footprint created in China and the rest of the Asian business through the acquired anaesthetic and thrombosis products provides the critical mass to support further product diversification in this significant pharmaceutical market.
  • We are targeting organic revenue growth of between 1% and 4% in the Commercial Pharmaceuticals business for the 2019 financial year.
  • Product launches from our focused product pipeline which includes some unique opportunities in the United States, a country where Aspen has not yet established a sales force.
  • Our favourable relationships with many multinational pharmaceutical companies positions us well to engage with them regarding potential opportunities. We will also remain alert to acquisition opportunities which present strategic value.
  • The conclusion of the agreement (conditions precedent) to dispose of the Group’s Nutritionals business announced on 13 September 2018 will allow for the Asia Pacific, Latin America and Sub-Saharan Africa business units to dedicate their time and attention to their core pharmaceutical portfolios. The transaction is expected to be completed before April 2019. The net proceeds will be utilised to reduce our gearing, creating greater headroom and capacity.