Highlights
- Revenue increases 24% to $105.6 million with strong growth in all markets and in all sales channels
- Operating profit including a $9.8 million non-recurring gain rises to $21.2 million, the top end of guidance 1, from $6.1 million in the prior year
- Net profit after tax rises to $12.7 million from a loss of $2.4 million
- Operating cash flow rises to $14.9 million from the prior year’s $1.1 million
- Momentum continues to build in the Maxigesic pain relief portfolio:Maxigesic now licensed in 125 territories and registered in 44 territories up from 42 last year
- Maxigesic tablets selling in 28 countries up from 20 last year; ten new territories poised to begin sales in the current financial year
- Maxigesic Intravenous (IV) registered in three markets as at 31 March 2020 with a further 18 added since
- $43.2 million debt facility refinanced with Bank of New Zealand on significantly lower interest rates
- Operating profits for the year to 31 March 2021 are expected to rise to between
- $14.0 million – $18.0 million from the underlying operating profit of $11.4 million for this FY2020 year
1
On 10 March 2020 AFT reiterated its guidance for an operating profit for the 12 months to 31 March 2020 of $18.8 million to $21.8 million which included the $9.8m non-recurring gain, and indicated the final result would be at the top end of this range.
AFT Pharmaceuticals (NZX:AFT, ASX:AFP) today reports a strong lift in revenue and earnings following sales growth and cost control in its diversified Australasian medicines business and growing international sales of its patented Maxigesic pain relief drug.
Revenue for the year to 31 March 2020 increased 24% to $105.6 million from $85.1 million in the prior financial year, with revenue growing strongly in Australia (up 22%), New Zealand (up 12%) and Asia (up 130%). The international business, which is focused primarily on the commercialisation of Maxigesic was up 55%.
Operating profit rose to $21.1 million, building on last year’s $6.1 million operating profit by $15.0 million. The result included a non-cash $9.8 million non-recurring gain related to AFT taking full control of the Pascomer dermatological medicine 2 intellectual property.
Excluding the one-off gain, the underlying operating profit of $11.4 million represented an 86% improvement on the prior year’s result and reflects continued sales growth, the return to more normalised research and development spending and careful management of costs throughout the business. Net profit after tax rose to $12.7 million from a loss of $2.4 million in the same period a year ago, demonstrating the operating leverage present in our business
AFT Pharmaceuticals Chairman David Flacks said: “The Board is delighted to report on an outstanding year. For the first time we broke through $100 million sales and delivered record earnings.
“Momentum has continued to build across our business in the last financial year. Our Australasian business continues to grow strongly extending a two-decade record of growth.
“Maxigesic continues to achieve key commercialisation milestones in international markets, with sales commencing in eight new countries in the past year. New dose forms of the medicine such as the intravenous formulation – Maxigesic IV – are also establishing a pipeline of opportunities that extend well into the future.
“Meanwhile, our South East Asia business moved into profit this year on the back of sales more than doubling in that region. Combined, these developments have driven strong improvements in operating earnings and cashflow and are setting the company up for continued growth.”
AFT Pharmaceuticals Founder and Managing Director Dr Hartley Atkinson said: “All of AFT’s operating divisions are performing well. We have achieved this growth while again maintaining tight control on costs. And, as foreshadowed last year, we delivered on the promised strong improvement in operating earnings.
“An important element in our success was our foresight in ramping up stock levels on a number of our key products ahead of the COVID19 pandemic arriving in Australasia.
2
The gain, as announced to the NZX and ASX on 4 November 2019, follows from the acquisition of the joint venture Dermatology Specialty Limited Partnership (DSLP) and arises from the recognition at acquisition of the Pascomer IP assets at their assessed fair value of $12.5 million.
These actions have significantly helped the company to navigate the initial impact of the virus in its Australian and New Zealand markets.
“We have also in-licensed a significant number of new products for our Australasian business and we expect them to make a strong contribution over the next few years, complementing the expected growth from our international business.”
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Summary Financial Results |
|
|
|
Year Ended 31 March |
||
|
|
2020 |
2019 |
|
|
$’000 |
$’000 |
|
Revenue |
105,597 |
85,127 |
|
Cost of Sales |
57,332 |
44,397 |
|
Gross Profit |
48,265 |
40,730 |
|
Other Income |
535 |
2,237 |
|
Selling and distribution expenses |
(26,203) |
(26,540) |
|
General and administrative expenses |
(9,111) |
(7,202) |
|
Research and development expenses |
(1,984) |
(2,588) |
|
Gain on acquisition of previously equity accounted joint venture entity |
9,784 |
(521) |
|
Operating Profit |
21,206 |
6,116 |
|
Underlying Operating Profit Adjusted for the $9,784 non-recurring gain on acquisition |
11,422 |
6,116 |
COVID19
We have seen unprecedented changes to our business in the wake of the COVID19 pandemic.
We have seen strong increases in sales for a number of our products including analgesics (Maxigesic), cold & flu medications (MaxigesicPE & Maxiclear), vitamins (Vitamin C Liposachets) and hospital antibiotics.
We have also begun to introduce some new products such as Crystawash (hand sanitiser), aimed at the post COVID19 environment to take advantage of changes we are seeing in consumer behaviour. These trends are likely to be enhanced by either the fear of, or actual cases of, reinfection across Australia and New Zealand.
A key challenge has been to maintain supply to our customers. Several competitors, particularly those in Australia, have frequently sold out of key products, enabling us to step in and offer an alternative.
In addition to the protective benefits that have come from pre-emptively increasing stock levels, our traditional reliance on sea freight has protected us from shortages in capacity and price increases in air freight that have followed in the wake of the pandemic.
As an essential business, we were able to operate throughout the Level 4 and 3 lockdown with a skeleton staff and the remainder were all fully operational using remote access. As we have always operated a highly mobile workforce, the move to remote working has not represented a major challenge to our staff nor systems.
Company sales in the first month of the new financial year are significantly ahead of the prior year, despite the sluggish retail environment. Sales in our Australian business have performed better than New Zealand as our team has still been able to visit some customers.
Against these gains, in excess of $1 million of export orders, including launch orders for 10 countries, were held up by the Indian Government restriction on the export of any products containing paracetamol. The export ban, which was imposed early in the crisis, has since been lifted. The sales have been deferred to the new financial year.
Fortunately, the ban did not impact local Maxigesic supplies as we also source the product from China and our manufacturing sites in that country have performed admirably throughout the pandemic.
Finally, some of our development work has been delayed by Covid19, including a study on Maxigesic IV specific to the registration of the product in the US and other studies related to our Pascomer treatment. Our NasoSURF nasal drug delivery device also saw delays to production and deployment.
AFT has not taken any government COVID19 related subsidies.
Whilst it is difficult to forecast with certainty the ongoing impacts from the pandemic, we have, to date, navigated it relatively well. Importantly, as we have seen over the more than two decades that AFT has been in existence, pharmaceutical products sell well in both good and bad economic times.
BALANCE SHEET
As at 31 March 2020, AFT retained a cash balance of $6.1 million, in line with the $6.9 million cash held a year ago. Total assets rose to $87.1 million from $63.6 million a year earlier and have increased primarily due to the acquisition of the Pascomer assets at their assessed fair value of $12.5 million and the company capitalising research and development expenditure
At the end of the financial year we refinanced CRG’s loans with a three-year $43.2 million facility from Bank of New Zealand (BNZ). As at 31 March 2020 borrowings stood at $43.2 million against the $41.8 million at the same time a year ago.
The new BNZ facilities are at significantly more attractive terms and interest rates than the previous CRG loans such that we anticipate significant finance cost savings in the current and subsequent financial years.
In the 2020 financial year AFT used most of its $14.9 million operating cash flow to fund research and development and financing costs. In the current year, in addition to continuing to invest in the business the company will also be using cashflows to reduce debt.
RPS CONVERSION
CRG has given notice to AFT to convert all 2,600,000 redeemable preference shares in AFT (RPS) held by CRG. In accordance with the terms of the RPS, on 20 May 2020 the 2,600,000 RPS held by CRG converted into 2,600,000 ordinary shares in AFT and AFT issued a further 468,030 ordinary shares in AFT to CRG in respect of the accumulated dividends on those RPS. Following this conversion, 730,000 RPS remain on issue.
OUTLOOK
“We see significant potential for our products in both global and local markets. The timing is always difficult to forecast with certainty, but we are seeing pleasing progress with strong local sales growth and accelerating momentum in international markets,” Dr Atkinson said.
“At the same time, we continue to develop and commercialise line extensions of the Maxigesic range and other products such as NasoSurf and Pascomer. Once achieved, all have the potential to generate significant shareholder value and improve healthcare outcomes for patients around the globe.
“Similar to last year, we have again progressed further down the pathway to realisation of this goal. But there is still a lot of work to do to reach our true potential and fully reward our shareholders.
“Despite all the present challenges, including the COVID19 pandemic, we are looking to the remainder of the 2021 financial year with confidence. We are targeting continuing positive cashflow and an operating profit of between $14.0 million – $18.0 million.
– Released for and on behalf of AFT Pharmaceuticals limited by Chief Financial Officer Malcolm Tubby
For more information:
Investors:
Dr Hartley Atkinson
Managing Director
AFT Pharmaceuticals
Tel: +64 9 488 0232
Media:
Richard Inder
The Project
+64 21 645 643
AFT is a growing multinational pharmaceutical company that develops, markets and distributes a broad portfolio of pharmaceutical products across a wide range of therapeutic categories which are distributed across all major pharmaceutical distribution channels: over the counter (OTC), prescription and hospital. Our product portfolio comprises both proprietary and in-licensed products, and includes patented, branded and generic drugs. Our business model is to develop and in-license products for sale by our own dedicated sales teams in our home markets of Australia and New Zealand and in certain Southeast Asian markets, and to out-license our products to local licensees and distributors to the rest of the world.
