Finweek English Edition

Healthy balance sheet


Aspen Pharmacare’s results for the year through 30 June, released on 1 September, were solid as HEPS jumped 21% to 1 204c and net borrowing more than halved to R16.3bn. It was their debt that got the company into trouble back in 2018 and they are now well within levels they can manage and within their debt covenants. Aspen is now also a very different company. The old strategy of buying assets with debt and using that cash flow to pay off the debt worked well until it didn’t (as is usually the case with debt, it’s all fine until it’s not) and it’s not likely to be a strategy they’re going back to. That leaves the company as a contract manufactur­er and generic drug business which is well-positioned but it does mean more modest growth in future. But with debt lower we should start seeing higher dividends. Aspen has traditiona­lly been a low dividend payer as they had to service their debt. That all said, the current price of almost 22 000c per share puts them on a P/E of about 18 times and that is not cheap. ■

*The writer owns shares in Shoprite, Murray & Roberts and Discovery.

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