AFT earnings rise in line with guidance
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
Market Release November 21, 2019
FINANCIAL RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2019
AFT earnings rise in line with guidance
Performance Highlights
• Operating Revenues increase 22% to $46.9 million with strong growth in all
markets.
• Operating Profits of $13.7 million for the six months following on from the $6.1
million operating profit for the full year ended 31 March 2019, with all markets
now generating operating profits.
• Gain on acquisition of $9.8 million arising from the gain on the acquisition of the
Pascomer intellectual property included in the Operating Profit.
• Cash balance improves to $7.3 million.
• Maxigesic pain relief registrations up to 44 territories for the oral formulation
and 2 territories for the intravenous formulation, in New Zealand and the key
Australian market.
• Debt refinance negotiations well advanced with local banks having provided
indicative term sheets with significant interest cost savings.
• Operating profit forecast for the year to 31 March 2020 to rise to between $18.8
- $21.8 million taking account of the Pascomer gain.
AFT Pharmaceuticals (NZX; AFT, ASX; AFP) today announces continued growth in
earnings amid rising sales of its over the counter (OTC) medicines in Australasia and its
patented Maxigesic pain relief medicine in global markets.
Group operating revenue for the six months to 30 September 2019 grew by 22% to
$46.9million from $38.4 million in the same period a year ago with its largest market,
Australia growing revenue by a strong 19%, New Zealand by 9%, Southeast Asia by
112% and the Rest of World by 64%.
Group operating profit for the six months to 30 September 2019 was $13.7 million up
from a loss of $0.1 million in the same period a year ago. As signalled earlier this month,
the result was bolstered by the non-recurring gain on acquisition of the joint venture
Dermatology Specialty Limited Partnership (DSLP) of $9.8 million.
Group net profit before tax (NPBT) rose to $9.9 million from a loss of $4.2 million in the
same period a year ago. Stripping out the DSLP gain NPBT was $0.1 million against a
loss in the same period a year ago of $4.2 million.
Chair David Flacks said: “AFT has delivered another strong result. The rise in operating
earnings confirms our strategy to expand our presence in our home markets of
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
Australia, New Zealand and Southeast Asia and grow our international revenues
through the out licensing of our intellectual property.
“This growth, coupled with moves to improve our financial strength through the
refinancing of our debt, position AFT to strongly grow shareholder value.”
Founder and Managing Director Dr Hartley Atkinson said: “We are pleased with the
progress we have made. As foreshadowed last year, all divisions of the company -
Australia, New Zealand, Asia and International – are now contributing to group
operating earnings.
“Our home markets of Australia and New Zealand continue to grow strongly. Following
the sale of the lower margin hospital products to Baxter Healthcare, the restructuring
of our product portfolio in these markets is now largely complete. We are now investing
for growth with the addition of new medicines to our in-licensed portfolio that have
the potential to lift sales considerably in the coming years.
“Sales from outside Australasia continue to grow as a proportion of our business, now
reaching $7.6 million representing 16% of group sales and up from 11% in the same
period a year ago.
“We see further significant growth in Maxigesic sales in the second half of 2020
financial year and into next financial year as the number of countries in which the
medicine is launched increases. We see an even sharper acceleration in following
years as sales in all these countries build and we add additional dose forms.
“Meanwhile, our pipeline of development opportunities continues to show promise.
We are looking to the future with confidence as we continue to execute on our plans.”
Financial performance
Group Operating Results
NZ$’000
Six Month Period
Ended September 30
Change
($)
Change
(%)
FY2020 FY2019
Revenue 46,946 38,441
+ 8,505 + 22
Cost of Sales (25,598) (20,292)
+ 5,306 + 26
Gross Profit 21,348 18,149
+ 3,199 + 18
Other Income 336 2,034
- 1,698 - 83
Selling and distribution expenses (12,938) (14,234)
- 1,296 - 9
General and administrative expenses (4,536) (3,489)
+ 1,047 + 30
Research and development expenses (223) (2,225) - 2,002 - 90
Equity Accounted Loss of joint venture entity (81) (344)
- 263 - 76
Gain on disposal of joint venture interest 9,785 -
+ 9,785 + +
Operating Profit / (Loss) 13,691 (109)
+13,800 + +
Gross Profit grew 18% to $21.3 million, driven by revenue growth in all markets. The
gross profit margin fell 1.7 percentage points to 45%. This reflected relatively strong
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
revenue growth in the hospital channel, which attracts lower gross profit margins, but
also has lower selling and distribution expenses.
Other Income of $0.3 million was down from $2.0 million in the prior year. It includes
fees we received on the divestment of some unused product registrations in Asia and
the Callaghan Innovation growth grant that we receive on eligible research and
development expenditure. The larger amount last year relates to the one-off fees we
received from the divestment of non-core hospital products.
Selling and Distribution expenses fell 9% to $12.9 million from $14.2 million in the same
period last year. We benefited from efficiencies in Australia, New Zealand and
Southeast Asia and revenue growth in the Rest of World where licensees carry these
costs.
Selling and distribution expenses now represent 27% of revenue, down from 37% in the
same period a year ago. We expect these expenses as a proportion of total revenue
to continue to fall as revenue from the Rest of World grows.
General and Administration expenses increased to $4.5 million from $3.5 million in the
same period a year ago due to one off legal fees in Australia relating to competitor
legal action that challenged certain Maxigesic claims. The marketing claims currently
in use have maintained our market share lead in the category and AFT remains
confident of its legal position.
Research and development expenses fell to a net $0.2 million with the successful
completion of the major clinical trial programme identified at the IPO in December
2015. R&D expenses were also reduced by one-off $1.7m contributions from joint
venture partners resulting from the successful development results.
AFT is continuing to carefully run its Research and Development budgets to stay within
profit targets. These efforts have been bolstered by agreements for Maxigesic IV and
Pascomer that recover Research and Development costs from partners, effectively
minimising risk, and the impact of the associated spend on AFT.
Despite the reduced expenditure we have not cut back on development work,
instead those costs are now being shared with our partners.
The gain on acquisition of intellectual property of $9.8 million arises from the
recognition at acquisition of the Pascomer IP assets at their assessed fair value of $12.5
million. The future development costs for Pascomer, which had previously been
accounted for under equity accounted expenses of the joint venture entity, will now
be borne by the North American Licensee.
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
REGIONAL PERFORMANCE
Australian Revenue grew by 19% to $25.7 million from $21.6million in the same period
a year ago and represented 55% of Group Operating Revenue. Operating profits rose
to $1.9 million from a $0.1 million loss in the same period a year ago.
The OTC channel grew at 18% to generate 60% of total Australian revenue.
Maxigesic sales grew and it maintains its leadership of the ibuprofen-paracetamol
combination section of the pain management market.
Our eyecare range delivered strong growth from its existing products and benefited
from new products including Novatears launched last year and Optisoothe launched
at Easter.
We now occupy the number two position in the lubricating eyecare category in
Australia.
The Hospital channel grew 25% to generate total sales of $7.6 million. It benefited from
the launch of new products particularly in the injectables market. The Prescription
channel grew at 9% also with the launch of new products.
New Zealand revenue grew by 9% to $13.7 million from $12.6 million in the same period
a year ago and represented 29% of Group Operating Revenue. Operating profit grew
to $1.7 million from a profit of $0.8 million in the same period a year ago.
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
The OTC channel grew at 17% to $7.4 million from $6.3 million at the same time a year
ago. The standout categories in the New Zealand market were natural medicines and
digestive health, both of which benefited from the launch of new products.
The Hospital channel declined by 10% to $1.9 million due to tender price reductions
and the temporary loss of product due to supplier changes. However, this channel is
expected to return to growth next year with new products.
The Prescription channel grew at 7% to $4.4 million in line with the introduction of new
products.
Southeast Asia Revenue grew by 112% to $2.4 million from $1.1 million in the same
period last year and now generates 5% of Group Operating Revenue. Operating
profits rose to $0.1 million from a loss of $0.2 million in the same period last year.
The main Hospital channel grew at 240% with the launch of two new products in
Singapore and Malaysia. Revenues in the OTC channel did not grow in the period due
to the initial Maxigesic launch sales into Hong Kong and Malaysian distributors in the
prior financial year for their respective launches. We expect these distributors to place
new orders in the second half.
Rest of World revenue grew by 64% to $5.2 million from $3.2 million in the same period
a year ago and represents 11% of Group Operating Revenue. Operating profits rose
to $10.1 million and includes the one-off $9.8 million gain in the DSLP business.
Maxigesic product sales and royalty income from existing markets, together with new
markets in the Nordics, Spain and Portugal generated approximately half the revenue
in the segment. The other half came from Maxigesic and Pascomer licence income
and includes a combination of upfront and other payments for the achievement of
regulatory approvals and other commercial milestones.
AFT this year booked its first sales milestone payment from one of our licensees in
Europe for achieving market sales targets. Milestone payments will increase and are
set to make a significant contribution to revenue in future years.
Maxigesic sales in the Rest of World are relatively flat compared with the first half of
the prior year but we expect growth to pick up as many sales orders are loaded into
the second half of the 2020 financial year. Steady progress is being made with
securing out-licensing and distribution agreements.
MAXIGESIC COMMERCIALISATION
Maxigesic tablets are now being sold in 24 countries
1
, up from 20 at the end of the
2019 financial year.
Product Maxigesic Tablets Maxigesic IV Maxigesic oral
solution
Territories 2020 2019 2020 2019 2020 2019
Licensed 125+ 125+ 70 68 122 122
Registered 44 42 2 - - -
Sold 24 20 - - - -
1
Countries include Australia, Brunei, Denmark, El Salvador, Finland, Guatemala, Hong Kong, Israel,
Iraq/Kurdistan, Ireland, Italy, Macau, Malaysia, Malta, Portugal, New Zealand, Nicaragua, Norway,
Serbia, Singapore, Spain, Sweden, United Kingdom and United Arab Emirates.
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
We anticipate launches of Maxigesic tablets in twelve markets will occur in the second
half of this financial year. We have received launch orders and had expected several
to have already occurred, but they have been delayed for primarily regulatory
reasons.
We have signed four additional Maxigesic tablet licensing or distribution agreements
over the last six months in Chile, Columbia, Germany and Peru. Ongoing discussions
continue in significant markets such as Brazil and Canada.
Meanwhile, momentum is building with further Maxigesic IV Distribution Agreements
signed in Pakistan and Vietnam, lifting the number of territories in which it has been
licensed to 70.
Discussions to out-license both the tablet and intravenous dose forms of Maxigesic for
the USA, China, and Japan, the top three pharmaceutical markets in the world, are
continuing.
PRODUCT DEVELOPMENT
Maxigesic
The majority of the Maxigesic clinical trial programme has now been completed. The
first two global registrations of Maxigesic IV, in Australia and New Zealand, were
achieved earlier this year. Our hospital team is now preparing for the launch of
Maxigesic IV in Australia in the second half of the 2020 financial year.
The Australian registration is particularly important as the country acts as a reference
for several other countries.
An additional clinical study is currently underway for a USA filing, with multiple study
sites in the USA and New Zealand. We are targeting the completion of this study during
this financial year to allow filing in the USA. Further clinical work is planned for additional
major markets including China and Japan which have now been identified as targets
for Maxigesic IV. The studies will be funded by the licensee. These countries were not
originally envisaged as potential markets, so it further expands the scope for Maxigesic
beyond that previously thought possible.
We continue to develop line extensions to strengthen and build the Maxigesic product
franchise in Australia and New Zealand and further afield.
New regulatory filings will commence as planned this calendar year for Maxigesic Hot
Drink Sachets. Final development work also continues on Maxigesic Dry Stick Sachets
and the first filing of Maxigesic Rapid is planned in the next calendar year.
New developments identified last year are now well underway with Maxigesic Cold &
Flu well advanced. A further patent for the key Australian market has been in-licensed
during the first half to create an additional Maxigesic line extension.
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
Pascomer
The development programme for our drug Pascomer, a topical formulation of
Rapamycin being developed for facial angiofibromas in tuberous sclerosis complex, is
now well underway.
We have commenced a large multi-centre international study with sites in New
Zealand, Australia, and the United States. All these sites have opened for enrolment,
and further sites in Spain, the United Kingdom and Eastern Europe are due to start
before the end of this calendar year.
Under the terms of the innovative licensing agreement we signed earlier this year, all
Pascomer Research and Development expenditure is now recovered from our north
American development partner, Timber Pharmaceuticals. As part of this agreement
we also took full control of the original JV partnership, a move that crystallised the gain
of $9.8 million.
We see this agreement as a good example of the creative approach we take to out-
licensing and developing our technologies. The agreement allows us to benefit from
the considerable upside of our technology but limits the financial risks that come with
investment into research and development.
We are excited about the potential for Pascomer. Clinical data covering more than
400 patients demonstrates the effectiveness for Rapamycin and this in turn reassures
us that the development risk is not high. Meanwhile, as previously indicated the
medicine has the potential to generate annual revenues for AFT in excess of $100
million, assuming successful development.
NasoSURF
The development programme for NasoSURF, a nasal drug nebuliser, continues with
manufacture of engineering batches underway following the post Human Factor
Studies redesign undertaken last Financial Year. Class II filing is expected in the next
calendar year.
Market research had already identified that the NasoSURF project also represents a
significant commercial opportunity. We expect to make regulatory pharmaceutical
filings late in the 2021 financial year.
Australasian markets.
Following the divestment of some lower margin hospital products in the 2019 Financial
Year, AFT has focused on in-licensing new products to take advantage of the strong
growth potential we see in these markets.
We are targeting the introduction of new medicines, which are focused in eyecare,
pain and Hospital, over the next three years. Although this is coming at the expense of
upfront licensing and regulatory fees and additional staff costs, we believe the
medicines have the potential to lift revenues significantly in the next five years.
Meanwhile, as announced in October, we entered into a Memorandum of
Understanding with the Taupo-based SETEK to develop medical cannabis products for
the Australian and New Zealand markets and potentially global markets.
We believe that SETEK is an excellent partner. The cooperation will combine SETEK’s
skills in producing cost competitive, organically certified cannabis with our expertise in
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
product development and sales and marketing of pharmaceuticals. The costs to
achieve this goal will be modest as they can be integrated into our existing drug
commercialisation infrastructure.
Cash Flow and Balance Sheet
Total Assets of $83.2 million rose from $63.6 million at 31 March 2019 (referred to as PCP
for this section) primarily due to the recognition of the fair value of the Pascomer IP
assets and the right of use assets under the adoption of the new accounting standard
for leases.
Working Capital remained steady at $28.1 million (PCP $28.0) with the increase in
inventory to $26.8 million (PCP $25.2 million) and Receivables to $20.0 million (PCP $19.2
million) offset by a corresponding increase in payables to $18.7 million (PCP $16.4
million).
Cash holdings improved to $7.3 million (PCP $6.9 million) with the $6.1 million net cash
in flow from operating activities offset by $2.8 million net cash out for investing activities,
primarily capitalised development costs and $2.8 million net cash out for financing
costs.
The CRG structured term loan has been reduced to $30.8 million following a
refinancing of $15.0 million with a new BNZ facility. Both facilities mature on 31 March
2020 and we are well advanced in our negotiations with local banks for a new long-
term re -financing facility, with indicative term sheets having been provided.
We expect considerable finance cost savings from these initiatives in the coming year.
Our new facilities will attract interest rates significantly lower than 13.5% per annum
rate payable underthe CRG facility. Meanwhile, we intend to use our positive
cashflows to progressively reduce debt from the next financial year.
Outlook
As previously indicated, the timing of sales of Maxigesic in new territories remains
difficult to determine due to a multitude of differing regulatory requirements and
related timelines.
Additional launches are underway, and a significant number of new launch orders
have been booked and these will continue to build more significantly in the second
half of the 2020 financial year and beyond.
We continue to expect the combination of these sales, the one-off gain in the value
of our DSLP venture and careful management of expenditure will allow us to deliver
an operating profit for the year to 31 March 2020 of $18.8 million to $21.8 million.
For more information:
Investors: Media:
Malcolm Tubby (CFO) Richard Inder
AFT Pharmaceuticals Ltd The Project
Phone: +64 9 488 0232 Phone: +64 21 645 643
Email: malcolm@aftpharm.com
Email: richard@theproject.co.nz
AFT Pharmaceuticals Limited, Le vel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
Incorporated in New Zealand ARBN:
ARBN 609 017 969
About AFT
AFT is a growing multinational pharmaceutical business with a broad range of
products, both developed itself and in-licensed from third parties. AFT’s products
cover all major pharmaceutical distribution channels: over-the-counter, prescription
and hospital. Historically, AFT’s home markets have been Australia, New Zealand
and South-East Asia. However, the company is out-licensing its own products to
licensees and distributors to sell in an increasing number of countries around the
world. The company’s intensive Research and Development programme forms the
basis of its international sales strategy. For more information about the company, visit
our website www.aftpharm.com
.
---
Condensed
Consolidated Interim
Financial Statements
FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2019
Working to improve your health
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
2
This review report relates to the unaudited condensed consolidated interim financial statements of AFT Pharmaceuticals Limited for
the six months ended 30 September 2019 included on AFT Pharmaceuticals Limited’s website. The Board of Directors is responsible
for the maintenance and integrity of AFT Pharmaceuticals Limited website. We have not been engaged to report on the integrity of the
entity’s website. We accept no responsibility for any changes that may have occurred to the unaudited condensed consolidated interim
financial statements since they were initially presented on the website. The review report refers only to the unaudited condensed
consolidated interim financial statements named above. It does not provide an opinion on any other information which may have been
hyperlinked to/from these unaudited condensed consolidated interim financial statements. If readers of this report are concerned with
the inherent risks arising from electronic data communication they should refer to the published hard copy of the unaudited condensed
consolidated interim financial statements and related review report dated 21 November 2019 to confirm the information included in
the unaudited condensed consolidated interim financial statements presented on this website. Legislation in New Zealand governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
INDEPENDENT REVIEW REPORT
TO THE SHAREHOLDERS OF AFT PHARMACEUTICALS LIMITED
We have reviewed the condensed consolidated interim financial statements of AFT Pharmaceuticals
Limited and its subsidiaries (‘the Group’) which comprise the consolidated balance sheet as at 30
September 2019, and the consolidated income statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the
six months ended on that date, and a summary of significant accounting policies and other explanatory
information on pages 4 to 24.
This report is made solely to the company’s shareholders, as a body. Our review has been undertaken
so that we might state to the company’s shareholders those matters we are required to state to them
in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company’s shareholders as a body, for our
engagement, for this report, or for the opinions we have formed.
Board of Directors’ Responsibilities
The Board of Directors are responsible for the preparation and fair presentation of the condensed
consolidated interim financial statements, in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting and for such internal control as the Board of Directors
determine is necessary to enable the preparation and fair presentation of the condensed consolidated
interim financial statements that are free from material misstatement, whether due to fraud or error.
Our Responsibilities
Our responsibility is to express a conclusion on the condensed consolidated interim financial
statements based on our review. We conducted our review in accordance with NZ SRE 2410 Review of
Financial Statements Performed by the Independent Auditor of the Entity (‘NZ SRE 2410’). NZ SRE
2410 requires us to conclude whether anything has come to our attention that causes us to believe
that the condensed consolidated interim financial statements, taken as a whole, are not prepared, in all
material respects, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim
Financial Reporting. As the auditor of AFT Pharmaceuticals Limited, NZ SRE 2410 requires that we
comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is
a limited assurance engagement. The auditor performs procedures, primarily consisting of making
enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing (New Zealand). Accordingly we do
not express an audit opinion on these financial statements.
Other than in our capacity as auditor and the provision of taxation services, we have no relationship
with or interests in AFT Pharmaceuticals Limited or its subsidiaries. These services have not impaired
our independence as auditor of the Company and Group.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
consolidated interim financial statements of the Group do not present fairly, in all material respects,
the financial position of the Group as at 30 September 2019 and its financial performance and cash
flows for the six months ended on that date in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting.
This review report relates to the unaudited condensed consolidated interim financial statements of AFT Pharmaceuticals Limited for
the six months ended 30 September 2019 included on AFT Pharmaceuticals Limited’s website. The Board of Directors is responsible
for the maintenance and integrity of AFT Pharmaceuticals Limited website. We have not been engaged to report on the integrity of the
entity’s website. We accept no responsibility for any changes that may have occurred to the unaudited condensed consolidated interim
financial statements since they were initially presented on the website. The review report refers only to the unaudited condensed
consolidated interim financial statements named above. It does not provide an opinion on any other information which may have been
hyperlinked to/from these unaudited condensed consolidated interim financial statements. If readers of this report are concerned with
the inherent risks arising from electronic data communication they should refer to the published hard copy of the unaudited condensed
consolidated interim financial statements and related review report dated 21 November 2019 to confirm the information included in
the unaudited condensed consolidated interim financial statements presented on this website. Legislation in New Zealand governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
INDEPENDENT REVIEW REPORT
TO THE SHAREHOLDERS OF AFT PHARMACEUTICALS LIMITED
We have reviewed the condensed consolidated interim financial statements of AFT Pharmaceuticals
Limited and its subsidiaries (‘the Group’) which comprise the consolidated balance sheet as at 30
September 2019, and the consolidated income statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the
six months ended on that date, and a summary of significant accounting policies and other explanatory
information on pages 9 to 25 .
This report is made solely to the company’s shareholders, as a body. Our review has been undertaken
so that we might state to the company’s shareholders those matters we are required to state to them
in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company’s shareholders as a body, for our
engagement, for this report, or for the opinions we have formed.
Board of Directors’ Responsibilities
The Board of Directors are responsible for the preparation and fair presentation of the condensed
consolidated interim financial statements, in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting and for such internal control as the Board of Directors
determine is necessary to enable the preparation and fair presentation of the condensed consolidated
interim financial statements that are free from material misstatement, whether due to fraud or error.
Our Responsibilities
Our responsibility is to express a conclusion on the condensed consolidated interim financial
statements based on our review. We conducted our review in accordance with NZ SRE 2410 Review of
Financial Statements Performed by the Independent Auditor of the Entity (‘NZ SRE 2410’). NZ SRE
2410 requires us to conclude whether anything has come to our attention that causes us to believe
that the condensed consolidated interim financial statements, taken as a whole, are not prepared, in all
material respects, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim
Financial Reporting. As the auditor of AFT Pharmaceuticals Limited, NZ SRE 2410 requires that we
comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is
a limited assurance engagement. The auditor performs procedures, primarily consisting of making
enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing (New Zealand). Accordingly we do
not express an audit opinion on these financial statements.
Other than in our capacity as auditor and the provision of taxation services, we have no relationship
with or interests in AFT Pharmaceuticals Limited or its subsidiaries. These services have not impaired
our independence as auditor of the Company and Group.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
consolidated interim financial statements of the Group do not present fairly, in all material respects,
the financial position of the Group as at 30 September 2019 and its financial performance and cash
flows for the six months ended on that date in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting.
3
This review report relates to the unaudited condensed consolidated interim financial statements of AFT Pharmaceuticals Limited for
the six months ended 30 September 2019 included on AFT Pharmaceuticals Limited’s website. The Board of Directors is responsible
for the maintenance and integrity of AFT Pharmaceuticals Limited website. We have not been engaged to report on the integrity of the
entity’s website. We accept no responsibility for any changes that may have occurred to the unaudited condensed consolidated interim
financial statements since they were initially presented on the website. The review report refers only to the unaudited condensed
consolidated interim financial statements named above. It does not provide an opinion on any other information which may have been
hyperlinked to/from these unaudited condensed consolidated interim financial statements. If readers of this report are concerned with
the inherent risks arising from electronic data communication they should refer to the published hard copy of the unaudited condensed
consolidated interim financial statements and related review report dated 21 November 2019 to confirm the information included in
the unaudited condensed consolidated interim financial statements presented on this website. Legislation in New Zealand governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Material uncertainty related to going concern
We draw attention to the going concern disclosure in note 3 in the condensed consolidated interim
financial statements, which indicates there is a material uncertainty concerning the Group’s ability to
repay its existing interest bearing liabilities which mature on 31 March 2020. Note 3 sets out the
Group’s plans to repay these interest bearing liabilities through a combination of new financing,
generating sufficient operating cash flows and raising additional funds from issuing new shares if
necessary. As stated in note 3, these events or conditions, along with other matters as set forth in
note 3, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability
to continue as a going concern. Our opinion is not modified in respect of this matter.
Jason Stachurski, Partner
for Deloitte Limited
Auckland, New Zealand
21 November 2019
This review report relates to the unaudited condensed consolidated interim financial statements of AFT Pharmaceuticals Limited for
the six months ended 30 September 2019 included on AFT Pharmaceuticals Limited’s website. The Board of Directors is responsible
for the maintenance and integrity of AFT Pharmaceuticals Limited website. We have not been engaged to report on the integrity of the
entity’s website. We accept no responsibility for any changes that may have occurred to the unaudited condensed consolidated interim
financial statements since they were initially presented on the website. The review report refers only to the unaudited condensed
consolidated interim financial statements named above. It does not provide an opinion on any other information which may have been
hyperlinked to/from these unaudited condensed consolidated interim financial statements. If readers of this report are concerned with
the inherent risks arising from electronic data communication they should refer to the published hard copy of the unaudited condensed
consolidated interim financial statements and related review report dated 21 November 2019 to confirm the information included in
the unaudited condensed consolidated interim financial statements presented on this website. Legislation in New Zealand governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
INDEPENDENT REVIEW REPORT
TO THE SHAREHOLDERS OF AFT PHARMACEUTICALS LIMITED
We have reviewed the condensed consolidated interim financial statements of AFT Pharmaceuticals
Limited and its subsidiaries (‘the Group’) which comprise the consolidated balance sheet as at 30
September 2019, and the consolidated income statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the
six months ended on that date, and a summary of significant accounting policies and other explanatory
information on pages 9 to 25 .
This report is made solely to the company’s shareholders, as a body. Our review has been undertaken
so that we might state to the company’s shareholders those matters we are required to state to them
in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company’s shareholders as a body, for our
engagement, for this report, or for the opinions we have formed.
Board of Directors’ Responsibilities
The Board of Directors are responsible for the preparation and fair presentation of the condensed
consolidated interim financial statements, in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting and for such internal control as the Board of Directors
determine is necessary to enable the preparation and fair presentation of the condensed consolidated
interim financial statements that are free from material misstatement, whether due to fraud or error.
Our Responsibilities
Our responsibility is to express a conclusion on the condensed consolidated interim financial
statements based on our review. We conducted our review in accordance with NZ SRE 2410 Review of
Financial Statements Performed by the Independent Auditor of the Entity (‘NZ SRE 2410’). NZ SRE
2410 requires us to conclude whether anything has come to our attention that causes us to believe
that the condensed consolidated interim financial statements, taken as a whole, are not prepared, in all
material respects, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim
Financial Reporting. As the auditor of AFT Pharmaceuticals Limited, NZ SRE 2410 requires that we
comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is
a limited assurance engagement. The auditor performs procedures, primarily consisting of making
enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing (New Zealand). Accordingly we do
not express an audit opinion on these financial statements.
Other than in our capacity as auditor and the provision of taxation services, we have no relationship
with or interests in AFT Pharmaceuticals Limited or its subsidiaries. These services have not impaired
our independence as auditor of the Company and Group.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
consolidated interim financial statements of the Group do not present fairly, in all material respects,
the financial position of the Group as at 30 September 2019 and its financial performance and cash
flows for the six months ended on that date in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting.
DRAFT
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
4
Revenue
Cost of sales
Gross Profit
Other income
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Equity accounted loss of joint venture entity
Gain on derecognition of equity accounted investment and recognition
of net assets acquired at fair value in a step acquisition
Operating Profit/(Loss)
Finance income
Interest expense
Other finance costs
Profit/(Loss) before tax
Tax credit / (expense)
Profit/(Loss) after tax attributable to owners of the parent
Basic and diluted earnings/(loss) per share ($)
13
12
4
46,946
(25,598)
21,348
336
(12,938)
(4,536)
(223)
(81)
9,785
13,691
14
(3,425)
(369)
9,911
(5)
9,906
0.10
Unaudited
6 Mths Ended
30-Sep-19
$NZ000’sNote
Unaudited
6 Mths Ended
30-Sep-18
38,441
(20,292)
18,149
2,034
(14,234)
(3,489)
(2,225)
(344)
-
(109)
16
(2,481)
(1,690)
(4,264)
76
(4,188)
(0.04)
Consolidated Income Statement
For the Six Months Ended 30 September 2019
5
Profit/(Loss) after tax
Other comprehensive (loss)/income
May be subsequently reclassified to profit and loss:
Foreign currency translation reserve
Other comprehensive profit/(loss) for the period, net of tax
Total comprehensive profit/(loss) for the period
attributable to owners of the parent
9,906
(245)
(245)
9,661
Unaudited
6 Mths Ended
30-Sep-19
$NZ000’s
Unaudited
6 Mths Ended
30-Sep-18
(4,188)
(224)
(224)
(4,412)
Consolidated Statement of Comprehensive Income
For the Six Months Ended 30 September 2019
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
6
Balance as at 31 March 2018
Unaudited
Six months to 30 September 2018
Loss after tax
Other comprehensive loss
Movement in share options reserve
Preference dividends accumulated
Dividends paid and provided*
Balance as at 30 September 2018
Unaudited
Six months to 31 March 2019
Profit after tax
Other comprehensive income
Movement in share options reserve
Preference dividends accumulated
Dividends paid and provided*
Balance as at 31 March 2019
Unaudited
Six months to 30 September 2019
Profit after tax
Other comprehensive loss
Movement in share options reserve
Preference dividends accumulated
Dividends paid and provided*
Balance as at 30 September 2019
11
483
-
-
-
396
-
879
-
-
-
362
-
1,241
-
-
-
254
-
1,495
63,743
-
-
-
-
-
63,743
-
-
-
-
-
63,743
-
-
-
-
-
63,743
(57,644)
(4,188)
-
-
-
(457)
(62,289)
1,761
-
-
-
(478)
(61,006)
9,906
-
-
-
(492)
(51,592)
Share
capital
Share
options
reserve
Redeemable
preference
share
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
equity
$NZ000’sNote
330
-
(224)
-
-
-
106
-
325
-
-
-
431
-
(245)
-
-
-
186
430
-
-
91
-
-
521
-
-
161
-
-
682
-
-
68
-
-
750
7,342
(4,188)
(224)
91
396
(457)
2,960
1,761
325
161
362
(478)
5,091
9,906
(245)
68
254
(492)
14,582
Consolidated Statement of Changes in Equity
For the Six Months Ended 30 September 2019
* Dividends paid and provided relate to the Redeemable preference shares
7
ASSETS
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Right of use assets
Deferred income tax assets
Investment in joint venture entity
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Lease liabilities
Current income tax liability
Derivative liabilities
Interest bearing liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Interest bearing liabilities
Total liabilities
EQUITY
Share capital
Retained earnings/(losses)
Share options reserve
Redeemable preference share reserve
Foreign currency translation reserve
Total equity
Total liabilities and equity
Net tangible assets per ordinary share
14
4
5
12
14
8
8
9
26,835
19,998
7,308
665
54,806
350
23,410
3,954
710
-
28,424
83,230
16,071
2,602
534
-
-
45,808
65,015
3,633
-
68,648
63,743
(51,592)
750
1,495
186
14,582
83,230
($0.09)
Unaudited
As at
30-Sep-19
$NZ000’sNote
Audited
As at
31-Mar-19
Unaudited
As at
30-Sep-18
25,158
19,187
6,916
-
51,261
357
8,239
-
705
3,033
12,334
63,595
15,098
1,270
-
145
241
41,750
58,504
-
-
58,504
63,743
(61,006)
682
1,241
431
5,091
63,595
($0.03)
27,815
12,993
7,400
481
48,689
335
7,0 8 9
-
800
2,493
10,717
59,406
13,245
1,263
-
-
-
-
14,508
-
41,938
56,446
63,743
(62,289)
521
879
106
2,960
59,406
($0.04)
Consolidated Balance Sheet
As at 30 September 2019
For and on behalf of the Board who authorised these financial statements for issue on 21 November 2019
Hartley Atkinson
Managing Director and Chief Executive Officer
David Flacks
Chairman
DRAFT
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
8
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Tax paid
Net cash from/(used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment
Investment in Joint Venture
Investment in intangible assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Interest received
Interest and finance cost paid
Right of use lease interest paid
Right of use lease liability paid
Borrowings repaid
New Borrowings
Dividends paid
Net cash from/(used in) financing activities
Net increase/(decrease) in cash
Impact of foreign exchange on cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
11
12
5
5
5
8
8
10
46,833
(40,548)
(150)
6,135
(50)
-
(2,720)
(2,770)
14
(2,618)
(152)
(292)
(14,493)
15,000
(237)
(2,778)
587
(195)
6,916
7,308
Unaudited
6 Mths Ended
30-Sep-19
$NZ000’sNote
Unaudited
6 Mths Ended
30-Sep-18
44,621
(46,670)
(134)
(2,183)
(57)
(702)
(2,062)
(2,821)
16
(1,640)
-
-
-
7,417
-
5,793
789
(159)
6,770
7,400
Consolidated Statement of Cash Flows
For the Six Months Ended 30 September 2019
9
Notes to the Financial Statements
For the Six Months Ended 30 September 2019
1. GENERAL INFORMATION
AFT Pharmaceuticals Limited (the ‘Company’) is a company which is incorporated and domiciled in
New Zealand. It is registered under the Companies Act 1993. These financial statements comprise
AFT Pharmaceuticals Limited and its subsidiaries (together referred to as the Group). The Group is a
pharmaceutical distributor and developer of pharmaceutical intellectual property.
These condensed consolidated interim financial statements were approved by the Directors on 21
November 2019, and are not audited, but have been reviewed by Deloitte Limited in accordance with the
New Zealand Standard on Review Engagements 2410.
2. BASIS OF PREPARATION
These general purpose financial statements for the six months to 30 September 2019 have been prepared
in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with
NZ IAS 34 and IAS 34, Interim Financial Reporting. The Group is a for-profit entity for the purposes of
complying with NZ GAAP.
These condensed consolidated interim financial statements do not include all the notes normally included in
an annual financial report. Accordingly, this report should be read in conjunction with the audited financial
statements for the year ended 31 March 2019, which have been prepared in accordance with the New
Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial
Reporting Standards (IFRS).
The same accounting policies and methods of computation are followed in the condensed consolidated
financial statements as compared to the audited financial statements for the year ended 31 March 2019, as
described in those annual financial statements, with the exception of the treatment of lease contracts as
required under the adoption of NZ IFRS 16 Leases. Further detail is presented in note 5
3. GOING CONCERN ASSUMPTION
At 30 September 2019, the Group has an interest bearing loan from CRG of $30.8m ($41.8m at 31 March
2019), an interest bearing loan of $15.0m from Bank of New Zealand (BNZ) ($Nil at 31 March 2019) and
held a cash balance of $7.3m ($6.9m as at 31 March 2019). The movements in the CRG loan during the year
came from a repayment of $14.5m, capitalised interest of $0.7m and the balance from movement in foreign
currency exchange rates. The borrowing from BNZ was used for the principal repayment amount of the
CRG loan.
The Group generated an operating profit for the 6 months ended 30 September 2019 of $13.7m, (30
September 2018, loss of $0.1m) and a net operating cash inflow for the 6 months ended 30 September 2019
of $6.1m (30 September 2018, outflow of $2.2m).
The CRG and BNZ loans are due for repayment in full on 31 March 2020 (refer to note 8).
The Directors have a reasonable expectation that the Group will be in a position to repay these loans on or
before 31 March 2020 from a combination of positive operating cash flows, refinancing from debt market
sources and issuance of new equity, if required. Accordingly, the Directors have adopted the going concern
assumption for the purposes of the preparation of these financial statements. The directors are conscious
that their reasonable expectations are based on what they consider to be the likely outcomes of these
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
10
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
future events and for this reason they consider that a material uncertainly exists which may cast significant
doubt on the Group’s ability to continue as a going concern and therefore may result in the Group’s inability
to realise its assets and settle its liabilities in the normal course of business.
Positive operating cash flows
The Directors have approved internal forecasts for the 18 months through to 31 March 2021, considered
achievability of the assumptions under these forecasts, tested for sensitivity, reviewed the existing working
capital against Group requirements and considered forecast compliance with applicable and anticipated
debt covenants. The forecasts for both financial years 2020 and 2021 indicate the continuation of positive
operating cash flow surpluses and profit after tax. The key revenue assumptions, which like all assumptions,
are subject to a degree of uncertainty are:
-
T
he launch of Maxigesic into further new licensed markets. It is currently sold in 24 countries and
ther
e are currently confirmed orders for a further nine countries. It is licensed for 125+ countries.
-the continued sales growth for the Group’s range of products in Australia. Sales growth in Australia
for the six months ended 30 September 2019 was 19%.
In addition, the Group is confident of its ability to execute further licensing agreements and to generate
future international revenues for the key innovative products: Maxigesic, Pascomer and NasoSurf. Given the
uncertainty on the timing of these, they have not been included in the forecast assumptions other than for a
small amount of upfront license income for Maxigesic.
Refi
nancing from debt market sources
The Group expects to have a new long term facility in place with a local commercial bank prior to or on 31
March 2020 which, together with the positive operating cash flow surpluses, will enable full repayment of
the CRG & BNZ loans on 31 March 2020. The Group is currently in discussion with local commercial banks,
and has received indicative term sheets.
As an interim step towards this and in order to reduce the cost of interest, the Group on 21 May 2019
established a $15m interim facility, which matures on 31 March 2020, from the BNZ utilising the existing
security arrangements and has repaid $14.5m (US$9.5m) of the CRG loan, as noted above in discussing the
movements in the CRG loan.
Issuance of new equity
The Directors are con
fident that having raised capital most recently in May 2017, new capital could be
accessed through the Company’s listing on NZX and ASX, if required.
4. SIGNIFICANT TRANSACTIONS AND EVENTS FOR THE CURRENT PERIOD
The joint venture, Dermatology Specialties Limited Partner (“DSLP”), was originally formed in June 2015
for the development and commercialisation of the product, Pascomer, which uses the active ingredient
Rapamycin for the topical treatment of indications commencing with facial angiofibromas in tuberous
sclerosis. DSLP has been equity accounted prior to acquisition with the investment at 31 March 2019 being
carried at $3.0m.
GOING CONCERN ASSUMPTION (continued)
11
The Group acquired the remaining 50% of DSLP and its general partner DSGP Limited, from its joint venture
partner Tardimed Sciences LLC on 5 July 2019 and these have been fully consolidated from this date.
As a result of the transaction, the Group retained the rights to the intellectual property, future product sales
and royalties. Timber Pharmaceuticals LLC (“Timber”), of which Tardimed Sciences LLC is the shareholder,
acquired the North-American distribution rights. This transaction did not require any cash payment by the
Group.
The Group has also entered into an out-license agreement with Timber, under which the Group has received
revenues from the upfront milestone and expects to receive future revenues from development, registration
and commercial milestones as well as product sales and royalties.
The Group has engaged external independent valuers to assist in determining the fair value of the Pascomer
intellectual property. Taking into account the inherent uncertainties of both the successful conclusion of
clinical trials and the successful registration with orphan status, the Group has determined the provisional
fair value of the Pascomer intellectual property to be $12.5m.
The following provisional fair values have been recognised in the consolidated condensed interim financial
statements in respect of DSLP:
Intangible asset – Pascomer IP $12.5m
Inventory $0.3m
Trade marks $0.1m
Gain on derecognition of equity accounted investment and $9.8m
recognition of net assets acquired at fair value in a step acquisition
As a result of this transaction, intangible assets have increased by $12.5m. The remaining increase in
intangible assets relate to capitalised registration and development costs, patents and trademarks acquired
which are not connected with the transaction described above.
5. ADOPTION OF NEW AND REVISED STANDARDS
NZ IFRS 16: LEASES
General impact of the new NZ IFRS 16
NZ IFRS 16 provides a comprehensive model for the identification of lease arrangements and their
treatment in the financial statements for both lessors and lessees. NZ IFRS 16 supersedes the previous
lease guidance including NZ IAS 17 Leases and the related interpretations when it became effective for
accounting periods beginning on or after 1 January 2019. The date of initial application of NZ IFRS 16 for the
Group was 1 April 2019.
The Group has chosen not to adopt the full retrospective application of NZ IFRS 16 in accordance with NZ
IFRS 16:C5(a). Consequently, the Group will not restate the comparative information. For the adoption
of NZ IFRS 16 the Group has used practical expedients to not reassess whether a contract is, or contains,
a lease at the date of initial application. Also it made use of the practical expedient to not make any
adjustment on transition for leases for which the underlying assets are of low value.
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
12
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
SIGNIFICANT TRANSACTIONS AND EVENTS FOR THE CURRENT PERIOD (continued)
Impact of the new NZ IFRS 16 definition of a lease
The change in definition of a lease mainly relates to the concept of control. NZ IFRS 16 distinguishes
between leases and service contracts on the basis of whether the use of an identified asset is controlled by
the customer. Control is considered to exist if the customer has, throughout the period of use
– The right to obtain substantially all of the economic benefits from the use of an identified asset; and
– The right to direct the use of that asset.
Impact on Lessee Accounting
NZ IFRS 16 changes how the Group accounts for leases previously classified as operating leases under NZ
IAS 17, which were off-balance sheet.
At transition date, the Group recorded right-of-use assets of $4,119k (at balance date $3,954k) and lease
liabilities of $4,260k (at balance date $4,167), with the previously held lease incentive of $141k written off
against the right-of-use assets. There was no impact on retained earnings.
On initial application of NZ IFRS 16, for all leases (except as noted below), the Group has:
a) Recognised right-of-use assets and lease liabilities in the consolidated balance sheet, initially
measured at the present value of the future lease payments;
b) Recognised depreciation of right-of-use assets and interest on lease liabilities in the consolidated
income statement;
c) Separated the total amount of cash paid into a principal portion and interest, both presented within
financing activities in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) have been recognised as part of the measurement of the
right-of-use assets whereas under NZ IAS 17 they resulted in the recognition of a lease liability incentive,
amortised as a reduction of rental expenses on a straight-line basis.
Under NZ IFRS 16, right-of-use assets are tested for impairment in accordance with NZ IAS 36 Impairment
of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal
computers and office furniture), the Group has opted to recognise a lease expense on a straight-line basis
as permitted by NZ IFRS 16. This expense is presented within general and administrative expenses in the
consolidated income statement.
13
Impact on income statement
Impact on profit (loss) for the period
Increase/(decrease) in general and administration expenses
Increase/(decrease) in interest expense
Increase (decrease) in profit for the year
Impact on earnings per share
Basic
Diluted
$NZ000’s
Unaudited 6
months ended
30-Sep-19
(80)
152
(72)
-
-
The table below shows the amount of adjustment for each financial statement line item affected by the
application of NZ IFRS 16 for the current reporting period.
The application of NZ IFRS 16 has an impact on the consolidated statement of cash flows of the Group.
Under NZ IFRS 16:
• Payments for short-term leases and leases of low-value assets and variable leases payments not
included in the measurement of the lease liability have been included in payments to suppliers and
employees within the operating activities.
• Cash payments for the interest portion of lease liability are included as part of financing activities.
• Cash payments for the principal portion of lease liability are included as part of financing activities.
Under NZ IAS 17, all lease payments for operating leases were presented as part of cash flows from
operating activities. Consequently, the net cash generated by operating activities has increased by
$444,000 and net cash used in financing activities has increased by the same amount.
AFT have examined its current borrowing structure and taken into account both current and forecast
economic conditions, costs of capital and a premium for its risk profile. This has resulted in differing
Incremental borrowing rates (IBR) for premises and other leases, and different rates in NZ and AU, as per
the following table:
NZ – Buildings – 7.00%
NZ – Vehicles and equipment – 8.00%
AU – Buildings – 7.30%
AU – Vehicles and equipment – 8.50%
These IBR were used by the Group to calculate the lease liability at the date of initial application. The
Group used different rates due to the difference in nature of the assets and their geographic location. The
weighted average incremental borrowing rate is 7.27%.
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
14
SIGNIFICANT TRANSACTIONS AND EVENTS FOR THE CURRENT PERIOD
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
The Group has used the practical expedient of applying a single discount rate to a portfolio of assets in
each country where it holds right-of-use assets. In determining the discount rate to use, Management
reviewed publicly available rates for Government bonds, BNZ Swap rates and Treasury risk free discount
rates and then applied an adjustment to these rates to allow for a company specific credit risk. The Group
does not consider any of its leases to be onerous.
At 31 March 2019, AFT disclosed lease commitments of $3,243,000. As at 1 April 2019, the value of leases
discounted at the incremental borrowing rate at the date of initial application was $4,119,000. The IFRS
inclusion of likely future lease renewals has impacted due to a longer lease being envisaged.
6. SIGNIFICANT ACCOUNTING POLICIES
The Group as lessee
The following accounting policy has been adopted since 1 April 2019.
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group
recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements
in which it is the lessee, except for short term leases (leases less than 12 months duration), and leases of
low value assets. For these leases the group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily
determined the Group uses its incremental borrowing rate.
The lease liability is presented as a separate line in the consolidated balance sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the
lease liability (using the effective interest rate method) and by reducing the carrying amount to reflect the
lease payments made.
The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-
use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option,
in which case the lease liability is re-measured by discounting the revised lease payments using a
revised discount rate
• The lease payments change due to changes in an index or rate or a change in expected payment
under a guaranteed residual value, in which cases the lease liability is re-measured by discounting the
revised lease payments using the initial discount rate (unless the lease payments change due to a
change in a floating interest rate, in which case a revised discount rate is used)
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in
which case the lease liability is re-measured by discounting the revised lease payments using a revised
discount rate.
15
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site
on which it is located or restore the underlying asset to the condition required by the terms and conditions
of the lease, a provision is recognised and measured under NZ IAS 37. The costs are included in the related
right-of-use asset.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying
asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects
that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the
useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the balance sheet.
The Group applies NZ IAS 36 to determine whether a right-of-use asset is impaired and accounts for
any identified impairment loss as described in the “property, plant and equipment” policy in the financial
statements dated 31 March 2019.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease
liability and the right-of-use asset. The related payments are recognised as an expense in the period in
which the event or condition that triggers those payments occurs and are included in the line “general and
administrative expenses” in the income statement.
7. SEASONALITY OF OPERATIONS
The Group currently earns most of its incomes from the Australian and New Zealand markets.
Seasonal factors means that revenues and operating profits are expected to be higher in the second half,
than those of the first 6 months. In the financial year ended 31 March 2019, 45% of revenues accumulated in
the first half and 55% accumulated in the second half.
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
16
The repayment terms for all CRG facilities were amended in September 2017 to interest only until maturity,
and the principal to be repaid in full on 31 March 2020.
In May 2019, the Group entered a term loan agreement with BNZ for $15.0m, repayable on 31 March 2020.
This enabled the Group to repay $14.5m (US$9.5m) of the CRG principal owed.
The loans have a general security over the assets of the Group together with a group guarantee. Interest
is fixed at 13.5% p.a. on the CRG loan, and at base + margin for the BNZ loan which floats every renewal
period (generally two months). The CRG loans are denominated in United States dollars (USD) and during
the period NZ$2.876m was recognised as unrealised foreign exchange loss. The carrying amount of the
CRG loans are substantially in line with the fair market value as at balance sheet date. At 30 September
2019 the CRG loan balance owing was $30.808m (H1 FY2019 $41.938m).
9. SHARE CAPITAL
Ordinary shares
No ordinary or redeemable preference shares have been issued in the six months ended 30 September
2019.
Staff share options are exercisable at the price of $2.80 each, being the issue price of a share at the time of
the company’s initial listing on NZX and ASX. The vesting period is generally up to four years however this
varies according to various performance criteria. Other than in limited circumstances options are forfeited if
an employee leaves the group before the options vest. The options are valued at the grant date at fair value
as calculated independently using the Black Scholes model. The options vest over up to four years from
date of issue.
Redeemable preference shares
The redeemable preference shares, issued in March 2017, attract a dividend of 9.4% accruing quarterly,
which may be satisfied in cash either in full or in part or deferred indefinitely at the Company’s absolute
discretion.
They do not carry any right to vote except at meetings of an ‘interest group’ of holders of redeemable
shares.
They may be redeemed at the option of the Company at any time two years or more after issue. On
redemption, the Company would pay the issue price plus unpaid dividends accrued to the date of
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
8. INTEREST BEARING LIABILITIES
Bank of New Zealand
CRG (Capital Royalty Group) loans
Total
$NZ000’s
Unaudited
As at
30-Sep-18
Audited
As at
31-Mar-19
Unaudited
As at
30-Sep-19
-
41,938
41,938
-
41,750
41,750
15,000
30,808
45,808
17
redemption. The redemption can only be settled in cash.
After three years from issue, they may be converted to ordinary shares at the option of the holder in
multiples of 100,000. The holder would receive one ordinary share for every redeemable share held and a
number of ordinary shares calculated by dividing the amount of any accumulated dividends by the issue
price. Conversion of the redeemable preference shares may only be settled through the issuance of shares.
Once the holder has elected to convert, neither the issuer nor the holder can be obligated to settle in any
other manner.
10. DIVIDENDS PAID
Ordinary shares
No dividends have been paid or declared for the ordinary shares.
Redeemable preference shares
The redeemable preference shares issued on 24 March 2017 attract a dividend rate of 9.4% per annum, or
25.8 cents per share per annum and fall due on a quarterly basis. For the 30 June 2019 and 30 September
2019 quarter ends, a total of $237,310 of dividends were paid (inclusive of withholding taxes) and $254,716
has been accumulated in the Redeemable Preference Share Reserve.
11. RECONCILIATION OF LOSS AFTER TAX WITH NET CASH FLOW FROM OPERATING
ACTIVITIES
Profit/(Loss) after tax
Non-cash items:
Depreciation
Amortisation
Impact of Foreign Exchange on cash and cash equivalents
Share options expense
Interest and finance expenses
Unrealised FX (gains) / losses
Share of JV Loss
Gain on derecognition of equity accounted investment
and recognition of net assets acquired at fair value in a step acquisition
Interest income
Movement in working capital:
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash from/(used in) operating activities
9,906
417
109
195
68
3,425
2,824
81
(9,785)
(14)
(1,678)
(1,477)
2,063
6,134
Unaudited
As at
30-Sep-19
$NZ000’s
Unaudited
As at
30-Sep-18
(4,188)
51
90
159
91
2,470
2,236
344
-
(16)
(3,404)
3,996
(4,014)
(2,183)
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
18
12. INVESTMENT IN JOINT VENTURE PARTNERSHIP
Interest in joint venture company at cost
Equity accounted earnings of joint venture partnership
Net equity investment in joint venture partnership
Balance at start of period
Investment during the period
Share of current period loss
Derecognition on acquisition of controlling interest
Balance at end of period
Dermatology Specialties LP
Principal activities: Development and distribution of pharmaceuticals
Dermatology Specialties LP was incorporated on 22 June 2015. Movements in investment in the joint
venture partnership during the 6 months comprise:
-
-
-
3,033
(81)
(2,952)
-
100%
Unaudited
As at
30-Sep-19
% Interest Held
$NZ000’s
Unaudited
As at
30-Sep-18
% Interest Held
5,046
(2,553)
2,493
2,135
702
(344)
-
2,493
50%
The joint venture partnership of the Group and its activities are as follows:
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
19
Unaudited
Sep-19
Revenue – sale of goods
Revenue – royalty income
Revenue - licensing
Revenue
Other income
Depreciation and amortisation
Equity accounted loss of joint venture entity
Gain on derecognition of equity accounted
investment and recognition of net assets
acquired at fair value in a step acquisition
Operating profit/(loss)
Finance income
Interest expense
Other gains/(losses)
Gain / (Loss) before tax
Total Assets
Property, plant and equipment
Intangible assets
RTU assets
Investment in joint venture entity
Capital expenditure
Unaudited
Sep-18
Revenue – sale of goods
Revenue – royalty income
Revenue - licensing
Revenue
Other income
Depreciation and amortisation
Equity accounted loss of joint venture entity
Operating profit/(loss)
Finance income
Interest expense
Other gains/(losses)
Gain / (Loss) before tax
Total Assets
Property, plant and equipment
Intangible assets
Investment in joint venture entity
Capital expenditure
2,369
-
-
2,369
-
(2)
-
-
98
-
-
102
200
215
13
-
-
-
3
1,118
-
-
1,118
-
(3)
-
(187)
-
-
35
(152)
96
15
-
-
-
13,691
-
-
13,691
142
(292)
-
-
1,651
14
(3,382)
273
(1,444)
47,558
291
10,910
2,868
-
2,760
12,566
-
-
12,566
-
(128)
-
881
16
(2,481)
(1,278)
(2,862)
33,158
269
7,089
-
2,098
25,697
-
-
25,697
-
(232)
-
-
1,861
-
(43)
(744)
1,074
22,957
46
-
1,086
-
7
21,601
-
-
21,601
1,860
(10)
-
(72)
-
-
(447)
(519)
23,659
51
-
-
21
Southeast
Asia
New ZealandAustralia
$NZ000’s
Rest of WorldTOTAL
2,533
124
2,532
5,189
194
-
(80)
9,784
10,081
-
-
-
10,081
12,500
-
12,500
-
-
-
2,659
101
396
3,156
174
-
(344)
(731)
-
-
-
(731)
2,493
-
-
2,493
-
44,290
124
2,532
46,946
336
(526)
(80)
9,784
13,691
14
(3,425)
(369)
9,911
83,230
350
23,410
3,954
-
2,770
37,944
101
396
38,441
2,034
(141)
(344)
(109)
16
(2,481)
(1,690)
(4,264)
59,406
335
7,089
2,493
2,119
13. OPERATING SEGMENTS
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
20
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
14. FINANCIAL RISK MANAGEMENT
(a) Managing financial risk
The Group’s activities expose it to various financial risks as detailed below.
• Market risk
Management is of the opinion that the Group’s exposure to market risk at balance date is defined as:
Risk Factor Description Sensitivity
(i) Foreign exchange risk Exposure to changes in foreign exchange rates on
assets and liabilities of the subsidiary, and
USD denominated borrowings As below
(ii) Interest rate risk Exposure to changes in interest rates on borrowings As below
(iii) Other price risk No commodity securities are bought, sold or traded Nil
• Foreign exchange risk
The Group benefits from the use of derivative financial instruments to manage foreign currency exposures.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates at
period end and the contract exchange rates, considered level 2 of the fair value hierarchy.
The Group purchases goods and services from overseas suppliers in a number of currencies, primarily
AUD, USD, EUR and GBP and has borrowings that are denominated in US dollar amounts. This exposes
the Group to foreign currency risk. The Group manages foreign currency risk through use of derivative
arrangements, in particular forward exchange contracts. The exposure is monitored on a regular basis based
on Group foreign exchange policies. Future revenues from markets outside Australasia will be denominated
primarily in USD and EUR which will provide a natural hedge against these costs.
In the current period for the six months to 30 September 2019 (H1 FY2020) net foreign exchange losses
totaled $368,637 (H1 FY2019: $1,700,357 gain) of which $2,875,747 (H1 FY2019: $3,063,766 gain) were
unrealised losses on the USD denominated CRG loan. Future revenues derived in USD and EUR will be used
towards repaying this debt as it falls due. The balance of the gains/losses are derived from the restatement
of the cash balances at the spot rate on the period end balance date of 30 September 2019 and the change
in spot rates during the time between when expenses are recorded in the general ledger and when they are
paid.
In total, the group had assets and liabilities denominated in the following currencies, as at 30 September
2019:
Assets NZD$’000 Currency Liabilities NZD$’000
8,771 AUD 2,009
4,768 USD 32,169
700 MYR 1
1,618 SGD 227
1,095 EUR 1,707
- GBP 128
21
The following forward foreign exchange contracts were held at 30 September 2019:
The following forward foreign exchange contracts were held at 31 March 2019:
The following forward foreign exchange contracts were held at 30 September 2018:
All contracts mature within one year from 30 September 2018.
Buy Currency
EUR
GBP
USD
Buy Currency
EUR
GBP
USD
Buy Currency
EUR
GBP
USD
Sell Currency
AUD
Buy Currency
Amount (‘000)
3,665
252
6,590
Buy Currency
Amount (‘000)
3,300
155
4,205
Buy Currency
Amount (‘000)
2,250
123
3,070
Sell Currency
Amount (‘000)
2,000
Sell Amount
NZD (‘000)
6,372
486
9,304
Sell Amount
NZD (‘000)
5,735
302
6,192
Sell Amount
NZD (‘000)
3,886
239
4,250
Buy Amount
NZD (‘000)
2,224
Fair Value
NZD (‘000)
70
10
585
Fair Value
NZD (‘000)
(228)
(3)
(10)
Fair Value
NZD (‘000)
115
5
320
Fair Value
NZD (‘000)
41
Mark to Market 30/9/19
Sell amount NZD (‘000)
6,302
476
8,719
Mark to Market 31/3/19
Sell amount NZD (‘000)
5,963
305
6,202
Mark to Market 30/9/18
Sell amount NZD (‘000)
3,771
234
3,930
Mark to Market 30/9/18
Sell amount NZD (‘000)
2,265
Total benefit as at 30 September 2019: 665
Total liability as at 31 March 2019: (241)
Total benefit as at 30 September 2018: 481
All contracts mature within one year from 30 September 2019.
All contracts mature within one year from 31 March 2019.
Forward Foreign Exchange Contracts
Forward Foreign Exchange Contracts
Forward Foreign Exchange Contracts
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
22
Liquidity profile
• Interest rate risk
USD borrowings are at a fixed interest rate, which exposes the Group to fair value interest rate risk. There
are no specific derivative arrangements to manage this risk. The BNZ loan is priced at base + margin which
floats every renewal period (generally two months).
• Credit risk
Financial instruments, which potentially subject the Group to credit risk, principally consist of accounts
receivable. Regular monitoring is undertaken to ensure that the credit exposure remains within the Group’s
normal terms of trade.
The Group has one significant concentration of credit risk at 30 September 2019 with the largest debtor
being $2,966,000 (H1 FY 2019: $3,604,000). There has been no past experience of default and no
indications of default in relation to this debtor.
The Group’s cash and short-term deposits are placed with high credit quality financial institutions.
Accordingly, the Group has no significant concentration of credit risk other than bank deposits, with 4.3%
of total assets at the Bank of New Zealand (H1 FY2019: 11.4%), 4.3% at NAB Bank (H1 FY2019: 1.1%). The
carrying value of financial assets represents the maximum exposure to credit risk.
• Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulty in raising funds at short notice to meet
its commitments and arises from the need to borrow funds for working capital. The directors monitor the
risk on a regular basis and actively manage the cash available to ensure the net exposure to liquidity risk is
minimised.
The liquidity/maturity profile of the liabilities is as follows:
30 September 2019
Trade and other payables
Lease liabilities
Borrowings (including interest)
Derivative instruments (outbound)
Derivative instruments (inbound)
Totals
30 September 2018
Trade and other payables
Borrowings (including interest)
Derivative instruments (outbound)
Derivative instruments (inbound)
Totals
< 1 year
$000
(18,673)
(534)
(47,640)
(16,162)
16,827
(66,182)
$000
(14,508)
(3,785)
(8,375)
8,815
(16,590)
1-2 years
$000
-
(438)
-
-
-
(438)
$000
-
(48,776)
-
-
(48,776)
2-5 years
$000
-
(1,065)
-
-
-
(1,065)
$000
-
-
-
-
-
> 5 years
$000
-
(2,130)
-
-
-
(2,130)
$000
-
-
-
-
-
TOTAL
$000
(18,673)
(4,167)
(47,640)
(16,162)
16,827
(69,815)
$000
(14,508)
(52,561)
(8,375)
8,815
(65,366)
(b) Fair Values
The carrying value of financial assets and liabilities (trade receivables and trade payables) approximates
their fair value. Trade receivables are valued net of provision and trade payables are valued at their origi-
nal amounts by contract.
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
FINANCIAL RISK MANAGEMENT (continued)
23
15. RELATED PARTIES
The Group had related party relationships with the following entities:
Related party Nature of relationship
CRG (Capital Royalty Group) Shareholder of both ordinary and redeemable preference shares
Atkinson Family Trust Shareholder of both ordinary and redeemable preference shares
The following transactions were carried out with these related parties:
(i) Loans
(iv) Key management compensation
CRG 8 30,808 41,750 41,938
Total loan balances 30,808 41,750 41,938
(ii) Interest expense
CRG
8 2,803 5,238 2,481
(iii) Dividends on redeemable preference shares
CRG 383 726 356
Atkinson Family Trust 108 209 101
Directors fees 146 292 146
Executive salaries 551 1,078 540
Short term benefits 230 190 187
Share Options Expense 16 126 15
Key management compensation 943 1,686 888
Unaudited
As at
30-Sep-19
Unaudited
As at
30-Sep-19
$NZ000’s
$NZ000’s
Note
Audited
As at
31-Mar-19
Audited
As at
31-Mar-19
Unaudited
As at
30-Sep-18
Unaudited
As at
30-Sep-18
Key management includes external Directors, the Chief Executive Officer, the Chief of Staff, the Chief
Financial Officer and the Director of International Business Development. These positions are mainly
responsible for planning, controlling and directing the activities of the business. The Chief of Staff is the
spouse of the Chief Executive Officer.
16. CONTINGENT LIABILITIES
In May 2015, AFT Pharmaceuticals Ltd signed as guarantor of AFT Pharmaceuticals Pty Ltd for its 5-year
lease contract for the premises occupied in Sydney, Australia. AFT Pharmaceuticals Pty Ltd has placed
AU$75,000 on term deposit with NAB in favour of the landlord of the business premises to support this
guarantee. The company has placed NZ$75,000 on term deposit with the BNZ. This sum is security for a
guarantee issued by the BNZ in favour of the NZX, should the company ever default on any of its payment
obligations to NZX.
AFT PHARMACEUTICALS LIMITED
Condensed Consolidated Interim Financial Statements
24
17. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 September 2019 (31 March 2019: nil: 30 September 2018: nil).
18. SUBSEQUENT EVENTS
There were no material events occurring after balance date and before the date of approval of the financial
statements requiring recognition or disclosure.
Notes to the Financial Statements (continued)
For the Six Months Ended 30 September 2019
---
Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 8 May 2019
Results for announcement to the market
AFT Pharmaceuticals Limited
Reporting Period 6 months to September 30 2019
Previous Reporting Period 6 months to September 30 2018
Currency NZ$
Amount (000s) Percentage change
Revenue from continuing
operations
$46,946 Up 22%
Total Revenue $46,946 Up 22%
Net profit/(loss) from continuing
operations
$13,691 Up ++%
Total net profit/(loss) $13,691 Up ++%
Interim/Final Dividend
Amount per Quoted Equity
Security
Unlisted redeemable preference shares NZ 3.5c
Imputed amount per Quoted
Equity Security
Unlisted redeemable preference shares NZ 0.0c
Record Date 14 September 2019
Dividend Payment Date 30 September 2019
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$(0.09) $(0.04)
A brief explanation of any of the
figures above necessary to
enable the figures to be
understood
Accompanying this announcement are the Group’s unaudited
consolidated financial statements for the six months ended
September 30 2019. These financial statements and the half
year results commentary dated November 21 2019 provide
the balance of information requirements in accordance with
NZX Listing Rule 3.5 and Appendix 2.
Pursuant to ASX listing rule 1.15.3 AFT Pharmaceuticals
Limited confirms that it continues to comply with the rules of
its home exchange (NZX Main Board).
The unlisted Redeemable preference shares issued on
March 24 2017 attract a dividend rate of 9.4% per annum, or
25.8 cents per share per annum. For the 30 June 2019
quarter end no dividends were paid. For the 30 September
2019 quarter end 50% of the dividend was paid in cash and
included in the above table. The remaining 50% of dividends
net of withholding taxes for the 30 September 2019 quarter
end together with all of the dividends net of withholding taxes
for the 30 June 2019 quarter end have been accumulated in
the Redeemable Preference Share Reserve.
No dividends have been paid on ordinary shares.
Authority for this announcement
Name of person
authorised to
make this announcement
Malcolm Tubby
Contact person for this
announcement
Malcolm Tubby, Chief Financial Officer,
AFT Pharmaceuticals Ltd
Contact phone number +64 9 488 0232
Contact email address malcolm@aftpharm.com
Date of release through MAP
21 November 2019
Audited financial statements accompany this announcement.
---
Working to improve yourhealth
INVESTOR PRESENTATION NOVEMBER2019
INVESTOR
PRESENTATION
NOVEMBER
2019
ImportantNotice
2
This presentation has been prepared by AFT Pharmaceuticals Limited (“AFT”), to provide a general overview of A F T. It is
not prepared for any other purpose and must not be provided to any person other than the intended recipient.
All amounts are disclosed in New Zealand dollars (NZ$) unless otherwise indicated. All references to FY20XX appearing in
this presentation are to the financial year ending 31 March, unless otherwise indicated.
This presentation is not a recommendation or other form of financial advice. While reasonable care has been taken in
compiling this presentation, none of AFT nor its subsidiaries, directors, employees, agents or advisers (to the maximum
extent permitted by law) gives any warranty or representation (express or implied) of the accuracy, completeness or
reliability of the information contained in it nor takes any responsibility for it. The information in this presentation has not
been and will not be independently verified or audited.
This presentation may contain certain forward-looking statements and comments about future events, including with respect
to the financial condition, results, operations and business of A F T. These statements are based on management’s current
expectations and the actual events or results may differ materially and adversely from these expectations. Recipients are
cautioned not to place undue reliance on forward-lookingstatements.
Past performance information given in this presentation is given for illustrative purposes only and should not be relied
upon (and is not) an indication of future performance.
INVESTOR
PRESENTATION
NOVEMBER
2019
H1 FY 2020Highlights
44
countries Maxigesic registeredin
24
countries Maxigesic soldin
$46.9m
operating revenueforH1 FY2020
$13.7m
operating profit for H1 FY2020
$7.3m
available cash as at 31 September2019 – up from 6.9m end ofFY2019
3
INVESTOR
PRESENTATION
NOVEMBER
2019
RevenueGrowth
4
-
5.0
10.0
15.0
20.0
25.0
$ m
FY2019 Interim
-
10.0
20.0
30.0
40.0
50.0
$ m
FY2019 Annual
-
5.0
10.0
15.0
20.0
25.0
$ m
FY2020 Interim
19% 9%64%112%
AustraliaNew ZealandRest of WorldSoutheast Asia
2.5%
6.9%
31.5%
59.1%
FY2019 Annual
2.9%
8.2%
32.7%
56.2%
FY2019 Interim
5.0%
11.1%
29.2%
54.7%
FY2020 Interim
INVESTOR
PRESENTATION
NOVEMBER
2019
Financial performance - Revenue by region and
channel
Overthecounter
AustraliaNewZealandRest ofWorldSoutheastAsia
5
10.2%
29.5%
60.3%
31.9%
14.2%
53.9%
29.5%
1.4%
69.1%
10.2%
88.4%
1.4%
Hospital
Prescription
NZ$000's
H1
FY2018
% of
total
H1
FY2019
% of
total
H1
FY2020
% of
total
Australia20,206 55.3%21,601 56.2%25,697 54.7%
YoY growth37.9% 6.9% 19.0%
New Zealand14,113 38.6%12,566
32.7%13,691
29.2%
YoY growth4.6% -11.0% 9.0%
Rest of World1,624 4.4%
3,156
8.2%5,189
11.1%
YoY growth48.0% 94.3% 64.4%
Southeast Asia618
1.7%1,118 2.9%2,369
5.0%
YoY growth14.0% 80.9% 111.9%
Total Operating Revenue36,561 100%38,441 100%46,946 100.0%
YoY growth22.8% 5.1% 22.1%
INVESTOR
PRESENTATION
NOVEMBER
2019
6
Consolidated Income
Statement
NZ$'000's Half Year to 30 September
H1
% ofH1
% of
FY2020revenueFY2019revenue
Revenue46,946 38,441
Cost of Sales
(25,598) 54.5%
(20,292) 52.8%
Gross Profit21,348 45.5% 18,149 47.2%
Other Income336 0.7%
2,034 5.3%
Selling and distribution expenses
(12,938) 27.6% (14,234) 37.0%
General and administrative expenses(4,536)
9.7% (3,489)
9.1%
Research and development expenses(223) 0.5% (2,225)
5.8%
Equity accounted loss of joint venture entity(81) 0.2%
(344) 0.9%
Gain on derecognition of equity accounted investment and
9,785 20.8% -
0.0%
recognition of net assets acquired at fair value in a step acquisition
Operating Profit / (Loss)13,691 (109)
Finance Income14
16
Finance Costs(3,425) (2,481)
Other gains / (Losses)(369) (1,690)
Profit / (Loss) before tax9,911 (4,264)
Tax benefit/(expense)(5) 76
Profit / (Loss) after tax9,906 (4,188)
INVESTOR
PRESENTATION
NOVEMBER
2019
Abbreviated BalanceSheet
7
UnauditedAuditedUnaudited
NZ$'000's 30 Sept '19
31 March '19
30 Sept '18
ASSETS
Current Assets
Inventories
26,835 25,158 27,815
Trade and other receivables19,998 19,187 12,993
Cash and cash equiv alents7,308 6,916 7,400
Derivative assets665 - 481
Total current assets54,806 51,261 48,689
Non-current Assets
Property, plant and equipment350 357 335
Intangible assets23,410 8,239 7,089
Right of use & deferred income tax assets4,664 705 800
Investment in joint venture entity - 3,033 2,493
Total assets83,230 63,595 59,406
LIABILITIES
Current liabilities
Current liabilities19,207 16,754 14,508
Interest bearing liabilities45,808 41,750 -
Total current liabilities65,015 58,504 14,508
Non-current liabilities
Lease liabilities3,633 - -
Interest bearing liabilities - - 41,938
Total liabilities68,648 58,504 56,446
Equity
Share Capital63,743 63,743 63,743
Retained earnings(51,592) (61,006) (62,289)
Reserves2,431 2,354 1,506
Total equity14,582 5,091 2,960
Total liabilities and equity83,230 63,595 59,406
INVESTOR
PRESENTATION
NOVEMBER
2019
Cashflow
8
NZ$'000's Half Year to 30 September
H1
FY2020
H1
FY2019
Net cash from / (used in) operating activities
6,135 (2,183)
Net cash used in investing activities(2,770) (2,821)
Net cash from / (used in) financing activities(2,778) 5,793
Net increase in cash587 789
Impact of foreign exchange on cash and cash equivalents(195) (159)
Opening cash and cash equivalents6,916
6,770
Closing cash and cash equivalents7,308 7,400
INVESTOR
PRESENTATION
NOVEMBER
2019
Operating profit progress
NZ$ million
9
(15)
(10)
(5)
-
5
10
15
20
25
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
INVESTOR
PRESENTATION
NOVEMBER
2019
Maxigesic Tablets registered across all ofEU
oFirst Maxigesic IV registrations successfully
completed in 2019 [AU & NZ]
oMaxigesic Oral Liquid filingscompletedin
first countries - 23countries
Maxigesic Hot Drink Sachets regulatory filings
to commenceDecember 2019
Maxigesic Rapid formulation completed successfully .
First filing in 2020 calendar year
Maxigesic Cold & Flu new development underway.
First filing to occur early 2020
Pascomer first large global multicenter studywell
underway– US, AU, NZ, Europe
NasoSURF redesigncompleted May 2019
following Human FactorStudi
es. Engineering
batches under manufacture
DevelopmentProgress
10
Launched
Launch P endin g
Available
Ireland– la u nched
UnitedKingd o m– la u nched
B elgiu m, L u x embourg&France -
launches pending Q12020
Spain&Portugal - launched April 2019
Nordics– la u nched
EasternEurope&Balkans
–
launchesearly 2020
Iraq– Kurdistanlaunched
UnitedArabEmirates -
salesgrowth still strong
Italy - successful launchand
salesgrowing still
Germany - R x licensedNov 2019
Switzerland- licensedMarch2019
B razil- licensing
negotiations
underway
Columbia,Peru,
C hile-
distributor
appointed
Mexico- launch
pending 2019
IVlicensed- launch2020
Licensing
discussions
starting for USA.
C anada
distributorto
b e appointed
CACM-
launched &
licensed
Aus tralia– sal esgrowing
s tronglypostcodeine
rescheduling.
No.#1Para- Ib uCombo
NewZealand–
increasingsales
andcodeine
rescheduling
confirmed.
Maxiges i c PE
launched
Singap o re&Brunei–launchedincludingOTC
LicensedinRussia
HongKonglaun ched2019
China- licensing negotiations underway
LicensedinTaiwan
Korea– licensingnegotiationsunderway
IVlicensed
Jap a n - licensingdiscu ssions
areunderw a y
In don esia-
IVn egotiations
underway
Pakista n-
d i s tributor
fo r MaxigesicIV
Malaysia– la u nched
Philipp ines– dis tributortobeappointed
MAXIGESICGLOBALUPDATE
[primaril y oral dose forms]
V ietnam-
distributor
appointed
for MaxigesicIV
INVESTOR
PRESENTATION
NOVEMBER
2019
Maxigesic Countries sold andordered
12
0
20
40
60
80
100
120
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Maxigesic around the world
Italy – RX
Launched April 15
Ireland – OTC
Launched July 18
UAE – OTC
Launched Jan 15
CACM- OTC
Launching July 18
Singapore/Malaysia
OTC launched June 18
Also sold in Brunei
Australia – OTC
Launched Feb 14
New Zealand – OTC
Launched Oct 09
Spain - OTC
Launched April 19
UK & Malta –OTC
Launched Nov 16
Israel – OTC
Launched Oct 17
Nordics – RX – 3 countries
Launched June 19
France - RX
Launching early 20
Portugal - OTC
Launched April 19
Eastern Europe (11 nations) -
OTC
Launching Early 20
Cyprus - OTC
Launching early 20
Belgium/Luxembourg
– RX
Launching early 2020
INVESTOR
PRESENTATION
NOVEMBER
2019
Maxigesic goingforward
ProductMaxigesicTabletsMaxigesicIVMaxigesic oralsolution
Territories202020192020201920202019
Licensed125+125+- %70683%122122-%
Registered44425%2-+++%--- %
Soldin242020%--- %--- %
14
INVESTOR
PRESENTATION
NOVEMBER
2019
Medium TermPlans
Further drive InternationalSales
- Keep acceleratingcountries launchedin
- Launchingnew line extensions [MaxigesicIV]
Extend InternationalLicensing
- Finaliselicensing agreement discussions in USA/Canada andL ATA M
- Finalise licensing agreement discussions in
previously unplanned Territories: China and Japan
- Additional new territories added – Chile,
Columbia, Germany, Pakistan, Peru, Vietnam
Drive Increased UpfrontPayments
- Maxigesic IV licensing agreements
- Larger territories such as USA, Japan,China
DriveLocal ANZ and SE Asia Sales
- Drive Maxigesic sales in AU &NZ
- New OTC launches in AU &NZ
- Double SE Asiasales. Presently 112%
Drive ImprovedFinancials
- Break-even in SEAsiaachieved 1H 20 and expected full year
- Profitprojectionson target
- Refinance to lower interest costs and repaydebt. Discussions on
target
- Maintain/improve Cash position
15
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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