RNS Number : 1691C
Hikma Pharmaceuticals Plc
28 August 2008
Hikma Pharmaceuticals PLC
Interim results announcement
for the six months to 30 June 2008
LONDON, 28 August 2008 - Hikma Pharmaceutical PLC ("Hikma") (LSE: HIK) (DIFX:HIK), the fast growing multinational pharmaceutical group
focused on developing, manufacturing and marketing a broad range of generic and in-licensed pharmaceutical products across the Middle East
and North Africa, the United States and Europe, today reports its Interim results for the six months ended 30 June 2008.
Group performance H1 2008($m) H1 2007 ($m) Change
Revenue 299.9 224.9 +33.4%
Operating profit 47.1 51.8 -9.0%
Adjusted operating profit 56.7 52.9 +7.2%
Profit attributable to shareholders 32.9 35.6 -7.6%
Adjusted profit attributable to shareholders 40.3 36.4 +10.7%
Diluted earnings per share (cents) 17.0 20.2 -15.8%
Adjusted diluted earnings per share (cents) 20.8 20.7 +0.5%
Dividend per share (cents) 3.5 3.5 +0.0%
* Group revenues up 33.4% to $299.9 million
* Adjusted profit attributable to shareholders up 10.7% to $40.3 million
* Maintained a dividend payout ratio of 20% with a declared interim dividend of 3.5 cents per share
* Branded revenues up 68% with organic sales growth of 22.3%
* Strong revenue growth and margin expansion at Arab Pharmaceutical Manufacturing ("APM") and Hikma Egypt
* Injectables revenues up by 34.3% driven by strong organic growth of 17.9% and recent acquisitions
* Lower revenues and significant margin erosion in our Generics business due to the difficult trading environment, severe price
competition and revisions to our estimates for chargebacks, rebates and returns
* Launched 87 products across the Group, including 9 new products, and, in August, signed 2 new in-licensing agreements for the MENA
region
* Raised gross proceeds of �81.6 million (approximately $160 million) in an equity placing of shares to finance the acquisition of
APM
Said Darwazah, Chief Executive of Hikma, said:
"Despite the challenges posed by our Generics business, we have delivered a robust set of financial results for the first half of 2008.
Our Branded and Injectables businesses are both performing extremely well, driven by a combination of consistent organic revenue growth and
recent acquisitions.
The outlook for revenue growth in the Branded and Injectables businesses in the second half of 2008 remains strong. We are on track to
deliver continued sales growth across MENA, expand our portfolio of own-brand and in-licensed products and develop our global injectables
business. We are also working hard to improve the financial performance in our Generics business. Our strategy remains firmly in place - to
consolidate further in the MENA pharmaceutical market and to build Hikma into a leading specialty pharmaceuticals company."
Enquiries:
Hikma Pharmaceuticals PLC
Said Darwazah, Chief Executive Officer
Bassam Kanaan, Chief Financial Officer
Susan Ringdal, Investor Relations Director Tel: +44 (0)20 7399 2760
Brunswick Group
Jon Coles / Justine McIlroy Tel: +44 (0)20 7404 5959
Hikma Pharmaceuticals PLC is a fast growing multinational group focused on developing, manufacturing and marketing a broad range of both
branded and non-branded generic and in-licensed pharmaceutical products. Hikma's operations are conducted through three businesses:
"Branded", "Injectables" and "Generics". Hikma's operations are based principally in the Middle East and North Africa ("MENA") region, where
it is a market leader and sells across 17 countries, the United States and Europe. In 2007, the Group achieved revenues of $449 million and
profit attributable to shareholders was $63 million. For news and other information, please visit www.hikma.com.
Chief executive's statement
In the first half of 2008 Hikma has continued its strong growth trajectory, with Group revenues increasing by 33.4% resulting from
consistent organic revenue growth in our Branded and Injectables businesses and the benefits of our recent acquisitions in Egypt and Jordan.
Our diversified business model operates across 40 countries in four continents with a product mix spanning branded, un-branded and
injectable generic products as well as a growing portfolio of high margin in-licensed products from originator companies. This business
model has seen us deliver robust Group revenue growth despite declining sales in our Generics business. We have implemented some further
management changes in this business and are working hard to improve its financial performance going forward.
We began this year by closing a successful $160.3 million placing to finance our acquisition of APM, which was oversubscribed and well
received by the market. In today's uncertain macro-economic environment, this placing has helped us retain balance sheet flexibility to
finance future growth in the business.
Our Branded business is now our largest division by sales and we continue to see excellent growth, driven by favourable market
demographics across the MENA region. In the first half of 2008 we delivered revenue growth of 68% through a combination of organic growth
and the contribution from recent acquisitions. Organic revenue growth of 22.3% demonstrates the strength of the underlying business,
particularly in markets like Jordan, Saudi Arabia and the other Gulf Countries. We have substantially completed the integration of APM and
Hikma Egypt and both of these businesses are performing ahead of our expectations. I am very proud to say that Hikma has grown to be the 5th
largest pharmaceutical company in the MENA region.
Our ever-increasing portfolio of in-licensed originator products is making a very positive contribution to sales across MENA, in line
with our strategy of developing this aspect of our business. These products now account for 35.5% of revenues in the division. The licensed
products from Takeda acquired as part of the APM acquisition, which include Actos� and Blopress� performed particularly well with sales
increasing by 78%.
Our global Injectables business, now our second largest division, saw sales grow across all countries in MENA benefiting from targeted
sales and marketing efforts. We were able to achieve double digit growth in Europe despite increasing competition in the German market and
we continue to gain momentum in the US market as we grow our product portfolio and increase sales volumes.
As recently announced, our Generics business experienced difficult trading conditions in the first half of the year, leading to
significantly lower sales and margins. We are taking steps to improve the financial performance of this business and hope to see evidence of
such improvement by the year end.
Overall, our diversified business model has allowed us to increase Group revenues despite the pressure we have experienced in our
Generic business. The outlook for revenue growth in the Branded and Injectables businesses for the second half of 2008 remains strong. I am
confident that Hikma will deliver another full year of strong revenue growth as we increase sales across MENA, expand our portfolio of
own-brand and in-licensed products and continue to develop our global Injectables business, while also working hard to improve the financial
performance of our Generic business. Our strategy remains firmly in place - to grow further in the MENA market and to build Hikma into a
leading specialty pharmaceuticals company.
Said Darwazah
Chief Executive Officer
Interim management review
Group performance
Revenue for the Group increased by 33.4% to $299.9 million, compared to $224.9 million in the first half of 2007. The revenue
contribution from Hikma Egypt, APM and Thymoorgan - the acquisitions completed since the first half of 2007 - was $57.1 million. Underlying
organic revenue growth, which excludes the impact of these acquisitions, was 8.0%, driven by strong performances in both the Branded and
Injectables businesses, but heavily impacted by a 26.5% decline in revenues in our US Generic business.
As a result, in the first half of 2008, the Branded and Injectables businesses accounted for 84.9% of revenues compared with 72.8% at
the end of the first half of 2007.
Revenue by segment H1 2008 H1 2007
Branded 58.0% 46.1%
Injectables 26.9% 26.7%
Generics 14.4% 26.1%
Revenue by region
MENA 67.1% 54.2%
US 18.6% 29.8%
Europeand rest of world 14.2% 16.0%
The Group's gross profit increased by 18.5% to $135.0 million, compared to $113.9 million in the first half of 2007. Group gross margin
for the first half of 2008 was 45.0%, compared to 50.7% in the first half of 2007 primarily due to the significant decline in gross profit
in the Generics business.
Group operating expenses grew in the first half of 2008 by 41.4% to $87.9 million, compared to $62.2 million in the first half of 2007.
Excluding acquisitions, operating expenses grew by 20.8%.
Sales and marketing expenses increased by 56.6% to $47.1 million largely reflecting the consolidation of APM and Hikma Egypt and the
higher amortisation costs related to the intangible assets arising on these acquisitions. Excluding the acquisitions of APM, Hikma Egypt and
Thymoorgan, sales and marketing expenses increased by 23.8%, which reflects investment to support the strong growth in the Branded business.
Sales and marketing expenses represented 15.7% of Group revenue in the first half of 2008, compared to 13.4% in the first half of 2007. We
expect sales and marketing expenses to decrease as a percentage of sales in the second half of the year.
The Group's general and administrative expenses increased by 31.9% to $28.0 million, compared to $21.2 million in the first half of
2007. This increase partially reflects the consolidation of APM, Hikma Egypt and Thymoorgan and includes exceptional acquisition integration
costs of $1.2 million. Corporate general and administrative costs decreased slightly to $8.4 million, compared to $8.7 million in the first
half of 2007. Overall, general and administrative expenses represented 9.3% of Group revenue in the first half of 2008, compared to 9.4% in
the first half of 2007.
Investment in R&D increased by 18.2% to $10.8 million, with total investment in R&D now representing 3.6% of Group revenue, compared to
4.1% in the first half of 2007. This reflects a shift towards product acquisitions and an increase in in-licensing activity.
Other net operating expenses, which consist mainly of provisions against slow moving items partially offset by foreign exchange gains,
were $1.9 million, compared to $1.7 million in the first half of 2007.
Operating profit for the Group decreased by 9.0% to $47.1 million, compared to the first half of 2007, and group operating margin
decreased to 15.7%, compared to 20.6% in the first half of 2007, reflecting, in part, the increase in intangible amortisation charges
excluding software and exceptional items.
Adjusted operating profit for the Group, which is defined as operating profit before the amortisation of intangible assets excluding
software and exceptional items, increased by 7.2% to $56.7 million, compared to $52.9 million in the first half of 2007. These exceptional
items include revisions to our estimates for chargebacks, returns and rebates in our US Generic business and acquisition integration costs
associated with the acquisition of APM. Adjusted operating margin was 18.9%, compared to 23.5% in the first half of 2007. This decline is
attributed to the planned investment in sales and marketing related to new product launches in the Branded business and to the difficulties
experienced by our Generics business in the US.
Analysis of adjusted consolidated income statement
H1 2008 H1 2007 H1 2008 vs
H1 2007
All figures in $ million Adjusted Exceptional items As reported Adjusted Intangible As reported Adjusted
and intangible amortisation
amortisation,6
Net sales 304.7 (4.8) 299.9 224.9 - 224.9 +35.5%
Operating profit 56.7 (9.6) 47.1 52.9 (1.1) 51.8 +7.2%
Operating profit margin 18.6% 15.7% 23.5% 23.0% -4.9
Net income before tax and 48.9 (9.6) 39.3 50.6 (1.1) 49.5 -3.4%
minority interests
Tax (8.1) 2.2 (5.9) (12.9) 0.3 (12.6) -37.2%
Effective tax rate 16.6% 15.1% 25.5% 25.5% -8.9
Profit attributable to 40.3 (7.4) 32.9 36.4 (0.8) 35.6 +10.7%
shareholders
Diluted EPS (cents) 20.8 (3.8) 17.0 20.7 (0.5) 20.2 +0.5%
Branded
The pharmaceutical market in the MENA region is predominantly a branded market, in which patented, generic and OTC pharmaceutical
products are marketed under specific proprietary brand names. Our Branded business manufactures branded generic and in-licensed patented
pharmaceutical products for sale across the MENA region and parts of Europe.
The Branded business is our largest business in terms of revenue and operating profit. Branded revenues increased by 68.0% to $174.0
million in the first half of 2008, compared to $103.6 million in the first half of 2007, reflecting strong organic growth of 22.3% and the
acquisitions we made in the MENA region in 2007. Trading continued to be strong across all our MENA markets, particularly Algeria, Jordan
and the GCC countries, where we are now selling under the Hikma, JPI and APM brands. The Branded business's performance in the first half of
the year also reflects the continuing seasonality of this business, which is traditionally stronger in the first six months of the year.
Both of the acquisitions made in the MENA region in 2007 performed ahead of our expectations in the first half of 2008. Sales at APM,
which was acquired in December 2007, grew by 59.4% to $33.5 million compared to reported sales of $21.0 million in the first half of 2007,
demonstrating the success of the swift integration process that began in January of 2008. APM's sales were also positively impacted by high
levels of order backlogs. Since the beginning of the year, we have improved APM's organisational structure to create a new sales operation,
as well as logistics, supply chain, budgeting and production planning functions. We are also unifying the Hikma and APM distribution
channels in many markets. These changes will bring synergies and reduce future sales and marketing expenses. In an effort to improve working
capital management, we are applying Hikma terms wherever possible. We are upgrading APM's manufacturing facilities to achieve the levels of
quality and Good Manufacturing Practice ("GMP") that Hikma demands. Through this process we have nearly doubled production on most lines. Further upgrades to APM's production facilities are
planned for the end of 2008, which will further enhance productivity but will require shutting down the APM plant for almost two months.
In Egypt, where sales grew by 78.9% in the first half of 2008, key functions such as finance, marketing and R&D are being integrated
into Hikma's global systems and we have made significant process improvements, nearly doubling production and units sold compared to the
first half of 2007. Significant investment was made in sales and marketing, to launch the Hikma brand in the Egyptian market and to promote
key products. As a result of our efforts, Hikma's market share in Egypt, while currently small, has increased significantly.
More focused sales and marketing efforts have helped to drive customer demand and increase sales across most Branded markets in the
first half of the year. Significant focus was put on promoting new and recently launched products, developing our market position in key
products and therapeutic areas, and building brand recognition.
As a result of these efforts, Hikma is now the fifth largest pharmaceutical manufacturer in the MENA region, with a market share of
3.3%. In the first half of 2008, we grew our market share in Algeria to 5.9% compared to 5.2% during the same period in 2007. We are now
the fifth largest pharmaceutical manufacturer and the largest generic pharmaceutical manufacturer by value in the Algerian market. In Saudi
Arabia, as a result of the APM acquisition, we are now the fifth largest pharmaceutical manufacturer and our market share in value terms
increased to 5.0%, compared to 3.9% as of June 2007. In Jordan, where we are the market leader, we have substantially increased our market
share to 12.5% through strong underlying market share growth and the consolidation of APM.
Revenue from Hikma's existing in-licensed products grew by 24.6% in the first half, representing 36.0% of Branded organic sales in the
first half of 2008. Including sales from in-licensed products acquired from APM and Hikma Egypt, in-licensed products now account for 35.5%
of total Branded sales. Sales of Actos�, Blopress� and the other products in-licensed from Takeda grew by 78% in the first half, as we
increased our market share in existing markets and began to launch these products across the Hikma network.
Gross profit in the Branded business increased by 67.2% to $94.0 million, compared to $56.2 million in the first half of 2007. The
Branded business's gross margin remained relatively stable at 54.0%, compared to 54.3% in the first half of 2007.
Branded operating profit increased by 47.0% in the first half of 2008, to $50.4 million. Operating margin in the Branded business was
29.0% in the first half of 2008, down from 33.1% in 2007. The decline reflects enhanced sales and marketing activities related to the
promotion of key products and an increase in investment in R&D. It also reflects additional investment to support the strong growth in the
Branded business.
Taking into account the usual seasonality in Branded revenues and operating margins in the second half of the year, we expect that the
Branded business will deliver revenue growth of approximately 60% for the full year.
Injectables
Revenue in our global Injectables business increased by 34.3% to $80.6 million reflecting underlying organic growth, which excludes the
acquisition of Thymoorgan and APM, of 17.9%, resulting from a strong performance in the MENA region and our growing business in the US.
Injectables revenue grew by 54.0% in the MENA region with Jordan, Algeria, Saudi Arabia and UAE performing particularly well. This
growth is attributable to the strength of our product portfolio, the quality of our sales force and an increase in attractive tender
business. The MENA region now represents 41.1% of Injectables sales, compared to 35.8% in the first half of 2007. We continue to see
excellent prospects for growth in Injectables sales in the MENA region, which we expect will represent an increasing percentage of future
Injectable sales.
In the principal part of our Injectables business in Europe - the oncology businesses, Ribosepharm and Thymoorgan - we delivered sales
of $18.3 million, compared to $17.5 million in the first half of 2007. Total first half sales in 2007 included $4.5 million in non-recurring
sales from a discontinued in-licensed product. As almost all oncology sales are generated in Germany, we expect this business will come
under increasing competitive pressure in the current market environment. We have appointed a new management team and are seeking to expand
our product portfolio. In the rest of our European business, the market for hospital products has been more challenging, particularly in
Germany, where some of our competitors are more aggressively targeting this market.
Despite intensifying competition in the US injectable market, our US Injectables sales grew by 53.0% compared to the first half of 2007,
primarily driven by higher private label business where we almost doubled sales. In our own drug business, we increased revenues by 26.6%,
benefiting from a significantly more diversified product portfolio in the US than one year ago. We are also achieving higher sales volumes
across a broader portfolio of cephalosporins and have seen excellent growth in some of our liquid products.
During the first half of 2008, the Injectables business received 38 regulatory approvals, including 2 in Europe, 30 in the MENA region
and 6 ANDA approvals in the US. A total of 36 products were launched, including 8 new products.
Injectables gross profit increased by 14.3% to $33.8 million, compared to $29.6 million in the first half of 2007, with gross margin
decreasing to 42.0%, compared to 49.3% in the first half of 2007. The decrease in gross margin reflects, in part, the consolidation of
Thymoorgan which, as a contract manufacturing business, has lower gross margins than the rest of Hikma's Injectables business. It also
reflects the consolidation of APM's low margin injectable sales contracts that terminate at the end of the year. Excluding the acquisitions
of Thymoorgan and APM, the Injectables gross margin was 45.4%, reflecting the more competitive environment in the German market and higher
overheads related to the start-up of our new cephalosporin plant in Portugal.
Injectables operating profit increased by 9.1% to $13.5 million, compared to $12.3 million in the first half of 2007. Injectables
operating margin decreased to 16.7% in the first half of 2008, down from 20.5% in the first half of 2007, primarily as a result of the
consolidation of APM's lower margin injectable sales. Excluding the consolidation of APM and the amortisation of intangibles, Injectables
operating margin was 19.4%.
Looking forward, we expect the Injectables business to continue to deliver strong revenue growth in the second half of the year. The
consolidation of APM's lower margin sales will continue to affect margins in the second half and, whilst sales continue to grow, we expect
that the increase in competition in Germany and the US could put additional pressure on margins. Excluding APM, however, we continue to
expect to deliver Injectables operating margins ahead of 2007.
Generics
Revenue in our Generics business decreased by 26.5% to $43.1 million, compared to $58.7 million in the first half of 2007. This decline
resulted from lower sales of lisinopril, following the expiry of the contract with the Department of Veterans Affairs at the end of December
2007, continued price erosion across other product lines, lower than expected demand for new products and additional one-off provisions of
$4.8 million related to revisions in our estimates for chargebacks, rebates and returns.
All of these factors, as well as higher than expected production and API costs, led to a decline in the Generics gross profit of 75.8%
to $6.8 million, compared to $28.2 million in the first half of 2007. Generics gross margin was 15.8%, compared to 48.1% in the first half
of 2007. Consequently, the Generics segment realised an operating loss of $6.0 million in the first half, compared to an operating profit of
$15.7 million in the first half of 2007.
We are focused on stemming the losses in this business as quickly as possible and have made further management changes, which include
appointing a General Manager and a new Vice President, Sales and Marketing for all US operations.
This enhanced management team is undertaking a thorough review of the business and has already taken steps to improve operating
performance. Following an in-depth review of profitability by product and by customer, actions are being taken to withdraw low margin
products, implement price increases and renegotiate terms of trade.
Looking forward, our priority is to improve the financial performance of this business as quickly as possible. While we continue to
expect a slight operating loss for the second half of the year, we are working to show some evidence of an improvement in financial
performance by year end.
Other businesses
Other businesses, which are primarily Arab Medical Containers, a manufacturer of plastic specialised packaging, and International
Pharmaceuticals Research Centre, which conducts bio-equivalency studies, had aggregate revenues in the first half of 2008 of $2.1 million,
compared to aggregate revenue of $2.6 million in the first half of 2007.
These other businesses delivered an operating loss of $2.3 million in the first half of 2008, compared to an operating loss of $1.8
million in the first half of 2007.
Research & Development
The Group's product portfolio continues to grow. During the first half of the year, we added 9 new products to the Group portfolio,
which now covers 362 products in 747 dosage strengths and forms. We manufacture and/or sell 40 of these products under-license from the
originator.
In the first half of 2008, Hikma received 90 regulatory approvals, including 2 ANDA approvals for the Generics business and 6 ANDA
approval for the Injectables business. Over the same period, 87 products and line extensions were launched across the group including 9 new
pharmaceutical compounds not previously marketed.
To ensure the continuous development of our product pipeline, we submitted 18 regulatory filings for new products, and a total of 110
across all regions and markets in the first half. As of 30 June 2008, we had a total of 91 pending approvals for new products and 572
pending approvals across all regions and markets.
We estimate the approximate addressable market for our portfolio of pending approvals to be approximately $18 billion, based on the 2007
full year sales of the currently marketed equivalent products in the markets covered by the pending approvals.
At 30 June 2008, we had a total of 61 new products under development, the majority of which should receive several marketing
authorisations for differing strengths and/or product forms over the next few years. This does not include the 29 new products under
development at Hikma Egypt.
Total filings in H1 Filings in H1 2008 Filings in H1 2008 Total pending Pending approvals Pending
approvals
2008 for new products and for new products approvals as of 30 for new products and for new
products
new line extensions only June 2008 new line extensions only as of
30 June
as of 30 June 2008
2008
Generics
United States 2 2 2 32 32
26
Branded
MENA 80 13 8 330 25
17
Europeand ROW 13 13 5 35 35
14
93 26 13 365 60
31
Injectables
United States 1 1 - 26 26
16
MENA 14 4 3 136 10
8
Europeand ROW 8 - - 21 13
10
23 5 3 183 49
34
118 33 18 580 141
91
Financial performance
Net finance expense
Net finance expense increased to $8.2 million, compared to $2.5 million in the first half of 2007 reflecting the increase in debt
financing required to fund acquisitions and the Group's expansion.
Profit before tax
Profit before taxes and minority interest for the Group decreased by 20.6% to $39.3 million, compared to $49.5 million in the first half
of 2007.
Tax
The Group incurred a tax expense of $5.9 million in the first half of 2008. The effective tax rate was 15.1%, a decrease of 10.4
percentage points on the comparable period. The effective tax rate decrease was primarily due to the net losses incurred in the Generics
business and to a shift in the Group's overall geographic sales mix towards lower tax countries, particularly in the MENA region.
Profit for the period
The Group's profit attributable to equity holders of the parent decreased by 7.6% to $32.9 million for the six months to 30 June 2008.
Earnings per share
Diluted earnings per share for the six months to 30 June 2008 were 17.0 cents, down 15.8% from 20.2 cents in the first half of 2007. On
an adjusted basis, diluted earnings per share have increased slightly to 20.8 cents, compared to 20.7 cents in the first half of 2007.
Dividend
The Board has declared an interim dividend of 3.5 cents per share (approximately 1.9 pence per share) to be paid on 17 October 2008 to
eligible shareholders on the register at the close of business on 19 September 2008. The ex-dividend date is 17 September 2008.
Operating cash flow and investment
Net cash inflow from operating activities was $5.4 million, compared to $3.9 million during the first half of 2007. In line with sales
growth, investment in working capital increased by $57.7 million compared to 31 December 2007. Historically, the Group has generated strong
cash flows in the second half of the year.
Receivables increased by 37.8% compared to 30 June 2007. Excluding acquisitions, receivables increased by 9.4%. As at 30 June 2008,
receivable days stood at 126 days, compared to 122 days at 30 June 2007. Excluding acquisitions9, receivable days stood at 120 days as at 30
June 2008.
Inventory increased by 63.6% compared to 30 June 2007, due to acquisitions9 and the necessity to support future sales growth. As at 30
June 2008, inventory days stood at 194 days, compared to 176 days at 30 June 2007 and 237 days at 31 December 2007. Excluding acquisitions9,
inventory days stood at 191 days at 30 June 2008.
Net cash used for investing activities was $35.2 million, compared to $92.0 million in the first half of 2007. Of this, capital
expenditure amounted to $30.0 million, compared to $19.1 million in the first half of 2007. This expenditure relates to expansion projects
in the Branded and Injectables businesses. During the first half of the year the Group also made regular investments to upgrade and maintain
existing facilities.
Balance sheet
The Group had a total cash balance of $22.5 million as at 30 June 2008, compared to $34.5 million at 31 December 2007. The Group's net
debt position at 30 June 2008 was $197.6 million, compared to $306.8 million at 31 December 2007. The reduction in net debt is primarily a
result of the $160.3 million equity placing in January that was used to finance the acquisition of APM. Darhold Limited, a related party of
the Company, participated in this placing, acquiring approximately 5.2 million shares, representing approximately 30.8% of the placing
shares. Mr Samih Darwazah, Mr Said Darwazah and Mr Mazen Darwazah, each a related party of the Company, also participated in the placing,
acquiring in aggregate, approximately 285,000 shares, representing approximately 1.7% of the placing shares.
Outlook
The outlook for revenue growth in the Branded and Injectables businesses in the second half of 2008 remains strong. We are on track to
deliver continued sales growth across the MENA region, expand our portfolio of own-brand and in-licensed products and develop our
Injectables business. We continue to expect the Group to deliver sales growth in the 30% to 35% range.
While we are working hard to improve the financial performance in our Generics business and to manage the increasing competition in our
Injectables business, we see these pressures continuing through the second half and are more cautious in our outlook for gross margin for
the Group as a whole, which we expect will be approximately 44% for the full year.
Forward looking statements
Certain statements in this announcement are forward-looking statements which have been made by the Directors in good faith based on the
information available to them up to the time of their approval of this announcement. By their nature, forward-looking statements involve a
number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied
by the forward-looking statements, and should be treated with caution. These risks, uncertainties or assumptions could materially affect the
outcome and financial effects of the plans and events described in this announcement. Forward-looking statements contained in this
announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the
future. You should not place undue reliance on forward-looking statements, which speak as only of the date of this the approval of this
announcement.
Except as required by law, the Directors do not make any undertaking to update or keep current the forward-looking statements contained
in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements. Nothing in this
announcement should be construed as a profit forecast.
INDEPENDENT REVIEW REPORT TO HIKMA PHARMACEUTICALS PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 30 June 2008 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the
condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 13. We have
read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an
independent 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, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial
Services Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
27 August 2008
Hikma Pharmaceuticals PLC
Condensed consolidated income statement
H12008 H12007 FY2007
Notes USD '000(Unaudited) USD '000(Unaudited) USD '000(Audited)
Continuing operations
Revenue 2 299,912 224,894 448,796
Cost of sales 2 (164,884) (110,975) (227,263)
Gross profit 2 135,028 113,919 221,533
Sales and marketing costs (47,149) (30,113) (61,021)
General and administrative (28,018) (21,247) (46,012)
expenses
Research and development costs (10,816) (9,153) (19,342)
Other operating expenses (net) (1,936) (1,656) (2,760)
Total operating expenses (87,919) (62,169) (129,135)
Adjusted operating profit 52,898 95,061
56,686
Exceptional items - revision 12
to estimates for chargebacks, (4,800) - -
returns and rebates
Exceptional items - 12
acquisition integration costs (1,205) - -
Intangible amortisation * 12 (3,572) (1,148) (2,663)
Operating profit 47,109 51,750 92,398
Finance income 430 1,376 2,029
Finance expense (8,601) (3,897) (10,837)
Other income 321 223 199
Profit before tax 39,259 49,452 83,789
Tax 3 (5,942) (12,610) (19,596)
Profit for the period 33,317 36,842 64,193
Attributable to:
Minority interest 405 1,228 1,617
Equity holders of the parent 32,912 35,614 62,576
33,317 36,842 64,193
Earnings per share (cents)
Basic 5 17.6 21.1 37.0
Diluted 5 17.0 20.2 35.4
On this page and throughout these interim financial information "H1 2008" refers to the six months ended 30 June 2008, "H1 2007" refers
to the six months ended 30 June 2007 and "FY 2007" refers to the year ended 31 December 2007.
* Intangible amortisation comprises the amortisation on intangible assets excluding software.
Hikma Pharmaceuticals PLC
Condensed consolidated balance sheet
30 June 30 June 31 December
2008 2007 2007
Notes USD '000 USD '000 USD '000
( ( (Audited)*
Unaudite Unaudite
d) d)*
Non-current assets
Intangible assets 263,534 87,382 255,551
Property, plant and equipment 263,903 178,977 243,901
Interest in joint venture 4,996 - 4,543
Deferred tax assets 14,060 13,339 14,503
Available for sale investments 842 573 1,008
Financial and other non-current 1,916 1,019 1,290
assets
549,251 281,290 520,796
Current assets
Inventories 6 174,853 106,883 147,292
Income tax recoverable 51 500 358
Trade and other receivables 7 229,168 164,951 188,981
Collateralised cash 720 5,457 5,628
Cash and cash equivalents 21,767 45,400 28,905
Other current assets 4,447 2,657 2,625
431,006 325,848 373,789
Total assets 980,257 607,138 894,585
Current liabilities
Bank overdrafts and loans 119,360 63,973 276,537
Obligations under finance leases 882 606 1,455
Trade and other payables 8 93,124 68,338 84,324
Income tax provision 12,459 12,126 10,583
Other provisions 5,066 3,057 4,475
Other current liabilities 16,353 7,805 16,642
247,244 155,905 394,016
Net current assets/(liabilities) 183,762 169,943 (20,227)
Non-current liabilities
Long-term financial debts 93,944 56,529 57,662
Deferred income 810 322 279
Obligations under finance leases 5,911 4,508 5,698
Deferred tax liabilities 12,138 4,396 12,273
112,803 65,755 75,912
Total liabilities 360,047 221,660 469,928
Net assets 620,210 385,478 424,657
Equity
Share capital 10 33,751 29,907 30,229
Share premium 10 269,503 112,295 114,059
Reserves 310,723 237,485 274,192
Equity attributable to equity 613,977 379,687 418,480
holders of the parent
Minority interest 6,233 5,791 6,177
Total equity 620,210 385,478 424,657
*These numbers are revised - see note 1
Hikma Pharmaceuticals PLC
Condensed consolidated statement of changes in equity
Notes Merger reserve Retained Other Total Share capital Share premium Total equity
earnings reserves reserves attributable
to equity
shareholders
of the parent
USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD
'000
At 1 January 2007 (audited) 33,920 161,631 8,373 203,924 29,712 111,431 345,067
Issue of equity shares - - - - 195 864 1,059
Cost of equity settled - 667 - 667 - - 667
employee share scheme
Deferred tax arising on - 2,033 - 2,033 - - 2,033
share-based payments
Dividends on ordinary shares - (6,765) - (6,765) - - (6,765)
Profit for the period - 35,614 - 35,614 - - 35,614
Cumulative effect of change in - (187) - (187) - - (187)
fair value of available for
sale investments and financial
derivatives
Revaluation reserve - 90 (90) - - - -
Currency translation gain - - 2,199 2,199 - - 2,199
Balance at 30 June 2007 33,920 193,083 10,482 237,485 29,907 112,295 379,687
(unaudited)
Balance at 1 January 2007 33,920 161,631 8,373 203,924 29,712 111,431 345,067
(audited)
Issue of equity shares - - - - 517 2,628 3,145
Cost of equity settled - 1,601 - 1,601 - - 1,601
employee share scheme
Deferred tax arising on - 2,968 - 2,968 - - 2,968
share-based payments
Dividends on ordinary shares - (12,696) - (12,696) - - (12,696)
Profit for the year - 62,576 - 62,576 - - 62,576
Cumulative effect of change in - (407) - (407) - - (407)
fair value of available for
sale investments and financial
derivatives
Revaluation reserve - 180 (180) - - - -
Currency translation gain - - 16,226 16,226 - - 16,226
Balance at 31 December 2007 33,920 215,853 24,419 274,192 30,229 114,059 418,480
(audited)
Issue of equity shares 10 - - - - 3,522 155,444 158,966
Cost of equity settled - 1,307 - 1,307 - - 1,307
employee share scheme
Deferred tax arising on - (261) - (261) - - (261)
share-based payments
Dividends on ordinary shares - (7,542) - (7,542) - - (7,542)
Profit for the period - 32,912 - 32,912 - - 32,912
Cumulative effect of change in - 160 - 160 - - 160
fair value of available for
sale investments and financial
derivatives
Revaluation reserve - 90 (90) - - - -
Currency translation gain - - 9,955 9,955 - - 9,955
Balance at 30 June 2008 33,920 242,519 34,284 310,723 33,751 269,503 613,977
(unaudited)
Hikma Pharmaceuticals PLC
Condensed consolidated statement of cash flows
H1 H1 FY
2008 2007 2007
Notes USD '000 (Unaudited) USD '000 (Unaudited) USD '000 (Audited)
9 5,442 3,883 53,283
Net cash from operating
activities
Investing activities
Purchases of property, plant (30,041) (19,064) (50,402)
and equipment
Proceeds from disposal of 130 162 906
property, plant and equipment
Purchase of intangible assets (2,882) (1,352) (4,586)
Investment in financial and (1,079) 223 329
other assets
Investment in available for 166 28 (226)
sale securities
Reduction of cash deposits - - -
Acquisition of subsidiary (1,934) (73,392) (296,903)
undertakings net of cash
acquired
Cash acquired on acquisition - - -
of subsidiaries
Finance income 1 430 1,376 2,029
Net cash used in investing (35,210) (92,019) (348,853)
activities
Financing activities
Decrease/(increase) in 4,908 (120) (291)
collateralised cash
Increase in long-term 41,904 36,779 42,464
financial debts
Repayment of long-term (5,622) (5,589) (13,546)
financial debts
(Decrease)/increase in (161,223) 26,029 229,658
short-term borrowings
Decrease)/increase in (360) (543) 126
obligations under finance
leases)
Dividends paid (7,557) (6,752) (12,834)
Dividends paid to minority (351) (166) (166)
shareholders
Interest paid 1 (8,632) (3,431) (10,166)
Proceeds from issue of new 158,966 1,059 3,145
shares
Net cash from financing 22,033 47,266 238,390
activities
Net decrease in cash and cash (7,735) (40,870) (57,180)
equivalents
Cash and cash equivalents at 28,905 86,227 86,227
beginning of period
Foreign exchange translation 597 43 (142)
Cash and cash equivalents at 21,767 45,400 28,905
end of period
Hikma Pharmaceuticals PLC
Condensed consolidated cash flow statement
1. Basis of preparation
The unaudited condensed set of financial statements for the six months ended 30 June 2008 have been prepared using the same accounting
policies and on a basis consistent with the audited results for the year ended 31 December 2007. The financial information has been prepared
under the historical cost convention, except for the revaluation to market of certain financial assets and liabilities.
Comparative figures for 30 June 2007 and 31 December 2007 have been adjusted for revisions to the provisional acquisition balance sheet
of the companies acquired by the Group in 2007. Further details are provided in note 11. In addition, in the condensed consolidated cash
flow statement and supporting notes interest paid has been reclassified to financing activities and finance income has been reclassified to
investing activities to better reflect the nature of the flows, following the recent acquisitions.
The financial information for the year ended 31 December 2007 does not constitute statutory accounts within the meaning of Section 240
of the Companies Act 1985. Statutory accounts for the year ended 31 December 2007, which were prepared under International Financial
Reporting Standards (IFRSs) issued by the International Accounting Standards Board, have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified and did not contain any statement under Section 237 (2) or (3) of the Companies Act
1985.
Exceptional items are defined as those that are material in nature or amount and are non-recurring. Exceptional items are disclosed
separately in the condensed consolidated income statement to assist in the understanding of the financial performance of the Group.
The currency used in the preparation of the accompanying consolidated financial statements is the US Dollar as the majority of the
Company's business is conducted in US Dollars (USD).
The Group's condensed consolidated financial statements are prepared in accordance with IAS 34 'Interim Financial Reporting'. They are
approved by the Board on 27 August 2008. Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments
For management purposes, the Group is currently organised into three operating divisions - Generics, Branded and Injectables. These
divisions are the basis on which the Group reports its primary segment information.
Segment information about these businesses is presented below.
Six months ended Branded Injectables Generics Corporate and other Group
30 June 2008 (unaudited) USD '000 USD '000 USD '000 USD '000 USD '000
Revenue 174,039 80,597 43,133 2,143 299,912
Cost of sales (80,040) (46,768) (36,300) (1,776) (164,884)
Gross profit 93,999 33,829 6,833 367 135,028
Result 54% 42% 16% 45%
Adjusted segment result 53,737 14,820 (1,173) (2,326) 65,058
Exceptional items and (3,349) (1,362) (4,866) - (9,577)
intangible amortisation
excluding software
Segment result 50,388 13,458 (6,039) (2,326) 55,481
Unallocated corporate expenses (8,372)
Operating profit 47,109
Finance income 430
Finance expense (8,601)
Other income 321
Profit before tax 39,259
Tax (5,942)
Profit for the period 33,317
Attributable to:
Minority interest 405
Equity holders of the parent 32,912
33,317
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments (continued)
Branded Injectables Generics Corporate and other Group
Other information 30 June) USD '000 USD '000 USD '000 USD '000 USD '000
2008 (unaudited
Additions to property, plant 17,306 5,200 5,830 856 29,192
and equipment assets (cost)
Additions to intangible assets 1,084 1,599 - 199 2,882
Total property, plant and 324,309 162,124 31,924 9,080 527,437
equipment and intangible
assets (net book value)
Depreciation and amortisation 9,466 4,697 2,220 760 17,143
Balance sheet
Total assets
Segment assets 633,582 226,937 96,557 23,181 980,257
Total liabilities
Segment liabilities 192,398 113,693 41,727 12,229 360,047
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments (continued)
Six months ended Branded Injectables Generics Corporate and other Group
30 June 2007 (unaudited) USD '000 USD '000 USD '000 USD '000 USD '000
Revenue 103,620 60,035 58,667 2,572 224,894
Cost of sales (47,388) (30,439) (30,463) (2,685) (110,975)
Gross profit/(loss) 56,232 29,596 28,204 (113) 113,919
Result 54% 49% 48% 51%
Adjusted segment result 34,492 13,260 15,670 (1,798) 61,624
Intangible amortisation (219) (929) - - (1,148)
excluding software
Segment result 34,273 12,331 15,670 (1,798) 60,476
Unallocated corporate expenses (8,726)
Operating profit 51,750
Finance income 1,376
Finance expense (3,897)
Other income 223
Profit before tax 49,452
Tax (12,610)
Profit for the period 36,842
Attributable to:
Minority interest 1,228
Equity holders of the parent 35,614
36,842
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments (continued)
Branded Injectables Generics Corporate and other Group
Other information 30 June USD '000 USD '000 USD '000 USD '000 USD '000
2007 (unaudited)
Additions to property, plant 11,375 6,782 2,495 465 21,117
and equipment assets (cost)
Acquisition of subsidiary's - 9,243 - - 9,243
property, plant and equipment
(cost)
Additions to intangible assets 405 524 295 128 1,352
Intangible assets arising on - 62,495 - - 62,495
acquisition
Total property, plant and 96,812 131,370 29,102 9,075 266,359
equipment and intangible
assets (net book value)
Depreciation and amortisation 3,710 3,167 2,279 667 9,823
Balance sheet
Total assets
Segment assets 275,909 182,703 104,227 44,299 607,138
Total liabilities
Segment liabilities 106,974 69,052 30,205 15,429 221,660
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments (continued)
Year ended Branded Injectables Generics Corporate and other Group
31 December 2007 (audited) USD '000 USD '000 USD '000 USD '000 USD '000
Revenue 198,942 121,164 124,229 4,461 448,796
Cost of sales (90,925) (67,005) (65,644) (3,689) (227,263)
Gross profit 108,017 54,159 58,585 772 221,533
Result 54% 45% 47% 49%
Adjusted segment result 62,150 22,666 31,644 (3,396) 113,064
Intangible amortisation (454) (2,209) - - (2,663)
excluding software
Segment result 61,696 20,457 31,644 (3,396) 110,401
Unallocated corporate expenses (18,003)
Operating profit 92,398
Finance income 2,029
Finance expense (10,837)
Other income 199
Profit before tax 83,789
Tax (19,596)
Profit for the year 64,193
Attributable to:
Minority interest 1,617
Equity holders of the parent 62,576
64,193
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
2. Business and geographical segments (continued)
Branded Injectables Generic Corporate and other Group
Other information 31 USD '000 USD '000 USD '000 USD '000 USD '000
December 2007 (audited)
Additions to property, plant 28,366 15,811 4,189 990 49,356
and equipment assets (cost)
Acquisition of subsidiary's 53,625 9,213 - - 62,838
property, plant and equipment
(cost)
Additions to intangible assets 1,453 2,557 445 131 4,586
Intangible assets arising on 159,940 62,495 - - 222,435
acquisition
Total property, plant and 314,027 148,252 28,304 8,869 499,452
equipment and intangible
assets (net book value)
Depreciation and amortisation 9,740 7,054 5,153 1,486 23,433
Balance sheet
Total assets
Segment assets 576,157 196,337 97,355 24,736 894,585
Total liabilities
Segment liabilities 169,119 78,723 9,781 212,305 469,928
The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services:
Sales revenue by geographical market
H1 2008 H1 2007 FY 2007
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Middle East and North Africa 201,308 121,960 229,196
United States 55,884 67,010 143,510
Europe and Rest of the World 42,720 35,924 76,090
299,912 224,894 448,796
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
3. Tax
H1 2008 H1 2007 FY 2007
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Current tax:
UK current tax 15,359 - 13,664
Double tax relief (15,359) - (13,664)
Overseas tax 6,005 13,259 19,552
Overseas deferred tax (63) (649) 44
5,942 12,610 19,596
4. Dividends
The Board has declared an interim dividend of $6.6 million (30 June 2007: $5.9 million, 31 December 2007: $13.5 million), equivalent to
3.5 cents per share, (30 June 2007: 3.5 cents per share, 31 December 2007: 7.5 cents per share) as the dividend in respect of the six month
period ended 30 June 2008 to be paid on 17 October 2008 to all shareholders on the register on 19 September 2008.
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
H1 2008 H1 2007 FY 2007
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Earnings for the purposes of 32,912 35,614 62,576
basic and diluted earnings per
share being net profit
attributable to equity holders
of the parent
Adjusted earnings being net 40,267 36,464 64,503
profit attributable to equity
holders of the parent before
exceptional items and
intangible amortisation
excluding software (Note 12)
Number Number Number
Number of shares '000 '000 '000
Weighted average number of 186,646 168,640 169,216
Ordinary Shares for the
purposes of basic earnings per
share
Effect of dilutive potential
Ordinary Shares:
Share options and awards 6,638 7,582 7,631
Weighted average number of 193,284 176,222 176,847
Ordinary Shares for the
purposes of diluted earnings
per share
H1 2008 H1 2007 FY 2007
Earnings per share Earnings per share Earnings per share
Cents Cents Cents
Basic 17.6 21.1 37.0
Diluted 17.0 20.2 35.4
Adjusted earnings per share
(before exceptional items and
intangible amortisation
excluding software):
Basic 21.6 21.6 38.1
Diluted 20.8 20.7 36.5
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
6. Inventories
30 June 30 June 31 December
2008 2007 2007
USD '000 (Unaudited) USD '000 USD '000 (Audited)*
(Unaudited)*
Finished goods 50,602 28,380 36,027
Work-in-progress 26,668 21,860 31,673
Raw and packing materials 75,119 48,941 62,327
Goods in transit 22,464 7,702 17,265
174,853 106,883 147,292
Goods in transit include inventory held at third parties whilst in transit between Group companies.
*These numbers are revised - see note 11
7. Trade and other receivables
30 June 30 June 31 December
2008 2007 2007
USD '000 (Unaudited) USD '000 (Unaudited) USD '000 (Audited)*
Trade receivables 207,133 150,356 172,099
Other prepayments 16,860 7,681 12,629
Value added tax recoverable 4,500 6,205 3,647
Interest receivable 245 457 302
Employee advances 430 252 304
229,168 164,951 188,981
*These numbers are revised - see note 11
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
8. Trade and other payables
30 June 30 June 31 December
2008 2007 2007
USD '000 (Unaudited) USD '000 (Unaudited) USD '000 (Audited)
Trade payables 58,781 42,387 49,143
Accrued expenses 23,320 20,985 25,392
Employees' provident fund * 3,698 2,444 3,158
VAT and sales tax payables 1,124 141 543
Dividends payable ** 2,728 208 3,490
Social security withholdings 1,045 804 1,026
Income tax withholdings 1,030 477 588
Other payables 1,398 892 984
93,124 68,338 84,324
* The employees' provident fund liability represents outstanding contributions to Hikma Pharmaceuticals Limited - Jordan retirement
benefit plan, on which the fund receives 5% interest.
** Included in dividends payable is $2,514,000 relating to dividends owed to the former shareholders of APM (31 Dec 2007: $3,261,000).
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
9. Net cash from operating activities
H1 2008 H1 2007 FY 2007
USD '000 (Unaudited) USD '000 (Unaudited) USD '000 (Audited)
Profit before tax and minority 39,259 49,452 83,789
interest
Adjustments for:
Depreciation, amortisation and
impairment of:
Property, plant and 13,050 8,069 19,374
equipment
Intangible assets 4,093 1,754 4,059
(Gains)/losses on disposal of (4) 117 (202)
property, plant and equipment
Movement on provisions 591 480 1,078
Deferred income 530 (34) (78)
Cumulative effect of change in 160 (11) (256)
fair value of derivatives
Cost of equity settled 1,307 667 1,601
employee share scheme
Finance income (430) (1,376) (2,029)
Interest and bank charges 8,601 3,897 10,837
Cash flow before working 67,157 63,015 118,173
capital
Change in trade and other (40,087) (36,264) (29,453)
receivables
Change in other current assets (1,822) (73) (47)
Change in inventories (27,706) (17,218) (29,065)
Change in trade and other 11,901 5,180 17,774
payables
Change in other current 19 (938) (6,112)
liabilities
Cash generated by operations 9,462 13,702 71,270
Income tax paid (4,020) (9,819) (17,987)
Net cash from operating 5,442 3,883 53,283
activities
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
10. Share placing
On 17 January 2008, a total of 17,000,000 new ordinary shares of 10 pence each in the Group were placed at a price of 480 pence per
share, raising gross proceeds of approximately �81.6 million ($160.3 million). As part of the Placing 5.23 million shares were placed with
Darhold Limited at the Placing Price and 333,000 shares were placed with the Darwazah family and other connected individuals at the Placing
Price. The total number of shares issued represents 9.96% of Hikma's issued ordinary share capital prior to the placing.
The Group used the proceeds from the placing to reduce borrowings incurred in connection with its JD116.0 million ($163.8 million)
acquisition of Arab Pharmaceutical Manufacturing Company thereby providing the Group with increased flexibility to finance future growth.
The costs of the placing were $2,484,000 which have been offset against share premium.
11. Revision of acquisition balance sheets
During the period, certain revisions have been made to the provisional acquisition fair values in relation to the businesses acquired in
the year ended 31 December 2007. The revisions made relate predominantly to receivables, inventories and other current liabilities.
The net impact of the revisions has been to increase acquisition Goodwill by $4.2 million as at 31 December 2007, and to decrease
acquisition Goodwill by $0.1 million as at 30 June 2007.
12. Exceptional items and intangible amortisation
Exceptional items are disclosed separately in the condensed consolidated income statement to assist in the understanding of the Group's
underlying performance.
H1 H1 FY
2008 2007 2007
USD '000 USD '000 USD '000
Revision to estimates for (4,800) - -
chargebacks, returns and rebates
Acquisition integration costs (1,205) - -
Exceptional items (6,005) - -
Intangible amortisation (3,572) (1,148) (2,663)
Tax effect 2,222 298 736
Impact on profit for the period (7,355) (850) (1,927)
Revision to estimates for chargebacks, returns, and rebates represents a one off charge taken against revenue during H1 2008.
Acquisition integration costs represent expenses incurred in integrating APM and Hikma Egypt into the Group. These are taken against
general and administrative expenses.
Intangible amortisation comprises the amortisation of intangible assets excluding software. These are mainly taken against operating
expenses.
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements - continued
13. Related party balances
Intra-group transactions have been eliminated on consolidation and are not disclosed in this note.
During the period, the Group entered into the following transactions with related parties:
Darhold Limited: is a related party of the Group because it is one of the major shareholders of Hikma Pharmaceuticals PLC with ownership
percentage of 30.7% at 30 June 2008 (30 June 2007: 30.8%, 31 December 2007: 30.8%). The only transaction in the period is disclosed in note
10.
Capital Bank (previously Export & Finance Bank) - Jordan: is a related party of the Group because two board members of the Bank are also
board members of Hikma Pharmaceuticals PLC. Total cash balances at Export & Finance Bank - Jordan were USD 259,000 (30 June 2007: USD
214,000 and 31 December 2007: USD 155,000). Loans and overdrafts granted by Export & Finance Bank to the Group in the period amounted to USD
272,000 (30 June 2007: USD 91,000 and 31 December 2008: USD 389,000) with interest rates ranging between 8.75% and LIBOR + 1 to 1.25%. Total
interest expense incurred against Group facilities was USD 21,000 (H1 2007: USD 28,000 and FY 2007: USD 47,000).
Jordan International Insurance Co: is a related party of the Group because one board member of the company is also a board member of
Hikma Pharmaceuticals PLC. Total insurance premiums paid by the Group to Jordan International Insurance Co during the period were USD
349,000 (H1 2007: USD 231,000 and FY 2007: USD 1,107,000). The Group's insurance expense for Jordan International Insurance Co contracts in
the period was USD 820,000 (H1 2007: USD 780,000 and FY 2007: USD 1,360,000). The amounts due to Jordan International Insurance Co at 30
June 2008 were USD 185,000 (30 June 2007: USD 189,000 and 31 December 2007: USD 143,000).
Tunisian Companies: amounts due from Tunisian companies include USD 270,000 (30 June 2007: USD 236,000 and 31 December 2007: USD
270,000) and USD 444,000 (30 June 2007: USD 338,000 and 31 December 2007: USD 486,000) due from Societe Hikma Ibn Al Baytar Limited -
Tunisia and Societe D'Industries Pharmaceutiques Ibn Al Baytar S.A. - Tunisia, respectively. The amounts due from Societe Hikma Pharma -
Tunisia and Societe Hikma Ibn Al Baytar Limited - Tunisia are stated before provision for doubtful debts of USD 154,000 (30 June 2007: USD
298,000 and 31 December 2007: USD 154,000).
West-Ward Pharmaceuticals Corp: Certain expenses of the Chairman were paid in the USA by West-ward Pharmaceuticals Corp and reimbursed
by the Chairman. At 30 June 2008, the balance outstanding amounted to USD 11,000 (30 June 2007: USD Nil and 31 December 2007: USD 11,000).
Principal risks and uncertainties
The principal risks and uncertainties related to Hikma's business are unchanged from those set out on pages 25 and 26 of the Annual
Report 2007. These risks are primarily related to: regulation; industry, economic and political dynamics; pricing dynamics; government
tender bids; research, development and commercialisation of new products; API and other raw material costs; seasonality; acquisitions; and,
foreign exchange, interest rate, credit, liquidity and inflation risk.
Directors' Responsibilities Statement
The Directors confirm that to the best of their knowledge, this condensed set of financial statements has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the European Union, and that the interim management report includes a fair review of
the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principle risks and
uncertainties for the remaining 26 weeks of the 52 week period) and DTR4.2.8R (disclosure of related party transactions and changes therein)
of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
By order of the Board:
Said Darwazah Mazen Darwazah
Chief Executive Officer Executive Vice Chairman
27 August 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BDLLLVVBLBBQ
Hikma Pharmaceuticals (LSE:HIK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hikma Pharmaceuticals (LSE:HIK)
Historical Stock Chart
From Jul 2023 to Jul 2024