TIDMHIK
RNS Number : 2994Z
Hikma Pharmaceuticals Plc
14 March 2012
PRESS RELEASE
Hikma delivers a robust performance in a challenging
environment, with revenues up 25.6% and adjusted operating profit
up 2.0%
Positive outlook for the Group in 2012, with expectation of 20%
top line growth
14 March 2012 - Hikma Pharmaceuticals PLC ("Hikma") (LSE: HIK)
(NASDAQ Dubai: HIK), the fast growing multinational pharmaceutical
group, today reports its preliminary results for the year ended 31
December 2011.
Group financial highlights
$ million 2011 2010 Change
--------------------------------------- ------ ------ -------
Revenue 918.0 730.9 +25.6%
--------------------------------------- ------ ------ -------
Gross profit 395.3 357.3 +10.6%
--------------------------------------- ------ ------ -------
Adjusted operating profit(1) 145.8 143.0 +2.0%
--------------------------------------- ------ ------ -------
Adjusted(2) profit attributable
to shareholders 100.9 103.1 -2.2%
--------------------------------------- ------ ------ -------
Reported profit attributable
to shareholders 80.1 98.8 -19.0%
--------------------------------------- ------ ------ -------
Earnings per share (basic) (cents) 41.3 51.4 -19.7%
--------------------------------------- ------ ------ -------
Adjusted earnings per share (diluted)
(cents) 51.0 52.4 -2.6%
--------------------------------------- ------ ------ -------
Net cash flow from operating
activities 126.4 152.5 -17.1%
--------------------------------------- ------ ------ -------
Dividend per share (cents) 13.0 13.0 -
--------------------------------------- ------ ------ -------
(1) Before the amortisation of intangible assets (excluding
software) and exceptional items (including acquisition and
integration related expenses of $16.4 million and an inventory
adjustment of $1.8 million)
(2) Before the amortisation of intangible assets (excluding
software) and exceptional items
-- Continued our track record of doubling revenue every four
years, with Group revenue up 25.6% to $918.0 million
-- Increased organic revenues by 7.6% and adjusted(1) operating
profit by 2.0%, despite the impact of the Arab Spring and the
discontinuation of colchicine
-- Net cash flow from operating activities of $126.4 million,
including the $21.1 million impact of working capital financing for
the Multi-Source Injectables ("MSI") acquisition
-- Strong growth in MENA operating cash flow helped to offset
the impact of the discontinuation of colchicine
-- Successfully financed $325 million of acquisitions with new debt facilities
-- Maintained the dividend at 13.0 cents per share
Group strategic highlights
-- Completed the MSI acquisition, doubling the size of our
global Injectables business, making us the second largest supplier
of generic injectables in the US and adding revenue of $120.3
million in 2011
-- Entered the Moroccan market, acquiring a 94.1%(3) stake in
Promopharm S.A. ("Promopharm"), significantly expanding our
geographic reach in MENA
-- Made significant capital investments to increase our
manufacturing capacity and capabilities in Egypt, Tunisia and
Algeria. Acquired a local manufacturing presence in Sudan
-- Completed strategic investments in India and China,
strengthening our ability to source quality Active Pharmaceutical
Ingredients ("API") and enhancing our R&D capabilities
(3) Hikma acquired a controlling stake of 63.9% in Promopharm on
3 October 2011. It increased this stake to 84.3% by 31 December
2011 through the purchase of additional shares in the market and to
94.1% by 6 January 2012 through a mandatory tender offer.
Segmental financial highlights
-- Better than expected performance in MENA, with Branded
revenue increasing by 12.1% and organic(4) revenue up 9.6%.
Adjusted operating profit increased by 9.3%
-- Doubled revenue in our global Injectables business to $315.7
million, with a 23.3% increase in organic(5) revenue reflecting
strong growth across all markets
-- Generics revenue declined by 11.3% to $154.8 million, in line
with guidance. Excluding exceptional colchicine sales in 2010,
Generics delivered double-digit revenue growth
(4) Before the consolidation of the Promopharm business
(5) Before the consolidation of the MSI and Promopharm
businesses
2012 outlook
-- Strong Group performance expected in 2012, with Group revenue growth of around 20%
Said Darwazah, Chief Executive Officer of Hikma, said:
"In 2011, Hikma continued its track record of doubling revenue
every four years, whilst at the same time achieving a number of
strategic milestones.
These achievements are all the more impressive for having been
delivered in a very challenging economic and geopolitical
environment. Our success in 2011 demonstrates the strength of our
diversified business model, the robust nature of our MENA
operations, the excellent potential of our global Injectables
business, our ability to deliver our core strategic objectives, the
dedication of our talented employees and our overall commitment to
quality and business ethics.
We are expecting a strong performance in 2012, reflecting the
investments that we have made across the Group in 2011 and the
excellent growth opportunities we see for our business,
particularly in the MENA region and in the global injectables
market."
-- ENDS --
Enquiries
Hikma Pharmaceuticals PLC
Susan Ringdal, Investor Relations Director +44 (0)20 7399
2760
FTI Consulting
Ben Atwell /Julia Phillips/Jonathan Birt/Matthew Cole +44 (0)20
7831 3113
About Hikma
Hikma Pharmaceuticals PLC is a fast growing multinational
pharmaceutical group focused on developing, manufacturing and
marketing a broad range of both branded and non-branded generic and
in-licensed products. Hikma's operations are conducted through
three businesses: "Branded", "Injectables" and "Generics" based
principally in the Middle East and North Africa ("MENA") region,
where it is a market leader, the United States and Europe. In 2011,
Hikma achieved revenue of $918.0 million and profit attributable to
shareholders of $80.1 million.
A meeting for analysts and investors will be held today at
09:30am GMT at FTI Consulting, Holborn Gate, 26, Holborn Gate
London WC2A 1PB. A live webcast of the meeting will be available at
www.hikma.com. The dial-in details are: London: +44 (0) 208 817
9301; UK: +44 (0) 845 634 0041 and UK Freephone: 0800 634 5205. The
Meeting ID is 6944088. In addition, we will be holding a conference
call for US investors at 2.00pm GMT on +1 866 966 1187, Meeting ID:
2421402252. A recording of both meeting and call will be available
on the Hikma website.
Business and financial review
Overview
Hikma's Group revenue increased by 25.6% to $918.0 million in
2011. Excluding the contribution of the MSI and Promopharm
acquisitions, organic sales growth was 7.6%.
Group gross profit increased by 10.6% to $395.3 million,
compared to $357.3 million in 2010 and adjusted operating profit
increased by $2.8 million or 2.0%, to $145.8 million. Adjusted
operating margin decreased from 19.6% in 2010 to 15.9% in 2011. The
lower margin in 2011 primarily reflects the exceptional
contribution from colchicine in 2010. Profitability was also
impacted by an increase in employee wages and benefits across the
MENA region, the consolidation of the lower margin MSI business and
the effect of foreign exchange movements on sales and raw material
costs.
Management focuses on adjusted profit metrics such as adjusted
operating profit and adjusted profit attributable to shareholders,
which remove the impact of the amortisation of intangible assets
(excluding software) and exceptional items such as transaction
costs, as this provides a clearer understanding of the Group's
underlying financial performance.
Summary P&L 2011 2010 Change
($ million)
------------------------------------- ------ ------ -------
Revenue 918.0 730.9 +25.6%
------------------------------------- ------ ------ -------
Gross profit 395.3 357.3 +10.6%
------------------------------------- ------ ------ -------
Gross margin 43.1% 48.9% -5.8
------------------------------------- ------ ------ -------
Operating profit 118.7 135.1 -12.1%
------------------------------------- ------ ------ -------
Adjusted operating profit 145.8 143.0 +2.0%
------------------------------------- ------ ------ -------
Adjusted operating margin 15.9% 19.6% -3.7
------------------------------------- ------ ------ -------
Profit attributable to shareholders 80.1 98.8 -19.0%
------------------------------------- ------ ------ -------
Adjusted profit attributable
to shareholders 100.9 103.1 -2.2%
------------------------------------- ------ ------ -------
Earnings per share (basic) (cents) 41.3 51.4 -19.7%
------------------------------------- ------ ------ -------
Dividend per share (cents) 13.0 13.0 -
------------------------------------- ------ ------ -------
Net cash from operating activities 126.4 152.5 -17.1%
------------------------------------- ------ ------ -------
Group revenue by business segment
Proforma(6) 2011 2010
2011
------------- ------------ ------ ------
Branded 46.8% 48.1% 53.9%
------------- ------------ ------ ------
Injectables 37.3% 34.4% 21.5%
------------- ------------ ------ ------
Generics 15.3% 16.9% 23.9%
------------- ------------ ------ ------
Others 0.6% 0.6% 0.7%
------------- ------------ ------ ------
(6) Reflects the impact on the Group if the MSI and Promopharm
businesses had been owned from the beginning of 2011
Group revenues by region
Proforma 2011 2011 2010
----------------- -------------- ------ ------
MENA 53.9% 55.4% 61.1%
----------------- -------------- ------ ------
US 37.0% 34.6% 28.0%
----------------- -------------- ------ ------
Europe and Rest
of World 9.1% 10.0% 10.9%
----------------- -------------- ------ ------
Branded
2011 highlights:
-- Strong second half performance across the MENA region
delivered full year revenue growth of 12.1% and organic revenue
growth of 9.6%. Adjusted operating profit increased by 9.3%
-- Entered the Moroccan market through the acquisition of a
94.1% controlling stake in Promopharm S.A.
-- Expanded capacity in Egypt, Tunisia and Algeria and acquired
a local manufacturing facility in Sudan, strengthening our presence
and capabilities in the MENA region
Branded revenues increased by 12.1% to $441.9 million, compared
to $394.2 million in 2010. Organic revenue growth was 9.6% to
$432.1 million, with the Promopharm acquisition contributing a
further $9.9 million in the three months to 31 December 2011.
In 2011, the rapid and effective response of our management
teams and the commitment of our local employees across the MENA
region helped to minimise the impact of the Arab Spring
disruptions, particularly in Egypt, Tunisia and Libya. Our Egyptian
business rebounded strongly in the second half and delivered 12.1%
revenue growth for the full year. In Tunisia, sales in 2011 were
maintained broadly in line with the prior year, despite the market
disruptions and the lost sales of Actos, which was withdrawn during
the year. In Libya, where the market was closed for more than half
the year, we achieved sales of just over $10 million in 2011 and we
expect demand to increase as the market recovers.
Our other key MENA markets performed well in 2011, as we focused
on growing our market share through increased sales of our existing
portfolio and continued new product launches. We delivered strong
growth in Algeria through an increase in local manufacturing,
despite lower pricing for locally produced products. In Jordan, we
benefitted as anticipated from the restructuring of our
distribution channels and we achieved strong growth in the Gulf
markets, particularly the UAE.
We have been building our presence in Sudan in recent years,
where we are the leading pharmaceutical company, with around 17%(7)
market share. In the second half of 2011, we acquired the business
of Elie Pharmaceuticals in Sudan, including a manufacturing
facility and a number of product registrations. This acquisition
will reinforce our leading market position and enable us to
accelerate the launch of new products. The total consideration was
$17.5 million.
(7) Advanced Marketing Statistics (AMS) Health, YTD December
2011
For some time, entry into Morocco, the fourth largest MENA
pharmaceutical market, has been an important strategic objective.
In October 2011, Hikma acquired Promopharm, the ninth largest
pharmaceutical company in Morocco with an attractive,
well-diversified portfolio of branded generics and in-licensed
products. We initially acquired a controlling stake of 63.9% and
then increased this stake to 84.3% by 31 December 2011 through the
purchase of additional shares in the market. Through a mandatory
tender offer that closed on 6 January 2012, we raised our stake in
Promopharm to 94.1%. The total consideration paid for the 94.1%
stake was $152.4 million, excluding transaction costs.
Promopharm contributed $9.9 million of sales to Hikma's Branded
business for the three month period to 31 December 2011 and a
further $1.3 million of revenue was consolidated into the
Injectables business. We see significant growth opportunities for
Promopharm. In the short term, we will focus on growing sales of
Promopharm's existing portfolio and R&D pipeline. Over the
medium term, we are working to register Hikma's strategic products
in Morocco, which we expect to drive sales growth and margin
expansion.
Revenue from in-licensed products grew by 9.8% to $174.8
million, despite one of our leading in-licensed products being
withdrawn from some key markets. For the year, in-licensed products
represented 39.6% of Branded sales, compared to 40.4% in 2010. We
continue to develop our portfolio of in-licensed products,
demonstrating our position as the partner of choice in the MENA
region.
In 2011, the Branded business launched a total of 43 products
across all markets, including 6 new compounds and 12 new dosage
forms and strengths. The Branded business also received 39
regulatory approvals across the region, including 8 for new
compounds.
Gross profit in the Branded business increased by 5.2% to $214.1
million, compared to $203.4 million in 2010. The Branded business
gross margin declined to 48.4%, compared to 51.6% in 2010. This
reflects increases in salaries and employee benefits due to
inflationary pressure across the MENA region, a higher percentage
of lower margin products and tender sales and the negative impact
of foreign exchange movements on sales and raw material costs. It
also results from the increase of local production in Algeria and
the lower prices for locally produced products.
Operating profit of the Branded business was $98.5 million,
compared to $98.7 million in 2010. Adjusted operating profit was
$105.1 million, up 9.3% from $96.2 million in 2010. Adjusted
operating margin was 23.8%, compared to 24.4% in the prior year,
principally reflecting the decline in gross profit margin.
In a very challenging year, we maintained our position as the
largest regional pharmaceutical company and the fifth(8) largest
pharmaceutical company overall in the MENA region. We increased our
market share to 3.9%, compared to 3.7% in the prior year. At the
same time, we invested significantly in our MENA facilities,
increasing capacity in Egypt, Tunisia and Algeria and strengthening
our sales and marketing operations across the region.
(8) IMS Health, YTD December 2011. Private retail sales only
include Algeria, Jordan, Kuwait, Egypt, Tunisia, Morocco, UAE,
Lebanon and Saudi Arabia
We believe Hikma is very well positioned to continue to grow
slightly ahead of the overall MENA market. With the benefit from
the Moroccan and Sudanese acquisitions we are expecting overall
Branded revenue growth of around 20% in 2012. We expect continued
inflationary pressure on MENA operating costs in 2012, which we aim
to offset through new product launches and sales and marketing
efficiencies. We expect gross margin and adjusted operating margin
in 2012 to be broadly in line with 2011.
Injectables
2011 highlights:
-- Organic Injectables revenue up 23.3%, driven by strong demand
across our product portfolio and growth in contract
manufacturing
-- Excellent improvement in organic Injectables operating margin to 17.5% from 15.1%
-- Completion of the MSI acquisition, adding $120.3 million of
revenue in the eight months to 31 December 2011
Revenue in our global Injectables business increased by $158.3
million to $315.7 million, compared to $157.4 million in 2010.
Organic Injectables revenues grew 23.3% to $194.1 million.
Injectables revenue Proforma(9) 2011 2010
by region 2011
--------------------- ------------ ------ ------
US 58.2% 51.3% 19.0%
--------------------- ------------ ------ ------
Europe 20.7% 24.8% 39.8%
--------------------- ------------ ------ ------
MENA 21.1% 23.9% 41.2%
--------------------- ------------ ------ ------
(9) Reflects the impact on the Injectables business if the MSI
and Promopharm businesses had been owned from the beginning of
2011
US Injectables sales, excluding MSI, reached $41.9 million, up
40.1% from $29.9 million in 2010. This excellent performance
reflects the strength of our product portfolio, with success from
recently launched products, good demand for our existing products
and an increased demand for contract manufacturing.
On 2 May 2011, we completed our acquisition of MSI, establishing
Hikma as the second largest supplier, by volume, of generic
injectables in the US market. The results of MSI have been
consolidated for the eight months to 31 December 2011, adding sales
of $120.3 million to our Injectables business for 2011. On a
proforma basis, MSI revenue in 2011 was $178.3 million. The MSI
business contributed adjusted operating profit of $17.8 million at
an adjusted operating margin of 14.8%, before the impact of
acquisition and integration related costs of $10.0 million, an
inventory adjustment of $1.8 million and intangible amortisation
$0.5 million. Overall, MSI contributed net income of $2.7 million
in 2011, ahead of our expectations.
Since May, we have been rapidly integrating this business and we
have made excellent progress with our restructuring programme.
Through headcount reductions and reorganisation of the
manufacturing operations, we are delivering significant gains in
productivity. We are driving greater value from the existing
product portfolio and in 2011 we began the process of re-activating
MSI's dormant ANDAs. We have also been executing our plan to build
the product pipeline through increased R&D. We have begun to
implement our plans to upgrade our Cherry Hill, New Jersey
facility, with investment in new state-of-the-art manufacturing
equipment with higher capacity, better reliability and of a
superior quality standard. We expect completion of this investment
by early 2013. As guided at the time of the acquisition, we expect
total capex investment in MSI of around $25 million, of which
around $4 million was incurred in 2011.
European Injectables sales increased by 24.7% to $78.2 million
in 2011, compared to $62.7 million in 2010. On a constant currency
basis, sales grew by 18.9%. Sales growth was driven by new contract
manufacturing opportunities, increased oncology sales and higher
sales of existing and recently launched products. We continued to
see strong price erosion during the year, which was more than
offset by volume growth.
Injectables sales in the MENA region increased by 16.2% to $75.4
million, compared to $64.9 million in 2010. Excluding, the
acquisition of Promopharm, which added Injectables revenue of $1.3
million for the three months to 31 December 2011, the organic MENA
Injectables business grew by 14.2%. In 2011, we saw the strongest
growth coming from Algeria, Jordan and Sudan, reflecting our
strengthened sales and marketing operations, new product launches,
growth in oncology sales and greater success in the tender market
as we grow in scale.
In October 2011, we inaugurated a new facility at our
Injectables manufacturing site in Portugal. The new facility has
the capability to fill and finish both sterile liquid and
freeze-dried (lyophilised) products. The facility has begun
producing lyophilised products for Europe and MENA and liquid
products for the US. In February 2012, the US Food and Drug
Administration ("FDA") approved the facility for the manufacture of
lyophilised products for the US market.
In 2011, the Injectables business launched a total of 43
products across all markets, including 7 new compounds and 14 new
dosage forms and strengths. The Injectables business also received
a total of 61 regulatory approvals across all regions and markets,
including 33 in MENA, 22 in Europe and 6 in the US.
Injectables gross profit grew by 79.7% to $127.6 million,
compared to $71.0 million in 2010. Gross margin was 40.4% compared
to 45.1% in 2010. Excluding MSI, the gross margin was 43.1% in
2011. The reduction in the underlying margin reflects increased
overheads related to the new lyophilisation plant, which was only
partially utilised during the year, and higher tender sales in
MENA.
Injectables operating profit increased by 91.5% to $45.4
million, compared to $23.7 million in 2010. Injectables operating
margin was 14.4%. Adjusted operating profit was $54.9 million and
adjusted operating margin was 17.4%. Excluding MSI and Promopharm,
operating margin was 17.5%, compared to 15.1% in 2010. This
significant margin improvement reflects our strong performance
across all markets, good cost control and the benefits of economies
of scale.
MSI is now largely integrated into the global Injectables
business and we expect the combined business to deliver very strong
growth in 2012, building on the excellent performance in 2011.
Given that MSI delivered better than expected profitability in
2011, we expect the adjusted operating margin of the overall
Injectables business to be in the high teens in 2012, ahead of our
previous expectations.
Generics
2011 highlights:
-- Generics revenue was $154.8 million, in line with guidance
-- Generics delivered double-digit revenue growth, excluding the
exceptional colchicine sales in 2010
-- Strong volume growth was partially offset by accelerating price erosion
Generics revenue was $154.8 million in 2011, down 11.3% from
$174.5 million in 2010. This decline in revenue reflects the
exceptional benefit of colchicine in 2010. Excluding colchicine,
the Generics business delivered double-digit revenue growth through
a significant increase in volumes, which was partially offset by
accelerating price erosion.
The Generics segment gross profit decreased by 36.2% to $52.2
million, compared to $81.8 million in the prior year. Gross margin
was 33.7%, compared to 46.9% in 2010, due to the contribution of
colchicine in 2010, as well as strong price erosion in the second
half of 2011 and an adverse change in product mix. Consequently,
the Generics segment achieved an operating profit of $17.1 million,
compared to $51.1 million in 2010 and Generics operating margin was
11.0%, compared to 29.3%.
During 2011 we made good progress with our tech transfer
programme. Products manufactured in our Jordan and Saudi Arabian
facilities for sale in the US represented 26.8% of Generics sales
in 2011, compared to 21.2%(10) in 2010. Over the medium term, we
will be focusing on leveraging our MENA production facilities and
exploiting synergies in order to be more competitive in the US oral
generic market.
(10) Sales figure in 2010 excludes colchicine
At our oral solid dosage manufacturing facility in Eatontown,
New Jersey, we have had to address observations made by the US FDA
during its inspection of the facility in June 2011, which resulted
in a warning letter being issued by the FDA in February 2012. We
have been taking, and continue to take, the necessary steps to
address the issues raised. We are committed to the highest
standards of quality and compliance and regard our relationship
with the FDA as critical to both our past and future success.
In 2011, the Generics business launched 2 new compounds and 5
new dosage forms and strengths and received 5 new product
approvals.
Generics revenue is expected to decline in 2012, reflecting
continued price erosion and limited new product launches. Looking
further ahead, we expect growth to be driven by continued
investment in the development of more differentiated products for
this business. R&D investment will increase in 2012, resulting
in an operating margin in the high single digits for the full year
in 2012, before rebuilding towards more normalised levels.
Other businesses
Other businesses primarily comprise Arab Medical Containers, a
manufacturer of pharmaceutical packaging, and International
Pharmaceuticals Research Centre, which conducts bio-equivalency
studies. These businesses, which supply Group operations and third
parties, had aggregate revenues of $5.6 million, compared with
aggregate revenue of $4.8 million in 2010.
These other businesses delivered an operating loss of $2.4
million in 2011, compared to an operating loss of $2.9 million in
2010.
Group
Revenue for the Group increased by 25.6% to $918.0 million in
2011, compared to $730.9 million in 2010. Excluding the
contribution of the MSI and Promopharm acquisitions, organic
revenue grew by $55.7 million, or 7.6%, driven by growth in the
Branded and Injectables businesses.
The Group's gross profit was $395.3 million, up 10.6% from
$357.3 million in 2010. Gross margin was 43.1%, compared to 48.9%
in the prior year, reflecting the loss of the contribution from
higher margin colchicine sales in 2010, increased employee wages
and benefits across the MENA region, the consolidation of the lower
margin MSI business and the effect of negative foreign exchange
movements on sales and raw material costs.
Group operating expenses grew by 24.5% to $276.7 million,
compared to $222.2 million in 2010. As a percentage of revenue,
Group operating expenses were 30.1%, in line with 2010. The
following paragraphs address the Group's main operating expenses in
turn.
Sales and marketing expenses grew more slowly than Group revenue
during the year, increasing by 17.5% to $125.3 million, compared to
$106.7 million in 2010, and decreased as a percentage of sales to
13.6% in 2011, compared to 14.6% in 2010. This primarily reflects
the strong performance of our global Injectables business, with its
relatively lower sales and marketing expenses as a percentage of
sales and the benefits of increased scale.
General and administrative expenses increased by 26.9% to $107.5
million, compared to $84.8 million in the prior year. As a
percentage of sales, general and administrative expenses were 11.7%
in 2011, compared to 11.6% in 2010. Excluding the impact of
acquisition and integration costs of $16.4 million in 2011 and $7.7
million in 2010, Group general and administrative expenses were
$91.2 million in 2011, or 9.9% of sales, compared to 10.5% in 2010.
This reflects good control of costs across the Group in 2011.
In line with our strategy to increase investment in R&D
across the Group, R&D grew by 32.2% to $31.2 million. Total
investment in R&D represented 3.4% of Group revenue, compared
to 3.2% in 2010. We expect to significantly increase our R&D
investment to around 4.5% of Group sales in 2012, as we work to
develop our global portfolio, particularly for our global
Injectables products.
During 2011, we have had success in executing our strategy to
build our API and R&D capabilities through strategic
investments in India and China. We acquired a minority stake in
Unimark Remedies Limited ("Unimark"), a leading manufacturer of API
ingredients and API intermediates. We will collaborate with Unimark
to develop new strategic APIs and finished products, enabling us to
bring more products in more therapeutic areas to market globally.
We also acquired a minority stake in Hubei Haosun Pharmaceutical Co
Ltd ("Haosun"), a Chinese company that develops and manufactures
niche, difficult to make APIs. This investment gives us access to a
high quality, long term source of oncology API.
Other net operating expenses increased on a reported basis by
$5.4 million to $12.6 million in 2011. However, excluding
non-recurring gains of $7.2 million in 2010 arising from the
revaluation of the previously held interests in the Tunisian
company Ibn Al Baytar and the Algerian company Al Dar Al Arabia,
net operating expenses decreased by $1.8 million in 2011 compared
to the prior year.
Operating profit for the Group was $118.7 million, compared to
$135.1 million in 2010. Group operating margin was 12.9%, compared
to 18.5% in 2010. Adjusted Group operating profit was $145.8
million compared to $143.0 million in 2010.
Research & Development(11)
The Group's product portfolio continues to grow. In 2011 the
Group's portfolio expanded to 667 compounds in 1,598 dosage forms
and strengths through acquisitions and new product launches. We
manufacture and/or sell 207of these compounds under-license.
Across all businesses and markets, a total of 91 products were
launched. In addition, the Group received 114 approvals.
Total marketed products Products launched in 2011
------------- --------------------------- --------------------------------------------
Total launches
New dosage across all
Dosage forms forms and countries
Compounds and strengths New compounds strengths in 2011(12)
Branded 448 1,168 6 12 43
Injectables 169 308 7 14 43
Generics 50 122 2 5 5
---------- --------------- -------------- ----------- ---------------
Group 667 1,598 15 31 91
Products pending approval as at
Products approved in 2011 31 Dec 2011
------------- --------------------------------------------- -----------------------------------------------
Total pending
Total approvals approvals across
New dosage across New dosage all countries
forms and all countries forms and as of 31 Dec
New compounds strengths in 2011(12) New compounds strengths 2011(12)
Branded 8 14 39 79 149 232
7 8 61 72 116 239
Injectables
5 14 14 22 22 22
Generics
-------------- ----------- ---------------- -------------- ----------- ------------------
Group 20 36 114 173 287 493
(11) Products are defined as pharmaceutical compounds sold by
the Group. New compounds are defined as pharmaceutical compounds
not yet launched by the Group and existing compounds being
introduced into a new segment
(12) Totals include all compounds and formulations that are
either launched, approved or pending approval across all
markets
To ensure the continuous development of our product pipeline, we
submitted 154 regulatory filings in 2011 across all regions and
markets. As of 31 December 2011, we had a total of 493 pending
approvals across all regions and markets.
At 31 December 2011, we had a total of 126 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.
Net finance expense
Net finance expense increased to $22.9 million, compared to
$13.5 million in 2010. The increase reflects higher borrowings in
2011 as a result of the MSI, Promopharm, Elie Pharmaceuticals,
Unimark and Haosun acquisitions. Additionally, it reflects higher
bank charges related to trade financing in the MENA region. We
expect the net finance expense in 2012 to be around $32 million,
reflecting the full year cost of new debt facilities, including
higher interest loans in local currencies that will help to provide
a natural hedge for foreign currency exposure. It also reflects an
increase in bank charges as we continue to grow our MENA
business.
Profit before tax
Profit before tax for the Group decreased by 22.4% to $93.9
million, compared to $121.0 million in 2010. Adjusted profit before
tax was $121.0 million, compared to $128.9 million in 2010.
Tax
The Group incurred a tax expense of $10.4 million in 2011,
compared to $21.5 million in 2010. The effective tax rate was
11.1%, compared to 17.7% in 2010. This reflects the reduced
profitability in the US in 2011, as well as the benefit of a
European Union tax credit arising in Portugal in 2011. Given the
changing geographic mix of sales, we expect the Group's effective
tax rate to be around 20% in 2012.
Profit for the year
The Group's profit attributable to equity holders of the parent
was $80.1 million, compared to $98.8 million in 2010. Adjusted
profit attributable to equity holders of the parent decreased by
2.2% to $100.9 million, compared to $103.1 million in 2010.
Earnings per share
Basic earnings per share for the year to 31 December 2011 were
41.3 cents, compared to 51.4 cents in 2010. Adjusted diluted
earnings per share were 51.0 cents, compared to 52.4 cents in
2010.
Dividend
The Board has recommended a final dividend of 7.5 cents per
share (approximately 4.6 pence per share), which will make a
dividend for the full year of 13.0cents per share, maintained in
line with 2010. The proposed final dividend will be paid on 24 May
2012 to shareholders on the register on 20 April 2012, subject to
approval by shareholders at the Annual General Meeting.
Net cash flow, working capital and net debt
Group cash flow from operations was $126.4 million, including
the $21.1 million impact of financing MSI's working capital
requirements, compared to $152.5 million in 2010. Excluding MSI,
Group net cash flow from operating activities decreased by 3.3% to
$147.5 million. Strong growth in operating cash flow in MENA helped
to offset the exceptional colchicine benefit in 2010.
Excluding the MSI acquisition, the Group continued to deliver
significant improvements in working capital in 2011, reducing its
overall working capital cycle by 15 days to 198 days. This reflects
our commitment to improve collections, increase the factoring of
receivables and optimise our supply chain. Including acquisitions,
the Group working capital cycle improved by 20 days to 193 days,
reflecting the shorter payment terms in the US.
Capital expenditure increased to $69.0 million, compared to
$49.1 million in 2010. In 2011, investment was focused on the
expansion of our manufacturing capabilities in the MENA region,
which accounted for $47.3 million in expenditure. This underlines
our future growth expectations for MENA and our commitment to the
region. Further investment included upgrades to the MSI facility
and the completion of our new lyophilisation plant in Portugal as
well as maintenance capex. We expect capital expenditure in 2012 to
be between $85 and $90 million, as we continue to expand our
manufacturing capacity in the MENA region and our Injectables
capacity in the US.
Group net debt increased from $101.1 million at 31 December 2010
to $421.9 million at 31 December 2011, reflecting the successful
negotiation of new debt facilities of $345.0 million. Net debt to
EBITDA was 2.6 times, compared to 0.6 times at 31 December 2010.
The increase in borrowing was principally to finance $325.0 million
of acquisitions completed during the year.
In December 2011, the Group further enhanced its borrowing
capacity by signing a new $110 million loan agreement with the
International Finance Corporation ("IFC"). The nine-year loan
facility will be used to support Hikma's ongoing programme of
capital expenditure and expansion in MENA. This facility is
currently undrawn.
Balance sheet
During the year, shareholder equity was negatively impacted by
unrealised foreign exchanges losses of $15.3 million, reflecting
the depreciation of the Euro, the Moroccan Dirham and the Algerian
Dinar against the US dollar, resulting from the revaluation of net
assets denominated in currencies other than US dollars.
2012 outlook
We expect to deliver Group revenue growth of around 20% in 2012.
Overall, we remain confident in Hikma's medium and long term growth
prospects and look forward to another strong year in 2012.
Responsibility statement
The responsibility statement below has been prepared in
connection with the company's full annual report for the year ended
31 December 2010. Certain parts thereof are not included within
this announcement.
We confirm to the best of our knowledge:
-- The financial statements, prepared in accordance with the
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole; and
-- The Business review, which is incorporated into the
Directors' report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face.
By order of the Board
Said Darwazah Khalid Nabilsi
Chief Executive Officer Chief Financial Officer
13 March 2012
Cautionary statement
This preliminary announcement has been prepared solely to
provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. It should not be relied on by any other party or for any
other purpose.
Forward looking statements
Certain statements in this announcement are forward-looking
statements - using words such as "intends", "believes",
"anticipates" and "expects". Where included, these 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 are based on assumptions
and involve inherent risks and uncertainties 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
adversely 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 the approval of this announcement.
Except as required by law, the Company is under no obligation 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.
Hikma Pharmaceuticals PLC
Consolidated statement of comprehensive income
for the year ended 31 December 2011
Notes 2011 2010
$000 $000
--------------- ----------------
Continuing operations
Revenue 3 918,025 730,936
Cost of sales 3 (522,676) (373,592)
--------------- ----------------
Gross profit 3 395,349 357,344
--------------- ----------------
Sales and marketing costs (125,295) (106,673)
General and administrative
expenses (107,540) (84,755)
Research and development costs (31,218) (23,608)
Other operating expenses (net) (12,608) (7,213)
--------------- ----------------
Total operating expenses (276,661) (222,249)
Adjusted operating profit 145,824 143,025
Exceptional items:
- Acquisition and integration
related expenses 4 (16,368) (7,705)
- Gains on revaluation of previously
held equity interests 4 - 7,176
- Inventory related adjustment 4 (1,770) -
Intangible amortisation* 4 (8,998) (7,401)
------------------------------------------ ---------- ------ --------------- ----------------
Operating profit 3 118,688 135,095
Results from associated companies (1,164) -
Finance income 468 346
Finance expense (23,368) (13,856)
Other expense (net) (732) (603)
--------------- ----------------
Profit before tax 93,892 120,982
Tax 5 (10,423) (21,455)
Profit for the year 83,469 99,527
=============== ================
Attributable to:
Non-controlling interests 3,362 678
Equity holders of the parent 80,107 98,849
--------------- ----------------
83,469 99,527
=============== ================
Cumulative effect of change
in fair value
of available for sale investments (42) 75
Cumulative effect of change
in fair value
of financial derivatives (692) (256)
Exchange difference on translation
of foreign operations (15,294) (19,532)
Total comprehensive income
for the year 67,441 79,814
=============== ================
Attributable to:
Non-controlling interests 3,557 (1,023)
Equity holders of the parent 63,884 80,837
--------------- ----------------
67,441 79,814
=============== ================
Earnings per share (cents)
Basic 7 41.3 51.4
=============== ================
Diluted 7 40.5 50.2
=============== ================
Adjusted basic 7 52.0 53.6
=============== ================
Adjusted diluted 7 51.0 52.4
=============== ================
* Intangible amortisation comprises the amortisation on
intangible assets other than software.
Hikma Pharmaceuticals PLC
Consolidated balance sheet
at 31 December 2011
Note 2011 2010
$000 $000
-------------- ---------------------------
Non-current assets
Intangible assets 408,804 269,120
Property, plant and
equipment 421,357 317,463
Interests in associated 37,445 -
companies
Deferred tax assets 36,072 23,288
Available for sale
investments 435 477
Financial and other non-current
assets 11,644 11,357
915,757 621,705
-------------- ---------------------------
Current assets
Inventories 8 239,260 182,192
Income tax asset 1,486 7,518
Trade and other receivables 9 315,856 237,185
Collateralised and
restricted cash 2,595 3,573
Cash and cash equivalents 94,715 62,718
Other current assets 5,973 929
659,885 494,115
-------------- ---------------------------
Total assets 1,575,642 1,115,820
============== ===========================
Current liabilities
Bank overdrafts and
loans 152,853 81,015
Obligations under finance
leases 3,300 2,251
Trade and other payables 10 171,098 127,555
Income tax provision 14,561 12,621
Other provisions 9,398 8,641
Other current liabilities 39,373 36,540
390,583 268,623
-------------- ---------------------------
Net current assets 269,302 225,492
-------------- ---------------------------
Non-current liabilities
Long-term financial
debts 11 344,895 78,040
Deferred income 249 335
Obligations under finance
leases 18,134 6,118
Deferred tax liabilities 23,147 12,404
386,425 96,897
-------------- ---------------------------
Total liabilities 777,008 365,520
============== ===========================
Net assets 798,634 750,300
============== ===========================
Equity
Share capital 12 34,904 34,525
Share premium 278,094 275,968
Own shares (2,222) (2,220)
Other reserves 465,799 435,649
-------------- ---------------------------
Equity attributable to equity
holders of the parent 776,575 743,922
Non-controlling interests 22,059 6,378
-------------- ---------------------------
Total equity 798,634 750,300
============== ===========================
Hikma Pharmaceuticals PLC
Consolidated statement of changes in equity
at 31 December 2011
Total
equity
attributable
to equity
shareholders
Merger Revaluation Translation Retained Total Share Share Own of the Non-controlling Total
reserve reserves reserves earnings reserves capital premium shares parent interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
-------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Balance
at 1 January
2010 33,920 4,266 5,751 327,130 371,067 34,236 272,785 (2,203) 675,885 7,372 683,257
Profit for
the year - - - 98,849 98,849 - - - 98,849 678 99,527
Cumulative
effect of
change in
fair value
of available
for sale
investments - - - 75 75 - - - 75 - 75
Cumulative
effect of
change in
fair value
of financial
derivatives - - - (256) (256) - - - (256) - (256)
Realisation
of revaluation
reserve - (181) - 181 - - - - - - -
Currency
translation
loss - - (17,831) - (17,831) - - - (17,831) (1,701) (19,532)
----------------- -------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Total
comprehensive
income for
the year - (181) (17,831) 98,849 80,837 - - - 80,837 (1,023) 79,814
Issue of
equity shares - - - - - 289 3,183 - 3,472 - 3,472
Purchase
of own shares - - - - - - - (107) (107) - (107)
Cost of
equity settled
employee
share scheme - - - 4,473 4,473 - - - 4,473 - 4,473
Exercise
of employees
long term
incentive
plan - - - (90) (90) - - 90 - - -
deferred
tax arising
on share-based
payments - - - 1,461 1,461 - - - 1,461 - 1,461
Current
tax arising
on share-based
payments - - - 974 974 - - - 974 - 974
Dividends
on ordinary
shares (note
12) - - - (23,073) (23,073) - - - (23,073) - (23,073)
Acquisition
of subsidiaries - - - - - - - - - 29 29
----------------- -------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Balance
at 31 December
2010 and
1 January
2011 33,920 4,085 (12,080) 409,724 435,649 34,525 275,968 (2,220) 743,922 6,378 750,300
Profit for
the year - - - 80,107 80,107 - - - 80,107 3,362 83,469
Cumulative
effect of
change in
fair value
of available
for sale
investments - - - (42) (42) - - - (42) - (42)
Cumulative
effect of
change in
fair value
of financial
derivatives - - - (692) (692) - - - (692) - (692)
Realisation
of revaluation
reserve - (181) - 181 - - - - - - -
Currency
translation
loss - - (15,489) - (15,489) - - - (15,489) 195 (15,294)
----------------- -------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Total
comprehensive
income for
the year - (181) (15,489) 79,554 63,884 - - - 63,884 3,557 67,441
Issue of
equity shares - - - - - 379 2,126 - 2,505 - 2,505
Purchase
of own shares - - - - - - - (115) (115) - (115)
Cost of
equity settled
employee
share scheme - - - 7,507 7,507 - - - 7,507 - 7,507
Exercise
of employees
long term
incentive
plan - - - (113) (113) - - 113 - - -
Deferred
tax arising
on share-based
payments - - - (5,644) (5,644) - - - (5,644) - (5,644)
Current
tax arising
on share-based
payments - - - 3,750 3,750 - - - 3,750 - 3,750
Dividends
on ordinary
shares (note
6) - - - (25,201) (25,201) - - - (25,201) (100) (25,301)
Acquisition
of subsidiaries - - - - - - - - - 26,650 26,650
Adjustment
arising
from change
in
non-controlling
interests - - - (14,033) (14,033) - - - (14,033) (14,914) (28,947)
Issue of
equity shares
of subsidiary - - - - - - - - - 488 488
----------------- -------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Balance
at 31 December
2011 33,920 3,904 (27,569) 455,544 465,799 34,904 278,094 (2,222) 776,575 22,059 798,634
----------------- -------------- -------------------- ------------------- --------------- ------------- ----------- --------------- ----------- ------------------ ------------------ ------------
Hikma Pharmaceuticals PLC
Consolidated cash flow statement
at 31 December 2011
Note 2011 2010
$000 $000
------------------------ ------------------------
Net cash from operating activities 126,397 152,540
Investing activities
Purchases of property, plant and
equipment (69,032) (49,121)
Proceeds from disposal of property,
plant and equipment 696 1,556
Purchase of intangible assets (8,967) (4,074)
Proceeds from disposal of intangible
assets 191 566
Acquisition of interest in associated (38,610) -
companies
Investment in financial and other
non-current assets (287) (10,800)
Proceeds from disposal of available
for sale investments - 140
Acquisition of subsidiary undertakings
net of cash acquired (217,779) (23,000)
Payments of costs directly attributable
to acquisitions 4 (10,147) (7,705)
Finance income 468 346
Net cash used in investing activities (343,467) (92,092)
------------------------ ------------------------
Financing activities
Decrease/(Increase) in collateralised
cash 978 (1,140)
Increase in long-term financial debts 335,353 19,045
Repayment of long-term financial
debts (68,364) (59,177)
Increase in short-term borrowings 59,095 14,147
Decrease in obligations under finance
leases (2,028) (616)
Dividends paid (25,201) (23,073)
Dividends paid to non-controlling (101) -
shareholders
Interest paid (23,758) (13,754)
Proceeds from issue of new shares 2,390 3,365
Proceeds from non-controlling interest for 488 -
capital increase in subsidiary
Acquisition of non-controlling interest (29,196) -
in subsidiary
------------------------ ------------------------
Net cash generated by/(used in) financing
activities 249,656 (61,203)
------------------------ ------------------------
Net increase/(decrease) in cash and
cash equivalents 32,586 (755)
Cash and cash equivalents at beginning
of year 62,718 65,663
Foreign exchange translation movements (589) (2,190)
------------------------ ------------------------
Cash and cash equivalents at end
of year 94,715 62,718
======================== ========================
Hikma Pharmaceuticals PLC
1. Basis of preparation
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2011
or 2010, but is derived from those accounts. Statutory accounts for
2010 have been delivered to the Registrar of Companies and those
for 2011 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts; their
reports were unqualified, did not draw attention any matters by way
of emphasis without qualifying their report and did not contain
statements under S498 (2) or (3) of the Companies Act 2006. Hikma
Pharmaceuticals PLC's consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (IFRSs) issued by the International Accounting Standards
Board. The financial statements have also been prepared in
accordance with IFRSs adopted for use in the European Union and
therefore comply with Article 4 of the EU IAS Regulation. The
financial statements have been prepared under the historical cost
convention, except for the revaluation to market of certain
financial assets and liabilities. The preliminary announcement is
based on the Company's financial statements.
The Group's previously published financial statements were also
prepared in accordance with International Financial Reporting
Standards. These International Financial Reporting Standards have
been subject to amendment and interpretation by the International
Accounting Standards Board and the financial statements presented
for the years ended 31 December 2010 and 31 December 2011 have been
prepared in accordance with those revised standards. Unless stated
otherwise these policies are in accordance with the revised
standards that have been applied throughout the year and prior
years presented in the financial statements.
The presentational and functional currency of Hikma
Pharmaceuticals PLC is the US Dollar as the majority of the
Company's business is conducted in US Dollars (USD).
2. Going concern
The directors believe that the Group is well diversified due to
its geographic spread, product diversity and large customer and
supplier base. The Group operates in the relatively defensive
generic pharmaceuticals industry which the directors expect to be
less affected compared to other industries.
The Group has increased its year end net debt position to $421.9
million (2010: $101.1 million) following significant investment in
acquisitions. Operating cash flow in 2011 was $126.4 million (2010:
$152.5 million). The Group has $396.4 million (2010: $264.8
million) of undrawn banking facilities. These facilities are well
diversified across the operating subsidiaries of the Group and are
with a number of financial institutions. The Group's forecasts,
taking into account reasonable possible changes in trading
performance, facility renewal sensitivities and maturities of
long-term debt, show that the Group should be able to operate well
within the levels of its facilities and their related
covenants.
After making enquiries, the directors believe that the Group is
adequately placed to manage its business and financing risks
successfully despite the current uncertain economic and political
outlook. The directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future. The directors therefore continue to adopt the
going concern basis in preparing the financial statements.
3. Segmental reporting
For management purposes, the Group is currently organised into
three operating divisions - Branded, Injectables and Generics.
These divisions are the basis on which the Group reports its
segment information.
The Group discloses underlying operating profit as the measure
of segment result as this is the measure used in the
decision-making and resource allocation process of the chief
operating decision maker, who is the Group's Chief Executive
Officer.
Information regarding the Group's operating segments is reported
below.
The following is an analysis of the Group's revenue and results
by reportable segment in 2011:
Year ended
31 December 2011 Branded Injectables Generic Others Group
$000 $000 $000 $000 $000
--------------- -------------- ------------------ ---------------- ------------------
Revenue 441,907 315,728 154,813 5,577 918,025
Cost of sales (227,830) (188,151) (102,609) (4,086) (522,676)
--------------- -------------- ------------------ ---------------- ------------------
Gross profit 214,077 127,577 52,204 1,491 395,349
Adjusted segment
result 105,143 54,938 17,124 (2,369) 174,836
Exceptional items:
- Integration related
expenses (921) (4,551) - - (5,472)
- Inventory related
adjustments - (1,770) - - (1,770)
Intangible amortisation* (5,763) (3,186) (39) (10) (8,998)
-------------------------- --------------- -------------- ------------------ ---------------- ------------------
Segment result 98,459 45,431 17,085 (2,379) 158,596
=============== ============== ================== ================
Adjusted Unallocated
corporate expenses (29,012)
Exceptional items:
- Acquisition related
expenses (10,896)
-------------------------- --------------- -------------- ------------------ ---------------- ------------------
Unallocated corporate
expenses (39,908)
Adjusted operating
profit 145,824
-------------------------- --------------- -------------- ------------------ ---------------- ------------------
Operating profit 118,688
Results from associated
companies (1,164)
Finance income 468
Finance expense (23,368)
Other expense (net) (732)
------------------
Profit before tax 93,892
Tax (10,423)
------------------
Profit for the year 83,469
==================
Attributable to:
Non-controlling interest 3,362
Equity holders of
the parent 80,107
83,469
==================
* Intangible amortisation comprises the amortisation of
intangible assets other than software.
"Others" mainly comprise Arab Medical Containers Ltd,
International Pharmaceutical Research Center Ltd and the chemicals
division of Hikma Pharmaceuticals Ltd Jordan.
Unallocated corporate expenses are primarily made up of employee
costs, office costs, professional fees, donations, travel expenses
and acquisition related expenses.
Segment assets and
liabilities Corporate
2011 Branded Injectables Generic and others Group
$000 $000 $000 $000 $000
---------------- ------------------ -------------- ----------------- ------------
Additions to property,
plant and equipment
(cost) 44,869 11,926 12,925 975 70,695
Acquisition of subsidaries'
property, plant and
equipment (net book
value) 24,125 50,071 - - 74,196
Additions to intangible
assets 5,054 2,520 1,106 287 8,967
Intangible assets
arising on acquisition 110,900 40,324 - - 151,224
Total property, plant
and equipment and
intangible assets
(net book value) 527,240 244,725 50,759 7,437 830,161
Depreciation 18,205 10,521 6,250 684 35,660
Amortisation (including
software) 7,064 3,748 307 224 11,343
Interests in associated
companies - - - 37,445 37,445
Balance sheet
Total assets 958,709 389,819 168,526 58,588 1,575,642
================ ================== ============== ================= ============
Total liabilities 490,523 197,271 31,514 57,700 777,008
================ ================== ============== ================= ============
The following is an analysis of the Group's revenue and results
by reportable segment in 2010:
Year ended
31 December 2010 Branded Injectables Generic Others Group
$000 $000 $000 $000 $000
----------- ----------------- ------------------ ---------------- ------------------
Revenue 394,166 157,439 174,491 4,840 730,936
Cost of sales (190,733) (86,437) (92,710) (3,712) (373,592)
----------- ----------------- ------------------ ---------------- ------------------
Gross profit 203,433 71,002 81,781 1,128 357,344
----------- ----------------- ------------------ ---------------- ------------------
Adjusted segment
result 96,230 26,224 51,258 (2,889) 170,823
Exceptional items
:
- Gains on revaluation
of previously held
equity interests 7,176 - - - 7,176
Intangible amortisation* (4,732) (2,500) (169) - (7,401)
-------------------------- ----------- ----------------- ------------------ ---------------- ------------------
Segment result 98,674 23,724 51,089 (2,889) 170,598
=========== ================= ================== ================ ==================
Adjusted unallocated
corporate expenses (27,798)
Exceptional items
:
- Acquisition related
expenses (7,705)
-------------------------- ----------- ----------------- ------------------ ---------------- ------------------
Unallocated corporate
expenses (35,503)
Adjusted operating
profit 143,025
-------------------------- ----------- ----------------- ------------------ ---------------- ------------------
Operating profit 135,095
Finance income 346
Finance expense (13,856)
Other expense (net) (603)
------------------
Profit before tax 120,982
Tax (21,455)
------------------
Profit for the year 99,527
==================
Attributable to:
Non-controlling interest 678
Equity holders of
the parent 98,849
99,527
==================
* Intangible amortisation comprises the amortisation of
intangible assets other than software.
"Others" mainly comprise Arab Medical Containers Ltd,
International Pharmaceutical Research Center Ltd and the chemicals
division of Hikma Pharmaceuticals Ltd Jordan.
Unallocated corporate expenses are primarily made up of employee
costs, office costs, professional fees, donations, travel expenses
and acquisition related expenses.
Segment assets and
liabilities Corporate
2010 Branded Injectables Generic and others Group
$000 $000 $000 $000 $000
------------ ------------------ -------------- ----------------- ------------
Additions to property,
plant and equipment
(cost) 32,747 7,428 6,798 2,125 49,098
Acquisition of subsidiary's
property, plant and
equipment (net book
value) 24,437 - - - 24,437
Additions to intangible
assets 2,147 1,902 5 20 4,074
Intangible assets
arising on acquisition 28,066 - - - 28,066
Total property, plant
and equipment and
intangible assets
(net book value) 397,301 146,818 32,682 9,782 586,583
Depreciation 16,032 5,517 6,373 1,169 29,091
Amortisation (including
software) 6,044 2,848 365 85 9,342
Balance sheet
Total assets 755,936 184,039 150,015 25,830 1,115,820
============ ================== ============== ================= ============
Total liabilities 240,438 77,217 26,967 20,898 365,520
============ ================== ============== ================= ============
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
For the year
ended 31 December
2011 2010
$000 $000
---------- ---------
Middle East and North Africa 508,776 446,524
United States 317,334 204,389
Europe and Rest of the World 87,622 79,133
United Kingdom 4,293 890
918,025 730,936
========== =========
The top selling markets are USA, Saudi Arabia and Algeria with
total sales of USD 317.3 million (2010: USD 204.4 million), USD
121.4 million (2010: USD 118.5 million) and USD 102.5 million
(2010: USD 88.8 million), respectively.
Included in revenues arising from the Branded and Injectables
segments are revenues of approximately USD 101.9 million (2010: USD
99.4 million) which arose from sales to the Group's largest
customer which is located in Saudi Arabia.
The following is an analysis of the total non current assets
excluding deferred tax and financial instruments and an analysis of
total assets by the geographical area in which the assets are
located:
Total non current
assets excluding
deferred tax and
financial instruments Total assets as
as at 31 December at 31 December
------------------------- ----------------------
2011 2010 2011 2010
$000 $000 $000 $000
------------ ----------- ---------- ----------
Middle East and North Africa 567,935 417,076 1,019,288 774,402
Europe 141,481 146,844 197,128 185,945
United States 131,589 33,589 349,705 150,018
United Kingdom 800 431 9,521 5,455
841,805 597,940 1,575,642 1,115,820
============ =========== ========== ==========
4. Exceptional items and intangible amortisation
Exceptional items are disclosed separately in the statement of
comprehensive income to assist in the understanding of the Group's
underlying performance.
2011 2010
$000 $000
---------------- ----------------
Acquisition related expenses (10,896) (7,705)
Integration related expenses (5,472) -
---------------- ----------------
(16,368) (7,705)
Gains on revaluation of previously
held equity interests - 7,176
Inventory related adjustment (1,770) -
---------------- ----------------
Exceptional items (18,138) (529)
Intangible amortisation * (8,998) (7,401)
Exceptional items and intangible
amortisation (27,136) (7,930)
Tax effect 6,374 3,666
Impact on profit for the year (20,762) (4,264)
================ ================
* Intangible amortisation comprises the amortisation on
intangible assets other than software.
Acquisition and integration related expenses are costs incurred
in acquiring the Baxter Healthcare Multi-Source injectables
business (MSI), Societe de Promotion Pharmaceutique du Maghreb S.A.
(Promopharm) S.A, and Elie Pharmaceuticals Businesses, now called
("Savanna"). Acquisition related expenses are included in the
unallocated corporate expenses while integration related expenses
are included in segment results. Further details are set out in
note 15 "Acquisition of subsidiaries".
Acquisition related expenses mainly comprises of third party
consulting services, legal and professional fees.
USD 10.1 million (31 December 2010: USD 7.7million) of costs
have been classified as investing activities in the cash flow
statement relating to the cash outflow in respect of acquisition
and integration costs in the period.
The inventory related adjustments reflect the fair value uplift
of the inventory acquired as part of the MSI acquisition (refer to
note 15).
In the prior year, acquisition related expenses related to
transaction costs incurred in acquiring Ibn Al Baytar, Al Dar Al
Arabia and MSI, for which the process of completion commenced in
the second half of 2010. These were included in the unallocated
corporate expenses.
Gains on revaluation of previously held equity interests related
to gains arising from the remeasurement to fair value of the
previously held equity interests in Ibn Al Baytar and Al Dar Al
Arabia. These were included within other operating expenses
(net).
5. Tax
2011 2010
$000 $000
----------- ------------
Current tax:
Foreign tax 15,541 27,037
Prior year adjustments (1,358) (691)
Deferred tax (3,760) (4,891)
10,423 21,455
=========== ============
UK corporation tax is calculated at 26.5% (2010: 28%) of the
estimated assessable profit made in the UK for the year.
Effective tax rate for the Group is 11.1% (2010: 17.74%).
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdiction.
The charge for the year can be reconciled to profit before tax
per the statement of comprehensive income as follows:
2011 2010
$000 $000
------------ ------------
Profit before tax: 93,892 120,982
------------ ------------
Tax at the UK corporation tax rate
of 26.5% (2010: 28%) 24,881 33,875
Profits taxed at different rates (10,796) (15,184)
Permanent differences (5,158) 853
Temporary differences for which no
benefit is recognised 2,854 2,602
Prior year adjustments (1,358) (691)
Tax expense for the year 10,423 21,455
============ ============
6. Dividends
2011 2010
$000 $000
------- -------
Amounts recognised as distributions
to equity holders in the year:
Final dividend for the year ended
31 December 2010 of 7.5 cents (2009:
6.5 cents) per share 14,497 12,473
Interim dividend for the year ended
31 December 2011 of 5.5 cents (2010:
5.5 cents) per share 10,704 10,600
25,201 23,073
======= =======
The proposed final dividend for the year ended 31 December 2011
is 7.5 cents (2010: 7.5 cents) per share, bringing the total
dividends for the year to 13.0 cents (2010: 13.0 cents) per
share.
7. Earnings per share
Earnings per share are calculated by dividing the profit
attributable to equity holders of the parent by the weighted
average number of ordinary shares. The number of ordinary shares
used for the basic and diluted calculations are shown in the table
below. Adjusted basic earnings per share and adjusted diluted
earnings per share are intended to highlight the adjusted results
of the Group before exceptional items and intangible amortisation.
A reconciliation of the basic and adjusted earnings used is also
set out below:
2011 2010
$000 $000
----------- ------------
Earnings for the purposes of basic and
diluted earnings per share being net profit
attributable to equity holders of the parent 80,107 98,849
=========== ============
Exceptional items (see note 4) 18,138 529
Intangible amortisation* 8,998 7,401
Tax effect of adjustments (6,374) (3,666)
Adjusted earnings for the purposes of adjusted
basic and diluted earnings per share being
adjusted net profit attributable to equity
holders of the parent 100,869 103,113
=========== ============
Number Number
Number of shares '000 '000
Weighted average number of Ordinary Shares
for the purposes of basic earnings per
share 194,135 192,304
Effect of dilutive potential Ordinary Shares:
Share based awards 3,633 4,551
----------- ------------
Weighted average number of Ordinary Shares
for the purposes of diluted earnings per
share 197,768 196,855
=========== ============
2011 2010
Earnings Earnings
per share per share
Cents Cents
----------- ------------
Basic 41.3 51.4
----------- ------------
Diluted 40.5 50.2
----------- ------------
Adjusted basic 52.0 53.6
----------- ------------
Adjusted diluted 51.0 52.4
----------- ------------
*Intangible amortisation comprises the amortisation of
intangible assets other than software.
8. Inventories
2011 2010
$000 $000
-------- --------
Finished goods 77,862 50,829
Work-in-progress 28,039 29,592
Raw and packing materials 114,449 81,864
Goods in transit 18,910 19,907
239,260 182,192
======== ========
Goods in transit include inventory held at third parties whilst
in transit between Group companies.
9. Trade and other receivables
2011 2010*
$000 $000
---------------- --------
Trade receivables 292,100 216,334
Prepayments 16,015 12,451
Value added tax recoverable 5,188 6,219
Interest receivable 490 223
Employee advances 2,063 1,958
315,856 237,185
================ ========
* Certain balances have been reclassified to conform with
current period presentation. Trade receivables in 2010 were net of
USD 16,000,000 of provisions for expired goods, certain returns and
other rebates, which have now been included in other current
liabilities.
10. Trade and other payables
2011 2010
$000 $000
-------- --------
Trade payables 97,756 74,936
Accrued expenses 60,276 42,428
Employees' provident fund * 4,181 2,625
VAT and sales tax payables 535 452
Dividends payable ** 2,207 2,256
Social security withholdings 1,107 1,130
Income tax withholdings 2,482 2,074
Other payables 2,554 1,654
171,098 127,555
======== ========
* The employees' provident fund liability mainly represents the
outstanding contributions due to the Hikma Pharmaceuticals Limited
- Jordan retirement benefit plan, on which the fund receives 5%
interest.
** Dividends payable includes USD 2,022,000 (2010: USD
2,072,000) due to the previous shareholders of APM.
11. Long-term financial debts
2011 2010
$000 $000
------------- -------------
Total loans 410,197 114,235
Less: current portion of loans (65,302) (36,195)
------------- -------------
Long-term financial loans 344,895 78,040
============= =============
Breakdown by maturity:
Within one year 65,302 36,195
In the second year 84,488 34,193
In third year 63,732 26,700
In the fourth year 65,490 6,167
In the fifth year 58,069 3,735
Thereafter 73,116 7,245
410,197 114,235
============= =============
Breakdown by currency:
USD 346,405 67,237
Euro 18,394 30,181
Algerian Dinar 37,400 10,951
Egyptian Pound 4,343 1,998
Tunisian Dinar 3,655 3,868
------------- -------------
410,197 114,235
============= =============
The loans are held at amortised cost.
Included in the table above are the following major arrangements
entered by the Group during the year::
a) A five year USD 100 million syndicated loan and a four year
USD 45 million revolver was entered into on 2 May 2011. The term
loan has been partially repaid by USD 25 million on 15 December
2011. There is an outstanding balance at the year end of USD 81
million and an unused revolver balance of USD 39 million. Quarterly
repayments for the term loan should commence on 30 June 2012 and
will continue until 2 May 2016. The revolver maturity date is 2 May
2015. This financing has been used to fund the acquisitions of the
MSI injectables business in the US.
b) A seven year syndicated loan of up to USD 180 million was
entered into on 27 September 2011. The loan has an outstanding
balance at year end of 140 million and a zero unused available
limit. The syndicated loan has been underwritten by USD 140
million. As of the balance sheet date the syndicate was not closed.
Quarterly repayments for the term loan should commence 18 months
after the date of the agreement and will continue until the 84th
month after the date of the agreement. Payment will be made with
equal instalments representing 3.182% from the loan balance and a
bullet payment of 30% at the maturity of the loan. The loan has
been used to finance the Moroccan acquisition and the Group general
capital expenditures.
12. Share capital
Issued and fully paid
- included in shareholders'
equity:
2011 2010
---------------------------- ----------------------------
Number Number
'000 $000 '000 $000
--------------- ----------- ------------- -------------
At 1 January 193,517 34,525 191,628 34,236
Issued during the year 2,334 379 1,889 289
At 31 December 195,851 34,904 193,517 34,525
=============== =========== ============= =============
13. Net cash from operating activities
2011 2010
$000 $000
----------------- -----------------
Profit before tax 93,892 120,982
Adjustments for:
Depreciation and amortisation of:
Property, plant and equipment 35,660 29,091
Intangible assets 11,343 9,342
Gain on revaluation of previously held equity
interest - (7,176)
Loss on disposal of property, plant and equipment 22 376
Gain on disposal of intangible assets (91) (162)
Movement on provisions 757 2,488
Movement on deferred income (87) (159)
Cost of equity settled employee share scheme 7,507 4,473
Payments of costs directly attributable to
acquisitions 4 10,147 7,705
Finance income (468) (346)
Interest and bank charges 23,368 13,856
Results from associates 1,164 -
----------------- -----------------
Cash flow before working capital 183,214 180,470
Change in trade and other receivables (59,898) 10,689
Change in other current assets (4,570) 322
Change in inventories (8,199) (19,295)
Change in trade and other payables 15,987 16,102
Change in other current liabilities 1,958 (3,091)
----------------- -----------------
Cash generated by operations 128,492 185,197
Income tax paid (2,095) (32,657)
Net cash generated from operating activities 126,397 152,540
================= =================
14. Related party balances
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
Transactions between the Group and its associate and other related
parties are disclosed below.
During the year, Group companies entered into the following
trading transactions with related parties:
Darhold Limited: is a related party of the Group because it is
considered one of the major shareholders of Hikma Pharmaceuticals
PLC with ownership percentage of 29.2% at the end of 2011 (2010:
29.5%). Further details on the relationship between Mr. Samih
Darwazah, Mr. Said Darwazah, Mr. Mazen Darwazah and Mr. Ali
Al-Husry, and Darhold Limited are given in the Directors'
Report.
Other than dividends (as paid to all shareholders), there were
no transactions between the Group and Darhold Limited in the
year.
Capital Bank - Jordan: is a related party of the Group because
during the year two board members of the Bank were also board
members at Hikma Pharmaceuticals PLC. Total cash balances at
Capital Bank - Jordan were USD 610,000 (2010: USD 2,169,000). Loans
and overdrafts granted by Capital Bank to the Group amounted to USD
3,841,000 (2010: USD 48,000) with interest rates ranging between
8.25% and 3MLIBOR + 1. Total interest expense incurred against
Group facilities was USD 7,000 (2010: USD 18,000). Total interest
income received was Nil (2010: USD 8,000) and total commission paid
in the year was USD 8,000 (2010: USD 76,000).
Jordan International Insurance Company: is a related party of
the Group because one board member of the company is also a board
member at Hikma Pharmaceuticals PLC. Total insurance premiums paid
by the Group to Jordan International Insurance Company during the
year were USD 3,035,000 (2010: USD 2,166,000). The Group's
insurance expense for Jordan International Insurance Company
contracts in the year 2011 was USD 2,902,000 (2010: USD 2,481,000).
The amounts due from Jordan International Insurance Company at the
year end were USD 109,000 (2010: Due to USD 66,000).
Mr. Yousef Abd Ali: Mr. Yousef Abd Ali is a related party of the
Group because he holds a non-controlling interest in Hikma Lebanon
of 33%, the amount owed to Mr. Yousef by the Group as at 31
December 2011 was USD 150,000 (2010: USD 161,000).
Labatec Pharma: is a related party of the Group because it is
owned by Mr. Samih Darwazah. During 2011 the Group total sales to
Labatec Pharma amounted to USD 34,000 (2010: USD 414,000) and the
Group total purchases from Labatec amounted to USD 3,805,000 (2010:
USD 1,373,000). At 31 December 2011 the amount owed to Labatec
Pharma from the Group was USD 753,000 (2010: USD 193,000).
King and Spalding: is a related party of the Group because the
partner of the firm is a board member and the company secretary of
West-Ward. King and Spalding is an outside legal counsel firm that
handles general legal matters for West-Ward. During 2011 fees of
USD 1,216,000 (2010: USD 927,000) were paid for legal services
provided.
15. Acquisition of subsidiaries
During the year, Hikma acquired three businesses: Baxter
Healthcare Corporation's Multi-Source injectables (MSI) business,
Societe de Promotion Pharmaceutique du Maghreb S.A. (Promopharm)
and Savanna Pharmaceuticals Industries Co.Ltd (Savanna), as
disclosed below:
MSI
On 2 May 2011, the Group completed the acquisition of Baxter
Healthcare Corporation's Multi-Source Injectables (MSI) business
for cash consideration of USD103,839,000 and deferred consideration
of USD 12,684,000 of which USD 11,542,000 is the discounted value
of a non interest bearing note and due in two payments, February
2012 and November 2012. This deferred consideration has been
treated as a financial liability in accordance with IAS 32
Financial Instruments: Presentation and IFRS 3 revised (2008):
Business Combinations.
The purpose of the acquisition was to significantly enhance the
scale and scope of Hikma's global Injectables platform.
The acquisition was a trade and asset based transaction. It is
considered a business combination in accordance with IFRS 3 revised
(2008): Business Combinations as Hikma's wholly owned subsidiary
West-Ward Pharmaceutical acquired an integrated set of activities
and assets that can be managed for the purpose of providing a
return to the shareholders.
Due to the timing of the acquisition, the fair value and
goodwill arising on acquisition stated below are considered to be
provisional.
The goodwill arising represents the synergies that will be
obtained by integrating MSI into the existing business and
increasing the scale of Hikma's Injectables business.
The Group consolidated statement of comprehensive income for the
year includes pre tax acquisition and integration related costs
amounting to USD 9,983,000 and the amortisation of a fair value
inventory adjustment of USD 1,770,000.
The net assets acquired in the transaction and the provisional
goodwill arising are set out below:
Multi-Source Injectables
Fair value
Book value adjustment Fair value
$000 $000 $000
----------------------------------------- ------------------ ------------------ ------------------
Product rights - 8,435 a 8,435
Property, plant and equipment 125,263 (75,192) b 50,071
Inventories 48,312 (12,059) c 36,253
Prepaid expenses 7,906 - 7,906
Deferred taxes asset - 14,937 d 14,937
Liabilities (11,264) (21,704) e (32,968)
Identifiable net assets 170,217 (85,583) 84,634
------------------ ------------------ ------------------
Consideration 116,523
Less: identifiable net assets (84,634)
Goodwill 31,889
==================
Consideration is satisfied by
:
Cash 103,839
Deferred consideration 12,684
116,523
==================
Cash consideration 103,839
Cash and cash equivalents acquired -
------------------
Net cash outflow arising on acquisition 103,839
==================
a. Product rights relating to thirty six product licenses and
approvals has been valued based on the type of rights acquired. A
discounted cash flow approach has been taken based on excess
earnings by product group, applying a discount rate applicable for
any market participant.
Useful lives of 9 -14 years have been determined.
b. The property, plant and equipment acquired have been valued
by a third party expert at current market values.
c. Inventories have been valued as follows:
a. Raw materials at the current replacement cost.
b. Finished goods and work in process at the estimated selling
prices less a cost to dispose and complete less a reasonable profit
attributable to selling effort.
Following a rigorous internal review of inventory acquired as
part of the acquisition, it has been determined that certain
inventory items are not marketable. Consequently, the value of this
inventory has been reduced to nil.
d. Taxable temporary differences have been identified by reference to IAS 12 "income tax".
e. Liabilities include finance lease obligations acquired which
have been revalued using a discounted future cash flow method and
applying the Company's incremental borrowing rate as the discount
rate, in addition to other fair value adjustments.
Certain measurement period adjustments have been recorded
following the discovery of quality issues relating to certain
products.
Goodwill recognised is expected to be deductible for income tax
purposes.
Full year impact of acquisition:
The revenue and net gain, excluding pre tax acquisition and
integration related costs amounting to USD 9,983,000 and the
amortisation of a fair value inventory adjustment of USD 1,770,000
of MSI from the date of the acquisition that is included in the
Group's consolidated statement of comprehensive income for the year
amounted to USD 120,300,000 and USD 11,636,000 respectively.
Promopharm
On 3 October 2011, the Group completed the acquisition of 63.9%
of Societe de Promotion Pharmaceutique du Maghreb S.A. (Promopharm)
business for cash consideration of USD 111,195,000. The
consolidated statement of comprehensive income for the year
includes pre tax acquisition related costs amounting to USD
4,696,000.
By 31 December 2011 the Group acquired an additional stake of
20.4% for a cash consideration of USD 29,196,000 through the
purchase of additional shares in the market. The additional 20.4%
stake has been treated as a separate transaction and was therefore
accounted for as an acquisition of non-controlling interest in
accordance with IAS 27 Consolidated and Separate Financial
Statements. The difference between the consideration paid,
including related expenses of USD 1,174,000, and reduction in
non-controlling interest, has been adjusted against retained
earnings attributable to the equity holders of the parent in
accordance with IAS 32 Financial Instruments: Presentation.
Subsequent to 31 December 2011 the Group acquired an additional
9.8% stake for cash consideration of USD 12,009,000 to bring the
total ownership to 94.1%. This was completed as part of a mandatory
tender offer, which closed on 6 January 2012.
This acquisition will deliver a substantial local manufacturing
presence in Morocco, the fourth largest pharmaceutical market in
MENA, and completes Hikma's footprint in the region and provides an
excellent distribution platform for launching Hikma's leading
strategic products in the Moroccan market. This acquisition will
create opportunities to export Promopharm's product portfolio to
Hikma's existing markets, leveraging Hikma's extensive sales and
marketing operations across MENA, and developing Hikma's presence
in West African markets.
Due to the timing of the acquisition closing on 3 October 2011,
the fair value and goodwill arising on acquisition stated below are
considered to be provisional.
The goodwill arising represents synergies that will be obtained
by integrating Promopharm into the existing business.
The net assets acquired in the transaction and the provisional
goodwill arising are set out below:
Promopharm
Fair value
Book value adjustment Fair value
$000 $000 $000
--------------------- -----------------------------
Trade name - 4,213 a 4,213
Customer relationships/base - 15,914 b 15,914
Product related - 19,100 c 19,100
Software 63 - 63
Cash and cash equivalent 16,982 - 16,982
Accounts receivable, net 9,179 - 9,179
Inventories 12,377 - 12,377
Deferred taxes asset 1,052 - 1,052
Tangible fixed assets 15,732 500 d 16,232
Financial debts (1,248) - (1,248)
Trade accounts payable (7,628) - (7,628)
Income tax provision (342) - (342)
Provisions (159) - (159)
Deferred taxes liabilities - (11,918) e (11,918)
Net assets acquired 46,008 27,809 73,817
Total consideration 111,195
Less: identifiable net
assets (73,817)
Less: non-controlling
interest
- 36.1% 26,649
Goodwill 64,027
Consideration is satisfied
by:
Cash 111,195
111,195
Cash consideration 111,195
Cash and cash equivalents
acquired (16,982)
Net cash outflow arising on
acquisition 94,213
a. Trade names relate to twenty six generic drugs included in
Promopharms's portfolio as well as eighteen others in the pipeline
which have been valued under the relief from royalty method. Useful
lives of ten years have been determined.
b. Customer relationships represent established customer
relationships with individuals or other businesses that repeatedly
order from a company. Customer relationships were valued by using
the multi excess earnings method. Useful lives of 15 years have
been determined.
c. Product related intangibles represent molecule rights, sales
and distribution agreements and manufacturing and licensing
agreements.
d. The property, plant and equipment acquired have been valued
by a third party expert at current market values.
e. Taxable temporary differences have been identified by
reference to IAS 12 "income tax".
Goodwill recognised is expected to be non deductable for income
tax purposes.
The revenue and net gain, excluding pre tax acquisition related
costs amounting to USD 4,696,000 of Promopharm from the date of the
acquisition that is included in the Groups' consolidated statement
of comprehensive income for the year amounted to USD 11,187,000 and
USD 1,203,000 respectively.
Full year impact of acquisitions:
If the acquisition of MSI and Promopharm had been completed on
the first day of the financial year, the Group's revenues for the
year would have been approximately USD 1,012,914,000 and the
Group's profit attributable to equity holders of the Parent would
have been approximately USD 82,451,000. The appropriate additional
contribution by entity for the period from the beginning of the
year up to the acquisition date is illustrated in the table
below:
Effect Effect
on Group's on Group's
revenues profit
$000 $000
MSI 57,971 2,597
Promopharm 36,918 (253)
94,889 2,344
16. Foreign exchange currencies
The currencies that have a significant impact on the Group
accounts and the exchange rates used are as follows:
Period end rates Average rates
2011 2010 2011 2010
USD/EUR 0.7722 0.7545 0.7180 0.7531
USD/Sudanese Pound 2.8918 3.1049 2.9869 2.5209
USD/Algerian Dinar 76.0061 74.0273 72.8147 74.3916
USD/Saudi Riyal 3.7495 3.7495 3.7495 3.7495
USD/British Pound 0.6470 0.6464 0.6233 0.6467
USD/Jordanian Dinar 0.7090 0.7090 0.7090 0.7090
USD/Egyptian Pound 6.0481 5.8224 5.9648 5.6555
USD/Japanese Yen 77.4136 81.5533 79.7414 87.8289
USD/Moroccan Dirham 8.6133 8.4104 8.3682 8.4898
Principal Risks and Uncertainties
The Group's business faces risks and uncertainties. The section
below sets out the principal risks and uncertainties that the Group
considers could have a significant effect on its financial
condition, results of operations or future performance. The list is
not set out in order of priority and other risks, currently unknown
or not considered material, could have a similar effect.
Operational risks
Risk Potential impact Mitigation
Compliance with regulatory
requirements
> Failure to comply with > Delays in supply > Commitment to maintain
applicable regulatory requirements or an inability to the highest levels
and manufacturing standards market or develop the of quality across
(often referred to as 'Current Group's products all manufacturing
Good Manufacturing Practices' facilities
or cGMP) > Delayed or denied
approvals for the > Strong global compliance
introduction function that oversees
of new products compliance across
the Group
> Product complaints
or recalls > Remuneration and
reward structure that
> Bans on product sales helps retain experienced
or importation personnel
> Disruptions to > Continuous staff
operations training and know-how
exchange
> Potential for litigation
> On-going development
of standard operating
procedures
Regulation changes
> Unanticipated legislative > Restrictions on the > Strong oversight
and regulatory actions, sale of one or more of local regulatory
developments and changes of our products environments to help
affecting the Group's operations anticipate potential
and products > Restrictions on our changes
ability to sell our
products at a profit > Local operations
in all of our key
> Unexpected additional markets
costs required to produce,
market or sell our > Representation and/or
products affiliation with local
industry bodies
> Increased compliance
costs > Diverse geographical
and therapeutic business
model
Commercialisation of new
products
> Delays in the receipt > Slowdown in revenue > Experienced regulatory
of marketing approvals, growth from new products teams able to accelerate
the authorisation of price submission processes
and re-imbursement > Inability to deliver across all of our
a positive return on markets
> Lack of approval and investments in R&D,
acceptance of new products manufacturing and sales > Highly qualified
by physicians, patients and marketing sales and marketing
and other key decision-makers teams across all markets
> Inability to confirm > A diversified product
safety, efficacy, convenience pipeline with over
and/or cost-effectiveness 173 compounds pending
of our products as compared approval, covering
to competitive products a broad range of
therapeutic
> Inability to participate areas
in tender sales
> A systematic commitment
to quality that helps
to secure approval
and acceptance of
new products and mitigate
potential safety issues
Product safety
> Unforeseen product safety > Interruptions to > Diversification
issues for marketed products, revenue flow of product portfolio
particularly in respect across key markets
of in-licensed products > Costs of recall, and therapies
potential for litigation
> Working with stakeholders
> Reputational damage to understand issues
as they arise
Product development
> Failure to secure new > Inability to grow > Experienced and
products or compounds for sales and increase successful in-house
development profitability for the R&D team, with specifically
Group targeted product development
pathways
> Lower return on investment
in research and development > Continually developing
and multi-faceted
approach to new product
development
> Strong business
development team
> Track record of
building in-licensed
brands
> Position as licensee
of choice for our
key MENA geography
Co-operation with Third
parties
> Inability to renew or > Loss of products > Investment in long-term
extend in-licensing or from our portfolio relationships with
other co-operation agreements existing in-licensing
with third parties > Revenue interruptions partners
> Failure to recoup > Experienced legal
sales and marketing team capable of negotiating
and business development robust agreements
costs with our partners
> Continuous development
of new partners for
licensing and co-operation
> Diverse revenue
model with in-house
R&D capabilities
Increased competition
> New market entrants in > Loss of market share > On-going portfolio
key geographies diversification, differentiation
> Decreasing revenues and renewal through
> On-going pricing pressure on established portfolio internal R&D, in-licensing
in increasingly commoditised and product acquisition
markets
> Continuing focus
on expansion of geographies
and therapeutic areas
Disruptions in the manufacturing
supply chain
> Inability to procure > Inability to develop > Alternate approved
active ingredients from and/or commercialise suppliers of active
approved sources new products ingredients
> Inability to procure > Inability to market > Long-term relationships
active ingredients on existing products as with reliable raw
commercially planned material suppliers
viable terms
> Lost revenue streams > Corporate auditing
> Inability to procure on short notice team continuously
the quantities of active monitors regulatory
ingredients needed to meet > Reduced service levels compliance of API
market requirements and damage to customer suppliers
relationships
> > Focus on improving
> Inability to supply service levels and
finished product to optimising our supply
our customers in a chain
timely fashion
Economic and political
and unforeseen events
> The failure of control, > Disruptions to manufacturing > Geographic diversification,
a change in the economic and marketing plans with 22 manufacturing
conditions (including the facilities and sales
Eurozone), political environment > Lost revenue streams in more than 40 countries
or sustained civil unrest
in any particular market > Inability to market > Product diversification,
or country or supply products with 667 products
and 1,598 dosage strengths
> Unforeseen events such and forms
as fire or flooding could
cause disruptions to
manufacturing
or supply
Litigation
> Commercial, product liability > Financial impact > In-house legal counsel
and other claims brought on Group results from with relevant jurisdictional
against the Group adverse resolution experience
of proceedings
> Reputational damage
Financial risks
Risk Impact Mitigation
Foreign exchange risk
> Exposure to foreign exchange > Fluctuations in the > Entering into currency
movements, primarily in Group's net asset values derivative contracts
the European, Algerian, and profits upon translation where possible
Sudanese and Egyptian currencies into US dollars
> Foreign currency
borrowing
> Matching foreign
currency revenues
to in-jurisdiction
costs
Interest rate risk
> Volatility in interest > Fluctuating impact > Optimisation of
rates on profits before taxation fixed and variable
rate debt as a proportion
of our total debt
> Use of interest
rate swap agreements
Credit Risk
> Inability to recover > Reduced working capital > Clear credit terms
trade receivables funds for settlement of
sales invoices
> Concentration of significant > Risk of bad debt
trade balances with key or default > Group Credit policy
customers in the MENA region limiting credit exposures
and the US
> Use of various financial
instruments such as
letters of credit,
factoring and credit
insurance arrangements
Liquidity Risk
> Insufficient free cash > Reduced liquidity > Continual evaluation
flow and borrowings headroom and working capital of headroom and borrowing
funds
> Committed debt facilities
> Inability to meet
short-term working > Diversity of institution,
capital needs and, subsidiary and geography
therefore, to execute of borrowings
our long term strategic
plans
Tax
> Changes to tax laws and > Negative impact on > Close observation
regulations in any of the the Group's effective of any intended or
markets in which we operate tax rate proposed changes to
tax rules, both in
> Costly compliance the UK and in other
requirements key countries where
the Group operates
This information is provided by RNS
The company news service from the London Stock Exchange
END
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