TIDMHIK
RNS Number : 1244K
Hikma Pharmaceuticals Plc
16 August 2012
PRESS RELEASE
Hikma delivers a strong first half performance and remains on
track to deliver revenue growth of 20% for the full year
London, 16 August 2012 - Hikma Pharmaceuticals PLC (LSE: HIK)
(NASDAQ DUBAI: HIK), the fast growing global pharmaceutical group,
today reports its interim results for the six months ended 30 June
2012.
Group financial highlights
Summary P&L H1 2012 H1 2011 Change
$ million
----------------------------------------- -------- -------- --------
Revenue 532.3 394.8 +34.8%
----------------------------------------- -------- -------- --------
Gross profit 234.1 172.6 +35.6%
----------------------------------------- -------- -------- --------
Gross margin 44.0% 43.7% +0.3
----------------------------------------- -------- -------- --------
Operating profit 75.1 49.0 +53.1%
----------------------------------------- -------- -------- --------
Adjusted operating profit 1 82.1 59.7 +37.4%
----------------------------------------- -------- -------- --------
Adjusted operating margin 15.4% 15.1% +0.3
----------------------------------------- -------- -------- --------
EBITDA 3 103.7 70.5 +47.1%
----------------------------------------- -------- -------- --------
Profit attributable to shareholders 40.4 33.1 +22.0%
----------------------------------------- -------- -------- --------
Adjusted profit attributable to
shareholders 3 46.0 40.7 +12.9%
----------------------------------------- -------- -------- --------
Earnings per share (diluted) (cents) 20.4 16.7 +22.2%
----------------------------------------- -------- -------- --------
Dividend per share (cents) 6.0 5.5 +9.1%
----------------------------------------- -------- -------- --------
Net cash flow from operating activities 47.1 19.2 +144.9%
----------------------------------------- -------- -------- --------
(1) Before the amortisation of intangible assets (excluding
software) and exceptional items (including acquisition and
integration related expenses of $0.6 million (H1 2011: $6.7
million))
(2) Earnings before interest, tax, depreciation and
amortisation
(3) Before the amortisation of intangible assets (excluding
software) and exceptional items
-- Group revenue increased by 34.8% to $532.3 million, with organic revenue up 7.6% 4
-- Branded revenue growth of 24.6% reflects strong demand across
our MENA markets, with organicgrowth of 12.8%. The Branded business
remains on track for around 20% full year revenue growth, with
gross and adjusted operating margins broadly in line with 2011
5
-- Excellent performance in global Injectables delivered 94.0%
revenue growth, with organic revenue growth of 25.7%, and adjusted
operating margin of 22.0% 6
-- Generics revenue decreased by 27.0% to $55.8 million,
reflecting the impact of additional compliance work at the
Eatontown facility and increased pricing pressure. Full year
revenue guidance is revised to around $115 million
(4) Before the consolidation of the Multi-Source Injectables,
Promopharm and Savanna businesses
(5) Before the consolidation of the Promopharm and Savanna
businesses
(6) Before the consolidation of the Multi-Source Injectables and
Promopharm businesses
-- Significant increase in Injectables margins more than offsets
lower margins in the Generics business, with Group adjusted
operating margin of 15.4%, compared to 15.1% in the first half of
2011
-- Profit attributable to shareholders up 22.0% to $40.4
million. On an adjusted basis, profit attributable to shareholders
is up 12.9% to $46.0 million
-- Net cash flow from operating activities up $27.9 million to
$47.1 million, reflecting growth in profitability and an ongoing
focus on working capital management
-- Continued new product delivery across all countries and
markets - launched 37 products and received 33 product approvals -
and enhancement of the portfolio through product acquisitions
-- Increase in the interim dividend to 6.0 cents per share, up
from 5.5 cents for the first half of last year
Said Darwazah, Chief Executive Officer of Hikma, said:
"We have had a strong start to the year in our Branded and
Injectables businesses. I am pleased with the growth we have
achieved in our key MENA markets this year. Our global Injectables
business continues to deliver extremely strong growth, as we
benefit from our increased scale and continued investment in
quality and products. In our Generics business, where operations
have been disrupted by additional compliance work, we expect sales
to gradually improve in the second half.
Overall, the Group is performing well and the outlook is
positive for the second half. I am pleased to be able to reiterate
our Group guidance of around 20% revenue growth for the full
year."
Enquiries
Hikma Pharmaceuticals PLC +44 (0)20 7399 2760
Susan Ringdal, Investor Relations Director
FTI Consulting +44 (0)20 7831 3113
Julia Phillips/Jonathan Birt/Matthew Cole
About Hikma
Hikma Pharmaceuticals PLC is a fast growing global
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
primarily in the Middle East and North Africa ("MENA") region,
where it is a market leader, the United States and Europe. In 2011,
Hikma achieved revenues of $918.0 million and profit attributable
to shareholders of $80.1 million.
A presentation for analysts and investors will be held today at
09:30 at FTI Consulting, Holborn Gate, 26 Southampton Buildings,
London, WC2A 1PB. To join via conference call please dial: +44 (0)
203 140 0722. Alternatively you can listen live via our website at
www.hikma.com. A recording of both the meeting and the call will be
available on the Hikma website. Video interviews of Said Darwazah,
CEO and Khalid Nabilsi, CFO are available at www.hikma.com. The
contents of the website do not form part of this interim management
report.
Interim management report
The interim management report set out below summarises the
performance of Hikma's three main business segments, Branded,
Injectables and Generics, for the six months ended 30 June
2012.
Group revenue by business segment (%)
H1 2012 H1 2011
------------- -------- --------
Branded 46.7% 50.6%
------------- -------- --------
Injectables 42.3% 29.4%
------------- -------- --------
Generics 10.5% 19.3%
------------- -------- --------
Others 0.5% 0.7%
------------- -------- --------
Group revenue by region (%)
H1 2012 H1 2011
---------------- -------- --------
MENA 56.0% 58.2%
---------------- -------- --------
US 36.1% 30.4%
---------------- -------- --------
Europe and ROW 7.9% 11.4%
---------------- -------- --------
Branded
H1 2012 highlights:
-- Branded revenue increased by 24.6%, with organic revenue up 12.8%
-- Branded adjusted operating profit increased by 10.5%, with an
adjusted operating margin of 21.1%
-- On track to meet guidance of around 20% revenue growth for
the full year, with gross and adjusted operating margins broadly in
line with 2011
Branded revenue increased by 24.6% in the first half of 2012 to
$248.8 million. Organic revenue grew 12.8% to $225.2 million, with
the recently acquired Promopharm and Savanna 7businesses
contributing a further $23.6 million.
(7) Formerly Elie Pharmaceuticals in Sudan
During the first half we delivered strong growth in our key MENA
markets. In particular, we achieved an excellent performance in our
Egyptian business, which grew by around 30%, reflecting increased
manufacturing capacity, new product launches and our greater focus
on strategic, higher value products. In Algeria, growth of over 20%
was driven by an increase in locally manufactured products,
stronger brand recognition and the strength and focus of our sales
and marketing team.
In Saudi Arabia and Jordan we performed well in the first half,
benefiting from a number of new product launches in Saudi Arabia
and higher tender sales in both these markets. In Libya, our
recovery has been impressive and we have achieved excellent growth
and a leading market position. Our business in Morocco performed in
line with our expectations, driven by its existing product
portfolio. We have begun the process of registering Hikma's key
strategic products in Morocco to deliver future growth. In Iraq,
sales were disrupted in the first few months of the year as we
changed our distributor. Sales in Iraq are now accelerating and we
expect a stronger second half.
In Sudan, a significant devaluation of the Sudanese pound
created uncertainty around pharmaceutical pricing and disrupted
product shipments. Although we were able to offset some of the
adverse currency impact, we achieved lower revenue in the first
half compared to the first half of 2011. Continued volatility with
respect to the exchange rate could further impact revenue in the
second half.
In the first half of 2012, the Branded business launched a total
of 30 products across all markets, including 2 new compounds and 4
new dosage forms and strengths. The Branded business also received
24 regulatory approvals across the region, including 1 for a new
product.
Revenue from in-licensed products increased from $80.9 million
to $89.2 million in the first half. This represented 35.8% of
Branded revenue compared to 40.5% of Branded revenue in the first
half of 2011. The change reflects strong growth in our branded
generics portfolio and lower sales of Actos, which has been
withdrawn in some of our markets.
Branded gross profit grew by 21.1% to $120.1 million in the
first half and gross margin was 48.3% compared to 49.7%. The
decline in margin is primarily attributable to the impact of
increased salaries and benefits driven by inflationary pressure in
the wake of the Arab Spring, the consolidation of the lower margin
Promopharm business and higher tender sales. This is being
partially offset by a greater focus on higher margin, strategic
products and operational efficiencies.
Operating profit in the Branded business was $47.4 million,
compared to $45.2 million in the first half of 2011. Adjusted
operating profit increased by 10.5% to $52.6 million. Adjusted
operating margin was 21.1%, compared to 23.8% in the first half of
2011, reflecting lower gross margin, an increase in salaries and
benefits, higher R&D investment and the impact of adverse
movements in the Sudanese pound and the Algerian dinar. The
devaluation of the Sudanese pound in the first half of 2012
resulted in a transactional loss of approximately $3.4 million.
We continue to expect around 20% Branded revenue growth for the
full year. Due to the weighting of sales and the benefit of
operating leverage, we expect gross margin and adjusted operating
margin for the full year to be broadly in line with 2011. However,
if the Sudanese pound and the Algerian dinar remain at their
current levels relative to the US dollar for the remainder of the
year, we would expect a small negative impact on our margin
outlook.
Injectables
H1 2012 highlights:
-- Injectables revenue grew by 94.0% to $225.2 million, with organic revenue up 25.7%
-- Strong performances across our US, MENA and European Injectables businesses
-- Significant expansion in Injectables adjusted operating margin, up from 14.0% to 22.0%
Injectables revenue by region
H1 2012 H1 2011
---------------- -------- --------
US 60.7% 37.6%
---------------- -------- --------
Europe and ROW 16.4% 31.3%
---------------- -------- --------
MENA 22.9% 31.1%
---------------- -------- --------
Revenue in our global Injectables business increased by 94.0% to
$225.2 million, compared to $116.1 million in the first half of
2011.
US Injectables revenue grew by $93.0 million, or 213.0%, to
$136.6 million. Organic revenue grew by $10.9 million, or 60.3%, to
$29.0 million. This excellent performance reflects the strength of
our product portfolio including recent product launches, our strong
manufacturing and sales platform in the US and growth in our
contract manufacturing business. Our quality track record means we
are also benefiting from the favourable market conditions created
by the supply constraints of our competitors.
In the MENA region, Injectables revenue increased by 42.9% to
$51.6 million, compared to $36.1 million in the first half of 2011.
Excluding Promopharm, which added Injectables revenue of $3.6
million, organic MENA Injectables revenue grew by 32.7%. This
reflects strong demand in the private market, particularly in Saudi
Arabia, Algeria and Libya and greater tender wins.
Revenue in our European Injectables business grew by 1.9% to
$37.0 million. On a constant currency basis, European Injectables
revenue growth was 10.1%, reflecting growth from new contract wins
for our contract manufacturing business, as well as good growth in
sales of our own drugs and recent product launches.
Injectables gross profit increased by 125.4% to $98.2 million,
compared to $43.6 million in the first half of 2011. Gross margin
increased to 43.6%, compared to 37.5% in the first half of 2011.
This reflects the successful restructuring of the Multi-Source
Injectables business ("MSI"), lower unit costs from greater
capacity utilisation and growth in our contract manufacturing
business.
Operating profit of the Injectables business increased by 257.2%
to $47.7 million. Adjusted operating margin increased from 14.0% to
22.0%. This excellent margin expansion reflects the improvement in
gross margin, significantly better operating leverage and tight
control of operating costs.
We remain focussed on strengthening our Injectables product
portfolio, with a particular emphasis on more differentiated
products. In January 2012 we received approval for a New Drug
Application ("NDA") for argatroban injection. In May 2012, we
purchased the Abbreviated New Drug Application ("ANDA") for sodium
ferrous gluconate injection from GeneraMedix Pharmaceuticals for a
cash consideration of $16.0 million. During the first half of 2012,
the Injectables business launched a total of 7 products across all
markets, including 3 new compounds and 3 new dosage forms and
strengths. The Injectables business also received a total of 15
regulatory approvals across all regions and markets, including 6 in
MENA, 5 in Europe and 4 in the US.
Given the current market environment and the continued demand
for our products, we expect the performance we achieved in
Injectables in the first half will be sustained in the second half
of the year.
Generics
H1 2012 highlights:
-- Generics revenue decreased by 27.0% to $55.8 million
-- Operating loss of $3.3 million reflects lower than expected
sales resulting from the impact of additional compliance work at
our Eatontown facility and increased pricing pressure
-- Revised revenue guidance to around $115 million for the full year
Generics revenue was $55.8 million, down 27.0% compared to $76.4
million in the first half of 2011. This decline reflects an
increase in pricing pressure and a slowdown in production at our
Eatontown facility related to the additional compliance work we
have undertaken to respond to FDA concerns raised in its warning
letter of February 2012. We expect sales to gradually improve in
the second half of the year and now expect full year revenue of
around $115 million.
We continue to focus on our strategic priorities for this
business, which include minimising our manufacturing costs and
building our product portfolio. We are accelerating the transfer of
products for manufacture in our MENA facilities to improve
efficiencies and reduce operating costs. In the first half, 27.2%
of Generics sales were manufactured in MENA, compared to 24.8% in
the first half of 2011.
We are also building our R&D pipeline of oral products for
the US market. In particular, we have made further progress in
developing our relationship with Unimark in India with an agreement
to collaborate on the development of fourteen ANDAs.
Generics gross profit was $15.2 million, compared to $29.2
million in the first half of 2011 and gross margin was 27.3%,
compared to 38.3% in the first half of 2011. This reflects reduced
operating leverage as a result of the significant slowdown in sales
and an adverse change in product mix.
The Generics business made an operating loss of $3.3 million in
the first half of 2012, compared to an operating profit of $10.2
million in the first half of 2011. This is due to lower sales, high
fixed operating costs and increased R&D expenditure. With a
better performance anticipated in the second half, we expect the
business to breakeven for the full year.
Other businesses
Other businesses, which primarily comprise Arab Medical
Containers, a manufacturer of plastic specialised packaging,
International Pharmaceuticals Research Centre, which conducts
bio-equivalency studies, and the chemicals division of Hikma
Pharmaceuticals Limited, contributed revenue of $2.5 million,
compared to $2.7 million in the first half of 2011.
These other businesses delivered an operating loss of $2.0
million in the first half of 2012, compared to a loss of $1.6
million in the first half of 2011.
Group
Group revenue increased by 34.8% to $532.3 million in the first
half of 2012. Excluding the contribution of MSI, Promopharm in
Morocco and Savanna in Sudan, organic revenue growth was 7.6%. The
Group is on track to meet its target of around 20% revenue growth
for the full year.
The Group's gross profit increased by 35.6% to $234.1 million,
compared to $172.6 million in the first half of 2011. Group gross
margin was 44.0%, compared to 43.7%, with the significant gross
margin improvement of the global Injectables business more than
offsetting the lower Generics gross margin.
Group operating expenses grew by 28.7% to $159.0 million,
compared to $123.6 million in the first half of 2011. Excluding the
amortisation of intangible assets (excluding software) and
exceptional items, 8 adjusted Group operating expenses grew by
33.2% to $152.0 million. The paragraphs below address the Group's
main operating expenses in turn.
(8) In H1 2012, amortisation of intangible assets (excluding
software) was $6.4 million (H1 2011: $4.0 million). In H1 2012,
exceptional items included within general and administrative
expenses were $0.6 million (H1 2011: $5.5 million)
Sales and marketing expenses were $74.1 million, or 13.9% of
sales, compared to $57.0 million and 14.4% of sales in the first
half of 2011. This reflects strong growth in our global Injectables
business where relatively low incremental sales and marketing
investment is required to generate new sales. This more than offset
an increase in MENA sales and marketing expenditure due to higher
wages and employee benefits.
General and administrative expenses increased by $10.8 million,
or 24.0%, to $55.9 million in the first half. As a percentage of
sales, general and administrative expenses reduced to 10.5%,
compared to 11.4% in the first half of 2011. Excluding
non-recurring transaction and integration costs, G&A expenses
as a percentage of sales were 10.4%, compared to 10.0% in the first
half of 2011. This increase primarily reflects an increase in
employee salaries and benefits in MENA.
Investment in R&D grew by 49.2% to $17.1 million, with total
investment in R&D representing 3.2% of Group revenue, compared
to 2.9% in the first half of 2011. We expect R&D spend will
increase in the second half of the year as we continue to execute
plans to develop our R&D pipeline, particularly for injectable
products.
Other net operating expenses increased by $1.9 million to $11.9
million reflecting an increase in foreign exchange losses,
primarily due to movements in the Sudanese pound and slow moving
stock provisions.
Operating profit for the Group increased by 53.1% to $75.1
million in the first half of 2012. Group operating margin increased
to 14.1%, compared to 12.4% in the first half of 2011. On an
adjusted basis, Group operating profit increased by 37.4% to $82.1
million and operating margin increased to 15.4%, up from 15.1% in
the first half of 2011.
Research & Development 9
(9) 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
The Group's product portfolio continues to grow. During the
first half of 2012, we launched 5 new compounds, expanding the
Group portfolio to 688 compounds in 1,696 dosage forms and
strengths. We manufacture and/or sell 207 of these compounds
under-license from the originator.
Across all businesses and markets, a total of 37 products were
launched during the first half. In addition, the Group received 39
approvals.
Total marketed products Products launched in H1 2012
------------- --------------------------- --------------------------------------------
Total launches
New dosage across all
Dosage forms forms and countries
Compounds and strengths New compounds strengths 10
Branded 446 1,225 2 4 30
Injectables 174 356 3 3 7
Generics 48 115 - - -
Group 688 1,696 5 7 37
Products pending approval as
Products approved in H1 2012 at 30 June 2012
------------- --------------------------------------------- -------------------------------------------
Total pending
Total approvals approvals
New dosage across all New dosage across all
forms and countries forms and countries
New compounds strengths 10 New compounds strengths 10
Branded 1 2 24 133 212 297
Injectables 3 5 15 74 122 255
Generics - - - 22 22 22
Group 4 7 39 229 356 574
(10) 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 104 regulatory filings in the first half of the year
across all regions and markets. As of 30 June 2012, we had a total
of 574 pending approvals across all regions and markets.
At 30 June 2012, we had a total of 109 new products under
development, the majority of which should receive several marketing
authorisations for different strengths and/or product forms over
the next few years.
Net finance expense
Net finance expense increased to $16.7 million, compared to $9.3
million in the first half of 2011 due to higher net debt, including
an increase in loans in local currency that carry higher financing
charges. This is explained in more detail in the net cash flow,
working capital and net debt section below.
Profit before tax
Profit before tax for the Group increased by 45.1% to $57.8
million, compared to $39.9 million in the first half of 2011.
Adjusted profit before tax increased by 28.3% to $64.8 million.
Tax
The Group incurred a tax expense of $15.0 million, compared to
$4.8 million in the first half of 2011. The effective tax rate was
25.9%, compared to 11.9% in the first half of 2011. The increase in
the tax rate is mainly attributable to the increased profitability
of the US Injectables business. We now expect the effective tax
rate for the Group to be around 23% for the full year.
Profit for the period
The Group's profit attributable to equity holders of the parent
increased by 22.0% to $40.4 million in the first half of 2012.
Adjusted profit attributable to equity holders of the parent
increased by 12.9% to $46.0 million.
Earnings per share
Basic earnings per share increased by 20.3% to 20.6 cents,
compared to 17.1 cents in the first half of 2011. Diluted earnings
per share increased by 22.2% to 20.4 cents, compared to 16.7 cents
in the first half of 2011. Adjusted diluted earnings per share was
23.3 cents, an increase of 13.1% over the first half of 2011.
Dividend
The Board has declared an interim dividend of 6.0 cents per
share (approximately 3.8 pence per share), compared to 5.5 cents
per share for the first half of 2011. The interim dividend will be
paid on 8 October 2012 to eligible shareholders on the register at
the close of business on 31 August 2012. The ex-dividend date is 29
August 2012 and the final date for currency elections is 14
September 2012.
Net cash flow, working capital and net debt
The Group generated operating cash flow of $47.1 million in the
first half, up $27.9 million from $19.2 million in the first half
of 2011. This increase in operating cash flow reflects the improved
profitability of the Group in the first half of 2012 and better
working capital management. Cash flow in the first half of 2011 was
impacted by a non-recurring cash injection of $18.9 million to fund
the initial working capital requirement of the MSI business at the
time of its acquisition in May 2011.
The Group continued to deliver significant improvements in
working capital in the first half, reducing its overall working
capital cycle by 46 days to 208 days. Group receivable days reduced
by 9 days to 108 days at 30 June 2012 and payable days decreased by
18 days to 66 days. Inventory days improved by 55 days to 166 days,
reflecting lower inventories in MENA compared to the first half of
2011 when markets were disrupted by the Arab Spring.
Capital expenditure was $26.1 million, compared to $33.0 million
in the first half of 2011. Around $16 million of that was spent in
MENA, principally to develop our chemical plant in Jordan and the
recently acquired Savanna business in Sudan, and to maintain our
manufacturing facilities across the MENA region. Investment in the
US of around $8 million was primarily to add new capacity at the
Cherry Hill facility in New Jersey. In Portugal, investments
included warehouse improvements and new machinery purchases. We now
expect capital expenditure for the full year of around $65
million.
Group net debt 11increased from $322.7 million at 30 June 2011
to $473.0 million at 30 June 2012. Net debt on 31 December 2011
stood at $421.9 million. The increase in borrowing in the first
half of 2012 was primarily to finance capital expenditure, the
purchase of intangible assets and the purchase of additional shares
in Promopharm.
(11) Net debt is calculated as bank overdrafts and loans, long
term financial debts and obligations under finance leases, less
cash and cash equivalents, collateralised cash and restricted
cash
Balance sheet
During the period, shareholder equity was negatively impacted by
unrealised foreign exchange losses of $25.1 million, reflecting the
depreciation of the Euro, the Sudanese pound and the Algerian dinar
against the US dollar and the revaluation of net assets denominated
in these currencies.
Summary and Outlook
Hikma has delivered a strong performance in the first half of
2012. The global Injectables business is delivering excellent
growth and our Branded business is performing very well. This is
being partially offset by the decline in the Generics business.
The Group remains on track to meet our full year target of
around 20% revenue growth.
We are expecting stronger sales growth in the MENA region in the
second half and we continue to expect our Branded business to
deliver around 20% revenue growth for the full year, with gross
margin and adjusted operating margin broadly in line with 2011.
However, if the Sudanese pound and the Algerian dinar remain at
their current levels relative to the US dollar for the remainder of
the year, we would expect a small negative impact on our margin
outlook.
Given the current market environment and the continued demand
for our injectable products, we expect the performance of the
global Injectables business in the first half of 2012 will be
sustained in the second half of the year.
In our Generics business, we now expect revenue of around $115
million and the business to break even for the full year.
Overall we are pleased with the progress of the Group in the
first half and the outlook for the full year.
Going concern statement
As stated in note 2 to the condensed financial statements, the
Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not
less than twelve months from the date of this report. Accordingly
they continue to adopt the going concern basis in preparing the
condensed financial statements.
Responsibility statement
The Board confirms that to the best of its knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months including their impact on the financial
statements and description of principal risks and uncertainties for
the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein which have had or could have a
material financial effect on the financial position of the Group
during the period).
By order of the Board
Said Darwazah
Chief Executive Officer
15 August 2012
Cautionary statement
This Interim Management Report ("IMR") has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR 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.
INDEPENDENT REVIEW REPORT TO HIKMA PHARMACEUTICALS PLC
We have been engaged by Hikma Pharmaceuticals PLC (the
'Company') to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 June
2012 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated cash
flow statement and related notes 1 to 15. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2012 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
15 August 2012
Condensed consolidated income statement
H1 H1 FY
Notes 2012 2011 2011
$000 (Unaudited) $000 (Unaudited) $000 (Audited)
-------------------- -------------------- ---------------
Continuing operations
Revenue 3 532,260 394,759 918,025
Cost of sales 3 (298,180) (222,141) (522,676)
-------------------- -------------------- ---------------
Gross profit 3 234,080 172,618 395,349
Sales and marketing costs (74,084) (56,988) (125,295)
General and administrative expenses (55,893) (45,073) (107,540)
Research and development costs (17,097) (11,459) (31,218)
Other operating expenses (net) (11,937) (10,053) (12,608)
-------------------- -------------------- ---------------
Total operating expenses (159,011) (123,573) (276,661)
-------------------- -------------------- ---------------
Adjusted operating profit 82,055 59,717 145,824
Exceptional items
- Acquisition and integration
related expenses 4 (601) (5,455) (16,368)
- Inventory related adjustment 4 - (1,203) (1,770)
Intangible amortisation* 4 (6,385) (4,014) (8,998)
------------------------------------- ------ -------------------- -------------------- ---------------
Operating profit 75,069 49,045 118,688
Loss from associated companies (50) - (1,164)
Finance income 355 154 468
Finance expense (17,039) (9,484) (23,368)
Other (expenses)/income (net) (491) 152 (732)
Profit before tax 57,844 39,867 93,892
Tax 5 (14,976) (4,755) (10,423)
-------------------- -------------------- ---------------
Profit for the period/year 42,868 35,112 83,469
-------------------- -------------------- ---------------
Attributable to:
Non-controlling interests 2,468 1,987 3,362
Equity holders of the parent 40,400 33,125 80,107
-------------------- -------------------- ---------------
42,868 35,112 83,469
==================== ==================== ===============
Earnings per share (cents)
Basic 7 20.6 17.1 41.3
==================== ==================== ===============
Diluted 7 20.4 16.7 40.5
==================== ==================== ===============
Adjusted basic 7 23.5 21.1 52.0
==================== ==================== ===============
Adjusted diluted 7 23.3 20.6 51.0
==================== ==================== ===============
On this page and throughout this interim financial information
"H1 2012" refers to the six months ended 30 June 2012, "H1 2011"
refers to the six months ended 30 June 2011 and "FY 2011" refers to
the year ended 31 December 2011.
* Intangible amortisation comprises the amortisation of
intangible assets other than software.
Condensed consolidated statement of comprehensive income
H1 H1 FY
2012 2011 2011
$000
$000 (Unaudited) $000 (Unaudited) (Audited)
------------------ ------------------- -------------
Profit for the period/year 42,868 35,112 83,469
Cumulative effect of change in fair
value of available for sale investments (19) (9) (42)
Cumulative effect of change in fair
value of financial derivatives (1,625) (601) (692)
Exchange difference on translation
of foreign operations (29,375) 14,381 (15,294)
Total comprehensive income for the
period/year 11,849 48,883 67,441
================== =================== =============
Attributable to:
Non-controlling interests (1,847) 2,537 3,557
Equity holders of the parent 13,696 46,346 63,884
------------------ ------------------- -------------
11,849 48,883 67,441
================== =================== =============
Condensed consolidated balance sheet
30 June 30 June 31 December
Notes 2012 2011 2011
$000 (Unaudited) $000 (Unaudited) $000 (Audited)
----------------- ----------------- -------------------
Non-current assets
Intangible assets 8 426,684 294,804 408,804
Property, plant and equipment 413,410 391,842 421,357
Interests in associated companies 37,395 38,610 37,445
Deferred tax assets 34,839 23,443 36,072
Available for sale investments 415 468 435
Financial and other non-current
assets 11,149 11,050 11,644
923,892 760,217 915,757
----------------- ----------------- -------------------
Current assets
Inventories 9 271,862 269,490 239,260
Income tax asset 915 5,403 1,486
Trade and other receivables 10 343,949 287,165 315,856
Collateralised and restricted
cash 6,637 2,510 2,595
Cash and cash equivalents 114,379 89,526 94,715
Other current assets 1,722 2,934 5,973
-----------------
739,464 657,028 659,885
----------------- ----------------- -------------------
Total assets 1,663,356 1,417,245 1,575,642
================= ================= ===================
Current liabilities
Bank overdrafts and loans 180,166 159,119 152,853
Obligations under finance leases 17,149 3,727 3,300
Trade and other payables 11 175,214 146,747 171,098
Income tax provision 15,179 10,652 14,561
Other provisions 10,508 9,176 9,398
Other current liabilities 58,181 34,583 39,373
456,397 364,004 390,583
----------------- ----------------- -------------------
Net current assets 283,067 293,024 269,302
----------------- ----------------- -------------------
Non-current liabilities
Long-term financial debts 12 393,842 231,999 344,895
Deferred income 212 318 249
Obligations under finance leases 2,861 19,894 18,134
Deferred tax liabilities 22,514 12,353 23,147
419,429 264,564 386,425
----------------- ----------------- -------------------
Total liabilities 875,826 628,568 777,008
================= ================= ===================
Net assets 787,530 788,677 798,634
================= ================= ===================
Equity
Share capital 35,063 34,937 34,904
Share premium 278,528 277,440 278,094
Own shares (120) (2,292) (2,222)
Other reserves 461,324 469,029 465,799
----------------- ----------------- -------------------
Equity attributable to equity
holders of the parent 774,795 779,114 776,575
Non-controlling interests 12,735 9,563 22,059
----------------- ----------------- -------------------
Total equity 787,530 788,677 798,634
================= ================= ===================
The financial statements of Hikma Pharmaceuticals PLC,
registered number 5557934, were approved by
the Board of Directors and signed on its behalf by:
Said Darwazah Breffni Byrne
Director Director 15 August 2012
Condensed consolidated statement of changes in equity
Total
equity
attributable
to
equity
shareholders
of
Merger Revaluation Translation Retained Total Share Share Own 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
2011
(Audited) 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
period - - - 33,125 33,125 - - - 33,125 1,987 35,112
Cumulative
effect
of change
in fair
value
of available
for
sale
investments - - - (9) (9) - - - (9) - (9)
Cumulative
effect
of change
in fair
value
of financial
derivatives - - - (601) (601) - - - (601) - (601)
Realisation
of revaluation
reserve - (91) - 91 - - - - - - -
Currency
translation
loss - - 13,831 - 13,831 - - - 13,831 550 14,381
Total
comprehensive
income
for
the
period - (91) 13,831 32,606 46,346 - - - 46,346 2,537 48,883
Issue
of equity
shares - - - - - 412 1,472 - 1,884 - 1,884
Purchase
of own
shares - - - - - - - (112) (112) - (112)
Cost
of equity
settled
employee
share
schemes - - - 3,634 3,634 - - - 3,634 - 3,634
Exercise
of employees
long
term
incentive
plan - - - (40) (40) - - 40 - - -
Deferred
tax
arising
on share-based
payments - - - (3,327) (3,327) - - - (3,327) - (3,327)
Dividends
on ordinary
shares - - - (14,497) (14,497) - - - (14,497) - (14,497)
Adjustment
arising
from
change
in
non-controlling
interests - - - 1,264 1,264 - - - 1,264 160 1,424
Issue
of equity
shares
of subsidiary - - - - - - - - - 488 488
-------------------
Balance
at 30
June
2011
(Unaudited) 33,920 3,994 1,751 429,364 469,029 34,937 277,440 (2,292) 779,114 9,563 788,677
=============== ================== =================== =================== =============== ================ ================= ============== ================== ================== =================
Balance
at 1
January
2011
(Audited) 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
period - (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
schemes - - - 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 - - - (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
(Audited) 33,920 3,904 (27,569) 455,544 465,799 34,904 278,094 (2,222) 776,575 22,059 798,634
=============== ================== =================== =================== =============== ================ ================= ============== ================== ================== =================
Profit
for
the
period - - - 40,400 40,400 - - - 40,400 2,468 42,868
Cumulative
effect
of change
in fair
value
of available
for
sale
investments - - - (19) (19) - - - (19) - (19)
Cumulative
effect
of change
in fair
value
of financial
derivatives - - - (1,625) (1,625) - - - (1,625) - (1,625)
Realisation
of revaluation
reserve - (91) - 91 - - - - - - -
Currency
translation
loss - - (25,060) - (25,060) - - - (25,060) (4,315) (29,375)
Total
comprehensive
income
for
the
period - (91) (25,060) 38,847 13,696 - - - 13,696 (1,847) 11,849
Issue
of equity
shares - - - - - 159 434 - 593 - 593
Purchase
of own
shares - - - - - - - (147) (147) - (147)
Cost
of equity
settled
employee
share
schemes - - - 3,675 3,675 - - - 3,675 - 3,675
Exercise
of employees
long
term
incentive
plan - - - (117) (117) - - 117 - - -
Exercise
of employees
management
incentive
plan - - - (2,132) (2,132) - - 2,132 - - -
Deferred
tax
arising
on share-based
payments - - - (18) (18) - - - (18) - (18)
Dividends
on ordinary
shares - - - (14,746) (14,746) - - - (14,746) (301) (15,047)
Adjustment
arising
from
change
in
non-controlling
interests - - - (4,833) (4,833) - - - (4,833) (7,176) (12,009)
Balance
at 30
June
2012
(Unaudited) 33,920 3,813 (52,629) 476,220 461,324 35,063 278,528 (120) 774,795 12,735 787,530
=============== ================== =================== =================== =============== ================ ================= ============== ================== ================== =================
Condensed consolidated cash flow statement
Notes H1 H1 FY
2012 2011 2011
$000 (Unaudited) $000 (Unaudited) $000 (Audited)
------------------ ------------------- ---------------
Net cash from operating activities 13 47,071 19,220 126,397
Investing activities
Purchases of property, plant and
equipment (29,340) (33,199) (69,032)
Proceeds from disposal of property,
plant and equipment 417 313 696
Purchase of intangible assets (27,582) (7,179) (8,967)
Proceeds from disposal of intangible
assets 143 66 191
Acquisition of interest in associated
companies - (38,610) (38,610)
Investment in financial and other
non-current assets 495 307 (287)
Acquisition of subsidiary
undertakings,
net of cash acquired (6,207) (105,825) (217,779)
Payments of costs directly
attributable
to acquisitions 4 (1,519) (3,892) (10,147)
Finance income 348 154 468
------------------ ------------------- ---------------
Net cash used in investing activities (63,245) (187,865) (343,467)
Financing activities
(Increase)/decrease in collateralised
and restricted cash (4,041) 1,063 978
Increase in long-term financial
debts 99,885 197,695 335,353
Repayment of long-term financial
debts (50,034) (51,488) (68,364)
Increase in short-term borrowings 35,961 69,769 59,095
Decrease in obligations under
finance leases (1,215) (489) (2,028)
Dividends paid (14,717) (14,497) (25,201)
Dividends paid to non-controlling
shareholders (301) - (100)
Interest paid (15,938) (9,555) (23,758)
Proceeds from issue of new shares 446 1,772 2,390
Proceeds from non-controlling interest
for capital
increase in subsidiary - 488 488
Acquisition of non-controlling interest
in subsidiary (12,009) - (29,196)
------------------ ------------------- ---------------
Net cash from financing activities 38,037 194,758 249,657
Net increase in cash and cash equivalents 21,863 26,113 32,587
Cash and cash equivalents at beginning
of period/year 94,715 62,718 62,718
Foreign exchange translation movements (2,199) 695 (590)
------------------ ------------------- ---------------
Cash and cash equivalents at end
of period/year 114,379 89,526 94,715
================== =================== ===============
Notes to the condensed set of financial statements
(unaudited)
1. General information
The financial information for the year ended 31 December 2011
does not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006. Statutory accounts for the
year ended 31 December 2011, which were prepared under
International Financial Reporting Standards (IFRSs) issued by the
International Accounting Standards Board, have been filed with the
Registrar of Companies. The auditor's report on those accounts was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain any statement under Section 498 (2) or
(3) of the Companies Act 2006.
2. Accounting policies
The unaudited condensed set of financial statements for the six
months ended 30 June 2012 have been prepared using the same
accounting policies and on a basis consistent with the audited
financial statements of Hikma Pharmaceuticals PLC (the 'Group') for
the year ended 31 December 2011 which are prepared in accordance
with IFRSs as adopted by the European Union.
Basis of preparation
The currency used in the preparation of the accompanying
condensed set of financial statements is the US Dollar ($) as the
majority of the Group's business is conducted in US Dollars.
The Group's condensed set of financial statements included in
this half- yearly financial report have been prepared in accordance
with International Accounting Standards 34 'Interim Financial
Reporting' as adopted by the European Union. They were approved by
the Board on 16 August 2012.
Taxes on income for interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
Certain balances have been reclassified to conform with current
period presentation, these include trade receivables as at 30 June
2011 which were shown net of $19,329,000 of provisions for expired
goods, certain returns and other rebates, which have now been
included in other current liabilities.
Going concern
The Group has $905.1 million of banking facilities of which
$331.1 million were undrawn as at 30 June 2012. Of the undrawn
facilities, $189.4 million was committed. These facilities are well
diversified across the operating subsidiaries of the Group with a
number of financial institutions.
About 50% of the Group's short-term and undrawn long-term
facilities are of a committed nature.
We continue to expect the short-term facilities to be renewed
upon maturity. In addition the Group maintained cash balances of
$121 million as at 30 June 2012. 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 within the levels of
its facilities.
Although the current economic conditions may affect short-term
demand for our products, as well as placing pressure on customers
and suppliers which may face liquidity issues, the Group's
geographic spread, product diversity, large customer and supplier
base substantially mitigate these risks.
In addition, the Group operates in the relatively defensive
generic pharmaceuticals industry which we expect to be less
affected compared to other industries that are subject to greater
cyclical changes.
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 outlook.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed financial statement.
Changes in accounting policy
The same accounting policies, presentation and method of computation are followed in the
condensed set of financial statements as applied in the Group's latest annual audited financial
statements.
Adoption of new and revised standards
At the date of authorisation of these financial statements, the
following Standards and Interpretations
which have not been applied in these financial statements were
in issue but not yet effective (and in some cases had not yet been
adopted by the EU):
IFRS 1(amended) Government Loans
IFRS 1 (amended) Severe Hyperinflation
and Removal of Fixed Dates for First-time Adopters
IFRS 7 and IAS 32(amended) Offsetting Financial Assets and
Financial Liabilities
IFRS 9 Financial Instruments and subsequent amendments to IFRS 9 and IFRS 7 issued 16 December 2011
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 (amended) Presentation of Items of Other
Comprehensive Income
IAS 12 Deferred Tax Recovery of Underlying
Assets
IAS 19 (amended) Employee Benefits
IAS 28 (revised) Investments in Associates and
Joint Ventures
Improvements 2011 Annual Improvements to IFRSs:
2009-2011 Cycle
The Directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group in future periods.
3. Business and geographical segments
For management purposes, the Group is currently organised into
three operating divisions - Branded, Injectables and Generics.
These divisions represent the Group's reportable segments under
IFRS 8 and are the basis on which the Group reports its primary
segment information.
Segment information about these businesses is presented
below.
Six months ended
30 June 2012 (Unaudited)
Branded Injectables Generics Others Group
$000 $000 $000 $000 $000
------------- ----------------- ---------------- ---------------- --------------
Revenue 248,821 225,215 55,768 2,456 532,260
Cost of sales (128,691) (127,035) (40,560) (1,894) (298,180)
------------- ----------------- ---------------- ---------------- --------------
Gross profit 120,130 98,180 15,208 562 234,080
------------- ----------------- ---------------- ---------------- --------------
Adjusted segment result 52,554 49,536 (3,291) (2,042) 96,757
Exceptional items :
- Integration related
expenses (601) - - - (601)
Intangible amortisation* (4,521) (1,846) (18) - (6,385)
-------------------------- ------------- ----------------- ---------------- ---------------- --------------
Segment result 47,432 47,690 (3,309) (2,042) 89,771
============= ================= ================ ================ ==============
Unallocated corporate
expenses (14,702)
--------------
Operating profit 75,069
--------------
Results from associated
companies (50)
Finance income 355
Finance expense (17,039)
Other expenses (net) (491)
--------------
Profit before tax 57,844
Tax (14,976)
--------------
Profit for the period 42,868
==============
Attributable to:
Non-controlling interest 2,468
Equity holders of the
parent 40,400
42,868
==============
Segment result is defined as operating profit for each
segment.
*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 and travel expenses.
Segment assets and liabilities
30 June 2012 (Unaudited)
Corporate
Branded Injectables Generics and Others Group
$000 $000 $000 $000 $000
----------------- ------------------ ------------- ---------------- ------------
Additions to property,
plant and equipment (cost) 14,636 9,198 2,045 197 26,076
Additions to intangible
assets 1,972 24,404 4,762 - 31,138
Total property, plant
and equipment and intangible
assets (net book value) 513,725 267,755 51,023 7,591 840,094
Depreciation 11,351 5,905 3,438 391 21,085
Amortisation (including
software) 5,071 2,290 162 92 7,615
Interest in associated
companies - - - 37,395 37,395
Balance sheet
Total assets 1,013,755 402,575 189,657 57,369 1,663,356
================= ================== ============= ================ ============
Total liabilities 567,572 233,649 28,450 46,155 875,826
================= ================== ============= ================ ============
Six months ended
30 June 2011 (Unaudited)
Branded Injectables Generics Others Group
$000 $000 $000 $000 $000
---------------- -------------- ---------------- ---------------- -------------
Revenue 199,623 116,105 76,376 2,655 394,759
Cost of sales (100,447) (72,555) (47,161) (1,978) (222,141)
---------------- -------------- ---------------- ---------------- -------------
Gross profit 99,176 43,550 29,215 677 172,618
---------------- -------------- ---------------- ---------------- -------------
Adjusted segment result 47,548 16,222 10,173 (1,591) 72,352
Exceptional items
:
- Inventory related
adjustments - (1,203) - - (1,203)
Intangible amortisation* (2,345) (1,669) - - (4,014)
-------------------------- ---------------- -------------- ---------------- ---------------- -------------
Segment result 45,203 13,350 10,173 (1,591) 67,135
================ ============== ================ ================ =============
Adjusted Unallocated corporate
expenses (12,635)
Exceptional items
:
- Acquisition related
expenses (5,455)
-------------------------- ---------------- -------------- ---------------- ---------------- -------------
Unallocated corporate
expenses (18,090)
-------------
Operating profit 49,045
-------------
Finance income 154
Finance expense (9,484)
Other income (net) 152
-------------
Profit before tax 39,867
Tax (4,755)
-------------
Profit for the period 35,112
=============
Attributable to:
Non-controlling interest 1,987
Equity holders of
the parent 33,125
35,112
=============
Segment result is defined as operating profit for each
segment.
*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.
30 June 2011 (Unaudited)
Corporate
Branded Injectables Generics and Others Group
$000 $000 $000 $000 $000
---------------- ----------------- ---------------- ----------------- -------------
Additions to property,
plant and equipment (cost) 24,057 3,048 3,761 2,119 32,985
Acquisition of subsidaries'
property, plant and
equipment
(net book value) - 50,342 - - 50,342
Additions to intangible
assets 6,191 988 - - 7,179
Intangible assets arising
on acquisition - 18,060 - - 18,060
Total property, plant and
equipment and intangible
assets (net book value) 415,339 226,018 33,969 11,320 686,646
Depreciation 9,648 3,749 2,363 480 16,240
Amortisation (including
software) 3,078 1,904 96 98 5,176
Interest in associated
companies - - - 38,610 38,610
Balance sheet
Total assets 867,629 370,882 147,884 30,850 1,417,245
================ ================= ================ ================= =============
Total liabilities 342,946 246,534 26,677 12,411 628,568
================ ================= ================ ================= =============
Year ended
31 December 2011 (Audited)
Branded Injectables Generics 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)
-------------
Operating profit 118,688
-------------
Results from associated
companies (1,164)
Finance income 468
Finance expense (23,368)
Other expenses (net) (732)
-------------
Profit before tax 93,892
Tax (10,423)
-------------
Profit for the period 83,469
=============
Attributable to:
Non-controlling interest 3,362
Equity holders of the
parent 80,107
83,469
=============
Segment result is defined as operating profit for each
segment.
*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.
31 December 2011 (Audited)
Corporate
Branded Injectables Generics 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
Interest 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 table provides an analysis of the Group's sales by
geographical market, irrespective of the origin of the
goods/services:
H1 2012 H1 2011 FY 2011
$000 $000 $000
------------------- -------------------- --------------
(Unaudited) (Unaudited) (Audited)
------------------- -------------------- --------------
Middle East and North
Africa 297,992 229,849 508,776
United States 192,363 120,013 317,334
Europe and Rest of
the World 38,425 43,922 87,622
United Kingdom 3,480 975 4,293
532,260 394,759 918,025
=================== ==================== ==============
Included in revenues arising from the Branded and Injectables
segments are revenues of approximately $54,365,000 (30 June 2011:
$43,301,000 and 31 December 2011: $101,900,000) which arose from
the Group's largest customer which is located in Saudi Arabia.
4. Exceptional items and intangible amortisation
Exceptional items are defined as those items that are material
in nature or amount and are non-recurring; those are disclosed
separately in the condensed consolidated income statementto assist
in the understanding of the Group's underlying performance.
H1 2012 H1 2011 FY 2011
$000 $000 $000
--------------- --------------- ------------
Acquisition related expenses - (5,455) (10,896)
Integration related expenses (601) - (5,472)
--------------- --------------- ------------
(601) (5,455) (16,368)
Inventory related adjustments - (1,203) (1,770)
--------------- --------------- ------------
Exceptional items (601) (6,658) (18,138)
Intangible amortisation* (6,385) (4,014) (8,998)
--------------- --------------- ------------
Exceptional items and intangible
amortisation (6,986) (10,672) (27,136)
Tax effect 1,395 3,055 6,374
--------------- --------------- ------------
Impact on profit for the period/
year (5,591) (7,617) (20,762)
=============== =============== ============
*Intangible amortisation comprises the amortisation of
intangible assets other than software.
During the period, the Group incurred $0.6 million in
integrating Promopharm and Savanna in the Group.
In the previous year, acquisition and integration-related
expenses are costs incurred in acquiring the Multi-Source
Injectables business ("MSI"), Promopharm, and Savanna.
Acquisition-related expenses are included in the unallocated
corporate expenses while integration-related expenses are included
in segment results.
Acquisition-related expenses mainly comprise third party
consulting services, legal and professional fees.
$1.5 million (30 June 2011: $3.9 million and 31 December 2011:
$10.1 million) of costs have been classified as investing
activities in the cash flow statement relating to the cash outflow
in respect of these costs in the period.
The inventory-related adjustments in previous year reflect the
fair value uplift of the inventory acquired as part of the MSI
acquisition.
5. Tax
H1 2012 H1 2011 FY 2011
$000 $000 $000
----------------- ----------------- ------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ------------
Current tax:
Foreign tax 14,969 4,423 15,541
Prior year adjustments 397 450 (1,358)
Deferred tax (390) (118) (3,760)
14,976 4,755 10,423
================= ================= ============
6. Dividends
H1 2012 H1 2011 FY 2011
$000 $000 $000
----------------- ----------------- ----------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ----------
Amounts recognised as distributions to
equity holders in the period:
Final dividend for the year ended 31
December 2011 of 7.5 cents (2010: 7.5
cents) per share 14,746 14,497 14,497
Interim dividend for the year ended 31
December 2011 of 5.5 cents per share - - 10,704
14,746 14,497 25,201
================= ================= ==========
The proposed interim dividend for the period ended 30 June 2012
is 6.0 cents (30 June 2011: 5.5 cents) per share.
7. Earnings per share
Earnings per share is 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:
H1 2012 H1 2011 FY 2011
$000 $000 $000
------------------ ----------------- --------------
(Unaudited) (Unaudited) (Audited)
------------------ ----------------- --------------
Earnings for the purposes of basic and
diluted earnings per share being net profit
attributable to equity holders of the parent 40,400 33,125 80,107
================== ================= ==============
Exceptional items 601 6,658 18,138
Intangible amortisation* 6,385 4,014 8,998
Tax effect of adjustments (1,395) (3,055) (6,374)
------------------ ----------------- --------------
Adjusted earnings for the purposes of adjusted
basic and diluted earnings per share being
adjusted net profit attributable to equity
holders of the parent 45,991 40,742 100,869
================== ================= ==============
Number Number Number
Number of shares: '000 '000 '000
Weighted average number of Ordinary Shares
for the purposes of basic earnings per
share 195,954 193,330 194,135
Effect of dilutive potential Ordinary Shares
:
Share-based awards 1,819 4,878 3,633
------------------ ----------------- --------------
Weighted average number of Ordinary Shares
for the purposes of diluted earnings per
share 197,773 198,208 197,768
================== ================= ==============
H1 2012 H1 2011 FY 2011
Earnings Earnings Earnings
per share per share per share
Cents Cents Cents
------------------ ----------------- --------------
Basic 20.6 17.1 41.3
------------------ ----------------- --------------
Diluted 20.4 16.7 40.5
------------------ ----------------- --------------
Adjusted basic 23.5 21.1 52.0
------------------ ----------------- --------------
Adjusted diluted 23.3 20.6 51.0
------------------ ----------------- --------------
*Intangible amortisation comprises the amortisation of
intangible assets other than software.
8. Intangible assets
Other
Product In acquisition
Marketing Customer related process Trade related
Goodwill rights relationships intangibles R&D names intangibles Software Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
---------------- ---------------------------- --------------------- --------------------- --------------- ------------- ------------------- -------------- -----------------
Cost
Balance
at 1 January
2011 177,685 8,352 62,737 25,391 4,318 6,949 2,982 14,014 302,428
Additions - 521 - 6,170 - - - 488 7,179
Acquisition
of
subsidiaries 5,804 - - 12,195 - - 61 - 18,060
Disposals - - - (50) - - - - (50)
Translation
adjustments 3,243 468 694 771 11 528 244 197 6,156
Balance
at 30
June 2011 186,732 9,341 63,431 44,477 4,329 7,477 3,287 14,699 333,773
Balance
at 1 January
2011 177,685 8,352 62,737 25,391 4,318 6,949 2,982 14,014 302,428
Additions - 1,155 - 6,831 - - - 981 8,967
Acquisition
of
subsidiaries 99,311 - 17,216 30,275 - 4,286 73 63 151,224
Disposals - - - (100) - - - - (100)
Translation
adjustments (6,983) (197) (1,259) (715) (51) (268) (65) (179) (9,717)
Balance
at 31
December
2011 270,013 9,310 78,694 61,682 4,267 10,967 2,990 14,879 452,802
Additions - 316 - 22,288 - - - 8,534 31,138
Adjustments* 606 - - - - - - - 606
Transfers - - - 686 (686) - - - -
Disposals (31) - - (150) - - - - (181)
Translation
adjustments (4,797) (196) (370) (813) (31) (73) (113) (145) (6,538)
Balance
at 30
June 2012 265,791 9,430 78,324 83,693 3,550 10,894 2,877 23,268 477,827
---------------- ---------------------------- --------------------- --------------------- --------------- ------------- ------------------- -------------- -----------------
Amortisation
Balance
at 1 January
2011 (608) (3,094) (14,079) (5,597) (912) (127) (919) (7,972) (33,308)
Charge
for the
period - (440) (2,118) (1,161) (140) (57) (98) (1,162) (5,176)
Translation
adjustments - (135) 39 (182) (24) (5) (59) (119) (485)
---------------- ---------------------------- --------------------- --------------------- --------------- ------------- ------------------- -------------- -----------------
Balance
at 30
June 2011 (608) (3,669) (16,158) (6,940) (1,076) (189) (1,076) (9,253) (38,969)
Balance
at 1 January
2011 (608) (3,094) (14,079) (5,597) (912) (127) (919) (7,972) (33,308)
Charge
for the
year - (1,033) (4,488) (2,768) (279) (228) (202) (2,345) (11,343)
Translation
adjustments - 100 226 139 30 12 29 117 653
Balance
at 31
December
2011 (608) (4,027) (18,341) (8,226) (1,161) (343) (1,092) (10,200) (43,998)
Charge
for the
period - (436) (2,635) (2,819) (117) (276) (102) (1,230) (7,615)
Transfers - - - (207) 207 - - - -
Translation
adjustments - 85 42 180 29 12 38 84 470
Balance
at 30
June 2012 (608) (4,378) (20,934) (11,072) (1,042) (607) (1,156) (11,346) (51,143)
Carrying
amount
At 30
June 2012 265,183 5,052 57,390 72,621 2,508 10,287 1,721 11,922 426,684
At 31
December
2011 269,405 5,283 60,353 53,456 3,106 10,624 1,898 4,679 408,804
At 30
June 2011 186,124 5,672 47,273 37,537 3,253 7,288 2,211 5,446 294,804
The current period additions within product related intangible
relate to licenses for products with an indefinite useful life. The
software additions relate to the Group's ongoing SAP
implementation.
*An adjustment of $0.6 million has been made to the provisional
goodwill recognised on the acquisition of MSI. The measurement
period for MSI closed on 2 May 2012.
9. Inventories
30 June 30 June 31 December
2012 2011 2011
$000 $000 $000
(Unaudited) (Unaudited) (Audited)
Finished goods 84,129 85,670 77,862
Work-in-progress 41,097 33,329 28,039
Raw and packing materials 130,952 136,561 114,449
Goods in transit 15,684 13,930 18,910
271,862 269,490 239,260
Goods in transit include inventory held at third parties whilst
in transit between Group companies.
10. Trade and other receivables
30 June 30 June 31 December
2012 2011 2011
$000 $000 $000
---------------- ----------------
(Unaudited) (Unaudited) (Audited)
---------------- ----------------
Trade receivables* 314,999 253,200 292,100
Prepayments 19,984 24,239 16,015
Value added tax recoverable 5,968 6,656 5,188
Interest receivable 433 701 490
Employee advances 2,565 2,369 2,063
343,949 287,165 315,856
================ ================
*See note 2.
11. Trade and other payables
30 June 30 June 31 December
2012 2011 2011
$000 $000 $000
(Unaudited) (Unaudited) (Audited)
Trade payables 108,626 102,341 97,756
Accrued expenses 52,176 31,973 60,276
Employees' provident fund * 4,779 3,072 4,181
VAT and sales tax payables 1,291 845 535
Dividends payable ** 2,525 2,228 2,207
Social security withholdings 1,587 1,230 1,107
Income tax withholdings 2,492 2,456 2,482
Other payables 1,738 2,602 2,554
175,214 146,747 171,098
* The employees' provident fund liability represents outstanding
contributions to the Hikma Pharmaceuticals Ltd (Jordan) retirement
benefit plan, on which the fund receives 5% interest.
** Dividends payable includes $2,009,000 (30 June 2011:
$2,045,000 and 31 December 2011: $2,022,000) due to the previous
shareholders of Arab Pharmaceutical Manufacturing.
12. Long-term financial debts
30 June 30 June 31 December
2012 2011 2011
$000 $000 $000
---------------
(Unaudited) (Unaudited) (Audited)
---------------
Long-term loans 474,978 285,809 410,197
Less: current portion of loans (81,136) (53,810) (65,302)
Long-term financial loans 393,842 231,999 344,895
Breakdown by maturity:
Within one year 81,136 53,810 65,302
In the second year 80,976 70,930 84,488
In the third year 75,569 45,271 63,732
In the fourth year 83,127 54,454 65,490
In the fifth year 53,369 49,987 58,069
Thereafter 100,801 11,357 73,116
474,978 285,809 410,197
13. Net cash from operating activities
Notes H1 H1 FY
2012 2011 2011
$000
$000 (Unaudited) $000 (Unaudited) (Audited)
Profit before tax 57,844 39,867 93,892
Adjustments for:
Depreciation, amortisation of:
Property, plant and equipment 21,085 16,240 35,660
Intangible assets 7,615 5,176 11,343
Loss on disposal of property, plant
and equipment 93 17 22
Losses/(Gain) on disposal of intangible
assets 38 (17) (91)
Movement on provisions 1,109 535 757
Movement on deferred income (37) (16) (87)
Cost of equity-settled employee share
schemes 3,675 3,634 7,507
Payments of costs directly attributable
to acquisitions 4 1,519 3,892 10,147
Finance income (348) (154) (468)
Interest and bank charges 17,033 9,484 23,368
Results from associates 50 - 1,164
Cash flow before working capital 109,676 78,658 183,214
Change in trade and other receivables (30,799) (35,947) (59,898)
Change in other current assets 2,610 (1,775) (4,570)
Change in inventories (47,751) (31,145) (8,199)
Change in trade and other payables 11,164 15,486 15,987
Change in other current liabilities 16,427 (1,220) 1,958
Cash generated by operations 61,327 24,057 128,492
Income tax paid (14,256) (4,837) (2,095)
Net cash generated from operating
activities 47,071 19,220 126,397
==================
14. Foreign exchange rates
Period end rates Average rates
30 June 30 June 31 December
2012 2011 2011 H1 2012 H1 2011 FY 2011
USD/EUR 0.7950 0.6949 0.7722 0.7704 0.7127 0.7180
USD/Sudanese Pound 5.3135 2.9000 2.8918 2.9727 3.0746 2.9869
USD/Algerian Dinar 78.8770 71.7025 76.0061 75.4000 72.3008 72.8147
USD/Saudi Riyal 3.7495 3.7495 3.7495 3.7495 3.7495 3.7495
USD/British Pound 0.6403 0.6242 0.6470 0.6340 0.6186 0.6233
USD/Jordanian Dinar 0.7090 0.7090 0.7090 0.7090 0.7090 0.7090
USD/Egyptian Pound 6.0790 5.9869 6.0481 6.0533 5.9361 5.9648
USD/Japanese Yen 79.5406 80.9900 77.4136 79.7230 81.9398 79.7414
USD/Moroccan Dirham 8.7514 8.7430 8.6133 8.8542 8.4910 8.3682
15. 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.
Trading transactions:
During the period, Group companies entered into the following
transactions with related parties:
Darhold Limited: is a related party of the Group because it is
one of the major shareholders of Hikma Pharmaceuticals PLC with an
ownership percentage of 29.0% at 30 June 2012 (30 June 2011: 29.3%
and 31 December 2011: 29.2%).
Other than dividends (as paid to all shareholders), there were
no transactions between the Group and Darhold Limited during the
period.
Capital Bank - Jordan: is a related party of the Group because
during the period two board members of the Bank were also board
members of Hikma Pharmaceuticals PLC. Total cash balances at
Capital Bank - Jordan were $2,991,000 (30 June 2011: $462,000 and
31 December 2011: $610,000). Loans and overdrafts granted by
Capital Bank to the Group amounted to $8,448,000 (30 June 2011:
$372,000 and 31 December 2011: $3,841,000) with interest rates
ranging between 9 % and 3 month LIBOR + 1%. Total interest expense
incurred against Group facilities was $165,000 (H1 2011: $9,000 and
FY 2011: $7,000). No interest income was received in any period and
total commission paid in the period was $38,000 (H1 2011: $16,000
and 2011: $8,000).
Jordan International Insurance Company: is a related party of
the Group because one board member of the insurance company is also
a board member of Hikma Pharmaceuticals PLC. Total insurance
premiums paid by the Group to Jordan International Insurance Co
during the period were $1,797,000 (H1 2011: $2,329,000 and FY 2011:
$3,035,000). The Group's insurance expense for Jordan International
Insurance Co contracts in the period was $2,715,000 (H1 2011:
$1,953,000 and FY 2011: $2,902,000). The amounts due to Jordan
International Insurance Co at 30 June 2012 were $577,000 (30 June
2011: $272,000 and 31 December 2011: Due from $109,000).
Mr. Yousef Abd Ali: Mr. Yousef Abd Ali is a related party of the
Group because he holds 33% of Hikma Liban SARL in Lebanon. The
amount owed to Mr. Yousef by the Group as at 30 June 2012 was
$150,000 (30 June 2011: $161,000 and 31 December 2011:
$150,000).
Labatec Pharma SA: is a related party of the Group because it is
owned by Mr. Samih Darwazah.
The Group sells to Labatec Pharma and purchases from Labatec
Pharma certain products for resale which gives both companies
access to additional markets. During the period to 30 June 2012 the
Group's total sales to Labatec Pharma amounted to $215,000 (H1
2011: Nil and FY 2011: $338,000) and the Group total purchases from
Labatec Pharma amounted to $1,396,000 (H1 2011: $1,177,000 and FY
2011: $3,805,000). At 30 June 2012 the amount owed to Labatec
Pharma from the Group was $892,000 (30 June 2011: $1,269,000 and 31
December 2011: $753,000).
King and Spalding: is a related party of the Group because a
partner of the firm is a board member and company secretary of
West-Ward Pharmaceutical Corp. King and Spalding is an outside
legal counsel firm that handles general legal matters for
West-Ward. During the period to June 2012 fees of $45,000 (H1 2011:
$951,000 and FY 2011: $1,216,000) were paid for legal services
provided.
Principal risks and uncertainties
The Group's business faces risks and uncertainties which could
have a significant effect on its financial condition, results of
operation or performance over the remaining six months of the
financial year and could cause actual results to differ materially
from expected and historical results.
Operational risks
Risk Potential impact Mitigation
Compliance with regulatory
requirements
> Failure to comply > Delays in supply or > Commitment to maintain
with applicable regulatory an inability to market the highest levels of
requirements and or develop the Group's quality across all manufacturing
manufacturing standards products facilities
(often referred to > Delayed or denied approvals > Strong global compliance
as 'Current Good for the introduction of function that oversees
Manufacturing Practices' new products compliance across the
or cGMP) > Product complaints or Group
recalls > Remuneration and reward
> Bans on product sales structure that helps
or importation retain experienced personnel
> Disruptions to operations > Continuous staff training
> Potential for litigation and know-how exchange
> On-going development
of standard operating
procedures
Regulation changes
> Unanticipated legislative > Restrictions on the > Strong oversight of
and regulatory actions, sale of one or more of local regulatory environments
developments and our products to help anticipate potential
changes affecting > Restrictions on our changes
the Group's operations ability to sell our products > Local operations in
and products at a profit all of our key markets
> Unexpected additional > Representation and/or
costs required to produce, affiliation with local
market or sell our products industry bodies
> Increased compliance > Diverse geographical
costs 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 > Inability to deliver submission processes
of price and re-imbursement a positive return on investments across all of our markets
> Lack of approval in R&D, manufacturing > Highly qualified sales
and acceptance of and sales and marketing and marketing teams across
new products by physicians, all markets
patients and other > A diversified product
key decision-makers pipeline with 229 compounds
> Inability to confirm pending approval, covering
safety, efficacy, a broad range of therapeutic
convenience and/or areas
cost-effectiveness > A systematic commitment
of our products as to quality that helps
compared to competitive to secure approval and
products acceptance of new products
> Inability to participate and mitigate potential
in tender sales safety issues
Product safety
> Unforeseen product > Interruptions to revenue > Diversification of
safety issues for flow product portfolio across
marketed products, > Costs of recall, potential key markets and therapies
particularly in respect for litigation > Working with stakeholders
of in-licensed products > Reputational damage to understand issues
as they arise
Product development
> Failure to secure > Inability to grow sales > Experienced and successful
new products or compounds and increase profitability in-house R&D team, with
for development for the Group specifically targeted
> Lower return on investment product development pathways
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 > Loss of products from > Investment in long-term
or extend in-licensing our portfolio relationships with existing
or other co-operation > Revenue interruptions in-licensing partners
agreements with third > Failure to recoup sales > Experienced legal team
parties and marketing and business capable of negotiating
development costs robust agreements 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 > Loss of market share > On-going portfolio
in key geographies > Decreasing revenues diversification, differentiation
> On-going pricing on established portfolio and renewal through internal
pressure in increasingly R&D, in-licensing and
commoditised markets product acquisition
> 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 and/or commercialise new suppliers of active ingredients
from approved sources products > Long-term relationships
> Inability to procure > Inability to market with reliable raw material
active ingredients existing products as planned suppliers
on commercially viable > Lost revenue streams > Corporate auditing
terms on short notice team continuously monitors
> Inability to procure > Reduced service levels regulatory compliance
the quantities of and damage to customer of API suppliers
active ingredients relationships > Focus on improving
needed to meet market > Inability to supply service levels and optimising
requirements finished product to our our supply chain
customers in a timely
fashion
Economic and political
and unforeseen events
> The failure of > Disruptions to manufacturing > Geographic diversification,
control, a change and marketing plans with 25 manufacturing
in the economic conditions > Lost revenue streams facilities and sales
(including the Eurozone), > Inability to market in more than 40 countries
political environment or supply products > Product diversification,
or sustained civil with 688 products and
unrest in any particular 1,696 dosage strengths
market or country and forms
> Unforeseen events
such as fire or flooding
could cause disruptions
to manufacturing
or supply
Litigation
> Commercial, product > Financial impact on > In-house legal counsel
liability and other Group results from adverse with relevant jurisdictional
claims brought against resolution of proceedings experience
the Group > Reputational damage
Financial risks
Risk Impact Mitigation
Foreign exchange
risk
> Exposure to foreign > Fluctuations in the > Entering into currency
exchange movements, Group's net asset values derivative contracts
primarily in the and profits upon translation where possible
European, Algerian, into US dollars > Foreign currency borrowing
Sudanese and Egyptian > Matching foreign currency
currencies revenues to in-jurisdiction
costs
Interest rate risk
> Volatility in interest > Fluctuating impact on > Optimisation of fixed
rates profits before taxation 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
> Concentration of > Risk of bad debt or invoices
significant trade default > Group Credit policy
balances with key limiting credit exposures
customers in the > Use of various financial
MENA region and the instruments such as letters
US of credit, factoring
and credit insurance
arrangements
Liquidity Risk
> Insufficient free > Reduced liquidity and > Continual evaluation
cash flow and borrowings working capital funds of headroom and borrowing
headroom > Inability to meet short-term > Committed debt facilities
working capital needs > Diversity of institution,
and, therefore, to execute subsidiary and geography
our long term strategic of borrowings
plans
Tax
> Changes to tax > Negative impact on the > Close observation of
laws and regulations Group's effective tax any intended or proposed
in any of the markets rate changes to tax rules,
in which we operate > Costly compliance requirements both in the UK and in
other key countries where
the Group operates
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUGURUPPPGA
Hikma Pharmaceuticals (LSE:HIK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hikma Pharmaceuticals (LSE:HIK)
Historical Stock Chart
From Jul 2023 to Jul 2024
