TIDMHIK
RNS Number : 8618Z
Hikma Pharmaceuticals Plc
13 March 2013
PRESS RELEASE
Hikma delivers a strong performance in 2012 with Group revenue
growth up 21% and EPS up 24%
London, 13 March 2013 - 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 2012.
Group financial highlights
Summary P&L 2012 2011 Change
$ million
------------------------------------- -------- ------ -------
Revenue 1,108.7 918.0 +20.8%
------------------------------------- -------- ------ -------
Gross profit 501.1 395.3 +26.8%
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Gross margin 45.2% 43.1% +2.1
------------------------------------- -------- ------ -------
Operating profit 166.8 118.7 +40.5%
------------------------------------- -------- ------ -------
Adjusted[1] operating profit 193.8 145.8 +32.9%
------------------------------------- -------- ------ -------
Adjusted operating margin 17.5% 15.9% +1.6
------------------------------------- -------- ------ -------
EBITDA[2] 225.2 165.7 +35.9%
------------------------------------- -------- ------ -------
Profit attributable to shareholders 100.3 80.1 +25.2%
------------------------------------- -------- ------ -------
Adjusted1 profit attributable
to shareholders 120.5 100.9 +19.4%
------------------------------------- -------- ------ -------
Earnings per share (cents) 51.1 41.3 +23.8%
------------------------------------- -------- ------ -------
Dividend per share (cents) 16.0 13.0 +23.1%
------------------------------------- -------- ------ -------
Net cash flow from operating
activities 182.2 126.4 +44.1%
------------------------------------- -------- ------ -------
-- Group revenue increased by 20.8% to $1,108.7 million, with organic[3]revenue up 5.2%
-- Branded revenue growth of 19.7% reflects strong demand across
our MENA markets, with organic[4] growth of 11.3%
-- Branded adjusted operating profit increased by 17.6%, with an
adjusted operating margin of 23.4%
-- In constant currency, Branded revenue grew by 23.1% and adjusted operating margin was 24.7%
-- Excellent performance in global Injectables delivered 48.9%
revenue growth, with organic[5] revenue growth of 22.3% and
adjusted operating margin of 26.2%
-- Remediation work at our Eatontown facility during 2012
reduced Generics revenue by 33.0% to $103.7 million and resulted in
an operating loss of $20.9 million
-- Increase in Group adjusted operating margin to 17.5%, from
15.9% in 2011, reflecting a significant improvement in Injectables
margin
-- Profit attributable to shareholders up 25.2% to $100.3
million. On an adjusted basis, profit attributable to shareholders
up 19.4% to $120.5 million
-- Net cash flow from operating activities up $55.8 million, to $182.2 million
-- Continued new product introductions across all countries and
markets - launched 14 products and received 81 product approvals -
and enhancement of the portfolio through product acquisitions
-- Completed acquisition of the Egyptian Company for
Pharmaceuticals and Chemical Industries in January 2013 for a cash
consideration of $20.5 million
-- Increase in the full year dividend to 16.0 cents per share, up from 13.0 cents in 2011
Said Darwazah, Chief Executive Officer of Hikma, said:
"I am pleased with the very strong performance of the Group this
year.
In the MENA region, our businesses are thriving as a result of
the investment we have been making to strengthen our manufacturing
and sales operations and our ongoing commitment to building our
businesses in these markets.
Our global Injectables business achieved excellent growth in
revenue and profitability, with very strong performances across our
geographies. We are benefiting from the strength of our sales and
manufacturing platform in the US, strong demand for our products
across our markets and our continued track record for quality and
operational excellence. We are encouraged by the prospects for the
global injectables market and believe the Injectables business is
well positioned for strong growth over the medium and long
term.
The performance of our Generics business has been impacted by
the remediation work we are doing at our Eatontown facility.
Following completion of a strategic review, bringing this facility
back into regulatory compliance remains the priority, as does
returning it to profitability. At the same time, we are evaluating
the alternative options for this business.
Our focus in 2013 continues to be on building our business in
MENA and on strengthening our global Injectables business. We are
well positioned for 2013 and we look forward to another strong
year."
Enquiries
Hikma Pharmaceuticals PLC
Susan Ringdal, VP Corporate Strategy and Investor Relations +44
(0)20 7399 2760/ +44 7776 477050
Lucinda Henderson, Investor Relations Manager +44 (0)20 7399
2765/ +44 7818 060211
FTI Consulting
Ben Atwell/ Julia Phillips/ Matthew Cole +44 (0)20 7831 3113
About Hikma
Hikma Pharmaceuticals PLC is a fast growing 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 2012, Hikma achieved
revenues of $1,108.7 million and profit attributable to
shareholders of $100.3 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)
203 139 4830 or 0808 237 0030 (UK toll free) and use participant
PIN code: 87887107. 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
preliminary results announcement.
Business and financial review
The business and financial review set out below summarises the
performance of Hikma's three main business segments, Branded,
Injectables and Generics, for the year ended 31 December 2012.
Group revenue by business segment (%)
2012 2011
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Branded 47.7% 48.1%
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Injectables 42.4% 34.4%
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Generics 9.4% 16.9%
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Others 0.5% 0.6%
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Group revenue by region (%)
2012 2011
---------------- ------ ------
MENA 55.8% 55.4%
---------------- ------ ------
US 36.1% 34.6%
---------------- ------ ------
Europe and ROW 8.1% 10.0%
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Branded
2012 highlights:
-- Branded revenue increased by 19.7%, with organic[6] revenue up 11.3%
-- Branded adjusted operating profit increased by 17.6%, with an
adjusted operating margin of 23.4%
-- 47 product launches and 4 new in-license agreements
Branded revenue increased by 19.7% in 2012 to $528.9 million,
compared with $441.9 million in 2011. On a constant currency basis,
Branded revenue growth was 23.1%. Organic revenue grew 11.3% to
$480.7 million, with the recently acquired Promopharm and Savanna
businesses in Morocco and Sudan respectively, contributing a
further $48.1 million. Over the year, we delivered particularly
strong performances in Algeria, Egypt and Libya. Across all of our
MENA markets we have benefitted from the recent investments we have
made to expand our local manufacturing presence, launch new
products and restructure our sales and marketing teams.
Our Egyptian business had an excellent year with over 25%
revenue growth, reflecting increased manufacturing capacity and new
product launches. The Egyptian team successfully restructured its
salesforce to enable a greater focus on strategic, higher value
products. On 22 January 2013, we completed the acquisition of the
Egyptian Company for Pharmaceuticals and Chemical Industries
("EPCI") for an aggregate cash consideration of $20.5 million. This
is an important strategic acquisition, bringing a complementary
portfolio of 35 products and enhancing our local manufacturing
capabilities, including the addition of a dedicated cephalosporin
facility. The acquisition of EPCI significantly enhances our growth
potential in the Egyptian market.
In Algeria, an increase in the volume of locally manufactured
products and investment in our salesforce helped drive revenue
growth of close to 20%. In Libya, we saw a very strong recovery
this year following the political unrest in 2011. Our ongoing
commitment to this market enabled us to restart our operations
quickly following the disruptions and rapidly establish Hikma as
the leading pharmaceutical company in this market. In Morocco,
where we have been progressing with the integration of Promopharm,
we have successfully submitted 6 of Hikma's leading products for
registration.
In Iraq, whilst sales were disrupted at the beginning of the
year due to the change we made to our distributor, we saw
accelerating sales in the second half. In Sudan, where a
significant devaluation of the Sudanese pound caused pricing
uncertainty and delayed shipments during the first half of the
year, we were able to deliver much stronger growth in the second
half and for the full year overall. We believe that Iraq and Sudan
are attractive markets that will offer excellent growth potential
over the medium and long term. We continue to strengthen our
salesforce in the Iraqi market and build our product portfolio. In
Sudan, we are upgrading the manufacturing facility we acquired in
2011, which will further strengthen our leading position in this
market.
During 2012, the Branded business launched a total of 47
products across all markets, including 6 new compounds and 9 new
dosage forms and strengths. The Branded business also received 36
regulatory approvals across the region, including 3 for new
products.
Revenue from in-licensed products increased from $174.8 million
to $195.3 million in 2012, supported by the revenue contribution
from Promopharm's in-license agreements. In-licensed products
represented 36.9% of Branded revenue compared to 39.6% in 2011.
Strong revenue growth from our leading in-licensed products is
being offset by lower sales of Actos following the withdrawal of
this product in some of our markets in 2011. We signed 4 new
licensing agreements for innovative oral products during 2012,
which will support our continued focus on growing our portfolio of
higher value products in growing therapeutic categories.
Branded gross profit grew by 20.2% to $257.3 million in 2012 and
gross margin was 48.7%, compared with 48.4% in 2011. Despite higher
inflationary pressure across the region in the wake of the Arab
Spring, we maintained a stable gross margin by focusing on higher
value, strategic products, reducing procurement costs and driving
greater operational efficiencies.
Operating profit in the Branded business increased by 13.1% to
$111.4 million, compared with $98.5 million in 2011. Adjusted
operating profit increased by 17.6% to $123.6 million. Adjusted
operating margin was 23.4%, compared with 23.8% in 2011, after
excluding the amortisation of intangibles, integration costs and
severance costs incurred as a result of restructuring our MENA
operations during 2012. Excluding the impact of adverse currency
movements, particularly the Sudanese pound and the Algerian dinar,
which reduced adjusted operating profit by around $10.9 million,
adjusted operating margin was 24.7%. The impact of higher salaries
and benefits and increased operating costs are being more than
offset by our ongoing success in restructuring our sales and
marketing teams and driving efficiency savings across our
operations.
On a constant currency basis, we expect Branded revenue growth
of around 11% in 2013 and a slight improvement in adjusted
operating margin. This reflects our ability to continue offsetting
increased inflationary pressure across the MENA region with the
launch of higher value products and by driving cost and operating
efficiencies. On a reported basis, taking into account exchange
rate movements since the beginning of 2013, Branded revenue growth
is currently expected to be around 9% this year, with margins in
line with 2012.
Injectables
2012 highlights:
-- Injectables revenue grew by 48.9% to $470.0 million, with organic revenue up 22.3%
-- Strong performances across our geographies - US, MENA and Europe
-- Significant improvement in Injectables adjusted operating margin, up from 17.4% to 26.2%
Injectables revenue by region
2012 2011
---------------- ------ ------
US 63.0% 51.3%
---------------- ------ ------
MENA 20.5% 23.9%
---------------- ------ ------
Europe and ROW 16.5% 24.8%
---------------- ------ ------
Revenue in our global Injectables business increased by 48.9% to
$470.0 million, compared with $315.7 million in 2011. Organic
revenue increased by 22.3% to $237.5 million.
US Injectables revenue grew by $134.0 million, or 82.6%, to
$296.2 million. This excellent performance reflects a full year
contribution from the Multi-Source Source Injectables ("MSI"), our
success in maximising the potential of our existing product
portfolio, stronger customer relationships, new product launches
and product acquisitions. It is also due to the operational
excellence of our Cherry Hill and Portuguese facilities, which
significantly increased output through better management and
additional capacity. Our strong quality track record has helped to
differentiate our business in the US market and enabled us to
benefit from the favourable market conditions created by the supply
constraints of some of our competitors.
In the MENA region, Injectables revenue increased by 27.5% to
$96.1 million, compared with $75.4 million in 2011. This reflects
particularly strong growth in Saudi Arabia, Algeria, Libya and
Jordan, due to strong demand in the private market and more tender
wins, as well as the full year contribution from Promopharm.
Revenue in our European Injectables business of $77.8 million
was in line with revenue of $78.2 million in 2011. However, on a
constant currency basis, European Injectables revenue grew by 7.3%,
reflecting new product growth and continuing demand for contract
manufacturing. We also successfully offset double-digit price
erosion with strong volume growth.
Injectables gross profit increased by 71.4% to $218.7 million,
compared with $127.6 million in 2011. Gross margin increased
significantly to 46.5%, compared with 40.4% in 2011. This reflects
our efforts to actively manage our existing product portfolio,
favourable market conditions, strong operational management,
increased plant utilisation and greater economies of scale.
Operating profit of the Injectables business increased by 154.3%
to $115.5 million. Adjusted operating profit increased by 123.8% to
$123.0 million. Adjusted operating margin increased from 17.4% to
26.2%. 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 global Injectables
product portfolio, with a particular emphasis on more
differentiated products. In 2012, we received approval for a New
Drug Application ("NDA") for argatroban injection, which we
launched at the end of the year. In May 2012, we purchased the
Abbreviated New Drug Application ("ANDA") for sodium ferrous
gluconate injection from GeneraMedix Pharmaceuticals. These are
both excellent products with strong market positions.
During 2012, the Injectables business launched a total of 30
products across all markets, including 8 new compounds and 8 new
dosage forms and strengths. The Injectables business also received
a total of 41 regulatory approvals across all regions and markets,
namely 11 in MENA, 22 in Europe and 8 in the US. We signed 4 new
licensing agreements during 2012 to add innovative injectable
products to our MENA portfolio.
We expect our global Injectables business to continue to perform
well and currently expect Injectables revenues will grow in the low
double-digits in 2013. We also see excellent prospects for the
global Injectables business over the medium and long term.
As previously announced, we are undertaking a review of the
strategic options for the Injectables business. We have received a
number of unsolicited expressions of interest for the business and
will consider the best option for shareholders.
Generics
2012 highlights:
-- Generics revenue decreased by 33.0% to $103.7 million
-- Operating loss of $20.9 million reflects the impact of
additional compliance work at our Eatontown facility
-- Exceptional costs of $7.4 million related to the remediation
work and restructuring of the Generics business
Generics revenue was $103.7 million, down 33.0% compared with
$154.8 million in 2011. This decline is due to the slowdown in
production at our Eatontown facility during 2012, while we
undertook the compliance work necessary to address the observations
raised by the US Food and Drug Administration ("US FDA") in its
warning letter of February 2012. This led us to voluntarily halt
commercial production at this facility during the last two months
of 2012.
Generics gross profit was $23.3 million, compared with $52.2
million in 2011, and gross margin was 22.5%, compared with 33.7% in
2011. This reflects reduced operating leverage as a result of the
significant slowdown in sales.
The Generics business made an operating loss of $20.9 million in
2012, compared with an operating profit of $17.1 million in 2011.
The loss included $7.4 million of one-off costs associated with the
remediation and restructuring work.
In late December 2012, we restarted manufacturing at the
Eatontown facility and we are bringing products back gradually. We
expect to complete the remediation work in the second half of the
year. As the remediation process has been slower than expected, we
remain focused on driving sustainable cost reduction and continue
to look for further opportunities to cut costs across the business.
Following the completion of a strategic review, we have also
initiated discussions with third parties to evaluate the
alternative options for this business.
The impact of continued remediation in 2013 is currently being
offset by a market opportunity that is driving strong demand for
one of our products. We expect to maintain Generics revenue at 2012
levels and 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 $6.2 million,
compared with $5.6 million in 2011.
These other businesses delivered an operating loss of $3.3
million in 2012, compared with a loss of $2.4 million in 2011.
Group
Group revenue increased by 20.8% to $1,108.7 million in 2012.
Excluding the contributions from MSI in the US, Promopharm in
Morocco and Savanna in Sudan, organic revenue growth was 5.2%.
The Group's gross profit increased by 26.8% to $501.1 million,
compared with $395.3 million in 2011. Group gross margin was 45.2%,
compared with 43.1%, with the significant gross margin improvement
of the global Injectables business more than offsetting the lower
Generics gross margin.
Group operating expenses grew by 20.8% to $334.3 million,
compared with $276.7 million in 2011. Excluding the amortisation of
intangible assets (excluding software) and exceptional items,[7]
adjusted Group operating expenses grew by 24.0% to $311.7 million.
The paragraphs below address the Group's main operating expenses in
turn.
Sales and marketing expenses were $152.8 million, or 13.8% of
revenue, compared with $125.3 million and 13.6% of revenue in 2011.
Excluding non-recurring costs in 2012, sales and marketing expenses
represented 13.4% of revenue. The strong growth in our global
Injectables business, where relatively low incremental sales and
marketing investment is required to generate new sales, offset an
increase in MENA sales and marketing expenditure due to higher
wages and employee benefits.
As a percentage of revenue, general and administrative expenses
were 11.2%, compared with 11.7% in 2011. General and administrative
expenses increased by $17.0 million, or 15.8%, to $124.6 million in
2012. Excluding non-recurring items, G&A expenses as a
percentage of revenue were 10.7% in 2012, compared with 9.9% in
2011. This reflects the increase in employee salaries and benefits
in MENA and the high fixed cost base of the Generics business
during the slowdown in production during 2012.
We continued to grow our investment in R&D, with a 9.0%
increase in expenditure across the Group to reach $34.0 million.
Total investment in R&D represented 3.1% of Group revenue,
compared with 3.4% in 2011. Whilst this is lower than originally
planned, we were able to replace some expected expenditure through
product acquisitions. We expect further growth in R&D spend in
2013 as we continue to execute plans to develop our product
pipeline, particularly for injectable products.
Other net operating expenses increased by $10.4 million to $23.0
million, reflecting an increase in slow moving inventory
provisions, primarily in the US, and higher transactional foreign
exchange losses, primarily due to movements in the Sudanese pound
against the US dollar.
Operating profit for the Group increased by 40.5% to $166.8
million in 2012. Group operating margin increased to 15.0%,
compared with 12.9% in 2011. On an adjusted basis, Group operating
profit increased by $48.0 million, or 32.9%, to $193.8 million and
operating margin increased to 17.5%, up from 15.9% in 2011.
Research & Development[8]
The Group's product portfolio continues to grow as a result of
our in-house product development efforts. During 2012, we launched
14 new compounds, expanding the Group portfolio to 825 compounds in
2,094 dosage forms and strengths.[9] We manufacture and/or sell 94
of these compounds under-license from the originator.
Across all businesses and markets, a total of 77 products were
launched during 2012. In addition, the Group received 81
approvals.
Total marketed products Products launched in 2012
------------- --------------------------- ------------------------------------------------
New dosage Total launches
Dosage forms forms and across
Compounds and strengths New compounds strengths all countries[10]
Branded 6069 1,6309 6 9 47
Injectables 178 361 8 8 30
Generics 41 103 - - -
Group 825 2,094 14 17 77
Products pending approval as
Products approved in 2012 at 31 December 2012
------------- ---------------------------------------------- ----------------------------------------------
Total
Total pending
New dosage approvals New dosage approvals
forms and across forms and across
New compounds strengths all countries10 New compounds strengths all countries10
Branded 3 5 36 139 222 346
Injectables 10 12 41 89 112 327
Generics 4 4 4 22 22 22
Group 17 21 81 250 356 695
To ensure the continuous development of our product pipeline, we
submitted 216 regulatory filings in 2012 across all regions and
markets. As of 31 December 2012, we had a total of 695 pending
approvals across all regions and markets.
At 31 December 2012, we had a total of 73 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 $34.5 million, compared with
$22.9 million in 2011. This primarily reflects the annualised
interest charge on the loans we acquired to finance the MSI and
Promopharm acquisitions made in 2011. We have also increased our
loans in local currencies in 2012, which carry higher financing
charges but help to reduce our exposure to exchange rate
fluctuations in markets such as Algeria and Egypt. This is
explained in more detail in the net cash flow, working capital and
net debt section below. In 2013, we expect a net finance expense of
around $40 million, reflecting a further increase in local loans
and additional working capital financing.
Profit before tax
Profit before tax for the Group increased by 40.6% to $132.0
million, compared with $93.9 million in 2011. Adjusted profit
before tax increased by 31.5% to $159.1 million.
Tax
The Group incurred a tax expense of $24.8 million, compared with
$10.4 million in 2011. The effective tax rate was 18.8%, compared
with 11.1% in 2011. The increase in the tax rate is mainly
attributable to the increased profitability in higher tax
jurisdictions, such as the US, North Africa and Portugal. The
operating loss in the Generics business meant that the tax rate in
2012 was slightly lower than our previous expectations, but for
2013, we expect the effective tax rate to increase to between 23%
and 24%.
Profit for the period
The Group's profit attributable to equity holders of the parent
increased by 25.2% to $100.3 million in 2012. Adjusted profit
attributable to equity holders of the parent increased by 19.4% to
$120.5 million.
Earnings per share
Basic earnings per share increased by 23.8% to 51.1 cents,
compared with 41.3 cents in 2011. Diluted earnings per share
increased by 24.9% to 50.6 cents, compared with 40.5 cents in 2011.
Adjusted diluted earnings per share was 60.8 cents, an increase of
19.2% over 2011.
Dividend
The Board has recommended a final dividend of 10 cents per share
(approximately 6.7 pence per share), which will make a dividend for
the full year of 16.0 cents per share, an increase of 23.1%
compared with 2011. The proposed final dividend will be paid on 23
May 2013 to eligible shareholders on the register at the close of
business on 19 April 2012, subject to approval by shareholders at
the Annual General Meeting. The ex-dividend date is 17 April 2013
and the final date for currency elections is 3 May 2013.
Net cash flow, working capital and net debt
The Group generated operating cash flow of $182.2 million in
2012, up $55.8 million from $126.4 million in 2011. This
significant increase was partly due to the impact of a $21.1
million non-recurring cash injection in 2011 to fund the working
capital requirement of MSI at the time of the acquisition, which
reduced that year's operating cash flow. Excluding this impact, the
underlying increase in cash generation of $34.7 million, or 23.5%,
reflects the strong improvement in profitability in 2012.
This excellent growth in cash flow was achieved with relatively
flat working capital days of 194 days, compared with 193 days in
2011. Whilst Group receivable and payable days improved -
receivable days reduced by 8 days to 97 days at 31 December 2012
and payable days increased by 5 days to 66 days - inventory days
increased by 15 days to 164 days. This was primarily driven by our
US business, where we significantly increased the production output
of the Injectables business and were holding more normalised stock
levels at December 2012, compared to December 2011.
Capital expenditure was $51.4 million, compared with $69.0
million in 2011. Around $32.0 million of that was spent in MENA,
principally to maintain our manufacturing facilities across the
region, to invest in our recently acquired facility in Sudan and to
develop our chemical plant in Jordan. Around $13.1 million was
spent in the US, primarily at our facility in Cherry Hill, New
Jersey, to expand manufacturing capacity. In Portugal, investments
included warehouse improvements and new machinery purchases.
The Group purchased $38.8 million of intangible assets during
2012, including around $30.7 million in respect of new products and
around $8.1 million related to the implementation of SAP at our
Cherry Hill facility.
Group net debt decreased from $421.9 million at 31 December 2011
to $406.5 million at 31 December 2012. This reflects higher cash
balances from increased profitability, partially offset by
increased borrowings in 2012 to finance capital expenditure, the
purchase of intangible assets, the purchase of additional shares in
Promopharm, the payment of the deferred consideration related to
the MSI acquisition and the EPCI acquisition in January 2013.
Balance sheet
During the period, shareholder equity was negatively impacted by
unrealised foreign exchange losses of $21.2 million, primarily
reflecting the depreciation of the Sudanese pound, the Egyptian
pound and the Algerian dinar against the US dollar and the
revaluation of net assets denominated in these currencies.
Summary and outlook
We delivered a strong performance in 2012, with a 20.8% increase
in revenue and a 23.8% increase in earnings per share. This
reflects strong growth in the Branded business and the excellent
performance of the Injectables business.
We remain confident in our medium and long term growth
prospects. We have made a good start to 2013 and expect to deliver
Group revenue growth of around 10% this year.
Going concern statement
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 reduced
its year end net debt position to $406.5 million (2011: $421.9
million) following significant investment in acquisitions.
Operating cash flow in 2011 was $182.2 million (2011: $126.4
million). The Group has $313.0 million (2011: $396.4 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.
Responsibility statement
The responsibility statement below has been prepared in
connection with the company's full annual report for the year ended
31 December 2012. Certain parts thereof are not included within
this announcement.
We confirm to the best of our knowledge:
-- The financial statements, prepared in accordance with
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
12 March 2013
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 income statement
for the year ended 31 December 2012
Note 2012 2011
$000 $000
--------------- ---------------
Continuing operations
Revenue 3 1,108,721 918,025
Cost of sales 3 (607,603) (522,676)
--------------- ---------------
Gross profit 3 501,118 395,349
--------------- ---------------
Sales and marketing costs (152,763) (125,295)
General and administrative
expenses (124,560) (107,540)
Research and development costs (34,019) (31,218)
Other operating expenses (net) (23,002) (12,608)
--------------- ---------------
Total operating expenses (334,344) (276,661)
Adjusted operating profit 193,835 145,824
Exceptional items:
- Acquisition and integration
related expenses 4 (3,131) (16,368)
- Severance expenses 4 (4,469) -
- Plant remediation costs 4 (6,787) -
- Inventory related adjustment 4 - (1,770)
Intangible amortisation* 4 (12,674) (8,998)
--------------------------------- ----- --------------- ---------------
Operating profit 3 166,774 118,688
Share of results of associated
companies 892 (1,164)
Finance income 1,266 468
Finance expense (35,717) (23,368)
Other expense (net) (1,174) (732)
--------------- ---------------
Profit before tax 132,041 93,892
Tax 5 (24,826) (10,423)
Profit for the year 107,215 83,469
=============== ===============
Attributable to:
Non-controlling interests 6,895 3,362
Equity holders of the parent 100,320 80,107
--------------- ---------------
107,215 83,469
=============== ===============
Earnings per share (cents)
Basic 7 51.1 41.3
=============== ===============
Diluted 7 50.6 40.5
=============== ===============
Adjusted basic 7 61.4 52.0
=============== ===============
Adjusted diluted 7 60.8 51.0
=============== ===============
* Intangible amortisation comprises the amortisation on
intangible assets other than software.
Hikma Pharmaceuticals PLC
Consolidated statement of comprehensive income
for the year ended 31 December 2012
2012 2011
$000 $000
------------ ------------
Profit for the year 107,215 83,469
Cumulative effect of change in
fair value of available for sale
investments (23) (42)
Cumulative effect of change in
fair value of financial derivatives (2,120) (692)
Exchange difference on translation
of foreign operations (26,547) (15,294)
------------ ------------
Total comprehensive income for
the year 78,525 67,441
============ ============
Attributable to:
Non-controlling interests 1,585 3,557
Equity holders of the parent 76,940 63,884
------------ ------------
78,525 67,441
============ ============
Hikma Pharmaceuticals PLC
Consolidated balance sheet
at 31 December 2012
Note 2012 2011
$000 $000
------------ ------------
Non-current assets
Intangible assets 433,049 408,804
Property, plant and equipment 419,943 421,357
Interests in associated
companies 38,337 37,445
Deferred tax assets 45,772 36,072
Financial and other non-current
assets 11,044 12,079
948,145 915,757
------------ ------------
Current assets
Inventories 8 272,231 239,260
Income tax asset 1,016 1,486
Trade and other receivables 9 328,147 315,856
Collateralised and restricted
cash 1,756 2,595
Cash and cash equivalents 176,510 94,715
Other current assets 2,307 5,973
781,967 659,885
------------ ------------
Total assets 1,730,112 1,575,642
============ ============
Current liabilities
Bank overdrafts and loans 192,879 152,853
Obligations under finance
leases 3,480 3,300
Trade and other payables 10 194,805 169,212
Income tax provision 23,029 14,561
Other provisions 10,664 9,398
Other current liabilities 42,097 39,622
466,954 388,946
------------ ------------
Net current assets 315,013 270,939
------------ ------------
Non-current liabilities
Long-term financial debts 11 372,488 344,895
Obligations under finance
leases 15,891 18,134
Deferred tax liabilities 22,921 23,147
Derivative financial instruments 4,008 1,886
415,308 388,062
------------ ------------
Total liabilities 882,262 777,008
============ ============
Net assets 847,850 798,634
============ ============
Note 2012 2011
$000 $000
------------ ------------
Equity
Share capital 12 35,091 34,904
Share premium 279,116 278,094
Own shares (86) (2,222)
Other reserves 518,532 465,799
------------ ------------
Equity attributable to equity holders
of the parent 832,653 776,575
Non-controlling interests 15,197 22,059
------------ ------------
Total equity 847,850 798,634
============ ============
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 Director
Mazen Darwazah Director
12 March 2013
Hikma Pharmaceuticals PLC
Consolidated statement of changes in equity for the year ended
31 December 2012
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 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
equity-settled
employee share
scheme - - - (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 and 1
January 2012 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 year - - - 100,320 100,320 - - - 100,320 6,895 107,215
Cumulative
effect of
change
in fair value
of available
for sale
investments - - - (23) (23) - - - (23) - (23)
Cumulative
effect of
change
in fair value
of financial
derivatives - - - (2,120) (2,120) - - - (2,120) - (2,120)
Realisation
of revaluation
reserve - (181) - 181 - - - - - - -
Currency
translation
(loss) - - (21,237) - (21,237) - - - (21,237) (5,310) (26,547)
Total
comprehensive
income for
the year - (181) (21,237) 98,358 76,940 - - - 76,940 1,585 78,525
Issue of equity
shares - - - - - 187 1,022 - 1,209 - 1,209
Purchase of
own shares - - - - - - - (158) (158) - (158)
Cost of equity
settled
employee
share scheme - - - 7,961 7,961 - - - 7,961 - 7,961
Exercise of
equity-settled
employee share
scheme - - - (2,294) (2,294) - - 2,294 - - -
Deferred tax
arising on
share-based
payments - - - 98 98 - - - 98 - 98
Current tax
arising on
share-based
payments - - - 1,411 1,411 - - - 1,411 - 1,411
Dividends on
ordinary shares
(note 6) - - - (26,550) (26,550) - - - (26,550) (1,271) (27,821)
Adjustment
arising from
change in
non-controlling
interests - - - (4,833) (4,833) - - - (4,833) (7,176) (12,009)
Balance at
31 December
2012 33,920 3,723 (48,806) 529,695 518,532 35,091 279,116 (86) 832,653 15,197 847,850
================ ==================== =================== ========================= =============== =============== ================== =============== ============== ================== ===============
Hikma Pharmaceuticals PLC
Consolidated cash flow statement
for the year ended 31 December 2012
Note 2012 2011
$000 $000
---------------------- -------------------
Net cash from operating activities 13 182,161 126,397
Investing activities
Purchases of property, plant and
equipment (51,405) (69,032)
Proceeds from disposal of property,
plant and equipment 989 696
Purchase of intangible assets (38,783) (8,967)
Proceeds from disposal of intangible
assets 255 191
Acquisition of interest in associated
companies - (38,610)
Investment in financial and other
non current assets 151 (287)
Acquisition of subsidiary undertakings
net of cash acquired (11,978) (217,779)
Payments of costs directly attributable
to acquisitions 4 (1,519) (10,147)
Finance income 1,266 468
---------------------- -------------------
Net cash used in investing activities (101,024) (343,467)
---------------------- -------------------
Financing activities
Decrease in collateralised and
restricted cash 839 978
Increase in long-term financial
debts 151,997 335,353
Repayment of long-term financial
debts (124,183) (68,364)
Increase in short-term borrowings 52,390 59,095
Decrease in obligations under
finance leases (2,122) (2,028)
Dividends paid (26,550) (25,201)
Dividends paid to non-controlling
shareholders (1,271) (100)
Interest paid (34,188) (23,758)
Proceeds from issue of new shares 1,051 2,390
Proceeds from non-controlling interest
for capital increase in subsidiary - 488
Acquisition of non-controlling
interest in subsidiary (12,009) (29,196)
Net cash generated by financing
activities 5,954 249,657
---------------------- -------------------
Net increase in cash and cash
equivalents 87,091 32,587
Cash and cash equivalents at beginning
of year 94,715 62,718
Foreign exchange translation movements (5,296) (590)
---------------------- -------------------
Cash and cash equivalents at end
of year 176,510 94,715
====================== ===================
Hikma Pharmaceuticals PLC
Notes to the consolidated financial statements
1. Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2012
or 2011, but is derived from those accounts. Statutory accounts for
2011 have been delivered to the Registrar of Companies and those
for 2012 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 2011 and 31 December 2012 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 reduced its year end net debt position to $406.5
million (2011: $421.9 million) following strong cash generation
from operations. Operating cash flow in 2012 was $182.2 million
(2011: $126.4 million). The Group has $313.0 million (2011: $396.4
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
segmental information.
The Group discloses underlying operating profit as the measure
of segmental result as this is the measure 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 2012:
Year ended
31 December 2012 Branded Injectables Generics Others Group
$000 $000 $000 $000 $000
-------------- ------------------ -------------- ------------ -----------
Revenue 528,854 470,030 103,679 6,158 1,108,721
Cost of sales (271,508) (251,302) (80,339) (4,454) (607,603)
Gross profit 257,346 218,728 23,340 1,704 501,118
-------------- ------------------ -------------- ------------ -----------
Adjusted segment result 123,634 122,952 (13,511) (3,338) 229,737
Exceptional items:
- Integration related
expenses (701) (2,430) - - (3,131)
- Severance expenses (2,527) (1,380) (562) - (4,469)
- Plant remediation
costs - - (6,787) - (6,787)
Intangible amortisation* (9,029) (3,614) (31) - (12,674)
--------------------------- -------------- ------------------ -------------- ------------ -----------
Segment result 111,377 115,528 (20,891) (3,338) 202,676
============== ================== ============== ============ ===========
Unallocated corporate
expenses (35,902)
Adjusted operating profit 193,835
--------------------------- -------------- ------------------ -------------- ------------ -----------
Operating profit 166,774
Results from associated
companies 892
Finance income 1,266
Finance expense (35,717)
Other expense (net) (1,174)
-----------
Profit before tax 132,041
Tax (24,826)
-----------
Profit for the year 107,215
===========
Attributable to:
Non-controlling interest 6,895
Equity holders of the
parent 100,320
107,215
===========
* Intangible amortisation comprises the amortisation of
intangible assets other than software.
"Others" mainly comprises 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 and travel
expenses.
Segment assets
and liabilities Corporate
2012 Branded Injectables Generics and others Group
$000 $000 $000 $000 $000
--------------- ------------------ -------------- ---------------- -----------
Additions to
property, plant
and equipment
(cost) 26,071 16,916 5,193 1,661 49,841
Additions to
intangible assets 1,886 35,738 7,056 - 44,680
Total property,
plant and equipment
and intangible
assets (net
book value) 503,858 281,588 61,129 6,417 852,992
Depreciation 21,120 12,944 6,710 1,585 42,359
Amortisation
(including software) 9,937 5,750 160 185 16,032
Interests in
associated companies - - - 38,337 38,337
Balance sheet
Total assets 1,050,373 481,001 135,214 63,524 1,730,112
=============== ================== ============== ================ ===========
Total liabilities 574,526 252,054 5,751 49,931 882,262
=============== ================== ============== ================ ===========
The following is an analysis
of the Group's revenue
and results by reportable
segment in 2011: Year ended
31 December 2011 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)
----------
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 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
subsidiary's
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 table provides an analysis of the Group's sales by
geographical market, irrespective of the origin of the
goods/services:
2012 2011
$000 $000
---------- --------
Middle East and North Africa 619,185 508,776
United States 399,877 317,334
Europe and Rest of the
World 80,992 87,622
United Kingdom 8,667 4,293
----------
1,108,721 918,025
========== ========
The top selling markets were as below:
2012 2011
$000 $000
-------- --------
United States 399,877 317,376
Saudi Arabia 124,819 121,387
Algeria 120,828 102,495
645,524 541,258
======== ========
Included in revenues arising from the Branded and Injectables
segments are revenues of approximately $103,971,000 (2011:
$101.905,000) 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 Total assets as
financial instruments at
as at 31 December 31 December
------------------------- ----------------------
2012 2011 2012 2011
$000 $000 $000 $000
------------ ----------- ---------- ----------
Middle East and North Africa 563,091 567,935 1,157,406 1,019,288
Europe 144,586 141,481 191,302 197,128
United States 155,604 131,589 372,797 349,705
United Kingdom 345 800 8,607 9,521
863,626 841,805 1,730,112 1,575,642
============ =========== ========== ==========
4. Exceptional items and intangible amortisation
Exceptional items are disclosed separately in the consolidated
income statement to assist in the understanding of the Group's
underlying performance.
2012 2011
$000 $000
------------------- -----------------
Acquisition related expenses - (10,896)
Integration related expenses (3,131) (5,472)
------------------- -----------------
(3,131) (16,368)
Severance expenses (4,469) -
Plant remediation costs (6,787) -
Inventory related adjustment - (1,770)
------------------- -----------------
Exceptional items (14,387) (18,138)
Intangible amortisation * (12,674) (8,998)
Exceptional items and intangible
amortisation (27,061) (27,136)
Tax effect 6,852 6,374
------------------- -----------------
Impact on profit for the year (20,209) (20,762)
=================== =================
* Intangible amortisation comprises the amortisation on
intangible assets other than software.
Acquisition and integration related costs
During the year the Group incurred $3,131,000 in cost associated
with the integration of MSI, Promopharm S.A, and Savanna.
In the previous year, acquisition and integration-related
expenses were incurred as a result of the acquisition of MSI,
Promopharm, and Savanna.
Acquisition-related expenses are included in 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.
Costs of $1,519,000 (2011: $10,147,000) 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.
Other costs
Severance expenses related to the restructuring of management
teams across all three operating regions.
The Generics segment incurred plant remediation costs for
compliance work at our Eatontown facility in response to
observations received from the FDA.
In the prior year, the inventory-related adjustment reflects the
fair value uplift of the inventory acquired as part of the MSI
acquisition.
5. Tax
2012 2011
$000 $000
---------- ----------
Current tax:
Foreign tax 30,535 15,541
Prior year adjustments 4,703 (1,358)
Deferred tax (10,412) (3,760)
24,826 10,423
========== ==========
UK corporation tax is calculated at 24.5% (2011: 26.5%) of the
estimated assessable profit made in the UK for the year.
Effective tax rate for the Group is 18.8% (2011: 11.10%).
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 consolidated income statement as follows:
2012 2011
$000 $000
---------- ---------
Profit before tax: 132,041 93,892
---------- ---------
Tax at the UK corporation tax rate of
24.5% (2011: 26.5%) 32,350 24,881
Profits taxed at different rates (17,219) (10,796)
Permanent differences 2,891 (5,158)
Temporary differences for which no benefit
is recognised 2,101 2,854
Prior year adjustments 4,703 (1,358)
Tax expense for the year 24,826 10,423
========== =========
6. Dividends
2012 2011
$000 $000
------- -------
Amounts recognised as distributions to equity
holders in the year:
Final dividend for the year ended 31 December
2011 of 7.5 cents (2010: 7.5 cents) per share 14,746 14,497
Interim dividend for the year ended 31 December
2012 of 6.0 cents (2011: 5.5 cents) per share 11,804 10,704
26,550 25,201
======= =======
The proposed final dividend for the year ended 31 December 2012
is 10.0 cents (2011: 7.5 cents) per share, bringing the total
dividends for the year to 16.0 cents (2011: 13.0 cents) per
share.
The proposed final dividends is subject to approval by
shareholders at the annual general meeting on 16 May 2013 and has
not been included as a liability in theses financial statements.
Based on the number of shares in issue at 31 December 2012
(196,765,000), the unrecognized liability is $19,677,000.
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 is 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:
2012 2011
$000 $000
----------- -----------
Earnings for the purposes of basic and diluted
earnings per share being net profit attributable
to equity holders of the parent 100,320 80,107
=========== ===========
Exceptional items (see note 4) 14,387 18,138
Intangible amortisation* 12,674 8,998
Tax effect of adjustments (6,852) (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 120,529 100,869
=========== ===========
Number Number
Number of shares '000 '000
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 196,348 194,135
Effect of dilutive potential Ordinary Shares:
Share-based awards 1,951 3,633
Weighted average number of Ordinary Shares for
the purposes of diluted earnings per share 198,299 197,768
=========== ===========
2012 2011
Earnings Earnings
per share per share
Cents Cents
----------- -----------
Basic 51.1 41.3
----------- -----------
Diluted 50.6 40.5
----------- -----------
Adjusted basic 61.4 52.0
----------- -----------
Adjusted diluted 60.8 51.0
----------- -----------
*Intangible amortisation comprises the amortisation of
intangible assets other than software.
8. Inventories
As at 31 December
2012 2011
$000 $000
--------- ---------
Finished goods 87,663 77,862
Work-in-progress 30,011 28,039
Raw and packing materials 135,571 114,449
Goods in transit 18,986 18,910
272,231 239,260
========= =========
Goods in transit include inventory held at third parties whilst
in transit between Group companies.
9. Trade and other receivables
As at 31 December
2012 2011
$000 $000
-------------- --------
Trade receivables 294,048 292,100
Prepayments 22,758 16,015
Value added tax recoverable 8,439 5,188
Interest receivable 579 490
Employee advances 2,323 2,063
328,147 315,856
============== ========
10. Trade and other payables
As at 31 December
2012 2011
$000 $000
--------- ---------
Trade payables 110,600 97,756
Accrued expenses 69,734 60,276
Employees' provident fund * 5,863 4,181
VAT and sales tax payables 560 535
Dividends payable ** 2,074 2,207
Social security withholdings 1,709 1,107
Income tax withholdings 2,862 2,482
Other payables 1,403 668
194,805 169,212
========= =========
* The employees' provident fund liability mainly represents the
outstanding contributions due to the Hikma Pharmaceuticals Ltd
(Jordan) retirement benefit plan, on which the fund receives 5%
interest.
** Dividends payable includes $1,889,000 (2011: $2,022,000) due
to the previous shareholders of APM.
11. Long-term financial debts As at 31 December
2012 2011
$000 $000
Total loans 460,997 410,197
Less: current portion of loans (88,509) (65,302)
Long-term financial loans 372,488 344,895
Breakdown by maturity:
Within one year 88,509 65,302
In the second year 79,794 84,488
In the third year 79,513 63,732
In the fourth year 77,923 65,490
In the fifth year 47,644 58,069
Thereafter 87,614 73,116
460,997 410,197
Breakdown by currency:
US Dollar 405,350 346,405
Euro 13,247 18,394
Jordanian Dinar 5,642 -
Algerian Dinar 29,294 37,400
Egyptian Pound 4,355 4,343
Tunisian Dinar 3,109 3,655
460,997 410,197
The loans are held at amortised cost.
At 31 December 2012, import and export financing, short-term
loans and the current and long-term portion of long-term loans
totalled $545,777,000 (2011: $467,677,000).
Long term loans amounting to $85,989,000 (2011: $105,338,000)
are secured.
Included in the table above are the following major arrangements
entered by the Group:
a) A five year $100,000,000 syndicated term loan and a four year
$45,000,000 revolver were entered into on 2 May 2011. The term loan
was partially repaid by $25,000,000 on 15 December 2011. Quarterly
equal repayments for the term loan commenced on 30 June 2012 and
will continue until 2 May 2016. The outstanding balance at year end
was $68,750,000 and an unused revolver balance of $40,000,000. The
revolver maturity date is 2 May 2015. The term loan has been used
to fund the acquisition of the MSI business in 2011, and the
revolver is used to fund the US business working capital needs.
b) A seven year syndicated loan of up to $180,000,000 was
entered into on 27 September 2011. The syndicate was closed on the
1 June 2012 and has an outstanding balance at year end of
$180,000,000. Quarterly repayments for the term loan should
commence 18 months after the date of the agreement- 27 March 2013
and will continue until the 84th month after the date of the
agreement- 27 September 2018. Payments 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 Promopharm acquisition and the Group's general
capital expenditure.
c) A nine year $110,000,000 loan from the International Finance
Corporation (IFC) was entered into on 19 December 2011. The loan
has an outstanding balance of $60,000,000 at year end and a
$50,000,000 unused available limit. Quarterly equal repayments for
the term loan should commence on 15 November 2013 and will continue
until 15 August 2020. The loan has been used to finance
acquisitions in the MENA region and MENA's capital expenditure,
noting that the loan is restricted to be used in permitted
developing countries.
12. Share capital
Issued and fully paid
- included in shareholders'
equity:
2012 2011
Number Number
'000 $000 '000 $000
At 1 January 195,851 34,904 193,517 34,525
Issued during the year 1,185 187 2,334 379
At 31 December 197,036 35,091 195,851 34,904
13. Net cash from operating activities
2012 2011
Note $000 $000
Profit before tax 132,041 93,892
Adjustments for:
Depreciation and amortisation of:
Property, plant and equipment 42,359 35,660
Intangible assets 16,032 11,343
Loss on disposal of property, plant and equipment 349 22
Loss (Gain) on disposal of intangible assets 67 (91)
Movement on provisions 1,266 757
Movement on deferred income (62) (87)
Cost of equity-settled employee share scheme 7,961 7,507
Payments of costs directly attributable to
acquisitions 4 1,519 10,147
Finance income (1,266) (468)
Interest and bank charges 35,717 23,368
Results from associates (892) 1,164
Cash flow before changes in working capital 235,091 183,214
Change in trade and other receivables (20,759) (59,898)
Change in other current assets 2,259 (4,570)
Change in inventories (42,305) (8,199)
Change in trade and other payables 21,914 15,987
Change in other current liabilities 10,429 1,958
Cash generated by operations 206,629 128,492
Income tax paid (24,468) (2,095)
Net cash generated from operating activities 182,161 126,397
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 associates and other related
parties are disclosed below.
Trading transactions:
During the year, Group companies entered into the following
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 29.0% at the end of 2012 (2011:
29.2%). 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 $2,977,000(2011: $610,000). Loans and
overdrafts granted by Capital Bank to the Group amounted to $Nil
(2011: $3,841,000) with interest rates ranging between 8.25% and
3MLIBOR + 1%. Total interest expense incurred against Group
facilities was $344,000 (2011: $7,000). Total interest income
received was $Nil (2011: $Nil) and total commission paid in the
year was $91,000 (2011: $8,000).
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 $3,423,000 (2011: $3,035,000). The Group's insurance
expense for Jordan International Insurance Company contracts in the
year 2012 was $2,806,000 (2011: $2,902,000). The amounts due to
Jordan International Insurance Company at the year end were
$154,000 (2011: Due from $109,000).
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 2012 was
$150,000 (2011: $150,000).
Labatec Pharma: is a related party of the Group because it is
owned by Mr. Samih Darwazah. During 2012 the Group total sales to
Labatec Pharma amounted to $282,000 (2011: $338,000) and the Group
total purchases from Labatec Pharma amounted to $1,179,000 (2011:
$3,805,000). At 31 December 2012 the amount owed from Labatec
Pharma to the Group was $211,000 (2011: Owed to $753,000).
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 2012 fees of
$45,000 (2011: $1,216,000) were paid for legal services
provided.
Jordan Resources & Investments Company: is a related party
of the Group because three board members of the Group are
shareholders in the firm. During 2012 fees of $151,000 (2011: $Nil)
were paid for training services provided.
American University of Beirut: is a related party of the Group
because one board member of the Group is also a trustee of the
University. During 2012 fees of $125,000 (2011: $Nil) were paid for
training services provided.
15. 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
2012 2011 2012 2011
USD/EUR 0.7565 0.7722 0.7775 0.7180
USD/Sudanese Pound 5.9988 2.8918 4.3346 2.9869
USD/Algerian Dinar 78.0915 76.0061 77.5551 72.8147
USD/Saudi Riyal 3.7495 3.7495 3.7495 3.7495
USD/British Pound 0.6185 0.6470 0.6309 0.6233
USD/Jordanian Dinar 0.7090 0.7090 0.7090 0.7090
USD/Egyptian Pound 6.3654 6.0481 6.0864 5.9648
USD/Japanese Yen 85.9013 77.4136 79.8155 79.7414
USD/Moroccan Dirham 8.4838 8.6133 8.6458 8.3682
USD/Tunisian Dinar 1.5506 1.4993 1.5686 1.4079
The Jordanian Dinar and Saudi Riyal have no impact on the
consolidated income statement as those currencies are pegged to the
US Dollar.
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 future performance 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
> Plant closure and know-how exchange
> Potential for litigation > 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
Integration of acquisitions
> Difficulties in > Inability to obtain > Extensive due diligence
integrating any technologies, the advantages that the undertaken as part of
products or businesses acquisitions were intended any acquisition process
acquired to create > Track record of acquisitions
> Adverse impact on our and subsequent business
business, financial condition integration
and results of operations > Human resources personnel
> Significant transaction focussed on managing
and integration costs employee integration
could adversely impact following acquisitions
our financial results > Close monitoring of
acquisition and integration
costs
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 26 manufacturing
in the economic conditions > Lost revenue streams facilities and sales
(including the Middle > Inability to market in more than 40 countries
East, North Africa or supply products > Product diversification,
and the Eurozone), with 825 products and
political environment 2,094 dosage strengths
or sustained civil and forms
unrest in any particular
market or country
> 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 financial results where possible
European, Algerian, upon translation into > Foreign currency borrowing
Sudanese and Egyptian US dollars > 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
([1]) Before the amortisation of intangible assets (excluding
software) and exceptional items
([2]) Earnings before interest, tax, depreciation and
amortisation
([3]) Before the consolidation of the Multi-Source Injectables,
Promopharm and Savanna businesses
([4]) Before the consolidation of the Promopharm and Savanna
businesses
([5]) Before the consolidation of the Multi-Source Injectables
and Promopharm businesses
[6] Before the consolidation of the Promopharm and Savanna
businesses
[7] In 2012, amortisation of intangible assets (excluding
software) was $12.7 million (2011: $9.0 million). In 2012,
exceptional items included within operating expenses were $9.9
million (2011: $16.4 million)
[8] 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
[9] Totals include 123 dermatological and cosmetic compounds in
401 dosage forms and strengths that are only sold in Morocco
[10] Totals include all compounds and formulations that are
either launched or approved or pending approval across all markets,
as relevant
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDDFAKDEEF
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