Interim Results 2007
Hikma Pharmaceuticals Plc
05 September 2007
Hikma Pharmaceuticals PLC
Interim results announcement for the six months to 30 June 2007
LONDON, 5 September 2007 - Hikma Pharmaceuticals PLC ('Hikma')(LSE: HIK)(DIFX:
HIK), a multinational pharmaceutical group focused on developing, manufacturing
and marketing a broad range of generic and in-licensed pharmaceutical products,
today reports its interim results for the six months to 30 June 2007.
H1 2007 highlights H1 2007 H1 2006 Change
($m) ($m)
Revenue 224.9 154.9 +45.2%
Operating profit 51.8 42.2 +22.7%
Profit before tax 49.5 42.4 +16.7%
Profit attributable to shareholders 35.6 30.1 +18.4%
Diluted earnings per share (cents) 20.2 17.2 +17.4%
Dividend per share (cents) 3.5 3.0 +16.7%
• Revenue for the first half of 2007 grew by 45.2% to $224.9 million
• Underlying organic revenue growth(1) was 21.5% driven by strong
performances in the Branded and Injectable businesses
• Delivered 18.4% growth in profit attributable to shareholders, to
$35.6 million
• Began production in our new cephalosporin plant in Portugal for the
MENA region and Europe
• Launched 71 products across the Group, including 16 new products(2),
and signed one new licensing agreement for the MENA region
• Entered the injectable oncology market through the acquisitions of
Ribosepharm and Thymoorgan in Germany
• Acquired 10 new oncology products to be registered in Europe and the
MENA region
• Entered the large and growing Egyptian market through an agreement to
acquire Alkan Pharma in August 2007
Said Darwazah, Chief Executive of Hikma, said:
'Hikma performed well in the first half of 2007 driven by strong organic revenue
growth and the benefits from our recent entry into the injectable oncology
market and the successful integration of JPI.'
'We are on track to deliver strong revenue growth in the second half of the
year, driven by continued growth across the MENA region in both the Branded and
Injectables businesses and the further development of our Injectables business
in the US and Europe. We will also benefit from the revenue contribution from
our oncology and Egyptian acquisitions. Overall, we remain confident in the
Group's ability to deliver another year of strong growth.'
Enquiries:
Hikma Pharmaceuticals PLC
Said Darwazah, Chief Executive
Bassam Kanaan, Chief Financial Officer
Susan Ringdal, Investor Relations Director Tel: +44 (0)20 7399 2760
Brunswick Group
Jon Coles / Justine McIlroy / Alex Tweed Tel: +44 (0)20 7404 5959
About Hikma
Hikma Pharmaceuticals PLC is a fast growing multinational group focused on
developing, manufacturing and marketing a broad range of both branded and
non-branded generic and in-licensed pharmaceutical products. Hikma's operations
are conducted through three businesses: 'Branded', 'Injectables' and 'Generics'.
Hikma's operations are based principally in the Middle East and North Africa
('MENA') region, where it is a market leader and sells across 17 countries, the
United States and Europe. In 2006, the Group had achieved revenues of $317
million (2005 $262 million) and profit attributable to shareholders was of $55
million (2005 $44 million). At 30 June 2007, the Group had over 2,700
employees. For news and other information, please visit www.hikma.com.
Business and financial review
Group performance
Revenue for the Group increased by 45.2% to $224.9 million, compared to $154.9
million in the first half of 2006. The revenue contribution from acquisitions
completed since the first half of 2006 was $36.6 million. Underlying organic
growth, which excludes the impact of these acquisitions, was 21.5%, driven by
strong performances in both the Branded and Injectables businesses.
The Branded and Injectables businesses together now account for 72.8% of our
sales compared with 63.2% at the end of the first half of 2006.
Revenue by segment H1 2007 H1 2006
Branded 46.1% 41.3%
Injectables 26.7% 21.9%
Generics 26.1% 34.8%
Revenue by region
MENA 54.2% 50.5%
US 29.8% 40.7%
Europe 16.0% 8.8%
The Group's gross profit increased by 42.5% to $113.9 million, compared to $80.0
million in the first half of 2006. Group gross margin for the first half of
2007 was 50.7%, compared to 51.6% in the first half of 2006. This change in
gross margin is due primarily to a decline in gross profit margin in the
Generics business that was only partially offset by the improving gross margin
in the Injectables business.
As a result of acquisitions, Group operating expenses grew in the first half of
2007 by 59.1% to $62.2 million, compared to $39.1 million in the first half of
2006. Excluding acquisitions, operating expenses grew by 24.6%.
Sales and marketing expenses increased by 90.2% to $30.1 million, due to the
acquisition of Ribosepharm, the injectable oncology sales and marketing
business, acquired in January of this year, and the consolidation of Al-Jazeera
Pharmaceutical Industries ('JPI'). These expenses include an amortisation
charge of $0.8 million related to intangible assets arising on these
acquisitions. Excluding acquisitions, sales and marketing expenses grew by
27.4%, which reflects investment to support the strong growth in both the
Branded and Injectables businesses. Sales and marketing expenses represented
13.4% of Group revenue in the first half of 2007, compared to 10.2% in the first
half of 2006.
The Group's general and administrative expenses increased by 60.8% to $21.2
million, compared to $13.2 million in the first half of 2006. As expected, this
change arose mainly from the consolidation of JPI and Ribosepharm. The need to
support the growth of the Group has also increased corporate general and
administrative costs, which grew by $2.5 million to $8.7 million in the first
half of 2007. General and administrative expenses represented 9.4% of Group
revenue in the first half of 2007, compared to 8.5% in the first half of 2006.
Investment in R&D increased by 1.4% to $9.2 million, compared to $9.0 million in
the first half of 2006. Total investment in R&D represented 4.1% of Group
revenue, compared to 5.8% in the first half of 2006. This reflects a shift
towards product acquisitions and an increase in licensing.
Other net operating expenses, which consist mainly of provisions against slow
moving items partially offset by foreign exchange gains, were $1.7 million,
compared to $1.0 million in the first half of 2006.
Operating profit for the Group increased by 22.7% to $51.8 million, compared to
$42.2 million in the first half of 2006. Group operating margin decreased to
23.0% in 2007, compared to 27.2% in the first half of 2006, which reflects an
increased investment in sales and marketing and other operating expenditure
across all segments, as well as pricing pressure in the Generics business.
Research & Development
The Group's product portfolio continues to grow. During the first half of the
year, we added eight new products to the Group portfolio, which now covers 202
products(3) in 423 dosage strengths and forms. We manufacture and/or sell 29 of
these products under-license from the originator.
In the first half of 2007, Hikma received 81 regulatory approvals(4), including
three ANDA approvals for the Generics business and one ANDA approval for the
Injectables business. Over the same period, 16 new products(5) were launched.
To ensure the continuous development of our product pipeline, we submitted a
total of 37 regulatory filings(6) in Jordan, the US and Europe, and 153 across
all regions and markets. As of 30 June 2007, we had a total of 126 pending
approvals in Jordan, the US and Europe and 588 pending approvals across all
regions and markets.
We estimate the approximate addressable market for our portfolio of pending
approvals to be approximately $12.0 billion, based on the 2006 full year sales
of the currently marketed equivalent products in the markets covered by the
pending approvals.
At 30 June 2007, we had a total of 106 products under development, the majority
of which should receive several marketing authorisations for differing strengths
and/or product forms over the next few years.
Outlook
We continue to expect to deliver organic revenue growth, including JPI, in the
mid-20% range for the full year, in line with the guidance we gave in January
2007. Taking into consideration the acquisitions of Ribosepharm, Thymoorgan and
Alkan, which should complete in September, we expect total Group revenue growth
of close to 40%. We expect gross margin to be approximately 50% and general and
administrative expenses to grow in line with revenue. We also expect investment
in R&D to be close to 5% of Group sales. Overall, we remain confident in the
Group's ability to deliver another year of strong growth.
Branded
The pharmaceutical market in the MENA region is predominantly a branded market,
in which patented, generic and OTC pharmaceutical products are marketed under
specific brand names. Our Branded business manufactures branded generic and
in-licensed patented pharmaceutical products for sale across the MENA Region and
Europe.
The Branded business is our largest business in terms of revenue, which
increased by 62.0% to $103.6 million in the first half of 2007, compared to
$64.0 million in the first half of 2006, reflecting the consolidation of JPI.
Excluding JPI, Branded revenues grew by 33.2% driven by excellent performances
across all our MENA markets. New product introductions and more focused sales
and marketing efforts have helped to drive demand and increase sales. A
particularly strong performance in the GCC countries was driven in part by the
successful integration of JPI. The Branded business's performance in the first
half also reflects the continuing seasonality of this business, which is
traditionally stronger in the first six months of the year.
During the first half, the Branded business received 56 regulatory approvals in
the MENA region, including eight in Jordan.
We grew our market share in Algeria in the first half of 2007 to 5.2%, compared
to 3.9% at the end of 2006(7). We also maintained our position as the sixth
largest pharmaceutical manufacturer and second largest generic pharmaceutical
manufacturer by value in the Algerian market. In Saudi Arabia, our combined
market share in value terms remained relatively constant at 3.9% in the first
half of 2007, compared to 4.0% for the 2006 full year, maintaining our position
as the fifth largest pharmaceutical manufacturer in this market. In Jordan, we
maintained our position as market leader during the first half of the year with
a market share of 7.1%, compared to 7.3% for the 2006 full year.
Revenues from under-license products represented 35.3% of Branded sales in the
first half of 2007, compared to 38.6% in the first half of 2006.
Gross profit of the Branded business increased by 58.9% to $56.2 million,
compared to $35.4 million in the first half of 2006. The Branded business's
gross margin decreased to 54.3%, compared to 55.3% in the first half of 2006,
reflecting an increase in overhead expenses and sales incentives.
Branded operating profit increased by 55.7% in the first half of 2007, to $34.3
million. Operating margins in the Branded business were 33.1% in the first half
of 2007, down from 34.4% in 2006. This change is due to the slight decrease in
Branded gross margin and to additional sales and marketing and general and
administrative expenses associated with JPI.
Injectables
Our Injectables business manufactures injectable generic pharmaceutical products
in powder, liquid and lyophilised forms for sale across the MENA Region, Europe
and the US.
Revenue in our Injectables business increased by 76.7% to $60.0 million,
compared to $34.0 million in the first half of 2006. The increase reflects
underlying organic growth of 23.0%, driven by a strong performance in the MENA
region, as well the consolidation of Ribosepharm and Thymoorgan, the injectable
oncology businesses acquired in the first half of 2007.
Injectables revenue grew in all countries across the MENA region, primarily due
to more focused sales and marketing efforts, including the addition of new
medical representatives, but also as a result of new product launches and an
increase in tender sales. In Europe, we saw strong growth in the Portuguese
market, as a direct result of superior customer service levels, and we continued
to strengthen our position in the highly competitive German market. In the US,
contract manufacturing sales fell as we prioritised our own product sales, which
increased to 53% of US Injectables sales, compared to 28% in the first half of
2006.
The oncology businesses, Ribosepharm and Thymoorgan, performed well in the first
half of 2007, contributing sales of $17.5 million, which includes $4.5 million
of non-recurring sales of Ribomustin, an under-license product, which was
discontinued from the Ribosepharm portfolio in April in accordance with the
original terms of the licensing agreement.
The sales and marketing team at Ribosepharm is maintaining a strong position in
the German injectable oncology market and we are successfully expanding our
product portfolio. At Thymoorgan, we have commenced the manufacture of our
first product for the Portuguese market and have begun the certification of the
plant for the MENA region.
During the first half of 2007, the Injectables business received 22 regulatory
approvals, including 6 in Europe, 15 in the MENA region and one ANDA approval in
the US.
Injectables gross profit increased by 100.1% to $29.6 million, compared to $14.8
million in the first half of 2006, with gross margin increasing to 49.3%,
compared to 43.5% in the first half of 2006. The increase in gross margin
reflects the contribution of Ribosepharm, which, as a sales and marketing
organisation, has higher gross margins than the underlying business. The gross
margin contribution from Ribosepharm more than offset slightly lower underlying
margins resulting from increasing price competition in Germany, the increase in
MENA tender sales and increasing overheads.
Injectables operating profit increased by 61.4% to $12.3 million, compared to
$7.6 million in the first half of 2006. Injectables operating margins decreased
to 20.5% in the first half of 2007, down from 22.5% in the first half of 2006,
primarily as a result of investment in our existing and new sales forces and an
increase in general and administrative expenses required to support the
business's growth.
In the first half of 2007 we began production at our new cephalosporin plant in
Portugal for Europe and the MENA region. We expect to begin production for the
US market in the second half of the year.
Generics
Revenue in our Generics business increased by 9.0% to $58.7 million, compared to
$53.8 million in the first half of 2006. This growth was driven by volume
increases, which offset continued price pressure, and by sales from recent
product launches. During the first half, the Generics business received three
ANDA approvals and launched one new product and five line extensions.
As expected, revenue growth in the Generics business was achieved through more
competitive pricing. As a result, Generics gross profit decreased by 2.6% to
$28.2 million, compared to $28.9 million in the first half of 2006, reflecting
continued price pressure as well as an increase in overhead expenses. Generics
gross margin was 48.1%, compared to 53.8% in the first half of 2006.
Generics operating profit decreased by 10.6% to $15.7 million. Operating margins
in the Generics business decreased to 26.7% of revenue, compared to 32.6% in the
first half of 2006 directly due to the decline in gross profit margin.
Other businesses
Other businesses, which primarily include Arab Medical Containers ('AMC'), a
manufacturer of plastic specialised packaging, and International Pharmaceuticals
Research Centre, which conducts bio-equivalency studies, had aggregate revenue
in the first half of 2007 of $2.6 million, or 1.1% of total Group revenue,
compared to aggregate revenue of $3.1 million in the first half of 2006.
Other businesses delivered an operating loss of $1.8 million in the first half
of 2007, compared to a loss of $0.1 million in the first half of 2006. This
change is due to the acquisition of the remaining share of JPI and the resulting
treatment of transactions between AMC and JPI.
Recent developments
In August we announced that we have agreed to acquire Alkan Pharma, an Egyptian
pharmaceuticals company, for a cash consideration of $60.5 million. Alkan's
local manufacturing capabilities, strong product portfolio and registration
pipeline, together with its extensive sales force, provides Hikma with a strong
base from which to access the large and growing Egyptian market.
Financial performance
Finance income
Financing income decreased by $1.2 million to $1.4 million due to a reduction in
the Company's net cash position following the acquisition of JPI, Ribosepharm
and Thymoorgan.
Finance costs
Financing costs increased by $1.5 million, reflecting the increase in debt
financing required to fund acquisitions and Group expansion.
Profit before tax
Profit before taxes and minority interest for the Group increased by 16.7% to
$49.5 million, compared to $42.4 million in the first half of 2006.
Tax
The Group incurred a tax expense of $12.6 million in the first half of 2007.
The effective tax rate was 25.5%, a year on year decrease of 1.5 percentage
points. The tax rate decrease was primarily due to a shift in the geographic
sales mix towards lower tax countries, particularly in the MENA Region.
Profit for the period
The Group's profit attributable to equity holders of the parent grew by 18.4% to
$35.6 million for the six months to 30 June 2007.
Earnings per share
Diluted earnings per share for the six months to 30 June 2007 were 20.2 cents,
up 17.4% from 17.2 cents in the first half of 2006.
Dividend
The Board has declared an interim dividend of 3.5 cents per share (approximately
1.7 pence per share). The interim dividend will be paid on 26 October 2007 to
shareholders on the register on 28 September 2007 with an ex-dividend date of 26
September 2007.
Operating cash flow and investment
Net cash inflow from operating activities was $1.8 million, compared to $9.6
million in the first half of 2006. Investment in working capital increased by
$49.3 million compared to 31 December 2006, primarily due to an increase in
receivables and inventory.
Receivables increased by 66% compared to 30 June 2006. Excluding acquisitions,
receivables increased by 37%, in line with the growth in sales achieved in the
MENA region, where collection periods are generally higher. As at 30 June 2007,
receivable days stood at 122 days, compared to 107 days at 30 June 2006 and 126
days at 31 December 2006.
Inventory increased by 60% compared to 30 June 2006, due to acquisitions and the
necessity to support growth in sales. As at 30 June 2007, inventory days stood
at 176 days, compared to 163 days at 30 June 2006 and 194 days at 30 December
2006.
Net cash used for investing activities was $93.4 million, compared to $26.2
million in the first half of 2006. Of this, capital expenditure amounted to
$19.1 million, compared to $25.0 million in the first half of 2006 and $49.7
million for the 2006 full year. This expenditure relates to expansion projects
in the Branded and Injectables businesses. During the first half of the year
the Group also made regular investments to upgrade and maintain existing
facilities.
Another significant component of investment activity during the first half was
the $73.4 million paid for the acquisitions of Ribosepharm and Thymoorgan.
Balance sheet
The Group had a cash balance of $50.9 million as at 30 June 2007, compared to
$117.1 million at 30 June 2006. The Group's net debt position at 30 June 2007
was $74.8 million, compared to a net cash position of $69.1 million at 30 June
2006, reflecting the increase in debt financing related to acquisitions and
Group expansion. Net cash/debt is calculated as the total of investments in
cash deposits, collateralised cash and cash and cash equivalents less bank
overdrafts and the current and long term portion of loans and obligations under
finance leases.
Intangible assets increased by $78.8 million from 30 June 2006. Of this
increase, $15.2 million relates to the second half of 2006 and comes mainly from
the acquisition of JPI. The increase during the first half of 2007 by $63.6
million is primarily due to the acquisitions of Ribosepharm and Thymoorgan.
Forward looking statements
Certain statements in this announcement are forward-looking statements which
have been made by the Directors in good faith based on the information available
to them up to the time of their approval of this announcement. By their nature,
forward-looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially from
those expressed or implied by the forward-looking statements, and should be
treated with caution. These risks, uncertainties or assumptions could 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
this 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 THE MEMBERS OF HIKMA PHARMACEUTICALS PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprise the consolidated income
statement, the consolidated balance sheet, the consolidated statement of changes
in equity, the consolidated cash flow statement, and the related notes 1 to 10.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Deloitte & Touche LLP
Chartered Accountants
London, United Kingdom
4 September 2007
Hikma Pharmaceuticals PLC
Consolidated income statement
H1* H1* FY*
2007 2006 2006
Notes USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 2 224,894 154,913 317,022
Cost of sales 2 (110,975) (74,945) (158,492)
Gross profit 2 113,919 79,968 158,530
Sales and marketing costs (30,113) (15,832) (35,014)
General and administrative expenses (21,247) (13,215) (30,328)
Research and development costs (9,153) (9,024) (18,291)
Other operating expenses (net) (1,656) (981) (588)
Total operating expenses (62,169) (39,052) (84,221)
Share of results of associates - 1,247 938
Operating profit 51,750 42,163 75,247
Finance income 1,376 2,547 5,258
Finance costs (3,897) (2,441) (4,958)
Other income 223 105 49
Profit before tax 49,452 42,374 75,596
Tax 3 (12,610) (11,441) (19,639)
Profit for the period 36,842 30,933 55,957
Attributable to:
Minority interest 1,228 857 1,435
Equity shareholders of the parent 35,614 30,076 54,522
36,842 30,933 55,957
Earnings per share (cents)
Basic 5 21.1 18.0 32.6
Diluted 5 20.2 17.2 31.0
Dividend per share (cents) 4 3.5 3.0 7.0
*On this page and throughout this interim financial information 'H1 2007' refers
to six months ending 30 June 2007, 'H1 2006' refers to the six months ended 30
June 2006 and 'FY 2006' refers to the year ended 31 December 2006.
Hikma Pharmaceuticals PLC
Consolidated balance sheet
30 June 30 June 31 December
2007 2006 2006
Notes USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Non-current assets
Intangible assets 87,529 8,702 23,940
Property, plant and equipment 178,977 112,164 156,845
Interest in associate - 8,797 -
Due from associate - 3,886 -
Deferred tax assets 13,339 1,760 5,719
Available for sale investments 573 718 776
Financial and other non-current 1,019 1,368 1,242
assets
281,437 137,395 188,522
Current assets
Inventories 106,736 66,921 83,720
Income tax recoverable
500 - 500
Trade and other receivables 6 164,951 100,023 121,846
Collateralised cash 5,457 5,239 5,337
Cash and cash equivalents 45,400 111,818 86,227
Other current assets 2,657 1,760 2,204
325,701 285,761 299,834
Total assets 607,138 423,156 488,356
Current liabilities
Bank overdrafts and loans 63,973 20,696 35,614
Obligations under finance leases 606 517 1,216
Trade and other payables 7 68,338 42,589 53,916
Income tax provision 12,126 7,441 8,535
Other provisions 3,057 1,269 2,577
Other current liabilities 7,805 3,589 4,868
155,905 76,101 106,726
Net current assets 169,796 209,660 193,108
Non-current liabilities
Long-term financial debts 56,529 25,675 25,339
Deferred income 322 400 356
Obligations under finance leases 4,508 1,075 4,441
Deferred tax liabilities 4,396 1,174 1,695
65,755 28,324 31,831
Total liabilities 221,660 104,425 138,557
Net assets 385,478 318,731 349,799
Equity
Share capital 29,907 29,554 29,712
Share premium 112,295 110,470 111,431
Reserves 237,485 174,441 203,924
Equity attributable to equity 379,687 314,465 345,067
holders of the parent
Minority interest 5,791 4,266 4,732
Total equity 385,478 318,731 349,799
Hikma Pharmaceuticals PLC
Consolidated statement of changes in equity
Total Share Share Total equity
reserves Capital premium attributable
to equity
shareholders
of the parent
USD '000 USD '000 USD '000 USD '000
At 1 January 2006 (audited) 144,350 29,457 110,074 283,881
Issue of equity shares - 97 396 493
Cost of equity settled 443 - - 443
employee share scheme
Deferred tax arising 108 - - 108
Dividends on ordinary shares (1,489) - - (1,489)
Profit for the period 30,076 - - 30,076
Cumulative effect of (561) - - (561)
change in fair
value of available
for sale investments
and financial
derivatives
Currency translation gain 1,514 - - 1,514
Balance at 30 June 2006 174,441 29,554 110,470 314,465
(unaudited)
Balance at 1 January 2006 144,350 29,457 110,074 283,881
(audited)
Issue of equity shares - 255 1,357 1,612
Cost of equity settled 879 - - 879
employee share scheme
Deferred and current tax 2,352 - - 2,352
arising on share options
Dividends on ordinary shares (6,509) - - (6,509)
Profit for the year 54,522 - - 54,522
Cumulative effect of (636) - - -636
change in fair
value of available
for sale investments
and financial derivatives
Revaluation reserve 4,807 - - 4,807
Currency translation gain 4,159 - - 4,159
Balance at 31 December 2006 203,924 29,712 111,431 345,067
(audited)
Issue of equity shares - 195 864 1,059
Cost of equity settled
employee share scheme 667 - - 667
Deferred tax arising on 2,033 - - 2,033
share options
Dividends on ordinary shares (6,765) - - (6,765)
Profit for the period 35,614 - - 35,614
Cumulative effect of (187) - - (187)
change in fair
value of available
for sale investments
and financial derivatives
Currency translation gain 2,199 - - 2,199
Balance at 30 June 2007 237,485 29,907 112,295 379,687
(unaudited)
Hikma Pharmaceuticals PLC
Consolidated cash flow statement
H1 H1 FY
2007 2006 2006
Note USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Net cash from operating 8 1,828 9,623 35,250
activities
Investing activities
Purchases of property, (19,064) (25,040) (49,725)
plant and equipment
Proceeds from disposal of 162 289 453
property, plant and equipment
Purchase of intangible assets (1,352) (1,600) (2,715)
Investment in financial and 223 125 34
other assets
Investment in available for 28 4 -
sale securities
Acquisition of subsidiaries (73,458) - (21,633)
undertakings
Cash acquired on acquisition 66 - 860
of subsidiaries
Net cash used in investing (93,395) (26,222) (72,726)
activities
Financing activities
Increase in collateralised (120) (119) (217)
cash
Increase in long-term 36,779 497 495
financial debts
Repayment of long-term (5,589) (5,611) (12,881)
financial debts
Increase/(decrease) in 26,029 (448) 1,244
short-term borrowings
(Decrease)/increase in (543) (615) 3,449
obligations under
finance leases
Dividends paid (6,752) (1,489) (6,989)
Dividends paid to (166) - (294)
minority shareholders
Proceeds from issue of 1,059 493 1,612
new shares
Net cash from / (used in) 50,697 (7,292) (13,581)
financing activities
Net decrease in cash and (40,870) (23,891) (51,057)
cash equivalents
Cash and cash equivalents 86,227 135,959 135,959
at beginning of period
Foreign exchange translation 43 (250) 1,325
Cash and cash equivalents 45,400 111,818 86,227
at end of period
Hikma Pharmaceuticals PLC
Notes to the interim financial information
1. Significant accounting policies
Basis of accounting
The unaudited financial information for the six months ended 30 June 2007 and
the comparative financial information for the six months ended 30 June 2006 have
been prepared, using the same accounting policies and on a basis consistent with
the audited full year results for the year ended 31 December 2006. The financial
information has been prepared under the historical cost convention, except for
the revaluation to market of certain financial assets and liabilities.
The financial information for the year ended 31 December 2006 does not
constitute statutory accounts within the meaning of Section 240 of the Company's
Act 1985. Statutory accounts for the year ended 31 December 2006, 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 and did not
contain any statement under Section 237 of the Companies Act 1985.
The currency used in the preparation of the accompanying consolidated financial
statements is the US Dollar as the majority of the Company's business is
conducted in US Dollars (USD).
Hikma Pharmaceuticals PLC
Notes to the interim accounts - continued
2. Business and geographical segments
For management purposes, the Group is currently organised into three operating
divisions - Generics, Branded and Injectables. These divisions are the basis on
which the Group reports its primary segment information.
Segment information about these businesses is presented below.
Six months ended Generics Branded Injectables Corporate and Group
other
30 June 2007 USD '000 USD '000 USD '000 USD '000 USD '000
(unaudited)
Revenue 58,667 103,620 60,035 2,572 224,894
Cost of sales (30,463) (47,388) (30,439) (2,685) (110,975)
Gross profit 28,204 56,232 29,596 (113) 113,919
Result
Segment result 15,670 34,273 12,331 (1,798) 60,476
Unallocated corporate (8,726)
expenses
Operating profit 51,750
Finance income 1,376
Finance costs (3,897)
Other income 223
Profit before tax 49,452
Tax (12,610)
Profit for the period 36,842
Attributable to:
Minority interest 1,228
Equity shareholders of the 35,614
parent
36,842
2. Business and geographical segments (continued)
Six months ended Generics Branded Injectables Corporate and Group
other
30 June 2006 USD '000 USD '000 USD '000 USD '000 USD '000
(unaudited)
Revenue 53,842 63,974 33,983 3,114 154,913
Cost of sales (24,899) (28,590) (19,191) (2,265) (74,945)
Gross profit 28,943 35,384 14,792 849 79,968
Result
Segment result 17,530 22,013 7,641 (100) 47,084
Unallocated corporate (6,168)
expenses
Share of results of - 1,247 - - 1,247
associate
Operating profit 42,163
Finance income 2,547
Finance costs (2,441)
Other income 105
Profit before tax 42,374
Tax (11,441)
Profit for the period 30,933
Attributable to:
Minority interest 857
Equity shareholders of 30,076
the parent
30,933
2. Business and geographical segments (continued)
Year ended Generics Branded Injectables Corporate and Group
other
31 December 2006 USD '000 USD '000 USD '000 USD '000 USD '000
(audited)
Revenue 113,674 130,114 67,570 5,664 317,022
Cost of sales (53,911) (60,642) (39,225) (4,714) (158,492)
Gross profit 59,763 69,472 28,345 950 158,530
Result
Segment result 36,011 39,379 13,360 -1,200 87,550
Unallocated corporate (13,241)
expenses
Share of results of - 938 - - 938
associate
Operating profit 75,247
Finance income 5,258
Finance costs (4,958)
Other income 49
Profit before tax 75,596
Tax (19,639)
Profit for the year 55,957
Attributable to:
Minority interest 1,435
Equity shareholders of 54,522
the parent
55,957
2. Business and geographical segments (continued)
The following table provides an analysis of the Group's sales by geographical
market, irrespective of the origin of the goods/services:
Sales revenue by geographical market
H1 2007 H1 2006 FY 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
United States 67,010 63,110 129,778
Europe and Rest of the World 35,924 13,580 29,543
Middle East and North Africa 121,960 78,223 157,701
224,894 154,913 317,022
3. Tax
H1 2007 H1 2006 FY 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Current tax:
UK current tax - 207 26,982
Double tax relief - - (26,840)
Overseas tax 13,259 11,234 23,093
Prior year adjustments - - (500)
Overseas deferred tax (649) - (3,096)
12,610 11,441 19,639
4. Dividends
The Board has declared an interim dividend of $5.9 million (30 June 2006: $5.0
million, 31 December 2006: $11.7 million), equivalent to 3.5 cents per share,
(30 June 2006: 3.0 cents per share, 31 December 2006: 7.0 cents per share) as
the dividend in respect of the six month period ended 30 June 2007 to be paid on
26 October 2007 to all shareholders on the register on 28 September 2007.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
H1 2007 H1 2006 FY 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Earnings for the purposes of basic and 35,614 30,076 54,522
diluted earnings per share being net profit
attributable to equity holders of the parent
Number Number Number
Number of shares '000 '000 '000
Weighted average number of Ordinary Shares 168,640 166,987 167,279
for the purposes of basic earnings per share
Effect of dilutive potential Ordinary Shares:
Share options and awards 7,582 8,335 8,638
Weighted average number of Ordinary Shares 176,222 175,322 175,917
for the purposes of diluted earnings per
share
H1 2007 H1 2006 FY 2006
Earnings per Earnings per Earnings per
share share share
Cents Cents Cents
Basic 21.1 18.0 32.6
Diluted 20.2 17.2 31.0
6. Trade and other receivables
30 June 30 June 31 December
2007 2006 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Trade receivables 150,356 90,754 109,266
Other prepayments 7,681 3,987 6,148
Value added tax recoverable 6,205 4,735 5,701
Interest receivable 457 413 427
Employee advances 252 69 304
Other receivables - 65 -
164,951 100,023 121,846
7. Trade and other payables
30 June 30 June 31 December
2007 2006 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Trade payables 42,387 26,923 32,331
Accrued expenses 20,985 10,595 15,000
Employees' provident fund * 2,444 2,021 2,106
VAT and sales tax payables 141 1,778 2,281
Dividends payable 208 371 361
Social security
withholdings 804 424 653
Income tax withholdings 477 394 382
Other payables 892 83 802
68,338 42,589 53,916
* The employees' provident fund liability represents outstanding contributions
to Hikma Pharmaceuticals Limited - Jordan retirement benefit plan, on which the
fund receives 5% interest.
8. Net cash from operating activities
H1 2007 H1 2006 FY 2006
USD '000 USD '000 USD '000
(Unaudited) (Unaudited) (Audited)
Profit before tax and minority interest 49,452 42,374 75,596
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment 8,069 5,305 12,468
Intangible assets 1,754 632 1,329
Results from associated companies - (1,247) (938)
Losses on disposal of property, plant and 117 62 59
equipment
Gains from sale of investments - (60) -
Movement on provisions 480 (96) 362
Deferred income (34) (16) (59)
Cumulative effect of change in fair value (11) - 27
of derivatives
Cost of equity settled employee share 667 443 879
scheme
Finance income (1,376) (2,547) (5,258)
Interest and bank charges 3,897 2,441 4,958
Cash flow before working capital 63,015 47,291 89,423
Change in trade and other receivables (36,264) (17,389) (17,059)
Change in due from associate / related - (1,582) (896)
party
Change in other current assets (73) 4,963 (290)
Change in inventories (17,218) (8,905) (17,565)
Change in trade and other payables 5,180 (1,428) 610
Change in other current liabilities (938) (5,033) 138
Cash generated by operations 13,702 17,917 54,361
Income tax paid (9,819) (8,646) (19,397)
Finance income 1,376 2,547 5,258
Interest paid (3,431) (2,195) (4,972)
Net cash from operating activities 1,828 9,623 35,250
9. Acquisition of subsidiaries
During the period, Hikma acquired three businesses; Ribosepharm GmbH, Thymoorgan
GmbH Pharmazie & Co. KG and Hikma Pharma Co.
Details are as follows:
Ribosepharm
On 25 January 2007, the Group completed the acquisition of 100% of the issued
share capital of Ribosepharm GmbH ('Ribosepharm') located in Germany for cash
consideration of USD 42,225,000. Ribosepharm's business is the marketing and
distribution of generic injectable oncology products to private practices and
hospitals in Germany.
The net assets acquired in the transaction and the provisional goodwill arising
are set out below:
Book Preliminary Fair value
value fair value
adjustment
USD '000 USD '000 USD '000
Net assets acquired
Product related intangibles 3,141 (2,828) 313
Trade name - 5,529 5,529
Customer relationships - 17,789 17,789
Registration down payment - 990 990
Net deferred tax assets - 4,926 4,926
Property, plant and equipment 285 - 285
Inventory 4,750 - 4,750
Other current assets 458 - 458
Trade receivables, net 4,085 - 4,085
Cash and cash equivalents 2 - 2
Trade payables (4,388) 660 (3,728)
Other current liabilities (4,594) - (4,594)
Net assets acquired (100%) 3,739 27,066 30,805
Provisional goodwill 12,145
Total consideration 42,950
Satisfied by :
Cash 42,225
Directly attributable costs 725
42,950
Cash consideration
42,225
Cash and cash equivalents acquired
(2)
Net cash outflow arising on acquisition 42,223
The revenue and net profit of Ribosepharm from the date of acquisition that is
included in the Group's income statement for the period amounted to USD
16,738,000 and USD 2,911,000 respectively.
9. Acquisition of subsidiaries - continued
Thymoorgan
On 31 May 2007, the Group completed the acquisition of 100% of the issued share
capital of Thymoorgan GmbH Pharmazie & Co. KG ('Thymoorgan') located in Germany
for cash consideration of USD 29,506,000. Thymoorgan is a German contract
manufacturer of lyophilised and liquid injectables for both oncological and
non-oncological uses.
The book value of tangible assets acquired was USD 4,300,000.
The Group is currently in the process of determining the fair value adjustments
and hence the goodwill and intangibles arising on the acquisition. Provisional
goodwill and intangibles of USD 26,400,000 has been recognised in the
consolidated balance sheet.
Hikma Pharma Co.
On 9 February 2007, the Group completed the acquisition of the remaining 51% of
the issued share capital of Hikma Pharma Co. located in Tunisia for cash
consideration of USD 4,000 which is equal to the fair value of net assets
acquired. The business of Hikma Pharma Co. is the marketing and promotion of
medical products.
10. Post balance sheet events
On 9 August 2007, the Group announced the acquisition of Alkan Pharma ('Alkan')
for cash consideration of USD 60.5 million. The acquisition is scheduled to
complete in September 2007, subject to meeting certain regulatory requirements.
The acquisition will be funded entirely by debt.
--------------------------
(1) Underlying organic revenue growth excludes the impact of acquisitions.
(2) New pharmaceutical compounds that are being launched for the first time by
the Group or for the first time within another business segment or a new region.
(3) Products are defined as pharmaceutical compounds sold by the Group.
(4) Approvals are comprehensive and include approvals for new products and line
extensions and approvals in new segments, regions and countries.
(5) New products are defined as pharmaceutical compounds not previously launched
by the Group and existing compounds being introduced into a new segment or a new
region. Line extensions are new forms or dosage strengths of existing
compounds.
(6) Filings comprise filings for new products and new line extensions and for
existing compounds and line extensions being introduced into new regions.
(7) Source: IMS Health, MAT June 2007.
This information is provided by RNS
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