Preliminary Results
Hikma Pharmaceuticals Plc
18 March 2008
Hikma Pharmaceuticals PLC
Preliminary results announcement
for the year ended 31 December 2007
LONDON, 18 March 2008 - Hikma Pharmaceuticals PLC ('Hikma') (LSE:HIK) (DIFX:
HIK), the fast-growing multinational pharmaceutical group focused on developing,
manufacturing and marketing a broad range of generic and in-licensed
pharmaceutical products, across the Middle East and North Africa, the US and
Europe, today reports its preliminary results for the year ended 31 December
2007.
Group performance 2007 2006 Growth 2007
$m $m vs. 2006
Revenue 448.8 317.0 +41.6%
EBITDA* 115.8 89.0 +30.1%
Operating profit 92.4 75.2 +22.8%
Profit attributable to shareholders 62.6 54.5 +14.8%
Diluted earnings per share (cents) 35.4 31.0 +14.2%
Dividend per share (cents) 7.5 7.0 +7.1%
Highlights
• Grew revenues by 41.6% to $448.8 million
• Underlying organic revenues grew by 28.0%**, driven by strong performances
in the Branded and Injectables businesses
• Delivered 14.8% growth in profit attributable to shareholders, to $62.6 million
• Entered the large and growing Egyptian market through the acquisition of
Alkan Pharma and strengthened our position in core markets through the
acquisition of Arab Pharmaceutical Manufacturing Co. Ltd., further
consolidating our leading position in the MENA region
• Entered the injectable oncology market through the acquisitions of Ribosepharm
and Thymoorgan in Germany and expanded our oncology portfolio through new product
acquisitions
• Began production in our new cephalosporin plant in Portugal for the MENA region
and Europe in 2007 and for the US in early 2008
• Launched 28 new products(1), received 129 approvals across all businesses and
geographic regions and submitted 74 regulatory filings in MENA, the US and Europe(2)
• Raised gross proceeds of £81.6 million (approximately $160 million) in
January 2008 through the placing of 17 million new ordinary shares, funding the
acquisition of APM, strengthening our balance sheet and enhancing our
flexibility to finance future growth
* Reported profit before interest, tax, depreciation and amortisation.
** Organic growth excludes the acquisitions made in 2007 (Ribosepharm GmbH ('R
ibosepharm'), Thymoorgan GmbH Pharmazie & Co. KG ('Thymoorgan'), Alkan Pharma
('Alkan')) unless stated otherwise.
(1) 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.
(2) This includes only the first submission of new compound or line extension in
a region.
Said Darwazah, Chief Executive of Hikma, said:
'Our position as a global speciality pharmaceutical company, with a position in
the MENA region, is stronger than ever. We have an excellent product portfolio,
a large and growing sales and marketing team and excellent manufacturing
capabilities that enable us to take advantage of the extremely favourable market
environment in which we operate.
Through the acquisitions we made in the MENA region this year, in Egypt and
Jordan, we have extended our successful business model into new markets and
strengthened our position in our core markets like Jordan and Saudi Arabia. The
acquisitions of Ribosepharm and Thymoorgan are providing an excellent platform
from which to develop a presence in the fast growing oncology market.
Globally, we are confident of delivering another year of strong performance in
2008 driven by our Branded and Injectable businesses, as we continue to grow
Hikma into a leading speciality pharmaceutical company and deliver high returns
on investment to our shareholders.'
An interview with Said Darwazah, Chief Executive, and Bassam Kanaan, Chief
Financial Officer is available on http://www.hikma.com and http://www.cantos.com.
There will be an analyst and investor presentation at 09.00hrs which will be
webcast on http://www.hikma.com and available through a conference call
facility. Participants should dial +44 (0)20 8609 0582 and use conference ID
208088#.
Enquiries:
Hikma Pharmaceuticals PLC Tel: +44 (0)20 7399 2760
Said Darwazah, Chief Executive
Bassam Kanaan, Chief Financial Officer
Susan Ringdal, Investor Relations Director
Brunswick Group Tel: +44 (0)20 7404 5959
Jon Coles / Justine McIlroy / Alex Tweed
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 2007, the Group achieved revenues of $449 million
(2006 $317 million) and profit attributable to shareholders was $63 million
(2006 $55 million). For news and other information, please visit www.hikma.com.
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.
Business and financial review
Branded Pharmaceuticals
Revenue in the Branded business, our largest business segment, increased by
52.9% to $198.9 million, compared to $130.1 million in 2006. Excluding the
acquisitions of JPI and Alkan, underlying sales growth was 32.0%, primarily due
to strong growth 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 Gulf Cooperation Council ('GCC')
countries was driven in part by the successful integration of JPI.
Algeria, Saudi Arabia, Jordan and Sudan were the Branded business's largest
markets in 2007. In Algeria, Hikma grew well above the average market growth
rate. This growth was driven by an increase in the number of marketed products,
enhanced sales and marketing efforts, with more focus on doctors, pharmacists
and better geographical coverage, and by strengthening our relationships with
the leading distributors. Our market share in Algeria reached 6.0% in 2007,
compared to 3.9% at the end of 2006, making us the fourth largest pharmaceutical
company in the Algerian market(3).
Sales in Saudi Arabia grew by nearly 80%, as we worked hard to complete the
integration of JPI. By year end the combined sales teams were performing well
and we had achieved strong margin improvement. We also increased our share of
the tender market, benefiting from our new status as a local manufacturer. Our
share of the private market, however, decreased to 3.8% in 2007, compared to
4.0% in 2006, making us the 6th largest player in the Saudi Arabian market.3 We
are confident of further progress in 2008 through increased sales efforts, the
benefits of new product launches - including three new products launched in 2007
and further benefits of the JPI / Hikma integration. We will benefit from APM's
strong position in the Saudi market.
Our growth in the Jordanian market was also strong in 2007 and well ahead of the
underlying market, due to new product launches, more focused sales efforts
especially for key products and better market coverage by our medical
representatives. We received 12 product approvals and launched nine new products
in the Jordanian market during the year. In 2007, we maintained our position as
market leader in the Jordanian market and our market share increased to 7.7%,
compared to 7.3% in 2006.(3)
(3) Source: IMS Health.
In Sudan we performed extremely well, largely due to a strong product focus, an
increase in the number of medical representatives and better geographical
coverage, combined with a more stable operating environment, growing pharmacy
chains and an overall increase in pharmaceutical spend. Significant benefits
were also derived from the integration of JPI's Sudanese operations. While
market data is not readily available for the Sudanese market, we believe that we
now have a leading position in this market.
We also achieved strong performances in some of our newer and smaller markets,
including UAE, Lebanon and the Ukraine, driven mainly by better brand
recognition and product launches.
In 2007 we continued to work hard to strengthen our leading position in the MENA
region. Through the acquisition of Alkan Pharma in September 2007, we extended
our reach into the important Egyptian market, which we estimate was worth
approximately $1.9 billion in 2007. We now have more than 250 sales and
marketing staff in Egypt and market 84 products in 126 dosage strengths and
forms. Five of these products are in-licenced and a further 19 products are
pending approval. In addition, we continue to sell Astellas' life-saving
immunosuppressant, Prograf, in the Egyptian market and will soon launch Actos,
Takeda's leading Type 2 diabetes drug.
Through the acquisition of Arab Pharmaceutical Manufacturing Co. Ltd. ('APM') at
the end of December 2007, we strengthened our position in our existing markets,
particularly in Jordan and Saudi Arabia. This acquisition brings together a high
quality and complementary portfolio. APM's currently marketed portfolio of 105
products in 222 dosage strengths and forms will enhance the product offering
available to Hikma's enlarged sales force by expanding existing product lines,
strengthening existing therapeutic areas and adding new molecules. APM's
portfolio includes oral, injectable and dermatological products and spans a
number of therapeutic categories, including cardiovascular, diabetes and
oncology.
Sales from in-licensed products grew by 44.6% to $64.2 million in 2007,
representing 32.3% of Branded sales, compared to 34.1% in 2006. During the
year, three new licensing agreements were signed and five new licenses were
added with the acquisition of Alkan in Egypt, bringing the total number of
in-licensed products marketed in the Branded business to 33.(4)
Gross profit in the Branded business increased by 55.5% to $108.0 million,
compared to $69.5 million in 2006. Gross margin in the Branded business
increased to 54.3%, compared to 53.4% in 2006. This change in gross profit
margin is attributed primarily to an improvement in product mix.
Operating profit in the Branded business increased by 56.7% in 2007, to $61.7
million. Through a strict focus on operating efficiencies, operating margins in
the Branded business increased to 31.0% in 2007, compared to 30.3% in 2006,
which demonstrates the successful integration of JPI. In 2007, operating
expenses included only a small amortisation charge related to acquisitions.
Going forward, however, we expect the amortisation charge for intangible assets
related to acquisitions to be close to $4.0 million.
In 2007, the Branded business received 78 regulatory approvals, including 12 in
Jordan, 49 in other MENA markets and 17 in Europe and the rest of the world. In
line with our strategic objectives for the Branded business, we launched a total
of 15 new products in 2007, nine in Jordan, three in Saudi Arabia and three in
Egypt. The total number of Branded sales and marketing staff operating across
our 17 MENA markets at year end was 1,010, which includes 256 in Egypt, 221 in
Saudi Arabia, 191 in Jordan and 127 in Algeria.
Injectable Pharmaceuticals
Our global Injectable business manufactures injectable pharmaceutical products
in powder, liquid and lyophilised forms for sale across the MENA region, Europe
and the US. The Injectable business contributed 27.0% of total Group revenue in
2007, compared to 21.3% in 2006.
Revenue in our Injectable business increased by 79.3% to $121.2 million,
compared to $67.6 million in 2006. The increase reflects underlying organic
growth of 25.2%(5), driven primarily by a strong performance in the MENA region,
as well as the consolidation of Ribosepharm and Thymoorgan, the injectable
oncology businesses acquired in the first half of 2007.
(4) At the end of 2007, a further five in-licenced products were pending launch.
(5) Organic growth is calculated before the acquisitions of Ribosepharm and
Thymoorgan.
During the year, the Injectables business received 42 regulatory approvals,
including 11 in Europe, 30 in the MENA region and one in the US. 25 of these
approvals were for new products, the rest were for new dosage strengths or
forms. Since the beginning of 2008, we have received a further four approvals in
the US.
In the MENA region, the Injectables business delivered strong growth across most
markets, with the largest contributions coming from Algeria, Saudi Arabia and
Sudan. This growth was driven by our strong product position, more focused sales
and marketing efforts, additional medical representatives, an increased focus on
institutional customers and an increasing ability to execute a bundled sales
strategy. Growth was reinforced by the 18 new products launched during the year.
In Europe, we saw strong growth in the Italian and Portuguese market as a direct
result of increased customer focus, and we were able to maintain our position in
the highly competitive German market. During the year we launched four new
products in the European market.
In the US, we faced increased competition. Nevertheless, we continue to grow own
product sales and are developing a strong market position for our products,
particularly the cephalosporins. In 2007 we began selling our products to the US
government and won several new contracts with buying groups for 2008. We
launched two new products in the US market in 2007 and expect to launch a
further three products in multiple dosage strengths and forms in the first half
of 2008.
In 2007 we took the important strategic step of entering the injectable generic
oncology market. In January we acquired Ribosepharm, a German oncology company
specialising in the marketing and distribution of branded generic injectable
oncology products. In May, we acquired Thymoorgan, a German contract
manufacturer of lyophilised and liquid injectables for both oncological and
non-oncological uses.
Ribosepharm and Thymoorgan, now our oncology business, performed well in 2007,
contributing sales of $36.6 million, which includes approximately $11 million of
sales from in-licensed products that have been or will be discontinued, which is
in line with expectations at the time of the Ribosepharm acquisition.
The sales and marketing team at Ribosepharm is performing well in the German
injectable oncology market and we are successfully expanding our oncology
product portfolio, which now includes 12 marketed products and a pipeline of 13
additional products. At Thymoorgan, we commenced the manufacture of our first
products for the European and MENA markets.
Gross profit of the Injectables business increased by 91.1% to $54.2 million,
compared to $28.3 million in 2006. The Injectable business's gross margin
increased to 44.7%, compared to 41.9% in 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 lower gross margins before
the impact of acquisitions resulting from increasing price competition in
Germany, the increase in MENA tender sales, which have lower margins, and an
increase in overheads and depreciation expense related to our new plant in
Portugal. As we expand production at the new plant in Portugal, we expect
overhead and depreciation expenses to decrease as a percentage of sales.
Injectable operating profit increased by 53.1% to $20.5 million, compared to
$13.4 million in 2006. Injectable operating margins decreased to 16.9% in 2007,
down from 19.8% in 2006. The decrease was driven primarily by the lower
underlying gross margins but also to an increase in operating expenses incurred
to support continued growth across all regions. These operating expenses include
an amortisation charge of $1.6 million related to the acquisition of intangible
assets. In 2008, we expect this charge will be approximately $2.2 million.
During the year, we focused on developing our Injectables sales and marketing
capabilities across all geographies and ended the year with 77 sales and
marketing representatives in the MENA Region, and 43 in Europe, including five
in Portugal and 33 in Germany, and 10 in the United States.
Generic Pharmaceuticals
The Generic business contributed 27.7% of total Group revenue in 2007, compared
to 35.9% in 2006 as the Branded and Injectables businesses continue to grow both
organically and through acquisitions. Consistent with 2006, all Generic revenues
were generated in the United States.
While price competition remained high in 2007, improved sales efforts and
increased demand for key products helped to drive volume growth. Sales from
recently launched products also drove Generic revenues, which grew by 9.3% in
2007 to $124.2 million, compared to $113.7 million in 2006.
Our sales contract with the Department of Veterans Affairs ('the VA'), an agency
of the government of the United States, for the supply of Lisinopril expired on
20 December 2007. As the VA has not submitted a new solicitation for this
product, we expect volumes to be considerably lower going forward. We expect to
compensate with sales from products launched in 2007 and 2008, but these sales
will have lower margins, and will result in lower margins going forward for the
segment as a whole.
Recent additions to strengthen the Generics senior management team will support
the business going forward. A new finance director was appointed in late 2007
and a new sales and marketing director was appointed in early 2008. Both have
significant experience in the pharmaceutical industry.
The Generic business received 9 ANDA approvals in 2007, including 4 for new
products. In addition, a total of 6 products were launched during the year.
Gross profit of the Generic business decreased by 2.0% to $58.6 million,
compared to $59.8 million in 2006. Gross margin in the Generic business was
47.2%, compared to 52.6% in 2006. This reflects continued price erosion, as well
as changes in the product mix.
Generic operating profit decreased by 12.1% to $31.6 million. Operating profit
margins in the Generic business decreased to 25.5% of revenue, compared to 31.7%
in 2006. The decrease in operating margin is attributed to price erosion and the
product mix mentioned above, as the level of operating expenses remained largely
unchanged.
Other businesses
Other businesses, which include primarily Arab Medical Containers, a
manufacturer of specialised plastic packaging, and International Pharmaceuticals
Research Centre, which conducts bio-equivalency studies, had aggregate revenue
in 2007 of $4.5 million, or 1.0% of total Group revenue. Other businesses
delivered an operating loss of $3.4 million in 2007, compared to a loss of $1.2
million in 2006, as a result of an increase in investment in research and
development.
Group performance
Revenue for the Group increased by 41.6% to $448.8 million, compared to $317.0
million in 2006. Excluding the acquisitions of Ribosepharm, Thymoorgan and Alkan
Pharma, revenues increased by 28.0%. The latter increase was primarily due to
strong increases in revenue in both the Branded and Injectable businesses.
In 2007, 44.3% of revenue was generated by our Branded business, 27.7% of
revenue was generated by our Generic business and 27.0% by our Injectables
business. Geographically, 51.1% of revenue was generated in the MENA region,
while 32.0% of revenue was generated in the United States and 17.0% in Europe
and the rest of the world.
The Group's gross profit increased by 39.7% to $221.5 million, compared to
$158.5 million in 2006. Group gross margins for 2007 were 49.4% of revenue,
compared to 50.0% in 2006. On a segmental basis, gross margins improved in the
Branded and Injectables businesses, but declined in the Generic business, due to
continued price erosion.
Group operating expenses increased in 2007 by 53.3% to $129.1 million, compared
to $84.2 million for 2006, mainly due to an increase in sales and marketing and
general and administrative expenditures related to acquisitions and to an
increase in corporate expenses required to support the enlarged Group. These
expenses include an amortisation charge of $1.6 million relating to intangible
assets arising on these and other acquisitions completed during the year. Sales
and marketing expenses represented 13.6% of Group revenue in 2007, compared to
11.0% in 2006.
Sales and marketing expenses before acquisitions(6) grew by 26.7%, which
reflects the strong growth in both the Branded and Injectables businesses.
Including acquisitions, sales and marketing expenses increased by 74.3% to $61.0
million, due primarily to the acquisition of Ribosepharm, and to the full
consolidation of Al-Jazeera Pharmaceutical Industries ('JPI').
The Group's general and administrative expenses increased by 51.7% to $46.0
million, compared to $30.3 million in 2006. As anticipated, the change arose
mainly from the consolidation of JPI, Ribosepharm, Thymoorgan and Alkan. The
need to support the growth of the Group has also increased corporate general and
administrative costs, which include costs associated with the company's new
long-term incentive plan. General and administrative expenses represented 10.3%
of Group revenue in 2007, compared to 9.6% in 2006.
Investment in R&D for the Group increased by 5.7% to $19.3 million, compared to
$18.3 million in 2006. This increase, which can be attributed to ongoing
investment in the development of our product portfolio, was lower than in 2006
reflecting a shift towards product and business acquisitions. Total investment
in R&D represented 4.3% of Group revenue in 2007, compared to 5.8% in 2006.
Other net operating expenses, which consist mainly of provisions against slow
moving items partially offset by foreign exchange gains, were $2.8 million,
compared to $0.6 million in 2006.
Earnings before interest, tax, depreciation and amortisation increased by 30.1%
to $115.8 million, compared to $89.0 million in 2006. Operating profit for the
Group increased by 22.8% to $92.4 million, compared to $75.2 million in 2006.
Group operating margin declined by 3.1 percentage points to 20.6% in 2007,
compared to 23.7% of revenue in 2006.
Research & Development
The Group's product(7) portfolio continues to grow. In the year to 31 December
2007, Hikma added 177 new products to the Group portfolio, which now covers 353
products in 728 dosage strengths and forms. We manufacture and/or sell 40 of
these under licence from the originator.
(6) This excludes the acquisition of Ribosepharm, Thymoorgan, Alkan Pharma and JPI.
(7) Products are defined as pharmaceutical compounds sold by the Group.
New products are defined as pharmaceutical compounds not yet 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.
Filings include only filings for new products and the first filing of line
extensions in a segment or region.
Approvals are comprehensive and include approvals for new products and line
extensions and approvals in new countries.
Pending approvals include only applications that are pending for new products
and the first filing of a line extension in a segment or region.
In the year to 31 December 2007, Hikma received 129 regulatory approvals,
including 9 ANDA approvals for the Generics business and 1 ANDA approval for the
Injectables business. Over the same period, 28 new products were launched.
Filings in New product Pending Pending approvals of
2007 filings in approvals as of new products as of
2007 31 December 2007 31 December 2007
---------- ----------- ----------- ------------------
Generic
Pharmaceuticals
United States 8 6 32 25
---------- ----------- ----------- -------------
Branded
Pharmaceuticals
MENA* 23 9 45 27
Europe and
ROW** 16 4 19 7
---------- ----------- ----------- -------------
39 13 64 34
Injectable
Pharmaceuticals
United States 7 2 31 21
MENA* 11 9 17 13
Europe 9 7 14 11
---------- ----------- ----------- -------------
27 18 62 45
========== =========== =========== =============
74 37 158 104
---------- ----------- ----------- -------------
* Includes only the first filing of a product or line extension in the MENA
region.
** Includes only the first filing of a product or line extension in Europe or
ROW.
To ensure the continuous development of our product pipeline, we submitted a
total of 74 regulatory filings for the first time in MENA, the US and Europe. As
of 31 December 2007, we had a total of 158 pending approvals in Jordan, the US
and Europe and 543 pending approvals across all regions and markets.
We estimate the approximate addressable market for our portfolio of pending
approvals to be approximately $19.8 billion, based on the 2007 full year sales
of the currently marketed equivalent products in the markets covered by the
pending approvals.
At 31 December 2007, we had a total of 133 new products under development, the
majority of which should receive several marketing authorisations over the next
few years, including separate marketing authorisations in differing strengths
and/or product forms over the next few years.
Finance income and costs
The Group's financing income principally comprises interest income. Financing
income decreased by $3.2 million to $2.0 million in 2007, compared to $5.3
million in 2006. Financing costs increased by $5.9 million to $10.8 million,
compared to $5.0 million in 2006. The decrease in finance income and increase in
finance costs was due to the decrease in cash and cash equivalents and increase
in debt primarily as a result of the cash used to finance the acquisitions made
during the year.
Profit before tax
Profit before taxes for the Group increased by $8.2 million, or 10.8%, to $83.8
million, compared to $75.6 million in 2006.
Tax
The Group had a tax expense of $19.6 million in 2007. The effective tax rate was
23.4%, a year on year decrease of 2.6 percentage points. This improvement
reflects an increase in sales generated in the MENA region.
Minority interest
Hikma's minority interest increased to $1.6 million in 2007, compared to $1.4
million in 2006.
Profit for the year
The Group's profit for the year attributable to equity holders of the parent
grew by 14.8% to $62.6 million for the year ended 31 December 2007, compared to
$54.5 million in 2006.
Earnings per share
Diluted earnings per share for the year to 31 December 2007 were 35.4 cents, up
14.2% from 31.0 cents in 2006.
Dividend
The Board has recommended a final dividend of 4.0 cents per share (approximately
2.0 pence per share), which will make the dividend for the full year of 7.5
cents per share, compared to 7.0 cents per share in 2006. The proposed final
dividend will be paid on 2 June 2008 to shareholders on the register on 2 May
2008, subject to approval at the Annual General Meeting.
Operating cash flow and investment
Net cash inflow from operating activities was $45.1 million, compared to $35.3
million in 2006. Working capital increased by $46.9 million, compared to $35.1
million at the end of 2006, primarily due to an increase in receivables and
inventory in line with historic sales and planned growth.
Trade receivables increased by 59.1% compared to 31 December 2006 largely as a
result of acquisitions in addition to organic sales growth. Excluding
acquisitions(8), receivable days stood at 125 days as at 31 December 2007,
compared to 126 days at 31 December 2006, indicating steady receivable growth in
line with sales.
(8) Excluding Ribosepharm, Thymoorgan, Alkan Pharma and Arab Pharmaceutical
Manufacturing.
Inventory increased by 76.4% compared to 31 December 2006, due to acquisitions
and the necessity to support planned growth in sales. Excluding acquisitions8,
inventory days stood at 207 days as at 31 December 2007, compared to 193 days at
31 December 2006.
Net cash used for investing activities was $350.9 million, compared to $72.7
million in 2006. The most significant component of investment activity during
the year was acquisition related: $73.6 million paid for the acquisitions of R
ibosepharm and Thymoorgan, $61.1 million paid for Alkan Pharma in Egypt and
$167.4 million paid for Arab Pharmaceutical Manufacturing in Jordan. In
addition, capital expenditure amounted to $50.4 million, compared to $49.7
million in 2006. This expenditure relates primarily to expansion projects in the
Branded and Injectables businesses. During the year the Group also made regular
investments to upgrade and maintain existing facilities.
On 17 January 2008 we successfully raised gross proceeds of £81.6 million
(approximately $160 million) in an equity placing of shares, funding the
acquisition of APM, strengthening our balance sheet and and enhancing our
flexibility to finance future growth.
Outlook
In 2008, we are expecting revenue growth of between 35% and 40%, supported by
organic growth and by the acquisitions and investments we have made over the
past two years. Gross margin is expected to be approximately 47%.
In our Branded business, we expect to continue to deliver strong organic growth.
We expect further growth to come from the acquisitions we have made in the MENA
region, which are performing extremely well. We now have over 1,000 Branded
sales and marketing staff in place across the MENA region, an enhanced product
portfolio and broad manufacturing capabilities to drive and support this growth.
In our US Generics business, we expect sales in 2008 to be broadly in line with
that achieved in 2007, and expect continued pricing pressure and significant
gross margin erosion. Looking ahead, we will work to grow this business through
the recent strengthening of the management team, increasing focus on higher
margin, niche products, dedicating additional capacity in low cost countries and
concentrating on acquiring lower cost API.
In our global Injectables business, we expect strong growth driven by new
product launches, further penetration of our existing product portfolio and from
our new oncology business, as we build our product portfolio and launch these
products into new markets in Europe and MENA. We also expect to deliver
improving operating margins in this business, as we benefit from increasing
economies of scale.
We are confident of delivering another year of strong performance in 2008 driven
by our Branded and Injectable businesses as we continue to grow Hikma into a
leading speciality pharmaceutical company.
Consolidated income statement
for the year ended 31 December 2007
Notes 2007 2006
USD '000 USD '000
------- --------
Continuing operations
Revenue 2 448,796 317,022
Cost of sales 2 (227,263) (158,492)
------- --------
Gross profit 2 221,533 158,530
Sales and marketing costs (61,021) (35,014)
General and administrative expenses (46,012) (30,328)
Research and development costs (19,342) (18,291)
Other operating expenses (net) (2,760) (588)
------- --------
Total operating expenses (129,135) (84,221)
Share of results of associate - 938
------- --------
Operating profit before intangible amortisation 95,061 75,524
Intangible amortisation* (2,663) (277)
------- --------
Operating profit 92,398 75,247
Finance income 2,029 5,258
Finance expense (10,837) (4,958)
Other income 199 49
------- --------
Profit before tax 83,789 75,596
Tax 3 (19,596) (19,639)
------- --------
Profit for the year 64,193 55,957
======= ========
Attributable to:
Minority interest 1,617 1,435
Equity holders of the parent 62,576 54,522
------- --------
64,193 55,957
======= ========
Earnings per share (cents)
Basic 5 37.0 32.6
======= ========
Diluted 5 35.4 31.0
======= ========
* Intangible amortisation comprises the amortisation on intangible assets
excluding software.
Hikma Pharmaceuticals PLC
Consolidated balance sheet
At 31 December 2007
Notes 2007 2006
USD '000 USD '000
------- -------
Non-current assets
Intangible assets 6 251,340 23,940
Property, plant and equipment 243,901 156,845
Interest in joint venture 4,543 -
Deferred tax assets 14,503 5,719
Available for sale investments 1,008 776
Financial and other non-current assets 1,290 1,242
------- -------
516,585 188,522
------- -------
Current assets
Inventories 7 147,670 83,720
Income tax recoverable 358 500
Trade and other receivables 8 190,714 121,846
Collateralised cash 5,628 5,337
Cash and cash equivalents 28,905 86,227
Other current assets 2,625 2,204
------- -------
375,900 299,834
------- -------
Total assets 892,485 488,356
======= =======
Current liabilities
Bank overdrafts and loans 276,537 35,614
Obligations under finance leases 1,455 1,216
Trade and other payables 9 84,324 53,916
Income tax provision 10,583 8,535
Other provisions 4,475 2,577
Other current liabilities 14,542 4,868
------- -------
391,916 106,726
------- -------
Net current (liabilities) / assets (16,016) 193,108
------- -------
Non-current liabilities
Long-term financial debts 57,662 25,339
Deferred income 279 356
Obligations under finance leases 5,698 4,441
Deferred tax liabilities 12,273 1,695
------- -------
75,912 31,831
------- -------
Total liabilities 467,828 138,557
======= =======
Net assets 424,657 349,799
======= =======
Notes 2007 2006
USD '000 USD '000
------- -------
Equity
Share capital 10 30,229 29,712
Share premium 114,059 111,431
Reserves 274,192 203,924
------- -------
Equity attributable to equity holders of the parent 418,480 345,067
Minority interest 6,177 4,732
------- -------
Total equity 424,657 349,799
======= =======
Consolidated statement of changes in equity
for the year ended 31 December 2007
Merger Retained Other Total Share Share Total equity
reserve earnings reserves* reserves Capital premium attributable to
equity
shareholders of
the parent
-------------------------------------------------------------------------------------------------------------------
USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000
Balance at
1 January 2006 33,920 111,023 (593) 144,350 29,457 110,074 283,881
Issue of equity
shares - - - - 255 1,357 1,612
Cost of
equity
settled
employee share
scheme - 879 - 879 - - 879
Deferred
tax arising on
share options - 2,352 - 2,352 - - 2,352
Dividends
on ordinary shares - (6,509) - (6,509) - - (6,509)
Profit for
the year - 54,522 - 54,522 - - 54,522
Cumulative
effect of
change in
fair value of
available
for sale
investments - (663) - (663) - - (663)
Cumulative
effect of
change in fair
value of
financial
derivatives - 27 - 27 - - 27
Revaluation
reserve - - 4,807 4,807 - - 4,807
Currency
translation
gain - - 4,159 4,159 - - 4,159
------- ------ ------ ------- ------- ------- -------
Balance at
31 December
2006 and 1
January 2007 33,920 161,631 8,373 203,924 29,712 111,431 345,067
Issue of
equity shares - - - - 517 2,628 3,145
Cost of equity
settled employee
share scheme - 1,601 - 1,601 - - 1,601
Deferred
tax arising on
share options - 2,968 - 2,968 - 2,968
Dividends
on ordinary shares - (12,696) - (12,696) - - (12,696)
Profit for
the year - 62,576 - 62,576 - - 62,576
Cumulative
effect of
change in fair
value of
available
for sale
investments - (151) - (151) - - (151)
Cumulative
effect of
change in
fair value of
financial
derivatives - (256) - (256) - - (256)
Revaluation
reserve - 180 (180) - - - -
Currency
translation
gain - - 16,226 16,226 - - 16,226
------- ------ ------ ------- ------- ------- -------
Balance at
31 December
2007 33,920 215,853 24,419 274,192 30,229 114,059 418,480
======= ====== ====== ======= ======= ======= =======
* Other reserves comprise the revaluation reserve and the cumulative translation
reserve.
Consolidated cash flow statement
For the year ended 31 December 2007
Note 2007 2006
USD '000 USD '000
-------- --------
Net cash from operating activities 12 45,146 35,250
Investing activities
Purchases of property, plant and equipment (50,402) (49,725)
Proceeds from disposal of property, plant and
equipment 906 453
Purchase of intangible assets (4,586) (2,715)
Investment in financial and other assets 329 34
Investment in available for sale securities (226) -
Acquisition of subsidiary undertakings net of cash
acquired (296,903) (20,773)
-------- --------
Net cash used in investing activities (350,882) (72,726)
-------- --------
Financing activities
Increase in collateralised cash (291) (217)
Increase in long-term financial debts 42,464 495
Repayment of long-term financial debts (13,546) (12,881)
Increase in short-term borrowings 229,658 1,244
Increase in obligations under finance leases 126 3,449
Dividends paid (12,834) (6,989)
Dividends paid to minority shareholders (166) (294)
Proceeds from issue of new shares 3,145 1,612
-------- --------
Net cash from/(used in) financing activities 248,556 (13,581)
-------- --------
Net (decrease) in cash and cash equivalents (57,180) (51,057)
Cash and cash equivalents at beginning of year 86,227 135,959
Foreign exchange translation (142) 1,325
-------- --------
Cash and cash equivalents at end of year 28,905 86,227
======== ========
Financial Information
1. Basis of preparation
The financial information in this announcement, which was approved by the Board
of Directors on 17 March 2008, does not constitute the Company's statutory
accounts for the years ended 31 December 2007 or 2006 but is derived from these
accounts.
The Group's principal accounting policies are unchanged compared with the year
ended 31 December 2006.
During the year, the Group adopted the following accounting pronouncement IFRS 7
'Financial Instruments: Disclosures' and the related amendment to IAS 1
'Presentation of Financial Statements - Capital Disclosures' which did not have
any impact on its results or financial position.
The primary statements and the financial information are derived from the
Group's consolidated financial statements for the year ended 31 December 2007
prepared in accordance with IFRS ('the financial statements') and does not
constitute full accounts within the meaning of section 240 of the Companies Act
1985 or contain sufficient information to comply with IFRS disclosure
requirements.
The Company's auditors, Deloitte & Touche LLP, have given an unqualified report
on the financial statements which does not contain any statement under section
237 of the Companies Act 1985. Subject to their approval by shareholders, the
financial statements will be filed with the Registrar of Companies following the
Company's Annual General Meeting on 15 May 2008.
2. Business and geographical segments
For management purposes, the Group is currently organised into three operating
divisions - Generic, 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.
Year ended
31 December
2007 Generic Branded Injectables Corporate and Group
other
USD '000 USD '000 USD '000 USD '000 USD '000
-------- -------- -------- -------- --------
Revenue 124,229 198,942 121,164 4,461 448,796
Cost of sales (65,644) (90,925) (67,005) (3,689) (227,263)
-------- -------- -------- -------- --------
Gross profit 58,585 108,017 54,159 772 221,533
-------- -------- -------- -------- --------
Result
Segment result 31,644 61,696 20,457 (3,396) 110,401
======== ======== ======== ========
Unallocated
corporate
expenses - - - - (18,003)
======== ======== ======== ======== --------
Operating
profit 92,398
Finance income 2,029
Finance expense (10,837)
Other income 199
--------
Profit before
tax 83,789
Tax (19,596)
--------
Profit for the
year 64,193
========
Attributable to:
Minority
interest 1,617
Equity holders
of the parent 62,576
--------
64,193
========
2. Business and geographical segments - continued
Other information Generic Branded Injectables Corporate and Group
2007 other
USD '000 USD '000 USD '000 USD '000 USD '000
-------- ------- -------- --------- ---------
Additions to
property,
plant and
equipment
assets (cost) 4,189 28,366 15,811 990 49,356
Acquisition of
subsidiary's
property,
plant and
equipment
(cost) - 53,625 9,213 - 62,838
Additions to
intangible
assets 445 1,453 2,557 131 4,586
Intangible
assets arising
on acquisition - 155,582 62,642 - 218,224
Total
property,
plant and
equipment and
intangible
assets (net
book value) 28,304 309,669 148,399 8,869 495,241
Depreciation
and
amortisation 5,153 9,740 7,054 1,486 23,433
Balance sheet
Total assets
Segment assets 97,355 574,057 196,337 24,736 892,485
======== ======= ======== ========= =========
Total liabilities
Segment
liabilities 9,781 167,019 78,723 212,305 467,828
======== ======= ======== ========= =========
2. Business and geographical segments - continued
Year ended
31 December 2006 Generic Branded Injectables Corporate and Group
other
USD '000 USD '000 USD '000 USD '000 USD '000
-------- ------- ------- ------- ---------
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
expenses - - - - (13,241)
Share of
results of
associates - 938 - - 938
======== ======= ======= ======= ---------
Operating
profit 75,247
Finance income 5,258
Finance expense (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 holders
of the parent 54,522
---------
55,957
=========
2. Business and geographical segments - continued
Other information
2006 Corporate
Generic Branded Injectables and other Group
USD '000 USD '000 USD '000 USD '000 USD '000
-------- -------- ------- -------- --------
Additions to
property,
plant and
equipment
assets (cost) 7,569 21,953 21,184 2,465 53,171
Acquisition of
subsidiary's
property,
plant and
equipment
(cost) - 34,400 - - 34,400
Additions to
intangible
assets - 1,494 1,200 21 2,715
Intangible
assets arising
on acquisition - 14,929 - - 14,929
Total
property,
plant and
equipment and
intangible
assets (net
book value) 28,847 89,159 53,557 9,222 180,785
Depreciation
and
amortisation 4,321 5,376 2,730 1,370 13,797
Balance sheet
Total assets
Segment assets 95,510 233,323 72,750 86,773 488,356
======== ======== ======= ======== ========
Total liabilities
Segment
liabilities 8,054 85,212 31,157 14,134 138,557
======== ======== ======= ======== ========
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
-------------------
For the year ended 31 December
2007 2006
USD '000 USD '000
----------- --------
United States 143,510 129,778
Middle East and North Africa 229,196 157,701
Europe and Rest of the World 76,090 29,543
----------- --------
448,796 317,022
=========== ========
The following is an analysis of the additions to property, plant and equipment
and intangible assets, an analysis of total property, plant and equipment and
intangible assets and an analysis of total assets by the geographical area in
which the assets are located:
Additions* to property, Total property, plant Total assets
plant and equipment and equipment and
and intangibles intangibles
---------------------- --------------------- --------------------------
2007 2006 2007 2006 2007 2006
USD 000's USD 000's USD 000's USD 000's USD 000's USD 000's
--------- --------- --------- --------- --------- ---------
United 4,634 7,569 28,304 28,848 96,196 94,466
States
Europe 90,316 22,804 148,694 53,898 208,388 149,057
Middle
East and
North Africa 240,054 74,842 318,243 98,039 587,901 244,833
-------- -------- -------- -------- -------- --------
335,004 105,215 495,241 180,785 892,485 488,356
======== ======== ======== ======== ======== ========
* Additions include property, plant and equipment and intangibles acquired with
and arising on the acquisition of subsidiary undertakings.
3. Tax
For the years ended 31 December
2007 2006
USD '000 USD '000
--------- ----------
Current tax:
UK current tax 13,664 26,982
Double tax relief (13,664) (26,840)
Foreign tax 19,552 23,093
Prior year adjustments - (500)
Deferred tax 44 (3,096)
--------- ----------
19,596 19,639
========= ==========
UK corporation tax is calculated at 30% of the estimated assessable profit made
in the UK for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdiction.
4. Dividends
2007 2006
USD '000 USD '000
-------- ---------
Amounts recognised as distributions to equity holders in
the year:
Final dividend for the year ended 31 December 2006 of
4.0 cents (2005: 0.89 cents) per share 6,765 1,489
Interim dividend for the year ended 31 December 2007 of
3.5 cents (2006: 3.0 cents) per share 5,931 5,020
-------- ---------
12,696 6,509
======== =========
Proposed final dividend for the year ended 31 December 2007 of 4.0 cents (2006:
4.0 cents) per share.
Total dividends for the year 7.5 cents (2006: 7.0 cents) per share.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
For the years ended 31 December
2007 2006
USD '000 USD '000
------- -------
Earnings for the purposes of basic and
diluted earnings per share being net profit
attributable to equity holders of the parent 62,576 54,522
======= =======
Number Number
Number of shares '000 '000
Weighted average number of Ordinary Shares
for the purposes of basic earnings per share 169,216 167,279
Effect of dilutive potential Ordinary Shares :
Share options 7,631 8,638
------- -------
Weighted average number of Ordinary Shares
for the purposes of diluted earnings per
share 176,847 175,917
======= =======
2007 2006
Earnings per Earnings per
share share
Cents Cents
------- -------
Basic 37.0 32.6
------- -------
Diluted 35.4 31.0
------- -------
6. Intangible assets
Goodwill Marketing Customer Product Software In process Trade name Other
rights relationships related R&D acquisition
intangibles related
intangibles Total
USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000
------- ------- -------- -------- -------- -------- -------- -------- --------
Cost
Balance at 1
January 2006 2,395 1,340 - 2,581 3,443 - - - 9,759
Additions 21 998 - 1,037 659 - - - 2,715
Acquisition
of
subsidiaries 6,727 - 4,946 3,256 - - - - 14,929
Subsequent
adjustments (219) - - - - - - - (219)
Translation
adjustments - 121 - - - - - - 121
------- ------- -------- -------- -------- -------- -------- -------- --------
Balance at 1
January 2007 8,924 2,459 4,946 6,874 4,102 - - - 27,305
Additions - 2,705 - 651 1,099 - - 131 4,586
Acquisition
of
subsidiaries 134,699 - 58,224 12,089 - 4,576 5,754 2,882 218,224
Subsequent
adjustments 394 - - - - - - - 394
Translation
adjustments 4,674 248 2,199 391 - 33 639 276 8,460
------- ------- -------- -------- -------- -------- -------- -------- --------
Balance at
31 December
2007 148,691 5,412 65,369 20,005 5,201 4,609 6,393 3,289 258,969
------- ------- -------- -------- -------- -------- -------- -------- --------
Amortisation
Balance at 1
January 2006 (608) (102) - - (1,314) - - - (2,024)
Charge for
the year - (152) - (125) (1,064) - - - (1,341)
------- ------- -------- -------- -------- -------- -------- -------- --------
Balance at 1
January 2007 (608) (254) - (125) (2,378) - - - (3,365)
Charge for
the year - (303) (1,512) (477) (1,396) - - (371) (4,059)
Acquisition
of subsidiaries - - - (72) - - - - (72)
Translation
adjustments - (35) (92) (12) - - - 6 (133)
------- ------- -------- -------- -------- -------- -------- -------- --------
Balance at
31 December
2007 (608) (592) (1,604) (686) (3,774) - - (365) (7,629)
------- ------- -------- -------- -------- -------- -------- -------- --------
Carrying
amount
At 31
December
2007 148,083 4,820 63,765 19,319 1,427 4,609 6,393 2,924 251,340
======= ====== ========= ======== ======= ========= ======== ======== ========
At 31
December
2006 8,316 2,205 4,946 6,749 1,724 - - - 23,940
======= ====== ========= ======== ======= ========= ======== ======== ========
7. Inventories
As at 31 December
2007 2006
USD '000 USD '000
-------- --------
Finished goods 36,405 21,684
Work-in-progress 31,673 18,489
Raw and packing materials 62,327 36,109
Goods in transit 17,265 7,438
-------- --------
147,670 83,720
======== ========
Goods in transit include inventory held at third parties whilst in transit
between Group companies.
8. Trade and other receivables
As at 31 December
2007 2006
USD '000 USD '000
------- -------
Trade receivables 173,832 109,266
Prepayments 12,629 6,148
Value added tax recoverable 3,647 5,701
Interest receivable 302 427
Employee advances 304 304
------- -------
190,714 121,846
======= =======
9. Trade and other payables
As at 31 December
2007 2006
USD '000 USD '000
-------- --------
Trade payables 49,143 32,331
Accrued expenses 25,392 15,000
Employees' provident fund * 3,158 2,106
VAT and sales tax payables 543 2,281
Dividends payable ** 3,490 361
Social security withholdings 1,026 653
Income tax withholdings 588 382
Other payables 984 802
-------- --------
84,324 53,916
======== ========
* The employee's provident fund liability represents largely the outstanding
contributions to Hikma Pharmaceuticals Limited - Jordan retirement benefit plan,
on which the fund receives 5% interest.
** Dividends payable includes USD 3,261,000 reported at the acquisition of APM.
10. Share capital
Authorised: 2007 2006
USD '000 USD '000
------- -------
500,000,000 Ordinary Shares of 10p each 88,700 88,700
======= =======
Issued and fully paid - included in shareholders' equity:
2007 2006
----------------- ---------------------
Number '000 USD '000 Number '000 USD '000
------- ------- ------- -------
At 1 January 168,164 29,712 166,798 29,457
Issued during the
year 2,570 517 1,366 255
------- ------- ------- -------
At 31 December 170,734 30,229 168,164 29,712
======= ======= ======= =======
On 17 January 2008, the Group placed equity share raising gross proceeds of
approximately £81.6 million (USD 160.8 million). More details are provided in
note 13.
11. Acquisitions of subsidiaries
During the year, Hikma acquired five businesses; Ribosepharm GmbH, Thymoorgan
GmbH Pharmazie Co. KG, Arab Pharmaceutical Manufacturing Co, Alkan Pharma SAE,
and Hikma Pharma Co. - Tunisia.
Due to the timing of the acquisitions, the accounting for these, except for
Ribosepharm, has been disclosed as provisional.
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 goodwill arising are set out
below:
Book value Fair value Fair value
adjustment
------- --------- -------
USD '000 USD '000 USD '000
Net assets acquired:
Product related
intangibles 3,291 (1,838) 1,453
Trade name - 5,529 5,529
Customer relationships - 17,789 17,789
Net deferred tax asset - 4,719 4,719
Property, plant and
equipment 285 - 285
Inventory 4,750 - 4,750
Other current assets 308 - 308
Accounts receivable, net 4,085 - 4,085
Cash and cash equivalents 2 - 2
Trade accounts payable (3,728) - (3,728)
Other current liabilities (4,594) - (4,594)
------- --------- -------
Net assets acquired (100%) 4,399 26,199 30,598
------- ---------
Goodwill 12,376
-------
Total consideration 42,974
=======
Satisfied by :
Cash 42,225
Directly attributable
costs 749
-------
42,974
=======
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 year amounted to USD 30,988,000
and USD 5,556,000 respectively.
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 net assets acquired in the transaction and the provisional goodwill arising
are set out below:
Book value Provisional Provisional
fair value Fair value
adjustment
--------- --------- -----------
USD '000 USD '000 USD '000
Net assets acquired:
Other related
intangibles - 2,882 2,882
Cash and cash
equivalent 47 - 47
Accounts
receivable,
net 743 - 743
Other current
assets 566 - 566
Inventories 1,124 - 1,124
Property,
plant and
equipment 7,781 - 7,781
Financial debts (46) - (46)
Capital lease
obligations-
current
portion (276) - (276)
Trade accounts
payable (621) - (621)
Other current
liabilities (395) - (395)
Income tax
provision (62) - (62)
Long-term
Financial
debts (2,426) - (2,426)
Capital lease
obligations-
long term (974) - (974)
Net deferred
tax
liabilities (154) (209) (363)
--------- --------- -----------
Net assets
acquired (100%) 5,307 2,673 7,980
--------- ---------
Goodwill 22,614
-----------
Total
consideration 30,594
===========
Satisfied by :
Cash 29,506
Directly
attributable
costs 1,088
-----------
30,594
===========
Cash
consideration 29,506
Cash and
cash equivalents
acquired (47)
-----------
Net cash
outflow
arising on
acquisition 29,459
===========
The revenue and net profit of Thymoorgan from the date of acquisition that is
included in the Group's income statement for the year amounted to USD 5,588,000
and USD 389,000 respectively.
The amount of goodwill recognised in relation to the Thymoorgan acquisition
relates to the value attributed to the employee know how within the business, as
Hikma do not have contractual or legal rights over these assets they do not meet
the identifiability criteria within IAS 38 and hence are reflected within
goodwill. In addition, the goodwill is also attributable to the anticipated
profitability of the distribution of the products manufactured into the new
Hikma oncology market.
Alkan Pharma SAE
On 6 September 2007, the Group completed the acquisition of 100% of the issued
share capital of Alkan Pharma SAE, subsequently re-named Hikma Pharma SAE for
cash consideration of USD 60,505,000. Hikma Pharma SAE develops, manufactures
and markets generic pharmaceuticals in both solid and liquid form for the
Egyptian market. Hikma Pharma Egypt's product portfolio spans a number of
therapeutic categories, including Alimentary and Metabolic, Musculoskeletal and
Infectious Disease.
The net assets acquired in the transaction and the provisional goodwill arising
are set out below:
Book value Provisional Provisional
fair value Fair value
adjustment
---------- ----------- ------------
USD '000 USD '000 USD '000
Net assets acquired:
Customer
relationships - 16,121 16,121
Product
related
intangibles - 1,476 1,476
In-process
research and
development - 1,055 1,055
Cash and cash
equivalents 1,856 - 1,856
Accounts
receivable,
net 7,088 - 7,088
Other current
assets 255 - 255
Inventories 3,559 - 3,559
Deferred taxes
asset 220 - 220
Property,
plant and
equipment 5,084 3,151 8,235
Financial debts (3,539) - (3,539)
Trade accounts
payable (1,324) - (1,324)
Other current
liabilities (1,521) - (1,521)
Income tax
provision (328) - (328)
Provisions (75) - (75)
Long-term
financial
debts (883) - (883)
Deferred tax
liabilities - (4,361) (4,361)
---------- ----------- ------------
Net assets
acquired (100%) 10,392 17,442 27,834
---------- -----------
Goodwill 33,232
------------
Total
consideration 61,066
============
Satisfied by:
Cash 60,505
Directly
attributable
costs 561
------------
61,066
============
Cash
consideration 60,505
Cash and cash
equivalents
acquired (1,856)
------------
Net cash
outflow
arising on
acquisition 58,649
============
The revenue and net profit of Hikma Pharma Egypt from the date of acquisition
that is included in the Group's income statement for the year amounted to USD
6,470,000 and USD 1,827,000 respectively.
Arab Pharmaceutical Manufacturing Company
On 27 December 2007, the Group acquired Arab Pharmaceutical Manufacturing
Company located in Jordan for cash consideration of USD 163,842,000. APM is a
well-established pharmaceutical company that develops and manufactures its own
branded generic products. APM also manufacturers and markets a number of
in-licenced products from leading global pharmaceutical companies. APM's
products are distributed in more than 25 countries and its 200-strong sales and
marketing team operates across 14 MENA markets.
The net assets acquired in the transaction and the provisional goodwill arising
are set out below:
Book value Provisional Provisional
fair value Fair value
adjustment
--------- -------- --------
USD '000 USD '000 USD '000
Net assets acquired:
Trade name - 225 225
Customer
relationships - 24,314 24,314
Product
related
intangibles - 9,152 9,152
In-process
research and
development - 3,521 3,521
Cash and cash
equivalents 470 - 470
Accounts
receivable,
net 25,511 - 25,511
Other current
assets 256 - 256
Inventories 24,806 - 24,806
Financial and
other non
current assets 411 - 411
Investment in
associated
companies 4,542 - 4,542
Property,
plant and
equipment 28,513 5,194 33,707
Financial debts (7,401) - (7,401)
Trade accounts
payable (3,568) - (3,568)
Other current
liabilities (7,449) - (7,449)
Income tax
provision (28) (28)
Provisions (2,577) - (2,577)
Deferred tax
liabilities - (4,962) (4,962)
--------- -------- --------
Net assets
acquired (100%) 63,486 37,444 100,930
--------- --------
Goodwill 66,480
--------
Total
consideration 167,410
========
Satisfied by :
Cash 163,842
Directly
attributable
costs 3,568
--------
167,410
========
Cash
consideration 163,842
Cash and
cash
equivalents
acquired (470)
--------
Net cash
outflow
arising on
acquisition 163,372
========
Hikma Pharma Co. - Tunisia
On 9 February 2007, the Group completed the acquisition of the remaining 51% of
the issued share capital of Hikma Pharma Co. - Tunisia 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. - Tunisia is the marketing and
promotion of medical products.
Full year impact of acquisitions:
If the acquisition of Thymoorgan, Hikma Pharma Egypt and APM had been completed
on the first day of the financial year, the Group's revenues for the year would
have been approximately USD 508,307,000 and the Group's profit attributable to
equity holders of the parent would have been approximately USD 72,405,000. The
appropriate additional contribution by entity for the period from the beginning
of the year up to the acquisition is illustrated in the table below:
Subsidiary Effect on Effect on
--------------------- Group's Group's profit
revenues ----------
----------
USD '000 USD '000
Thymoorgan 3,422 453
Hikma Pharma Egypt 11,722 2,570
APM 44,367 6,806
---------- ----------
59,511 9,829
========== ==========
As Ribosepharm's full year results were consolidated into the Group results for
the year, this disclosure is not applicable for Ribosepharm. The impact of Hikma
Pharma Co. - Tunisia is not considered material.
12. Net cash from operating activities
2007 2006
USD '000 USD '000
-------- -------
Profit before tax 83,789 75,596
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment 19,374 12,468
Intangible assets 4,059 1,329
Results from associated companies - (938)
(Gains) / losses on disposal of property, plant and
equipment and intangibles (202) 59
Movement on provisions 1,078 362
Deferred income (78) (59)
Cumulative effect of change in fair value of derivatives (256) 27
Stock options / awards granted 1,601 879
Finance income (2,029) (5,258)
Interest and bank charges 10,837 4,958
-------- -------
Cash flow before working capital 118,173 89,423
Change in trade and other receivables (29,453) (17,059)
Change in due from associate / related party - (896)
Change in other current assets (47) (290)
Change in inventories (29,065) (17,565)
Change in trade and other payables 17,774 610
Change in other current liabilities (6,112) 138
-------- -------
Cash generated by operations 71,270 54,361
Income tax paid (17,987) (19,397)
Finance income 2,029 5,258
Interest paid (10,166) (4,972)
-------- -------
Net cash generated from operating activities 45,146 35,250
======== =======
13. Subsequent events
On 17 January 2008, a total of 17.0 million new ordinary shares of 10 pence each
in the Group were placed at a price of 480 pence per share, raising gross
proceeds of approximately £81.6 million (USD 160.8 million). As part of the
Placing 5.23 million shares were placed with Darhold Limited at the Placing
Price and 332,663 shares were placed with the Darwazah family and other
connected individuals at the Placing Price. The total number of shares issued
represents 9.96% of Hikma's issued ordinary share capital prior to the placing.
The estimated cost of the placing was USD 2,530,000.
The Group used the proceeds from the placing to reduce borrowings incurred in
connection with its JD116.0 million (USD163.8 million) acquisition of Arab
Pharmaceutical Manufacturing Company thereby providing the Group with increased
flexibility to finance future growth.
This information is provided by RNS
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