24th Feb 2022 15:46
(Alliance News) - Shares in Hikma Pharmaceutical PLC fell on Thursday along with the rest of the London market, despite having no obvious exposure to a war in Ukraine.
The generic drugmaker was founded in Jordan, is now UK-based, and makes some 60% of its revenue in the US. What's more, Hikma reported strong annual results on Thursday and said it plans to make USD300 million in share buybacks.
Shares were trading 8.1% lower at 1,850.50 pence each in afternoon trade in London, giving Hikma a GBP4.29 billion market capitalisation. The wider FTSE 100 index was down just 3.6%.
Hikma posted revenue of USD2.55 billion in 2021, up 9.0% from USD2.34 billion in 2020, though pretax profit edged down 2.5% to USD544 million from USD558 million.
The generic drugmaker said the lower profit reflected a 74% increase in the amortisation of intangibles to USD73 million from USD42 million, due to new product launches.
Core pretax profit, however, grew 11% year-on-year to USD578 million from USD522 million, reflected by the "strong" performance of its business segments.
Hikma declared a final dividend of 36 cents, a 5.9% boost from a shareholder payout of 34 cents the year before. Its full-year dividend amounted to 54 US cents, up 8% from 50 cents.
It also launched a share buyback of up to USD300 million, saying this reflects its strong cash generation, balance sheet strength, and confidence in future growth prospects.
Looking ahead, Hikma expects Injectables division revenue growth in the low to mid-single digits, with core operating margin in the range of 35% to 37%. Injectables revenue rose by 7.8% in 2021 to USD1.05 billion, with a core operating margin of 37.5%, down from 38.6% in 2020.
Generics revenue growth is forecast in the range of 8% to 10% and core operating margin in the range of 24% to 25%. Generics revenue was USD820 million last year, up 10%. Its core operating margin was 24.6% in 2021, up from 21.6% in 2020.
"Hikma delivered strong financial results in 2021, marking another successful year of solid growth and continued strategic momentum," Chief Executive Siggi Olafsson said. "As we look to 2022 and beyond, I am most excited about how we are continuing to build and evolve our portfolio with important investments and new partnerships."
Hikma's 2021 results were in line with expectations, Peel Hunt said, but its guidance for 2022 was below what the market had estimated. Analyst Miles Dixon said 8% to 10% growth for Generics was short of market consensus of 17% and the broker's own estimate of 13%.
"We are not too concerned," Dixon said, noting the guidance shortfall was already discounted in the Hikma share price. Peel Hunt also already had 2023 revenue growth for Generics at just 5%.
Dixon noted that Peel Hunt recently upgraded Hikma shares to 'buy' on the basis of "underappreciated strategic execution", and "we see no reason to change our fundamental thesis".
Peel Hunt has a price target of 2,460p on Hikma shares, so a 33% premium to the current price.
By Abby Amoakuh; [email protected]; and Tom Waite; [email protected]
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