27th Jan 2005 11:00
AstraZeneca PLC27 January 2005 AstraZeneca PLCFourth Quarter and Full Year Results 2004 "Strong earnings performance for 2004; good earnings growth anticipated despite recent disappointments." Financial Highlights (before Exceptional Items) Group 4th 4th Actual CER Full Year Full Year Actual CER Quarter Quarter % % 2004 2003 % % 2004 2003 $m $m $m $m Sales 5,799 4,875 +19 +16 21,426 18,849 +14 +9 Operating Profit 1,319 849 +55 +68 4,770 4,111 +16 +15 Profit before Tax 1,345 869 +55 +66 4,866 4,202 +16 +15 Earnings per Share Before Exceptional $0.59 $0.38 +55 +68 $2.11 $1.78 +19 +18 Items Statutory (FRS3) $0.59 $0.38 +55 +68 $2.28 $1.78 +28 +27 Under IFRS/IAS $2.18 $1.76 +24 +23 All narrative in this section refers to growth rates at constant exchange rates (CER) • Strong financial performance in the fourth quarter; sales up 16 percent and operating profit up 68 percent. Fourth quarter operating profit includes provisions charged for ExantaTM ($71 million) and IressaTM ($85 million).• Sales for the full year increased by 9 percent to $21.4 billion on a strong sales performance of key growth products (up 30 percent to $11.2 billion).• Dividend increased by 18.2 percent to $0.94 per share for the full year.• NexiumTM sales were $3.9 billion for the full year, up 15 percent.• SeroquelTM sales increased by 33 percent to just over $2 billion for the full year.• CrestorTM sales for the full year totalled $908 million, up from $129 million in 2003.• SymbicortTM sales reached $797 million for the full year, up 32 percent.• ArimidexTM sales increased by 48 percent to $811 million for the full year on expanded usage in the treatment of early stages of breast cancer.• The Company anticipates EPS for 2005 in the range of $2.40 to $2.55 ($2.35 to $2.50 on IFRS basis). Sir Tom McKillop, Chief Executive, said: "We have delivered a strong fourthquarter performance, with EPS up 68 percent, which has resulted in AstraZenecaachieving an excellent financial performance in 2004, despite somedisappointment with recently introduced products. We are determined to restoreshareholder confidence and deliver good earnings growth in the coming yearsthrough strong sales growth from key products and continued delivery ofproductivity gains, whilst progressing the development pipeline." London, 27 January 2005Media Enquiries: Steve Brown/Edel McCaffrey (London) (020) 7304 5033/5034 Staffan Ternby (Sodertalje) (8) 553 26107 Rachel Bloom-Baglin (Wilmington) (302) 886 7858 Analyst/Investor Enquiries: Mina Blair (London) (020) 7304 5084 Jonathan Hunt (London) (020) 7304 5087 Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage/Jorgen Winroth (US) (302) 886 4065/(212) 579 0506 Interviews with Sir Tom McKillop, Chief Executive and Jonathan Symonds, ChiefFinancial Officer are available in video/audio and text on http://www.astrazeneca.com and http://www.cantos.com Business Highlights All narrative in this section refers to growth rates atconstant exchange rates (CER) unless otherwise indicated Full Year Sales for the full year increased 9 percent at CER, or 14 percent on an asreported basis (including positive exchange rate benefit of 5 percent). Salesoutside the US were up 7 percent. Sales in the US were up 10 percent; howeverestimated underlying sales growth in the US was 15 percent when adjusted forinventory movements in 2004 and in 2003. Combined R&D and SG&A expenditures were up 6 percent at CER (13 percent asreported) with the expected slowing in the rate of growth of these expenses inthe second half of the year. Operating profit was up 15 percent for the fullyear including provisions totalling $236 million in respect of ExantaTM andIressaTM taken in the second half of the year. Earnings per share for the yearwere $2.28 ($2.11 before the exceptional gains) compared with $1.78 in 2003. Global sales of key growth products reached $11,161 million for the full year(up 30 percent) and now comprise 52 percent of total company sales (versus 44percent in 2003). NexiumTM sales reached $3,883 million for the full year, up 15 percent. Salesoutside the US increased 29 percent to $1,167 million. Sales in the US reached$2,716 million, on strong underlying volume growth (up 20 percent). Pricing wasbroadly neutral in its impact for the full year. The 10 percent sales growthrate in the US for the full year was lower than underlying growth as a result ofinventory reductions in 2004, compared with inventory increases in 2003. Sales of Cardiovascular products increased by 17 percent for the full year,benefiting from CrestorTM sales of $908 million, including $543 million in theUS. Whilst this represents very strong growth, sales in the US were adverselyaffected by what the company consider to be unfounded challenges concerning thesafety of CrestorTM. The Company monitors the safety of all its productsextremely carefully, is firmly of the view that the safety profile of CrestorTMis in line with the other marketed statins, and is determined to restore goodgrowth in its market share. Other notable growth product performances include SymbicortTM (sales up 32percent to $797 million), ArimidexTM (sales up 48 percent to $811 million) andSeroquelTM (sales up 33 percent to pass the $2 billion annual sales milestone). Fourth Quarter Sales in the fourth quarter were $5,799 million, up 16 percent on a CER basis; apositive exchange benefit of 3 percent increased reported sales growth to 19percent. Sales outside the US were up 6 percent at CER. Sales growth in theUS was 30 percent; estimated underlying sales growth was around 20 percent whenadjusted for inventory movements (chiefly destocking of NexiumTM and Toprol-XL(TM)in the fourth quarter last year). US sales in the fourth quarter 2004 werebroadly in line with estimated underlying demand, as inventory managementagreements continue to reduce sales volatility. Disciplined management of expenditures in R&D and SG&A continued in the fourthquarter. In aggregate, these expenses were 4 percent lower than the fourthquarter 2003. Operating profit increased 68 percent. Provisions chargedagainst operating profit in the fourth quarter include $71 million in respect ofExantaTM inventories following the recent communication received from the FrenchRegulatory Authority, and $85 million related to IressaTM inventories and assetsfollowing the preliminary analysis of the ISEL study which did not demonstrate astatistically significant improvement in overall survival for IressaTM treatmentin patients with advanced lung cancer. Earnings per share in the fourth quarterwere $0.59 compared with $0.38 in 2003. Future Prospects The setbacks with ExantaTM and IressaTM are disappointing but the businessremains robust. The Company expects continued sales growth, including strongprospects for NexiumTM, SymbicortTM, SeroquelTM, ArimidexTM and, withrestoration of market share progress in the US, for CrestorTM. This salesgrowth coupled with disciplined cost management and productivity improvementsshould lead to earnings per share in the range of $2.40 to $2.55 on currentaccounting standards ($2.35 to $2.50 on an IFRS basis) in 2005, with goodearnings growth in the following two years. Disclosure Notice: The preceding forward-looking statements relating toexpectations for earnings and business prospects for AstraZeneca PLC are subjectto risks and uncertainties, which may cause results to differ materially fromthose set forth in the forward-looking statements. These include, but are notlimited to: the rate of growth in sales of generic omeprazole in the US,continued growth in currently marketed products (in particular CrestorTM,NexiumTM, SeroquelTM, SymbicortTM and ArimidexTM), the growth in costs andexpenses, interest rate movements, exchange rate fluctuations and the tax rate.For further details on these and other risks and uncertainties, see AstraZenecaPLC's Securities and Exchange Commission filings, including the Annual Reportand Form 20-F Information 2003. Sales All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Gastrointestinal Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003LosecTM/ PrilosecTM 446 528 -19 1,947 2,565 -30NexiumTM 1,106 836 +30 3,883 3,302 +15Total 1,576 1,387 +11 5,918 5,943 -4 • In the US, dispensed tablet volume for NexiumTM increased by 20 percent for the full year. The impact of price was broadly neutral. Actual sales growth of 10 percent reflects inventory movements. NexiumTM share of total prescriptions in the US PPI market was 27.1 percent in December. The increase of 1.8 points in market share versus last year outpaced all other PPI products.• US sales for NexiumTM in the fourth quarter were up 34 percent, which reflects inventory destocking in the fourth quarter of 2003. Estimated underlying growth was 14 percent. In November, NexiumTM received FDA approval for a new indication, for reducing the risk of gastric ulcers developing among at risk patients on continuous therapy with non-steroidal anti-inflammatory drugs.• Sales of NexiumTM outside the US were $1,167 million for the full year (up 29 percent) on a strong performance in many major markets. Sales in the fourth quarter were up 21 percent.• US sales for PrilosecTM for the full year were down 58 percent, in line with the decline in prescriptions.• Outside the US, sales of LosecTM were down 22 percent in the fourth quarter and 16 percent for the full year. Full year sales increased 24 percent in Japan. Cardiovascular Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003SelokenTM / Toprol-XL(TM) 381 246 +53 1,387 1,280 +6AtacandTM 240 207 +12 879 750 +10PlendilTM 94 157 -42 455 540 -20ZestrilTM 113 136 -20 440 478 -15CrestorTM 312 41 n/m 908 129 n/mTotal 1,321 990 +30 4,777 3,910 +17 • Prescriptions for Toprol-XL(TM) in the US increased by 18 percent for the full year, twice the rate of the beta-blocker market. Market share of total prescriptions in December was 28.1 percent, up 1.9 points versus last year.• Fourth quarter sales for Toprol-XL(TM) in the US were up 87 percent as a result of significant destocking in the fourth quarter 2003. This lifted the full year growth rate to 7 percent in the US, which is still below estimated underlying growth as a result of net stock movements year on year.• In connection with the patent litigation relating to Toprol-XL(TM) referred to in more detail on page 18, AstraZeneca has decided to file a terminal disclaimer of the Toprol-XL(TM) patents-in-suit over one of the other patents raised by the defendants, which will result in a revision of the expiration date of the Toprol-XL(TM) patents-in-suit from March 2008 to September 2007.• Sales of SelokenTM outside the US were up 5 percent in the quarter and 3 percent for the full year.• More than 70 percent of sales for AtacandTM come from markets outside the US, and in these markets sales continued to show good growth (up 20 percent in the fourth quarter and 18 percent for the full year). Sales in the US were down 5 percent in the quarter and 4 percent for the full year, in line with prescription trends. • In November the European Mutual Recognition Procedure approved AtacandTM for the treatment of chronic heart failure, based on the positive results of the CHARM clinical trial programme. The result of CHARM identified AtacandTM as the first angiotensin receptor blocker to reduce deaths and heart failure hospital admissions in chronic heart failure patients with impaired systolic function, whether or not they are taking an ACE-inhibitor.• The US FDA Cardiovascular and Renal Drugs Advisory Committee will review the proposed chronic heart failure indication for AtacandTM at its meeting on 24 February 2005.• CrestorTM has now been approved in 67 markets, and launched in 56. Up to the end of 2004, more than four million patients had been treated with CrestorTM worldwide, and more than 15 million prescriptions had been written. Sales for the full year reached $908 million.• CrestorTM sales in Europe were $74 million in the quarter and $231 million for the full year. Market share in the major markets has increased since our third quarter report. Prescription market share is now 10.3 percent in the Netherlands, and 3.8 percent in the UK. CrestorTM was launched in the spring of 2004 in France and Italy, and based on the latest data, prescription market shares are 4.4 percent in France and 8.0 percent in Italy.• CrestorTM sales in Canada for the full year were $98 million, and the latest market share of monthly total prescriptions was 12.1 percent.• In the US, market share progress has been more volatile, as a result of episodic media coverage of challenges to the CrestorTM safety profile, despite mounting evidence amassed from clinical trials experience and thorough analysis of post-marketing surveillance reports supporting the Company's view that the safety profile of CrestorTM is in line with other marketed statins. In late November, US Senate hearings related to Merck's Vioxx again fuelled news reports on CrestorTM and four other products, which interrupted market share progress. In the week ending 14 January, CrestorTM share of new prescriptions was 6.0 percent. Market share in the dynamic segment (new and switch patients) was 8.2 percent. The Company is determined to restore market share momentum, as it has done successfully on two previous occasions after similar adverse media coverage earlier in 2004.• The formal approval of CrestorTM in Japan, announced in January 2005, included a requirement for a post-marketing surveillance programme to be carried out in a hospital environment prior to a full-scale launch. Whilst the scope and duration of this programme is yet to be agreed, it is unlikely that significant sales of CrestorTM will be made in Japan in 2005.• In October 2004, the FDA decided that AstraZeneca had not established a positive benefit/risk profile for ExantaTM and did not approve ExantaTM for any of the indications sought. Discussions are ongoing with the FDA to determine if there is now a realistic prospect of bringing ExantaTM to the US market. In January 2005, the French Regulatory Authority (AFSSAPS) requested more information before ExantaTM can be considered for approval of long term use in Europe. Respiratory Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003SymbicortTM 219 172 +20 797 549 +32PulmicortTM 313 294 +4 1,050 968 +4RhinocortTM 93 92 - 361 364 -3AccolateTM 32 31 +3 116 107 +6OxisTM 25 29 -17 101 120 -24Total 722 661 +6 2,583 2,261 +8 • SymbicortTM sales were up 20 percent in the quarter and 32 percent for the full year on share gains in the fast growing combination product segment of the asthma and COPD markets.• On 15 January results from the STAY trial - one of the largest asthma studies ever conducted - were published in the American Journal of Respiratory and Critical Care Medicine. Data revealed for the first time that SymbicortTM Single Inhaler TherapyTM offers superior control in the main measures of asthma management versus traditional SymbicortTM fixed dose, including a significant 45 percent reduction in the frequency of severe exacerbations. A re-application to the European Union Mutual Recognition Procedure will be filed later in 2005, to include new data on the SymbicortTM Single Inhaler TherapyTM treatment concept from additional studies, including in total 13,000 patients with mild to severe asthma.• More than 40 percent of global PulmicortTM sales come from the sales of PulmicortTM RespulesTM in the US. A 17 percent increase in US PulmicortTM RespulesTM sales resulted in a 4 percent increase in worldwide sales for PulmicortTM.• Sales for RhinocortTM for the full year were down 3 percent as a result of a broadly flat performance for the US market for inhaled nasal steroids in general, including RhinocortTM Aqua. Oncology Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003CasodexTM 276 207 +29 1,012 854 +11ZoladexTM 242 239 -2 917 869 -1ArimidexTM 233 147 +54 811 519 +48IressaTM 80 92 -14 389 228 +65FaslodexTM 26 21 +24 99 77 +28NolvadexTM 35 40 -13 134 178 -31Total 895 750 +16 3,376 2,743 +16 • CasodexTM sales outside the US were up 12 percent for the quarter and 11 percent for the full year. Sales in Japan continue to grow strongly, up 24 percent for the year.• CasodexTM sales in the US in the fourth quarter were up 152 percent as a result of significant destocking in the fourth quarter last year. Reflecting the maturity of the market in advanced prostate cancer, underlying performance was essentially unchanged. Reported sales for the full year were up 9 percent.• ArimidexTM had another year of excellent sales growth, with sales up 48 percent to $811 million as a result of increased use in the adjuvant treatment of early breast cancer. The important role for aromatase inhibitors, such as ArimidexTM, in the treatment of this patient population was affirmed in the updated treatment guidelines recently published by the American Society of Clinical Oncology. As the only aromatase inhibitor indicated for primary adjuvant treatment (approved now in 80 countries) ArimidexTM is well positioned to benefit from continued adoption of these treatment guidelines in clinical practice.• Sales in the US for ArimidexTM for the full year were up 52 percent, in line with estimated underlying growth. New prescription market share for hormonal treatments for breast cancer reached 29 percent in December, up 7.5 points over last year. The Company now estimates that more than 50 percent of newly diagnosed patients with early breast cancer are receiving ArimidexTM as adjuvant treatment.• Sales in the US for ArimidexTM in the fourth quarter were up 89 percent, and reflect destocking in the fourth quarter last year.• Outside the US, sales of ArimidexTM were up 39 percent in the quarter and 46 percent for the full year. Full year sales were up 48 percent in Europe, and increased 41 percent in Japan.• IressaTM sales reached $389 million for the full year, including $176 million in the US and $136 million in Japan.• However, on 17 December the Company announced disappointing results from a preliminary analysis of the ISEL study that showed a difference in favour of increased survival with IressaTM, which failed to reach statistical significance in comparison with placebo in the overall population of patients with advanced lung cancer. Prospective sub-group analyses did show statistically significant differences in survival in favour of IressaTM in patients of East Asian origin and in non smokers. In January 2005, after consultation with the European Medicines Evaluation Agency, we withdrew the European Marketing Authorisation Application for Iressa. While sales will continue in certain markets with regulatory consent, such as Japan, the company has chosen to suspend promotion in the US and some other markets while the implications of this preliminary result are discussed with regulatory authorities and the full analysis of the ISEL study is completed. • Fourth quarter sales in the US for IressaTM were $17 million. In view of the regulatory uncertainties and the increased probability of returns of unused product, we have not recognised the revenue from sales made in the latter half of the quarter. Until the situation stabilises, revenue from IressaTM sales in the US will be recognised on confirmed patient usage rather than on wholesaler shipment. Neuroscience Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003SeroquelTM 562 428 +29 2,027 1,487 +33ZomigTM 89 104 -17 356 349 -3DiprivanTM 126 119 +4 500 458 +5Local anaesthetics 144 122 +14 542 466 +8Others 17 19 -11 71 73 -10Total 938 792 +16 3,496 2,833 +19 • SeroquelTM sales reached a new milestone in 2004, exceeding $2 billion in annual sales for the first time. Sales growth is well ahead of the atypical antipsychotic class in most major markets, fuelled by successful launches of the bipolar mania indication. • SeroquelTM sales in the US for the full year were up 33 percent, in line with prescription growth of 30 percent. In September, SeroquelTM became the leading atypical antipsychotic by new prescription market share. In December, new prescription share reached 27.5 percent, a class leading increase of 4.6 points over December 2003. • SeroquelTM sales in the US in the fourth quarter increased 22 percent, somewhat below estimated underlying growth of 34 percent as a result of net stock movements. • SeroquelTM sales outside the US increased 58 percent in the fourth quarter and 36 percent for the full year. For the year sales increased 45 percent in Europe, 44 percent in Canada, and 13 percent in Asia Pacific. • ZomigTM performance in the full year reflects a 10 percent decline in the US, partially offset by slight growth (up 2 percent) in the rest of the world. Geographic Sales Fourth Quarter CER % Full Year CER % 2004 2003 2004 2003US 2,657 2,044 +30 9,631 8,747 +10Europe 1,988 1,846 +1 7,649 6,709 +3Japan 412 356 +14 1,430 1,189 +11RoW 742 629 +16 2,716 2,204 +16 • Underlying growth in the US for the full year was estimated to be 15 percent when adjusted for net inventory movements in 2003 and 2004. Sales growth from CrestorTM, SeroquelTM, NexiumTM and ArimidexTM more than offset a further $500 million decline in sales of PrilosecTM for the year.• Sales in Europe were up 3 percent for the full year, with increased volume partially offset by declining realised prices. The launch roll out for CrestorTM and good growth for NexiumTM (up 26 percent), SymbicortTM (up 29 percent), ArimidexTM (up 48 percent) and SeroquelTM (up 45 percent) more than offset declines in Losec TM (down 25 percent) and other mature products.• Sales in Japan were up 11 percent for the full year on a strong performance in Oncology products (up 19 percent) and for LosecTM (up 24 percent). Operating Review All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Full Year Reported sales increased by 14 percent and operating profit by 16 percent. Atconstant exchange rates sales increased by 9 percent and operating profit by 15percent. Overall, exchange benefited EPS by around 1 cent with the weak dollaradding 5 percent to sales, but increasing costs, predominantly those denominatedin sterling and Swedish krona by around 7 percent. Over the year the euro was 9percent stronger and sterling and Swedish krona were stronger by 9 percent and11 percent respectively. The Inventory Management Agreements (IMAs) entered into at the beginning of 2004have successfully reduced inventory volatility and by the end of the yearinventories were close to target levels. Over the year inventories atwholesalers are estimated to have declined by around $150 million. Adjustingboth 2004 and 2003 for inventory movements, it is estimated that total companysales growth would increase from 9 percent to 11 percent. Operating margin increased by 0.5 percentage points from 21.8 percent to 22.3percent. Currency depressed operating margin by 0.9 percentage points implyingan underlying margin improvement of 1.4 percentage points. Gross margin decreased by 0.2 percentage points to 76.0 percent. Lower paymentsto Merck, amounting to 4.9 percent of sales for the year, benefited gross marginby 0.9 percentage points. The resulting underlying decline in gross margin of1.1 percentage points is entirely attributable to the ExantaTM provisions of$151 million and the IressaTM provisions of $85 million. R&D and SG&A combined grew by 6 percent (13 percent as reported) with R&Dgrowing by 3 percent and SG&A by 8 percent. These growth rates have slowedconsiderably during the year as product launch cost growth, which commenced inthe second half of 2003, has plateaued. This, together with continued strictcost control, has benefited full year margin by 1.1 percentage points. Otheroperating income added 0.4 percentage points to operating margin throughdisposal gains from some minor business activities and trade investments. Fourth Quarter Reported sales increased by 19 percent and operating profit by 55 percent. Atconstant exchange rates sales increased by 16 percent and operating profit by 68percent. In quarter four, the net effect of exchange on operating profit was negative andreduced EPS by 4 cents mainly as a result of hedging benefits seen in quarterfour of 2003 which were not repeated. Compared with quarter four last year, theeuro was 9 percent stronger than the dollar, benefiting sales, while the Swedishkrona and sterling were 9 percent stronger and 8 percent stronger respectively,increasing costs. As a result of the successful operation of the IMAs, sales in the fourth quarterof 2004 in the US were largely unaffected by inventory movements. In contrast,wholesaler inventories declined by some $150 million in the fourth quarter of2003. Operating margin for the quarter of 22.7 percent was 5.3 percentage points abovelast year; currency reduced operating margin by 2.1 percent. Gross margin was 3.2 percentage points lower than the fourth quarter last yearat 73.7 percent. Payments to Merck at 5.0 percent of sales were 0.3 percentagepoints higher than the fourth quarter last year. Excluding Merck, underlyinggross margin declined by 2.9 percentage points of which the ExantaTM and IressaTM provisions represented 2.6 percentage points. ExantaTM provisions in thequarter were $71 million and IressaTM provisions were $85 million. In aggregate, R&D and SG&A expenses of $2,993 million were 4 percent lower thanlast year. In comparison to the fourth quarter last year, R&D and SG&A combinedadded 10.4 percentage points to operating margin, with the benefit contributedequally by R&D and SG&A. In comparison to the fourth quarter last year, R&Dexpenditure decreased by 12 percent mainly through reduction in level ofcollaboration spend and a more even phasing across the year. SG&A growth wasrestricted to 1 percent growth, due mostly to lower promotional spend and costcontrol. Exceptional Items The disposal of the Advanta joint venture was completed on 1 September 2004 for$284 million. All payments due have now been received. The profit on disposal,after transaction costs and warranty and indemnity provisions, was $219 million.There is no tax charge arising on disposal; tax relief of $9 million has beenreflected in respect of associated disposal costs. An agreement has been reached with US tax authorities that a portion of the $355million ZoladexTM settlement, recorded as an exceptional item in 2002, isdeductible for tax purposes. Consequently, an exceptional tax credit wasrecorded in quarter three of $58 million in relation to this. Interest and Dividend Income Net interest and dividend income for the full year was $96 million (2003 $91million), and $26 million in the fourth quarter (2003 $20 million). Aspreviously reported, net interest includes a gain arising from the close out ofan interest rate swap. Taxation Excluding exceptional items, the effective tax rate for the full year 2004 was27.1 percent compared with 27.2 percent for 2003. The post exceptional tax rateis 24.7 percent for the year due to the ZoladexTM exceptional tax credit and thegain on the sale of Advanta shares. It is anticipated that the effective taxrate for 2005 will increase to around 29 percent as a result of the mix ofoverseas profits and the impact of IFRS. Thereafter, the effective tax rate isanticipated to decrease to approximately 28 percent, again due to the mix ofoverseas profits. As previously reported, a tax credit of $357 million in respect of currencylosses arising in 2000 was taken to reserves and recognized in the Statement ofTotal Recognised Gains and Losses. Cash Flow Cash generated from operating activities before exceptional items was $6,069million compared with $4,617 million in 2003. The increase in cash is due tohigher profits and minimal working capital outflows of $9 million compared to$1,101 million in 2003. In 2003 all three components of working capital led tosubstantial cash outflows whereas in 2004 there were inflows on inventories($129 million) and creditors ($71 million) offset by an outflow on debtors ($209million). The reduction in inventory was due partly to tight operationalmanagement and high sales in the second half of 2004 but also in part to theExantaTM and IressaTM provisions. The increase in creditors was seen mainly intrade creditors. Debtors increased over the year as sales in the fourthquarter, and particularly December, were substantially higher than in the sameperiod in 2003. Cash flow from working capital in the fourth quarter wasnotably strong due mainly to inventories which, when compared with September2004, fell for the reasons above and debtors, which also fell because sales inDecember were lower than in September. Cash expenditure on exceptional items was $8 million compared with $391 millionin 2003, which included $355 million settlement in respect of the ZoladexTMinvestigation. Tax paid was $1,246 million, which is $360 million higher than last year. Thiswas due to larger tax credits in relation to prior year foreign currency lossesarising from inter-company balances and other deductions arising in 2003.Capital expenditure of $1,296 million is $301 million lower than last year.Proceeds from the sale of the joint venture interest in the Advanta seedsbusiness and the Durascan divestment totalled $355 million compared with $80million in 2003 from the sale of Marlow Foods. Accordingly, free cash flow(being cash flow before returns to shareholders and financing) for the year was$3,932 million compared with $1,899 million in 2003. Share repurchases totalled $2,212 million and external dividends paid of $1,378million were $156 million higher than in 2003. After the $862 million increasein short term investments and $727 million financing inflows which includes $746million new financing in the form of a US bond, net cash funds have increased by$478 million from the beginning of the year to stand at $3,974 million at 31December 2004. Dividends and Shareholder Return The Board has recommended a 19.4 percent increase in the second interim dividendto $0.645 (34.3 pence, 4.497 SEK) to be paid on 21 March 2005. This brings thefull year dividend to $0.94 (50.3 pence, 6.697 SEK) an increase of 18.2percent. The Board keeps under continuous review its shareholders' return strategy andrestates its intention to grow dividends in line with earnings while maintainingdividend cover in the two to three times range. The Board also believes thatthe share buy-back programme is a key part of shareholder return that addressescash flow and potentially surplus capital. In the absence of strategic uses forcash, the Board expects to distribute the free cash flow generated over the nextthree years. Current net cash balances of $4.0 billion fully cover theprincipal obligation in this period - the possibility that Merck exercises itsoption in 2008, the minimum obligation for which is $3.3 billion. It isanticipated that share repurchases in 2005 will not be less than 2004 levels. Share Repurchases During the quarter 16.6 million shares were repurchased for cancellation at atotal cost of $662 million which brings the total for the year to 50.1 millionshares at a total cost of $2,212 million. The total number of shares that remains in issue at 31 December 2004 is 1,645million. Updated R&D Pipeline Table An updated R&D pipeline table is appended to this press release and is alsoavailable on the Company's website, www.astrazeneca.com, under information forinvestors. IFRS Restatements AstraZeneca is required to adopt International Financial Reporting Standards(IFRS) and International Accounting Standards (IAS) from 1 January 2005. Underthese standards, EPS for 2004 (before exceptional items) would be $2.01 (areduction of 10 cents compared to UK GAAP) compared to 2003 EPS of $1.76 (areduction of 2 cents compared to UK GAAP). The effect of IAS adoption isgreater in 2004 than in 2003 principally because of gains on financialinstruments that are not expected to recur. Subject to unforeseen market valueadjustments, the impact of IFRS in 2005 is likely to reduce EPS by around 5cents. A summary of the impact of these adjustments is shown on page 15 of this pressrelease. More details are available on the Company's website,www.astrazeneca.com. Calendar28 April Announcement of first quarter results28 April Annual General Meeting28 July Announcement of second quarter and half year results27 October Announcement of third quarter and nine months results Sir Tom McKillop Chief Executive This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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