Final Results

17th Mar 2009 07:00



Hikma Pharmaceuticals PLC

Preliminary results announcement

for the year ended 31 December 2008

LONDON, 17 March 2009 - 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 2008.

Group performance	2008	2007	% change
	$m	$m
Revenue	580.7	448.8	+29.4%
EBITDA*	113.8	115.8	-1.7%
Operating profit	80.7	92.4	-12.7%
Profit attributable to shareholders	57.1	62.6	-8.7%
Adjusted profit attributable to shareholders**	67.4	64.5	+4.5%
Diluted earnings per share (cents)	29.6	35.4	-16.4%
Operating cash flow	75.0	53.3	+40.7%
Dividend per share (cents)	7.5	7.5	-

* Reported profit before interest, tax, depreciation and amortisation

** Profit before the amortisation of intangible assets (other than software) and exceptional items

Highlights 

Commenting on the 2008 results and outlook, Said Darwazah, Chief Executive of Hikma, said:

"Hikma achieved another year of outstanding growth in its Branded and Injectables businesses, with 63% of Group revenues generated in the Middle East and North Africa. The acquisitions of APM and Hikma Egypt were significant contributors, benefiting from Hikma management and marketing expertise to grow revenues by 38% and 58% respectively. Following the poor performance of our US Generics business in the first half of 2008, we made a number of management and other changes that returned the business to profitability in the final quarter. We also delivered a 41% increase in operational cash flow from our focus on working capital management.

"Given the prevailing economic conditions in 2009, we are expecting Group revenues to grow by 10-15%, with an improvement in our gross margin of 1-2%. The higher end of these ranges is based on constant exchange rates while the lower end can be expected if the 2009 average exchange rate is at the level prevailing in mid-March.  Our solid balance sheet and the improvements we are achieving in operating cash flow will give us the financial flexibility to pursue strategic acquisitions that will enhance our strong organic growth. 

"We are confident that the proven strength of Hikma's business model will enable us to deliver a strong performance in 2009 and the years ahead."

An interview with Said Darwazah, Chief Executive, 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.

Enquiries:

Hikma Pharmaceuticals PLC  Tel: +44 (0)20 7399 2760

Said Darwazah, Chief Executive

Bassam Kanaan, Chief Financial Officer

Peter Laing, Investor Relations

Brunswick Group Tel: +44 (0)20 7404 5959

Jon Coles / Justine McIlroy

  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 2008, the Group achieved revenues of $581 million (2007 $449 million) and profit attributable to shareholders was $57 million (2007 $63 million). For news and other information, please visit www.hikma.com.

Forward looking statements

Certain statements in this announcement are forward-looking statements - using words such as "intends", "believes", anticipates" and "expects". Where included, these have been made by the Directors in good faith based on the information available to them up to the time of their approval of this annoucement. By their nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements, and should be treated with caution. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described in this announcement. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak as only of the date of the approval of this announcement.

Except as required by law, the Company is under no obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements.

  Business and Financial Review

Group performance

Revenue for the Group increased by 29.4% to $580.7 million, compared with $448.8 million in 2007. The revenue contribution from Hikma Egypt (previously Alkan), APM and Thymoorgan - the acquisitions completed since the beginning of 2007 - was $102.5 million. Underlying organic revenue growth (excluding the impact of these acquisitions) was 9.5%, driven by strong performances in both the Branded and Injectables businesses but offset by a 14.9% decline in revenues in our US Generics business.

As a result, the Branded and Injectables businesses accounted for 81% of revenues in 2008 compared with 71% in 2007.

Revenue by segment	2008	2007
Branded	55.3%	44.3%
Injectables	25.7%	27.0%
Generics	18.2%	27.7%
Revenue by region
MENA	63.0%	51.0%
US	22.5%	32.0%
Europe and rest of world	14.5%	17.0%

Branded Pharmaceuticals

The Branded business is our largest business in terms of revenue and operating profit. Branded revenues increased by 61.3% to $320.8 million in 2008, compared with $198.9 million in 2007, reflecting strong organic growth of 22.4% enhanced by the acquisitions we made in the MENA region in 2007. Trading continued to be strong across all our MENA markets, particularly Algeria, Jordan, Saudi Arabia and the other Gulf Cooperation Council (GCC) countries.

Both of the acquisitions made in the MENA region in 2007 performed ahead of our expectations in 2008.

Sales at APM, acquired in December 2007, grew by 38% to $61.3 million in 2008 compared with reported sales of $44.4 million in 2007. This performance demonstrates how successful the integration process has been. We have improved APM's organisational structure by creating a new sales operation and logistics, supply chain, budgeting and production planning functions and we have integrated the Hikma and APM distribution channels in many markets. These changes are bringing synergies and will reduce future sales and marketing expenses. In order to improve working capital management, we have applied Hikma's standard terms of trade wherever possible. We have upgraded APM's manufacturing facilities to bring them into line with Hikma's demanding levels of quality and compliance standards. Through this process we nearly doubled production on most lines. Further capacity upgrades were made towards the end of the year that required a scheduled suspension of production at the APM plant for almost two months. Production has since restarted.

Sales at Hikma Egypt, acquired in September 2007, grew by 58% to $28.8 million in 2008 compared with $18.2 million in 2007. This acquisition significantly enhanced our exposure to the fast-growing Egyptian market. Hikma Egypt has now been fully integrated, with key functions such as finance, marketing and R&D incorporated into Hikma's global systems. We have also made significant process improvements, nearly doubling production output and units sold compared with 2007. We also made a significant investment in sales and marketing to launch the Hikma brand in the Egyptian market and to promote key products.

In 2008 our largest markets were Algeria, Saudi Arabia, Jordan and Egypt. More focused sales and marketing efforts have helped to drive customer demand and increase sales across these and most other Branded markets. Significant attention was paid to promoting new and recently launched products, strengthening our market position in key therapeutic areas and building brand recognition.

As a result of these efforts, Hikma is now the fifth largest pharmaceutical manufacturer in the MENA region, with a market share of 3.4%2. For the top nine retail pharmaceutical markets in MENA in which we operate, the total private market was worth approximately $7.3 billion in 2008 with year on year growth of 18.5%.

Algeria is the largest private pharmaceutical market in the MENA region. The private market in Algeria was worth over $1.7 billion in 2008, when it grew at a rate of over 30%. In 2008, we raised our market share in Algeria to 6.4% compared with 6.1% in 2007. We are now the fourth largest pharmaceutical manufacturer and the largest generic pharmaceutical manufacturer by value in the Algerian market.

Egypt is currently the second largest private pharmaceutical market in MENA. In 2008 it grew by 19% and was worth over $1.6 billion in retail sales. Our market share in Egypt, while still well below our strategic target of 5%, has increased significantly and currently stands at 1.4%. We expect further strong growth in 2009 as we launch more Hikma products through our Egyptian sales network.

Saudi Arabia is the third largest private pharmaceutical market in MENA. The retail market was worth in excess of $1.5 billion in 2008 when it grew by 6%. The acquisition of APM in 2007 has helped to strengthen Hikma's position in the Saudi market where we are the fifth largest pharmaceutical manufacturer, with a market share in value terms of 4.9% in 2008, compared with 4.8% in 2007. 

Although the Jordanian pharmaceutical market is still comparatively small, we remain the clear market leader with a market share of 12.4%, up from 7.7% in 2007, and more than twice the share of the second largest pharmaceutical company operating in this market. The increase in our market share is due to our expanding product range and the consolidation of APM.

 

_____________________ 2 Source of all market and market share data: IMS Health, Moving Annual Totals as of December 2008 for the top 9 MENA markets in which Hikma operates (Algeria, Egypt, Jordan, Kuwait, Lebanon, Morocco, Saudi Arabia, Tunisia and the United Arab Emirates). These market figures are for retail pharmacy sales only and exclude hospital sales and government contracts that can be significant in certain markets

 

In-licensing remains an important part of our growth strategy in the MENA region and our portfolio of licensed products continues to deliver excellent results. In 2008 revenue from our 40 in-licensed products (including in-licensed products that we acquired from APM and Hikma Egypt) grew by 63% and accounted for one third of total Branded sales. Our long-term strategic target is to raise this proportion to 50%. We are confident that our strong market position in the MENA region and our excellent track record with licensed products will continue to attract leading multinational partners. This is demonstrated by the excellent performance of the Takeda products that entered our portfolio in 2007. Sales of the antidiabetic Actos®, the antihypertensive Blopress® and the other products in-licensed from Takeda in 2007 grew by more than 64% in 2008 as we captured greater market share.

Gross profit in the Branded business increased by 60.0% to $172.8 million, compared with $108.0 million in 2007. The Branded business's gross margin remained stable at 53.9%, compared with 54.3% in 2007.

Branded operating profit increased by 41.8% in 2008 to $87.5 million. Operating margin in the Branded business was 27.3% in 2008, down from 31.0% in 2007. On an adjusted basis, excluding the amortisation of intangible assets and exceptional items, operating profit margin in 2008 was 29.2% against 31.2% in 2007. The decline in margin primarily reflects the additional investment in sales and marketing activities and research and development to support the strong growth in Branded sales. This investment in sales and marketing relates in particular to the promotion of key products including the new in-licensed products acquired from APM.

In 2008, the Branded business received 91 regulatory approvals, including 17 new products in Jordan and Egypt, 67 in other MENA markets and 7 in Europe and the rest of the world. In line with our strategic objectives for the Branded business, we launched a total of 6 new products in 2008, 4 in Jordan and 2 in Egypt. The total number of Branded sales and marketing staff operating across our 17 MENA markets at year end was 1090, including 296 in Egypt, 222 in Saudi Arabia, 149 in Jordan and 164 in Algeria.

Injectable Pharmaceuticals

Revenue in our global Injectables business increased by 23.2% to $149.3 million. Excluding the contribution from the acquisitions of Thymoorgan and APM that we made in 2007, organic growth was 14.2%, driven by a strong performance in the MENA region and our growing business in the US. 

Injectables revenue grew by 43.0% in the MENA region with Jordan and Algeria performing particularly well. This growth is attributable to the strength of our product portfolio, the quality of our sales force and a 50% increase in attractive tender business. The MENA region now represents 36.6% of Injectables sales, compared with 31.5% in 2007. We continue to see excellent prospects for growth in Injectables sales in the MENA region which we expect to account for an increasing percentage of our future Injectable sales.

Despite intensifying competition in the US injectable market, our US Injectables sales grew by 29.2% compared with 2007 and represented 16.7% of our global Injectables business. We saw strong demand in both our own product and private label business in the US. We benefited from a number of new product launches that resulted in a US product portfolio that was significantly more diverse than in 2007. We are also achieving higher sales volumes across a broader portfolio of cephalosporin antibiotics and have seen excellent growth in some of our liquid products. 

In Europe, which includes our oncology business, we saw increasing pricing pressure in the German market. Overall European injectable sales reached $69.8 million, compared with $63.7 million in 2007, an increase of 9.6%. Excluding $7 million of non-recurring sales in 2007 from two in-licensed products whose licences, as we had expected, have expired, European injectable sales rose by 14%. Europe now represents 46.7% of our Injectables business compared with 52.5% in 2007. We have appointed a new management team for the oncology business that will be expanding our product portfolio and also marketing these products in markets outside Germany in 2009, particularly in the MENA region.

Injectables gross profit increased by 17.0% to $63.4 million, compared with $54.2 million in 2007, but gross margin decreased to 42.4% compared with 44.7% in 2007. The decrease in gross margin reflects, in part, the inclusion for a full year of the Thymoorgan contract manufacturing business that has a lower gross margin than the rest of Hikma's Injectables business. It also reflects the consolidation of some low margin injectable sales contracts at APM that will not be renewed on completion. Excluding the acquisitions of Thymoorgan and APM, the Injectables gross margin was 45.1%, slightly below the 2007 level of 45.7%.

Injectables operating profit increased by 8.0% to $22.1 million, compared with $20.5 million in 2007. Injectables operating margin decreased to 14.8% in 2008, down from 16.9% in 2007, primarily as a result of the consolidation of APM's lower margin injectable sales. Excluding the consolidation of APM and amortisation of intangibles (excluding software), the Injectables operating margin was slightly higher at 17.3%.

During 2008, the Injectables business received 60 regulatory approvals across all markets, including 37 in the MENA region, 16 in Europe and the rest of the world and 7 ANDA approvals in the US. A total of 61 products were launched, including 9 new products.

Generic Pharmaceuticals

Our Generics business is entirely focused on the US market for oral generics. Sales of injectable generics in the US market are included in our Injectables segment.

Revenue in our Generics business decreased by 14.9% to $105.7 million, compared with $124.2 million in 2007. This decline resulted initially from lower sales of the antihypertensive lisinopril following the completion, in December 2007, of our contract to supply the Department of Veterans Affairs. The absence of these revenues in 2008 was exacerbated by continued price erosion across other product lines and lower than expected demand for new products. In addition, as reported in our interim results, we made a one-off provision of $4.8 million related to revisions in our estimates for chargebacks, rebates and returns. 

All of these factors, as well as higher than expected production and API costs, led to a 67% decline in the Generics gross profit to $19.3 million, compared with $58.6 million in 2007. The Generics gross margin was 18.3%, compared with 47.2% in 2007. Consequently, the Generics business realised an operating loss of $5.8 million compared with an operating profit of $31.6 million in 2007.

We focused on stemming the losses in this business as quickly as possible and made several management changes. These included the appointments of a new General Manager and a new Vice President, Sales and Marketing for all US operations.

This strengthened management team undertook a comprehensive review of the business in the second half of 2008 and identified a number of approaches to improving operating performance. Following an in-depth examination of profitability by product and by customer, we withdrew from the supply of some low margin products, implemented price increases where possible, secured lower cost sources of APIs, improved our manufacturing and distribution efficiencies, raised service levels and renegotiated our standard terms of trade.

We are pleased to report that these actions resulted in the Generics business returning to profitability in the closing months of 2008, although the profit achieved was not sufficient to offset losses incurred earlier in the year. We expect profitable trading to be sustained during 2009 as we continue to focus on implementing these actions. We have also noted a recent improvement in the prices of certain products in the US following the FDA-enforced withdrawal of some non-US suppliers in 2008.

During 2008, the Generics business received three regulatory approvals, of which two were new products. A total of seven products were launched, including two new products.

Other businesses 

Our Other businesses segment consists primarily of Arab Medical Containers, a manufacturer of plastic specialised packaging, and International Pharmaceuticals Research Centre, which conducts bio-equivalency studies. These businesses, which supply third parties as well as other Group operations, had aggregate revenues of $4.8 million in 2008, compared with aggregate revenue of $4.5 million in 2007. This represented 0.8% of Group revenues in 2008.

These Other businesses delivered an operating loss of $3.7 million in 2008, compared with an operating loss of $3.4 million in 2007. This loss can be attributed primarily to corporate research and development costs that cannot be allocated to specific business segments.

Research & Development3

The Group's product portfolio continues to grow. During 2008, we added 17 new products to the Group portfolio that now includes 369 products in 767 dosage strengths and forms. We manufacture and/or sell 40 of these products under licence.

In 2008, Hikma received 154 regulatory approvals of which 91 approvals were for the Branded business, 60 for the Injectables business and 3 for the Generics business. Over the same period, 168 products and line extensions were launched across the Group, including the 17 new pharmaceutical compounds not previously marketed.

_____________________ 3Products 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.

 

	Filings in 2008	Filings in 2008 for new products and new line extensions	Filings in 2008 for new products only	Total pending approvals as of 31 December 2008	Pending approvals for new products and new line extensions as of 31 December 2008	Pending approvals for new products only as of 31 December 2008
Generics
United States	4	4	2	33	33	25
Branded
MENA	169	32	16	386	41	23
Europe and Rest of World	16	16	6	37	37	14
Injectables
United States	8	8	6	32	32	21
MENA	26	12	7	145	17	11
Europe and Rest of World	10	9	9	14	13	13
Group total	233	81	46	647	173	107

To ensure a continuous flow of new products from our pipeline, we submitted 46 regulatory filings for new products, and a total of 233 submissions across all regions and markets. As of 31 December 2008, we had a total of 107 pending approvals for new products and 647 pending approvals across all regions and markets.

We estimate the approximate addressable market for our portfolio of pending approvals to be approximately $24 billion, based on estimates by IMS Health for the 2008 full year sales of the currently marketed equivalent products in the markets covered by the pending approvals. 

At 31 December 2008, we had a total of 111 new products under development. We expect the majority of these to receive several marketing authorisations for differing strengths and/or product forms over the next few years.

Financial performance 

The Group's gross profit increased by 15.8% to $256.5 million, compared with $221.5 million in 2007. Group gross margin was 44.2%, compared with 49.4% in 2007, primarily due to the impact of the significant decline in gross profit in the Generics business.

Group operating expenses rose by 36.1% to $175.8 million, compared with $129.1 million in 2007. This reflects primarily a strategic increase in sales and marketing expenses and control of our general and administrative and research and development costs during the year. Excluding acquisitions, operating expenses grew by 19.7%. On an adjusted basis4, operating expenses as a percentage of sales increased by 0.3 percentage points to 28.5%, up from 28.2% in 2007.

_____________________

4Before the amortisation of intangible assets (other than software) and exceptional items, which include acquisition integration costs and revisions to estimates for charge-backs, rebates and returns

Sales and marketing expenses increased by 48.5% to $90.6 million, largely reflecting the consolidation of APM and Hikma Egypt and the higher amortisation costs related to intangible assets arising on these acquisitions. Excluding the 2007 acquisitions of APM, Hikma Egypt and Thymoorgan, sales and marketing expenses rose by 19.8% as we invested in the promotion of our leading own-brand and in-licensed products. We expect to see further benefits from this in 2009. Sales and marketing expenses represented 15.6% of Group revenue in 2008, compared with 13.6% in 2007. We expect sales and marketing expenses as a percentage of sales to begin to decline slightly in 2009.

The Group's general and administrative expenses increased by 23.6% to $56.9 million, compared with $46.0 million in 2007. This increase partially reflects the consolidation of APM, Hikma Egypt and Thymoorgan and includes exceptional acquisition integration costs of $1.6 million. Tighter control of corporate general and administrative costs meant that there was only a slight increase of $1.3 million, bringing total corporate general and administrative costs to $19.4 million, compared with $18.0 million in 2007. Overall, general and administrative expenses represented 9.8% of Group revenue in 2008, compared with 10.3% in 2007.

Investment in R&D increased by 14.6% to $22.2 million, with total investment in R&D now representing 3.8% of Group revenue, compared with 4.3% in 2007. This decline mainly reflects an increase in the proportion of our development projects in the MENA region where development costs tend to be lower than in the USA or Europe. It also reflects a strategic shift towards the acquisition of product files and related product intangibles.

Other net operating expenses, consisting mainly of provisions against slow moving items of $8.6 million partially offset by foreign exchange gains of $1.2 million, were $6.2 million, compared with $2.8 million in 2007. The major reason for the increase in 2008 was the provision that we made in our US Generics business for slow moving items due to deteriorating market conditions.

Operating profit for the Group decreased by 12.7% to $80.7 million, compared with $92.4 million in 2007, and Group operating margin decreased to 13.9%, compared with 20.6% in 2007. This decline reflects, for the most part, the loss incurred in our Generics business where operating profit fell by $37.4 million from 2007 to 2008.

Adjusted operating profit for the Group, defined as operating profit before the amortisation of intangible assets (other than software) and exceptional items, which include acquisition integration costs and revisions to estimates for charge-backs, rebates and returns, was largely unchanged in 2008 at $94.3 million, compared with $95.1 million in 2007. These exceptional items include a $4.8 million one-off provision for revisions to our estimates for chargebacks, returns and rebates in our US Generics business and $1.6 million of acquisition integration costs associated with the acquisition of APM and Hikma Egypt. Adjusted operating profit margin was 16.1%, compared with 21.2% in 2007. This decline is attributed primarily to the difficulties experienced by our Generics business in the US but also to planned investment in sales and marketing related to new product launches in the Branded business.

Finance income and costs

Net financing cost for the year was $16.7 million compared with $8.8 million during 2007. The increase is due to higher average debt levels during 2008 compared to 2007.

Profit before tax

Profit before taxes for the Group decreased by $19.8 million, or 23.6%, to $64.0 million, compared with $83.8 million in 2007.

Tax

The Group had a tax expense of $6.9 million in 2008. The effective tax rate was 10.8%, a year on year decrease of 12.7 percentage points. This improvement reflects the absence of profits in the USA and a further increase in the proportion of sales and profits generated in the MENA region.

Minority interest

Hikma's minority interest was nil in 2008, compared with $1.6 million in 2007. This was primarily due to a decline in the profitability of Hikma's 51% owned subsidiary in Sudan. 

Profit for the year

The Group's profit for the year attributable to equity holders of the parent decreased by 8.7% to $57.1 million for the year ended 31 December 2008, compared with $62.6 million in 2007. 

Adjusted profit for the year

Excluding the amortisation of intangible assets (excluding software) and exceptional items, which include integration costs and revisions to estimates for charge-backs, rebates and returns, the Group's adjusted profit for the year attributable to equity holders of the parent increased by 4.5% to $67.4 million for the year ended 31 December 2008, compared with $64.5 million in 2007. 

Earnings per share 

Diluted earnings per share for the year to 31 December 2008 were 29.6 cents, down by 16.4% from 35.4 cents in 2007.

Dividend

The Board has recommended a final dividend of 4.0 cents per share (approximately 2.8 pence per share), which will make the dividend for the full year of 7.5 cents per share, the same amount paid in 2007. The proposed final dividend will be paid on 2 June 2009 to shareholders on the register on 1 May 2009, subject to approval at the Annual General Meeting.

Operating cash flow and investment

Net cash inflow from operating activities was $75.0 million, compared with $53.3 million in 2007. The previously reported 2007 operating cash flow has been increased due to the reclassification of finance income and interest paid by £8.1 million. This improvement came as a result of our focus on effective working capital management where, excluding acquisitions, receivable days decreased by 9 days and inventory days decreased by 21 days.

Net cash used for investing activities was $66.1 million, compared with $348.9 million in 2007. The latter included just under $300 million of expenditure on acquisitions ($71.7 million for Ribosepharm and Thymoorgan, $58.7 million for Alkan Pharma in Egypt and $163.4 million for Arab Pharmaceutical Manufacturing in Jordan). Capital expenditure amounted to $56.2 million, compared with $50.4 million in 2007. This expenditure related 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 enhancing our flexibility to finance future growth. 

Outlook

Given the prevailing economic conditions, in 2009 we are expecting Group revenues to grow by 10-15%, with an improvement in our gross margin of 1-2%. This will be driven by organic growth and supported by the acquisitions and investments we have made over the past two years. The higher end of these ranges is based on constant exchange rates while the lower end can be expected if the 2009 average exchange rate is at the level currently prevailing5.

With over 60% of sales now generated in the MENA region, we should continue to benefit from the growth in that pharmaceutical market, which remains much higher than the global market. Our share of the MENA market should also continue to increase as we further penetrate existing markets, expand into new markets and grow our portfolio of own-brand and in-licensed products.

With new products and new markets, we believe that there remains considerable scope for us to grow our global Injectables business, particularly in the MENA region where we will be starting to launch our portfolio of oncology products. In our US Generics business, which returned to profitability in the fourth quarter of 2008, we will continue to implement the changes that helped to turn this business around and benefit from improving market conditions in the US.

_____________________ 

 

Hikma Pharmaceuticals PLC

Consolidated income statement

for the year ended 31 December 2008

		Notes		2008		2007
				USD '000		USD '000
Continuing operations
Revenue		2		580,656		448,796
Cost of sales		2		(324,174)		(227,263)
Gross profit		2		256,482		221,533
Sales and marketing costs				(90,560)		(61,021)
General and administrative expenses				(56,853)		(46,012)
Research and development costs				(22,172)		(19,342)
Other operating expenses (net)				(6,215)		(2,760)
Total operating expenses				(175,800)		(129,135)
Adjusted operating profit				94,326		95,061
Exceptional items :
- Revision to estimates for chargebacks, returns and rebates		3		(4,800)		-
- Acquisition integration costs		3		(1,629)		-
Intangible amortisation*		3		(7,215)		(2,663)
Operating profit				80,682		92,398
Finance income				817		2,029
Finance expense				(17,545)		(10,837)
Other income				80		199
Profit before tax				64,034		83,789
Tax		4		(6,915)		(19,596)
Profit for the year				57,119		64,193
Attributable to:
Minority interest				(6)		1,617
Equity holders of the parent				57,125		62,576
				57,119		64,193
Earnings per share (cents)
Basic		6		30.4		37.0
Diluted		6		29.6		35.4

Intangible amortisation comprises the amortisation on intangible assets other than software.

Hikma Pharmaceuticals PLC

Consolidated balance sheet

at 31 December 2008

		Notes		2008		2007 (Restated)*
				USD '000		USD '000
Non-current assets
Intangible assets				258,228		259,841
Property, plant and equipment				271,650		246,656
Interest in joint venture				5,453		4,543
Deferred tax assets				13,305		14,503
Available for sale investments				540		1,008
Financial and other non-current assets				2,077		1,290
				551,253		527,841
Current assets
Inventories		7		154,756		140,409
Income tax recoverable				-		358
Trade and other receivables		8		195,843		188,275
Collateralised cash				819		5,628
Cash and cash equivalents				62,727		28,905
Other current assets				1,061		2,625
				415,206		366,200
Total assets				966,459		894,041
Current liabilities
Bank overdrafts and loans				117,300		276,537
Obligations under finance leases				1,221		1,455
Trade and other payables		9		82,003		84,324
Income tax provision				12,016		10,583
Other provisions				5,392		4,475
Other current liabilities				10,502		16,662
				228,434		394,036
Net current assets / (liabilities)				186,772		(27,836)
Non-current liabilities
Long-term financial debts				110,414		57,662
Deferred income				695		279
Obligations under finance leases				5,496		5,698
Deferred tax liabilities				12,425		11,709
				129,030		75,348
Total liabilities				357,464		469,384
Net assets				608,995		424,657

\* The 2007 comparatives have been restated due to the finalisation of 2007 acquisition accounting.

See note 11

Hikma Pharmaceuticals PLC

Consolidated balance sheet

at 31 December 2008

		Notes		2008		2007
				USD '000		USD '000
Equity
Share capital		10		33,857		30,229
Share premium				269,973		114,059
Own shares				(1,124)		-
Other reserves				300,503		274,192
Equity attributable to equity holders of the parent				603,209		418,480
Minority interest				5,786		6,177
Total equity				608,995		424,657

Hikma Pharmaceuticals PLC

Consolidated statement of changes in equity

for the year ended 31 December 2008

	Merger reserve USD '000	Revaluation reserves USD '000	Translation reserves USD '000	Retained earnings USD '000	Total reserves USD '000	Share capital USD '000	Share premium USD '000	Own shares USD '000	Total equity attributable to equity shareholders of the parent USD '000	Minority interest USD '000	Total equity USD '000
Balance at 1 January 2007	33,920	4,807	3,566	161,631	203,924	29,712	111,431	-	345,067	4,732	349,799
Issue of equity shares	-	-	-	-	-	517	2,628	-	3,145	-	3,145
Cost of equity settled employee share scheme	-	-	-	1,601	1,601	-	-	-	1,601	-	1,601
Deferred and current tax arising on share-based payments	-	-	-	2,968	2,968	-	-	-	2,968	-	2,968
Dividends on ordinary shares	-	-	-	(12,696)	(12,696)	-	-	-	(12,696)	-	(12,696)
Dividends paid to minority shareholders	-	-	-	-	-	-	-	-	-	(172)	(172)
Profit for the year	-	-	-	62,576	62,576	-	-	-	62,576	1,617	64,193
Cumulative effect of change in fair value of available for sale investments	-	-	-	(151)	(151)	-	-	-	(151)	-	(151)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(256)	(256)	-	-	-	(256)	-	(256)
Realisation of revaluation reserve	-	(180)		180	-	-	-	-	-	-	-
Currency translation gain	-	-	16,226	-	16,226	-	-	-	16,226	-	16,226
Balance at 31 December 2007 and 1 January 2008	33,920	4,627	19,792	215,853	274,192	30,229	114,059	-	418,480	6,177	424,657
Issue of equity shares	-	-	-	-	-	3,628	155,914	-	159,542	-	159,542
Acquisition of own shares	-	-	-	-	-	-	-	(1,124)	(1,124)	-	(1,124)
Cost of equity settled employee share scheme	-	-	-	3,384	3,384	-	-	-	3,384	-	3,384
Deferred tax arising on share-based payments	-	-	-	(4,299)	(4,299)	-	-	-	(4,299)	-	(4,299)
Dividends on ordinary shares	-	-	-	(14,151)	(14,151)	-	-	-	(14,151)	-	(14,151)
Dividends paid to minority shareholders	-	-	-	-	-	-	-	-	-	(385)	(385)
Profit/(loss) for the year	-	-	-	57,125	57,125	-	-	-	57,125	(6)	57,119
Cumulative effect of change in fair value of available for sale investments	-	-	-	(216)	(216)	-	-	-	(216)	-	(216)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(78)	(78)	-	-	-	(78)	-	(78)
Realisation of revaluation reserve	-	(180)	-	180	-	-	-	-	-	-	-
Currency translation loss	-	-	(15,454)	-	(15,454)	-	-	-	(15,454)	-	(15,454)
Balance at 31 December 2008	33,920	4,447	4,338	257,798	300,503	33,857	269,973	(1,124)	603,209	5,786	608,995

Hikma Pharmaceuticals PLC

Consolidated cash flow statement

for the year ended 31 December 2008

	Note		2008		2007
			USD '000		USD '000
Net cash from operating activities	12		74,969		53,283
Investing activities
Purchases of property, plant and equipment			(56,205)		(50,402)
Proceeds from disposal of property, plant and equipment			1,003		906
Purchase of intangible assets			(9,313)		(4,586)
Proceeds from disposal of intangible assets			1,257		-
Change in interest in joint venture			(910)		-
Investment in financial and other non current assets			(787)		329
Proceeds/(investment) in available for sale investments (net)			252		(226)
Acquisition of subsidiary undertakings, net of cash acquired			-		(296,903)
Subsequent Payments relating to prior year acquisitions			(2,234)		-
Finance income			817		2,029
Net cash used in investing activities			(66,120)		(348,853)
Financing activities
Decrease/(increase) in collateralised cash			4,809		(291)
Increase in long-term financial debts			101,685		42,464
Repayment of long-term financial debts			(48,933)		(13,546)
(Decrease)/increase in short-term borrowings			(159,237)		229,658
(Decrease)/increase in obligations under finance leases			(436)		126
Dividends paid			(14,151)		(12,834)
Dividends paid to minority shareholders			(385)		(166)
Purchase of own shares			(1,124)		-
Interest paid			(17,097)		(10,166)
Proceeds from issue of new shares			162,026		3,145
Costs of issue of new shares			(2,484)		-
Net cash from financing activities			24,673		238,390
Net increase/(decrease) in cash and cash equivalents			33,522		(57,180)
Cash and cash equivalents at beginning of year			28,905		86,227
Foreign exchange translation movements			300		(142)
Cash and cash equivalents at end of year			62,727		28,905

Hikma Pharmaceuticals PLC

Notes to the consolidated financial information

1. Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention any matters by way of emphasis without qualifying their report and did not contain statements under s237(2) or (3) Companies Act 1985.

Hikma Pharmaceuticals PLC's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared under the historical cost convention, except for the revaluation to market of certain financial assets and liabilities. The preliminary announcement is based on the Company's financial statements.

Comparative figures for 31 December 2007 have been adjusted for revisions to the provisional acquisition balance sheet of the companies acquired by the Group in 2007. There is no impact on the income statement and further details are set out in note 11. In addition, in the consolidated cash flow statement and supporting notes interest paid has been reclassified to financing activities and finance income has been reclassified to investing activities to better reflect the nature of the flows, following the recent acquisitions.

The Group's previously published financial statements were also prepared in accordance with International Financial Reporting Standards. These International Financial Reporting Standards have been subject to amendment and interpretation by the International Accounting Standards Board and the financial statements presented for the years ended 31 December 2006 and 31 December 2007 have been prepared in accordance with those revised standards. Unless stated otherwise these policies are in accordance with the revised standards that have been applied throughout the year and prior years presented in the financial statements.

The presentational and functional currency of Hikma Pharmaceuticals PLC is the US Dollar as the majority of the Company's business is conducted in US Dollars (USD).

Going concern

Although the current economic conditions may affect short term demand for our products, as well as place pressure on customers and suppliers which may face liquidity issues, the Group's geographic spread, product diversity and large customer and supplier base substantially mitigate these risks. In addition, the Group operates in the relatively defensive generic pharmaceuticals industry which we expect to be less affected compared to other industries that are subject to greater cyclical changes.

The Group has $229 million of banking facilities of which $120.8 million were undrawn as at 31 December 2008. These facilities are well diversified across the operating subsidiaries of the Group with a number of financial institutions. The majority of these facilities are short term, uncommitted working capital related. However, we continue to expected them to be renewed annually. In addition the Group maintained cash balances of $62.7 million as at 31 December 2008. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities and maturities of long term debt, show that the Group should be able to operate well within the levels of its facilities and their related covenants. 

After making enquiries, the directors believe that the Group is adequately placed to manage its business and financing risks successfully despite the current uncertain economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Notes to the consolidated financial information

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 2008	Branded		Injectables		Generic		Others		Group
	USD '000		USD '000		USD '000		USD '000		USD '000
Revenue	320,837		149,320		105,696		4,803		580,656
Cost of sales	(148,023)		(85,942)		(86,385)		(3,824)		(324,174)
Gross profit	172,814		63,378		19,311		979		256,482
Result
Adjusted segment result	93,591		24,688		(839)		(3,738)		113,702
Exceptional items :
-Revision to estimates for chargebacks, returns and rebates	-		-		(4,800)		-		(4,800)
- Acquisition integration costs	(1,629)		-		-		-		(1,629)
Intangible amortisation*	(4,478)		(2,587)		(150)		-		(7,215)
Segment result	87,484		22,101		(5,789)		(3,738)		100,058
Unallocated corporate expenses									(19,376)
Operating profit									80,682
Finance income									817
Finance expense									(17,545)
Other income									80
Profit before tax									64,034
Tax									(6,915)
Profit for the year									57,119
Attributable to:
Minority interest									(6)
Equity holders of the parent									57,125
									57,119

"Others" mainly comprises Arab Medical Containers LTD and International Pharmaceutical Research

Center LTD and the chemicals division of Hikma Pharmaceuticals LTD Jordan.

Notes to the consolidated financial information

Unallocated corporate expenses are primarily made up of employee costs, office costs, professional fees and donations.

* Intangible amortisation comprises the amortisation on intangible assets other than software. 

2. Business and geographical segments

Other information 2008		Branded		Injectables		Generic		Corporate and Other		Group
		USD '000		USD '000		USD '000		USD '000		USD '000
Additions to property, plant and equipment (cost)		34,226		12,981		8,037		1,427		56,671
Additions to intangible assets		3,801		4,781		463		1,601		10,646
Total property, plant and equipment and intangible assets (net book value)		336,839		150,282		32,185		10,572		529,878
Depreciation and amortisation		18,666		8,540		4,613		1,303		33,122
Balance sheet
Total assets
Segment assets		642,397		196,894		95,456		31,712		966,459
Total liabilities
Segment liabilities		196,924		82,804		28,191		49,545		357,464

 

Notes to the consolidated financial information

2. Business and geographical segments

Year ended 31 December 2007	Branded	Injectables	Generic	Others		Group
	USD '000	USD '000	USD '000	USD '000		USD '000
Revenue	198,942	121,164	124,229	4,461		448,796
Cost of sales	(90,925)	(67,005)	(65,644)	(3,689)		(227,263)
Gross profit	108,017	54,159	58,585	772		221,533
Result
Adjusted segment result	62,162	22,654	31,644	(3,396)		113,064
Intangible amortisation*	(466)	(2,197)	-	-		(2,663)
Segment result	61,696	20,457	31,644	(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

"Others" mainly comprises of Arab Medical Containers LTD and International Pharmaceutical Research Center LTD and the chemicals division of Hikma Pharmaceuticals LTD Jordan.

Unallocated corporate expenses are primarily made up of employee costs, office costs, professional fees and donations.

Notes to the consolidated financial information

* Intangible amortisation comprises the amortisation on intangible assets other than software.

2. Business and geographical segments

Other information (Restated)* 2007	Branded		Injectables		Generic		Corporate and Other		Group
	USD '000		USD '000		USD '000		USD '000		USD '000
Additions to property, plant and equipment (cost)	28,366		15,811		4,189		990		49,356
Acquisition of subsidiary's property, plant and equipment (cost)*	56,380		9,213		-		-		65,593
Additions to intangible assets	1,453		2,557		445		131		4,586
Intangible assets arising on acquisition*	164,230		62,495		-		-		226,725
Total property, plant and equipment and intangible assets (net book value)*	321,072		148,252		28,304		8,869		506,497
Depreciation and amortisation	9,740		7,054		5,153		1,486		23,433
Balance sheet
Total assets
Segment assets	575,613		196,337		97,355		24,736		894,041
Total liabilities
Segment liabilities	168,575		78,723		9,781		212,305		469,384

* The 2007 comparatives have been restated due to the finalisation of 2007 acquisition accounting. See note 11.

 

 2. Business and geographical segments

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
		2008		2007
		USD '000		USD '000
Middle East and North Africa		365,922		229,196
Europe and Rest of the World		84,128		76,090
United States		130,606		143,510
		580,656		448,796

Notes to the consolidated financial information

The following is an analysis of the additions and 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, plant and equipment and intangibles in the year				Total property, plant and equipment and intangibles as at December 31				Total assets as at December 31
	2008		2007* (Restated)		2008		2007* (Restated)		2008		2007* (Restated)
	USD 000		USD 000		USD 000		USD 000		USD 000		USD 000
Middle East and North Africa	40,047		251,457		345,992		329,646		657,901		589,457
Europe	18,770		90,169		151,701		148,547		213,102		208,388
United States	8,500		4,634		32,185		28,304		95,456		96,196
	67,317		346,260		529,878		506,497		966,459		894,041

Additions in 2007 include property, plant and equipment and intangibles acquired with and arising on the acquisition of subsidiary undertakings.

\* The 2007 comparatives have been restated due to the finalisation of 2007 acquisition accounting. See note 11.

 

3. Exceptional items and intangible amortisation

Exceptional items are disclosed separately in the consolidated income statement to assist in the understanding of the Group's underlying performance.

		For the years ended 31 December
		2008		2007
		USD '000		USD '000
Revision to estimates for chargebacks, returns and rebates		(4,800)		-
Acquisition integration costs		(1,629)		-
Exceptional items		(6,429)		-
Intangible amortisation		(7,215)		(2,663)
Exceptional items and intangible amortization		(13,644)		(2,663)
Tax effect		3,408		736
Impact on profit for the year		(10,236)		(1,927)

Revision to estimates for chargebacks, returns and rebates represents a one off charge taken against revenue during 2008. Acquisition integration costs represent expenses incurred in integrating APM and Hikma Pharma SAE (Egypt) into the Group. These are included within sales and marketing and general and administrative expenses. Intangible amortisation comprises the amortisation of intangible assets other than software.

Notes to the consolidated financial information

4. Tax

		For the years ended 31 December
		2008		2007
		USD '000		USD '000
Current tax:
UK current tax		2,280		13,664
Double tax relief		(2,280)		(13,664)
Foreign tax		9,268		20,552
Prior year adjustments		76		(1,000)
Deferred tax		(2,429)		44
		6,915		19,596

UK corporation tax is calculated at 28.5% (2007: 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. 

The charge for the year can be reconciled to profit before tax per the income statement as follows:

		2008		2007
		USD '000		USD '000
Profit before tax:		64,034		83,789
Tax at the UK corporation tax rate of 28.5% ( 2007: 30%)		18,250		25,137
Profits taxed at different rates		(15,089)		(7,100)
UK tax on dividend income		2,280		13,664
Double tax relief offset		(2,280)		(13,664)
Permanent differences		2,886		2,314
Losses for which no benefit is recognised		792		713
Other tax adjustments		-		(468)
Prior year adjustments		76		(1,000)
Tax expense for the year		6,915		19,596

 

5. Dividends

		2008		2007
		USD '000		USD '000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2007 of 4.0 cents (2006: 4.0 cents) per share		7,542		6,765
Interim dividend for the year ended 31 December 2008 of 3.5 cents (2007: 3.5 cents) per share		6,609		5,931
		14,151		12,696
The proposed final dividend for the year ended 31 December 2008 is 4.0 cents (2007: 4.0 cents) per share, bringing the total dividends for the year to 7.5 cents (2007: 7.5 cents) per share.

6. 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
			2008		2007
			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			57,125		62,576
			Number		Number
Number of shares			'000		'000
Weighted average number of Ordinary Shares for the purposes of basic earnings per share			187,876		169,216
Effect of dilutive potential Ordinary Shares :
Share options and LTIP			5,295		7,631
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share			193,171		176,847
			2008		2007
			Earnings per share		Earnings per share
			Cents		Cents
Basic			30.4		37.0
Diluted			29.6		35.4

7. Inventories

		As at 31 December
		2008		2007 (Restated)*
		USD '000		USD '000
Finished goods		45,585		36,029
Work-in-progress		23,609		31,673
Raw and packing materials		71,733		62,327
Goods in transit		13,829		10,380
		154,756		140,409

Goods in transit include inventory held at third parties whilst in transit between Group companies.

\* The 2007 comparatives have been restated due to the finalisation of 2007 acquisition accounting. See note 11

		As at 31 December 2007		Additions		Utilisation		Translation adjustments		As at 31 December 2008
		USD '000		USD '000		USD '000		USD '000		USD '000
Provision for slow moving inventory		8,309		7,756		(7,399)		(113)		8,553

The total expense in the income statement for the write-off of inventory including provision for such write offs was USD 8,589,000 (2007: USD 4,646,000).

8. Trade and other receivables

		As at 31 December
		2008		2007 (Restated)*
		USD '000		USD '000
Trade receivables		173,958		171,393
Prepayments		14,345		12,629
Value added tax recoverable		5,306		3,647
Interest receivable		108		302
Employee advances		2,126		304
		195,843		188,275

\* The 2007 comparatives have been restated due to the finalisation of 2007 acquisition accounting. See note 11

9. Trade and other payables

		As at 31 December
		2008		2007
		USD '000		USD '000
Trade payables		42,632		49,143
Accrued expenses		29,823		25,392
Employees' provident fund *		2,753		3,158
VAT and sales tax payables		1,408		543
Dividends payable **		2,495		3,490
Social security withholdings		745		1,026
Income tax withholdings		1,037		588
Other payables		1,110		984
		82,003		84,324

* The employee's provident fund liability mainly represents the outstanding contributions due to the Hikma Pharmaceuticals Limited - Jordan retirement benefit plan, on which the fund receives 5% interest.

** Dividends payable includes USD 2,303,000 (2007: USD 3,261,000) due to the previous shareholders of APM. 

 

10. Share capital

Authorised:		2008		2007
		USD '000		USD '000
500,000,000 Ordinary Shares of 10p each		88,700		88,700

Issued and fully paid - included in shareholders' equity:
		2008				2007
		Number '000		USD '000		Number '000		USD '000
At 1 January		170,734		30,229		168,164		29,712
Issued during the year		18,504		3,628		2,570		517
At 31 December		189,238		33,857		170,734		30,229

On 17 January 2008, a total of 17,000,000 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 GBP 81.6 million (USD 160.3 million). As part of the Placing 5.23 million shares were placed with Darhold Limited at the Placing Price and 333,000 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 Group used the proceeds from the placing to reduce borrowings incurred in connection with its JOD 116.0 million (USD 163.8 million) acquisition of Arab Pharmaceutical Manufacturing Company thereby providing the Group with increased flexibility to finance future growth.

The costs of the placing of USD 2,484,000 were offset against share premium.

11. Acquisitions of subsidiaries

In accordance with IFRS 3 the Group balance sheet as at 31 December 2007 has been restated to reflect the final fair value adjustments in relation to the acquisitions made during 2007.

			2007 (as previously reported) USD '000		Final fair value adjustments USD '000		2007 (Restated) USD '000
Non-current assets
Intangible assets			251,340		8,501		259,841
Property, plant and equipment			243,901		2,755		246,656
Interest in joint venture			4,543		-		4,543
Deferred tax assets			14,503		-		14,503
Available for sale investments			1,008		-		1,008
Financial and other non-current assets			1,290		-		1,290
			516,585		11,256		527,841
Current assets
Inventories			147,670		(7,261)		140,409
Income tax recoverable			358		-		358
Trade and other receivables			190,714		(2,439)		188,275
Collateralised cash			5,628		-		5,628
Cash and cash equivalents			28,905		-		28,905
Other current assets			2,625		-		2,625
			375,900		(9,700)		366,200
Total assets			892,485		1,556		894,041
Current liabilities
Bank overdrafts and loans			276,537		-		276,537
Obligations under finance leases			1,455		-		1,455
Trade and other payables			84,324		-		84,324
Income tax provision			10,583		-		10,583
Other provisions			4,475		-		4,475
Other current liabilities			14,542		2,120		16,662
			391,916		2,120		394,036
Net current (liabilities)			(16,016)		(11,820)		(27,836)
Non-current liabilities
Long-term financial debts			57,662		-		57,662
Deferred income			279		-		279
Obligations under finance leases			5,698		-		5,698
Deferred tax liabilities			12,273		(564)		11,709
			75,912		(564)		75,348
Total liabilities			467,828		1,556		469,384
Net assets			424,657		-		424,657

12. Net cash from operating activities

 

		2008		2007
		USD '000		USD '000
Profit before tax		64,034		83,789
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment		25,067		19,374
Intangible assets		8,055		4,059
Gains on disposal of property, plant and equipment		(6)		(202)
Gains on disposal of intangible assets		(832)		-
Movement on provisions		917		1,078
Movement on deferred income		416		(78)
Cumulative effect of change in fair value of derivatives		(78)		(256)
Cost of equity settled employee share scheme		3,384		1,601
Finance income		(817)		(2,029)
Interest and bank charges		17,545		10,837
Cash flow before working capital		117,685		118,173
Change in trade and other receivables		(10,903)		(29,453)
Change in other current assets		1,564		(47)
Change in inventories		(19,327)		(29,065)
Change in trade and other payables		(615)		17,774
Change in other current liabilities		(5,751)		(6,112)
Cash generated by operations		82,653		71,270
Income tax paid		(7,684)		(17,987)
Net cash generated from operating activities		74,969		53,283

 

13. Foreign exchange currencies

 

The currencies that have a significant impact on the group accounts and the exchange rates used are as follows:

	Period end rates				Average rates
	2008		2007		2008		2007
USD/EUR	1.4097		1.4729		1.4713		1.3707
USD/Sudanese Pound	0.4579		0.4872		0.4779		0.4961
USD/Algerian Dinar	0.0141		0.0150		0.0155		0.0144
USD/Saudi Riyal	0.2667		0.2667		0.2667		0.2667
USD/British Pound	1.4479		1.9973		1.8552		2.0018
USD/Jordanian Dinar	1.4104		1.4104		1.4104		1.4104
USD/Egyptian Pound	0.1806		0.1823		0.1833		0.1821

The Jordanian Dinar and Saudi Riyal have no impact on the income statement as those currencies are pegged against the US Dollar.

ENDFR SFWEDMSUSEDD

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