5th Sep 2007 07:02
Hikma Pharmaceuticals Plc05 September 2007 Hikma Pharmaceuticals PLC Interim results announcement for the six months to 30 June 2007 LONDON, 5 September 2007 - Hikma Pharmaceuticals PLC ("Hikma")(LSE: HIK)(DIFX:HIK), a multinational pharmaceutical group focused on developing, manufacturingand marketing a broad range of generic and in-licensed pharmaceutical products,today reports its interim results for the six months to 30 June 2007. H1 2007 highlights H1 2007 H1 2006 Change ($m) ($m)Revenue 224.9 154.9 +45.2%Operating profit 51.8 42.2 +22.7%Profit before tax 49.5 42.4 +16.7%Profit attributable to shareholders 35.6 30.1 +18.4%Diluted earnings per share (cents) 20.2 17.2 +17.4%Dividend per share (cents) 3.5 3.0 +16.7% • Revenue for the first half of 2007 grew by 45.2% to $224.9 million • Underlying organic revenue growth(1) was 21.5% driven by strong performances in the Branded and Injectable businesses • Delivered 18.4% growth in profit attributable to shareholders, to $35.6 million • Began production in our new cephalosporin plant in Portugal for the MENA region and Europe • Launched 71 products across the Group, including 16 new products(2), and signed one new licensing agreement for the MENA region • Entered the injectable oncology market through the acquisitions of Ribosepharm and Thymoorgan in Germany • Acquired 10 new oncology products to be registered in Europe and the MENA region • Entered the large and growing Egyptian market through an agreement to acquire Alkan Pharma in August 2007 Said Darwazah, Chief Executive of Hikma, said: "Hikma performed well in the first half of 2007 driven by strong organic revenuegrowth and the benefits from our recent entry into the injectable oncologymarket and the successful integration of JPI." "We are on track to deliver strong revenue growth in the second half of theyear, driven by continued growth across the MENA region in both the Branded andInjectables businesses and the further development of our Injectables businessin the US and Europe. We will also benefit from the revenue contribution fromour oncology and Egyptian acquisitions. Overall, we remain confident in theGroup's ability to deliver another year of strong growth." Enquiries: Hikma Pharmaceuticals PLCSaid Darwazah, Chief ExecutiveBassam Kanaan, Chief Financial OfficerSusan Ringdal, Investor Relations Director Tel: +44 (0)20 7399 2760 Brunswick GroupJon Coles / Justine McIlroy / Alex Tweed Tel: +44 (0)20 7404 5959 About Hikma Hikma Pharmaceuticals PLC is a fast growing multinational group focused ondeveloping, manufacturing and marketing a broad range of both branded andnon-branded generic and in-licensed pharmaceutical products. Hikma's operationsare 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, theUnited States and Europe. In 2006, the Group had achieved revenues of $317million (2005 $262 million) and profit attributable to shareholders was of $55million (2005 $44 million). At 30 June 2007, the Group had over 2,700employees. For news and other information, please visit www.hikma.com. Business and financial review Group performance Revenue for the Group increased by 45.2% to $224.9 million, compared to $154.9million in the first half of 2006. The revenue contribution from acquisitionscompleted since the first half of 2006 was $36.6 million. Underlying organicgrowth, which excludes the impact of these acquisitions, was 21.5%, driven bystrong performances in both the Branded and Injectables businesses. The Branded and Injectables businesses together now account for 72.8% of oursales compared with 63.2% at the end of the first half of 2006. Revenue by segment H1 2007 H1 2006Branded 46.1% 41.3%Injectables 26.7% 21.9%Generics 26.1% 34.8% Revenue by regionMENA 54.2% 50.5%US 29.8% 40.7%Europe 16.0% 8.8% The Group's gross profit increased by 42.5% to $113.9 million, compared to $80.0million in the first half of 2006. Group gross margin for the first half of2007 was 50.7%, compared to 51.6% in the first half of 2006. This change ingross margin is due primarily to a decline in gross profit margin in theGenerics business that was only partially offset by the improving gross marginin the Injectables business. As a result of acquisitions, Group operating expenses grew in the first half of2007 by 59.1% to $62.2 million, compared to $39.1 million in the first half of2006. Excluding acquisitions, operating expenses grew by 24.6%. Sales and marketing expenses increased by 90.2% to $30.1 million, due to theacquisition of Ribosepharm, the injectable oncology sales and marketingbusiness, acquired in January of this year, and the consolidation of Al-JazeeraPharmaceutical Industries ("JPI"). These expenses include an amortisationcharge of $0.8 million related to intangible assets arising on theseacquisitions. Excluding acquisitions, sales and marketing expenses grew by27.4%, which reflects investment to support the strong growth in both theBranded and Injectables businesses. Sales and marketing expenses represented13.4% of Group revenue in the first half of 2007, compared to 10.2% in the firsthalf of 2006. The Group's general and administrative expenses increased by 60.8% to $21.2million, compared to $13.2 million in the first half of 2006. As expected, thischange arose mainly from the consolidation of JPI and Ribosepharm. The need tosupport the growth of the Group has also increased corporate general andadministrative costs, which grew by $2.5 million to $8.7 million in the firsthalf of 2007. General and administrative expenses represented 9.4% of Grouprevenue in the first half of 2007, compared to 8.5% in the first half of 2006. Investment in R&D increased by 1.4% to $9.2 million, compared to $9.0 million inthe first half of 2006. Total investment in R&D represented 4.1% of Grouprevenue, compared to 5.8% in the first half of 2006. This reflects a shifttowards product acquisitions and an increase in licensing. Other net operating expenses, which consist mainly of provisions against slowmoving items partially offset by foreign exchange gains, were $1.7 million,compared to $1.0 million in the first half of 2006. Operating profit for the Group increased by 22.7% to $51.8 million, compared to$42.2 million in the first half of 2006. Group operating margin decreased to23.0% in 2007, compared to 27.2% in the first half of 2006, which reflects anincreased investment in sales and marketing and other operating expenditureacross all segments, as well as pricing pressure in the Generics business. Research & Development The Group's product portfolio continues to grow. During the first half of theyear, we added eight new products to the Group portfolio, which now covers 202products(3) in 423 dosage strengths and forms. We manufacture and/or sell 29 ofthese products under-license from the originator. In the first half of 2007, Hikma received 81 regulatory approvals(4), includingthree ANDA approvals for the Generics business and one ANDA approval for theInjectables business. Over the same period, 16 new products(5) were launched. To ensure the continuous development of our product pipeline, we submitted atotal of 37 regulatory filings(6) in Jordan, the US and Europe, and 153 acrossall regions and markets. As of 30 June 2007, we had a total of 126 pendingapprovals in Jordan, the US and Europe and 588 pending approvals across allregions and markets. We estimate the approximate addressable market for our portfolio of pendingapprovals to be approximately $12.0 billion, based on the 2006 full year salesof the currently marketed equivalent products in the markets covered by thepending approvals. At 30 June 2007, we had a total of 106 products under development, the majorityof which should receive several marketing authorisations for differing strengthsand/or product forms over the next few years. Outlook We continue to expect to deliver organic revenue growth, including JPI, in themid-20% range for the full year, in line with the guidance we gave in January2007. Taking into consideration the acquisitions of Ribosepharm, Thymoorgan andAlkan, which should complete in September, we expect total Group revenue growthof close to 40%. We expect gross margin to be approximately 50% and general andadministrative expenses to grow in line with revenue. We also expect investmentin R&D to be close to 5% of Group sales. Overall, we remain confident in theGroup's ability to deliver another year of strong growth. Branded The pharmaceutical market in the MENA region is predominantly a branded market,in which patented, generic and OTC pharmaceutical products are marketed underspecific brand names. Our Branded business manufactures branded generic andin-licensed patented pharmaceutical products for sale across the MENA Region andEurope. The Branded business is our largest business in terms of revenue, whichincreased by 62.0% to $103.6 million in the first half of 2007, compared to$64.0 million in the first half of 2006, reflecting the consolidation of JPI.Excluding JPI, Branded revenues grew by 33.2% driven by excellent performancesacross all our MENA markets. New product introductions and more focused salesand marketing efforts have helped to drive demand and increase sales. Aparticularly strong performance in the GCC countries was driven in part by thesuccessful integration of JPI. The Branded business's performance in the firsthalf also reflects the continuing seasonality of this business, which istraditionally stronger in the first six months of the year. During the first half, the Branded business received 56 regulatory approvals inthe MENA region, including eight in Jordan. We grew our market share in Algeria in the first half of 2007 to 5.2%, comparedto 3.9% at the end of 2006(7). We also maintained our position as the sixthlargest pharmaceutical manufacturer and second largest generic pharmaceuticalmanufacturer by value in the Algerian market. In Saudi Arabia, our combinedmarket share in value terms remained relatively constant at 3.9% in the firsthalf of 2007, compared to 4.0% for the 2006 full year, maintaining our positionas the fifth largest pharmaceutical manufacturer in this market. In Jordan, wemaintained our position as market leader during the first half of the year witha market share of 7.1%, compared to 7.3% for the 2006 full year. Revenues from under-license products represented 35.3% of Branded sales in thefirst half of 2007, compared to 38.6% in the first half of 2006. Gross profit of the Branded business increased by 58.9% to $56.2 million,compared to $35.4 million in the first half of 2006. The Branded business'sgross margin decreased to 54.3%, compared to 55.3% in the first half of 2006,reflecting an increase in overhead expenses and sales incentives. Branded operating profit increased by 55.7% in the first half of 2007, to $34.3million. Operating margins in the Branded business were 33.1% in the first halfof 2007, down from 34.4% in 2006. This change is due to the slight decrease inBranded gross margin and to additional sales and marketing and general andadministrative expenses associated with JPI. Injectables Our Injectables business manufactures injectable generic pharmaceutical productsin powder, liquid and lyophilised forms for sale across the MENA Region, Europeand the US. Revenue in our Injectables business increased by 76.7% to $60.0 million,compared to $34.0 million in the first half of 2006. The increase reflectsunderlying organic growth of 23.0%, driven by a strong performance in the MENAregion, as well the consolidation of Ribosepharm and Thymoorgan, the injectableoncology businesses acquired in the first half of 2007. Injectables revenue grew in all countries across the MENA region, primarily dueto more focused sales and marketing efforts, including the addition of newmedical representatives, but also as a result of new product launches and anincrease in tender sales. In Europe, we saw strong growth in the Portuguesemarket, as a direct result of superior customer service levels, and we continuedto strengthen our position in the highly competitive German market. In the US,contract manufacturing sales fell as we prioritised our own product sales, whichincreased to 53% of US Injectables sales, compared to 28% in the first half of2006. The oncology businesses, Ribosepharm and Thymoorgan, performed well in the firsthalf of 2007, contributing sales of $17.5 million, which includes $4.5 millionof non-recurring sales of Ribomustin, an under-license product, which wasdiscontinued from the Ribosepharm portfolio in April in accordance with theoriginal terms of the licensing agreement. The sales and marketing team at Ribosepharm is maintaining a strong position inthe German injectable oncology market and we are successfully expanding ourproduct portfolio. At Thymoorgan, we have commenced the manufacture of ourfirst product for the Portuguese market and have begun the certification of theplant for the MENA region. During the first half of 2007, the Injectables business received 22 regulatoryapprovals, including 6 in Europe, 15 in the MENA region and one ANDA approval inthe US. Injectables gross profit increased by 100.1% to $29.6 million, compared to $14.8million in the first half of 2006, with gross margin increasing to 49.3%,compared to 43.5% in the first half of 2006. The increase in gross marginreflects the contribution of Ribosepharm, which, as a sales and marketingorganisation, has higher gross margins than the underlying business. The grossmargin contribution from Ribosepharm more than offset slightly lower underlyingmargins resulting from increasing price competition in Germany, the increase inMENA tender sales and increasing overheads. Injectables operating profit increased by 61.4% to $12.3 million, compared to$7.6 million in the first half of 2006. Injectables operating margins decreasedto 20.5% in the first half of 2007, down from 22.5% in the first half of 2006,primarily as a result of investment in our existing and new sales forces and anincrease in general and administrative expenses required to support thebusiness's growth. In the first half of 2007 we began production at our new cephalosporin plant inPortugal for Europe and the MENA region. We expect to begin production for theUS market in the second half of the year. Generics Revenue in our Generics business increased by 9.0% to $58.7 million, compared to$53.8 million in the first half of 2006. This growth was driven by volumeincreases, which offset continued price pressure, and by sales from recentproduct launches. During the first half, the Generics business received threeANDA approvals and launched one new product and five line extensions. As expected, revenue growth in the Generics business was achieved through morecompetitive pricing. As a result, Generics gross profit decreased by 2.6% to$28.2 million, compared to $28.9 million in the first half of 2006, reflectingcontinued price pressure as well as an increase in overhead expenses. Genericsgross margin was 48.1%, compared to 53.8% in the first half of 2006. Generics operating profit decreased by 10.6% to $15.7 million. Operating marginsin the Generics business decreased to 26.7% of revenue, compared to 32.6% in thefirst half of 2006 directly due to the decline in gross profit margin. Other businesses Other businesses, which primarily include Arab Medical Containers ("AMC"), amanufacturer of plastic specialised packaging, and International PharmaceuticalsResearch Centre, which conducts bio-equivalency studies, had aggregate revenuein the first half of 2007 of $2.6 million, or 1.1% of total Group revenue,compared to aggregate revenue of $3.1 million in the first half of 2006. Other businesses delivered an operating loss of $1.8 million in the first halfof 2007, compared to a loss of $0.1 million in the first half of 2006. Thischange is due to the acquisition of the remaining share of JPI and the resultingtreatment of transactions between AMC and JPI. Recent developments In August we announced that we have agreed to acquire Alkan Pharma, an Egyptianpharmaceuticals company, for a cash consideration of $60.5 million. Alkan'slocal manufacturing capabilities, strong product portfolio and registrationpipeline, together with its extensive sales force, provides Hikma with a strongbase from which to access the large and growing Egyptian market. Financial performance Finance income Financing income decreased by $1.2 million to $1.4 million due to a reduction inthe Company's net cash position following the acquisition of JPI, Ribosepharmand Thymoorgan. Finance costs Financing costs increased by $1.5 million, reflecting the increase in debtfinancing required to fund acquisitions and Group expansion. Profit before tax Profit before taxes and minority interest for the Group increased by 16.7% to$49.5 million, compared to $42.4 million in the first half of 2006. Tax The Group incurred a tax expense of $12.6 million in the first half of 2007.The effective tax rate was 25.5%, a year on year decrease of 1.5 percentagepoints. The tax rate decrease was primarily due to a shift in the geographicsales mix towards lower tax countries, particularly in the MENA Region. Profit for the period The Group's profit attributable to equity holders of the parent grew by 18.4% to$35.6 million for the six months to 30 June 2007. Earnings per share Diluted earnings per share for the six months to 30 June 2007 were 20.2 cents,up 17.4% from 17.2 cents in the first half of 2006. Dividend The Board has declared an interim dividend of 3.5 cents per share (approximately1.7 pence per share). The interim dividend will be paid on 26 October 2007 toshareholders on the register on 28 September 2007 with an ex-dividend date of 26September 2007. Operating cash flow and investment Net cash inflow from operating activities was $1.8 million, compared to $9.6million in the first half of 2006. Investment in working capital increased by$49.3 million compared to 31 December 2006, primarily due to an increase inreceivables and inventory. Receivables increased by 66% compared to 30 June 2006. Excluding acquisitions,receivables increased by 37%, in line with the growth in sales achieved in theMENA region, where collection periods are generally higher. As at 30 June 2007,receivable days stood at 122 days, compared to 107 days at 30 June 2006 and 126days at 31 December 2006. Inventory increased by 60% compared to 30 June 2006, due to acquisitions and thenecessity to support growth in sales. As at 30 June 2007, inventory days stoodat 176 days, compared to 163 days at 30 June 2006 and 194 days at 30 December2006. Net cash used for investing activities was $93.4 million, compared to $26.2million in the first half of 2006. Of this, capital expenditure amounted to$19.1 million, compared to $25.0 million in the first half of 2006 and $49.7million for the 2006 full year. This expenditure relates to expansion projectsin the Branded and Injectables businesses. During the first half of the yearthe Group also made regular investments to upgrade and maintain existingfacilities. Another significant component of investment activity during the first half wasthe $73.4 million paid for the acquisitions of Ribosepharm and Thymoorgan. Balance sheet The Group had a cash balance of $50.9 million as at 30 June 2007, compared to$117.1 million at 30 June 2006. The Group's net debt position at 30 June 2007was $74.8 million, compared to a net cash position of $69.1 million at 30 June2006, reflecting the increase in debt financing related to acquisitions andGroup expansion. Net cash/debt is calculated as the total of investments incash deposits, collateralised cash and cash and cash equivalents less bankoverdrafts and the current and long term portion of loans and obligations underfinance leases. Intangible assets increased by $78.8 million from 30 June 2006. Of thisincrease, $15.2 million relates to the second half of 2006 and comes mainly fromthe acquisition of JPI. The increase during the first half of 2007 by $63.6million is primarily due to the acquisitions of Ribosepharm and Thymoorgan. Forward looking statements Certain statements in this announcement are forward-looking statements whichhave been made by the Directors in good faith based on the information availableto them up to the time of their approval of this announcement. By their nature,forward-looking statements involve a number of risks, uncertainties orassumptions that could cause actual results or events to differ materially fromthose expressed or implied by the forward-looking statements, and should betreated with caution. These risks, uncertainties or assumptions could adverselyaffect the outcome and financial effects of the plans and events described inthis announcement. Forward-looking statements contained in this announcementregarding past trends or activities should not be taken as a representation thatsuch trends or activities will continue in the future. You should not placeundue reliance on forward-looking statements, which speak as only of the date ofthis the approval of this announcement. Except as required by law, the Company is under no obligation to update or keepcurrent the forward-looking statements contained in this announcement or tocorrect any inaccuracies which may become apparent in such forward-lookingstatements. INDEPENDENT REVIEW REPORT TO THE MEMBERS OF HIKMA PHARMACEUTICALS PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated statement of changesin equity, the consolidated cash flow statement, and the related notes 1 to 10.We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered AccountantsLondon, United Kingdom4 September 2007 Hikma Pharmaceuticals PLCConsolidated income statement H1* H1* FY* 2007 2006 2006 Notes USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) Continuing operationsRevenue 2 224,894 154,913 317,022Cost of sales 2 (110,975) (74,945) (158,492)Gross profit 2 113,919 79,968 158,530 Sales and marketing costs (30,113) (15,832) (35,014)General and administrative expenses (21,247) (13,215) (30,328)Research and development costs (9,153) (9,024) (18,291)Other operating expenses (net) (1,656) (981) (588)Total operating expenses (62,169) (39,052) (84,221)Share of results of associates - 1,247 938 Operating profit 51,750 42,163 75,247 Finance income 1,376 2,547 5,258Finance costs (3,897) (2,441) (4,958)Other income 223 105 49 Profit before tax 49,452 42,374 75,596 Tax 3 (12,610) (11,441) (19,639) Profit for the period 36,842 30,933 55,957Attributable to:Minority interest 1,228 857 1,435Equity shareholders of the parent 35,614 30,076 54,522 36,842 30,933 55,957 Earnings per share (cents) Basic 5 21.1 18.0 32.6Diluted 5 20.2 17.2 31.0Dividend per share (cents) 4 3.5 3.0 7.0 *On this page and throughout this interim financial information "H1 2007" refersto six months ending 30 June 2007, "H1 2006" refers to the six months ended 30June 2006 and "FY 2006" refers to the year ended 31 December 2006. Hikma Pharmaceuticals PLCConsolidated balance sheet 30 June 30 June 31 December 2007 2006 2006 Notes USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited)Non-current assetsIntangible assets 87,529 8,702 23,940Property, plant and equipment 178,977 112,164 156,845Interest in associate - 8,797 -Due from associate - 3,886 -Deferred tax assets 13,339 1,760 5,719Available for sale investments 573 718 776Financial and other non-current 1,019 1,368 1,242assets 281,437 137,395 188,522Current assetsInventories 106,736 66,921 83,720Income tax recoverable 500 - 500Trade and other receivables 6 164,951 100,023 121,846Collateralised cash 5,457 5,239 5,337Cash and cash equivalents 45,400 111,818 86,227Other current assets 2,657 1,760 2,204 325,701 285,761 299,834Total assets 607,138 423,156 488,356Current liabilitiesBank overdrafts and loans 63,973 20,696 35,614Obligations under finance leases 606 517 1,216Trade and other payables 7 68,338 42,589 53,916Income tax provision 12,126 7,441 8,535Other provisions 3,057 1,269 2,577Other current liabilities 7,805 3,589 4,868 155,905 76,101 106,726Net current assets 169,796 209,660 193,108Non-current liabilitiesLong-term financial debts 56,529 25,675 25,339Deferred income 322 400 356Obligations under finance leases 4,508 1,075 4,441Deferred tax liabilities 4,396 1,174 1,695 65,755 28,324 31,831 Total liabilities 221,660 104,425 138,557Net assets 385,478 318,731 349,799 EquityShare capital 29,907 29,554 29,712Share premium 112,295 110,470 111,431Reserves 237,485 174,441 203,924 Equity attributable to equity 379,687 314,465 345,067holders of the parent Minority interest 5,791 4,266 4,732Total equity 385,478 318,731 349,799 Hikma Pharmaceuticals PLCConsolidated statement of changes in equity Total Share Share Total equity reserves Capital premium attributable to equity shareholders of the parent USD '000 USD '000 USD '000 USD '000At 1 January 2006 (audited) 144,350 29,457 110,074 283,881Issue of equity shares - 97 396 493Cost of equity settled 443 - - 443employee share schemeDeferred tax arising 108 - - 108Dividends on ordinary shares (1,489) - - (1,489) Profit for the period 30,076 - - 30,076Cumulative effect of (561) - - (561)change in fair value of available for sale investmentsand financial derivativesCurrency translation gain 1,514 - - 1,514 Balance at 30 June 2006 174,441 29,554 110,470 314,465(unaudited) Balance at 1 January 2006 144,350 29,457 110,074 283,881(audited)Issue of equity shares - 255 1,357 1,612Cost of equity settled 879 - - 879 employee share scheme Deferred and current tax 2,352 - - 2,352 arising on share options Dividends on ordinary shares (6,509) - - (6,509)Profit for the year 54,522 - - 54,522Cumulative effect of (636) - - -636change in fair value of available for sale investments and financial derivativesRevaluation reserve 4,807 - - 4,807Currency translation gain 4,159 - - 4,159 Balance at 31 December 2006 203,924 29,712 111,431 345,067(audited) Issue of equity shares - 195 864 1,059Cost of equity settled employee share scheme 667 - - 667Deferred tax arising on 2,033 - - 2,033share optionsDividends on ordinary shares (6,765) - - (6,765)Profit for the period 35,614 - - 35,614Cumulative effect of (187) - - (187)change in fairvalue of available for sale investments and financial derivativesCurrency translation gain 2,199 - - 2,199 Balance at 30 June 2007 237,485 29,907 112,295 379,687(unaudited) Hikma Pharmaceuticals PLCConsolidated cash flow statement H1 H1 FY 2007 2006 2006 Note USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) Net cash from operating 8 1,828 9,623 35,250activities Investing activitiesPurchases of property, (19,064) (25,040) (49,725)plant and equipment Proceeds from disposal of 162 289 453property, plant and equipment Purchase of intangible assets (1,352) (1,600) (2,715)Investment in financial and 223 125 34other assets Investment in available for 28 4 -sale securities Acquisition of subsidiaries (73,458) - (21,633)undertakings Cash acquired on acquisition 66 - 860of subsidiaries Net cash used in investing (93,395) (26,222) (72,726)activities Financing activitiesIncrease in collateralised (120) (119) (217)cash Increase in long-term 36,779 497 495financial debts Repayment of long-term (5,589) (5,611) (12,881)financial debts Increase/(decrease) in 26,029 (448) 1,244short-term borrowings (Decrease)/increase in (543) (615) 3,449obligations under finance leases Dividends paid (6,752) (1,489) (6,989) Dividends paid to (166) - (294)minority shareholders Proceeds from issue of 1,059 493 1,612new shares Net cash from / (used in) 50,697 (7,292) (13,581)financing activities Net decrease in cash and (40,870) (23,891) (51,057)cash equivalents Cash and cash equivalents 86,227 135,959 135,959at beginning of period Foreign exchange translation 43 (250) 1,325 Cash and cash equivalents 45,400 111,818 86,227at end of period Hikma Pharmaceuticals PLCNotes to the interim financial information 1. Significant accounting policies Basis of accounting The unaudited financial information for the six months ended 30 June 2007 andthe comparative financial information for the six months ended 30 June 2006 havebeen prepared, using the same accounting policies and on a basis consistent withthe audited full year results for the year ended 31 December 2006. The financialinformation has been prepared under the historical cost convention, except forthe revaluation to market of certain financial assets and liabilities. The financial information for the year ended 31 December 2006 does notconstitute statutory accounts within the meaning of Section 240 of the Company'sAct 1985. Statutory accounts for the year ended 31 December 2006, which wereprepared under International Financial Reporting Standards (IFRSs) issued by theInternational Accounting Standards Board, have been filed with the Registrar ofCompanies. The auditor's report on those accounts was unqualified and did notcontain any statement under Section 237 of the Companies Act 1985. The currency used in the preparation of the accompanying consolidated financialstatements is the US Dollar as the majority of the Company's business isconducted in US Dollars (USD). Hikma Pharmaceuticals PLCNotes to the interim accounts - continued 2. Business and geographical segments For management purposes, the Group is currently organised into three operatingdivisions - Generics, Branded and Injectables. These divisions are the basis onwhich the Group reports its primary segment information. Segment information about these businesses is presented below. Six months ended Generics Branded Injectables Corporate and Group other30 June 2007 USD '000 USD '000 USD '000 USD '000 USD '000(unaudited)Revenue 58,667 103,620 60,035 2,572 224,894Cost of sales (30,463) (47,388) (30,439) (2,685) (110,975) Gross profit 28,204 56,232 29,596 (113) 113,919 ResultSegment result 15,670 34,273 12,331 (1,798) 60,476 Unallocated corporate (8,726)expenses Operating profit 51,750 Finance income 1,376Finance costs (3,897)Other income 223 Profit before tax 49,452Tax (12,610)Profit for the period 36,842 Attributable to:Minority interest 1,228Equity shareholders of the 35,614parent 36,842 2. Business and geographical segments (continued) Six months ended Generics Branded Injectables Corporate and Group other30 June 2006 USD '000 USD '000 USD '000 USD '000 USD '000(unaudited)Revenue 53,842 63,974 33,983 3,114 154,913Cost of sales (24,899) (28,590) (19,191) (2,265) (74,945) Gross profit 28,943 35,384 14,792 849 79,968 ResultSegment result 17,530 22,013 7,641 (100) 47,084 Unallocated corporate (6,168)expenses Share of results of - 1,247 - - 1,247associate Operating profit 42,163 Finance income 2,547Finance costs (2,441)Other income 105 Profit before tax 42,374Tax (11,441)Profit for the period 30,933 Attributable to:Minority interest 857Equity shareholders of 30,076the parent 30,933 2. Business and geographical segments (continued) Year ended Generics Branded Injectables Corporate and Group other31 December 2006 USD '000 USD '000 USD '000 USD '000 USD '000(audited) Revenue 113,674 130,114 67,570 5,664 317,022Cost of sales (53,911) (60,642) (39,225) (4,714) (158,492) Gross profit 59,763 69,472 28,345 950 158,530 ResultSegment result 36,011 39,379 13,360 -1,200 87,550 Unallocated corporate (13,241)expenses Share of results of - 938 - - 938associate Operating profit 75,247 Finance income 5,258Finance costs (4,958)Other income 49 Profit before tax 75,596Tax (19,639)Profit for the year 55,957 Attributable to:Minority interest 1,435Equity shareholders of 54,522the parent 55,957 2. Business and geographical segments (continued) The following table provides an analysis of the Group's sales by geographicalmarket, irrespective of the origin of the goods/services: Sales revenue by geographical market H1 2007 H1 2006 FY 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) United States 67,010 63,110 129,778Europe and Rest of the World 35,924 13,580 29,543Middle East and North Africa 121,960 78,223 157,701 224,894 154,913 317,022 3. Tax H1 2007 H1 2006 FY 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) Current tax: UK current tax - 207 26,982 Double tax relief - - (26,840) Overseas tax 13,259 11,234 23,093 Prior year adjustments - - (500)Overseas deferred tax (649) - (3,096) 12,610 11,441 19,639 4. Dividends The Board has declared an interim dividend of $5.9 million (30 June 2006: $5.0million, 31 December 2006: $11.7 million), equivalent to 3.5 cents per share,(30 June 2006: 3.0 cents per share, 31 December 2006: 7.0 cents per share) asthe dividend in respect of the six month period ended 30 June 2007 to be paid on26 October 2007 to all shareholders on the register on 28 September 2007. 5. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: H1 2007 H1 2006 FY 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited)Earnings for the purposes of basic and 35,614 30,076 54,522diluted earnings per share being net profitattributable to equity holders of the parent Number Number NumberNumber of shares '000 '000 '000Weighted average number of Ordinary Shares 168,640 166,987 167,279for the purposes of basic earnings per share Effect of dilutive potential Ordinary Shares:Share options and awards 7,582 8,335 8,638 Weighted average number of Ordinary Shares 176,222 175,322 175,917for the purposes of diluted earnings pershare H1 2007 H1 2006 FY 2006 Earnings per Earnings per Earnings per share share share Cents Cents Cents Basic 21.1 18.0 32.6 Diluted 20.2 17.2 31.0 6. Trade and other receivables 30 June 30 June 31 December 2007 2006 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) Trade receivables 150,356 90,754 109,266Other prepayments 7,681 3,987 6,148Value added tax recoverable 6,205 4,735 5,701Interest receivable 457 413 427Employee advances 252 69 304Other receivables - 65 - 164,951 100,023 121,846 7. Trade and other payables 30 June 30 June 31 December 2007 2006 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited) Trade payables 42,387 26,923 32,331Accrued expenses 20,985 10,595 15,000Employees' provident fund * 2,444 2,021 2,106VAT and sales tax payables 141 1,778 2,281Dividends payable 208 371 361Social security withholdings 804 424 653Income tax withholdings 477 394 382Other payables 892 83 802 68,338 42,589 53,916 * The employees' provident fund liability represents outstanding contributionsto Hikma Pharmaceuticals Limited - Jordan retirement benefit plan, on which thefund receives 5% interest. 8. Net cash from operating activities H1 2007 H1 2006 FY 2006 USD '000 USD '000 USD '000 (Unaudited) (Unaudited) (Audited)Profit before tax and minority interest 49,452 42,374 75,596Adjustments for: Depreciation, amortisation and impairment of: Property, plant and equipment 8,069 5,305 12,468 Intangible assets 1,754 632 1,329Results from associated companies - (1,247) (938)Losses on disposal of property, plant and 117 62 59equipment Gains from sale of investments - (60) -Movement on provisions 480 (96) 362Deferred income (34) (16) (59)Cumulative effect of change in fair value (11) - 27of derivatives Cost of equity settled employee share 667 443 879scheme Finance income (1,376) (2,547) (5,258)Interest and bank charges 3,897 2,441 4,958 Cash flow before working capital 63,015 47,291 89,423Change in trade and other receivables (36,264) (17,389) (17,059)Change in due from associate / related - (1,582) (896)party Change in other current assets (73) 4,963 (290)Change in inventories (17,218) (8,905) (17,565)Change in trade and other payables 5,180 (1,428) 610Change in other current liabilities (938) (5,033) 138 Cash generated by operations 13,702 17,917 54,361 Income tax paid (9,819) (8,646) (19,397)Finance income 1,376 2,547 5,258Interest paid (3,431) (2,195) (4,972) Net cash from operating activities 1,828 9,623 35,250 9. Acquisition of subsidiaries During the period, Hikma acquired three businesses; Ribosepharm GmbH, ThymoorganGmbH Pharmazie & Co. KG and Hikma Pharma Co. Details are as follows: Ribosepharm On 25 January 2007, the Group completed the acquisition of 100% of the issuedshare capital of Ribosepharm GmbH ("Ribosepharm") located in Germany for cashconsideration of USD 42,225,000. Ribosepharm's business is the marketing anddistribution of generic injectable oncology products to private practices andhospitals in Germany. The net assets acquired in the transaction and the provisional goodwill arisingare set out below: Book Preliminary Fair value value fair value adjustment USD '000 USD '000 USD '000Net assets acquiredProduct related intangibles 3,141 (2,828) 313Trade name - 5,529 5,529 Customer relationships - 17,789 17,789 Registration down payment - 990 990 Net deferred tax assets - 4,926 4,926 Property, plant and equipment 285 - 285Inventory 4,750 - 4,750Other current assets 458 - 458Trade receivables, net 4,085 - 4,085Cash and cash equivalents 2 - 2Trade payables (4,388) 660 (3,728)Other current liabilities (4,594) - (4,594)Net assets acquired (100%) 3,739 27,066 30,805Provisional goodwill 12,145Total consideration 42,950Satisfied by :Cash 42,225Directly attributable costs 725 42,950 Cash consideration 42,225Cash and cash equivalents acquired (2)Net cash outflow arising on acquisition 42,223 The revenue and net profit of Ribosepharm from the date of acquisition that isincluded in the Group's income statement for the period amounted to USD16,738,000 and USD 2,911,000 respectively. 9. Acquisition of subsidiaries - continued Thymoorgan On 31 May 2007, the Group completed the acquisition of 100% of the issued sharecapital of Thymoorgan GmbH Pharmazie & Co. KG ("Thymoorgan") located in Germanyfor cash consideration of USD 29,506,000. Thymoorgan is a German contractmanufacturer of lyophilised and liquid injectables for both oncological andnon-oncological uses. The book value of tangible assets acquired was USD 4,300,000. The Group is currently in the process of determining the fair value adjustmentsand hence the goodwill and intangibles arising on the acquisition. Provisionalgoodwill and intangibles of USD 26,400,000 has been recognised in theconsolidated balance sheet. Hikma Pharma Co. On 9 February 2007, the Group completed the acquisition of the remaining 51% ofthe issued share capital of Hikma Pharma Co. located in Tunisia for cashconsideration of USD 4,000 which is equal to the fair value of net assetsacquired. The business of Hikma Pharma Co. is the marketing and promotion ofmedical products. 10. Post balance sheet events On 9 August 2007, the Group announced the acquisition of Alkan Pharma ("Alkan")for cash consideration of USD 60.5 million. The acquisition is scheduled tocomplete in September 2007, subject to meeting certain regulatory requirements.The acquisition will be funded entirely by debt. -------------------------- (1) Underlying organic revenue growth excludes the impact of acquisitions. (2) New pharmaceutical compounds that are being launched for the first time bythe Group or for the first time within another business segment or a new region. (3) Products are defined as pharmaceutical compounds sold by the Group. (4) Approvals are comprehensive and include approvals for new products and lineextensions and approvals in new segments, regions and countries. (5) New products are defined as pharmaceutical compounds not previously launchedby the Group and existing compounds being introduced into a new segment or a newregion. Line extensions are new forms or dosage strengths of existingcompounds. (6) Filings comprise filings for new products and new line extensions and forexisting compounds and line extensions being introduced into new regions. (7) Source: IMS Health, MAT June 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hikma Pharmaceuticals