18th Mar 2008 07:02
Hikma Pharmaceuticals Plc18 March 2008 Hikma Pharmaceuticals PLC Preliminary results announcement for the year ended 31 December 2007 LONDON, 18 March 2008 - Hikma Pharmaceuticals PLC ("Hikma") (LSE:HIK) (DIFX:HIK), the fast-growing multinational pharmaceutical group focused on developing,manufacturing and marketing a broad range of generic and in-licensedpharmaceutical products, across the Middle East and North Africa, the US andEurope, today reports its preliminary results for the year ended 31 December2007. Group performance 2007 2006 Growth 2007 $m $m vs. 2006Revenue 448.8 317.0 +41.6%EBITDA* 115.8 89.0 +30.1%Operating profit 92.4 75.2 +22.8%Profit attributable to shareholders 62.6 54.5 +14.8%Diluted earnings per share (cents) 35.4 31.0 +14.2%Dividend per share (cents) 7.5 7.0 +7.1% Highlights • Grew revenues by 41.6% to $448.8 million • Underlying organic revenues grew by 28.0%**, driven by strong performances in the Branded and Injectables businesses • Delivered 14.8% growth in profit attributable to shareholders, to $62.6 million • Entered the large and growing Egyptian market through the acquisition ofAlkan Pharma and strengthened our position in core markets through theacquisition of Arab Pharmaceutical Manufacturing Co. Ltd., furtherconsolidating our leading position in the MENA region • Entered the injectable oncology market through the acquisitions of Ribosepharm and Thymoorgan in Germany and expanded our oncology portfolio through new product acquisitions • Began production in our new cephalosporin plant in Portugal for the MENA region and Europe in 2007 and for the US in early 2008 • Launched 28 new products(1), received 129 approvals across all businesses and geographic regions and submitted 74 regulatory filings in MENA, the US and Europe(2) • Raised gross proceeds of £81.6 million (approximately $160 million) inJanuary 2008 through the placing of 17 million new ordinary shares, funding theacquisition of APM, strengthening our balance sheet and enhancing ourflexibility to finance future growth * Reported profit before interest, tax, depreciation and amortisation. ** Organic growth excludes the acquisitions made in 2007 (Ribosepharm GmbH ("Ribosepharm"), Thymoorgan GmbH Pharmazie & Co. KG ("Thymoorgan"), Alkan Pharma("Alkan")) unless stated otherwise. (1) 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. (2) This includes only the first submission of new compound or line extension ina region. Said Darwazah, Chief Executive of Hikma, said:"Our position as a global speciality pharmaceutical company, with a position inthe MENA region, is stronger than ever. We have an excellent product portfolio,a large and growing sales and marketing team and excellent manufacturingcapabilities that enable us to take advantage of the extremely favourable marketenvironment in which we operate. Through the acquisitions we made in the MENA region this year, in Egypt andJordan, we have extended our successful business model into new markets andstrengthened our position in our core markets like Jordan and Saudi Arabia. Theacquisitions of Ribosepharm and Thymoorgan are providing an excellent platformfrom which to develop a presence in the fast growing oncology market. Globally, we are confident of delivering another year of strong performance in2008 driven by our Branded and Injectable businesses, as we continue to growHikma into a leading speciality pharmaceutical company and deliver high returnson investment to our shareholders." An interview with Said Darwazah, Chief Executive, and Bassam Kanaan, ChiefFinancial Officer is available on http://www.hikma.com and http://www.cantos.com. There will be an analyst and investor presentation at 09.00hrs which will bewebcast on http://www.hikma.com and available through a conference callfacility. Participants should dial +44 (0)20 8609 0582 and use conference ID208088#. Enquiries:Hikma Pharmaceuticals PLC Tel: +44 (0)20 7399 2760Said Darwazah, Chief ExecutiveBassam Kanaan, Chief Financial OfficerSusan Ringdal, Investor Relations Director Brunswick Group Tel: +44 (0)20 7404 5959Jon Coles / Justine McIlroy / Alex Tweed 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 2007, the Group achieved revenues of $449 million(2006 $317 million) and profit attributable to shareholders was $63 million(2006 $55 million). For news and other information, please visit www.hikma.com. Forward looking statementsCertain 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. Business and financial review Branded PharmaceuticalsRevenue in the Branded business, our largest business segment, increased by52.9% to $198.9 million, compared to $130.1 million in 2006. Excluding theacquisitions of JPI and Alkan, underlying sales growth was 32.0%, primarily dueto strong growth across all our MENA markets. New product introductions and morefocused sales and marketing efforts have helped to drive demand and increasesales. A particularly strong performance in the Gulf Cooperation Council ("GCC")countries was driven in part by the successful integration of JPI. Algeria, Saudi Arabia, Jordan and Sudan were the Branded business's largestmarkets in 2007. In Algeria, Hikma grew well above the average market growthrate. This growth was driven by an increase in the number of marketed products,enhanced sales and marketing efforts, with more focus on doctors, pharmacistsand better geographical coverage, and by strengthening our relationships withthe leading distributors. Our market share in Algeria reached 6.0% in 2007,compared to 3.9% at the end of 2006, making us the fourth largest pharmaceuticalcompany in the Algerian market(3). Sales in Saudi Arabia grew by nearly 80%, as we worked hard to complete theintegration of JPI. By year end the combined sales teams were performing welland we had achieved strong margin improvement. We also increased our share ofthe tender market, benefiting from our new status as a local manufacturer. Ourshare of the private market, however, decreased to 3.8% in 2007, compared to4.0% in 2006, making us the 6th largest player in the Saudi Arabian market.3 Weare confident of further progress in 2008 through increased sales efforts, thebenefits of new product launches - including three new products launched in 2007and further benefits of the JPI / Hikma integration. We will benefit from APM'sstrong position in the Saudi market. Our growth in the Jordanian market was also strong in 2007 and well ahead of theunderlying market, due to new product launches, more focused sales effortsespecially for key products and better market coverage by our medicalrepresentatives. We received 12 product approvals and launched nine new productsin the Jordanian market during the year. In 2007, we maintained our position asmarket leader in the Jordanian market and our market share increased to 7.7%,compared to 7.3% in 2006.(3) (3) Source: IMS Health. In Sudan we performed extremely well, largely due to a strong product focus, anincrease in the number of medical representatives and better geographicalcoverage, combined with a more stable operating environment, growing pharmacychains and an overall increase in pharmaceutical spend. Significant benefitswere also derived from the integration of JPI's Sudanese operations. Whilemarket data is not readily available for the Sudanese market, we believe that wenow have a leading position in this market. We also achieved strong performances in some of our newer and smaller markets,including UAE, Lebanon and the Ukraine, driven mainly by better brandrecognition and product launches. In 2007 we continued to work hard to strengthen our leading position in the MENAregion. Through the acquisition of Alkan Pharma in September 2007, we extendedour reach into the important Egyptian market, which we estimate was worthapproximately $1.9 billion in 2007. We now have more than 250 sales andmarketing staff in Egypt and market 84 products in 126 dosage strengths andforms. Five of these products are in-licenced and a further 19 products arepending approval. In addition, we continue to sell Astellas' life-savingimmunosuppressant, Prograf, in the Egyptian market and will soon launch Actos,Takeda's leading Type 2 diabetes drug. Through the acquisition of Arab Pharmaceutical Manufacturing Co. Ltd. ("APM") atthe end of December 2007, we strengthened our position in our existing markets,particularly in Jordan and Saudi Arabia. This acquisition brings together a highquality and complementary portfolio. APM's currently marketed portfolio of 105products in 222 dosage strengths and forms will enhance the product offeringavailable to Hikma's enlarged sales force by expanding existing product lines,strengthening existing therapeutic areas and adding new molecules. APM'sportfolio includes oral, injectable and dermatological products and spans anumber of therapeutic categories, including cardiovascular, diabetes andoncology. Sales from in-licensed products grew by 44.6% to $64.2 million in 2007,representing 32.3% of Branded sales, compared to 34.1% in 2006. During theyear, three new licensing agreements were signed and five new licenses wereadded with the acquisition of Alkan in Egypt, bringing the total number ofin-licensed products marketed in the Branded business to 33.(4) Gross profit in the Branded business increased by 55.5% to $108.0 million,compared to $69.5 million in 2006. Gross margin in the Branded businessincreased to 54.3%, compared to 53.4% in 2006. This change in gross profitmargin is attributed primarily to an improvement in product mix. Operating profit in the Branded business increased by 56.7% in 2007, to $61.7million. Through a strict focus on operating efficiencies, operating margins inthe Branded business increased to 31.0% in 2007, compared to 30.3% in 2006,which demonstrates the successful integration of JPI. In 2007, operatingexpenses included only a small amortisation charge related to acquisitions.Going forward, however, we expect the amortisation charge for intangible assetsrelated to acquisitions to be close to $4.0 million. In 2007, the Branded business received 78 regulatory approvals, including 12 inJordan, 49 in other MENA markets and 17 in Europe and the rest of the world. Inline with our strategic objectives for the Branded business, we launched a totalof 15 new products in 2007, nine in Jordan, three in Saudi Arabia and three inEgypt. The total number of Branded sales and marketing staff operating acrossour 17 MENA markets at year end was 1,010, which includes 256 in Egypt, 221 inSaudi Arabia, 191 in Jordan and 127 in Algeria. Injectable Pharmaceuticals Our global Injectable business manufactures injectable pharmaceutical productsin powder, liquid and lyophilised forms for sale across the MENA region, Europeand the US. The Injectable business contributed 27.0% of total Group revenue in2007, compared to 21.3% in 2006. Revenue in our Injectable business increased by 79.3% to $121.2 million,compared to $67.6 million in 2006. The increase reflects underlying organicgrowth of 25.2%(5), driven primarily by a strong performance in the MENA region,as well as the consolidation of Ribosepharm and Thymoorgan, the injectableoncology businesses acquired in the first half of 2007. (4) At the end of 2007, a further five in-licenced products were pending launch. (5) Organic growth is calculated before the acquisitions of Ribosepharm andThymoorgan. During the year, the Injectables business received 42 regulatory approvals,including 11 in Europe, 30 in the MENA region and one in the US. 25 of theseapprovals were for new products, the rest were for new dosage strengths orforms. Since the beginning of 2008, we have received a further four approvals inthe US. In the MENA region, the Injectables business delivered strong growth across mostmarkets, with the largest contributions coming from Algeria, Saudi Arabia andSudan. This growth was driven by our strong product position, more focused salesand marketing efforts, additional medical representatives, an increased focus oninstitutional customers and an increasing ability to execute a bundled salesstrategy. Growth was reinforced by the 18 new products launched during the year. In Europe, we saw strong growth in the Italian and Portuguese market as a directresult of increased customer focus, and we were able to maintain our position inthe highly competitive German market. During the year we launched four newproducts in the European market. In the US, we faced increased competition. Nevertheless, we continue to grow ownproduct sales and are developing a strong market position for our products,particularly the cephalosporins. In 2007 we began selling our products to the USgovernment and won several new contracts with buying groups for 2008. Welaunched two new products in the US market in 2007 and expect to launch afurther three products in multiple dosage strengths and forms in the first halfof 2008. In 2007 we took the important strategic step of entering the injectable genericoncology market. In January we acquired Ribosepharm, a German oncology companyspecialising in the marketing and distribution of branded generic injectableoncology products. In May, we acquired Thymoorgan, a German contractmanufacturer of lyophilised and liquid injectables for both oncological andnon-oncological uses. Ribosepharm and Thymoorgan, now our oncology business, performed well in 2007,contributing sales of $36.6 million, which includes approximately $11 million ofsales from in-licensed products that have been or will be discontinued, which isin line with expectations at the time of the Ribosepharm acquisition. The sales and marketing team at Ribosepharm is performing well in the Germaninjectable oncology market and we are successfully expanding our oncologyproduct portfolio, which now includes 12 marketed products and a pipeline of 13additional products. At Thymoorgan, we commenced the manufacture of our firstproducts for the European and MENA markets. Gross profit of the Injectables business increased by 91.1% to $54.2 million,compared to $28.3 million in 2006. The Injectable business's gross marginincreased to 44.7%, compared to 41.9% in 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 lower gross margins beforethe impact of acquisitions resulting from increasing price competition inGermany, the increase in MENA tender sales, which have lower margins, and anincrease in overheads and depreciation expense related to our new plant inPortugal. As we expand production at the new plant in Portugal, we expectoverhead and depreciation expenses to decrease as a percentage of sales. Injectable operating profit increased by 53.1% to $20.5 million, compared to$13.4 million in 2006. Injectable operating margins decreased to 16.9% in 2007,down from 19.8% in 2006. The decrease was driven primarily by the lowerunderlying gross margins but also to an increase in operating expenses incurredto support continued growth across all regions. These operating expenses includean amortisation charge of $1.6 million related to the acquisition of intangibleassets. In 2008, we expect this charge will be approximately $2.2 million. During the year, we focused on developing our Injectables sales and marketingcapabilities across all geographies and ended the year with 77 sales andmarketing representatives in the MENA Region, and 43 in Europe, including fivein Portugal and 33 in Germany, and 10 in the United States. Generic Pharmaceuticals The Generic business contributed 27.7% of total Group revenue in 2007, comparedto 35.9% in 2006 as the Branded and Injectables businesses continue to grow bothorganically and through acquisitions. Consistent with 2006, all Generic revenueswere generated in the United States. While price competition remained high in 2007, improved sales efforts andincreased demand for key products helped to drive volume growth. Sales fromrecently launched products also drove Generic revenues, which grew by 9.3% in2007 to $124.2 million, compared to $113.7 million in 2006. Our sales contract with the Department of Veterans Affairs ("the VA"), an agencyof the government of the United States, for the supply of Lisinopril expired on20 December 2007. As the VA has not submitted a new solicitation for thisproduct, we expect volumes to be considerably lower going forward. We expect tocompensate with sales from products launched in 2007 and 2008, but these saleswill have lower margins, and will result in lower margins going forward for thesegment as a whole. Recent additions to strengthen the Generics senior management team will supportthe business going forward. A new finance director was appointed in late 2007and a new sales and marketing director was appointed in early 2008. Both havesignificant experience in the pharmaceutical industry. The Generic business received 9 ANDA approvals in 2007, including 4 for newproducts. In addition, a total of 6 products were launched during the year. Gross profit of the Generic business decreased by 2.0% to $58.6 million,compared to $59.8 million in 2006. Gross margin in the Generic business was47.2%, compared to 52.6% in 2006. This reflects continued price erosion, as wellas changes in the product mix. Generic operating profit decreased by 12.1% to $31.6 million. Operating profitmargins in the Generic business decreased to 25.5% of revenue, compared to 31.7%in 2006. The decrease in operating margin is attributed to price erosion and theproduct mix mentioned above, as the level of operating expenses remained largelyunchanged. Other businesses Other businesses, which include primarily Arab Medical Containers, amanufacturer of specialised plastic packaging, and International PharmaceuticalsResearch Centre, which conducts bio-equivalency studies, had aggregate revenuein 2007 of $4.5 million, or 1.0% of total Group revenue. Other businessesdelivered an operating loss of $3.4 million in 2007, compared to a loss of $1.2million in 2006, as a result of an increase in investment in research anddevelopment. Group performance Revenue for the Group increased by 41.6% to $448.8 million, compared to $317.0million in 2006. Excluding the acquisitions of Ribosepharm, Thymoorgan and AlkanPharma, revenues increased by 28.0%. The latter increase was primarily due tostrong increases in revenue in both the Branded and Injectable businesses. In 2007, 44.3% of revenue was generated by our Branded business, 27.7% ofrevenue was generated by our Generic business and 27.0% by our Injectablesbusiness. Geographically, 51.1% of revenue was generated in the MENA region,while 32.0% of revenue was generated in the United States and 17.0% in Europeand the rest of the world. The Group's gross profit increased by 39.7% to $221.5 million, compared to$158.5 million in 2006. Group gross margins for 2007 were 49.4% of revenue,compared to 50.0% in 2006. On a segmental basis, gross margins improved in theBranded and Injectables businesses, but declined in the Generic business, due tocontinued price erosion. Group operating expenses increased in 2007 by 53.3% to $129.1 million, comparedto $84.2 million for 2006, mainly due to an increase in sales and marketing andgeneral and administrative expenditures related to acquisitions and to anincrease in corporate expenses required to support the enlarged Group. Theseexpenses include an amortisation charge of $1.6 million relating to intangibleassets arising on these and other acquisitions completed during the year. Salesand marketing expenses represented 13.6% of Group revenue in 2007, compared to11.0% in 2006. Sales and marketing expenses before acquisitions(6) grew by 26.7%, whichreflects the strong growth in both the Branded and Injectables businesses.Including acquisitions, sales and marketing expenses increased by 74.3% to $61.0million, due primarily to the acquisition of Ribosepharm, and to the fullconsolidation of Al-Jazeera Pharmaceutical Industries ("JPI"). The Group's general and administrative expenses increased by 51.7% to $46.0million, compared to $30.3 million in 2006. As anticipated, the change arosemainly from the consolidation of JPI, Ribosepharm, Thymoorgan and Alkan. Theneed to support the growth of the Group has also increased corporate general andadministrative costs, which include costs associated with the company's newlong-term incentive plan. General and administrative expenses represented 10.3%of Group revenue in 2007, compared to 9.6% in 2006. Investment in R&D for the Group increased by 5.7% to $19.3 million, compared to$18.3 million in 2006. This increase, which can be attributed to ongoinginvestment in the development of our product portfolio, was lower than in 2006reflecting a shift towards product and business acquisitions. Total investmentin R&D represented 4.3% of Group revenue in 2007, compared to 5.8% in 2006. Other net operating expenses, which consist mainly of provisions against slowmoving items partially offset by foreign exchange gains, were $2.8 million,compared to $0.6 million in 2006. Earnings before interest, tax, depreciation and amortisation increased by 30.1%to $115.8 million, compared to $89.0 million in 2006. Operating profit for theGroup increased by 22.8% to $92.4 million, compared to $75.2 million in 2006.Group operating margin declined by 3.1 percentage points to 20.6% in 2007,compared to 23.7% of revenue in 2006. Research & Development The Group's product(7) portfolio continues to grow. In the year to 31 December2007, Hikma added 177 new products to the Group portfolio, which now covers 353products in 728 dosage strengths and forms. We manufacture and/or sell 40 ofthese under licence from the originator. (6) This excludes the acquisition of Ribosepharm, Thymoorgan, Alkan Pharma and JPI. (7) Products are defined as pharmaceutical compounds sold by the Group.New products are defined as pharmaceutical compounds not yet launched by theGroup and existing compounds being introduced into a new segment or a newregion. Line extensions are new forms or dosage strengths. Filings include only filings for new products and the first filing of lineextensions in a segment or region. Approvals are comprehensive and include approvals for new products and lineextensions and approvals in new countries. Pending approvals include only applications that are pending for new productsand the first filing of a line extension in a segment or region. In the year to 31 December 2007, Hikma received 129 regulatory approvals,including 9 ANDA approvals for the Generics business and 1 ANDA approval for theInjectables business. Over the same period, 28 new products were launched. Filings in New product Pending Pending approvals of 2007 filings in approvals as of new products as of 2007 31 December 2007 31 December 2007 ---------- ----------- ----------- ------------------GenericPharmaceuticalsUnited States 8 6 32 25 ---------- ----------- ----------- ------------- BrandedPharmaceuticalsMENA* 23 9 45 27Europe andROW** 16 4 19 7 ---------- ----------- ----------- ------------- 39 13 64 34 InjectablePharmaceuticalsUnited States 7 2 31 21MENA* 11 9 17 13Europe 9 7 14 11 ---------- ----------- ----------- ------------- 27 18 62 45 ========== =========== =========== ============= 74 37 158 104 ---------- ----------- ----------- ------------- * Includes only the first filing of a product or line extension in the MENAregion.** Includes only the first filing of a product or line extension in Europe orROW. To ensure the continuous development of our product pipeline, we submitted atotal of 74 regulatory filings for the first time in MENA, the US and Europe. Asof 31 December 2007, we had a total of 158 pending approvals in Jordan, the USand Europe and 543 pending approvals across all regions and markets. We estimate the approximate addressable market for our portfolio of pendingapprovals to be approximately $19.8 billion, based on the 2007 full year salesof the currently marketed equivalent products in the markets covered by thepending approvals. At 31 December 2007, we had a total of 133 new products under development, themajority of which should receive several marketing authorisations over the nextfew years, including separate marketing authorisations in differing strengthsand/or product forms over the next few years. Finance income and costs The Group's financing income principally comprises interest income. Financingincome decreased by $3.2 million to $2.0 million in 2007, compared to $5.3million in 2006. Financing costs increased by $5.9 million to $10.8 million,compared to $5.0 million in 2006. The decrease in finance income and increase infinance costs was due to the decrease in cash and cash equivalents and increasein debt primarily as a result of the cash used to finance the acquisitions madeduring the year. Profit before tax Profit before taxes for the Group increased by $8.2 million, or 10.8%, to $83.8million, compared to $75.6 million in 2006. Tax The Group had a tax expense of $19.6 million in 2007. The effective tax rate was23.4%, a year on year decrease of 2.6 percentage points. This improvementreflects an increase in sales generated in the MENA region. Minority interest Hikma's minority interest increased to $1.6 million in 2007, compared to $1.4million in 2006. Profit for the year The Group's profit for the year attributable to equity holders of the parentgrew by 14.8% to $62.6 million for the year ended 31 December 2007, compared to$54.5 million in 2006. Earnings per share Diluted earnings per share for the year to 31 December 2007 were 35.4 cents, up14.2% from 31.0 cents in 2006. Dividend The Board has recommended a final dividend of 4.0 cents per share (approximately2.0 pence per share), which will make the dividend for the full year of 7.5cents per share, compared to 7.0 cents per share in 2006. The proposed finaldividend will be paid on 2 June 2008 to shareholders on the register on 2 May2008, subject to approval at the Annual General Meeting. Operating cash flow and investment Net cash inflow from operating activities was $45.1 million, compared to $35.3million in 2006. Working capital increased by $46.9 million, compared to $35.1million at the end of 2006, primarily due to an increase in receivables andinventory in line with historic sales and planned growth. Trade receivables increased by 59.1% compared to 31 December 2006 largely as aresult of acquisitions in addition to organic sales growth. Excludingacquisitions(8), receivable days stood at 125 days as at 31 December 2007,compared to 126 days at 31 December 2006, indicating steady receivable growth inline with sales. (8) Excluding Ribosepharm, Thymoorgan, Alkan Pharma and Arab PharmaceuticalManufacturing. Inventory increased by 76.4% compared to 31 December 2006, due to acquisitionsand the necessity to support planned growth in sales. Excluding acquisitions8,inventory days stood at 207 days as at 31 December 2007, compared to 193 days at31 December 2006. Net cash used for investing activities was $350.9 million, compared to $72.7million in 2006. The most significant component of investment activity duringthe year was acquisition related: $73.6 million paid for the acquisitions of Ribosepharm and Thymoorgan, $61.1 million paid for Alkan Pharma in Egypt and$167.4 million paid for Arab Pharmaceutical Manufacturing in Jordan. Inaddition, capital expenditure amounted to $50.4 million, compared to $49.7million in 2006. This expenditure relates primarily to expansion projects in theBranded and Injectables businesses. During the year the Group also made regularinvestments 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 theacquisition of APM, strengthening our balance sheet and and enhancing ourflexibility to finance future growth. Outlook In 2008, we are expecting revenue growth of between 35% and 40%, supported byorganic growth and by the acquisitions and investments we have made over thepast two years. Gross margin is expected to be approximately 47%. In our Branded business, we expect to continue to deliver strong organic growth.We expect further growth to come from the acquisitions we have made in the MENAregion, which are performing extremely well. We now have over 1,000 Brandedsales and marketing staff in place across the MENA region, an enhanced productportfolio and broad manufacturing capabilities to drive and support this growth. In our US Generics business, we expect sales in 2008 to be broadly in line withthat achieved in 2007, and expect continued pricing pressure and significantgross margin erosion. Looking ahead, we will work to grow this business throughthe recent strengthening of the management team, increasing focus on highermargin, niche products, dedicating additional capacity in low cost countries andconcentrating on acquiring lower cost API. In our global Injectables business, we expect strong growth driven by newproduct launches, further penetration of our existing product portfolio and fromour new oncology business, as we build our product portfolio and launch theseproducts into new markets in Europe and MENA. We also expect to deliverimproving operating margins in this business, as we benefit from increasingeconomies of scale. We are confident of delivering another year of strong performance in 2008 drivenby our Branded and Injectable businesses as we continue to grow Hikma into aleading speciality pharmaceutical company. Consolidated income statementfor the year ended 31 December 2007 Notes 2007 2006 USD '000 USD '000 ------- -------- Continuing operationsRevenue 2 448,796 317,022Cost of sales 2 (227,263) (158,492) ------- --------Gross profit 2 221,533 158,530 Sales and marketing costs (61,021) (35,014)General and administrative expenses (46,012) (30,328)Research and development costs (19,342) (18,291)Other operating expenses (net) (2,760) (588) ------- --------Total operating expenses (129,135) (84,221)Share of results of associate - 938 ------- --------Operating profit before intangible amortisation 95,061 75,524Intangible amortisation* (2,663) (277) ------- --------Operating profit 92,398 75,247 Finance income 2,029 5,258Finance expense (10,837) (4,958)Other income 199 49 ------- --------Profit before tax 83,789 75,596 Tax 3 (19,596) (19,639) ------- --------Profit for the year 64,193 55,957 ======= ========Attributable to:Minority interest 1,617 1,435Equity holders of the parent 62,576 54,522 ------- -------- 64,193 55,957 ======= ========Earnings per share (cents) Basic 5 37.0 32.6 ======= ========Diluted 5 35.4 31.0 ======= ======== * Intangible amortisation comprises the amortisation on intangible assetsexcluding software. Hikma Pharmaceuticals PLCConsolidated balance sheetAt 31 December 2007 Notes 2007 2006 USD '000 USD '000 ------- -------Non-current assetsIntangible assets 6 251,340 23,940Property, plant and equipment 243,901 156,845Interest in joint venture 4,543 -Deferred tax assets 14,503 5,719Available for sale investments 1,008 776Financial and other non-current assets 1,290 1,242 ------- ------- 516,585 188,522 ------- -------Current assetsInventories 7 147,670 83,720Income tax recoverable 358 500Trade and other receivables 8 190,714 121,846Collateralised cash 5,628 5,337Cash and cash equivalents 28,905 86,227Other current assets 2,625 2,204 ------- ------- 375,900 299,834 ------- -------Total assets 892,485 488,356 ======= =======Current liabilitiesBank overdrafts and loans 276,537 35,614Obligations under finance leases 1,455 1,216Trade and other payables 9 84,324 53,916Income tax provision 10,583 8,535Other provisions 4,475 2,577Other current liabilities 14,542 4,868 ------- ------- 391,916 106,726 ------- -------Net current (liabilities) / assets (16,016) 193,108 ------- -------Non-current liabilitiesLong-term financial debts 57,662 25,339Deferred income 279 356Obligations under finance leases 5,698 4,441Deferred tax liabilities 12,273 1,695 ------- ------- 75,912 31,831 ------- -------Total liabilities 467,828 138,557 ======= =======Net assets 424,657 349,799 ======= ======= Notes 2007 2006 USD '000 USD '000 ------- -------EquityShare capital 10 30,229 29,712Share premium 114,059 111,431Reserves 274,192 203,924 ------- -------Equity attributable to equity holders of the parent 418,480 345,067 Minority interest 6,177 4,732 ------- -------Total equity 424,657 349,799 ======= ======= Consolidated statement of changes in equityfor the year ended 31 December 2007 Merger Retained Other Total Share Share Total equity reserve earnings reserves* reserves Capital premium attributable to equity shareholders of the parent------------------------------------------------------------------------------------------------------------------- USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000Balance at1 January 2006 33,920 111,023 (593) 144,350 29,457 110,074 283,881 Issue of equity shares - - - - 255 1,357 1,612Cost ofequitysettledemployee share scheme - 879 - 879 - - 879Deferredtax arising on share options - 2,352 - 2,352 - - 2,352Dividendson ordinary shares - (6,509) - (6,509) - - (6,509)Profit forthe year - 54,522 - 54,522 - - 54,522Cumulativeeffect ofchange infair value ofavailablefor saleinvestments - (663) - (663) - - (663)Cumulativeeffect ofchange in fairvalue offinancial derivatives - 27 - 27 - - 27Revaluationreserve - - 4,807 4,807 - - 4,807Currencytranslationgain - - 4,159 4,159 - - 4,159 ------- ------ ------ ------- ------- ------- -------Balance at31 December2006 and 1January 2007 33,920 161,631 8,373 203,924 29,712 111,431 345,067 Issue ofequity shares - - - - 517 2,628 3,145Cost of equitysettled employeeshare scheme - 1,601 - 1,601 - - 1,601Deferredtax arising on share options - 2,968 - 2,968 - 2,968Dividendson ordinary shares - (12,696) - (12,696) - - (12,696) Profit forthe year - 62,576 - 62,576 - - 62,576Cumulative effect ofchange in fairvalue ofavailablefor sale investments - (151) - (151) - - (151)Cumulativeeffect ofchange infair value offinancial derivatives - (256) - (256) - - (256)Revaluationreserve - 180 (180) - - - -Currencytranslationgain - - 16,226 16,226 - - 16,226 ------- ------ ------ ------- ------- ------- -------Balance at31 December2007 33,920 215,853 24,419 274,192 30,229 114,059 418,480 ======= ====== ====== ======= ======= ======= ======= * Other reserves comprise the revaluation reserve and the cumulative translationreserve. Consolidated cash flow statementFor the year ended 31 December 2007 Note 2007 2006 USD '000 USD '000 -------- -------- Net cash from operating activities 12 45,146 35,250 Investing activitiesPurchases of property, plant and equipment (50,402) (49,725)Proceeds from disposal of property, plant andequipment 906 453Purchase of intangible assets (4,586) (2,715)Investment in financial and other assets 329 34Investment in available for sale securities (226) -Acquisition of subsidiary undertakings net of cashacquired (296,903) (20,773) -------- --------Net cash used in investing activities (350,882) (72,726) -------- --------Financing activitiesIncrease in collateralised cash (291) (217)Increase in long-term financial debts 42,464 495Repayment of long-term financial debts (13,546) (12,881)Increase in short-term borrowings 229,658 1,244Increase in obligations under finance leases 126 3,449Dividends paid (12,834) (6,989)Dividends paid to minority shareholders (166) (294)Proceeds from issue of new shares 3,145 1,612 -------- --------Net cash from/(used in) financing activities 248,556 (13,581) -------- -------- Net (decrease) in cash and cash equivalents (57,180) (51,057) Cash and cash equivalents at beginning of year 86,227 135,959 Foreign exchange translation (142) 1,325 -------- --------Cash and cash equivalents at end of year 28,905 86,227 ======== ======== Financial Information 1. Basis of preparation The financial information in this announcement, which was approved by the Boardof Directors on 17 March 2008, does not constitute the Company's statutoryaccounts for the years ended 31 December 2007 or 2006 but is derived from theseaccounts. The Group's principal accounting policies are unchanged compared with the yearended 31 December 2006. During the year, the Group adopted the following accounting pronouncement IFRS 7"Financial Instruments: Disclosures" and the related amendment to IAS 1"Presentation of Financial Statements - Capital Disclosures" which did not haveany impact on its results or financial position. The primary statements and the financial information are derived from theGroup's consolidated financial statements for the year ended 31 December 2007prepared in accordance with IFRS ("the financial statements") and does notconstitute full accounts within the meaning of section 240 of the Companies Act1985 or contain sufficient information to comply with IFRS disclosurerequirements. The Company's auditors, Deloitte & Touche LLP, have given an unqualified reporton the financial statements which does not contain any statement under section237 of the Companies Act 1985. Subject to their approval by shareholders, thefinancial statements will be filed with the Registrar of Companies following theCompany's Annual General Meeting on 15 May 2008. 2. Business and geographical segments For management purposes, the Group is currently organised into three operatingdivisions - Generic, Branded and Injectables. These divisions are the basis onwhich the Group reports its primary segment information. Segment information about these businesses is presented below. Year ended31 December 2007 Generic Branded Injectables Corporate and Group other USD '000 USD '000 USD '000 USD '000 USD '000 -------- -------- -------- -------- -------- Revenue 124,229 198,942 121,164 4,461 448,796Cost of sales (65,644) (90,925) (67,005) (3,689) (227,263) -------- -------- -------- -------- -------- Gross profit 58,585 108,017 54,159 772 221,533 -------- -------- -------- -------- -------- ResultSegment result 31,644 61,696 20,457 (3,396) 110,401 ======== ======== ======== ======== Unallocatedcorporateexpenses - - - - (18,003) ======== ======== ======== ======== -------- Operatingprofit 92,398 Finance income 2,029Finance expense (10,837)Other income 199 -------- Profit beforetax 83,789Tax (19,596) --------Profit for theyear 64,193 ========Attributable to:Minorityinterest 1,617Equity holdersof the parent 62,576 -------- 64,193 ======== 2. Business and geographical segments - continued Other information Generic Branded Injectables Corporate and Group2007 other USD '000 USD '000 USD '000 USD '000 USD '000 -------- ------- -------- --------- --------- Additions toproperty,plant andequipmentassets (cost) 4,189 28,366 15,811 990 49,356Acquisition ofsubsidiary'sproperty,plant andequipment(cost) - 53,625 9,213 - 62,838Additions tointangibleassets 445 1,453 2,557 131 4,586Intangibleassets arisingon acquisition - 155,582 62,642 - 218,224Totalproperty,plant andequipment andintangibleassets (netbook value) 28,304 309,669 148,399 8,869 495,241Depreciationandamortisation 5,153 9,740 7,054 1,486 23,433 Balance sheet Total assetsSegment assets 97,355 574,057 196,337 24,736 892,485 ======== ======= ======== ========= =========Total liabilitiesSegmentliabilities 9,781 167,019 78,723 212,305 467,828 ======== ======= ======== ========= ========= 2. Business and geographical segments - continued Year ended31 December 2006 Generic Branded Injectables Corporate and Group other USD '000 USD '000 USD '000 USD '000 USD '000 -------- ------- ------- ------- --------- Revenue 113,674 130,114 67,570 5,664 317,022Cost 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 ======== ======= ======= =======Unallocatedcorporateexpenses - - - - (13,241) Share ofresults ofassociates - 938 - - 938 ======== ======= ======= ======= ---------Operatingprofit 75,247Finance income 5,258Finance expense (4,958)Other income 49 --------- Profit before tax 75,596Tax (19,639)Profit for the ---------year 55,957 =========Attributable to:Minorityinterest 1,435Equity holdersof the parent 54,522 --------- 55,957 ========= 2. Business and geographical segments - continued Other information 2006 Corporate Generic Branded Injectables and other Group USD '000 USD '000 USD '000 USD '000 USD '000 -------- -------- ------- -------- -------- Additions toproperty,plant andequipmentassets (cost) 7,569 21,953 21,184 2,465 53,171Acquisition ofsubsidiary'sproperty,plant andequipment(cost) - 34,400 - - 34,400Additions tointangibleassets - 1,494 1,200 21 2,715Intangibleassets arisingon acquisition - 14,929 - - 14,929Totalproperty,plant andequipment andintangibleassets (netbook value) 28,847 89,159 53,557 9,222 180,785Depreciationandamortisation 4,321 5,376 2,730 1,370 13,797 Balance sheet Total assetsSegment assets 95,510 233,323 72,750 86,773 488,356 ======== ======== ======= ======== ======== Total liabilitiesSegmentliabilities 8,054 85,212 31,157 14,134 138,557 ======== ======== ======= ======== ======== 2. Business and geographical segments - continued The following table provides an analysis of the Group's sales by geographicalmarket, irrespective of the origin of the goods/services: Sales revenue by geographical market ------------------- For the year ended 31 December 2007 2006 USD '000 USD '000 ----------- --------United States 143,510 129,778Middle East and North Africa 229,196 157,701Europe and Rest of the World 76,090 29,543 ----------- -------- 448,796 317,022 =========== ======== The following is an analysis of the additions to property, plant and equipmentand intangible assets, an analysis of total property, plant and equipment andintangible assets and an analysis of total assets by the geographical area inwhich the assets are located: Additions* to property, Total property, plant Total assets plant and equipment and equipment and and intangibles intangibles ---------------------- --------------------- -------------------------- 2007 2006 2007 2006 2007 2006 USD 000's USD 000's USD 000's USD 000's USD 000's USD 000's --------- --------- --------- --------- --------- --------- United 4,634 7,569 28,304 28,848 96,196 94,466StatesEurope 90,316 22,804 148,694 53,898 208,388 149,057MiddleEast andNorth Africa 240,054 74,842 318,243 98,039 587,901 244,833 -------- -------- -------- -------- -------- -------- 335,004 105,215 495,241 180,785 892,485 488,356 ======== ======== ======== ======== ======== ======== * Additions include property, plant and equipment and intangibles acquired withand arising on the acquisition of subsidiary undertakings. 3. Tax For the years ended 31 December 2007 2006 USD '000 USD '000 --------- ---------- Current tax: UK current tax 13,664 26,982 Double tax relief (13,664) (26,840) Foreign tax 19,552 23,093 Prior year adjustments - (500)Deferred tax 44 (3,096) --------- ---------- 19,596 19,639 ========= ========== UK corporation tax is calculated at 30% of the estimated assessable profit madein the UK for the year.Taxation for other jurisdictions is calculated at the rates prevailing in therespective jurisdiction. 4. Dividends 2007 2006 USD '000 USD '000 -------- ---------Amounts recognised as distributions to equity holders inthe year:Final dividend for the year ended 31 December 2006 of4.0 cents (2005: 0.89 cents) per share 6,765 1,489Interim dividend for the year ended 31 December 2007 of3.5 cents (2006: 3.0 cents) per share 5,931 5,020 -------- --------- 12,696 6,509 ======== ========= Proposed final dividend for the year ended 31 December 2007 of 4.0 cents (2006:4.0 cents) per share.Total dividends for the year 7.5 cents (2006: 7.0 cents) per share. 5. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: For the years ended 31 December 2007 2006 USD '000 USD '000 ------- -------Earnings for the purposes of basic anddiluted earnings per share being net profitattributable to equity holders of the parent 62,576 54,522 ======= ======= Number NumberNumber of shares '000 '000Weighted average number of Ordinary Sharesfor the purposes of basic earnings per share 169,216 167,279 Effect of dilutive potential Ordinary Shares :Share options 7,631 8,638 ------- -------Weighted average number of Ordinary Sharesfor the purposes of diluted earnings pershare 176,847 175,917 ======= ======= 2007 2006 Earnings per Earnings per share share Cents Cents ------- -------Basic 37.0 32.6 ------- -------Diluted 35.4 31.0 ------- ------- 6. Intangible assets Goodwill Marketing Customer Product Software In process Trade name Other rights relationships related R&D acquisition intangibles related intangibles Total USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 USD '000 ------- ------- -------- -------- -------- -------- -------- -------- --------CostBalance at 1January 2006 2,395 1,340 - 2,581 3,443 - - - 9,759Additions 21 998 - 1,037 659 - - - 2,715Acquisitionof subsidiaries 6,727 - 4,946 3,256 - - - - 14,929Subsequentadjustments (219) - - - - - - - (219)Translationadjustments - 121 - - - - - - 121 ------- ------- -------- -------- -------- -------- -------- -------- --------Balance at 1January 2007 8,924 2,459 4,946 6,874 4,102 - - - 27,305 Additions - 2,705 - 651 1,099 - - 131 4,586Acquisitionof subsidiaries 134,699 - 58,224 12,089 - 4,576 5,754 2,882 218,224Subsequentadjustments 394 - - - - - - - 394Translationadjustments 4,674 248 2,199 391 - 33 639 276 8,460 ------- ------- -------- -------- -------- -------- -------- -------- --------Balance at31 December2007 148,691 5,412 65,369 20,005 5,201 4,609 6,393 3,289 258,969 ------- ------- -------- -------- -------- -------- -------- -------- -------- AmortisationBalance at 1January 2006 (608) (102) - - (1,314) - - - (2,024)Charge forthe year - (152) - (125) (1,064) - - - (1,341) ------- ------- -------- -------- -------- -------- -------- -------- --------Balance at 1January 2007 (608) (254) - (125) (2,378) - - - (3,365) Charge forthe year - (303) (1,512) (477) (1,396) - - (371) (4,059)Acquisitionof subsidiaries - - - (72) - - - - (72)Translationadjustments - (35) (92) (12) - - - 6 (133) ------- ------- -------- -------- -------- -------- -------- -------- --------Balance at31 December 2007 (608) (592) (1,604) (686) (3,774) - - (365) (7,629) ------- ------- -------- -------- -------- -------- -------- -------- --------CarryingamountAt 31December2007 148,083 4,820 63,765 19,319 1,427 4,609 6,393 2,924 251,340 ======= ====== ========= ======== ======= ========= ======== ======== ========At 31December 2006 8,316 2,205 4,946 6,749 1,724 - - - 23,940 ======= ====== ========= ======== ======= ========= ======== ======== ======== 7. Inventories As at 31 December 2007 2006 USD '000 USD '000 -------- -------- Finished goods 36,405 21,684Work-in-progress 31,673 18,489Raw and packing materials 62,327 36,109Goods in transit 17,265 7,438 -------- -------- 147,670 83,720 ======== ======== Goods in transit include inventory held at third parties whilst in transitbetween Group companies. 8. Trade and other receivables As at 31 December 2007 2006 USD '000 USD '000 ------- ------- Trade receivables 173,832 109,266Prepayments 12,629 6,148Value added tax recoverable 3,647 5,701Interest receivable 302 427Employee advances 304 304 ------- ------- 190,714 121,846 ======= =======9. Trade and other payables As at 31 December 2007 2006 USD '000 USD '000 -------- -------- Trade payables 49,143 32,331Accrued expenses 25,392 15,000Employees' provident fund * 3,158 2,106VAT and sales tax payables 543 2,281Dividends payable ** 3,490 361Social security withholdings 1,026 653Income tax withholdings 588 382Other payables 984 802 -------- -------- 84,324 53,916 ======== ======== * The employee's provident fund liability represents largely the outstandingcontributions to Hikma Pharmaceuticals Limited - Jordan retirement benefit plan,on which the fund receives 5% interest. ** Dividends payable includes USD 3,261,000 reported at the acquisition of APM. 10. Share capital Authorised: 2007 2006 USD '000 USD '000 ------- -------500,000,000 Ordinary Shares of 10p each 88,700 88,700 ======= ======= Issued and fully paid - included in shareholders' equity: 2007 2006 ----------------- --------------------- Number '000 USD '000 Number '000 USD '000 ------- ------- ------- ------- At 1 January 168,164 29,712 166,798 29,457Issued during theyear 2,570 517 1,366 255 ------- ------- ------- -------At 31 December 170,734 30,229 168,164 29,712 ======= ======= ======= ======= On 17 January 2008, the Group placed equity share raising gross proceeds ofapproximately £81.6 million (USD 160.8 million). More details are provided innote 13. 11. Acquisitions of subsidiaries During the year, Hikma acquired five businesses; Ribosepharm GmbH, ThymoorganGmbH Pharmazie Co. KG, Arab Pharmaceutical Manufacturing Co, Alkan Pharma SAE,and Hikma Pharma Co. - Tunisia. Due to the timing of the acquisitions, the accounting for these, except forRibosepharm, has been disclosed as provisional. 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 goodwill arising are set outbelow: Book value Fair value Fair value adjustment ------- --------- ------- USD '000 USD '000 USD '000Net assets acquired:Product relatedintangibles 3,291 (1,838) 1,453Trade name - 5,529 5,529Customer relationships - 17,789 17,789Net deferred tax asset - 4,719 4,719Property, plant andequipment 285 - 285Inventory 4,750 - 4,750Other current assets 308 - 308Accounts receivable, net 4,085 - 4,085Cash and cash equivalents 2 - 2Trade accounts payable (3,728) - (3,728)Other current liabilities (4,594) - (4,594) ------- --------- -------Net assets acquired (100%) 4,399 26,199 30,598 ------- ---------Goodwill 12,376 -------Total consideration 42,974 =======Satisfied by :Cash 42,225Directly attributablecosts 749 ------- 42,974 =======Cash consideration 42,225Cash and cashequivalents acquired (2) -------Net cash outflow arisingon 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 year amounted to USD 30,988,000and USD 5,556,000 respectively. 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 net assets acquired in the transaction and the provisional goodwill arisingare set out below: Book value Provisional Provisional fair value Fair value adjustment --------- --------- ----------- USD '000 USD '000 USD '000Net assets acquired:Other relatedintangibles - 2,882 2,882Cash and cashequivalent 47 - 47Accountsreceivable,net 743 - 743Other currentassets 566 - 566Inventories 1,124 - 1,124Property,plant andequipment 7,781 - 7,781Financial debts (46) - (46)Capital leaseobligations-currentportion (276) - (276)Trade accountspayable (621) - (621)Other currentliabilities (395) - (395)Income taxprovision (62) - (62)Long-termFinancialdebts (2,426) - (2,426)Capital leaseobligations-long term (974) - (974)Net deferredtaxliabilities (154) (209) (363) --------- --------- -----------Net assetsacquired (100%) 5,307 2,673 7,980 --------- ---------Goodwill 22,614 -----------Totalconsideration 30,594 ===========Satisfied by :Cash 29,506Directlyattributablecosts 1,088 ----------- 30,594 =========== Cashconsideration 29,506Cash andcash equivalentsacquired (47) -----------Net cashoutflowarising onacquisition 29,459 =========== The revenue and net profit of Thymoorgan from the date of acquisition that isincluded in the Group's income statement for the year amounted to USD 5,588,000and USD 389,000 respectively. The amount of goodwill recognised in relation to the Thymoorgan acquisitionrelates to the value attributed to the employee know how within the business, asHikma do not have contractual or legal rights over these assets they do not meetthe identifiability criteria within IAS 38 and hence are reflected withingoodwill. In addition, the goodwill is also attributable to the anticipatedprofitability of the distribution of the products manufactured into the newHikma oncology market. Alkan Pharma SAE On 6 September 2007, the Group completed the acquisition of 100% of the issuedshare capital of Alkan Pharma SAE, subsequently re-named Hikma Pharma SAE forcash consideration of USD 60,505,000. Hikma Pharma SAE develops, manufacturesand markets generic pharmaceuticals in both solid and liquid form for theEgyptian market. Hikma Pharma Egypt's product portfolio spans a number oftherapeutic categories, including Alimentary and Metabolic, Musculoskeletal andInfectious Disease. The net assets acquired in the transaction and the provisional goodwill arisingare set out below: Book value Provisional Provisional fair value Fair value adjustment ---------- ----------- ------------ USD '000 USD '000 USD '000Net assets acquired:Customerrelationships - 16,121 16,121Productrelatedintangibles - 1,476 1,476In-processresearch anddevelopment - 1,055 1,055Cash and cashequivalents 1,856 - 1,856Accountsreceivable,net 7,088 - 7,088Other currentassets 255 - 255Inventories 3,559 - 3,559Deferred taxesasset 220 - 220Property,plant andequipment 5,084 3,151 8,235Financial debts (3,539) - (3,539)Trade accountspayable (1,324) - (1,324)Other currentliabilities (1,521) - (1,521)Income taxprovision (328) - (328)Provisions (75) - (75)Long-termfinancialdebts (883) - (883)Deferred taxliabilities - (4,361) (4,361) ---------- ----------- ------------Net assetsacquired (100%) 10,392 17,442 27,834 ---------- -----------Goodwill 33,232 ------------Totalconsideration 61,066 ============Satisfied by:Cash 60,505Directlyattributablecosts 561 ------------ 61,066 ============Cashconsideration 60,505Cash and cashequivalentsacquired (1,856) ------------Net cashoutflowarising onacquisition 58,649 ============ The revenue and net profit of Hikma Pharma Egypt from the date of acquisitionthat is included in the Group's income statement for the year amounted to USD6,470,000 and USD 1,827,000 respectively. Arab Pharmaceutical Manufacturing Company On 27 December 2007, the Group acquired Arab Pharmaceutical ManufacturingCompany located in Jordan for cash consideration of USD 163,842,000. APM is awell-established pharmaceutical company that develops and manufactures its ownbranded generic products. APM also manufacturers and markets a number ofin-licenced products from leading global pharmaceutical companies. APM'sproducts are distributed in more than 25 countries and its 200-strong sales andmarketing team operates across 14 MENA markets. The net assets acquired in the transaction and the provisional goodwill arisingare set out below: Book value Provisional Provisional fair value Fair value adjustment --------- -------- -------- USD '000 USD '000 USD '000Net assets acquired:Trade name - 225 225Customerrelationships - 24,314 24,314Productrelatedintangibles - 9,152 9,152In-processresearch anddevelopment - 3,521 3,521Cash and cashequivalents 470 - 470Accountsreceivable,net 25,511 - 25,511Other currentassets 256 - 256Inventories 24,806 - 24,806Financial andother noncurrent assets 411 - 411Investment inassociatedcompanies 4,542 - 4,542Property,plant andequipment 28,513 5,194 33,707Financial debts (7,401) - (7,401)Trade accountspayable (3,568) - (3,568)Other currentliabilities (7,449) - (7,449)Income taxprovision (28) (28)Provisions (2,577) - (2,577)Deferred taxliabilities - (4,962) (4,962) --------- -------- --------Net assetsacquired (100%) 63,486 37,444 100,930 --------- --------Goodwill 66,480 --------Totalconsideration 167,410 ========Satisfied by :Cash 163,842Directlyattributablecosts 3,568 -------- 167,410 ========Cashconsideration 163,842Cash andcashequivalentsacquired (470) --------Net cashoutflowarising onacquisition 163,372 ======== Hikma Pharma Co. - Tunisia On 9 February 2007, the Group completed the acquisition of the remaining 51% ofthe issued share capital of Hikma Pharma Co. - Tunisia located in Tunisia forcash consideration of USD 4,000 which is equal to the fair value of net assetsacquired. The business of Hikma Pharma Co. - Tunisia is the marketing andpromotion of medical products. Full year impact of acquisitions: If the acquisition of Thymoorgan, Hikma Pharma Egypt and APM had been completedon the first day of the financial year, the Group's revenues for the year wouldhave been approximately USD 508,307,000 and the Group's profit attributable toequity holders of the parent would have been approximately USD 72,405,000. Theappropriate additional contribution by entity for the period from the beginningof the year up to the acquisition is illustrated in the table below: Subsidiary Effect on Effect on--------------------- Group's Group's profit revenues ---------- ---------- USD '000 USD '000 Thymoorgan 3,422 453Hikma Pharma Egypt 11,722 2,570APM 44,367 6,806 ---------- ---------- 59,511 9,829 ========== ========== As Ribosepharm's full year results were consolidated into the Group results forthe year, this disclosure is not applicable for Ribosepharm. The impact of HikmaPharma Co. - Tunisia is not considered material. 12. Net cash from operating activities 2007 2006 USD '000 USD '000 -------- ------- Profit before tax 83,789 75,596Adjustments for:Depreciation, amortisation and impairment of:Property, plant and equipment 19,374 12,468Intangible assets 4,059 1,329Results from associated companies - (938)(Gains) / losses on disposal of property, plant andequipment and intangibles (202) 59Movement on provisions 1,078 362Deferred income (78) (59)Cumulative effect of change in fair value of derivatives (256) 27Stock options / awards granted 1,601 879Finance income (2,029) (5,258)Interest and bank charges 10,837 4,958 -------- -------Cash flow before working capital 118,173 89,423Change in trade and other receivables (29,453) (17,059)Change in due from associate / related party - (896)Change in other current assets (47) (290)Change in inventories (29,065) (17,565)Change in trade and other payables 17,774 610Change in other current liabilities (6,112) 138 -------- -------Cash generated by operations 71,270 54,361 Income tax paid (17,987) (19,397)Finance income 2,029 5,258Interest paid (10,166) (4,972) -------- -------Net cash generated from operating activities 45,146 35,250 ======== ======= 13. Subsequent events On 17 January 2008, a total of 17.0 million new ordinary shares of 10 pence eachin the Group were placed at a price of 480 pence per share, raising grossproceeds of approximately £81.6 million (USD 160.8 million). As part of thePlacing 5.23 million shares were placed with Darhold Limited at the PlacingPrice and 332,663 shares were placed with the Darwazah family and otherconnected individuals at the Placing Price. The total number of shares issuedrepresents 9.96% of Hikma's issued ordinary share capital prior to the placing.The estimated cost of the placing was USD 2,530,000. The Group used the proceeds from the placing to reduce borrowings incurred inconnection with its JD116.0 million (USD163.8 million) acquisition of ArabPharmaceutical Manufacturing Company thereby providing the Group with increasedflexibility to finance future growth. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hikma Pharmaceuticals