Half Yearly Report

RNS Number : 1244K

Hikma Pharmaceuticals Plc

16 August 2012

PRESS RELEASE

Hikma delivers a strong first half performance and remains on track to deliver revenue growth of 20% for the full year

London, 16 August 2012 - Hikma Pharmaceuticals PLC (LSE: HIK) (NASDAQ DUBAI: HIK), the fast growing global pharmaceutical group, today reports its interim results for the six months ended 30 June 2012.

Group financial highlights

Summary P&L $ million	H1 2012	H1 2011	Change
Revenue	532.3	394.8	+34.8%
Gross profit	234.1	172.6	+35.6%
Gross margin	44.0%	43.7%	+0.3

Operating profit	75.1	49.0	+53.1%

Adjusted operating profit 1	82.1	59.7	+37.4%
Adjusted operating margin	15.4%	15.1%	+0.3

EBITDA 3	103.7	70.5	+47.1%

Profit attributable to shareholders	40.4	33.1	+22.0%

Adjusted profit attributable to shareholders 3	46.0	40.7	+12.9%

Earnings per share (diluted) (cents)	20.4	16.7	+22.2%

Dividend per share (cents)	6.0	5.5	+9.1%

Net cash flow from operating activities	47.1	19.2	+144.9%

¹Before the amortisation of intangible assets (excluding software) and exceptional items (including acquisition and integration related expenses of $0.6 million (H1 2011: $6.7 million))

²Earnings before interest, tax, depreciation and amortisation

³Before the amortisation of intangible assets (excluding software) and exceptional items

· Group revenue increased by 34.8% to $532.3 million, with organic revenue up 7.6% 4

· Branded revenue growth of 24.6% reflects strong demand across our MENA markets, with organicgrowth of 12.8%. The Branded business remains on track for around 20% full year revenue growth, with gross and adjusted operating margins broadly in line with 2011 5

· Excellent performance in global Injectables delivered 94.0% revenue growth, with organic revenue growth of 25.7%, and adjusted operating margin of 22.0% 6

· Generics revenue decreased by 27.0% to $55.8 million, reflecting the impact of additional compliance work at the Eatontown facility and increased pricing pressure. Full year revenue guidance is revised to around $115 million

⁴Before the consolidation of the Multi-Source Injectables, Promopharm and Savanna businesses

⁵Before the consolidation of the Promopharm and Savanna businesses

⁶ Before the consolidation of the Multi-Source Injectables and Promopharm businesses

· Significant increase in Injectables margins more than offsets lower margins in the Generics business, with Group adjusted operating margin of 15.4%, compared to 15.1% in the first half of 2011

· Profit attributable to shareholders up 22.0% to $40.4 million. On an adjusted basis, profit attributable to shareholders is up 12.9% to $46.0 million

· Net cash flow from operating activities up $27.9 million to $47.1 million, reflecting growth in profitability and an ongoing focus on working capital management

· Continued new product delivery across all countries and markets - launched 37 products and received 33 product approvals - and enhancement of the portfolio through product acquisitions

· Increase in the interim dividend to 6.0 cents per share, up from 5.5 cents for the first half of last year

Said Darwazah, Chief Executive Officer of Hikma, said:

"We have had a strong start to the year in our Branded and Injectables businesses. I am pleased with the growth we have achieved in our key MENA markets this year. Our global Injectables business continues to deliver extremely strong growth, as we benefit from our increased scale and continued investment in quality and products. In our Generics business, where operations have been disrupted by additional compliance work, we expect sales to gradually improve in the second half.

Overall, the Group is performing well and the outlook is positive for the second half. I am pleased to be able to reiterate our Group guidance of around 20% revenue growth for the full year."

Enquiries

Hikma Pharmaceuticals PLC +44 (0)20 7399 2760

Susan Ringdal, Investor Relations Director

FTI Consulting +44 (0)20 7831 3113

Julia Phillips/Jonathan Birt/Matthew Cole

About Hikma

Hikma Pharmaceuticals PLC is a fast growing global pharmaceutical group focused on developing, manufacturing and marketing a broad range of both branded and non-branded generic and in-licensed products. Hikma's operations are conducted through three businesses: "Branded", "Injectables" and "Generics" based primarily in the Middle East and North Africa ("MENA") region, where it is a market leader, the United States and Europe. In 2011, Hikma achieved revenues of $918.0 million and profit attributable to shareholders of $80.1 million.

A presentation for analysts and investors will be held today at 09:30 at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. To join via conference call please dial: +44 (0) 203 140 0722. Alternatively you can listen live via our website at www.hikma.com. A recording of both the meeting and the call will be available on the Hikma website. Video interviews of Said Darwazah, CEO and Khalid Nabilsi, CFO are available at www.hikma.com. The contents of the website do not form part of this interim management report.

Interim management report

The interim management report set out below summarises the performance of Hikma's three main business segments, Branded, Injectables and Generics, for the six months ended 30 June 2012.

Group revenue by business segment (%)

	H1 2012	H1 2011
Branded	46.7%	50.6%
Injectables	42.3%	29.4%
Generics	10.5%	19.3%
Others	0.5%	0.7%

Group revenue by region (%)

	H1 2012	H1 2011
MENA	56.0%	58.2%
US	36.1%	30.4%
Europe and ROW	7.9%	11.4%

Branded

H1 2012 highlights:

• Branded revenue increased by 24.6%, with organic revenue up 12.8%

• Branded adjusted operating profit increased by 10.5%, with an adjusted operating margin of 21.1%

• On track to meet guidance of around 20% revenue growth for the full year, with gross and adjusted operating margins broadly in line with 2011

Branded revenue increased by 24.6% in the first half of 2012 to $248.8 million. Organic revenue grew 12.8% to $225.2 million, with the recently acquired Promopharm and Savanna 7businesses contributing a further $23.6 million.

⁷Formerly Elie Pharmaceuticals in Sudan

During the first half we delivered strong growth in our key MENA markets. In particular, we achieved an excellent performance in our Egyptian business, which grew by around 30%, reflecting increased manufacturing capacity, new product launches and our greater focus on strategic, higher value products. In Algeria, growth of over 20% was driven by an increase in locally manufactured products, stronger brand recognition and the strength and focus of our sales and marketing team.

In Saudi Arabia and Jordan we performed well in the first half, benefiting from a number of new product launches in Saudi Arabia and higher tender sales in both these markets. In Libya, our recovery has been impressive and we have achieved excellent growth and a leading market position. Our business in Morocco performed in line with our expectations, driven by its existing product portfolio. We have begun the process of registering Hikma's key strategic products in Morocco to deliver future growth. In Iraq, sales were disrupted in the first few months of the year as we changed our distributor. Sales in Iraq are now accelerating and we expect a stronger second half.

In Sudan, a significant devaluation of the Sudanese pound created uncertainty around pharmaceutical pricing and disrupted product shipments. Although we were able to offset some of the adverse currency impact, we achieved lower revenue in the first half compared to the first half of 2011. Continued volatility with respect to the exchange rate could further impact revenue in the second half.

In the first half of 2012, the Branded business launched a total of 30 products across all markets, including 2 new compounds and 4 new dosage forms and strengths. The Branded business also received 24 regulatory approvals across the region, including 1 for a new product.

Revenue from in-licensed products increased from $80.9 million to $89.2 million in the first half. This represented 35.8% of Branded revenue compared to 40.5% of Branded revenue in the first half of 2011. The change reflects strong growth in our branded generics portfolio and lower sales of Actos, which has been withdrawn in some of our markets.

Branded gross profit grew by 21.1% to $120.1 million in the first half and gross margin was 48.3% compared to 49.7%. The decline in margin is primarily attributable to the impact of increased salaries and benefits driven by inflationary pressure in the wake of the Arab Spring, the consolidation of the lower margin Promopharm business and higher tender sales. This is being partially offset by a greater focus on higher margin, strategic products and operational efficiencies.

Operating profit in the Branded business was $47.4 million, compared to $45.2 million in the first half of 2011. Adjusted operating profit increased by 10.5% to $52.6 million. Adjusted operating margin was 21.1%, compared to 23.8% in the first half of 2011, reflecting lower gross margin, an increase in salaries and benefits, higher R&D investment and the impact of adverse movements in the Sudanese pound and the Algerian dinar. The devaluation of the Sudanese pound in the first half of 2012 resulted in a transactional loss of approximately $3.4 million.

We continue to expect around 20% Branded revenue growth for the full year. Due to the weighting of sales and the benefit of operating leverage, we expect gross margin and adjusted operating margin for the full year to be broadly in line with 2011. However, if the Sudanese pound and the Algerian dinar remain at their current levels relative to the US dollar for the remainder of the year, we would expect a small negative impact on our margin outlook.

Injectables

H1 2012 highlights:

· Injectables revenue grew by 94.0% to $225.2 million, with organic revenue up 25.7%

· Strong performances across our US, MENA and European Injectables businesses

· Significant expansion in Injectables adjusted operating margin, up from 14.0% to 22.0%

Injectables revenue by region

	H1 2012	H1 2011
US	60.7%	37.6%
Europe and ROW	16.4%	31.3%
MENA	22.9%	31.1%

Revenue in our global Injectables business increased by 94.0% to $225.2 million, compared to $116.1 million in the first half of 2011.

US Injectables revenue grew by $93.0 million, or 213.0%, to $136.6 million. Organic revenue grew by $10.9 million, or 60.3%, to $29.0 million. This excellent performance reflects the strength of our product portfolio including recent product launches, our strong manufacturing and sales platform in the US and growth in our contract manufacturing business. Our quality track record means we are also benefiting from the favourable market conditions created by the supply constraints of our competitors.

In the MENA region, Injectables revenue increased by 42.9% to $51.6 million, compared to $36.1 million in the first half of 2011. Excluding Promopharm, which added Injectables revenue of $3.6 million, organic MENA Injectables revenue grew by 32.7%. This reflects strong demand in the private market, particularly in Saudi Arabia, Algeria and Libya and greater tender wins.

Revenue in our European Injectables business grew by 1.9% to $37.0 million. On a constant currency basis, European Injectables revenue growth was 10.1%, reflecting growth from new contract wins for our contract manufacturing business, as well as good growth in sales of our own drugs and recent product launches.

Injectables gross profit increased by 125.4% to $98.2 million, compared to $43.6 million in the first half of 2011. Gross margin increased to 43.6%, compared to 37.5% in the first half of 2011. This reflects the successful restructuring of the Multi-Source Injectables business ("MSI"), lower unit costs from greater capacity utilisation and growth in our contract manufacturing business.

Operating profit of the Injectables business increased by 257.2% to $47.7 million. Adjusted operating margin increased from 14.0% to 22.0%. This excellent margin expansion reflects the improvement in gross margin, significantly better operating leverage and tight control of operating costs.

We remain focussed on strengthening our Injectables product portfolio, with a particular emphasis on more differentiated products. In January 2012 we received approval for a New Drug Application ("NDA") for argatroban injection. In May 2012, we purchased the Abbreviated New Drug Application ("ANDA") for sodium ferrous gluconate injection from GeneraMedix Pharmaceuticals for a cash consideration of $16.0 million. During the first half of 2012, the Injectables business launched a total of 7 products across all markets, including 3 new compounds and 3 new dosage forms and strengths. The Injectables business also received a total of 15 regulatory approvals across all regions and markets, including 6 in MENA, 5 in Europe and 4 in the US.

Given the current market environment and the continued demand for our products, we expect the performance we achieved in Injectables in the first half will be sustained in the second half of the year.

Generics

H1 2012 highlights:

· Generics revenue decreased by 27.0% to $55.8 million

· Operating loss of $3.3 million reflects lower than expected sales resulting from the impact of additional compliance work at our Eatontown facility and increased pricing pressure

· Revised revenue guidance to around $115 million for the full year

Generics revenue was $55.8 million, down 27.0% compared to $76.4 million in the first half of 2011. This decline reflects an increase in pricing pressure and a slowdown in production at our Eatontown facility related to the additional compliance work we have undertaken to respond to FDA concerns raised in its warning letter of February 2012. We expect sales to gradually improve in the second half of the year and now expect full year revenue of around $115 million.

We continue to focus on our strategic priorities for this business, which include minimising our manufacturing costs and building our product portfolio. We are accelerating the transfer of products for manufacture in our MENA facilities to improve efficiencies and reduce operating costs. In the first half, 27.2% of Generics sales were manufactured in MENA, compared to 24.8% in the first half of 2011.

We are also building our R&D pipeline of oral products for the US market. In particular, we have made further progress in developing our relationship with Unimark in India with an agreement to collaborate on the development of fourteen ANDAs.

Generics gross profit was $15.2 million, compared to $29.2 million in the first half of 2011 and gross margin was 27.3%, compared to 38.3% in the first half of 2011. This reflects reduced operating leverage as a result of the significant slowdown in sales and an adverse change in product mix.

The Generics business made an operating loss of $3.3 million in the first half of 2012, compared to an operating profit of $10.2 million in the first half of 2011. This is due to lower sales, high fixed operating costs and increased R&D expenditure. With a better performance anticipated in the second half, we expect the business to breakeven for the full year.

Other businesses

Other businesses, which primarily comprise Arab Medical Containers, a manufacturer of plastic specialised packaging, International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, and the chemicals division of Hikma Pharmaceuticals Limited, contributed revenue of $2.5 million, compared to $2.7 million in the first half of 2011.

These other businesses delivered an operating loss of $2.0 million in the first half of 2012, compared to a loss of $1.6 million in the first half of 2011.

Group

Group revenue increased by 34.8% to $532.3 million in the first half of 2012. Excluding the contribution of MSI, Promopharm in Morocco and Savanna in Sudan, organic revenue growth was 7.6%. The Group is on track to meet its target of around 20% revenue growth for the full year.

The Group's gross profit increased by 35.6% to $234.1 million, compared to $172.6 million in the first half of 2011. Group gross margin was 44.0%, compared to 43.7%, with the significant gross margin improvement of the global Injectables business more than offsetting the lower Generics gross margin.

Group operating expenses grew by 28.7% to $159.0 million, compared to $123.6 million in the first half of 2011. Excluding the amortisation of intangible assets (excluding software) and exceptional items, 8 adjusted Group operating expenses grew by 33.2% to $152.0 million. The paragraphs below address the Group's main operating expenses in turn.

⁸In H1 2012, amortisation of intangible assets (excluding software) was $6.4 million (H1 2011: $4.0 million). In H1 2012, exceptional items included within general and administrative expenses were $0.6 million (H1 2011: $5.5 million)

Sales and marketing expenses were $74.1 million, or 13.9% of sales, compared to $57.0 million and 14.4% of sales in the first half of 2011. This reflects strong growth in our global Injectables business where relatively low incremental sales and marketing investment is required to generate new sales. This more than offset an increase in MENA sales and marketing expenditure due to higher wages and employee benefits.

General and administrative expenses increased by $10.8 million, or 24.0%, to $55.9 million in the first half. As a percentage of sales, general and administrative expenses reduced to 10.5%, compared to 11.4% in the first half of 2011. Excluding non-recurring transaction and integration costs, G&A expenses as a percentage of sales were 10.4%, compared to 10.0% in the first half of 2011. This increase primarily reflects an increase in employee salaries and benefits in MENA.

Investment in R&D grew by 49.2% to $17.1 million, with total investment in R&D representing 3.2% of Group revenue, compared to 2.9% in the first half of 2011. We expect R&D spend will increase in the second half of the year as we continue to execute plans to develop our R&D pipeline, particularly for injectable products.

Other net operating expenses increased by $1.9 million to $11.9 million reflecting an increase in foreign exchange losses, primarily due to movements in the Sudanese pound and slow moving stock provisions.

Operating profit for the Group increased by 53.1% to $75.1 million in the first half of 2012. Group operating margin increased to 14.1%, compared to 12.4% in the first half of 2011. On an adjusted basis, Group operating profit increased by 37.4% to $82.1 million and operating margin increased to 15.4%, up from 15.1% in the first half of 2011.

Research & Development 9

⁹Products are defined as pharmaceutical compounds sold by the Group. New compounds are defined as pharmaceutical compounds not yet launched by the Group and existing compounds being introduced into a new segment

The Group's product portfolio continues to grow. During the first half of 2012, we launched 5 new compounds, expanding the Group portfolio to 688 compounds in 1,696 dosage forms and strengths. We manufacture and/or sell 207 of these compounds under-license from the originator.

Across all businesses and markets, a total of 37 products were launched during the first half. In addition, the Group received 39 approvals.

	Total marketed products		Products launched in H1 2012
	Compounds	Dosage forms and strengths	New compounds	New dosage forms and strengths	Total launches across all countries 10

Branded	446	1,225	2	4	30

Injectables	174	356	3	3	7

Generics	48	115	-	-	-

Group	688	1,696	5	7	37

	Products approved in H1 2012			Products pending approval as at 30 June 2012
	New compounds	New dosage forms and strengths	Total approvals across all countries 10	New compounds	New dosage forms and strengths	Total pending approvals across all countries 10

Branded	1	2	24	133	212	297

Injectables	3	5	15	74	122	255

Generics	-	-	-	22	22	22

Group	4	7	39	229	356	574

¹⁰Totals include all compounds and formulations that are either launched, approved or pending approval across all markets

To ensure the continuous development of our product pipeline, we submitted 104 regulatory filings in the first half of the year across all regions and markets. As of 30 June 2012, we had a total of 574 pending approvals across all regions and markets.

At 30 June 2012, we had a total of 109 new products under development, the majority of which should receive several marketing authorisations for different strengths and/or product forms over the next few years.

Net finance expense

Net finance expense increased to $16.7 million, compared to $9.3 million in the first half of 2011 due to higher net debt, including an increase in loans in local currency that carry higher financing charges. This is explained in more detail in the net cash flow, working capital and net debt section below.

Profit before tax

Profit before tax for the Group increased by 45.1% to $57.8 million, compared to $39.9 million in the first half of 2011. Adjusted profit before tax increased by 28.3% to $64.8 million.

Tax

The Group incurred a tax expense of $15.0 million, compared to $4.8 million in the first half of 2011. The effective tax rate was 25.9%, compared to 11.9% in the first half of 2011. The increase in the tax rate is mainly attributable to the increased profitability of the US Injectables business. We now expect the effective tax rate for the Group to be around 23% for the full year.

Profit for the period

The Group's profit attributable to equity holders of the parent increased by 22.0% to $40.4 million in the first half of 2012. Adjusted profit attributable to equity holders of the parent increased by 12.9% to $46.0 million.

Earnings per share

Basic earnings per share increased by 20.3% to 20.6 cents, compared to 17.1 cents in the first half of 2011. Diluted earnings per share increased by 22.2% to 20.4 cents, compared to 16.7 cents in the first half of 2011. Adjusted diluted earnings per share was 23.3 cents, an increase of 13.1% over the first half of 2011.

Dividend

The Board has declared an interim dividend of 6.0 cents per share (approximately 3.8 pence per share), compared to 5.5 cents per share for the first half of 2011. The interim dividend will be paid on 8 October 2012 to eligible shareholders on the register at the close of business on 31 August 2012. The ex-dividend date is 29 August 2012 and the final date for currency elections is 14 September 2012.

Net cash flow, working capital and net debt

The Group generated operating cash flow of $47.1 million in the first half, up $27.9 million from $19.2 million in the first half of 2011. This increase in operating cash flow reflects the improved profitability of the Group in the first half of 2012 and better working capital management. Cash flow in the first half of 2011 was impacted by a non-recurring cash injection of $18.9 million to fund the initial working capital requirement of the MSI business at the time of its acquisition in May 2011.

The Group continued to deliver significant improvements in working capital in the first half, reducing its overall working capital cycle by 46 days to 208 days. Group receivable days reduced by 9 days to 108 days at 30 June 2012 and payable days decreased by 18 days to 66 days. Inventory days improved by 55 days to 166 days, reflecting lower inventories in MENA compared to the first half of 2011 when markets were disrupted by the Arab Spring.

Capital expenditure was $26.1 million, compared to $33.0 million in the first half of 2011. Around $16 million of that was spent in MENA, principally to develop our chemical plant in Jordan and the recently acquired Savanna business in Sudan, and to maintain our manufacturing facilities across the MENA region. Investment in the US of around $8 million was primarily to add new capacity at the Cherry Hill facility in New Jersey. In Portugal, investments included warehouse improvements and new machinery purchases. We now expect capital expenditure for the full year of around $65 million.

Group net debt 11increased from $322.7 million at 30 June 2011 to $473.0 million at 30 June 2012. Net debt on 31 December 2011 stood at $421.9 million. The increase in borrowing in the first half of 2012 was primarily to finance capital expenditure, the purchase of intangible assets and the purchase of additional shares in Promopharm.

¹¹Net debt is calculated as bank overdrafts and loans, long term financial debts and obligations under finance leases, less cash and cash equivalents, collateralised cash and restricted cash

Balance sheet

During the period, shareholder equity was negatively impacted by unrealised foreign exchange losses of $25.1 million, reflecting the depreciation of the Euro, the Sudanese pound and the Algerian dinar against the US dollar and the revaluation of net assets denominated in these currencies.

Summary and Outlook

Hikma has delivered a strong performance in the first half of 2012. The global Injectables business is delivering excellent growth and our Branded business is performing very well. This is being partially offset by the decline in the Generics business.

The Group remains on track to meet our full year target of around 20% revenue growth.

We are expecting stronger sales growth in the MENA region in the second half and we continue to expect our Branded business to deliver around 20% revenue growth for the full year, with gross margin and adjusted operating margin broadly in line with 2011. However, if the Sudanese pound and the Algerian dinar remain at their current levels relative to the US dollar for the remainder of the year, we would expect a small negative impact on our margin outlook.

Given the current market environment and the continued demand for our injectable products, we expect the performance of the global Injectables business in the first half of 2012 will be sustained in the second half of the year.

In our Generics business, we now expect revenue of around $115 million and the business to break even for the full year.

Overall we are pleased with the progress of the Group in the first half and the outlook for the full year.

Going concern statement

As stated in note 2 to the condensed financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than twelve months from the date of this report. Accordingly they continue to adopt the going concern basis in preparing the condensed financial statements.

Responsibility statement

The Board confirms that to the best of its knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months including their impact on the financial statements and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein which have had or could have a material financial effect on the financial position of the Group during the period).

By order of the Board

Said Darwazah

Chief Executive Officer

15 August 2012

Cautionary statement

This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

Forward looking statements

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

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

INDEPENDENT REVIEW REPORT TO HIKMA PHARMACEUTICALS PLC

We have been engaged by Hikma Pharmaceuticals PLC (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

15 August 2012

Condensed consolidated income statement

	Notes	H1 2012	H1 2011	FY 2011
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Continuing operations
Revenue	3	532,260	394,759	918,025
Cost of sales	3	(298,180)	(222,141)	(522,676)
Gross profit	3	234,080	172,618	395,349
Sales and marketing costs		(74,084)	(56,988)	(125,295)
General and administrative expenses		(55,893)	(45,073)	(107,540)
Research and development costs		(17,097)	(11,459)	(31,218)
Other operating expenses (net)		(11,937)	(10,053)	(12,608)
Total operating expenses		(159,011)	(123,573)	(276,661)
Adjusted operating profit		82,055	59,717	145,824
Exceptional items
- Acquisition and integration related expenses	4	(601)	(5,455)	(16,368)
- Inventory related adjustment	4	-	(1,203)	(1,770)
Intangible amortisation*	4	(6,385)	(4,014)	(8,998)

Operating profit		75,069	49,045	118,688
Loss from associated companies		(50)	-	(1,164)
Finance income		355	154	468
Finance expense		(17,039)	(9,484)	(23,368)
Other (expenses)/income (net)		(491)	152	(732)
Profit before tax		57,844	39,867	93,892
Tax	5	(14,976)	(4,755)	(10,423)
Profit for the period/year		42,868	35,112	83,469
Attributable to:
Non-controlling interests		2,468	1,987	3,362
Equity holders of the parent		40,400	33,125	80,107
		42,868	35,112	83,469
Earnings per share (cents)
Basic	7	20.6	17.1	41.3
Diluted	7	20.4	16.7	40.5
Adjusted basic	7	23.5	21.1	52.0
Adjusted diluted	7	23.3	20.6	51.0

On this page and throughout this interim financial information "H1 2012" refers to the six months ended 30 June 2012, "H1 2011" refers to the six months ended 30 June 2011 and "FY 2011" refers to the year ended 31 December 2011.

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

Condensed consolidated statement of comprehensive income

	H1 2012	H1 2011	FY 2011
	$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Profit for the period/year	42,868	35,112	83,469
Cumulative effect of change in fair value of available for sale investments	(19)	(9)	(42)
Cumulative effect of change in fair value of financial derivatives	(1,625)	(601)	(692)
Exchange difference on translation of foreign operations	(29,375)	14,381	(15,294)
Total comprehensive income for the period/year	11,849	48,883	67,441
Attributable to:
Non-controlling interests	(1,847)	2,537	3,557
Equity holders of the parent	13,696	46,346	63,884
	11,849	48,883	67,441

Condensed consolidated balance sheet

	Notes	30 June 2012	30 June 2011	31 December 2011
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Non-current assets
Intangible assets	8	426,684	294,804	408,804
Property, plant and equipment		413,410	391,842	421,357
Interests in associated companies		37,395	38,610	37,445
Deferred tax assets		34,839	23,443	36,072
Available for sale investments		415	468	435
Financial and other non-current assets		11,149	11,050	11,644
		923,892	760,217	915,757
Current assets
Inventories	9	271,862	269,490	239,260
Income tax asset		915	5,403	1,486
Trade and other receivables	10	343,949	287,165	315,856
Collateralised and restricted cash		6,637	2,510	2,595
Cash and cash equivalents		114,379	89,526	94,715
Other current assets		1,722	2,934	5,973
		739,464	657,028	659,885
Total assets		1,663,356	1,417,245	1,575,642
Current liabilities
Bank overdrafts and loans		180,166	159,119	152,853
Obligations under finance leases		17,149	3,727	3,300
Trade and other payables	11	175,214	146,747	171,098
Income tax provision		15,179	10,652	14,561
Other provisions		10,508	9,176	9,398
Other current liabilities		58,181	34,583	39,373
		456,397	364,004	390,583
Net current assets		283,067	293,024	269,302
Non-current liabilities
Long-term financial debts	12	393,842	231,999	344,895
Deferred income		212	318	249
Obligations under finance leases		2,861	19,894	18,134
Deferred tax liabilities		22,514	12,353	23,147
		419,429	264,564	386,425
Total liabilities		875,826	628,568	777,008
Net assets		787,530	788,677	798,634
Equity
Share capital		35,063	34,937	34,904
Share premium		278,528	277,440	278,094
Own shares		(120)	(2,292)	(2,222)
Other reserves		461,324	469,029	465,799
Equity attributable to equity holders of the parent		774,795	779,114	776,575
Non-controlling interests		12,735	9,563	22,059
Total equity		787,530	788,677	798,634

The financial statements of Hikma Pharmaceuticals PLC, registered number 5557934, were approved by the Board of Directors and signed on its behalf by:

Said Darwazah Breffni Byrne

Director Director 15 August 2012

Condensed consolidated statement of changes in equity

	Merger reserve $000	Revaluation reserves $000	Translation reserves $000	Retained earnings $000	Total reserves $000	Share capital $000	Share premium $000	Own shares $000	Total equity attributable to equity shareholders of the parent $000	Non-controlling interests $000	Total equity $000

Balance at 1 January 2011 (Audited)	33,920	4,085	(12,080)	409,724	435,649	34,525	275,968	(2,220)	743,922	6,378	750,300
Profit for the period	-	-	-	33,125	33,125	-	-	-	33,125	1,987	35,112
Cumulative effect of change in fair value of available for sale investments	-	-	-	(9)	(9)	-	-	-	(9)	-	(9)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(601)	(601)	-	-	-	(601)	-	(601)
Realisation of revaluation reserve	-	(91)	-	91	-	-	-	-	-	-	-
Currency translation loss	-	-	13,831	-	13,831	-	-	-	13,831	550	14,381
Total comprehensive income for the period	-	(91)	13,831	32,606	46,346	-	-	-	46,346	2,537	48,883
Issue of equity shares	-	-	-	-	-	412	1,472	-	1,884	-	1,884
Purchase of own shares	-	-	-	-	-	-	-	(112)	(112)	-	(112)
Cost of equity settled employee share schemes	-	-	-	3,634	3,634	-	-	-	3,634	-	3,634
Exercise of employees long term incentive plan	-	-	-	(40)	(40)	-	-	40	-	-	-
Deferred tax arising on share-based payments	-	-	-	(3,327)	(3,327)	-	-	-	(3,327)	-	(3,327)
Dividends on ordinary shares	-	-	-	(14,497)	(14,497)	-	-	-	(14,497)	-	(14,497)
Adjustment arising from change in non-controlling interests	-	-	-	1,264	1,264	-	-	-	1,264	160	1,424
Issue of equity shares of subsidiary	-	-	-	-	-	-	-	-	-	488	488
Balance at 30 June 2011 (Unaudited)	33,920	3,994	1,751	429,364	469,029	34,937	277,440	(2,292)	779,114	9,563	788,677
Balance at 1 January 2011 (Audited)	33,920	4,085	(12,080)	409,724	435,649	34,525	275,968	(2,220)	743,922	6,378	750,300

Profit for the year	-	-	-	80,107	80,107	-	-	-	80,107	3,362	83,469
Cumulative effect of change in fair value of available for sale investments	-	-	-	(42)	(42)	-	-	-	(42)	-	(42)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(692)	(692)	-	-	-	(692)	-	(692)
Realisation of revaluation reserve	-	(181)	-	181	-	-	-	-	-	-	-
Currency translation loss	-	-	(15,489)	-	(15,489)	-	-	-	(15,489)	195	(15,294)
Total comprehensive income for the period	-	(181)	(15,489)	79,554	63,884	-	-	-	63,884	3,557	67,441
Issue of equity shares	-	-	-	-	-	379	2,126	-	2,505	-	2,505
Purchase of own shares	-	-	-	-	-	-	-	(115)	(115)	-	(115)
Cost of equity settled employee share schemes	-	-	-	7,507	7,507	-	-	-	7,507	-	7,507
Exercise of employees long term incentive plan	-	-	-	(113)	(113)	-	-	113	-	-	-
Deferred tax arising on share-based payments	-	-	-	(5,644)	(5,644)	-	-	-	(5,644)	-	(5,644)
Current tax arising on share-based payments	-	-	-	3,750	3,750	-	-	-	3,750	-	3,750
Dividends on ordinary shares	-	-	-	(25,201)	(25,201)	-	-	-	(25,201)	(100)	(25,301)
Acquisition of subsidiaries	-	-	-	-	-	-	-	-	-	26,650	26,650
Adjustment arising from change in non-controlling interests	-	-	-	(14,033)	(14,033)	-	-	-	(14,033)	(14,914)	(28,947)
Issue of equity shares of subsidiary	-	-	-	-	-	-	-	-	-	488	488
Balance at 31 December 2011 (Audited)	33,920	3,904	(27,569)	455,544	465,799	34,904	278,094	(2,222)	776,575	22,059	798,634
Profit for the period	-	-	-	40,400	40,400	-	-	-	40,400	2,468	42,868
Cumulative effect of change in fair value of available for sale investments	-	-	-	(19)	(19)	-	-	-	(19)	-	(19)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(1,625)	(1,625)	-	-	-	(1,625)	-	(1,625)
Realisation of revaluation reserve	-	(91)	-	91	-	-	-	-	-	-	-
Currency translation loss	-	-	(25,060)	-	(25,060)	-	-	-	(25,060)	(4,315)	(29,375)
Total comprehensive income for the period	-	(91)	(25,060)	38,847	13,696	-	-	-	13,696	(1,847)	11,849
Issue of equity shares	-	-	-	-	-	159	434	-	593	-	593
Purchase of own shares	-	-	-	-	-	-	-	(147)	(147)	-	(147)
Cost of equity settled employee share schemes	-	-	-	3,675	3,675	-	-	-	3,675	-	3,675
Exercise of employees long term incentive plan	-	-	-	(117)	(117)	-	-	117	-	-	-
Exercise of employees management incentive plan	-	-	-	(2,132)	(2,132)	-	-	2,132	-	-	-
Deferred tax arising on share-based payments	-	-	-	(18)	(18)	-	-	-	(18)	-	(18)
Dividends on ordinary shares	-	-	-	(14,746)	(14,746)	-	-	-	(14,746)	(301)	(15,047)
Adjustment arising from change in non-controlling interests	-	-	-	(4,833)	(4,833)	-	-	-	(4,833)	(7,176)	(12,009)
Balance at 30 June 2012 (Unaudited)	33,920	3,813	(52,629)	476,220	461,324	35,063	278,528	(120)	774,795	12,735	787,530

Condensed consolidated cash flow statement

	Notes	H1 2012	H1 2011	FY 2011
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Net cash from operating activities	13	47,071	19,220	126,397
Investing activities
Purchases of property, plant and equipment		(29,340)	(33,199)	(69,032)
Proceeds from disposal of property, plant and equipment		417	313	696
Purchase of intangible assets		(27,582)	(7,179)	(8,967)
Proceeds from disposal of intangible assets		143	66	191
Acquisition of interest in associated companies		-	(38,610)	(38,610)
Investment in financial and other non-current assets		495	307	(287)
Acquisition of subsidiary undertakings, net of cash acquired		(6,207)	(105,825)	(217,779)
Payments of costs directly attributable to acquisitions	4	(1,519)	(3,892)	(10,147)
Finance income		348	154	468
Net cash used in investing activities		(63,245)	(187,865)	(343,467)
Financing activities
(Increase)/decrease in collateralised and restricted cash		(4,041)	1,063	978
Increase in long-term financial debts		99,885	197,695	335,353
Repayment of long-term financial debts		(50,034)	(51,488)	(68,364)
Increase in short-term borrowings		35,961	69,769	59,095
Decrease in obligations under finance leases		(1,215)	(489)	(2,028)
Dividends paid		(14,717)	(14,497)	(25,201)
Dividends paid to non-controlling shareholders		(301)	-	(100)
Interest paid		(15,938)	(9,555)	(23,758)
Proceeds from issue of new shares		446	1,772	2,390
Proceeds from non-controlling interest for capital increase in subsidiary		-	488	488
Acquisition of non-controlling interest in subsidiary		(12,009)	-	(29,196)
Net cash from financing activities		38,037	194,758	249,657
Net increase in cash and cash equivalents		21,863	26,113	32,587
Cash and cash equivalents at beginning of period/year		94,715	62,718	62,718
Foreign exchange translation movements		(2,199)	695	(590)
Cash and cash equivalents at end of period/year		114,379	89,526	94,715

Notes to the condensed set of financial statements (unaudited)

1. General information

The financial information for the year ended 31 December 2011 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011, which were prepared under International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board, have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

2. Accounting policies

The unaudited condensed set of financial statements for the six months ended 30 June 2012 have been prepared using the same accounting policies and on a basis consistent with the audited financial statements of Hikma Pharmaceuticals PLC (the 'Group') for the year ended 31 December 2011 which are prepared in accordance with IFRSs as adopted by the European Union.

Basis of preparation

The currency used in the preparation of the accompanying condensed set of financial statements is the US Dollar ($) as the majority of the Group's business is conducted in US Dollars.

The Group's condensed set of financial statements included in this half- yearly financial report have been prepared in accordance with International Accounting Standards 34 'Interim Financial Reporting' as adopted by the European Union. They were approved by the Board on 16 August 2012.

Taxes on income for interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Certain balances have been reclassified to conform with current period presentation, these include trade receivables as at 30 June 2011 which were shown net of $19,329,000 of provisions for expired goods, certain returns and other rebates, which have now been included in other current liabilities.

Going concern

The Group has $905.1 million of banking facilities of which $331.1 million were undrawn as at 30 June 2012. Of the undrawn facilities, $189.4 million was committed. These facilities are well diversified across the operating subsidiaries of the Group with a number of financial institutions.

About 50% of the Group's short-term and undrawn long-term facilities are of a committed nature.

We continue to expect the short-term facilities to be renewed upon maturity. In addition the Group maintained cash balances of $121 million as at 30 June 2012. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities and maturities of long-term debt, show that the Group should be able to operate within the levels of its facilities.

Although the current economic conditions may affect short-term demand for our products, as well as placing pressure on customers and suppliers which may face liquidity issues, the Group's geographic spread, product diversity, large customer and supplier base substantially mitigate these risks.

In addition, the Group operates in the relatively defensive generic pharmaceuticals industry which we expect to be less affected compared to other industries that are subject to greater cyclical changes.

After making enquiries, the Directors believe that the Group is adequately placed to manage its business and financing risks successfully despite the current uncertain economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statement.

Changes in accounting policy

The same accounting policies, presentation and method of computation are followed in the

condensed set of financial statements as applied in the Group's latest annual audited financial statements.

Adoption of new and revised standards

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 1(amended) Government Loans

IFRS 1 (amended) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

IFRS 7 and IAS 32(amended) Offsetting Financial Assets and Financial Liabilities

IFRS 9 Financial Instruments and subsequent amendments to IFRS 9 and IFRS 7 issued 16 December 2011

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IAS 1 (amended)	Presentation of Items of Other Comprehensive Income
IAS 12	Deferred Tax Recovery of Underlying Assets
IAS 19 (amended)	Employee Benefits
IAS 28 (revised)	Investments in Associates and Joint Ventures
Improvements 2011	Annual Improvements to IFRSs: 2009-2011 Cycle

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods.

3. Business and geographical segments

For management purposes, the Group is currently organised into three operating divisions - Branded, Injectables and Generics. These divisions represent the Group's reportable segments under IFRS 8 and are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below.

Six months ended
30 June 2012 (Unaudited)
	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	248,821	225,215	55,768	2,456	532,260
Cost of sales	(128,691)	(127,035)	(40,560)	(1,894)	(298,180)
Gross profit	120,130	98,180	15,208	562	234,080

Adjusted segment result	52,554	49,536	(3,291)	(2,042)	96,757
Exceptional items :
- Integration related expenses	(601)	-	-	-	(601)
Intangible amortisation*	(4,521)	(1,846)	(18)	-	(6,385)

Segment result	47,432	47,690	(3,309)	(2,042)	89,771
Unallocated corporate expenses					(14,702)
Operating profit					75,069
Results from associated companies					(50)
Finance income					355
Finance expense					(17,039)
Other expenses (net)					(491)
Profit before tax					57,844
Tax					(14,976)
Profit for the period					42,868
Attributable to:
Non-controlling interest					2,468
Equity holders of the parent					40,400
					42,868

Segment result is defined as operating profit for each segment.

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

"Others" mainly comprise Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals division of Hikma Pharmaceuticals Ltd (Jordan).

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

Segment assets and liabilities
30 June 2012 (Unaudited)
	Branded	Injectables	Generics	Corporate and Others	Group
	$000	$000	$000	$000	$000
Additions to property, plant and equipment (cost)	14,636	9,198	2,045	197	26,076
Additions to intangible assets	1,972	24,404	4,762	-	31,138
Total property, plant and equipment and intangible assets (net book value)	513,725	267,755	51,023	7,591	840,094
Depreciation	11,351	5,905	3,438	391	21,085
Amortisation (including software)	5,071	2,290	162	92	7,615
Interest in associated companies	-	-	-	37,395	37,395
Balance sheet
Total assets	1,013,755	402,575	189,657	57,369	1,663,356
Total liabilities	567,572	233,649	28,450	46,155	875,826

Six months ended
30 June 2011 (Unaudited)
	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	199,623	116,105	76,376	2,655	394,759
Cost of sales	(100,447)	(72,555)	(47,161)	(1,978)	(222,141)
Gross profit	99,176	43,550	29,215	677	172,618

Adjusted segment result	47,548	16,222	10,173	(1,591)	72,352
Exceptional items :
- Inventory related adjustments	-	(1,203)	-	-	(1,203)
Intangible amortisation*	(2,345)	(1,669)	-	-	(4,014)

Segment result	45,203	13,350	10,173	(1,591)	67,135

Adjusted Unallocated corporate expenses					(12,635)
Exceptional items :
- Acquisition related expenses					(5,455)
Unallocated corporate expenses					(18,090)
Operating profit					49,045
Finance income					154
Finance expense					(9,484)
Other income (net)					152
Profit before tax					39,867
Tax					(4,755)
Profit for the period					35,112
Attributable to:
Non-controlling interest					1,987
Equity holders of the parent					33,125
					35,112

Segment result is defined as operating profit for each segment.

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

"Others" mainly comprise Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals division of Hikma Pharmaceuticals Ltd (Jordan).

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

30 June 2011 (Unaudited)
	Branded	Injectables	Generics	Corporate and Others	Group
	$000	$000	$000	$000	$000
Additions to property, plant and equipment (cost)	24,057	3,048	3,761	2,119	32,985
Acquisition of subsidaries' property, plant and equipment (net book value)	-	50,342	-	-	50,342
Additions to intangible assets	6,191	988	-	-	7,179
Intangible assets arising on acquisition	-	18,060	-	-	18,060
Total property, plant and equipment and intangible assets (net book value)	415,339	226,018	33,969	11,320	686,646
Depreciation	9,648	3,749	2,363	480	16,240
Amortisation (including software)	3,078	1,904	96	98	5,176
Interest in associated companies	-	-	-	38,610	38,610
Balance sheet
Total assets	867,629	370,882	147,884	30,850	1,417,245
Total liabilities	342,946	246,534	26,677	12,411	628,568

Year ended
31 December 2011 (Audited)

	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	441,907	315,728	154,813	5,577	918,025
Cost of sales	(227,830)	(188,151)	(102,609)	(4,086)	(522,676)
Gross profit	214,077	127,577	52,204	1,491	395,349

Adjusted segment result	105,143	54,938	17,124	(2,369)	174,836
Exceptional items :
- Integration related expenses	(921)	(4,551)	-	-	(5,472)
- Inventory related adjustments	-	(1,770)	-	-	(1,770)
Intangible amortisation*	(5,763)	(3,186)	(39)	(10)	(8,998)
Segment result	98,459	45,431	17,085	(2,379)	158,596

Adjusted Unallocated corporate expenses					(29,012)
Exceptional items :
- Acquisition related expenses					(10,896)
Unallocated corporate expenses					(39,908)
Operating profit					118,688
Results from associated companies					(1,164)
Finance income					468
Finance expense					(23,368)
Other expenses (net)					(732)
Profit before tax					93,892
Tax					(10,423)
Profit for the period					83,469
Attributable to:
Non-controlling interest					3,362
Equity holders of the parent					80,107
					83,469

Segment result is defined as operating profit for each segment.

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

"Others" mainly comprise Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals division of Hikma Pharmaceuticals Ltd (Jordan).

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

31 December 2011 (Audited)
	Branded	Injectables	Generics	Corporate and Others	Group
	$000	$000	$000	$000	$000
Additions to property, plant and equipment (cost)	44,869	11,926	12,925	975	70,695
Acquisition of subsidaries' property, plant and equipment (net book value)	24,125	50,071	-	-	74,196
Additions to intangible assets	5,054	2,520	1,106	287	8,967
Intangible assets arising on acquisition	110,900	40,324	-	-	151,224
Total property, plant and equipment and intangible assets (net book value)	527,240	244,725	50,759	7,437	830,161
Depreciation	18,205	10,521	6,250	684	35,660
Amortisation (including software)	7,064	3,748	307	224	11,343
Interest in associated companies	-	-	-	37,445	37,445
Balance sheet
Total assets	958,709	389,819	168,526	58,588	1,575,642
Total liabilities	490,523	197,271	31,514	57,700	777,008

The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services:



	H1 2012	H1 2011	FY 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Middle East and North Africa	297,992	229,849	508,776
United States	192,363	120,013	317,334
Europe and Rest of the World	38,425	43,922	87,622
United Kingdom	3,480	975	4,293
	532,260	394,759	918,025

Included in revenues arising from the Branded and Injectables segments are revenues of approximately $54,365,000 (30 June 2011: $43,301,000 and 31 December 2011: $101,900,000) which arose from the Group's largest customer which is located in Saudi Arabia.

4. Exceptional items and intangible amortisation

Exceptional items are defined as those items that are material in nature or amount and are non-recurring; those are disclosed separately in the condensed consolidated income statementto assist in the understanding of the Group's underlying performance.


	H1 2012	H1 2011	FY 2011
	$000	$000	$000
Acquisition related expenses	-	(5,455)	(10,896)
Integration related expenses	(601)	-	(5,472)
	(601)	(5,455)	(16,368)
Inventory related adjustments	-	(1,203)	(1,770)
Exceptional items	(601)	(6,658)	(18,138)
Intangible amortisation*	(6,385)	(4,014)	(8,998)
Exceptional items and intangible amortisation	(6,986)	(10,672)	(27,136)
Tax effect	1,395	3,055	6,374
Impact on profit for the period/ year	(5,591)	(7,617)	(20,762)

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

During the period, the Group incurred $0.6 million in integrating Promopharm and Savanna in the Group.

In the previous year, acquisition and integration-related expenses are costs incurred in acquiring the Multi-Source Injectables business ("MSI"), Promopharm, and Savanna. Acquisition-related expenses are included in the unallocated corporate expenses while integration-related expenses are included in segment results.

Acquisition-related expenses mainly comprise third party consulting services, legal and professional fees.

$1.5 million (30 June 2011: $3.9 million and 31 December 2011: $10.1 million) of costs have been classified as investing activities in the cash flow statement relating to the cash outflow in respect of these costs in the period.

The inventory-related adjustments in previous year reflect the fair value uplift of the inventory acquired as part of the MSI acquisition.

5. Tax

	H1 2012	H1 2011	FY 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Current tax:
Foreign tax	14,969	4,423	15,541
Prior year adjustments	397	450	(1,358)
Deferred tax	(390)	(118)	(3,760)
	14,976	4,755	10,423

6. Dividends

	H1 2012	H1 2011	FY 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2011 of 7.5 cents (2010: 7.5 cents) per share	14,746	14,497	14,497
Interim dividend for the year ended 31 December 2011 of 5.5 cents per share	-	-	10,704
	14,746	14,497	25,201

The proposed interim dividend for the period ended 30 June 2012 is 6.0 cents (30 June 2011: 5.5 cents) per share.

7. Earnings per share

Earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares. The number of ordinary shares used for the basic and diluted calculations are shown in the table below. Adjusted basic earnings per share and adjusted diluted earnings per share are intended to highlight the adjusted results of the Group before exceptional items and intangible amortisation*. A reconciliation of the basic and adjusted earnings used is also set out below:

	H1 2012	H1 2011	FY 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	40,400	33,125	80,107
Exceptional items	601	6,658	18,138
Intangible amortisation*	6,385	4,014	8,998
Tax effect of adjustments	(1,395)	(3,055)	(6,374)
Adjusted earnings for the purposes of adjusted basic and diluted earnings per share being adjusted net profit attributable to equity holders of the parent	45,991	40,742	100,869
	Number	Number	Number
Number of shares:	'000	'000	'000
Weighted average number of Ordinary Shares for the purposes of basic earnings per share	195,954	193,330	194,135
Effect of dilutive potential Ordinary Shares :
Share-based awards	1,819	4,878	3,633
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share	197,773	198,208	197,768
	H1 2012	H1 2011	FY 2011
	Earnings per share	Earnings per share	Earnings per share
	Cents	Cents	Cents
Basic	20.6	17.1	41.3
Diluted	20.4	16.7	40.5
Adjusted basic	23.5	21.1	52.0
Adjusted diluted	23.3	20.6	51.0

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

8. Intangible assets

	Goodwill	Marketing rights	Customer relationships		Product related intangibles	In process R&D	Trade names	Other acquisition related intangibles	Software	Total
	$000	$000	$000		$000	$000	$000	$000	$000	$000
Cost
Balance at 1 January 2011	177,685	8,352		62,737	25,391	4,318	6,949	2,982	14,014	302,428
Additions	-	521		-	6,170	-	-	-	488	7,179
Acquisition of subsidiaries	5,804	-		-	12,195	-	-	61	-	18,060
Disposals	-	-		-	(50)	-	-	-	-	(50)
Translation adjustments	3,243	468		694	771	11	528	244	197	6,156
Balance at 30 June 2011	186,732	9,341		63,431	44,477	4,329	7,477	3,287	14,699	333,773
Balance at 1 January 2011	177,685	8,352		62,737	25,391	4,318	6,949	2,982	14,014	302,428
Additions	-	1,155		-	6,831	-	-	-	981	8,967
Acquisition of subsidiaries	99,311	-		17,216	30,275	-	4,286	73	63	151,224
Disposals	-	-		-	(100)	-	-	-	-	(100)
Translation adjustments	(6,983)	(197)		(1,259)	(715)	(51)	(268)	(65)	(179)	(9,717)
Balance at 31 December 2011	270,013	9,310		78,694	61,682	4,267	10,967	2,990	14,879	452,802
Additions	-	316		-	22,288	-	-	-	8,534	31,138
Adjustments*	606	-		-	-	-	-	-	-	606
Transfers	-	-		-	686	(686)	-	-	-	-
Disposals	(31)	-		-	(150)	-	-	-	-	(181)
Translation adjustments	(4,797)	(196)		(370)	(813)	(31)	(73)	(113)	(145)	(6,538)
Balance at 30 June 2012	265,791	9,430		78,324	83,693	3,550	10,894	2,877	23,268	477,827
Amortisation
Balance at 1 January 2011	(608)	(3,094)		(14,079)	(5,597)	(912)	(127)	(919)	(7,972)	(33,308)
Charge for the period	-	(440)		(2,118)	(1,161)	(140)	(57)	(98)	(1,162)	(5,176)
Translation adjustments	-	(135)		39	(182)	(24)	(5)	(59)	(119)	(485)
Balance at 30 June 2011	(608)	(3,669)		(16,158)	(6,940)	(1,076)	(189)	(1,076)	(9,253)	(38,969)
Balance at 1 January 2011	(608)	(3,094)		(14,079)	(5,597)	(912)	(127)	(919)	(7,972)	(33,308)
Charge for the year	-	(1,033)		(4,488)	(2,768)	(279)	(228)	(202)	(2,345)	(11,343)
Translation adjustments	-	100		226	139	30	12	29	117	653
Balance at 31 December 2011	(608)	(4,027)		(18,341)	(8,226)	(1,161)	(343)	(1,092)	(10,200)	(43,998)
Charge for the period	-	(436)		(2,635)	(2,819)	(117)	(276)	(102)	(1,230)	(7,615)
Transfers	-	-		-	(207)	207	-	-	-	-
Translation adjustments	-	85		42	180	29	12	38	84	470
Balance at 30 June 2012	(608)	(4,378)		(20,934)	(11,072)	(1,042)	(607)	(1,156)	(11,346)	(51,143)
Carrying amount
At 30 June 2012	265,183	5,052		57,390	72,621	2,508	10,287	1,721	11,922	426,684
At 31 December 2011	269,405	5,283		60,353	53,456	3,106	10,624	1,898	4,679	408,804
At 30 June 2011	186,124	5,672		47,273	37,537	3,253	7,288	2,211	5,446	294,804

The current period additions within product related intangible relate to licenses for products with an indefinite useful life. The software additions relate to the Group's ongoing SAP implementation.

*An adjustment of $0.6 million has been made to the provisional goodwill recognised on the acquisition of MSI. The measurement period for MSI closed on 2 May 2012.

9. Inventories

	30 June 2012	30 June 2011	31 December 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Finished goods	84,129	85,670	77,862
Work-in-progress	41,097	33,329	28,039
Raw and packing materials	130,952	136,561	114,449
Goods in transit	15,684	13,930	18,910
	271,862	269,490	239,260

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

10. Trade and other receivables

	30 June 2012	30 June 2011	31 December 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Trade receivables*	314,999	253,200	292,100
Prepayments	19,984	24,239	16,015
Value added tax recoverable	5,968	6,656	5,188
Interest receivable	433	701	490
Employee advances	2,565	2,369	2,063
	343,949	287,165	315,856

*See note 2.

11. Trade and other payables

	30 June 2012	30 June 2011	31 December 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Trade payables	108,626	102,341	97,756
Accrued expenses	52,176	31,973	60,276
Employees' provident fund *	4,779	3,072	4,181
VAT and sales tax payables	1,291	845	535
Dividends payable **	2,525	2,228	2,207
Social security withholdings	1,587	1,230	1,107
Income tax withholdings	2,492	2,456	2,482
Other payables	1,738	2,602	2,554
	175,214	146,747	171,098

* The employees' provident fund liability represents outstanding contributions to the Hikma Pharmaceuticals Ltd (Jordan) retirement benefit plan, on which the fund receives 5% interest.

** Dividends payable includes $2,009,000 (30 June 2011: $2,045,000 and 31 December 2011: $2,022,000) due to the previous shareholders of Arab Pharmaceutical Manufacturing.

12. Long-term financial debts


	30 June 2012	30 June 2011	31 December 2011
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Long-term loans	474,978	285,809	410,197
Less: current portion of loans	(81,136)	(53,810)	(65,302)
Long-term financial loans	393,842	231,999	344,895
Breakdown by maturity:
Within one year	81,136	53,810	65,302
In the second year	80,976	70,930	84,488
In the third year	75,569	45,271	63,732
In the fourth year	83,127	54,454	65,490
In the fifth year	53,369	49,987	58,069
Thereafter	100,801	11,357	73,116
	474,978	285,809	410,197

13. Net cash from operating activities

	Notes		H1 2012	H1 2011	FY 2011
			$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Profit before tax			57,844	39,867	93,892
Adjustments for:
Depreciation, amortisation of:
Property, plant and equipment			21,085	16,240	35,660
Intangible assets			7,615	5,176	11,343
Loss on disposal of property, plant and equipment			93	17	22
Losses/(Gain) on disposal of intangible assets			38	(17)	(91)
Movement on provisions			1,109	535	757
Movement on deferred income			(37)	(16)	(87)
Cost of equity-settled employee share schemes			3,675	3,634	7,507
Payments of costs directly attributable to acquisitions		4	1,519	3,892	10,147
Finance income			(348)	(154)	(468)
Interest and bank charges			17,033	9,484	23,368
Results from associates			50	-	1,164
Cash flow before working capital			109,676	78,658	183,214
Change in trade and other receivables			(30,799)	(35,947)	(59,898)
Change in other current assets			2,610	(1,775)	(4,570)
Change in inventories			(47,751)	(31,145)	(8,199)
Change in trade and other payables			11,164	15,486	15,987
Change in other current liabilities			16,427	(1,220)	1,958
Cash generated by operations			61,327	24,057	128,492
Income tax paid			(14,256)	(4,837)	(2,095)
Net cash generated from operating activities			47,071	19,220	126,397

14. Foreign exchange rates

	Period end rates				Average rates
	30 June 2012	30 June 2011	31 December 2011	H1 2012		H1 2011	FY 2011


USD/EUR	0.7950	0.6949	0.7722	0.7704		0.7127	0.7180
USD/Sudanese Pound	5.3135	2.9000	2.8918	2.9727		3.0746	2.9869
USD/Algerian Dinar	78.8770	71.7025	76.0061	75.4000		72.3008	72.8147
USD/Saudi Riyal	3.7495	3.7495	3.7495	3.7495		3.7495	3.7495
USD/British Pound	0.6403	0.6242	0.6470	0.6340		0.6186	0.6233
USD/Jordanian Dinar	0.7090	0.7090	0.7090	0.7090		0.7090	0.7090
USD/Egyptian Pound	6.0790	5.9869	6.0481	6.0533		5.9361	5.9648
USD/Japanese Yen	79.5406	80.9900	77.4136	79.7230		81.9398	79.7414
USD/Moroccan Dirham	8.7514	8.7430	8.6133	8.8542		8.4910	8.3682

15. Related party balances

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associate and other related parties are disclosed below.

Trading transactions:

During the period, Group companies entered into the following transactions with related parties:

Darhold Limited: is a related party of the Group because it is one of the major shareholders of Hikma Pharmaceuticals PLC with an ownership percentage of 29.0% at 30 June 2012 (30 June 2011: 29.3% and 31 December 2011: 29.2%).

Other than dividends (as paid to all shareholders), there were no transactions between the Group and Darhold Limited during the period.

Capital Bank - Jordan: is a related party of the Group because during the period two board members of the Bank were also board members of Hikma Pharmaceuticals PLC. Total cash balances at Capital Bank - Jordan were $2,991,000 (30 June 2011: $462,000 and 31 December 2011: $610,000). Loans and overdrafts granted by Capital Bank to the Group amounted to $8,448,000 (30 June 2011: $372,000 and 31 December 2011: $3,841,000) with interest rates ranging between 9 % and 3 month LIBOR + 1%. Total interest expense incurred against Group facilities was $165,000 (H1 2011: $9,000 and FY 2011: $7,000). No interest income was received in any period and total commission paid in the period was $38,000 (H1 2011: $16,000 and 2011: $8,000).

Jordan International Insurance Company: is a related party of the Group because one board member of the insurance company is also a board member of Hikma Pharmaceuticals PLC. Total insurance premiums paid by the Group to Jordan International Insurance Co during the period were $1,797,000 (H1 2011: $2,329,000 and FY 2011: $3,035,000). The Group's insurance expense for Jordan International Insurance Co contracts in the period was $2,715,000 (H1 2011: $1,953,000 and FY 2011: $2,902,000). The amounts due to Jordan International Insurance Co at 30 June 2012 were $577,000 (30 June 2011: $272,000 and 31 December 2011: Due from $109,000).

Mr. Yousef Abd Ali: Mr. Yousef Abd Ali is a related party of the Group because he holds 33% of Hikma Liban SARL in Lebanon. The amount owed to Mr. Yousef by the Group as at 30 June 2012 was $150,000 (30 June 2011: $161,000 and 31 December 2011: $150,000).

Labatec Pharma SA: is a related party of the Group because it is owned by Mr. Samih Darwazah.

The Group sells to Labatec Pharma and purchases from Labatec Pharma certain products for resale which gives both companies access to additional markets. During the period to 30 June 2012 the Group's total sales to Labatec Pharma amounted to $215,000 (H1 2011: Nil and FY 2011: $338,000) and the Group total purchases from Labatec Pharma amounted to $1,396,000 (H1 2011: $1,177,000 and FY 2011: $3,805,000). At 30 June 2012 the amount owed to Labatec Pharma from the Group was $892,000 (30 June 2011: $1,269,000 and 31 December 2011: $753,000).

King and Spalding: is a related party of the Group because a partner of the firm is a board member and company secretary of West-Ward Pharmaceutical Corp. King and Spalding is an outside legal counsel firm that handles general legal matters for West-Ward. During the period to June 2012 fees of $45,000 (H1 2011: $951,000 and FY 2011: $1,216,000) were paid for legal services provided.

Principal risks and uncertainties

The Group's business faces risks and uncertainties which could have a significant effect on its financial condition, results of operation or performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.

Operational risks

Risk	Potential impact	Mitigation
Compliance with regulatory requirements
> Failure to comply with applicable regulatory requirements and manufacturing standards (often referred to as 'Current Good Manufacturing Practices' or cGMP)	> Delays in supply or an inability to market or develop the Group's products > Delayed or denied approvals for the introduction of new products > Product complaints or recalls > Bans on product sales or importation > Disruptions to operations > Potential for litigation	> Commitment to maintain the highest levels of quality across all manufacturing facilities > Strong global compliance function that oversees compliance across the Group > Remuneration and reward structure that helps retain experienced personnel > Continuous staff training and know-how exchange > On-going development of standard operating procedures
Regulation changes
> Unanticipated legislative and regulatory actions, developments and changes affecting the Group's operations and products	> Restrictions on the sale of one or more of our products > Restrictions on our ability to sell our products at a profit > Unexpected additional costs required to produce, market or sell our products > Increased compliance costs	> Strong oversight of local regulatory environments to help anticipate potential changes > Local operations in all of our key markets > Representation and/or affiliation with local industry bodies > Diverse geographical and therapeutic business model
Commercialisation of new products
> Delays in the receipt of marketing approvals, the authorisation of price and re-imbursement > Lack of approval and acceptance of new products by physicians, patients and other key decision-makers > Inability to confirm safety, efficacy, convenience and/or cost-effectiveness of our products as compared to competitive products > Inability to participate in tender sales	> Slowdown in revenue growth from new products > Inability to deliver a positive return on investments in R&D, manufacturing and sales and marketing	> Experienced regulatory teams able to accelerate submission processes across all of our markets > Highly qualified sales and marketing teams across all markets > A diversified product pipeline with 229 compounds pending approval, covering a broad range of therapeutic areas > A systematic commitment to quality that helps to secure approval and acceptance of new products and mitigate potential safety issues
Product safety
> Unforeseen product safety issues for marketed products, particularly in respect of in-licensed products	> Interruptions to revenue flow > Costs of recall, potential for litigation > Reputational damage	> Diversification of product portfolio across key markets and therapies > Working with stakeholders to understand issues as they arise
Product development
> Failure to secure new products or compounds for development	> Inability to grow sales and increase profitability for the Group > Lower return on investment in research and development	> Experienced and successful in-house R&D team, with specifically targeted product development pathways > Continually developing and multi-faceted approach to new product development > Strong business development team > Track record of building in-licensed brands > Position as licensee of choice for our key MENA geography
Co-operation with Third parties
> Inability to renew or extend in-licensing or other co-operation agreements with third parties	> Loss of products from our portfolio > Revenue interruptions > Failure to recoup sales and marketing and business development costs	> Investment in long-term relationships with existing in-licensing partners > Experienced legal team capable of negotiating robust agreements with our partners > Continuous development of new partners for licensing and co-operation > Diverse revenue model with in-house R&D capabilities
Increased competition
> New market entrants in key geographies > On-going pricing pressure in increasingly commoditised markets	> Loss of market share > Decreasing revenues on established portfolio	> On-going portfolio diversification, differentiation and renewal through internal R&D, in-licensing and product acquisition > Continuing focus on expansion of geographies and therapeutic areas
Disruptions in the manufacturing supply chain
> Inability to procure active ingredients from approved sources > Inability to procure active ingredients on commercially viable terms > Inability to procure the quantities of active ingredients needed to meet market requirements	> Inability to develop and/or commercialise new products > Inability to market existing products as planned > Lost revenue streams on short notice > Reduced service levels and damage to customer relationships > Inability to supply finished product to our customers in a timely fashion	> Alternate approved suppliers of active ingredients > Long-term relationships with reliable raw material suppliers > Corporate auditing team continuously monitors regulatory compliance of API suppliers > Focus on improving service levels and optimising our supply chain
Economic and political and unforeseen events
> The failure of control, a change in the economic conditions (including the Eurozone), political environment or sustained civil unrest in any particular market or country > Unforeseen events such as fire or flooding could cause disruptions to manufacturing or supply	> Disruptions to manufacturing and marketing plans > Lost revenue streams > Inability to market or supply products	> Geographic diversification, with 25 manufacturing facilities and sales in more than 40 countries > Product diversification, with 688 products and 1,696 dosage strengths and forms
Litigation
> Commercial, product liability and other claims brought against the Group	> Financial impact on Group results from adverse resolution of proceedings > Reputational damage	> In-house legal counsel with relevant jurisdictional experience

Financial risks

Risk	Impact	Mitigation
Foreign exchange risk
> Exposure to foreign exchange movements, primarily in the European, Algerian, Sudanese and Egyptian currencies	> Fluctuations in the Group's net asset values and profits upon translation into US dollars	> Entering into currency derivative contracts where possible > Foreign currency borrowing > Matching foreign currency revenues to in-jurisdiction costs
Interest rate risk
> Volatility in interest rates	> Fluctuating impact on profits before taxation	> Optimisation of fixed and variable rate debt as a proportion of our total debt > Use of interest rate swap agreements
Credit Risk
> Inability to recover trade receivables > Concentration of significant trade balances with key customers in the MENA region and the US	> Reduced working capital funds > Risk of bad debt or default	> Clear credit terms for settlement of sales invoices > Group Credit policy limiting credit exposures > Use of various financial instruments such as letters of credit, factoring and credit insurance arrangements
Liquidity Risk
> Insufficient free cash flow and borrowings headroom	> Reduced liquidity and working capital funds > Inability to meet short-term working capital needs and, therefore, to execute our long term strategic plans	> Continual evaluation of headroom and borrowing > Committed debt facilities > Diversity of institution, subsidiary and geography of borrowings
Tax
> Changes to tax laws and regulations in any of the markets in which we operate	> Negative impact on the Group's effective tax rate > Costly compliance requirements	> Close observation of any intended or proposed changes to tax rules, both in the UK and in other key countries where the Group operates

This information is provided by RNS

The company news service from the London Stock Exchange

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