Final Results
PRESS RELEASE
Hikma delivers an excellent performance in 2013 with Group revenue growth of 23% and EPS up 111%
Hikma expects continued growth in 2014
London, 12 March 2014 - Hikma Pharmaceuticals PLC ("Hikma", "Group") (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY), the fast growing multinational pharmaceutical group, today reports its preliminary results for the year ended 31 December 2013.
2013 highlights
Group
· Group revenue increased by 23% to $1,365 million, driven by strong underlying growth and doxycycline sales
· Group adjusted operating margin rose to 30.3%, up from 17.5%, reflecting significant improvement in Generics and Injectables margins
· Profit attributable to shareholders increased by 112% to $212 million. On an adjusted basis, profit attributable to shareholders rose 128% to $274 million
· Basic EPS increased 111% to 107.6 cents per share
· Net cash flow from operating activities increased by $153 million to $337 million
· New product introductions continued across all countries and markets - launched 104 products and received 241 new product approvals
· Proposed final dividend of 13.0 cents per share, plus a special dividend of 4.0 cents per share, making a full year dividend of 20.0 cents per share and a total special dividend for the year of 7.0 cents per share
Branded
· Branded revenue grew 5%, and 8% in constant currency, in line with guidance
· Branded adjusted operating profit grew by 9% to $135 million, with a significant improvement in adjusted operating margin, up 100 basis points to 24.4%
Injectables
· Global Injectablesrevenue increased by 14%, driven by a strong performance in the US, up 23%
· Adjusted operating margin of 31.0%, up from 26.2% in 2012, reflecting pricing improvements, new product launches and operational efficiencies
Generics
· Generics revenue increased by158% to $268 million, reflecting very strong doxycycline sales
· Generics operating profit of $127 million, after remediation-related and other exceptional costs of $39 million
Said Darwazah, Chief Executive Officer of Hikma, said:
"The Group had an excellent year, with all of our businesses delivering a strong performance and improved profitability.
In the MENA region, our focus on improving the product mix, enhancing our sales activities and driving manufacturing efficiencies delivered good growth and better profitability. Our global Injectables business continued to perform very well, particularly in the US, where we are maximising the potential of our portfolio and further improving margins. Our continued investment in our product pipeline and focus on operational excellence will help to sustain future growth.
Our Generics business delivered very strong revenue, driven primarily by doxycycline, and generated significant cash flow. This enabled us to cover the costs of remediating our Eatontown facility and further strengthen the Group balance sheet as we continue to look at acquisition opportunities across our businesses.
Overall, I am very pleased with the results we achieved in 2013 and confident about the prospects for 2014."
Group financial highlights
|
Summary P&L $ million |
2013
|
2012
|
Change |
|
Revenue |
1,365 |
1,109 |
+23% |
|
|
|
|
|
|
Gross profit |
764 |
504 |
+52% |
|
Gross margin |
56.0% |
45.4% |
+10.6 |
|
|
|
|
|
|
Operating profit |
352 |
167 |
+111% |
|
413 |
194 |
+113% |
|
|
Adjusted operating margin |
30.3% |
17.5% |
+12.8 |
|
|
|
|
|
|
EBITDA[3] |
427 |
226 |
+89% |
|
Adjusted EBITDA1,2,3 |
463 |
240 |
+93% |
|
|
|
|
|
|
Profit attributable to shareholders |
212 |
100 |
+112% |
|
|
|
|
|
|
Adjusted profit attributable to shareholders1, 2 |
274 |
120 |
+128% |
|
|
|
|
|
|
Basic earnings per share (cents) |
107.6 |
51.1 |
+111% |
|
Adjusted basic earnings per share (cents) 1, 2 |
139.1 |
61.4 |
+127% |
|
|
|
|
|
|
Dividend per share (cents) |
20.0 |
16.0 |
+25% |
|
Special dividend per share (cents) |
7.0 |
-- |
-- |
|
Total dividend per share (cents) |
27.0 |
16.0 |
+69% |
|
|
|
|
|
|
Net cash flow from operating activities |
337 |
184 |
+83% |
Enquiries
Hikma Pharmaceuticals PLC
Susan Ringdal, VP Corporate Strategy and Investor Relations +44 (0)20 7399 2760/ +44 7776 477050
Lucinda Henderson, Investor Relations Manager +44 (0)20 7399 2765/ +44 7818 060211
FTI Consulting
Ben Atwell/ Matthew Cole/ Julia Phillips +44 (0)20 7831 3113
About Hikma
Hikma Pharmaceuticals PLC is a fast growing 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 2013, Hikma achieved revenues of $1,365 million and profit attributable to shareholders of $212 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) 203 139 4830 or 0808 237 0030 (UK toll free) and use participant PIN code: 59706264#. 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 atwww.hikma.com. The contents of the website do not form part of this preliminary results announcement.
Business and financial review
The business and financial review set out below summarises the performance of Hikma's three main business segments, Branded, Injectables and Generics, for the year ended 31 December 2013.
Group revenue by business segment (%)
|
|
2013 |
2012 |
|
Branded |
41% |
48% |
|
Injectables |
39% |
42% |
|
Generics |
20% |
9% |
|
Others |
0% |
1% |
Group revenue by region (%)
|
|
2013 |
2012 |
|
MENA |
47% |
56% |
|
US |
46% |
36% |
|
Europe and ROW |
7% |
8% |
Branded
2013 highlights:
• Branded revenue increased by 5%, and 8% in constant currency, in line with guidance
• Branded adjusted operating profit increased by 9%, with an adjusted operating margin of 24.4%, up from 23.4%
• 69 product launches and 4 new in-license agreements
Branded revenue increased by 5% in 2013 to $554 million, compared with $529 million in 2012. On a constant currency basis, Branded revenue was $570 million, up 8%, reflecting good performances across key markets. Although our decision to cut low margin tender sales impacted revenue, this strategy has helped to drive improved profitability. Across all of our MENA markets, we are benefiting from our increased focus on higher value, strategic products, enhanced sales and marketing activities and operational efficiencies.
Our Egyptian business achieved steady revenue growth, despite the political instability during the year and the significant depreciation in the Egyptian pound against the US dollar of around 12%. On a constant currency basis, revenue growth in Egypt was around 20%. This reflects a stronger focus on strategic, high margin products and our continued emphasis on driving value rather than volume growth through new product launches. This business was strengthened by the acquisition of the Egyptian Company for Pharmaceuticals and Chemical Industries ("EPCI") in January 2013 for an aggregate cash consideration of $21 million. This acquisition added a number of strategic products, including several cephalosporins and ophthalmics, and a sales force of more than 130 people.
In Algeria, revenue growth of 6% was driven by our broad product portfolio and new product launches. We continued to strengthen our business in Algeria, increasing the volume of products that we manufacture locally and enhancing our local R&D capabilities, which drove an increase in product submissions over the year. Our business in Saudi Arabia delivered strong growth in the private market in 2013, however, our decision to significantly reduce low margin tender sales meant that overall revenue was slightly lower than in 2012. This strategy has strengthened the overall business, with double-digit revenue growth in the second half, and our strong pipeline of new product launches is expected to support good growth in 2014.
In Morocco, we received our first approvals for Hikma products in the second half of 2013 and these products have recently been launched. This enlarged portfolio, combined with the actions we have taken to strengthen our sales team in Morocco and upgrade our manufacturing operations, will enable us to deliver a strong performance in 2014. Our businesses in Jordan and Tunisia performed well this year and in Iraq we delivered particularly strong growth, benefiting from the appointment of a new distributor in 2012. In Sudan, our local manufacturing facility and new product registrations are driving strong growth.
As well as continuing to invest in our existing MENA markets, we are actively looking at opportunities to enter new markets. In September 2013, we began our expansion into sub-Saharan Africa when we signed a 50:50 joint venture agreement with MIDROC Pharmaceuticals Limited, a member of Sheikh Mohammed Hussein Al Amoudi's MIDROC Group, to enter the Ethiopian pharmaceutical market. The joint venture will establish local manufacturing and will market and distribute pharmaceutical products in Ethiopia.
During 2013, the Branded business launched a total of 69 products across all markets, including 16 new compounds and 27 new dosage forms and strengths. The Branded business also received 140 regulatory approvals across the region.
Revenue from in-licensed products increased from $195 million to $210 million in 2013, reflecting strong demand for key products. In-licensed products represented 38% of Branded revenue compared with 37% in 2012. We signed 4 new licensing agreements for innovative oral products during 2013, which will support our continued focus on growing our portfolio of higher value products in growing therapeutic categories.
Branded gross profit grew by 7% to $276 million in 2013 and gross margin was 49.8%, compared with 48.6% in 2012. The improvement in gross margin primarily reflects good control of overhead costs as well as a favourable product mix, achieved through our focus on higher value products, and a reduction in low margin tender sales. Lower raw material prices, due to the benefits of economies of scale and movements in the Japanese yen against the US dollar, also contributed to the margin improvement.
Operating profit in the Branded business increased by 12% to $124 million, compared with $111 million in 2012. Adjusted operating margin was 24.4%, up 100 basis points from 23.4% in 2012, after excluding the amortisation of intangibles of $10 million and other non-recurring severance costs of $1 million. The margin improvement is a result of our success in driving higher margin sales, combined with enhanced sales and marketing activities and operational efficiencies. These actions have enabled us to absorb wage inflation across the MENA region and disruptions related to the Arab Spring.
On a constant currency basis, we expect Branded revenue growth of around 10% in 2014, driven by strong market fundamentals in MENA and the investment we have been making to develop our product portfolio and increase capacity. Following the significant improvement in adjusted operating margin that we delivered in 2013, we expect margins in 2014 to remain stable.
Injectables
2013 highlights:
· Injectables revenue grew by 14% to $536 million
· US Injectables delivered an excellent performance, reflecting our increasingly strong competitive position
· Significant improvement in Injectables adjusted operating margin, up from 26.2% to 31.0%
Injectables revenue by region
|
|
2013 |
2012 |
|
US |
68% |
63% |
|
MENA |
17% |
20% |
|
Europe and ROW |
15% |
17% |
Revenue in our global Injectables business increased by 14% to $536 million, compared with $470 million in 2012.
US Injectables revenue grew by $67 million, or 23%, to $363 million. This excellent performance reflects our success in securing price increases, shifting the product mix and launching new products. Our strong quality track record has helped to strengthen our competitive position in the US market and enhance our customer relationships. We expect our broad product portfolio, including higher value, more differentiated products, to drive continued strong growth in the US.
In Europe, Injectables revenue was $81 million, up 4% from $78 million in 2012. We continue to successfully offset double-digit price erosion with strong volume growth and new product launches. During the year, demand for contract manufacturing remained strong. Revenue in our MENA Injectables business decreased by 4% to $92 million, compared with $96 million in 2012, primarily due to lower tender sales in 2013. However, due to the change in product mix, we achieved double-digit growth in profitability. We expect this business to deliver a stronger performance in 2014 as a result of enhancing our Injectables sales teams in the MENA and increasing our R&D investment.
Injectables gross profit increased by 29% to $282 million, compared with $219 million in 2012. Gross margin increased significantly to 52.6%, compared with 46.6% in 2012. This reflects our efforts to maximise the potential of existing products and optimise pricing, favourable market conditions in the US and strong operational management.
Operating profit of the Injectables business increased by 34% to $155 million. Adjusted operating profit increased by 35% to $166 million. Adjusted operating margin increased from 26.2% to 31.0%. This excellent margin expansion reflects the improvement in gross margin, greater operating efficiencies and tight control of costs. It was also achieved despite a significant increase in R&D expenditure, which is expected to increase further in 2014. Our ability to add higher value, more differentiated products to our portfolio will be a key driver of growth in 2014 and beyond.
During 2013, the Injectables business launched a total of 35 products across all markets, including 10 new compounds and 16 new dosage forms and strengths. The Injectables business also received a total of 89 regulatory approvals across all regions and markets, namely 56 in MENA, 28 in Europe and 5 in the US. We signed 9 new licensing agreements during 2013, adding innovative injectable products to our US, MENA and European portfolios.
In 2014, we expect our global Injectables business to continue to perform well due to our higher value product mix and attractive market opportunities. We are expecting revenue growth above 20% and an improvement in adjusted operating margin.
Generics
2013 highlights:
· Generics revenue increased by 158% to $268 million, reflecting very strong doxycycline sales
· Operating profit increased to $127 million, after $39 million of remediation-related and other exceptional costs
Generics revenue was $268 million, compared to $104 million in 2012. This mostly reflects very strong sales of doxycycline and includes only a limited contribution from the rest of our portfolio, which we began to slowly re-introduce over the course of the year. We expect doxycycline revenue to decrease in 2014 due to increased competition in the US doxycycline market.
Generics gross profit was $206 million, compared with $26 million in 2012, and gross margin was 76.9%, compared with 25.0% in 2012. Operating profit was $127 million and operating margin was 47.4%, compared with an operating loss of $21 million in 2012. Excluding the impact of remediation-related and other exceptional costs of $39 million, adjusted operating profit was $166 million and adjusted operating margin was 61.9% in 2013, compared with an adjusted operating loss of $14 million in 2012.
During 2013, the Generics business received a total of 12 product approvals, including 4 new compounds. These products will be manufactured in our US Food and Drug Administration ("US FDA") approved facilities in Jordan.
Our Eatontown facility underwent extensive remediation work in 2013 and was re-inspected by the US FDA in February 2014. The inspection went well and we are awaiting the US FDA's formal feedback on the regulatory status of the facility.
Having spent considerable time on the remediation of our Eatontown facility and reviewed the strategic potential of our Generics business, we believe there are an increasing number of attractive market opportunities and it is our intention to pursue these. To this end, we acquired several products during 2013, focusing on niche areas such as transdermals and dermatologicals. In 2014, we will continue to look for further product acquisitions, alongside re-introducing our product portfolio and re-building our market position.
We expect the Generics business to deliver revenue of around $170 million in 2014, which assumes a significant reduction in doxycycline sales. We expect an adjusted operating margin of above 25%.
Other businesses
Other businesses, which primarily comprise Arab Medical Containers, a manufacturer of plastic specialised medicinal sterile containers, International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, and the API manufacturing division of Hikma Pharmaceuticals Limited Jordan, contributed revenue of $7 million in 2013, compared with $6 million in 2012. These other businesses delivered an operating loss of $9 million in 2013, compared with a loss of $3 million in 2012.
Group
Group revenue increased by 23% to $1,365 million in 2013. Group gross profit increased by 52% to $764 million, compared with $504 million in 2012. Group gross margin was 56.0%, compared with 45.4%, reflecting the significant gross margin improvement of the Generics business, as well as good margin improvements in our global Injectables and Branded businesses.
Group operating expenses grew by 22% to $412 million, compared with $337 million in 2012. Excluding the amortisation of intangible assets (excluding software) of $15 million and exceptional items[4] of $46 million, adjusted Group operating expenses grew by 13% to $351 million. The paragraphs below address the Group's main operating expenses in turn.
Sales and marketing expenses were $160 million, or 12% of revenue, compared with $150 million and 14% of revenue in 2012. The decline as a percentage of revenue reflects strong Generics revenue growth, which did not require incremental sales and marketing costs. The absolute increase in sales and marketing expenses reflects our investment in product promotion in MENA and increases to wages and employee benefits across the MENA region.
General and administrative expenses increased by $28 million, or 23%, in 2013. This reflects an increase in employee benefits related to the exceptional performance of the Group this year, an increase in the provision for end of service contracts to reflect new employment policies and higher fees for consultants and other professional services.
We continued to grow our investment in R&D, which increased by 15% to $39 million. We invested a further $37 million in new product acquisitions and partnership agreements, which has been capitalised on the balance sheet. We expect to increase our investment in R&D and new product acquisitions in 2014 as a key driver of future growth.
Other operating expenses (net) increased by $32 million to $62 million. Excluding exceptional items of $37 million[5] which related largely to the remediation of our Eatontown facility, operating expenses increased by $2 million.
Operating profit for the Group increased by 111% to $352 million in 2013. Group operating margin increased to 25.8%, compared with 15.1% in 2012. On an adjusted basis, Group operating profit increased by $219 million, or 113%, to $413 million and operating margin increased to 30.3%, up from 17.5% in 2012.
Research & Development[6]
The Group's product portfolio continues to grow as a result of our in-house product development efforts. During 2013, we launched 26 new compounds. The Group's portfolio now stands at 710 compounds in 1,679 dosage forms and strengths.[7] We manufacture and/or sell 95 of these compounds under-license from the licensor.
Across all businesses and markets, a total of 104 products were launched during 2013. In addition, the Group received 241 approvals.
|
|
Total marketed products |
Products launched in 2013 |
Products approved in 2013 |
Products pending approval as at 31 December 2013 |
|||
|
|
Compounds |
Dosage forms and strengths |
New compounds |
New dosage forms and strengths |
Total launches across all countries[8] |
Total approvals across all countries8 |
Total pending approvals across all countries8 |
|
|
|
|
|
|
|
|
|
|
Branded |
4997 |
1,2567 |
16 |
27 |
69 |
140 |
406 |
|
|
|
|
|
|
|
|
|
|
Injectables |
200 |
379 |
10 |
16 |
35 |
89 |
279 |
|
|
|
|
|
|
|
|
|
|
Generics |
11 |
44 |
0 |
0 |
0 |
12 |
49
|
|
|
|
|
|
|
|
|
|
|
Group |
710 |
1,679 |
26 |
43 |
104 |
241 |
734 |
|
|
|
|
|
|
|
|
|
To ensure the continuous development of our product pipeline, we submitted 389 regulatory filings in 2013 across all regions and markets. As of 31 December 2013, we had a total of 734 pending approvals across all regions and markets. At 31 December 2013, we had a total of 265 new products under development.
Share of results of associated companies
During 2011, Hikma acquired a minority interest in Unimark Remedies Limited ("Unimark") in India for a cash consideration of $34 million. Unimark manufactures active pharmaceutical ingredients ("API") and API intermediates. Unimark has been impacted by a decline in prices in its API manufacturing business and is in the process of restructuring its corporate debt. In 2013, we incurred an impairment charge of $16 million in respect of our investment and a further $3 million charge in respect of our share of operating losses for the year. Going forward, we expect that Unimark will be able to successfully manage these issues.
Net finance expense
The Group's net debt position at 31 December 2013 was $267 million, down from $405 million at 31 December 2012. The reduction in total debt resulted in a decrease in net finance expense to $35 million, compared with $37 million in 2012. The decrease in net finance expense was partially offset by an early repayment fee on a long term loan. In 2014, we expect a net finance expense of around $35 million, reflecting an increase in local loans and additional working capital financing.
Profit before tax
Profit before tax for the Group increased by 126% to $298 million, compared with $132 million in 2012. Adjusted profit before tax increased by 136% to $375 million.
Tax
The Group incurred a tax expense of $82 million, compared with $25 million in 2012. The effective tax rate was 28%. Excluding the impact of the non-cash impairment charge in respect of Unimark, the effective tax rate was 26%, compared with 19% in 2012. The increase in the tax rate is mainly attributable to the increased profitability in higher tax jurisdictions. In 2014, we expect the effective tax rate to be between 26% and 27%.
Profit attributable to shareholders
The Group's profit attributable to shareholders increased by 112% to $212 million in 2013. Adjusted profit attributable to shareholders increased by 128% to $274 million.
Earnings per share
Basic earnings per share increased by 111% to 107.6 cents, compared with 51.1 cents in 2012. Diluted earnings per share increased by 112% to 107.1 cents, compared with 50.6 cents in 2012. Adjusted diluted earnings per share was 138.4 cents, an increase of 128% over 2012.
Dividend
The Board of Hikma ("Board") has recommended a final dividend of 13.0 cents per share (approximately 7.8 pence per share) for 2013, which will make a dividend for the full year of 20.0 cents per share (approximately 12.0 pence per share), an increase of 25% compared with 2012. In addition, the Board has recommended a special final dividend of 4.0 cents per share (approximately 2.4 pence per share), which makes a special full year dividend of 7.0 cents per share (approximately 4.2 pence per share). This makes a total dividend for the year of 27.0 cents per share (approximately 16.2 pence per share). This distribution to shareholders comes after the allocation of capital to plant remediation costs, debt repayment and capital expenditure.
The proposed final dividend and final special dividend will be paid on 22 May 2014 to eligible shareholders on the register of Hikma at the close of business on 25 April 2014, subject to approval by shareholders at Hikma's Annual General Meeting. The ex-dividend date is 23 April 2014 and the final date for currency elections is 9 May 2014.
Net cash flow, working capital and net debt
The Group generated operating cash flow of $337 million in 2013, up $153 million from $184 million in 2012. This significant improvement in operating cash flow reflects the significant increase in profitability. Working capital days increased by 4 days from 194 days in 2012 to 198 days in 2013.
Capital expenditure was $59 million, compared with $51 million in 2012. Of this, $33 million was spent in MENA, principally to maintain our manufacturing facilities across the region and to upgrade our recently acquired facility in Egypt. The remainder was spent in the US, primarily to add capacity at our Injectables facility, and in Europe for the installation of a new injectables production line and a dedicated R&D line.
The Group made an acquisition in Egypt in January 2013, acquiring EPCI for a total consideration of $21 million of which $19 million was paid during the year and $2 million was deferred.
In 2013, the Group made product-related investments of $37 million, compared with $31 million in 2012. These investments included advance payments made to acquire products and product-related technologies for the US and MENA, which were capitalised on the balance sheet.[9] They also include an agreement with Unilife for the supply of pre-filled syringes.
Group net debt decreased from $405 million at 31 December 2012, to $267 million at 31 December 2013. This reflects the strong performance of the Group in 2013, which enabled us to make an early repayment of long term loans.
Balance sheet
During the period, shareholder equity was positively impacted by an unrealised foreign exchange gain of $3 million, primarily reflecting positive movements in the Euro and Moroccan dinar, partially offset by an adverse movement in the Egyptian pound against the US dollar and the revaluation of net assets denominated in these currencies.
Summary and outlook
The Group delivered a strong performance across our businesses in 2013, with a 23% increase in revenue and a 111% increase in basic earnings per share.
We have made a good start to 2014 and expect to deliver Group revenue growth of around 5% this year. This is expected despite the anticipated reduction in doxycycline sales in 2014.
On a constant currency basis, we expect Branded revenue growth of around 10% in 2014, driven by strong market fundamentals in MENA and the investment we have been making to develop our product portfolio and increase capacity. Following the significant improvement in adjusted operating margin that we delivered in 2013, we expect margins in 2014 to remain stable.
In 2014, we expect our global Injectables business to continue to perform well. Due to our higher value product mix and attractive market opportunities, we are expecting revenue growth above 20% and an improvement in adjusted operating margin. The Generics business is expected to deliver revenue of around $170 million in 2014, which assumes a significant reduction in doxycycline sales. We expect Generics adjusted operating margin of above 25%.
Overall, we are pleased with the performance of the Group in 2013 and remain confident in our medium and long term growth prospects.
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 future performance and could cause actual results to differ materially from expected and historical results.
Going concern statement
The Directors of Hikma ("Directors") believe that the Group is well diversified due to its geographic spread, product diversity and large customer and supplier base. The Group operates in the relatively defensive generic pharmaceuticals industry which the Directors expect to be less affected by economic downturns compared to other industries. The Group has reduced its year end net debt position to $267 million (2012: $405 million), following strong cash generation from operations. Operating cash flow in 2013 was $337 million (2012: $184 million). The Group has $376 million (2012: $313 million) of undrawn banking facilities. These facilities are well diversified across the subsidiaries of the Group and are with a number of financial institutions. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities and maturities of long-term debt, show that the Group should be able to operate well within the levels of its facilities and their related covenants.
After making enquiries, the Directors believe that the Group is adequately placed to manage its business and financing risks successfully despite the current uncertain economic and political outlook. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore continue to adopt the going concern basis in preparing the financial statements.
Responsibility statement
The responsibility statement below has been prepared in connection with company's full annual report for the year ended 31 December 2013. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
· The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
· The business and financial review, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
|
|
|
By order of the Board
Said Darwazah Khalid Nabilsi 11 March 2014
|
|
|
Cautionary statement
This preliminary announcement has been prepared solely to provide additional information to the shareholders of Hikma to assess the Group's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose.
Forward looking statements
This announcement may contain statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature. All statements other than statements of historical fact may be forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward looking words such as "intends", "believes", "anticipates", "expects", "estimates", "forecasts", "targets", "aims", "budget", "scheduled" or words or terms of similar substance or the negative thereof, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved.
Where included, such statements have been made by Hikma in good faith based on the information available to it up to the time of the approval of this announcement. By their nature, forward looking statements are based on current expectations, assumptions and projections about future events and therefore 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 and a variety of factors, many of which are beyond Hikma's control, could cause actual results to differ materially from those projected or implied in any forward-looking statements. 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, Hikma 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. Except as expressly provided in this announcement, no forward looking or other statements have been reviewed by the auditors of Hikma. All subsequent oral or written forward looking statements attributable to the Hikma or any of its members, Directors, officers or employees or any person acting on their behalf are expressly qualified in their entirety by the cautionary statement above.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
|
|
|
Note |
|
2013 |
|
2012* |
|
|
|
|
|
|
$m |
|
$m |
|
|
Continuing operations |
|
|
|
|
|
|
|
|
Revenue |
|
3 |
|
1,365 |
|
1,109 |
|
|
Cost of sales |
|
3 |
|
(601) |
|
(605) |
|
|
Gross profit |
|
3 |
|
764 |
|
504 |
|
|
Sales and marketing costs |
|
|
|
(160) |
|
(150) |
|
|
General and administrative expenses |
|
|
|
(151) |
|
(123) |
|
|
Research and development costs |
|
|
|
(39) |
|
(34) |
|
|
Other operating expenses (net) |
|
|
|
(62) |
|
(30) |
|
|
Total operating expenses |
|
|
|
(412) |
|
(337) |
|
|
Adjusted operating profit |
|
|
|
413 |
|
194 |
|
|
Exceptional items: |
|
|
|
|
|
|
|
|
- Acquisition and integration related expenses |
|
4 |
|
- |
|
(3) |
|
|
- Severance costs |
|
4 |
|
(1) |
|
(4) |
|
|
- Plant remediation costs |
|
4 |
|
(24) |
|
(7) |
|
|
- Impairment losses |
|
4 |
|
(10) |
|
- |
|
|
- Other claims provisions |
|
4 |
|
(11) |
|
- |
|
|
Intangible amortisation** |
|
4 |
|
(15) |
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
3 |
|
352 |
|
167 |
|
|
Associated companies |
|
|
|
|
|
|
|
|
-share of results |
|
|
|
(3) |
|
1 |
|
|
-exceptional impairment of investment |
|
|
|
(16) |
|
- |
|
|
Finance income |
|
|
|
2 |
|
1 |
|
|
Finance expense |
|
|
|
(37) |
|
(38) |
|
|
Other income expense (net) |
|
|
|
- |
|
1 |
|
|
Profit before tax |
|
|
|
298 |
|
132 |
|
|
Tax |
|
5 |
|
(82) |
|
(25) |
|
|
Profit for the year |
|
|
|
216 |
|
107 |
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
4 |
|
7 |
|
|
Equity holders of the parent |
|
|
|
212 |
|
100 |
|
|
|
|
|
|
216 |
|
107 |
|
|
Earnings per share (cents) |
|
|
|
|
|
|
|
|
Basic |
|
7 |
|
107.6 |
|
51.1 |
|
|
Diluted |
|
7 |
|
107.1 |
|
50.6 |
|
|
Adjusted basic |
|
7 |
|
139.1 |
|
61.4 |
|
|
Adjusted diluted |
|
7 |
|
138.4 |
|
60.8 |
|
* Certain comparative figures have been represented to conform with the 2013 presentation.
** Intangible amortisation comprises the amortisation of intangible assets other than software.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
|
|
|
2013 |
|
2012 |
|
|
|
$m |
|
$m |
|
PROFIT FOR THE YEAR |
|
216 |
|
107 |
|
Items that may be reclassified subsequently to the income statement: |
|
|
|
|
|
Cumulative effect of change in fair value of financial derivatives |
|
3 |
|
(2) |
|
Exchange difference on translation of foreign operations |
|
3 |
|
(26) |
|
Total comprehensive income for the year |
|
222 |
|
79 |
|
Attributable to: |
|
|
|
|
|
Non-controlling interests |
|
5 |
|
1 |
|
Equity holders of the parent |
|
217 |
|
78 |
|
|
|
222 |
|
79 |
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2013
|
|
Note |
|
2013 |
|
2012 |
|
Non-current assets |
|
|
$m |
|
$m |
|
Intangible assets |
|
|
447 |
|
433 |
|
Property, plant and equipment |
|
|
443 |
|
420 |
|
Investment in associates and joint ventures |
|
|
22 |
|
38 |
|
Deferred tax assets |
|
|
86 |
|
46 |
|
Financial and other non-current assets |
|
|
34 |
|
11 |
|
|
|
|
1,032 |
|
948 |
|
Current assets |
|
|
|
|
|
|
Inventories |
8 |
|
276 |
|
272 |
|
Income tax asset |
|
|
4 |
|
1 |
|
Trade and other receivables |
9 |
|
439 |
|
328 |
|
Collateralised and restricted cash |
|
|
7 |
|
2 |
|
Cash and cash equivalents |
|
|
168 |
|
177 |
|
Other current assets |
|
|
3 |
|
2 |
|
|
|
|
897 |
|
782 |
|
Total assets |
|
|
1,929 |
|
1,730 |
|
Current liabilities |
|
|
|
|
|
|
Bank overdrafts and loans |
|
|
159 |
|
193 |
|
Obligations under finance leases |
|
|
1 |
|
3 |
|
Trade and other payables |
10 |
|
241 |
|
195 |
|
Income tax provision |
|
|
65 |
|
23 |
|
Other provisions |
|
|
20 |
|
11 |
|
Other current liabilities |
11 |
|
100 |
|
42 |
|
|
|
|
586 |
|
467 |
|
Net current assets |
|
|
311 |
|
315 |
|
Non-current liabilities |
|
|
|
|
|
|
Long-term financial debts |
12 |
|
263 |
|
372 |
|
Obligations under finance leases |
|
|
19 |
|
16 |
|
Deferred tax liabilities |
|
|
26 |
|
23 |
|
Derivative financial instruments |
|
|
1 |
|
4 |
|
|
|
|
309 |
|
415 |
|
Total liabilities |
|
|
895 |
|
882 |
|
Net assets |
|
|
1,034 |
|
848 |
|
Equity |
|
|
|
|
|
|
Share capital |
13 |
|
35 |
|
35 |
|
Share premium |
|
|
281 |
|
279 |
|
Own shares |
|
|
(3) |
|
- |
|
Other reserves |
|
|
704 |
|
519 |
|
Equity attributable to equity holders of the parent |
|
|
1,017 |
|
833 |
|
Non-controlling interests |
|
|
17 |
|
15 |
|
Total equity |
|
|
1,034 |
|
848 |
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 Mazen Darwazah
Director Director
11 March 2014
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
|
|
|
Merger and Revaluation reserves |
Translation reserves |
Retained earnings |
Total reserves |
Share capital |
Share premium |
Own shares |
Total equity attributable to equity shareholders of the parent |
Non-controlling interests |
Total equity |
|
|
|
Balance at 1 January 2012 |
|
38 |
(28) |
456 |
466 |
35 |
278 |
(2) |
777 |
22 |
799 |
||
|
Profit for the year |
|
- |
- |
100 |
100 |
- |
- |
- |
100 |
7 |
107 |
||
|
Cumulative effect of change in fair value of financial derivatives |
|
- |
- |
(2) |
(2) |
- |
- |
- |
(2) |
- |
(2) |
||
|
Currency translation loss |
|
- |
(20) |
- |
(20) |
- |
- |
- |
(20) |
(6) |
(26) |
||
|
Total comprehensive income for the year |
|
- |
(20) |
98 |
78 |
- |
- |
- |
78 |
1 |
79 |
||
|
Issue of equity shares |
|
- |
- |
- |
- |
- |
1 |
- |
1 |
- |
1 |
||
|
Cost of equity settled employee share scheme |
|
- |
- |
8 |
8 |
- |
- |
- |
8 |
- |
8 |
||
|
Exercise of equity settled employee share scheme |
|
- |
- |
(2) |
(2) |
- |
- |
2 |
- |
- |
- |
||
|
Current tax arising on share-based payments |
|
- |
- |
1 |
1 |
- |
- |
- |
1 |
- |
1 |
||
|
Dividends on ordinary shares (Note 6) |
|
- |
- |
(27) |
(27) |
- |
- |
- |
(27) |
(1) |
(28) |
||
|
Adjustment arising from change in |
|
- |
- |
(5) |
(5) |
- |
- |
- |
(5) |
(7) |
(12) |
||
|
Balance at 31 December 2012 and 1 January 2013 |
|
38 |
(48) |
529 |
519 |
35 |
279 |
- |
833 |
15 |
848 |
||
|
Profit for the year |
|
- |
- |
212 |
212 |
- |
- |
- |
212 |
4 |
216 |
||
|
Cumulative effect of change in fair value of financial derivatives |
|
- |
- |
3 |
3 |
- |
- |
- |
3 |
- |
3 |
||
|
Currency translation gain |
|
- |
2 |
- |
2 |
- |
- |
- |
2 |
1 |
3 |
||
|
Total comprehensive income for the year |
|
- |
2 |
215 |
217 |
- |
- |
- |
217 |
5 |
222 |
||
|
Issue of equity shares |
|
- |
- |
- |
- |
- |
2 |
- |
2 |
- |
2 |
||
|
Own shares acquired |
|
- |
- |
- |
- |
- |
- |
(3) |
(3) |
- |
(3) |
||
|
Cost of equity settled employee share scheme |
|
- |
- |
7 |
7 |
- |
- |
- |
7 |
- |
7 |
||
|
Dividends on ordinary shares (Note 6) |
|
- |
- |
(39) |
(39) |
- |
- |
- |
(39) |
(3) |
(42) |
||
|
Balance at 31 December 2013 |
|
38 |
(46) |
712 |
704 |
35 |
281 |
(3) |
1,017 |
17 |
1,034 |
||
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013
|
|
|
|
2013 |
|
2012 |
|
|
Note |
|
$m |
|
$m |
|
Net cash from operating activities |
14 |
|
337 |
|
184 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(59) |
|
(51) |
|
Proceeds from disposal of property, plant and equipment |
|
|
1 |
|
1 |
|
Purchase of intangible assets |
|
|
(16) |
|
(38) |
|
Acquisition of interest in joint ventures |
|
|
(3) |
|
- |
|
Investment in financial and other non current assets |
|
|
(22) |
|
- |
|
Acquisition of subsidiary undertakings net of cash acquired |
|
|
(18) |
|
(12) |
|
Payments of costs directly attributable to acquisitions |
4 |
|
- |
|
(2) |
|
Finance income |
|
|
2 |
|
1 |
|
Net cash used in investing activities |
|
|
(115) |
|
(101) |
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
(Increase)/decrease in collateralised and restricted cash |
|
|
(5) |
|
1 |
|
Increase in long-term financial debts |
|
|
7 |
|
152 |
|
Repayment of long-term financial debts |
|
|
(117) |
|
(124) |
|
(Decrease)/Increase in short-term borrowings |
|
|
(34) |
|
52 |
|
Increase/(Decrease) in obligations under finance leases |
|
|
1 |
|
(2) |
|
Dividends paid |
|
|
(39) |
|
(27) |
|
Dividends paid to non-controlling shareholders of subsidiaries |
|
|
(3) |
|
(1) |
|
Purchase of own shares |
|
|
(4) |
|
- |
|
Interest paid |
|
|
(37) |
|
(36) |
|
Proceeds from issue of new shares |
|
|
2 |
|
1 |
|
Acquisition of non-controlling interest in subsidiary |
|
|
- |
|
(12) |
|
Net cash (used in)/ generated by financing activities |
|
|
(229) |
|
4 |
|
Net (Decrease)/ increase in cash and cash equivalents |
|
|
(7) |
|
87 |
|
Cash and cash equivalents at beginning of year |
|
|
177 |
|
95 |
|
Foreign exchange translation movements |
|
|
(2) |
|
(5) |
|
Cash and cash equivalents at end of year |
|
|
168 |
|
177 |
1. Accounting policies
Basis of preparation
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 2012, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention any matters by way of emphasis without qualifying their report and did not contain statements under S498 (2) or (3) of the Companies Act 2006. Hikma Pharmaceuticals PLC's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared under the historical cost convention, except for the revaluation to market of certain financial assets and liabilities. The preliminary announcement is based on the Company's financial statements. The Group's previously published financial statements were also prepared in accordance with International Financial Reporting Standards. These International Financial Reporting Standards have been subject to amendment and interpretation by the International Accounting Standards Board and the financial statements presented for the years ended 31 December 2013 and 31 December 2012 have been prepared in accordance with those revised standards. Unless stated otherwise these policies are in accordance with the revised standards that have been applied throughout the year and prior years presented in the financial statements. The presentational and functional currency of Hikma Pharmaceuticals PLC is the US Dollar as the majority of the Company's business is conducted in US Dollars (USD).
Revenue recognition
Dynamic market changes can generate uncertainty as to the ultimate net selling price of a pharmaceutical product and therefore revenue cannot always be measured reliably at the point when the product is supplied or made available to external customers. The Company has therefore expanded its revenue recognition policy as shown below; this had no impact on revenue recognised in prior periods.
Revenue is recognised in the consolidated income statement when goods or services are supplied or made available to external customers against orders received and when the significant risks and rewards of ownership have passed.
Revenue represents the amounts receivable after the deduction of discounts, value added tax, other sales taxes, allowances given, provisions for chargebacks and accruals for estimated future rebates and returns. The methodology and assumptions used to estimate rebates and returns are monitored and adjusted regularly in light of contractual and historical information.
If the ultimate net selling price cannot be reliably measured, revenue recognition is deferred until a reliable measurement can be made. Deferred revenue is included in other current liabilities in the consolidated balance sheet.
ADOPTION OF NEW AND REVISED STANDARDS
The following new and revised Standards and Interpretations have been adopted in the current year.
Their adoption has not had any significant impact on the amounts reported in these financial statements, however may impact the accounting for future transactions and arrangements.
|
IFRS 7 |
Offsetting Financial Assets and Financial Liabilities |
||
|
IFRS 10 |
Consolidated Financial Statements |
||
|
IFRS 11 |
Joint Arrangements |
||
|
IFRS 12 |
Disclosure of Interests in Other Entities |
|
|
|
IFRS 13 |
Fair Value Measurement |
|
|
|
IAS 1 |
Presentation of Items of Other Comprehensive Income |
|
|
|
IAS 19 (revised 2011) |
Employee Benefits |
|
|
|
IAS 27 (revised 2011) |
Separate Financial Statements |
|
|
|
IAS 28 (revised 2011) |
Investments in Associates |
|
|
|
Annual Improvements to IFRSs 2009-2011 Cycle |
Minor amendments |
|
|
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 9 |
Financial Instruments |
|
Amendments to IFRS 10, 12 and IAS27 - Investment entities |
Added disclosure requirements for entities becoming, or ceasing to be, investment entities, as defined in IFRS 10 |
|
Amendments to IAS 19 |
Defined Benefit Plans: Employee Contributions |
|
Amendments to IAS 32 |
Offsetting Financial Assets and Financial Liabilities |
|
Amendments to IAS 36 |
Recoverable Amount Disclosures for Non-Financial Assets |
|
Amendments to IAS 39 |
Novation of Derivatives and Continuation of Hedge Accounting |
|
IFRIC 21 |
Levies |
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.
2. Going concern
The Directors believe that the Group is well diversified due to its geographic spread, product diversity and large customer and supplier base. The Group operates in the relatively defensive generic pharmaceuticals industry which the Directors expect to be less affected compared to other industries.
The Group has reduced its year end net debt position to $ 267 million (2012: $405 million) following strong cash generation from operations. Operating cash flow in 2013 was $337 million (2012: $184 million). The Group has $376 million (2012: $313 million) of undrawn banking facilities. These facilities are well diversified across the subsidiaries of the Group and are with a number of financial institutions. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities and maturities of long-term debt, show that the Group should be able to operate well within the levels of its facilities and their related covenants. After making enquiries, the Directors believe that the Group is adequately placed to manage its business and financing risks successfully despite the current uncertain economic and political outlook. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore continue to adopt the going concern basis in preparing the financial statements
3. Segmental reporting
For management purposes, the Group is currently organised into three principal operating divisions - Branded, Injectables and Generics. These divisions are the basis on which the Group reports its segmental information.
The Group discloses underlying operating profit as the measure of segmental result, as this is the measure used in the decision-making and resource allocation process of the chief operating decision maker, who is the Group's Chief Executive Officer.
Information regarding the Group's operating segments is reported below.
The following is an analysis of the Group's revenue and results by reportable segment in 2013:
|
Year ended |
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2013 |
Branded |
|
Injectables |
|
Generics |
|
Others |
|
Group |
|
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
Revenue |
554 |
|
536 |
|
268 |
|
7 |
|
1,365 |
|
|
|
Cost of sales |
(278) |
|
(254) |
|
(62) |
|
(7) |
|
(601) |
|
|
|
Gross profit |
276 |
|
282 |
|
206 |
|
- |
|
764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment result |
135 |
|
166 |
|
166 |
|
(9) |
|
458 |
|
|
|
Exceptional items: |
|
|
|
|
|
|
|
|
|
|
|
|
- Severance costs |
(1) |
|
- |
|
- |
|
- |
|
(1) |
|
|
|
- Plant remediation costs |
- |
|
- |
|
(24) |
|
- |
|
(24) |
|
|
|
- Impairment losses |
- |
|
(6) |
|
(4) |
|
- |
|
(10) |
|
|
|
- Other claims provisions |
- |
|
- |
|
(11) |
|
- |
|
(11) |
|
|
|
Intangible amortisation* |
(10) |
|
(5) |
|
- |
|
- |
|
(15) |
|
|
|
Segment result |
124 |
|
155 |
|
127 |
|
(9) |
|
397 |
|
|
|
Unallocated corporate expenses |
|
|
|
|
|
|
|
|
(45) |
|
|
|
Adjusted operating profit |
|
|
|
|
|
|
|
|
413 |
|
|
|
Operating profit |
|
|
|
|
|
|
|
|
352 |
|
|
|
Associated companies |
|
|
|
|
|
|
|
|
|
|
|
|
-Share of results |
|
|
|
|
|
|
|
|
(3) |
|
|
|
-exceptional impairment of investment |
|
|
|
|
|
|
|
|
(16) |
|
|
|
Finance income |
|
|
|
|
|
|
|
|
2 |
|
|
|
Finance expense |
|
|
|
|
|
|
|
|
(37) |
|
|
|
Profit before tax |
|
|
|
|
|
|
|
|
298 |
|
|
|
Tax |
|
|
|
|
|
|
|
|
(82) |
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
216 |
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
|
|
|
4 |
|
|
|
Equity holders of the parent |
|
|
|
|
|
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
|
Segment result is defined as operating profit for each segment.
* Intangible amortisation comprises the amortisation on intangible assets other than software.
"Others" mainly comprises 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, and travel expenses.
|
Segment assets and liabilities |
|
Branded |
|
Injectables |
|
Generics |
|
Corporate and others |
|
Group |
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
Additions to property, plant and equipment (cost) |
|
25 |
|
31 |
|
10 |
|
- |
|
66 |
|
Acquisition of subsidaries' property, plant and equipment (net book value) |
|
6 |
|
- |
|
- |
|
- |
|
6 |
|
Additions to intangible assets |
|
3 |
|
13 |
|
2 |
|
- |
|
18 |
|
Intangible assets arising on acquisition |
|
20 |
|
- |
|
- |
|
- |
|
20 |
|
Total property, plant and equipment and intangible assets (net book value) |
|
519 |
|
314 |
|
51 |
|
6 |
|
890 |
|
Depreciation and impairment |
|
22 |
|
17 |
|
8 |
|
2 |
|
49 |
|
Amortisation and impairment |
|
|
|
|
|
|
|
|
|
|
|
(including software) |
|
10 |
|
12 |
|
4 |
|
- |
|
26 |
|
Investment in associates and joint venutres |
|
- |
|
- |
|
- |
|
22 |
|
22 |
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
1,138 |
|
592 |
|
141 |
|
58 |
|
1,929 |
|
Total liabilities |
|
551 |
|
259 |
|
25 |
|
60 |
|
895 |
The following is an analysis of the Group's revenue and results by reportable segment in 2012:
|
Year ended |
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2012 |
Branded |
|
Injectables |
|
Generics |
|
Others |
|
Group |
|
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
Revenue |
529 |
|
470 |
|
104 |
|
6 |
|
1,109 |
|
|
|
Cost of sales |
(272) |
|
(251) |
|
(78) |
|
(4) |
|
(605) |
|
|
|
Gross profit |
257 |
|
219 |
|
26 |
|
2 |
|
504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment result |
124 |
|
123 |
|
(14) |
|
(3) |
|
230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional items: |
|
|
|
|
|
|
|
|
|
|
|
|
- Integration related expenses |
(1) |
|
(2) |
|
- |
|
- |
|
(3) |
|
|
|
- Severance expenses |
(3) |
|
(1) |
|
- |
|
- |
|
(4) |
|
|
|
- Plant remediation costs |
- |
|
- |
|
(7) |
|
- |
|
(7) |
|
|
|
Intangible amortisation* |
(9) |
|
(4) |
|
- |
|
- |
|
(13) |
|
|
|
Segment result |
111 |
|
116 |
|
(21) |
|
(3) |
|
203 |
|
|
|
Unallocated corporate expenses |
|
|
|
|
|
|
|
|
(36) |
|
|
|
Adjusted operating profit |
|
|
|
|
|
|
|
|
194 |
|
|
|
Operating profit |
|
|
|
|
|
|
|
|
167 |
|
|
|
Share of results of associated companies |
|
|
|
|
|
|
|
|
1 |
|
|
|
Finance income |
|
|
|
|
|
|
|
|
1 |
|
|
|
Finance expense |
|
|
|
|
|
|
|
|
(38) |
|
|
|
Other expense (net) |
|
|
|
|
|
|
|
|
1 |
|
|
|
Profit before tax |
|
|
|
|
|
|
|
|
132 |
|
|
|
Tax |
|
|
|
|
|
|
|
|
(25) |
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
107 |
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
|
|
|
7 |
|
|
|
Equity holders of the parent |
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
107 |
|
|
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 and travel expenses.
|
Segment assets and liabilities |
|
Branded |
|
Injectables |
|
Generics |
|
Corporate and others |
|
Group |
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
Additions to property, plant and equipment (cost) |
|
26 |
|
17 |
|
5 |
|
2 |
|
50 |
|
Additions to intangible assets |
|
2 |
|
35 |
|
7 |
|
- |
|
44 |
|
Total property, plant and equipment and intangible assets (net book value) |
|
504 |
|
282 |
|
61 |
|
6 |
|
853 |
|
Depreciation |
|
21 |
|
13 |
|
7 |
|
2 |
|
43 |
|
Amortisation (including software) |
|
10 |
|
6 |
|
- |
|
- |
|
16 |
|
Interests in associated companies |
|
- |
|
- |
|
- |
|
38 |
|
38 |
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
1,050 |
|
481 |
|
135 |
|
64 |
|
1,730 |
|
Total liabilities |
|
574 |
|
252 |
|
6 |
|
50 |
|
882 |
The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services:
|
|
|
2013 |
|
2012 |
|
|
|
$m |
|
$m |
|
Middle East and North Africa |
|
638 |
|
619 |
|
United States |
|
631 |
|
400 |
|
Europe and Rest of the World |
|
89 |
|
81 |
|
United Kingdom |
|
7 |
|
9 |
|
|
|
1,365 |
|
1,109 |
The top selling markets were as below:
|
|
|
2013 |
|
2012 |
|
|
|
$m |
|
$m |
|
United States |
|
631 |
|
400 |
|
Saudi Arabia |
|
132 |
|
125 |
|
Algeria |
|
125 |
|
121 |
|
|
|
888 |
|
646 |
Generics revenue was $268 million (2012: $104 million). This mostly reflects very strong sales of doxycycline and includes only a limited contribution from the rest of our portfolio. Included in revenues arising from the Generics and Injectables segments are revenues of approximately $172 million (2012: 86 million) which arose from the Group's largest customer which is located in the US. In prior periods the Group's largest customer was located in Saudi Arabia, the Branded and Injectables segments included revenue arising from this customer of $101 million and $104 million for the periods ended 31 December 2013 and 31 December 2012 respectively.
The following is an analysis of the total non-current assets excluding deferred tax and financial instruments and an analysis of total assets by the geographical area in which the assets are located:
|
|
Total non current assets excluding deferred tax and financial instruments as at 31 December |
|
Total assets as at 31 December |
||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Middle East and North Africa |
624 |
|
601 |
|
1,255 |
|
1,157 |
|
Europe |
156 |
|
145 |
|
217 |
|
191 |
|
United States |
163 |
|
156 |
|
437 |
|
373 |
|
United Kingdom |
3 |
|
- |
|
20 |
|
9 |
|
|
946 |
|
902 |
|
1,929 |
|
1,730 |
4. Exceptional items and intangible amortisation
Exceptional items are disclosed separately in the consolidated income statement to assist in the understanding of the Group's underlying performance.
|
|
|
2013 |
|
2012 |
|
|||
|
|
|
$m |
|
$m |
|
|||
|
Acquisition and integration related expenses |
|
- |
|
(3) |
||||
|
Other Costs: |
|
|
|
|
||||
|
Severance expenses |
|
(1) |
|
(4) |
||||
|
Plant remediation costs |
|
(24) |
|
(7) |
||||
|
Impairment losses |
|
(10) |
|
- |
||||
|
Other claims provisions |
|
(11) |
|
- |
||||
|
Exceptional items included in operating profit |
|
(46) |
|
(14) |
||||
|
Impairment of investment in associates |
|
(16) |
|
- |
||||
|
Exceptional items included in profit |
|
(62) |
|
(14) |
||||
|
Intangible amortisation * |
|
(15) |
|
(13) |
||||
|
Exceptional items and intangible amortisation |
|
(77) |
|
(27) |
||||
|
Tax effect |
|
15 |
|
7 |
||||
|
Impact on profit for the year |
|
(62) |
|
(20) |
||||
* Intangible amortisation comprises the amortisation of intangible assets other than software.
Acquisition and integration related expenses
In previous periods, acquisition and integration-related expenses were costs incurred in the integration of 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.
Acquisition costs of $Nil (2012: $2 million) have been classified as investing activities in the cash flow statement.
Other costs
Severance expenses in 2013 related to restructuring of management teams in MENA (2012: across all three operating regions).
Plant remediation costs represent write-down of inventory of some products and ongoing costs incurred for compliance work at our Eatontown facility in response to observations made by the US FDA. Remediation costs are included in other operating expenses.
Impairment losses are related to the write off of intangible product rights of $8 million (2012: $Nil), in addition to the write off of certain property, plant and equipment of $2 million (2012: $Nil). Impairment of intangible assets is included in research and development. Impairment of fixed assets is included in other operating expenses.
Other claims provisions relate to the Group's best estimate of the ultimate settlement amount of claims outstanding in the current period and is included in other operating expenses.
Impairment of investment in associates
During 2011, Hikma acquired a minority interest in Unimark Remedies Limited ("Unimark") in India for a cash consideration of $34 million. Unimark manufactures active pharmaceutical ingredients ("API") and API intermediates. Unimark has been impacted by a decline in prices in its API manufacturing business and is in the process of restructuring its corporate debt. During the year, we incurred an impairment charge of $16 million in respect of our investment. We expect that Unimark will be able to successfully manage its current issues.
5. Tax
|
|
|
2013 |
|
2012 |
|
|
$m |
|
$m |
|
|
Current tax: |
|
|
|
|
|
Foreign tax |
|
123 |
|
30 |
|
Adjustments to prior year |
|
- |
|
5 |
|
Deferred tax |
|
(41) |
|
(10) |
|
|
|
82 |
|
25 |
UK corporation tax is calculated at 23.25% (2012: 24.5%) of the estimated assessable profit made in the UK for the year.
The effective tax rate for the Group is 27.7% (2012:18.8%).
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdiction.
The charge for the year can be reconciled to profit before tax per the consolidated income statement as follows:
|
|
|
2013 |
|
2012 |
|
|
$m |
|
$m |
|
|
Profit before tax: |
|
298 |
|
132 |
|
Tax at the UK corporation tax rate of 23.25% (2012: 24.5%) |
|
69 |
|
32 |
|
Profits taxed at different rates |
|
3 |
|
(17) |
|
Permanent differences |
|
7 |
|
3 |
|
Temporary differences for which no benefit is recognised |
|
3 |
|
2 |
|
Adjustment to Prior year |
|
- |
|
5 |
|
Tax expense for the year |
|
82 |
|
25 |
The movement in deferred tax in the period is due to short-term timing differences.
6. Dividends
|
|
|
2013 |
|
2012 |
|
$m |
|
$m |
||
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
|
|
Final dividend for the year ended 31 December 2012 of 10.0 cents (2011: 7.5 cents) per share |
|
19 |
|
15 |
|
Interim dividend for the year ended 31 December 2013 of 7.0 cents (2012: 6.0 cents) per share |
|
14 |
|
12 |
|
Special Interim dividend for the year ended 31 December 2013 of 3.0 cents (2012: Nil) per share |
|
6 |
|
- |
|
|
|
39 |
|
27 |
The proposed final dividend for the year ended 31 December 2013 is 13.0 cents (2012:10.0 cents) per share plus a special dividends of 4.0 cents (2012: Nil) per share that reflect the exceptional performance of the generics business during the year, bringing the total dividend for the year to 20.0 cents (2012:16.0 cents) per share plus a special dividend of 7.0 cents (2012: Nil) per share.
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 15 May 2014 and has not been included as a liability in these financial statements. Based on the number of shares in issue at 31 December 2013 (197,747,000), the unrecognised liability is $34 million.
7. Earnings per share
Earnings per share are 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 is 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 (excluding software). A reconciliation of the basic and adjusted earnings used is also set out below:
|
|
|
2013 |
|
2012 |
|
||||||
|
$m |
|
$m |
|
||||||||
|
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent |
|
212 |
|
100 |
|
||||||
|
Exceptional items (see note 4) |
|
|
62 |
|
14 |
|
|||||
|
Intangible amortisation* |
|
|
15 |
|
13 |
|
|||||
|
Tax effect of adjustments |
|
|
(15) |
|
(7) |
|
|||||
|
Adjusted earnings for the purposes of adjusted basic and diluted earnings per share being adjusted net profit attributable to equity holders of the parent |
|
|
274 |
|
120 |
|
|||||
|
|
|
Number |
|
Number |
|
||||||
|
Number of shares |
|
'm |
|
'm |
|
||||||
|
Weighted average number of Ordinary Shares for the purposes of basic earnings per share |
|
197 |
|
196 |
|
||||||
|
Effect of dilutive potential Ordinary Shares: |
|
|
|
|
|
||||||
|
Share-based awards |
|
1 |
|
2 |
|
||||||
|
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share |
|
198 |
|
198 |
|
||||||
|
|
|
|
2013 |
|
2012 |
|
|||||
|
|
|
|
|
Earnings per share |
|
Earnings per share |
|||||
|
|
|
|
|
Cents |
|
Cents |
|||||
|
|
Basic |
|
107.6 |
|
51.1 |
||||||
|
|
Diluted |
|
107.1 |
|
50.6 |
||||||
|
|
Adjusted basic |
|
139.1 |
|
61.4 |
||||||
|
|
Adjusted diluted |
|
138.4 |
|
60.8 |
||||||
*Intangible amortisation comprises the amortisation of intangible assets other than software.
8. Inventories
|
|
|
As at 31 December |
|||||
|
|
|
|
2013 |
|
2012 |
||
|
|
$m |
|
$m |
||||
|
|
Finished goods |
|
77 |
|
88 |
||
|
|
Work-in-progress |
|
30 |
|
30 |
||
|
|
Raw and packing materials |
|
149 |
|
135 |
||
|
|
Goods in transit |
|
20 |
|
19 |
||
|
|
|
|
276 |
|
272 |
||
Goods in transit includes inventory held at third parties whilst in transit between Group companies.
9. Trade and other receivables
|
|
|
As at 31 December |
||||||
|
|
|
|
2013 |
|
2012 |
|
||
|
|
$m |
|
$m |
|
||||
|
|
Trade receivables |
|
385 |
|
294 |
|
||
|
|
Prepayments |
|
40 |
|
23 |
|
||
|
|
Value added tax recoverable |
|
11 |
|
8 |
|
||
|
|
Interest receivable |
|
- |
|
1 |
|
||
|
|
Employee advances |
|
3 |
|
2 |
|
||
|
|
|
|
439 |
|
328 |
|
||
10. Trade and other payables
|
|
|
As at 31 December |
||
|
|
|
2013 |
|
2012 |
|
$m |
|
$m |
||
|
|
|
|
|
|
|
Trade payables |
|
120 |
|
110 |
|
Accrued expenses |
|
105 |
|
70 |
|
Employees' provident fund * |
|
5 |
|
6 |
|
VAT and sales tax payables |
|
1 |
|
1 |
|
Dividends payable ** |
|
2 |
|
2 |
|
Social security withholdings |
|
3 |
|
2 |
|
Income tax withholdings |
|
4 |
|
3 |
|
Other payables |
|
1 |
|
1 |
|
|
|
241 |
|
195 |
* The employees' provident fund liability mainly represents the outstanding contributions due to the Hikma Pharmaceuticals Ltd (Jordan) retirement benefit plan, on which the fund receives 5% interest.
** Dividends payable includes $2 million (2012: $2 million) due to the previous shareholders of APM.
11. Other current liabilities
|
|
|
As at 31 December |
||
|
|
|
2013 |
|
2012 |
|
$m |
|
$m |
||
|
Deferred revenue |
|
51 |
|
1 |
|
Return and free goods provision |
|
29 |
|
30 |
|
Other provisions |
|
20 |
|
11 |
|
|
|
100 |
|
42 |
12. Long-term financial debts
|
|
|
As at 31 December |
||
|
|
|
2013 |
|
2012 |
|
$m |
|
$m |
||
|
Total loans |
|
323 |
|
461 |
|
Less: current portion of loans |
|
(60) |
|
(89) |
|
Long-term financial loans |
|
263 |
|
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Breakdown by maturity: |
|
|
|
|
|
Within one year |
|
60 |
|
89 |
|
In the second year |
|
61 |
|
78 |
|
In the third year |
|
60 |
|
80 |
|
In the fourth year |
|
51 |
|
78 |
|
In the fifth year |
|
76 |
|
48 |
|
Thereafter |
|
15 |
|
88 |
|
|
|
323 |
|
461 |
|
|
|
|
|
|
|
Breakdown by currency: |
|
|
|
|
|
US Dollar |
|
280 |
|
406 |
|
Euro |
|
10 |
|
13 |
|
Jordanian Dinar |
|
5 |
|
6 |
|
Algerian Dinar |
|
21 |
|
29 |
|
Egyptian Pound |
|
5 |
|
4 |
|
Tunisian Dinar |
|
2 |
|
3 |
|
|
|
323 |
|
461 |
The loans are held at amortised cost.
13. Share capital
|
Issued and fully paid - included in shareholders' equity: |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
2013 |
|
2012 |
|||||||||||
|
|
|
Number 'm |
|
$m |
|
Number 'm |
|
$m |
|||||||
|
At 1 January |
|
197 |
|
35 |
|
196 |
|
35 |
|||||||
|
Issued during the year |
|
1 |
|
- |
|
1 |
|
- |
|||||||
|
At 31 December |
|
198 |
|
35 |
|
197 |
|
35 |
|||||||
14. Net cash from operating activities
|
|
Note |
2013 |
|
2012 |
|
$m |
|
$m |
||
|
Profit before tax |
|
298 |
|
132 |
|
Adjustments for: |
|
|
|
|
|
Depreciation, amortisation, and impairment of: |
|
|
|
|
|
Property, plant and equipment |
|
49 |
|
43 |
|
Intangible assets |
|
26 |
|
16 |
|
Investment in associate |
|
16 |
|
- |
|
Movement on provisions |
|
9 |
|
1 |
|
Cost of equity-settled employee share scheme |
|
7 |
|
8 |
|
Payments of costs directly attributable to acquisitions |
4 |
- |
|
2 |
|
Finance income |
|
(2) |
|
(1) |
|
Interest and bank charges |
|
37 |
|
38 |
|
Results from associates |
|
3 |
|
(1) |
|
Cash flow before working capital |
|
443 |
|
238 |
|
Change in trade and other receivables |
|
(110) |
|
(21) |
|
Change in other current assets |
|
- |
|
2 |
|
Change in inventories |
|
(2) |
|
(42) |
|
Change in trade and other payables |
|
35 |
|
22 |
|
Change in other current liabilities |
|
56 |
|
10 |
|
Change in other non-current liabilities |
|
(1) |
|
- |
|
Cash generated by operations |
|
421 |
|
209 |
|
Income tax paid |
|
(84) |
|
(25) |
|
Net cash generated from operating activities |
|
337 |
|
184 |
15. Related parties
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 associates and other related parties are disclosed below.
Trading transactions:
During the year, Group companies entered into the following transactions with related parties:
Darhold Limited: is a related party of the Group because it is considered one of the major shareholders of Hikma Pharmaceuticals PLC with an ownership percentage of 28.9% at the end of 2013 (2012: 29.0%). Further details on the relationship between Mr. Samih Darwazah, Mr. Said Darwazah, Mr. Mazen Darwazah and Mr. Ali Al-Husry, and Darhold Limited are given in the Directors' Report.
Other than dividends (as paid to all shareholders), there were no transactions between the Group and Darhold Limited in the year.
Capital Bank - Jordan: is a related party of the Group because two Hikma Pharmaceuticals PLC board members are also board members of Capital Bank - Jordan. Total cash balances at Capital Bank - Jordan were $17.2 million (31 December 2012: $3.0 million). Facilities granted by Capital Bank to the Group amounted to $4.7 million (31 December 2012: $Nil). Interest expense/income is within market rate.
Arab Bank: During the year one member of Hikma Pharmaceuticals PLC senior management member became a board member of Arab Bank PLC. Total cash balances at Arab Bank were $51.5 million (31 December 2012: $75.7 million). Facilities granted by Arab Bank to the Group amounted to $169.4 million (31 December 2012: $187.1 million). Interest expense/income is within market rate.
Jordan International Insurance Company:is a related party of the Group because one Board member of the Company is also a Board member at Hikma Pharmaceuticals PLC. Total insurance premiums paid by the Group to Jordan International Insurance Company during the year were $0.2 million (2012: $3.4 million). The Group's insurance expense for Jordan International Insurance Company contracts in the year 2013 was $0.2 million (2012: $2.8 million). The amounts due to Jordan International Insurance Company at the year-end were $0.1 million (2012: Due to $0.2 million).
Mr. Yousef Abd Ali: is a related party of the Group because he holds a non-controlling interest in Hikma Lebanon of 33%, the amount owed from Mr. Yousef by the Group as at 31 December 2013 was $Nil (due to in 2012: $0.2 million).
Labatec Pharma: is a related party of the Group because it is owned by Mr. Samih Darwazah. During 2013, the Group total sales to Labatec Pharma amounted to $0.4 million (2012: $0.3 million) and the Group total purchases from Labatec Pharma amounted to $Nil (2012: $1.2 million). At 31 December 2013, the amount owed from Labatec Pharma to the Group was $Nil (2012: Owed from $0.2 million).
King and Spalding: is a related party of the Group because a partner of the firm is a Board member and the company secretary of West-Ward. King and Spalding is an outside legal counsel firm that handles general legal matters for West-Ward. During 2013 fees of $Nil (2012: $0.1 million) were paid for legal services provided.
Jordan Resources & Investments Company:is a related party of the Group because three Board members of the Group are shareholders in the firm. During 2013 fees of $0.2 million (2012: $0.2 million) were paid for training services provided.
American University of Beirut:is a related party of the Group because one Board member of the Group is also a trustee of the University. During 2013 fees of $0.1 million (2012: $0.1 million) were paid for training services provided. At 31 December 2013 the amount owed to American University of Beirut from the Group amounted to $0.1 million (2012: owed to $Nil).
HikmaCure: During 2013, the Group signed a 50:50 joint venture ("JV") agreement with MIDROC Pharmaceuticals Limited. The JV is called HikmaCure. Hikma and MIDROC will invest in HikmaCure in equal proportions and have committed to provide up to $22 million each in cash of which $3 million has been paid during the year.
Unimark: The Group held a non-controlling interest of 23.1% in the Indian company Unimark remedies Limited ("Unimark") at 31 December 2013 (2012: 23.1%). During 2013 the Group amount of $3 million in relation to products development agreement.
Haosun: The Group held a non-controlling interest of 30.1% in Hubei Haosun Pharmaceutical Co., Ltd ("Haosun") at 31 December 2013 (2012: 30.1%). During 2013 the total purchases from "Haosun" was $0.2 million (2012: $0.3 million)
16. Acquisition of a subsidiary
On 22 January 2013, Hikma acquired 100% of the Egyptian Company for Pharmaceuticals & Chemical Industries ("EPCI"). Hikma paid cash consideration of $19 million and deferred consideration of $2 million. The main purpose of the acquisition was to strengthen Hikma's position in the large and fast growing Egyptian market.
The fair value of assets acquired included: property plant and equipment of $6 million, intangible assets of $10 million, goodwill of $10 million and other net liabilities of $6 million.
The goodwill arising represents the synergies that will be obtained by integrating EPCI into the existing business.Goodwill recognised is expected to be non deductible for income tax purposes.
The impact of this acquisition on the Group's revenues and profits is immaterial.
17. Foreign exchange currencies
|
|
Period end rates |
|
Average rates |
||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
USD/EUR |
0.7263 |
|
0.7565 |
|
0.7529 |
|
0.7775 |
|
USD/Sudanese Pound |
5.9755 |
|
5.9988 |
|
5.6988 |
|
4.3346 |
|
USD/Algerian Dinar |
78.1082 |
|
78.0915 |
|
79.3595 |
|
77.5551 |
|
USD/Saudi Riyal |
3.7495 |
|
3.7495 |
|
3.7495 |
|
3.7495 |
|
USD/British Pound |
0.6064 |
|
0.6185 |
|
0.6390 |
|
0.6309 |
|
USD/Jordanian Dinar |
0.7090 |
|
0.7090 |
|
0.7090 |
|
0.7090 |
|
USD/Egyptian Pound |
6.9586 |
|
6.3654 |
|
6.8861 |
|
6.0864 |
|
USD/Japanese Yen |
85.9013 |
|
85.9013 |
|
79.8155 |
|
79.8155 |
|
USD/Moroccan Dirham |
8.1069 |
|
8.4838 |
|
8.3517 |
|
8.6458 |
|
USD/Tunisian Dinar |
1.6467 |
|
1.5506 |
|
1.6253 |
|
1.5686 |
The Jordanian Dinar and Suadi Riyal have no impact on the consolidated income statement as those currencies are pegged to the US Dollar.
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 > Plant closure > 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 734 products 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 > Strong quality, compliance and pharmacovigilance teams capable of addressing issues and providing solutions |
|
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 > Fraudulent activities by third parties (vendors, partners, etc.) |
> Loss of products from our portfolio > Revenue interruptions > Failure to recoup sales and marketing and business development costs > Negative actions by various regulatory bodies (e.g. US SEC, UK Serious Fraud Office, etc.)
|
> 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 > Due diligence by the Group Compliance function on potential vendors, partners and other third parties |
|
Integration of acquisitions |
||
|
> Difficulties in integrating any technologies, products or businesses acquired |
> Inability to obtain the advantages that the acquisitions were intended to create > Adverse impact on our business, financial condition and results of operations > Significant transaction and integration costs could adversely impact our financial results > Post acquisition discovery of fraudulent activity by the business acquired |
> Extensive due diligence, including that performed by the Group Compliance function, undertaken as part of any acquisition process > Track record of acquisitions and subsequent business integration > Human resources personnel focussed on managing employee integration following acquisitions > Close monitoring of acquisition and integration costs |
|
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 Middle East, North Africa and 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 26 manufacturing facilities and sales in more than 50 countries > Product diversification, with 710 products and 1,679 dosage strengths and forms > Strong track record in crisis management
|
|
Litigation |
||
|
> Commercial, product liability and other claims brought against a company within the Group or the Group as a whole |
> Financial impact on Group results from adverse resolution of proceedings > Reputational damage |
> In-house legal counsel with relevant jurisdictional experience > Use of top-tier external legal firms in all jurisdictions > Management team with extensive experience of the generics industry |
Financial risks
|
Risk |
Impact |
Mitigation |
|
Foreign exchange risk |
||
|
> Exposure to foreign exchange movements, primarily in the Algerian, Egyptian, European, Moroccan, Sudanese and Tunisian currencies |
> Fluctuations in the Group's net asset values and financial results 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 > Specialised department that structures compliant, tax effective solutions > Regular use of top professional advisory firms |
[1] Before the amortisation of intangible assets (excluding software) and exceptional items, as set out in note 4 to the financial information
[2] Adjusted profit and adjusted profit attributable to shareholders in 2012 have been re-classified to reflect the classification of certain exceptional items on a consistent basis with the treatment in 2013, as set out in note 4 to the financial information
[3] Earnings before interest, tax, depreciation and amortisation. EBITDA is stated before impairment charges for intangible and fixed assets
[4] In 2013, amortisation of intangible assets (excluding software) was $15 million (2012: $13 million). In 2013, exceptional items included within operating expenses were $46 million (2012: $14 million)
[5] In 2013, exceptional items included within other operating expenses (net) were $37 million (2012: $7 million)
[6] Products 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
[7] Totals include 123 dermatological and cosmetic compounds in 401 dosage forms and strengths that are only sold in Morocco
[8] Totals include all compounds and formulations that are either launched or approved or pending approval across all markets, as relevant
[9] In 2013, $14 million (2012: $31 million) of the product-related investments were capitalised within intangible assets and $23 million (2012: $0 million) were capitalised within non-current assets on the balance sheet
This information is provided by RNS
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