Interim Results

RNS Number : 1691C

Hikma Pharmaceuticals Plc

28 August 2008

 



Hikma Pharmaceuticals PLC

Interim results announcement

for the six months to 30 June 2008

LONDON, 28 August 2008 - Hikma Pharmaceutical PLC ('Hikma') (LSE: HIK) (DIFX:HIK), the fast growing multinational pharmaceutical group focused on developing, manufacturing and marketing a broad range of generic and in-licensed pharmaceutical products across the Middle East and North Africa, the United States and Europe, today reports its Interim results for the six months ended 30 June 2008.

Group performance	H1 2008 ($m)	H1 2007 ($m)	Change
Revenue	299.9	224.9	+33.4%
Operating profit	47.1	51.8	-9.0%
Adjusted operating profit	56.7	52.9	+7.2%
Profit attributable to shareholders	32.9	35.6	-7.6%
Adjusted profit attributable to shareholders	40.3	36.4	+10.7%
Diluted earnings per share (cents)	17.0	20.2	-15.8%
Adjusted diluted earnings per share (cents)	20.8	20.7	+0.5%
Dividend per share (cents)	3.5	3.5	+0.0%

• Group revenues up 33.4% to $299.9 million

• Adjusted profit attributable to shareholders up 10.7% to $40.3 million

• Maintained a dividend payout ratio of 20% with a declared interim dividend of 3.5 cents per share

• Branded revenues up 68% with organic sales growth of 22.3% 

• Strong revenue growth and margin expansion at Arab Pharmaceutical Manufacturing ('APM') and Hikma Egypt

• Injectables revenues up by 34.3% driven by strong organic growth of 17.9% and recent acquisitions

• Lower revenues and significant margin erosion in our Generics business due to the difficult trading environment, severe price competition and revisions to our estimates for chargebacks, rebates and returns 

• Launched 87 products across the Group, including 9 new products, and, in August, signed 2 new in-licensing agreements for the MENA region

• Raised gross proceeds of £81.6 million (approximately $160 million) in an equity placing of shares to finance the acquisition of APM

Said Darwazah, Chief Executive of Hikma, said:

'Despite the challenges posed by our Generics business, we have delivered a robust set of financial results for the first half of 2008. Our Branded and Injectables businesses are both performing extremely well, driven by a combination of consistent organic revenue growth and recent acquisitions. 

The outlook for revenue growth in the Branded and Injectables businesses in the second half of 2008 remains strong. We are on track to deliver continued sales growth across MENA, expand our portfolio of own-brand and in-licensed products and develop our global injectables business. We are also working hard to improve the financial performance in our Generics business.  Our strategy remains firmly in place - to consolidate further in the MENA pharmaceutical market and to build Hikma into a leading specialty pharmaceuticals company.'

Enquiries:

Hikma Pharmaceuticals PLC

Said Darwazah, Chief Executive Officer

Bassam Kanaan, Chief Financial Officer    

Susan Ringdal, Investor Relations Director         Tel: [phone]

Brunswick Group

Jon Coles / Justine McIlroy                               Tel: [phone]

Hikma Pharmaceuticals PLC is a fast growing multinational group focused on developing, manufacturing and marketing a broad range of both branded and non-branded generic and in-licensed pharmaceutical products. Hikma's operations are conducted through three businesses: 'Branded', 'Injectables' and 'Generics'. Hikma's operations are based principally in the Middle East and North Africa ('MENA') region, where it is a market leader and sells across 17 countries, the United States and Europe. In 2007, the Group achieved revenues of $449 million and profit attributable to shareholders was $63 million. For news and other information, please visit www.hikma.com.

  Chief executive's statement

In the first half of 2008 Hikma has continued its strong growth trajectory, with Group revenues increasing by 33.4% resulting from consistent organic revenue growth in our Branded and Injectables businesses and the benefits of our recent acquisitions in Egypt and Jordan. Our diversified business model operates across 40 countries in four continents with a product mix spanning branded, un-branded and injectable generic products as well as a growing portfolio of high margin in-licensed products from originator companies. This business model has seen us deliver robust Group revenue growth despite declining sales in our Generics business. We have implemented some further management changes in this business and are working hard to improve its financial performance going forward. 

We began this year by closing a successful $160.3 million placing to finance our acquisition of APM, which was oversubscribed and well received by the market. In today's uncertain macro-economic environment, this placing has helped us retain balance sheet flexibility to finance future growth in the business.

Our Branded business is now our largest division by sales and we continue to see excellent growth, driven by favourable market demographics across the MENA region. In the first half of 2008 we delivered revenue growth of 68% through a combination of organic growth and the contribution from recent acquisitions. Organic revenue growth of 22.3% demonstrates the strength of the underlying business, particularly in markets like Jordan, Saudi Arabia and the other Gulf Countries. We have substantially completed the integration of APM and Hikma Egypt and both of these businesses are performing ahead of our expectations. I am very proud to say that Hikma has grown to be the 5th largest pharmaceutical company in the MENA region. 

Our ever-increasing portfolio of in-licensed originator products is making a very positive contribution to sales across MENA, in line with our strategy of developing this aspect of our business. These products now account for 35.5% of revenues in the division. The licensed products from Takeda acquired as part of the APM acquisition, which include Actos® and Blopress® performed particularly well with sales increasing by 78%. 

Our global Injectables business, now our second largest division, saw sales grow across all countries in MENA benefiting from targeted sales and marketing efforts. We were able to achieve double digit growth in Europe despite increasing competition in the German market and we continue to gain momentum in the US market as we grow our product portfolio and increase sales volumes.

As recently announced, our Generics business experienced difficult trading conditions in the first half of the year, leading to significantly lower sales and margins. We are taking steps to improve the financial performance of this business and hope to see evidence of such improvement by the year end.

Overall, our diversified business model has allowed us to increase Group revenues despite the pressure we have experienced in our Generic business. The outlook for revenue growth in the Branded and Injectables businesses for the second half of 2008 remains strong. I am confident that Hikma will deliver another full year of strong revenue growth as we increase sales across MENA, expand our portfolio of own-brand and in-licensed products and continue to develop our global Injectables business, while also working hard to improve the financial performance of our Generic business. Our strategy remains firmly in place - to grow further in the MENA market and to build Hikma into a leading specialty pharmaceuticals company.

Said Darwazah

Chief Executive Officer

  Interim management review

Group performance

Revenue for the Group increased by 33.4% to $299.9 million, compared to $224.9 million in the first half of 2007. The revenue contribution from Hikma Egypt, APM and Thymoorgan - the acquisitions completed since the first half of 2007 - was $57.1 million. Underlying organic revenue growth, which excludes the impact of these acquisitions, was 8.0%, driven by strong performances in both the Branded and Injectables businesses, but heavily impacted by a 26.5% decline in revenues in our US Generic business.

As a result, in the first half of 2008, the Branded and Injectables businesses accounted for 84.9% of revenues compared with 72.8% at the end of the first half of 2007.

Revenue by segment	H1 2008	H1 2007
Branded	58.0%	46.1%
Injectables	26.9%	26.7%
Generics	14.4%	26.1%
Revenue by region
MENA	67.1%	54.2%
US	18.6%	29.8%
Europe and rest of world	14.2%	16.0%

The Group's gross profit increased by 18.5% to $135.0 million, compared to $113.9 million in the first half of 2007. Group gross margin for the first half of 2008 was 45.0%, compared to 50.7% in the first half of 2007 primarily due to the significant decline in gross profit in the Generics business.

Group operating expenses grew in the first half of 2008 by 41.4% to $87.9 million, compared to $62.2 million in the first half of 2007. Excluding acquisitions, operating expenses grew by 20.8%.

Sales and marketing expenses increased by 56.6% to $47.1 million largely reflecting the consolidation of APM and Hikma Egypt and the higher amortisation costs related to the intangible assets arising on these acquisitions. Excluding the acquisitions of APM, Hikma Egypt and Thymoorgan, sales and marketing expenses increased by 23.8%, which reflects investment to support the strong growth in the Branded business. Sales and marketing expenses represented 15.7% of Group revenue in the first half of 2008, compared to 13.4% in the first half of 2007. We expect sales and marketing expenses to decrease as a percentage of sales in the second half of the year.

The Group's general and administrative expenses increased by 31.9% to $28.0 million, compared to $21.2 million in the first half of 2007. This increase partially reflects the consolidation of APM, Hikma Egypt and Thymoorgan and includes exceptional acquisition integration costs of $1.2 million. Corporate general and administrative costs decreased slightly to $8.4 million, compared to $8.7 million in the first half of 2007. Overall, general and administrative expenses represented 9.3% of Group revenue in the first half of 2008, compared to 9.4% in the first half of 2007.

Investment in R&D increased by 18.2% to $10.8 million, with total investment in R&D now representing 3.6% of Group revenue, compared to 4.1% in the first half of 2007. This reflects a shift towards product acquisitions and an increase in in-licensing activity. 

Other net operating expenses, which consist mainly of provisions against slow moving items partially offset by foreign exchange gains, were $1.9 million, compared to $1.7 million in the first half of 2007.

Operating profit for the Group decreased by 9.0% to $47.1 million, compared to the first half of 2007, and group operating margin decreased to 15.7%, compared to 20.6% in the first half of 2007, reflecting, in part, the increase in intangible amortisation charges excluding software and exceptional items.  

Adjusted operating profit for the Group, which is defined as operating profit before the amortisation of intangible assets excluding software and exceptional items, increased by 7.2% to $56.7 million, compared to $52.9 million in the first half of 2007. These exceptional items include revisions to our estimates for chargebacks, returns and rebates in our US Generic business and acquisition integration costs associated with the acquisition of APM. Adjusted operating margin was 18.9%, compared to 23.5% in the first half of 2007. This decline is attributed to the planned investment in sales and marketing related to new product launches in the Branded business and to the difficulties experienced by our Generics business in the US.

Analysis of adjusted consolidated income statement
	H1 2008			H1 2007			H1 2008 vs  H1 2007
All figures in $ million	Adjusted	Exceptional items and intangible amortisation,6	As reported	Adjusted	Intangible amortisation	As reported	Adjusted
Net sales	304.7	(4.8)	299.9	224.9	-	224.9	+35.5%
Operating profit	56.7	(9.6)	47.1	52.9	(1.1)	51.8	+7.2%
Operating profit margin	18.6%		15.7%	23.5%		23.0%	-4.9
Net income before tax and minority interests	48.9	(9.6)	39.3	50.6	(1.1)	49.5	-3.4%
Tax	(8.1)	2.2	(5.9)	(12.9)	0.3	(12.6)	-37.2%
Effective tax rate	16.6%		15.1%	25.5%		25.5%	-8.9
Profit attributable to shareholders	40.3	(7.4)	32.9	36.4	(0.8)	35.6	+10.7%
Diluted EPS (cents)	20.8	(3.8)	17.0	20.7	(0.5)	20.2	+0.5%

Branded 

The pharmaceutical market in the MENA region is predominantly a branded market, in which patented, generic and OTC pharmaceutical products are marketed under specific proprietary brand names. Our Branded business manufactures branded generic and in-licensed patented pharmaceutical products for sale across the MENA region and parts of Europe.  

The Branded business is our largest business in terms of revenue and operating profit. Branded revenues increased by 68.0% to $174.0 million in the first half of 2008, compared to $103.6 million in the first half of 2007, reflecting strong organic growth of 22.3% and the acquisitions we made in the MENA region in 2007. Trading continued to be strong across all our MENA markets, particularly Algeria, Jordan and the GCC countries, where we are now selling under the Hikma, JPI and APM brands. The Branded business's performance in the first half of the year also reflects the continuing seasonality of this business, which is traditionally stronger in the first six months of the year.

Both of the acquisitions made in the MENA region in 2007 performed ahead of our expectations in the first half of 2008. Sales at APM, which was acquired in December 2007, grew by 59.4% to $33.5 million compared to reported sales of $21.0 million in the first half of 2007, demonstrating the success of the swift integration process that began in January of 2008. APM's sales were also positively impacted by high levels of order backlogs. Since the beginning of the year, we have improved APM's organisational structure to create a new sales operation, as well as logistics, supply chain, budgeting and production planning functions. We are also unifying the Hikma and APM distribution channels in many markets. These changes will bring synergies and reduce future sales and marketing expenses. In an effort to improve working capital management, we are applying Hikma terms wherever possible. We are upgrading APM's manufacturing facilities to achieve the levels of quality and Good Manufacturing Practice ('GMP') that Hikma demands. Through this process we have nearly doubled production on most lines. Further upgrades to APM's production facilities are planned for the end of 2008, which will further enhance productivity but will require shutting down the APM plant for almost two months.

In Egypt, where sales grew by 78.9% in the first half of 2008, key functions such as finance, marketing and R&D are being integrated into Hikma's global systems and we have made significant process improvements, nearly doubling production and units sold compared to the first half of 2007. Significant investment was made in sales and marketing, to launch the Hikma brand in the Egyptian market and to promote key products. As a result of our efforts, Hikma's market share in Egypt, while currently small, has increased significantly.

More focused sales and marketing efforts have helped to drive customer demand and increase sales across most Branded markets in the first half of the year. Significant focus was put on promoting new and recently launched products, developing our market position in key products and therapeutic areas, and building brand recognition.  

As a result of these efforts, Hikma is now the fifth largest pharmaceutical manufacturer in the MENA region, with a market share of 3.3%.  In the first half of 2008, we grew our market share in Algeria to 5.9% compared to 5.2% during the same period in 2007. We are now the fifth largest pharmaceutical manufacturer and the largest generic pharmaceutical manufacturer by value in the Algerian market. In Saudi Arabia, as a result of the APM acquisition, we are now the fifth largest pharmaceutical manufacturer and our market share in value terms increased to 5.0%, compared to 3.9% as of June 2007. In Jordan, where we are the market leader, we have substantially increased our market share to 12.5% through strong underlying market share growth and the consolidation of APM.

Revenue from Hikma's existing in-licensed products grew by 24.6% in the first half, representing 36.0% of Branded organic sales in the first half of 2008. Including sales from in-licensed products acquired from APM and Hikma Egypt, in-licensed products now account for 35.5% of total Branded sales. Sales of Actos®, Blopress® and the other products in-licensed from Takeda grew by 78% in the first half, as we increased our market share in existing markets and began to launch these products across the Hikma network.  

Gross profit in the Branded business increased by 67.2% to $94.0 million, compared to $56.2 million in the first half of 2007. The Branded business's gross margin remained relatively stable at 54.0%, compared to 54.3% in the first half of 2007.  

Branded operating profit increased by 47.0% in the first half of 2008, to $50.4 million. Operating margin in the Branded business was 29.0% in the first half of 2008, down from 33.1% in 2007. The decline reflects enhanced sales and marketing activities related to the promotion of key products and an increase in investment in R&D. It also reflects additional investment to support the strong growth in the Branded business.

Taking into account the usual seasonality in Branded revenues and operating margins in the second half of the year, we expect that the Branded business will deliver revenue growth of approximately 60% for the full year.  
  Injectables

Revenue in our global Injectables business increased by 34.3% to $80.6 million reflecting underlying organic growth, which excludes the acquisition of Thymoorgan and APM, of 17.9%, resulting from a strong performance in the MENA region and our growing business in the US. 

Injectables revenue grew by 54.0% in the MENA region with Jordan, Algeria, Saudi Arabia and UAE performing particularly well. This growth is attributable to the strength of our product portfolio, the quality of our sales force and an increase in attractive tender business. The MENA region now represents 41.1% of Injectables sales, compared to 35.8% in the first half of 2007. We continue to see excellent prospects for growth in Injectables sales in the MENA region, which we expect will represent an increasing percentage of future Injectable sales.

In the principal part of our Injectables business in Europe - the oncology businesses, Ribosepharm and Thymoorgan - we delivered sales of $18.3 million, compared to $17.5 million in the first half of 2007. Total first half sales in 2007 included $4.5 million in non-recurring sales from a discontinued in-licensed product. As almost all oncology sales are generated in Germany, we expect this business will come under increasing competitive pressure in the current market environment. We have appointed a new management team and are seeking to expand our product portfolio. In the rest of our European business, the market for hospital products has been more challenging, particularly in Germany, where some of our competitors are more aggressively targeting this market.

Despite intensifying competition in the US injectable market, our US Injectables sales grew by 53.0% compared to the first half of 2007, primarily driven by higher private label business where we almost doubled sales. In our own drug business, we increased revenues by 26.6%, benefiting from a significantly more diversified product portfolio in the US than one year ago. We are also achieving higher sales volumes across a broader portfolio of cephalosporins and have seen excellent growth in some of our liquid products. 

During the first half of 2008, the Injectables business received 38 regulatory approvals, including 2 in Europe, 30 in the MENA region and 6 ANDA approvals in the US. A total of 36 products were launched, including 8 new products.

Injectables gross profit increased by 14.3% to $33.8 million, compared to $29.6 million in the first half of 2007, with gross margin decreasing to 42.0%, compared to 49.3% in the first half of 2007. The decrease in gross margin reflects, in part, the consolidation of Thymoorgan which, as a contract manufacturing business, has lower gross margins than the rest of Hikma's Injectables business. It also reflects the consolidation of APM's low margin injectable sales contracts that terminate at the end of the year. Excluding the acquisitions of Thymoorgan and APM, the Injectables gross margin was 45.4%, reflecting the more competitive environment in the German market and higher overheads related to the start-up of our new cephalosporin plant in Portugal. 

Injectables operating profit increased by 9.1% to $13.5 million, compared to $12.3 million in the first half of 2007. Injectables operating margin decreased to 16.7% in the first half of 2008, down from 20.5% in the first half of 2007, primarily as a result of the consolidation of APM's lower margin injectable sales. Excluding the consolidation of APM and the amortisation of intangibles, Injectables operating margin was 19.4%.

Looking forward, we expect the Injectables business to continue to deliver strong revenue growth in the second half of the year. The consolidation of APM's lower margin sales will continue to affect margins in the second half and, whilst sales continue to grow, we expect that the increase in competition in Germany and the US could put additional pressure on margins. Excluding APM, however, we continue to expect to deliver Injectables operating margins ahead of 2007.  

Generics

Revenue in our Generics business decreased by 26.5% to $43.1 million, compared to $58.7 million in the first half of 2007. This decline resulted from lower sales of lisinopril, following the expiry of the contract with the Department of Veterans Affairs at the end of December 2007, continued price erosion across other product lines, lower than expected demand for new products and additional one-off provisions of $4.8 million related to revisions in our estimates for chargebacks, rebates and returns. 

All of these factors, as well as higher than expected production and API costs, led to a decline in the Generics gross profit of 75.8% to $6.8 million, compared to $28.2 million in the first half of 2007. Generics gross margin was 15.8%, compared to 48.1% in the first half of 2007. Consequently, the Generics segment realised an operating loss of $6.0 million in the first half, compared to an operating profit of $15.7 million in the first half of 2007.

We are focused on stemming the losses in this business as quickly as possible and have made further management changes, which include appointing a General Manager and a new Vice President, Sales and Marketing for all US operations.  

This enhanced management team is undertaking a thorough review of the business and has already taken steps to improve operating performance. Following an in-depth review of profitability by product and by customer, actions are being taken to withdraw low margin products, implement price increases and renegotiate terms of trade.  

Looking forward, our priority is to improve the financial performance of this business as quickly as possible. While we continue to expect a slight operating loss for the second half of the year, we are working to show some evidence of an improvement in financial performance by year end.

Other businesses 

Other businesses, which are primarily Arab Medical Containers, a manufacturer of plastic specialised packaging, and International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, had aggregate revenues in the first half of 2008 of $2.1 million, compared to aggregate revenue of $2.6 million in the first half of 2007.

These other businesses delivered an operating loss of $2.3 million in the first half of 2008, compared to an operating loss of $1.8 million in the first half of 2007. 

Research & Development

The Group's product portfolio continues to grow. During the first half of the year, we added 9 new products to the Group portfolio, which now covers 362 products in 747 dosage strengths and forms. We manufacture and/or sell 40 of these products under-license from the originator.

In the first half of 2008, Hikma received 90 regulatory approvals, including 2 ANDA approvals for the Generics business and 6 ANDA approval for the Injectables business. Over the same period, 87 products and line extensions were launched across the group including 9 new pharmaceutical compounds not previously marketed. 

To ensure the continuous development of our product pipeline, we submitted 18 regulatory filings for new products, and a total of 110 across all regions and markets in the first half. As of 30 June 2008, we had a total of 91 pending approvals for new products and 572 pending approvals across all regions and markets.  

We estimate the approximate addressable market for our portfolio of pending approvals to be approximately $18 billion, based on the 2007 full year sales of the currently marketed equivalent products in the markets covered by the pending approvals.  

At 30 June 2008, we had a total of 61 new products under development, the majority of which should receive several marketing authorisations for differing strengths and/or product forms over the next few years. This does not include the 29 new products under development at Hikma Egypt. 

	Total filings in H1 2008	Filings in H1 2008 for new products and new line extensions	Filings in H1 2008 for new products only	Total pending approvals as of 30 June 2008	Pending approvals for new products and new line extensions as of 30 June 2008	Pending approvals for new products only as of 30 June 2008
Generics
United States	2	2	2	32	32	26
Branded
MENA	80	13	8	330	25	17
Europe and ROW	13	13	5	35	35	14
	93	26	13	365	60	31
Injectables
United States	1	1	-	26	26	16
MENA	14	4	3	136	10	8
Europe and ROW	8	-	-	21	13	10
	23	5	3	183	49	34
	118	33	18	580	141	91

Financial performance

Net finance expense

Net finance expense increased to $8.2 million, compared to $2.5 million in the first half of 2007 reflecting the increase in debt financing required to fund acquisitions and the Group's expansion.

Profit before tax

Profit before taxes and minority interest for the Group decreased by 20.6% to $39.3 million, compared to $49.5 million in the first half of 2007.  

Tax

The Group incurred a tax expense of $5.9 million in the first half of 2008. The effective tax rate was 15.1%, a decrease of 10.4 percentage points on the comparable period. The effective tax rate decrease was primarily due to the net losses incurred in the Generics business and to a shift in the Group's overall geographic sales mix towards lower tax countries, particularly in the MENA region. 

Profit for the period

The Group's profit attributable to equity holders of the parent decreased by 7.6% to $32.9 million for the six months to 30 June 2008.

Earnings per share 

Diluted earnings per share for the six months to 30 June 2008 were 17.0 cents, down 15.8% from 20.2 cents in the first half of 2007. On an adjusted basis, diluted earnings per share have increased slightly to 20.8 cents, compared to 20.7 cents in the first half of 2007.

Dividend

The Board has declared an interim dividend of 3.5 cents per share (approximately 1.9 pence per share) to be paid on 17 October 2008 to eligible shareholders on the register at the close of business on 19 September 2008. The ex-dividend date is 17 September 2008.

Operating cash flow and investment

Net cash inflow from operating activities was $5.4 million, compared to $3.9 million during the first half of 2007. In line with sales growth, investment in working capital increased by $57.7 million compared to 31 December 2007. Historically, the Group has generated strong cash flows in the second half of the year.

Receivables increased by 37.8% compared to 30 June 2007. Excluding acquisitions, receivables increased by 9.4%. As at 30 June 2008, receivable days stood at 126 days, compared to 122 days at 30 June 2007. Excluding acquisitions9, receivable days stood at 120 days as at 30 June 2008.  

Inventory increased by 63.6% compared to 30 June 2007, due to acquisitions9 and the necessity to support future sales growth. As at 30 June 2008, inventory days stood at 194 days, compared to 176 days at 30 June 2007 and 237 days at 31 December 2007. Excluding acquisitions9, inventory days stood at 191 days at 30 June 2008.

Net cash used for investing activities was $35.2 million, compared to $92.0 million in the first half of 2007. Of this, capital expenditure amounted to $30.0 million, compared to $19.1 million in the first half of 2007. This expenditure relates to expansion projects in the Branded and Injectables businesses. During the first half of the year the Group also made regular investments to upgrade and maintain existing facilities. 

Balance sheet 

The Group had a total cash balance of $22.5 million as at 30 June 2008, compared to $34.5 million at 31 December 2007. The Group's net debt position at 30 June 2008 was $197.6 million, compared to $306.8 million at 31 December 2007. The reduction in net debt is primarily a result of the $160.3 million equity placing in January that was used to finance the acquisition of APM. Darhold Limited, a related party of the Company, participated in this placing, acquiring approximately 5.2 million shares, representing approximately 30.8% of the placing shares. Mr Samih Darwazah, Mr Said Darwazah and Mr Mazen Darwazah, each a related party of the Company, also participated in the placing, acquiring in aggregate, approximately 285,000 shares, representing approximately 1.7% of the placing shares. 

Outlook

The outlook for revenue growth in the Branded and Injectables businesses in the second half of 2008 remains strong. We are on track to deliver continued sales growth across the MENA region, expand our portfolio of own-brand and in-licensed products and develop our Injectables business. We continue to expect the Group to deliver sales growth in the 30% to 35% range.

While we are working hard to improve the financial performance in our Generics business and to manage the increasing competition in our Injectables business, we see these pressures continuing through the second half and are more cautious in our outlook for gross margin for the Group as a whole, which we expect will be approximately 44% for the full year.  

Forward looking statements

Certain statements in this announcement are forward-looking statements which 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 involve a number of risks, uncertainties or assumptions 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 materially 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 this the approval of this announcement.

Except as required by law, the Directors do not make any undertaking 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. Nothing in this announcement should be construed as a profit forecast.

  INDEPENDENT REVIEW REPORT TO HIKMA PHARMACEUTICALS PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 13. 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 2410 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 them 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 Kingdoms' Financial Services Authority.

As disclosed in note 1, 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 2008 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 & Touche LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

27 August 2008

Hikma Pharmaceuticals PLC

Condensed consolidated income statement

			H1 2008		H1 2007		FY 2007
	Notes		USD '000 (Unaudited)		USD '000 (Unaudited)		USD '000 (Audited)
Continuing operations
Revenue	2		299,912		224,894		448,796
Cost of sales	2		(164,884)		(110,975)		(227,263)
Gross profit	2		135,028		113,919		221,533
Sales and marketing costs			(47,149)		(30,113)		(61,021)
General and administrative expenses			(28,018)		(21,247)		(46,012)
Research and development costs			(10,816)		(9,153)		(19,342)
Other operating expenses (net)			(1,936)		(1,656)		(2,760)
Total operating expenses			(87,919)		(62,169)		(129,135)
Adjusted operating profit			56,686		52,898		95,061
Exceptional items - revision to estimates for chargebacks, returns and rebates	12		(4,800)		-		-
Exceptional items - acquisition integration costs	12		(1,205)		-		-
Intangible amortisation *	12		(3,572)		(1,148)		(2,663)
Operating profit			47,109		51,750		92,398
Finance income			430		1,376		2,029
Finance expense			(8,601)		(3,897)		(10,837)
Other income			321		223		199
Profit before tax			39,259		49,452		83,789
Tax	3		(5,942)		(12,610)		(19,596)
Profit for the period			33,317		36,842		64,193
Attributable to:
Minority interest			405		1,228		1,617
Equity holders of the parent			32,912		35,614		62,576
			33,317		36,842		64,193
Earnings per share (cents)
Basic	5		17.6		21.1		37.0
Diluted	5		17.0		20.2		35.4

On this page and throughout these interim financial information 'H1 2008' refers to the six months ended 30 June 2008, 'H1 2007' refers to the six months ended 30 June 2007 and 'FY 2007' refers to the year ended 31 December 2007. 

* Intangible amortisation comprises the amortisation on intangible assets excluding software.

  Hikma Pharmaceuticals PLC

Condensed consolidated balance sheet

			30 June		30 June		31 December
			2008		2007		2007
	Notes		USD '000 (Unaudited)		USD '000 (Unaudited)*		USD '000 (Audited)*
Non-current assets
Intangible assets			263,534		87,382		255,551
Property, plant and equipment			263,903		178,977		243,901
Interest in joint venture			4,996		-		4,543
Deferred tax assets			14,060		13,339		14,503
Available for sale investments			842		573		1,008
Financial and other non-current assets			1,916		1,019		1,290
			549,251		281,290		520,796
Current assets
Inventories	6		174,853		106,883		147,292
Income tax recoverable			51		500		358
Trade and other receivables	7		229,168		164,951		188,981
Collateralised cash			720		5,457		5,628
Cash and cash equivalents			21,767		45,400		28,905
Other current assets			4,447		2,657		2,625
			431,006		325,848		373,789
Total assets			980,257		607,138		894,585
Current liabilities
Bank overdrafts and loans			119,360		63,973		276,537
Obligations under finance leases			882		606		1,455
Trade and other payables	8		93,124		68,338		84,324
Income tax provision			12,459		12,126		10,583
Other provisions			5,066		3,057		4,475
Other current liabilities			16,353		7,805		16,642
			247,244		155,905		394,016
Net current assets/(liabilities)			183,762		169,943		(20,227)
Non-current liabilities
Long-term financial debts			93,944		56,529		57,662
Deferred income			810		322		279
Obligations under finance leases			5,911		4,508		5,698
Deferred tax liabilities			12,138		4,396		12,273
			112,803		65,755		75,912
Total liabilities			360,047		221,660		469,928
Net assets			620,210		385,478		424,657
Equity
Share capital	10		33,751		29,907		30,229
Share premium	10		269,503		112,295		114,059
Reserves			310,723		237,485		274,192
Equity attributable to equity holders of the parent			613,977		379,687		418,480
Minority interest			6,233		5,791		6,177
Total equity			620,210		385,478		424,657

*These numbers are revised - see note 1

  Hikma Pharmaceuticals PLC

Condensed consolidated statement of changes in equity

	Notes	Merger reserve	Retained earnings	Other reserves	Total reserves	Share capital	Share premium	Total equity attributable to equity shareholders of the parent
		USD '000	USD '000	USD '000	USD '000	USD '000	USD '000	USD  '000
At 1 January 2007 (audited)		33,920	161,631	8,373	203,924	29,712	111,431	345,067
Issue of equity shares		-	-	-	-	195	864	1,059
Cost of equity settled employee share scheme		-	667	-	667	-	-	667
Deferred tax arising on share-based payments		-	2,033	-	2,033	-	-	2,033
Dividends on ordinary shares		-	(6,765)	-	(6,765)	-	-	(6,765)
Profit for the period		-	35,614	-	35,614	-	-	35,614
Cumulative effect of change in fair value of available for sale investments and financial derivatives		-	(187)	-	(187)	-	-	(187)
Revaluation reserve		-	90	(90)	-	-	-	-
Currency translation gain		-	-	2,199	2,199	-	-	2,199
Balance at 30 June 2007 (unaudited)		33,920	193,083	10,482	237,485	29,907	112,295	379,687
Balance at 1 January 2007 (audited)		33,920	161,631	8,373	203,924	29,712	111,431	345,067
Issue of equity shares		-	-	-	-	517	2,628	3,145
Cost of equity settled employee share scheme		-	1,601	-	1,601	-	-	1,601
Deferred tax arising on share-based payments		-	2,968	-	2,968	-	-	2,968
Dividends on ordinary shares		-	(12,696)	-	(12,696)	-	-	(12,696)
Profit for the year		-	62,576	-	62,576	-	-	62,576
Cumulative effect of change in fair value of available for sale investments and financial derivatives		-	(407)	-	(407)	-	-	(407)
Revaluation reserve		-	180	(180)	-	-	-	-
Currency translation gain		-	-	16,226	16,226	-	-	16,226
Balance at 31 December 2007 (audited)		33,920	215,853	24,419	274,192	30,229	114,059	418,480
Issue of equity shares	10	-	-	-	-	3,522	155,444	158,966
Cost of equity settled employee share scheme		-	1,307	-	1,307	-	-	1,307
Deferred tax arising on share-based payments		-	(261)	-	(261)	-	-	(261)
Dividends on ordinary shares		-	(7,542)	-	(7,542)	-	-	(7,542)
Profit for the period		-	32,912	-	32,912	-	-	32,912
Cumulative effect of change in fair value of available for sale investments and financial derivatives		-	160	-	160	-	-	160
Revaluation reserve		-	90	(90)	-	-	-	-
Currency translation gain		-	-	9,955	9,955	-	-	9,955
Balance at 30 June 2008 (unaudited)		33,920	242,519	34,284	310,723	33,751	269,503	613,977

  Hikma Pharmaceuticals PLC

Condensed consolidated statement of cash flows

		H1  2008		H1  2007		FY  2007
	Notes	USD '000 (Unaudited)		USD '000 (Unaudited)		USD '000 (Audited)
Net cash from operating activities	9	5,442		3,883		53,283
Investing activities
Purchases of property, plant and equipment		(30,041)		(19,064)		(50,402)
Proceeds from disposal of property, plant and equipment		130		162		906
Purchase of intangible assets		(2,882)		(1,352)		(4,586)
Investment in financial and other assets		(1,079)		223		329
Investment in available for sale securities		166		28		(226)
Reduction of cash deposits		-		-		-
Acquisition of subsidiary undertakings net of cash acquired		(1,934)		(73,392)		(296,903)
Cash acquired on acquisition of subsidiaries		-		-		-
Finance income	1	430		1,376		2,029
Net cash used in investing activities		(35,210)		(92,019)		(348,853)
Financing activities
Decrease/(increase) in collateralised cash		4,908		(120)		(291)
Increase in long-term financial debts		41,904		36,779		42,464
Repayment of long-term financial debts		(5,622)		(5,589)		(13,546)
(Decrease)/increase in short-term borrowings		(161,223)		26,029		229,658
Decrease)/increase in obligations under finance leases)		(360)		(543)		126
Dividends paid		(7,557)		(6,752)		(12,834)
Dividends paid to minority shareholders		(351)		(166)		(166)
Interest paid	1	(8,632)		(3,431)		(10,166)
Proceeds from issue of new shares		158,966		1,059		3,145
Net cash from financing activities		22,033		47,266		238,390
Net decrease in cash and cash equivalents		(7,735)		(40,870)		(57,180)
Cash and cash equivalents at beginning of period		28,905		86,227		86,227
Foreign exchange translation		597		43		(142)
Cash and cash equivalents at end of period		21,767		45,400		28,905

  Hikma Pharmaceuticals PLC

Condensed consolidated cash flow statement

1.    Basis of preparation

The unaudited condensed set of financial statements for the six months ended 30 June 2008 have been prepared using the same accounting policies and on a basis consistent with the audited results for the year ended 31 December 2007. The financial information has been prepared under the historical cost convention, except for the revaluation to market of certain financial assets and liabilities. 

Comparative figures for 30 June 2007 and 31 December 2007 have been adjusted for revisions to the provisional acquisition balance sheet of the companies acquired by the Group in 2007. Further details are provided in note 11. In addition, in the condensed consolidated cash flow statement and supporting notes interest paid has been reclassified to financing activities and finance income has been reclassified to investing activities to better reflect the nature of the flows, following the recent acquisitions.

The financial information for the year ended 31 December 2007 does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2007, 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 auditors' report on those accounts was unqualified and did not contain any statement under Section 237 (2) or (3) of the Companies Act 1985.

Exceptional items are defined as those that are material in nature or amount and are non-recurring. Exceptional items are disclosed separately in the condensed consolidated income statement to assist in the understanding of the financial performance of the Group.

The currency used in the preparation of the accompanying consolidated financial statements is the US Dollar as the majority of the Company's business is conducted in US Dollars (USD).

The Group's condensed consolidated financial statements are prepared in accordance with IAS 34 'Interim Financial Reporting'. They are approved by the Board on 27 August 2008.  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments

For management purposes, the Group is currently organised into three operating divisions - Generics, Branded and Injectables. These divisions are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below.

Six months ended		Branded		Injectables		Generics		Corporate and other		Group
30 June 2008 (unaudited)		USD '000		USD '000		USD '000		USD '000		USD '000
Revenue		174,039		80,597		43,133		2,143		299,912
Cost of sales		(80,040)		(46,768)		(36,300)		(1,776)		(164,884)
Gross profit		93,999		33,829		6,833		367		135,028
Result		54%		42%		16%				45%
Adjusted segment result		53,737		14,820		(1,173)		(2,326)		65,058
Exceptional items and intangible amortisation excluding software		(3,349)		(1,362)		(4,866)		-		(9,577)
Segment result		50,388		13,458		(6,039)		(2,326)		55,481
Unallocated corporate expenses										(8,372)
Operating profit										47,109
Finance income										430
Finance expense										(8,601)
Other income										321
Profit before tax										39,259
Tax										(5,942)
Profit for the period										33,317
Attributable to:
Minority interest										405
Equity holders of the parent										32,912
										33,317

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments (continued)

		Branded		Injectables		Generics		Corporate and other		Group
Other information 30 June)		USD '000		USD '000		USD '000		USD '000		USD '000
2008 (unaudited
Additions to property, plant and equipment assets (cost)		17,306		5,200		5,830		856		29,192
Additions to intangible assets		1,084		1,599		-		199		2,882
Total property, plant and equipment and intangible assets (net book value)		324,309		162,124		31,924		9,080		527,437
Depreciation and amortisation		9,466		4,697		2,220		760		17,143
Balance sheet
Total assets
Segment assets		633,582		226,937		96,557		23,181		980,257
Total liabilities
Segment liabilities		192,398		113,693		41,727		12,229		360,047

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments (continued)

Six months ended		Branded		Injectables		Generics		Corporate and other		Group
30 June 2007 (unaudited)		USD '000		USD '000		USD '000		USD '000		USD '000
Revenue		103,620		60,035		58,667		2,572		224,894
Cost of sales		(47,388)		(30,439)		(30,463)		(2,685)		(110,975)
Gross profit/(loss)		56,232		29,596		28,204		(113)		113,919
Result		54%		49%		48%				51%
Adjusted segment result		34,492		13,260		15,670		(1,798)		61,624
Intangible amortisation excluding software		(219)		(929)		-		-		(1,148)
Segment result		34,273		12,331		15,670		(1,798)		60,476
Unallocated corporate expenses										(8,726)
Operating profit										51,750
Finance income										1,376
Finance expense										(3,897)
Other income										223
Profit before tax										49,452
Tax										(12,610)
Profit for the period										36,842
Attributable to:
Minority interest										1,228
Equity holders of the parent										35,614
										36,842

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments (continued)

		Branded		Injectables		Generics		Corporate and other		Group
Other information 30 June		USD '000		USD '000		USD '000		USD '000		USD '000
2007 (unaudited)
Additions to property, plant and equipment assets (cost)		11,375		6,782		2,495		465		21,117
Acquisition of subsidiary's property, plant and equipment (cost)		-		9,243		-		-		9,243
Additions to intangible assets		405		524		295		128		1,352
Intangible assets arising on acquisition		-		62,495		-		-		62,495
Total property, plant and equipment and intangible assets (net book value)		96,812		131,370		29,102		9,075		266,359
Depreciation and amortisation		3,710		3,167		2,279		667		9,823
Balance sheet
Total assets
Segment assets		275,909		182,703		104,227		44,299		607,138
Total liabilities
Segment liabilities		106,974		69,052		30,205		15,429		221,660

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments (continued)

Year ended		Branded		Injectables		Generics		Corporate and other		Group
31 December 2007 (audited)		USD '000		USD '000		USD '000		USD '000		USD '000
Revenue		198,942		121,164		124,229		4,461		448,796
Cost of sales		(90,925)		(67,005)		(65,644)		(3,689)		(227,263)
Gross profit		108,017		54,159		58,585		772		221,533
Result		54%		45%		47%				49%
Adjusted segment result		62,150		22,666		31,644		(3,396)		113,064
Intangible amortisation excluding software		(454)		(2,209)		-		-		(2,663)
Segment result		61,696		20,457		31,644		(3,396)		110,401
Unallocated corporate expenses										(18,003)
Operating profit										92,398
Finance income										2,029
Finance expense										(10,837)
Other income										199
Profit before tax										83,789
Tax										(19,596)
Profit for the year										64,193
Attributable to:
Minority interest										1,617
Equity holders of the parent										62,576
										64,193

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

2.    Business and geographical segments (continued)

		Branded		Injectables		Generic		Corporate and other		Group
Other information 31		USD '000		USD '000		USD '000		USD '000		USD '000
December 2007 (audited)
Additions to property, plant and equipment assets (cost)		28,366		15,811		4,189		990		49,356
Acquisition of subsidiary's property, plant and equipment (cost)		53,625		9,213		-		-		62,838
Additions to intangible assets		1,453		2,557		445		131		4,586
Intangible assets arising on acquisition		159,940		62,495		-		-		222,435
Total property, plant and equipment and intangible assets (net book value)		314,027		148,252		28,304		8,869		499,452
Depreciation and amortisation		9,740		7,054		5,153		1,486		23,433
Balance sheet
Total assets
Segment assets		576,157		196,337		97,355		24,736		894,585
Total liabilities
Segment liabilities		169,119		78,723		9,781		212,305		469,928

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

		Sales revenue by geographical market
		H1 2008		H1 2007		FY 2007
		USD '000		USD '000		USD '000
		(Unaudited)		(Unaudited)		(Audited)
Middle East and North Africa		201,308		121,960		229,196
United States		55,884		67,010		143,510
Europe and Rest of the World		42,720		35,924		76,090
		299,912		224,894		448,796

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

3.    Tax

		H1 2008		H1 2007		FY 2007
		USD '000		USD '000		USD '000
		(Unaudited)		(Unaudited)		(Audited)
Current tax:
UK current tax		15,359		-		13,664
Double tax relief		(15,359)		-		(13,664)
Overseas tax		6,005		13,259		19,552
Overseas deferred tax		(63)		(649)		44
		5,942		12,610		19,596

4.    Dividends

The Board has declared an interim dividend of $6.6 million (30 June 2007: $5.9 million, 31 December 2007: $13.5 million), equivalent to 3.5 cents per share, (30 June 2007: 3.5 cents per share, 31 December 2007: 7.5 cents per share) as the dividend in respect of the six month period ended 30 June 2008 to be paid on 17 October 2008 to all shareholders on the register on 19 September 2008.

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

5.    Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

		H1 2008		H1 2007		FY 2007
		USD '000		USD '000		USD '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		32,912		35,614		62,576
Adjusted earnings being net profit attributable to equity holders of the parent before exceptional items and intangible amortisation excluding software (Note 12)		40,267		36,464		64,503
		Number		Number		Number
Number of shares		'000		'000		'000
Weighted average number of Ordinary Shares for the purposes of basic earnings per share		186,646		168,640		169,216
Effect of dilutive potential Ordinary Shares:
Share options and awards		6,638		7,582		7,631
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share		193,284		176,222		176,847
		H1 2008		H1 2007		FY 2007
		Earnings per share		Earnings per share		Earnings per share
		Cents		Cents		Cents
Basic		17.6		21.1		37.0
Diluted		17.0		20.2		35.4
Adjusted earnings per share (before exceptional items and intangible amortisation excluding software):
Basic		21.6		21.6		38.1
Diluted		20.8		20.7		36.5

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

6.    Inventories

		30 June		30 June		31 December
		2008		2007		2007
		USD '000 (Unaudited)		USD '000 (Unaudited)*		USD '000 (Audited)*
Finished goods		50,602		28,380		36,027
Work-in-progress		26,668		21,860		31,673
Raw and packing materials		75,119		48,941		62,327
Goods in transit		22,464		7,702		17,265
		174,853		106,883		147,292

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

*These numbers are revised - see note 11

7.    Trade and other receivables

		30 June		30 June		31 December
		2008		2007		2007
		USD '000 (Unaudited)		USD '000 (Unaudited)		USD '000 (Audited)*
Trade receivables		207,133		150,356		172,099
Other prepayments		16,860		7,681		12,629
Value added tax recoverable		4,500		6,205		3,647
Interest receivable		245		457		302
Employee advances		430		252		304
		229,168		164,951		188,981

*These numbers are revised - see note 11

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

8.    Trade and other payables

		30 June		30 June		31 December
		2008		2007		2007
		USD '000 (Unaudited)		USD '000 (Unaudited)		USD '000 (Audited)
Trade payables		58,781		42,387		49,143
Accrued expenses		23,320		20,985		25,392
Employees' provident fund *		3,698		2,444		3,158
VAT and sales tax payables		1,124		141		543
Dividends payable **		2,728		208		3,490
Social security withholdings		1,045		804		1,026
Income tax withholdings		1,030		477		588
Other payables		1,398		892		984
		93,124		68,338		84,324

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

** Included in dividends payable is $2,514,000 relating to dividends owed to the former shareholders of APM (31 Dec 2007: $3,261,000).

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

9.    Net cash from operating activities

		H1 2008		H1 2007		FY 2007
		USD '000 (Unaudited)		USD '000 (Unaudited)		USD '000 (Audited)
Profit before tax and minority interest		39,259		49,452		83,789
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment		13,050		8,069		19,374
Intangible assets		4,093		1,754		4,059
(Gains)/losses on disposal of property, plant and equipment		(4)		117		(202)
Movement on provisions		591		480		1,078
Deferred income		530		(34)		(78)
Cumulative effect of change in fair value of derivatives		160		(11)		(256)
Cost of equity settled employee share scheme		1,307		667		1,601
Finance income		(430)		(1,376)		(2,029)
Interest and bank charges		8,601		3,897		10,837
Cash flow before working capital		67,157		63,015		118,173
Change in trade and other receivables		(40,087)		(36,264)		(29,453)
Change in other current assets		(1,822)		(73)		(47)
Change in inventories		(27,706)		(17,218)		(29,065)
Change in trade and other payables		11,901		5,180		17,774
Change in other current liabilities		19		(938)		(6,112)
Cash generated by operations		9,462		13,702		71,270
Income tax paid		(4,020)		(9,819)		(17,987)
Net cash from operating activities		5,442		3,883		53,283

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

10.    Share placing

On 17 January 2008, a total of 17,000,000 new ordinary shares of 10 pence each in the Group were placed at a price of 480 pence per share, raising gross proceeds of approximately £81.6 million ($160.3 million). As part of the Placing 5.23 million shares were placed with Darhold Limited at the Placing Price and 333,000 shares were placed with the Darwazah family and other connected individuals at the Placing Price. The total number of shares issued represents 9.96% of Hikma's issued ordinary share capital prior to the placing.

The Group used the proceeds from the placing to reduce borrowings incurred in connection with its JD116.0 million ($163.8 million) acquisition of Arab Pharmaceutical Manufacturing Company thereby providing the Group with increased flexibility to finance future growth.

The costs of the placing were $2,484,000 which have been offset against share premium.

11.    Revision of acquisition balance sheets 

During the period, certain revisions have been made to the provisional acquisition fair values in relation to the businesses acquired in the year ended 31 December 2007. The revisions made relate predominantly to receivables, inventories and other current liabilities.

The net impact of the revisions has been to increase acquisition Goodwill by $4.2 million as at 31 December 2007, and to decrease acquisition Goodwill by $0.1 million as at 30 June 2007.

12.    Exceptional items and intangible amortisation

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

		H1 2008		H1 2007		FY 2007
		USD '000		USD '000		USD '000
Revision to estimates for chargebacks, returns and rebates		(4,800)		-		-
Acquisition integration costs		(1,205)		-		-
Exceptional items		(6,005)		-		-
Intangible amortisation		(3,572)		(1,148)		(2,663)
Tax effect		2,222		298		736
Impact on profit for the period		(7,355)		(850)		(1,927)

Revision to estimates for chargebacks, returns, and rebates represents a one off charge taken against revenue during H1 2008.

Acquisition integration costs represent expenses incurred in integrating APM and Hikma Egypt into the Group. These are taken against general and administrative expenses.

Intangible amortisation comprises the amortisation of intangible assets excluding software. These are mainly taken against operating expenses.

  Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements - continued

13.    Related party balances

Intra-group transactions have been eliminated on consolidation and are not disclosed in this note. 

During the period, the Group 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 ownership percentage of 30.7% at 30 June 2008 (30 June 2007: 30.8%, 31 December 2007: 30.8%). The only transaction in the period is disclosed in note 10.

Capital Bank (previously Export & Finance Bank) - Jordan: is a related party of the Group because two board members of the Bank are also board members of Hikma Pharmaceuticals PLC. Total cash balances at Export & Finance Bank - Jordan were USD 259,000 (30 June 2007: USD 214,000 and 31 December 2007: USD 155,000). Loans and overdrafts granted by Export & Finance Bank to the Group in the period amounted to USD 272,000 (30 June 2007: USD 91,000 and 31 December 2008: USD 389,000) with interest rates ranging between 8.75% and LIBOR + 1 to 1.25%. Total interest expense incurred against Group facilities was USD 21,000 (H1 2007: USD 28,000 and FY 2007: USD 47,000).

Jordan International Insurance Co: is a related party of the Group because one board member of the 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 USD 349,000 (H1 2007: USD 231,000 and FY 2007: USD 1,107,000). The Group's insurance expense for Jordan International Insurance Co contracts in the period was USD 820,000 (H1 2007: USD 780,000 and FY 2007: USD 1,360,000). The amounts due to Jordan International Insurance Co at 30 June 2008 were USD 185,000 (30 June 2007: USD 189,000 and 31 December 2007: USD 143,000).

Tunisian Companies: amounts due from Tunisian companies include USD 270,000 (30 June 2007: USD 236,000 and 31 December 2007: USD 270,000) and USD 444,000 (30 June 2007: USD 338,000 and 31 December 2007: USD 486,000) due from Societe Hikma Ibn Al Baytar Limited - Tunisia and Societe D'Industries Pharmaceutiques Ibn Al Baytar S.A. - Tunisia, respectively. The amounts due from Societe Hikma Pharma - Tunisia and Societe Hikma Ibn Al Baytar Limited - Tunisia are stated before provision for doubtful debts of USD 154,000 (30 June 2007: USD 298,000 and 31 December 2007: USD 154,000).

West-Ward Pharmaceuticals Corp: Certain expenses of the Chairman were paid in the USA by West-ward Pharmaceuticals Corp and reimbursed by the Chairman. At 30 June 2008, the balance outstanding amounted to USD 11,000 (30 June 2007: USD Nil and 31 December 2007: USD 11,000).

Principal risks and uncertainties

The principal risks and uncertainties related to Hikma's business are unchanged from those set out on pages 25 and 26 of the Annual Report 2007. These risks are primarily related to: regulation; industry, economic and political dynamics; pricing dynamics; government tender bids; research, development and commercialisation of new products; API and other raw material costs; seasonality; acquisitions; and, foreign exchange, interest rate, credit, liquidity and inflation risk.

Directors' Responsibilities Statement

The Directors confirm that to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union, and that the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principle risks and uncertainties for the remaining 26 weeks of the 52 week period) and DTR4.2.8R (disclosure of related party transactions and changes therein) of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

By order of the Board:

Said Darwazah                              Mazen Darwazah

Chief Executive Officer                   Executive Vice Chairman

27 August 2008

 

END

 

 

IR BDLLLVVBLBBQ