Interim Results

RNS Number : 1427M

Hikma Pharmaceuticals Plc

21 August 2013

PRESS RELEASE

Hikma delivers exceptionally strong first half results with 20% revenue growth and 156% increase in adjusted EPS

Raising Group guidance to around 20% revenue growth for the full year, with a positive outlook for all businesses

London, 21 August 2013 - Hikma Pharmaceuticals PLC ("Hikma") (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY), the fast growing multinational pharmaceutical group, today reports its interim results for the six months ended 30 June 2013.

H1 2013 highlights

Group

· Group revenue increased by 19.9% to $638.3 million. Full year Group guidance raised to around 20% revenue growth

· Group adjusted operating margin rose to 29.6%, up from 15.7%, reflecting significant improvement in Generics and Injectables margins

· Profit attributable to shareholders increased by 82.1% to $73.6 million. On an adjusted basis, profit attributable to shareholders rose 157.2% to $121.2 million

· Net cash flow from operating activities increased by $88.9 million to $136.0 million

· Continued new product introductions across all countries and markets - launched 63 products and received 65 product approvals

· Increase in the interim dividend to 7.0 cents per share, up from 6.0 cents in the first half of 2012, plus a special dividend of 3.0 cents per share that reflects the exceptional performance of the Generics business

Branded

· Branded revenue grew 3.2%, or 8.7% in constant currency. The Branded business remains on track for around 11% full year revenue growth in constant currency

· Branded adjusted operating profit grew by 10.6%, with adjusted operating margin of 22.6%

Injectables

· Global Injectablesrevenue grew 9.5%, with adjusted operating margin of 28.6%, driven by strong performances in the US and Europe

· The Injectables business remains on track to deliver low double-digit revenue growth for the full year

Generics

· Generics revenue increased by 136.6% to $132.0 million and full year Generics revenue guidance raised to $230 million, reflecting exceptionally strong doxycycline sales

· Generics operating profit of $49.4 million, after non-recurring costs of $32.8 million

Said Darwazah, Chief Executive Officer of Hikma, said:

"The Group has made an excellent start to this year and all of our businesses are performing well.

In the MENA region, our strategic focus on higher value products and operational efficiencies is delivering improved profitability. Our global Injectables business continues to deliver good growth in revenue and a significant improvement in profitability. In particular, we are benefitting from strong demand for our products in the US and new product launches.

The Generics business is benefiting from exceptional sales of doxycycline and generated strong profitability in the first half of the year. This is enabling us to more than offset the impact of the ongoing remediation at our Eatontown facility and is providing excellent cash flow for the Group.

Overall, the Group is performing well and I am very pleased to be able to raise our Group guidance to around 20% revenue growth for the full year."

Group financial highlights

Summary P&L $ million	H1 2013	H1 2012	Change
Revenue	638.3	532.3	+19.9%
Gross profit	353.3	234.1	+50.9%
Gross margin	55.3%	44.0%	+11.3pp

Operating profit	144.0	75.1	+91.8%

Adjusted operating profit ^{^[1]}^, ^{^[2]}	189.1	83.7	+125.8%
Adjusted operating margin	29.6%	15.7%	+13.9pp

EBITDA^{^[3]}	182.6	103.7	+76.1%

Profit attributable to shareholders	73.6	40.4	+82.1%

Adjusted profit attributable to shareholders^{1, 2}	121.2	47.1	+157.2%

Adjusted basic earnings per share (cents)	61.6	24.1	+155.9%

Dividend per share (cents)	7.0	6.0	+16.7%

Special dividend per share (cents)	3.0	--	--

Net cash flow from operating activities	136.0	47.1	+189.0%

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/ Julia Phillips/ Matthew Cole +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 2012, Hikma achieved revenues of $1,108.7 million and profit attributable to shareholders of $100.3 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: 93232833#. Alternatively you can listen live via our websiteat www.hikma.com. A recording of both the meeting and the call will be available on the Hikma website. Video interviews of Said Darwazah, CEO and Khalid Nabilsi, CFO are available at www.hikma.com. The contents of this website do not form part of this interim management report.

Interim management report

The interim management report set out below summarises the performance of Hikma's three main business segments, Branded, Injectables and Generics, for the six months ended 30 June 2013.

Group revenue by business segment (%)

	H1 2013	H1 2012
Branded	40.2%	46.7%
Injectables	38.6%	42.3%
Generics	20.7%	10.5%
Others	0.5%	0.5%

Group revenue by region (%)

	H1 2013	H1 2012
MENA	45.9%	56.0%
US	46.6%	36.1%
Europe and ROW	7.5%	7.9%

Branded

H1 2013 highlights:

• Branded revenue increased by 3.2%, or 8.7% in constant currency

• Branded adjusted operating profit increased by 10.6%, with adjusted operating margin of 22.6%, up from 21.1%

• 34 products launched and two new in-license agreements signed

Branded revenue increased by 3.2% in the first half of 2013 to $256.8 million, compared with $248.8 million in the first half of 2012. On a constant currency basis, Branded revenue was $270.5 million, up 8.7%. During the period, we continued to focus on prioritising higher value strategic products through enhanced sales and marketing activities across our MENA markets. We also worked on driving operational efficiencies in our local manufacturing facilities.

Our Egyptian business had an excellent first half, with revenue growth of around 14%, despite the significant depreciation of the Egyptian pound against the US dollar, which depreciated by around 11% during the first half of 2013. This reflects our continued emphasis on higher value products and the contribution from new product launches. These factors should also drive performance in the second half and, whilst the situation in Egypt has escalated in recent weeks, we have confidence in our experienced local management team and their strong track record of managing the business through disruptions.

During the period, we completed the acquisition of the Egyptian Company for Pharmaceutical and Chemical Industries ("EPCI") for an aggregate cash consideration of $20.5 million. We have fully integrated EPCI's sales and marketing team and are upgrading their manufacturing facility. We expect EPCI's excellent product portfolio and specialised manufacturing capabilities to drive significant growth in our Egyptian business over the medium term.

In Algeria, we experienced slower than expected sales in the first half due to the timing of orders and lower sales of certain products that had an exceptionally good performance in the first half of 2012. We believe we are well positioned to achieve strong growth in the second half driven by new product launches and increased demand for our product portfolio. We expect to deliver double-digit revenue growth in Algeria for the full year. In anticipation of continued strong demand in Algeria in the coming years, we began the expansion of our general formulation facility in the first half, which will enable us to meet growing demand and strengthen our competitive position in the Algerian market.

In Saudi Arabia, we are implementing our strategy to improve profitability by reducing low margin tender sales and focusing on the promotion of higher margin, more strategic products. Profitability is improving and we are expecting good top line growth in the second half, driven by more targeted sales and marketing efforts and new product launches.

In Sudan, we made a very strong start to the year, benefitting from our local manufacturing facility and new product registrations. We have more than offset the significant impact of the currency devaluation that took place in Sudan in June 2012. In Iraq, we are delivering strong growth following the appointment of an additional distributor in 2012. Our business in Jordan has also performed well, benefitting from a greater focus on higher value products and the sales force restructuring done in 2012.

During the first half of 2013, the Branded business launched a total of 34 products across all markets, including 12 new compounds and 20 new dosage forms and strengths. The Branded business also received 38 regulatory approvals across the region.

Revenue from in-licensed products increased from $89.2 million to $93.9 million in the first half. In-licensed products represented 36.6% of Branded revenue, compared with 35.8% in the first half of 2012. We signed two new licensing agreements for innovative oral products during the first half of 2013, which will support our continued focus on growing our portfolio of higher value products in growing therapeutic areas.

Branded gross profit grew by 8.1% to $129.8 million in the first half of 2013 and gross margin was 50.5%, compared with 48.3% in the first half of 2012. The improvement in gross margin primarily reflects a favourable product mix during the period, with a focus on higher value products and a reduction in low margin tender sales.

Operating profit in the Branded business increased by 8.3% to $51.3 million, compared with $47.4 million in the first half of 2012. Adjusted operating margin was 22.6%, compared with 21.1% in the first half of 2012, after excluding the amortisation of intangibles of $4.8 million and other non-recurring costs of $2.0 million.

Excluding the impact of adverse currency movements, adjusted operating margin was 23.1%. This improvement in margin reflects our success in driving higher margin sales, restructuring our sales and marketing teams and improved operational efficiencies. This has enabled us to absorb continued inflationary pressure in the region and other disruptions to our business related to the Arab Spring.

On a constant currency basis, we continue to expect Branded revenue growth of around 11% for the full year and a slight improvement in adjusted operating margin. On a reported basis, taking into account exchange rate movements since the beginning of 2013, we expect Branded revenue growth to be around 7% this year, with margins in line with 2012.

Injectables

H1 2013 highlights:

· Global Injectables revenue grew by 9.5% to $246.6 million

· Excellent performance in US Injectables, up 21.1%, driven by new launches and price improvements

· Significant improvement in Injectables adjusted operating margin to 28.6%, up from 22.7%

Injectables revenue by region

	H1 2013	H1 2012
US	67.1%	60.7%
MENA	16.3%	22.9%
Europe and ROW	16.6%	16.4%

Revenue in our global Injectables business increased by 9.5% to $246.6 million, compared with $225.2 million in the first half of 2012.

US Injectables revenue grew by $28.8 million, or 21.1%, to $165.4 million. This excellent performance reflects our success in driving new product launches and price improvements. Our ability to maintain supply and our strong quality track record continue to be key competitive advantages.

In the MENA region, Injectables revenue decreased by 22.3% to $40.1 million, compared with $51.6 million in the first half of 2012. This primarily reflects the timing of tenders in Algeria and Saudi Arabia, a strategic reduction in low margin tender sales and a difficult comparator period. We are expecting strong growth in the second half across our MENA markets, driven in part by the shipping of tenders won at the end of the first half. However, a delay in product registrations means that MENA Injectables revenue for the full year will be broadly in line with last year.

Revenue in our European Injectables business grew by 10.6% to $41.1 million. Growth was driven by recent product launches and continuing demand for contract manufacturing. We successfully offset double-digit price erosion with strong volume growth.

Injectables gross profit increased by 26.9% to $124.6 million, compared with $98.2 million in the first half of 2012. Gross margin increased significantly to 50.5%, compared with 43.6% in the first half of 2012. This reflects pricing improvements, new product launches and significant overhead reductions at our Cherry Hill facility.

Operating profit increased by 37.5% to $65.6 million. Adjusted operating profit increased by 37.9% to $70.6 million. Adjusted operating margin increased from 22.7% to 28.6%. This excellent margin expansion reflects the improvement in gross margin and operating efficiencies. It was also achieved despite higher R&D expenditure, which will continue to increase in the second half of the year.

We remain focussed on strengthening our global Injectables product portfolio, with a particular emphasis on more differentiated products. In January, we received a 505(b)2 approval for phenylephrine injection, which we re-launched in February. We are investing in a dedicated R&D line at our Portuguese facility that will help us to accelerate our internal product development. We are also focussed on expanding our portfolio through partnerships and product acquisitions. Our ability to add higher value, more differentiated products to our portfolio will be a key driver of growth for our global Injectables business.

During the first half of 2013, the Injectables business launched a total of 29 products across all markets, including 8 new compounds and 12 new dosage forms and strengths. The Injectables business also received a total of 26 regulatory approvals across all regions and markets, namely 8 in MENA, 15 in Europe and 3 in the US. During the period, we also signed a licensing agreement with Theravance for Vibativ®, an anti-infective product for the MENA region.

We expect our global Injectables business to continue to perform well in 2013 and we reiterate our guidance of low double-digit revenue growth for the full year.

Generics

H1 2013 highlights:

· Generics revenue increased by 136.6% to $132.0 million on strong doxycycline sales

· Operating profit increased to $49.4 million, after $32.8 million of remediation and other one-off costs^{^[4]}

Generics revenue was $132.0 million, compared to $55.8 million in the first half of 2012. This is due to exceptionally strong revenue from doxycycline and includes only a limited contribution from the rest of our portfolio. The ongoing remediation work at our Eatontown facility has slowed the re-introduction of products and we are having to rebuild our market position.

Generics gross profit was $99.4 million, compared with $15.2 million in the first half of 2012, and gross margin was 75.3%, compared with 27.3% in the first half of 2012. Operating profit was $49.4 million and operating margin was 37.4%, compared with an operating loss of $3.3 million in the first half of 2012.

Excluding the impact of non-recurring remediation and other one-off costs of $32.8 million, adjusted operating profit was $82.2 million and adjusted operating margin was 62.3% in the first half of 2013, compared with an adjusted operating loss of $3.3 million in the first half of 2012.

Doxycycline revenue has been exceptionally strong, leading us to raise our Generics revenue guidance from around $200 million to around $230 million for 2013. We expect reported operating margin to be above 30% for the full year, after remediation costs of around $30 million and other one-off costs of around $15 million. Visibility for 2014 remains limited at this stage. The remediation of the Eatontown facility remains our priority and we continue to expect to complete the remediation work by the end of the year.

Other businesses

Other businesses, which primarily comprise Arab Medical Containers, a manufacturer of plastic specialised packaging, International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, and the chemicals division of Hikma Pharmaceuticals Limited, contributed revenue of $2.9 million, compared with $2.5 million in the first half of 2012.

These other businesses delivered an operating loss of $2.9 million in the first half of 2013, compared with a loss of $2.0 million in the first half of 2012.

Group

Group revenue increased by 19.9% to $638.3 million in the first half of 2013. Group gross profit increased by 50.9% to $353.3 million, compared with $234.1 million in the first half of 2012. Group gross margin was 55.3%, compared with 44.0% in the first half of 2012, reflecting the significant gross margin improvement of the Generics and global Injectables businesses.

Group operating expenses grew by 31.6% to $209.3 million, compared with $159.0 million in the first half of 2012. Excluding the amortisation of intangible assets (excluding software) of $7.1 million and exceptional items^{^[5]} of $38.0 million, adjusted Group operating expenses grew by 9.2% to $164.2 million. The paragraphs below address the Group's main operating expenses in turn.

Sales and marketing expenses were $77.7 million, or 12.2% of revenue, compared with $74.1 million and 13.9% of revenue in the first half of 2012. Strong Generics revenue growth, which did not require incremental sales and marketing costs, offset an increase in wages and employee benefits in the MENA region.

General and administrative expenses increased by $10.9 million, or 19.5%, to $66.8 million in the first half of 2013. The increase in expenses primarily reflects an increase in employee benefits related to the exceptional performance of the US business this year, as well as increased IT costs.

Group R&D expenditure was $19.5 million in the first half of 2013, compared with $17.1 million in the first half of 2012. An increase in spend for the Branded and Injectables businesses has more than offset a reduction in R&D expenditure for the Generics business. Total investment in R&D represented 3.1% of Group revenue, compared with 3.2% in the first half of 2012. We expect increased investment in R&D in the second half of 2013, as we continue to focus on new product development, particularly for the Injectables business.

Other net operating expenses increased by $33.3 million to $45.2 million. Excluding exceptional items, the increase was $2.5 million, primarily reflecting an increase in provisions for slow-moving items.

Operating profit for the Group increased by 91.8% to $144.0 million in the first half of 2013. Group operating margin increased to 22.6%, compared with 14.1% in the first half of 2012. On an adjusted basis, Group operating profit increased by $105.4 million, or 125.8%, to $189.1 million and operating margin increased to 29.6%, up from 15.7% in the first half of 2012.

Research & Development^{^[6]}

The Group's product portfolio continues to grow as a result of our in-house product development efforts. During the first half of 2013, we launched 20 new compounds, expanding the Group portfolio to 685 compounds in 1,626 dosage forms and strengths.^{^[7]} We manufacture and/or sell 94 of these compounds under license from the originator.

Across all businesses and markets, a total of 63 products were launched during the first half of 2013. In addition, the Group received 65 approvals.

	Total marketed products		Products launched in H1 2013			Products approved in H1 2013	Products pending approval as at 30 June 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 181 177 21 379

Branded	493⁷	1,246⁷	12	20	34	38

Injectables	186	374	8	12	29	26

Generics	6	6	0	0	0	1

Group	685	1,626	20	32	63	65

To ensure the continuous development of our product pipeline, we submitted 111 regulatory filings in the first half of 2013 across all regions and markets. As of 30 June 2013, we had a total of 379 pending approvals across all regions and markets and a total of 205 products under development.

Investments in associates

During 2011, Hikma acquired a minority interest in Unimark Remedies Limited ("Unimark") in India for a cash consideration of $33.6 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 period, we incurred an impairment charge of $15 million in respect of our investment. We believe that Unimark will be able to successfully manage its current issues and we continue to collaborate with Unimark in the development of a portfolio of products for the US market.

Net finance expense

The Group's net debt position at 30 June 2013 was $357.0 million, down from $406.5 million at 31 December 2012, and $473.0 million at 30 June 2012. Despite the reduction in total debt during the period, net finance expense increased to $17.0 million, compared with $16.7 million in the first half of 2012. The increase relates to the early repayment of long term loans in the first half of 2013. We now expect net finance expense to be around $38 million for the full year.

Profit before tax

Profit before tax for the Group increased by 92.9% to $111.6 million, compared with $57.8 million in the first half of 2012. Adjusted profit before tax increased by 158.1% to $171.7 million.

Tax

The Group incurred a tax expense of $35.1 million, compared with $15.0 million in the first half of 2012. The effective tax rate was 31.5%. Excluding the impact of the non-cash impairment charge in respect of Unimark, the effective tax rate was 27.7% in the first half of 2013, compared with 25.9% in the first half of 2012. The increase in the tax rate is mainly attributable to the increased profitability in higher tax jurisdictions. We now expect the full year effective tax rate to be around 24%, excluding the impact of the impairment charge related to our investment in Unimark.

Profit attributable to equity holders of the parent

The Group's profit attributable to equity holders of the parent increased by 82.1% to $73.6 million in the first half of 2013. Adjusted profit attributable to equity holders of the parent increased by 157.2% to $121.2 million.

Earnings per share

Basic earnings per share increased by 81.2% to 37.4 cents, compared with 20.6 cents in the first half of 2012. Diluted earnings per share increased by 80.9% to 37.0 cents, compared with 20.4 cents in the first half of 2012. Adjusted diluted earnings per share was 60.9 cents, an increase of 155.5% over the first half of 2012.

Dividend

The Board has declared an interim dividend of 7.0 cents per share (approximately 4.5 pence per share), compared to 6.0 cents per share for the first half of 2012. In addition, the Board has declared a special dividend of 3.0 cents (approximately 1.9 pence per share), which reflects the exceptional performance of the Generics business in the first half. The interim dividend and the special dividend will be paid on 7 October 2013 to eligible shareholders on the register at the close of business on 6 September 2013. The ex-dividend date is 4 September 2013 and the final date for currency elections is 13 September 2013.

Net cash flow, working capital and net debt

The Group generated operating cash flow of $136.0 million in the first half of 2013, up $88.9 million from $47.1 million in the first half of 2012. The significant improvement in operating cash flow was achieved through strong growth in profitability while maintaining our focus on working capital management. Working capital days were unchanged at 207 days.

Capital expenditure was $25.6 million, compared with $26.1 million in the first half of 2012. Around $13 million was spent in MENA, principally to maintain our manufacturing facilities across the region and to upgrade our recently acquired facility in Egypt. Around $10 million was spent in the US, primarily at our facility in Cherry Hill.

The Group made an acquisition in Egypt in January 2013, acquiring EPCI for a total consideration of $20.5 million of which $18.5 million was paid and $2.0 million was deferred.

Group net debt decreased from $406.5 million at 31 December 2012 to $357.0 million at 30 June 2013. This reflects the strong performance of the Group in the first half of 2013, which enabled us to make an early repayment of long term loans.

Balance sheet

During the period, shareholder equity was negatively impacted by unrealised foreign exchange losses of $13.4 million, primarily reflecting adverse movements in the Egyptian pound and the Algerian dinar against the US dollar and the revaluation of net assets denominated in these currencies.

Summary and outlook

We delivered a strong performance across our businesses in the first half of 2013, with a 19.9% increase in revenue and a 155.9% increase in adjusted basic earnings per share.

We now expect the Group to deliver full year revenue growth of around 20%.

We are expecting stronger sales in the MENA region in the second half and we continue to expect our Branded business, on a constant currency basis, to deliver revenue growth of around 11% for the full year and a slight improvement in adjusted operating margin. On a reported basis, taking into account exchange rate movements since the beginning of 2013, we expect Branded revenue growth to be around 7% for the full year, with margins in line with 2012.

We expect the strong performance of our global Injectables business will be sustained in the second half of the year and we reiterate our guidance of low double-digit revenue growth.

Doxycycline revenue has been exceptionally strong, leading us to raise our Generics revenue guidance from around $200 million to around $230 million for 2013. We expect reported operating margin to be above 30% for the full year, after remediation and other one-off costs of around $45 million. Visibility for 2014 remains limited at this stage. The remediation of the Eatontown facility remains our priority and we continue to expect to complete the remediation work by the end of the year.

Overall, we are pleased with the performance of the Group in the first half of 2013 and we are confident in the outlook for the remainder of the year, as well as the Group's medium and long term growth prospects.

Going concern statement

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

Responsibility statement

The Board confirms that to the best of its knowledge:

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

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

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

By order of the Board

Said Darwazah Khalid Nabilsi
Chief Executive Officer Chief Financial Officer

20 August 2013

Cautionary statement

This interim management report has been prepared solely to provide additional information to shareholders 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

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

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

INDEPENDENT REVIEW REPORT TO HIKMA PHARMACEUTICALS PLC

We have been engaged by Hikma Pharmaceuticals PLC (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 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 Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

20 August 2013

Hikma Pharmaceuticals PLC

Condensed consolidated income statement

	Note	H1 2013	H1 2012	FY 2012
Continuing operations		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Revenue	3	638,300	532,260	1,108,721
Cost of sales	3	(285,012)	(298,180)	(607,603)
Gross profit	3	353,288	234,080	501,118
Sales and marketing costs		(77,709)	(74,084)	(152,763)
General and administrative expenses		(66,808)	(55,893)	(124,560)
Research and development costs		(19,547)	(17,097)	(34,019)
Other operating expenses (net)		(45,205)	(11,937)	(23,002)
Total operating expenses		(209,269)	(159,011)	(334,344)
Adjusted operating profit		189,098	83,730	193,835
Exceptional items
- Acquisition and integration related expenses	4	(429)	(2,276)	(3,131)
- Severance expenses	4	(464)	-	(4,469)
- Plant remediation costs	4	(18,980)	-	(6,787)
- Impairment losses	4	(7,800)	-	-
- Other claims provisions	4	(10,300)	-	-
Intangible amortisation*	4	(7,106)	(6,385)	(12,674)
Operating profit	3	144,019	75,069	166,774
Share of results of associated companies	8	(80)	(50)	892
Impairment of investment in associates	8	(15,000)	-	-
Finance income		619	355	1,266
Finance expense		(17,590)	(17,039)	(35,717)
Other expenses (net)		(382)	(491)	(1,174)
Profit before tax		111,586	57,844	132,041
Tax	5	(35,123)	(14,976)	(24,826)
Profit for the period/year		76,463	42,868	107,215
Attributable to:
Non-controlling interests		2,881	2,468	6,895
Equity holders of the parent		73,582	40,400	100,320
		76,463	42,868	107,215
Earnings per share (cents)
Basic	7	37.4	20.6	51.1
Diluted	7	37.0	20.4	50.6
Adjusted basic	7	61.6	24.1	61.4
Adjusted diluted	7	60.9	23.8	60.8

On this page and throughout this interim financial information "H1 2013" refers to the six months ended 30 June 2013, "H1 2012" refers to the six months ended 30 June 2012 and "FY 2012" refers to the year ended 31 December 2012.

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

Hikma Pharmaceuticals PLC

Condensed consolidated statement of other comprehensive income

	H1 2013	H1 2012	FY 2012
	$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Profit for the period/year	76,463	42,868	107,215
Items that may be reclassified subsequently to profit or loss:

-Cumulative effect of change in fair value of available for sale investments	(6)	(19)	(23)
-Cumulative effect of change in fair value of financial derivatives	2,428	(1,625)	(2,120)
-Exchange difference on translation of foreign operations	(13,002)	(29,375)	(26,547)

Total comprehensive income for the period/year	65,883	11,849	78,525
Attributable to:
Non-controlling interests	3,245	(1,847)	1,585
Equity holders of the parent	62,638	13,696	76,940
	65,883	11,849	78,525

Hikma Pharmaceuticals PLC

Condensed consolidated balance sheet

	Note	30 June 2013	30 June 2012	31 December 2012
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Non-current assets
Intangible assets		435,294	426,684	433,049
Property, plant and equipment		423,879	413,410	419,943
Interests in associated companies	8	23,257	37,395	38,337
Deferred tax assets		49,210	34,839	45,772
Financial and other non-current assets		11,134	11,564	11,044
		942,774	923,892	948,145
Current assets
Inventories	9	272,987	271,862	272,231
Income tax asset		1,134	915	1,016
Trade and other receivables	10	389,479	343,949	328,147
Collateralised and restricted cash		5,307	6,637	1,756
Cash and cash equivalents		119,007	114,379	176,510
Other current assets		2,112	1,722	2,307
		790,026	739,464	781,967
Total assets		1,732,800	1,663,356	1,730,112
Current liabilities
Bank overdrafts and loans		171,904	180,166	192,879
Obligations under finance leases		1,995	17,149	3,480
Trade and other payables	11	196,124	175,214	194,805
Income tax provision		30,124	15,179	23,029
Other provisions		11,882	10,508	10,664
Other current liabilities		88,832	54,867	42,097
		500,861	453,083	466,954
Net current assets		289,165	286,381	315,013
Non-current liabilities
Long-term financial debts	12	287,975	393,842	372,488
Obligations under finance leases		19,476	2,861	15,891
Deferred tax liabilities		25,157	22,514	22,921
Derivative financial instruments		1,442	3,526	4,008
		334,050	422,743	415,308
Total liabilities		834,911	875,826	882,262
Net assets		897,889	787,530	847,850
Equity
Share capital		35,229	35,063	35,091
Share premium		280,492	278,528	279,116
Own shares		(82)	(120)	(86)
Other reserves		565,299	461,324	518,532
Equity attributable to equity holders of the parent		880,938	774,795	832,653
Non-controlling interests		16,951	12,735	15,197
Total equity		897,889	787,530	847,850

Hikma Pharmaceuticals PLC

Condensed consolidated balance sheet

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 Darwazeh

Director Director

20 August 2013

Hikma Pharmaceuticals PLC

Condensed consolidated statement of changes in equity

	Merger reserve $000	Revaluation reserves $000	Translation reserves $000	Retained earnings $000	Total reserves $000	Share capital $000	Share premium $000	Own shares $000	Total equity attributable to equity shareholders of the parent $000	Non-controlling interests $000	Total equity $000
Balance at 1 January 2012 (Audited)	33,920	3,904	(27,569)	455,544	465,799	34,904	278,094	(2,222)	776,575	22,059	798,634
Profit for the period	-	-	-	40,400	40,400	-	-	-	40,400	2,468	42,868
Cumulative effect of change in fair value of available for sale investments	-	-	-	(19)	(19)	-	-	-	(19)	-	(19)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(1,625)	(1,625)	-	-	-	(1,625)	-	(1,625)
Realisation of revaluation reserve	-	(91)	-	91	-	-	-	-	-	-	-
Currency translation loss	-	-	(25,060)	-	(25,060)	-	-	-	(25,060)	(4,315)	(29,375)
Total comprehensive income for the period	-	(91)	(25,060)	38,847	13,696	-	-	-	13,696	(1,847)	11,849
Issue of equity shares	-	-	-	-	-	159	434	-	593	-	593
Purchase of own shares	-	-	-	-	-	-	-	(147)	(147)	-	(147)
Cost of equity settled employee share schemes	-	-	-	3,675	3,675	-	-	-	3,675	-	3,675
Exercise of equity settled employee share scheme	-	-	-	(2,249)	(2,249)	-	-	2,249	-	-	-
Deferred tax arising on share-based payments	-	-	-	(18)	(18)	-	-	-	(18)	-	(18)
Dividends on ordinary shares (note 6)	-	-	-	(14,746)	(14,746)	-	-	-	(14,746)	(301)	(15,047)
Adjustment arising from change in non-controlling interests	-	-	-	(4,833)	(4,833)	-	-	-	(4,833)	(7,176)	(12,009)
Balance at 30 June 2012 (Unaudited)	33,920	3,813	(52,629)	476,220	461,324	35,063	278,528	(120)	774,795	12,735	787,530
Balance at 1 January 2012 (Audited)	33,920	3,904	(27,569)	455,544	465,799	34,904	278,094	(2,222)	776,575	22,059	798,634
Profit for the year	-	-	-	100,320	100,320	-	-	-	100,320	6,895	107,215
Cumulative effect of change in fair value of available for sale investments	-	-	-	(23)	(23)	-	-	-	(23)	-	(23)
Cumulative effect of change in fair value of financial derivatives	-	-	-	(2,120)	(2,120)	-	-	-	(2,120)	-	(2,120)
Realisation of revaluation reserve	-	(181)	-	181	-	-	-	-	-	-	-
Currency translation loss	-	-	(21,237)	-	(21,237)	-	-	-	(21,237)	(5,310)	(26,547)
Total comprehensive income for the period	-	(181)	(21,237)	98,358	76,940	-	-	-	76,940	1,585	78,525
Issue of equity shares	-	-	-	-	-	187	1,022	-	1,209	-	1,209
Purchase of own shares	-	-	-	-	-	-	-	(158)	(158)	-	(158)
Cost of equity settled employee share schemes	-	-	-	7,961	7,961	-	-	-	7,961	-	7,961
Exercise of equity settled employee share scheme	-	-	-	(2,294)	(2,294)	-	-	2,294	-	-	-
Deferred tax arising on share-based payments	-	-	-	98	98	-	-	-	98	-	98
Current tax arising on share-based payments	-	-	-	1,411	1,411	-	-	-	1,411	-	1,411
Dividends on ordinary shares (note 6)	-	-	-	(26,550)	(26,550)	-	-	-	(26,550)	(1,271)	(27,821)
Adjustment arising from change in non-controlling interests	-	-	-	(4,833)	(4,833)	-	-	-	(4,833)	(7,176)	(12,009)
Balance at 31 December 2012 (Audited)	33,920	3,723	(48,806)	529,695	518,532	35,091	279,116	(86)	832,653	15,197	847,850
Profit for the period	-	-	-	73,582	73,582	-	-	-	73,582	2,881	76,463
Cumulative effect of change in fair value of available for sale investments	-	-	-	(6)	(6)	-	-	-	(6)	-	(6)
Cumulative effect of change in fair value of financial derivatives	-	-	-	2,428	2,428	-	-	-	2,428	-	2,428
Realisation of revaluation reserve	-	(91)	-	91	-	-	-	-	-	-	-
Currency translation loss	-	-	(13,366)	-	(13,366)	-	-	-	(13,366)	364	(13,002)
Total comprehensive income for the period	-	(91)	(13,366)	76,095	62,638	-	-	-	62,638	3,245	65,883
Issue of equity shares	-	-	-	-	-	138	1,376	-	1,514	-	1,514
Purchase of own shares	-	-	-	-	-	-	-	(106)	(106)	-	(106)
Cost of equity settled employee share schemes	-	-	-	3,981	3,981	-	-	-	3,981	-	3,981
Exercise of equity settled employee share scheme	-	-	-	(110)	(110)	-	-	110	-	-	-
Deferred tax arising on share-based payments	-	-	-	(26)	(26)	-	-	-	(26)	-	(26)
Dividends on ordinary shares (note 6)	-	-	-	(19,716)	(19,716)	-	-	-	(19,716)	(1,909)	(21,625)
Issue of equity shares of subsidiary	-	-	-	-	-	-	-	-	-	418	418
Balance at 30 June 2013 (Unaudited)	33,920	3,632	(62,172)	589,919	565,299	35,229	280,492	(82)	880,938	16,951	897,889

Hikma Pharmaceuticals PLC

Condensed consolidated cash flow statement

	Note	H1 2013	H1 2012	FY 2012
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Net cash from operating activities	13	136,020	47,071	182,161
Investing activities
Purchases of property, plant and equipment		(26,954)	(29,340)	(51,405)
Proceeds from disposal of property, plant and equipment		1,759	417	989
Purchase of intangible assets		(2,575)	(27,582)	(38,783)
Proceeds from disposal of intangible assets		105	143	255
Investment in financial and other non-current assets		(96)	495	151
Acquisition of subsidiary undertakings, net of cash acquired		(18,240)	(6,207)	(11,978)
Payments of costs directly attributable to acquisitions	4	(429)	(1,519)	(1,519)
Finance income		619	348	1,266
Net cash used in investing activities		(45,811)	(63,245)	(101,024)
Financing activities
(Increase)/decrease in collateralised and restricted cash		(3,551)	(4,041)	839
Increase in long-term financial debts		6,818	99,885	151,997
Repayment of long-term financial debts		(90,648)	(50,034)	(124,183)
(Decrease)/increase in short-term borrowings		(19,704)	35,961	52,390
Decrease in obligations under finance leases		(1,252)	(1,215)	(2,122)
Dividends paid		(19,684)	(14,717)	(26,550)
Dividends paid to non-controlling shareholders		(1,909)	(301)	(1,271)
Interest paid		(18,565)	(15,938)	(34,188)
Proceeds from issue of new shares		1,409	446	1,051
Proceeds from non-controlling interest for capital increase in subsidiary		418	-	-
Acquisition of non-controlling interest in subsidiary		-	(12,009)	(12,009)
Net cash (used in)/from financing activities		(146,668)	38,037	5,954
Net (decrease)/increase in cash and cash equivalents		(56,459)	21,863	87,091
Cash and cash equivalents at beginning of period/year		176,511	94,715	94,715
Foreign exchange translation movements		(1,045)	(2,199)	(5,296)
Cash and cash equivalents at end of period/year		119,007	114,379	176,510

Hikma Pharmaceuticals PLC

Notes to the condensed set of financial statements (unaudited)

1. General information

The financial information for the year ended 31 December 2012 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012, which were prepared under International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board, have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

2. Accounting policies

The unaudited condensed set of financial statements for the six months ended 30 June 2013 have been prepared using the same accounting policies and on a basis consistent with the audited financial statements of Hikma Pharmaceuticals PLC (the 'Group') for the year ended 31 December 2012 which are prepared in accordance with IFRSs as adopted by the European Union.

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 recognition

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

Basis of preparation

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

The Group's condensed set of financial statements included in this half- yearly financial report have been prepared in accordance with International Accounting Standards 34 'Interim Financial Reporting' as adopted by the European Union. They were approved by the Board on 20 August 2013.

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

Going concern

The Group has $757.9 million of banking facilities of which $265.3 million were undrawn as at 30 June 2013. Of the undrawn facilities, $125.6 million was committed. These facilities are well diversified across the operating subsidiaries of the Group with a number of financial institutions.

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

We continue to expect the short-term facilities to be renewed upon maturity. In addition the Group maintained cash and cash equivalent of $119 million as at 30 June 2013. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities and maturities of long-term debt, show that the Group should be able to operate within the levels of its facilities.

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

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

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

Changes in accounting policies

The same accounting policies, presentation and method of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

Adoption of new and revised standards

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 but, with the exception of the amendment to IFRS 1 and IFRIC 20, may impact the accounting for future transactions and arrangements

IAS 1 - Amendments	Presentation of Items of Other Comprehensive Income
IFRS 13 - Fair Value measurement	New fair value disclosures required for financial instruments, including certain IFRS 7 disclosures
Annual Improvements 2009-2011 cycle	Minor amendments for IAS 1 changes on minimum comparative information. Also clarified a measure of segment assets and liabilities is only required if such amounts are regularly provided to the chief operating decision maker
Amendment to IFRS 1	Severe Hyper inflation and Removal of fixed Dates for First-time Adopters
Amendment to IAS 12	Deferred tax: Recovery of underlying Assets
Amendment to IFRS 1	Government loans
Amendment to IFRS 7 - Disclosures	Offsetting of Financial Assets and Financial Liabilities
IAS 19 (revised 2011)	Employee benefits
IFRIC 20	Stripping Costs in the Production Phase of a Surface Mine

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):

Amendments to IFRS 10, IFRS 12, and IAS 27 - Investment Entities	Added disclosure requirements for entities becoming, or ceasing to be, investment entities, as defined in IFRS 10.
IFRS 10	Consolidated Financial Statements
IFRS 11	Joint Arrangements
IFRS 12	Disclosure of Interests in Other Entities
IAS 27 (revised 2011)	Separate Financial Statements
IAS 28 (revised 2011)	Investment in Associates and Joint Ventures
Amendments to IAS 32	Offsetting Financial Assets and Financial Liabilities

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

3. Business and geographical segments

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

Segment information about these businesses is presented below.

Six months ended
30 June 2013 (Unaudited)
	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	256,825	246,579	131,959	2,937	638,300
Cost of sales	(127,010)	(121,985)	(32,594)	(3,423)	(285,012)
Gross profit	129,815	124,594	99,365	(486)	353,288
Adjusted segment result	58,140	70,625	82,190	(2,901)	208,054
Exceptional items :
- Severance costs	(464)	-	-	-	(464)
- Plant remediation costs	-	-	(18,980)	-	(18,980)
- Impairment losses	(1,500)	(2,800)	(3,500)	-	(7,800)
- Other claims provisions	-	-	(10,300)	-	(10,300)
Intangible amortisation*	(4,827)	(2,261)	(18)	-	(7,106)
Segment result	51,349	65,564	49,392	(2,901)	163,404

Adjusted Unallocated corporate expenses					(18,956)
Exceptional items :
- Acquisition related expenses					(429)
Unallocated corporate expenses					(19,385)
Adjusted operating profit					189,098
Operating profit					144,019
Share of results of associated companies					(80)
Impairment of investment in associates					(15,000)
Finance income					619
Finance expense					(17,590)
Other expenses (net)					(382)
Profit before tax					111,586
Tax					(35,123)
Profit for the period					76,463
Attributable to:
Non-controlling interest					2,881
Equity holders of the parent					73,582
					76,463

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, professional fees and travel expenses.

Segment assets and liabilities
30 June 2013 (Unaudited)
	Branded	Injectables	Generics	Corporate and Others	Group
	$000	$000	$000	$000	$000
Additions to property, plant and equipment (cost)	12,409	11,441	1,550	240	25,640
Acquisition of subsidaries' property, plant and equipment (net book value)	6,334	-	-	-	6,334
Additions to intangible assets (cost)	1,218	3,650	470	117	5,455
Intangible assets arising on acquisition	18,925	-	-	-	18,925
Total property, plant and equipment and intangible assets (net book value)	509,769	292,693	50,273	6,438	859,173
Depreciation	10,536	6,651	3,684	684	21,556
Amortisation and Impairment (including software)	5,268	6,534	3,620	137	15,558
Interest in associated companies	-	-	-	23,257	23,257
Balance sheet
Total assets	1,050,544	492,585	142,474	47,197	1,732,800
Total liabilities	554,427	174,476	50,914	55,094	834,911

Six months ended
30 June 2012 (Unaudited)

	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	248,821	225,215	55,768	2,456	532,260
Cost of sales	(128,691)	(127,035)	(40,560)	(1,894)	(298,180)
Gross profit	120,130	98,180	15,208	562	234,080
Adjusted segment result	52,554	51,211	(3,291)	(2,042)	98,432
Exceptional items :
- Integration related expenses*	(601)	(1,675)	-	-	(2,276)
Intangible amortisation**	(4,521)	(1,846)	(18)	-	(6,385)
Segment result	47,432	47,690	(3,309)	(2,042)	89,771

Unallocated corporate expenses					(14,702)
Adjusted Operating Profit					83,730
Operating profit					75,069
Share of results of associated companies					(50)
Finance income					355
Finance expense					(17,039)
Other expenses (net)					(491)
Profit before tax					57,844
Tax					(14,976)
Profit for the period					42,868
Attributable to:
Non-controlling interest					2,468
Equity holders of the parent					40,400
					42,868

Segment result is defined as operating profit for each segment.

*See note 4

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

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

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

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


31 December 2012 (Audited)
	Branded	Injectables	Generics	Others	Group
	$000	$000	$000	$000	$000
Revenue	528,854	470,030	103,679	6,158	1,108,721
Cost of sales	(271,508)	(251,302)	(80,339)	(4,454)	(607,603)
Gross profit	257,346	218,728	23,340	1,704	501,118
Adjusted segment result	123,634	122,952	(13,511)	(3,338)	229,737
Exceptional items :
- Integration related expenses	(701)	(2,430)	-	-	(3,131)
- Severance expenses	(2,527)	(1,380)	(562)	-	(4,469)
- Plant remediation costs	-	-	(6,787)	-	(6,787)
Intangible amortisation*	(9,029)	(3,614)	(31)	-	(12,674)
Segment result	111,377	115,528	(20,891)	(3,338)	202,676

Unallocated corporate expenses					(35,902)
Adjusted operating profit					193,835
Operating profit					166,774
Share of results of associated companies					892
Finance income					1,266
Finance expense					(35,717)
Other expenses (net)					(1,174)
Profit before tax					132,041
Tax					(24,826)
Profit for the period					107,215
Attributable to:
Non-controlling interest					6,895
Equity holders of the parent					100,320
					107,215

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.

	Branded	Injectables	Generics	Corporate and Others	Group
	$000	$000	$000	$000	$000
Additions to property, plant and equipment (cost)	26,071	16,916	5,193	1,661	49,841
Additions to intangible assets	1,886	35,738	7,056	-	44,680
Total property, plant and equipment and intangible assets (net book value)	503,858	281,588	61,129	6,417	852,992
Depreciation	21,120	12,944	6,710	1,585	42,359
Amortisation (including software)	9,937	5,750	160	185	16,032
Interest in associated companies	-	-	-	38,337	38,337
Balance sheet
Total assets	1,050,373	481,001	135,214	63,524	1,730,112
Total liabilities	574,526	252,054	5,751	49,931	882,262

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


	H1 2013	H1 2012	FY 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Middle East and North Africa	293,145	297,992	619,185
United States	297,334	192,363	399,877
Europe and Rest of the World	44,866	38,425	80,992
United Kingdom	2,955	3,480	8,667
	638,300	532,260	1,108,721

Included in revenues arising from the Generics and Injectables segments are revenues of approximately $82,144,000 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 and the Branded and Injectables segments included revenue arising from this customer of $54,365,000 and $103,971,000 for the periods ended 30 June 2012 and 31 December 2012, respectively.

4. Exceptional items and intangible amortisation

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


	H1 2013	H1 2012	FY 2012
	$000	$000	$000
Acquisition and integration related expenses*	(429)	(2,276)	(3,131)
Other Costs:
Severance expenses	(464)	-	(4,469)
Plant remediation costs	(18,980)	-	(6,787)
Impairment losses	(7,800)	-	-
Other claims provisions	(10,300)	-	-
Exceptional items including in operating profit	(37,973)	(2,276)	(14,387)
Impairment of investment in associates	(15,000)	-	-
Exceptional items	(52,973)	(2,276)	(14,387)
Intangible amortisation**	(7,106)	(6,385)	(12,674)
Exceptional items and intangible amortisation	(60,079)	(8,661)	(27,061)
Tax effect	12,438	1,931	6,852
Impact on profit for the period/ year	(47,641)	(6,730)	(20,209)

* H1 2012 exceptional figures have been represented to conform with the FY2012 and H1 2013 presentation.

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

Acquisition and integration related expenses

During the period, the Group incurred $429,000 in acquisition costs related to the acquisition of the Egyptian Company for Pharmaceuticals & Chemical Industries "EPCI" (see note 15).

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 cost of $429,000 (H1 2012: $1,519,000 and FY 2012: $1,519,000) have been classified as investing activities in the cash flow statement relating to the cash outflow in respect of these costs in the period.

Other costs

Severance expenses related to restructuring of management teams across all three operating regions.

Plant remediation costs represent costs incurred for compliance work at our Eatontown facility in response to observations made by the US FDA.

Impairment losses are related to the write off of intangible product rights, in addition to the write off of certain property, plant and equipment. Impairment of intangible assets is included in research and development expenses and 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 $33.6 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 period, we incurred an impairment charge of $15 million in respect of our investment. We believe that Unimark will be able to successfully manage its current issues and we continue to collaborate with Unimark in the development of a portfolio of products for the US market.

5. Tax

	H1 2013	H1 2012	FY 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Current tax:
Foreign tax	40,350	14,969	30,535
Prior year adjustments	(1,129)	397	4,703
Deferred tax	(4,098)	(390)	(10,412)
	35,123	14,976	24,826

Tax for the six month period is charged at 31.5% (H1 2012: 25.9%; FY 2012: 18.8%).

The application of tax law and practice is subject to some uncertainty and amounts are provided in respect of this. Issues are raised during the course of regular tax audits and, although the outcome of open items cannot be predicted, no material adverse impact on results is expected from such issues.

6. Dividends

	H1 2013	H1 2012	FY 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2012 of 10.0 cents (2011: 7.5 cents) per share	19,716	14,746	14,746
Interim dividend for the year ended 31 December 2012 of 6.0 cents per share	-	-	11,804
	19,716	14,746	26,550

The proposed interim dividend for the period ended 30 June 2013 is 7.0 cents (30 June 2012: 6.0 cents) per share plus a special dividend of 3.0 cents per share that reflects the exceptional performance of the Generics business.

Based on the number of shares in issue at 30 June 2013 (197,696,000), the unrecognised liability is $19,770,000.

7. Earnings per share

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


	H1 2013	H1 2012*	FY 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	73,582	40,400	100,320
Exceptional items*	52,973	2,276	14,387
Intangible amortisation**	7,106	6,385	12,674
Tax effect of adjustments	(12,438)	(1,931)	(6,852)
Adjusted earnings for the purposes of adjusted basic and diluted earnings per share being adjusted net profit attributable to equity holders of the parent	121,223	47,130	120,529
	Number	Number	Number
Number of shares:	'000	'000	'000
Weighted average number of Ordinary Shares for the purposes of basic earnings per share	196,943	195,954	196,348
Effect of dilutive potential Ordinary Shares :
Share-based awards	2,157	1,819	1,951
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share	199,100	197,773	198,299
	H1 2013	H1 2012	FY 2012
	Earnings per share	Earnings per share	Earnings per share
	Cents	Cents	Cents
Basic	37.4	20.6	51.1
Diluted	37.0	20.4	50.6
Adjusted basic	61.6	24.1	61.4
Adjusted diluted	60.9	23.8	60.8

* See note 4

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

8. Interests in associated companies

	For the period ended 30 June 2013	For the period ended 30 June 2012	For the year ended 31 December 2012
	$000	$000	$000
Balance at beginning of period/year	38,337	37,445	37,445
Share of (loss)/income of associates	(80)	(50)	892
Impairment	(15,000)	-	-
Balance at end of period/year	23,257	37,395	38,337

9. Inventories

	30 June 2013	30 June 2012	31 December 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Finished goods	79,435	84,129	87,663
Work-in-progress	35,979	41,097	30,011
Raw and packing materials	139,262	130,952	135,571
Goods in transit	18,311	15,684	18,986
	272,987	271,862	272,231

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

10. Trade and other receivables

	30 June 2013	30 June 2012	31 December 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Trade receivables	337,656	314,999	294,048
Prepayments	39,053	19,984	22,758
Value added tax recoverable	8,847	5,968	8,439
Interest receivable	658	433	579
Employee advances	3,265	2,565	2,323
	389,479	343,949	328,147

11. Trade and other payables

	30 June 2013	30 June 2012	31 December 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Trade payables	101,376	108,626	110,600
Accrued expenses	78,980	52,176	69,734
Employees' provident fund *	4,954	4,779	5,863
VAT and sales tax payables	1,039	1,291	560
Dividends payable **	2,971	2,525	2,074
Social security withholdings	2,109	1,587	1,709
Income tax withholdings	2,833	2,492	2,862
Other payables	1,862	1,738	1,403
	196,124	175,214	194,805

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

** Dividends payable includes $1,863,000 (30 June 2012: $2,009,000 and 31 December 2012: $1,889,000) due to the previous shareholders of Arab Pharmaceutical Manufacturing Company.

12. Long-term financial debts

	30 June 2013	30 June 2012	31 December 2012
	$000	$000	$000
	(Unaudited)	(Unaudited)	(Audited)
Long-term loans	355,203	474,978	460,997
Less: current portion of loans	(67,228)	(81,136)	(88,509)
Long-term financial loans	287,975	393,842	372,488
Breakdown by maturity:
Within one year	67,228	81,136	88,509
In the second year	60,782	80,976	79,794
In the third year	60,055	75,569	79,513
In the fourth year	57,981	83,127	77,923
In the fifth year	38,636	53,369	47,644
Thereafter	70,521	100,801	87,614
	355,203	474,978	460,997

13. Net cash from operating activities

	Note	H1 2013	H1 2012	FY 2012
		$000 (Unaudited)	$000 (Unaudited)	$000 (Audited)
Profit before tax		111,586	57,844	132,041
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment		21,556	21,085	42,359
Intangible assets		15,558	7,615	16,032
Loss on disposal of property, plant and equipment		6	93	349
Loss on disposal of intangible assets		-	38	67
Movement on provisions		1,238	1,109	1,266
Movement on deferred income		(36)	(37)	(62)
Cost of equity-settled employee share schemes		3,981	3,675	7,961
Payments of costs directly attributable to acquisitions	4	429	1,519	1,519
Finance income		(619)	(348)	(1,266)
Interest and bank charges		17,590	17,033	35,717
Results from associates		80	50	(892)
Impairment of associates		15,000	-	-
Cash flow before working capital		186,369	109,676	235,091
Change in trade and other receivables		(63,375)	(30,799)	(20,759)
Change in other current assets		351	2,610	2,259
Change in inventories		(2,049)	(47,751)	(42,305)
Change in trade and other payables		4,949	11,164	21,914
Change in other current liabilities		41,824	16,427	10,429
Cash generated by operations		168,069	61,327	206,629
Income tax paid		(32,049)	(14,256)	(24,468)
Net cash generated from operating activities		136,020	47,071	182,161

14. Related party balances

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

Trading transactions:

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

Darhold Limited: is a related party of the Group because it is one of the major shareholders of Hikma Pharmaceuticals PLC with an ownership percentage of 28.9% at 30 June 2013 (30 June 2012: 29.0% and 31 December 2012: 29.0%).

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

Capital Bank - Jordan: is a related party of the Group because two board members of the Bank were also board members of Hikma Pharmaceuticals PLC. Total cash balances at Capital Bank - Jordan were $2,037,000 (30 June 2012: $2,991,000 and 31 December 2012: $2,977,000). Loans and overdrafts from the Capital Bank to the Group outstanding at 30 June 2013 amounted to $3,433,000 (30 June 2012: $8,448,000 and 31 December 2012: $Nil). Interest income and expense are within market rates.

Jordan International Insurance Company: is a related party of the Group because one board member of the insurance company is also a board member of Hikma Pharmaceuticals PLC. Total insurance premiums paid by the Group to Jordan International Insurance Company during the period were $257,000 (H1 2012: $1,797,000 and FY 2012: $3,423,000). The Group's insurance expense for Jordan International Insurance Company contracts in the period was $187,000 (H1 2012: $2,715,000 and FY 2012: $2,806,000). The amounts due to Jordan International Insurance Company at 30 June 2013 were $20,000 (30 June 2012: $577,000 and 31 December 2012: $154,000).

Mr. Yousef Abd Ali: is a related party of the Group because he holds a non-controlling interest in Hikma Leban SARL in Lebanon of 33%. The amount owed to Mr. Yousef by the Group as at 30 June 2013 was $150,000 (30 June 2012: $150,000 and 31 December 2012: $150,000).

Labatec Pharma SA: is a related party of the Group because it is owned by Mr. Samih Darwazah. During the period the Group total sales to Labatec Pharma amounted to $171,000 (H1 2012: $215,000 and FY 2012: $282,000) and the Group total purchases from Labatec Pharma amounted to $Nil (H1 2012: $1,396,000 and FY 2012: $1,179,000). At 30 June 2013 the amount owed from Labatec Pharma to the Group was $365,000 (30 June 2012: owed from the Group $892,000 and 31 December 2012: owed to the Group $211,000).

King and Spalding: is a related party of the Group because a partner of the firm is a board member and company secretary of West-Ward. King and Spalding is an outside legal counsel firm that handles general legal matters for West-Ward. During the period fees of $5,000 (H1 2012: $45,000 and FY 2012: $45,000) were paid for legal services provided.

Jordan Resources & Investments Company: is a related party of the Group because three board members of Hikma Pharmaceuticals PLC are shareholders in the firm. During the period fees of $88,000 were paid for training services provided (H1 2012: $Nil and FY 2012: $151,000).

American University of Beirut: is a related party of the Group because one board member of Hikma Pharmaceuticals PLC is also a trustee of the University. During the period fees of $96,000 (H1 2012: $36,000 and FY 2012: $125,000) were paid for training services provided. At 30 June 2013 the amount owed from American University of Beirut to the Group was $7,000 (30 June 2012 and 31 December 2012: $Nil).

Arab Bank: is a related party of the Group because during the period one member of Hikma Pharmaceuticals PLC's Senior Management has become a board member of the Arab bank. Total cash balances at the Arab Bank were $34,711,000 (30 June 2012: $18,169,000 and 31 December 2012: $75,681,000). Loans and overdrafts from the Arab Bank to the Group outstanding at 30 June 2013 amounted to $179,165,000 (30 June 2012: $175,029,000 and 31 December 2012: $187,081,000). Interest income and expense are within market rates.

15. 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 $18,500,000 and deferred consideration of $2,000,000. 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 $6,334,000, intangible assets of $9,655,000, and goodwill of $9,270,000 and other net assets and liabilities of ($4,759,000).

The goodwill arising represents the synergies that will be obtained by integrating EPCI into the existing business.

The Group's condensed consolidated income statement includes related acquisition costs amounting to $429,000 recorded within general and administrative expenses.

The impact of this acquisition on the Group's revenues and profits is immaterial.

16. Foreign exchange rates

	Period end rates			Average rates
	30 June 2013	30 June 2012	31 December 2012	H1 2013	H1 2012	FY 2012
USD/EUR	0.7685	0.7950	0.7565	0.7614	0.7704	0.7775
USD/Sudanese Pound	5.5785	5.3135	5.9988	5.6544	2.9727	4.3346
USD/Algerian Dinar	80.0232	78.8770	78.0915	78.4885	75.4000	77.5551
USD/Saudi Riyal	3.7495	3.7495	3.7495	3.7495	3.7495	3.7495
USD/British Pound	0.6572	0.6403	0.6185	0.6473	0.6340	0.6309
USD/Jordanian Dinar	0.7090	0.7090	0.7090	0.7090	0.7090	0.7090
USD/Egyptian Pound	7.0294	6.0790	6.3654	6.8311	6.0533	6.0864
USD/Japanese Yen	99.1710	79.5406	85.9013	95.5219	79.7230	79.8155
USD/Moroccan Dirham	8.5614	8.7514	8.4838	8.8315	8.8542	8.6458
USD/Tunisian Dinar	1.6548	1.5865	1.5506	1.5949	1.5375	1.5686

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.

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 379 compounds pending approval, covering a broad range of therapeutic areas

> A systematic commitment to quality that helps to secure approval and acceptance of new products and mitigate potential safety issues

Product safety

> Unforeseen product safety issues for marketed products, particularly in respect of in-licensed products

> Interruptions to revenue flow

> Costs of recall, potential for litigation

> Reputational damage

> Diversification of product portfolio across key markets and therapies

> Working with stakeholders to understand issues as they arise

> 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

> Loss of products from our portfolio

> Revenue interruptions

> Failure to recoup sales and marketing and business development costs

> Investment in long-term relationships with existing in-licensing partners

> Experienced legal team capable of negotiating robust agreements with our partners

> Continuous development of new partners for licensing and co-operation

> Diverse revenue model with in-house R&D capabilities

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

> Extensive due diligence 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 40 countries

> Product diversification, with 685 products and 1,626 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

Financial risks

Risk	Impact	Mitigation
Foreign exchange risk
> Exposure to foreign exchange movements, primarily in the European, Algerian, Sudanese and Egyptian currencies	> Fluctuations in the Group's net asset values and 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

^{^[1]}Before the amortisation of intangible assets (excluding software) and exceptional items, as set out in note 4 to the condensed set of financial statements

[2] Adjusted profit and adjusted profit attributable to shareholders in H1 2012 have been re-classified to reflect the classification of certain exceptional items on a consistent basis with the treatment in H1 2013, as set out in note 4 to the condensed set of financial statements

^{^[3]} Earnings before interest, tax, depreciation and amortisation. EBITDA is stated before impairment charges and share of results from associated companies

[4] Remediation costs of $19.0 million include inventory write-downs, failure to supply penalties and consulting services. Other one-off costs of $13.8 million include impairment losses and other claims provisions as set out in note 4 of the condensed set of financial statements.

[5] In H1 2013, amortisation of intangible assets (excluding software) was $7.1 million compared with $6.4 million in H1 2012. In H1 2013, exceptional items included within operating expenses were $38.0 million compared with $2.3 million in H1 2012

[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

This information is provided by RNS

The company news service from the London Stock Exchange

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