REG - Hikma Pharmaceutical - Final Results <Origin Href="QuoteRef">HIK.L</Origin> - Part 2

Hikma PharmaceuticalsAnnouncement

11/03/2015 07:02

- Part 2: For the preceding part double click  ID:nRSK1023Ha 

the Company's financial
statements. The Group's previously published financial statements were also prepared in accordance with International
Financial Reporting Standards. These International Financial Reporting Standards have been subject to amendment and
interpretation by the International Accounting Standards Board and the financial statements presented for the years ended
31 December 2014 and 31 December 2013 have been prepared in accordance with those revised standards. Unless stated
otherwise these policies are in accordance with the revised standards that have been applied throughout the year and prior
years presented in the financial statements. The presentational and functional currency of Hikma Pharmaceuticals PLC is the
US Dollar as the majority of the Company's business is conducted in US Dollars (USD). 
 
Revenue recognition 
 
Dynamic market changes can generate uncertainty as to the ultimate net selling price of a pharmaceutical product and
therefore revenue cannot always be measured reliably at the point when the product is supplied or made available to
external customers.  The Company has therefore expanded its revenue recognition policy as shown below. 
 
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 title and risk of loss have passed. 
 
Revenue represents the amounts receivable after the deduction of discounts, value added tax, other sales taxes, allowances
given, provisions for chargebacks and accruals for estimated future rebates and returns. The methodology and assumptions
used to estimate rebates and returns are monitored and adjusted regularly in light of contractual and historical
information. 
 
If the ultimate net selling price cannot be reliably measured, revenue recognition is deferred until a reliable measurement
can be made.  Deferred revenue is included in other current liabilities in the consolidated balance sheet. 
 
ADOPTION OF NEW AND REVISED STANDARDS 
 
The following new and revised Standards and Interpretations have been adopted in the current year. 
 
Their adoption has not had any significant impact on the amounts reported in these financial statements, however, may
impact the accounting for future transactions and arrangements. 
 
 Amendments to IFRS 10, IFRS 12 and IAS 27  Investment entities                                      
 Amendments to IAS 36                       Recoverable amount disclosures for Non-Financial assets  
 
 
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by
the EU): 
 
 IFRS 9                                           Financial Instruments                                                                 
 IFRS 11                                          Joint arrangements                                                                    
 IFRS 14                                          Regulatory deferral accounts                                                          
 IAS 16 and IAS 38 (amendments)                   Property, plant and equipment and intangible assets                                   
 IAS 16 and IAS 41 (amendments)                   Property, plant and equipment and agriculture                                         
 IFRS 15                                          Revenue from contracts with customers (impact to be evaluated)                        
 IAS 19 (amendments)                              Employee benefits                                                                     
 IAS 27 (amendments)                              Investment Entities                                                                   
 IFRS 10 and IAS 28 (amendments)                  Sales or contribution of assets between an investor and it associate / Joint venture  
 Annual improvements to IFRSs: 2010 - 2012                                                                                              
 Annual improvements to IFRSs: 2011 - 2013                                                                                              
 Annual improvements to IFRSs: 2012 - 2014 Cycle                                                                                        
 
 
Except as noted above the directors do not expect that the adoption of the Standards and Interpretations listed above will
have a material impact on the financial statements of the Group in future periods. 
 
2. Going concern 
 
The Directors of Hikma ("Directors") believe that the Group is well diversified due to its geographic spread, product
diversity and large customer and supplier base. The Group operates in the relatively defensive generic pharmaceuticals
industry which the Directors expect to be less affected by economic downturns compared to other industries. Whilst a new
bridge loan facility, which was used to finance the cash consideration of $225 million for the Bedford acquisition in July,
increased the Group's total debt, the Group's overall net debt position of $274 million at 31 December 2014 was broadly in
line with the position of $267 million at 31 December 2013, reflecting strong cash flow generation in 2014. Operating cash
flow in 2014 was $425 million (2013: $337 million). The Group has $839 million (2013: $234 million) of undrawn short-term
and long-term banking facilities, in addition to $180 million (2013: $142 million) of unutilised import and export
financing limits. These facilities are well diversified across the subsidiaries of the Group and are with a number of
financial institutions. The Group's forecasts, taking into account reasonable possible changes in trading performance,
facility renewal sensitivities and maturities of long-term debt, show that the Group should be able to operate well within
the levels of its facilities and their related covenants. 
 
After making enquiries, the Directors believe that the Group is adequately placed to manage its business and financing
risks successfully despite the current uncertain economic and political outlook.  The Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  The
Directors therefore continue to adopt the going concern basis in preparing the financial statements. 
 
3. Segmental reporting 
 
For management purposes, the Group is currently organised into three principal operating divisions - Branded, Injectables
and Generics. These divisions are the basis on which the Group reports its segmental information. 
 
The Group discloses underlying operating profit as the measure of segmental result, as this is the measure used in the
decision-making and resource allocation process of the chief operating decision maker, who is the Group's Chief Executive
Officer. 
 
Information regarding the Group's operating segments is reported below. 
 
The following is an analysis of the Group's revenue and results by reportable segment in 2014: 
 
 Year ended                                                                                        
 31 December 2014                         Branded    Injectables    Generics    Others    Group    
                                          $m         $m             $m          $m        $m       
 Revenue                                  551        713            216         9         1,489    
 Cost of sales                            (284)      (282)          (66)        (6)       (638)    
 Gross profit                             267        431            150         3         851      
                                                                                                   
 Adjusted segment result                  111        265            113         (5)       484      
 -Exceptional items:                                                                               
 Intangible amortisation*                 (9)        (5)            -           -         (14)     
                                                                                                   
 Segment result                           102        260            113         (5)       470      
                                                                                                   
 Adjusted unallocated corporate expenses                                                  (57)     
 Exceptional items:                                                                                
 - Acquisition related expenses                                                           (11)     
                                                                                                   
 Unallocated corporate expenses                                                           (68)     
                                                                                                   
 Adjusted operating profit                                                                427      
 Operating profit                                                                         402      
 Associated companies                                                                              
 -Share of results                                                                        (6)      
 Finance income                                                                           4        
 Finance expense                                                                          (38)     
 Profit before tax                                                                        362      
 Tax                                                                                      (80)     
 Profit for the year                                                                      282      
 Attributable to:                                                                                  
 Non-controlling interest                                                                 4        
 Equity holders of the parent                                                             278      
                                                                                          282      
                                                                                                     
 
 
Segment result is defined as operating profit for each segment. 
 
* Intangible amortisation comprises the amortisation on intangible assets other than software. 
 
"Others" mainly comprises Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals
division of Hikma Pharmaceuticals Ltd (Jordan). 
 
Unallocated corporate expenses are primarily made up of employee costs, professional fees, travel expenses and donations. 
 
 Segment assets and liabilities                                                 Branded    Injectables    Generics    Corporate and others    Group  
 2014                                                                                                                                                
                                                                                $m         $m             $m          $m                      $m     
 Additions to property, plant and equipment (cost)                              48         31             8           2                       89     
 Acquisition of subsidiaries' property, plant and equipment (net book value)    -          53             -           -                       53     
 Additions to intangible assets                                                 4          16             4           1                       25     
 Intangible assets arising on acquisition                                       -          174            -           -                       174    
 Total property, plant and equipment and intangible assets (net book value)     511        528            70          7                       1,116  
 Depreciation and impairment                                                    22         18             7           2                       49     
 Amortisation and impairment                                                                                                                         
 (including software)                                                           10         13             -           -                       23     
 Investment in associates and joint ventures                                    -          -              -           16                      16     
 Balance sheet                                                                                                                                       
 Total assets                                                                   1,123      770            175         183                     2,251  
 Total liabilities                                                              481        405            92          57                      1,035  
 
 
The following is an analysis of the Group's revenue and results by reportable segment in 2013: 
 
 Year ended                                                                                      
 31 December 2013                       Branded    Injectables    Generics    Others    Group    
                                        $m         $m             $m          $m        $m       
 Revenue                                554        536            268         7         1,365    
 Cost of sales                          (278)      (254)          (62)        (7)       (601)    
 Gross profit                           276        282            206         -         764      
                                                                                                 
 Adjusted segment result                135        166            166         (9)       458      
 Exceptional items:                                                                              
 - Severance costs                      (1)        -              -           -         (1)      
 - Plant remediation costs              -          -              (24)        -         (24)     
 - Impairment losses                    -          (6)            (4)         -         (10)     
 - Other claims provisions              -          -              (11)        -         (11)     
 Intangible amortisation*               (10)       (5)            -           -         (15)     
 Segment result                         124        155            127         (9)       397      
 Unallocated corporate expenses                                                         (45)     
 Adjusted operating profit                                                              413      
 Operating profit                                                                       352      
 Associated companies                                                                            
 -Share of results                                                                      (3)      
 -exceptional impairment of investment                                                  (16)     
 Finance income                                                                         2        
 Finance expense                                                                        (37)     
 Profit before tax                                                                      298      
 Tax                                                                                    (82)     
 Profit for the year                                                                    216      
 Attributable to:                                                                                
 Non-controlling interest                                                               4        
 Equity holders of the parent                                                           212      
                                                                                        216      
                                                                                                   
 
 
Segment result is defined as operating profit for each segment. 
 
*Intangible amortisation comprises the amortisation of intangible assets other than software. 
 
"Others" mainly comprise Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals
division of Hikma Pharmaceuticals Ltd (Jordan). 
 
Unallocated corporate expenses are primarily made up of employee costs, office costs, professional fees, donations and
travel expenses. 
 
 Segment assets and liabilities                                                 Branded    Injectables    Generics    Corporate and others    Group  
 2013                                                                                                                                                
                                                                                $m         $m             $m          $m                      $m     
 Additions to property, plant and equipment (cost)                              25         31             10          -                       66     
 Acquisition of subsidiaries' property, plant and equipment (net book value)    6          -              -           -                       6      
 Additions to intangible assets                                                 3          13             2           -                       18     
 Intangible assets arising on acquisition                                       20         -              -           -                       20     
 Total property, plant and equipment and intangible assets (net book value)     519        314            51          6                       890    
 Depreciation and impairment                                                    22         17             8           2                       49     
 Amortisation and impairment                                                                                                                         
 (including software)                                                           10         12             4           -                       26     
 Investment in associates and joint ventures                                    -          -              -           22                      22     
 Balance sheet