REG - Hikma Pharmaceutical - Half-year Report <Origin Href="QuoteRef">HIK.L</Origin> - Part 3
24/08/2016 07:07
- Part 3: For the preceding part double click ID:nRSX9654Hb
709 1,440
The top selling markets were as below:
H1 2016 H1 2015 FY 2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
United States 529 344 697
Saudi Arabia 64 80 162
Algeria 57 58 113
650 482 972
Included in revenues arising from the Generics and Injectables segments are revenues of approximately $123 million (H1
2015: $86 million and FY 2015: $173 million) which arose from the Group's largest customer which is located in the United
States.
4. Exceptional items and other adjustments
Exceptional items are disclosed separately in the consolidated income statement to assist in the understanding of the
Group's core performance.
H1 2016 H1 2015 FY 2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Exceptional items
Acquisition, integration and other costs (39) (1) (14)
Gain from sale of assets, net 18 - 6
Inventory related adjustments (note 21) (20) - -
Release of contingent liability 4 - -
Severance costs - (5) (6)
Proceeds from legal claims - 2 2
Exceptional items included in operating profit (37) (4) (12)
Impairment of investment in associates - - (7)
Exceptional items included in profit (37) (4) (19)
Other adjustments
Intangible amortisation other than software (18) (6) (16)
Remeasurement of contingent liabilities, net (notes,15,19,21) (9) - (2)
Exceptional items and intangible amortisation (64) (10) (37)
Tax effect 13 2 3
Impact on profit for the period/ year (51) (8) (34)
Exceptional items:
-Acquisition, integration and other related costs were incurred in relation to the acquisition of West-Ward Columbus which
was closed on 29 February 2016. Acquisition related expenses are included in the unallocated corporate expenses, while
integration and other expenses are included in the segment results. Acquisition related expenses mainly comprise third
party consulting services, legal and professional fees, other costs represent severance and retention payments paid.
-Gain from sale of assets related to the divestiture of certain products.
-Inventory related adjustments reflect the amortisation of the fair value uplift of the inventory acquired as part of
West-Ward Columbus acquisition.
-Release of contingent liability, is due to not achieving certain performance-related milestones in respect of a previous
acquisition.
Other Adjustments:
· Remeasurement of contingent liabilities represent the net difference resulting from the valuation of the liabilities
associated with the future contingent payments.
.
In previous periods exceptional items and other adjustments are related to the following:
-Acquisition and integration related costs are incurred in relation to the acquisition of West-Ward Columbus which was
closed on 29 February 2016. 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.
-Gain from sale of the assets related to the sale of Bedford manufacturing facilities to Xellia Pharmaceuticals for a cash
consideration of $30 million. The gain is net of hibernation costs related to the assets.
-Severance costs in 2015 related to restructuring of management teams mainly in MENA.
-Proceeds from legal claims refers to cash received in settlement of an indemnification claim in the US.
-Impairment of investment in associates represents the impairment of the remaining investment balance related to Unimark
limited. Hikma's share in Unimark Remedies Limited has been divested during 2016 for minimal value.
-Remeasurement of contingent liabilities represent the difference resulting from the valuation of the liability associated
with the future earnout payments to be made in relation to the co-development and earnout payment agreement (note 15).
5. Tax
H1 2016 H1 2015 FY 2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Current tax:
Foreign tax 34 28 68
Adjustments to prior years 2 3 1
Deferred tax (12) 4 (5)
24 35 64
Tax for the six month period is charged at 28.9% (H1 2015: 20.6%; FY 2015: 20.1%).
The application of tax law and practice is subject to some uncertainty and amounts are provided where the likelihood of a
cash outflow is probable.
The effective tax rate for H1 2016 is higher than it was at H1 2015 predominantly due to the effect of the West-Ward
Columbus acquisition, which resulted in a change in the weighing of the profit mix to jurisdictions with a higher statutory
tax rate. We expect our full year effective tax rate to be in the region of 25%.
6.Dividends
H1 2016 H1 2015 FY 2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Amounts recognised as distributions to equity holders in the period/years:
Final dividend for the year ended 31 December 2015 of 21.0 cents(2014: 15.0 cents) per share 50 30 30
Interim dividend for the year ended 31 December 2015of 11.0 cents per share - - 22
Special final dividend for the year ended 31 December 2014 of 6.0 cents per share - 12 12
50 42 64
The proposed interim dividend for the period ended 30 June 2016 is 11.0 cents (30 June 2015: 11.0 cents, and 31 December
2015: 21.0 cents) per share.
Based on the number of shares in issue at 30 June 2016 of (239,923,850), the unrecognised liability is $26 million.
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 is shown in
the table below. Core basic earnings per share and Core diluted earnings per share are intended to highlight the Core
results of the Group before exceptional items and other adjustments. A reconciliation of the reported and core earnings
used is also set out below:
H1 2016 H1 2015 FY 2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent 58 134 252
Exceptional items (note 4) 37 4 19
Other adjustments:
- Intangible amortisation other than software (note 4) 18 6 16
- Remeasurement of contingent liabilities, net (note 4) 9 - 2
Tax effect of adjustments (13) (2) (3)
Core earnings for the purposes of Core basic and diluted earnings per share being adjusted net profit attributable to equity holders of the parent 109 142 286
Number Number Number
Number of shares: 'm 'm 'm
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 226 199 199
Effect of dilutive potential Ordinary Shares :
Share-based awards 2 1 2
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share 228 200 201
H1 2016 H1 2015 FY 2015
Earnings per share Earnings per share Earnings per share
Cents Cents Cents
Basic 25.7 67.3 126.6
Diluted 25.4 67.0 125.4
Core basic 48.2 71.4 143.7
Core diluted 47.8 71.0 142.3
8. Investments in associates and joint ventures
A loss of $nil representing the Group share of the result of Hubei Haosun Pharmaceutical Co., Ltd (Share of the result of
Unimark Remedies Limited and Hubei Haosun Pharmaceutical Co., Ltd during H1 2015: $2 million, FY 2015: $2 million). During
2015, the Group impaired the remaining investment balance related to Unimark Remedies Limited of $7 million which was due
to the continuous financial difficulties. Hikma's share in Unimark Remedies Limited has been divested during 2016 for
minimal value.
The below represents the Group's share of the result and the impairment of Unimark Remedies Limited and Hubei Haosun
Pharmaceutical Co. Ltd. Both are included in the consolidated income statement.
For the period ended 30 June 2016 For the period ended 30 June 2015 For the year ended 31 December 2015
Joint Ventures Associates Total Joint Ventures Associates Total Joint Ventures Associates Total
$m $m $m $m $m $m $m $m $m
Balance at 1 January 3 4 7 3 13 16 3 13 16
Share of loss - - - - (2) (2) - (2) (2)
Impairment of investment (see note 4) - - - - - - - (7) (7)
Balance at end of period/year 3 4 7 3 11 14 3 4 7
9. Inventories
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Finished goods 158 50 55
Work-in-progress 63 36 33
Raw and packing materials 256 158 152
Goods in transit 19 36 11
496 280 251
Goods in transit includes inventory held at third parties whilst in transit between Group companies.
10. Trade and other receivables
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Trade receivables 590 421 432
Prepayments 68 46 39
VAT and sales tax recoverable 10 14 15
Employee advances 3 3 2
671 484 488
11. Other current assets
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Price adjustment receivable (note 21) 113 - -
Investment measured at fair value 21 20 20
Others 5 2 5
139 22 25
Investment measured at fair value: represents the agreement the Group entered in 2015 with an asset management firm to
manage a $20 million equity portfolio. This investment is measured at fair value and any changes in fair value go through
other comprehensive income.
The fair value of financial assets and liabilities is included at the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or liquidation sale. Management classifies items that
are recognised at fair value based on the level of inputs used in their fair value determination.
This asset is classified as level 1 "quoted prices in active markets".
12. Trade and other payables
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Trade payables 180 126 139
Accrued expenses 127 94 122
Other payables 15 14 15
322 234 276
Other payables mainly include employees' provident fund liability of $6 million (30 June 2015: $ 4 million, 31 December
2015: $5 million),which mainly represents the outstanding contributions to the Hikma Pharmaceuticals Ltd (Jordan)
retirement benefit plan, on which the fund receives 5% interest.
13. Other current liabilities
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Deferred revenue 13 26 16
Return and free goods provision 112 50 49
Co-development and earnout payment (note 15) 8 - 3
Contingent consideration and liability (note 21) 66 - -
Others* 72 31 29
271 107 97
*The others balance above includes indirect rebate liabilities across the Group.
14. Current and Non-current financial debts
Short-term financial debts
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Bank overdrafts 15 12 8
Import and export financing 83 110 58
Short-term loans 5 3 4
Current portion of long-term loans 55 40 45
158 165 115
Import and export financing represents short-term financing for the ordinary trading activities of the business.
Long-term financial debts
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Long-term loans 452 135 141
Long-term borrowings (Eurobond) 495 494 494
Less: current portion of loans (55) (40) (45)
Long-term financial loans 892 589 590
Breakdown by maturity:
Within one year 55 40 45
In the second year 39 39 35
In the third year 314 22 20
In the fourth year 528 13 17
In the fifth year 10 511 513
Thereafter 1 4 5
947 629 635
The loans are held at amortised cost.
Included in the table above are the following major arrangements entered into by the Group:
a) A US$500 million (with fair value of $494 million) 4.25% Eurobond due in April 2020 with the rating of (BB+/Ba1). The
proceeds were used to refinance existing debt and for general corporate purposes.
b) A three-year $1,175 million Revolving Credit Facility (RCF) loan with a one year extension option from a syndicate of
banks led by Citibank International Limited was entered into on 27 October 2015. The loan has an outstanding balance of
$285 million and a $890 million unutilised available limit. The RCF has been used for the first time to finance the most
recent acquisition of West-Ward Columbus which closed on 29 February 2016.
c) A nine-year $110 million loan from the International Finance Corporation (IFC) was entered into on 19 December 2011.
The loan has an outstanding balance of $86 million (with a fair value of $86 million) and no unutilised limit. Quarterly
equal repayments of the term loan commenced on 15 November 2013 and will continue until 15 August 2020. The loan has been
used to finance acquisitions in the MENA region and MENA's capital expenditure.
15. Other non-current liabilities
30 June2016 30 June2015 31 December2015
$m $m $m
(Unaudited) (Unaudited) (Audited)
Contingent consideration and liability (note 21) 252 - -
Co-development and earnout payment 17 - 18
Others 21 1 2
290 1 20
Co-development and earnout payment agreement: The liability mainly relates to the present value of future payments on a
co-development and earnout agreement. Through this agreement, milestone payments dependent on successful clinical
development of defined products are received by the Group. In return of receiving such milestone payments, the Group has
agreed to pay the contracting party a certain percentage of future sales of those products. As at 30 June 2016 and 31
December 2015, the liability associated with these earnout payments was adjusted to reflect the present value of the
expected future cash outflows and the difference is presented as a financing cost.
16. Share Capital
Issued and fully paid - included in shareholders' equity:
H1 2016 (Unaudited) H1 2015 (Unaudited) FY 2015 (Audited)
Number 'm $m Number 'm $m Number 'm $m
At 1 January 200 35 199 35 199 35
Issues of ordinary shares during the period/year
Exercise of share-based payments 1 - - - 1 -
Acquisition of subsidiary 40 5 - - - -
At end of period/year 241 40 199 35 200 35
17. Net cash from operating activities
H1 2016 H1 2015 FY 2015
$m (Unaudited) $m (Unaudited) $m (Audited)
Profit before tax 83 170 318
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment 32 25 51
Intangible assets 21 8 22
Investment in associate - - 7
Gain on disposal of property, plant and equipment - - (11)
Gain on disposal of intangible assets (note 4) (17) - -
Movement on provisions - 1 3
Cost of equity-settled employee share schemes 10 7 15
Finance income (2) (1) (3)
Interest and bank charges 40 23 57
Results from associates - 2 2
Cash flow before working capital 167 235 461
Change in trade and other receivables (26) (57) (78)
Change in other current assets (2) 1 (1)
Change in inventories (55) (12) 4
Change in trade and other payables 20 (6) 28
Change in other current liabilities 25 2 3
Cash generated by operations 129 163 417
Income tax paid (30) (38) (51)
Net cash from operating activities 99 125 366
18. Contingent Liabilities
A contingent liability existed at the balance sheet date in respect of external guarantees and letters of credit totalling
$54 million (30 June 2015*: $50 million, 31 December 2015: $50 million).
Other contingent liabilities:
The integrated nature of the Group's worldwide operations, involving significant investment in research and manufacturing
at a number of locations, with consequential cross-border supply routes into our end-markets, can potentially give rise to
complexity and delay in negotiations with taxation authorities as to the profits on which individual Group companies are
liable to tax. Disagreements with, and between, taxation authorities as to intra-Group transactions, in particular the
price at which goods and services should be transferred between Group companies in different tax jurisdictions, have the
potential to produce conflicting claims from taxation authorities as to the profits to be taxed in individual territories.
The promotion, marketing and sale of pharmaceutical products and medical devices is highly regulated and the operations of
market participants, such as Hikma, are closely supervised by regulatory authorities and law enforcement agencies,
including the FDA and the US Department of Justice. As a result, the Group is subject to certain investigations by
governmental agencies, as well as other various legal proceedings considered typical to its business relating to
employment, product liability and commercial disputes.
* 30 June 2015 figure was restated.
19. Fair value of financial assets and liabilities
The fair value of financial assets and liabilities is included at the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or liquidation sale. Management classifies items that
are recognised at fair value based on the level of inputs used in their fair value determination as described below:
· Level 1: Quoted prices in active markets for identical assets or liabilities
· Level 2: Inputs that are observable for the asset or liability
· Level 3: Inputs that are not based on observable market data
The Group has the following Level 1 financial assets and liabilities;
· Investment designated at fair value (note 11).
· A US$500 million Eurobond (note 14).
The following table presents the changes in Level 3 items for the period ended 30 June 2016, 30 June 2015, and the year
ended 31 December 2015:
Contingent Consideration$m
Balance at 1 January 2015 (Audited) 4
Acquisitions -
Remeasurement through income statement -
Balance at 30 June 2015 (Unaudited) 4
Balance at 1 January 2015 (Audited) 4
Additions -
Remeasurement through income statement -
Balance at 31 December 2015 (Audited) 4
Balance at 31 December 2015 (Audited) 4
Additions -
Release (note 4) (4)
Settlement (20)
Acquisitions (note 21) 220
Remeasurement through income statement (note 4) 8
Balance at 30 June 2016 (Unaudited) 208
The main level 3 inputs used by the Group are derived and evaluated as follows:
- The key input of the contingent considerations related to the expected cash inflows, milestones, and approvals of
certain products discounted using a Monte Carlo analysis. If expected cash flows were 10% higher or lower, the fair value
will increase/decrease by $ 12 million.
20. 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 considered one of the major shareholders of Hikma
Pharmaceuticals PLC with an ownership percentage of 24.38% at 30 June 2016 (30 June 2015: 28.7% and 31 December 2015:
29.06%).
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 Hikma Pharmaceuticals PLC board members are also board
members of Capital Bank - Jordan. Additionally, a senior member of Hikma management team is a board member of one company
owned by Capital Bank - Jordan. Total cash balance at Capital Bank - Jordan as of 30 June 2016 was $10 million (30 June
2015 $4.4 million and 31 December 2015: $9.4 million). Utilisation of facilities granted by Capital Bank- Jordan to the
Group amounted to $4 million at 30 June 2016 (30 June 2015: $nil and 31 December 2015: $nil). Interest income/expense is
within market rates.
Jordan International Insurance Company: is a related party of the Group because one board member of the Company is also a
board member of Hikma Pharmaceuticals PLC. The Group's insurance expense for Jordan International Insurance Company
contracts during the period was $0.5 million (H1 2015: $0.2 million and FY 2015: $0.5 million). The amounts due from Jordan
International Insurance Company at 30 June 2016 were $0.2 million (The amounts due to Jordan International Insurance
Company at 30 June 2015: $0.1 million and 31 December 2015: $0.4 million).
Labatec Pharma: is a related party of the Group because it is owned by the Darwazah family. During the period, the Group
total sales to Labatec Pharma amounted to $0.8 million (H1 2015: $0.3 million and FY 2015: $0.9 million). At 30 June 2016,
the amount owed from Labatec Pharma to the Group was $0.4 million (30 June 2015: $nil and 31 December 2015: $0.2 million).
Arab Bank: is a related party of the Group because a senior member of Hikma management team is also a board member of Arab
Bank PLC. Total cash balances at Arab Bank were $55 million (30 June 2015: $95 million and 31 December 2015: $55.7
million). Utilisation of facilities granted by Arab Bank to the Group amounted to $73 million (30 June 2015: $80.5 million
and 31 December 2015: $56.6 million). Interest expense/income is within market rates.
American University of Beirut: is a related party of the Group because one board member of the Group is also a trustee of
the University. During the period, fees of $0.1 million (H1 2015: $0.1 million and FY 2015: $0.2 million) were paid. At 30
June 2016, the amount owed to American University of Beirut from the Group amounted to $nil (30 June 2015: $nil and 31
December 2015: $nil).
Boehringer: During the period the Group total sales to BI amounted to $35.3 million and the Group total purchases from BI
amounted to $1.1 million. At 30 June 2016 the amount owed from BI to the Group was $27.1 million. In addition, balances
arising from the acquisition in respect of contingent consideration are disclosed in note 19 and purchase price adjustments
which are outstanding are disclosed note 21.
HikmaCure: The Group holds a 50:50 joint venture ("JV") agreement with MIDROC Pharmaceuticals Limited. The JV is called
HikmaCure. Hikma and MIDROC invested in HikmaCure in equal proportions and have committed to provide up to $22 million each
in cash of which $2.5 million has been paid in previous periods.
Unimark: During 2015, the Group has impaired the remaining investment balance related to Unimark Remedies Limited. The
exceptional impairment of investment was $7 million. Hikma's share in Unimark Remedies Limited has been divested during
2016 for minimal value.
Haosun: The Group held a non-controlling interest of 30.1% in Hubei Haosun Pharmaceutical Co., Ltd ("Haosun") at 30 June
2016 (30 June 2015: 30.1% and 31 December 2015: 30.1%). During the period, total purchases from Haosun were $nil (H1 2015:
$0.6 million and FY 2015: $0.6 million).
21. Acquisition of businesses
During the year, Hikma acquired two businesses: West-Ward Columbus and EUP.
West-Ward Columbus
On 28 July 2015 Hikma announced that it has agreed to acquire West-Ward Columbus, from Boehringer Ingelheim
(Boehringer).West-Ward Columbus is a well-established US specialty generics company with a highly differentiated product
portfolio and best-in-class R&D capabilities.
On 29 February 2016, Hikma completed the acquisition of West-Ward Columbus where the total fair value of the consideration
is deemed to be $1,725 million consists of net cash consideration of $575 million (net of certain working capital and other
adjustments), 40 million Ordinary Shares were issued to Boehringer based on Hikma's share price of £18.81 and the US: GBP
exchange rate of 1.3879:1 (representing an estimated 16.71 per cent. of Hikma issued share capital immediately following
the issuance), a contingent consideration of $224 million based on future performance, in addition to purchase price
adjustment of $118 million reflecting further working capital adjustments as well as amounts receivable from Boehringer in
respect of milestones and other conditions.
The goodwill arising represents primarily the ability of the business to develop future products as well as the work
force.
The net assets acquired in the transaction and the provisional goodwill arising have been valued by a third party expert as
set out below. These amounts are provisional and subject to change.
Net assets acquired Fair Value
$m
Trade and other receivables 169 a
Inventories 197 b
Intangible assets 731 c
Property, plant and equipment 453 d
Deferred tax assets 58 e
Trade and other payables (32)
Other current liabilities (81)
Deferred tax liabilities (20) e
Other non current liabilities (139) f
Net assets acquired 1,336
Goodwill 389
Total consideration 1,725
Discharged by:
Cash consideration 575
Issuance of shares 1,044
Contingent consideration 224 g
Adjustment to purchase price (118)
1,725
Cash consideration 575
Cash and cash equivalents acquired -
Net cash outflow arising on acquisition 575
a. Trade and other receivables include a prepayment related to the Transitional Service Agreement between the Group and
Boehringer.
The fair value of trade and other receivables is $169 million and includes trade receivables with a fair value of $158
million. The gross contractual amount for trade receivables due is $158 million.
b. Inventories have been valued as follows:
- Raw materials at the current replacement cost.
- Finished goods and work in process at the estimated selling prices less a cost to dispose of and complete, less a
reasonable profit attributable to the selling effort.
c. Intangible assets represent:
- Fair value of marketed products which present the outcome of the R&D efforts, material and formulas. The Multi Period
Excess Earnings Method ("MEEM") of the Income Approach has been used to value those products. Useful lives of 9 -14 years
have been determined.
- Fair value of products in various stages of development ("Pipeline Products"). The Multi Period Excess Earnings
Method ("MEEM") of the Income Approach has been used to value those products. Useful lives of 7 -15 years have been
determined.
d. The Property, plant and equipment acquired have been valued by a third party expert at current market values on the
basis of Fair Value as defined in IFRS 13 and in accordance with IFRS 3 Business Combinations.
e. Taxable temporary differences have been identified by reference to IAS 12 "income tax".
f. As part of the acquisition of West-Ward Columbus, Hikma assumed a contingent liability related to the co-development
with a third party of two specific products that includes payments for milestones and royalties dependent on the net sales.
These contingent liabilities were recorded as opening balance sheet liabilities based on a probability weighted present
value amount at the time of the acquisition. Subsequent to the acquisition, $10 million of such milestones were paid. In
addition, concurrent with the acquisition, Hikma entered into supply and manufacturing contracts with Boehringer.
g. As part of the acquisition of West-Ward Columbus, Hikma agreed to pay to Boehringer contingent consideration of $220
million representing a probability weighted present value of potential liabilities related to two specific products subject
to the achievement of certain US FDA approval milestones, royalties dependent on the net sales for a period of ten years
from the first commercial sale of each product, in addition to exclusivity payments for each calendar quarter in the first
year that certain conditions exist.
Goodwill recognised is expected to be non-deductible for income tax purposes.
The revenue and core operating profit (excluding acquisition, integration, and other costs amounting to $39 million, the
amortisation of the fair value uplift of the inventory of $20 million, and the intangible amortisation of $8 million) of
West-Ward Columbus from the date of the acquisition, that is included in the Group's consolidated statement of
comprehensive income for the year amounted to $193 million and $4 million, respectively.
EUP
On 8 September 2015 Hikma announced that it has agreed to acquire 97.73% of the share capital of EUP from a consortium of
shareholders. EUP is a pharmaceutical manufacturing company specialising in oncology products. The acquisition of EUP will
strengthen Hikma's position in the large and fast growing Egyptian market, add an attractive portfolio and pipeline in the
key strategic areas of oncology and injectables, add a manufacturing facility in Egypt, with both oral and injectable
lines, and leverage Hikma's established market position in Egypt and strong sales and marketing team.
On closing the transaction on Feb 17th 2016, the total fair value of the consideration is deemed to be $38 million. $34
million is cash consideration and the balance of $4 million has been treated as a financial liability and deemed
consideration in accordance with IAS 32 Financial Instruments: Presentation and IFRS 3 revised (2008): Business
Combinations.
The goodwill arising represents the synergies that will be obtained by integrating EUP into the existing business.
The net assets acquired in the transaction and the provisional goodwill arising have been valued by a third party expert as
set out below. These amounts are provisional and subject to change.
Net assets acquired Fair Value
$m
Cash and cash equivalents 1
Inventories 1
Intangible Assets 21 a
Property, plant and equipment 11 b
Financial debt (1)
Income tax provision (1)
Other current liabilities (2)
Deferred tax liability (6) c
Net assets acquired 24
Non-controlling interest 1 d
Goodwill 13
Total consideration 38
Discharged by:
Cash 34
Deferred consideration 4
38
Cash consideration 34
Cash and cash equivalents acquired (1)
Net cash outflow arising on acquisition 33
a. Product rights relating to product licenses and approvals have been valued based on the type of rights acquired. A
discounted cash flow approach has been taken based on excess earnings by product group, applying a discount rate applicable
for any market participant. The product rights have been valued using a model that reflects a market participant point of
view, where assumptions were built based on the expected market performance for these products irrespective of the
acquirer's identity.
b. The property, plant and equipment acquired have been valued by a third party expert at current market value.
c. Taxable temporary differences have been identified by reference to IAS 12 "income tax".
d. The non-controlling interests have been recognised as a proportion of net assets acquired.
Goodwill recognised is expected to be non-deductible for income tax purposes.
The revenue and core operating loss of EUP from the date of the acquisition that is included in the Group's consolidated
statement of comprehensive income for the year amounted to $1 million and $1 million, respectively.
Full period impact of acquisitions:
If the acquisition of West-Ward Columbus and EUP had been completed on the first day of the financial year, the Group's
revenues for the period would have been approximately $989 million and the Group's profit attributable to equity holders of
the parent would have been approximately $58 million. The appropriate additional contribution by entity for the period from
the beginning of the year up to the acquisition date is illustrated in the table below:
Effect on Group's revenues Effect on Group's profit/(loss)
$m $m
West-Ward Columbus 107 1
EUP - (1)
107 -
22. Foreign exchange rates
Period end rates Average rates
30 June 2016 30 June 2015 31 December 2015 H1 2016 H1 2015 FY 2015
USD/EUR 0.9005 0.9011 0.9168 0.8955 0.8949 0.9006
USD/Sudanese Pound 11.2740 6.3171 9.6600 11.2740 6.3171 9.6600
USD/Algerian Dinar 110.3681 98.9472 107.1317 108.0838 95.7360 100.4033
USD/Saudi Riyal 3.7495 3.7495 3.7495 3.7495 3.7495 3.7495
USD/British Pound 0.7467 0.6361 0.6754 0.6976 0.6562 0.6540
USD/Jordanian Dinar 0.7090 0.7090 0.7090 0.7090 0.7090 0.7090
USD/Egyptian Pound 8.8810 7.6278 7.8309 8.4602 7.5700 7.7160
USD/Japanese Yen 103.1779 122.7400 120.3800 111.4201 120.2700 121.0700
USD/Moroccan Dirham 9.7393 9.7228 9.8476 9.7860 9.3910 9.8008
USD/Tunisian Dinar 2.1925 1.9406 2.0321 2.0530 1.9380 1.9623
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Hikma Pharmaceuticals
See all newsREG - Hikma Pharmaceutical - Director/PDMR Shareholding
AnnouncementREG - Hikma Pharmaceutical - Transaction in Own Shares
AnnouncementREG - Hikma Pharmaceutical - Transaction in Own Shares
AnnouncementREG - Hikma Pharmaceutical - Transaction in Own Shares
AnnouncementREG - Hikma Pharmaceutical - Transaction in Own Shares
Announcement