REG - Hikma Pharmaceutical - Interim Results <Origin Href="QuoteRef">HIK.L</Origin> - Part 2
19/08/2015 07:00
- Part 2: For the preceding part double click ID:nRSS4236Wa
279 227 - - - 227 3 230
Cost of equity settled employee share schemes - - 8 8 - - - 8 - 8
Exercise of equity-settled employee share scheme - - (2) (2) - - 2 - - -
Dividends on ordinary shares (note 6) - - (55) (55) - - - (55) (1) (56)
Balance at 31 December 2014 (Audited) 38 (98) 942 882 35 281 (1) 1,197 19 1,216
Profit for the period - - 134 134 - - - 134 1 135
Currency translation loss - (40) - (40) - - - (40) - (40)
Total comprehensive income for the period - (40) 134 94 - - - 94 1 95
Cost of equity settled employee share schemes - - 7 7 - - - 7 - 7
Dividends on ordinary shares (note 6) - - (42) (42) - - - (42) (2) (44)
Balance at 30 June 2015 (Unaudited) 38 (138) 1,041 941 35 281 (1) 1,256 18 1,274
Hikma Pharmaceuticals PLC
Condensed consolidated cash flow statement
Note H1 H1 FY
2015 2014 2014
$m (Unaudited) $m (Unaudited) $m (Audited)
Net cash from operating activities 15 125 200 425
Investing activities
Purchases of property, plant and equipment (37) (43) (91)
Proceeds from disposal of property, plant and equipment 2 - 1
Purchase of intangible assets (16) (13) (27)
Proceeds from disposal of intangible assets - - 1
Investment in financial and other non-current assets - (4) (5)
Investments designated at fair value (20) - -
Acquisition of subsidiary undertakings, net of cash acquired - - (225)
Finance income 1 1 4
Net cash used in investing activities (70) (59) (342)
Financing activities
Increase/(decrease) in collateralised and restricted cash 3 - (1)
Increase in long-term financial debts 505 5 5
Repayment of long-term financial debts (65) (31) (121)
(Decrease)/increase in short-term borrowings (222) 45 241
Increase in obligations under finance leases - 4 -
Dividends paid (42) (34) (55)
Dividends paid to non-controlling shareholders of subsidiaries (2) (1) (1)
Interest paid (18) (16) (38)
Net cash generated from/(used in) financing activities 159 (28) 30
Net increase in cash and cash equivalents 214 113 113
Cash and cash equivalents at beginning of period/year 280 168 168
Foreign exchange translation movements (4) 1 (1)
Cash and cash equivalents at end of period/year 490 282 280
Hikma Pharmaceuticals PLC
Notes to the condensed set of financial statements
1. General information
The financial information for the year ended 31 December 2014 does not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014, 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 2015 has 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 2014 which are prepared in accordance with IFRSs as adopted by the European Union.
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 18 August 2015.
Taxes on income for interim periods are accrued using the effective tax rate that would be applicable to expected total
annual earnings.
Going concern
The Directors believe that the Group is well diversified due to its geographic spread, product diversity and large customer
and supplier base. The Group operates in the generic pharmaceuticals industry which the Directors expect to be insulated
from wider economic conditions.
The $500 million bond issuance was utilised to repay the Bedford acquisition bridge loan of $225 million and the remaining
$58 million of the $180 million syndicate facility. The Group net debt position was $283 million (30 June 2014: $175
million and 31 December 2014: $274 million). Operating cash flow in 2015 was $125 million (30 June 2014: $200 million and
31 December 2014: $425 million). The Group has $824 million (30 June 2014: $330 million and 31 December 2014: $839 million)
of undrawn short term and long term banking facilities, in addition to $170 million (30 June 2014: $143 million and 31
December 2014: $180 million) of unutilised import and export financing limits. These facilities are 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, maturities of long-term debt and the
acquisition of Roxane, show that the Group should be able to operate within the levels of its available facilities. The
acquisition of Roxane will be financed through a combination of cash reserves, existing and additional bank financing.
After making enquiries, 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.
Changes in accounting policies
The same accounting policies, presentation and method of computation are followed in the condensed set of financial
statements as has been applied in the Group's latest annual audited financial statements.
There have been no changes to the accounting standards in the current year that have materially impacted the Group
financial statements.
3. Business and geographical segments
For management purposes, the Group is 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 for the period ended June 30 2015:
Six months ended
30 June 2015 (Unaudited)
Branded Injectables Generics Others Group
$m $m $m $m $m
Revenue 282 344 79 4 709
Cost of sales (146) (129) (31) (3) (309)
Gross profit 136 215 48 1 400
Adjusted segment result 58 146 33 (3) 234
Exceptional items :
- Severance costs (5) - - - (5)
- Proceeds from legal claims - 2 - - 2
Intangible amortisation* (4) (2) - - (6)
Segment result 49 146 33 (3) 225
Adjusted Unallocated corporate expenses (30)
Exceptional items :
- Acquisition related expenses (1)
Unallocated corporate expenses (31)
Adjusted operating profit 204
Operating profit 194
Share of results of associated companies (2)
Finance income 1
Finance expense (23)
Profit before tax 170
Tax (35)
Profit for the period 135
Attributable to:
Non-controlling interest 1
Equity holders of the parent 134
135
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.
3. Business and geographical segments (continued)
Segment assets and Liabilities
30 June 2015 (Unaudited)
Branded Injectables Generics Corporate and Others Group
$m $m $m $m $m
Additions to property, plant and equipment (cost) 15 11 5 - 31
Subsequent re-measurement of acquired property, plant and equipment (net book value) - (1) - - (1)
Additions to intangible assets (cost) 2 9 3 2 16
Subsequent re-measurement of acquired intangible assets - (8) - - (8)
Total property, plant and equipment and intangible assets (net book value) 491 511 80 7 1,089
Depreciation 12 8 4 1 25
Amortisation (including software) 4 4 - - 8
Investment in associates and joint ventures - - - 14 14
Balance sheet
Total assets 1,173 832 159 343 2,507
Total liabilities 494 389 79 271 1,233
3. Business and geographical segments (continued)
Six months ended
30 June 2014 (Unaudited)
Branded Injectables Generics Others Group
$m $m $m $m $m
Revenue 259 346 128 5 738
Cost of sales (130) (131) (33) (3) (297)
Gross profit 129 215 95 2 441
Adjusted segment result 54 142 78 (3) 271
Intangible amortisation* (5) (2) - - (7)
Segment result 49 140 78 (3) 264
Adjusted Unallocated corporate expenses (27)
Exceptional items :
- Acquisition related expenses (1)
Unallocated corporate expenses (28)
Adjusted operating profit 244
Operating profit 236
Share of results of associated companies (2)
Finance income 1
Finance expense (16)
Profit before tax 219
Tax (48)
Profit for the period 171
Attributable to:
Non-controlling interest 2
Equity holders of the parent 169
171
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.
3. Business and geographical segments (continued)
Segment assets and Liabilities30 June 2014 (Unaudited)
Branded Injectables Generics Corporate and Others Group
$m $m $m $m $m
Additions to property, plant and equipment (cost) 19 10 2 - 31
Additions to intangible assets (cost) 3 6 1 - 10
Total property, plant and equipment and intangible assets (net book value) 519 314 52 6 891
Depreciation 12 7 4 1 24
Amortisation (including software) 5 4 - - 9
Investment in associates and joint ventures - - - 20 20
Balance sheet
Total assets 1,266 583 136 78 2,063
Total liabilities 567 202 47 80 896
3. Business and geographical segments (continued)
Year ended
31 December 2014 (Audited)
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
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
Share of results of associated companies (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 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, travel expenses and donations.
3. Business and geographical segments (continued)
Segment assets and Liabilities
31 December 2014 (Audited)
Branded Injectables Generics Corporate and Others Group
$m $m $m $m $m
Additions to property, plant and equipment (cost) 48 31 8 2 89
Acquisition of subsidaries' 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 table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the
goods/services:
H1 2015 H1 2014 FY 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Middle East and North Africa 322 296 633
United States 344 396 763
Europe and Rest of the World 40 45 89
United Kingdom 3 1 4
709 738 1,489
The top selling markets were as below:
H1 2015 H1 2014 FY 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
United States 344 396 763
Saudi Arabia 80 68 146
Algeria 58 40 86
482 504 995
Included in revenues arising from the Generics and Injectables segments are revenues of approximately $86 million (H1 2014:
$121 million and FY 2014: $221 million) which arose from the Group's largest customer which is located in the United
States.
4. Exceptional items and intangible amortisation
Exceptional items are disclosed separately in the condensed consolidated income statement to assist in the understanding of
the Group's underlying performance.
H1 2015 H1 2014 FY 2014
$m $m $m
Severance costs (5) - -
Proceeds from legal claims 2 - -
Acquisition related expenses (1) (1) (11)
Exceptional items included in operating profit (4) (1) (11)
Intangible amortisation* (6) (7) (14)
Exceptional items and intangible amortisation (10) (8) (25)
Tax effect 2 1 4
Impact on profit for the period/ year (8) (7) (21)
*Intangible amortisation comprises the amortisation of intangible assets other than software.
- Severance expenses in 2015 related to restructuring of management teams in MENA.
- Legal claims refers to proceeds received in settlement of an indemnification claim in the US.
- Acquisition related expenses are costs incurred in relation to the acquisition of Roxane laboratories Inc. and
Boehringer Ingelheim "Roxane Inc.", the process of which is ongoing.
In previous periods exceptional items relate to the following:
Acquisition related expenses were costs incurred from acquiring Bedford Laboratories, these expenses were included in the
unallocated corporate expenses and mainly comprise third party consulting services, legal and professional fees.
5. Tax
H1 2015 H1 2014 FY 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Current tax:
Foreign tax 28 54 82
Prior year adjustments 3 - (9)
Deferred tax 4 (6) 7
35 48 80
Tax for the six month period is charged at 20.6% (H1 2014: 21.9%; FY 2014: 22.1%).
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.
6. Dividends
H1 2015 H1 2014 FY 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2014 of 15.0 cents (2013: 13.0 cents) per share 30 26 26
Interim dividend for the year ended 31 December 2014 - - 14
of 7.0 cents per share
Special final dividend for the year ended 31 December 2014 of 6.0 cents (2013: 4.0 cents) per share 12 8 8
Special interim dividend for the year ended 31 December 2014 of 4.0 cents (2013: 3.0 cents) per share - - 7
42 34 55
The proposed interim dividend for the period ended 30 June 2015 is 11.0 cents (30 June 2014: 7.0 cents plus 4.0 cents as a
special dividend, and 31 December 2014: 15.0 cents plus 6.0 cents as a special dividend) per share.
Based on the number of shares in issue at 30 June 2015 (199,343,000), the unrecognised liability is $21,928,000.
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 is shown in
the table below. Adjusted basic earnings per share and adjusted diluted earnings per share are intended to highlight the
adjusted results of the Group before exceptional items, intangible amortisation* and the tax effect of these adjustments. A
reconciliation of the basic and adjusted earnings used is also set out below:
H1 2015 H1 2014 FY 2014
$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 134 169 278
Exceptional items 4 1 11
Intangible amortisation* 6 7 14
Tax effect of adjustments (2) (1) (4)
Adjusted earnings for the purposes of adjusted basic and diluted earnings per share being adjusted net profit attributable to equity holders of the parent 142 176 299
Number Number Number
Number of shares: m m m
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 199 198 198
Effect of dilutive potential Ordinary Shares :
Share-based awards 1 2 2
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share 200 200 200
H1 2015 H1 2014 FY 2014
Earnings per share Earnings per share Earnings per share
Cents Cents Cents
Basic 67.3 85.4 140.4
Diluted 67.0 84.5 139.0
Adjusted basic 71.4 88.9 151.0
Adjusted diluted 71.0 88.0 149.5
*Intangible amortisation comprises the amortisation of intangible assets other than software.
8. Investments in associates and joint ventures
A loss of $2 million, representing the Group's share of the result of Unimark Remedies Limited and Hubei Haosun
Pharmaceutical Co., Ltd, is included in the condensed consolidated income statement.
For the period ended 30 June 2015 For the period ended 30 June 2014 For the year ended 31 December 2014
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 13 16 3 19 22 3 19 22
Share of loss - (2) (2) - (2) (2) - (6) (6)
Balance at end of period/year 3 11 14 3 17 20 3 13 16
9. Inventories
30 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Finished goods 50 87 60
Work-in-progress 36 38 33
Raw and packing materials 158 169 159
Goods in transit 36 15 21
280 309 273
Goods in transit include inventory held at third parties whilst in transit between Group companies.
10. Trade and other receivables
30 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Trade receivables 421 358 384
Prepayments 46 47 42
VAT and sales tax recoverable 14 9 12
Employee advances 3 4 1
484 418 439
11. Other current assets
The Group entered into an agreement with an asset management firm to manage a $20 million portfolio. This investment is
measured at fair value 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 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Trade payables 126 122 129
Accrued expenses 94 82 105
Other payables 14 15 14
234 219 248
13. Other current liabilities
30 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Deferred revenue 26 56 46
Return and free goods provision 50 28 35
Other provisions 31 25 28
107 109 109
14. Current and Non-current financial debts
Short-term financial debts
30 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Bank overdrafts 12 25 19
Import and export financing 110 114 83
Short-term loans 3 3 227
Current portion of long-term loans 40 61 64
165 203 393
Long-term financial debts
30 June 30 June 31 December
2015 2014 2014
$m $m $m
(Unaudited) (Unaudited) (Audited)
Long-term loans 135 298 209
Long-term borrowings (Bonds) 494 - -
Less: current portion of loans (40) (61) (64)
Long-term financial loans 589 237 145
Breakdown by maturity:
Within one year 40 61 64
In the second year 39 63 65
In the third year 22 61 51
In the fourth year 13 41 13
In the fifth year 511 62 9
Thereafter 4 10 7
629 298 209
On the first of April 2015, Hikma Pharmaceutical PLC issued a $500 million 4.25% bond due in April 2020, traded on the GEM
Market of the Irish Stock Exchange.
15. Net cash from operating activities
H1 H1 FY
2015 2014 2014
$m (Unaudited) $m (Unaudited) $m (Audited)
Profit before tax 170 219 362
Adjustments for:
Depreciation, amortisation and impairment of:
Property, plant and equipment 25 24 49
Intangible assets 8 9 23
Loss on disposal of property, plant and equipment - 1 1
Gain on disposal of intangible assets - - (1)
Movement on provisions 1 - 5
Cost of equity-settled employee share schemes 7 4 8
Finance income (1) (1) (4)
Interest and bank charges 23 16 38
Results from associates 2 2 6
Cash flow before working capital 235 274 487
Change in trade and other receivables (57) 19 (16)
Change in other current assets 1 - -
Change in inventories (12) (35) 2
Change in trade and other payables (6) (6) 24
Change in other current liabilities 2 8 7
Cash generated by operations 163 260 504
Income tax paid (38) (60) (79)
Net cash generated from operating activities 125 200 425
16. 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 28.7% at 30 June 2015 (30 June 2014: 28.8% and 31 December 2014:
28.8%). 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 one Hikma Pharmaceuticals PLC board member is also a board
member of Capital Bank - Jordan. Total cash balances at Capital Bank - Jordan were $4.4 million (30 June 2014: $22.3
million and 31 December 2014: $5.7 million). Facilities granted by Capital Bank to the Group amounted to $nil at 30 June
2015 (30 June 2014: $4.6 million and 31 December 2014: $nil). Interest income and expense are at 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 in the period was $0.2 million (H1 2014: $0.2 million and FY 2014: $0.2 million). The amounts due to Jordan
International Insurance Company at 30 June 2015 were $0.1 million (30 June 2014: $0.1 million and 31 December 2014: $nil).
Labatec Pharma: is a related party of the Group because it is owned by the estate of Mr. Samih Darwazah. During the period,
the Group total sales to Labatec Pharma amounted to $0.3 million (H1 2014: $0.2 million and FY 2014: $0.5 million). At 30
June 2015, the amount owed from Labatec Pharma to the Group was $nil (30 June 2014: $0.1 million and 31 December 2014: $
0.1 million).
Jordan Resources & Investments Company: is a related party of the Group because three Board members of the Group are
shareholders in the firm. During the period, fees of $nil (H1 2014: $nil and FY 2014: $nil) were paid for training services
provided.
Arab Bank: is a related party of the Group because one senior management member in Hikma Pharmaceuticals PLC is also a
board member of Arab Bank PLC. Total cash balances at Arab Bank were $95 million (30 June 2014: $76 million and 31 December
2014: $90.4 million). Facilities granted by Arab Bank to the Group amounted to $80.5 million (30 June 2014: $161 million
and 31 December 2014: $115 million). Interest expense/income is at 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 2014: $nil and FY 2014: $0.1 million) were paid. At 30 June
2015, the amount owed to the American University of Beirut from the Group amounted to $nil (30 June 2014: $nil and 31
December 2014: $0.1 million).
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: The Group held a non-controlling interest of 23.1% in the Indian company Unimark Remedies Limited ("Unimark") at
30 June 2015 (30 June 2014: 23.1% and 31 December 2014: 23.1%). During the period, the Group paid an amount of $nil in
relation to a products development agreement (H1 2014: $0.1 million and FY 2014: $2.5 million).
16. Related party balances - continued
Haosun: The Group held a non-controlling interest of 30.1% in Hubei Haosun Pharmaceutical Co., Ltd ("Haosun") at 30 June
2015 (30 June 2014: 30.1% and 31 December 2014: 30.1%). During the period total purchases from Haosun were $0.6 million (H1
2014: $nil and FY 2014: $1.0 million). At 30 June 2015 the amount owed from ("Housen") amounted to $nil (30 June 2014: $0.1
million and 31 December 2014: $nil).
17. Acquisition of a business
On 15 July 2014 Hikma completed its acquisition of the US generic injectables business, Bedford Laboratories ("Bedford")
from Ben Venue Laboratories, Inc. ("Ben Venue"), a member of the Boehringer Ingelheim Group of Companies. The consideration
for the acquisition comprised of an upfront cash payment of $225 million which was paid on 15 July 2014 and contingent cash
payments which are, subject to the achievement of performance-related milestones over a period of five years from closing
the transaction.
Hikma acquired Bedford's product portfolio of 82 products, intellectual property rights, inventories, a strong R&D and
business development pipeline and a number of employees across key business functions. On 17 September 2014 Hikma completed
the acquisition of all the assets of Ben Venue generics injectables manufacturing site in Bedford, Ohio, pursuant to the
exclusivity arrangement entered into with Ben Venue on 28 May 2014. No incremental consideration was payable for the Ben
Venue manufacturing site.
A reduction of $8 million was made to the provisional goodwill recognised on the acquisition of Bedford as a result of the
adjustments to inventory, property plant and equipment and deferred tax made prior to the end of the measurement period on
15 July 2015.
18. Contingent Liabilities
A contingent liability existed at the balance sheet date in respect of external guarantees and letter of credits totalling
$131 million (30 June 2014: $132 million, 31 December 2014: $45 million).
The integrated nature of the Group's worldwide operations, involving significant investment in research and strategic
manufacturing at a limited number of locations, with consequential cross-border supply routes into numerous end-markets,
gives rise to complexity and delay in negotiations with revenue authorities as to the profits on which individual Group
companies are liable to tax.
Disagreements with, and between, revenue 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 revenue 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.
19. Subsequent events
On 28 July 2015 Hikma announced that it has agreed to acquire Roxane Laboratories Inc. and Boehringer Ingelheim Roxane Inc.
(together, "Roxane"), from Boehringer Ingelheim ("Boehringer"). Roxane is a well-established US specialty generics company
with a highly differentiated product portfolio and best-in-class R&D capabilities.
Under the terms of the acquisition, on closing of the transaction Hikma will pay cash consideration of $1.18 billion and
will issue 40 million new Hikma shares to Boehringer (representing an estimated 16.71 per cent. of Hikma's issued share
capital immediately following closing and admission). Based on an agreed issue price for the new Hikma shares of £23.50
per share and the US:GBP exchange rate of 1.56:1, the total consideration payable on closing will be approximately $2.65
billion. Hikma has also agreed to make further cash payments of up to $125 million, contingent to the achievement of
certain performance milestones.
20. Foreign exchange rates
Period end rates Average rates
30 June 2015 30 June 2014 31 December 2014 H1 2015 H1 2014 FY 2014
USD/EUR 0.9011 0.7325 0.8226 0.8949 0.7293 0.7523
USD/Sudanese Pound 6.3171 5.9666 6.2696 6.3171 5.9666 6.0277
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USD/Saudi Riyal 3.7495 3.7495 3.7495
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