Hikma delivers strong 2023 performance and a positive outlook
for 2024
London, 22 February 2024 - Hikma Pharmaceuticals PLC ('Hikma' or 'Group'), the
multinational pharmaceutical company, today reports its audited
results for the year ended 31 December 2023.
Riad Mishlawi, Chief Executive
Officer of Hikma, said:
"Hikma delivered strong growth and made significant progress
in 2023. All three of our businesses grew, delivering double digit
Group revenue and operating profit growth with an impressive core
EBITDA margin of 28%. Our results demonstrate momentum across each
of our three businesses, with new product launches and partnerships
continuing to expand our portfolio, including into more complex
areas such as oncology.
Hikma has a resilient portfolio of diversified global
businesses that are expanding to meet growing regional needs for a
broad range of essential medicines. In 2023 we continued to
invest for the future, strengthening our infrastructure and working
closely with our customers. We have also evolved our strategy,
focusing on execution and leveraging our leading market positions.
I am excited about the many growth opportunities across all three
of our businesses, which underpin my confidence for the
future."
Reported results (statutory)
|
2023
$ million
|
2022
$
million
|
Change
|
Constant
currency1
change
|
Revenue
|
2,875
|
2,517
|
14%
|
15%
|
Operating profit
|
367
|
282
|
30%
|
34%
|
Profit attributable to
shareholders
|
190
|
188
|
1%
|
7%
|
Cashflow from operating
activities
|
608
|
530
|
15%
|
-
|
Basic earnings per share
(cents)
|
86
|
84
|
2%
|
8%
|
Total dividend per share
(cents)
|
72
|
56
|
29%
|
-
|
Core results2 (underlying)
|
2023
$ million
|
2022
$
million
|
Change
|
Constant
currency1
change
|
Core revenue
|
2,875
|
2,517
|
14%
|
15%
|
Core operating profit
|
707
|
596
|
19%
|
20%
|
Core EBITDA3
|
811
|
695
|
17%
|
17%
|
Core profit attributable to
shareholders
|
492
|
406
|
21%
|
23%
|
Core basic earnings per share
(cents)
|
223
|
181
|
23%
|
25%
|
Double digit revenue and profit growth
·
Group revenue up 14% reflecting growth across all
three businesses
· Core
operating profit up 19% at a margin of 24.6%, driven by improving
profitability in our Branded and Generics businesses. Reported
operating profit up 30%, reflecting higher 2022 impairment charges,
but after including the 2023 impact of a $129 million
provision to cover the expected settlement
amount for all opioid related cases in North America
·
Group core EBITDA up 17% to $811 million at a
margin of 28.2%
·
Core profit attributable to shareholders up 21%
and reported profit attributable to shareholders up 1%
·
Cashflow from operating activities up 15% to $608
million primarily reflecting growth in operating profit
·
$149 million invested in R&D (2022: $144
million), growing our pipeline of complex and specialty
products
·
Strong balance sheet with low leverage at 1.2x
net debt to core EBITDA (31 December 2022: 1.5x)
·
Full-year dividend of 72 cents per share, up from
56 cents per share in 2022. The Board intends to progressively
increase Hikma's dividend, with a payout ratio in the range of 30%
to 40% reflecting confidence in the long-term growth prospects for
the Group
Growth in all three businesses
·
Injectables4: revenue up 6% reflecting growth in all three
geographies. Injectables core operating profit increased by
2% with a core operating margin of 36.9% (2022: 38.3%). Revenue and
operating losses in our 503B compounding business are now reported
in our Others segment4
·
Branded: revenue up 3% (up 6% in constant
currency) reflecting a good performance across the majority of our
markets, offsetting the impact of halting our operations in Sudan.
Core operating profit growth of 16% and a core operating margin of
23.8% (2022: 21.1%)
·
Generics: revenue up 39% and core operating
profit up 86% with a core operating margin of 20.5% (2022: 15.3%),
reflecting good recovery in the base business and strong
contribution from the authorised generic of sodium
oxybate
Strategic updates
·
Riad Mishlawi appointed CEO in September 2023,
with Dr Bill Larkins appointed President of Injectables
·
Added differentiated products to our MENA
portfolio and enhanced our pipeline through a series of exclusive
licensing agreements
·
Expanded our Injectables capacity, adding new
lines and technologies
·
Strengthened our contract manufacturing pipeline
in Generics with several new contract wins
·
Completed the acquisition of part of the Akorn
business through a bankruptcy process for $98 million, including
manufacturing equipment and portfolio and pipeline products that
will support our US businesses
·
Halted operations in Sudan, which represented
less than 3% of Group revenue in 2022, as a result of the ongoing
conflict in the country. This resulted in $83 million of impairment
and costs
2024 Group outlook
·
Group revenue growth in the range of 4% to
6%
·
Group core operating profit in the range of $660
million to $700 million
Further information:
A pre-recorded presentation will
be available at www.hikma.com at 07:00 GMT. Hikma will also hold a live Q&A webinar at
12:00pm GMT, and a recording will be made available on the
Company's website.
A link to register for the webinar
can be found at the following link:
https://www.lsegissuerservices.com/spark/HikmaPharmaceuticals/events/dab4c916-711a-4167-82ae-d842bd1e7366
For further information please
contact Deepa Jadeja - djadeja@hikma.com.
Hikma (Investors):
Susan Ringdal
EVP, Strategic Planning and Global
Affairs
|
+44 (0)20 7399 2760/ +44 (0)7776
477050
|
Guy Featherstone
Associate Director, Investor
Relations
|
+44 (0)20 3892 4389/ +44 (0)7795
896738
|
Layan Kalisse
Senior Associate, Investor
Relations
|
+44 (0)20 7399 2788/ +44 (0)7970
709912
|
Teneo (Press):
Charles Armitstead / Rob
Yates
+44 (0)7703 330 269/ +44 (0)7715
375443
About Hikma:
Hikma helps put better health
within reach every day for millions of people around the world. For
more than 45 years, we've been creating high-quality medicines and
making them accessible to the people who need them. Headquartered
in the UK, we are a global company with a local presence across
North America, the Middle East and North Africa (MENA) and Europe,
and we use our unique insight and expertise to transform
cutting-edge science into innovative solutions that transform
people's lives. We're committed to our customers, and the people
they care for, and by thinking creatively and acting practically,
we provide them with a broad range of branded and non-branded
generic medicines. Together, our 9,100 colleagues are helping to
shape a healthier world that enriches all our communities. We are a
leading licensing partner, and through our venture capital arm, are
helping bring innovative health technologies to people around the
world. For more information, please visit:
www.hikma.com
Hikma Pharmaceuticals PLC (LSE:
HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY) (LEI:549300BNS685UXH4JI75)
(rated BBB-/stable S&P, BBB-/positive Fitch)
STRATEGIC REVIEW
In 2023, we continued to deliver
on our purpose of making high quality medicines accessible to those
that need them. All three of our businesses grew, driven by
new launches, partnerships and a focus on delivering more from our
existing portfolio. Riad Mishlawi was appointed CEO during the year
and under this new leadership, and with a refreshed, ambitious
strategic focus, we are well placed for our next chapter of
growth.
Good growth in all three businesses
At a group level, revenue
increased 14% versus the prior year, with an increase in core
operating profit of 19%. We delivered Group core EBITDA of
$811 million at a margin of 28.2%.
Injectables
Our global Injectables business,
which manufactures and supplies generic injectables medicines to
hospitals across North America, Europe and MENA, grew revenue in
2023 by 6% at a core operating margin of 36.9%. We are the
third largest generic injectable company by volume in the
US5 and have a portfolio of over 150 products.
During the year, Dr Bill Larkins was appointed to run this
business, following Riad Mishlawi's appointment as Group
CEO.
We continued to launch new
products across our markets, including 17 in the US and we were
able to supply into shortage situations in the US and key European
markets, leveraging the breadth of our portfolio. We
experienced some supply and capacity constraints in the third
quarter that are now fully resolved. New high speed lines in New
Jersey and Portugal became fully operational during the second half
of the year, strengthening our ability to capture growth
opportunities going forward.
In Europe, as well as stepping
into shortage situations, we are pleased with the continued
progress in our newer markets. In MENA, we are performing
very well, with our in-licenced biosimilar products and our own
generic injectables both contributing to growth and helping us to
offset the impact of halting of operations in Sudan.
Reflecting our intention to drive
growth in 503B compounding, we have reallocated this business to
the 'Others' segment. This reallocation will help to ensure a clear
focus on its development as we continue to build this business over
the next few years.
Branded
Our Branded business, which
supplies branded generics and in-licensed patented products across
the MENA region, grew revenue 3% and achieved an impressive 23.8%
core operating margin. We have also recently become the
second largest pharmaceutical company in the MENA region by
sales6.
These strong results were achieved
despite the difficult decision to halt operations in Sudan in April
due to the ongoing conflict. We also faced some currency headwinds
due to the devaluation of the Egyptian Pound. Excluding this,
on a constant currency basis, Branded revenue growth was 6%.
The strong margin performance reflects the improvement in product
mix as we launch and grow products used to treat chronic illnesses,
with a noteworthy performance from our oncology
portfolio.
Generics
Generics, which supplies oral and
other non‑injectable generic and specialty products to the US retail
market, had an exceptionally strong year, growing revenue 39% in
2023 at a core operating margin of 20.5%.
Our performance, particularly at
the profit level, was driven by sales of the authorised generic of
sodium oxybate, which we launched at the start of the year. The
initial high gross margin for this product was lower in the second
half and will reduce again in 2024 due to the terms of our
settlement agreement. Generics' base business saw an easing
of the significant price erosion experienced in 2022, as well as
good contract wins across the portfolio. We have also launched
several new products.
We continue to invest in our
specialty portfolio and in 2023 saw good momentum for Kloxxado, our
8mg naloxone nasal spray. Contract manufacturing is also
increasingly important to our Generics strategy and we had good
contract wins during the year which will provide a steady revenue
contribution and leverage our Columbus manufacturing
facility.
Our growth strategy
Following the appointment of Riad
Mishlawi as CEO, we have evolved our strategy to enhance our focus
on making the most of available opportunities while driving
continued operational efficiencies. Our strategic focus is
centred around three core pillars: Strive for excellence, Diversify
and differentiate and People and responsibility.
Strive for excellence: We
already have a broad product portfolio, strong commercial
capabilities, high-quality manufacturing facilities and an
extensive network of global partners. We want to leverage
these strengths to make sure we are capturing all the opportunities
available to us. As we grow, we will continue to expand our
manufacturing capabilities, optimise operational efficiencies and
invest in new technologies. We will also leverage our
capacity for contract manufacturing. We will maximise the
potential of our products by deploying a more targeted commercial
approach with customers to ensure we make full use of our world
class portfolio.
Diversify and differentiate: Expanding our portfolio across our businesses and global
markets continues to be a fundamental priority. Although
generic medicine prices erode as competition increases, our
pipeline of new products enables us to mitigate this while also
benefitting our customers. We are expanding our R&D
capabilities and investing in new projects to ensure that our
pipeline reflects the future needs of our customers. This is
complemented by strategic partnerships and acquisitions that bring
complex products we are not able to develop in-house and enable us
to partner with others to bring novel products to market. We also
see potential to expand selectively into adjacent markets and
businesses, for example via our sterile compounding business in the
US, or portfolio expansion in Canada and new countries in
Europe.
People and responsibility: Our people are the cornerstone of our company and without
them, our products wouldn't be developed and launched, our plants
wouldn't run and our customers wouldn't receive the vital medicines
they need. Our culture is one of progress and belonging and we are
cultivating this to help empower our people to find the best way of
bringing success to Hikma and fulfilling the needs of our
customers. From recruiting and retaining the best talent, to
providing the best training we can, as well as fostering a
workplace where everyone feels included and can perform at their
best, our people will remain a central strength of
Hikma.
This year, a new Leadership
Council has been formed, to provide support to our Executive
Committee and improve communications among leaders at every level
of our organisation. This council is made up of twelve senior
leaders across various disciplines and geographies.
Our broader responsibility agenda
will now be embedded within our corporate strategy. While we
have always been guided by acting responsibly, this should go
hand-in-hand with how we go to market. Access to medicine,
for example, is a material sustainability topic, and is central to
our purpose. In 2023 we continued to increase the size of our
medicine donation programme, donating $4.9 million worth of
medicine (calculated using COGS), signifying our ambition to
continue to expand disaster relief, support for vulnerable
populations and emergency response. Managing our use of energy and
water is important for minimising our impact on the environment and
also ensures we are operating as efficiently as possible.
We also continue to engage our procurement
community and key suppliers to elevate awareness of relevant
sustainability themes. Our outreach included suppliers that make up
around 45% of Hikma's Scope 3 footprint. Finally, our focus
on trust and quality is central to being a reliable supplier and
minimising the risks around us. Across all of our
sustainability topics, we work to ensure we are aligned with
evolving regulations and reporting requirements.
Board change
Patrick Butler will step down as a
Non-Executive Director, from close of business on 29 February 2024.
This follows the disclosure in our 2022 Annual Report that, after
standing down as Senior Independent Director and Chair of the
Nomination and Governance Committee at the 2023 AGM, Patrick would
stay on the Board as a non-independent, Non-Executive Director for
up to one year, to aid the transition to a new CEO and support the
transition of responsibilities to Victoria Hull as Hikma's new
Senior Independent Director, stepping down no later than the AGM in
2024.
Subsequent event
On 1 February 2024, the
Group reached an agreement in principle to resolve the opioid
related cases brought against Hikma Pharmaceuticals USA Inc. by US
states, their subdivisions, and tribal nations. These cases
represent the vast majority of cases brought against Hikma related
to the manufacture and sale of prescription opioid medications. The
agreed upon settlement is not an admission of wrongdoing or legal
liability. The Group booked a total provision of $129 million to
cover the expected settlement amount for all related cases in North
America. The provision is considered an adjusting post balance
sheet event and is recognised in the consolidated financial
statements for the year ended 31 December 2023.
2024 Outlook
We are confident that our strategy
will continue to deliver growth in 2024.
We expect Group revenue to grow in
the range of 4% to 6% and for core operating profit to be in the
range of $660 million to $700 million. This is supported by all
three of our businesses.
We expect Injectables revenue to
grow in the range of 6% to 8%. We expect core operating margin to
be in the range of 36% to 37%. We will
leverage our increased capacity to capture growth opportunities,
launch new products across our markets and continue to build
momentum in new markets.
We expect Branded revenue to grow
in the mid to high single-digits in constant currency, or
low-single digits on a reported basis, and for reported core
operating profit to be broadly in line with 2023.
Our focus on building our portfolio of medicines
used for chronic illnesses will continue to drive further momentum
in this business.
We expect Generics revenue to grow
in the range of 3% to 5%. We expect core operating margin to be in
the mid-teens. We expect to deliver a good
performance from our base business, supported by new launches and
the continued strong performance of the authorised generic of
sodium oxybate, albeit at a reduced margin due to the royalties
payable. While these higher royalties will
create a profit headwind, our outlook demonstrates the robustness
of this business.
We expect Group core net finance
expense to be around $91 million and the core effective tax rate to
be in the range of 22% to 23%.
We expect Group capital
expenditure to be in the range of $160 million to $180
million.
FINANCIAL REVIEW
The financial review set out below
summarises the reported and core7 performance of the
Hikma Group and our three main business segments, Injectables,
Branded and Generics for the year ended 31 December
2023.
Group
|
2023
$ million
|
2022
$
million
|
Change
|
Constant
currency
change
|
Revenue
|
2,875
|
2,517
|
14%
|
15%
|
Gross profit
|
1,390
|
1,238
|
12%
|
13%
|
Gross margin
|
48.3%
|
49.2%
|
(0.9)pp
|
(0.9)pp
|
Core gross profit
|
1,407
|
1,265
|
11%
|
12%
|
Core gross margin
|
48.9%
|
50.3%
|
(1.4)pp
|
(1.2)pp
|
Operating profit
|
367
|
282
|
30%
|
34%
|
Operating margin
|
12.8%
|
11.2%
|
1.6pp
|
1.9pp
|
Core operating profit
|
707
|
596
|
19%
|
20%
|
Core operating margin
|
24.6%
|
23.7%
|
0.9pp
|
1.0pp
|
Core EBITDA
|
811
|
695
|
17%
|
17%
|
Core EBITDA margin
|
28.2%
|
27.6%
|
0.6pp
|
0.5pp
|
Group revenue was up 14%
reflecting growth in all three business. Group gross margin
declined slightly primarily driven by shifting product and
geographic mix in the Injectables business.
Group operating expenses were
$1,023 million (2022: $956 million). Excluding adjustments
related to the amortisation of intangible
assets (other than software) of $88 million (2022: $92 million) and
exceptional items and other adjustments of $235 million (2022: $195
million), Group core operating expenses were $700 million
(2022: $669 million).
Selling, general and
administrative (SG&A) expenses were $767 million (2022: $615
million). This includes a provision of $129 million related to an
agreement in principle and provisions to resolve outstanding
opioid-related cases in North America, which is considered an
exceptional item. Core SG&A expenses were $544 million (2022:
$509 million), up 7%, primarily reflecting investment in sales and
marketing in the US and MENA.
Research and development (R&D)
expenses were $149 million (2022: $144 million), representing 5% of
Group core revenue (2022: 6%), as we continue to invest in adding
more complex and differentiated products to our pipeline and
expanding our portfolios across our markets.
Other net operating expenses were
$75 million (2022: $192 million) primarily reflecting the impairment charge related to halting our operations in
Sudan. Core other net operating expenses were $4 million
(2022: $11 million), primarily comprising foreign exchange-related
costs.
The increase in core operating
profit by 19% and core operating margin to 24.6% were driven by the
strong performance of both Generics and Branded. Reported operating
profit grew 30%, reflecting lower reported operating profit in 2022
resulting from higher 2022 impairment charges, but after including
the 2023 impact of a $129 million provision to cover the expected
settlement amount for all opioid related cases in North
America.
Group revenue by business segment
|
2023
$ million
|
2022
$
million
|
Injectables
|
1,203
|
42%
|
1,140
|
45%
|
Branded
|
714
|
25%
|
691
|
27%
|
Generics
|
937
|
33%
|
672
|
27%
|
Others8
|
21
|
1%
|
14
|
1%
|
Total
|
2,875
|
|
2,517
|
|
Group revenue by region
|
2023
$ million
|
2022
$
million
|
North
America9
|
1,749
|
61%
|
1,433
|
57%
|
MENA
|
909
|
32%
|
866
|
34%
|
Europe and
ROW9
|
217
|
8%
|
218
|
9%
|
Total
|
2,875
|
|
2,517
|
|
Injectables
|
2023
$ million
|
202210
$
million
|
Change
|
Constant
currency change
|
Revenue
|
1,203
|
1,140
|
6%
|
6%
|
Gross profit
|
655
|
625
|
5%
|
5%
|
Gross margin
|
54.4%
|
54.8%
|
(0.4)pp
|
(0.3)pp
|
Core gross profit
|
657
|
651
|
1%
|
1%
|
Core gross margin
|
54.6%
|
57.1%
|
(2.5)pp
|
(2.4)pp
|
Operating profit
|
358
|
354
|
1%
|
2%
|
Operating margin
|
29.8%
|
31.1%
|
(1.3)pp
|
(1.0)pp
|
Core operating profit
|
444
|
437
|
2%
|
2%
|
Core operating margin
|
36.9%
|
38.3%
|
(1.4)pp
|
(1.2)pp
|
Injectables revenue grew 6% in
2023, reflecting good growth in all three geographies, benefitting
from the breadth of our global portfolio and advanced manufacturing
capabilities. This helped to fully offset loss of sales from
halting our operations in Sudan.
In North America11 we
are benefiting from good demand for our broad product portfolio,
including for products in short supply, recent launches and a full
contribution from the acquisitions of Custopharm and Teligent's
Canadian assets. This more than offset increased competition on
certain products.
In Europe and rest of the world
(ROW) we are delivering good growth across all of our markets,
benefitting from our growing portfolio of products as well as our
short supply chain and lead times, enabling us to respond to
shortages in Germany. We continue to make progress in new markets
including France, Spain and the UK.
In MENA we achieved strong growth
driven by good demand for our portfolio across most of our markets,
including for our biosimilar products as we continue to launch into
new markets.
Core gross profit grew 1% to $657
million and core gross margin was 54.6%, reflecting changes in
geographic and product mix and some inflationary
pressure.
Injectables operating profit,
which includes a $14 million impairment charge and costs related to
halting our operations in Sudan, grew 1%. Injectables core
operating profit grew 2% and core operating margin was 36.9%. This
reflects the change in gross profit, offset by good control of
costs.
During the year, the Injectables
business had 28 launches in North America, 25 in MENA and 67 in
Europe and ROW. We submitted 55 filings to
regulatory authorities across all markets. We further developed our
portfolio through new licensing agreements.
Branded
|
2023
$ million
|
2022
$
million
|
Change
|
Constant
currency change
|
Revenue
|
714
|
691
|
3%
|
6%
|
Gross profit
|
351
|
350
|
0%
|
2%
|
Gross margin
|
49.2%
|
50.7%
|
(1.5)pp
|
(1.8)pp
|
Core gross profit
|
366
|
350
|
5%
|
8%
|
Core gross margin
|
51.3%
|
50.7%
|
0.6pp
|
0.6pp
|
Operating profit
|
95
|
136
|
(30)%
|
(24)%
|
Operating margin
|
13.3%
|
19.7%
|
(6.4)pp
|
(5.7)pp
|
Core operating profit
|
170
|
146
|
16%
|
19%
|
Core operating margin
|
23.8%
|
21.1%
|
2.7pp
|
2.6pp
|
Our Branded business grew revenue
3% on a reported basis and 6% in constant currency. This reflects a
good performance across most of our markets, enabling us to fully
offset the loss of sales resulting from halting our operations in
Sudan. We also saw strong demand for medicines focused on chronic
illnesses, particularly our growing oral oncology
portfolio.
Core gross profit grew and core
gross margin improved to 51.3%, reflecting an improvement in
product mix, driven by our focus on building a portfolio of
treatments for chronic illnesses.
Reported operating profit, which
includes a $69 million impairment charge and cost in relation to
halting our operations in Sudan, declined 30%. Core operating
profit grew 16% and core operating margin expanded to 23.8%. This
reflects the improvement in core gross profit, which more than
offset the negative foreign exchange impact related to the currency
devaluation in Egypt. On a reported basis, operating profit was
down due to the impairment we took on our Sudanese business where
we are unable to operate due to the ongoing conflict.
During the year,
the Branded business had 32 launches and
submitted 47 filings to regulatory authorities.
Revenue from in-licensed products represented 29% of Branded
revenue (2022: 29%)12.
Generics
|
2023
$ million
|
2022
$
million
|
Change
|
Revenue
|
937
|
672
|
39%
|
Gross profit
|
387
|
265
|
46%
|
Gross margin
|
41.3%
|
39.4%
|
1.9pp
|
Core gross profit
|
387
|
266
|
45%
|
Core gross margin
|
41.3%
|
39.6%
|
1.7pp
|
Operating profit
|
147
|
(117)
|
226%
|
Operating margin
|
15.7%
|
(17.4)%
|
33.1pp
|
Core operating profit
|
192
|
103
|
86%
|
Core operating margin
|
20.5%
|
15.3%
|
5.2pp
|
Revenue in our Generics business
grew 39% in 2023, driven by good volume growth in our base
business, an improved pricing environment, and an exceptionally
strong contribution from the launch of the authorised generic of
sodium oxybate.
The increase in Generics core
gross profit and margin expansion to 41.3% was primarily a result
of improved product mix and the strong profitability of the
authorised generic of sodium oxybate in the first six months of the
year. Royalties payable on this product increased in the
second half due to the terms of our settlement
agreement.
Generics core operating profit was
up 86%, reflecting growth in gross profit. This strong profit
contribution enabled us to invest back into this business,
particularly in sales and marketing, as we continue to build our
specialty business, and in R&D. Core operating margin was
20.5%.
In 2023, the Generics business
launched five products and submitted five filings to regulatory
authorities.
Other businesses
Other businesses, which now
includes our 503B compounding business, as well as Arab Medical
Containers (AMC), a manufacturer of plastic specialised medicinal
sterile containers, and International Pharmaceuticals Research
Centre (IPRC), which conducts bio-equivalency studies, contributed
revenue of $21 million in 2023 (2022: $14
million13) with an operating loss of $9 million (2022:
$6 million loss). We are making good progress in growing our
compounding business and continue to invest in building our
manufacturing and commercial capabilities.
Research and development
Our investment in R&D and
business development enables us to continue expanding the Group's
product portfolio. During 2023, we had 157 new launches and
received 128 approvals. To ensure the continuous development of our
product pipeline, we submitted 107 regulatory filings.
|
2023
submissions14
|
2023
approvals14
|
2023
launches14
|
Injectables
|
55
|
87
|
120
|
North America
|
27
|
31
|
28
|
MENA
|
21
|
23
|
25
|
Europe & ROW
|
7
|
33
|
67
|
Branded
|
47
|
37
|
32
|
Generics
|
5
|
4
|
5
|
Total
|
107
|
128
|
157
|
Net finance expense
|
2023
$ million
|
2022
$
million
|
Change
|
Constant
currency change
|
Finance income
|
7
|
29
|
(76)%
|
(76)%
|
Finance expense
|
95
|
81
|
17%
|
18%
|
Net finance expense
|
88
|
52
|
69%
|
70%
|
Core finance income
|
7
|
3
|
133%
|
133%
|
Core finance expense
|
90
|
77
|
17%
|
17%
|
Core net finance expense
|
83
|
74
|
12%
|
12%
|
Core net finance expense increased
to $83 million (2022: $74 million), reflecting the increase in
interest rates during 2023.
We expect core net finance expense
to be around $91 million in 202415.
Profit before tax
Reported profit before tax
increased to $281 million (2022: $233 million), primarily due to
the good growth in all three businesses, partially offset by the
opioid legal settlement provision. Excluding exceptional items and
other adjustments, core profit before tax was $626 million (2022:
$520 million), up 20%.
Tax
The Group incurred a reported tax
expense of $89 million (2022: $42 million) and a reported effective
tax rate of 31.7% (2022: 18.0%). Excluding exceptional items and
other adjustments, Group core tax expense was $131 million (2022:
$111 million). The core effective tax rate was 20.9% (2022:
21.3%).
We expect the Group core effective
tax rate to be in the range of 22% to 23% in 2024.
Profit attributable to shareholders
Profit attributable to
shareholders was $190 million (2022: $188 million). Core profit attributable to
shareholders increased by 21%
to $492
million (2022: $406 million).
Earnings per share
|
2023
|
2022
|
Change
|
Constant
currency change
|
Basic earnings per share
(cents)
|
86
|
84
|
2%
|
8%
|
Core basic earnings per share
(cents)
|
223
|
181
|
23%
|
25%
|
Diluted earnings per share
(cents)
|
85
|
84
|
2%
|
8%
|
Core diluted earnings per share
(cents)
|
221
|
180
|
23%
|
25%
|
Weighted average number of
Ordinary Shares for the purposes of basic earnings
|
220,862,103
|
223,728,472
|
-
|
-
|
Weighted average number of
Ordinary Shares for the purposes of diluted earnings
|
222,368,714
|
224,908,809
|
-
|
-
|
The increase in core earnings per
share reflects the increase in profit attributable to shareholders
as a result of the strong performance in all three
businesses.
Dividend
The Board is recommending a final
dividend of 47 cents per share (2022: 37 cents per share) bringing
the total dividend for the full year to 72 cents per share (2022:
56 cents per share). This equates to a payout ratio of around
32%, which is above our historical range of 20% to 30%. We intend
to progressively increase our dividend, with a payout ratio in the
range of 30% to 40%, reflecting the Board's confidence in the
long-term growth prospects for the Group. The proposed dividend
will be paid on 3 May 2024 to eligible shareholders on the register
at the close of business on 22 March 2024, subject to approval at
the Annual General Meeting on 25 April 2024.
Net cash flow, working capital and net debt
The Group generated operating cash
flow of $608 million (2022: $530 million). This change primarily
reflects the increase in operating profit.
Group working capital days were
243 at 31 December 2023. Compared to the position on 31 December
2022, Group working capital days decreased by 8 days from 251 days,
due primarily to an improvement in receivable days.
Capital expenditure was $169
million (2022: $138 million). In the US, $46 million was spent on
upgrades, new technologies and capacity expansion across our Cherry
Hill, Dayton, and Columbus sites. In MENA, $96 million was spent
strengthening and expanding manufacturing capabilities, including
two ongoing greenfield Injectables production sites in Algeria and
Morocco, expanding our site in Algeria and a new land purchase in
Saudi Arabia. In Europe, we spent $27 million enhancing our
manufacturing capabilities, including new filling lines in Portugal
and Italy and adding lyophilisation capacity in Portugal. We expect
Group capital expenditure to be in the range of $160 million to
$180 million in 2024.
The Group's total debt was $1,191
million at 31 December 2023 (31 December 2022: $1,283
million).
The Group's cash balance at 31
December 2023 was $215 million (31
December 2022: $270 million).
The Group's net debt (excluding
co-development agreements and contingent liabilities) was $976
million at 31 December 2023 (31 December 2022: $1,013 million). We
continue to have a healthy balance sheet, with a net debt to core
EBITDA ratio of 1.2x (31 December 2022: 1.5x).
Balance sheet
Net assets at 31 December 2023
were $2,209 million (31 December 2022: $2,148 million). Net current
assets were $761 million (31 December 2022: $922
million).
The Board
The Board of Directors that served
during the twelve-month period to 31 December 2023 and their
respective responsibilities can be found on the Leadership team
section of www.hikma.com.
Cautionary statement
This preliminary announcement has
been prepared solely to provide additional information to the
shareholders of Hikma and should not be relied on by any other
party or for any other purpose.
Definitions
We use a number of non-IFRS
measures to report and monitor the performance of our business.
Management uses these adjusted numbers internally to measure our
progress and for setting performance targets. We also present these
numbers, alongside our reported results, to external audiences to
help them understand the underlying performance of our business.
Our core numbers may be calculated differently to other
companies.
Adjusted measures are not
substitutable for IFRS results and should not be considered
superior to results presented in accordance with IFRS.
Core results
Reported results represent the
Group's overall performance. However, these results can
include one-off or non-cash items which are excluded when assessing
the underlying performance of the Group. Our core results
exclude the exceptional items and other adjustments set out in Note
5 in this release.
Group gross profit
|
2023
$million
|
2022
$million
|
Core gross profit
|
1,407
|
1,265
|
Provision against inventory
related to halted operations in Sudan
|
(17)
|
-
|
Unwinding of acquisition related
inventory step-up
|
-
|
(27)
|
Reported gross profit
|
1,390
|
1,238
|
Group operating profit
|
2023
$million
|
2022
$million
|
Core operating profit
|
707
|
596
|
Provision related to expected
North America opioid legal settlement
|
(129)
|
-
|
Impairment and cost related to
halted operations in Sudan
|
(83)
|
-
|
Intangible assets amortisation
other than software
|
(88)
|
(92)
|
Reorganisation costs
|
-
|
(14)
|
Impairment of property, plant and
equipment and right-of-use-assets
|
(8)
|
(80)
|
Impairment of intangible
assets
|
(32)
|
(101)
|
Unwinding of acquisition related
inventory step-up
|
-
|
(27)
|
Reported operating profit
|
367
|
282
|
Constant currency
As the majority of our business is
conducted in the US, we present our results in US dollars.
For both our Branded and Injectable businesses, a proportion of
their sales are denominated in a currency other than the US
dollar. In order to illustrate the underlying
performance of these businesses, we include information on our
results in constant currency.
Constant currency numbers in 2023
represent reported 2023 numbers translated using 2022 exchange
rates, excluding price increases in the business resulting from the
devaluation of the Egyptian and Sudanese pound and excluding the
impact from hyperinflation accounting.
Core EBITDA
Core EBITDA is earnings before
interest, tax, depreciation, amortisation, impairment charges and
unwinding of acquisition related inventory step-up, adjusted for
exceptional items and other adjustments.
|
2023
$ million
|
2022
$
million
|
Reported operating profit
|
367
|
282
|
Depreciation and impairment
charges/reversals in relation to property, plant and
equipment
|
110
|
157
|
Amortisation and impairment
charges/reversals in relation to intangible assets
|
131
|
202
|
Depreciation and impairment
charges/reversals in relation to right-of-use assets
|
18
|
13
|
Unwinding of acquisition related
inventory step-up
|
-
|
27
|
Provision related to expected
North America opioid legal settlement
|
129
|
-
|
Provision against inventory
related to halted operations in Sudan
|
17
|
-
|
Impairment charge on financial
assets
|
29
|
-
|
Impairment charge on other current
assets
|
2
|
-
|
Cost from halted operations in
Sudan
|
8
|
-
|
Reorganisation costs
|
-
|
14
|
Core EBITDA
|
811
|
695
|
Working capital days
We believe Group working capital
days provides a useful measure of the Group's working capital
management and liquidity. Group working capital days are
calculated as Group receivable days plus Group inventory days, less
Group payable days. Group receivable days are calculated as
Group trade receivables x 365, divided by 12 months Group revenue.
Group inventory days are calculated as Group inventory x 365,
divided by 12 months Group cost of sales. Group payable days are
calculated as Group trade payables x 365, divided by 12 months
Group cost of sales.
Group net debt
We believe Group net debt is a
useful measure of the strength of the Group's financing
position. Group net debt is calculated as Group total debt
less Group total cash. Group total debt excludes
co-development agreements and contingent
liabilities.
Group net debt
|
31 Dec
2023
$ million
|
31
Dec 2022
$
million
|
Short-term financial
debts
|
(150)
|
(139)
|
Short-term leases
liabilities
|
(11)
|
(9)
|
Long-term financial
debts
|
(975)
|
(1,074)
|
Long-term leases
liabilities
|
(55)
|
(61)
|
Total debt
|
(1,191)
|
(1,283)
|
Cash and cash
equivalents
|
205
|
270
|
Restricted cash
|
10
|
-
|
Net debt
|
(976)
|
(1,013)
|
Forward looking statements
This announcement contains certain
statements which are, or may be deemed to be, "forward looking
statements" which are prospective in nature with respect to Hikma's
expectations and plans, strategy, management objectives, future
developments and performance, costs, revenues and other trend
information. All statements other than statements of
historical fact may be forward-looking statements. Often, but
not always, forward-looking statements can be identified by the use
of forward looking words such as "aims", "anticipates", "believes", "budget", "estimates", "expects", "forecasts", "goals", "intends", "objectives", "outlook", "plan", "project", "risks", "seek" "scheduled", "targets" or words or terms of similar
substance or the negative thereof, as well as variations of such
words and phrases or statements that certain actions, events or
results "could",
"may", "might", "probably", "should", "will" or "would" be taken, occur or be
achieved.
By their nature, forward looking
statements are based on current expectations and projections about
future events and are therefore subject to assumptions, risks and
uncertainties that are beyond Hikma's ability to control or
estimate precisely and which could cause actual results or events
to differ materially from those expressed or implied by the forward
looking statements. In particular, these
include statements relating to future actions, product
authorisations, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of
contingencies such as legal proceedings, dividend payments and
financial results. Where included, such statements have been made
by or on behalf of Hikma in good faith based upon the knowledge and
information available to the Directors on the date of this
announcement. Accordingly, no assurance can be given that any
particular expectation will be met and Hikma's shareholders are
cautioned not to place undue reliance on the forward-looking
statements. 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.
Other than in accordance with its
legal or regulatory obligations (including under the UK Market
Abuse Regulation and the UK Listing Rules and the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority), Hikma does not undertake to update the forward looking
statements contained in this announcement to reflect any changes in
events, conditions or circumstances on which any such statement is
based or to correct any inaccuracies which may become apparent in
such forward looking statements. Except as expressly provided
in this announcement, no forward looking or other statements have
been reviewed by the auditors of Hikma. Any forward looking
statement above and all subsequent oral or written forward looking
statements attributable to Hikma or any of its members, directors,
officers or employees or any person acting on their behalf are
expressly qualified in their entirety by this cautionary statement.
Past share performance cannot be relied on as a guide to future
performance. Nothing in this announcement should be construed as a
profit forecast.
Neither the content of Hikma's
website nor any other website accessible by hyperlinks from Hikma's
website are incorporated in, or form part of, this
announcement.
Principal risks and uncertainties
The Group faces risks from a range
of sources that could have a material impact on our financial
commitments and ability to trade in the future. The principal risks
are determined via robust assessment considering our risk context
by the Board of Directors with input from executive management. The
principal risks facing the company have not materially changed over
the year, although the risks and uncertainties of operating in the
complex and diverse MENA region were highlighted by the conflict in
Sudan, ongoing economic challenges in Egypt, and raised
geopolitical tensions. In contrast, the agreement in principle to
resolve the majority of the opioid related cases brought against
the company has reduced exposure to litigation. The principal risks
are set out in the 2023 annual report on pages 71 - 74, which will
be available in March 2024. The Board recognises that certain risk
factors that influence the principal risks are outside of the
control of management. The Board is satisfied that the principal
risks are being managed appropriately and consistently with the
target risk appetite. The set of principal risks should not be
considered as an exhaustive list of all the risks the Group
faces.
1 Constant currency numbers in 2023 represent reported 2023
numbers translated using 2022 exchange rates, excluding price
increases in the business resulting from the devaluation of the
Egyptian and Sudanese pound and excluding the impact from
hyperinflation accounting.
2 Core results throughout the document are presented to show
the underlying performance of the Group, excluding the exceptional
items and other adjustments set out in Note 5 of this release. Core
results are a non-IFRS measure and a reconciliation to reported
IFRS measures is provided on page 15.
3 Core
EBTIDA is earnings before interest, tax,
depreciation, amortisation, impairment charges and unwinding of
acquisition related inventory step-up, adjusted for exceptional
items and other adjustments. Core EBITDA
is a non-IFRS measure, see page 16 for a reconciliation to reported
IFRS results.
4 During 2023, the Group has revised its Injectables operating
segment. Previously, the 503B compounding business was reported
under the Injectables segment and is now included within the Others
segment. 503B compounding business' 2022 revenue of $1 million and
operating loss of $9 million have therefore been reclassified to
the Others segment. 2023 Others revenue was $21 million (2022: $14
million) with an operating loss of $9 million (2022: $6 million
loss).
5 IQVIA MAT December 2023, generic injectable volumes by
eaches, excluding branded generics and Becton Dickinson.
6 Based on internal analysis by Hikma using IQVIA
MIDAS® Monthly value sales data for Kuwait, KSA, UAE,
Jordan, Lebanon, Egypt, Tunisia, Algeria and Morocco, MAT Dec 2023,
reflecting estimates of real-world activity. Copyright IQVIA. All
rights reserved.
7 Core results throughout the document are presented to show
the underlying performance of the Group, excluding the exceptional
items and other adjustments set out in Note 5 of the consolidated
financial statements set out in this release. Core results are a
non-IFRS measure and a reconciliation to reported IFRS measures is
provided on page 15.
8 During 2023, the Group has revised its injectables operating
segment. Previously, the 503B compounding business was reported
under the Injectables segment and is now included within the Others
segment. 503B compounding business' 2022 revenue of $1 million and
operating loss of $9 million have therefore been reclassified to
the Others segment.
9 Canada is now included in North America (previously in Europe
and Rest of World). Canada's 2022 sales of $18 million have
therefore been reclassified to North America.
10 During 2023, the Group has revised its Injectables operating
segment. Previously, the 503B compounding business was reported
under the Injectables segment and is now included within the Others
segment. 503B compounding business' 2022 revenue of $1 million and
operating loss of $9 million have therefore been reclassified to
the Others segment.
11 Canada is now included in North America (previously in Europe
and ROW). Canada's 2022 sales of $18 million have therefore been
reclassified to North America.
12 Hikma now owns the rights for three products that were
previously under-licensed. Revenue from these products have been
excluded from this calculation
13 During 2023, the Group has revised its Others operating
segment. Previously, the 503B compounding business was reported
under the Injectables segment and is now included within the Others
segment. 503B compounding business' 2022 revenue of $1 million and
operating loss of $9 million have therefore been reclassified to
the Others segment.
14 Pipeline projects submitted, approved and launched by country
in 2023.
15 Based on the composition of the Group's net debt portfolio as
at 31 December 2023, a one percentage point increase/decrease in
interest rates would result in $3 million decrease/increase in net
finance cost per year (2022: $4 million
increase/decrease).
Hikma Pharmaceuticals
PLC
Consolidated income
statement
For the year ended 31 December
2023
|
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
|
Note
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
3
|
2,875
|
-
|
2,875
|
2,517
|
-
|
2,517
|
Cost of sales
|
|
(1,468)
|
(17)
|
(1,485)
|
(1,252)
|
(27)
|
(1,279)
|
- Gross
profit/(loss)
|
|
1,407
|
(17)
|
1,390
|
1,265
|
(27)
|
1,238
|
Selling, general and
administrative expenses
|
|
(544)
|
(223)
|
(767)
|
(509)
|
(106)
|
(615)
|
Impairment loss on financial
assets, net
|
|
(3)
|
(29)
|
(32)
|
(5)
|
-
|
(5)
|
Research and development
expenses
|
|
(149)
|
-
|
(149)
|
(144)
|
-
|
(144)
|
Other operating
expenses
|
|
(9)
|
(71)
|
(80)
|
(25)
|
(181)
|
(206)
|
Other operating income
|
|
5
|
-
|
5
|
14
|
-
|
14
|
- Total operating
expenses
|
|
(700)
|
(323)
|
(1,023)
|
(669)
|
(287)
|
(956)
|
- Operating
profit/(loss)
|
4
|
707
|
(340)
|
367
|
596
|
(314)
|
282
|
Finance income
|
|
7
|
-
|
7
|
3
|
26
|
29
|
Finance expense
|
|
(90)
|
(5)
|
(95)
|
(77)
|
(4)
|
(81)
|
Gain/(loss) from investment at
fair value through profit or loss (FVTPL)
|
|
2
|
-
|
2
|
(2)
|
-
|
(2)
|
Gain from investment divestiture,
net
|
|
-
|
-
|
-
|
-
|
5
|
5
|
- Profit/(loss) before
tax
|
|
626
|
(345)
|
281
|
520
|
(287)
|
233
|
Tax
|
6
|
(131)
|
42
|
(89)
|
(111)
|
69
|
(42)
|
- Profit/(loss) for the
year
|
|
495
|
(303)
|
192
|
409
|
(218)
|
191
|
Attributable to:
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
3
|
(1)
|
2
|
3
|
-
|
3
|
- Equity holders of the parent
|
|
492
|
(302)
|
190
|
406
|
(218)
|
188
|
|
|
|
|
|
|
|
|
- Earnings per share
(cents)
|
|
|
|
|
|
|
|
Basic
|
8
|
223
|
|
86
|
181
|
|
84
|
Diluted
|
8
|
221
|
|
85
|
180
|
|
84
|
Hikma Pharmaceuticals
PLC
Consolidated statement of
comprehensive income
For the year ended 31 December
2023
|
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
- Profit/(loss) for the
year
|
|
495
|
(303)
|
192
|
409
|
(218)
|
191
|
- Other comprehensive
income/(expense)
|
|
|
|
|
|
|
|
- Items that may subsequently
be reclassified to the consolidated income
statement:
|
|
|
|
|
|
|
|
Currency translation and
hyperinflation movement
|
|
(3)
|
-
|
(3)
|
(87)
|
-
|
(87)
|
Deferred tax on currency
translation
|
|
1
|
-
|
1
|
-
|
-
|
-
|
Reclassification of translation
gain on disposal of subsidiary
|
|
-
|
-
|
-
|
-
|
(8)
|
(8)
|
- Items that will not
subsequently be reclassified to the consolidated income
statement:
|
|
|
|
|
|
|
|
Change in investments at fair
value through other comprehensive income (FVTOCI)
|
|
(13)
|
-
|
(13)
|
(8)
|
-
|
(8)
|
- Total other comprehensive
expense for the year
|
|
(15)
|
-
|
(15)
|
(95)
|
(8)
|
(103)
|
- Total comprehensive
income/(expense) for the year
|
|
480
|
(303)
|
177
|
314
|
(226)
|
88
|
Attributable to:
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
2
|
-
|
2
|
-
|
-
|
-
|
- Equity holders of the
parent
|
|
478
|
(303)
|
175
|
314
|
(226)
|
88
|
|
|
480
|
(303)
|
177
|
314
|
(226)
|
88
|
Hikma Pharmaceuticals
PLC
Consolidated balance
sheet
At 31 December 2023
|
|
2023
|
2022
|
|
Note
|
$m
|
$m
|
- Non-current
assets
|
|
|
|
Goodwill
|
9
|
388
|
389
|
Other intangible assets
|
9
|
712
|
735
|
Property, plant and
equipment
|
10
|
1,096
|
1,024
|
Right-of-use assets
|
|
45
|
57
|
Investment in joint
venture
|
|
10
|
10
|
Deferred tax assets
|
|
226
|
192
|
Financial and other non-current
assets
|
|
103
|
65
|
|
|
2,580
|
2,472
|
- Current
assets
|
|
|
|
Inventories
|
|
891
|
776
|
Income tax receivable
|
|
49
|
32
|
Trade and other
receivables
|
11
|
824
|
809
|
Cash and cash
equivalents
|
|
205
|
270
|
Other current assets
|
|
120
|
110
|
Assets classified as held for
sale/distribution
|
|
11
|
2
|
|
|
2,100
|
1,999
|
- Total
assets
|
|
4,680
|
4,471
|
- Current
liabilities
|
|
|
|
Short-term financial
debts
|
12
|
150
|
139
|
Lease liabilities
|
|
11
|
9
|
Trade and other
payables
|
|
568
|
476
|
Income tax payable
|
|
74
|
73
|
Provisions
|
13
|
152
|
32
|
Other current
liabilities
|
|
384
|
348
|
|
|
1,339
|
1,077
|
- Net current
assets
|
|
761
|
922
|
- Non-current
liabilities
|
|
|
|
Long-term financial
debts
|
14
|
975
|
1,074
|
Lease liabilities
|
|
55
|
61
|
Deferred tax
liabilities
|
|
25
|
19
|
Provisions
|
13
|
7
|
-
|
Other non-current
liabilities
|
|
70
|
92
|
|
|
1,132
|
1,246
|
- Total
liabilities
|
|
2,471
|
2,323
|
- Net assets
|
|
2,209
|
2,148
|
- Equity
|
|
|
|
Share capital
|
|
40
|
40
|
Share premium
|
|
282
|
282
|
Other reserves
|
|
(282)
|
(265)
|
Translation reserve related to
assets classified as held for distribution
|
|
-
|
(14)
|
Retained earnings
|
|
2,158
|
2,092
|
- Equity attributable to equity holders of the
parent
|
|
2,198
|
2,135
|
Non-controlling
interests
|
|
11
|
13
|
- Total
equity
|
|
2,209
|
2,148
|
Hikma Pharmaceuticals
PLC
Consolidated statement of changes
in equity
For the year ended 31 December
2023
|
|
Share
capital
|
Share
premium
|
Other reserves
|
Translation reserve related to
assets classified as held for distribution
|
Retained earnings
|
Equity attributable to equity
holders of the parent
|
Non-controlling
interests
|
Total
equity
|
|
|
|
|
Merger and revaluation
reserves
|
Translation reserve
|
Capital redemption
reserve
|
Total other reserves
|
|
|
|
|
|
|
Note
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Balance at 1 January 2022
|
|
42
|
282
|
164
|
(224)
|
-
|
(60)
|
-
|
2,189
|
2,453
|
14
|
2,467
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
188
|
188
|
3
|
191
|
Change in investments at fair
value through other comprehensive income (FVTOCI)
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(8)
|
(8)
|
-
|
(8)
|
Currency translation and
hyperinflation movement
|
|
-
|
-
|
-
|
(84)
|
-
|
(84)
|
-
|
-
|
(84)
|
(3)
|
(87)
|
Reclassification of translation
gains on disposal of subsidiary
|
|
-
|
-
|
-
|
(8)
|
-
|
(8)
|
-
|
-
|
(8)
|
-
|
(8)
|
Total comprehensive income for the year
|
|
-
|
-
|
-
|
(92)
|
-
|
(92)
|
-
|
180
|
88
|
-
|
88
|
Transfer of merger
reserve
|
|
-
|
-
|
(129)
|
-
|
-
|
(129)
|
-
|
129
|
-
|
-
|
-
|
Issue of Ordinary Bonus
Share
|
|
1,746
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,746)
|
-
|
-
|
-
|
Cancellation of Ordinary Bonus
Share
|
|
(1,746)
|
-
|
-
|
-
|
-
|
-
|
-
|
1,746
|
-
|
-
|
-
|
Cost of equity-settled employee
share scheme
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
22
|
22
|
-
|
22
|
Dividends paid
|
7
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(125)
|
(125)
|
(3)
|
(128)
|
Ordinary Shares purchased and
cancelled
|
|
(2)
|
-
|
-
|
-
|
2
|
2
|
-
|
(300)
|
(300)
|
-
|
(300)
|
Shares buyback transaction
cost
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3)
|
(3)
|
-
|
(3)
|
Other comprehensive income
accumulated in equity related to assets classified as held for
distribution
|
|
-
|
-
|
-
|
14
|
-
|
14
|
(14)
|
-
|
-
|
-
|
-
|
Acquisition of
subsidiaries
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2
|
2
|
Balance at 31 December 2022 and 1 January
2023
|
|
40
|
282
|
35
|
(302)
|
2
|
(265)
|
(14)
|
2,092
|
2,135
|
13
|
2,148
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
190
|
190
|
2
|
192
|
Change in investments at fair
value through other comprehensive income (FVTOCI)
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13)
|
(13)
|
-
|
(13)
|
Currency translation and
hyperinflation movement
|
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
-
|
-
|
(3)
|
-
|
1
|
Deferred tax on currency
translation
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
1
|
-
|
1
|
Total comprehensive income for the year
|
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
-
|
178
|
175
|
2
|
177
|
Cost of equity-settled employee
share scheme
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
25
|
25
|
-
|
25
|
Dividends paid
|
7
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(137)
|
(137)
|
(4)
|
(141)
|
Other comprehensive income
accumulated in equity related to assets no longer classified as
held for distribution1
|
|
-
|
-
|
-
|
(14)
|
-
|
(14)
|
14
|
-
|
-
|
-
|
-
|
Balance at 31 December 2023
|
|
40
|
282
|
35
|
(319)
|
2
|
(282)
|
-
|
2,158
|
2,198
|
11
|
2,209
|
1.
Translation reserve related to assets classified as held for
distribution was reclassified to other reserves as the liquidation
of Pharma Ixir Co. Ltd, one of the subsidiaries in Sudan, is no
longer expected to be completed within twelve months because of the
ongoing conflict in the country.
Hikma Pharmaceuticals
PLC
Consolidated cash flow
statement
For the year ended 31 December
2023
|
|
2023
|
2022
|
|
Note
|
$m
|
$m
|
- Cash flows from operating
activities
|
|
|
|
Cash generated from
operations
|
15
|
737
|
585
|
Income taxes paid
|
|
(131)
|
(103)
|
Income taxes received
|
|
2
|
48
|
- Net cash inflow from
operating activities
|
|
608
|
530
|
- Cash flow from investing
activities
|
|
|
|
Purchase of property, plant and
equipment
|
|
(169)
|
(138)
|
Proceeds from disposal of
property, plant and equipment
|
|
18
|
1
|
Purchase of intangible
assets
|
|
(35)
|
(87)
|
Proceeds from disposal of
intangible assets
|
|
-
|
9
|
Additions to investments at
FVTOCI
|
|
(27)
|
(15)
|
Proceeds from sale of investment
at FVTOCI
|
|
1
|
-
|
Acquisition of businesses, net of
cash acquired
|
16
|
(98)
|
(373)
|
Advance payment related to
non-financial assets
|
|
(23)
|
-
|
Cash loss on disposal of
subsidiary
|
|
-
|
(1)
|
Payments of contingent
consideration liability
|
|
(7)
|
(6)
|
Interest income
received
|
|
7
|
3
|
- Net cash outflow from
investing activities
|
|
(333)
|
(607)
|
- Cash flow from financing
activities
|
|
|
|
Proceeds from issue of long-term
financial debts
|
|
778
|
1,401
|
Repayment of long-term financial
debts
|
|
(841)
|
(962)
|
Proceeds from short-term financial
debts
|
|
437
|
380
|
Repayment of short-term financial
debts
|
|
(467)
|
(363)
|
Repayment of lease
liabilities
|
|
(10)
|
(9)
|
Dividends paid
|
7
|
(137)
|
(125)
|
Distributions to non-controlling
interests
|
|
(4)
|
(3)
|
Interest and bank charges
paid
|
|
(82)
|
(68)
|
Increase in restricted
cash
|
|
(10)
|
-
|
Revolving credit
facility upfront fees paid
|
|
-
|
(5)
|
Share buyback
|
|
-
|
(300)
|
Share buyback transaction
costs
|
|
-
|
(3)
|
- Payments of co-development and earnout payment
agreement
|
|
(1)
|
(1)
|
- Net cash outflow from
financing activities
|
|
(337)
|
(58)
|
- Net decrease in cash and
cash equivalents
|
|
(62)
|
(135)
|
Cash and cash equivalents at beginning of
year
|
|
270
|
426
|
- Foreign exchange translation movements
|
|
(3)
|
(21)
|
Cash and cash equivalents at end of year
|
|
205
|
270
|
Hikma Pharmaceuticals
PLC
Notes to the consolidated
financial statements
1. Accounting policies
General information
Hikma Pharmaceuticals PLC is a
public limited liability company incorporated and domiciled in the
United Kingdom under the Companies Act 2006.
The Group's principal activities
are the development, manufacturing, marketing and selling of a
broad range of generic, branded generic and in-licensed patented
pharmaceutical products in solid, semi-solid, liquid and injectable
final dosage forms.
Basis of preparation
Hikma Pharmaceuticals PLC's
consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. The consolidated financial
statements also fully comply with the International Financial
Reporting Standards as issued by the International Accounting
Standards Board ("IFRS Accounting Standards").
The consolidated financial
statements have been prepared under the historical cost convention,
except for the revaluation to fair value of certain financial
assets and liabilities.
The accounting policies included
in this note have been applied consistently other than where new
policies have been adopted.
The Group's previously published
consolidated financial statements were also prepared in accordance
with UK-adopted international accounting standards, the
requirements of the Companies Act 2006, and were fully compliant
with the IFRS Accounting Standards as issued by the
IASB.
The presentational currency of the
Group's consolidated financial statements is the US dollar as the
majority of the Group's business is conducted in US
dollars.
The financial information does not
constitute the Company's statutory accounts for the years to 31
December 2023 or 2022 but is derived from those accounts. The
auditors have reported on those accounts and their report (i) was
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006 in respect of the
accounts for the year to 31 December 2023 or 31 December
2022.
Adoption of new and revised standards
The following new and revised
standards and interpretations have been issued and are effective
for annual periods beginning on 1 January 2023.
IFRS 17 (New Standard)
|
Insurance Contracts
|
IAS 1 (Amendments)
|
Presentation of Financial
Statements and IFRS Practice Statement 2 Making Materiality
Judgements - disclosure of accounting policies
|
IAS 8 (Amendments)
|
Accounting Policies, Changes in
Accounting Estimates and Errors - definition of accounting
estimates
|
IAS 12 (Amendments)
|
Income Taxes - deferred tax
related to assets and liabilities arising from a single
transaction
|
IAS 12 (Amendments)
|
Income Taxes - International Tax
Reform - Pillar Two Model Rules
|
IAS 1 amendments had an impact on
the Group's disclosures of accounting policies, but did not impact
the measurement, recognition or presentation of the consolidated
financial statements. The other new and revised standards and
interpretations had no significant impact on the consolidated
financial statements but may impact the accounting for future
transactions and arrangements.
The standards and interpretations
that had been issued but were not mandatory for annual reporting
periods ending on 31 December 2023 were not early adopted. The
Group doesn't expect any significant impact from applying these
standards and interpretations.
Exceptional items and other adjustments
We use a number of non-IFRS
measures to report and monitor the performance of our business.
Management uses these adjusted numbers internally to measure our
progress and for setting performance targets. We also present these
numbers, alongside our reported results, to external audiences to
help them understand the underlying performance of our business.
Our adjusted numbers may be calculated differently to other
companies.
Adjusted measures are not
substitutable for IFRS numbers and should not be considered
superior to results presented in accordance with IFRS Accounting
Standards.
Core results
Reported results represent the
Group's overall performance. However, these results can include
one-off or non-cash items that mask the underlying performance of
the Group. To provide a more complete picture of the Group's
performance and to improve comparability of our consolidated
financial statements to external audiences, we provide, alongside
our reported results, core results, which are a non-IFRS measure.
We represent and discuss our Group and segmental financials
reconciled between reported and core results. This presentation
allows for full visibility and transparency of our financials so
that shareholders are able to clearly assess the performance
factors of the Group.
Core results mainly
exclude:
- Amortisation
of intangible assets other than software
- Impairment
charge/reversal of intangible assets and property, plant and
equipment
- Finance income
and expense resulting from remeasurement and unwinding of
contingent consideration and co-development earnout payment
agreement financial liabilities
- Exceptional
items which management believes to be exceptional in nature by
virtue of their size or incidence, or have a distortive effect on
current year earnings, such as costs associated with business
combinations, one-off gains and losses on disposal of businesses,
legal expenses, reorganisation costs and any exceptional items
related to tax such as significant tax benefit/expense associated
with previously unrecognised deferred tax
assets/liabilities
Our core results exclude the
exceptional items and other adjustments set out in Note 5 in the
Notes to the consolidated financial statements.
Intangible assets
Intangible assets are measured at
cost, less any accumulated amortisation and impairment
losses.
The assets other than goodwill are
amortised on a straight-line basis and the amortisation expense is
recognised in the selling, general and administrative
expenses.
Judgement is used to assess the
degree of certainty attached to the flow of future economic
benefits that are attributable to the use of the asset on the
basis of the evidence available at the time of initial recognition,
giving greater weight to external evidence.
Expenditures on research and
development activities are charged to the consolidated income
statement, except only when the criteria for recognising an
internally generated intangible asset is met, which
is usually when approval from the relevant regulatory
authority is considered probable.
Also, the Group engages with
third-party research and development companies to develop products
on its behalf. Substantial payments made to such third parties to
fund research and development efforts are recognised as
intangible assets if the capitalisation criteria for an intangible
asset are met, typically when licences are acquired and certain
milestones are met. All other expenditures are charged to the
consolidated income statement.
Principal intangible assets
are:
(a) Goodwill
(b) Product related
intangibles:
(i) Product files and
in-licensed products recognised through acquisitions and
partnerships are amortised over their useful economic lives once
the asset is ready for use
(ii) In-process product
files recognised on acquisition are amortised over the useful
economic life once the asset is ready for use
(c) Purchased software: is
amortised over the useful economic life when the asset is ready for
use
(d) Other identified
intangibles are:
(e) Customer relationships:
represent the value attributed to the long-term relationships held
with existing customers that the Group acquired on business
combinations. Customer relationships are amortised over their
useful economic lives
(f) Trade names: are
amortised over their useful lives from the date
of acquisition
(g) Marketing rights: are
amortised over their useful lives commencing in the year in
which the rights first generate sales
2. Going concern
The Directors believe that the
Group is well diversified due to its geographic spread, product
diversity and large customer and supplier base. Taking into account
the Group's current position and its principal risks for a period
longer than 12 months from the date of signing the consolidated
financial statement, a going concern analysis has been prepared
using realistic scenarios applying a severe but plausible downside
which shows sufficient liquidity headroom. Therefore, the Directors
believe that the Group and its subsidiaries are adequately placed
to manage their business and financing risks successfully, despite
the current uncertain economic outlook. Having assessed the
principal risks, the Directors considered it appropriate to adopt
the going concern basis of accounting in preparing the consolidated
financial statements.
Financial covenants are suspended
while the Group retains its investment grade status from two rating
agencies1. As of 31 December 2023, the Group's
investment grade rating was affirmed by S&P and
Fitch.
1. Rating agencies: means each of
Fitch, Moody's and S&P or any of their affiliates or
successors
3. Revenue
Business and geographical markets
The following tables provide an
analysis of the Group's reported revenue by segment and
geographical market, irrespective of the origin of the
goods/services:
|
Injectables
|
Generics
|
Branded
|
Others
|
Total
|
Year ended 31 December
2023
|
$m
|
$m
|
$m
|
$m
|
$m
|
North America
|
808
|
937
|
-
|
4
|
1,749
|
Middle East and North
Africa
|
195
|
-
|
703
|
11
|
909
|
Europe and rest of the
world
|
189
|
-
|
11
|
6
|
206
|
United Kingdom
|
11
|
-
|
-
|
-
|
11
|
|
1,203
|
937
|
714
|
21
|
2,875
|
|
Injectables2
|
Generics
|
Branded
|
Others2
|
Total
|
Year ended 31 December 2022
(revised)
|
$m
|
$m
|
$m
|
$m
|
$m
|
North
America1
|
778
|
672
|
-
|
1
|
1,451
|
Middle East and North
Africa
|
178
|
-
|
681
|
7
|
866
|
Europe and rest of the
world
|
176
|
-
|
10
|
6
|
192
|
United Kingdom
|
8
|
-
|
-
|
-
|
8
|
|
1,140
|
672
|
691
|
14
|
2,517
|
1. Canada is now included in North
America (previously in Europe and rest of world). Canada's 2022
revenue of $18 million has therefore been reclassified to North
America
2. During 2023, the Group has
revised its Injectables operating segment. Previously, the 503B
compounding business was reported under the Injectables segment and
is now included within the Others segment. 503B compounding
business 2022 revenue of $1 million has therefore been reclassified
to the Others segment
The top selling markets are shown
below:
|
|
|
|
2023
|
2022
|
|
|
|
|
$m
|
$m
|
United States
|
|
|
|
1,726
|
1,433
|
Saudi Arabia
|
|
|
|
261
|
240
|
Algeria
|
|
|
|
189
|
132
|
Egypt
|
|
|
|
93
|
115
|
|
|
|
|
2,269
|
1,920
|
In 2023, included in revenue
arising from the Generics and Injectables segments are sales the
Group made to three wholesalers in the US, each accounting for
equal to or greater than 10% of the Group's revenue: $370 million
(13% of Group revenue), $365 million (13% of Group revenue) and
$278 million (10% of Group revenue). In 2022, revenue included
sales made to three wholesalers: $361 million (14% of Group
revenue), $330 million (13% of Group revenue) and $251 million (10%
of Group revenue), respectively.
The following table provides
contract balances related to revenue:
|
|
|
|
2023
|
2022
|
|
|
|
|
$m
|
$m
|
Net trade receivables (Note
11)
|
|
|
|
789
|
777
|
Contract and refund
liabilities
|
|
|
|
179
|
193
|
Trade receivables are non-interest
bearing and typical credit terms range from 30 to 90 days in the
US, 30 to 120 days in Europe and 180 to 360 days
in MENA.
Contract and refund liabilities
mainly relate to returns and free goods provisions.
4. Business segments
For management reporting purposes,
the Group is organised into three principal operating divisions -
Injectables, Branded and Generics. These divisions are the
basis on which the Group reports its segmental
information.
Core operating profit, defined as
'segment result', is the principal 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:
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
(revised)2
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
(revised)2
|
Injectables
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
1,203
|
-
|
1,203
|
1,140
|
-
|
1,140
|
Cost of sales
|
(546)
|
(2)
|
(548)
|
(489)
|
(26)
|
(515)
|
Gross profit
|
657
|
(2)
|
655
|
651
|
(26)
|
625
|
Total operating
expenses
|
(213)
|
(84)
|
(297)
|
(214)
|
(57)
|
(271)
|
Segment result
|
444
|
(86)
|
358
|
437
|
(83)
|
354
|
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
Branded
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
714
|
-
|
714
|
691
|
-
|
691
|
Cost of sales
|
(348)
|
(15)
|
(363)
|
(341)
|
-
|
(341)
|
Gross profit
|
366
|
(15)
|
351
|
350
|
-
|
350
|
Total operating
expenses
|
(196)
|
(60)
|
(256)
|
(204)
|
(10)
|
(214)
|
Segment result
|
170
|
(75)
|
95
|
146
|
(10)
|
136
|
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
Generics
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
937
|
-
|
937
|
672
|
-
|
672
|
Cost of sales
|
(550)
|
-
|
(550)
|
(406)
|
(1)
|
(407)
|
Gross profit
|
387
|
-
|
387
|
266
|
(1)
|
265
|
Total operating
expenses
|
(195)
|
(45)
|
(240)
|
(163)
|
(219)
|
(382)
|
Segment result
|
192
|
(45)
|
147
|
103
|
(220)
|
(117)
|
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
(revised)2
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
(revised)2
|
Others¹
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
21
|
-
|
21
|
14
|
-
|
14
|
Cost of sales
|
(24)
|
-
|
(24)
|
(15)
|
-
|
(15)
|
Gross profit
|
(3)
|
-
|
(3)
|
(1)
|
-
|
(1)
|
Total operating
expenses
|
(6)
|
-
|
(6)
|
(5)
|
-
|
(5)
|
Segment result
|
(9)
|
-
|
(9)
|
(6)
|
-
|
(6)
|
1. Others mainly comprises Arab
Medical Containers LLC, International Pharmaceutical Research
Centre LLC and the 503B compounding business
2.
During 2023, the Group has revised its Injectables operating
segment. Previously, the 503B compounding business was reported
under the Injectables segment and is now included within the Others
segment. The 503B compounding business 2022 revenue of $1 million
and operating loss of $9 million have therefore been reclassified
to the Others segment
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
Group
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Segments' results
|
797
|
(206)
|
591
|
680
|
(313)
|
367
|
Unallocated expenses¹
|
(90)
|
(134)
|
(224)
|
(84)
|
(1)
|
(85)
|
Operating profit/(loss)
|
707
|
(340)
|
367
|
596
|
(314)
|
282
|
Finance income
|
7
|
-
|
7
|
3
|
26
|
29
|
Finance expense
|
(90)
|
(5)
|
(95)
|
(77)
|
(4)
|
(81)
|
Gain/(loss) from investment at
fair value through profit or loss (FVTPL)
|
2
|
-
|
2
|
(2)
|
-
|
(2)
|
Gain from investment divestiture,
net
|
-
|
-
|
-
|
-
|
5
|
5
|
Profit/(loss) before tax
|
626
|
(345)
|
281
|
520
|
(287)
|
233
|
Tax
|
(131)
|
42
|
(89)
|
(111)
|
69
|
(42)
|
Profit/(loss) for the year
|
495
|
(303)
|
192
|
409
|
(218)
|
191
|
Attributable to:
|
|
|
|
|
|
|
Non-controlling
interests
|
3
|
(1)
|
2
|
3
|
-
|
3
|
Equity holders of the parent
|
492
|
(302)
|
190
|
406
|
(218)
|
188
|
1. In 2023, unallocated expenses
mainly comprise provision for legal settlements (Notes 5, 13 and
18), employee costs, third-party professional fees, IT and travel
expenses
The following table provides an
analysis of the Group's non-current assets2 by geographic area:
|
|
|
|
|
2023
|
2022
(restated)4
|
|
|
|
|
|
$m
|
$m
|
|
|
|
|
|
|
|
North America
|
|
|
|
|
1,301
|
1,305
|
US
|
|
|
|
|
36
|
37
|
Canada3
|
|
|
|
|
1,337
|
1,342
|
Middle East and North
Africa
|
|
|
|
|
|
|
Jordan
|
|
|
|
|
348
|
349
|
Algeria
|
|
|
|
|
104
|
85
|
Morocco
|
|
|
|
|
89
|
76
|
Saudi Arabia
|
|
|
|
|
71
|
51
|
Others
|
|
|
|
|
75
|
97
|
|
|
|
|
|
687
|
658
|
Europe and rest of the
world
|
|
|
|
|
|
|
Portugal
|
|
|
|
|
147
|
133
|
Germany
|
|
|
|
|
42
|
40
|
Others3
|
|
|
|
|
47
|
22
|
|
|
|
|
|
236
|
195
|
United Kingdom
|
|
|
|
|
11
|
20
|
|
|
|
|
|
2,271
|
2,215
|
2. Non-current assets exclude
deferred tax assets, investments at FVTOCI, restricted cash and
other financial assets
3. Canada is now included in North
America (previously in Europe and rest of the world). Canada's 2022
non-current assets of $37 million have therefore been reclassified
to North America
4. 2022 numbers have been restated
to add investment in joint venture to the relevant geographical
area
5. Exceptional items and other adjustments
Exceptional items and other
adjustments are disclosed separately in the consolidated income
statement to assist in the understanding of the Group's core
performance. Exceptional items and other adjustments have been
recognised in accordance with our accounting policy outlined in
Note 1, the details are presented below:
|
|
Injectables
|
Branded
|
Generics
|
Unallocated
|
Total
|
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
Impairment and cost in relation to
halted operations in Sudan
|
___1
|
(14)
|
(69)
|
-
|
-
|
(83)
|
Provision for legal
settlements
|
SG&A
|
-
|
-
|
-
|
(129)
|
(129)
|
Intangible assets amortisation
other than software
|
SG&A
|
(47)
|
(6)
|
(35)
|
-
|
(88)
|
Impairment charge on intangible
assets
|
Other operating
expenses
|
(18)
|
-
|
(9)
|
(5)
|
(32)
|
Impairment charge on right-of-use
assets and property, plant and equipment
|
Other operating
expenses
|
(7)
|
-
|
(1)
|
-
|
(8)
|
Remeasurement of contingent
consideration and other financial liability
|
Finance expense
|
-
|
-
|
-
|
(2)
|
(2)
|
Unwinding of contingent
consideration and other financial liability
|
Finance expense
|
-
|
-
|
-
|
(3)
|
(3)
|
Exceptional items and other adjustments included in profit
before tax
|
|
(86)
|
(75)
|
(45)
|
(139)
|
(345)
|
Tax effect
|
Tax
|
|
|
|
|
42
|
Impact on profit for the year
|
|
|
|
|
|
(303)
|
Non-controlling
interest
|
|
|
|
|
|
(1)
|
Equity holders of the
parent
|
|
|
|
|
|
(302)
|
1. The impact on the consolidated
income statement line items is shown below.
-
Impairment and costs in relation to halted
operations in Sudan: In April 2023, violent conflict erupted in the
Sudanese capital of Khartoum. The conflict has since been
escalating in other areas of the country. The Group has evaluated
the effect on the carrying values of the Group's assets, and as a
consequence, a loss of $76m was recognised to reflect the fall in
the recoverable amount of the assets listed below. A further $7
million of employee benefits, hyperinflation and other expenses
from the halted operations have been classified as exceptional
items on the basis that no revenue was generated from those
assets.
|
|
Injectables
|
Branded
|
Generics
|
Unallocated
|
Total
|
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
Provision against
inventory
|
Cost of sales
|
(2)
|
(15)
|
-
|
-
|
(17)
|
Impairment charge on financial
assets
|
Net impairment loss on financial
assets
|
(12)
|
(17)
|
-
|
-
|
(29)
|
Impairment charge on intangible
assets
|
Other operating
expenses
|
-
|
(3)
|
-
|
-
|
(3)
|
Impairment charge on property,
plant and equipment
|
Other operating
expenses
|
-
|
(25)
|
-
|
-
|
(25)
|
Impairment charge on other current
assets
|
Other operating
expenses
|
-
|
(2)
|
-
|
-
|
(2)
|
Cost from halted operations in
Sudan
|
SG&A
|
-
|
(6)
|
-
|
-
|
(6)
|
Cost from halted operations in
Sudan
|
Other operating
expenses
|
-
|
(1)
|
-
|
-
|
(1)
|
|
|
(14)
|
(69)
|
-
|
-
|
(83)
|
- Provision for legal settlements: On 1 February 2024, the
Group reached an agreement in principle to resolve the vast
majority of the opioid related cases brought against Hikma
Pharmaceuticals USA Inc. by US states, their subdivisions, and
tribal nations. The agreed upon settlement is not an admission of
wrongdoing or legal liability. The Group booked a total provision
of $129 million to cover the expected settlement amount for all
related cases in North America (Notes 13 and 18)
- Intangible assets amortisation other than software of $88
million (Note 9)
- Impairment charge on intangible assets: $32 million mainly
comprise $11 million in relation to product related intangible
assets as a result of the decline in performance and forecasted
profitability and $16 million marketing rights due the termination
of business development contracts. Additionally, $5 million of
impairment charge relates to software (Notes 9)
- Impairment charge on property, plant and equipment and
right-of-use assets: $8 million of impairment charge mainly relates
to a leased property with no future plans of utilisation (Notes
10)
- Remeasurement of contingent consideration and other financial
liability: $2 million represents the finance expense resulting from
the valuation of the liabilities associated with the future
contingent payments in respect of contingent consideration
recognised through business combinations and the financial
liability in relation to the co-development earnout payment
agreement
- Unwinding of contingent consideration and other financial
liability: $3 million represents the finance expense resulting from
the unwinding of contingent consideration recognised through
business combinations and the financial liability in relation to
the co-development earnout payment agreement
Tax effect
- The tax
effect represents the tax effect on pre-tax exceptional items and
other adjustments which is calculated based on the applicable tax
rate in each jurisdiction
In the previous year, exceptional
items and other adjustments were related to the
following:
|
|
Injectables
|
Branded
|
Generics
|
Unallocated
|
Total
|
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
Gain from investment divestiture,
net
|
|
-
|
-
|
-
|
5
|
5
|
Reorganisation costs
|
SG&A
|
(2)
|
(2)
|
(9)
|
(1)
|
(14)
|
Impairment charge on property,
plant and equipment and right-of-use assets
|
Other operating
expenses
|
(4)
|
-
|
(76)
|
-
|
(80)
|
Impairment charge on intangible
assets
|
Other operating
expenses
|
(8)
|
-
|
(93)
|
-
|
(101)
|
Intangible assets amortisation
other than software
|
SG&A
|
(43)
|
(8)
|
(41)
|
-
|
(92)
|
Unwinding of acquisition related
inventory step-up
|
Cost of sales
|
(26)
|
-
|
(1)
|
-
|
(27)
|
Remeasurement of contingent
consideration
|
Finance income
|
-
|
-
|
-
|
26
|
26
|
Unwinding of contingent
consideration and other financial liability
|
Finance expense
|
-
|
-
|
-
|
(4)
|
(4)
|
Exceptional items and other
adjustments included in profit before tax
|
|
(83)
|
(10)
|
(220)
|
26
|
(287)
|
Tax effect
|
Tax
|
|
|
|
|
69
|
Impact on profit for the
year
|
|
|
|
|
|
(218)
|
-
Gain from investment divestiture: represents $8
million from reclassification of translation gains previously
included in other comprehensive income and the $3 million loss on
disposal of Hikma Liban S.A.R.L.
-
Reorganisation costs: $14 million of
reorganisation costs relate to a one-off global restructuring to
align staffing levels with current business conditions.
-
Impairment charge on property, plant and
equipment and right-of-use assets: $80 million of impairment charge
relates to excess capacity and the rationalisation of the R&D
pipeline associated production lines mainly in the Generics CGU, in
addition to the impairment of generic Advair Diskus® CGU related
property, plant and equipment (Notes 10)
-
Impairment charge on intangible assets: $101
million impairment charge mainly relates to the generic Advair
Diskus® CGU, other product related intangible assets and marketing
rights mainly resulting from decline in performance and forecasted
profitability and the rationalisation of the R&D pipeline in
the Generics CGU (Notes 9)
-
Intangible assets amortisation other than
software: $92 million intangible assets amortisation other than
software
-
Unwinding of acquisition related inventory
step-up: $27 million unwinding of acquisition related inventory
step-up reflects the unwinding of the fair value uplift of the
inventory acquired as part of Custopharm Topco Holdings, Inc.
business combination and the Teligent Inc. Canadian assets
acquisition ($25 million and $2 million, respectively)
-
Remeasurement of contingent consideration: $26
million finance income represents the income resulting from the
valuation of the liabilities associated with the future contingent
payments in respect of contingent consideration recognised through
business combinations
-
Unwinding of contingent consideration and other
financial liability: $4 million finance expense represents the
expense resulting from the unwinding of contingent consideration
recognised through business combinations and the financial
liability in relation to the co-development earnout payment
agreement
Tax effect
-
The tax effect represents the tax effect on
pre-tax exceptional items and other adjustments which is calculated
based on the applicable tax rate in each jurisdiction
6. Tax
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Current tax
|
|
|
|
|
|
|
Current year
|
117
|
(2)
|
115
|
121
|
(16)
|
105
|
Adjustment to prior
years
|
(1)
|
-
|
(1)
|
(1)
|
-
|
(1)
|
Deferred tax
|
|
|
|
|
|
|
Current year
|
11
|
(40)
|
(29)
|
(5)
|
(53)
|
(58)
|
Adjustment to prior
year
|
4
|
-
|
4
|
(4)
|
-
|
(4)
|
|
131
|
(42)
|
89
|
111
|
(69)
|
42
|
UK corporation tax is calculated
at 23.5% blended rate (2022: 19.0%).
The Group incurred a tax expense
of $89 million (2022: $42 million), the reported and core effective
tax rates are 31.7% and 20.9% respectively (2022: 18.0% and 21.3%
respectively). The reported effective tax rate is higher than the
statutory rate due to the exceptional items related to
Sudan.
Taxation for all jurisdictions is
calculated at the rates prevailing in the respective
jurisdiction.
The charge for the year can be
reconciled to profit before tax per the consolidated income
statement as follows:
|
|
|
|
|
2023
|
2022
|
|
|
|
|
|
$m
|
$m
|
Profit before tax
|
|
|
|
|
281
|
233
|
Tax at the UK corporation tax rate
of 23.5% (2022: 19.00%)
|
|
|
|
66
|
44
|
Profits taxed at different
rates
|
|
|
|
|
(21)
|
4
|
Permanent differences:
|
|
|
|
|
|
|
- Non-deductible expenditure
|
|
|
|
|
3
|
3
|
- Other permanent differences
|
|
|
|
|
2
|
2
|
- Research and development benefit
|
|
|
|
|
(3)
|
(5)
|
State and local taxes
|
|
|
|
|
2
|
(2)
|
Temporary differences:
|
|
|
|
|
|
|
- Rate change, tax losses and other deductible temporary
differences for which no benefit is recognised
|
(3)
|
(5)
|
Impact of the halted operations in
Sudan
|
32
|
-
|
Change in uncertain tax
positions
|
|
|
|
|
9
|
10
|
Unremitted earnings
|
|
|
|
|
(1)
|
(4)
|
Prior year adjustments
|
|
|
|
|
3
|
(5)
|
Tax expense for the
year
|
|
|
|
|
89
|
42
|
Profits taxed at different tax
rates relate to profits arising in overseas jurisdictions where the
tax rate differs from the UK statutory rate. Permanent differences
relate to items which are non-taxable or for which no tax relief is
ever likely to be due. The major items are expenses and income
disallowed where they are covered by statutory exemptions, foreign
exchange differences in some territories and statutory reliefs such
as research and development.
The exceptional costs associated
with the halted operations in Sudan mainly comprise tax on
permanent differences of $24 million and unrecognised deferred tax
assets of $12 million on the basis that the Group does not consider
it probable that tax deductions can be realised on these temporary
differences for local tax purposes.
Rate change, tax losses and other
deductible temporary differences for which no benefit is recognised
include items for which it is not appropriate to recognise deferred
tax.
The change in the uncertain tax
positions relates to the balance the Group holds in the event a
revenue authority successfully takes an adverse view of the
positions adopted by the Group in 2023 and prior years. As at 31
December 2023, the Group's uncertain tax positions amounted to $59
million (2022: $50 million). The Group released $13 million in 2023
(2022: $3 million) primarily due to the resolution of some audits
with the relevant tax authorities and released $nil (2022: $2
million) following closure of tax audit with no final tax
adjustments required by the relevant tax authorities, this was
offset by new provisions and updates of $22 million booked in 2023
(2022: $15 million) arising from new and ongoing tax audits. There
was no impact from the currency exchange difference in 2023 (2022:
$1 million reduction to the aggregate balance). If all areas of
uncertainty were audited and all areas resulted in an adverse
outcome, management does not believe any material additional tax
would be payable beyond what is provided.
Prior year adjustments include
differences between the tax liability recorded in the tax returns
submitted for previous years and the estimated tax provision
reported in a prior year's consolidated financial statements. This
category also includes adjustments to the tax returns against which
an adverse uncertain tax position has been booked and included
under 'change in uncertain tax positions' above.
Publication of tax
strategy
In line with the UK requirement
for large UK businesses to publish their tax strategy, the Group's
tax strategy has been made available on the Group's
website.
Global minimum tax - Pillar
Two
Pillar Two legislation has been
enacted, or substantively enacted, in certain jurisdictions where
the Group operates. The legislation will be effective for the
Group's financial year beginning 1 January 2024. The Group is in
scope of the enacted or substantively enacted legislation and has
performed an assessment of the Group's potential exposure to Pillar
Two income taxes for the year ending on 31 December
2024.
The assessment of the potential
exposure to Pillar Two income taxes is based on the most recent
information available regarding the financial performance of the
constituent entities in the Group. Based on the assessment, the
Group has identified potential exposure to Pillar Two income taxes
in respect of profits earned in the UAE. The potential exposure
comes from the constituent entities (mainly operating subsidiaries)
in these jurisdictions where the expected Pillar Two effective tax
rate is below 15%. Starting in 2024, the Group's core effective tax
rate guidance reflects Pillar Two impact which contributed to an
increase of 2 to 3 percentage points. Further factors such as the
proportion of profit before tax, revenues, costs, and foreign
currency exchange rates have been considered in the guidance for
the core effective tax rate in 2024.
The Group is continuing to assess
the impact of the Pillar Two income taxes legislation on its future
financial performance.
Tax contingent
liabilities
Due to the Group operating across
a number of different tax jurisdictions, it is subject to periodic
challenge by local tax authorities on a range of tax matters
arising in the normal course of business. These challenges
generally include transfer pricing arrangements, other
international tax matters and the judgemental interpretation of
local tax legislation.
A tax contingent liability is not
provided for and disclosed if:
-
tax payments are not probable in the future on
challenges by tax authorities; or
-
it is a present tax obligation, but the amount
cannot be measured reliably
7. Dividends
|
Paid in
2023
|
Paid
in
2022
|
|
$m
|
$m
|
Amounts recognised as
distributions to equity holders in the year:
|
|
|
Final dividend for the year ended
31 December 2022 of 37 cents (31 December 2022: 36 cents) per
share
|
82
|
83
|
Interim dividend during the year
ended 31 December 2023 of 25 cents (31 December 2022: 19 cents) per
share
|
55
|
42
|
|
137
|
125
|
The proposed final dividend for
the year ended 31 December 2023 is 47 cents (2022: 37
cents).
The proposed final dividend is
subject to approval by shareholders at the Annual General Meeting
on 25 April 2024 and has not been included as a liability in these
consolidated financial statements. Based on the number of shares in
free issue at 31 December 2023 (221,081,371), the final dividend
would be $104 million.
8. Earnings per share (EPS)
Basic EPS is calculated by
dividing the profit attributable to equity holders of the parent by
the weighted average number of Ordinary Shares in free issue during
the year after deducting Treasury shares. Treasure shares have no
right to receive dividends.
Diluted EPS is calculated after
adjusting the weighted average number of Ordinary Shares used in
the basic EPS calculation for the conversion of all potentially
dilutive Ordinary Shares.
Core basic and diluted EPS are
intended to highlight the core results of the Group before
exceptional items and other adjustments.
|
2023
Core
results
|
2023
Exceptional items and other adjustments
(Note 5)
|
2023
Reported
results
|
2022
Core
results
|
2022
Exceptional
items and
other
adjustments
(Note 5)
|
2022
Reported
results
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Profit attributable to equity
holders of the parent
|
492
|
(302)
|
190
|
406
|
(218)
|
188
|
The number of shares used in
calculating basic and diluted EPS is reconciled below:
|
|
|
|
|
2023
|
2022
|
Weighted average number of
Ordinary Shares in free issue
|
|
|
|
|
Number
|
Number
|
Basic EPS
|
|
|
|
|
220,862,103
|
223,728,472
|
Effect of potentially dilutive
Ordinary Shares:
|
|
|
|
|
|
|
Share-based awards
|
|
|
|
|
1,506,611
|
1,180,336
|
Diluted EPS
|
|
|
|
|
222,368,714
|
224,908,809
|
|
|
|
2023
Core
EPS
|
2023
Reported
EPS
|
2022 Core
EPS
|
2022
Reported
EPS
|
|
|
|
Cents
|
Cents
|
Cents
|
Cents
|
Basic
|
|
|
223
|
86
|
181
|
84
|
Diluted
|
|
|
221
|
85
|
180
|
84
|
9. Goodwill and other intangible assets
The changes in the carrying value
of goodwill and other intangible assets for the years ended 31
December 2023 and 31 December 2022 are as follows:
|
Goodwill
|
|
Other intangible
assets
|
|
|
|
|
Product-related
intangibles
|
Software
|
Other identified
intangibles
|
Total
|
|
$m
|
|
$m
|
$m
|
$m
|
$m
|
Cost
|
|
|
|
|
|
|
Balance at 1 January 2022
|
693
|
|
1,056
|
142
|
257
|
2,148
|
Additions
|
-
|
|
48
|
1
|
36
|
85
|
Disposals
|
-
|
|
-
|
-
|
(3)
|
(3)
|
Translation adjustments
|
(15)
|
|
(5)
|
(2)
|
(5)
|
(27)
|
Acquisition of
subsidiaries
|
119
|
|
251
|
-
|
-
|
370
|
Balance at 31 December 2022 and 1 January
2023
|
797
|
|
1,350
|
141
|
285
|
2,573
|
Additions
|
-
|
|
10
|
1
|
33
|
44
|
Disposals
|
-
|
|
-
|
(4)
|
(3)
|
(7)
|
Translation adjustments
|
(1)
|
|
(1)
|
-
|
2
|
-
|
Business combination (Note
16)
|
-
|
|
63
|
-
|
-
|
63
|
Balance at 31 December 2023
|
796
|
|
1,422
|
138
|
317
|
2,673
|
|
|
|
|
|
|
|
Accumulated Amortisation and
Impairment
|
|
|
|
|
|
|
Balance at 1 January
2022
|
(408)
|
|
(650)
|
(91)
|
(107)
|
(1,256)
|
Charge for the year
|
-
|
|
(75)
|
(8)
|
(17)
|
(100)
|
Impairment charge
|
-
|
|
(72)
|
(1)
|
(29)
|
(102)
|
Translation adjustments
|
-
|
|
4
|
2
|
3
|
9
|
Balance at 31 December 2022 and 1 January
2023
|
(408)
|
|
(793)
|
(98)
|
(150)
|
(1,449)
|
Charge for the year
|
-
|
|
(73)
|
(8)
|
(15)
|
(96)
|
Disposals
|
-
|
|
-
|
4
|
3
|
7
|
Impairment charge
|
-
|
|
(13)
|
(5)
|
(17)
|
(35)
|
Translation adjustments
|
-
|
|
1
|
-
|
(1)
|
-
|
Balance at 31 December 2023
|
(408)
|
|
(878)
|
(107)
|
(180)
|
(1,573)
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
|
At 31 December 2023
|
388
|
|
544
|
31
|
137
|
1,100
|
At 31 December 2022
|
389
|
|
557
|
43
|
135
|
1,124
|
Of the total intangible assets
other than goodwill, $152 million (2022: $89 million) are not yet
available for use.
Goodwill
Goodwill is allocated from the
acquisition date to the CGUs that are expected to benefit from the
synergies of the business combination. The carrying amount of
goodwill has been allocated as follows:
|
|
|
|
|
|
As at 31
December
|
|
|
|
|
|
2023
|
2022
|
|
|
|
|
|
$m
|
$m
|
Injectables
|
|
|
|
|
228
|
229
|
Branded
|
|
|
|
|
160
|
160
|
Total
|
|
|
|
|
388
|
389
|
In accordance with the Group
policy, goodwill is tested annually for impairment during the
fourth quarter or more frequently if there are indicators that
goodwill may be impaired. The impairment test was performed by
calculating the recoverable amount of the CGUs to which the
goodwill is allocated, based on discounted cash flows by applying
an appropriate discount rate that reflects the risk factors
associated with the cash flows under which these CGUs sit.
These values are then compared to the carrying value of the
CGUs to determine whether an impairment is required.
Details related to the discounted
cash flow models used in the impairment tests of the CGUs under
which the goodwill is allocated are as follows:
Valuation basis, terminal growth
rate and discount rate
|
|
Valuation basis
|
Terminal
growth rate (perpetuity)
|
Discount
rate
|
|
|
2023
|
2022
|
2023
|
2022
|
|
Injectables
|
VIU
|
2.5%
|
1.6%
|
12.6%
|
12.0%
|
Pre−tax
|
Branded
|
VIU
|
2.5%
|
2.2%
|
17.4%
|
17.7%
|
Pre−tax
|
Key assumptions
|
Projected cash flows based
on:
Sales growth rates, informed by
pricing and volume assumptions
|
|
Profit margins and profit margin
growth rates for marketed and pipeline products
|
|
Expected launch dates for pipeline
products
|
|
Terminal growth rates
|
|
Discount rates
|
|
Determination of
assumptions
|
Growth rates are internal
forecasts based on both internal and external market information,
informed by historical experience and management's best estimates
of the future
|
|
Margins reflect past experience,
adjusted for expected changes in the future
Establishing the launch date and
probability of a successful product approval for pipeline
products
|
|
Terminal growth rates are based on
the Group's experience in its markets
|
|
Discount rates for each CGU are
derived from specific regions/countries
|
|
Period of specific projected cash
flows
|
5 years
|
|
The valuation did not result in
any impairment for the CGUs and indicated that sufficient headroom
exists even under reasonable changes in key assumptions.
The Group monitors the development
of climate related risks and assessed the qualitative and
quantitative impact which is not expected to have a material impact
on the consolidated financial statements nor the recoverable amount
of the CGUs.
Product-related intangible assets
Product rights not yet available for use
Product rights not yet available
for use amounts to $75 million (2022: $22 million), no amortisation
has been charged against them. The Group performs an impairment
review of these assets annually. The result of this test was an
impairment charge of $3 million in the Generics segment mainly due
to the high risk of obtaining regulatory approval for a certain
product (2022: $8 million in the Injectables
segment).
Product rights
Product rights consists of
marketed products of $469 million (2022: $535 million) which
includes one product in the injectables CGU of $129 million (2022:
$140 million) that has a remaining useful life of twelve years
(2022: thirteen years), in addition to generic Advair Diskus® of
$87 million (2022: $97 million) that has a remaining useful life of
eight years (2022: nine years). The product rights have an
average estimated useful life of twelve years.
The Group performs impairment
indicators assessment for definite life intangible assets, if any
indicator exists, the Group reconsiders the asset's estimated
economic benefit, calculates the recoverable value of the
individual assets or asset group's cash flows and compares such
value against the individual asset's or asset group's carrying
amount. If the carrying amount is greater, the Group records
an impairment loss for the excess of book value over the
recoverable value. As at 31 December 2023, the result of this
testing was an impairment charge of $10 million (2022: $64
million).
Software
Software intangibles mainly
represent the Enterprise Resource Planning solutions that are being
implemented in different operations across the Group in addition to
other software applications, of which $1 million is not yet
available for use (2022: $9 million). The software has an average
estimated useful life that varies from three to ten
years.
Following a review of impairment
indicators for software as at 31 December 2023, an impairment
charge of $5 million was recognised (2022: $1 million).
Other identified intangibles
Other identified intangibles
comprise marketing rights, customer relationships and trade names
of $137 million (2022: $135 million) of which $76 million represent
assets not yet available for use (2022: $58 million). The Group
performs an impairment review of other identified intangible assets
that are not yet available for use annually, and performs
impairment indicators assessment for assets in use. The result of
this test was an impairment charge of $17 million mainly in the
Injectables and Generics segments due to the discontinuation of
certain marketing rights (2022: $29 million).
Marketing rights
Marketing rights are amortised
over their useful lives commencing in the year in which the rights
are ready for use with estimated useful lives varying from two to
ten years.
Customer relationships
Customer relationships represent
the value attributed to existing direct customers that the Group
acquired on the acquisition of subsidiaries. The customer
relationships have an average estimated useful life of fifteen
years.
Trade names
Trade names were mainly recognised
on the acquisition of Hikma Germany GmbH (Germany) with estimated
useful lives of ten years.
10. Property, plant and equipment
|
Land and
buildings
|
Machinery and
equipment
|
Vehicles, fixtures and
equipment
|
Projects under
construction
|
Total
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
Cost
|
|
|
|
|
|
Balance at 1 January 2022
|
676
|
796
|
138
|
271
|
1,881
|
Additions
|
4
|
16
|
7
|
114
|
141
|
Disposals
|
(1)
|
(10)
|
(3)
|
(1)
|
(15)
|
Transfers
|
74
|
35
|
11
|
(120)
|
-
|
Acquisition of
subsidiaries
|
-
|
1
|
-
|
-
|
1
|
Transfer to assets classified as
held for distribution
|
(2)
|
-
|
-
|
-
|
(2)
|
Translation adjustment
|
(26)
|
(19)
|
(8)
|
(2)
|
(55)
|
Balance at 31 December 2022 and 1 January
2023
|
725
|
819
|
145
|
262
|
1,951
|
Additions
|
31
|
20
|
7
|
112
|
170
|
Disposals
|
(15)
|
(10)
|
(9)
|
-
|
(34)
|
Transfers
|
43
|
63
|
6
|
(112)
|
-
|
Business combination (Note
16)
|
25
|
3
|
-
|
8
|
36
|
Transfer to assets classified as
held for sale
|
(11)
|
-
|
-
|
-
|
(11)
|
Translation adjustment
|
(1)
|
(1)
|
(1)
|
2
|
(1)
|
Balance at 31 December 2023
|
797
|
894
|
148
|
272
|
2,111
|
|
|
|
|
|
|
Accumulated depreciation and impairment
|
|
|
|
|
|
Balance at 1 January
2022
|
(231)
|
(458)
|
(117)
|
(3)
|
(809)
|
Charge for the year
|
(21)
|
(47)
|
(12)
|
-
|
(80)
|
Disposals
|
1
|
9
|
3
|
-
|
13
|
Impairment
|
-
|
(16)
|
-
|
(61)
|
(77)
|
Translation adjustment
|
8
|
13
|
5
|
-
|
26
|
Balance at 31 December 2022 and 1 January
2023
|
(243)
|
(499)
|
(121)
|
(64)
|
(927)
|
Charge for the year
|
(23)
|
(49)
|
(12)
|
-
|
(84)
|
Disposals
|
-
|
7
|
9
|
-
|
16
|
Impairment
|
(14)
|
(8)
|
(1)
|
(3)
|
(26)
|
Translation adjustment
|
2
|
3
|
1
|
-
|
6
|
Balance at 31 December 2023
|
(278)
|
(546)
|
(124)
|
(67)
|
(1,015)
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
At 31 December 2023
|
519
|
348
|
24
|
205
|
1,096
|
At 31 December 2022
|
482
|
320
|
24
|
198
|
1,024
|
Land is not subject to
depreciation.
As at 31 December 2023, the Group
had pledged property, plant and equipment with a carrying value of
$nil (2022: $8 million) as collateral for various long-term loans.
In 2022, the amount included specific items in the net property,
plant and equipment of the Group's businesses in
Tunisia.
As at 31 December 2023, the Group
had entered into contractual commitments for the acquisition of
property, plant and equipment amounting to $52 million (2022:
$40 million).
During the year ended 31 December
2023, $2 million of borrowing costs have been capitalised (2022:
$[nil]).
As at 31 December 2023, the Group
booked an impairment charge of $26 million mainly in relation to
Sudan exposure (Notes 5). In 2022, the Group booked an
impairment charge of $77 million. $61 million of the impairment
charge is in respect of the excess capacity and the rationalisation
of the R&D pipeline associated production lines in the Generics
CGU, in addition to $16 million of impairment of generic Advair
Diskus® CGU related property, plant and equipment (Notes
5).
11. Trade and other receivables
|
|
|
|
|
|
As at 31
December
|
|
|
|
|
|
2023
|
2022
|
|
|
|
|
$m
|
$m
|
Gross trade receivables
|
|
|
|
|
1,222
|
1,128
|
Chargebacks and other
allowances
|
|
|
|
|
(352)
|
(298)
|
Expected credit loss
allowance
|
|
|
|
|
(81)
|
(53)
|
Net trade receivables
|
|
|
|
|
789
|
777
|
VAT and sales tax
recoverable
|
|
|
|
|
35
|
32
|
Net trade and other
receivables
|
|
|
|
|
824
|
809
|
The fair value of receivables is
estimated to be not significantly different from the respective
carrying amounts.
Trade receivables are stated net
of provisions for chargebacks, other allowances and expected credit
loss allowance as follows:
|
As
at
31 December 2022 and 1 January 2023
|
Additions, net
|
Utilisation
|
Translation adjustments
|
Acquisition of subsidiaries
|
As at
31 December 2023
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Chargebacks and other
allowances
|
298
|
2,560
|
(2,505)
|
(1)
|
-
|
352
|
Expected credit loss
allowance
|
53
|
32
|
(4)
|
-
|
-
|
81
|
|
351
|
2,592
|
(2,509)
|
(1)
|
-
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at
31 December 2021 and 1 January 2022
|
Additions, net
|
Utilisation
|
Translation adjustments
|
Acquisition of subsidiaries
|
As
at
31 December 2022
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
Chargebacks and other
allowances
|
275
|
2,344
|
(2,346)
|
-
|
25
|
298
|
Expected credit loss
allowance
|
51
|
5
|
-
|
(3)
|
-
|
53
|
|
326
|
2,349
|
(2,346)
|
(3)
|
25
|
351
|
The increase in the allowance for expected credit loss is mainly
driven by the impairment of trade and other receivables related to
Sudan exposure (Note 5).
At 31 December 2023, the provision
balance relating to chargebacks was $236 million (2022: $204
million). The key inputs and assumptions included in calculating
this provision are estimations of 'in channel' inventory at the
wholesalers (including processing lag) of 39 days (2022: 36 days),
estimated chargeback rates as informed by average historical
chargeback credits adjusted for expected chargeback levels for new
products, changes to pricing and estimated future sales trends
(including customer mix). Based on the conditions existing at the
balance sheet date, an increase/decrease in the estimate of in
channel inventory by 1 day increases/decreases the provision by $6
million (2022: $5 million), and if the overall chargeback rate of
57% (2022: 57%) increases/decreases by one percentage point, the
provision would increase/decrease by $4 million (2022: $4
million).
At 31 December 2023, the provision
balance relating to customer rebates was $49 million (2022: $49
million). The key inputs and assumptions included in calculating
this provision are the historical relationship between contractual
rebate payments to revenue, past payment experience, changes to
pricing and sales levels, estimation of 'in channel' inventory at
the wholesalers and retail pharmacies and estimated future sales
trends (including customer mix). Based on the conditions existing
at the balance sheet date, a ten-basis point increase/decrease in
the rebates rate of 4.9% (2022: 5.7%) would increase/decrease this
provision by approximately $1 million (2022: approximately
$1 million).
12. Short-term financial debts
|
|
As at 31
December
|
|
2023
|
2022
|
|
$m
|
$m
|
Bank overdrafts
|
2
|
11
|
Import and export
financing1
|
44
|
62
|
Short-term loans
|
-
|
2
|
Current portion of long-term loans
(Note 14)
|
104
|
64
|
|
150
|
139
|
|
2023
|
2022
|
|
%
|
%
|
The weighted average interest
rates incurred are as follows:
|
|
|
Bank overdrafts
|
13.34
|
4.78
|
Import and export
financing
|
7.10
|
5.87
|
Short-term loans
|
4.75
|
4.20
|
1. Import and export financing
represents short-term financing for the ordinary trading activities
of the Group
13. Provisions
|
|
End of service
indemnity
|
Legal
|
Total
|
|
|
$m
|
$m
|
$m
|
Balance at 1 January
2022
|
|
31
|
-
|
31
|
Additions
|
|
8
|
-
|
8
|
Utilisations
|
|
(7)
|
-
|
(7)
|
Balance at 31 December 2022 and 1
January 2023
|
|
32
|
-
|
32
|
Additions
|
|
3
|
129
|
132
|
Utilisations
|
|
(5)
|
-
|
(5)
|
Balance at 31 December
2023
|
|
30
|
129
|
159
|
|
2023
|
2022
|
|
$m
|
$m
|
Due within one year
|
152
|
32
|
Due after more than one
year
|
7
|
-
|
|
159
|
32
|
Provision for end of service
indemnity relates to employees of certain Group subsidiaries and
includes some immaterial amounts for defined benefit plans. This
provision is calculated based on relevant laws in the countries
where each Group company operates, in addition to their own
policies. For defined benefit plans, the actuarial valuations
performed in 2023 did not result in any change in the net liability
(2022: $nil)
Legal provision is related to the
expected settlement amount for legal matters, of which $7 million
is expected to be settled after more than one year (Notes 5 and
18).
14. Long-term financial debts
|
|
As at 31 December
|
|
2023
|
2022
|
|
$m
|
$m
|
Long-term loans
|
582
|
644
|
Long-term borrowings
(Eurobond)
|
497
|
494
|
Less: current portion of long-term
loans (Note 12)
|
(104)
|
(64)
|
Long-term financial
loans
|
975
|
1,074
|
Breakdown by maturity:
|
|
|
Within one year
|
104
|
64
|
In the second year
|
604
|
65
|
In the third year
|
100
|
553
|
In the fourth year
|
208
|
52
|
In the fifth year
|
59
|
401
|
In the sixth year
|
4
|
1
|
Thereafter
|
-
|
2
|
|
1,079
|
1,138
|
Breakdown by currency:
|
|
|
US dollar
|
1,002
|
1,068
|
Euro
|
21
|
31
|
Jordanian dinar
|
13
|
16
|
Algerian dinar
|
29
|
16
|
Saudi riyal
|
-
|
-
|
Moroccan dirham
|
11
|
6
|
Tunisian dinar
|
3
|
1
|
|
1,079
|
1,138
|
The loans are held at amortised
cost.
None of the long-term loans were
secured on certain property, plant and equipment (31 December 2022:
$1 million).
Major loan arrangements
include:
a) $1,150 million
syndicated revolving credit facility that matures on 4 January
2029. At 31 December 2023, the facility had an outstanding balance
of $nil (2022: $278 million) and an unutilised amount of $1,150
million (2022: $872 million). The facility can be used for general
corporate purposes
b) A $500 million
3.25%, five-year Eurobond with a rating of BBB- (S&P &
Fitch) that matures on 9 July 2025. At 31 December 2023, the
facility had an outstanding balance of $497 million (2022: $494
million) and a fair value of $481 million (2022: $466 million). The
proceeds were used for general corporate purposes
c) A $400 million
five-year syndicated loan facility that matures on 13 October 2027.
At 31 December 2023, the facility had an outstanding balance of
$315 million (2022: $190 million) and a fair value of $315 million
(2022: $190 million). The proceeds were used for general corporate
purposes
d) A $200 million
eight-year loan facility from the International Finance Corporation
and Managed Co-lending Portfolio program that matures on 15
September 2028. At 31 December 2023, the facility had an
outstanding balance of $100 million (2022: no utilisation) and a
fair value of $100 million (2022: $nil), the remaining $100 million
has an availability period until March 2024. The facility can be
used for general corporate purposes
e) A $150 million
ten-year loan facility from the International Finance Corporation
that matures on 15 December 2027. At 31 December 2023, the facility
had an outstanding balance of $86 million (2022: $108 million) and
a fair value of $80 million (2022: $98 million). The proceeds were
used for general corporate purposes
|
2023
|
2022
|
|
%
|
%
|
The weighted average interest
rates incurred are as follows:
|
|
|
Bank loans (including the current
bank loans)
|
5.76
|
2.96
|
Eurobond1
|
3.68
|
3.69
|
1. The Eurobond effective interest
rate includes unwinding of discount amount and upfront
fees
15. Cash generated from operating
activities
|
2023
|
2022
|
|
$m
|
$m
|
Profit before tax
|
281
|
233
|
Adjustments for depreciation,
amortisation and impairment charges of:
|
|
|
Property, plant and
equipment
|
110
|
157
|
Intangible assets
|
131
|
202
|
Right-of-use of assets
|
18
|
13
|
Unwinding of acquisition related
inventory step-up
|
-
|
26
|
Reclassification of translation
gains on disposal of subsidiary
|
-
|
(5)
|
(Gain)/loss from investment at
fair value through profit or loss (FVTPL)
|
(2)
|
2
|
Gain on disposal of intangible
assets
|
-
|
(6)
|
Cost of equity-settled employee
share scheme
|
25
|
22
|
Finance income
|
(7)
|
(29)
|
Finance expense
|
95
|
81
|
Foreign exchange loss and
net monetary hyperinflation impact
|
6
|
20
|
Changes in working
capital:
|
|
|
Change
in trade and other receivables
|
(24)
|
4
|
Change
in other current assets
|
(9)
|
(19)
|
Change
in inventories
|
(115)
|
(102)
|
Change
in trade and other payables
|
88
|
16
|
Change
in other current liabilities
|
13
|
(16)
|
Change
in provisions
|
127
|
1
|
Change in other non-current
assets
|
5
|
(9)
|
Change in other non-current
liabilities
|
(5)
|
(6)
|
Cash flow from operating
activities
|
737
|
585
|
16. Business combination
Akorn Operating Company LLC (Akorn)
On 5 July 2023, the Group
completed the acquisition of the assets of Akorn as part of a
Chapter 7 Bankruptcy process, and paid cash consideration of
$98 million. This acquisition has been accounted for as a
business combination in accordance with the requirements of IFRS 3
'business combination'.
The net assets acquired in the
transaction are provisional. The identifiable assets and
liabilities recognised as a result of this acquisition are as
follows:
|
$m
|
Product related intangible assets
(Note 9)
|
63
|
Property, Plant and Equipment
(Note 10)
|
36
|
Inventories
|
2
|
Other current
liabilities
|
(3)
|
Net assets acquired
|
98
|
Total consideration
|
98
|
|
|
Satisfied by:
|
|
Cash consideration
|
98
|
Net cash outflow arising from acquisition
|
98
|
Product related intangible assets
comprise product rights of $36 million and IPR&D of $27
million. $19 million of product rights are expected to be ready for
use following the finalisation of the technology transfer process.
Property, plant and equipment mainly included land and buildings of
$25 million, and machinery and equipment of $11 million, of which
the Group has disposed of $15 million of land and buildings, and $3
million of machinery and equipment, no gain/loss has been
recognised as a result of these disposals. At 31 December 2023, $11
million of land and buildings has been classified as held for
sale.
Other liabilities mainly comprise
technology transfer costs. No goodwill arose as a result of this
acquisition.
Akorn did not contribute to the
revenue and profit before tax of the Group in 2023 as the
contributions are expected to flow after the finalisation of the
technology transfer process.
17. Contingent liabilities
Standby letters of credit and
letters of guarantee
A contingent liability existed at
the balance sheet date in respect of standby letters of credit and
letters of guarantee totalling $55 million (2022: $55 million)
arising in the normal course of business. No provision for these
liabilities has been made in these consolidated financial
statements.
A contingent liability existed at
the balance sheet date for standby letters of credit totalling $14
million (2022: $14 million) for potential stamp duty obligations
that may arise from the repayment of loans by intercompany
guarantors. It's not probable that any repayment will be made by
the intercompany guarantors.
Legal proceedings
The Group is involved in a number
of legal proceedings in the ordinary course of its business,
including actual or threatened litigation and actual or potential
government investigations relating to employment matters, product
liability, commercial disputes, pricing, sales and marketing
practices, infringement of IP rights, the validity of certain
patents and competition laws.
Most of the claims involve highly
complex issues. Often these issues are subject to substantial
uncertainties and, therefore, the probability of a loss, if any,
being sustained and/or an estimate of the amount of any loss is
difficult to ascertain. It is the Group's policy to provide for
amounts related to these legal matters if it is probable that a
liability has been incurred and an amount is reasonably
estimable.
The Group currently intends to
vigorously defend against these proceedings. From time to time,
however, the Group may settle or otherwise resolve these matters on
terms and conditions that it believes to be in its best
interest.
-
Starting in 2016, several complaints have been
filed in the United States on behalf of putative classes of direct
and indirect purchasers of generic drug products, as well as
several individual direct purchasers opt-out plaintiffs and
third-party payors of generic drug products. These complaints,
which now number thirty-two allege that more than forty generic
pharmaceutical defendants including the Group entities engaged in
conspiracies to fix, increase, maintain and/or stabilise the prices
and market shares of the generic drug products named between
approximately 2010 and 2016. The plaintiffs seek treble damages,
which can be significantly higher than the profits Hikma made on
the named drug products, and equitable injunctive relief under
federal and state antitrust and consumer protection laws. The
lawsuits have been consolidated in a multidistrict litigation (MDL)
court in the United States District Court for the Eastern District
of Pennsylvania (In re Generic Pharmaceuticals Pricing Antitrust
Litigation, No. 2724, (E.D. Pa.)). At this point, the Group does
not believe sufficient evidence exists to make any
provision.
-
Starting in June 2020, several complaints have
been filed in the United States on behalf of both individual
plaintiffs and putative classes of direct and indirect purchasers,
as well as third party payors of Xyrem® against certain Group
entities and other defendants. Currently, most of these cases have
been consolidated in an MDL court in the United States District
Court for the Northern District of California (In re Xyrem (Sodium
Oxybate) Antitrust Litigation, No.2966, (N.D. Cal)). These
complaints allege that Jazz Pharmaceuticals PLC and its
subsidiaries entered into unlawful "pay-for-delay" reverse payment
agreements with each of the defendants, including Hikma, in
settling patent infringement litigation over Xyrem®. The plaintiffs
in these lawsuits seek treble damages, which can be significantly
higher than the profits Hikma makes from selling the generic
version of Xyrem®, and equitable injunctive relief under federal
and state antitrust and consumer protection laws. A trial has been
scheduled to start on October 28, 2024 in the MDL matter. At
this point, the Group does not believe sufficient evidence exists
to make any provision.
-
In November 2020, Amarin Pharmaceuticals filed a
patent infringement lawsuit against certain Group entities in the
United States District Court for the District of Delaware (No.
20-cv-1630) alleging that Hikma's sales and distribution of its
generic icosapent ethyl product infringes three Amarin patents that
describe certain methods of using icosapent ethyl. Amarin sought an
injunction barring Hikma from selling its generic product as well
as unspecified damages. Hikma's product is not approved for the
patented methods but rather is approved only for a different
indication not covered by any valid patents. In January 2022 the
court dismissed the lawsuit, and Amarin has appealed the court's
ruling to the United States Court of Appeals for the Federal
Circuit. Briefing on the appeal has been completed but no
oral argument has been scheduled. The Group does not believe
sufficient evidence exists to make any provision.
18. Subsequent event
On 1 February 2024, the
Group reached an agreement in principle to resolve the vast
majority of the opioid related cases brought against Hikma
Pharmaceuticals USA Inc. by US states, their subdivisions, and
tribal nations. These cases relate to the manufacture and sale of
prescription opioid medications. The agreed upon settlement is not
an admission of wrongdoing or legal liability.
The Group booked a total provision
of $129 million to cover the expected settlement amount for all
related cases in North America. The provision is considered an
adjusting post balance sheet event and is recognised as an
exceptional item in the consolidated financial statements for the
year ended 31 December 2023 (Notes 5 and 13).