Hikma's reorganisation of its US generics business yielded an immediate dividend in the first half: a 185 per cent increase in the division's operating profit to $26.1m (£16.9m). This allowed the middle-east-based pharmaceutical manufacturer to shrug off operational problems in its branded medicines business and post overall operating profits nearly 30 per cent higher at $74.3m.
The turnaround in the generics business was down to increased sales on top of a relatively stable cost base, which meant gross margins climbed 14 percentage points to 47.9 per cent. Management does not expect this outperformance to continue in the second half, but still forecasts 20 per cent generics revenue growth for 2010.
The branded medicines business, which sells branded medicines in the middle east, came under pressure after Algeria banned importation of medicines and forced Hikma to source more production locally. This disruption, combined with greater marketing costs, meant operating profits fell 10.5 per cent to $49.5m on a reduced margin of 25.5 per cent. However, a better second half should deliver low double-digit revenue growth. The injectables business saw an 18 per cent increase in operating profits to $10.6m.
KBC Peel Hunt upgraded its 2010 forecasts for pre-tax profit and EPS by 9 per cent and 12 per cent to $128m and 54¢, respectively, but kept 2011's figures under review.
HIKMA PHARMACEUTICALS (HIK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 734p | MARKET VALUE: | £1.42bn | |
| TOUCH: | 732-734p | 12-MONTH HIGH: | 746p | LOW: 440p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 359¢* | NET DEBT: | 18% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2009 | 321 | 50.4 | 22.8 | 4.50 |
| 2010 | 358 | 67.4 | 28.5 | 5.50 |
| % change | +12 | +34 | +25 | +22 |
Ex-div: 08 Sep Payment: 14 Oct *Includes intangible assets of $265m, or 137¢ a share £-$=1.54 | ||||
