A combination of an increase in sales of Chinese medical products and a major partnership agreement with AstraZeneca helped Hutchison China Meditech record its maiden profit last year. The $20m (£12.5m) deal means Hutchison's drug development programme is now self-funded, but it's sales growth of home-produced medicine that reflected the company's commercial expansion in mainland China. Paradoxically, this is both the company's strength and weakness as investors have taken a more cautious attitude towards the Chinese economy.
Sales in the company's healthcare division climbed by 17 per cent to $271m (£171m) last year and produced an 11 per cent higher operating profit of $14m, as the business benefited from organic growth in nine core products, including six over-the-counter (OTC) brands. But, it was sales of prescription medicines that was the key driver, with revenues here up 30 per cent to $92.4m, reflecting the company's growing presence in China and expansion of its distribution network. Hutchison's OTC product range also posted double-digit sales growth, helped in part by acquisitions, but this unit suffered from rising raw materials costs and consequent discounting to maintain market share.
The extra milestone funding for the drug development division means Hutchinson now has six products in clinical trials, with two in phase I trials and one in phase IIb.
Broker Charles Stanley expects an operating profit of $6.7m in 2012.
HUTCHISON CHINA MEDITECH (HCM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 443p | MARKET VALUE: | £229m | |
| TOUCH: | 435-450p | 12-MONTH HIGH: | 488p | LOW: 172p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 125¢* | NET CASH**: | $3.6m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 65 | -10.0 | -23.6 | nil |
| 2008 | 87 | -14.8 | -35.0 | nil |
| 2009 | 111 | -5.0 | -17.1 | nil |
| 2010 | 135 | -2.6 | -13.3 | nil |
| 2011 | 167 | 4.8 | 1.4 | nil |
| % change | +24 | - | - | - |
*Includes intangible assets of $23m, or 45¢ a share **Net of convertible preference shares of $20.1m £1:$1.58 | ||||
