In the last six months, Hikma’s (HIK) new management has provided a masterclass in restoring faith. A cautiously optimistic outlook statement, five separate drug launches and two strategic partnership announcements have sent the group’s share price up 89 per cent since the full-year results. Fortunately, half-year numbers have more than justified that rise: operating profit was up 23 per cent on a like-for-like basis off the back of solid revenue growth and widening margins. The question now is whether Hikma can keep going?
Upgraded guidance in the injectables and generics businesses (the two largest divisions) is certainly a good sign. Both reported a double-digit increase in both revenues and adjusted operating profit in the first half, meaning management now expects solid sales growth in both divisions, despite the continued competitive pressures. Broker Numis has upgraded its 2018 earnings forecasts to 107ȼ (84p) as a result (from 105ȼ in 2017).
But it’s worth noting that Hikma’s injectables business was boosted by severe shortage in pain management medicines in the US hospitals in the first half which increased demand. That supply and demand imbalance is unlikely to continue indefinitely. Meanwhile, research and development expenditure at the generics business will tick back up again in the second half, which will constrain the division’s operating profit margins.
| HIKMA (HIK) | ||||
| ORD PRICE: | 1,782p | MARKET VALUE: | £4.29bn | |
| TOUCH: | 1,780-1,782p | 12-MONTH HIGH: | 1,818p | LOW: 814p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 633ȼ* | NET DEBT: | 32% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2017 | 895 | 100 | 28.8 | 11.0 |
| 2018 | 989 | 141 | 44.0 | 12.0 |
| % change | +11 | +41 | +53 | +9 |
| Ex-div: | 23 Aug | |||
| Payment: | 21 Sep | |||
| *Includes intangible assets of $776m, or 321ȼ a share £1=$1.27 | ||||
