| Thu 20 Aug 2009, 7:05 | | CMP - Cipla Medpro - Unaudited Results For The 6 Months Ended 30 June 2009 |
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CMP
CMP
CMP - Cipla Medpro - Unaudited Results For The 6 Months Ended 30 June 2009
CIPLA MEDPRO SOUTH AFRICA LIMITED
(formerly Enaleni Pharmaceuticals Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2002/018027/06)
(ISIN Number: ZAE000128179 Share Code: CMP)
("Cipla Medpro" or "the Company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2009
Fourth largest pharmaceutical company by value
Fastest growing pharmaceutical company (EV 121,7)
Cipla Medpro division revenue up 24%
PBIT increases 8% to R117,3 million
HEPS up 8% to 15,6 cents
Normalised HEPS up 29% to 15,3 cents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
6 months 6 months Year ended
ended ended 31 December
30 June 2009 30 June 2008 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 555 365 463 433 994 892
Gross profit 257 868 223 116 493 339
Other income 5 703 3 602 7 256
Other operating
expenses (146 257) (118 289) (273 075)
Profit before finance
costs and
income tax 117 314 108 429 227 520
Finance costs (18 561) (19 781) (64 897)
Finance income 3 357 11 449 30 024
Profit before income tax 102 110 100 097 192 647
Income tax expense (33 008) (35 061) (62 593)
Profit for the period 69 102 65 036 130 054
Profit attributable to:
Equity holders of the
parent 68 576 64 622 128 679
Non-controlling interest 526 414 1 375
Profit for the period 69 102 65 036 130 054
Other comprehensive
income for the period
(net of income tax) - - -
Total comprehensive
income for the period 69 102 65 036 130 054
Total comprehensive income
attributable to:
Equity holders of the
parent 68 576 64 622 128 679
Non-controlling interest 526 414 1 375
Total comprehensive
income for the period 69 102 65 036 130 054
Number of shares (`000)
Weighted average (basic) 440 015 439 550 439 784
Weighted average (diluted) 440 706 439 909 439 974
Earnings per share (cents)
Basic 15,6 14,7 29,3
Diluted 15,6 14,7 29,2
Reconciliation of
headline earnings
Profit attributable to
ordinary shareholders 68 576 64 622 128 679
Adjusted for: (3) (1 130) (657)
(Gain) loss on
disposals of property,
plant and equipment (4) 213 172
Gain on disposals of
intangible assets - (1 087) (1 087)
(Gain) loss on disposals of
discontinued operations - (440) 151
Total tax effects of
adjustments 1 184 107
Headline earnings 68 573 63 492 128 022
Headline earnings per
share (cents)
Basic 15,6 14,4 29,1
Diluted 15,6 14,4 29,1
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June 30 June 31 December
2009 2008 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 1 770 538 1 578 337 1 697 023
Property, plant and equipment 341 190 196 424 287 174
Intangible assets 1 415 153 1 374 610 1 402 745
Other investments 4 7 4
Deferred tax assets 14 191 7 296 7 100
Current assets 479 422 470 953 458 272
Inventories 200 901 119 390 190 542
Income tax receivable 1 135 1 117 1 135
Trade and other receivables 261 228 197 589 222 839
Loans receivable 3 824 2 682 3 505
Cash and cash equivalents 12 334 150 175 40 251
Total assets 2 249 960 2 049 290 2 155 295
EQUITY AND LIABILITIES
Capital and reserves 1 474 877 1 336 734 1 404 284
Non-controlling interest 2 166 566 1 640
Total equity 1 477 043 1 337 300 1 405 924
Non-current liabilities 341 389 378 377 346 818
Loans and borrowings 335 485 369 843 345 024
Deferred tax liabilities 5 904 8 534 1 794
Current liabilities 431 528 333 613 402 553
Bank overdraft 36 256 - 8 542
Loans and borrowings 5 946 992 1 926
Income tax payable 48 181 57 613 15 298
Trade and other payables 341 145 275 008 376 787
Total liabilities 772 917 711 990 749 371
Total equity and liabilities 2 249 960 2 049 290 2 155 295
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 months 6 months Year ended
ended ended 31 December
30 June 2009 30 June 2008 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash flows from
operating activities 1 894 114 608 142 503
Cash flows from
investing activities (52 006) (47 564) (170 380)
Cash flows from
financing activities (5 519) (76 518) (100 063)
Net decrease in cash
and cash equivalents (55 631) (9 474) (127 940)
Cash and cash equivalents
at beginning of the period 31 709 159 649 159 649
Cash and cash equivalents
at end of the period (23 922) 150 175 31 709
CONDENSED CONSOLIDATED SEGMENTAL REPORT
6 months 6 months Year ended
ended ended 31 December
30 June 2009 30 June 2008 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Segment revenue
Cipla Medpro 543 929 437 754 937 385
CMM 11 436 25 679 57 507
Head office - - -
Total 555 365 463 433 994 892
Segment result
Cipla Medpro 143 662 126 880 255 106
CMM (20 644) (15 971) (15 335)
Head office (5 704) (2 480) (12 251)
Total 117 314 108 429 227 520
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Share Share Treasury
capital premium shares
R`000 R`000 R`000
Balance at 1 January 2008 443 1 019 296 (8 707)
Total comprehensive income for the year - - -
Shares issued from Share Incentive Trust - - 737
IFRS 2 Share-based Payments - - -
Acquisition of non-controlling interest - - -
Balance at 1 January 2009 443 1 019 296 (7 970)
Total comprehensive income for the period - - -
IFRS 2 Share-based Payments - - -
Balance at 30 June 2009 443 1 019 296 (7 970)
Attributable to equity holders of the parent
Retained
income Total
R`000 R`000
Balance at 1 January 2008 259 190 1 270 222
Total comprehensive income for the year 128 679 128 679
Shares issued from Share Incentive Trust - 737
IFRS 2 Share-based Payments 4 646 4 646
Acquisition of non-controlling interest - -
Balance at 1 January 2009 392 515 1 404 284
Total comprehensive income for the period 68 576 68 576
IFRS 2 Share-based Payments 2 017 2 017
Balance at 30 June 2009 463 108 1 474 877
Non-controlling Total
interest equity
R`000 R`000
Balance at 1 January 2008 152 1 270 374
Total comprehensive income for the year 1 375 130 054
Shares issued from Share Incentive Trust - 737
IFRS 2 Share-based Payments - 4 646
Acquisition of non-controlling interest 113 113
Balance at 1 January 2009 1 640 1 405 924
Total comprehensive income for the period 526 69 102
IFRS 2 Share-based Payments - 2 017
Balance at 30 June 2009 2 166 1 477 043
COMMENTARY
FINANCIAL PERFORMANCE
The Cipla Medpro division succeeded in growing revenues by 24,3%, and PBIT by
14,1%. This growth was achieved under trying circumstances given the fact that
the focus of management was diverted to dealing with the Adcock bid process.
Furthermore, the uncertainty and concern experienced by staff and customers
cannot be underestimated.
Despite the above, Cipla Medpro achieved the highest Evolution Index (121,7)
(June 2009 IMS) of the top 10 pharmaceutical companies in South Africa.
The SEP increase came into effect in February 2009, but the positive effect was
only felt in April 2009 due to stock piling that took place prior to the
increase.
The Adcock offer placed restrictions on the business as a whole, and had a
negative impact on the manufacturing division, which was unable to negotiate
and conclude contracts with 3rd parties due to the uncertainty. Furthermore,
discussions to consolidate our business for the future had to be put on hold.
The group achieved growth despite the economic recession and the costs incurred
in the Adcock bid. Revenues grew by 19,8% to R555,4 million (2008: R463,4
million) mainly attributable to the volume growth achieved in the Cipla Medpro
division.
The gross margin declined slightly to 46,4% (2008: 48,1%). This decrease in
margin is mainly attributable to the adverse exchange rate experienced, however
the SEP increase negated some of the unfavourable exchange rate impact.
Profit before financing costs and income tax (PBIT) for the period is
R117,3 million (2008: R108,4 million), an increase of 8,2%. The operating
Profit includes exchange rate gains of R5,5 million (2008: loss of
R5,6 million).
The net finance costs increased to R15,2 million (2008: R8,3 million) mainly
due to the movement on interest rate swaps of R12,4 million and the use of
overdraft facilities during the period. Finance income of R3,4 million (2008:
R11,4 million) includes swap settlements of R2,8 million (2008: R4,7 million).
After an improvement in the effective tax rate to 32,3% (2008: 35,0%), a profit
after tax for the period of R69,1 million (2008: R65,0 million) was achieved,
resulting in basic and fully diluted EPS of 15,6 cents (2008: basic and fully
diluted EPS of 14,7 cents), an increase of 6,1%. Basic and fully diluted HEPS
increased 8,3% to 15,6 cents (2008: 14,4 cents).
Normalised EPS for the period, after adjusting for the full effect of the
interest rate swap settlements, increased 26,4% to 15,3 cents (2008: 12,1
cents). Normalised HEPS for the period increased 28,6% to 15,3 cents (2008:
11,9 cents).
The reconciliation to headline earnings includes the following amounts:
Gains on the disposal of property, plant and equipment in 2009 of R4 000
(2008: loss of R0,2 million);
2008 also included gains on the disposal of intangibles of R1,1 million and
gains on the disposal of discontinued operations of R0,4 million (2009: no
adjustments).
When the effects of cash on hand are excluded, interest-bearing borrowings
increased to R377,7 million (2008: R370,8 million). At 30 June 2009 the group
is overdrawn to the extent of R23,9 million, compared to a net cash surplus of
R150,2 million at 30 June 2008 primarily due to the factory upgrade and working
capital requirements.
Cash flows generated from operating activities, due to working capital
requirements, are R1,9 million (2008: R114,6 million), while R52,0 million
(2008: R47,6 million) was invested in the group, mainly in the upgraded
facility. A net R5,5 million (2008: R76,5 million) was utilised to repay debt
in the group.
BOARD OF DIRECTORS
With two executive directors and five non-executive directors the board remains
stable and unchanged. The stability and experience of the board proved an
invaluable asset in dealing with the unsolicited offer by Adcock.
OPERATIONAL REVIEW
Cipla Medpro Holdings (Pty) Ltd (Cipla Medpro)
This business continues its growth and by June 2009 was ranked the fourth
largest pharmaceutical company. While the Total Private Market in SA was
growing at 15,0% (Rand value) by June 2009, Cipla Medpro`s growth was 39,9% and
its Evolution Index was 121,7, the highest of the top 10 pharmaceutical
companies. The company`s Total Private Market share by Rand value at June 2009
was 4,3%, and by units, 6,0%.
Cipla Medpro accounted for 100% of the group`s profits, with revenues of R543,9
million (2008: R437,8 million) and PBIT of R143,7 million (2008: R126,0
million). Cipla Medpro`s growth strategy remains focused on growing the Cipla
brands (more than 90% are still growing despite certain brands being launched
some fourteen (14) years ago), diversifying into allied businesses (small and
large animal veterinary products, crop care - herbicides, insecticides etc.),
being competitive in its generic low priced model and focussing on building its
Over the Counter (OTC) business. Furthermore, Cipla Medpro embarked on an
expansion programme into Africa and Europe. We are glad to announce an ongoing
exciting programme for our exports department with partnerships that have
already been cemented and some that are close to being concluded.
Cipla India continues to deliver on their promise of being the best partner
possible. Our exclusive access to Cipla India`s strong pipeline of products and
dossiers has resulted in over 400 dossiers being made available to South Africa
since 1996. Currently 167 dossiers await MCC registration, a further 63 are due
for submission to the MCC, and Cipla India will be delivering an additional 39
dossiers in the next 12 months.
The animal health businesses, although small by comparison to the
pharmaceutical business, continue to perform well. While subject to seasonal
sales fluctuations on some lines, the Cipla Vet business (targeting small and
companion animals) increased its market shares across all product lines, unlike
many competitors. It boasts the market leading position in both the equine and
dog deworming markets. The Cipla Agrimed business (targeting livestock and
production animals) recorded a 40% year to date growth over the same period
last year and 75% of its own brands marketed occupy top ten positions in their
respective categories. Combined with further launches, growth is expected in
the second half of the year.
Like the animal health businesses, the Cipla Agricare business (the new
agrichemicals division launched early 2009) is also seasonal, so initial orders
were low during the winter months. With 22 products registered, many of which
are maize herbicides, this six month old business is expected to achieve the
bulk of its first year targets during the latter half of 2009. Cipla Agricare
currently has four dossiers awaiting registration and a further 17 on the way
from Cipla for commencement of trials and the registration process.
Cipla Medpro Manufacturing (Pty) Ltd (CMM)
As predicted, this division posted a loss before interest and tax of R20,6
million for the period under review. The manufacturing facility is currently
producing some of the group`s own products - Laxette, Pynmed, AlkaFizz,
Gastrolyte and Abflex.
To date, third party manufacturing agreements have been concluded with two
local companies. While the initial contract values are conservative we are
optimistic that as these relationships grow, sales volumes will increase. More
than that, CMM has tendered for a significant portion of the RT 289 Government
tender.
STRATEGY FOR THE GROUP
Our unique product mix, an ever-expanding range within challenging disease
categories and valuable markets, diversification into new categories, as well
as consistent and swift product registrations ensures continued growth of the
business.
The launch of a specialised oncology division is on track for early 2010.
BASIS OF PREPARATION OF THE UNAUDITED RESULTS
The interim consolidated financial statements consist of a statement of
comprehensive income, statement of financial position, statement of changes in
equity, condensed statement of cash flows and condensed segmental report for
the period ended 30 June 2009.
The interim financial statements have been prepared in accordance with IAS 34:
Interim Financial Reporting, and in accordance with the Companies Act in South
Africa. The accounting policies adopted in the preparation of these
consolidated financial statements are consistent with those followed in the
preparation of the group`s annual financial statements for the year ended 31
December 2008.
DIVIDENDS
Currently all earnings generated by the group are utilised to repay debt, fund
the remainder of the factory upgrade and fund growth opportunities.
PCS Luthuli JS Smith
Chairman Chief Executive Officer
20 August 2009
CORPORATE INFORMATION
Non-executive directors PCS Luthuli (Chairman); Dr GS Mahlati;
MT Mosweu; MB Caga; ND Mokone
Executive directors JS Smith (Chief Executive Officer); C Aucamp
(Chief Financial Officer)
Company secretary MW Daly
Registration number 2002/018027/06
JSE code CMP
ISIN ZAE000128179
Registered address 1474 South Coast Road, Mobeni, KwaZulu-Natal,
4052
Postal address PO Box 32003, Mobeni, 4060
Transfer secretaries Computershare Investor Services (Proprietary)
Limited
Telephone +27 31 451 3800
Facsimile +27 31 451 3889
Sponsor Nedbank Capital
Auditors Mazars Moores Rowland
Legal advisors Deneys Reitz Incorporated
Website www.ciplamedsa.co.za
Date: 20/08/2009 07:05:01 Produced by the JSE SENS Department.
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