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CMP
CMP
CMP - Cipla Medpro - Unaudited consolidated interim results and
declaration of ordinary dividend for the six months ended 30 June
2010
CIPLA MEDPRO SOUTH AFRICA 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 CONSOLIDATED INTERIM RESULTS AND DECLARATION OF
ORDINARY DIVIDEND FOR THE SIX MONTHS ENDED 30 JUNE 2010
HEPS and EPS up 58% to 24,6 cents
Normalised HEPS up 64% to 25,1 cents
Group revenue up 29% to R714,3 million
Inaugural interim dividend of 5 cents per share
Fourth largest pharmaceutical company by value - 12 months
to June 2010
Third largest pharmaceutical company by value - month of
June 2010
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 714 335 555 365 1 262 058
Gross profit 401 303 257 868 620 358
Other income 9 923 5 703 6 426
Other operating
expenses (216 545) (146 257) (365 407)
Profit before
finance costs and
income tax 194 681 117 314 261 377
Finance costs (35 125) (18 561) (28 227)
Finance income 539 3 357 5 354
Profit before
income tax 160 095 102 110 238 504
Income tax
expense (50 354) (33 008) (76 418)
Profit for the
period 109 741 69 102 162 086
Profit attributable to:
Equity holders
of the parent 108 733 68 576 159 904
Non-controlling
interest 1 008 526 2 182
Profit for the
period 109 741 69 102 162 086
Other
comprehensive
income for the
period (net of
income tax) - - -
Total
comprehensive
income for
the period 109 741 69 102 162 086
Total
comprehensive
income
attributable to:
Equity holders
of the parent 108 733 68 576 159 904
Non-controlling
interest 1 008 526 2 182
Total
comprehensive
income for
the period 109 741 69 102 162 086
Number of
shares (`000)
In issue 449 856 443 266 449 856
Weighted
average (basic) 442 135 440 015 440 111
Weighted
average
(diluted) 445 236 440 706 441 074
Earnings per
share (cents)
Basic 24,6 15,6 36,3
Diluted 24,4 15,6 36,3
Reconciliation of
headline earnings
Profit attributable
to ordinary
shareholders 108 733 68 576 159 904
Adjusted for: 37 (3) 1 003
Loss (gain) on
disposals of
property, plant
and equipment 43 (4) 1 166
Total tax effects
of adjustments (6) 1 (163)
Headline earnings 108 770 68 573 160 907
Headline earnings
per share (cents)
Basic 24,6 15,6 36,6
Diluted 24,4 15,6 36,5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash flows from
operating
activities 121 154 1 894 10 162
Cash flows from
investing
activities (40 882) (52 006) (118 574)
Cash flows from
financing
activities (17 704) (5 519) 16 560
Net increase
(decrease) in
cash and
cash equivalents 62 568 (55 631) (91 852)
Cash and cash
equivalents at
beginning
of the period (60 143) 31 709 31 709
Cash and cash
equivalents at end
of the period 2 425 (23 922) (60 143)
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
30 June 30 June 31 December
2010 2009 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current
assets 1 879 073 1 770 538 1 836 288
Property, plant
and equipment 404 303 341 190 389 012
Intangible
assets 1 448 275 1 415 153 1 428 577
Other
investments 4 4 4
Loans receivable 47 - -
Deferred tax
assets 26 444 14 191 18 695
Current assets 527 326 479 422 422 625
Inventory 191 888 200 901 181 673
Income tax
receivable 1 137 1 135 1 137
Trade and other
receivables 271 076 261 228 230 970
Loans receivable 2 000 3 824 5 162
Cash and cash
equivalents 61 225 12 334 3 683
Total assets 2 406 399 2 249 960 2 258 913
EQUITY AND
LIABILITIES
Capital and
reserves 1 693 494 1 474 877 1 576 545
Non-controlling
interest 4 580 2 166 3 822
Total equity 1 698 074 1 477 043 1 580 367
Non-current
liabilities 337 938 341 389 358 321
Loans and
borrowings 322 697 335 485 348 779
Deferred tax
liabilities 15 241 5 904 9 542
Current
liabilities 370 387 431 528 320 225
Bank overdraft 58 800 36 256 63 826
Loans and
borrowings 16 808 5 946 8 430
Income tax
payable 61 540 48 181 11 793
Trade and other
payables 233 239 341 145 236 176
Total
liabilities 708 325 772 917 678 546
Total equity
and liabilities 2 406 399 2 249 960 2 258 913
CONDENSED CONSOLIDATED SEGMENTAL REPORT
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Segment revenue -
external customers
Non-factory 698 391 543 929 1 233 348
Factory 15 944 11 436 28 710
Total 714 335 555 365 1 262 058
Segment result
Non-factory 236 028 143 662 308 078
Factory (29 556) (20 644) (35 617)
Head office (11 791) (5 704) (11 084)
Total 194 681 117 314 261 377
Segment assets
Non-factory 2 607 502 2 345 709 2 384 367
Factory 1 269 570 1 222 093 1 227 670
Eliminations(1 470 673) (1 317 842) (1 353 124)
Total 2 406 399 2 249 960 2 258 913
CONDENSED 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 31
December 2008 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)
Total comprehensive
income for the period - - -
Issue of share capital 7 21 654 -
Share issue expenses - (26) -
Shares issued from
the Share Option Trust - - 6 327
Shares acquired by
the Share Option Trust - - (21 661)
IFRS 2 Share-based
Payments - - -
Balance at 31
December 2009 450 1 040 924 (23 304)
Total comprehensive
income for the period - - -
IFRS 2 Share-based
Payments - - -
Dividend paid - - -
Balance at 30 June 2010 450 1 040 924 (23 304)
Attributable to equity holders of the parent
Retained
income Total
R`000 R`000
Balance at 31 December 2008 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
Total comprehensive
income for the period 91 328 91 328
Issue of share capital - 21 661
Share issue expenses - (26)
Shares issued from the
Share Option Trust - 6 327
Shares acquired by the
Share Option Trust - (21 661)
IFRS 2 Share-based Payments 4 039 4 039
Balance at 31 December 2009 558 475 1 576 545
Total comprehensive
income for the period 108 733 108 733
IFRS 2 Share-based Payments 8 216 8 216
Dividend paid - -
Balance at 30 June 2010 675 424 1 693 494
Non-controlling Total
interest equity
R`000 R`000
Balance at 31 December 2008 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
Total comprehensive
income for the period 1 656 92 984
Issue of share capital - 21 661
Share issue expenses - (26)
Shares issued from the
Share Option Trust - 6 327
Shares acquired by the
Share Option Trust - (21 661)
IFRS 2 Share-based Payments - 4 039
Balance at 31 December 2009 3 822 1 580 367
Total comprehensive
income for the period 1 008 109 741
IFRS 2 Share-based Payments - 8 216
Dividend paid (250) (250)
Balance at 30 June 2010 4 580 1 698 074
COMMENTARY
FINANCIAL PERFORMANCE
Cipla is proud to announce a pleasing set of results for
the first six months of 2010. Cipla Medpro maintained its
current standing as the fourth largest pharmaceutical
company by Rand value for the 12 months to June 2010, and
managed to attain the third position for the month of June
2010. The evolution index (EV) for the 12 months was
112,1, which is the highest of the top 10 pharmaceutical
companies in South Africa, whilst an EV of 131,1 was
achieved for the month of June 2010 (IMS, June 2010).
The group`s headline earnings increased to R108,8 million
(2009: R68,6 million), a significant increase of 58,6%.
This translates into an increase of 57,7% to 24,6 cents
(2009: 15,6 cents) at the headline earnings per share
(HEPS) level, based on 442,1 million (2009: 440,0 million)
weighted average number of shares in issue for the 2010
interim period (before the effects of dilution are taken
into account).
The reconciliation to headline earnings includes the loss
on disposal of property, plant and equipment of R36 928
(2009: gain of R3 010), net of tax.
Earnings per share (EPS) improved by 57,7% to 24,6 cents
(2009: 15,6 cents). After adjusting for the full effect of
the interest rate swaps during the period, normalised HEPS
and EPS increased by 64,1% to 25,1 cents (2009: 15,3
cents).
Revenues grew by 28,6% to R714,3 million (2009: R555,4
million). Gross profit increased by 55,6% to R401,3
million (2009: R257,9 million), and the gross profit
margin improved to 56,2% from 46,4% for the comparative
period in 2009 (December 2009: 49,2%). This increase in
margin has been achieved due to the stronger Rand when
compared to the prior comparative period and a price
increase on over-the-counter (OTC) products that was
implemented in March 2010. Although Cipla only implemented
the price increase on the products subject to Single Exit
Price (SEP) regulations in June 2010, with the full effect
of this only materialising during the second half of the
year, the increase in the margin is also due to better
pricing and a more favourable product mix. The Cipla
Medpro division achieved a gross margin of 57,9% when
compared to 48,4% at 30 June 2009 and 50,7% for the full
2009 financial year.
Profit before financing costs and income tax for the
period is R194,7 million (2009: R117,3 million), an
increase of 65,9%. This increase was achieved by
controlling the increase in operating expenditure when
compared to the growth in the gross profit, and an
additional R4,2 million being earned from other income
when compared to the R5,7 million earned in the 2009
comparative period. The operating profit also includes
foreign exchange gains of R9,0 million (2009: R5,5
million).
The net finance costs increased to R34,6 million (2009:
R15,2 million) mainly due to:
swap settlements of R1,3 million (2009: R2,8 million
refund);
an increase of R1,1 million in interest on overdraft
facilities;
an increase of R1,8 million in interest on instalment
sale agreements; and
finance costs of R19,0 million qualifying for
capitalisation during the first six months of 2009 in
terms of IAS 23 Borrowing Costs (2010: Rnil).
Finance income reduced to R0,5 million (2009: R3,4
million) due to no swap refund earned in 2010, when
compared to the R2,8 million refund in the prior
comparative period. Despite the increase in finance costs
the interest cover still remains at a satisfactory level
of 5,5 times (2009: 6,3 times).
After an improvement in the effective tax rate to 31,5%
(2009: 32,3%), profit after tax for the period of R109,7
million (2009: R69,1 million) was achieved. The effective
tax rate will continue to improve during the remainder of
2010 and into 2011 as we continue to settle the preference
shares voluntarily. The main factors resulting in the
effective tax rate being higher than the statutory tax
rate are:
non-deductible preference share interest of R7,5 million
(2009: R12,1 million);
non-deductible IFRS 2 Share-based Payment expenses of
R8,2 million (2009: R2,0 million); and
STC of R0,8 million (2009: R1,2 million).
When the effects of cash on hand are excluded,
interest-bearing borrowings decreased to R337,1 million
(2009: R365,4 million). At 30 June 2010 the group`s net
cash position was a positive R2,4 million - a pleasing
improvement from the overdrawn positions of R23,9 million
and R60,1 million at 30 June 2009 and 31 December 2009
respectively. The improvement in the cash position can be
attributed to the improved profitability of the business
and increased sales in 2010. Debtors days have improved to
67 days (31 December 2009: 66 days and 30 June 2009:
75 days), whilst creditors days have decreased to 166 days
(31 December 2009: 174 days and 30 June 2009: 187 days).
This decrease is attributable to Cipla Medpro taking
advantage of the strong Rand and settling some of the
inventory purchases earlier than the contractual terms of
180 days. Inventory days have increased marginally to
114 days (31 December 2009: 106 days and 30 June 2009:
97 days). This was as a consequence of the Transnet strike
action that resulted in delayed inventory being delivered
just before 30 June 2010.
Cash flows generated from operating activities are R121,2
million (2009: R1,9 million), after adjusting for the
non-cash flow effects of depreciation of R8,7 million
(2009: R4,0 million), IFRS 2 Share-based Payment expenses
of R8,2 million (2009: R2,0 million) and FEC gains of
R22,4 million (2009: FEC losses of R28,3 million).
Investing activities resulted in outflows of R40,9 million
(2009: R52,0 million) due to acquisitions of property,
plant and equipment and intangible assets. A net R17,7
million was utilised for financing activities (2009: R5,5
million), mainly for the settlement of R94,3 million of
the preference shares (R69,2 million of which was settled
voluntarily). This was offset by draw downs of R43,2
million on the Nedbank Limited loan facility and R33,4
million on the working capital and instalment sale
facilities at the factory.
We are pleased to announce our inaugural interim dividend
of five cents per share which equates to a dividend cover
of 4,8 times.
OPERATIONAL REVIEW
This business continues its growth and by June 2010 was
ranked fourth largest pharmaceutical company for the 12
months and third largest for the month of June 2010. Cipla
Medpro has an EV of 112 (Rands) and 109 (Units) (IMS, June
2010).
The total private pharmaceutical market grew by 10% in
Rands and 7% in units. Cipla Medpro`s performance
outstripped the market, growing by 24% in Rands and 16% in
units.
We remain focussed on growing our brands in both OTC and
SEP products. Our top three SEP brands contributed to
sales (12 months) of R170 million into the private sector
and still have huge growth potential. Lexamil is
performing at an EV of 140. Our top ten OTC products all
have EVs of over 100, with Airmune tracking to do
significant turnover in the next 12 months.
Our OTC business grew by 32% during the six month period.
Cipla Medpro launched Atolip (Atorvastatin) in June 2010
and it is our belief that Atolip will become our biggest
brand in the foreseeable future. We plan to launch two
significant products in the month of September, one of
which will be the first generic in a market dominated by
two products doing R250 million per annum in revenues.
The Cipla Vet (small animal) business grew by 58% to R9,8
million (2009: R6,2 million) and Cipla Agrimed (large
animal) grew by 46% to R25,7 million (2009: R17,6
million).
Whilst the manufacturing division (CMM) significantly
improved revenues in May and June 2010, it still posted a
loss for the six month period. We are cognisant of the
need to increase volume in CMM and as such we are
extremely excited to announce that we are in the process
of finalising an agreement with Cipla India, in terms of
which Cipla India will acquire a 25% shareholding in CMM,
for a nominal value. Pursuant to this, Cipla India will
provide additional volume and assist us in achieving World
Health Organisation (WHO) and Food and Drug Administration
(FDA) manufacturing approvals in the near future,
resulting in increased orders and business for our
factory. This will ensure better continuity, increased
capacity utilisation and further entrench the relationship
with Cipla India.
BOARD OF DIRECTORS
The board has remained stable and continues to function in
accordance with its approved charter.
AUDIT AND RISK COMMITTEE
The audit and risk committee functions in accordance with
a formal charter approved by the board and meets at least
four times a year to discharge its responsibilities. The
audit and risk committee is satisfied that the auditor was
independent of the group.
BASIS OF PREPARATION OF THE UNAUDITED RESULTS
The interim condensed consolidated financial statements
have been prepared in accordance with IAS 34 Interim
Financial Reporting, and in accordance with the Companies
Act of 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
2009, except for the adoption of new/amended standards, as
applicable, which became effective during the interim
reporting period.
NEW VENTURES
Cipla Medpro has initiated two new divisions, Cipla
Consult (Pty) Limited and Cipla Nutrition (Pty) Limited,
during the period under review. Although small in their
start-up phase, these may lead to enhanced business
benefits in the future.
SHARE OPTIONS
On 25 March 2010, the board approved an ex gratia grant of
1 million share options to JS Smith, at a strike price of
531 cents per share.
SUBSEQUENT EVENTS
On 30 July 2010, R25,3 million of the preference shares
were voluntarily redeemed, resulting in an outstanding
preference share liability of R74,7 million on this date.
The associated R0,6 million of preference share interest
was also settled on this date.
On 3 August 2010, Medpro Pharmaceutica (Pty) Limited drew
down an additional R25,0 million against its loan facility
from Nedbank Limited. The loan balance as of 3 August 2010
has increased to R93,2 million.
Except as disclosed above, the directors are not aware of
any other matter or circumstance which is material to the
financial affairs of the group, which has occurred between
30 June 2010 and the date of approval of the interim
financial statements, that has not been otherwise dealt
with in the group interim financial statements.
PCS Luthuli JS Smith
Chairman Chief Executive Officer
31 August 2010
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that an interim cash dividend
number 1 of five cents per share has been declared in
respect of the six months ended 30 June 2010.
The salient dates for the payment of the interim dividend
are detailed below:
Last day to trade: Friday, 1 October 2010
Shares trade "ex" dividend: Monday, 4 October 2010
Record date: Friday, 8 October 2010
Payment date: Monday, 11 October 2010
Share certificates may not be dematerialised or
rematerialised between Monday, 4 October 2010 and Friday,
8 October 2010, both dates inclusive.
By order of the board
MW Daly
Company Secretary
Durban
31 August 2010
CORPORATE INFORMATION
Non-executive directors PCS Luthuli (Chairman);
MB Caga; JvD du Preez;
ND Mokone; MT Mosweu; SMD Zungu
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
(Pty) Limited
Telephone +27 31 451 3800
Facsimile +27 31 451 3889
Sponsor Nedbank Capital
Auditors Mazars
Legal advisors Deneys Reitz Incorporated
Website www.ciplamedsa.co.za
Date: 31/08/2010 07:05:01 Produced by the JSE SENS Department.
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