| Thu 17 Mar 2011, 7:05 | | CMP - Cipla Medpro - Reviewed condensed consolidated results for the year ended |
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CMP
CMP
CMP - Cipla Medpro - Reviewed condensed consolidated results for the year ended
31 December 2010
CIPLA MEDPRO
South Africa Limited
Registration number 2002/018027/06
JSE code CMP
ISIN ZAE000128179
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
- HEPS and EPS increased to 44,2 cents - increased by 21% and 22% respectively
- Normalised HEPS and EPS increased to 52,3 cents - increased by 29%
- Group revenue up 15% to R1,447 billion
- Final dividend of 6 cents per share - total dividend for the year of
11 cents per share
- The group was awarded 15% of the ARV tender - equivalent to R633 million
over 2 years
- Maintained current standing as fourth-largest pharmaceutical company by
value
- Attained third position as largest pharmaceutical company by value for
December 2010
- Evolution Index (EV) of 108,0 - highest of the top ten pharmaceutical
companies in South Africa (Source: IMS South Africa)
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2010 2009
Reviewed Audited
R`000 R`000
Revenue 1 446 979 1 262 058
Gross profit 898 087 620 358
Other income 6 614 6 426
Other operating expenses (557 198) (365 407)
Profit before finance costs and income tax 347 503 261 377
Finance costs (60 585) (28 227)
Finance income 2 830 5 354
Profit before income tax 289 748 238 504
Income tax expense (90 445) (76 418)
Profit for the year 199 303 162 086
Profit attributable to:
Equity holders of the parent 195 403 159 904
Non-controlling interest 3 900 2 182
Profit for the year 199 303 162 086
Other comprehensive income for the year
(net of income tax) - -
Total comprehensive income for the year 199 303 162 086
Total comprehensive income attributable to:
Equity holders of the parent 195 403 159 904
Non-controlling interest 3 900 2 182
Total comprehensive income for the year 199 303 162 086
Number of shares (`000)
In issue 454 027 449 856
Weighted average (basic) 442 489 440 111
Weighted average (diluted) 447 241 441 074
Earnings per share (cents)
Basic 44,2 36,3
Diluted 43,7 36,3
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 195 403 159 904
Adjusted for: 36 1 003
Loss on disposals of property, plant and equipment 42 1 166
Total tax effects of adjustments (6) (163)
Headline earnings 195 439 160 907
Headline earnings per share (cents)
Basic 44,2 36,6
Diluted 43,7 36,5
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Year ended Year ended
31 December 31 December
2010 2009
Reviewed Audited
R`000 R`000
Cash flows from operating activities 150 940 10 162
Cash flows from investing activities (98 226) (118 574)
Cash flows from financing activities (17 419) 16 560
Net increase (decrease) in cash and cash equivalents 35 295 (91 852)
Cash and cash equivalents at beginning of the year (60 143) 31 709
Cash and cash equivalents at end of the year (24 848) (60 143)
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
31 December 31 December
2010 2009
Reviewed Audited
R`000 R`000
ASSETS
Non-current assets 1 923 821 1 836 288
Property, plant and equipment 420 125 389 012
Intangible assets 1 475 470 1 428 577
Other investments 6 4
Deferred tax assets 28 220 18 695
Current assets 609 335 422 625
Inventory 289 661 181 673
Income tax receivable 742 1 137
Trade and other receivables 264 775 230 970
Loans receivable 7 709 5 162
Cash and cash equivalents 46 448 3 683
Total assets 2 533 156 2 258 913
EQUITY AND LIABILITIES
Capital and reserves 1 777 396 1 576 545
Non-controlling interest 7 472 3 822
Total equity 1 784 868 1 580 367
Non-current liabilities 326 770 358 321
Loans and borrowings 314 428 348 779
Deferred tax liabilities 12 342 9 542
Current liabilities 421 518 320 225
Bank overdraft 71 296 63 826
Loans and borrowings 17 354 8 430
Income tax payable 10 012 11 793
Trade and other payables 322 856 236 176
Total liabilities 748 288 678 546
Total equity and liabilities 2 533 156 2 258 913
CONDENSED CONSOLIDATED
SEGMENTAL REPORT
Year ended Year ended
31 December 31 December
2010 2009
Reviewed Audited
R`000 R`000
Segment revenue - external customers
Non-factory 1 417 678 1 233 348
Factory 29 301 28 710
Total 1 446 979 1 262 058
Segment result
Non-factory 399 766 308 078
Factory (29 025) (35 617)
Head office (23 238) (11 084)
Total 347 503 261 377
Segment assets
Non-factory 2 812 126 2 384 367
Factory 1 296 527 1 227 670
Eliminations (1 575 497) (1 353 124)
Total 2 533 156 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 1 January 2009 443 1 019 296 (7 970)
Total comprehensive income for the year - - -
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 1 January 2010 450 1 040 924 (23 304)
Total comprehensive income for the year - - -
Issue of share capital 4 22 201 -
Share issue expenses - (27) -
Shares issued from the Share Option Trust - - 17 490
Shares acquired by the Share Option Trust - - (22 205)
IFRS 2 Share-based Payments - - -
Dividends paid - - -
Balance at 31 December 2010 454 1 063 098 (28 019)
Attributable to equity holders of the parent
Share-based
payment Retained
reserve income Total
R`000 R`000 R`000
Balance at 1 January 2009 9 557 382 958 1 404 284
Total comprehensive income for the year - 159 904 159 904
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 6 056 - 6 056
Balance at 1 January 2010 15 613 542 862 1 576 545
Total comprehensive income for the year - 195 403 195 403
Issue of share capital - - 22 205
Share issue expenses - - (27)
Shares issued from the Share Option Trust - - 17 490
Shares acquired by the Share Option Trust - - (22 205)
IFRS 2 Share-based Payments 10 478 - 10 478
Dividends paid - (22 493) (22 493)
Balance at 31 December 2010 26 091 715 772 1 777 396
Non-
controlling Total
interest equity
R`000 R`000
Balance at 1 January 2009 1 640 1 405 924
Total comprehensive income for the year 2 182 162 086
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 - 6 056
Balance at 1 January 2010 3 822 1 580 367
Total comprehensive income for the year 3 900 199 303
Issue of share capital - 22 205
Share issue expenses - (27)
Shares issued from the Share Option Trust - 17 490
Shares acquired by the Share Option Trust - (22 205)
IFRS 2 Share-based Payments - 10 478
Dividends paid (250) (22 743)
Balance at 31 December 2010 7 472 1 784 868
COMMENTARY
OVERVIEW
The 2010 annual results have been achieved despite significant non-cash IFRS
adjustments relating to forward exchange contracts (FECs). As a result of the
strong Rand/weak US Dollar at 31 December 2010, an unrealised loss on FECs of
R44,7 million was debited to the income statement despite a gain being recorded
in the accounts at 30 June 2010 of R22,4 million and an unrealised loss of R24,7
million at 31 December 2009. Although this has resulted in a significant non-
cash adjustment to the income statement, we have enjoyed the benefit of the
stronger Rand throughout the year, and this can be seen in our gross profit
margin which has increased significantly from 49,2% at 31 December 2009 to 62,1%
at the end of 2010. To illustrate the significance that the strong Rand/weak US
Dollar had on the results, which was at its lowest level in about seven years,
we have re-valued the FECs using the spot rate at the end of January 2011, which
was R7,20. At this rate the loss of R44,7 million would have been reversed
completely.
These adjustments do not affect the group`s ability to generate cash and after
paying its inaugural interim dividend in the second half of 2010, which amounted
to R22,5 million and STC of R2,3 million, the group`s operations generated
R150,9 million cash in the 2010 financial year, compared to R10,2 million in
2009.
REVIEW OF OPERATIONS
Cipla Medpro Holdings (Pty) Limited (Cipla Medpro)
This business continues its growth and by December 2010 was ranked fourth-
largest pharmaceutical company for the 12 months and third largest, by value,
for the month of December 2010. Cipla Medpro had an EV of 108,0 (Rands) and
109,2 (units) (IMS, December 2010) and, by value, grew the fastest of the top
ten pharmaceutical companies in South Africa, as we did in 2009.
The total private pharmaceutical market grew by 8,0% in Rands and 4,9% in units.
Cipla Medpro`s performance outstripped the market, growing by 16,6% in Rands and
14,5% in units respectively in the 2010 year (IMS, December 2010).
Accounting for 100% of the group`s profits with revenues of R1,418 billion
(2009: R1,233 billion) and profit before finance costs and income tax of R380,7
million (2009: R296,4 million), before inter-company eliminations, 2010 saw
positive results for this business.
The relationship with Cipla India Limited (Cipla India) continues to deliver
research and development on newer generics, the launch of first to market patent
expired molecules and over-the-counter (OTC) medicines. Dossiers regularly flow
from Cipla India helping to bolster our already significant pipeline of products
for the future. The top ten Cipla Medpro products by value, some as old as ten
years, continue to grow in units, which is rewarding given our strategy of
building brands.
2010 saw a number of significant product launches, albeit late during the year:
- first to market Sereflo, a combination active ingredient inhaler for asthma;
- Numoxx, a late generation quinolone antibiotic; and
- Atolip, a generic of the world`s most popular anti-hypercholesterol agent.
We believe that Sereflo, Numoxx and Atolip will deliver attractive revenues and
margins for us during 2011. We are unhappy with the number of registrations we
gained during the year, even though a vast number of dossiers were submitted and
are awaiting evaluation and registration.
Cipla Medpro will add an oncology division to its already comprehensive
medicines portfolio during 2011, commencing with 20 molecules targeting a host
of cancers.
In the highly specialised field of oncology, Cipla India has remained one of the
leading manufacturers of cancer drugs by keeping ahead of the technological
advances at their state-of-the-art dedicated plants, not only for these
products, but also the Active Pharmaceutical Ingredients (APIs).
The fact that Cipla India is fully integrated and therefore in control of the
supply, quality and obviously price of their API and finished product, is a
strategic advantage.
Furthermore, the range and depth of their growing oncology portfolio makes them
an attractive supplier to us in this specialised market.
Dr Yusuf Hamied, chairman and managing director of Cipla India, is quoted as
saying that after HIV/AIDS, this is Cipla India`s second major crusade: to see
that access to life-saving anticancer medicines are available to patients at
affordable prices.
We also continue to work on opportunities outside of South Africa and to launch
more and more OTC medicines in our domestic market.
While small contributors to total revenues, the seven-year old animal health
businesses continued to demonstrate pleasing growth. The Cipla Vet business
(targeting small and companion animal markets) increased its market shares
across many lines and showed total revenue growth of 31,1%. The Cipla Agrimed
division (targeting livestock and production animal markets) recorded a 36,1%
growth in revenue and a number of its brands occupy top positions in their
categories.
Looking forward, we are optimistic that Cipla Medpro will realise its potential
even further. Cipla India has taken a major stand in biotechnology and has set
up factories in Goa to produce some of the world`s leading anticancer drugs.
They have also invested in stem cell research and development. In the short term
Cipla Medpro will focus on more generic launches at home and outside (we own 109
registrations in Botswana, 211 in Namibia and expect quite a few in Nigeria in
the months to come), more OTC launches, growth in our animal business and a
complete turnaround of our Agricare business.
Cipla Medpro Manufacturing division (CMM)
In 2010 the CMM division manufactured 28 products, of which 15 were for Cipla
Medpro. CMM had a turnover of R94,5 million (2009: R49,2 million), and posted a
loss before finance costs and income tax of R27,8 million (2009: R35,8 million),
before inter-company eliminations. In 2011, we will manufacture a minimum of 32
products and 50 stock keeping units. Further, we will continue to contract
manufacture for the current three client companies. The biggest movement however
will come from the recently awarded ARV tender RT71-2010, wherein the group was
awarded R633 million (including VAT) of business over the next two years and
therefore we are pleased to report that the Durban-based facility is on its way
to health. We will manufacture a significant portion of that at CMM.
Additionally, once we obtain regulatory approvals in Africa, we will begin
manufacturing for those markets at CMM.
Finally, with Cipla India poised to take a 25% stake in CMM, and with our
intention to attain both World Health Prequalification and Food and Drug
Administration (FDA) accreditation for CMM, we are confident that significant
opportunities will open up to supply the donor funded markets north of us,
further increasing the business of CMM.
REVIEW OF RESULTS
Cipla Medpro South Africa Limited (CMSA or the group) is pleased to announce a
satisfactory increase of 21,5% to R195,4 million (2009: R160,9 million) in
headline earnings for the financial year, constituting an increase of 20,8% to
44,2 cents (2009: 36,6 cents) in headline earnings per share (HEPS). This is
based on 442,5 million (2009: 440,1 million) weighted average number of shares
in issue for the 2010 year (before the effects of dilution are taken into
account). The reconciliation to headline earnings includes the loss on disposals
of property, plant and equipment of R36 thousand (2009: R1,0 million), net of
tax.
Earnings per share (EPS) improved by 21,8% to 44,2 cents (2009: 36,3 cents).
After adjusting for the full effect of the fair value adjustment on the interest
rate swaps, interest rate swap settlements and the FEC losses, normalised HEPS
increased by 28,5% to 52,3 cents (2009: 40,7 cents) and normalised EPS increased
by 29,1% to 52,3 cents (2009: 40,5 cents). The current and comparative
normalised calculations mainly comprise non-cash adjustments.
Revenue increased by 14,7% to R1,447 billion (2009: R1,262 billion) and the
improvement in our gross profit margin to 62,1% can be attributed to the
stronger Rand and a price increase on OTC products that was implemented in March
2010. Although Cipla Medpro only implemented the price increase on certain
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 a more profitable product mix.
Profit before finance costs and income tax for the year increased by 33,0% to
R347,5 million (2009: R261,4 million).
Finance income reduced to R2,8 million (2009: R5,4 million) due to no swap
refund earned in 2010, compared to the R1,9 million refund in the previous
financial year. The increase in net finance costs to R57,8 million (2009: R22,9
million) is mainly due to:
- finance costs of only R0,3 million qualifying for capitalisation during 2010
in terms of IAS 23 Borrowing Costs (2009: R35,5 million);
- swap settlements of R2,8 million (2009: R1,9 million refund);
- a decrease of R11,5 million in interest on preference shares;
- an increase of R4,7 million in interest on the Nedbank loan facilities; and
- an increase of R3,3 million in interest on instalment sale agreements.
Despite an increase in finance costs the interest cover still remains at a
satisfactory level of 5,7 times (2009: 9,3 times).
Profit after tax for the year was R199,3 million (2009: R162,1 million). This
was achieved after an improvement in the effective tax rate to 31,2% (2009:
32,0%). The main factors resulting in the effective tax rate being higher than
the statutory tax rate are:
- non-deductible preference share interest of R9,5 million (2009: R21,0
million);
- non-deductible IFRS 2 Share-based Payment expenses of R10,5 million (2009:
R6,1 million); and
- STC of R2,7 million (2009: R2,1 million).
Excluding the effects of cash on hand, interest-bearing borrowings have
decreased to R356,6 million (2009: R417,4 million). After paying the inaugural
interim dividend of R22,5 million in October 2010 and the second provisional tax
payment of R32,4 million on 31 December 2010, the group`s net cash position was
overdrawn to the extent of R24,8 million on 31 December 2010 - an improvement
from R60,1 million overdrawn at 31 December 2009. 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 63 days (31 December 2009: 66 days and 30 June
2010: 67 days). Creditors days have improved to 186 days (31 December 2009: 174
days and 30 June 2010: 166 days) due to increased purchases from Cipla India in
the second half of the year, in anticipation of holiday periods, longer lead
times and increased sales budgeted for 2011. This in turn resulted in a higher
stock holding than normal and inventory days increased accordingly to 157 days
(31 December 2009: 106 days and 30 June 2010: 114 days).
Cash flows generated from operating activities are R150,9 million (2009: R10,2
million), after adjusting for the non-cash flow effects of depreciation of R18,1
million (2009: R10,8 million), IFRS 2 Share-based Payment expenses of R10,5
million (2009: R6,1 million) and FEC losses of R44,7 million (2009: R24,7
million). The inaugural interim dividend of R22,5 million was also paid to
shareholders during the second half of 2010 (2009: Rnil).
Investing activities resulted in outflows of R98,2 million (2009: R118,6
million) due to acquisitions of property, plant and equipment and intangible
assets. A net R17,4 million was utilised for financing activities (2009: R16,6
million generated), mainly for the settlement of R159,8 million of the
preference shares (R109,7 million of which was settled in advance). This was
offset by draw downs of R100 million on the Nedbank Limited loan facility and
R34,3 million on the working capital and instalment sale facilities at the
factory.
We are pleased to announce our second and final dividend for 2010 of six cents
per share which results in a total dividend of 11 cents per share for the year
and equates to a dividend cover of 4,0 times.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
The condensed consolidated financial results have been prepared in accordance
with the recognition and measurement criteria of all applicable standards and
interpretations of International Financial Reporting Standards (IFRS), are
presented in terms of the disclosure requirements as set out in IAS 34 Interim
Financial Reporting and are in accordance with the Companies Act of South
Africa.
Mazars have reviewed the condensed consolidated financial information for the
year ended 31 December 2010, and their unqualified opinion is available for
inspection at the company`s registered office.
The accounting policies applied in the preparation of these condensed
consolidated financial statements are consistent with those followed in the
preparation of the consolidated financial statements for the year ended 31
December 2009, except for the adoption of new/amended standards and
interpretations becoming effective since January 2010, and the adoption of IAS
31 Interests in Joint Ventures.
NEW VENTURES
Cipla Medpro, a wholly owned subsidiary of CMSA, has initiated two new
businesses, Cipla Nutrition (Pty) Limited and Cipla Consult (Pty) Limited,
during the year. Both entities are joint ventures in which Cipla Medpro has a
50% interest. Although small in their start-up phase, these ventures will lead
to enhanced business benefits in the future.
Cipla Medpro also acquired additional interests in the following subsidiaries,
at nominal values, resulting in all of the subsidiaries below being wholly owned
by Cipla Medpro as at 31 December 2010:
- Cipla Agricare (Pty) Limited (2009: 50% interest);
- Medpro Pharmaceutica Africa (Pty) Limited (2009: 50% interest); and
- Cipla Dibcare (Pty) Limited (2009: 67% interest).
DIRECTORATE
There have been no changes to the board and it 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. The audit and risk committee is also satisfied with
regard to the suitability, experience and knowledge of the Chief Financial
Officer.
SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance which is material to
the financial affairs of the group, which has occurred subsequent to 31 December
2010, that has not been otherwise dealt with in the consolidated financial
statements.
PCS Luthuli JS Smith
Chairman Chief Executive Officer
17 March 2011
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final cash dividend number 2 of six cents per
share has been declared in respect of the 12 months ended 31 December 2010,
bringing the total cash dividend to 11 cents for the 2010 financial year.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade: Friday, 6 May 2011
Shares trade ex dividend: Monday, 9 May 2011
Record date: Friday, 13 May 2011
Payment date: Monday, 16 May 2011
Share certificates may not be dematerialised or rematerialised between Monday, 9
May 2011 and Friday, 13 May 2011, both dates inclusive.
By order of the board
MW Daly
Company Secretary
Durban
17 March 2011
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
Leagal advisors Deneys Reitz Incorporated
Website www.ciplamedsa.co.za
Date: 17/03/2011 07:05:02 Produced by the JSE SENS Department.
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