| Thu 25 Aug 2011, 7:05 | | CMP - Cipla Medpro South Africa Limited - Unaudited condensed consolidated |
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CMP
CMP
CMP - Cipla Medpro South Africa Limited - Unaudited condensed consolidated
interim results for the six months ended 30 June 2011
CIPLA MEDPRO SOUTH AFRICA LIMITED
Registration number 2002/018027/06
JSE code CMP
ISIN ZAE000128179
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
- HEPS and EPS of 42,5 cents - increased by 73%
- Normalised HEPS and EPS of 26,8 cents - increased by 25%
- Revenue of R842,8 million - increased by 18%
- Interim dividend of 6,5 cents (2010: 5,0 cents) per share and a possible
share buy-back
- Third largest pharmaceutical company by value
- Evolution Index (EV) of 105,3 - highest of the top 20 pharmaceutical
companies in South Africa (Source: IMS South Africa)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Revenue 842 812 714 335 1 446 979
Gross profit 490 250 401 303 898 087
Other income 79 712 9 923 6 614
Other operating expenses (268 647) (216 545) (557 198)
Profit before finance costs and
income tax 301 315 194 681 347 503
Finance costs (31 030) (35 125) (60 585)
Finance income 4 131 539 2 830
Profit before income tax 274 416 160 095 289 748
Income tax expense (81 803) (50 354) (90 445)
Profit for the period 192 613 109 741 199 303
Profit attributable to:
Equity holders of the parent 190 084 108 733 195 403
Non-controlling interest 2 529 1 008 3 900
Profit for the period 192 613 109 741 199 303
Other comprehensive income for
the period (net of income tax) - - -
Total comprehensive income
for the period 192 613 109 741 199 303
Total comprehensive income
attributable to:
Equity holders of the parent 190 084 108 733 195 403
Non-controlling interest 2 529 1 008 3 900
Total comprehensive income
for the period 192 613 109 741 199 303
Number of shares (`000)
In issue (including treasury shares) 454 027 449 856 454 027
Weighted average (basic) 447 587 442 135 442 489
Weighted average (diluted) 450 055 445 236 447 241
Earnings per share (cents)
Basic 42,5 24,6 44,2
Diluted 42,2 24,4 43,7
Reconciliation of headline earnings
Profit attributable to equity holders
of the parent 190 084 108 733 195 403
Adjusted for: (64) 37 36
(Gain) loss on disposals of property,
plant and equipment (74) 43 42
Total tax effects of adjustments 10 (6) (6)
Headline earnings 190 020 108 770 195 439
Headline earnings per share (cents)
Basic 42,5 24,6 44,2
Diluted 42,2 24,4 43,7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Cash flows from operating activities 147 905 121 154 150 940
Cash flows from investing activities (59 127) (40 882) (98 226)
Cash flows from financing activities (24 729) (17 704) (17 419)
Net increase in cash and cash
equivalents 64 049 62 568 35 295
Cash and cash equivalents at beginning
of the period (24 848) (60 143) (60 143)
Cash and cash equivalents at
end of the period 39 201 2 425 (24 848)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
ASSETS
Non-current assets 1 974 426 1 879 073 1 923 821
Property, plant and equipment 435 049 404 303 420 125
Intangible assets 1 507 557 1 448 275 1 475 470
Other investments 6 4 6
Loans receivable - 47 -
Deferred tax assets 31 814 26 444 28 220
Current assets 805 316 527 326 609 335
Inventory 317 370 191 888 289 661
Income tax receivable 926 1 137 742
Trade and other receivables 363 635 271 076 264 775
Loans receivable 7 891 2 000 7 709
Cash and cash equivalents 115 494 61 225 46 448
Total assets 2 779 742 2 406 399 2 533 156
EQUITY AND LIABILITIES
Capital and reserves 1 940 403 1 693 494 1 777 396
Non-controlling interest 9 501 4 580 7 472
Total equity 1 949 904 1 698 074 1 784 868
Non-current liabilities 315 685 337 938 326 770
Loans and borrowings 296 999 322 697 314 428
Deferred tax liabilities 18 686 15 241 12 342
Current liabilities 514 153 370 387 421 518
Bank overdrafts 76 293 58 800 71 296
Loans and borrowings 10 054 16 808 17 354
Income tax payable 29 118 61 540 10 012
Trade and other payables 398 688 233 239 322 856
Total liabilities 829 838 708 325 748 288
Total equity and liabilities 2 779 742 2 406 399 2 533 156
CONDENSED CONSOLIDATED SEGMENTAL REPORT
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Segment revenue - external
customers
Non-factory 833 386 698 391 1 417 678
Factory 9 426 15 944 29 301
Total 842 812 714 335 1 446 979
Inter-segment revenue - factory 75 541 16 383 65 226
Segment result
Non-factory 323 420 236 028 399 766
Factory (9 781) (29 556) (29 025)
Head office (12 324) (11 791) (23 238)
Total 301 315 194 681 347 503
Segment assets
Non-factory 3 096 997 2 607 502 2 812 126
Factory 1 375 520 1 269 570 1 296 527
Eliminations (1 692 775) (1 470 673) (1 575 497)
Total 2 779 742 2 406 399 2 533 156
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Share-based
Share Share Treasury payment
capital premium shares reserve
R`000 R`000 R`000 R`000
Balance at 31 December
2009 (audited) 450 1 040 924 (23 304) 15 613
Total comprehensive income
for the period - - - -
IFRS 2 Share-based Payments - - - 8 216
Dividend paid - - - -
Balance at 30 June 2010
(unaudited) 450 1 040 924 (23 304) 23 829
Total comprehensive income
for the period - - - -
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 - - - 2 262
Dividends paid - - - -
Balance at 31 December
2010 (audited) 454 1 063 098 (28 019) 26 091
Total comprehensive income
for the period - - - -
IFRS 2 Share-based Payments - - - 165
Dividends paid - - - -
Balance at 30 June 2011
(unaudited) 454 1 063 098 (28 019) 26 256
Attributable to equity
holders of the parent
Non-
Retained controlling Total
income Total interest equity
R`000 R`000 R`000 R`000
Balance at 31 December
2009 (audited) 542 862 1 576 545 3 822 1 580 367
Total comprehensive
income for the period 108 733 108 733 1 008 109 741
IFRS 2 Share-based
Payments - 8 216 - 8 216
Dividend paid - - (250) (250)
Balance at 30 June
2010 (unaudited) 651 595 1 693 494 4 580 1 698 074
Total comprehensive
income for the period 86 670 86 670 2 892 89 562
Issue of share capital - 22 205 - 22 205
Share issue expenses - (27) - (27)
Shares issued from the
Share Option Trust - 17 490 - 17 490
Shares acquired by the
Share Option Trust - (22 205) - (22 205)
IFRS 2 Share-based
Payments - 2 262 - 2 262
Dividends paid (22 493) (22 493) - (22 493)
Balance at 31 December
2010 (audited) 715 772 1 777 396 7 472 1 784 868
Total comprehensive
income for the period 190 084 190 084 2 529 192 613
IFRS 2 Share-based
Payments - 165 - 165
Dividends paid (27 242) (27 242) (500) (27 742)
Balance at 30 June
2011 (unaudited) 878 614 1 940 403 9 501 1 949 904
COMMENTARY
OVERVIEW
We are pleased to present a solid set of results for the six months ended 30
June 2011 despite the slow rate of new product registrations at the Medicines
Control Council (MCC) and no Single Exit Price (SEP) increase granted for
2011. The positive impact of the weak US Dollar on our 2011 interim results
can be seen through the unrealised gains made on forward exchange contracts
(FECs) of R28,6 million (2010: R22,4 million), compared to the loss of R44,7
million for the year ended 31 December 2010. Our gross profit margins continue
to benefit from the weak US Dollar, but not quite to the same extent that was
seen in the 2010 financial year, due to certain factors that will remedy in
the second half.
The case against Pfizer Limited and Pfizer Laboratories (Pty) Limited, arising
from damages caused by Pfizer`s incorrectly obtained interdict against Cipla
Medpro`s amlodipine besylate products in 2003, has been settled in our favour.
This has positively affected the earnings per share (EPS) and headline
earnings per share (HEPS) calculations. The settlement income has been
accounted for in our statement of comprehensive income, however, the terms
thereof remain confidential.
REVIEW OF OPERATIONS
Cipla Medpro Holdings (Pty) Limited (Cipla Medpro)
The business continues its growth and by June 2011 was ranked third largest
pharmaceutical company, by value, for the 12 months and third largest for the
month of June 2011. Cipla Medpro has an EV of 105,3 (Rands) and 103,5 (Units)
(IMS, June 2011). The EV of 105,3 is the highest of the top 20 pharmaceutical
companies in South Africa.
The total private pharmaceutical market grew by 6,3% in Rands and 2,4% in
units. Cipla Medpro`s performance outstripped the market, growing by 11,9% in
Rands and 5,6% in units.
We remain focused on growing our brands in over-the-counter (OTC) medicines,
particularly at retail level, and SEP. There is still a huge gap between
ourselves and the top two pharmaceutical companies in South Africa. Serious
opportunity for growth still exists at pharmacy and doctor level. Our top
three SEP brands contributed to sales (12 months) of R182 million into the
private sector and still have growth potential. Lexamil is performing at an EV
of 107. Of our top ten OTC products, seven have EV`s of over 100, with Airmune
tracking to do significant turnover in the next 12 months. Our OTC business
grew by 8,9% during the six-month period and this excludes sales into retail.
We are excited to announce the launch of our oncology division on 15 September
2011. Our business unit manager and six experienced sales people have been
appointed to launch the first six products. Stock is in South Africa already.
We believe that, with further registrations due soon, Cipla Medpro will become
a significant supplier of oncology medicines to the population of South
Africa.
The Cipla Vet (small animal) business grew by 11% to R10,9 million and Cipla
Agrimed (large animal) grew by 32% to R34,0 million for the six months. Cipla
Agrimed has landed a Government contract worth R100,0 million over two years
at acceptable margins.
Cipla Medpro Manufacturing division (CMM)
CMM achieved a turnover of R85,0 million (2010: R32,3 million) for the period,
before eliminating inter-company revenue of R75,5 million (2010: R16,4
million), an increase of 163,2%, and posted a loss before finance costs and
income tax of R10,1 million (2010: loss of R27,4 million) before inter-company
eliminations, an improvement of 63,1%. The group was awarded R633 million
(including VAT) over two years of the ARV tender RT71-2010 in December 2010,
but this only materialised into significant sales for CMM from April 2011 due
to the lead times of raw materials being imported, as well as the finalising
of any product validations that were still required. The benefit from the
award will continue to flow through to CMM and the positive trend in the
results is expected to continue. We have made a number of senior appointments
of late and we are confident that improved leadership will deliver the rewards
we seek and expect.
REVIEW OF RESULTS
Statement of comprehensive income
Cipla Medpro South Africa Limited (CMSA or the group) is pleased to report an
increase of 74,7% at the headline earnings level to R190,0 million (2010:
R108,8 million) for the six-month period ending 30 June 2011, translating into
an increase of 72,8% to 42,5 cents (2010: 24,6 cents) in HEPS. This is based
on 447,6 million (2010: 442,1 million) weighted average number of shares in
issue for the 2011 period (before the effects of dilution are taken into
account). The reconciliation to headline earnings includes the gain (2010:
loss) on disposals of property, plant and equipment, net of tax.
There was also an improvement of 72,8% in EPS to 42,5 cents (2010: 24,6
cents). After adjusting for the settlement income received, the full effect of
the fair value adjustment on the interest rate swaps, interest rate swap
settlements and the FEC gains, normalised HEPS and EPS increased by 25,2% to
26,8 cents (2010: 21,4 cents).
Revenue increased by 18,0% to R842,8 million (2010: R714,3 million) and the
gross profit margin improved to 58,2% when compared to 56,2% at 30 June 2010.
However, our gross profit margin has reduced from the unusually high level of
62,1% for the full 2010 financial year, and continues to be influenced by the
exchange rate. The gross profit margin of 58,2% has been achieved in spite of
no SEP increase given in 2011.
Profit before finance costs and income tax for the period increased by 54,8%
to R301,3 million (2010: R194,7 million), even though operating expenses
increased from R216,5 million at 30 June 2010 to R268,6 million for the
current period.
Net finance costs reduced to R26,9 million (2010: R34,6 million) mainly as a
result of the settlement of the preference share liability, the effects of
which are included in the analysis below:
- fair value gain on interest rate swaps of R2,6 million (2010: loss of R1,6
million);
- a decrease of R6,5 million in interest on preference shares;
- increased swap settlements of R2,6 million (2010: R1,3 million); and
- an increase of R3,2 million in interest on the Nedbank loan facilities.
Currently the interest cover is at a very healthy level of 9,7 times (2010:
5,5 times).
Profit after tax for the period was R192,6 million (2010: R109,7 million).
This was achieved after an improvement in the effective tax rate to 29,8%
(2010: 31,5%). The effective tax rate continues to improve since the majority
of interest on third party debt is now tax deductible, but still remains
higher than the statutory tax rate due to the following factors:
- STC of R3,0 million (2010: R0,8 million);
- non-deductible preference share interest of R1,0 million (2010: R7,5
million); and
- non-deductible IFRS 2 Share-based Payment expenses of R0,2 million (2010:
R8,2 million).
The IFRS 2 Share-based Payment expense has reduced significantly as many of
the previously issued options have vested, whilst the options issued to staff
during 2011, which are in terms of the newly approved CMSA Employee Share
Option Scheme, vest over a five-year period. This expense will increase in the
future but is not likely to reach the levels seen in the 2010 financial year.
Statement of financial position
Excluding the effects of cash on hand, interest-bearing borrowings have
decreased by R69,2 million to R267,9 million (2010: R337,1 million) and the
gearing ratio has reduced to 13,7% (2010: 19,9%). After paying the final
dividend of R27,2 million in May 2011 and the first provisional tax payment of
R45,3 million on 30 June 2011, the group`s positive net cash position was
R39,2 million (31 December 2010: overdrawn by R24,8 million and 30 June 2010:
positive balance of R2,4 million).
Debtors days have increased slightly to 67 days (31 December 2010: 63 days and
30 June 2010: 67 days). Creditors days have remained stable and are currently
at 185 days (31 December 2010: 186 days and 30 June 2010: 166 days). The
inventory days of 156 days (31December 2010: 157 days and 30 June 2010: 114
days) is still considered too high and management is focused on reducing the
inventory days to a more acceptable level.
Statement of cash flow
Cash flows generated from operating activities are R147,9 million (2010:
R121,2 million), after adjusting for the non-cash flow effects of depreciation
of R11,5 million (2010: R8,7 million), IFRS 2 Share-based Payment expenses of
R0,2 million (2010: R8,2 million) and FEC gains of R28,6 million (2010: R22,4
million). The final dividend of R27,2 million was also paid to shareholders
during May 2011 (30 June 2010: Rnil).
Investing activities resulted in outflows of R59,1 million (2010: R40,9
million), mainly due to acquisitions of property, plant and equipment and
intangible assets. A net R24,7 million was utilised for financing activities
(2010: R17,7 million), mainly for the voluntary full settlement of R34,5
million of the preference shares to Nedbank. This was offset by the net
reduction of R16,2 million on the working capital and instalment sale
facilities at the factory and draw downs of R26,0 million on the Nedbank loan
facilities.
BASIS OF PREPARATION
The condensed consolidated interim 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), the disclosure requirements as set out in IAS 34 Interim Financial
Reporting, the Companies Act of 2008, as amended, where applicable the AC 500
standards as issued by the Accounting Practices Board or its successor and the
Listings Requirements of the JSE.
The accounting policies and methods of computation applied in the preparation
of these consolidated interim financial statements are consistent with those
followed in the preparation of the consolidated financial statements for the
year ended 31 December 2010, except for the adoption of new/amended standards
and interpretations becoming effective since January 2011.
The condensed consolidated interim financial results for the six months ended
30 June 2011 have not been audited or reviewed by the group`s external
auditors.
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 its terms of
reference 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.
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 30 June
2011, that has not been otherwise dealt with in the consolidated financial
statements.
PCS Luthuli JS Smith
Chairman Chief Executive Officer
25 August 2011
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that an interim cash dividend (dividend number 3) of
6,5 cents per share has been declared in respect of the six months ended 30
June 2011. The company is also considering a possible share buy-back under its
general authority that was obtained at the last annual general meeting.
The salient dates for the payment of the interim dividend are detailed below:
Last day to trade: Friday, 30 September 2011
Shares trade ex dividend: Monday, 3 October 2011
Record date: Friday, 7 October 2011
Payment date: Monday, 10 October 2011
Share certificates may not be dematerialised or rematerialised between Monday,
3 October 2011 and Friday, 7 October 2011, both dates inclusive.
By order of the board
MW Daly Durban
Company Secretary 25 August 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
Legal advisors
Norton Rose South Africa
www.ciplamedsa.co.za
Date: 25/08/2011 07:05:02 Produced by the JSE SENS Department.
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