| Thu 15 Mar 2012, 7:30 | | CMP - Cipla Medpro South Africa Limited - reviewed condensed consolidated |
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CMP
CMP
CMP - Cipla Medpro South Africa Limited - reviewed condensed consolidated
annual results for the year ended 31 December 2011
CIPLA MEDPRO SOUTH AFRICA LIMITED
Registration number: 2002/018027/06
JSE code: CMP
ISIN: ZAE000128179
REVIEWED CONDENSED CONSOLIDATED ANNUAL RESULTS
for the year ended 31 December 2011
- Revenue of R1,768 billion - increased by 22%
- HEPS and EPS of 80,8 cents - increased by 83%
- Completed share buy-back of 1,7% of ordinary shares
- Final dividend of 7,5 cents per share recommended (2010: 6,0 cents) - total
dividend for the year of 14,0 cents (2010: 11,0 cents) per share
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
Year ended Year ended
31 December 31 December
2011 2010
R`000 R`000
Revenue 1 767 561 1 446 979
Gross profit 1 055 516 898 087
Other income 121 264 6 614
Other operating expenses (608 446) (557 198)
Profit before finance costs and income tax 568 334 347 503
Finance costs (58 212) (60 585)
Finance income 8 208 2 830
Profit before income tax 518 330 289 748
Income tax expense (152 229) (90 445)
Profit for the year 366 101 199 303
Profit attributable to:
Equity holders of the parent 361 075 195 403
Non-controlling interest 5 026 3 900
Profit for the year 366 101 199 303
Other comprehensive income for the
year (net of income tax) - -
Total comprehensive income for the year 366 101 199 303
Total comprehensive income attributable to:
Equity holders of the parent 361 075 195 403
Non-controlling interest 5 026 3 900
Total comprehensive income for the year 366 101 199 303
Number of shares
In issue (including treasury shares) (`000) 446 462 454 027
Weighted average (excluding treasury shares)
Basic (`000) 446 945 442 489
Diluted (`000) 449 264 447 241
Earnings per share
Basic (cents) 80,8 44,2
Diluted (cents) 80,4 43,7
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 361 075 195 403
Adjusted for: 215 36
(Gain) loss on disposals of property,
plant and equipment (72) 42
Loss on deemed disposal of joint venture 385 -
Total tax effects of adjustments (98) (6)
Headline earnings 361 290 195 439
Headline earnings per share
Basic (cents) 80,8 44,2
Diluted (cents) 80,4 43,7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
Year ended Year ended
31 December 31 December
2011 2010
R`000 R`000
Total equity at beginning of the year 1 784 868 1 580 367
Total comprehensive income for the year 366 101 199 303
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)
Share buy-back (49 983) -
IFRS 2 Share-based Payments 1 455 10 478
Changes in ownership interest 1 407 -
Dividends paid (58 103) (22 743)
Total equity at end of the year 2 045 745 1 784 868
Comprising:
Capital and reserves 2 033 201 1 777 396
Non-controlling interest 12 544 7 472
Total equity 2 045 745 1 784 868
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
31 December 31 December
2011 2010
R`000 R`000
ASSETS
Non-current assets 2 019 511 1 923 821
Property, plant and equipment 444 457 420 125
Intangible assets 1 535 443 1 475 470
Other investments 8 6
Loans receivable 3 191 -
Deferred tax assets 36 412 28 220
Current assets 824 116 609 335
Inventory 414 907 289 661
Income tax receivable 1 312 742
Trade and other receivables 387 523 264 775
Loans receivable 3 881 7 709
Cash and cash equivalents 16 493 46 448
Total assets 2 843 627 2 533 156
EQUITY AND LIABILITIES
Capital and reserves 2 033 201 1 777 396
Non-controlling interest 12 544 7 472
Total equity 2 045 745 1 784 868
Non-current liabilities 297 512 326 770
Loans and borrowings 282 722 314 428
Deferred tax liabilities 14 790 12 342
Current liabilities 500 370 421 518
Bank overdrafts 106 963 71 296
Loans and borrowings 21 976 17 354
Income tax payable 29 295 10 012
Trade and other payables 342 136 322 856
Total liabilities 797 882 748 288
Total equity and liabilities 2 843 627 2 533 156
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
Year ended Year ended
31 December 31 December
2011 2010
R`000 R`000
Cash flows from operating activities 112 008 150 940
Cash flows from investing activities (107 021) (98 226)
Cash flows from financing activities (70 609) (17 419)
Net (decrease) increase in cash and cash equivalents (65 622) 35 295
Cash and cash equivalents at beginning of the year (24 848) (60 143)
Cash and cash equivalents at end of the year (90 470) (24 848)
CONDENSED CONSOLIDATED SEGMENTAL REPORT
Reviewed Audited
Year ended Year ended
31 December 31 December
2011 2010
R`000 R`000
Segment revenue - external
customers
SEP 1 258 717 1 046 398
OTC 391 955 316 978
Other operating segments 116 889 83 603
Total 1 767 561 1 446 979
Segment result
SEP 440 836 277 032
OTC 100 641 56 273
Other operating segments 26 857 14 198
Total 568 334 347 503
COMMENTARY
OVERVIEW
We present our results for the year ending 31 December 2011 in a year that saw
difficult economic conditions for consumers and businesses alike. The exchange
rate, no Single Exit Price (SEP) increase and an extremely slow rate of new
product registrations at the Medicines Control Council (MCC) continued to
influence the results negatively. The positive impact of our hedging policy is
evident in the annual results with unrealised gains made on the mark to market
(fair valuation) of forward exchange contracts (FECs) of R109,2 million (2010:
loss of R44,7 million). We continued to achieve healthy gross profit margins
as a result of the weaker US Dollar in the first half of 2011 and our
favourable forward cover in the second half of 2011. Anticipated volumes from
government tender antiretroviral (ARV) business did not materialise to the
levels expected. Our view is that 2012 tender volumes are likely to be better.
The case against Pfizer Limited and Pfizer Laboratories (Pty) Limited, arising
from damages caused by Pfizer`s incorrectly obtained interdict against the
group`s amlodipine besylate products in 2003, initially reported on SENS
during October 2010, was settled in our favour as reported in the 2011 interim
results. This positively affected the earnings per share (EPS) and headline
earnings per share (HEPS) calculations, but should be viewed as an isolated
occurrence. 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), a wholly owned subsidiary
of Cipla Medpro South Africa Limited (CMSA or the group), continues its
growth, albeit slower than anticipated, and by January 2012 was again ranked
third largest pharmaceutical company by value for the 12 months, and third
largest for the month of January 2012. Cipla Medpro has an Evolution Index
(EV) of 102,7 (Rands) (IMS, January 2012). The EV of 102,7 is the third
highest of the top 20 pharmaceutical companies in South Africa.
The total private market grew by 9,8% in Rands. Cipla Medpro`s performance
outstripped the market, growing by 12,8% in Rands (IMS, January 2012).
We remain focused on growing our brands in over-the-counter (OTC) medicines,
particularly at retail level, and SEP. There is still a huge opportunity to
continue SEP and OTC growth given the pipeline of medicines we have.
Unfortunately the slow registration process, resulting in a lack of new first-
to-market products, continues to weigh heavily on our business.
Our top three SEP brands contributed to sales of R190,8 million (12 months)
(IMS, January 2012) into the private sector and still have growth potential.
Lexamil is performing at an EV of 109,8. Of our top ten OTC products, eight
have EVs of over 100, with Airmune expected to achieve significant turnover in
the next 12 to 18 months.
Our OTC business grew by 10,9% during the 12-month period (IMS, January 2012)
and this excludes sales into retail.
We launched our oncology division during late September 2011 and have started
making inroads already. We look forward to a good trading year with this
division.
The Cipla Vet (small animal) revenue increased by 10,9% to R23,4 million and
Cipla Agrimed (large animal) increased by 44,7% to R77,0 million for the year
ended 31 December 2011. We are pleased with the growth of our animal
businesses.
Turnover of the factory increased significantly in 2011 (more than 100%), but
the division still posted a loss mainly as a result of low uptake of ARVs from
the government. However the loss has reduced when compared to the previous
years. This business continues to improve while providing the group with a
strategic and operational advantage, especially when we start moving into
Africa.
As previously stated, the ARV tender business did not materialise to the
numbers we had expected, probably due to the fact that more PEPFAR (US
President`s Emergency Plan for AIDS Relief) and Global Fund orders were
placed. Cipla India benefitted from this which is borne out by their sales to
SCS (Supply Chain Services).
Although we experienced slower growth than expected (only launched five
products, mostly late in the second half of the year), we believe 2012 will be
better. Provided of course, that the registrations we expect materialise.
REVIEW OF RESULTS
Statement of comprehensive income
CMSA is pleased to report headline earnings of R361,3 million (2010: R195,4
million), an increase of 84,9%, for the 12 months ended 31 December 2011. This
translates into an increase of 82,8% to 80,8 cents (2010: 44,2 cents) in HEPS,
based on 446,9 million (2010: 442,5 million) weighted average number of shares
in issue for the 2011 year (before the effects of dilution are taken into
account). This is after accounting for the effect of buying back 7,6 million
CMSA shares in November 2011 (which are in the process of being cancelled) at
a total cost, including all expenses, of R50,0 million under the general
approval granted by shareholders at the last annual general meeting held on 25
May 2011. The reconciliation to headline earnings includes the gain/loss on
disposals of property, plant and equipment and the loss on the deemed disposal
of a joint venture, all net of tax. EPS improved by 82,8% to 80,8 cents (2010:
44,2 cents).
After adjusting for the effect of the mark to market valuation of FECs,
settlement income, the fair value adjustments on the interest rate swaps, the
interest rate swap settlements and other matters, normalised HEPS increased by
11,5% to 58,3 cents (2010: 52,3 cents) and normalised EPS by 11,3% to 58,2
cents (2010: 52,3 cents).
Revenue increased by 22,2% to R1,768 billion (2010: R1,447 billion) and
although the gross profit margin was still at pleasing levels, it decreased to
59,7% from 62,1% at 31 December 2010 - slightly higher than the 58,2% achieved
at 30 June 2011. The exchange rate continues to have an impact on the margin
and the group was proud to achieve this result without any SEP increase having
been given during the 2011 year.
Profit before finance costs and income tax for the year increased by 63,5% to
R568,3 million (2010: R347,5 million), with operating expenses increasing from
R557,2 million at 31 December 2010 to R608,4 million for the current year.
55,8% of the operating expenses were incurred during the second half of the
year, mainly attributable to increased advertising and marketing costs during
the second half of the year, including amounts related to once-off events.
Net finance costs reduced from R57,8 million to R50,0 million mainly as a
result of the settlement of the preference share liability, the effects of
which are included in the analysis below:
- interest on preferences shares of R1,0 million (2010: R9,5 million), a
decrease of R8,5 million;
- fair value gain on interest rate swaps of R4,1 million (2010: loss of R2,2
million);
- increased outflows of swap settlements of R4,3 million (2010: R2,8 million);
and
- interest on the Nedbank Limited long-term loan facilities of R22,5 million
(2010: R18,1 million), an increase of R4,4 million due to the rearrangement of
our debt structure.
Currently the interest cover is at a comfortable level of 9,8 times (2010: 5,7
times). If the settlement income and unrealised gains on the mark to market of
FECs are excluded from the calculation, the cover is 6,7 times.
Profit after tax for the year was R366,1 million (2010: R199,3 million). This
was achieved after an improvement in the effective tax rate to 29,4% (2010:
31,2%). The effective tax rate continued to improve, but still remains higher
than the statutory tax rate due to the following factors:
- STC of R6,0 million (2010: R2,7 million);
- non-deductible preference share interest of R1,0 million (2010: R9,5
million); and
- non-deductible IFRS 2 Share-based Payment expenses of R1,5 million (2010:
R10,5 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 new CMSA Employee Share Option Scheme,
vest over a five-year period. This expense will increase in the future as more
options are granted, but is not likely to reach the levels seen in the 2010
financial year.
Statement of financial position
Net interest-bearing borrowings have increased by R38,6 million to R395,2
million (2010: R356,6 million), however, the gearing ratio has reduced to
19,3% (2010: 20,0%), although higher than the 13,7% reported at 30 June 2011 -
mainly due to the settlement income. The group`s net cash position was
overdrawn at 31 December 2011 by R90,5 million (2010: R24,8 million) as a
result of the following:
- payment of the interim dividend of R29,5 million in October 2011;
- payment of the second provisional tax payment of R72,6 million on 30
December 2011;
- payment of R50,0 million for the share buy-back, including costs, in
November 2011; and
- amounts totalling R49,2 million owing by certain provincial health
departments, in excess of normal debtor terms.
Debtors days have increased slightly to 67 days (31 December 2010: 63 days and
30 June 2011: 67 days), mainly due to slow and non-payment from certain
debtors as referred to above. Creditors days are currently at 170 days (31
December 2010: 186 days and 30 June 2011: 185 days) with the reduction as a
result of some invoices being settled early to take advantage of the exchange
rate, where possible. The inventory days have increased to 181 days (31
December 2010: 157 days and 30 June 2011: 156 days) due to high levels of ARV
stock held at year-end. This was due to facilitating the shut down during
middle December 2011 to the beginning of January 2012 for preventative repairs
and maintenance. If the ARV products are excluded from the calculation, the
inventory days would reduce to approximately 151 days.
Statement of cash flows
Cash flows generated from operating activities are R112,0 million (2010:
R150,9 million), after adjusting for the non-cash flow effects of depreciation
of R24,1 million (2010: R18,1 million), IFRS 2 Share-based Payment expenses of
R1,5 million (2010: R10,5 million) and FEC gains of R109,2 million (2010: loss
of R44,7 million). The final dividend relating to 2010 of R27,2 million, was
paid to shareholders during May 2011, and the 2011 interim dividend of R29,5
million was paid in October 2011 (2010: inaugural interim dividend of R22,5
million).
Investing activities resulted in outflows of R107,0 million (2010: R98,2
million) due to acquisitions of property, plant and equipment and intangible
assets. A net R70,6 million was utilised for financing activities (2010: R17,4
million), mainly for the share buy-back of R50,0 million, the settlement of
R34,5 million of the preference shares to Nedbank Limited and R10,0 million on
the working capital and instalment sale facilities at the factory. This was
offset by drawdowns of R26,0 million on the Nedbank Limited loan facility.
Segmental reporting
Based on the requirements of the group`s chief operating decision maker (CODM)
in 2011, the reporting segments were amended in accordance with IFRS 8
Operating Segments. As the factory, a previously reported operating segment,
is now producing mainly for the group and with third party manufacturing
reducing to immaterial levels in 2011, the segments reported on to the CODM on
a monthly basis were amended. The segments as per the condensed consolidated
segmental report are the segments reviewed by the CODM on which to base
business decisions. Segmental information is reported to the CODM up to a
profit before finance costs and income tax level.
BASIS OF PREPARATION
The condensed consolidated financial results have been prepared in accordance
with the framework concepts and 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, the AC 500
standards as issued by the Accounting Practices Board or its successor (where
applicable) and the Listings Requirements of the JSE.
The accounting policies and methods of computation 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 2010, except for the adoption of new/amended standards
and interpretations becoming effective since January 2011.
The condensed consolidated financial results for the year ended 31 December
2011 have been reviewed by Mazars and their unqualified opinion is available
for inspection at the company`s registered office.
C Aucamp (Chief Financial Officer) is responsible for these condensed
consolidated financial statements and has been involved with the preparation
thereof in conjunction with MW Daly and E van der Merwe, all three of whom are
qualified Chartered Accountants (South Africa).
CHANGES IN OWNERSHIP INTEREST
Cipla Medpro made the following acquisitions/disposals during the year, none
of which had a material impact on the affairs of the group:
- acquired a 100% interest in a shelf company in Botswana, at a nominal value;
- acquired an additional 25% interest in Cipla Nutrition (Pty) Limited (2010:
50% joint venture); and
- accounted for the disposal of a portion of its interest in Cipla Agrimed
(Pty) Limited in terms of the shareholders` agreement, without losing control
over this company.
DIRECTORATE
There have been no changes to the board and it continues to function in
accordance with its approved charter.
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 2011, that has not been otherwise dealt with in the consolidated
financial statements.
PCS Luthuli JS Smith
Chairman Chief Executive Officer
15 March 2012
DECLARATION OF ORDINARY DIVIDEND
As Dividends Tax will become effective from 1 April 2012 and will apply to all
declarations of dividends to shareholders after that date, the board has
recommended that a final dividend of 7,5 cents per share be declared no later
than 5 April 2012, in respect of the 2011 financial year. This will bring the
total cash dividend to 14,0 cents per share, an increase of 27,3% when
compared to the total dividend of 11,0 cents in 2010.
As such, the final dividend will be subject to Dividends Tax and the salient
dates for the payment of the final dividend are detailed below:
Last day to trade cum dividend Friday, 4 May 2012
Shares trade ex dividend Monday, 7 May 2012
Record date Friday, 11 May 2012
Payment date Monday, 14 May 2012
Share certificates may not be dematerialised or rematerialised between Monday,
7 May 2012 and Friday, 11 May 2012, both dates inclusive.
The company`s policy to maintain a dividend cover of between four and five
times has been complied with when the results are analysed on a normalised
basis. The cover is based on normalised earnings due to the non-cash effect of
the unrealised gains on FECs that may or may not be realised during the 2012
financial year.
By order of the board
MW Daly Durban
Company Secretary 15 March 2012
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to
the financial condition and results of the operations of Cipla Medpro South
Africa Limited that, by their nature, involve risk and uncertainty because
they relate to events and depend on circumstances that may or may not occur in
the future. These may relate to future prospects, opportunities and
strategies. If one or more of these risks materialise, or should underlying
assumptions prove incorrect, actual results may differ from those anticipated.
By consequence, all forward-looking statements have not been reviewed or
reported on by the group`s auditors.
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
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: 15/03/2012 07:30:01 Produced by the JSE SENS Department.
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