| Fri 21 Oct 2005, 17:55 | | Enaleni - Profit forecast |
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Enaleni - Profit forecast, Financial effects and Withdrawal of cautionary
Enaleni Pharmaceuticals Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/018027/06)
(JSE code: ENL ISIN: ZAE000067740)
("Enaleni" or "the company")
Warning: The listing of ordinary shares in the company is on ALTx. Investors
are advised of the risks of investing in a company listed on ALTx. Investors are
advised that the JSE does not guarantee the viability or the success of a
company listed on ALTx. In terms of the Listings Requirements, the company is
obliged to appoint and retain a Designated Adviser, which is required to, inter
alia, attend all board meetings held by the company to ensure that all the
Listings Requirements and applicable regulations are complied with, approve the
Financial Director of the company and guide the company in a competent,
professional and impartial manner. If the company fails to retain a Designated
Adviser, it must make arrangements to appoint a new Designated Adviser within 10
business days, failing which the company faces suspension of trading of its
securities. If a Designated Adviser is not appointed within 30 days of its
suspension, the company faces the termination of its listing without the
prospect of an appropriate offer to minority shareholders.
ENALENI - PROFIT FORECAST, FINANCIAL EFFECTS AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
1.1. Shareholders are advised that, further to the announcement dated 26
September 2005, a profit forecast for the enlarged Enaleni group after the
recent acquisitions of Xeragen Laboratories (Pty) Limited, trading as FirstPh
("FirstPharm") and Cipla Medpro Holdings (Pty) Limited ("Cipla Medpro")
("recent acquisitions") and the financial effects of the Cipla Medpro
transaction are hereby released.
2. Terms and conditions precedent of the Cipla Medpro transaction
2.1. The purchase consideration in terms of the Cipla Medpro transaction is R1.2
billion and will be settled as follows to the Cipla Medpro vendors:
- R990 million in cash through a combination of equity and debt funding;
- R110 million of the purchase consideration will be settled to the Cipla
Medpro vendors by the issuing of Enaleni ordinary shares at an issue price of
280 cents per share, being a premium to the market price at the time that the
Cipla Medpro transaction was agreed;
- a deferred payment of R100 million ("deferred payment") which, if the
profit before taxation for the year to 31 December 2006 is less than R150
million, will be adjusted downwards by the percentage by which the profit before
tax is less than R150 million.
An increase in the overall purchase consideration of between R75 million to
R200 million will be payable on the achievement of profits before taxation
for the year ended 31 December 2006 of over R175 million (on a sliding scale
basis).
2.2. The key management and team members of Cipla Medpro will all become
beneficial shareholders in Enaleni subsequent to the transaction.
2.3. Nedbank Capital and Exchange Sponsors have been mandated by Enaleni to
source the required equity and debt funding referred to above. Shareholders
will be informed once further details of the total funding package are known.
2.4. The effective date of the transaction is 1 November 2005. If the purchase
consideration is not paid in full by 30 November 2005, interest will accrue from
1 December 2005 on the amount of R990 million at 7% per annum compounded monthly
in arrears.
2.5. In terms of the Cipla Medpro transaction, Cipla Medpro"s management team
and all team members remain unchanged with Jerome Smith as CEO, Duncan
Watermeyer (Director: Regulatory), Dr Nic De Jongh (Director: Medical), Chris
Aucamp (Director: Finance) and Vanessa Liebenberg (Director: Sales).
2.6. The directors of Cipla Medpro have entered into written employment
contracts acceptable to Enaleni incorporating restraint of trade clauses.
2.7. The Cipla Medpro transaction is subject inter alia to the following
conditions precedent:
- approval of the transaction by the shareholders of Enaleni;
- approval of the transaction by the Competition Commission and/or the
Competition Tribunal, as the case may be; and
- the successful raising of the equity and debt funding.
3. Profit forecast
3.1. The forecast income statements of Enaleni including all recent acquisitions
for the financial years ending 31 December 2005 and 31 December 2006, the
preparation of which is the responsibility of the directors, are set out belo
The forecasts have been examined by KPMG Inc. and their independent reporting
accountants" report thereon will be included in the circular to be sent to
shareholders as set out in paragraph 5 below.
3.2. The historical and forecast income statements of the enlarged group are as
follows:
Audited Forecast (1) Forecast
31 Dec 2004 31 Dec 2005 31 Dec 2006
R"000 R"000 R"000
Revenue 120 473 198 996 730 949
Gross Profit 38 245 94 447 405 282
Less: Staff costs (14 007) (33 085) (97 607)
Share-based payments - (574) -
Restructuring costs - (415) -
Other operating expenses (18 454) (45 915) (125 627)
EBITDA 5 784 14 458 182 048
Depreciation (766) (1 901) (3 571)
Profit before interest 5 018 12 557 178 477
and taxation
Net interest paid (1 118) (2 102) (29 128)
Profit before taxation 3 900 10 455 149 349
Taxation (848) (3 326) (45 184)
Profit after taxation 3 052 7 129 104 165
Minority interests 277 496 (1 219)
Add: headline earnings - 989 -
adjustment(2)
Headline earnings 3 329 8 614 102 946
attributable to ordinary
shareholders
Less: headline earnings - (989) -
adjustment(2)
Earnings attributable to 3 329 7 625 102 946
ordinary shareholders
Weighted average shares 47 771(3) 98 080 400 342(4)
in issue (000)
Weighted average fully 47 771 100 729 406 993
diluted shares in issue
(000)
Earnings per share 7.0 7.8 25.7
(cents)
Headline earnings per 7.0 8.8 25.7
share (cents)
Fully diluted earnings 7.0 7.6 25.3
per share (cents)
Fully diluted headline 7.0 8.6 25.3
earnings per share
(cents)
Dividend per share 0.7 - -
(cents)
Notes:
(1) The effective date of the FirstPharm transaction was 1 September 2005 an
the 31 December 2005 results therefore include 4 months of the FirstPharm
results. The effective date of the Cipla Medpro transaction is 1 Novembe
however, it is assumed that all conditions precedent will be fulfilled on
around 31 December 2005. In accordance with IFRS 3: (AC140) Business
Combinations the Cipla Medpro results have only been included from 1 Janu
2006.
(2) The headline earnings adjustment refers to restructuring costs and share
based payments.
(3) The earnings and headline earnings per share calculations for 31 Decembe
2004 are based on the conversion of the original 100 weighted number of o
shares in issue to 47 770 700.
(4) The rights issue and vendor placing issue price is assumed to be 300 cen
per share.
Main assumptions:
(1) Revenue is based on the existing operations of companies in the group an
existing contract manufacturing agreements in place, therefore only organ
growth is assumed from 2006 onwards.
(2) Gross profit margins increase because of the change in sales mix, with
branded products and generic pharmaceuticals contributing a larger percentage of
future sales.
(3) The future non-marketing overheads of the group are of a fixed nature and
will only increase marginally should volume sales increase.
(4) It is assumed that the Cipla Medpro transaction is partly funded by senior
debt of R300 million at an average annual interest rate of 11%.
4. Unaudited pro forma financial effects of the transaction
4.1. The unaudited pro forma financial effects set out below are provided for
illustrative purposes only to provide information about how the acquisition o
Cipla Medpro and the issue of Enaleni ordinary shares may have impacted on
Enaleni"s results and financial position. Due to the nature of the unaudited
pro forma financial information, it may not give a fair presentation of the
group"s results and financial position after the acquisition of Cipla Medpro.
The unaudited pro forma financial effects are based on the unaudited interim
financial information of Enaleni at 30 June 2005. The directors of Enaleni a
responsible for the preparation of the unaudited pro forma financial effects.
Before the After the % Change
Cipla Medpro Cipla Medpro
transaction transaction
unaudited 30 unaudited 30
June 2005 June 2005
Earnings per share (cents) 3.7 7.8 108
Headline earnings per 5.2 8.0 54
share (cents)
Net asset value per share 48.8 214.9 340
(cents)
Net tangible asset value 29.8 (74.3) n/m*
per share (cents)
Weighted average shares in 65 433 397 993
issue (000)
Shares in issue at period 113 545 397 993
end (000)
* Not meaningful
Notes:
(1) The unaudited pro forma financial effects on the results were prepared on
the basis that the acquisition of Cipla Medpro was completed on 1 January
(2) The unaudited pro forma financial effects on the financial positions were
prepared on the basis that the acquisition of Cipla Medpro was completed o
June 2005.
(3) The "Before the Cipla Medpro transaction" column has been extracted witho
adjustment, from the unaudited results of Enaleni for the interim period e
30 June 2005.
(4) The "After the Cipla Medpro transaction" earnings per share and headline
earnings per share has been adjusted to include the following:
- the notional interest charge arising as a result of the net present v
of the deferred payment in terms of AC133: Financial Instruments: Recogn
and Measurement;
- the interest charge on the funding of the transaction;
(5) The "After Cipla Medpro transaction" net asset value and net tangible ass
value per share has been adjusted to include the following:
- the rights issue, vendor placing and debt to fund the acquisition;
- the estimated transaction costs that have been written off against share
premium;
- the assets and liabilities of Cipla Medpro;
- the raising of the net present valued deferred payment;
- the net tangible asset value per share excludes patents, trademarks and
goodwill.
(6) The fully diluted earnings and headline earnings per share have not been
disclosed as it is not material.
(7) The allocation of the purchase price in terms of IFRS 3: (AC 140); Busine
Combinations has not as yet been calculated as this is done at year end.
pro forma financial information has been prepared on the basis that the ex
of the purchase price over the net asset value of the acquisition will com
goodwill of R1.1 billion.
5. Circular to shareholders
A circular to Enaleni shareholders containing details of the Cipla Medpro
transaction and incorporating a notice of general meeting of shareholders
will, subject to approval by the JSE, be mailed to shareholders.
6. Withdrawal of cautionary announcement
Caution is no longer required to be exercised by shareholders when dealing
in their securities.
Independent Designated Adviser, Investment Bank and Joint Corporate Adviser and
Arranger
Nedbank Capital
Designated Adviser and Joint Corporate Adviser and Arranger
Exchange Sponsors
Independent Auditors and Reporting Accountants
KPMG Inc.
Attorneys
Deneys Reitz Inc
Johannesburg
21 October 2005
Date: 21/10/2005 05:55:50 PM Produced by the JSE SENS Department
