| Tue 4 Apr 2006, 8:30 | | Enaleni - Audited group results for the year ended |
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ENL
ENL
Enaleni - Audited group results for the year ended 31 December 2005
Enaleni Pharmaceuticals
Registration number: 2002/018027/06
JSE Code: ENL
ISIN: ZAE000067740
Audited group results for the year ended 31 December 2005
* Successfully listed on the JSE
* Revenues increased by 113% to R245 million
* PBIT increased by 364% to R24,9 million
* Headline EPS 9,0 cents per share - exceeded forecast
* Top JSE empowerment pharmaceutical company - Financial Mail
* R1,2 billion successful acquisition of Cipla Medpro
* Achieved top 10 pharmaceutical company status in South Africa
INCOME STATEMENT
Year ended Year ended
31 December 31 December
2005 2004
Audited Audited*
R"000s R"000s
Revenue 245 078 115 202
Gross profit 109 070 37 207
Other operating income 4 016 2 333
Other operating expenses (88 157) (34 173)
Staff costs (38 748) (14 007)
Depreciation (2 013) (608)
Other operating expenses (47 396) (19 558)
Operating profit before financing
costs and tax 24 929 5 367
Net finance costs (6 850) (1 118)
Profit before tax 18 079 4 249
Taxation (5 541) (895)
Profit after tax 12 538 3 354
Attributable to:
Equity holders of the parent 13 204 3 632
Minority interest (666) (278)
Profit for the period 12 538 3 354
*Restated under IFRS
Reconciliation of headline earnings
Profit attributable to
ordinary shareholders 13 204 3 632
Adjusted for non-trading items (3 101) -
Restructuring costs 830 -
Profit on sale of fixed assets (75) -
Excess of assets acquired
over purchase price (3 856) -
Headline earnings 10 103 3 632
Weighted average shares in issue
on which earnings are based (`000) 112 119 47 771
Weighted average fully
diluted shares in issue
on which diluted earnings
per share are based (`000) 113 988 47 771
Earnings per share (cents)
Basic 11,8 7,6
Diluted 11,6 7,6
Headline earnings per share (cents)
Basic 9,0 7,6
Diluted 8,9 7,6
*Restated under IFRS
BALANCE SHEET
31 December 31 December
2005 2004
Audited Audited*
R"000s R"000s
ASSETS
Total non-current assets 1 209 779 19 681
Property, plant and equipment 22 950 8 753
Intangible assets 1 170 001 7 900
Investments 5 010 -
Loans receivable 1 917 1 984
Deferred tax assets 9 901 1 044
Total current assets 287 530 39 763
Inventories 60 796 13 507
Trade and other receivables 114 546 18 456
Cash and cash equivalents 112 188 7 800
Total assets 1 497 309 59 444
EQUITY AND LIABILITIES
Capital and reserves 891 566 5 154
Minority interest (1 559) (278)
Total equity 890 007 4 876
Total non-current liabilities 124 448 19 159
Long-term loans and borrowings 123 853 19 159
Deferred tax liabilities 595 -
Total current liabilities 482 854 35 409
Bank overdraft 4 768 -
Short-term loans and borrowings 307 711 4 382
Income tax payable 21 813 1 940
Trade and other payables 145 254 29 087
Forward exchange contracts 3 308 -
Total liabilities 607 302 54 568
Total equity and liabilities 1 497 309 59 444
*Restated under IFRS
CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2005 2004
Audited Audited*
R"000s R"000s
Cash generated from operations 7 918 8 153
Net finance costs (6 850) (1 118)
Net dividends paid (478) (343)
Taxation paid (22 049) (882)
Secondary tax on companies paid (263) -
Cash flows from operating activities (21 722) 5 810
Expenditure to maintain
operating capacity
Acquisitions of property,
plant and equipment (7 908) (9 099)
Acquisition of intangible assets (4 249) (7 900)
Proceeds on disposals of
plant and equipment 4 991 52
Expenditure for expansion
Acquisition of subsidiaries (1 122 824) -
Acquisition of unlisted investments (5 001) (1 984)
Decrease in loans receivable 36 076 -
Increase in director"s loan receivable (887) -
Cash flows from investing
activities (1 099 802) (18 931)
Proceeds from the issue
of share capital 875 621 -
Acquisition of treasury shares (2 651) -
Loans raised 348 174 15 335
Cash flows from financing activities 1 221 144 15 335
Net increase in cash and
cash equivalents 99 620 2 214
Cash and cash equivalents
at beginning of the year 7 800 5 586
Cash and cash equivalents
at end of the year 107 420 7 800
*Restated under IFRS
SEGMENTAL ANALYSIS OF EARNINGS
Year ended Year ended
31 December 31 December
2005 2004
Audited Audited*
R"000s R"000s
Pharmaceutical 11 208 3 909
Consumer and vitality 1 996 (277)
Attributable to equity
holders of the parent 13 204 3 632
*Restated under IFRS
STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Retained
capital premium shares income*
R"000s R"000s R"000s R"000s
Balance at
1 January 2004 - - - 1 865
Net profit for the year - - - 3 632
Dividends paid - - - (343)
Balance at
1 January 2005 - - - 5 154
Issue of share capital 403 875 218 - -
Shares held by share
incentive trust - - (2 651) -
Net profit for the year - - - 13 204
IFRS 2 Share based
payments - - - 238
Minority interest acquired - - - -
Balance at
31 December 2005 403 875 218 (2 651) 18 596
Minority Total
Total interest* equity
R"000s R"000s R"000s
Balance at
1 January 2004 1 865 - 1 865
Net profit for the year 3 632 (278) 3 354
Dividends paid (343) - (343)
Balance at
1 January 2005 5 154 (278) 4 876
Issue of share capital 875 621 - 875 621
Shares held by share
incentive trust (2 651) - (2 651)
Net profit for the year 13 204 (666) 12 538
IFRS 2 Share based
payments 238 - 238
Minority interest acquired - (615) (615)
Balance at
31 December 2005 891 566 (1 559) 890 007
*Restated under IFRS
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
Equity Equity Earnings
IFRS transition date Audited Audited
1 January 31 December 31 December
2004 2004 2004
R"000s R"000s R"000s
As previously reported
under SA GAAP 2 057 5 044 3 330
IAS 16 Property,
plant and equipment
Reduction in
depreciation - 157 157
Taxation effect - (47) (47)
Restated under IFRS 2 057 5 154 3 440
IAS 17 Leases
Straight lining
of lease rentals (192) - 192
Restated after IFRS
and operating leases 1 865 5 154 3 632
PRO FORMA STATEMENT OF EARNINGS
The unaudited summary of group earnings is included for illustrative purposes.
The unaudited headline earnings for the year ended 31 December 2005 would have
been R70 660 000 if all the subsidiaries had been owned for the full accounting
year.
The forecast headline earnings for the year ended 31 December 2006, as stated in
the circular issued to shareholders on 28 November 2005, are R102 946 000.
Unaudited Forecast
31 December 31 December
2005 2006
Notes R"000s R"000s
Revenue 625 746 730 949
Gross profit 306 767 405 282
Other operating expenses (162 625) (226 805)
Staff costs (92 354) (97 607)
Depreciation (4 884) (3 571)
Other (65 387) (125 627)
Operating profit before
financing costs and tax 144 142 178 477
Net finance costs 1 (38 061) (29 128)
Profit before tax 106 081 149 349
Taxation (33 733) (45 184)
Profit after tax 72 348 104 165
Minority interests 1 413 (1 219)
Headline earnings adjustment 2 (3 101) -
Headline earnings
attributable to
ordinary shareholders 70 660 102 946
Headline earnings adjustment 3 101 -
Earnings attributable
to ordinary shareholders 73 761 102 946
Weighted average shares
in issue (`000) 400 360 400 360
Weighted average fully
diluted shares in issue (`000) 407 491 407 491
Earnings per share (cents)
Basic 18,4 25,7
Diluted 18,1 25,3
Headline earnings per
share (cents)
Basic 17,6 25,7
Diluted 17,3 25,3
Notes:
1. The net finance costs for the year
ended 31 December 2005 includes an
estimate for net finance costs of
R33 066 000 to fairly compare with the
forecast net finance costs for the
year ended 31 December 2006.
2. Included in the headline earnings
adjustment and taken to profit and
loss for the year in terms of
IFRS 3 are the following:
Restructuring costs, (830)
Profit on sale of fixed assets and 75
Excess of assets acquired over
purchase price 3 856
COMMENTS
The board of directors is pleased to report a 113% growth in revenues to R245
million for the year ended 31 December 2005. The group"s operating profit before
net finance costs and tax increased on the previous year by 364% to R24,9
million.
These figures include the consolidation of Cipla Medpro for only one month and
exclude the annualisation of other Enaleni subsidiaries which were acquired
during the year. The group headline earnings of 9,0 cents per share has exceeded
the forecast published in the circular to shareholders dated 28 November 2005.
The pharmaceutical industry has, notwithstanding the constantly changing
regulatory environment in South Africa and its resultant challenges, continued
to show resilience. We are pleased to announce that Enaleni was able to
significantly increase its market share during this period. Being the fastest
growing large pharmaceutical company in South Africa, Enaleni has become a
substantial player in the pharmaceutical industry.
The successful acquisition of Cipla Medpro for R1,2 billion was one of the
largest industry transactions in recent times. The listing of Enaleni on the JSE
in June 2005 has been both beneficial to the company and well received by the
market, strategically positioning the company to capitalise on the emerging
opportunities in the pharmaceutical industry.
The R270 million BEE transaction, which formed part of the Cipla Medpro
acquisition, has firmly secured Enaleni"s position as the leading empowerment
pharmaceutical company in Southern Africa, well positioned to capitalise on the
soon to be finalised Health Charter.
The twelve BEE consortiums which have invested in Enaleni were carefully
selected to ensure alignment with the strategies and objectives of Enaleni.
The criteria for selection favoured those parties with the following attributes:
* Truly broad-based.
* Womens" groupings.
* Significant experience in the wider health care sector.
* Ability to contribute meaningfully on a strategic and operational level to
ensure the continued success and growth of the Enaleni group. During the
year, the company, which has recently attained an AA Empowerdex rating,
managed to achieve a variety of prestigious awards:
* The Financial Mail"s top JSE listed BEE company in the Health Sector.
* The Financial Mail"s fourth most empowered company on the JSE.
* Third place in the Business Report/Business Map Awards in the category, Top
BEE Market Performer.
* Best Investor Relations by an AltX listed company in the IR Magazine -
Investor Relations awards.
* The Black Business Quarterly"s (BBQ) - Best Established Black Business Award.
OPERATIONAL REVIEW
Enaleni"s strategy is to build a well balanced portfolio of two business units,
being the Pharmaceutical division and the Consumer and vitality division.
Pharmaceutical division
The pharmaceutical division includes Cipla Medpro, FirstPharm and the contract
manufacturing business. The division continues to perform well and increased its
market share during 2005. The division increased its market rating by three
places to 10th position (source IMS December 2005 - total Rand sales).
Cipla Medpro:
* Has increased its market share in the key therapeutic chronic medicine
markets of respiratory and cardiovascular.
* Has registered twelve ARVs. It is anticipated that Cipla Medpro will become
a significant player in the ARV market in the years ahead.
* Has launched 27 molecules during 2005, and achieved the shortest average
turnaround time with the Medicines Control Council.
* Is now the fifth largest pharmaceutical marketer by volume in South Africa
and has developed a significant pharmaceutical dossier pipeline, which is
expected to result in increased future revenues.
The pharmaceutical division has secured substantial tenders and is one of the
larger suppliers of medicines to the state. The division has also entered into a
number of strategic partnerships and relationships with large multi-nationals
which has had a significant positive impact on revenues. Enaleni has invested in
additional pharmaceutical manufacturing capabilities and currently has 50%
capacity available.
Consumer and vitality division
The consumer business continued to focus on affordable healthcare through its
power brand, Hercules. The Consumer factory was recently sold for R8,5 million
and has been relocated to a 5 500m2 site adjacent to the group"s pharmaceutical
manufacturing facility in Mobeni, KwaZulu-Natal. The close physical proximity of
the group facilities will ensure operational synergies.
The group will be investing in growing market share to ensure that the consumer
business will be a significant contributor to profit in the medium term. The
company continues to explore acquisition opportunities.
Bioharmony and Muscle Science have increased their market share during the
period and continue to show significant growth.
GROUP SHORT-TERM LOANS
The balance sheet item of "Short-term loans and borrowings" at 31 December 2005
includes a R300 million loan which was repayable in January 2006. This loan was
substituted in January 2006 with a five year term loan of R300 million.
PROSPECTS
In the circular issued to shareholders on 28 November 2005, Enaleni announced
forecast sales of R731 million for 2006 and forecast profit before interest and
tax of R178,5 million. The board is pleased to announce that for the first two
months of 2006, the group is trading in line with the projected forecast.
The board anticipates this growth will continue for the rest of the year on the
assumption that the current market conditions endure.
In terms of the acquisition agreement of Cipla Medpro, further capital of
between R100 million and R300 million will be paid to the vendors of Cipla
Medpro by 31 March 2007, should Cipla Medpro contribute profit before taxation
in excess of R150 million for the year ended
31 December 2006. Whilst the initial intention was to fund such payment through
a combination of debt and equity, it should be noted that accumulated cash
reserves of R100 million have been set aside for payment to the vendors as and
when required.
The Enaleni group remains focused on providing health and vitality for all South
Africans, and is committed to building a significant pharmaceutical company in
Africa. This will include a strategy focusing on organic growth and strategic
acquisitions to strengthen the existing core businesses.
BASIS OF PREPARATION OF THE RESULTS
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). These are the group"s first
IFRS consolidated financial statements and the provisions of IFRS 1 (first time
adoption of IFRS) have been applied.
AUDITED RESULTS
The results for the year ended 31 December 2005 have been audited by KPMG Inc.
Their unqualified audit opinion is available for inspection at the registered
office of the company.
DIVIDEND POLICY
Initially all earnings generated by the group will be utilised to repay debt and
fund future growth and development. It is the intention of the company to
commence paying dividends within three years after 31 December 2005 subject to
prevailing future cash flow requirements.
CHANGES TO BOARD OF DIRECTORS
The company has announced the restructuring of its board with the appointment of
two new non executive board members with immediate effect:
* Dr Gil Mahlati, a well respected businessman who has considerable experience
and knowledge in the pharmaceutical industry; and
* Thembisa Dingaan, a merchant banker with an international legal background,
who has extensive business experience in acquisitions and mergers,
empowerment transactions, and structured corporate finance. Thembisa sits on
a number of high profile boards.
CORPORATE INFORMATION
Non executive directors: PCS Luthuli (Chairman), DDT Tambo
Executive directors: TD Edwards (CEO), U Parusnath, P Pillay, NM Sithole,
S Whitfield (CFO), DE Wolfson
Registration number: 2002/018027/06
JSE Code: ENL
ISIN: ZAE000067740
Registered address: 1474 South Coast Road Mobeni KwaZulu-Natal 4060
Postal address: PO Box 32003 Mobeni 4060
Transfer secretaries: Computershare Investor Services (2005) (Proprietary)
Limited
Telephone: 031 451 3800 Facsimile: 031 469 2674
Sponsor: Nedbank Capital
Please view these results on www.enaleni.com
we deliver on our promise
www.enaleni.com
Date: 04/04/2006 08:30:21 AM Produced by the JSE SENS Department
