| Mon 28 Aug 2006, 9:30 | | Enaleni - Unaudited Results for the six months end |
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ENL
ENL
Enaleni - Unaudited Results for the six months ended 30 June 2006
ENALENI PHARMACEUTICALS LIMITED
(Incorported in the Republic of South Africa)
Registration number: 2002/018027/06
JSE Code: ENL
ISIN: ZAE000067740
UNAUDITED RESULTS
for the six months ended 30 June 2006
* Revenue increases 4 times to R371 million
* Cash flows from operating activities R55.3 million
* PBIT increases 12 times to R93.1 million
* Cipla Medpro successfully integrated
* HEPS increases 188% to 12.4 cents
* Ranked fourth most empowered company on JSE
CONSOLIDATED INCOME STATEMENTS 6 months
*6 months
ended ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
Unaudited Unaudited Audited
R"000 R"000 R"000
Revenue 371 056 87 413 245 078
Gross profit 182 919 40 057 109 070
Other operating income 5 289 1 661 4 016
Operating expenses (95 116) (34 210) (88 157)
Operating profit before
financing costs
and taxation 93 092 7 508 24 929
Net finance costs (11 440) (1 059) (6 850)
Profit before taxation 81 652 6 449 18 079
Taxation (28 407) (1 135) (5 541)
Profit after taxation 53 245 5 314 12 538
Attributable to:
Equity holders of the parent 52 833 5 709 13 204
Minority interest 412 (395) (666)
Profit for the period 53 245 5 314 12 538
Reconciliation of headline
earnings
Profit attributable to
ordinary shareholders 52 833 5 709 13 204
Adjusted for: (3 086) (2 897) (3 101)
Restructuring costs - 365 830
Profit on sale of fixed assets (3 086) - (75)
Excess of assets acquired
over purchase price - (3 262) (3 856)
Headline earnings 49 747 2 812 10 103
Weighted average shares
in issue on which
earnings are based ("000) 400 360 65 433 112 119
Weighted average fully
diluted shares in issue on
which diluted earnings
per share are based ("000) 407 491 65 433 113 988
Earnings per share (cents)
Basic 13.2 8.7 11.8
Diluted 13.0 8.7 11.6
Headline earnings per share
(cents)
Basic 12.4 4.3 9.0
Diluted 12.2 4.3 8.9
RESTATEMENT OF COMPARATIVES*
The figures for the comparative period ended 30 June 2005 have been restated
as disclosed to shareholders in the circular dated 28 November 2005.
The effect of the restatement is an increase in profit after taxation of
R3.262 million, and a corresponding increase in the value of intangibles in
the balance sheet.
The increase relates to negative goodwill on acquisitions, now accurately
reflected in the income statement for the period ended 30 June 2005.
The interim results for the period ended 30 June 2005 previously reflected the
negative goodwill with intangibles in the balance sheet.
Earnings per share increased accordingly by 5 cents to 8.7 cents per share.
Headline earnings per share decreased by 0.9 cents to 4.3 cents per share.
This adjustment results from the now appropriate treatment of share-based
payments amounting to R574 000 when calculating headline earnings.
CONSOLIDATED BALANCE SHEETS
30 June 2006 *30 June 2005 31 Dec 2005
Unaudited Unaudited Audited
R"000 R"000 R"000
ASSETS
Non-current assets 1 213 746 53 515 1 209 779
Property, plant and equipment 22 323 17 578 22 950
Intangible assets 1 174 807 24 779 1 170 001
Investments 5 510 - 5 010
Loans receivable 2 136 - 1 917
Deferred tax 8 970 11 158 9 901
Current assets 324 098 65 657 287 530
Inventories 84 930 20 741 60 796
Trade and other receivables 160 173 42 890 114 546
Cash and cash equivalents 78 995 2 026 112 188
Total assets 1 537 844 119 172 1 497 309
EQUITY AND LIABILITIES
Capital and reserves 942 680 58 645 891 566
Minority interest (1 147) (1 266) (1 559)
Total equity 941 533 57 379 890 007
Non-current liabilities 252 169 12 679 124 448
Long-term loans and
borrowings 250 688 12 679 123 853
Deferred tax 1 481 - 595
Current liabilities 344 142 49 114 482 854
Bank overdraft 2 067 3 589 4 768
Short-term loans and
borrowings 101 472 5 443 307 711
Income tax payable 45 703 1 160 21 813
Trade and other payables 194 900 38 922 148 562
Total liabilities 596 311 61 793 607 302
Total equity and liabilities 1 537 844 119 172 1 497 309
CONSOLIDATED ABRIDGED CASH FLOW STATEMENTS
6 months *6 months
ended ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
Unaudited Unaudited Audited
R"000 R"000 R"000
Cash flows from operating
activities 55 309 (8 150) (21 722)
Cash flows from investing
activities (3 629) (9 956) (1 099 802)
Cash flows from financing
activities (82 172) 8 743 1 221 144
Net (decrease)/increase
in cash and cash
equivalents (30 492) (9 363) 99 620
Cash and cash equivalents
at beginning
of the period 107 420 7 800 7 800
Cash and cash equivalents
at end of the period 76 928 (1 563) 107 420
SEGMENTAL ANALYSIS
6 months *6 months
ended ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
Unaudited Unaudited Audited
R"000 R"000 R"000
Revenue
Pharmaceutical 318 045 45 327 166 139
Consumer and vitality 53 011 42 086 78 939
Total 371 056 87 413 245 078
Operating profit/(loss)
before financing costs
and taxation
Pharmaceutical 91 347 8 498 21 704
Consumer and vitality 1 745 (990) 3 225
Total 93 092 7 508 24 929
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Retained
Capital Premium Shares Income
R"000 R"000 R"000 R"000
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
1 January 2006 403 875 218 (2 651) 18 596
Share issue expenses - (2 768) - -
Shares held by share
incentive trust 4 13 436 (13 440) -
Net profit for the period - - - 52 833
IFRS 2 Share-based
payments - - - 1 049
Balance at
30 June 2006 407 885 886 (16 091) 72 478
Minority Total
Total Interest Equity
R"000 R"000 R"000
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
1 January 2006 891 566 (1 559) 890 007
Share issue expenses (2 768) - (2 768)
Shares held by share
incentive trust - - -
Net profit for the period 52 833 412 53 245
IFRS 2 Share-based
payments 1 049 - 1 049
Balance at
30 June 2006 942 680 (1 147) 941 533
COMMENTARY
FINANCIAL PERFORMANCE
It is our pleasure to announce an outstanding set of interim results which are
substantially ahead of the previous year. We continue to deliver on our
promise of establishing a major pharmaceutical company in South Africa that is
committed to providing affordable healthcare and vitality for all South
Africans.
Conditions for the generic pharmaceutical sector continue to remain positive.
Against this backdrop, the board of directors is pleased to report that
revenue for the half-year ending 30 June 2006 is R371 million, more than 300%
higher than the corresponding period in 2005, and in line with the forecast
for the year, announced in a circular to shareholders on 28 November 2005.
The increase in revenue has been leveraged to the bottom line resulting in
profit before interest and tax increasing twelvefold to R93.1 million compared
with R7.5 million in 2005. Headline earnings per share rose 188% to
12.4 cents.
The business has generated good cash flows producing R55.3 million from
operating activities in the period under review. In line with the group"s
growth strategy, these cash flows have been deployed to repay debt and fund
growth in the two operating divisions.
The group has made considerable progress in bedding down its acquisitions, as
is evident in the performance of the business. Enaleni is experiencing strong
top-line growth, and intends to extract further synergies between all the
businesses.
Cipla Medpro, which was acquired for R1.2 billion in November last year,
performed better than expected as its integration continued to proceed
smoothly. This is the first time that Cipla Medpro"s performance has been
included in the financial results of Enaleni Pharmaceuticals Limited for a
full reporting period, allowing the group to provide an accurate portrayal of
its size. The group has continued to derive considerable benefit from its
relationship with Cipla Limited, the largest pharmaceutical company in India,
operating 30 manufacturing facilities.
The acquisition of Cipla Medpro has elevated Enaleni to the fastest growing
pharmaceutical group in South Africa, positioning it as the 10th biggest
pharmaceutical and third largest generics company. This is a considerable
achievement given that the group has been in existence for only three years.
BOARD ANNOUNCEMENTS
The group is pleased to announce that Jerome Smith, CEO of Cipla Medpro, has
extended his contract with Enaleni until the end of 2008. He is to be
appointed to the Enaleni board in September of this year. Jerome and his team
will be able to build on their success with Cipla Medpro by extending their
management expertise to the entire pharmaceutical division.
The group has also employed a new chief financial officer, former Ernst &
Young partner Andy Hall, who is both a pharmacist and chartered accountant.
This appointment will allow Stan Whitfield to focus on acquisitions and
business development. Stan will remain as an executive director of the company
in the capacity of commercial director. The group"s chief executive, Trevor
Edwards, has extended his contract until the end of 2008, committing himself
to the group.
Sweet Sensations 67 (Pty) Limited, a broad-based black empowerment group with
extensive knowledge of the pharmaceutical industry, is already adding
strategic value to the group through its two appointees to the board, Dr Gil
Mahlati and Thembisa Dingaan.
In addition, Nomini Rapoo, the group company secretary at the Industrial
Development Corporation, has joined the board. An expert in corporate
governance, Ms Rapoo is an admitted attorney of the High Court and holds B Com
and LLB degrees from the University of Natal (Pietermaritzburg). She practised
as a commercial lawyer for seven years before joining the IDC in 2002.
OPERATIONAL REVIEW
After several acquisitions in 2005, Enaleni has continued to consolidate
itsportfolio of products within its business units. The group"s two divisions -
pharmaceuticals, and consumer and vitality - now employ in excess of 700
people.
Pharmaceutical division
The pharmaceutical division includes Cipla Medpro (incorporating a fledgling
veterinary division), FirstPharm and the contract manufacturing business. The
division continued to perform well and increased its market share during the
period. The division produced revenue of R318 million in the period under
review, compared to R45.3 million in the comparative period.
Cipla Medpro is the fastest growing major pharmaceutical company in South
Africa and has launched a number of highly successful new products over the
past 18 months, including Lansoloc and Flomist, both of which have overtaken
the innovator in unit sales, Venlor, a highly innovative neuropsychiatric drug
and a number of line extensions to already existing products. Triomune, the
world"s first 3-in-1 ARV was launched in May. These new products have
contributed 10% to Cipla Medpro"s revenue in the period under review. The
company has an impressive product pipeline to bring to market over the next
three years and intends to extend into new therapeutic classes including
diabetes, oncology and hormones.
The Enaleni group is now well positioned to capitalise on the government
pharmaceutical tenders to be awarded in 2007. The value of the tenders in the
generic drugs market is estimated at between R3 billion and R4 billion over a
two-year period. Enaleni will be competing for a substantial portion of this
opportunity, aiming our efforts at R1 billion of the tender. The future value
of the ARV market is estimated at R4 billion over the next three years. The
company has a formidable basket of ARVs available, which should position it
as a significant player at the next round of tenders.
FirstPharm, which was acquired in the second half of 2005, is being integrated
into the group"s pharmaceutical division and is contributing positively to
operating performance. FirstPharm enjoyed a number of record months in the
first half of the year. Revenue in the period under review increased by 24%
over the comparative period. The group expects to derive further synergies
from the FirstPharm acquisition as the integration continues. Further products
will be launched before the year-end.
FirstPharm has traditionally focused on supplying its products to dispensing
doctors. It is now increasing the distribution of several products through
general pharmacies and has had good success in listing some of its key brands
with the major pharmaceutical retailers. The company recently acquired the
Sunsafe brand, a dermatologically-endorsed sun protection range with high
brand awareness in pharmacy. This brand will be integrated into the Vitacare
range of skincare products marketed by FirstPharm.
Growth within the contract manufacturing division is within expectations. The
company is investigating an upgrade to its facilities to become compliant with
PIC/S over a two- to three-year timeframe. The group is also committed to
continued investment in people within the manufacturing division and is
confident of making strategic appointments of highly experienced individuals
over the next six months. These investments in facilities and personnel will
strategically position the group to take advantage of additional business
likely to be generated by government tenders in 2007 and establish a strong
manufacturing platform to integrate future acquisitions. Reckitt Benckiser
South Africa, a customer that accounts for a meaningful portion of the
manufacturing revenue, has extended its manufacturing and supply contract with
the group until 2010.
Enaleni is also pleased to announce that in keeping with its philosophy of
developing good relationships with all stakeholders, it has successfully
concluded a two-year wage agreement with its employees.
Consumer and vitality division
The consumer and vitality division continued to perform strongly across its
healthcare, vitality and personal-care brands in the period under review.
Revenue during this period increased by 26% to R53 million and operating profit
of R1.7 million includes a significant investment in marketing, the benefits of
which should be realised in the second half of the financial year.
At present, the division accounts for approximately 14% of the group"s
revenue, translating into a contribution to operating profit of less than 2%.
The group is very aware of the rising demand for affordable over-the-counter
products and the international trend towards vitality and wellness.
Consequently, Enaleni has begun to develop a strong consumer division to build
a substantial branded business over the coming years. The division is
committed to developing power brands under the Hercules, Caivil, Bioharmony
and Muscle Science banners. The second half of the financial year will include
various marketing initiatives, product launches and acquisitions to enable the
division to attain critical mass.
BLACK EMPOWERMENT
Enaleni is a leader in black empowerment and was recently recognised by the
Financial Mail as the fourth most empowered company on the JSE as well as the
exchange"s top empowered pharmaceutical company. The company is well
positioned to capitalise on the opportunities which will arise from the soon-
to-be-finalised healthcare charter.
CAPITAL STRUCTURE
In terms of the acquisition agreement of Cipla Medpro, further capital of
between R100 million and R300 million will be required to settle the vendors
of Cipla Medpro by approximately 31 May 2007, should Cipla Medpro contribute
profit before taxation in excess of R150 million for the year ended 31
December 2006. The group is currently in the process of raising the necessary
long-term funding to fund these payments.
PROSPECTS
In the circular issued to shareholders on 28 November 2005, the group forecast
sales of R731 million for 2006 and profit before interest and tax of R178.5
million. The group is trading in line with the forecast. Trading in the second
half of the year is traditionally better than in the first period.
Enaleni remains committed to building a business that can generate sustainable
earnings and long-term growth. The group will continue to invest in growth
opportunities, marketing and brand investment to achieve these objectives.
NAME CHANGE TO ENALENI CIPLA PHARMACEUTICALS
As approved at the Enaleni Pharmaceuticals Limited annual general meeting on
28 June 2006, the company intends to change its name to Enaleni Cipla
Pharmaceuticals Limited. The new name acknowledges the evolving structure of
the group and the significant contribution that Cipla Medpro makes to the
group"s sales and profit. The name change is also intended to reflect the
value that the Cipla brand brings to the group.
BASIS OF PREPARATION OF THE UNAUDITED RESULTS
The interim condensed consolidated financial statements for the period ended
30 June 2006 have been prepared in accordance with IAS 34, Interim Financial
Reporting, and in accordance with the Companies Act in South Africa. The
accounting policies adopted in the preparation of these condensed consolidated
financial statements are consistent with those followed in the preparation of
the group"s annual financial statements for the year ended 31 December 2005.
DIVIDENDS
Currently, all earnings generated by the group are utilised to repay debt, and
fund acquisitions and other growth opportunities.
On behalf of the board
PCS Luthuli TD Edwards
Chairman Chief Executive Officer
15 August 2006
CORPORATE INFORMATION
Non-executive directors: PCS Luthuli (Chairman), Dr G Mahlati, T Dingaan,
N Rapoo
Executive directors: TD Edwards (CEO), AG Hall (CFO), U Parusnath,
P Pillay, S Whitfield
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 (2004)
(Proprietary) Limited
Telephone: 031 451 3800
Facsimile: 031 451 3889
Sponsor: Nedbank Capital
Please view these results on www.enaleni.com
Date: 28/08/2006 09:30:11 AM Produced by the JSE SENS Department
