Moneyweb.co.za

• Cipla India FIA to acquire 100% of CMSA for approximately R4,5 billion
• Revenue of R2,297 billion – increased by 30%
• 3rd largest, and fastest growing of the top 10 pharmaceutical companies in SA, by value
REVIEWED, CONDENSED,
• HEPS of 37,6 cents and EPS of 36,6 cents
PROVISIONAL, CONSOLIDATED
– decreased by 32% and 30% respectively compared to the restated results
ANNUAL RESULTS
• Normalised HEPS and EPS of 46,8 cents – remained flat compared to the restated results
• 24% of ARV tender won by the CMSA group (R1,448 billion (including VAT))
WWW.CIPLAMEDSA.CO.zA
CONDENSED PROVISIONAL CONSOLIDATED
CONDENSED PROVISIONAL CONSOLIDATED
CONDENSED PROVISIONAL CONSOLIDATED
CONDENSED PROVISIONAL CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
Reviewed
Reviewed
Reviewed
Reviewed
31 December 31 December 31 December
Year ended
Year ended
Year ended
31 December
31 December
31 December
ASSETS
Non-current assets
1 920 769
2 297 224
Total equity at beginning
Cash flows from operating
of the year
1 843 481
activities
163 110
1 142 936
427 811
Cash flows from investing
1 397 749
activities
(47 673)
(831 814)
Cash flows from financing
Profit before finance costs
activities
and income tax
326 544
Current assets
1 092 157
121 861
(78 814)
433 869
(73 185)
Profit before income tax
252 110
(90 470)
Total equity at end of the year
1 966 158
(83 746)
Cash and cash equivalents at
518 254
Comprising:
end of the year
Profit for the year
1 948 369
Profit attributable to:
Total equity
1 966 158
Total assets
3 012 926
CONDENSED PROVISIONAL
Profit for the year
AND LIABILITIES
RECONCILIATION OF HEADLINE EARNINGS
CONSOLIDATED SEGMENTAL REPORT
Capital and reserves
1 948 369
Reviewed
Reviewed
Total comprehensive income
Year ended
Year ended
for the year
31 December
31 December
Total equity
1 966 158
Total comprehensive income
Non-current liabilities
302 042
attributable to:
268 003
Segment revenue – external
customers
1 729 994
Total comprehensive income
410 680
Current liabilities
744 726
for the year
156 550
Number of shares (‘000)
615 611
2 297 224
446 462
Segment result
254 850
441 078
443 292
Headline earnings
Total liabilities
1 046 768
Earnings per share (cents)
Headline earnings per share (cents)
Total equity
326 544
and liabilities
3 012 926
* The unallocated item relates to the RBSA settlement.
OVERVIEW
National Health Insurance (NHI). In real terms, in 2012 we delivered • added back impairment on intangible assets of R5,4 million No final dividend will be declared for the 2012 year as a result of the Cipla • Cipla Limited (Cipla India) firm intention announcement (FIA) of 100% of 131 stock keeping units (SKUs) to the state (2011: 108), shipped 24,9 million units Cipla Medpro South Africa Limited’s (CMSA) share capital, at R10,00 per (2011: 14,3 million) – an increase of 74,1%, received tender buy-outs (for tenders • added back due diligence costs related to the Cipla India transaction of share, announced on 28 February 2013. The circular to shareholders is awarded to other companies who were not able to deliver) to the tune of 31 December
targeted for posting on or about 28 March 2013 and the Scheme meeting R80,3 million excluding VAT (2011: R18,7 million) and achieved total tender • in 2011 deducted the non-recurring settlement income of R68,8 million Ratio analysis:
of shareholders to consider and approve the transaction is planned for sales of R692,7 million excluding VAT (2011: R372,4 million). Significant gains were made in the antiretroviral (ARV) tender, wherein for some product • Revenue continues to grow at a pleasing rate despite all the distractions lines we delivered more than two times the awarded tender volumes. We After taking the above adjustments into account, normalised HEPS and EPS of 2012. This is a testament to the commitment and dedication of our are particularly pleased that the tender unit was able to grow sales from have decreased slightly with 0,2% compared to the restated 2011 results. exceptional sales force, assisted by the various key support functions buy-out opportunities more than three-fold. We were once again awarded Revenue improved by 30,0% to R2 297,2 million (2011: R1 767,6 million), the respiratory tender and rounded off 2012 with the award of a significant breaking through the R2 billion landmark with strong sales in the second portion of the ARV tender from government worth a combined value of • Single exit price (SEP) increase of only 2,1% granted during the 2012 year half of the year (June 2012: R1 079,8 million). The SEP increase of 2,1% was approximately R1,448 billion (including VAT) for a two-year period that * This excludes the VAT receivable and payable – an increase for 2013 of 5,8% effective from March 2013.
granted with effect from 26 March 2012 and the increase for 2013 of 5,8% commenced on 1 January 2013. This is a major achievement for CMSA and with effect from 18 March 2013. The revenue growth was achieved mainly BASIS OF PREPARATION
• Delays experienced at the Medicines Control Council (MCC) with the an improvement from the previous ARV tender in which our award was These condensed financial statements have been prepared in accordance registration of new molecules continue to hamper our ability to launch through increased supply of ARVs to the State (increased by more than valued at R633 million (including VAT) from 2010 to 2012. The company’s with the framework concepts and the measurement and recognition 100%), private market growth of approximately 13% and growth in the other portion now represents 24% of the total tender award. As per Government’s operating segments of approximately 34%. As a result of the product mix requirements of International Financial Reporting Standards (IFRS), the • Gross margins come under pressure as a result of the change in product estimates included in the tender documents, our ARV tender combined changing based on the significant growth in ARVs supplied to the State and interpretations adopted by the International Accounting Standards Board, mix and impact of the exchange rate.
with the previously awarded respiratory tender could result in our tender South African Institute of Chartered Accountants Financial Reporting Guides business with the State exceeding R2 billion over the next two years. the weakening Rand, gross margins came under pressure. The gross profit • Incorrect application of our accounting policy on intangible assets in the as issued by the Accounting Practices Committee and Financial Reporting A material portion of these products will be manufactured at our (GP) increased by R113,0 million to R1 142,9 million (2011: R1 029,9 million) past resulted in an annual amortisation charge and impairments in 2012 Pronouncements as issued by the Financial Reporting Standards Council manufacturing facility (CMM) based in Durban.
with the GP margin reducing to 49,8% (2011: 58,3%).
as well as a prior period restatement relating to historic amortisation and include disclosure as required by IAS 34 Interim Financial Reporting and charges and impairments of certain intangible assets.
CMM revenues grew by 46% from R197,9 million in 2011 to R288,9 million Other income has decreased from 2011 mainly as a result of the non- in 2012, before inter-company eliminations. We continue to contract recurring settlement income of R68,8 million included in other income in 2011 • Chief Executive Officer (CEO) suspended in August 2012 and then The financial statements have been prepared using accounting policies manufacture for third parties and although opportunities to perform more (2012: Rnil) and the net effect of foreign exchange movements and gains on subsequently resigned in October 2012. Chief Financial Officer (CFO) that comply with IFRS and which are consistent with those applied third-party manufacturing continue to present themselves, we are selective in mark to market valuation of FECs of R49,3 million (2012: R5,9 million).
in the preparation of the financial statements for the year ended our approach so that priority is afforded to the recently awarded ARV tender Other operating expenses have increased by 8,5% from R766,8 million to • Unauthorised bonuses paid to the former CEO and CFO were repaid in 31 December 2011, except for the incorrect application of the accounting products and Cipla Medpro private sector products. We are committed to 2012 and are recorded in other income.
policy relating to intangible assets as mentioned above.
continuously improve our efficiencies and drive cost containment initiatives • losses on the mark to market valuation of FECs of R47,8 million • KPMG Inc. appointed as the independent external auditors.
while we invest in new equipment and technology at our manufacturing The condensed consolidated financial statements for the year ended facility to meet the evolving good manufacturing practices and volume (2011: R109,2 million gains included in other income); 31 December 2012, have been reviewed by the group’s external auditors REVIEW OF OPERATIONS
and their unqualified opinion is available for inspection at the company’s We present our results for the year ended 31 December 2012 after another • advertising and marketing costs of R226,7 million (2011: R204,1 million); challenging year that saw significant movements in the exchange rate and REVIEW OF RESULTS
• transport and freight of R34,0 million (2011: R26,2 million); an SEP increase of only 2,1%. Like the rest of the industry, we continue to face Subsequent to the release of our 2011 annual results on SENS on 15 March MW Daly (CFO) is responsible for these condensed consolidated financial • amortisation charges of R22,5 million (2011: R24,4 million); challenges with the registration of new products at the MCC, many of which 2012 and before finalisation of our 2011 Integrated Annual Report, the RBSA statements and has been involved with the preparation thereof in conjunction are potentially first to market opportunities. Despite these restrictions on matter was settled and we were required to restate our 2011 results, which • impairment of intangible assets of R5,4 million (2011: R18,1 million); and with E van der Merwe, both of whom are qualified Chartered Accountants our growth prospects, we are satisfied that we have continued to maintain were then released on SENS on 29 June 2012. During the audit of our 2012 • depreciation of R21,9 million (2011: R18,5 million).
a leadership position and grow sales across various product lines and annual results, three issues have come to light that have resulted in prior Operating expenses have been a key focus area for management over the DIRECTORATE
therapeutic categories. Our ability to build enduring brands is reflected in period restatements. As a result, the comparative information included in The following changes have been made to the board: the fact that our leading brands like Lexamil and Venlor (central nervous this advert, and the base used for the analysis in the commentary, has been past six months and strict measures and corrective actions have been put system); Asthavent and Budeflam (respiratory); and Carloc (cardiovascular) restated accordingly. The restatements relate to a change in application of in place to ensure we start widening the gap between sales growth and • former CEO, JS Smith, was suspended in August 2012 and then resigned have all maintained leadership positions in the market despite significant the accounting policy relating to intangible assets, a VAT receivable and expenses, to ensure a sustainable and profitable future. We have covered and robust competition and the entry of new players with aggressive pricing VAT payable that needed to be raised (Rnil effect on retained income) and more than 80% of the purchases for the first six months of 2013 with FECs at • former independent, non-executive board member, JvD du Preez was in the South African pharmaceutical market.
an adjustment relating to stock which was overstated in 2011. We will refer an average rate of approximately R8,74/USD currency.
The South African pharmaceutical market continues to grow and presents throughout to the 2011 results and these are the ‘restated’ results which take A detailed exercise was undertaken with regard to the intangible assets • former CFO, C Aucamp, resigned in November 2012; and significant opportunities for the future. Unlike the mature markets of the into account the RBSA settlement, intangible asset impact (amortisation • MW Daly, former Company Secretary and Financial Director of CMM, was west, generic utilisation is still fairly low at around 58% (compared to 82% charge and impairment, where applicable), VAT impact as well as the effect • reassessment of the original purchase price allocation that was performed in the US (Generic Pharmaceutical Association of America and IMS Health) when CMSA (previously Enaleni Pharmaceuticals Limited) acquired 100% The board continues to function in accordance with its approved charter. and in the 70%’s in some European markets (European Generics Association Earnings per share (EPS) has decreased from 52,3 cents to 36,6 cents of the share capital of Cipla Medpro in December 2005; and R Manilall was appointed as Company Secretary in December 2012.
and IMS Health)). This, combined with the significant patent expirations that based on profit attributable to equity holders of the parent of R161,4 million will occur in the next few years, will continue to see robust growth in generic (2011: R233,9 million). Headline earnings per share (HEPS) has decreased • reassessment of the useful lives.
SUBSEQUENT EVENTS
usage and opportunities for our company. We will continue to leverage off from 55,3 cents to 37,6 cents mainly as a result of the non-recurring The useful lives can be summarised as follows: During February 2013, as mentioned above, Cipla India made a firm intention Cipla India’s pipeline and platform technologies and look forward to many settlement income in 2011 of R68,8 million (2012: Rnil), the gains on the offer for the acquisition of 100% of the share capital of CMSA. This did not first to market opportunities in the future. mark to market valuation of forward exchange contracts (FECs) in 2011 of Useful life
impact the group’s results for the year ended 31 December 2012.
Despite the challenges noted above Cipla Medpro Holdings Proprietary R109,2 million (2012: losses of R47,8 million) and the impact of the RBSA Other than the event referred to above, the directors are not aware of any Limited (Cipla Medpro), a wholly owned subsidiary of CMSA, has continued settlement in 2011 of R109,9 million (2012: Rnil). These calculations are other matter or circumstance which is material to the financial affairs of the to grow on the back of a strong sales and marketing team, reliable supply based on 441,1 million (2011: 446,9 million) weighted average number group, which has occurred subsequent to 31 December 2012, that has not and excellent channel relationships. The total pharmaceutical market grew of shares in issue for the 12 months of 2012 (before the effects of been otherwise dealt with in the consolidated financial results.
by 7,1% in Rand value, whilst Cipla Medpro posted a growth of 15,3% with an dilution are taken into account). Headline earnings of R166,0 million evolution index of 107,7; the highest of the top 10 pharmaceutical companies (2011: R247,2 million) were achieved after adjusting for the impairment of The amortisation and impairment of intangible assets (excluding computer intangible assets of R4,7 million (2011: R13,1 million), the gain on disposal of property, plant and equipment in 2011 of R0,1 million (2012: one thousand Our overall market share has held steady at 5,2% and we are now entrenched Rand) and the loss on the deemed disposal of a joint venture in 2011 of PCS Luthuli
JvD du Preez
as the third largest pharmaceutical manufacturer by value (IMS, December R0,3 million (2012: Rnil), all net of tax. 2012). We are pleased that our other divisions continue to show steady growth with sales of R27,0 million (2011: R23,4 million) for our small animal business In order to arrive at our normalised HEPS and EPS of 46,8 cents (Cipla Vet) and R106,3 million (2011: R77,0 million) for our large animal (2011: 46,9 cents), the following adjustments (before tax) were made: FORWARD-LOOKING STATEMENTS
• added back the finance cost portion of the RBSA provision of R4,1 million At 31 December 2012 there was a favourable net cash balance of R31,4 million This announcement contains certain forward-looking statements with respect Our Oncology division, with a broad portfolio of products, is gaining traction (2011: deducted the finance income portion R7,4 million) and in 2011 when compared to an overdrawn position of R90,5 million at 31 December to the financial condition and results of the operations of Cipla Medpro South and we have now launched a total of 17 products to the market (plus another added back the RBSA settlement costs of R117,3 million and related legal 2011. Cash generated from operations increased from R112,0 million to Africa Limited that, by their nature, involve risk and uncertainty because they four products to be launched shortly). We are making inroads and will, in R163,1 million while cash outflows from investing activities reduced from relate to events and depend on circumstances that may or may not occur in addition, this year launch a number of other previously registered products. • added back the net effect of interest rate swap entries (fair value R107,0 million to R47,7 million as a result of less investment in property, plant the future. These may relate to future prospects, opportunities and strategies. The broad portfolios and our competitive pricing will stand us in good stead adjustments and swap settlements) of R0,3 million in 2011 (2012: and equipment and intangible assets. Cash flows from financing activities If one or more of these risks materialise, or should underlying assumptions resulted in an inflow in 2012 of R6,4 million (2011: outflow of R70,6 million – prove incorrect, actual results may differ from those anticipated. By We are pleased with the improved performance of our tender division which • added back the losses on the mark to market valuation of FECs of which was mainly due to the share buyback and redemption of preference consequence, all forward-looking statements have not been reviewed or bodes well for us going into the future, especially in light of the proposed R47,8 million (2011: deducted gains of R109,2 million); reported on by the group’s auditors.
Non-executive directors PCS Luthuli (Chairman);
Company secretary R Manilall
Registered address 1474 South Coast Road,
Telephone +27 31 451 3800
Sponsor Nedbank Capital
Registration number 2002/018027/06
Facsimile +27 31 451 3889
External auditors KPMG Inc.
Postal address PO Box 32003, Mobeni, 4060
Executive directors JvD du Preez (Acting Chief
JSE code CMP
Email investor@ciplamedpro.co.za
Legal advisors Norton Rose South Africa
Transfer secretaries Computershare Investor Services
Executive Officer); MW Daly (Chief Financial Officer) ISIN ZAE000128179
Whistle-blowing hotline 0800 21 21 51 (toll-free)

Source: http://www.moneyweb.co.za/mw/applications/mw/templates/funds/SENS_20130326_S329897.pdf