RNS Number:3743P
Intercare Group PLC
04 September 2003
4 September 2003
The Intercare Group plc
The Intercare Group plc, the pharmaceutical manufacturer and distributor, today
announces its interim results for the six months ended 30 June 2003.
Key Financials H1 H1
2003 2002
Turnover #156.2m #129.3m
Operating profit* #10.2m #12.6m
Profit before tax* #7.3m #10.7m
Adjusted earnings per share* 6.3p 9.5p
Dividend per share 2.3p 2.2p
Cash inflow from operations #13.7m #1.4m
* Before goodwill and licence amortisation and exceptional items
Statutory Figures H1 H1
2003 2002
Operating profit+ #3.2m #7.0m
Profit before tax+ #0.3m #5.1m
Basic (loss)/earnings per share+ (2.1p) 2.5p
+ After goodwill and licence amortisation and exceptional items
Highlights
* Record turnover achieved during period, with sales up 21%
* Excellent results from core Manufacturing Division
o Sales up 73%
o Operating profits before amortisation up 39%
* LCO Sante, acquired in October 2002, successfully integrated
* Distribution Division significantly affected by strength of Euro
* Strong operating cash inflow of #13.7m (2002: #1.4m)
* Trading in line with expectations at commencement of second half
Mr Ken Harvey, Chairman, commented:
"The Group's core Manufacturing Division continues to perform strongly and we
are confident of its prospects for the second half. Despite the major setback
experienced by the Distribution Division in the first half, there are slow but
tentative signs of progress in the distribution market as we commence the second
half, with margins showing some improvement.
Historically, Group profitability has been higher in the second half than the
first. As indicated earlier this year, this effect is expected to be more
marked than in the past. Overall trading in the early part of the second half
of the year is in line with expectations."
Enquiries
The Intercare Group plc Tel: 01423 535500
John Parker, Chief Executive www.intercareplc.co.uk
Jeremy Earnshaw, Group Finance Director
Andrew Kay, Chief Operating Officer
Financial Dynamics Tel: 020 7831 3113
David Yates/Ben Atwell
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Chairman's Statement
Introduction
During the first half of 2003, Intercare has benefited from its strategy to grow
the Group's presence in the pharmaceutical manufacturing market. Trading across
our core Manufacturing Division has been strong, particularly at Martindale, the
specialist pharmaceutical manufacturer acquired in 2000. LCO Sante, acquired in
October 2002, has been successfully integrated into the Group and is also
performing well.
However, the Group's results have been affected by a significant decline in the
profitability of the Distribution Division in the first half of the year.
Although generics performed in line with expectations, the parallel import
sector in the Distribution Division suffered from a number of external factors
outside the Group's control, in particular from movements in currency exchange
rates. The rapid strengthening of the Euro in the earlier part of the year
increased the costs of the products bought in Europe by about 10%. However, due
to competitive pressures, it was very difficult to raise prices.
As a result of this combination of events together with the expected patent
expiry of Zocor, the leading cholesterol lowering drug, margins came under
severe pressure. We have undertaken a thorough review of our costs and, where
appropriate, have taken the necessary action. Sales, however, grew ahead of the
market as a result of the recent completion of our national distribution network
and the twice daily, efficient delivery service that we are able to supply to
our retail customers.
Going forward, the Group will continue to focus its efforts on pharmaceutical
manufacturing. Driven by continuing consolidation amongst the world's major
pharmaceutical companies, demand for the outsourced supply chain services
provided by the Group continues to grow strongly. Worldwide demand for
pharmaceutical contract manufacturing is forecast to increase by more than 10%
per year and, within this, the pre-filled syringe market, where Intercare is
particularly well-positioned through its operations at Federa in Belgium and
France, is expected to experience above average growth.
Group Results
As highlighted earlier the results for the six months to 30th June 2003
demonstrate the strong performance of the Manufacturing Division offset by a
significant decline in profit at the Distribution Division.
The Group achieved a record turnover during the period of #156.2m (2002:
#129.3m) an increase of 21%. Operating profit before amortisation of goodwill
and product licences decreased by 19% to #10.2m (2002: #12.6m). Profit before
tax and amortisation of goodwill and product licences decreased by 32% to #7.3m
(2002: #10.7m).
Adjusted earnings per share reflects the earnings achieved excluding the impact
of goodwill and product licence amortisation. Adjusted earnings per share
decreased by 34% to 6.3p during the six months to 30th June 2003 (2002: 9.5p).
Profit before tax and after amortisation of goodwill and product licences
decreased to #0.3m (2002: #5.1m). There was a loss per share of 2.1p (2002:
earnings per share of 2.5p).
The Board continues to adopt a progressive dividend policy, and the interim
dividend for the six months to 30th June 2003 is increased to 2.3p (2002: 2.2p).
Operating cash inflow was excellent during the period. The Group generated a
healthy #13.7m of cash from operations (2002: #1.4m), including a reduction in
working capital of #1.5m. The Group remains firmly on target to achieve its aim
of converting some 60%-70% of annualised operating profit into operating cash
inflow. This cash generation allows the Group to continue to fund its
Manufacturing Division's long-term capital investment programme, which amounted
to expenditure of #8.1m in the period. Most of this is being invested in the
new pre-filled syringe factory in Belgium.
Net borrowings increased to #73.1m at 30th June 2003 from #71.0m at 31st
December 2002 (30th June 2002: #63.0m). Net assets were #100.0m at the period
end, compared to #94.6m at 30th June 2002 and #101.7m at 31st December 2002.
Trading Review
Pharmaceutical Manufacturing Division
This division incorporates Martindale in the UK, which manufactures specialist
off patent drugs under its own brand identity, LCO Sante, Federa France, Veramic
and Federa Belgium. The latter companies provide contract manufacturing,
product development and logistics support for international external customers.
Federa Belgium also manufactures and develops products for Martindale.
Trading in the first six months of the year was strong with Martindale an
excellent performer. Divisional sales grew by 73% to #51.3m (2002: #29.6m) and
operating profits before amortisation of goodwill and product licences rose by
37% to #9.9m (2002: #7.2m). An operating margin before amortisation of goodwill
and product licences of 19.3% was generated. Given the traditionally stronger
second half, a trading margin for the full year above 20% is expected.
The first half of 2003 included a full six month contribution from LCO Sante in
France, which has been successfully integrated. The new hormone manufacturing
suite is now operational and is expected to become FDA compliant by mid 2004.
Working closely with external international pharmaceutical companies, LCO's new
product development programme is looking very healthy over the medium term.
Martindale demonstrated good growth in the first half, particularly in the
manufacture of specials, addiction and specialist parenteral products. There
has also been a welcome improvement in the Export/International segment.
Market demand for pre-filled syringes from external customers remains strong
benefiting both Federa Belgium and Federa France. In Belgium, Federa produces
pre-filled syringes for flu and other vaccines, heparins and critical care
products. Heparin is a long established medicine used in the prevention and
treatment of a number of illnesses, including deep vein thrombosis. Federa
France also produces heparin products for one of the largest pharmaceutical
companies in the world.
Good progress has been made in the first six months of 2003 on building and
fitting out the new factory in Belgium. This is expected to become FDA
compliant and to commence operations in 2005, following production and
validation tests in the second half of 2004. In May, the Belgian authorities
inspected the fridges in the new factory building and approved them for the
storage of vaccines produced by Federa at its existing Brussels facility. Once
the new factory is fully operational, equipment from the existing factory will
be transferred across and the building sold.
Pharmaceutical Distribution Division
Turnover for the period was #104.9m (2002: #99.7m) representing an increase of
5.2%. However, affected in particular by the impact of currency movements in
the parallel import sector, the division's operating profit before amortisation
of goodwill fell to #1.7m (2002: #6.2m), an operating margin of 1.6% (2002:
6.2%). Generics performed according to expectations.
The Lord Hunt review of generics pricing is on-going whilst the OFT
recommendation with respect to new pharmacy locations and openings has been
turned down by the Government and a much more limited proposal put forward.
This is anticipated to be neutral to Intercare as are the implications of the
Lord Hunt review. Meanwhile Mr Justice Laddie is still clarifying ongoing
judgements which affect the packaging of parallel imported products but does not
challenge their legality.
With the opening of the Aberdeen depot in the first quarter of this year, the
division's infrastructure is complete and the division is now able to offer at
least a once-daily delivery to over 90% of its core customer base.
Prospects
The Group's core Manufacturing Division continues to perform strongly and we are
confident of its prospects for the second half. Despite the major setback
experienced by the Distribution Division in the first half, there are slow but
tentative signs of progress in the distribution market with margins showing some
improvement.
Historically, Group profitability has been higher in the second half than the
first. As indicated earlier this year, this effect is expected to be more
marked than in the past. Overall trading in the early part of the second half
of the year is in line with expectations.
Ken Harvey
Chairman
4th September 2003
Consolidated Profit and Loss Account
for the six months ended 30 June 2003
6 months 6 months Year ended
ended 30 ended 31 December
June 2003 30 June 2002 2002
#'000 #'000 #'000
(unaudited) (unaudited) (audited)
Note
Group turnover 1 156,180 129,309 275,133
Operating profit
Group operating profit
before goodwill and
licence amortisation 10,032 12,440 28,770
Goodwill and licence
amortisation (6,769) (5,421) (11,515)
_______ _______ _______
Group operating profit 3,263 7,019 17,255
Share of associate's 111 215
operating profit before
goodwill amortisation 127
Goodwill amortisation (168) (168) (337)
_______ _______ _______
Share of associate's
operating loss (41) (57) (122)
_______ _______ _______
Total operating profit 1 3,222 6,962 17,133
Net interest payable and similar
charges (2,887) (1,894) (4,413)
Exceptional finance fees - - (2,096)
_______ _______ _______
Total net interest payable
and similar charges
(2,887) (1,894) (6,509)
Profit on ordinary activities
before taxation, goodwill
and licence amortisation
and exceptional item 7,272 10,657 24,572
Goodwill and licence
amortisation (6,937) (5,589) (11,852)
Exceptional finance fees 4 - - (2,096)
_______ _______ _______
Profit on ordinary activities
before taxation 335 5,068 10,624
Tax on profit on ordinary
activities 5 (2,073) (3,091) (6,512)
_______ _______ _______
(Loss)/Profit on ordinary activities
after taxation
(1,738) 1,977 4,112
Dividends (1,913) (1,768) (4,427)
_______ _______ _______
Retained (loss)/profit for the
financial period (3,651) 209 (315)
Basic (loss)/earnings per
share 6 (2.1)p 2.5 p 5.1 p
_______ _______ _______
Adjusted earnings per share 6 6.3 p 9.5 p 21.7 p
_______ _______ _______
Diluted (loss)/earnings per
share 6 (2.1)p 2.4 p 5.1 p
_______ _______ _______
Adjusted diluted earnings per 6
share 6.2 p 9.4 p 21.4 p
_______ _______ _______
Dividend per share 7 2.3 p 2.2 p 5.4 p
_______ _______ _______
Consolidated Balance Sheet as at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
(unaudited) (unaudited) (audited)
Fixed assets
Intangible assets:
Licences 3,147 3,723 3,613
Goodwill 98,376 84,661 104,816
Negative goodwill (1,429) (1,417) (1,449)
_______ _______ _______
100,094 86,967 106,980
Tangible assets 35,138 17,185 27,749
Investments 274 242 274
Interest in associate:
Goodwill 2,477 2,812 2,645
Share of net assets 234 232 191
_______ _______ _______
2,711 3,044 2,836
_______ _______ _______
Total fixed assets 138,217 107,438 137,839
Current assets
Assets held for resale 334 483 336
Stocks 46,529 31,813 42,214
Debtors 60,503 61,304 66,085
Cash at bank and in hand 6,086 258 5,180
_______ _______ _______
113,452 93,858 113,815
Creditors:
Amounts falling due within one year (80,594) (74,416) (88,430)
_______ _______ _______
Net current assets 32,858 19,442 25,385
_______ _______ _______
Total assets less current liabilities 171,075 126,880 163,224
Creditors:
Amounts falling due after more than one year (71,100) (32,230) (61,484)
_______ _______ _______
Net assets 99,975 94,650 101,740
_______ _______ _______
Capital and reserves
Share capital 2,078 1,996 2,076
Share premium 59,590 59,488 59,535
Merger reserve 30,751 23,774 30,751
Profit and loss 7,556 9,392 9,378
_______ _______ _______
Equity shareholders' funds 99,975 94,650 101,740
_______ _______ _______
Consolidated Cash Flow Statement for the six months ended 30 June 2003
6 months 6 months Year ended
ended 30 ended 31 December
June 2003 30 June 2002 2002
#'000 #'000 #'000
(unaudited) (unaudited) (audited)
Note
Net cash inflow from operating activities 2 13,671 1,441 35,922
Dividends received from associate 40 - 100
Returns on investments and servicing of finance
Interest received 119 5 54
Interest paid (2,320) (1,953) (4,621)
Interest element of finance lease rental payments (2) (6) (4)
_______ ______ _______
(2,203) (1,954) (4,571)
Taxation (2,895) (2,669) (6,675)
Capital expenditure and financial investment (8,110) (3,369) (8,564)
Acquisitions and disposals (61) - (27,625)
Equity dividends paid (2,659) (2,463) (4,207)
_______ ______ _______
Cash outflow before financing (2,217) (9,014) (15,620)
Financing
Issue of ordinary share capital 57 288 335
New loans 6,899 500 65,010
Repayment of loans - - (39,500)
Exceptional finance costs - - (2,096)
Increase/(decrease) in debt
factoring 1,795 10,420 (498)
Principal payments under finance leases (9) (6) (6)
_______ ______ _______
Net cash inflow from financing 8,742 11,202 23,245
_______ ______ _______
Increase in cash in the period 6,525 2,188 7,625
_______ ______ _______
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period 6,525 2,188 7,625
Cash outflow on finance leases 9 6 6
Cash inflow on loans (6,899) (500) (25,510)
Cash (inflow)/outflow on debt factoring (1,795) (10,420) 498
_______ ______ _______
Change in net debt arising from cash flows (2,160) (8,726) (17,381)
Non-cash flow movements - - (99)
Translational differences 38 (68) 29
_______ ______ _______
Increase in net debt in the period (2,122) (8,794) (17,451)
Net debt at start of period (70,976) (53,525) (53,525)
_______ ______ _______
Net debt at end of period (73,098) (62,319) (70,976)
_______ ______ _______
Notes to Interim Statements
1. The segmental analysis of turnover and operating profit is as follows.
6 months 6 months Year ended
ended 30 ended 31 December
June 2003 30 June 2002 2002
#'000 #'000 #'000
Turnover
Pharmaceutical Manufacturing 51,327 29,618 67,897
Pharmaceutical Distribution 104,853 99,691 207,236
________ _______ ________
156,180 129,309 275,133
Operating profit
Pharmaceutical Manufacturing
before goodwill and licence amortisation 9,928 7,236 16,983
Goodwill and licence amortisation (5,851) (4,503) (9,680)
________ _______ ________
Total Pharmaceutical
Manufacturing 4,077 2,733 7,303
Pharmaceutical Distribution before
goodwill amortisation 1,701 6,153 13,813
Goodwill amortisation (918) (918) (1,835)
________ _______ ________
Total Pharmaceutical Distribution 783 5,235 11,978
Central costs (1,597) (949) (2,026)
________ _______ ________
Group operating profit 3,263 7,019 17,255
Associate 127 111 215
Goodwill amortisation (168) (168) (337)
________ _______ ________
(41) (57) (122)
________ _______ ________
Total operating profit 3,222 6,962 17,133
Notes to Interim Statements
2. Reconciliation of operating profit to operating cash flows
6 months 6 months Year ended
ended 30 ended 31 December
June 2003 30 June 2002 2002
#'000 #'000 #'000
Group operating profit 3,263 7,019 17,255
Depreciation charges 2,106 1,182 2,796
Amortisation of licences 288 292 584
Amortisation of goodwill 6,481 5,129 10,934
(Increase)/decrease in working capital:
stocks (3,505) (6,524) (9,150)
debtors 6,169 (12,300) (13,261)
creditors (1,434) 6,643 26,332
currency translation adjustments 303 - 432
_______ _______ _______
Net cash inflow from operating activities 13,671 1,441 35,922
3. The financial information set out herein does not constitute full financial
statements within the meaning of the Companies Act 1985. The financial
information for the six months ended 30 June 2003 is unaudited and has been
prepared on the basis of the accounting policies set out in the Group's
2002 Report and Accounts. The accounts for the period ended 31 December
2002 received an unqualified audit report and have been filed with the
Registrar of Companies.
4. In 2002, the Group incurred exceptional finance arrangement fees totalling
#2,096,000 in respect of securing bank facilities of #179,000,000.
5. The charge for taxation for the six months ended 30 June 2003 reflects the
anticipated effective rate applicable for the year ending 31 December 2003.
6. The calculation of the (loss)/earnings per share for the six months ended
30 June 2003 is by reference to the loss after taxation of #1,738,000 (2002
six months #1,977,000 profit, 2002 twelve months #4,112,000 profit) and by
reference to the weighted average number of ordinary shares in issue of
83,148,408 (2002 six months 79,665,287, 2002 twelve months 80,483,349).
The calculation of adjusted earnings per share is by reference to the
profits after taxation excluding amortisation of goodwill and licences and
exceptional items of #5,199,000 (2002 six months #7,566,000, 2002 twelve
months #17,431,000). The weighted average number of shares in issue is as
defined above.
7. The interim dividend of 2.3p (2002: 2.2p) is payable on 28 November 2003 to
shareholders on the register on 12 September 2003. The ordinary shares
will be quoted ex-dividend from 10 September 2003.
8. Copies of the interim report will be sent to all shareholders. Further
copies are available from the Company Secretary, The Intercare Group plc,
Windsor House, Cornwall Road, Harrogate, HG1 2PW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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