Hikma Pharmaceuticals Plc Final Results

Data : 27/02/2020 @ 08:00
Fonte : UK Regulatory (RNS & others)
Titolo : Hikma Pharmaceuticals Plc (HIK)
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Hikma Pharmaceuticals Plc Final Results

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RNS Number : 2725E

Hikma Pharmaceuticals Plc

27 February 2020

London, 27 February 2020 - Hikma Pharmaceuticals PLC (Hikma, Group), the multinational pharmaceutical company, today reports its preliminary audited results for the year ended 31 December 2019.

2019 core (1) results summary

   --   Group core revenue of $2,203 million, up 6% 
   --   Group core operating profit of $508 million, up 10% 
   --   Core basic earnings per share of 150.4 cents, up 9% 

2019 reported results summary

   --   Group revenue of $2,207 million, up 7% 
   --   Group operating profit of $493 million, up 33% 
   --   Basic earnings per share of 200.8 cents, up 72% 
   --   Cashflow from operating activities of $472 million, up 10% 

-- Net debt reduced to $242 million and low leverage maintained (net debt to core EBITDA(2) ratio 0.4x)

   --   Full year dividend of 44 cents per share, up from 38 cents per share 

2019 highlights

-- Injectables core revenue up 7% driven by strong demand for our broad portfolio and recent launches

-- Generics core operating profit up 33% reflecting excellent commercial execution and reduced costs

   --   Branded core revenue up 8% driven by strong demand across most of our MENA markets 
   --   108 new products launched across all markets, expanding our global product portfolio 
   --   18 licensing agreements signed for the US and MENA 
   --   Completed a repeat clinical endpoint study for our generic version of Advair Diskus(R) 

-- Entered into a long-term supply agreement with Civica Rx to assist in the delivery of essential medicines in short supply to US hospitals

Siggi Olafsson, Chief Executive Officer of Hikma, said:

"2019 was another very good year for Hikma, driven by strong demand for our broad product portfolio, excellent commercial execution and increased operational efficiencies across the organization. During a challenging year for the industry, we delivered strong financial performance and made important progress on our strategic objectives, including strengthening our operations, building our portfolio and pipeline, forming new partnerships, developing our people and attracting new talent across the Group. These actions were reflected in our financial results in 2019, with each of our three businesses delivering good organic growth in revenue and operating profit.

I am proud of what our teams have achieved across the Group, enabling us to provide high-quality medicines to the people that need them most, every day. We remain highly focussed on executing our strategic priorities, which will drive further growth in 2020 and beyond, creating sustainable value for all our stakeholders."

 
                                                                           Constant 
 Core results                            2019          2018             currency(3) 
                                    $ million     $ million   Change         change 
 Core revenue                           2,203         2,076       6%             6% 
                                 ------------  ------------  -------  ------------- 
 Core operating profit                    508           460      10%             9% 
                                 ------------  ------------  -------  ------------- 
 Core EBITDA                              593           549       8%             6% 
                                 ------------  ------------  -------  ------------- 
 Core profit attributable to 
  shareholders                            364           332      10%             7% 
                                 ------------  ------------  -------  ------------- 
 Core basic earnings per share 
  (cents)                               150.4         137.8       9%             7% 
                                 ------------  ------------  -------  ------------- 
 
 
  Reported results                                                              Constant 
                                               2019         2018             currency(3) 
                                          $ million    $ million   Change         change 
 Revenue                                      2,207        2,070       7%             6% 
                                       ------------  -----------  -------  ------------- 
 Operating profit                               493          371      33%            31% 
                                       ------------  -----------  -------  ------------- 
 EBITDA                                         592          492      20%            19% 
                                       ------------  -----------  -------  ------------- 
 Profit attributable to shareholders            486          282      72%            70% 
                                       ------------  -----------  -------  ------------- 
 Basic earnings per share (cents)             200.8        117.0      72%            69% 
                                       ------------  -----------  -------  ------------- 
 

Enquiries

Hikma Pharmaceuticals PLC

 
 Susan Ringdal 
  EVP, Strategic Planning and Global    +44 (0)20 7399 2760/ +44 7776 
  Affairs                                477050 
 Guy Featherstone                       +44 (0)20 3892 4389/ +44 7795 
  Senior Investor Relations Manager      896738 
 Layan Kalisse                          +44 (0)20 7399 2788/ +44 7970 
  Investor Relations Analyst             709912 
 

FTI Consulting

 
 Ben Atwell    +44 (0)20 3727 1000 
 

Hikma Pharmaceuticals PLC (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY) (LEI:549300BNS685UXH4JI75) (rated Ba1/stable Moody's and BB+/positive S&P)

Hikma helps put better health within reach every day for millions of people in more than 50 countries around the world. For more than 40 years, we've been creating high-quality medicines and making them accessible to the people who need them. Headquartered in the UK, we are a global company with a local presence across the United States (US), the Middle East and North Africa (MENA) and Europe, and we use our unique insight and expertise to transform cutting-edge science into innovative solutions that transform people's lives. We're committed to our customers, and the people they care for, and by thinking creatively and acting practically, we provide them with a broad range of branded and non-branded generic medicines. Together, our 8,600 colleagues are helping to shape a healthier world that enriches all our communities. We are a leading licensing partner, and through our venture capital arm, are helping bring innovative health technologies to people around the world. For more information, please visit: www.hikma.com

A presentation for analysts and investors will be held today at 09:30 UK time. To join via conference call please dial: 0800 640 6441 (UK toll free) or +44 20 3936 2999, access code: 442936. Alternatively, the results presentation and a webcast recording of the event will be available on Hikma's website at www.hikma.com . The contents of the website do not form part of this preliminary results announcement.

Business and financial review

The business and financial review set out below summarises the performance of the Hikma Group and our three main business segments, Injectables, Generics and Branded, for the year ended 31 December 2019.

Group

 
                                                               Constant 
                                 2019         2018             currency 
                            $ million    $ million   Change      change 
 Revenue                        2,207        2,070       7%          6% 
                         ------------  -----------  -------  ---------- 
 Core revenue                   2,203        2,076       6%          6% 
                         ------------  -----------  -------  ---------- 
 Gross profit                   1,148        1,050       9%          8% 
                         ------------  -----------  -------  ---------- 
 Core gross profit              1,144        1,072       7%          6% 
                         ------------  -----------  -------  ---------- 
 Core gross margin              51.9%        51.6%    0.3pp       0.1pp 
                         ------------  -----------  -------  ---------- 
 Operating profit                 493          371      33%         31% 
                         ------------  -----------  -------  ---------- 
 Core operating profit            508          460      10%          9% 
                         ------------  -----------  -------  ---------- 
 Core operating margin          23.1%        22.2%    0.9pp       0.6pp 
                         ------------  -----------  -------  ---------- 
 

Group revenue was $2,207 million in 2019. Group core revenue grew 6% to $2,203 million (2018: $2,076 million), reflecting good growth in each of our three businesses. Group core gross profit grew 7% to $1,144 million (2018: $1,072 million), reflecting the growth in revenue across all business segments and a significant reduction in overhead costs arising from the closure of our Eatontown facility in 2018. Group core gross margin was 51.9% (2018: 51.6%).

Group operating expenses were $655 million (2018: $679 million). Excluding adjustments related to the amortisation of intangible assets (other than software) of $34 million (2018: $30 million) and net income from exceptional items of $15 million (2018: net expense $37 million), Group core operating expenses were $636 million (2018: $612 million).

Selling, general and administrative (SG&A) expenses were $494 million (2018: $470 million). Excluding the amortisation of intangible assets (other than software) and exceptional items, core SG&A expenses were $453 million (2018: $437 million), up 4%. This increase primarily reflects higher employee benefits as a result of strengthening our teams across the Group. Net impairment reversals on financial assets were zero, versus $11 million in the comparator period, which related to the release of doubtful debt provisions.

Research and development (R&D) expenses were $150 million (2018: $147 million). Excluding exceptional items,(4) core R&D expenses were $126 million (2018: $118 million). This reflects increased investment in our Injectables and Generics R&D programmes, as we build our pipeline of complex products. Core R&D was 6% of Group core revenue, in line with 2018.

Other net operating expenses were $11 million (2018: $73 million). Excluding exceptional items,(5) core other net operating expenses were $57 million (2018: $68 million), primarily due to better management of inventory, resulting in lower inventory provisions in 2019.

The Group reported operating profit of $493 million (2018: $371 million). Excluding the impact of amortisation (other than software) and exceptional items, core operating profit increased by 10% to $508 million (2018: $460 million) and core operating margin was 23.1% (2018: 22.2%).

Group core revenue by business segment

 
 $ million          2019         2018 
 Injectables      890   40%     832   40% 
               ------  ----  ------  ---- 
 Generics         719   33%     692   33% 
               ------  ----  ------  ---- 
 Branded          583   26%     542   26% 
               ------  ----  ------  ---- 
 Others            11    1%      10    1% 
               ------  ----  ------  ---- 
 Total          2,203         2,076 
               ------  ----  ------  ---- 
 

Group core revenue by region

 
 $ million            2019          2018 
 US                1,355   61%   1,299   62% 
                  ------  ----  ------  ---- 
 MENA                719   33%     656   32% 
                  ------  ----  ------  ---- 
 Europe and ROW      129    6%     121    6% 
                  ------  ----  ------  ---- 
 Total             2,203         2,076 
                  ------  ----  ------  ---- 
 

Injectables

 
 $ million                                           Constant 
                                                     currency 
                           2019    2018    Change      change 
 Revenue                    894     826        8%          9% 
                         ------  ------  --------  ---------- 
 Core revenue               890     832        7%          8% 
                         ------  ------  --------  ---------- 
 Gross profit               523     497        5%          6% 
                         ------  ------  --------  ---------- 
 Core gross profit          519     503        3%          4% 
                         ------  ------  --------  ---------- 
 Core gross margin        58.3%   60.5%   (2.2)pp     (2.3)pp 
                         ------  ------  --------  ---------- 
 Operating profit           320     305        5%          5% 
                         ------  ------  --------  ---------- 
 Core operating profit      338     335        1%          1% 
                         ------  ------  --------  ---------- 
 Core operating margin    38.0%   40.3%   (2.3)pp     (2.4)pp 
                         ------  ------  --------  ---------- 
 

Injectables core revenue increased by 7% to $890 million (2018: $832 million). In constant currency, Injectables core revenue grew by 8%.

US Injectables core revenue grew 5% to $636 million (2018: $607 million), reflecting the breadth and resilience of our portfolio. Strong sales of our in-market products and growth from recent launches more than offset increased competition on certain products.

MENA Injectables revenue was $146 million, up 22% (2018: $120 million). In constant currency, MENA Injectables revenue increased by 20%, reflecting good growth across our markets, including Saudi Arabia and Egypt, as well as strong demand for Remsima (R) and a further contribution from newly launched Herzuma (R) .

European Injectables revenue was $108 million, up 3% (2018: $105 million). In constant currency, European Injectables revenue increased by 9% to $114 million, reflecting a good performance from our contract manufacturing business.

Injectables core gross profit increased by 3% to $519 million (2018: $503 million) and core gross margin reduced to 58.3% (2018: 60.5%), primarily reflecting a change in the product mix in the US.

Injectables core operating profit, which excludes the amortisation of intangible assets (other than software) and exceptional items,(6) was $338 million (2018: $335 million). Core operating margin was 38.0% (2018: 40.3%), due to the lower gross margin.

During the year, the Injectables business launched 14 products in the US, 40 in MENA and 15 in Europe. We submitted 183 filings to regulatory authorities across all markets and signed six licensing agreements to add more complex products to our pipeline.

In 2020, we expect Injectables revenue to grow in the low to mid-single digits, driven by new product launches and demand for our broad product portfolio across all of our markets, which should more than offset continued price erosion. We expect core operating margin to be in the range of 35% to 37%.

Generics

 
 $ million                 2019    2018   Change 
 Revenue                    719     692       4% 
                         ------  ------  ------- 
 Gross profit               326     279      17% 
                         ------  ------  ------- 
 Core gross profit          326     295      11% 
                         ------  ------  ------- 
 Core gross margin        45.3%   42.6%    2.7pp 
                         ------  ------  ------- 
 Operating profit           151      40     278% 
                         ------  ------  ------- 
 Core operating profit      124      93      33% 
                         ------  ------  ------- 
 Core operating margin    17.2%   13.4%    3.8pp 
                         ------  ------  ------- 
 

Generics revenue grew 4% to $719 million in 2019 (2018: $692 million). While the US retail generics market environment remained challenging, we more than offset continued price erosion by driving strong demand for our differentiated product portfolio, including our leading nasal sprays, and by launching new products.

Generics core gross profit grew 11% to $326 million (2018: $295 million) and core gross margin increased to 45.3% (2018: 42.6%). This reflected volume growth and an improvement in the product mix, as well as the benefit of lower overhead costs resulting from the consolidation of our manufacturing facilities in 2018 and other efficiency gains.

Generics core operating profit, which excludes the amortisation of intangible assets (other than software) and exceptional items,(7) increased by 33% to $124 million (2018: $93 million). Core operating margin increased to 17.2% (2018: 13.4%). This significant improvement in profitability reflects the increase in core gross profit and better management of inventory related expenses, which more than offset an increase in marketing and R&D expenses.

During the year, the Generics business launched four products and submitted three files to regulatory authorities, as well as adding 12 products through the signing of six business development agreements. As previously announced, we also completed a repeat clinical study for generic Advair Diskus(R) and have submitted the results to the US FDA for review.

In 2020, we expect Generics revenue to be in the range of $700 million to $750 million and core operating margin to be around 20%. Our guidance assumes that we will launch generic Advair Diskus (R) in the second half of the year and we have included revenue of $20 million to $40 million from generic Advair Diskus (R) in this range. If we do not launch generic Advair Diskus (R) in 2020, we would expect the core operating margin for the Generics business to be between 16% and 18%.

Branded

 
 $ million                                          Constant 
                                                    currency 
                           2019    2018   Change      change 
 Revenue                    583     542       8%          6% 
                         ------  ------  -------  ---------- 
 Gross profit               296     271       9%          5% 
                         ------  ------  -------  ---------- 
 Gross margin             50.8%   50.0%    0.8pp     (0.2)pp 
                         ------  ------  -------  ---------- 
 Operating profit           105     111     (5)%       (13)% 
                         ------  ------  -------  ---------- 
 Core operating profit      129     117      10%          3% 
                         ------  ------  -------  ---------- 
 Core operating margin    22.1%   21.6%    0.5pp     (0.4)pp 
                         ------  ------  -------  ---------- 
 

On a reported basis, Branded revenue grew 8% to $583 million (2018: $542 million). On a constant currency basis, Branded revenue increased 6% to $572 million.

Our largest markets, Saudi Arabia and Egypt, performed well, reflecting our strong market positions, good demand for our marketed products and new launches. We also delivered a good performance across most of our other MENA markets, which more than offset significantly lower sales in Algeria resulting primarily from political and economic disruptions.

During the year, the Branded business launched 35 products and submitted 171 filings to regulatory authorities. We further developed our portfolio through new licensing agreements. These included agreements with Gedeon Richter for their novel antipsychotic, cariprazine, with Faes Farma for their Bilaxten (R) , and with Chiesi for a portfolio of their respiratory and neo-natal products for the Egyptian market . Revenue from in-licensed products represented 37% of Branded revenue (2018: 36%).

Branded gross profit was $296 million, up 9% (2018: $271 million) and gross margin was 50.8% (2018: 50.0%). In constant currency, gross profit increased by 5% and gross margin was stable at 49.8% (2018: 50.0%). The improvement in gross profit largely reflects the increase in revenues over the period.

Core operating profit, which excludes the amortisation of intangibles (other than software) and exceptional items,(8) was $129 million, up 10% (2018: $117 million), and core operating margin was 22.1% (2018: 21.6%). In constant currency, core operating profit grew 3% and core operating margin was 21.2% (2018: 21.6%).

We expect Branded revenue to grow in the mid-single digits in constant currency in 2020.

Other businesses

Other businesses, which is primarily comprised of Arab Medical Containers, a manufacturer of plastic specialised medicinal sterile containers, International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, Hikma Emerging Markets and Asia Pacific FZ LLC, and the chemicals division of Hikma Pharmaceuticals LLC (Jordan) contributed revenue of $11 million in 2019 (2018: $10 million) and broke even (2018: loss of $5 million). This improvement in profitability is primarily due to the closure of our emerging markets division as we focus on our core markets, in line with our strategy.

Research and development

Our investment in R&D and business development enables us to continue expanding the Group's product portfolio. During 2019, we had 108 new launches and received 169 approvals.

 
                      2019 submissions(9)   2019 approvals(9)   2019 launches(9) 
 Injectables 
                     --------------------  ------------------  ----------------- 
            US                         14                   7                 14 
                     --------------------  ------------------  ----------------- 
            MENA                       78                  40                 40 
                     --------------------  ------------------  ----------------- 
            Europe                     91                  26                 15 
                     --------------------  ------------------  ----------------- 
 Generics                               3                   4                  4 
                     --------------------  ------------------  ----------------- 
 Branded                              171                  92                 35 
                     --------------------  ------------------  ----------------- 
 Total                                357                 169                108 
                     --------------------  ------------------  ----------------- 
 

To ensure the continuous development of our product pipeline, we submitted 357 regulatory filings.

Net finance expense

Core net finance expense was $45 million (2018: $51 million) due to increased cash deposits and reflecting lower debt utilisation. After recognising non-cash net interest income of $45 million resulting from the remeasurement of the contingent consideration related to the Columbus business acquisition, reported net finance expense was zero.

We expect core net finance expense to be around $47 million in 2020.

Profit before tax

Core profit before tax was $465 million (2018: $408 million), reflecting the strong performance of our three business segments. Reported profit before tax was $491 million (2018: $293 million). Reported profit before tax in the comparator period was impacted by exceptional costs relating to the restructuring of our Generics facilities.

Tax

The Group incurred a reported tax expense of $4 million (2018: $8 million) and an effective tax rate of 0.8% (2018: 2.7%), primarily due to the utilisation of previously unrecognised tax losses and deferred tax benefits recognised upon the internal reorganisation of intangible assets. Excluding exceptional items, Group core tax expense was $100 million (2018: $73 million). The core effective tax rate increased to 21.5% (2018: 17.9%), primarily due to a change in the earnings mix.

We expect the Group core effective tax rate to be around 22% to 23% in 2020.

Profit attributable to shareholders

Profit attributable to shareholders was $486 million (2018: $282 million). Core profit attributable to shareholders increased by 10% to $364 million (2018: $332 million).

Earnings per share

Basic earnings per share was 200.8 cents (2018: 117.0 cents). Core basic earnings per share increased by 9% to 150.4 cents (2018: 137.8 cents) and core diluted earnings per share increased by 9% to 149.8 cents (2018: 137.2 cents).

Dividend

The Board is recommending a final dividend of 30 cents per share (approximately 23 pence per share) (2018: 26 cents per share) bringing the total dividend for the full year to 44 cents per share (approximately 34 pence per share) (2018: 38 cents per share). The proposed dividend will be paid on 7 May 2020 to eligible shareholders on the register at the close of business on 20 March 2020, subject to approval at the Annual General Meeting on 30 April 2020.

Net cash flow, working capital and net debt

The Group generated strong operating cash flow of $472 million (2018: $430 million). Group working capital days were down 8 days to 202 days, primarily driven by improved cash collection.

Capital expenditure was $119 million (2018: $107 million). In the US, $36 million was spent upgrading equipment and adding new technologies for our Generics and Injectables businesses. In MENA, $63 million was spent strengthening and expanding manufacturing capabilities. In Europe, we spent $20 million, expanding our facilities in Portugal, where we recently completed construction of our new high containment operation (HCO), which has begun commercial production. We expect Group capital expenditure to be in the range of $120 million to $140 million in 2020.

The Group's total debt increased to $685 million at 31 December 2019 (31 December 2018: $637 million), reflecting the adoption of IFRS 16, which required the recognition of lease liabilities of $45 million at 31 December 2019. The Group's cash balance improved significantly over the year to $443m (2018: $276 million). The Group's net debt (excluding co-development agreements and contingent liabilities) was $242 million at 31 December 2019 (31 December 2018: $361 million).(10) We continue to have a very strong balance sheet with a net debt to core EBITDA ratio of 0.4x. As part of our long-term financing requirements, we are exploring refinancing options for our $500 million Eurobond, which is due to be repaid in April 2020, including alternatives in the fixed income markets. The Group may also utilise its cash and unutilised revolving credit facility of $1,000 million to repay the Eurobond.

Balance sheet

Net assets at 31 December 2019 were $2,129 million (31 December 2018: $1,697 million). Net current assets reduced to $377 million (31 December 2018: $775 million) due to the reclassification of the Eurobond of $500 million from long-term liabilities to current liabilities.

Outlook for 2020

We expect Injectables revenue to grow in the low to mid-single digits in 2020. We expect core operating margin to be in the range of 35% to 37%.

We expect Generics revenue to be in the range of $700 million to $750 million and core operating margin to be around 20%. Our guidance assumes that we will launch generic Advair Diskus (R) in the second half of the year and we have included revenue of $20 million to $40 million from generic Advair Diskus (R) in this range. If we do not launch generic Advair Diskus (R) in 2020, we would expect the core operating margin for the Generics business to be between 16% and 18%.

We expect Branded revenue to grow in the mid-single digits in constant currency in 2020.

We expect Group net finance expense to be around $47 million in 2020 and the core effective tax rate to be around 22% to 23%. We expect Group capital expenditure to be in the range of $120 million to $140 million.

Following the recent outbreak of coronavirus disease (COVID-19), we have assessed the potential exposure of our business to related disruptions. As we do not have extensive operations or manufacturing in China, nor are we directly dependent on Chinese-manufactured goods or services, we do not currently anticipate any material impact. This is a complex situation that we are continually monitoring.

Responsibility statement

The responsibility statement below has been prepared for the year ended 31 December 2019. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

-- The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;

-- The business and financial review, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

-- Financial statements taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to access the company's performance, business model and strategy.

By order of the Board

 
 Sigurdur Olafsson          Khalid Nabilsi 
 
  Chief Executive Officer    Chief Financial Officer 
  26 February 2020           26 February 2020 
 

The Board

The Board of Directors that served during all or part of the twelve-month period to 31 December 2019 and their respective responsibilities can be found on the Leadership team section of www.hikma.com .

Cautionary statement

This preliminary announcement has been prepared solely to provide additional information to the shareholders of Hikma and should not be relied on by any other party or for any other purpose.

Definitions

We use a number of non-IFRS measures to report and monitor the performance of our business. Management uses these adjusted numbers internally to measure our progress and for setting performance targets. We also present these numbers, alongside our reported results, to external audiences to help them understand the underlying performance of our business. Our core numbers may be calculated differently to other companies.

Adjusted measures are not substitutable for IFRS results and should not be considered superior to results presented in accordance with IFRS.

Core results

Reported results represent the Group's overall performance. However, these results can include one-off or non-cash items which are excluded when assessing the underlying performance of the Group. To provide a more complete picture of the Group's performance to external audiences, we provide, alongside our reported results, core results, which are a non-IFRS measure. Our core results exclude the exceptional items and other adjustments set out in Note 5.

 
 Group operating profit                             2019        2018 
                                                $million    $million 
 Core operating profit                               508         460 
                                              ----------  ---------- 
 R&D costs                                          (24)        (29) 
                                              ----------  ---------- 
 Jordan warehouse fire incident                     (13)           - 
                                              ----------  ---------- 
 Proceeds from legal claim                            32           - 
                                              ----------  ---------- 
 Contingent consideration adjustment                   7           - 
                                              ----------  ---------- 
 MENA severance and restructuring costs              (7)           - 
                                              ----------  ---------- 
 Integration costs                                     4        (30) 
                                              ----------  ---------- 
 Net impairment reversal of product related           20           - 
  intangibles 
                                              ----------  ---------- 
 Intangible assets amortisation other 
  than software                                     (34)        (30) 
                                              ----------  ---------- 
 Reported operating profit                           493         371 
                                              ----------  ---------- 
 

Constant currency

As the majority of our business is conducted in the US, we present our results in US dollars. For both our Branded and Injectable businesses, a proportion of their sales are denominated in a currency other than the US dollar. In order to illustrate the underlying performance of these businesses, we include information on our results in constant currency.

Constant currency numbers in 2019 represent reported 2019 numbers re-stated using 2018 exchange rates, excluding price increases in the business which resulted from the devaluation of currencies.

EBITDA

EBITDA is earnings before interest, tax, depreciation, amortisation and impairment charges/reversals.

 
 EBITDA 
  $ million                             2019   2018 
 Reported operating profit               493    371 
                                       -----  ----- 
 Depreciation, amortisation and 
  impairment charges/reversals            99    121 
                                       -----  ----- 
 Reported EBITDA                         592    492 
                                       -----  ----- 
 Exceptional items: 
                                       -----  ----- 
 Research and development costs           24     29 
                                       -----  ----- 
 Jordan warehouse fire incident           13      - 
                                       -----  ----- 
 Proceeds from legal claim              (32)      - 
                                       -----  ----- 
 Contingent consideration adjustment     (7)      - 
                                       -----  ----- 
 MENA severance and restructuring 
  costs                                    7 
                                       -----  ----- 
 Integration costs                       (4)     28 
                                       -----  ----- 
 Core EBITDA                             593    549 
                                       -----  ----- 
 

Working capital days

We believe Group working capital days provides a useful measure of the Group's working capital management and liquidity. Group working capital days are calculated as Group receivable days plus Group inventory days, less Group payable days. Group receivable days are calculated as Group trade receivables x 365, divided by trailing 12 months Group revenue.

Group net debt

We believe Group net debt is a useful measure of the strength of the Group's financing position. Group net debt is calculated as Group total debt less Group total cash. Group total debt excludes co-development agreements and contingent liabilities.

 
 Group net debt 
  $ million                               Dec-19   Dec-18 
 Short-term financial debts                (569)     (74) 
                                         -------  ------- 
 Short-term leases liabilities               (9)      (1) 
                                         -------  ------- 
 Long-term financial debts                  (48)    (539) 
                                         -------  ------- 
 Long-term leases liabilities               (59)     (23) 
                                         -------  ------- 
 Total debt                                (685)    (637) 
                                         -------  ------- 
 Cash, cash equivalents and restricted 
  cash                                       443      276 
                                         -------  ------- 
 Net debt                                  (242)    (361) 
                                         -------  ------- 
 

Forward looking statements

This announcement contains certain statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature with respect to Hikma's expectations and plans, strategy, management objectives, future developments and performance, costs, revenues and other trend information. All statements other than statements of historical fact may be forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward looking words such as "intends", "believes", "anticipates", "expects", "estimates", "forecasts", "targets", "aims", "budget", "scheduled" or words or terms of similar substance or the negative thereof, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved.

By their nature, forward looking statements are based on current expectations and projections about future events and are therefore subject to assumptions, risks and uncertainties that are beyond Hikma's ability to control or estimate precisely and which could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. Where included, such statements have been made by or on behalf of Hikma in good faith based upon the knowledge and information available to the Directors on the date of this announcement. Accordingly, no assurance can be given that any particular expectation will be met and Hikma's shareholders are cautioned not to place undue reliance on the forward-looking statements. Forward looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future.

Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation ((EU) No. 596/2014) and the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Hikma does not undertake to update the forward looking statements contained in this announcement to reflect any changes in events, conditions or circumstances on which any such statement is based or to correct any inaccuracies which may become apparent in such forward looking statements. Except as expressly provided in this announcement, no forward looking or other statements have been reviewed by the auditors of Hikma. All subsequent oral or written forward looking statements attributable to Hikma or any of its members, directors, officers or employees or any person acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Past share performance cannot be relied on as a guide to future performance. Nothing in this announcement should be construed as a profit forecast.

Neither the content of Hikma's website nor any other website accessible by hyperlinks from Hikma's website are incorporated in, or form part of, this announcement.

Principal risks and uncertainties

The Group faces risks from a range of sources that could have a material impact on our financial commitments and ability to trade in the future. The principal risks are determined via robust assessment considering our risk context by the Board of Directors with input from executive management. The principal risks facing the company have not materially changed over the year and they are set out in the 2019 annual report on pages 43 - 51. The Board recognises that certain risk factors that influence the principal risks are outside of the control of management. The Board is satisfied that the principal risks are being managed appropriately and consistently with the target risk appetite. The set of principal risks should not be considered as an exhaustive list of all the risks the Group faces.

(1) Core results throughout the document are presented to show the underlying performance of the Group, excluding the exceptional items and other adjustments set out in Note 5. Core results are a non-IFRS measure and a reconciliation to reported IFRS measures is provided on page 11

(2) EBITDA is earnings before interest, tax, depreciation, amortisation and impairment charges/reversals. EBITDA is a non-IFRS measure, see page 12 for a reconciliation to reported IFRS results

(3) Constant currency numbers in 2019 throughout the document represent 2019 numbers re-stated using 2018 exchange rates, excluding price increases in the business which resulted from the devaluation of currencies

(4) In 2019, Hikma incurred $24 million of R&D costs related to a repeat clinical endpoint study for generic Advair Diskus(R) (2018: $29 million). See Note 5 for further information

(5) In 2019, exceptional items comprised proceeds from a legal claim of $32 million, costs related to a warehouse fire at one of our facilities in Jordan of $13 million, a contingent consideration adjustment of $7 million and net $20 million related to impairment reversal of product related intangibles related to Columbus business. Refer to Note 5 for further information

(6) Exceptional items comprised integration costs of $4 million. Amortisation of intangible assets (other than software) was $22 million. Refer to Note 5 for further information

(7) Exceptional items comprised $24 million of expenses related to a repeat clinical endpoint study for generic Advair Diskus(R) , $6 million of costs related to a warehouse fire at one of our facilities in Jordan, $32 million of proceeds from a legal claim, $7 million from a contingent consideration readjustment and net $20 million related to impairment reversal of product related intangibles related to Columbus business. Amortisation of intangible assets (other than software) was $2 million. Refer to Note 5 for further information

(8) In 2019, exceptional items comprised expenses of $7 million related to a warehouse fire in one of our facilities in Jordan and $7 million of severance and restructuring costs. Amortisation of intangible assets (other than software) was $10 million. Refer to Note 5 for further information

(9) New products submitted, approved and launched by country in 2019

(10) Group net debt is calculated as Group total debt less Group total cash. Group net debt is a non-IFRS measure, see page 12 for a reconciliation of Group net debt to reported IFRS results

Hikma Pharmaceuticals PLC

Consolidated income statement

For the year ended 31 December 2019

 
                                           2019                    2019        2019 Reported                    2018                    2018           2018 Reported 
                                           Core             Exceptional              results                    Core             Exceptional                 results 
                                        results                   items                                      results                   items 
                                                              and other                                                            and other 
                                                            adjustments                                                          adjustments 
                                                                  (note                                                                (note 
                                                                     5)                                                                   5) 
                    Note                     $m                      $m                   $m                      $m                      $m                      $m 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 
 Revenue             3                    2,203                       4                2,207                   2,076                     (6)                   2,070 
 Cost of sales                          (1,059)                       -              (1,059)                 (1,004)                    (16)                 (1,020) 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Gross profit                             1,144                       4                1,148                   1,072                    (22)                   1,050 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Selling, general 
  and 
  administrative 
  expenses(1)                             (453)                    (41)                (494)                   (437)                    (33)                   (470) 
 Net impairment 
  reversals on 
  financial 
  assets                                      -                       -                    -                      11                       -                      11 
 Research and 
  development 
  expenses                                (126)                    (24)                (150)                   (118)                    (29)                   (147) 
 Other operating 
  income 
  /(expenses), 
  net                                      (57)                      46                 (11)                    (68)                     (5)                    (73) 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Total operating 
  expenses                                (636)                    (19)                (655)                   (612)                    (67)                   (679) 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Operating profit    4                      508                    (15)                  493                     460                    (89)                     371 
 Finance income                               7                      60                   67                       3                       -                       3 
 Finance expense                           (52)                    (15)                 (67)                    (54)                    (26)                    (80) 
 Gain/(loss) from 
  investment at 
  fair 
  value through 
  profit 
  and loss 
  (FVTPL)                                     2                       -                    2                     (1)                       -                     (1) 
 Loss from 
  investment 
  divestiture                                 -                     (4)                  (4)                       -                       -                       - 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Profit before 
  tax                                       465                      26                  491                     408                   (115)                     293 
 Tax                 6                   (100 )                      96                  (4)                    (73)                      65                     (8) 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Profit for the 
  year                                      365                     122                  487                     335                    (50)                     285 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Attributable to: 
 Non-controlling 
  interests                                   1                       -                    1                       3                       -                       3 
 Equity holders 
  of the parent                             364                     122                  486                     332                    (50)                     282 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
                                            365                     122                  487                     335                    (50)                     285 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Earnings per 
  share 
  (cents)            8 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 Basic                                    150.4                                        200.8                   137.8                                           117.0 
 Diluted                                  149.8                                        200.0                   137.2                                           116.5 
                          ---------------------  ----------------------  -------------------  ----------------------  ----------------------  ---------------------- 
 
 

(1) Beginning in 2019, Sales and Marketing (S&M) and General & Administrative (G&A) expenses are reported under one-line item. In 2018, S&M and G&A were $224 million and $246 million, respectively.

Hikma Pharmaceuticals PLC

Consolidated statement of comprehensive income

For the year ended 31 December 2019

 
                                   2019   2019 Exceptional        2019       2018   2018 Exceptional        2018 
                                   Core              items    Reported       Core              items    Reported 
                                results          and other     results    results          and other     results 
                                               adjustments                               adjustments 
                                                     (note                                     (note 
                                                        5)                                        5) 
                                     $m                 $m          $m         $m                 $m          $m 
 
 Profit for the year                365                122         487        335               (50)         285 
 Other comprehensive 
  income 
 Items that may be 
  reclassified subsequently 
  to the consolidated 
  income statement, 
  net of tax: 
 Currency translation 
  gain/(loss)                        20                  -          20       (29)                  -        (29) 
                              ---------  -----------------  ----------  ---------  -----------------  ---------- 
 Items that will not 
  be reclassified 
 subsequently to the 
  consolidated 
 income statement, 
  net of tax 
 Change in investments 
  at fair value through 
  other comprehensive 
  income (FVTOCI)                   (2)                  -         (2)          7                  -           7 
                              ---------  -----------------  ----------  ---------  -----------------  ---------- 
 Total comprehensive 
  income for the year               383                122         505        313               (50)         263 
                              =========  =================  ==========  =========  =================  ========== 
 Attributable to: 
 Non-controlling interests            2                  -           2          1                  -           1 
 Equity holders of 
  the parent                        381                122         503        312               (50)         262 
                              ---------  -----------------  ----------  ---------  -----------------  ---------- 
                                    383                122         505        313               (50)         263 
                              ---------  -----------------  ----------  ---------  -----------------  ---------- 
 
 
 

Hikma Pharmaceuticals PLC

Consolidated balance sheet

At 31 December 2019

 
                                                              2019                   2018 
                                       Note                     $m                     $m 
                                             ---------------------  --------------------- 
 Non-current assets 
 Goodwill                               9                      282                    279 
 Other intangible assets                9                      552                    487 
 Property, plant and equipment                                 912                    870 
 Right-of-use assets                    10                      50                      - 
 Investment in associates and joint 
  ventures                                                      11                     11 
 Deferred tax assets                    14                     243                    125 
 Financial and other non-current 
  assets                                                        32                     57 
                                             ---------------------  --------------------- 
                                                             2,082                  1,829 
                                             ---------------------  --------------------- 
 Current assets 
 Inventories                                                   568                    528 
 Income tax receivable                                          79                     74 
 Trade and other receivables            11                     719                    731 
 Collateralised and restricted                                   1                      - 
  cash 
 Cash and cash equivalents                                     442                    276 
 Other current assets                                           39                     59 
                                             ---------------------  --------------------- 
                                                             1,848                  1,668 
                                             ---------------------  --------------------- 
 Total assets                                                3,930                  3,497 
                                             =====================  ===================== 
 Current liabilities 
 Short-term financial debts             12                     569                     74 
 Leases liabilities                     10                       9                      1 
 Trade and other payables                                      473                    465 
 Income tax provision                                           82                     68 
 Other provisions                                               23                     23 
 Other current liabilities                                     315                    262 
                                             ---------------------  --------------------- 
                                                             1,471                    893 
                                             ---------------------  --------------------- 
 Net current assets                                            377                    775 
                                             ---------------------  --------------------- 
 Non-current liabilities 
 Long-term financial debts              13                      48                    539 
 Leases liabilities                     10                      59                     23 
 Deferred tax liabilities               14                      20                     16 
 Other non-current liabilities                                 203                    329 
                                             ---------------------  --------------------- 
                                                               330                    907 
                                             ---------------------  --------------------- 
 Total liabilities                                           1,801                  1,800 
                                             =====================  ===================== 
 Net assets                                                  2,129                  1,697 
                                             =====================  ===================== 
 Equity 
 Share capital                                                  41                     40 
 Share premium                                                 282                    282 
 Other reserves                                              (179)                  (217) 
 Retained earnings                                           1,973                  1,580 
                                             ---------------------  --------------------- 
 Equity attributable to equity 
  holders of the parent                                      2,117                  1,685 
                                             ---------------------  --------------------- 
 Non-controlling interests                                      12                     12 
                                             ---------------------  --------------------- 
 Total equity                                                2,129                  1,697 
                                             =====================  ===================== 
 

Hikma Pharmaceuticals PLC

Consolidated statement of changes in equity

For the year ended 31 December 2019

 
                                   Merger             Translation             Own                  Total             Retained                  Share                  Share                   Equity               Non-controlling                       Total 
                          and revaluation                 reserve          shares                  other             earnings                capital                premium             attributable                     interests                      equity 
                                 reserves                                                       reserves                                                                                   to equity 
                                                                                                                                                                                        shareholders 
                                                                                                                                                                                              of the 
                                                                                                                                                                                              parent 
                                       $m                      $m              $m                     $m                   $m                     $m                     $m                       $m                            $m                          $m 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Balance at 
  1 January 
  2018(1)                              38                   (227)             (1)                  (190)                1,354                     40                    282                    1,486                            14                       1,500 
 Profit for 
  the year                              -                       -               -                      -                  282                      -                      -                      282                             3                         285 
 Change in 
  investments 
  at FVTOCI                             -                       -               -                      -                    7                      -                      -                        7                             -                           7 
 Currency 
  translation 
  loss                                  -                    (27)               -                   (27)                    -                      -                      -                     (27)                           (2)                        (29) 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Total 
  comprehensive 
  income for 
  the year                              -                    (27)               -                   (27)                  289                      -                      -                      262                             1                         263 
 Total 
 transactions 
 with owners, 
 recognised 
 directly in 
 equity 
 Cost of 
  equity-settled 
  employee share 
  scheme                                -                       -               -                      -                   21                      -                      -                       21                             -                          21 
 Dividends on 
  ordinary 
  shares 
  (note 7)                              -                       -               -                      -                 (84)                      -                      -                     (84)                           (3)                        (87) 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Balance at 
  31 December 
  2018 and 1 
  January 2019                         38                   (254)             (1)                  (217)                1,580                     40                    282                    1,685                            12                       1,697 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Impact of IFRIC 
  23(2)                                 -                       -               -                      -                    2                      -                      -                        2                             -                           2 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Balance at 
  1 January 2019 
  as adjusted                          38                   (254)             (1)                  (217)                1,582                     40                    282                    1,687                            12                       1,699 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Profit for 
  the year(3)                          20                       -               -                     20                  466                      -                      -                      486                             1                         487 
 Change in 
  investments 
  at FVTOCI                             -                       -               -                      -                  (2)                      -                      -                      (2)                             -                         (2) 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Currency 
  translation 
  gain                                  -                      19               -                     19                    -                      -                      -                       19                             1                          20 
 Total 
  comprehensive 
  income for 
  the year                             20                      19               -                     39                  464                      -                      -                      503                             2                         505 
 Total 
 transactions 
 with owners, 
 recognised 
 directly in 
 equity 
 Cost of 
  equity-settled 
  employee share 
  scheme                                -                       -               -                      -                   24                      -                      -                       24                             -                          24 
 Exercise of 
  employee share 
  scheme                              (1)                       -               -                    (1)                    -                      1                      -                        -                             -                           - 
 Dividends on 
  ordinary 
  shares 
  (note 7)                              -                       -               -                      -                 (97)                      -                      -                     (97)                           (2)                        (99) 
                  -----------------------  ----------------------  --------------  ---------------------  -------------------  ---------------------  ---------------------  -----------------------  ----------------------------  -------------------------- 
 Balance at 
  31 December 
  2019                                 57                   (235)             (1)                  (179)                1,973                     41                    282                    2,117                            12                       2,129 
                  =======================  ======================  ==============  =====================  ===================  =====================  =====================  =======================  ============================  ========================== 
 

(1)The Group adopted IFRS 9 and IFRS 15 from 1 January 2018. The impact of IFRS 9 and IFRS 15 was $3 million and $25 million debit to retained earnings, respectively.

(2) The Group adopted IFRIC 23 as of 1 January 2019. The impact of adoption was a decrease of $2 million of the amount previously held for uncertain tax positions (note 1).

(3) A net impairment reversal of $20 million has been allocated from retained earnings to the merger and revaluation reserves in relation to Columbus business impairment reversal (note 5 and 9).

Hikma Pharmaceuticals PLC

Consolidated cash flow statement

For the year ended 31 December 2019

 
                                                                                         2019                     2018 
                                                                                Note       $m                       $m 
 Cash flows from operating activities 
 Cash generated from operations                                                  15       580                      493 
 Income taxes paid                                                                      (125)                     (63) 
 Income taxes received                                                                     17                        - 
 Net cash inflow from operating activities                                                472                      430 
 Cash flow from investing activities 
 Purchases of property, plant and equipment                                             (119)                    (107) 
 Proceeds from disposal of property, plant and equipment                                    2                       13 
 Purchase of intangible assets                                                           (67)                     (32) 
 Investment in joint ventures                                                               -                      (4) 
 (Increase)/decrease in investment in financial and other non-current assets              (1)                        4 
 Proceeds from sale of investment at fair value through other comprehensive                12                        - 
 income 
 Additions of investments at fair value through other comprehensive income                (5)                      (4) 
 Acquisition of business undertakings net of cash acquired                                (8)                     (14) 
 Proceeds from investment divestiture                                                       2                        - 
 Contingent consideration receipt                                                          27                       45 
 Interest income received                                                                   6                        3 
                                                                                      -------  ----------------------- 
 Net cash outflow from investing activities                                             (151)                     (96) 
                                                                                      -------  ----------------------- 
 Cash flow from financing activities 
 (Increase)/decrease in collateralised and restricted cash                                (1)                        3 
 Proceeds from issue of long-term financial debts                                          19                       93 
 Repayment of long-term financial debts                                                  (11)                    (224) 
 Proceeds from short-term borrowings                                                      267                      138 
 Repayment of short-term borrowings                                                     (273)                    (148) 
 Repayment of lease liabilities                                                          (12)                        - 
 Dividends paid                                                                          (97)                     (84) 
 Dividends paid to non-controlling shareholders of subsidiaries                           (2)                      (3) 
 Interest and bank charges paid                                                          (44)                     (51) 
 Payment to co-development and earnout payment agreement                                  (1)                      (2) 
                                                                                      -------  ----------------------- 
 Net cash outflow from financing activities                                             (155)                    (278) 
                                                                                      -------  ----------------------- 
 Net increase in cash and cash equivalents                                                166                       56 
                                                                                      -------  ----------------------- 
 Cash and cash equivalents at beginning of year                                           276                      227 
                                                                                      -------  ----------------------- 
 Foreign exchange translation movements                                                     -                      (7) 
                                                                                      -------  ----------------------- 
 Cash and cash equivalents at end of year                                                 442                      276 
                                                                                      =======  ======================= 
 
 

Hikma Pharmaceuticals PLC

Notes to the consolidated financial statements

1. Accounting policies

General information

Hikma Pharmaceuticals PLC is a public limited liability company incorporated and domiciled in England and Wales under the Companies Act 2006.

The Group's principal activities are the development, manufacturing, marketing and selling of a broad range of generic, branded and in-licensed pharmaceuticals products in solid, semi-solid, liquid and injectable final dosage forms.

Basis of preparation

The Group consolidated financial statements are prepared in accordance with:

i) EU endorsed International Financial Reporting Standards (IFRS) and interpretations of the International Financial Reporting Standards Interpretations Committee and those parts of the Companies Act 2006 as applicable to companies using IFRS.

(ii) International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation to fair value of certain financial assets and liabilities.

The accounting policies included in this note have been applied consistently other than where new policies have been adopted.

The Group's previously published consolidated financial statements were also prepared in accordance with IFRSs issued by the IASB and also in accordance with IFRSs adopted for use in the European Union.

The presentational and functional currency of Hikma Pharmaceuticals PLC is the US dollar as the majority of the Company's business is conducted in US dollars.

The financial information does not constitute the Company's statutory accounts for the years to 31 December 2019 or 2018 but is derived from those accounts.

Adoption of new and revised standards

The following new and revised Standards and Interpretations have been adopted in the current year. Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the consolidated financial statements of the Group but may impact the accounting for future transactions and arrangements.

 
 IFRS 16    Leases 
---------  --------------------------------------- 
 IFRIC 23   Uncertainty over income tax treatments 
---------  --------------------------------------- 
 

IFRS 16

IFRS 16 was issued in January 2016 and it replaces IAS 17 'Leases', IFRIC 4 'Determining whether an Arrangement Contains a Lease', SIC-15 Operating Leases-Incentives' and SIC-27 'Evaluating the Substance of Transactions Involving the Legal form of a Lease'.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets (e.g personal computers) and short-term leases (i.e leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee recognises a liability to make lease payments (i.e the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e the right-of-use asset). Lessees are required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees are also required to remeasure the lease liability upon the occurrence of certain events (e.g a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments).

The lessee generally recognises the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019.

The Group has adopted IFRS 16, applying modified retrospective approach on 1 January 2019, and recognised right-of-use assets of $55 million (including $10 million reclassed from property, plant, and equipment previously recognised as assets held under finance lease and offsetting accrued rent of $3 million) and lease liabilities of $48 million, the effect on the current year of adopting IFRS 16 is disclosed in note 10.

IFRIC 23

IFRIC 23 'Uncertainty over income tax treatments' was issued in June 2017. The interpretation clarifies that if it is considered probable that a tax authority will accept an uncertain tax treatment, the tax charge should be calculated on that basis. If it is not considered probable, the effect of the uncertainty should be estimated and reflected in the tax charge. In assessing the uncertainty, it is assumed that the tax authority will have full knowledge of all information related to the matter.

The Group adopted IFRIC 23 as of 1 January 2019 and reassessed the effect of uncertainty where applicable. The impact of adoption was a decrease of $2 million of the amount previously held for uncertain tax positions which was reflected in retained earnings.

2. Going concern

The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence and therefore considered the going concern basis as appropriate. Therefore, they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.

3. Revenue from contracts with customers

Business and geographical markets

The following table provides an analysis of the Group's reported sales by segment and geographical market, irrespective of the origin of the goods/services:

 
                           Branded   Injectables   Generics   Others   Total 
 Year ended 31 December         $m            $m         $m       $m      $m 
  2019 
------------------------  --------  ------------  ---------  -------  ------ 
 United States                   -           640        719        -   1,359 
 Middle East and North 
  Africa                       567           146          -        6     719 
 Europe and rest of the 
  world                         16           101          -        5     122 
 United Kingdom                  -             7          -        -       7 
------------------------  --------  ------------  ---------  -------  ------ 
                               583           894        719       11   2,207 
------------------------  --------  ------------  ---------  -------  ------ 
 
                           Branded   Injectables   Generics   Others   Total 
 Year ended 31 December         $m            $m         $m       $m      $m 
  2018 
------------------------  --------  ------------  ---------  -------  ------ 
 United States                   -           601        692        -   1,293 
 Middle East and North 
  Africa                       531           120          -        5     656 
 Europe and rest of the 
  world                         11           100          -        5     116 
 United Kingdom                  -             5          -        -       5 
------------------------  --------  ------------  ---------  -------  ------ 
                               542           826        692       10   2,070 
------------------------  --------  ------------  ---------  -------  ------ 
 

The top selling markets in 2019 are as below:

 
                    2019     2018 
                      $m       $m 
---------------  -------  ------- 
 United States     1,359    1,293 
 Saudi Arabia        204      170 
 Egypt               114       97 
---------------  -------  ------- 
                   1,677    1,560 
---------------  -------  ------- 
 

Included in revenues arising in the Generics and Injectables segments are revenues of approximately $323 million (2018: $309 million) which arose from the Group's largest customer which is located in the United States.

The following table provide contract balances related to revenue:

 
                                         2019            2018 
                                           $m              $m 
-----------------------------  --------------  -------------- 
 Trade receivables (note 11)              637             654 
 Contract liability                       142             151 
-----------------------------  --------------  -------------- 
 

Trade receivables are non-interest bearing and are typical credit terms in the US range from 30 to 90 days, in Europe 30 to 120 days, and in Mena 180-360 days.

Contract liability mainly relate to returns provision and free goods balance.

4 . Business segments

For management reporting purposes, the Group is organised into three principal operating divisions - Injectables, Generics and Branded. These divisions are the basis on which the Group reports its segmental information.

Core operating profit, defined as 'segment result', is the principal measure used in the decision-making and resource allocation process of the chief operating decision maker, who is the Group's Chief Executive Officer.

Information regarding the Group's operating segments is reported below:

 
 Injectables                     2019           2019        2019       2018           2018        2018 
                                 Core    Exceptional    Reported       Core    Exceptional    Reported 
                              results          items     results    results          items     results 
                                           and other                             and other 
                                         adjustments                           adjustments 
                                               (note                                 (note 
                                                  5)                                    5) 
                                   $m             $m          $m         $m             $m          $m 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 Revenue                          890              4         894        832            (6)         826 
 Cost of sales                  (371)              -       (371)      (329)              -       (329) 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 Gross profit                     519              4         523        503            (6)         497 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 Total operating expenses       (181)           (22)       (203)      (168)           (24)       (192) 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 Segment result                   338           (18)         320        335           (30)         305 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 
 
 Generics               2019                 2019        2019       2018                 2018        2018 
                        Core          Exceptional    Reported       Core          Exceptional    Reported 
                     results            items and     results    results            items and     results 
                                other adjustments                           other adjustments 
                                            (note                                       (note 
                                               5)                                          5) 
                          $m                   $m          $m         $m                   $m          $m 
                   ---------  -------------------  ----------  ---------  -------------------  ---------- 
 Revenue                 719                    -         719        692                    -         692 
 Cost of sales         (393)                    -       (393)      (397)                 (16)       (413) 
                   ---------  -------------------  ----------  ---------  -------------------  ---------- 
 Gross profit            326                    -         326        295                 (16)         279 
                   ---------  -------------------  ----------  ---------  -------------------  ---------- 
 Total operating 
  expenses             (202)                   27       (175)      (202)                 (37)       (239) 
                   ---------  -------------------  ----------  ---------  -------------------  ---------- 
 Segment result          124                   27         151         93                 (53)          40 
                   ---------  -------------------  ----------  ---------  -------------------  ---------- 
 
 
 
 Branded                2019                 2019        2019       2018           2018        2018 
                        Core          Exceptional    Reported       Core    Exceptional    Reported 
                     results            items and     results    results          items     results 
                                other adjustments                             and other 
                                         (note 5)                           adjustments 
                                                                                  (note 
                                                                                     5) 
                          $m                   $m          $m         $m             $m          $m 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Revenue                 583                    -         583        542              -         542 
 Cost of sales         (287)                    -       (287)      (271)              -       (271) 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Gross profit            296                    -         296        271              -         271 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Total operating 
  expenses             (167)                 (24)       (191)      (154)            (6)       (160) 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Segment result          129                 (24)         105        117            (6)         111 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 
 
 Others(1)              2019                 2019        2019       2018           2018        2018 
                        Core          Exceptional    Reported       Core    Exceptional    Reported 
                     results            items and     results    results          items     results 
                                other adjustments                             and other 
                                         (note 5)                           adjustments 
                                                                                  (note 
                                                                                     5) 
                          $m                   $m          $m         $m             $m          $m 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Revenue                  11                    -          11         10              -          10 
 Cost of sales           (8)                    -         (8)        (7)              -         (7) 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Gross profit              3                    -           3          3              -           3 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Total operating 
  expenses               (3)                    -         (3)        (8)              -         (8) 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 Segment result            -                    -           -        (5)              -         (5) 
                   ---------  -------------------  ----------  ---------  -------------  ---------- 
 

(1)Others mainly comprises Arab Medical Containers LLC, International Pharmaceutical Research Center LLC, Hikma Emerging Markets and Asia Pacific FZ LLC, and the chemicals division of Hikma Pharmaceuticals LLC (Jordan).

 
 Group                   2019                          2019        2019                2018           2018        2018 
                         Core                   Exceptional    Reported                Core    Exceptional    Reported 
                      results                     items and     results             results          items     results 
                                          other adjustments                                      and other 
                                                      (note                                    adjustments 
                                                         5)                                          (note 
                                                                                                        5) 
                           $m                            $m          $m                  $m             $m          $m 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Segment result           591                          (15)         576                 540           (89)         451 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Unallocated 
  expenses(1)            (83)                             -        (83)                (80)              -        (80) 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Operating profit         508                          (15)         493                 460           (89)         371 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Finance income             7                            60          67                   3              -           3 
 Finance expense         (52)                          (15)        (67)                (54)           (26)        (80) 
 Gain/(loss) from 
  investment at 
  FVTPL                     2                             -           2                 (1)              -         (1) 
 Loss from 
  investment 
  divestiture               -                           (4)         (4)                   -              -           - 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Profit before tax        465                            26         491                 408          (115)         293 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Tax                    (100)                            96         (4)                (73)             65         (8) 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 Profit for the 
  year                    365                           122         487                 335           (50)         285 
                    =========  ============================  ==========  ==================  =============  ========== 
 
 Attributable to: 
 Non-controlling 
  interests                 1                             -           1                   3              -           3 
 Equity holders of 
  the parent              364                           122         486                 332           (50)         282 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
                          365                           122         487                 335           (50)         285 
                    ---------  ----------------------------  ----------  ------------------  -------------  ---------- 
 

(1) Unallocated corporate expenses mainly comprises employee costs, third-party professional fees, IT and travel expenses.

5. Exceptional items and other adjustments

Exceptional items and other adjustments are disclosed separately in the consolidated income statement to assist in understanding the Group's core performance.

 
                                                                                         2019              2018 
                                                                                           $m                $m 
                                                                           ------------------  ---------------- 
 
 Exceptional items 
 R&D cost                                                                                (24)              (29) 
 Jordan warehouse fire incident                                                          (13)                 - 
 Proceeds from legal claim                                                                 32                 - 
 Contingent consideration adjustment                                                        7                 - 
 MENA severance and restructuring costs                                                   (7)                 - 
 Integration costs                                                                          4              (30) 
 Loss from investment divestiture                                                         (4)                 - 
 Impairment reversal of product related intangibles, net                                   20                 - 
 Tax benefit associated with previously unrecognised deferred tax assets                   49                43 
 Tax benefit associated with intangible asset transfers                                    48                 - 
 Prior year favourable US tax ruling                                                        -                13 
 Exceptional items                                                                        112               (3) 
                                                                           ------------------  ---------------- 
 
 Other adjustments 
 Intangible assets amortisation other than software                                      (34)              (30) 
 Remeasurement of contingent consideration, net                                            45              (26) 
                                                                           ------------------  ---------------- 
 Exceptional items and other adjustments                                                  123              (59) 
                                                                           ------------------  ---------------- 
 Tax effect                                                                               (1)                 9 
                                                                           ------------------  ---------------- 
 Impact on profit for the year                                                            122              (50) 
                                                                           ==================  ================ 
 

Exceptional items have been recognised in accordance with our accounting policy, the details are presented below:

Exceptional items:

- Hikma incurred $24 million of research and development costs related to a repeat clinical endpoint study for generic Advair Diskus(R). The study was completed in November 2019, the study and certain additional information was submitted to the US FDA for their review

- During the year, a fire broke out in a warehouse at one of Hikma's Jordan facilities which serves the Generics and Branded segments. Production was halted for a period of time and inventory was damaged. The associated loss was $17 million, mainly comprised of damaged inventory and the cost to remediate property, plant and equipment. To date, the Group has received insurance compensation of $4 million related to the fire incident resulting in a net exceptional expense of $13 million included in other operating income/(expense). The Group expects to receive final insurance compensation in 2020 and the amount receivable related to contingent asset cannot be measured reliably and is dependent on the final outcome of the insurance claim

- Hikma received compensation proceeds of $32 million in relation to a litigation matter with an external party where one of Hikma's products sales were halted by a temporary restraining order and an injunction. The litigation was resolved in Hikma's favour and a payment was received from the plaintiff representing lost profit over the affected time period. This is included in other operating income/(expense)

- The contingent consideration adjustment of $7 million relates to a change in estimate of the amount of expected contingent payments Hikma was entitled to receive under the terms of the Columbus acquisition agreement. This is included in other operating income/(expense), in cash flow from investing activities

- MENA severance and restructuring costs of $7 million related to one-off organisational restructuring in MENA and are mainly included in SG&A. Management expects to incur further costs in 2020 over approximately $5 million

- A provision of $4 million in relation to integration costs of the Columbus business and the consolidation of the distribution centers in the US was released. This was previously provided for in 2018 as exceptional items included in revenue

- $4 million loss from divestiture of Medlac investment (note 16)

- $21 million Impairment reversal of product related intangibles related to specific product related assets in Generics segment offset by $1 million impairment charge. This is included in other operating income/(expense)

- The Group has benefited $49 million from the utilisation of previously unrecognised deferred tax assets following the internal reorganisation of intangible assets (note 6)

- The Group has recorded a $48 million tax benefit associated with the internal reorganisation on intangible assets (note 6)

In previous year, exceptional items and other adjustments were related to the following:

- During 2018, Hikma incurred $29 million of research and development costs related to a repeat clinical endpoint study for generic Advair Diskus(R). In 2017, Hikma recognised a $29 million contingent consideration gain from Boehringer Ingelheim as compensation for failure to receive FDA approval of generic Advair Diskus(R) before 24 December 2017. To obtain approval, the FDA requires the completion of an additional clinical endpoint study. Both the compensation and repeat clinical study cost have been treated as exceptional items.

   -        Integration and other costs were incurred in relation to the restructuring of our Columbus manufacturing facility and the closure of Eatontown manufacturing facility, in addition to the consolidation of the distribution centre in the US, of which $6 million is included in revenue, $16 million is included in cost of sales, $2 million in sales and marketing, $1 million in general and administrative and $5 million in other operating expenses. 
   -        Tax benefit of $43 million associated with prior year impairment loss recognised in 2018. 

- The prior year favorable US tax ruling of $13 million relates to the benefit associated with a change in the tax reporting for chargebacks in the US.

Other adjustments

Remeasurement of contingent consideration, financial liability and asset represents the net difference resulting from the valuation of the liabilities and assets associated with the future contingent payments receivables in respect of the Columbus business acquisition and the financial liability in relation to the co-development earnout payment agreement. The remeasurement is included in finance expense/income.

6. Tax

 
                                2019           2019   2019 Reported       2018           2018   2018 Reported 
                                Core    Exceptional         results       Core    Exceptional         results 
                             results          items                    results          items 
                                          and other                                 and other 
                                        adjustments                               adjustments 
                                              (note                                     (note 
                                                 5)                                        5) 
                                  $m             $m              $m         $m             $m              $m 
 Current tax: 
  UK corporation tax 
     Domestic tax                 16             32              48          1              -               1 
     Foreign tax                  73            (3)              70         36            (9)              27 
 Deferred tax (note 
  14) 
     Current year                  2          (125)             123         39           (43)             (4) 
     Adjustment to prior 
      year                         9              -               9        (3)           (13)            (16) 
                           ---------  -------------  --------------  ---------  -------------  -------------- 
                                 100           (96)               4         73           (65)               8 
                           ---------  -------------  --------------  ---------  -------------  -------------- 
 

UK corporation tax is calculated at 19.0% (2018: 19.0%) of the estimated assessable profit made in the UK for the year .

The Group incurred a tax expense of $4 million (2018: $8 million). The effective tax charge rate is 0.8% (2018: 2.7%). The reported effective tax rate is lower than the statutory rate mainly due to the utilisation and recognition of previously unrecognised deferred tax assets and the benefit of higher estimated future tax amortisation following the internal reorganisation of intangible assets during the year.

Taxation for all jurisdictions is calculated at the rates prevailing in the respective jurisdiction.

The charge for the year can be reconciled to profit before tax per the consolidated income statement as follows:

 
                                                                                                2019    2018 
                                                                                                  $m      $m 
                                                                                              ------  ------ 
 Profit before tax                                                                               491     293 
 Tax at the UK corporation tax rate of 19.0% (2018: 19.0%)                                        93      56 
 Profits taxed at different rates                                                                  3      14 
 Permanent differences 
 - Non-taxable income                                                                            (1)    (14) 
 - Non-deductible expenditure                                                                      3       2 
 - Adjustment on intercompany inventory                                                            1       1 
 -Other permanent differences                                                                      2       - 
 State and local taxes                                                                             7       4 
 Temporary differences 
 - Tax losses and other deductible temporary differences for which no benefit is recognised        2       5 
 - Prior year favourable US tax ruling                                                             -    (13) 
 - Exceptional tax benefit associated with previously unrecognised tax losses (note 5)          (49)    (43) 
 - Exceptional tax benefit associated with the internal reorganisation of intangible assets     (48)       - 
  (note 5) 
 Change in provision for uncertain tax positions                                                (14)     (2) 
 Unremitted earnings                                                                             (4)       4 
 Prior year adjustments                                                                            9     (6) 
                                                                                              ------  ------ 
 Tax expense for the year                                                                          4       8 
                                                                                              ------  ------ 
 

Profits taxed at different tax rates relates to profits arising in overseas jurisdictions where the tax rate differs from the UK statutory rate.

Permanent differences relate to items which are non-taxable or for which no tax relief is ever likely to be due. The major items are expenses and income disallowed where they are covered by statutory exemptions, foreign exchange differences in some territories and statutory reliefs such as R&D and manufacturing tax credits.

Tax losses and other deductible temporary differences for which no benefit is recognised for which no benefit is recognised includes items for which it is not possible to book deferred tax and comprise mainly unrecognised tax losses.

The exceptional tax benefit associated with previously unrecognised tax losses is a result of the internal reorganisation of intangible assets during the year.

The exceptional tax benefit associated with the internal reorganisation of intangible assets is mainly due to a higher amortisable base resulting in a higher estimated future tax deduction.

The change in provision for uncertain tax positions relates to the provisions the Group holds in the event of a revenue authority successfully taking an adverse view of the positions adopted by the Group in 2019 and primarily relates to a transfer pricing adjustment.

Prior year adjustments include differences between the tax liability recorded in the tax returns submitted for previous years and estimated tax provision reported in a prior period's consolidated financial statements. This category also includes adjustments (favorable or adverse) in respect of uncertain tax positions following agreement of the tax returns with the relevant tax authorities.

Publication of tax strategy

In line with the UK requirement for large UK businesses to publish their tax strategy, Hikma's tax strategy has been made available on the Group's website.

7. Dividends

 
                                                     2019    2018 
                                                     Paid    Paid 
                                                       in      in 
                                                       $m      $m 
                                                   ------  ------ 
 
 Amounts recognised as distributions to equity 
  holders in the year: 
 Final dividend for the year ended 31 December 
  2018 of 26.0 cents (31 December 2017: 23.0 
  cents) per share                                    63     55 
 Interim dividend for the year ended 31 December 
  2019 of 14.0 cents (31 December 2018: 12.0 
  cents) per share                                    34     29 
                                                   ------  ------ 
                                                     97      84 
                                                   ------  ------ 
 

The proposed final dividend for the year ended 31 December 2019 is 30 cents (2018: 26.0 cents).

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 30 April 2020 and has not been included as a liability in these consolidated financial statements. Based on the number of shares in issue at 31 December 2019 (242,319,174), the unrecognised liability is $73 million.

8. Earnings per share (EPS)

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of the ordinary outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all dilutive potential ordinary shares into ordinary shares. The number of ordinary shares used for the basic and diluted calculations is shown in the table below. Core basic earnings per share and Core diluted earnings per share are intended to highlight the Core results of the Group before exceptional items and other adjustments.

 
                                 2019           2019        2019       2018           2018        2018 
                                 Core    Exceptional    Reported       Core    Exceptional    Reported 
                              results          items     results    results          items     results 
                                           and other                             and other 
                                         adjustments                           adjustments 
                                               (note                                 (note 
                                                  5)                                    5) 
                                   $m             $m          $m         $m             $m          $m 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 Earnings for the 
  purposes of basic 
  and diluted EPS being 
  net profit attributable 
  to equity holders 
  of the parent                   364            122         486        332           (50)         282 
                            ---------  -------------  ----------  ---------  -------------  ---------- 
 
 
                                                                                 2019     2018 
                                                                               Number   Number 
 Number of shares                                                                  'm       'm 
                                                                              -------  ------- 
 Weighted average number of Ordinary Shares for the purposes of basic EPS         242      241 
 Effect of dilutive potential Ordinary Shares: 
 Share-based awards                                                                 1        1 
                                                                              -------  ------- 
 Weighted average number of Ordinary Shares for the purposes of diluted EPS       243      242 
                                                                              -------  ------- 
 
 
             2019        2019    2018        2018 
             Core    Reported    Core    Reported 
              EPS         EPS     EPS         EPS 
            Cents       Cents   Cents       Cents 
           ------  ----------  ------  ---------- 
 Basic      150.4       200.8   137.8       117.0 
           ------  ----------  ------  ---------- 
 Diluted    149.8       200.0   137.2       116.5 
           ------  ----------  ------  ---------- 
 

9. Goodwill and other intangible assets

The changes in the carrying value of goodwill and other intangible assets for the years ended 31 December 2019 and 31 December 2018 are as follows:

 
                                 Goodwill   Product-related   Software          Other     Total 
                                                intangibles                identified 
                                                                          intangibles 
                                       $m                $m         $m             $m        $m 
                                ---------  ----------------  ---------  -------------  -------- 
  Cost 
  Balance at 1 January 2018           690             1,015        118            111     1,934 
  Additions                             -                 -         12             21        33 
  Acquisition of subsidiaries           -                 1          -              -         1 
  Translation adjustments             (3)               (1)          -            (2)       (6) 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Balance at 1 January 2019           687             1,015        130            130     1,962 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Additions                             -                17         18             54        89 
  Translation adjustments               3                 1        (1)              -         3 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Balance at 31 December 2019         690             1,033        147            184     2,054 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
 
   Amortisation 
  Balance at 1 January 2018         (408)             (633)       (51)           (57)   (1,149) 
  Charge for the year                   -              (22)       (10)            (8)      (40) 
  Impairment charge                     -               (4)        (5)              -       (9) 
  Translation adjustments               -                 1          -              1         2 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Balance at 1 January 2019         (408)             (658)       (66)           (64)   (1,196) 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Charge for the year                   -              (21)       (10)           (13)      (44) 
 Impairment reversal                    -                21          -              -        21 
  Impairment charge                     -               (2)        (1)              -       (3) 
  Translation adjustments               -                 -          2              -         2 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Balance at 31 December 2019       (408)             (660)       (75)           (77)   (1,220) 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  Carrying amount 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  At 31 December 2019                 282               373         72            107       834 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
  At 31 December 2018                 279               357         64             66       766 
------------------------------  ---------  ----------------  ---------  -------------  -------- 
 
 

In 2019, the Group recorded a total intangible impairment reversal of $21 million related to specific product related assets in the Generics segment.

In 2018, the Group recorded a total intangible impairment charge of $9 million, of which $5 million related to software and $4 million to product related intangibles. $7 million of the impairment charge is included within other operating expenses.

Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

 
                  As at 31 December 
                -------------------- 
                     2019       2018 
                       $m         $m 
                ---------  --------- 
 Branded              168        166 
 Injectables          114        113 
                ---------  --------- 
 Total                282        279 
                ---------  --------- 
 

In accordance with the Group policy, goodwill is tested annually for impairment during the fourth quarter or more frequently if there are indications that goodwill may be impaired.

Details related to the discounted cash flow models used in the impairment tests of the CGUs are as follows:

 
 Valuation basis                Value in use 
-----------------------------  ------------------------------  -----------------------------  ------------------------ 
 Key assumptions                Sales growth rates 
                                Profit margins 
                                Terminal growth rate 
                                Discount rate 
-----------------------------  ------------------------------  -----------------------------  ------------------------ 
 Determination of assumptions   Growth rates are internal forecasts based on both internal and external market 
                                information 
                                Margins reflect past experience, adjusted for expected 
                                changes 
                                Terminal growth rates based on management's estimate of future long-term average 
                                growth rates 
                                Discount rates based on Group WACC, adjusted where 
                                appropriate 
                                Taxation rate based on appropriate rates for each region 
-----------------------------  -------------------------------------------------------------  ------------------------ 
 Period of specific projected   5 years 
 cash flows 
-----------------------------  ------------------------------  -----------------------------  ------------------------ 
 Terminal growth rate and                                               Terminal growth rate     Pre-tax discount rate 
 discount rate                                                                  (perpetuity) 
                               ------------------------------  -----------------------------  ------------------------ 
  Branded                                                                               2.8%                     18.0% 
  Injectables                                                                           1.9%                     13.0% 
  Generics                                                                              1.6%                     15.0% 
  generic Advair Diskus(R)                                                              -(1)                     17.7% 
 ------------------------------------------------------------  -----------------------------  ------------------------ 
 

(1)generic Advair Diskus (R) has a useful life of 12 years.

CGUs: The Group performed its annual goodwill and CGU impairment test on a quantitative basis of the Branded, Injectables and Generics CGUs. The Group conducted a sensitivity analysis on the impairment of each CGU's carrying value. Although the Directors have concluded sufficient headroom(2) exists for all of the CGUs, there is a possibility that changes to the key assumptions could result in impairment. The Group has performed sensitivity analysis on the key assumptions affecting the valuation of the Branded, Injectables and Generics CGUs and has determined that sufficient headroom still exists. Specifically, an evaluation of the CGU was made assuming an increase of 2% in the discount rate, or a 10% decline in the projected cash flows, or a 5% decline in the projected cash flows in the terminal year, or a 2% decline in the terminal growth rate and in all cases sufficient headroom exists.

The Group evaluated generic Advair Diskus(R) as separate CGU mainly due to it distinct assets and liabilities and its capabilities to generate independent cash flows. The key reason to the separate generic Advair Diskus(R) from Generics CGU is the strategic focus on developing specialised inhalation products.

As of 31 December 2019, the Group performed sensitivity analyses over the valuation of the generic Advair Diskus(R) CGU. Specifically, an evaluation of the generic Advair Diskus(R) CGU was made assuming a delay in launch of 1 year and additional market entrant. In both cases sufficient headroom still exists. Furthermore, in the event of not receiving an FDA approval, the overall impact will be an approximate $76 million credit to the consolidated income statement as a result of writing down the carrying value of the CGU of $98 million and releasing related contingent consideration liability of $174 million.

Whilst there is some uncertainty regarding the short-term impact of the political events in MENA, the Group does not consider such events to have any significant impact on Branded CGU headroom.

(2) Headroom is defined as the excess of the value in use, compared to the carrying value of a CGU .

Product-related intangibles

   -     IPR&D 

During the last quarter, the Group performed its annual review of In-Process Research and Development assets (IPR&D). The result of this testing was an impairment charge of $2 million.

   -     Product Rights 

Whenever impairment indicators are identified for definite life intangible assets, Hikma reconsiders the asset's estimated life, calculates the value of the individual assets or asset group's cash flows and compares such value against the individual asset's or asset group's carrying amount. If the carrying amount is greater, Hikma records an impairment loss for the excess of book value over valuation based on the discounted cash flows by applying an appropriate pre-tax WACC rate that reflects the risk factors associated with the cash flow streams and the segment which these products pertain to. The more significant estimates and assumptions inherent in the estimate of the value in use of identifiable intangible assets include all assumptions associated with forecasting product profitability. As at 31 December 2019, the result of this testing was a reversal of impairment charge of $21 million related to specific product related assets (Generics segment) due to improved performance and forecast profitability.

In addition, on August 9, 2019, Hikma signed an asset purchase agreement with Insys Therapeutics for the purchase of two products under development and related tangible assets. The overall cash consideration amounted to $17 million, of which $16 million was attributable to in-process research and development.

Software

Software intangibles mainly represent the Enterprise Resource Planning solutions that are being implemented in different operations across the Group in addition to other software applications. The software has an average estimated useful life that varies from three to ten years.

In 2019, the Group recorded an impairment charge of $1 million related to software.

Other identified intangibles

- Customer relationships

Customer relationships represent the value attributed to existing direct customers that the Group acquired on the acquisition of subsidiaries. The customer relationships have an average estimated useful life of 15 years.

- Trade names

Trade names were mainly recognised on the acquisition of Hikma Germany GmbH (Germany) and Promopharm with estimated useful lives of ten years.

- Marketing rights

Marketing rights are amortised over their useful lives commencing in the year in which the rights are ready for use with estimated useful lives varying from two to ten years.

As at 31 December 2019, the Group had entered into contractual commitments for the acquisition of intangible assets of $5 million (2018: $4 million).

10. Leases

IFRS 16 'Leases' was implemented by the Group from 1 January 2019. It replaces IAS 17 'Leases' and requires lease liabilities and right of use assets to be recognised on the consolidated balance sheet for all leases except for short-term leases and leases of low-value assets. The right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised in addition to the assets previously recognised under finance lease. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application in addition to the liabilities previously recognised for assets under finance leases. The Group did not change the initial carrying amounts of previous finance leases (i.e. the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under IAS 17).

The nature and effect of the changes as a result of adoption of IFRS 16 accounting standards is described below.

The effect of the adoption of IFRS 16 as at 1 January 2019 (increase/(decrease)) is as follows:

 
                                          1 January 
                                               2019 
                                                 $m 
 Assets 
 Right-of-use assets                             55 
 Property, plant and equipment                 (10) 
-------------------------------  ------------------ 
 Total assets                                    45 
===============================  ================== 
 
 Liabilities 
 Accrued rent                                   (3) 
 Lease Liabilities                               48 
-------------------------------  ------------------ 
 Total liabilities                               45 
===============================  ================== 
 

In 2019, the impact of applying IFRS 16 on the consolidated income statement is:

- Increase in depreciation expense of $7 million.

- Increase in interest expense of $3 million.

- Decrease in rental expense of $10 million.

In 2019, the impact of applying IFRS 16 on the consolidated cash flow statement is:

- Increase in cash inflow from operating activities of $10 million.

- Increase in cash outflow from financing activities $10 million.

The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018, as follows:

 
                                                                                                $m 
 
 Operating lease commitments as at December 31 2018                                             38 
 Non-lease payments previously excluded from operating lease liabilities                         9 
-------------------------------------------------------------------------------  ----------------- 
 Total operating lease commitments as at 1 January 2019                                         47 
-------------------------------------------------------------------------------  ----------------- 
 Weighted average incremental borrowing rate as at 1 January 2019                               6% 
 Discounted operating lease commitments at 1 January 2019                                       40 
 Add: 
 Commitments relating to leases previously classified as finance leases                         24 
 Payments in optional extension periods not recognised as at 31 December 2018.                   8 
-------------------------------------------------------------------------------  ----------------- 
 Lease liabilities as at 1 January 2019                                                         72 
===============================================================================  ================= 
 

The carrying amounts of right-of-use assets recognised and the movements during the period:

 
                                   Buildings   Motor vehicles     Total 
                                          $m               $m        $m 
 As at 1 January 2019                     52                3        55 
 Additions                               (1)                5         4 
 Depreciation expense                    (7)              (2)       (9) 
------------------------  ------------------  ---------------  -------- 
 As at 31 December 2019                   44                6        50 
========================  ==================  ===============  ======== 
 

The carrying amounts of lease liabilities and the movements during the period:

 
                                        2019 
                                          $m 
 As at 1 January                          72 
 Additions                                 4 
 Accretion of interest                     4 
 Payments                               (12) 
------------------------  ------------------ 
 As at 31 December 2019                   68 
------------------------  ------------------ 
 Current                                   9 
 Non-Current                              59 
------------------------  ------------------ 
 

The maturity analysis of lease liabilities:

 
                            2019 
 Breakdown by maturity:       $m 
 Within one year               9 
 In the second year            8 
 In the third year             6 
 In the fourth year            5 
 In the fifth year            23 
 In the sixth year             3 
 Thereafter                   14 
-------------------------  ----- 
                              68 
 ========================  ===== 
 

The Group also applied the available practical expedients wherein it:

- Used a single discount rate to a portfolio of leases with reasonably similar characteristics

- Relied on its assessment of whether leases are onerous immediately before the date of initial application

- Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.

- Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

- Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

Based on the foregoing, as at 1 January 2019:

- Right-of-use assets of $55 million were recognised and presented separately in the consolidated balance sheet. This includes the lease assets recognised previously under finance leases of $10 million that were reclassified from property, plant and equipment.

- Additional lease liabilities of $48 million were recognised.

- Accrued rent including trade and other payables of $3 million related to previous operating leases were derecognised.

11. Trade and other receivables

 
                                   As at 31 D ecember 
                                 --------------------- 
                                     2019         2018 
                                       $m           $m 
-------------------------------  --------  ----------- 
 Trade receivables                    637          654 
 Prepayments                           49           57 
 VAT and sales tax recoverable         31           17 
 Employee advances                      2            3 
-------------------------------  --------  ----------- 
                                      719          731 
===============================  ========  =========== 
 

The fair value of receivables is estimated to be equal to the carrying amounts.

Trade receivables are stated net of provisions for chargebacks and doubtful debts as follows:

 
                           As at 31   Additions,   Utilisation    As at 31 
                           December          net                  December 
                               2018                                   2019 
                                 $m           $m            $m          $m 
-----------------------  ----------  -----------  ------------  ---------- 
 Chargebacks and other 
  allowances                    236        2,009       (1,965)         280 
 Doubtful debts                  56            1           (2)          55 
-----------------------  ----------  -----------  ------------  ---------- 
                                292        2,010       (1,967)         335 
-----------------------  ----------  -----------  ------------  ---------- 
 

At 31 December 2019, the provision balance relating to chargebacks was $179 million (2018: $156 million) within what management believes is a reasonable range for the provision of $170 million to $188 million. The key inputs and assumptions included in calculating this provision are estimations of 'in channel' inventory at the wholesalers (including processing lag) of 38 days (2018 37 days) and the estimated chargeback rates as informed by average historical chargeback credits adjusted for expected chargeback levels for new products and estimated future sales trends. Based on the conditions existing at the balance sheet date an increase/decrease in the estimate of in channel inventory by 1 day increases/ decreases the provision by $5 million and if overall chargeback rate of 45% increases/decreases by one percentage point the provision would increase/ decrease by $4 million.

At 31 December 2019, provision balance relating to customer rebates was $88 million (2018: $65 million) within what management believes is a reasonable range for the provision of $85 million to $91 million. The key inputs and assumptions included in calculating this provision are historical relationships of rebates and payments to revenue, past payment experience, estimate of 'in channel' inventory at the wholesalers and estimated future trends. Based on the conditions existing at the balance sheet date, a one percentage point increase/decrease in rebates rate of 9.8% would increase/decrease this provision by approximately $6 million.

12. Short-term financial debts

 
                                              As at 31 December 
                                            -------------------- 
                                                 2019       2018 
                                                   $m         $m 
------------------------------------------  ---------  --------- 
 Bank overdrafts                                    6          - 
 Import and export financing                       52         58 
 Short-term loans                                   2          7 
 Current portion of long-term loans (note 
  13)(1)                                          509          9 
------------------------------------------  ---------  --------- 
                                                  569         74 
==========================================  =========  ========= 
 

(1) As part of our long-term financing requirements, we are exploring refinancing options for our $500 million Eurobond which is due for repayment in April 2020, including alternatives in the fixed income markets. The Group may also utilise its cash and unutilised revolving credit facility of $1,000 million (refer to note 13) to repay the Eurobond.

 
                                             2019   2018 
                                                %      % 
------------------------------------------  -----  ----- 
 The weighted average interest rates paid 
  are as follows: 
 Bank overdrafts                             5.35   5.31 
 Bank loans (including the non-current 
  bank loans)                                5.82   4.48 
 Eurobond                                    4.25   4.25 
 Import and export financing (2)             6.17   5.45 
------------------------------------------  -----  ----- 
 

(2) Import and export financing represents short-term financing for the ordinary trading activities of the Group.

13.Long-term financial debts

 
                                              As at 31 December 
------------------------------------------  -------------------- 
                                                  2019      2018 
                                                    $m        $m 
------------------------------------------  ----------  -------- 
 Long-term loans                                    57        51 
 Long-term borrowings (Eurobond)                   500       497 
 Less: current portion of long-term loans 
  (note 12)                                      (509)       (9) 
------------------------------------------  ----------  -------- 
 Long-term financial loans                          48       539 
------------------------------------------  ----------  -------- 
 
 Breakdown by maturity: 
 Within one year                                   509         9 
 In the second year                                 12       509 
 In the third year                                  12         8 
 In the fourth year                                 15         8 
 In the fifth year                                   6         9 
 In the sixth year                                   2         5 
 Thereafter                                          1         - 
------------------------------------------  ----------  -------- 
                                                   557       548 
------------------------------------------  ----------  -------- 
 Breakdown by currency: 
 US Dollar                                         508       514 
 Euro                                               16        17 
 Jordanian Dinar                                    12         - 
 Algerian Dinar                                     20        16 
 Tunisian Dinar                                      1         1 
------------------------------------------  ----------  -------- 
                                                   557       548 
------------------------------------------  ----------  -------- 
 

The loans are held at amortised cost.

Long-term loans amounting to $1 million (31 December 2018: $1 million) are secured on certain property, plant and equipment.

Major arrangements entered into by the Group:

a) A $500 million (carrying value of $500 million, and fair value of $501 million) 4.25% Eurobond which is due for repayment in April 2020 with the rating of (BB+/Ba1). The proceeds were used to refinance existing debt and to finance part of the cash consideration of the Columbus business acquisition.

b) A syndicated revolving credit facility of $1,175 million was entered into on the 27 of October 2015. $1,000 million of this facility matures on 24 December 2021 and the remaining $175 million matured 24 December 2019. The facility has an outstanding balance of $nil (2018: $nil) and a $1,000 million unused available limit (2018: $1,175million). The facility can be used for general corporate purposes.

c) A ten-year $150 million loan from the International Finance Corporation was entered into on 21 December 2017. There was no utilisation of the loan as at 31 December 2019. Quarterly equal repayments of the long-term loan will commence on 15 March 2021. The loan will be used in MENA and in other World Bank countries of operation for its general corporate purposes. The facility matures on 15 December 2027.

14. Deferred tax

Certain deferred tax assets and liabilities have been appropriately offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

 
                              As at 31 December 
                            -------------------- 
                                2019        2018 
                                  $m          $m 
--------------------------  --------  ---------- 
 Deferred tax liabilities       (20)        (16) 
 Deferred tax assets             243         125 
                                 223         109 
==========================  ========  ========== 
 

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting years.

 
                        Tax   Deferred   Other short-term   Amortisable     Fixed   Share-based   Total 
                     Losses        R&D          temporary        assets    assets      payments 
                                 costs     differences(1) 
                         $m                            $m            $m        $m            $m      $m 
-----------------  --------  ---------  -----------------  ------------  --------  ------------  ------ 
 At 1 January 
  2018                    3          1                133          (16)      (33)             -      88 
 Credit/(charge) 
  to income               -          -               (16)             5        31             1      21 
 At 31 December 
  2018 and 1 
  January 2019            3          1                117          (11)       (2)             1     109 
-----------------  --------  ---------  -----------------  ------------  --------  ------------  ------ 
 Credit/(charge) 
  to income               -         -1                 -3           126       (8)             -     114 
-----------------  --------  ---------  -----------------  ------------  --------  ------------  ------ 
 At 31 December 
  2019                    3          -                114           115      (10)             1     223 
-----------------  --------  ---------  -----------------  ------------  --------  ------------  ------ 
 

(1) The other deferred taxes on short-term temporary differences primarily relate to charge backs and product returns in the US of $51 million (2018: $49 million), inventory related provisions in the US of $18 million (2018: $14 million) and the unrealised intercompany profits of $17 million (2018: $15 million).

No deferred tax asset has been recognised on temporary differences totalling $170 million (2018: $536 million) mainly due to the unpredictability of the related future profit streams. $161 million (2018: $527 million) of these temporary differences relate to losses on which no deferred tax is recognised. None of these losses are expected to expire. In 2019, $92 million of losses can no longer be carried forward under domestic UK tax rules.

A deferred tax liability has been recognised on temporary differences relating to the unremitted earnings of overseas subsidiaries of $3 million (2018: $8 million). No deferred tax liability has been recognised on the remaining unremitted earnings of $236 million (2018: $187 million), as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future.

Deferred taxes on amortisable assets relate to differences between the tax deductions and book deductions for intangible assets in the Group. The credit to income in 2019 mainly arose as a result of the internal reorganisation of intangible assets which generated a higher amortisable base and therefore resulting in a higher estimated future tax deduction.

15. Net cash generated from operating activities

 
                                                                     2019   2018 
                                                                       $m     $m 
 
 
Profit before tax                                                     491    293 
      Adjustments for: 
      Depreciation, amortisation, impairment, and write-down of: 
         Property, plant and equipment                                 64     72 
         Intangible assets                                             26     49 
        Right of Use of Assets                                          9      - 
(Gain)/loss from investment at fair value through profit or loss      (2)      1 
Loss from investment divestiture                                        4      - 
Gain on disposal of property, plant and equipment                       3      3 
Movement on provisions                                                  -    (3) 
Cost of equity-settled employee share scheme                           24     21 
Finance income                                                       (66)    (3) 
Interest and bank charges                                              67     80 
Foreign exchange loss                                                   4      5 
------------------------------------------------------------------  -----  ----- 
Cash flow before working capital                                      624    518 
------------------------------------------------------------------  -----  ----- 
Change in trade and other receivables                                  21   (41) 
Change in other current assets                                        (2)    (5) 
Change in inventories                                                (25)   (51) 
Change in trade and other payables                                    (6)     88 
Change in other current liabilities                                    50      7 
Change in other non-current liabilities                              (82)   (23) 
------------------------------------------------------------------  -----  ----- 
Cash generated from operations                                        580    493 
------------------------------------------------------------------  -----  ----- 
 

16. Business combinations

Acquisition and selling of Medlac Pharma

On 2 January 2019, the Group acquired 100% of the share capital of Medlac Pharma Italy Co Ltd (Medlac), an injectable manufacturing company in Vietnam. As part of the consideration the Group paid an initial upfront payment of $8 million and incurred $1 million acquisition cost. On 29 April 2019, the Group sold Medlac back to the original seller for a consideration of $5 million, resulting in a total loss of $4 million (note 5).

17. Contingent liabilities

A contingent liability existed at the balance sheet date in respect of external guarantees and letters of credit totalling $40 million (31 December 2018: $44 million) arising in the normal course of business. No provision for these liabilities has been made in these consolidated financial statements.

The Group is involved in a number of legal proceedings in the ordinary course of its business. It is the Group's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. Management does not believe sufficient evidence exists at this point to make any provision with respect to the following matters.

In 2018, the Group received a civil investigative demand from the US Department of Justice requesting information related to products, pricing and related communications. In 2017, the Group received a subpoena from a US state attorney general and a subpoena from the US Department of Justice. Hikma denies having engaged in any conduct that would give rise to liability with respect to these demands but is cooperating with all such demands.

Starting in 2016, several complaints have been filed in the United States on behalf of putative classes of direct and indirect purchasers of generic drug products, as well as several individual direct purchaser opt-out plaintiffs (including two product). These complaints, which allege that the defendants engaged in conspiracies to fix, increase, maintain and/or stabilise the prices of the generic drug products named, have been brought against Hikma and various other defendants. The plaintiffs generally seek damages and injunctive relief under federal antitrust law and damages under various states laws. Hikma denies having engaged in conduct that would give rise to liability with respect to these civil suits and is vigorously pursuing defense of these cases.

Numerous complaints have been filed with respect to Hikma's sales and distribution of opioid products. Those complaints now total approximately 637 in number. These lawsuits have been filed against distributors, branded pharmaceuticals manufacturers, pharmacies, hospitals, generic pharmaceuticals manufacturers, individuals, and other defendants by a number of cities, counties, states, other governmental agencies and private plaintiffs in both state and federal courts. Most of the federal cases have been consolidated into a multidistrict litigation in the Northern District of Ohio. These cases assert in general that the defendants allegedly engaged in improper marketing and distribution of opioids and that defendants failed to develop and implement systems sufficient to identify suspicious orders of opioid products and prevent the abuse and diversion of such products. Plaintiffs seek a variety of remedies, including restitution, civil penalties, disgorgement of profits, treble damages, attorneys' fees and injunctive relief. Hikma denies having engaged in conduct that would give rise to liability with respect to these civil suits and is vigorously pursuing defense of these cases.

A contingent liability existed at the balance sheet date in respect to a standby letter of credit totalling $9 million (2018: $9 million) for potential stamp duty obligation that may arise for repayment of a loan by intercompany guarantors. It's not probable that the repayment will be made by the intercompany guarantors.

On April 25, the European Commission released its decision that certain tax exemptions offered by the UK authorities could constitute State Aid and where this is the case, the relevant tax will need to be paid to the UK tax authorities. The UK Government has subsequently appealed against this decision. In common with other UK headquartered international companies whose arrangements were in line with current UK CFC legislation, Hikma may be affected by the outcome of this decision and has estimated the maximum potential liability to be approximately $3 million. Hikma is reviewing the details of the decision and assessing any impact upon the Company's tax position. HMRC are expected to write to the Company shortly stating their position. Based on management's understanding of legislation and professional advice taken on the matter, management does not believe that a provision is warranted.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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