Hikma shares were tumbling on Thursday morning after the pharmaceuticals company reported flat group revenue in its first half, at $1.21bn, as it slashed its guidance on its lagging generics business.
The FTSE 100 firm said a “strong performance” in injectables and its branded operations offset the impact of weaker pricing in generics in the six months ended 30 June.
Reported operating profit slid 27% to $239m, primarily reflecting a high comparative in the first half of 2021 due to an impairment reversal, and reported basic earnings per share were 29% weaker at 76.2 cents.
Its core underlying operating profit was down 4% to $296m, with the board putting that weakness down to lower profit in generics. Reported operating profit down 27%,
Hikma said it maintained “comfortable” leverage, with net debt-to-EBITDA of 1.7x as at 30 June, up from 0.6x at the end of December.
That was after the acquisitions of Custopharm and the Canadian assets of Teligent, and a buyback of $300m worth of shares during the period.
The company declared an interim dividend of 19 cents per share.
Looking ahead, Hikma said that given “persistent challenges” in the US generics market, it now expected revenue in that division to be in the range of $650m to $675m for the full year, down from $710m to $750m, and its core underlying operating margin to be between 15% and 16%, down from around 20%.
In its branded operations, it said it now expected revenue to grow in the low-single digits on a reported basis.
On a constant currency basis, it said it expected branded revenue to grow in the mid-single digits, while it anticipated core operating profit to be “more evenly split” across the year.
In injectables, the company said it continued to expect revenue growth to be in the mid-to-high single digits, and core operating margin to be between 36% and 37%.
“Hikma’s resilient first half performance is a testament to the strength of our core underlying business, supported by the breadth and depth of our portfolio and capabilities,” said executive chairman and chief executive officer Said Darwazah.
“Double digit profit growth in our Injectables and Branded businesses has helped to offset a decline in Generics caused by industry-wide competitive pressures.”
Darwazah said the company’s “increasingly differentiated” portfolio, “market leading” positions, “unique” manufacturing footprint and its customer relationships formed a “strong foundation” for further progress.
“We expect to maintain good momentum in branded and injectables and for generics to return to growth in 2023.”
At 0958 BST, shares in Hikma Pharmaceuticals were down 8.83% at 1,606.5p.
Reporting by Josh White at Sharecast.com.
