Shire Pharmaceuticals Group plc |  |
New strategic plan builds platform for Shire’s future
Strong 2003 performance – positive outlook for 2004
Basingstoke, UK – 11 March 2004 – Shire Pharmaceuticals Group plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the twelve months ended 31 December 2003.
Full Year 2003 Unaudited US GAAP Results Highlights| 2003 $M | 2002 $M | % Growth | |||
Total revenues | 1,237.1 | 1,037.3 | +19% | ||
Operating income | 394.6 | 327.0 | +21% | ||
Income from continuing operations before | 384.5 | 329.1 | +17% | ||
Net income | 276.1 | 250.6 | +10% | ||
Diluted Earnings Per Share (EPS): | |||||
Per ordinary share | 54.2c | 49.0c | +11% | ||
Per American Depository Share (ADS) | 162.6c | 147.1c | +11% | ||
| (1) Average exchange rates for 2003 and 2002 were $1.64: £1.00 and $1.50: £1.00 respectively. | |||||
Matthew Emmens, Chief Executive Officer, said:
“Shire had another excellent year in 2003. The ADDERALL® brand maintained its leading position in the ADHD market despite significant competitive challenges. This outstanding performance says much about the attributes of ADDERALL XR®, but more about our sales team and the potential of our business model. We have confidence in our ability to be the leader in meeting the demands of the specialist physician and the prospect of expanding our reach to new therapeutic areas.
“Looking ahead, we expect further pipeline news in 2004 including updates on the approval of FOSRENOL® and ADDERALL XR for the adult indication. We have filed a New Drug Application (NDA) for BIPOTROL®, a novel carbamazepine formulation for bipolar disorder, and a supplemental New Drug Application (sNDA) for PENTASA® 500 mg, for the treatment of ulcerative colitis, with the Food and Drug Administration (FDA). Currently Shire has six projects in registration and the potential for 11 product launches by 2007. We also continue to be in active discussions regarding the acquisition of new products.
“I am extremely confident in our strategy, our business model and prospects for the future. We continue to target on average mid-teens earnings growth and aim to maintain consistent margins beyond 2004.”
Full Year 2003 and Recent Events Highlights
- 2003 revenues of $1,237.1 million were up 19% compared with 2002, driven by excellent ADDERALL XR sales.
- Diluted earnings per ADS of 162.6c include closure costs of $13.3 million, associated with the closure of our Lead Optimisation business in Canada and a $10.7 million write-down to fair value of properties now classified as assets held for sale.
- ADDERALL XR sales of $474.5 million, up 49% on 2002; ADDERALL XR outperformed the market with prescription demand up 49% compared with 2002; the ADDERALL franchise is the leading ADHD brand in the US with 25%1market share in December 2003.
- Royalties up 16% on 2002, to $203.6 million; 3TC™ royalties up 9% to $144.6 million, ZEFFIX™ up 17% to $24.7 million and other royalties (mainly REMINYL™) up 63% to $34.3 million.
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- FOSRENOL, approvable letter responses delivered to the FDA in the US.
- FOSRENOL, labelling discussions initiated with EU Reference Member State.
- BIPOTROL, a carbamazepine treatment for bipolar disorder, filed with the FDA in February 2004.
- PENTASA 500mg, for the treatment of ulcerative colitis, filed with the FDA in March 2004.
- SPD503, positive data from first Phase III paediatric study.
- ADDERALL XR approval received in Canada in February 2004.
- Introduction of dividend policy in 2004.
New Non Executive Director and Audit Committee Chairman
Shire has announced the appointment of David Kappler as Non Executive Director, who will join the Shire Board in April and will take over the Chairmanship of the Audit Committee in June 2004. Mr Kappler is Chief Financial Officer of Cadbury Schweppes plc, the FTSE and NYSE listed global confectionery and beverages group, where he has held a range of senior finance positions during his almost 40 year career with the Group.
Review and update on new strategy
In the summer, following a thorough internal review, we announced a new strategy. We are simplifying Shire - we will search, develop and market but will not invent. Shire will seek to acquire products with substantive patent protection rather than just three years’ Hatch-Waxman exclusivity. We will focus our in-licensing and M&A efforts on the US market, and obtain European rights whenever possible.
Shire has refocused its R&D efforts and technology to concentrate on late stage projects where we will have commercial presence and is creating the flexibility to add new therapeutic areas based on product acquisition opportunities. The strategic review thoroughly evaluated the Group’s pipeline and refocused resources on four projects, which are currently in Phase II and III of development. This approach aims to deliver the combined benefit of increased returns and lower risks.
The implementation of these actions has resulted in:
- The exit from early stage therapeutic research, which we completed in the third Quarter 2003;
- The planned exit from the vaccines business, which we are targeting to achieve around mid-year 2004.
These changes have implications for both the Group’s organizational structure and operating sites. We have a new global management structure aimed at close interaction between development, marketing and sales, and new people in key positions reporting directly to the Chief Executive Officer. In addition, we have advanced our plans to reduce the number of North American sites from 14 to four, including the opening of a new US headquarters office on the East Coast. Pennsylvania is currently being considered in this regard. We will close our sites in Newport, Kentucky and Rockville, Maryland. Shire’s world headquarters will continue to be located in Basingstoke, UK.
The cost of the planned reorganization in 2004 is estimated at approximately $55 million (23 cents per ADS), split between retaining and relocating key staff to the new US headquarters, and site closure costs and other relocation expenses. The majority of these costs will be charged under US GAAP as part of operating expenses. It is anticipated that these changes will improve both the efficiency of operation and the cost structure of the Group going forward.
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Outlook
For 2004, Shire expects revenue growth to be in the high single digit range, despite the loss of exclusivity on PROAMATINE in Q3 2003 and the anticipated loss of exclusivity on AGRYLIN in the US in Q4 2004.
We remain committed to our stated aim of achieving earnings growth, on average, in the mid-teens range and maintaining consistent operating margins beyond 2004.
Earnings for 2004 will be affected by the restructuring costs of the planned re-organisation, detailed above, and the outcome of the planned exit of the vaccines business.
Dividend
Reflecting the Company’s stage of development and cash generative profile, the Board intends to declare the payment of the Company’s first interim dividend of 1 pence per share for the six months ending June 2004, with a view to growing the dividend progressively.
- Ends -
For further information please contact:
| Cléa Rosenfeld – Global Investor Relations | +44 1256 894 160 |
| Jessica Mann – Global Media | +44 1256 894 160 |
| Notes to editors |
Shire Pharmaceuticals Group plc
Shire Pharmaceuticals Group plc (Shire) is a global specialty pharmaceutical company with a strategic focus on meeting the needs of the specialist physician and currently focuses on developing projects and marketing products in the areas of central nervous system (CNS), gastrointestinal (GI), and renal diseases. Shire has operations in the world’s key pharmaceutical markets (US, Canada, UK, France, Italy, Spain and Germany) as well as a specialist drug delivery unit in the US.
For further information on Shire, please visit the Company’s website:www.shire.com
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THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialise, Shire’s results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with the inherent uncertainty of pharmaceutical research, product development, manufacturing and commercialisation, the impact of competitive products, including, but not limited to, the impact on Shire’s Attention Deficit Hyperactivity Disorder (ADHD) franchise, patents, including but not limited to, legal challenges relating to Shire’s ADHD franchise, government regulation and approval, including but not limited to the expected product approval dates of lanthanum carbonate (FOSRENOL®), METHYPATCH®, XAGRID® and the adult indication for ADDERALL XR®, the implementation of the planned reorganisation and other risks and uncertainties detailed from time to time in Shire’s filings with the Securities and Exchange Commission.
The following are trademarks of Shire or companies within the Shire Group, which are the subject of trade mark registrations in certain territories.
| ADDERALL XR®(mixed amphetamine salts) |
| ADDERALL®(mixed amphetamine salts) |
| AGRYLIN®(anagrelide hydrochloride) |
| CALCICHEW®(calcium carbonate) |
| CARBATROL®(carbamazepine) |
| BIPOTROL®(carbamazepine) |
| FOSRENOL®(lanthanum carbonate) |
| METHYPATCH®(methylphenidate) |
| PROAMATINE®(midodrine hydrochloride) |
| TROXATYL®(troxacitabine) |
| XAGRID®(anagrelide hydrochloride) |
| The following are trade marks of third parties. |
| 3TC (trademark of GlaxoSmithKline (GSK)) |
| PENTASA (trademark of Ferring AS) |
| REMINYL (trademark of Johnson & Johnson) |
| ZEFFIX (trademark of GSK) |
| Data sources. |
| 1IMS Prescription Data – Product specific |
| 2GSK |
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OVERVIEW OF US GAAP FINANCIAL RESULTS
Introduction
Revenues for the year ended 31 December 2003 increased by 19% to $1,237.1 million (2002: $1,037.3 million), which was at the uppermost end of the Company’s guidance range.
The Company recorded net income of $276.1 million, an increase of 10% compared to the prior year (2002: $250.6 million). Diluted earnings per ordinary share were 54.2 cents, or 162.6 cents per ADS, an increase of 11% over 2002, in the middle of the range indicated in the Company’s guidance. This result was achieved after charging $13.3 million of closure costs in respect of Lead Optimisation and $10.7 million write-down to fair value of properties now classified as assets held for sale.
The business generated cash inflows from operating activities of $355.3 million.
Cash, cash equivalents and marketable securities at 31 December 2003 amounted to $1,414.2 million (31 December 2002: $1,213.8 million). After deduction of borrowings, this translates to a net cash position of $1,036.4 million (31 December 2002: $805.7 million). Where appropriate, this may be used primarily to further enhance our portfolio through product and project acquisitions.
The Company initiated a share re-purchase programme during the year, buying back 7.6 million ordinary shares at a total cost of $52.4 million. Additionally, the Company redeemed $29.8 million of its convertible debt.
Product sales
For the year ended 31 December 2003, product sales increased $170.4 million (20%) to $1,029.8 million (2002: $859.4 million) and represented 83% of total revenues.
2003 Product Highlights
| Product | Sales $M | Sales Growth % | US Rx1 Growth % | December 20031 US Market Share % |
| ADDERALL XR | 474.5 | +49% | +49% | 23% |
| ADDERALL | 61.1 | -44% | -65% | 2% |
| AGRYLIN | 132.5 | +11% | +7% | 27% |
| PENTASA | 99.3 | +14% | -1% | 17% |
| CARBATROL | 52.4 | +16% | +5% | 43% |
| PROAMATINE | 49.3 | -3% | +2% | 15% |
ADDERALL XR and ADDERALL for the treatment of attention deficit hyperactivity disorder (ADHD)
ADDERALL XR
Sales of ADDERALL XR for the year ended 31 December 2003 were $474.5 million, an increase of 49% compared to prior year (2002: $317.9 million).
US prescriptions were up 49% over the same period, due primarily to a 19% increase in the total US ADHD prescription market and successful marketing efforts.
Sales growth was in line with prescription volume growth with price increases in April and November 2003 being offset by higher sales deductions and allowances (primarily Medicaid rebate payments and sales allowances for the coupon sampling program).
ADDERALL XR retained 23% share of the total US ADHD market in December 2003, compared with 18% in December 2002.
The Company’s extended release “once daily” ADDERALL XR, is covered by two US patents. During 2003 the Company was notified that Barr Laboratories Inc. (Barr) had submitted an Abbreviated New Drug Application (ANDA) under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR prior to the expiration date of the Company’s two US patents and alleging that one patent is invalid and one is not infringed by Barr’s mixed amphetamine salt product. The Company has filed two suits against Barr seeking a ruling that Barr’s product infringes both of the Company’s US patents.
The Company was also notified in November 2003 that Impax Laboratories Inc. (Impax) has submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR, prior to the expiry of the Company’s two US patents and alleging that the
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patents are not infringed by Impax’s mixed amphetamine salt product. In December 2003 the Company filed suit against Impax seeking a ruling that Impax’s product infringes the Company’s two US patents.
ADDERALL
Sales of ADDERALL for the year ended 31 December 2003 were $61.1 million, a decrease of 44% compared to prior year (2002: $109.8 million).
US prescriptions were down 65% over the same period; this was due to the switch of patients to either ADDERALL XR or generic alternatives.
The difference between sales and prescription volume growth was due to a combination of price increases, lower sales deductions and favourable movements in customer stocking levels.
ADDERALL had a 2% share of the total US ADHD market in December 2003, compared with 5% in December 2002.
AGRYLIN for the treatment of thrombocythaemia
Worldwide sales of AGRYLIN for the year ended 31 December 2003 were $132.5 million, an increase of 11% compared to the prior year (2002: $119.2 million).
The increase was primarily driven by substantial sales growth, outside the US market, where AGRYLIN is currently available on a named patient basis.
In addition, US prescription volumes were up 7% over the same period.
AGRYLIN had a 27% share of the total US AGRYLIN, Hydrea and generic hydroxyurea prescription market in December 2003 (December 2002: 27%).
AGRYLIN remains the only product specifically approved for essential thrombocythaemia in the US. The Company is seeking a paediatric extension for AGRYLIN which would extend its orphan drug exclusivity from March 2004 to September 2004, after which time it is expected to face generic competition. The expected launch of XAGRID in the EU (the trade name of AGRYLIN used in the EU) in the second half 2004, will continue to drive volume growth in markets outside the US.
PENTASA for the treatment of ulcerative colitis
Sales of PENTASA for the year ended 31 December 2003 were $99.3 million, an increase of 14% compared to prior year (2002: $87.2 million).
US prescription volumes were down 1% over the same period.
Price increases and an increase in customer stocking levels generated year on year revenue growth.
PENTASA had a 17% share of the total US oral mesalamine/olsalazine prescription market in December 2003, compared with 18% in December 2002.
CARBATROL for the treatment of epilepsy
Sales of CARBATROL for the year ended 31 December 2003 were $52.4 million, an increase of 16% compared to prior year (2002: $45.3 million).
US prescription volumes were up 5% over the same period, due to renewed promotional efforts in 2003 and the resolution of supply constraints that impacted availability throughout 2002.
Price increases and the launch of the Company’s new 100mg strength in Q4 2003, contributed the remainder of the revenue growth between years.
CARBATROL had a 43% share of the total US extended release carbamazepine prescription market in December 2003, compared with 36% in December 2002.
In August 2003, the Company received notification that Nostrum Pharmaceuticals, Inc. (Nostrum) had submitted an application seeking permission to market its generic version of the 300mg strength of CARBATROL prior to the expiry of the Company’s US patents for CARBATROL. Shire filed a complaint against Nostrum for patent infringement under the Hatch-Waxman Act in September 2003.
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PROAMATINE for the treatment of hypotension
Sales of PROAMATINE, for the year ended 31 December 2003 were $49.3 million, a decrease of 3% compared to prior year (2002: $50.9 million).
US prescription volumes were up 2% over the same period.
Customer de-stocking subsequent to the anticipated launch of generic copies of PROAMATINE in the fourth quarter of 2003, contributed heavily to the decline in revenues between years.
PROAMATINE had a 15% share of the total US PROAMATINE and fludrocortisone acetate prescription market in December 2003, compared with 25% in December 2002.
Royalties
Royalty revenue increased 16% to $203.6 million for 2003 (2002: $174.8 million) as a result of strong sales and positive foreign exchange movements.
2003 Royalty Highlights
| Product | Royalties to Shire $M | Royalty growth % | Worldwide in-market sales by licensee in 20032 $M |
| 3TC | 144.6 | +9%* | 1,099 |
| ZEFFIX | 24.7 | + 17%** | 214 |
| Other | 34.3 | + 63% | n/a |
| *The impact of foreign exchange movements has contributed 4% to the reported growth |
| **The impact of foreign exchange movements has contributed 6% to the reported growth |
3TC
Royalties from 3TC for the year ended 31 December 2003 were $144.6 million, an increase of 9% compared to prior year (2002: $132.5 million). This was primarily due to continued growth in the nucleoside analogue market for HIV. This growth is supported by increases in the number of individuals living with HIV, as well as reduced mortality due to more effective treatment regimens.
For 3TC Shire receives royalties from GSK on worldwide sales, with the exception of Canada, where a commercialisation partnership with GSK exists. GSK’s worldwide sales of 3TC, for the year ended 31 December 2003 were $1,099 million, an increase of 12% compared to prior year (2002: $982 million).
ZEFFIX
Royalties from ZEFFIX for the year ended 31 December 2003 were $24.7 million, an increase of 17% compared to prior year (2002: $21.2 million).
For ZEFFIX Shire receives royalties from GSK on worldwide sales, with the exception of Canada, where a commercialisation partnership with GSK exists. GSK’s worldwide sales of ZEFFIX, for the year ended 31 December 2003 were $214 million, an increase of 15% compared to prior year (2002: $186 million).
Other
Other royalties are primarily in respect of REMINYL, a product marketed worldwide by Johnson & Johnson (J&J), with the exception of the United Kingdom, where a commercialisation partnership with J&J exists. Sales of REMINYL, a treatment for mild to moderately severe dementia of the Alzheimer’s type, is growing well in the Alzheimer’s market.
Cost of product sales
For the year ended 31 December 2003 cost of product sales represented 16% of product sales (2002: 16%).
Research and development
Research and development expenditure increased 14% to $215.8 million in 2003, and as a proportion of total revenues represented 17% (2002: 18%).
Shire’s strategic aim is to focus on the development of later stage and lower risk projects. As a result of this focus Shire closed its early stage therapeutic research (Lead Optimisation) unit in Canada.
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Selling, general and administrative
Selling, general and administrative (SG&A) expenses increased from $332.2 million in 2002 to $376.9 million in 2003, an increase of 13% in contrast with product sales growth of 20% for the period. SG&A expenses were 37% of product sales (2002: 39%).
Depreciation and amortisation
The depreciation and amortisation charge for the year ended 31 December 2003 was $86.7 million (2002: $55.2 million). Included within the 2003 charge are $27.5 million of intangible asset impairments and write-downs (2002: $18.8 million) and $16.7 million of tangible fixed asset write-downs (2002: $nil).
Interest income and expense
In the year ended 31 December 2003, interest income of $16.9 million was received compared with $19.5 million in 2002. The decrease is due to the reduction in interest rates more than offsetting any benefit of the increased cash balance held during the year.
Interest expense increased marginally to $9.5 million (2002: $9.3 million). The interest charged on the 2% convertible note in 2003 was $7.5 million (2002: $8.0 million).
Other expense, net
For the year ended 31 December 2003, other expense, net, totalled $17.5 million. The main components were $15.6 million related to the write-downs of non-current investments to fair value, a foreign exchange loss of $6.7 million and $3.8 million income from the management of GeneChem funds.
For the year ended 31 December 2002, other expense, net, totalled $8.3 million. The main components were a $2.3 million mark to market loss recorded on the Roberts Supplemental Executive Retirement Plan, $8.7 million in respect of write-downs of non-current investments to fair value and $3.3 million income from the two GeneChem venture capital funds.
Taxation
For the year ended 31 December 2003 income taxes increased by 22% to $107.4 million (2002: $88.4 million). The Company’s effective tax rate was 28% for the year ended 31 December 2003 (2002: 27%).
As of 31 December 2003 the Company had recorded net deferred tax assets of $63.1 million (2002: $41.1 million).
Equity in (losses)/earnings of equity method investees
The Company received $3.5 million, representing a 50% share of earnings from the antiviral commercialisation partnership with GSK in Canada (2002: $2.6 million). A loss of $4.6 million was incurred representing a 50% share of the losses in Qualia Computing Inc (2002: loss of $0.9 million).
On 31 December 2003, the Company sold its investment in Qualia Computing Inc. to iCAD Inc.
Discontinued operations
Discontinued operations are in respect of the Company’s US “Over-The-Counter” (OTC) business that was sold in December 2002. The OTC products were acquired as part of the merger with Roberts in 1999 and consisted of non-prescription laxatives and dietary supplements. Shire’s main strategic focus is on innovative prescription pharmaceuticals prescribed by specialty doctors.
Sales generated by the OTC products represented approximately 3% of the Company’s total product sales in 2002.
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R&D Focus
Substantial progress has been made in revising the Company’s R&D focus: Shire out-licensed Japanese development and commercialisation rights for both AGRYLIN and FOSRENOL to the Pharmaceutical Division of Kirin Brewery Company Ltd and to Bayer Yakuhin Ltd respectively. Out-licensing discussions continue for TROXATYL. In addition, partnering discussions are underway for SPD754 (HIV); the remaining antiviral projects SPD756 (HIV) and SPD760 (Hepatitis C) are also now available for partnering.
Central Nervous System
Finalisation of the response to the approvable letter for ADDERALL XR adult indication during Q4 2003 culminated in submission of the response to the FDA in January 2004. A 6-month review period is anticipated. Clinical work to support the paediatric exclusivity extension for ADDERALL XR also progressed in Q4 2003. A successful response to the paediatric written request would extend exclusivity to April 2005.
Support to Noven to define and conduct an enhanced clinical programme for METHYPATCH continued in Q4 2003.
Substantial activity on SPD417 in Q4 2003 culminated in a NDA filing in February 2004. This product, now to be known as BIPOTROL, will be the first carbamazepine-based product for bipolar disorder in the US and utilises a unique dose titration and presentation. Under a NDA the product would be entitled to 3-years Hatch-Waxman exclusivity and the product also has formulation patent protection through 2016.
Key data are now available from the first Phase III paediatric study in ADHD with SPD503. This 8-week study demonstrated highly statistically significant differences from placebo in ADHD-RS, Conners Parent and Teacher Rating Scales and Clinicians Global Impression.
SPD473, Shire’s other non-scheduled, non-stimulant ADHD project, progressed to Phase II with the initiation of a proof-of-concept study in August 2003.
Gastro Intestinal
Support for the PENTASA brand made progress in Q4 2003 culminating in the filing of a supplemental New Drug Application (sNDA) for PENTASA 500mg in March 2004. A 6-month review period is anticipated. This high strength dose form is expected to enhance product acceptability to patients.
SPD746, the high-strength 5-ASA based product for ulcerative colitis, entered phase III at the end of September 2003.
Other Projects
Clinical work to support US paediatric exclusivity extension for AGRYLIN also progressed in Q4 2003. A successful response to the paediatric written request would extend exclusivity to September 2004. In Europe, the regulatory process for XAGRID continues with the Committee for Proprietary Medicinal Products.
Finalisation of the response to the approvable letter for FOSRENOL was a key activity in Q4 2003 and culminated in the response being filed in January 2004. A 6-month review is anticipated. In Europe, FOSRENOL has also progressed with labelling discussions held with the Reference Member State.
R&D Pipeline Update
Shire now has 6 products in Registration. These are FOSRENOL, XAGRID, METHYPATCH, ADDERALL XR Adult, BIPOTROL and PENTASA 500mg. In addition, Shire has two other projects in Phase III: SPD503 and SPD476 and two projects in Phase II: SPD473 and SPD480.
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| US GAAP Results for the year ended 31 December 2003 | ||||
| Consolidated Balance Sheets | ||||
| Unaudited | ||||
| 31 December | 31 December | |||
| 2003 | 2002 | |||
| $’000 | $’000 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | 1,103,286 | 880,973 | ||
| Restricted cash | 6,795 | 16,745 | ||
| Marketable securities | 304,129 | 316,126 | ||
| Accounts receivable, net | 215,690 | 138,397 | ||
| Inventories | 45,258 | 49,216 | ||
| Deferred tax asset | 64,532 | 34,849 | ||
| Prepaid expenses and other current assets | 48,017 | 30,790 | ||
| Total current assets | 1,787,707 | 1,467,096 | ||
| Investments | 73,153 | 71,962 | ||
| Property, plant and equipment, net | 161,225 | 135,234 | ||
| Goodwill, net | 225,860 | 203,767 | ||
| Other intangible assets, net | 307,882 | 301,084 | ||
| Deferred tax asset | - | 6,216 | ||
| Other non-current assets | 22,953 | 23,264 | ||
| Total assets | 2,578,780 | 2,208,623 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Current instalments of long-term debt | 1,054 | 888 | ||
| Accounts payable and accrued expenses | 215,494 | 184,107 | ||
| Other current liabilities | 37,127 | 16,725 | ||
| Total current liabilities from continuing operations | 253,675 | 201,720 | ||
| Current liabilities from discontinued operations | - | 12,784 | ||
| Total current liabilities | 253,675 | 214,504 | ||
| Long-term debt, excluding current instalments | 376,781 | 407,302 | ||
| Deferred tax liability | 1,400 | - | ||
| Other long-term liabilities | 23,798 | 13,651 | ||
| Total liabilities | 655,654 | 635,457 | ||
| Shareholders’ equity: | ||||
| Common stock of 5p par value; 800,000,000 shares | ||||
| authorised; and 477,894,726 (2002: 484,344,412) shares | ||||
| issued and outstanding | 39,521 | 40,051 | ||
| Exchangeable shares; 5,839,559 (2002: 5,874,112) shares | ||||
| issued and outstanding | 270,667 | 272,523 | ||
| Additional paid-in capital | 983,356 | 1,027,499 | ||
| Accumulated other comprehensive income/(loss) | 79,007 | (41,431) | ||
| Retained earnings | 550,575 | 274,524 | ||
| Total shareholders’ equity | 1,923,126 | 1,573,166 | ||
| Total liabilities and shareholders’ equity | 2,578,780 | 2,208,623 | ||
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US GAAP Results for the year ended 31 December 2003
Consolidated Statements of Operations
| Years ended 31 December | Unaudited | |||||||
| 2003 | 2002 | 2001 | ||||||
| $’000 | $’000 | $’000 | ||||||
| Total revenues | 1,237,101 | 1,037,298 | 852,956 | |||||
| Cost of revenues | (163,114) | (133,682) | (112,006) | |||||
| Gross profit | 1,073,987 | 903,616 | 740,950 | |||||
| Operating expenses | (679,373) | (576,578) | (597,842) | |||||
| Operating income | 394,614 | 327,038 | 143,108 | |||||
| Interest income | 16,856 | 19,536 | 19,667 | |||||
| Interest expense | (9,470) | (9,252) | (12,035) | |||||
| Other expense, net | (17,539) | (8,262) | (52,933) | |||||
| Total other income/(expense), net | (10,153) | 2,022 | (45,301) | |||||
| Income from continuing operations before income | ||||||||
| taxes and equity in (losses)/earnings of equity method | ||||||||
| investees | 384,461 | 329,060 | 97,807 | |||||
| Income taxes | (107,353) | (88,350) | (67,781) | |||||
| Equity in (losses)/earnings of equity method investees | (1,057) | 1,668 | 1,985 | |||||
| Income from continuing operations | 276,051 | 242,378 | 32,011 | |||||
| Income from discontinued operations (net of income | ||||||||
| tax expense of $nil, $3,588,000, and $3,963,000 | ||||||||
| respectively) | - | 6,108 | 6,748 | |||||
| Gain on disposition of discontinued operations (net of | ||||||||
| income tax expense of $1,224,000) | - | 2,083 | - | |||||
| Net income | 276,051 | 250,569 | 38,759 | |||||
| Earnings per share: | ||||||||
| Basic | ||||||||
| Continuing operations | 55.4c | 48.4c | 6.5c | |||||
| Discontinued operations | - | 1.6c | 1.4c | |||||
| Net income | 55.4c | 50.0c | 7.9c | |||||
| Diluted | ||||||||
| Continuing operations | 54.2c | 47.4c | 6.4c | |||||
| Discontinued operations | - | 1.6c | 1.3c | |||||
| Net income | 54.2c | 49.0c | 7.7c | |||||
| Weighted average number of shares: | ||||||||
| Basic | 498,212,826 | 500,687,594 | 492,594,226 | |||||
| Diluted | 518,967,395 | 522,418,246 | 504,875,587 | |||||
The results for the year ended 31 December 2001 have been restated to reflect the disposal of our OTC business that has been accounted for as a discontinued operation.
11
| US GAAP Results for the year ended 31 December 2003 | ||||||
| Consolidated Statements of Cash Flows | ||||||
| Year ended 31 December | Unaudited | |||||
| 2003 | 2002 | 2001 | ||||
| $’000 | $’000 | $’000 | ||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income from continuing operations | 276,051 | 242,378 | 32,011 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortisation | 42,474 | 36,434 | 45,809 | |||
| Increase/(decrease) in provision for doubtful | ||||||
| accounts and discounts | 3,268 | (1,139) | 3,015 | |||
| Increase/(decrease) in provision for rebates and returns | 17,089 | (2,297) | 35,526 | |||
| Stock option compensation - options | (24) | (166) | 2,278 | |||
| Stock option compensation - warrants | - | - | 4,502 | |||
| Tax benefit of stock option compensation, | ||||||
| charged directly to equity | 692 | 688 | 3,805 | |||
| Decrease/(increase) in deferred tax asset | (22,067) | (9,884) | 2,275 | |||
| Non cash exchange gains and losses | 8,558 | 12,495 | (1,017) | |||
| Equity in losses of equity method investees | 1,057 | (1,668) | (1,985) | |||
| Other elements | 1,468 | - | 1,788 | |||
| Write-down of long term investments | 15,616 | 8,732 | 61,596 | |||
| Write-down of intangible assets | 27,489 | 18,777 | 25,393 | |||
| Write-down of property, plant and equipment | 6,026 | - | - | |||
| Write-down of assets held for resale | 10,689 | - | - | |||
| (Gain)/loss on sale of property, plant and | ||||||
| equipment | (169) | 1,376 | 8,112 | |||
| Loss on sale of intangible assets | - | - | 2,052 | |||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||
| (Increase)/decrease in accounts receivable | (57,932) | 61,159 | (52,033) | |||
| Decrease/(increase) in inventory | 7,387 | (3,543) | 5,278 | |||
| (Increase)/decrease in prepayments and other | ||||||
| current assets | (13,024) | 9,801 | (29,124) | |||
| Increases of property, plant and equipment | 12,470 | - | - | |||
| held for resale | ||||||
| Decrease in other assets | 311 | 2,905 | 823 | |||
| Increase/(decrease) in accounts and | ||||||
| notes payable and other liabilities | (3,822) | (13,581) | 27,970 | |||
| Increase/(decrease) in deferred income | 19,372 | (17,409) | 17,409 | |||
| Dividend received from equity method investees | 2,289 | - | - | |||
| Net cash provided by operating activities | 355,268 | 345,058 | 195,483 | |||
12
US GAAP Results for the year ended 31 December 2003
Consolidated Statements of Cash Flows (continued)
| Year ended 31 December | Unaudited | |||||
| 2003 | 2002 | 2001 | ||||
| $’000 | $’000 | $’000 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Decrease/(increase) in short-term deposits | 11,997 | 407,653 | (367,206) | |||
| Purchase of subsidiary undertakings | - | (17,300) | - | |||
| Purchase of long-term investments | (5,643) | (5,933) | (20,351) | |||
| Purchase of intangible assets | (47,049) | (24,032) | (35,986) | |||
| Purchase of property, plant and equipment | (52,165) | (22,647) | (13,604) | |||
| Proceeds from sale of long-term investments | 1,000 | 4,108 | - | |||
| Proceeds from sale of property, plant and equipment | 1,262 | 721 | 7,081 | |||
| Proceeds from sale of intangible assets | - | - | 4,556 | |||
| Proceeds from sale of a business | - | 71,000 | - | |||
| Movements in restricted cash | 9,950 | (16,745) | - | |||
| Net cash (used in)/provided by investing activities | (80,648) | 396,825 | (425,510) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| (Redemption)/proceeds from 2% convertible loan notes | (29,775) | - | 400,000 | |||
| Payment of debt issuance costs | - | - | (9,000) | |||
| Repurchase/payments on long-term debt, capital leases and notes | (579) | (3,381) | (207,762) | |||
| Proceeds from exercise of options | 5,195 | 6,008 | 70,192 | |||
| Proceeds from issue of common stock, net | - | 1,526 | ||||
| Payment for the redemption of stock | (52,392) | - | - | |||
| Net cash (used in)/provided by financing activities | (77,551) | 2,627 | 254,956 | |||
| Effect of foreign exchange rate changes on cash and | ||||||
| cash equivalents | 25,244 | 6,964 | (1,509) | |||
| Net increase in cash and cash equivalents | 222,313 | 751,474 | 23,420 | |||
| Cash flows provided by discontinued operations | - | 11,459 | 1,354 | |||
| Net increase in cash and cash equivalents | 222,313 | 762,933 | 24,774 | |||
| Cash and cash equivalents at beginning of period | 880,973 | 118,040 | 93,266 | |||
| Cash and cash equivalents at end of period | 1,103,286 | 880,973 | 118,040 | |||
| 13 |
Selected notes to the Unaudited US GAAP Financial Statements
(1) Analysis of revenues, operating income and reportable segments
The Company has disclosed segment information for the individual operating areas of the business, based on the way in which the business is managed and controlled. The Company evaluates performance based on operating income or loss before interest and income taxes.
For 2003 our reporting has been expanded as set out below to provide more information on the Corporate and International segments. The 2002 and 2001 reportable segments have been restated on this basis.
| Year ended 31 December | US | International | Biologics | Corporate | R&D | Total | ||||||
| 2003 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||||||
| Product sales | 846,438 | 158,643 | 24,757 | - | - | 1,029,838 | ||||||
| Licensing and development | 3,376 | 301 | - | - | - | 3,677 | ||||||
| Royalties | 14 | 10,314 | - | 193,245 | - | 203,573 | ||||||
| Other | 13 | - | - | - | - | 13 | ||||||
| Total revenues | 849,841 | 169,258 | 24,757 | 193,245 | - | 1,237,101 | ||||||
| Cost of product sales | 94,597 | 53,166 | 15,351 | - | - | 163,114 | ||||||
| Research and development | - | - | - | - | 215,781 | 215,781 | ||||||
| Selling, general and | ||||||||||||
| administrative | 234,091 | 76,912 | 9,134 | 56,777 | - | 376,914 | ||||||
| Depreciation and | ||||||||||||
| amortisation | 30,965 | 24,338 | 4,571 | 26,804 | - | 86,678 | ||||||
| Total operating expenses | 359,653 | 154,416 | 29,056 | 83,581 | 215,781 | 842,487 | ||||||
| Operating income/(loss) | 490,188 | 14,842 | (4,299) | 109,664 | (215,781) | 394,614 | ||||||
| Year ended 31 December | US | International | Biologics | Corporate | R&D | Total | ||||||
| 2002 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||||||
| Product sales | 714,655 | 131,465 | 13,268 | - | - | 859,388 | ||||||
| Licensing and development | 2,661 | 403 | - | - | - | 3,064 | ||||||
| Royalties | 215 | 8,999 | - | 165,598 | - | 174,812 | ||||||
| Other revenues | - | 34 | - | - | - | 34 | ||||||
| Total revenues | 717,531 | 140,901 | 13,268 | 165,598 | - | 1,037,298 | ||||||
| Cost of product sales | 63,356 | 59,242 | 11,084 | - | - | 133,682 | ||||||
| Research and development | - | - | - | - | 189,179 | 189,179 | ||||||
| Selling, general and | ||||||||||||
| administrative | 211,032 | 68,290 | 8,480 | 44,386 | - | 332,188 | ||||||
| Depreciation and | ||||||||||||
| amortisation | 28,999 | 11,200 | 4,138 | 10,874 | - | 55,211 | ||||||
| Total operating expenses | 303,387 | 138,732 | 23,702 | 55,260 | 189,179 | 710,260 | ||||||
| Operating income/(loss) | 414,144 | 2,169 | (10,434) | 110,338 | (189,179) | 327,038 | ||||||
14
Selectednotes to the Unaudited US GAAP Financial Statements (continued)
(1) Analysis of revenues, operating income and reportable segments (continued)
| Year ended 31 December | US | International | Biologics | Corporate | R&D | Total | ||||||
| 2001 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||||||
| Product sales | 587,449 | 106,286 | 5,616 | - | - | 699,351 | ||||||
| Licensing and development | 4,507 | 991 | - | - | - | 5,498 | ||||||
| Royalties | 264 | 5,604 | - | 139,287 | - | 145,155 | ||||||
| Other revenues | - | 900 | 2,052 | - | - | 2,952 | ||||||
| Total revenues | 592,220 | 113,781 | 7,668 | 139,287 | - | 852,956 | ||||||
| Cost of product sales | 58,655 | 40,754 | 12,597 | - | - | 112,006 | ||||||
| Research and development | - | - | - | - | 171,029 | 171,029 | ||||||
| Selling, general and | ||||||||||||
| administrative | 179,115 | 41,542 | 1,203 | 37,875 | - | 259,735 | ||||||
| Depreciation and | ||||||||||||
| amortisation | 18,375 | 10,744 | 4,129 | 12,561 | - | 45,809 | ||||||
| Asset impairments and | ||||||||||||
| restructuring charges | - | - | - | 29,699 | - | 29,699 | ||||||
| Merger transaction | ||||||||||||
| expenses | - | - | - | 83,470 | - | 83,470 | ||||||
| Loss on disposition of | ||||||||||||
| assets | - | 8,100 | - | - | - | 8,100 | ||||||
| Total operating expenses | 256,145 | 101,140 | 17,929 | 163,605 | 171,029 | 709,848 | ||||||
| Operating income/(loss) | 336,075 | 12,641 | (10,261) | (24,318) | (171,029) | 143,108 | ||||||
15
Selected notes to the Unaudited US GAAP Financial Statements (continued)
(2) Earnings per share
Basic earnings per share is based upon the net income available to common stockholders divided by the weighted-average number of common shares outstanding during the year.
Diluted earnings per share is based upon net income available to common stockholders divided by the weighted-average number of common shares outstanding during the year and adjusted for the effect of all dilutive potential common shares that were outstanding during the year.
| Year ended 31 December | 2003 | 2002 | 2001 | |||
| $’000 | $’000 | $’000 | ||||
| Numerator for basic earnings per share | 276,051 | 250,569 | 38,759 | |||
| Interest charged on convertible debt, net of tax | 5,218 | 5,585 | - | |||
| Numerator for diluted earnings per share | 281,269 | 256,154 | 38,759 | |||
| Number of | Number of | Number of | ||||
| shares | shares | shares | ||||
| Weighted-average number of shares: | ||||||
| Basic | 498,212,826 | 500,687,594 | 492,594,226 | |||
| Effect of dilutive shares: | ||||||
| Stock options | 1,859,076 | 1,883,475 | 11,362,332 | |||
| Warrants | - | - | 919,029 | |||
| Convertible debt | 18,895,493 | 19,847,177 | - | |||
| Diluted | 518,967,395 | 522,418,246 | 504,875,587 | |||
| Basic earnings per share | 55.4c | 50.0c | 7.9c | |||
| Diluted earnings per share | 54.2c | 49.0c | 7.7c | |||
The computation of weighted average number of shares for diluted EPS for the year ended 31 December 2001 does not include convertible debt because, after eliminating interest charged to operations from the numerator, the inclusion would be anti-dilutive.
Warrants to purchase approximately 1.4 million common shares for the year ended 31 December 2003 (2002: 1.4 million) were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.
Stock options to purchase approximately 17.0 million common shares for the year ended 31 December 2003 (2002: 17.5 million) were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.
16
Selected notes to the Unaudited US GAAP Financial Statements (continued)
(3) Analysis of revenues
| Q1 | Q2 | Q3 | Q4 | Year | 2003 | 2003 | |||||||
| 2003 | 2003 | 2003 | 2003 | 2003 | change | % of total | |||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | % | revenues | |||||||
| Net product | |||||||||||||
| sales: | |||||||||||||
| ADDERALL XR | 115,163 | 102,429 | 121,255 | 135,609 | 474,456 | +49% | 38% | ||||||
| ADDERALL | 18,899 | 19,191 | 8,961 | 14,083 | 61,134 | -44% | 5% | ||||||
| AGRYLIN | 39,674 | 36,551 | 25,907 | 30,409 | 132,541 | +11% | 11% | ||||||
| PENTASA | 29,719 | 24,754 | 19,838 | 24,943 | 99,254 | +14% | 8% | ||||||
| CARBATROL | 9,421 | 13,915 | 11,619 | 17,440 | 52,395 | +16% | 4% | ||||||
| PROAMATINE | 13,835 | 18,301 | 8,102 | 9,052 | 49,290 | -3% | 4% | ||||||
| Calciums | 6,108 | 6,359 | 7,009 | 9,469 | 28,945 | +25% | 2% | ||||||
| Others | 23,534 | 24,950 | 35,655 | 47,684 | 131,823 | +24% | 11% | ||||||
| 256,353 | 246,450 | 238,346 | 288,689 | 1,029,838 | +20% | 83% | |||||||
| Royalty income: | |||||||||||||
| 3TC | 34,139 | 37,540 | 35,300 | 37,575 | 144,554 | +9% | 12% | ||||||
| ZEFFIX | 6,399 | 5,721 | 6,217 | 6,367 | 24,704 | + 17% | 2% | ||||||
| Others | 7,225 | 8,575 | 8,218 | 10,297 | 34,315 | + 63% | 3% | ||||||
| 47,763 | 51,836 | 49,735 | 54,239 | 203,573 | +16% | 17% | |||||||
| Licensing | 394 | 702 | 1,355 | 1,226 | 3,677 | +20% | - | ||||||
| Other | 7 | - | 6 | - | 13 | -62% | - | ||||||
| Total revenues | 304,517 | 298,988 | 289,442 | 344,154 | 1,237,101 | +19% | 100% | ||||||
| Q1 | Q2 | Q3 | Q4 | Year | 2002 | 2002 | |||||||
| 2002 | 2002 | 2002 | 2002 | 2002 | change | % of total | |||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | % | revenues | |||||||
| Net product sales: | |||||||||||||
| ADDERALL XR | 61,875 | 75,821 | 78,000 | 102,244 | 317,940 | +874% | 31% | ||||||
| ADDERALL | 46,170 | 28,321 | 18,128 | 17,163 | 109,782 | -65% | 11% | ||||||
| AGRYLIN | 23,436 | 29,435 | 28,725 | 37,611 | 119,207 | +39% | 12% | ||||||
| PENTASA | 17,547 | 21,479 | 21,619 | 26,511 | 87,156 | +15% | 8% | ||||||
| CARBATROL | 11,572 | 12,574 | 10,944 | 10,161 | 45,251 | +23% | 4% | ||||||
| PROAMATINE | 9,573 | 10,868 | 14,398 | 16,069 | 50,908 | +34% | 5% | ||||||
| Calciums | 4,699 | 5,703 | 6,126 | 6,633 | 23,161 | +11% | 2% | ||||||
| Others | 21,635 | 22,660 | 27,564 | 34,124 | 105,983 | +15% | 10% | ||||||
| 196,507 | 206,861 | 205,504 | 250,516 | 859,388 | +23% | 83% | |||||||
| Royalty income: | |||||||||||||
| 3TC | 30,636 | 30,720 | 32,501 | 38,672 | 132,529 | +10% | 13% | ||||||
| ZEFFIX | 5,293 | 4,510 | 5,547 | 5,885 | 21,235 | +25% | 2% | ||||||
| Others | 3,647 | 5,282 | 5,437 | 6,682 | 21,048 | +160% | 2% | ||||||
| 39,576 | 40,512 | 43,485 | 51,239 | 174,812 | +20% | 17% | |||||||
| Licensing | 682 | 923 | 726 | 733 | 3,064 | -44% | - | ||||||
| Other | 217 | (212) | 5 | 24 | 34 | -99% | - | ||||||
| Total revenues | 236,982 | 248,084 | 249,720 | 302,512 | 1,037,298 | +22% | 100% |
17
US GAAP Results for the 3 months ended 31 December 2003
Consolidated Statements of Operations
| 3 months ended 31 December | 2003 | |||
| $’000 | 2002 | |||
| Unaudited | $’000 | |||
| Total revenues | 344,154 | 302,512 | ||
| Cost of revenues | (47,490) | (47,173) | ||
| Gross profit | 296,664 | 255,339 | ||
| Operating expenses | (174,271) | (154,693) | ||
| Operating income | 122,393 | 100,646 | ||
| Interest income | 3,757 | 4,843 | ||
| Interest expense | (2,138) | (3,199) | ||
| Other expense, net | (9,542) | (8,693) | ||
| Total other expense, net | (7,923) | (7,049) | ||
| Income from continuing operations before income taxes and | ||||
| equity in (losses)/earnings of equity method investees | 114,470 | 93,597 | ||
| Income taxes | (32,231) | (24,316) | ||
| Equity in earnings/(losses) of equity method investees | 642 | (1,635) | ||
| Income from continuing operations | 82,881 | 67,646 | ||
| Income from discontinued operations (net of income tax | ||||
| expense of $673,000) | - | 1,146 | ||
| Gain on disposition of discontinued operations (net of income | ||||
| tax expense of $1,224,000) | - | 2,083 | ||
| Net income | 82,881 | 70,875 | ||
| Earnings per share: | ||||
| Basic | ||||
| Continuing operations | 16.7c | 13.5c | ||
| Discontinued operations | - | 0.6c | ||
| Net income | 16.7c | 14.1c | ||
| Diluted | ||||
| Continuing operations | 16.3c | 13.2c | ||
| Discontinued operations | - | 0.6c | ||
| Net income | 16.3c | 13.8c | ||
| Weighted average number of shares: | ||||
| Basic | 495,031,261 | 501,411,413 | ||
| Diluted | 516,404,663 | 522,473,225 |
18
UK GAAP Results for the year ended 31 December 2003
Consolidated Profit and Loss Account
| For the year ended 31 December | Unaudited | |||
| 2003 | 2002 | |||
| £’000 | £’000 | |||
| Turnover: group and share of joint venture | 764,662 | 697,314 | ||
| Less: share of joint venture’s turnover | (3,594) | (762) | ||
| Continuing operations | 761,068 | 696,552 | ||
| Discontinued operations | - | 15,975 | ||
| Group turnover | 761,068 | 712,527 | ||
| Cost of sales | (102,384) | (95,042) | ||
| Gross profit | 658,684 | 617,485 | ||
| Net operating expenses (2003: including £426,362,000 | (958,619) | (1,150,630) | ||
| exceptional goodwill impairment. 2002: £613,983,000) | ||||
| Other operating income | 698 | - | ||
| Operating loss: | (299,237) | (533,145) | ||
| Continuing operations - Group | (299,237) | (541,603) | ||
| Discontinued operations | - | 8,458 | ||
| (299,237) | (533,145) | |||
| Share of joint venture’s operating loss | (2,806) | (559) | ||
| Total operating loss | (302,043) | (533,704) | ||
| Finance charges, net | 3,702 | 6,931 | ||
| Loss on ordinary activities before taxation | (298,341) | (526,773) | ||
| Tax on loss on ordinary activities | (65,014) | (61,626) | ||
| Retained loss for the year transferred from reserves | (363,355) | (588,399) | ||
| Loss per share | ||||
| Basic | (72.9p) | (117.5p) | ||
| Diluted | (72.9p) | (117.5p) |
Consolidated Statement of Total Recognised Gains and Losses
| For the year to 31 December | Unaudited | |||
| 2003 | 2002 | |||
| £’000 | £’000 | |||
| Loss for the year | (363,355) | (588,399) | ||
| Translation of the financial statements of overseas | ||||
| subsidiaries | (47,157) | (62,739) | ||
| Total recognised gains and losses relating to the year | (410,512) | (651,138) | ||
19
UK GAAP Results for the year to 31 December 2003
Consolidated Balance Sheet
| Unaudited | ||||
| 31 December | 31 December | |||
| 2003 | 2002 | |||
| £’000 | £’000 | |||
| Fixed assets | ||||
| Intangible assets – intellectual property | 171,548 | 183,404 | ||
| Intangible assets – goodwill | 1,365,583 | 1,900,896 | ||
| Tangible assets | 97,054 | 84,001 | ||
| Fixed asset investments | 33,269 | 37,345 | ||
| Investment in joint ventures | ||||
| Share of gross assets | - | 5,082 | ||
| Share of gross liabilities | - | (342) | ||
| 1,667,454 | 2,210,386 | |||
| Current assets | ||||
| Stocks | 25,282 | 30,571 | ||
| Debtors | ||||
| - due within one year excluding deferred tax | 141,046 | 106,125 | ||
| - due within one year – deferred tax | 36,049 | 21,646 | ||
| - due after more than one year excluding deferred tax | 9,224 | 9,535 | ||
| - due after more than one year – deferred tax | - | 3,861 | ||
| Current asset investments | 169,895 | 196,364 | ||
| Cash at bank and in hand | 621,670 | 558,432 | ||
| 1,003,166 | 926,534 | |||
| Creditors: amounts falling due within one year | (141,722) | (131,885) | ||
| Net current assets | 861,444 | 794,649 | ||
| Total assets less current liabilities | 2,528,898 | 3,005,035 | ||
| Creditors: amounts falling due after more than one year | ||||
| Convertible debt | (202,659) | (243,547) | ||
| Deferred tax | (782) | - | ||
| Other creditors | (16,957) | (13,782) | ||
| (220,398) | (257,329) | |||
| Net assets | 2,308,500 | 2,747,706 | ||
| Capital and reserves | ||||
| Called-up share capital | 23,895 | 24,217 | ||
| Share premium | 3,218,695 | 3,214,512 | ||
| Exchangeable shares | 190,425 | 191,552 | ||
| Capital reserve | 2,755 | 2,755 | ||
| Capital redemption reserve | 380 | - | ||
| Other reserves | 24,247 | 24,247 | ||
| Profit and loss account | (1,151,897) | (709,577) | ||
| Equity shareholders’ funds | 2,308,500 | 2,747,706 | ||
20
UK GAAP Results for the year to 31 December 2003
Consolidated cash flow statement
| Unaudited | ||||
| Year to 31 December | 2003 | 2002 | ||
| £’000 | £’000 | |||
| Net cash inflow from operating activities (note 2a) | 280,275 | 302,321 | ||
| Returns on investments and servicing of finance: | ||||
| Interest received | 13,165 | 15,434 | ||
| Interest paid | (9,404) | (8,458) | ||
| Interest element of finance lease rentals paid | (59) | (45) | ||
| Net cash inflow from returns on investments and | ||||
| servicing of finance | 3,702 | 6,931 | ||
| Taxation: | ||||
| Overseas corporation tax paid | (66,874) | (73,145) | ||
| Capital expenditure and financial investments: | ||||
| Purchase of long term investment | (3,447) | (2,957) | ||
| Purchase of intangible fixed assets | (30,238) | (15,470) | ||
| Purchase of tangible fixed assets | (31,400) | (15,014) | ||
| Proceeds from sale of a business | 559 | 44,103 | ||
| Proceeds from sale of tangible fixed assets | 1,060 | 542 | ||
| Net cash (outflow)/inflow for capital expenditure and | ||||
| financial investments | (63,466) | 11,204 | ||
| Acquisitions and disposals: | ||||
| Purchase of subsidiary undertaking | - | (11,647) | ||
| Expenses of acquisitions | - | (235) | ||
| Net cash acquired with subsidiary undertakings | - | 33 | ||
| Net cash outflow from acquisitions | - | (11,849) | ||
| Cash inflow before management of liquid resources | ||||
| and financing | 153,637 | 235,462 | ||
| Management of liquid resources: | ||||
| Increase in cash placed on short-term deposit | 17,848 | 254,561 | ||
| Financing: | ||||
| Exercise of share options | 3,114 | 3,985 | ||
| Share repurchase | (31,808) | - | ||
| Capital element of finance leases | (160) | (74) | ||
| Net decrease in debt during the year | (18,053) | (832) | ||
| Net cash (outflow)/inflow from financing | (46,907) | 3,079 | ||
| Increase in cash in the year | 124,578 | 493,102 | ||
21
UK GAAP Results for the year to 31 December 2003
Reconciliation of movements in Group shareholders’ funds
| Unaudited | ||||
| Year to 31 December | 2003 | 2002 | ||
| £’000 | £’000 | |||
| Loss for the year | (363,355) | (588,399) | ||
| Other recognised gains and losses relating to the year | (47,157) | (62,739) | ||
| (410,512) | (651,138) | |||
| Repurchase of ordinary share capital | (31,808) | - | ||
| Loan conversion | - | 955 | ||
| Proceeds on exercise of employee share options | 3,114 | 3,983 | ||
| Net reductions to shareholders’ funds | (439,206) | (646,200) | ||
| Opening shareholders’ funds | 2,747,706 | 3,393,906 | ||
| Closing shareholders’ funds | 2,308,500 | 2,747,706 | ||
| Notes to the UK GAAP Financial Statements | ||||
| (1) Loss per share |
Loss per share has been calculated by dividing the loss on ordinary activities after taxation for each year by the weighted-average number of shares in issue during those years.
The weighted-average number of shares used in calculating fully diluted earnings per share is the same as the basic number of shares used in calculating the basic earnings per share adjusted for the effects of all dilutive potential ordinary shares. No amounts were included in the weighted average number of shares in 2003 and 2002 for potenetially dilutive options and convertible debt as their inclusion would be anti-dilutive in a loss making period.
| Year to 31 December | Unaudited | |||
| 2003 | 2002 | |||
| £’000 | £’000 | |||
| Loss for the period (for basic and diluted EPS) | (363,355) | (588,399) | ||
| Number of shares | Number of shares | |||
| Weighted-average number of shares: | ||||
| Basic and fully diluted | 498,212,826 | 500,687,594 | ||
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UK GAAP Results for the year to 31 December 2003
Notes the UK GAAP financial statements (continued)
(2) Notes to the consolidated cash flow statement
(a) Reconciliation of operating loss to net cash inflow from operating activities
| Unaudited | ||||
| Year to 31 December | 2003 | 2002 | ||
| £’000 | £’000 | |||
| Group operating loss | (299,237) | (533,145) | ||
| Exchange loss | - | 962 | ||
| Depreciation | 13,404 | 9,073 | ||
| Amortisation of intangible fixed assets | 120,705 | 153,979 | ||
| Profit on sale of discontinued operations | (698) | (2,006) | ||
| (Profit)/loss on sale of fixed assets | (100) | 854 | ||
| Write-off of fixed asset investments | 9,491 | 5,809 | ||
| Write-off of intangible fixed assets | 442,815 | 631,447 | ||
| Write-off of tangible fixed assets | 5,965 | - | ||
| Decrease/(increase) in stocks | 3,320 | (1,485) | ||
| (Increase)/decrease in debtors | (27,868) | 51,832 | ||
| Decrease in creditors | 12,478 | (14,999) | ||
| Net cash inflow from operating activities | 280,275 | 302,321 | ||
(b) Analysis and reconciliation of net funds
| Acquired | Other | ||||||||||
| Start of | in year | non-cash | Exchange | End of | |||||||
| Year to 31 December | year | excl. cash | Cash flow | changes | movement | year | |||||
| 2003 (unaudited) | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |||||
| Cash at bank and in hand | 558,432 | - | 124,578 | - | (61,340) | 621,670 | |||||
| Debt due within one year | (389) | - | 443 | (446) | (39) | (431) | |||||
| Finance leases | (162) | - | 160 | (155) | (1) | (158) | |||||
| 557,881 | - | 125,181 | (601) | (61,380) | 621,081 | ||||||
| Debt due after one year | (244,325) | - | 17,610 | 446 | 23,186 | (203,083) | |||||
| Finance leases | (3,757) | - | - | 155 | 364 | (3,238) | |||||
| 309,799 | - | 142,791 | - | (37,830) | 414,760 | ||||||
| Current assets | |||||||||||
| investments | 196,364 | - | (17,848) | - | (8,621) | 169,895 | |||||
| Net funds | 506,163 | - | 124,943 | - | (46,451) | 584,655 | |||||
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UK GAAP Results for the year to 31 December
2003 Notes the UK GAAP financial statements (continued)
(2) Notes to the consolidated cash flow statement (continued)
(b) Analysis and reconciliation of net funds (continued)
| Acquired | Other non- | ||||||||||
| Year to 31 December | Start of | in year | Cash | cash | Exchange | End of | |||||
| 2002 (audited) | year | excl cash | flow | changes | movement | year | |||||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||||
| Cash at bank and in hand | 81,434 | - | 493,102 | - | (16,104) | 558,432 | |||||
| Debt due within one year | (3,008) | - | 2,005 | 565 | 49 | (389) | |||||
| Finance leases | - | (243) | 74 | - | 7 | (162) | |||||
| 78,426 | (243) | 495,181 | 565 | (16,048) | 557,881 | ||||||
| Debt due after one year | (269,883) | - | (1,173) | 389 | 26,342 | (244,325) | |||||
| Finance leases | - | (3,926) | - | - | 169 | (3,757) | |||||
| (191,457) | (4,169) | 494,008 | 954 | 10,463 | 309,799 | ||||||
| Current asset investments | 497,397 | - | (254,561) | (87) | (46,385) | 196,364 | |||||
| 305,940 | (4,169) | 239,447 | 867 | (35,922) | 506,163 | ||||||
| (c) Reconciliation of net funds | |||||||||||
| Unaudited | |||||||||||
| Year to 31 December | 2003 | 2002 | |||||||||
| £’000 | £’000 | ||||||||||
| Increase in cash in the year | 124,578 | 493,102 | |||||||||
| Cash outflow from decrease in debt and lease financing | 18,213 | 906 | |||||||||
| Cash inflow from decreases in liquid resources | (17,848) | (254,561) | |||||||||
| Change in net funds resulting from cash flows | 124,943 | 239,447 | |||||||||
| Leases and current asset investments acquired with subsidiary undertakings | - | (4,169) | |||||||||
| Arenol loan note conversion | - | 954 | |||||||||
| Qualia Computing Inc, joint venture | - | (87) | |||||||||
| Translation difference | (46,451) | (35,922) | |||||||||
| Movement in net funds in year | 78,492 | 200,223 | |||||||||
| Net funds at start of year | 506,163 | 305,940 | |||||||||
| Net funds at end of year | 584,655 | 506,163 | |||||||||
(3) Basis of preparation
The Group have applied consistent accounting policies throughout both years. This preliminary announcement was approved by the Board on 10 March 2004.
The UK GAAP financial information does not constitute the Group’s statutory accounts under section 240 of the Companies Act 1985 for the year ended 31 December 2002 but is derived from those accounts.
The results for the year ended 31 December 2003 have not been audited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2002, the Group’s last statutory period, have been delivered to the Registrar of Companies. The auditors have reported on those accounts and their report was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. The 2003 statutory accounts have not yet been delivered to the Registrar of Companies.
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