Strong second quarter results: 2004 proving to be a verygood year
Basingstoke, UK – July 29, 2004 – Shire Pharmaceuticals Group plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the second quarter ended June 30, 2004.
Second Quarter 2004 Unaudited Results Highlights
US GAAP | Q2 2004 | Q2 2003 | |||||||||||
US GAAP $M | Discontinued Operation $M | Total $M | US GAAP $M | Discontinued Operation $M | Total $M | ||||||||
Revenues | 321.0 | 0.9 | 321.9 | 298.2 | 0.8 | 299.0 | |||||||
Growth % | +8% | +8% | |||||||||||
Operating income/(loss) | 110.2 | (11.0) | 99.2 | 102.6 | (8.4) | 94.2 | |||||||
Income/(loss) before | |||||||||||||
income taxes and | |||||||||||||
equity in earnings / | |||||||||||||
(losses) of equity method | |||||||||||||
investees | 126.6 | (11.3) | 99.4 | (7.2) | |||||||||
Income from continuing | |||||||||||||
operations | 89.5 | 72.7 | |||||||||||
Expected loss from | |||||||||||||
discontinuedoperations | (55.5) | (7.2) | |||||||||||
Net income | 34.0 | 65.5 | |||||||||||
*the expected loss from discontinued operations includes a $44.2 million loss on disposal of the vaccines business as previously highlighted in the press release announcing the sale. In addition, there is a loss of $11.3 million which represents the loss before income tax for the 3 months ended June 30, 2004 for the discontinued vaccines business as shown above. | |||||||||||||
US GAAP | |||||||||||||
Diluted Earnings/(Losses) Per Share: | |||||||||||||
Per ordinary share | 6.8c | (11.1c) | 12.8c | (1.4c) | |||||||||
Per American | |||||||||||||
Depositary Share | 20.4c | (33.3c) | 38.4c | (4.2c) | |||||||||
Non-US GAAP | |||||||||||||
Diluted Earnings Per Share excluding reorganization costs, gain on | |||||||||||||
sale of investment and the impact of the discontinued operation(1): | |||||||||||||
Per ordinary share | 18.4c | 14.2c | |||||||||||
Per American | |||||||||||||
Depositary Share | 55.2c | 42.6c | |||||||||||
Note Average exchange rates for Q2 2004 and 2003 were $1.81: £1.00 and $1.62: £1.00 respectively. | ||
(1) | This is a non-US GAAP financial measure. Management believes that the presentation of this non-US GAAP financial measure provides useful information to investors regarding Shire’s underlying performance as the costs associated with the reorganization, the gain on the sale of an investment and the expected loss from discontinued operations are not part of the Company’s ongoing operations. A reconciliation of this non-US GAAP financial measure to the most directly comparable US GAAP financial measure can be found on page 20. | |
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Matthew Emmens, Chief Executive Officer, said:
“With an increase of 27% in income from the underlying business for the quarter, these are excellent operating results that reflect the continued strength of our marketed products and the successful ongoing implementation of our reorganization and strategy. Importantly, we now anticipate earnings growth for continuing operations to be in excess of 20% for 2004, after excluding the impact of the discontinued vaccines business, the $55 million cost associated with the reorganization and the $14.8 million gain on the sale of a portfolio investment. These results and our confidence in the underlying business support our decision to pay a dividend for the first time. This is consistent with the clear evolution of the organization and our prospects for the future.
"Shire's refocused pipeline of late stage products is coming on stream well. Following the approval of FOSRENOL® in Sweden and expected US approval later this year, we are working to ensure a successful global launch of this new renal product. In addition we anticipate the approval of ADDERALL XR® for adults during the next quarter. In the second quarter we received approval for the 500mg strength of PENTASA®. Five further promising projects are in registration and four are in the late stage development. We continue to consider relevant acquisition of new products to build our pipeline and portfolio.
"2004 is proving to be a very good year for Shire. The underlying business is strong and our reorganization is positioning the Company to deliver value this year and beyond.”
Second Quarter 2004 and Recent Events Highlights
- Revenues up 8% to $321.0 million, compared with Q2 2003.
- ADDERALL XR® (mixed amphetamine salts) continues to perform strongly. Share of the total US ADHD market was maintained at 23% in June 2004, while sales increased by 40% to $143.5 million compared with Q2 2003.
- Royalties up 11% to $57.7 million.
- Cash flows from operating activities totaled $101.7 million, resulting in a net cash position of $1,251.4 million.
- FOSRENOL (lanthanum carbonate): next US Food and Drug Administration (FDA) action due on October 26, 2004. Targeted launch remains December 2004.
- PENTASA (mesalamine) 500mg launch planned for Q3 2004.
- ADDERALL XR Adult next FDA action due on August 13, 2004.
- Shire and ID Biomedical Corporation (IDB) continue to make good progress towards the completion of the sale of Shire’s vaccines business. IDB is required to reimburse Shire at closing for the net cost of operating the vaccines business from June 30, 2004. The loss associated with the discontinued vaccines business was $55 million for the quarter.
- XAGRID® (anagrelide hydrochloride): we expect the Committee for Medicinal Products for Human Use (CHMP) to issue a positive opinion early in the 3rd quarter following the completion of the regulatory process.
- TROXATYL® (troxacitabine) global research, development and marketing rights were out-licensed to Structural GenomiX Inc. on July 24, 2004, in exchange for upfront, milestone and royalty payments.
- Shire appoints Dr Eliseo Salinas to head the Global R&D function. Eliseo joins us from Wyeth Research and brings impressive technical knowledge of central nervous system disorders.
- The reorganization program is proceeding on track and is designed to create value for the Company in the medium to long term.
Dividend
Shire announces the commencement of the payment of a dividend which will be paid semi annually and set in US cents per share / ADS. Dividend payments will be made in Pounds Sterling to Ordinary Shareholders, US Dollars to ADS holders and Canadian Dollars to Exchangeable Shareholders based on exchange rates
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taken on or immediately before the date of resolution. For the 2004 financial year we anticipate an approximate one third / two third split of the total annual payout between the first and second interim dividends. Shire intends to pursue a progressive dividend policy. It is expected that the first interim payment in each year will be maintained at a consistent level. Any growth will typically come through increasing the second interim payment in a financial year. In respect of the half year ended June 30, 2004, the Board has resolved to pay an interim dividend of one penny per ordinary share equivalent to 5.4738 US cents per ADS and 7.2732 Canadian cents per exchangeable share. The interim dividend will be paid on October 14, 2004 to persons whose names appear on the register of members of the Company (or to persons registered as holders of Exchangeable Shares in Shire Acquisitions Inc.) at the close of business on September 17, 2004.
2004 Financial Outlook
With our growing confidence in Shire’s underlying business we are upgrading our current year earnings guidance and we now anticipate earnings growth for continuing operations to be in excess of 20% for 2004, after excluding the impact of the discontinued vaccines business, the $55 million cost associated with the reorganization and the $14.8 million gain on the sale of a portfolio investment. Revenue growth is expected to be in the high single digit range, despite the loss of exclusivity on PROAMATINE® (midodrine hydrochloride) in Q3 2003 and the anticipated loss of exclusivity on AGRYLIN® (anagrelide hydrochloride) in the US in Q4 2004. Beyond 2004 we remain committed to achieving our target of earnings growth, on average, in the mid teens range with consistent operating margins.
– Ends – | ||
For further information please contact: | ||
Global (outside US & Canada) | ||
Cléa Rosenfeld – Investor Relations | +44 1256 894 160 | |
Jessica Mann – Media | +44 1256 894 160 | |
Notes to editors | ||
Shire Pharmaceuticals Group plc |
Shire Pharmaceuticals Group plc (Shire) is a global 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
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 materialize, 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 commercialization, 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), methylphenidate (METHYPATCH®), anagrelide hydrochloride (XAGRID), carbamazepine (BIPOTROL®) and the adult indication for extended release mixed amphetamine salts (ADDERALL XR), the implementation of the planned reorganization and other risks and uncertainties detailed from time to time in Shire’s filings with the Securities and Exchange Commission.
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The following are trademarks of Shire or companies within the Shire Group, which are the subject of trademark registrations in certain territories
ADDERALL XR® (mixed amphetamine salts)
AGRYLIN® (anagrelide hydrochloride)
BIPOTROL® (carbamazepine)
CARBATROL® (carbamazepine)
FOSRENOL® (lanthanum carbonate)
FLUVIRAL® S/F(split virion influenza vaccine)
PROAMATINE® (midodrine hydrochloride)
TROXATYL® (troxacitabine)
XAGRID® (anagrelide hydrochloride)
The following are trademarks of third parties
3TC® (trademark of GlaxoSmithKline (GSK))
PENTASA® (trademark of Ferring AS)
REMINYL® (trademark of Johnson & Johnson)
ZEFFIX® (trademark of GSK)
STRATERRA® (trademark of Eli Lilly)
METHYPATCH® (trademark of Noven)
NEISVAC-C® (trademark of Baxter)
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OVERVIEW OF US GAAP FINANCIAL RESULTS
1. Introduction
The results for the three months to June 30, 2003 have been restated to reflect the proposed disposal of the vaccines business, accounted for as a discontinued operation in accordance with generally accepted accounting principles in the United States of America (US GAAP). In accordance with US GAAP guidelines, 2003 figures from revenues down to income from continuing operations exclude the results of the vaccines business, while 2003 net income and earnings per share include the results of the vaccines business.
Revenues from continuing operations for the three months to June 30, 2004 increased by 8% to $321.0 million (2003: $298.2 million).Income from continuing operations before taxes increased by 27% to $126.6 million (2003: $99.4 million)
Included in the net income result for the quarter were $18.2 million of reorganization costs, a $14.8 million gain on the sale of a listed investment and the expected loss from the discontinued operation of $55.5 million. The reported net income under US GAAP including these elements for the 3 months to June 30, 2004 showed a decrease of 48% when compared to Q2 2003.
The business generated a cash inflow from operating activities of $101.7 million (2003: $12.8 million).
Cash and cash equivalents, restricted cash and marketable securities at June 30, 2004 amounted to $1,627.5 million (December 31, 2003: $1,414.0 million). After deduction of borrowings, this translates to a net cash position of $1,251.4 million (December 31, 2003: $1,037.7 million). Where appropriate, this may be used to further enhance our portfolio through product and project acquisitions.
2. Product sales
For the three months to June 30, 2004, product sales increased $9.6 million to $255.3 million (2003: $245.7 million) and represented 80% of total revenues (2003: 82%).
Second Quarter 2004 Product Highlights
Product | Sales $M | Sales Growth % | US Rx1 Growth % | June 20041 US Market Share % |
ADDERALL XR | 143.5 | +40% | +20% | 23% |
AGRYLIN | 34.0 | -7% | +3% | 27% |
PENTASA | 26.4 | +7% | +2% | 17% |
CARBATROL | 11.9 | -15% | +14% | 45% |
ADDERALL XR for the treatment of ADHD
Sales of ADDERALL XR for the 3 months to June 30, 2004 were $143.5 million, an increase of 40% compared to prior year (2003: $102.4 million).
US prescriptions were up 20% over the same period, due primarily to an 18% increase in the total US ADHD market. ADDERALL XR had a 23% share of the total US ADHD market in June 2004 (June 2003: 22%), which reflects good continued sales growth in a competitive market.
The difference between revenue growth and prescription growth is largely due to the impact of price increases in November 2003 and June 2004, in addition to stocking by wholesalers to normalize inventory levels.
In January and August 2003 the Company was notified that Barr Laboratories Inc. (Barr) had submitted Abbreviated New Drug Applications or ANDA under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR, the Company’s extended release “once daily” treatment for ADHD, prior to the expiration date of certain of the Company’s US patents. The ANDA notifications alleged that one of the Company’s patents is invalid and one is not infringed by Barr’s mixed amphetamine salt product. The Company has filed suits against Barr seeking rulings that Barr’s product infringes certain of the Company’s US patents, injunctions preventing Barr from commercializing its ANDA product and damages in the event Barr does engage in commercialization.
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The Company was notified in November 2003 that Impax Laboratories Inc. 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 US patents and alleging that the 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 certain of the Company’s US patents. Shire Laboratories Inc. is also seeking an injunction to prevent Impax commercializing its ANDA product and damages in the event Impax does engage in commercialization of a generic version of ADDERALL XR prior to the expiration of the Group’s patents. A trial date of October 11, 2005 has now been set.
AGRYLIN for the treatment of thrombocythemia
Worldwide sales of AGRYLIN for the three months to June 30, 2004 were $34.0 million, a decrease of 7% compared to the prior year (2003: $36.6 million).
Although prescription demand was up by 3% between comparable periods, modest de-stocking by wholesalers in the US drove the decreases in revenues between comparative quarters. For the three months to June 30, 2004 revenues outside the US market, where AGRYLIN is currently available on a named patient basis only, showed good growth.
US prescription volumes were up 3% over the same period.
AGRYLIN had a 27% share of the total US AGRYLIN, hydrea and generic hydroxyurea prescription market in June 2004 (June 2003: 27%).
AGRYLIN remains the only product specifically approved for essential thrombocythemia in the US. Pediatric exclusivity has been granted by the FDA, which extends existing exclusivity to September 2004. After this time it is expected to face generic competition.
The expected launch of XAGRID in the EU (the trade name of AGRYLIN in the EU), in the second half of 2004, will help to drive some growth from markets outside the US.
PENTASA for the treatment of ulcerative colitis
Sales of PENTASA for the three months to June 30, 2004 were $26.4 million, an increase of 7% compared to prior year (2003: $24.8 million).
US prescription volumes were up 2% over the same period.
The sales growth for the quarter is in excess of prescription growth due to a price increase in November 2003.
PENTASA had a 17% share of the total US oral mesalmine/olsalazine prescription market in June 2004 (June 2003: 17%).
CARBATROL for the treatment of epilepsy
Sales of CARBATROL for the three months to June 30, 2004 were $11.9 million, a decrease of 15% compared to prior year (2003: $13.9 million).
US prescription volumes were up 14% over the same period, due to the impact of promotional efforts.
The reported growth has been negatively impacted by some wholesaler de-stocking in the quarter combined with a modest increase in sales deductions.
CARBATROL had a 45% share of the total US extended release carbamazepine prescription market in June 2004 (June 2003: 38%).
In August 2003, the Company received notification that Nostrum Pharmaceuticals Inc. 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 in September 2003. By way of counterclaim, Nostrum is seeking a declaration that the Company’s patents are not infringed by Nostrum’s ANDA product and was seeking actual and punitive damages for alleged abuse of process by Shire. On July 12, 2004 the United States District Court for the District of New Jersey dismissed Nostrum’s abuse of process counterclaim for failure to state a claim upon which relief can be granted.
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3. Royalties
Royalty revenue increased 11% to $57.7 million for the three months to June 30, 2004 (2003: $51.8 million) as a result of strong sales and positive foreign exchange movements.
Second Quarter 2004 Royalty Highlights
Product | Royalties to Shire $M | Royalty Growth % | Worldwide in-market sales by licensee2 in Q2 2004 $M |
3TC | 39.6 | +6%* | 298 |
ZEFFIX | 6.8 | +19%** | 60 |
Other | 11.3 | +31% | n/a |
* | The impact of foreign exchange movements has contributed +4% to the reported growth. |
** | The impact of foreign exchange movements has contributed +5% to the reported growth. |
2 | GSK |
3TC
Royalties from 3TC for the three months to June 30, 2004 were $39.6 million, an increase of 6% compared to Q2 2003 ($37.5 million). This was primarily due to the impact of foreign exchange movements but also continued growth in the nucleoside analogue market for HIV in Western Europe.
For 3TC, Shire receives royalties from GSK on worldwide sales, with the exception of Canada where a commercialization partnership with GSK exists. GSK’s worldwide sales of 3TC, for the three months to June 30, 2004 were $298 million, an increase of 6% compared to the three months ended June 30, 2003 ($281 million).
ZEFFIX
Royalties from ZEFFIX for the three months to June 30, 2004 were $6.8 million, an increase of 19% compared to Q2 2003 ($5.7 million). The product continues to show strong growth in Japan, the US and the UK and is expected to grow strongly in China. Foreign exchange movements also positively impacted performance in the quarter.
For ZEFFIX, Shire receives royalties from GSK on worldwide sales, with the exception of Canada where a commercialization partnership with GSK exists. GSK’s worldwide sales of ZEFFIX, for the three months to June 30, 2004, were $60 million, an increase of 15% compared to the three months ended June 30, 2003 ($52 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 and Ireland where Shire has exclusive marketing rights.
Sales of REMINYL, a treatment for mild to moderately severe dementia of the Alzheimer’s type, are growing well in the Alzheimer’s market.
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4.Financial details
Cost of product sales
For the three months to June 30, 2004, our cost of product sales amounted to 11% of product sales (2003: 15%). The decrease is driven by a change in the product mix, with an increased percentage of income being derived from higher margin products.
Research and development (R&D)
R&D expenditure increased from $44.8 million in Q2 2003 to $47.4 million in Q2 2004. Expressed as a percentage of total revenues, R&D expenditure was 15% for the three months to June 30, 2004 (2003: 15%). The R&D expenditure as a percentage of total revenues has decreased compared with historical levels as a result of the accounting applied to the expected disposal of the vaccines business. It is anticipated that R&D expenditure will increase for the last 6 months of the year but will remain in the range of 15-16% of total revenues for the full year.
Selling, general and administrative (SG&A)
SG&A expenses increased from $101.7 million in Q2 2003 to $105.1 million in Q2 2004, an increase of 3%. As a percentage of product sales, these expenses were 41%, which is consistent with Q2 2003.
Depreciation and amortization
The depreciation charge for the three months to June 30, 2004 was $3.1 million (2003: $2.9 million). Amortization charges were $10.0 million for the three months to June 30, 2004 (2003: $9.1 million).
Reorganization costs
During the three months to June 30, 2004, $18.2 million of reorganization costs were incurred. The costs related to employee severance, relocation and the write-down of tangible fixed assets.
Interest income and expense
For the three months to June 30, 2004, the Company received interest income of $4.4 million (2003: $4.3 million). Interest expense decreased from $2.7 million in Q2 2003 to $2.1 million in Q2 2004 as a result of the partial buy-back of the convertible notes in Q2 2003.
Other income/(expense), net
For the three months to June 30, 2004, other income totaled $14.1 million (2003: expense of $4.9 million). The income in Q2 2004 was primarily due to the realized gain on the sale of a portfolio investment. The expense in Q2 2003 primarily related to the write-down of certain portfolio investments.
Taxation
The effective tax rate on continuing operations for the three months to June 30, 2004 was 30% (2003: 26%). The effective tax rate on continuing operations for the 6 months to June 30, 2004 is 28% and it is anticipated that this effective rate on continuing operations will remain for the full year. At June 30, 2004, net deferred tax assets of $70.4 million were recognized (December 31, 2003: $63.1 million).
Equity in earnings/(losses) of equity method investees
During the three months to June 30, 2004, we received $1.2 million representing our 50% share of earnings from our antiviral commercialization partnership with GSK in Canada (2003: $0.9 million). Included in the figure to June 30, 2003 is our 50% share of the losses of our commercialization partnership with Qualia Computing Inc., which was sold in December 2003.
Discontinued operations
The Company is nearing the completion of the disposal of its vaccines business to IDB. This business was acquired as part of the merger with BioChem Pharma Inc. in May 2001. The vaccines business, currently known as Shire Biologics Inc., is active in research, development, manufacturing and the commercialization of human vaccines. Its portfolio includes two marketed products: FLUVIRAL for influenza and NEISVAC-C for meningitis C in Canada, as well as a pipeline of product candidates for the treatment of streptococcus pneumonia, neisseria meningitidis, group B streptococcus and group A streptococcus.
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The intention to exit the vaccines business was first announced by Shire in July 2003. This followed Shire’s strategic review which refocused the Company on fewer projects at a later stage of development as well as marketed products. The vaccines business is no longer core to the Company’s global strategy and, upon completion of this transaction, Shire will be exclusively focused on therapeutic products meeting the needs of the specialist physician. The transaction is being treated as a discontinued operation as the transaction is substantially complete. IDB is required to reimburse Shire at closing for the net cost of operating the vaccines business from June 30, 2004.
In accordance with US GAAP disclosure requirements for discontinued operations the 2003 results have been restated. The results of the discontinued operation have been removed from all periods on a line-by-line basis from product sales revenue to income from continuing operations. The net loss from the discontinued operation, together with the expected loss on disposal recognized in 2004, are shown as separate line items.
The vaccines business impacted net income with losses of $20.1 million and $12.9 million for the 6 months to June 30, 2004 and 2003. The impact for the 3 months to June 30, 2004 and 2003 was $11.3 million and $7.2 million respectively. In addition to the loss for the 3 months to June 30, 2004 is an expected loss on the disposal of the vaccines business of $44.2 million resulting principally from the write down of a $70 million loan to IDB.
5. R&D pipeline
CNS
- The FDA is reviewing Shire’s response to the ADDERALL XR adult ‘approvable’ letter. The FDA action date is August 13, 2004.
- Shire is preparing its response to the FDA’s pediatric request for data concerning the use of ADDERALL XR in children. A successful response would extend exclusivity to April 2005.
- A second phase III study has been initiated in the pediatric ADHD clinical program for SPD503.
- A program has been agreed with the FDA to address issues raised in the ‘non-approvable’ letter for METHYPATCH and this work has been initiated.
- The BIPOTROL New Drug Application continues in FDA review with an FDA action expected on December 13, 2004.
- The SPD473 (monoamine re-uptake inhibitor) Proof of Concept study in ADHD did not meet with Shire’s criteria for continued development in ADHD.
GI
- PENTASA 500mg received approval from the FDA for the treatment of ulcerative colitis in July 2004. This higher strength product should increase patient acceptability.
- Recruitment into the early SPD476 ulcerative colitis Phase III program was slow but during the first half of 2004 a number of initiatives were introduced to enhance this. Recruitment has now accelerated and filing remains targeted for 2005 however, this has had a knock-on effect in delaying planning for the SPD480 pivotal program.
General Products
- In July 2004, Shire received a letter from the FDA indicating that the FDA required a 90-day extension to the FDA’s initial review period to complete evaluation of new data relating to formulation and dosage strength. Shire expects the final action date to the anticipated FOSRENOL approval to be on October 26, 2004. Labelling discussions as well as pre-launch preparation will take place in parallel during this 90-day period. The regulatory authorities in Sweden approved Fosrenol in March this year. Discussions and preparation for the Mutual Recognition Process in Europe are underway, with further European approvals to be expected by the end of 2004.
- The FDA awarded a six-month pediatric exclusivity extension for AGRYLIN (anagrelide hydrochloride, known as XAGRID in Europe) in the US through to mid-September 2004. In addition and following the Positive Opinion in July 2003, Shire received notice of the termination of part of an independent Medical Research Council study in which anagrelide was being studied in
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combination with aminosalicylic acid (aspirin). The CPMP (now known as Committee for Medicinal Products for Human Use (CHMP)) requested access to data from this independent study. Their review is now complete and it is anticipated that the CHMP will reconfirm their Positive Opinion for XAGRID imminently from which time the standard regulatory procedures leading to licenses and launch will start.
- Out-licensing negotiations continue for SPD754 and partners in Japan are being sought for SPD476 and SPD480. TROXATYL global research, development and marketing rights out-licensed in July 2004 to Structural GenomiX Inc., in exchange of upfront, milestones and royalty payments.
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US GAAP Results for the 6 months to June 30, 2004 Consolidated Balance Sheets | ||||
(Unaudited) June 30, 2004 $’000 | December 31, 2003 $’000 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | 1,307,130 | 1,103,041 | ||
Restricted cash | 48,244 | 6,795 | ||
Marketable securities | 272,157 | 304,129 | ||
Accounts receivable, net | 171,326 | 194,583 | ||
Inventories | 50,236 | 43,128 | ||
Deferred tax asset | 71,935 | 64,532 | ||
Prepaid expenses and other current assets | 52,954 | 47,403 | ||
Current assets from continuing operations | 1,973,982 | 1,763,611 | ||
Current assets from discontinued operations | 49,998 | 24,096 | ||
Total current assets | 2,023,980 | 1,787,707 | ||
Investments | 51,902 | 72,975 | ||
Property, plant and equipment, net | 98,294 | 94,495 | ||
Goodwill, net | 222,914 | 221,231 | ||
Other intangible assets, net | 316,789 | 307,882 | ||
Other non-current assets | 10,359 | 22,420 | ||
Long-term assets from continuing operations | 700,258 | 719,003 | ||
Long-term assets from discontinued operations | - | 72,070 | ||
Total assets | 2,724,238 | 2,578,780 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Current liabilities: | ||||
Current installments of long-term debt | 370,483 | 290 | ||
Accounts payable and accrued expenses | 239,401 | 205,779 | ||
Other current liabilities | 41,275 | 37,127 | ||
Current liabilities from continuing operations | 651,159 | 243,196 | ||
Current liabilities from discontinued operations | - | 10,479 | ||
Total current liabilities | 651,159 | 253,675 | ||
Long-term debt, excluding current installments | 5,685 | 376,017 | ||
Deferred tax liability | 1,571 | 1,400 | ||
Other long-term liabilities | 44,222 | 23,783 | ||
Long-term liabilities from continuing operations | 51,478 | 401,200 | ||
Long-term liabilities from discontinued operations | - | 779 | ||
Total liabilities | 702,637 | 655,654 | ||
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US GAAP Results for the 6 months to June 30, 2004 Consolidated Balance Sheets (continued) | ||||
(Unaudited) June 30, 2004 $’000 | December 31, 2003 $’000 | |||
Shareholders’ equity: | ||||
Common stock of 5p par value; 800,000,000 shares | ||||
authorized; and 481,254,798 (December 31, 2003: | ||||
477,894,726) shares issued and outstanding | 39,828 | 39,521 | ||
Exchangeable shares; 5,003,587 (December 31, 2003: | ||||
5,839,559) shares issued and outstanding | 231,830 | 270,667 | ||
Additional paid-in capital | 1,027,661 | 983,356 | ||
Accumulated other comprehensive income | 63,126 | 79,007 | ||
Retained earnings | 659,156 | 550,575 | ||
Total shareholders’ equity | 2,021,601 | 1,923,126 | ||
Total liabilities and shareholders’ equity | 2,724,238 | 2,578,780 | ||
The results for December 31, 2003 have been restated to reflect the proposed disposal of the vaccines business that has been accounted for as a discontinued operation.
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US GAAP Results for the 6 months to June 30, 2004 Unaudited Consolidated Statements of Operations | ||||||||
3 months to June 30, 2004 $’000 | 3 months to June 30, 2003 $’000 | 6 months to June 30, 2004 $’000 | 6 months to June 30, 2003 $’000 | |||||
Total revenues | 320,960 | 298,209 | 644,560 | 600,934 | ||||
Cost of revenues | (26,984 | ) | (37,018 | ) | (61,077 | ) | (73,460 | ) |
Gross profit | 293,976 | 261,191 | 583,483 | 527,474 | ||||
Operating expenses | (183,762 | ) | (158,542 | ) | (359,039 | ) | (328,675 | ) |
Operating income | 110,214 | 102,649 | 224,444 | 198,799 | ||||
Interest income | 4,375 | 4,301 | 8,404 | 9,411 | ||||
Interest expense | (2,101 | ) | (2,679 | ) | (4,227 | ) | (5,327 | ) |
Other income/(expense), net | 14,081 | (4,919) | 9,262 | (9,773 | ) | |||
Total other income/(expense), net | 16,355 | (3,297) | 13,439 | (5,689) | ||||
Income from continuing operations before | ||||||||
income taxes and equity in earnings/ (losses) | 126,569 | 99,352 | 237,883 | 193,110 | ||||
of equity method investees | ||||||||
Income taxes | (38,226 | ) | (25,457 | ) | (67,228 | ) | (49,983 | ) |
Equity in earnings/(losses) of equity method | ||||||||
investees | 1,170 | (1,205 | ) | 2,218 | (1,654 | ) | ||
Income from continuing operations | 89,513 | 72,690 | 172,873 | 141,473 | ||||
Loss from discontinued operations | (11,349 | ) | (7,205 | ) | (20,135 | ) | (12,922 | ) |
Expected loss on disposition of discontinued | ||||||||
operations | (44,157 | ) | - | (44,157 | ) | - | ||
Net income | 34,007 | 65,485 | 108,581 | 128,551 | ||||
Earnings per share: | ||||||||
Basic | ||||||||
Continuing operations | 18.1c | 14.5c | 34.9c | 28.2c | ||||
Loss from discontinued operations | (2.3c | ) | (1.4c) | (4.1c | ) | (2.6c | ) | |
Expected loss on disposition of discontinued operations | (8.9c | ) | - | (8.9c | ) | - | ||
Net income | 6.9c | 13.1c | 21.9c | 25.6c | ||||
Diluted | ||||||||
Continuing operations | 17.9c | 14.2c | 33.9c | 27.6c | ||||
Loss from discontinued operations | (2.3c | ) | (1.4c | ) | (3.9c | ) | (2.5c | ) |
Expected loss on disposition of discontinued operations | (8.8c | ) | - | (8.5c | ) | - | ||
Net income | 6.8c | 12.8c | 21.5c | 25.1c | ||||
Weighted average number of shares: | ||||||||
Basic | 496,074,144 | 501,504,962 | 495,896,175 | 501,746,083 | ||||
Diluted | 499,241,832 | 522,559,387 | 517,822,110 | 522,652,319 | ||||
The results for the 3 and 6 months ended June 30, 2003 have been restated to reflect the proposed disposal of the vaccines business that has been accounted for as a discontinued operation.
13
US GAAP Results for the 6 months to June 30, 2004 Unaudited Consolidated Statements of Cash Flows | ||||||||
3 months to June 30, 2004 $’000 | 3 months to June 30, 2003 $’000 | 6 months to June 30, 2004 $’000 | 6 months to June 30, 2003 $’000 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income from continuing operations | 89,513 | 72,690 | 172,873 | 141,473 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization – included in: | ||||||||
Cost of product sales | 1,284 | - | 1,284 | - | ||||
Sales, general and administration | 13,079 | 8,685 | 25,583 | 19,060 | ||||
(Decrease)/increase in provision for doubtful | ||||||||
accounts and discounts | (1,038 | ) | 1,062 | (429 | ) | 1,195 | ||
Increase in provision for rebates and returns | 20,489 | 3,997 | 25,771 | 8 | ||||
Stock option compensation | 98 | - | 98 | (24 | ) | |||
Movement in deferred tax asset | (5,082 | ) | (6,659 | ) | (7,232 | ) | (17,844 | ) |
Equity in (earnings)/losses of equity method | (1,170 | ) | 1,205 | (2,218 | ) | 1,654 | ||
Write-down of long term investments | - | 4,500 | 7,214 | 8,473 | ||||
Write-down of intangible assets | - | 3,287 | - | 3,287 | ||||
Write-down of property, plant and equipment | 843 | - | 1,239 | - | ||||
Gain on sale of long term investments | (14,805 | ) | - | (14,805 | ) | - | ||
Gain on sale of property, plant and equipment | (78 | ) | - | (78 | ) | - | ||
Decrease in deferred revenue | - | - | (551 | ) | - | |||
Changes in operating assets and liabilities, net of | ||||||||
acquisitions: | ||||||||
Decrease/(increase) in accounts receivable | 29,842 | (54,045 | ) | 23,672 | (57,456 | ) | ||
(Increase)/decrease in inventory | (4,546 | ) | 1,911 | (6,754 | ) | 1,430 | ||
Increase in prepayments and other current assets | (20,712 | ) | (3,953 | ) | (13,467 | ) | (4,433 | ) |
Decrease/(increase) in other assets | 6,439 | (722 | ) | 12,155 | 718 | |||
(Decrease)/increase in accounts and notes payable | ||||||||
and other liabilities | (14,314 | ) | (19,180 | ) | 7,511 | (537 | ) | |
Dividend received from equity method investees | 1,834 | - | 1,834 | - | ||||
Net cash provided by operating activities | 101,676 | 12,778 | 233,700 | 97,004 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Decrease in short-term deposits | 15,151 | 33,750 | 31,972 | 101,373 | ||||
Purchase of long-term investments | (4,802) | - | (5,514) | (1,475 | ) | |||
Purchase of property, plant and equipment | (6,131 | ) | (12,559 | ) | (13,961 | ) | (26,370 | ) |
Purchase of intangible assets | (12,000 | ) | (25,500 | ) | (12,000 | ) | (25,500 | ) |
Proceeds from sale of long-term investments | 26,513 | - | 26,733 | - | ||||
Proceeds from sale of property, plant and equipment | 400 | - | 400 | - | ||||
Proceeds from assets held for resale | 7,659 | - | 7,659 | - | ||||
Distribution from long-term investments | 1,202 | - | 1,202 | - | ||||
Movements in restricted cash | (5,115 | ) | - | (41,449 | ) | - | ||
Net cash provided by/(used in) investing activities | 22,877 | (4,309 | ) | (4,958 | ) | 48,028 | ||
14
US GAAP Results for the 6 months to June 30, 2004 Unaudited Consolidated Statements of Cash Flows (continued) | ||||||||
3 months to June 30, 2004 $’000 | 3 months to June 30, 2003 $’000 | 6 months to June 30, 2004 $’000 | 6 months to June 30, 2003 $’000 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Redemption from 2% convertible loan notes | - | (29,775 | ) | - | (29,775 | ) | ||
Repayment of long-term debt and capital leases | (59 | ) | (41 | ) | (135 | ) | (104 | ) |
Proceeds from exercise of options | 2,569 | 1,343 | 5,351 | 2,254 | ||||
Proceeds from issue of common stock, net | - | - | 326 | - | ||||
Payments for the redemption of common stock | - | (52,392 | ) | - | (52,392 | ) | ||
Net cash provided by/(used in) financing activities | 2,510 | (80,865 | ) | 5,542 | (80,017 | ) | ||
Effect of foreign exchange rate changes on cash and | ||||||||
cash equivalents | (878 | ) | 10,794 | (1,280 | ) | 18,463 | ||
Net increase/(decrease) in cash and cash | 126,185 | (61,602 | ) | 233,004 | 83,478 | |||
equivalents | ||||||||
Cash flows used in discontinued operations | (22,657 | ) | (12,978 | ) | (28,915 | ) | (13,844 | ) |
Net increase/(decrease) in cash and cash | 103,528 | (74,580 | ) | 204,089 | 69,634 | |||
equivalents | ||||||||
Cash and cash equivalents at beginning of period | 1,203,602 | 1,041,361 | 1,103,041 | 897,147 | ||||
Cash and cash equivalents at end of period | 1,307,130 | 966,781 | 1,307,130 | 966,781 | ||||
The results for the 3 and 6 months ended June 30, 2003 have been restated to reflect the proposed disposal of the vaccines business that has been accounted for as a discontinued operation.
15
US GAAP Results for the 6 months to June 30, 2004
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 reporting segments of the business, based on the way in which the business is managed and controlled. The Company’s principal reporting segments are by operational function, each being managed and monitored separately and serving different markets. The Company evaluates performance based on operating income.
The US segment represents our commercial operations in the United States and the International segment represents the commercial operations in the Rest of the World. The R&D segment represents all direct research and development costs incurred by the Company throughout the world. Corporate represents the royalty business that is managed at the corporate office and certain costs that are managed at the corporate office and not allocated to the other segments.
The results for the 3 and 6 months to June 30, 2003 have been restated to reflect the proposed disposal of the vaccines business that has been accounted for as a discontinued operation.
3 months to June 30, 2004 | US | International | Corporate | R&D | Total | |||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||
Product sales | 210,004 | 45,276 | - | - | 255,280 | |||||
Licensing and development | 4,395 | 1,087 | - | - | 5,482 | |||||
Royalties | - | 2,837 | 54,820 | - | 57,657 | |||||
Other revenues | 716 | 1,825 | - | - | 2,541 | |||||
Total revenues | 215,115 | 51,025 | 54,820 | - | 320,960 | |||||
Cost of product sales | 20,101 | 6,883 | - | - | 26,984 | |||||
Research and development | - | - | - | 47,375 | 47,375 | |||||
Selling, general and administrative | 67,421 | 24,204 | 13,516 | - | 105,141 | |||||
Depreciation and amortization(1) | 7,158 | 2,956 | 2,965 | - | 13,079 | |||||
Reorganization costs | 9,563 | 2,696 | 2,839 | 3,069 | 18,167 | |||||
Total operating expenses | 104,243 | 36,739 | 19,320 | 50,444 | 210,746 | |||||
Operating income/(loss) | 110,872 | 14,286 | 35,500 | (50,444 | ) | 110,214 | ||||
3 months to June 30, 2003 | US | International | Corporate | R&D | Total | |||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||
Product sales | 209,607 | 36,064 | - | - | 245,671 | |||||
Licensing and development | 702 | - | - | - | 702 | |||||
Royalties | 14 | 2,725 | 49,097 | - | 51,836 | |||||
Total revenues | 210,323 | 38,789 | 49,097 | - | 298,209 | |||||
Cost of product sales | 26,887 | 10,131 | - | - | 37,018 | |||||
Research and development | - | - | - | 44,830 | 44,830 | |||||
Selling, general and administrative | 65,941 | 20,600 | 15,205 | - | 101,746 | |||||
Depreciation and amortization(1) | 8,728 | 2,379 | 859 | - | 11,966 | |||||
Total operating expenses | 101,556 | 33,110 | 16,064 | 44,830 | 195,560 | |||||
Operating income/(loss) | 108,767 | 5,679 | 33,033 | (44,830 | ) | 102,649 | ||||
16
US GAAP Results for the 6 months to June 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
6 months to June 30, 2004 | US | International | Corporate | R&D | Total | |||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||
Product sales | 433,300 | 86,574 | - | - | 519,874 | |||||
Licensing and development | 6,279 | 1,118 | - | - | 7,397 | |||||
Royalties | - | 5,635 | 108,167 | - | 113,802 | |||||
Other revenues | 1,439 | 2,048 | - | - | 3,487 | |||||
Total revenues | 441,018 | 95,375 | 108,167 | - | 644,560 | |||||
Cost of product sales | 41,861 | 19,216 | - | - | 61,077 | |||||
Research and development | - | - | - | 86,001 | 86,001 | |||||
Selling, general and administrative | 144,616 | 49,805 | 31,054 | - | 225,475 | |||||
Depreciation and amortization(1) | 17,109 | 5,410 | 3,064 | - | 25,583 | |||||
Reorganization costs | 12,424 | 2,696 | 2,900 | 3,960 | 21,980 | |||||
Total operating expenses | 216,010 | 77,127 | 37,018 | 89,961 | 420,116 | |||||
Operating income/(loss) | 225,008 | 18,248 | 71,149 | (89,961 | ) | 224,444 | ||||
6 months to June 30, 2003 | US | International | Corporate | R&D | Total | |||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||
Product sales | 429,570 | 70,662 | - | - | 500,232 | |||||
Licensing and development | 1,096 | - | - | - | 1,096 | |||||
Royalties | 14 | 4,924 | 94,661 | - | 99,599 | |||||
Other revenues | 7 | - | - | - | 7 | |||||
Total revenues | 430,687 | 75,586 | 94,661 | - | 600,934 | |||||
Cost of product sales | 53,259 | 20,201 | - | - | 73,460 | |||||
Research and development | - | - | - | 94,773 | 94,773 | |||||
Selling, general and administrative | 135,626 | 41,274 | 34,524 | - | 211,424 | |||||
Depreciation and amortization(1) | 16,053 | 4,744 | 1,681 | - | 22,478 | |||||
Total operating expenses | 204,938 | 66,219 | 36,205 | 94,773 | 402,135 | |||||
Operating income/(loss) | 225,749 | 9,367 | 58,456 | (94,773) | 198,799 | |||||
(1) Depreciation from manufacturing plants is included within cost of product sales. Depreciation and amortization relating to R&D assets are included within US and International segments.
17
US GAAP Results for the 6 months to June 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(2) Earnings per share
Basic EPS is based upon the net income available to common stockholders divided by the weighted-average number of ordinary shares outstanding during the period.
Diluted EPS is based upon net income available to common stockholders divided by the weighted-average number of ordinary shares outstanding during the period and adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the period.
Stock options to purchase approximately 18.0 million and 14.6 million common shares for the three months and six months to June 30, 2004 respectively, were anti-dilutive and were therefore excluded from the computation of diluted earnings per share (2003: 18.1 million and 18.0 million respectively).
Warrants to purchase approximately 1.4 million common shares for the three and six months to June 30, 2003 were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.
The $370 million convertible loan note is excluded from the calculation of weighted average number of shares for fully diluted earnings per share for the three months ended June 30, 2004 as it was not dilutive.
3 months to | 3 months to | 6 months to | 6 months to | |||||
June 30, 2004 | June 30, 2003 | June 30, 2004 | June 30, 2003 | |||||
No. of shares | No. of shares | No. of shares | No. of shares | |||||
Weighted average number of | ||||||||
shares: | ||||||||
Basic | 496,074,144 | 501,504,962 | 495,896,175 | 501,746,083 | ||||
Effect of dilutive shares: | ||||||||
Stock options | 3,115,296 | 2,030,976 | 3,460,629 | 1,470,870 | ||||
Warrants | 52,392 | - | 94,742 | - | ||||
Convertible debt | - | 19,023,449 | 18,370,564 | 19,435,366 | ||||
Diluted | 499,241,832 | 522,559,387 | 517,822,110 | 522,652,319 | ||||
Reconciliation of reported EPS: | ||||||||
3 months to | 3 months to | 6 months to | 6 months to | |||||
June 30, 2004 | June 30, 2003 | June 30, 2004 | June 30, 2003 | |||||
$’000 | $’000 | $’000 | $’000 | |||||
Net income for basic EPS | 34,007 | 65,485 | 108,581 | 128,551 | ||||
Interest charged on convertible | ||||||||
debt, net of tax | - | 1,342 | 2,666 | 2,723 | ||||
Net income for diluted EPS | 34,007 | 66,827 | 111,247 | 131,274 | ||||
Income from continuing operations | 18.1c | 14.5c | 34.9c | 28.2c | ||||
Loss from discontinued operations | (2.3c | ) | (1.4c | ) | (4.1c | ) | (2.6c) | |
Expected loss on disposal of discontinued | ||||||||
operations | (8.9c | ) | - | (8.9c) | - | |||
Basic earnings per share | 6.9c | 13.1c | 21.9c | 25.6c | ||||
Income from continuing operations | 17.9c | 14.2c | 33.9c | 27.6c | ||||
Loss from discontinued operations | (2.3c) | (1.4c) | (3.9c | ) | (2.5c | ) | ||
Expected loss on disposal of discontinued operations | (8.8c) | - | (8.5c | ) | - | |||
Diluted earnings per share | 6.8c | 12.8c | 21.5c | 25.1c | ||||
18 |
US GAAP Results for the 6 months to 30 June 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(3) Analysis of revenues
3 months | 3 months | 3 months | 3 months | |||||
to June 30, | to June 30, | to June 30, | to June 30, | |||||
2004 | 2003 | 2004 | 2004 | |||||
$’000 | $’000 | % change | % of total | |||||
Net product sales: | ||||||||
ADDERALL XR | 143,484 | 102,429 | +40% | 45% | ||||
AGRYLIN | 33,974 | 36,551 | -7% | 11% | ||||
PENTASA | 26,433 | 24,754 | +7% | 8% | ||||
CARBATROL | 11,863 | 13,915 | -15% | 4% | ||||
Others | 39,526 | 68,022 | -42% | 12% | ||||
255,280 | 245,671 | +4% | 80% | |||||
Royalty income: | ||||||||
3TC | 39,636 | 37,540 | +6% | 12% | ||||
ZEFFIX | 6,802 | 5,721 | +19% | 2% | ||||
Others | 11,219 | 8,575 | +31% | 4% | ||||
57,657 | 51,836 | +11% | 18% | |||||
Licensing and development | 5,482 | 702 | +681% | 1% | ||||
Other | 2,541 | - | n/a | 1% | ||||
Total revenues | 320,960 | 298,209 | +8% | 100% | ||||
6 months | 6 months | 6 months | 6 months | |||||
to June 30, | to June 30, | to June 30, | to June 30, | |||||
2004 | 2003 | 2004 | 2004 | |||||
$’000 | $’000 | % change | % of total | |||||
Net product sales: | ||||||||
ADDERALL XR | 282,946 | 217,592 | +30% | 44% | ||||
AGRYLIN | 72,274 | 76,225 | -5% | 11% | ||||
PENTASA | 53,680 | 54,473 | -1% | 8% | ||||
CARBATROL | 27,648 | 23,336 | +18% | 4% | ||||
Others | 83,326 | 128,606 | -35% | 13% | ||||
519,874 | 500,232 | +4% | 80% | |||||
Royalty income: | ||||||||
3TC | 77,802 | 71,679 | +9% | 12% | ||||
ZEFFIX | 13,140 | 12,120 | +8% | 2% | ||||
Others | 22,860 | 15,800 | +45% | 4% | ||||
113,802 | 99,599 | +14% | 18% | |||||
Licensing and development | 7,397 | 1,096 | +575% | 1% | ||||
Other | 3,487 | 7 | n/a | 1% | ||||
Total revenues | 644,560 | 600,934 | +7% | 100% | ||||
19
Non-GAAP measures for the 6 months to June 30, 2004
Reconciliation of reported EPS:
3 months | 3 months | 6 months | 6 months | |||||
to June 30, | to June 30, | to June 30, | to June 30, | |||||
2004 | 2003 | 2004 | 2003 | |||||
$’000 | $’000 | $’000 | $’000 | |||||
Net income for diluted EPS | 34,007 | 66,827 | 111,247 | 131,274 | ||||
Reorganization costs, net of tax | 13,128 | - | 15,873 | - | ||||
Discontinued operations | 55,506 | 7,205 | 64,292 | 12,922 | ||||
Gain on sale of investment, net of tax | (10,660 | ) | - | (10,660 | ) | - | ||
Net income for diluted EPS excluding reorganization costs, gain on sale of investment and the impact of the discontinued operation | 91,981 | 74,032 | 180,752 | 144,196 | ||||
Diluted EPS (as reported) | 6.8c | 12.8c | 21.5c | 25.1c | ||||
Add back: | ||||||||
Reorganization costs, net of tax | 2.6c | - | 3.1c | - | ||||
Discontinued operations | 11.1c | 1.4c | 12.4c | 2.5c | ||||
Gain on sale of investment, net of tax | (2.1c | ) | - | (2.1c | ) | - | ||
Diluted EPS excluding reorganization costs, gain on sale of investment and the impact of the discontinued operation | 18.4c | 14.2c | 34.9c | 27.6c | ||||
20
UK GAAP Results for the 6 months ended 30 June 2004
Unaudited and Unreviewed Consolidated Profit and Loss Account
3 months | 3 months | 6 months | 6 months | (Audited) | ||||||
to | to | to | to | Year to | ||||||
30 June | 30 June | 30 June | 30 June | 31 December | ||||||
2004 | 2003 | 2004 | 2003 | 2003 | ||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||
Turnover: group and share of joint | ||||||||||
venture | 180,199 | 186,628 | 359,570 | 378,638 | 764,662 | |||||
Less: share of joint venture’s | �� | |||||||||
turnover | - | (810 | ) | - | (1,536 | ) | (3,594 | ) | ||
Group turnover | 180,199 | 185,818 | 359,570 | 377,102 | 761,068 | |||||
Cost of sales | (18,789 | ) | (27,162 | ) | (39,736 | ) | (49,496 | ) | (102,384 | ) |
Gross profit | 161,410 | 158,656 | 319,834 | 327,606 | 658,684 | |||||
Net operating expenses | (119,547 | ) | (130,065 | ) | (240,180 | ) | (274,014 | ) | (957,921 | ) |
Operating profit/(loss): | 41,863 | 28,591 | 79,654 | 53,592 | (299,237 | ) | ||||
Share of joint venture’s operating loss | - | (1,263 | ) | - | (1,991 | ) | (2,806 | ) | ||
Provision for loss on disposal | (23,191 | ) | - | (23,191 | ) | - | - | |||
Finance charges, net | 1,845 | 1,492 | 3,330 | 3,177 | 3,702 | |||||
Profit/(loss) on ordinary activities | ||||||||||
before taxation | 20,517 | 28,820 | 59,793 | 54,778 | (298,341 | ) | ||||
Tax on profit/(loss) on ordinary activities | (21,205 | ) | (15,628 | ) | (37,049 | ) | (30,815 | ) | (65,014 | ) |
(Loss)/profit on ordinary activities | ||||||||||
after taxation | (688 | ) | 13,192 | 22,744 | 23,963 | (363,355 | ) | |||
Dividends | (4,963 | ) | - | (4,963 | ) | - | - | |||
Retained (loss)/profit for the period | ||||||||||
transferred to reserves | (5,651 | ) | 13,192 | 17,781 | 23,963 | (363,355 | ) | |||
Earnings per share | ||||||||||
Basic | ||||||||||
Net (loss)/income | (1.1p | ) | 2.6p | 3.6p | 4.8p | (72.9p | ) | |||
Diluted | ||||||||||
Net (loss)/income | ||||||||||
(1.1p | ) | 2.6p | 3.6p | 4.8p | (72.9p | ) | ||||
21
UK GAAP Results for the 6 months ended 30 June 2004
Unaudited and Unreviewed Consolidated Statement of Total Recognised Gains and Losses
3 months | 3 months | 6 months | 6 months | (Audited) | ||||||
to | to | to | to | Year to | ||||||
30 June | 30 June | 30 June | 30 June | 31 December | ||||||
2004 | 2003 | 2004 | 2003 | 2003 | ||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||
(Loss)/profit for the period | (5,651 | ) | 13,192 | 17,781 | 23,963 | (363,355 | ) | |||
Translation of the financial statements of | ||||||||||
overseas subsidiaries | 11,295 | (20,039 | ) | (17,022 | ) | 8,834 | (47,157 | ) | ||
Total recognised gains and losses relating | ||||||||||
to the period | 5,644 | (6,847 | ) | 759 | 32,797 | (410,512 | ) | |||
22
UK GAAP Results for the 6 months to 30 June 2004 | ||||||
Unaudited and Unreviewed Consolidated Balance Sheet | ||||||
(Audited) | ||||||
30 June | 31 December | 30 June | ||||
2004 | 2003 | 2003 | ||||
£’000 | £’000 | £’000 | ||||
Fixed assets | ||||||
Intangible assets – intellectual property | 174,190 | 171,548 | 186,541 | |||
Intangible assets – goodwill | 1,328,217 | 1,365,583 | 1,847,076 | |||
Tangible assets | 97,980 | 97,054 | 101,209 | |||
Fixed asset investments | 24,503 | 33,269 | 37,411 | |||
Investment in joint ventures | ||||||
Share of gross assets | - | - | 3,850 | |||
Share of gross liabilities | - | - | (523 | ) | ||
1,624,890 | 1,667,454 | 2,175,564 | ||||
Current assets | ||||||
Stocks | 32,397 | 25,282 | 32,969 | |||
Debtors | ||||||
- due within one year excluding deferred tax | 124,908 | 141,046 | 136,073 | |||
- due within one year – deferred tax | 39,666 | 36,049 | 22,275 | |||
- due after more than one year excluding deferred tax | 5,954 | 9,224 | 13,713 | |||
- due after more than one year - deferred tax | - | - | 13,393 | |||
Current asset investments | 150,073 | 169,895 | 206,386 | |||
Cash at bank and in hand | 751,668 | 621,670 | 513,548 | |||
1,104,666 | 1,003,166 | 938,357 | ||||
Creditors: amounts falling due within one year | ||||||
Convertible debt | (200,315 | ) | - | - | ||
Other creditors | (167,731 | ) | (141,722 | ) | (132,601 | ) |
(368,046 | ) | (141,722 | ) | (132,601 | ) | |
Net current assets | 736,620 | 861,444 | 805,756 | |||
Total assets less current liabilities | 2,361,510 | 2,528,898 | 2,981,320 | |||
Creditors: amounts falling due after more than one | ||||||
Convertible debt | - | (202,659 | ) | (219,544 | ) | |
Deferred tax | (866 | ) | (782 | ) | - | |
Other creditors | (48,264 | ) | (16,957 | ) | (11,683 | ) |
(49,130 | ) | (220,398 | ) | (231,227 | ) | |
Net assets | 2,312,380 | 2,308,500 | 2,750,093 | |||
Capital and reserves | ||||||
Called-up share capital | 24,063 | 23,895 | 23,866 | |||
Share premium | 3,248,909 | 3,218,695 | 3,217,006 | |||
Exchangeable shares | 163,164 | 190,425 | 190,442 | |||
Capital reserve | 3,135 | 3,135 | 3,135 | |||
Other reserves | 24,247 | 24,247 | 24,247 | |||
Profit and loss account deficit | (1,151,138 | ) | (1,151,897 | ) | (708,603 | ) |
Equity shareholders’ funds | 2,312,380 | 2,308,500 | 2,750,093 | |||
23 |
UK GAAP Results for the 6 months ended 30 June 2004 | ||||
Unaudited and Unreviewed Consolidated Cash Flow Statement | ||||
6 months to | 6 months to | |||
30 June | 30 June | |||
2004 | 2003 | |||
£’000 | £’000 | |||
Net cash inflow from operating activities (note 2a) | 150,909 | 98,224 | ||
Returns on investments and servicing of finance: | ||||
Interest received | 5,767 | 7,303 | ||
Interest paid | (2,300 | ) | (4,090 | ) |
Interest element of finance leases | (38 | ) | (36 | ) |
Net cash inflow from returns on investments and | ||||
servicing of finance | 3,429 | 3,177 | ||
Taxation: | ||||
Overseas corporation tax paid | (45,080 | ) | (46,605 | ) |
Capital expenditure and financial investments: | ||||
Purchase of long term investment | (3,039 | ) | (912 | ) |
Purchase of intangible fixed assets | (6,525 | ) | (14,568 | ) |
Purchase of tangible fixed assets | (14,730 | ) | (16,992 | ) |
Distribution from long-term investment | 672 | - | ||
Proceeds from sale of long-term investment | 14,936 | - | ||
Proceeds from sale of tangible fixed assets | 5,008 | - | ||
Cost incurred on sale of business | (1,054 | ) | - | |
Net cash outflow for capital expenditure and financial | ||||
investments | (4,732 | ) | (32,472 | ) |
Cash inflow before management of liquid resources | ||||
and financing | 104,526 | 22,324 | ||
Management of liquid resources: | ||||
Decrease/(increase) in cash placed on short-term deposit | 17,630 | (6,235 | ) | |
Financing: | ||||
Issue of ordinary share capital | 178 | - | ||
Payments for redemption of share capital | - | (31,822 | ) | |
Exercise of share options | 2,942 | 1,412 | ||
Net decrease in debt during the year | 354 | (18,400 | ) | |
Capital element of finance leases | (75 | ) | (75 | ) |
Net cash inflow/(outflow) from financing | 3,399 | (48,885 | ) | |
Increase/(decrease) in cash in the year | 125,555 | (32,796 | ) | |
24
UK GAAP Results for the 6 months ended 30 June 2004
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements
(1) Earnings per share (EPS)
Basic EPS is based upon the profit on ordinary activities after taxation divided by the weighted-average number of ordinary shares outstanding during the period.
Diluted EPS is based upon the profit on ordinary activities after taxation divided by the weighted-average number of ordinary shares outstanding during the period and adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the period.
Stock options to purchase approximately 18.0 million and 14.6 million common shares for the three months and six months ended 30 June 2003 respectively, were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.
The warrants to purchase approximately 1.4 million common shares for the 3 and 6 months ended 30 June 2003 were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.
The $370 million convertible loan note is excluded from the calculation of weighted average number of shares for fully diluted earnings per share for the three months and six months ended 30 June 2004 and 2003 as it was not dilutive.
3 months to | 3 months to | 6 months to | 6 months to | |||||
30 June | 30 June | 30 June | 30 June | |||||
2004 | 2003 | 2004 | 2003 | |||||
No. of shares | No. of shares | No. of shares | No. of shares | |||||
Weighted average number of shares: | ||||||||
Basic | 496,074,144 | 501,504,962 | 495,896,175 | 501,746,083 | ||||
Effect of dilutive shares: | ||||||||
Stock options | 3,115,296 | 2,030,976 | 3,460,629 | 1,470,870 | ||||
Warrants | 52,392 | - | 94,742 | - | ||||
Diluted | 499,241,832 | 503,535,938 | 499,451,546 | 503,216,953 | ||||
Reconciliation of reported EPS: | ||||||||
3 months to | 3 months to | 6 months to | 6 months to | |||||
30 June | 30 June | 30 June | 30 June | |||||
2004 | 2003 | 2004 | 2003 | |||||
£’000 | £’000 | £’000 | £’000 | |||||
Net income for basic and diluted EPS | (5,651 | ) | 13,192 | 17,781 | 23,963 | |||
25
UK GAAP Results for the 6 months ended 30 June 2004
Selected Notes to the Unaudited and Unreviewed 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
6 months to | 6 months to | |||
30 June 2004 | 30 June 2003 | |||
£’000 | £’000 | |||
Group operating profit | 79,654 | 53,592 | ||
Exchange loss | - | 2,298 | ||
Depreciation | 5,384 | 4,734 | ||
Amortisation of intangible fixed assets | 47,616 | 62,630 | ||
Profit on sale of investments | (8,264 | ) | - | |
Profit on sale of fixed assets | (43 | ) | - | |
Write-off of fixed asset investments | 3,882 | 5,251 | ||
Write-off of intangible fixed assets | - | 1,996 | ||
Write-off of tangible fixed assets | 680 | - | ||
Increase in stocks | (4,838 | ) | (2,398 | ) |
Decrease/(increase) in debtors | 13,198 | (26,494 | ) | |
Increase/(decrease) in creditors | 13,640 | (3,385 | ) | |
Net cash inflow from operating activities | 150,909 | 98,224 | ||
(b) Analysis and reconciliation of net funds
6 months to 30 June 2004 | Other non- | |||||||||
Start of | cash | Exchange | End of | |||||||
period | Cash flow | changes | movement | period | ||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||
Cash at bank and in hand | 621,670 | 125,555 | - | 4,443 | 751,668 | |||||
Debt due within one year | (431 | ) | - | (198,495 | ) | (1,796 | ) | (200,722 | ) | |
Finance leases | (158 | ) | 14 | - | 2 | (142 | ) | |||
621,081 | 125,569 | (198,495 | ) | 2,649 | 550,804 | |||||
Debt due after one year | (203,083 | ) | (354 | ) | 198,495 | 4,535 | (407 | ) | ||
Finance leases | (3,238 | ) | 61 | - | 42 | (3,135 | ) | |||
414,760 | 125,276 | - | 7,226 | 547,262 | ||||||
Current assets investments | 169,895 | (17,630 | ) | - | (2,192 | ) | 150,073 | |||
Net funds | 584,655 | 107,646 | - | 5,034 | 697,335 | |||||
26
UK GAAP Results for the 6 months ended 30 June 2004
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements (continued)
(2) Notes to the consolidated cash flow statement (continued)
(b) Analysis and reconciliation of net funds (continued)
6 months to 30 June 2003 | Start of | Cash | Exchange | End of | ||||
period | flow | movement | period | |||||
£’000 | £’000 | £’000 | £’000 | |||||
Cash at bank and in hand | 558,432 | (32,796 | ) | (12,088 | ) | 513,548 | ||
Debt due within one year | (389 | ) | (1 | ) | (52 | ) | (442 | ) |
Finance leases | (162 | ) | (19 | ) | 2 | (179 | ) | |
557,881 | (32,816 | ) | (12,138 | ) | 512,927 | |||
Debt due after one year | (244,325 | ) | 18,408 | 5,490 | (220,427 | ) | ||
Finance leases | (3,757 | ) | 87 | 89 | (3,581 | ) | ||
309,799 | (14,321 | ) | (6,559 | ) | 288,919 | |||
Current asset investments | 196,364 | 6,235 | 3,787 | 206,386 | ||||
506,163 | (8,086 | ) | (2,772 | ) | 495,305 | |||
(c) Reconciliation of net funds | ||||||||
6 months to | 6 months to | |||||||
30 June | 30 June | |||||||
2004 | 2003 | |||||||
£’000 | £’000 | |||||||
Increase/(decrease) in cash in the period | 125,555 | (32,796 | ) | |||||
Cash (inflow)/outflow from (increase)/decrease in debt and lease financing | (279 | ) | 18,475 | |||||
Cash (inflow)/outflow from (decrease)/increase in liquid resources | (17,630 | ) | 6,235 | |||||
Change in net funds resulting from cash flows | 107,646 | (8,086 | ) | |||||
Translation difference | 5,034 | (2,772 | ) | |||||
Movement in net funds in period | 112,680 | (10,858 | ) | |||||
Net funds at start of period | 584,655 | 506,163 | ||||||
Net funds at end of period | 697,335 | 495,305 | ||||||
(3) Basis of preparation |
The Group has applied consistent accounting policies throughout both periods.
The results for the three and six months ended 30 June 2004 have not been audited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The financial information relating to the year ended 31 December 2003 has been extracted from the full report and accounts which have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified.
The UK interim financial statements were approved by the Board on 28 July 2004.
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