Better Health. Within Reach. Every Day
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Better health. Within reach. Every day. © Hikma Pharmaceuticals PLC Annual Report 2020 Welcome to our 2020 Annual Report Our performance Revenue Operating profit Hikma puts ($m) ($m) better health $2,341m $579m 4 Executive Chairman’s 26 Business and +6% +17% within reach, statement financial review We are delivering results and investing Achieved strong organic growth in the future to drive sustainable over our three business segments. every day. 1 2 long-term growth and create value Core operating profit EBITDA for stakeholders. ($m) ($m) $566m $670m +11% +13% By creating high-quality products and making them accessible to those who need Profit to shareholders Basic earnings per share ($m) (cents) them we are helping to shape a healthier world that enriches $431m 182.6c all our communities. 6 Chief Executive 38 Sustainability (11)% (9)% Officer’s statement We have a duty of care towards patients, communities, our people The resilience and commitment and the environment. of our people in a challenging year enabled us to maintain supply Core basic earnings per share3 Dividend per share of vital medicines for patients. (cents) (cents) Strategic report Corporate governance 2 What we do 63 Message from our Executive Chairman 4 Executive Chairman’s statement 64 Corporate governance at a glance 172.9c 50c 6 Chief Executive Officer’s statement 66 Board of Directors 9 Investment case 68 Executive Committee 10 Our response to COVID-19 70 Governance report Deliver +15% +14% 12 Our strategy 74 Committee reports 14 Our progress 90 Remuneration report 16 Our markets 105 Directors’ report 18 Our business model Better health. 20 Stakeholder engagement Financial statements Within reach. 1. Core results are presented to show the underlying performance of the Group, excluding the exceptional Every day. items and other adjustments set out in Note 6 in the Notes to the consolidated financial statements. 110 Independent auditors’ report Build Business and financial review A reconciliation from core to reported operating profit is included within the Consolidated income 118 Consolidated financial statements 26 Group overview statement in the Financial statements 123 Notes to the consolidated 28 Injectables Inspire 2. EBITDA is earnings before interest, tax, depreciation, amortisation and impairment charges. financial statements EBITDA is a non-IFRS measure, see page 36 for a reconciliation to reported IFRS results 30 Generics 62 171 Company financial statements 3. Core basic earnings per share is reconciled to basic earnings per share in Note 15 in the Notes 32 Branded Corporate 173 Notes to the Company to the consolidated financial statements 34 Group performance financial statements governance Sustainability The Board has continued to deliver 38 Sustainability Shareholder information Risk management strong governance and strategic 179 Shareholder information 12 52 Risk management 180 Principal Group Companies Our strategy oversight in a challenging 60 Compliance and Advisers Our purpose is to make healthcare environment. more accessible by delivering on our three strategic priorities. Hikma Pharmaceuticals PLC Annual Report 2020 1 What we do We develop, manufacture and market a broad range of generic pharmaceutical products across the US, MENA and Europe. c.8,600 31 7 780+ employees manufacturing plants R&D centres products We are also a leading licensing partner. in 11 countries Our markets Our business segments Segmental core revenue Injectables $977m (2019: $890m) Generics $744m (2019: $719m) Branded $613m (2019: $583m) US MENA Europe & ROW Other $7m (2019: $11m) c.1,900 c.5,700 c.1,000 employees employees employees US % Group core revenue Our large manufacturing facilities in the United States (US) – one US 60% (2019: 61%) for injectables and one for non-injectables – supply products across MENA 33% (2019: 33%) a broad range of therapeutic areas, including respiratory, oncology and pain management. We also have two dedicated R&D facilities Europe & ROW 7% (2019: 6%) Injectables Generics Branded to support sustainable growth. Our Injectables business develops Our Generics business develops Our Branded business develops MENA and manufactures generic injectable and manufactures oral and other and manufactures branded generics We sell branded generics and in-licensed patented products products. Our products are sold non-injectable generic products. and markets and sells in-licensed across the Middle East and North Africa (MENA). We have across our markets and are primarily Our products are sold in the patented products in MENA. Our manufacturing facilities in seven countries, including US FDA- used in hospitals. US retail market. products are sold in the retail and inspected plants in Jordan and Saudi Arabia. Around 2,000 sales hospital markets. representatives and support staff market our brands to healthcare professionals across 18 markets. Europe and the rest of the world (ROW) We have injectable manufacturing facilities in Portugal, Germany and Italy, with a range of capabilities including dedicated capacity for oncology and cephalosporins. These facilities supply injectable products to the US and MENA and a growing number of markets in Europe. 2 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 3 Executive Chairman’s statement In Beirut, following the terrible explosion in Further detail on the activities of the Board At Hikma we focus on quality and August, we were on the ground immediately, and its Committees are set out in the delivering medicines, which we donated to Corporate governance section of this report hospital groups in the region. We also worked on pages 62-108. I would like to reliability in everything we do. with the charity Anera in Lebanon to help provide specialised medicine to nearly 100 Financial performance and thank all of children suffering from sickle cell disease. shareholder returns You can read more about our community Hikma performed well in 2020 with good our employees, outreach and stakeholder considerations revenue growth and an improvement in core on pages 23 and 39-43 of this report. profitability. as well as our The business has cemented its strength in Our culture and our people customers, Said Darwazah the debt capital markets, with the raising of a In 2020 we introduced our new corporate new $500 million Eurobond in July, following suppliers, Executive Chairman culture programme anchored on the twin the repayment of our previous bond in April. pillars of progress and belonging, and Furthermore, during the year we achieved shareholders powered by three core values: innovation, investment grade status from two ratings collaboration and caring. These values agencies – an accomplishment which and other guide our behaviours and help foster an reflects the quality of the business. environment where everyone is appreciated and can do their best work. In June, Boehringer Ingelheim (BI) exited stakeholders as entirely from its strategic stake in Hikma, We conducted a company-wide employee and we took this unique opportunity to utilise we look forward survey, for which we had a 90% response our balance sheet strength and repurchase rate. The results show our engagement a portion of BI’s holding. The purchase to continued scores improving, highlighting the pride highlights the Board’s conviction in the that employees have in working for Hikma. continued success of Hikma and its success in 2021. We value diversity in our workforce, and we long-term growth prospects. Our strong are implementing policies and programmes, balance sheet enabled us to comfortably to ensure that we are the inclusive and undertake this transaction whilst maintaining inspiring place to work that our founder set continued financial flexibility. out to establish. We remain committed to paying a dividend We have established the Diversity Equity to our shareholders. Acknowledging the and Belonging (DEB) Task Force, a sub- strong financial performance in 2020, as well committee of the Executive Committee, as our robust balance sheet, the Board has to oversee the adoption of a more inclusive recommended a final dividend of 34 cents approach to employee recruitment, retention per share. Combined with the interim and promotion. In the US we have divided of 16 cents per share, this represents established the Black Employees Advisory a 14% increase in the total dividend for the Board, an employee-led initiative to enhance full year in 2020, to 50 cents per share our diversity, equity and belonging goals. (approximately 36 pence per share), up from 44 cents per share (approximately 34 pence Importance of our purpose Quality and reliability Communities and our responsibility Corporate governance per share) in 2019. Our values Hikma’s purpose to put better health within A founding principle of Hikma is the to give back Our CEO, Siggi Olafsson, has been in the role To foster a culture of progress and reach, every day drives us to bring important, importance we place on quality and Fulfilling our purpose of putting better health for three years now and I am delighted with Future prospects The strategy we set out when Siggi joined belonging, we have three core values: quality and affordable medicines to people reliability. Our customers trust us to deliver within reach every day is not only about the progress we have made since he joined. Hikma in 2018 is delivering results. A focus who need them. In 2020, the COVID-19 high-quality and affordable medicines when providing medicines. We have a strong Siggi has energised the business, helped us on the foundation has helped deliver pandemic truly galvanised this mission. I am they need them. In recent years we have legacy of supporting the communities in build on our strong foundations, and not Innovation a strong performance this year, and our proud of the role we have played, along with invested significantly to ensure we maintain which we live and work, and in 2020 these lost sight of the important qualities and We keep learning, inspire others pipeline is expanding as we continue many others in the pharmaceutical industry, this quality and reliability as we grow.