ii view: Hikma Pharmaceuticals ups the dividend by 17%

Hikma Pharmaceuticals raises full-year guidance and rewards investors.

Half-year results  

• Revenue up 7% to $1.05 billion
• Operating profit up 37% to $238 million
• Interim dividend payment up 17% to 14 cents per share
• Increased full year guidance

Chief executive Siggi Olafsson said:

"All of our businesses are performing well.  We are delivering more from our unique and diversified business model, leading market positions and high-quality operations to drive strong organic growth.   Our good half-year financial results demonstrate the breadth and resilience of our marketed portfolio, successful pipeline launches and actions we've taken to reduce costs and increase efficiencies.  During the first half, we continued to focus on pipeline development.  We increased investment in our R&D programmes, added new products through partnerships and strengthened our R&D team."

ii round-up:

Founded in Jordan in 1978, today Hikma Pharmaceuticals (LSE:HIK) supplies over 650 medicines and products globally.

Products fall into the three categories of injectables, generics and branded

Therapeutic categories include anti-infectives, cardiovascular, central nervous system, diabetes, oncology, pain management and respiratory.

Headquartered in the UK, it employs over 8,000 people across more than 50 countries, with the US accounting for around two-thirds of group sales. 

Hikma reported solid progress in these half-year results. Generic products led the way, with strong demand and recent launches more than offsetting price erosion. It launched 37 new products during the half. 

Consolidation of its manufacturing facilities in 2018 helped reduce costs. 

Management raised its full year guidance and rewarded shareholders with a 17% hike in the dividend payment. 

The share price rose by over 6% in afternoon UK stock market trading. 

ii view:

Hikma is the third largest US supplier of generic injectable medicines. One in every six generic injectable medicines used in US hospitals are a Hikma product. In 2016 the company received a Drug Shortage Assistance Award from the US Food and Drug Administration (FDA) for its role in preventing or alleviating drug shortages.

For investors, defensive qualities and a forward price earnings ratio below the ten-year average offer appeal. Larger rivals such as AstraZeneca (LSE:AZN) and GlaxoSmithKline (LSE:GSK) offer higher dividend yields, but dividend earnings cover of over three times at Hikma potentially provides room for future growth.

Positives: 

• Diversity in both product and geographical location
• Strong R&D pipeline - submitted 122 regulatory product filings

Negatives:

• Currency translation can hinder performance
• Key markets Saudi Arabia and Egypt can suffer political instability

The average rating of stock market analysts:

Buy