Merck 2014 Annual Report Download - page 94

89GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Course of business and economic position
GROUP →
RESEARCH AND DEVELOPMENT COSTS BY DIVISION – 2014
€ million / in %
%
Biopharmaceuticals → 1,343.7
Consumer Health → 22.3
Performance Materials → 170.6
Life Science → 162.6
1
10
10
79
The increase in research and development costs was mainly attrib-
utable to the Biopharmaceuticals division and included in partic-
ular expenses for provisions set up for unavoidable subsequent
costs that are likely to be incurred in connection with the discon-
tinuation of clinical
development programs. Consequently, 79 % of
Group-wide research
and development spending was attributable
to this division (2013: 78 %). The Group research spending ratio
(research and develop
ment costs as a percentage of sales) rose
accordingly to 15.1 %
(2013: 14.1 %).
In 2014, the improvement in other operating expenses and income
(net) to €– 258 million (2013: € – 718 million) mainly reflected
the adjustment of provisions for litigation, lower expenses from
one-time items and higher foreign exchange gains (see also
“Other operating expenses and income” in the Notes to the Group
accounts). However, other operating expenses and income were
affected in 2014 by higher impairments of intangible assets in
connection with the discontinuation of clinical development pro-
grams in the Biopharmaceuticals division.
Owing to the good performance of the Merck KGaA, Darmstadt,
Germany, share price compared with the DAX, expenses from addi-
tions to provisions within the scope of the company’s Long-Term
Incentive Plan ( LTIP ) were higher in 2014 than in the previous year.
The intrinsic value of the Share Units of MerckKGaA, Darmstadt,
Germany, (MSUs) was recognized under the respective functional
costs in the income statement depending on the field of activity of
the eligible participants. MSUs are virtual shares in the
Group that
eligible executives and employees could receive at the end of a
three- year performance period within the scope of the LTIP .
As a result of the development of income and expenses
described above, the operating result (EBIT) of the Group increased
by 9.4 % to €1,762 million in 2014.
The improvement in the financial result by €17 million to €– 205
million was largely attributable to the positive development of the
interest result (see also “Financial Result” in the Notes to the Group
accounts).
Income tax expenses of €392million (2013: €180 million) led
to a tax ratio of 25.2 % (2013: 12.9 %). The low tax ratio of the
previous year was attributable to one-time deferred tax income
(see also “Income Tax” in the Notes to the Group accounts).
Net income, i.e. profit after tax attributable to MerckKGaA,
Darmstadt, Germany, shareholders, in 2014 was €1,157 million
(2013: €1,202 million). Taking the share split into account, this
resulted in earnings per share of €2.66 (2013: €2.77).
The key financial indicator used to steer operating business,
EBITDA pre one-time items, climbed 4.1 % to €3,388million (2013:
€3,253 million). The resulting EBITDA pre margin of 30.0 % nearly
reached the year-earlier level (30.4 %). The reconciliation of the
operating result (EBIT) to EBITDA pre one-time items is presented
under “Internal management system of the Group”.