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RNS
Alliance Pharma PLC  -  APH   

Full Year Results

Released 07:00 29-Mar-2017

RNS Number : 8463A
Alliance Pharma PLC
29 March 2017
 

 

                                                  29 March 2017

 

 

 

ALLIANCE PHARMA PLC

("Alliance" or the "Group")

Results for the year ended 31 December 2016

Alliance Pharma plc (AIM: APH), the specialty pharmaceutical company, is pleased to announce its results for the year ended 31 December 2016.

 

Financial Highlights

·      Revenue up 102% at £97.5m (2015: £48.3m)

Reflecting a full year's ownership of the products acquired from Sinclair Pharma plc ("Sinclair") in December 2015

·      EBITDA* up 102% to £26.0m (2015: £12.9m)

·      Pre-tax profit up 103% to £22.2m (2015: £11.0m (underlying))

·      Diluted EPS** up 11% at 3.82p (2015: 3.44p)

·      Free cash flow*** up 110% to £13.0m (2015: £6.2m) - £10.9m generated in the second half of the year

·      Net bank debt**** of £76.1m (2015: £71.5m) - a reduction from £79.0m at 30 June 2016

Gearing at year end of 2.8 times (Net debt to adjusted EBITDA ratio)

·      Proposed dividend:

Final dividend up 10% to 0.807p per share (2015: 0.734p)

Full year dividend up 10% to 1.210p per share (2015: 1.100p)

 

*See note 3 **See note 8 ***See note 13 ****See note 12

 

Operational Highlights

·      Successfully integrated 27 products acquired from Sinclair, effectively doubling the size of the Group

·      Achieved strong growth with Kelo-cote™ and MacuShield™, our key international growth products.  Kelo-cote became our first £10m brand

·      Negotiated the in-licensing of Diclectin™ across a further nine EU territories - a unique opportunity for nausea and vomiting of pregnancy

·      Agreed settlement post year-end with Sinclair, including £5m cash compensation, in relation to the material reduction of business in Kelo-stretch, as announced on 21 March 2017

 

Commenting on the results, Andrew Smith, Alliance's Chairman, said: "2016 has been transformational for Alliance following the acquisition of the Sinclair healthcare products business. Sales and profits have broadly doubled and our geographic reach extends to more than 100 countries. Having successfully integrated the acquisition, we are now focused on our three international growth opportunities - Kelo-cote, MacuShield and Diclectin.

"The current year has started well and we look forward to building on our foundations: an attractive, balanced portfolio, an expanded geographic footprint and a strong team."

 

 

 

For further information:

 

Alliance Pharma plc

+ 44 (0) 1249 466966

John Dawson, Chief Executive

 

Andrew Franklin, Chief Financial Officer

 

www.alliancepharma.co.uk

 

Buchanan

+ 44 (0) 20 7466 5000

Mark Court / Sophie Cowles / Jane Glover

 

 

 

Numis Securities Limited

+ 44 (0) 20 7260 1000

Nominated Adviser: Michael Meade / Freddie Barnfield

 

Corporate Broking: James Black / Toby Adcock

 

 

 

Notes to editors:

 

About Alliance

Alliance, founded in 1998, is an international speciality pharmaceutical company based in Chippenham, Wiltshire, UK. The Company has sales in more than 100 countries worldwide via direct sales, joint ventures and a network of distributors.  Alliance has a strong track record of acquiring the rights to established niche products and it currently owns or licenses the rights to approximately 90 pharmaceutical and consumer healthcare products. The Company continues to explore opportunities to expand its product portfolio.

Alliance joined the AIM market of the London Stock Exchange in December 2003 and trades under the symbol APH.

 

 

Chairman's and Chief Executive's Review

 

We are pleased to report a year of significant progress for the Group, including the successful integration of our transformational acquisition announced in December 2015.

 

Significant achievements in the year

 

We successfully integrated the ex-Sinclair products into Alliance - effectively doubling our size - while at the same time achieving our growth targets. One of the successes of the acquisition has been the establishment of a meaningful infrastructure across the 'big 5' EU markets. An early example of the value of this is the signing of an in-licensing agreement for Diclectin for the EU. This is our first pan-European deal, and would not have been possible prior to the acquisition of the Sinclair products. Our new offices in Milan, Madrid, and Singapore, along with the enlargement of our Düsseldorf office, the major refurbishment of our Paris office and the significant broadening of our distributor base, give us a strong platform for further international growth.

 

Kelo-cote, our scar reduction product, passed a milestone to become our first £10m brand. MacuShield, our nutritional supplement product for age-related macular degeneration (AMD), also performed strongly, growing by 40% to achieve sales of £5.3m. Hydromol, our emollient range, achieved sales of £7.0m in a competitive market (+6% vs. 2015). We also saw strong growth from our UK consumer health products as a result of marketing and distribution initiatives, including Ashton & Parsons Infants' Powders, whose sales grew by 34% to £2.0m (2015: £1.5m).

 

These achievements, and more, are testament to the calibre and hard work of our 175 colleagues, who are now part of stronger, more capable teams working to a common set of values. We are proud of our 'can do' culture and progressive approach to employment practices, and our enlarged business and international footprint provide greater opportunities for development and growth.

 

Delivery of such growth performance is only possible with a supply chain that is robust and flexible, for which we wish to thank our partners with whom we work closely.

 

Market context

 

We operate in the international market for healthcare products, of which global prescribed medicines had estimated sales of €853 billion in 2015, up 29% from 2013 (Source: IMS MIDAS WRPWW). Healthcare is set to remain an attractively growing market, underpinned by longstanding factors such as on-going medical advances and aging populations in many developed markets in which we operate.

 

There has been a theme of budgetary control from the funders of prescription healthcare in several of our markets. In the UK, Clinical Commissioning Groups are exerting strong budgetary influences on the prescribing of general practitioners. Similarly, in Germany, the Krankenkassen health insurance funds are employing price control measures. Despite such cash constraints in European healthcare, the sector remains attractive.

 

The diversity of our portfolio (with a balance between consumer and prescription products) and our international footprint together position us well to benefit from trends in specific segments and geographies and equally to reduce risk.

 

Strategy

 

Our vision is to be the rising star of European specialty pharma, and with the establishment of our pan-European infrastructure we have laid down a strong foundation to achieve this ambition.

 

Our growth strategy comprises two key strands:

·      Buy (acquisitions and in-licensing); and

·      Build (maximising and extending brand potential, and international expansion).

 

Buy

 

Acquisitions and in-licensing

 

Our focus in 2016 was the integration of the very large acquisition of Sinclair's Healthcare Products business, which was approximately equivalent in size to Alliance Pharma. For that reason we did not make any acquisitions in 2016, although we kept in touch with the market through our networking activities, and have a pipeline of opportunities to evaluate in 2017.

 

The principal in-licensing opportunity was the European rights for Diclectin, and we expect to submit for regulatory approval for nine EU territories later in 2017, following the anticipated UK approval in Q3 2017. We are excited about the opportunity to serve this unmet market, as there is no licensed treatment for nausea and vomiting of pregnancy in the UK, nor in most European markets. Extensive market research points to the large unmet need for such a treatment.

 

Build

 

Maximising and extending brand potential

 

Our portfolio has grown considerably to more than 90 products.   Naturally we focus our brand-building efforts where we see the greatest potential.

 

Our key international growth brands are Kelo-cote, MacuShield and Diclectin (to be launched). Kelo-cote grew by 24% to become our first £10m brand with China being it's largest market and we were delighted last year to sign a new agreement with our distributor there. Additionally we were also pleased to see good performance in other territories of the Asia Pacific region, where the market for advanced personal care products is strong and growing. MacuShield also performed well, growing from £3.5m in 2015 (11 months) to £5.3m in 2016. A feature common to both Kelo-cote and MacuShield is the two-pronged approach to promotion. We promote the advantages of the products to clinicians who give a recommendation to their patients to purchase the product from a retailer, where our consumer marketing ensures distribution and availability on the shelf.

 

At the national level, key products that are a focus for brand-building include: Hydromol for eczema (2016 sales £7.0m mainly in the UK, vs £6.6m in 2015), Aloclair for mouth ulcers, where the major markets are Italy and Spain (2016 total brand sales of £6.3m); Oxyplastine for nappy rash/eczema, where the major markets are France and N. Africa (2016 total brand sales £2.8m); and Ashton & Parsons for teething infants in the UK (2016 sales £2.0m vs £1.5m in 2015).

 

Finally, completing our portfolio is a bedrock of over 70 products that deliver stable and reliable sales without any significant promotional expenditure. These products are predominantly prescription medicines, occupying niche positions and are engrained into prescribing practice. 

 

We have greatly expanded the number of territories to which we distribute. Our teams are now exploring opportunities in countries where our brands are not currently sold, within the constraints of the regulatory environment, clinical practice and the competitive backdrop in those markets.

 

Delivering efficiency gains

 

Efficiency and operational capabilities are further core elements of our strategy to build value. As part of the integration of the acquired Sinclair products we have taken the opportunity to develop our internal structures to manage the expanded and more international business, and have brought in new functions and capabilities such as treasury and international tax management. The refurbishment of several of our offices will ensure we continue to provide an attractive working environment for our valued colleagues.

 

We are also embarking on the implementation of an ERP system, having evaluated the options with a highly skilled project team that included third party specialists. The ERP system will cover all of the Group's financial and supply chain planning and fulfilment activities, and we expect this to be operational in 2018.

 

Financial Review

 

Group performance

 

Group revenue for 2016 is more than double the prior year at £97.5m (2015: £48.3m). The ex-Sinclair products delivered sales of £43.8m and represented 45% of total sales, with the remaining Alliance portfolio performing strongly and delivering a sales increase of 13% to £53.7m for the year (2015: £47.5m).

 

Group sales were enhanced by approximately £4.2m due to the weakening of Sterling that occurred over the year, primarily against the Euro and US Dollar. However the effect on operating profits was much lower at approximately £0.6m due to the natural Euro hedge that exists, whereby Euro-denominated movements in sales are matched by corresponding movements in Euro-denominated cost of goods and operating costs.

 

Gross profit was up 91% to £54.8m (2015: £28.7m), giving a gross margin for the year of 56.3% (2015: 59.4%). The reduction to the margin on the rate achieved in 2015 was due to the change in sales mix in the expanded portfolio. We expect to maintain an average gross margin in the range of 55-60% of sales.

 

EBITDA increased to £26.0m from £12.9m (see note 3) representing a 102% increase. Operating expenses were £29.2m in 2016 against £16.3m (underlying) in 2015. The increase resulted from the full-year effect of the ex-Sinclair products' cost base and increased promotional support given to our key growth brands.

 

The tax charge for the year of £4.1m is based upon the prevailing tax rates in the relevant countries, after taking into account the impact of the planned reduction in the UK corporation tax rate on our deferred tax balances, and equates to an effective rate of 18.6%. The Group's underlying effective tax rate for 2016, in the absence of the UK tax rate reduction impact on deferred tax, was 22.0% which better reflects our effective tax rate forecast.

 

Diluted earnings per share grew by 11% to 3.82p (2015: 3.44p (underlying)). 

 

Working capital

 

The build-up of trade receivables and trade payables in 2016 was a result of the acquisition of the Sinclair Healthcare Products Business.

 

As such, trade receivables increased from £11.6m to £26.7m and trade payables increased from £13.9m to £22.0m. These increases primarily occurred in the first half of 2016 and have now stabilised.

 

Inventories increased over the period from £12.9m to £15.4m as a result of the strategic build-up of certain key products whilst they were transferred to new manufacturing partners.

 

Cash flow and net debt

 

The increase in cash and cash equivalents over the year was £4.0m.

 

The first half of 2016 was affected by the normalisation of working capital movements. Full year free cash flow (cash generation from operating activities less interest, tax and capital expenditure) was up 110% increasing to £13.0m (2015: £6.2m). Cash conversion was particularly good in the second half of the year with the generation of more than £10m of free cash flow.  

 

Net debt was £71.5m as at 31 December 2015, £79.0m as at 30 June 2016 and reducing to £76.1m as at 31 December 2016. This is despite the adverse translational effects on the conversion of US Dollar and Euro debt following the weakening of Sterling. Expressed at 31 December 2015 currency rates, net debt would have been £69.1m.

 

At the year-end, the adjusted net debt/EBITDA ratio was 2.8 times and comfortably below our banking covenant of 3.0 times.

 

We expect net debt and leverage to progressively reduce during 2017 driven by the Group's strong cash generation, including utilising our surplus US Dollar position, to service debt repayments.

 

In addition, as announced on 21 March 2017, the Group reached a settlement with Sinclair, in connection with the material reduction of business in Kelo-stretch, which was acquired in the prior year. The result of the settlement is a £5.0m cash payment to Alliance (£4.0m to be received before 30 April 2017 and £1.0m on or before 30 June 2018) and also the retained rights to Flammacerium (US) to be relinquished, with immediate effect. This will be treated as exceptional income in the 2017 financial statements and the cash element of the compensation will be used to reduce the Group's current bank loans.

 

The Group has a total bank facility of £100.0m of which £66.5m (2015: £65.0m) remains drawn on the Term Loan and £18.0m (2015: £10.0m) utilised from the Revolving Credit Facility (RCF) as at 31 December 2016. In addition to this facility, the Group also has access to a £4.5m overdraft which was undrawn at 31 December 2016.

 

External factors

 

Future currency movements are clearly an unknown. However the Group is broadly naturally hedged against movements in the Euro as our sales and costs are largely balanced, but we have some exposure to the US Dollar. We monitor this closely, and also keep a close eye on the possible implications of the UK leaving the EU. The balance of our business in both the UK and EU spreads our exposure, and it is important to note that our licences to trade are local to each member state. As previously mentioned, there is a trend that funders of prescription products are becoming increasingly budget-conscious. This is mitigated, to a certain degree, by the breadth of our portfolio, which includes a large and growing proportion of consumer products where pricing can move with the market.

 

Dividend

 

The Directors propose to maintain a progressive dividend policy and are recommending a final payment of 0.807p per ordinary share to give a total for the year of 1.21p. This represents an increase of 10% on 2015.

 

The final dividend will, subject to approval at the Company's AGM on 25 May 2017, be paid on 12 July 2017 to shareholders on the register on 16 June 2017.

 

The level of dividend cover in 2016 remained ample at over three times. The total dividend payment for 2016 will be approximately £5.7m including the £1.9m interim payment.

 

Outlook

 

We anticipate continued growth from our key international growth brands, Kelo-cote and MacuShield, where we have been strengthening our brand strategies and distribution arrangements. This will be supplemented by various growth initiatives that are being implemented for our key local brands in many territories.

 

The Group continues to generate good levels of free cash flow, as demonstrated by the £10.9m generated in H2 2016. The net debt/EBITDA ratio has reduced in Q1 and we project the downward progression to continue in 2017. This has been assisted by the funds to be received from Sinclair in relation to the Kelo-stretch settlement.

 

A major growth initiative is the launch of Diclectin to meet the unmet need for an approved treatment of nausea and vomiting of pregnancy. This depends on regulatory approval which is anticipated to be in Q3 2017 for the UK and approximately one year later for our other EU territories.

 

We look forward to building on our foundations: an attractive, balanced portfolio, an expanded geographical footprint and a strong team. 

 

 

 

 

 

 

 

 

 

Consolidated Income Statement

 

 

 

 

 

Year ended 31 December 2016

 

 

Year ended 31 December 2015

 

 

 

 

 

 

 Underlying

 

 

Non-Underlying (note 4)

 

 

 

 

Total

 

 

 

 

 Underlying

 

 

Non-Underlying (note 4)

 

 

 

 

Total

 

Note

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

Revenue

 

97,492

-

97,492

48,344

-

48,344

Cost of sales

 

(42,643)

-

(42,643)

(19,614)

-

(19,614)

Gross profit

 

54,849

-

54,849

28,730

-

28,730

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Administration and marketing expense

 

(28,842)

-

(28,842)

(15,833)

(1,846)

(17,679)

Share-based employee remuneration

 

(696)

-

(696)

(615)

-

(615)

Share of joint venture profits

 

299

-

299

194

-

194

 

 

(29,239)

-

(29,239)

(16,254)

(1,846)

(18,100)

 

 

 

 

 

 

 

 

Operating profit/(loss) excluding exceptional item

 

Exceptional compensation income

4

25,610

 

-

-

 

-

25,610

 

-

12,476

 

-

(1,846)

 

6,332

10,630

 

6,332

 

 

 

 

 

 

 

 

Operating profit

 

25,610

-

25,610

12,476

4,486

16,962

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

 

 

 

Interest payable and similar charges

5

(4,195)

-

(4,195)

(1,698)

(273)

(1,971)

Finance income

5

804

-

804

191

-

191

 

 

(3,391)

-

(3,391)

(1,507)

(273)

(1,780)

 

 

 

 

 

 

 

 

Profit before taxation

 

22,219

-

22,219

10,969

4,213

15,182

Taxation

6

(4,127)

-

(4,127)

(1,375)

(1,115)

(2,490)

Profit for the year attributable to equity shareholders

 

18,092

-

18,092

9,594

3,098

12,692

Earnings per share

 

 

 

 

 

 

 

Basic (pence)

8

3.85

 

3.85

3.52

 

4.65

Diluted (pence)

8

3.82

 

3.82

3.44

 

4.55

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 

Year ended 
31 December 2016

Year ended  

31 December 2015

 

 

 

£000s

£000s

 

 

 

 

 

Profit for the period

 

 

18,092

12,692

 

Other comprehensive income

 

Items that may be reclassified to profit or loss

 

 

 

 

Net foreign exchange gain on investment in foreign subsidiaries (net of hedged items)

 

 

2,076

32

Interest rate swaps - cash flow hedge (net of deferred tax)

 

 

(221)

5

Total comprehensive income for the period

 

 

19,947

12,729

 

 

 

 

 

 

Consolidated Balance Sheet

 

 

 

 

31 December 2016

 

31 December 2015

 

 

Note

 

£000s

 

£000s

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill and intangible assets

9

 

264,833

 

249,832

Property, plant and equipment

 

 

1,806

 

1,013

Joint Venture investment

 

 

1,464

 

1,465

Joint Venture receivable

 

 

1,462

 

1,462

Deferred tax asset

 

 

1,709

 

956

Other non-current assets

 

 

180

 

122

 

 

 

271,454

 

254,850

Current assets

 

 

 

 

 

Inventories

 

 

15,356

 

12,910

Trade and other receivables

10

 

26,706

 

11,630

Cash and cash equivalents

12

 

7,221

 

3,229

 

 

 

49,283

 

27,769

Total assets

 

 

320,737

 

282,619

 

 

 

 

 

 

Equity

 

 

 

 

 

Ordinary share capital

 

 

4,726

 

4,682

Share premium account

 

 

109,594

 

108,308

Share option reserve

 

 

3,306

 

2,610

Reverse takeover reserve

 

 

(329)

 

(329)

Other reserve

 

 

(319)

 

(98)

Translation reserve

 

 

2,108

 

32

Retained earnings

 

 

60,177

 

47,237

Total equity

 

 

179,263

 

162,442

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Loans and borrowings

12

 

57,554

 

58,968

Other liabilities

 

 

1,817

 

1,496

Deferred tax liability

 

 

31,442

 

27,838

Derivative financial instruments

 

 

384

 

120

 

 

 

91,197

 

88,422

Current liabilities

 

 

 

 

 

Bank overdraft

12

 

-

 

31

Loans and borrowings

12

 

25,782

 

15,776

Corporation tax

 

 

2,543

 

2,075

Trade and other payables

11

 

21,952

 

13,873

 

 

 

50,277

 

31,755

 

 

 

 

 

 

Total liabilities

 

 

141,474

 

120,177

 

 

 

 

 

 

Total equity and liabilities

 

 

320,737

 

282,619

 

Consolidated Statement of Changes in Equity

 

Ordinary share capital

Share premium account

Share option reserve

Reverse takeover reserve

Other reserve

Translation reserve 

Retained earnings 

Total equity

 

£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

Balance 1 January 2016

4,682

108,308

2,610

(329)

(98)

32

47,237

162,442

 

 

 

 

 

 

 

 

 

Issue of shares

44

-

-

-

-

-

-

44

Share premium

-

1,286

-

-

-

-

-

1,286

Dividend paid

-

-

-

-

-

-

(5,152)

(5,152)

Share options charge

-

-

      696

-

-

-

-

696

Transactions with owners

44

1,286

696

-

-

-

(5,152)

(3,126)

Profit for the period

-

-

-

-

-

-

18,092

18,092

Other comprehensive income

 

 

 

 

 

 

 

 

Interest rate swaps - cash flow hedge (net of deferred tax)

-

-

-

-

(221)

-

-

(221)

Foreign exchange translation differences

-

-

-

-

-

2,076

-

2,076

Total comprehensive income for the period

-

-

-

-

(221)

2,076

18,092

19,947

Balance 31 December 2016

4,726

109,594

3,306

(329)

(319)

2,108

60,177

179,263

 

 

 

 

 

Consolidated Cash Flow Statements

 

 

 

Year ended

31 December 2016

 

 

Year ended 
31 December 2015
 

 

 

Note

£000s

£000s

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Cash generated from operations

13

19,957

9,836

 

Tax paid

 

(3,032)

(1,860)

 

Cash flows received from operating activities

 

16,925

7,976

 

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

111

139

 

Dividend received

 

300

-

 

Development costs capitalised

 

(266)

(7)

 

Purchase of property, plant and equipment

 

(1,130)

(647)

 

Net assets acquired on acquisition

 

-

(221)

 

Loan to Joint Venture

 

(1,018)

-

 

Consideration on acquisitions

 

(1,289)

(133,629)

 

Deferred contingent consideration on acquisitions

 

(4,737)

-

 

Net cash (used in)/received from investing activities

 

(8,029)

(134,365)

 

 

 

 

 

 

Financing activities

 

 

 

 

Interest paid and similar charges

 

(2,822)

(1,163)

 

Loan issue costs

 

(326)

(1,174)

 

Proceeds from issue of shares

 

-

83,500

 

Costs incurred on issue of shares

 

-

(2,661)

 

Proceeds from exercise of share options

 

1,330

121

 

Dividend paid

 

(5,152)

(2,643)

 

Receipt from borrowings

 

8,000

80,500

 

Repayment of borrowings

 

(6,495)

(28,000)

 

Net cash received (used in)/from financing activities

 

(5,465)

128,480

 

 

 

 

 

 

Net movement in cash and cash equivalents

 

3,431

2,091

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

3,198

1,020

 

Exchange gains on cash and cash equivalents

 

592

87

 

Cash and cash equivalents at the end of the period

12

7,221

3,198

 

           

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1. Basis of preparation

 

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 December 2016 or 31 December 2015. The auditors reported on those accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2016 have not yet been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 were delivered to the Registrar of Companies as published on the Group's website on 28 April 2016.

 

2. Segmental reporting

Operating segments

The Group is engaged in single business activity of pharmaceuticals. The Group's pharmaceutical business consists of the marketing and sales of acquired products. The Group's Board of Directors ("the Board") is the Group's Chief Operating Decision Maker (CODM), as defined by IFRS 8, and all significant operating decisions are taken by the Board. In assessing performance, the Board reviews financial information on an integrated basis for the Group as a whole, substantially in the form of, and on the same basis as, the Group's IFRS financial statements. During the financial year, one of the key activities undertaken has been the integration of the brands and companies acquired from Sinclair Pharma plc. The form of reporting provided to the Board has necessarily evolved as required while this integration process was ongoing.

Geographical information

The following revenue information is based on the geographical location of the customer:

 

 

 

Year ended

31 December 2016

Year ended

31 December 2015

 

 

 

£000s

£000s

United Kingdom

 

 

49,411

39,444

Rest of Europe

 

 

29,006

3,240

Rest of the World

 

 

19,075

5,660

Statutory Revenue

 

 

97,492

48,344

 

 

 

 

 

 

3. Profit before taxation

 

Profit before taxation is stated after charging/(crediting):

 

Year ended

31 December 2016

Year ended

31 December 2015

 

£000

£000

Fees payable to the Company's auditor for the audit of the Company's annual accounts

25

-

Fees payable by the Group to the Company's auditor for other services:

 

 

- The audit of the financial statements of subsidiaries

103

-

 

 

 

Fees payable to the Company's previous auditor for the audit of the Company's annual accounts

-

63

Fees payable by the Group to the Company's previous auditor for other services:

 

 

- The audit of the financial statements of subsidiaries

-

50

- Audit-related assurance services

-

9

- All other taxation advisory services

-

67

- All services relating to corporate finance transactions (either proposed or entered into) by or on behalf of the Company or any of its associates

-

356

 

 

 

Amortisation of intangible assets

92

199

Share options charge

696

615

Depreciation of plant, property and equipment

337

239

Operating lease rentals - land and buildings

383

100

Research and development

91

12

Gain on foreign exchange transactions

(693)

(52)

 

As referred to above, "EBITDA" is defined by the CODM as:

 

 

 

31 December 2016

 

31 December 2015

Reconciliation of EBITDA

 

£000s

 

£000s

Profit before tax

 

22,219

 

15,182

Non-underlying items (note 4)

 

-

 

(4,213)

Financing costs (note 5)

 

3,391

 

1,507

Depreciation

 

337

 

239

Amortisation

 

92

 

199

Total

 

26,039

 

12,914

 

 

 

 

 

4.   Non-underlying and exceptional items

 

Non-underlying items are those significant items which the Directors consider, by their nature, are not related to the normal trading activities of the Group. They are therefore separately disclosed as their significant, non-recurring nature does not allow a true understanding of the Group's underlying financial performance. One-off items relating to acquisitions e.g. acquisition costs and the costs of restructuring post-acquisition are shown as non-underlying.  Exceptional items, including settlements and impairments of intangible assets, are also shown as non-underlying items.

The non-underlying and exceptional items relate to the following:

 

Year ended

31 December 2016

 

Year ended

31 December 2015

 

 

 000s

£000s

a)    Acquisition costs

-

1,846

b)    Exceptional compensation income

-

(6,332)

       c)    Charge in respect of loan settlement

-

273

 

-

(4,213)

 

 

a)    Costs related to the acquisition of the Healthcare Products Business from Sinclair Pharma plc in December 2015 amounted to £1.8m.  The main costs included legal and professional fees of £1.2m and staffing costs of £0.5m.

b)    The exceptional income related to £6.7m compensation received from Sanofi Pasteur, net of £0.4m associated costs, for the suspension of ImmuCyst production.

c)     The charge in respect of the loan settlement related to the release of £0.3m prepaid loan issue costs on the £18m loan repaid on 17 December 2015.

 

In the prior year Annual Report, the unwinding/fair value movement in relation to deferred consideration was treated as non-underlying. It is considered to be an underlying activity, therefore treated as such in the current year and comparative.

 

5. Finance costs

 

Year ended

31 December 2016

 

Year ended

31 December 2015

 

 

£000s

£000s

Interest payable and similar charges

 

 

        On loans and overdrafts

(2,868)

(1,116)

        Amortised finance issue costs

(358)

(378)

        Notional interest

(969)

(477)

 

(4,195)

(1,971)

Interest income

111

139

 

 

 

Other finance income

 

 

        Foreign exchange movements

693

52

 

693

52

Finance costs - net

(3,391)

(1,780)

 

Notional interest relates to the unwinding of the deferred consideration on the MacuVision acquisition.

 

 

 

 

 

6. Taxation

 

Analysis of the charge for the period is as follows:

 

Year ended         31 December 2016

Year ended          31 December 2015

 

£000s

£000s

Corporation tax

 

 

  In respect of current period

3,552

2,977

  Adjustment in respect of prior periods

32

-

 

3,584

2,977

Deferred tax (see note 22)

 

 

  Origination and reversal of temporary differences

539

(398)

  Adjustment in respect of prior periods

4

(89)

Taxation

4,127

2,490

 

 

 

       

The difference between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

 

Year ended

 31 December 2016

Year ended

 31 December 2015

 

£000s

Profit before taxation

22,219

15,182

Profit before taxation multiplied by standard rate of corporation tax in the United Kingdom of 20% (2015: 20.25%)

4,444

3,074

Effect of:

 

 

Non-deductible expenses

376

429

Non-taxable income

(60)

(39)

Adjustment in respect of prior periods

36

(89)

Impact of reduction in UK tax rate on deferred tax liability

(755)

(827)

Differing tax rates on overseas earnings

205

54

Share options

(133)

(175)

Other differences

14

63

Total taxation

4,127

2,490

 

 

 

 

Changes to the UK corporation tax rate were announced in Finance Act (No 2) 2015 and Finance Act 2016, reducing the UK's main rate to 17% from 1 April 2020. As the change was substantively enacted at the balance sheet date the effect is included in these financial statements.

 

 

7. Dividends

 

Year ended

 31 December 2016

 

Year ended

 31 December 2015

 

Pence/share

£000s

 

Pence/share

000s

Amounts recognised as distributions to owners in the year

 

 

 

 

 

Interim dividend for the prior financial year

0.366

1,714

 

0.333

880

Final dividend for the prior financial year

0.734

3,438

 

0.667

1,763

 

1.100

5,152

 

1.000

2,643

 

 

 

 

 

 

Interim dividend for the current financial year

0.403

1,904

 

0.366

1,714

 

The proposed final dividend of 0.807 pence per share for the current financial year was approved by the Board of Directors on 27 March 2017 and is subject to the approval of shareholders at the Annual General Meeting.  The proposed dividend has not been included as a liability as at 31 December 2016 in accordance with IAS 10 Events After the Balance Sheet Date. The interim dividend for the current financial year was paid on 12 January 2017.  Subject to shareholder approval, the final dividend will be paid on 12 July 2017 to shareholders on the register of members on 16 June 2017.

 

 

 

 

 

 

 

 

8. Earnings per share (EPS)

 

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.  For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.

 

A reconciliation of the weighted average number of ordinary shares used in the measures is given below:

 

 

 

 

Year ended

31 December 2016

Year ended

31 December 2015

Basic EPS calculation

 

 

469,423,814

272,729,247

Employee share options

 

 

4,824,605

6,322,550

Diluted EPS calculation

 

 

474,248,419

279,051,797

 

The adjusted basic EPS is intended to demonstrate recurring elements of the results of the Group before exceptional items.  A reconciliation of the earnings used in the different measures is given below:

 

 

 

 

Year ended

31 December 2016

Year ended

31 December 2015

 

 

 

£000s

£000s

Earnings for basic EPS

 

 

18,092

12,692

Non-underlying: Exceptional items

 

 

-

(6,332)

Other non-underlying items

 

 

-

2,119

Tax effect of non-underlying items

 

 

-

1,115

For adjusted EPS

 

 

18,092

9,594

 

The resulting EPS measures are:

 

 

 

 

Year ended

31 December 2016

Year ended

31 December 2015

 

 

 

Pence

Pence

Basic EPS

 

 

3.85

4.65

Diluted EPS

 

 

3.82

4.55

Adjusted basic EPS

 

 

3.85

3.52

Adjusted diluted EPS

 

 

3.82

3.44

 

9. Goodwill and intangible assets

 

 Goodwill

Brands and distribution rights

Development costs

 

 

Assets under development

Total

The Group

£000s

£000s

£000s

£000

£000s

Cost

 

 

 

 

 

At 1 January 2016

15,922

235,824

438

1,500

253,684

Additions

-

2,339

266

1,000

3,605

Fair value adjustments

275

-

-

-

275

Exchange adjustments

-

11,213

-

-

11,213

At 31 December 2016

16,197

249,376

704

2,500

268,777

Amortisation and impairment

 

 

 

 

 

At 1 January 2016

-

3,852

-

-

3,852

Amortisation for the year

-

92

-

-

92

At 31 December 2016

-

3,944

-

-

3,944

Net book amount

 

 

 

 

 

At 31 December 2016

16,197

245,432

704

2,500

264,833

At 1 January 2016

15,922

231,972

438

1,500

249,832

 

 

The following acquisition activities took place in the year:

 

·      On 12 September 2016, the Group entered a further Licence and Supply Agreement for the product Diclectin with Duchesnay Inc. Alliance acquired UK rights to Diclectin in January 2015 and this additional agreement secures rights to launch the product in a further nine EU countries including Germany, France and Italy.  The consideration recognised in relation to this is £1.0m. This amount is included within assets under development and will be amortised when the product is ready for launch. UK approval is pending with the UK's regulatory body, the Medicines and Healthcare products Regulatory Agency, with this anticipated to be in mid-2017. Following UK approval, certain other EU territories are forecast for approval in 2018.

 

·      On 27 October 2016, the Group secured the distribution rights on additional territories for MacuShield.  The consideration recognised in relation to this is £2.3m and the distribution rights are for a period of ten years which the balance will therefore be amortised over.

 

10. Trade and other receivables

 

31 December 2016

31 December 2015

 

£000s

£000s

Trade receivables

20,530

8,783

Other receivables

1,788

1,062

Prepayments and accrued income

2,110

525

Amounts owed by       Joint Venture

2,278

1,260

 

26,706

11,630

 

11. Trade and other payables - current

 

31 December 2016

31 December 2015

 

£000s

£000s

Trade payables

5,655

1,153

Other taxes and social security costs

1,030

905

Accruals and deferred income

11,125

5,663

Other payables

1,120

728

Deferred consideration for acquisitions

3,022

5,026

Amounts due to Joint Ventures

-

398

 

21,952

13,873

 

12. Loans and borrowings

 

31 December 2016

31 December 2015

Current

£000s

£000s

Bank loans due within one year or on demand:

 

 

Secured

26,000

16,000

Finance issue costs

(218)

(224)

 

25,782

15,776

 

 

 

 

 

31 December 2016

31 December 2015

Non-current

£000s

£000s

Bank loans:

 

 

Secured

58,478

59,918

Finance issue costs

(924)

(950)

 

57,554

58,968

 

 

 

 

Reconciliation of net debt

 

31 December 2016

 

31 December 2015

 

 

 

£000s

 

£000s

 

Loans and borrowings - current

 

(25,782)

 

(15,776)

 

Loans and borrowings - non-current

 

(57,554)

 

(58,968)

 

Cash and cash equivalents

 

7,221

 

3,229

 

Bank overdraft

 

-

 

(31)

 

Total

 

(76,115)

 

(71,546)

 

 

 

The Group has a total committed bank facility of £100.0m (31 December 2015: £100.0m) maturing in November 2020 of which £65m is drawn as term loan and £35m is available to draw down through a Revolving Credit Facility ('RCF').  The RCF is repayable within one to three months and therefore included within current liabilities.

 

The bank facility is secured by a fixed and floating charge over the Company's and Group's assets.

 

 

 

 

13. Cash generated from operations

 

Group

 

Company

 

Year ended

31 December

2016

£000s

Year ended

31 December

2015

£000s

 

Year ended

31 December 2016

£000s

Year ended

31 December

2015

£000s

 

 

Profit before taxation

22,219

15,182

 

3,459

1,571

Interest payable and similar charges

4,195

1,971

 

-

-

Interest income

(111)

(139)

 

(3,983)

(2,097)

Other finance costs

(693)

(52)

 

-

-

Depreciation of property, plant and equipment

337

239

 

-

-

Amortisation of intangibles

92

199

 

-

-

Change in inventories

(2,446)

(6,996)

 

-

-

Share of post-tax Joint Venture profits

(299)

(194)

 

-

-

Change in trade and other receivables

(14,116)

(3,308)

 

(93)

(1)

Change in trade and other payables

10,083

2,319

 

(412)

388

Share based employee remuneration

696

615

 

696

615

Cash generated from operations

19,957

9,836

 

(333)

476

 

As referred to above, "free cash flow" is defined by the CODM as:

 

 

 

31 December 2016

 

31 December 2015

Reconciliation of free cash flow

 

£000s

 

£000s

Cash generated from operations

 

19,957

 

9,836

Financing costs

 

(2,822)

 

(1,163)

Capital expenditure

 

(1,130)

 

(647)

Tax paid

 

(3,032)

 

(1,860)

Total

 

12,973

 

6,166

 


This information is provided by RNS
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