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RNS
Alliance Pharma PLC   -  APH   

Interim Results

Released 07:00 24-Sep-2019

RNS Number : 3740N
Alliance Pharma PLC
24 September 2019
 

For immediate release

                                           24 September 2019

 

ALLIANCE PHARMA PLC

("Alliance" or the "Group")

 

Interim results for the six months ended 30 June 2019

GOOD REVENUE GROWTH AND STRONG CASH FLOW

 

Alliance Pharma plc (AIM: APH), the international healthcare group, is pleased to announce its interim results for the six months ended 30 June 2019.

HIGHLIGHTS

·      Revenue on a see-through* basis up 29% at £70.3m (up 28% on a constant currency* basis), with like-for-like revenue on a constant currency basis up 10%

Continued strong revenue growth from International Star brands, led by Kelo-cote™

Asia Pacific and international distributor business continue to be main growth areas

Local brands performed in line with expectations

·      Underlying EBITDA* up 34% to £18.8m (H1 2018: £14.1m)

·      Continued strong cash flow, with leverage reduced to 1.95 times

·      New banking facilities in place, providing further flexibility

·      Nizoral™ transition progressing well; new offices and dedicated team established in Singapore and Shanghai to support this business

·      Interim dividend increased 10% to 0.536p

 

FINANCIAL SUMMARY

Unaudited six months ended 30 June

2019

£m

2018 (restated**)

£m

Growth

Revenue (see-through basis)*  

70.3

54.5

29%

Revenue (statutory basis)

66.0

54.5

21%

Gross profit

41.3

32.4

27%

Underlying EBITDA*

18.8

14.1

34%

Underlying profit before taxation

15.2

12.1

25%

Reported profit before taxation

15.2

11.2

35%

Underlying basic earnings per share

2.34p

2.04p

15%

Reported basic earnings per share

2.34p

1.90p

23%

Free cash flow*

14.5

10.4

40%

Leverage

1.95

2.33 (31 Dec)

 

Net debt*

74.1

85.5 (31 Dec)

 

Interim dividend per share

0.536p

0.487p

10%

 

* The performance of the Group is assessed using Alternative Performance Measures ("APMs"), which are measures that are not defined under IFRS, but are used by management to monitor ongoing business performance against both shorter term budgets and forecasts and against the Group's longer term strategic plans. APMs are defined in note 18.

Specifically, see-through revenue includes sales from Nizoral™ as if they had been invoiced by Alliance. Under the terms of the transitional services agreement with Johnson & Johnson (J&J), Alliance receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licences in the Asia-Pacific territories transfer from J&J to Alliance, which is expected to occur during 2019 and 2020. For statutory accounting purposes the product margin on Nizoral sales is included within Revenue, in line with IFRS 15.

** 2018 comparatives have been restated following the adoption of IFRS 16 Leases and the reclassification of £0.3m of costs relating to the Nizoral acquisition.

 

OUTLOOK

The second half of the year has started well and, based on trading in the year to date, the Board expects full year revenues and underlying trading profit to be in line with its expectations.

 

Commenting on the interim results, Peter Butterfield, Chief Executive Officer of Alliance, said:

 

"We continue to see sustained growth from our product portfolio driven by our continued focus on both international growth markets and higher growth, consumer healthcare products. The first half of 2019 has seen us enhance our presence in the Asia Pacific region, to support the transition and ongoing management of Nizoral, and put in place new banking facilities, which will provide further flexibility for the Group to deliver carefully targeted acquisitions over the next few years to complement its organic growth strategy.

 

"The second half of the year has started well; our strong underlying growth and cash generation, coupled with the enhanced banking facilities, mean we are well positioned to pursue future growth opportunities."

 

 

ANALYST MEETING AND WEBCAST

A meeting for analysts will be held at 10.00am this morning at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. Please contact Buchanan for further details on 020 7466 5000 or email alliancepharma@buchanan.uk.com.

 

To access a live webcast of the analyst presentation, please log on to the following web address several minutes before 10.00am: https://webcasting.buchanan.uk.com/broadcast/5d40296548a6d52f84f6c8b5

 

A replay of the webcast will be made available at the Investors section of Alliance's website, www.alliancepharmaceuticals.com.

 

 

For further information:

 

Alliance Pharma plc

+ 44 (0)1249 466966

Peter Butterfield, Chief Executive Officer

 

Andrew Franklin, Chief Financial Officer

 

www.alliancepharma.co.uk

 

Buchanan

+ 44 (0)20 7466 5000

Mark Court / Sophie Wills / Hannah Ratcliff

 

 

 

Numis Securities Limited

+ 44 (0)20 7260 1000

Nominated Adviser: Freddie Barnfield / Freddie Naylor-Leyland

 

Corporate Broking: James Black

 

 

Investec Bank plc

+ 44 (0)  20 7597 5970

Corporate Finance: Daniel Adams / Ed Thomas

 

Corporate Broking: Patrick Robb / Tejas Padalkar

 

 

 

 

About Alliance

Alliance Pharma plc (AIM: APH) is an international healthcare group, headquartered in the UK with subsidiaries in Europe, the Far East and the US and wide international reach through an extensive network of distributors, generating sales in more than 100 countries.

We currently own or license the rights to more than 90 consumer healthcare products and pharmaceuticals, which are managed on a portfolio basis according to their growth potential. Promotional investment is focused on a small number of brands with significant international or multi-territory reach. The remainder of the portfolio comprises products which are sold in a limited number of local markets and require little or no promotional investment.

Our strategy allows us to deliver good organic growth and to enhance our growth rate through carefully selected acquisitions.

For more information on Alliance, please visit our websitewww.alliancepharmaceuticals.com  
 

CHIEF EXECUTIVE'S STATEMENT

Overview

Alliance Pharma's vision is to be a leading international healthcare business built around products that are clinically valuable to patients.

Over the past 4 years, we have been on a transformative journey, significantly increasing the scale of our business, building up our portfolio of International Star brands - a select number of promoted products which are considered to offer significant benefit to patients and have international growth potential - and diversifying our routes to market through a number of key acquisitions.

Our International Star brands, Kelo-cote™, Nizoral™, MacuShield™, Vamousse™ and Xonvea™ now account for more than 40% of our revenues. As International Stars, these brands benefit from the provision of central strategic oversight, direction and campaign generation, ensuring marketing activities are aligned across all territories whilst allowing for local customisation where appropriate.

We have also successfully diversified our routes to market. In 2015, three quarters of our revenues were derived from prescription medicines; now over half our revenues are generated from consumer healthcare products.

To support this growth, we have broadened our operating capability; from being primarily a UK-centric organisation, we now have a direct presence across Western Europe, the US and the Far East, with additional reach secured through an extensive network of around 100 international distributors.

During the first half of 2019, we enhanced our presence in Singapore and Shanghai through moving to new offices and establishing a dedicated team to support the integration and ongoing management of Nizoral, which we acquired in June 2018.

Trading performance

The Group delivered another strong performance in the first half of 2019 with see-through revenues up 29% to £70.3m (H1 2018: £54.5m). Like-for-like revenues, excluding acquisitions, were up 10% (on a constant currency basis) on the same period last year to £60.3m.

Gross profit increased by 27% to £41.3m (H1 2018: £32.4m) and, notwithstanding continued planned investment in our International Star brands and developing our business in the Asia Pacific region, an  increase in operational leverage resulted in a 34% increase in underlying EBITDA to £18.8m (H1 2018: £14.1m). As a result of adverse currency movements, the increase in underlying profit before tax was more modest at 25%, with pre-tax profits of £15.2m (H1 2018: £12.1m).

Nizoral transition

We continue to make good progress with the transition of Nizoral, the medicated anti-dandruff shampoo acquired from J&J for the Asia Pacific region in June 2018. The acquisition included product licences covering 17 Asia Pacific territories in which the brand is registered. The first of these transfers is now underway with completion anticipated in 6 markets in H2 2019, with the remaining transfers being completed in the first half of next year. Under the terms of the transitional services agreement with J&J, we receive the net profit on sales of Nizoral from the date of acquisition up until the point at which the licence in each territory transfers to Alliance.   

 

 

 

OPERATIONAL REVIEW

International Star brands

During the first half of 2019, our International Star brands saw strong revenue growth with sales of £30.9m (H1 2018: £17.3m), up 79% compared with the same period last year and up 21% on a like-for-like basis (excluding Nizoral™ and Xonvea™).

Kelo-cote

Kelo-cote, our scar treatment product, delivered another very strong performance, with first half sales up 20% to £13.1m (H1 2018: £10.9m), primarily due to continued strong demand from the Asia Pacific region.

Going forward, we plan to support the growth of this key brand through further range enhancements and expect to maintain similar levels of marketing support.

Nizoral

Nizoral, the medicated anti-dandruff shampoo acquired from J&J in June 2018, performed slightly below expectations in the first half of 2019, generating see-through sales (under J&J management) of £10.0m (H2 2018: £10.9m). However, integration and transition activities are progressing well and, as we start to bring the product licences under our control, we will be able to manage the associated commercial relationships much more proactively going forwards.

MacuShield

MacuShield, our eye health supplement continued to perform well, with sales up 27% to £4.7m (H1 2018: £3.7m), growth coming primarily from the repatriation of a distribution agreement in the Republic of Ireland.

The first half of 2019 saw MacuShield launched in another two territories (Italy and Turkey), with further launches planned for the next 12 months to continue to drive sales growth.

Vamousse

Vamousse, for the prevention and treatment of head lice, delivered another good performance, achieving sales of £3.1m in the period, up 15% on the same period last year (H1 2018: £2.7m), due to strong performance in its core market, the US.

We continue to evaluate opportunities to introduce Vamousse into new markets with work underway to support launches in another three territories in the coming 12 months.

Xonvea

Prescriptions for Xonvea, for the treatment of nausea and vomiting of pregnancy where conservative management has failed, continue to increase month on month although at a lower rate than originally anticipated. We remain fully committed to the brand and await the forthcoming updated guidelines from The Royal College of Obstetricians and Gynaecologists, which are expected early next year.

Local Brands

Our Local brands comprise a wide portfolio of products that either occupy established therapeutic niches or have strong brand heritage and as such are well established in their local markets without necessarily having wider international potential.  Collectively they generate significant profit and cashflow for the business and, as such, represent a key component of our business model. Most of our Local brands occupy well-established niches in their respective market segments and provide stable cashflows with little or no promotional effort.

Revenues generated by our Local brands in the first half of 2019 were in line with management expectations at £39.4m, an increase of 6% on the same period last year (H1 2018: £37.2m).

 

 

Performance by region

Asia Pacific and International Distributors

Our Asia Pacific and international distributor business continued to perform strongly with see-through revenue increasing 90% to £27.0m in the first half of 2019 (H1 2018: £14.2m) and statutory sales increasing 60% to £22.7m. Excluding Nizoral, sales on a like-for-like basis grew 20% driven by strong sales of Oxyplastine and Bio-Taches in the Middle East and Africa and Aloclair in Central and Eastern Europe and Latin America.

UK and Republic of Ireland

Sales in the UK and Republic of Ireland increased by 1% on the same period last year to £26.1m (H1 2018: £25.7m), with a strong performance from MacuShield (due to the repatriation of a distribution agreement in the Republic of Ireland, offsetting a softer performance of MacuShield in the UK) countering weaker performances from some of our legacy medicine products.

Mainland Europe

Sales in Mainland Europe increased 18% to £14.3m in the first half of the year (H1 2018: £12.2m), the main driver being France, which saw Kelo-cote sales almost double during this period, from £2.4m to £4.6m, due to increased export and domestic demand.

Sales across our other European affiliates were broadly unchanged.

US

Our team in Cary, North Carolina, is now fully established and Vamousse continues its strong performance in the US, achieving sales of £2.6m in the period, up 22% on the same period last year (H1 2018: £2.1m), as the brand continues to take share in the market.

Operations

Medical Device Regulation ("MDR")

We are on track to ensure our technical documentation and processes meet the new requirements of the MDR, which will start to apply from May 2020. The new regulation places greater scrutiny on the technical documentation, product safety and medical device performance through stricter requirements on clinical information and requires enhanced traceability and transparency.

We expect to absorb the costs of operating under MDR without any further impact on margins.

Brexit

As part of our continued readiness for the UK's expected exit from the EU, we will be reinstating the additional inventory levels built up previously to mitigate the possibility of a 'no deal' outcome and the absence of a transition period.  All applicable statutory roles are now in place and necessary authorisation transfers completed. We are following the progress of negotiations closely to ensure we have the most up to date information available to allow us to ensure continuity of supply, irrespective of the outcome.

People & infrastructure

Over the past 12 months, the Board has evolved very effectively, with the appointment of two new independent Non-executive Directors. Jo LeCouilliard and Richard Jones joined at the start of 2019 and bring further international business experience and capital markets expertise into the Group, complementing that of our established independent Board members, David Cook and Nigel Clifford.

In June, John Dawson, Non-executive Director, founder and former CEO of Alliance, took the decision to step down from the Company's Board. We would like to take this opportunity to thank John for his invaluable contribution to the development of the Alliance business over the past 23 years.

Alliance currently employs more than 220 people in 10 locations around the world; all committed to the successful delivery of Alliance's vision. During the first half of the year we scaled up our operations in Asia Pacific, moving to new offices in Singapore and Shanghai, and completing the recruitment of several new posts to support the transition and ongoing management of Nizoral. Our resourcing requirements will continue to evolve as the business grows and diversifies, generating requirements for additional specialist or local market expertise.

ERP implementation

We are currently midway through the User Acceptance Testing phase of our Enterprise Resource Planning ("ERP") project. This phase is progressing well, and we expect the testing cycle to conclude by the end of 2019, enabling the system to become operational during the first half of 2020. The implementation of this system is expected to deliver significant business benefits, allowing us to drive our operational leverage through standardisation of processes and increased visibility of performance metrics, whilst also giving us the scale-up capability needed to accommodate future growth and any acquisitions.

Current trading and outlook

The second half of the year has started well and, based on trading in the year to date, the Board expects full year revenues and underlying trading profit to be in line with its expectations.

Strategically, the priorities for the Group continue to be the delivery of organic growth, primarily from our International Star brands; progressing with the transition of Nizoral; and continuing to support Xonvea in its important post-launch phase.

The combination of good organic growth and strong cashflows means the business will to continue to de-lever over the remainder of the year, leaving us well placed to pursue future growth opportunities.

 

 

 

FINANCIAL REVIEW

 

Summary underlying income statement

Unaudited six months ended 30 June

2019

£m

2018

(restated**)

£m

Growth

Revenue (see-through basis)*

70.3

54.5

29%

Revenue (statutory basis)

66.0

54.5

21%

Gross profit

41.3

32.4

27%

Operating expenses

(22.5)

(18.7)

20%

Underlying EBITDA*

18.8

14.1

34%

Depreciation & amortisation

(1.1)

(0.8)

45%

Underlying EBIT*

17.7

13.3

33%

Finance costs

(2.5)

(1.1)

123%

Underlying profit before taxation

15.2

12.1

25%

Underlying basic earnings per share

2.34p

2.04p

15%

Interim dividend per share

0.536p

0.487p

10%

 

* The performance of the Group is assessed using Alternative Performance Measures ("APMs"), which are measures that are not defined under IFRS, but are used by management to monitor ongoing business performance against both shorter term budgets and forecasts and against the Group's longer term strategic plans. APMs are defined in note 18.

Specifically, see-through revenue includes sales from Nizoral™ as if they had been invoiced by Alliance. Under the terms of the transitional services agreement with Johnson & Johnson (J&J), Alliance receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licences in the Asia-Pacific territories transfer from J&J to Alliance, which is expected to occur during 2019 and 2020. For statutory accounting purposes the product margin on Nizoral sales is included within Revenue, in line with IFRS 15.

Underlying profitability metrics are presented as we believe this provides investors with useful information about the performance of the business. For 2019, there were no non-underlying items and underlying results were the same as total results; for 2018, underlying results exclude £1.5m of profit on the disposal of the Group's interest in Unigreg Limited and a £2.5m impairment charge in relation to the Group's interest in Synthasia International Co. Ltd. In 2018, legal and due diligence costs of £0.3m relating to the Nizoral acquisition were presented as a non-underlying item. Following subsequent review these have been capitalised as part of the Nizoral intangible cost (note 8). The unaudited results have been restated to reflect this change in treatment. Further detail can be found in note 3.

** 2018 comparatives have been restated following the adoption of IFRS 16 Leases and the reclassification of £0.3m of costs relating to the Nizoral acquisition.

 

The Group delivered an encouraging financial performance in the first half of 2019, with see-through revenues increasing 29% to £70.3m and statutory revenues increasing 21% to £66.0m (H1 2018: £54.5m), due to continued healthy revenue growth from our International Star brands, in particular Kelo-cote, and the inclusion of post-acquisition revenues from Nizoral. Underlying profit before taxation increased by 25% to £15.2m (H1 2018: £12.1m).

Group revenues benefited by approximately £0.6m versus the same period last year due to the weakening of Sterling, primarily against the US Dollar. However, the natural hedge that exists within the Alliance business between the US Dollar and Sterling meant that the effect on operating profits was much smaller, due to the associated increase in cost of goods and operating costs denominated in US Dollars.

Gross profit increased by 27% to £41.3m (H1 2018: £32.4m), resulting in a 0.8% reduction in gross margin as a percentage of see-through revenues to 58.8% (H1 2018: 59.6%), due to the lower margin delivered by Nizoral, under J&J management. 

Operating costs (defined as excluding depreciation and amortisation and the IFRS2 share options charge) increased by £3.9m to £21.7m , due to the transitional service fees payable to J&J  in connection with Nizoral and the scale up of our operations in Asia Pacific, to support the integration and ongoing management of this product. As a percentage of sales, operating costs represented 30.9% of see-through sales (H1 2018: 33.7%). Sales and marketing expenditure continued to increase during the first half of 2019 as planned, to support the sales growth of our International Star brands.

Taking account of the planned increase in operating costs, underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 34% to £18.8m (H1 2018: £14.1m). 

Finance costs

Finance costs increased by £1.4m on the prior period to £2.5m (H1 2018: £1.1m), primarily due to currency movements - in the first half of 2018, the Group benefited from exchange gains of £0.3m, whilst in the first half of 2019, there was an adverse impact from currency movements of £0.2m, coupled with a £0.4m loss on derivatives.

The average interest charge on gross debt during the period was 3.12%.

Taxation

The total tax charge for the period was £3.0m (H1 2018: £2.1m), equating to an effective tax rate of 19.9% (H1 2018: 18.9%). Excluding non-underlying items, which generated a tax credit of £0.3m in H1 2018, the underlying tax charge for 2018 was £2.4m, representing an effective tax rate (ETR) of 19.9%. 

Earnings per share

Underlying basic earnings per share, the measure used by the Board in assessing earnings performance, was 2.34p, an increase of 15% on the corresponding period last year (H1 2018: 2.04p), reflecting the increase in the Group's underlying profit after tax.

Reported basic earnings per share increased by 23% to 2.34p (H1 2018: 1.90p) due to non-underlying items reducing earnings in 2018.

Dividend

The Board remains committed to a progressive dividend policy and is recommending an interim dividend payment of 0.536p per share, which represents an increase of 10% on 2018.

 

The level of dividend cover in the first half of 2019 remained ample at more than three times. The interim dividend payment for 2019 will be £2.8m (H1 2018: £2.5m) and will be paid on 10 January 2020 to shareholders on the register on 20 December 2019.

Balance sheet

Intangible assets remained largely unchanged at £335.0m (31 December 2018: £335.2m).

Working capital

There was a £2.2m reduction in inventories in the period, as the planned increase in inventory in preparation for the Falsified Medicines Directive, which came into effect in February 2019, and the original Brexit deadline, in March 2019, unwound, and inventory levels returned to normal again. We plan to re-build inventory levels during Q3 in readiness for the UK's expected exit from the EU.

Receivables reduced by £1.7m in the period, due to the timing of trade-related cash receipts and total payables increased by £1.2m.

Cash flow and net debt

Underlying free cash flow was strong at £14.5m (H1 2018: £10.4m), leading to an £11.7m reduction in net debt in the period to £74.1m at 30 June 2019 (31 December 2018: £85.8m).

As a result of this strong cash generation, leverage (adjusted net debt / EBITDA) fell to 1.95 times at the end of June 2019 (31 December 2018: 2.33 times) and we expect to see a further reduction in leverage in the second half of the year.

 

 

Treasury and capital management

The Group's operations are financed by retained earnings and bank borrowings, with additional equity being raised on a periodic basis to finance larger acquisitions. Borrowings are denominated in Sterling, Euro and US Dollars.

The Group manages its exposure to currency fluctuations on translation by managing currencies at Group level using bank accounts denominated in its primary trading currencies (Sterling, Euro and US dollars) and forward contracts.

On 2 July 2019, the Group agreed a new £165m fully Revolving Credit Facility, together with a £50m accordion, with an enlarged syndicate of lenders on improved terms, replacing the existing facility which ran through to December 2020. This new facility is available until July 2023, with a one-year extension option, and provides further flexibility for the Group to deliver carefully targeted acquisitions over the next few years to complement its organic growth strategy.

 

 

Unaudited Consolidated Income Statement

For the six months ended 30 June 2019

 

 

 

 

 

Unaudited Six months

 ended 30 June 2019

               

 

 

Unaudited Six months

 ended 30 June 2018

 

Note

 

Underlying

£000s

Non-Underlying £000s

 

Total

£000s

 

Underlying

£000s

restated

Non-Underlying

£000s

restated

 

Total

£000s

restated

Revenue

4

66,007

-

      66,007

54,455

-

54,455

Cost of sales

 

(24,691)

-

 (24,691)

(22,021)

-

(22,021)

Gross profit

 

41,316

-

41,316

32,434

-

32,434

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Administration and marketing expenses

 

(22,793)

-

    (22,793)

(18,603)

-

(18,603)

Share-based employee remuneration

 

(855)

-

      (855)

(571)

-

(571)

Share of Joint Venture profits

 

-    

-

              -

13

-

13

Profit on disposal of Unigreg Joint Venture

6

-

-

          -

-

1,508

1,508

Impairment and write-down of Synthasia Joint Venture Assets

6

-

-

           -

-

(2,460)

(2,460)

 

 

 

 

 

 

 

 

Operating profit

 

17,668

-

  17,668

13,273

(952)

12,321

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

 

 

 

Interest payable and similar charges

5

(2,521)

-

  (2,521)

(1,499)

-

(1,499)

Finance income

5

13

-

         13

373

-

373

 

 

(2,508)

-

   (2,508)

(1,126)

-

(1,126)

 

 

 

 

 

 

 

 

Profit before taxation

 

15,160

-

  15,160

12,147

(952)

11,195

Taxation

7

(3,018)

-

   (3,018)

(2,417)

299

(2,118)

Profit for the period attributable to equity shareholders

 

12,142

-

  12,142

9,730

(653)

9,077

Earnings per share

 

 

 

 

 

 

 

Basic (pence)

13

2.34

 

      2.34

2.04

 

1.90

Diluted (pence)

13

2.30

 

      2.30

1.98

 

1.85

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2019

 

 

 

Unaudited         

Six months

ended

30 June 2019

£000s

 

Six months

ended

30 June 2018

£ 000s

restated

Profit for the period

 

 

12,142

9,077

 

Other comprehensive income

 

 

 

 

 

Items that may be reclassified to profit or loss:

 

Interest rate swaps - cash flow hedge

 

 

(83)

92

Deferred tax on interest rate swaps

 

 

14

(16)

Foreign exchange translation differences

 

 

224

323

 

 

 

 

 

Total comprehensive income for the period

 

 

12,297

9,476

 

 

 

 

 

 

 

 

Unaudited Consolidated Balance Sheet

As at 30 June 2019

 

 

 

 

 

 

Unaudited

30 June 2019

 

 

Audited

31 December 2018

 

 

Note

£000s

 

£000s

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill and intangible assets

 

8

335,006

 

335,243

Property, plant and equipment

 

9

9,978

 

7,594

Deferred tax asset

 

 

1,814

 

1,845

Other non-current assets

 

 

132

 

180

 

 

 

346,930

 

344,862

Current assets

 

 

 

 

 

Inventories

 

 

16,459

 

18,706

Trade and other receivables

 

10

27,406

 

29,148

Cash and cash equivalents

 

 

16,468

 

10,893

 

 

 

60,333

 

58,747

 

 

 

 

 

 

Total assets

 

 

407,263

 

403,609

 

 

 

 

 

 

Equity

 

 

 

 

 

Ordinary share Capital

 

 

                                                   5,199

                 

5,182

Share premium account

 

 

                                               145,017

                 

144,639

Share option reserve

 

 

6,772

 

6,121

Other reserve

 

 

(329)

 

(329)

Cashflow Hedging Reserve

 

 

(73)

 

(4)

Translation reserve

 

 

1,715

 

1,491

Retained earnings

 

 

99,645

 

95,099

Total equity

 

 

257,946

 

252,199

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Loans and borrowings

 

15

23,504

 

28,667

Other liabilities

 

12

2,842

 

2,352

Deferred tax liability

 

 

28,721

 

28,663

Derivative financial instruments

 

 

88

 

5

 

 

 

55,155

 

59,687

Current liabilities

 

 

 

 

 

Loans and borrowing

 

15

67,047

 

68,035

Corporation tax

 

 

3,315

 

1,457

Trade and other payables

 

11

23,424

 

22,231

Derivative financial instruments

 

 

376

 

-

 

 

 

94,162

 

91,723

 

 

 

 

 

 

Total liabilities

 

 

149,317

 

151,410

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

407,263

 

403,609

 

 

 

 

 

 

 

 

 

 

 

Unaudited Consolidated Statement of Cash Flows

For the six months ended 30 June 2019

 

 

Unaudited

Six months

ended

30 June 2019

£ 000s

Unaudited

Six months

ended

30 June 2018

£ 000s

 

Note

 

restated

Operating activities

 

 

 

Profit for the period before tax

 

15,160

11,195

Interest payable and similar charges

5

2,521

1,499

Finance income

5

(13)

(373)

Profit on disposal of Unigreg Joint Venture

6

-

(1,508)

Impairment and write down of Synthasia Joint Venture assets                                                                                                       

6

-

2,460

Depreciation of property, plant and equipment

9

                          745

666

Amortisation and impairment of intangible assets

8

391

118

Share-based employee remuneration

 

855

571

Change in inventories

 

2,247

(2,098)

Share of post-tax Joint Venture profits

 

-

(13)

Change in trade and other receivables

 

1,743

(1,810)

Change in trade and other payables

 

(4,467)

4,440

Cash generated from operations

 

19,182

15,147

Tax paid

 

(1,283)

(2,363)

Cash flows from operating activities

 

17,899

12,784

 

 

 

 

Investing activities

 

 

 

Interest received

5

13

39

Development costs capitalised

8

(8)

(25)

Purchase of property, plant and equipment

 

(1,680)

(940)

Exceptional compensation income

 

-

1,000

Net proceeds from disposal of Unigreg Joint Venture

6

-

2,196

Loan to Joint Venture

6

-

1,426

Consideration on acquisition

8

-

(60,000)

Net cash used in investing activities

 

(1,675)

(56,304)

 

 

 

 

Financing activities

 

 

 

Interest paid and similar charges

 

(1,721)

(1,454)

Loan issue costs

 

-

(197)

Net proceeds from issue of shares

 

-

32,845

Proceeds from exercise of share options

 

395

815

Capital lease payments

 

(375)

(291)

Dividend paid

14

(2,524)

(2,104)

Receipt from borrowings

 

                                -

28,000

Repayment of borrowings

15

(6,359)

(10,813)

Net cash (used in)/received from financing activities

 

(10,584)

46,801

 

 

 

 

Net movement in cash and cash equivalents

 

5,640

3,281

Cash and cash equivalents at beginning of period

 

10,893

11,184

Effects of exchange rate movements

 

(65)

14

Cash and cash equivalents at end of period

 

16,468

14,479

 

 

 

 

 

 

 

Unaudited Consolidated Statement of Changes in Equity

For the six months ended 30 June 2019

 

 

Ordinary Share

Capital 

£ 000s

Share Premium account

£ 000s

Share Option reserve £ 000s

Other

Reserve

£ 000s

Cash flow Hedging reserve 

£ 000s

 Translation reserve

£ 000s

Retained earnings

£ 000s

restated

Total equity

£ 000s

Balance 1 January 2018 (audited)

4,750

110,252

5,073

(329)

(117)

(390)

83,089

203,108

Issue of shares

400

33,259

-

-

-

-

-

33,659

Dividend payable/paid

-

-

-

-

-

-

(6,340)

(6,340)

Share options charge (including deferred tax)

-

-

1,500

-

-

-

-

1,500

Transactions with owners

400

33,259

1,500

-

-

-

(6,340)

28,819

Profit for the period

-

-

-

-

-

-

9,077

9,077

Other comprehensive income

 

 

 

 

 

 

 

 

Interest rate swaps - cash flow hedge

-

-

-

-

  92

-

-

92

Deferred tax on interest rate swaps

-

-

-

-

(16)

-

-

(16)

Foreign exchange translation differences

-

-

-

-

-

323

-

323

Total comprehensive income for the period

-

-

-

-

76

 

323

9,077

9,476

Balance 30 June 2018 (unaudited)

5,150

143,511

6,573

(329)

(41)

713

85,826

241,403

 

 

 

 

 

 

 

 

 

Balance 1 January 2019 (audited)

5,182

144,639

6,121

(329)

(4)

1,491

95,009

252,199

Issue of shares

17

378

-

 -

-

-

-

395

Dividend payable/paid

-

-

-

-

-

-

(7,596)

(7,596)

Share options charge (including deferred tax)

-

-

651

-

-

-

-

651

Transactions with owners

17

378

651

-

-

-

(7,596)

(6,550)

Profit for the period

-

-

-

-

-

-

12,142

12,142

Other comprehensive income

 

 

 

 

 

 

 

 

Interest rate swaps - cash flow hedge

-

-

-

-

(83)

-

-

(83)

Deferred tax on interest rate swaps

-

-

-

-

14

-

-

14

Foreign exchange translation differences

-

-

-

-

-

224

-

224

Total comprehensive income for the period

-

-

-

-

(69)

 

224

12,142

12,297

Balance 30 June 2019(unaudited)

5,199

145,017

6,772

(329)

(73)

1,715

99,645

257,946

                   
 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

1.         Nature of operations

 

Alliance Pharma plc ("the Company") and its subsidiaries (together "the Group") acquire, market and distribute pharmaceutical and other medical products. The Company is a public limited company, limited by shares, incorporated and domiciled in England. The address of its registered office is Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB.

               

                The Company is listed on the London Stock Exchange, Alternative Investment Market (AIM).

 

2.         General information

 

The information in these financial statements does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and is unaudited. These financial statements have been prepared in accordance with the AIM rules, and IAS 34 has not been adopted. A copy of the Group's statutory accounts for the year ended 31 December 2018, prepared under International Financial Reporting Standards as adopted by the European Union, has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.

               

The financial statements for the six-month period ended 30 June 2019 (including restated comparatives for the six months ended 30 June 2018) was approved by the Board of Directors on 23 September 2019.

 

The current rate of cash generation by the Group comfortably exceeds the capital and debt servicing needs of the business. The Board remains confident that all the bank covenants will continue to be met and the Group will be able to meet its working capital needs for at least the next 12 months.

 

After making enquiries, the Directors have formed a judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason, the Directors continue to adopt the going concern basis in preparing these financial statements.

 

3.         Accounting policies

 

The Group applies, for the first time, IFRS 16 Leases in these unaudited interim financial statements. The impact of this change in accounting policy is described below.

 

IFRS 16 Leases was adopted for the first time by the Group for the period beginning 1 January 2018. The new standard requires lessees to recognise a lease liability reflecting future lease payments and a 'right-of-use' asset for virtually all lease contracts, excluding certain short-term leases and leases of low-value assets. The Group has applied the retrospective approach which restates comparative information as if IFRS 16 has always applied.

 

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate. The weighted average incremental borrowing rate applied to the lease liabilities is 3.0%. The associated right-of-use assets for leases have been measured on a retrospective basis.

 

In the unaudited prior period results associated legal and due diligence costs of £307,000 relating to the Nizoral acquisition were presented as a non-underlying item in administration and marketing expenses. Following subsequent review, and as presented in the 31 December 2018 Annual Report, these have been capitalised as part of the Nizoral intangible asset held within Brands and distribution rights. The unaudited prior period results have been restated to reflect this change in accounting treatment.

 

Remaining accounting policies applied in these financial statements are as published by the Group in the 31 December 2018 Annual Report.  The Annual Report is available on the Group's website alliancepharmaceuticals.com.
 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

3.         Accounting policies (continued)

 

3.1          Impact on the financial statements

 

As a result of the adoption of IFRS 16 and the Nizoral adjustment prior period comparatives have been restated.

 

Consolidated Income Statement

 

 

 

Six months ended 30 June 2018 before adjustments

£000s

 

Effect of Nizoral acquisition costs

£000s

 

 

Effect of

 IFRS 16 adjustments

£000s

 

Six months ended 30 June 2018 post adjustments

£000s

Revenue

54,455

-

-

54,455

Cost of sales

(22,021)

-

-

(22,021)

Gross profit

32,434

-

-

32,434

 

 

 

 

 

Operating expenses

 

 

 

 

Administration and marketing expenses

(18,945)

307

35

(18,603)

Share-based employee remuneration

(571)

-

-

(571)

Share of Joint Venture profits

13

-

-

13

Profit on disposal of Unigreg Joint Venture

1,508

-

-

1,508

Impairment and write-down of Synthasia Joint Venture Assets

(2,460)

-

-

(2,460)

Operating profit

11,979

307

35

12,321

 

 

 

 

 

Finance costs

 

 

 

 

Interest payable and similar charges

(1,464)

-

(35)

(1,499)

Finance income

373

-

-

373

 

(1,091)

-

(35)

(1,126)

 

 

 

 

 

Profit before taxation

10,888

307

-

11,195

Taxation

(2,059)

(59)

-

(2,118)

Profit for the period attributable to equity shareholders

8,829

248

-

9,077

Earnings per share

 

 

 

 

Basic (pence)

1.85

 

 

1.90

Diluted (pence)

1.80

 

 

1.85

 

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

3.         Accounting policies (continued)

3.1          Impact on the financial statements (continued)

 

Summary Consolidated Balance Sheet

 

 

 

 

 

30 June 2018 before adjustments

 

Effect of Nizoral acquisition costs

 

 

Effect of

IFRS 16 adjustments

 

 

30 June 2018 post adjustments

 

 

 

£000s

£000's

£000s

£000s

Assets

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Goodwill and intangible assets

 

 

339,476

307

-

339,783

Property, plant and equipment

 

 

3,907

-

2,142

6,049

Other non-current assets

 

 

3,278

-

-

3,278

 

 

 

346,661

307

2,142

349,110

 

 

 

 

 

 

 

Current assets

 

 

53,592

-

-

53,592

Total assets

 

 

400,253

307

2,142

402,702

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Other equity reserves

 

 

155,577

-

-

155,577

Retained earnings

 

 

85,847

248

(269)

85,826

Total equity

 

 

241,424

248

(269)

241,403

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Other non-current liabilities

 

 

33,749

-

-

33,749

Deferred tax liability

 

 

27,608

59

-

27,667

Other liabilities

 

 

3,624

-

2,035

5,659

 

 

 

64,981

59

2,035

67,075

Current liabilities

 

 

 

 

 

 

Other current liabilities

 

 

67,047

-

-

67,047

Corporation tax

 

 

1,549

-

-

1,549

Trade and other payables

 

 

25,252

-

376

25,628

 

 

 

93,848

-

376

94,224

 

 

 

 

 

 

 

Total liabilities

 

 

158,829

59

2,411

161,299

 

 

 

 

 

 

 

Total equity and liabilities

 

 

400,253

307

2,142

402,702

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

3.         Accounting policies (continued)

3.1          Impact on the financial statements (continued)

 

Summary Consolidated Cashflow statement

 

 

Six months ended 30 June 2018 before adjustments

Effect of Nizoral acquisition costs

Effect of

 IFRS 16 adjustments

 
 

Six months

ended

30 June 2018 post adjustments

Cash flows from operating activities

£000s

£000s

£000s

£ 000s

Profit after taxation

10,888

307

-

11,195

Interest payable and similar charges

1,464

-

35

1,499

Nizoral acquisition costs

307

(307)

-

-

Depreciation of property, plant and equipment

410

-

256

666

Other adjusting items

1,787

-

-

1,787

Cash generated from operations

14,856

-

291

15,147

Tax paid

(2,363)

-

-

(2,363)

Cash flows received from operating activities

12,493

-

291

12,784

 

 

 

 

 

Cash flows used in investing activities

(56,304)

-

-

(56,304)

 

 

 

 

 

Financing activities

 

 

 

 

Capital lease payments

-

-

(291)

(291)

Other financing cashflows

47,092

-

-

47,092

Net cash received from financing activities

47,092

-

(291)

46,801

 

 

 

 

 

Net movement in cash and cash equivalents

3,281

-

-

3,281

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

 

4.         Revenue

 

Revenue information By Brand

 

 

 

Unaudited

Six months

ended

 30 June 2019

Unaudited

Six months

ended

 30 June 2018

 

 

£000s

£000s

International Star brands:

 

 

 

Kelo-cote

13,143

10,919

Nizoral *

5,702

-

MacuShield

 

4,666

 3,667

Vamousse

 

3,080

 2,683  

Xonvea

 

-

-

 

 

26,591

17,269

Local brands:

 

 

 

Aloclair

 

4,371

 3,505

Flamma Franchise

 

3,856

 4,005

Hydromol

 

3,356

 3,455

Oxyplastine

 

2,078

1,057

Forceval

 

2,048

 1,811

Optiflo

 

1,503

 1,354

Ashton & Parsons

 

1,207

 1,128

Ametop

 

1,002

1,098

Other local brands

 

19,995

19,773

 

 

39,416

37,186

Total Revenue

 

66,007

54,455

 

 Revenue information By Geography

 

 

 

Unaudited

Six months

ended

 30 June 2019

Unaudited

Six months

Ended

30 June 2018

 

 

£000s

£000s

UK and Republic of Ireland

 

26,122 

  25,744 

Mainland Europe

 

14,323 

12,181 

International including USA

 

                  25,562

16,530 

Total Revenue

 

                  66,007  

54,455

 

 

*Nizoral is shown on a net profit basis in statutory revenue. Nizoral revenue presented on a see-through income statement basis is included as an alternative performance measure in Note 18.

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

5.         Finance costs

 

Unaudited

Six months

 ended

30 June 2019

Unaudited

Six months

ended

30 June 2018

 

£000s

£000s

 

 

restated

On loans and overdrafts

(1,634)

(1,285)

Amortised finance issue costs

(233)

(152)

Unwinding of discount on deferred and contingent consideration

(27)

Net fair value losses on derivatives 

(377)

-

Net exchange losses

(234)

-

Interest on lease liabilities

(43)

(35)

Interest payable and similar charges

(2,521)

(1,499)

 

 

 

Interest income

13

39

Net exchange gain 

-

334

Finance Income

13

373

Net Finance costs

(2,508)

(1,126)

 

 

The unwinding of discount on deferred and contingent consideration in the prior period is in respect of amounts payable from the Macuhealth and Vamousse acquisitions.

 

6.         Non-underlying items

 

Unaudited

Six months

ended

 30 June 2019

Unaudited

Six months

ended

30 June 2018

 

£000s

£000s

 

 

restated

Unigreg Joint Venture profit on disposal

-

1,508

Impairment and write down of Synthasia Joint Venture assets

-

(2,460)

Total non-underlying items before taxation

-

(952)

 

In April 2018 the Group sold its 60% interest in Unigreg Limited to its joint venture partner, Pacific Glory Development Limited, for a consideration of £2.9m. The Group profit on disposal was £1.5m net of fees.

 

In May 2018 the Group was notified that the import licence partner was not going to receive the required approval to import Suprememil, the infant milk formula brand owned by Synthasia. Following subsequent discussions with the import licence partner and Synthasia management, the Board concluded to fully impair the joint venture investment of £0.3m and to fully provide for the associated receivables balances of £2.2m.  This generated a non-cash, non-underlying impairment charge and receivables provision of £2.5m.

 

In the unaudited prior period results associated legal and due diligence costs of £307,000 relating to the Nizoral acquisition were presented as a non-underlying item in administration and marketing expenses. Following subsequent review, and as presented in the 31 December 2018 Annual Report, these have been capitalised as part of the Nizoral intangible asset held within Brands and distribution rights. The unaudited prior period results have been restated to reflect this change in accounting treatment.

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

7.         Taxation

 

Analysis of charge for the period is as follows:

 

 Unaudited

Six months ended

30 June 2019

 Unaudited

Six months

ended

30 June 2018

 

£ 000s

£ 000s

 

 

restated

Corporation tax

2,916

1,668

Deferred tax

102

450

Taxation

3,018

2,118

 

8.         Goodwill and Intangible assets

 

 

Goodwill

Brands and distribution rights

Development costs

Assets under development

Total

 

 

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

Cost

 

 

 

 

 

 

At 1 January 2019 (audited)

 

16,565

328,092

768

1,000

346,425

Additions

 

-

-

8

-

8

Exchange adjustments

 

-

146

-

-

146

At 30 June 2019 (unaudited)

 

16,565

328,238

776

1,000

346,579

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

At 1 January 2019 (audited)

 

-

11,182

-

-

11,182

Underlying impairment for the period

Amortisation for the period

 

-

-

284

107

-

-

-

-

284

107

At 30 June 2019 (unaudited)

 

-

11,573

-

-

11,573

 

 

 

 

 

 

 

Net book amount

 

 

 

 

 

 

At 30 June 2019 (unaudited)

 

16,565

        316,665

776

1,000

335,006

At 1 January 2019 (audited)

 

16,565

316,910

768

1,000

335,243

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

9.         Property, plant and equipment

 

 

 

 

 

 

 

 

Computer software and equipment

Fixtures, fitting and equipment

 

          

Plant &

machinery

 

 

Right of use

Lease assets

 

 

 

    Total

 

The Group

£000s

£000s

£000s

£000s

£000s

 

Cost

 

 

 

 

 

 

At 1 January 2019 (audited)

5,327

2,036

14

3,964

11,341

 

Additions

1,289

387

-

1,453

3,129

 

Disposal

(1)

(2)

-

(1,957)

(1,960)

 

At 30 June 2019 (Unaudited)

6,615

2,421

14

3,460

12,510

 

Depreciation

 

 

 

 

 

 

At 1 January 2019 (audited)

1,074

836

-

1,837

3,747

 

Provided in the period

186

157

2

400

745

 

Disposal

(1)

(2)

-

(1,957)

(1,960)

 

At 30 June 2019 (Unaudited)

1,259

991

2

280

2,532

 

Net book amount

 

 

 

 

 

 

At 30 June 2019 (Unaudited)

5,356

1,430

12

3,180

9,978

 

At 1 January 2019 (audited)

4,253

1,200

14

2,127

7,594

 

 

10.       Trade and other receivables

 

 Unaudited

30 June 2019

 Audited

31 December 2018

 

£ 000s

£ 000s

Trade receivables

21,880

23,407

Other receivables

1,285

1,083

Prepayments and accrued income

4,241

4,658

 

27,406

29,148

 

11.       Trade and other payables

 

 Unaudited

30 June 2019

 Audited

31 December 2018

 

£ 000s

£ 000s

Trade payables

7,345

8,978

Other taxes and social security costs

1,136

1,808

Accruals and deferred income

7,801

7,777

Dividend Payable

5,072

2,524

Other payables

540

197

Contingent consideration

500

500

Lease liabilities

1,030

447

 

23,424

22,231

           

12.       Other non-current liabilities

 

 Unaudited

30 June 2019

 Audited

31 December 2018

 

£ 000s

£ 000s

Lease Liabilities

2,467

1,972

Other non-current liabilities

  375

380

 

2,842

2,352

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

13.       Earnings per share (EPS)

 

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.  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:

 

 

Six months

ended

30 June 2019

Six months

ended

30 June 2018

 

Weighted average number of shares 000s

Weighted average number of shares 000s

For basic EPS

518,516

477,676

Share options

10,019

13,561

528,535

491,237

           

 

Six months to 30 June 2019

Six months to

30 June 2018

 

£000s

£ 000

 

 

Restated

Earnings for basic and diluted EPS

12,142

9,077

Non-underlying items

-

653

Earnings for underlying basic and diluted EPS

12,142

9,730

 

The resulting EPS measures are:

 

 

 

 

 

 

 

 Six months to

30 June 2019

Pence

Six months to

30 June 2018

Pence

Restated

Basic EPS

2.34

1.90

Diluted EPS

2.30

1.85

Adjusted basic EPS

2.34

2.04

Adjusted diluted EPS

2.30

1.98

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

14.       Dividends

 

 

 

 

Six months

ended

30 June 2019

 

 

 

Pence/share

£ 000s

Amounts recognised as distributions to owners in the year

 

 

 

 

Interim dividend for the prior financial year

 

 

0.487

2,524

Final dividend for the prior financial year

 

 

0.977

5,072

 

 

 

 

  7,596

 

 

 

 

The interim dividend for 2018: (£0.487 pence per share) was paid on 10 January 2019. The final dividend for 2018 was approved by the Board of Directors on 22 March 2019 and subsequently by the shareholders at the Annual General Meeting on 23 May 2019. Following these approvals, final dividend has been included as a liability as at 30 June 2019 and was paid on 11 July 2019 to shareholders who were on the register of members at 14 June 2019.

 

The proposed interim dividend for the current financial year has not been recognised as a liability as at 30 June 2019. This is in accordance with IAS 10 Events After the Balance Sheet Date.

 

 

 

 

 

Six months

ended

30 June 2018

 

 

 

Pence/share

£ 000s

Amounts recognised as distributions to owners in the year

 

 

 

 

Interim dividend for the prior financial year

 

 

0.443

2,104

Final dividend for the prior financial year

 

 

0.888

4,236

 

 

 

 

  6,340

 

 

 

 

The interim dividend for 2017: (£0.443 pence per share) was paid on 11 January 2018. The final dividend for 2017: (£0.888 pence per share) was paid on 11 July 2018.

 

15.       Loans and borrowings

 

Movements in borrowings are analysed as follows:

 

 

£ 000s

At 1 January 2019 (audited)                                                           

96,702

Repayment of borrowings                                             

(6,359)

Amortisation of prepaid arrangement fees                                             

233

Exchange movements                                                                             

(25)

At 30 June 2019 (unaudited)                                                    

90,551

 

 

The carrying amount of the group's borrowings are denominated in the following currencies:

 

 

 Unaudited

30 June 2019

 Audited

31 December 2018

 

£ 000s

£ 000s

GBP

61,987

66,187

USD

13,158

15,197

EUR

16,072

16,216

Loan issue costs

(666)

(898)

 

90,551

96,702

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

16.       Post balance sheet events

 

On 2 July 2019, the Group agreed a new £165m fully Revolving Credit Facility, together with a £50m accordion, with an enlarged syndicate of lenders on improved terms, replacing the existing facility which ran through to December 2020. This new facility is available until July 2023, with a one-year extension option, and provides further flexibility for the Group to deliver carefully targeted acquisitions over the next few years to complement its organic growth strategy.

 

17.       Contingent liabilities

 

Contingent liabilities are possible obligations that are not probable. The Group operates in a highly regulated sector and in markets and geographies around the world each with differing requirements.  As a result, and in the normal course of business, the Group can be subject to a number of regulatory inspections/investigations on an ongoing basis. It is therefore possible that the Group may incur penalties for non-compliance. In addition, a number of the Group's brands and products are subject to pricing and other forms of legal or regulatory restrictions from both governmental/regulatory bodies and also from third parties. Assessments as to whether or not to recognise a provision in respect of these matters are judgemental as the matters are often complex and rely on estimates and assumptions as to future events. 

 

On 23 May 2019 the UK's Competition and Markets Authority ("CMA") issued a Statement of Objection alleging anti-competitive agreements against the Group and certain other pharmaceutical companies in relation to the sale of prescription prochlorperazine. Prochlorperazine is one of the Group's smaller products and had peak sales in 2015 of £1.9m and sales of less than £0.2m in 2018.

 

The Group confirms that it has had no involvement in the pricing or distribution of prochlorperazine since 2013, when it was out-licensed by the Group. Prior to 2013, prochlorperazine was marketed directly by the Group.

 

The Group has reviewed the CMA Statement of Objection in detail and is working with the CMA to resolve its alleged objections.

 

The Group's assessment as at 23 September 2019, based on currently available information, is that there are no matters for which a provision is required (31 December 2018: £nil). However, given the inherent uncertainties involved in assessing the outcomes of such matters there can be no assurance regarding the outcome of any ongoing inspections/investigations and the position could change over time as a result of the factors referred to above.
 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

18.       Alternative performance measures

 

The performance of the Group is assessed using Alternative Performance Measures (APMs). The Group's results are presented both before and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides both management and investors with useful additional information about the Group's performance and aids a more effective comparison of the Group's trading performance from one period to the next and with similar businesses.

 

In addition, the Group's results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor on-going business performance against both shorter term budgets and forecasts but also against the Groups longer term strategic plans.

 

APMs used to explain and monitor Group performance:

Measure

Definition

Reconciliation to GAAP measure

Underlying

EBIT and EBITDA

Earnings before interest, tax and non-underlying items (EBIT), then depreciation, amortisation and underlying impairment (EBITDA).

Calculated by taking profit before tax and financing costs, excluding non-underlying items and adding back depreciation and amortisation.

Note A below

Free cash flow

Free cash flow is defined as cash generated from operations less cash payments made for financing costs, capital expenditure and tax.

Note B below

Net debt

Net debt is defined as the group's gross bank debt position net of finance issue costs and cash.

Note C below

See-through

income statement

Under the terms of the transitional services agreement with J&J, Alliance receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licences in the Asia-Pacific territories transfer from J&J to Alliance, which is expected to occur during 2019 and 2020. The net profit arising in the six months ended 30 June 2019 has been recognised as part of statutory revenue.

 

The see-through income statement recognises the underlying sales and cost of sales which give rise to the net profit, as management consider this to be a more meaningful representation of the underlying performance of the business, and to reflect the way in which it is managed.

 

Note D below

 

 

 

 

Notes to the Half Yearly Report

For the six months ended 30 June 2019

 

18.       Alternative performance measures (continued)

 

A. Underlying EBIT and EBITDA

 

 

Unaudited

Six months

ended

 30 June 2019

 

Unaudited

Six months

ended

 30 June 2018

 

 

£000s

 

£000s

Reconciliation of Underlying EBIT and EBITDA

 

 

 

restated

Profit before tax

 

15,160

 

11,195

Non-underlying items

 

-

 

952

Financing costs (note 5)

 

2,508

 

1,126

Underlying EBIT

 

17,668

 

13,273

Depreciation (note 9)

                               

                                    745

 

666

Amortisation and impairment (note 8)

 

391

 

118

Underlying EBITDA

 

18,804

 

14,057

 

B. Free cash flow

 

 

Unaudited

Six months

ended

 30 June 2019

 

Unaudited

Six months

ended

 30 June 2018

 

 

£000s

 

£000s

Reconciliation of free cash flow

 

 

 

restated

Cash generated from operations

 

19,182

 

15,147

Financing costs

 

(1,721)

 

(1,454)

Capital expenditure

 

(1,680)

 

(940)

Tax paid

 

(1,283)

 

(2,363)

Free cash flow

 

14,498

 

10,390

 

C.   Net debt       

 

Unaudited

 30 June 2019

 

 

Audited 

 31 December 2018

Reconciliation of net debt

 

£000s

 

£000s

Loans and borrowings - current

 

(67,047)

 

(68,035)

Loans and borrowings - non-current

 

(23,504)

 

(28,667)

Cash and cash equivalents

 

16,468

 

10,893

Net debt

 

(74,083)

 

(85,809)

           

                D. See-through income statement

 

Unaudited six months ended 30 June 2019 statutory values

£000s

See-through adjustment

£000s

Unaudited six months ended 30 June 2019 see-through values

£000s

Revenue

66,007

                    4,270

70,277

Cost of sales

(24,691)

                  (4,270)

(28,961)

Gross profit

41,316

-

41,316

Gross profit margin

62.6%

-

58.8%

 

                There is no impact from the see-through adjustment on income statement lines below gross profit.

 


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