Half Year Trading Update

Alliance Pharma PLC

18 July 2023

 

For immediate release

18 July 2023

ALLIANCE PHARMA

("Alliance", "Company" or the "Group")

Half Year Trading Update

Strong growth in Kelo-Cote in-market sales

Board's expectations for Group's FY operating performance unchanged

Alliance Pharma plc (AIM: APH), the international healthcare group, announces its trading update for the six months ended 30 June 2023 (the "Period"), ahead of the expected announcement of the Group's interim results on 19 September 2023.

Summary

The Group delivered see-through¹ revenues of £82.4m in the Period (H1 22: £81.6m), up 1.1% versus the prior period and down 1.7% at constant exchange rates ("CER") including revenue from our most recent US acquisition (ScarAway™ and the US rights to Kelo-Cote™). Whilst the first half had a mixed performance with regulatory issues resulting in some manufacturing delays in certain smaller products, revenue growth for the Kelo-Cote™ franchise and Nizoral™ was in line with the Board's expectations, and Amberen™ revenues returned to growth in Q2 on a like-for-like basis. Importantly in-market demand for Kelo-Cote continues to grow strongly and the Board's expectations for Group operating performance in the full year remains unchanged.

Kelo-Cote

Demand for Kelo-Cote in the China cross-border market continues to recover in-line with our expectations. The scar-treatment category increased 10% in the first four months of 2023 (the latest available data), with Kelo-Cote in-market revenues increasing 23%. Kelo-Cote now has 29% value share of the China cross-border market YTD, up 450bp on the prior period. The China domestic market is also demonstrating strong growth, up 8% in the first four months of the year, and with Kelo-Cote in-market revenues up 31%.

Group revenues from the total Kelo-Cote franchise grew 6.2% CER to £25.6m (H1 22: £22.9m) in the Period, including our US acquisition which is growing in line with expectations. As previously reported the destocking at our China cross-border distributor, which continued through much of H1 23, meant that like-for-like Kelo-Cote revenues were down 4.1% CER. With this destocking now substantially complete, together with increasing in-market demand, we have strong expectations for revenues in H2, driving revenue growth above 20% for the full year.

Nizoral

Nizoral revenues grew strongly in the Period rising 40.4% CER to £11.1m (H1 22: £7.9m), reflecting both market share and distribution gains and the timing of orders in the prior period. Adjusting for the delayed order in June 2022, underlying Nizoral growth was in the low double digits. Our new Chinese distributor has created strong growth opportunities through expanding the brand's reach, supported by our new marketing initiatives and the introduction of updated packaging. The performance to date provides confidence to reiterate guidance of high single digit revenue growth for Nizoral in FY 2023.

Amberen

Amberen revenues declined 3.6% CER in the Period, on a like-for-like basis excluding sales from a leading discount store account that was lost in 2022 and have returned to growth in Q2 on the same basis. On a reported basis, Amberen sales were £5.9m in the Period (H1 22: £7.5m). Alliance is continuing to invest in transitioning Amberen towards the higher growth e-commerce channel and refreshing its marketing campaign and packaging to accelerate this transition. We continue to anticipate double-digit revenue growth on a like-for-like basis in FY 2023.

Other products

There was a mixed performance in Other Consumer Healthcare with regulatory challenges in some products impacting stock availability in H1 23. As a result, other Consumer Healthcare sales declined 10.0% (11.9% CER) to £17.2m (H1 22: £19.0m) and total Consumer Healthcare revenues for the Period were £59.7m (H1 22: £57.4m), up 3.9% on the prior year (up 0.5% CER). Regulatory issues also impacted some prescription medicines with sales down 5.7% (6.9% CER) to £22.7m (H1 22: £24.1m). These regulatory issues in both Other Consumer and prescription medicines have been addressed, which we expect to drive positive momentum in H2.

Cash and debt

Free cash flow in the Period was £5.7m higher than the prior period at £10.8m (H1 22: £5.1m) and net debt decreased £7.5m to £94.5m at 30 June 2023 (31 December 2022: £102.0m). Group leverage² (as at 30 June 2023) is expected to be approximately 2.7x (31 December 2022: 2.6x).

We continue to expect Group revenues, including the Kelo-Cote franchise, to build throughout H2, driving strong gross margin improvement and substantial EBITDA expansion, underpinning the Board's expectations of a strong second half performance. Net debt and Group leverage are both expected to fall materially in H2, reflecting the Group's strong cash generation, and Group leverage is expected to be below 2.0x by the end of the year.

Peter Butterfield, Chief Executive Officer of Alliance, commented:

"I am pleased to be back in the business full time and to be focused on driving the Company's growth through the implementation of our long-term strategy. We are encouraged by the recovery in China and the significant market share gains made by Kelo-Cote, along with the excellent progress of Nizoral. Meanwhile our wider portfolio continues to provide a robust platform from which to grow our Consumer Healthcare brands.

"Our free cash flow is expected to continue to build strongly throughout 2023, which we anticipate will reduce our net debt and leverage by the end of the year. The Board's expectation for full year operating performance is unchanged."

¹ See-through revenue includes sales from Nizoral™ as if they had been invoiced by Alliance as principal. For statutory accounting purposes the product margin relating to Nizoral sales made on an agency basis is included within Revenue, in line with IFRS 15.

² Adjusted net debt / enlarged Group EBITDA, calculated using pro forma EBITDA on a trailing 12-month basis.

For further information:

Alliance Pharma plc	+ 44 (0)1249 466966
Cora McCallum, Head of Investor Relations & Corporate Communications	+ 44 (0)1249 705168
[e-mail]
Buchanan	+ 44 (0)20 7466 5000
Mark Court / Hannah Ratcliff
[e-mail]
Numis Securities Limited (Nominated Adviser and Joint Broker)	+ 44 (0)20 7260 1000
Freddie Barnfield / Duncan Monteith / Sher Shah
Investec Bank plc (Joint Broker)	+ 44 (0)20 7597 5970
Patrick Robb / Maria Gomez de Olea

About Alliance

Alliance Pharma plc (AIM: APH) is a growing consumer healthcare company. Our purpose is to empower people to make a positive difference to their health and wellbeing by making our trusted and proven brands available around the world.

We deliver organic growth through investing in our priority brands and channels, in related innovation, and through selective geographic expansion to increase the reach of our brands. Periodically, we may look to enhance our organic growth through selective, complementary acquisitions.

Headquartered in the UK, the Group employs around 285 people based in locations across Europe, North America, and the Asia Pacific region. By outsourcing our manufacturing and logistics we remain asset-light and focused on maximising the value we can bring, both to our stakeholders and to our brands.

For more information on Alliance, please visit our website: www.alliancepharmaceuticals.com

 

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