Interim Results

RNS Number : 6796N

Alliance Pharma PLC

11 September 2013

 



 

11 September 2013

 

ALLIANCE PHARMA PLC

("Alliance" or the "Company")

Interim Results for the six months ended 30 June 2013

Alliance Pharma plc(AIM: APH), the speciality pharmaceutical company, is pleased to announce its interim results for the six months ended 30 June 2013.

Highlights of the year to date:

•         Half year sales up 4% to £22.8m (H1 2012: £22.0m)

•       Hydromol™ continues to grow well - now a £5m brand

•       Launch of MolluDab™ - an exciting new treatment for molluscum contagiosum

•         Half year profit before tax up 29% to £6.8m (H1 2012: £5.3m)

•         Basic earnings per share for the half year up 23% to 2.22p (H1 2012: 1.80p)

•         Interim dividend up 10% to 0.303p per share (H1 2012: 0.275p)

          •       Net bank debt £26.6m (31 December 2012: £21.8m)

•     Gearing modest with net bank debt : EBITDA at 1.5 times*

•         Acquisition of international Syntometrine^TM rights from Novartis in June 2013

*Including pro forma EBITDA from acquisitions

Commenting on the results, Michael Gatenby, Alliance Pharma's Chairman, said:

"The strong start to 2013 augurs well for meeting full year expectations.  We are energetically pursuing additional growth through further acquisitions, supported by strong UK and international teams, a good flow of opportunities, healthy cash flow and ample headroom in our funding facilities."

For further information:

Alliance Pharma plc	+ 44 (0) 1249 466966
John Dawson, Chief Executive
Richard Wright, Finance Director
www.alliancepharma.co.uk
Buchanan	+ 44 (0) 20 7466 5000
Mark Court / Fiona Henson / Sophie Cowles
Numis Securities Limited	+ 44 (0) 20 7260 1000
Nominated Adviser: Michael Meade / Oliver Cardigan / Freddie Barnfield
Corporate Broking: David Poutney

Chairman's and Chief Executive's Statement

Alliance made encouraging progress in the first half of 2013 as sales growth continued and profits advanced strongly. This was a significant achievement, given the continuing unavailability of the ImmuCyst™ bladder cancer treatment.

Turnover was boosted by our cyclical toxicology product, which reached the peak of its sales cycle during the first half, and by the acquisitions made in the second half of 2012. Together with growth in our existing portfolio, these more than offset the temporary loss of ImmuCyst and a decline in sales in Ireland of our Nu-Seals™ enteric-coated low-dose aspirin.

Our performance is not likely to be quite as strong in the second half as the toxicology product sales pass their cyclical peak.  However, we will gain an additional contribution from Syntometrine™, the obstetric drug to which we acquired international rights in June 2013.

Trading and financial performance

Pre-tax profit was up 29% to £6.8m (H1 2012: £5.3m), on sales that rose 4% to £22.8m (H1 2012: £22.0m).

First-half sales were buoyed by our cyclical toxicology product, which reached the peak of its 30-month sales cycle. Sales reached £3.2m in the first half, but are set to be significantly lower in the second half of 2013 and through 2014.

Our Hydromol dermatology range maintained its double-digit growth, with annualised sales up 23%. The brand continued to gain share in a growth market and annualised sales of Hydromol now exceed £5.0m.

The Opus Group stoma care business, acquired in October 2012, made a substantial contribution to sales, as expected, at £2.0m.

Gelclair™, acquired alongside ImmuCyst and also promoted by the secondary care team, has continued to maintain growth. Annualised sales of this oral mucositis treatment have passed £1m and are growing at approximately 10% per annum.

Our Nu-Seals™ enteric-coated low-dose aspirin, sold mainly in the Irish Republic, continued to suffer from the arrival of generic competitors, with sales reducing to £1.6m (H1 2012: £2.1m).  But the sales decline was slower than we had been expecting, as a result of the time it took to enact the reference pricing and generic substitution legislation. The full impact will now probably not be felt until sometime in 2014; in the meantime, our efforts to maintain relationships with pharmacists through a contracted sales force appear to be slowing the attrition in sales.

Sales of Ashton & Parsons Infants' Powders have been limited by production constraints, as we cautioned at the time of acquisition in 2011. New production capacity is expected to be coming on stream over the next couple of months, and as output rises in the fourth quarter we will be able to start realising the product's full sales potential.

The hand-back of nine products that we have been distributing for Novartis, which was originally planned for the start of 2013, is being phased through this year. These products have in the past contributed around £0.5m gross margin per annum.

Sales of the ImmuCyst bladder cancer treatment have been suspended while Sanofi Pasteur addresses regulatory issues at its manufacturing facility. As highlighted in our half year trading update, we currently expect to bring the product back to market in the second half of 2014.  However, rebuilding sales will take some time as we will have to regain market share.

In the UK our marketing investment has been relatively stable over the past couple of years.  Over time we anticipate some increase in spend to support several consumer products acquired in recent years that have potential to reward marketing investment.  These include Quinoderm^TM, an acne skincare product, and MolluDab, a treatment for the highly infectious skin condition molluscum contagiosum.  We acquired the rights to launch MolluDab as part of our acquisition from Beacon Pharmaceuticals in 2011 and have brought the product to the market in the first half of this year.  This product is in a niche market, but we are hopeful that it will gain a good share of that market.

In China, the in-market sales of Forceval™ have reduced due to strong competition in the marketplace.  As a result, our distributor in China has been left with high inventory levels, leading in turn to a very low level of orders from the distributor this year.  We are working with the distributor to address the situation.

The strong profit performance reflected short-term changes in the product mix that temporarily lifted the gross margin rate during the period to 61.9%.

Operating costs were £6.5m, or 28.7% of sales. This is virtually unchanged from the 28.5% for the year ended December 2012 despite continuing investment in establishing our French and German presence, and some staffing increases to support the growth in our product portfolio.

Finance costs have remained at £0.7m.  Strong cash generation enables us to keep investing in acquisitions without increasing debt unduly: in the first half, net debt rose only £4.8m to £26.6m despite spending £8.2m on acquisitions.

The ratio of bank debt to EBITDA (including pro forma EBITDA from acquisitions) remains modest at 1.5 times (FY 2012: 1.3 times).  Interest cover is very comfortable at 11.7 times.

The convertible loan stock continues to be converted to equity, ahead of the November 2013 maturity date.  The amount of outstanding stock fell from £4.2m to £2.7m over the period. The steady pace of conversion over the past couple of years has helped to minimise the impact of conversions on equity investors.

Dividend

We are maintaining our progressive dividend policy with an interim payment of 0.303p per ordinary share. This provides an increase of 10% on last year's figure while remaining well covered by profits.  The interim dividend will be paid on 15 January 2014 to shareholders on the register on 6 December 2013.

Strategy

Our business model has been based for many years on acquiring and licensing established products with stable sales in niche areas with limited or no competition.  Most of these have required little or no promotional support.  The range and mix of products has gradually broadened over the years beyond this bedrock.  For example, around one quarter of sales are now over-the-counter, and these products typically require some modest marketing cost but offer the potential of organic growth.

We continue to have two UK field forces, one focused on dermatology and the other focused on specialist hospital products, and have scope for economies of scale when we bring in products that these teams can promote alongside the existing ones, such as the dermatology team working on MolluDab. 

We currently generate just under a fifth of our sales outside the UK.  In 2012 we launched a strategy to increase the flow of acquisition opportunities by more actively searching beyond the UK, particularly in Western Europe. Most of our existing products offer limited opportunities for expanding international sales, so our international strategy is to replicate the successful UK model by acquiring established products in overseas markets.

In 2012 we appointed Country Managers in France and Germany to drive the acquisition and development of product portfolios in Western Europe. We also acquired the antimalarial brands Paludrine™, Avloclor™ and Savarine™, which are sold mainly in the UK and France. This has enabled us to begin sales in France.  We have been able to attract a very encouraging flow of acquisition opportunities through our new Country Managers and are hopeful of completing further European acquisitions in the near future.

We remain alert to attractive opportunities beyond Europe, and in June 2013 we acquired from Novartis the international rights to Syntometrine, an obstetric drug to which we already own the UK rights. Overseas sales in countries including Australia, South Africa, Malaysia and New Zealand have been generating annual gross margin of some US$2.8m.  Although we expect the addition of these new territories to increase our annual distribution and operating costs by around £0.5m per annum, the acquisition is immediately earnings enhancing.  And the extension of our international distribution footprint creates new opportunities to make acquisitions with potential for internationalisation.

Team

In August 2013 we welcomed Stephen Kidner as Operations Director.  This new role reflects the continuing growth of the business and our determination to optimise efficiency and cash generation.  Stephen brings over 20 years' pharmaceutical industry experience spanning product development, production and supply at companies including Wyeth and Mundipharma International.

Outlook

The strong start to 2013 augurs well for meeting full year expectations albeit that, with lower sales of the cyclical toxicology product, the second half is unlikely to be quite as strong.

We await details of the industry's new five-year pricing agreement with the UK government, effective from January 2014. This is likely to have some impact on pricing, but now affects less than a half of our total sales.

Also in 2014 we expect to benefit from continued growth in our existing portfolio, the full year impact of the Syntometrine acquisition, and the return to the market of ImmuCyst.  However we are expecting the new legislation on reference pricing and generic substitution in Ireland to impact Nu-Seals sales and our toxicology product will be in its cyclical downswing.  We are energetically pursuing additional growth through further acquisitions, supported by strong UK and international teams, a good flow of opportunities, healthy cash flow and ample headroom in our funding facilities.

Consolidated Income Statement

For the six months ended 30 June 2013

		6 months to 30 June 2013	6 months to 30 June 2012	Year to 31 December 2012
	Note	£ 000s	£ 000s	£ 000s
Revenue		22,781	22,004	44,897
Cost of sales		(8,682)	(10,129)	(19,779)
Gross profit		14,099	11,875	25,118
Operating expenses
Administration and marketing expense		(6,104)	(5,446)	(11,856)
Amortisation of intangible assets		(200)	(251)	(573)
Share-based employee remuneration		(238)	(198)	(369)
		(6,542)	(5,895)	(12,798)
Operating profit		7,557	5,980	12,320
Finance costs
Interest payable		(649)	(707)	(1,541)
Interest income		2	2	-
Foreign exchange rate movement		(74)	32	30
		(721)	(673)	(1,511)
Profit on ordinary activities before taxation		6,836	5,307	10,809
Taxation	4	(1,347)	(974)	(2,119)
Profit for the period attributable to equity shareholders		5,489	4,333	8,690
Earnings per share
Basic (pence)	8	2.22	1.80	3.61
Diluted (pence)	8	2.13	1.69	3.40

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2013

		6 months to 30 June 2013	6 months to 30 June 2012	Year to 31 December 2012
		£ 000s	£ 000s	£ 000s
Profit for the period		5,489	4,333	8,690
Other items recognised directly in equity:
Items that may be reclassified to profit or loss: Interest rate swaps - cash flow hedge		113	1	6
Deferred tax on interest rate swap		(25)	-	(2)
Total comprehensive income for the period		5,577	4,334	8,694

Consolidated Balance Sheet

At 30 June 2013

		30 June 2013	30 June 2012	31 December 2012
	Note	£ 000s	£ 000s	£ 000s
Assets
Non-current assets
Intangible fixed assets	5	87,219	66,120	79,890
Property, plant and equipment		593	663	564
Derivative financial assets		113	-	-
		87,925	66,783	80,454
Current assets
Inventories		6,007	4,622	5,393
Trade and other receivables	6	10,443	9,288	10,145
Cash and cash equivalents		1,481	3,161	4,634
		17,931	17,071	20,172
Total assets		105,856	83,854	100,626
Equity
Ordinary share capital		2,512	2,407	2,430
Share premium account		26,806	24,982	25,297
Share option reserve		1,030	621	792
Reverse takeover reserve		(329)	(329)	(329)
Other reserve		88	(3)	-
Retained earnings		27,111	19,301	23,658
Total equity		57,218	46,979	51,848
Liabilities
Non-current liabilities
Long-term financial liabilities		21,225	12,725	20,225
Convertible debt		-	4,352	-
Other liabilities		-	19	20
Deferred tax liability		6,238	4,067	6,124
Provisions for other liabilities and charges		282	433	364
		27,745	21,596	26,733
Current liabilities
Cash and cash equivalents		1,846	1	1
Financial liabilities		5,000	4,750	6,250
Convertible debt		2,694	-	4,189
Corporation tax		1,561	973	1,322
Trade and other payables	7	9,610	9,372	10,086
Derivative financial instruments		-	5	-
Provisions for other liabilities and charges		182	178	197
		20,893	15,279	22,045
Total liabilities		48,638	36,875	48,778
Total equity and liabilities		105,856	83,854	100,626

Consolidated Statement of Cash Flows

For the six months ended 30 June 2013

		6 months to 30 June 2013	6 months to 30 June 2012	Year to 31 December 2012
		£ 000s	£ 000s	£ 000s
Operating activities
Result for the period before tax		6,836	5,307	10,809
Interest payable		649	707	1,466
Interest receivable		(2)	(2)	-
Other finance costs		74	(32)	45
Depreciation of property, plant and equipment		133	137	274
Amortisation of intangible assets		200	251	573
Change in inventories		(613)	1,030	505
Change in trade and other receivables		(298)	(628)	(724)
Change in trade and other payables		(1,281)	(307)	1,100
Tax paid		(1,019)	(1,044)	(1,982)
Share options charge		238	198	369
Cash flows from operating activities		4,917	5,617	12,435
Investing activities
Interest received		2	2	-
Payment of deferred consideration		(641)	(20)	(20)
Development costs capitalised		(6)	(66)	(107)
Net assets acquired in Opus, net of cash		-	-	(422)
Purchase of property, plant and equipment		(164)	(35)	(73)
Purchase of other intangible assets		(7,523)	(175)	(12,377)
Net cash used in investing activities		(8,332)	(294)	(12,999)
Financing activities
Interest paid and similar charges		(675)	(648)	(1,198)
Loan issue costs		-	(26)	(100)
Proceeds from exercise of share options		82	-	190
Dividend paid		(666)	(600)	(1,803)
Receipt from borrowings		3,500	-	10,000
Repayment of borrowings		(3,750)	(2,000)	(3,000)
Net cash used in financing activities		(1,509)	(3,274)	4,089
Net movement in cash and cash equivalents		(4,924)	2,049	3,525
Cash and cash equivalents at beginning of period		4,633	1,078	1,078
Exchange losses on cash and cash equivalents		(74)	33	30
Cash and cash equivalents at end of period		(365)	3,160	4,633

Consolidated Statement of Changes in Equity

At 30 June 2013

	Ordinary	Share	Share	Reverse
	share	premium	option	takeover	Other	Retained	Total
	capital	account	reserve	reserve	reserve	earnings	equity
	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s
Balance 1 January 2012	2,401	24,866	423	(329)	(4)	16,771	44,128
Issue of shares	29	431	-	-	-	-	460
Dividend paid	-	-	-	-	-	(1,803)	(1,803)
Employee benefits	-	-	369	-	-	-	369
Transactions with owners	29	431	369	-	-	(1,803)	(974)
Profit for the period	-	-	-	-	-	8,690	8,690
Other comprehensive income
Interest rate swaps - cash flow hedge	-	-	-	-	6	-	6
Deferred tax on interest rate swap	-	-	-	-	(2)	-	(2)
Total comprehensive income for the period	-	-	-	-	4	8,690	8,694
Balance 31 December 2012	2,430	25,297	792	(329)	-	23,658	51,848
Balance 1 January 2012	2,401	24,866	423	(329)	(4)	16,771	44,128
Issue of shares	6	116	-	-	-	-	122
Dividend payable/paid	-	-	-	-	-	(1,803)	(1,803)
Employee benefits	-	-	198	-	-	-	198
Transactions with owners	6	116	198	-	-	(1,803)	(1,483)
Profit for the period	-	-	-	-	-	4,333	4,333
Other comprehensive income
Interest rate swaps - cash flow hedge	-	-	-	-	1	-	1
Total comprehensive income for the period	-	-	-	-	1	4,333	4,334
Balance 30 June 2012	2,407	24,982	621	(329)	(3)	19,301	46,979
Balance 1 January 2013	2,430	25,297	792	(329)	-	23,658	51,848
Issue of shares	82	1,509	-	-	-	-	1,591
Dividend payable/paid	-	-	-	-	-	(2,036)	(2,036)
Employee benefits	-	-	238	-	-	-	238
Transactions with owners	82	1,509	238	-	-	(2,036)	(207)
Profit for the period	-	-	-	-	-	5,489	5,489
Other comprehensive income
Interest rate swaps - cash flow hedge	-	-	-	-	88	-	88
Total comprehensive income for the period	-	-	-	-	88	5,489	5,577
Balance 30 June 2013	2,512	26,806	1,030	(329)	88	27,111	57,218

Notes to the Half Yearly Report

For the six months ended 30 June 2013

1          Nature of operations

Alliance Pharma plc ("the Company") and its subsidiaries (together "the Group") acquire, market and distribute pharmaceutical products. The Company is a public limited company 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 un-audited. A copy of the Group's statutory accounts for the period ended 31 December 2012, 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 interim financial report for the six month period ended 30 June 2013 (including comparatives for the six months ended 30 June 2012) was approved by the Board of Directors on 10 September 2013.

The current rate of cash generation by the Group comfortably exceeds the capital and debt servicing needs of the business (though there cannot, of course, be absolute certainty that the rate of cash generation will be maintained).  The Board remains confident that all the bank covenants will continue to be met.  The Group has an £8m Working Capital Facility which is largely undrawn and which the Board believes should comfortably satisfy the Group's working capital needs for at least the next 12 months.

3          Accounting policies

The same accounting policies and methods of computation are followed in the interim financial report as published by the company in its 31 December 2012 Annual Report. The Annual report is available on the company's website at www.alliancepharma.co.uk.

4          Taxation

Analysis of charge in period.

	30 June 2013	30 June 2012	31 December 2012
	£ 000s	£ 000s	£ 000s
United Kingdom corporation tax at 23.25%/25%/24.5%
In respect of current period	1,258	971	1,910
Current tax	1,258	971	1,910
Deferred tax	89	3	209
Taxation	1,347	974	2,119

Notes to the Half Yearly Report (continued)

For the six months ended 30 June 2013

5.         Intangible assets

	Goodwill on consolidation	Purchased Goodwill	Technical know-how, trademarks and distribution rights	Development costs	Total
	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s
Cost
At 1 January 2013	1,144	2,449	78,107	310	82,010
Additions	-	-	7,523	6	7,529
At 30 June 2013	1,144	2,449	85,630	316	89,539
Amortisation and impairment
At 1 January 2013	-	-	2,120	-	2,120
Amortisation for the period	-	-	200	-	200
At 30 June 2013	-	-	2,320	-	2,320
Net book amount
At 30 June 2013	1,144	2,449	83,310	316	87,219
At 1 January 2013	1,144	2,449	75,987	310	79,890

On 6 June 2013, the Group acquired all of the existing rights to Syntometrine^TM from Novartis AG and Novartis Pharma AG (together "Novartis") for cash consideration of US$11.5 million (£7.5 million).

6          Trade and other receivables

	30 June 2013	30 June 2012	31 December 2012
	£ 000s	£ 000s	£ 000s
Trade receivables	9,529	8,761	9,583
Other receivables	236	49	212
Prepayments and accrued income	635	400	350
Amounts owed by joint venture	43	78	-
	10,443	9,288	10,145

7          Trade and other payables

	30 June 2013	30 June 2012	31 December 2012
	£ 000s	£ 000s	£ 000s
Trade payables	2,524	1,132	902
Other taxes and social security costs	1,022	996	1,225
Accruals and deferred income	4,623	5,366	7,019
Other payables	71	675	940
Dividend payable	1,370	1,203	-
	9,610	9,372	10,086

Notes to the Half Yearly Report (continued)

For the six months ended 30 June 2013

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 outstanding 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:

	6 months to 30 June 2013	6 months to 30 June 2012	Year ended 31 December 2012
	Weighted average number of shares 000s	Weighted average number of shares 000s	Weighted average number of shares 000s
For basic EPS	246,975	240,430	240,881
Share options	1,768	2,733	2,033
Conversion of Convertible Unsecured Loan Stock (CULS)	12,867	20,887	20,054
For diluted EPS	261,610	264,050	262,968

	6 months to 30 June 2013	6 months to 30 June 2012	Year ended 31 December 2012
	£ 000s	£ 000s	£ 000s
Earnings for basic EPS	5,489	4,333	8,690
Interest saving on conversion of CULS	108	175	337
Tax effect of interest saving on conversion of CULS	(25)	(43)	(81)
Earnings for diluted EPS	5,572	4,465	8,946

The resulting EPS measures are:

	6 months to 30 June 2013	6 months to 30 June 2012	Year ended 31 December 2012
	Pence	Pence	Pence
Basic EPS	2.22	1.80	3.61
Diluted EPS	2.13	1.69	3.40

Notes to the Half Yearly Report (continued)

For the six months ended 30 June 2013

9          Dividends

		6 months to 30 June 2013					6 months to 30 June 2012			Year ended 31 December 2012
			Pence/share	£ 000s			Pence/share		£ 000s		Pence/share £ 000s
	Amounts recognised as distributions to owners in the year
	Interim dividend for the prior financial year		0.275			666	0.25	600		0.25		600
	Final dividend for the prior financial year		-			-	-	-		0.50		1,203
	Proposed final dividend for the prior financial year		0.55			1,370	0.50	1,203		-		-
					2,036			1,803				1,803

The proposed final dividend for the prior financial year was approved by the Board of Directors on 20 March 2013 and subsequently by the shareholders at the Annual General Meeting on 22 May 2013. The proposed dividend has been included as a liability as at 30 June 2013 in accordance with IAS 10 Events After the Balance Sheet Date. The proposed final dividend for the prior financial year was paid on 11 July 2013 to shareholders who were on the register of members at 14 June 2013.

 

END

 

 

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