Interim Results
Alliance Pharma PLC
03 November 2005
FOR IMMEDIATE RELEASE 3 NOVEMBER 2005
ALLIANCE PHARMA PLC
('Alliance Pharma' or 'the Company')
Interim Results for the six month period ended 31 Augst 2005
Alliance Pharma plc (AIM: APH), an emerging speciality pharmaceutical company,
is pleased to announce its interim results for the half year ended 31 August
2005.
Financial Highlights
• Sales up 35.5% to £7.5m
• Profit after tax, on an IFRS basis was £385K
• Gross margin improvement of 53.6%
• Operating cashflow remains strong at £1.6m
• Basic earnings per share of 0.26p
• Financial year changing to December 31st - commencing December 2005
Operational Highlights
• Phase III clinical trials on Isprelor(TM), (induction of labour)
- trials expected to complete the middle of 2006
• Phase III trials on Posidorm(TM), (melatonin for sleeping disorders),
- on track for introduction in 2007
• Selective acquisition of reputable prescription brands under discussion
Commenting on the results, Michael Gatenby, Alliance Pharma's Chairman, said:
'Our interim results for the 6 months to August 2005 represent another period of
good, on-target, performance from the current business with solid progress also
being made on the development projects. Significant progress has also been made
in building and strengthening the managerial team...... We look forward to the
next half year with continued optimism.'
For further information:
Alliance Pharma plc + 44 (0) 1249 466966
John Dawson, Chief Executive
Maddy Scott, Finance Director
www.alliancepharma.co.uk
Buchanan Communications + 44 (0) 20 7466 5000
Mark Court/Lisa Baderoon
Notes to editors
About Alliance Pharma
Alliance Pharma, founded in 1996, is an AIM listed emerging speciality
pharmaceutical company based in Chippenham, Wiltshire, UK. The company has a
strong track record of acquiring the rights to established niche brands and
owns, or shares, the rights to 30 branded pharmaceutical products and continues
to explore opportunities to expand the range.
Alliance Pharma's products are prescribed in the treatment of a wide range of
conditions and include brands used in periodontitis (a serious gum disease), the
prevention of heart disease, in Parkinson's disease, in nutrition, in nasal
infections, in the treatment of dermatological conditions and in childbirth.
Alliance Pharma's sales are mainly prescription driven. Its products are
distributed to hospitals directly and to pharmaceutical wholesalers which
service both hospital and retail pharmacies with their prescription
requirements.
Alliance Pharma is also developing novel products for sleep disorders and the
induction of labour.
Alliance Pharma joined the AIM market of the London Stock Exchange in December
2003 and trades under the symbol APH.
Chairman's statement
Our Interim Results for the 6 months to August 2005 represent another period of
good, on-target, performance from the current business with solid progress also
being made on the development projects. Significant progress has also been made
in building and strengthening the managerial team.
Sales were £7.5m having grown by 35.5%, compared to the same period last year,
5.8% being like for like and 29.7% arising from the acquisitions of Periostat
and Forceval in November 2004.
Profit after tax, on an IFRS basis was £385k corresponding to £206k for the same
period last year, representing an increase of 86.7%. This was after P&L costs
for the pre-marketing activities on the development projects of £301k.
Development costs, per se, of £724k were capitalised, bringing the total
expenditure on development projects to £1,025k in the period.
IFRS adjustments amounted to (£113k), the most significant of which was (£115k)
for the change in the fair value of interest rate swaps which provide us with
interest rate stability until 2008. This revaluation is a non-cash item which
could move around from period to period.
Excluding the IFRS adjustments, profit after tax was £498k. Looking forward to
the full year results, we expect minor phasing differences on expenses,
particularly on the development projects, to reduce slightly the pro-rata
accumulation of profit compared to the first six months, but nevertheless the
full year result is expected to be within the range of market forecasts.
We have taken the decision to change our financial year end to December 31st
commencing in December 2005 in order to align ourselves with most companies in
our sector. This means that the period to December 2005 will contain 10 months
trading. Trading to the end of October was on plan and therefore we expect the
result in December to be proportionate to our expectation for the full 12 month
period.
Regarding segmental analysis, sales for our Growth Brands grew from £2.9m (at
August 2004) to £3.6m and the Growth Brands Result grew from £1.5m to £2.0m.
Nu-Seals and Symmetrel continue to perform well. Since the acquisition of
Periostat in November 2004, great progress has been made on its integration. In
April 2004 a Head of the Dental Business Unit took office; in May a co-promotion
deal was signed with Oraldent; and by August the OralDent sales team had been
expanded in number and trained on the technical aspects of Periostat enabling
promotion of Periostat to commence. As yet, it is thus too soon to see the
impact.
In the Core Brands segment which does not receive promotional support, sales
grew from £2.7m to £4.0m, principally due to acquisition of Forceval in November
2004. It was however affected by the one-off 7% price decrease imposed on sales
to the UK NHS in January 2005 as part of the industry-wide renegotiation of the
PPRS (Pharmaceutical Price Regulation Scheme) for the period 2005 - 2011. Whilst
this has been a bitter pill to swallow, it does provide price stability for the
period up to 2011. Growth due to acquisitions was 27.4%. The Core Brands Result
grew from £0.75m to £1.2m.
Our Phase III clinical trials on Isprelor(TM), our intra-vaginal misoprostol for
induction of labour, opened in January with the expectation that they would be
finished this year. Site set-ups were prolonged and patient recruitment has been
slower than planned. To compensate for this, the number of sites is currently
being expanded and the trials are now expected to complete around the middle of
2006, with the introduction being delayed into 2007. Nevertheless interest in
the product is keen and an Alliance sponsored symposium on the use of
misoprostol in obstetrics at the 6th International Scientific Meeting of the
Royal College of Obstetricians and Gynaecologists in Cairo in September was very
well attended and provoked much positive contribution during discussion.
Our Phase III trials on Posidorm(TM), our medical development of melatonin for
sleeping disorders, commenced in July and progress is going well with the
project remaining on track for an introduction in 2007. Posidorm is a very
substantial market opportunity for the Company as it addresses a market
currently estimated at £0.5 billion but which is expected to treble in the next
decade. Out-licensing discussions on Posidorm are ongoing.
Selective acquisition of reputable prescription brands remains an essential part
of our strategy for building the business base and we have several projects
under discussion.
As can be seen from the accompanying announcement we have just divested for the
sum of £0.5m the rights to Uniflu, an OTC cold and 'flu preparation, to G R Lane
Health Products Ltd for the UK and various other territories. This product had
been acquired along with Forceval in a package of assets from the Administrators
of Unigreg Ltd in November 2004. Uniflu, which has undeveloped potential in the
UK, was non-core to Alliance, although, via overseas distributors, we retain our
international sales of around £400k and we are pleased with the sum achieved.
Michael Gatenby
Chairman
Consolidated interim income statement
For the six months ended 31 August 2005
6 months 6 months 12 months
to 31 Aug to 31 Aug to 28 Feb
2005 2004 2005
Note £ £ £
Sales revenue 4 7,545,724 5,568,333 11,826,292
Cost of sales (3,501,628) (2,658,048) (5,624,857)
--------- --------- ----------
Gross profit 4,044,096 2,910,285 6,201,435
Operating expenses
Other operating expenses (2,629,096) (1,801,822) (3,832,893)
--------- --------- ----------
(2,629,096) (1,801,822) (3,832,893)
------------------- --------- --------- ----------
Operating profit
Pre exceptional items 1,415,000 1,108,463 2,368,542
Exceptional items - (109,504) (109,504)
Operating profit before
finance costs 1,415,000 998,959 2,259,038
----------------------- --------- --------- ----------
Finance costs
Interest paid (906,300) (717,880) (1,661,487)
Other finance costs (20,806) (76,689) (191,715)
Change in fair value of
derivative
financial instruments (115,263) - -
--------- --------- ----------
(1,042,369) (794,569) (1,853,202)
--------- --------- ----------
Profit for the period before
taxation 372,631 204,390 405,836
Taxation 12,497 1,864 -
--------- --------- ----------
Profit for the financial 5 385,128 206,254 405,836
period ========= ========= ==========
Earnings per share
Basic (pence) 6 0.26 0.19 0.33
========= ========= ==========
Diluted (pence) 6 0.46 0.46 0.81
========= ========= ==========
Consolidated balance sheet
At 31 August 2005
At At At
31 Aug 31 Aug 28 Feb
2005 2004 2005
£ £ £
Assets
Non-current assets
Goodwill 1,128,973 1,128,740 1,128,973
Other intangible fixed assets 27,692,227 17,033,810 26,966,042
Property, plant and equipment 299,048 201,352 306,573
Deferred tax assets 12,497 1,864 -
---------- --------- ----------
29,132,745 18,365,766 28,401,588
---------- --------- ----------
Current assets
Inventories 2,351,889 1,847,401 2,469,363
Trade and other receivables 3,377,500 1,752,514 2,149,613
Cash and cash equivalents 267,853 3,679,696 1,367,271
---------- --------- ----------
5,997,242 7,279,611 5,986,247
---------- --------- ----------
Total assets 35,129,987 25,645,377 34,387,835
========== ========= ==========
Equity
Ordinary Share capital 1,473,559 1,107,939 1,473,559
Share premium 9,030,959 5,221,761 9,030,959
Fair value of share options 22,610 2,119 12,423
Reserves (329,349) (329,349) (329,349)
Retained earnings (2,978,159) (3,562,869) (3,363,286)
---------- --------- ----------
Total equity 7,219,620 2,439,601 6,824,306
---------- --------- ----------
Liabilities
Non-current
Long term financial liabilities 12,789,901 10,375,627 14,293,913
Convertible debt 7,153,229 7,111,617 7,132,423
Other liabilities 163,889 200,000 177,778
---------- --------- ----------
20,107,019 17,687,244 21,604,114
---------- --------- ----------
Current
Financial liabilities 3,016,827 1,925,101 2,551,721
Derivative financial instruments 115,263 - -
Trade and other payables and
provisions 4,671,258 3,593,431 3,407,694
---------- --------- ----------
7,803,348 5,518,532 5,959,415
---------- --------- ----------
Total liabilities 27,910,367 23,205,776 27,563,529
---------- --------- ----------
Total equity and liabilities 35,129,987 25,645,377 34,387,835
========== ========= ==========
Consolidated interim statement of cash flows
For the six months ended 31 August 2005
6 months 6 months 12 months
to 31 Aug to 31 Aug to 28 Feb
2005 2004 2005
£ £ £
Operating activities
Result for the year before tax
and finance costs 1,415,000 998,959 2,259,038
Depreciation of property,
plant and equipment 65,526 43,691 115,229
Change in inventories 117,474 (107,885) (729,847)
Change in trade and other (1,227,887) 238,702 (165,521)
receivables
Change in trade and other 1,279,892 (233,611) 93,882
payables
Tax paid (1,420) - (12,747)
Share options charges 10,187 2,119 12,423
---------- --------- ----------
Cash flows from operating 1,658,772 941,975 1,572,457
activities ========== ========= ==========
Investing activities
Interest received 51,621 101,703 161,726
Interest paid and similar (956,719) (543,341) (1,820,209)
charges
Other finance charges paid (1,202) (1,607) (3,004)
Payment of deferred (13,889) - (128,399)
consideration
Purchase of subsidiary - (112,401) -
undertaking
Finance issue costs paid - (53,549) -
Development costs capitalised (724,630) - (858,499)
Purchase of tangible assets (58,001) (69,190) (245,948)
Purchase of other intangible (1,555) (170,572) (9,248,913)
assets ---------- --------- ----------
Net cash used in investing (1,704,375) (848,957) (12,143,246)
activities ---------- --------- ----------
Financing activities
Net proceeds from the issue of - - 4,181,941
shares
Receipt from borrowings - - 6,875,000
Repayment of borrowings (1,115,514) (978,526) (3,763,859)
Finance lease payments (10,378) (13,992) (26,031)
---------- --------- ----------
Net cash used in financing (1,125,892) (992,518) 7,267,051
activities ---------- --------- ----------
Net movement in cash and
cash equivalents (1,171,495) (899,500) (3,303,738)
Cash and cash equivalents
at 1 March 2005 1,275,459 4,579,197 4,579,197
---------- --------- ----------
Cash and cash equivalents
at 31 August 2005 103,964 3,679,697 1,275,459
========== ========= ==========
Consolidated interim statement of changes in equity
At 31 August 2005
Equity attributable to equity holders of Alliance Pharma plc
Shares
Share Share to be Reserves Retained Total
Capital Premium issued earnings Equity
£ £ £ £ £ £
Balance
1 March 2004 1,107,939 5,214,638 - (329,349) (3,769,123) 2,224,105
Costs of share issue
reclaimed - 7,123 - - - 7,123
Employee
benefits - - 2,119 - - 2,119
Profit for the
period - - - - 206,254 206,254
------- -------- ------- ------- -------- --------
Balance
31 August 2004 1,107,939 5,221,761 2,119 (329,349) (3,562,869) 2,439,601
------- -------- ------- ------- -------- --------
Balance
1 September
2004 1,107,939 5,221,761 2,119 (329,349) (3,562,869) 2,439,601
Issue of
shares 365,620 - - - - 365,620
Premium on
shares issued - 3,809,198 - - - 3,809,198
Employee
benefits - - 10,304 - - 10,304
Profit for the
period - - - - 199,582 199,582
------- -------- ------- ------- -------- --------
Balance
28 February
2005 1,473,559 9,030,959 12,423 (329,349) (3,363,287) 6,824,305 (1)
------- -------- ------- ------- -------- --------
Balance
1 March 2005 1,473,559 9,030,959 12,423 (329,349) (3,363,287) 6,824,305
Employee
benefits - - 10,187 - - 10,187
Profit for the
period - - - - 385,128 385,128
------- -------- ------- ------- -------- --------
Balance
31 August 2005 1,473,559 9,030,959 22,610 (329,349) (2,978,159) 7,219,620 -
------- -------- ------- ------- -------- --------
Notes to the interim report
For the six months ended 31 August 2005
1. Nature of operations
Alliance Pharma plc and its subsidiaries' ('Alliance' or 'The Group') principal
activities comprise the development, marketing and distribution of
pharmaceutical products. The principal activity of the Company is to act as a
holding company.
2. General information
The information for the year ended 28 February 2005 does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. A copy
of the statutory accounts for that year, prepared under UK GAAP, has been
delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified.
The interim financial report for the six month period ended 31 August 2005
(including comparatives for the six months ended 31 August 2004) were approved
by the board of directors on 3 November 2005.
3. Accounting policies
The interim financial report has been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting and the requirements of
International Financial Reporting Standard 1 First-time adoption of
International Financial Reporting Standards relevant to interim reports.
The same accounting policies and methods of computation are followed in the
interim financial report as published by the company in the 'additional
unaudited information' contained within its February 2005 Annual Report, which
is available on the company's website on www.alliancepharma.co.uk.
4. Segmental information
The business is split between those brands which are invested in for growth,
core brands which have no promotional investment and development projects which
are non-revenue-generating.
Growth Core Development Central & Total
Brands Brands Projects Unallocated Group
£ £ £ £ £
For the half
year ended
31 August
2005
Segment
revenue 3,586,822 3,958,904 - - 7,545,725 - 1
======== ======== ========== ========= ========
Segment
result 2,019,031 1,202,794 (301,009) (1,505,817) 1,415,000 - -
======== ======== ========== ========= ========
For the
half year
ended 31
August
2004
Segment
revenue 2,882,919 2,685,414 - - 5,568,333 - 0
======== ======== ========== ========= ========
Segment
result 1,515,295 753,131 - (1,159,963) 1,108,463 - -
======== ======== ========== ========= ========
For the
year ended
28 February
2005
Segment
revenue 6,072,302 5,753,990 - - 11,826,292 - 0
======== ======== ========== ========= ========
Segment ======== ======== ========== ========= =========
result 3,454,484 1,421,245 (51,103) (2,456,084) 2,368,542 - (0)
======== ======== ========== ========= =========
5. Transition to International Financial Reporting Standards
The transition from UK GAAP to IFRS has been made in accordance with IFRS 1
(First Time Adoption of International Financial Reporting Standards).
IFRS 1, permits those companies adopting IFRS for the first time to take some
exemptions from the full requirements of IFRS. Alliance Pharma plc has taken the
following exemptions:
• business combinations prior to the transition date (1 March 2004) have
not been restated onto an IFRS basis.
• The comparative information presented in the Group's first full set of
IFRS financial statements need not comply with IAS 32 and IAS 39. Therefore
the group has:
(a) applied UK GAAP in the comparative information to financial instruments
within the scope of IAS 32 and IAS 39.
(b) the main adjustments that would make the opening balance sheet comply with
IAS 32 and IAS 39 are:
1) that the interest rate swaps are considered a derivative financial
instrument, under IAS 39, 'financial instruments; recognition and measurement',
and would be originally recognised in the balance sheet at cost and then
re-measured at subsequent reporting dates to fair value. Changes in the fair
value of derivatives financial instruments are recorded in the income statement.
Under UK GAAP these financial instruments are recorded at cost. The fair value
of the interest rate swap at 1 March 2005, the beginning of the period in which
IAS 32 and IAS 39 has been applied, was £3,000. This amount is not considered
material to make any adjustment for a change in accounting policy as required by
IAS 8; and
2) under UK GAAP the convertible loan stock is accounted for within
creditors falling due within one year and creditors falling due after one year.
In accordance with IAS 32, financial instruments; disclosure and presentation,
the convertible loan stock is considered a compound financial instrument. The
components of the financial instrument would have been separated and the
liability recorded within creditors and equity element within shareholders
funds.
The fair value of the equity element of all loan stock currently in issue was
nil at the date of issue.
5. Transition to International Financial Reporting Standards (continued)
The reconciliation of the Group's equity previously reported under UK GAAP to
its equity under IFRSs may be summarised as follows:
As at As at As at As at
31 Aug 31 Aug 28 Feb 28 Feb
2005 2004 2005 2004
£ £ £ £
**
Equity
Equity under UK GAAP
previously reported 7,322,386 1,839,990 6,824,306 2,224,106
Amortisation * - 597,747 - -
-------- -------- -------- --------
Revised equity under UK
GAAP 7,322,386 2,437,737 6,824,306 2,224,106
Interest rate swaps - fair
value adjustment (115,263) - - -
Employee benefits reserve 22,610 2,119 12,423 -
Deferred tax adjustment 12,497 1,864 - -
Employee benefits expense (22,610) (2,119) (12,423) -
-------- -------- -------- --------
Equity under IFRS 7,219,620 2,439,601 6,824,306 2,224,106
======== ======== ======== ========
Profit and loss previously reported under UK GAAP can be reconciled to IFRS as
follows:
6 months 6 months 12 months
to to to
31 Aug 31 Aug 28 Feb
2005 2004 2005
£ £ £
**
Income statement
(Loss)/profit for period under
UK GAAP previously reported 498,081 (391,238) 418,259
Amortisation - 597,747 -
---------- --------- ----------
Revised (loss)/profit for
period under UK GAAP 498,081 206,509 418,259
Interest-rate swaps - fair value
adjustment (115,263) - -
Employee benefits expense (10,187) (2,119) (12,423)
Deferred tax movement 12,497 1,864 -
---------- --------- ----------
Profit for period under IFRS 385,128 206,254 405,836
========== ========= ==========
* Amortisation of goodwill and intangible assets previously reported in the 31
August 2004 interim financial report has been reversed to reflect a change in
accounting estimate that was applied in the annual report for the full year to
28 February 2005.
** Reconciliations included above relating to the period ending 31 August 2005
have been given for information purposes only and do not relate to previously
reported numbers.
6. Earnings per share
The basic earnings per share is based on equity profits of £385,128 (31 August
2004: £206,254; 28 February2005: £405,836) and 147,355,891 (31 August 2004:
110,793,903; 28 February 2005: 123,815,891) ordinary shares of 1p each, being
the weighted average number of shares in issue in the period.
An adjusted earnings per share has been disclosed in order to show performance
undistorted by exceptional items and one-off finance charges. The adjusted
earnings per share is based on equity earnings of £385,128 (31 August 2004:
£315,758; 28 February 2005: £633,067).
6 months 6 months 12 months
to to to
31 Aug 31 Aug 28 Feb
2005 2004 2005
£ £ £
Reconciliation of diluted
earnings
Equity earnings 385,128 206,254 405,836
Interest saved on convertible
loan stock 300,000 300,000 600,000
---------- --------- ----------
Diluted earnings 685,128 506,254 1,005,836
========== ========= ==========
Reconciliation of adjusted
earnings
Equity earnings 385,128 206,254 405,836
Aborted acquisition costs - 109,504 109,504
Other finance costs - - 117,727
---------- --------- ----------
Adjusted earnings 385,128 315,758 633,067
========== ========= ==========
Reconciliation of adjusted
diluted earnings
Equity earnings 385,128 206,254 405,836
Adjustments to diluted earnings 300,000 300,000 600,000
Adjustments to adjusted - 109,504 227,231
earnings
---------- --------- ----------
Adjusted diluted earnings 685,128 615,758 1,233,067
========== ========= ==========
Reconciliation of ordinary
shares
Basic number of ordinary shares 147,355,891 110,793,903 123,815,981
Conversion of convertible debt 340,630 338,648 339,639
Exercise of options - - 204,686
---------- --------- ----------
Diluted number of ordinary 147,696,521 111,132,551 124,360,306
shares ========== ========= ==========
Earnings per share
Basic (pence) 0.26 0.19 0.33
========== ========= ==========
Adjusted (pence) 0.26 0.28 0.51
========== ========= ==========
Diluted (pence) 0.46 0.46 0.81
========== ========= ==========
Adjusted diluted (pence) 0.46 0.55 0.99
========== ========= ==========
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