Preliminary Results

RNS Number : 4330U

Alliance Pharma PLC

07 April 2016

 

07 April 2016

ALLIANCE PHARMA PLC

("Alliance" or the "Group")

Results for the year ended 31 December 2015

Alliance Pharma plc (AIM: APH), the specialty pharmaceutical company, is pleased to announce its results for the year ended 31 December 2015.

Financial Highlights

·      Revenue up 11% at £48.3m (2014: £43.5m), including £0.8m from the transformational acquisition of the Sinclair Healthcare Products Business

·      Reported pre-tax profit up 49% to £15.2m (2014: £10.2m)

·      Underlying pre-tax profit up 6% at £11.4m* (2014: £10.8m)

·      Adjusted diluted EPS up 8% at 3.61p* (2014: 3.34p)

·      Free cash flow of £6.3m (2014: £10.3m), after acquisition of £4.7m Sinclair inventory

·      Net bank debt of £71.5m (2014: £21.1m)

·      Gearing at year end of 2.8 times (Debt to EBITDA ratio)

·      Proposed dividend:

o  Final dividend up 10% to 0.734p per share (2014: 0.667p)

o  Full year dividend up 10% to 1.100p per share (2014: 1.000p)

* Before non-underlying items, being primarily compensation from Sanofi and acquisition costs for Sinclair, See note 2.

Operational Highlights

·      Transformational Sinclair Healthcare Products Business acquisition in December 2015

·      MacuShield™ acquisition in February 2015

·      Licensing agreement signed with Duchesnay Inc in January 2015 for the product Diclectin™

·      Hydromol™ continues to demonstrate good growth, achieving year on year sales growth of 10% to £6.6m

·      Settlement received of £6.3m (net of fees) in connection with ImmuCyst™ claim

Commenting on the results, Andrew Smith, Alliance's Chairman, said: "This year has been transformational for Alliance following the Sinclair Healthcare Products Business acquisition. We will broadly double the scale of our business - in sales, profits and people. We have extended our reach from around 40 countries to over 100, greatly strengthened our presence in Europe and Asia, and extended our portfolio to some 90 products. Alliance is now a truly international business with significant growth prospects. The current year has started well and we are progressing successfully in the integration of the Sinclair Healthcare Products acquisition."

For further information:

Alliance Pharma plc	+ 44 (0) 1249 466966
John Dawson, Chief Executive
Andrew Franklin, Chief Financial Officer Sarah Robinson, Company Secretary
www.alliancepharma.co.uk
Buchanan	+ 44 (0) 20 7466 5000
Mark Court / Sophie Cowles / Jane Glover
Numis Securities Limited	+ 44 (0) 20 7260 1000
Nominated Adviser: Michael Meade / Freddie Barnfield
Corporate Broking: James Black / Toby Adcock

Notes to editors:

About Alliance

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

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

 

STRATEGIC AND BUSINESS REVIEW

2015 was a transformational year for Alliance. Following the acquisition of the Healthcare Products Business from Sinclair IS Pharma plc, we will double the scale of our business - in terms of sales, profits and people. We have extended our reach from around 40 countries to over 100 and extended our portfolio to some 90 products.  Importantly this greatly strengthens our presence in Europe enhancing our ability to compete for future pan-European licensing and acquisition opportunities.  It also brings extra business into our China operation and in South East Asia, where we will establish a base in Singapore. Alliance is now a truly international business.

The acquisition from Sinclair for £132.2m (including inventory), announced on 17 December 2015, was our largest acquisition to date, bringing us 27 products which generated annual revenues to June 2015 of £43.3m.

In addition, we made two other important additions in the first quarter of 2015, from which we expect to drive significant growth in the next few years. MacuShield, a treatment for age-related macular degeneration, gives us a fast-growing product with major potential for internationalisation. And Diclectin, which we have in-licensed for the UK market, is on track to be the UK's only licensed product for nausea and vomiting of pregnancy. We also acquired five child nutrition brands in China from Sinopharm Nutraceuticals Shanghai (SNS) in September 2015. These add to our Mother and Child business in China and have significant turnaround potential.

These additions represent exciting prospects for our performance in 2016 and beyond and should not overshadow the good progress made in our underlying business over the past year. Our sales growth of over 11% in 2015 was due to a strong performance of our existing portfolio and the impact of MacuShield.

Trading performance

Sales rose over 11% to £48.3m, including £0.8m contributed by the acquired Sinclair business in December. Excluding Sinclair, the sales increase was almost 9%.

The principal growth driver continued to be the Hydromol dermatology range, up 10% to £6.6m. Anbesol™, one of our consumer health products, has continued to benefit from a strong following on social media and sales grew 20% to £1.5m. Gelclair™, our treatment for oral mucositis, rose 5% to £1.4m. And Forceval™ capsules recovered strongly from earlier stock-outs, with sales up by £0.6m to £2.1m.

MacuShield, acquired in February 2015, outperformed our expectations, contributing £3.5m of sales.

Partially offsetting these gains was the loss of revenue from nine products that we handed back to Novartis in 2014.  In the 2014 financial year, they contributed sales of £1.6m although the margins on the products were relatively small. Nu-Seals™ continued to suffer sales erosion by generic competitors in Ireland, and sales fell by a further £0.6m to £1.9m; we are still awaiting a decision from the regulator on whether to allow generic substitution by pharmacists. Quinoderm™ Cream remains off the market, as the sole manufacturer of the active ingredient has ended production. We are in the process of developing alternative supplies, and look forward to recommencing sales in early 2017.

We have been preparing to put marketing support behind two key brands in 2016. We trialled TV advertising for Ashton & Parsons Infants' Powders™ in 2015, and before committing to a full campaign we are building distribution listings to ensure wide availability; meanwhile, sales levelled-off in 2015 at £1.5m after strong growth in 2014. Lypsyl™ sales were also flat at £1.1m while we worked on redesigning the product for relaunch in 2016.

Our substantial bedrock portfolio of unpromoted products performed well, with overall sales stable as expected.

In Europe, our French and German businesses maintained stable sales volumes - although the value was affected by the relative strength of sterling against the euro during the year.

In China, we currently have a 20% stake in Synthasia International. In 2015 we helped to resolve some supply issues with its Swiss manufacturer of infant milk formula products and our 20% share of the sales grew 29% to £0.4m. Forceval, which we sell in China through a distributor, suffered from stockholding fluctuations: sales fell from £1.6m in 2014 to £0.9m, but are now recovering. Our child nutrition brands, acquired in September 2015, contributed £0.2m sales.   

Financial performance

Pre-tax profits were up 49% to £15.2m (2014: £10.2m). However, this result benefited from the balance of some significant one-off items. Excluding these, the underlying trading profit was up 6% to £11.4m (2014: £10.8m).

These major exceptional items included £6.3m (net) compensation received for the suspension of ImmuCyst production by Sanofi, partially offset by Sinclair acquisition costs of £1.8m together with a fair value adjustment to the deferred consideration for the MacuShield acquisition of £0.5m, partly triggered by better-than-forecast sales growth.

Gross profit was up 15% to £28.7m (2014: £25.0m), giving a gross margin for the year of 59.4%. This increase on the 57.5% achieved in 2014 was primarily due to a more favourable mix following handback of the nine Novartis products. We expect to maintain gross margins at 55-60%.

The increase in gross profit was partially absorbed by higher operating costs of £16.3m, excluding non-underlying items, up from £13.3m in 2014.  This resulted from increased marketing investment in key brands, particularly MacuShield following acquisition, pre-launch preparation for Diclectin and a strengthening of the supply chain function leading to a modest increase in staff numbers and costs.

Operating profit - excluding non-underlying items - was £12.5m (2014: £11.8m). This represented 25.8% of sales (2014: 27.1%), the slight decrease being driven by the above mentioned increased investment.

The underlying business remains strongly cash generative. However, in 2015 free cash flow reduced to £6.3m (2014: £10.3m). The principal factors were one-off events: planned stock building to pre-empt supply disruptions, and the inventory costs resulting from the Sinclair products acquisition.

The Sinclair acquisition was financed by increases in both share capital and bank debt. The issue of some 204m shares raised a net £80.8m. For the balance, we negotiated an increase in bank facilities from £55m to £100m, from which we drew £75m for acquisition funding and repayment of existing facilities. This resulted in net debt at the year-end of £71.5m (2014: £21.1m), which we expect to reduce progressively with cash generated by the enlarged business.

At the year-end, the bank debt/EBITDA ratio was 2.8 times on a pro forma basis including historic EBITDA for the Sinclair business. This compares with 1.6 times at the end of 2014.

At the year-end, our unused bank facility stood at £25.0m (2014: £23.8m) plus a £5m overdraft facility.

Earnings per share and dividend

Reported earnings per share (EPS) was 4.65p (2014: 3.17p). Adjusted for non-underlying items, the diluted EPS figure was 3.61p, 8% above 2014.

The 2015 EPS figure is based on a time-weighted average number of shares for the year of 279m, reflecting the increased number of shares in issue at the year-end of 468m, compared with 264m in 2014.

Given the year's strong performance, and consistent with our progressive dividend policy, we are recommending a final payment of 0.734p per ordinary share to give a total for the year of 1.1p. This represents an increase of 10% on 2014. The final dividend will be paid on 13 July 2016 to shareholders on the register on 17 June 2016. Although the new shares for the Sinclair acquisition were issued in December 2015, this had a   minimal impact on EPS dilution, and the level of dividend cover in 2015 remained ample at over three times. The total dividend payment for 2015 will be £5.1m including the £1.7m interim payment.

Strategy

Our business model is based on a diversified and growing portfolio of products and brands, in which no single brand currently accounts for more than about 9% of total sales. This portfolio balances two elements.  We have a segment of brands with growth potential in which we invest and we have a bedrock of brands that are well established in their market niches and will maintain their sales for many years with little or no promotion. By balancing the two, we can invest in targeted marketing to grow sales while maintaining good cash generation and profitability.

Our promoted portfolio is focused on three key areas: Dermatology where our main products are Kelo-cote^TM, Hydromol and Flammazine^TM/ Flammacerium^TM; Mother and Child where our key products are Oxyplastine^TM, Ashton & Parsons, Diclectin (pre-launch) and Suprememil in China; and Ophthalmology with MacuShield where a significant internationalisation opportunity exists.

Under our long-established 'buy and build' strategy we supplement organic growth with acquisitions that allow us to accelerate expansion and adjust the balance of our portfolio.

In recent years we have been broadening the growth element of our portfolio to include consumer healthcare products. Our growing experience in this area enables us to identify products that offer substantial organic growth potential in return for relatively modest promotional investment. These consumer products also have a degree of pricing flexibility and therefore help to balance margin risk across the portfolio. The February 2015 acquisition of MacuShield has further boosted our offer to both healthcare professionals and retailers. We are promoting it to ophthalmology clinicians, who recommend it to suitable patients to purchase over-the-counter (OTC), where we also have promotional capabilities.

We further expanded our prescription healthcare portfolio in 2015 by in-licensing Diclectin. This combination of a widely-used antihistamine with vitamin B6 has a well-established safety and efficacy profile and has been used for over 30 years in Canada to treat nausea and vomiting of pregnancy. We submitted Diclectin for UK registration in the second quarter of 2015, and we estimate being able to launch in 2017. In the United States, it was licensed by the FDA in 2013 under the name Diclegis with a Category A safety rating for drugs used during pregnancy.  Since then, sales have reached $160m in under three years, which augurs well for its prospects in the UK.  Pending UK approval, we are undertaking market access work with NHS budget holders to facilitate uptake at launch.

On the acquisition side, the Sinclair Healthcare Products Business fits very well with our strategy. We have gained 27 products including four key growth brands. Of these, three (Kelo-cote, Flammazine/ Flammacerium and Atopiclair^TM) are in skincare and wound management; the other (Aloclair^TM) is an over-the-counter (OTC) consumer treatment for mouth ulcers.

Since completion of the acquisition in mid-December 2015, sales of Kelo-stretch^TM, which had been identified as a key growth brand, have been lower than anticipated despite extensive promotional activities by A. Menarini Asia-Pacific Pte. Ltd., our key partner in South East Asia. Despite this, other Sinclair brands they distribute for us are performing well. The relationship with Menarini remains strong and other opportunities are being positively explored. The 2016 impact of the Kelo-stretch shortfall is estimated at a possible reduction of £1.2m at the operating profit level. Notwithstanding this, trading to date for the Sinclair Healthcare Products in aggregate has remained in line with management's expectations.

In the expanded product portfolio, the balance between promoted and non-promoted 'bedrock' products remains roughly equal thus balancing cash flow stability and promotion driven growth. The balance between OTC and prescription products has shifted slightly in favour of OTC - but the impact on marketing costs will be limited because a large proportion of Sinclair product sales are made through distributors, who bear the cost of advertising.

We now have a substantially larger international footprint. Previously, we made approximately 80% of our sales in the UK. Now, the split is broadly 50% UK, 25% Western Europe excluding UK, and 25% Rest of World. We have gained new strength in China, greater exposure to fast-growing markets in SE Asia, and footholds in the US and Latin America. We have also boosted our position in Europe, gaining operating companies in France and Italy and a sales presence in Spain.

Our core strategy remains unchanged, with organic growth augmented by acquisitions, in-licensing and modest development of line extensions. Our increased scale and international reach provide an enhanced platform for further development. They create new marketing opportunities for our existing products, particularly Hydromol and MacuShield, and strengthen our hand in seeking acquisition and in-licensing opportunities outside the UK. We intend to maintain a balance between non-promoted bedrock products and our three promoted growth areas: Dermatology, Mother and Child, and Ophthalmology.

Integration of the Sinclair products and teams is on track and will continue through 2016. Our Chippenham office remains the Group and UK headquarters, while our international distributor management is run from our international business centre in Paris where we have staff of around 20 people. We are establishing a small office in Singapore to manage operations in SE Asia.

Our activities in China grew considerably in 2015. From Sinopharm Nutraceuticals Shanghai, we acquired five child nutrition brands with annual sales of around £1.5m but with significant turnaround potential. We now own these brands outright, and are marketing them through our part-owned Synthasia business. Additionally, one of the key growth brands we acquired from Sinclair is Kelo-cote, a scar treatment gel that sells particularly well in China.  

After some years of preparatory work we now have a portfolio of products around which we are developing our business in China, and we look to build on this platform over the next few years. To facilitate our trading in China we have established a 'wholly owned foreign enterprise' in the Shanghai Free Trade Zone.

We resumed sales of our bladder cancer treatment, ImmuCyst, in February 2016. This had been one of our lead products until our supplier, Sanofi Pasteur, suspended production in mid-2012 for which we received compensation of £6.3m, net of costs, in 2015. Despite ImmuCyst's absence for three and a half years, the market remained underserved until recently, as the only competitor treatment was in short supply. It is difficult to estimate our likely market share going forward, as our supplies from Sanofi will be limited and we believe the competitor product is now available in greater quantities.

Team

In September we welcomed Andrew Franklin to the Board as Chief Financial Officer. Andrew was Finance Director and Company Secretary of Genzyme Therapeutics Ltd from 2010 to 2012 and had previously held senior financial management positions with Wyeth for over 12 years. He joined us from Panasonic Europe, where he was General Manager, European Tax and Accounting.

Non-executive Director Nigel Clifford joined the Board in January 2015.

Consequent upon the planned departure in 2016 of Tony Booley, our long-standing Executive Director - International, we have brought together the Group's commercial leadership under Peter Butterfield as Chief Commercial Officer. Reporting to Peter, Karim Husny has joined Alliance as Paris-based Head of International covering all our distributor-based business, which now accounts for some 25% of sales. He brings extensive international experience in OTC and consumer healthcare at European pharmaceutical firms including Omega Pharma, Pfizer and Sanofi's Zentiva business.

About 40 key staff have joined us from Sinclair and we are recruiting around 20 more to support the new products and operations.

Charity

We continue to donate products regularly to International Health Partners, which distributes medicines to doctors in the world's neediest areas. We also support employee fundraising for local causes including Wiltshire Air Ambulance and Bristol charity PROPS, which provides support for young people with learning difficulties and disabilities and their families.

Outlook

In 2016 and beyond, we look forward to building on the greatly enlarged platform established during 2015. We acknowledge the effort required this year to integrate two organisations with different working methods, data and IT systems; but the process is already well underway and progressing successfully. Although most of the one-off costs of the Sinclair acquisition were met in 2015, we expect the bulk of the integration costs to be borne in 2016. We also intend to take the opportunity to invest in a significant new enterprise resource planning (ERP) system over the next 18 months.

We are very pleased with the Sinclair products acquisition and, notwithstanding the Kelo-stretch shortfall, we expect the enlarged Group to perform in line with expectations for the full year. 

In the meantime we will maintain our long-term 'buy and build' strategy for business growth. Our increased capitalisation and greatly strengthened international position will significantly enhance our ability to grow both organically - by our access to much larger markets - and through further acquisitions.

 

Consolidated Income Statement

				Year ended 31 December 2015			Year ended 31 December 2014
		Underlying	Non-Underlying (note 2)	Total	Underlying	Non-Underlying (note 2)	Total
	Note	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s	£ 000s
Revenue		48,344	-	48,344	43,536	-	43,536
Cost of sales		(19,614)	-	(19,614)	(18,493)	-	(18,493)
Gross profit		28,730	-	28,730	25,043	-	25,043
Operating expenses
Administration and marketing expense		(15,634)	(1,846)	(17,480)	(12,510)	-	(12,510)
Amortisation of intangible assets		(199)	-	(199)	(488)	-	(488)
Share-based employee remuneration		(615)	-	(615)	(571)	-	(571)
Share of joint venture profits		194	-	194	319	-	319
		(16,254)	(1,846)	(18,100)	(13,250)	-	(13,250)
Operating profit excluding exceptional item Exceptional item	2	12,476 -	(1,846) 6,332	10,630 6,332	11,793 -	- (622)	11,793 (622)
Operating profit		12,476	4,486	16,962	11,793	(622)	11,171
Finance costs
Interest payable and similar charges	3	(1,221)	(750)	(1,971)	(1,090)	-	(1,090)
Interest income	3	139	-	139	48	-	48
Other finance income	3	52	-	52	28	-	28
		(1,030)	(750)	(1,780)	(1,014)	-	(1,014)
Profit on ordinary activities before taxation		11,446	3,736	15,182	10,779	(622)	10,157
Taxation	4	(1,375)	(1,115)	(2,490)	(1,896)	124	(1,772)
Profit for the year attributable to equity shareholders		10,071	2,621	12,692	8,883	(498)	8,385
Earnings per share
Basic (pence)	6			4.65			3.17
Diluted (pence)	6			4.55			3.16

Consolidated Statement of Comprehensive Income

			Year ended 31 December 2015	Year ended 31 December 2014
			£000s	£000s
Profit for the period			12,692	8,385
Other comprehensive income Items that may be reclassified to profit or loss
Foreign exchange revaluations			32	7
Interest rate swaps - cash flow hedge			9	(572)
Deferred tax on interest rate swaps			(4)	119
Share of Joint Venture other comprehensive loss			-	(8)
Total comprehensive income for the period			12,729	7,931

Consolidated Balance Sheet

			31 December 2015		31 December 2014
	Note		£000s		£000s
Assets
Non-current assets
Intangible assets	7		259,945 875		88,875
Property, plant and equipment			1,013		396
Joint Venture investment			1,465		1,271
Joint Venture receivable			1,462		1,462
Deferred tax asset			418		194
Other non-current assets			122		-
			264,425		92,198
Current assets
Inventories			12,910		5,914
Trade and other receivables	9		11,630		8,322
Cash and cash equivalents	11		3,229		1,434
			27,769		15,670
Total assets			292,194		107,868
Equity
Ordinary share capital			4,682		2,641
Share premium account			108,308		29,388
Share option reserve			2,610		1,995
Reverse takeover reserve			(329)		(329)
Other reserve			(98)		(103)
Translation reserve			32		-
Retained earnings			47,237		37,188
Total equity			162,442		70,780
Liabilities
Non-current liabilities
Long term financial liabilities	12		58,968		19,235
Other liabilities			1,496		-
Deferred tax liability			37,413		6,309
Derivative financial instruments			120		129
			97,997		25,673
Current liabilities
Cash and cash equivalents	11		31		414
Financial liabilities	12		15,776		2,895
Corporation tax			2,075		959
Trade and other payables	10		13,873		6,920
Provisions for other liabilities			-		227
			31,755		11,415
Total liabilities			129,752		37,088
Total equity and liabilities			292,194		107,868

Consolidated Statement of Changes in Equity

	Ordinary share capital	Share premium account	Share option reserve	Reverse takeover reserve	Other reserve	Translation reserve	Retained earnings	Total equity
	£000s	£000s	£000s	£000s	£000s	£000s	£000s	£000s
Balance 1 January 2015	2,641	29,388	1,995	(329)	(103)	-	37,188	70,780
Issue of shares	2,041	-	-	-	-	-	-	2,041
Share premium	-	78,920	-	-	-	-	-	78,920
Dividend paid	-	-	-	-	-	-	(2,643)	(2,643)
Share options charge	-	-	615	-	-	-	-	615
Transactions with owners	2,041	78,920	615	-	-	-	(2,643)	78,933
Profit for the period	-	-	-	-	-	-	12,692	12,692
Other comprehensive income
Interest rate swaps - cash flow hedge	-	-	-	-	9	-	-	9
Deferred tax on interest rate swap	-	-	-	-	(4)	-	-	(4)
Foreign exchange translation differences	-	-	-	-	-	32	-	32
Total comprehensive income for the period	-	-	-	-	5	32	12,692	12,729
Balance 31 December 2015	4,682	108,308	2,610	(329)	(98)	32	47,237	162,442

Consolidated Cash Flow Statement

			Year ended 31 December 2015	Year ended 31 December 2014
	Note		£ 000s	£ 000s
Cash flows from operating activities
Cash generated from operations		13	9,836	13,451
Tax paid			(1,860)	(2,028)
Cash flows received from operating activities			7,976	11,423
Investing activities
Interest received			139	48
Dividend received			-	72
Development costs capitalised			(7)	(58)
Purchase of property, plant and equipment			(647)	(111)
Purchase of other intangible assets			(133,629)	(2,817)
Net assets acquired on acquisition			(221)	-
Investment in Joint Venture			-	(499)
Net cash (used in) / received from investing activities			(134,365)	(3,365)
Financing activities
Interest paid and similar charges			(1,163)	(986)
Loan issue costs			(1,174)	-
Loan to Joint Venture			-	(503)
Proceeds from issue of shares			83,500	-
Costs incurred on issue of shares			(2,661)	-
Proceeds from exercise of share options			121	8
Dividend paid			(2,643)	(2,398)
Receipt from borrowings			80,500	2,750
Repayment of borrowings			(28,000)	(4,500)
Net cash received from / (used in) financing activities			128,480	(5,629)
Net movement in cash and cash equivalents			2,091	2,429
Cash and cash equivalents at the beginning of the period			1,020	(1,438)
Exchange gains on cash and cash equivalents			87	29
Cash and cash equivalents at the end of the period	11		3,198	1,020

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 December 2015 or 31 December 2014. The auditors reported on those accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2015 have not yet been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2014 were delivered to the Registrar of Companies as published on the Group's website on 10 April 2015.

2. Non-underlying and exceptional items

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

	Year ended 31 December 2015	Year ended 31 December 2014
	£ 000s	£ 000s
a)    Acquisition costs	1,846	-
b)    Exceptional item	(6,332)	-
c)    Notional interest	477	-
d)   Charge in respect of loan settlement	273	-
e)   Impairment of intangible fixed assets	-	622
	(3,736)	622

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

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

c)     Notional interest related to the unwinding of the discount on the deferred consideration payable for the acquisition of the share capital of MacuVision Europe Limited.

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

e)    The impairment of intangible fixed assets related to the write down of Pavacol-D Syrup, originally purchased for £0.6m, to £nil, to reflect the uncertainty in being able to bring this product back into supply.

3. Finance costs

	Year ended 31 December 2015	Year ended 31 December 2014
	£ 000s	£ 000s
Interest payable and similar charges
On loans and overdrafts	(1,116)	(968)
Amortised finance issue costs	(378)	(104)
Notional interest	(477)	(18)
	(1,971)	(1,090)
Interest income	139	48
Other finance  income
Foreign exchange movements on cash balances	52	28
	52	28
Finance costs - net	(1,780)	(1,014)

Notional interest relates to the unwinding of the deferred consideration on the MacuVision acquisition.  The notional interest in 2014 was the discount applied to provisions.

4. Taxation

Analysis of charge in period.

	Year ended  31 December 2015	Year ended  31 December  2014
	£ 000s	£ 000s
United Kingdom corporation tax at 20.25% (2014: 21.5%)
In respect of current period	2,977	1,870
Adjustment in respect of prior periods	-	(38)
	2,977	1,832
Deferred tax
Origination and reversal of temporary differences	(398)	(60)
Adjustment in respect of prior periods	(89)	-
Taxation	2,490	1,772

5. Dividends

	Year ended  31 December 2015			Year ended  31 December 2014
	Pence/share	£ 000s		Pence/share	£ 000s
Amounts recognised as distributions to owners in the year
Interim dividend for the prior financial year	0.333	880		0.303	800
Final dividend for the prior financial year	0.667	1,763		0.605	1,598
	1.000	2,643		0.908	2,398
Interim dividend for the current financial year	0.366	1,714		0.333	880

The proposed final dividend of 0.734 pence per share for the current financial year was approved by the Board of Directors on 31 March 2016 and is subject to the approval of shareholders at the Annual General Meeting. The proposed dividend has not been included as a liability as at 31 December 2015 in accordance with IAS 10 Events After the Balance Sheet Date. The interim dividend for the current financial year was paid on 14 January 2016.  Subject to shareholder approval, the final dividend will be paid on 13 July 2016 to shareholders who are on the register of members on 17 June 2016.

6. Earnings per share (EPS)

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

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

			Year ended 31 December 2015	Year ended 31 December 2014
For basic EPS calculation			272,729,247	264,148,367
Employee share options			6,322,550	1,454,986
For diluted EPS calculation			279,051,797	265,603,353

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

			Year ended 31 December 2015	Year ended 31 December 2014
			£ 000s	£ 000s
Earnings for basic EPS			12,692	8,385
Non-underlying: Exceptional items			(6,332)	622
Other non-underlying items			2,596	-
Tax effect of non-underlying items			1,115	(124)
For adjusted EPS			10,071	8,883

The resulting EPS measures are:

			Year ended 31 December 2015	Year ended 31 December 2014
			Pence	Pence
Basic EPS			4.65	3.17
Diluted EPS			4.55	3.16
Adjusted basic EPS			3.69	3.36
Adjusted diluted EPS			3.61	3.34

7. Intangible assets

	Goodwill	Technical know-how, trademarks and distribution rights	Development costs	Total
The Group	£000s	£000s	£000s	£000s
Cost
At 1 January 2015	3,593	88,504	431	92,528
Additions	-	16,925	7	16,932
Additions due to acquisition	22,442	130,565	-	153,007
Exchange adjustments	-	1,330	-	1,330
At 31 December 2015	26,035	237,324	438	263,797
Amortisation and impairment
At 1 January 2015	-	3,653	-	3,653
Amortisation for the year	-	199	-	199
At 31 December 2015	-	3,852	-	3,852
Net book amount
At 31 December 2015	26,035	233,472	438	259,945
At 1 January 2015	3,593	84,851	431	88,875

8. Acquisitions

1)   MacuVision Europe Limited

On 2 February 2015, the Group acquired 100% of the share capital of MacuVision Europe Limited (MacuVision).  Included in the acquisition was MacuShield, an eye care treatment designed to be taken by sufferers of dry age-related macular degeneration and other eye conditions. 

The total consideration for the acquisition was between £6.0m and £12.0m.  The consideration for the acquisition comprised a base consideration of £6.0m with an initial payment of £5.5m on 2 February 2015, and a further cash payment of £0.5m in April 2015 in respect of the net asset value of MacuVision.

Further contingent consideration of up to £6.0m is dependent on the sales of MacuShield during the two 12 month earnings periods following acquisition, and is payable in April 2016 and April 2017. 

The fair values of the assets acquired, as at 2 February 2015, are as follows:

		Book value of			Fair value of assets
			assets and liabilities	Fair value	and liabilities
			acquired	adjustments	acquired
			£ 000s	£ 000s	£ 000s
Intangible fixed assets			27	8,737	8,764
Tangible fixed assets			27	(17)	10
Current assets (excluding cash and cash equivalents)			1,683	-	1,683
Cash and cash equivalents			78	-	78
Current liabilities			(1,260)	-	(1,260)
Non-Current liabilities			(31)	-	(31)
Net assets			524	8,720	9,244
Deferred tax liability			-	(1,748)	(1,748)
Goodwill			-	1,748	1,748
Fair value of net assets acquired			524	8,720	9,244
Cash paid					6,047
Cash payable (being £3,563k discounted to fair value)					3,197
Total Consideration					9,244

The goodwill that arose on acquisition reflects the opportunity to grow by exploiting new routes to market via the Alliance distribution network and sales force.  None of the goodwill recognised is expected to be deductible for income tax purposes.

All expenses incurred in the acquisition of MacuVision of £169k were recognised within Administration and Marketing expense.

The amounts included in the consolidated statement of comprehensive income since 2 February 2015 included revenue of £3.5m and gross profits of £2.2m.  Had the transaction occurred on the first day of the financial year, then estimated contribution to Group revenues would have been £3.9m and gross profits of £2.4m.

As at 31 December 2015 the fair value of the contingent consideration was £3.7m compared to an unwound amount of £3.5m, resulting in a fair value charge to the P&L of £0.2m. This was as a result of forecast sales for the second earnings period exceeding the original estimate at the time of acquisition.  

8. Acquisitions (continued)

2)   Healthcare Products Business from Sinclair IS Pharma plc

On 17 December 2015 the Company completed the acquisition of certain assets and businesses from Sinclair IS Pharma plc.  The acquisition included 27 products including four key growth brands (Kelo-Cote, Flammacerium, Aloclair, and Atopiclair). 

The acquisition is effected as the purchase of the collection of companies and the acquisition of the product Aloclair not owned by those companies and their related businesses.  The acquisition delivers Alliance a product portfolio operating in fast growing markets underpinned by geographic

expansion and new product introductions. Additionally, the Healthcare Products Business ("HPB") offers Alliance the opportunity to internationalise and transform Alliance into a global leader in specialty pharmaceuticals. Similar to the product mix of Alliance's existing products, the product mix of the HPB is a mix of established products and growth products and follows a buy and build investment strategy.

The Group acquired 100% of the share capital Advance Bio-Technologies Inc. (incorporated in Florida, USA), Sinclair Pharma S.r.l. (incorporated in Italy), Sinclair Pharma France SAS (incorporated in France) and Maelor Laboratories Limited (incorporated in England and Wales).

The total consideration for the acquisition was £127.5m, plus £5.3m for inventory. Total consideration of £131.0m was satisfied on completion, being £126.3m plus the estimated stock value of £4.7m.  A further £1.2m was paid in January 2016 and the remaining £0.6m is payable on determination of the final stock value. These amounts were satisfied wholly in cash, funded partly by way of new loans, and partly by the issue and allotment of additional shares.

The provisional fair values of the assets acquired, as at 17 December 2015, are as follows:

		Book value of			Fair value of assets
			assets and liabilities	Fair value	and liabilities
			acquired	adjustments	acquired
			£ 000s	£ 000s	£ 000s
Intangible fixed assets			7,416	128,384	135,800
Tangible fixed assets			209	-	209
Other non-current assets			255	(133)	122
Current assets (excluding cash and cash equivalents)			5,659	(404)	5,255
Cash and cash equivalents			-	-	-
Current liabilities			(53)	53	-
Non-Current liabilities			(109)	-	(109)
Net assets			13,377	127,900	141,277
Deferred tax liability			-	(29,200)	(29,200)
Goodwill			-	20,694	20,694
Fair value of net assets acquired			13,377	119,394	132,771
Cash paid					131,000
Cash payable					1,771
Total Consideration					132,771

The fair values set out above are provisional figures which will be finalised in the 2016 financial statements following management's final review of key reconciliations and judgemental areas including intangible fixed assets and acquired inventory balances.

The fair value of intangible assets recognised on business combination comprise the following product related intangibles: Aloclair, Atopiclair, Flamma franchise, Kelo-cote, Kelo-stretch, Other Dermatology Products and Other Specialist Hospital Products.

The goodwill that arose on acquisition reflects the opportunity to grow through the international expansion of the combined business. None of the goodwill recognised is expected to be deductible for income tax purposes.

8. Acquisitions (continued)

All expenses incurred in the acquisition of the Healthcare business from Sinclair of £1.8m were recognised as non-underlying costs within Administration and Marketing expense.

The amounts included in the consolidated statement of comprehensive income since 17 December 2015 included revenue of £0.8m and gross profits of £0.5m.  Had the transaction occurred on the first day of the financial year, then estimated contribution to Group revenues would have been £39.4m and gross profits of £23.3m.

9. Trade and other receivables

		31 December 2015 £ 000s	31 December 2014 £ 000s
Trade receivables		8,783	6,645
Other receivables		1,062	669
Prepayments and accrued income		525	453
Amounts owed by joint venture		1,260	555
		11,630	8,322

10. Trade and other payables - current

		31 December 2015 £ 000s	31 December 2014 £ 000s
Trade payables		1,153	1,693
Other taxes and social security costs		905	969
Accruals and deferred income		5,663	4,065
Other payables		728	193
Deferred considerations for acquisitions		5,026	-
Amounts due to Joint ventures		398	-
		13,873	6,920

11. Cash and cash equivalents

		31 December 2015 £ 000s	31 December 2014 £ 000s
Cash at bank and in hand		3,229	1,434
Working capital facility		(31)	(414)
		3,198	1,020

12. Financial liabilities - borrowings

	31 December 2015		31 December 2014
Current	£000s		£000s
Bank loans due within one year or on demand:
Secured	16,000		3,000
Finance issue costs	(224)		(105)
	15,776		2,895
	31 December 2015		31 December 2014
Non-current	£000s		£000s
Bank loans:
Secured	59,918		19,500
Finance issue costs	(950)		(265)
	58,968		19,235

The Group has a total committed bank facility of £100.0m (31 December 2014: £46.3m) maturing in November 2020 of which £65m is drawn as term loan and £35m is available to draw down through a Revolving Credit Facility (RCF). The RCF is repayable within one to three months and therefore included within current liabilities.

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

13. Cash generated from operations

	Year ended 31 December 2015 £ 000s	Year ended 31 December 2014 £ 000s
Result for the period before tax	15,182	10,157
Interest payable and similar charges	1,971	1,098
Interest income	(139)	(48)
Other finance costs	(52)	(28)
Depreciation of property, plant and equipment	239	307
Amortisation/impairment of intangibles	199	1,110
Change in inventories	(6,996)	(446)
Change in investments	(194)	(312)
Change in trade and other receivables	(3,308)	2,823
Change in trade and other payables	2,319	(1,781)
Share based employee remuneration	615	571
Cash generated from operations	9,836	13,451

 

END

 

 

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