REG - Alliance Pharma PLC - Interim Results
26/09/2023 07:00
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RNS Number : 6555N Alliance Pharma PLC 26 September 2023
For immediate release
26 September 2023
ALLIANCE PHARMA PLC
("Alliance" or the "Group")
Results for the six months ended 30 June 2023
Board expectations for year-end performance remain unchanged
Alliance Pharma plc (AIM: APH), the international healthcare group, is pleased
to announce its interim results for the six months ended 30 June 2023 ("the
Period"). 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. However, as previously announced, this was
balanced by mixed performance in certain smaller products with regulatory
issues resulting in some manufacturing delays.
In-market demand for Kelo-Cote continues to grow in H2 2023 and we have
extended our distribution agreement which secures our FY revenue expectations.
The underlying business remains strong and the Board's expectations for Group
performance in the full year remain unchanged.
FINANCIAL SUMMARY
Unaudited six months ended June 30 2023 2023 2022 2022 Growth underlying Growth reported
Underlying (£m) Reported (£m) Underlying (£m) Reported (£m)
Revenue (see-through basis)* 82.4 82.4 81.6 81.6 1% 1%
Revenue (statutory basis) 81.4 81.4 78.8 78.8 3% 3%
Gross profit 46.9 46.9 50.6 50.6 -7% -7%
Profit before taxation 10.3 6.2 19.7 16.5 -48% -62%
Basic earnings per share 1.58 0.95 2.90 2.43 -46% -61%
Free cash flow* 11.0 5.1
Cash from operations 15.5 8.4
Net debt* 94.5 102.0
Interim dividend per share 0.0p 0.592p
OPERATING AND FINANCIAL HIGHLIGHTS
· H1 23 revenue growth impacted by Kelo-Cote destocking in China and
temporary manufacturing delays arising from regulatory issues in certain
smaller other consumer and prescription medicine products which will reverse
in H2.
· In-market demand for Kelo-Cote in China continues to recover,
with market share gains seen in e-commerce channels.
· Consumer Healthcare see-through revenue* up 1% to £59.7m (H1 22:
£57.4m) with strong growth in Nizoral offsetting softer performance in other
consumer healthcare brands.
· Prescription Medicine revenues of £22.7m, down 7% CER (H1 21:
£24.1m).
· Robust free cash flow of £11.0m (H1 22: £5.1m) and net debt
decreasing £7.5m to £94.5m. Group leverage of 2.7x at 30 June 2023 (31
December 2022: 2.6x).
· Debt refinancing completed with a new 3-year £150m revolving
credit facility agreed with two 1-year options to extend further.
· Significant revenue step-up expected in H2 23 driving group
leverage below 2.0x by year end.
· In response to shareholder feedback, the Board has decided to
pause the interim dividend whilst we develop a new dividend policy with
greater focus on reinvestment in the business. The new policy will be
published in the preliminary results in March 2024.
DEVELOPING OUR BUSINESS
· Nizoral gaining market share as our new Chinese distributor expands
the brand's reach, supported by new marketing campaigns and refreshed
packaging.
· Amberen returning to growth with unique new product range
extension due to launch in Q4 2023.
· New TV advertising campaigns launched for Kelo-Cote in the UK and
MacuShield™ in Ireland.
· Significant progress made on brand innovation with further range
enhancement expected in Q4 2023 across the consumer healthcare portfolio.
· ERP system successfully rolled out into APAC with China roll-out
planned for 2024.
· All scope 1 & 2 emissions for 2022 offset through carbon
credits bought in 2023. Work has commenced to fit photovoltaic panels to our
headquarters in Chippenham, UK, which is a significant step towards our goal
to become net zero for our scope 1 & 2 emissions by 2030.
Commenting on the results, Peter Butterfield, Chief Executive Officer of
Alliance, said:
"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, which
is now fully under our control. Meanwhile our wider portfolio continues to
provide a robust platform from which to grow our Consumer Healthcare brands.
"The second half of 2023 has got off to an encouraging start as we have
addressed the regulatory issues and recommenced production of certain products
impacted in the first half of the year. Our Kelo-Cote CBEC distributor has
begun to place orders and we have contractual agreements in place to secure
the future orders required to meet our expectations for full year revenues. We
anticipate strong Group sales growth in H2 as our marketing campaigns yield
benefits and we launch several new products to grow our market share.
"Our free cash flow is expected to continue to build strongly for the
remainder of 2023, and we will continue to reduce our net debt and leverage by
the end of the year. The Board's expectation for full year operating
performance is unchanged."
* The performance of the Group is assessed using Alternative Performance
Measures ("APMs"), which are measures that are not defined under IFRS, but are
used by management to monitor ongoing business performance against both
shorter term budgets and forecasts and against the Group's longer term
strategic plans. APMs are defined in note 17.
Specifically, see-through revenue includes all 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.
ANALYST MEETING & WEBCAST
A meeting for analysts will be held at 9.30am this morning, 26 September 2023,
at Buchanan, 107 Cheapside, London EC2V 6DN. For further details, analysts
should contact Buchanan at alliancepharma@buchanan.uk.com
(mailto:alliancepharma@buchanan.uk.com) .
A live webcast of the analyst meeting will be available at this link:
https://stream.buchanan.uk.com/broadcast/64d35bfa8964824b00aaa7a0
(https://stream.buchanan.uk.com/broadcast/64d35bfa8964824b00aaa7a0)
Following the meeting, a replay of the webcast will be made available at the
investor section of Alliance's website,
https://www.alliancepharmaceuticals.com/investors/
(https://www.alliancepharmaceuticals.com/investors/%0d)
For further information:
Alliance Pharma plc + 44 (0)1249 466966
Head of Investor Relations: Cora McCallum + 44 (0)1249 705168
ir@allianceph.com
Buchanan + 44 (0)20 7466 5000
Mark Court / Sophie Wills / Hannah Ratcliff
alliancepharma@buchanan.uk.com
Numis Securities Limited (Nominated Adviser and Joint Broker) + 44 (0)20 7260 1000
Nominated Adviser: 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 (http://www.alliancepharmaceuticals.com)
Trading performance
Overview
The Group delivered see-through(1) revenues of £82.4m in the Period (H1 22:
£81.6m), up 1% versus the prior period and down 2% at constant exchange rates
("CER") when including revenue from our most recent US acquisition (ScarAway
and the US rights to Kelo-Cote). Statutory revenue was 3% above the prior
period at £81.4m (H1 22: £78.8m) and up 1% CER.
Revenue summary
Unaudited six months ended 30 June 2023 2022 Growth CER growth
£m £m
Kelo-Cote franchise 25.6 22.9 12% 6%
Amberen 5.9 7.5 -22% -27%
Nizoral* 11.1 7.9 41% 40%
Other consumer brands 17.2 19.1 -10% -12%
Consumer Healthcare 59.7 57.4 4% 1%
Prescription Medicines 22.7 24.1 -6% -7%
See-through revenue* 82.4 81.6 1% -2%
LFL Consumer Healthcare see-through revenue*, excl. ScarAway 57.1 57.4 -1% -4%
LFL see-through revenue*, excluding ScarAway 79.8 81.6 -2% -5%
Statutory revenue - Consumer Healthcare 58.7 54.6 7% 4%
Statutory revenue - Group 81.4 78.8 3% 1%
LFL Consumer Healthcare statutory revenue, excluding ScarAway 56.1 54.6 3%
LFL Group statutory revenue, excluding ScarAway 78.8 78.8 0%
Consumer Healthcare
Consumer Healthcare revenues of £59.7m were up 4% (+1% CER) versus the prior
Period (H1 22: £57.4m), benefitting from the US acquisition (ScarAway and the
US rights to Kelo-Cote) in addition to currency tailwinds. On a statutory
basis, reported revenues were 7% above the prior Period at £58.7m and up 4%
CER.
Excluding the impact of the US acquisition, like-for-like see-through Consumer
Healthcare revenue decreased by 1% to £57.1m (-4% CER).
Kelo-Cote - scar prevention and treatment
Revenues from the Kelo-Cote franchise rose 12% (6% CER) in the Period to
£25.6m. Adjusting for the recent acquisition and currency tailwinds,
like-for-like revenues for the Kelo-Cote franchise declined 4% mainly due to
lower order volumes from our China cross-border e-commerce (CBEC) partner
during a period of destocking.
China remains a significant market for Kelo-Cote. Demand for domestic (Chinese
label) product continues to increase as our distribution partner opens new
retail channels and elective surgeries resume following a hiatus during COVID
lockdowns. Whilst the recovery in the cross-border channel is slightly behind
our expectations at this stage, our distribution partner remains confident in
the long-term outlook and we have extended our distribution agreement which
secures our full year revenue expectations, introduces new territories and
contains a commitment to prioritise sea freight over air thereby supporting
our ESG strategy.
At current market demand, we estimate our distributor will have circa six to
eight months of inventory at the year-end. Although this is higher than they
previously communicated to us, it is in line with historic levels before COVID
and we believe this to be an appropriate stock level given the importance of
the brand, the inherent volatility of a large and complex market such as
China; and our preference for sea freight.
We continue to work with our cross-border distribution partners to gain
further insight into the multiple routes to market for our product and refine
our selling strategy accordingly. The B2C e-commerce channel continues to
progress well, growing 7% in the 12 months to end of July. Kelo-Cote delivered
an exceptionally strong performance in the recent 618 festival in June in
China, an online shopping event on TMALL, similar to the Amazon Prime event in
the UK in November. Over the course of the online promotional period,
Kelo-Cote was the leading scar treatment product and delivered fourth highest
sales in the medical device category.
We remain focused on removing counterfeit product from all channels. Through
working collaboratively with our distributor and local agencies we have
successfully reduced the level of counterfeit product online below 5%, and we
believe we have eliminated approximately one quarter of counterfeit sellers in
a major offline cosmetics market.
The B2B offline traded market remains challenging. Whilst Kelo-Cote has
delivered strong growth through the online institutional trading platforms,
there is little visibility or credible market data available to accurately
track the development of this offline market. We continue to work closely with
our Cross-border partner to optimise sales in this channel.
Domestic China demand continues to be strong with record in-market sales
recorded in August.
Outside China, where the scar treatment market is less developed, we have
increased marketing investment to raise consumer awareness of scar treatment
options and to promote Kelo-Cote. Our first ever outdoor campaign in the UK
ran from late February to early April and delivered a 74% increase in sales in
the first four months of the year versus the prior period. We are delighted
that this campaign was recently recognised as the best Digital Brand Promotion
by the Pharmaceutical Marketing Society. This outdoor campaign was followed by
a TV advertising campaign that ran through July and August in the UK. Whilst
we have yet to fully assess the impact of the campaign, we have seen 19%
increase in volumes sold in Q2 2023 versus Q1 2023.
Our latest acquisition, the US rights to ScarAway and Kelo-Cote in March 2022,
has created the Group's first fully global brand. The integration of both
assets has gone very smoothly with full transition completed in just four
months and sales remaining in-line with expectations with scope for further
growth and range extensions. Like-for-like ScarAway sales increased 17% in Q2.
We remain on track to deliver over 20% year on year revenue growth for the
Kelo-Cote franchise this year.
Amberen - vitamin mineral supplement for the relief of menopause symptoms
(US)
Amberen revenues declined 3% 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.
Performance in H1 23 was hampered by a number of industry wide challenges put
in place by Amazon, including a change in billing for warehouse space and a
change in price comparison approach leading to the removal of the buy box for
a short period. In addition, the perimenopause product was delisted from
Amazon for a few months due to an incorrect application of an algorithm that
screens advertising claims. However, we overcame these issues and have
strengthened the marketing support to mitigate any future problems. We have
now launched Amberen in Canada, generating our first sales in the region in
August, and are on track with our brand extension plans.
Q4 sees the first of many planned new product range extensions as we introduce
a unique gummy formulation of Amberen for the relief of the symptoms of
menopause. This is the result of in-house innovation and development (I&D)
and is the first gummy in the category. Feedback from our consumer pilot
studies and retailers was extremely positive and the product will be available
on Amazon and our own DTC platform initially.
We continue to invest in Amberen and remain confident in the longer-term
opportunity that this category provides. Whilst growth has returned on a
like-for-like basis, the Amazon challenges mean we now anticipate low
single-digit growth on a like-for-like basis in 2023.
Nizoral - medicated anti-dandruff shampoo
Nizoral revenues grew strongly in the Period rising 40% 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 roll-out of our strategic brand plan for Nizoral is now well underway,
with consumer activation campaigns ongoing across a number of key territories
where Nizoral commands a market leading position, including Australia, South
Korea, Thailand and the Philippines. These campaigns are run in partnership
with our local distributors, as part of a growth strategy centred around
consumer and healthcare professional activation, e-commerce, and I&D. A
new campaign was launched in the top nine cities in China in September focused
on recruiting consumers in the twenties demographic.
The performance to date provides confidence to reiterate guidance of high
single-digit revenue growth for Nizoral in FY 2023 on a constant currency
basis.
Other Consumer Healthcare brands
There was a mixed performance in Other Consumer Healthcare with regulatory
delays in some products impacting stock availability in H1 23. As a result,
Other Consumer Healthcare revenues declined 10% (12% CER) to £17.2m (H1 22:
£19.1m). Adjusting for the products that were out-of-stock, underlying other
consumer healthcare revenues increased 7%, above the average growth rate for
the wider consumer healthcare market.
Aloclair™ (pain relief for mouth ulcers) revenues were subject to order
phasing, falling back 49% CER to £2.3m, as the re-certification process
required by the transition from the previous Medical Device Directive to the
new Medical Device Regulation took longer than anticipated due to the well
documented backlogs at notified bodies across Europe. Whilst we had built
stock in the market ahead of the transition period, this was depleted during
H1 23 leading to the product becoming out of stock in some European markets.
The re-certification process is now complete, and manufacturing restarted in
August. We anticipate a more regular ordering process from our distributors in
the mid-term.
Prescription Medicines
Revenues in our larger prescription medicines brands were encouraging.
Hydromol™ (an emollient for the treatment of eczema) delivered revenue
growth of 13% CER to £4.7m, benefitting from strong volume growth and a price
increase successfully negotiated towards the end of 2022. Revenues for
Forceval™ (a multi-vitamin and mineral supplement) increased 12% CER to
£3.3m, as our campaign to raise awareness and educate clinicians regarding
the benefits of our product to support patients with malnutrition has driven
market share gains within the National Health Service (NHS). We recently
celebrated the fiftieth anniversary of Forceval as a licensed multi-vitamin
and mineral supplement available to the NHS.
Regulatory issues impacted some prescription products with total Prescription
Medicines revenues down 6% to £22.7m (H1 22: £24.1m) and down 7% CER.
Following a hiatus in regulatory inspections during COVID, inspections
restarted in 2023 and a small number of API suppliers lost their certificates
whilst necessary remedial actions were implemented. This affected our Flamma
franchise (for the treatment of burns), as well as a number of smaller
products. All of the affected suppliers have now been re-certified or have
firm dates for when manufacturing will restart, such that all products are
expected to back in stock in the second half of this year. Excluding the
impact of the out-of-stock products, underlying sales grew 4%.
We continue to manage this part of our business actively, to ensure
appropriate levels of investment and financial return. Overall cash generation
from this portfolio of niche products remains good and, coupled with their
limited requirement for promotional investment, this unit continues to play an
important part in our overall business.
Profit and loss account
We continued to manage our direct costs well in the Period. Around half of our
cost base is related to the price we pay for finished goods, warehousing and
distribution with approximately a quarter relating to labour. The remaining
25% comprises around 15% of discretionary marketing spend and 10% fixed
overheads.
Changes in revenue mix led to a 530 basis point (bp) decline in gross margin
to 56.8% of see-through revenue (H1 22: 62.1%) and a 7% decline in gross
profit to £46.9m (H1 22: £50.6m). Gross margin relative to statutory revenue
was 57.6% (H1 22: 64.3%).
We continued our investment in the business in H1 23, improving our operating
capabilities and marketing effectiveness provided to a number of our brands,
whilst maintaining good cost control through ensuring a targeted approach to
spending. Accordingly, underlying operating costs (defined as underlying
administration and marketing expenses, excluding depreciation and underlying
amortisation charges) remained broadly in line as a proportion of revenue to
last year at 34.5% (H1 22: 34.4%) of see-through sales.
This investment was partially offset by a £0.5m reduction in the IFRS 2 share
options charge to £0.5m for the Period (H1 22: £1.0m).
Net of the increase in operating costs and reduction in the share options
charge, underlying earnings before interest, taxes, depreciation and
amortisation (EBITDA) decreased 16.6% in the Period to £18.0m (H1 22:
£21.5m), whilst underlying operating profit (EBIT) decreased by 17.9% to
£16.3m (H1 22: £19.8m). A similar reduction was seen in reported operating
profit, which decreased by £4.4m to £12.2m (H1 22: £16.6m).
Net finance costs of £6.0m include interest charges of £4.3m (H1 22: £1.7m)
and net exchange losses of £1.4m, which represents a significant movement
versus the prior period when we recorded an exchange gain of £1.9m. With an
underlying tax charge of £1.8m (H1 22: £4.1m) equating to a tax rate of
17.3% (H1 22: 20.8%), underlying basic earnings per share decreased 46% to
1.58p (H1 22: 2.90p).
Cash generation
Free cash flow in the Period was significantly higher than the prior period at
£11.0m (H1 22: £5.1m) and net debt decreased £7.5m to £94.5m at 30 June
2023 (31 December 2022: £102.0m). Group leverage (as at 30 June 2023) was
2.7x (31 December 2022: 2.6x).
Net working capital outflow in the period of £0.9m relates to an increase in
inventories and trade payables, being partially offset by the timing of
receipts from our distributors which resulted in a strong reduction in trade
receivables. Overall, cash generated from operations was £17.2m (H1 22:
£8.4m), a 105% increase on the same period last year.
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.
Dividend
We acknowledge the 37.52% vote against the final dividend for 2022 at the
recent AGM held in May 2023. As part of a wider stakeholder engagement the
Board has subsequently engaged with shareholders, representing 60% of the
share register, to understand their views on dividends. In response to their
feedback the Board has decided to pause the interim dividend whilst it
develops a new dividend policy with greater emphasis on reinvestment in the
business to drive growth. Our clear intention is to continue to pay dividends
as we feel this demonstrates strong financial discipline. Further detail of
this new policy will be provided in the preliminary results statement in March
2024.
Innovation and development (I&D)
We continue to actively invest in our business to maintain strong organic
revenue growth and are committed to spending some £1m-£2m per annum on
I&D with a view to generating 10% of net consumer sales from new product
innovation in the future. The investment we have made in our Innovation and
Development (I&D) team is beginning to deliver. We now have a number of
projects in the pipeline, some of which were launched, or will launch, in
2023, providing potential for significant organic growth in future years.
Canker-X (pain relief for mouth ulcers) was launched in the US in January 2023
and is on track to deliver $1m in net revenues in under 12 months. It has
gained good distribution momentum both online (Amazon) and in bricks and
mortar (Walgreens, RiteAid) with a number of additional retailers interested
in stocking the range. We anticipate annual net sales potential in the low
single million dollars.
Following the successful launch of Kelo-Cote Kids in China in 2022, we
launched this product in the UK in an Amazon exclusive in March 2023. This
launch has been supported by digital activity utilising assets designed for
global use. We expect to introduce the Kids formulation in Germany and the US
(under the ScarAway brand) in Q1 2024.
As previously indicated, we launched Kelo-Cote scar sheets in the China cross
border market on the TMALL flagship store in May 2023 in a strategy designed
to generate positive reviews ahead of the important 618 festival in June. We
also launched scar sheets for the treatment of caesarean section scars in the
UK exclusively with Amazon and have generated promotional content which will
be live on Amazon soon.
Operational and corporate developments
The development of our global ERP platform continued with the successful
roll-out of our system in APAC (ex China). Following this go-live, the Group
now operates a single-instance ERP platform in the EMEA, US and now APAC (ex
China) with the final phase, the final roll out to our operations in China,
planned for next year. In the Period we also completed various projects to
help improve our ERP Finance and Supply Chain processes and leverage the
efficiency benefits of a single business platform.
In August we successfully completed the refinancing of our Revolving Credit
Facility, which was scheduled to mature in July 2024. The facility was agreed
with the Group's existing syndicate of supportive relationship banks. Through
the refinancing we took the opportunity to resize and reduce the total
committed facility by £15m to £150m, whilst increasing the Accordion by
£15m to £65m. The covenants include a net leverage (the ratio of net bank
debt to EBITDA) and interest cover (the ratio of EBITDA to finance charges)
test. The facility is available until August 2026, with two further one-year
extension options.
Our involvement in the appeal against the Competition and Markets Authority
("CMA") decision regarding anti-competitive behaviours in relation to four
companies has now completed. The Competition Appeal Tribunal panel will now
consider the evidence presented during the tribunal and we anticipate the
Panel to reach their conclusion by the end of 2023.
Continuing our sustainability journey
We continue to make good progress on our sustainability journey, publishing
our first voluntary stand-alone TCFD report for 2022 in May 2023. We also
created an online sustainability report to accompany the publication of our
Annual Report in March as we strive to improve further the communication of
our sustainability strategy.
Throughout this year we have focused on developing our social and governance
strategies. We have partnered with the Slave-Free Alliance (SFA), an
independent charity founded in the UK in 2018 that supports organisations that
are committed to slave-free business operations and supply chains. The SFA is
a social enterprise wholly owned by Hope for Justice, an international charity
founded in 2008. Hope for Justice runs prevention programmes, rescue, advocacy
and aftercare services to restore victims' lives and works with government and
organisations to reform society.
The SFA have provided bespoke workshop-based modern slavery training to our
quality and sourcing chain teams to help these teams better identify modern
slavery "red flags" during quality audits and supplier site visits.
The SFA has also conducted a gap analysis of our modern slavery mitigations
and policies, and we will be working to implement their recommendations in H2
23 and beyond.
In addition, this year Alliance has appointed a new e-learning provider to
deliver "gamified", engaging compliance training to our colleagues, including
data protection, unconscious bias, modern slavery, anti-bribery and corruption
and competition awareness training.
We implemented a partner code of conduct in 2022 and, throughout this year,
have worked to ensure that our Contract Manufacturing Organisations (CMOs) and
distributors agree to comply with our code. To date 88% of our CMOs have
returned a signed code of conduct and we are aiming to reach 100% by year end.
We have also introduced an employee code of conduct, which includes a section
on our speak up policy. To support this, we have engaged Safecall, an
independent reporting helpline to allow colleagues and external partners to
raise concerns anonymously from over 100 countries. The service is operational
for 24 hours a day, seven days a week, and available in over 60 languages.
In August we commenced work to install photovoltaic panels on the roof of our
award-winning headquarters in Chippenham, UK. This program of work also
includes the installation of a new, more efficient substation and electric
vehicle charging points. The work is expected to complete in January 2024,
allowing us to generate our own electricity, which is a significant step
towards our goal to become net zero for our scope 1 & 2 emissions by 2030.
Furthermore, we have purchased carbon credits to offset the scope 1 and 2
carbon emissions we generated in 2022. We have deliberately selected carbon
offset projects which align with our sustainability development goals,
focusing on reforestation projects that also include local community education
and support.
For further detail, please see the Sustainability section of our website.
Board changes
As previously announced, and in line with good corporate governance, David
Cook stepped down as Alliance's Chair following the AGM in May 2023. David
served on the Board for nine years and was replaced by Jo LeCouilliard, an
Independent Non-executive Director of Alliance. Jo joined the Alliance Board
on 1 January 2019, bringing more than 25 years of international healthcare
management experience through her career at GlaxoSmithKline where, amongst
other roles, she headed the US vaccines business and the Asia Pacific
Pharmaceuticals business.
In February 2023 we welcomed Jeyan Heper to the Alliance Board as an executive
in the newly created role of Chief Operating Officer. Jeyan has a strong track
record of strategic leadership in the international consumer health market,
overseeing a number of global programs and driving growth in flagship brands.
In his career spanning more than 25 years Jeyan has held senior executive
roles at Procter & Gamble, Danone Group and Ansell's sexual wellness
global business, before it was spun-out to become Lifestyles Healthcare, a
private equity/pharma-owned company where Jeyan became CEO.
Jeyan is helping to bolster the Group's operational capabilities, identify
growth opportunities, and help drive the Company's strategy to expand its
consumer health presence through leveraging his experience of e-commerce in
China and the US, and improving operational effectiveness.
The Board was strengthened further by the appointment of Martin Sutherland as
an additional Independent Non-Executive Director in February 2023. Martin is a
senior executive with over 30 years' experience in global businesses and is
currently a Non-Executive Director at Forterra plc and Non-executive Chair of
Logiq Consulting Ltd. Prior to this, Martin was CEO of De La Rue PLC. Martin
has a proven track record of delivering growth through new product innovation,
market diversification and international expansion.
Martin's experience brings a new perspective to complement the strong consumer
healthcare knowledge already present on the board.
Current trading and outlook
The second half of 2023 has got off to an encouraging start with trading
in-line with expectations. We anticipate strong growth in H2 as Kelo-Cote
revenues continue to build, we recommence supply of products that have been
out of stock and launch new product innovation. The Board's expectation for
Group year-end performance remains unchanged.
Peter Butterfield
Andrew Franklin
Chief Executive
Officer
Chief Financial Officer
26 September
2023
26 September 2023
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2023
Unaudited Unaudited
Six months ended 30 June 2023 Six months ended 30 June 2022
Underlying £000s Non-Underlying £000s Total Underlying £000s Non-Underlying £000s Total
Note (Note 6) £000s (Note 6) £000s
Revenue 4 81,398 - 81,398 78,765 - 78,765
Cost of sales (34,536) - (34,536) (28,127) - (28,127)
Gross profit 46,862 - 46,862 50,638 - 50,638
Operating expenses
Administration and marketing expenses (29,177) (1,000) (30,177) (28,820) 369 (28,451)
Amortisation of intangible assets 6 (948) (3,082) (4,030) (948) (3,619) (4,567)
Share-based employee remuneration (460) - (460) (1,048) - (1,048)
Operating profit 16,277 (4,082) 12,195 19,822 (3,250) 16,572
Finance costs
Interest payable and similar charges 5 (4,600) - (4,600) (2,023) - (2,023)
Finance income 5 (1,359) - (1,359) 1,933 - 1,933
Net finance costs (5,959) - (5,959) (90) - (90)
Profit before taxation 10,318 (4,082) 6,236 19,732 (3,250) 16,482
Taxation 7 (1,784) 657 (1,127) (4,102) 724 (3,378)
Profit for the period attributable to equity shareholders 8,534 (3,425) 5,109 15,630 (2,526) 13,104
Earnings per share
Basic (pence) 9 1.58 0.95 2.90 2.43
Diluted (pence) 9 1.58 0.94 2.86 2.40
All of the activities of the Group are classified as continuing.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited Unaudited
Six months ended
Six months ended
30 June 2023 30 June 2022
£000s £000s
Profit for the period 5,109 13,104
Other comprehensive income
Items that may be reclassified to profit or loss:
Foreign exchange forward contracts - cash flow hedge (gross) (32) (1,593)
Foreign exchange forward contracts - cash flow hedge (deferred tax) 8 398
Foreign exchange translation differences (gross) (9,185) 14,253
Foreign exchange translation differences (deferred tax) 2,296 (3,563)
Total comprehensive income for the period (1,804) 22,599
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 June 2023
Note Unaudited Audited
30 June 2023 31 December 2022
£000s £000s
Assets
Non-current assets
Goodwill and intangible assets 10 409,552 421,630
Property, plant and equipment 11 5,308 5,578
Deferred tax asset 3,689 4,117
Derivative financial instruments - 17
Other non-current assets 513 588
419,062 431,930
Current assets
Inventories 27,096 24,286
Trade and other receivables 12 41,069 49,324
Derivative financial instruments 381 157
Cash and cash equivalents 26,112 31,714
Total current assets 94,658 105,481
Total assets 513,720 537,411
Equity
Ordinary share capital 5,401 5,400
Share premium account 151,683 151,650
Share option reserve 10,801 10,141
Other reserve (329) (329)
Cash flow hedging reserve 107 131
Translation reserve 5,541 12,430
Retained earnings 103,755 108,238
Total equity 276,959 287,661
Liabilities
Non-current liabilities
Loans and borrowings 15 120,638 133,744
Other liabilities 14 3,266 3,415
Derivatives financial instruments 57 -
Deferred tax liability 63,770 65,569
Total non-current liabilities 187,731 202,728
Current liabilities
Corporation tax 2,112 2,984
Trade and other payables 13 32,015 35,616
Provisions 16 8,326 8,422
Derivative financial instruments 182 -
Dividend payable 8 6,395 -
Total current liabilities 49,030 47,022
Total liabilities 236,761 249,750
Total equity and liabilities 513,720 537,411
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Ordinary Share Premium account £000s Share Option reserve £000s Other reserve £000s Cash flow Hedging reserve £000s Translation reserve £000s Retained earnings £000s Total
Share
Capital Equity
£000s
£000s
Balance 1 January 2023 (audited) 5,400 151,650 10,141 (329) 131 12,430 108,238 287,661
Issue of shares 1 33 - - - - - 34
Dividend paid/payable - - - - - - (9,592) (9,592)
Share options charge (including deferred tax) - - 660 - - - - 660
Transactions with owners 1 33 660 - - - (9,592) (8,898)
Profit for the period - - - - - - 5,109 5,109
Other comprehensive income
Foreign exchange forward contracts - cash flow hedge (net of deferred tax) - - - - (24) - - (24)
Foreign exchange translation differences - - - - - (6,889) - (6,889)
Total comprehensive income for the period - - - - (24) (6,889) 5,109 (1,804)
Balance 30 June 2023 (unaudited) 5,401 151,683 10,801 (329) 107 5,541 103,755 276,959
Ordinary Share Premium account £000s Share Option reserve £000s Other reserve £000s Cash flow Hedging reserve £000s Translation reserve £000s Retained earnings £000s Total
Share
Capital Equity
£000s
£000s
Balance 1 January 2022 (audited) 5,382 151,328 10,058 (329) 48 (419) 116,418 282,486
Issue of shares 15 275 - - - - - 290
Dividend paid - - - - - - (9,116) (9,116)
Share options charge (including deferred tax) - - 670 - - - - 670
Transactions with owners 15 275 670 - - - (9,116) (8,156)
Profit for the period - - - - - - 13,104 13,104
Other comprehensive income
Foreign exchange forward contracts - cash flow hedge (net of deferred tax) - - - - (1,195) - - (1,195)
Foreign exchange translation differences - - - - - 10,690 - 10,690
Total comprehensive income for the period - - - - (1,195) 10,690 13,104 22,599
Balance 30 June 2022 (unaudited) 5,397 151,603 10,728 (329) (1,147) 10,271 120,406 296,929
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2023
Note Unaudited Unaudited
Six months ended Six months ended
30 June 2023 30 June 2022
£000s £000s
Operating activities
Profit for the period before tax 6,236 16,482
Interest payable and similar charges 5 4,600 2,023
Foreign exchange (gain)/loss 5 1,359 (1,933)
Amortisation of intangible assets 10 4,030 4,567
Depreciation of property, plant and equipment 11 733 765
Share-based employee remuneration 460 1,048
Change in inventories (2,810) (959)
Change in trade and other receivables 8,330 (14,415)
Change in trade and other payables (5,694) 850
Cash generated from operations 17,244 8,428
Tax paid (1,786) (1,081)
Cash flows from operating activities 15,458 7,347
Investing activities
Acquisitions and deferred consideration (207) (15,480)
Purchase of intangible assets 10 - (219)
Purchase of property, plant and equipment 11 (199) (333)
Net cash used in investing activities (406) (16,032)
Financing activities
Interest paid and similar charges (4,299) (1,706)
Loan issue costs 15 (100)
Proceeds from exercise of share options 34 290
Capital lease payments (442) (478)
Dividend paid 8 (3,197) (3,030)
Proceeds from borrowing 15 - 14,925
Repayment of borrowings 15 (12,000) (1,261)
Net cash used in financing activities (20,004) 8,740
Net movement in cash and cash equivalents (4,952) 55
Cash and cash equivalents at beginning of period 31,714 29,061
Effects of exchange rate movements (650) 264
Cash and cash equivalents at end of period 26,112 29,380
NOTES TO THE HALF YEAR REPORT
For the six months ended 30 June 2023
1. General information
Alliance Pharma plc ('the Company') and its subsidiaries (together 'the
Group') acquire, market, and distribute consumer healthcare products and
prescription medicines. The Company is a public limited company, limited by
shares, registered, incorporated, and domiciled in England and Wales in the
UK. 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').
The information in these financial statements does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006 and is unaudited.
These financial statements have been prepared in accordance with the AIM
rules, and IAS 34 has not been adopted. A copy of the Group's statutory
accounts for the year ended 31 December 2022, prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 ('Adopted IFRS'), 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.
These consolidated financial statements for the six-month period ended 30 June
2023 have been approved for issue by the Board of Directors on 26 September
2023.
2. Going concern
On 15 August 2023, the Group agreed a new £150m fully Revolving Credit
Facility ('RCF'), together with a £65m accordion. The facility was agreed
with its existing syndicate of lenders, replacing the previous RCF which ran
through to July 2024. This new facility is available until August 2026, with
two further one-year extension options.
The RCF is drawn in short to medium-term tranches of debt which are repayable
within 12 months of draw-down. These tranches of debt can be rolled over
provided certain conditions are met, including covenant compliance. The Group
considers that it is highly unlikely it would be unable to exercise its right
to roll over the debt. This due to mitigating actions it could take to
maintain compliance with these conditions, including future covenant
requirements, even in downside scenarios.
The Directors have prepared cash flow forecasts for a period of 12 months from
the date of approval of these financial statements (the going concern period).
These indicate that the Group will have sufficient funds, given the RCF
financing available, to meet its liabilities as they fall due for that period.
Also, the Directors have considered the sensitivity of cash flow forecasts to
severe downside scenarios, including a reasonably possible downside scenario
which models severe disruption to CBEC sales resulting in a decline in EBITDA
against budget of over 30%. Even in this severe scenario, the forecasts
indicate that the Group will have sufficient funds to meet its liabilities as
they fall due, and will continue to comply with its loan covenants, throughout
the forecast period.
Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements and have
therefore determined it is appropriate to adopt the going concern basis in
preparing the financial statements.
3. Accounting policies
Judgements and estimates
The principal judgements and estimates made in this period are the same as
those published by the Group in the 31 December 2022 Annual Report, which is
available on the Group's website: www.alliancepharmaceuticals.com.
Non-underlying items
Amortisation and impairment charges for intangible assets relating to goodwill
and brand and distribution rights are included as non-underlying items. The
revaluation of deferred tax balances following substantial tax legislation
changes are also included as non-underlying items. The Directors believe that
this classification of underlying and non-underlying items, when considered
together with total statutory results, provides investors, analysts and other
stakeholders with helpful complementary information to better understand the
financial performance and position of the Group from period to period, and
allows the Group's performance to be more easily compared against the majority
of its peer companies. These measures are also used by management for planning
and reporting purposes. They may not be directly comparable with similarly
described measures used by other companies. For further detail, please refer
to note 6.
3. Accounting policies (continued)
Other accounting policies
The remaining accounting policies applied in these interim financial
statements are the same as those published by the Group in the 31 December
2022 Annual Report. The Annual Report is available on the Group's website.
4. Revenue
Revenue information by brand Unaudited Unaudited
Six months ended 30 June 2023 Six months ended 30 June 2022
£000s £000s
Consumer healthcare brands:
Kelo-cote franchise 25,587 22,948
Amberen 5,855 7,536
Nizoral* 10,068 5,133
MacuShield 4,189 4,628
Aloclair 2,258 4,233
Vamousse 2,227 2,417
Other Consumer healthcare brands 8,477 7,745
Total Revenue - Consumer healthcare brands 58,661 54,640
Prescription medicines:
Hydromol 4,661 4,116
Flamma Franchise 2,939 3,115
Forceval 3,270 2,908
Other Prescription medicines 11,867 13,986
Total Revenue - Prescription medicines 22,737 24,125
Total Revenue 81,398 78,765
Revenue information by geography Unaudited Unaudited
Six months ended Six months ended 30 June 2022
30 June 2023 £000s
£000s
Europe, Middle East and Africa (EMEA) 36,661 40,607
Asia Pacific and China (APAC) 29,986 24,554
Americas (AMER) 14,751 13,604
Total Revenue 81,398 78,765
* Nizoral is shown on a net profit basis in statutory revenue. Nizoral
revenue presented on a see-through income statement basis is included as an
alternative performance measure in note 17.
5. Finance costs
Unaudited Unaudited
Six months ended 30 June 2023 Six months ended 30 June 2022
£000s £000s
On loans and overdrafts (4,222) (1,662)
Amortised finance issue costs (321) (314)
Interest on lease liabilities (57) (47)
Interest payable and similar charges (4,600) (2,023)
Interest income - -
Net exchange gain/(loss) (1,359) 1,933
Finance income/(costs) (1,359) 1,933
Net finance costs (5,959) (90)
6. Non-underlying items
The Group presents a number of non-IFRS measures which exclude the impact of
significant non-underlying items. This is to allow investors to understand the
underlying trading performance of the Group and can exclude items such as:
amortisation and impairment of acquired intangible assets; restructuring
costs; gains or losses on disposal; remeasurement and accounting for the
passage of time in respect of contingent considerations; and the revaluation
of deferred tax balances following substantial tax legislation changes. This
assessment requires judgement to be applied by the Directors as to which
transactions are non-underlying and whether this classification enhances the
understanding of the users of the financial statements.
Unaudited Unaudited
Six months ended 30 June 2023 Six months ended 30 June 2022
£000s £000s
Amortisation of intangible assets 3,082 3,619
ScarAway acquisition costs - (369)
Other non-underlying costs 1,000 -
Total non-underlying items before taxation 4,082 3,250
Non-underlying taxation (657) (724)
Total non-underlying items after taxation 3,425 2,526
Amortisation of intangible assets
The amortisation costs of acquired intangible assets are a significant item
considered unrelated to trading performance and, as such, have been presented
as non-underlying. This classification is in line with the majority of peer
companies of the Group.
ScarAway acquisition costs
ScarAway acquisition costs relate to capitalised professional fees in relation
to the ScarAway acquisition which completed in March 2022. These costs were
incurred in 2021 as non-underlying costs and capitalised in 2022
post-completion.
Other non-underlying costs
Other non-underlying costs relate to one-off legal and professional costs.
7. Taxation
Analysis of charge for the period is as
follows:
Unaudited Unaudited
Six months ended 30 June 2023 Six months ended 30 June 2022
Underlying £000s Non-Underlying £000s Total Underlying £000s Non-Underlying £000s Total
(Note 6) £000s (Note 6) £000s
Corporation tax 914 - 914 2,684 - 2,684
Deferred tax 870 (657) 213 1,418 (724) 694
Taxation 1,784 (657) 1,127 4,102 (724) 3,378
The difference between the total tax charge and the amount calculated by
applying the standard rate of UK corporation tax to profit before tax is as
follows:
Unaudited Unaudited
Six months ended 30 June 2023 Six months ended
£000s 30 June 2022
£000s
Profit before taxation 6,236 16,482
Profit before taxation multiplied by standard rate of corporation tax in the 1,465 3,132
United Kingdom at 23.5% (2022: 19%)
Effects of:
Non-deductible expenses and non-taxable income 321 (70)
Non-underlying amortisation and impairment 107 113
Differences between current and deferred tax rate (note 6) 75 114
Different tax rates on overseas earnings (130) 89
Foreign exchange (711) -
Total tax charge 1,127 3,378
8. Dividends
In response to shareholder feedback, the Board has decided to pause the
interim dividend whilst we develop a new dividend policy with greater focus on
reinvestment in the business. The new policy will be published with the
preliminary results in March 2024.
Pence/share Six months ended
30 June 2023
£000s
Amounts recognised as distributions to shareholders in 2023
Interim dividend for the 2022 financial year 0.592 3,197
Final dividend for the 2022 financial year 1.184 6,395
9,592
The interim dividend for 2022 was paid on 19 January 2023. The final dividend
for 2022 was paid on 17 July 2023.
Pence/share Six months ended
30 June 2022
£000s
Amounts recognised as distributions to shareholders in 2022
Interim dividend for the 2021 financial year 0.563 3,030
Final dividend for the 2021 financial year 1.128 6,086
9,116
The interim dividend for 2021 was paid on 7 January 2022. The final dividend
for 2021 was paid on 8 July 2022.
9. Earnings per share ('EPS')
Basic EPS is calculated by dividing the earnings attributable to ordinary
shareholders by the weighted average number of Ordinary Shares outstanding
during the period. For diluted EPS, the weighted average number of Ordinary
Shares in issue is adjusted to assume conversion of all dilutive potential
Ordinary Shares.
A reconciliation of the weighted average number of Ordinary Shares used in the
measures is given below:
Weighted average number of shares 000s
Six months ended Six months ended
30 June 2023
30 June 2022
For basic EPS 540,039 539,077
Share options 1,537 7,846
For diluted EPS 541,576 546,923
Six months to Six months to
30 June 2023
30 June 2022
£000s
£000s
Earnings for basic and diluted EPS 5,109 13,104
Non-underlying items (note 6) 3,425 2,526
Earnings for underlying basic and diluted EPS 8,534 15,630
The resulting EPS measures are:
Six months to Six months to
30 June 2023
30 June 2022
Pence Pence
Basic EPS 0.95 2.43
Diluted EPS 0.94 2.40
Underlying basic EPS 1.58 2.90
Underlying diluted EPS 1.58 2.86
10. Goodwill and intangible assets
Consumer Healthcare brands and distribution rights Prescription Medicines brands and distribution rights Total
£000s £000s £000s
Goodwill Computer software
£000s £000s
Cost
At 1 January 2023 (audited) 34,626 291,762 152,691 15,292 494,371
Exchange adjustments (463) (6,999) (586) - (8,048)
At 30 June 2023 (unaudited) 34,163 284,763 152,105 15,292 486,323
Amortisation and impairment
At 1 January 2023 (audited) 13,096 9,575 46,744 3,326 72,741
Amortisation for the period (note 6) - 79 3,003 948 4,030
At 30 June 2023 (unaudited) 13,096 9,654 49,747 4,274 76,771
Net book amount
At 30 June 2023 (unaudited) 21,067 275,109 102,358 11,018 409,552
At 1 January 2023 (audited) 21,530 282,187 105,947 11,966 421,630
11. Property, plant and equipment
The Group Computer software and equipment Fixtures, fittings and equipment Plant & machinery Right-of-use lease assets Total
£000s £000s £000s £000s £000s
Cost
At 1 January 2023 (audited) 2,199 3,944 74 5,230 11,447
Additions 27 172 - 425 624
Effect of movements in exchange rates (53) (25) - (222) (300)
Disposals - - - (265) (265)
At 30 June 2023 (unaudited) 2,173 4,091 74 5,168 11,506
Depreciation
At 1 January 2023 (audited) 1,857 2,200 49 1,763 5,869
Provided in the period 76 267 5 385 733
Disposals - - - (265) (265)
Effect of movements in exchange rates (46) (15) - (78) (139)
At 30 June 2023 (unaudited) 1,887 2,452 54 1,805 6,198
Net book amount ,
At 30 June 2023 (unaudited) 286 1,639 20 3,363 5,308
At 1 January 2023 (audited) 342 1,744 25 3,467 5,578
12. Trade and other receivables
Unaudited Audited
30 June 2023 31 December 2022
£000s £000s
Trade receivables 36,259 44,764
Other receivables 2,637 2,775
Prepayments 1,819 1,094
Accrued income 354 691
41,069 49,324
13. Trade and other payables
Unaudited Audited
30 June 2023 31 December 2022
£000s £000s
Trade payables 14,118 18,567
Other taxes and social security costs 1,074 1,546
Accruals and deferred income 15,389 13,972
Other payables 716 918
Lease liabilities 718 613
32,015 35,616
14. Other non-current liabilities
Unaudited Audited
30 June 2023
£000s 31 December 2022
£000s
Lease liabilities 3,070 3,219
Other non-current liabilities 196 196
3,266 3,415
15. Loans and borrowings
On 15 August 2023, the Group agreed a new £150m fully Revolving Credit
Facility, together with a £65m accordion. The facility was agreed with its
existing syndicate of lenders, replacing the previous RCF which ran through to
July 2024. This new facility is available until August 2026, with two further
one-year extension options. This has been classified as a non-current
liability.
The bank facility is secured by a fixed and floating charge over the Company's
and Group's assets registered with Companies House.
The Group also has access to an overdraft facility of £2m.
Movements in borrowings are analysed as follows:
£000s
At 1 January 2023 (audited) 133,744
Net repayment of borrowings (12,000)
Prepaid arrangement fees (100)
Amortisation of prepaid arrangement fees 321
Exchange movements* (1,327)
At 30 June 2023 (unaudited) 120,638
* Exchange movements on loans and borrowings with effective net investment
hedges are reported in other comprehensive income and accumulated in the
translation reserve.
The Group's debt is provided on a floating interest rate basis.
The interest rate exposure of the financial liabilities of the Group at the
period end was:
Floating rate interest exposure Unaudited Audited
30 June 2023
31 December 2022
£000s
£000s
Bank loans - Sterling denominated 96,817 96,817
Bank loans - US Dollar denominated 17,115 30,261
Bank loans - Euro denominated 6,807 6,987
Total financial liabilities 120,739 134,065
Unamortised issue costs (101) (321)
Net book value of financial liabilities 120,638 133,744
16. Provisions
The Group CMA provision Restructuring provision Total
£000s £000s £000s
Cost
At 1 January 2023 (audited) 7,900 522 8,422
Utilised during the period - (82) (82)
Exchange differences - (14) (14)
At 30 June 2023 (unaudited) 7,900 426 8,326
On 23 May 2019 the UK's Competition and Markets Authority ('CMA') issued a
Statement of Objection alleging anti-competitive agreement involving the Group
and certain other pharmaceutical companies in relation to the sale of
prescription prochlorperazine. Prochlorperazine is one of the Group's smaller
products and had peak sales in 2015 of £1.9m and sales of £0.1m in 2022.
On 3 February 2022, the CMA announced its finding that four companies,
including Alliance, had infringed competition law (the "Infringement
Decision"). The Alliance Board fundamentally disagree with the CMA's finding.
The Group believes that it has a strong case and has appealed the CMA's
decision, and the proposed fine of £7.9m. The appeal has now been heard at
the Competition Appeal Tribunal with those proceedings closing on 4 August
2023. The Group hopes that a verdict will be delivered during 2023, although
it may be later.
Despite its Appeal, the Directors believe that, as a result of the
Infringement Decision, a provision of £7.9m should continue to be recorded at
30 June 2023 (31 December 2022: £7.9m).
This reflects the amount of the proposed fine communicated by the CMA, and
therefore, notwithstanding the Directors' belief as to the merits of the
grounds on which it has appealed the CMA decision, the Directors consider this
to be the appropriate position given that, in the event that the Group's
appeal proved to be unsuccessful, the ultimate level of the fine cannot be
greater than this. In addition, in the event that the Group's appeal were to
prove to be unsuccessful, the Directors have presented what they consider to
be strong grounds upon which the amount of the fine could be reduced. However,
as this is a matter which cannot be predicted with certainty at this time the
Directors believe that the most appropriate course of action is to include the
maximum potential amount of the fine.
If the appeal is unsuccessful, the Group may also be liable for a proportion
of the legal costs of the CMA relating to the appeal and, depending on the
CAT's findings, a potential financial claim for damages from the UK's National
Health Service. The Group has not recorded a provision in relation to these
potential costs or claims as these amounts cannot be reliably estimated at
this time.
In accordance with IAS 37.92, the Group does not provide further information
on the grounds that this could seriously prejudice the outcome of the appeal.
The restructuring provision of £0.4m at 30 June 2023 (31 December 2022:
£0.5m) relates to the balance of restructuring costs in relation to the
closure of the Milan office following a change to the operating model for our
direct-to-market business in Italy.
17. Alternative performance measures
The performance of the Group is assessed using Alternative Performance
Measures ('APMs'). The Group's results are presented both before and after
non-underlying items. Adjusted profitability measures are presented excluding
non-underlying items as we believe this provides both management and investors
with useful additional information about the Group's performance and aids a
more effective comparison of the Group's trading performance from one period
to the next and with similar businesses. In addition, the Group's results are
described using certain other measures that are not defined under IFRS and are
therefore considered to be APMs. These measures are used by management to
monitor ongoing business performance against both shorter-term budgets and
forecasts but also against the Group's longer-term strategic plans. APMs used
to explain and monitor Group performance are:
Measure Definition Reconciliation to GAAP measure
Underlying EBIT and EBITDA Earnings before interest, tax and non-underlying items (EBIT also referred to Note A below
as underlying operating profit), then depreciation, amortisation and
underlying impairment (EBITDA).
Calculated by taking profit before tax and financing costs, excluding
non-underlying items and adding back depreciation and amortisation.
EBITDA margin is calculated using see-though revenue.
Free cash flow Free cash flow is defined as cash generated from operations less cash payments Note B below
made for interest payable and similar charges, capital expenditure and tax.
Net debt Net debt is defined as the Group's gross bank debt position net of finance Note C below
issue costs and cash.
Underlying effective tax rate Underlying effective tax rate is calculated by dividing total taxation for Note D below
the year less impact of tax rate changes and non-underlying charges,
by the underlying profit before tax for the year
See-through income statement Under the terms of the transitional services agreement with certain supply Note E below
partners, Alliance receives the benefit of the net profit on sales of Nizoral
from the date of acquisition up until the product licences in the Asia-Pacific
territories transfer to Alliance. The net product margin is recognised as part
of statutory revenue.
The see-through income statement recognises the underlying sales and cost of
sales which give rise to the net product margin, as management consider this
to be a more meaningful representation of the underlying performance of the
business, and to reflect the way in which it is managed.
Constant exchange rate (CER) revenue Like-for-like revenue, impact of acquisitions and total see-through revenue Note F below
stated so that the portion denominated in non-sterling currencies is
retranslated using foreign exchange rates from the previous financial year.
Like-for-like Like-for-like figures compare financial results in one period with those for Not needed
the previous period, excluding the impact of acquisitions and disposals made
in either period. For 2022, like-for-like revenue excludes the impact of
ScarAway & Kelo-cote US brand and distribution rights which were acquired
in March 2022.
Operating costs Defined as underlying administration and marketing expenses, Not needed
excluding depreciation and underlying amortisation charges.
17. Alternative performance measures (continued)
A. Underlying EBIT and EBITDA
Reconciliation of Underlying EBIT and EBITDA Unaudited Unaudited
Six months ended
Six months ended
30 June 2023
30 June 2022
£000s £000s
Profit before tax 6,236 16,482
Non-underlying items (note 6) 4,082 3,250
Net finance costs (note 5) 5,959 90
Underlying EBIT 16,277 19,822
Depreciation (note 11) 733 765
Underlying amortisation (note 10) 948 948
Underlying EBITDA 17,958 21,535
B. Free cash flow
Reconciliation of free cash flow Unaudited Unaudited
Six months ended
Six months ended
30 June 2023
30 June 2022
£000s
£000s
Cash generated from operations 17,244 8,428
Financing costs (4,299) (1,706)
Capital expenditure (199) (552)
Tax paid (1,786) (1,081)
Free cash flow 10,960 5,089
C. Net debt
Reconciliation of net debt Unaudited Audited
30 June 2023
£000s 31 December 2022
£000s
Loans and borrowings - non-current (120,638) (133,744)
Cash and cash equivalents 26,112 31,714
Net debt (94,526) (102,030)
D. Underlying effective tax rate
Reconciliation of adjusted underlying effective tax rate Unaudited Unaudited
Six months ended
Six months ended
30 June 2023
30 June 2022
£000s
£000s
Total taxation charge for the year (1,127) (3,378)
Non-underlying tax credit (657) (724)
Underlying taxation charge for the year (1,784) (4,102)
Underlying profit before tax for the year 10,318 19,732
Underlying effective tax rate 17.3% 20.8%
17. Alternative performance measures (continued)
E. See-through income statement
Unaudited See-through adjustment Unaudited
Six months ended
Six months ended
30 June 2023 £000s
30 June 2023
statutory values
see-through values
£000s £000s
Revenue 81,398 1,039 82,437
Cost of sales (34,536) (1,039) (35,575)
Gross profit 46,862 - 46,862
Gross profit margin 57.6% - 56.8%
Unaudited See-through adjustment Unaudited
Six months ended
Six months ended
30 June 2022 £000s
30 June 2022
statutory values
see-through values
£000s £000s
Revenue 78,765 2,789 81,554
Cost of sales (28,127) (2,789) (30,916)
Gross profit 50,638 - 50,638
Gross profit margin 64.3% - 62.1%
There is no impact from the see-through adjustment on income statement lines
below gross profit.
F. Constant exchange rate revenue
See-through revenue Unaudited Foreign Unaudited
exchange
Six months ended
Six months ended
impact
30 June 2023
CER
30 June 2023 £000s
£000s
£000s
LFL see-through revenue - Consumer Healthcare brands 57,104 (1,708) 55,396
LFL see-through revenue - Prescription Medicines 22,737 (289) 22,448
Like-for-like see-through revenue 79,841 (1,997) 77,844
Impact of acquisitions (ScarAway & Kelo-cote US) 2,596 (245) 2,351
See-through revenue (Note E) 82,437 (2,242) 80,195
Statutory revenue Unaudited Foreign Unaudited
exchange
Six months ended
Six months ended
impact
30 June 2023
CER
30 June 2023 £000s
£000s
£000s
LFL statutory revenue - Consumer Healthcare brands 56,065 (1,705) 54,360
LFL statutory revenue - Prescription Medicines 22,737 (289) 22,448
Like-for-like see-through revenue 78,802 (1,994) 76,808
Impact of acquisitions (ScarAway & Kelo-cote US) 2,596 (245) 2,351
Statutory revenue 81,398 (2,239) 79,159
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