Interim Results

RNS Number : 0426M
Alliance Pharma PLC
12 September 2012
 



For immediate release

12 September 2012

 

 

 

ALLIANCE PHARMA PLC

("Alliance" or the "Company")

 

Interim results for the six months ended 30 June 2012

 

Alliance Pharma plc (AIM: APH), the speciality pharmaceutical company, is pleased to announce its interim results for the six months ended 30 June 2012.

 

Highlights of the year to date:

 

·      Half year sales £22.0m (H1 2011: £24.4m)

 

·      Underlying sales growth of 2%, excluding DeltacortrilTM

 

·      Half year profit before tax £5.3m (H1 2011: £7.0m)

 

·      Underlying pre-tax profit growth of 16%, excluding Deltacortril

 

·      Basic earnings per share for the half year 1.80p (H1 2011: 2.38p)

 

·      Interim dividend up 10% to 0.275p per share (H1 2011: 0.25p)

 

·      Net bank debt reduced to £14.3m (31 December 2011: £18.4m)

 

·      Acquisition of anti-malarial brands from AstraZeneca UK Ltd in August 2012

 

·      First stage of Continental expansion underway

 

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

 

"We are pleased with the underlying performance in the first half year.  We have an attractive and robust portfolio, which, boosted by the product acquisitions we have made over the past 12 months, gives us plenty of scope for driving organic sales growth. We remain well placed to fund further acquisitions and we have substantially broadened our search for targets to include opportunities on the Continent. We are confident that Alliance will continue to make solid progress."

 

 

For further information:

 

Alliance Pharma plc

John Dawson, Chief Executive


Richard Wright, Finance Director


www.alliancepharma.co.uk


 

Buchanan

Mark Court / Fiona Henson / Sophie Cowles




Numis Securities Limited

+ 44 (0) 20 7260 1000

Nominated Adviser: Michael Meade / Oliver Cardigan


Corporate Broking: David Poutney




Chairman's and Chief Executive's Statement

 

In the first half of 2012 we delivered growth in underlying sales and profits and benefited from robust cash generation.  We also made progress with our acquisition strategy, resulting in the purchase of three products from AstraZeneca UK in August. This acquisition was particularly important as it gives Alliance a foothold in continental Europe, part of a strategy to significantly increase the number of acquisition opportunities.

 

Underlying sales (excluding the previously highlighted decline in Deltacortril) in the first half were up 2% on the same period in 2011 and underlying pre-tax profits were up 16%.  Total sales were £22.0m (H1 2011: £24.4m) and total pre-tax profits were £5.3m (H1 2011: £7.0m). HydromolTM grew particularly well, recording growth of 28% in the first half. Our healthy cash flows have allowed us both to make further reductions in net debt and to increase the interim dividend by 10%.

 

Sales of Deltacortril / enteric coated prednisolone now appear to have stabilised at a run rate of around £2m per annum, following the decline seen in early 2011 after the launch of a second generic competitor and changes in clinical preference.

 

As discussed over the past 18 months we have seen increased competition in Ireland for Nu-SealsTM, our enteric-coated low-dose aspirin. Also, as announced in June, Sanofi Pasteur has suspended production of the ImmuCystTM bladder cancer treatment, with production expected to resume by late 2013.

 

In August 2011 we acquired the antimalarial brands PaludrineTM, AvloclorTM and SavarineTM from AstraZeneca for an initial consideration of £4.2m with a further sum payable over the next three years not expected to exceed £1m.  These brands are sold mainly in the UK and France and are expected to contribute around £1.1m per annum to our operating profit.

 

Financial performance

 

Sales and operating profit showed improvement on the previous six months as the business returned to growth, demonstrating our recovery from the rapid Deltacortril decline of 2011. Sales increased from £21.6m in H2 2011 to £22.0m in H1 2012 and pre-tax profit increased over the same period from £3.7m to £5.3m.

 

Compared with the first half of 2011, total sales were down by 10% at £22.0m - reflecting the substantially greater benefit that we were still receiving from Deltacortril at the start of 2011; however, the underlying business, excluding Deltacortril, achieved year-on-year growth of 2%. Continued growth in Hydromol and the benefits of the 2011 acquisitions more than offset the reduction in Nu-Seals sales and the impact of the ImmuCyst production issue.

 

Gross margin has stabilised after a period of decline caused largely by the reducing contribution from higher-margin Deltacortril sales in the product mix. The gross margin rate in the first half of 2012 was 54.0%, compared with 56.8% in the first half of 2011 and 53.3% in the whole of 2011.

 

Total administration and marketing expenses were virtually unchanged from a year earlier as our programme of cost savings offset inflationary pressures. We have pursued savings across all areas of activity; as expected, the greatest economies came from the supply chain, particularly from retendering distribution contracts.

 

Operating profit was £6.0m (H1 2011: £7.8m) and pre-tax profit was £5.3m (H1 2011: £7.0m).  Excluding the Deltacortril gross margin, underlying operating profit increased by 10% and underlying pre-tax profit by 16%.

 

Continued healthy cash flows enabled us to make further reductions in net bank debt - down from £18.4m to £14.3m over the period. This resulted in a further modest reduction in financing costs, from £0.8m in H1 2011 to £0.7m in H1 2012. The debt/EBITDA ratio reduced to 1.32, from 1.41 at the end of 2011. The cash generated in the first half year effectively funded the acquisition of the anti-malarial products from AstraZeneca in August.

 

Products and marketing

 

The interruption to the production of ImmuCyst, which we license from Sanofi Pasteur for distribution in the UK and Ireland, is particularly frustrating because we had been achieving significant sales growth with this product. By May this year, the moving annual sales total had reached £4.4m, representing annual growth of 18% and making ImmuCyst one of our largest products.

 

Our organic sales growth continues to be led by our dermatology product Hydromol. This increased sales by 28% in the first half, to £2.2m (H1 2011:£1.7m).

 

This year we have seen increased competition for Nu-Seals, our enteric-coated low-dose aspirin, which is sold mainly in the Irish Republic. The single existing competitor was joined by two new generic competitors and as a result Nu-Seals sales were down from £2.8m in the first half of 2011 to £2.1m in the same period in 2012.  In July 2012 the Irish Government published draft legislation intended to introduce both generic substitution and reference pricing and as a result we expect sales to fall back further over the next 12 months.

 

As previously announced, our distribution contract for nine Novartis products will cease at the end of this year, although we are due to receive a termination payment.

 

In 2011 we acquired a total of 10 products in three separate deals. These products between them brought annualised sales of around £5m.  They include some very interesting consumer brands, such as AnbesolTM for pain caused by mouth ulcers or teething and QuinodermTM for acne. These brands have a strong heritage and bring with them the potential for growth.

 

Dividend

 

Our confidence in the business remains strong. Indeed, the evident resilience of the business confirms that our progressive dividend policy is soundly based. We therefore propose to pay an increased interim dividend of 0.275p, up 10% on last year's interim payment.  This interim dividend remains well covered by after-tax earnings.  The interim dividend will be paid on 15 January 2013 to shareholders on the register on 7 December 2012.

 

Strategy

 

Alliance acquires and licenses established products with stable sales in niche areas. While most of these require little or no promotional support, we actively market a small number of products with clear growth potential. These account for less than a fifth of our sales. We have two field forces, focused on dermatology and specialist hospital products, and have scope for economies of scale when we bring in products that these teams can promote alongside the existing ones. Following the ImmuCyst production issue, we are re-evaluating the use of the specialist hospital team, whose focus for the time being has shifted to other products within the portfolio. 

 

We currently generate just under a fifth of our sales outside the UK, and have ambitions to diversify the business by significantly increasing this proportion - primarily through increased sales in Western Europe. For most of our existing portfolio, the opportunities for expanding international sales are limited: as long-established products occupying well-defended niches, they would have to dislodge similarly well-entrenched competitors elsewhere at disproportionate cost.

 

Our international strategy is therefore to replicate the model that has proved so effective in the UK by acquiring established products in overseas markets. Our extensive research across Europe indicates that other Western European countries are well suited to this approach.

 

Our newly acquired anti-malarial products give us a useful foothold in France, where they are already well established with annual sales of about £1m. We have also recently appointed two country managers to develop opportunities and sales on the Continent: one will cover France and the other Germany, Austria and Switzerland. Their remit is to reinforce our continuing search for acquisition targets in those countries, advise on the deals and build the resulting businesses.

 

Team

 

As part of our international strategy outlined above, in August we announced the appointment of two country managers to drive the development of product portfolios in Western Europe through acquisition.

 

Dr Philippe Pasdelou, country manager for France, has considerable experience of managing pharmaceutical companies in France and other countries - including establishing a company with a similar business model to ours. His new role includes managing sales of our newly-acquired anti-malarial brands in France.

 

Lars Börger, country manager for Germany, Switzerland and Austria, has experience across a number of pharmaceutical and medical device companies in both strategic and operational roles. He was most recently Director Licensing with Grünenthal.

 

Outlook

 

In terms of headwinds, the temporary absence of ImmuCyst will clearly be a constraint until it returns and we know that the Irish Government plans to enact legislation enabling generic substitution in the next few months that may increase the impact of competition on Nu-Seals. Against this, Hydromol is growing well and we are set to benefit from the upswing in sales of our cyclical toxicology product, which will be going through the peak of its replacement cycle over the next 12 months.

 

We have an attractive and robust portfolio, which, boosted by the product acquisitions we have made over the past 12 months, gives us plenty of scope for driving organic sales growth. We remain well placed to fund further acquisitions and we have broadened our search for targets to include opportunities on the Continent. We are confident that Alliance will continue to make solid progress.

 



 

Consolidated Income Statement

For the six months ended 30 June 2012

 



6 months to

30 June 2012

6 months to

30 June 2011

Year to

31 December 2011


Note

£ 000s

£ 000s

£ 000s






Revenue


22,004

24,390

45,957






Cost of sales


(10,129)

(10,529)

(21,469)






Gross profit


11,875

13,861

24,488






Operating expenses





Administration and marketing expense


(5,446)

(5,468)

(11,235)

Amortisation of intangible assets


(251)

(462)

(735)

Share-based employee remuneration


(198)

(93)

(179)



(5,895)

(6,023)

(12,149)






Operating profit


5,980

7,838

12,339






Finance costs





Interest paid


(707)

(805)

(1,600)

Interest income


2

2

2

Foreign exchange rate movement


32

(38)

(29)








(673)

(841)

(1,627)






Profit on ordinary activities before taxation


5,307

6,997

10,712






Taxation

4

(974)

(1,347)

(2,076)






Profit for the period attributable to equity shareholders


4,333

5,650

8,636






Earnings per share





Basic (pence)

7

1.80

2.38

3.62

Diluted (pence)

7

1.69

2.21

3.39






 

 

 


Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2012

 



6 months to

30 June 2012

6 months to

30 June 2011

Year to

31 December 2011



£ 000s

£ 000s

£ 000s






Profit for the period


4,333

5,650

8,636






Interest rate swaps - cash flow hedge


1

1

22

Deferred tax on interest rate swap


-

-

(6)






Total comprehensive income for the period


4,334

5,651

8,652






 

 



Consolidated balance sheet

At 30 June 2012



 30 June 2012

 30 June 2011

 31 December 2011


Note

£ 000s

£ 000s

£ 000s






Assets





Non-current assets





Intangible fixed assets


66,120

62,375

66,130

Property, plant and equipment


663

811

765








66,783

63,186

66,895






Current assets





Inventories


4,622

5,402

5,652

Trade and other receivables

5

9,288

8,387

8,660

Cash and cash equivalents


3,161

1,368

1,079



17,071

15,157

15,391











Total assets


83,854

78,343

82,286






Equity





Ordinary share capital


2,407

2,394

2,401

Share premium account


24,982

24,815

24,866

Share option reserve


621

337

423

Reverse takeover reserve


(329)

(329)

(329)

Other reserve


(3)

(19)

(4)

Retained earnings


19,301

13,785

16,771

Total equity


46,979

40,983

44,128






Liabilities





Non-current liabilities





Long-term financial liabilities


12,725

13,550

15,225

Convertible debt


4,352

4,447

4,460

Other liabilities


19

40

40

Derivative financial instruments


-

8

-

Deferred tax liability


4,067

3,871

4,064

Provisions for other liabilities and charges


433

387

510



21,596

22,303

24,299

Current liabilities





Cash and cash equivalents


1

1,480

1

Financial liabilities


4,750

4,000

4,250

Corporation tax


973

504

1,046

Trade and other payables

6

9,372

8,667

8,367

Derivative financial instruments


5

19

6

Provisions for other liabilities and charges


178

387

189



15,279

15,057

13,859






Total liabilities


36,875

37,360

38,158











Total equity and liabilities


83,854

78,343

82,286








Consolidated Statement of Cash Flows

For the six months ended 30 June 2012

 



6 months to

30 June 2012

6 months to

30 June 2011

Year to

31 December 2011



£ 000s

£ 000s

£ 000s






Operating activities





Result for the period before tax


5,307

6,997

10,712

Interest payable


707

805

1,504

Interest receivable


(2)

(2)

(2)

Other finance costs


(32)

38

124

Profit on disposal of intangibles


-

-

(50)

Depreciation of property, plant and equipment


137

132

263

Amortisation of intangible assets


251

462

735

Change in inventories


1,030

(858)

(1,109)

Change in trade and other receivables


(628)

1,303

1,078

Change in trade and other payables


(307)

(3,330)

(1,780)

Tax paid


(1,044)

(1,497)

(1,496)

Share options charge


198

93

179

Cash flows from operating activities


5,617

4,143

10,158






Investing activities





Interest received


2

2

2

Payment of deferred consideration


(20)

(1,120)

(2,120)

Development costs capitalised


(66)

-

(203)

Net proceeds from sale of intangible assets


-

-

102

Purchase of property, plant and equipment


(35)

(55)

(140)

Purchase of other intangible assets


(175)

(2,550)

(6,475)

Net cash used in investing activities


(294)

(3,723)

(8,834)






Financing activities





Interest paid and similar charges


(648)

(729)

(1,439)

Loan issue costs


(26)

(26)

(65)

Proceeds from exercise of share options


-

123

182

Dividend paid


(600)

(401)

(1,359)

Receipt from borrowings


-

2,550

6,475

Repayment of borrowings


(2,000)

(4,000)

(6,000)

Net cash used in financing activities


(3,274)

(2,483)

(2,206)






Net movement in cash and cash equivalents


2,049

(2,063)

(882)

Cash and cash equivalents at beginning of period


1,078

1,989

1,989

Exchange losses on cash and cash equivalents


33

(38)

(29)

Cash and cash equivalents at end of period


3,160

(112)

1,078






 



Consolidated Statement of Changes in Equity

At 30 June 2012


Ordinary

Share

Share

Reverse





share

premium

option

takeover

Other

Retained

Total


capital

account

reserve

reserve

reserve

earnings

equity


£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s









Balance 1 January 2011

2,361

24,331

244

(329)

(20)

9,494

36,081









Issue of shares

40

535

-

-

-

-

575

Dividend paid

-

-

-

-

-

(1,359)

(1,359)

Employee benefits

-

-

179

-

-

-

179

Transactions with owners

40

535

179

-

-

(1,359)

(605)

Profit for the period

-

-

-

-

-

8,636

8,636

Other comprehensive income








Interest rate swaps - cash flow hedge

-

-

-

-

22

-

22

Deferred tax on interest rate swap

-

-

-

-

(6)

-

(6)

Total comprehensive income for the period

-

-

-

-

16

8,636

8,652









Balance 31 December 2011

2,401

24,866

423

(329)

(4)

16,771

44,128

 

 
















Balance 1 January 2011

2,361

24,331

244

(329)

(20)

9,494

36,081









Issue of shares

33

484

-

-

-

-

517

Dividend paid

-

-

-

-

-

(1,359)

(1,359)

Employee benefits

-

-

93

-

-

-

93

Transactions with owners

33

484

93

-

-

(1,359)

(749)

Profit for the period

-

-

-

-

-

5,650

5,650

Other comprehensive income








Interest rate swaps - cash flow hedge

-

-

-

-

1

-

1

Total comprehensive income for the period

-

-

-

-

1

5,650

5,651









Balance 30June 2011

2,394

24,815

337

(329)

(19)

13,785

40,983

















Balance 1 January 2012

2,401

24,866

423

(329)

(4)

16,771

44,128









Issue of shares

6

116

-

-

-

-

122

Dividend payable/paid

-

-

-

-

-

(1,803)

(1,803)

Employee benefits

-

-

198

-

-

-

198

Transactions with owners

6

116

198

-

-

(1,803)

(1,483)

Profit for the period

-

-

-

-

-

4,333

4,333

Other comprehensive income








Interest rate swaps - cash flow hedge

-

-

-

-

1

-

1

Total comprehensive income for the period

-

-

-

-

1

4,333

4,334









Balance 30 June 2012

2,407

24,982

621

(329)

(3)

19,301

46,979









 



 

Notes to the interim report

For the six months ended 30 June 2012

 

1          Nature of operations

 

Alliance Pharma plc ("the Company") and its subsidiaries (together "the Group") acquire, market and distribute pharmaceutical products. The Company is a public limited company incorporated and domiciled in England. The address of its registered office is Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB.

               

                The Company is listed on the London Stock Exchange, Alternative Investment Market (AIM).

 

2          General information

 

The information in these financial statements does not constitute statutory accounts as defined in section 435 of the Companies Act 2006 and is un-audited. A copy of the statutory accounts for the period ended 31 December 2011, prepared under International Financial Reporting Standards, has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified.

 

The interim financial report for the six month period ended 30 June 2012 (including comparatives for the six months ended 30 June 2011) was approved by the Board of Directors on 11September 2012.

 

3          Accounting policies

 

The same accounting policies and methods of computation are followed in the interim financial report as published by the company in its 31 December 2011 Annual Report. The Annual report is available on the company's website at www.alliancepharma.co.uk.

 

4          Taxation

 

Analysis of charge in period.

 


 30 June 2012

 30 June 2011

 31 December 2011


£ 000s

£ 000s

£ 000s

United Kingdom corporation tax at 25%/27%/26.5%




    In respect of current period

971

1,504

2,046

    Adjustment in respect of prior periods

-

(225)

(225)

Current tax

971

1,279

1,821





Deferred tax

3

68

255

Taxation

974

1,347

2,076

 

 

5          Trade and other receivables


 30 June 2012

 30 June 2011

 31 December 2011


£ 000s

£ 000s

£ 000s





Trade receivables

8,761

7,958

8,152

Other receivables

49

36

147

Prepayments and accrued income

400

376

331

Amounts owed by joint venture

78

17

30


9,288

8,387

8,660

 



Notes to the interim report (continued)

For the six months ended 30 June 2012

 

6          Trade and other payables


 30 June 2012

 30 June 2011

 31 December 2011


£ 000s

£ 000s

£ 000s





Trade payables

1,132

597

1,194

Other taxes and social security costs

996

955

864

Accruals and deferred income

5,366

5,092

6,168

Other payables

675

1,065

141

Dividend payable

1,203

958

-


9,372

8,667

8,367

     

           

7          Earnings per share (EPS)

 

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

           

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


6 months to

30 June 2012

6 months to

30 June 2011

Year ended

31 December 2011


Weighted average number of shares 000s

Weighted average number of shares 000s

Weighted average number of shares 000s

For basic EPS

240,430

237,415

238,602

Share options

2,733

2,366

2,752

Conversion of Convertible Unsecured Loan Stock (CULS)

20,887

21,467

21,467

For diluted EPS

264,050

261,248

262,821

 



Notes to the interim report (continued)

For the six months ended 30 June 2012

 

7          Earnings per share (EPS) (continued)

 


6 months to

30 June 2012

6 months to

30 June 2011

Year ended

31 December 2011


£ 000s

£ 000s

£ 000s

Earnings for basic EPS

4,333

5,650

8,636

Interest saving on conversion of CULS

175

180

361

Tax effect of interest saving on conversion of CULS

(43)

(47)

(94)

Earnings for diluted EPS

4,465

5,783

8,903

 

 

The resulting EPS measures are:


6 months to

30 June 2012

6 months to

30 June 2011

Year ended

31 December 2011


Pence

Pence

Pence

Basic EPS

1.80

2.38

3.62

Diluted EPS

1.69

2.21

3.39

 

 

8          Dividends


6 months to

30 June 2012

6 months to

30 June 2011

Year ended

31December 2011

 






 


Pence/share

£ 000s

  Pence/share

£ 000s

Pence/share £ 000s

 

Amounts recognised as distributions to owners in the year





 

Interim dividend for the prior financial year

0.25

600

0.17

401

0.17

401

 

Final dividend for the prior financial year

-

-

-

-

0.40

958

 

Proposed final dividend for the prior financial year

0.50

1,203

0.40

958

-

-

 



 



1,803


1,359


1,359

 







The proposed final dividend for the prior financial year was approved by the Board of Directors on 21 March 2012 and subsequently by the shareholders at the Annual General Meeting on 23 May 2012. The proposed dividend has been included as a liability as at 30June 2012 in accordance with IAS 10 Events After the Balance Sheet Date. The proposed final dividend for the prior financial year was paid on 12 July 2012 to shareholders who were on the register of members at 15 June 2012.

 

9          Post balance sheet events

The Group acquired the antimalarial brands Paludrine, Avloclor and Savarine from AstraZeneca UK Limited on 1 August 2012 for an initial consideration of £4.2 million, and may pay a further sum over the next three years, which is not expected to exceed £1.0 million, dependent on sales of the brands.

The initial consideration was funded from existing cash and bank facilities, including a £2 million drawdown from the Group's £20 million Revolving Credit Facility ("RCF"), and any deferred consideration will be funded from future cash generation.

The acquired products are sold mainly in the UK and France.

The Group expects the acquired products to generate incremental contribution before financing costs of approximately £1.1 million per annum.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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