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Interim Results for the six months ended 30 June 2017


("Alliance" or the "Group")

Alliance Pharma plc (AIM: APH), the specialty pharmaceutical company, is pleased to announce its interim results for the six months ended 30 June 2017.

Financial Highlights

  • Revenue up 8% to £50.3m (H1 2016: £46.4m)
    • Kelo-cote™ up 52% to £6.2m (H1 2016: £4.1m)
    • MacuShield™ up 67% to £3.4m (H1 2016: £2.0m)
  • EBITDA* up 3% to £13.6m (H1 2016: £13.2m)
  • Free cash flow (excluding Sinclair settlement)* up £9.0m to £11.1m (H1 2016: £2.1m)
    • Working capital normalisation following the Sinclair Healthcare Products acquisition
  • Leverage (adjusted net debt to EBITDA ratio) of 2.4 times (31 December 2016: 2.8 times)
  • Net debt* reduced by £12.7m to £63.4m (H1 2016: £76.1m)
  • Interim dividend up 10% to 0.443p (H1 2016: 0.403p)
* See note 15

Operational Highlights

  • Strong growth from our international brands, Kelo-cote and MacuShield, underlining the exciting potential of these products
  • Infrastructure and management teams developed and strengthened, supporting continued growth and acquisitions
  • Strong cash generation with leverage continuing its reduction profile, on current trends, to 2 times by year-end
Commenting on the results, Andrew Smith, Alliance Pharma’s Chairman, said: “Following a transformational 2016, the business has performed well in the first half of 2017. With the integration of the Sinclair Pharma products now complete we are strategically positioned for growth and, with leverage levels reducing, we are now able to pursue bolt-on acquisitions.”

Analyst meeting

A meeting for analysts will be held at 11.00am this morning, 13 September 2017, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. For further details, please contact Buchanan on 020 7466 5000.

For further information:

Alliance Pharma plc + 44 (0)1249 466966
Peter Butterfield, Chief Executive Officer
Andrew Franklin, Chief Financial Officer

Buchanan + 44 (0)20 7466 5000
Mark Court / Sophie Wills / Hannah Ratcliff

Numis Securities Limited + 44 (0)20 7260 1000
Nominated Adviser: Michael Meade / Freddie Barnfield
Corporate Broking: James Black

Investec Bank plc + 44 (0)20 7597 5970
Corporate Finance: Daniel Adams / Ed Thomas
Corporate Broking: Patrick Robb / Tejas Padalkar

Notes to editors:

About Alliance Pharma

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.

Chairman's and chief executive's statement

Trading performance

Sales for the six months ended 30 June 2017 were £50.3m, 8% higher than the same period last year (H1 2016: £46.4m). Underlying profit before tax was £11.9m (H1 2016: £11.7m) and, including the Sinclair compensation, the reported profit before tax was £16.9m (H1 2016: £11.7m).

Exchange rate movements boosted revenues for the half year by £2.6m (equivalent to 5 percentage points of revenue growth) as Sterling weakened against both the Euro and the Dollar relative to the rates for the same period last year. The impact on profit before tax was significantly lower, due to the greater proportion of cost of goods and operating costs denominated in these currencies.

The investment we have made in our international growth brands has yielded promising results. Sales of Kelo-cote, our scar reduction product, increased by 52% to reach £6.2m (H1 2016: £4.1m) across its markets.  MacuShield, for age-related macular degeneration, also performed well, seeing a 67% increase in revenues to £3.4m (H1 2016: £2.0m). This has been driven by a combination of distribution gains in new territories and growth in the rates of sale in existing outlets, stimulated by our increased marketing investment.

Overall, our trading performance has been in line with the Board’s expectations, and sets us up well for the second half of the year.


As stated in our announcement in July 2017, the Medicine and Healthcare products Regulatory Agency (“MHRA”) did not approve Diclectin, a treatment for nausea and vomiting of pregnancy, for the UK which was unexpected. Our regulatory team has now had time to work with Duchesnay Inc. of Canada (“Duchesnay”), the licensor and marketing authorisation applicant, to better understand the approach taken by the MHRA. Whilst the communication between the MHRA and Duchesnay remains confidential, we believe there are grounds to re-open discussions. There is no financial impact of this decision at this time.

Diclectin is a much-needed product as there is no licensed medicine for treating nausea and vomiting of pregnancy in the UK. At this stage we expect these discussions to continue well into 2018 and, in the meantime, we will re-direct our commercial resources to other important growth projects within Alliance.


We generated revenues of £25.2m (H1 2016: £24.5m), representing overall growth of 3%.

MacuShield recorded strong sales of £2.7m, a 98% increase of £1.3m over H1 2016 (H1 2016: £1.4m). The product continues to benefit from our promotional activities in the ophthalmic and consumer healthcare arenas.

Hydromol™ sales were £3.4m, representing a 4% decline compared with H1 2016, most of which was due to non-availability of the Hydromol Intensive™ presentation, which has recently returned to supply, although the emollient market has declined slightly over the past six months.

Our consumer products group (Anbesol™, Ashton & Parsons™, and Lypsyl™) achieved sales totalling £2.2m, a decline of 3%, caused by volatility within the buying patterns of the major retailers. There have been good distribution gains for Ashton & Parsons Infants’ Powders™, with new and expanded listings including, most recently, Morrisons, both in-store and online. The brand has a sound distribution platform in place ahead of further promotional campaigns planned for the second half of the year, which positions it well for future growth. Lypsyl also saw pleasing growth, following a product redesign and reformulation, and is beginning to respond to promotional focus. The Board still believes there to be significant brand value to extract despite the underinvestment prior to our ownership. The remainder of our UK portfolio achieved sales of £16.9m, showing a small decline of 3% although sales are expected to improve in the second half of the year.

Western Europe

Revenues for Western Europe (excluding the UK) showed a modest improvement to £12.6m for the half year (H1 2016: £11.7m). In France, our largest affiliate outside the UK, sales grew 7% to £4.8m, benefiting from a stronger Euro, with sales in local currency showing a slight (-4%) decline. The sales team has now started to focus on selling Kelo-cote directly, having repatriated the distribution agreement from Recordati in March this year. The DACH (Germany, Austria and Switzerland) region was up 14% in reportable currency, up 4% in constant currency, and continues to perform solidly and in line with expectations. Spain and Italy are predominantly driven by Aloclair™, our treatment for mouth ulcers. Spain ended the first six months significantly ahead, up 18% on a constant currency basis at £1.7m, benefiting from Aloclair, which continues to grow well in market. Kelo-cote also performed well, driven by sales in Portuguese private hospitals. In Italy, our smallest affiliate, sales were up 9% in reportable currency but down 2% on a constant currency basis at £1.4m. The repatriation of Kelo-cote distribution agreements has successfully taken place in France, Germany and Italy. Overall, the pan-European structure has now been completed and is well placed for further acquisitions.


The International side of the business performed very well in the first half, with revenues up 23% in reportable currency and 9% in constant currency. Strong performances from our lead brand Kelo-cote in the Asia Pacific region, and in China particularly, along with our Central European business have more than made up for a slightly weaker than anticipated performance in the Middle East and Africa region where the business has been subject to uneven distributor ordering patterns. The transition of the Sinclair distributor business has been embedded smoothly into our Paris office with most distributors now transferred into Alliance. In the first half of the year we have also taken the opportunity to re-organise our Chinese business behind our Nutraceuticals portfolio, which continues to perform well.

Financial review

Group Performance

Sales in the first half of 2017 grew by £3.9m (+8%) to £50.3m (H1 2016: £46.4m) following the solid performance of our international growth brands Kelo-cote and MacuShield. The gross margin achieved of 57.6%, resulting in a gross profit of £29.0m, was 1.6 percentage points higher than the comparative period (H1 2016: 56.0%, £26.0m) and reflects an improving sales mix.

Administration and marketing expenses for the half year increased by £2.2m (H1 2017: £15.1m, H1 2016: £12.9m) and were broadly in line with spend in the second half of last year (H2 2016: £15.9m). The increase on the same period last year is due to the full-year effect of the ex-Sinclair products’ cost base and increased promotional support given to our key growth brands.

Earnings before interest, taxes, depreciation and amortisation (EBITDA), defined as Operating Profit excluding non-underlying items (including share of Joint Venture profit) less Depreciation and Amortisation, was £13.6m (H1 2016: £13.2m), representing an overall margin of 27.1% of sales.

As announced on 21 March 2017, the Group reached agreement with Sinclair Pharma plc in connection with the material reduction of business in Kelo-stretch™, which was acquired in 2015. The terms of the compensation agreement were a £4.0m cash payment to Alliance (received in April 2017) and a further £1.0m cash receipt to be paid on or before 30 June 2018. The total compensation of £5.0m is recognised as a non-underlying exceptional income in the Income Statement.

Interest costs in the six-month period reduced to £1.5m (H1 2016: £1.7m). This is as a result of the reduction in overall net debt, partially offset by the translation effect of the Euro and US Dollar denominated interest into a weaker Sterling.

Underlying profit before tax increased to £11.9m (H1 2016: £11.7m).

The underlying tax charge for the period of £2.6m is based upon the prevailing tax rates in the relevant countries and equates to an effective tax rate (ETR) of 21.8%, in line with the Group’s forecasted underlying tax rate of 22%. The ETR for the prior period of 18.5% had benefited from the planned reduction in the UK corporation tax rate on our deferred tax balances.

Basic adjusted earnings per share (EPS) for the six months was 1.97p (H1 2016: 2.04p), and including non-underlying items was 2.84p (H1 2016: 2.04p). Adjusting for the Group’s underlying ETR of 21.8% in H1 2017, the basic adjusted EPS for the prior period would have been 1.96p.

Cash flow and net debt

Demonstrating the strongly cash generative nature of the Group, free cash flow (defined as cash generated from operating activities excluding non-underlying items less interest, tax and capital expenditure) generated in the first half was £11.1m and a significant improvement on the same period last year (H1 2016: £2.1m) which was adversely affected by the build-up of working capital following the Sinclair Healthcare Products acquisition. Free cash flow in the period was ahead of the cash generated in the second half of last year of £10.9m. As a result, cash and cash equivalents increased £1.8m to £9m as at 30 June 2017 (H1 2016: £7.2m).

Inventory was held broadly level with last year at £15.2m (H1 2016: £15.4m), however we expect a modest increase towards the end of 2017 as a result of certain strategic inventory builds to secure supply.

Net debt reduced to £63.4m as at 30 June 2017 (31 December 2016: £76.1m), due largely to the Group’s strong cash generation as well as the £4.0m compensation received from Sinclair and a foreign exchange benefit of approximately £1.0m. Our adjusted net debt/EBITDA ratio as at 30 June 2017 was 2.4 times (31 December 2016: 2.8 times), against our covenant limit of 2.75 times (31 December 2016: 3.0 times). We continue to anticipate that leverage will reduce, on current trends, to around 2.0 times by the end of the year.

The Group has total bank facilities of £100m of which £55.4m (31 December 2016: £66.5m) remains drawn on the Term Loan with £18.0m (31 December 2016: £18.0m) currently utilised from the Revolving Credit Facility (RCF). In addition to this, the Group also has access to a £4.5m working capital facility, which was largely undrawn at 30 June 2017, and an additional undrawn £25m facility available with bank approval.


In line with our strong cash generation in the first half of 2017, we are making an interim payment of 0.443p (H1 2016: 0.403p).  This represents an increase of 10% on last year’s figure while maintaining dividend cover at 3 times adjusted earnings.

The interim dividend will be paid on 11 January 2018 to shareholders on the register on 22 December 2017.


Our strategy for growth remains two-fold.  We drive organic growth in selected brands via targeted marketing investment and we seek additional growth from bolt-on acquisitions. This strategy is in effect a buy and grow strategy.

Our marketing investment concentrates on two International Star brands, Kelo-cote and MacuShield, which benefit from a global strategy developed centrally and adapted locally in each market.  Additionally we have national growth brands, known as Local Heroes which are very important to individual countries and whose marketing strategy is driven locally.


Kelo-cote is our largest and fastest growing brand and has global reach, now selling in 65 countries. Compared with H1 2016, sales grew by £2.1m to £6.2m in the first half of 2017. Kelo-cote is a silicone gel for the treatment of scars. Silicon gels are well established as the first line treatment in scar management. Kelo-cote is the most technically advanced product in this class and, through its unique patented formula, is the quickest drying silicone gel on the market. In this fast growing market this important benefit gives us a competitive advantage that is appreciated by clinicians and users alike. We have global rights, outside of the US.

We have recently strengthened our management of the brand by the appointment of an experienced global marketing head who will focus on developing both the brand’s strategy and relationships with key global opinion leaders. Alliance was the lead sponsor at this year’s Scar Club conference in Montpellier in June, which was attended by leaders in the scar management field. We continue to work on new product development and line extensions for the Kelo-cote brand to help reinforce its position as a professionally endorsed specialist product.

The Asia-Pacific region continues to perform well with sales progressing ahead of expectations, via our network of local distribution partners, with China, Kelo-cote’s largest market, developing particularly well. In Europe, where we have developed our own infrastructure in the major EU countries, we are in the process of repatriating the distribution agreements both to give us more control over the marketing of the brand and to improve margins. Discussions are well underway for the launch of the product into some new markets.


MacuShield is a dietary supplement of macular pigments for slowing the progression of age-related macular degeneration (AMD). It can also aid visual performance, improving contrast sensitivity in situations where there is high glare – such as night driving. It currently sells in 17 markets and we have global rights, outside of the Americas and the Caribbean.

In the first half of 2017, sales grew by £1.4m to £3.4m, compared with the same period in 2016. MacuShield is at an earlier phase of its international development with sales in the UK and Ireland developing well to £2.9m, compared with £1.7m in the first half of 2016. In the UK our presence in Boots has increased with a further 800 stores taking the MacuShield Gold presentation and better in-store positioning. Our marketing strategy is two-pronged with our retail and consumer activities run in parallel with communications to ophthalmologists via our medical sales team.

MacuShield growth has been further bolstered by good performances in some of the newer European territories, including Romania, Serbia and Greece where sales are growing as our distributors roll out the brand through their respective routes to market. We have also used our newly formed International team to negotiate MacuShield into new distributors outside of Europe, and the first six months of the year have seen three new distributors signed in Israel, Lebanon and Pakistan, with several others in discussion.

National growth products (Local Heroes)

As a large part of Alliance’s historic growth has been by acquisition, we have several products that are important in only one or a limited number of countries and which are not part of our global strategy. Some of these have growth potential that respond to marketing investment in an economic way and are managed locally. Examples are Aloclair in Spain and Italy, Hydromol in the UK and the UK group of consumer products (Anbesol, Ashton & Parsons and Lypsyl).


Very important to our strategy is the existence within our portfolio of a bedrock of well-established products that require minimal promotional efforts to maintain meaningful sales. These products constitute approximately 50% of total group revenues and provide a reliable source of cash flow that can be used for marketing investment elsewhere in the portfolio, or to fund further bolt-on acquisitions. These products cover a wide range of therapy areas as promotional synergies are not a prerequisite.


In addition to organic growth, bolt-on acquisitions have been and will continue to be an important source of growth.  We acquire products where we can see a good history of stable sales and therefore this element of our strategy is relatively low risk. From larger pharmaceutical companies, we tend to acquire very well established products that are no longer core to those organisations. From smaller entrepreneurial companies we tend to acquire growing products that have been developed, launched and established, but whose further growth requires a larger organization with a broader distribution footprint.

Following the integration of the transformational acquisition of the pharma products from Sinclair Pharma, and as our leverage levels reduce, we are now in a position to re-commence our activity of securing bolt-on acquisitions as and when attractive opportunities arise. Our expanded infrastructure enables us to take advantage of opportunities across a wider range of territories.  Similarly we shall keep a watch for in-licensing opportunities that could be exploited via our expanded infrastructure, although these are less available than bolt-on acquisitions, where several interesting opportunities are currently under evaluation.

Appointment of Second Broker

As we are now an enlarged group we have appointed a second broker, Investec Bank plc, to work alongside Numis Securities Limited, our Nominated Adviser and broker.

People & Infrastructure

Recent promotions, accompanied by the appointment of external talent, have rounded out the management structure required to achieve our growth ambition.

Peter Butterfield was appointed Chief Operating Officer in June, to add to his Deputy CEO duties. The change in role signals a sharing of responsibilities with CEO John Dawson, who can now focus more on outward-facing initiatives.

In addition to this and other internal promotions, we made several key appointments of external candidates. Chris Delafield joined us from Sanofi as the new Global Marketing Head for Kelo-cote, Matthew Toms joined as Head of Supply Chain from Refresco UK, Dr. Verity Rawson joined as Medical Affairs Manager from Merck, and we have brought our commercial legal function in-house with the appointment of Chris Chrysanthou from Fladgate LLP.

Our office infrastructure was completed with the refurbishment of our Chippenham head office to provide a more effective working environment.

In 2016 we took the decision to invest in a new enterprise resource planning system to streamline our processes, which will bring the legacy Alliance Pharma and Sinclair systems onto a single integrated platform that will cover all of our financial and supply chain planning and fulfilment activities. Following a review of external providers, we selected Microsoft Dynamics as our system of choice, and it is on target to be operational across the business in mid-2018.


We strive to make a contribution to the community and, with our employees, are strong fundraising supporters, recently raising £30,000 for Sands, the stillbirth and neonatal death charity, through activities across the Company including sponsored walks and a 250 mile cycle ride between our Paris and Chippenham offices. We also have a long established relationship with International Health Partners, to which we donate products for distribution to health practitioners in the world’s neediest areas.


With the physical and management infrastructure we now have in place and the encouraging financial performance achieved to date from our targeted investments, we see scope for continued organic growth. We anticipate that this will be driven by our international growth brands Kelo-cote and MacuShield as well as our local hero brands, funded by the cash generated by these and our bedrock products that require little or no promotional investment. We will supplement our organic growth with bolt-on acquisitions as and when suitable candidates arise that will add value to the Group. Our European footprint, diversified portfolio and strong management team also provide a sound foundation for attracting in-licensing opportunities, which we will evaluate alongside product acquisitions.

We continue to monitor the landscape in relation to Brexit where we would advocate a frictionless outcome as regards cross-border trading, medicines regulation, adequate freedom of movement and access to specialised talent for the Group head office in the UK. There is uncertainty at this early stage of negotiation, however our balanced revenue base, pan-European infrastructure and nationally held EU licences will ensure our ability to trade in the EU market of the future.

Having delivered results in this period in line with expectations, and having a sound platform in place, we look forward to the second half and beyond with confidence. 

Unaudited Consolidated Income Statement - can be found in the full Press Release under Reports and Presentations.