Half Year Trading Update
ALLIANCE PHARMA PLC
("Alliance" or the "Group")
Half Year Trading Update
Alliance Pharma plc (AIM: APH), the specialty pharmaceutical group, announces its pre-close trading update ahead of the announcement of its interim results for the six months ended 30 June 2018.
The Group traded well in the first half of 2018. Revenues for the period are expected to be 10% higher than the same period last year at approximately £54.5m (H1 2017: £49.4m, restated following the adoption of IFRS 15*); trading profits for the period are expected to increase at a rate lower than sales due largely to the phasing of spend to support marketing and selling activities. On the basis of trading in the year to date, the Board expects revenue and underlying profit before tax for the current financial year to be in line with expectations.
Our International Star brands continued to deliver a strong performance in the first half. Sales of Kelo-Cote® increased 77% to £10.9m (H1 2017: £6.2m). MacuShield® also performed well with sales up 22% at £3.7m (H1 2017: £3.0m, restated*). Vamousse®, a range of products for the prevention and treatment of head lice, acquired in December 2017, performed in line with expectations. Vamousse achieved sales of £2.7m in the period and is well-placed to grow in the second half, which includes the important 'back-to-school' period in the US and UK.
Elsewhere in the portfolio, our local hero brands performed in line with expectations and the bedrock slightly behind expectations, due to a combination of manufacturing delays and distributor order phasing.
Revenues were adversely impacted by currency movements in the period by approximately £0.9m, due mainly to the strengthening of Sterling, primarily against the US Dollar. On a constant currency basis, sales would have increased by 12% and, excluding acquisitions, sales would have increased 4%. The effect of currency on operating profits will be smaller due to the reductions in cost of goods and the hedging impact of operating costs denominated in these currencies.
Underlying free cash flow in the first half of 2018 is expected to be approximately £10.1m (H1 2017: £11.1m). The reduction on the prior year is driven by a planned increase in total inventory holding of £2.1m, following the acquisition of Vamousse and Ametop™ at the end of 2017, and the timing of certain tax payments in the period.
Net debt increased by approximately £14.0m to £86.3m as at 30 June 2018 (31 December 2017: £72.3m), due to additional debt drawn of £28.0m to fund the acquisition (completed on 21 June 2018) of Nizoral™, a medicated anti-dandruff shampoo, for the Asia-Pacific markets. This additional debt is partially offset by the Group's underlying cash generation in the period, a £2.4m cash receipt following the disposal of the Group's interest in Unigreg Limited announced in April 2018 and the final £1.0m compensation received from Sinclair Pharma plc.
Leverage (defined as adjusted net debt/proforma EBITDA) reduced to approximately 2.4 times at 30 June 2018 (31 December 2017: 2.5 times). We expect leverage to modestly reduce in the second half, with the cash generated from the underlying business more than offsetting the pre-marketing/launch activities of Xonvea®, a prescription product for the treatment of nausea and vomiting of pregnancy that was approved by the MHRA on 6 July 2018, and the expected increase in working capital following the Nizoral acquisition.
We expect to launch Xonvea in the UK in the Autumn of this year. Furthermore, we will commence the regulatory approval process for a further nine European countries for which we have in-licensed the marketing rights. Whilst we do not expect to generate significant sales of Xonvea in the UK until H2 2019, and later for the European markets, the product has the potential to be a substantial growth driver for Alliance.
The Group expects to announce its interim results for the six months ended 30 June 2018 on 19 September 2018.
* The adoption of IFRS 15 'Revenue from Contracts with Customers' has resulted in the reclassification of certain rebates as a deduction from Revenue; previously these rebates were included within Cost of Sales. To ensure comparability, the H1 2017 comparatives have been restated on the same basis, resulting in a reduction in sales of £0.9m for H1 2017. There is no impact on profit in either period.
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 / Gemma Mostyn-Owen
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 / David Herring
Notes to editors:
Alliance Pharma plc is an international specialty pharmaceutical company.
Headquartered in Chippenham, UK, Alliance commenced trading in 1998 and has been listed on AIM since 2003. Alliance has a strong track record of acquiring established niche products and it currently owns or licenses the rights to approximately 90 pharmaceutical and consumer healthcare products. It has sales in more than 100 countries either directly via its affiliates or through its selected network of distributor partners. Alliance joined the AIM market of the London Stock Exchange in December 2003 and trades under the symbol APH.
For more information on Alliance, please visit our website: www.alliancepharmaceuticals.com