Full Year Trading Update
Alliance Pharma plc (AIM: APH), the international healthcare group, announces its unaudited trading update for the year ended 31 December 2022 (“the Year”), ahead of the expected announcement of the Group’s audited full year results on 21 March 2023.
The Group delivered see-through1 revenues of £172.0m in the Year (2021: £169.6m), in line with the trading update on 23 November 2022 (the “November Trading Update”) and up 1% on the prior year. Adjusting for currency, revenues declined 3%. Excluding sales from ScarAway™ and the US rights to Kelo-cote™, both acquired in March 2022 (the “US Acquisition”), like-for-like2 see-through revenues declined 6% at constant exchange rates (“CER”).
Kelo-cote revenues grew 2% to £50.0m (2021: £48.8m) in the Year, boosted by the US Acquisition and currency gains (-6% CER). As previously reported in the November Trading Update, a slower recovery in B2B demand for Kelo-cote in the China cross-border e-commerce channel, coupled with a one-off destocking effect in that channel, meant that like-for-like Kelo-cote revenues were down 17% CER.
End-consumer demand in the scar treatment market in e-commerce in China remains strong, with 18% value growth in the three months to end October (the latest available data) and Kelo-cote gaining share in that period. Looking ahead, we expect Kelo-cote revenues to build throughout the year with overall growth anticipated to be above 20% in 2023, slightly ahead of the 18% CAGR delivered for the four year period ending 31 December 2022, excluding the US Acquisition.
Nizoral™ revenues recovered strongly in H2 2022 growing 15% CER, partly due to the delayed orders from H1 falling into H2 and as Alliance finalised the remaining marketing authorisation transfers in China and Vietnam, paving the way for a new distributor to be appointed in China in June 2022. Consequently revenues grew 6% to £21.8m (2021: £20.6m) for the Year (3% CER). The new Chinese distributor, and the completion of all marketing authorisation transfers, provides a very strong platform to drive high single digit revenue growth for Nizoral in 2023, supported by new marketing initiatives and the introduction of updated packaging.
In the US, Amberen™ generated net revenues of £14.9m (2021: £19.2m), 22% below prior year (-30% CER), reflecting tougher trading conditions in the bricks and mortar category and the loss of a leading discount store account. 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. Amberen now has an enhanced platform from which to generate double-digit revenue growth on a like-for-like basis in 2023 and beyond.
Other consumer brands continued the positive trajectory seen in H1, delivering revenues for the Year of £38.4m (2021: £33.2m), up 16% on the prior year (14% CER), with particularly strong growth from Aloclair and Vamousse. This solid performance in other consumer healthcare brands clearly illustrates the benefits of a diversified portfolio, and we anticipate continued high single-digit growth in this portfolio of products in 2023, substantially ahead of the broader consumer healthcare market.
Total Consumer Healthcare revenues for the Year were £125.2m (2021: £121.8m), up 3% on the prior year (-3% CER). The Kelo-cote performance meant that like-for-like total Consumer Healthcare revenues fell 7% CER. The Prescription Medicines business continues to deliver stable revenues with £46.8m (2021: £47.8m), in the Year, down 2% on the prior year on both a reported and currency adjusted basis.
Underlying profit before tax is expected to be slightly above £30m, in-line with the November Trading Update. Free cash flow was £15.8m (2021: £30.2m) and, following the US Acquisition, net debt increased to £102.0m at 31 December 2022 (31 December 2021: £87.0m). Group leverage3 is expected to be in the range of 2.5x-2.6x (31 December 2021: 1.7x), below the Group’s banking covenants of 3.0x. Net debt and Group leverage are both expected to fall during 2023, reflecting the Group’s anticipated strong cash generation, with Group leverage expected to be below 2.0x by the end of 2023.
“2023 has started well for Alliance and we were pleased to announce last week the appointment of Jeyan Heper as Chief Operating Officer, starting on 1 February. Whilst there was a sudden rise in COVID cases in China in December, following the relaxation of the Zero-COVID policy, the level of infection in major cities is reducing and normal life is beginning to resume. Whilst end-market demand for consumer healthcare products in China has been constrained, available evidence indicates that the recovery has already commenced and the Board remains confident in our full year expectations.”
Andrew Franklin, Chief Financial Officer of Alliance"Our free cash flow has remained robust, and is expected to build strongly throughout 2023, which we anticipate will enable us to reduce our net debt and leverage over the course of the year".
1 See-through revenue includes 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. Revenue for 2022 on a statutory reported basis is expected to be £167.4, an increase of 3% on the prior year
2 Like-for-like revenues exclude ScarAway and US Kelo-cote, which were acquired in March 2022
3 Adjusted net debt / enlarged Group EBITDA, calculated using pro forma EBITDA on a trailing 12-month basis
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (withdrawal) act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under article 17 of MAR.
For further information:
Alliance Pharma plc
Head of Investor Relations: Cora McCallum
+ 44 (0)1249 466966
+ 44 (0)1249 705168
ir@allianceph.com
Buchanan
Mark Court / Hannah Ratcliff
+ 44 (0)20 7466 5000
alliancepharma@buchanan.uk.com
Numis Securities Limited
Nominated Adviser: Freddie Barnfield / Duncan Monteith
Corporate Broking: James Black
+ 44 (0)20 7260 1000
Investec Bank plc
Corporate Broking: Patrick Robb
+ 44 (0) 20 7597 5970
About Alliance
Alliance Pharma plc (AIM: APH) is an international healthcare group. Our purpose is to improve the lives of consumers and patients through making available a range of clinically valuable healthcare products.
Our core focus is on the marketing of Consumer Healthcare brands, complemented by a smaller Prescription Medicines business. In total, we hold marketing rights to around 80 brands, with revenues generated from a mix of direct, distributor and e-commerce sales.
Headquartered in the UK, the Group employs around 250 people based in locations across Europe, North America, and the Asia Pacific region. By outsourcing our manufacturing and logistics operations, we remain asset-light and focused on maximising the value of our brands.
For more information on Alliance, please visit our website: www.alliancepharmaceuticals.com