TIDMAPH
RNS Number : 1086T
Alliance Pharma PLC
23 March 2021
For immediate release 23 March 2021
ALLIANCE PHARMA PLC
("Alliance" or the "Group")
Results for the year ended 31 December 2020
Strong performance from Consumer Healthcare brands
Very strong cash generation
2021 has started well, with the recent Amberen(TM) acquisition
set to enhance growth
Alliance Pharma plc (AIM: APH), the international healthcare
group, is pleased to announce its preliminary results for the year
ended 31 December 2020. The Group continued to deliver a robust
operational and financial performance in 2020, despite the
challenges posed by COVID-19.
OVERVIEW
-- Strong performance from Consumer Healthcare brands, which now
account for over two thirds of Group see-through revenues*
o Kelo-cote(TM) revenues up 12%
o Nizoral(TM) see-through revenues* up 4%
o See-through revenues* overall up 1% to GBP93.0m (2019:
GBP92.4m)
o Statutory revenues up 2% to GBP85.3m (2019: GBP83.7m)
-- Prescription Medicine revenues down 14% to GBP44.5m (2019:
GBP51.9m), reflecting delays in routine treatments as a result of
COVID-19
-- Group see-through revenue* in total down 5% (down 5% CCY*) to GBP137.5m (2019: GBP144.3m)
-- Group statutory revenues down 4%, to GBP129.8m (2019: GBP135.6m)
-- Substantial US acquisition completed in December 2020,
bringing a highly successful and fast-growing brand, Amberen (TM),
into the Group, and creating scale in the Group's US operations
-- Underlying profit before tax up 2% to GBP33.5m (2019: GBP32.9m)
-- Reported profit before tax down 58% to GBP13.0m (2019:
GBP31.1m), due to non-cash impairment and amortisation charges, and
acquisition costs relating to the Biogix Inc acquisition
-- Group leverage post acquisition of Biogix Inc at 2.43 times,
up from 1.48 times at December 2019; leverage expected to decrease
to below 2.0 times during 2021
-- Free cash flow very strong at GBP34.1m, helped by favourable
movements in net working capital
-- Cash generated from operations up 19% to GBP46.4m (2019: GBP39.0m)
-- Proposed final dividend payment of 1.074p per share, giving a
total dividend of 1.610p (2019: 0.536p)
FINANCIAL SUMMARY
Year ended 31 December 2020 2019 Growth
GBPm GBPm
Revenue (see-through basis)* 137.5 144.3 -5%
--------------------------------- ------- ------- -------
Revenue (statutory basis) 129.8 135.6 -4%
--------------------------------- ------- ------- -------
Gross profit 82.8 86.1 -4%
--------------------------------- ------- ------- -------
Underlying profit before
taxation 33.5 32.9 2%
--------------------------------- ------- ------- -------
Reported profit before taxation 13.0 31.1 -58%
--------------------------------- ------- ------- -------
Underlying basic earnings
per share 5.21p 5.09p 2%
--------------------------------- ------- ------- -------
Reported basic earnings per
share 1.54p 4.80p -68%
--------------------------------- ------- ------- -------
Free cash flow* 34.1 29.1 17%
--------------------------------- ------- ------- -------
Cash generated from operations 46.4 39.0 19%
--------------------------------- ------- ------- -------
Leverage 2.43x 1.48x
--------------------------------- ------- ------- -------
Net debt* 109.4 59.2
--------------------------------- ------- ------- -------
Proposed total dividend per
share 1.610p 0.536p 200%
--------------------------------- ------- ------- -------
* 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 Groups longer term strategic plans. APMs
are defined in note 20.
Specifically, see-through revenue includes sales from
Nizoral(TM) as if they had been invoiced by Alliance. Under the
terms of the transitional services agreement with Johnson &
Johnson (J&J), Alliance receives the benefit of the net profit
on sales of Nizoral from the date of acquisition up until the
product licences in each of the Asia-Pacific territories transfer
from J&J to Alliance. For statutory accounting purposes the
product margin on Nizoral sales is included within Revenue, in line
with IFRS 15.
Commenting on the results, Peter Butterfield, Alliance Pharma's
Chief Executive Officer, said :
"The Group delivered a robust operational and financial
performance in 2020, despite the challenges of the pandemic. Whilst
top line revenue growth was constrained, our Consumer Healthcare
business has performed well and we have seen some strong
performances from a number of our brands, in particular
Kelo-cote.
"Through maintaining good control of our operating costs, we
have continued to deliver a resilient underlying operating
performance and o ur free cash flow has also remained very strong,
enabling us to pay down more of our debt than expected ahead of
completing the Biogix acquisition in December 2020.
"This strategically significant acquisition bears testament to
our ability to continue to deliver on our longer-term growth
strategy, notwithstanding the global pandemic. In addition to
bringing another sizeable and fast-growing brand into the Group, it
significantly enhances the scale of our business operations in the
US, the world's largest consumer healthcare market, and in consumer
healthcare more generally.
"2021 has started well and we remain confident in our ability to
continue to deliver a strong operational and financial performance,
in line with market expectations. We look forward to regaining the
strong momentum and revenue growth that the Group has enjoyed in
recent years, whilst also benefiting from the additional scale and
future growth opportunities that Amberen brings.
"Whilst our near-term focus will be on integrating Biogix into
our existing US business, we will continue to look for
opportunities to selectively add to our portfolio in line with our
strategy of acquiring consumer healthcare brands in international
markets in which we already have a presence."
CONFERENCE CALL & WEBCAST
A conference call for analysts will be held at 10.30am this
morning, 23 March 2021. Analysts who require dial-in details,
please contact Buchanan at alliancepharma@buchanan.uk.com .
A recorded webcast of the analyst conference call, including the
investor presentation slides, will be made available this afternoon
at this link:
https://webcasting.buchanan.uk.com/broadcast/60180f8da6bfbf43d06ac2ea
The recorded webcast will also be made available at the investor
section of Alliance's website,
https://www.alliancepharmaceuticals.com/investors/
For more information, please contact Buchanan on 020 7466 5000
or email alliancepharma@buchanan.uk.com .
For further information
Alliance Pharma plc + 44 (0)1249 466966
Peter Butterfield, Chief Executive
Officer
Andrew Franklin, Chief Financial Officer
www.alliancepharma.co.uk
Buchanan + 44 (0)20 7466 5000
Mark Court / Sophie Wills / Hannah
Ratcliff
Numis Securities Limited + 44 (0)20 7260 1000
Nominated Adviser: Freddie Barnfield
/ Oliver Steele
Corporate Broking: James Black
Investec Bank plc + 44 (0) 20 7597 5970
Corporate Finance: Daniel Adams
Corporate Broking: Patrick Robb
About Alliance
Alliance Pharma plc (AIM: APH) is an international healthcare
group, headquartered in the UK with subsidiaries in Europe, the Far
East and the US and wide international reach through an extensive
network of distributors, generating sales in more than 100
countries.
We hold the marketing rights to around 80 Consumer Healthcare
brands and Prescription Medicines, which are managed on a portfolio
basis according to their growth potential. Promotional investment
is focused primarily on our Consumer Healthcare brands, many of
which have significant international or multi-territory reach. Our
Prescription Medicines are generally sold in a more limited number
of local markets, and most require little or no promotional
investment.
Our strategy allows us to deliver good organic growth and to
enhance our growth rate through carefully selected
acquisitions.
For more information on Alliance, please visit our website:
www.alliancepharmaceuticals.com
CHIEF EXECUTIVE'S STATEMENT
Trading performance
Overview
Against the backdrop of the COVID-19 pandemic, the Group
delivered a robust performance in 2020, with see-through revenues
down only 5% to GBP137.5m (2019: GBP144.3m), and a similar level of
decline on a constant currency basis. On a statutory reported
basis, revenues were down 4% to GBP129.8m (2019: GBP135.6m).
Whilst gross profit reduced, in line with revenues, by 4% to
GBP82.8m (2019: GBP86.1m), a slowdown in the natural run rate of
discretionary spend, coupled with continued good control over the
rest of our operating cost base and lower financing and borrowing
costs, resulted in underlying profit before tax increasing by 2% to
GBP33.5m (2019: GBP32.9m).
Non-cash impairment and amortisation charges, coupled with
acquisition costs for the Biogix acquisition, meant reported profit
before tax decreased 58% to GBP13.0m (2019: GBP31.1m).
As previously announced, we have reclassified our portfolio into
Consumer Healthcare brands and Prescription Medicines, in
recognition of the inherently different characteristics of these
categories, Consumer Healthcare brands being the main driver of
growth within the business, whilst revenues from our largely
unpromoted pharmaceutical products provide cash generation.
Consumer Healthcare brands performance
Our Consumer Healthcare brands continued to perform strongly
notwithstanding the global challenges, with see-through revenues*
up 1% to GBP93.0m (2019: GBP92.4m) and statutory revenues up 2% to
GBP85.3m (2019: GBP83.7m). These brands now account for more than
two thirds of Group see-through revenues, with this proportion
increasing further in 2021, with the inclusion of Amberen.
Kelo-cote - scar prevention and treatment
We were particularly pleased with the performance of Kelo-cote,
which delivered good growth in 2020, continuing the trend from
2019, with sales up 12% to GBP34.7m (2019: GBP31.0m), due to
further strong demand from China from the second quarter onwards as
local lockdown restrictions eased. Across the rest of the APAC
region, ongoing local lockdown restrictions in response to the
pandemic have had a more sustained impact on the brand's
performance, likewise in South America and some countries within
EMEA. Nevertheless, we expect sales across all these regions to
return strongly once lockdown restrictions are eased.
In common with many consumer-facing businesses, the pandemic has
resulted in an overall shift to online sales platforms, and we
continue to focus on our digital marketing strategies to increase
brand awareness both with end users of the product and with
healthcare professionals around the globe. Pre-pandemic, digital
was already an established and important sales channel for
Kelo-cote, with around 40% of our Chinese sales being facilitated
by online platforms.
Nizoral - medicated anti-dandruff shampoo
Nizoral sales were resilient, particularly in China, with the
brand generating see-through sales* of GBP21.0m, up 4% on 2019
(2019: GBP20.2m).
China continues to be an important market for Nizoral and a
future growth-driver for this key brand. As previously announced,
in July 2020 we launched a new formulation of Nizoral (branded
locally as Triatop) in China , to sit alongside the original
formulations, and this has contributed to the robust overall brand
growth this year.
We now have distribution agreements in place for all territories
in the region. The vast majority of the product licence transfers
have been completed. By the end of 2022 we will have concluded our
partnership with Johnson & Johnson through the transition
period.
Other Consumer brands
Performance across the rest of our Consumer Healthcare portfolio
was mixed, with revenues down 9% in 2020 to GBP37.3m (2019:
GBP41.2m). Whilst we continued to see strong performances from some
of the brands in this part of our portfolio, for example Ashton
& Parsons (TM) (teething gel) , which saw sales increase 27% to
GBP3.4m (2019: GBP2.7m) , boosted by new UK retail listings
following the launch of the new gel presentation, others faced more
challenging trading conditions due to the pandemic.
Vamousse (prevention and treatment of head lice) naturally had a
difficult year in 2020, with sales down 14% at GBP5.6m (2019:
GBP6.5m), as a result of pandemic-related school closures in the
US, the product's primary market. Whilst sales held up well during
the first half of the year, sales in the second half of the year
were significantly lower than those achieved during the same period
last year. Despite this however, Vamousse has continued to gain
market share in the US and is set to return strongly once lockdown
is eased. We expect a recovery in sales as schools progressively
re-open.
Sales of MacuShield (eye health supplement) for the first half
of 2020 were down 21% compared with the second half of 2019,
primarily due to the temporary closure of bricks and mortar retail
outlets and opticians in the UK. However, the second half of 2020
saw a reversal of this trend, with sales up 38% on those for the
first half of 2020 and 10% up on those for the same period last
year. Overall sales were down 18% on those for the previous year at
GBP6.8m (2019: GBP8.2m), partly due to distributor stocking and
changes in trading arrangements with a key distributor during the
first half of 2019 resulting in sales being higher than normal for
that period. With in-market sales in the UK now returning to
growth, we again expect this brand to continue its growth trend
throughout 2021 and beyond.
We are confident that as restrictions are eased, we will start
to see a return in distributor-led demand for some of our other
Consumer brands which were adversely affected by the pandemic in
2020.
Prescription Medicines performance
Revenues from our Prescription Medicines portfolio in 2020 were
GBP44.5m, down 14% on the corresponding period last year (2019:
GBP51.9m), with demand for some of our prescription-driven products
being adversely impacted by delays to routine treatments, as
healthcare professionals focused on maintaining hospital capacity
to treat patients with COVID-19. However, we did see a modest
recovery in the second half, with revenues up 7% on those for the
first half, and we anticipate demand will return as local
restrictions are eased and the provision of routine healthcare
treatment normalises.
We continue to actively manage our Prescription Medicines
portfolio, discontinuing or disposing of a small number of products
which deliver very low revenues and margins whilst continuing to
put limited promotional support behind some of the larger brands
such as Hydromol(TM), an emollient product for the treatment of
eczema, and Forceval(TM), a nutritional support product, which
continued to deliver double digit growth in the UK in 2020. As a
result, we expect sales from this part of our portfolio to remain
relatively stable, once the disruption to routine treatments caused
by the pandemic has subsided. These products continue to provide
good cash generation for the business and given their limited
requirement for promotional investment, they continue to play an
important part in the overall make-up of our product portfolio.
Regional performance
As previously announced, in the first half of 2020, we
re-organised our regional performance commentary and segmental
analysis, to align more closely with the Group's commercial
reporting structure, which focuses on the regions of Europe, Middle
East and Africa (EMEA), Asia Pacific (APAC) and the Americas
(AMER).
EMEA(1)
Across the EMEA region as a whole, revenues for 2020 were down
4% versus the previous year at GBP93.8m (2019: GBP97.4m).
As previously noted, EMEA accounts for over 90% of our
Prescription Medicines revenues. Whilst we saw a reduction in
demand for Prescription Medicines in 2020, due primarily to delays
in routine treatments, this reduction was partially offset by
continued good growth from our Consumer Healthcare portfolio in
this region, in particular Kelo-cote, to satisfy both export and
local demand.
Whilst our distributor business in EMEA performed strongly
during the first half of the year, with revenues up 8% versus the
comparable period last year, during the second half, the landscape
became more challenging, as distributors sought to respond to
changes in local trading conditions as a result of COVID-19,
resulting in full year EMEA-distributor revenues being down 9% on
those for 2019.
APAC(2)
The revenue base in this region is dominated by Kelo-cote and
Nizoral, which collectively accounted for just over 85% of sales in
2020.
See-through sales across the APAC region as a whole were down 3%
versus the prior year at GBP37.0m (2019: GBP38.2m), primarily due
to the reduction in both Kelo-cote and Nizoral sales across the
majority of countries in the region with the exception of China
which, as previously noted, benefited from a recovery in demand
from the second quarter onwards, as local lockdown restrictions
eased.
AMER(3)
Sales in the AMER region fell by GBP2.0m (23%) to GBP6.7m in
2020 (2019: GBP8.7m), reflecting both the fall in Vamousse revenues
in the US and weaker demand from our international distributor
business in South America, in response to COVID-19.
Acquisitions
In December 2020, we successfully completed the acquisition of
Biogix Inc and the Amberen brand, a highly successful and
fast-growing brand for the relief of menopause symptoms. Headline
consideration for the acquisition (excluding working capital and
currency hedging costs) was US$110.0m (GBP81.8m), paid for in cash
from the Group's existing financial resources.
As an established, clinically evidenced brand with significant
sales and good growth potential, in a growing market, Amberen fits
perfectly with our strategy of acquiring established consumer
healthcare brands in territories in which we already have a
presence. The acquisition of Biogix has created scale in our
business in the US, whilst also providing us with a third key brand
for the delivery of future organic growth.
Completing this strategically significant acquisition against
the backdrop of the pandemic bears testament to our ability to
continue to deliver on our longer-term growth strategy.
Operational review
In 2021, we will be rolling out our new Innovation &
Development (I&D) process and Digital Excellence training
programme to further support the growth of our main Consumer
Healthcare brands.
As previously reported, the new global Sales & Operations
Planning (S&OP) process rolled out in 2019 has proved
invaluable to us this year in helping to manage the demand
fluctuations caused by COVID-19 and in maintaining continuity of
supply.
We have also put in place a new software tool to support our
budgeting, forecasting and monthly reporting processes, through
automating workflows such as consolidations and report generation.
Our new system allows for robust real-time data provision and
better customised reporting for users.
Our ERP system has progressed well and is on track to go live in
Q2 2021, providing business benefits and scale-up capability
through the standardisation of processes.
People
In 2020 Alliance took part for the first time in the Great Place
to Work(R) survey, to increase our understanding of employee
engagement within the business. We were extremely pleased to
achieve a Trust Index(c) rating of 79%, just six percentage points
below that for the World's Best Workplaces Top 25, and to have been
Great Place to Work-Certified(TM) both in the UK and in China.
Our social impact activities during the year focused on
providing financial support to charities local to our office
locations, to enable them to better support those impacted by
COVID-19. During the year, Alliance donated more than GBP150,000 to
charities in several different countries to support them in
delivering services through the pandemic. We also continued our
donations to International Health Partners, donating approximately
12,000 units of product with a value in excess of GBP100,000 in
2020, to support those suffering due to a lack of access to
medicines.
Throughout the year, there have been numerous examples of our
employees 'going the extra mile' and thinking creatively to ensure
that our products continue to be available to consumers and
patients who need them, overcoming the challenges that remote
working has brought, and continuing to deliver great results. In
addition to maintaining the performance of the base business as we
navigated our way through the challenges of local lockdowns and the
uncertainties of Brexit, we have also successfully completed a
large and strategically significant acquisition - an achievement
which, again, bears testament to the strength of our culture and
the 'can do' attitude of our people, wherever in the world they may
be located.
Our UK-based facilities team have made good use of the time
spent in lockdown to make a start on further significant
refurbishment works at our Avonbridge House headquarters in
Chippenham - a project made considerably easier by almost all other
employees working from home. Internal designs have been changed to
create more collaborative workspaces, and we continue to evaluate
how we develop our future ways of working to make best use of our
office space once pandemic restrictions are eased.
The Group currently employs more than 200 people in 11 locations
around the world; all committed to the successful delivery of
Alliance's vision: "To be a leading international healthcare
business built around products which are clinically valuable to
patients. We will be both the partner and employer of choice."
We recognise that great results can only be achieved through the
combined efforts of our dedicated team of colleagues around the
globe, our partners, and customers, and through the strong
collaborative culture that we have built within Alliance. At no
time has this culture of working together been more valuable to us
than during 2020, as we have sought to navigate the challenges of
the global pandemic.
On behalf of the Board, I would like to take this opportunity to
extend my sincere thanks to all those who have worked so hard to
deliver an excellent performance for Alliance in 2020, against the
backdrop of the global pandemic, in what continue to be
unprecedented and challenging times.
Whilst inevitably a challenging year, due to the uncertainty
brought about by the global pandemic and consequential restrictions
imposed by governments around the world, the Group's performance,
and achievements in 2020 bear testament to the robustness and
resilience of our product portfolio, our business model, and our
people. As a result of our robust performance, we have not needed
to make use of any of the UK government assistance schemes, nor
have we furloughed any of our employees, or made any redundancies
due to the pandemic.
Current trading and outlook
2021 has started well for the Group. Our integration of the
Biogix business is on track and we remain confident in our ability
to continue to respond effectively to the challenges of COVID-19,
and to maintain our robust operational and financial performance to
deliver results in line with current market expectations.
Operationally, the priorities for the Group in 2021 will be:
-- Continuing to invest in our Consumer Healthcare brands in
order to maximise their organic growth potential, supported by the
rollout of our new I&D process and Digital Excellence training
programme,
-- Integrating Biogix and Amberen into the US-based Alliance business,
-- Continuing to review opportunities to add selectively to our
portfolio; our focus remains on augmenting our consumer healthcare
brands in international markets where we already have a
presence.
Peter Butterfield
Chief Executive Officer
23 March 2021
(1) This combines revenues previously disclosed under the UK and
Republic of Ireland and Western Europe, with revenues from our
distributor business across Central and Eastern Europe, the Middle
East and Africa, all of which were previously reported as part of
International revenues.
(2) APAC revenues were recognised previously as part of
International revenues .
(3) This region comprises revenues previously disclosed under
the US (including Canada) segment, together with revenues from
South America, previously included as part of International
revenues.
FINANCIAL REVIEW
Summary underlying income statement
Year ended 31 December 2020 2019 Growth
GBPm GBPm
Revenue (see-through basis)* 137.5 144.3 -5%
--------------------------------------- ------- ------- -------
Revenue (statutory basis) 129.8 135.6 -4%
--------------------------------------- ------- ------- -------
Gross profit 82.8 86.1 -4%
--------------------------------------- ------- ------- -------
Administration and marketing expenses (44.6) (46.7) -5%
--------------------------------------- ------- ------- -------
Underlying EBITDA* 38.6 39.4 -2%
--------------------------------------- ------- ------- -------
Underlying depreciation, amortisation
and impairment (1.8) (2.0) -11%
--------------------------------------- ------- ------- -------
Underlying EBIT 36.8 37.4 -2%
--------------------------------------- ------- ------- -------
Finance costs (3.3) (4.6) -28%
--------------------------------------- ------- ------- -------
Underlying profit before taxation 33.5 32.9 2%
--------------------------------------- ------- ------- -------
Reported profit before taxation 13.0 31.1 -58%
--------------------------------------- ------- ------- -------
Underlying basic earnings per share 5.21p 5.09p 2%
--------------------------------------- ------- ------- -------
Reported basic earnings per share 1.54p 4.80p -68%
--------------------------------------- ------- ------- -------
Proposed total dividend per share 1.610p 0.536p 200%
--------------------------------------- ------- ------- -------
Note: Underlying profitability metrics are presented as we
believe this provides investors with useful information about the
performance of the business. For 2020, underlying results exclude
the amortisation and impairment of intangible assets announced at
the half year and GBP1.3m of costs associated with the Biogix
acquisition; for 2019, underlying results exclude a GBP1.7m charge
on the return of the Xonvea rights and a GBP0.1m charge on the
disposal of Flammacerium. Further detail can be found in note
4.
* 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 Groups longer term strategic plans. APMs
are defined in note 20.
Specifically, see-through revenue includes sales from
Nizoral(TM) as if they had been invoiced by Alliance. Under the
terms of the transitional services agreement with J&J, Alliance
receives the benefit of the net profit on sales of Nizoral from the
date of acquisition up until the product licences in each of the
Asia-Pacific territories transfer from J&J to Alliance. For
statutory accounting purposes the product margin on Nizoral sales
is included within Revenue, in line with IFRS 15.
The Group delivered a robust financial performance in 2020,
against the backdrop of the global pandemic, with see-through
revenues decreasing just 5% to GBP137.5m (2019: GBP144.3m) and
statutory revenues decreasing 4% to GBP129.8m (2019: GBP135.6m).
This was largely due to continued strong performance by our
Consumer Healthcare brands, in particular Kelo-cote. However,
reductions in operating costs, together with lower interest and
financing costs, resulted in a 2% increase in underlying profit
before taxation in 2020 to GBP33.5m (2019: GBP32.9m). Reported
profit before tax decreased 58% in 2020 to GBP13.0m (2019:
GBP31.1m), primarily due to amortisation and impairment charges
incurred as a result of the decision to adopt finite useful lives
for our Prescription Medicines and certain other brand assets from
the start of 2020.
Group revenues were only minimally impacted by exchange rate
movements, which benefited by approximately GBP0.3m from Sterling
strengthening against the US Dollar through the second half of the
year, offsetting a slight weakening in Sterling against the Euro.
The impact of exchange rate movements at the operating profit level
was minimal.
Gross profit decreased by a similar percentage to revenues, to
GBP82.8m, down 4% versus the previous year (2019: GBP86.1m), with
gross margin increasing slightly, from 59.7% to 60.2% of
see-through revenue, and from 63.5% to 63.8% of statutory revenue,
due mainly to favourable changes in product mix.
Operating costs (defined as underlying administration and
marketing expenses, excluding underlying depreciation,
amortisation, and impairment charges) decreased by GBP2.1m to
GBP42.8m (2019: GBP44.9m), due to deferral of discretionary spend,
in response to the pandemic, and reductions in other expenditure, p
artially offset by increased marketing costs to support the
investment in Consumer Health brands. This resulted in operating
costs, as a percentage of see-through sales, to be maintained in
line with the prior year, at 31.1% (2019: 31.1%).
The IFRS2 share options charge for 2020 was GBP1.4m, down
GBP0.4m versus that for the previous year (2019: GBP1.8m).
As a result of the reduction in operating costs, the impact on
underlying earnings before interest, taxes, depreciation, and
amortisation (EBITDA) was much smaller, with underlying EBITDA
decreasing just 2% to GBP38.6m (2019: GBP39.4m), and underlying
operating profit decreasing by a similar amount to GBP36.8m (2019:
GBP37.4m). Reported operating profit decreased 54% to GBP16.3m
(2019: GBP35.6m).
Underlying depreciation, amortisation, and underlying impairment
charges
Underlying depreciation, amortisation, and impairment charges
for 2020 were GBP1.8m, down GBP0.2m on the prior year (2019:
GBP2.0m). Following changes in the accounting policy regarding
classification of non-underlying items announced in the first half
of 2020, as set out below, for 2020 this charge relates purely to
depreciation.
Finance costs
Finance costs were down by GBP1.3m compared with the previous
year, at GBP3.3m (2019: GBP4.6m). Of this, GBP1.2m related to a
reduction in borrowing costs, reflecting both a lower level of
borrowings and a reduction in the interest rate charged on our
borrowings. The remaining GBP0.1m related to currency
movements.
The average interest charge on gross debt during the period
(including non-utilisation fees) was 2.55% (2019: 3.37%).
Change in accounting estimate
As set out in the Half Year Report, as the Group continues its
focus on its growing Consumer Healthcare portfolio, the Directors
have considered the continuing appropriateness of using the
indefinite useful lives accounting concept across the entire
intangible brand asset portfolio.
For the majority of Consumer Healthcare brand assets, having
regard to the expected long-term growth profile of the Consumer
Healthcare business and the enduring nature of the brands, which
are supported by ongoing marketing spend, the Directors have
concluded that indefinite useful lives remain appropriate.
However, for Prescription Medicine brand assets, the Directors
have decided to adopt finite useful lives of up to 20 years for all
these assets effective from 1 January 2020. In arriving at this
lifespan, the Directors took account of all relevant factors,
including typical pharmaceutical product life cycles and the
potential development of alternative treatments over time, and also
the policies adopted by our peer group.
As a result of this change in estimated useful lives, the
carrying value of the Prescription Medicine and certain other brand
assets will be amortised to the profit and loss account over their
useful lives, generating an annual non-cash amortisation charge of
GBP7.2m in 2020 and for subsequent years.
Non-cash impairment charges
The Group has also conducted impairment reviews for all
intangible brand assets. These reviews, together with the change in
useful life assumption for Prescription Medicine assets, have
resulted in some non-cash impairments, as detailed in note 4.
Classification of non-underlying items
The Group has also updated its classification policy for
non-underlying items. Following this update all non-cash
amortisation and impairment charges will be included as
non-underlying items for 2020 and subsequent years, in line with
the general market treatment. This change has been made to enable
users to better understand the financial performance and position
of the Group from one period to the next, and to facilitate
comparison with its peer group, the majority of whom also exclude
amortisation and impairment from their underlying results.
Reconciliation of underlying to reported profit before tax
Year ended 31 December 2020 2019
GBPm
GBPm
Underlying profit before taxation 33.5 32.9
---------------------------------------- ------- ------
Non-underlying items:
---------------------------------------- ------- ------
Amortisation of intangible assets (7.2) -
---------------------------------------- ------- ------
Impairment of intangible assets and (12.1) -
goodwill
---------------------------------------- ------- ------
Acquisition costs - Biogix Inc. (1.3) -
---------------------------------------- ------- ------
Return of Xonvea licensing rights - (1.7)
---------------------------------------- ------- ------
Disposal of Flammacerium - (0.1)
---------------------------------------- ------- ------
Total (20.5) (1.8)
---------------------------------------- ------- ------
Reported profit before taxation 13.0 31.1
---------------------------------------- ------- ------
Taxation
The underlying total tax charge for 2020 was GBP6.4m (2019:
GBP6.4m), which equates to an effective tax rate of 19.0% (2019:
19.5%). The total tax charge for the year was GBP5.0m (2019:
GBP6.1m), equating to an effective tax rate on reported profits of
38.3% (2019: 19.5%). The tax credit on non-underlying items
reflects the net effect of the tax credit on amortisation and
impairment items, of GBP3.2m, partially offset by a charge of
GBP1.8m due to the impact of the change in the UK tax rate from 17%
to 19% on deferred tax balances, which relate primarily to
intangible assets.
Earnings per share
Underlying basic earnings per share, the measure used by the
Board in assessing earnings performance, was up on the previous
year at 5.21p (2019: 5.09p), reflecting the small increase in the
Group's underlying profit after tax, coupled with a modest increase
in the number of shares in issue.
Reported basic earnings per share reduced by 68% to 1.54p (2019:
4.80p) due to the greater impact which non-underlying items had on
reported earnings in 2020 versus 2019.
Dividend
The Board is pleased to announce that, after cancelling the 2019
final dividend owing to COVID-19 and then paying an interim
dividend payment for 2020, in line with that for 2019, it is
proposing a final dividend payment of 1.074p per share for 2020,
taking the total dividend payment for the year to 1.610p. The Board
will continue to assess the level of future cash distributions
having regard to overall business performance and future
outlook.
The final dividend, subject to approval at the Company's AGM on
19 May 2021, will be paid on 8 July 2021 to shareholders on the
register on 11 June 2021.
Balance sheet
Intangible assets increased by GBP84.2m in 2020, to GBP412.9m
(2019: GBP328.7m), due mainly to the addition of acquired
intangibles from the Biogix acquisition of GBP105.4m, partially
offset by non-underlying impairments of GBP12.1m and amortisation
charges of GBP7.2m as announced at half year
Further detail is provided in note 9.
Working capital
The Group continued to maintain good control of its working
capital during 2020, despite the challenges of the pandemic, with
total net working capital at 31 December 2020 of GBP19.3m, a
reduction of GBP5.4m on that at the start of the period (31
December 2019: GBP24.7m) due mainly to the movement in receivables
and payables balances.
Inventories, net of provisions, amounted to GBP22.9m as at 31
December 2020, an increase of GBP7.4m versus the start of the year
(31 December 2019: GBP15.5m) and GBP2.2m of this reflects inventory
acquired as part of the Biogix acquisition; the remainder reflects
the purchase of additional finished goods inventory, raw materials
and componentry, to mitigate against both future manufacturing and
supply challenges as a consequence of COVID-19 and any potential
disruption to our supply chain in the wake of the UK's departure
from the EU.
Receivables decreased by GBP5.9m, reflecting both the decline in
revenues and the timing of fourth quarter sales, whilst payables
increased by GBP6.9m, as a result of higher inventory holdings and
the phasing of payments around the year end.
Cash flow and net debt
Free cash flow (see note 20 for definition) for the year
remained very strong at GBP34.1m (2019: GBP29.1m), with second half
cash flows being significantly stronger than first half, bolstered
by favourable movements in net working capital. Cash generated from
operations was GBP46.4m (2019: GBP39.0m).
Following the drawdown of US$110.0m from our existing GBP165
million Revolving Credit Facility to fund the acquisition of Biogix
Inc, announced on 29 December 2020, net debt was GBP109.4m at 31
December 2020 (31 December 2019: GBP59.2m).
As a result of this acquisition, Group leverage(2) increased to
2.43 times at 31 December 2020 (31 December 2019: 1.48 times),
still comfortably within our covenant limit of 3.0 times.
We expect free cash flow generation to remain good in 2021,
albeit constrained in the first half due to the reversal of the
favourable working capital movements seen in Q4 2020. In the
absence of further acquisitions, we expect leverage to decrease to
below 2.0 times by the end of the year.
Treasury and capital management
The Group's operations are financed by retained earnings and
bank borrowings, with additional equity being raised on a periodic
basis to finance larger acquisitions. Borrowings are denominated in
Sterling, Euro and US Dollars.
Group risk management policy is to hedge up to 75% of estimated
future foreign currency EBITDA exposure, for up to 18 months at any
point in time. The Group uses forward foreign exchange contracts to
implement this policy which are generally designated as cash flow
hedges.
In June 2020, the Group exercised its option to secure a
12-month extension to its GBP165m Revolving Credit Facility, on the
same terms, and this now runs through to July 2024. This facility
provides flexibility for the Group to pursue its acquisition
strategy over the next few years, to complement future organic
growth.
Following the Biogix acquisition on 29 December 2020, GBP25m of
this facility remained unutilised at 31 December 2020.
Andrew Franklin
Chief Financial Officer
23 March 2021
CONSOLIDATED INCOME STATEMENT
Note Year ended 31 December Year ended 31 December
2020 2019
---------------------------------------- ------------------------------------ ------------------------------------
Underlying Non-Underlying Total Underlying Non-Underlying Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
(Note (Note
4) 4)
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
2,
Revenue 20 129,801 - 129,801 135,637 - 135,637
Cost of sales (46,985) - (46,985) (49,561) - (49,561)
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Gross profit 82,816 - 82,816 86,076 - 86,076
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Operating expenses
Administration and marketing
expenses 4 (44,614) (1,300) (45,914) (46,351) - (46,351)
Amortisation of intangible
assets 4 - (7,155) (7,155) (179) - (179)
Impairment of goodwill and
intangible assets 4 - (12,057) (12,057) (284) - (284)
Share-based employee remuneration (1,374) - (1,374) (1,816) - (1,816)
Return of Xonvea Licensing
Rights 4 - - - - (1,672) (1,672)
Disposal of Flammacerium 4 - - - - (145) (145)
Operating profit 36,828 (20,512) 16,316 37,446 (1,817) 35,629
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Finance costs
Interest payable and similar
charges 5 (2,657) - (2,657) (3,777) - (3,777)
Finance costs 5 (643) - (643) (776) - (776)
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
(3,300) - (3,300) (4,553) - (4,553)
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Profit before taxation 3 33,528 (20,512) 13,016 32,893 (1,817) 31,076
Taxation 6 (6,372) 1,383 (4,989) (6,414) 348 (6,066)
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Profit for the period attributable
to equity shareholders 27,156 (19,129) 8,027 26,479 (1,469) 25,010
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
Earnings per share
Basic (pence) 8 5.21 1.54 5.09 4.80
Diluted (pence) 8 5.14 1.52 4.99 4.72
----------------------------------- --- ---------- -------------- -------- ---------- -------------- --------
All of the activities of the Group are classed as
continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
------------------------------------------------- ------------ ------------
Profit for the year 8,027 25,010
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign exchange translation differences (net
of deferred tax) (1,051) (1,495)
Forward exchange forward contracts - cash flow
hedge (net of deferred tax) (250) 489
Interest rate swaps - cash flow hedge (net of
deferred tax) 27 (23)
------------------------------------------------- ------------ ------------
Total comprehensive income for the year 6,753 23,981
------------------------------------------------- ------------ ------------
CONSOLIDATED BALANCE SHEET
31 December 31 December
2020 2019
Note GBP000s GBP000s
--------------------------------- ---- ----------- -----------
Assets
Non-current assets
Goodwill and intangible assets 9 412,872 328,660
Property, plant and equipment 15,921 11,554
Deferred tax 15 2,139 1,710
Other non-current assets 682 676
--------------------------------- ---- ----------- -----------
431,614 342,600
Current assets
Inventories 10 22,917 15,518
Trade and other receivables 11 25,114 30,992
Derivative financial instruments 310 697
Cash and cash equivalents 28,898 17,830
--------------------------------- ---- ----------- -----------
77,239 65,037
--------------------------------- ---- ----------- -----------
Total assets 508,853 407,637
--------------------------------- ---- ----------- -----------
Equity
Ordinary share capital 16 5,329 5,294
Share premium account 150,645 149,036
Share option reserve 8,426 7,208
Other reserve (329) (329)
Cash flow hedging reserve 239 462
Translation reserve (1,055) (4)
Retained earnings 117,703 112,513
--------------------------------- ---- ----------- -----------
Total equity 280,958 274,180
Liabilities
Non-current liabilities
Loans and borrowings 13 138,328 77,040
Other liabilities 14 3,200 2,401
Deferred tax liability 15 56,181 29,810
197,709 109,251
Current liabilities
Corporation tax 1,435 2,344
Trade and other payables 12 28,736 21,815
Derivative financial instruments 15 47
30,186 24,206
--------------------------------- ---- ----------- -----------
Total liabilities 227,895 133,457
--------------------------------- ---- ----------- -----------
Total equity and liabilities 508,853 407,637
--------------------------------- ---- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Cash
Ordinary Share flow Share
share premium Other hedging Translation option Retained Total
capital account reserve reserve reserve reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Balance 1 January
2019 5,182 144,639 (329) (4) 1,491 6,121 95,099 252,199
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Issue of shares 112 4,397 - - - - - 4,509
Dividend paid - - - - - - (7,596) (7,596)
Share options charge
(including deferred
tax) - - - - - 1,087 - 1,087
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Transactions with
owners 112 4,397 - - - 1,087 (7,596) (2,000)
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Profit for the year - - - - - - 25,010 25,010
Other comprehensive
income
Foreign exchange forward
contracts - cash flow
hedge (net of deferred
tax) - - - 489 - - - 489
Interest rate swaps
- cash flow hedge
(net of deferred tax) - - - (23) - - - (23)
Foreign exchange translation
differences (net of
deferred tax) - - - - (1,495) - - (1,495)
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Total comprehensive
income for the year - - - 466 (1,495) - 25,010 23,981
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Balance 31 December
2019 5,294 149,036 (329) 462 (4) 7,208 112,513 274,180
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Balance 1 January
2020 5,294 149,036 (329) 462 (4) 7,208 112,513 274,180
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Issue of shares 35 1,609 - - - - - 1,644
Dividend paid - - - - - - (2,837) (2,837)
Share options charge
(including deferred
tax) - - - - - 1,218 - 1,218
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Transactions with
owners 35 1,609 - - - 1,218 (2,837) 25
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Profit for the year - - - - - - 8,027 8,027
Other comprehensive
income
Foreign exchange forward
contracts - cash flow
hedge (net of deferred
tax) - - - (250) - - - (250)
Interest rate swaps
- cash flow hedge
(net of deferred tax) - - - 27 - - - 27
Foreign exchange translation
differences (net of
deferred tax) - - - - (1,051) - - (1,051)
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Total comprehensive
income for the year - - - (223) (1,055) - 8,027 6,753
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
Balance 31 December
2020 5,329 150,645 (329) 239 (1,055) 8,426 117,703 280,958
----------------------------- -------- -------- --------- -------- ----------- -------- --------- --------
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2020 GBP000s 2019
Note GBP000s
------------------------------- ---- ------------- ------------
Cash flows from operating
activities
Cash generated from operations 17 46,405 38,958
Tax paid (4,838) (3,200)
------------------------------- ---- ------------- ------------
Cash flows from operating
activities 41,567 35,758
------------------------------- ---- ------------- ------------
Investing activities
Interest received 10 23
Acquisition of Biogix Inc 19 (82,667) -
Development expenditure - (12)
Purchase of property, plant
and equipment (4,612) (4,145)
Proceeds from disposal
of Joint Venture Investment - 500
Proceeds from disposal
of intangibles 1,405 350
Net cash used in investing
activities (85,864) (3,284)
------------------------------- ---- ------------- ------------
Financing activities
Interest paid and similar
charges (2,866) (2,505)
Loan issue costs (362) (1,401)
Capital lease payments (884) (726)
Proceeds from exercise
of share options 1,644 4,509
Dividend paid (2,837) (7,596)
Proceeds from borrowings 82,595 1,054
Repayment of borrowings (21,541) (18,533)
------------------------------- ---- ------------- ------------
Net cash provided by/(used
in) financing activities 55,749 (25,198)
------------------------------- ---- ------------- ------------
Net movement in cash and
cash equivalents 11,452 7,276
Cash and cash equivalents
at 1 January 17,830 10,893
Exchange losses on cash
and cash equivalents (384) (339)
Cash and cash equivalents
at 31 December 28,898 17,830
------------------------------- ---- ------------- ------------
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2020
1. General information
Alliance Pharma plc ('the Company') and its subsidiaries
(together "the Group") acquire, market and distribute
pharmaceutical and other medical products. 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 AIM stock
exchange.
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the year ended 31
December 2020 or 31 December 2019. The auditors reported on those
accounts and their report was (i) unqualified, (ii) did not include
references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006. The statutory accounts for the year ended 31 December
2020 have not yet been delivered to the Registrar of Companies.
2. Revenue and segmental information
The Group's reportable segments are the strategic business units
that represent different parts of the overall product portfolio.
These being Consumer Healthcare brands and Prescription Medicines.
The business units are managed separately as each portfolio
requires different expertise to deliver the corresponding product
offering. The segmental presentation reflects the decision in the
year to reclassify the portfolio, in recognition of the inherently
different characteristics of these product types. Previously the
business has been reported as a single segment.
Operating segments are disclosed in a manner consistent with the
internal reporting provided to the CODM during the reporting year.
The Group's Board of Directors ('the Board') is the Group's CODM.
The Group evaluates performance of the operational segments on the
basis of revenue and gross profit. Other than intangible assets,
disclosed in note 9, assets and liabilities are reported to the
Board at Group level and are not separated segmentally.
Year ended Year ended
31 December 31 December
2020 2019
Revenue information By Brand GBP000s GBP000s
------------------------------------------- ------------ ------------
Consumer Healthcare brands:
Kelo-cote 34,748 31,039
Nizoral * 13,260 11,528
MacuShield 6,751 8,236
Vamousse 5,626 6,538
Aloclair 7,601 8,057
Ashton & Parsons 3,408 2,676
Oxyplastine 3,140 3,458
Other consumer healthcare brands 10,806 12,192
------------------------------------------- ------------ ------------
Total revenue - Consumer healthcare brands 85,340 83,724
------------------------------------------- ------------ ------------
Prescription Medicines:
Hydromol 6,304 6,732
Flamma Franchise 5,897 7,647
Forceval 4,893 4,409
Optiflo 3,056 2,921
Ametop 1,465 2,272
Other prescription medicines 22,846 27,932
------------------------------------------- ------------ ------------
Total revenue - Prescription medicines 44,461 51,913
------------------------------------------- ------------ ------------
Total Revenue 129,801 135,637
------------------------------------------- ------------ ------------
* Nizoral is shown on an agency basis in statutory revenue.
Nizoral revenue presented on a see-through income statement basis
is included as an alternative performance measure in note 20.
Revenue information by Geography
Classification by geography is based on customer location.
Year ended Year ended
31 December 31 December
2020 2019
Revenue information By Geography GBP000s GBP000s
-------------------------------------- ------------ ------------
Europe, Middle East and Africa (EMEA) 93,769 97,347
Asia Pacific and China (APAC) 29,309 29,558
Americas (AMER) 6,723 8,732
-------------------------------------- ------------ ------------
Total Revenue 129,801 135,637
-------------------------------------- ------------ ------------
Operating Segment Results
Year ended 31 December 2020
-------------------------------------
Consumer Prescription
Healthcare Medicines Total
GBP000s GBP000s GBP'000s
-------------- ----------- ------------ ----------
Revenue 85,340 44,461 129,801
Cost of Sales (26,199) (20,786) (46,985)
-------------- ----------- ------------ ----------
Gross Profit 59,141 23,675 82,816
-------------- ----------- ------------ ----------
Year ended 31 December 2019
-------------------------------------
Consumer Prescription
Healthcare Medicines Total
GBP000s GBP000s GBP'000s
-------------- ----------- ------------ ----------
Revenue 83,724 51,913 135,637
Cost of Sales (25,228) (24,333) (49,561)
-------------- ----------- ------------ ----------
Gross Profit 58,496 27,580 86,076
-------------- ----------- ------------ ----------
Major customers
The revenues from the Group's largest customers are as follows.
Two customers separately comprised 10% or more of revenue (2019:
one).
Major customer 1 is a multi-national organisation with sales in
both EMEA and AMER regions.
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
------------------------------------------------------- ------------ ------------
Major customer 1 (Consumer healthcare and Prescription
medicine sales in EMEA and AMER) 17,345 24,036
------------------------------------------------------- ------------ ------------
Major customer 2 (Consumer healthcare sales in
EMEA) 16,474 2,595
------------------------------------------------------- ------------ ------------
3. Profit before taxation
Year ended Year ended
31 December 31 December
2020 2019
Profit before taxation is stated after charging: GBP000 GBP000
-------------------------------------------------------- ------------ ------------
Amounts receivable by the Company's auditor and
its associates in respect of
- The audit of these financial statements 48 40
- The audit of the financial statements of subsidiaries 198 161
- Other assurance services 5 5
Amortisation of intangible assets 7,155 179
Impairment of intangible assets 12,057 284
Losses on disposals 308 1,817
Share options charge 1,374 1,816
Depreciation of plant, property and equipment 1,753 1,496
Loss on foreign exchange transactions 653 799
-------------------------------------------------------- ------------ ------------
4. 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
intangibles; 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.
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
--------------------------------------------- ------------ ------------
Amortisation of intangible assets (7,155) -
Impairment of goodwill and intangible assets (12,057) -
Biogix acquisition costs (1,300) -
Return of Xonvea licensing rights - (1,672)
Disposal of Flammacerium - (145)
--------------------------------------------- ------------ ------------
Total non-underlying items before taxation (20,512) (1,817)
Taxation on non-underlying items 3,194 348
Impact of UK tax rate change from 17% to 19% (1,811) -
--------------------------------------------- ------------ ------------
Total non-underlying items after taxation (19,129) (1,469)
--------------------------------------------- ------------ ------------
Amortisation of intangible assets
As disclosed in note 9, finite useful lives of up to 20 years
have been adopted prospectively from 1 January 2020 for
Prescription Medicine and certain other brand assets. This
generates an annual amortisation charge of GBP7.2m. The
amortisation charges are a significant item considered unrelated to
2020 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.
Impairment of goodwill and intangible assets
The Group conducted impairment reviews for all intangible assets
as part of its interim reporting to 30 June 2020. These reviews,
together with the change in useful life assumption for Prescription
Medicine assets, resulted in impairment losses as the carrying
value of certain cash-generating units exceeded estimated
recoverable amounts. Further details are provided in note 9. The
impairment losses are significant items resulting from changes in
assumptions for future recoverable amounts. As such they are
considered unrelated to 2020 trading performance and have been
presented as non-underlying.
Biogix acquisition costs
Legal and professional fees related to the purchase of Biogix
Inc (note 19) were GBP1.3m. These acquisition costs are a
significant item considered unrelated to 2020 trading performance,
and as such have been presented as non-underlying.
Return of Xonvea Licensing Rights
In November 2019, the Group reached an agreement with Duchesnay
Inc. of Canada ('Duchesnay') to return the UK and EU licensing
rights to Xonvea, a prescription medicine for the treatment of
nausea and vomiting of pregnancy where conservative management has
failed. The total non-underlying loss on disposal was GBP1.7m. The
disposal is a significant item considered unrelated to 2019 trading
performance, and as such has been presented as non-underlying.
Disposal of Flammacerium
In December 2019, the Group sold the global rights to the brand
Flammacerium for gross cash consideration of GBP0.75m payable over
six years. The total non-underlying loss on disposal was GBP0.1m.
The disposal is a significant item considered unrelated to 2019
trading performance, and as such has been presented as
non-underlying.
Impact of UK tax rate change from 17% to 19%
A change to the UK corporation tax rate was announced in the
Chancellor's Budget on 16 March 2016, reducing the main rate from
19% to 17% from 1 April 2020. This commitment was abandoned in the
Budget on 11 March 2020. As this change was substantively enacted
on 17 March 2020, the effect is included in these financial
statements. The change in tax rate is a significant item that
relates only to deferred tax, principally on intangibles, and is
unrelated to 2020 trading performance. As such the rate change
impact has been presented as non-underlying.
5. Finance costs
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
------------------------------------- ------------ ------------
Interest payable and similar charges
On loans and overdrafts (1,988) (3,191)
Amortised finance issue costs (581) (491)
Interest on lease liabilities (88) (95)
------------------------------------- ------------ ------------
(2,657) (3,777)
Finance income
Interest income 10 23
Net exchange losses (653) (799)
------------------------------------- ------------ ------------
(643) (776)
------------------------------------- ------------ ------------
Finance costs - net (3,300) (4,553)
------------------------------------- ------------ ------------
6. Taxation
Analysis of the charge for the period is as follows:
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
------------------------------------------------------ ------------ ------------
Corporation tax
In respect of current period 4,417 4,373
Adjustment in respect of prior periods (123) (227)
------------------------------------------------------ ------------ ------------
4,294 4,146
Deferred tax (see note 15)
Origination and reversal of temporary differences 705 1,804
Adjustment in respect of prior periods (10) 116
------------------------------------------------------ ------------ ------------
Taxation 4,989 6,066
------------------------------------------------------ ------------ ------------
The difference between the total tax charge shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax is as follows:
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
----------------------------------------------- ------------ ------------
Profit before taxation 13,016 31,076
----------------------------------------------- ------------ ------------
Profit before taxation multiplied by standard
rate of corporation tax in the United Kingdom
of 19.00% (2019: 19.00%) 2,473 5,904
Effect of:
Non-deductible expenses 614 166
Non-taxable income (18) -
Adjustment in respect of prior periods (132) (111)
Differences between current and deferred tax
rates 1,811 (226)
Differing tax rates on overseas earnings 40 277
Share options (7) (241)
Movement in other tax provisions 208 297
----------------------------------------------- ------------ ------------
Total taxation 4,989 6,066
----------------------------------------------- ------------ ------------
The taxation charge for the year includes the impact on deferred
tax of the increase in the main rate of UK tax from 17% to 19%,
following the abandonment of the proposed reduction to 17% in the
Budget on 11 March 2020.
A further change to UK corporation tax was announced in the
Budget on 3 March 2021, increasing the main rate of UK corporation
tax from 19% to 25% with effect from 1 April 2023. As this change
was not substantively enacted at the balance sheet date, the effect
is not included in these financial statements and UK timing
differences have continued to be recognised at 19% for deferred tax
purposes. The overall effect of this change in policy, if it had
applied to the deferred tax balance at the balance sheet date,
would be to increase the overall net deferred tax liability by
GBP4.7m. The income tax expense for the period would have increased
by GBP5.1m, with a credit of GBP0.2m to the revaluation reserve,
and a GBP0.2m credit to other comprehensive income.
The Group has calculated 'adjusted underlying effective tax
rate' as an alternative performance measure in note 20.
7. Dividends
An interim dividend of 0.536p per share for the 2020 financial
year was paid on 7 January 2021.
Year ended 31 December
2020
------------------------
Pence / share GBP'000s
---------------------------------------------- -------------- --------
Amounts recognised as distributions to owners
in 2020
Interim dividend for the 2019 financial year 0.536 2,837
---------------------------------------------- -------------- --------
The interim dividend for 2019 was paid on 10 January 2020.
Year ended 31 December
2019
------------------------
Pence / share GBP'000s
---------------------------------------------- -------------- --------
Amounts recognised as distributions to owners
in 2019
Interim dividend for the 2018 financial year 0.487 2,524
Final dividend for the 2018 financial year 0.977 5,072
---------------------------------------------- -------------- --------
7,596
---------------------------------------------- -------------- --------
The interim dividend for 2018 was paid on 10 January 2019. The
final dividend for 2018 was paid on 11 July 2019.
8. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to
Ordinary shareholders by the weighted average number of Ordinary
shares in issue 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. There are no
differences in earnings used to calculate each measure as a result
of the dilutive employee share options.
A reconciliation of the weighted average number of Ordinary
shares used in the measures is given below:
Year ended Year ended
31 December 31 December
2020 2019
------------------------ ------------ ------------
Basic EPS calculation 521,686,254 520,687,101
Employee share options 6,256,040 9,471,693
------------------------ ------------ ------------
Diluted EPS calculation 527,924,294 530,158,794
------------------------ ------------ ------------
The underlying basic EPS is intended to demonstrate recurring
elements of the results of the Group before non-underlying items. A
reconciliation of the earnings used in the different measures is
given below:
Year ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
---------------------------------- ------------ ------------
Earnings for basic EPS 8,027 25,010
Non-underlying items (note 4) 19,129 1,469
---------------------------------- ------------ ------------
Earnings for underlying basic EPS 27,156 26,479
---------------------------------- ------------ ------------
The resulting EPS measures are:
Year ended Year ended
31 December 31 December
2020 2019
Pence Pence
----------------------- ------------ ------------
Basic EPS 1.54 4.80
----------------------- ------------ ------------
Diluted EPS 1.52 4.72
----------------------- ------------ ------------
Underlying basic EPS 5.21 5.09
----------------------- ------------ ------------
Underlying diluted EPS 5.14 4.99
----------------------- ------------ ------------
9. Goodwill and intangible assets
Consumer Prescription
healthcare medicines
brands brands
and distribution and distribution Development Assets
Goodwill rights rights costs under development Total
GBP000s GBP000s GBP'000s GBP000s GBP000s GBP000s
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
Cost
At 1 January 2020 16,532 171,102 152,439 - - 340,073
Acquisition (note 19) 15,427 89,990 - - - 105,417
Disposals - - (714) - - (714)
Exchange adjustments 445 (2,889) 1,165 - - (1,279)
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
At 31 December 2020 32,404 258,203 152,890 - - 443,497
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
Amortisation and
impairment
At 1 January 2020 - 4,226 7,187 - - 11,413
Non-underlying impairment
for the year 1,144 2,007 8,906 - - 12,057
Non-underlying
amortisation
for the year - 226 6,929 - - 7,155
At 31 December 2020 1,144 6,459 23,022 - - 30,625
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
Net book amount
At 31 December 2020 31,260 251,744 129,868 - - 412,872
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
At 1 January 2020 16,532 166,876 145,252 - - 328,660
-------------------------- --------- ----------------- ----------------- ----------- ------------------ --------
Consumer Prescription
healthcare medicines
brands and brands
distribution and distribution Development Assets
Goodwill rights rights costs under development Total
GBP000s GBP000s GBP'000s GBP000s GBP000s GBP000s
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
Cost
At 1 January 2019 16,565 172,781 155,311 768 1,000 346,425
Additions - - - 12 - 12
Disposals (33) - (1,500) (780) (1,000) (3,313)
Exchange adjustments - (1,679) (1,372) - - (3,051)
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
At 31 December 2019 16,532 171,102 152,439 - - 340,073
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
Amortisation and impairment
At 1 January 2019 - 4,226 6,956 - - 11,182
Underlying impairment
for the year - - 284 - - 284
Underlying amortisation
for the year - - 179 - - 179
Disposal - - (232) - - (232)
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
At 31 December 2019 - 4,226 7,187 - - 11,413
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
Net book amount
At 31 December 2019 16,532 166,876 145,252 - - 328,660
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
At 1 January 2019 16,565 168,555 148,355 768 1,000 335,243
---------------------------- --------- ------------- ----------------- ----------- ------------------ --------
Goodwill and brands and distribution rights are subject to an
impairment review at least annually.
Recent acquisitions
On 29 December 2020 the Group completed the acquisition of 100%
of the share capital of Biogix Inc, a privately held, US-based
consumer healthcare company. The acquisition brings into the Group
a highly successful and fast-growing brand, Amberen, with
significant near-term growth potential. As part of this acquisition
an intangible brand asset with fair value of $121.0m (GBP90.0m) for
the product Amberen, and goodwill of $20.8m (GBP15.4m) have been
recognised (note 19).
Key judgement - useful economic lives
As a result of the 2020 strategic review, the Group has
segregated its portfolio of assets into two areas; Consumer
Healthcare brands and Prescription Medicines. Following this
determination, the Directors considered the continuing
appropriateness of indefinite useful lives which have previously
been adopted across the intangible brand asset portfolio. This in
the context of the focus on growing Consumer Healthcare brands,
their increasing dominance of the portfolio and the planned rollout
of Digital Excellence programmes. Prescription Medicines have been
considered in the context of more limited requirement for
promotional investment, and potential exposure to other market
factors detailed further below.
For the majority of Consumer Healthcare brand assets, indefinite
useful lives have been judged to remain appropriate. This due to
the expected long-term growth profile of the Consumer Healthcare
business and the enduring nature of the brands, which are supported
by continuing marketing spend.
For Prescription Medicine brand assets, finite useful lives of
up to 20 years have been adopted prospectively from 1 January 2020.
The determination of this lifespan takes into account all relevant
factors for each individual asset, including typical pharmaceutical
asset life cycles and the potential development of alternative
treatments over time.
Certain brands were acquired with patent protection, which lasts
for a finite period of time. It is the opinion of the Directors
that these patents do not provide any incremental value to the
value of the brand and therefore no separate value has been placed
on these patents. This assessment is based on a view of future
profitability after patent expiry and past experience with similar
brands.
It is the opinion of the Directors that the indefinite life
assets meet the criteria set out in IAS 38. This assessment is made
on an asset-by-asset basis taking into account:
-- how long the brand has been established in the market and
subsequent resilience to economic and social changes;
-- stability of the industry in which the brand is used;
-- potential obsolescence or erosion of sales;
-- barriers to entry;
-- whether sufficient marketing promotional resourcing is available; and
-- dependency on other assets with defined useful economic lives.
The Prescription Medicine brand assets have a weighted average
remaining life of 19 years at 31 December 2020.
An increase in the finite useful lives adopted of 2 years would
have reduced the annual amortisation charge by GBP0.6m. A reduction
of 2 years would have increased the annual amortisation charge by
GBP0.8m.
The net book value of intangible assets and goodwill which are
considered to have indefinite useful lives are allocated to CGUs in
the following table. Goodwill relating to the acquisition of
certain assets and businesses from Sinclair IS Pharma plc is
allocated to the group of related Consumer Healthcare and
Prescription Medicine product CGUs. Other Goodwill amounts are
allocated to the product CGU with which they were originally
acquired. Intangible assets that are considered to have indefinite
lives all relate to the Consumer healthcare segment, except for
Sinclair Prescription Medicine Goodwill.
31 December 2020
----------------------------------
Consumer
healthcare
brands and
distribution
Goodwill rights Total
GBP000s GBP000s GBP000s
------------------------------------------ --------- ------------- --------
Amberen 15,140 88,321 103,461
Nizoral - 60,307 60,307
Vamousse - 11,596 11,596
MacuShield - 8,740 8,740
Anbesol & Ashton and Parsons - 2,550 2,550
Nutraceutical products - 1,715 1,715
Quinoderm - 1,500 1,500
Products acquired from Sinclair
------------------------------------------ --------- ------------- --------
Kelo-cote (non EU, excluding US) - 40,245 40,245
Kelo-cote (EU) - 17,800 17,800
Aloclair - 14,000 14,000
Atopiclair - 2,300 2,300
Goodwill - Sinclair Prescription Medicine 1,105 - 1,105
Goodwill - Sinclair Consumer 10,819 - 10,819
------------------------------------------ --------- ------------- --------
27,064 249,074 276,138
------------------------------------------ --------- ------------- --------
The difference in Amberen values in the table compared to note
19 are the result of foreign exchange retranslation of these US
Dollar denominated assets.
Impairment
All intangible assets are stated at the lower of cost less
accumulated amortisation and impairment or the recoverable
amount.
Assets are tested for impairment at least annually, or more
frequently if there are indicators that amounts might be impaired.
These assets are tested at CGU level (or at group of CGUs level in
the case of goodwill relating to the acquisition of certain assets
and businesses) as the Directors believe these CGUs generate
largely independent cash inflows.
The impairment test involves determining the recoverable amount
of the relevant cash-generating unit, which corresponds to the
higher of the fair value less costs to sell or its value in
use.
The value in use calculation uses cash flow projections based on
financial forecasts for up to the next five years extrapolated to
perpetuity. Financial forecasts for the following year are based on
the approved annual budget. Financial forecasts for years two to
five are based on the approved long-range plan. Margins are based
on past experience and cost estimates.
The Group conducted impairment reviews for all intangible assets
as part of its interim reporting to 30 June 2020. These reviews,
together with the change in useful life assumption for Prescription
Medicine assets, resulted in impairment losses as the carrying
value of certain cash generating units exceeded estimated
recoverable amounts. Recoverable amounts are the greater of value
in use and fair value less costs to sell over the assets' useful
lives.
The key assets impacted were:
-- Haemopressin and Optiflo intangible asset impaired by GBP5.3m
(GBP0.7m due to market factors and GBP4.6m due to the change in
accounting estimate).
-- Nu-seals intangible asset impaired by GBP3.6m (GBP2.9m due to
market factors and GBP0.7m due to the change in accounting
estimate).
-- Other intangible assets were impaired by GBP2.1m (GBP1.8m due
to market factors and GBP0.3m due to the change in accounting
estimate).
-- Goodwill was impaired by GBP1.1m (GBP1.1m due to market factors).
The impairments due to market factors were a result of changes
in the long-term sales, cost and margin expectations in the Group's
latest financial forecast.
The Group has completed an additional impairment review at 31
December 2020 for all intangible assets. No further impairments
were identified in this review.
Key source of estimation uncertainty - value in use
assumptions
For the year end impairment review, key assumptions on which
cash flow projections depend are as follows (including our
assessment of the estimation uncertainty arising):
Discount rates
-- Methodology: Cash flows are discounted at an appropriate
rate, based on the Group's post-tax Weighted Average Cost of
Capital (WACC) adjusted where appropriate for country specific
risks, of between 6.7%-11.0%, or pre-tax 8.4%-13.8% (2019:
7.7%-12.0%, or pre-tax 9.6%-15.0%). The Group's WACC has reduced in
the year due to updates in assumptions for the risk-free rate, the
small stock premium and the equity beta. The risk-free rate has
reduced due to changes in government bond yields, the small stock
premium has reduced to recognise the Group's growth in market
capitalisation and the equity beta has reduced based on sector
market data. These factors were partially offset by the inclusion
of a risk premium to recognise the impact of Covid-19.
-- Estimation uncertainty: The assumptions included in the
compilation of the CGU specific discount rates are designed to
approximate the discount rate that a potential market participant
would adopt. Given the nature of the Group's business model, the
discount rate necessarily includes estimation uncertainty.
Forecast cash-flows
-- Methodology: Approved budgets and forecasts for up to five
years, based on management's best estimate of cash flows by
individual CGU. These forecasts are then uplifted to perpetuity
using growth rates between -3.0% to 2.0% (2019: -2.8% to 2.0%)
based on the Group's long-term projections.
-- Estimation uncertainty: The growth rates assumed in the
Group's budgets and forecasts inherently include estimation
uncertainty relating to the achievement of commercial initiatives
and external factors such as competition.
Sensitivity Analysis
The Group has conducted sensitivity analysis on the impairment
tests. The valuations generally indicate sufficient headroom, and
the Group does not consider that any reasonably possible change in
key assumptions could result in an impairment for the majority of
intangible assets.
Management have identified that for certain CGUs with lower
headroom, that a reasonably possible change in the two key
assumptions could cause the carrying amount to exceed the
recoverable amount. These assumptions are detailed as follows.
The cash flow projections included specific estimates for five
years and a terminal growth rate thereafter. The terminal growth
rates are determined based on management's estimate of the
long-term prospects for each product.
Value in use Individual assumptions
calculation required for
assumptions the estimated
recoverable
amount to equal
to the carrying
value
------------------- ------------------------
Estimated Remaining Pre-tax Terminal Pre-tax Terminal
recoverable UEL years discount margin discount margin
Carrying amount rate % growth rate % growth
amount GBP000s rate rate
GBP000s % %
---------------------- -------- ------------ ---------- --------- -------- ------------ ----------
Haemopressin, Optiflo
& Others 18,711 18,946 19 9.0 0.7 9.3 0.2
Nu-Seals 5,222 5,458 19 8.8 (2.0) 9.5 (3.5)
---------------------- -------- ------------ ---------- --------- -------- ------------ ----------
The following table shows the potential impact of reasonably
possible changes to individual assumptions on the estimated
recoverable amount of the CGUs.
Decrease in
CGU recoverable
amount GBP000s
---------------------------
2.0% increase 2% reduction
in pre-tax in terminal
discount margin
rate growth
rate
---------------------- ------------- ------------
Haemopressin, Optiflo
& Others (2,091) (1,151)
Nu-Seals (583) (350)
------------------------------ ------------- ------------
10. Inventories
31 December 31 December
2020 2019
GBP000s GBP000s
----------------------------- ----------- -----------
Finished goods and materials 25,916 19,089
Inventory provision (2,999) (3,571)
----------------------------- ----------- -----------
22,917 15,518
Inventory costs expensed through the income statement during the
year were GBP39,636,000 (2019: GBP42,631,000). During the year
GBP1,284,000 (2019: GBP2,673,000) was recognised as an expense
relating to the write-down of inventories to net realisable value.
The prior year expense included GBP1,152,000 related to the return
of Xonvea licensing rights.
11. Trade and other receivables
31 December 31 December
2020 2019
GBP000s GBP000s
------------------ ----------- -----------
Trade receivables 19,834 23,987
Other receivables 1,544 2,522
Prepayments 898 703
Accrued income 2,838 3,780
------------------ ----------- -----------
25,114 30,992
------------------ ----------- -----------
Accrued income represents amounts owed unconditionally to the
Group which have not been invoiced at the year end. For these
assets, only the passage of time is required before payment becomes
due.
The ageing of trade receivables at 31 December is detailed
below:
31 December 31 December
Trade and receivables, net estimated allowances 2020 2019
for expected credit losses GBP000s GBP000s
------------------------------------------------ ----------- -----------
Not past due - Accrued income 2,838 3,780
Not past due 15,764 19,640
1-30 days past due 2,550 3,253
31-60 days past due 1,520 278
61-90 days past due - 320
Past 91 days - 496
------------------------------------------------ ----------- -----------
22,672 27,767
------------------------------------------------ ----------- -----------
31 December 31 December
Trade and receivables, gross of estimated allowances 2020 2019
for expected credit losses GBP000s GBP000s
----------------------------------------------------- ----------- -----------
Not past due - Accrued income 2,838 3,780
Not past due 15,764 19,640
1-30 days past due 2,550 3,253
31-60 days past due 1,606 278
61-90 days past due 31 320
Past 91 days 524 1,495
----------------------------------------------------- ----------- -----------
23,313 28,766
----------------------------------------------------- ----------- -----------
As at 31 December 2020, trade and other receivables of
GBP641,000 (2019: GBP999,000) were past due and impaired.
To manage credit risk customers are required to pay in
accordance with agreed terms. Our settlement terms are generally
due within 30 or 60 days from the end of the month of sale.
12. Trade and other payables
31 December 31 December
2020 2019
GBP000s GBP000s
-------------------------------------- ----------- -----------
Trade payables 11,275 6,970
Other taxes and social security costs 2,440 3,247
Accruals 13,639 10,114
Other payables 418 459
Lease liabilities 964 1,025
-------------------------------------- ----------- -----------
28,736 21,815
-------------------------------------- ----------- -----------
13. Loans and borrowings
The Group has a GBP165m fully Revolving Credit Facility ('RCF'),
together with a GBP50m accordion facility, with a syndicate of
lenders. This facility is available until July 2024, following
utilisation of a one-year extension option from July 2023 in the
year. The bank facility is secured by a fixed and floating charge
over the Company's and Group's assets registered with Companies
House.
31 December 31 December
2020 2019
Non-current GBP000s GBP000s
-------------------- ----------- -----------
Bank loans:
Secured 139,920 78,848
Finance issue costs (1,592) (1,808)
-------------------- ----------- -----------
138,328 77,040
-------------------- ----------- -----------
31 December 31 December
2020 2019
Movement in loans and borrowings GBP000s GBP000s
----------------------------------------- ----------- -----------
At 1 January 77,040 96,702
Net receipts/(payments) from borrowing 61,054 (17,479)
Additional prepaid arrangement fees (362) (1,401)
Amortisation of prepaid arrangement fees 578 491
Exchange movements * 18 (1,273)
----------------------------------------- ----------- -----------
At 31 December 138,328 77,040
----------------------------------------- ----------- -----------
* Exchange movements on loans and borrowings are reported in
other comprehensive income and accumulated in the translation
reserve.
14. Other non-current liabilities
31 December 31 December
2020 2019
GBP000s GBP000s
------------------------------ ----------- -----------
Lease liabilities 2,731 1,997
Other non-current liabilities 469 404
------------------------------ ----------- -----------
3,200 2,401
------------------------------ ----------- -----------
15. Deferred tax
31 December 31 December
2020 2019
GBP000s GBP000s
-------------------------------------------------- ----------- -----------
Accelerated capital allowances on tangible assets (917) (468)
Temporary differences: trading 492 234
Temporary differences: non-trading 623 662
Accelerated allowances on intangible assets (9,839) (10,081)
Initial recognition of intangible assets from
business combination (45,369) (19,161)
Share based payments 1,024 806
Interest rate hedge - 8
Foreign exchange forward contracts (56) (100)
-------------------------------------------------- ----------- -----------
(54,042) (28,100)
Recognised as:
-------------------------------------------------- ----------- -----------
Deferred tax asset 2,139 1,710
-------------------------------------------------- ----------- -----------
Deferred tax liability (56,181) (29,810)
-------------------------------------------------- ----------- -----------
Reconciliation of deferred tax movements:
Recognised Recognised
in other Recognised in the
1 January comprehensive directly Recognised income 31 December
2020 income in equity on acquisition statement 2020
GBP000s GBP000s GBP'000s GBP000s GBP000s GBP000s
--------------------------- ---------- -------------- ------------ --------------- ---------- -----------
Non-current assets
Intangible assets (29,242) - - (25,491) (475) (55,208)
Property, plant and
equipment (468) - (42) - (407) (917)
Non-current liabilities
Derivative financial
instruments (92) 36 - - - (56)
Other non-current
liabilities 662 (39) - - - 623
Equity
Share option reserve 806 - 96 - 122 1,024
Temporary differences
Trading 234 - 221 - 37 492
--------------------------- ---------- -------------- ------------ --------------- ---------- -----------
(28,100) (3) 275 (25,491) (723) (54,042)
--------------------------- ---------- -------------- ------------ --------------- ---------- -----------
Recognised as:
Deferred tax asset 1,710 2,139
--------------------------- ---------- -------------- ------------ --------------- ---------- -----------
Deferred tax liability (29,810) (56,181)
--------------------------- ---------- -------------- ------------ --------------- ---------- -----------
Recognised Recognised Recognised
1 January in other comprehensive directly in the income 31 December
2019 income in equity statement 2019
GBP000s GBP000s GBP'000s GBP000s GBP000s
--------------------------- ---------- ----------------------- ------------ -------------- -----------
Non-current assets
Intangible assets (28,491) - 606 (1,357) (29,242)
Property, plant and
equipment (172) - - (296) (468)
Non-current liabilities
Derivative financial
instruments 1 (93) - - (92)
Other non-current
liabilities 715 (53) - - 662
Equity
Share option reserve 735 - 179 (108) 806
Temporary differences
Trading 108 - - 126 234
Losses 286 - - (286) -
--------------------------- ---------- ----------------------- ------------ -------------- -----------
(26,818) (146) 785 (1,921) (28,100)
--------------------------- ---------- ----------------------- ------------ -------------- -----------
Recognised as:
Deferred tax asset 1,845 1,710
--------------------------- ---------- ----------------------- ------------ -------------- -----------
Deferred tax liability (28,663) (29,810)
--------------------------- ---------- ----------------------- ------------ -------------- -----------
The Group has no unrecognised deferred tax assets (2019:
GBPnil).
16. Share capital
Allotted, called up
and fully paid
-------------------------------------------------
No. of shares GBP000s
------------------------------------------------- ------------- -------
At 1 January 2019 - ordinary shares of 1p each 518,214,226 5,182
------------------------------------------------- ------------- -------
Issued during the year 11,188,393 112
------------------------------------------------- ------------- -------
At 31 December 2019 - ordinary shares of 1p each 529,402,619 5,294
------------------------------------------------- ------------- -------
Issued during the year 3,516,492 35
------------------------------------------------- ------------- -------
At 31 December 2020 - ordinary shares of 1p each 532,919,111 5,329
------------------------------------------------- ------------- -------
Between 1 January 2020 and 31 December 2020 3,516,492 shares
were issued on the exercise of employee share options (2019:
11,188,393).
The holders of Ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Managing Capital
Our objective in managing the business's capital structure is to
ensure that the Group has the financial capacity, liquidity and
flexibility to support the existing business and to fund
acquisition opportunities as they arise.
The capital structure of the Group consists of net bank debt and
shareholders' equity. At 31 December 2020, net debt was GBP109.4m
(2019: GBP59.2m), whilst shareholders' equity was GBP281.0m (2019:
GBP274.2m).
The business is profitable and cash generative. The main
financial covenant applying to bank debt are that leverage (the
ratio of net bank debt to EBITDA) should not exceed 3.0 times. The
Group complied with this covenant in 2020 and 2019.
Smaller acquisitions are typically financed using bank debt,
while larger acquisitions typically involve a combination of bank
debt and additional equity. The mixture of debt and equity is
varied, taking into account the desire to maximise the shareholder
returns while keeping leverage at comfortable levels.
17. Cash generated from operations
Year
ended Year ended
31 December 31 December
2020 2019
GBP000s GBP000s
---------------------------------------------- ------------- ------------
Profit for the year 8,027 25,010
Taxation 4,989 6,066
Interest payable and similar charges 2,657 3,777
Interest income (10) (23)
Foreign exchange loss 644 799
Return of Xonvea licensing Rights - 1,672
Loss on disposal of intangibles 308 145
Depreciation of property, plant and equipment 1,753 1,496
Amortisation and impairment of intangibles 19,212 463
Change in inventories (5,206) 2,036
Change in trade and other receivables 6,728 (498)
Change in trade and other payables 5,929 (3,801)
Share based employee remuneration 1,374 1,816
Cash generated from operations 46,405 38,958
---------------------------------------------- ------------- ------------
18. Contingent liabilities
Contingent liabilities are possible obligations that are not
probable. The Group operates in a highly regulated sector and in
markets and geographies around the world each with differing
requirements. As a result, and in the normal course of business,
the Group can be subject to a number of regulatory
inspections/investigations on an ongoing basis. It is therefore
possible that the Group may incur penalties for noncompliance. In
addition, a number of the Group's brands and products are subject
to pricing and other forms of legal or regulatory restrictions from
both governmental/regulatory bodies and also from third parties.
Assessments as to whether or not to recognise a provision in
respect of these matters are judgemental as the matters are often
complex and rely on estimates and assumptions as to future
events.
On 23 May 2019 the UK's Competition and Markets Authority
('CMA') issued a Statement of Objection alleging anti-competitive
agreements against 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 GBP1.9m and sales of GBP0.3m in 2020.
The Group confirms that it has had no involvement in the pricing
or distribution of prochlorperazine since 2013, when it was
out-licensed by the Group. Prior to 2013, prochlorperazine was
marketed directly by the Group.
The Group has reviewed the CMA Statement of Objection in detail
and is working with the CMA to resolve its alleged objections.
The Group's assessment as at the date of this report, based on
currently available information, is that there are no matters for
which a provision is required (31 December 2019: GBPnil). However,
given the inherent uncertainties involved in assessing the outcomes
of such matters there can be no assurance regarding the outcome of
any ongoing inspections/investigations and the position could
change over time as a result of the factors referred to above.
19. Acquisition of Biogix Inc
On 29 December 2020 the Group completed the acquisition of 100%
of the share capital of Biogix Inc, a privately held, US-based
consumer healthcare company. The acquisition brings into the Group
a highly successful and fast-growing brand, Amberen, with
significant near-term growth potential.
The total amount paid in relation to the acquisition was
$111.6m, being $110.0m consideration paid in cash on completion,
$0.7m estimated working capital adjustment paid in cash on
completion and $0.9m foreign exchange option cash premium paid in
December 2020.
The acquisition was funded by drawdown of $22.0m and GBP66.1m
from the Group's existing GBP165 million Revolving Credit Facility
shortly before completion in December 2020. The Sterling drawdown
was subsequently sold in a foreign exchange transaction to buy US
Dollars for use in settlement of cash payments on completion. A
portion of funding was drawn in Sterling so that, after taking
account of existing borrowings, the Group's overall loan position
by currency, matches expected post-hedging cash generated by
currency.
The provisional fair values of the assets acquired, as at 29
December 2020, are as follows:
Fair value Fair value
Book value Fair value of assets of assets
of assets and adjustments and liabilities and liabilities
liabilities $000 acquired acquired
acquired $000s $000s GBP000s
------------------------------ --------------- ------------- ---------------- ----------------
Intangible fixed assets 37 121,000 121,037 89,990
Deferred tax asset 223 - 223 166
Property, plant and equipment 419 - 419 312
Current assets (excluding
cash and cash equivalents) 5,824 - 5,824 4,330
Cash and cash equivalents 382 - 382 284
Current liabilities (1,587) - (1,587) (1,180)
Lease liabilities (378) - (378) (281)
------------------------------ --------------- ------------- ---------------- ----------------
Net assets 4,920 121,000 125,920 93,621
Deferred tax liability (35,101) (26,097)
Goodwill 20,750 15,427
------------------------------ --------------- ------------- ---------------- ----------------
Fair value of net assets
acquired 111,569 82,951
------------------------------ --------------- ------------- ---------------- ----------------
Cash consideration 110,000 81,784
Working capital adjustment
paid in cash 660 491
Option premium paid in cash 909 676
Total consideration 111,569 82,951
------------------------------ --------------- ------------- ---------------- ----------------
The fair values set out above are provisional figures which will
be confirmed in the 2021 financial statements, following additional
review of judgemental areas including intangible asset allocation
and finalisation of completion accounts.
The fair value of the intangible asset recognised on business
combination all relates to Amberen. A single brand intangible asset
was identified for valuation through completion of a formal
purchase price allocation exercise. This as brand recognition and
positioning were the key drivers for the acquisition and are
regarded as the main barrier to market entry. No other intangible
assets were considered to have separately identifiable value.
The brand was valued using a multi-period excess earnings
approach, utilising the Group's long term cashflow forecast and a
post-tax discount rate of 10.75%.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
Legal and professional fees incurred in the acquisition of
GBP1.3m were recognised as non-underlying costs within
administration and marketing expenses (note 4).
The amounts included in the consolidated statement of
comprehensive income since 29 December 2020 included no revenue or
gross profit. Had the transaction occurred on the first day of the
financial year, then estimated contribution to Group revenues would
have been $25.8m (GBP20.0m) and gross profit of $20.2m
(GBP15.6m).
20. 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:
Reconciliation
to GAAP
Measure Definition measure
Underlying Earnings before interest, tax and non-underlying Note A below
EBIT and EBITDA items (EBIT), 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 Note B below
from operations less cash payments made for
interest payable and similar charges, capital
expenditure and tax.
----------------------------------------------------- --------------
Net debt Net debt is defined as the group's gross Note C below
bank debt position net of finance issue costs
and cash.
----------------------------------------------------- --------------
Underlying effective Underlying effective tax rate is calculated Note D below
tax rate by dividing total taxation for the year less
impact of tax rate changes and non-underlying
charges, by the underlying profit before
tax for the year.
----------------------------------------------------- --------------
See-through Under the terms of the transitional services Note E below
income statement agreement with J&J, 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 from J&J 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 currency See-through revenue stated so that the portion Note F below
basis revenue denominated in non-sterling currencies is
retranslated using foreign exchange rates
from the previous financial year.
----------------------------------------------------- --------------
A. Underlying EBIT and EBITDA
Year Ended Year Ended
31 December 31 December
2020 2019
Reconciliation of Underlying EBIT and EBITDA GBP000s GBP000s
--------------------------------------------- ------------ ------------
Profit before tax 13,016 31,076
Non-underlying items (note 4) 20,512 1,817
Finance costs (note 5) 3,300 4,553
--------------------------------------------- ------------ ------------
Underlying EBIT 36,828 37,446
--------------------------------------------- ------------ ------------
Depreciation 1,753 1,496
Underlying impairment (note 9) - 284
Underlying Amortisation (note 9) - 179
--------------------------------------------- ------------ ------------
Underlying EBITDA 38,581 39,405
--------------------------------------------- ------------ ------------
B. Free cash flow
Year Ended Year Ended
31 December 31 December
2020 2019
Reconciliation of free cash flow GBP000s GBP000s
----------------------------------------- ------------ ------------
Cash generated from operations (note 17) 46,405 38,958
Interest payable and similar charges (2,866) (2,505)
Capital expenditure (4,612) (4,145)
Tax paid (4,838) (3,200)
----------------------------------------- ------------ ------------
Free cash flow 34,089 29,108
----------------------------------------- ------------ ------------
C. Net debt
31 December 31 December
2020 2019
Reconciliation of net debt Note GBP000s GBP000s
----------------------------------- ---- ----------- -----------
Loans and borrowings - non-current 13 (138,328) (77,040)
Cash and cash equivalents 28,898 17,830
----------------------------------- ---- ----------- -----------
Net debt (109,430) (59,210)
----------------------------------- ---- ----------- -----------
D. Underlying effective tax rate
Year Ended Year Ended
31 December 31 December
Reconciliation of adjusted underlying effective 2020 2019
tax rate GBP000s GBP000s
------------------------------------------------- ------------ ------------
Total taxation charge for the year (4,989) (6,066)
Non-underlying tax credit (1,383) (348)
------------------------------------------------- ------------ ------------
Adjusted underlying taxation charge for the year (6,372) (6,414)
------------------------------------------------- ------------ ------------
Underlying profit before tax for the year 33,528 32,893
------------------------------------------------- ------------ ------------
Adjusted underlying effective tax rate 19.0% 19.5%
------------------------------------------------- ------------ ------------
E. See-through income statement
2020 statutory See-through 2020 see-through
values adjustment values
GBP000s GBP000s GBP000s
------------------------------------- -------------- ----------- ----------------
Revenue - Consumer healthcare brands 85,340 7,719 93,059
Revenue - Prescription Medicines 44,461 - 44,461
Total Revenue 129,801 7,719 137,520
Cost of sales (46,985) (7,719) (54,704)
------------------------------------- -------------- ----------- ----------------
Gross profit 82,816 - 82,816
------------------------------------- -------------- ----------- ----------------
Gross profit margin 63.8% 60.2%
------------------------------------- -------------- ----------- ----------------
2019 statutory See-through 2019 see-through
values adjustment values
GBP000s GBP000s GBP000s
------------------------------------- -------------- ----------- ----------------
Revenue - Consumer healthcare brands 83,738 8,641 92,379
Revenue - Prescription Medicines 51,899 - 51,899
Total Revenue 135,637 8,641 144,278
Cost of sales (49,561) (8,641) (58,202)
------------------------------------- -------------- ----------- ----------------
Gross profit 86,076 - 86,076
------------------------------------- -------------- ----------- ----------------
Gross profit margin 63.5% 59.7%
------------------------------------- -------------- ----------- ----------------
There is no impact from the see-through adjustment on income
statement lines below gross profit.
F. Constant currency revenue
2020
Foreign constant
exchange currency
2020 impact revenue
GBP000s GBP000s GBP000s
----------------------------- -------- --------- ---------
See-through revenue (Note E) 137,520 (329) 137,191
----------------------------- -------- --------- ---------
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FR DKBBQDBKBQNB
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