TIDMCLIN
RNS Number : 0329S
Clinigen Group plc
28 September 2017
28 September 2017
STRONG PERFORMANCE WITH ADJUSTED EPS UP 25%
Clinigen Group plc (AIM: CLIN, 'Clinigen' or 'the Group'), the
global pharmaceuticals and services group, has today published its
full year results for the year ended 30 June 2017.
FINANCIAL SUMMARY
Year ended 30 June 2017 2016 Growth
GBPm GBPm
-------------------------------- ------ ------ --------
Revenue 302.3 339.9 (11)%
-------------------------------- ------ ------ --------
Adjusted gross profit 122.8 100.7 22%
-------------------------------- ------ ------ --------
Adjusted EBITDA 65.1 53.7 21%
-------------------------------- ------ ------ --------
Cash generated from operations 54.7 49.4 11%
-------------------------------- ------ ------ --------
Reported earnings per
share 3.3p 11.9p (72)%
-------------------------------- ------ ------ --------
Adjusted earnings per
share 41.8p 33.4p 25%
-------------------------------- ------ ------ --------
Dividend per share 5.0p 4.0p 25%
-------------------------------- ------ ------ --------
Net debt 35.0 68.1
-------------------------------- ------ ------ --------
Note: The Group results on an adjusted basis exclude
amortisation and non-underlying costs (see note 2 and 3 of this
financial information). Adjusted EBITDA is also adjusted to include
the Group's share of EBITDA from its joint venture. Adjusted EBITDA
and adjusted EPS metrics are now shown after share-based payments
of GBP2.5m (2016: GBP2.3m). Prior year has been restated
accordingly.
HIGHLIGHTS
-- Adjusted gross profit up 22% - driven by organic growth, full
year's contribution from Link Healthcare ('Link') and currency
benefits
-- Adjusted EPS up 25% to 41.8p (2016: 33.4p)
-- Strong cash flow performance with cash generated from
operations of GBP54.7m (2016: GBP49.4m)
-- Net debt substantially decreased by GBP33.1m to GBP35.0m
(2016: GBP68.1m)
-- Full year dividend increased 25% to 5.0p (2016: 4.0p)
-- Strong growth across all operations
-- Outstanding performance in Africa and Asia Pacific
-- Dexrazoxane portfolio revitalisation significantly enhanced
by EC approval to update product information for Cardioxane, and
launch of Totect in US
-- New simplified reporting structure comprising Clinical Trial
Services ('CTS'), Unlicensed Medicines and Commercial Medicines
POST PERIOD
-- Proposed acquisition of Quantum Pharma plc ('Quantum') for
GBP150.3m announced on 13 September 2017 subject to Quantum's
shareholder approval
Shaun Chilton, Group Chief Executive Officer, said:
"All of our business operations have performed strongly over the
year resulting in a 25% increase in adjusted EPS and a 25% increase
in dividend.
"We have continued to make significant progress in our strategy
to build scale and capability in high growth geographies in the
Africa and Asia Pacific region.
"Our strategic priorities remain unchanged - we continue to
drive organic growth across all parts of the Group and search for
selective acquisitions to complement our existing offering and
capabilities.
"In line with this strategy, our recently announced proposed
acquisition of Quantum would extend our Unlicensed Medicines
capability, accelerate Clinigen's unlicensed to licensed global
strategy and enable Clinigen to internationalise Quantum's existing
portfolio of commercial products.
"The Group is well positioned to deliver another good year of
progress and longer term the Board believes we are in an excellent
position to capitalise on the substantial opportunity in our
markets."
*Adjusted results exclude amortisation and non-underlying costs.
Adjusted EBITDA includes the 50% share of the EBITDA from the joint
venture in South Africa. Adjusted results are now shown after
share-based payments and the prior year has been restated
accordingly.
A video of the CEO and CFO describing today's results can be
seen here:
http://www.clinigengroup.com/results-reports-presentations
An analyst briefing will be held at 9:30am on Thursday, 28
September 2017 at the offices of Instinctif Partners, 65 Gresham
Street, London EC2V 7NQ.
An audio replay file will be made available shortly afterwards
via the Group's website: www.clinigengroup.com.
Contact details
Clinigen Group plc Tel: +44 (0) 1283 495010
Shaun Chilton, Group Chief
Executive Officer
Martin Abell, Group Chief Financial
Officer
Matt Parrish, Head of Investor
Relations
Numis Securities Limited Tel: +44 (0) 20 7260 1000
Michael Meade / Freddie Barnfield
(Nominated Adviser)
James Black / Tom Ballard (Corporate
Broking)
RBC Capital Markets - Joint Tel: +44 (0) 20
Broker 7653 4000
Marcus Jackson / Elliot Thomas
/ Jack Wood
Instinctif Partners Tel: +44 (0) 20
7457 2020
Adrian Duffield / Melanie Toyne-Sewell
/ Alex Shaw Email: clinigen@instinctif.com
Notes to readers
Following the completion of the Link earn-out and subsequent
closer integration of Link into the Group, the performance of the
business is now reported as three synergistic operations; Clinical
Trial Services, Unlicensed Medicines and Commercial Medicines. This
structure reflects how the Group operates in practice and will
allow the Group to develop further its complementary portfolio of
businesses worldwide, enhance its ability in providing access to
medicines and capitalise on its market-leading positions and
expanded geographical footprint.
The Unlicensed Medicines operation encompasses Managed Access,
Global Access and the unlicensed business within Link. Commercial
Medicines encompasses the Specialty Pharmaceuticals portfolio and
the commercial business of the Link division. Note 2 of the
condensed financial information reports the Group results for the
five segments structure as operated throughout the year and also
the new three segment structure.
About Clinigen Group
Clinigen Group plc (AIM: CLIN) is a global pharmaceutical and
services company with a unique combination of businesses focused on
providing access to medicines. Its mission is to deliver the right
medicine to the right patient at the right time through three areas
of global medicine supply; clinical trial, unlicensed and licensed
medicines.
Clinical Trial Services
Clinigen is the global market leader in the specialist supply
and management of quality-assured comparator medicines and services
to clinical trials and Investigator Initiated Trials.
Unlicensed Medicines
Clinigen is the global leader in ethically sourcing and
supplying unlicensed medicines to hospital pharmacists and
physicians for patients with a high unmet medical need. The Group
manages early access programmes to innovative new medicines and
provides 'on-demand' access globally to medicines which remain
unlicensed at the point of care.
Commercial Medicines
The Group acquires global rights to niche hospital-only and
critical care products, revitalising these assets around the world
and returning them back to sustained growth. The Group also
provides access to licensed and branded generic medicines in the
Africa and Asia Pacific region.
For more information on Clinigen, please visit
www.clinigengroup.com
Cautionary statement
This announcement contains certain projections and other
forward-looking statements with respect to the financial condition,
results of operations, businesses and prospects of Clinigen Group
plc. These statements are based on current expectations and involve
risk and uncertainty because they relate to events and depend upon
circumstances that may or may not occur in the future. There are a
number of factors which could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. Any of the assumptions underlying these
forward-looking statements could prove inaccurate or incorrect and
therefore any results contemplated in the forward-looking
statements may not actually be achieved. Recipients are cautioned
not to place undue reliance on any forward-looking statements
contained herein. Except as required by law, Clinigen undertakes no
obligation to update or revise (publicly or otherwise) any
forward-looking statement, whether as a result of new information,
future events or other circumstances.
The information contained in this statement has not been audited
and may be subject to further review.
OVERVIEW
The Group has delivered another excellent full year performance
with all parts of the business performing strongly.
As previously announced, following the completion of the Link
earn-out and subsequent closer integration of Link into the Group,
the performance of the business will be reported as three business
operations: CTS, Unlicensed Medicines, and Commercial
Medicines.
This structure reflects how the Group now operates in practice
and will allow the Group to better capitalise on its market leading
positions and expanded geographical footprint.
Financial results
Revenue increased 6%, excluding the effect of the change in mix
in Managed Access towards programmes where the product is provided
by the pharmaceutical client free of charge and the termination of
a large Global Access low margin commercial contract, which was
inherited with the Idis acquisition. This revenue growth is lower
than the growth in gross profit primarily due to the change in mix
in CTS towards higher margin products and activity. Reported
revenue was GBP302.3m (2016: GBP339.9m).
Adjusted gross profit, viewed by the Board as the best measure
of top-line growth, increased 22%, driven by organic growth across
all operations, a full year's contribution from Link and currency
benefits following the depreciation of sterling.
Adjusted EBITDA increased by 21% to GBP65.1m (2016: GBP53.7m)
and adjusted EPS increased by 25% to 41.8p (2016: 33.4p). Reported
EPS was 3.3p (2016: 11.9p) after taking account of amortisation and
other non-underlying costs which included the revision to the
earlier estimate for the contingent consideration of the Link
acquisition, which is charged to the income statement.
Cash generated from operations was GBP54.7m (2016: GBP49.4m)
indicating another strong cash flow performance, underpinned by
good credit control and working capital management.
In view of the strong trading performance, the Directors are
proposing to increase the final dividend to 3.4p per share (2016:
2.7p), resulting in a 25% increase in the full year dividend to
5.0p per share (2016: 4.0p).
Strategic progress
Clinigen has a unique combination of businesses providing access
to medicines across clinical trials, unlicensed and licensed
medicines - the key stages of a pharmaceutical product's lifecycle.
It is able to offer access and supply solutions to both
pharmaceutical companies and Healthcare Professionals ('HCPs')
through a combination of a global reach and local knowledge.
Underlying the business remains the mission: 'Right Medicine,
Right Patient, Right Time'.
Clinical Trial Services
The strategy for CTS is to build the core business in supplying
quality-assured comparator medicines and develop further the added
value services for clinical trials and Investigator Initiated
Trials ('IITs').
The focus for the year has been on increasing client penetration
with those clients spending more than GBP1m per annum and providing
added value services, especially IITs, whose rising prominence
reflects the changing nature of generating data in support of
commercialising medicines. Progress has been positive and is
reported in more detail in the operational section.
Unlicensed Medicines (encompassing Managed Access, Global Access
and the unlicensed business within Link)
Clinigen's aim is to become the trusted global leader in the
ethical access to unlicensed medicines, both through the management
of innovative new medicines and through compliant access to
'on-demand' medicines.
During the year, the Group has continued its focus in adding
Managed Access Programmes ('MAPs') in early access, exclusive
supply agreements in 'on-demand' access, and increasing the demand
for its added value services.
Access to products and deeper relationships with customers
remain the major drivers of the business.
The long term opportunity for the Group is to leverage its
market leading position and capability to drive organic growth
across multiple geographies.
Commercial Medicines (encompassing Specialty Pharmaceuticals and
the commercial business within Link)
During the year, the Group has continued with the revitalisation
of its current product portfolio, has sought new products for
acquisition and has explored regional commercial opportunities in
the Africa and Asia Pacific region.
Major areas of focus for the global Specialty Pharmaceuticals
product portfolio have included the Foscavir bag line extension,
the launch of Totect in the US and the transfer of the US license
for Ethyol to Clinigen's strategic partner, Cumberland. Post period
end, in August the Group received approval by the European
Commission to modify the current product information for Cardioxane
originally applied during an Article 31 referral in 2011. This was
a major regulatory achievement for the Group, and is the first time
such a result has been achieved. It is a key milestone in the
revitalisation of Cardioxane and will drive sales in the medium
term.
As a result of the Link acquisition and its regional licensed
and commercial medicines capabilities, the Group is now being
presented with new collaboration opportunities. The agreements with
Eisai to provide access to Halaven(R) and Fycompa(R) in South
Africa demonstrate a continuation of a successful relationship with
Eisai, underlining how Clinigen is becoming the partner of choice
to top pharmaceutical companies in the supply and distribution of
their products.
Proposed acquisition of Quantum
On 13 September 2017, post period end, the Group announced the
proposed acquisition of Quantum valued at 82p per Quantum share
(37p in cash and 0.0405 new Clinigen shares) totaling GBP150.3m for
the entire diluted share capital. It is intended that the
acquisition will be effected by means of a court-sanctioned scheme
of arrangement which is subject to the agreement by Quantum
shareholders.
The acquisition provides the opportunity to strengthen
Clinigen's position as global leader in ethical access to
medicines.
Quantum's capabilities in unlicensed to licensed medicines
('UL2L') is complementary to Clinigen and would accelerate the
Group's UL2L global strategy. The acquisition would also allow
Quantum's portfolio of commercial products to be internationalised
through Clinigen's current infrastructure.
The acquisition would bring immediate financial benefits and
there is a sound cultural fit between the two businesses.
Current trading and FY18 priorities
Significant progress is being made against the Group's strategic
objectives. The priorities in the current year are to capitalise on
Clinigen's international market leading positions and geographical
footprint in order to drive organic growth across the Group, and to
overlay organic growth with selective bolt on acquisitions.
The Group is well positioned to deliver another good year of
progress. Longer term, the Board believes the Group is in an
excellent position to capitalise on the substantial opportunity in
its markets.
OPERATIONAL REVIEW
Adjusted gross profit by division
Year ended 30 June 2017 2016 Growth
GBPm GBPm
------------------------- ------ ------ -------
Clinical Trial Services 23.3 19.7 18%
------------------------- ------ ------ -------
Unlicensed Medicines 52.2 43.7 19%
------------------------- ------ ------ -------
Commercial Medicines 47.3 37.3 27%
------------------------- ------ ------ -------
122.8 100.7 22%
------------------------- ------ ------ -------
Clinical Trial Services
CTS is the global market leader in the specialist supply and
management of quality-assured comparator medicines and services to
clinical trials and IITs.
The division, representing 19% of adjusted Group gross profit,
has again delivered another excellent year of growth increasing
gross profit by 18%. CTS served 93 clients in the year, with the
top 10 clients representing 89% of gross profit. Six clients
generated more than GBP1m in gross profit, contributing 80% of the
division's gross profit.
The gross margin of 21% increased significantly versus prior
year (2016: 14%) due to the change in mix towards higher margin
products and activity.
Growth has come from deeper engagement with clients in the core
business, the winning of new clients among the world's largest 25
pharmaceutical companies and an increase in the number of IITs
supported.
IITs are independently sponsored studies which are developed and
executed by third-party investigators, operating externally to the
originators of the investigational product. There is an increasing
trend towards using these trials to support the more traditional
randomised clinical trials to commercialise medicines. CTS
supported 19 IITs in the period (2016: 13).
CTS is seeing that clients increasingly require a larger service
provider, which has a global reach and is capable of offering a
broader and more complex solution. Adding complementary added value
services, such as IITs, is a key part of the strategy to access an
attractive additional market. This widens service capability,
deepens the relationships with current clients and reinforces CTS'
market-leader status.
CTS has established a leading position in the market as a
trusted partner capable of delivering high quality service across
the world with an extensive understanding of the complex regulatory
environment. These strengths, combined with the strategy of
over-layering the core service offering with added value services,
position the operation to take advantage of the rapidly developing
market opportunity.
The priorities this year are to further develop the expanded
services, formalise the IIT service offering, increase client
penetration and extend into new markets.
Unlicensed Medicines
Clinigen is the global leader in ethically sourcing and
supplying unlicensed medicines to hospital pharmacists and
physicians for patients with a high unmet medical need. The Group
manages early access programmes to innovative new medicines and
provides 'on-demand' access globally to medicines which remain
unlicensed at the point of care.
The Unlicensed Medicines operation encompasses Managed Access,
Global Access and the unlicensed business within Link. It
represents 42% of adjusted Group gross profit and increased its
gross profit by 19%.
This operation works with 25 of the top 50 pharmaceutical and
biotech companies in the world, and with more than 7,000 hospital
pharmacists. During the year it shipped 956,000 units of drugs
across 109 countries.
In the early access space, the Group is the global market leader
in providing exclusive, ethical worldwide access to the most
promising innovative medicines on behalf of pharmaceutical and
biotech companies in disease areas where there is a high unmet
patient need. These disease areas are typically in oncology,
central nervous system, infectious disease, immunology and orphan
disease. These early access initiatives are called Managed Access
Programmes.
At the end of the year, there were 107 MAPs under management
(2016: 112), including those in the Africa and Asia Pacific region,
of which 87% of products shipped on behalf of the client were
provided free of charge to patients (2016: 85%). When the product
is 'charged for', the revenue is passed through the Group's
accounts. A shift in mix towards 'free of charge' products can have
a material impact on the revenue generated without affecting gross
profit. This is why the Group views gross profit as the best
measure of top-line growth.
Clinigen Consulting, part of the Unlicensed Medicines operation,
advises companies in evaluating and establishing best practice
early access policies and in the importance of leveraging Real
World Data ('RWD') to maximise impact and sustained value. These
added value services provide the Group with an additional
opportunity to enhance its market-leading position. During the
year, these added value services contributed 4% of the operation's
gross profit (2016: 3%).
The Unlicensed Medicines business also comprises the ethical
supply of 'on-demand' unlicensed or short supply medicines to
patients, via their physicians.
The sourcing and supply of unlicensed medicines is highly
complex and leads to a high unmet patient need. Clinigen benefits
from being a specialist global supplier with a deep understanding
of the complex regulatory environment and from having broad and
embedded relationships with both pharmaceutical companies and
pharmacists.
Progress was made against the operation's key objective of
increasing the number of 'on-demand' exclusive supply agreements
for certain high demand or niche medicines. During the year, the
number of these agreements increased to 31 (2016: 24), including
those in the Africa and Asia Pacific region, most notably were
those signed with Mitsubishi Tanabe, Shionogi and Romark.
Each of these agreements were different in nature and the
products ranged from innovative, to older, more established
medicines. This illustrates Clinigen's reach in providing access
across the product lifecycle and demonstrates its ability to
provide bespoke solutions to pharmaceutical companies.
The Africa and Asia Pacific region delivered strong organic
growth across all geographies whilst also benefiting from the
translation effects from the depreciation in sterling. As the Link
business is integrated further into the Clinigen infrastructure,
the Unlicensed Medicines operation will be able to leverage on the
global supply and distribution infrastructure.
The launch of the Japanese business in H1 2017 strengthened
Clinigen's presence in Asia by allowing the Group to supply and
distribute both commercial and unlicensed medicines. In addition,
the Group obtained a wholesale license in Hong Kong, allowing it to
expand its reach and control its distribution in this region.
The priorities this year in early access are to expand the added
value services and achieve better penetration of new and existing
clients. In 'on-demand' access, the aims are to capitalise on the
considerable long-term international opportunity by adding
exclusive supply agreements and strengthen the pipeline of new
products. Clinigen also intends to increase its profile further
with physicians, pharmacists and KOLs through targeted marketing
activity.
Commercial Medicines
Clinigen's Commercial Medicines operation acquires global rights
to niche hospital-only and critical care products and revitalises
them back to sustained growth. It also provides access to licensed
and branded generic medicines in the Africa and Asia Pacific
region.
Commercial Medicines, encompassing the Specialty Pharmaceuticals
portfolio and the commercial business of the Link division,
represents 39% of adjusted Group gross profit. The operation was
the biggest driver of Group profit following an excellent year of
progress, increasing gross profits by 27%.
Gross margin was 71.3% (2016: 76.3%). The decrease was due to
the change in mix towards the lower margin commercial activity in
the Africa and Asia Pacific region, as a result of a full year's
contribution from Link. The gross margin from the Specialty
Pharmaceutical products was broadly unchanged.
Clinigen owns five products undergoing revitalisation in two
therapy areas (oncology support and infectious disease).
Collectively, these products represent 75% of Commercial Medicines
gross profit (2016: 86%).
Foscavir is an anti-viral targeting human herpes viruses and is
used primarily in bone marrow transplant patients. Foscavir
achieved good growth in the year benefiting from a 6% increase of
in-market sales and currency benefits. Foscavir now represents 53%
of Commercial Medicines gross profit (2016: 55%). The Foscavir bag
line extension is progressing to plan, with sales expected to begin
in the second half of 2018.
The launch of the Japanese business has allowed the Group to
take back direct control of Foscavir in this country. Japan is the
third largest pharmaceutical market in the world and remains an
important market for Foscavir, with more than 2,000 patients
treated annually.
Ethyol is used to reduce the incidence of dry mouth in patients
undergoing high dose radiation treatment. Sales improved in the
second half, following the transfer in H1 of the US licence to
Cumberland, the Group's US strategic partner. Success of Ethyol in
the US market is an important part of its global revitalisation
strategy.
The Group's dexrazoxane portfolio comprises Cardioxane, Savene
and Totect. Cardioxane is used as a cardio protectant in oncology
(anthracycline) treatment. Savene and Totect are used as important
emergency treatments for extravasation (leakage) at the site of
injection of oncology (anthracycline) treatments. The dexrazoxane
portfolio performed as expected. Gross profit was lower than last
year due to the completion of a phase of a clinical trial where
Cardioxane was used as an adjuvant drug.
During the calendar year, a key milestone was achieved in the
revitalisation of Cardioxane. The product received approval from
the European Commission in August 2017 to modify its current
product information. This was originally applied during an Article
31 referral in 2011. This approval represents a major regulatory
achievement for the Group as physicians will now be able to
consider using Cardioxane where high dose anthracycline therapy is
planned in paediatric patients. The safety profile has also been
reassessed in the adult population and will result in updated
product information. The approval is expected to lead to an
increase in usage of Cardioxane in the medium term.
In January 2017, the Group announced an exclusive US agreement
with Cumberland to commercialise Totect, the second such agreement
under the strategic partnership. In September 2017, the Group
further announced the product launch. This is an important
milestone in the product's revitalisation strategy, and will enable
patients to access this vital FDA-approved emergency support
therapy.
In the Africa and Asia Pacific region, the Group has 175
specialist pharmaceutical and medical technology actively marketed
licensed products including both branded and generic products, and
supplies diagnostic kits, diabetes management and wound care
products. Collectively, products in this region represent 25% of
Commercial Medicines gross profit (2016: 14%).
Excellent progress was made in the Africa and Asia Pacific
region, building sales from the existing commercial portfolio and
the strategy of converting UL2L medicines. Growth was strong across
all geographies and the region also benefited from the translation
effects from the depreciation in sterling, and the expansion of the
gross profit % resulting from the appreciation of the local
currencies.
An important growth driver in this region will be the conversion
of UL2L medicines. Agreements with Eisai for Halaven(R) for
advanced breast cancer and Fycompa(R) for partial-onset seizures
demonstrate how the Group is building this part of the business.
Clinigen is increasingly becoming the partner of choice to top
pharmaceutical companies in the supply and distribution of their
products.
The priorities for Commercial Medicines are: continued
revitalisation of existing products, the launch of the Foscavir bag
line extension, seeking selective product acquisitions that fit
within the portfolio, and further conversion of UL2L medicines.
Assuming the competitive landscape remains unchanged (most sales
are derived from products not under patent protection and so
increased competition is an ongoing risk), Commercial Medicines is
well positioned to continue to drive growth this year across all
parts of the portfolio.
Technology
The Group ERP system, which will help make the business more
efficient and scalable is progressing to plan with implementation
expected to complete in 2018. Cliniport, the online proprietary
medicines access platform, which aims to strengthen Clinigen's
market proposition and interaction with customers, was launched
during the year.
FINANCIAL REVIEW
Summary adjusted income statement
Year ended 30 June 2017 2016 Growth
Adjusted results GBPm GBPm
--------------------------- ------- ------- --------
Revenue 302.3 339.9 (11)%
--------------------------- ------- ------- --------
Gross profit 122.8 100.7 22%
--------------------------- ------- ------- --------
Administrative expenses (56.2) (45.3) (24)%
--------------------------- ------- ------- --------
EBITDA from joint venture 1.0 0.6 67%
--------------------------- ------- ------- --------
EBITDA (before SBP) 67.6 56.0 21%
--------------------------- ------- ------- --------
Share-based payments (2.5) (2.3)
--------------------------- ------- ------- --------
EBITDA (after SBP) 65.1 53.7 21%
--------------------------- ------- ------- --------
Depreciation (0.6) (0.8)
--------------------------- ------- ------- --------
EBITA 64.5 52.9 22%
--------------------------- ------- ------- --------
Finance cost (2.4) (4.0)
--------------------------- ------- ------- --------
Profit before tax 62.1 48.9 27%
Basic earnings per share
(after SBP) 41.8p 33.4p 25%
--------------------------- ------- ------- --------
Dividend per share 5.0p 4.0p 25%
--------------------------- ------- ------- --------
This summary income statement presents the Group results on an
adjusted basis excluding amortisation and non-underlying costs (see
note 2 and 3 of the condensed financial statements). EBITDA as
disclosed in this summary is also adjusted to include the Group's
share of EBITDA from its joint venture.
When presenting the financial results, a number of adjusted
measures are used which are considered by the Board and management
in reporting, planning and decision making. Underlying results
reflect the Group's trading performance and exclude amortisation
and non-underlying costs which are explained in note 3.
Now that the IPO related share-based payments ('SBP') have
concluded and consequently the SBP are at a normalised level, SBP
costs are now included in adjusted EBITDA and adjusted profit
before tax. The joint venture ('JV') contribution is no longer
shown in adjusted revenue and gross profit, but is included on a
pre-tax basis in adjusted EBITDA and adjusted profit before tax.
The prior year comparative has been restated accordingly.
Overall, the Group achieved a strong financial performance with
its key three financial metrics, adjusted gross profit, adjusted
EBITDA and adjusted earnings per share all growing more than
20%.
Revenue increased 6% excluding the effect of the change in mix
in Managed Access towards programmes where the product is provided
by the pharmaceutical client free of charge, and the termination of
a large Global Access low margin commercial contract, which was
inherited with the Idis acquisition. This revenue growth is lower
than growth in gross profit, primarily due to the change in mix in
CTS towards higher margin products and activity. Reported revenue
was GBP302.3m (2016: GBP339.9m).
Adjusted gross profit, which the management views as the key
indicator of top-line performance, increased by 22% due to a
combination of good organic growth across all divisions, a full
year's contribution from Link and currency benefits. The Commercial
Medicines operation was the largest beneficiary of the currency
movements.
As planned, the percentage increase in administrative expenses
was modestly higher than for gross profit. Contributing to the
increase in overheads were a full year of Link's overheads,
increased cost of overseas overheads on translation following the
depreciation in sterling (35% of employees are overseas), and
increased spend to strengthen the infrastructure and management
team to support the Group's long-term growth ambitions.
EBITDA from the JV in South Africa increased from GBP0.6m to
GBP1.0m due to a full year's contribution this year.
The SBP charge, relating to long-term incentive plans, increased
from GBP2.3m to GBP2.5m due to an increased number of people
included in the schemes.
Adjusted EBITDA, shown excluding non-underlying costs and
including EBITDA from the JV, increased by 21%, benefiting from the
increase in gross profits. See note 2 of the financial statements
for a reconciliation of adjusted EBITDA to the IFRS equivalent
comparative.
Finance cost
The adjusted net finance cost, excluding the amounts relating to
the increase in the estimate for contingent consideration for Link
and the associated unwind of the discount, was GBP2.4m (2016:
GBP4.0m). This relates primarily to bank debt and the reduction is
due to lower debt levels and lower interest rates applied as
leverage decreases. The average interest charge on gross debt
during the period was 1.5%.
The reported finance cost was GBP31.5m (2016: GBP4.7m), with the
significant increase attributable to the increase in the estimate
of the contingent consideration for Link.
The table below shows the reconciling items between the adjusted
profit before tax of GBP62.1m (2016: GBP48.9m) and the reported
profit before tax of GBP14.1m (2016: GBP15.9m).
Reconciliation of adjusted profit before tax to reported profit
before tax
Year ended 30 June
------ ------
2017 2016
GBPm GBPm
--------------------------------------------------------------- ------ ------
Adjusted profit before tax 62.1 48.9
--------------------------------------------------------------- ------ ------
Link contingent consideration (29.1) (0.7)
--------------------------------------------------------------- ------ ------
Amortisation (18.6) (20.0)
--------------------------------------------------------------- ------ ------
Adjustment for fair value of acquired stock sold in the period (0.1) (4.6)
--------------------------------------------------------------- ------ ------
Tax on joint venture in South Africa (0.2) (0.2)
--------------------------------------------------------------- ------ ------
Acquisition costs - (1.4)
--------------------------------------------------------------- ------ ------
Restructuring costs - (5.6)
--------------------------------------------------------------- ------ ------
Impairment of intangible fixed assets - (0.5)
--------------------------------------------------------------- ------ ------
Total adjustments (48.0) (33.0)
--------------------------------------------------------------- ------ ------
Reported profit before tax 14.1 15.9
--------------------------------------------------------------- ------ ------
The adjustments to profit before tax comprise GBP29.1m in
finance costs relating to the increase in the estimate for
contingent consideration for Link and the non-cash interest charge
unwind relating to the Link contingent consideration, amortisation
of GBP18.6m (2016: GBP20.0m), the release of fair value profit
margin on acquired inventory of GBP0.1m (2016: GBP4.6m) and the
Company's share of the tax charge in the JV earnings of GBP0.2m
(2016: GBP0.2m).
The GBP29.1m (2016: GBP0.7m) adjustment to the net finance
charge is the increase in the earlier estimate for the contingent
consideration for the Link business of GBP27.0m (2016: GBPnil) and
the unwind of the discount applied to the contingent consideration
payable in respect of Link of GBP2.1m (2016: GBP0.7m) (these items
are described in more detail in the balance sheet section).
Amortisation was GBP18.6m (2016: GBP20.0m), of which GBP13.4m
related to acquired intangibles, GBP4.4m related to the trademarks
and licences of SP products, and GBP0.8m related to software.
Amortisation relating to the Group ERP system currently being
implemented is expected to begin towards the end of the current
financial year after the system becomes operational.
The non-underlying costs last year included acquisition costs
relating to Link, restructuring costs relating mainly to the
integration of the Idis and Link acquisitions and the regulatory
and compliance costs relating to the Vibativ product that has now
been transferred back to Theravance Biopharma.
Taxation
Taxation was GBP10.3m (2016: GBP2.4m), based primarily on the
prevailing UK and US tax rates. This charge is calculated as
GBP14.0m based on the adjusted profit of GBP62.1m, offset by a
credit of GBP3.7m in respect to the adjusted items.
The adjusted effective tax rate remains unchanged at 23% (2016:
23%).
Earnings per share
Adjusted basic earnings per share, calculated excluding
amortisation and non-underlying costs, increased by 25% to 41.8p
(2016: 33.4p). The increase reflects the Group's higher adjusted
profit from operations.
Reported basic earnings per share was 3.3p (2016: 11.9p) due to
the revision to the earlier estimate of contingent consideration on
the Link acquisition being charged to the income statement.
Dividend
The Board is committed to a sustainable and progressive dividend
policy and expects interim and final dividend payments to be split
approximately one-third to two-thirds respectively.
In view of the strong results, the Board proposes a final
dividend of 3.4p per share (2016: 2.7p), resulting in an increase
in the full year dividend of 25% to 5.0p per share (2016:
4.0p).
The final dividend will be paid, subject to shareholder
approval, on 1 December 2017 to shareholders on the register on 10
November 2017.
Cash flow and net debt
Cash flow performance was again strong in the year, with cash
generated from operations of GBP54.7m (2016: GBP49.4m). As
expected, net working capital increased by GBP9.6m due to the
winding down in the first half of some large Managed Access
contracts with favourable working capital characteristics and the
increase in scale in the business.
Capital expenditure was GBP8.8m (2016: GBP8.0m), of which
GBP4.5m related to the Group ERP system, GBP1.4m related to office
and warehouse refurbishments and GBP2.1m related to SP products,
including GBP1.0m deferred consideration on Totect. As previously
guided, capital expenditure has been higher than usual due to
budgeted spend on the Group ERP system, which is currently being
implemented.
The other main cash flows were tax paid of GBP6.9m (2016:
GBP3.7m), interest paid of GBP1.7m (2016: GBP3.6m) and dividends
paid of GBP4.9m (2016: GBP4.1m).
Overall net debt decreased GBP33.1m on last year to
GBP35.0m.
Balance sheet
Intangible assets decreased from GBP334.1m at 30 June 2016 to
GBP332.5m, due to amortisation of GBP18.6m, offset by capital
expenditure of GBP6.4m and foreign exchange adjustments of
GBP10.6m.
Net working capital increased to GBP4.4m (2016: GBP(4.2)m) for
the reasons described above. The low levels of working capital in
the business reflect a strong focus on credit control and working
capital management.
Total deferred consideration is GBP41.8m (2016: GBP13.2m);
GBP37.6m (2016: GBP8.5m) of this relates to the contingent
consideration on the Link acquisition. The contingent
consideration, which was subject to performance criteria of Link
and is payable in October 2017 in cash, has been discounted and is
calculated based on the results for the 12 months ended 30 June
2017.
The increase is largely due to the depreciation in sterling,
which results in an increase in the earnings of Link when the
results for the performance period are translated into sterling,
and, to a lesser extent, the appreciation of key local currencies
which contributed to an improvement in Link's gross profit
margin.
The remaining GBP4.2m (2016: GBP4.7m) of deferred consideration
is in respect of further milestone payments on the previous year's
product acquisitions.
Treasury management
The Group's operations are financed by retained earnings and
bank borrowings, and on occasion, the issue of shares to finance
acquisitions.
As at 30 June 2017, the Group had a total bank facility of
GBP122m, consisting of a five-year term repayment loan of GBP27m
which matures in June 2020 and a revolving credit facility ('RCF')
of GBP95m which is available until June 2020 and is renewable on a
monthly basis. Covenant terms apply to the bank facilities
comprising interest cover and adjusted leverage covenants.
At 30 June 2017, the fixed term loan was fully utilised at
GBP27.0m (2016: GBP36.0m) and GBP36.9m (2016: GBP61.3m) was
borrowed against the revolving credit facility. All borrowings are
in sterling. There were no instances of default, including covenant
terms, in the year.
To finance the proposed acquisition of Quantum announced on 13
September 2017, the finance facility has been extended for five
years and increased by GBP78m to GBP200m. To provide additional
headroom, there is a further option to increase this facility to
GBP220m for the first 12 months exercisable on completion of the
Quantum acquisition. In the event that the deal does not complete,
the finance facility will revert back to GBP122m.
The Group's finance facilities provide good headroom and
flexibility to support the strategy of adding bolt-on
acquisitions.
Borrowings at the end of the year are in sterling and are
managed by the Group's UK based Treasury function, which manages
the Group's treasury risk in accordance with policies set by the
Board.
The Group reduces its exposure to currency fluctuations on
translation by typically managing currencies at Group level using
bank accounts denominated in foreign currencies. Where there is
sufficient visibility of currency requirements, forward contracts
are used to hedge exposure to foreign currency fluctuations. The
Group's treasury function does not engage in speculative
transactions and does not operate as a profit centre.
The Group has applied hedge accounting where permissible to
match hedges to the transactions to which they relate thereby
reducing volatility in the results which may arise from gains and
losses on hedging instruments.
Principal risks facing the business
Clinigen operates an embedded risk management framework, which
is monitored and reviewed by the Board. There are a number of
potential risks and uncertainties that could have a material impact
on the Group's financial performance and position. These include
risks relating to competitive threat, the regulatory environment,
political environment, counterfeit product penetrating the supply
chain, reliance on technology, reputational risk, and foreign
exchange. These risks and the Group's mitigating actions are set
out in the Annual Report.
Condensed consolidated income statement
for the year ended 30 June 2017
2017 2017 2017 2016 2016 2016
Underlying Non-underlying Total Underlying Non-underlying Total
(note restated restated
3) (note
(In GBPm) Note 3)
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Revenue 2 302.3 - 302.3 339.9 - 339.9
Cost of sales (179.5) (0.1) (179.6) (239.2) (4.6) (243.8)
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Gross profit 2 122.8 (0.1) 122.7 100.7 (4.6) 96.1
Administrative
expenses (64.5) (13.4) (77.9) (53.4) (22.5) (75.9)
Profit from operations 58.3 (13.5) 44.8 47.3 (27.1) 20.2
Finance cost 4 (2.4) (29.1) (31.5) (4.0) (0.7) (4.7)
Share of profit
of joint venture 0.8 - 0.8 0.4 - 0.4
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Profit before
income tax 56.7 (42.6) 14.1 43.7 (27.8) 15.9
Income tax expense 5 (12.8) 2.5 (10.3) (10.0) 7.6 (2.4)
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Profit attributable
to owners of
the Company 43.9 (40.1) 3.8 33.7 (20.2) 13.5
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Earnings per
share (pence)
Basic 6 3.3 11.9
Diluted 6 3.2 11.8
----------------------- ---- ----------- --------------- ------- ----------- --------------- -------
Condensed consolidated statement of comprehensive income
for the year ended 30 June 2017
2017 2017 2017 2016 2016 2016
Underlying Non-underlying Total Underlying Non-underlying Total
(note restated
3) (note
(In GBPm) 3)
------------------------ ----------- --------------- ------ ----------- --------------- ------
Profit for the year
attributable to the
owners of the parent 43.9 (40.1) 3.8 33.7 (20.2) 13.5
Other comprehensive
income
items that may be
reclassified to profit
or loss
Cash flow hedges 0.3 - 0.3 - - -
Currency translation
differences 10.1 - 10.1 0.6 - 0.6
------------------------ ----------- --------------- ------ ----------- --------------- ------
Total comprehensive
income attributable
to owners of the
Company 54.3 (40.1) 14.2 34.3 (20.2) 14.1
------------------------ ----------- --------------- ------ ----------- --------------- ------
All amounts relate to continuing operations.
Condensed consolidated statement of financial position
as at 30 June 2017
2016
(In GBPm) Note 2017 restated
-------------------------------- ---- ----- ---------
Non-current assets
Intangible assets 332.5 334.1
Property, plant and equipment 3.3 2.7
Investment in joint venture 8.7 7.4
Deferred tax asset 3.6 3.5
--------------------------------- ---- ----- ---------
348.1 347.7
Current assets
Inventories 16.7 15.6
Trade and other receivables 65.9 68.8
Derivative financial instrument 1.0 -
Cash and cash equivalents 27.8 27.8
--------------------------------- ---- ----- ---------
111.4 112.2
-------------------------------- ---- ----- ---------
Total assets 459.5 459.9
--------------------------------- ---- ----- ---------
Non-current liabilities
Trade and other payables 1.3 11.0
Loans and borrowings 8 17.3 25.9
Deferred tax liability 20.1 22.2
--------------------------------- ---- ----- ---------
38.7 59.1
Current liabilities
Trade and other payables 118.7 90.8
Provisions - 0.8
Loans and borrowings 8 45.5 70.0
Corporation tax liability 7.5 1.4
Derivative financial instrument - 1.3
171.7 164.3
-------------------------------- ---- ----- ---------
Total liabilities 210.4 223.4
--------------------------------- ---- ----- ---------
Net assets 249.1 236.5
--------------------------------- ---- ----- ---------
Equity
Share capital 0.1 0.1
Share premium account 161.2 160.7
Merger reserve 5.4 5.4
Hedging reserve 0.3 -
Foreign exchange reserve 10.5 0.4
Retained earnings 71.6 69.9
--------------------------------- ---- ----- ---------
Total shareholders' equity 249.1 236.5
--------------------------------- ---- ----- ---------
The notes on pages 19 to 27 form an integral part of these
condensed consolidated financial statements.
Condensed consolidated statement of cash flows
for the year ended 30 June 2017
(In GBPm) Note 2017 2016
-------------------------------- ---- ------ ------
Operating activities
Profit for the year before
tax 14.1 15.9
Adjustments for:
Amortisation of intangible
fixed assets 18.6 20.0
Depreciation of property,
plant and equipment 0.6 0.8
Loss on disposal of non-current
assets 0.2 0.1
Provision for restructuring
costs - 0.8
Movement in fair value of
derivatives (2.0) 1.3
Release of fair value on
acquired inventory 3 0.1 4.6
Share of profit of joint
venture (0.8) (0.4)
Finance cost 4 31.5 4.7
Share-based payment expense 2.0 1.8
-------------------------------- ---- ------ ------
64.3 49.6
Decrease in trade and other
receivables 3.2 8.1
Increase in inventories (0.8) (2.1)
Decrease in trade and other
payables (12.0) (6.2)
-------------------------------- ---- ------ ------
Cash generated from operations 54.7 49.4
Income taxes paid (6.9) (3.7)
Interest paid (1.7) (3.6)
-------------------------------- ---- ------ ------
Net cash flows from operating
activities 46.1 42.1
Investing activities
Purchase of intangible fixed
assets (7.4) (6.7)
Purchase of property, plant
and equipment (1.4) (1.3)
Purchase of subsidiary, net
of cash acquired - (22.4)
-------------------------------- ---- ------ ------
Net cash used in investing
activities (8.8) (30.4)
Financing activities
Proceeds from issue of shares 0.5 0.3
Proceeds from increase in
loan - 27.6
Loan repayments (33.4) (36.1)
Dividends paid (4.9) (4.1)
-------------------------------- ---- ------ ------
Net cash used in financing
activities (37.8) (12.3)
-------------------------------- ---- ------ ------
Net decrease in cash and
cash equivalents (0.5) (0.6)
Cash and cash equivalents
at beginning of the year 27.8 27.8
Exchange gains 0.5 0.6
-------------------------------- ---- ------ ------
Cash and cash equivalents
at end of the year 27.8 27.8
-------------------------------- ---- ------ ------
Condensed consolidated statement of changes in equity
for the year ended 30 June 2017
Share Share Merger Hedging Foreign Retained Total
capital premium reserve reserve exchange earnings equity
(In GBPm) account reserve
------------------------ -------- -------- -------- -------- --------- --------- -------
At 1 July 2015 0.1 141.0 5.4 - (0.2) 58.3 204.6
Profit for the year - - - - - 13.5 13.5
Currency translation
differences - - - - 0.6 - 0.6
------------------------ -------- -------- -------- -------- --------- --------- -------
Total comprehensive
income - - - - 0.6 13.5 14.1
Share-based payment
scheme - - - - - 1.8 1.8
Deferred taxation
on share-based payment
scheme - - - - - (1.6) (1.6)
Tax credit in respect
of tax losses arising
on exercise of share
options - - - - - 2.0 2.0
Issue of new shares - 19.7 - - - - 19.7
Dividend paid (note
7) - - - - - (4.1) (4.1)
Total transactions
with owners of the
Company, recognised
directly in equity - 19.7 - - - (1.9) 17.8
------------------------ -------- -------- -------- -------- --------- --------- -------
At 30 June 2016 0.1 160.7 5.4 - 0.4 69.9 236.5
------------------------ -------- -------- -------- -------- --------- --------- -------
Share Share Merger Hedging Foreign Retained Total
capital premium reserve reserve exchange earnings equity
(In GBPm) account reserve
------------------------ -------- -------- -------- -------- --------- --------- -------
At 1 July 2016 0.1 160.7 5.4 - 0.4 69.9 236.5
Profit for the year - - - - - 3.8 3.8
Currency translation
differences - - - - 10.1 - 10.1
Cash flow hedges
- Effective portion
of fair value gains - - - 1.4 - - 1.4
- Transfers to the
income statement
(revenue) - - - (1.1) - - (1.1)
------------------------ -------- -------- -------- -------- --------- --------- -------
Total comprehensive
income - - - 0.3 10.1 3.8 14.2
Share-based payment
scheme - - - - - 2.0 2.0
Deferred taxation
on share-based payment
scheme - - - - - 0.2 0.2
Tax credit in respect
of tax losses arising
on exercise of share
options - - - - - 0.6 0.6
Issue of new shares - 0.5 - - - - 0.5
Dividend paid (note
7) - - - - - (4.9) (4.9)
------------------------ -------- -------- -------- -------- --------- --------- -------
Total transactions
with owners of the
Company, recognised
directly in equity - 0.5 - - - (2.1) (1.6)
------------------------ -------- -------- -------- -------- --------- --------- -------
At 30 June 2017 0.1 161.2 5.4 0.3 10.5 71.6 249.1
------------------------ -------- -------- -------- -------- --------- --------- -------
Notes forming part of the condensed consolidated financial
statements
1. Basis of preparation
The consolidated financial statements of Clinigen Group plc have
been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations
(collectively "IFRSs") issued by the International Accounting
Standards Board ("IASB") as adopted by the European Union ("adopted
IFRSs") and with those parts of the Companies Act 2006 that are
applicable to companies that prepare financial statements in
accordance with IFRSs. The consolidated financial statements have
been prepared under the historical cost convention, as modified by
the revaluation of financial assets and financial liabilities
(including derivative instruments) at fair value through profit or
loss.
The financial information contained in this announcement which
does not constitute statutory accounts as defined in Section 434 of
the Companies Act 2006 and is unaudited, has been derived from the
statutory consolidated accounts for the year ended 30 June 2017.
The auditors' report on those accounts was unqualified and did not
contain a statement under Section 498 of the Companies Act
2006.
The preparation of financial statements in conformity with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise its
judgement in the process of applying the Group's accounting
policies.
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The areas where significant
judgments and estimates have been made in preparing the financial
statements and their effect are disclosed in the notes to the
Group's statutory consolidated financial statements for the year
ended 30 June 2017 in note 2.
Having reassessed the principal risks, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing the consolidated financial statements.
2. Segment information
The Group's reportable segments are strategic operating business
units that provide different products and service offerings into
different market environments. They are managed separately because
each operational business requires different expertise to deliver
the different product or service offering they provide.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
during the reporting year. The chief operating decision maker has
been identified as the Executive Directors. Subsequent to the year
end, the organisation structure of the business has changed to the
three reported businesses of Commercial Medicines, Unlicensed
Medicines and CTS, and with effect from 1 July 2017 the internal
reporting to the chief operating decision maker has changed to this
basis. The results have also been presented on this revised basis
which is how the results will be reported in future.
Operating segment results
The Group evaluates performance of the operational segments on
the basis of gross profit from operations.
2017 2016
----------------------------- ---------------- ----------------
Revenue Gross Revenue Gross
(In GBPm) profit profit
----------------------------- ------- ------- ------- -------
Clinical Trial Services 109.9 23.3 137.9 19.7
Managed Access 60.1 28.4 100.8 26.5
Global Access 40.1 14.5 39.6 13.8
Specialty Pharmaceuticals 41.4 35.6 37.1 31.9
Link Healthcare 50.8 21.0 24.5 8.8
----------------------------- ------- ------- ------- -------
Segmental result 302.3 122.8 339.9 100.7
Adjustment for fair value of
acquired stock sold in the
year - (0.1) - (4.6)
Reported results 302.3 122.7 339.9 96.1
----------------------------- ------- ------- ------- -------
The following analysis shows how the segmental results will be
reported in future following the organisation changes effective
from 1 July 2017.
2017 2016
----------------------------- ---------------- ----------------
Revenue Gross Revenue Gross
(In GBPm) profit profit
----------------------------- ------- ------- ------- -------
Clinical Trial Services 109.9 23.3 137.9 19.7
Commercial Medicines 66.3 47.3 48.9 37.3
Unlicensed Medicines 126.1 52.2 153.1 43.7
----------------------------- ------- ------- ------- -------
Segmental result 302.3 122.8 339.9 100.7
Adjustment for fair value of
acquired stock sold in the
year - (0.1) - (4.6)
Reported results 302.3 122.7 339.9 96.1
----------------------------- ------- ------- ------- -------
2017 2016
------------------------------ -------------------------- ----------------------------------- ------
Underlying Non-underlying Total Underlying Non-underlying Total
(In GBPm) (restated) (restated)
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Segmental gross profit 122.8 (0.1) 122.7 100.7 (4.6) 96.1
Administrative expenses
excluding amortisation,
depreciation and share-based
payment costs (56.2) - (56.2) (45.3) (7.5) (52.8)
Share-based payment
costs (2.5) - (2.5) (2.3) - (2.3)
------------------------------ ---------- -------------- ------ ----------- -------------- ------
EBITDA 64.1 (0.1) 64.0 53.1 (12.1) 41.0
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Analysed as:
Adjusted EBITDA including
joint venture 65.1 (0.1) 65.0 53.7 (12.1) 41.6
Joint venture EBITDA (1.0) - (1.0) (0.6) - (0.6)
EBITDA excluding joint
venture 64.1 (0.1) 64.0 53.1 (12.1) 41.0
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Amortisation (5.2) (13.4) (18.6) (5.0) (15.0) (20.0)
Depreciation (0.6) - (0.6) (0.8) - (0.8)
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Profit from operations 58.3 (13.5) 44.8 47.3 (27.1) 20.2
Finance costs (2.4) (29.1) (31.5) (4.0) (0.7) (4.7)
Share of joint venture
profit 0.8 - 0.8 0.4 - 0.4
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Profit before taxation 56.7 (42.6) 14.1 43.7 (27.8) 15.9
Taxation (12.8) 2.5 (10.3) (10.0) 7.6 (2.4)
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Profit after taxation 43.9 (40.1) 3.8 33.7 (20.2) 13.5
2017 2016
---------------------------------- -----------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total
(In GBPm) (restated)
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Analysed as
Adjusted profit after
tax before amortisation
of software and licences
(as used for adjusted
EPS) 48.1 (40.1) 8.0 37.7 (20.2) 17.5
Amortisation of software (0.8) - (0.8) (0.7) - (0.7)
Amortisation of licences (4.4) - (4.4) (4.3) - (4.3)
Tax on amortisation
of software and licences 1.0 - 1.0 1.0 - 1.0
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Reported profit after
tax 43.9 (40.1) 3.8 33.7 (20.2) 13.5
------------------------------ ---------- -------------- ------ ----------- -------------- ------
Share-based payment costs have been reclassified from
non-underlying to underlying in the year and the prior year
comparatives restated. Share-based payment costs comprise an
equity-settled charge of GBP2.0m (2016: GBP1.8m) and associated
social security costs of GBP0.5m (2016: GBP0.5m).
(In GBPm) 2017 2016
------------------------- ----- -----
Breakdown of revenues by
products and services:
Products 259.8 304.2
Services 35.8 31.4
Royalties 6.7 4.3
302.3 339.9
------------------------- ----- -----
Geographical analysis
(In GBPm) 2017 2016
---------------------------------- ----- -----
Revenue arises from the following
locations:
UK 72.2 52.1
Europe 101.0 138.5
USA 56.5 100.1
Rest of world 72.6 49.2
302.3 339.9
---------------------------------- ----- -----
(In GBPm) 2017 2016
-------------------------- ----- -----
Gross profit arises from
the following locations:
UK 23.5 19.3
Europe 42.0 38.9
USA 29.8 29.3
Rest of world 27.5 13.2
122.8 100.7
-------------------------- ----- -----
3. Non-underlying items
Non-underlying items have been reported separately in order to
provide the reader of the financial statements with a better
understanding of the operating performance of the Group. These
items include amortisation of intangible assets arising on
acquisition, one off costs including business acquisition costs,
restructuring costs, changes in contingent consideration, unwind of
discount on contingent consideration, and impairment charges. The
associated tax impact is also reported as non-underlying.
2017 2016
(In GBPm) restated
------------------------------------------------- ----- ---------
Cost of sales
a) Adjustment for fair value of acquired
stock sold in the year 0.1 4.6
Administrative expenses
b) Acquisition costs - 1.4
c) Restructuring costs - 5.6
d) Impairment of intangible fixed assets - 0.5
e) Amortisation of intangible fixed assets
acquired through business combinations 13.4 15.0
------------------------------------------------- ----- ---------
13.4 22.5
Finance costs
f) Increase in Link contingent consideration 27.0 -
g) Unwind of discount on Link contingent
consideration 2.1 0.7
------------------------------------------------- ----- ---------
29.1 0.7
Taxation
h) Credit in respect of tax on non-underlying
costs (2.9) (4.9)
i) Credit in respect of rate differences
on deferred tax (0.5) (1.4)
j) Corporation tax adjustments in respect
of prior year 0.9 (1.3)
------------------------------------------------- ----- ---------
(2.5) (7.6)
------------------------------------------------- ----- ---------
40.1 20.2
------------------------------------------------- ----- ---------
a) Under IFRS 3, inventory acquired in a business combination is
valued at fair value on acquisition, which includes the profit
margin in the inventory's carrying value. The GBP0.1m (2016:
GBP4.6m) above represents the profit margin on the inventory sold
in the year which was acquired with both the Idis and Link
businesses.
b) The acquisition costs incurred in the prior year relating to
Link Healthcare amounted to GBP1.4m. The main costs included
GBP0.5m of legal advice, GBP0.4m for corporate finance advice and
GBP0.1m of stamp duty.
c) The restructuring costs in the prior year of GBP5.6m relate
mainly to the integration of the Idis and Link Healthcare
acquisitions. These costs include GBP2.0m of redundancy costs,
GBP1.0m related to the closure and integration of offices, and
GBP1.9m of incremental costs related to maintaining the Idis IT
systems which are being used in the short term before a new system
is implemented across the Group.
d) The impairment of intangible fixed assets in the prior year
are further costs in respect of Vibativ to comply with the
regulatory requirements up to when this product was transferred
back to the vendor on 4 August 2016. This product was fully
impaired in the second half of the previous financial year due to
its loss making position.
e) The amortisation of intangible assets acquired as part of the
business combination with Idis and Link, (namely brand, trade
names, customer relationships and contracts) are included in
non-underlying due to their significance and to provide the reader
with a consistent view of the underlying costs of the operating
Group.
f) Changes in the estimate of the contingent consideration
payable in relation to the Link acquisition based on the earnings
of Link for the year ended 30 June 2017. This is classified as a
finance cost as the primary reason for the increase is the
depreciation of sterling against the local functional currencies
since October 2015, when the contingent consideration was
originally calculated.
g) The non-cash unwind of the discount applied to the contingent
consideration payable in relation to the acquisition of Link
Healthcare.
h) The tax credit in respect of non-underlying items reflects
the tax benefit on the costs incurred.
i) The reduction in corporation tax rate to 19% and 17% from 1
April 2017 and 1 April 2020 respectively, reduces the deferred tax
balances expected to unwind in the future creating a credit to the
income statement of GBP0.5m (2016: GBP1.4m). The credit is
recognised in non-underlying items as the associated deferred tax
balances relate to the fair value of acquired intangible
assets.
j) Tax computations of acquired entities for periods prior to
acquisition have identified additional tax charges/credits
recognised during the year.
In the prior year share-based payment charges of GBP2.3m and the
associated tax credit of GBP0.3m were classified as non-underlying.
In prior years a significant element of these charges arose from
the initial listing of the Group on the London Stock Exchange.
Share-based payment charges now reflect the ongoing trading
activities of the Group and therefore are now included within the
underlying results, with the prior year comparatives restated
accordingly.
4. Finance cost
(In GBPm) 2017 2016
------------------------------------------ ---- ----
Bank interest 1.4 3.2
Borrowing costs 0.3 0.3
Amortisation of facility issue costs 0.3 0.4
Unwind of discount on Totect and
Foscavir deferred consideration 0.4 0.1
------------------------------------------ ---- ----
Underlying finance cost 2.4 4.0
Increase in Link contingent consideration 27.0 -
Unwind of discount on Link contingent
consideration 2.1 0.7
Total finance cost 31.5 4.7
------------------------------------------ ---- ----
The contingent consideration payable on the Link acquisition is
remeasured each period end depending on the current forecasts for
the earn-out period. At 30 June 2017, following the completion of
the earn-out period, the remeasurement of the contingent
consideration resulted in a charge of GBP27.0m. This increase is
recognised in finance costs as the primary reason for the increase
is the depreciation of sterling against the local functional
currencies since October 2015.
5. Income tax
(In GBPm) 2017 2016
--------------------------- ----- -----
Current tax expense
Current tax on profits of
the year 13.2 8.4
Adjustments in respect of
prior years 0.4 (1.3)
---------------------------- ----- -----
Total current tax expense 13.6 7.1
Deferred tax expense
Decrease in deferred tax
assets 0.1 0.1
Decrease in deferred tax
liability (3.4) (4.8)
Total deferred tax benefit (3.3) (4.7)
---------------------------- ----- -----
Income tax expense 10.3 2.4
---------------------------- ----- -----
The tax on the Group's profit before income tax differs from the
theoretical amount that would arise using the standard rate of
corporation tax in the UK applied to profit for the year as
follows:
(In GBPm) 2017 2016
----------------------------------------- ----- -----
Profit before income tax 14.1 15.9
----------------------------------------- ----- -------
Expected tax charge based on corporation
tax rate of 19.75% (2016: 20.0%) 2.8 3.2
Expenses not deductible for tax purposes
other than goodwill amortisation and
impairment 6.2 0.5
Adjustments to tax charge in respect
of prior years 0.4 (1.3)
Higher rates of taxes on overseas
earnings 1.0 0.9
Loss arising in year for which no
deferred income tax is recognised 0.4 0.3
Remeasurement of deferred tax - change
in the UK tax rate (0.5) (1.2)
Total tax expense 10.3 2.4
----------------------------------------- ----- -------
Amounts recognised directly in equity:
The income tax credited directly to equity during the year is as
follows:
(In GBPm) 2017 2016
---------------------------------------- ---- ----
Deferred tax: unexercised share options
and losses recognised directly in
equity 0.8 0.4
----------------------------------------- ---- ----
(In GBPm) 2017 2016
---------------------------------------- ---- ----
Unused tax losses for which no deferred
tax asset has been recognised 2.9 2.0
----------------------------------------- ---- ----
Potential tax benefit at 38% 1.1 0.8
----------------------------------------- ---- ----
The unused tax losses have been incurred in the US subsidiary,
Idis Inc. Idis Inc. has been merged into Clinigen Inc. and it is
currently uncertain whether these tax losses can be utilised in the
future.
Following announcements in the Summer Budget 2015 and the Budget
2016, the UK corporation tax rate reduced to 19% from 1 April 2017
and will reduce to 17% from 1 April 2020. The Summer Budget 2015
had originally announced that the rate would reduce to 18% from 1
April 2020. This reduction was substantively enacted on 26 October
2015 and so the prior year deferred tax assets and liabilities were
calculated at this rate. The subsequent announcement in the Budget
2016 that the rate will reduce to 17% from 1 April 2020 was
substantively enacted on 6 September 2016, and so closing deferred
tax assets and liabilities have been calculated at this rate.
6. Earnings per share
(In GBPm) 2017 2016
------------------------------------ ----- -----
Reported profit used in calculating
basic and diluted EPS 3.8 13.5
------------------------------------ ----- -----
Number of shares (million)
Weighted average number of shares 115.0 113.1
Dilution effect of share options 1.8 1.3
------------------------------------ ----- -----
Weighted average number of shares
used for diluted EPS 116.8 114.4
------------------------------------ ----- -----
Reported EPS (pence)
Basic 3.3p 11.9p
Diluted 3.2p 11.8p
------------------------------------ ----- -----
The adjusted EPS, based on the following earnings figure for the
year and weighted average number of shares of 115,017,972 (2016:
113,084,261 shares) is 41.8p (2016 restated: 33.4p).
2017 2016
(In GBPm) restated
-------------------------------------- ----- ---------
Underlying profit after tax 43.9 33.7
Add-back of amortisation on software
and licences 5.2 5.0
Less tax associated with amortisation
on software and licences (1.0) (1.0)
-------------------------------------- ----- ---------
Adjusted underlying earnings used
in calculating basic and diluted
adjusted EPS 48.1 37.7
-------------------------------------- ----- ---------
2017 2016
---------------------------------- ----- -----
Number of shares (million)
Weighted average number of shares 115.0 113.1
Dilution effect of share options 1.8 1.3
---------------------------------- ----- -----
Weighted average number of shares
used for diluted EPS 116.8 114.4
---------------------------------- ----- -----
Adjusted EPS (pence)
Basic 41.8p 33.4p
Diluted 41.2p 33.0p
---------------------------------- ----- -----
7. Dividends
(In GBPm) 2017 2016
---------------------------------------- ---- ----
Final dividend in respect of the
year ended 30 June 2016 of 2.7p (2016:
2.3p) per ordinary share 3.1 2.6
Interim dividend of 1.6p (2016: 1.3p)
per ordinary share paid during the
year 1.8 1.5
---------------------------------------- ---- ----
4.9 4.1
---------------------------------------- ---- ----
The Board proposes to pay a final dividend of 3.4p per ordinary
share, subject to approval at the AGM on 1 December 2017.
8. Loans and borrowings
The book value of loans and borrowings are as follows:
2017 2016
---------------- --------------------------- -----------------------------
(In GBPm) Current Non-current Total Current Non-current Total
---------------- ------- ----------- ----- ------- ----------- -----
Bank borrowings 45.5 17.3 62.8 70.0 25.9 95.9
---------------- ------- ----------- ----- ------- ----------- -----
At 30 June 2017, the Group had a total bank facility of
GBP122.0m available (2016: GBP131.0m). This consisted of a 5 year
fixed term repayment loan of GBP27.0m (2016: GBP36.0m) and a
revolving credit facility (RCF) of GBP95.0m (2016: GBP95.0m). The
RCF had a remaining period of 2 years 10 months and was renewable
on a monthly basis. It is therefore included within current
liabilities.
At 30 June 2017, the fixed term loan was fully utilised at
GBP27.0m (2016: GBP36.0m) and GBP36.9m (2016: GBP61.3m) was
borrowed against the revolving credit facility. All borrowings are
in sterling. There were no instances of default, including covenant
terms, in either the current or the preceding year.
Interest is payable on a tiered scale based on the level of
borrowing. The applicable interest rate on amounts drawn down is up
to 2.75% plus LIBOR/EURIBOR (as applicable) on both the RCF and the
term loan facility. The margin payable is dependent on the adjusted
leverage ratio and will reduce to a minimum of 1.25% plus
LIBOR/EURIBOR (as applicable) as adjusted leverage decreases.
The bank loans are secured on the intangible fixed assets of the
Group.
On 13 September 2017 the Group announced the proposed
acquisition of Quantum Pharma plc. To finance this proposed
acquisition, the Group's bank facility has been extended for 5
years to 2022 and increased to GBP200m, with an option to increase
the facility to GBP220m for 12 months exercisable on completion of
the Quantum acquisition. The term loan has been repaid in full with
the extended facility consisting entirely of RCF. In the event that
the acquisition does not complete, the bank facility will revert
back to GBP122m.
Maturity of loans and borrowings
The maturity profile of the carrying amount of the Group's
borrowings at the year end was as follows:
2017 2016
-------------- ---------------------------------------- ----------------------------------------
Gross Unamortised Net borrowings Gross Unamortised Net borrowings
borrowings Issue borrowings Issue
(In GBPm) costs costs
-------------- ----------- ----------- -------------- ----------- ----------- --------------
Within 1 year 45.9 (0.4) 45.5 70.3 (0.3) 70.0
In more than
1 year but
less than 2
years 9.0 (0.4) 8.6 9.0 (0.4) 8.6
In more than
2 years but
less than 5
years 9.0 (0.3) 8.7 18.0 (0.7) 17.3
-------------- ----------- ----------- -------------- ----------- ----------- --------------
63.9 (1.1) 62.8 97.3 (1.4) 95.9
-------------- ----------- ----------- -------------- ----------- ----------- --------------
9. Business combinations
Following the acquisition of Link Healthcare in October 2015 and
the disclosure of the provisional fair values in the annual report
for the financial year ended 30 June 2016, the directors have
reviewed the fair value of the assets and liabilities acquired.
This review resulted in a reduction in the fair value of inventory
of GBP0.4m.
The revised fair value of assets acquired and liabilities
assumed on the Link Healthcare acquisition were as follows:
(In GBPm) Restated
-------------------------------- --------
Intangible assets 17.1
Investment in joint venture 7.0
Property, plant and equipment 0.6
Inventories 6.9
Trade and other receivables 6.6
Cash 1.9
Trade and other payables (6.3)
Provision for deferred tax (5.4)
---------------------------------- --------
Net assets acquired 28.4
Goodwill arising on acquisition 23.1
---------------------------------- --------
Total consideration 51.5
---------------------------------- --------
The total consideration of GBP51.5m initially used to calculate
goodwill arising on acquisition, was made up of initial
consideration of GBP43.7m and contingent consideration of GBP7.8m,
being the discounted expected deferred payment which would be
payable in October 2017. This contingent consideration was subject
to performance against target EBITA and is calculated based on the
expected results of Link Healthcare during that period taking into
account its historical track record and financial forecasts.
The contingent consideration is included in the Group balance
sheet in current trade and other payables. At 30 June 2017, the
re-measurement of the contingent consideration increased the
liability to GBP37.6m resulting in a charge to the income statement
of GBP27.0m. This increase is shown in finance costs as the primary
reason for the increase is the depreciation of sterling against the
local functional currencies since October 2015.
The fair value of acquired inventories represents inventories
valued at the sale price in line with IFRS 3 less provision for
obsolescence and slow moving inventory following the application of
Clinigen's group accounting policies. This provision takes account
of the condition of inventory, the remaining expiry period and
applies assumptions around expected future demand for the
inventory.
The goodwill of GBP23.1m arising from the acquisition represents
the geographical expansion potential provided through access to the
South Africa and APAC markets, and the benefit of having local
in-house regulatory expertise and distribution capabilities. None
of the goodwill is expected to be deductible for income tax
purposes.
10. Post balance sheet events
On 13 September 2017, the Group announced the proposed
acquisition of Quantum valued at 82p per Quantum share (37p in cash
and 0.0405 new Clinigen shares) totalling GBP150.3m for the entire
diluted share capital. It is intended that the acquisition will be
effected by means of a court-sanctioned scheme of arrangement which
is subject to the agreement by Quantum shareholders.
To finance this proposed acquisition, the Group's bank facility
has been extended for 5 years to 2022 and increased to GBP200m,
with an option to increase the facility to GBP220m for 12 months
exercisable on completion of the Quantum acquisition. The term loan
has been repaid in full with the extended facility consisting
entirely of RCF. In the event that the acquisition does not
complete, the bank facility will revert back to GBP122m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBUARBSAKUUR
(END) Dow Jones Newswires
September 28, 2017 02:01 ET (06:01 GMT)
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