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What Alliance Pharma does:

Alliance Pharma PLC (LON:APH) is an AIM traded company that focuses on the acquisition and licensing of pharmaceutical and healthcare products.

Over the past 20 years the group has made 35 acquisitions, which include healthcare and pharma businesses, and rights to products.

Alliance has five so-called “star” brands, which are managed and marketed centrally and sold internationally.

These brands include: Lice treatment Vamousse; Kelo-cote, a scar reduction product; MacuShield, a supplement recommended by eye experts; anti-fungal shampoo Nizoral; and Xonvea, a pregnancy nausea treatment.

The company runs its business across three broad regions: Europe, where the company sells a combination of prescription and OTC products; the newer US business, where it is focusing on the promotion of Vamousse; and the fast-growing Asia Pacific business, which has a tilt towards dermatology.


How it’s doing:

In a full-year trading update in January, Alliance said 2019 underlying profit was in line with expectations after turnover grew 16%, while strong cash generation saw a significant fall in the company’s net debt.

The group, which has a number of international star medicine brands as well as important regional product lines, weighed in with what it described as “see-through revenues” of £144.3mln.

The stand-out performer, growing 38%, was scar reduction treatment Kelo-cote.

However, Macushield (a supplement for eye health) and Vamousse (hair lice) were also up 18% and 14% respectively in the 12 months to December 31.

Nizoral, the medicated shampoo business acquired in June 2018, performed in line with expectations, generating see-through revenues of £20.2mln. The sales of local brands nudged up £600,000 to £78.4mln.

Free cash flow, meanwhile, was described as “strong” at £29.1mln. It allowed the company to reduce its net debt from £74.1mln at the end of June and £85.8mln just over a year ago to £59.2mln at end 2019. Debt to underlying earnings (EBITDA) is now a more conservative 1.5 times.

According to chief executive Peter Butterfield the reduction of liabilities frees up funds for acquisitions, or as he put it “leaves us well placed to selectively add to our portfolio with a continued focus on augmenting our consumer brands in international markets”. 


Inflection points:

  • Revenues for the six months until 30 June were £70.3mln, up 28% on a constant currency basis, or an organic 10% if the impact of recent purchases was stripped out.
  • Net debt fell by £11.4mln in the six months from the end of December to £74.1mln.
  • Its interim dividend rose 10% to 0.536p, for the “seventh or eighth time”.
  • Overseas sales exceeded surpassed domestic revenues in 2018 for the first time ever.
  • The integration of Nizoral, a Johnson & Johnson medicated shampoo, for which Alliance acquired the Asia-Pacific rights last June for £60mln, is progressing well and traded in line with expectations last year.
  • Chief executive Peter Butterfield has hinted at further acquisitions as the group looks to deploy its strong cash flow to further develop the business.


Watch the interview:


Blue Sky:

Butterfield said that the pharma company’s aim is to “bring acquisitions in that fit those geographic footprints for us and start to drive some synergy out of the base that we’ve been building over the last three years.”

He added that the acquisition of Nizoral from giant Johnson & Johnson last year is a complex process across 14 territories and that should be mostly finished by next June.

Underlying organic growth was up 10% in the six months ending June 30, which Butterfield said was “very positive for keeping the business growing even without acquisitions”.

Strong cash generation from the business also allowed it “de-lever” in the first half of the year, and it increased its dividend 10% to provide shareholders with more value.