Alliance Pharma (APH) H2 2023 earnings summary

Executive summary

• Audit delays in 2023 led to a thorough review of processes and significant non-cash impairments (£79.3m), mainly related to Amberen and Nizoral, but underlying business performance, profits, and cash flow remained strong.

• Record revenue growth of 6% year-over-year, with strong performance from Kelo-Cote and Nizoral, while Amberen underperformed expectations due to market challenges.

• Underlying EBITDA grew 15% year-over-year, outpacing revenue growth, supported by robust cost control and strong cash generation.

• Leadership transition with a new Chair and CEO, and successful appeal against a major competition law case, resulting in reversal of a £7.9m provision.

• Sustainability initiatives led to a 48% reduction in Scope 1 & 2 emissions and carbon neutrality in 2023.

Financial highlights

• Revenue grew 6% to £182.7m (7% at constant currency) compared to the prior year.

• EBITDA increased 15% to £45m, representing 24.6% of sales.

• Underlying profit before tax rose 4% to £31.5m; underlying basic EPS up 6% to £0.0455.

• Free cash flow increased 35% to £21.3m, enabling net debt reduction by £11m to £91.2m and leverage down to 2.05x.

• Gross margin declined to 57.5% due to revenue mix and higher distribution costs.

Outlook and guidance

• Underlying profits for 2024 expected to be in line with 2023, with continued investment in key brands, sales, marketing, and innovation.

• Focus remains on cost control, strong cash generation, and reducing leverage below 2x by year-end.

• Technical guidance for 2024 includes interest cost of £9m–£10m, capex of £1.5m–£2.5m, and effective tax rate of 25%.

• Anticipated mid-single-digit revenue growth for Kelo-Cote in 2024, returning to double-digit growth from 2025.

• Amberen expected to return to growth in 2024, with momentum in e-commerce and new initiatives.