Alliance Pharma (APH) H2 2023 earnings summary

Executive summary

• Audit delays in 2023 led to a thorough review of processes and more robust impairment assessments, resulting in significant non-cash impairment charges, mainly for Amberen and Nizoral.

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

• Record revenue growth of 6% year-over-year, driven by strong performance in Kelo-Cote and Nizoral, with Amberen facing market challenges.

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

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

Financial highlights

• Revenue increased 6% to £182.7m (7% at constant currency), with underlying EBITDA at £45m (+15%) and underlying profit before tax at £31.5m (+4%).

• Underlying basic EPS up 6% to £0.0455; leverage reduced to 2.05x from 2.57x due to solid cash generation.

• Free cash flow increased 35% to £21.3m, with reported free cash flow from trading at £36.9m.

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

• Reported loss after tax was £33.1m, reflecting non-underlying impairment charges.

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

• No dividend declared for 2023; board to update policy when appropriate, prioritizing reinvestment and debt reduction.

• 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.