ALLIANCE PHARMA Half Year Trading Update
Full year guidance reiterated as H1 challenges expected to ease in H2
Alliance Pharma plc (AIM: APH), the international healthcare group, announces its trading update for the six months ended 30 June 2022 (the “Period”), ahead of the expected announcement of the Group’s interim results on 20 September 2022.
Group see-through revenue of £81.6m was up 1% on the prior period (H1 21: £80.9m) and down 2% at constant exchange rates (“CER”). As detailed in our AGM trading statement on 18 May 2022, Group performance will be more heavily weighted to H2 than in previous years owing to the lockdown in Shanghai and associated temporary disruption to our supply chain, coupled with our anticipated revenue trajectory for both Nizoral™ and Amberen™.
Whilst we controlled our costs well in the Period, we expect H1 22 gross margin to be below prior year due to sales mix and some cost inflation in warehousing and distribution. We anticipate gross margin to improve in H2 22 through favourable product mix and lower freight costs as supply chains normalise. We remain focused on controlling operating costs and have efficiency programs in place to help mitigate further cost inflation.
In-market consumer demand for our brands remains strong and the Board expects that the full year financial performance will be in line with market expectations.
H1 trading in more detail
Consumer Healthcare revenues of £57.4m were up 1% versus the prior period (H1 21: £56.8m) and down 3% CER. Revenues from the Kelo-cote™ franchise rose 5% to £22.9m, benefitting from the recent US acquisition (ScarAway™ and the US rights to Kelo-cote) in addition to currency tailwinds. Adjusting for both these factors, like-for-like revenues for the Kelo-cote franchise declined 12% mainly due to lower order volumes from our China cross-border e-commerce (CBEC) partner. The CBEC scar treatment market declined during H1 22 as lockdowns prevented product from entering China for some months, however the online domestic market grew and Kelo-cote gained share. In-market demand remains strong and we continue to work with our new CBEC distributor to develop this channel and optimise sales during the first year of implementation of this relationship. We anticipate increased order volumes in H2 22.
Following the completion of the marketing authorisation transfer for Nizoral in China from Johnson & Johnson, we transitioned to a new local distributor in the Period. Nizoral see-through revenues of £7.9m (H1 21: £9.0m) were 12% lower (-12% CER), primarily due to the phasing of orders to the new distributor. The delayed sales from H1 22 have already been booked in H2 22 and we remain confident in delivering further growth.
Amberen revenues of £7.5m (H1 21: £9.5m) were 21% lower (-25% CER) reflecting tougher prior year comparators for the entire category in the bricks and mortar channel and increasing competition on-line. We have focused our efforts on the faster growth eCommerce channel, which represents c. 75% of the total market by value, and are delivering market share gains in this area. We have refreshed our claim set and launched new marketing assets in late H1 22, which are expected to drive sales improvement in H2, but we now expect 2022 sales of Amberen to be slightly below 2021. We continue to invest to ensure a strong sales strategy, which, complemented by new product development, is expected to deliver growth from 2023.
Our underlying business remains strong, demonstrating the benefits of a diversified portfolio, with Other Consumer Healthcare revenues increasing 15% to £19.0m (H1 21: £16.5m) in both reported and constant currency and Prescription Medicine revenues of £24.1m remaining in line with the prior Period (H1 21: £24.1m), up 1% at CER.
Free cash flow in the Period remained encouraging at £5.1m (H1 21: £6.5m) with net debt increasing £16.6m to £103.6m at 30 June 2022 (31 December 2021: £87.0m), due to the $19.4m (£14.8m) US acquisition of ScarAway and the US rights to Kelo-cote. As a result, Group leverage will increase to slightly above 2.0x at Period end, however, with healthy cash generation expected in H2, we anticipate leverage will reduce to c.1.5x at the year end.
Peter Butterfield, Chief Executive Officer of Alliance, commented:
“I am pleased with the performance of the Group in the first half of 2022 against the backdrop of difficult global trading conditions. Our portfolio continues to provide a robust platform from which to grow our consumer healthcare brands; I was also delighted to have closed a highly strategic US acquisition in the Period and the integration of ScarAway has gone very smoothly. June was a record trading month for Alliance and we expect this positive momentum to continue, delivering strong sales growth versus prior year across our key brands in H2 as we execute the revenue trajectory expected by us and our distribution partners, in addition to booking the Nizoral orders delayed from H1.”
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (withdrawal) act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under article 17 of MAR.