Alliance Pharma confident after some first-half setbacks

Consumer healthcare firm Alliance Pharma reported first-half revenue growth for its Kelo-Cote and Nizoral products on Tuesday, meeting the board's expectations.

The AIM-traded company said Amberen also experienced a revenue resurgence in the second quarter, but on the downside, some smaller products faced regulatory issues, causing manufacturing delays.

Revenue on a see-through basis stood at £82.4m, marking a 1% increase, while statutory revenue reached £81.4m, a 3% rise.

Gross profit amounted to £46.9m, down 7% year-on-year, and profit before tax significantly dipped by 62% to £6.2m.

The company said it generated a robust free cash flow of £11m, a considerable leap from £5.1m in the same period of 2022, while cash from operations was £15.5m, compared to £8.4m in the prior year.

Alliance Pharma's net debt narrowed to £94.5m, down from £102m in 2022.

However, the board declared no interim dividend, having made a 0.592p per-share distribution for the first six months of 2022.

Alliance said first-half revenue growth was affected by Kelo-Cote destocking in China and manufacturing delays due to regulatory issues, which were expected to reverse in the second half.

It said Kelo-Cote demand in China was rebounding, especially in e-commerce sectors.

The company’s consumer healthcare sector saw a 1% increase in see-through revenue, to £59.7m, driven by Nizoral's strong performance, offsetting weaker returns from other consumer healthcare brands.

Prescription medicine revenues fell by 7% to £22.7m.

The firm said it had secured a new three-year £150m revolving credit facility, with the option for two one-year extensions.

Alliance added that it anticipated a significant revenue surge in the latter half of 2023, aiming to reduce group leverage to below 2.0x by the end of the year.

Based on shareholder feedback, the board said it had halted the interim dividend to concentrate on a new dividend policy centred around reinvesting in the company.

The policy details would be unveiled in its preliminary results, slated for March next year.

“We are encouraged by the recovery in China and the significant market share gains made by Kelo-Cote, along with the excellent progress of Nizoral, which is now fully under our control,” said chief executive officer Peter Butterfield.

“Meanwhile, our wider portfolio continues to provide a robust platform from which to grow our consumer healthcare brands.

“The second half of 2023 has got off to an encouraging start as we have addressed the regulatory issues and recommenced production of certain products impacted in the first half of the year.”

Butterfield said the firm’s Kelo-Cote CBEC distributor had started placing orders, adding that it had contractual agreements to secure the future orders required to meet expectations for full-year revenues.

“We anticipate strong group sales growth in the second half as our marketing campaigns yield benefits and we launch several new products to grow our market share.

“Our free cash flow is expected to continue to build strongly for the remainder of 2023, and we will continue to reduce our net debt and leverage by the end of the year.

“The board's expectation for full-year operating performance is unchanged.”

At 1624 BST, shares in Alliance Pharma were up 2.43% at 48.45p.

Reporting by Josh White for Sharecast.com.