ALLIANCE PHARMA plc Annual Report and
Accounts for the year ended 31 December 2014
2014 Annual Report
Contents
Business Summary*
Highlights 01
Our Business Model 02
Growth through Acquisitions 05
Growth through Healthcare 06
Professionals
Growth through Consumer 08
Markets
Growth through International 10
Expansion
Report of the Directors
Strategic Report 12
Board of Directors 16
Senior Team Members 18
Corporate Governance 19
Directors’ Remuneration 20
Other Matters 22
Financial Statements
Independent Auditor’s Report 24
to the Members of Alliance
Pharma plc
Consolidated Income Statement 25
Consolidated Statement of
Comprehensive Income 26
Consolidated Balance Sheet 27
Company Balance Sheet 28
Consolidated Statement of 29
Changes in Equity
Company Statement of 30
Changes in Equity
Consolidated and Company 31
Cash Flow Statements
Notes to the Financial Statements 32
Supplementary Information*
Shareholder Information 65
Five Year Summary 66
Advisors 67
*Unaudited information.
Alliance Pharma plc | Annual Report 2014
Alliance Pharma plc is
an AIM listed speciality
pharmaceutical company
Alliance has a strong track record of acquiring the
rights to established niche products and owns or
licences the rights to more than 60 pharmaceutical
products and continues to explore opportunities to
expand the range. The group commenced trading in
1998 and has since grown to an annual turnover of
£43m. Alliance has its headquarters in the UK at
Chippenham, Wiltshire.
Highlights
Business Summary
SALES†
£43.5m
PROFIT
BEFORE TAX*
£10.8m
Key
NUMBERS
48.0
44.1
42.4
45.3
43.5
12.9
10.7
10.8
12.0
10.8
2010 | 2011 | 2012 | 2013 | 2014
2010 | 2011 | 2012 | 2013 | 2014
DIVIDEND
1.000p
FREE CASH
FLOW†
12.3
1.000
0.908
0.825
0.75
0.57
11.0
10.3
8.7
8.2
£10.3m
EPS – BASIC*
3.36p
3.96
3.62
3.61
3.81
3.36
2010 | 2011 | 2012 | 2013 | 2014
2010 | 2011 | 2012 | 2013 | 2014
2010 | 2011 | 2012 | 2013 | 2014
†Restated due to the adoption of IFRS 11.
*Before exceptional item, being impairment of Pavacol-D intangible.
Key
FACTS
Acquisition of Irenat, our
first German product, in
January 2014 contributing
£0.8m to sales in 2014
Acquisition of fast-growing
MacuShield brand in
February 2015
Hydromol continues to
demonstrate good growth,
achieving year on year
sales growth of 15%
Ashton & Parsons Infants’
Powders sales achieve
very significant growth to
£1.4m (2013: £0.4m) as a
result of product redesign
and improved supply
Full year dividend up
10% to 1.000p per share
(2013: 0.908p)
Operating profit 27%
of sales
Low gearing with Debt to
EBITDA ratio of 1.6 times
Alliance Pharma plc | Annual Report 2014
01
Our Business Model
Strategy
Alliance's principal activity is the marketing of pharmaceutical or healthcare products. Its brands are sourced
either via acquisition or inward licensing. They are selected for their sales stability or growth potential. Capital
intensive activities such as manufacturing, warehousing and logistics are controlled by Alliance but outsourced to
leading specialist organisations in these fields. It does not engage in R&D, except for minor line extensions.
The acquired products are ones whose market
position has been established by their
originators. Where necessary, Alliance ensures
the product’s viability by regulatory and technical
initiatives so that the established franchise can
be relied upon to provide sustainable cash-flow
into the foreseeable future.
Acquired products are assessed for their
potential to respond to promotional investment.
If promotion would produce an economic
return, then it is implemented via Alliance’s
highly skilled sales and marketing operation.
Corporate growth is further enhanced by
licensing in and marketing products that have
been developed by other companies’ R&D
activities.
Acquisitions of products are typically financed by
a combination of cash flow, bank debt and equity
in a ratio that optimises earnings per share
whilst maintaining acceptable levels of gearing.
Surplus cash generated after providing for debt
servicing and the operational needs of the
business is then available for dividend payments.
Balanced Portfolio
The bedrock of our business is established products.
These are good, stable products that continue to meet medical needs and
require limited to no promotion in order to sustain their sales.
They provide considerable cash generation to support the growth
activities behind the Dermatology, Specialist Secondary Care,
Ophthalmology and Consumer Healthcare products and also assist in
the financing of acquisitions.
Business Summary
Alastair Tweedale
Head of Established Products
19%
International –
products supporting our
international expansion.
13%
Specialist
Secondary Care –
used by hospitals and
healthcare professionals.
16%
Dermatology –
a range of products for the
treatment of eczema and skin
complaints.
17%
Consumer –
a range of products sold
over the counter.
35%
Bedrock –
non-promoted and
cash generative.
02
Alliance Pharma plc | Annual Report 2014
Percentages on a pro-forma basis for the year ended 31 December 2014 including share of joint ventures and acquisitions.
Alliance Pharma plc | Annual Report 2014
03
Risk Reduction through Diversity
Any potential risk is spread across a portfolio of over 60 products,
the largest representing just over 10% of Alliance’s sales.*
*Proforma 2014 Revenue.
Risk Reduction Through Diversity
Other (46 products)
Hydromol
Opus
Forceval
MacuShield
Buccastem
Nu-Seals
Syntometrine
Timodine
Vitamin E
Naseptin
Ashton & Parsons
Anti Malarials
35.4%
12.3%
8.7%
7.1%
7.1%
5.1%
4.8%
4.4%
3.5%
3.2%
2.9%
2.8%
2.7%
AVERAGE
AGE 48
YEARS
Longevity of Brands
Product
Hydromol
MacuShield
Forceval
Buccastem
Nu-Seals
Syntometrine
Timodine
Vitamin E
Naseptin
Ashton & Parsons
04 Alliance Pharma plc | Annual Report 2014
Annual Sales*
Launch Date
£6.0m
£3.5m
£3.5m
£2.5m
£2.5m
£2.1m
£1.7m
£1.6m
£1.4m
£1.4m
1987
2006
1970
1987
1978
1956
1972
1989
1959
1867
Growth through Acquisitions
Business Summary
Product life-cycle:
Alliance’s bedrock products are usually at least
10 years post patent expiry with a stable sales
history and a low volume that limits direct
competition.
H
S
A
C
T I M E
LOWER VOLUME – typically no competition.
HIGHER VOLUME – generic competition.
Business Development Team
Alliance is committed to continued growth via
acquisition, in-licensing opportunities and forming
mutually beneficial business partnerships.
Left to right:
Anne Melbourne, Dan Thomas, Keturah McElroy and Puja Thapar
The business development team very actively searches for
acquisition opportunities and will assess divestments of individual
products, portfolios, subsidiaries and whole companies across any
therapy area or geography.
Alliance’s experience across a wide range of pharmaceutical
products and markets allows for rapid assessment of opportunities
as they occur.
Throughout the acquisition process, the business development team
integrates with finance, legal, operations, regulatory and marketing.
This allows for rapid assessment of opportunities as they occur and
also facilitates a smooth transition of ownership when the
acquisition has completed.
27
60
27 deals
in 16 years
Over 60
products
Building global
operation
Alliance has a strong track record of successful
acquisitions and has considerable expertise in target
selection, contract negotiation and integration of the
products into its operations. It has considerable
financial resources available for future deals.
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2004
2002
2001
1999
1
deal
2
deals
2
deals
2
deals
3
deals
1
deal
1
deal
1
deal
1
deal
5
deals
3
deals
2
deals
2
deals
1
deal
£5.5m
£3.7m
£9.4m
£12.4m
£6.5m
£16.4m
£7.5m
£0.6m
£1.95m
£7.4m
£9.7m
£11.1m
£4.5m
£2.1m
TOTAL INVESTMENT SINCE 1999
Alliance Pharma plc | Annual Report 2014
05
Growth through Healthcare Professionals
Steve Lobb
Head of Hydromol
David Hope
Head of Secondary Care
Alliance’s Dermatology and Secondary Care business units both utilise our UK sales force to promote products
within their ranges to Healthcare Professionals. Specific targeting techniques are used to increase awareness of
these products which helps drive growth in market share.
Opus Healthcare
The Opus Healthcare business specialises in the development and supply of a stoma care
accessory range. SkinSafe protective film and Lift Plus adhesive remover protect peristomal
skin whilst AbsorbaGel, DeoGel, LaVera, ClearWay and NaturCare are designed to make
wearing a stoma pouch easier. All of the products are available on prescription.
Gelclair
Gelclair is a viscous gel specially formulated to aid in the
management of lesions of the oral mucosa. It forms a
protective film that, by coating and sticking to the lining of the
mouth and throat, offers rapid and effective pain
management. Gelclair comes as a concentrated gel in
sachets for dilution with water.
ImmuCyst
ImmuCyst 81mg is a Bacillus Calmette – Guérin (BCG)
therapy which was originally developed as a vaccine, but was
later discovered to be effective against non-muscle invasive
bladder cancer. It works the way other vaccines work, by
stimulating the body’s own immune system to fight the
cancer. ImmuCyst has been shown to be a more effective
treatment than chemotherapy in fighting the growth of
these tumours.
06 Alliance Pharma plc | Annual Report 2014
Business Summary
Hydromol
The Hydromol complete emollient therapy range is used to control dry skin conditions and improve skin hydration.
Dermatological conditions are among the most common diseases encountered by healthcare professionals. Atopic eczema accounts
for 30% of all dermatological consultations in general practice, and the prevalence is increasing. Estimates vary due to the different
populations examined, but figures suggest a prevalence of around 15–20% in children and 2–10% in adults.
The Hydromol range comprises an ointment, a bath and shower emollient, a cream and an intensive urea cream. The brand Hydromol
achieved 18%* growth in 2014.
Hydromol UK sales
£7m
£6m
£5m
£4m
£3m
£2m
£1m
£0
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Alliance Pharma plc | Annual Report 2014
07
*IMS data.
Growth through Consumer Markets
In recent years we have been broadening the scope of our portfolio, primarily to
include consumer healthcare products.
These products typically require some modest marketing investment but offer
potential for organic growth.
Alex Duggan
Head of Consumer Healthcare
Alex Duggan joined Alliance in 2014 as Head of Consumer Healthcare. Alex brings
with him a wealth of experience that is being utilised to aid the growth and
development of the consumer brands.
MacuShield
MacuShield, recently acquired in February 2015, is the UK’s
most recommended eye care supplement by opticians.
MacuShield is a unique food supplement containing the three
macular pigments lutein, zeaxanthin and meso-zexanthin,
and is designed to be taken by sufferers of dry age-related
macular degeneration (AMD) and other eye conditions.
The product is supported by numerous peer-reviewed
published studies.
Lypsyl
The original lip balm since 1891, Lypsyl provides daily
moisturising care and protection for your lips. The Vitamin E
formula helps stop lips from drying out, with Aloe Vera
extracts to soothe and moisturise and SPF15 to protect your
lips against harmful UVA and UVB rays. Lypsyl’s Cold Sore
Gel provides a triple action formula to relieve the symptoms
of cold sores.
Anbesol
Anbesol is a well-established treatment used for the
temporary relief of pain caused by mouth ulcers, denture
irritation and babies’ teething. Anbesol contains a local
anaesthetic (lidocaine hydrochloride) which works by helping
to stop the sensation of pain. It also contains two antiseptics
which help protect against infection. Available in a liquid,
adult gel and teething gel formulations.
MolluDab
MolluDab is a clinically proven, effective treatment for the
viral skin condition molluscum contagiosum. Containing 5%
potassium hydroxide, MolluDab clears the molluscum lesions
in 1-5 weeks, far quicker than leaving them to clear on their
own, which can take 18 months or more. Potassium hydroxide
is the only solution indicated for use on molluscum
contagiosum, which presents itself as wart type papules on
the skin, predominantly affecting children and young adults.
08 Alliance Pharma plc | Annual Report 2014
Business Summary
Ashton & Parsons
Ashton & Parsons Infants' Powders are a gentle, natural
remedy for the pain and symptoms associated with teething.
Originally developed in 1867 by Ashton & Parsons London, The
City Homeopathic Pharmacies, these Infants' Powders have
been used to soothe the symptoms of teething pain for nearly
150 years. Made from tincture of Matricaria, which is extracted
from German Chamomile flowers, Ashton & Parsons is proud
to be Britain’s No.1 Teething Remedy in Pharmacies and will be
making its TV debut in 2015.
Alliance Pharma plc | Annual Report 2014
09
Growth through International Expansion
Direct Presence
Joint Venture
Local Partners
Local Partners:
Netherlands
Denmark
Finland
Sweden
Iceland
Spain
Portugal
Czech Republic
Greece
Poland
Romania
Slovakia
Malta
Cyprus
Lebanon
Qatar
Oman
Egypt
Gabon
Niger
Burkina Faso
Madagascar
Kenya
South Africa
Namibia
Swaziland
Mauritius
Sri Lanka
Malaysia
Brunei
Singapore
Hong Kong
Australia
New Zealand
The Caribbean
China
Alliance accelerated the development of its mother and
baby franchise in 2014 and is well placed to benefit from
the expected growth in this sector.
In 2014, Alliance acquired a 20% stake in Synthasia for
£0.5m. Synthasia is a Shanghai based company supplying
the Chinese market with Suprememil, an advanced infant
milk formula brand that is manufactured for it in
Switzerland. During 2014 the Chinese authorities
performed a review of the import licences for infant milk;
Suprememil’s licence was renewed, whilst many were not,
providing further opportunities for growth.
Alliance, via its joint venture partner, continues to sell the
vitamin / mineral supplement FushiFu (Forceval) for use in
early pregnancy.
Tony Booley
International Executive Director
10 Alliance Pharma plc | Annual Report 2014
Business Summary
Europe
UK
Although we are undertaking international expansion, 79% of
our total business is in the UK, which remains an important
growth area. We continue to screen a large volume of
acquisition opportunities in a variety of therapeutic areas
within the UK market, as well as searching for organic
growth potential.
Germany
In January 2014, from Bayer Alliance acquired Irenat, its first
product in Germany, moving to a position of profitable trading as
part of the strategy of developing international presence.
Irenat is an established endocrinology brand that is mainly used
for diagnosing and treating hyperthyroidism.
Following this successful acquisition, Alliance continues to
pursue other opportunities.
France
In France we continue to distribute our anti-malarial products
and are also seeing a significant number of opportunities for
further acquisitions coming through.
Republic of Ireland
The acquisition of MacuShield at the beginning of 2015 will
add a substantial contribution to sales in this territory and
will help offset the decline in Nu-Seals due to increased
generic competition.
Much of the scientific research connected with MacuShield
has been undertaken at the world-leading Macular Pigments
Research Group within the Waterford Institute of Technology.
Con Walshe
Country Manager of Ireland
Lars Börger
Country Manager of Germany
Philippe Pasdelou
Country Manager of France
Rest of the World
In 2014 Alliance completed the integration of the 2013
acquisition for the worldwide rights to Syntometrine, having
already owned the UK rights. This added several important
new distributors, via new territories including Australia,
South Africa and Malaysia. These may be valuable
relationships in the event of further acquisitions.
The acquisition of MacuShield
will also add sales in several
new territories, further
increasing Alliance’s
international presence.
Rajiv Ghidiyal
Head of APAC, EMEA, Americas
Alliance Pharma plc | Annual Report 2014
11
Strategic Report
In 2014 Alliance performed well, taking only a modest dip in sales and profits in a challenging year, which
underlines the resilience of our business. We enter 2015 well placed for resumed growth. While sales of our
cyclical toxicology product reduced to a minimal level and Nu-Seals continued its moderate decline arising from
the Irish government’s moves on generic substitution, much of the adverse impact was offset by further solid
growth in the rest of the portfolio. This growth will be augmented in 2015 by the acquisition of MacuShield,
completed in February 2015, and the expected resumption of ImmuCyst sales in the second half of the year.
2015
WELL PLACED
FOR RESUMED
GROWTH
Adoption of IFRS 11 Joint
Arrangements
The Group was required to adopt
International Financial Reporting Standard
11 Joint Arrangements in 2014. Alliance’s
joint ventures, both of which are in China, are
now accounted for using the equity method
which only brings the net result into the P&L.
Previously they have been accounted for
using proportional consolidation which
incorporated our share of sales and costs
separately. Prior year figures have been
restated accordingly and all references
herein to prior year numbers are to the
restated figures. More details of the impact
can be seen in Note 33.
I
Trading performance
Excluding joint ventures, revenue reduced by
4% to £43.5m (2013: £45.3m). The decline
was due to two products: sales of our cyclical
toxicology product fell in line with the low
part of its 2½-year replacement cycle and the
loss of the tender; and Nu-Seals sales
reduced to £2.5m under pressure from
generic competition. Together, these
products accounted for a revenue reduction
totalling some £4.3m. This was substantially
offset by healthy revenue growth of £2.5m
(11%) in the rest of our portfolio.
12 Alliance Pharma plc | Annual Report 2014
The underlying growth was led by another
double-digit performance from Hydromol,
with sales up 15%. We have grown annual
sales of this brand from just under £1m
when we acquired it in 2006 to over £6m in
2014. Sales of the Opus stoma care products
grew by 10% to £4.3m.
With supplies of Ashton & Parsons Infants’
Powders now free of production constraints,
sales are developing well – more than
tripling to £1.4m in 2014. Gelclair, our
treatment for oral mucositis, continued to
grow well, with sales up 10% to £1.3m and
MolluDab, the molluscum contagiosum
treatment that we launched in 2013, made
further good progress in this niche market.
We were also pleased with the performance
in 2014 of our recent acquisitions – Lypsyl in
December 2013 and Irenat in Germany in
January 2014. With sales of £0.8m, Irenat
continues to show the stability that made it
an attractive first product for our German
business. With Lypsyl we have halted the
decline experienced under its previous
owners. To increase sales we have begun to
capitalise on its still-substantial consumer
recognition and are currently researching
market perceptions and developing our
strategy for investment in order to breathe
new life into this well-known brand.
We have been unable to supply ImmuCyst,
our bladder cancer treatment, since
production was halted at Sanofi’s
manufacturing plant in Canada in mid-2012.
ImmuCyst had peak sales of over £4m per
annum before production was suspended.
Regulatory validation of the refurbished
production facility is taking significantly
longer than initially anticipated, and we now
expect to resume sales in the second half of
2015. Market feedback indicates continued
DOUBLE-DIGIT
%
PERFORMANCE
5
1
FROM HYDROMOL
P
WITH SALES U
demand for the product, and we expect to
rebuild substantial sales over time as
hospitals revert to ImmuCyst. Indeed we are
aware that the only licensed competitor is
not currently able to supply the full market
demand. We will do all we can to bring
ImmuCyst back as soon as possible. In the
meantime, we are at an advanced stage in
the process to consider our claim for
profits lost during the extended
manufacturing hiatus.
Generic competition continues to erode Nu-
Seals sales in Ireland. The Irish regulator
has still not adjudicated on which low-dose
aspirin products should be included on the
list of interchangeable medicines that would
permit pharmacists to dispense generic
products against branded prescriptions. We
have submitted a strong case to the
regulator for Nu-Seals to be kept off this list
but if Nu-Seals is eventually included, sales
are likely to fall substantially, which may
well lead to a non-cash impairment charge
against the £9.1m intangible asset.
The planned hand-back of nine products to
Novartis, which we had been distributing
since the origin of the company in 1998, was
completed in 2014. It had been phased over
the past two years, and the impact is low as
these products generated only £0.3m of
gross margin for us in 2014.
Financial performance
Pre-exceptional pre-tax profit was £10.8m,
down 10% from 2013. However, excluding
the cyclical toxicology product, underlying
profit from the rest of the portfolio showed a
healthy increase of 15%. Adjusted earnings
per share were 3.36 pence, down from 3.82
pence in 2013.
Gross margin for the full year was 57.5%.
This was lower than the 60.4% achieved in
2013, which was flattered by the peak sales
of the higher-margin toxicology product, but
higher than the 56.9% achieved in 2012. We
expect to sustain margins at about the 2014
level going forward.
2015
WELL PLACED
FOR RESUMED
GROWTH
Report of the Directors
RE-INTRODUCTION
OF IMMUCYST
%
5
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IS A HIGHLY
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GENERATIVEB
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FREE CASH
FLOW OF
£10.3M
maintain their sales for many years with
little or no promotion. This balance allows
us to invest in marketing to develop growth,
whilst at the same time delivering good
cash generation and profitability. As
examples, we purchased Lypsyl in
December 2013 for the turn-around
opportunity to deliver growth; Irenat in
January 2014 for its stability and cash
generation without the need for promotion;
and MacuShield in February 2015 for its
strong ongoing growth and the opportunity
for us to grow the brand further across
many territories.
In recent years we have been broadening
the growth element of our portfolio to
include consumer healthcare products.
These typically offer substantial organic
growth, whilst only requiring modest
promotional investment. Our increasing
experience in this area indicates that certain
types of consumer product can do well
without major marketing expenditure. And
these consumer products help to balance
risk across the portfolio because they are
not exposed to government price controls.
Alliance is a highly cash generative
business, and 2014’s free cash flow of
£10.3m was well ahead of the £8.2m
achieved in 2013. £3.8m of this was
reinvested in acquisitions during the year
and £2.4m was returned to shareholders via
the dividends.
At the year-end, our unused bank facility
available to fund acquisitions stood at
£23.8m (2013: £25.0m). This was reduced to
£18.3m in February 2015, following the
drawdown of £5.5m as the initial payment
for MacuVision Europe Ltd, which brought
us the MacuShield brand.
Earnings per share
Adjusted basic EPS was 3.36p (2013: 3.82p),
and adjusted diluted EPS was 3.34p (2013:
3.68p), the reduction mainly reflecting the
impact of the toxicology product dropping to
the low point of its cycle and the tender
being lost. Including the Pavacol-D
impairment charge, basic EPS was 3.17p
(2013: 3.82p). During the year the number of
shares in issue remained virtually
unchanged at 264.1m.
Dividend
We are maintaining our progressive dividend
policy, recommending a final payment of
0.667 pence per ordinary share to give a
total for the year of 1.0 pence per share.
This represents a 10% increase on the
previous year’s dividend, while still
maintaining ample earnings cover of over
three times. The final dividend will be paid
on 15 July 2015 to shareholders on the
register on 19 June 2015.
Strategy
The essence of our model is our long-
established ‘buy and build’ strategy, which
is underpinned by a well balanced portfolio.
We have a healthy segment of brands in
which we invest for growth. Conversely we
also possess many brands that are well
established in their market niches and will
Alliance Pharma plc | Annual Report 2014
13
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
Operating costs were well contained at
£13.1m (2013: £13.5m). We made further
modest savings on central overheads, but
most costs remained broadly stable.
Marketing investment remained broadly flat,
although we continued to shift the emphasis
gently from our dermatology and secondary
care products in favour of our growing OTC
consumer portfolio.
Production issues have halted the sales of
Pavacol-D, our cough-suppressant
medicine. We are currently looking at how to
bring this brand back to market but there is
a significant risk that it will not be
economical to do so and therefore the
related £0.6m intangible asset has been
written off in full. Apart from this one-off
non-cash impairment charge, the impact on
profits is not significant as sales of Pavacol-
D have been very low for the past few years
as a result of various supply issues.
The reduced sales contribution from the
cyclical toxicology product resulted in a
lower operating profit before exceptional
items of £11.8m (2013: £13.3m). This
represented 27.1% of sales (2013: 29.4%) –
still a very healthy percentage.
E
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IS A HIGHLY
S
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Our financing costs reduced for the sixth
consecutive year to £1.0m (2013: £1.3m).
This was as a result of the conversion of the
last of the convertible loan stock in 2013 and
the reduction in net bank debt from £25.2m
at the start of the year to £21.1m at the
year-end. Year-end debt to EBITDA gearing
remained flat at 1.6 times.
IN CONSUMER
HEALTHCARE
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OF IMMUCYST
IN JANUARY 2014
WE ACQUIRED
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OPPORTUNITIES
ACROSS A WIDER
F
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G
N
A
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D
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A
AMPLE
FINANCING
HEADROOM
DOUBLE-DIGIT
%
PERFORMANCE
5
1
FROM HYDROMOL
P
WITH SALES U
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
PROGRESSIVE
DIVIDENDP
Y
C
I
L
O
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
Strategic Report continued
2015
WELL PLACED
FOR RESUMED
GROWTH
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL W
T
I
S
E
L
A
S
H
%
5
1
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IN CONSUMER
HEALTHCARE
H
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V
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A
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I
RE-INTRODUCTION
OF IMMUCYST
IN JANUARY 2014
WE ACQUIRED
IRENAT
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
E
C
N
A
I
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L
A
CASH
IS A HIGHLY
S
S
Recently, we have increased the proportion
E
N
in our portfolio of both promoted content
and consumer brands. Following the
I
S
integration of the MacuShield brand,
GENERATIVEB
U
promoted products will have risen to about
40% of sales, being equally divided between
prescription and consumer.
FREE CASH
FLOW OF
£10.3M
There is likely to be to a measured increase
in marketing investment over the next few
years, although this will not be at the
expense of profitability. In 2015 the focus
will be on the re-introduction of Immucyst;
continuing the rapid growth of MacuShield;
the continuing growth of Hydromol; and the
commencement of promotion behind
Ashton & Parsons Infants’ Powders.
E
U
N
I
T
N
O
C
E
W
K
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E
S
O
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E ACQUISITION
OPPORTUNITIES
ACROSS A WIDER
F
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G
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V
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K
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A
M
D
N
A
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
Team
PROGRESSIVE
DIVIDENDP
In May 2014 we welcomed Andrew Smith as
our new Non-Executive Chairman, following
Michael Gatenby’s retirement. Andrew
knows the business well, having been a
Non-Executive Director since 2006.
Y
C
I
L
O
AMPLE
FINANCING
HEADROOM
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL
WITH SALES U
P
%
5
1
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
2015
In February 2015 we acquired MacuVision
Europe Ltd, a UK-based business selling
MacuShield, a treatment for dry age-related
macular degeneration and other eye
conditions. The initial consideration was
£5.5m plus the net asset value, with
deferred payments totalling up to £6.0m
over the next two years dependent on
MacuShield’s sales growth. The acquisition
should bring an initial gross profit
contribution of about £1m a year and sales
are growing rapidly, up 51% in 2014.
WELL PLACED
FOR RESUMED
GROWTH
S
E
L
A
S
H
T
I
%
5
1
P
U
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL W
MacuShield is a once-a-day capsule that
contains meso-zeaxanthin, lutein and
zeaxanthin – three carotenoids, or pigments.
These three carotenoids are naturally
present in the eye, where together they are
known as macular pigment. Macular
pigment helps to protect the eye by
neutralising free radicals and absorbing
blue light, which can damage the retina.
With age, and particularly in dry age-related
macular degeneration and other eye
conditions, the level of macular pigment is
reduced creating the need for a dietary
supplement to boost the level of pigment in
the retina.
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
In the first half of the year we are testing
IN CONSUMER
H
S
both TV advertising and direct mail
E
T
V
HEALTHCARE
W
campaign options for Ashton & Parsons
I
T
A
O
I
Infants’ Powders so that we can maximise
T
WE HAVE SEVERALG
R
I
N
the return on the spend that is scheduled
for later in the year.
I
RE-INTRODUCTION
OF IMMUCYST
Extensive work on re-positioning the Lypsyl
brand will continue through 2015, with a
view to increasing the marketing investment
in 2016.
IN JANUARY 2014
WE ACQUIRED
IRENAT
We have maintained our focus on M&A. In
January 2014 we acquired Irenat, a well-
established prescription brand in Germany
S
F
K
T
O
E
used in thyroid conditions. This was our first
C
E
E
U
acquisition in Germany since placing a
G
D
S
N
O
Country Manager there in 2012. It means
O
A
R
T
P
that our German business is now trading
profitably.
E ACQUISITION
OPPORTUNITIES
ACROSS A WIDER
V
I
T
C
A
R
T
T
A
E
U
N
I
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N
O
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W
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A
I
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A
CASH
Around 75% of MacuShield sales are
IS A HIGHLY
generated in the UK, with the remainder
S
being sales to international distributors,
S
mainly in Europe.
E
N
We continue to seek attractive acquisition
opportunities across a wide range of
I
S
products and markets. Over time we would
GENERATIVEB
U
expect to maintain a balance across the
portfolio – between prescription and
consumer products, and between promoted
and non-promoted products.
FREE CASH
FLOW OF
£10.3M
IN CONSUMER
H
T
HEALTHCARE
W
O
WE HAVE SEVERALG
R
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
Also in January 2014, we took a 20%
minority stake in the Shanghai based,
Synthasia International, a company that
markets a high-quality Swiss infant milk
formula product in China. This transaction
has a progressive arrangement whereby
Alliance can increase its share to 100% over
several years at pre-determined multiples.
Progress at Synthasia was delayed initially
by a Chinese government review of all
imported formula milk products, which,
whilst problematic in the short term, had
the benefit of removing many competitors
Y
C
from the market.
I
L
Our businesses in France and Germany are
O
both progressing well and we are seeing a
good flow of acquisition opportunities.
PROGRESSIVE
DIVIDENDP
S
E
V
I
T
A
I
T
I
N
I
AMPLE
FINANCING
HEADROOM
Two new Non-Executive Directors have
joined the board in the past year. David Cook
joined in April 2014, taking over the Chair of
our Audit Committee from Michael Gatenby,
and Nigel Clifford joined in January 2015
following the retirement of Paul Ranson in
December 2014. David is currently Chief
Financial Officer and Chief Business Officer
of Biotie Therapies Corp. and brings
extensive knowledge and experience of the
pharmaceutical industry. Nigel has been
Chief Executive of Procserve Holdings for
the past three years and is about to move to
become Chief Executive of Ordnance Survey.
He brings broad business experience with
significant exposure to European and
international markets.
Our Finance Director, Richard Wright, has
indicated his intention to leave Alliance at
the end of May 2015. We are grateful to
Richard for his significant contribution to
the business over the past eight years and
wish him well for the future. The process to
recruit a replacement is under way.
DOUBLE-DIGIT
%
PERFORMANCE
5
1
FROM HYDROMOL
P
WITH SALES U
To manage the growing number of
consumer products in our portfolio, we
appointed Alex Duggan in January 2015 as
Head of Consumer Healthcare. Alex has
over 20 years of experience as an
entrepreneur in consumer healthcare and
has launched several leading products in
the UK and internationally, including
Snoreeze and Wartner.
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
We continue to donate products regularly to
International Health Partners, a charity that
distributes medicines to doctors in the
world’s neediest areas.
Charity
AMPLE
FINANCING
HEADROOM
RE-INTRODUCTION
OF IMMUCYST
14 Alliance Pharma plc | Annual Report 2014
IN JANUARY 2014
WE ACQUIRED
IRENAT
E
U
N
I
T
N
O
C
E
W
K
E
E
S
O
T
T
C
A
R
T
T
A
E ACQUISITION
V
I
F
O
OPPORTUNITIES
ACROSS A WIDER
A
N
G
E
S
T
C
U
D
O
R
P
S
T
E
K
R
A
M
D
N
A
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL
WITH SALES U
P
%
5
1
2015
WELL PLACED
FOR RESUMED
GROWTH
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL W
T
I
S
E
L
A
S
H
%
5
1
P
U
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
E
C
N
A
I
L
L
A
IS A HIGHLY
CASH
S
S
E
N
GENERATIVEB
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S
I
FREE CASH
FLOW OF
£10.3M
2015
WELL PLACED
FOR RESUMED
GROWTH
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL W
T
I
S
E
L
A
S
H
%
5
1
P
U
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
E
C
N
A
I
L
L
A
IS A HIGHLY
CASH
S
S
E
N
I
GENERATIVEB
U
S
FREE CASH
FLOW OF
£10.3M
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
PROGRESSIVE
DIVIDENDP
O
C
L
Y
I
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
2015
WELL PLACED
FOR RESUMED
GROWTH
DOUBLE-DIGIT
S
E
L
A
S
%
5
1
H
PERFORMANCE
FROM HYDROMOL W
P
U
T
I
IN CONSUMER
HEALTHCARE
H
T
W
O
WE HAVE SEVERALG
R
S
E
V
I
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A
I
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I
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I
RE-INTRODUCTION
OF IMMUCYST
IN JANUARY 2014
WE ACQUIRED
IRENAT
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
Alliance also supports its employees in their
fundraising activities for local charities. In
2014 this included £9,000 raised by eight
employees who cycled from Bristol to
Bordeaux in aid of PROPS, a charity
supporting young people with special needs;
and £2,500 raised by employees for the
Wiltshire Air Ambulance.
E
U
N
I
T
N
O
C
E
W
K
E
E
S
O
T
Report of the Directors
E ACQUISITION
OPPORTUNITIES
ACROSS A WIDER
F
O
E
G
N
A
V
I
T
C
A
R
T
T
A
S
T
C
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D
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P
S
T
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K
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A
M
D
N
A
AMPLE
FINANCING
HEADROOM
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL
WITH SALES U
P
%
5
1
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
E
C
N
A
I
L
L
A
Outlook
CASH
IS A HIGHLY
S
S
E
N
S
GENERATIVEB
U
In 2015 and 2016 we expect to overcome the
headwinds that have beset us in recent
years, namely: the suspension of ImmuCyst
production in 2012; the generic threats to
Nu-Seals in Ireland as part of the generic
substitution initiative; and the emergence of
new competitors to our cyclical toxicology
product.
I
FREE CASH
FLOW OF
£10.3M
Principal risks and uncertainties
The Group’s principal risks and uncertainties
are outlined below.
Sales volumes being affected by a
change in demand
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
Changes in demand for pharmaceuticals
products could be caused by a number of
factors, such as changes in the competitive
environment. Key criteria when Alliance
selects products to add to its portfolio are
that the products are in niche areas, with the
majority requiring little or no promotional
support, and that the products have many
years of steady sales history before
acquisition.
generic substitution and reference pricing
regime is in the process of being
implemented which may impact Nu-Seals
later in 2015. The Company has made
representations to the HPRA explaining why
Nu-Seals should not be included on this list.
Cost price inflation affecting gross margins
Increases in the cost of goods could erode
gross margins. In a number of cases
Alliance has arrangements with suppliers
which either fix prices or limit price
increases over the next few years. At the
expiry of such arrangements, prices are
tested against prevailing rates in the
market. Alliance also looks for
improvements in production techniques to
reduce the cost of manufacturing.
Sales volumes being affected by
supply chain constraints
System failure or cyber security breach
PROGRESSIVE
DIVIDENDP
Issues within the supply chain can interrupt
supply leading to insufficient stock being
available to meet demand, particularly as all
manufacturing is outsourced and is therefore
outside our direct control. Over the last few
years Alliance has taken a number of
measures to strengthen its supply chain.
These include where possible strengthening
the supply chain team within the business,
dual sourcing of some key products and of
some key ingredients, holding larger buffer
stocks of selected products and improved
communication with suppliers.
Y
The Group has a range of measures in place
C
to monitor and mitigate this risk: networks
and systems are protected by anti-virus
I
L
software, firewalls and network
segmentation that are regularly updated;
O
regular introduction of more up to date
software also provides additional in-built
security; and incident management,
business continuity management and IT
disaster recovery plans are in place for
critical business processes to mitigate the
effects of the business being unable to
operate in the event of a major incident.
Sales pricing being reduced by
regulatory action
Around one third of the Group’s revenues
are from products covered by the
Pharmaceutical Price Regulation Scheme
(PPRS), which is the UK Government’s tool
for controlling pricing for the NHS. Alliance
is a member of the ABPI and other industry
bodies which are consulted by the
Government on changes to PPRS. The latest
scheme commenced in January 2014 and
runs for five years. Most of the other UK
revenue is from products that are medical
devices, sold over the counter or are generic.
The regulatory regime for medical devices
allows for inflationary price increases each
year and over the counter and generic
products are freely priced. In Ireland, a new
Financial risk management
The Group monitors credit risk closely and
considers that its current policies of credit
checks meets its objectives of managing
exposure to credit risk. The Group’s other
financial risk management policies and
objectives are detailed in note 21 of the
financial statements.
On behalf of the Board
Sarah Robinson
Company Secretary
24 March 2015
Alliance Pharma plc | Annual Report 2014
15
ImmuCyst is expected to return in the
second half of 2015 after an absence of
three years. Our market intelligence is that
clinicians eagerly await its resumed
availability. Additionally in the hospital
sector we expect continuing good
performance from Gelclair in oral
complications arising from cancer
treatments and we expect the Opus range of
stoma products to continue to sell well.
The long-running positive trend behind
Hydromol, our favoured range of emollients
for patients requiring skin rehydration, is
also expected to continue.
In consumer healthcare, we have several
growth initiatives. We aim to develop further
the strong franchise behind Ashton &
Parsons Infants’ Powders, which is the
number one pharmacy brand in its sector.
With Lypsyl, following brand re-positioning
work being undertaken this year, we plan to
re-invigorate this well-known brand in 2016.
Finally we are very excited by the significant
potential afforded by MacuShield, which is
recommended by eye specialists for use in
dry age-related macular degeneration.
On the M&A front we are encouraged by the
deal flow we are currently experiencing, for
which we have ample financing headroom.
AMPLE
FINANCING
HEADROOM
DOUBLE-DIGIT
%
PERFORMANCE
5
1
FROM HYDROMOL
P
WITH SALES U
IN CONSUMER
HEALTHCARE
H
T
W
O
WE HAVE SEVERALG
R
S
E
V
I
T
A
I
T
I
N
I
RE-INTRODUCTION
OF IMMUCYST
IN JANUARY 2014
WE ACQUIRED
IRENAT
E
U
N
I
T
N
O
C
E
W
K
E
E
S
O
T
T
C
A
R
T
T
A
E ACQUISITION
V
I
F
O
OPPORTUNITIES
ACROSS A WIDER
A
N
G
E
S
T
C
U
D
O
R
P
S
T
E
K
R
A
M
D
N
A
2015
WELL PLACED
FOR RESUMED
GROWTH
DOUBLE-DIGIT
PERFORMANCE
FROM HYDROMOL W
T
I
S
E
L
A
S
H
%
5
1
P
U
OUR FINANCING
COSTS REDUCED
FOR THE SIXTH
CONSECUTIVE YEAR
E
C
N
A
I
L
L
A
IS A HIGHLY
CASH
S
S
E
N
I
GENERATIVEB
U
S
FREE CASH
FLOW OF
£10.3M
WE WELCOMED
ANDREW SMITH
AS OUR NEW
NON-EXECUTIVE
CHAIRMAN
PROGRESSIVE
DIVIDENDP
O
C
L
Y
I
WE PURCHASED
MACUSHIELD
IN FEBRUARY 2015
FOR ITS STRONG
ONGOING
GROWTH
Board of Directors
Directors who held office at the date of this report are set out below. All were Directors throughout 2014 with the
exception of David Cook who was appointed on 1 April 2014 and Nigel Clifford who was appointed on 26 January 2015.
Andrew Smith – Chairman 325
Andrew joined the Board of Alliance in 2006. He has held various senior positions in the
pharmaceutical industry in the UK and USA having been managing director and senior
vice-president of SmithKline Beecham Pharmaceuticals (now GSK), chief executive of
Cerebrus plc until its sale and president international medical marketing services with
Parexel International. Andrew is a founder of Navitas BioPharma Consulting. He
graduated in Natural Sciences from the University of Cambridge.
John Dawson – Chief Executive Officer 4
John founded Alliance in 1996. He gained multi-disciplinary experience in the
pharmaceutical industry over thirty years. John held various senior roles at Sandoz
(now Novartis AG) as director of finance and administration and deputy managing director.
John has a BSc (Pharmacy) and an MSc (Finance) from the London Business School.
Richard Wright – Finance Director
Richard joined the Board of Alliance in 2007. He is a Chartered Accountant with over
20 years of experience in financial roles across a variety of sectors. Richard read
Mathematics at Robinson College, Cambridge and qualified as an accountant with Ernst
& Young LLP before joining Somerfield plc. More recently, he held senior finance
positions at FirstGroup plc and Parragon Publishing.
Tony Booley – Executive Director
Tony joined Alliance in 1998. He has had around 30 years’ experience in the
pharmaceutical and healthcare industries, with positions at Leo Pharma, Glaxo Wellcome
(now GlaxoSmithKline “GSK”) and Getinge Industrier AB. His senior management
experience includes positions in the UK and internationally. Tony graduated in Physiology,
has an MBA from Warwick and is a Chartered Marketer.
16 Alliance Pharma plc | Annual Report 2014
Report of the Directors
Peter Butterfield – Executive Director
Peter joined the board of Alliance in February 2010 following the acquisition of
Cambridge Laboratories, where he spent five years, latterly as UK Commercial Director.
He is a Board Member of the Association of the British Pharmaceutical Industry ("ABPI")
and is chairman of the ABPI Small Companies Forum. Prior to joining Cambridge
Laboratories, Peter spent six years at GlaxoSmithKline. He holds an honours degree in
Pharmacology from the University of Edinburgh.
Thomas Casdagli – Non-Executive Director 64
Thomas joined the board of Alliance as a non-executive director on 3 March 2009. He is a
partner at MVM Life Science Partners LLP, a life science venture capital fund. He has
been an active investor in life sciences since joining MVM in 2002. Before joining MVM,
Thomas worked at PricewaterhouseCoopers LLP where he qualified as a Chartered
Accountant. Thomas graduated in Molecular and Cellular Biochemistry from the
University of Oxford in 1998.
David Cook – Non-Executive Director 164
David joined the board of Alliance as a non-executive director on 1 April 2014. He is
currently Chief Financial Officer and Chief Business Officer of Biotie Therapies Corp,
a drug development company quoted in Helsinki on the NASDAQ OMX market. He has
previously held senior financial positions with Jazz Pharmaceuticals International,
EUSA Pharma Inc and Zeneus Pharma. David qualified as a chartered accountant with
PricewaterhouseCoopers after graduating in chemistry at the University of Oxford.
Nigel Clifford – Non-Executive Director 246 (appointed to Committees on 24 February 2015)
Nigel joined the board of Alliance as a non-executive director on 26 January 2015. He is
currently Chief Executive of Procserve Holdings Limited, though will shortly be moving to
be Chief Executive at Ordnance Survey. He is also currently a non-executive director of
Anite plc. He has previously held senior positions at Micro Focus International plc, Nokia,
Symbian Software Ltd, Tertio Telecoms Limited, Cable and Wireless plc, Glasgow Royal
Infirmary NHS Trust and BT plc. Nigel graduated in Geography from the University of
Cambridge and has an MBA from Strathclyde University.
1 Chairman Audit Committee 2 Audit Committee member 3 Chairman Nomination Committee
4 Nomination Committee member 5 Chairman Remuneration Committee 6 Remuneration Committee member
Alliance Pharma plc | Annual Report 2014
17
Senior Team Members
Janice Timberlake – Human Resources Director
Janice joined Alliance in 2011 as HR Director. She is a Fellow of the Chartered Institute of
Personnel & Development and has over 20 years of experience in HR roles across a variety of
industry sectors. Janice’s early career was in the UK mining industry, followed by Board roles
in the UK division of MyTravel Plc (formerly Airtours) and latterly the Natural Environment
Research Council. She is currently a non-executive Director and Trustee of Plymouth Marine
Laboratory Ltd, and holds a BSc honours degree in Geography from Hull University.
Dan Thomas – Business Development Director
Since joining Alliance in 2006 Dan has led Alliance’s M&A and licensing activity,
completing over 17 deals. Dan has worked in senior management in the clinical research
(CRO) sector, at Chiltern International and in the biotech research and diagnostics sector,
at R&D Systems Europe (Techne Corp Inc), responsible for international regional sales
operations. Dan has worked in Canada, Germany and France. He holds a first class
honours degree in Applied Biochemistry from Brunel University. In 2011 Dan won the
PLG/AstraZeneca BD Executive of the Year award.
Sarah Robinson – Company Secretary
Sarah joined Alliance in 2010 as the Company Secretary. She has worked in Asia, the UK
and the USA, was Company Secretary for the Financial Times and has further experience
in the financial services and health sector. A Chartered Secretary, Sarah gained her MBA
from Southampton University.
Margaret Boulton – Medical & Regulatory Affairs Director
Margaret joined Alliance in 2009. She has around twenty years of experience in the
pharmaceutical and healthcare industries, with Regulatory/Scientific Affairs positions at
Abbott, Baxter and Élan. Margaret graduated in Animal Science at Nottingham, has a PhD
from Edinburgh and an MBA from Bath.
Stephen Kidner – Operations Director
Stephen joined Alliance in August 2013 bringing a background in development,
manufacturing and supply chain management gained in the pharmaceutical industry over
a 23 year career with Wyeth and Mundipharma International. A science graduate, Stephen
holds an MSc in Pharmaceuticals and an MBA.
18 Alliance Pharma plc | Annual Report 2014
Corporate Governance
Report of the Directors
Introduction
Alliance Pharma plc is an AIM listed company and the Board is committed to achieving good standards of
corporate governance, integrity and business ethics.
Responsibilities of the Board
The Board is responsible to the
shareholders for:
l Setting the Group’s strategy
l Maintaining the policy and decision-
making process around which the
strategy is implemented
l Ensuring that necessary financial and
human resources are in place to meet
strategic aims
l Monitoring performance against key
financial and non-financial indicators
l Providing leadership whilst maintaining
the controls for managing risk
l Overseeing the system of risk
management
l Setting values and standards in
corporate governance matters.
There is a list of matters reserved for the
Board which may be updated by the Board
and approved by the Board only.
The Chairman is responsible for leading the
Board, facilitating the effective contribution of
all members and ensuring that it operates
effectively in the interests of the
shareholders. The Chief Executive Officer is
responsible for the leadership of the business
and implementation of the strategy. The
Company Secretary is responsible, on behalf
of the Chairman, for ensuring that all Board
and Committee meetings are conducted
properly, that the Directors receive the
appropriate information prior to the meeting,
for ensuring that governance requirements
are considered and implemented and for
accurately recording each meeting. The
Directors may have access to independent
professional advice, where needed, at the
Group’s expense.
Board Evaluation and
Governance Review
In 2014 the Board conducted a Board
Evaluation and a review of corporate
governance.
The review of corporate governance looked at
the new UK Governance Code (2014), and
compared its requirements with both the
NAPF Aim Guidelines and the QCA Code as
they apply to the Company. As the company is
listed on AIM, it is not required to comply with
the UK Governance Code but uses this as a
benchmark for good governance practice.
The review noted that the appointment of
David Cook in April 2014 and the anticipated
appointment of Nigel Clifford in January 2015
would build on the independence of the
Board. The Board did not consider that the
appointment of senior independent director
was necessary in 2014 but will consider this
at each review.
The Board Evaluation, conducted every two
years, reviewed the effectiveness of the
Board in determining the corporate strategy,
governance and controls, and Board
development. The Evaluation results will be
used to develop the effectiveness of the
Board when progressing the corporate
strategy and oversight of the control
structure within the organisation. The
Evaluation considered the Board’s
development requirements and the
appropriate induction of new members.
Relations with Shareholders
At each meeting, the Board is updated on the
meetings and communications with the
shareholders and an analysis of the
shareholder base is presented. Research
notes by brokers are circulated to all Board
members. Throughout the year the Chief
Executive Officer and Finance Director meet
with the large, institutional shareholders
who hold the majority of the shares. Regular
feedback is given to the Board following
meetings with the shareholders from the
financial PR advisors, and from the
shareholders via the brokers.
The Group recognises that whilst the
majority of the shares are held by large
institutions, attention should be paid to the
private shareholders and the Investor
Relations section of the Group’s website is
regularly updated and amended with the aim
being to provide good information to all
shareholders, particularly private investors.
The website provides a facility to receive
email alert notifications of Group news and
stock exchange announcements. In addition
the Chief Executive Officer and Finance
Director regularly present at conferences
attended by many potential and current
private shareholders and meet with Private
Client Fund Managers representing the
interests of private investors following which
feedback is given to the Group.
At the Annual General Meeting the Chairman
issues a statement on current trading.
Directors are available following the meeting
to answer questions and for informal
discussions. The results of the proxy votes
are announced at the meeting, including the
abstentions and these are published on the
website following the meeting.
Management Teams
During 2014 the Board delegated management
of the business to the Corporate Organisation
Team and the UK and International Review
and Planning Teams. The Executive Team,
which comprises the Executive Directors, is
the chief operating decision maker and
attended the Corporate Organisation Team
and Review and Planning team meetings.
Reporting Structure
Committees
The Board has an Audit Committee, a
Nominations Committee and a Remuneration
Committee, each with written terms of
reference. The terms of reference are available
on the Group website. The Report of the
Remuneration Committee and Report of the
Nominations Committee form part of this
governance section. Each Committee reports
to the Board on its activities.
Meetings
The Board meets regularly on pre-determined
dates and has a strategy meeting each year
consisting of the Board and other Senior
Managers, the purpose of which is to discuss
progress on the strategy, to review the long term
strategy and develop the strategic framework for
the achievement of the Group’s targets. During
2014 the Board held 11 scheduled meetings.
Michael Gatenby attended the three scheduled
meetings until his retirement in March 2014.
David Cook attended the eight scheduled Board
meetings from his appointment in April 2014.
Thomas Casadagli attended ten Board meetings.
All other members of the Board attended all the
scheduled meetings. In addition there were a
number of ad-hoc meetings.
Non-Executive Directors
The role of the non-executive directors is to:
l Challenge constructively and help develop
proposals on strategy
l Satisfy themselves as to the financial
integrity of the financial information
l Satisfy themselves as to the robustness
of the controls
l Ensure that the systems of risk
management are robust and defensible
l Review management performance and the
monitoring and reporting of such
performance.
They have a role in determining the pay and
benefits of the Executive Directors, to play a
key role in the appointment and, if necessary,
removal of Executive Directors and Board
succession.
Alliance Pharma plc | Annual Report 2014
19
Directors’ Remuneration
Remuneration Committee
The members of the Remuneration
Committee are:
Andrew Smith (Chairman of the
Remuneration Committee)
Thomas Casdagli
David Cook
Nigel Clifford (appointed 24 February 2015)
The Company Secretary attends the
meetings of the Remuneration Committee
as secretary to the Remuneration
Committee. The Chief Executive Officer and
the Human Resources Director are also
invited to attend certain meetings of the
Remuneration Committee.
There were 6 Remuneration Committee
meetings held during the year.
The Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013 do not
apply to companies quoted on AIM; the
Remuneration Committee is committed to
use the Regulations to influence the Report
and follow best practice where appropriate.
The terms of reference of the
Remuneration Committee are available on
www.alliancepharma.co.uk
Role of the Remuneration
Committee
The Remuneration Committee reviews and
determines on behalf of the Board and
shareholders of the Company the pay,
benefits and other terms of service of the
Executive Directors of the Company and the
broad pay strategy with respect to senior
Company employees.
Remuneration Policy
The objective of the Company’s remuneration
policy is to attract and retain the directors
and senior executives needed to run the
Company in a cost-effective manner.
The remuneration policy of the Company
has four principal components:
1. Basic Salaries and Benefits in Kind –
Basic salaries are determined by the
Remuneration Committee bearing in
mind the salaries paid in AIM-listed and
other small market capitalisation
healthcare companies. Within that
frame of reference, it is intended that pay
should be at or near the median level.
Benefits in kind include the provision of
company cars (or a salary alternative).
level perceived appropriate to provide
the necessary incentives for Executive
Directors and Senior Managers. There
are appropriate adjustments to the
bonus payable in the event of over- or
under-achievement of the Group against
those targets. In addition, bonuses are
adjusted for personal performance and
the amount of bonus paid will reflect
any substantial periods of absence or
unavailability of the employee.
3. Share Options Scheme – The Company
has in place a share option scheme
covering all employees, under which
share options are normally granted
once a year. The exercise price of the
options granted under the scheme is set
equal to the market value of the
company's shares at the time of grant.
The share option scheme is overseen by
the Remuneration Committee which
shall determine the terms under which
eligible individuals may be invited to
participate. The scheme is normally an
HMRC approved scheme but may be
unapproved in relation to certain
individuals.
4. Pensions – There is a defined
2. Bonuses – Bonuses are payable to staff
according to the achievement by the
Group of certain pre-determined earnings
targets. The level of bonuses payable on
achievement of the targets is set at the
contribution scheme for all Executive
Directors and employees. Only basic
salaries are pensionable, except in the
case of Tony Booley, whose bonus is
also pensionable.
Directors’ Remuneration
The aggregate remuneration payable to the directors during the period was as follows:
Salary Bonus Other Pension Total Remuneration
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
A R Booley 182,057 153,001 7,789 35,908 6,483 2,114 2,403 17,792 198,732 208,815
P J Butterfield 161,600 153,001 10,219 45,063 520 473 15,140 14,280 187,479 212,817
T Casdagli - - - - - - - - - -
J Dawson 212,677 209,076 8,014 49,904 5,332 6,086 10,000 10,000 236,023 275,066
M R B Gatenby 29,277 74,246 - - 832 770 - - 30,109 75,016
P M Ranson 34,404 33,791 - - - - - - 34,404 33,791
A L Smith 56,134 33,791 - - 1,611 499 - - 57,745 34,29
R D Wright 155,606 153,001 5,720 36,050 1,767 1,610 14,372 14,280 177,465 204,941
D Cook 25,910 - - - 318 - - - 26,228 -
857,665 809,907 31,742 166,925 16,863 11,552 41,915 56,352 948,185 1,044,736
Total Remuneration Share based payments Total
2014 2013 2014 2013 2014 2013
A R Booley 198,732 208,815 35,013 20,227 233,745 229,042
P J Butterfield 187,479 212,817 55,092 80,077 242,571 292,894
T Casdagli - - - - - -
J Dawson 236,023 275,066 - - 236,023 275,066
M R B Gatenby 30,109 75,016 - - 30,109 75,016
P M Ranson 34,404 33,791 - - 34,404 33,791
A L Smith 57,745 34,290 - - 57,745 34,290
R D Wright 177,465 204,941 35,013 20,258 212,478 225,199
D Cook 26,228 - - - 26,228 -
948,185 1,044,736 125,118 120,562 1,073,303 1,165,298
20 Alliance Pharma plc | Annual Report 2014
Report of the Directors
Directors’ Service Contracts
All Executive Directors are employed under service contracts. The services of all Executive Directors may be terminated by the provision
of a maximum of 12 months’ notice by the Company.
Directors’ Share Options
Details of options for the directors who served during the year are as follows:
Number 2013 Granted Exercised Number 2014
Not subject to Subject to Not subject to Subject to Not subject to Subject to Not subject to Subject to Exercise Date from
performance performance performance performance performance performance performance performance price which Expiry
conditions conditions conditions conditions conditions conditions conditions conditions (pence) exercisable date
AR Booley 110,000 - - - - - 110,000 - 7.75 13/04/12 12/04/19
116,500 - - - - - 116,500 - 34.25 29/04/13 28/04/20
130,000 - - - - - 130,000 - 34.12 28/04/14 27/04/21
140,000 - - - - - 140,000 - 29.25 19/10/15 18/10/22
144,200 - - - - - 144,200 - 37.25 06/06/16 05/06/23
- 400,000 - - - - - 400,000 35.75 23/10/18 22/10/23
- - 144,200 - - - 144,200 33.75 11/04/17 10/04/24
PJ Butterfield 1,000,000 - - - - - 1,000,000 - 33.25 26/03/13 25/03/20
115,000 - - - - - 115,000 - 34.25 29/04/13 28/04/20
1,130,000 - - - - - 1,130,000 - 34.12 28/04/14 27/04/21
140,000 - - - - - 140,000 - 29.25 19/10/15 18/10/22
144,200 - - - - - 144,200 - 37.25 06/06/16 05/06/23
- 400,000 - - - - - 400,000 35.75 23/10/18 22/10/23
- - 144,200 - - - 144,200 33.75 11/04/17 10/04/24
RD Wright - - - - - - - - 8.50 23/04/11 22/04/18
- - - - - - - - 7.75 13/04/12 12/04/19
118,650 - - - - - 118,650 - 34.25 29/04/13 28/04/20
130,000 - - - - - 130,000 - 34.12 28/04/14 27/04/21
140,000 - - - - - 140,000 - 29.25 19/10/15 18/10/22
144,200 - - - - - 144,200 - 37.25 06/06/16 05/06/23
- 400,000 - - - - - 400,000 35.75 23/10/18 22/10/23
- - 144,200 - - - 144,200 33.75 11/04/17 10/04/24
The market price of ordinary shares at 31 December 2014 was 37.00 pence and the range during the period was from 32.00 pence to
41.00 pence.
Nominations Committee
The Nominations Committee met seven
times during the year. Michael Gatenby
attended the 3 meetings prior to his
retirement on 26 June 2014. David Cook
attended the 4 meetings following his
appointment. Thomas Casdagli attended 6
meetings. Other members attended all the
meetings. The Committee focused heavily
on Board succession with the following key
outcomes:
l The appointment on 1 April 2014 of
David Cook as a Non-Executive Director
and as Chair of the Audit Committee
l The appointment of Nigel Clifford on 26
January 2015 as a Non-Executive
Director
The Committee appointed Hanson Green
Ltd to compile a short list of candidates for
these vacancies. Hanson Green Ltd has no
other connection with the company. The
Committee acknowledges that diversity is a
benefit to the Company and bears this in
mind when recruiting to any role. By this
approach, the company seeks to recruit the
best individual for the role, but has not
implemented a policy of positive
discrimination by forms of measurable
diversity objectives.
Board succession and composition will
remain a priority for the coming year.
Audit Committee
The Audit Committee met 3 times during
the year. Michael Gatenby attended the 1
meeting prior to his retirement on 26 June
2014. David Cook attended the 2 meetings
following his appointment. Andrew Smith
and Paul Ranson, prior to his retirement on
31 December 2014, attended all meetings.
The external auditors attend the meetings
to discuss the planning and conclusions of
their audits and reviews.
The Audit Committee is able to call for
information from management and
consults with the external auditors directly
if required.
The Audit Committee operates within
specific terms of reference which include:
l considering the appointment of external
auditors
l reviewing the relationship with external
auditors
l reviewing the financial reporting and
internal control procedures
l reviewing the management of financial
matters and focusing upon the
independence and objectivity of the
external auditors
l reviewing the consistency of accounting
policies both on a year to year basis and
across the Group.
Alliance Pharma plc | Annual Report 2014
21
Other Matters
Principal activities
The principal activity of the Group is the acquisition, marketing and distribution of pharmaceutical products. The principal activity of the
Company is to act as a holding company.
Directors
The following table shows the beneficial interests of the Directors (and their spouses and minor children) in the shares of the Company.
Ordinary shares
At start of year
Beneficial Non-beneficial or subsequent
interest interest At end of year appointment
Number Number Number Number
Anthony Booley 4,310,723 - 4,310,723 4,610,723
Peter Butterfield - - - -
Thomas Casdagli 26,101 24,035,799 24,061,900 24,061,900
John Dawson 39,576,402 20,000,000 59,576,402 59,576,402
Michael Gatenby 350,000 - 350,000 350,000
Paul Ranson 48,000 - 48,000 48,000
Andrew Smith 200,000 - 200,000 200,000
Richard Wright 190,768 - 190,768 190,768
Directors’ Responsibilities Statement
The directors are responsible for preparing the Strategic Report and the Directors’ Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to
prepare the Group financial statements and the Company financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs). Under company law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company and group for that period. In
preparing these financial statements, the directors are required to:
l select suitable accounting policies and then apply them consistently;
l make judgments and accounting estimates that are reasonable and prudent;
l state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial
statements;
l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions
and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
l so far as each of the directors is aware there is no relevant audit information of which the company’s auditor is unaware; and
l the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
22 Alliance Pharma plc | Annual Report 2014
Report of the Directors
Disabled employees
Applications for employment by disabled persons are fully considered, bearing in mind the aptitudes of the applicant concerned. In the
event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that
appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons
should, as far as possible, be identical to that of other employees.
Employee information and consultation
The Group continues to involve its staff in the future development of the business. Information is provided to employees through the
Group website, intranet site and by regular briefing meetings.
The Group operates a Group Personal Pension Plan and a Stakeholder Pension Plan which is available to all employees.
Going concern
As explained in the Strategic Report, the current rate of cash generation by the Group comfortably exceeds the capital and debt
servicing needs of the business (though there cannot, of course, be absolute certainty that the rate of cash generation will be
maintained). The Board remains confident that all the bank covenants will continue to be met. The Group has a £5m Working Capital
Facility which is largely undrawn and which the Board believes should comfortably satisfy the Group’s working capital needs for at least
the next 12 months.
After making enquiries, the Directors have formed a judgement that there is reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements.
Political donations
There were no political donations made during the period.
Auditor
A resolution to re-appoint Grant Thornton UK LLP as auditor for the next year will be proposed at the annual general meeting in
accordance with section 489 of the Companies Act 2006.
Annual General Meeting
The 2015 Annual General Meeting of the Company will be held on 27 May 2015, the business of which is set out in the Notice of Meeting.
On behalf of the Board
Sarah Robinson
Company Secretary
24 March 2015
Alliance Pharma plc | Annual Report 2014
23
Independent Auditor’s Report
to the members of Alliance Pharma plc
We have audited the financial statements of Alliance Pharma plc for the year ended 31 December 2014 which comprise the consolidated
income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the company balance sheet,
the consolidated statement of changes in equity, company statement of changes in equity, the consolidated and company cash flow
statements and the related notes. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
l the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December
2014 and of the group's profit for the year then ended;
l the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
l the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
l the parent company financial statements are not in agreement with the accounting records and returns; or
l certain disclosures of directors' remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit.
Tracey James
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford Rowan Place
24 March 2015
24 Alliance Pharma plc | Annual Report 2014
Consolidated Income Statement
Financial Statements
Year ended Year ended
31 December 31 December
2014 2013
Restated*
Notes £000s £000s
Revenue 3 43,536 45,275
Cost of sales (18,493) (17,944)
Gross profit 25,043 27,331
Operating expenses
Administration and marketing expense (12,510) (12,917)
Amortisation of intangible assets (488) (422)
Share-based employee remuneration 6 (571) (632)
Share of joint venture profits/(losses) 319 (48)
(13,250) (14,019)
Operating profit excluding exceptional item 11,793 13,312
Exceptional item: impairment 11 (622) -
Operating profit 11,171 13,312
Finance costs
Interest payable and similar charges 5 (1,090) (1,281)
Interest income 5 48 50
Other finance income/(charges) 5 28 (72)
(1,014) (1,303)
Profit on ordinary activities before taxation 4 10,157 12,009
Taxation 7 (1,772) (2,425)
Profit for the year attributable to equity shareholders 8,385 9,584
Earnings per share
Basic (pence) 9 3.17 3.82
Diluted (pence) 9 3.16 3.68
*Restated due to the adoption of IFRS 11, please see note 2 and 33.
All of the activities of the Group are classed as continuing.
The accompanying accounting policies and notes form an integral part of these financial statements.
Alliance Pharma plc | Annual Report 2014
25
Consolidated Statement of
Comprehensive Income
Year ending Year ending
31 December 31 December
2014 2013
£000s £000s
Profit for the period 8,385 9,584
Other comprehensive income
Other items recognised directly in equity
Items that may be reclassified to profit or loss
Interest rate swaps – cash flow hedge (572) 443
Deferred tax on interest rate swaps 119 (93)
Foreign exchange translation differences 7 -
Share of joint venture other comprehensive loss (8) -
Total comprehensive income for the period 7,931 9,934
26 Alliance Pharma plc | Annual Report 2014
Consolidated Balance Sheet
Financial Statements
31 December 31 December 1 January
2014 2013 2013
Restated* Restated*
Note £000s £000s £000s
Assets
Non-current assets
Intangible assets 10 88,875 87,111 77,940
Property, plant and equipment 11 396 592 564
Joint venture investment 33 1,271 533 1,001
Joint venture receivable 33 1,462 1,462 1,462
Derivative financial instruments 22 - 443 -
Deferred tax asset 23 194 - -
92,198 90,141 80,967
Current assets
Inventories 13 5,914 5,468 5,393
Trade and other receivables 14 8,322 10,641 9,507
Cash and cash equivalents 15 1,434 687 4,613
15,670 16,796 19,513
Total assets 107,868 106,937 100,480
Equity
Ordinary share capital 25 2,641 2,641 2,430
Share premium account 29,388 29,380 25,297
Share option reserve 1,995 1,424 792
Reverse takeover reserve (329) (329) (329)
Other reserve (103) 350 -
Retained earnings 37,188 31,202 23,658
Total equity 70,780 64,668 51,848
Liabilities
Non-current liabilities
Long term financial liabilities 18 19,235 20,881 20,225
Other liabilities 20 - - 20
Deferred tax liability 23 6,309 6,294 6,124
Provisions for other liabilities 24 - 199 364
Derivative financial instruments 22 129 - -
25,673 27,374 26,733
Current liabilities
Cash and cash equivalents 15 414 2,125 1
Financial liabilities 18 2,895 2,895 6,250
Convertible debt 18,19 - - 4,189
Corporation tax 959 1,154 1,322
Trade and other payables 17 6,920 8,531 9,940
Provisions for other liabilities 24 227 190 197
11,415 14,895 21,899
Total liabilities 37,088 42,269 48,632
Total equity and liabilities 107,868 106,937 100,480
*Restated due to the adoption of IFRS 11, please see note 2 and 33.
The financial statements were approved by the Board of Directors on 24 March 2015.
John Dawson Richard Wright
Director Director
The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478
Alliance Pharma plc | Annual Report 2014
27
Company Balance Sheet
31 December 31 December 1 January
2014 2013 2013
Note £000s £000s £000s
Assets
Non-current assets
Investment in subsidiaries 12 51,936 47,119 37,618
51,936 47,119 37,618
Current assets
Trade and other receivables 14 25 50 10,021
Cash and cash equivalents 15 12 12 182
37 62 10,203
Total assets 51,973 47,181 47,821
Equity
Ordinary share capital 25 2,641 2,641 2,430
Share premium account 29,388 29,380 25,297
Share option reserve 1,995 1,424 792
Retained earnings 17,766 13,527 14,719
Total equity 51,790 46,972 43,238
Liabilities
Current liabilities
Convertible debt 18,19 - - 4,189
Corporation tax - - 4
Trade and other payables 17 183 209 390
183 209 4,583
Total liabilities 183 209 4,583
Total equity and liabilities 51,973 47,181 47,821
The financial statements were approved by the Board of Directors on 24 March 2015.
John Dawson Richard Wright
Director Director
The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478
28 Alliance Pharma plc | Annual Report 2014
Consolidated Statement of
Changes in Equity
Financial Statements
Ordinary Share Share Reverse
share premium option takeover Other Retained Total
capital account reserve reserve reserve earnings equity
£000s £000s £000s £000s £000s £000s £000s
Balance 1 January 2013 2,430 25,297 792 (329) - 23,658 51,848
Issue of shares 211 4,083 - - - - 4,294
Dividend paid - - - - - (2,040) (2,040)
Share options charge - - 632 - - - 632
Transactions with owners 211 4,083 632 - - (2,040) 2,886
Profit for the period - - - - - 9,584 9,584
Other comprehensive income
Interest rate swaps –
cash flow hedge - - - - 443 - 443
Deferred tax on interest rate swap - - - - (93) - (93)
Total comprehensive income
for the period - - - - 350 9,584 9,934
Balance 31 December 2013 2,641 29,380 1,424 (329) 350 31,202 64,668
Balance 1 January 2014 2,641 29,380 1,424 (329) 350 31,202 64,668
Issue of shares - 8 - - - - 8
Dividend paid - - - - - (2,398) (2,398)
Share options charge - - 571 - - - 571
Transactions with owners - 8 571 - - (2,398) (1,819)
Profit for the period - - - - - 8,385 8,385
Other comprehensive income
Interest rate swaps –
cash flow hedge - - - - (572) - (572)
Deferred tax on interest rate swap - - - - 119 - 119
Foreign exchange translation
differences - - - - - (1) (1)
Total comprehensive income
for the period - - - - (453) 8,384 7,931
Balance 31 December 2014 2,641 29,388 1,995 (329) (103) 37,188 70,780
The balance on the share premium account may not be legally distributed under section 831 of the Companies Act 2006.
Alliance Pharma plc | Annual Report 2014
29
Company Statement of
Changes in Equity
Ordinary Share Share
share premium option Retained Total
capital account reserve earnings equity
£000s £000s £000s £000s £000s
Balance 1 January 2013 2,430 25,297 792 14,719 43,238
Issue of shares 211 4,083 - - 4,294
Dividend paid - - - (2,040) (2,040)
Share options charge - - 632 - 632
Transactions with owners 211 4,083 632 (2,040) 2,886
Profit for the period - - - 848 848
Balance 31 December 2013 2,641 29,380 1,424 13,527 46,972
Balance 1 January 2014 2,641 29,380 1,424 13,527 46,972
Issue of shares - 8 - - 8
Dividend paid - - - (2,398) (2,398)
Share options charge - - 571 - 571
Transactions with owners - 8 571 (2,398) (1,819)
Profit for the period - - - 6,637 6,637
Balance 31 December 2014 2,641 29,388 1,995 17,766 51,790
The balance on the share premium account may not be legally distributed under section 831 of the Companies Act 2006.
The profit for the year dealt with in the financial statements of the parent company was £6,637,000 (2013: Profit £848,000).
As permitted by section 408 of the Companies Act 2006, no separate income statement is presented in respect of the parent company.
30 Alliance Pharma plc | Annual Report 2014
Consolidated and Company
Cash Flow Statements
Financial Statements
Group Company
Year ended
Year ended 31 December Year ended Year ended
31 December 2013 31 December 31 December
2014 Restated* 2014 2013
Note £000s £000s £000s £000s
Cash flows from operating activities
Cash generated from operations 27 13,451 11,897 50 (23)
Tax paid (2,028) (2,516) - (4)
Cash flows received from/(used in) operating activities 11,423 9,381 50 (27)
Investing activities
Interest received 48 50 1,757 1,464
Dividend received 72 420 5,400 10,000
Investment in subsidiary - - (4,817) (9,501)
Payment of deferred consideration - (20) - -
Development costs capitalised 10 (58) (63) - -
Purchase of property, plant and equipment 11 (111) (298) - -
Purchase of other intangible assets 10 (2,817) (9,534) - -
Investment in joint venture 33 (499) - - -
Net cash (used in)/received from investing activities (3,365) (9,445) 2,340 1,963
Financing activities
Interest paid and similar charges (986) (1,232) - (148)
Loan issue costs - (500) - -
Loan to joint venture (503) - - -
Proceeds from exercise of share options 8 82 8 82
Dividend paid (2,398) (2,040) (2,398) (2,040)
Receipt from borrowings 2,750 28,500 - -
Repayment of borrowings (4,500) (30,725) - -
Net cash (used in)/received from financing activities (5,629) (5,915) (2,390) (2,106)
Net movement in cash and cash equivalents 2,429 (5,979) - (170)
Cash and cash equivalents at the beginning of the period (1,438) 4,613 12 182
Exchange gains/(losses) on cash and cash equivalents 29 (72) - -
Cash and cash equivalents at the end of the period 15 1,020 (1,438) 12 12
*Restated due to the adoption of IFRS 11, please see note 2 and 33.
The accompanying accounting policies and notes form an integral part of these financial statements.
Alliance Pharma plc | Annual Report 2014
31
Notes to the Financial
Statements
for year ended 31 December 2014
1. General information
Alliance Pharma plc (‘the Company’) and its subsidiaries (together ‘the Group’) acquire, market and distribute pharmaceutical and other
medical products. The Company is a public limited company incorporated and domiciled in England. The address of its registered office is
Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB.
The Company is listed on the AIM stock exchange.
These consolidated financial statements have been approved for issue by the Board of Directors on 24 March 2015.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The new
consolidation standards have been adopted in the year (IAS 27, 28 and IFRS 10, 11 and 12), none have a material impact other than that
noted through IFRS 11. These policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and
with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared
under the historical cost convention, with the exception of derivatives which are included at fair value. A summary of the more important
Group and Company accounting policies are set out below. The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions in these statements, particularly in relation to determining the
useful economic life of assets, that affect the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
2.2 Consolidation
The consolidated balance sheet includes the assets and liabilities of the company and its subsidiaries which are made up to 31 December
2014. Entities over which the Group has the ability to exercise control are accounted for as subsidiaries. Interests acquired in entities are
consolidated from the effective date of acquisition and interests sold are consolidated up to the date of disposal. Balances between Group
companies are eliminated; no profit is taken on sales between Group companies. Goodwill arising on the acquisition of interests in
subsidiaries, representing the excess of consideration transferred over the Group's share of the fair values of identifiable assets,
liabilities and contingent liabilities acquired, is capitalised as a separate item.
An entity is treated as a joint venture where the Group holds a long term interest and shares control under a contractual agreement.
Following IFRS 11 becoming effective and the subsequent adoption by the company in January 2014, the company now accounts for its
investment in joint ventures using the equity method in accordance with IAS 28. This replaces the proportionate consolidation method of
accounting applied previously, and has also required the restatement of comparative numbers. See note 33 for details of joint ventures.
The consolidated income statement includes the Group’s share of the joint ventures’ profit.
2.3 Judgements and estimates
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in
accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. Critical judgements, estimates and
assumptions that are applied in the preparation of the consolidated financial statements include:
Depreciation and amortisation
The Group exercises judgement to determine useful lives and residual values of intangibles, computer equipment, and fixtures, fittings
and equipment. The assets are depreciated down to their residual values over their estimated useful lives.
Impairment
The value in use calculation uses cash flow projections based on financial forecasts for the next two years approved by management and
extrapolated for a 15 year period or the useful economic life, whichever is the shorter. In each case it is assumed there will be no growth
beyond 2016 and the cash flows of each acquisition are discounted at a rate of 10%, which approximates to the Group’s weighted average
cost of capital (see note 10).
32 Alliance Pharma plc | Annual Report 2014
Financial Statements
2. Summary of significant accounting policies continued
Provisions
Provisions have been made for onerous leases and associated costs (see note 24) and for slow moving and obsolete stock. These
provisions are estimates and the actual costs and timing of future cash flows are dependent on future events. The difference between
expectations and the actual future liability will be accounted for in the period when such determination is made.
Deferred consideration
The Company determines that where there is an obligation to pay consideration dependent on the sale of a product, and the Company can
control whether the product is sold or not, the consideration is only recognised once a sale is made.
Consolidation of Joint Ventures
The Group owns 60% of the issued share capital of Unigreg Limited. The Group considered the existence of substantive participating
rights held by the minority shareholder which provide that shareholder with a veto right over the significant financial and operating
policies of Unigreg Ltd and determined that, as a result of these rights, the Group does not have control over the financial and operating
policies of Unigreg Ltd, despite the Group's 60% ownership interests consequently the company is accounted for as a joint venture.
The Group owns 20% of the issued share capital of Synthasia International Company Limited (‘Synthasia’). The Group considered the
existence of substantive participating rights held by both the Group and another shareholder which provide both parties with a veto right
over the significant financial and operating policies of Synthasia and determined that, as a result of these rights, Synthasia is accounted
for as a joint venture.
In accordance with IFRS 11, the Group’s investments made to date in joint arrangements are characterised as joint ventures in which
the Group has rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligation for
underlying liabilities.
2.4 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group’s
activities. Revenue is shown net of value-added tax, estimated returns, rebates and discounts and after eliminating sales within the Group
and represents amounts invoiced to third parties in relation to the Group’s sole principle activity namely the distribution of
pharmaceutical products. Revenue is recognised when a Group entity has delivered products to the customer and confirmation of receipt
is confirmed. The risks and rewards are transferred upon customers receiving the goods.
2.5 Foreign currency transactions
The consolidated financial statements are presented in sterling, which is the presentational currency of the Group and the functional
currency of the parent Company. Foreign currency transactions by Group companies are booked at the exchange rate ruling on the date of
the transaction. Foreign currency monetary assets and liabilities are retranslated into local currency at the rate of exchange ruling at the
balance sheet date. Exchange differences are booked to the income statement.
2.6 Property, plant and equipment
Computer equipment, fixtures, fittings and equipment are stated at the cost of purchase less any provisions for depreciation and
impairment. The rates generally applicable are:
Computer equipment
Fixtures, fittings and equipment
20% – 33.3% per annum, straight line
20% – 25% per annum, straight line
Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.
2.7 Leases
Leasing agreements which transfer to the Group substantially all the benefits and risks of ownership are treated as finance leases, as if
the asset had been purchased outright. The assets are included within computer equipment, fixtures, fittings and equipment and the
capital element of the leasing commitments are shown as obligations under finance leases. Assets held under finance leases are
depreciated on a basis consistent with similar owned assets or the lease term if shorter. The interest element of the lease rental is
included in the income statement. All other leases are considered operating leases and the annual rentals are included in the income
statement on a straight line basis over the lease term.
2.8 Goodwill
Goodwill represents the excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets
acquired. Goodwill is reviewed for impairment at least annually by assessing the recoverable amount of each acquisition, considered to be
a cash-generating unit, to which the goodwill relates. The recoverable amount is the higher of fair value less costs to sell and value in
use. When the recoverable amount of the cash-generating unit is less than the carrying amount an impairment loss is recognised. Any
impairment is recognised immediately in the Group Income Statement and is not subsequently reversed.
Alliance Pharma plc | Annual Report 2014
33
Notes to the Financial
Statements continued
for year ended 31 December 2014
2. Summary of significant accounting policies continued
2.9 Intangible assets
Acquired intangible assets
Intangible assets are stated at the lower of cost less provision for amortisation and impairment or the recoverable amount (explained
further in note 10). Technical know-how and trademarks are deemed to have an indefinite useful life and are tested for impairment
annually. Distribution licences are amortised over the current life of the licence on a straight line basis and are tested for impairment
annually, if the licence period can be extended the useful life of the intangible asset shall include the renewal period only if there is
evidence to support renewal by the entity without disproportionate cost. In determining the useful economic life of distribution rights each
acquisition has been reviewed separately and consideration given to the period over which the Group expects to derive economic benefit.
Internally-generated intangible assets –Research and development expenditure
Research expenditure is charged to the Income Statement in the period in which it is incurred. Development expenditure is capitalised
when it can be reliably measured and the project it is attributable to is separately identifiable, is technically feasible, demonstrates future
economic benefit, and will be used or sold by the Group once completed.
The capitalised cost is amortised over the period during which the Group is expected to benefit and begins when the asset is ready
for use.
Development costs are reviewed at least annually for impairment by assessing the recoverable amount of each cash-generating unit, to
which the development costs relate. The recoverable amount is the higher of fair value less costs to sell and value in use. When the
recoverable amount of the cash-generating unit is less than the carrying amount an impairment loss is recognised. Any impairment is
recognised immediately in the Group Income Statement. Any reversal of a previously recorded impairment loss in a subsequent period
would also be recognised immediately in the Group Income Statement and is not subsequently reversed.
Development costs not meeting the recognition criteria are expensed as incurred.
Impairment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit
level. Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful
life, and those intangible assets not yet available for use are tested for impairment at least annually.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an
internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated,
are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash
generating unit. With the exception of goodwill and development costs, all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist.
2.10 Inventories
Inventories are included at the lower of cost less any provision for impairment or net realisable value. Cost is determined on a first-in-
first-out basis using the weighted average cost.
2.11 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit reported in the income statement
because the former excludes items of income or expense that are either taxable or deductible in other years or that are never taxable or
deductible, and it includes tax reliefs that are not included in the income statement. The Group’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are provided in full on temporary differences, and deferred tax assets are recognised to the
extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax
is provided using the rates of tax that are expected to apply in the period when the liability is settled or the asset is realised, based on
rates that have been substantively enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted. The Group
jointly controls the sharing of profits in the joint venture and as such no deferred tax has been recognised on temporary differences.
34 Alliance Pharma plc | Annual Report 2014
Financial Statements
2. Summary of significant accounting policies continued
2.12 Derivative financial instruments and hedging activities
Derivative financial instruments are used to manage exposure to market risk from treasury operations. The principal financial instrument
used by the Group is interest rate swaps. The Group does not hold or issue derivative financial instruments for trading or speculative
purposes. Derivative financial instruments are recognised in the balance sheet at fair value and then re-measured at subsequent
reporting dates. The fair value is calculated by reference to market interest rates and supported by counterparty confirmation.
The interest rate swaps are designated as cash flow hedges.
The effective portion of changes in the fair value of derivative financial instruments that are designated as cash flow hedges is recognised
in other comprehensive income, while the gain or loss relating to the ineffective portion is recognised immediately in the income
statement. Changes in the fair value of derivative financial instruments that are not designated as cash flow hedges are recognised in the
income statement as they arise.
2.13 Debt instruments
Debt instruments are initially stated at their fair value net of issue costs, and subsequently measured at amortised cost using the
effective interest rate method.
Convertible Unsecured Loan Stock issued by the Company is regarded as compound financial instruments. Compound financial
instruments are split and recorded respectively within each of its two components, equity and liability. The fair values of the liability
component and the equity conversion component were determined at issuance of the bond. The equity component was determined as nil
and the fair value of the liability component, included in long-term borrowings, was calculated using a market interest rate for an
equivalent non-convertible bond.
2.14 Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
method.
2.15 Financial assets – loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as
non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the
balance sheet (note 2.16 and 2.17).
2.16 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect amounts due according to the original terms of the receivables.
2.17 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other
short-term highly liquid investments, available with no penalty, with original maturities of three months or less, bank overdrafts and
working capital facilities.
2.18 Employee benefits – share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for
the grant of the options is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted. Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. At each balance sheet date, the Group revises its estimates of the number of
options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the Group Income
Statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options are exercised.
Alliance Pharma plc | Annual Report 2014
35
Notes to the Financial
Statements continued
for year ended 31 December 2014
2. Summary of significant accounting policies continued
2.19 Equity
Equity comprises the following:
“Share capital” represents the nominal value of equity shares.
“Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses
of the share issue.
“Share option reserve” represents equity-settled share-based employee remuneration until such share options are exercised.
“Other reserves” represents the fair value of derivative financial instruments at the balance sheet date that are designated as cash flow
hedges net of deferred tax, less amounts reclassified through other comprehensive income.
“Retained earnings” represents retained profit.
“Reverse takeover reserve” represents the difference between the fair value and nominal value of shares issued on a reverse takeover.
2.20 Investments
Investments in subsidiaries included in the Company’s balance sheet are stated at cost less any provision for impairment.
2.21 Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, for which it is probable
that a transfer of economic benefits will be required to settle the obligation and where a reliable estimate can be made of the amount of
the obligation.
Where material, the provisions have been discounted to their present value.
2.22 Business combinations
Business combinations are accounted for using the acquisition accounting method. Identifiable assets, liabilities and contingent liabilities
acquired are measured at fair value at acquisition date. The consideration transferred is measured at fair value and includes the fair
value of any contingent consideration. The costs of acquisition are charged to the income statement in the period in which they are
incurred.
2.23 New standards not yet applied
A number of new EU adopted standards, amendments to standards and interpretations are not yet effective for the year ended 31
December 2014 and have not been applied in preparing these financial statements. The following list is not comprehensive but includes
the most significant to these financial statements:
l IFRS 9 ‘Financial Instruments’ (2014), representing the completion of the IASB project to replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’. The new standard introduces extensive changes to IAS 39’s guidance on the classification and
measurement of financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9 also
provides new guidance on the application of hedge accounting. The new standard is required to be applied for annual reporting periods
beginning on or after 1 January 2018.
l IFRS 15 ‘Revenue from Contracts with Customers’ replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several revenue-
related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in
many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance
obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.
The Group does not currently expect that adoption of these standards will have a significant effect on the financial position or
consolidated results of the Group.
The Group continually reviews amendments to the standards made under the IASB’s annual improvements project.
36 Alliance Pharma plc | Annual Report 2014
Financial Statements
3. Segmental reporting
Operating segments
An operating segment is defined as a component of the entity:
i)
that engages in business activities from which it may earn revenues and incur expenses,
ii) whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM) to make decisions about the
resources to be allocated to the segment and assess its performance, and
iii) for which discrete financial information is available.
For the year ended 31 December 2014 the Executive Team has been identified as the CODM.
Our management information system produces reports for the Executive Team grouping financial performance under the following
business areas:
l Hydromol
l Secondary Care
l Community and Consumer Products
l Established Products
l International
All business areas are responsible for developing, marketing and distributing a range of pharmaceutical and other medical products. As
permitted by IFRS 8, since these business areas are deemed to have similar economic characteristics and are similar, if not the same, in
all of the following:
l business areas derive their revenue from the supply of pharmaceutical products,
l the production and distribution process is the same across all business areas,
l business areas supply to similar customers i.e. pharmaceutical distributors or pharmacies, and
l all business areas are subject to a similar regulatory environment.
The business areas have been aggregated into a single reportable segment, namely pharmaceuticals. Each month the CODM is
presented with financial information prepared in accordance with IFRS as adopted in the EU and the accounting policies set out in note 2
to these financial statements. As such the financial information provided to the CODM regarding the operating segment has already been
disclosed in the financial statements.
Geographical information
The following revenue information is based on the geographical location of the customer:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
United Kingdom 36,166 38,890
Ireland 3,116 3,626
Rest of the world 4,254 2,759
Statutory Revenue 43,536 45,275
China joint ventures 1,941 238
Total revenue 45,477 45,513
All non-current assets are located within the United Kingdom.
Alliance Pharma plc | Annual Report 2014
37
Notes to the Financial
Statements continued
for year ended 31 December 2014
3. Segmental reporting continued
Major customers
During the year there were 2 (year ended 31 December 2013: 2) customers who separately comprised 10% or more of revenue.
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Major customer 1 15,133 15,252
Major customer 2 10,577 10,937
25,710 26,189
4. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 8 8
Fees payable by the Group to the Company’s auditor for other services:
– The audit of the Company’s subsidiaries 44 38
– Other advisory services 33 112
Amortisation of intangible assets 488 422
Impairment of intangible assets 622 -
Share options charge 571 632
Depreciation of plant, property and equipment 307 266
Operating lease rentals 97 97
(Profit)/Loss on foreign exchange transactions (28) 72
5. Finance costs
Year ended Year ended
31 December 31 December
2014 2013
Restated
£000s £000s
Interest payable and similar charges
On loans and overdrafts (968) (1,222)
Amortised finance issue costs (104) (22)
Notional interest (18) (37)
(1,090) (1,281)
Interest income 48 50
Other finance income/(charges)
Foreign exchange movement on euro denominated debt 28 (72)
28 (72)
Finance costs – net (1,014) (1,303)
Notional interest relates to the unwinding of the discount applied to provisions (see note 24).
38 Alliance Pharma plc | Annual Report 2014
Financial Statements
6. Directors and employees
Employee benefit expenses for the Group during the period were as follows:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Wages and salaries 4,541 4,691
Social security costs 556 639
Other pension costs (note 30) 327 307
Share-based employee remuneration (note 26) 571 632
5,995 6,269
The average number of employees of the Group during the period was:
Year ended Year ended
31 December 31 December
2014 2013
Management and administration 74 72
Remuneration in respect of Directors (including pension) was as follows:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Emoluments 948 1,045
948 1,045
Gain on share options recognised by directors during the year was £nil (2013: £212,920).
For additional disclosures please refer to Directors’ Remuneration section of the Directors’ Report.
The amounts set out above include remuneration in respect of the highest paid Director as follows:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Emoluments for qualifying services 226 265
During the period contributions were paid to defined contribution schemes for four directors (year ended 31 December 2013: four).
Key management of the Group are the Executive Team. Benefit expenses in respect of the key management was as follows:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Short term employee benefits 852 986
Share-based payments 125 121
Post-employment benefits 42 56
1,019 1,163
Average number of members of the CODM (the Executive Team) for the year ended 31 December 2014 was four (year ended 31
December 2013: four).
Alliance Pharma plc | Annual Report 2014
39
Notes to the Financial
Statements continued
for year ended 31 December 2014
7. Taxation
Analysis of charge in period.
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
United Kingdom corporation tax at 21.5% (2013: 23.25%)
In respect of current period 1,870 2,242
Adjustment in respect of prior periods (38) 106
1,832 2,348
Deferred tax (see note 23)
Origination and reversal of temporary differences (60) 77
Taxation 1,772 2,425
The difference between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax
to the profit before tax is as follows:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Profit on ordinary activities before tax 10,157 12,009
Profit on ordinary activities multiplied by standard rate of corporation
tax in the United Kingdom of 21.5% (2013: 23.25%) 2,183 2,792
Effect of:
Non-deductible expenses 182 139
Attributable to joint venture (69) (11)
Adjustment in respect of prior period (38) 106
Impact of reduction in UK tax rate on deferred tax liability (300) (597)
Other differences (186) (4)
Total taxation 1,772 2,425
A number of changes to the UK Corporation tax system were announced in the Finance Act 2012. The main rate of corporation tax was
reduced from 24% to 23% from 1 April 2013. Further reductions to the main rate reduced the rate by 2% per annum to 21% from 1 April 2014
and it will reduce by another 1% to 20% from 1 April 2015. At the balance sheet date the substantively enacted rate was 20% (2013: 21%).
8. Dividends
Year ended Year ended
31 December 31 December
2014 2013
Pence/share £000s Pence/share £000s
Amounts recognised as distributions to owners in the year
Interim dividend for the prior financial year 0.303 800 0.275 666
Final dividend for the prior financial year 0.605 1,598 0.550 1,374
2,398 2,040
Interim dividend for the current financial year 0.333 880 0.303 800
The proposed final dividend of 0.667 pence per share for the current financial year was approved by the Board of Directors on 24 March
2015 and is subject to the approval of shareholders at the Annual General Meeting. The proposed dividend has not been included as a
liability as at 31 December 2014 in accordance with IAS 10 Events After the Balance Sheet Date. The interim dividend for the current
financial year was paid on 15 January 2015. Subject to shareholder approval, the final dividend will be paid on 15 July 2015 to
shareholders who are on the register of members on 19 June 2015.
40 Alliance Pharma plc | Annual Report 2014
Financial Statements
9. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares
in issue during the year. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares.
A reconciliation of the weighted average number of ordinary shares used in the measures is given below:
Year ended Year ended
31 December 31 December
2014 2013
For basic EPS calculation 264,148,367 250,836,337
Employee share options 1,454,986 2,020,036
Conversion of Convertible Unsecured Loan Stock (CULS) - 12,154,481
For diluted EPS calculation 265,603,353 265,010,854
The adjusted basic EPS is intended to demonstrate recurring elements of the results of the Group before exceptional items.
A reconciliation of the earnings used in the different measures is given below:
Year ended Year ended
31 December 31 December
2014 2013
£000s £000s
Earnings for basic EPS 8,385 9,584
Exceptional items 622 -
Tax effect of exceptional items (124) -
For adjusted EPS 8,883 9,584
Earnings for basic EPS 8,385 9,584
Interest saving on conversion of CULS - 204
Tax effect of interest saving on conversion of CULS - (47)
Earnings for diluted EPS 8,385 9,741
Earnings for adjusted EPS 8,883 9,584
Interest saving on conversion of CULS - 204
Tax effect of interest saving on conversion of CULS - (47)
Earnings for diluted adjusted EPS 8,883 9,741
The resulting EPS measures are:
Year ended Year ended
31 December 31 December
2014 2013
Pence Pence
Basic EPS 3.17 3.82
Diluted EPS 3.16 3.68
Adjusted basic EPS 3.36 3.82
Adjusted diluted EPS 3.34 3.68
Alliance Pharma plc | Annual Report 2014
41
Notes to the Financial
Statements continued
for year ended 31 December 2014
10. Intangible assets
Technical
know-how,
trademarks
and
Goodwill on Purchased distribution Development
consolidation Goodwill rights costs Total
The Group £000s £000s £000s £000s £000s
Cost
At 1 January 2014 1,144 2,449 85,687 373 89,653
Additions - - 2,817 58 2,875
At 31 December 20134 1,144 2,449 88,504 431 92,528
Amortisation and impairment
At 1 January 2014 - - 2,543 - 2,543
Amortisation for the year - - 488 - 488
Impairment for the year - - 622 - 622
At 31 December 2014 - - 3,653 - 3,653
Net book amount
At 31 December 2014 1,144 2,449 84,851 431 88,875
At 1 January 2014 1,144 2,449 83,145 373 87,111
Goodwill on consolidation
The goodwill on consolidation arose on the acquisition of Dermapharm Ltd, which took place during the year ended 29 February 2004.
Purchased goodwill
During the year ended 31 December 2010, the Group completed the purchase of the trade and certain assets of Cambridge Laboratories
(Ireland) Limited and Cambridge Laboratories Limited. The goodwill of £0.6m that arose on acquisition reflects Alliance’s entry into the
oncology market with an established brand name and sales force.
Goodwill of £1.85m arose on acquisition of Opus Group Holdings Limited in the year ended 31 December 2012.
Technical know-how, trademarks and distribution rights
Acquired technical knowhow, trademarks and distribution rights when purchased are assessed to ensure they meet a set of criteria
including an established and stable sales history. The products are generally in niche areas where there is limited foreseeable prospect of
erosion of sales and they require little or no promotion to maintain sales.
The following acquisition activity took place in the year:
l On 14 January 2014, the Company acquired the rights to the thyroid product Irenat from subsidiaries of Bayer AG ("Bayer") for a
consideration of
treating hyperthyroidism. In the 12 months to October 2013, total sales of Irenat by Bayer were
was
0.5m.
€
3.3m. Irenat, a sodium perchlorate monohydrate, is marketed in Germany and is mainly used for diagnosing and
0.8m and the gross margin generated
€
€
The consideration value for the Irenat acquisition was payable on completion. The acquisition was funded from available cash and existing
facilities. £23.75 million was undrawn on the Group’s acquisition facilities at year end.
Impairment
As explained in note 2.8 and 2.9 all intangible assets are stated at the lower of cost less provision for amortisation and impairment or the
recoverable amount.
The Board decided to write down the intangible asset for Pavacol-D Syrup, originally purchased for £622,000, to £Nil to reflect the
uncertainty in being able to bring this product back into supply. An impairment charge of £622,000 is shown as an exceptional item in the
Consolidated income statement.
Goodwill (allocated across cash-generating units that are expected to benefit from it), indefinite life assets and development costs are
tested for impairment annually, or more frequently if there are indications that amounts might be impaired. The impairment test involves
determining the recoverable amount of the relevant asset or cash-generating unit, which corresponds to the higher of the fair value less
costs to sell or its value in use.
42 Alliance Pharma plc | Annual Report 2014
Financial Statements
10. Intangible assets continued
The value in use calculation considers each asset or cash generating unit on a case by case basis and uses cash flow projections based
on financial forecasts for the next two years, which are based on historic sales trends and management’s sales growth assumptions.
These forecasts are approved by management and extrapolated for a 15 year period or the useful economic life, whichever is the shorter.
The key assumptions on which cash flow projections are made are:
l There will be no growth beyond 2016;
l Cash flows are discounted at an appropriate rate. The discount rates consider market information and specific circumstances of each
asset or cash-generating unit. A rate of 10%, which approximates to the Group’s weighted average cost of capital, is considered
appropriate for all assets; and
l The CODM considers 15 years to be a sufficient period to represent the indefinite useful economic lives of the products.
The value in use calculations for assets and cash generating units, when tested with assumptions beyond a reasonable range, did not
result in the recoverable amounts falling below their carrying value for the remaining intangible assets excluding Pavacol-D Syrup.
Development projects are reviewed as to the likelihood of their completion and valued using a discounted cash flow, using appropriate
risk factors, to assess whether the project is impaired.
A new generic substitution and reference pricing regime is in the process of being implemented in the Republic of Ireland by the Health
Products Regulatory Authority (HPRA). In 2014 the HPRA proposed that Nu-Seals be included on a list of interchangeable medicines. The
Company has made representations to the HPRA explaining why Nu-Seals should not be included on this list. The Board’s view is that it
is more likely than not that Nu-Seals will not be included on the list of interchangeable medicines and the related intangible asset of
£9.1m is not impaired. The recoverable amount, based on value in use, is estimated at £11.6m. The key assumptions in arriving at the
value in use are that the Nu-Seals’ volumes will fall by around 30% and that pricing will not change. The intangible asset could be
impaired if volumes fell by more than 50%, or if pricing fell by more than 22%. If Nu-Seals were to be included on the list of
interchangeable medicines, pricing may fall by 58%.
Technical
know-how,
trademarks
and
distribution
Goodwill on Purchased rights Development Total
consolidation Goodwill Restated costs Restated
The Group £000s £000s £000s £000s £000s
Cost
At 1 January 2013 1,144 2,449 76,157 310 80,060
Additions - - 9,534 63 9,597
Disposals - - (4) - (4)
At 31 December 2013 1,144 2,449 85,687 373 89,653
Amortisation and impairment
At 1 January 2013 - - 2,120 - 2,120
Amortisation for the year - - 422 - 422
At 31 December 2013 - - 2,542 - 2,542
Net book amount
At 31 December 2013 1,144 2,449 83,145 373 87,111
At 1 January 2013 1,144 2,449 74,037 310 77,940
Alliance Pharma plc | Annual Report 2014
43
Notes to the Financial
Statements continued
for year ended 31 December 2014
10. Intangible assets continued
Technical
know-how,
trademarks
and
distribution
Goodwill on Purchased rights Development Total
consolidation Goodwill Restated costs Restated
The Group £000s £000s £000s £000s £000s
Cost
At 1 January 2012 1,144 600 63,780 203 65,727
Additions - 1,849 12,377 107 14,333
At 31 December 2012 1,144 2,449 76,157 310 80,060
Amortisation and impairment
At 1 January 2012 - - 1,547 - 1,547
Amortisation for the year - - 573 - 573
At 31 December 2012 - - 2,120 - 2,120
Net book amount
At 31 December 2012 1,144 2,449 74,037 310 77,940
At 1 January 2012 1,144 600 62,233 203 64,180
11. Property, plant and equipment
Fixtures,
Computer fittings and
equipment equipment Total
The Group £000s £000s £000s
Cost
At 1 January 2014 479 989 1,468
Additions 105 6 111
At 31 December 2014 584 995 1,579
Depreciation
At 1 January 2014 211 665 876
Provided in the year 111 196 307
At 31 December 2014 322 861 1,183
Net book amount
At 31 December 2014 262 134 396
At 1 January 2014 268 324 592
44 Alliance Pharma plc | Annual Report 2014
Financial Statements
11. Property, plant and equipment continued
Fixtures,
Computer fittings and
equipment equipment Total
The Group £000s £000s £000s
Cost
At 1 January 2013 222 952 1,174
Additions 257 41 298
Disposals - (4) (4)
At 31 December 2013 479 989 1,468
Depreciation
At 1 January 2013 143 467 610
Provided in the year 68 198 266
At 31 December 2013 211 665 876
Net book amount
At 31 December 2013 268 324 592
At 1 January 2013 79 485 564
Fixtures,
Computer fittings and
equipment equipment Total
The Group £000s £000s £000s
Cost
At 1 January 2012 271 902 1,173
Additions 18 55 73
Disposals (67) (5) (72)
At 31 December 2012 222 952 1,174
Depreciation
At 1 January 2012 127 281 408
Provided in the year 83 191 274
Eliminated on disposals (67) (5) (72)
At 31 December 2012 143 467 610
Net book amount
At 31 December 2012 79 485 564
At 1 January 2012 144 621 765
Alliance Pharma plc | Annual Report 2014
45
Notes to the Financial
Statements continued
for year ended 31 December 2014
12. Investments
Investment in
subsidiary
undertakings
The Company £000s
Cost
At 1 January 2014 47,119
Additions 4,817
At 31 December 2014 51,936
At 1 January 2013 37,618
Additions 9,501
At 31 December 2013 47,119
At 1 January 2012 36,402
Additions 1,216
At 31 December 2012 37,618
The additions in the year relate to the increased investment the Company has made in Alliance Pharmaceuticals Limited to support the
acquisition of new product licenses.
The subsidiary and associated undertakings where the Group held 20% or more of the equity share capital at 31 December 2014 are
shown below:
Country of registration Shares held %
Company or incorporation Class owned Nature of business
Alliance Pharmaceuticals Limited United Kingdom Ordinary 100 Pharmaceutical sales
Dermapharm Limited United Kingdom Ordinary 100 Dormant
Alliance Health Limited United Kingdom Ordinary 100 Dormant
Alliance Consumer Health Limited United Kingdom Ordinary 100 Dormant
Alliance Generics Limited United Kingdom Ordinary 100 Dormant
Alliance Healthcare Limited United Kingdom Ordinary 100 Dormant
Caraderm Limited Northern Ireland Ordinary 100 Dormant
Unigreg Limited British Virgin Islands Ordinary 60 Pharmaceutical sales
Unigreg Worldwide Limited United Kingdom Ordinary 60 Dormant
Opus Group Holdings Limited United Kingdom Ordinary 100 Dormant
Opus Healthcare Limited United Kingdom Ordinary 100 Dormant
Opus Healthcare Limited Republic of Ireland Ordinary 100 Non-trading
Alliance Pharmaceuticals GmbH Germany Ordinary 100 Non-trading
Alliance Pharmaceuticals SAS France Ordinary 100 Pharmaceutical sales
Synthasia International Company Ltd Hong Kong Ordinary 20 Pharmaceutical sales
Synthasia Shanghai Co. Ltd China Ordinary 20 Pharmaceutical sales
All subsidiary undertakings prepare accounts to 31 December, except Opus Healthcare Limited (Republic of Ireland) which prepares
accounts to 28 February and Unigreg Worldwide Limited which prepares accounts to 31 May. Alliance Pharmaceuticals Limited, Alliance
Pharmaceuticals GmbH and Alliance Pharmaceuticals SAS are the only investments held directly by Alliance Pharma plc. All other
investments are held by Alliance Pharmaceuticals Limited with the exception of Opus subsidiaries which are held by Opus Group
Holdings Limited, Unigreg Worldwide Limited which is held by Unigreg Limited, and Synthasia Shanghai Co. Ltd which is held by
Synthasia International Company Ltd.
46 Alliance Pharma plc | Annual Report 2014
Financial Statements
13. Inventories
31 December 31 December 1 January
2014 2013 2013
The Group £000s £000s £000s
Finished goods and materials 5,914 5,468 5,393
Inventory costs expensed through the income statement during the year were £15,964,000 (year ended 31 December 2013: £15,816,000*
restated for IFRS 11). During the year £61,774 (2013: £157,217) was recognised as an expense relating to the write-down of inventory to
net realisable value.
14. Trade and other receivables
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
£000s £000s £000s £000s £000s £000s
Trade receivables 6,645 9,131 8,945 - - -
Other receivables 669 536 212 17 38 10,011
Prepayments and accrued income 453 804 350 8 12 10
Amounts owed by joint venture 555 170 - - - -
8,322 10,641 9,507 25 50 10,021
Dividends declared but not paid between Alliance Pharmaceuticals Limited and the Company of £nil for the year ended 31 December
2014 (for the year ended 31 December 2013: £nil, for the year ended 31 December 2012: £10m) are included within other receivables.
The ageing of trade receivables at 31 December is detailed below:
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
Not past due 4,105 4,292 4,869
Due 30-31 December 1,415 3,994 3,782
Past due 3 days to 91 days 964 662 339
Past 91 days 161 183 (45)
6,645 9,131 8,945
For the year ended 31 December 2014 £1,545,000 was received by the 9th January 2015. For the year ended 31 December 2013 £3,384,000
was received by the 10 January 2014. For the year ended 31 December 2012 £3,149,000 was received by the 11 January 2013.
Trade and other receivables are stated net of estimated allowances for doubtful debts. As at 31 December 2014, trade and other
receivables of £nil (for the year ended 31 December 2013: £108,000) were past due and impaired.
Our policy requires customers to pay us in accordance with agreed payment terms. Depending on the geographical location, our
settlement terms are generally due within 30 or 60 days from the end of the month of sale and do not bear any effective interest rate.
15. Cash and cash equivalents
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
£000s £000s £000s £000s £000s £000s
Cash at bank and in hand 1,434 687 4,614 12 12 182
Working capital facility (414) (2,125) (1) - - -
1,020 (1,438) 4,613 12 12 182
Alliance Pharma plc | Annual Report 2014
47
Notes to the Financial
Statements continued
for year ended 31 December 2014
16. Major non-cash transactions
Principal non-cash transactions include finance issue costs amortised in the income statement during the year of £104,000 (year ended
31 December 2013: £22,000) and an exchange movement of £28,000 (year ended 31 December 2013: £72,000) (see note 5). Interest rate
swaps designated as cash flow hedges resulted in a £572,000 loss (year ended 31 December 2013: £443,000 gain) to other comprehensive
income. As a consequence of the onerous contracts a notional interest charge representing the unwinding of the discounted value of the
onerous contract provision of £18,000 (year ended 31 December 2013: £37,000) was recognised in the income statement. Amortisation
and impairment of intangible assets resulted in a total charge of £1,110,000 (year ended 31 December 2013: £422,000) being recognised
in the income statement.
17. Trade and other payables – current
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
£000s £000s £000s £000s £000s £000s
Trade payables 1,693 1,118 902 - 19 -
Other taxes and social security costs 969 1,069 1,225 - - -
Accruals and deferred income 4,065 6,028 6,873 183 190 370
Other payables 193 316 940 - - 20
6,920 8,531 9,940 183 209 390
18. Financial liabilities – borrowings
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
Current £000s £000s £000s £000s £000s £000s
Bank loans due within one year or on demand:
Secured (a) 3,000 3,000 6,250 - - -
Finance issue costs (105) (105) - - - -
2,895 2,895 6,250 - - -
Convertible debt (note 19) - - 4,189 - - 4,189
2,895 2,895 10,439 - - 4,189
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
Non-current £000s £000s £000s £000s £000s £000s
Bank loans:
Secured (a) 19,500 21,250 20,225 - - -
Finance issue costs (265) (369) - - - -
19,235 20,881 20,225 - - -
Convertible debt (note 19) - - - - - -
19,235 20,881 20,225 - - -
(a) The bank loans are secured by a fixed and floating charge over the Company's and Group’s assets.
During the year £2.75m was drawn down on the revolving credit facility to fund acquisitions in the year.
48 Alliance Pharma plc | Annual Report 2014
Financial Statements
19. Convertible debt
All outstanding convertible unsecured loan stock was converted into ordinary shares during 2013. The conversion rate was 21p per
ordinary share.
The Company received conversion notices in respect of £nil (year ended 31 December 2013: £4,211,255) nominal value of the
Company’s 8% Convertible Unsecured Loan Stock. Accordingly, the Company has allotted nil (2013: 20,053,570) ordinary shares of 1p
each in the Company.
20. Other non-current liabilities
The Group The Company
31 December 31 December 1 January 31 December 31 December 1 January
2014 2013 2013 2014 2013 2013
£000s £000s £000s £000s £000s £000s
Deferred consideration for acquisitions - - 20 - - -
- - 20 - - -
Deferred consideration of £nil (year ended 31 December 2013: £nil, year ended 31 December 2012: £20,000) relates to the acquisition of
Dermapharm Limited which took place in the year ended 29 February 2004.
21. Financial instruments
The Group uses financial instruments comprising borrowings, some cash and liquid resources, and various items such as trade
receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance
for the Group’s operations.
The Group also has a bank facility denominated in euros. The purpose of this facility is to manage the currency risk arising from the
Group's operations. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk and
liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. These policies
have remained unchanged from the previous year.
Interest rate risk
The Group finances its operations through a mixture of debt and equity.
The Group uses interest rate swaps to reduce the risk arising from changes in interest rates. These swaps are re-measured to fair value
at each period end by Lloyds Bank. The valuations are indicative values based on mid-market levels as at the close of business on the
balance sheet date.
The Group has in place interest rate swaps with a nominal value of £20m (year ended 31 December 2013: £20m, year ended 31 December
2012: £nil) to convert the floating interest rate charge to a fixed rate interest charge.
The interest rate exposure of the financial liabilities of the Group at the period end was:
Fixed Floating Total
£000s £000s £000s
At 31 December 2014
Bank loans – sterling denominated - 22,500 22,500
Interest rate hedges 20,000 (20,000) -
Sterling subtotal 20,000 2,500 22,500
Working capital facility - 414 414
Total financial liabilities 20,000 2,914 22,914
Unamortised issue costs - (370) (370)
Net book value of financial liabilities 20,000 2,544 22,544
Alliance Pharma plc | Annual Report 2014
49
Notes to the Financial
Statements continued
for year ended 31 December 2014
21. Financial instruments continued
Fixed Floating Total
£000s £000s £000s
At 31 December 2013
Bank loans – sterling denominated - 24,250 24,250
Interest rate hedges 20,000 (20,000) -
Sterling subtotal 20,000 4,250 24,250
Working capital facility – euro denominated - 2,124 2,124
Total financial liabilities 20,000 6,374 26,374
Unamortised issue costs - (474) (474)
Net book value of financial liabilities 20,000 5,900 25,900
At 31 December 2012
Bank loans – sterling denominated - 26,475 26,475
Convertible loan stock 4,211 - 4,211
Sterling subtotal 4,211 26,475 30,686
Working capital facility – euro denominated - 1 1
Euro subtotal - 1 1
Total financial liabilities 4,211 26,475 30,687
Unamortised issue costs (22) - (22)
Net book value of financial liabilities 4,189 26,475 30,665
Fixed rate financial liabilities
Weighted
Weighted average
average period for
fixed rate which rate
% is fixed
At 31 December 2014
Sterling 3.19 3.27 years
At 31 December 2013
Sterling 3.19 4.27 years
At 1 January 2013
Sterling 8.00 0.92 years
The Sterling floating rate borrowings bear interest at a rate based on LIBOR.
The Group balance sheet also includes financial assets in the form of cash at bank and in hand totalling £1,434,000 (31 December 2013:
£687,000, 31 December 2012: £4,613,000) which are exposed to floating interest rates based on LIBOR.
A 0.5% increase in LIBOR would reduce pre-tax profits by approximately £20,000 in 2015. A 0.5% decrease would have the opposite effect.
50 Alliance Pharma plc | Annual Report 2014
Financial Statements
21. Financial instruments continued
Currency risk
Approximately 10% of the Group's sales are to overseas customers in the EU. These sales are invoiced in euros. Certain expenses of the
Group are also in euros. The level of euro expenses broadly matches the level of euro income. Approximately 3% of the Group’s sales are
invoiced in other currencies.
All other Group sales and all but a small proportion of other Group expenses are denominated in sterling.
A 5% weakening of sterling against the euro would result in a £61,000 decrease in predicted pre-tax profits, while a 5% strengthening of
sterling would have the opposite effect.
Liquidity risk
The Group seeks to manage financial risk, to ensure sufficient liquidity is available to meet the identifiable needs of the Group and to invest
cash assets safely and profitably. The Group’s long-term funding is provided by bank loans with a repayment schedule of £750,000 per
quarter from December 2013. The existing bank facilities are due for renewal in June 2018. The Group’s policy is to re-finance the debt well
in advance of the term loan expiry. Short-term flexibility is achieved through the use of the £5,000,000 working capital facility.
Fair value measurement
Effective from 1 January 2013, the Group adopted the amendments to IFRS13 for financial instruments that are measured in the Group
balance sheet at fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
l quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
l inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2); and
l inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
Lloyds Bank performs valuations of financial items for financial reporting purposes. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of maximising the use of market-base information. Valuation processes
and fair value changes are discussed among the audit committee and the finance team at least every year, in line with the Group's
reporting dates.
The valuation techniques used for instruments categorised in Level 2 are described below:
Interest rate swaps (Level 2)
The Group's interest rate swaps are not traded in active markets. These have been fair valued using observable interest rates. The effects
of non-observable inputs are not significant for interest rate swaps.
The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2014:
Level 1 Level 2 Level 3 Total
Liabilities £000s £000s £000s £000s
Derivative financial instruments:
Interest rate swaps - 129 - 129
- 129 - 129
The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2013:
Level 1 Level 2 Level 3 Total
Assets £000s £000s £000s £000s
Derivative financial instruments:
Interest rate swaps - 443 - 443
- 443 - 443
The following table presents the Group’s financial assets and liabilities that are measured at fair value at 1 January 2013:
Level 1 Level 2 Level 3 Total
Liabilities £000s £000s £000s £000s
Derivative financial instruments:
Interest rate swaps - - - -
- - - -
Alliance Pharma plc | Annual Report 2014
51
Notes to the Financial
Statements continued
for year ended 31 December 2013
21. Financial instruments continued
The maturity profile of the Group's bank loans (capital only) at the year end is as follows:
At At At
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
Due within:
One year 3,000 3,000 6,250
More than one year, not more than two years 3,000 3,000 20,225
More than two years, not more than three years 3,000 3,000 -
More than three years 13,500 15,250 -
22,500 24,250 26,475
The maturity profile of the Group's financial gross liabilities (capital and interest) at the year end is as follows:
31 December 2014
In more than In more than
one year, two years,
In one year, but not more but not more In more than
or less than two than five five years Total
£000s £000s £000s £000s £000s
Trade and other payables 6,920 - - - 6,920
Working capital facility 414 - - - 414
Bank loans 3,642 3,548 16,950 - 24,140
Convertible loan stock - - - - -
Onerous contracts 227 - - - 227
11,203 3,548 16,950 - 31,701
31 December 2013
In more than In more than
In one year, one year, two years,
or less but not more but not more In more than Total
Restated than two than five five years Restated
£000s £000s £000s £000s £000s
Trade and other payables 8,531 - - - 8,531
Working capital facility 2,125 - - - 2,125
Bank loans 3,737 3,642 19,436 - 26,815
Convertible loan stock - - - - -
Onerous contracts 190 199 - - 389
14,583 3,841 19,436 - 37,860
52 Alliance Pharma plc | Annual Report 2014
Financial Statements
21. Financial instruments continued
1 January 2013
In more than In more than
In one year, one year, two years,
or less but not more but not more In more than Total
Restated than two than five five years Restated
£000s £000s £000s £000s £000s
Trade and other payables 9,940 20 - - 9,960
Working capital facility 1 - - - 1
Bank loans 6,957 20,746 - - 27,703
Convertible loan stock 4,436 - - - 4,436
Onerous contracts 197 182 182 - 561
21,531 20,948 182 - 42,661
The maturity profile of the Company's financial gross liabilities (capital and interest) at the year end is as follows:
31 December 2014 31 December 2013 1 January 2013
Bank Bank Bank
Trade borrowings Trade borrowings Trade borrowings
payables and other payables and other payables and other
and other loans and other loans and other loans
£000s £000s £000s £000s £000s £000s
In one year, or less 183 - 209 - 390 4,436
183 - 209 - 390 4,436
The Group had £23,750,000 (31 December 2013: £25,000,000, 1 January 2013: £11,499,000) undrawn committed borrowing facilities
available at 31 December 2014 and £4,500,000 of working capital facility available.
Classification of the Group’s financial instruments is set out below:
Loans and Non-financial
receivables assets Total
As at 31 December 2014 £000s £000s £000s
Financial assets
Cash 1,434 - 1,434
Trade and other receivables 7,869 453 8,322
9,303 453 9,756
Liabilities
Other not within
Held for financial scope of
trading liabilities IAS39 Total
As at 31 December 2014 £000s £000s £000s £000s
Financial liabilities
Cash and cash equivalents - 414 - 414
Long term financial liabilities (exc. issue costs) - 19,500 - 19,500
Convertible debt - - - -
Other liabilities - - - -
Financial liabilities (exc. issue costs) - 3,000 - 3,000
Trade and other payables - 5,951 969 6,920
Corporation tax - - 959 959
Onerous contracts – current - - 227 227
- 28,865 2,155 31,020
Alliance Pharma plc | Annual Report 2014
53
Notes to the Financial
Statements continued
for year ended 31 December 2014
21. Financial instruments continued
Loans and Non-financial
receivables assets Total
As at 31 December 2013 £000s £000s £000s
Financial assets
Cash 687 - 687
Trade and other receivables 9,836 805 10,641
10,523 805 11,328
Liabilities
Other not within
Held for financial scope of
trading liabilities IAS39 Total
As at 31 December 2013 £000s £000s £000s £000s
Financial liabilities
Cash and cash equivalents - 2,125 - 2,125
Long term financial liabilities - 21,250 - 21,250
Financial liabilities - 3,000 - 3,000
Trade and other payables - 7,462 1,069 8,531
Corporation tax - - 1,154 1,154
Onerous contracts – non current - - 199 199
Onerous contracts – current - - 190 190
- 33,837 2,612 36,449
Loans and Non-financial
receivables assets Total
As at 1 January 2013 £000s £000s £000s
Financial assets
Cash 4,613 - 4,613
Trade and other receivables 9,157 350 9,507
13,770 350 14,120
Liabilities
Other not within
Held for financial scope of
trading liabilities IAS39 Total
As at 1 January 2013 £000s £000s £000s £000s
Financial liabilities
Cash and cash equivalents - 1 - 1
Long term financial liabilities - 20,225 - 20,225
Convertible debt - 4,189 - 4,189
Other liabilities - 20 - 20
Financial liabilities - 6,250 - 6,250
Trade and other payables - 8,715 1,225 9,940
Corporation tax - - 1,322 1,322
Onerous contracts – non current - - 364 364
Onerous contracts – current - - 197 197
- 39,400 3,108 42,508
54 Alliance Pharma plc | Annual Report 2014
Financial Statements
21. Financial instruments continued
Classification of the Company’s financial instruments is set out below:
Loans and Non-financial
receivables assets Total
As at 31 December 2014 £000s £000s £000s
Financial assets
Cash 12 - 12
Trade and other receivables - 25 25
12 25 37
Liabilities
Other not within
financial scope of
liabilities IAS39 Total
As at 31 December 2014 £000s £000s £000s
Financial liabilities
Trade and other payables 1 182 183
1 182 183
Loans and Non-financial
receivables assets Total
As at 31 December 2013 £000s £000s £000s
Financial assets
Cash 12 - 12
Trade and other receivables - 50 50
12 50 62
Liabilities
Other not within
financial scope of
liabilities IAS39 Total
As at 31 December 2013 £000s £000s £000s
Financial liabilities
Trade and other payables 19 190 209
19 190 209
Loans and Non-financial
receivables assets Total
As at 1 January 2013 £000s £000s £000s
Financial assets
Cash 182 - 182
Trade and other receivables - 10,021 10,021
182 10,021 10,203
Liabilities
Other not within
financial scope of
liabilities IAS39 Total
As at 1 January 2013 £000s £000s £000s
Financial liabilities
Convertible debt 4,189 - 4,1890
Trade and other payables 390 - 390
Corporation Tax - 4 4
4,579 4 4,583
Alliance Pharma plc | Annual Report 2014
55
Notes to the Financial
Statements continued
for year ended 31 December 2014
22. Derivative financial instruments
31 December 31 December 1 January
2014 2013 2013
Liabilities Assets Liabilities
£000s £000s £000s
Interest rate swap – cash flow hedge (129) 443 -
- 443 -
Current portion - - -
Non-current portion (129) 443 -
The cash flow hedges were tested for effectiveness during the year and were found to be highly effective. The ineffective element was
immaterial. The hedge and interest on the bank debt are settled on a quarterly basis on the same date and measured against the same
benchmark, namely 3 month sterling LIBOR. The amount recognised through the income statement in respect of interest rate swaps
during the year was a charge of £140,000 (year ended 31 December 2013: £105,000 charge).
23. Deferred tax provision
31 December 31 December 1 January
2014 2013 2013
The Group £000s £000s £000s
Accelerated capital allowances 6 (18) (4)
Accelerated allowances on intangible assets (4,699) (4,493) (4,271)
Initial recognition of intangible assets from business combination (1,610) (1,690) (1,849)
Interest rate hedge 26 (93) -
Share based payments 162 - -
(6,115) (6,294) (6,124)
Deferred tax asset 194 - -
Deferred tax provision (6,309) (6,294) (6,124)
Reconciliation of deferred tax movements:
Recognised
in other Recognised Recognised
31 December comprehensive in the income on business 31 December
2013 income statement combination 2014
The Group £000s £000s £000s £000s £000s
Non-current assets
Intangible assets (4,493) - (206) - (4,699)
Initial recognition of intangible from
business combination (1,690) - 80 - (1,610)
Property, plant and equipment (18) - 24 - 6
Non-current Liabilities
Derivative financial instruments (93) 119 - - 26
Equity
Share option reserve - - 162 - 162
(6,294) 119 60 - (6,115)
Recognised as:
Deferred tax asset - 194
Deferred tax liability (6,294) (6,309)
56 Alliance Pharma plc | Annual Report 2014
Financial Statements
23. Deferred tax provision continued
The Finance Act 2012 included legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013. The reduction
from 24% to 23% was substantively enacted at the balance sheet date and has therefore been reflected in these Group financial
statements.
In addition to the changes in the rates of corporation tax disclosed above, it was announced in the December 2012 Budget Statement that
the rate would be reduced from 23% to 21% from 1 April 2014 and in the March 2013 Budget Statement it was announced that the rate
would be further reduced to 20% from 1 April 2015.
At the balance sheet date the substantively enacted rate was 20% (2013: 21%).
Recognised
in other Recognised Recognised
1 January comprehensive in the income on business 31 December
2013 income statement combination 2013
The Group £000s £000s £000s £000s £000s
Non-current assets
Intangible assets (4,271) - (222) - (4,493)
Initial recognition of intangible from
business combination (1,849) - 159 - (1,690)
Property, plant and equipment (4) - (14) - (18)
Current Liabilities
Derivative financial instruments - (93) - - (93)
(6,124) (93) (77) - (6,294)
Recognised as:
Deferred tax asset - -
Deferred tax liability (6,124) (6,294)
24. Provisions for other liabilities
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
At start of year 389 561 699
Amount utilised in year (180) (209) (187)
Unwinding of discount 18 37 49
At year end 227 389 561
Leases and associated costs for offices in Newcastle and Dublin, acquired as part of the Cambridge Laboratories acquisition have
subsequently been treated as onerous contracts. As at 31 December 2014 an amount of £277,000 (year ended 31 December 2013:
£389,000) discounted at a rate of 10%, representing payments due until the end of each contract has been recognised. The Dublin
property lease expired in 2011 and the Newcastle property lease will run until 2015.
The balances are analysed as follows:
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
Current 227 190 197
Non-Current - 199 364
Alliance Pharma plc | Annual Report 2014
57
Notes to the Financial
Statements continued
for year ended 31 December 2014
25. Share capital
Authorised Authorised
No. of shares £000s
At 31 December 2014 – ordinary shares of 1p each 400,000,000 4,000
At 31 December 2013 – ordinary shares of 1p each 400,000,000 4,000
At 1 January 2013 – ordinary shares of 1p each 400,000,000 4,000
Allotted, Allotted,
called and called and
fully paid fully paid
No. of shares £000s
At 1 January 2013 – ordinary shares of 1p each 243,035,642 2,430
Issued during the year 21,045,231 211
At 31 December 2013 – ordinary shares of 1p each 264,080,873 2,641
Issued during the year 67,492 -
At 31 December 2014 – ordinary shares of 1p each 264,148,365 2,641
Between 1 January 2014 and 31 December 2014, 67,492 shares were issued on the exercise of employee share options (2013: 991,661).
During the year, the Company received conversion notices in respect of £nil nominal value of the Company’s 8% Convertible Unsecured
Loan Stock (2013: £4,211,255). Accordingly, the Company has allotted nil ordinary shares of 1p each in the Company (2013: 20,053,570).
Potential issues of ordinary shares
Under the Group's share option scheme for employees and Directors options have been granted to subscribe for shares in the Company
at prices ranging from 7.75p to 37.25p. Options are exercisable three years after date of grant, but in certain instances this can be
extended to five years. Options outstanding are as follows:
Exercise 31 December 31 December 1 January
price Exercise 2014 2013 2013
Year of grant pence from Number Number Number
2005 19.00 2008 9,000 9,000 9,000
2006 18.75 2009 27,250 40,250 40,250
2007 9.25 2010 19,250 33,250 33,250
2008 8.5 2011 629,750 644,750 1,308,426
2009 7.75 2012 694,060 709,060 1,037,045
2010 33.25 and 34.25 2013 2,318,325 2,482,139 2,633,889
2011 34.12 and 31.00 2014 3,860,081 4,030,261 4,248,253
2012 29.25 2015 3,063,514 3,250,600 3,494,826
2013 37.25 and 35.75 2016 5,033,176 5,228,976 -
2013 35.75 2018 3,700,000 4,000,000 -
2014 33.75 2017 2,699,056 - -
22,053,462 20,428,286 12,804,939
See Note 19 for details of the Convertible Unsecured Loan Stock.
58 Alliance Pharma plc | Annual Report 2014
Financial Statements
25. Share capital continued
Managing Capital
Our objective in managing the business’ capital structure is to ensure that the Group has the financial capacity, liquidity and flexibility to
support the existing business and to fund acquisition opportunities as they arise.
The capital structure of the Group consists of net bank debt and Shareholders’ equity. At 31 December 2014, net bank debt was £21.1
million, whilst Shareholders’ equity was £71.1 million.
The business is profitable and cash generative. The main financial covenants applying to bank debt are that leverage (the ratio of net bank
debt to EBITDA) should not exceed 2.5 times, interest cover (the ratio of EBITDA to finance charges) should be no less than 4.0 times, and
operating cash flows must exceed debt service cash flows. The Group comfortably complied with these covenants in 2014 and 2013.
Smaller acquisitions are typically financed purely with bank debt, while larger acquisitions typically involve a combination of bank debt
and additional equity. The mixture of debt and equity is varied, taking into account the desire to maximise the shareholder returns while
keeping gearing at comfortable levels, i.e. net bank debt below around two times EBITDA.
26. Share based payments
Under the Group's share option scheme for employees and Directors, options to subscribe for shares in the Company are granted
normally once each year. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date
of grant. The contractual life of an option is 10 years from date of grant. Generally, options granted become exercisable on the third
anniversary of the date of grant, but in certain instances this can be extended to five years. Exercise of an option is normally subject to
continued employment. All share-based employee remuneration is settled in equity. Options are valued using the Black-Scholes option-
pricing model. There are generally no performance conditions attached to the options, but 4m of the options granted on 23 October 2013
are subject to performance criteria and have the extension to five years before they can be exercised. The assumptions used in the
calculation are as follows:
Number
of options
Number of remaining at
Share price Exercise options 31 December Expected Risk free
Grant date at issue price granted 2014 volatility rate
27/07/05 19.00p 19.00p 424,516 9,000 22.8% 4.13%
04/05/06 18.75p 18.75p 901,190 27,250 14.9% 4.30%
02/05/07 9.25p 9.25p 1,402,425 19,250 20.4% 4.62%
23/04/08 8.50p 8.50p 5,419,950 629,750 18.6% 4.90%
14/04/09 7.75p 7.75p 2,307,860 694,060 25.5% 4.08%
26/03/10 33.25p 33.25p 1,300,000 1,300,000 43.5% 3.90%
29/04/10 34.25p 34.25p 1,502,778 1,018,325 45.7% 3.90%
28/04/11 34.12p 34.12p 3,981,916 3,560,081 43.9% 4.10%
21/09/11 31.00p 31.00p 300,000 300,000 53.2% 4.10%
19/10/12 29.25p 29.25p 3,494,826 3,063,514 49.7% 1.70%
06/06/13 37.25p 37.25p 3,370,703 3,133,176 49.8% 2.40%
23/10/13 35.75p 35.75p 5,900,000 5,600,000 49.5% 2.60%
11/04/14 33.75p 33.75p 2,726,556 2,699,056 49.0% 2.70%
In each case, it is assumed the majority of options will be exercised at the earliest opportunity and that on average they are exercised one
year after they become exercisable. The expected volatility is based on historical volatility from 23 December 2003. The risk free rate of
return is based on UK government bonds of a term consistent with the assumed option life.
Alliance Pharma plc | Annual Report 2014
59
Notes to the Financial
Statements continued
for year ended 31 December 2014
26. Share based payments continued
Share options and weighted average exercise price are as follows for the reporting periods presented:
2014 2013 2012
Weighted Weighted Weighted
average average average
exercise exercise exercise
price price price
Number Pence Number Pence Number Pence
Outstanding at start of year 20,428,286 32.43 12,804,939 27.77 10,865,378 24.82
Granted 2,726,556 33.75 9,270,703 36.30 3,494,826 29.25
Exercised (67,492) 13.69 (991,661) 8.24 (1,555,265) 10.54
Forfeited (1,033,888) 34.36 (655,695) 32.54 - -
Outstanding at end of year 22,053,462 32.56 20,428,286 32.43 12,804,939 27.77
Exercisable at end of year 7,557,716 29.17 3,918,449 16.79 2,427,971 8.40
Share options were exercised throughout the financial year. Share options were exercised between 7.75 and 29.25 pence per share.
27. Cash generated from operations
Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2014 2013 2014 2013
£000s £000s £000s £000s
Result for the period before tax 10,157 12,009 1,237 848
Interest paid 1,098 1,281 - 171
Interest income (48) (50) (1,757) (1,464)
Other finance costs (28) 72 - -
Depreciation of property, plant and equipment 307 266 - -
Amortisation/Impairment of intangibles 1,110 422 - -
Change in inventories (446) (75) - -
Change in Investments (312) 48 - -
Change in trade and other receivables 2,823 (1,134) 25 (28)
Change in trade and other payables (1,781) (1,574) (26) (182)
Share options charges 571 632 571 632
Cash flows from operating activities 13,451 11,897 50 (23)
28. Capital commitments
Neither the Group nor Company had any capital commitments at 31 December 2014 or at 31 December 2013.
29. Contingent liabilities
Neither the Group nor Company had any contingent liabilities at 31 December 2014 or at 31 December 2013.
60 Alliance Pharma plc | Annual Report 2014
Financial Statements
30. Pensions
The Group operates a defined contribution group personal pension scheme for the benefit of certain Directors and employees.
31 December 31 December
2014 2013
The Group £000s £000s
Contributions payable by the group for the year 327 307
The Group also operates a stakeholder pension plan available to all employees.
31. Leasing commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
31 December 31 December 1 January
2014 2013 2013
Land and Land and Land and
buildings buildings buildings
£000s £000s £000s
No later than one year 327 287 361
Later than one year and no later than five years 389 589 753
Later than five years 123 220 317
839 1,096 1,431
32. Related party transactions
The group paid £227,000 (year ended 31 December 2013: £163,000) for services from Fasken Martineau LLP and £37,000 for services from
Pinsent Mason (year ended 31 December 2013: £15,000); both firms had Paul Ranson as a partner during 2014. At 31 December 2014
there was a balance of £5,496 (31 December 2013: £33,238) outstanding in respect of services from Fasken Martineau LLP and £nil in
respect of Pinsent Mason.
During the year the Company received funds of £270,000 (year ended 31 December 2013: £12,450,000) from its subsidiary Alliance
Pharmaceuticals Limited. Net payments of £91,000 (year ended 31 December 2013: £485,000) were made by Alliance Pharmaceuticals
Limited on behalf of Alliance Pharma plc. Interest of £1,757,000 (year ended 31 December 2013: £1,464,000) was charged to Alliance
Pharmaceuticals Limited on the total outstanding debt. During the year the Company re-invested £2,850,000 (year ended 31 December 2013:
£5,550,000) in Alliance Pharmaceuticals Limited. During the year an amount of £571,000 (year end 31 December 2013: £632,000) was
charged to Alliance Pharmaceuticals Limited by the Company for the employee share based payment. The amount owed by Alliance
Pharmaceuticals Limited at the year-end is £47,557,000 (31 December 2013: £42,108,000).
Dividends declared by Alliance Pharmaceuticals Limited due to the Company are £5,400,000 for the year ended 31 December 2014 (for
the year ended 31 December 2013: £nil, for the year ended 31 December 2012: £10,000,000). During the year dividends of £5,400,000 were
paid by Alliance Pharmaceuticals Limited to the Company.
During the year the Group made payments on behalf of Unigreg of £374,000 (year ended 31 December 2013: £299,000). Interest receivable
from Unigreg was £48,000 (year ended 31 December 2013: £52,000).
Alliance Pharma plc | Annual Report 2014
61
Notes to the Financial
Statements continued
for year ended 31 December 2014
33. Joint Venture
Name
Unigreg Ltd
Principal Activity Country of Incorporation % Owned
Distribution of pharmaceutical products to China British Virgin Islands 60
Synthasia International Company Ltd
Distribution of infant milk formula products to China Hong Kong 20
In the prior period joint ventures were accounted for using the proportionate consolidation method of accounting. Following IFRS 11 Joint
Arrangements becoming effective, the Group considered the categorisation of Unigreg Limited and Synthasia International Company
Limited and determined they are joint ventures. A joint venturer shall recognise its interest in a joint venture as an investment and shall
account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures.
The effect of IFRS 11 on the 31 December 2013 comparatives is shown below:
31 December 31 December 31 December
2013 2013 2013
Restated Published Movement
£000s £000s £000s
Revenue 45,275 45,513 (238)
Cost of sales (17,944) (18,072) 128
Gross profit 27,331 27,441 (110)
Operating expenses (13,971) (14,081) 110
Share of joint venture profits/(losses) (48) - (48)
Operating profit 13,312 13,360 (48)
Finance costs (1,303) (1,351) 48
Profit on ordinary activities before taxation 12,009 12,009 -
Taxation (2,425) (2,425) -
Profit for the year attributable to equity shareholders 9,584 9,584 -
31 December 31 December 31 December
2013 2013 2013
Restated Published Movement
£000s £000s £000s
Intangible assets 87,111 89,061 (1,950)
Joint Venture Investment 533 - 533
Joint Venture Receivable 1,462 - 1,462
Other NCA 1,035 1,035 -
Non-current assets 90,141 90,096 45
Current assets 16,796 16,895 (99)
Total assets 106,937 106,991 (54)
Equity 64,668 64,668 -
Non-current liabilities 27,374 27,374 -
Current liabilities 14,895 14,949 (54)
Total equity and liabilities 106,937 106,991 (54)
62 Alliance Pharma plc | Annual Report 2014
Financial Statements
33. Joint Venture continued
Movement in investments in joint ventures in the year:
£000s
At 1 January 2013 1,001
Share of post-tax profits/(loss) of joint ventures (48)
Dividend received (420)
At 31 December 2013 533
Additions 499
Share of post-tax profits of joint ventures 319
Other movements in reserves (8)
Dividend received (72)
At 31 December 2014 1,271
Additions in the period relate to the 20% investment in Synthasia International Company Limited, a subsidiary of which supplies the
Chinese market with Suprememil, an advanced infant milk formula brand.
The carrying value of joint ventures is split as follows:
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
Unigreg Limited 791 533 1,001
Synthasia International Company Limited 480 - -
Total 1,271 533 1,001
The Group’s principal joint venture is Unigreg Limited.
The share of the assets, liabilities, revenue and profits of the Groups principal joint venture Unigreg Limited, which are included in the
Group’s financial statements, are as follows:
31 December 31 December 1 January
2014 2013 2013
£000s £000s £000s
Intangible fixed assets 1,950 1,950 1,950
Current assets 397 200 658
Current liabilities (94) (155) (145)
Non-current liabilities (1,462) (1,462) (1,462)
Net assets 791 533 1,001
Year ended Year ended Year ended
31 December 31 December 31 December
2014 2013 2012
£000s £000s £000s
Income 1,622 238 2,475
Cost of sales (875) (128) (1,415)
Administration and marketing expense (369) (111) (239)
Finance charges (48) (47) (48)
Profit/(loss) on ordinary activities before taxation 330 (48) 773
Alliance Pharma plc | Annual Report 2014
63
Notes to the Financial
Statements continued
for year ended 31 December 2014
33. Joint Venture continued
Financial Statements
Unigreg Ltd, has applied to China’s State Food and Drug Administration (‘SFDA’) to vary the licence for importing Forceval into China.
There is uncertainty about whether or when this variation will be approved. There is a risk that for a period of time Unigreg will be unable
to import further product into China. There are a number of measures of mitigation that can be taken to offset this risk. The Board’s view
is that these mitigation measures are likely to be sufficient to ensure the continuation of the business in the long term, and that the
intangible asset relating to Forceval in China is unlikely to be impaired. The carrying value of the related intangible asset is £1.95m.
The share of losses of the Groups individually immaterial joint ventures which are included in the Group’s financial statements, are as
follows:
Year ended Year ended Year ended
31 December 31 December 31 December
2014 2013 2012
£000s £000s £000s
(Loss) from continuing operations (11) - -
Other comprehensive loss (8) - -
Total comprehensive loss (19) - -
34. Ultimate controlling party
There is no single ultimate controlling party.
35. Subsequent event
MacuVision Europe Limited acquisition
On 2 February 2015 the Group completed the acquisition of MacuVision Europe Limited ("MacuVision") for initial consideration of £5.5
million plus the net asset value of MacuVision at completion (estimated at £577,000) and deferred contingent consideration of up to £6.0
million (estimated at £3,742,000). MacuVision sells MacuShield, an eye care treatment designed to be taken by sufferers of dry age-
related macular degeneration and other eye conditions.
In the twelve months to 31 March 2014 the turnover of Solihull-based MacuVision was £2.7 million and the EBITDA (earnings before
interest, tax, depreciation and amortisation) was £0.9 million. In the twelve months to 31 December 2014, MacuShield sales were £3.4
million. As at 31 March 2014 MacuVision had net assets of £0.6 million.
The initial consideration has been funded from existing cash and bank facilities, including a £5.5 million drawdown from the Group's £25
million Revolving Credit Facility ("RCF"). This brings the utilisation of the RCF to £6.8 million. The deferred contingent consideration will
be funded from cash generation and existing bank facilities. Up to £4.0 million of this will be payable after one year and up to £2.0m will
be payable after two years, both dependent on the revenue growth of MacuShield.
The provisional fair values of the assets acquired are as follows:
Book value Fair value
of assets and of assets and
liabilities Fair value liabilities
acquired adjustments acquired
£000s £000s £000s
Intangible fixed assets 27 9,242 9,269
Tangible fixed assets 30 - 30
Current assets (excluding cash and cash equivalents) 1,750 - 1,750
Cash and cash equivalents 78 - 78
Current liabilities (1,277) - (1,277)
Non-current liabilities (31) - (31)
Net assets 577 9,242 9,819
Deferred tax liability - (1,848) (1,848)
Goodwill - 1,848 1,848
Total consideration 577 9,242 9,819
64 Alliance Pharma plc | Annual Report 2014
Supplementary Information
Shareholder enquiries
The Company’s share register is maintained on our behalf by Capita Asset Services, who are responsible for updating the register,
including details of changes to shareholders’ addresses and purchases and sales of the Company’s shares. If you have any questions
about your shareholding in the Company or need to notify any changes to your personal details you should write to Capita Asset Services,
PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF or telephone 0871 664 0300 (calls cost 10p per minute plus network extras, lines
are open 9:00am to 5:30pm Monday to Friday).
Financial Calendar
Annual General Meeting
Final dividend record date
Payment of final dividend
27 May 2015
19 June 2015
15 July 2015
Interim results announcement
9 September 2015
Year end
31 December 2015
Preliminary announcement
March 2016
Shareholder Analysis
Below is an analysis of the share register by size of holding as at 23 March 2015:
Proportion of Number of Proportion of
Size of shareholding shareholders shares held shares
1-5,000 29% 347,780 0.13%
5,001-10,000 14% 661,790 0.25%
10,001-50,000 35% 4,898,075 1.85%
50,001-100,000 5% 2,433,739 0.92%
100,001-500,000 9% 11,908,016 4.51%
500,001-1,000,000 2% 9,735,750 3.69%
1,000,001-5,000,000 4% 49,267,008 18.65%
5,000,001-10,000,000 1% 33,802,839 12.80%
10,000,001-50,000,000 1% 151,107,668 57.20%
100% 264,162,665 100%
As at 23 March 2015 the Company has 619 registered shareholders.
Alliance Pharma plc | Annual Report 2014
65
Five Year Summary
Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December
2010* 2011* 2012* 2013* 2014
£m £m £m £m £m
Revenue 48.0 44.1 42.4 45.3 43.5
Operating profit before exceptional items 18.6 12.3 12.3 13.3 11.8
Exceptional operating items (1.7) - - - 0.6
Operating profit after exceptional items 16.9 12.3 12.3 13.3 11.2
Exceptional finance items (1.8) - - - -
Profit before tax before exceptional items 16.4 10.7 10.8 12.0 10.8
Profit/(loss) before tax after exceptional items 12.9 10.7 10.8 12.0 10.2
Intangible assets 58.3 64.2 77.9 87.1 88.9
Tangible assets 0.9 0.8 0.6 0.6 0.4
Current assets 15.5 14.6 19.5 16.8 15.7
Current liabilities 16.5 13.6 21.9 14.9 11.4
Equity 36.1 44.1 51.8 64.7 70.8
Average shares in issue (millions) 226.1 238.6 240.9 250.8 264.1
Shares in issue at period end (millions) 236.1 240.1 243.0 264.1 264.1
Earnings per share – basic (p) 3.96 3.62 3.61 3.82 3.17
Earnings per share – adjusted basic (p) 5.07 3.62 3.61 3.82 3.36
*Restated for impact of IFRS 11.
66 Alliance Pharma plc | Annual Report 2014
Advisors
Supplementary Information
AUDITOR
FINANCIAL PR
Grant Thornton UK LLP
Buchanan Communications
Hartwell House
55-61 Victoria Street
Bristol
BS1 6FT
BANKERS
107 Cheapside
London
EC2V 6DN
REGISTRARS
Capita Asset Services
Lloyds Bank Corporate Markets
PXS 1
The Atrium
Davidson House
Forbury Square
Reading
Berkshire
RG1 3EU
Royal Bank of Scotland
3rd Floor
3 Temple Back East
Bristol
BS1 6DZ
34 Beckenham Road
Beckenham
Kent
BR3 4ZF
REGISTERED OFFICE
Avonbridge House
Bath Road
Chippenham
Wiltshire
SN15 2BB
COMPANY NUMBER
CORPORATE ADVISORS
04241478
Numis Securities Ltd
10 Paternoster Square
London
EC4M 7LT
Alliance Pharma plc | Annual Report 2014
67
Supplementary Information
Cautionary statement regarding forward-looking statements
This Annual Report has been prepared for the members of the Company and no one else. The Company, its Directors, employees or
agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or
liability is expressly disclaimed.
This Annual Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing Alliance.
By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-
looking statements reflect the knowledge and information available at the date of preparation of this Annual Report, and will not be
updated during the year. Nothing in this Annual Report should be construed as a profit forecast.
The Report of the Directors in this Annual Report has been drawn up and presented in accordance with English company law and the
liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.
In particular, Directors would be liable to the Company (but not to any third party) if the Report of the Directors contains errors as a
result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would not otherwise be liable.
TRADEMARKS
The following are registered trademarks of Alliance Pharmaceuticals Limited (a subsidiary of Alliance Pharma plc) and are protected
in a number of countries:
AbsorbagelTM, AcnisalTM, ALLIANCE, ALLIANCE and Logo, ALLIANCE GENERICS, ALLIANCE PHARMACEUTICALS, AlphadermTM,
AnbesolTM, AquadrateTM, Ashton & Parsons Infants’ PowderTM, AtaraxTM, AvloclorTM, BuccastemTM, CeanelTM, ClearWayTM, ClearWay
MiniTM, ClearWay Stoma BridgeTM, DeoGelTM, DeltacortrilTM, Dermamist, DistamineTM, EnergEyesTM, ForcevalTM, HydromolTM, Irenat™,
IsprelorTM, LiftTM, Lift+TM, Lift PlusTM, Lypsyl™, Lypsyl – It’s On Everyone’s Lips™, Lypsyl Kissables™, Lypsyl Shimmer™, LysovirTM,
MacuShieldTM, MacuShield GoldTM, MacuVisionTM, MetedTM, MolluDabTM, NaseptinTM, NaturCareTM, NaturCare BreezeTM, NaturCare
FragantTM, NaturCare ZestTM, NaturCare IPDTM, Nu-SealsTM, OcclusalTM, OndemetTM, OPUS and Logo, PaludrineTM, PavacolTM,
Pavacol-DTM, PentraxTM, PeriostatTM, PermitabsTM, PosidormTM, QuinodermTM and Quinoderm Q device, RizudermTM, Roman in a
chariot device, SavarineTM, SkinSafeTM, SkinSafe Non Sting Protective FilmTM, Syntometrine™, Terra-cortrilTM, ThwartTM, TimodineTM,
Trust The ScienceTM, UnifluTM, UnigregTM.
The following are all used under licence by Alliance Pharmaceuticals Limited:
XenazineTM is a registered trademark of Biovail Laboratories International (Barbados).
GelclairTM is a registered trademark of Helsinn Healthcare S.A.
ImmuCystTM is a registered trademark of Sanofi Pasteur Limited.
68 Alliance Pharma plc | Annual Report 2014
Alliance Pharma plc
Avonbridge House
Bath Road
Chippenham
Wiltshire
SN15 2BB
United Kingdom
T: +44 (0)1249 466966
F: +44 (0)1249 466977
E: ir@alliancepharma.co.uk
www.alliancepharma.co.uk
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