2015 Annual Report
and Accounts
Contents
Business Summary*
01 Business and Financial Highlights
02 Our Business Model
04 Sinclair Acquisition
06 Growth through International Expansion
08 Corporate Development
09 Growth through Acquisitions
10 Promoted Brands
13 Development of the Organisation
Report of the Directors
14 Strategic Report
18 Board of Directors
20 Corporate Governance
22 Directors’ Remuneration
24 Other Matters
Financial Statements
26 Independent Auditor’s Report to the Members of
Alliance Pharma plc
27 Consolidated Income Statement
28 Consolidated Statement of Comprehensive Income
29 Consolidated Balance Sheet
30 Company Balance Sheet
31 Consolidated Statement of Changes in Equity
32 Company Statement of Changes in Equity
33 Consolidated and Company Cash Flow Statements
34 Notes to the Financial Statements
Alliance Pharma
plc is an AIM
listed specialty
pharmaceutical
company
Alliance, commencing trade in 1998, is an
international specialty pharmaceutical
company based in Chippenham, Wiltshire,
UK. The Company has sales in more than
100 countries worldwide via direct sales,
joint ventures and a network of distributors.
Alliance has a strong track record of
acquiring the rights to established niche
Supplementary Information*
products and it currently owns or licenses the
68 Shareholder Information
69 Shareholder Analysis
70 Five Year Summary
71 Advisors
*Unaudited information.
rights to approximately 90 pharmaceutical
and consumer healthcare products. The
Company continues to explore opportunities
to expand its product portfolio.
Alliance Pharma plc | Annual Report 2015 01
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Key Facts
Transformational Sinclair
Healthcare Products Business
acquisition in December 2015
MacuShield acquisition in
February 2015, used in Age-
related Macular Degeneration
(‘AMD’), contributed £3.5m to
revenue in 2015 and provides
an exciting international
growth opportunity
Licensing agreement signed
with Duchesnay Inc. in January
2015 for the product Diclectin
Revenue up 11% at £48.3m
(2014: £43.5m), including £0.8m
from the acquisition of the
Sinclair Healthcare Products
Business
Hydromol continues to
demonstrate good growth,
achieving year on year sales
growth of 10% to £6.6m
Settlement received of £6.3m
(net of fees) in connection with
ImmuCyst claim
Full year dividend up 10% to
1.100p per share (2014: 1.000p)
Business and Financial Highlights
Key Numbers
Sales
£48.3m
Profit Before Tax*
£11.4m
Dividend
1.100p
Free Cash Flow
£6.3m
EPS - Basic*
3.69p
2015
48.3m
2014
43.5m
2015* 11.4m
2014*
10.8m
2015
1.100p
2014
1.000p
2015
6.3m
2014
10.3m
2015* 3.69p
2014* 3.36p
*Before non-underlying items, being primarily compensation from Sanofi and acquisition costs for the
Sinclair Healthcare Products Business in 2015 and Pavacol-D impairment in 2014.
02 Alliance Pharma plc | Annual Report 2015
Our Business Model
Strategy
Alliance’s principal activities are the acquisition or inward licensing of
established and marketed products with stable sales or growth potential, and
the marketing of those products. Its manufacturing, storage and logistics are
controlled by Alliance but outsourced to leading specialist organisations in
these fields. It does not engage in R&D, but does undertake modest development
on line extensions.
The acquired products have a market position which has been
long established by their previous owners. 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.
Certain 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
specialised 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.
The acquisition of products is typically financed by a
combination of 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.
Operational Business Model
Finance
Portfolio
management
(c. 90
products)
Commercial
&
Marketing
Supply
Chain &
Operations
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HR & IT
Regulatory
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Alliance Pharma plc | Annual Report 2015 03
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Three Pillars
Our promoted portfolio is focused on
three key areas: Dermatology; Mother
and Child; and Ophthalmology.
The promotion of these pillars is
supported by our bedrock of non-
promoted 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 of these three pillars, and
also assist in the financing of
acquisitions.
52% Other (90 products)
9% Kelo-cote
8% Flamma
7% Hydromol
5% Aloclair
4% MacuShield
4% Haemopressin
4% Forceval
4% Optiflo
3% Oxyplastine
Balanced Portfolio
16%*%*%
Mother & Child
Kelo-stretch, Forceval/
Fushifu, Suprememil,
Ashton & Parsons, Anbesol,
Alovex, Syntometrine,
MolluDab, Timodine,
Oxyplastine
Oxyplastine
32%*%*%
Dermatology
Kelo-cote,
Hydromol,
Flammazine/
Flammacerium
Aloclair,
Atopiclair,
Lypsyl
4%*%*%
Ophthalmology
MacuShield
M Shi ld
48%*%*%
The Bedrock:
Core portfolio of non-promoted products.
Risk Reduction through Diversity
Any potential risk is spread across a portfolio of around 90 products, the largest
representing under 10% of Alliance’s sales.*
Risk Reduction Through Diversity
*Percentages refer to pro forma sales in the 12 months to 31 December 2015, including share of Joint Ventures.
04 Alliance Pharma plc | Annual Report 2015
Sinclair Acquisition
Transformational acquisition launches a
new stage in our growth.
In December 2015 we made our largest ever acquisition – our 31st since the company
commenced trading in 1998. The £127.5m purchase of Sinclair Pharma’s Healthcare
Products Business will double the size of our business, bringing us 27 products
generating annual sales of £39.4m in the 12 months to 31 December 2015.
These products, focused on dermatology and wound care, neatly complement our
existing portfolio. The combined portfolio supports our strategy with a well balanced
blend of stable, established products and growth brands, and enhances the balance
between prescription and over-the-counter products.
The big change comes in our international reach and scale. Previously, some 80% of
our sales came from the UK. Now, the split is broadly 50% UK, 25% Western Europe
excluding UK, and 25% Rest of the World. Our strategy to build our presence in the top
five EU markets has gained real momentum in France, Italy, Germany and Spain. And
we’ve gained an extensive network of distributors serving fast-growing markets in SE
Asia and footholds in the US and Latin America.
This expanded international footprint provides a strong platform for broadening sales of
our key growth brands, particularly Hydromol and MacuShield. And we’re now in a
much stronger position to bid for attractive product acquisitions and in-licensing
outside the UK.
Our increased scale will allow us to improve systems and gain operational efficiencies.
The combined strengths of our product portfolios – together with the excellent strategic
fit – will enable Alliance to build a truly international business.
New strength in Europe
Last year’s sales* figures for the acquired Sinclair products, top five markets:
France
UK
Italy
Germany
Algeria
£8.3m
£5.9m
£2.7m
£2.2m
£2.1m
Atopiclair
Flammacerium
Next five largest markets: Spain, China, Brazil, Belgium, Indonesia
Aloclair
Key growth brands
The acquisition brings us four key growth brands:
Kelo-cote (£7.7m*) – a patented gel for management of
abnormal scars.
Wound
management
The Flamma range (£6.9m*) – unique sterile treatments for
severe burns and wounds prone to infection. Includes
Flammacerium, designated as an orphan drug in the US,
which we also plan to launch in the UK.
Aloclair (£4.2m*) – fast pain relief and healing for mouth
ulcers, with a new ‘ultra’ version in development.
Skin care
Atopiclair (£1.7m*) – steroid-free treatment for dermatitis,
complementing the Hydromol range.
*Sales being the 12 months to 31 December 2015.
Alliance Pharma plc | Annual Report 2015 05
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06 Alliance Pharma plc | Annual Report 2015
Growth through International Expansion
Internationalisation
accelerated in 2015
Following the Sinclair acquisition,
we now have a substantially larger
international footprint. Previously,
we made approximately 80% of our
sales in the UK. Now, the split is
broadly 50% UK, 25% Western
Europe excluding UK, and 25% Rest
of World.
We have gained new strength in
China, greater exposure to fast-
growing markets in SE Asia, and
footholds in the US and Latin
America. We have also boosted
our position in Europe, gaining
operating companies in France and
Italy and a sales presence in Spain,
meaning we now have significant
sales in each of the EU-5 (UK,
France, Germany, Spain & Italy).
pre-Sinclair
post-Sinclair
Non-UK
19%
Non-UK
49%
UK
81%
UK
51%
*Pro-forma sales for the 12 months to December 2015, including share of Joint Ventures.
1
UK – Chippenham
2
France – Paris
3
Germany – Düsseldorf
Our Group HQ will continue to be in
Chippenham where we have around 90
people working across supply chain,
finance, corporate development, sales and
marketing, regulatory, medical, quality,
IT and HR.
Whilst we are undertaking international
expansion, around 50% of Group sales are
in the UK and this remains an important
growth area in which we will continue to
review acquisition opportunities. The UK
domestic market commercial activities are
also managed from this office.
We appointed Philippe Pasdelou in 2012 as
Country Manager in France, the same year
in which we made our first French product
acquisitions, Paludrine and Savarine.
The Sinclair acquisition has brought a
significant platform for growth, bringing
both an office in Paris, with around 20
people, and £8m of sales (based on the 12
months to 31 December 2015). The Paris
office houses the French local country
organisation and also the Group’s
International business centre under
Karim Husny.
Following the appointment of Lars Börger
as Country Manager of Germany, Austria
and Switzerland in 2012, Alliance made its
first German product acquisition, Irenat,
in 2014. Following the Sinclair acquisition,
we have now established a small office in
Düsseldorf for commercial activities to
manage the newly expanded portfolio and
continue to look for new opportunities.
1
2
3
4
Alliance Pharma plc | Annual Report 2015 07
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Head of International
Karim Husny was appointed Head of International at the
beginning of 2016 covering all our distributor-based business in
the expanded Group, which now accounts for some 25% of sales.
He brings extensive international experience in OTC and
consumer healthcare at European pharmaceutical firms
including Omega Pharma, Pfizer and Sanofi's Zentiva business.
Map key:
Direct Presence
Direct Presence being established
Distribution Partners
4
Italy – Milan
5
China – Shanghai
6
SE Asia – Singapore
With the Sinclair acquisition we now have
an office in Milan with around 12 people
and sales in Italy of some £3m. The
principal activities in Milan are the
commercial management of the Italian
territory sales and also a part of the Group
quality function focusing on Medical
Devices.
Our activities in China grew considerably in
2015. From Sinopharm Nutraceuticals
Shanghai, we acquired five child nutrition
brands with annual sales of around £1.5m
but with significant turnaround potential.
Additionally, one of the key growth brands
we acquired from Sinclair is Kelo-cote, a
scar treatment gel that sells well in China.
After some years of preparatory work we
now have a portfolio of products around
which we are developing our business in
China, and we look to build on this platform
over the next few years.
We have recently appointed Roger Lim as
Regional Business Manager for SE Asia.
We see this region providing significant
growth potential for the acquired products
from Sinclair as well as the historic Alliance
portfolio, and this appointment will keep us
close to the market.
08 Alliance Pharma plc | Annual Report 2015
Corporate Development
Our core strategy remains the pursuit of organic
growth complemented by acquisitions, in-licensing
and modest development of line extensions.
We have a long track record of successful acquisitions, having completed 31
acquisitions and a number of in-licensing deals over the past 17 years.
Under our long-established ‘buy and build’ strategy we supplement organic growth
with acquisitions that allow us to accelerate expansion and adjust the balance of our
portfolio.
We will acquire established medicines with continuing clinical need, a history of stable
sales, limited competition and limited promotional support to add to our non-promoted
‘bedrock’ products.
We will also acquire products and businesses with the potential for growth through
targeted promotional investment. In recent years we have been broadening the growth
element of our portfolio to include consumer healthcare products. Our developing
experience in this area enables us to identify products that offer substantial organic
growth potential in return for relatively modest promotional investment. The Sinclair
Healthcare Products acquisition has further increased our consumer focus and this
will be important moving forward. These consumer products also have a degree of
pricing flexibility and therefore help to balance margin risk across the portfolio.
We will work closely with existing and new partner companies to share and license
rights to assets that have growth opportunities.
We will concentrate our commercial growth activities behind the therapy areas of
Dermatology, Mother & Child and Ophthalmology, making full use of our expanded
geographic footprint.
We will leverage our new scale to attract wider international licensing opportunities,
such as pan-EU deals and deals with partners outside Europe.
We have access to considerable financial resources to fund future deals, both through
our investor base and our banking partners.
To enable us to deliver on our strategy, the group has a dedicated Corporate
Development team who actively seek acquisition and licensing opportunities. We have
considerable expertise in target selection, contract negotiation, due diligence and
efficient integration of acquired products and businesses into our organisation.
Dan Thomas, Chief Corporate
Development Officer
Irenat
Acquired January 2014, Germany
MacuShield
Acquired February 2015, Global exc. US
Sinclair Healthcare Products Business
Suprememil
Acquired December 2015
Joint venture January 2014, China
Lypsyl
Acquired December 2013, UK & ROI
Growth through Acquisitions
Strong track record of successful acquisitions.
£16m
£6m
£12m
£9m
Alliance Pharma plc | Annual Report 2015 09
£139m
£4m
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2010
1 DEAL
2011
3 DEALS
2012
2 DEALS
2013
2 DEALS
2014
2 DEALS
2015
4 DEALS
31 31 Deals
in 17 years.
90 Over 90
Products.
Building
global operation.
Acquisitions
In licensing
We are actively seeking opportunities to
acquire individual products, portfolios
of products or corporates that meet our
target criteria.
Within the 31 acquisitions, we acquired products from several of
the multi-national and mid-tier pharma companies, as well as
making a number of corporate acquisitions.
We welcome speculative approaches. We are open to acquisitions
in any therapy area or geography, although we are particularly
interested in products which complement any of our existing
therapy areas or which have sales in the ‘EU5’ territories (UK,
France, Germany, Spain & Italy) or in China.
Our evaluation processes are well developed and managed by a
dedicated team of professionals who engage with colleagues in
both the commercial and functional support areas (technical
operations, medical, regulatory, finance, legal, HR) as required in
order to facilitate a rapid and thorough assessment. As part of
this process, the team routinely manage integration planning and
any transitional arrangements, so as to make the subsequent
incorporation of the new assets as smooth as possible.
We seek to in-license the rights to new
product opportunities in therapy areas
which are complementary to our
existing promoted business interests in
Dermatology, Mother & Child, and
Ophthalmology. We are equally happy to
look at products in other therapy areas
too, which otherwise fit our criteria.
Typically we would look to take-on products for which all clinical
trial work has been completed that are either in the process of
registration, or which are already registered and ready to
commercialise.
We have good experience in bringing new products to market,
leveraging the relationships we have fostered with healthcare
professionals in our existing promoted therapy areas.
We seek international licensing opportunities, such as pan-
EU deals.
Our assessment processes for in-licensing opportunities mirror
those for acquisitions, being led by our Corporate Development
team, supported by expertise from elsewhere in the business, as
needed. We aim to complete a thorough and timely assessment
of opportunities and will work with prospective licensing
partners to agree a balanced share of the risks and rewards
inherent in bringing a new product to market and developing its
market position.
10 Alliance Pharma plc | Annual Report 2015
Promoted Brands
Our promoted portfolio is focused on three key
areas: Dermatology, Mother and Child, and
Ophthalmology.
In addition to Sinclair, we made three important additions in 2015 to these areas, from
which we expect to drive significant growth in the next few years:
l MacuShield, a treatment for age-related macular degeneration, gives us a fast-
growing product with major potential for internationalisation.
l Diclectin, which we have in-licensed for the UK market, is on track to be the UK’s
only licensed product for nausea and vomiting of pregnancy.
l Five child nutrition brands in China from Sinopharm Nutraceuticals Shanghai
(‘SNS’). These add to our Mother and Child business in China and have significant
turnaround potential.
Our increased scale and international reach now also provides an enhanced platform
for further development. This creates new marketing opportunities for our existing
products and also the acquired Healthcare Products from Sinclair.
Ophthalmology
MacuShield
Acquired in February 2015, MacuShield 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-Zeaxanthin, 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.
Sales of MacuShield were £3.5m in the 11 months to 31 December 2015, representing
growth on a twelve month basis of 13% on the previous year. Of the £3.5m of sales,
some 90% of this was in the UK & ROI. This demonstrates the potential for international
expansion through our expanded global distribution partner network.
International potential
International
10%
ROI
18%
UK
72%
The UK’s most
recommended eye care
supplement
Alliance Pharma plc | Annual Report 2015 11
Kelo-cote
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Dermatology
Kelo-cote
Kelo-cote, acquired as part of the Sinclair
Healthcare Products Business, is now Alliance’s
largest brand with sales in the 12 months to 31
December 2015 of £8m.
Kelo-cote is a patented, non-invasive, clinically proven solution to prevent and treat
excessive scarring. It forms a self-drying, transparent silicone layer which creates a
flexible and breathable barrier, enabling the affected area to heal under the best
conditions to reduce redness. This will flatten and diminish the appearance of raised or
coloured scars as old as four years, along with relieving itching and discomfort.
With a presence in more than 60 countries and over one million patients treated
worldwide, Kelo-cote is a prized brand that we see as having further potential for
international growth.
Hydromol
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.
Hydromol has achieved good growth over a number of years, and in 2015 continued to
do so; sales grew by 10% to £6.6m.
Our increased scale and international reach provide an enhanced platform for further
development, creating new marketing opportunities for Hydromol.
12 Alliance Pharma plc | Annual Report 2015
Promoted Brands continued
Mother and Child
Diclectin
Alliance in-licensed Diclectin from Duchesnay Inc.
in January 2015.
This combination of a widely-used antihistamine with vitamin B6 has a well-established
safety and efficacy profile and has been used for over 30 years in Canada to treat
nausea and vomiting of pregnancy. We submitted Diclectin for UK registration in the
second quarter of 2015, and we estimate being able to launch in 2017.
In the United States, it was licensed by the FDA in 2013 under the name Diclegis with a
Category A safety rating for drugs used during pregnancy. Since then, sales have
reached $160m in under three years, which augurs well for its prospects in the UK.
Pending UK approval, we are undertaking market access work with NHS budget
holders to facilitate uptake at launch.
We believe Diclectin represents an exciting growth opportunity for Alliance over the
next 5 years.
Ashton & Parsons
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.
Sales in 2015 were £1.5m, and in 2016 we will be building distribution listings to
ensure wide availability.
Development of the Organisation
Alliance Pharma plc | Annual Report 2015 13
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Janice Timberlake, Chief Human
Resources Officer
Stephen Kidner, Chief Scientific and
Operations Officer
Organisation & People
Scientific Affairs & Operations
In February 2016 we brought together
our Medical & Regulatory Affairs and
Operations departments to create one
Scientific Affairs and Operations team.
By integrating all the functions needed
to supply cost-effective and compliant
product we aim to streamline our
processes and by doing so expect to
realise greater operating efficiency
and effectiveness.
We now source products from 50 manufacturing partners
concentrated within Europe and by doing so have retained our
agile, asset light and low risk manufacturing model. Active
tendering and supplier relationship management ensures the
right spread of partners and that mutual value is realised.
Reflecting the increased scale and scope of our global supply
chain operations we have strengthened our logistics capabilities.
We have invested in our quality management team whilst
leveraging strengths acquired in the quality management of
medical devices in Milan.
Whilst our current focus is firmly on integrating our new
enlarged business we have begun our search for a new ERP
system which we anticipate will be operational late in 2017.
Having the entire Alliance group on a single ERP platform will
enable us to run our global operations far more efficiently.
We continue to be an exciting and
dynamic organisation, growing through
acquisition to create an increasingly
international footprint. The recent
acquisition has brought 41 new people
into the business in France, Italy and in
the UK, which together with a number
of new appointments in the UK, Spain,
Germany, Singapore & China will bring
our people base to around 150 globally.
Our capable people are at the heart of our business; a diverse
team of dedicated, enthusiastic and experienced professionals
who are committed to providing much needed medicines
around the world. As our international footprint increases, we
are becoming more multi-cultural. We recognise and celebrate
this diversity, learning from one another, and sharing cultural
perspectives. This adds strength and quality to our thinking and
delivery, so creating a healthy progressive culture.
This environment also enables us to attract people from top
blue chip pharmaceutical and non-pharmaceutical companies.
We have recruited this year across several disciplines, from
supply chain, finance, sales and marketing to more specialist
pharmaceutical disciplines of development, regulatory, medical
and quality. These people bring with them expertise on many
brands, therapy areas and wide-ranging professional
experiences and best practice.
The growth over the past year has also created exciting
opportunities for our people to develop their careers with us.
We encourage our people to stretch themselves personally by
taking on fresh challenges and projects.
Developing our skills and capability is important to Alliance
and over the past year we have continued to support part-time
study, professional exams, short skills courses, continuous
professional development and have several internal
development programmes, including personal impact,
change management and essential management skills
programmes.
14 Alliance Pharma plc | Annual Report 2015
Strategic Report
2015 was a transformational year for Alliance. Following the acquisition of the
Healthcare Products Business from Sinclair IS Pharma plc, we will double the scale
of our business – in terms of sales, profits and people. We have extended our reach
from around 40 countries to over 100 and extended our portfolio to some 90
products. Importantly this greatly strengthens our presence in Europe enhancing our
ability to compete for future pan-European licensing and acquisition opportunities.
It also brings extra business into our China operation and in South East Asia, where
we will establish a base in Singapore. Alliance is now a truly international business.
The acquisition from Sinclair for £132.2m (including inventory),
announced on 17 December 2015, was our largest acquisition to
date, bringing us 27 products which generated annual revenues to
31 December 2015 of £39.4m.
In addition, we made two other important additions in the first
quarter of 2015, from which we expect to drive significant growth
in the next few years. MacuShield, a treatment for age-related
macular degeneration, gives us a fast-growing product with major
potential for internationalisation. And Diclectin, which we have in-
licensed for the UK market, is on track to be the UK’s only
licensed product for nausea and vomiting of pregnancy. We also
acquired five child nutrition brands in China from Sinopharm
Nutraceuticals Shanghai (‘SNS’) in September 2015. These add to
our Mother and Child business in China and have significant
turnaround potential.
These additions represent exciting prospects for our performance
in 2016 and beyond and should not overshadow the good progress
made in our underlying business over the past year. Our sales
growth of over 11% in 2015 was due to a strong performance of
our existing portfolio and the impact of the MacuShield.
Trading performance
Sales rose over 11% to £48.3m, including £0.8m contributed by the
acquired Sinclair business in December. Excluding Sinclair, the
sales increase was almost 9%.
The principal growth driver continued to be the Hydromol
dermatology range, up 10% to £6.6m. Anbesol, one of our
consumer health products, has continued to benefit from a strong
following on social media and sales grew 20% to £1.5m. Gelclair,
our treatment for oral mucositis, rose 5% to £1.4m. And Forceval
capsules recovered strongly from earlier stock-outs, with sales up
by £0.6m to £2.1m.
MacuShield, acquired in February 2015, outperformed our
expectations, contributing £3.5m of sales.
Partially offsetting these gains was the loss of revenue from nine
products that we handed back to Novartis in 2014. In the 2014
financial year, they contributed sales of £1.6m although the
margins on the products were relatively small. Nu-Seals
continued to suffer sales erosion by generic competitors in
Ireland, and sales fell by a further £0.6m to £1.9m; we are still
awaiting a decision from the regulator on whether to allow generic
substitution by pharmacists. Quinoderm Cream remains off the
market, as the sole manufacturer of the active ingredient has
ended production. We are in the process of developing alternative
supplies, and look forward to recommencing sales in early 2017.
We have been preparing to put marketing support behind two key
brands in 2016. We trialled TV advertising for Ashton & Parsons
Infants’ Powders in 2015, and before committing to a full campaign
we are building distribution listings to ensure wide availability;
meanwhile, sales levelled-off in 2015 at £1.5m after strong growth
in 2014. Lypsyl sales were also flat at £1.1m while we worked on
redesigning the product for relaunch in 2016.
Our substantial bedrock portfolio of unpromoted products
performed well, with overall sales stable as expected.
In Europe, our French and German businesses maintained stable
sales volumes – although the value was affected by the relative
strength of sterling against the euro during the year.
In China, we currently have a 20% stake in Synthasia International.
In 2015 we helped to resolve some supply issues with its Swiss
manufacturer of infant milk formula products and our 20% share
of the sales grew 29% to £0.4m. Forceval, which we sell in China
through a distributor, suffered from stockholding fluctuations:
sales fell from £1.6m in 2014 to £0.9m, but are now recovering.
Our child nutrition brands, acquired in September 2015,
contributed £0.2m sales.
Financial performance
Pre-tax profits were up 49% to £15.2m (2014: £10.2m). However,
this result benefited from the balance of some significant one-off
items. Excluding these, the underlying trading profit was up 6% to
£11.4m (2014: £10.8m).
These major exceptional items included £6.3m (net) compensation
received for the suspension of ImmuCyst production by Sanofi,
partially offset by Sinclair acquisition costs of £1.8m together with
a fair value adjustment to the deferred consideration for the
MacuShield acquisition of £0.5m, partly triggered by better-than-
forecast sales growth.
Gross profit was up 15% to £28.7m (2014: £25.0m), giving a gross
margin for the year of 59.4%. This increase on the 57.5% achieved
in 2014 was primarily due to a more favourable mix following
handback of the nine Novartis products. We expect to maintain
gross margins at 55-60%.
The increase in gross profit was partially absorbed by higher
operating costs of £16.3m, excluding non-underlying items, up
from £13.3m in 2014. This resulted from increased marketing
investment in key brands, particularly MacuShield following
acquisition, pre-launch preparation for Diclectin and a
strengthening of the supply chain function leading to a modest
increase in staff numbers and costs.
Alliance Pharma plc | Annual Report 2015 15
MacuShield, acquired
in February 2015,
outperformed our
expectations,
contributing £3.5m
of sales.
Gross profit was up
15% to £28.7m (2014:
£25.0m), giving a gross
margin for the year of
59.4%.
In recent years we have
been broadening the
growth element of our
portfolio to include
consumer healthcare
products.
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Operating profit – excluding non-underlying items – was £12.5m
(2014: £11.8m). This represented 25.8% of sales (2014: 27.1%), the
slight decrease being driven by the above mentioned increased
investment.
The underlying business remains strongly cash generative.
However, in 2015 free cash flow reduced to £6.3m (2014: £10.3m).
The principal factors were one-off events: planned stock building
to pre-empt supply disruptions, and the inventory costs resulting
from the Sinclair products acquisition.
The Sinclair acquisition was financed by increases in both share
capital and bank debt. The issue of some 204m shares raised a net
£80.8m. For the balance, we negotiated an increase in bank
facilities from £55m to £100m, from which we drew £75m for
acquisition funding and repayment of existing facilities. This
resulted in net debt at the year-end of £71.5m (2014: £21.1m),
which we expect to reduce progressively with cash generated by
the enlarged business.
At the year-end, the bank debt/EBITDA ratio was 2.8 times on a
pro forma basis including historic EBITDA for the Sinclair
business. This compares with 1.6 times at the end of 2014.
At the year-end, our unused bank facility stood at £25.0m (2014:
£23.8m) plus a £5m overdraft facility.
Earnings per share and dividend
Reported earnings per share (EPS) was 4.65p (2014: 3.17p).
Adjusted for non-underlying items, the diluted EPS figure was 3.61p,
8% above 2014.
The 2015 EPS figure is based on a time-weighted average number
of shares for the year of 279m, reflecting the increased number of
shares in issue at the year-end of 468m, compared with 264m in 2014.
Given the year’s strong performance, and consistent with our
progressive dividend policy, we are recommending a final payment
of 0.734p per ordinary share to give a total for the year of 1.1p. This
represents an increase of 10% on 2014. The final dividend will be
paid on 13 July 2016 to shareholders on the register on 17 June
2016. Although the new shares for the Sinclair acquisition were
issued in December 2015, this had a minimal impact on EPS
dilution, and the level of dividend cover in 2015 remained ample at
over three times. The total dividend payment for 2015 will be £5.1m
including the £1.7m interim payment.
Strategy
Our business model is based on a diversified and growing portfolio
of products and brands, in which no single brand currently
accounts for more than about 9% of total sales. This portfolio
balances two elements. We have a segment of brands with growth
potential in which we invest and we have a bedrock of brands that
are well established in their market niches and will maintain their
sales for many years with little or no promotion. By balancing the
two, we can invest in targeted marketing to grow sales while
maintaining good cash generation and profitability.
Our promoted portfolio is focused on three key areas: Dermatology
where our main products are Kelo-cote, Hydromol and
Flammazine/Flammacerium; Mother and Child where our key
products are Oxyplastine, Ashton & Parsons, Diclectin (pre-launch)
and Suprememil in China; and Ophthalmology with MacuShield
where a significant internationalisation opportunity exists.
Under our long-established ‘buy and build’ strategy we
supplement organic growth with acquisitions that allow us to
accelerate expansion and adjust the balance of our portfolio.
In recent years we have been broadening the growth element of our
portfolio to include consumer healthcare products. Our growing
experience in this area enables us to identify products that offer
substantial organic growth potential in return for relatively modest
promotional investment. These consumer products also have a
degree of pricing flexibility and therefore help to balance margin risk
across the portfolio. The February 2015 acquisition of MacuShield
has further boosted our offer to both healthcare professionals and
retailers. We are promoting it to ophthalmology clinicians, who
recommend it to suitable patients to purchase over-the-counter
(‘OTC’), where we also have promotional capabilities.
We further expanded our prescription healthcare portfolio in 2015
by in-licensing Diclectin. This combination of a widely-used
antihistamine with vitamin B6 has a well-established safety and
efficacy profile and has been used for over 30 years in Canada to
treat nausea and vomiting of pregnancy. We submitted Diclectin for
UK registration in the second quarter of 2015, and we estimate
being able to launch in 2017. In the United States, it was licensed
by the FDA in 2013 under the name Diclegis with a Category A
safety rating for drugs used during pregnancy. Since then, sales
have reached $160m in under three years, which augurs well for
its prospects in the UK. Pending UK approval, we are undertaking
market access work with NHS budget holders to facilitate uptake
at launch.
On the acquisition side, the Sinclair Healthcare Products Business
fits very well with our strategy. We have gained 27 products
including four key growth brands. Of these, three (Kelo-cote,
Flammazine/ Flammacerium and Atopiclair) are in skincare and
wound management; the other (Aloclair) is an OTC consumer
treatment for mouth ulcers.
16 Alliance Pharma plc | Annual Report 2015
Strategic Report continued
Since completion of the acquisition in mid-December 2015, sales of
Kelo-stretch, which had been identified as a key growth brand, have
been lower than we had anticipated despite extensive promotional
activities by A. Menarini Asia-Pacific Pte. Ltd., our key partner in
South East Asia. Despite this, other Sinclair brands they distribute
for us are performing well. The relationship with Menarini remains
strong and other opportunities are being positively explored. The
2016 impact of the Kelo-stretch shortfall is estimated at a possible
reduction of £1.2m at the operating profit level. Notwithstanding
this, trading to date for the Sinclair Healthcare Products in
aggregate has remained in line with management’s expectations.
In the expanded product portfolio, the balance between promoted
and non-promoted ‘bedrock’ products remains roughly equal thus
balancing cash flow stability and promotion driven growth. The
balance between OTC and prescription products has shifted slightly
in favour of OTC – but the impact on marketing costs will be limited
because a large proportion of Sinclair product sales are made
through distributors, who bear the cost of advertising.
We now have a substantially larger international footprint.
Previously, we made approximately 80% of our sales in the UK.
Now, the split is broadly 50% UK, 25% Western Europe excluding
UK, and 25% Rest of World. We have gained new strength in China,
greater exposure to fast-growing markets in SE Asia, and footholds
in the US and Latin America. We have also boosted our position in
Europe, gaining operating companies in France and Italy and a
sales presence in Spain.
Our core strategy remains unchanged, with organic growth
augmented by acquisitions, in-licensing and modest development
of line extensions. Our increased scale and international reach
provide an enhanced platform for further development. They create
new marketing opportunities for our existing products, particularly
Hydromol and MacuShield, and strengthen our hand in seeking
acquisition and in-licensing opportunities outside the UK. We
intend to maintain a balance between non-promoted bedrock
products and our three promoted growth areas: Dermatology,
Mother and Child, and Ophthalmology.
Integration of the Sinclair products and teams is on track and will
continue through 2016. Our Chippenham office remains the Group
and UK headquarters, while our international distributor
management is run from our international business centre in Paris
where we have staff of around 20 people. We are establishing a
small office in Singapore to manage operations in SE Asia.
Our activities in China grew considerably in 2015. From Sinopharm
Nutraceuticals Shanghai, we acquired five child nutrition brands
with annual sales of around £1.5m but with significant turnaround
potential. We now own these brands outright, and are marketing
them through our part-owned Synthasia business. Additionally, one
of the key growth brands we acquired from Sinclair is Kelo-cote, a
scar treatment gel that sells particularly well in China.
After some years of preparatory work we now have a portfolio of
products around which we are developing our business in China,
and we look to build on this platform over the next few years. To
facilitate our trading in China we have established a ‘wholly owned
foreign enterprise’ in the Shanghai Free Trade Zone.
We resumed sales of our bladder cancer treatment, ImmuCyst, in
February 2016. This had been one of our lead products until our
supplier, Sanofi Pasteur, suspended production in mid-2012 for
which we received compensation of £6.3m, net of costs, in 2015.
Despite ImmuCyst’s absence for three and a half years, the market
remained underserved until recently, as the only competitor
treatment was in short supply. It is difficult to estimate our likely
market share going forward, as our supplies from Sanofi will be
limited and we believe the competitor product is now available in
greater quantities.
Team
In September we welcomed Andrew Franklin to the Board as Chief
Financial Officer. Andrew was Finance Director and Company
Secretary of Genzyme Therapeutics Ltd from 2010 to 2012 and had
previously held senior financial management positions with Wyeth
for over 12 years. He joined us from Panasonic Europe, where he
was General Manager, European Tax and Accounting.
Non-executive Director Nigel Clifford joined the Board in
January 2015.
Consequent upon the planned departure in 2016 of Tony Booley, our
long-standing Executive Director – International, we have brought
together the Group’s commercial leadership under Peter
Butterfield as Chief Commercial Officer. Reporting to Peter, Karim
Husny has joined Alliance as Paris-based Head of International
covering all our distributor-based business, which now accounts for
some 25% of sales. He brings extensive international experience in
OTC and consumer healthcare at European pharmaceutical firms
including Omega Pharma, Pfizer and Sanofi's Zentiva business.
About 40 key staff have joined us from Sinclair and we are recruiting
around 20 more to support the new products and operations.
Charity
We continue to donate products regularly to International Health
Partners, which distributes medicines to doctors in the world’s
neediest areas. We also support employee fundraising for local
causes including Wiltshire Air Ambulance and Bristol charity
PROPS, which provides support for young people with learning
difficulties and disabilities and their families.
Outlook
In 2016 and beyond, we look forward to building on the greatly
enlarged platform established during 2015. We acknowledge the
effort required this year to integrate two organisations with
different working methods, data and IT systems; but the process is
already well underway and progressing successfully. Although
most of the one-off costs of the Sinclair acquisition were met in
2015, we expect the bulk of the integration costs to be borne in
2016. We also intend to take the opportunity to invest in a
significant new enterprise resource planning (‘ERP’) system over
the next 18 months.
We are very pleased with the Sinclair products acquisition and,
notwithstanding the Kelo-stretch shortfall, we expect the enlarged
Group to perform in line with expectations for the full year.
In the meantime we will maintain our long-term ‘buy and build’
strategy for business growth. Our increased capitalisation and
greatly strengthened international position will significantly
enhance our ability to grow both organically – by our access to
much larger markets – and through further acquisitions.
Alliance Pharma plc | Annual Report 2015 17
Our increased scale and
international reach
provide an enhanced
platform for further
development.
Our activities in China
grew considerably in
2015.
About 40 key staff
have joined us from
Sinclair.
Principal risks and uncertainties
The Group’s principal risks and uncertainties are outlined below.
Integration of the Healthcare Products Business acquired
from Sinclair
The integration of the Sinclair acquisition, completed on 17
December 2015, is a key area of focus in 2016. The acquired
business brings offices in Paris and Milan, and also operates on
different IT systems to the existing Group. As such, rationalising the
Group onto a common ERP system will be a project extending
through to 2017. In addition, there is an increased risk from the
number of new contract manufacturing organisations (‘CMOs’) and
distributors and we will build relationships in the first half of 2016
with them in order to maintain supply and develop sales. See note
35 for more detail on this acquisition.
A dedicated Project Manager has been assigned to the integration
to ensure key transition milestones are achieved by the business to
the required timetable. The Project Manager is supported by a
cross-functional team, with regular communication across the
business providing the necessary skills and resource to enable a
successful transition.
Financial risk management
The Group regularly monitors its cash flow and covenant forecast,
allowing for mitigating actions to be taken to remain within contracted
covenants and plan ahead to make regular debt payments.
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.
The Sinclair acquisition primarily increases the exposure that
Alliance has to fluctuations in the US Dollar and the Euro. To
mitigate the impact of Dollar and Euro receipts devaluing, a
proportion of the loans to fund the acquisition were drawn down in
US Dollar and Euro denominations (see note 21). We will continue
to monitor the Group’s exposure and use financial instruments,
such as forward contracts, to manage this risk as required.
Sales volumes being affected by supply chain constraints
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.
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Sales volumes being affected by a change in demand
Changes in demand for pharmaceutical 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 and that the products have many
years of steady sales history prior to acquisition.
Sales pricing being reduced by regulatory action
Pricing pressure is being seen across Europe as countries look to
reduce their national debt. Our largest exposure is in the UK where
around 18% of the Group’s revenues were from products covered by
the Pharmaceutical Price Regulation Scheme (‘PPRS’) in 2015, 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 the 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.
Following the acquisition of the Healthcare Products Business from
Sinclair, and the resulting internationalisation, the concentration
risk for pricing reductions in the UK is now significantly reduced.
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.
System failure or cyber security breach
The Group has a range of measures in place to monitor and
mitigate this risk: networks and systems are protected by anti-virus
software, firewalls and network segmentation that are regularly
updated; 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.
On behalf of the Board
Sarah Robinson
Company Secretary
6 April 2016
18 Alliance Pharma plc | Annual Report 2015
Board of Directors
Directors who held office at the date of this report are set out below. All were
Directors throughout 2015 with the exception of Andrew Franklin, who was
appointed 28 September 2015, and Nigel Clifford, who was appointed with effect
from 26 January 2015.
Andrew Smith
Non-Executive Director, Chairman235
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
GlaxoSmithKline), chief executive of Cerebrus plc until its sale, and President of
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
Executive Director, Chief Executive Officer4
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.
Andrew Franklin
Executive Director, Chief Financial Officer
Andrew joined Alliance in September 2015 from Panasonic Europe Ltd, where he
was General Manager – European Tax and Accounting. From 2010 to 2012 Andrew
was Finance Director and Company Secretary of Genzyme Therapeutics Ltd, the UK
& Ireland subsidiary of Genzyme Corporation, the biotechnology company acquired
by Sanofi. Prior to that, he gained 12 years pharmaceutical experience with Wyeth in
a variety of senior financial positions.
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) and Getinge Industrier AB. His senior
management experience includes positions in the UK and overseas. Tony graduated
in Physiology, has an MBA from the University of Warwick and is a Chartered
Marketer. On 23 November 2015 it was announced that Tony had informed the Board
of his intention to leave the Company in order to pursue other business interests.
Tony will remain in his role until the handover of his duties is completed, which is
expected to be by 30 June 2016.
Alliance Pharma plc | Annual Report 2015 19
Peter Butterfield
Executive Director, Chief Commercial Officer
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 Director46
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.
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Nigel Clifford
Non-Executive Director246 (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 Officer of Ordnance Survey and formerly a non-
executive director of Anite plc. He has previously held senior positions at Proceserve
Holdings Limited as Chief Executive, 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.
David Cook
Non-Executive Director146
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 and in
New York on NASDAQ. 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.
1 Chairman Audit Committee 2 Audit Committee member 3 Chairman Nomination Committee
4 Nomination Committee member 5 Chairman Remuneration Committee 6 Remuneration Committee member
20 Alliance Pharma plc | Annual Report 2015
Corporate Governance
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 Evaluation and Review are conducted
biennially. The Board Evaluation, reviews the effectiveness of the
Board in determining the corporate strategy, governance and
controls, and Board development. The Evaluation results are used
to develop the effectiveness of the Board when progressing the
corporate strategy and oversight of the control structure within
the organisation.
We do not comply with the UK Corporate Governance Code.
However, we have reported on our Corporate Governance
arrangements by drawing upon best practice available, including
those aspects of the UK Corporate Governance Code we consider
to be relevant to the Company.
The review noted that the appointment of David Cook in April 2014
and the appointment of Nigel Clifford in January 2015 would build
on the independence of the Board. The Board did not consider
that the appointment of a senior independent director was
necessary but will consider this at each review. The UK
Governance Code requires the Board to consider their policy on
gender diversity in the boardroom, to report against it annually
and to consider diversity as a factor when evaluating the
effectiveness of the Board. Therefore the Company searches for,
recruits and appoints the best available person on the basis of
aptitude and ability, regardless of sex, marital or civil
partnership status, race, colour, nationality, ethnic or national
origins, pregnancy, disability, age, sexual orientation, religion,
belief or gender reassignment.
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 Chief Financial Officer 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 Investors section of the Group’s website is
regularly updated and amended with the aim 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 Chief Financial Officer 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.
Modern Slavery Act
Relevant commercial organisations are required to prepare and
publish a slavery and human trafficking statement each
financial year. The new reporting provision applies to financial
years ending on or after 31 March 2016. The Board are taking
steps to incorporate appropriate and proportionate controls.
Management Teams
During 2015 the Board delegated management of the business
to the Corporate Organisation Team. 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.
Alliance Pharma plc | Annual Report 2015 21
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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 2015 the Board held 11 scheduled meetings. Thomas
Casdagli, David Cook and Anthony Booley attended ten scheduled
Board meetings, Andrew Franklin attended all the Board meetings
since his appointment on 28 September, and Nigel Clifford attended
eight Board meetings since his appointment. 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.
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 Chief Human Resources Officer are also
invited to attend certain meetings of the Remuneration Committee.
There were five 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).
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 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. Share Options granted to senior
managers include a company performance element.
4. Pensions – There is a defined 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.
Gender Pay Transparency Report
The Remuneration Committee will consider the Regulations under
the Equality Act 2010 on Gender Pay Transparency in 2016.
Diversity Policy Reporting
Listed companies will also be required to include in their corporate
governance statement a description of the board diversity policy
applied with regard to aspects such as age, gender or educational
and professional backgrounds, the objectives of that diversity
policy, how it has been implemented and the results in the
reporting period.
22 Alliance Pharma plc | Annual Report 2015
Directors’ Remuneration
Directors’ Remuneration
The aggregate remuneration payable to the directors during the period was as follows:
Salary Bonus Other Pension Total Remuneration
£ 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
A R Booley 195,301 182,057 62,131 7,789 370,291 6,483 - 2,403 627,723 198,732
P J Butterfield 175,065 161,600 92,438 10,219 537 520 16,553 15,140 284,593 187,479
T Casdagli - - - - - - - - - -
J Dawson 219,614 212,677 96,680 8,014 1,922 5,332 10,000 10,000 328,216 236,023
A T Franklin 38,802 - 9,807 - - - 2,333 - 50,942 -
M R B Gatenby - 29,277 - - - 832 - - - 30,109
P M Ranson - 34,404 - - - - - - - 34,404
A L Smith 74,003 56,134 - - - 1,611 - - 74,003 57,745
R D Wright 65,389 155,606 - 5,720 147,353 1,767 6,114 14,372 218,856 177,465
D Cook 37,474 25,910 - - 657 318 - - 38,131 26,228
N Clifford 33,997 - - - 562 - - - 34,559 -
839,645 857,665 261,056 31,742 521,322 16,863 35,000 41,915 1,657,023 948,185
Total Remuneration Share based payments Total
£ 2015 2014 2015 2014 2015 2014
A R Booley 627,723 198,732 24,713 35,013 652,436 233,745
P J Butterfield 284,593 187,479 25,272 55,092 309,865 242,571
T Casdagli - - - - - -
J Dawson 328,216 236,023 - - 328,216 236,023
A T Franklin 50,942 - 5,435 - 56,377 -
M R B Gatenby - 30,109 - - - 30,109
P M Ranson - 34,404 - - - 34,404
A L Smith 74,003 57,745 - - 74,003 57,745
R D Wright 218,856 177,465 13,968 35,013 232,824 212,478
D Cook 38,131 26,228 - - 38,131 26,228
N Clifford 34,559 - - - 34,559 -
1,657,023 948,185 69,388 125,118 1,726,411 1,073,303
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.
On 23 November 2015, it was announced that Tony Booley would
leave the Company. As part of Mr Booley’s settlement agreement a
payment of £362,000 has been accrued in relation to payment in
lieu of notice and loss of office that is expected to be paid in 2016.
Loss of Office Payments
Richard Wright resigned from the Board on 29 May 2015. Until that
date he received his base salary and benefits. As part of Mr
Wright’s settlement agreement a payment of £146,100 in lieu of
notice was made.
Alliance Pharma plc | Annual Report 2015 23
Directors’ Share Options
Details of options for the Directors who served during the year are as follows:
2014 Granted 2015
Not subject to Subject to Not subject to Subject to Not subject to Subject to Exercise Date from
performance performance performance performance performance performance price which Expiry
Number
conditions conditions conditions conditions conditions conditions (pence) exercisable date
A R 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
- - 149,653 - 149,653 43.75 27/05/18 26/05/25
P J 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
- - 166,625 - 166,625 - 43.75 27/05/18 26/05/25
A T Franklin - - 2,000,000 - 2,000,000 - 46.75 04/12/18 03/12/25
No Director exercised any options during the year except Richard Wright who exercised 248,650 shares under the share option scheme.
A further 828,400 share options were forfeited by Mr Wright.
The market price of ordinary shares at 31 December 2015 was 43.00 pence and the range during the period was from 33.75 pence to
61.13 pence.
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Nominations Committee
The Nominations Committee met five times during the year. Nigel
Clifford attended the 4 meetings following his appointment.
Thomas Casdagli and David Cook attended 4 meetings. Other
members attended all the meetings.
The Committee focused heavily on Board succession with the key
outcome of the appointment on 28 September 2015 of Andrew
Franklin as Chief Financial Officer. The Committee appointed
Boyden Executive Search to compile a short list of candidates for
this vacancy. Boyden 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 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.
Audit Committee
The Audit Committee met three times during the year. All
members attended all the meetings.
The external auditors attend the meetings to discuss the planning
and conclusions of their audits and reviews and meet with the
members of the Committee without any members of the Executive
present after each meeting.
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
As a result of the increased size of the Group following the
acquisition of assets and businesses from Sinclair IS Pharma, a
newly-formed Risk Review Committee will report to the Audit
Committee and to the Senior Leadership Team.
24 Alliance Pharma plc | Annual Report 2015
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
Beneficial Non-beneficial At start of year or
interest interest At end of year subsequent appointment
Number Number Number Number
Anthony Booley 2,055,723 - 2,055,723 4,310,723
Peter Butterfield - - - -
Thomas Casdagli 78,518 55,483,382 55,561,900 24,061,900
John Dawson 39,576,402 20,000,000 59,576,402 59,576,402
Nigel Clifford 180,663 - 180,663 -
David Cook - - - -
Andrew Franklin - - - -
Andrew Smith 275,000 - 275,000 200,000
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 judgements 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.
Alliance Pharma plc | Annual Report 2015 25
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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 monthly 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 2016 Annual General Meeting of the Company will be held on
25 May 2016, the business of which is set out in the Notice of
Meeting.
On behalf of the Board
Sarah Robinson
Company Secretary
6 April 2016
26 Alliance Pharma plc | Annual Report 2015
Independent Auditor’s report to
the members of Alliance Pharma plc
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 D James
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
6 April 2016
We have audited the financial statements of Alliance Pharma plc
for the year ended 31 December 2015 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, the company statement of changes in equity, and 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 and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
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 (APB’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 2015 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;
and
l the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
l the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Alliance Pharma plc | Annual Report 2015 27
Consolidated Income Statement
Year ended 31 December 2015 Year ended 31 December 2014
Non- Non-
Underlying Underlying Total Underlying Underlying Total
Note (note 5) (note 5)
£000s £000s £000s £000s £000s £000s
Revenue 3 48,344 - 48,344 43,536 - 43,536
Cost of sales (19,614) - (19,614) (18,493) - (18,493)
Gross profit 28,730 - 28,730 25,043 - 25,043
Operating expenses
Administration and marketing expenses (15,634) (1,846) (17,480) (12,510) - (12,510)
Amortisation of intangible assets (199) - (199) (488) - (488)
Share-based employee remuneration 7 (615) - (615) (571) - (571)
Share of joint venture profits 194 - 194 319 - 319
(16,254) (1,846) (18,100) (13,250) - (13,250)
Operating profit/(loss) excluding exceptional item 12,476 (1,846) 10,630 11,793 - 11,793
Exceptional item 5 - 6,332 6,332 - (622) (622)
Operating profit 12,476 4,486 16,962 11,793 (622) 11,171
Finance costs
Interest payable and similar charges 6 (1,221) (750) (1,971) (1,090) - (1,090)
Interest income 6 139 - 139 48 - 48
Other finance income 6 52 - 52 28 - 28
(1,030) (750) (1,780) (1,014) - (1,014)
Profit on ordinary activities before taxation 4 11,446 3,736 15,182 10,779 (622) 10,157
Taxation 8 (1,375) (1,115) (2,490) (1,896) 124 (1,772)
Profit for the year attributable to equity shareholders 10,071 2,621 12,692 8,883 (498) 8,385
Earnings per share
Basic (pence) 10 4.65 3.17
Diluted (pence) 10 4.55 3.16
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.
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Consolidated Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Profit for the period 12,692 8,385
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign exchange revaluations 32 7
Interest rate swaps – cash flow hedge 9 (572)
Deferred tax on interest rate swaps (4) 119
Share of Joint Venture other comprehensive loss - (8)
Total comprehensive income for the period 12,729 7,931
Alliance Pharma plc | Annual Report 2015 29
Consolidated Balance Sheet
31 December 31 December
2015 2014
Note £000s £000s
Assets
Non-current assets
Intangible assets 11 259,945 88,875
Property, plant and equipment 12 1,013 396
Joint Venture investment 33 1,465 1,271
Joint Venture receivable 33 1,462 1,462
Deferred tax asset 23 418 194
Other non-current assets 122 -
264,425 92,198
Current assets
Inventories 14 12,910 5,914
Trade and other receivables 15 11,630 8,322
Cash and cash equivalents 16 3,229 1,434
27,769 15,670
Total assets 292,194 107,868
Equity
Ordinary share capital 25 4,682 2,641
Share premium account 108,308 29,388
Share option reserve 2,610 1,995
Reverse takeover reserve (329) (329)
Other reserve (98) (103)
Translation reserve 32 -
Retained earnings 47,237 37,188
Total equity 162,442 70,780
Liabilities
Non-current liabilities
Long term financial liabilities 19 58,968 19,235
Other liabilities 20 1,496 -
Deferred tax liability 23 37,413 6,309
Derivative financial instruments 22 120 129
97,997 25,673
Current liabilities
Cash and cash equivalents 16 31 414
Financial liabilities 19 15,776 2,895
Corporation tax 2,075 959
Trade and other payables 18 13,873 6,920
Provisions for other liabilities 24 - 227
31,755 11,415
Total liabilities 129,752 37,088
Total equity and liabilities 292,194 107,868
The financial statements were approved by the Board of Directors on 6 April 2016.
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John Dawson Andrew Franklin
Director Director
The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478.
30 Alliance Pharma plc | Annual Report 2015
Company Balance Sheet
31 December 2015 31 December 2014
Note £000s £000s
Assets
Non-current assets
Investment in subsidiaries 13 138,569 51,936
138,569 51,936
Current assets
Trade and other receivables 15 26 25
Cash and cash equivalents 16 - 12
26 37
Total assets 138,595 51,973
Equity
Ordinary share capital 25 4,682 2,641
Share premium account 108,308 29,388
Share option reserve 2,610 1,995
Retained earnings 22,394 17,766
Total equity 137,994 51,790
Liabilities
Current liabilities
Trade and other payables 18 571 183
Cash and cash equivalents 16 30 -
601 183
Total liabilities 601 183
Total equity and liabilities 138,595 51,973
The financial statements were approved by the Board of Directors on 6 April 2016.
John Dawson Andrew Franklin
Director Director
The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478.
Alliance Pharma plc | Annual Report 2015 31
Consolidated Statement of Changes in Equity
Ordinary Share Share Reverse
share premium option takeover Other Translation Retained Total
capital account reserve reserve reserve reserve earnings equity
£000s £000s £000s £000s £000s £000s £000s £000s
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
Balance 1 January 2015 2,641 29,388 1,995 (329) (103) - 37,188 70,780
Issue of shares 2,041 - - - - - - 2,041
Share premium - 78,920 - - - - - 78,920
Dividend paid - - - - - - (2,643) (2,643)
Share options charge - - 615 - - - - 615
Transactions with owners 2,041 78,920 615 - - - (2,643) 78,933
Profit for the period - - - - - - 12,692 12,692
Other comprehensive income
Interest rate swaps – cash flow hedge - - - - 9 - - 9
Deferred tax on interest rate swap - - - - (4) - - (4)
Foreign exchange translation differences - - - - - 32 - 32
Total comprehensive income for the period - - - - 5 32 12,692 12,729
Balance 31 December 2015 4,682 108,308 2,610 (329) (98) 32 47,237 162,442
The balance on the share premium account may not be legally distributed under section 831 of the Companies Act 2006.
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32 Alliance Pharma plc | Annual Report 2015
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 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 and total comprehensive income - - - 6,637 6,637
Balance 31 December 2014 2,641 29,388 1,995 17,766 51,790
Balance 1 January 2015 2,641 29,388 1,995 17,766 51,790
Issue of shares 2,041 - - - 2,041
Share premium - 78,920 - - 78,920
Dividend paid - - - (2,643) (2,643)
Share options charge - - 615 - 615
Transactions with owners 2,041 78,920 615 (2,643) 78,933
Profit for the period and total comprehensive income - - - 7,271 7,271
Balance 31 December 2015 4,682 108,308 2,610 22,394 137,994
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 £7,271,000 (2014: £6,637,000).
As permitted by section 408 of the Companies Act 2006, no separate income statement is presented in respect of the Parent Company.
Alliance Pharma plc | Annual Report 2015 33
Consolidated and Company Cash Flow Statements
Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2015 2014 2015 2014
Note £000s £000s £000s £000s
Cash flows from operating activities
Cash generated from operations 27 9,836 13,451 476 50
Tax paid (1,860) (2,028) - -
Cash flows received from operating activities 7,976 11,423 476 50
Investing activities
Interest received 139 48 2,097 1,757
Dividend received - 72 5,700 5,400
Investment in subsidiary - - (86,632) (4,817)
Development costs capitalised 11 (7) (58) - -
Purchase of property, plant and equipment 12 (647) (111) - -
Purchase of other intangible assets (133,629) (2,817) - -
Net assets acquired on acquisition (221) - - -
Investment in Joint Venture - (499) - -
Net cash (used in) / received from investing activities (134,365) (3,365) (78,835) 2,340
Financing activities
Interest paid and similar charges (1,163) (986) - -
Loan issue costs (1,174) - - -
Loan to Joint Venture - (503) - -
Proceeds from issue of shares 83,500 - 83,500 -
Costs incurred on issue of shares (2,661) - (2,661) -
Proceeds from exercise of share options 121 8 121 8
Dividend paid (2,643) (2,398) (2,643) (2,398)
Receipt from borrowings 80,500 2,750 - -
Repayment of borrowings (28,000) (4,500) - -
Net cash received from / (used in) financing activities 128,480 (5,629) 78,317 (2,390)
Net movement in cash and cash equivalents 2,091 2,429 (42) -
Cash and cash equivalents at the beginning of the period 1,020 (1,438) 12 12
Exchange gains on cash and cash equivalents 87 29 - -
Cash and cash equivalents at the end of the period 16 3,198 1,020 (30) 12
The accompanying accounting policies and notes form an integral part of these financial statements.
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Notes to the Financial Statements
for year ended 31 December 2015
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 6 April 2016.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the periods presented.
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 2015. 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 the Group now accounts for its investment in Joint Ventures using the equity method in accordance with IAS 28. 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 2017 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 11).
Provisions
Provisions have been made 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.
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
Alliance Pharma plc | Annual Report 2015 35
2. Summary of significant accounting policies continued
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.
Segmental reporting
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.
Intangibles
Where there are national governmental pricing controls in place, the Group has the ability to increase pricing of certain products and
reduce pricing of others. When this occurs, the intangible assets associated to each product are grouped for impairment testing
purposes.
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 to mitigate 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.
A 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 therefore the intangible
is unlikely to be impaired.
Business combinations
Management uses valuation techniques when determining the fair values of certain assets and liabilities acquired in a business
combination (see Note 35). In particular, the fair value of contingent consideration is dependent on the outcome of many variables
including the acquirees’ future sales (see Note 21).
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 at the point when substantially all of the risks and rewards of ownership are
transferred to the customer; for UK customers normally this is when the goods are accepted at the customer’s specified delivery
address, and for international customers this is normally on dispatch.
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. Differences on exchange resulting from the translation of overseas assets and liabilities are
recognised directly in equity. Gains and losses arising on currency borrowings used to hedge the foreign currency exposure on the net
assets of the foreign operations are accounted for directly in equity, to the extent that hedge accounting criteria are met and are
included in the consolidated statement of comprehensive income and expense.
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Notes to the Financial Statements continued
for year ended 31 December 2015
2. Summary of significant accounting policies continued
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
20% - 33.3% per annum, straight line
Fixtures, fittings and equipment
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.
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 11). 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.
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.
Alliance Pharma plc | Annual Report 2015 37
2. Summary of significant accounting policies continued
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.
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.
Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity. Gains
and losses on those hedging instruments designated as hedges of the net investment in foreign operations, are recognised in equity to
the extent that the hedging relationship is effective; these amounts are included in exchange differences on translation of foreign
operations as stated in the statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised
immediately in the income statement for the period. Gains and losses accumulated in the translation reserve are included in the
income statement when the foreign investment is disposed of.
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.
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 (notes 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.
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Notes to the Financial Statements continued
for year ended 31 December 2015
2. Summary of significant accounting policies continued
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.
2.19 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.
2.20 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.
“Reverse takeover reserve” represents the difference between the fair value and nominal value of shares issued on a reverse takeover.
“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.
“Translation reserve” represents gains and losses arising on the net assets of overseas operations into Sterling.
“Retained earnings” represents retained profit.
2.21 Investments
Investments in subsidiaries included in the Company’s balance sheet are stated at cost less any provision for impairment.
2.22 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.
2.23 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. Any contingent consideration to be transferred by the acquirer will
be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is
deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other
comprehensive income.
2.24 Non-underlying items
Non-underlying items are those significant items which the Directors consider are not related to the normal trading activities of the
Group and are therefore separately disclosed to enable full understanding of the Group’s financial performance (see note 5). One-off
items relating to acquisitions e.g. acquisition costs and the costs of restructuring post-acquisition are shown as non-underlying.
Exceptional items including settlements and impairments of intangible assets are also shown as non-underlying items.
2.25 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 2015 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.
Alliance Pharma plc | Annual Report 2015 39
2. Summary of significant accounting policies continued
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.
l IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’. The new standard requires lessees to recognise a lease liability reflecting future lease
payments and a ‘right-of-use’ asset for virtually all lease contracts, excluding certain short-term leases and leases of low-value
assets. The new standard is required to be applied for annual reporting periods beginning on or after 1 January 2019.
The Group are currently assessing the impact of the new standards 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.
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 2015 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
2015 2014
£000s £000s
United Kingdom 39,444 36,166
Ireland 3,240 3,116
Rest of the World 5,660 4,254
Statutory revenue 48,344 43,536
China Joint Ventures 1,325 1,941
Total revenue 49,669 45,477
Non-current assets are located within the United Kingdom, France, Italy and the United States of America.
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40 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
3. Segmental reporting continued
Major customers
During the year there were 2 (year ended 31 December 2014: 2) customers who separately comprised 10% or more of revenue.
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Major customer 1 13,470 15,133
Major customer 2 10,420 10,577
23,890 25,710
4. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 63 8
Fees payable by the Group to the Company’s auditor for other services:
- The audit of the accounts of any associate of the Company 50 44
- Audit-related assurance services 9 1
- All other taxation advisory services 67 -
- All services relating to corporate finance transactions (either proposed or entered into) by or on behalf
of the Company or any of its associates 356 32
Amortisation of intangible assets 199 488
Impairment of intangible assets - 622
Share options charge 615 571
Depreciation of plant, property and equipment 239 307
Operating lease rentals 100 97
Research and development 12 -
Profit on foreign exchange transactions (52) (28)
5. Non-underlying and exceptional items
The non-underlying and exceptional items relate to the following:
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
a) Acquisition costs 1,846 -
b) Exceptional item (6,332) -
c) Notional interest 477 -
d) Charge in respect of loan settlement 273 -
e) Impairment of intangible fixed assets - 622
(3,736) 622
a) The acquisition costs related to the acquisition of the Healthcare Products Business from Sinclair IS Pharma plc in December 2015
and amounted to £1.8m. The main costs included legal and professional fees of £1.2m and staffing costs of £0.5m.
b) The exceptional item related to £6.7m compensation received from Sanofi Pasteur, net of £0.4m associated costs, for the
suspension of ImmuCyst production.
c) Notional interest related to the unwinding of the discount on the deferred consideration payable for the acquisition of the share
capital of MacuVision Europe Limited.
Alliance Pharma plc | Annual Report 2015 41
5. Non-underlying and exceptional items continued
d) The charge in respect of the loan settlement related to the release of £0.3m prepaid loan issue costs on the £18m loan repaid on 17
December 2015.
e) The impairment of intangible fixed assets related to the write down of Pavacol-D Syrup, originally purchased for £0.6m, to £nil, to
reflect the uncertainty in being able to bring this product back into supply.
6. Finance costs
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Interest payable and similar charges
On loans and overdrafts (1,116) (968)
Amortised finance issue costs (378) (104)
Notional interest (477) (18)
(1,971) (1,090)
Interest income 139 48
Other finance income
Foreign exchange movements on cash balances 52 28
52 28
Finance costs – net (1,780) (1,014)
Notional interest relates to the unwinding of the deferred consideration on the MacuVision acquisition. The notional interest in 2014 was the
discount applied to provisions (see note 24).
7. Directors and employees
Employee benefit expenses for the Group during the period were as follows:
Year ended Year ended
31 December 31 December
2015 2014
Note £000s £000s
Wages and salaries 6,604 4,541
Social security costs 819 556
Other pension costs 30 362 327
Share-based employee remuneration 26 615 571
8,400 5,995
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The average number of employees of the Group during the period was:
Year ended Year ended
31 December 31 December
2015 2014
Management and administration 86 74
42 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
7. Directors and employees continued
Remuneration in respect of Directors (including pension) was as follows:
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Emoluments 1,657 948
1,657 948
Gain on share options recognised by Directors during the year was £13,968 (2014: £nil).
For additional disclosures please refer to the Directors’ Remuneration section included in 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
2015 2014
£000s £000s
Emoluments for qualifying services 628 226
During the period contributions were paid to defined contribution schemes for four Directors (year ended 31 December 2014: 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
2015 2014
£000s £000s
Short-term employee benefits 1,566 852
Share-based payments 69 125
Post-employment benefits 35 42
1,670 1,019
Average number of members of the CODM (the Executive Team) for the year ended 31 December 2015 was four (year ended 31 December
2014: four).
8. Taxation
Analysis of charge in period.
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
United Kingdom corporation tax at 20.25% (2014: 21.5%)
In respect of current period 2,977 1,870
Adjustment in respect of prior periods - (38)
2,977 1,832
Deferred tax (see note 23)
Origination and reversal of temporary differences (398) (60)
Adjustment in respect of prior periods (89) -
Taxation 2,490 1,772
Alliance Pharma plc | Annual Report 2015 43
8. Taxation continued
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
2015 2014
£000s £000s
Profit on ordinary activities before tax 15,182 10,157
Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom
of 20.25% (2014: 21.5%) 3,074 2,183
Effect of:
Non-deductible expenses 429 182
Attributable to Joint Venture (39) (69)
Adjustment in respect of prior period (89) (38)
Impact of reduction in UK tax rate on deferred tax liability (827) (300)
Differing tax rates on overseas earnings 54 -
Share options (175) -
Other differences 63 (186)
Total taxation 2,490 1,772
Changes to the UK corporation tax rates were announced in the Chancellor's Budget on 8 July 2015. These include reductions to the main rate
to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. As the changes were substantively enacted at the balance sheet date
the effects are included in these financial statements (2014: 20%).
A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016, reducing the main rate to 17% from 1
April 2020. As the change was not substantively enacted at the balance sheet date the effect is not included in these financial statements. The
overall effect of this change, if it had applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax liability
by an additional £1,083,168 and decrease the tax expense for the period by £403,168. £680,000 of the movement relates to deferred tax
recognised on business combination and would have no impact to the tax expense.
9. Dividends
Year ended Year ended
31 December 31 December
2015 2014
Pence/share £000s Pence/share £000s
Amounts recognised as distributions to owners in the year:
Interim dividend for the prior financial year 0.333 880 0.303 800
Final dividend for the prior financial year 0.667 1,763 0.605 1,598
1.000 2,643 0.908 2,398
Interim dividend for the current financial year 0.366 1,714 0.333 880
The proposed final dividend of 0.734 pence per share for the current financial year was approved by the Board of Directors on 31 March 2016
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 2015 in accordance with IAS 10 Events After the Balance Sheet Date. The interim dividend for the current financial year was paid
on 14 January 2016. Subject to shareholder approval, the final dividend will be paid on 13 July 2016 to shareholders who are on the register of
members on 17 June 2016.
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Notes to the Financial Statements continued
for year ended 31 December 2015
10. 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
2015 2014
For basic EPS calculation 272,729,247 264,148,367
Employee share options 6,322,550 1,454,986
For diluted EPS calculation 279,051,797 265,603,353
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
2015 2014
£000s £000s
Earnings for basic EPS 12,692 8,385
Non-underlying: exceptional items (6,332) 622
Other non-underlying items 2,596 -
Tax effect of non-underlying items 1,115 (124)
For adjusted EPS 10,071 8,883
The resulting EPS measures are:
Year ended Year ended
31 December 31 December
2015 2014
Pence Pence
Basic EPS 4.65 3.17
Diluted EPS 4.55 3.16
Adjusted basic EPS 3.69 3.36
Adjusted diluted EPS 3.61 3.34
Alliance Pharma plc | Annual Report 2015 45
11. Intangible assets
Technical know-
how, trademarks
and distribution Development
Goodwill rights costs Total
The Group £000s £000s £000s £000s
Cost
At 1 January 2015 3,593 88,504 431 92,528
Additions - 16,925 7 16,932
Additions due to acquisition 22,442 130,565 - 153,007
Exchange adjustments - 1,330 - 1,330
At 31 December 2015 26,035 237,324 438 263,797
Amortisation and impairment
At 1 January 2015 - 3,653 - 3,653
Amortisation for the year - 199 - 199
At 31 December 2015 - 3,852 - 3,852
Net book amount
At 31 December 2015 26,035 233,472 438 259,945
At 1 January 2015 3,593 84,851 431 88,875
Goodwill
During the year ended 29 February 2004 goodwill of £1.1m arose on the acquisition of Dermapharm Ltd.
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 £1.9m arose on acquisition of Opus Group Holdings Limited in the year ended 31 December 2012.
Goodwill on consolidation of £20.7m arose on the acquisition of certain assets and businesses from Sinclair IS Pharma plc (see note
35). The fair values set out above are provisional figures which will be finalised in the 2016 financial statements following
management’s final review of key reconciliations and judgemental areas relating to acquired inventory and creditor balances.
Additional goodwill of £1.7m arose on the acquisition of the share capital of MacuVision Europe Limited (see note 35).
Technical know-how, trademarks and distribution rights
Acquired technical know-how, 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 activities took place in the year:
l 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 (£0.5m) and deferred contingent consideration of up to £6.0
million (estimated at £3.2m). MacuVision sells MacuShield, an eye care treatment designed to be taken by sufferers of dry age-
related macular degeneration and other eye conditions. The fair value of the intangible asset acquired was £8.8m included within
technical know-how, trademarks and distribution rights.
l On 29 January 2015, the Group entered a Licence and Supply Agreement for the product Diclectin with Duchesnay Inc. The
consideration recognised in relation to this is £1.5m. Diclectin is a product to treat nausea and vomiting of pregnancy and is
anticipated to launch in 2017.
l On 16 September 2015 the Company acquired the rights to five Nutraceutical brands from Sinopharm Nutraceuticals (Shanghai) Co
Ltd for an estimated total consideration of RMB 13.7m (£1.4m). Rujiali (Calcium), Lefuzhi (DHA capsules), Aiweidi (Vitamin D drops),
Manlun Junshe and Changmin (probiotic powder drink) are marketed in China. The consideration was payable in four instalments
including a final instalment payable based on 2016 sales.
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Notes to the Financial Statements continued
for year ended 31 December 2015
11. Intangible assets continued
l On 17 December 2015 Alliance Pharmaceuticals Limited completed the acquisition of certain assets and businesses from Sinclair
IS Pharma plc. The acquisition included 27 products including four key growth brands (Kelo-cote, Flammacerium, Aloclair, and
Atopiclair). The acquisition is effected as the purchase of the collection of companies forming the SPH Group and the acquisition of
the Product Aloclair not owned by those Companies and their related businesses. The SPH Group is a collection of four companies:
Advanced Bio-Technologies Inc. (incorporated in Florida, USA), Sinclair Pharma S.r.l. (incorporated in Italy), Sinclair Pharma
France SAS (incorporated in France) and Maelor Laboratories Limited (incorporated in England and Wales). The total consideration
for the acquisition was £127.5 million, plus £5.3 million for inventory, satisfied partly in cash, funded by way of new loans, and
partly by the issue and allotment of additional shares. The fair value of the intangible assets acquired was £135.8m.
Impairment
As explained in notes 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.
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.
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 2017;
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.
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 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%.
Alliance Pharma plc | Annual Report 2015 47
11. Intangible assets continued
Technical know
how, trademarks
and distribution Development
Goodwill rights costs Total
The Group £000s £000s £000s £000s
Cost
At 1 January 2014 3,593 85,687 373 89,653
Additions - 2,817 58 2,875
At 31 December 2014 3,593 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 3,593 84,851 431 88,875
At 1 January 2014 3,593 83,145 373 87,111
12. Property, plant and equipment
Fixtures,
Computer fittings and Plant & Motor
equipment equipment machinery vehicles Total
The Group £000s £000s £000s £000s £000s
Cost
At 1 January 2015 584 995 - - 1,579
Additions 414 223 - - 637
Additions due to acquisition - 102 109 8 219
At 31 December 2015 998 1,320 109 8 2,435
Depreciation
At 1 January 2015 322 861 - - 1,183
Provided in the year 116 120 - 3 239
At 31 December 2015 438 981 - 3 1,422
Net book amount
At 31 December 2015 560 339 109 5 1,013
At 1 January 2015 262 134 - - 396
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Notes to the Financial Statements continued
for year ended 31 December 2015
12. Property, plant and equipment continued
Fixtures,
Computer fittings and Plant & Motor
equipment equipment machinery vehicles Total
The Group £000s £000s £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
13. Investments
Investment in subsidiary
undertakings
The Company £000s
Cost
At 1 January 2015 51,936
Additions 86,633
At 31 December 2015 138,569
At 1 January 2014 47,119
Additions 4,817
At 31 December 2014 51,936
The additions in the year relate to the increased investment the Company has made in Alliance Pharmaceuticals Limited and Alliance
Pharmaceuticals SAS to support the acquisition of new business and product licences.
Alliance Pharma plc | Annual Report 2015 49
13. Investments continued
The subsidiary and associated undertakings where the Group held 20% or more of the equity share capital at 31 December 2015 are
shown below:
Company Country of registration Shares held % Nature of
or incorporation Class owned 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 Non-trading
Synthasia International Company Limited Hong Kong Ordinary 20 Pharmaceutical sales
Synthasia Shanghai Co. Limited China Ordinary 20 Pharmaceutical sales
Alliance Pharmaceuticals (Asia) Limited Hong Kong Ordinary 100 Pharmaceutical sales
Alliance Pharmaceuticals Shanghai Limited China Ordinary 100 Pharmaceutical sales
MacuVision Europe Limited United Kingdom Ordinary 100 Pharmaceutical sales
Maelor Laboratories Limited United Kingdom Ordinary 100 Pharmaceutical sales
Sinclair Pharma S.r.l. Italy Ordinary 100 Pharmaceutical sales
Advanced Bio-Technologies Inc. USA Ordinary 100 Pharmaceutical sales
Sinclair Pharma France SAS France Ordinary 100 Pharmaceutical sales
All subsidiary undertakings prepare accounts to 31 December, except Opus Healthcare Limited (Republic of Ireland) which prepares
accounts to 28 February, Unigreg Worldwide Limited which prepares accounts to 31 May and Sinclair Pharma S.r.l. which prepares
accounts to 30 June. Alliance Pharmaceuticals Limited, Alliance Pharmaceuticals GmbH, Alliance Pharmaceuticals SAS and Alliance
Pharmaceutical (Asia) Limited 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, Synthasia Shanghai Co. Ltd which is held by Synthasia International Company
Ltd, Alliance Pharmaceuticals Shanghai Limited which is held by Alliance Pharmaceuticals (Asia) Limited, and Sinclair Pharma
France SAS which is held by Alliance Pharmaceuticals SAS.
14. Inventories
31 December 31 December
2015 2014
The Group £000s £000s
Finished goods and materials 13,376 6,742
Inventory provision (466) (828)
12,910 5,914
Inventory costs expensed through the income statement during the year were £15,693,000 (2014: £15,964,000). During the year £264,665 (2014:
£61,774) was recognised as an expense relating to the write-down of stock to net realisable value.
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Notes to the Financial Statements continued
for year ended 31 December 2015
15. Trade and other receivables
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
£000s £000s £000s £000s
Trade receivables 8,783 6,645 - -
Other receivables 1062 669 16 17
Prepayments and accrued income 525 453 10 8
Amounts owed by Joint Venture 1,260 555 - -
11,630 8,322 26 25
The ageing of trade receivables at 31 December is detailed below:
31 December 31 December
2015 2014
£000s £000s
Not past due 5,965 4,105
Due 30-31 December 1,403 1,415
Past due 3 days to 91 days 1,228 964
Past 91 days 187 161
8,783 6,645
For the year ended 31 December 2015 £578,000 was received by 8 January 2016. For the year ended 31 December 2014 £1,545,000 was
received by 9 January 2015.
Trade and other receivables are stated net of estimated allowances for doubtful debts. As at 31 December 2015, trade and other receivables of
£nil (for the year ended 31 December 2014: £nil) 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.
16. Cash and cash equivalents
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
£000s £000s £000s £000s
Cash at bank and in hand 3,229 1,434 - 12
Working capital facility (31) (414) (30) -
3,198 1,020 (30) 12
17. Major non-cash transactions
Principal non-cash transactions include finance issue costs amortised and written off in the income statement during the year of
£378,000 (2014: £104,000) and an exchange movement of £52,000 (2014: £28,000) (see note 6). Interest rate swaps designated as cash
flow hedges resulted in a £9,000 gain (2014: £572,000 loss) to other comprehensive income. Amortisation of intangible assets resulted
in a total charge of £199,000 (2014: £488,000, impairment £622,000) being recognised in the income statement. During the year the
discount on the deferred consideration was recognised as a notional interest charge through the income statement for the amount of
£477,000 (2014: £nil) (see note 6). A notional interest charge, representing the unwinding of the discounted value of the onerous
contract provision of £18,000, was recognised in the income statement in 2014. Nothing was recognised during the year.
Alliance Pharma plc | Annual Report 2015 51
18. Trade and other payables - current
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
£000s £000s £000s £000s
Trade payables 1,153 1,693 - -
Other taxes and social security costs 905 969 - -
Accruals and deferred income 5,663 4,065 571 183
Other payables 728 193 - -
Deferred consideration for acquisitions 5,026 - - -
Amounts due to Joint Ventures 398 - - -
13,873 6,920 571 183
Deferred consideration of £2.8m (year ended 31 December 2014: £nil) relates to the acquisition of MacuVision Europe Limited which took place
on 2 February 2015 and is payable in April 2016 (see note 35). Deferred consideration of £0.4m (year ended 31 December 2014: £nil) relates to
the acquisition of the rights to five Nutraceutical brands from Sinopharm Nutraceuticals (Shanghai) Co Ltd which took place on 16 September
2015 and is payable during 2016. Deferred consideration of £1.8m (year ended 31 December 2014: £nil) relates to the acquisition of certain
assets and businesses from Sinclair IS Pharma plc which took place on 17 December 2015. This is payable during 2016 (see note 35).
19. Financial liabilities - borrowings
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
Current £000s £000s £000s £000s
Bank loans due within one year or on demand:
Secured 16,000 3,000 - -
Finance issue costs (224) (105) - -
15,776 2,895 - -
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
Non-current £000s £000s £000s £000s
Bank loans:
Secured 59,918 19,500 - -
Finance issue costs (950) (265) - -
58,968 19,235 - -
The Group has a total committed bank facility of £100m (31 December 2014: £46.3m) maturing in November 2020 of which £65m is drawn as
‘term loan and £35m is available to draw down through a Revolving Credit Facility (‘RCF’). The RCF is repayable within one to three months and
therefore included within current liabilities.
The bank facility is secured by a fixed and floating charge over the Company's and Group’s assets.
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Notes to the Financial Statements continued
for year ended 31 December 2015
20. Other non-current liabilities
Group Company
31 December 31 December 31 December 31 December
2015 2014 2015 2014
£000s £000s £000s £000s
Deferred consideration for acquisitions 1,383 - - -
Other non-current liabilities 113 - - -
1,496 - - -
Deferred consideration of £0.9m (year ended 31 December 2014: £nil) relates to the acquisition of MacuVision Europe Limited which took place
on 2 February 2015 and is payable in April 2017 (see note 35). Deferred consideration of £0.5m (year ended 31 December 2014: £nil) relates to
the Licence and Supply Agreement for the product Diclectin with Duchesnay Inc. and is payable in May 2017.
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 risks arising from the Group’s financial instruments
are liquidity risk, interest rate risk and foreign currency 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.
In addition to Sterling, the Group also has bank facilities denominated in Euros and US Dollars. The purpose of these facilities is to
manage the currency risk arising from the Group's operations.
Liquidity Risk
The Group seeks to manage financial risk by ensuring at all times there is sufficient liquidity to meet its financial liabilities as they fall
due and to invest any surplus cash safely and profitably. The Group finances its operations through a mixture of debt and equity. The
Group’s main source of debt is provided by a £100m committed Credit Facility maturing in November 2020 (year ended 31 December
2014: £46.3m). This is made up of amortising Term Debt of £65m (year ended 31 December 2014: £20m) and a Revolving Credit Facility
(‘RCF’) of £35m (year ended 31 December 2014: £25m). In order to manage currency risk the Group has borrowed part of the Term
Loans in Euros and US Dollars as follows: EUR 18m (£13.2m) (year ended 31 December 2014: £nil) and USD 36m (£24.3m) (year ended
31 December 2014: £nil); the remainder is denominated in Sterling. At year end the Group had also drawn down £10m of the RCF
(year ended 31 December 2014: £1.3m). The Group also has access to an uncommitted overdraft facility of £4.5m.
The Group balance sheet also includes financial assets in the form of cash at bank and in hand totalling £3,229,000 (31 December
2014: £1,434,000). Of this £2,431,000 was held in Sterling, £759,000 in Euro and the balance in other currencies.
Interest rate risk
The Group’s debt is provided on a floating interest rate basis. The Group uses interest rate swaps to fix the rates paid on a portion of
its debt in order to mitigate against the risks of increasing interest rates. These swaps are re-measured to fair value at each period
end. 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 2014: £20m) to convert the floating
interest rate charge to a fixed rate interest charge maturing in April 2018.
Subsequent to year end the Group implemented the following interest rate swaps:
l Euro interest rate swap: Nominal value EUR 18m, start date of 31 March 2016 amortising to maturity in November 2020.
l Sterling interest rate swap: Nominal value of £16m, start date of 11 April 2018 amortising to maturity in November 2020.
Alliance Pharma plc | Annual Report 2015 53
21. Financial instruments continued
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 2015
Bank loans – Sterling denominated - 38,359 38,359
Bank loans – Euro denominated - 13,235 13,235
Bank loans – US Dollar denominated - 24,324 24,324
Interest rate hedges – Sterling denominated 20,000 (20,000) -
Sterling subtotal 20,000 55,918 75,918
Working capital facility - - -
Total financial liabilities 20,000 55,918 75,918
Unamortised issue costs - (1,174) (1,174)
Net book value of financial liabilities 20,000 54,744 74,744
At 31 December 2014
Bank loans – Sterling denominated - 22,500 22,500
Interest rate hedges – Sterling denominated 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
Fixed rate financial liabilities
Weighted Weighted
average average period
fixed rate % for which
rate is fixed
At 31 December 2015
Sterling 2.94 2.27 years
At 31 December 2014
Sterling 3.19 3.27 years
The Sterling floating rate borrowings bear interest at a rate based on LIBOR. The Euro floating rate borrowings bear interest at a rate based on
EURIBOR. The US Dollar floating rate borrowings bear interest at a benchmark rate (US Dollar LIBOR).
A 0.5% increase in LIBOR would reduce pre-tax profits by approximately £213,000 in 2016. A 0.5% decrease would have the opposite effect.
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Notes to the Financial Statements continued
for year ended 31 December 2015
21. Financial instruments continued
Currency risk
Approximately 30% of the Group's sales are invoiced in Euros. The Group also has a level of Euro expense that naturally nets off a high
portion of the Euro sales. Approximately 10% of the Group’s sales are invoiced in US Dollar, a portion of which will be used to service
the US Dollar denominated debt. The majority of 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 £47,000 decrease in predicted pre-tax profits, while a 5% strengthening
of Sterling would have the approximate opposite effect. A 5% weakening of Sterling against the US Dollar would result in a £439,000
increase in predicted pre-tax profits, while a 5% strengthening of Sterling would have the approximate opposite effect.
Net investment hedges
The Group uses currency denominated borrowings to hedge the exposure of a portion of its net investment in overseas operations
against changes in value due to changes in foreign exchange rates. The net investment hedge was tested for effectiveness during the
year and found to be highly effective. The ineffective element is immaterial. At 31 December 2015 the fair value of the hedge was US
Dollar 36.0m (£24.3m).
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 perform 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 Levels 2 and 3 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 liabilities that are measured at fair value at 31 December 2015:
Level 1 Level 2 Level 3 Total
Liabilities £000s £000s £000s £000s
Derivative financial instruments:
Interest rate swaps - 120 - 120
- 120 - 120
Alliance Pharma plc | Annual Report 2015 55
21. Financial instruments continued
The following table presents the Group’s financial 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 maturity profile of the Group's bank loans (capital only) at the year end is as follows:
At 31 December At 31 December
2015 2014
£000s £000s
Due within:
One year 16,000 3,000
More than one year, not more than two years 8,000 3,000
More than two years, not more than three years 8,000 3,000
More than three years 43,918 13,500
75,918 22,500
The maturity profile of the Group's financial gross liabilities (capital and interest) at the year-end is as follows:
31 December 2015
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 13,873 1,496 - - 15,369
Working capital facility 31 - - - 31
Bank loans 17,946 9,658 55,310 - 82,914
31,850 11,154 55,310 - 98,314
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
Onerous contracts 227 - - - 227
11,203 3, 548 16,950 - 31,701
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56 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
21. Financial instruments continued
The maturity profile of the Company's financial gross liabilities (capital and interest) at the year end is as follows:
31 December 2015 31 December 2014
Bank Bank
Trade borrowings Trade borrowings
payables and payables and
and other other loans and other other loans
£000s £000s £000s £000s
In one year, or less 571 31 183 -
571 31 183 -
The Group had £25.0m (31 December 2014: £23.8m) undrawn committed borrowing facilities available and £4.5m of undrawn uncommitted
facility available at 31 December 2015.
Classification of the Group’s financial instruments is set out below:
Loans and Non-financial
receivables assets Total
As at 31 December 2015 £000s £000s £000s
Financial assets
Cash and cash equivalents 3,229 - 3,229
Trade and other receivables 10,705 925 11,630
Other non-current assets 122 - 122
14,056 925 14,981
Other Liabilities not
Held for financial within scope
trading liabilities of IAS39 Total
As at 31 December 2015 £000s £000s £000s £000s
Financial liabilities
Working capital facility - 31 - 31
Long term financial liabilities (exc. issue costs) - 59,918 - 59,918
Financial liabilities (exc. issue costs) - 16,000 - 16,000
Trade and other payables - 12,968 905 13,873
Other liabilities - 1,496 - 1,496
Corporation tax - - 2,075 2,075
- 90,413 2,980 93,393
Loans and Non-financial
receivables assets Total
As at 31 December 2014 £000s £000s £000s
Financial assets
Cash and cash equivalents 1,434 - 1,434
Trade and other receivables 7,869 453 8,322
9,303 453 9,756
Alliance Pharma plc | Annual Report 2015 57
21. Financial instruments continued
Other Liabilities not
Held for financial within scope
trading liabilities of IAS39 Total
As at 31 December 2014 £000s £000s £000s £000s
Financial liabilities
Working capital facility - 414 - 414
Long term financial liabilities (exc. issue costs) - 19,500 - 19,500
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
Classification of the Company’s financial instruments is set out below:
Loans and Non-financial
receivables assets Total
As at 31 December 2015 £000s £000s £000s
Financial assets
Trade and other receivables - 26 26
- 26 26
Other Liabilities not
financial within scope
liabilities of IAS39 Total
As at 31 December 2015 £000s £000s £000s
Financial liabilities
Working capital facility 30 - 30
Trade and other payables - 571 571
30 571 601
Loans and Non-financial
receivables assets Total
As at 31 December 2014 £000s £000s £000s
Financial assets
Cash and cash equivalents 12 - 12
Trade and other receivables - 25 25
12 25 37
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Other Liabilities not
financial within scope
liabilities of IAS39 Total
As at 31 December 2014 £000s £000s £000s
Financial liabilities
Trade and other payables 1 182 183
1 182 183
58 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
21. Financial instruments continued
Contingent consideration (Level 3)
The fair value of contingent consideration related to the acquisition of MacuVision Europe Limited (see note 35) is estimated using a
present value technique. The £3,674,000 fair value is calculated using the discount rate adjustment technique, taking the most likely
cash flows and discounting at a risk adjusted rate of 10% (see note 11).
An increase of 5% in estimated cash flows would result in an increase to the fair value of £250,000. A decrease would have the
opposite effect.
Level 3 fair value measurements:
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
31 December 31 December
2015 2014
Liabilities Liabilities
Note £000s £000s
Balance at 1 January 2015 - -
Acquired through business combination 35 3,197 -
Amount recognised in profit or loss under finance costs 477 -
Balance at 31 December 2015 3,674 -
22. Derivative financial instruments
31 December 31 December
2015 2014
Liabilities Liabilities
The Group £000s £000s
Interest rate swap – cash flow hedge 120 129
Non-current portion 120 129
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 £133,000 (year ended 31 December 2014: £140,000).
23. Deferred tax provision
31 December 31 December
2015 2014
The Group £000s £000s
Accelerated capital allowances on tangible assets (51) 6
Temporary differences trading 7 -
Accelerated allowances on intangible assets (4,726) (4,699)
Initial recognition of intangible assets from business combination (32,636) (1,610)
Interest rate hedge 21 26
Share based payments 390 162
(36,995) (6,115)
Deferred tax asset 418 194
Deferred tax provision (37,413) (6,309)
Alliance Pharma plc | Annual Report 2015 59
23. Deferred tax provision continued
Reconciliation of deferred tax movements:
Recognised
in other Recognised Recognised
31 December comprehensive in the income on business 31 December
2014 income statement combination 2015
The Group £000s £000s £000s £000s £000s
Non-current assets
Intangible assets (4,699) - (27) - (4,726)
Initial recognition of intangible from business combination (1,610) - 162 (31,188) (32,636)
Property, plant and equipment 6 - (57) - (51)
Non-current liabilities
Derivative financial instruments 26 (5) - - 21
Equity
Share option reserve 162 - 228 - 390
Temporary differences
Trading - - 7 - 7
(6,115) (5) 313 (31,188) (36,995)
Recognised as:
Deferred tax asset 194 418
Deferred tax liability (6,309) (37,413)
Changes to the UK corporation tax rates were announced in the Chancellor's Budget on 8 July 2015. These include reductions to the main rate
to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. As the changes were substantively enacted at the balance sheet date
the effects are included in these financial statements (2014: 20%).
A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016, reducing the main rate to 17% from 1
April 2020. As the change was not substantively enacted at the balance sheet date the effect is not included in these financial statements. The
overall effect of this change, if it had applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax liability
by an additional £1,083,168 and decrease the tax expense for the period by £403,168. £680,000 of the movement relates to deferred tax
recognised on business combination and would have no impact to the tax expense.
Recognised
in other Recognised Recognised
1 January comprehensive in the income on business 31 December
2014 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)
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60 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
24. Provisions for other liabilities
31 December 31 December
2015 2014
The Group £000s £000s
At start of year 227 389
Amount utilised in year (227) (180)
Unwinding of discount - 18
At year end - 227
Leases and associated costs for offices in Newcastle, acquired as part of the Cambridge Laboratories acquisition, had subsequently been
treated as onerous contracts. As at 31 December 2015 an amount of £nil (year ended 31 December 2014: £227,000) discounted at a rate of
10%, representing payments due until the end of each contract, has been recognised. The Newcastle property lease ran until 2015 and has
now ended.
25. Share capital
Allotted, called Allotted, called
and fully paid and fully paid
No. of shares £000s
At 1 January 2014 - 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
Issued during the year 204,030,792 2,041
At 31 December 2015 - ordinary shares of 1p each 468,179,157 4,682
Between 1 January 2015 and 31 December 2015, 372,245 shares were issued on the exercise of employee share options (2014: 67,492).
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 46.75p. 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:
31 December 31 December
Exercise price Exercise 2015 2014
Year of grant pence from Number Number
2005 19.00 2008 - 9,000
2006 18.75 2009 27,250 27,250
2007 9.25 2010 19,250 19,250
2008 8.5 2011 629,750 629,750
2009 7.75 2012 679,760 694,060
2010 33.25 and 34.25 2013 2,168,125 2,318,325
2011 34.12 and 31.00 2014 3,696,831 3,860,081
2012 29.25 2015 2,861,251 3,063,514
2013 37.25 and 35.75 2016 4,812,138 5,033,176
2013 35.75 2018 3,300,000 3,700,000
2014 33.75 2017 2,408,268 2,699,056
2015 43.75 and 46.75 2018 5,840,271 -
26,442,894 22,053,462
Alliance Pharma plc | Annual Report 2015 61
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 2015, net bank debt was £71.5
million, whilst Shareholders’ equity was £162.4 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 3.25 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 2015
and 2014.
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.
26. Share-based payments
Under the Group's share option scheme for employees and Directors, options to subscribe for shares in the Parent 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 2015 volatility rate
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 2,307,860 679,760 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 1,502,778 868,125 45.7% 3.90%
28/04/11 34.12p 34.12p 3,981,916 3,396,831 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 2,861,251 49.7% 1.70%
06/06/13 37.25p 37.25p 3,370,703 2,912,138 49.8% 2.40%
23/10/13 35.75p 35.75p 5,900,000 5,200,000 49.5% 2.60%
11/04/14 33.75p 33.75p 2,726,556 2,408,268 49.0% 2.70%
27/05/15 43.75p 43.75p 3,840,271 3,840,271 47.6% 2.00%
04/12/15 46.75p 46.75p 2,000,000 2,000,000 45.3% 2.00%
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In each case, it is assumed the majority of options will be exercised at the earliest opportunity and that on average they are exercised after four
years. 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.
62 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
26. Share based payments continued
Share options and weighted average exercise price are as follows for the reporting periods presented:
2015 2014
Weighted Weighted
average average
exercise exercise
price price
Number Pence Number Pence
Outstanding at start of year 22,053,462 32.56 20,428,286 32.43
Granted 5,840,271 44.78 2,726,556 33.75
Exercised (372,245) 32.58 (67,492) 13.69
Forfeited (1,078,594) 34.98 (1,033,888) 34.36
Outstanding at end of year 26,442,894 35.18 22,053,462 32.56
Exercisable at end of year 10,082,217 35.18 7,557,716 29.17
Share options were exercised throughout the financial year. Share options were exercised between 7.75 and 37.25 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
2015 2014 2015 2014
£000s £000s £000s £000s
Result for the period before tax 15,182 10,157 1,571 1,237
Interest payable and similar charges 1,971 1,098 - -
Interest income (139) (48) (2,097) (1,757)
Other finance costs (52) (28) - -
Depreciation of property, plant and equipment 239 307 - -
Amortisation/impairment of intangibles 199 1,110 - -
Change in inventories (6,996) (446) - -
Change in investments (194) (312) - -
Change in trade and other receivables (3,308) 2,823 (1) 25
Change in trade and other payables 2,319 (1,781) 388 (26)
Share based employee remuneration 615 571 615 571
Cash generated from operations 9,836 13,451 476 50
28. Capital commitments
Neither the Group nor Company had any capital commitments at 31 December 2015 or at 31 December 2014.
29. Contingent liabilities
Neither the Group nor Company had any contingent liabilities at 31 December 2015 or at 31 December 2014.
Alliance Pharma plc | Annual Report 2015 63
30. Pensions
The Group operates a defined contribution group personal pension scheme for the benefit of certain Directors and employees.
31 December 31 December
2015 2014
The Group £000s £000s
Contributions payable by the group for the year 362 327
The Group also operates a stakeholder pension plan which is 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
2015 2014
Land and Land and
buildings buildings
£000s £000s
No later than one year 148 327
Later than one year and no later than five years 415 389
Later than five years - 123
563 839
32. Related party transactions
During the year the Company received funds of £300,000 (year ended 31 December 2014: £270,000) from its subsidiary Alliance
Pharmaceuticals Limited. Net payments of £54,000 (year ended 31 December 2014: £91,000) were made by Alliance Pharmaceuticals
Limited on behalf of Alliance Pharma plc. VAT amounts reclaimed on behalf of Alliance Pharma plc by Alliance Pharmaceuticals
Limited were £69,000 (year ended 31 December 2014: £nil). During the year the Company re-invested £64,010,000 (year ended 31
December 2014: £2,850,000) in Alliance Pharmaceuticals Limited. Interest of £2,064,000 (year ended 31 December 2014: £1,757,000)
was charged to Alliance Pharmaceuticals Limited on the total outstanding debt. During the year an amount of £615,000 (year end 31
December 2014: £571,000) 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 £113,962,000 (31 December 2014: £47,557,000). During the
year the Company re-invested £20,194,000 (year ended 31 December 2014: £nil) in Alliance Pharmaceuticals SAS. Interest of £33,000
(year ended 31 December 2014: £nil) was charged to Alliance Pharmaceuticals SAS on the total outstanding debt. The amount owed
by Alliance Pharmaceuticals SAS at the year-end is £20,228,000 (31 December 2014: £nil).
Dividends declared by Alliance Pharmaceuticals Limited due to the Company are £5,700,000 for the year ended 31 December 2015 (for
the year ended 31 December 2014: £5,400,000). During the year dividends of £5,700,000 were paid by Alliance Pharmaceuticals
Limited to the Company.
During the year the Group made payments on behalf of Unigreg of £719,000 (year ended 31 December 2014: £374,000). Interest
receivable from Unigreg was £48,000 (year ended 31 December 2014: £48,000).
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64 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
33. Joint Ventures
Name Principal Activity Country of Incorporation % Owned
Unigreg Limited Distribution of pharmaceutical products to China British Virgin Islands 60
Synthasia International Company Ltd Distribution of infant milk formula products in China Hong Kong 20
In accordance with IFRS 11 Joint Arrangements the Group has determined that Unigreg Limited and Synthasia International Company Limited
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.
Movement in investments in Joint Ventures in the year:
£000s
At 1 January 2015 1,271
Share of post-tax profits of Joint Ventures 194
At 31 December 2015 1,465
The carrying value of Joint Ventures is split as follows:
31 December 31 December
2015 2014
£000s £000s
Unigreg Limited 1,003 791
Synthasia International Company Limited 462 480
Total 1,465 1,271
Amounts owing from Joint Ventures are as follows:
31 December 31 December
2015 2014
£000s £000s
Unigreg Limited 1,462 1,462
Total 1,462 1,462
The Group’s principal Joint Venture is Unigreg Limited.
The share of the assets, liabilities, revenue and profits of the Group’s principal Joint Venture, Unigreg Limited, which are included in
the Group’s financial statements, are as follows:
31 December 31 December
2015 2014
£000s £000s
Intangible fixed assets 1,950 1,950
Current assets 836 397
Current liabilities (321) (94)
Non-current liabilities (1,462) (1,462)
Net assets 1,003 791
Alliance Pharma plc | Annual Report 2015 65
33. Joint Ventures continued
Year ended Year ended
31 December 31 December
2015 2014
£000s £000s
Income 914 1,622
Cost of sales (517) (875)
Administration and marketing expenses (116) (369)
Finance charges (69) (48)
Profit on ordinary activities before taxation 212 330
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 to mitigate 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 Group’s individually immaterial Joint Ventures which are included in the Group’s financial statements, are
as follows:
31 December 31 December
2015 2014
£000s £000s
Loss from continuing operations (18) (11)
Other comprehensive loss - (8)
Total comprehensive loss (18) (19)
34. Ultimate controlling party
There is no single ultimate controlling party.
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66 Alliance Pharma plc | Annual Report 2015
Notes to the Financial Statements continued
for year ended 31 December 2015
35. Acquisitions
1) MacuVision Europe Limited
On 2 February 2015, the Group acquired 100% of the share capital of MacuVision Europe Limited (‘MacuVision’). Included in the acquisition
was MacuShield, an eye care treatment designed to be taken by sufferers of dry age-related macular degeneration and other eye conditions.
The total consideration for the acquisition was between £6.0m and £12.0m. The consideration for the acquisition comprised a base
consideration of £6.0m with an initial payment of £5.5m on 2 February 2015, and a further cash payment of £0.5m in April 2015 in
respect of the net asset value of MacuVision.
Further contingent consideration of up to £6.0m is dependent on the sales of MacuShield during the two 12 month earnings periods
following acquisition, and is payable in April 2016 and April 2017.
The fair values of the assets acquired, as at 2 February 2015, are as follows:
Book value of Fair value of
assets and assets and
liabilities Fair value liabilities
acquired adjustments acquired
£000s £000s £000s
Intangible fixed assets 27 8,737 8,764
Property, plant and equipment 27 (17) 10
Current assets (excluding cash and cash equivalents) 1,683 - 1,683
Cash and cash equivalents 78 - 78
Current liabilities (1,260) - (1,260)
Non-current liabilities (31) - (31)
Net assets 524 8,720 9,244
Deferred tax liability - (1,748) (1,748)
Goodwill - 1,748 1,748
Fair value of net assets acquired 524 8,720 9,244
Cash paid 6,047
Cash payable (being £3,563,000 measured at fair value) 3,197
Total consideration 9,244
The goodwill that arose on acquisition reflects the opportunity to grow by exploiting new routes to market via the Alliance distribution
network and sales force. None of the goodwill recognised is expected to be deductible for income tax purposes.
All expenses incurred in the acquisition of MacuVision of £169,000 were recognised within Administration and Marketing expenses.
The amounts included in the consolidated statement of comprehensive income since 2 February 2015 included revenue of £3.5m and
gross profits of £2.2m. Had the transaction occurred on the first day of the financial year, then estimated contribution to Group
revenues would have been £3.9m and gross profits of £2.4m.
As at 31 December 2015 the fair value of the contingent consideration was £3.7m compared to an unwound amount of £3.5m,
resulting in a fair value charge to the P&L of £0.2m. This was as a result of forecast sales for the second earnings period exceeding
the original estimate at the time of acquisition.
Alliance Pharma plc | Annual Report 2015 67
35. Acquisitions continued
2) Healthcare Products Business from Sinclair IS Pharma plc
On 17 December 2015 the Company completed the acquisition of certain assets and businesses from Sinclair IS Pharma plc. The
acquisition included 27 products including four key growth brands (Kelo-cote, Flammacerium, Aloclair, and Atopiclair).
The acquisition is effected as the purchase of the collection of companies and the acquisition of the product Aloclair not owned by
those companies and their related businesses. The acquisition delivers Alliance a product portfolio operating in fast growing markets
underpinned by geographic expansion and new product introductions. Additionally, the Healthcare Products Business (‘HPB’) offers
Alliance the opportunity to internationalise and transform Alliance into a global leader in specialty pharmaceuticals. Similar to the
product mix of Alliance’s existing products, the product mix of the HPB is a mix of established products and growth products and
follows a buy and build investment strategy.
The Group acquired 100% of the share capital of Advanced Bio-Technologies Inc. (incorporated in Florida, USA), Sinclair Pharma S.r.l.
(incorporated in Italy), Sinclair Pharma France SAS (incorporated in France) and Maelor Laboratories Limited (incorporated in England
and Wales).
The total consideration for the acquisition was £127.5m, plus £5.3m for inventory. Total consideration of £131.0m was satisfied on
completion, being £126.3m plus the estimated stock value of £4.7m. A further £1.2m was paid in January 2016 and the remaining
£0.6m is payable on determination of the final stock value. These amounts were satisfied wholly in cash, funded partly by way of new
loans, and partly by the issue and allotment of additional shares.
The provisional fair values of the assets acquired, as at 17 December 2015, are as follows:
Book value of Fair value of
assets and assets and
liabilities Fair value liabilities
acquired adjustments acquired
£000s £000s £000s
Intangible fixed assets 7,416 128,384 135,800
Property, plant and equipment 209 - 209
Other non-current assets 255 (133) 122
Current assets (excluding cash and cash equivalents) 5,659 (404) 5,255
Cash and cash equivalents - - -
Current liabilities (53) 53 -
Non-current liabilities (109) - (109)
Net assets 13,377 127,900 141,277
Deferred tax liability - (29,200) (29,200)
Goodwill - 20,694 20,694
Fair value of net assets acquired 13,377 119,394 132,771
Cash paid 131,000
Cash payable 1,771
Total consideration 132,771
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The fair values set out above are provisional figures which will be finalised in the 2016 financial statements following management’s final
review of key reconciliations and judgemental areas including intangible fixed assets and acquired inventory balances.
The fair value of intangible assets recognised on business combination comprise the following product related intangibles: Aloclair, Atopliclair,
Flamma franchise, Kelo-cote, Kelo-stretch, Other Dermatology Products and Other Specialist Hospital Products.
The goodwill that arose on acquisition reflects the opportunity to grow through the international expansion of the combined business. None of
the goodwill recognised is expected to be deductible for income tax purposes.
All expenses incurred in the acquisition of the Healthcare business from Sinclair of £1.8m were recognised as non-underlying costs within
Administration and Marketing expenses.
The amounts included in the consolidated statement of comprehensive income since 17 December 2015 included revenue of £0.8m and gross
profits of £0.5m. Had the transaction occurred on the first day of the financial year, then estimated contribution to Group revenues would have
been £39.4m and gross profits of £23.3m.
68 Alliance Pharma plc | Annual Report 2015
Supplementary Information
Shareholder 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 25 May 2016
Final dividend record date 17 June 2016
Payment of final dividend 13 July 2016
Interim results announcement September 2016
Year End 31 December 2016
Preliminary announcement March 2017
Alliance Pharma plc | Annual Report 2015 69
Shareholder Analysis
Below is an analysis of the share register by size of holding as at 1 March 2016:
Proportion of Number of Proportion of
Size of shareholding shareholders shares held shares
1-5,000 27% 453,450 0.10%
5,001-10,000 16% 890,615 0.19%
10,001-50,000 34% 5,388,392 1.15%
50,001-100,000 7% 3,468,083 0.74%
100,001-500,000 7% 12,513,115 2.67%
500,001-1,000,000 2% 14,294,400 3.05%
1,000,001-5,000,000 4% 78,884,509 16.85%
5,000,001-10,000,000 1% 37,617,487 8.03%
10,000,001-50,000,000 2% 314,794,214 67.22%
100% 468,304,265 100%
As at 1 March 2016 the Company has 736 registered shareholders.
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70 Alliance Pharma plc | Annual Report 2015
Five Year Summary
Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December
2011* 2012* 2013* 2014 2015
£m £m £m £m £m
Revenue 44.1 42.4 45.3 43.5 48.3
Operating profit before exceptional items 12.3 12.3 13.3 11.8 10.6
Exceptional operating items - - - 0.6 (6.3)
Operating profit after exceptional items 12.3 12.3 13.3 11.2 17.0
Profit before tax before exceptional items 10.7 10.8 12.0 10.8 8.9
Profit before tax after exceptional items 10.7 10.8 12.0 10.2 15.2
Intangible assets 64.2 77.9 87.1 88.9 259.9
Tangible assets 0.8 0.6 0.6 0.4 1.0
Current assets 14.6 19.5 16.8 15.7 27.8
Current liabilities 13.6 21.9 14.9 11.4 31.8
Equity 44.1 51.8 64.7 70.8 162.4
Average shares in issue (millions) 238.6 240.9 250.8 264.1 272.7
Shares in issue at period end (millions) 240.1 243.0 264.1 264.1 468.2
Earnings per share - basic (p) 3.62 3.61 3.82 3.17 4.65
Earnings per share - adjusted basic (p) 3.62 3.61 3.82 3.36 3.69
*Restated for impact of IFRS 11
Alliance Pharma plc | Annual Report 2015 71
Advisors
AUDITOR
Grant Thornton UK LLP
Hartwell House
55-61 Victoria Street
Bristol
BS1 6FT
BANKERS
Lloyds Bank Corporate Markets
The Atrium
Davidson House
Forbury Square
Reading
Berkshire
RG1 3EU
Royal Bank of Scotland
3rd Floor
3 Temple Back East
Bristol
BS1 6DZ
Silicon Valley Bank
Alphabeta
14-18 Finsbury Square
London
EC2A 1BR
CORPORATE ADVISOR
Numis Securities Ltd
10 Paternoster Square
London
EC4M 7LT
FINANCIAL PR
Buchanan Communications
107 Cheapside
London
EC2V 6DN
REGISTRAR
Capita Asset Services
PXS 1
34 Beckenham Road
Beckenham
Kent
BR3 4ZF
REGISTERED OFFICE
Avonbridge House
Bath Road
Chippenham
Wiltshire
SN15 2BB
COMPANY NUMBER
04241478
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72 Alliance Pharma plc | Annual Report 2015
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 Pharma plc and subsidiary companies and are protected in a number of countries:
AbsorbagelTM; AcnisalTM, ALLIANCE, ALLIANCE and Logo, ALLIANCE GENERICS, ALLIANCE PHARMACEUTICALS, AloclairTM, AlostopTM,
AlphadermTM, AnbesolTM, AquadrateTM, Ashton & ParsonsTM, Ashton & Parsons Infants’ PowderTM, AtaraxTM, AtopiclairTM, AvloclorTM, Bio-
corneumTM, Bio-tachesTM, BiotanoidTM, BuccastemTM, Canker-XTM, CeanelTM, ClearWayTM, ClearWay Stoma BridgeTM, ContisolTM, DecapinolTM,
DekapinolTM, DeltacortrilTM, DermachronicTM, DermacideTM, DermamistTM, DermoxylTM, DistamineTM, EffadianeTM, FadiamoneTM, FazolTM, Fazol G
NitrateTM, Fazol GynTM, FlammaceriumTM, FlammaclairTM, FlammasprayTM, FlammasunTM, FlammazineTM, ForcevalTM, Gen-onglesTM, GlydermTM,
HaemopressinTM, HerpclairTM, HydromolTM, IrenatTM, ISIBTM, IsprelorTM, JonctumTM, Kelo-coteTM, Kelo-stretchTM, LiftTM, Lift+TM, Lift PlusTM,
LypsylTM, Lypsyl- It’s On Everyone’s LipsTM, Lypsyl KissablesTM, Lypsyl ShimmerTM, LysovirTM, MacuShieldTM, MacuShield GoldTM, MetedTM,
MolludabTM, NaseptinTM, NaturCareTM, NaturCare BreezeTM, NaturCare FragrantTM, NaturCare ZestTM, NaturCare IPDTM, Nu-SealsTM, OcclusalTM,
OndemetTM, OPUS and Logo, OxyplastineTM, PaludrineTM, PapclairTM, PapuduoTM, PapulexTM, PapustilTM, PavacolTM, Pavacol-DTM, PentraxTM,
PeriostatTM, PermitabsTM, PosidormTM, QuinodermTM, Quinoderm Q deviceTM, RincinolTM, RizudermTM, Roman in a chariot device, SavarineTM,
SebclairTM, SkinSafeTM, SkinSafe Non Sting Protective FilmTM, StemflovaTM, SyntometrineTM, Terra-cortrilTM, T-GoTM, ThwartTM, TimodineTM,
TridesonitTM, Trust the ScienceTM, UnifluTM, UnigregTM, VariquelTM, VibramycineTM, Vita-dermacideTM.
The following are all used under licence by Alliance Pharmaceuticals Limited:
Xenazine is a registered trademark of Biovail Laboratories International (Barbados)
Gelclair is a registered trademark of Helsinn Healthcare S.A.
ImmuCyst is a registered trademark of Sanofi Pasteur Limited
Designed & produced by Design Wall.
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