Alliance Pharma plc
Annual Report and Accounts
2020
Together
we achieve
more
Company Overview
An alliance of people,
partners and brands,
working together
to achieve more
Contents
Overview
2020 Overview & Financial
Highlights
At a Glance
Making Great Alliances
Investment Case
Strategic Report
Chief Executive’s Review
Our Markets
Our Business Model
Our Strategy
Strategy in Action
Responding to COVID-19
Key Performance Indicators
Responsible Business
Financial Review
01
02
04
10
14
20
22
24
28
32
34
36
52
Governance
Chairman’s Introduction
to Governance
Board of Directors
Our Governance Framework
QCA Code Compliance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
Directors’ Report
68
70
72
73
79
82
86
95
Financial Statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement
of Changes in Equity
Company Statement
of Changes in Equity
Consolidated and Company
Cash Flow Statements
Notes to the Financial Statements
100
108
109
110
111
112
113
114
115
Additional Information
Unaudited Information
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
158
159
160
161
162
Risk Management and Internal Controls 56
Our Principal Risks and Uncertainties
58
Alliance Pharma plc – Annual Report and Accounts 2020
For more information visit
alliancepharmaceuticals.com
2020 Financial Highlights
The Group continued to deliver a
robust operational and financial
performance in 2020, despite the
challenges posed by COVID-19.
Overview
Strong performance from Consumer
Healthcare brands, which now account
for over two thirds of Group see-through
revenues*
Kelo-cote™ revenues up 12%
Nizoral™ see-through revenues* up 4%
See-through revenues* overall up 1% to
£93.0m (2019: £92.4m)
See-through Revenue*
£137.5m -5%
(2019: £144.3m)
Statutory Revenue
£129.8m -4%
(2019: £135.6m)
2020
2019
2018
2017
£137.5m
£144.3m
£124.0m
£101.6m
2020
2019
2018
2017
£129.8m
£135.6m
£118.2m
£101.6m
Statutory revenues up 2% to £85.3m
Underlying Profit Before Tax
£33.5m +2%
(2019: £32.9m)
Reported Profit Before Tax
£13.0m -58%
(2019: £31.1m)
(2019: £83.7m)
Prescription Medicine revenues down
14% to £44.5m (2019: £51.9m), reflecting
delays in routine treatments as a result
of COVID-19
Group see-through revenue* in total
down 5% (down 5% CCY*) to £137.5m
(2019: £144.3m)
Group statutory revenues down 4%,
to £129.8m (2019: £135.6m)
Substantial US acquisition completed
in December 2020, bringing highly
successful and fast-growing brand,
Amberen™, into the Group, and creating
scale in the Group’s US operations
Underlying profit before tax up 2%
to £33.5m (2019: £32.9m)
Reported profit before tax down 58% to
£13.0m (2019: £31.1m), due to non-cash
impairment and amortisation charges,
and acquisition costs relating to the
Biogix acquisition
Group leverage post acquisition of Biogix
Inc at 2.43 times, up from 1.48 times at
December 2019; leverage expected to
decrease to below 2.0 times during 2021
Free cash flow very strong at £34.1m,
helped by favourable movements in net
working capital
Cash generated from operations up 19% to
£46.4m (2019: £39.0m)
Proposed final dividend payment of
1.074p per share, giving a total dividend
of 1.610p (2019: 0.536p)
2020
2019
2018
2017
£33.5m
2020
£13.0m
£32.9m
£28.1m
£23.9m
2019
2018
2017
£31.1m
£22.8m
£28.3m
Underlying Basic EPS**
5.11p
(2019: 5.09p)
2020
2019
2018
2017
Reported Basic EPS
1.51p -69%
(2019: 4.80p)
5.11p
5.09p
4.54p
4.05p
2020
2019
2018
2017
1.51p
4.80p
3.69p
6.08p
Free Cash Flow*
£34.1m +17%
(2019: £29.1m)
Net Debt
£109.4m +85%
(2019: £59.2m)
2020
2019
2018
2017
£34.1m
£29.1m
2020
2019
2018
2017
£16.1m
£22.0m
£109.4m
£59.2m
£85.8m
£72.3m
*
Non-IFRS alternative performance measures (see note 33). See-through revenue includes sales from Nizoral as if they had been invoiced
by Alliance. For statutory accounting purposes the product margin on Nizoral sales is included within Revenue, in line with IFRS 15.
**
The 2017 measure refers to the Underlying Adjusted Basic EPS as disclosed in the 2017 Annual Report which was adjusted to normalise
the impact of significant changes in overseas tax rates.
01
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Company Overview
At a Glance
We are a leading international healthcare
business of interconnected people and
brands. A global range of products
delivering outstanding value.
We are an alliance
One team,
achieving more
Who we are
Founded in the UK over 20 years ago, we have grown
both our geographic reach and our product range and now
market around 80 consumer healthcare and pharmaceutical
products in over 100 countries worldwide.
What we do
We focus on our strengths – bringing our specialist expertise
to the marketing and regulatory management of our
products, so as to ensure that they can be made available
to the widest range of people who could potentially benefit
from them, wherever they may be located. Outsourcing
all our manufacturing, warehousing and logistics activities
enables us to remain asset-light and focused on doing what
we do best.
How we do it
We have built a successful business with a strong
collaborative culture. We recognise that our relevance and
value is in how we work together, both with our colleagues
and with our customers, suppliers and all other external
stakeholders. Our entrepreneurial spirit and our core values
of performance, realism, accountability, integrity, skill and
entrepreneurship remain at the heart of how we engage
with each other and conduct our business.
Our mission
To create partnerships that unlock potential for brands,
businesses and people around the world.
Responsible business
We are committed to operating our business in an ethical
and sustainable way, having regard to the interests of all our
stakeholders – including our customers, suppliers, business
partners and employees. We recognise that everything we
do has an impact on the natural environment and on the
people and communities within it and we are committed
to looking for ways to reduce our impact in these areas to
ensure a better future for all.
Proud to be recognised as a London Stock Exchange Group
‘1,000 Companies to Inspire Britain’ page 27
02
Alliance Pharma plc – Annual Report and Accounts 2020
Our Vision
To be a leading international healthcare business, built around products that are clinically valuable to patients.
G Achieved through G
Our Purpose
To make a difference to people’s lives, through making a range of clinically valuable healthcare products
available to consumers and patients around the world.
Our Values
Performance – Our high-performing people continually
drive business success
Realism – We set stretching goals and targets which
we believe are achievable
Accountability – We take responsibility and deliver what
we promise
Integrity – We build trust in all our relationships through
openness and fairness
Skill – We recruit highly skilled people and develop
their talents to the full
Entrepreneurship – Our people think of the business
as if it was their own
Our Strategy (see page 24)
Maximising brand potential –
to deliver organic growth
Acquiring new products –
to deliver incremental growth
G Delivered by G
G Enabled by G
Investing in people –
and in developing our strong, collaborative culture
Acting responsibly –
to maximise the value created for all our stakeholders
Our Business Model (see page 22)
Investing behind selected brands, primarily
Consumer Healthcare brands, to promote growth
Maintaining our cash-generative Prescription
Medicines portfolio
Acquiring new products to provide further
opportunities for growth
Reinvesting cash generated in:
‒ Growing our existing brands
‒ Paying down debt
‒ Rewarding our shareholders
‒ Funding acquisitions
G Supported by G
Our strong, collaborative culture of working together to achieve more (see more on page 06)
03
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 04
Alliance Pharma plc – Annual Report and Accounts 2020
Making Great Alliances
Our Partners
Working together as one global team,
we create partnerships that unlock
potential for brands, businesses, and
people, enabling us to identify and
respond to user demand as the markets
in which we operate continue to grow.
Together
we build trust
and reliability
For our products to be clinically valuable to patients and consumers,
they need to trust them to deliver the benefits claimed.
From our global regulatory, quality and supply chain teams, to our
medical information team, who responded to over 4,000 product
enquiries in 2020, we work hard to ensure the quality, safety and
efficacy of our products and maintain reliable supplies. Maintaining
the trust of our customers depends on it.
Trust is also key to our relationships with our partners – the distributors
and suppliers who form an integral part of our business. It’s embodied
in our value of Integrity, which underpins how we conduct all our
business relationships.
Recognised expertise
We have deep sector expertise in
the management of many types of
product, from pharmaceuticals to
medical devices, food supplements
and traditional herbal remedies, across
multiple geographies.
See more on pages 22–23 (Our Business Model) and
38–41 (Our Stakeholders)
05
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Making Great Alliances
Our People
Collaborative culture
Our dedicated team of talented and
engaged people embody Alliance’s
values and entrepreneurial spirit.
They thrive in a ‘can do’ collaborative
culture, where flexibility of thought and
constructive challenge enables them to
deliver successful business outcomes.
Our people are key to our success. We
recognise that great results can only be
achieved through the combined efforts of
our dedicated team of colleagues around
the globe, and to the strong collaborative
culture we have built within Alliance.
Together
we are
stronger
Our open and inclusive culture enables people and business relationships
to thrive. We welcome the differing perspectives and diversity of thought
that people from different backgrounds and geographies can bring in
addressing the challenges we face as a global business.
Never before has our culture of working together been more valuable
or relevant than in 2020, as we sought to understand and respond to the
COVID-19 pandemic.
Through ensuring our colleagues around the globe stayed safe,
connected, and informed, we have been able to effectively support
them through the pandemic, as they worked, often remotely but always
together, to keep the business strong.
See more on pages 44–45 (Responsible Business – People)
and 32–33 (COVID-19 Response)
06
Alliance Pharma plc – Annual Report and Accounts 2020
07
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 08
Alliance Pharma plc – Annual Report and Accounts 2020
Making Great Alliances
Our Consumers and Patients
Responsible business commitments
We recognise that everything we
do has an impact on the natural
environment and on the people and
communities within it and we are
committed to looking for ways to
reduce our impact in these areas to
ensure a better future for all.
We want to make a difference – through
providing clinically valuable products
which positively impact the lives of
consumers and patients in a sustainable
and responsible way, recognising the
wider impact of our business activities
on people and planet.
Together
we make a
positive
impact
From ongoing environmental improvements to our HQ building, to
increasing the level of assurance around our supply chain, and the
ethical business considerations which underpin these relationships,
we’re committed to operating our business in a sustainable and
responsible way.
The same applies to local communities – we’re proud of our long history
of making a positive impact through charitable giving and supporting
those further afield with product donations. 2020 saw us increase
our level of charitable support in recognition of the devastating effect
that the pandemic has had on many charities’ fundraising abilities
and continue to donate products to International Health Partners
and directly to healthcare professionals, to support them in providing
treatment through the pandemic.
See more on page 31 (Strategy in Action –
Acting Responsibly) and page 49 (Responsible Business)
09
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Company Overview
Investment Case
Working together to achieve more for investors. We have a proven, consistent
track record that provides the opportunity to invest both for income and
for growth. Our alliances enable us to deliver the sustained returns that
institutional and private investors value, in an ethical and responsible way.
Recognised
expertise
Clearly articulated
strategy & proven
business model
Diversified
portfolio
reduces risk
Deep sector expertise in the management of
many types of consumer healthcare
and prescription medicine products
Engaged and committed global team
Expertise in sourcing, executing
and integrating acquisitions
Clear strategy to enable delivery of sustainable
business growth, through focusing on:
Maximising brand potential to deliver
organic growth
Acquiring new products to deliver
incremental growth
Investing in people
Acting responsibly
Proven business model:
Investing behind our Consumer Healthcare
brands, to drive organic growth
Maintaining our cash-generative heritage
Prescription Medicines
Reinvesting cash in growing our existing
brands, rewarding our stakeholders, paying
down debt and funding further acquisitions
Selectively identifying, acquiring and
integrating new products, to provide
additional opportunities for growth
Revenues derive from around
80 brands spanning multiple therapy areas
and geographies
2020 see-through revenue*
by product type
Consumer Healthcare
products
£93.0m
(68%)
(2019: £92.4m (64%))
Prescription Medicines
£44.5m
(32%)
(2019: £51.9m (36%))
For more information see page 44
For more information see page 22 & 24
For more information see page 30
10
Alliance Pharma plc – Annual Report and Accounts 2020
Reducing our impact
As all our manufacturing activities are outsourced
to contract manufacturers, the environmental
impacts of our direct business activities are
relatively limited. That doesn’t stop us from actively
looking to keep our natural resource usage and
carbon emissions to a minimum though.
Scope 1 & 2 carbon emissions (UK)
82 tCO₂e
(2019: data unavailable)
Strong
financial
performance
Ethical
business
commitments
Experienced
leadership
team
Highly profitable and cash-generative
Established track record of delivering
underlying profit growth and effectively
managing our borrowing commitments
Strong cash generation supports deal
flow and enables rapid deleveraging
post acquisition
We are a purpose-driven organisation,
with a strong collaborative culture and
well-established values
We have an experienced and highly
motivated leadership team, who have been
together as a team for several years
We have a well-invested infrastructure
We are committed to ethical and
sustainable business practices
For more information see page 52
For more information see page 36
For more information see page 72
11
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 12
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Chief Executive’s Review
Our Markets
Our Business Model
Our Strategy
Strategy in Action
Responding to COVID-19
Key Performance Indicators
Responsible Business
Financial Review
Risk Management and Internal Controls
Our Principal Risks and Uncertainties
14
20
22
24
28
32
34
36
52
56
58
Strategic
Report
13
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive's Review
TRADING PERFORMANCE
Overview
Against the backdrop of the COVID-19
pandemic, the Group delivered a robust
performance in 2020, with see-through
revenues* down only 5% to £137.5m (2019:
£144.3m), and a similar level of decline on
a constant currency basis. On a statutory
reported basis, revenues were down 4% to
£129.8m (2019: £135.6m).
Whilst gross profit reduced, in line with
revenues, by 4% to £82.8m (2019: £86.1m),
a slowdown in the natural run rate of
discretionary spend, coupled with continued
good control over the rest of our operating
cost base and lower financing and borrowing
costs, resulted in underlying profit before tax
increasing by 2% to £33.5m (2019: £32.9m).
Non-cash impairment and amortisation
charges, coupled with acquisition costs for the
Biogix acquisition, meant reported profit before
tax decreased 58% to £13.0m (2019: £31.1m).
As previously announced, we have reclassified
our portfolio into Consumer Healthcare brands
and Prescription Medicines, in recognition of
the inherently different characteristics of these
categories, Consumer Healthcare brands being
the main driver of growth within the business,
whilst revenues from our largely unpromoted
pharmaceutical products provide cash
generation.
Consumer Healthcare
brands performance
Our Consumer Healthcare brands continued
to perform strongly notwithstanding the global
challenges, with see-through revenues* up
1% to £93.0m (2019: £92.4m) and statutory
revenues up 2% to £85.3m (2019: £83.7m).
These brands now account for more than two
thirds of Group see-through revenues*, with this
proportion increasing further in 2021, with the
inclusion of Amberen.
Delivering
sustainable
business
growth
14
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
2020
Highlights
Kelo-cote – scar prevention and treatment
We were particularly pleased with the performance of Kelo-cote, which
delivered good growth in 2020, continuing the trend from 2019, with
sales up 12% to £34.7m (2019: £31.0m), due to further strong demand
from China from the second quarter onwards, as local lockdown
restrictions eased. Across the rest of the APAC region, ongoing local
lockdown restrictions in response to the pandemic have had a more
sustained impact on the brand’s performance, likewise in South America
and some countries within EMEA. Nevertheless, we expect sales across
all these regions to return strongly once lockdown restrictions are eased.
In common with many consumer-facing businesses, the pandemic has
resulted in an overall shift to online sales platforms, and we continue to
focus on our digital marketing strategies to increase brand awareness
both with end users of the product and with healthcare professionals
around the globe. Pre-pandemic, digital was already an established and
important sales channel for Kelo-cote, with around 40% of our Chinese
sales being facilitated by online platforms.
Nizoral – medicated anti-dandruff shampoo
Nizoral sales were resilient, particularly in China, with the brand
generating see-through sales* of £21.0m, up 4% on 2019 (2019:
£20.2m).
China continues to be an important market for Nizoral and a future
growth-driver for this key brand. As previously announced, in July 2020
we launched a new formulation of Nizoral (branded locally as Triatop) in
China, to sit alongside the original formulations, and this has contributed
to the robust overall brand growth this year.
We now have distribution agreements in place for all territories in the
region. The vast majority of the product licence transfers have been
completed. By the end of 2022, we will have concluded our partnership
with Johnson & Johnson through the transition period.
Other Consumer brands
Performance across the rest of our Consumer Healthcare portfolio was
mixed, with revenues down 9% in 2020 to £37.3m (2019: £41.2m).
Whilst we continued to see strong performances from some of the brands
in this part of our portfolio, for example Ashton & Parsons™ (teething gel),
which saw sales increase 27% to £3.4m (2019: £2.7m), boosted by new
UK retail listings, following the launch of the new gel presentation, others
faced more challenging trading conditions due to the pandemic.
Vamousse (prevention and treatment of head lice) naturally had a
difficult year in 2020, with sales down 14% at £5.6m (2019: £6.5m),
as a result of pandemic-related school closures in the US, the product's
primary market.
Strong performance from our Consumer Healthcare
brands, with Kelo-cote continuing to show good growth
(+12%), and Nizoral see-through sales* also proving
resilient (4%)
Substantial US acquisition completed in December 2020,
bringing Amberen™, a highly successful and fast-growing
brand into the Group, and creating scale in the Group’s
US operations
New line extension for Nizoral launched in China in July
2020 – China continues to be a significant growth driver
for both Kelo-cote and Nizoral
2020
2019
2018
2017
£137.5m
£144.3m
£124.0m
£101.6m
See-through Revenue*
£137.5m -5%
(2019: £144.3m)
2020
2019
2018
2017
£129.8m
£135.6m
£118.2m
£101.6m
Statutory Revenue
£129.8m -4%
(2019: £135.6m)
15
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive's Review
continued
Completing this strategically significant
acquisition bears testament to our ability
to continue to deliver on our longer-term
growth strategy, notwithstanding the
global pandemic.
Whilst sales held up well during the first half of the year, sales in the
second half of the year were significantly lower than those achieved
during the same period last year. Despite this however, Vamousse has
continued to gain market share in the US and is set to return strongly
once lockdown is eased. We expect a recovery in sales as schools
progressively reopen.
Regional performance
As previously announced, in the first half of 2020, we reorganised our
regional performance commentary and segmental analysis, to align
it more closely with the Group’s commercial reporting structure, which
focuses on the regions of Europe, Middle East and Africa (EMEA), Asia
Pacific (APAC) and the Americas (AMER).
Sales of MacuShield (eye health supplement) for the first half of 2020
were down 21% compared with the second half of 2019, primarily due
to the temporary closure of bricks and mortar retail outlets and opticians
in the UK. However the second half of 2020 saw a reversal of this trend,
with sales up 38% on those for the first half of 2020 and 10% up on those
for the same period last year. Overall sales were down 18% on those
for the previous year at £6.8m (2019: £8.2m), partly due to distributor
stocking and changes in trading arrangements with a key distributor
during the first half of 2019 resulting in sales being higher than normal for
that period. With in-market sales in the UK now returning to growth, we
again expect this brand to continue its growth trend in 2021 and beyond.
We are confident that as restrictions are eased, we will start to see a
return in distributor-led demand for some of our other Consumer brands
which were adversely affected by the pandemic in 2020.
Prescription Medicines performance
Revenues from our Prescription Medicines portfolio in 2020 were
£44.5m, down 14% on the corresponding period last year (2019:
£51.9m), with demand for our prescription-driven products being
adversely impacted by delays to routine treatments, as healthcare
professionals focused on maintaining hospital capacity to treat patients
with COVID-19. However, we did see a modest recovery in the second
half, with revenues up 7% on those for the first half, and we anticipate
demand will return as local restrictions are eased and the provision of
routine healthcare treatment normalises.
We continue to actively manage our Prescription Medicines portfolio,
discontinuing or disposing of a small number of products which
deliver very low revenues and margins, whilst continuing to put
limited promotional support behind some of the larger brands such as
Hydromol™, an emollient product for the treatment of eczema, and
Forceval™, a nutritional support product, which continued to deliver
double digit growth in the UK in 2020. As a result, we expect sales from
this part of our portfolio to remain relatively stable, once the disruption to
routine treatments caused by the pandemic has subsided. These products
continue to provide good cash generation for the business and given their
limited requirement for promotional investment, they continue to play an
important part in the overall make-up of our product portfolio.
EMEA1
Across the EMEA region as a whole, revenues for 2020 were
down 4% versus the previous year at £93.8m (2019: £97.4m).
As previously noted, EMEA accounts for over 90% of our Prescription
Medicines revenues. Whilst we saw a reduction in demand for
Prescription Medicines in 2020, due primarily to delays in routine
treatments, this reduction was partially offset by continued good growth
from our Consumer Healthcare portfolio in this region, in particular Kelo-
cote, to satisfy both export and local demand.
Whilst our distributor business in EMEA performed strongly during the first
half of the year, with revenues up 8% versus the comparable period last
year, during the second half, the landscape became more challenging,
as distributors sought to respond to changes in local trading conditions
as a result of COVID-19, resulting in full year EMEA distributor revenues
being down 9% on those for 2019.
APAC2
The revenue base in this region is dominated by Kelo-cote and
Nizoral, which collectively accounted for just over 85% of sales
in 2020.
See-through sales across the APAC region as a whole were down 3%
versus the prior year at £37.0m (2019: £38.2m), primarily due to the
reduction in both Kelo-cote and Nizoral sales across the majority of
countries in the region, with the exception of China which, as previously
noted, benefited from a recovery in demand from the second quarter
onwards, as local lockdown restrictions eased.
AMER3
Sales in the AMER region fell by £2.0m (23%) to £6.7m in 2020 (2019:
£8.7m), reflecting both the fall in Vamousse revenues in the
US and weaker demand from our international distributor business
in South America, in response to COVID-19.
16
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Amberen
Following the acquisition of Biogix Inc
in the US in December 2020, we now
have access to another fast-growing
brand withn our Consumer Heallthcare
portfolio – Amberen, for the relief of
menopause symptoms. This acquisition
significantly enhances the scale of our
business in the US.
Amberen pro-forma 2020 sales
$25.8m
(2019: $22.0m)
Year-on-year growth
+17%
See page 29
Integration
Good progress has already been
made with fully integrating the brand
into Alliance and we expect this to be
substantially complete by the end of the
first half of 2021.
Annual value of the vitamin,
mineral & supplement market
in the US
$55bn
(growing at 7% p.a.)
Acquisitions
In December 2020, we successfully completed the acquisition of Biogix
Inc and the Amberen brand, a highly successful and fast-growing brand
for the relief of menopause symptoms. Headline consideration for the
acquisition (excluding working capital and currency hedging costs) was
US$110.0m (£81.8m), paid for in cash from the Group’s existing financial
resources.
As an established, clinically evidenced brand with significant sales and
good growth potential, in a growing market, Amberen fits perfectly with
our strategy of acquiring established consumer healthcare brands in
territories in which we already have a presence. The acquisition of Biogix
has created scale in our business in the US, whilst also providing us with a
third key brand for the delivery of future organic growth.
Completing this strategically significant acquisition against the backdrop
of the pandemic bears testament to our ability to continue to deliver on
our longer-term growth strategy.
OPERATIONAL REVIEW
In 2021, we will be rolling out our new Innovation & Development (I&D)
process and Digital Excellence training programme, to further support
the growth of our main Consumer Healthcare brands.
As previously reported, the new global Sales & Operations Planning
(S&OP) process rolled out in 2019 has proved invaluable to us this year
in helping to manage the demand fluctuations caused by COVID-19 and
in maintaining continuity of supply.
We have also put in place a new software tool, to support our budgeting,
forecasting, and monthly reporting processes, through automating
workflows such as consolidations and report generation. Our new system
allows for robust real-time data provision and better customised reporting
for users.
Our ERP system has progressed well and is on track to go live in Q2
2021, providing business benefits and scale-up capability through the
standardisation of processes.
17
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information The Group continued to deliver a
robust performance in 2020, despite the
challenges of the pandemic. Whilst top
line revenue growth was constrained,
our Consumer Healthcare brands
continued to perform well.
Operational impacts
As an established, office-based
business, we are fortunate in that
we have been able to successfully
transition to remote working as
needed, with minimal disruption to
our business operations.
Consumer Healthcare revenues
£93.0m
+ 1% (see-through* basis)
Strategic Report
Chief Executive's Review
continued
People
In 2020 Alliance took part for the first time in the Great Place to Work®
survey, to increase our understanding of employee engagement within
the business. We were extremely pleased to achieve a Trust Index©
rating of 79%, just six percentage points below that for the World’s Best
Workplaces Top 25, and to have been Great Place to Work-Certified™
both in the UK and in China.
Our social impact activities during the year focused on providing
financial support to charities local to our office locations, to enable them
to better support those impacted by COVID-19. During the year, Alliance
donated more than £150,000 to charities in several different countries,
to support them in delivering services through the pandemic. We also
continued our donations to International Health Partners, donating
approximately 12,000 units of product with a value in excess
of £100,000 in 2020, to support those suffering due to a lack of
access to medicines.
Throughout the year, there have been numerous examples of our
employees ‘going the extra mile’ and thinking creatively to ensure that
our products continue to be available to consumers and patients who
need them, overcoming the challenges that remote working has brought,
and continuing to deliver great results. In addition to maintaining the
performance of the base business as we navigated our way through
the challenges of local lockdowns and the uncertainties of Brexit, we
have also successfully completed a large and strategically significant
acquisition – an achievement which, again, bears testament to the
strength of our culture and the ‘can do’ attitude of our people, wherever in
the world they may be located.
Our UK-based facilities team have made good use of the time spent
in lockdown to make a start on further significant refurbishment works
at our Avonbridge House headquarters in Chippenham – a project
made considerably easier by almost all other employees working from
home. Internal designs have been changed to create more collaborative
workspaces, and we continue to evaluate how we develop our future
ways of working to make best use of our office space once pandemic
restrictions are eased.
Cash on hand
£18m
at the start of the pandemic
Undrawn credit facility
£86m
at 31 December 2019
Financial impacts
We entered the pandemic with
a strong balance sheet, and our
robust operational and financial
performance in 2020 meant we did
not need to make use of the various
UK government assistance schemes,
and have not furloughed employees,
or had to make any redundancies,
as a result of the pandemic.
.
See pages 32–33
18
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
The Group currently employs more than 200 people in 11 locations
around the world; all committed to the successful delivery of
Alliance’s vision: "To be a leading international healthcare business built
around products which are clinically valuable to patients. We will be both
the partner and employer of choice."
We recognise that great results can only be achieved through the
combined efforts of our dedicated team of colleagues around the globe,
our partners, and customers, and through the strong collaborative culture
that we have built within Alliance. At no time has this culture of working
together been more valuable to us than during 2020, as we have sought
to navigate the challenges of the global pandemic.
On behalf of the Board, I would like to take this opportunity to extend
my sincere thanks to all those who have worked so hard to deliver an
excellent performance for Alliance in 2020, against the backdrop
of the global pandemic, in what continue to be unprecedented and
challenging times.
Whilst inevitably a challenging year, due to the uncertainty brought
about by the global pandemic and consequential restrictions imposed
by governments around the world, the Group’s performance, and
achievements in 2020 bear testament to the robustness and resilience of
our product portfolio, our business model, and our people. As a result of
our robust performance, we have not needed to make use of any of the
UK government assistance schemes, nor have we furloughed any of our
employees, or made any redundancies due to the pandemic.
Current trading and outlook
2021 has started well for the Group. Our integration of the Biogix
business is on track and we remain confident in our ability to continue to
respond effectively to the challenges of COVID-19, and to maintain our
robust operational and financial performance to deliver results in line with
market expectations.
Operationally, the priorities for the Group in 2021 will be:
• Continuing to invest in our Consumer Healthcare brands in order to
maximise their organic growth potential, supported by the rollout of
our new I&D process and Digital Excellence training programme;
• Integrating Biogix and Amberen into the US-based Alliance business;
• Continuing to review opportunities to add selectively to our portfolio;
our focus remains on augmenting our Consumer Healthcare brands in
international markets where we already have a presence.
Peter Butterfield
Chief Executive Officer
23 March 2021
* Non-IFRS alternative performance measures (see note 33). See-through revenue incudes sales from
Nizoral as if they had been invoiced by Alliance. For statutory accounting purposes the product
margin on Nizoral sales is included within Revenue, in line with IFRS 15.
1
2
3
This combines revenues previously disclosed under the UK and Republic of Ireland and Western
Europe, with revenues from our distributor business across Central and Eastern Europe, the Middle East
and Africa, all of which were previously reported as part of International revenues.
APAC revenues were recognised previously as part of International revenues.
This region comprises revenues previously disclosed under the US (including Canada) segment,
together with revenues from South America, previously included as part of International revenues.
19
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Strategic Report
Our Markets
Social media and e-commerce usage1
Global market overview –
trends in consumer healthcare
The global market for consumer healthcare
continues to be driven by the key trends highlighted
in our 2019 Annual Report, namely:
• Increasing life expectancy – as a result of increasing longevity
and ageing populations, leading to an increased demand for
healthcare – particularly for products which target conditions
typically experienced in later life.
• Increasing prosperity, self-care, and the wellness movement
– rising levels of prosperity and disposable income in many parts
of the world, particularly in developing countries, coupled with
the shift towards self-medication using over-the-counter (OTC)
products, rather than relying on prescription medicines, and an
increased focus on personal wellbeing and on prevention rather
than cure.
• Digital healthcare and the empowerment of patients
and consumers – with consumers, especially younger ones,
increasingly turning to online resources to self-diagnose and
discover solutions to their health concerns, and consumers as
prospective patients becoming active partners in their healthcare
journey, as their ability to carry out extensive research online,
enables them to become more knowledgeable about the services
they receive and the products they use.
• The growth of e-commerce – with online discounting, the
emergence of high-speed mobile data, and increasingly secure
and speedy payment methods, leading consumers to embrace
the convenience of online purchases.
2020 has seen further acceleration of the shifts towards digital
healthcare and an acceleration of the growth in e-commerce,
in response to the global pandemic.
83%
of internet users
are now engaging
on social media…
…that’s
58%
of the world’s total
population
99%
of those users access social
media through an app
or mobile device…
The COVID-19 pandemic has
accelerated the shift towards
e-commerce by as much as 5 years
20
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
2020 has seen further acceleration of the shifts towards
digital healthcare and an acceleration of the growth in
e-commerce, in response to the global pandemic.
The COVID-19 pandemic has impacted almost every aspect of our
daily lives and challenged consumers' sense of wellbeing. With health
and wellbeing becoming a bigger consideration for many people,
consumers have had to adapt, learning about their health risks, and
accessing healthcare in very different ways2. Unable to engage in
person with their doctors and healthcare professionals about their
health concerns, consumers have increasingly turned to a digital
healthcare journey, with many healthcare providers now offering
online services. These virtual visits have risen from 15% to 28%
during the pandemic, and on average, 80% of those accessing these
services expect to continue to use this type of care in the future, even
once the pandemic restrictions have ended.
This movement towards online healthcare inevitably increases
the consumer’s agency and engagement, as there is an increasing
availability of information. This allows the consumer to challenge
their healthcare professional’s opinion, leading to an overall
reduction in satisfaction, but also an increased willingness to share
their health data, mostly due to an increase in the use of health
monitoring services and technology which consumers are increasingly
using to monitor their health and fitness, potentially leading to more
advanced and personalised care.
In terms of e-commerce, the COVID-19 pandemic has accelerated
the shift towards e-commerce by as much as five years, with 86% of
millennials, 79% of Gen X and 62% of baby boomer generations
having purchased online3. The US Department of Commerce suggests
a growth of up to 37% (13% comparative for 2019) in online sales
Q3 of 20204, which means 14% of all retail is online and 22% of
all sales are expected to be made through online sales channels by
20235. Looking further ahead, NASDAQ predicts that 95% of retail
purchases will be made online by 2040.
This shift in spending during the COVID-19 pandemic has been most
tangible in China where 64% of Chinese consumers surveyed shifted
the purchase of healthcare and hygiene products from offline to
online. While many markets are expected to experience a negative
revenue impact from the pandemic, eCommerce revenues are
expected to increase at a global level, with Food & Personal Care
being the largest growth category6,7.
The opportunity for Alliance
Consumer healthcare is becoming an increasingly dominant part
of our portfolio, currently accounting for more than two thirds
of our revenues, with this percentage set to increase further in 2021,
with the inclusion of Amberen.
The acceleration in digital healthcare provision and e-commerce
that have taken place in 2020, have highlighted the increasing
importance of healthcare brands having an effective digital strategy.
We continue to focus our marketing investment on the creation of
digital content and communications, ensuring we develop engaging
activity which drives business growth through this channel as part of
our Marketing Excellence programme. This will be further supported
by the rollout of new Digital Excellence training to our global brand
teams in 2021. For more on this see Strategy in Action – Maximising
Brand Potential on page 28.
We are already starting to build significant momentum in our
e-commerce sales. Much of the recent sales growth we have seen
from Kelo-cote has been driven by online purchasing. Pre-pandemic,
digital was already an established and important sales channel for
the brand, with around 40% of our Chinese sales being facilitated
by online platforms. Sales on cross-border e-commerce platforms
in China such as Tmall Global continue to grow strongly, and we
estimate that the percentage of Kelo-cote sales to the Chinese market
facilitated by online platforms now to be in excess of 75%.
Our latest acquisition, Amberen, saw year-on-year growth in
online sales of 70% over 2019, to account for more than 20% of
overall sales, whilst in the UK, the primary market for MacuShield,
the increasing engagement of older demographics with online
purchasing saw online sales increase to around 35% of total sales,
with more than 20% of our UK consumer product sales being made
through online channels.
Our pharma heritage leaves us well placed to deal with the challenge
of increased regulation that is now impacting consumer healthcare
products – for example medical devices, which are currently facing
increased regulation in Europe under the Medical Device Regulation,
and we continue to exploit our medical and regulatory capabilities to
support us in this, as required.
1
2
3
4
5
https://backlinko.com/social-media-users
https://www2.deloitte.com/us/en/insights/industry/health-care/consumer-health-trends.html
eMarketer May’20
ec_current.pdf (census.gov)
E-commerce worldwide - statistics & facts | Statista
6 How eCommerce is impacted by COVID-19 2020 | Statista
7 https://nicholashallcompany.wordpress.com/tag/e-commerce/
21
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Business Model
Our Business Model
Our business model sets out how we execute our strategy
to deliver on our purpose: making a difference to people’s
lives, through making a range of clinically valuable healthcare
products available to consumers and patients around the world.
Resources & dependencies:
External market conditions
The global demand for healthcare
products and prescription medicines
See pages 20–21
Our assets and resources
Our people & culture see pages 44–45
Our brands see pages 14–17
Our relationships see pages 38–41
Our infrastructure see page 49
Our financial resources see pages 52–55
Support from our stakeholders
Maintaining effective engagement to
ensure we continue to understand their
needs and respond to their concerns
See pages 38–41
How we create value:
Invest
Selectively investing in our brands
Using our deep sector expertise, marketing skills, and technical capabilities
to invest in selected brands, primarily Consumer Healthcare brands,
to accelerate their growth
Maintain
Maintaining our heritage pharma brands
These remain a good source of cash generation for us and so continue
to benefit from our established expertise in the management of many
types of regulated medical products
Acquire
Selectively acquiring new brands
To supplement our existing portfolio and provide new opportunities
for growth
How we utilise the cash
we generate:
The cash generated from our trading
activities is applied in:
Reinvesting in our existing brands
Acquiring new brands
Paying down debt
Rewarding our shareholders
The amount we reinvested in our
existing portfolio of brands in 2020
The amount by which our net debt would have
decreased in 2020, excluding the acquisition
of Amberen
£17m+
£32.5m
The amount we spent on acquiring
new brand, Amberen, in 2020
The dividend payments we made
to shareholders in 2020
£82.7m
£2.8m
22
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Some of the ways in which our activities
benefit consumers and patients:
In 2020, we sold over
4 million
packs of Kelo-cote – enough
to treat around 8 scars a minute
How we maximise the value we create:
We do this through focusing on the 8 Critical
Success Factors which underpin our strategy:
See pages 26–27
Product development
(range extensions)
To ensure our products continue to
stay aligned with changing consumer
preferences
In July 2020, we successfully launched
a new formulation of Nizoral (Triatop)
in China
See page 15
Ensuring availability of funding
Maintaining a blended model –
acquisitions and organic growth
Maximising deal flow
Developing our marketing excellence
Maintaining operational excellence
Ensuring we have an engaged, skilled
and motivated workforce
Developing a scalable resource capability
Marketing Alliance as a success story
Responsible business
Operating our business in an ethical and
sustainable way, which benefits all our
stakeholders, whilst seeking to minimise
the negative environmental and social
impacts of our business operations.
See pages 36–51
Continuing to develop our marketing
and promotional materials
To increase consumer awareness and
understanding of our products
In 2020, we redesigned our packaging
and promotional materials for Vamousse in
the US – in 2020, this product was used to
treat 750k headlice infestations
Acquiring new products
To increase the number of clinically
valuable healthcare products we are
able to offer to consumers and patients
In December 2020, we completed the US
acquisition of Amberen – for the relief of
the symptoms of menopause
See page 29
Governance & risk management
Maintaining an effective
governance framework
See page 72
Ensuring effective management of risk
See pages 56–57
Continuing to support healthcare
professionals (HCPs)
To increase their knowledge and
awareness of our products, so they
can make informed recommendations
to patients
In 2020, we were forced to take our UK
sales team activities online – however
that didn’t stop the team from maintaining
high levels of engagement – and donating
products to help HCPs counter the effects
of constant handwashing
See page 31
Our culture and values
Acting in accordance with our values
See page 51
Maintaining our strong and collaborative
culture of working together to achieve more
See pages 5–9
Brand protection
To increase trust and consumer
confidence in our products, through
ensuring consumers only have access
to genuine products
In 2020, we created a new Head of
Global Brand Protection role to assure the
security of our supply chain and minimise
the risk of counterfeit product being sold to
consumers
See page 47
23
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Strategy
Our Strategy
Our strategy enables us to deliver on our purpose and to progress
towards our vision of being a leading international healthcare
business, built around products that are clinically valuable
to patients. Our strategy is focused around four key elements:
Maximising brand potential
Acquiring & integrating new products
To deliver organic growth – achieved through:
To deliver incremental growth – selective approach:
Insight-led marketing activity to increase brand
awareness (consumer products)
Taking advantage of operating synergies –
geographic & product type
Extending geographical reach, through new distributor
partnerships
Range development and extension
Growth opportunity is primarily around our Consumer
Healthcare brands
Refreshing/complementing our portfolio
Targeting products that are clinically valuable
to healthcare consumers/patients
Our focus & key
achievements
in 2020
Putting in place new distributor relationships to support
Nizoral sales post transition
Completing the strategic acquisition of Biogix
Inc/Amberen in the US
Developing a new formulation for Nizoral / Triatop
in China and commencing commercialisation
Developing our marketing capabilities through
implementation of our Marketing Excellence programme
Continuing to identify and evaluate potentially
suitable acquisition opportunities; we reviewed
just under 100 opportunities in 2020
Substantially concluding the Nizoral transition
process with J&J
Associated CSFs* 1 4 5 7 8
1 2 3 7 8
KPIs
10 new distributor agreements signed (2019: 18)
96 acquisition opportunities reviewed (2019: 131)
Consumer Healthcare see-through revenues accounted for
68% of total see-through sales (2019: 64%)
Kelo-cote see-through revenues +12% vs 2019; Nizoral
see-through revenues +4% vs 2019
Our priorities
in 2021
Realising the growth potential from Amberen as we bring
this brand fully into our business
Increase our focus on innovation and product development
to maintain the relevance of our brands to consumers,
through implementation of a new Innovation &
Development (‘I&D’) process
1 strategic acquisition completed (2019: 0)
Integrating Biogix Inc / Amberen into Alliance
Continuing to identify and evaluate potentially suitable
acquisition opportunities – strong pipeline
Principal risks
1, 3–13
2, 5, 8–13
* Underpinning our strategy are eight Critical Success Factors (‘CSFs’) – the operational priorities for the
business which are considered to be key to the successful delivery of our strategy.
24
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
People
75
new hires in 2020 (employees + contractors)
Investing in people
Acting responsibly
Continuing to invest in our people and in developing
Alliance’s strong, collaborative culture
To maximise the value created for all our stakeholders,
through managing our business in a responsible and
sustainable way
Our focus & key
achievements
in 2020
Ensuring the safety and wellbeing of our employees
through the coronavirus pandemic
Putting in place new support systems, as necessary to
enable employees to stay connected and engaged whilst
working remotely
Becoming Great Place to Work-Certified™ (‘GPTW’) in
both the UK and China
Developing our internal ESG framework to maintain
oversight of all relevant ESG activities (new initiatives
and those already forming part of existing business
operations)
Initiating key projects, including Know Your Supplier
(‘KYS’) and Know Your Customer (‘KYC’) to provide
additional assurance on our end-to-end supply chain
activities
Rolling out tailored online compliance training to all
employees, to increase awareness of legal requirements
and associated compliance risks
Associated CSFs*
KPIs
75 new hires in 2020 (employees + contractors)
54 new employees in 2020
Employee turnover: <1%
1,359 course completions for the online compliance
training modules, equating to more than 1,500 hours of
study
Our priorities
in 2021
Continue on our engagement journey, through actioning
findings from the GPTW survey
Continue to progress key ESG-related initiatives,
such as KYS/KYC
Develop blueprint for future ways of working,
as COVID-19 restrictions are lifted
Progress evaluation of other potential ESG-related
workstreams – including around product packaging
Maintain levels of compliance training, with increased
focus on tailoring training for individual roles
Principal risks
5, 7, 10, 12, 13
3–10, 12, 13
25
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Strategic Report
Our Strategy
continued
Strategy – CSFs
Underpinning our strategy are eight Critical Success
Factors (‘CSFs’) – the operational priorities for the
business which are considered to be key to the successful
delivery of our strategy.
CSF
Strategic elements
this supports
1
Maintaining a
blended model
– acquisitions +
organic growth
Maximising
brand potential
Acquiring &
integrating
new products
Identified focus for 2020
Progress in 2020
Focus for 2021
Continuing to invest in
our consumer brands to
maximise future growth
potential, whilst looking to
augment this part of our
portfolio and extend our
international reach, through
suitable acquisitions
Consumer brand revenues
maintained in 2020 (+1%), despite
COVID challenges, with strong
performances from Kelo-cote and
Nizoral
Nizoral transition substantially
completed
See pages 14-19
Maximise the growth from
our Consumer Healthcare
brands, through targeted
investment, recognising
the increasing importance
of online sales channels
2
Maximising
deal flow
Acquiring &
integrating
new products
Identifying and securing one
or more acquisitions which
fit our selective acquisition
criteria
Completed acquisition of Biogix
Inc/Amberen in the US
Just under 100 acquisition
opportunities reviewed, a number
of which were progressed to late-
stage evaluation
Fully integrate Biogix/
Amberen into Alliance
business
Continue acquisition
search/evaluation
See page 29
Ensuring access
to funds
Acquiring &
integrating
new products
RCF term extension
Ensuring continued
availability of funding (debt
and/or equity) to support
future acquisitions
Term of £165m Revolving Credit
Facility extended by a further
12 months to June 2024
RCF drawdown of $110m to fund
Biogix acquisition
Ensure continued
availability of funding
(debt and/or equity) to
support future acquisitions
Developing
our marketing
excellence
Maintaining
operational
excellence
Maximising
brand potential
Rollout of Marketing
Excellence programme,
ensuring appropriate level
of support provided for our
consumer brands on a local
and global basis
See pages 52-55
Marketing Excellence programme
successfully rolled out and brand
planning process integrated with
strategy review
See page 28
Maximising
brand potential
Progressing our ERP
implementation
Good progress made with the
development of our ERP system
Acting responsibly
Fully embedding our
improved NPI and S&OP
processes
Improved S&OP (and NPI) process
now fully embedded – providing
strong support for supply chain
management during the pandemic
See pages 52-55
Continue to develop our
Marketing Excellence
capabilities, through
rollout of Digital
Excellence training and
new I&D processes
Implement our new ERP
system – on track for Q2
2021
Continue to ensure
effective management
of COVID-19 risks
Progress KYS/KYC
programmes and other
key elements of our
ESG strategy to further
increase business
assurance in these areas
26
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
CSF
Ensuring
we have an
engaged,
skilled and
motivated
workforce
Maintaining
a scalable
resource
capability
Marketing
Alliance as a
success story
Strategic elements
this supports
Investing in people
Acting responsibly
Working towards
participation in the Great
Place to Work® (‘GPTW’)
survey
Implementation of actions
coming out of Britain’s
Healthiest Workplace
survey
Ensuring sufficient resource
available to deliver our
growth plans
Maintaining an
appropriate balance
between employee and
contract heads
Ensure the Alliance story
is clearly communicated
to investors and other
stakeholders – both
current and prospective
Maximising
brand potential
Acquiring &
integrating
new products
Investing in people
Maximising
brand potential
Acquiring &
integrating
new products
Investing in people
Acting responsibly
Identified focus for 2020
Progress in 2020
Focus for 2021
GPTW certification achieved in
the UK and in China – with Best
Workplaces™ nomination in the UK
Actions from Britain’s Healthiest
Workplace survey largely overtaken
by shift in working arrangements as
a result of the pandemic – Ways of
Working (‘WoW’) study put in place
to monitor ongoing impacts of remote
working
See pages 30 & 44-45
75 new hires made in 2020 – mix of
permanent roles, supporting business
evolution and growth, and additional
contractor heads taken on to support
workload peaks
See pages 44-45
Implement
actions coming
out of the GPTW
survey, to further
improve employee
engagement
Continue to monitor
and respond to WoW
survey findings;
develop blueprint for
future ways of working
Ensure employee base
stays connected
Continue to ensure
resourcing adequately
supports medium-term
growth ambitions
50+ meetings held with current/
prospective investors
54 new employees recruited
Identified as one of the London Stock
Exchange Group’s ‘1,000 Companies
to Inspire Britain’ in 2020, for the
second year running
Continue to
develop investor
communications –
in particular around
ESG – and wider
understanding of
our business
See pages 44-45
27
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Strategic Report
Strategy in Action –
Maximising Brand
Potential
Developing a first-class
Marketing Excellence
programme
No. of brands / brand groupings prioritised as
part of our Marketing Excellence programme:
13
Training our marketing teams to develop best-in-
class brand plans
Through carrying out a detailed situation analysis to
identify the key issues and opportunities, using the
insights gained to creating commercial objectives and
strategic imperatives, providing clarity around how we
can exploit these opportunities or overcome issues.
Digital Excellence a key focus for 2021
Recognising the increasing opportunity presented by
digital communication and media, in 2021 we will be
rolling out a new Digital Excellence training programme
to our global marketing teams. This has been designed to
give them a more in-depth understanding of customers'
digital personas, increase the effective use of search
and social media, and analysis of the data which these
activities generate, in order to drive value.
Marketing Excellence is one of the Critical Success Factors which
underpin the delivery of our strategy, enabling us to maximise the
organic growth of our brands, especially our larger consumer
brands – Kelo-cote, Nizoral and Amberen. Our structured Marketing
Excellence programme focuses on creating strong and enduring
brands and delivering sustainable long-term value.
For more information visit
alliancepharmaceuticals.com
28
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
What do we mean by Marketing Excellence?
• Gaining a deep understanding of our customers, and clearly
identifying who the core target audience is for each of our brands,
be they healthcare professionals (HCPs), consumers or patients
• Understanding the influencers of our target audience – friends and
family, social media bloggers, pharmacists
• Identifying the core insight for our target – the deep human truth
and tension that our target faces in their everyday lives
• Creating a strong proposition for our brands – the unique
promise we make to our customers to encourage them to buy or
recommend our products
• Making ‘cut-through’ communications with messaging that speaks
directly to our target and that also has the right emotional and
rational triggers
• Deploying the right media – be it digital media such as Facebook
or Google, TV or symposia with HCPs
• Using our Marketing Excellence programme to drive business
excellence, through creating powerful and long-lasting brands
Strategic Report
Strategy in Action –
Acquiring and
Integrating New
Products
Amberen – the latest
addition to our portfolio
No. of women in the age range to be impacted
by menopause symptoms in the US:
41m
Annual value of the VMS market in the US:
$55bn
(growing at 7% p.a.)
Amberen is a clinically evidenced range of over-the-counter
supplement products, for the relief of the symptoms of menopause
(and more recently perimenopause).
During menopause, women can experience multiple symptoms, with
as many as 70% of women experiencing hot flushes and night sweats.
Amberen is a non-hormonal, dietary supplement designed to relieve
these symptoms. It comprises a proprietary formulation of bioactive
antioxidants (succinates), amino acids, minerals and Vitamin E.
Amberen is a strong brand in a new market segment for Alliance
(menopause supplements), within the fast-growing vitamin, mineral
& supplement (‘VMS’) market. Launched in the US, the largest
healthcare market in the world, in 2007, since 2015 it has gained
strong retail distribution across multiple channels, such that it is
currently the primary driver of category growth in the US1.
The focus of the growth strategy for the brand to date has been on
increasing retail distribution, supported by a significant investment
in Advertising and Promotion spend (‘A&P’), using coupons to drive
consumer trial and brand loyalty. The brand’s premium pricing versus
competitors, allows for high A&P reinvestment.
A perfect strategic fit
As an established, clinically evidenced brand with significant
sales and good growth potential, in a growing market, Amberen
fits perfectly with our strategy of acquiring established consumer
healthcare brands in territories where we already have a presence.
Offering significant near-term growth potential, it is set to become our
second largest brand and provides the business with another great
platform for the delivery of future organic growth.
Synergy potential
In addition to offering distribution channel synergy with Vamousse in
the US, the acquisition of Amberen also creates an opportunity for
synergistic bidding on future US acquisition opportunities.
1
Source: IRI MULO 52 w/e Aug 9, 2020
For more information visit
alliancepharmaceuticals.com
29
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Strategy in Action –
Investing in People
Becoming Great Place
to Work-Certified™
Survey response rate:
73%
Overall Trust Index© rating:
79%
A key focus for the Investing in People element of our strategy in 2020,
has been our participation in the Great Place to Work® (‘GPTW’)
survey, to increase our understanding of employee engagement within
the business. Alliance has undertaken annual employee engagement
surveys for many years, with great results, however the existing survey
was not as extensive as we needed for a larger, more diverse business
and did not provide external benchmarking.
The GPTW survey covers a broad range of factors which are key drivers
to building internal trust and engagement of employees. Having access
to this much richer pool of data gives us a more in-depth insight into
how our employees view Alliance, enabling us to further progress our
engagement journey. It also shows how Alliance is performing against
other leading businesses around the world.
In addition to employee participation in the survey which covered 60
core and 14 additional statements, we were also required to make a
detailed submission on our response to the COVID-19 pandemic.
Outcomes
We were delighted to receive an overall Trust Index© rating of 79%,
just six percentage points below that for the 2020 World’s Best
Workplaces Top 25, to have been Great Place to Work-Certified™
both in the UK and China, and to have earned a Best Workplaces™
nomination in the UK – quite an achievement considering that the
survey was conducted in Autumn of 2020, when the majority of our
employees had spent many months working remotely due to local
pandemic restrictions.
Next steps
The survey has provided us with a lot of valuable feedback
highlighting areas for us to focus on in 2021 and beyond,
to ensure that we stay focused on putting our people at the
top of our agenda, continuing to ensure that Alliance remains
Great Place to Work-Certified™, and reinforcing the spirit of
togetherness that is the lynchpin of our culture.
For more information visit
alliancepharmaceuticals.com
30
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Strategic Report
Strategy in Action –
Acting Responsibly
Helping others respond
to the challenges of
COVID-19
Supporting healthcare professionals
One of the images taken and used by the
Royal London Hospital Air Ambulance team,
showing their apprecaition for the donations of
Hydromol they received.
Providing support to
healthcare professionals
Recognising that many healthcare professionals
(HCPs) were starting to suffer from dermatological
complications of continuous handwashing and
extensive use of PPE, our UK sales team donated
Hydromol™, an emollient product for the treatment of
eczema, free of charge. The level of appreciation and
gratitude from HCPs to these donations was such that
we received numerous e-mails and social media posts
thanking us for our support.
Alliance has always been a strong and consitent supporter of
the wider community, from our values-based PRAISE awards to
employees, which give recipients the opportunity to nominate
a charity to receive a cash donation, to our volunteering days,
fundraising activities and product donations, which support both local
and international charities.
Helping in the search for treatments
The pharmaceutical sector has been at the forefront of the COVID-19
crisis, both in the race to develop vaccines, and to identify other
potential treatments for those affected by the virus. In the UK, we
worked closely with the Department of Health to support their search
for treatments and therapeutics, reinstating supply of a previously
discontinued product which may potentially benefit those suffering
from COVID-19, to expedited timescales.
The challenges of COVID-19 for charities
We recognise that for many charities, the impacts of the pandemic
have been devastating, restricting their ability to fundraise whilst at
the same time increasing the demand for their services. We therefore
took the decision, in the early stages of the pandemic, to switch our
original planned charity initiatives for 2020, and provide financial
support to a charity local to each of our office locations. Over the
course of the year, we donated more than £150,000 to six different
charities around the world, to support them in delivering their services
through the pandemic.
For more information visit
alliancepharmaceuticals.com
31
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responding to COVID-19
Responding to COVID-19
Working together to keep our business strong
through the global pandemic
Our Senior Leadership Team (left to right)
Peter Butterfield – Chief Executive Officer
Janice Timberlake – Chief People & Infrastructure Officer
Stephen Kidner – Chief Scientific Affairs & Operations Officer
Dan Thomas – Chief Corporate Development Officer
Alex Duggan – Chief Commercial Officer
Andrew Franklin – Chief Financial Officer
Never before has Alliance’s culture of working together been
more valuable or relevant than in 2020, as we sought to respond
quickly and decisively to the challenges brought about by the
global pandemic.
Our early-stage response was focused around two key objectives:
keeping our people safe and keeping the business strong. Through
the swift and measured response of our leaders, we were able to
maintain our focus as we navigated our way through the changing
local restrictions. As a result, we were able to exit 2020 in a strong
position.
Overleaf we provide a timeline of key events and management
actions taken in response to COVID-19 through 2020.
Responding to the challenges that COVID-19 has brought has
highlighted the resilience and strength of our product portfolio, our
business model, and, most importantly, our people.
Prioritising our Employees
A large part of Alliance’s success is down to the strong,
collaborative culture that exists within the business, and the high
levels of commitment shown by its workforce of over 200 skilled
and dedicated employees. To keep the business strong through
the pandemic, the Senior Leadership Team (‘SLT’) knew that they
needed to focus on keeping Alliance’s people strong, providing
reassurance around the business’s resilience and its ability to weather
the challenges brought about by COVID-19, trying to keep things as
normal as possible for the business’s employees, and to promote a
sense of security through very uncertain times. This included:
• honouring their 2019 bonus arrangements
• maintaining the 2020 pay reviews and employee share
option grants
• not making any use of the UK government loan assistance
programmes, grants or furlough schemes, and
• not making any redundancies as a result of the pandemic.
Some of the specific measures we put in place in 2020 to support
our employees through the challenges of prolonged remote
working included:
32
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
TIMELINE
Covid 19
Timeline of key responses to the COVID-19 global
pandemic in 2020
January 2020
With concerns rising about the growing
intensity of the COVID-19 outbreak in
China, the SLT begin to actively monitor
the situation, restricting business travel
to/from China and closing our Shanghai
office; discussions commenced around
global business continuity planning
March 2020
COVID-response team broadened
in scope and representation as
COVID-19 became a global
challenge; majority of employees
moved to remote working; international
travel restrictions were put in place
Alliance’s Board took the decision not
to propose a final dividend for 2019,
so as to conserve cash in light of global
economic uncertainty brought about by
the pandemic
May 2020
Alliance holds its first virtual AGM
July 2020
Alliance issues a positive half year
trading statement, noting that despite a
modest drop in revenues, the business
had seen a robust performance from its
Consumer Healthcare products
September 2020
Home working reinstated as the default
option for UK-based employees;
further update on response and
impacts provided as part of our
Interim results announcement;
dividend payments to shareholders
recommenced – announcement of an
interim dividend payment for 2020
February 2020
COVID-response team put in place,
reporting to the SLT with the remit to
‘Safeguard our people and safeguard
the business’; initial focus on APAC
business and supply chain
April 2020
‘Ways of Working’ survey and
‘Alliance Connect’ meetings
commence; update on initial response
and near-term outlook provided to
shareholders as part of our 2019 Prelims
presentation and Annual Report
August 2020
UK headquarters office reopened,
to allow employees that need
to work in the office to do so
October to December 2020
The business continues to operate
largely remotely, with local lockdown
restrictions being reintroduced in
several locations
By the end of the year, Alliance has
donated more than £150,000 to
support charities working to help those
impacted by the pandemic
‘Ways of Working’ survey
A regular bi-weekly survey, open to all employees, which aims to
monitor how changes in their working environment have impacted
their productivity and their physical, mental and cognitive health
and wellbeing.
• Enables additional targeted support to be provided
to those that need it
• Helps us design the blueprint for our future ways of working
‘Alliance Connect’
A more informal monthly meeting for all employees to come
together virtually and share their experiences during the pandemic;
this meeting complemented our regular monthly global Company
briefings.
• Opportunity to share ‘human interest’ stories of how employees
in different regions and parts of the organisation have been
impacted by the pandemic
• Provides a forum for the SLT to address employees’ questions
and concerns
Current situation and expected impacts in 2021
Whilst the impact of the pandemic on our business has been modest
to date, due to the nature of our business, our financial strength and
the timely and effective management actions taken by the SLT, we
recognise that the pandemic has the potential to continue to impact
our sales performance in 2021, whilst regional/local restrictions
persist. It is worth noting however that a sizeable portion of our sales
are to China, where the ongoing impacts of the pandemic are being
felt in a much more limited way.
We continue to regularly review and update our demand forecasts to
understand and mitigate any potential adverse effects on revenues,
and to maintain close working relationships with our suppliers and
distributors, to understand the impacts of the pandemic on their
businesses and to provide early warning of any potential signs
of distress.
Whilst the vast majority of our employees continue to work from
home, we continue to stay connected as a business and are looking
forward to being able to re-engage with each other on a face-to-
face basis. We continue to survey all our employees on a monthly
basis, to provide real-time feedback on their work arrangements and
wellbeing and to help inform our planning for new ways of working
as pandemic restrictions are eased.
Whilst the global uncertainty brought about by the pandemic
looks likely to continue for some time to come, we remain confident
in our ability to continue to respond effectively to the challenges
of COVID-19, and to maintain our robust operational and
financial performance.
33
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Key Performance
Indicators
Key Performance Indicators
Our key financial and non-financial performance measures
are set out below. These are the primary measures used by
management to monitor business performance, both against
short-term budgets and forecasts and longer-term strategic plans.
Financial KPIs:
See-through Revenue*
£137.5m -5%
(2019: £144.3m)
Underlying EBITDA*
£38.6m -2%
(2019: £39.4m)
Underlying EBIT*
£36.8m -2%
(2019: £37.4m)
2020
2019
2018
2017
£137.5m
£144.3m
£124.0m
£101.6m
2020
2019
2018
2017
£38.6m
£39.4m
£32.4m
£27.2m
2020
2019
2018
2017
£36.8m
£37.4m
£28.9m
£25.8m
Underlying Profit Before Tax
£33.5m +2%
(2019: £32.9m)
Underlying Basic EPS
5.11p
(2019: 5.09p)
Dividend Per Share
1.610p +200%
(2019: 0.536p)
2020
2019
2018
2017
£33.5m
£32.9m
£28.1m
£23.9m
2020
2019
2018
2017
5.11p
5.09p
4.54p
4.05p
2020
2019
2018
2017
0.536p
1.610p
1.464p
1.331p
Free Cash Flow*
£34.1m +17%
(2019: £29.1m)
Leverage1
2.43x
(2019: 1.48x)
Nebt debt
£109.4m +85%
(2019: £59.2m)
2020
2019
2018
2017
£34.1m
£29.1m
2020
2019
2018
2017
£16.1m
£22.0m
1.48x
2.43x
2.33x
2.46x
2020
2019
2018
2017
£109.4m
£59.2m
£85.8m
£72.3m
*
1
These measures constitute Alternative Performance Measures (‘APMs’), as defined in note 33 to the Financial Statements.
Leverage is defined as: Adjusted net debt/enlarged Group EBITDA, calculated using pro forma EBITDA on a trailing 12-month basis for acquired entities, in line with our banking covenants.
34
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Non-Financial KPIs:
Commercial performance metrics
Consumer Healthcare sales as a % of total sales1
YoY growth – Consumer Healthcare sales1
68% +4%
(2019: 64%)
+1%
(2019: 31%) 3-year CAGR: +29%2
Prescription Medicines Sales as a % of total sales1
YoY growth – Prescription Medicines Sales
32% -4%
(2019: 36%)
-14%
(2019: -3%)
Acquisition-related metrics
Total number of opportunities reviewed
in 2020:
Number of opportunities progressed to
due diligence:
Number of acquisitions
completed:
96
(2019: 131)
6
(2019: 4)
1
(2019: 0)
People-related metrics
Total number of employees on payroll
Female employees as a % of total employees
Employee turnover
245
(2019: 214)
57%
(2019: 58%)
0.8%
(2019: 1.3%)
1
2
Measured relative to see-through sales.
This includes the impact of Nizoral, which was acquired by the Group in July 2018.
35
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Strategic Report
Responsible Business
Responsible business – our approach to ESG
Our purpose is to make a difference to people’s lives through
making a range of clinically valuable healthcare products
available to consumers and patients around the world.
At Alliance, we have always had a strong focus on our people, and
on how we do business and interact with our stakeholders, through
our values-based culture, which promotes trust, openness, and
fairness. This, coupled with the adoption of an increasingly mature
approach to governance, has provided a strong foundation for the
development of the Group’s ESG strategy.
We work hard to ensure that we conduct our business in an ethical
and sustainable way, having regard to the interests of all our
stakeholders and the impact that our business has on the wider world
and the people and communities within it.
Over the course of 2020, we have gained greater clarity around our
priorities from an ESG perspective and considered how we can best
manage and report on these, both internally, and externally, within
the context of recognised reporting frameworks.
Ultimately the aim of our ESG strategy is to provide greater clarity
and transparency around our business operations, and evidence
of the steps we are taking to ensure our business operates
in a way which is both responsible and sustainable.
A number of the initiatives we started in 2020, for example our Know
Your Supplier (‘KYS’) programme, which aims to further improve
and streamline our supplier management and associated business
assurance activities, are currently at a fairly early stage and so
we will report substantively on the outcomes from these next year.
However, this is something we intend to do in the future, as these
initiatives become more established and embedded in our day-to-
day business operations.
Selection of an appropriate reporting framework
Following a review of recognised external reporting frameworks, we concluded
that the most relevant primary reference framework for Alliance was the United
Nations Sustainable Development Goals (UNSDGs), the 17 goals which were
adopted by all UN Member States in 2015, as part of the 2030 Agenda for
Sustainable Development, which sets out a 15-year plan to achieve the Goals.
The goals which we consider to be most relevant to Alliance are:
UN goal:
How Alliance contributes:
Ensure healthy lives and
promote well-being for
all at all ages
Alliance’s focus is on supplying clinically valuable healthcare products which enable people
to lead healthier lives, either through the treatment of existing conditions, or through promoting
well-being through adopting a preventative approach.
Ensure inclusive and
equitable quality education
and promote lifelong
learning opportunities
for all
Alliance works closely with HCPs, providing them with product and therapy area education,
information and resources, so they can prescribe or recommend our products with confidence
and offer informed guidance to users.
Ensure gender equality
and empower all women
and girls
Alliance is committed in its recruitment, promotion, and other selection processes to ensuring
equal opportunities for all, irrespective of gender, and to maintaining a culture of inclusion, in
which diversity is seen as a strength.
Promote sustained,
inclusive and sustainable
economic growth, full and
productive employment
and decent work for all
Alliance currently employs more than 200 people around the world, working together in
the delivery of our vision and sustainable growth of our business. Alliance recognises that its
employees are key to the business’s success, and ensuring that we have an engaged, skilled
and motivated workforce is considered to be one of the Critical Success Factors to the
successful delivery of our strategy.
Ensure sustainable
consumption and
production patterns
Through its quality management systems and supply chain management activities,
Alliance aims to ensure that all its products meet the highest standards of quality, safety
and efficacy and are manufactured by contract manufacturers who hold the required
authorisations, comply with the Group’s audit requirements and adhere to the Group’s
policies on anti-bribery and anti-slavery.
36
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Board and SLT involvement
In recognition of the increasing importance of ESG, both to the Board
and to key stakeholders, and following the Board evaluation which
took place in January 2021, the Board took the decision to create
an ESG Committee, initially comprising all Board members, to take
overall responsibility for ESG matters.
Responsibility for overseeing the Group’s ESG initiatives at an
operational level will continue to sit with the Senior Leadership
Team (‘SLT’).
Materiality assessment
Having considered the areas identified by the Sustainable Accounting
Standards Board (SASB) standards as being likely to be material
for businesses operating in the Healthcare sector / Pharmaceuticals
industry, we have worked on developing our own internal landscape
mapping and reporting structures around ESG, and have concluded
that the areas which are most likely to have a material impact on
Alliance’s business performance from an ESG perspective are:
These areas form
the focus of our
ESG coverage
for 2020.
People
• Culture & employee engagement
• Training & development
• Diversity & inclusion
• Health & well-being
Customers
• Access & affordability
• Product quality & safety
• Customer welfare / HCP support
Suppliers
• Supply chain management – including human rights &
business ethics
Leadership & governance
• Business Ethics – existence of policies, employee training
37
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Our principal stakeholders
Working together we create
sustainable value for all our
stakeholders
Our shareholders
• Strong financial performance
• Share price appreciation
• Dividend income
Our employees
• Competitive reward structures
• Share options
• Flexible working
• Learning & development opportunities, on a global basis
Suppliers & partners
• Continued business growth opportunities
Consumers & patients
• Safe and effective healthcare products
Healthcare professionals
• Engagement, education, information, and resources
Communities
• Local engagement
• Therapy area expertise
• Charitable & product donations
38
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Stakeholder engagement
Our business is based around our culture of working together to achieve more – working as one global team to create partnerships that
unlock potential for brands, businesses, and people, thereby maximising the value we create, not just for our shareholders, but for all the key
stakeholders in our business, recognising that each has a part to play in ensuring the business’s long-term success.
For Alliance, regular engagement with our stakeholders is an integral part of how we operate as a business – actively seeking to understand
the concerns and aspirations of our employees, how they perceive the business and their levels of engagement, the challenges faced by our
suppliers and distributors – particularly in 2020 against the backdrop of the global pandemic – and the needs of consumers and patients, and
healthcare professionals – the users and recommenders of our products.
The Board recognises the importance of maintaining an engaged and motivated workforce, dependable supply chains, customer confidence in
our products, close relationships with healthcare professionals, good returns for our shareholders and social impact in both our local and wider
communities.
Our key stakeholders, their material issues and how we engage with them are set out in the table overleaf, with additional information on how
stakeholder considerations have been considered by the Board in their decision-making in accordance with s172 of the Companies Act 2006
being provided as part of the s172 statement on page 42.
We summarise below the relevance of the four key elements of our strategy to our key stakeholder groups.
Strategic objective
Maximising brand
potential to deliver
organic growth
Acquiring new
products to deliver
additional growth
Investing in people
and in developing
our strong,
collaborative culture
Acting responsibly
to maximise the
value created for all
our stakeholders
Relevance to:
Shareholders
Employees
Consumers
& patients
Suppliers &
distribution
partners
Healthcare
professionals
Communities
Highly Relevant
Relevant
Indirectly Relevant
Our shareholders are interested in the overall financial performance
of the business, which in turn is dependent on its ability to deliver
sustainable long-term growth
Our employees are primarily interested in the business’s ability to
provide them with fulfilling and rewarding work, to receive a fair
reward for their efforts and to benefit from the business’s success
Consumers and patients are interested in having access to products
with a good safety and efficacy profile, at a reasonable cost
Our suppliers and distribution partners are primarily interested in the
development of long-term partnerships, with balanced contractual
terms, and the continued growth of our business
HCPs are interested in our product expertise and engaging with
us to share information and resources
Our social impact activities are focused on donations of time, cash,
and products
39
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Stakeholder engagement continued
Our key stakeholders
Shareholders
Employees
Consumers & patients
Suppliers
Distribution partners
Healthcare professionals
Communities
Their material issues /
what’s important to them
Financial performance
Share price appreciation
Strategy
Dividends
Business model
Corporate governance
ESG
Product quality
Product safety and efficacy
Product availability
Product cost
Fulfilling and rewarding work
Competitive remuneration and
benefits package
Opportunities:
‒ to share in the Group’s success
‒ for learning and career
development
‒ to make a difference
‒ to discover and realise
their potential
How we engage with
them as a business
Investor roadshows
Capital Markets Days
One-to-one meetings
Annual Report and Accounts
Half year and Full year Trading and
Results Announcements
Monthly Company briefings
Bi-annual appraisal process
Annual development reviews
Staff surveys
Social events
Key metrics &
deliverables in 2020
Board /
SLT engagement
More than 50 one-to-one meetings
held with current and prospective
investors
2 significant* new investors gained
in 2020
AGM (full Board)
Presentation of Half year and
Full year Trading and Results
Announcements (CEO/CFO)
Investor meetings (CEO/CFO/
Chairman)
Responding to specific shareholder
enquiries (CEO/CFO)
Commissioning / reviewing
shareholder research (CEO/CFO/
Board)
Trust Index© score of 79% from
Great Place to Work (‘GPTW’)
employee engagement
Monthly Company update meetings,
led by CEO and other members of SLT
Reviewing results from GPTW
employee engagement survey, sharing
these with employees and formulating
action plan (SLT)
Ensuring our employees were
prioritised in determining our response
to the global pandemic (SLT)
pages 32–33
Links to other
relevant content
s172 matters A–F and principal
decisions pages 42–43
Responsible Business –
Leadership & governance page 48
Strategy in Action –
Investing in People page 30
Responsible Business –
People pages 44–45
Responding to COVID-19 page 32
*
>2% of issued share capital
40
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Consumer healthcare products:
digital channels (websites,
social media), advertising (TV, print,
in-store promotions), focus groups
Medicines:
direct engagement limited, due to
regulatory constraints, although
we do provide basic product
information as part of our Medical
Information function
38m units of product sold in 2020
68% of revenues from more widely
available Consumer Healthcare
products, for which product
positioning / market context
are the main determinants of price
Most direct engagement is via
our commercial / medical teams,
with engagement by relevant SLT
members on an ‘as needed’ basis
Responsible Business –
Customers page 46
Responsible Business –
Suppliers page 47
Strategy in Action –
Acting Responsibly page 31
Responsible Business –
Social impact page 50
Long-term partnerships
Collaborative approach
Long-term partnerships
Collaborative approach
Balanced contractual terms
Balanced contractual terms
Fair payment terms
Growth of our business
Growth of our business
Reliable product supply
Engagement and product
Time, skills, and expertise
expertise
resources
Education, information, and
Financial support
Donations of goods and
products
Participation as an active
member of the local business
community
Regular cross-functional
Regular meetings held with
Responding to specific product-
Understanding their needs
meetings held with key suppliers
distributors to understand
related questions
throughout the year
Communications increased
in 2020 to understand and
manage COVID-19 impacts
market dynamics and sales
performance, provide product
training, and address any
regulatory or supply issues
Level of communications
increased in 2020 to understand
and address COVID-19 impacts
and making donations of cash,
goods and products where
we believe these can have
maximum impact
Strategy adapted in 2020 due
to the challenges of COVID-19
Providing educational materials
and resources
Acting as a source of scientific
and clinical background to enable
them to judge the place of our
products in clinical practice, in
guidelines and in funding decisions
Utilising their expertise and advice
in the development of our products
and educational materials
£47.5m cost of sales spend
c. 55% of our sales are made via
Ongoing engagement through
All key suppliers paid in line with
agreed payment terms
distributors
attendance at / presentations to
online symposia and other events
support
for HCPs
£150,000 of charitable
donations for COVID-19
11,875 units of product
(equivalent to 37,500+
treatments) donated to IHP
engagement by SLT lead on an
generally on an ‘as needed’
engagements
Most direct engagement is
via our commercial leads,
Most direct engagement is via our
Charitable initiatives lead
marketing and medical teams, with
by SLT
with engagement by SLT lead
SLT review of outcomes from these
Charitable donation limits
agreed by the Board
Most direct engagement is
via functional leads within
our operations team, with
‘as needed’ basis
basis, with ongoing direct
involvement by SLT lead in a
limited number of key distributor
relationships
Their material issues /
what’s important to them
Financial performance
Share price appreciation
Fulfilling and rewarding work
Product quality
Competitive remuneration and
Product safety and efficacy
Product availability
Product cost
Strategy
Dividends
Business model
Corporate governance
ESG
benefits package
Opportunities:
‒ to share in the Group’s success
‒ for learning and career
development
‒ to make a difference
‒ to discover and realise
their potential
Monthly Company briefings
Bi-annual appraisal process
Annual development reviews
How we engage with
them as a business
Investor roadshows
Capital Markets Days
One-to-one meetings
Annual Report and Accounts
Staff surveys
Half year and Full year Trading and
Social events
Results Announcements
Consumer healthcare products:
digital channels (websites,
social media), advertising (TV, print,
in-store promotions), focus groups
Medicines:
direct engagement limited, due to
regulatory constraints, although
we do provide basic product
information as part of our Medical
Information function
68% of revenues from more widely
available Consumer Healthcare
products, for which product
positioning / market context
are the main determinants of price
Board /
SLT engagement
AGM (full Board)
Presentation of Half year and
Full year Trading and Results
Announcements (CEO/CFO)
Investor meetings (CEO/CFO/
Chairman)
Responding to specific shareholder
enquiries (CEO/CFO)
Commissioning / reviewing
shareholder research (CEO/CFO/
Board)
Monthly Company update meetings,
Most direct engagement is via
led by CEO and other members of SLT
our commercial / medical teams,
with engagement by relevant SLT
members on an ‘as needed’ basis
Reviewing results from GPTW
employee engagement survey, sharing
these with employees and formulating
action plan (SLT)
Ensuring our employees were
prioritised in determining our response
to the global pandemic (SLT)
pages 32–33
Links to other
relevant content
s172 matters A–F and principal
Strategy in Action –
decisions pages 42–43
Responsible Business –
Investing in People page 30
Responsible Business –
Leadership & governance page 48
People pages 44–45
Responding to COVID-19 page 32
*
>2% of issued share capital
Our key stakeholders
Shareholders
Employees
Consumers & patients
Suppliers
Distribution partners
Healthcare professionals
Communities
Long-term partnerships
Collaborative approach
Balanced contractual terms
Fair payment terms
Growth of our business
Long-term partnerships
Collaborative approach
Balanced contractual terms
Growth of our business
Reliable product supply
Engagement and product
expertise
Education, information, and
resources
Regular cross-functional
meetings held with key suppliers
throughout the year
Communications increased
in 2020 to understand and
manage COVID-19 impacts
Regular meetings held with
distributors to understand
market dynamics and sales
performance, provide product
training, and address any
regulatory or supply issues
Level of communications
increased in 2020 to understand
and address COVID-19 impacts
Key metrics &
More than 50 one-to-one meetings
Trust Index© score of 79% from
38m units of product sold in 2020
deliverables in 2020
held with current and prospective
Great Place to Work (‘GPTW’)
investors
in 2020
2 significant* new investors gained
employee engagement
£47.5m cost of sales spend
All key suppliers paid in line with
agreed payment terms
c. 55% of our sales are made via
distributors
Responding to specific product-
related questions
Providing educational materials
and resources
Acting as a source of scientific
and clinical background to enable
them to judge the place of our
products in clinical practice, in
guidelines and in funding decisions
Utilising their expertise and advice
in the development of our products
and educational materials
Ongoing engagement through
attendance at / presentations to
online symposia and other events
for HCPs
Time, skills, and expertise
Financial support
Donations of goods and
products
Participation as an active
member of the local business
community
Understanding their needs
and making donations of cash,
goods and products where
we believe these can have
maximum impact
Strategy adapted in 2020 due
to the challenges of COVID-19
£150,000 of charitable
donations for COVID-19
support
11,875 units of product
(equivalent to 37,500+
treatments) donated to IHP
Most direct engagement is
via functional leads within
our operations team, with
engagement by SLT lead on an
‘as needed’ basis
Most direct engagement is
via our commercial leads,
with engagement by SLT lead
generally on an ‘as needed’
basis, with ongoing direct
involvement by SLT lead in a
limited number of key distributor
relationships
Most direct engagement is via our
marketing and medical teams, with
SLT review of outcomes from these
engagements
Charitable initiatives lead
by SLT
Charitable donation limits
agreed by the Board
Responsible Business –
Customers page 46
Responsible Business –
Suppliers page 47
Strategy in Action –
Acting Responsibly page 31
Responsible Business –
Social impact page 50
41
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Directors’ responsibilities under s172 Companies Act 2006
Under s172 Companies Act 2006, a company’s directors have a duty to discharge their responsibilities having regard to:
a) the likely consequences of any decision in the long term
b) the interests of the company’s employees
c) the need to foster the company’s business relationships with suppliers, customers and others
d) the impact of the company’s operations on the community and the environment
e) the desirability of the company maintaining a reputation for high standards of business conduct
f)
the need to act fairly as between members of the company
In the table below, we set out how the Board has discharged its responsibilities under s172 Companies Act 2006 in 2020.
Matter
Key decisions / areas of focus for the Board in 2020
For more information see:
a) Long-term impacts
the likely consequences
of any decision in the
long term
Dividends – non-payment of 2019 final dividend due to economic
uncertainty caused by COVID-19; reinstatement of dividend
payments for 2020; review of dividend policy
Additional investment in ERP system: upgrade to D365 and
additional consultancy support
Review and approval of annual strategy / long range plan
Extension of the Group’s Revolving Credit Facility
Review of Group risk register
Succession planning
D&O insurance cover
Acquisition of Biogix Inc and submission of non-binding and binding
offers for other acquisition opportunities
Strategic report:
Our Strategy pages 24–31
Our Business Model pages 22–23
Chief Executive’s Review pages 14–19
Financial Review pages 52–55
Risk Management & Internal Controls pages 56–57
Principal Risks & Uncertainties pages 58–65
Governance:
Audit & Risk Committee Report pages 82–85
Nominations Committee Report pages 79–81
b) Employee
considerations
the interests of the
company’s employees
Review of 2021 budget
Approval of updated whistleblowing procedure
Approval of share option grants
Review of findings from Great Place to Work survey
Review of non-financial KPIs relating to human capital
management
ERP implementation – engagement of additional consultancy
support
Auditors – audit partner rotation
Brand protection
Approval of charitable contributions in response to COVD-19
Development of ESG strategy
c) Business
relationships the need
to foster the company’s
business relationships
with suppliers,
customers and others
d) Community and
environmental
impacts the impact
of the company’s
operations on the
community and the
environment
Strategic report:
Our Strategy pages 24–31
Our Business Model pages 22–23
KPIs pages 34–35
Stakeholder engagement pages 39–41
Responsible Business – People pages 36–51
Governance:
Audit & Risk Committee Report pages 82–85
Remuneration Committee Report pages 86–94
Strategic report:
Our Business Model pages 22–23
Stakeholder engagement pages 39–41
Principal Risks & Uncertainties pages 58–65
Governance:
Audit & Risk Committee Report pages 82–85
Strategic report:
Our Strategy pages 24–31
Responsible Business – Our approach to ESG
pages 36–37
Responsible Business – Social impact page 50
Responsible Business – Leadership & Governance
page 48
42
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Matter
Key decisions / areas of focus for the Board in 2020
For more information see:
e) Good reputation
the desirability of the
company maintaining
a reputation for high
standards of business
conduct
Review of financial announcements, financial statements, and
narrative reporting
Review of Group risk register
Approval of updated whistleblowing procedure
f) Acting fairly the
need to act fairly as
between members of
the company
Dividends – see (a) above
Approval of share option grants
Approval of Directors' remuneration and bonus awards
The impact of acquisitions on bonus arrangements
Strategic report:
Responsible business – Leadership & governance
page 48
Risk Management & Internal Controls pages 56–57
Principal Risks & Uncertainties pages 58–65
Governance:
Audit & Risk Committee Report pages 82–85
Strategic report:
Financial Review pages 52-55
Governance:
Remuneration Committee Report pages 86–94
Alliance’s CEO,
Peter Butterfield,
in conversation with
Chairman, David Cook
43
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
People
UN goals:
Culture & employee engagement
Alliance’s employees are integral to the realisation of the Group’s strategy
and the successful delivery of its vision. As such, the Group places great
importance on attracting and retaining high-quality employees and
aligning the success of the Group with their rewards. The Group operates
a share option scheme which aims to ensure that all employees have an
opportunity to benefit from the growth of the business as reflected in the
Company’s share price and an annual corporate bonus scheme, which
provides for rewards to be made to all employees, based on corporate
and individual performance.
Our strong, collaborative culture of working together to achieve more is
one of the defining characteristics of our business. Alongside our values
(see below), it underpins how we go about our day-to-day activities,
how we connect with each other and how we respond to challenges.
It is this culture, attitude and value set which has enabled us to not just
survive but thrive as a business through the global pandemic. For more
on Alliance’s response to the pandemic see ‘Responding to COVID-19’
on pages 32-33.
The Group’s Senior Leadership Team (‘SLT’) engages regularly with
employees and monitors their views and any concerns raised closely. During
the pandemic, with extensive remote working arrangements in place, the
SLT increased their level of engagement, in recognition of the uncertain and
challenging times facing both the business and all of its employees.
The Group has for many years carried out an annual employee
engagement survey, the results of which are reviewed by the Board
to ensure that appropriate actions are taken in response to the survey
findings. In 2020 Alliance took part for the first time in the Great Place
to Work® (‘GPTW’) survey. We were extremely pleased to have been
Great Place to Work®-Certified both in the UK and in China and to have
earned a Best Workplaces™ nomination in the UK. For more on our
participation in the Great Place to Work survey see: Strategy in Action
– Investing in People on page 30.
Alliance is committed to creating an environment based on the principles
of fairness, honesty, integrity, and respect. Whilst employees are
encouraged to raise any concerns they may have, relating to their
employment with their line manager or a more senior manager within
the Company on an informal basis in the first instance, the Group also
operates a formal, confidential grievance procedure through which
employees may raise any concerns which cannot be resolved through
the informal route. This procedure is designed to ensure that any problem
or grievance employees may have about their job or Alliance’s treatment
of them is properly and fairly considered by the Company.
Training & development
Alliance is committed to offering all permanent employees, whether
full or part time, appropriate opportunities for training, development,
and career enhancement, actively encouraging and supporting the
development of their skills and knowledge through internal and external
short courses and formal training programmes.
Annual development reviews are carried out for all employees, to identify
any current job-specific training needs, and future career progression
aspirations.
These reviews run alongside our annual performance appraisal process,
which operates for all permanent employees, and which provide an
opportunity to assess progress and performance against pre-agreed
goals and objectives, on an annual basis, supported by mid-year
reviews. More informal feedback is provided through regular weekly
line management meetings, which are held with all employees.
We have several leadership and management development programmes
in place. In 2020, we adapted our Management Development
Programme to a virtual setting to ensure we maintained momentum in
developing our new line managers and those identified through the
development plan and annual appraisal processes as high-potential
employees. The first virtual programme began in October with nine
participants. This year we also launched our Master Classes for
managers, in response to the development needs identified by managers.
These focused on Coaching skills and in 'Leading Through Change' – an
essential skill in the context of the pandemic.
We forecast our hiring needs annually, both on a short-terms basis, as
part of our annual budgeting process, and in the longer term, as part of
our strategic planning process. We continue to provide opportunities for
early-stage career development, through our apprenticeship programme,
and to carry out an annual succession planning exercise at senior level.
44
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Make-up of Alliance’s employee
base at 31 December by gender:
All employees:
2020
2019
Board & SLT:
2020
2019
Male
106 (43%)
2019: 89 (42%)
Female
140 (57%)
2019: 125 (58%)
Male
8 (80%)
2019: 8 (80%)
Female
2 (20%)
2019: 2 (20%)
Our values
Performance
Our high-performing people continually
drive business success
Realism
We set stretching goals and targets
which we believe are achievable
Accountability
We take responsibility and deliver what
we promise
Integrity
We build trust in all our relationships
through openness and fairness
Skill
We recruit highly skilled people and
develop their talents to the full
Entrepreneurship
Our people think of the business as if it was
their own
45
Diversity & inclusion
Alliance is committed to equality of treatment for all employees, and
those seeking employment with the Group, regardless of gender, marital
status, race, ethnic origin, colour, nationality, national origin, disability,
sexual orientation, religion or age, geographical origin, social status,
or area of abode. The Group is committed to complying with all current
legislation concerning unfair discrimination and to encouraging good
practice in equality of treatment. In furtherance of this commitment,
Alliance has an Equal Opportunities Policy Statement, which sets out
its commitments, and the expectation Alliance has of all its employees
to ensure we treat others with fairness, respect, and integrity.
In the GPTW survey, we were pleased to see that fairness and equality
was one of our highest scoring areas.
Alliance continues to balance its employee headcount with a contract
workforce, so as to maintain a scalable resource capability and ensure
flexibility of resourcing, in particular to support resource intensive projects
such as our ERP implementation. In 2020, 75 new people joined the
business, 54 of whom (72%) joined as employees, with the remaining
21 being short-term contractors.
Health & wellbeing
The Group remains committed to ensuring the health and wellbeing
of its employees and provides Healthcare insurance to all permanent
employees and their dependents, subject to qualifying conditions.
Schemes are reviewed annually to ensure they continue to meet the needs
of the business and our employees, with a new scheme provider being
selected for our UK-based employees in 2020.
The Group has a formal work/life balance policy under which eligible
employees can request a change to their working hours, or working
patterns, for example term-time working, job-sharing, or staggered hours.
Recognising the challenges faced by working parents and/or carers in
balancing home schooling/caring responsibilities with work commitments
during the pandemic, the Group was quick to take a very open approach
to supporting those needing more flexible working arrangements.
Whilst the gym in our head office may have been repurposed as a
COVID-safe meeting room and the provision of free fruit to employees
temporarily suspended, Alliance remains committed to supporting
employees in maintaining a healthy lifestyle whilst working from home.
Employees have been encouraged to take regular breaks, go on
lunchtime walks and stay active, whilst responses to the Ways of Working
survey have provided a means for management to identify and address
any potential areas of concern.
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Customers
UN goals:
Access & affordability
Alliance is committed to ensuring that all its products are readily
available to consumers and patients, subject to relevant regulatory
restrictions, and that the prices we charge for our products are
reasonable and reflective of local market conditions. For many of our
Prescription Medicines products, we are subject to external pricing
controls, such as the voluntary scheme for branded medicines pricing
and access in the UK (VPAS). We work closely with our suppliers and
logistics providers to avoid, where at all possible, any disruption to
the continuity of supply, particularly for those prescription medicine
products deemed to have a high medical need.
In addition, we offer access to our products to those in need through
our product donations to International Health Partners – see page 50.
Customer welfare, product quality & safety –
our commitment to patients
Consumers and patients rely on us to deliver products that can help
to improve their health – whether these are prescription medicines,
or healthcare products bought online, or off the shelf in their local
pharmacy or supermarket, by consumers, as part of a self-care
regime, or to treat common ailments.
We are committed to ensuring that all our products meet the highest
standards of safety and efficacy and that we remain fully compliant
with all applicable regulations. Our quality assurance systems and
processes aim to provide an appropriate level of confidence that
suppliers, vendors, and contractors are able to supply consistent
quality of materials, components, and services in compliance
with regulatory requirements and to identify and mitigate any
associated risks.
46
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Support for healthcare professionals –
our commitment to transparency
Alliance is committed to providing transparency and clarity around
our collaboration with healthcare professionals, healthcare
organisations and patient organisations. In the UK and Republic of
Ireland, Alliance publishes transfers of value in accordance with the
ABPI and IPHA Codes of Practice.
Responsible marketing, advertising, and sales practices
Alliance is committed to ethical business practices regarding the
marketing, advertising, and sales of our brands, and we have
robust standard operating procedures in place to achieve this,
with comprehensive training for all compliance staff, to ensure our
activities comply with the appropriate standards and legislation.
Ultimately this provides reassurance for healthcare professionals,
patients and consumers regarding the integrity of Alliance’s brands.
Though our membership of key trade associations such as the
Association of the British Pharmaceutical Industry (ABPI), the
Proprietary Association of Great Britain (PAGB) and the Association
of the British HealthTech Industry (ABHI), we are able to stay
at the forefront of continually evolving compliance legislation.
Our processes are regularly audited and refined to ensure
continued compliance with relevant internal and external
regulatory requirements.
Suppliers
UN goal:
Supply chain management
We recognise that, as a business which outsources all its
manufacturing activites, we have an obligation to maintain adequate
oversight of our end-to-end supply operations and to be aware of
any associated environmental health and safety, business ethics and
supply chain security risks which may exist within our supply chain,
including risks to our supply chain arising from the effects of climate
change, so these can be effectively managed.
Our established vendor selection processes aim to ensure that all new
CMOs are subject to cross-functional assessment by representatives
from our Finance and Legal, Sourcing, Technical and Quality
teams against a broad set of measures, to ensure compliance with
Alliance’s internal policies, in addition to appropriate external quality
standards, such as EU GMP, ISO 13485, ISO 22716 and GPvP, and
that they have hold appropriate third party authorisations, e.g. MIA
for medicines, issued by a competent authority.
To support those aspects of our supply chain which we are directly
involved with, in the UK, we hold Wholesale Dealers Authorisations,
assessed, and approved by the MHRA to allow wholesale dealing
of medicines in the UK and in France we hold Exploitant status and a
Wholesale Dealers Authorisation, assessed and approved by ANSM,
to allow the marketing and wholesale dealing of medicines in France.
Both our UK and Italian trading companies hold ISO 13485:2016
(similar to ISO 9001) assessed quality systems to support the
marketing of medical devices, which are independently assessed by
BSI (UK) and TUV (Italy). Both of these entities also have CE marked
medical devices, Class II and above, independently assessed by the
Italian and UK Ministry of Health assigned Notified Bodies. In the UK,
we are audited regularly by Trading Standards to support the placing
on the market of products designated as food supplements.
In China, we are working towards having an NMPA accredited
quality management system to enable us to hold Marketing
Authorisations in China.
To support these accreditations, in addition to annual
pharmacovigilance training, all employees receive training on Good
Distribution Practice, with regular training on Company procedures
and policies being provided to relevant employees within the
business, as needed. Those employees holding statutory roles, such as
QPPV, RP, Clinicians, are expected to perform ongoing professional
development as a prerequisite for holding these roles.
Business ethics considerations
We are committed to ensuring there is transparency not only in
our own business but also in our approach to tackling modern
slavery throughout our supply chains, consistent with our disclosure
obligations under the Modern Slavery Act 2015. We expect the
same high standards from all of our contractors, suppliers, and other
business partners, and as part of our contracting processes, we
include specific prohibitions against the use of forced, compulsory
or trafficked labour, or anyone held in slavery or servitude, whether
adults or children, and we expect that our suppliers will hold their own
suppliers to the same high standards.
We carry out ongoing, risk-based monitoring of our suppliers, to
ensure they remain able to supply consistent quality of materials,
components, and services in compliance with regulatory requirements
and to identify and mitigate any associated risks.
As part of our efforts to further improve and streamline our supplier
management and associated business assurance activities, in 2020,
we instigated a Know Your Supplier (‘KYS’) programme, partnering
with a market-leading data aggregator / analytics provider to
gain access to wide-ranging supplier data and in-depth analytics
capabilities, to give us improved visibility of any potential ‘red flags’
in our supply chain. This in turn will enable us to better align existing
compliance review and escalation processes, so as to ensure any
identified issues are remediated on a timely basis. The solution
is expected to be implemented during the first half of 2021, with
the focus initially being on our direct suppliers, using a risk-based
approach to selection.
Supply chain security and brand protection
We recognise that, for some of our consumer products, there is a risk
of counterfeit product reaching the market, which may not have been
subject to the same rigorous production standards and quality testing
as genuine product, rendering it potentially less effective. In 2020,
we created a new Head of Brand Protection role, to understand any
potential vulnerabilities in our supply chain and address any identified
counterfeiting risks.
We are also in the process of setting up a Know Your Customer
(‘KYC’) programme, to bolster our customer qualification and
approval processes and ensure we have full visibility over our
end-to-end supply chain.
47
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Governance –
business ethics
Employee training
In 2020, we rolled out a suite of online training
courses to all employees, covering:
Anti-Bribery
Anti-Money Laundering
Competition Law
GDPR
Market Abuse
Modern Slavery Act
Sanctions
Tax Evasion Prevention
Over the course of the year, we achieved
1,359
course completions…
…accounting for
1,571
hours of study
All our employees (including contractors) are also required to
undergo annual pharmacovigilance training, and we continue
to provide further in-depth training for specific employees
around such matters as competition law and contracts, as
required.
Our approach to business ethics
Alliance is committed to operating its business in an ethical and
sustainable way, putting in place formal policies around Modern
Slavery and Bribery and Corruption, together with training for all
employees and contractors, to ensure these policies are understood
and adhered to.
Modern slavery
Alliance has an anti-slavery and human trafficking policy, designed to
promote compliance with the Modern Slavery Act 2015. The policy
provides guidance to employees, contractors and other business
partners on slavery and human trafficking and the measures taken
by Alliance to tackle any slavery and human trafficking in its business
and its supply chains.
All employees and contractors are required to comply with this policy,
with training on the policy, and on the risk the business faces from
modern slavery in its supply chains, forming part of the induction
process for all individuals who work for Alliance. Regular refresher
training on this and other compliance matters is provided to all
employees on an annual basis – see Employee training on this page.
For further detail on Modern Slavery and our supply chain,
see page 47.
Bribery and corruption
It is our policy to conduct all business in an honest and ethical manner.
We take a zero-tolerance approach to bribery and corruption and
are committed to acting professionally, fairly and with integrity in all
our business dealings and relationships wherever we operate and
implementing and enforcing effective systems to counter bribery and
corruption.
We will uphold all laws relevant to countering bribery and corruption
in all the jurisdictions in which we operate. However, as a UK-
registered Group, we remain bound by UK laws, including the Bribery
Act 2010, in respect of our conduct both at home and abroad.
Alliance has an anti-bribery and corruption policy, designed to
assist in the prevention of bribery and corruption by or involving the
Group’s employees. The policy provides guidance both to the Group
and its employees and contractors, with respect to their respective
obligations and potential liabilities under the Bribery Act 2010. All
employees and contractors are required to comply with this policy.
The Group also operates a formal Whistleblowing Procedure, to
support employees in raising any concerns they may have around any
suspected wrongdoing.
48
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Environment
2020/21 improvements
to our Avonbridge House HQ:
Replacement of existing windows with thermally efficient
argon filled double glazing throughout the building
Replacement of the last old AC unit with a modern energy
efficient system
Replacement of the lights in the Atrium and final suite
with LED units
Insulation of the attic space
Replacement all of the glazing in the Atrium with
thermally efficient units
Given the nature of our business and the fact that we outsource
all of our manufacturing, our actual carbon emissions and other
environmental impacts from our direct business operations are
relatively modest.
Company reporting detail
Alliance Pharma plc is a company limited by guarantee, registered
in England and Wales Number 04241478. Registered office:
Avonbridge House, Bath Road, Chippenham, SN15 2BB.
We recognise that our business operations do have some limited
impact on the natural environment both through the consumption of
natural resources, such as water and fossil fuels, and through carbon
emissions, both from our offices and from business travel.
We continue to look for ways to improve the energy efficiency of our
UK headquarters building, where around 70% of our employees are
ordinarily based, with further improvement works carried out in 2020,
with an expected completion in H1 2021. Our opportunities to bring
about positive environmental change in our regional offices around
the world is limited, due to their much smaller size and location within
multi-occupancy office buildings.
We are actively looking at how we can best utilise our office space to
accommodate potential new ways of working as the global pandemic
subsides and restrictions are lifted.
The amount of both domestic and international travel undertaken by
our employees in 2020 has been significantly reduced due to global
pandemic restrictions. This has forced us to rely much more on virtual
rather than face-to-face meetings. Whilst we expect there to be some
resumption of both domestic and international travel once restrictions
are eased, it is unlikely that this will return to pre-pandemic levels.
The Company has gathered data regarding scope one and scope
two carbon emissions (as defined by the GHG Protocol) for the
financial year spanning 1 January 2020 to 31 December 2020 from
its UK Operations for inclusion in Company Reporting (2020) as
defined by the requirements of the Streamlined Energy and Carbon
Reporting (SECR) legislation.
Scope 1
Natural Gas
Transport (Diesel)
Transport (Petrol)
Scope 2
Unit
kWh
Litres
Litres
Raw
Quality
Conversion
Factor
kWh
10,644
10,644
0.18387
tCO2e
1.96
10,644
58,040
0.24057
13.96
4,456
42,824
0.2292
9.82
Electricity (Imported)
kWh
241,339
241,339
0.23314
56.27
Total kWh
352,847
Total tCO2e
Revenue (£m)
kgCO2e/£m
82.00
109
0.7523
The combined Scope 1 and Scope 2 Carbon Emissions for the period
was recorded at 82 tCO2e. Since this is the first year of carbon
footprint calculation it is not possible to publish a year-on-year
change at this time. The energy consumed in the period is 352,847
kWh with 71% relating to building consumption and 29% related to
employee travel. The Specific Carbon Consumption (SCC) for the
period is calculated at 0.07523 kgCO2e/£m of revenue excluding
management fees and recharges.
During the reporting period Alliance complied with the Energy Savings
Opportunity Scheme (ESOS) second phase, engaging with an external
Lead Auditor to undertake energy and transport efficiency audits.
49
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Responsible Business
continued
Social impact
Charity need image?
Every year Alliance works with employees to identify and support
a charity of choice either at a local or global level. Additionally, all
employees are given a charity day each year to provide practical or
fundraising support to a charity they care about.
In 2020, we decided to support one local charity in each country
where we have an office base, which needed help to respond to the
increased demands on their services as a result of COVID-19. Over
the course of the year, we provided more than £150,000 of support,
to local charities chosen by employees in each of our office locations.
For more on how we helped others repond to the challenges of
COVID-19, see Strategy in Action – Acting Responsibly on page 31.
Our work with International Health Partners
For more than 15 years, International Health Partners (IHP) has
worked to facilitate the donation of essential medicines and
healthcare products to some of the world’s most vulnerable
communities, including those caught up in conflict, and those
impacted by natural disasters. In 2020, IHP sent 5.8 million treatments
to those in need, covering 36 countries.
Alliance has been a long-term supporter of IHP and in 2020,
we donated 11,875 units of product (equivalent to 37,500+
treatments) with a value in excess of £100,000, which were
distributed to those in need in 10 countries across Africa,
the Middle East, and Central America.
50
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Our values
Acting in accordance with our
values, we maintain our strong and
collaborative culture of working
together to achieve more
Performance
Our high-performing people
continually drive business success
Realism
We set stretching goals and targets
which we believe are achievable
Accountability
We take responsibility and deliver
what we promise
Integrity
We build trust in all our relationships through openness
and fairness
Skill
We recruit highly skilled people and
develop their talents to the full
Entrepreneurship
Our people think of the business as if it was their own
51
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Financial Review
The Group delivered a robust financial
performance in 2020, against the backdrop
of the global pandemic, with see-through
revenues decreasing just 5% to £129.8m (2019:
£144.3m) and statutory revenues decreasing
4% to £135.6m (2019: £135.6m). This was
largely due to continued strong performance by
our Consumer Healthcare brands, in particular
Kelo-cote. However, reductions in operating
costs, together with lower interest and financing
costs, resulted in a 2% increase in underlying
profit before taxation in 2020 to £33.5m
(2019: £32.9m). Reported profit before tax
decreased 58% in 2020 to £13.0m (2019:
£31.1m), primarily due to amortisation and
impairment charges incurred as a result
of the decision to adopt finite useful lives
for our Prescription Medicines and certain
other brand assets from the start of 2020.
Group revenues were only minimally impacted
by exchange rate movements, which benefited
by approximately £0.3m from Sterling
strengthening against the US Dollar through
the second half of the year, offsetting a slight
weakening in Sterling against the Euro. The
impact of exchange rate movements at the
operating profit level was minimal.
Gross profit decreased by a similar percentage
to revenues, to £82.8m, down 4% versus the
previous year (2019: £86.1m), with gross
margin increasing slightly, from 59.7% to
60.2% of see-through revenue, and from
63.5% to 63.8% of statutory revenue, due
mainly to favourable changes in product mix.
Operating costs (defined as underlying
administration and marketing expenses,
excluding underlying depreciation,
amortisation, and impairment charges)
decreased by £2.1m to £42.8m (2019:
£44.9m), due to deferral of discretionary
spend, in response to the pandemic, and
reductions in other expenditure, partially offset
by increased marketing costs to support the
investment in Consumer Healthcare brands. This
resulted in operating costs as a percentage of
see-through sales to be maintained in line with
the prior year, at 31.1% (2019: 31.1%).
Continued
strong performance
despite pandemic
challenges
52
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
2020
Highlights
Underlying EBITDA remained resilient, despite a 5%
fall in see-through revenues (statutory revenues -4%),
due to good control over operating expenditure;
operating leverage maintained in line with 2019
Underlying profit before tax up 2% (reported profit
before tax -58%, due to non-cash impairment and
amortisation charges, and acquisition costs)
Very strong cash generation, helped by favourable
movements in working capital, with post-
acquisition leverage still below 2.5x
Underlying EBITDA*
£38.6m -2%
(2019: £39.4m)
2020
2019
2018
2017
£38.6m
£39.4m
£32.4m
£27.2m
Reported operating profit £16.2m (2019: £35.6m) -54%
Free Cash Flow*
£34.1m +17%
(2019: £29.1m)
2020
2019
2018
2017
£34.1m
£29.1m
£16.1m
£22.0m
Cash generated from operations £46.4m (2019: £39.0m) +17%
*
Non-IFRS alternative performance measures (see note 33). See-through revenue includes
sales from Nizoral as if they had been invoiced by Alliance. For statutory accounting purposes
the product margin on Nizoral sales is included within Revenue, in line with IFRS 15.
53
The IFRS 2 share options charge for 2020 was £1.4m, down £0.4m
versus that for the previous year (2019: £1.8m).
As a result of the reduction in operating costs, the impact on underlying
earnings before interest, taxes, depreciation, and amortisation (EBITDA)
was much smaller, with underlying EBITDA decreasing just 2% to £38.6m
(2019: £39.4m), and underlying operating profit decreasing by a similar
amount to £36.8m (2019: £37.4m). Reported operating profit decreased
54% to £16.3m (2019: £35.6m).
Underlying depreciation, amortisation, and underlying
impairment charges
Underlying depreciation, amortisation, and impairment charges
for 2020 were £1.8m, down £0.2m on the prior year (2019: £2.0m).
Following changes in the accounting policy regarding classification
of non-underlying items announced in the first half of 2020, as set out
below, for 2020 this charge relates purely to depreciation.
Finance costs
Finance costs were down by £1.3m compared with the previous year, at
£3.3m (2019: £4.6m). Of this, £1.2m related to a reduction in borrowing
costs, reflecting both a lower level of borrowings and a reduction in the
interest rate charged on our borrowings. The remaining £0.1m related to
currency movements.
The average interest charge on gross debt during the period (including
non-utilisation fees) was 2.55% (2019: 3.37%).
Change in accounting estimate
As set out in the Half Year Report, as the Group continues its focus on its
growing Consumer Healthcare portfolio, the Directors have considered
the continuing appropriateness of using the indefinite useful lives
accounting concept across the entire intangible brand asset portfolio.
For the majority of Consumer Healthcare brand assets, having regard
to the expected long-term growth profile of the Consumer Healthcare
business and the enduring nature of the brands, which are supported by
ongoing marketing spend, the Directors have concluded that indefinite
useful lives remain appropriate.
However, for Prescription Medicines brand assets, the Directors have
decided to adopt finite useful lives of up to 20 years for all these assets
effective from 1 January 2020. In arriving at this lifespan, the Directors
took account of all relevant factors, including typical pharmaceutical
product life cycles and the potential development of alternative
treatments over time, and also the policies adopted by our peer group.
As a result of this change in estimated useful lives, the carrying value
of the Prescription Medicines and certain other brand assets will be
amortised to the profit and loss account over their useful lives, generating
an annual non-cash amortisation charge of £7.2m in 2020 and
for subsequent years.
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Financial Review
continued
Non-cash impairment charges
The Group has also conducted impairment reviews for all intangible
brand assets. These reviews, together with the change in useful life
assumption for Prescription Medicines assets, have resulted in some
non-cash impairments, as detailed in note 5.
Classification of non-underlying items
The Group has also updated its classification policy for non-underlying
items. Following this update all non-cash amortisation and impairment
charges will be included as non-underlying items for 2020 and
subsequent years, in line with the general market treatment. This change
has been made to enable users to better understand the financial
performance and position of the Group from one period to the next, and
to facilitate comparison with its peer group, the majority of whom also
exclude amortisation and impairment from their underlying results.
Reconciliation of underlying to reported profit before tax
Year ended 31 December
Underlying profit before taxation
Non-underlying items:
Amortisation of intangible assets
Impairment of intangible assets and goodwill
Acquisition costs – Biogix Inc.
Return of Xonvea licensing rights
Disposal of Flammacerium
Total
Reported profit before taxation
2020
£m
33.5
(7.2)
(12.1)
(1.3)
–
–
(20.5)
13.0
2019
£m
32.9
–
–
–
(1.7)
(0.1)
(1.8)
31.1
Taxation
The underlying total tax charge for 2020 was £6.4m (2019: £6.4m),
which equates to an effective tax rate of 19.0% (2019: 19.5%). The
total tax charge for the year was £5.0m (2019: £6.1m), equating
to an effective tax rate on reported profits of 38.3% (2019: 19.5%).
The tax credit on non-underlying items reflects the net effect of the tax
credit on amortisation and impairment items, of £3.2m, partially offset
by a charge of £1.8m due to the impact of the change in the UK tax rate
from 17% to 19% on deferred tax balances, which relate primarily to
intangible assets.
2020
Highlights
continued
Underlying Profit Before Tax
£33.5m +2%
(2019: £32.9m)
2020
2019
2018
2017
£33.5m
£32.9m
£28.1m
£23.9m
Reported Profit Before Tax £13.0m (2019: £31.1m) -58%
Underlying Basic EPS**
5.11p
(2019: 5.09p)
2020
2019
2018
2017
5.11p
5.09p
4.54p
4.05p
Reported Basic EPS 1.51p (2019: 4.80p) -69%
Dividend Per Share
1.610p +200%
(2019: 0.536p)
2020
2019
2018
2017
0.536p
1.610p
1.464p
1.331p
Net Debt
£109.4m +85%
(2019: £59.2m)
2020
2019
2018
2017
£109.4m
£59.2m
£85.8m
£72.3m
54
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
*
The 2017 measure refers to the Underlying Adjusted Basic EPS as disclosed in the 2017
Annual Report which was adjusted to normalise the impact of significant changes in
overseas tax rates.
Earnings per share
Underlying basic earnings per share, the measure used by the Board
in assessing earnings performance, was marginally up on the previous
year at 5.11p, (2019: 5.09p), reflecting the very small increase in the
Group’s underlying profit after tax, coupled with a modest increase in the
number of shares in issue.
Cash flow and net debt
Free cash flow (see note 33 for definition) for the year remained very
strong at £34.1m (2019: £29.1m), with second half cash flows being
significantly stronger than first half, bolstered by favourable movements
in net working capital. Cash generated from operations was £46.4m
(2019: £39.0m).
Reported basic earnings per share reduced by 69% to 1.51p (2019:
4.80p) due to the greater impact which non-underlying items had
on reported earnings in 2020 versus 2019.
Dividend
The Board is pleased to announce that, after cancelling the 2019 final
dividend owing to COVID-19 and then paying an interim dividend
payment for 2020, in line with that for 2019, it is proposing
a final dividend payment of 1.074p per share for 2020, taking the
total dividend payment for the year to 1.610p. The Board will continue
to assess the level of future cash distributions having regard to overall
business performance and future outlook.
The final dividend, subject to approval at the Company's AGM on 19
May 2021, will be paid on 8 July 2021 to shareholders on the register on
11 June 2021.
Balance sheet
Intangible assets increased by £84.2m in 2020, to £412.9m (2019:
£328.7m), due mainly to the addition of acquired intangibles from
the Biogix acquisition of £105.4m, partially offset by non-underlying
impairments of £12.1m and amortisation charges of £7.2m as announced
at half year.
Further detail is provided in note 11.
Working capital
The Group continued to maintain good control of its working capital
during 2020, despite the challenges of the pandemic, with total net
working capital at 31 December 2020 of £19.3m, a reduction of £5.4m
on that at the start of the period (31 December 2019: £24.7m) due
mainly to the movement in receivables and payables balances.
Inventories, net of provisions, amounted to £22.9m as at 31 December
2020, an increase of £7.4m versus the start of the year (31 December
2019: £15.5m), and £2.2m of this reflects inventory acquired as
part of the Biogix acquisition; the remainder reflects the purchase of
additional finished goods inventory, raw materials and componentry, to
mitigate against both future manufacturing and supply challenges as a
consequence of COVID-19 and any potential disruption to our supply
chain in the wake of the UK’s departure from the EU.
Receivables decreased by £5.9m, reflecting both the decline in revenues
and the timing of fourth quarter sales, whilst payables increased by
£6.9m, as a result of higher inventory holdings and the phasing of
payments around the year end.
Following the drawdown of US$110.0m from our existing £165 million
Revolving Credit Facility to fund the acquisition of Biogix Inc, announced
on 29 December 2020, net debt was £109.4m at 31 December 2020
(31 December 2019: £59.2m).
As a result of this acquisition, Group leverage increased to 2.43 times
at 31 December 2020 (31 December 2019: 1.48 times), still comfortably
within our covenant limit of 3.0 times.
We expect free cash flow generation to remain good in 2021, albeit
constrained in the first half, due to the reversal of the favourable
working capital movements seen in Q4 2020. In the absence of further
acquisitions, we expect leverage to decrease to below 2.0 times by the
end of the year.
Treasury and capital management
The Group’s operations are financed by retained earnings and bank
borrowings, with additional equity being raised on a periodic basis to
finance larger acquisitions. Borrowings are denominated in Sterling, Euro
and US Dollars.
Group risk management policy is to hedge up to 75% of estimated
future foreign currency EBITDA exposure, for up to 18 months
at any point in time. The Group uses forward foreign exchange contracts
to implement this policy which are generally designated as cash
flow hedges.
In June 2020, the Group exercised its option to secure a 12-month
extension to its £165m Revolving Credit Facility, on the same terms,
and this now runs through to July 2024. This facility provides flexibility
for the Group to pursue its acquisition strategy over the next few years,
to complement future organic growth.
Following the Biogix acquisition on 29 December 2020, £25m
of this facility remained unutilised at 31 December 2020.
Andrew Franklin
Chief Financial Officer
23 March 2021
55
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Risk Management
and Internal Controls
Risk management and internal controls
At a global level, Alliance Pharma recognises
that it is essential that we actively manage our
risks and maximise our opportunities.
We remain focused on our values and believe that adopting
responsible behaviour across our business activities plays an
important part in achieving our purpose. The Board ensures a healthy
balance between the risks we face and harnessing the opportunities
to support sustainable growth in order to help meet the Group’s
strategic objectives, delivering value to our shareholders.
Our approach to risk management and internal control
The Board has primary responsibility for the Group’s overall
approach to risk management and systems of internal control.
It delegates oversight of the management of risk and internal control
to the Audit and Risk Committee. During the year, and in line with its
responsibilities pursuant to its terms of reference, the Audit and Risk
Committee reviews the identification, evaluation and management
of the risks facing the business and considers the effectiveness of
associated processes and controls.
The Committee reports regularly to the Board and, at least once a
year, the Board carries out a formal review of risk management and
the risks which have been identified by the risk management process.
Those risks which the Board is not prepared to take are either avoided
or, as far as possible, are mitigated and/or transfered to insurers.
Oversight
and reporting
The Board and the Audit and Risk
Committee leads process for risk
management
Identify
and assess
Top-down/bottom-up review
Review
and mitigate
The SLT reviews progress and
mitigations
The Audit and Risk Committee reviews the framework for risk management
and considers the Group’s principal risks and uncertainties.
The Audit and Risk Committee reports directly to the Board.
The identification and assessment and management of risks in the business
is driven and monitored by the Senior Leadership Team with the support of
the Company Secretary.
The existence of a risk is identified from either a ‘bottom-up’ process
involving line management or a ‘top-down’ review by the Senior Leadership
Team. As well as a consolidated Group Risk Register, there are risk registers
in place at a functional business level.
Risks are identified and assessed by the likelihood of them occurring and
their potential impact on the business. This calculates the potential level of
exposure on the business. These are then categorised to identify those that
can be effectively managed at a functional or departmental level and those
that need to be addressed at a cross-functional business level.
Risk registers are regularly reviewed to capture and identify new risks
and identify opportunities to improve the mitigating actions.
Each risk is allocated a business owner, who is responsible for implementing
the mitigating actions and reporting on progress with those improvements and
the status of those risks to the Senior Leadership Team. The Senior Leadership
Team reviews all risks on a quarterly basis, with the principal risks being
monitored monthly and, in the case of the principal risks and uncertainties,
such risks are reported to and reviewed by the Audit and Risk Committee as
well as the Board.
Actions being taken, or that should be taken, to help mitigate the potential
exposure to the risks are regularly reviewed to ensure the appropriate
individual ‘owns’ the risk and the actions being taken remain effective.
Report
and review
The Audit and Risk Committee reviews
and discusses key risks identified
The Company Secretary prepares an update report on risk and notifies
the Audit and Risk Committee of key changes to the Group Risk Register.
Existing mitigations are considered for each risk and the residual levels
of exposure assessed.
56
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
“ The Audit and Risk Committee keeps under review the Group’s internal
financial controls systems that identify, assess, manage and monitor
financial risks, and other internal control and risk management systems.”
David Cook
Independent Non-executive Chairman
The responsibilities surrounding risk management and internal control systems are designed to meet the needs of the size and complexity of the
business. It takes into account the applicable requirements of pharmaceutical regulators in the various markets in which the business operates
and the regulatory and legal requirements as a UK AIM listed plc.
The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material
misstatement or loss. The key components of the current system of internal control are:
Communicating our strategy and our values
Planning
Policies, processes and procedures
Reporting, management information and discussion
Organisational structure, accountability
Training and monitoring
Setting and communicating clear strategic goals to the business helps
ensure all employees understand the objectives of the business and
raises awareness.
Defining the Group’s values and maintaining a code of ethics for
all employees to encourage a culture that promotes good behaviour.
Developing clear business plans and budgets in line with strategy,
supported by intra-year forecasting. This provides the business with
clear points of reference.
Developing clear policies and procedures for all areas of the business which
consider all aspects of legal, regulatory and ethical responsibility. Final
implementation of the Enterprise Resource Planning (ERP) system will further
strengthen and enhance the Group’s systems of internal control. This provides
the business with an opportunity to review processes and reporting practices
throughout the Group and provide consistency across the same.
Regular reporting of actual performance relative to those strategic goals,
plans, budgets and forecasts. This ensures the business can track and trace
factors that could impact on strategy and performance.
Creating an appropriate structure of responsibility and accountability,
including segregation of duties, appropriate reporting lines for key managers
and regular line management communications and one-to-one meetings
where performance is discussed, supported by an appraisal process.
Training and monitoring employees’ understanding of the external regulatory
codes which are applicable to the Group’s business, as well as the Group’s
internal policies and procedures.
Management monitoring of compliance with the external regulatory codes
which are applicable to the Group business, as well as the Group’s internal
policies and procedures, and responding appropriately to any breaches.
Internal audit function
Each year, the Audit and Risk Committee and the Board separately consider the need for an internal audit function. Given the current size of the
Group, the Audit and Risk Committee and the Board do not judge it appropriate to maintain a dedicated internal audit function. This position is
kept under review.
57
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Principal Risks and
Uncertainties
Principal risks and uncertainties
During the year, the Board reviewed the principal risks and
uncertainties facing the Group and continues to focus on those which
could threaten the sustainability of our business model, our reputation,
future performance expectations, or in extreme cases, the solvency
or liquidity of our business. The links between our principal risks and
uncertainties and our strategy are set out in the table below.
Principal risks are assessed on a residual basis according to our
current view of their potential severity (being the combination of
impact and likelihood), and assuming that existing plans for mitigation
are and remain effective. This year, we are including a mapping
showing the current positioning of each of our principal risks based
on our assessment of their residual impact and likelihood.
The identified risks are not intended to be an exhaustive list of all risks
the Group faces but are the principal risks and uncertainties which
the Directors believe include all known material risks in relation to the
Group and the markets and industry within which we operate.
The environment in which we operate is constantly evolving and
can be affected by events that are outside of our control and which
may impact on us both operationally and financially. New risks may
emerge, the potential impact of known risks, including how quickly
they escalate, and/or our assessment of these risks may need to
change. During 2020, we faced a new risk arising from the global
pandemic. Further information on the impact of COVID-19 on all
aspects of our business can be found on pages 32 and 33.
How our principal risks and uncertainties impact the achievement of our strategic objectives
Strategic objectives
Maximising brand
potential
Acquiring &
integrating new
products
Investing in
people
Acting
responsibly
Strategic risks
Operational risks
Compliance risks
1 Organic growth: innovation & competition
2
3
4
5
6
7
8
9
Inorganic growth – acquisitions
Product safety
Supply disruption
Business systems
Cyber-security
People
Supply chain management
Product regulations
10 Legal & compliance
Financial risks
11 Foreign exchange
12 Pandemics and other worldwide events:
Other risks
COVID-19
13 Unforeseen event
58
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Analysing identified risks
t
c
a
p
m
I
3
1
4
9
2
6 12
8
10
7
5
11
Strategic risks
1
Organic growth:
innovation & competition
2 Inorganic growth – acquisitions
Likelihood
Operational risks
3 Product safety
4 Supply disruption
5 Business systems
6 Cyber-security
7 People
8 Supply chain management
Compliance risks
9 Product regulations
10 Legal & compliance
Financial risks
11 Foreign exchange
Other risks
12 Pandemics and other
world-wide events: COVID-19
An unforeseen event means one or more significant events, which could not
reasonably have been foreseen, and which adversely impacts the business’s
ability to continue to operate effectively.
We have taken the decision to remove the specific risk of political uncertainty
associated with Brexit from our principal risks and uncertainties this year, on
the basis that it is no longer considered to pose a significant risk to the Group.
Now that the transition period has come to an end and a trade deal has
been agreed with this EU, we have more clarity around post-Brexit trading
arrangements and are confident that any residual risk from
Brexit, for example to movement of goods to/from the UK/EU,
can be managed within our existing risk management framework.
59
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Strategic Report
Our Principal Risks and
Uncertainties continued
Strategic risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
1. Organic
growth:
innovation &
competition
Risk that we are unable to achieve our strategic
growth ambitions due to a failure to keep pace
with changing consumer preferences, both as
to product and channel, resulting in a loss of
competitive positioning, or due to a failure to
identify and exploit new geographic markets
for our products.
The products we sell are subject to normal
market forces, so demand may fall, or the
price we can achieve may be reduced, as our
products face new or increased competition in
response to changing consumer preferences for
products or sales channel.
• Loss of revenue, reduced
profitability and reduced
growth from failure to
maintain our competitive
positioning, or to
identify and exploit new
geographic markets for
our products
• Depending on its severity,
this could also potentially
impact our share price,
cash flow and covenant
compliance
Risk has
not changed
materially
since last year
• Continued focus on Marketing
Excellence, to ensure we stay
attuned to changing consumer
preferences, and to maximise
the value of our marketing
campaigns
• Increasing focus on innovation
and development activities
• Rollout of Digital Excellence
training across our marketing
teams.
• Maintaining close working
relationships with our distributors
• Ongoing monitoring and
forecasting of sales, costs,
profits, and cash flows
• Acquisitions fail to deliver
expected benefits – due
to overly optimistic
forecasts, unidentified
risks/poor evaluation of
identified risks during due
diligence, or as a result of
failings in the integration
process, resulting in
integration taking longer/
costing more than was
originally anticipated
• Distraction cost to the
business from acquisition
evaluation activities
• Maintaining an active presence
and continuing to grow our
reputation in the M&A market,
to ensure a good pipeline of
opportunities
• Ongoing refinements to our
acquisition evaluation process
• Experience gained from having
completed multiple deals
• Engage experienced legal,
regulatory and financial experts
to assist with the due diligence
process
Risk has
not changed
materially
since last year
2. Inorganic
growth –
acquisitions
As a significant portion of our international
sales are made via distributors, we are also at
risk from distributor loss or from the failure to
secure a suitable distributor in a new market
we are looking to enter.
Risk that we are unable to achieve our strategic
growth ambitions due to a lack of suitable
acquisition opportunities, a failure to secure
suitable assets, or to effectively integrate assets
once acquired.
There can be no guarantee that the Group will
be able to identify suitable targets to continue
to boost its growth through acquisitions. The
market for high-quality assets – whether brands
or corporates – is highly competitive and the
Group may find itself unable to compete if the
pricing of targets proves prohibitive.
As the Group looks to increase the size of
acquisitions, the complexity around both the
acquisition itself and associated integration
also increases.
60
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Operational risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
3. Product
safety
Risk of an adverse reaction to one of our
products constituting a safety risk for consumers.
The Group produces and sells a wide range of
medicines, medical devices, food supplements
and cosmetics. There are inherent risks that
some of these products could cause adverse
reactions.
4. Supply
disruption
Disruption to the continuity of supply as a result
of our inability to procure critical ingredients,
logistics failures, or reliance on a single site
of manufacture.
• Products have to be
withdrawn from sale
and we may have
legal liability to those
injured by the product,
potentially damaging
our reputation, and
compromising our future
performance. In an
extreme scenario, this
could impact our liquidity
position or even solvency
• Manufacturing, sourcing,
or distribution issues,
including an inability
to increase production
volumes to meet demand,
impinges on our potential
sales and has the
potential to compromise
our future performance
and, in an extreme
scenario, cash generation
Risk has
not changed
materially
since last year
Risk has
not changed
materially
since last year
• Dedicated in-house Quality
function, which carries out
regular supplier audits
• Adverse event reporting and
signal management for all
medicine products – generally,
the Group’s products are well-
tolerated, and many have been
in existence for decades
• Maintenance of necessary
regulatory approvals for all
products in the markets we
trade in
• Maintenance of public and
products liability insurance to
provide an appropriate level of
protection for the Company
• Maintaining close working
relationships with or key suppliers,
to ensure we have early visibility
of any potential issues
• Ensuring we maintain adequate
stocks of critical ingredients and
of finished goods, to enable us
to cushion the impacts of any
disruption in the supply chain
• Forward booking transportation,
to minimise the impacts of any
disruption to logistics provision
– for example due to COVID-19
/Brexit
• Putting in place dual sourcing
arrangements for key products,
to mitigate against manufacturer
failure/inability to supply to
meet sales demand
• Where possible, and cost-
effective, the potential financial
impact of supply chain disruption
is mitigated by insurance
61
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Principal Risks and
Uncertainties continued
Operational risks continued
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
5. Business
systems
Failure to maintain and develop business
systems and technology which adequately
supports business processes, organisational
infrastructure, and strategic growth ambitions,
and enables us to manage any business
continuity risk from unforeseen events.
The business is highly dependent on multiple
IT systems – and systems failure as a result
of a business continuity event could have a
significant impact on the business’s ability to
continue to operate effectively.
The business is also in the process of
implementing an ERP system to replace a
number of its legacy finance / supply chain
management systems. Once implemented,
the ERP system is expected to improve the
internal control environment, although the
implementation process carries with it some
short-term transitional risk.
6. Cyber
security
Risk that the integrity, confidentiality and
availability of our data and third-party
information which we hold is compromised
through cyber-attacks.
We hold significant amounts of confidential
data relating to our products, our commercial
activities, our financial transactions and all
other aspects of our business operations in
electronic format, making it susceptible to being
compromised through cyber-attacks.
We also hold significant amounts of confidential
data on our customers and employees, some
of which is collected via our transaction
processes, and so includes their financial
information in addition to other personal data,
which is similarly at risk of loss, corruption, or
unauthorised dissemination as a result of a
successful cyber-attack.
• Loss of income or late
• Continued investment in key
market reporting as a result
of a business continuity
event causing loss of
access to key resources,
systems, and/or data.
This could also potentially
result in compliance
failure, loss of control and
an inability to trade
• Quality of data
degrades as a result
of not effectively
managing data shared
across multiple systems,
leading to poor decision
making and increased
transactional errors
• The new ERP system may
not work as intended or
may fail to deliver the
expected business benefits
• Reputational impact if we
suffered a major loss of
personal data as a result
of a successful cyber-
attack.
• Financial loss, data loss,
or reputational damage
due to fraud perpetrated
through a successful
social engineering attack.
• Financial transactions
being rerouted
fraudulently because
sensitive transactional
data is given away.
• Data destruction or
ransom as a result of
a malicious link being
clicked.
Risk has
not changed
materially
since last year
business systems – including our
new ERP system
• Improved change control /
change management processes
to better protect the integrity of
our master data
• IT Steering Group in place
to maintain oversight of core
systems and lead on changes
required as a result of systems
development or regulatory
changes
• Business continuity plans in
place and under regular review
Risk has
not changed
materially
since last year
• Use of anti-virus software,
firewalls, and network
segmentation.
• Ensuring all business software
remains up to date, to provide
additional in-built security
• Implementation/review of
incident management, business
continuity and IT disaster
recovery plans.
• Maintenance of appropriate
physical and cyber-security
measures to prevent unauthorised
access to information
• Provision of training and alerts
to staff to ensure that they are
aware of known risks.
• Engagement of third parties to
review and recommend ongoing
improvements to enhance IT
security and resilience.
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Alliance Pharma plc – Annual Report and Accounts 2020
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
7. People
Failure to attract and retain sufficient high-
quality people to deliver the business’s strategic
growth ambitions.
By virtue of its business model, Alliance has
a high level of reliance on the skills and
knowledge of its employees, many of whom
have considerable sector experience or other
specialist expertise, making them attractive to
competitors and not always easy to replace.
As the business continues to scale and
to expand its geographic presence, our
requirements for high-calibre people
continues to increase.
Risk has
not changed
materially
since last year
• The loss of key employees
could potentially weaken
the Group’s operational/
management capabilities,
potentially impeding its
ability to grow
• Loss of continuity/loss of
knowledge as a result of
employee replacement,
leading to operational
inefficiencies
• Potential lack of required
skills and expertise to
support the continued
growth of the business, its
systems, procedures, and
processes
• Maintaining competitive
incentive and reward structures,
which remain attractive to
existing employees and enable
us to continue to attract high-
quality applicants for new roles
• Clearly defined roles and
responsibilities supported
by documented systems and
procedures to provide a level
of continuity in the event an
employee leaves the Group
• Maintaining relationships with
a number of international and
local recruitment agencies to
ensure we are able to find and
recruit good quality employees
8. Supply chain
management
The increasing globalisation of our supplier
base as a result of recent acquisitions has
served to increase our exposure to risks around
Environmental H&S, Business Ethics, Supply
Chain Security and Climate.
Failure to maintain sufficient oversight of
our end-to-end supply operations and the
associated Environmental H&S, Business Ethics,
Supply Chain Security and Climate risks.
This is potentially a significant risk for Alliance,
as our outsourced supply model has historically
afforded only limited visibility of our end-to-
end supply chain. We also face the risk of
some of our more popular consumer products
being subject to counterfeiting, leading not
only to a potential loss of revenue, but also
reputational damage and a potential safety risk
to consumers/patients.
• Potential reputational
damage, loss of product
supply and loss of
revenues from failure
to maintain sufficient
oversight of our end-to-
end supply operations
• Loss of revenue, and
potential reputational
damage from counterfeit
product reaching the
market, which may not
have been subject to the
same rigorous quality
and safety testing as
genuine products
This is a
new risk
• Maintaining a balance between
permanent and contract heads
to increase flexibility, particularly
for project-based work
• Setting up a Know Your Supplier
(‘KYS’) programme, partnering
with a market-leading data
analytics provider, to improve
the visibility of potential ‘red
flags’ in our supply chain; this will
enable us to better align existing
compliance review and escalation
processes, so as to facilitate timely
remediation of issues
• Creation of new Head of Brand
Protection role, to understand
any potential vulnerabilities in
our supply chain and address
any identified counterfeiting risks
• Setting up a Know Your Customer
(‘KYC’) programme, to bolster
our customer qualification and
approval processes
63
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Principal Risks and
Uncertainties continued
Compliance risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
9. Product
regulations
10. Legal and
compliance
Risk of non-compliance with product
classification regulations and registration
requirements, including relevant
internal/external quality regulations
and requirements, across all territories
in which our products are manufactured
and/or sold.
Product regulations are continually being
updated, new requirements introduced
(e.g. Medical Device Regulations), or
product classifications changed.
In a number of territories our product
registrations are maintained by local
distributors in order to comply with local
regulatory requirements, creating an
added layer of complexity.
Risk of non-compliance with relevant laws
and regulations in all countries in which
we operate, including anti-corruption
laws, data privacy laws, competition
laws, accounting, taxation and listing
regulations.
As the scope and scale of our business
operations increases, we face an
increasingly complex compliance
burden. The level of legal and regulatory
requirements to which we are subject
continues to increase, and also the
penalties for non-compliance, so it is vital
that we are able to effectively manage all
the various aspects of our compliance risk.
As we enter new territories and overseas
markets, we become exposed to
increased bribery, anti-slavery, and
corruption risks. Likewise, as the Group
expands its operations, the VAT and
general tax environment in which it
operates becomes more complex and the
risk of incorrectly reporting and paying
relevant taxes increases.
• Some of our products may not gain
regulatory approval or could face
the risk of having their regulatory
status challenged or adversely
altered. This could affect the Group’s
ability to launch new products or
maintain sales of its current products
in current jurisdictions or pursue
further geographic expansion
• Non-compliance with product
classification regulations/registration
requirements may result in product
having to be withdrawn from the
market, with a consequential loss
of sales
• If compliance issues cannot be
remediated, this could lead to
cessation of product supply, or
limitation of market opportunities
• The Group has ongoing regulatory
requirements (pharmacovigilance
etc) which could, if not adhered to,
lead to substantial fines and impact
on the Group’s ability to sell certain
products. Likewise, we may incur
penalties for non-compliance as
a result of adverse findings from
regulatory inspections, which may
potentially impact on the sales of our
products, damage our brands and
our reputation
• Bribery, anti-slavery, and corruption
all carry their own penalties, and
reputational damage
• A failure to abide by data protection
rules or incur a breach of data
security could also pose a financial
and reputational risk to the Group
• Breaches of VAT and taxation rules
also carry a risk of interest and
penalties becoming payable
• Ongoing investigation by the
Competition and Markets Authority
(CMA) relating to Prochlorperazine
could potentially lead to fines being
imposed on the Group
• Allocation of sufficiently
experienced internal resource to
support the regulatory approval
of products, including any
extensions to other markets
• Maintenance of regular
discussions with local regulatory
advisers to monitor any products
that may be subject to challenge
Risk has
not changed
materially
since last year
Risk has
not changed
materially
since last year
• Continuing oversight of corporate
compliance by in-house
Company Secretarial function.
• Introduction of the new ERP
system will assist with supply
chain management and VAT
reporting
• Training made available to all
employees on anti-bribery, anti-
money laundering, competition
law, market abuse, modern
slavery, sanctions, tax evasion
and GDPR
• Engagement of third-party
experts in our overseas territories
to help us ensure compliance with
local rules and regulations
• Wide-ranging induction process
for new starters to ensure they
understand their individual,
and the Group’s, obligations
in relation to matters such as
adverse event reporting
• Ongoing work with the help of
external lawyers to work with the
CMA to resolve those allegations
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
11. Foreign
exchange
risk
Risk movements in FX rates adversely impact
financial performance.
The Group earns a proportion of its revenues
and profits in currencies other than Sterling
(principally Euros and US Dollars), but accounts
for the business in Sterling. The reporting of
revenues and profits is therefore subject to
volatility due to changes in exchange rates.
Due to the acquisition of Biogix, which earns
revenues and profits in US Dollars, this risk has
increased since last year.
• Adverse movements in
• The Group’s funding structure,
Sterling exchange rates
vs Euro, US Dollar and
other currencies
with borrowings denominated in
Sterling, Euros and US Dollars
provides a natural hedge to
some of these exposures
• The Group has a risk
Risk has
increased
since last
year
management policy to hedge
up to 75% of its estimated
future foreign currency EBITDA
exposure, for up to 18 months
at any given point in time. The
Group uses forward foreign
exchange contracts to implement
this policy which are generally
designated as cash flow hedges
Other risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
12. Pandemics
and other
worldwide
events:
COVID-19
In common with most other businesses, we will
always be at risk from extreme and unexpected
global events affecting our ability to operate.
This could be an event that affects our people,
our operational sites, our IT systems, or any other
aspect of our business operations.
This was the case with the COVID-19 pandemic
which surfaced in 2020, and which continues to
create global uncertainty.
Whilst the impact of the pandemic on our
business has been relatively minimal to date, due
to proactive management by the Group’s Senior
Leadership Team, there will continue to be a risk
to revenues and to profits whilst regional / local
restrictions persist.
• Reduction in revenues/
profitability and/
or failure to achieve
expected growth due to
reductions in demand
or potential supply
issues caused by local
pandemic restrictions
and/or the knock-on
impact of lockdowns (for
example on the provision
of routine healthcare
procedures)
• Any significant impact
on the Group’s revenues
and profitability could
potentially affect the
Group’s ability to comply
with its borrowing
covenants
Risk has
reduced
since last
year
• Regular review and updating of
demand forecasts to understand
and mitigate any potential
adverse effects on revenues,
supported by our recently
improved S&OP processes
• Maintenance of close working
relationships with suppliers and
distributors; ongoing monitoring
for any signs of distress
• Continuing to support our
employees through an extended
period of remote working
65
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Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Chairman’s Introduction to Governance
Board of Directors
Our Governance Framework
QCA Code Compliance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
Directors’ Report
68
70
72
73
79
82
86
95
Governance
67
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Chairman's Introduction
Dear shareholders and colleagues,
Here we explain the activities of the Board and its Committees and
how we have ensured that governance remains central to delivering
on our strategy and the successful operation of our business.
Reflecting on the last 15 months, the Board and I have been
impressed with the way in which the business has come together to
navigate both the challenges of the pandemic and the opportunities
to build a stronger, more connected, and resilient business.
As a global business, we have benefitted from the investment we have
made into our technology and infrastructure, which has allowed us
to provide a secure and effective way for our employees to continue
their work remotely. Our systems and processes across the Group
have proved to be robust and where needed they have been adapted
to maintain continuity and minimise disruption. In addition, we have
neither furloughed our employees nor taken up any direct support
from government.
There is a strong culture of supportive leadership at Alliance. As we
have moved through the global pandemic, the continuing safety,
health, and wellbeing of our employees has remained one of our key
concerns. Different ways of working have, in many ways, brought
the global Alliance team closer together. There is frequent dialogue
between management and employees through online meetings,
Breakfast Briefings, Alliance Connect, regular employee surveys and
virtual social events. This has helped us understand how we can best
help and support our people and foster their continued engagement.
This was further reinforced in Autumn 2020, when we were pleased
to announce that Alliance received the 'Great Place to Work®'
certification both in the UK and in China. You can read more about
this on page 30.
Identifying and managing risks remains an inherent part of our
business. We have continued to strengthen our governance and
assurance frameworks to align with our growth strategy and to
provide a platform that helps us build a sustainable and resilient
business over the long term.
Notwithstanding these uncertain times, we have been able to draw
on our strong foundations and seek new opportunities to advance our
strategy. The recent US acquisition of Biogix Inc. with the addition of
Amberen into our Consumer Healthcare portfolio is further evidence
of the capabilities of our people to continue to target, deliver and
implement our business strategy with confidence.
Chairman’s
introduction
to governance
“ It is my pleasure to introduce this
year’s report on governance. In
the following sections, we provide
an update on our compliance
with Corporate Governance, the
Remuneration Report and the
Directors’ Report.”
68
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Alliance Pharma plc – Annual Report and Accounts 2020
Members and meetings
at a glance
Meetings held between 1 January 2020
and 31 December 2020
Board
13 Meetings – 100% attendance
David Cook
Chairman
Independent
13/13
Peter Butterfield
Andrew Franklin
Nigel Clifford
Jo LeCouilliard
Richard Jones
CEO
CFO
NED
NED
NED
–
–
13/13
13/13
Independent
13/13
Independent
13/13
Independent
13/13
Audit & Risk Committee
4 Meetings – 100% attendance
Richard Jones
Jo LeCouilliard
David Cook
Chair
NED
NED
4/4
4/4
4/4
Remuneration Committee
5 Meetings – 100% attendance
Jo LeCouilliard
Chair
David Cook
Nigel Clifford
NED
NED
5/5
5/5
5/5
Nomination Committee
2 Meetings – 100% attendance
David Cook
Jo LeCouilliard
Nigel Clifford
Richard Jones
Chair
NED
NED
NED
2/2
2/2
2/2
2/2
69
Alliance is in an industry where we can be part of the solution to
the pandemic. Our teams worked with the Department of Health to
ensure the supply of a product which may potentially benefit patients
with COVID-19. In addition, our social impact activities focused on
donating to charities whose work supports those local to our various
office locations affected by COVID-19.
Following this year’s Board evaluation review carried out in January
2021, and in light of the increasing important of ESG, the Board has
taken the decision to establish an ESG Committee. We will report
on the activities of this new committee in next year’s annual report.
Further information on the Group's work in this area can be found on
pages 36 to 51 of this report.
We were pleased to resume dividends and declared an interim
dividend to shareholders at half-year. This follows a review by the
Board of our dividend policy after suspending the final dividend
payment for 2019 in response to the COVID-19 pandemic. Since
then, we have continued to assess the level of cash distributions
having regard to overall performance of the business and outlook and
we are pleased to be recommending a final dividend to shareolders
of 1.074 pence per share.
At last year’s AGM, shareholders voted to approve changes to the
Company’s Articles of Association that provided flexibility to the
Board in the event of continued uncertainty. The Board has therefore
taken the decision to hold this year’s AGM in the form of a hybrid
meeting and will be held at 10.00am on 19 May 2021. Further
details will be notified to shareholders in due course.
The Board would like to thank all shareholders and colleagues for
their continued support, and we look forward to continuing with our
good work. We wish you a safe and healthy 2021.
David Cook
Chairman
23 March 2021
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Board of Directors
David Cook
Independent Non-executive Chairman
Peter Butterfield
Chief Executive Officer
Andrew Franklin
Chief Financial Officer
Peter was previously the Company’s Deputy
Chief Executive Officer and was appointed to
his present office as Chief Executive Officer on
1 May 2018 having joined Alliance in 2010 as
an Executive Director.
Andrew joined Alliance in September 2015 from
Panasonic Europe Ltd, where he was General
Manager, European Tax and Accounting.
Peter holds an honours degree in Pharmacology from
the University of Edinburgh.
Andrew holds an honours degree in Civil Engineering
from the University of Wales, Cardiff.
Peter has over 20 years’ experience in the life
sciences sector and strong leadership experience
gained in a variety of contexts. Peter joined the Board
of Alliance in 2010 with the acquisition of Cambridge
Laboratories where he spent five years, latterly as
UK Commercial Director. Prior to joining Cambridge
Laboratories, Peter spent six years at GlaxoSmithKline
in a variety of marketing and sales roles.
From 2010 to 2012 Andrew was Finance Director
and Company Secretary of Genzyme Therapeutics
Ltd, the UK and Ireland subsidiary of Genzyme
Corporation. Prior to that, he gained 12 years’
pharmaceutical experience with Wyeth in a variety
of senior financial positions.
Andrew is a Fellow of the Institute of Chartered
Accountants in England and Wales with extensive
experience of financial management of international
businesses, including significant prior experience in
life sciences companies.
Date joined
David joined the Board of Alliance as a Non-
executive Director in 2014 and was appointed
Chairman of the Board on 1 March 2018.
Qualifications
David qualified as a Chartered Accountant with
PricewaterhouseCoopers after graduating in
Chemistry at the University of Oxford.
Experience
He is currently Chief Financial Officer and an
Executive Director of Ellipses Pharma, an international
cancer drug development company, and was
previously Chief Financial Officer and Chief Business
Officer of Biotie Therapies Corp, a drug development
company quoted in Helsinki and on NASDAQ. He
has previously held senior financial positions with
Jazz Pharmaceuticals International, EUSA Pharma
and Zeneus Pharma.
David has extensive experience of financial and
general business management (including the
implementation of buy and build strategies) in the life
sciences sector, of financing those businesses and
managing investor relations across a number of stock
markets globally.
Committee membership
C
View the Nomination Committee Report
on page 79
70
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Committee Membership Key
Audit and Risk Committee
Nomination Committee
Remuneration Committee
C
Committee Chair
Nigel Clifford
Independent Non-executive Director
Richard Jones
Independent Non-executive Director
Jo LeCouilliard
Independent Non-executive Director
Nigel joined the Board of Alliance as a
Non-executive Director in 2015.
Richard joined Alliance as a Non-executive Director
on 1 January 2019.
Jo joined Alliance as a Non-executive Director on
1 January 2019.
Nigel graduated in Geography from the University
of Cambridge and has an MBA from Strathclyde
University.
Richard has a degree in Engineering from Newcastle
University and is a Chartered Accountant.
Jo graduated in Natural Sciences from Cambridge
University and is a Chartered Accountant.
He was appointed Deputy Chair at the UK
Government’s new Geospatial Commission in
December 2018 and is an Operating Partner with
Marlin Operations Group. Previously, he held Chief
Executive and senior positions at Ordnance Survey,
Procserve Holdings, Micro Focus International plc,
Nokia, Symbian Software, Tertio Telecoms, Cable
and Wireless plc, Glasgow Royal Infirmary NHS
Trust and BT plc. He also served as a Non-executive
Director of Anite plc.
He brings significant experience of the strategic
and commercial management of complex global
businesses, gained in a variety of industry sectors and
under a variety of ownership structures.
In 2020, Richard was appointed Chief Financial
Officer at UK main market listed Medica Group PLC,
the UK’s leading teleradiology provider. Prior to this
he was CFO and a Board member of dual UK and
US listed Mereo BioPharma Group PLC, a biopharma
company developing a range of products in bone,
endocrine and respiratory therapies with a focus on
rare diseases.
Richard joined Mereo from UK AIM listed Shield
Therapeutics plc where he was CFO and Company
Secretary from early 2011 having initially joined
the Board as a Non-executive Director in 2010. At
Shield he had a leading role establishing the finance
operations and guiding Shield through its 2016 IPO.
He has a background in investment banking, having
held senior positions at Investec and Brewin Dolphin
Securities, where he advised healthcare clients on a
wide range of transactions including IPOs, M&A and
fundraisings.
Jo has 25 years’ healthcare management
experience gained in Europe, the US and Asia.
Much of her career has been in pharmaceuticals at
GlaxoSmithKline where, amongst other roles, she
headed the US vaccines business and Asia Pacific
Pharmaceuticals business and led a programme to
modernise the commercial model. She was previously
Chief Operating Officer at the BMI group of private
hospitals in the UK. She was Non-executive Director
at Frimley Park NHS Foundation Trust in the UK,
Duke NUS Medical School in Singapore and Cello
Health plc.
She is currently a Non-Executive Director at UK listed
company Circassia Group plc and is also on the
Board of Recordti S.p.a.
C
C
View the Audit and Risk Committee Report on
page 82
View the Remuneration Committee Report on
page 86
71
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Our Governance
Framework
9
Our Governance
Framework
Shareholders
Our shareholders delegate to the Board collectively,
the responsibility for the long-term success of the
Company within a framework of good governance.
The Board seeks to understand the investor base
through regular dialogue and engagement.
The Matters Reserved to the Board and
Committee terms of reference can be
viewed on the Company’s website.
The Board
The Board’s role is to set the vision and strategy for the Company and deliver value to its shareholders
over the medium to long term.
There is a collective responsibility for deciding the governance arrangements most appropriate to achieving the
Company’s purpose to support robust decision making, managing risk and ensuring a healthy culture. To assist in
discharging its duties, some areas of responsibility are delegated to the Committees of the Board.
More information on the activities of the
Board can be found on page 74
compliance & assurance oversight and delegated authorities
The Nomination Committee
The Nomination Committee leads on the process for
appointment, succession planning and evaluating
Board and Committee composition and diversity to
ensure Board effectiveness.
The Audit and Risk Committee
The Audit and Risk Committee leads on reviewing the
integrity of the Group’s financial results and other
reporting; reviews the effectiveness of the external
audit; and has oversight of the effectiveness of risk
management and systems of internal control.
The Remuneration Committee
The Remuneration Committee leads on designing
remuneration policy, determining Board and senior
executive remuneration; and takes account of the
wider Group pay and associated policies.
More information on the work of the Nomination
Committee can be found on pages 79 to 81
More information on the work of the Audit
and Risk Committee can be found on
pages 82 to 85
More information on the work of the
Remuneration Committee can be found
on pages 86 to 94
CEO & Senior Leadership Team
The SLT is led by the Chief Executive and meets on a regular basis.
The SLT is responsible for business operations.
More information on the SLT can be found on our website at
www.alliancepharmaceuticals.com/about-us/our-leadership-team
Group
EMEA*
APAC*
AMER*
compliance & assurance oversight, delegated authorities
risk management and internal controls
Function support
Values & behaviours
• Finance and tax
• Commercial, sales and marketing
• Agents, customers and suppliers
• Fair competition and business
• Governance and legal
• Regulatory
• Corporate development
• Supply and logistics
• Business reporting
• Compliance with laws
• People and infrastructure
• Scientific affairs and operations
• Conflicts of interest
practice
• Protection of Company assets
• Anti-bribery and corruption
• Whistleblowing
*
For definitions, see page 19
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Alliance Pharma plc – Annual Report and Accounts 2020
Governance
Our Compliance with the
Principles of the QCA code
Our compliance with the
principles of the QCA code
As an AIM listed company, our governance is underpinned by the Quoted Companies Alliance (QCA) Corporate Governance
Code 2018 (the ‘QCA Code’). In addition to the QCA Code, we monitor developments and guidance in the UK Corporate
Governance Code, applicable to main market listed companies, to keep abreast of matters which we feel could also be embedded
as best practice as part of a progressive approach.
1
2
3
4
5
To establish a strategy and business model which
promote long-term value for shareholders
To seek to understand and meet shareholder
needs and expectations
To take into account wider stakeholder and
social responsibilities and their implications for
long-term success
To embed effective risk management, considering both
opportunities and threats, throughout
the organisation
To ensure that between them the Directors have the
necessary up-to-date experience, skills
and capabilities
To evaluate Board performance based on
clear and relevant objectives, seeking
continuous improvement
To promote a culture that is based on ethical values
and behaviours
To maintain governance structures and processes that
are fit for purpose and support good decision-making by
the Board
6
7
8
9
10
To maintain the Board as a well-functioning, balanced
team led by the Chair
To communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders
and other relevant stakeholders
For more information visit
alliancepharmaceuticals.com
Complying with
the QCA Code
1
2
3
We have indicated with the numeric markers
throughout this section to highlight how we
comply with the QCA Code. Further information
can also be found on our website at:
www.alliancepharmaceuticals.com/
investors/governance
73
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Key activities of the Board and its Committees
Throughout the year the Board received regular updates on, and considered, the commercial and financial performance of the business,
scientific operations and affairs, people and infrastructure, legal, ERP implementation, and the management and impact of COVID-19. In
addition to these standing items, other business considered by the Board and its Committees is set out below.
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug*
Sep
Oct
Nov
Dec
Strategic planning
Strategy planning, review of Group strategy, presentations
from business and functions
2021 Budget
Presentations and budget approval for 2021
Corporate development
Review of acquisition opportunities and completion of
acquisition of Biogix Inc.
Business reviews
Mainland Europe, Asia Pacific, US and product review,
brand protection
Investor engagement and broker presentations
Presentations from brokers, full and half year results webcast
presentations, analyst calls and investor roadshows, private
client fund manager meetings, one-to-one calls and AGM
Review of banking facilities
Approval of extension to Group banking facilities
Company results, trading statements and dividends
Annual Report and Accounts, dividend policy and declarations
Nomination Committee
Board composition and Committee membership, succession
planning, terms of reference, bonus proposal for 2021
Remuneration Committee
Review of salary proposals, 2019 corporate bonus awards,
Company share option awards, 2020 corporate bonus
scheme, objectives and targets, terms of reference
Audit and Risk Committee
Key accounting estimates and judgements, significant
accounting policies, annual audit process and fees, external
auditor, internal audit, foreign currency and hedging
Governance including ESG
Includes the review of risk management framework, Board
Effectiveness Review, Governance reporting, review of Articles
of Association, AGM Notice, D&O insurance, review of ESG
requirements, CSR, Modern Slavery Statement, review of
gender pay
* Although there is no scheduled meeting in August, a management pack is circulated.
74
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Alliance Pharma plc – Annual Report and Accounts 2020
The role of the Board 1
The Board is responsible for the Group’s vision, business model and
strategy. Together, the Directors are responsible for providing effective
leadership to promote the long-term success of the Company.
Each year in June, the Board holds a two-day strategy planning
meeting at which the SLT and other senior employees present their
proposals. From this session, the Group’s strategic plan and business
model is agreed. This strategic plan and business model is regularly
reviewed by the SLT to ensure alignment with the operations of the
business and the CEO reports to the Board on implementation and
progress and ensures decisions are made in line with the plan. The
strategy is communicated to all employees by the management
teams through breakfast briefings and online presentations. Further
information on how the Company delivers the strategy to promote
long-term growth can be found on pages 24 to 31 and on its business
model on pages 22 and 23.
There is a formal list of matters reserved for the Board, which may
only be amended by the Board and is available on our website.
Key responsibilities of the Board include:
• Maintaining the policy and decision-making process through
which the strategy is implemented;
• Checking that necessary financial and human resources are in
place to meet strategic aims;
• Providing entrepreneurial leadership within a framework of good
governance and sound risk management;
• Monitoring performance against key financial and non-financial
indicators;
• Responsibility for risk management and systems of internal
control; and
• Setting values and standards in corporate governance matters.
Promoting the long-term success of the Company
The powers and duties of the Directors are determined by legislation
and the Company’s Articles of Association. Directors are required
to act in good faith in a way that they consider would be most likely
to promote the success of the Company and having considered the
views of the wider stakeholders of the Company.
The Directors are aware and mindful of their duties and obligations
under s.172 of the Companies Act 2006. The Board ensures that
the decisions are taken with a view to promoting the success of
the Group as a whole and having considered the likely and long-
term consequences and wider stakeholder considerations. Further
information on this can be found on pages 42 and 43 in the
Responsible Business section of this report.
Open and honest discussion at Board level between management
and the Directors considers the impact on the Group’s stakeholders
when reviewing items flowing up to the Board as part of its activities,
whether this is reviewing strategy, budget or a corporate development
opportunity. Each meeting considers what information is needed to
assist the Directors with their responsibilities. This can take the form of
written reports, market reviews and guidance, and presentations and
briefings from both internal members of staff and external advisers.
Promoting corporate culture 8
The Board aims to lead by example and make decisions that are in the
best interest of the Group as a whole. Our culture is underpinned by
a clear set of values, which guide decision making at all levels in the
business. The Board reviews and approves the Group’s policies which
are then implemented and communicated internally and externally to
those who are expected to adhere to them. Further information about
our culture and values can be found on pages 44 and 45.
Engagement with shareholders and other stakeholders
2 3 10
The Board and its Committees recognise that to meet its
responsibilities to shareholders and other stakeholders, it is important
to ensure effective engagement with, and encourage participation
from, these parties. The Board factors the needs and concerns of
all the Company’s stakeholders into its discussion and decision
making having been made aware of the needs, interests, and any
impact of such decisions on the Company’s stakeholders. Visibility
and awareness are further increased through senior management
who have collective responsibility for communicating and engaging
with specific stakeholder groups. This includes making sure that the
business as a whole upholds its values and monitors behaviour
for acceptability.
Further information on our dialogues and engagement with
shareholders and other stakeholders can be found on pages 38
to 41.
The Directors are committed to open communication with the Group’s
shareholders to ensure that they clearly understand our business,
strategy and performance. Throughout the year, the CEO and CFO
meet with potential and existing investors and they feed back to the
Board the key summary points from their meetings. In addition to these
meetings, there were at least 50 scheduled meetings held as part of
the Company’s investor roadshows for the annual 2019 and half-year
2020 results.
The Board is provided with an analysis of the Company’s investor
base at each Board meeting and research notes by sell-side analysts
are circulated to all Directors. Furthermore, analysts’ notes, and
brokers’ briefings are received and considered by the Board in order
to ensure, as far as possible, a clear and up-to-date understanding of
investors’ views. Information on investor sentiment is also provided to
the Board by the Company’s brokers and financial PR advisers.
A list of the Company’s major shareholders can be found in the
investor section of our website, and a list of notifiable holdings can
be found on page 95 of the Directors’ Report. These are regularly
updated following the formal notification of movements to the
Company.
The Company further communicates with shareholders through its
Annual Report and Accounts, half-year announcements, trading
updates and at the Company’s AGM. Such reports as well as other
relevant announcements and related information are all available on
the Group’s website, www.alliancepharmaceuticals.com.
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OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
continued
The Group recognises the importance of retail shareholders and
the ‘Investors’ section on the Group’s website is regularly updated
with the aim of providing good information for all investors, but
particularly retail shareholders. The website offers a facility to sign
up for email alert notifications of Company news and regulatory
announcements. In addition, the CEO and CFO will regularly present
at conferences attended by many potential and current retail investors
and meet with specialist private client fund managers.
The Board and its Committees 5 9
The Board currently comprises six Directors, being the Chairman,
three further independent Non-executive Directors and two Executive
Directors. Independence on the Board is reviewed annually by the
Nomination Committee.
Each of the independent Non-executive Directors sits on at least two
of the Audit and Risk, Nomination and Remuneration Committees. This
ensures that between them they have a role in determining the pay
and benefits of the Executive Directors and in the planning of Board
succession including the appointment and, if necessary, removal of
Executive Directors. Three independent Non-executive Directors,
all of whom have an accountancy qualification, sit on the Audit
and Risk Committee, enabling them to review internal controls and
financial reporting matters. They have a direct relationship with the
external auditors.
Each Non-executive Director is appointed for an initial term of three
years, subject to annual re-election by shareholders at the AGM.
Their appointment term may be renewed by mutual agreement.
Board Committees
The Board has delegated and empowered three Committees: a
Remuneration Committee, a Nomination Committee and an Audit and
Risk Committee. Each Committee has written terms of reference set
by the Board, which are reviewed annually and are available on the
Company’s website.
Membership of each Committee is determined by the Board on
the recommendation of the Nomination Committee. Executive
Directors are not permitted to be members of the Committees. Each
Committee Chair reports to the Board on the activities considered and
determined by the relevant Committee. A summary of the Committees’
responsibilities and their work during the year can be found in the
reports from the Committees appearing later in this section.
Board attendance, support and meeting management
Attendance
In leading and controlling the Company, the Directors are expected
to attend all meetings. The Board and its Committees meet regularly
on scheduled dates. This includes a two-day strategy meeting in each
year which is also attended by all senior executives of the Group,
the purpose of which is to review progress in delivering agreed plans
and to develop and settle the Group’s business plans and long-
term strategic targets and set the framework for the achievement
of those goals.
The Board held 11 scheduled meetings, and two unscheduled
meetings, during the year. Due to COVID-19 rules, eight meetings were
held electronically, and five meetings were held in person.
The responsibilities of both the Chairman and CEO are clearly
defined and understood.
The Chairman
The Chairman, David Cook, has primary responsibility for leading
the Board, facilitating the effective contribution of all members and
ensuring that it operates effectively and in the best interests of the
shareholders. In addition, he maintains a strong focus on governance
to ensure good practice is embedded in the business with good flows
in communication and reporting. He maintains a regular dialogue
with the CEO to ensure the business receives the support from the
Board necessary to progress the strategy.
The Chairman also meets with the Non-executive Directors on their
own at least once a year and meets with them as part of the Board
evaluation process. Shareholders have an opportunity to engage with
the Chairman and the Board at the Company’s AGM.
The Chief Executive Officer (CEO)
The CEO, Peter Butterfield, is responsible for the day-to-day running
of the business and implementation of the Group’s strategy. He is
supported by the SLT who have management responsibility for the
business operations and support functions. Relevant matters are
reported to the Board by the CEO and, as appropriate, the CFO and
other members from the SLT.
Non-executive Directors
Non-executive Directors are required to commit the time necessary to
fulfil their role. Their role is to:
• provide oversight and scrutiny of the performance of the
Executive Directors;
• constructively challenge to help develop and execute on the
agreed strategy;
• satisfy themselves as to the integrity of the financial reporting
systems and the information they provide;
• satisfy themselves as to the robustness of the internal controls;
• ensure that the systems of risk management are robust and
defensible; and
• review corporate performance and the reporting of such
performance to shareholders.
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Alliance Pharma plc – Annual Report and Accounts 2020
Directors’ conflicts of interest
The Company has effective procedures in place to monitor and deal
with conflicts of interest. Directors are required to notify the Company
of any situation that could give rise to a conflict or potential conflict
thereby compromising their independence and objectivity. Each
member is required to disclose any such potential conflicts at the start
of every meeting. The Board is fully aware of the other commitments
and interests of its Directors, and changes to these commitments
and interests are reported to and, where appropriate, agreed with
the rest of the Board. Where any such conflict arises, the Board
determines whether or not a Director can vote or be a party of the
item under consideration in accordance with the Company’s Articles
of Association.
The Board is satisfied that potential conflicts have been effectively
managed throughout the year.
Meetings follow a clear agenda, supported by written reports and
presentations from both internal members of staff as well as external
advisers and consultants. Two ad hoc meetings of the Board were
called to deal with non-routine business.
Board meeting attendance
David Cook
Chairman
Independent
Peter Butterfield
Andrew Franklin
Nigel Clifford
Jo LeCouilliard
Richard Jones
CEO
CFO
NED
NED
NED
–
–
Independent
Independent
Independent
13/13
13/13
13/13
13/13
13/13
13/13
Meeting management
The Company Secretary is secretary to the Board and the Board’s
Committees and assists the Chairman to ensure good governance.
On behalf of the Chairman, Chris Chrysanthou is responsible for
ensuring that all Board and Committee meetings are conducted
properly and that the Directors are properly briefed on any item of
business to be discussed. He has a direct line into the Chairman on
all matters relating to governance and is responsible for ensuring
governance, legal and regulatory compliance is considered,
recorded and implemented.
Procedures are in place for distributing meeting agendas and
reports so that they are received in good time, with the appropriate
information. Ahead of each Board meeting, the Directors each
receive written reports updating on strategy, finance, including
monthly management accounts, operations, commercial activities,
business development, risk management, legal and regulatory,
people and infrastructure and on investor relations. Meeting papers
are distributed via an electronic board portal.
The Directors may have access to independent professional advice,
where needed, at the Group’s expense.
Director training and development
All the Directors are responsible for ensuring their skills and
knowledge are kept up to date. This is done in varying ways but
includes professional training, online training or attending seminars
and webinars offered by advisers and consultancies. In addition,
regular updates on corporate governance, legal or regulatory
changes are also provided via reporting or through presentations
to the Board.
77
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Governance
continued
Board effectiveness
As required under the QCA, the Board continually monitors and improves its performance and evaluates its performance based on clear
and relevant objectives. The Chairman evaluates the performance of the Board annually to offer Directors an opportunity to discuss their
contribution in terms of their skills and experience as well as identifying areas for improvement or development to enhance the capabilities of
the Board as a whole. The Nomination Committee reviews any outcomes affecting Board and Committee composition.
Key improvements following the outcomes of the 2020 review have enhanced our planning to maintain Board focus on strategy and drawing
on the wider skills and experience of the Non-executive Directors by encouraging greater dialogue with senior management. The Board has
enhanced its forward planning of topics to support strategic discussions, and the process has been further refined as part of our 2021 planning.
Despite the challenges in 2020 of not being able to meet face to face there was still a good dialogue between the Non-executive Directors
and the senior team through video-conference when required.
The 2021 evaluation consisted of one-to-one meetings between the Chairman and each Director to discuss various matters relating to Board
and Committee performance and their effectiveness; each meeting was also attended by the Company Secretary, who also obtained feedback
from each Director on the Chairman. Key discussion points included a review of activities held during 2020, Board dynamics and culture,
meeting structure, risk and governance, strategy, the work of the Committees, ESG, engagement with shareholders, and priorities over the next
12–18 months.
Results and outcomes were reviewed, summarised and circulated to Board members for discussion in February 2021. The table below sets out
the key focus areas arising from the 2021 review and explains how previous years’ recommendations have been addressed:
Areas of focus
Feedback and recommendations
An effective Board, its culture, and
dynamics
Ambition and strategic planning
Meeting format, locations and 2021
planning/priorities
Roles, contributions, and stakeholder
engagement
There is a high degree of challenge, with good debate and discussion. There is a healthy divergence of
opinion; views are respected and challenge is responded to in positive and constructive manner. To enhance
decision-making and debate, the Company Secretarial team will ensure that the Non-executive Directors are
able to meet and discuss both separately and with the Executive any matters on an ad hoc basis.
Being able to deliver against the Group strategy remains a core focus and the Board will continue broadening
strategic questions and spend more time thinking about global prospects, and risks and opportunities for the
longer term. However, despite this, the online presentations were still very productive and well delivered by the
management teams. As we continue to build a consumer healthcare business, the Board will consider running a
two-step approach to strategy, holding both a mini-strategy day and the larger strategy event later in the year.
Our meeting planning, process and format works well and overall, the Board feels very supported. Enhanced
forward planning will continue to align with the delivery on strategy, focusing on growth, ESG, core assets,
and regions. Meetings will be held through a blend of face-to-face and remote working. Efficiencies through
reporting will also be developed to engender a culture that embeds an understanding of the need to support
the Board in discharging its responsibilities.
When making its decisions the Board considers the interests of and feedback from its stakeholders. It is
therefore important that the Board continues to maintain a dialogue with the Company’s shareholders, its
workforce, and other key stakeholders. The Non-executive Directors do not operate exclusively within the
confines of the boardroom and maintain a good understanding of the business. To further this, the Board
will work with the SLT to develop an engagement strategy based on the issues that are most important to the
Company’s long-term success. The Board will also review the need for dedicated investor relations support.
The next review is scheduled for early 2022.
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Alliance Pharma plc – Annual Report and Accounts 2020
Governance
Nomination Committee Report
5
9 10
6
Nomination
Committee
Report
“ As an international business
it is critical that we ensure we
have the right people to help
us continue to deliver our
objectives in line with
the Group’s strategy.”
Chairman’s statement
On behalf of the Nomination Committee (the ‘Committee’), I am
pleased to introduce the Nomination Committee report in which we
set out the Committee’s responsibilities and report on the activities of
the Committee during the year.
As an international business it is critical that we ensure we have the
right people to help us continue to deliver our objectives in line with
Group’s strategy. This means the Committee must remain focused
on understanding its framework for diversity alongside talent and
succession planning across the business. You can read more about
diversity and inclusion and our accreditation as a Great Place to Work®
on page 30 of this Annual Report.
Gender and ethnic diversity forms part of the Committee’s discussions
when reviewing succession plans for the Board and SLT. With two new
members joining the Board in 2019, we have been working hard to
ensure stability and effectiveness to lead on our strategy. Each year,
our Board evaluation process also discusses with Board members their
thoughts on succession and diversity when reviewing Board culture and
the Board’s effectiveness.
As part of a progressive plan, we review the skills on our Board and
work with Group HR to ensure we identify any gaps. We talk about
a range of areas such as diversity of thought, experience, gender,
ethnicity, skills, nationality, and specific skills identified to strengthen
and develop the knowledge base on the Board. When necessary
we also engage and work with specialist recruitment consultants to
help identify talent and search for potential candidates that meet our
objective criteria.
As a board of an AIM listed company, we monitor the guidance and
best practice in the market around the areas of gender and ethnicity,
in particular the percentage targets set for FTSE main market listed
companies.
Should investors wish to discuss any aspects of the work of the
Committee, I will be available to answer questions at this year’s AGM.
David Cook
Nomination Committee Chairman
23 March 2021
79
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Nomination Committee Report
continued
DIRECTOR
ROLE
GENDER
FINANCE
PHARMA/
LIFE SCIENCES
INTERNATIONAL
SALES &
MARKETING
GROWTH
FINANCIAL
MARKETS*
STRATEGIC
MERGERS &
ACQUISITIONS
Peter Butterfield
Andrew Franklin
Nigel Clifford
David Cook
Jo LeCouilliard
Richard Jones
CEO
CFO
INED
INED
INED
INED
M
M
M
M
F
M
*
UK and overseas financial markets experience
The role of the Committee
The Nomination Committee’s primary role is to carry out a selection
process for the appointment and reappointment of all Directors to the
Board, and to review the structure, size and composition of the Board
(including in terms of skills, knowledge, experience and diversity). The
Committee also reviews the leadership needs of the organisation and
monitors succession planning for both Board and senior executive roles.
The framework of duties is set out in its terms of reference which are
available on the Company’s website. Each year the Committee reviews
its own performance and its Terms of Reference.
Duties of the Committee
The duties of the Committee include:
• Keeping itself informed about strategic issues and commercial
changes affecting the Company.
• Reviewing the structure, size, and composition of the Board
including diversity, skills, knowledge, and experience.
• Considers succession plans for Directors and other senior
executives.
• Identifying and nominating candidates to fill Board vacancies.
• Evaluating the balance of skill, knowledge, experience, and
diversity prior to commencing any appointment process.
• Reviewing the results of the Board performance evaluation insofar
as it relates to composition and time commitment of Directors.
• Making recommendations to the Board on matters such as
Committee membership, reappointment, and re-election
of Directors.
Members of the Committee have access to the Company Secretary
who attends and minutes all meetings. To enable the Committee to
discharge its duties effectively, the Company Secretary is responsible
for ensuring the Committee receives high-quality, timely information.
The Chair of the Committee reports to the Board on its proceedings
after each meeting on all matters within its duties and responsibilities
and will make any recommendations to the Board it deems appropriate.
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Alliance Pharma plc – Annual Report and Accounts 2020
Board gender
diversity
Male
83%
Female
17%
Committee membership and attendance
Appointments to the Committee are made by the Board. Only
members of the Committee have the right to attend meetings.
However, where appropriate, the Chief People and Infrastructure
Officer and the CEO are invited to attend certain meetings of the
Committee to support with discussions around succession planning
and recruitment process.
Attendance
During the year, the Committee held two scheduled meetings and
reported on its activities to the Board. As at the date of this report,
the members of the Nomination Committee, all of whom held office
throughout the year and to the date of this report unless otherwise
stated, are:
Member
Role
Status
Appointment date Attendance
David Cook
Chairman Independent
01/04/2014
Nigel Clifford* NED
Independent
26/01/2015
Jo LeCouilliard NED
Independent
29/01/2019
Richard Jones
NED
Independent
29/01/2019
2/2
2/2
2/2
2/2
*
Nigel Clifford stepped down as Chairman of the Committee on 1 January 2021 and was replaced
by David Cook. Nigel Clifford remains a member of the Committee.
Activities of the Committee
Board composition
The Committee reviews any outcomes from the annual Board
performance evaluation that relate both to composition and time
commitment from Non-executive Directors. The Committee keeps
under review the Board’s composition to ensure it provides a
sufficiently wide range of skills and experience to enable it to
pursue its strategic goals and to address anticipated issues in
the foreseeable future. This process includes reviewing the mix
of skills, sector experience and financial, public markets and
international experience.
Being a global business, the Committee is aware of the benefits of
diversity on the Board and at the senior management level. It remains
committed to considering diversity when discussing appointments
and succession plans. The Company and the Board always seek to
search for, recruit and appoint the best available person based on
aptitude and ability, regardless of gender, marital or civil partnership
status, race, colour, nationality, ethnic or national origins, pregnancy,
disability, age, sexual orientation, religion or belief.
Board balance and independence
The Committee considers there to be an appropriate balance
between Executive and Non-executive Directors on the Board,
and following this year’s Board evaluation, members confirmed
that discussions are not dominated by any one or small group of
people when making decisions. Having considered the guidelines
on independence, on appointment as Chairman, David Cook
was independent and continues to be regarded by the Board
as independent alongside Nigel Clifford, Richard Jones and
Jo LeCouilliard.
Committee membership changes
At Nigel Clifford’s request, the Committee reviewed the time
commitment required with respect to the chairing of both the
Nomination and Remuneration Committees. In December 2020,
following this review and on the recommendation of the Committee,
the Board approved a change to the chairmanship of these
Committees with effect from 1 January 2021: David Cook was
appointed Chair of the Nomination Committee and Jo LeCouilliard
was appointed Chair of the Remuneration Committee. Nigel remains
a member of both Committees.
Senior Independent Director (SID)
Each year the Nomination Committee considers whether it is
appropriate to have a SID to act as a sounding board and
intermediary for the Chairman or other Board members. As part of
their review in 2020, it was concluded that the appointment of a SID
is not necessary at this time, but the potential appointment will be kept
under review.
External directorships
The Chairman and Non-executive Directors hold appointments as
directors on a small number of other companies, as detailed in their
biographies on pages 70 and 71. It is considered that the Chairman
and Non-executive Directors allocate sufficient time and commitment
to fulfil their duties to the Company.
Board appointments and succession planning
Succession planning
The Committee works closely with the Board and, with the support
of the Chief People and Infrastructure Officer, develops strategies in
support of progressive and orderly succession planning for Board
and senior management. Planning includes consideration of the
challenges and opportunities facing the Company and careful
evaluation of the skills and experience needed on the Board in the
future. When developing these plans, the Directors are mindful of the
need for a more diverse executive pipeline to help increase diversity
levels in senior positions.
Board appointments and induction
Whether as part of formal succession planning or to fill any Board
vacancy that should arise, the Committee leads the process for the
appointment of Directors. The Chairman does not chair the Committee
when it is dealing with the appointment of his successor.
Any appointment process follows a careful assessment of the balance
of skills, knowledge and experience and diversity on the Board to
identify capabilities that would enhance the Board and support the
long-term strategy of the Group. The Chief People and Infrastructure
Officer prepares a role description and capabilities required for
the appointment. The services of an external recruitment agency
are engaged to facilitate the search with instructions to consider
candidates from a wide range of backgrounds. Potential candidates
are also considered on merit and against objective criteria with
due regard to the benefits of diversity, including gender, and time
available to devote to the position. Potential candidates are required
to disclose business interests that may result in a conflict of interest.
From a shortlist of suitable candidates, interviews are held with the
Chairman of the Board, CEO and Chief People and Infrastructure
Officer and other Board members. The Committee then recommends
appointments to the full Board for their formal approval. New
appointments are proposed to shareholders for approval at the next
AGM following first date of appointment.
On appointment, all Directors receive a personally tailored induction.
This includes meetings with members of the Board, members of
the SLT, the Head of Legal and Group Company Secretary and
receive presentations from key functions in the business. They are
provided with an overview of the Group’s structure and operations
and governance policies and receive copies of past Board minutes
and reports via the electronic board portal. In addition, the portal
holds other key corporate documents and information, for example,
Matters Reserved for the Board, Committee Terms of Reference, the
Company’s Articles of Association and the Directors’ and Officers’
liability insurance arrangements.
Annual re-election of Directors at AGM
In accordance with the Company’s Articles of Association, all
Directors are subject to election or re-election by shareholders
at the AGM. In line with good practice, the Committee recommended
to the Board that all six Directors, being eligible, put themselves forward
for annual re-election at the Company’s AGM.
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OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Audit and Risk Committee Report
4
9 10
5
Chairman’s statement
On behalf of the Audit and Risk Committee (the ‘Committee’), I am
pleased to introduce the Audit and Risk Committee report. As an
AIM listed company, we are guided by the QCA’s Audit Committee
Guide and, when appropriate to do so, look to the UK Corporate
Governance Code 2018 and to investor guidelines for best practice.
Below we set out the Committee’s responsibilities and report on the
activities of the Committee during the year.
The consequences of the outbreak of the pandemic in 2020 were
quickly a key topic at the Audit and Risk Committee and we witnessed
a reporting regime in the UK that had to adapt to accommodate
some of the challenges being faced by the business community. At the
start of the year, this saw us announcing a temporary postponement
of our audited preliminary results based on the Financial Conduct
Authority’s (FCA) guidance to observe a moratorium on the publication
of preliminary financial statements for at least two weeks owing to
the impact of the COVID-19 coronavirus on companies and auditors.
This provided our auditor KPMG LLP (KPMG) further opportunity to
review and challenge management in relation to the potential impact
of COVID-19 on the Group’s solvency and going concern. We were
pleased to release our 2019 annual results on 7 April 2020 having
carefully reviewed the potential impact of COVID-19 on our estimates
and judgements particularly in respect of going concern.
During the year, we segregated our portfolio of assets into two areas:
(i) Consumer Healthcare brands and (ii) Prescription Medicines.
As a result, the Committee took the opportunity to consider the
portfolio and review the estimates and judgements being used to
determine indefinite useful lives of these products and conducted
impairment reviews for all intangible brand assets. In addition,
in order to bring our policy into line with market, we updated the
classification policy for non-underlying items and took the decision
to include all amortisation and impairment charges for intangible
assets in non-underlying items for 2020 and subsequent years to add
additional clarity to our underlying trading in our financial statements.
Changes in the useful life assumptions and resulting impairments
were explained to the market on 23 September 2020 as part of the
Company’s half-year financial statements and can also be found in
note 2.9 on page 133.
At the very end of the year and in early 2021, we carefully reviewed
the accounting treatment and key estimates and judgements in respect
of the acquisition of Biogix Inc on 29 December 2020. Further details
are set out in note 31 on page 154.
Audit and Risk
Committee
Report
“ Information that is fair,
balanced, and understandable
helps shareholders assess
Alliance’s performance,
business model and strategy.”
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Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
DIRECTOR
ROLE
GENDER
FINANCE
PHARMA/
LIFE SCIENCES
INTERNATIONAL
SALES &
MARKETING
GROWTH
FINANCIAL
MARKETS*
STRATEGIC
MERGERS &
ACQUISITIONS
Richard Jones (C)
INED
David Cook
Jo LeCouilliard
INED
INED
M
M
F
*
UK and overseas financial markets experience
One of the Committee’s key responsibilities is to review and challenge
the processes for identifying risks and opportunities (both financial
and non-financial) and risk mitigation structures. We regularly review
the Group’s risk register throughout the year and the Committee
believes that the Group strategy has the support of a management
team who understand the risk management framework required to
deliver it. Information about our system of risk management and
internal control together with the principal risks and uncertainties
facing the business can be found on pages 56 to 65.
The Committee also carried out a review of the effectiveness of the
Company’s auditor, KPMG LLP. Following this review, we are pleased
to be recommending their reappointment at this year’s AGM. In
addition, and in line with rules on audit partner rotation, Andrew
Campbell-Orde will be stepping down following the signing of these
accounts and Huw Brown will take over as lead partner for the 2021
audit. The Committee would like to thank Andrew for his support to the
Committee since 2016.
Richard Jones
Audit and Risk Committee Chairman
23 March 2021
Committee
gender diversity
Male
67%
Female
33%
The role of the Committee
The Audit and Risk Committee assists the Board with monitoring and
reviewing the Company’s financial results and other reporting and
has oversight of the effectiveness of risk management and systems of
internal control. Its role is to provide confidence to shareholders on
the integrity of our reported financial results and provide challenge
to the external auditors and senior management. The framework
of duties is set out in its Terms of Reference which are available on
the Company’s website. Each year the Committee reviews its own
performance and its Terms of Reference.
Duties of the Committee
The duties of the Committee include:
• Reviewing the management and reporting of financial matters
including key accounting policies.
• Reviewing the Annual Report and Accounts and advising the
Board on whether, when take as a whole, it is fair, balanced, and
understandable and provides shareholder with the information
necessary to assess the Company’s performance, business model
and strategy.
• Considering the appointment of external auditors and the
frequency of retendering and rotation of the audit.
• Overseeing the relationship with, and the independence and
objectivity of, the external auditors.
• Setting policy in relation to the use of the external auditors for non-
audit services.
• Advising the Board on the Company’s appetite for and tolerance
of risk and the strategy in relation to risk management and review
any non-conformances with these.
• Reviewing the Company’s risk management and internal control
systems and their effectiveness.
• Reviewing the Company’s procedures for detecting fraud, bribery
and corruption and ensuring arrangements are adequate for
employees to raise concerns.
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Members of the Committee have access to the Company Secretary
who attends and minutes all meetings. To enable the Committee to
discharge its duties effectively, the Company Secretary is responsible
for ensuring the Committee receives high-quality, timely information.
The Chairman of the Committee works closely with the CFO and the
finance department to ensure papers for meetings are comprehensive
and comprehendible. When appropriate to do so, the Committee
seeks the support of external advisers and consultants.
The Committee reports to the Board which includes reporting on
any matters where it considers action or improvement is needed,
including recommendation of remedial actions. The Chair of the
Committee reports to the Board on its proceedings after each meeting
on all matters including any reporting issues and on estimates and
judgements made in the preparation of financial statements.
Committee membership and attendance
Appointments to the Committee are made by the Board following any
recommendations from the Nomination Committee. Only members of
the Committee have the right to attend meetings. All three members
of the Committee have a mix of knowledge and skills gained through
their experience of business, management practices including risk,
the industry sector and have recent and relevant financial experience.
The CEO, CFO and the Group Head of Finance are invited to attend
all meetings, while other senior financial managers will attend as
appropriate.
The external auditors also attend the meetings to discuss the planning
and conclusions of their work and meet with the members of the Audit
and Risk Committee without any members of the executive team
present after each meeting. The Audit and Risk Committee can call for
information from management and consults with the external auditors
directly if required.
Attendance
During the year, the Committee held four scheduled meetings and
reported on its activities to the Board.
As at the date of this report, the members of the Audit and Risk
Committee, all of whom held office throughout the year and to the
date of this report unless otherwise stated, are:
Member
Role
Status
Appointment date Attendance
Richard Jones
Chairman Independent
29/01/2019
David Cook
NED
Independent
01/04/2014
Jo LeCouilliard NED
Independent
29/01/2019
4/4
4/4
4/4
Activities of the Committee
Areas of focus
Key duties and responsibilities
Activities in the year ended 31 December 2020
Financial Statements
and narrative
reporting
The content and integrity of
financial statements and any formal
announcements relating to financial
performance, including review of
the significant financial reporting
judgements contained therein.
• Review of the financial statements and narrative reporting in the Annual Report and
Accounts for 2019 and 2020 and in the unaudited half year results to 30 June 2020,
with reference to the reports being fair, balanced and understandable.
• Review of the preliminary results for the financial years ended 31 December 2019
and the unaudited half year results to 30 June 2020.
• All financial announcements are circulated for review and approved by the Board.
• Consideration of reports from the external auditor in respect of the Annual Report
and Accounts for 2019 and 2020.
Going concern
Matters that have informed the
Board’s assessment of whether the
Company is a going concern.
• A review of the going concern including methodology, assessment in support of the
going concern assumption, concluding the expectation that the Group has adequate
resources to continue in operation existence for the foreseeable future.
Accounting policies
and standards
Estimates and judgements,
amortisation of intangible assets
and non-underlying classification.
• Review of estimates and judgements being used to determine indefinite useful lives of
product portfolio.
• Review of amortisation and impairment.
• Review of non-underlying classification policy.
Estimates and judgements
acquisition of Biogix Inc.
Foreign Exchange Hedging
Treasury Policy.
• Review of estimates and judgements to accounting for the acquisition of Biogix Inc.
under IFRS 3 including careful review of the underlying estimates and judgements in
the preliminary Purchase Price Allocation.
• Review of foreign exchange and hedging pre- and post the acquisition of Biogix
Inc. to ensure forward hedging strategies in respect of Sterling and US Dollar ensure
certainty. This included a review of the impact on leverage and accounting.
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Alliance Pharma plc – Annual Report and Accounts 2020
Risk management and
internal controls
Financial and other internal controls
and risk management systems
including the Group’s Principal Risks
and Uncertainties.
• A review of risk management and the Group risk register.
• Review of the Group’s assessment of its control framework including progress in
enhancing the control environment.
• A review of the business and corporate governance statement relating to the audit
and risk management.
• A review of the Group’s risk management and internal control systems is set out on
pages 56 to 65.
• Annual review of the need for an internal audit function.
Regulatory and compliance risk
• Reviewed and introduced an updated Whistleblowing policy and procedure.
Review of external
auditor
External auditor’s independence
and objectivity and the effectiveness
of the audit process.
The policy to control engagement of
the external auditor to supply non-
audit services.
• Meetings with the external auditor without management to consider any potential
areas of concern.
• Review and consideration of the external auditor’s findings and recommendations
and management’s response from the audit of the year ended 31 December 2019
and 2020.
• Approve the terms of appointment, areas of responsibility and duties.
• Scope and strategy of the 2020 external audit set out in the engagement letter and
recommend approval to the Board.
• Review of the external auditor’s performance, independence, and objectivity.
The rotation of Audit Partner
• Considered the rules relating to the rotation of the audit partner rotation under the
2019 FRC Ethical Standards. Andrew Campbell-Orde’s five-year term to the end of
the 2020 annual audit was reviewed and the Committee agreed that there would be a
change in audit partner following the completion of the 2020 audit.
Terms of Reference
Reporting to the Board on how
the Committee has discharged its
responsibilities.
• The Committee reviewed its own Terms of Reference which are considered to be
satisfactory. The Committee and Board were satisfied that the Committee and its
members continue to operate effectively individually and collectively and had
discharged all of the duties within its remit.
External auditor
Audit process
Each year, the Committee assesses the proposed Audit plan for
the external auditor’s review of the Company’s full-year financial
statements. This plan sets out the scope of the audit, areas of
significant risk of material misstatement, timetable and fees. KPMG
formally present their findings to the Committee but throughout
the auditing process there is regular dialogue and engagement
with management with any significant matters or risks being
communicated.
Prior to the Board’s approval of the Annual Report and Accounts,
the Committee reviews with the auditor the representations set out
in the management representation letter and reports to the Board.
The auditor presents the Board with a management representation
letter which the Committee will have reviewed and discussed with the
auditor as part of its year-end meetings.
Effectiveness and independence of the external auditor
The Committee is responsible for agreeing the terms of engagement
with the Company’s external auditors KPMG. The objectivity and
independence of the external auditors is safeguarded by reviewing
the auditors’ formal declarations, monitoring relationships between
key audit staff and the Company, and tracking the level of non-audit
fees payable to the external auditors.
Reappointment of the external auditor
KPMG took up office as the Company’s auditor in 2016. The auditor’s
appointment requires the approval of shareholders at the AGM.
Following a review by the Committee, the proposed reappointment
of KPMG as the Company’s auditor will be recommended to
shareholders by the Board at the 2021 AGM.
Internal audit function
The Audit and Risk Committee considers the need for an internal
audit function. This is reviewed annually, and the Committee
has determined, that given the current size of the Group, it is not
appropriate to maintain a dedicated internal audit function. The
position is kept under review.
Whistleblowing
In June 2020, the Board approved a revised Whistleblowing Policy
and procedures. Published on the Company’s intranet, it provides
all employees access to a confidential forum in which it is possible to
raise concerns about potential and perceived improprieties. Provided
it is appropriate to do so, the process is managed by the Company
Secretary in conjunction with Human Resources. The outcomes of any
investigations carried out in accordance with the Policy is reported to
the Committee.
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Remuneration Committee Report
5
9 10
Remuneration
Committee
Report
“ Our remuneration policy seeks
to balance long-term shareholder
value with fair pay and reward to
ensure that we attract, motivate
and retain the best skills,
experience and capabilities.”
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Alliance Pharma plc – Annual Report and Accounts 2020
Chairman’s statement
On behalf of the Remuneration Committee (the ‘Committee’), I am
pleased to introduce my first Remuneration Committee report since
becoming Chairman of the Committee at the beginning of 2021.
In line with good practice reporting for Remuneration Committees on
AIM, this year’s report provides readers with greater disclosure of
the Board's approach to remuneration. As an AIM listed company,
we are guided by the QCA’s Remuneration Committee Guide and,
when appropriate to do so, look to the UK Corporate Governance
Code 2018 and to investor guidelines for best practice. Below we set
out the Committee’s responsibilities and report on the activities of the
Committee during the year.
The Committee remains aware of the importance placed by investors
on remuneration. In carrying out its duties, we continue to balance our
remuneration policy and practices with our size and complexity as
well as with the performance of the business. We promote the long-
term growth of shareholder value, in line with the Group’s strategy,
and the need to ensure that our people remain motivated through fair
remuneration strategies.
Matters considered by the Committee during the year have been very
cognisant of market expectations and the views of investor bodies,
including the expectation for executive remuneration outcomes to
reflect the experience of shareholders, the wider workforce, and other
key stakeholders. The Committee believes that the Company’s current
remuneration policy encourages and rewards the right behaviours
and that any risks created by its structure is within the appetite of
the Board.
DIRECTOR
ROLE
GENDER
FINANCE
PHARMA/
LIFE SCIENCES
INTERNATIONAL
SALES &
MARKETING
GROWTH
FINANCIAL
MARKETS*
STRATEGIC
MERGERS &
ACQUISITIONS
Jo LeCouilliard (C)
INED
David Cook
Nigel Clifford
INED
INED
F
M
M
*
UK and overseas financial markets experience
This year’s results highlight the resilient nature of our business and
are a credit to the hard work of the management team and all our
employees. Our policy on remuneration remains unchanged for
both Executive and Non-executive Directors. In applying our policy
during the year, the Committee considered the resilient performance
of the business and the fact that the Company grew underlying
profits before tax without the need to reduce headcount, furlough
employees or take any other direct support (financial or otherwise)
from government. The Company also made significant progress in
delivering its strategy by growing organically and inorganically
despite the impact of the pandemic. In view of this resilient
performance and strategic progress, limited discretion was applied
in assessing the achievement of corporate bonus targets for all
employees, including the Executive Directors.
The key activities of the Committee included:
• A review of our remuneration policies, remuneration levels (both
fixed and variable), and appropriate AIM market comparisons
with respect to discussions on any changes to Executive
remuneration. Ensuring our policy achieves its objectives
and continues to attract, retain, and motivate a high-quality
management team to run the Alliance business successfully for
our shareholders.
• Discussions in the context of the potential impact of external
factors, such as COVID-19, on the business and the economy
generally, the Company’s dividend policy and payments,
competence, investor sentiment, sector performance, affordability,
total reward, and wider employee view.
• Reviewing and approving annual bonus against the achievement
of targets and personal performance.
• Monitoring and making recommendations with respect to the level
and structure of remuneration for senior management.
• Assessing the achievement of performance conditions and extent
of vesting relating to share awards which matured in 2020.
• Approving the grant of share option awards under the Company’s
share incentive plans to the Executive Directors and employees.
• Reviewing the holding requirements under the Company’s Share
Ownership Policy.
Committee
gender diversity
Male
67%
Female
33%
The Committee continues to monitor trends and developments in
relation to remuneration and market practices, corporate governance
and welcomes views from its shareholders. Being committed to and
maintaining a healthy dialogue with our shareholders helps to ensure
that our remuneration strategy is understood and remains appropriate
across all levels of the organisation.
I will be attending the AGM on 19 May 2021 and will be available to
answer any shareholder questions on the Committee’s activities. In the
meantime, I would like to thank our shareholders for their continued
support.
Jo LeCouilliard
Remuneration Committee Chairman
23 March 2021
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The role of the Remuneration Committee
The role of the Remuneration Committee is to ensure there is a formal
process for considering Executive remuneration. On behalf of the
Board, it reviews the pay, benefits, and other terms of service of the
Executive Directors of the Company and the broad pay strategy with
respect to other senior executives. The framework of duties is set out in
its Terms of Reference which are available on the Company’s website.
Each year the Committee reviews its own performance and its Terms
of Reference.
Members of the Committee have access to the Company Secretary
who attends and minutes all meetings. To enable the Committee to
discharge its duties effectively, the Company Secretary is responsible
for ensuring the Committee receives high-quality, timely information.
The Chair of the Committee reports to the Board on its proceedings
after each meeting on all matters within its duties and responsibilities
and will make any recommendations to the Board it deems
appropriate. The Committee will also engage with the Nomination
Committee when considering, for example, the appointment of
Directors or contractual terms on termination.
Committee membership and attendance
Appointments to the Committee are made by the Board following any
recommendations from the Nomination Committee. Only members
of the Committee have the right to attend meetings. However,
where appropriate, the CEO, CFO and the Chief People and
Infrastructure Officer are also invited to attend certain meetings of
the Remuneration Committee.
Attendance
During the year, the Committee held a total of five meetings and
reported on its activities to the Board. As at the date of this report,
the membership of the Remuneration Committee comprises three
Independent Non-executive Directors, who all held office throughout
the year and to the date of his report. The members and their
attendance are as follows:
Member
Role
Status
Appointment date Attendance
Jo LeCouilliard Chairman Independent
29/01/2019
David Cook
NED
Independent
01/04/2014
Nigel Clifford* NED
Independent
24/02/2015
5/5
5/5
5/5
*
Nigel Clifford stepped down as Chairman of the Committee on 1 January 2021 and was replaced
by Jo LeCouilliard. Nigel Clifford remains a member of the Committee.
Activities of the Committee
During the year 2020, matters reviewed and considered by
the Remuneration Committee included reviewing policies on
remuneration, external environment, and market comparators,
increases to annual base salaries, short-term and long-term reward
and incentives, and assessing the extent to which targets have been
achieved under the performance-related bonus scheme. When
appropriate to do so, the Remuneration Committee seeks the support
of external advisers and consultants. No Directors or senior managers
are involved in any decisions as to their own remuneration.
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Alliance Pharma plc – Annual Report and Accounts 2020
REMUNERATION POLICY
Remuneration policy tables
As the Company is not a fully listed company, it is not required to produce a formal remuneration policy or seek shareholder approval of that
policy. Notwithstanding, we set out below additional information that the Committee believes will be most useful to shareholders and reflects
remuneration practices that are appropriate for an AIM company of our size. The policy is designed to ensure our Executive Director pay
arrangements remain supportive of and drive the strategy.
Policy table in respect of Executive remuneration
Element
Policy
Base salary
Base salaries are reviewed annually to ensure they remain in line with other pharmaceutical/healthcare and AIM-listed companies
and reflect the size and scope of the individual’s role. Within that frame of reference, the Company aims to be at or near the median
level.
Annual base salaries increase in line with the remuneration policy and take effect from May each year. The Committee is committed
to ensuring that salaries remain competitive relative to the AIM 100. Levels are set to attract and retain individuals to lead and drive
forwards the agreed strategy for the Company.
Pension and
other benefits
Executive Directors can participate in the Company’s defined contribution pension scheme. In line with all employees, only their base
salaries are pensionable. The Company contributes twice the amount contributed by the employee up to a maximum of 10%. When
appropriate to do so, Executive Directors may take benefits as a salary cash supplement (which will ordinarily be reduced to take
account of the employer National Insurance Contributions).
Other benefits in kind include life assurance, healthcare and the provision of a cash allowance in lieu of a company car.
Annual bonus
The delivery of the Group’s in-year, short-term corporate goals is incentivised by offering a cash-settled bonus (‘Annual Bonus’)
linked to two factors:
• the achievement of budgeted levels of underlying profit before tax (‘Target’), which is the key metric the Board considers in
monitoring corporate performance; and
• personal performance of each Executive.
As part of this incentive strategy Executive Directors are eligible to participate in the all-employee Annual Bonus scheme. The
level of that bonus is determined by first assessing whether the Target has been achieved by the business and, once this target has
been achieved, applying a further multiplier which is determined by assessment of the Executive’s personal performance for the
relevant year.
The Target is set at the start of each financial year – the Target is determined with the approval of the Remuneration Committee to
ensure it incentivises Executives and aligns with the Group’s strategy.
Personal performance is measured on various factors including delivery of pre-set personal targets.
Based on a combination of Target and personal performance the Annual Bonus that each of the Executives is able to earn is as follows:
Chief Executive Officer
A Target bonus of 50% of base salary for 100% Target performance, increasing on a sliding scale up to a maximum of 100% of
base salary.
The Target bonus can be further increased by applying a personal performance multiplier to the achieved Target bonus for
overperformance. The maximum personal performance related multiplier of 1.5x (up to an additional 50%) is applied to the
Target bonus.
The CEO’s potential maximum Annual Bonus reward is 150% of base salary.
Chief Financial Officer
A Target bonus of 40% of base salary for 100% OTE Target performance, increasing on a sliding scale up to a maximum of 80% of
base salary.
The bonus can be further increased by applying a personal performance multiplier to the achieved Target bonus for
overperformance. The maximum personal performance-related multiplier of 1.5x (up to an additional 50%) is applied to the
Target bonus.
The CFO’s potential maximum Annual Bonus reward is 120% of base salary.
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REMUNERATION POLICY CONTINUED
Element
Policy
Share incentive
schemes
The Company operates two share incentive schemes to encourage a culture of long-term growth and performance that aligns with
share ownership. Executive Directors can participate in both the Company Share Option Plan (CSOP) and the Long-Term Incentive
Scheme (LTIP).
Any awards granted to the Executive Directors are subject to performance metrics which are reviewed regularly by the Committee,
and the level of award is reviewed annually to ensure that the aggregate remuneration remains competitive.
Performance targets for Directors’ awards granted under the LTIP and CSOP continue to be based on market benchmarked Earnings
Per Share (EPS) and Total Shareholder Return (TSR).
The maximum total market value of shares over which awards may be granted under the LTIP to any participant during any financial
year is 100% of the participant’s salary. However, in exceptional circumstances, the Committee may, at its absolute discretion, grant
a higher amount. The maximum market value of shares under the approved part of the CSOP shall not exceed £30,000. There is no
limit on the market value of shares when granting unapproved share option awards.
Further information about the Company’s share incentive plans is set out on page 95.
Share ownership
To align Directors and Senior Management’s interests with our shareholders, the Company operates a Share Ownership Policy.
When exercising share options relevant employees are required to build a qualifying interest in shares that is equal to a percentage
of their base salary at the prevailing time. Ordinary Shares are valued at their market value at the time of any calculation carried out
to determine whether a qualifying interest has been established or needs to be increased. Both the CEO and CFO are required to
build a qualifying interest equal to 100% of their base salaries. Further information can be found on page 94 of this report.
Policy table in respect of Non-executive remuneration
Remuneration / Benefit Application
Fees
Non-executive Directors of the Company receive a basic fee for the services provided to the Company. These are reviewed by the
Company from time to time to ensure levels remain in line with comparable companies. There are no performance measures in relation
to fees paid to Non-executive Directors.
The Non-executive Directors do not receive an additional allowance for chairing one or more of the Committees of the Board.
DIRECTORS’ REMUNERATION
The aggregate remuneration payable to the Directors in respect of the period was as follows:
Salary or fees
Other
Pension
Bonus
Total remuneration,
excluding share options
Exercised share
option gains1
Total remuneration,
including share options
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Peter Butterfield
311,667
266,667
12,328
14,214
27,389
24,004
206,250
206,250
557,634
511,135
54,400
1,223,558
612,034
1,734,693
Andrew Franklin
210,000
186,000
8,590
8,023
20,636
18,258
110,000
114,000
349,226
326,281
Nigel Clifford
44,389
42,848
David Cook
78,488
76,069
Richard Jones
44,389
41,598
Jo LeCouilliard
42,723
37,848
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,389
42,848
78,488
76,069
44,389
41,598
42,723
37,848
–
–
–
–
–
452,250
349,226
778,531
–
–
–
–
44,389
42,848
78,488
76,069
44,389
41,598
42,723
37,848
731,656
651,030
20,918
22,237
48,025
42,262
316,256
320,250
1,116,849
1,035,779
54,400
1,675,808
1,172,249
2,711,587
1 Details of share option exercises carried out during the year are shown in the notes to the table on share incentive awards on page 93.
No Director received any remuneration from a third party in respect of their service as a Director of the Company.
Base salary
Base salaries for the CEO and CFO were increased following a benchmarking exercise in the first quarter of 2020, which resulted in a
rebasing of their annual salaries and increased from £275,000 to £330,000 for the CEO and from £190,000 to £220,000 for the CFO.
These increases took effect on 1 May 2020.
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Alliance Pharma plc – Annual Report and Accounts 2020
Pension and benefits
Both the CEO and CFO received an employer pension contribution of twice the amount contributed by the Director up to a maximum of 10%.
The column headed ‘Other’ in the table above shows the value of benefits provided to each Executive Director, including a cash allowance in
lieu of a company car and healthcare. As seen from the table, only Executive Directors accrue retirement benefits, all of whom did so through
defined contribution (money purchase) schemes. The Company does not operate a defined benefit scheme. No Director or former Director
received any benefits from a retirement benefits scheme that were not otherwise available to all members of the scheme.
Annual bonus
Due to the impact of COVID-19, the Company narrowly missed its internal profit target set before the outbreak of the pandemic. The Company
grew its underlying profits before tax without the need to reduce headcount, furlough employees, or take any other direct support (financial or
otherwise) from the government. It also made significant progress in delivering its strategy by growing organically and inorganically despite the
pandemic. In view of this strategic progress and resilient performance, bonuses were awarded to all employees as though the Company’s profit
target had been met, but not exceeded. For the Executive Directors this resulted in the following payments:
Peter Butterfield
Andrew Franklin
2020
£
206,250
110,000
2019
£
206,250
114,000
2020
% salary
62.5
50
2019
% salary
75
60
Non-executive Directors’ fees
In 2020, and following an internal benchmarking review of the market, the Board approved an increase to the Non-executive Director fees.
The annual fee paid to David Cook increased from £75,456 to £80,000. Fees paid to Nigel Clifford, Jo LeCouilliard and Richard Jones
increased from £38,170 to £45,000 per annum. These changes took effect from 1 May 2020. Non-executive Directors no longer receive an
additional allowance for chairing one or more of the Committees of the Board.
Share incentive awards
The Company operates two share incentive schemes under which share options are granted to Executive Directors and senior management.
More details on our share plans can be found in the Directors’ Report on page 95.
Awards under the Alliance Company Share Option Plan 2015 (CSOP)
During the year, the Committee approved the award of market value share options to the Executive Directors and SLT. The quantum of award is
equal to 50% of their base salary and where appropriate may attract HMRC tax advantages.
On 23 September 2020, the Company granted Peter Butterfield 165,000 and Andrew Franklin 110,000 unapproved share options under
the CSOP with an exercise price of 73.7p per share (being the closing mid-market price of one 1p Ordinary Share in the Company at close of
trading on 22 September 2020). Based on the exercise price, the value of the awards as at the date of grant was equal to £121,605 for the
CEO and £81,070 for the CFO. These awards will vest on the third anniversary from the date of grant, 23 September 2023, subject to meeting
the EPS and TSR performance targets as set out below.
Awards under the Alliance Long-Term Incentive Plan 2019 (LTIP)
The Committee also approved awards granted under the Company’s LTIP in the form of nil-cost options. These were granted on 23 September
2020 with a face value of 55% of base salary to the CEO, equal to (246,269 option awards); and 45% of base salary to the CFO, equal
to £99,000 (134,328 option awards). The strike price used to calculate the quantum of awards was 73.7p per share (being the closing
mid-market price of one 1p Ordinary Share in the Company at close of trading on 22 September 2020). These awards will vest on the third
anniversary from the date of grant, 23 September 2023, subject to meeting the EPS and TSR performance targets on the follow page.
Malus and clawback
All awards under the LTIP are subject to standard malus and clawback provisions which allow the Company, in certain circumstances, to either
(i) terminate outstanding options, or (ii) seek repayment of after tax value of options which have been exercised by an Executive which has
been dismissed as a result of a set of prescribed irregularities including the discovery material misstatement of results of the Company or Group;
or a serious breach of the Company’s code of ethics has arisen; or a serious regulatory, or health and safety issue has occurred.
Performance conditions
All options granted to Executive Directors will only vest if targets for growth in the Company’s underlying diluted Earnings Per Share (EPS) are
met over a period of three years. EPS is an important metric which provides a strong incentive to drive the Group’s business over that longer-
term period and to mitigate downside risks that could affect the Group’s profitability. Reputational risks could reasonably be expected to affect
the share price, so the Executive is further incentivised to mitigate these exposures, if they wish to maximise the potential value of their options.
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DIRECTORS' REMUNERATION CONTINUED
In 2019, the Committee reviewed performance targets as part of the introduction of the LTIP and introduced a second measure, in addition to
EPS, based on Total Shareholder Return (TSR). As such, all options granted in 2020 to Executives under the CSOP and LTIP are subject to EPS
and TSR performance conditions. 50% of the awards are subject to EPS and 50% is subject to TSR as set out below:
EPS Compound Annual Growth Rate over the performance period
% of award that vests (of 50%)
< 5% CAGR
5% –10% CAGR
> 10% CAGR
0%
Calculated on a straight-line basis between 50% and 100%
100%
CAGR: means compound annual growth rate.
EPS: means the underlying diluted earnings per share as presented in the Company’s published Annual Reports.
EPS Compound Annual Growth Rate: means the percentage of increase in the EPS of the Company calculated by reference to the difference between (i) the EPS as presented in the
published Annual Report for the financial year ending 31 December 2019, to (ii) the EPS as presented in the published Annual Report for the financial year ending 31 December 2022.
EPS Performance Period: the period from 31 December 2019 to 31 December 2022 (inclusive).
TSR against the FTSE Small Cap Index (ex-Trusts) over the performance period
% of award that vests (of 50%)
Less than the Index
Equal to the Index
0%
50%
Between the Index but less than 15% outperformance of the
Index on a cumulative basis over the TSR performance period
Calculated on a straight-line basis between 50% and 100%
Equal to or greater than 15% outperformance of the Index
on a cumulative basis over the TSR performance period
100%
Index: means the FTSE Small Cap Index, excluding investments trusts as determined by the Company’s nominated adviser.
TSR: means total shareholder return calculated by reference to the Company’s share price appreciation plus all dividend per share paid (based on ex div date) during the
TSR Performance Period, and as determined by the Company’s Nominated Adviser at the end of the TSR Performance Period.
TSR Performance Period: the period starting on the Grant Date and ending on the third anniversary of the Grant Date.
Share Price 2020
100
90
80
70
60
50
40
30
20
10
0
)
p
(
e
c
i
r
P
e
r
a
h
S
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
The closing mid-market price of Ordinary shares on 31 December 2020 (being the last dealing day in the calendar year) was 87.6p and the
range during the year was from 57.2p to 87.6p.
92
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Share Incentive Awards
Executive Directors hold options over the Company’s share option and long-term incentive plans. Details of options held under the Company’s
employee share schemes by the Directors as at 31 December 2020 and who served during the year are as follows:
Peter Butterfield
Type of award
Date of
grant
Exercise
price (p)
Performance
condition
No. of
options
granted
Vested
Exercised
Lapsed
CSOP Unapproved
27-Oct-16
CSOP Unapproved
27-Oct-16
CSOP Unapproved
15-Sep-17
CSOP Approved
15-Sep-17
CSOP Unapproved
05-Oct-18
CSOP Unapproved
05-Dec-19
47.50
47.50
53.00
53.00
81.60
76.90
200,000
200,000
200,0001
1,000,000
–
148,397
148,397
56,603
56,603
EPS
EPS
EPS
EPS
EPS
1,250,000
EPS & TSR
137,500
LTIP
05-Dec-19
Nil
EPS & TSR
196,684
CSOP Unapproved
23-Sep-20
73.70
EPS & TSR
165,000
LTIP
23-Sep-20
Nil
EPS & TSR
246,269
Number
of options
capable of
exercise
Exercisable
from
Exercisable
to
–
–
27-Oct-19
27-Oct-26
27-Oct-21
27-Oct-26
148,397
15-Sep-20
15-Sep-27
56,603
15-Sep-20
15-Sep-27
–
–
–
–
–
05-Oct-21
05-Oct-28
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-23
23-Sep-23
23-Sep-24
23-Sep-23
23-Sep-24
1
On 7 May 2020, Peter Butterfield exercised 200,000 options over Ordinary shares of 1p each granted to him by the Company under the CSOP in 2016. The exercise price was 47.5p per share. 161,915 shares
were then subsequently sold at a market price of 74.7p per share and 38,085 shares were retained in accordance with the Company’s Share Ownership Policy.
3,400,453
405,000
200,000
205,000
Andrew Franklin
Type of award
Date of
grant
Exercise
price (p)
Performance
condition
No. of
options
granted
Vested
Exercised
Lapsed
64,171
64,171
64,1711
1,935,829
1,935,829
1,435,8291
CSOP Approved
04-Dec-15
CSOP Unapproved
04-Dec-15
CSOP Unapproved
27-Oct-16
CSOP Unapproved
27-Oct-16
CSOP Unapproved
15-Sep-17
CSOP Unapproved
05-Oct-18
CSOP Approved
05-Dec-19
CSOP Unapproved
05-Dec-19
46.75
46.75
47.50
47.50
53.00
81.60
76.90
76.90
No
No
EPS
EPS
EPS
EPS
EPS & TSR
EPS & TSR
155,000
155,000
400,000
–
170,000
170,000
178,000
39,011
55,989
LTIP
05-Dec-19
Nil
EPS & TSR
111,183
CSOP Unapproved
23-Sep-20
73.70
EPS & TSR
110,000
LTIP
23-Sep-20
Nil
EPS & TSR
134,328
Number
of options
capable of
exercise
Exercisable
from
Exercisable
to
–
04-Dec-18
04-Dec-25
500,000
04-Dec-18
04-Dec-25
155,000
27-Oct-19
27-Oct-26
–
27-Oct-21
27-Oct-26
170,000
15-Sep-20
15-Sep-27
–
–
–
–
–
–
05-Oct-21
05-Oct-28
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-23
23-Sep-23
23-Sep-24
23-Sep-23
23-Sep-24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
As disclosed to the market in 2019, 1,500,00 share options were exercised by Andrew Franklin on 2 December 2019 following which 128,384 shares were retained in accordance with the Company’s Share
Ownership Policy.
3,353,511
2,325,000
1,500,000
825,000
93
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Remuneration Committee Report
continued
DIRECTORS' REMUNERATION CONTINUED
Directors’ interests and shareholdings
Share ownership policy
The Company operates a share ownership policy under which the Executive Directors and certain other employees are required when
exercising options to acquire and maintain an interest in Alliance Pharma shares up to a percentage of base salary. The policy requires
Executive Directors when they exercise options to retain shares in the Company with a value equal to 50% of the net gain (post costs and
settlement of tax liabilities) until such time as the required level of shareholding is achieved. Once an Executive Director has built a stake in the
Company equal to the required levels, they are free to exercise without having to retain shares. Interests may also be maintained as a result
of a Director acquiring Ordinary shares in the open market. The Company Secretary maintains a record of individual required levels and
qualifying interests based on information provided by an individual subject to this policy and reports periodically to the Remuneration
Committee regarding compliance. Ordinary shares are valued at their market value at the time of any calculation carried out using the previous
day’s closing middle market quotation.
The Committee recently agreed that from the 1 April 2021, the holding requirements under the share ownership policy are to increase from
100% to 200% of base salary for the CEO and from 100% to the 150% of base salary for the CFO.
As at 22 March 2021, the Executive Directors hold the following interests in Ordinary shares of the Company:
Director
Peter Butterfield
Andrew Franklin
CEO
CFO
Percentage of salary
2020 Base salary
Shareholding
Value of holdings*
% achieved
100%
100%
£330,000
£210,000
412,461
128,384
£350,179
£108,998
106%
50%
* At the closing market price on 22 March 2021: 84.9p.
The following table shows the interests of the Directors (and their spouses and minor children) in the shares of the Company.
Director
Peter Butterfield
Andrew Franklin
Nigel Clifford
David Cook
Richard Jones
Jo LeCouilliard
At 31 December 2019
At 31 December 2020
Beneficial
Non-beneficial
Total
Beneficial
Non-beneficial
Total
374,376
128,384
180,663
102,371
15,000
–
–
–
–
–
–
–
374,376
128,384
180,663
102,371
15,000
–
412,461
128,384
180,663
234,129
15,000
–
–
–
–
–
–
–
412,461
128,384
180,663
234,129
15,000
–
Directors’ service contracts
All Executive Directors are employed under 12-month rolling service contracts. The services of all Executive Directors may be terminated (i) by the
Company or individual giving 12 months’ notice or (ii) immediately, in the event that the Director is not re-elected by shareholders at an AGM.
Executive Director
appointment
current contract
Unexpired term
(Company)
(Director)
Date of
Date of
Notice period
Notice period
Peter Butterfield
Chief Executive
22/02/2010
05/08/2010
Rolling 12 months
12 months
Andrew Franklin
Chief Financial Officer
28/09/2015
25/06/2015
Rolling 12 months
12 months
12 months
12 months
The Non-executive Directors are employed under letters of engagement for which may be terminated by the Company by (i) giving the
appropriate notice, or (ii) immediately, in the event that the Director is not re-elected by shareholders at an AGM.
Non-executive Director
First date of
appointment
Current term
Unexpired term
David Cook
Chair & Independent NED
01/04/2014
Jo LeCouilliard
Independent NED
Nigel Clifford
Independent NED
Richard Jones
Independent NED
01/01/2019
26/01/2015
01/01/2019
4 years
5 years
4 years
5 years
24 Months
34 Months
34 Months
34 Months
The Executive Directors’ service contracts and Chairman and Non-executive Directors’ letters of appointment are available for inspection
by shareholders at the Company’s registered office or by emailing the Company Secretary at Company.Secretary@AlliancePharma.co.uk.
94
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Governance
Directors' Report
DIRECTORS’ REPORT
Scope of this report
The Directors present their Annual Report, together with the audited
financial statements of the Company and the Group, for the year
ended 31 December 2020.
The Directors’ Report required under the Companies Act 2006
includes and comprises the Directors’ biographies on pages 70 and
71, the Corporate Governance statement on pages 68 to 85, the
Remuneration Committee report on pages 86 to 94 and the Strategic
Report on pages 14 to 65.
As permitted under the Companies Act 2006, certain matters which
would otherwise need to be included in this Directors’ Report have
instead been discussed in the Strategic Report on pages 14 to 65.
These matters include any important post-balance sheet events, the
likely future developments in the business of the Company and its
subsidiaries, the activities of the Company and its subsidiaries in the
field of research and development.
Principal activities
The principal activity of the Company is to act as a holding company.
The principal activity of the Group is the acquisition, marketing and
distribution of healthcare and pharmaceutical products.
Branches
A list of the Group’s subsidiaries and associated undertakings can
be found on pages 136 and 137 under note 13 to the financial
statements. There are no branches of the Company outside the UK.
Alliance Pharmaceuticals GmbH, a company within the Alliance
Group, has a Swiss branch which operates under the name Alliance
Pharmaceuticals GmbH Düsseldorf, Zweigniederlassung Uster.
Directors
Names and biographical details of the Directors of the Company
at the date of this report are shown on pages 70 and 71. The
rules setting out the powers of Directors, their appointment and
replacement is set out in the Company’s Articles of Association.
Further information on the process can be found on page 81 of
the Nomination Committee Report.
Details of Executive Directors’ service contracts and letters of
appointment for Non-executive Directors can be found in the
Remuneration Report on page 94. All Directors put themselves
forward for annual re-election at the Company’s Annual
General Meeting.
Directors’ indemnities
The Company’s Articles of Association contain provision for Directors
to be indemnified (including the funding of defence costs) to the
extent permitted by the Companies Act 2006. This indemnity would
only be available if judgement was given in the individual’s favour,
or he or she was acquitted, or relief under the Companies Act 2006
was granted by the court. There were no qualifying pension scheme
indemnity provisions in force during the year.
Share capital and shareholders’ rights
The Company’s issued share capital as at the date of this report is
533,301,854 Ordinary Shares of 1p each. Each Ordinary Share
carries one vote at general meetings of the Company. There are no
restrictions on the transfer of Ordinary Shares other than restrictions,
which may from time to time be imposed by law. The Company is not
aware of any agreements between shareholders that may restrict
transfer of securities or voting rights.
The Company has no shareholder authority to acquire its own shares.
Dividends
The Board declared an interim dividend in respect of the year ending
2020 of 0.536p per share (2019: 0.536p) which was paid on 7
January 2021. The Directors are recommending a final dividend of
1.074pence per share (2019: Nil) which, subject to shareholders’
approval at the AGM, will be paid on 8 July 2021 to shareholders on
the register at close of business on 11 June 2021. The total dividend
paid and proposed in respect of the year ended 31 December 2020
is therefore 1.610pence per share (2019: 0.536p).
Substantial shareholdings
As at the date of this report, as required under AIM and certain
disclosure rules, the Company has been notified of the major
shareholdings in the table below. Both the number of shares held, and
the percentage holding are stated as at the latest date of notification
to the Company. Details of all major shareholdings can also be found
in the Investor section of the Company’s website.
Shareholder
Number of
shares held
Percentage
of issued
share capital
Fidelity Mgt & Research
53,317,753
10.00%
Slater Investment
Blackrock Investment Mgt
38,846,041
31,870,145
Kempen Capital Management N.V.
26,621,969
John Dawson
Polar Capital
MVM Partners LLP
Investec Wealth & Investment
Rathbone Investment Mgt
Artemis Invetsment Mgt
29,976,402
23,252,692
21,282,590
19,844,776
18,294,618
16,304,802
7.28%
6.00%
5.01%
5.63%
4.36%
3.99%
3.72%
3.43%
3.06%
95
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Governance
Directors' Report
continued
Company share incentive plans
The Company operates two incentive share plans.
The Alliance Company Share Option Plan 2015 (CSOP)
For many years, the Company has operated a CSOP under which all
employees are eligible to receive awards in the form of market value
options. At the discretion of the Committee, awards are typically
granted subject to a three-year vesting period and following maturity,
participants have a seven-year period in which to exercise their
options.
Awards granted are based on a percentage of salary and where
appropriate may attract HMRC tax advantages. Employees based
outside of the UK will receive non-tax advantaged share option
awards and where this is not possible the Committee considers
awards in the form of share appreciation rights.
All awards granted to Executive Directors and Senior Management
are subject to performance conditions. These are explained in the
Remuneration Committee Report on page 91.
The Alliance Long-Term Incentive Plan 2019 (LTIP)
In 2019 the Company introduced the LTIP which forms part of the
remuneration strategy for the Executive Directors and members of the
Senior Leadership Team. Awards are granted in the form of nil-cost
share options based on a percentage of base salary. All awards
granted under the LTIP are subject to performance conditions and
malus and clawback provisions. Subject to achieving the performance
conditions set by the Committee, such awards will vest three years
from the date of grant and participants will have 12 months in which
to exercise any vested award.
Details in relation to awards granted to the Company’s Executive
Directors are contained in the Remuneration Report on pages 91
and 93.
Employee Benefit Trust (EBT/Trust) and management
of dilution
The Company manages dilution rates within the standard guidelines.
In 2017 the Group established the Alliance Pharma Employee Benefit
Trust to facilitate the acquisition of Ordinary Shares in the Company
for the purpose of satisfying awards granted under share option
schemes. The Group has been operating the Trust to help manage
dilution limits in line with good practice. The Trust is administered by
an independent Trustee who operates the Trust independently of the
Group. The EBT is a discretionary trust, the sole beneficiaries being
employees (including Executive Directors) of the Group who have
received applicable awards.
The Trustees must act in the best interests of the beneficiaries as a
whole and will exercise their discretion in deciding whether or not
to act on any recommendations proposed by the Company. Any
assets held by the Trust would be consolidated into the Group’s
financial statements.
96
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
The Company may grant awards on the basis that it is the Company’s
intention to settle the exercise of awards through shares purchased in
the open market on an arm’s length basis. Awards granted and settled
in this way are not included in the Company’s headroom and dilution
calculation. The Group may fund (although it has not yet needed
to and therefore has not done so) the EBT to purchase on the
EBT’s own account shares in the Company on the open market.
This is in return for the EBT agreeing to use the shares in the Company
that it holds to satisfy certain outstanding awards made under the
Company’s share option schemes. The purchasing in the market of
shares to satisfy the exercise of options places a cash requirement on
the business. To date no shares have been purchased by the Trust for
satisfaction of outstanding or future share option awards.
To further help manage dilution limits, and where appropriate
and agreed with the Committee, share options are net settled
upon exercise.
Employee share dealing and share ownership
In accordance with AIM Rule 21, all employees are made aware of
and are required to comply with the Company’s Share Dealing Policy
when dealing in the Company’s shares or exercising options over
shares. The Dealing Code sets out the rules relating to close periods,
clearance procedures, time frames and disclosure requirements.
The Company operates a share ownership policy under which the
Executive Directors and certain other employees are required when
exercising options to acquire and maintain an interest in Alliance
Pharma shares up to a percentage of base salary, details of which
can be found on page 94.
Accounting policies, financial instruments and risks
Details of the Group’s financial instruments and financial risk
management disclosures can be found in note 20 of the Group
financial statements on pages 140 to 146.
Charitable donations
During the year ended 31 December 2020, the Group contributed
£212,000 (2019: £55,000) to charitable causes. Further information
on our social responsibilities can be found on page 50.
Political donations
No political donations or contributions were made, or political
expenditure incurred during the period.
Directors’ obligations to the auditor
The Directors confirm that:
• so far as each of the Directors is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
• they have each taken all the steps that they ought to have taken
as Directors to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
Company’s Auditor
Our auditor, KPMG LLP, has expressed its willingness to continue in
office and a resolution to reappoint KPMG LLP as auditor for the next
year will be proposed at the Annual General Meeting.
Annual General Meeting
This year’s AGM will take place at 10.00am on 19 May 2021. As
permitted under the Company’s Articles of Association, the Board
has taken the decision to hold this year’s AGM in the form of a hybrid
meeting. This is due to the ongoing uncertainties relating to lockdown
measures due to COVID-19. The Notice of AGM together with details
on how to attend the meeting will be circulated to shareholders and
published on the Company’s website in due course.
Electronic communications
Shareholders are encouraged to move away from hard copy
Company communications. This means that, instead of being
obliged to send Annual Reports, notices of shareholder meetings
and other documents to shareholders in hard copy by post, the
Company can instead elect to publish them on its website at
www.alliancepharmaceuticals.com. Using the website and
email allows us to reduce printing and postage costs and it
is better for many shareholders who can choose and access
just the information they need, from the website, at any time.
Shareholders still have the right to ask for paper versions of
shareholder information, but we are strongly encouraging all
shareholders to consider the electronic option.
Shareholders can vote electronically using the following link,
www.signalshares.com. Registering your details on the Link share
portal also gives shareholders easy access to information about
their shareholdings and the ability to vote at general meetings or
appoint a proxy to vote.
Chris Chrysanthou
Company Secretary
23 March 2021
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under the AIM
Rules of the London Stock Exchange they are required to prepare
the Group financial statements in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and applicable law and they have elected to
prepare the parent Company financial statements on the same basis.
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 of the Group and parent Company and
of the Group’s profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable, relevant
and reliable;
• state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006;
• assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and,
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report and a Directors’ Report
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
97
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 98
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated and Company
Cash Flow Statements
Notes to the Financial Statements
100
108
109
110
111
112
113
114
115
Financial
Statements
99
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Financial Statements
Independent
Auditor’s Report
Independent auditor’s report
to the members of Alliance Pharma plc
1. Our opinion is unmodified
We have audited the financial statements of Alliance Pharma plc
(“the Company”) for the year ended 31 December 2020 which
comprise the the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Balance
Sheet, Company Balance Sheet, Consolidated Statement of
Changes in Equity, Company Statement of Changes in Equity,
Consolidated and Company Cash Flow Statements, and the
related notes, including the accounting policies in Note 2.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our
ethical responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
In our opinion:
– 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 2020 and of the Group’s profit for the year then
ended;
Overview
Materiality: Group
financial statements
as a whole
£1.5m (2019: £1.4m)
4.7% (2019: 4.3%) of normalised Group profit
before tax
– the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
– the parent Company financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of, and as
applied in accordance with the provisions of, the Companies
Act 2006; and
– the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Coverage
92% (2019: 92%) of group profit before tax
Key audit matters vs 2019
Recurring risks
Impairment of intangible assets
(including goodwill)
Recoverability of parent
company’s investment in
subsidiaries
New: Intangible assets:
Selection of useful economic lives
New: Business combinations:
valuation of identified intangible
assets
100
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows:
Impairment of intangible assets
and goodwill
(£412.9m; 2019: £328.7m)
Refer to page 119 (accounting policy) and
page 131 (financial disclosures).
The risk
Forecast-based valuations
The estimated recoverable amount of intangible
assets is subjective due to the inherent uncertainty
involved in forecasting and discounting future cash
flows.
This assessment is based on assumptions (such as
forecast cash flows, discount rates, growth rates
and, in the case of finite life assets, the estimated
useful economic lives), which are inherently highly
judgemental.
Given the quantum of the balance in relation to our
materiality and the inherent estimation uncertainty
associated with these judgements, we concluded this
to be our most significant Key Audit Matter.
The effect of these matters is that, as part of our
risk assessment, we determined that the value
in use across the portfolio has a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality
for the financial statements as a whole. The financial
statements (note 11) disclose the range/sensitivity
estimated by the Group.
Our response
We applied the procedures below to higher
risk CGUs for detailed testing based on historic
headroom levels, sensitivities, historic forecasting
accuracy, issues identified from discussions with
commercial, regulatory and financial management
and information about the products available in the
public domain.
— Benchmarking assumptions: Using our own
valuations specialist, we challenged the Group’s
selection of discount and growth rates by
comparing those used to externally derived
data (including competitor analysis). In addition,
we assessed whether the forecasts (including
growth rate) were consistent with current
business strategies in place, and that the selected
useful economic lives for finite life assets were
appropriate;
— Sensitivity analysis: We performed our own
analysis to assess the sensitivity of the impairment
reviews to changes in the key assumptions,
including the discount rate, growth rate, useful
economic lives, and the forecast cash flows;
— Historical comparisons: We compared the
previously forecast cash flows to actual results to
assess the historical accuracy of forecasting;
— Assessing transparency: We assessed the
adequacy of the Group’s disclosures in respect
of the sensitivity to changes in key assumptions.
For the remaining population of CGUs, we
performed historical comparisons, sensitivity analysis
and held discussions with the directors.
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101
Financial Statements
Independent
Auditor’s Report
continued
2. Key audit matters: our assessment of risks of material misstatement (continued)
Intangible assets: selection of useful
economic lives
(£381.6m; 2019: £312.1m)
Refer to page 119 (accounting policy) and
page 131 (financial disclosures).
Business combinations: valuation of
identified intangible assets
(£90.0m)
Refer to page 122 (accounting policy) and
page 154 (financial disclosures).
The risk
Subjective estimate
Our response
Our procedures included:
Certain intangible assets are sensitive to the
selection of useful economic lives due to the impact
of this estimate on the recoverable amount and
amortisation charged against finite life assets.
The estimate is subjective due to the inherent
uncertainty involved in determining an appropriate
useful economic life for assets of this nature.
This assessment is based on factors that include how
established the brand is, the stability of the industry,
barriers to entry and risks of obsolescence.
The effect of these matters is that, as part of our
risk assessment, we determined that the selection
of useful economic lives has a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality
for the financial statements as a whole. The financial
statements (note 11) disclose the range/sensitivity
estimated by the Group.
— Our sector experience: Evaluated the
assumptions used in the selection of useful
economic lives;
— Benchmarking assumptions: Compared the
group’s assumptions to internal and externally
derived data such as projected growth of specific
products or markets, and an assessment of certain
products’ competition;
— Sensitivity analysis: Performed a sensitivity
analysis on the assumptions noted above and
performed a comparison against peer companies;
— Assessing transparency: Assessed the adequacy
of the Group’s disclosures in respect
of the change in estimate.
Forecast-based valuations
Our procedures included:
On 29 December 2020 the Group completed
the acquisition of 100% of the share capital of
Biogix Inc, a privately held, US-based consumer
healthcare company.
Accounting for acquisitions can be complex, with
judgement required in both the identification of
assets acquired (including any intangible assets),
and the valuation of those assets and liabilities
assumed, in accordance with IFRS 3 ‘Business
Combinations’.
The calculation of fair value is subjective due to
the inherent uncertainty involved in the valuation
of assets and liabilities, and this requires the
application of judgement by management and
technical expertise. In particular the method of
valuation, future forecasts (including cash-flow
forecasts) and underlying assumptions may all have
a material impact on the valuation of assets and
liabilities, notably on the valuation of intangible
assets which typically represents the most significant
assets acquired in acquisitions of this nature.
— Test of detail: Reviewed the sale agreement
and the accounting for the acquisition, including
review of the identification of assets acquired
(including any potential intangible assets) and
the valuation of assets acquired and liabilities
assumed.
— Test of detail: Considered the completeness of the
intangible assets identified by management and
the valuation of those intangible assets with the
assistance of our corporate finance specialist.
— Benchmarking assumptions: Assessed the
appropriateness of the valuation models used,
assessment of the discount rate used in the models,
and a review of the cash flow forecasts used to
value the identified intangible assets and the fair
value of assets and liabilities acquired.
— Assessing transparency: Assessed the
completeness of disclosures for the acquisition
against the requirements of the relevant
accounting standards.
102
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Recoverability of parent company’s
investment in subsidiaries
(£199.8m; 2019: £194.6m)
Refer to page 121 (accounting policy) and
page 136 (financial disclosures).
The risk
Low-risk, high value
Our response
Our procedures included:
The carrying amount of the parent company’s
investments in subsidiaries represents 99.9% (2019:
99.9%) of the company’s total assets.
Their recoverability is not at a high risk of significant
misstatement or subject to significant judgement.
However, due to their materiality in the context
of the parent company financial statements, this
is considered to be the area that had the greatest
effect on our overall parent company audit.
— Tests of detail: We compared the carrying
amount of 100% of the investments with the net
assets value of the respective subsidiaries, being
an approximation of their minimum recoverable
amount, to identify whether the net asset values
were in excess of the carrying amounts and
assessed whether those subsidiaries have
historically been profit-making. The Group audit
team performs the statutory audit of all material
investments;
— Test of detail: Where the carrying value of
the investment exceeded the net assets of the
subsidiary we obtained the forecasts used
by the directors in their assessment of the
recoverability of the investments in the Company
balance sheet. We challenged and assessed the
underlying assumptions used in these forecasts,
taking into consideration the assumptions used
by the directors in testing the recoverability of
the intangible assets at a Group level and the
sensitivity of impairment of the parent company’s
investment in subsidiaries to these assumptions.
We continue to perform procedures over going concern and the impact of uncertainties due to the UK exiting the European Union on our audit,
however given the passage of time, the level of uncertainty over the impact of Covid-19 and Brexit on the Group has reduced.
As a result of these matters, we have not assessed these risks as the most significant in our current year audit and, therefore, are not separately
identified in our report this year.
103
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Financial Statements
Independent
Auditor’s Report
continued
3. Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at
£1.5m (2019: £1.4m), determined with reference to a benchmark
of group profit before tax, normalised to exclude the impairment
and amortisation of intangible assets (as disclosed in note 5) of
£19.2m (2019: normalised to exclude costs relating to the return
of Xonvea Licensing Rights of £1.7m), of which it represents 4.7%
(2019: 4.3%).
Materiality for the parent company financial statements as a
whole was set at £1.4m (2019: £1.3m), determined with reference
to a benchmark of company total assets, of which it represents
0.7% (2019: 0.7%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across
the financial statements as a whole.
Performance materiality was set at 75% (2019: 75%) of materiality
for the financial statements as a whole, which equates to £1.125m
(2019: £1.05m) for the group and £1.05m (2019: £0.975m)
for the parent company. We applied this percentage in our
determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £75,000 (2019:
£70,000), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the group’s 19 (2019: 18) reporting components, we
subjected 4 (2019: 4) to full scope audits for group purposes.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above
and the information to be reported back. The Group team
approved the component materialities, which ranged from £0.6m
to £1.0m having regard to the mix of size and risk profile of the
Group across the components. The work on 1 of the 4 components
(2019: 1 of the 4 components) was performed by component
auditors and the rest, including the audit of the parent company,
was performed by the Group team.
Normalised group
profit before tax
£32.2m (2019: £32.9m)
Group Materiality
£1.5m (2019: £1.4m)
£1.5m
Whole financial statements
materiality (2019: £1.4m)
£1.0m
Range of materiality
at four components
(£0.6m to £1.0m)
(2019: £0.6m to £0.9m)
£75,000
Misstatements reported to
the audit committee
(2019: £70,000)
Group profit before tax
8
8
92%
(2019: 92%)
92
92
Normalised PBT
Group materiality
Group revenue
11
8
89%
(2019: 92%)
92
89
Group total assets
2
7
98%
(2019: 93%)
93
98
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Residual components
104
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Alliance Pharma plc – Annual Report and Accounts 2020
4. Going concern
Our conclusions based on this work:
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group and the Company’s financial position
means that this is realistic. They have also concluded that there are
no material uncertainties that could have cast significant doubt
over their ability to continue as a going concern for at least a year
from the date of approval of the financial statements (“the going
concern period”).
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
Company’s financial resources or ability to continue operations
over the going concern period. The risks that we considered most
likely to adversely affect the Group’s and Company’s available
financial resources and/or metrics relevant to debt covenants over
this period were:
– we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
– we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company’s ability to
continue as a going concern for the going concern period; and
– we found the going concern disclosure in note 2.18 to be
acceptable
However, as we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the above conclusions are not a guarantee that the Group or the
Company will continue in operation.
– The impact on customer confidence as a result of a slowdown in
5. Fraud and breaches of laws and regulations –
the Global economy;
– Constraints on supply chain, sourcing or logistics and the impact
it could have on the Group’s key products; and
– The impact that changes in product regulation could have on
the ability to sell new or existing products.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
comparing severe, but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available financial resources and covenants indicated by the
Group’s financial forecasts.
Our procedures also included a critical assessment of the
assumptions in the Group’s base case and downside scenarios,
in particular in relation to the recent impact of Covid-19 on the
economic situation worldwide (and its impact on the Group) and
our knowledge of the entity and the sector in which it operates.
We considered whether the going concern disclosure in note 2.18
to the financial statements gives a full and accurate description of
the directors’ assessment of going concern, including the identified
risks.
ability to detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
– Enquiring of directors, and the audit committee, and inspection
of policy documentation as to the Group’s high-level policies
and procedures to prevent and detect fraud, including the
Group’s channel for “whistleblowing”, as well as whether they
have knowledge of any actual, suspected or alleged fraud;
– Reading Board and Audit Committee meeting minutes;
– Considering remuneration incentive schemes and performance
targets for management and the directors;
– Using analytical procedures to identify any unusual or
unexpected relationships; and
– Using our own forensic specialists to assist us in identifying
fraud risks based on discussions of the circumstances of
the Group.
105
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Independent
Auditor’s Report
continued
5. Fraud and breaches of laws and regulations –
ability to detect continued
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the
audit. This included communication from the group to component
audit teams of relevant fraud risks identified at the Group level
and request to component audit teams to report to the Group
audit team any instances of fraud that could give rise to a material
misstatement at group.
As required by auditing standards, and taking into account
possible pressures to meet profit targets, we perform procedures
to address the risk of management override of controls and the
risk of fraudulent revenue recognition, in particular the risk that
revenue is recorded in the wrong period and the risk that Group
and component management may be in a position to make
inappropriate accounting entries.
We also identified fraud risks related to the impairment of
intangible assets (including goodwill) and the selection of useful
economic lives of intangible assets in response to possible
pressures to meet profit targets.
Further detail in respect of the impairment of intangible assets
(including goodwill) and selection of useful economic lives of
intangible assets are set out in the key audit matter disclosures in
section 2 of this report.
We performed procedures including:
– Identifying journal entries and other adjustments to test for all
full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included
those posted to unusual accounts, and journal descriptions
containing specific key words;
– Evaluating the business purpose of significant unusual
transactions; and
– Assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience, through
discussion with the directors (as required by auditing standards),
and discussed with the directors the policies and procedures
regarding compliance with laws and regulations.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. This included communication from the
group to component audit teams of relevant laws and regulations
identified at the Group level, and a request for component auditors
to report to the group team any instances of non-compliance with
laws and regulations that could give rise to a material misstatement
at group.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation and taxation legislation, and we assessed the
extent of compliance with these laws and regulations as part of
our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect:
health and safety, anti-bribery, competition laws, employment
law, and certain aspects of company legislation recognising
the nature of the Group’s activities. Auditing standards limit the
required audit procedures to identify non-compliance with these
laws and regulations to enquiry of the directors and inspection of
regulatory and legal correspondence, if any. Therefore if a breach
of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of
law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
106
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Alliance Pharma plc – Annual Report and Accounts 2020
6. We have nothing to report on the other information in
the Annual Report and accounts
The directors are responsible for the other information presented
in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely
on that work we have not identified material misstatements in the
other information.
Strategic report and directors’ report
Based solely on our work on the other information:
– we have not identified material misstatements in the strategic
report and the directors’ report;
– in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
7. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
– 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
– the parent Company financial statements are not in agreement
with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law
are not made; or
– we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 97,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
9. The purpose of our audit work and to whom we owe
our responsibilities
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.
Andrew Campbell-Orde
(Senior Statutory Auditor) for and on behalf of
KPMG LLP, Statutory Auditor
Chartered Accountants
66 Queen Square, Bristol BS1 4BE
23 March 2021
107
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Consolidated Income
Statement
Revenue
Cost of sales
Gross profit
Operating expenses
Administration and marketing expenses
Amortisation of intangible assets
Impairment of goodwill and intangible assets
Note
3,33
5
5
5
Return of Xonvea Licensing Rights
Disposal of Flammacerium
Operating profit
Finance costs
Interest payable and similar charges
Finance costs
Profit before taxation
Taxation
Profit for the period attributable to equity
shareholders
Earnings per share
Basic (pence)
Diluted (pence)
–
–
–
–
–
–
–
Total
£000s
135,637
(49,561)
86,076
(46,351)
(179)
(284)
(1,816)
(1,672)
(145)
Year ended 31 December 2020
Year ended 31 December 2019
Non-
underlying
£000s
(Note 5)
Total
£000s
Underlying
£000s
Non-
underlying
£000s
(Note 5)
Underlying
£000s
129,801
(46,985)
82,816
–
–
–
129,801
135,637
(46,985)
(49,561)
82,816
86,076
(44,614)
(1,300)
(45,914)
(46,351)
–
–
(7,155)
(7,155)
(12,057)
(12,057)
(179)
(284)
–
–
–
–
–
–
–
–
–
(1,672)
(145)
36,828
(20,512)
16,316
37,446
(1,817)
35,629
(2,657)
(643)
(3,300)
–
–
–
(2,657)
(3,777)
(643)
(776)
(3,300)
(4,553)
–
–
–
(3,777)
(776)
(4,553)
33,528
(20,512)
13,016
32,893
(1,817)
31,076
(6,372)
1,383
(4,989)
(6,414)
348
(6,066)
27,156
(19,129)
8,027
26,479
(1,469)
25,010
5
5
6
6
4
8
10
10
5.11
5.05
1.51
1.49
5.09
4.99
4.80
4.72
Share-based employee remuneration
7, 23
(1,374)
(1,374)
(1,816)
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.
108
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial Statements
Consolidated Statement
of Comprehensive Income
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign exchange translation differences (net of deferred tax)
Forward exchange forward contracts – cash flow hedge (net of deferred tax)
Interest rate swaps – cash flow hedge (net of deferred tax)
Total comprehensive income for the year
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
8,027
25,010
(1,051)
(250)
27
6,753
(1,495)
489
(23)
23,981
109
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Financial Statements
Consolidated Balance Sheet
Assets
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Deferred tax
Other non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Equity
Ordinary share capital
Share premium account
Share option reserve
Other reserve
Cash flow hedging reserve
Translation reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Loans and borrowings
Other liabilities
Deferred tax liability
Current liabilities
Corporation tax
Trade and other payables
Derivative financial instruments
Total liabilities
Total equity and liabilities
Note
31 December 2020
£000s
31 December 2019
£000s
11
12
21
14
15
20
16
22
18
19
21
17
20
412,872
15,921
2,139
682
431,614
22,917
25,114
310
28,898
77,239
508,853
5,329
150,645
8,426
(329)
239
(1,055)
117,703
280,958
138,328
3,200
56,181
197,709
1,435
28,736
15
30,186
227,895
508,853
328,660
11,554
1,710
676
342,600
15,518
30,992
697
17,830
65,037
407,637
5,294
149,036
7,208
(329)
462
(4)
112,513
274,180
77,040
2,401
29,810
109,251
2,344
21,815
47
24,206
133,457
407,637
The financial statements were approved by the Board of Directors on 23 March 2021.
Peter Butterfield
Director
Andrew Franklin
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
Company number 04241478
110
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial Statements
Company Balance Sheet
Assets
Non-current assets
Investment and loans to subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Ordinary share capital
Share premium account
Share option reserve
Retained earnings
Total equity
Liabilities
Current liabilities
Trade and other payables
Corporation tax
Total liabilities
Total equity and liabilities
Note
31 December 2020
£000s
31 December 2019
£000s
13
15
16
22
17
199,776
194,630
36
297
333
24
97
121
200,109
194,751
5,329
150,645
7,955
34,912
198,841
306
962
1,268
200,109
5,294
149,036
6,846
32,316
193,492
225
1,034
1,259
194,751
The Company’s profit for the year was £5,433,000 (2019: £12,161,000).
As permitted by section 408 of the Companies Act 2006, no separate Income Statement is presented in respect of the Parent Company.
The financial statements were approved by the Board of Directors on 23 March 2021.
Peter Butterfield
Director
Andrew Franklin
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
Company number 04241478
111
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Consolidated Statement
of Changes in Equity
Ordinary
share
capital
£000s
Share
premium
account
£000s
Other
reserve
£000s
Cash flow
hedging
reserve
£000s
Translation
reserve
£000s
Share
option
reserve
£000s
Retained
earnings
£000s
Total equity
£000s
Balance 1 January 2019
5,182
144,639
(329)
(4)
1,491
6,121
95,099
252,199
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the year
Other comprehensive income
Foreign exchange forward contracts – cash flow
hedge (net of deferred tax)
Interest rate swaps – cash flow hedge (net of
deferred tax)
Foreign exchange translation differences (net of
deferred tax)
Total comprehensive income for the year
112
4,397
–
–
112
–
–
–
–
–
–
–
4,397
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance 31 December 2019
5,294
149,036
(329)
–
–
–
–
–
489
(23)
–
466
462
–
–
–
–
–
–
–
(1,495)
(1,495)
–
–
1,087
1,087
–
–
–
–
–
–
4,509
(7,596)
(7,596)
–
1,087
(7,596)
(2,000)
25,010
25,010
–
–
–
489
(23)
(1,495)
25,010
23,981
(4)
7,208
112,513
274,180
Balance 1 January 2020
5,294 149,036
(329)
462
(4)
7,208
112,513
274,180
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the year
Other comprehensive income
Foreign exchange forward contracts – cash flow
hedge (net of deferred tax)
Interest rate swaps – cash flow hedge (net of
deferred tax)
Foreign exchange translation differences (net of
deferred tax)
Total comprehensive income for the year
35
1,609
–
–
35
–
–
–
–
–
–
–
1,609
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(250)
27
–
–
–
–
–
–
–
–
(1,051)
(223)
(1,051)
–
–
1,218
1,218
–
–
–
–
–
–
1,644
(2,837)
(2,837)
–
1,218
(2,837)
25
8,027
8,027
–
–
–
(250)
27
(1,051)
8,027
6,753
Balance 31 December 2020
5,329
150,645
(329)
239
(1,055)
8,426
117,703
280,958
112
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial Statements
Company Statement
of Changes in Equity
Ordinary share
capital
£000s
Share premium
account
£000s
Share option
reserve
£000s
Retained
earnings
£000s
Total
equity
£000s
Balance 1 January 2019
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the period and total comprehensive income
5,182
112
–
–
112
–
144,639
4,397
–
–
4,397
–
Balance 31 December 2019
5,294
149,036
6,846
6,121
27,751
183,693
–
–
725
725
–
–
(7,596)
–
(7,596)
12,161
32,316
4,509
(7,596)
725
(2,362)
12,161
193,492
5,294
149,036
6,846
32,316
193,492
Balance 1 January 2020
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the period and total comprehensive income
35
–
–
35
–
1,609
–
–
1,609
–
Balance 31 December 2020
5,329
150,645
–
–
1,109
1,109
–
7,955
–
(2,837)
–
(2,837)
5,433
34,912
1,644
(2,837)
1,109
(84)
5,433
198,841
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OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Financial Statements
Consolidated and Company
Cash Flow Statements
Cash flows from operating activities
Cash generated from operations
Tax paid
Cash flows from/(used in) operating activities
Investing activities
Interest received
Dividend received
Acquisition of Biogix Inc
Contribution from/(investment in) subsidiary
Development expenditure
Purchase of property, plant and equipment
Proceeds from disposal of Joint Venture Investment
Proceeds from disposal of intangibles
Net cash (used in)/from investing activities
Financing activities
Interest paid and similar charges
Loan issue costs
Capital lease payments
Proceeds from exercise of share options
Dividend paid
Proceeds from borrowings
Repayment of borrowings
Note
24
31
13
11
12
31
30
9
20
20
Net cash provided by/(used in) financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange losses on cash and cash equivalents
Cash and cash equivalents at 31 December
16
Group
Company
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
46,405
(4,838)
41,567
10
–
(82,667)
–
–
(4,612)
–
1,405
(85,864)
(2,866)
(362)
(884)
1,644
(2,837)
82,595
(21,541)
55,749
11,452
17,830
(384)
28,898
38,958
(3,200)
35,758
23
–
–
–
(12)
(4,145)
500
350
(3,284)
(2,505)
(1,401)
(726)
4,509
(7,596)
1,054
(18,533)
(25,198)
7,276
10,893
(339)
17,830
(2,133)
(1,012)
(3,145)
–
2,800
–
1,738
–
–
–
–
(773)
(445)
(1,218)
–
7,596
–
(3,277)
–
–
–
–
4,538
4,319
–
–
–
1,644
(2,837)
–
–
–
–
–
4,509
(7,596)
–
–
(1,193)
(3,087)
200
97
–
297
14
83
–
97
The accompanying accounting policies and notes form an integral part of these financial statements.
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial Statements
Notes to the Financial Statements
1. General information
Alliance Pharma plc (‘the Company’) and its subsidiaries (together ‘the Group’) acquire, market and distribute consumer healthcare products
and prescription medicines. The Company is a public limited company, limited by shares, registered, incorporated and domiciled in England
and Wales in the UK. 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 23 March 2021.
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, unless otherwise stated.
2.1 Basis of preparation
These financial statements have been prepared and approved by the Directors in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 (‘Adopted IFRSs’). The financial statements have been prepared under the
historical cost convention, with the exception of derivatives which are included at fair value.
2.2 Consolidation
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’) and equity account
the Group’s interest in Joint Ventures. The parent Company financial statements present information about the Company as a separate entity
and not about the Group.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Joint Ventures
An entity is treated as a Joint Venture where the Group has rights to the net assets of the arrangement, rather than rights to its assets and
obligations for its liabilities. Joint Ventures are accounted for using the equity method (equity accounted investees) and are initially recognised
at cost. The consolidated financial statements include the Group’s share of the total comprehensive income and equity movements of equity
accounted investees, from the date that joint control commences until the date that joint control ceases.
Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated.
2.3 Judgements and estimates
The preparation of the consolidated financial statements requires the Directors 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 relevant circumstances. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed by the Directors on an ongoing basis.
Judgements
The following are the critical judgements, apart from those involving estimates (which are dealt with separately below), that the Directors have
made in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the Group’s
financial statements.
These are as follows:
• Selection of indefinite useful economic lives for certain intangible assets (note 11).
• Identification and presentation of non-underlying items (note 5).
• Assessment of the Statement of Objection issued by the UK’s Competition and Markets Authority (‘CMA’) (note 26).
• Identification of intangible assets and other fair value adjustments in business combinations (note 31).
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OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 2. Summary of significant accounting policies continued
2.3 Judgements and estimates continued
Selection of indefinite useful economic lives for certain intangible assets
As a result of the 2020 Strategic Review, the Group has segregated its portfolio of assets into two areas: Consumer Healthcare brands and
Prescription Medicines. Following this determination the Directors considered the continuing appropriateness of indefinite useful lives which
have previously been adopted across the intangible brand asset portfolio. This in the context of the focus on growing Consumer Healthcare
brands, their increasing dominance of the portfolio and the planned rollout of Digital Excellence programmes, as further detailed in the
Strategic Report. Prescription Medicines have been considered in the context of more limited requirement for promotional investment, and
potential exposure to other market factors detailed further below.
For the majority of Consumer Healthcare brand assets, indefinite useful lives have been judged to remain appropriate. This is due to the
expected long-term growth profile of the Consumer Healthcare business and the enduring nature of the brands, which are supported by
continuing marketing spend.
For Prescription Medicine brand assets, finite useful lives of up to 20 years have been adopted prospectively from 1 January 2020. The
determination of this lifespan takes into account all relevant factors for each individual asset, including typical pharmaceutical asset life cycles
and the potential development of alternative treatments over time.
As a result of this change in estimate for 2020 and subsequent years, the carrying value of the Prescription Medicines and certain other brand
assets will be amortised to the profit and loss account over their useful lives. This generates an annual non-cash amortisation charge of £7.2m.
The Group has conducted impairment reviews for all intangible brand assets. These reviews, together with the change in useful life assumption
for Prescription Medicines assets, have resulted in a number of impairments as detailed in note 11.
Identification and presentation of non-underlying items
The Group has updated its classification policy for non-underlying items (note 5). Following the update all amortisation and impairment
charges for intangible assets will be included as non-underlying items for 2020 and subsequent years, in line with the majority of peer
companies of the Group. The revaluation of deferred tax balances following substantial tax legislation changes will also be included as non-
underlying items for 2020 and subsequent years.
The Directors believe that this classification of underlying and non-underlying items, when considered together with total statutory results,
provides investors, analysts and other stakeholders with helpful complementary information to understand better the financial performance and
position of the Group from period to period, and allows the Group’s performance to be more easily compared against the majority of its peer
companies. These measures are also used by management for planning and reporting purposes. They may not be directly comparable with
similarly described measures used by other companies.
Estimates
IAS 1 requires the disclosure of assumptions and estimates at the end of the current reporting period that have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and liabilities within the next financial year.
The Directors consider these estimates to be as follows:
• Key assumptions used in discounted cash flow projections for impairment testing of certain intangible assets (note 11).
• Useful economic lives selected for intangible assets with finite lifespans (note 11).
• Fair value measurement of assets and liabilities acquired in business combinations (note 31).
2.4 Revenue recognition
Identification of performance obligations
Revenue comprises consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities, namely the
distribution of pharmaceutical products. The Group has assessed the performance obligations as being each unit of good sold by the Group.
The Group receives royalties in relation to certain agreements with distributors in exchange for the licensed use of intellectual property and
trademarks owned by the Group, which are generally based on sales volumes. The Group also receives product margin generated by a third
party on its behalf under certain transitional arrangements. The Group has assessed the performance obligations as being each unit of good
sold by the third party.
Transaction price
The transaction price for each performance obligation comprises the stand-alone selling price for the product excluding value-added tax and
net of rebates and discounts. Intra-Group sales are eliminated in the consolidated financial statements.
Royalty income and the deductions relating to rebates and discounts are based on the Group’s contractual obligations. Certain of the rebate
arrangements also include elements of variable consideration. The Group does not consider these elements to be significant, however an
estimate of variable consideration is included where appropriate. The IFRS 15 exemption from estimating variable consideration has been
applied to the Group’s sales-based royalties.
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued The Group has considered whether it is an ‘agent’ or ‘principal’ under IFRS 15 for each commercial arrangement and accounted for these
accordingly. The Group is considered the ‘principal’ for all key commercial relationships relating to sale of goods, except the relationship with
J&J as described in full under ‘Specific revenue streams’. This is because the Group controls each specified good before transfer to customers.
Timing of recognition
Under IFRS 15 an entity recognises revenue when it satisfies a performance obligation by transferring a good to a customer. An entity transfers
a good to a customer when the customer obtains control of that good. Control may be transferred either at a point in time or over time. For the
Group, revenue is recognised at a point in time when customers have control of the sold goods, or on an appropriate basis where royalty or
other arrangements are in place with third parties. To determine the point in time control is transferred for sale of goods the Group considers all
relevant indicators.
Specific revenue streams
The Group has the following recognition policies for different commercial arrangements:
(i) Pharmaceutical product sales – ex-works terms: Recognition at a point in time when each unit of pharmaceutical product is available to the
customer for collection. At this point in time the customer has an obligation to pay for the goods, legal title and significant risks and rewards
of ownership.
(ii) Pharmaceutical product sales – dispatch terms: Recognition at a point in time when each unit of pharmaceutical product is dispatched to the
customer. At this point in time the customer has an obligation to pay for the goods, legal title and significant risks and rewards of ownership.
(iii) Pharmaceutical product royalties receivable: Recognition at a point in time when the third party makes pharmaceutical product sales subject
to a royalty agreement with the Group.
(iv) Pharmaceutical product rebates payable (including VPAS): Recognition as a deduction from revenue when the third party makes
pharmaceutical product sales subject to a rebate agreement with the Group or when sales are made in the scope of the VPAS
Voluntary Scheme.
VPAS applies to branded, licensed medicines which are available on NHS prescription. Under the scheme, a fixed percentage of measured
sales is due to the Department of Health and Social Care and the rebate is calculated and paid on a quarterly basis. For medium-sized
companies, the VPAS scheme includes an exemption where total measured sales are less than £5.0m per year. As the Group’s total measured
sales in 2020 were under this threshold, the Group was exempt from any VPAS payments and, as a result, no amounts were deducted from
revenue (2019: no deduction).
(v) Pharmaceutical product transitional agreements: Recognition of a point in time when the third party makes pharmaceutical product sales
subject to a transitional agreement with the Group.
The amounts recognised in statutory revenue represent the product margin generated by the third party on behalf of the Group. Related
transitional agreement fees are recognised within administrative expenses.
This is relevant to Nizoral (note 33) where the Group has a transitional services agreement with J&J. Under the terms of the agreement, the
Group receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licences in the Asia-Pacific
territories transfer to Alliance. The Group has determined it is an ‘agent’ in this relationship as it does not control the sale of goods to third
party customers.
The Group does not consider that judgements made in evaluating when customers obtain control of a promised good to have significantly
influenced the timing of revenue recognition in the year.
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OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 2. Summary of significant accounting policies continued
2.5 Foreign currency
The consolidated financial statements are presented in Sterling, which is the presentational currency of the Group and the functional currency
of the 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 Sterling at the rate of exchange ruling at the balance sheet date. Foreign
exchange differences arising on translation are recognised in the income statement except for differences arising on the retranslation of a
financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are
recognised directly in other comprehensive income.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the
Group’s presentational currency, Sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the
transactions. Exchange differences arising from translation of foreign operations are reported in other comprehensive income and accumulated
in the translation reserve. Foreign currency differences arising on the retranslation of a hedge of a net investment in a foreign operation are
reported in other comprehensive income and accumulated in the translation reserve, to the extent that the hedge is effective.
2.6 Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s Chief Operating Decision Maker
(‘CODM’). The Group’s Board of Directors (‘the Board’) is the Group’s Chief Operating Decision Maker (‘CODM’), as defined by IFRS 8, and
all significant operating decisions are taken by the Board. In assessing performance, the Board reviews financial information for the Group,
substantially in the form of, and on the same basis as, the Group’s IFRS financial statements. Revenue and Gross profit are the key measures
reviewed by the CODM at the segmental reporting level.
2.7 Property, plant and equipment
Computer software and equipment, fixtures, fittings and equipment, plant and machinery and motor vehicles are stated at the cost of purchase
less any provisions for depreciation and impairment. Depreciation of an asset starts when the asset is available for use. The rates generally
applicable are:
Computer software and equipment
20% – 33.3% per annum, straight line
Fixtures, fittings and equipment
20% – 25% per annum, straight line
Plant and machinery
20% – 25% per annum, straight line
2.8 Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the Group’s
incremental borrowing rate.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the income
statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment.
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued
2.9 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is
tested annually for impairment.
Acquired intangible assets
(i) Brands
Separately acquired brands are shown at cost less accumulated amortisation and impairment. Brands acquired as part of a business
combination are recognised at fair value at the acquisition date, where they are separately identifiable. Brands are amortised over their useful
economic life, except when their life is determined as being indefinite.
Applying indefinite lives to certain acquired brands is appropriate due to the stable long-term nature of the business and the enduring nature of
the brands. Indefinite life brands are tested at least annually for impairment.
A review of the useful economic life of brands is performed annually, to ensure that these lives are still appropriate. If a brand is considered to
have a finite life, its carrying value is amortised over that period.
(ii) Patents
Where an acquired intangible includes a definite period of patent protection and the value attributed to the patent is considered material, the
Group has accounted for the value of the patent separate to the underlying brand. The patent is amortised over the period to patent expiry.
(iii) Distribution rights
Payments made in respect of product registration and distribution rights are capitalised where the rights comply with the above requirements
for recognition of acquired brands. If the registration or distribution rights are for a defined time period, the intangible asset is amortised over
that period. If no time period is defined, the intangible asset is treated in the same way as acquired brands with an indefinite life. 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.
Development costs
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. Development costs not
meeting the recognition criteria are expensed as incurred.
Impairment
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of
impairment. For all intangible assets and goodwill this includes estimation of the recoverable amount.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the ‘cash-generating unit’). The Directors have determined that the cash-generating units are at
product-group level.
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units, or (‘CGU’). For
the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment
is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is
allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are
recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
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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. Inventory 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.
2.11 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating
to investment and loans to subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.
2.12 Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in profit or loss unless designated
as cash flow hedges.
The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast
transactions arising from changes in foreign exchange rates.
At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge.
The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in
cash flows of the hedged item and hedging instrument are expected to offset each other.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is
recognised in other comprehensive income and accumulated in the cash flow hedging reserve. The effective portion of changes in the fair
value of the derivative that is recognised in other comprehensive income is limited to the cumulative change in fair value of the hedged item,
determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is
recognised immediately in profit or loss.
If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then
hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been
accumulated in the cash flow hedging reserve remains in equity until it is reclassified to profit or loss in the same period or periods as the
hedged expected future cash flows affect profit or loss.
If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the cash flow hedging
reserve and the cost of hedging reserve are immediately reclassified to profit or loss.
Translation risk
Exchange differences arising from the translation of the net investment in foreign operations are reported in other comprehensive income and
accumulated in the translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investment in foreign
operations, are recognised 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 reclassified to the
income statement when the foreign investment is disposed of.
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Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 2.13 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash
equivalents, loans and borrowings, and trade and other payables.
Modifications of financial instruments (including loans and borrowings) are reviewed quantitatively and qualitatively to determine if the
modification is ‘substantial’. Substantial modification of a financial liability results in derecognition of the original balance, and recognition of
a new financial liability at fair value. The difference between the carrying amount of the original financial liability and the fair value of the new
financial liability is charged to the income statement. A non-substantial modification of financial liability does not result in the derecognition of
the original balance, however may also result in a gain or loss recognised in the income statement.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using
the effective interest method, less any impairment losses. The Group’s trade receivables are subject to the IFRS 9 expected credit loss model.
The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance based on
historic default rates. The expected credit loss rate varies depending on whether and the extent to which settlement of the trade receivables is
overdue.
Accrued income represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only
the passage of time is required before payment becomes due.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part
of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.
Dividends and interest received are included in investing activities. Dividends and interest paid are included in financing activities.
Investments in debt and equity securities
The Company’s investment and loans to subsidiaries is stated at amortised cost less impairment.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost using the effective interest method.
2.14 Employee benefits – Share-based payment transactions
Employees (including Directors) of the Group receive part of their remuneration in the form of share-based payments, whereby, depending on
the scheme, employees render services in exchange for rights over shares (‘equity-settled transactions’) or entitlement to a future cash payment
(‘cash-settled transactions’), the amount of which is determined with reference to the Company’s share price.
The cost of equity-settled transactions with employees is measured, where appropriate, with reference to the fair value at the date on which
they are granted. Where options need to be valued an appropriate valuation model is applied. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of exercise restrictions and behavioural considerations. The cost of equity-
settled transactions is fully recharged to subsidiaries.
The cost of cash-settled transactions is measured with reference to the fair value of the liability, which is taken to be the closing price of the
Company’s shares. Until the liability is settled it is remeasured at the end of each reporting period and at the date of settlement, with any
changes in the fair value being recognised in the income statement.
The cost of equity-settled transactions is recognised, along with a corresponding increase in equity, over the years in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cost of
cash-settled transactions is recognised, along with a provision for expected cash settlement, over the vesting period.
At each reporting date, the cumulative expense recognised for equity-settled transactions reflects the extent to which the vesting period
has expired and the number of awards that, in the opinion of management, will ultimately vest. Management’s estimates are based on the
best available information at that date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is
conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that
all other performance conditions are satisfied.
The provision of shares to satisfy certain of the Group’s share option schemes can be facilitated by purchases of own shares by the Group’s
Employee Benefit Trust. The costs of operating the Trust is borne by the Group but is not material. To date, no shares have been purchased by
the Trust for satisfaction of outstanding or future share option awards.
The Employee Benefit Trust is considered to be controlled by the Group. The activities of the Trust are conducted on behalf of the Group
according to its specific business needs in order to obtain benefits from its operation and, on this basis, the assets held by the Trust are
consolidated into the Group’s financial statements.
121
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 2. Summary of significant accounting policies continued
2.15 Equity
‘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.
‘Retained earnings’ represents retained profit.
‘Other reserve’ represents the difference between the fair value and nominal value of shares issued on a reverse takeover.
‘Cash flow hedging reserve’ 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 translation of the net assets of overseas operations into the Group’s presentation
currency of Sterling.
2.16 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 for settlement and where a reliable estimate can be made of the amount of the obligation. Where
material, provisions have been discounted to their present value.
2.17 Business combinations
Business combinations are accounted for using the acquisition accounting method. Identifiable assets and liabilities acquired are measured
at fair value at acquisition date. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are
expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration
is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the
contingent consideration are recognised in profit or loss. The Group also engages in acquisitions of product-specific assets (such as brands
- set out in note 2.9). Where elements of the consideration paid are variable and based on future revenues, the cost of the intangible asset
recognised is based on the agreed minimum payments and any additional payments are expensed as the related sales occur.
122
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 2.18 Going concern
The Group is in a net current asset position of £47.1m (2019: £41.8m). The Group’s debt funding is provided by a £165m Revolving Credit
Facility (‘RCF’), together with a £50m accordion facility, with a syndicate of lenders. This facility is available until July 2024, following
utilisation of a one-year extension option in the year.
The Directors have prepared cash flow forecasts for a period of 12 months from the date of approval of these financial statements (the going
concern period). These indicate that the Group will have sufficient funds, given the RCF financing available, to meet its liabilities as they fall due
for that period. The cash flow forecasts include the current estimated impact of COVID-19.
Also, the Directors have considered the sensitivity of cash flow forecasts to severe downside scenarios. In particular, the Directors considered
a severe scenario involving a 25% decline in EBITDA against budget until Q1 2022 and no further reduction in net debt. Even in this unlikely
scenario, the forecasts indicate that the Group will have sufficient funds to meet its liabilities as they fall due, and will continue to comply with its
loan covenants, throughout the forecast period.
The RCF is drawn in short to medium-term tranches of debt which are repayable within 12 months of draw-down. These tranches of debt can
be rolled over provided certain conditions are met, including covenant compliance. The Group considers that it is highly unlikely it would be
unable to exercise its right to roll-over the debt based on the forecast covenant compliance in the severe downside modelled above. Even in a
more extreme scenario there are mitigating actions (within the control of the Group) it could take to maintain compliance with these conditions,
including future covenant requirements. The Directors therefore believe that the Group has the ability and the intent to roll-over the drawn RCF
amounts when due and consequently has presented the RCF as a non-current liability.
Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due
for at least 12 months from the date of approval of the financial statements and have therefore determined it is appropriate to adopt
the going concern basis in preparing the financial statements.
2.19 Alternative performance measures
The performance of the Group is assessed using Alternative Performance Measures (‘APMs’). The Group’s results are presented both before
and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides both
management and investors with useful additional information about the Group’s performance and aids effective comparison of the Group’s
trading performance from one period to the next and with similar businesses.
In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered
to be APMs. These measures are used by management to monitor ongoing business performance against both shorter-term budgets and
forecasts but also against the Group’s longer-term strategic plans. APMs are presented in note 33.
The Group does not consider adjusted profitability measures or APMs to be a substitute for, or superior to, IFRS measures.
123
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 3. Revenue and segmental information
The Group’s reportable segments are the strategic business units that represent different parts of the overall product portfolio. These being
Consumer Healthcare brands and Prescription Medicines. The business units are managed separately as each portfolio requires different
expertise to deliver the corresponding product offering. The segmental presentation reflects the decision in the year to reclassify the
portfolio, in recognition of the inherently different characteristics of these product types. Previously the business has been reported as a
single segment.
Operating segments are disclosed in a manner consistent with the internal reporting provided to the CODM during the reporting year. The
Group’s Board of Directors (‘the Board’) is the Group’s CODM. The Group evaluates performance of the operational segments on the basis
of revenue and gross profit. Other than intangible assets, disclosed in note 11, assets and liabilities are reported to the Board at Group level
and are not separated segmentally.
Revenue
Revenue information by brand
Consumer Healthcare brands:
Kelo-cote
Nizoral*
MacuShield
Vamousse
Aloclair
Ashton & Parsons
Oxyplastine
Other Consumer Healthcare brands
Total Revenue – Consumer Healthcare brands:
Prescription Medicines:
Hydromol
Flamma Franchise
Forceval
Optiflo
Ametop
Other prescription medicines
Total Revenue – Prescription Medicines
Total Revenue
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
34,748
13,260
6,751
5,626
7,601
3,408
3,140
10,806
85,340
6,304
5,897
4,893
3,056
1,465
22,846
44,461
129,801
31,039
11,528
8,236
6,538
8,057
2,676
3,458
12,192
83,724
6,732
7,647
4,409
2,921
2,272
27,932
51,913
135,637
* Nizoral is shown on an agency basis in statutory revenue. Nizoral revenue presented on a see-through income statement basis is included as an alternative performance measure in note 33.
Revenue information by geography
Classification by geography is based on customer location.
Europe, Middle East and Africa (EMEA)
Asia Pacific and China (APAC)
Americas (AMER)
Total Revenue
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
93,769
29,309
6,723
129,801
97,347
29,558
8,732
135,637
124
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued Operating segment results
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Year ended 31 December 2020
Consumer Healthcare
£000s
Prescription Medicines
£000s
85,340
(26,199)
59,141
44,461
(20,786)
23,675
Year ended 31 December 2019
Consumer Healthcare
£000s
Prescription Medicines
£000s
83,724
(25,228)
58,496
51,913
(24,333)
27,580
Total
£000s
129,801
(46,985)
82,816
Total
£000s
135,637
(49,561)
86,076
Major customers
The revenues from the Group’s largest customers are as follows. Two customers separately comprised 10% or more of revenue (2019: one).
Major customer 1 is a multinational organisation with sales in both EMEA and AMER regions.
Major customer 1 (Consumer Healthcare and Prescription Medicines sales in EMEA and AMER)
Major customer 2 (Consumer Healthcare sales in EMEA)
4. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Amounts receivable by the Company’s auditor and its associates in respect of:
– The audit of these financial statements
– The audit of the financial statements of subsidiaries
– Other assurance services
Amortisation of intangible assets
Impairment of intangible assets
Losses on disposals
Share options charge
Depreciation of plant, property and equipment
Loss on foreign exchange transactions
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
17,345
16,646
24,036
2,595
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
48
198
5
7,155
12,057
308
1,374
1,753
653
40
161
5
179
284
1,817
1,816
1,496
799
125
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 5. Non-underlying items
The Group presents a number of non-IFRS measures which exclude the impact of significant non-underlying items. This is to allow investors to
understand the underlying trading performance of the Group, and can exclude items such as: amortisation and impairment of intangibles; gains
or losses on disposal; remeasurement and accounting for the passage of time in respect of contingent considerations; and the revaluation of
deferred tax balances following substantial tax legislation changes. This assessment requires judgement to be applied by the Directors as to
which transactions are non-underlying and whether this classification enhances the understanding of the users of the financial statements.
Amortisation of intangible assets
Impairment of goodwill and intangible assets
Biogix acquisition costs
Return of Xonvea Licensing Rights
Disposal of Flammacerium
Total non-underlying items before taxation
Taxation on non-underlying items
Impact of UK tax rate change from 17% to 19%
Total non-underlying items after taxation
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
(7,155)
(12,057)
(1,300)
–
–
(20,512)
3,194
(1,811)
(19,129)
–
–
–
(1,672)
(145)
(1,817)
348
–
(1,469)
Amortisation of intangible assets
As disclosed in notes 2 and 11, finite useful lives of up to 20 years have been adopted prospectively from 1 January 2020 for Prescription
Medicines and certain other brand assets. This generates an annual amortisation charge of £7.2m. The amortisation charges are a significant
item considered unrelated to 2020 trading performance, and as such have been presented as non-underlying. This classification is in line with
the majority of peer companies of the Group.
Impairment of goodwill and intangible assets
The Group conducted impairment reviews for all intangible assets as part of its interim reporting to 30 June 2020. These reviews, together
with the change in useful life assumption for Prescription Medicines assets, resulted in impairment losses as the carrying value of certain cash-
generating units exceeded estimated recoverable amounts. Further details are provided in note 11. The impairment losses are significant items
resulting from changes in assumptions for future recoverable amounts. As such they are considered unrelated to 2020 trading performance,
and have been presented as non-underlying.
Biogix acquisition costs
Legal and professional fees related to the purchase of Biogix Inc (note 31) were £1.3m. These acquisition costs are a significant item considered
unrelated to 2020 trading performance, and as such have been presented as non-underlying.
Return of Xonvea Licensing Rights
In November 2019, the Group reached an agreement with Duchesnay Inc. of Canada (‘Duchesnay’) to return the UK and EU licensing rights to
Xonvea, a prescription medicine for the treatment of nausea and vomiting of pregnancy where conservative management has failed. The total
non-underlying loss on disposal was £1.7m (note 30). The disposal is a significant item considered unrelated to 2019 trading performance,
and as such has been presented as non-underlying.
Disposal of Flammacerium
In December 2019, the Group sold the global rights to the brand Flammacerium for gross cash consideration of £0.75m payable over six
years. The total non-underlying loss on disposal was £0.1m (note 30). The disposal is a significant item considered unrelated to 2019 trading
performance, and as such has been presented as non-underlying.
Impact of UK tax rate change from 17% to 19%
A change to the UK corporation tax rate was announced in the Chancellor’s Budget on 16 March 2016, reducing the main rate from 19%
to 17% from 1 April 2020. This commitment was abandoned in the Budget on 11 March 2020. As this change was substantively enacted on
17 March 2020, the effect is included in these financial statements. The change in tax rate is a significant item that relates only to deferred
tax, principally on intangibles, and is unrelated to 2020 trading performance. As such the rate change impact has been presented as non-
underlying.
126
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 6. Finance costs
Interest payable and similar charges
On loans and overdrafts
Amortised finance issue costs
Interest on lease liabilities
Finance income
Interest income
Net exchange losses
Finance costs – net
.
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
(1,988)
(581)
(88)
(2,657)
10
(653)
(643)
(3,300)
(3,191)
(491)
(95)
(3,777)
23
(799)
(776)
(4,553)
127
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 7. Directors and employees
Employee benefit expenses for the Group (including Directors) during the year were as follows:
Wages and salaries
Social security costs
Other pension costs (note 27)
Share-based employee remuneration (note 23)
The average number of employees of the Group (including Directors) during the year was:
Management and administration
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
16,437
1,958
994
1,374
20,763
15,432
2,443
812
1,816
20,503
Year ended
31 December 2020
Number
Year ended
31 December 2019
Number
221
219
Key management of the Group is the Board of Directors (including Non-executive Directors). Benefit expenses in respect of the key
management was as follows:
Directors’ remuneration
Pension contributions
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
1,069
48
1,117
991
43
1,034
During the year contributions were paid to defined contribution schemes for two Directors (2019: two).
Gain on share options exercised by Directors during the year was £54,000 (2019: £1,676,000). The notional non-cash IFRS 2 share-based
payment expense in respect of Directors was £217,000 (2019: £156,000).
The amounts set out above include remuneration in respect of the highest paid Director as follows:
Emoluments for qualifying services
Pension contributions
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
531
27
558
485
26
511
The notional non-cash IFRS 2 share-based payment expense in respect of the highest paid Director was £156,000 (2019: £114,000).
Average number of members of the Board of Directors (including Non-executive Directors) for the year ended 31 December 2020 was six
(2019: six).
128
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 8. Taxation
Analysis of the charge for the period is as follows:
Corporation tax
In respect of current period
Adjustment in respect of prior periods
Deferred tax (see note 21)
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Taxation
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
4,417
(123)
4,294
705
(10)
4,989
4,373
(227)
4,146
1,804
116
6,066
The difference between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to
the profit before tax is as follows:
Profit before taxation
Profit before taxation multiplied by standard rate of corporation tax in
the United Kingdom of 19.00% (2019: 19.00%)
Effect of:
Non-deductible expenses
Non-taxable income
Adjustment in respect of prior periods
Differences between current and deferred tax rates
Differing tax rates on overseas earnings
Share options
Movement in other tax provisions
Total taxation
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
13,016
31,076
2,473
5,904
614
(18)
(132)
1,811
40
(7)
208
4,989
166
–
(111)
(226)
277
(241)
297
6,066
The taxation charge for the year includes the impact on deferred tax of the increase in the main rate of UK tax from 17% to 19%, following the
abandonment of the proposed reduction to 17% in the Budget on 11 March 2020.
A further change to UK corporation tax was announced in the Budget on 3 March 2021, increasing the main rate of UK corporation tax from
19% to 25% with effect from 1 April 2023. As this change was not substantively enacted at the balance sheet date, the effect is not included in
these financial statements and UK timing differences have continued to be recognised at 19% for deferred tax purposes. The overall effect of
this change in policy, if it had applied to the deferred tax balance at the balance sheet date, would be to increase the overall net deferred tax
liability by £4.7m. The income tax expense for the period would have increased by £5.1m, with a credit of £0.2m to the revaluation reserve,
and a £0.2m credit to other comprehensive income.
The Group has calculated ‘adjusted underlying effective tax rate’ as an alternative performance measure in note 33.
129
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 9. Dividends
An interim dividend of 0.536p per share for the 2020 financial year was paid on 7 January 2021.
Amounts recognised as distributions to owners in 2020
Interim dividend for the 2019 financial year
The interim dividend for 2019 was paid on 10 January 2020.
Amounts recognised as distributions to owners in 2019
Interim dividend for the 2018 financial year
Final dividend for the 2018 financial year
Year ended
31 December 2020
Pence/share
£000s
0.536
2,837
Year ended
31 December 2019
Pence/share
£000s
0.487
0.977
2,524
5,072
7,596
The interim dividend for 2018 was paid on 10 January 2019. The final dividend for 2018 was paid on 11 July 2019.
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. There are no differences in earnings used to calculate each measure as a result of the dilutive employee share options.
A reconciliation of the weighted average number of Ordinary shares used in the measures is given below:
Basic EPS calculation
Employee share options
Diluted EPS calculation
Year ended
31 December 2020
Year ended
31 December 2019
531,062,798
520,687,101
6,256,040
9,471,693
537,318,838
530,158,794
The underlying basic EPS is intended to demonstrate recurring elements of the results of the Group before non-underlying items.
A reconciliation of the earnings used in the different measures is given below:
Earnings for basic EPS
Non-underlying items (note 5)
Earnings for underlying basic EPS
The resulting EPS measures are:
Basic EPS
Diluted EPS
Underlying basic EPS
Underlying diluted EPS
130
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
8,027
19,129
27,156
25,010
1,469
26,479
Year ended
31 December 2020
Pence
Year ended
31 December 2019
Pence
1.51
1.49
5.11
5.05
4.80
4.72
5.09
4.99
Financial StatementsNotes to the Financial Statements continued 11. Goodwill and intangible assets
The Group
Cost
At 1 January 2020
Acquisition (note 31)
Disposals
Exchange adjustments
At 31 December 2020
Amortisation and impairment
At 1 January 2020
Non-underlying impairment for the year
Non-underlying amortisation for the year
At 31 December 2020
Net book amount
At 31 December 2020
At 1 January 2020
The Group
Cost
At 1 January 2019
Additions
Disposals (note 30)
Exchange adjustments
At 31 December 2019
Amortisation and impairment
At 1 January 2019
Underlying impairment for the year
Underlying amortisation for the year
Disposal (note 30)
At 31 December 2019
Net book amount
At 31 December 2019
At 1 January 2019
Consumer
Healthcare
brands and
distribution
rights £000s
Prescription
Medicines
brands and
distribution
rights £000s
Development
costs
£000s
Assets under
development
£000s
Goodwill
£000s
16,532
15,427
–
445
171,102
152,439
89,990
–
(2,889)
–
(714)
1,165
32,404
258,203
152,890
–
1,144
–
1,144
4,226
2,007
226
6,459
7,187
8,906
6,929
23,022
31,260
16,532
251,744
166,876
129,868
145,252
Consumer
Healthcare
brands and
distribution
rights £000s
Prescription
Medicines
brands and
distribution
rights £000s
Goodwill
£000s
16,565
172,781
155,311
–
(33)
–
–
–
(1,679)
–
(1,500)
(1,372)
16,532
171,102
152,439
–
–
–
–
–
4,226
–
–
–
4,226
6,956
284
179
(232)
7,187
16,532
16,565
166,876
168,555
145,252
148,355
Total
£000s
340,073
105,417
(714)
(1,279)
443,497
11,413
12,057
7,155
30,625
412,872
328,660
12
(3,313)
(3,051)
340,073
11,182
284
179
(232)
11,413
328,660
335,243
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
768
12
(780)
–
–
–
–
–
–
–
–
–
(1,000)
–
–
–
–
–
–
–
–
768
1,000
Development
costs
£000s
Assets under
development
£000s
Total
£000s
1,000
346,425
Goodwill and brands and distribution rights are subject to an impairment review at least annually.
Recent acquisitions
On 29 December 2020 the Group completed the acquisition of 100% of the share capital of Biogix Inc, a privately held, US-based consumer
healthcare company. The acquisition brings into the Group a highly successful and fast-growing brand, Amberen, with significant near-term
growth potential. As part of this acquisition an intangible brand asset with fair value of $121.0m (£90.0m) for the product Amberen, and
goodwill of $20.8m (£15.4m), have been recognised (note 31).
131
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 11. Goodwill and intangible assets continued
Key judgement – useful economic lives
As a result of the 2020 Strategic Review, the Group has segregated its portfolio of assets into two areas: Consumer Healthcare brands and
Prescription Medicines. Following this determination the Directors considered the continuing appropriateness of indefinite useful lives which
have previously been adopted across the intangible brand asset portfolio. This in the context of the focus on growing Consumer Healthcare
brands, their increasing dominance of the portfolio and the planned rollout of Digital Excellence programmes, as further detailed in the
Strategic Report. Prescription Medicines have been considered in the context of more limited requirement for promotional investment, and
potential exposure to other market factors detailed further below.
For the majority of Consumer Healthcare brand assets, indefinite useful lives have been judged to remain appropriate. This is due to the
expected long-term growth profile of the Consumer Healthcare business and the enduring nature of the brands, which are supported by
continuing marketing spend.
For Prescription Medicines brand assets, finite useful lives of up to 20 years have been adopted prospectively from 1 January 2020. The
determination of this lifespan takes into account all relevant factors for each individual asset, including typical pharmaceutical asset life cycles
and the potential development of alternative treatments over time.
Certain brands were acquired with patent protection, which lasts for a finite period of time. It is the opinion of the Directors that these patents do
not provide any incremental value to the value of the brand and therefore no separate value has been placed on these patents. This assessment
is based on a view of future profitability after patent expiry and past experience with similar brands.
It is the opinion of the Directors that the indefinite life assets meet the criteria set out in IAS 38. This assessment is made on an asset-by-asset
basis taking into account:
• how long the brand has been established in the market and subsequent resilience to economic and social changes;
• stability of the industry in which the brand is used;
• potential obsolescence or erosion of sales;
• barriers to entry;
• whether sufficient marketing and promotional resourcing is available; and
• dependency on other assets with defined useful economic lives.
The Prescription Medicines brand assets have a weighted average remaining life of 19 years at 31 December 2020.
An increase in the finite useful lives adopted of two years would have reduced the annual amortisation charge by £0.6m. A reduction of two
years would have increased the annual amortisation charge by £0.8m.
The net book value of intangible assets and goodwill which are considered to have indefinite useful lives are allocated to CGUs in the following
table. Goodwill relating to the acquisition of certain assets and businesses from Sinclair IS Pharma plc is allocated to the group of related
Consumer Healthcare and Prescription Medicines product CGUs. Other goodwill amounts are allocated to the product CGU with which they
were originally acquired. Intangible assets that are considered to have indefinite lives all relate to the Consumer Healthcare segment, except
for Sinclair Prescription Medicines goodwill.
Amberen
Nizoral
Vamousse
MacuShield
Anbesol & Ashton and Parsons
Nutraceutical products
Quinoderm
Products acquired from Sinclair
Kelo-cote (non EU, excluding US)
Kelo-cote (EU)
Aloclair
Atopiclair
Goodwill – Sinclair Prescription Medicines
Goodwill – Sinclair Consumer Healthcare
132
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
31 December 2020
Consumer healthcare
brands and
distribution rights
£000s
88,321
60,307
11,596
8,740
2,550
1,715
1,500
40,245
17,800
14,000
2,300
–
–
249,074
Goodwill
£000s
15,140
–
–
–
–
–
–
–
–
–
–
1,105
10,819
27,064
Total
£000s
103,461
60,307
11,596
8,740
2,550
1,715
1,500
40,245
17,800
14,000
2,300
1,105
10,819
276,138
Financial StatementsNotes to the Financial Statements continued
The difference in Amberen values in the table compared to note 31 are the result of foreign exchange retranslation of these US Dollar
denominated assets.
Impairment
As explained in note 2.9 all intangible assets are stated at the lower of cost less accumulated amortisation and impairment or the
recoverable amount.
Assets are tested for impairment at least annually, or more frequently if there are indicators that amounts might be impaired. These assets
are tested at CGU level (or at group of CGUs level in the case of goodwill relating to the acquisition of certain assets and businesses) as the
Directors believe these CGUs generate largely independent cash inflows.
The impairment test involves determining the recoverable amount of the relevant 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 uses cash flow projections based on financial forecasts for up to the next five years extrapolated to perpetuity.
Financial forecasts for the following year are based on the approved annual budget. Financial forecasts for years two to five are based on the
approved long range plan. Margins are based on past experience and cost estimates.
The Group conducted impairment reviews for all intangible assets as part of its interim reporting to 30 June 2020. These reviews, together
with the change in useful life assumption for Prescription Medicines assets, resulted in impairment losses as the carrying value of certain cash-
generating units exceeded estimated recoverable amounts. Recoverable amounts are the greater of value in use and fair value less costs to sell
over the assets’ useful lives.
The key assets impacted were:
• Haemopressin and Optiflo intangible asset impaired by £5.3m (£0.7m due to market factors and £4.6m due to the change in
accounting estimate).
• Nu-seals intangible asset impaired by £3.6m (£2.9m due to market factors and £0.7m due to the change in accounting estimate).
• Other intangible assets impaired by £2.1m (£1.8m due to market factors and £0.3m due to the change in accounting estimate).
• Goodwill impaired by £1.1m (£1.1m due to market factors).
The impairments due to market factors were a result of changes in the long-term sales, cost and margin expectations in the Group’s latest
financial forecast.
The Group has completed an additional impairment review at 31 December 2020 for all intangible assets. No further impairments were
identified in this review.
Key source of estimation uncertainty – value in use assumptions
For the year end impairment review, key assumptions on which cash flow projections depend are as follows (including our assessment of the
estimation uncertainty arising):
Discount rates
• Methodology: Cash flows are discounted at an appropriate rate, based on the Group’s post-tax Weighted Average Cost of Capital
(WACC) adjusted where appropriate for country-specific risks, of between 6.7%–11.0%, or pre-tax 8.4%–13.8% (2019: 7.7%–12.0%,
or pre-tax 9.6%–15.0%). The Group’s WACC has reduced in the year due to updates in assumptions for the risk-free rate, the small stock
premium and the equity beta. The risk-free rate has reduced due to changes in government bond yields, the small stock premium has
reduced to recognise the Group’s growth in market capitalisation and the equity beta has reduced based on sector market data. These
factors were partially offset by the inclusion of a risk premium to recognise the impact of COVID-19.
• Estimation uncertainty: The assumptions included in the compilation of the CGU specific discount rates are designed to approximate the
discount rate that a potential market participant would adopt. Given the nature of the Group’s business model, the discount rate necessarily
includes estimation uncertainty.
Forecast cash flows
• Methodology: Approved budgets and forecasts for up to five years, based on management’s best estimate of cash flows by individual CGU.
These forecasts are then uplifted to perpetuity using growth rates between -3.0% to 2.0% (2019: -2.8% to 2.0%) based on the Group’s
long-term projections.
• Estimation uncertainty: The growth rates assumed in the Group’s budgets and forecasts inherently include estimation uncertainty relating to
the achievement of commercial initiatives and external factors such as competition.
133
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 11. Goodwill and intangible assets continued
Sensitivity analysis
The Group has conducted sensitivity analysis on the impairment tests. The valuations generally indicate sufficient headroom, and the Group
does not consider that any reasonably possible change in key assumptions could result in an impairment for the majority of intangible assets.
Management have identified that for certain CGUs with lower headroom, a reasonably possible change in the two key assumptions could
cause the carrying amount to exceed the recoverable amount. These assumptions are detailed as follows.
The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rates are
determined based on management’s estimate of the long-term prospects for each product.
Carrying
amount £000s
Estimated
recoverable
amount £000s
Value in use
calculation assumptions
Individual assumptions required for
the estimated recoverable amount to
equal to the carrying amount
Remaining UEL
years
Pre-tax
discount rate %
Terminal margin
growth rate %
Pre-tax
discount rate %
Terminal margin
growth rate %
Haemopressin, Optiflo & Others
Nu-Seals
18,711
5,222
18,946
5,458
19
19
9.0
8.8
0.7
(2.0)
9.3
9.5
0.2
(3.5)
The following table shows the potential impact of reasonably possible changes to individual assumptions on the estimated recoverable amount
of the CGUs.
Haemopressin, Optiflo & Others
Nu-Seals
Decrease in CGU recoverable amount £000s
2.0% increase in
pre-tax discount rate
2.0% reduction in
terminal margin
growth rate
(2,091)
(583)
(1,151)
(350)
134
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 6,739
22,330
12. Property, plant and equipment
The Group
Cost
At 1 January 2020
Additions
Acquisition (note 31)
Effect of movements in exchange rates
Disposals
At 31 December 2020
Depreciation
At 1 January 2019
Provided in the year
Effect of movements in exchange rates
Disposals
At 31 December 2020
Net book amount
At 31 December 2020
At 1 January 2020
The Group
Cost
At 1 January 2019
Additions
Effect of movements in exchange rates
Disposals
At 31 December 2019
Depreciation
At 1 January 2019
Provided in the year
Effect of movements in exchange rates
Disposals
At 31 December 2019
Net book amount
At 31 December 2019
At 1 January 2019
Computer
software and
equipment
£000s
Fixtures,
fittings & equipment
£000s
Plant & machinery
£000s
Right of
use lease assets
£000s
8,511
4,562
–
29
(54)
13,048
1,172
504
(2)
(54)
1,620
11,428
7,339
2,699
50
–
(3)
(235)
2,511
1,200
444
(1)
(235)
1,408
1,103
1,499
14
–
18
–
–
32
4
4
–
–
8
24
10
5,293
1,125
294
27
–
2,587
801
(15)
–
3,373
3,366
2,706
Computer
software and
equipment
£000s
Fixtures,
fittings & equipment
£000s
Plant & machinery
£000s
Right of
use lease assets
£000s
5,327
3,461
(9)
(268)
8,511
1,074
367
(1)
(268)
1,172
7,339
4,253
2,036
684
(14)
(7)
2,699
836
375
(4)
(7)
1,200
1,499
1,200
14
–
–
–
14
–
4
–
–
4
10
14
3,964
1,329
–
–
5,293
1,837
750
–
–
2,587
2,706
2,127
Total
£000s
16,517
5,737
312
53
(289)
4,963
1,753
(18)
(289)
6,409
15,921
11,554
Total
£000s
11,341
5,474
(23)
(275)
16,517
3,747
1,496
(5)
(275)
4,963
11,554
7,594
Property, plant and equipment of £14.4m is located within the United Kingdom (2019: £9.7m). The balance is located in France, Italy, China,
Singapore, Spain, Germany and the United States of America. Right of use assets relate to the Group’s leased offices.
135
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 13. Investments
The Company
Cost
At 1 January 2020
Net additions
At 31 December 2020
At 1 January 2019
Net additions
At 31 December 2020
Investment and
loans to subsidiary
undertakings
£000s
194,630
5,146
199,776
184,211
10,419
194,630
The investment balance includes outstanding intercompany debt due from subsidiaries of £176.5m (note 28). The Directors do not consider that
this amount will be demanded by the Company and therefore it has been classified as an investment. No provision has been recognised for
estimated credit losses on loans to subsidiaries, as it is considered these would be immaterial.
The subsidiary and associated undertakings where the Group held 20% or more of the equity share capital at 31 December 2020 are shown
below:
Company
Advanced Bio-Technologies Inc.
Alliance Pharma France SAS
Alliance Pharma (Singapore) Private Limited*
Alliance Pharma S.r.l.
Alliance Pharmaceuticals Limited*
Alliance Pharmaceuticals (Asia) Limited*
Alliance Lifescience Technology (Shanghai) Co.,Limited
Alliance Pharmaceuticals Spain SL*
Alliance Pharma Inc.
Alliance Pharmaceuticals (Thailand) Co., Ltd
Alliance Pharmaceuticals (Philippines) Corporation
Alliance CHC (India) Private Limited
Biogix Inc.
Synthasia International Company Limited
Synthasia Shanghai Co. Limited
Maelor Laboratories Limited
Alliance Pharmaceuticals GmbH*
Alliance Pharmaceuticals GmbH* – Swiss Branch
Alliance Pharmaceuticals SAS*
Opus Healthcare Limited
Alliance Pharma (Ireland) Limited
Alliance Consumer Health Limited
Alliance Generics Limited
Alliance Health Limited
Alliance Healthcare Limited
Caraderm Limited
Dermapharm Limited
MacuVision Europe Limited
Opus Group Holdings Limited
Opus Healthcare Limited
*
Investments held directly by Alliance Pharma plc
136
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Country of registration
%
or incorporation
owned Nature of business
USA
France
Singapore
Italy
England & Wales
Hong Kong
China
Spain
USA
Thailand
Philippines
India
USA
Hong Kong
China
England & Wales
Germany
Switzerland
France
Republic of Ireland
Republic of Ireland
England & Wales
England & Wales
England & Wales
England & Wales
Northern Ireland
England & Wales
England & Wales
England & Wales
England & Wales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
20 Pharmaceutical sales
20 Pharmaceutical sales
100 Non-trading
100 Non-trading
100 Non-trading
100 Non-trading
100 Non-trading
100 Non-trading
100 Dormant
100 Dormant
100 Dormant
100 Dormant
100 Dormant
100 Dormant
100 Dormant
100 Dormant
100 Dormant
Financial StatementsNotes to the Financial Statements continued The registered address in each country is as follows:
Territory
USA
France
China
Company
Registered Office Address
Advanced Bio-Technologies Inc.
Alliance Pharma Inc.
Biogix Inc.
Alliance Pharmaceuticals SAS
Alliance Pharma France SAS
100 N. Tampa Street, Suite 2700, Tampa, FL 33602,
United States
Corporation Trust Company, 1209 Orange Street, Wilmington, DE
19801-1120
201 Continental Blvd., Suite 230, El Segundo, California 90245
69, avenue Franklin D. Roosevelt, 75008 Paris, France
69, avenue Franklin D. Roosevelt, 75008 Paris, France
Alliance Pharmaceuticals Lifescience Technology
(Shanghai) Co.,Limited
Suit 1004, NanFung Tower, No. 1568, Road Huashan, Shanghai,
200030, P.R.China
Synthasia Shanghai Company Limited
Germany
Alliance Pharmaceuticals GmbH
Hong Kong
Alliance Pharmaceuticals (Asia) Limited
Suite 806, Silva Bay Tower, Tower C, 469 Wusong Road, Hongkou
District, Shanghai 200080, P.R. China
Hanseatic Trade Center, Am Sandtorkai 41, D-20457 Hamburg,
Germany
Room 2105, 21/ F Office Tower, Langham Place, 8 Argyle Street,
Mongkok, Kowloon
Synthasia International Company Limited
Unit 2402, 24/F, Bonham Trade Centre, 50 Bonham Strand, Sheung
Wan, Hong Kong
Italy
Alliance Pharma S.r.l.
Via Brera 6, 20121 Milan, Italy
Republic of Ireland
Alliance Pharma (Ireland) Limited
6th Floor, South Bank House, Barrow Street, Dublin 4
Singapore
Spain
Opus Healthcare Limited
6th Floor, South Bank House, Barrow Street, Dublin 4
Alliance Pharma (Singapore) Private Limited
6 Battery Road, #10-01, Singapore (049909)
Alliance Pharmaceuticals Spain SL
Paseo de la Castllana 259 C – 18th Floor, Regus Business Center,
Torre de Cristal, Madrid, ZIP Code 28046, Spain
Switzerland (Branch)
Alliance Pharmaceuticals GmbH Düsseldorf
Bahnhofstrasse 37, Postfach 2818, CH-8021 Zürich
Thailand
Alliance Pharmaceuticals (Thailand) Co., Ltd
England & Wales
All Companies
The Ninth Tower 35th floor, 33/4, Tower A Rama 9 Road,
Huaykwang Subdistrict, Huaykwang district, Bangkok, Thailand
10310
Avonbridge House, Bath Road, Chippenham, Wiltshire,
SN15 2BB
Northern Ireland
Caraderm Limited
6 Trevor Hill, Newry, County Down, BT34 1DN
Philippines
Alliance Pharmaceuticals (Philippines) Corporation
India
Allinace CHC (India) Private Limited
30/F 88 Corporate Center Sedeno Cor.Valero STS., BEL-AIR 1209,
City of Makati NCR, Fourth District, Philippines
314, Bhaveshwar Arcade Annexe, LBS Marg, Opp. Shreyas
Cimema, Ghatkopar West Mumbai, Bandra Suburban, MH
400086 IN
Unless otherwise stated, the share capital comprises Ordinary shares and the ownership percentage is provided for each undertaking. All
subsidiary undertakings prepare accounts to 31 December.
Maelor Laboratories Limited is exempt from the Companies Act 2006 requirement relating to the audit of its individual accounts by virtue of
Section 479A of the Act as this company has guaranteed the subsidiary company under Section 479C of the Act.
14. Inventories
The Group
Finished goods and materials
Inventory provision
31 December 2020
£000s
31 December 2019
£000s
25,916
(2,999)
22,917
19,089
(3,571)
15,518
Inventory costs expensed through the income statement during the year were £39,636,000 (2019: £42,631,000). During the year
£1,284,000 (2019: £2,673,000) was recognised as an expense relating to the write-down of inventories to net realisable value. The prior
year expense included £1,152,000 related to the return of Xonvea licensing rights (note 30).
137
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 15. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Accrued income
The Group
The Company
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
19,834
1,544
898
2,838
25,114
23,987
2,522
703
3,780
30,992
–
25
11
–
36
–
9
15
–
24
Accrued income represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only
the passage of time is required before payment becomes due.
The ageing of trade receivables of the Group at 31 December is detailed below:
Trade receivables and accrued income, net estimated allowances for expected credit losses
31 December 2020
£000s
31 December 2019
£000s
Not past due – accrued income
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
Trade receivables and accrued income, gross of estimated allowances for expected credit losses
Not past due – accrued income
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
2,838
15,764
2,550
1,520
–
–
3,780
19,640
3,253
278
320
496
22,672
27,767
31 December 2020
£000s
31 December 2019
£000s
2,838
15,764
2,550
1,606
31
524
23,313
3,780
19,640
3,253
278
320
1,495
28,766
As at 31 December 2020, trade and other receivables of £641,000 (2019: £999,000) were past due and impaired.
To manage credit risk customers are required to pay in accordance with agreed terms. Our settlement terms are generally due within 30 or 60
days from the end of the month of sale.
16. Cash and cash equivalents
Sterling
Euros
US Dollars
Other currencies
Cash at bank and in hand
The Group
The Company
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
15,842
2,039
7,495
3,522
28,898
6,275
6,563
2,071
2,921
17,830
297
–
–
–
297
97
–
–
–
97
138
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 17. Trade and other payables
Trade payables
Other taxes and social security costs
Accruals
Other payables
Lease liabilities
The Group
The Company
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
11,275
2,440
13,639
418
964
28,736
6,970
3,247
10,114
459
1,025
21,815
16
–
290
–
–
306
–
–
225
–
–
225
18. Loans and borrowings
The Group has a £165m fully Revolving Credit Facility (‘RCF’), together with a £50m accordion facility, with an syndicate of lenders. This
facility is available until July 2024, following utilisation of a one-year extension option from July 2023 in the year. This has been classified as a
non-current liability (note 2.18). The bank facility is secured by a fixed and floating charge over the Company’s and Group’s assets registered
with Companies House.
Non-current
Bank loans:
Secured
Finance issue costs
Movement in loans and borrowings
At 1 January
Net receipts/(payments) from borrowing
Additional prepaid arrangement fees
Amortisation of prepaid arrangement fees
Exchange movements*
At 31 December
The Group
The Company
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
139,920
(1,592)
138,328
78,848
(1,808)
77,040
–
–
–
–
–
–
31 December 2020
£000s
31 December 2019
£000s
77,040
61,054
(362)
578
18
138,328
96,702
(17,479)
(1,401)
491
(1,273)
77,040
* Exchange movements on loans and borrowings are reported in other comprehensive income and accumulated in the translation reserve.
139
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 19. Other non-current liabilities
Lease liabilities
Other non-current liabilities
The Group
The Company
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
2,731
469
3,200
1,997
404
2,401
–
–
–
–
–
–
20. Financial instruments
The Group uses financial instruments comprising borrowings, derivatives, 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, foreign currency risk and credit risk. The Board is responsible for risk management policies on managing each of these
which are summarised below, except credit risk which is detailed in note 15.
Liquidity risk
The Group’s operations are financed by retained earnings and bank borrowings, with additional equity being raised on a periodic basis to
finance larger acquisitions. Borrowings are denominated in Sterling, Euro and US Dollars. The purpose of Euro and US Dollar borrowings are
to manage the currency exposure arising from the Group’s operations.
The Group has a £165m fully Revolving Credit Facility (‘RCF’), together with a £50m accordion facility, with a syndicate of lenders. This facility
is available until July 2024, following utilisation of a one-year extension option from July 2023 in the year.
The RCF is drawn in short to medium-term tranches of debt which are repayable within 12 months of draw-down. These tranches of debt can
be rolled over provided certain conditions are met, including covenant compliance. The Group considers that it is highly unlikely it would be
unable to exercise its right to roll-over the debt. This is due to mitigating actions it could take to maintain compliance with these conditions,
including future covenant requirements, even in downside scenarios. The Directors therefore believe that the Group has the ability and the intent
to roll-over the drawn RCF amounts when due and consequently has presented the RCF as a non-current liability.
The Group also has access to an overdraft facility of £4.0m.
The maturity profile of the Group’s financial gross (capital and interest) liabilities, except forward foreign exchange contracts for which maturity
is disclosed separately, at the year-end is as follows:
Trade and other payables
Bank loans*
Lease liabilities
31 December 2020
In more than one
year, but not more
than two
£000s
In more than two
years, but not more
than five
£000s
–
–
544
544
–
–
1,086
1,086
In one year or less
£000s
27,220
139,995
964
168,179
In more than
five years
£000s
–
–
1,521
1,521
Total
£000s
27,220
139,995
4,115
171,330
*
Includes an amount of £139.9m (2019: £78.8m) in respect of gross contractual cash flows payable under the RCF; these are shown as due within one year or less to reflect the contractual maturity of the tranches
drawn down at 31 December 2020. As explained above, the RCF is classified as a non-current liability as the Directors have assessed that the Group has the ability and the intent to roll-over the drawn RCF
amounts when due.
140
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued Trade and other payables
Bank loans*
Interest rate swaps
Lease liabilities
31 December 2019
In more than one
year, but not more
than two
£000s
In more than two
years, but not more
than five
£000s
–
–
–
717
717
–
–
–
1,339
1,339
In one year or less
£000s
20,790
79,852
47
1,025
101,714
In more than
five years
£000s
–
–
–
164
164
Total
£000s
20,790
79,852
47
3,245
103,934
The maturity profile of the Company’s financial gross liabilities (capital and interest) at the year end is as follows:
Trade and other payables
31 December 2020
In one year or less
£000s
31 December 2019
In one year or less
£000s
306
225
Interest rate risk
The Group’s debt is provided on a floating interest rate basis. The Group previously used 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 were remeasured to fair value at each period end.
The Group has no interest rate swaps in place at 31 December 2020 (2019: GBP interest rate swaps with a nominal value of £8.0m, and EUR
interest rate swaps with a nominal value of EUR12.0m were in place).
The interest rate exposure of the financial liabilities of the Group at the period end was:
At 31 December 2020
Bank loans – Sterling denominated
Bank loans – Euro denominated
Bank loans – US Dollar denominated
Total financial liabilities
Unamortised issue costs
Net book value of financial liabilities
At 31 December 2019
Bank loans – Sterling denominated
Bank loans – Euro denominated
Bank loans – US Dollar denominated
Interest rate hedges – Sterling denominated
Interest rate hedges – Euro denominated
Total financial liabilities
Unamortised issue costs
Net book value of financial liabilities
Fixed
£000s
Floating
£000s
Total
£000s
–
–
–
–
–
–
Fixed
£000s
–
–
–
8,000
10,169
18,169
–
18,169
105,317
9,281
25,322
139,920
(1,592)
138,328
Floating
£000s
54,792
13,559
10,497
(8,000)
(10,169)
60,679
(1,808)
58,871
105,317
9,281
25,322
139,920
(1,592)
138,328
Total
£000s
54,792
13,559
10,497
–
–
78,848
(1,808)
77,040
141
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 20. Financial instruments continued
Interest rate risk continued
At 31 December 2020
Sterling
Euros
At 31 December 2019
Sterling
Euros
Fixed rate financial liabilities
Weighted average
fixed rate %
Weighted average
period for which rate
is fixed
–
–
3.20
2.16
–
–
0.91 years
0.91 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 £0.3m in 2020. A 0.5% decrease would have the opposite effect.
A 0.5% increase in EURIBOR would reduce pre-tax profits by approximately £0.1m in 2020. A 0.5% decrease would have no effect on profit
as the Group’s Euro denominated borrowings have an interest rate floor.
A 0.5% increase in US LIBOR would reduce pre-tax profits by approximately £0.1m in 2020. A 0.5% decrease would have the opposite effect.
Currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales,
purchases, receivables and borrowings are denominated and the respective functional currencies of Group companies. The functional
currencies of Group companies are primarily Sterling, Euro and US Dollars.
Approximately 40% of the Group’s sales are invoiced in Euros and 17% invoiced in US Dollar. The majority of other Group sales are invoiced
in Sterling.
The Group’s risk management policy is to hedge up to 75% of its estimated net foreign currency exposure in respect of forecast sales and
purchases for up to the next 18 months at any point in time. The Group uses forward foreign exchange contracts to hedge its currency risk.
These contracts are generally designated as cash flow hedges.
After the impacts of hedging, 5% weakening or strengthening of Sterling against the Euro would have resulted in £0.3m gain or loss to EBITDA
(note 33) in 2020. On the same basis, 5% weakening or strengthening of Sterling against the US Dollar would have resulted in a £0.4m gain
or loss to EBITDA in 2020.
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 effective. As the Group repays its foreign denominated borrowings the hedged portion of the net investment is reduced.
142
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued Fair value measurement
The Group has adopted IFRS 13 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:
• quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
• 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
• inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The Group’s financial instruments held at fair value (or for which fair value is disclosed) in the scope of IFRS 13 are as follows:
Interest rate swaps
Forward foreign exchange contracts
Level
2
2
31 December 2020
Carrying value
£000s
31 December 2019
Carrying value
£000s
–
295
295
(47)
697
650
For the other financial assets and liabilities, the carrying amount is a reasonable approximation of fair value and therefore no further disclosure
is provided. 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 were not traded in active markets. These were fair valued using observable interest rates. The effects of non-
observable inputs are not significant for interest rate swaps.
Counterparty banks performed valuations of interest rate swaps for financial reporting purposes, determined by discounting the future cash
flows at rates determined by year end yield curves. The valuation processes and fair value changes were discussed by the Audit and Risk
Committee and the finance team at least every half year, in line with the Group’s reporting dates.
Forward foreign exchange contracts (Level 2)
The Group’s currency rate swaps are not traded in active markets. These have been fair valued using observable currency rates. The effects of
non-observable inputs are not significant for currency rate swaps.
Counterparty banks perform valuations of currency rate swaps for financial reporting purposes, determined by discounting the future cash
flows at rates determined by year end spot and forward rate. The valuation processes and fair value changes are discussed by the Audit and
Risk Committee and the finance team at least every half year, in line with the Group’s reporting dates.
143
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 20. Financial instruments continued
Forward foreign exchange contracts (Level 2) continued
The following table details the foreign currency forward contracts outstanding at the end of the reporting period. Forward foreign exchange
contract assets and liabilities are presented in ‘Derivative financial instruments’ (either as asset or as liabilities) within the statement of
financial position:
Average forward rate
Notional value: Foreign currency
Carrying amount of the hedging
instruments assets/(liabilities)
2020
2019
$000s
€000s
$000s
€000s
2020
£000s
2019
£000s
Sell Dollars
Less than 3 months
3 to 6 months
6 to 12 months
12 to 18 months
Sell Euros
Less than 3 months
3 to 6 months
6 to 12 months
12 to 18 months
2020
rate
1.246
1.320
1.306
1.342
1.298
1.132
1.115
1.112
1.115
1.119
2019
rate
1.282
1.283
1.272
–
2,400
2,900
4,000
900
1.278
10,200
1.153
1.144
1.131
–
1.143
–
–
–
–
–
10,200
–
–
–
–
–
6,175
6,550
9,660
3,000
25,385
25,385
2,025
2,225
5,125
–
9,375
–
–
–
–
–
9,375
–
–
–
–
–
3,350
2,800
4,550
–
10,700
10,700
168
112
196
13
489
(89)
(34)
(43)
(28)
(194)
295
68
80
232
–
380
42
102
173
–
317
697
144
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued Classification of financial assets and liabilities
Group
Classification of the Group’s financial assets and liabilities is set out below:
Financial assets
Financial assets at amortised cost
Trade receivables
Accrued income
Cash and cash equivalents
Derivative financial instruments
Used for hedging
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Loans and borrowings
Other liabilities
Lease liabilities
Derivative financial instruments
Used for hedging
Company
Classification of the Company’s financial instruments is set out below:
Financial assets
Financial assets at amortised cost
Trade and other receivables
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
31 December 2020
£000s
31 December 2019
£000s
20,221
2,838
28,898
310
52,267
23,987
3,780
17,830
697
46,294
31 December 2020
£000s
31 December 2019
£000s
27,220
138,328
470
3,695
15
169,728
20,790
77,040
404
3,022
47
101,303
31 December 2020
£000s
31 December 2019
£000s
36
24
31 December 2020
£000s
31 December 2019
£000s
306
225
145
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information
20. Financial instruments continued
Reconciliation to cash flow movements
Cash flows
Non-cash changes
2019
£000s
Principal
£000s
Interest
£000s
Foreign
exchange*
£000s
Net
additions
£000s
Amortisation
£000s
Interest
£000s
2020
£000s
Gross loans and borrowings
78,848
61,054
Prepaid arrangement fees
(1,808)
(362)
–
–
Accrued interest
Lease liabilities
866
3,022
–
(2,778)
(884)
(88)
18
–
–
–
–
–
–
1,557
–
578
–
–
–
–
139,920
(1,592)
1,988
76
88
3,695
* Exchange movements on loans and borrowings are reported in other comprehensive income and accumulated in the translation reserve.
Derivative financial instruments
Current portion
Interest rate swap – cash flow hedge
Current portion
Non-current portion
Forward exchange swap – cash flow hedge
31 December 2020
Assets/(Liabilities)
£000s
31 December 2019
Assets/(Liabilities)
£000s
–
–
310
(15)
295
(47)
(47)
697
–
697
The cash flow hedges were tested for effectiveness both retrospectively and prospectively as at 31 December 2020. They were found to be
highly effective, with the ineffective element being immaterial. The amount recognised through the income statement in finance costs for interest
rate swaps during the year was a charge of £49,000 (2019: £103,000). The amounts recognised through the income statement in respect of
the forward foreign exchange contracts during the year was a credit of £51,000 in finance costs (2019: credit of £109,000), and a credit of
£24,000 in Revenue (2019: £nil).
146
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 21. Deferred tax
The Group
Accelerated capital allowances on tangible assets
Temporary differences: trading
Temporary differences: non-trading
Accelerated allowances on intangible assets
Initial recognition of intangible assets from business combination
Share-based payments
Interest rate hedge
Foreign exchange forward contracts
Recognised as:
Deferred tax asset
Deferred tax liability
Reconciliation of deferred tax movements:
31 December 2020
£000s
31 December 2019
£000s
(917)
492
623
(9,839)
(45,369)
1,024
–
(56)
(468)
234
662
(10,081)
(19,161)
806
8
(100)
(54,042)
(28,100)
2,139
(56,181)
1,710
(29,810)
The Group
Non-current assets
Intangible assets
Property, plant and equipment
Non-current liabilities
Derivative financial instruments
Other non-current liabilities
Equity
Share option reserve
Temporary differences
Trading
Recognised as:
Deferred tax asset
Deferred tax liability
Recognised
in other
comprehensive
income
£000s
1 January 2020
£000s
Recognised
directly in equity
£000s
Recognised
on acquisition
£000s
Recognised
in the income
statement
£000s
31 December 2020
£000s
(29,242)
(468)
(92)
662
806
234
(28,100)
1,710
(29,810)
–
–
36
(39)
–
–
(3)
–
(42)
–
–
96
221
275
(25,491)
–
–
–
–
–
(25,491)
(475)
(407)
–
–
122
37
(723)
(55,208)
(917)
(56)
623
1,024
492
(54,042)
2,139
(56,181)
147
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Recognised
in other
comprehensive
income
£000s
Recognised
directly in equity
£000s
Recognised
in the income
statement
£000s
31 December 2019
£000s
21. Deferred tax continued
The Group
Non-current assets
Intangible assets
Property, plant and equipment
Non-current liabilities
Derivative financial Instruments
Other non-current liabilities
Equity
Share option reserve
Temporary differences
Trading
Losses
Recognised as:
Deferred tax asset
Deferred tax liability
1 January 2019
£000s
(28,491)
(172)
1
715
735
108
286
–
–
(93)
(53)
–
–
–
(26,818)
(146)
1,845
(28,663)
The Group has no unrecognised deferred tax assets (2019: £nil).
22. Share capital
At 1 January 2019 – Ordinary shares of 1p each
Issued during the year
At 31 December 2019 – Ordinary shares of 1p each
Issued during the year
At 31 December 2020 – Ordinary shares of 1p each
606
–
–
–
179
–
–
785
(1,357)
(296)
–
–
(108)
126
(286)
(1,921)
(29,242)
(468)
(92)
662
806
234
–
(28,100)
1,710
(29,810)
Allotted, called up and fully paid
No. of shares
518,214,226
11,188,393
529,402,619
3,516,492
532,919,111
£000s
5,182
112
5,294
35
5,329
Between 1 January 2020 and 31 December 2020 3,516,492 shares were issued on the exercise of employee share options
(2019: 11,188,393).
The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company.
148
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued Potential share options commitment
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 0.00p to 81.60p (2019: 0.00p to 81.60p). 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:
Year of grant
2010
2011
2012
2013
2013
2014
2015
2016
2016
2017
2018
2019
2019
2020
2020
Exercise price
Pence
33.25 and 34.25
31.00 and 34.12
29.25
35.75 and 37.25
35.75
33.75
43.75 and 46.75
44.00 and 47.5
47.50
53.00
81.60
76.90
0.00
73.70
0.00
Exercise from
Scheme
31 December 2020
Number (000s)
31 December 2019
Number (000s)
2013
2014
2015
2016
2018
2017
2018
2019
2021
2020
2021
2022
2022
2023
2023
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
LTIP
CSOP
LTIP
–
186
75
892
450
494
1,852
3,896
3,500
4,694
6,322
6,793
596
6,129
704
79
401
126
1,211
450
581
2,066
5,114
3,500
6,260
6,769
7,331
596
–
–
36,583
34,484
The provision of shares to satisfy certain of the Group’s share option schemes can be facilitated by purchases of own shares by the Group’s
Employee Benefit Trust. The costs of operating the Trust is borne by the Group but is not material. To date, no shares have been purchased by
the Trust for satisfaction of outstanding or future share option awards.
Managing capital
Our objective in managing the business’s 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 2020, net debt was £109.4m (2019:
£59.2m) (note 33), whilst shareholders’ equity was £281.0m (2019: £274.2m).
The business is profitable and cash-generative. The main financial covenant applying to bank debt is that leverage (the ratio of net bank debt to
EBITDA) should not exceed 3.0 times. The Group complied with this covenant in 2020 and 2019.
Smaller acquisitions are typically financed using 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
leverage at comfortable levels.
149
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 23. Share-based payments
Under the Group’s share option scheme for employees and Directors, options to subscribe for shares in the Company are granted normally
once each year. The contractual life of an option is ten 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. Options are valued by a third-party provider using the Black-Scholes option-pricing model.
Certain options are subject to EPS or Total Shareholder Return (TSR) accretion performance criteria; those outstanding are as follows:
Year of grant
Exercise price
Pence
Exercise from
31 December 2020
Number (000s)
31 December 2019
Number (000s)
2013
2014
2015
2016
2016
2017
2018
2019
2019
2020
2020
35.75
33.75
43.75
47.50
47.50
53.00
81.60
76.90
0.00
73.70
0.00
2018
2017
2018
2019
2021
2020
2021
2022
2022
2023
2023
450
204
317
545
3,500
1,028
2,411
1,127
596
917
704
450
204
317
875
3,500
1,358
2,411
1,127
596
–
–
11,799
10,838
The total expense for the year relating to share-based payment plans was £1.4m (2019: £1.8m), of which £1.1m (2019: £1.0m) related to
equity-settled transactions and £0.3m (2019: £0.8m) related to cash-settled transactions.
It is assumed that on average options will be exercised after five years. The expected volatility is based on historical volatility (calculated based
on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available
information. The risk-free rate of return is based on UK Government bonds of a term consistent with the assumed option life.
The cash-settled transaction expense includes provision for social security charges based on the applicable social tax rate applied to the
number of share awards which are expected to vest, valued with reference to the year-end share price.
The estimated total equity-settled fair value of the share options granted on 23 September 2020 was £1,117,000. The model inputs were a
market price of 73.7p, expected volatility of 31.74% and a risk-free rate of 0.0%.
Share options and weighted average exercise price are as follows for the reporting periods presented:
Outstanding at start of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2020
2019
Number
(000s)
34,484
6,833
(3,516)
(1,218)
36,583
12,539
Weighted
average price
Pence
59.40
66.10
47.65
74.70
61.39
47.02
Number
(000s)
40,714
7,928
(11,188)
(2,970)
34,484
10,030
Weighted
average price
Pence
52.10
76.90
40.30
62.89
59.40
43.32
Share options were exercised throughout the financial year. Share options were exercised at prices of between 29.25 and 53.0 pence
per share.
150
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 24. Cash generated from operations
Profit for the year
Taxation
Interest payable and similar charges
Interest income
Foreign exchange loss
Return of Xonvea Licensing Rights
Loss on disposal of intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of intangibles
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Share-based employee remuneration
Dividends received
Cash generated from/(used in) operations
Group
Company
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
8,027
4,989
2,657
(10)
644
–
308
1,753
19,212
(5,206)
6,728
5,929
1,374
–
46,405
25,010
6,066
3,777
(23)
799
1,672
145
1,496
463
2,036
(498)
(3,801)
1,816
–
38,958
5,433
941
–
(5,777)
–
–
–
–
–
–
(12)
82
–
(2,800)
(2,133)
12,161
877
–
(6,225)
–
–
–
–
–
–
5
5
–
(7,596)
(773)
25. Capital commitments
The Group had capital commitments at 31 December 2020 totalling £3,500,000 (2019: £3,900,000).
26. Contingent liabilities
Contingent liabilities are possible obligations that are not probable. The Group operates in a highly regulated sector and in markets and
geographies around the world each with differing requirements. As a result, and in the normal course of business, the Group can be subject to
a number of regulatory inspections/investigations on an ongoing basis. It is therefore possible that the Group may incur penalties for non-
compliance. In addition, a number of the Group’s brands and products are subject to pricing and other forms of legal or regulatory restrictions
from both governmental/regulatory bodies and also from third parties. Assessments as to whether or not to recognise a provision in respect of
these matters are judgemental as the matters are often complex and rely on estimates and assumptions as to future events.
On 23 May 2019 the UK’s Competition and Markets Authority (‘CMA’) issued a Statement of Objection alleging anti-competitive agreements
against the Group and certain other pharmaceutical companies in relation to the sale of prescription prochlorperazine. Prochlorperazine is
one of the Group’s smaller products and had peak sales in 2015 of £1.9m and sales of £0.3m in 2020.
The Group confirms that it has had no involvement in the pricing or distribution of prochlorperazine since 2013, when it was outlicensed by the
Group. Prior to 2013, prochlorperazine was marketed directly by the Group.
The Group has reviewed the CMA Statement of Objection in detail and is working with the CMA to resolve its alleged objections.
The Group’s assessment as at the date of this report, based on currently available information, is that there are no matters for which a provision
is required (31 December 2019: £nil). However, given the inherent uncertainties involved in assessing the outcomes of such matters there can
be no assurance regarding the outcome of any ongoing inspections/investigations and the position could change over time as a result of the
factors referred to above.
151
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 27. Pensions
The Group operates a defined contribution pension scheme for the benefit of certain Directors and employees.
The Group
Contributions payable by the Group for the year
31 December 2020
£000s
31 December 2019
£000s
994
812
28. Related party transactions
During the year, the Company entered into the following transactions with related parties:
The Company
Transaction values for the year ended
Amount due from
related parties
31 December 2020
£000s
31 December 2019
£000s
31 December 2020
£000s
31 December 2019
£000s
Alliance Pharmaceuticals Limited – Net funds received
Alliance Pharmaceuticals Limited – Interest received
Alliance Pharmaceuticals Limited – Investments during the year
Alliance Pharmaceuticals Limited – Share-based payment
recharge
Alliance Pharmaceuticals Limited – Dividend declared and received
750
5,777
(272)
(1,109)
2,800
974
6,225
4,167
(1,025)
7,596
29. Joint Ventures and post balance sheet events
Name
Principal activity
Country of
incorporation
Synthasia International Company Limited
Distribution of infant milk formula products in China
Hong Kong
Synthasia Shanghai Company Limited
Distribution of infant milk formula products in China
China
176,539
170,056
–
–
–
–
–
–
–
–
% Owned
20
20
The Group owns 20% of the issued share capital of Synthasia International Company Limited, which is a 100% parent of Synthasia Shanghai
Company Limited (together known as ‘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 has determined that, as a result of these rights and by exercise of judgement, Synthasia is accounted for as a Joint Venture. In accordance
with IFRS 11 Joint Arrangements, 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.
In May 2018 the Group was notified that the import licence partner was not going to receive the required approval to import Suprememil, the
infant milk formula brand owned by Synthasia. Following subsequent discussions with the import licence partner and Synthasia management,
the Board concluded that the joint venture investment of £0.3m, and associated loan balances of £2.2m, was to be written down in full.
Following the impairment further losses from the Synthasia Joint Venture have not been recognised. This is due to the Group having no
obligation to fund such losses.
On 10 March 2021 the Group fully divested its holding in Synthasia for nil consideration. As part of the terms of disposal Suprememil brand
trademarks were retained by the Group for potential future use.
The carrying value of Joint Ventures is as follows:
Investments
Synthasia International Company Limited
Synthasia Shanghai Company Limited
Trade and other receivables
Synthasia International Company Limited
Synthasia Shanghai Company Limited
31 December 2020
£000s
31 December 2019
£000s
–
–
–
–
31 December 2020
£000s
31 December 2019
£000s
–
–
–
–
The receivables from Synthasia International Company Limited are stated after a provision of £2.2m (2019: £2.2m).
152
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Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 30. Significant disposals
Return of Xonvea Licensing Rights
In November 2019, the Group reached an agreement with Duchesnay Inc. of Canada (‘Duchesnay’) to return the UK and EU licensing
rights to Xonvea, a prescription medicine for the treatment of nausea and vomiting of pregnancy where conservative management has
failed. Under the terms of the agreement, £2.0m in milestone payments made to date will be paid to the Group, £1.25m having been paid
to date with the balance due in 2021. Additionally, the remaining £0.5m due on initial acquisition of Xonvea previously held as contingent
consideration was waived as part of the agreement. This resulted in the release of the contingent consideration and the disposal of the
corresponding £0.5m asset under development in 2019. Both the release and disposal were included within the loss on disposal, resulting
in no net impact on the income statement.
In 2019, the Group incurred non-underlying inventory provisions and associated restructuring costs in connection with the return of the Xonvea
rights of £1.9m (note 14). The total non-underlying loss on disposal was £1.7m as follows:
Return of Xonvea Licensing Rights
Milestone repayments
Net book amount – intangible asset brand (note 11)
Net book amount – intangible asset under development (note 11)
Release of contingent consideration
Inventory provisions
Associated restructuring costs
Non-underlying loss
£000s
2,000
(1,268)
(1,000)
500
(1,152)
(752)
(1,672)
Disposal of Flammacerium
In December 2019, the Group sold the global rights to the brand Flammacerium for gross cash consideration of £0.75m payable over six
years. Flammacerium is used for the prevention and treatment of infections in severe burn wounds. The total non-underlying loss on disposal
was £0.1m as follows:
Disposal of Flammacerium
Gross cash consideration
Impact of discounting on cash consideration
Net book amount – intangible asset development costs (note 11)
Net book amount – goodwill (note 11)
Associated transaction costs
Non-underlying loss
£000s
750
(57)
(780)
(33)
(25)
(145)
153
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information 31. Acquisition of Biogix Inc
On 29 December 2020 the Group completed the acquisition of 100% of the share capital of Biogix Inc, a privately held, US-based consumer
healthcare company. The acquisition brings into the Group a highly successful and fast-growing brand, Amberen, with significant near-term
growth potential.
The total amount paid in relation to the acquisition was $111.6m, being $110.0m consideration paid in cash on completion, $0.7m estimated
working capital adjustment paid in cash on completion and $0.9m foreign exchange option cash premium paid in December 2020.
The acquisition was funded by drawdown of $22.0m and £66.1m from the Group’s existing £165m Revolving Credit Facility shortly before
completion in December 2020. The Sterling drawdown was subsequently sold in a foreign exchange transaction to buy US Dollars for use in
settlement of cash payments on completion. A portion of funding was drawn in Sterling so that, after taking account of existing borrowings, the
Group’s overall loan position by currency, matches expected post-hedging cash generated by currency.
The provisional fair values of the assets acquired, as at 29 December 2020, are as follows:
Intangible fixed assets
Deferred tax asset
Property, plant and equipment
Current assets (excluding cash and cash equivalents)
Cash and cash equivalents
Current liabilities
Lease liabilities
Net assets
Deferred tax liability
Goodwill
Fair value of net assets acquired
Cash consideration
Working capital adjustment paid in cash
Option premium paid in cash
Total consideration
Book value of
assets and liabilities
acquired $000s
Fair value
adjustments $000s
Fair value of assets
and liabilities
acquired $000s
Fair value of assets
and liabilities
acquired £000s
37
223
419
5,824
382
(1,587)
(378)
4,920
121,000
121,037
89,990
–
–
–
–
–
–
121,000
223
419
5,824
382
(1,587)
(378)
125,920
(35,101)
20,750
111,569
110,000
660
909
166
312
4,330
284
(1,180)
(281)
93,621
(26,097)
15,427
82,951
81,784
491
676
111,569
82,951
The fair values set out above are provisional figures which will be confirmed in the 2021 financial statements, following additional review of
judgemental areas including intangible asset allocation and finalisation of completion accounts.
The fair value of the intangible asset recognised on business combination all relates to Amberen. A single brand intangible asset was identified
for valuation through completion of a formal purchase price allocation exercise. This as brand recognition and positioning were the key drivers
for the acquisition and are regarded as the main barrier to market entry. No other intangible assets were considered to have separately
identifiable value.
The brand was valued using a multi-period excess earnings approach, utilising the Group’s long-term cash flow forecast and a post-tax
discount rate of 10.75%.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Legal and professional fees incurred in the acquisition of £1.3m were recognised as non-underlying costs within administration and marketing
expenses (note 5).
The amounts included in the consolidated statement of comprehensive income since 29 December 2020 included no revenue or gross profit.
Had the transaction occurred on the first day of the financial year, then estimated contribution to Group revenues would have been $25.8m
(£20.0m) and gross profit of $20.2m (£15.6m).
154
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Financial StatementsNotes to the Financial Statements continued 32. Ultimate controlling party
The Company’s shares are listed on the Alternative Investment Market (‘AIM’) and are held widely. There is no single ultimate controlling party.
33. Alternative performance measures
The performance of the Group is assessed using Alternative Performance Measures (‘APMs’). The Group’s results are presented both before
and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides
both management and investors with useful additional information about the Group’s performance and aids a more effective comparison of
the Group’s trading performance from one period to the next and with similar businesses. In addition, the Group’s results are described using
certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management
to monitor ongoing business performance against both shorter-term budgets and forecasts but also against the Group’s longer-term strategic
plans. APMs used to explain and monitor Group performance are as follows:
Measure
Definition
Underlying
EBIT and EBITDA
Earnings before interest, tax and non-underlying items (EBIT), then depreciation, amortisation
and underlying impairment (EBITDA).
Calculated by taking profit before tax and financing costs, excluding non-underlying items and
adding back depreciation and amortisation.
EBITDA margin is calculated using see-though revenue.
Free cash flow
Free cash flow is defined as cash generated from operations less cash payments made for interest
payable and similar charges, capital expenditure and tax.
Net debt
Net debt is defined as the Group’s gross bank debt position net of finance issue costs and cash.
Underlying
effective tax rate
Underlying effective tax rate is calculated by dividing total taxation for the year less impact of tax
rate changes and non-underlying charges, by the underlying profit before tax for the year.
See-through
income statement
Under the terms of the transitional services agreement with J&J, Alliance receives the benefit of
the net profit on sales of Nizoral from the date of acquisition up until the product licences in the
Asia-Pacific territories transfer from J&J to Alliance. The net product margin is recognised as part
of statutory revenue.
The see-through income statement recognises the underlying sales and cost of sales which
give rise to the net product margin, as management consider this to be a more meaningful
representation of the underlying performance of the business, and to reflect the way in which it is
managed.
Reconciliation
to GAAP measure
Note A below
Note B below
Note C below
Note D below
Note E below
Constant currency
basis revenue
See-through revenue stated so that the portion denominated in non-Sterling currencies is
retranslated using foreign exchange rates from the previous financial year.
Note F below
155
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Financial Statements
Notes to the Financial Statements
continued
33. Alternative performance measures continued
A. Underlying EBIT and EBITDA
Reconciliation of Underlying EBIT and EBITDA
Profit before tax
Non-underlying items (note 5)
Finance costs (note 6)
Underlying EBIT
Depreciation (note 12)
Underlying impairment (note 11)
Underlying amortisation (note 11)
Underlying EBITDA
B. Free cash flow
Reconciliation of free cash flow
Cash generated from operations (note 24)
Interest payable and similar charges
Capital expenditure
Tax paid
Free cash flow
C. Net debt
Reconciliation of net debt
Loans and borrowings – non-current
Cash and cash equivalents
Net debt
D. Underlying effective tax rate
Reconciliation of underlying effective tax rate
Total taxation charge for the year
Non-underlying tax credit (note 5)
Underlying taxation charge for the year
Underlying profit before tax for the year
Underlying effective tax rate
156
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
13,016
20,512
3,300
36,828
1,753
–
–
38,581
31,076
1,817
4,553
37,446
1,496
284
179
39,405
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
46,405
(2,866)
(4,612)
(4,838)
34,089
38,958
(2,505)
(4,145)
(3,200)
29,108
Note
18
16
31 December 2020
£000s
31 December 2019
£000s
(138,328)
28,898
(109,430)
(77,040)
17,830
(59,210)
Year ended
31 December 2020
£000s
Year ended
31 December 2019
£000s
(4,989)
(1,383)
(6,372)
33,528
19.0%
(6,066)
(348)
(6,414)
32,893
19.5%
E. See-through income statement
Revenue – Consumer Healthcare brands
Revenue – Prescription Medicines
Total Revenue
Cost of sales
Gross profit
Gross profit margin
Revenue – Consumer Healthcare brands
Revenue – Prescription Medicines
Total Revenue
Cost of sales
Gross profit
Gross profit margin
2020
Statutory
values
£000s
85,340
44,461
129,801
(46,985)
82,816
63.8%
2019
Statutory
values
£000s
83,738
51,899
135,637
(49,561)
86,076
63.5%
There is no impact from the see-through adjustment on income statement lines below gross profit.
F. Constant currency revenue
See-through revenue (Note E)
See-through revenue (Note E)
2020
£000s
137,520
2019
£000s
144,278
See-through
adjustment
£000s
7,719
–
7,719
(7,719)
–
See-through
adjustment
£000s
8,641
–
8,641
(8,641)
–
Foreign
exchange
impact
£000s
(329)
Foreign
exchange
impact
£000s
(767)
2020
See-through
values
£000s
93,059
44,461
137,520
(54,704)
82,816
60.2%
2019
See-through
values
£000s
92,379
51,899
144,278
(58,202)
86,076
59.7%
2020
Constant
currency
revenue
£000s
137,191
2019
Constant
currency
revenue
£000s
143,511
157
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Additional Information
Unaudited Information
Shareholder Information
Shareholder enquiries
The Company’s share register is maintained by Link Group (‘Link’) who are responsible for updating the register, including changes to
shareholders’ names or addresses and processing off-market transfers 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 Link Group, 10th Floor, Central
Square, 29 Wellington Street, Leeds, LS1 4DL or telephone 0371 664 0300 (calls are charged at the standard geographical rate and will
vary by provider, lines are open 9.00am to 5.00pm Monday to Friday).
Financial Calendar
Annual General Meeting
19 May 2021
Interim results announcement
21 September 2021
Year end
31 December 2021
Preliminary announcement
22 March 2022
158
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Five Year Summary
Revenue
Operating profit before
non-underlying items
Non-underlying operating items
Operating profit
Profit before tax before
non-underlying items
Profit before tax after non-underlying items
Intangible assets
Tangible assets
Current assets
Current liabilities
Equity
Average shares in issue (millions)
Shares in issue at period end (millions)
Earnings per share – basic (p)
Earnings per share – adjusted
underlying basic (p)
Year ended
31 December 2016
£m
Year ended
31 December 2017
£m
Year ended
31 December 2018
£m
Year ended
31 December 2019
£m
Year ended
31 December 2020
£m
97.5
25.6
–
25.6
22.2
22.2
264.8
1.8
49.3
50.3
179.3
469.4
472.6
3.85
3.69
101.6
118.2
135.6
129.8
25.8
4.4
30.2
23.9
28.3
278.6
5.7
49.1
61.4
203.1
473.8
475.0
6.08
4.05
28.9
(5.3)
23.7
28.1
22.8
335.2
7.6
58.7
91.7
252.2
497.2
518.2
3.69
4.54
37.4
(1.8)
35.6
32.9
31.1
328.7
11.6
65.0
24.2
274.2
520.7
529.4
4.80
5.09
36.8
(20.5)
16.3
33.5
13.0
412.9
15.9
77.2
30.2
281.0
531.1
532.9
1.51
5.11
159
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Additional Information
continued
Advisers and Key Service Providers
Registered Office
Avonbridge House
Bath Road
Chippenham
Wiltshire
SN15 2BB
Company number
04241478
Auditor
KPMG LLP
66 Queen Square
Bristol
BS1 4BE
Financial PR
Buchanan Communications
107 Cheapside
London
EC2V 6DN
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Nomad and Joint Broker
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
Joint Broker
Investec Bank plc
2 Gresham Street
London
EC2V7QP
Bankers
Bank of Ireland
Bows Bells House
1 Bread Street
London EC4M 9BE
Citibank, N.A
Citigroup Centre
33 Canada Square
Canary Wharf
London E14 5LB
Lloyds Bank PLC
25 Gresham Street
London EC2V 7HN
National Westminster Bank PLC
250 Bishopsgate
London EC2M 4AA
Silicon Valley Bank
Alphabeta
14–18 Finsbury Square
London EC2A 1BR
160
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
Cautionary Statement
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.
161
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Additional Information
continued
Glossary
ABHI
Association of the British HealthTech Industry
ABPI
Association of the British Pharmaceutical Industry
AGM
Annual General Meeting
ANSM
Agence Nationale de Sécurité du Médicament et des Produits de Santé
BSI
CEO
CFO
British Standards Institution
Chief Executive Officer
Chief Finance Officer
CMO
Contract Manufacturer
ERP
FDA
Enterprise Resource Planning
US Food and Drug Administration
GMP
Good Manufacturing Practice
GPvP
Good Pharmacovigilance Practice
HCP
IHP
Healthcare Professional
International Health Partners
IPHA
Irish Pharmaceutical Healthcare Association
J&J
Johnson and Johnson
MDR
Medical Device Regulation
MHRA
Medicines and Healthcare products Regulatory Agency
MIA
Medical Industry Accredited
NMPA
National Medical Products Administration
NPI
OTC
New Product Introduction
Over the Counter
PAGB
Proprietary Association of Great Britain
QPPV
Qualified Person Responsible For Pharmacovigilance
RP
Responsible Person
SECR
Streamlined Energy and Carbon Reporting regulations
S&OP
Sales and Operations Planning
VPAS
Voluntary Pricing and Access Scheme
162
Alliance Pharma plc – Annual Report and Accounts 2020
Alliance Pharma plc – Annual Report and Accounts 2020
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@alliancepharmaceuticals.com
www.alliancepharmaceuticals.com