Achieving
more
together
Alliance Pharma plc
Annual Report and Accounts
2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
An alliance of people,
partners and brands,
working together
to achieve more
Contents
Company Overview
2021 Financial Highlights
At a Glance
Our Values
01
02
04
Strategic Report
Chief Executive’s Review
Our Markets
Our Business Model
Our Strategy
Key Performance Indicators
Sustainability Overview
Sustainability Performance
Developing our Environmental
Sustainability Strategy
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
Governance
Chairman’s Introduction
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Task Force on Climate-related Financial
Disclosures (TCFD)
Directors’ Report
47
48
50
56
60
65
76
78
80
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
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102
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17
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34
35
39
Additional Information
Unaudited Information
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
139
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Alliance Pharma plc – Annual Report and Accounts 2021
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Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
2021 Financial Highlights
The Group delivered a
strong operational and
financial performance
in 2021, leaving it well
placed to take advantage
of further growth
opportunities in 2022.
See-through Revenue*
Statutory Revenue
Underlying Profit Before Tax
£169.6m +23%
£163.2m +26%
£42.2m +26%
(2020: £137.5m)
(2020: £129.8m)
(2020: £33.5m)
Reported Profit Before Tax
Underlying Basic EPS
£18.2m +40%
6.39p +25%
Reported Basic EPS
1.37p -9%
(2020: 1.51p)
(2020: 5.11p)
Net Debt*
(2020: £13.0m)
Free Cash Flow*
£30.2m -12%
(2020: £34.1m)
Overview
£87.0m -20%
(2020: £109.4m)
*
Non-IFRS alternative performance measures (see note 34).
See-through revenue includes all sales from Nizoral as if they had
been invoiced by Alliance as principal. For statutory accounting
purposes the product margin relating to Nizoral sales made on an
agency basis is included within Revenue, in line with IFRS 15.
Strong overall revenue growth driven by
Strong Free Cash Flow* driving down Group
Dedicated Innovation and Development team
Consumer Healthcare, underpinned by continued
market penetration via e-commerce activity, which
now represents around 25% of Group sales
Consumer Healthcare see-through revenue* up
31% to £121.8m (2020: £93.0m) and up 36%
at constant exchange rates* (CER) with excellent
performance from Kelo-cote and the inclusion of
Amberen, acquired in December 2020
Robust Prescription Medicines performance with
revenues up 8% to £47.8m (2020: £44.5m),
with strong H2 recovery as the effects of
COVID-19 receded
leverage to 1.7x at 31 December 2021 (2.4x at
December 2020)
now in place to underpin Consumer Healthcare
organic growth
Amberen fully integrated into the Group
Roll-out of strategic brand plan for Nizoral now
Successfully implemented Group-wide ERP
well underway
system, enhancing visibility across the business
Committed to carbon neutral Scope 1&2
US operating capabilities expanded to provide
a platform for future growth
Strengthened European management team
and expanded the Board to increase consumer
brand experience
emissions from 2021
Certified as a Great Place To Work® again in
UK and China, and now in Singapore with a
Trust Index© rating of 76%
01
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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At a Glance
We are Alliance,
a growing international
healthcare group
Headquartered in
the UK, we employ
around 250 people
based in locations
across Europe,
North America,
and the Asia
Pacific region.
Who we are
We are Alliance, a growing international
healthcare group.
A business founded on the principle that
by working together, we can achieve more.
What we do
Our purpose is to improve the lives of
consumers and patients through making
available a range of clinically valuable
healthcare products.
How we do it
Every day, we work with our partners and
colleagues around the globe, to maximise
the value of our brands.
Confident in the knowledge that in doing so,
we can make a real difference to people’s lives.
Our core business is Consumer Healthcare.
This accounts for more than 70% of our revenues
and is what drives our growth. We also have a
well-established Prescription Medicines business,
which operates from the same regulatory platform.
In total, we hold marketing rights to around
80 brands.
Our commercial operations extend across EMEA,
AMER and APAC, with revenues generated from
a mix of direct, distributor and e-commerce sales.
By outsourcing all our manufacturing and logistics
activities, we remain asset-light and focused on
maximising the value of our brands.
02
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At a Glance continued
Our Purpose
Our Vision
Our Strategy
To improve the lives of consumers and patients
through making available a range of clinically
valuable healthcare products.
To be a leading international healthcare
business, built around products that are
clinically valuable to patients.
We will be both the partner and employer
of choice.
There are two main strands to our strategy:
Delivering solid organic growth from
our key brands
Supplementing this growth with
selective, complementary acquisitions
in the consumer healthcare space
Underpinned by a focus on:
Investing in people
Sustainability
See page 17
Our Business Model
Our Culture
Our Values
Leveraging the global platform we’ve
created and the capabilities, expertise and
relationships that support this enables us to
maximise the value of our existing brands and
integrate acquired brands with ease.
Our culture reflects the spirit of collaboration
embedded in our business – the tacit belief that
through working together, both internally and
with external partners, we can achieve more
for our stakeholders and for society as a whole.
Performance
Realism
Accountability
Integrity
Skill
Entrepreneurship
See page 16
See page 22
See pages 04 & 05
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Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Our Values
Living up to
our values
Acting in accordance with our
values, we maintain our strong
culture of working together to
achieve more.
Realism
We set stretching goals and targets which
we believe are achievable
When we learnt that the manufacturer of one
of the lead products in our Vamousse headlice
prevention/treatment range was unable to
continue manufacturing it, some quick thinking
was needed to avoid a potential out of stock
situation in the peak back-to-school season in
the US. By working together and adopting a
creative, ‘can do’ approach, a cross-functional
team, with participants from the US and UK,
managed to come up with a solution which, with
limited compromises and last-minute adjustments,
they then successfully implemented to resolve
what had originally looked like a very
challenging situation.
Performance
Our high-performing people continually
drive business success
Undeterred by the challenges of remote
working imposed by the global pandemic,
in April 2021, members of our global
brand marketing team went above and
beyond to deliver a very successful
Alliance brand week and marketing
excellence program virtually. This enabled
the brand leads to showcase the plans
they’d created for each of the 13 brands
prioritised as part of this programme,
building wider awareness and
understanding of our brand marketing
priorities across the business.
See page 22
Accountability
We take responsibility and deliver what
we promise
From developing new Key Opinion Leaders’
endorsements for our products to delivering
new or improved processes, many great
demonstrations of our values in practice
involve our employees taking individual
or collective responsibility to ensure that
delivery expectations are met at all levels in
the organisation. One of the best examples
of Accountability in 2021 came from our UK
Facilities team, who successfully managed
the transformation of our UK headquarters
and the challenge of undertaking works to a
listed building, against the backdrop of ever-
changing COVID-19 restrictions.
See page 33
04
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Our Values continued
Our values, and the culture that underpins them,
are at the heart of how we operate as a business
Each month, we take time to celebrate outstanding
demonstrations of our values in practice
In 2021, more than 50 colleagues received special
recognition through the values-based PRAISE awards
scheme, with more than £2,500 donated to charities
of their choice
Skill
We recruit highly skilled people and develop
their talents to the full
Many of our PRAISE awards recognised the
utilisation of skills developed over the course
of an employee’s journey with Alliance – we
see many great examples of employees taking
on and successfully delivering projects that lie
outside their current experience and skill sets.
Integrity
We build trust in all our relationships
Trust is a key element in all our relationships,
both internal and external – creating successful
partnerships and business relationships
depends on it. In April 2021, after a lengthy
process, members of our medical and
regulatory teams successfully obtained a
new indication for one of our established
Prescription Medicines in the UK and 10 other
territories across the EU. To do this, they had to
overcome multiple challenges – from dealing
with several complex information requests from
the assessors to translation issues and rigorous
challenges from our safety partners. Through
exercising a high degree of skill and integrity,
showing sensitivity to others’ perspectives, and
persevering with their endeavours, the team
successfully delivered a great outcome, both
for Alliance and for patients.
For example, in 2021 a member of our
customer services team took on the challenge
of consolidating the business activities going
through our two UK wholesalers – the first
project of this size and cross-functional nature
they had led. Through effective leadership
and strong project management skills, they
were able to bring the project to a successful
conclusion and enable the associated cost
savings to be realised.
The ‘Alliance Asset Hub’, an enterprising solution
conceived and actualised by a member of our
global marketing team, now sits at the heart of our
marketing ecosystem, providing a single source
of truth for all our digital brand assets. Accessible
by teams around the globe and with the ability to
make direct updates to our brand websites, whilst
controlling access and usage rights, the system is
expected to deliver real business benefits as our
focus on marketing excellence continues.
05
Entrepreneurship
Our people think of the business as it if was their own
Tired of the daily frustration of trying to
locate the right brand assets, our marketing
team came together and decided to take the
initiative to create a digital asset management
system to better manage our growing
portfolio of digital assets.
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Strategic
Report
Chief Executive’s Review
Our Markets
Our Business Model
Our Strategy
Key Performance Indicators
Sustainability Overview
Sustainability Performance
Developing our Environmental
Sustainability Strategy
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
07
13
16
17
23
25
28
33
34
35
39
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Chief Executive’s Review
Continuing
on our growth
trajectory
See-through Revenue*
£169.6m +23%
(2020: £137.5m)
Statutory Revenue
£163.2m +26%
(2020: £129.8m)
*
Non-IFRS alternative performance measures (see note 34).
See-through revenue includes all sales from Nizoral as if they had
been invoiced by Alliance as principal. For statutory accounting
purposes the product margin relating to Nizoral sales made on an
agency basis is included within Revenue, in line with IFRS 15.
“ I’m delighted with the strong
performance of the Group in
2021. Kelo-cote enjoyed another
excellent year, helping us to
deliver double digit organic
revenue growth, and Amberen
is now fully integrated into our
enlarged US operations”
Alliance Pharma plc – Annual Report and Accounts 2021
07
Company Overview
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Chief Executive’s Review continued
TRADING PERFORMANCE
Overview
The Group delivered strong growth in the year,
with see-through revenue up 23% to £169.6m
(2020: £137.5m), despite the impact of currency
headwinds and continuing lockdowns, particularly
in the APAC region; at constant exchange rates
(CER), revenue growth was 27%. Like-for-like
(LFL) revenue, excluding revenues attributable to
Amberen, which was acquired by the Group at the
end of 2020, grew 9% (12% CER). On a statutory
reported basis, Group revenues were up 26% to
£163.2m (2020: £129.8m) (+30% CER) and up
11% to £144.0m (2020: £129.8m) on a like-for-
like basis, excluding Amberen (+14% CER).
Gross profit increased by 32% to £109.5m (2020:
£82.8m), the increase outstripping revenue
growth due to favourable changes in product
mix, resulting from the inclusion of Amberen
and the significant growth in Kelo-cote sales.
This was balanced by an expected increase in
operating costs, primarily reflecting the inclusion
of the Amberen cost base, the resumption of
discretionary spend deferred from the early stages
of the pandemic and higher levels of investment
in the business to support growth. Coupled with a
small increase in depreciation and amortisation
charges, as we brought our new ERP system into
service, underlying profit before tax increased
26% to £42.2m (2020: £33.5m), with the profit
before tax margin increasing by 50 basis points to
24.9% (2020: 24.2%).
Non-cash amortisation and impairment charges,
together with a provision in relation to the
Competition and Markets Authority (CMA)
decision and restructuring costs, resulted in
reported profit increasing by 39% to £18.2m
(2020: £13.0m).
Consumer Healthcare
Our Consumer Healthcare business continued
to perform well through 2021, with increased
e-commerce activity and the integration of Amberen
helping to drive year-on-year see-through revenue
growth of 31% (36% CER), to £121.8m (2020:
£93.0m). On a statutory basis, reported revenues
were £115.4m, up 35% from the previous year
(2020: £85.3m) and up 41% CER.
Excluding the impact of Amberen, like-for-like
Consumer Healthcare see-through revenue
increased by 10% (14% CER) to £102.6m whilst
reported revenue increased by 13% (16% CER)
to £96.1m.
Kelo-cote – scar prevention & treatment
Kelo-cote delivered another excellent performance,
particularly in the APAC region, generating revenues
of £48.8m, up 41% on the prior year (2020:
£34.7m). CER revenues were up 47% due to
continued strong demand from China, reflecting the
growth of both domestic sales and significant cross-
border e-commerce (‘CBEC’) sales.
Kelo-cote is very well established in China, with high
brand awareness and usage. The growth in domestic
and CBEC revenues reflects the increasing trend for
consumers in China and elsewhere to migrate more
to online purchasing, both of the brand itself and
healthcare products generally – a trend accelerated
by the pandemic.
In 2021, we entered into a new CBEC distribution
agreement for Kelo-cote, to move Alliance closer
to the customer and provide greater control of
our distribution chain. This decision was taken in
response to the success of CBEC in facilitating export
sales from the EU to consumers in China, and in
recognition of the significant opportunity that China
offers for this key brand. As a result, we expect further
top-line growth in China over the medium term.
Performance across the rest of the APAC region
was more mixed, as many countries continued to
be impacted by the pandemic, although both Hong
Kong and South Korea recorded strong growth.
A similar trend was evident across South America
and much of EMEA; with strong performances from
a number of European territories including France
(domestic and export sales), and the UK.
*
See-through revenue includes all sales from Nizoral as if they had been
invoiced by Alliance as principal. For statutory accounting purposes
the product margin relating to Nizoral sales made on an agency basis
is included within Revenue, in line with IFRS 15.
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Chief Executive’s Review continued
Amberen – vitamin mineral
supplement for the relief of
menopause symptoms (US)
Amberen made an encouraging start during its
first year of trading under the Group’s ownership,
generating net revenues of $26.5m (£19.2m) in the
Year, with H2 2021 revenues up 12% CER on H2
2020 (under previous ownership). Full year revenue
growth was up 3% CER, with the brand’s Amazon
sales in particular experiencing strong year-on-year
growth, compensating for more challenging trading
conditions for the category as a whole in the bricks
and mortar retail sector.
We expect to see Amberen revenue growth
accelerate in 2022, with a weighting towards H2,
as we look to leverage the expanded operating
platform we have put in place in the US, increase
our focus on brand positioning and execute a new
integrated marketing campaign for the brand.
We are focused on developing an innovation
pipeline to underpin the growth of the brand in the
longer term.
Nizoral – medicated
anti-dandruff shampoo
Nizoral had a challenging start to the year due
to a combination of distributor order phasing,
manufacturing delays, and the ongoing impacts
of COVID-19 on demand, particularly in India.
We experienced some delay to the transitioning of
regulatory approvals in Vietnam and the Philippines,
whilst growth in key pharmacy chain listings for the
new Triatop combi product in China was also slower
than planned.
However, revenues started to recover in the second
half of the year, with see-through revenue of £11.6m
in H2 2021 (£9.0m in H1 2021 and £11.2m in
H2 2020), as the challenging regional trading
conditions affecting both supply and demand eased.
Triatop combi product pharmacy listings in China
also improved in the last few weeks of the year, which
should help support further sales momentum in 2022.
Consequently, see-through revenues for the Year of
£20.6m, were up 1% CER (-2% as reported) (2020:
£21.0m). On a statutory reported basis, revenues
were up 7%, at £14.2m (2020: £13.3m) (+9% CER).
We expect to see further improvement in 2022, as
the pandemic recedes and we take full control of
the supply chain following the end of the transition
period with J&J. The roll-out of our strategic brand
plan for Nizoral is now well underway, with
consumer activation campaigns ongoing or planned
across a number of key territories, including Australia,
South Korea and Taiwan. These activities are being
carried out in partnership with our local distribution
partners as part of a growth strategy centred around
consumer and healthcare professional activation,
e-commerce, and Innovation & Development (I&D).
Other Consumer Healthcare brands
We continued to see a mixed performance across
our other Consumer Healthcare brands, particularly
for those products sold principally through
international distributors.
MacuShield (eye health supplement), was an
early beneficiary of a recovery in UK retail sales
post COVID-19, whilst Vamousse (prevention and
treatment of head lice) continued to be impacted by
COVID-19 challenges as school closures and social
distancing requirements led to significantly reduced
incidence of head lice, particularly in the US, the
product’s primary market. With distributor stocking
patterns contributing to declines in Oxyplastine and
Aloclair, revenues in other Consumer Healthcare
brands fell 9% CER.
As we progress through 2022, and global trading
patterns and consumer behaviours start to normalise
post COVID-19, we expect to see sales of Vamousse,
Aloclair, Oxyplastine and a number of our other
smaller consumer brands start to pick up again.
Further revenue detail on these brands is available
in note 3.
Prescription Medicines
The Prescription Medicines business delivered robust
revenues of £47.8m (2020: £44.5m), up 8% on the
prior year, reflecting a partial return to the delivery
of routine treatments and normalisation of daily life
compared with the early stages of the pandemic
in 2020. Key drivers of revenue growth included
the Opus range of stoma care products, Forceval
(nutritional supplement), Hydromol (emollient for the
treatment of eczema) and Flammazine (prevention of
infection of burns and wounds).
We continue to actively manage this part of our
portfolio, periodically discontinuing or disposing
of smaller products that deliver very low sales and
margins. However, the cash generation from these
assets remains good and, coupled with their limited
requirement for promotional investment, this business
will continue to play an important part in our overall
product portfolio.
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AMER (The Americas)
Revenues in the AMER region increased by £19.3m
to £26.0m (2020: £6.7m), reflecting the acquisition
of Amberen, which contributed £19.2m to sales in
the year. On a like-for-like basis, sales were in line
with those for the prior year at £6.8m, with a decline
in Vamousse sales in the US, due to the continued
impacts of the pandemic, offset by increased sales
of Kelo-cote in South America. This region now
accounts for more than 20% of our Consumer
Healthcare revenues.
Following a period of investment to expand its
local operating capabilities, the US business now
has an enhanced platform from which to generate
strong growth in Amberen and other existing brands
and to scale up further when suitable acquisitions
are identified.
Chief Executive’s Review continued
Regional performance
EMEA (Europe, UK, Middle East & Africa)
EMEA regional revenues of £89.2m were down
5% versus those for the prior year (2020: £93.8m),
primarily due to a mid-year change in the distributor
for Kelo-cote CBEC, which is now located in APAC,
and hence sales are now included in APAC revenues,
whereas previously they were included in EMEA. This
change in revenue classification was partially offset
by the uplift in Prescription Medicines revenues, with
this region accounting for 95% of all Prescription
Medicines sales in the year, coupled with the growth
in MacuShield sales, which originate primarily in
EMEA (the largest market being the UK).
APAC (Asia Pacific and China)
APAC regional see-through revenues rose 47%
versus the prior year at £54.4m (2020: £37.0m),
with statutory revenues up 64% to £48.0m
(2020: £29.3m).
Revenues in this region are dominated by Kelo-cote
and Nizoral (which is only sold by Alliance in APAC)
and which collectively account for 90% of APAC
sales in 2021.
Regional revenues in 2021 benefitted from the
change in distribution arrangements for Kelo-cote
CBEC sales, with revenue recognised as part of
APAC, rather than EMEA, from the middle of the
year. The uplift in sales also reflects underlying
growth in Kelo-cote sales, both in China and across
the wider APAC region, coupled with the slight
decline in Nizoral sales.
Developing our regional platform
Rounding out our operational capabilities across
the three geographic regions in which we operate,
EMEA, APAC and AMER, has been a major focus
for us in recent years. The platform which we’ve
created across these three regions, underpinned
by our global support functions, enables us to
create value through both driving the growth of our
existing brands and acquiring and integrating new
assets with ease – as demonstrated most recently
with Amberen.
CURRENT TRADING AND OUTLOOK
2022 has started well, and we remain confident in
our ability to deliver financial performance in line
with market expectations.
We now have a clear focus on our core Consumer
Healthcare business, supported by a well-defined
value maximisation strategy and a scalable
platform across EMEA, APAC and the US,
to drive future growth.
The new distribution agreement we put in place in
2021 will enable us to deliver further growth for
Kelo-cote through our CBEC business and gives
us the opportunity to extend the range of products
made available through this channel, potentially
accelerating the growth of a number of our other
consumer brands.
Through 2022, we expect to see increased growth
from Nizoral as we accelerate the roll-out of our
strategic plan for the brand and as the impact of the
pandemic recedes.
With Amberen now fully integrated into our enlarged
US operations, we expect to see revenues increasing
as we begin to realise the benefits of additional
revenue opportunities that the brand has brought into
the Group.
We now have a more balanced consumer portfolio
around the globe and, as our net debt and leverage
continue to reduce, we are increasingly well placed
to participate in complementary acquisitions in the
consumer healthcare space and to leverage the
operating platform we have built across EMEA,
APAC and the US. Coupled with a proven ability
to extract value from our key consumer brands, we
remain confident in our ability to realise our mid-
term growth ambitions.
10
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Chief Executive’s Review continued
OPERATIONAL DEVELOPMENTS
We recognise the need to invest in our business
to maintain strong organic revenue growth.
We recently implemented a new Innovation &
Development (I&D) process and in 2021 we created
new dedicated roles and a central I&D budget to
deliver new products, claims and packaging ideas.
We expect to see a number of these innovations
come to market in 2022 as we refresh existing
products to maintain consumer appeal.
We have also commenced the roll-out of our
new Digital Excellence training programme to
our global marketing teams to ensure our staff
have the necessary skills and knowledge to drive
sustainable long-term value.
Our ERP system went live in the first half of 2021,
and we have already realised benefits to the
business through the standardisation of processes.
Our significant pre-launch preparation ensured a
virtually seamless changeover; work continues on
refining some of the reporting requirements and
rolling the system out to a few remaining smaller
entities, but we expect this to complete in the next
12 months.
During the year we secured new, larger offices
in Cary, North Carolina, to accommodate our
growing US team, closed our office in Los Angeles
and streamlined our European footprint through
the closure of our Milan office, incurring
associated restructuring costs of £2.4m, which
have been presented as non-underlying.
We also completed further substantial upgrade
and refurbishment works at our UK headquarters,
improving the building’s environmental
credentials whilst also reconfiguring space to
better accommodate post-pandemic working
arrangements. All employees have now returned
to the office on a hybrid basis, both in the UK
and in our regional offices around the globe, as
pandemic restrictions allow.
INCREASING OUR FOCUS ON
SUSTAINABILITY
We have continued to focus on developing our
sustainable business strategy during the year,
under the direction of the ESG Board Committee,
and informed by feedback from a number of
our key investors plus external gap analysis.
This work has resulted in the development of our
Sustainability Framework; we now have greater
clarity regarding our specific areas of focus and
the key activities which underpin these.
We have initiated a programme of work to drive
improvements to the sustainability of our product
packaging and are also in the early stages of
developing our broader environmental strategy,
including our response to climate change. In
2021, we quantified our Scope 3 greenhouse
gas emissions for the first time and are using the
results to help inform the development of our
carbon action plan, with a view to setting carbon
reduction targets and our path to net zero in the
near future.
Minimising our environmental impact
In 2021, we completed a programme of upgrading
and refurbishment works at our UK headquarters,
further improving the building’s environmental
credentials. We continue to actively look for ways
to reduce our direct (Scope 1 & 2) emissions as part
of the drive towards net zero and intend to achieve
carbon neutrality for our Scope 1 & 2 UK emissions
for 2021 retrospectively in 2022, through the use of
sequestration schemes.
Given the nature of our business, and our use of
third-party distributors, contract manufacturers
(CMOs) and logistics service providers (LSPs),
the majority of our greenhouse gas emissions
are classified as Scope 3. In 2022, we plan to
reach out to our larger CMOs and LSPs to better
understand where they are on their respective
emissions reduction journeys and to obtain
their Scope 1 and 2 data to help improve the
methodology used for our Scope 3 calculations.
We will also continue to reduce our own Scope
1 and 2 emissions, which were 90tCO2e for our
UK operations in 2021, and will achieve carbon
neutrality for these retrospectively in 2022 through
the use of sequestration schemes.
With the foundations now in place, we will be
looking to raise the profile of sustainability within
the business more widely in 2022, as we continue
our journey to become a more sustainable
business. We remain a responsible corporate
citizen, committed to minimising the negative
impacts of our operations on the environment,
whilst making a positive contribution to society.
Further coverage on the progress we have made
with our sustainable business strategy can be
found on pages 25 to 33 of this report.
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Chief Executive’s Review continued
PEOPLE
On behalf of the Board, I would like to take this
opportunity to express my sincere thanks to all
those who have helped to make 2021 such a
successful year for Alliance. We currently employ
around 250 people in 10 locations around the
globe. In 2021, we created around 20 new roles,
spread across all our main geographic locations,
as we looked to meet our evolving business needs.
This included the creation of a new dedicated
I&D team to underpin the growth of our Consumer
Healthcare brands.
We recognise the need to develop appropriate in-
house expertise in specific skill sets, using a blend
of external subject matter experts and internal
training to ensure our platform remains scalable
as we grow. We anticipate continued investment in
our global team in 2022.
In 2021, we once again participated in the Great
Place To Work® survey, as we further progressed
our employee engagement journey. We were very
pleased to have received an overall Trust Index©
rating of 76% and to have been recertified as a
Great Place To Work® in the UK and China whilst
gaining an additional certification in Singapore,
with 81% of participants globally saying that
Alliance was a Great Place To Work®.
Further coverage on this and other aspects of our
people strategy can be found on page 22.
During the second half of the Year, we rolled
out and refined our new ways of working to
provide flexibility over office and home working
for our employees around the globe, based on
individual role, activities, and the location of other
colleagues with whom they interact regularly. The
majority of employees now spend 2 or 3 days a
week in the office, subject to local government
guidance, allowing them to combine the benefits
of individual focus time with the increased
connection and collaboration opportunities
that come from being physically present with
colleagues in the office. This increased flexibility
has been very positively received across the
business and is working well for us.
We recognise that great people, and the
successful partnerships that they build both within
the business and externally, are key to the delivery
of great results.
BOARD CHANGES
As previously announced, Kristof Neirynck, a
highly experienced consumer brands executive,
took up his position as an independent Non-
executive Director of the Group on 1 December
2021, bringing with him almost 20 years of
international consumer brand experience,
including complex omnichannel business models,
direct-to-consumer strategies and CBEC sales
into China. His experience will be invaluable
as we look to further develop and grow our
business, in particular our CBEC activities,
over the coming years.
Supporting early-stage career development
2021 saw two of our employees successfully
complete their apprenticeship training and move
on to new permanent roles within the business –
demonstrating the continued success of Alliance’s
apprenticeship programme in fostering early-stage
skills development. We have since taken on an
additional apprentice in our Finance team and have
recently launched both a graduate scheme and an
industry placement scheme, furthering our commitment
to supporting those at the start of their careers.
LOOKING FORWARD TO 2022
2022 has got off to an encouraging start. We
remain confident in our ability to further capitalise
on identified organic growth opportunities within
the business and to deliver financial performance
in line with market expectations.
Operationally, the priorities for the Group in
2022 are:
›
›
›
To continue to invest behind our larger
Consumer Healthcare brands, in order to drive
further growth, supported by our increasing
focus on e-commerce and I&D activities;
To continue to progress our sustainable
business agenda, including the creation of our
carbon action plan and the setting of emissions
reduction targets;
To continue to look for opportunities to
participate in complementary acquisitions in
the consumer healthcare space, to leverage the
operating platform we have built across EMEA,
APAC and the US, and balance the scale of our
business operations across these regions.
Peter Butterfield
Chief Executive Officer
30 March 2022
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Our Markets
The long-term trends in
consumer healthcare remain
unchanged, although the
COVID-19 pandemic has
caused significant short-term
impacts. Sustainability is also
emerging as a key consideration
for both manufacturers and
brand owners.
1 in 20 Google searches
relate to health
67%
of people are
researching
health problems
60%
59%
tend to take an OTC
product before making
a doctors appointment
take OTC products
to manage acute
health conditions
Source: https://www.iqvia.com/-/media/iqvia/pdfs/library/fact-sheets/social-media-intelligence-brochure-for-consumer-health-customers.pdf
Macro trends in consumer healthcare
Increasing life expectancy – increasing
›
longevity and ageing populations have
led 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 – levels of prosperity
and disposable income in many parts of the
world, particularly in developing countries,
are rising. We are also seeing a shift towards
self-medication using over the counter (OTC)
products, rather than relying on prescription
medicines, coupled with an increased focus on
personal wellbeing, and on prevention rather
than cure.
› Digital healthcare and the empowerment
of patients and consumers – consumers,
especially younger ones, are increasingly
turning to online resources to self-diagnose
and discover solutions to their health concerns.
As prospective patients, consumers are
becoming active partners in their healthcare
journey. With the ability to carry out extensive
research online, they are able to become more
knowledgeable about the services they receive
and the products they use.
›
The growth of e-commerce – the emergence
of high-speed mobile data, rapid delivery times
and increasingly secure and speedy payment
methods have led consumers to embrace the
convenience of online purchasing.
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Our Markets continued
Impacts of the COVID–19
global pandemic
›
Fluctuating demand – consumers and
retailers stocked up in the early stages of the
pandemic, causing a subsequent reduction in
demand and orders, impacting sales. Demand
and supply patterns only normalise once
inventory has sold through.
› Strained supply chains – production and
logistics have been heavily impacted both by
workers being unable to work due to illness
or self-isolation requirements, and reduced
capacity as a result of compliance with social
distancing restrictions.
› New healthcare habits – consumers learnt
to manage their minor ailments with home
remedies or went without treatments, for
example in the mouth ulcer category. Brands
will need to re-engage with consumers about
the benefits of treating, now that access to
treatment is available again.
› E-commerce – consumers switched to
purchasing through online retailers, with global
e-commerce sales increasing 26.4% in 2020
and a further 16.3% in 2021. E-commerce
now represents 19% of total retail sales, driven
by the continued impact of the COVID-19
pandemic shifting consumer purchase patterns
from traditional bricks and mortar stores to
online marketplaces like Amazon and retailer
websites*. Consumers are expected to continue
to shop this way.
› Self-diagnosis – consumers turned to the
internet to diagnose their health issues and
to find recommended solutions, relying less
on healthcare professionals, who were often
difficult to access.
Accelerated shifts towards
digital healthcare
Emerging trends – sustainability
Consumers, retailers, and healthcare providers
are increasingly choosing goods and services that
promote a lower carbon footprint compared to
alternatives. As a result, organisations, consumer
healthcare brands and their wider supplier
network will need to demonstrate their commitment
to the environmental agenda consistently and
proactively in order to retain and grow their
market positions.
E-commerce market is worth 4.9tr
worldwide of which consumer healthcare is
260bn
Relevance of the online channel per CHC product category
Vitamins & supplements
Cold remedies
Pain killer
Cough relief
Wound care
Feminine hygiene1
Gastro-intestinal
Allergy
Eye care
Ear care
Heart health
Sedatives/sleeping aid
Lower online relevance
Average
Higher online relevance
Source: https://www.simon-kucher.com/en-gb/blog/online-shopping-consumer-healthcare-sector-what-consumers-want-and-what-deters-them
30%
growth in China and
23%
growth in the US in 2021
14
The opportunity for Alliance…
Alliance is very well-placed to meet the growing
need for OTC and self-selection healthcare
products and services, with over 70% of our
revenues now generated from consumer
healthcare products, and with our established
global operating platform, strong distributor and
retailer relationships, and an increasing focus both
on product innovation and on sustainability.
*
Source: e-Marketer, January 2022; InsiderIntelligence.com
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Our Markets continued
c.25%
of 2021 sales through
e-commerce
…and how we’re capitalising on it
› Our brand prioritisation framework ensures
investment and innovation are focussed on
the biggest perceived opportunities. In 2021,
our key brand, Kelo-cote, delivered growth of
more than 40%, driven by favourable category
dynamics and the growing e-commerce
channel, which now represents around 25%
of Group sales. We have now put in place the
brand strategies needed to accelerate growth
of Nizoral and Amberen in 2022.
›
To support the growth of our e-commerce
sales, in 2021 we set up a dedicated team to
lead our cross-border e-commerce (‘CBEC’)
activities and develop effective strategies to
win in domestic e-commerce channels (see
case study ‘Responding to the acceleration in
e-commerce growth’ on page 20).
›
›
To further fuel the growth of our key and high-
priority brands, we introduced new innovation
processes, tools and capabilities in 2021
which have resulted in a rapid expansion of
our consumer healthcare innovation pipeline.
This will be further enhanced in 2022 by the
creation of a dedicated team and a meaningful
increase in the development budget, designed
to deliver breakthrough new product extensions
and claims for our key brands globally.
› Our pharma heritage continues to provide
us with a strong foundation, leaving 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
Regulations. We continue to upskill our medical
and regulatory capabilities to provide the
necessary support.
The acceleration in digital healthcare provision
and e-commerce has cemented the increasing
importance of healthcare brands having an
effective digital strategy. In 2021, we launched
a new Digital Excellence training programme
for our commercial teams, and we plan to
expand with more content in 2022.
› As part of our wider Sustainability initiatives,
we recently kicked off a series of workstreams
to help us reduce the carbon footprint of our
packaging and will be looking to factor this
thinking into all future innovation projects
as well as apply best practice to our current
packaging estate.
› We continue to strengthen our marketing
investment in order to grow awareness of our
key brands and build engagement to secure
life-time value.
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Our Business Model
Working together to leverage
our platform and maximise
the value of our brands.
The platform we’ve created across EMEA,
APAC and AMER enables us to both drive
the growth of our existing brands and to
acquire and integrate new assets with ease.
This is how we create value and execute our
growth strategy.
The key capabilities, expertise and
relationships that enable us to drive
value creation are centred around
our commercial activities and the
brand-specific support functions
which underpin these.
c. 35%
of our consumer healthcare
revenues are now derived
from e-commerce
Global
Marketing
›
Ensures consistency of promotion for
each of our lead brands – global
strategy with local implementation
›
Through our marketing excellence
programme all our marketeers are
trained to deliver insight-led campaigns,
with tailored messaging to key
customer groups
Commercial activities
Distributor
network
› Relationships with an extensive network
of distributors around the world
› Sales specialists located in key territories
with responsibility for managing key
accounts and partnering with distributors
on e-commerce initiatives
E-commerce
capability
› Dedicated in-house resource with
external domain expertise supporting
interface with key online retailers –
Tmall/Alibaba, JD.com, Amazon
› Supported by brand protection activities
Innovation &
development capability
› Dedicated in-house resource and newly
created team supporting key brands in
the development of new line extensions
Regulatory expertise
› Global capability with deep domain expertise across
Medical/claims expertise
› Key to supporting our focus on clinically valuable
Brand-specific support activities
products & essential to supporting our licensed medicines
all categories of licensed medicinal products. A
proven ability to register products in new territories
and handle registration transfers and other complex
regulatory projects
Supply chain management
› Global sourcing and supply chain capability built up over
20+ years with a mix of local and centralised resource
› Data generation to support core claims in key markets
and for the development of new claims and horizon
scanning of the evolving regulatory landscape
›
Excellent relationships with c.60 CMOs; effective
performance management and ongoing programmes to
drive efficiency through cost of goods reduction
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Our Strategy
Our strategy enables us to deliver
sustainable business growth through
maximising the value of our core
Consumer Healthcare business, thereby
increasing the number of people who can
potentially benefit from our products.
This is what enables us to progress towards our vision of becoming a leading international healthcare
business, and being both the partner and employer of choice.
There are two core elements to our strategy: delivering organic growth from our key brands, and
engaging in selective, complementary acquisitions that can leverage our established infrastructure to
enhance this growth. Underpinning these are our investment in people and sustainable business strategy.
Over the following pages we provide more detail around our core strategy, our progress in 2021 and our
priorities for 2022. Similar commentary in relation to investing in people can be found on page 22, with
our sustainability strategy being covered on pages 25 to 33.
Core strategy
Strategic
elements:
Organic growth –
key brands
Complementary
acquisitions
See page 18
See page 19
›
Investing in marketing excellence and
Innovation and Development (I&D)
to drive growth in major Consumer
Healthcare brands
› Stable, cash-generative Prescription
Medicines business provides
synergy through in-house regulatory
knowledge and supports growth
Focus on Consumer Healthcare
›
›
Leveraging global platform
› Strong balance sheet means we
are increasingly well placed to
participate in complementary
acquisitions
Underpinned by
Strategic
elements:
Investing
in people
Sustainability
See page 22
See page 25
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Our Strategy continued
Organic growth
– key brands
The primary driver of organic
growth is our Consumer
Healthcare portfolio.
Our key brands, Kelo-cote, Amberen and
Nizoral, are all well-established in their
respective core markets, with strong claim sets
and good clinical utility – enabling them to
deliver real value to users. All target growing
demographics, making them well-suited to
digital marketing and e-commerce, and all
offer good innovation opportunities too. It is this
combination of brand characteristics, coupled
with the operating platform we have built across
EMEA, APAC and AMER, and the expertise and
relationships underpinning this, which provides
the opportunity for us to drive double digit
growth from these brands.
Many of our smaller consumer brands share
similar characteristics, enabling them to benefit
both from the platform and from a common
approach to driving growth, focused on marketing
excellence and where appropriate, innovation.
See-through revenues*
2021
2020
£44.5m
Consumer Healthcare
Prescription Medicines
£47.8m
£93.0m
£121.8m
Progress in 2021:
› Delivered a 430 basis point improvement
in gross margin, including the first full year
of Amberen – allowing for increased
investment in marketing and Innovation &
Development (‘I&D’) to accelerate future
organic growth
Innovation & development (I&D)
I&D at Alliance encompasses a broad range
of activities aimed at creating value through:
› New product development – brand
extensions (new formulations, targeting
related sub-sectors), or new presentations
› New thinking – for example, classification
switches, or the creation of new claims for
a product
› New therapeutic indications
› Refreshing existing products to maintain
›
consumer appeal
Implemented a new cross-border
e-commerce distribution agreement for
Kelo-cote, enabling us to move closer to
the customer and giving further control of
our distribution chain
› Rolled out a new I&D process, supported
by a dedicated team, to develop and
deliver an innovation pipeline for our key
consumer brands. This will enable us to
maintain the relevance of our brands to
consumers by extending the reach of a
number of our larger consumer brands,
through brand extensions
Priorities for 2022:
› Continuing our focus on I&D, with the first new
products arising from this process expected to
launch in 2022
›
Extending our cross-border e-commerce
platform in China, to include additional
brands, through the creation of an Alliance
multi-brand store
› Realising the growth potential from Amberen
through increasing our focus on brand
positioning, executing a new integrated
marketing campaign and starting to build
an innovation pipeline for the brand to
underpin its longer-term growth
*
Non-IFRS alternative performance measures (see note 34).
See-through revenue includes all sales from Nizoral as if they had been invoiced by Alliance as principal. For statutory accounting
purposes the product margin relating to Nizoral sales made on an agency basis is included within Revenue, in line with IFRS 15.
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Our Strategy continued
Enhancing our growth
through complementary
acquisitions
We are a selective acquiror,
seeking assets we can
integrate into our platform
and apply our skills and
know-how, to generate
strong returns.
Our strategy is to acquire
new products which meet our
selective acquisition criteria
and integrate these into the
business efficiently, to enhance
our growth.
The platform we have created across EMEA,
APAC and, more recently, the US, enables us to
acquire and integrate new assets with ease – we
continue to evaluate opportunities which meet our
selective acquisition criteria to further develop our
business. We typically review around 80 to 100
opportunities a year.
Our well-established relationships within the
consumer healthcare M&A market, clear
acquisition criteria and track record mean
we continue to have good access to new
opportunities, whilst our continued strong cash
generation means we can deleverage quickly,
replenishing our available debt capacity.
Progress in 2021:
› Amberen integration completed, helping to
both increase our presence and develop
our operating platform in the US
› Around 80 acquisition opportunities
reviewed, of which three progressed to
full evaluation
› Net debt reduced by £22.4m, with leverage
falling from 2.43x following the acquisition
of Amberen in December 2020, to 1.73x at
31 December 2021
Priorities for 2022:
› Continuing to identify, evaluate and progress
new opportunities which will deliver value
to shareholders and help us to achieve our
growth ambitions
› Continuing to maintain the strength of our
pipeline and our funding capabilities in both
debt and equity
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Our Strategy continued
Case study
Responding to
the acceleration
in e-commerce
growth
In 2021, we continued to take advantage of the
change in consumer behaviour by embracing
e-commerce opportunities both locally and
cross-border (‘CBEC’), with a particular focus on
Kelo-cote in China. In August 2021, we entered
into a new CBEC distribution agreement for Kelo-
cote, bringing us closer to the customer and giving
us increased control of our distribution chain.
Working with our partner, we launched Kelo-cote
flagship stores on the China CBEC marketplaces,
Tmall and JD.com, to further accelerate top-line
growth in this key market. The initial response has
been very encouraging.
In 2021, around 25% of Group sales were
e-commerce related, representing around one
third of our total Consumer Healthcare sales. In
addition to CBEC sales, which remain a key focus,
this also included sales in the UK and US through
platforms like Amazon, Walgreens.com and Boots.
com. In 2022, in addition to optimising our existing
e-commerce sales channels, we plan to make a
number of our other brands available to Chinese
consumers through e-commerce platforms, and
also to expand our geographical presence on
marketplace platforms in South-East Asia, a region
with high e-commerce growth.
Global retail e-commerce
revenues reached $4.9 trillion
in 2021, with COVID-19
driving growth of 16.3%.
Retail e-commerce sales now
represent 19.0% of total retail
sales, up from 17.9% in 2020*.
E-commerce growth
The personal care category, which
includes healthcare products, grew
18.4% in 2021 to reach $260
billion. This presents a significant
opportunity for us to drive enhanced
revenue growth*.
*
Source: e-commerce report 2021 – Food and Personal Care – Statista Digital Market Outlook, June 2021.
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Our Strategy continued
Case study
Developing
our platform
in the US
2021 saw significant transformation
of our business in the US, following
the acquisition of Amberen at the
end of 2020. We now have a solid
platform from which to support
growth in the region and to scale up
further when suitable acquisition
opportunities arise.
The development of our business in the US, the
largest and one of the fastest growing consumer
healthcare markets in the world, has been a key
strategic focus for us in recent years. Initiated with
the acquisition of Vamousse in 2017, it was the
Amberen acquisition in late 2020 which brought
pivotal growth.
Throughout 2021, in parallel with the integration
of Amberen, we have been strengthening
our operating capabilities: redesigning our
organisation structure, bringing in new people,
and upskilling existing colleagues, to create a
team who can both commercialise new products
and manage growth. We’ve also migrated our
US headquarters to new, larger premises, to
accommodate our growing team.
Our aim in 2022 and beyond is to further exploit
the platform we have established in the US through
the inclusion of additional OTC products.
New products
We expect to launch a number of
new products/line extensions in the
US over the next 12–18 months,
and continue to actively look for US
acquisition opportunities to build on
our strengths in this market.
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Our Strategy continued
Investing
in people
People are a key element of
the Alliance mix. Our vision is
to be the employer of choice.
To achieve this, it’s crucial that we continue to
invest in our employees and to recognise the
changes and challenges to working patterns that
have come about in response to the pandemic and
respond accordingly. Our overriding objective
is to continue to ensure that our resourcing
adequately supports the business’ medium-
term growth ambitions – and that our strong
collaborative and inclusive culture, and the
people who form part of it, continue to thrive.
Additional metrics on employees can be found
in Sustainability – people and human capital
management on page 30
* As at 31 December 2021.
1
Defined as those running major divisions or departments, but not part of
the executive team.
Employees by gender*:
Board & SLT (n=10)
2021
2020
Male
Female
80%
20%
(2020: 80%)
(2020: 20%)
Senior managers1 (n=27)
2021
2020
Male
Female
74%
26%
(2020: 78%)
(2020: 22%)
All employees (n=245)
2021
2020
Male
Female
42%
58%
(2020: 43%)
(2020: 57%)
Total headcount (incl. non-execs and
fixed term contractors (FTCs))
256
(2020: 246)
Employee engagement (GPTW survey):
Survey response rate:
74%
(2020: 73%)
Overall Trust
Index© rating:
76%
(2020: 79%)
Progress in 2021:
› We continued to strengthen our employee
Priorities for 2022:
› Action findings from the 2021 GPTW survey:
engagement, through actioning findings from
the 2020 Great Place To Work ® (GPTW)
survey and ensuring that the employee base
stayed connected, particularly through
extended periods of remote working
› We developed and implemented new, more
flexible working arrangements based on
insights gained from the Ways of Working
survey, which we continued to run on a regular
basis throughout 2021 to check in on how
employees were feeling, identify any issues or
requirements for additional support, and inform
our future plans
› We ensured the effective integration of new
employees joining our US business following
the Amberen acquisition
› We put in place a global employee assistance
programme as an additional benefit
for employees
› We continued to develop and refine our
recruitment and orientation processes, and
succession planning
five priority areas have been identified
and local focus groups will be used to gain
additional insight
› Continue to test and refine our new ways of
working to ensure this works successfully both
at a business and individual level
› Continue to bring new people into the business
to ensure our resource capability continues
to support our growth ambitions for 2022
and beyond
›
Progress with the implementation of our new
HR system (scoping and planning already
underway in 2021)
Great Place to Work
We were delighted to achieve Great Place To Work ®
(GPTW) certifications in the UK and in China again this
year – and also to be Great Place to Work-certified for
the first time in Singapore
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Key Performance Indicators
We set out here
our key financial
performance measures.
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*
£169.6m +23%
(2020: £137.5m)
Underlying EBITDA*
£48.6m +26%
(2020: £38.6m)
Underlying EBIT/Operating profit *
£45.6m +24%
(2020: £36.8m)
2021
2020
2019
2018
£169.6m
£137.5m
£144.3m
£124.0m
2021
2020
2019
2018
£48.6m
£38.6m
£39.4
£32.4m
2021
2020
2019
2018
£45.6m
£36.8m
£37.4m
£28.9m
Underlying Profit Before Tax
£42.2m +26%
(2020: £33.5m)
Underlying Basic EPS
6.39p +25%
(2020: 5.11p)
Dividend Per Share
1.691p +5%
(2020: 1.610p)
2021
2020
2019
2018
£42.2m
£33.5m
£32.9m
£28.1m
2021
2020
2019
2018
6.39p
5.11p
5.09p
4.54p
2021
2020
2019
2018
0.536p
1.691p
1.610p
1.464p
Free Cash Flow*
£30.2m -12%
(2020: £34.1m)
Leverage1
1.73x
(2020: 2.43x)
Net Debt*
£87.0m -20%
(2020: £109.4m)
2021
2020
2019
2018
£30.2m
£34.1m
£29.1m
£16.1m
2021
2020
2019
2018
1.73x
1.48x
2.43x
2.33x
2021
2020
2019
2018
£87.0m
£109.4m
£59.2m
£85.8m
*
1
These measures constitute Alternative Performance Measures (‘APMs’), as defined in note 34 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.
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Key Performance Indicators continued
In addition to the
financial KPIs detailed
overleaf, we employ
a number of other
internal performance
measures to enable the
effective management
of our business.
Other internal performance measures:
Portfolio evolution (driver for organic revenue growth and margin improvement):
Revenue*: Consumer Healthcare
£121.8m +31%
(2020: £93.0m)
Total headcount*
256 +0
(2020: 246)
2021
2020
2019
2018
£121.8m
£93.0m
£92.4m
£70.3m
2021
2020
2019
2018
256
246
214
218
*
Defined as total number of employees on payroll as at 31 December.
Employee engagement:
GPTW Trust Index© rating: 76% (2020: 79%)
Working capital management:
Supplier payment days1: 46 (2020: 52)
1
Calculated as the month-end value of trade creditors relative to the
trailing 12 months cost of goods, expressed as a days equivalent,
averaged over the year.
Sustainability:
Further detail on our key sustainability metrics
can be found on pages 22 to 33.
Revenue*: Consumer Healthcare as a % of total
72% +4%
(2020: 68%)
2021
2020
2019
2018
72%
68%
64%
57%
GM%*: Total
64.5% +430bp**
(2020: 60.2%)
2021
2020
2019
2018
*
See-through basis.
**
Basis points.
64.5%
60.2%
59.7%
58.6%
Other measures
We also employ a broad range of other
measures to help us manage business
performance, including but not limited to:
› Brand revenues, margins and contribution,
by management region and having regard
to brand prioritisation for marketing
investment and innovation
› Measures around the level and nature
of acquisition opportunities
›
Post-acquisition performance
evaluation measures
› On-time in-full delivery, out-of-stocks
(to ensure continuity of product supply)
›
Inventory levels, provisioning and ageing
profile; trade receivables and payables
levels and ageing profiles (working
capital management)
We do not disclose the related metrics
associated with these measures, on the basis
that they are commercially sensitive and/or
intended for internal use only.
24
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Sustainability Overview
Sustainability
Working together
to deliver sustainable
business growth.
Our approach
During 2021, we refined and formalised
our approach to sustainability, under the
direction of the newly established ESG
Committee, creating our sustainability
framework, developing actionable plans for
each material area, and increasing our focus
on environmental considerations, including
climate change, metrics, and reporting.
Our sustainability framework
Our sustainability framework identifies the
eight areas material to our business that we
need to concentrate our efforts on to assure
the long-term future of the business and to
deliver on our Purpose – to improve the lives
of consumers and patients through making
available a range of clinically valuable
healthcare products. We refer to these as our
‘Areas of Focus’.
Supply chain
management
People &
human capital
management
Product
quality &
safety
Delivering
sustainable
business
growth
Ethical sales
practices
Business
ethics
Environmental
impacts – supply
chain & logistics
Packaging
lifecycle
management
Product
environmental
H&S
Our contribution to the United
Nations Sustainable Development
Goals (UNSDGs)
The UNSDGs to which our business activities
contribute are set out below. We believe
we can contribute most value to Sustainable
Development Goal 3 (Good Health &
Wellbeing: Ensure healthy lives and promote
well-being for all at all ages), as this aligns
directly with our Purpose – to improve the
lives of consumers and patients through
making available a range of clinically
valuable healthcare products.
Further detail around how Alliance contributes
to the UNSDGs can be found on our website
alliancepharmaceuticals.com
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Sustainability Overview continued
We recognise that single use plastics and
packaging recyclability are an increasing
concern for consumers. In 2022 we will be
undertaking an extensive review of all our
packaging componentry, across our portfolio
and supply chain, to inform the development
and focus of our sustainable packaging
strategy with a view to establishing and
communicating clear targets in this area.
Unlike some consumer goods categories,
where packaging changes can be implemented
relatively quickly with limited hurdles, in the
healthcare market, particularly with regards
pharmaceutical products, any change in
packaging materials cannot be made without
a variation to the product license, which in
the case of changes to primary packaging,
requires the generation, submission and
approval of supporting stability data.
With this in mind, in 2021, we created a
Sustainable Packaging programme team,
to work towards the reduction of single-use
plastics and increasing the use of Post-
Consumer Recycled (PCR) materials across
our portfolio. Going forwards, all new product
developments will require full consideration
and review of packaging components to
ensure the final presentation is aligned with the
sustainability targets we set.
› Worked with external consultants to quantify
our Scope 1, 2 & 3 carbon emissions, as a
precursor to the development of our carbon
action plan and the setting of targets for
carbon emissions reduction for both our direct
(Scope 1 & 2) and indirect (Scope 3) emissions
› Kicked off a sustainable packaging programme
in Q4 2021 to develop and implement a ‘fit
for purpose’ strategy for packaging lifecycle
management across our portfolio
›
›
Established a Sustainability Forum in Q4 2021,
comprising a group of employees who will work
with the corporate sustainability lead to identify
and deliver small-scale sustainable change
initiatives across the business. This has initially
been focused on our UK operations, with wider
regional participation planned for 2022
Evolved our corporate website to include a
dedicated section on sustainability (‘Acting
Responsibly), to act as a repository for our
sustainability content going forwards
Our priorities for 2022:
We have made good progress with our
sustainability initiatives in 2021, however we
recognise that this is a journey and there is still
much to do – particularly as the reporting and
assurance requirements around ESG, and related
sustainability considerations, continue to evolve.
Overview of progress in 2021:
Over the course of the year, we have:
›
Formalised our approach to sustainability
and strengthened our governance processes
through the creation of a Board-level ESG
Committee in February 2021. The committee
works with the Senior Leadership Team (SLT)
and the corporate sustainability lead in the
development and implementation of our
sustainability strategy
› Developed our sustainability framework;
identifying then reporting against the key
metrics underpinning this. We also mapped
our sustainability disclosures and accounting
metrics to the relevant elements of the
Sustainability Accounting Standards Board
(SASB) standards for the first time, and will look
to publish the results on our website in 2022
›
Published our Business Principles, together
with our Anti-Bribery and Corruption
Policy, Whistleblowing Policy, Anti-Modern
Slavery Policy and Diversity, Equality, and
Inclusion Policy
› Concluded the implementation of our Know
Your Supplier (‘KYS’) programme, with
the improvements in supplier management
now embedded as part of our business-as-
usual processes
›
Engaged with our institutional investors,
to better understand their requirements as
regards ESG factors and sustainability, and
the metrics and disclosures in which they are
most interested to help shape our sustainability
framework and strategy development
26
Sustainable packaging
Awareness of environmental
issues is becoming more
widespread, with consumers
and retailers increasingly
choosing products that support
a lower carbon footprint.
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Additional Information
Sustainability Overview continued
In 2022, our focus will be on:
› Continuing to develop our environmental
strategy and our response to climate
change. We have committed to achieve
carbon neutrality for our 2021 Scope 1 &
2 emissions in the UK in 2022 through the
use of sequestration schemes. We will also
be increasing our levels of engagement
with our CMOs and logistics partners to
better understand their carbon footprints
and emissions reduction strategies and
the implications these have on our end-to-
end carbon footprint; actively looking for
opportunities to reduce the Scope 3 carbon
emissions in our supply chain as part of our
overall carbon reduction plan
› Developing and implementing a sustainable
packaging strategy, together with appropriate
targets and delivery plan
› Continuing to evolve our data collation and
reporting capabilities – particularly around
the composition of our product packaging
and to support the quantification of our
Scope 3 emissions
› Developing suitable performance metrics
and targets for those areas of our Framework
where none exist currently, which we can use
as a basis for measuring our progress in future
years. This will include carbon reductions
targets (aligned with the Science Based Targets
Initiative (‘SBTi’)) and targets around the
sustainability of our product packaging.
We intend to publish emissions reductions
targets in late 2022 for Scopes 1 & 2 and
are aiming to set Scope 3 targets in 2023
›
Progressing towards full disclosures in line with
the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations for 2022
› Continuing to improve the assurance
framework around our ethical business
practices, to ensure that both our suppliers
and distributors continue to operate their
businesses ethically and in line with all
relevant regulatory requirements
› Continuing to develop the sustainable business
content held on our website, the transparency
of our disclosures around how we operate as
a business, and where we’re focusing our
efforts to ensure we remain sustainable over
the longer term
›
Progressing ideas generated through the
Sustainability Forum and other small-scale
initiatives, both in the UK and across our
regional offices
Our approach to each of the Areas of Focus
identified in our Sustainability Framework,
together with key metrics, our progress and
achievements in 2021, and our priorities and
focus for the coming year, are set out on
pages 28 to 31.
What has become increasingly evident to us,
particularly in the context of our response to wider
societal challenges such as climate change, is the
importance of working collaboratively – both within
our own business and with our suppliers, logistics
partners, distributors, and other stakeholders, if we
are to make meaningful progress. This is particularly
true for carbon emissions, given that a significant
majority of our Scope 3 emissions originate within
our supply chain and logistics activities, where our
ability to directly control emissions is limited.
More information can be found on our website
https://www.alliancepharmaceuticals.com/
acting-responsibly/environment
Environmental considerations
Working together with our suppliers, logistics
partners, distributors and other stakeholders
will be key to the delivery of our environmental
strategy, as we all seek to address common
challenges around climate change.
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Sustainability Performance
Product quality & safety
Ethical sales practices
Business ethics
What it covers
Ensuring we have robust quality assurance systems in
place to ensure the quality and safety of our products
and to mitigate the supply of counterfeit product
Ensuring the claims made by our products can be properly substantiated and
that we maintain ethical business practices in the marketing, advertising, and
selling of our products
Why it’s important
Maintaining consumers’ and patients’ trust in the
quality and safety of our products is essential to the
maintenance of our corporate reputation and our ability
to successfully market our products
Ensuring the accuracy and appropriateness of promotional materials and the
claims made by our products is key to maintaining consumers’ and patients’ trust
in our brands
2021 Overview
9
22
Supplier audits carried out
(2020: 5)
Representing 67% coverage of our supplier base on a
rolling 3-year average basis1
Number of external regulatory inspections Alliance
operating companies have been subject to: 7 (2020: 5)
No enforcement actions were taken by Competent
Authorities in response to non-compliance with
appropriate manufacturing and regulated standards
in 2021 (2020: 0)
Routine internal audit assessments carried out
(2020: 40)
Internal audit assessments are carried out on a periodic basis to ensure the
robustness of our promotional review procedures. Coverage is targeted at
a constant 10% of total promotional pieces approved per annum. Actual
coverage in 2021 was 4.5%, down from 9.4% in 2020
No upheld complaints were made to the ABPI, PAGB, FTC, NAD, or other
Codes of Practice bodies regarding promotion of Alliance products, where
Alliance is directly responsible for promotion in 2021 (2020: 0)
Modern slavery, bribery and corruption, ethical
considerations around our interactions with healthcare
professionals and the pursuance of other ethical
business practices
We are committed to operating our business in
an ethical and responsible way, ensuring that we
have appropriate policies in place, that employees
are properly trained on them and that appropriate
escalation routes exist for non-compliance
1,407
Online2 course completions
(2020: 1,359)
We now have approved escalation procedures in place
to work with any supplier who does not meet our ethical
standards, with defined timelines for remediation and
provision for eventual termination of the relationship,
where issues are not satisfactorily resolved
In 2021, the total amount of monetary losses we
incurred as a result of legal proceedings associated
with bribery, corruption and other unethical business
practices was £Nil (2020: £Nil)
Focus for 2022
Continuing to assure the quality and safety of our
products through our rolling, risk-based programme of
supplier quality audits
Continuing to ensure that the systems and processes we have in place to ensure
the accuracy and appropriateness of promotional materials remain fit for
purpose and that our internal control systems continue to operative effectively
in order to minimise the risk of non-compliance
Obtaining written confirmations from our contract
manufacturers and suppliers that they comply with our
ethical standards (phased approach – target completion
end 2023)
1
2
Calculated as the total number of suppliers audited over the 3 years from 2019 – 2021, divided by the number
of active suppliers as at 31 December 2021.
Vinciworks is a suite of online training modules covering anti-bribery, anti-money laundering, competition law,
GDPR, market abuse, Modern Slavery Act, sanctions and the prevention of tax evasion.
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Sustainability Performance continued
Product environmental H&S
Packaging lifecycle management
What it covers
Ensuring our products are made with environmentally
friendly ingredients; identifying and eliminating
REACH1 substances of very high concern (SVHC) from
our products – and ensuring we have a robust process
in place to identify and manage emerging materials
and chemicals of concern
Reducing the environmental impact of our product packaging,
through reducing packaging volume/weight, increasing the use of
recycled materials, and ensuring that as much of our packaging as
possible is made from materials that can be recycled, reused
and/or composted
Why it’s important
We are committed to operating our business in a way
which minimises the impact on the natural environment
– this means ensuring that our products are made
with environmentally friendly ingredients and do not
contain materials and chemicals of concern
We are committed to operating our business in a way which
minimises the impact on the natural environment – reducing the
environmental impacts of our product packaging is one way of
achieving this. Reducing packaging volume/weight will also reduce
the environmental impact of transporting products to consumers
2021 Overview
We have established environmental scanning
processes to identify and manage emerging materials
and chemicals of concern as soon as we become
aware of these – reformulating products where
necessary, in order to ensure that we are able to stay
compliant with new regulations as they emerge
In Q4 2021, we set up our Sustainable Packaging programme, to
develop and implement a ‘fit for purpose’ strategy for packaging
lifecycle management. This will enable us to address usage and
waste across our packaging estate at a holistic level, reducing or
removing unnecessary elements of our packaging, changing its
composition, replacing less sustainable materials, e.g., single-use
plastics, with more sustainable alternatives, increasing the use
of recycled content and/or making packaging easier to recycle,
or biodegradable
Focus for 2022
Continuing to ensure that our processes for identifying
and managing emerging materials of concern remain
fit for purpose and that any REACH1 SVHC’s are
eliminated from our products on a timely basis
Progress the creation and implementation of a sustainable
packaging strategy; including the creation of a roadmap for the
associated workstreams which feed into this and the setting of
targets/defining our level of ambition
Packaging sustainability will now be factored into all Innovation
& Development projects at the design stage, and we will be
looking to embed this thinking into brand strategies more widely
going forwards
1
REACH – Registration, Evaluation, Authorisation and Restriction of Chemicals
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Sustainability Performance continued
People and human capital management
What it covers
This covers a wide range of social factors, including diversity and inclusion, culture
and employee engagement, working conditions, reward structures, training and
development, and opportunities for progression
Why it’s important
Investing in People is one of the core elements of Alliance’s strategy – as such, the
recruitment and retention of high-quality and highly motivated employees is what lies
at the heart of our business success
2021 Overview
Age profile of employees
Length of service of employees
Employees by location
Employee turnover rate1:
2021
2020
2021
2020
2021
2020
Voluntary
20.6%
(2020: 9.6%)
Involuntary
8.6%
(2020: 0.4%)
Under 29
2021 30
2020 26
30–39
2021 75
2020 68
40–49
2021 72
2020 74
50–59
2021 55
2020 54
60+
2021 11
2020 10
Not known
2021 2
2020 13
Under a year
2021 61
2020 50
1–2 years
2021 38
2020 31
2–5 years
2021 78
2020 91
5–10 years
2021 46
2020 41
10–15 years
2021 15
2020 24
15+ years
2021 7
2020 8
UK & ROI
2021 170
2020 168
APAC
2021 28
2020 31
Central Europe
US
2021 28
2020 36
2021 16
2020 13
Additional information on how we invest in
our people is provided on page 22 and on
our website
Focus for 2022
Analysing and actioning key findings from the Great Place To Work® (GPTW) survey,
with focus groups planned for H1 2022
Continuing to invest in our capability development and the recruitment and onboarding
processes which support this, including the roll-out of a new graduate training scheme
Continuing to refine our ways of working to ensure our new hybrid model is working
effectively across all areas of our business
1
Voluntary turnover is defined as those leaving the business by virtue of resignation, or retirement, or the expiry of fixed
term contracts; involuntary turnover is defined as those leaving the business by virtue of dismissal or redundancy.
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Sustainability Performance continued
Supply chain management
Environmental impacts – supply chain & logistics
What it covers
Ensuring that we have good visibility of our supply chain so that we can ensure that our
suppliers adhere to the same ethical standards as we do, and that they are committed
to sustainable manufacturing practices, which aim to safeguard people and planet
Greenhouse gas (GHG) emissions and other environmental impacts associated with our supply chain and
logistics (warehousing and distribution) activities, including transportation of products by our distributors
Why it’s important
Our commitment to operating our business in a sustainable way goes beyond the
activities we carry out ourselves. Our contract manufacturers are an integral part of
our business activities – and as such we expect them to adhere to the same ethical
standards which we have set ourselves, and to support our commitment to operate our
business in a sustainable way
As a responsible business, we have a duty to do what we can to reduce the environmental impacts of our
business activities
2021 Overview
Know Your Supplier (KYS) programme implemented, providing increased visibility
of potential ‘red flags’ in our supply chain. Associated compliance and escalation
processes strengthened to facilitate timely resolution of issues
The quantification of our Scope 3 carbon emissions in 2021 revealed that more than 80% of our GHG
emissions originate in our supply chain and logistics activities – including onward transportation of products
by our distribution partners, so focusing on this area will be key to reducing our overall Scope 3 emissions
53 finished goods supply partners are now being monitored by this programme,
representing 90% of our total finished goods suppliers
No significant issues were detected in 2021
We have already taken a number of actions to reduce carbon emissions in our supply chain, including:
›
›
Truncating the supply chains for our lead brands (Kelo-cote, Amberen, Nizoral) to produce closer to
market, reducing transportation emissions
Improving the efficiency of our logistics operations, through increased order sizes/reduced frequencies
and the use of sea rather than air freight
More detail around the development of our environmental sustainability strategy can be found on page 33
Focus for 2022
Review findings from initial test phase of supplier self-assessment around modern
slavery, labour practices and health & safety practices, to determine whether there is
value in extending this more widely
In 2022, we plan to reach out to our larger CMOs and LSPs (covering two thirds of our 2021 spend) to better
understand where they are on their respective emissions reduction journeys and to obtain their Scope 1 and 2
data to help improve the methodology used for our Scope 3 calculations
Carry out assessment of strategic suppliers’ sustainable sourcing ratings, and whether these
could be usefully employed as part of a more holistic approach to supplier management
We will use the findings from this work to help us determine realistic Scope 3 emissions reductions targets and our
overall path to net zero
We will also be looking to increase our focus on Modern Slavery audits (which may
also include physical inspections, depending on the evidential value of the same), with
a view to having a formal structure and system in place by the end of 2023, whereby
10% of our contract manufacturers are audited annually on a rolling basis, whether
this is based on an external recognised standard or one developed internally
An additional head is being recruited to support this area, and also our sustainable packaging programme
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Sustainability Performance continued
In addition to the eight Areas of Focus which make up our Sustainability
Framework, there are two other areas which, whilst not material to the long-
term sustainability of our business, are nonetheless important to us from a
broader societal perspective. These are the environmental impacts of our
own operations, which are discussed further on page 83, in the context of
our overall environmental sustainability strategy development and our social
impact activities.
Social impact
What it covers
Social impact activities undertaken to benefit local communities around the world,
including those involved in conflict and/or in the developing world
Why it’s important
Alliance has always had a strong ‘social conscience’ and commitment to work with
its employees to support those in need, through donations (of cash, time, products)
and fundraising activities
2021 Overview
In 2021, our social impact activities within our local communities were limited by
the ongoing impacts of the pandemic, with many of our offices being subject to
local work from home guidance for a significant part of the year
However, this didn’t stop us from continuing our efforts further afield. Through
our continued support of International Health Partners (IHP), we enabled 31,979
treatments to be sent to 13 countries in 2021, helping to provide around 10,600
people with the medicine they need. This included responding to an urgent call from
their NGO partner in Venezuela, for antimalarial medicine, in response to which
we supplied 498 treatments to help meet the need
Focus for 2022
In 2022, in addition to continuing our support for IHP, we plan to resume our social
impact activities within our local communities
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Additional Information
Developing our environmental sustainability strategy
This year, for the first time, we have recognised
climate change as an emerging risk within
our Principal Risks and Uncertainties and are
continuing to work with external consultants
to progress towards full disclosures in line with
the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations for 2022.
For 2021, we have made partial TCFD disclosures,
which can be found on pages 78 and 79.
Over 80% of our
GHG emissions
originate in our
supply chain and
logistics activities.
We are currently in the early stages of developing
our broader environmental strategy including our
response to climate change.
Given the nature of our business, and our use of
third-party distributors, contract manufacturers
(CMOs) and logistics service providers (LSPs),
the majority of our greenhouse gas emissions are
classified as Scope 3. In 2021, we quantified our
Scope 3 greenhouse gas emissions for the first
time (based on data for 2020). We are using the
results of this exercise, together with equivalent
calculations to be undertaken for 2021, to help
inform the development of our carbon action plan,
with a view to setting carbon reduction targets for
Scopes 1, 2 & 3 and our path to net zero in the
near future.
In addition to revealing the significance of the
emissions linked to our supply chain and logistics
activities, which now forms one of the eight Areas
of Focus within our Sustainability Framework, this
exercise also revealed where opportunities may
exist to try and improve the basis of measurement,
particularly for Scope 3 emissions. In 2022, we
plan to reach out to our larger CMOs and LSPs
to better understand where they are on their
respective emissions reduction journeys and
to obtain their Scope 1 and 2 data to
help improve the methodology used for
our Scope 3 calculations.
Whilst the environmental impact of our own
operations (Scope 1 & 2) is relatively low, and so
not material to the longer-term sustainability of our
business, reducing them is nonetheless important
to us from a broader societal perspective.
The investments we’ve made in our UK
headquarters building in recent years have
significantly improved its energy efficiency,
with additional upgrading and refurbishment
work having been undertaken in 2021, further
improving the building’s environmental credentials.
We continue to actively look for ways to reduce
our Scope 1 & 2 emissions, which amounted to
90tCO2e for our UK operations in 2021, and will
achieve carbon neutrality for these retrospectively
in 2022, through the use of sequestration schemes.
Outside the UK, our office premises tend to be
held on all-inclusive operating leases, giving us a
more limited ability to control their environmental
footprint. We will however be looking to increase
our understanding of the situation on an office-
by-office basis, to see what can be done, as we
progress through 2022. We are also looking at
ways we can reduce emissions attributable to
some of the smaller categories in Scope 3, such
as non-stock purchases, business travel, and
employee commuting.
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Stakeholder Engagement
Stakeholder engagement
– overview
Our principal stakeholders
and their primary
requirements
Our shareholders
› Strong financial performance
› Share price appreciation
› Dividend income
›
Long-term sustainability of the business
Working together we
create sustainable value
for all our stakeholders.
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.
Information on how stakeholder considerations
have been considered by the Board in their
decision-making in accordance with s172 of
the Companies Act 2006 is provided within the
Governance section on page 53. Additional
content regarding our stakeholder relationships
and how we manage these can be found on
our website.
Healthcare professionals
›
Engagement, education, information,
and resources
›
Therapy area expertise
Debt providers
› Strong financial performance
› Ability to service & repay borrowings
Our employees
› Competitive reward structures
› Share options
›
›
Flexible working
Learning & development opportunities on
a global basis
Consumers & patients
› Safe and effective healthcare products
Suppliers & partners
› Continued business growth opportunities
Communities
Local engagement
›
› Charitable & product donations
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Financial Review
Another excellent
performance driven by
strong revenue
growth
Underlying EBITDA*
£48.6m +26%
“Strong growth by our higher
margin Consumer Healthcare
brands, a change in CBEC
distribution arrangements for
Kelo-cote and the acquisition
of Amberen led to further
improvement in margins”
(2020: £38.6m)
Free Cash Flow*
£30.2m -12%
(2020: £34.1m)
*
Non-IFRS alternative performance measures (see note 34).
Alliance Pharma plc – Annual Report and Accounts 2021
35
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Financial Review continued
Summary underlying income statement
Year ended 31 December
Revenue summary
Year ended 31 December
See-through revenue*
Statutory revenue
Gross profit
Operating costs (including IFRS 2 share options charge)
Underlying EBITDA*
Depreciation and underlying amortisation
Underlying operating profit (EBIT)
Finance costs
Underlying profit before taxation
Reported profit before taxation
Underlying basic earnings per share
Reported basic earnings per share
Proposed total dividend per share
2021
£m
169.6
163.2
109.5
60.9
48.6
2.9
45.6
3.4
42.2
18.2
6.39p
1.37p
2020
£m
137.5
129.8
82.8
44.2
38.6
1.8
36.8
3.3
33.5
13.0
5.11p
1.51p
1.691p
1.610p
Growth
+23%
+26%
+32%
+38%
+26%
+68%
+24%
+4%
+26%
+39%
+25%
-9%
+5%
*
The performance of the Group is assessed using Alternative Performance Measures (‘APMs’), which are measures that are not defined under IFRS, but are
used by management to monitor ongoing business performance against both shorter-term budgets and forecasts and against the Group’s longer-term
strategic plans. APMs are defined in note 34.
Specifically, see-through revenue includes all sales from Nizoral™ as if they had been invoiced by Alliance as principal. For statutory accounting
purposes the product margin on Nizoral sales made on an agency basis is included within Revenue, in line with IFRS 15.
Underlying profitability metrics are presented as we believe this provides investors with useful information about the performance of the business. In 2021,
underlying results exclude the amortisation and impairment of acquired intangible assets, the CMA provision and restructuring costs; in 2020, underlying
results exclude the amortisation and impairment of intangible assets, and costs associated with the acquisition of Biogix Inc. Further detail can be found in
note 5.
Kelo-cote
Amberen
Nizoral*
Other consumer brands
Consumer Healthcare*
Prescription Medicines
See-through revenue*
LFL Consumer Healthcare see-through revenue*,
excluding Amberen
LFL see-through revenue*, excluding Amberen
Statutory revenue – Consumer Healthcare
Statutory revenue – Group
LFL Consumer Healthcare statutory revenue,
excluding Amberen
LFL Group statutory revenue, excluding Amberen
2021
£m
48.8
19.2
20.6
33.2
121.8
47.8
169.6
102.6
150.4
115.4
163.2
96.1
144.0
2020
£m
34.7
–
21.0
37.3
93.0
44.5
137.5
93.0
137.5
85.3
129.8
85.3
129.8
Growth
+41%
–
-2%
-11%
+31%
+8%
+23%
+10%
+9%
+35%
+26%
+13%
+11%
CER
growth
+47%
–
+1%
-9%
+36%
+8%
+27%
+14%
+12%
+41%
+30%
+16%
+14%
Revenues and operating profits
The Group delivered a strong financial performance in the year, with see-through revenue increasing 23%
to £169.6m (2020: £137.5m) and 27% at constant exchange rates (CER). Like-for-like revenue excluding
Amberen, which was acquired in December 2020, increased 9% (12% CER). Group revenue was adversely
impacted in 2021 by exchange rate movements, principally the strengthening of Sterling against the US Dollar,
which depressed see-through revenue by approximately £5.1m. Statutory revenue increased 26% to £163.2m
(2020: £129.8m) and rose 30% CER.
The strong growth in our higher margin consumer health brands, coupled with changes to our distribution
arrangements for Kelo-cote and the acquisition of Amberen, led to a 32% increase in gross profit to
£109.5m (2020: £82.8m). Consequently, gross margin increased 430 basis points (bp) to 64.5% of see-
through revenue (2020: 60.2%). Gross margin relative to statutory revenue was 67.1% (2020: 63.8%).
36
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Financial Review continued
Underlying profit before tax increased 26% to
£42.2m (2020: £33.5m) driving 50 basis point (bp)
margin improvement to 24.9% despite increased
operating expenses through the inclusion of the
Amberen cost base, coupled with a modest increase
in depreciation and underlying amortisation costs.
Reported profit before tax increased 39% to £18.2m
(2020: £13.0m).
We increased our investment in the business in 2021,
improving our operating capabilities and boosting
the level of marketing support provided to a number
of our brands. With the resumption of discretionary
spend, which we deferred or cancelled in 2020 in
response to the global pandemic, in addition to the
aforementioned inclusion of the Amberen cost base,
operating costs (defined as underlying administration
and marketing expenses, excluding depreciation and
underlying amortisation charges) increased 37%
versus the prior year to £58.6m (2020: £42.8m).
As a result, operating costs as a percentage of sales
increased 3.5% to 34.6% of see-through sales
(2020: 31.1%).
The IFRS 2 share options charge for the year was
£2.3m, up £0.9m versus that for the prior year
(2020: £1.4m) reflecting an increase in the share
price in 2021.
Net of the increase in operating costs and the
share options charge, underlying earnings
before interest, taxes, depreciation and
underlying amortisation (EBITDA) increased
26% in the year to £48.6m (2020: £38.6m),
whilst underlying operating profit (EBIT)
increased by 24% to £45.6m (2020: £36.8m).
Reported operating profit increased by £5.3m
to £21.6m (2020: £16.3m), with non-underlying
items of £24.1m (2020: £20.5m). Further detail
on non-underlying items is provided below and
in note 5.
Depreciation and amortisation
Depreciation charges for the year were £1.6m,
down £0.2m on the prior year (2020: £1.8m). In
addition, we incurred £1.3m of amortisation costs
relating to our new ERP system, which went live in
2021. Following a change in accounting policy, the
costs relating to this system are now treated as an
intangible asset (previously included within tangible
assets). Further detail is provided in note 2.9.
Finance costs
Finance costs remained in line with the prior year
at £3.4m (2020: £3.3m), with a £1.0m increase
in borrowing costs, reflecting the higher level of
borrowings following the Amberen acquisition,
being largely offset by higher net gains on currency
movements in the year.
The average interest charge on gross debt during
the year (including non-utilisation fees) was 2.24%
(2020: 2.55%).
Non-underlying items
Non-underlying items in the year principally
comprise amortisation charges for Prescription
Medicines and certain other brand assets,
impairment charges identified as a result of the
annual impairment review (see note 11), a provision
of £7.9m in relation to the Competition and
Markets Authority (CMA) decision (see note 20)
and restructuring costs relating to the closure of our
offices in Milan and Los Angeles. For the prior year,
non-underlying items comprised amortisation and
impairment charges, together with costs relating to
the Amberen acquisition. Further detail on non-
underlying items is provided in note 5.
Reconciliation of underlying to reported
profit before tax
Year ended 31 December
Underlying profit before taxation
42.2
33.5
2021
£m
2020
£m
Non-underlying items:
Amortisation of acquired
intangibles
Impairment of intangible assets
and goodwill
CMA provision
Restructuring costs
Other
Acquisitions costs –
Biogix Inc. (Amberen)
Total
(7.2)
(7.2)
(6.2)
(12.1)
(7.9)
(2.4)
(0.4)
–
–
–
–
(1.3)
(24.1)
(20.5)
Reported profit before taxation
18.2
13.0
Taxation
The underlying tax charge for the year was £8.0m
(2020: £6.4m), which equates to an effective tax
rate of 19.0% (2020: 19.0%). The total tax charge for
the Year was £10.8m (2020: £5.0m), equating to an
effective tax rate on reported profits of 41.6% (2020:
38.3%) and includes a £5.0m charge following
the increase in the UK tax rate from 19% to 25%
(this charge relates primarily to an increase in the
deferred tax balances on intangible assets).
Earnings per share
Underlying basic earnings per share, the
measure used by the Board in assessing earnings
performance, was 6.39p, an increase of 25% on the
prior year (2020: 5.11p), reflecting the increase in the
Group’s underlying profit after tax offset by a modest
increase in the number of shares in issue.
Reported basic earnings per share decreased by 9%
to 1.37p (2020: 1.51p)) due to the greater impact
that non-underlying items had on reported earnings
in the year versus the prior year.
Dividend
The Board is pleased to announce that it is proposing
a final dividend payment of 1.128p per share for
2021, an increase of 5% on the final dividend
payment for 2020, taking the total dividend
payment for the year to 1.691p (2020: 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 for 2021, subject to approval
at the Company’s AGM on 18 May 2022, will
be paid on 7 July 2022, to shareholders on the
register on 10 June 2022.
37
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Financial Review continued
Balance sheet
Intangible assets increased by £0.8m in the year to
£413.7m (31 December 2020: £412.9m).
Following the successful deployment of Microsoft
Dynamics D365 into the business in mid-2021, we
conducted a review of the associated capitalised
project costs, and as a result have transferred
these capitalised costs, amounting to £15.0m, from
property, plant and equipment to intangible assets
in-line with the deployment of the live system into
the business. These additions have effectively been
offset by underlying amortisation charges of £1.4m,
non-underlying amortisation charges of £7.2m
and non-underlying impairment charges of £6.2m;
the remaining balance being due to exchange
rate movements and a £0.2m true-up for working
capital relating to the Amberen acquisition.
Working capital
Net working capital at 31 December 2021 was
£22.0m, an increase of £2.7m on that at the
start of the year (31 December 2020: £19.3m),
primarily reflecting movements in payables and
receivables balances.
Inventories, net of provisions, reduced £1.8m to
£21.1m at 31 December 2021 (31 December
2020: £22.9m). This reduction was caused by
the partial unwinding in H1 2021 of the higher
inventory levels built up during 2020 in order to
mitigate against any disruption to our supply chain
following the UK’s departure from the EU, and to
ensure continuity of supply through the pandemic.
Receivables increased by £5.7m, reflecting both
the increase in revenues, and the timing of sales
and cash receipts in the second half of the year,
versus the equivalent period in 2020.
Payables increased by £1.2m, reflecting the
phasing of invoices and payments around the year
end, with a £2.8m reduction in trade payables
being more than offset by a £3.8m increase in
accruals and deferred income.
Provisions
In the year, the Group created provisions totalling
£9.5m as at 31 December 2021 (31 December 2020:
£Nil), £7.9m of which relates to the CMA decision, the
remainder, £1.6m, being a provision for restructuring
costs. Further detail is provided in note 20.
Cash flow and net debt
Free cash flow (see note 34 for definition) for the
year remained strong at £30.2m (2020: £34.1m),
with second half cash flows being significantly
stronger than first half (H1 2021: £6.5m; H2
2021: £23.7m), reflecting both the reversal of the
favourable movements in net working capital seen
at the end of 2020 during the first half of the year,
and the timing of sales in the second half. Cash
generated from operations decreased by 3% to
£44.9m (2020: £46.4m).
As a result, net debt reduced by £22.4m to £87.0m
at 31 December 2021 (31 December 2020:
£109.4m), with Group leverage reducing to 1.73
times (31 December 2020: 2.43 times).
We expect our cash generation to remain strong
in 2022, and for leverage to reduce below 1.5
times by the end of the year, in the absence of
further acquisitions.
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 part-fund
larger acquisitions. Borrowings are denominated in
Sterling, Euro and US Dollars.
Implementing our ERP system
We are already starting to see the business benefits
from our ERP system, which went live in the first half
of 2021, representing the culmination of a significant
period of investment and cross-functional team effort
in scoping, design, development and implementation
activities. Used by our operations and finance teams
around the world, the system has enabled us to
simplify, standardise and automate business processes
across the Group. Due to the high level of preparation
work undertaken pre-implementation, the changeover
from old to new systems was virtually seamless.
Group risk management policy is to hedge up to
75% of estimated future foreign currency EBITDA
exposure, for up to the next 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.
The Group benefits from a £165m Revolving Credit
Facility (RCF) and a £50m Accordion Facility,
expiring in July 2024. This facility provides flexibility
for the Group to pursue its acquisition strategy
over the next couple of years to complement future
organic growth. £48m of this RCF, together with the
whole of the accordion facility, remained unutilised
as at 31 December 2021.
The cash generated from our trading operations is
applied as follows:
›
›
›
›
in reinvesting in our current portfolio of brands,
with investment being primarily targeted at our
larger Consumer Healthcare brands
in acquiring new Consumer Healthcare brands,
to complement our existing portfolio and
leverage our operating platform
in paying down debt; and
in paying dividends to our shareholders.
Andrew Franklin
Chief Financial Officer
30 March 2022
38
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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 on pages 40 to 45.
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. The
current positioning of each of our principal risks,
based on our assessment of their residual impact
and likelihood, is shown in the graph to the right.
The identified risks are not intended to be an
exhaustive list of all the 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. For
2021, we have recognised a new emerging risk in
relation to climate change.
In addition to the matters set out in the coming
pages, and as announced by the Group on
3 February 2022, the UK’s Competition and
Markets Authority (‘CMA’) announced its finding
that four companies, including Alliance, had
infringed competition law (the ‘Infringement
Decision’) in relation to the sale of prescription
prochlorperazine. The Directors fundamentally
disagree with the CMA’s finding.
The Group believes that it has a strong case
and will be appealing the CMA’s decision, and
the proposed fine of £7.9m, at the Competition
Appeal Tribunal which is expected to be heard
in late 2022/early 2023. The Group continues
to engage with its expert external legal team to
prepare a robust and effective appeal against
these allegations.
Environmental and Climate Change
An emerging risk is a risk around which we
do not believe we have sufficient clarity
currently to be able to assess its likely
impact – and the likelihood of this impact
occurring. Such risks are unlikely to impact
the business in the near term, but have the
potential to significantly impact the business
ability to achieve its strategic objectives in
the medium-longer term.
We have taken the decision to recognise
environmental and climate change as
an emerging risk this year, pending the
completion of the scenario analysis needed
to support full compliance with the disclosure
recommendations set out by the Task Force
for Climate-related Financial Disclosures
(TCFD), which we expect to complete during
2022. This should provide the necessary
insight into whether climate change is likely
to constitute a material risk to our business.
Analysing identified risks
12
8
2
5
1
4
6
9
10
7
11
t
c
a
p
m
I
3
Strategic risks
Operational risks
Compliance risks
Likelihood
1
Organic growth:
innovation & competition
2 Inorganic growth – acquisitions
3 Product safety
4 Supply disruption
5 Business systems
6 Cyber-security
7 People
9 Product regulations
10 Legal & compliance
Financial risks
11 Foreign exchange
Other risks
8 Supply chain management
12 Pandemic, geopolitical
and worldwide risks
39
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
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
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.
As a significant portion of our international sales are made via
distributors, we are also at risk from losing a distributor or failing to
secure a suitable distributor in existing or new markets. Widening
sales distribution channels to include digital online sales platforms
means sales could be affected should third-party systems become
temporarily unavailable.
We also face the risk of some of our more popular consumer
products being subject to counterfeiting, where others seek to take
advantage of the reputation built up in our brands for their own
commercial exploitation. Equally, there is also a risk that once a
patent has expired, others in the market may copy our products
and seek to increase competition.
2. Inorganic
growth –
acquisitions
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.
Loss of revenue, reduced profitability and reduced growth
from failure to maintain our competitive positioning, or to
increase or maintain market share
› Continued focus on Marketing Excellence, to ensure we stay
attuned to changing consumer preferences, and to maximise
the value of our marketing campaigns
Failing to identify and exploit new geographic markets for
our products
›
›
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
› Depending on its severity, this could also potentially impact
our share price, cash flow and covenant compliance
Increasing focus on innovation and development activities
Roll-out 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
› Head of Brand Protection, brand protection strategies, support
from external experts
›
Product or claims innovation strategies, to pre-empt
patent expiration
›
Sustaining investment in brand promotion
› 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
40
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
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.
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
4. Supply
disruption
Disruption to the continuity of supply as a result of our inability to
procure critical ingredients, due for example to geopolitical events,
logistics failures, or reliance on a single site of manufacture.
› 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
› 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 our 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
geopolitical and economic events
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
41
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Operational risks continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
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’ ability to continue to
operate effectively.
›
Loss of income or late 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
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.
›
›
›
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
›
›
›
The successful implementation of the ERP system has improved
the internal control environment
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
› 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
42
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Operational risks continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
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’ 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.
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 and increases the risk of failing to maintain
sufficient oversight of our end-to-end supply operations associated
with these areas.
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.
8. Supply chain
management
Compliance risks
›
›
›
›
The loss of key employees could potentially weaken the
Group’s operational/management capabilities, potentially
impeding its ability to grow
› 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
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
› 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
› Maintaining a balance between permanent and contract heads
to increase flexibility, particularly for project-based work
Potential reputational damage, loss of product supply and loss
of revenues from failure to maintain sufficient oversight of our
end-to-end supply operations
›
The implementation our 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 enables us to align compliance and
escalation processes to facilitate timely remediation of issues
› Our Know Your Customer (‘KYC’) programme, to bolster our
customer qualification and approval processes
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
9. Product
regulations
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.
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
› 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
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Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Compliance risks continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
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.
›
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
Infringement Decision by the CMA relating to alleged anti-
competitive agreement would, in the event that the Company’s
appeal is not successful, lead to a fine of up to £7.9m
› 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
› Notice of appeal against the infringement decision will be
filed. Ongoing work with expert legal team to ensure that the
Company’s appeal is as robust and effective as possible to
give the company the greatest chance of succeeding
10. Legal and
compliance
Financial risks
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
11. Foreign
Movements in FX rates adversely impact financial performance.
› Adverse movements in Sterling exchange rates vs Euro, US dollar,
›
exchange risk
The Group earns a proportion of its revenues and profits in
currencies other than Sterling (principally Euros, US dollars and
Hong Kong 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.
The change in CBEC distributor in 2021, has increased the Group’s
exposure to Hong Kong dollars.
Hong Kong dollar and other currencies
The Group’s funding structure, with borrowings denominated
in Sterling, Euros and US Dollars, provides a natural hedge to
some of these exposures
›
The Group has a risk 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
44
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Principal Risks and Uncertainties continued
Links to strategy:
Organic growth
– key brand potential
Trends:
Investing in people
Risk has increased versus last year
Risk has not changed materially since last year
Complementary acquisitions
Acting responsibly
Risk has reduced versus last year
Other risks
12. Pandemics,
geopolitical
and other
worldwide
events
Emerging risks
13. Environmental
climate change
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
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 is now being
managed in accordance with latest guidance and advice.
More recently, the escalation of geopolitical events in Europe
could cause supply chain disruption within the business and
subject us to economic uncertainty.
›
›
›
Reduction in revenues/profitability and/or failure to achieve
expected growth due to reductions in demand or potential
supply issues. Any significant impact on the Group’s revenues
and profitability could potentially affect the Group’s ability to
comply with its borrowing covenants
Pressure on sourcing and supply chain could lead to (i) an
increase in the cost of transportation, raw materials and goods
in general (ii) a reduction in availability of certain materials
both of which could in turn impact profitability
Increased costs/reduced demand for goods due to weaker
economic growth and higher inflation
› General inflationary pressures being experienced by the
wider business community will lead to increased pressure
on workforce costs and rewards, which in turn could
impact profitability
›
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
› Keeping abreast of global events and economic
conditions in the territories we operate to ensure risks are
monitored accordingly
Risk description and relevance
Potential impacts
Key mitigating activities
Risk to the longer-term viability of the business due to the impacts
of environmental and climate change, both the direct impacts,
e.g. the severity and frequency of adverse weather events and
rising sea levels, and the indirect impacts, e.g. higher energy costs,
infrastructure funding, which are likely to become increasingly
prevalent, as we transition to a low-carbon economy.
›
These have yet to be determined
›
Increased business focus on environmental strategy and
associated risks
›
Engagement of third party expert support
› Creation of TCFD roadmap and emissions reduction targets
Trend
NEW
45
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Governance
Chairman’s Introduction
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Task Force on Climate-related Financial
Disclosures (TCFD)
Directors’ Report
47
48
50
56
60
65
76
78
80
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Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Chairman’s Introduction
Dear shareholders
and colleagues,
A warm welcome to this year’s report on
governance where I as your Chairman
provide an overview of the Group’s
governance arrangements. The Board
believes governance is central to delivering
on our strategy and helps ensure the
successful operation of our business.
Last year, in adapting to life with the
pandemic, we were able to build a stronger,
more connected, and resilient business. As
we all settle into a world where the pandemic
seems to be very much a part of life, the
business likewise has adapted and responded
to support its customers, suppliers, employees
and shareholders. The safety, health, and
wellbeing of our employees continues to be of
paramount importance and we have further
improved our technology and infrastructure
to provide safe ways of working, thereby
keeping disruption to a minimum.
Following the acquisition of Biogix Inc.,
the business has worked hard on integration
and continues to build strong foundations
to ensure it can grow its Consumer
Healthcare portfolio.
In April 2021, Nigel Clifford resigned from
the Board and, following a rigorous search
and recruitment process, we were pleased to
welcome Kristof Neirynck as a Non-executive
Director on 1 December 2021.
Kristof brings with him his experience
in international Consumer Healthcare,
Marketing, Digital Transformation and
Innovation. Further information about Kristof
can be found in his biography on page 49.
As a company admitted to AIM, our
governance is underpinned by the Quoted
Companies Alliance (QCA) Corporate
Governance Code 2018 (the ‘QCA Code’).
During the year, we have complied with the
principles of the QCA Code and details of
how we have done so can be found in the
governance section of the Company’s website.
The sustainability agenda continues to be
progressed by the business with oversight
from the newly formed ESG Committee.
You can read more about the work of the
Committee on page 76.
This year’s AGM will be held at 10.00am
on 18 May 2022. Further details can be
found in the Notice of AGM accompanying
this Report.
The Board would like to thank all
shareholders and colleagues for their
continued support, and we look forward to
continuing with our good work during 2022.
David Cook
Chairman
30 March 2022
47
“ Good governance practice
continues to remain a priority
for the Board as we continue to
work together to deliver value
to our shareholders”
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Board of Directors
Committee Membership Key
Audit and Risk Committee
Nomination Committee
Remuneration Committee
ESG Committee
C
Committee Chair
David Cook
Independent Non-executive Chairman
Date joined
Peter Butterfield
Chief Executive Officer
Andrew Franklin
Chief Financial Officer
David joined the Board of Alliance as a Non-executive Director in 2014 and
was appointed Chairman of the Board on 1 March 2018.
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.
Qualifications
David graduated in Chemistry at the University of Oxford and is a
Chartered Accountant.
Experience
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.
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.
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.
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
C
View the Nomination Committee Report on page 56
View the ESG Committee Report on page 76
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.
48
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Financial Statements
Additional Information
Board of Directors continued
Committee Membership Key
Audit and Risk Committee
Nomination Committee
Remuneration Committee
ESG Committee
C
Committee Chair
Jo LeCouilliard
Independent Non-executive Director
Date joined
Richard Jones
Independent Non-executive Director
Kristof Neirynck
Independent Non-executive Director
Jo joined Alliance as a Non-executive Director on 1 January 2019.
Richard joined Alliance as a Non-executive Director on 1 January 2019.
Kristof joined Alliance as an Independent Non-executive Director on 1 December 2021.
Qualifications
Jo graduated in Natural Sciences from Cambridge University and is a
Chartered Accountant.
Richard has a degree in Engineering from Newcastle University and is a
Chartered Accountant.
He graduated as a Master of Science in Electronic Engineering from the University of
Ghent, Belgium.
Experience
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 Recordati S.p.a and Indivior PLC.
Richard is Chief Financial Officer at Medica Group PLC, the UK’s leading teleradiology
provider. Prior to this, he was CFO and a Board member of 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.
Kristof joined the Board on 1 December 2021. He is global Chief Marketing Officer at
Avon Cosmetics and brings 20 years of experience in General Management, Marketing,
Digital Transformation, and Innovation, having carried out roles in Fast Moving
Consumer Goods/Consumer Packaged Goods, Luxury and Retail sectors across multiple
geographies. He is well versed in operating across an omnichannel model, combining
bricks and mortar retail, e-commerce and direct to consumer experience.
Kristof joined Walgreens Boots Alliance in 2015 and in 2017 became their Chief
Marketing Officer for their Global Brands division where he had responsibility for a
$4bn sales portfolio of more than 20 of their owned brands in Beauty and Consumer
Healthcare. Prior to this, Kristof held leadership roles at P&G’s Prestige, Laundry and
Feminine Care global divisions, having started his career in 2002 at Procter & Gamble
in Belgium before moving to Procter & Gamble International in Switzerland in 2004.
Committee membership
C
View the Remuneration Committee Report on page 65
C
View the Audit and Risk Committee Report on page 60
49
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Financial Statements
Additional Information
Governance
Key activities of the Board and its Committees
Throughout the year the Board received regular updates on, and considered, strategy, the commercial and financial performance of the business, scientific affairs and operations, people and
infrastructure and legal and governance. 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
2022 Budget
Presentations and budget approval
Corporate development
Review of acquisition opportunities and integration of Biogix Inc.
Business reviews
Mainland Europe, Asia Pacific, US, various product and brand reviews, brand protection, Great Place to Work
Investor engagement and broker presentations
Full and half year results webcast presentations, analyst calls and investor road-shows, private client fund manager meetings,
one-to-one calls and AGM, and presentations from brokers
Company results, trading statements and dividends
Annual Report and Accounts, dividend policy and declarations
Nomination Committee
Board composition and Committee membership, succession planning, NED recruitment, terms of reference, bonus proposal
for 2022
Remuneration Committee
Review of salary proposals, 2020 corporate bonus awards, Company share option awards, 2021 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, US accounting post acquisition of Biogix Inc., ERP accounting and accounting treatment of
CMA investigation
ESG Committee
2021 and 2022 sustainability framework and initiative, investor engagement, disclosure and accounting metrics, carbon action
plan and environmental strategy, corporate website disclosures, terms of reference
Governance & Legal
Includes the review of risk management framework, Board Effectiveness Review, Governance reporting, review of Articles of
Association, AGM Notice, D&O insurance, litigation, Modern Slavery Statement, review of gender pay
*
Although there is no scheduled meeting in August, a management pack is circulated.
50
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Governance
Financial Statements
Additional Information
Governance continued
The role of the Board
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.
› 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;
Each year 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. The CEO is responsible for the
implementation of the strategy and reports to
the Board formally at a half year review. 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 17 to 22 and in its business
model on page 16.
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.
The Board’s key responsibilities include:
› 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.
Corporate culture and business conduct
Our culture is underpinned by a clear set of
values (PRAISE), which help guide decision-
making at all levels in the business.
The Board expects the business to foster
relationships and operate high standards
of business conduct. The Board reviews
and approves the Group’s policies which
have been implemented and communicated
internally and externally to those who are
expected to adhere to them. For example, this
includes policies on diversity and inclusion,
the prevention of bribery and corruption,
fair competition and anti-slavery and human
trafficking. Further information about our
policies can be found in ‘Business Ethics‘
on our website.
Engagement with shareholders
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 discussions
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.
Recently, the Company invested in its Investor
Relations (IR) by appointing a new Head of IR
and Corporate Communications.
Further information on our dialogues and
engagement with shareholders and other
stakeholders can be found on pages 34
and 53.
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 57 scheduled meetings
held as part of the Company’s investor road-
shows for the annual 2020 and half-year
2021 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.
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Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Financial Statements
Additional Information
Governance continued
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 80 of the Directors’ Report.
These are regularly updated following
the formal notification of movements to
the Company.
The Board and its Committees
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 and confirmed annually by
the Nomination Committee.
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. The
website also offers a facility to sign up for
email alert notifications of Company news
and regulatory announcements.
With employees
The Board receives regular updates on
People and employee engagement at its
meetings. This includes briefings following
surveys, organisational structure and other
positive initiatives to support health and
wellbeing. From time to time, employees
are invited to attend various Board and
Committee meetings to present on key
operational and strategic matters.
The Chairman
The Chairman, David Cook, has primary
responsibility for leading the Board and
facilitating the effective contribution of all
members to meetings. He maintains a strong
focus on governance to ensure good practice
is embedded in the business with good flows in
communication and reporting. He has regular
dialogue with the CEO to ensure the business
and the management team 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 further 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.
The 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.
Each of the Non-executive Directors sits on
at least three of the Committees ensuring
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 five years, subject to annual
re-election by shareholders at the AGM.
Their appointment term may be renewed by
mutual agreement.
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Financial Statements
Additional Information
Governance continued
Stakeholder engagement and section 172
Engaging with the Company’s stakeholders is
well embedded in the business as we continue
to look after our relationships with employees,
customers and suppliers and consumers and
the wider communities.
Promoting long-term success — s.172
Companies Act 2006
The powers and duties of the Directors are
determined by legislation and the Company’s
Articles of Association. The Directors are
aware and mindful of their duties and
obligations under s.172 of the Companies Act
2006. Directors are required to act in good
faith. Discussions give due consideration to the
impact of decisions on the Group’s strategy
and values, stakeholders and the Directors are
provided with written reports, market reviews,
guidance, and presentations and briefings
from both internal members of staff and
external advisers as part of the process.
Decisions are taken with a view to
promoting the success of the Group and
having considered the likely and long-term
consequences for stakeholders concerned.
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
Case study 1
Improving brand protection and distribution of products
During the year the Board receives regular updates on what the business is doing to
protect its brands to ensure that opportunities are maximised to key geographical regions
of the business. Plans put forward considered various stakeholder needs, including:
›
Investing in resources and the development of existing skills and expertise both in the
UK and in APAC.
› Maximising benefits and financial value to the business and shareholders.
›
Investing in the detection and prevention of counterfeit products to ensure product
quality and consumer safety.
› Reviewing and engaging key distribution partners and channels to protect the integrity
of the supply of products to customers and consumers.
Case study 2
ESG is very much at the heart of Board decisions
The Board continues to press forward with its focus on Sustainability, having established an
ESG Committee at the beginning of 2021. A dialogue with key institutional shareholders
formed part of a stakeholder engagement programme to ascertain and understand their
views and approach. With a focus maintained on shareholders, people, customers and
suppliers, and our impact on the wider community and planet, stakeholder needs are very
much at the centre of a progressive strategy. During the year:
› External consultants have been engaged to support, help and inform the development
of our sustainability strategy and framework and broaden understanding.
› An active dialogue was maintained with the investor community.
› Feedback was provided to the Board following open workshops with employees to
better understand their views on ESG and climate-related matters. These sessions led
to the Sustainability Forum.
› Engagement with the Remuneration Committee to ensure alignment with the Company’s
reward and benefits strategy.
53
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Additional Information
Governance continued
Board
11 Board Meeting attendance – 91% attendance
Member
David Cook
Peter Butterfield
Andrew Franklin
Kristof Neirynck*
Jo LeCouilliard
Nigel Clifford*
Richard Jones
Role
Chairman
CEO
CFO
NED
NED
NED
NED
Status
Independent
–
–
Independent
Independent
Independent
Independent
Attendance
11/11
11/11
11/11
1/1
11/11
4/4
10/11
*
Kristof Neirynck joined the Board of Directors on 1 December 2021. Nigel Clifford resigned from the Board of Directors on 30 April 2021.
Board Committees
The Board has delegated and empowered
four Committees: a Remuneration Committee,
a Nomination Committee, an Audit and Risk
Committee and an ESG 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 only permitted to be members of the
ESG Committee.
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 schedule
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
three unscheduled meetings, during 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. Three unscheduled
meetings of the Board were called to deal
with non-routine business.
Meeting management
The Company Secretary is secretary to the
Board and the Board’s Committees. On behalf
of the Chairman, the Company Secretary 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.
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.
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Additional Information
Governance continued
The table below sets out the key focus areas arising from the 2022 review:
Areas of focus
Feedback and recommendations
Board planning framework
and dynamics
The planning framework drives discipline and behaviours. The strong proximity of
the Board and management is a real strength and there is always open and sensible
discussion and challenge from Directors.
Focus on strategy
The strategy is well formulated. The Board continues to understand the impact of
emerging trends and envision the longer-term plans. The recent appointment of Kristof
Neirynck demonstrates the Board’s commitment to strategy by enhancing skills and
capabilities in the area of consumer healthcare.
Performance and remit
of Board Committees
Overall the Committees are chaired and run very well. The Remuneration,
Nomination and ESG Committees need to ensure their work continues to evolve
as the strategy develops, particularly in the areas of remuneration policy and
succession planning.
Board engagement
There is good engagement with investors and the Board is to consider how it could
engage with employees outside of surveys and presentations.
The next review in relation to 2022 is scheduled for early 2023.
Board effectiveness
As required under the QCA Code, 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.
In last year’s Annual Report we set out the
feedback from the 2021 review which
focussed on four key areas including roles,
contributions, and stakeholder engagement;
meeting management and priorities; ambition
and strategic planning and Board culture
and dynamics.
Where necessary and helpful, the Executive
and senior leadership team can maintain a
dialogue with the Non-executive Directors
and can contact each other freely. During the
year, the progress made included:
› The Board holding a dedicated two-
day face-to-face strategy meeting at
which management teams delivered their
presentations on their proposals for the
short-to-medium terms plans for the business.
Alongside this there was a mid-year meeting
to review progress against the strategy.
›
Improved reporting to ensure there is the
right balance of information to support
decision-making. Meetings are held
face-to-face where possible and the
current Board schedule provides for
some meetings to be held at our
overseas offices.
› The Board is mindful of investors’ views
and there is a good level of engagement
through telephone meetings, road-shows,
presentation days and responding to
written requests for information. During the
year, there was enhanced engagement
with investors on ESG matters to
understand their views. In addition, the
Board recently approved the appointment
of a new Head of Investor Relations and
Corporate Communications and looks
forward to hosting a Capital Markets
Day in 2022.
The 2022 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 obtained feedback
from each Director on the Chairman.
Results and outcomes were reviewed,
summarised and circulated to Board members
for discussion in February 2022.
55
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Additional Information
Nomination Committee Report
Nomination
Committee
Report
“As a growing Consumer
Healthcare business we
seek the very best skills
and experience to help
us achieve the Group’s
strategic objectives”
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 a growing international Consumer
Healthcare business it is critical that we
employ the capabilities of and develop
our people to help us continue to deliver
on our strategy. We remain focused on
understanding our framework on gender
and ethnic diversity and inclusion, and
succession planning across the business.
During the year much of the Committee’s
focus has been on succession planning, Board
composition, and the search and appointment
of a new Non-executive Director.
On 1 December 2021, we warmly welcomed
Kristof Neirynck to the Board and he was also
appointed to the Nomination, Remuneration
and ESG Committees. You can read
more about our recruitment and induction
processes on page 59 of this report.
David Cook
Nomination Committee Chairman
30 March 2022
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Nomination Committee Report continued
DIRECTOR
Peter Butterfield
Andrew Franklin
Kristof Neirynck
David Cook
Jo LeCouilliard
Richard Jones
ROLE
CEO
CFO
INED
INED
INED
INED
GENDER
FINANCE
CONSUMER
HEALTHCARE
PHARMA
INTERNATIONAL
GROWTH
FINANCIAL
MARKETS*
Board gender diversity
M
M
M
M
F
M
Male
83%
Female
17%
*
UK and overseas financial markets experience.
Diversity and inclusion
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 a company admitted to AIM,
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.
The Company’s Diversity and Inclusion Policy
can be found on the Company’s website.
The role of the Committee
The Nomination Committee’s primary roles
are 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.
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.
› Reviewing the structure, size, and
composition of the Board, including
diversity, skills, knowledge, and experience.
› Considering 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.
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Nomination Committee Report continued
Attendance
During the year, the Committee held two scheduled meetings and reported on its activities to the Board.
Nomination Committee
2 Meetings – 100% attendance*
Member
Role
David Cook
Jo LeCouilliard
Kristof Neirynck
Nigel Clifford**
Richard Jones
Chairman
NED
NED
NED
NED
Status
Independent
Independent
Independent
Independent
Independent
Attendance
2/2
2/2
–
1/1
2/2
*
Additional ad hoc meetings were held during the year to deal with NED recruitment.
**
Resigned from the Board on 30 April 2021.
Committee membership
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.
Committee membership changes
Nigel Clifford stepped down from the
Committee on 30 April 2021. With
effect from 1 December, Kristof Neirynck
was appointed a member of the
Nomination 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.
NED search and appointment
During 2021, the Nomination Committee
conducted a search and recruitment process
followed a review of the skills, capabilities and
experience on the Board. As an international
consumer healthcare business with diverse
products across many territories, the Board
sought to recruit someone with close
knowledge and extensive experience in the
marketing of products in the healthcare sector,
across several countries, particularly in the US,
APAC and European regions. The Committee’s
process was supported by the Chief People
and Infrastructure Officer and the Company
engaged the services of an external executive
search and recruitment agency.
Following a recommendation by the
Nomination Committee, the Board was
pleased to announce the appointment of
Kristof Neirynck as a Non-executive Director
on the 29 June 2021. He took office on
1 December 2021 and brings with him the
addition of skills and experience in marketing,
digital transformation and innovation gained in
fast-moving consumer healthcare companies.
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 Richard Jones, Jo LeCouilliard
and Kristof Neirynck.
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 2021, 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 and/or senior
management on a small number of other
companies, as detailed in their biographies
on pages 48 and 49. It is considered that
the Chairman and Non-executive Directors
allocate sufficient time and commitment to
fulfil their duties to the Company.
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Nomination Committee Report continued
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.
Page 75 in the Remuneration Committee
Report sets out the term of appointment for
each Director. The nine year tenure of the
Chairman will come to an end early 2023,
after which he is no longer considered to be
independent. Accordingly, the Committee
has started to consider succession for the
role and shareholders will be notified of any
proposed changes as and when it would be
appropriate to do so.
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 short-list 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 the first date of appointment.
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.
On appointment, all Directors receive a
personally tailored induction. This includes
meetings with members of the Board,
members of the SLT, the Group General
Counsel and Company Secretary, and
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.
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Audit and Risk Committee Report
Audit and Risk
Committee
Report
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 a
company admitted to AIM, 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.
In this report we set out the Committee’s
responsibilities and report on the activities
of the Committee during the year.
At the start of the year, alongside our regular
work carefully reviewing the Company’s
annual financial statements, the associated
accounting treatment and disclosures, efforts
focussed on the integration of Biogix Inc.
following its acquisition on the 29 December
2020. The Committee carried out a post-
acquisition accounting review of Biogix Inc.,
which included a review of the independent
audit conducted in respect of the Company’s
financial statements prior to acquisition,
significant judgements and estimates used
in considering the impact of the acquisition
under IFRS 3 (‘Business Combinations’)
and the appropriateness of the disclosures
and accounting rules for the year ended
31 December 2020 in respect of the acquisition.
60
“ We continue to monitor the
integrity of the financial
statements and other
announcements as the
business works to achieve
its goals”
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Financial Statements
Additional Information
Audit and Risk Committee Report continued
In addition, there was a mid-year review of
financial controls in the US. Key controls have
been implemented including the appointment
of a Divisional Financial Controller.
Regular reviews were held with the Company’s
Auditor, KPMG LLP, without management in
attendance. In 2021, the Committee welcomed
Huw Brown as the new lead audit partner.
The Chair meets with Huw Brown outside of
the formal Committee meetings as part of
relationship engagement.
As part of the Committee’s annual review of
the need for an internal audit function, the
Committee concluded that, with the growth
of the business and the corresponding
complexities, it is appropriate to establish a
new internal audit function. Management is
currently in the process of appointing a new
Internal Audit Manager who will report to me.
The Committee reviews the Group’s risk
register quarterly, 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 principal
risks and uncertainties and our system of
risk management and internal control can
be found on pages 39 to 45 and on
pages 63 and 64.
The Company intends to undertake a tender
process for audit services and expects this
process to be completed by Q3 2022.
Notwithstanding such process, a resolution to
re-appoint KPMG LLP will be proposed at this
year’s Annual General Meeting.
Richard Jones
Audit and Risk Committee Chairman
30 March 2022
› Considering the appointment of external
auditors and the frequency of re-tendering
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 reviewing 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.
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 shareholders
with the information necessary to assess
the Company’s performance, business
model and strategy.
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Audit and Risk Committee Report continued
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 comprehensible. 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.
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:
Audit and Risk Committee
4 Meetings – 100% attendance
Member
Role
Richard Jones
David Cook
Jo LeCouilliard
Chairman
NED
NED
Status
Independent
Independent
Independent
Attendance
4/4
4/4
4/4
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 auditor 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 auditor directly if required.
Key activities of the Committee
Areas of focus
Financial
statements
and narrative
reporting
Key duties and
responsibilities
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.
Activities in the year ended 31 December 2021
›
Review of the financial statements and narrative reporting
in the Annual Report and Accounts for 2020 and 2021
with reference to the reports being fair, balanced and
understandable. Included a review of the appropriateness
of the disclosures considering requirements and guidance
under IFRS, the AIM Rules for Companies, Companies Act
2006 requirements, FRC guidance and the QCA Corporate
Governance Code 2018.
›
Review of the preliminary results for the financial years ended
31 December 2020 and the unaudited half year results to
30 June 2021.
› Consideration of reports from the external auditor in respect
of the Annual Report and Accounts for 2020 and 2021.
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.
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Areas of focus
Key duties and
responsibilities
Accounting
policies and
standards
Key accounting
estimates and
judgements.
Activities in the year ended 31 December 2021
›
›
In respect of the preparation of the financial statements for
the year ended 31 December 2021, the Committee reviewed
key accounting judgements and estimates including a review
of the group’s weighted average cost of capital (WACC);
a review of intangible assets including consideration of
impairment under IAS 36; estimates and judgements in
respect of going concern, review of alternative performance
measures, and accounting for the Biogix Inc acquisition.
The review of the legal and accounting considerations and
draft disclosures for the financial statements for the year
ended 2021, including the making of a provision following
the CMA’s Infringement Decision on 3 February 2022.
› A review of an assessment under IFRS 15 and the revenue
recognition in relation to a major cross-border e-commerce
distribution agreement.
› A review of the accounting treatment for ERP systems in
light of IFRS Interpretations Committee decisions on cloud
computing arrangements.
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.
Regulatory and
compliance risk.
› Annual review of the need for an internal audit function.
Review of the Company’s Whistleblowing policy
›
and procedures.
Areas of focus
Review of
external
auditor
Key duties and
responsibilities
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.
Terms of
Reference
Reporting to the Board
on how the Committee
has discharged its
responsibilities.
Activities in the year ended 31 December 2021
› 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 2020 and 2021.
› Approve the terms of appointment, areas of responsibility
and duties.
›
›
›
Scope, strategy and fees of the 2021 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 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.
Risk management and internal controls
The Board has primary responsibility for the Group’s overall approach to risk management
and systems of internal control and has delegated its oversight to the Committee.
During the year, the Committee has reviewed and reported on the identification, evaluation
and management of risks facing the business and has considered the effectiveness of
associated processes and controls to ensure a healthy balance between the risk we
face and harnessing the opportunities that align with strategy to grow a strong and
sustainable business.
At least once a year, the Board also reviews risk management and those risks the Board is not
prepared to take are either avoided or, as far as possible, are mitigated and/or transferred
to insurers.
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Audit and Risk Committee Report continued
Internal audit function
Every year, the Audit and Risk Committee
considers the need for an internal audit
function. This year the Committee has taken a
decision to establish an internal audit function
and its activities will be reported in the 2022
Annual Report.
Whistleblowing
The Company has a Whistleblowing Policy
and procedures to help with the detection
and prevention of fraud. Published on the
Company’s Intranet, the Policy 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.
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. The Company intends to undertake a
tender process for audit services and expects
this process to be completed by Q3 2022.
Notwithstanding such process, a resolution to
re-appoint KPMG LLP will be proposed at this
year’s Annual General Meeting.
Each year, the Committee reviews the scope
and fees for the annual audit of the Company.
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 as
well as the legal requirements of being a
UK company admitted to AIM. Internal
controls are designed to manage rather than
eliminate risk and provide reasonable but
not absolute assurance against material loss
or misstatement.
The key components of the current systems of
internal controls are:
› Clearly communicating Alliance’s
values and strategy to ensure these
are understood and people know
what is expected.
› Developing business and financial
plans that support the strategy.
› Reviewing policies and procedures to
ensure these remain fit for purpose.
› Strengthening controls through enterprise
resource planning.
› Regular reporting of actual performance
relative to goals, budgets and forecasts.
› Ensuring there is a structure of
accountability and accountability.
› Training and monitoring.
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Additional Information
Remuneration Committee Report
Remuneration
Committee
Report
Chairman’s statement
On behalf of the Remuneration Committee
(the ‘Committee’), I am pleased to introduce
this year’s Remuneration Committee Report.
As a company admitted to AIM, 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. 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. The
Committee believes that the Company’s current
remuneration policy encourages and rewards
the right behaviours and that any risks created
by its structure are within the appetite of the
Board. The key activities of the Committee
during the year included:
› Reviewing our remuneration policies
and remuneration levels (both fixed and
variable) in the context of appropriate AIM
market comparisons.
› 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.
65
“ We aim to ensure that
our remuneration
arrangements align to
support implementation of
the Group’s strategy for the
medium to long term”
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
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Financial Statements
Additional Information
Remuneration Committee Report continued
› Considering the context of the potential
impact of external factors 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 bonuses
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 2021.
› 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.
The Committee continues to monitor trends and
developments in relation to remuneration and
market practices and 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 18 May
2022 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
30 March 2022
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Remuneration Committee Report continued
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
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 six 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 and their attendance was as follows:
Remuneration Committee
6 Meetings – 100% attendance
Member
Role
Jo LeCouilliard
Chairman
David Cook
Nigel Clifford*
Kristof Neirynck**
NED
NED
NED
*
Nigel Clifford resigned from the Board of Directors on 30 April 2021.
** Kristof Neirynck joined the Committee on 1 December 2021.
Status
Independent
Independent
Independent
Independent
Attendance
6/6
6/6
2/2
1/1
Activities of the Committee
During the year, matters reviewed and considered by the Remuneration Committee included
reviewing policies on remuneration, external environment, 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. During the year, the Committee undertook a competitive tender
process and appointed Ellason LLP as adviser to the Committee. Ellason LLP are members
of the Remuneration Consultants Group, which sets out guidelines to ensure that any advice
received is independent. Ellason LLP provides no other services to the Company and the
Committee is satisfied that the advice received is objective and independent. No Directors or
senior managers are involved in any decisions as to their own remuneration.
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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. However, 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 other AIM 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.
Element
Policy
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, 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 threshold level of financial performance has been achieved by the business and,
once this has been achieved, applying a further multiplier which is determined by assessment
of the Executive’s personal performance for the relevant year.
The financial targets are set at the start of each financial year – the targets are determined with the
approval of the Remuneration Committee to ensure they incentivise the Executives and align with
delivery of the Group’s strategy.
Personal performance is measured on various factors including delivery of pre-set personal targets.
Based on a combination of financial and personal performance, the Annual Bonus that each of the
Executives is able to earn is as follows:
Chief Executive Officer
A bonus of 50% of base salary is payable for on-target financial performance, increasing on a
sliding scale up to a maximum of 100% of base salary.
The bonus payable can be further increased by applying a personal performance multiplier.
The maximum personal performance multiplier is 1.5x (i.e. up to an additional 50% of salary).
The CEO’s potential maximum Annual Bonus opportunity is therefore 150% of base salary.
Chief Financial Officer
A bonus of 40% of base salary is payable for on-target financial 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. The
maximum personal performance-related multiplier is 1.5x (up to an additional 40% of salary).
The CFO’s potential maximum Annual Bonus opportunity is therefore 120% of base salary.
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REMUNERATION POLICY CONTINUED
Element
Policy
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.
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 market value Company Share Option Plan (CSOP), and a nil-cost Long-Term Incentive
Plan (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 Earnings Per Share (EPS) and Total Shareholder Return (TSR) related targets, assessed
over a three-year performance period.
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 81.
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 or vested options capable of exercise 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. The CEO is required to build a qualifying interest equal to 200% of his
base salary, while the CFO is required to build an interest equal to 150% of his salary. Further
information can be found on page 74 of this report.
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Remuneration Committee Report continued
DIRECTORS’ REMUNERATION
The aggregate remuneration payable to the Directors in respect of the period was as follows:
Peter Butterfield
Andrew Franklin
Nigel Clifford1
David Cook
Richard Jones
Jo LeCouilliard
Kristof Neirynck2
Salary or fees
Other
Pension
Bonus
Total remuneration,
excluding share options
Exercised share
option gains
Total remuneration, including
share options
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
335,500
311,667
12,377
12,328
28,998
27,389
238,889
206,250
615,764
557,634
363,146
54,400
978,910
612,034
226,667
210,000
11,922
8,590
22,667
20,636
155,940
110,000
417,296
349,226
15,000
82,667
45,750
44,389
78,488
44,389
45,750
42,723
3,844
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,000
82,667
45,750
44,389
78,488
44,389
45,750
42,723
3,844
–
–
–
–
–
–
–
–
–
–
–
–
–
417,296
349,226
15,000
82,667
45,750
44,389
78,488
44,389
45,750
42,723
3,844
–
755,178
731,656
24,299
20,918
51,665
48,025
394,829
316,250 1,225,971
1,116,849
363,146
54,400 1,589,217
1,172,249
1 Nigel Clifford retired from the Board as a Non-executive Director on 30 April 2021.
2 Kristof Neirynck joined the Board as an independent Non-executive Director on 1 December 2021.
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 in line with the wider workforce during the
year from £330,000 to £338,250 for the CEO and from £220,000 to £230,000 for the CFO.
These increases took effect on 1 May 2021.
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% of salary.
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. Only
the Executive Directors accrue retirement benefits, and both 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
The Committee reviewed the achievement of actual underlying profit before tax (PBT) against
budgeted levels of underlying PBT — the key metric for monitoring corporate performance.
In addition, the Committee considered the personal performance of the Executive Directors
as measured against various factors including pre-set personal objectives. For the Executive
Directors this resulted in the following payments:
Peter Butterfield
Andrew Franklin
2021
£
238,889
155,940
2020
£
206,250
110,000
2021
% salary
71
68
2020
% salary
62.5
50
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Financial Statements
Additional Information
Remuneration Committee Report continued
DIRECTORS’ REMUNERATION CONTINUED
Non-executive Directors’ fees
An increase to Non-executive Directors’ fees was approved during the year and took effect
on 1 May 2021. The annual fee paid to David Cook is £84,000. Jo LeCouilliard, Kristof
Neirynck and Richard Jones each receive a fee of £46,125 per annum. Non-executive
Directors do not 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 81.
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 Senior Leadership Team (‘SLT’). The quantum of award is one share
for every £2 of base salary and, where appropriate, may attract HMRC tax advantages.
On 29 September 2021, the Company granted Peter Butterfield 29,182 approved and
139,943 unapproved share options under the CSOP. On the same date, the Company
granted Andrew Franklin 115,000 unapproved share options under the same plan. These
share options were all granted with an exercise price of 102.8p per share (being the closing
mid-market price of one 1p Ordinary share in the Company at close of trading on 28
September 2021). Based on the exercise price, the value of the awards as at the date of grant
was equal to £173,860 for the CEO and £118,220 for the CFO. These awards will vest on
the third anniversary from the date of grant, 29 September 2024, subject to meeting the EPS
and TSR performance targets as set out on page 72.
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 29 September 2021 with a face value of 55% of base
salary to Peter Butterfield, equal to £186,037 (180,970 option awards); and 45% of base
salary to Andrew Franklin, equal to £103,500 (100,681 option awards). The strike price used
to calculate the quantum of awards was 102.8p per share (being the closing mid-market
price of one 1p Ordinary share in the Company at close of trading on 28 September 2021).
These awards will vest on the third anniversary from the date of grant, 29 September 2024,
subject to meeting the EPS and TSR performance targets on the following 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
of 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 before 2019 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. Reputation 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 2021 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% are
subject to TSR as set out below:
Awards vesting during the year
On 5 October 2021, market value share options made in 2018 under the CSOP to Peter
Butterfield and Andrew Franklin vested 100% based on the achievement of the EPS target for
the financial year ending 31 December 2020 of 4.58p (being RPI+2% per annum over the
three year performance period).
EPS Compound Annual Growth Rate
over the performance period
< 5% CAGR
5% – 10% CAGR
> 10% CAGR
% of award that vests (of 50%)
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 2020, to (ii) the EPS as presented in the published Annual
Report for the financial year ending 31 December 2023.
EPS Performance Period: the period from 31 December 2020 to 31 December 2023 (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% out-performance 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% out-performance of the Index on a cumulative
basis over the TSR performance period
100%
On 27 October 2021, market value share options made in 2016 under the CSOP to Peter
Butterfield and Andrew Franklin vested 100% based on the achievement of an EPS target for
the financial year ending 31 December 2020 of 4.52p (being RPI+2% p.a. over the five year
performance period).
Details of the number of shares vesting and the relevant exercise prices for these option
awards are set out in the table on page 73.
120
115
110
105
100
95
90
85
80
Index: means the FTSE Small Cap Index, excluding investments trusts as determined by the Company’s nominated adviser.
Jan - 21
Mar - 21
May - 21
Jul - 21
Sep - 21
Nov - 21
Dec - 21
TSR: means total shareholder return calculated by reference to the Company’s share price appreciation plus all dividend per share paid (based on ex
dividend 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.
Alliance
FTSE Small Cap (ex. Investment Trusts)
FTSE AIM 100
The closing mid-market price of Ordinary shares on 31 December 2021 (being the last
dealing day in the calendar year) was 108.8p and the range during the year was from
82.0p to 110.0p.
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DIRECTORS’ REMUNERATION CONTINUED
Share incentive awards
Executive Directors hold options through
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 2021 and who served
during the year are as shown opposite.
Shares are retained as required in order
to comply with the Company’s Share
Ownership Policy for which details are
provided on page 74.
On 21 April 2021, Peter Butterfield
exercised 205,000 options over Ordinary
shares of 1p each granted to him by the
Company under the CSOP in 2017. The
exercise price was 53.0p per share.
93,000 shares were then subsequently
sold at a market price of 95.4p per share.
On 19 November 2021, Peter Butterfield
exercised 500,000 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.
269,417 shares were then subsequently
sold at a market price of 102.5p per share.
Peter Butterfield
Type of award
Date of grant
Exercise price
(p)
Performance
condition
No. of
options granted
Vested
Exercised
Lapsed
CSOP Unapproved
CSOP Unapproved
CSOP Approved
CSOP Unapproved
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
CSOP Unapproved
CSOP Approved
LTIP
27-Oct-16
15-Sep-17
15-Sep-17
05-Oct-18
05-Dec-19
05-Dec-19
23-Sep-20
23-Sep-20
29-Sep-21
29-Sep-21
29-Sep-21
Andrew Franklin
47.50
53.00
53.00
81.60
76.90
Nil
73.70
Nil
102.80
102.80
Nil
EPS
EPS
EPS
EPS
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
1,000,000
148,397
56,603
1,250,000
137,500
196,684
165,000
246,269
139,943
29,182
180,970
3,550,548
1,000,000
148,397
56,603
1,250,000
–
–
–
–
–
–
–
2,455,000
500,000
148,397
56,603
–
–
–
–
–
–
–
–
705,000
–
–
–
–
–
–
–
–
–
–
–
Type of award
Date of grant
Exercise price
(p)
Performance
condition
No. of
options granted
Vested
Exercised
Lapsed
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Approved
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
04-Dec-15
27-Oct-16
27-Oct-16
15-Sep-17
05-Oct-18
05-Dec-19
05-Dec-19
05-Dec-19
23-Sep-20
23-Sep-20
29-Sep-21
29-Sep-21
46.75
47.50
47.50
53.00
81.60
76.90
76.90
Nil
73.70
Nil
102.80
Nil
No
EPS
EPS
EPS
EPS
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
1,935,829
155,000
400,000
170,000
178,000
39,011
55,989
111,183
110,000
134,328
115,000
100,681
3,505,021
1,935,829
155,000
400,000
170,000
178,000
–
–
–
–
–
–
–
2,838,829
1,435,829
–
–
–
–
–
–
–
–
–
–
–
1,435,829
–
–
–
–
–
–
–
–
–
–
–
–
Andrew Franklin did not exercise any share options during the year.
Number of
options capable
of exercise
Exercisable
from
Exercisable
to
500,000
–
–
27-Oct-21
15-Sep-20
15-Sep-20
27-Oct-26
15-Sep-27
15-Sep-27
1,250,000
05-Oct-21
05-Oct-28
– 05-Dec-22 05-Dec-29
– 05-Dec-22 05-Dec-23
23-Sep-24
– 23-Sep-23
23-Sep-24
– 23-Sep-23
29-Sep-31
– 29-Sep-24
29-Sep-31
– 29-Sep-24
29-Sep-25
– 29-Sep-24
1,750,000
Number of
options capable
of exercise
Exercisable
from
Exercisable
to
500,000
155,000
400,000
04-Dec-18 04-Dec-25
27-Oct-26
27-Oct-19
27-Oct-26
27-Oct-21
170,000
178,000
15-Sep-20
05-Oct-21
15-Sep-27
05-Oct-28
– 05-Dec-22 05-Dec-29
– 05-Dec-22 05-Dec-29
– 05-Dec-22 05-Dec-23
23-Sep-24
– 23-Sep-23
23-Sep-24
– 23-Sep-23
29-Sep-31
– 29-Sep-24
29-Sep-25
– 29-Sep-24
1,403,000
73
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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. Pursuant to the policy, 50% of the value of any vested but
unexercised awards count towards the holding requirements. 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.
From 1 April 2021, the holding requirements under the share ownership policy increased from
100% to 200% of base salary for the CEO and from 100% to the 150% of base salary for
the CFO.
As at 21 March 2022, the Executive Directors hold the following interests in Ordinary shares
of the Company:
Director
Percentage
of salary
2021
Base salary Shareholding
Vested but
unexercised
awards
Value of
holdings*
% achieved
Peter Butterfield CEO
200%
£338,250
442,104
1,750,000
£838,504
Andrew Franklin CFO
150%
£230,000
128,384
1,403,000
£558,129
248%
243%
*
At the closing market price on 21 March 2022: 111.4p.
The following table shows the interests of the Directors (and their spouses and minor children)
in the shares of the Company.
Director
Beneficial
Non-beneficial
Total
Beneficial
Non-beneficial
Total
At 31 December 2020
At 31 December 2021
Peter Butterfield
Andrew Franklin
David Cook
Richard Jones
Jo LeCouilliard
Kristof Neirynck
412,461
128,384
234,129
15,000
–
–
–
–
–
–
–
–
412,461
442,104
128,384
128,384
234,129
234,129
15,000
15,000
–
–
–
–
–
–
–
–
–
–
442,104
128,384
234,129
15,000
–
–
74
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Remuneration Committee Report continued
DIRECTORS’ REMUNERATION CONTINUED
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
Peter Butterfield
Andrew Franklin
Chief
Executive
Chief
Financial
Officer
Date of
appointment
Date of
current contract Unexpired term
Notice period
(Company)
Notice period
(Director)
22/02/2010 05/08/2010
Rolling 12 months 12 months
12 months
28/09/2015 25/06/2015
Rolling 12 months 12 months
12 months
The Non-executive Directors are employed under letters of engagement 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
Richard Jones
Independent NED
01/01/2019
01/01/2019
Kristof Neirynck
Independent NED
01/12/2021
4 years
5 years
5 years
5 years
13 Months
22 Months
22 Months
57 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.
75
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
ESG Committee Report
ESG
Committee
Report
“ Driving ESG and the
sustainability agenda is
a real positive step
benefiting all stakeholders
across our business and
its operations”
Chairman’s statement
I am pleased to be introducing the first report
from the ESG Committee (the ‘Committee’).
This Committee was newly formed in 2021 and
during the last year it has been busy getting to
grips with issues associated with our approach
to sustainability, environmental considerations
including climate change, government policies,
metrics, reporting requirements, and investor
and other stakeholder needs all of whom are
engaging with this much-needed agenda.
In this report we set out the Committee’s
responsibilities and report on the activities of
the Committee during the year. The business
sees this as a much needed and positive
step forward and there has been good
engagement with our various stakeholders.
In particular, the Committee would like
to thank our employees who took part
in the workshops which preceded the
creation of the Sustainability Forum
and to those shareholders who have
also worked with us to help us better
understand responsible investing.
The Committee looks forward to building
on all the hard work being done.
David Cook
ESG Committee Chairman
30 March 2022
76
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
ESG Committee Report continued
The role of the Committee
The ESG Committee’s primary role is to
review the overarching ESG vision for the
Company and ensure that the priorities
are anchored and an integral part of the
Company’s overall strategy.
Duties of the Committee
The duties of the Committee include:
› To ensure that the views of stakeholder
groups on ESG matters are solicited and
understood to inform the Company’s
long-term strategic decisions.
› To identify the relevant ESG priorities that
most significantly impact the Company and
its stakeholders, its reputation and public
interest role.
› To assist in defining and executing the
Company’s strategy and, in so doing,
agree the annual plan and targets relating
to ESG matters.
› To review the Company’s performance
against its annual plan and ESG targets,
initiatives and commitments.
› To guide the Company’s ESG
communication strategy.
› To ensure that ESG priorities are reflected
in the Company’s culture through its
purpose, vision, values and behaviours
as well as its supplier code of conduct.
Committee membership
All Board members currently sit in the Committee and have the right to attend meetings.
The Committee works closely with the SLT and meetings are also attended by the Corporate
Sustainability Lead. Others are invited to attend as appropriate to support the Committee
with discussions.
Committee membership changes
Nigel Clifford stepped down from the Committee on the 30 April 2021. With effect from
1 December, Kristof Neirynck was appointed a member of the ESG Committee.
Attendance
During the year, the Committee held three scheduled meetings and reported on its activities to
the Board.
ESG Committee
3 Meetings – 100% attendance
Member
Role
Activities of the Committee
An overview of our approach and
sustainability framework can be found
on page 25.
Activities
› Reviewed 2021 and 2022 objectives and
sustainability framework and initiatives.
› Received investor presentations to
understand ESG investor perspectives.
› Reviewed feedback from one to one
meetings held with investors to understand
their objectives.
› Reviewed the mapping of Alliance’s
sustainability disclosures and accounting
metrics to SASB.
› Reviewed the Company’s ratings with
Status
Attendance
MSCI and Sustainalytics.
David Cook
Peter Butterfield
Andrew Franklin
Jo LeCouilliard
Richard Jones
Kristof Neirynck
Chairman
Independent
CEO
CFO
NED
NED
NED
–
–
Independent
Independent
Independent
3/3
3/3
3/3
3/3
3/3
3/3
› Appointed energy consultancy firm to
help shape the medium-term ambition
particularly in areas of TCFD and Scope 3
emissions, supply chain management and
development of key metrics.
› Oversaw the Company’s environmental
strategy, carbon action plan and
sustainable packaging strategy.
›
Liaised with Remuneration Committee to
develop ESG link to remuneration strategy.
› Reviewed the Acting Responsibly section
on the corporate website.
77
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Task Force on Climate-related Financial Disclosures (TCFD)
The purpose of the TCFD recommendations is to provide
a foundation to improve investors’ and others’ ability to
appropriately assess and price climate-related risks and
opportunities. The recommended disclosures are structured
around four thematic areas that represent core areas of how
organisations operate: governance, strategy, risk management,
and metrics and targets.
We are still in the early stages of evaluating the impact of
climate change on our business and strategy. As part of our
2021 reporting, we are therefore making partial disclosures,
setting out our approach to climate-related issues as they
relate to governance, strategy and risk management, together
with those metrics which we are currently able to provide.
We are looking to undertake the scenario analysis required
to enable us to provide more extensive disclosures in line with
TCFD recommendations in 2022, as we progress our wider
environmental sustainability strategy. This will form part of our
reporting for the year ended 31 December 2022.
Recommendation
Governance
Disclose the organisation’s governance around climate-related risks
and opportunities.
Response
Further information
The ESG Committee is responsible for setting the Group’s overarching
sustainability strategy, including its environmental strategy, and for identifying
relevant ESG priorities that most significantly impact the Group, including those
relating to climate change.
Governance – ESG Committee Report – page 76
a) Describe the Board’s oversight of climate-related risks and opportunities.
b) Describe management’s role in assessing and managing climate-related
The SLT, supported by the Corporate Sustainability Lead, is responsible for
operationalising this strategy.
risks and opportunities.
Strategy
Disclose the actual and potential impacts of climate-related risks and
opportunities on the organisation’s businesses, strategy, and financial
planning where such information is material.
a) Describe the climate-related risks and opportunities the organisation
has identified over the short, medium, and long term.
b) Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning.
c) Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario.
The actual and potential impacts of climate-related risks and opportunities
on the Group’s business, strategy and financial planning have yet to be fully
quantified. We are therefore unable to determine the extent to which these
are likely to be material. Given the nature of our business and our operating
model, whilst there are likely to be some financial and operational impacts, at
this stage we have yet to determine the extent to which these may be material.
We expect to complete the scenario analysis required to enable us to make a
proper assessment during 2022.
Environmental Strategy – page 33
78
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Task Force on Climate-related Financial Disclosures (TCFD) continued
Recommendation
Risk Management
Disclose how the organisation identifies, assesses, and manages climate-
related risks.
a) Describe the organisation’s processes for identifying and assessing
climate-related risks.
b) Describe the organisation’s processes for managing climate-related risks.
c) Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall
risk management.
Metrics & Targets
Disclose the metrics and targets used to assess and manage relevant climate-
related risks and opportunities where such information is material.
a) Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
c) Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
Response
Further information
Climate change has been identified as an emerging risk, on the basis that we
do not currently have sufficient clarity around it to be able to assess its likely
impact, and the likelihood of this impact occurring.
The risk has been included on the Group risk register and is being managed as
part of the Group’s wider risk management framework, under the oversight of
the Board with the support of the Audit and Risk Committee
Principal Risks and Uncertainties – pages 39–45
Additional information on metrics and targets used to assess and manage
relevant climate-related risks, to the extent that they are material, will be
provided as part of our 2022 reporting once we have completed the required
scenario analysis.
Environmental Strategy – page 33
Our Scope 1 & 2 GHG emissions for our UK operations for 2021 are included
as part of our Streamlined Energy and Carbon Reporting (SECR)
SECR – page 83
In 2021, we quantified our Scope 3 GHG emissions for 2020. This led to
‘Environmental impacts – supply chain and logistics’ being included as one
of the eight Areas of Focus within our Sustainability Framework. We intend to
publish emissions reductions targets in late 2022 for Scopes 1 & 2 and are
aiming to set Scope 3 targets in 2023.
Sustainability Overview – pages 25–27
Sustainability Performance – page 28–32
79
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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 2021.
The Directors’ Report required under the
Companies Act 2006 includes and comprises
the Directors’ biographies on pages 48 and
49, the Governance statement on pages 50
to 55, the Remuneration Committee Report on
pages 65 to 75 and the Strategic Report on
pages 06 to 45.
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 06 to 45. 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 consumer healthcare
and pharmaceutical products.
Branches
A list of the Group’s subsidiaries and
associated undertakings can be found on
pages 121 and 122 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 48 and 49. 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 59 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 75. 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
21 March 2022 is 538,658,812 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 2021 of 0.563p
per share (2020: 0.536p) which was paid
on 7 January 2022. The Directors are
recommending a final dividend of 1.128p
per share (2020: 1.074p) which, subject to
shareholders’ approval at the AGM, will be
paid on 7 July 2022 to shareholders on the
register at close of business on 10 June 2022.
The total dividend paid and proposed in
respect of the year ended 31 December 2021
is therefore 1.691p per share (2020: 1.610p).
Substantial shareholdings
As at the 21 March 2022, 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
53,913,307
10.01%
Slater Investment
49,692,096
Van Lanschot Kempen
42,254,750
Blackrock Inc.
Investec Group
Rathbone plc
34,648,461
24,825,908
20,626,281
Polar Capital Holdings
19,096,921
Royal Bank of Canada
16,197,254
9.23%
7.84%
6.43%
4.61%
3.83%
3.55%
3.01%
80
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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.
Options awarded are based on one share for
every £2 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
pages 71 and 72.
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 page 73.
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.
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 70.
81
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Directors' Report continued
Accounting policies, financial
instruments and risks
Details of the Group’s financial instruments
and financial risk management disclosures
can be found in note 21 of the Group
financial statements on pages 125 to 129.
Charitable donations
During the year ended 31 December 2021, the
Group contributed £25,635 (2020: £121,000)
to charitable causes.
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
The Company intends to undertake a tender
process for audit services and expects this
process to be completed by Q3 2022.
Notwithstanding such process, a resolution to
re-appoint KPMG LLP will be proposed at this
year’s Annual General Meeting.
Annual General Meeting
This year’s AGM will be held on 18 May
2022, the business of which is set out in the
Notice of Meeting. A circular containing
the Notice of Meeting together with an
explanatory letter from the Chairman
accompanies the Annual Report and is also
available on the Company’s website.
Please note that following the Company’s
move to electronic communications, we are
no longer producing hard copy forms of
proxy. These are available on request from
the Company’s Registrars.
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 also 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.
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Directors' Report continued
COMPLIANCE WITH THE STREAMLINED ENERGY
AND CARBON REPORTING REQUIREMENTS
Annual reporting figures
The total consumption and emissions figures
for energy supplies reportable by Alliance
Pharma Plc.
Consumption (kWh) and greenhouse
gas emissions (tCO2e) totals
The following figures show the consumption and
associated emissions for this reporting year for
our operations, with figures from the previous
reporting period included for comparison.
Scope 1 consumption and emissions relate
to direct combustion of natural gas, and fuels
utilised for transportation operations, such as
company vehicle fleets.
Scope 2 consumption and emissions relate to
indirect emissions relating to the consumption
of purchased electricity in day-to-day
business operations.
Scope 3 consumption and emissions relate
to emissions resulting from sources not
directly owned by us. This relates to grey fleet
(business travel undertaken in employee-
owned vehicles) only.
Totals
The total consumption (kWh) figures for
reportable energy supplies are shown
as follows:
2021
Consumption
(kWh)
2020
Consumption
(kWh)
Intensity Metric
2021 Intensity
Metric
2020 Intensity
Metric
tCO2e/£m turnover
0.70
0.75
Utility and Scope
Grid-supplied electricity
(Scope 2)
Gaseous and other fuels
(Scope 1)
Transportation
(Scope 1 and 3)
Total
256,103
241,399
10,644
10,644
144,186
100,864
410,933
352,907
The total emission (tCO2e) figures for
reportable energy supplies are set out below.
Conversion factors utilised in these calculations
are detailed in the appendix:
2021
Consumption
(tCO2e)
2020
Consumption
(tCO2e)
Utility and Scope
Grid-supplied electricity
(Scope 2)
Gaseous and other fuels
(Scope 1)
Transportation
(Scope 1 and 3)
Total
Energy efficiency improvements
We are committed to year-on-year
improvements in our operational energy
efficiency. As such, a register of energy
efficiency measures available to us has been
compiled, with a view to implementing these
measures in the next five years.
Measures ongoing and undertaken
through 2021:
We have undertaken a programme of
refurbishment and upgrading works at
Avonbridge House, including:
› Replacement of windows with thermally
efficient argon-filled double glazing.
54.38
56.27
› Completion of Air Conditioning upgrade.
1.95
1.96
33.68
90.01
23.78
82.01
› Completion of Light Emitting Diode
lighting upgrade.
›
Insulation of attic space.
› Replacement of atrium glazing.
Appendix to SECR
Reporting methodology
Scope 1 and 2 consumption and CO2e
emission data have been calculated in line
with the 2019 UK Government environmental
reporting guidance. The following Emission
Factor Databases consistent with the 2019
UK Government environmental reporting
guidance have been used, utilising the current
published kWh gross calorific value (CV)
and kgCO2e emissions factors relevant for
reporting year 01/01/2021 – 31/12/2021:
Database 2021, Version 1.0.
For properties where Alliance Pharma is
indirectly responsible for utilities (i.e. via a
landlord or service charge), an average
kWh/m² consumption was calculated at
meter level, based upon CIBSE standard
benchmarks and was applied to the
properties with similar operations with no
available data.
These full year estimations were applied
to one electricity supply and one gas
supply. These estimations equated to 7%
of reported consumption.
Intensity metric
An intensity metric of tCO2e per £m turnover
has been applied for our annual total
emissions. The methodology of the intensity
metric calculations are detailed in the
appendix, and the results of this analysis are
shown as follows:
Measures prioritised for
implementation in 2022:
We are actively looking at options for the
installation of renewable energy generation
at our Avonbridge site.
Intensity metrics have been calculated utilising
the 2021 reportable figures for the following
metric, and tCO2e for both individual sources
and total emissions were then divided by this
figure to determine the tCO2e per metric:
› Total turnover (£m) £128m
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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.
› Make judgements and estimates that are
reasonable, relevant and reliable;
› State whether they have been prepared in
accordance with UK-adopted international
accounting standards;
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 UK-adopted international accounting
standards 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;
› 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
comply 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.
Chris Chrysanthou
Company Secretary
30 March 2022
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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
86
95
96
97
98
99
100
101
102
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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 2021 which comprise 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.
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 2021 and of the Group’s profit for the year
then ended;
›
›
›
the Group financial statements have been properly prepared in accordance with UK-
adopted international accounting standards;
the parent Company financial statements have been properly prepared in accordance with
UK-adopted international accounting standards 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.
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.
Overview
Materiality: group financial
statements as a whole
£1.5m (2020: £1.5m)
4.7% (2020: 4.7%) of normalised Group profit before tax
Coverage
96% (2020: 92%) of group profit before tax
Key audit matters vs 2020
Recurring risks
Impairment of intangible brand assets
Recoverability of parent company’s investment in subsidiaries
Event driven
New: CMA infringement decision
New: Accounting treatment of costs related to cloud-based
software arrangements
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:
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Independent auditor’s report continued
2. Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
The risk
Our response
Impairment of
Intangible
Brand Assets
(£368.8 million;
2020: £381.6 million)
Refer to page 63
(Audit Committee
Report), page 105
(accounting policy)
and page 115
(financial disclosures.
Forecast-based assessment:
The estimated recoverable amount
of intangible assets (excluding
Goodwill and Computer Software)
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 and, in the case
of finite life assets, the period over
which management have forecast
cashflows), which are inherently
highly judgemental.
For all CGUs, we held discussions with the directors,
commercial, regulatory and financial management
and considered information about the products
available in the public domain. For higher risk CGUs
our procedures included:
› 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.
In addition, we assessed whether the forecasts
(including growth rate) were consistent with current
business strategies in place and information about
the products available in the public domain, and
that the selected useful economic lives for finite life
assets were appropriate;
CMA infringement
decision
(£7.9 million; 2020:
£Nil)
Refer to page 63
(Audit Committee
Report), page 102
(accounting policy)
and page 124
(financial disclosures).
The Group has a total of 53 CGUs,
from which our risk has been
identified in respect of 3, which hold
an aggregate value of £10.8 million.
›
Given the quantum of the balance
in relation to our materiality and
the inherent estimation uncertainty,
we concluded this to be our most
significant Key Audit Matter.
The affect 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.
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 CGUs which we determined were not higher
risk, we performed historical comparisons and
sensitivity analysis to ensure our risk assessment
was appropriate.
We performed the tests above rather than seeking
to rely on any of the group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
Dispute outcome:
Our procedures included:
›
Enquiry of lawyers: Discussions with and
inquires of the Group’s in-house and external
legal advisors, the directors and management;
› Our compliance expertise: Using our own
forensic and compliance specialists, critically
assessed the judgements taken by the Directors,
and monitored external sources of information;
› Assessing transparency: Assessing whether
the Group’s disclosures detailing the regulatory
proceedings adequately disclose the potential
liabilities of the Group;
› Accounting analysis: Assessing the
directors analysis of whether the receipt of the
infringement decision was an adjusting or non-
adjusting subsequent event.
We performed the tests above rather than seeking
to rely on any of the group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
As explained in note 20, the Group
received an infringement decision
and fine of £7.9 million from the
Competition and Markets Authority
(the “CMA”) on 3 February
2022 relating to suspected anti-
competitive agreements in relation to
Prochlorperazine, which covered the
period from June 2013 to July 2018.
The amounts involved are significant,
and the application of accounting
standards to determine the amount
to be provided as a liability, is
inherently subjective. The provision
of £7.9 million recognised could
be released in entirety if the Group
is successful at appeal, or a lower
amount agreed by the appeal.
Following the issuance of an
infringement notice by the CMA,
this risk has increased.
We have identified this matter as a
risk of error and a risk of fraud due
to perceived impact on the Group’s
share price.
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2. Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
The risk
Our response
Accounting
treatment of costs
related to cloud-
based software
arrangements
(£15.0 million; 2020:
£11.0 million)
Refer to page 63
(Audit Committee
Report), page 103
(accounting policy)
and page 115
(financial disclosures).
Accounting treatment:
Our procedures included:
› Accounting clarity: We assessed the
accounting clarification of the IFRIC April
2021 decision against the Group’s treatment
of capitalised ERP costs, including reviewing
contractual documentation;
› Our IT expertise: In conjunction with the IT
auditors, the audit team sought input from ERP
implementation professionals on the practical
and technical aspects of transferring the ERP
from the cloud onto the company’s servers;
› Assessing transparency: We assessed the
adequacy of the Group’s related disclosures in
respect of the judgements taken by management.
We performed the tests above rather than seeking
to rely on any of the group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
The Group has capitalised
internal and external costs in
respect of cloud-based software
arrangements. In April 2021 the
IFRS Interpretations Committee
(‘IFRIC’) published an agenda
decision on accounting for cloud
computing costs.
This IFRIC decision has been
considered by the Group and
the Group have concluded that
no change in respect of the
capitalisation of certain costs
associated with their Enterprise
Resource Planning (ERP) system
is required.
In assessing whether a change in
accounting policy is required, the
Group has exercised significant
judgement in reaching a conclusion.
The risk is that a potential change
in accounting policy has not
appropriately been identified and
applied to both the current and
prior years.
Recoverability of
parent company’s
investment in
subsidiaries
(£199.3 million;
2020: £199.8 million)
Refer to page 63
(Audit Committee
Report), page 108
(accounting policy)
and page 121
(financial disclosures).
Low risk, high value:
Our procedures included:
›
The carrying amount of the
parent company’s investments
in subsidiaries represents 99.9%
(2020: 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.
Test of detail: We compared the carrying
amount of 100% of the investments with the
net asset value of the respective subsidiaries,
being an approximation that 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;
We performed the test above rather than seeking
to rely on any of the group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedure described.
We continue to perform procedures over the selection of useful economic lives for intangible
assets. However, following a consistent application of accounting policy in the current year,
we have not assessed this as one of the most significant risks in our current year audit and,
therefore, it is not separately identified in our report this year.
We also continue to perform procedures over Goodwill, however, due to the absence of
significant acquisitions in the current year and the significant levels of headroom present, we
have not included it within this risk in our report this year
We also continue to consider the need for procedures over Business combinations: valuation
of identified intangible assets. However, due to no business combinations having occurred in
the current year, we have not assessed this as one of the most significant risks in our current
year audit and, therefore, it is not separately identified in our report this year.
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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 (2020: £1.5m),
determined with reference to a benchmark of Group profit before tax, normalised to
exclude the impairment of intangible assets, as disclosed in note 5, of £6.15m and the CMA
provision, also disclosed in note 5, of £7.9m (2020: normalised to exclude the impairment
and amortisation of intangible assets, as disclosed in note 5, of £19.2m), of which it represents
4.7% (2020: 4.7%)
Materiality for the parent Company financial statements as a whole was set at £0.9m (2020:
£1.4m), determined with reference to a benchmark of Company total assets, of which it
represents 0.5% (2020: 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% (2020: 75%) of materiality for the financial
statements as a whole, which equates to £1.125m (2020: £1.125m) for the Group and
£0.675m (2020: £1.05m) 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 (2020: £75,000), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Of the Group’s 17 (2020: 19) reporting components, we subjected 3 (2020: 3) to full scope
audits for group purposes and 1 (2020: 0) to an audit of account balances over revenue,
trade receivables and cash and cash equivalents. The component for which we performed an
audit of account balances was not individually significant but was included in the scope of our
group reporting work in order to provide further coverage over the group’s results.
The scope of the audit work performed was fully substantive as we did not rely upon the
Group’s internal control over financial reporting.
The components within the scope of our work accounted for the percentages illustrated
opposite.
The remaining 8% (2020: 11%) of total Group revenue, 4% (2020: 8%) of Group profit before
tax and 11% (2020: 2%) of total Group assets is represented by 13 (2020: 14) of reporting
components, none of which individually represented more than 10% (2020: 10%) of any of
total Group revenue, Group profit before tax or total Group assets. For these components,
we performed analysis at an aggregated group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
Normalised group profit before tax
£32.2m (2020: £32.2m)
Group materiality
£1.5m (2020: £1.5m)
£1.5m
Whole financial statements materiality
(2020: £1.5m)
£1.125m
Whole financial statements performance materiality
(2020: £1.125m)
£1.1m
Range of materiality at 4 components (£0.2m–£1.1m)
(2020: £0.6m to £1.0m)
£75,000
Misstatements reported to the audit committee
(2020: £75,000)
Normalised PBT
Group materiality
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3. Our application of materiality and an overview of the scope of our audit continued
Group revenue
8%
11%
8%
92%
(2020 89%)
89%
84%
Group total assets
11%
2%
3%
89%
(2020 98%)
98%
86%
Group profit before tax
1% 4%
8%
96%
(2020 92%)
92%
95%
Full scope for group audit purposes 2021
Audit of account balances 2021
Full scope for group audit purposes 2020
Residual components
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 £0.2m to £1.1m
(2020: £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 (2020: 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. The Group team performed procedures on the items
excluded from normalised Group profit before tax.
Other than the UK, the Group team visited one component location in the USA (2020: nil)
during the year to perform audit procedures. Video and telephone conference meetings were
also held with the component auditor for the component that was not physically visited. At
these meetings, the findings reported to the Group team were discussed in more detail, and
any further work required by the Group team was then performed by the component auditor.
4. Going concern
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:
› The impact on customer confidence as a result of a slowdown in the Global economy;
› Constraints on supply chain, sourcing or logistics and the impact it could have on the
Group’s key products;
› The impact that changes in product regulation could have on the ability to sell new or
existing products; and
› The impact of the settlement of the penalty relating to the CMA infringement decision.
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4. Going concern continued
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.
5. Fraud and breaches of laws and regulations – 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:
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 geopolitical instability and
the ongoing COVID-19 pandemic on the economic situation worldwide (and its impact on the
Group), and our knowledge of the entity and the sector in which it operates.
› 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;
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.
Our conclusions based on this work:
› 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 will continue in operation.
› 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.
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 audit
team to component audit teams of relevant fraud risks identified at the Group level and a
request to full scope component audit teams to report to the Group audit team any instances
of fraud that could give rise to a material misstatement at the Group level.
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 Group and component management may be in a position to make
inappropriate accounting entries; and
› The risk that revenue is overstated through recording of revenues in the wrong period
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5. Fraud and breaches of laws and regulations – ability to detect continued
Identifying and responding to risks of material misstatement due to fraud continued
We also identified a fraud risk related to the CMA infringement decision, in response
to a perceived impact on the Group’s share price. Further detail in respect of the CMA
infringement decision is 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, product regulation 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.
Further detail in respect of CMA infringement decision is set out in the key audit matter
disclosures in section 2 of this report.
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.
92
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Strategic Report
Governance
Financial Statements
Additional Information
Independent auditor’s report continued
6. We have nothing to report on the other information in the Annual Report
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 84, 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.
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Financial Statements
Additional Information
Independent auditor’s report continued
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.
Huw Brown
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
66 Queen Square,
Bristol,
BS1 4BE
30 March 2022
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Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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
CMA provision
Share-based employee remuneration
Operating profit
Finance costs
Interest payable and similar charges
Finance income/(costs)
Profit before taxation
Taxation
Profit for the period attributable to
equity shareholders
Earnings per share
Basic (pence)
Diluted (pence)
Note
3,34
5
5
5
20
7, 24
6
6
4
8
10
10
Year ended 31 December 2021
Year ended 31 December 2020
Underlying
£000s
163,207
(53,757)
109,450
(60,202)
(1,362)
–
–
(2,250)
45,636
(3,646)
228
(3,418)
42,218
(8,033)
Non-underlying
£000s
(Note 5)
Total
£000s
Underlying
£000s
Non-underlying
£000s
(Note 5)
–
–
–
163,207
(53,757)
109,450
129,801
(46,985)
82,816
(2,843)
(7,168)
(6,150)
(7,900)
–
(24,061)
–
–
–
(24,061)
(2,805)
(63,045)
(44,614)
(8,530)
(6,150)
(7,900)
(2,250)
21,575
(3,646)
228
(3,418)
18,157
(10,838)
–
–
–
(1,374)
36,828
(2,657)
(643)
(3,300)
33,528
(6,372)
–
–
–
(1,300)
(7,155)
(12,057)
–
–
(20,512)
–
–
–
(20,512)
1,383
Total
£000s
129,801
(46,985)
82,816
(45,914)
(7,155)
(12,057)
–
(1,374)
16,316
(2,657)
(643)
(3,300)
13,016
(4,989)
34,185
(26,866)
7,319
27,156
(19,129)
8,027
6.39
6.30
1.37
1.35
5.11
5.05
1.51
1.49
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.
95
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Strategic Report
Governance
Financial Statements
Additional Information
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)
Foreign 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 2021
£000s
Year ended
31 December 2020
£000s
7,319
8,027
636
(191)
–
7,764
(1,051)
(250)
27
6,753
96
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Consolidated Balance Sheet
Assets
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Deferred tax asset
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
Note
31 December 2021
£000s
31 December 2020
£000s
Note
31 December 2021
£000s
31 December 2020
£000s
11
12
22
14
15
21
16
23
413,744
4,826
3,526
371
412,872
15,921
2,139
682
Liabilities
Non-current liabilities
Loans and borrowings
Other liabilities
Deferred tax liability
422,467
431,614
Current liabilities
21,075
30,821
64
29,061
81,021
22,917
25,114
310
28,898
77,239
Corporation tax
Trade and other payables
Provisions
Derivative financial instruments
Total liabilities
503,488
508,853
Total equity and liabilities
18
19
22
17
20
21
116,060
2,637
61,728
180,425
1,178
29,930
9,469
–
40,577
221,002
503,488
138,328
3,200
56,181
197,709
1,435
28,736
–
15
30,186
227,895
508,853
5,382
151,328
10,058
(329)
48
(419)
116,418
282,486
5,329
150,645
8,426
(329)
239
(1,055)
117,703
280,958
The financial statements were approved by the Board of Directors on 30 March 2022.
Peter Butterfield
Director
Andrew Franklin
Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company number 04241478
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Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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
Note
31 December 2021
£000s
31 December 2020
£000s
The Company’s profit for the year was £6,756,000 (2020: £5,433,000).
As permitted by section 408 of the Companies Act 2006, no separate Income Statement
is presented in respect of the Parent Company.
13
15
16
23
17
199,348
199,776
The financial statements were approved by the Board of Directors on 30 March 2022.
Peter Butterfield
Director
Andrew Franklin
Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company number 04241478
39
141
180
36
297
333
199,528
200,109
5,382
151,328
8,962
33,064
198,736
368
424
792
5,329
150,645
7,955
34,912
198,841
306
962
1,268
Total equity and liabilities
199,528
200,109
98
Alliance Pharma plc – Annual Report and Accounts 2021
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
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
5,294 149,036
(329)
462
(4)
7,208 112,513 274,180
Balance 1 January
2021
5,329 150,645
(329)
239
(1,055)
8,426 117,703 280,958
–
1,644
Issue of shares
53
683
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Consolidated Statement of Changes in Equity
Balance 1 January
2020
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
Balance
31 December 2020
35
1,609
–
–
35
–
–
–
1,609
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(250)
27
–
–
–
–
–
–
–
–
(1,051)
(223)
(1,051)
–
–
(2,837)
(2,837)
Dividend paid
1,218
–
1,218
1,218
(2,837)
25
Share options charge
(including deferred tax)
Transactions
with owners
–
8,027
8,027
Profit for the year
Other
comprehensive
income
Foreign exchange
forward contracts –
cash flow hedge
(net of deferred tax)
Foreign exchange
translation differences
(net of deferred tax)
Total comprehensive
income for the year
Balance
31 December 2021
–
–
–
–
–
–
(250)
27
–
(1,051)
8,027
6,753
5,329 150,645
(329)
239
(1,055)
8,426 117,703 280,958
–
–
53
–
–
–
–
–
–
683
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
736
(8,604)
(8,604)
1,632
–
1,632
1,632
(8,604)
(6,236)
–
7,319
7,319
(191)
–
–
636
(191)
636
–
–
–
–
–
(191)
636
7,319
7,764
5,382 151,328
(329)
48
(419) 10,058 116,418 282,486
99
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Company Statement of Changes in Equity
Ordinary share capital
£000s
Share premium account
£000s
Share option reserve
£000s
Retained earnings
£000s
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
Balance 31 December 2020
5,294
35
–
–
35
–
5,329
149,036
1,609
–
–
1,609
–
150,645
Balance 1 January 2021
5,329
150,645
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the period and total comprehensive income
53
–
–
53
–
683
–
–
683
–
Balance 31 December 2021
5,382
151,328
6,846
–
–
1,109
1,109
–
7,955
7,955
–
–
1,007
1,007
–
8,962
32,316
–
(2,837)
–
(2,837)
5,433
34,912
34,912
–
(8,604)
–
(8,604)
6,756
33,064
Total equity
£000s
193,492
1,644
(2,837)
1,109
(84)
5,433
198,841
198,841
736
(8,604)
1,007
(6,862)
6,756
198,736
100
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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
Purchase of intangible assets
Purchase of property, plant and equipment
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
Contribution from/(investment in) subsidiary
Proceeds from exercise of share options
Dividend paid
Proceeds from borrowings
Repayment of borrowings
Net cash provided by/(used in) financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December
Note
25
31
11
12
13
9
21
21
16
Group
Company
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
The accompanying accounting
policies and notes form an integral
part of these financial statements.
44,919
(6,260)
38,659
–
–
183
(4,006)
(1,526)
750
(4,599)
(2,965)
–
(924)
–
736
(8,604)
–
(22,587)
(34,344)
(284)
28,898
447
29,061
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
(961)
(1,484)
(2,445)
–
2,600
–
–
–
–
(2,133)
(1,012)
(3,145)
–
2,800
–
–
–
–
2,600
2,800
–
–
–
7,557
736
(8,604)
–
–
(311)
(156)
297
–
141
–
–
–
1,738
1,644
(2,837)
–
–
(545)
200
97
–
297
101
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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 30 March 2022.
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 UK-adopted international
accounting standards (‘UK-adopted IFRS’).
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:
› Assessment of cloud-based software costs
in relation to the Group’s cloud hosted
ERP system.
› Determining the treatment of payment to
customers in significant contracts. This is
considered a critical judgement, but the
impact is immaterial for the current year.
›
Identification and presentation of
non-underlying items (note 5).
› Assessment of the Infringement Decision
announced by the UK’s Competition and
Markets Authority (‘CMA’) (note 20).
102
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Financial Statements
Additional Information
2. Summary of significant accounting
policies continued
2.3 Judgements and estimates continued
Intangible assets – cloud-based
software costs
The determination of whether a cloud-based
software arrangement represents a pure
Software as a Service solution, or a right to
take possession of, and to use, the software
requires judgement.
In light of the recent IFRIC agenda decision
regarding cloud-based software, the Group
has reviewed its service agreements in
respect of its cloud-based ERP system and
has considered several factors to conclude
on the appropriate accounting treatment.
These factors include the nature and key
terms of licence arrangements, ownership
of intellectual property rights, ability to
restrict access to systems and the feasibility
of removing software applications from the
cloud environment and running them within
the Group’s own IT environment instead,
taking into account the associated costs and
potential change in functionality.
Having considered these factors the Group
concluded that it does have substantive
control over the ERP system and has therefore
recognised it as an intangible asset in line
with the guidance under IAS 38. Had the
Group concluded that it does not have control,
a proportion of the costs would have been
expensed in the Income Statement in the
current year.
Identification and presentation of
non-underlying items
In 2020 the Group updated its classification
policy for non-underlying items (note 5).
Following the update all amortisation and
impairment charges for acquired intangible
assets are included as non-underlying items,
in line with the majority of peer companies
of the Group. Significant restructuring
costs (for example, relating to office or
business closures), the CMA provision and
the revaluation of deferred tax balances
following substantial tax legislation changes
are also included as non-underlying items.
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.
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.
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).
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 third parties
on its behalf under certain transitional
arrangements. The Group has assessed the
performance obligations as being each unit
of good sold by the third parties.
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.
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 certain supply
partners as described in full under ‘Specific
revenue streams’. This is because the Group
controls each specified good before transfer
to customers.
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2.4 Revenue recognition continued
Where consideration is payable to a customer,
this is evaluated by the Group to determine
whether the amount represents a reduction of
the transaction price, a payment for distinct
goods or services or a combination of the
two. The fair value of the good or service is
also evaluated to assess whether the payment
should be accounted for as a payment to
suppliers or a reduction in transaction price.
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.
Revenue is recognised net of a provision for
the expected level of returns.
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 and delivery at place: Recognition
at a point in time when each unit of
pharmaceutical product is dispatched to
the customer or reaches the designated
place. At this point in time the customer
has an obligation to pay for the goods,
legal title and significant risks and
rewards of ownership. This revenue
recognition policy covers the cross border
e-commerce stream as referred to in the
strategic report.
(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, discounts
and payments to customers: 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 2021 were under
this threshold, the Group was exempt from
any VPAS payments and, as a result, no
amounts were deducted from revenue
(2020: no deduction).
For transactions with variable consideration,
such as coupons, this is recognised at the
point of sale to the customer.
Payments to customers are accounted for as
a reduction of revenue unless they are linked
to a distinct service, in which case they are
classified as an operating expense.
(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 34) where
the Group has transitional agreements with
certain supply partners. Under the terms
of the agreements, 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 these
relationships 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.
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.
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2.5 Foreign currency continued
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.
2.7 Property, plant and equipment
Computer 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 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.
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 asset 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.
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2.9 Intangible assets and goodwill
continued
(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.
(iv) Computer software
Computer software comprises software
purchased from third parties as well as
the cost of internally developed software.
Computer software licences are capitalised
on the basis of the costs incurred to acquire
and bring into use the specific software.
Costs that are directly associated with
the production of identifiable and unique
software products controlled by the Group,
and are probable of producing future
economic benefits, are recognised as
intangible assets. Direct costs of software
development include employee costs and
directly attributable overheads. Software
integral to an item of hardware equipment is
classified as property, plant and equipment.
Costs associated with maintaining software
programs are recognised as an expense
when they are incurred. Amortisation is
charged to the Income Statement on a
straight-line basis over the estimated useful
life from the date the software is available
for use, generally eight years. In bringing the
asset into use, the Directors have determined
that the asset related to the ERP system should
be reclassified from property, plant and
equipment to intangible assets. The Directors
have considered the impact on the prior
period and have considered this not material.
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,
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 intangible
assets with an indefinite life, assets with a
finite life that show indicators of impairment,
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. Except for the Biogix
entity, which recognises inventory on an
average cost basis, inventory cost for the
Group 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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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 it 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 Executive 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.
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2.15 Equity
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.
‘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.
2.18 Going concern
The Group is in a net current asset position of
£40.4m (2020: £47.1m). 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.
The Directors have prepared cash flow forecasts
for a period of more than 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.
Also, the Directors have considered the
sensitivity of cash flow forecasts to severe
downside scenarios, including the potential
impact of the timing of the payment in relation
to the CMA decision, detailed further in note 20.
The Directors considered a reverse stress test
scenario which indicates that a decline in
EBITDA against forecast of over 40% would
be needed to result in a breach of loan
covenants. The Directors consider this remote.
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. 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.
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Financial Statements
Additional Information
2. Summary of significant accounting policies continued
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 34.
The Group does not consider adjusted profitability measures or APMs to be a substitute for, or
superior to, IFRS measures.
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 as a result of the
inherently different characteristics of these product types.
Operating segments reflect the way in which information is presented to and reviewed
by the CODM for the purposes of making strategic decisions and assessing Group-wide
performance. 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
Amberen
Nizoral*
MacuShield
Aloclair
Vamousse
Other Consumer Healthcare brands
Total revenue – Consumer Healthcare brands:
Prescription Medicines:
Hydromol
Flamma Franchise
Forceval
Other prescription medicines
Total revenue – Prescription Medicines
Total revenue
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
48,845
19,233
14,189
8,829
5,773
4,110
14,397
115,376
7,009
6,610
5,685
28,527
47,831
163,207
34,748
–
13,260
6,751
7,601
5,626
17,354
85,340
6,304
5,897
4,893
27,367
44,461
129,801
*
Nizoral statutory revenue includes revenue generated on an agency basis. Nizoral revenue presented on a see-through Income Statement basis is
included as an alternative performance measure in note 34.
110
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Financial Statements
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3. Revenue and segmental information continued
Revenue information by geography
Classification by geography is based on customer location.
Major customers
The revenues from the Group’s largest customers are as follows. No customers separately
comprised 10% or more of revenue (2020: two). Major customer 1 is a multinational
organisation with sales in both EMEA and AMER regions.
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
Europe, Middle East and Africa (EMEA)
Asia Pacific and China (APAC)
Americas (AMER)
Total revenue
Operating segment results
89,188
48,030
25,989
163,207
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Year ended 31 December 2021
Consumer Healthcare
£000s
Prescription Medicines
£000s
115,376
(31,545)
83,831
47,831
(22,212)
25,619
Year ended 31 December 2020
Consumer Healthcare
£000s
Prescription Medicines
£000s
85,340
(26,199)
59,141
44,461
(20,786)
23,675
93,769
29,309
6,723
129,801
Total
£000s
163,207
(53,757)
109,450
Total
£000s
129,801
(46,985)
82,816
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
CMA provision
Losses on disposals
Share options charge
Depreciation of plant, property and equipment
(Gain)/loss on foreign exchange transactions
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
13,723
12,014
17,345
16,646
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
96
326
5
8,530
6,150
7,900
–
2,250
1,575
(205)
48
198
5
7,155
12,057
–
308
1,374
1,753
653
111
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Governance
Financial Statements
Additional 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 acquired intangible assets; restructuring costs; significant 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 acquired intangible assets
Impairment of goodwill and intangible assets
Biogix acquisition costs
CMA provision
Restructuring costs
Other
Total non-underlying items before taxation
Taxation on non-underlying items
Impact of UK tax rate change from 17% to 19%
Impact of UK tax rate change from 19% to 25%
Non-underlying taxation
Total non-underlying items after taxation
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
(7,168)
(6,150)
–
(7,900)
(2,420)
(423)
(24,061)
2,167
–
(4,972)
(2,805)
(26,866)
(7,155)
(12,057)
(1,300)
–
–
–
(20,512)
3,194
(1,811)
–
1,383
(19,129)
Amortisation of intangible assets
The amortisation costs of acquired intangible assets are a significant item considered
unrelated to 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 impairment reviews for the Group’s intangible 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 2021 trading performance, and have been presented as non-underlying.
Biogix acquisition costs
Legal and professional fees related to the purchase of Biogix Inc in 2020 (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.
CMA provision
The CMA provision of £7.9m relates to the CMA Infringement Decision which is detailed
further in note 20. This is considered unrelated to trading performance, and as such has been
presented as non-underlying.
Restructuring costs
Costs of Group restructuring in the year ended 31 December 2021 relating to the closure of
the Milan and Los Angeles offices were £2.4m (2020: £Nil). These costs are a significant
item considered unrelated to 2021 trading performance, and as such have been presented
as non-underlying.
Impact of UK tax rate change from 17% to 19%
The taxation charge for the year ended 31 December 2020 includes the impact on deferred
tax of the main rate of UK corporation tax from 17% to 19%, following the abandonment
of the proposed reduction to 17% in the March 2020 Budget. The change in tax rate is a
significant item that relates only to deferred tax, principally on intangibles, and is unrelated to
trading performance. As such, the rate change impact has been presented as non-underlying.
Impact of UK tax rate change from 19% to 25%
In the Budget on 3 March 2021, a further change to UK corporation tax rates was
announced, increasing the main rate from 19% to 25% with effect from 1 April 2023.
The impact on deferred tax of this further rate increase is included in these financial
statements as a non-underlying item.
112
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Financial Statements
Additional Information
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 gains/(losses)
Finance costs – net
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
(2,904)
(639)
(103)
(3,646)
23
205
228
(3,418)
(1,988)
(581)
(88)
(2,657)
10
(653)
(643)
(3,300)
7. Directors and employees
Employee benefit expenses for the Group (including Executive Directors) during the year were
as follows:
Key management of the Group is the Board of Directors (including Non-executive Directors)
and the Senior Leadership Team (SLT). Benefit expenses in respect of the key management
were as follows:
Key management remuneration
Pension contributions
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
3,442
121
3,563
2,380
112
2,492
During the year contributions were paid to defined contribution schemes for two Executive
Directors (2020: two).
Gain on share options exercised by Executive Directors during the year was £363,000
(2020: £54,000). The notional non-cash IFRS 2 share-based payment expense in respect
of Directors was £256,000 (2020: £217,000).
The amounts set out above include remuneration in respect of the highest paid Director
as follows:
Wages and salaries
Social security costs
Other pension costs (note 28)
Share-based employee remuneration (note 24)
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
18,886
2,077
1,306
2,250
24,519
16,437
1,958
994
1,374
20,763
Emoluments for qualifying services
Pension contributions
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
587
29
616
531
27
558
The average number of employees of the Group (including Directors) during the year was:
Management and administration
Year ended
31 December 2021
Number
Year ended
31 December 2020
Number
255
221
The notional non-cash IFRS 2 share-based payment expense in respect of the highest paid
Director was £177,000 (2020: £156,000).
Average number of members of the Board of Directors (including Non-executive Directors) for
the year ended 31 December 2021 was six (2020: six).
113
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Additional Information
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 22)
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Taxation
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
6,069
(65)
6,004
4,471
363
10,838
4,417
(123)
4,294
705
(10)
4,989
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:
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
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
Unrecognised losses
Foreign exchange
Share options
Movement in other tax provisions
Total taxation
18,157
3,449
1,888
(4)
298
4,972
114
246
96
(352)
131
10,838
13,016
2,473
614
(18)
(132)
1,811
40
–
–
(7)
208
4,989
The taxation charge for the year ended 31 December 2020 included 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. The taxation charge for the year ended 31 December 2021 includes the impact on
deferred tax of this increase.
The Group has calculated ‘underlying effective tax rate’ as an alternative performance
measure in note 34.
9. Dividends
An interim dividend of 0.563p per share for the 2021 financial year was paid on 7 January
2022. The Board is proposing a final dividend payment of 1.128p per share for 2021, taking
the total dividend payment for the year to 1.691p (2020: 1.610p).
Amounts recognised as distributions to owners in 2021
Interim dividend for the 2020 financial year
Final dividend for the 2020 financial year
Total dividend
Year ended
31 December 2021
Pence/share
£000s
0.536
1.074
1.610
2,857
5,747
8,604
The interim dividend for 2020 was paid on 7 January 2021. The final dividend for 2020 was
paid on 8 July 2021.
Amounts recognised as distributions to owners in 2020
Interim dividend for the 2019 financial year
Year ended
31 December 2020
Pence/share
0.536
£000s
2,837
114
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Additional Information
10. Earnings per share (EPS)
The resulting EPS measures are:
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
Diluted EPS
Underlying basic EPS
Underlying diluted EPS
11. Goodwill and intangible assets
Year ended
31 December 2021
Pence
Year ended
31 December 2020
Pence
1.37
1.35
6.39
6.30
1.51
1.49
5.11
5.05
Basic EPS calculation
Employee share options
Diluted EPS calculation
Year ended
31 December 2021
Year ended
31 December 2020
535,295,583
531,062,798
7,039,113
6,256,040
542,334,696
537,318,838
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 and diluted EPS
Non-underlying items (note 5)
Earnings for underlying basic and diluted EPS
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
7,319
26,866
34,185
8,027
19,129
27,156
Goodwill
£000s
Consumer Healthcare
brands and distribution
rights £000s
Prescription Medicines
brands and distribution
rights £000s
Computer
software
£000s
Total
£000s
The Group
Cost
At 1 January 2021
32,404
258,203
152,890
–
443,497
Transfer from property,
plant and equipment
Additions
Acquisition (note 31)
Exchange adjustments
–
–
(183)
161
At 31 December 2021
32,382
Amortisation and
impairment
At 1 January 2021
1,144
Non-underlying
impairment for the year
Non-underlying
amortisation for the year
Underlying amortisation
for the year
–
–
–
At 31 December 2021
1,144
Net book amount
At 31 December 2021
31,238
At 1 January 2021
31,260
–
–
–
1,877
260,080
6,459
1,500
226
–
8,185
–
–
–
(1,346)
11,037
11,037
4,006
4,006
–
–
(183)
692
151,544
15,043
459,049
23,022
4,650
6,942
–
–
–
30,625
6,150
7,168
–
34,614
1,362
1,362
1,362
45,305
251,895
251,744
116,930
13,681
413,744
129,868
–
412,872
115
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
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Governance
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Additional Information
11. Goodwill and intangible assets continued
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
Goodwill
£000s
Consumer Healthcare
brands and distribution
rights £000s
Prescription Medicines
brands and distribution
rights £000s
Total
£000s
16,532
15,427
–
445
32,404
–
1,144
–
1,144
31,260
16,532
171,102
89,990
–
(2,889)
258,203
4,226
2,007
226
6,459
251,744
166,876
152,439
340,073
–
105,417
(714)
1,165
(714)
(1,279)
152,890
443,497
7,187
11,413
8,906
12,057
6,929
7,155
23,022
30,625
129,868
412,872
145,252
328,660
Computer software
The addition of the computer software intangible asset is explained in note 2.3 judgements
and estimates.
Prior year 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). During the year ended 31 December 2021, there was a reduction in the
working capital adjustment paid in cash by $0.2m (£0.2m).
Useful economic lives
As a result of the 2020 Strategic Review, the Group 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 is in the context of the focus on
growing Consumer Healthcare brands, their increasing dominance of the portfolio and the roll-
out 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 were adopted
prospectively from 1 January 2020. The determination of this lifespan has taken into account
all relevant factors for each individual asset, including typical pharmaceutical asset life cycles
and the potential development of alternative treatments over time.
116
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11. Goodwill and intangible assets continued
Useful economic lives continued
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 18 years
at 31 December 2021 (2020: 19 years).
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
Ashton and Parsons
Lefuzhi
Anbesol
Aiweidi
Opus range
Cambridge intangibles
Products acquired from Sinclair
Kelo-cote (non EU, excluding US)
Kelo-cote (EU)
Aloclair
Atopiclair
Goodwill – Sinclair Prescription Medicines
Goodwill – Sinclair Consumer Healthcare
31 December 2021
Consumer healthcare
brands and
distribution rights
£000s
89,629
60,307
11,596
8,740
1,562
1,514
987
212
–
–
40,842
17,800
14,000
2,300
–
–
Total
£000s
104,808
60,307
11,596
10,488
1,562
1,514
987
212
1,849
598
40,842
17,800
14,000
2,300
1,347
10,517
249,489
280,727
Goodwill
£000s
15,179
–
–
1,748
–
–
–
–
1,849
598
–
–
–
–
1,347
10,517
31,238
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.
117
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021
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Strategic Report
Governance
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Additional Information
11. Goodwill and intangible assets continued
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.
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 intangible assets with
an indefinite life, assets with a finite life that show indicators of impairment, and goodwill this
includes estimation of the recoverable amount. 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.
As a result of the impairment review for the Year Ended 31 December 2021, the following
impairment charges were identified:
› Haemopressin, a prescription medicine brand and distribution rights asset, impaired by
£3.9m due to market factors.
› Other prescription medicine brand and distribution rights assets impaired by £0.8m due
to increasing costs resulting from changes in the regulatory framework.
› Consumer healthcare brand and distribution rights assets impaired by £1.5m due to
viability of future sales in the current market.
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 6.3%–8.6%, or pre-tax 7.9%–10.8% (2020: 6.7%–
11.0%, or pre-tax 8.4%–13.8%). The Group’s WACC has remained consistent overall, but
the range of discount rates for individual brands is lower due to changes in the country
profile of the individual brands. The Group risk-free rate has increased 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 remained consistent based on
sector market data. The risk premium to recognise the impact of COVID-19 remains
consistent with the prior year.
› 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 for the CGU’s remaining useful economic life, or to perpetuity for assets with
indefinite useful lives, using growth rates between -2.5% to 2.0% (2020: -3.0% 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.
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.
118
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Financial Statements
Additional Information
11. Goodwill and intangible assets continued
Management have identified a specific source of estimation uncertainty in relation to the
Haemopressin asset. The value of the asset is currently supported by projected future cash
flows in relation to a third-party licence agreement which is awaiting regulatory approval. It is
considered likely that this approval will be granted, and the resulting cash flows are expected
to support the carrying value of the asset. However, if approval is not granted, this would
result in an additional impairment charge of £4.7m, the carrying value post impairment.
As there is uncertainty in relation to the projected cash flows in relation to this CGU if the
licence is granted, additional risk has been factored into the value in use calculation. Based
on data from existing markets, the resulting value in use calculations are considered to reflect
the appropriate level of risk. The following table shows the key assumptions made.
Value in use
calculation assumptions
Pre-tax
discount
rate %
Risk-related reduction
of projected cash flows
Brand 1
Brand 2
Remaining UEL years
rights assets with lower headroom (‘Brand 1’ and ‘Brand 2’), a reasonably possible change
in 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.
Value in use
calculation assumptions
Pre-tax
discount
rate %
9.2
8.0
Terminal
margin
growth
rate %
0.0
2.0
Individual assumptions
required for the estimated
recoverable amount to equal
to the carrying amount
Pre-tax
discount
rate %
10.8
9.2
Terminal
margin
growth
rate %
(2.8)
(0.5)
Remaining
UEL years
18
18
Haemopressin
7 years from date of approval
8.9%
25%
The following table shows the potential impact of reasonably possible changes to individual
assumptions on the estimated recoverable amount of the CGUs.
The following table shows the potential impact of reasonably possible changes to the key
assumptions made.
Haemopressin
Decrease in CGU recoverable amount £000s
2.0% increase in
pre-tax discount
rate
Further reduction in
projected cash flows
(50% reduction)
(602)
(1,784)
Brand 1
Brand 2
Management have identified that for certain prescription medicines brands and distribution
Decrease in CGU recoverable amount £000s
Headroom
2.0% increase in
pre-tax discount rate
2.0% reduction in
terminal margin growth
rate
355
122
(579)
(168)
(350)
(140)
119
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
12. Property, plant and equipment
The Group
Cost
At 1 January 2021
Additions
Transfer to intangible assets
Disposals
Computer
software and
equipment
£000s
Fixtures,
fittings &
equipment
£000s
Plant &
machinery
£000s
Right of
use lease
assets
£000s
Total
£000s
13,048
162
(11,037)
2,511
1,323
–
(136)
(104)
32
41
–
–
6,739
22,330
275
1,801
–
(11,037)
(708)
(948)
At 31 December 2021
2,037
3,730
73
6,306
12,146
Depreciation
At 1 January 2021
Provided in the year
Effect of movements in exchange rates
Disposals
At 31 December 2021
Net book amount
At 31 December 2021
At 1 January 2021
1,620
1,408
186
–
446
(9)
(136)
(104)
1,670
1,741
367
11,428
1,989
1,103
8
28
–
–
36
37
24
3,373
915
–
6,409
1,575
(9)
(415)
(655)
3,873
7,320
2,433
4,826
3,366
15,921
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 2020
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
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)
2,699
50
–
(3)
(235)
2,511
1,200
444
(1)
(235)
1,620
1,408
11,428
7,339
1,103
1,499
14
–
18
–
–
32
4
4
–
–
8
24
10
Total
£000s
16,517
5,737
312
53
(289)
5,293
1,125
294
27
–
6,739
22,330
2,587
801
(15)
–
4,963
1,753
(18)
(289)
3,373
6,409
3,366
2,706
15,921
11,554
Property, plant and equipment of £4.1m is located within the United Kingdom (2020:
£14.4m). The balance is located in France, China, Singapore, Spain, Germany and the
United States of America. Right of use assets relate to the Group’s leased offices.
120
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
13. Investments
The Company
Cost
At 1 January 2021
Net movements
At 31 December 2021
At 1 January 2020
Net movements
At 31 December 2020
Investment and
loans to subsidiary
undertakings
£000s
199,776
(428)
199,348
194,630
5,146
199,776
The investment balance includes outstanding intercompany debt due from subsidiaries of
£176.1m (note 29). 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 net movement for the year ended 31 December 2021 included interest charged of £6.1m
(2020: £5.8m), the recharge of the share option charge £1.1m (2020: £1.1m), the dividend
received of £2.6m (2020: £2.8m) and payments received to reduce the loan.
The subsidiary and associated undertakings where the Group held 20% or more of the equity
share capital at 31 December 2021 are shown below:
Company
Advanced Bio-Technologies Inc.
Alliance Pharma France SAS
Country of registration
or incorporation
%
owned Nature of business
USA
France
100 Pharmaceutical sales
100 Pharmaceutical sales
Alliance Pharma (Singapore) Private Limited*
Singapore
100 Pharmaceutical sales
Alliance Pharma S.r.l.
Italy
100 Pharmaceutical sales
Alliance Pharmaceuticals Limited*
England & Wales
100 Pharmaceutical sales
Alliance Pharmaceuticals (Asia) Limited*
Hong Kong
100 Pharmaceutical sales
Company
Country of registration
or incorporation
%
owned Nature of business
Alliance Lifescience Technology (Shanghai) Co.,Limited China
Alliance Pharmaceuticals Spain SL*
Alliance Pharma Inc.
Spain
USA
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
Alliance Pharmaceuticals (Thailand) Co., Ltd
Thailand
100 Pharmaceutical sales
Alliance Pharmaceuticals (Philippines) Corporation
Philippines
100 Pharmaceutical sales
Alliance CHC (India) Private Limited
Biogix Inc.
India
USA
100 Pharmaceutical sales
100 Pharmaceutical sales
Maelor Laboratories Limited
England & Wales
100 Non-trading
Alliance Pharmaceuticals GmbH*
Germany
Alliance Pharmaceuticals GmbH* – Swiss Branch
Switzerland
Alliance Pharmaceuticals SAS*
France
100 Non-trading
100 Non-trading
100 Non-trading
Opus Healthcare Limited
Republic of Ireland
100 Non-trading
Alliance Pharma (Ireland) Limited
Republic of Ireland
100 Non-trading
Alliance Consumer Health Limited
England & Wales
100 Dormant
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.
England & Wales
100 Dormant
England & Wales
100 Dormant
England & Wales
100 Dormant
Northern Ireland
100 Dormant
England & Wales
100 Dormant
England & Wales
100 Dormant
England & Wales
100 Dormant
England & Wales
100 Dormant
121
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
13. Investments continued
The registered address in each country is as follows:
Territory
Thailand
Territory
USA
Company
Registered Office Address
Advanced Bio-Technologies Inc. One Urban Center, 4830 West Kennedy Blvd, Suite
England & Wales
All Companies
Alliance Pharma Inc.
Biogix Inc.
600, Tampa FL 33609, United States
11000 Regency Pkwy, Ste 106, Cary NC 27518,
United States
201 Continental Blvd., Suite 230, El Segundo,
California 90245, United States
France
Alliance Pharmaceuticals SAS
35 rue d’Artois Paris 75008, France
China
Germany
Hong Kong
Alliance Pharma France SAS
35 rue d’Artois Paris 75008, France
Alliance Pharmaceuticals
Lifescience Technology (Shanghai)
Co.,Limited
Suite 1004, NanFung Tower, No. 1568, Road
Huashan, Shanghai, 200030, P.R.China
Alliance Pharmaceuticals GmbH Hanseatic Trade Center, Am Sandtorkai 41, D-20457
Hamburg, Germany
Alliance Pharmaceuticals
(Asia) Limited
Room 2105, 21/F Office Tower, Langham Place, 8
Argyle Street, Mongkok, Kowloon, Hong Kong
Italy
Alliance Pharma S.r.l.
Viale Francesco Restelli 5, 20124, Milano, Italy
Republic of Ireland
Alliance Pharma (Ireland) Limited 6th Floor, South Bank House, Barrow Street, Dublin 4
Opus Healthcare Limited
6th Floor, South Bank House, Barrow Street, Dublin 4
Singapore
Alliance Pharma (Singapore)
Private Limited
1 Scotts Road, Shaw Centre 22-06, 228208,
Singapore
Spain
Alliance Pharmaceuticals Spain SL Regus Business Center Torre de Cristal, Paseo de la
Switzerland (Branch) Alliance Pharmaceuticals
GmbH Düsseldorf
Casstellana, 259 C Planta 18, Cuatro Torres Business
area 28046, Madrid, Spain
Bahnhofstrasse 37, Postfach 2818, CH-8021 Zürich,
Switzerland
Company
Registered Office Address
Alliance Pharmaceuticals
(Thailand) Co., Ltd
No. 444 Olympia Thai Tower, 8th Floor, Ratchadapisek
Road, Samsennok Sub-district, Huaykwang District,
Bangkok, Thailand
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
Alliance 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 the company has
guaranteed the subsidiary company under Section 479C of the Act.
14. Inventories
The Group
Finished goods and materials
Inventory provision
31 December 2021
£000s
31 December 2020
£000s
24,311
(3,236)
21,075
25,916
(2,999)
22,917
Inventory costs expensed through the Income Statement during the year were £52,932,000
(2020: £39,636,000). During the year £534,000 (2020: £1,284,000) was recognised as
an expense relating to the write-down of inventories to net realisable value.
122
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
15. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Accrued income
The Group
The Company
31 December 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£000s
23,929
1,953
3,102
1,837
30,821
19,834
1,544
898
2,838
25,114
–
31
8
–
39
–
25
11
–
36
Accrued income, which is all classified as not past due, 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 as at 31 December is detailed below:
Trade receivables, net of estimated
allowances for expected credit losses
31 December 2021
£000s
31 December 2020
£000s
Trade receivables, gross of estimated allowances for expected
credit losses
31 December 2021
£000s
31 December 2020
£000s
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
20,405
2,573
633
389
780
24,780
15,764
2,550
1,606
31
524
20,475
As at 31 December 2021, trade and other receivables of £851,000 (2020: £641,000) 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
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
20,405
2,573
633
318
–
15,764
2,550
1,520
–
–
Sterling
Euros
US Dollars
Thai Baht
23,929
19,834
Other currencies
Cash at bank and in hand
The Group
The Company
31 December 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£000s
17,541
3,862
2,427
3,060
2,171
29,061
15,842
2,039
7,495
2,637
885
28,898
141
297
–
–
–
–
–
–
–
–
141
297
123
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
17. Trade and other payables
The Group
The Company
31 December 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£000s
Trade payables
8,341
11,275
Other taxes and social
security costs
Accruals
Other payables
Lease liabilities
2,773
17,512
848
456
2,440
13,639
418
964
29,930
28,736
–
–
368
–
–
368
16
–
290
–
–
306
18. Loans and borrowings
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.
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.
Movement in loans and borrowings
At 1 January
Net (payments)/receipts from borrowing
Additional prepaid arrangement fees
Amortisation of prepaid arrangement fees
Exchange movements*
At 31 December
31 December 2021
£000s
31 December 2020
£000s
138,328
(22,587)
–
628
(309)
77,040
61,054
(362)
578
18
116,060
138,328
*
Exchange movements on loans and borrowings with effective net investment hedges are reported in other comprehensive income and accumulated in
the translation reserve.
19. Other non-current liabilities
The Group
The Company
31 December 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£000s
Lease liabilities
Other non-current liabilities
2,426
211
2,637
2,731
469
3,200
–
–
–
Non-current
Bank loans:
Secured
Finance issue costs
The Group
The Company
31 December 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£000s
20. Provisions
117,025
(965)
116,060
139,920
(1,592)
138,328
–
–
–
–
–
–
At 1 January 2021
Charge to Income Statement
Provisions utilised during the year
Exchange differences
At 31 December 2021
CMA provision
(£000s)
Restructuring
provision
(£000s)
–
7,900
–
–
7,900
–
1,869
(259)
(41)
1,569
–
–
–
Total
(£000s)
–
9,769
(259)
(41)
9,469
124
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
20. Provisions continued
On 23 May 2019 the UK’s Competition and Markets Authority (‘CMA’) issued a Statement
of Objection alleging anti-competitive agreement involving 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 £0.7m in 2021.
On 3 February 2022, the CMA announced its finding that four companies, including Alliance,
had infringed competition law (the ‘Infringement Decision’). The Directors fundamentally
disagree with the CMA’s finding.
The Group believes that it has a strong case and will be appealing the CMA’s decision, and
the proposed fine of £7.9m, at the Competition Appeal Tribunal which is expected to be
heard in late 2022/early 2023, although the timing may be extended due to the current
workload pressures within the court system. Historically, the Group’s assessment was that
there were no matters for which a provision was required, however the Infringement Decision
has caused the Group to revisit this assessment.
Despite the Group’s intention to appeal, the Directors believe that, as a result of the
Infringement Decision, a provision of £7.9m should be recorded at 31 December 2021
(2020: £Nil)
This reflects the amount of the proposed fine communicated by the CMA, and therefore,
notwithstanding the Directors belief as to the merits of the grounds on which it will be
appealing the CMA decision, the Directors consider this to be the appropriate position given
that, in the event that the Group’s appeal proves to be unsuccessful, the ultimate level of the
fine cannot be greater than this. In addition, in the event the Group’s appeal were to prove to
be unsuccessful, the Directors consider that there are strong grounds upon which the amount
of the fine could be reduced. However, as this is a matter which cannot be predicted with
certainty at this time the Directors believe that the most appropriate course of action is to
include the maximum potential amount of the fine.
If the appeal is unsuccessful, the Group may also be liable for a proportion of the legal costs
of the CMA relating to the appeal. The Group has not recorded a provision in relation to
these potential litigation costs as these costs relate to the decision to appeal which was taken
after the year end and their amount cannot be reliably estimated.
In accordance with IAS 37.92, the Group does not provide further information on the grounds
that this could seriously prejudice the outcome of the appeal.
The restructuring provision of £1.6m at 31 December 2021 (2020: £Nil) relates to the
balance of restructuring costs in relation to the closure of the Milan office following a change
to the operating model for our direct-to-market business in Italy. The related outflows are
expected to occur in the year ended 31 December 2022.
21 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.
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.
125
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
21 Financial instruments continued
Liquidity risk continued
The Group also has access to an overdraft facility of £2.0m.
The maturity profile of the Company’s financial gross liabilities (capital and interest) at the
year end is as follows:
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
31 December 2021
In one year or less
£000s
31 December 2020
In one year or less
£000s
368
306
31 December 2021
In one year
or less
£000s
In more than
one year, but not
more than two
£000s
In more than two
years, but not
more than five
£000s
In more than
five years
£000s
36,166
117,057
539
153,762
–
–
391
391
–
–
900
900
–
–
1,244
1,244
Total
£000s
36,166
117,057
3,074
156,297
Trade and other
payables
Bank loans*
Lease liabilities
*
Includes an amount of £117.1m (2020: £140.0m) 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 2021. 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.
31 December 2020
In one year
or less
£000s
In more than
one year, but not
more than two
£000s
In more than two
years, but not
more than five
£000s
In more than
five years
£000s
27,220
139,995
964
168,179
–
–
544
544
–
–
1,086
1,086
–
–
1,521
1,521
Trade and other
payables
Bank loans*
Lease liabilities
Interest rate risk
The Group’s debt is provided on a floating interest rate basis.
The interest rate exposure of the financial liabilities of the Group at the period end was:
Floating rate interest exposure
At 31 December 2021
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
31 December 2021
£000s
31 December 2020
£000s
96,817
7,895
12,313
117,025
(965)
105,317
9,281
25,322
139,920
(1,592)
116,060
138,328
Total
£000s
27,220
139,995
4,115
171,330
The Sterling floating rate borrowings bear interest at a rate based on LIBOR for the year
ended 31 December 2021. From 1 January 2022 the Sterling floating rate borrowings will
bear interest at a rate based on SONIA. This is not expected to have a significant impact on
the Group’s financial instruments and associated risks. 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 have reduced pre-tax profits by approximately £0.5m in
2021. A 0.5% decrease would have the opposite effect.
126
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
21 Financial instruments continued
Interest rate risk continued
A 0.5% increase in EURIBOR would have reduced pre-tax profits by approximately £0.1m
in 2021. 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 have reduced 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, US Dollars and Hong
Kong Dollars.
Approximately 23% of the Group’s sales are invoiced in Euro, 32% invoiced in US Dollar and
9% invoiced in Hong Kong 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 34) in 2021. On the same basis,
5% weakening or strengthening of Sterling against the US Dollar would have resulted in a
£0.3m gain or loss to EBITDA in 2021. On the same basis, 5% weakening or strengthening of
Sterling against the Hong Kong Dollar would have had no impact on EBITDA in 2021.
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.
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:
Forward foreign exchange contracts
Level
2
31 December 2021
Carrying value
£000s
31 December 2020
Carrying value
£000s
64
64
295
295
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 Level 2 are described below:
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.
127
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
21 Financial instruments continued
Forward foreign exchange contracts (Level 2) continued
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.
At 31 December 2021, the Group held the following forward exchange contracts to hedge
exposures to changes in foreign currency rates:
Maturity
1–6 months
6–12 months
More than
one year
Forward exchange contracts
Net exposure (£000s)
Average GBP:USD forward contract rate
Average GBP:EUR forward contract rate
54
1.370
1.138
10
1.367
–
Average GBP:HKD forward contract rate
10.508
10.488
–
–
–
–
At 31 December 2020, the Group held the following forward exchange contracts to hedge
exposures to changes in foreign currency rates:
Forward exchange contracts
Net exposure (£000s)
Average GBP:USD forward contract rate
Average GBP:EUR forward contract rate
Average GBP:HKD forward contract rate
Maturity
1–6 months
6–12 months
More than
one year
157
1.283
1.124
–
153
1.306
1.112
–
(15)
1.342
1.115
–
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
31 December 2021
£000s
31 December 2020
£000s
23,929
1,837
29,061
64
54,891
20,221
2,838
28,898
310
52,267
31 December 2021
£000s
31 December 2020
£000s
36,166
117,057
–
2,882
–
156,105
27,220
138,328
470
3,695
15
169,728
128
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
21 Financial instruments continued
Forward foreign exchange contracts (Level 2) continued
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
Reconciliation to cash flow movements
The cash flow hedges were tested for
effectiveness both retrospectively and
prospectively as at 31 December 2021.
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 £Nil (2020: £49,000). The amounts
recognised through the Income Statement
in respect of the forward foreign exchange
contracts during the year was a credit
of £982,000 in revenue (2020: credit
of £24,000).
31 December 2021
£000s
31 December 2020
£000s
31
36
31 December 2021
£000s
31 December 2020
£000s
368
306
Gross loans and borrowings
Prepaid arrangement fees
Accrued interest
Lease liabilities
Cash flows
Non-cash changes
2020
£000s
Principal
£000s
Interest
£000s
139,920
(22,587)
(1,592)
76
3,695
–
–
(924)
–
–
(2,861)
(103)
Foreign
exchange*
£000s
(308)
–
–
–
Net additions
£000s
Amortisation
£000s
Interest
£000s
–
–
–
111
–
627
–
–
–
–
2,817
103
2021
£000s
117,025
(965)
32
2,882
*
Exchange movements on loans and borrowings are reported in other comprehensive income and accumulated in the translation reserve.
Derivative financial instruments
Current portion
Non-current portion
Forward exchange swap – cash flow hedge
31 December 2021
Assets/(Liabilities)
£000s
31 December 2020
Assets/(Liabilities)
£000s
64
–
64
310
(15)
295
129
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
22. Deferred tax
Reconciliation of deferred tax movements:
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
Foreign exchange forward contracts
Losses
Recognised as:
Deferred tax asset
Deferred tax liability
31 December 2021
£000s
31 December 2020
£000s
(464)
291
915
(13,452)
(47,796)
1,819
(16)
501
(917)
492
623
(9,839)
(45,369)
1,024
(56)
–
(58,202)
(54,042)
3,526
(61,728)
2,139
(56,181)
1 January
2021
£000s
Transfers
£000s
Recognised
in other
comprehensive
income/
directly in
equity
Recognised
in the income
statement
£000s
31 December
2021
£000s
(55,208)
(917)
(670)
670
(284)
(5,086)
(61,248)
–
(217)
(464)
The Group
Non-current assets
Intangible assets
Property, plant and equipment
Non-current liabilities
Derivative financial instruments
Other non-current liabilities
(56)
623
Equity
Share option reserve
1,024
Temporary differences
Trading
Losses
Recognised as:
Deferred tax asset
Deferred tax liability
492
–
(54,042)
2,139
(56,181)
(54,042)
–
–
–
–
–
–
40
292
626
–
–
–
–
(16)
915
169
1,819
(201)
501
291
501
674
(4,834)
(58,202)
The Group has unrecognised deferred tax assets of £246,000 in relation to losses
(2020: £nil).
3,526
(61,728)
(58,202)
130
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
22. Deferred tax continued
23. Share capital
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
The Group
Non-current assets
–
(25,491)
(475)
(55,208)
At 1 January 2020 – Ordinary shares of 1p each
Issued during the year
At 31 December 2020 – Ordinary shares of 1p each
Issued during the year
Allotted, called up and fully paid
No. of shares
529,402,619
3,516,492
532,919,111
5,306,413
£000s
5,294
35
5,329
53
5,382
–
–
36
(39)
–
–
(3)
Intangible assets
(29,242)
Property, plant and
equipment
Non-current liabilities
Derivative financial
instruments
Other non-current
liabilities
Equity
(468)
(92)
662
Share option reserve
806
Temporary differences
Trading
234
(28,100)
Recognised as:
Deferred tax asset
1,710
Deferred tax liability
(29,810)
(28,100)
(42)
–
–
96
221
275
–
–
–
–
–
(407)
(917)
At 31 December 2021 – Ordinary shares of 1p each
538,225,524
Between 1 January 2021 and 31 December 2021 5,306,413 shares were issued on the
exercise of employee share options (2020: 3,516,492).
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.
–
–
(56)
623
122
1,024
37
492
(25,491)
(723)
(54,042)
2,139
(56,181)
(54,042)
131
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
23. Share capital continued
Potential share options commitment
Under the Group’s share option scheme for employees and Executive Directors, options have been granted to subscribe for shares in the
Company at prices ranging from 0.00p to 102.80p (2020: 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
2011
2012
2013
2013
2014
2015
2016
2016
2017
2018
2019
2019
2020
2020
2021
2021
Exercise price
Pence
31.00 and 34.12
29.25
37.25
35.75
33.75
43.75 and 46.75
47.50
47.50
53.00
81.60
76.90
0.00
73.70
0.00
102.80
0.00
Exercise from
Scheme
31 December 2021
Number (000s)
31 December 2020
Number (000s)
2014
2015
2016
2018
2017
2018
2019
2021
2020
2021
2022
2022
2023
2023
2024
2024
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
LTIP
CSOP
LTIP
CSOP
LTIP
–
41
263
–
321
1,219
1,077
1,800
2,877
4,171
5,422
529
5,042
628
7,012
531
186
75
892
450
494
1,852
3,896
3,500
4,694
6,322
6,793
596
6,129
704
–
–
30,933
36,583
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 cost 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 2021 net debt was
£87.0m (2020: £109.4m) (note 34),
whilst shareholders’ equity was £282.5m
(2020: £281.0m).
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 2021 and 2020.
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.
132
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
24. Share-based payments
Under the Group’s share option scheme for employees and Executive 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.
Share options and weighted average exercise price are as follows for the reporting
periods presented:
2021
2020
Number
(000s)
36,583
7,674
(5,306)
(8,018)
30,933
11,845
Weighted
average price
Pence
47.02
93.94
50.07
63.27
71.62
60.12
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
Outstanding at start of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Share options were exercised throughout the financial year. Share options were exercised at
prices of between 29.25 and 81.60 pence per share.
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 2021
Number (000s)
31 December 2020
Number (000s)
2013
2014
2015
2016
2016
2017
2018
2019
2019
2020
2020
2021
2021
35.75
33.75
43.75
47.50
47.50
53.00
81.60
76.90
0.00
73.70
0.00
102.80
0.00
2018
2017
2018
2019
2021
2020
2021
2022
2022
2023
2023
2024
2024
–
92
104
155
1,800
323
1,639
911
529
837
628
1,172
531
8,721
450
204
317
545
3,500
1,028
2,411
1,127
596
917
704
–
–
11,799
The total expense for the year relating to share-based payment plans was £2.3m (2020:
£1.4m), of which £2.0m (2020: £1.1m) related to equity-settled transactions and £0.3m
(2020: £0.3m) 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 29 September
2021 was £1,551,000. The model inputs were a market price of 102.8p, expected volatility
of 29.96% and a risk-free rate of 1.07%.
133
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
25. Cash generated from operations
Group
Company
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
7,319
10,838
3,646
(23)
(205)
–
8,027
4,989
2,657
(10)
644
308
1,575
1,753
14,680
1,842
19,212
(5,206)
(6,146)
6,728
(326)
9,469
2,250
–
5,929
–
1,374
–
6,756
946
–
5,433
941
–
(6,121)
(5,777)
–
–
–
–
–
(3)
62
–
–
–
–
–
–
–
(12)
82
–
–
(2,600)
(2,800)
44,919
46,405
(960)
(2,133)
Profit for the year
Taxation
Interest payable and
similar charges
Interest income
Foreign exchange (gain)/loss
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
Change in provisions
Share-based employee
remuneration
Dividends received
Cash generated from/
(used in) operations
26. Capital commitments
The Group had capital commitments at 31 December 2021 totalling £Nil
(2020: £3,500,000).
27. 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/customer and other claims 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.
28. Pensions
The Group operates a defined contribution pension scheme for the benefit of Executive
Directors and certain employees.
The Group
31 December 2021
£000s
31 December 2020
£000s
Contributions payable by the Group for the year
1,306
994
134
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
29. 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 2021
£000s
31 December 2020
£000s
31 December 2021
£000s
31 December 2020
£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
(10,170)
750
176,111
176,539
6,121
5,777
–
(272)
1,021
1,109
2,600
2,800
–
–
–
–
–
–
–
–
Net funds received represent net payments made against the intercompany loan by Alliance
Pharmaceuticals Limited.
30. Joint ventures
Name
Principal activity
Country of
incorporation
%
Owned
Synthasia International Company Limited Distribution of infant milk formula
Hong Kong
products in China
Synthasia Shanghai Company Limited
Distribution of infant milk formula
products in China
China
20
20
Until 10 March 2021, the Group owned 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 determined that, as a result of these rights and by exercise of judgement, Synthasia was
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. There are currently no forecasted sales for this brand.
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
brought 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 $111.3m, being $110.0m consideration
paid in cash on completion, $0.4m estimated working capital adjustment paid in cash on
completion and $0.9m foreign exchange option cash premium paid in December 2020.
135
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
31. Acquisition of Biogix Inc continued
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 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 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%.
The fair values of the assets acquired, as at 29 December 2020, are as follows:
None of the goodwill recognised is expected to be deductible for income tax purposes.
Book value
of assets and
liabilities acquired
$000s
37
223
419
5,824
382
(1,587)
(378)
4,920
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
Fair value
adjustments
$000s
121,000
–
Fair value of
assets and
liabilities acquired
$000s
Fair value of
assets and
liabilities acquired
£000s
121,037
223
–
419
–
–
–
–
121,000
5,824
382
(1,587)
(378)
125,920
(35,101)
20,501
111,320
110,000
411
909
111,320
89,990
166
312
4,330
284
(1,180)
(281)
93,621
(26,097)
15,244
82,768
81,784
308
676
82,768
The fair values set out above are final figures, following additional review of judgemental areas
including intangible asset allocation and finalisation of completion accounts during the year.
There was a reduction in the working capital adjustment paid in cash by $249,000 (£183,000).
Legal and professional fees incurred in the acquisition of £1.3m were recognised as non-
underlying costs within administration and marketing expenses (note 5).
32. Events after the reporting date
On 25 March 2022 the Group announced that it has completed the acquisition of the Kelo-
cote® US licensing rights and the second largest US scar treatment brand ‘ScarAway®’ from
Perrigo Company PLC, a global consumer self-care company, for $19.4m (£14.8m). paid for
in cash from the Group’s existing financial resources. The accounting considerations will be
finalised in the second quarter of 2022 and included in the Group’s interim results for the six
months ended 30 June 2022.
33. 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.
34. 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:
136
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
34. Alternative performance measures continued
A. Underlying EBIT and EBITDA
Measure
Definition
Underlying
EBIT and
EBITDA
Earnings before interest, tax and non-underlying items (EBIT, also referred to
as underlying operating profit), then depreciation, amortisation and underlying
impairment (EBITDA).
Reconciliation
to GAAP measure
Note A below
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.
Note B below
Reconciliation of Underlying EBIT and EBITDA
Profit before tax
Non-underlying items (note 5)
Underlying profit before tax
Finance costs (note 6)
Underlying EBIT
Depreciation (note 12)
Underlying amortisation (note 11)
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 certain supply partners,
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 to
Alliance. The net product margin is recognised as part of statutory revenue.
Constant
exchange
rate (CER)
revenue
Like-for-like
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.
Like-for-like revenue, impact of acquisitions, and total see-through revenue are
stated so that the portion denominated in non-Sterling currencies is retranslated
using foreign exchange rates from the previous financial year.
Like-for-like figures compare financial results in one period with those for the
previous period, excluding the impact of acquisitions and disposals made in
either period. For 2021, like-for-like revenue excludes the impact of Amberen
which was acquired in December 2020.
Note C below
Underlying EBITDA
Note D below
B. Free cash flow
Note E below
Reconciliation of free cash flow
Cash generated from operations (note 25)
Interest payable and similar charges
Capital expenditure
Tax paid
Free cash flow
Note F below
C. Net debt
Reconciliation of net debt
Not needed
Loans and borrowings – non-current
Cash and cash equivalents
Net debt
Operating
costs
Defined as underlying administration and marketing expenses, excluding
depreciation and underlying amortisation charges.
Not needed
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
18,157
24,061
42,218
3,418
45,636
1,575
1,362
48,573
13,016
20,512
33,528
3,300
36,828
1,753
–
38,581
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
44,919
(2,965)
(5,532)
(6,260)
30,162
46,405
(2,866)
(4,612)
(4,838)
34,089
Note
18
16
31 December 2021
£000s
31 December 2020
£000s
(116,060)
29,061
(86,999)
(138,328)
28,898
(109,430)
137
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
34. Alternative performance measures continued
D. Underlying effective tax rate
There is no impact from the see-through adjustment on Income Statement lines below
gross profit.
Reconciliation of underlying effective tax rate
Total taxation charge for the year
Non-underlying tax debit/(credit) (note 5)
Underlying taxation charge for the year
Underlying profit before tax for the year
Underlying effective tax rate
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
Year ended
31 December 2021
£000s
Year ended
31 December 2020
£000s
F. Constant exchange rate revenue
(10,838)
2,805
(8,033)
42,218
19.0%
See-through
adjustment
£000s
6,443
–
6,443
(6,443)
–
–
See-through
adjustment
£000s
7,719
–
7,719
(7,719)
–
–
(4,989)
(1,383)
(6,372)
33,528
19.0%
2021
See-through
values
£000s
121,819
47,831
169,650
(60,200)
109,450
64.5%
2020
See-through
values
£000s
93,059
44,461
137,520
(54,704)
82,816
60.2%
2021
Statutory
values
£000s
115,376
47,831
163,207
(53,757)
109,450
67.1%
2020
Statutory
values
£000s
85,340
44,461
129,801
(46,985)
82,816
63.8%
LFL see-through revenue – Consumer
Healthcare brands
LFL see-through revenue – Prescription Medicines
Like-for-like see-through revenue
Impact of acquisitions (Amberen)
See-through revenue (Note E)
LFL statutory revenue – Consumer
Healthcare brands
LFL statutory revenue – Prescription Medicines
Like-for-like statutory revenue
Impact of acquisitions (Amberen)
Statutory revenue
2021
AER
£000s
102,586
47,831
150,417
19,233
169,650
2021
AER
£000s
96,143
47,831
143,974
19,233
163,207
Foreign
exchange
impact
£000s
3,389
326
3,715
1,362
5,077
Foreign
exchange
impact
£000s
3,247
326
3,573
1,362
4,935
2021
CER
£000s
105,975
48,157
154,132
20,595
174,727
2021
CER
£000s
99,390
48,157
147,547
20,595
168,142
138
Notes to the Financial Statements continuedAlliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional 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 question about your
shareholding in the Company or you 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
18 May 2022
Interim results announcement
20 September 2022
Year end
31 December 2022
Preliminary announcement
21 March 2023
139
Alliance Pharma plc – Annual Report and Accounts 2021
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Additional Information continued
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 2017
£m
Year ended
31 December 2018
£m
Year ended
31 December 2019
£m
Year ended
31 December 2020
£m
Year ended
31 December 2021
£m
101.6
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
118.2
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
135.6
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
129.8
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
163.2
45.6
(24.0)
21.6
42.2
18.2
413.8
4.8
81.0
40.6
282.5
535.3
538.2
1.37
6.39
140
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional 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
45 Gresham Street
London
EC2V 7BF
Joint Broker
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
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
141
Alliance Pharma plc – Annual Report and Accounts 2021 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
Additional Information continued
Cautionary Statement
Glossary
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.
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.
ABHI
ABPI
AGM
CBEC
CEO
CFO
CMA
CMO
ERP
ESG
FDA
FTC
HCP
IHP
J&J
LSP
NAD
OTC
PAGB
QPPV
SECR
S&OP
TCFD
VPAS
Association of the British HealthTech Industry
Association of the British Pharmaceutical Industry
Annual General Meeting
Cross Border E-Commerce
Chief Executive Officer
Chief Finance Officer
Competition and Markets Authority
Contract Manufacturer
Enterprise Resource Planning
Environmental, Social, and Governance
US Food and Drug Administration
Federal Trade Commission
Healthcare Professional
International Health Partners
Johnson and Johnson
Logistics Service Provider
National Advertising Division
Over the Counter
Proprietary Association of Great Britain
Qualified Person Responsible For Pharmacovigilance
Streamlined Energy and Carbon Reporting regulations
Sales and Operations Planning
Task Force on Climate-related Financial Disclosures
Voluntary Pricing and Access Scheme
142
Alliance Pharma plc – Annual Report and Accounts 2021 CBP00019082504183028
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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