WE ARE
ALLIANCE
Alliance Pharma plc
Annual Report and Accounts
2022
Strategic Report
Governance
Financial Statements
Additional Information
Company Overview
Who We Are
2022 Performance Overview
2022 A Year in Review
Purpose, Vision, Strategy, Values
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C O N T E N T S
AN ALLIANCE OF
PEOPLE, PARTNERS
AND BRANDS,
WORKING
TOGETHER TO
ACHIEVE MORE
How we report to our stakeholders
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alliancepharmaceuticals.com
Annual Report
Online Sustainability Report
Our website
View our report online at
alliancepharmaceuticals.
com/investors/2022-annual-
report/
Online sustainability
report at osr22.
alliancepharmaceuticals.com
Visit our main site for
further information at
alliancepharmaceuticals.com
Company Overview
Who We Are
2022 Performance Overview
2022 A Year in Review
Purpose, Vision, Strategy, Values
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
Managing our packaging estate
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
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18
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22
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27
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31
33
35
40
42
47
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
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60
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86
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102
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
106
Company Statement of Changes in Equity 107
Consolidated and Company Cash
Flow Statements
Notes to the Financial Statements
103
104
105
108
109
Additional Information
Unaudited Information
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
148
149
150
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152
Alliance Pharma plcAnnual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022 Strategic Report
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Additional Information
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W H O W E A R E
Company Overview
Company Overview
Who We Are
Who We Are
2022 Performance Overview
2022 Performance Overview
2022 A Year in Review
2022 A Year in Review
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
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WE ARE ALLIANCE
An international consumer healthcare company,
empowering people to make a positive difference to their health and wellbeing,
through making our trusted and proven brands available around the world.
A TEAM OF
TALENTED PEOPLE285
as at 31 December 2022
BASED IN
STRATEGIC LOCATIONS8
Working together to deliver value for our stakeholders through maximising the value of our brands.
INVESTING IN OUR
PRIORITY BRANDS
AND CHANNELS
INNOVATING
TO ENSURE OUR
BRANDS REMAIN
RELEVANT
SELECTIVELY
EXTENDING THE
GEOGRAPHIC REACH
OF OUR BRANDS
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alliancepharmaceuticals.com
Outsourcing capital-intensive activities, such as manufacturing and logistics, to allow us to focus on what we do best.
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plcAnnual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
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Strategic Report
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Governance
Governance
Governance
Financial Statements
Financial Statements
Financial Statements
Financial Statements
Additional Information
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Additional Information
Additional Information
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2 0 2 2 P E R F O R M A N C E O V E R V I E W
Company Overview
Company Overview
Company Overview
Who We Are
Who We Are
Who We Are
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
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SEE-THROUGH REVENUE*
UNDERLYING PROFIT BEFORE TAX*
UNDERLYING BASIC EPS*
£172.0m +1%
£30.3m -28%
(2021: £169.6m)
(2021: £42.2m)
4.28p -33%
(2021: 6.39p)
STATUTORY REVENUE
REPORTED PROFIT BEFORE TAX
REPORTED BASIC EPS
£167.4m +3%
£5.2m -71%
(2021: £163.2m)
(2021: £18.2m)
0.17p -88%
(2021: 1.37p)
FREE CASH FLOW*
NET DEBT*
£15.8m -48%
£102.0m +17%
(2021: £30.2m)
(2021: £87.0m)
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* Non-IFRS Alternative Performance Measures (‘APMs’), (see note 31).
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.
Alliance Pharma plc Annual Report and Accounts 2022
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Strategic Report
Strategic Report
Strategic Report
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Governance
Governance
Governance
Financial Statements
Financial Statements
Financial Statements
Financial Statements
Additional Information
Additional Information
Additional Information
Additional Information
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Company Overview
Company Overview
Company Overview
Company Overview
Who We Are
Who We Are
Who We Are
Who We Are
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
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2 0 2 2 A Y E A R I N R E V I E W
Whilst trading performance in 2022 was not as strong
as had been anticipated at the start of the Year, Alliance
successfully completed a highly strategic acquisition of
ScarAway™ and the rights to Kelo-Cote™ in the US in
March and delivered the first new product launch from
its innovation and development platform. The Group has
robust plans in place to support a return to growth in 2023.
›
Prescription Medicines performance stable, with revenues of
£46.8m (2021: £47.8m), down 2% CER2.
›
› Underlying PBT declined 28% largely due to less favourable
product mix with a lower proportion of Kelo-Cote™ and
Amberen™ sales. Reported PBT declined 71% due to higher
non-cash impairment charges of £18.2m, including £12.0m
for Amberen.
Free cash flow was lower by 48% at £15.8m, primarily
reflecting the timing of sales and cash receipts. Cash from
operations declined by 45% to £24.9m.
Following the highly strategic US acquisition for $19.4m
(£14.8m), net debt increased to £102.0m moving Group
leverage to 2.57 times at 31 December 2022 (1.73 times at
31 December 2021).
›
› Consumer Healthcare see-through revenue1 up 3% to
£125.2m (2021: £121.8m) (down 3% CER2) with 16%
growth in Other Consumer brands partially offsetting softer
performance in key brands.
Revenue growth impacted by lockdown in China, associated
temporary business-to-business (‘B2B’) disruption to the
supply chain, slower recovery in B2B demand for
Kelo-Cote™ and a one-off destocking effect, but boosted
by the US acquisition and FX gains.
›
›
›
Integration of the US acquisition completed in just four
months, successfully leveraging our established infrastructure,
with revenues in line with expectations.
Last remaining NizoralTM marketing authorisations
transferred from Johnson & Johnson (‘J&J’) to Alliance in
both China and Vietnam; new top-tier Chinese distributor
appointed and manufacturing supply consolidation
progressing well, which will result in improvements in cost
efficiencies in the near future.
1 Non-IFRS Alternative Performance Measure (‘APM’), (see note 31).
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.
2 Constant exchange rates.
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›
›
›
›
›
See our Spotlight on ScarAway™ and Kelo-CoteTM US acquisition
on page 22
See the Chief Executive’s Review on page 06
First new product launched from our innovation and
development programme – Kelo-Cote™ Kids.
See our Spotlight on innovation and development on page 20
Scope 1 and 2 emissions target set to achieve net zero in
2030, with an interim reduction of 65% by 2025.
See our Spotlight on developing our response to climate
change on page 33
Re-certified as a Great Place To Work® (GPTW) in the UK,
China and Singapore with new certifications in the US and
France and a Trust Index© rating of 79% (2021: 76%).
See our Spotlight on culture, people & values on page 24
› Updated and refined our Purpose, Vision and Strategy to
better align with the evolving dynamics of the consumer
healthcare market.
See Our Strategy on page 12
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Financial Statements
Financial Statements
Financial Statements
Financial Statements
Additional Information
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Additional Information
Additional Information
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P U R P O S E , V I S I O N , S T R A T E G Y , V A L U E S
A clear purpose
We empower people
to make a positive
difference to their health
and wellbeing
Our refreshed purpose, and
the refined vision that it
supports, enable us to align
ourselves more closely to
changing market dynamics.
Our strategy focuses on those
categories in which we can
add most value, to promote
the successful evolution of our
business and meet specific
consumer needs.
Our strong culture will enable
us to implement the
transformation needed to deliver
our strategic priorities.
Our values remain unchanged.
See our purpose and vision on page 11
s
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f
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D
Company Overview
Company Overview
Company Overview
Company Overview
Company Overview
Who We Are
Who We Are
Who We Are
Who We Are
Who We Are
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 Performance Overview
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
2022 A Year in Review
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
Purpose, Vision, Strategy, Values
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alliancepharmaceuticals.com
alliancepharmaceuticals.com
alliancepharmaceuticals.com
alliancepharmaceuticals.com
Guides
Delivers
Our Vision
Our Purpose
Our Strategy
See page 11
See page 11
See page 12
E
n
a
b
l
e
s
Our Values
Our Culture
Our Business Model
See our website
See page 24
See our website
Shape
Supports
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plcAnnual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022Company OverviewAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
05
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
Alliance Pharma plc Annual Report and Accounts 2022
Strategic Report
“ As we continue on our growth
trajectory journey, our portfolio
continues to provide a robust platform
from which to grow our consumer
healthcare brands.”
Peter Butterfield, Chief Executive Officer
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
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Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
C H I E F E X E C U T I V E ’ S R E V I E W
TRADING PERFORMANCE
Overview
We recognise that 2022 didn’t deliver the trading performance
that we expected at the start of the year. This was largely due
to underperformance in two discrete areas of our business,
Kelo-Cote™ in the China business-to-business (‘B2B’) channel,
and Amberen™ in the bricks and mortar channel, and was
set against a challenging economic backdrop with the war in
Ukraine and COVID 19-related lockdowns in China creating
supply disruption.
However, we were able to successfully leverage our existing
infrastructure, by acquiring ScarAway™ and the US rights
to Kelo-Cote™ in March 2022, to create our first truly
global brand, bringing additional growth opportunities into
the business. We also started to realise the benefits of our
investment in innovation and development with the launch of
Kelo-Cote™ Kids.
We start 2023 in a good position, having refreshed our
strategy, to better align our business with the evolving dynamics
of the Consumer Healthcare market. Going forward, our efforts
will be focused on those market segments in which we already
have a strong presence and expertise in order to drive solid
organic revenue growth above that of the broader Consumer
Healthcare market.
A challenging year
The implementation of rigid lockdowns in China from March
prevented the movement of Kelo-Cote™ across the border from
Hong Kong, effectively closing the cross-border e-commerce
(‘CBEC’) channel and leading to declines in the CBEC scar
treatment market in H1. During this period, consumer demand
remained strong and the domestic online market grew, with
Kelo-Cote™ gaining share.
SEE-THROUGH REVENUE
£172.0m
+1% (2021: £169.6m)
See our operational
performance on
page 43
Whilst the CBEC market returned to growth in H2, and
Kelo-Cote™ delivered a strong performance in the business-
to-consumer (‘B2C’) channel, winning a prestigious Tmall
global award for surpassing RMB100m (c. £12m) in sales, the
B2B market was slower to recover, with traders reluctant to
restock Kelo-Cote™ for fear that counterfeit product would be
available at a lower price. This problem was compounded by a
one-off destocking decision by our CBEC distributor.
We continue to work with our CBEC distributor to further develop
this channel, expand reach and optimise sales. Our B2C channel
is well developed, and we have refined our strategy to increase
our presence in the significant B2B channel, which incorporates
additional distributor support. In light of that, we anticipate that
sales will build steadily through 2023.
Amberen™ sales performance was impacted by declines in
the underlying bricks and mortar market due to an increase in
prevalence of cheaper, white-label alternatives and switching to
online platforms, in addition to the loss of a leading discount store
account. Alliance is committed to increasing the performance
of Amberen™ in the higher growth e-commerce channel whilst
optimising sales in bricks and mortar where appropriate.
The brand's packaging has been re-launched featuring stronger
claims, and advertising investment continues focused on digital,
video, social media and search engine optimisation to drive
share gains.
We were disappointed by the CMA’s finding that four
companies, including Alliance, infringed competition law in
relation to the sale of prescription prochlorperazine between
June 2013 and July 2018. We fundamentally disagree with the
findings, and the proposed fine, and look forward to presenting
our case at the Competition Appeal Tribunal, which is scheduled
to commence on 5 June 2023.
Strengthening our Consumer Healthcare business
We acquired ScarAway™ and the US rights to Kelo-Cote™ in
March 2022 to create the Group’s first fully global brand. The
integration of both assets went very smoothly, with full transition
completed in just four months and post-acquisition sales in
line with expectations. This successful integration was made
possible by the implementation of our ERP system in 2021,
and we have used the learnings from this project to create a
blueprint for future acquisitions.
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Strategic Report
Governance
Financial Statements
Additional Information
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Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
C H I E F E X E C U T I V E ’ S R E V I E W C O N T I N U E D
2022 was also the year in which we finally gained full control of
the remaining marketing authorisations for Nizoral™ across the
APAC region, securing China in March 2022 and Vietnam in
May 2022, following the acquisition of the Nizoral™ brand from
Johnson & Johnson (‘J&J’) in 2018. The transfer of the marketing
authorisation in China allowed us to transition to a new top-tier
local distributor at the end of H1 2022 to service the brand’s
largest market. Our new distributor offers a larger sales team than
the partner we inherited from J&J and has fewer products in its
portfolio, which ensures more sales resources are dedicated to
our account.
Progressing our innovation and
development programme
Our dedicated Innovation and Development (‘I&D’) team
was established in 2021 to support the organic growth in our
Consumer Healthcare brands and in April 2022 we launched
the first product from this initiative, Kelo-Cote™ Kids, into the
CBEC channel. With only two other products in the children’s
CBEC scar treatment market in China we were able to drive
market share gains to 39% in December 2022, delivering
incremental growth in the brand.
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The performance of this launch has exceeded our initial
expectations; new product innovation approvals have been
submitted to allow us to launch Kelo-Cote™ Kids in the UK and
Germany in 2023.
See our Spotlight on innovation and development on page 20
We have a number of new products, line extensions and
reformulations in our I&D pipeline and have since launched
Canker-X, part of the Aloclair™ brand franchise, in the US in
January 2023. With investment of £1m – £2m per annum in I&D
we aim to achieve 10% of Consumer Healthcare sales through
products developed on our I&D platform in the next five years.
We gained greater understanding of the constituents of our
packaging estate, both primary and secondary, and the steps we
need to take to promote recycling and reduce the use of single-
use plastics. Our newly appointed sustainable sourcing lead is
helping us to progress these initiatives in 2023 with a number of
pilot projects planned.
See our Spotlight on managing our packaging estate on page 31
Building a strong alliance of colleagues
Our business, and the delivery of our strategy, is only possible
due to our network of talented, dedicated colleagues. We
currently employ more than 285 people in eight locations around
the world. We created 18 new roles in 2022, across all our
geographies, as we looked to meet our evolving business needs,
increasing our capabilities in data analysis, sustainable sourcing
and packaging, ERP and sales and marketing in the US.
Refining our Purpose, Vision and Strategy
Throughout 2022 we have worked to refine our Purpose and
Vision to align with our transformation to a predominantly
Consumer Healthcare company. We have also worked to evolve
our strategy to better position the Company for the years ahead
and in response to changing underlying market dynamics. Going
forward, our aim is to drive solid organic revenue growth above
that of the broader consumer healthcare market.
This updated strategy provides a more targeted approach,
identifying the key global categories in which we will operate,
and more clearly defines the areas in which we would consider
future acquisitions. Going forward, we will focus our resources
on the global priority categories of helping damaged skin and
supporting healthy ageing.
See our Strategy on page 12
Continuing our sustainability journey
We made good progress against our environmental
sustainability agenda in 2022, setting a target to reach net
zero for all Scope 1 & 2 emissions by 2030. This year we also
undertook an initial risk assessment and scenario analysis to
support the publication of our first voluntary stand-alone TCFD
report and more extensive voluntary TCFD disclosures on our
journey to full TCFD compliance.
See our Spotlight on developing our response to climate change
on page 33
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
08
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
C H I E F E X E C U T I V E ’ S R E V I E W C O N T I N U E D
We have also expanded our talent development programmes
to ensure we attract and retain an appropriate mix of skilled
professionals. In 2022 we launched our graduate and year
in industry programmes to support those at the early stages
of their career development and to complement our existing
apprenticeship programme in the UK.
As COVID-19 restrictions eased around the world we were finally
able to bring together colleagues from all our offices, with the
exception of Shanghai, for our first global employee conference.
The conference provided an opportunity for colleagues to
network, share ideas and discuss our updated purpose, vision and
strategy. Due to continued COVID-19 lockdowns, we organised
a parallel event to allow our team in Shanghai to participate and
share the experience.
Our investment in colleague engagement continues to pay
dividends as evidenced by our re-certification as a Great Place
to Work in the UK, China and Singapore. We were delighted to
receive certification for the first time in the US and France meaning
that all our qualifying offices are now certified. In the 2022 survey
we were pleased to have received an overall Trust Index rating of
79% (2021: 76%) with 82% of participants globally saying that
Alliance was a Great Place to Work (2021: 81%).
See our Spotlight on culture, people and values on page 24
On behalf of the Board, I would like to thank all those colleagues
who helped us to deliver our achievements in 2022.
Board and executive changes
In February 2023 we welcomed Jeyan Heper to Alliance, in the
newly created position of Chief Operating Officer. Jeyan has
a strong track record of strategic leadership in the international
consumer health market, overseeing a number of global
programmes and driving growth in flagship brands.
Outlook for 2023
Our clear focus on the core Consumer Healthcare business in
addition to our well-established, scalable platform across EMEA,
APAC and the US, should support good organic growth in the near
term. Whilst 2022 presented some challenges to the business, we
have robust plans in place to drive growth in 2023 and the Board’s
expectations for full year performance are unchanged.
As indicated in the January trading update, Kelo-Cote™ revenues
are expected to build through the year, supported by strong end-
consumer demand. The China cross-border e-commerce market
for Kelo-Cote™ has shown early signs of recovery with in-market
demand and sales orders increasing over the first two months of
the year, and we expect total revenue growth for the entire Kelo-
Cote™ franchise to be above 20% in 2023. We expect to see
high single-digit revenue growth from Nizoral™ in 2023, as we
accelerate the roll-out of our tested strategic plan for the brand in
partnership with our new distributors in China and Vietnam.
Amberen™ faced some temporary headwinds in early 2023 due
to supply challenges at Amazon which are being addressed. The
underlying market conditions are positive and this, together with
our revised marketing plans, mean that we still anticipate double-
digit revenue growth for Amberen on a like-for-like basis.
Our portfolio of other consumer brands is expected to deliver
high single-digit revenue growth, substantially ahead of the
broader consumer healthcare market.
In his career spanning more than 25 years Jeyan has held senior
executive roles at Procter & Gamble, Danone Group and Ansell’s
sexual wellness global business, before it was spun-out to
become Lifestyles Healthcare, a private equity/pharma-owned
company where Jeyan became CEO.
Jeyan will help to bolster the Group’s operational capabilities,
identify growth opportunities, and help drive the Company’s
strategy to expand its consumer health presence through
leveraging his experience of e-commerce in China and the US,
and improving operational effectiveness.
Jeyan joined the Alliance Board, which was strengthened further
by the appointment of Martin Sutherland as an additional
Independent Non-Executive Director (‘NED’). Martin is a senior
executive with over 30 years’ experience in global businesses
and is currently a NED at Forterra plc and Reliance Cyber Ltd.
Prior to this, Martin was CEO of De La Rue PLC. Martin has a
proven track record of delivering growth through new product
innovation, market diversification and international expansion.
Martin’s experience will bring a new perspective to complement
the strong consumer healthcare knowledge already present on
the Board.
Peter Butterfield
Chief Executive Officer
20 March 2023
See our Board of Directors on pages 61 and 62
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09
12
18
20
22
24
27
29
Managing our packaging estate
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Developing our response to
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35
40
42
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M A R K E T O V E R V I E W
The macro factors shaping our business
1. Ageing global population
By 2030, c.1.4 billion people globally will be
over 60 years old, with an associated increase
in demand for healthcare. Education and
income advancement in emerging markets will
also contribute to this trend.
2. Growth in self-care
There is a growing trend towards more
proactive management of health and
wellbeing, rather than an individual just
taking action when they feel unwell. The rising
cost of providing public healthcare means
governments are becoming more supportive
of this, increasing the availability of OTC
medicines and supporting pharmacists and
nutritionists to provide more first line care
and support.
3. Digital health
The increasing adoption of digital health
solutions is providing consumers, health
practitioners and manufacturers with greater
access to information on medical conditions,
treatments, and outcomes. Regular feedback
from a digital device can lead to a more
engaged consumer who is willing to take
more actions to manage their health. By
aggregating that feedback across many
consumers, we can identify emerging needs
or gaps in the market and develop new
products and services to meet them.
2
3
1
Growth in
self-care
Ageing global
population
Six
macro factors
impacting our
business
Economic
uncertainty
Digital
health
Environmental
sustainability
Omni-channel
retail
4
4. Omni-channel retail
Whilst there has been a rise in the purchase
of health products and services online, this
is not the only way that consumers want to
transact. A purchasing journey may include
multiple or omni-channels, such as first
seeking advice in a pharmacy but ultimately
purchasing from a website via a mobile
phone. Each channel must be optimised so
that the consumer is able to find what they
want and complete their purchase easily.
5. Environmental sustainability
With greater focus and scrutiny on
sustainability, the way a business operates
matters more than ever. Many consumers
now actively seek companies and brands
whose values align with their own, for example
choosing products containing sustainably
sourced ingredients or with environmentally
friendly packaging.
6. Economic uncertainty
Businesses operate in a volatile, uncertain,
complex, and ambiguous world where
being agile, resilient and managing cost is
essential to success. Faced with a higher cost
of living, consumers tend to look for brands
and services that offer the best value to them,
and with proven results, rather than risk using
something unknown.
6
5
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M A R K E T O V E R V I E W C O N T I N U E D
Former paradigm
A Reactive Patient
People only took action when they felt unwell.
Good health
Poor health
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New paradigm
A Proactive Consumer
Innovations and new technologies allow a more proactive management
of health.
Eating healthily
Connected health
(wearables,
mHealth,
telehealth, etc.)
Practising
sport
Asking
questions
about
health
Finding
medicine/
self-medication
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M A R K E T O V E R V I E W C O N T I N U E D
We have considered these macro factors, in combination with our key areas of
expertise, in order to refresh our purpose and refine our vision, which we believe
places us in a stronger position to continue the successful evolution of our business.
Purpose
We empower people to make
a positive difference to their
health and wellbeing
Vision
To be a high performing consumer
healthcare company, built on a portfolio
of leading, trusted and proven brands
We use the word ‘empower’ in recognition of the shift that we are witnessing from
a reactive patient to a proactive healthcare consumer.
Over 70% of our sales currently come from our consumer healthcare products. We have the ability
to develop these products further and this will be our focus going forwards.
The words ‘positive difference’ refer to the maintenance, treatment or improvement
of any aspect of a consumer’s health & wellbeing, so that they perceive it to be
better than it was before.
In considering our future performance we will take account of:
›
›
›
›
the rate of growth achieved by our priority brands, relative to their respective categories;
external expectations of our sales and profit growth;
how we are rated by our strategic partners; and
how we are rated by our employees.
By leading, trusted and proven brands, we mean brands with a strong point of difference, that are
leaders in their field, and have a proven track record of delivering on their claims.
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12
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20
22
24
27
29
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O U R S T R A T E G Y
Our vision is to be a high performing
consumer healthcare company, built on a
portfolio of leading, trusted and proven brands
EVOLVING OUR STRATEGY TO DELIVER AGAINST
OUR REFINED VISION AND PURPOSE
Throughout this year we have refined our purpose, vision and
strategy to align with our transformation to a predominantly
consumer healthcare company. We have also worked to evolve
our strategy to better position the Company for the years ahead,
and in response to changing underlying market dynamics.
Helping damaged skin
Within the multi-billion-dollar global skincare category there are
several skin health sub-categories, such as scar management,
medicated anti-dandruff shampoo and dry skin – sub-categories
which are both fast growing at present and have large future
growth potential thanks to favourable demographics and high
global prevalence of these conditions.
Our previous strategy focused on delivering organic growth
in our key brands (broadly defined as our larger Consumer
Healthcare brands) and complementary acquisitions, focused in
the Consumer Healthcare space, whereas our updated strategy
provides a more targeted approach. We’ve now identified the
key categories in which we want to focus, both from a category
and geographical perspective, which allows for a clearer
definition of the acquisitions we will seek.
Our strategy will now focus on the global priority categories of
helping damaged skin and supporting healthy ageing.
See our evolved strategy infographic on page 15
Alliance already has brands, products, technology, and expertise
within these high-growth sub-categories – brands that are
grounded in science, which we can build and develop further,
to make a positive difference to more people’s lives globally.
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12
18
20
22
24
27
29
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Stakeholder Engagement
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33
35
40
42
47
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O U R S T R A T E G Y C O N T I N U E D
Supporting healthy ageing
The favourable demographics of the ageing global population
are expected to continue, with forecasts predicting that an
additional quarter of a billion people (or 40% of the global
population) will be over the age of 45 by 2030. The 65+ age
group is growing consistently faster than any other age group,
as medical advances facilitate longer lifespans.
Brands falling within the categories of Helping damaged
skin, and Supporting healthy ageing will be the focus of our
innovation and future acquisition activities going forwards.
In addition, we have a number of high performing local
brands and critical medicines, which are central to the
delivery of our purpose.
High performing local brands
We have a number of high performing local brands which
continue to provide a strong contribution to the business and so
warrant specific local focus and investment. These brands deliver
significant sales in a market or region and have the potential to
deliver good regional growth.
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06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
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Stakeholder Engagement
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33
35
40
42
47
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As people become increasingly proactive in managing their
health, we anticipate sustained growth in those healthcare
categories that support healthy ageing. This includes managing
conditions that arise as a result of the ageing process, such as
menopause, or age-related macular degeneration (‘AMD’), and
also long-term conditions which can occur at any age, where we
can support an individual’s health and wellbeing over a longer
period of time.
Critical medicines
Critical medicines are for conditions that are life-threatening or
where patients’ physical or mental health would be seriously
impacted without the product and there are no viable alternatives.
We see it as part of our social responsibility to ensure that our
critical medicines continue to be made available to patients,
and it is this, rather than financial returns or growth potential,
which underpins our resource allocation decisions for this
group of products.
Foundation brands
We continue to review the future of those smaller brands which
have lower contribution to our bottom-line performance, and
which may have higher associated risks and, if appropriate,
will look to discontinue or divest these.
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Our Strategy
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Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
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Key Performance Indicators
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06
09
12
18
20
22
24
27
29
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31
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33
35
40
42
47
O U R S T R A T E G Y C O N T I N U E D
Core priority markets
Since 2016, and aligned with our period of expansion through
acquisition, we have been building the optimal global office
base to support our future growth. We remain fully committed to
this global footprint.
We will continue to manage and drive growth from our eight key
regional offices located in Paris, Düsseldorf, Madrid, Dublin, Cary,
Singapore, Shanghai, and our headquarters in Chippenham.
From this fixed base of offices, we will service and grow our
business globally, with particular focus on our identified Core
Priority markets:
›
›
The US, China and UK will continue to be our highest
priority geographies – these are markets where there
remains significant growth potential and where we have
existing scale.
France and Germany offer attractive OTC markets, and whilst
our revenue generation in these markets is relatively low at
present, our direct presence and high-quality local teams
provide the potential to drive both scale and growth.
Collectively, these five markets currently account for around
75% of our annual sales. Our remaining markets will continue to
provide profitable incremental business.
4
2
1
3
5
8
7
6
Geographic key
International offices
For more information visit
alliancepharmaceuticals.com
4 Düsseldorf, Germany
Core priority markets
Other markets
1
2
3
Dublin, Republic of Ireland
Paris, France
Global Head Office: Chippenham, UK
5 Madrid, Spain
6
7
8
Singapore
Shanghai, China
Cary, North Carolina, USA
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06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
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Principal Risks and Uncertainties
33
35
40
42
47
T H E E V O L U T I O N O F O U R S T R A T E G Y
Previous strategy:
Core strategy:
Revised strategy:
Market (category) focus:
Our revised strategy focuses on the global priority categories of helping damaged skin
and supporting healthy ageing
Helping damaged skin
Supporting healthy ageing
Organic growth –
Key brands
Complementary
acquisitions
Supported by:
High performing local brands
Critical medicines
Underpinned by:
Investing in people
Sustainability
Strategic priorities:
These are the four focus areas that will enable the successful delivery of our strategy
For more information visit
alliancepharmaceuticals.com
These elements have now been embedded in our strategic priorities
Brand
growth
Commercial
execution
Strategic supply
partnerships
Organisational
agility
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O U R S T R A T E G I C P R I O R I T I E S
To enable the successful delivery of our new strategy, we have identified four priorities for the business over the next three to five years:
We will seek to enhance the attractiveness of
our high value brands, through:
›
›
›
insight-led, data-driven, measurable
marketing investment;
acquisition and in-licensing of products or
technologies to support our key brands; and
innovation and development activity to
keep our core brand portfolios ahead of
their respective competitive sets.
In 2022, we successfully rolled out our new,
reinvigorated marketing strategy for Nizoral™
See our Spotlight on marketing excellence
on page 18
We also saw £1.7m of sales generated from
new innovation projects, including the
expansion of our Kelo-Cote™ range with the
launch of Kelo-Cote™ Kids.
See our Spotlight on innovation and
development on page 20
And we completed the acquisition and
successful integration of ScarAway™ and the
US rights to Kelo-Cote™, widening the reach
of this key brand franchise and bolstering our
presence in the US
See our Spotlight on ScarAwayTM and
Kelo-CoteTM US acquisition on page 22
We will continue to look for omni-channel
presence in our core markets whilst recognising
that e-commerce represents our fastest growth
channels in these markets, a trend which we
expect to continue for many years to come.
In 2022, more than a third of our consumer
healthcare sales were via e-commerce, which
is significantly more than the global average for
consumer healthcare, of around 13%.
We believe that by 2027, this will have
increased to around 40 – 45% of our total
consumer healthcare sales.
Cross-border e-commerce (‘CBEC’)
continues to be an important contributor to
Kelo-Cote™ sales in China, both through the
B2B and B2C channels.
Brand growth
We will build fast growing
brands where consumer
choice is driven by the positive
difference we make
Commercial
execution
We will increase the impact of
our commercial execution, with
a major focus on eCommerce
See our CEO
Review on
page 06
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Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
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Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
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O U R S T R A T E G I C P R I O R I T I E S C O N T I N U E D
Partners who will support us not just with the
manufacture and supply of current products,
but also with innovation and the delivery of
our environmental sustainability strategy.
A smaller network of partners will also
facilitate efficiency gains.
2022 was a challenging year for our
operational teams, with inflation and the
war in Ukraine impacting the costs and
availability of raw materials, componentry,
and transportation. This resulted in longer lead
times, and challenged our ability to ensure on-
time-in-full delivery to our customers.
Going forward, we are looking to
consolidate our supply chain, moving to a
smaller, high-performing network of strong
partners with whom we can collaborate and
invest for the future.
Strategic supply
partnerships
We will transform our supply chain
by investing in a network of
strategic partnerships
It is the diverse combination of skills, experience
and energy of Alliance’s people that help to
create our strong culture. We will be harnessing
this culture to enable the successful delivery
of our new strategy with increased focus
and pace.
Agile businesses are tuned in to the dynamic
external world and centred on their customers’
changing needs. They have a rapid cycle of
ideas development – a test, learn and adapt
approach, which we believe is well-suited to
areas such as innovation and e-commerce.
We recognise that new technologies,
approaches, and opportunities enable
companies to gain competitive advantage
quickly – innovation and e-commerce
require us to excel in these fast-moving,
competitive worlds. Change is continual and
as the pace of change increases we need
to ensure we maintain sufficient agility to
respond appropriately.
In October 2022, we held our first ever global
employee conference, at which we shared
our new purpose, vision and strategy with
our employees from around the world, as a
precursor to the development of the detailed
operational plans which will enable us to
deliver our refined strategic priorities.
Organisational
agility
We will continue to cultivate an
agile organisation and culture
that delivers our growth
See our
Sustainability
overview on
page 30
See our Spotlight on
culture, people and
values on page 24
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Spotlight on…
06
09
12
18
20
22
24
27
29
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31
Developing our response to
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33
35
40
42
47
S P O T L I G H T O N …
Marketing excellence
Reinvigorating a
heritage brand
Nizoral™, or Triatop™ as it is known in China, is a brand
with over 40 years’ heritage in the Asia Pacific region.
c. $240m
4% p.a.
VALUE OF THE MEDICATED
ANTI-DANDRUFF MARKET
IN APAC1
FORECAST MARKET GROWTH
RATE TO 20251
For more information visit
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1 Nicholas Hall.
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“ Our deep understanding of
our target consumer’s attitude
and behaviours allowed us to
develop an effective campaign
across all key markets.”
Ambrose Peng, Global Marketing Manager –
Nizoral™/Triatop™
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06
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12
18
20
22
24
27
29
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31
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35
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47
S P O T L I G H T O N … M A R K E T I N G E X C E L L E N C E C O N T I N U E D
When Alliance acquired Nizoral™ in the APAC region in 2018,
it had been deprioritised by its former owners and had received
little by way of marketing investment for several years. As a result,
whilst it still had a loyal following amongst older consumers, a
whole generation of younger consumers were largely unaware
of the brand.
Using the results from our extensive consumer insight research,
we developed a consumer-focused regional campaign,
partnering with our local distributors and agencies to tailor
the execution of this by country – for example, using leading
basketball players to promote the brand on social media in
the Philippines, a greater reference to scientific evidence in
China and a more light-hearted, humorous approach
in Australia.
As a result, we have seen double-digit revenue growth this
year in China, Australia and the Philippines.
The challenge for Alliance was therefore to design a new
marketing approach to target this younger demographic, which
promoted the product through an appropriate channel mix and
emphasised key points of differentiation over its competitors in a
contemporary, culturally relevant way.
For more information visit
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MARKET LEADER WITH
52%
SHARE IN AUSTRALIA2
2 Iqvia.
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Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
S P O T L I G H T O N …
Innovation and development
Our new I&D platform
gets off to a strong start!
April 2022 saw the launch of Kelo-Cote™ Kids – the first
product from our new innovation platform – and a great
example of how, through thinking creatively, we were able to
extend the reach of our leading brand (Kelo-Cote™ scar gel) to
a new audience – parents with children.
96%
OF PARENTS IN CHINA, WITH A
CHILD WHO HAS EXPERIENCED
SCARS, ARE LOOKING TO TREAT1
39%
MARKET SHARE
AT DECEMBER 20222
For more information visit
alliancepharmaceuticals.com
1 CLEAR consumer research, China, September 2021.
2 Brand value share – Scar kids segment - China, Nint, December 2022.
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ScarAway™ and Kelo-Cote™
US acquisition
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Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
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S P O T L I G H T O N … I N N O V A T I O N A N D D E V E L O P M E N T C O N T I N U E D
Kelo-Cote™ Kids product launch – April 2022
Through our research1, we discovered that in China:
› 60% of parents have children who have experienced
scars in the last year
› Of those, 96% are looking to treat
›
Safety, quality and efficacy are the key factors in parents’
purchasing decisions
› 24% of parents were already using Kelo-Cote™ to treat
their children's scars
Since its launch in April 2022, Kelo-Cote™ Kids has enjoyed
rapid market share growth, to command a 39% share of the
market by value2 in December 2022, with limited cannibalisation
of core product sales. It is now being marketed both through our
Kelo-Cote™ CBEC flagship store in China and through local
domestic channels.
“ Since its launch, Kelo-Cote™
Kids has enjoyed rapid
market share growth,
to command a 39% share
of the scar kids market in China.”
Natalie Bayes,
Global Senior Brand Manager –
Kelo-Cote™
In 2023, we plan to roll out the product to more markets.
This is a great example of how our new I&D platform has
enabled us to deliver relevant consumer innovation, whilst also
strengthening our lead brand, Kelo-Cote™.
New packaging, with fun otter characters designed to appeal
to parents and children, enabled us to highlight those product
claims which were most relevant to this audience:
› Helps soften and flatten scars
› Helps reduce redness and itching
›
›
Suitable for sensitive skin
Suitable for 3+ months
For more information visit
alliancepharmaceuticals.com
1 CLEAR consumer research, China, September 2021.
2 Brand value share – Scar kids segment - China, Nint, December 2022.
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Strategic Report
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Marketing excellence
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06
09
12
18
20
22
24
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29
Managing our packaging estate
31
Developing our response to
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Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
S P O T L I G H T O N …
ScarAway™ and Kelo-Cote™ US acquisition
A highly strategic acquisition
Alliance’s acquisition of ScarAway™, the second largest brand in the
US scar treatment market, and the US rights to Kelo-Cote™ in March
2022 is a great example of how we’ve executed our strategy to
deliver growth through selective, complementary acquisitions.
c. $90m
28%
VALUE OF US SCAR
TREATMENT MARKET1
SCARAWAY’S™ SHARE
OF THIS MARKET1
For more information visit
alliancepharmaceuticals.com
1 IRI and Jungle Scout.
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S P O T L I G H T O N … S C A R A W A Y ™ A N D K E L O - C O T E ™ U S A C Q U I S I T I O N C O N T I N U E D
This acquisition created scale in the US, the largest consumer
healthcare market in the world, enabling us to leverage the
operating platform we’d created following the Vamousse™
and Amberen™ acquisitions, and completed our ownership of
the worldwide rights to Kelo-Cote™, thereby creating our first
global brand.
ScarAway™ also provided the opportunity to offer a silicone
sheet in addition to a gel formulation in the US – both of which
are universally considered first-line prophylactic and treatment
options for hypertrophic scars and minor keloid scars.
Following rapid integration of the acquired business in just
four months, our subsequent focus has been on leveraging the
brands’ existing distribution network, consolidating supply-
side relationships, and increasing investment to drive further
growth. New, modernised packaging is in development and
is scheduled for launch in 2023, alongside a comprehensive
consumer marketing campaign and new product development
to accelerate market share gains.
“We were able to integrate
the ScarAway™ acquisition
in just four months,
establishing a process
which should make future
integrations more efficient.”
Amanda Sicvol, Head of North America
Strategic Report
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Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
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Key Performance Indicators
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06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
S P O T L I G H T O N …
Culture, people and values
Ensuring our people and culture
continue to support the business’s
medium-term growth ambitions
In 2022, we welcomed a record 80 new colleagues
into the business, introduced new early careers
schemes and held our first all-employee conference.
285
TOTAL EMPLOYEES1
2021: 245
82%
SAY THIS IS A GREAT
PLACE TO WORK2
2021: 81%
For more information visit
alliancepharmaceuticals.com
1 As at 31 December.
2 Based on findings from Great Place to Work® survey, October 2022.
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Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
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Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
Company Overview
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S P O T L I G H T O N … C U L T U R E , P E O P L E A N D V A L U E S C O N T I N U E D
ORGANISATIONAL DEVELOPMENT
The continued expansion of our US team through 2022, initiated
in response to the Amberen™ acquisition in 2020, followed by
ScarAway™ and the US rights to Kelo-Cote™ in March 2022,
means that we now have an experienced multi-functional team
in the US, dedicated to supporting the growth of our growing
portfolio of US-based brands, with a strong focus on innovation.
MOVING FORWARDS
Our new focus on organisational agility as a key enabler to
the delivery of our strategy will require an increase both in
focus and in pace – harnessing the skills, experience and
energy that exists in our business, together with our culture
of resilience, teamwork and collaboration, to enable us to
respond to new challenges as they arise.
We also continued to support early career development, through
the launch of our graduate development programme in the
UK, bringing two graduates into our Commercial and Scientific
Affairs teams, along with a year in industry placement student
into our Group Finance function.
STRENGTHENING OUR EMPLOYER BRAND
This has been a major focus for us during 2022, as the
competition for talent has intensified, leading to challenges in
filling some specialist roles. We continue to provide a compelling
career proposition and attract high calibre candidates with our
strong positive culture and team ethos.
Throughout 2023, we will be focusing on building our innovation
capability, processes and agility.
Progress in 2022:
› 80 new joiners integrated into the business, 18 of whom
joined in newly created roles
Improved GPTW survey outcomes, with additional
certifications obtained in the US and France
Supplier selection completed for our new HR system
›
›
EMPLOYEES BY GENDER1
BOARD & SENIOR LEADERSHIP TEAM
78%
MALE
(2021: 80% Male 20% Female)
22%
FEMALE
SENIOR MANAGERS2,3
69%
MALE
(2021: 78% Male 22% Female)
31%
FEMALE
ALL EMPLOYEES4
42%
58%
FEMALE
EMPLOYEE ENGAGEMENT5
SURVEY
RESPONSE RATE
87%
(2021: 74%)
OVERALL TRUST
INDEX© RATING
79%
(2021: 76%)
Focus for 2023:
› Developing agile ways of working within our Innovation
MALE
(2021: 42% Male 58% Female)
and Development team
› Continuing to strengthen our employer brand to attract
›
and retain talent
Enhancing our internal communications, to increase
connection throughout the business
› Completing the implementation of our new HR system
Footnotes:
1 As at 31 December.
2 2022: n=9 (2021: n=10).
3 Defined as those running major divisions of departments, but not part of the management
team; 2022: n=29 (2021: n=27).
4 Including NED and fixed-term contractors.
5 As measured by the Great Place to Work® survey.
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S P O T L I G H T O N … C U L T U R E , P E O P L E A N D V A L U E S C O N T I N U E D
Strategic Report
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Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
All together in Bath –
reconnecting post-pandemic
Maintaining cultural cohesion and connectivity
has always been really important to us –
particularly following the adoption of hybrid
working, which rapidly became the norm post-
pandemic. It was this desire for connection
which led to the decision to hold our first global
employee conference in 2022.
In addition to giving all our colleagues around the world the
opportunity to come together in person to network and share
ideas, the conference also enabled us to discuss our updated
purpose, vision, and strategy with all our employees, listen to
their feedback and start to build collective understanding around
some of the operational challenges we will need to address as
we look to implement this revised strategy.
It was a great way to meet new colleagues and strengthen
personal connections across the business, particularly given the
high number of new recruits over the past couple of years, and
the limited opportunities for in-person connection during the
global pandemic.
Sustainability was very much front of mind, both in the
conference content and organisation – from a lunchtime ‘pop up’
to increase employee awareness and engagement around our
sustainability strategy, to the catering and travel arrangements for
the conference itself.
Our first global conference was very well received by
colleagues, and we’re sure that the benefits in terms of increased
understanding, cultural alignment and connection, will continue
to prevail through the organisation for many years to come.
For more information visit
alliancepharmaceuticals.com
246
CONFERENCE ATTENDEES
>90%
OF ELIGIBLE ATTENDEES
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K E Y P E R F O R M A N C E I N D I C A T O R S
FINANCIAL KPIs
We set out here
our key financial
performance measures.
These are the primary
measures used by
management to monitor
business performance,
against both short-term
budgets and forecasts and
longer-term strategic plans.
Strategic Report
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Our Strategy
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Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
1 These measures constitute Alternative Performance Measures
(‘APMs’), as defined in note 31 to the Financial Statements.
2 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.
3 Basis points.
SEE-THROUGH REVENUE1
GM%: (OVERALL)
£172.0m +1%
(2021: £169.6m)
59.1% -540bp3
(2021: 64.5%)
UNDERLYING EBITDA1
£39.2m -19%
(2021: £48.6m)
2022
2021
2020
2019
£172.0m
£169.6m
£137.5m
£144.3m
2022
2021
2020
2019
59.1%
64.5%
60.2%
59.7%
2022
2021
2020
2019
£48.6m
£39.2m
£38.6m
£39.4m
UNDERLYING PROFIT BEFORE TAX
UNDERLYING BASIC EPS
£30.3m -28%
(2021: £42.2m)
4.28p -33%
(2021: 6.39p)
DIVIDEND PER SHARE
1.776p +5%
(2021: 1.691p)
2022
2021
2020
2019
£30.3m
£33.5m
£32.9m
£42.2m
2022
2021
2020
2019
4.28p
5.11p
5.09p
6.39p
2022
2021
2020
2019
0.536p
1.776p
1.691p
1.610p
FREE CASH FLOW1
£15.8m -48%
(2021: £30.2m)
LEVERAGE2
2.57x
(2021: 1.73xx)
NET DEBT1
£102.0m +17%
(2021: £87.0m)
2022
2021
2020
2019
£15.8m
£30.2m
£34.1m
£29.1m
2022
2021
2020
2019
2.57x
2.43x
1.73x
1.48x
2022
2021
2020
2019
£102.0m
£87.0m
£109.4m
£59.2m
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Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
K E Y P E R F O R M A N C E I N D I C A T O R S C O N T I N U E D
ADDITIONAL KPIs
WORKING CAPITAL MANAGEMENT
PORTFOLIO EVOLUTION
RESOURCING
SUPPLIER PAYMENT DAYS1
58 +12 days
(2021: 46)
REVENUE: CONSUMER HEALTHCARE BRANDS4
TOTAL HEADCOUNT5
£125.2m +3%
(2021: £121.8m)
285 +16%
(2021: 245)
2022
2021
2020
2019
58
46
52
41
2022
2021
2020
2019
£125.2m
£121.8m
£93.0m
£92.4m
2022
2021
2020
2019
285
245
245
214
DAYS SALES OUTSTANDING2
71 +10 days
(2021: 61)
2022
2021
2020
2019
CONSUMER HEALTHCARE AS A % OF TOTAL REVENUE4
EMPLOYEE ENGAGEMENT: (GPTW Trust Index©)
73% +1%
(2021: 72%)
79% +3%
(2021: 76%)
71
55
61
61
2022
2021
2020
2019
73%
72%
68%
64%
2022
2021
2020
2019
N/A
79%
76%
79%
DAYS INVENTORY ON HAND3
154 -15 days
(2021: 169)
2022
2021
2020
2019
154
169
138
128
1 Month-end value of trade payables relative to the trailing 12
months cost of goods expressed as a days’ equivalent, averaged
over the year.
2 Month-end value of trade receivables relative to the trailing 12 months
sales expressed as a days’ equivalent, averaged over the year.
3 Month-end value of inventory relative to the trailing 12 months cost
of goods expressed as a days’ equivalent, averaged over the year.
4 See-through basis.
5 As at 31 December.
Other measures
In addition to the measures disclosed
above, 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 relative to
marketing and innovation investment
Post-acquisition performance evaluation
measures
› On-time in-full delivery and out-of-stocks
(to ensure continuity of product supply)
› Additional detail around 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.
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S U S T A I N A B I L I T Y
Prioritising people,
planet and product
Our approach
We are committed to operating our business in a responsible
way, which minimises negative impacts on people and planet,
makes a positive contribution to society and promotes the
sustainability of our business for the longer term.
Our sustainability framework
Our sustainability framework identifies the key areas we are
focusing on, to deliver our purpose and to assure the future of
our business for the longer term.
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
PEOPLE
Read about
Our People Story
on page 30
PURPOSE
Read about
Our Purpose
on page 11
PLANET
Read about
Our Planet Story
on page 30
Visit our Sustainability hub
Learn more about how our framework has evolved, and our
approach to materiality and governance on our website
alliancepharmaceuticals.com/sustainability
For more information visit
alliancepharmaceuticals.com
Read about how we have delivered against our
sustainability commitments on page 30 and in
our Online Sustainability Report on our website
PRODUCT
Read about Our Product Story
on page 30
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
30
S U S T A I N A B I L I T Y C O N T I N U E D
Overview
We have made good progress against our sustainability agenda in 2022 – below is a summary of our key achievements in the year and our main areas of focus for 2023.
Further detail, including relevant metrics for all the areas of focus forming part of our sustainability framework, can be found in our Online Sustainability Report.
Identified focus areas for 2022
Progress in the year
Focus for 2023
PEOPLE
Continued investment in capability
development, to ensure our resourcing
supports our growth ambitions.
Continued focus on cultural development and
employee engagement.
Ensuring that our employees continue to have
a good understanding of, and comply with,
all relevant ethical business practices.
PLANET
Environmental strategy development –
developing our carbon action plan and
our response to climate change.
Packaging lifecycle management –
strategy development and target setting.
› 80 new heads brought into the business in 2022 – 18 of which were in newly created roles
› New UK graduate and industry placement schemes rolled out
› High levels of employee engagement maintained with increased GPTW survey participation
and trust index ratings; additional certifications achieved in US and France
First all-employee conference held
›
› More targeted approach to online compliance training, driving an increase in course
completion rates
› Compliance training provision further enhanced through partnering with new external providers
›
Increasing our organisational agility – developing the
requisite capabilities through a combination of talent
acquisition, training, and cultural change
› Maintaining and enhancing our high levels of employee
engagement
›
Launching our employee code of conduct, setting the
benchmark for the ethical behaviours we expect
from colleagues
› Offset Scope 1 & 2 UK emissions for 2021
› Set Scope 1 & 2 net zero targets
› Commenced initial engagement (‘fact find’) with all our contract manufacturers ('CMOs') and
our top ten logistics partners to establish where they are on their climate change journeys
› Undertook scenario analysis and risk assessment to support publication of first full TCFD report
and disclosures
› Gained greater understanding of the constituents of our packaging estate (primary and
secondary) and the steps we need to take to promote circularity and reduce our use of single-
use plastics; pilot projects initiated to further understanding
Continuing to work towards developing our Scope 3
emissions reduction targets, through:
›
›
embedding ownership of product-related emissions
within the appropriate functional areas of the business;
and
continued methodology improvements to increase the
accuracy of emissions measurement across all categories
Continuing to develop our packaging strategy, confirming
and publishing sustainability improvement targets for both
primary and secondary packaging
For more information visit
alliancepharmaceuticals.com
PRODUCT
Increasing the oversight we have of our
supply chain; obtaining confirmation from our
contract manufacturers and other suppliers
that they comply with our ethical standards.
›
Partner code of conduct published, setting out the ethical expectations we have of our partners
– be they CMOs, logistics service providers or distributors
› Obtaining formal confirmation from our CMOs that they
comply with our ethical standards
›
Tightening our processes around modern slavery in our
supply chain
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S P O T L I G H T O N …
Managing our packaging estate
Developing and implementing a sustainable packaging strategy,
supported by appropriate targets and delivery plans, was one
of the key focus areas we identified for 2022 to reduce the
environmental impact of our product packaging.
We have made good progress in 2022 to build a better
understanding of our primary and secondary packaging estate,
and the associated challenges and opportunities it presents,
although we are not yet in a position to publish targets relating to
packaging sustainability.
Just over half of our packaging by weight is made up of paper,
metal, and glass – materials for which there are already
established circularity channels. Our focus will therefore be on
leveraging these channels, through better labelling of recycling
instructions on packs and the use of recycled and/or FSC-
certified paper for our secondary packaging and instructions for
use sheets.
The remainder of our estate comprises plastics – primarily rigid
plastics, such as bottles and jars. The recyclability of these varies
both by product, and by country.
WHAT DOES OUR PRODUCT
PACKAGING CONSIST OF?
THE DIFFERENT FORMATS THAT
OUR PLASTIC PACKAGING TAKES
Metal
10%
Glass
6%
Blister
8%
Misc
2%
Paper
38%
Tube
10%
Plastic
46%
Rigid
80%
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Our Strategy
Spotlight on…
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09
12
18
20
22
24
27
29
Managing our packaging estate 31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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S P O T L I G H T O N … M A N A G I N G O U R P A C K A G I N G E S T A T E C O N T I N U E D
We have identified a number of avenues we will be exploring
in 2023 to improve the environmental credentials of the plastics
used in our packaging. These include:
›
›
›
reducing overall consumption through ‘right sizing’
of components;
increasing component recyclability – through better labelling
and the switch to materials that are more widely recycled;
replacing PVC/PVDC plastics with alternative materials,
or formats; and
› maximising the use of PCR content.
Blister packs present a particular challenge for us, and the
pharmaceutical industry as a whole, as they comprise two
different elements welded together, making them widely
unrecyclable. These packs also contain harmful PVC.
Elimination of polyvinylchloride ('PVC') and
polyvinylidene chloride ('PVDC')
PVC and PVDC are widely used in the forming material
for blister packs, as they’re low cost, have good barrier
properties, and are easy to use. However, they are non-
recyclable and their presence pollutes plastics recycling
streams. When incinerated, they release chlorine into the
atmosphere – or into the water table if sent to landfill.
Maximising the use of post-consumer recycled
('PCR') plastics
Whilst we will be looking to incorporate more PCR plastic
in our packaging, the availability of PCR plastic suitable for
use in consumer healthcare products is currently low, and
what is available is of inconsistent quality and commands
a higher price than the equivalent virgin material. Over
time, the expectation is that progressive legislation will tax
virgin materials to promote use of PCR, whilst high levels
of investment in recycling technologies (mechanical and
chemical) will improve the availability and competitiveness
of high-quality PCR material.
We are excited by the potential to bring about positive
change, through working in partnership with our suppliers
to source new and better alternatives to some of our current
packaging, in furtherance of our ambition to reduce our
reliance on single-use plastics.
Pilot studies have been initiated to look at more sustainable
packaging options for plastic tubes, rigid packaging, and blister
packs. We expect these to be completed during the first half of
2023 and the outputs from these projects will then inform the
future development of our strategy.
We remain mindful of the need to balance environmental
benefits with broader sustainability considerations within our
supply chain, including cost, security of supply, and the maturity
of associated technologies.
Whilst improving the environmental credentials of our packaging
will help to reduce our end-to-end Scope 3 emissions –
both those associated with the end-of-life treatment of our
packaging, and the more significant emissions associated with
its manufacture – collectively they only account for only c.10%
of our total emissions and so will be a contributor to, rather than
a key driver of, our wider Scope 3 product-related emissions
reduction.
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Developing our response to
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TCFD
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33
35
40
42
47
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S P O T L I G H T O N …
Developing our response to climate change
The scenario analysis and risk evaluation process has been a
valuable learning experience for us, as we included not just
our own operational sites, but also those of our larger CMOs,
enabling us to make use of insights gained in relation to the
resilience of our supply chain through COVID-19, and disruptions
to global supply chains as a result of the war in Ukraine in our
assessment of both physical and transition risks.
In 2023, we will look to deepen our relationships with our
partners, in order to support the mutual dissemination of
knowledge around climate risks and opportunities, and to
better understand their emissions management strategies,
as a precursor to developing our Scope 3 emissions targets.
We will also be looking to extend our climate risk analysis to
include other key partners in our value chain.
In our 2021 Annual Report, we highlighted our ambition to
progress towards full disclosure, in line with the Task Force on
Climate-related Financial Disclosures ('TCFD') recommendations,
in 2022.
During the year we have worked with external consultants to
support us with the evaluation of our business from a TCFD
perspective and to undertake the scenario analysis and risk
assessment required in order to determine our exposure to
climate-related risks, considering both our own operations and
the locations of our key supply partners.
As part of our journey to full TCFD compliance, we are proud
to publish our extended voluntary disclosures for 2022 as part
of this Report, with additional detail to be provided in our first
stand-alone TCFD report, to follow shortly on our website. The
disclosures are being made on a voluntary basis because, as a
UK-registered company, with securities admitted to AIM, with
less than 500 employees, we are currently outside the scope of
the mandatory disclosure requirements.
As a result of this process, and the associated climate scenario
analysis and risk review, we have concluded that we should be
recognising the impact of tackling climate change as a principal
risk and it has therefore been added to our Principal Risks and
Uncertainties coverage on pages 47-56.
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09
12
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20
22
24
27
29
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31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
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S P O T L I G H T O N … D E V E L O P I N G O U R R E S P O N S E T O C L I M A T E C H A N G E C O N T I N U E D
Setting (and delivering against) our Scope 1 & 2
emissions targets
Midway through 2022, we set and published our Scope
1 & 2 emissions targets:
›
To achieve a 65% reduction in our emissions (versus 2018
baseline) by 2025, and to achieve net zero (90% absolute
reduction) by 2030.
› We used 2018 as our base year so we could demonstrate
the significant reduction in emissions we’ve achieved already
through environmental improvements to our Chippenham
office HQ and to avoid using a base year in which use of the
building was artificially low, due to COVID-19 restrictions.
The graphic below shows the trajectory of our emissions from
2018 through 2021 (the latest data available at the time the
targets were set), and the further reductions needed to reach
our targets.
Our Scope 1 & 2 emissions for 2022 were 52 tCO2, a reduction
of 26% versus those for 2021, due primarily to reduced
consumption at our Chippenham HQ and the non-renewal of the
lease for our leased office in Chester mid-way through the year.
We anticipate that further reductions in our UK emissions will be
driven largely by own electricity generation at our Chippenham
HQ, through the installation of PV roof panels, subject to receipt
of all necessary consents.
120
100
80
2
O
C
t
60
40
20
0
Scope 1 & 2 emissions – progression and targets
Achieved to date: 38% reduction
Interim target: 65% reduction
Intensity reduction 2018–2021: 55%
Net zero target: 90% absolute reduction
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Electricity – UK
Electricity – international sites
Gas & other fuels – UK
Gas & other fuels – international sites
Target
Progression
Emissions intensity
Remaining 10% removed by offsets
Reductions in emissions at our international sites where we
control the supply will be driven principally by switching to
renewable tariffs.
We also expect to benefit from small reductions in consumption
driven by energy-saving measures through increased colleague
awareness and engagement across all our offices and from grid-
driven reductions in electricity tariffs.
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0
t
C
O
2
/
£
m
r
e
v
e
n
u
e
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Developing our response to
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33
35
40
42
47
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T A S K F O R C E F O R C L I M A T E - R E L A T E D F I N A N C I A L D I S C L O S U R E S ( T C F D )
We recognise that we have a role to play in reducing
our environmental impact and our contribution to
climate change.
Whilst there is no current requirement for us to comply with
the mandatory requirements of TCFD, we welcome the
recommendations, and having published partial disclosures in
our 2021 Annual Report, we are pleased to report voluntarily on
our progress in 2022 in integrating climate considerations into
our existing business strategy and risk management processes.
In addition to the disclosures below, we plan to publish our first
stand-alone TCFD report on the sustainability section of our
website at the end of March 2023, to provide supplementary
information around the risks and opportunities we face as a
business as a result of climate change and how we plan to
address these.
Governance – taking responsibility for climate-related risks
and opportunities
Climate governance has been integrated into our existing
corporate governance structures, with the Board having
overall responsibility for Alliance’s response to climate
change and providing oversight on climate-related risks and
opportunities, whilst ensuring suitable management processes
are integrated into future financial planning, business strategy
and operations. The CEO is the Board Director responsible
for sustainability and for ensuring communication between
stakeholders, the Board, management, and employees
around our climate action is ongoing.
The ESG Committee, which in 2022 comprised all Board
members, is responsible for setting the Group’s overarching
sustainability strategy, and for identifying relevant ESG priorities
that most significantly impact the Group, including those relating
to climate change. The Committee is also responsible for ensuring
that climate change priorities are anchored as an integral part of
the Company’s business strategy.
The ESG Committee has delegated management responsibility
for climate-related risks and opportunities to the Senior
Leadership Team ('SLT'), supported by the Corporate
Sustainability Lead. Collectively, they ensure the development
and implementation of the Company’s sustainability strategy,
including climate action and TCFD reporting.
Throughout the year, members of the ESG Board Committee,
SLT and wider management worked with third-party ESG
specialists to identify and assess the impact of climate change
on our business operations. A series of workshops were
held to build internal capability across all levels within the
organisation, as a precursor to the creation of a climate risk
register, which will be reviewed and updated annually, to
ensure climate risks and opportunities continue to be properly
assessed, monitored, and reported.
Strategy – developing a resilient business strategy
We have a clear strategy to deliver sustainable business growth,
through maximising the value of our core Consumer Healthcare
business. Through implementing the recommendations of the
TCFD, we have been able to identify the climate risks which may
prevent us from successfully delivering our business strategy,
together with opportunities to strengthen our position and
deliver increased value for stakeholders. This forward-looking
analysis has helped us consider climate change in our long-term
planning, to ensure that our business strategy remains resilient to
the impacts of climate change.
Our climate risk management process identified the climate-
related risks and opportunities, which could potentially impact
our business. To strengthen this process, we utilised climate
scenario analysis, investigating the resilience of our business
strategy across differing future projections of climate events.
Climate scenario analysis was conducted for all our operational
sites with the exception of Dublin (due to its size), allowing us to
assess the impact of climate change on our future operations.
The outsourced nature of our business means that we rely
heavily on third-party partners, such as our distributors, contract
manufacturers ('CMOs') and logistic service providers ('LSPs').
Any climate-related impacts on their operations could potentially
present a significant risk to our business. We therefore widened
our assessment of physical risks, through carrying out climate
scenario analysis on 24 of our key supplier sites, to begin to
understand how climate change may impact our value chain. We
plan to extend this analysis further in 2023.
Climate scenarios
We considered three climate change scenarios, when evaluating
the impact of each identified risk on our business operations and
financial planning:
Below 2°C
›
› 2–3°C
› Above 3°C
With the warming pathways modelled over three time-horizons:
Short-term (2022–2025)
›
› Medium-term (2025–2035)
Long-term (2035–2050)
›
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Developing our response to
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33
35
40
42
47
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Strategic Report
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Our Strategy
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Marketing excellence
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Innovation and development
Innovation and development
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ScarAway™ and Kelo-Cote™
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US acquisition
Culture, people and values
Culture, people and values
Key Performance Indicators
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Sustainability
Spotlight on…
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06
06
09
09
12
12
18
18
20
20
22
22
24
24
27
27
29
29
Managing our packaging estate
Managing our packaging estate
31
31
Developing our response to
Developing our response to
climate change
climate change
TCFD
TCFD
Stakeholder Engagement
Stakeholder Engagement
Financial Review
Financial Review
Principal Risks and Uncertainties
Principal Risks and Uncertainties
33
33
35
35
40
40
42
42
47
47
T A S K F O R C E F O R C L I M A T E - R E L A T E D F I N A N C I A L D I S C L O S U R E S ( T C F D ) C O N T I N U E D
We considered both the short to medium-term risks and opportunities arising from the transition to a lower-carbon economy, together with our level of exposure to the longer-term physical risks associated
with global warming. Through this process, we identified eight transition risks and two climate-related opportunities, which are outlined in the table below, together with their potential impacts, to the extent
that we are able to quantify these. We also identified six physical risks which we will need to manage our exposure to in the longer term, which are also summarised below.
Transition risks
Area
Risk
Policy & Legal
Increased regulation due to
climate change
Scenario(s)
Timeframe
Impact description
Impact
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Expenditures – Increased operating costs
Negligible/< £0.5m
(e.g. higher compliance costs)
Increase in carbon pricing
2–3°C
Medium Term (2025–2035)
Expenditures – Increased direct costs
Negligible/< £0.5m
Mandates on and regulation of existing
products and services
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Expenditures – Increased direct costs
Negligible/< £0.5m
Market
Increased cost of energy and materials
Below 2°C, 2–3°C and >3°C
Short to Medium Term (2022–2035) Expenditures – Increased indirect
Small/£0.5m–£1.5m
(operating) costs
Reputation
Technology
Changing consumer preferences and
increased sensitivity to ESG
Increased stakeholder concern
damaging our reputation
Substitution of existing products with
lower emissions alternatives
Costs to transition to lower emissions
technology
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Revenue – Decreased revenue due to
Small/£0.5m–£1.5m
reduced demand for products
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Capital and Financing –
Small/£0.5m–£1.5m
Decreased access to capital
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Capex – Increased capital
Small/£0.5m–£1.5m
expenditure / investment
Below 2°C and 2–3°C
Short to Medium Term (2022–2035) Capex – Increased capital
Negligible/< £0.5m
expenditure / investment
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Market Overview
Our Strategy
Our Strategy
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Marketing excellence
Marketing excellence
Innovation and development
Innovation and development
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ScarAway™ and Kelo-Cote™
US acquisition
US acquisition
Culture, people and values
Culture, people and values
Key Performance Indicators
Key Performance Indicators
Sustainability
Sustainability
Spotlight on…
Spotlight on…
06
06
09
09
12
12
18
18
20
20
22
22
24
24
27
27
29
29
Managing our packaging estate
Managing our packaging estate
31
31
Developing our response to
Developing our response to
climate change
climate change
TCFD
TCFD
Stakeholder Engagement
Stakeholder Engagement
Financial Review
Financial Review
Principal Risks and Uncertainties
Principal Risks and Uncertainties
33
33
35
35
40
40
42
42
47
47
T A S K F O R C E F O R C L I M A T E - R E L A T E D F I N A N C I A L D I S C L O S U R E S ( T C F D ) C O N T I N U E D
Climate-related opportunities
Area
Opportunity
Timeline
Impact
Products and
Services
Development of new products or services
through R&D and innovation
Medium (2025–2035)
Increased revenue from an increase
in demand for sustainable products
Energy
resources
Use of lower-emission sources
of energy
Short – Medium Term
(2022–2035)
Physical risks
Nature
Acute
Climate-related Risk
Increased frequency and severity
of flooding
Increased frequency of
heatwaves/extreme heat
Scenario
Above 3°C
Above 3°C
We are not yet in a position to
quantify this opportunity
Reduction in operating expenses
because of increased efficiency (for
example, energy costs)
Small/£0.5m – £1.5m
Timeline
Exposure
Long Term (2035–2050)
Long Term (2035–2050)
Increased frequency of wildfires
Above 3°C
Long Term (2035–2050)
Chronic
Rising mean temperatures
Above 3°C
Long Term (2035–2050)
Sea level rise
Water stress
Above 3°C
Above 3°C
Long Term (2035–2050)
Long Term (2035–2050)
Seven of our offices and 21 supplier sites are situated in potential
high flood risk zones
Seven of our offices and 20 supplier sites are situated in areas at
high risk of experiencing rising temperatures
One of our offices and eight supplier sites are located in areas at
high risk of wildfire impact
Seven of our offices and 20 supplier sites will experience a
significant increase in mean temperatures
Two of our offices and 11 supplier sites are potentially at risk from
rising sea levels
Four of our offices and 12 supplier sites are located in areas likely to
be subject to extremely high, or high, water stress by 2030
Additional details of our climate-related risks, scenario analysis and assessment processes underpinning these can be found in our 2022 TCFD report, which will be published shortly on our website.
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Market Overview
Our Strategy
Our Strategy
Spotlight on…
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Marketing excellence
Marketing excellence
Innovation and development
Innovation and development
ScarAway™ and Kelo-Cote™
ScarAway™ and Kelo-Cote™
US acquisition
US acquisition
Culture, people and values
Culture, people and values
Key Performance Indicators
Key Performance Indicators
Sustainability
Sustainability
Spotlight on…
Spotlight on…
06
06
09
09
12
12
18
18
20
20
22
22
24
24
27
27
29
29
Managing our packaging estate
Managing our packaging estate
31
31
Developing our response to
Developing our response to
climate change
climate change
TCFD
TCFD
Stakeholder Engagement
Stakeholder Engagement
Financial Review
Financial Review
Principal Risks and Uncertainties
Principal Risks and Uncertainties
33
33
35
35
40
40
42
42
47
47
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T A S K F O R C E F O R C L I M A T E - R E L A T E D F I N A N C I A L D I S C L O S U R E S ( T C F D ) C O N T I N U E D
Risk Management – Embedding climate into our risk management framework
At Alliance, we have an established and comprehensive risk management framework, which informs how business risks are identified, rated, and monitored. Through our TCFD programme, and with the
support of third-party consultants, we have created a stand-alone climate risk management framework, to identify and assess our climate-related risks and opportunities, and then integrated this into our
wider business risk management processes.
The creation of our climate risk management framework followed four key steps, to identify our risks, consider their potential impacts and identify current and future mitigation actions, to reduce their impact.
1. Identify
›
internal stakeholder engagement
programme created, to identify climate-
related risks which may impact our business
2. Assess
›
climate scenario analysis carried out to
develop our understanding of climate
change and how the identified risks and
opportunities could potentially impact our
business over time
3. Appraise
›
risk management options appraised,
through a series of climate risk management
workshops, to evaluate the effectiveness of
the current mitigation actions
4. Address
›
identification and implementation of further
mitigation actions to reduce climate change
risk, as required
Going forwards, we will be reviewing our climate-related risks and opportunities annually, to monitor the performance of our mitigation plans and reassess the impact as appropriate. Responsibility for
maintaining the climate risk register and for ensuring that climate risks and opportunities are accurately reviewed, reported, and monitored, sits with the SLT.
Following completion of the scenario analysis necessary to enable us to determine our potential level of exposure to climate-related risks – and the impact that these may have on our business, both in the
short to medium term and in the longer term – we have taken the decision to recognise the impact of tackling climate change as a principal risk this year, rather than an emerging risk, as reported in our 2021
Annual Report.
Metrics and Targets – Measuring and managing our climate impact
The primary metrics and targets we use to assess and manage relevant climate-related risks and opportunities are as follows:
Carbon emissions metrics
Emission Type
Scope 1 (direct)
Scope 2 (indirect)
Scope 3 (indirect)
Total
Emissions intensity*
* Defined as tCO2e per £m of revenue.
2022 Calculated Emissions (tonnes of CO2e)
2021 Calculated Emissions (tonnes of CO2e)
2020 Calculated Emissions (tonnes of CO2e)
Location-based
Market-based
Location-based
Market-based
Location-based
Market-based
2
50
47,973
48,025
279
2
52
47,973
48,026
279
2
68
37,648
37,627
128
2
16
37,648
37,575
128
64
89
32,243
32,396
128
–
–
–
–
–
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T A S K F O R C E F O R C L I M A T E - R E L A T E D F I N A N C I A L D I S C L O S U R E S ( T C F D ) C O N T I N U E D
Strategic Report
Strategic Report
Chief Executive’s Review
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Market Overview
Our Strategy
Our Strategy
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Marketing excellence
Marketing excellence
Innovation and development
Innovation and development
ScarAway™ and Kelo-Cote™
ScarAway™ and Kelo-Cote™
US acquisition
US acquisition
Culture, people and values
Culture, people and values
Key Performance Indicators
Key Performance Indicators
Sustainability
Sustainability
Spotlight on…
Spotlight on…
06
06
09
09
12
12
18
18
20
20
22
22
24
24
27
27
29
29
Managing our packaging estate
Managing our packaging estate
31
31
Developing our response to
Developing our response to
climate change
climate change
TCFD
TCFD
Stakeholder Engagement
Stakeholder Engagement
Financial Review
Financial Review
Principal Risks and Uncertainties
Principal Risks and Uncertainties
33
33
35
35
40
40
42
42
47
47
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The increase in Scope 3 emissions from 2020 to 2021 was
primarily due to increased activity levels following the easing of
pandemic restrictions and the acquisition of Amberen™, coupled
with an increased use of air freight versus sea freight to mitigate
ongoing pandemic-related disruptions to supply chains and
available logistics capacity.
The increase in Scope 3 emissions from 2021 to 2022 was
driven by increases in emissions associated with contract
manufacturer activity, logistics (upstream and downstream)
and business travel.
Targets and progress
In September 2022, we set our Scope 1 & 2 emissions targets,
to achieve net zero in 2030, with an interim target of 65%
reduction by 2025, using 2018 as our baseline. More detail on
our Scope 1 & 2 emissions targets and the progress we’ve made
in delivering these can be found on page 34.
We continued to evolve our data collection processes to improve
the accuracy of our Scope 3 emissions in 2022, as a precursor
to setting targets for specific categories of Scope 3 emissions in
2023, as we look to further evolve our carbon action plan and
climate change commitments.
Related reading:
See ESG Committee Report on page 86
See Spotlight on developing our response to climate change
on page 33
See Principal Risks & Uncertainties – impact of tackling climate
change climate change on page 48
See Streamlined Energy and Carbon Reporting (SECR)
on page 90
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Strategic Report
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Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
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S T A K E H O L D E R E N G A G E M E N T
Engaging with
our stakeholders
Overview
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 a
positive contribution to both our local and
wider communities. The Board works closely
with the Senior Leadership Team to ensure we
continue to understand and meet the evolving
needs of all our stakeholders, whilst maintaining
our relevance and ability to create long-term
sustainable value.
On the following pages, we have identified
our principal stakeholders, their primary
requirements and how we’ve delivered against
these in 2022.
Examples of how stakeholder interests have
been considered by the Board in their decision-
making are provided in the Governance section.
See Promoting the success of the company – s.172
on page 67
Additional content regarding our stakeholder
relationships and how we manage these can
also be found on our website.
SHAREHOLDERS
EMPLOYEES
CUSTOMERS
Our shareholders are interested in:
Strong financial performance
Share price appreciation
›
›
› Dividend income
›
ESG and long-term business
sustainability
How we delivered for our
shareholders in 2022:
› Dividend +5% vs 2021
›
Share price adversely impacted by
financial performance
Refreshed purpose, vision and strategy
Infrastructure strengthened; new
people and skills brought into
the business
Portfolio broadened through
ScarAway™ acquisition in the US
›
›
›
› Good progress made with
developing and executing our
sustainability strategy
Our customers are looking for:
›
Safe and effective healthcare products,
which are widely available, at a
reasonable cost
How we delivered for our customers
in 2022:
›
Safety and efficacy standards
maintained (see Online Sustainability
Report)
› 44m units of product supplied
› Continued channel expansion for our
consumer products, particularly in
e-commerce
Pricing aligned with competitive
positioning (consumer products)
›
Our employees are interested in:
› Competitive reward structures
› Opportunity to share in the success of
the business
Flexible working
›
› Meaningful work and connection
Learning and development
›
opportunities
How we delivered for our
employees in 2022:
› Corporate bonus paid (for FY21)
› Annual pay increase
›
Share options granted to all
eligible employees
Flexible working arrangements
maintained
›
› Monthly business briefings
›
Participation in GPTW survey
› Global employee conference
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S T A K E H O L D E R E N G A G E M E N T C O N T I N U E D
SUPPLY AND DISTRIBUTION PARTNERS
HEALTHCARE PROFESSIONALS
LENDERS
WIDER COMMUNITIES
Our supply & distribution partners
are looking for:
› Continued business growth
opportunities
How we delivered for our supply
and distribution partners in 2022:
Supplier spend +39% vs 2021
›
>£70m of sales made via distributors
›
in 2022
Healthcare professionals are
looking for:
›
Engagement, education, information,
and resources
Therapy area expertise
›
How we delivered for healthcare
professionals in 2022:
›
Responses provided to more than
900 enquiries from HCPs
Our lenders are interested in:
Strong financial performance
›
› Ability to service & repay borrowings
How we delivered for our lenders in
2022:
› £15.8m of free cash flow generated
› Compliance with borrowing
covenants maintained
The wider community is interested in:
›
›
› Charitable and product donations
Social impact strategy
Local engagement
How we delivered for the wider
community in 2022:
› 12,000 units of product donated to
International Health Partners, enabling
149,000 treatments to be sent to
10 countries around the world
› £50k donated to Ukraine
humanitarian appeal
› Ongoing support of local charities
and community events
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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42
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
F I N A N C I A L R E V I E W
“ Whilst 2022 presented challenges in two
discrete areas of the business, we worked
hard to control costs and minimise the
impact on underlying operating profit,
whilst developing robust mitigation plans.”
Andrew Franklin, Chief Financial Officer
UNDERLYING EBITDA*
£39.2m
(2021: £48.6m -19%)
FREE CASH FLOW*
£15.8m
(2021: £30.2m -48%)
For more information visit
alliancepharmaceuticals.com
* Non-IFRS alternative performance measures (see note 31).
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F I N A N C I A L R E V I E W C O N T I N U E D
SUMMARY UNDERLYING INCOME STATEMENT
Year ended 31 December
REVENUE SUMMARY
Year ended 31 December
Strategic Report
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Our Strategy
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Marketing excellence
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ScarAway™ and Kelo-Cote™
US acquisition
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Key Performance Indicators
Sustainability
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06
09
12
18
20
22
24
27
29
See-through revenue*
Statutory revenue
Gross profit
Operating costs (including share-based employee
remuneration)
Underlying EBITDA*
Depreciation and underlying amortisation
Underlying operating profit (EBIT)
Managing our packaging estate
31
Finance costs
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
Underlying profit before taxation
Reported profit before taxation
Underlying basic earnings per share
Reported basic earnings per share
Proposed total dividend per share
2022
£m
172.0
167.4
101.7
62.5
39.2
3.5
35.7
5.4
30.3
5.2
4.28p
0.17p
1.776p
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
1.691p
Growth
+1%
+3%
-7%
+3%
-19%
+20%
-22%
+57%
-28%
-71%
-33%
-88%
+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 31.
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 2022, underlying results exclude the amortisation and impairment of acquired intangible assets; in 2021, underlying results
exclude the amortisation and impairment of acquired intangible assets, the CMA provision and restructuring costs. Further detail can be
found in note 5.
For more information visit
alliancepharmaceuticals.com
Kelo-Cote™ franchise
Amberen™
Nizoral™*
Other Consumer brands
Total Consumer Healthcare
Prescription Medicines
See-through revenue*
LFL Consumer Healthcare see-through
revenue*, excl. ScarAway™ & Kelo-Cote™ US
LFL see-through revenue*,
excluding ScarAway™ & Kelo-Cote™ US
Statutory revenue – Consumer Healthcare
Statutory revenue – Group
LFL Consumer Healthcare statutory revenue,
excluding ScarAway™ & Kelo-Cote™ US
LFL Group statutory revenue, excluding
ScarAway™ & Kelo-Cote™ US
2022
£m
50.0
14.9
21.8
38.4
125.2
46.8
172.0
118.9
165.7
120.6
167.4
114.3
161.1
2021
£m
48.8
19.2
20.6
33.2
121.8
47.8
169.6
121.8
169.6
115.4
163.2
115.4
163.2
Growth
CER growth
+2%
-22%
+6%
+16%
+3%
-2%
+1%
-2%
-2%
+5%
+3%
-1%
-1%
-6%
-30%
+3%
+14%
-3%
-2%
-3%%
-7%
-6%
+3%
-2%
-6%
-5%
REVENUES
Group see-through revenue increased 1% to £172.0m (2021: £169.6m) and decreased 3% at
constant exchange rates ('CER'). Like-for-like see-through revenue excluding ScarAway™ and
Kelo-Cote™ US, acquired in March 2022, decreased 2% (-6% CER). Group revenue benefited
from exchange rate movements in 2022, principally the weakening of Sterling against the US Dollar
and HK Dollar, which increased see-through revenue by approximately £6.7m. Statutory revenue
increased 3% to £167.4m (2021: £163.2m) (-2% CER).
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
Company Overview
Strategic Report
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Financial Statements
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44
F I N A N C I A L R E V I E W C O N T I N U E D
REVENUES CONTINUED
Consumer Healthcare
Total Consumer Healthcare revenues for the year were
£125.2m (2021: £121.8m), up 3% on the prior year (-3%
CER) benefiting from the US acquisition in addition to
currency tailwinds. On a statutory basis, reported Consumer
Healthcare revenues were £120.6m, up 5% from the previous
year (2021: £115.4m) and up 3% CER.
Excluding the impact of the US acquisition, like-for-like see-
through Consumer Healthcare revenue fell 2% (-7% CER) to
£118.9m whilst on a statutory basis, like-for-like Consumer
Healthcare revenues decreased 1% to £114.3m (-6% CER).
Kelo-Cote™ franchise– scar prevention and treatment
Kelo-Cote™ franchise revenues grew 2% to £50.0m (2021:
£48.8m) in the year, boosted by the US acquisition and currency
gains (-6% CER). As previously reported, the cross-border
e-commerce ('CBEC') scar treatment market declined during H1
2022 as rigid lockdowns in China from March prevented the
movement of product across the border from Hong Kong for a
number of months. However, the online domestic market grew,
and Kelo-Cote™ gained share. In H2 2022, a slower recovery
in B2B demand for Kelo-Cote™ in the China CBEC channel,
coupled with a one-off destocking effect in that channel, meant
that like-for-like global Kelo-Cote™ revenues were down 17%
CER in the year.
End-consumer demand in the scar treatment market in
e-commerce in China remains strong, with 7% value growth in
2022 and Kelo-Cote™ gaining share. We continue to work with
our CBEC distributor to develop further this channel, expand
reach and optimise sales. Our B2C channel is well developed
and in September our Kelo-Cote™ flagship online store was
awarded a prestigious Tmall Global award, alongside a small
number of other prominent brands, for surpassing RMB100m
(c.£12m) in annual sales for the first time. We have refined our
strategy to increase our presence in the significant B2B channel,
which incorporates additional distributor support, and have
successfully reduced the level of counterfeit product in the market.
Looking ahead, we expect total Kelo-Cote™ franchise revenues
to build throughout the year with overall growth anticipated to be
above 20% in 2023, compensating in part for the one-off events
which adversely affected revenues in 2022. This is slightly ahead
of the 18% CAGR delivered for the four-year period ending
31 December 2022, excluding the US acquisition.
Nizoral™ – medicated anti-dandruff shampoo
Following the completion of the marketing authorisation transfer
for Nizoral™ in China from Johnson & Johnson, we transitioned
to a new top-tier local distributor at the end of H1 2022 to
service the brand’s largest market. However phasing of orders to
the new distributor led to a 12% decline in revenues in H1 2022.
Nizoral™ revenues recovered strongly in H2 2022, growing
15% CER, partly due to the delayed orders from H1 falling
into H2 and as Alliance finalised the remaining marketing
authorisation transfers in Vietnam. Consequently, revenues
grew 6% to £21.8m (2021: £20.6m) for the year (3% CER). The
new Chinese distributor, and the completion of all marketing
authorisation transfers, provides a very strong platform to
drive high single-digit revenue growth for Nizoral™ in 2023,
supported by new marketing initiatives and the introduction of
updated packaging.
Amberen™ – vitamin mineral supplement for the relief
of menopause symptoms
Amberen™ generated net revenues of £14.9m (2021:
£19.2m), 22% below prior year (-30% CER). Amberen™ sales
performance was impacted by declines in the underlying
bricks and mortar market due to an increase in prevalence of
cheaper, white-label alternatives and customer switching to
online platforms, in addition to the loss of a leading discount store
account. Alliance is committed to improving the performance
of Amberen™ in the higher-growth e-commerce channel, whilst
optimising sales in bricks and mortar where appropriate. The
brand’s packaging has been re-launched featuring stronger
claims, and advertising investment continues, focused on digital,
video, social media and search engine optimisation to drive
share gains.
Amberen™ now has an enhanced platform from which to
generate double-digit revenue growth on a like-for-like basis
in 2023 and beyond. We are also focused on developing an
innovation pipeline, to underpin the growth of the brand in
the longer-term. Given the disruption to the bricks and mortar
market, we now anticipate 2025 sales of c. £20m, below
our original £35m expectation. As a consequence, coupled
with higher interest rates, we have impaired the asset value
by £12.0m.
Other Consumer Healthcare brands
Our underlying business remains strong, with Other Consumer
Healthcare revenues increasing 16% to £38.4m (2021: £33.2m)
and 14% CER, with particularly strong growth from Aloclair™
and Vamousse™. This solid performance in our Other Consumer
Healthcare brands clearly illustrates the benefits of a diversified
portfolio, and we anticipate continued high single-digit growth
in this portfolio of products in 2023, substantially ahead of the
broader consumer healthcare market.
Prescription Medicines
The Prescription Medicines business continues to deliver stable
revenues with £46.8m (2021: £47.8m), in the year, down 2% on
the prior year on both a reported and currency-adjusted basis.
Key brands include Hydromol (emollient for the treatment of
eczema), Forceval (nutritional supplement) and the Opus range
of stoma care products, all of which performed well in the year.
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F I N A N C I A L R E V I E W C O N T I N U E D
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 strong and, coupled with their limited
requirement for promotional investment, this business continues to
play an important part in our overall product portfolio.
Operating performance
Whilst revenues increased 1% in the year, gross profit decreased
7% to £101.7m (2021: £109.5m) due to a less favourable product
mix with a lower proportion of Kelo-Cote™ and Amberen™ sales,
and with Kelo-Cote™ generating a lower gross margin than in
2021 due to a less favourable channel mix. Gross margin reduced
by 540 basis points to 59.1% of see-through revenue (2021:
64.5%) and gross margin relative to statutory revenue was 60.7%
(2021: 67.1%).
Operating costs (defined as underlying administration and
marketing expenses, excluding depreciation and underlying
amortisation charges) increased 6% versus the prior year to
£62.4m (2021: £58.6m) largely due to increased investment in
marketing and employee costs to drive future growth, coupled
with a modest increase in expenses to accommodate the US
acquisition. As a result, operating costs as a percentage of sales
increased 1.7% to 36.3% of see-through sales (2021: 34.6%).
With a lower share price in H2 2022 leading to a £2.2m reduction
in share option charges versus prior year (2022: £0.1m, 2021:
£2.3m) underlying earnings before interest, taxes, depreciation
and underlying amortisation ('EBITDA') decreased 19% in the year
to £39.2m (2021: £48.6m), whilst underlying operating profit
('EBIT') decreased by 22% to £35.7m (2021: £45.6m). Reported
operating profit decreased by £11.0m to £10.6m (2021: £21.6m),
with non-underlying items of £25.1m (2021: £24.1m).
Finance costs increased by £2.0m to £5.4m (2021: £3.4m),
due to an increase in borrowing costs, reflecting both the rise
in interest rates and an increase in the level of borrowings
following the US acquisition.
The average interest charge on gross debt during the year
(including non-utilisation fees) was 3.6% (2021: 2.2%).
The significant reduction in gross margin, in addition to the
increase in operating and finance costs, led to a 28% decrease in
underlying profit before tax to £30.3m (2021: £42.2m), resulting
in a 730 basis point margin reduction to 17.6% of see-through
revenues. Reported profit before tax decreased 71% to £5.2m
(2021: £18.2m), primarily due to non-underlying amortisation
and impairment charges. Further detail on non-underlying items is
provided below and in note 5.
Depreciation and underlying amortisation
Depreciation and underlying amortisation charges for the
year were £3.5m, up £0.6m on the prior year (2021: £2.9m),
reflecting the first full year of amortisation of the ERP system.
Non-underlying items
Non-underlying items in the year principally comprised
amortisation charges for Prescription Medicines and certain
other brand assets, together with impairment charges identified
as a result of the annual impairment review (see note 11).
For 2022, impairment charges of £18.2m include £12.0m
in relation to Amberen™, reflecting both the reduction in
expected future cash flows, following the loss of a leading
discount store account and more challenging trading
conditions in the bricks and mortar market, and the higher cost
of capital through increasing market interest rates.
For the prior year, non-underlying items comprised amortisation
and impairment charges, together with 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. 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
Non-underlying items:
Amortisation of acquired intangibles
Impairment of intangible
assets and goodwill
CMA provision
Restructuring costs
Other
Total
Reported profit before taxation
2022
£m
30.3
(7.2)
(18.2)
–
–
0.4
(25.1)
5.2
2021
£m
42.2
(7.2)
(6.2)
(7.9)
(2.4)
(0.4)
(24.1)
18.2
Taxation
The underlying tax charge for the year was £7.2m (2021:
£8.0m), which equates to an underlying effective tax rate of
23.9% (2021: 19.0%). The total tax charge for the year was
£4.3m (2021: £10.8m), equating to an effective tax rate on
reported profits of 82.0% (2021: 59.7%). The prior year figure
includes a £5.0m charge following the increase in the UK tax
rate from 19% to 25%, relating primarily to an increase in the
deferred tax balances on intangible assets.
Strategic Report
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Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Strategic Report
Strategic Report
Chief Executive’s Review
Chief Executive’s Review
Market Overview
Market Overview
Our Strategy
Our Strategy
Spotlight on…
Spotlight on…
Marketing excellence
Marketing excellence
Innovation and development
Innovation and development
ScarAway™ and Kelo-Cote™
ScarAway™ and Kelo-Cote™
US acquisition
US acquisition
Culture, people and values
Culture, people and values
Key Performance Indicators
Key Performance Indicators
Sustainability
Sustainability
Spotlight on…
Spotlight on…
06
06
09
09
12
12
18
18
20
20
22
22
24
24
27
27
29
29
Managing our packaging estate
Managing our packaging estate
31
31
Developing our response to
Developing our response to
climate change
climate change
TCFD
TCFD
Stakeholder Engagement
Stakeholder Engagement
Financial Review
Financial Review
Principal Risks and Uncertainties
Principal Risks and Uncertainties
33
33
35
35
40
40
42
42
47
47
For more information visit
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F I N A N C I A L R E V I E W C O N T I N U E D
Earnings per share
Underlying basic earnings per share, the measure used by the
Board in assessing earnings performance, was 4.28p, a decrease
of 33% on the prior year (2021: 6.39p), reflecting the decrease
in the Group’s underlying profit after tax coupled with a modest
increase in the number of shares in issue.
Inventories, net of provisions, increased £3.2m to £24.3m
at 31 December 2022 (31 December 2021: £21.1m). This
increase was due in part to the inclusion of inventory relating
to ScarAway™ and Kelo-Cote™ US, coupled with increased
inventory holdings to mitigate against both inflationary
pressures and supply chain disruption.
Reported basic earnings per share decreased by 88% to 0.17p
(2021: 1.37p) due to a greater impact from non-underlying items
on reported earnings in 2022 versus 2021.
Dividend
The Board is proposing a final dividend payment of 1.184p
per share for 2022, an increase of 5% on the final dividend
payment for 2021, taking the total dividend payment for the year
to 1.776p (2021: 1.691p). 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 2022, subject to approval at the Company’s
AGM on 25 May 2023, will be paid on 18 July 2023, to
shareholders on the register on 23 June 2023.
Balance sheet
Intangible assets increased by £7.9m in the year to £421.6m
(31 December 2021: £413.7m). Of this, £15.2m relates to the US
acquisition and associated distribution rights in March 2022, the
remainder comprises the acquisition of an Aloclair™ brand asset
for £1.2m, upwards revaluation adjustments linked to exchange
rate movements of £18.7m, underlying amortisation charges
of £2.0m, non-underlying amortisation charges of £7.2m,
non-underlying impairment charges of £18.2m and £0.2m of
additions to computer software assets. As noted above, £12.0m
of the non-underlying impairment charges related to Amberen™.
Working capital
Net working capital at 31 December 2022 was £38.0m,
an increase of £16.0m on that at the start of the year
(31 December 2021: £22.0m), primarily reflecting
movements in payables and receivables balances.
Alliance Pharma plc Annual Report and Accounts 2022
Receivables increased by £18.5m to £49.3m, reflecting
the timing of sales and cash receipts in the second half of
the year, versus the equivalent period in 2021. Payables
increased by £5.7m to £35.6m, reflecting the phasing of
invoices and payments around the year end, higher cost of
sales and the increase in the year end inventory holding.
Provisions
Provisions decreased by £1.1m in the year, reflecting the utilisation
of the restructuring provision for the closure of the Italy office. Of
the £8.4m total provision, £7.9m relates to the CMA decision and
£0.5m is the remaining restructuring provision. Further detail is
provided in note 20.
Cash flow and net debt
Free cash flow (see note 31 for definition) for the year was
£15.8m, in line with guidance given in the November Trading
Update, but below the £30.2m reported in 2021, due to the
weaker trading performance and the increase in working capital
due to the timing of sales and cash receipts in the second half.
Cash generated from operations decreased by 45% to £24.9m
(2021: £44.9m).
Net debt increased by £15.0m to £102.0m at 31 December
2022 (31 December 2021: £87.0m), reflecting both in-year
cash generation and the $19.4m (£14.8m) US acquisition of
ScarAway™ and the US rights to Kelo-Cote™, with Group
leverage increasing to 2.57x (31 December 2021: 1.73x) and
interest rate cover decreasing to 7.39 times (31 December 2021:
14.34 times).
Net debt and Group leverage are both expected to fall
during 2023, particularly in the second half, reflecting the
Group’s anticipated strong cash generation, with Group
leverage expected to be below 2.0x by the end of 2023.
Treasury and capital management
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. Of this
RCF, £29.9m, together with the whole of the Accordion Facility,
remained unutilised as at 31 December 2022.
Borrowings are denominated in Sterling, Euro and US Dollars.
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 selectively acquiring and in-licensing products or
technologies that support our key brands;
in paying down debt; and
in paying dividends to our shareholders.
Andrew Franklin
Chief Financial Officer
20 March 2023
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
47
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
Protecting our business
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 49 to 56.
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.
SEVERE
Analysing our identified risks
STRATEGIC RISKS
1
Organic growth: innovation
and competition
2 Inorganic growth – acquisitions
OPERATIONAL RISKS
3 Product safety
4 Supply disruption
5 Impact of tackling climate change
T
C
A
P
M
I
6 Business systems
7 Cyber-security
8 People
9 Supply chain management
COMPLIANCE RISKS
10 Product regulations
11 Legal and compliance
OTHER RISKS
12 Macro-economic
13 Pandemics
14 Geopolitical and other
worldwide events
RISK MOVEMENT
No Change
Movement
New
2
1
4
10
7
11
12
13
9
14
6
8
5
3
For more information visit
alliancepharmaceuticals.com
The links between our principal risks and uncertainties and
our strategy are set out in the table on pages 49 to 56
UNLIKELY
POSSIBLE
LIKELIHOOD
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Company Overview
Strategic Report
Governance
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48
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S C O N T I N U E D
The Board, with the support of the Audit and Risk Committee,
monitors and reviews risks in relation to those risks that could
or are impacting the Group’s performance, its operations, and
its stakeholders. The consideration of risks is inherent within the
decision-making, and throughout the year the Board members
have challenged management on key issues faced by the business.
›
›
›
›
The Board continues to monitor, and assess the likelihood
of any further impact on the Group from the demand for
Kelo-Cote™ in the China B2B market, which was recovering
more slowly than the Company or its distribution partners
had anticipated in 2022, impacting stockholdings and sales
orders – the effects of which were communicated to the
market on 23 November 2022.
The Nomination Committee accelerated its succession
planning review for Executives and Senior Management
– this work is ongoing and led to the appointment of Jeyan
Heper as a new Chief Operating Officer. The Board was
further enhanced by the appointment of Martin Sutherland,
as a new independent Non-executive Director, who along
with Jeyan has strengthened the Board.
The pressure of increases on costs of goods being felt by all
businesses continues to be a key consideration for the Group
– active engagement with our supply partners to mitigate
any such increases, whilst also managing the sale side of the
supply chain, has seen a reduction in the potential impacts,
and the business remains focused on this key area.
The Board is mindful of the potential impact on the business
of the Competition and Markets Authority’s (‘CMA’) decision
dated 3 February 2022, including the proposed fine of
£7.9m. The Board continues to believe that the Company has
a strong case and is appealing the UK CMA’s decision. The
date of the hearing is set for 5 June 2023.
Impact of tackling climate change
When reporting our principal risks and uncertainties
for 2021, we took the decision to recognise climate
change as an emerging risk, on the basis that we
didn’t believe that we had sufficient clarity at that
time to be able to assess its likely impact – and the
likelihood of that impact occurring.
Having now completed the scenario analysis
needed to report in line with the recommendations
set out by the Task Force for Climate-related
Financial Disclosures (TCFD,) we have taken the
decision to categorise the 'Impact of tackling climate
change' as its own principal risk and to fully embed
the management and oversight of this risk within
our established operational risk management
framework. The ESG Committee feels the work
needed by the Group to move towards tackling those
parts of its operations which have a direct impact
on climate change (emissions in the supply chain,
plastic packaging, etc.) more accurately reflects the
risks (increased costs, operational disruption etc.)
associated with climate change for our business.
See our report on TCFD on page 35
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Strategic risks
1. Organic
growth:
innovation and
competition
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
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. The significant proportion of sales into China via the
CBEC trading route (in particular the B2B channel) leaves the Group exposed
to the sensitivities of that market and the impacts of a slower than expected
recovery of that market post-lockdowns. 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.
›
›
Loss of revenue, reduced profitability and reduced
growth from failure to maintain our competitive
positioning, or to increase or maintain market share.
In particular, the risk to Kelo-Cote™ forecast sales
(principally in China) due to slower than expected
recovery of the B2B trading channels could result in
loss of high margin sales
Loss of revenue, and potential damage to reputation
from counterfeit product reaching the market, which
may not have been subject to the same rigorous
quality and safety testing as genuine products
› Continued focus on Marketing Excellence, to ensure we
stay attuned to changing consumer preferences, and to
maximise the value of our marketing campaigns
›
Increasing focus on innovation and development activities
› 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
› Depending on its severity, this could also potentially
impact our share price, cash flow and covenant
compliance
›
›
Product or claims innovation strategies, to pre-empt
patent expiration
Sustaining investment in brand promotion
2. Inorganic
growth –
acquisitions
Risk that we are unable to deliver additional growth in excess of our strategic
growth ambitions due to (i) lack of affordable funding (both debt and equity)
(ii) a lack of suitable acquisition opportunities, or (iii) a failure to effectively
integrate assets and maximize their potential 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. This would be further impacted by an inability to source affordable
debt (or any debt depending on the Groups then prevailing leverage). A lack
of sensible debt option would lead the Group to look to raise equity which
itself may prove difficult or too expensive depending on the prevailing market
sentiment and the impact this has on the prevailing share price.
As the Group looks to increase the size of acquisitions, the complexity and
costs around both the acquisition itself and associated integration also
increases.
› 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
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Strategic Report
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Operational risks
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
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
› 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
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.
› Maintenance of public and products liability insurance to
provide an appropriate level of protection for the Company
› Manufacturing, sourcing, or distribution issues,
› Maintaining close working relationships with our key suppliers,
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
›
›
›
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
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Strategic Report
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Financial Statements
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51
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Operational risks continued
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Risk description and relevance
Potential impacts
Key mitigating activities
5. Impact of
tackling
climate change
Risk to the longer-term viability of the business due to the impacts
of all the changes to be made by the business to its operations in
order to tackle the effects of climate change.
In addition, to the operational impacts of tackling the wider
impact our business has on the climate, the Group also faces
challenges from the direct physical impacts of climate change
itself, e.g. the severity and frequency of adverse weather events
and rising sea levels, and indirect impacts, such as higher energy
costs, infrastructure funding, all of which are likely to become
increasingly prevalent as we implement our plans to tackle
the impact of climate change by transitioning to a
low-carbon economy.
As detailed on page 36 of our TCFD disclosures potential
impacts during the transition phase include:
Increased cost of energy and materials, in particular the
increases which would come from ensuring more sustainable
packaging for our products as we seek to transition
away from plastics where possible. The increased costs
of production and transportation associated with a more
environmentally friendly supply chain, including the possible
need to engage a more expensive group of selective
manufacturers who meet the needs of our own
ESG demands.
› Changing consumer preferences and increased sensitivity
to ESG with consumers potentially substituting existing
›
›
products with lower emissions alternatives
Reputation damage due to a failure to respond to
increased stakeholder concerns
The identified physical risks (see page 37) all have the
potential to cause disruption to our business activities
and supply chains in the longer term, depending on the
warming pathway we find ourselves on.
›
›
Increased business focus on environmental strategy and
associated risks
Engagement of third party expert support and wider
engagement with competitors/peers to ensure we are able to
utilise any improvements which are made in the wider market
around issues such as packaging
› Creation of TCFD roadmap and emissions reduction targets
Trend
NEW
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Operational risks continued
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
6. Business
systems
Failure to maintain and develop business systems and technology
which adequately supports business processes, organisational
infrastructure, and strategic growth ambitions, and enables us to
manage any business continuity risk from unforeseen events.
The business is highly dependent on multiple IT systems – and
systems failure as a result of a business continuity event could have
a significant impact on the business’s ability to continue to operate
effectively.
›
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
›
›
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
› 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
›
Business continuity plans in place and under regular review
7. 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.
›
›
›
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
We also hold 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.
› Data destruction or ransom as a result of a malicious link
being clicked
› 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
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Strategic Report
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Financial Statements
Additional Information
53
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Operational risks continued
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
8. People
Failure to attract and retain sufficient high-quality people to deliver the
business’s strategic growth ambitions.
By virtue of its business model, Alliance has a high level of reliance
on the skills and knowledge of its employees, many of whom have
considerable sector experience or other specialist expertise, making
them attractive to competitors and not always easy to replace.
As the business continues to scale and to expand its geographic
presence, our requirements for high-calibre people continues
to increase.
9. Supply chain
management
The increasing globalisation of our supplier base as a result of recent
acquisitions has served to increase our exposure to risks around
Environmental, H&S, Business Ethics, Supply Chain Security and
Climate 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.
›
›
›
›
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
› 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
Potential lack of required skills and expertise to support
the continued growth of the business,
its systems, procedures, and processes
› Maintaining relationships with a number of international and
local recruitment agencies to ensure we are able to find and
recruit good quality employees
Potential reputational damage, loss of product supply
and loss of revenues from failure to maintain sufficient
oversight of our end-to-end supply operations
› Maintaining a balance between permanent and contract heads
to increase flexibility, particularly for project-based work
› Our Know Your Supplier (‘KYS’) programme, which provides
us with visibility of potential ‘red flags’ in our supply chain,
enabling us to align compliance and escalation processes to
facilitate timely remediation of issues
›
›
Project to review contract manufacturers is underway
The publication of our Partner Code of Conduct, setting out our
expectations of our Partners from a business ethics perspective
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
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Financial Statements
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
Compliance risks
10. 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.
11. Legal and
compliance
management
Risk of non-compliance with relevant laws and regulations in all
countries in which we operate, including anti-corruption laws, data
privacy laws, competition laws, accounting, taxation and listing
regulations.
As the scope and scale of our business operations increases, we
face an increasingly complex compliance burden. The level of legal
and regulatory requirements to which we are subject continues to
increase, and also the penalties for non-compliance, so it is vital
that we are able to effectively manage all the various aspects of our
compliance risk.
As we enter new territories and overseas markets, we become
exposed to increased bribery, anti-slavery, and corruption risks.
Likewise, as the Group expands its operations, the VAT and general
tax environment in which it operates becomes more complex and the
risk of incorrectly reporting and paying relevant taxes increases.
Some of our products may not gain regulatory approval
or could face the risk of having their regulatory status
challenged or adversely altered. This could affect the
Group’s ability to launch new products or maintain sales
of its current products in current jurisdictions or pursue
further geographic expansion
› 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
› Non-compliance with product classification
regulations/registration requirements may result in
product having to be withdrawn from the market, with a
consequential loss of sales
›
›
If compliance issues cannot be remediated, this could
lead to cessation of product supply, or limitation of
market opportunities
The Group has ongoing regulatory requirements
(pharmacovigilance, etc.) which could, if not adhered
to, lead to substantial fines and impact on the Group’s
ability to sell certain products. Likewise, we may incur
penalties for non-compliance as a result of adverse
findings from regulatory inspections, which may
potentially impact on the sales of our products, damage
our brands and our reputation
›
Bribery, anti-slavery, and corruption all carry their own
penalties, and reputational damage
› A failure to abide by data protection rules or incur a
breach of data security could also pose a financial and
reputational risk to the Group
›
›
Breaches of VAT and taxation rules also carry a risk of
interest and penalties becoming payable
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
›
›
Training for 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
›
The filing of the notice of appeal against the CMA’s infringement
decision and 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
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Financial risks
12. Macro-
economic
Risk description and relevance
Potential impacts
Key mitigating activities
Trend
Movements in FX rates adversely impact financial performance.
The Group earns a proportion of its revenues and profits in
currencies other than Sterling (principally Euros, 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
Inflationary increases means that the business must ensure it
adjusts its financial and commercial strategies either in the UK
or overseas.
Income generation could be impacted by operational and other
risks, thereby increasing the Group's leverage.
› Adverse movements in Sterling exchange rates vs Euro,
US Dollar, Hong Kong Dollar and other currencies
increase the costs of raw material and other overheads
including wages and is often linked to supply chain
disruption as markets adapt.
›
›
› Higher prices for goods will decrease consumer
purchasing of non-essential products.
›
Increased leverage would impact ability of the Group's
ability to implement its desired capital allocation
strategy, which could in turn stifle the growth potential.
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
›
Review pricing strategies across the portfolio and look to
increase flexibility with supply chain
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
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P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
C O N T I N U E D
Links to strategy:
Brand Growth
Commercial execution
Strategic supply partnerships
Agile organisation
Risk trends:
Risk has increased versus last year
Risk has reduced versus last year
Risk has not changed materially since last year
Other risks
13. Pandemics
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, the aftermath effects of which
continues to impact our trading environment today, particularly
in China.
›
›
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, or (ii) a reduction in availability
of certain materials, both of which could in turn impact
profitability
› Work toward less value concentration of our business in any one
jurisdiction or market to try and mitigate inability to make sales
in affected areas.
› Move towards more on-line sales for those of our products
which are permitted to be sold on-line, with a drive to increase
share on those on-line channel, to help mitigate any loss of sales
for physical markets are shut down.
14. Geopolitical
and
worldwide
events
Last year, we saw how the escalation of geopolitical events in
Europe had the potential to cause supply chain disruption within
the business and subject us to increased economic uncertainty.
Any further escalation of the current conflicts, or any new conflicts
in or connected to our major markets could have a significant
impact on sales or manufacturing.
Inflationary pressures globally are increasing costs of goods.
› Disruption caused by military or political conflict/
tensions could cause our markets to be restricted
or even close. This could lead to loss of sales and a
potential inability to recover market share if/when those
issues are resolved
›
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
›
Increasing costs impact our profits and ability to remain
competitive. This could also impact market share
›
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
NEW
› 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 in which we operate to ensure risks are monitored
accordingly.
Strategic Report
Chief Executive’s Review
Market Overview
Our Strategy
Spotlight on…
Marketing excellence
Innovation and development
ScarAway™ and Kelo-Cote™
US acquisition
Culture, people and values
Key Performance Indicators
Sustainability
Spotlight on…
06
09
12
18
20
22
24
27
29
Managing our packaging estate
31
Developing our response to
climate change
TCFD
Stakeholder Engagement
Financial Review
Principal Risks and Uncertainties
33
35
40
42
47
For more information visit
alliancepharmaceuticals.com
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Financial Statements
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57
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
Alliance Pharma plc Annual Report and Accounts 2022
Governance
“ We continue to ensure that
our corporate governance
processes remain robust,
challenging and appropriate.”
David Cook, Chair
For more information visit
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C H A I R ’ S I N T R O D U C T I O N
“ Our governance framework helps us
set priorities, establish accountabilities
and manage risks effectively.”
Dear shareholders and colleagues,
In my last year as Chair and on behalf of the Board, I am pleased to introduce the Governance
Report for the year ended 31 December 2022. The following sections provide readers with an
overview of the Group’s governance arrangements.
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 Board continues to ensure that our
corporate governance processes remain robust, challenging and appropriate providing strong
foundations to underpin our assessment of risks to our strategy and the delivery of that strategy for
the long-term sustainability of the business.
During the year we took the opportunity to review and reset our strategy and we have redefined
our vision and purpose, which you can read more about on pages 12 to 17. We have aligned this
with our governance framework to ensure it is supportive of the strategy and the decisions we as a
Board and as Directors must make. This year has not been without its challenges, as the business
has continued to navigate certain externalities resulting from changes in the macro-economic,
political and residual post-pandemic environments. Some of these challenges are explained in the
section on Protecting the Business on page 47. The good work of the Committees also ensures there
is appropriate focus with sensible, pragmatic outcomes. You can read more about their work in the
reports that follow.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Financial Statements
Additional Information
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C H A I R ’ S I N T R O D U C T I O N C O N T I N U E D
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
Developing our strategic
partnerships to ensure the
sustainable organic growth of
the business
Steady progress against our
sustainability objectives with
continued oversight from the
ESG Committee
Succession planning and
incentive structures to ensure
effective, motivated leadership
to support the future direction of
the Company
Challenging financial
performance and resilience
across the business to ensure
sustainable foundations
for growth
For more information visit
alliancepharmaceuticals.com
At the same time, we announced that
the Board had agreed the appointment
of Richard Jones as Senior Independent
Director whose role will provide further
support to Board members and shareholders.
On 18 May 2022, we announced the
successful appointment of Jo LeCouilliard as
my successor as Chair. I wish Jo all the very
best in her new role.
2023 ANNUAL GENERAL MEETING
This year’s AGM will be held at 9.00am on
25 May 2023. Further details can be found in
the Notice of AGM accompanying this Report.
As previously announced, I will be stepping
down as Chair and Director of the Company at
the end of the 2023 AGM as I hand over the
role to Jo LeCouilliard.
The Board and I would like to thank all
shareholders and colleagues for their continued
support, and we look forward to continuing
with our good work during 2023.
David Cook
Chair
20 March 2023
CHANGE OF AUDITOR
This year we were pleased to welcome Deloitte
LLP as the Company’s new auditor following
KPMG LLP’s resignation at the beginning of
August 2022. Shareholders will see that their
reappointment is proposed at this year’s Annual
General Meeting (‘AGM’).
BOARD APPOINTMENTS
You can read about the Directors’ skills and
experience on pages 61 and 62.
As previously announced, we were
delighted that Jeyan Heper joined as
Chief Operating Officer, and also joined
the Board, on 1 February 2023. Jeyan has
a strong track record of strategic leadership
in the international consumer health market,
overseeing a number of global programmes
and driving growth in flagship brands. He
has responsibility for the Group’s operational
capabilities, identifying growth opportunities,
and further driving the Company’s strategy to
expand its consumer health presence.
To further support the delivery of our
strategy we also welcome Non-executive
Director Martin Sutherland who joined us on
1 February 2023. Martin has a proven track
record of delivering growth through new
product innovation, market diversification
and international expansion. We believe
that Martin’s experience will bring a new
perspective to complement the strong
consumer healthcare knowledge already
present on the Board.
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60
O U R G O V E R N A N C E S T R U C T U R E
THE BOARD
Responsible for the Group’s vision, business model, risk and strategy. Together, the Directors are responsible
for providing effective leadership to promote the long-term success of the Company.
See our Board of Directors on pages 61 to 62
CHIEF EXECUTIVE OFFICER
Responsible for the day-to-day running of the business
and the implementation of the Group’s strategy.
BOARD CHAIR
Leadership of the Board and facilitating the effective
contribution of all members to meetings.
BOARD COMMITTEES
Four Committees operate under delegated powers
and with clear terms of reference.
SENIOR LEADERSHIP TEAM
Support CEO and have management responsibility for the
business operations and its support functions.
NOMINATION COMMITTEE
Reviews the leadership needs of the
organisation and monitors succession planning
for both Board and senior executive roles.
Responsible for the selection process and
nomination of all Directors to the Board, and
reviews the structure, size, and composition of
the Board
AUDIT AND RISK COMMITTEE
Monitors and reviews the financial results and
other reporting and oversees the effectiveness
of risk management and systems of internal
control. Provide confidence to shareholders on
the integrity of reported financial results and
challenge to the external auditors and
senior management.
REMUNERATION COMMITTEE
Ensures there is a formal process for reviewing
salaries, benefits, and other terms of service to
determine appropriate levels of remuneration
for the Executive Directors and other
senior executives.
ESG COMMITTEE
Reviews the overarching ESG vision for the
Company and ensure that the priorities are
anchored to become an integral part of the
overall strategy.
Read more on pages 69 to 71
Read more on pages 72 to 76
Read more on pages 77 to 85
Read more on pages 86 to 87
Committee Chair:
Jo LeCouilliard
Members:
4
Meetings:
8
Committee Chair:
Richard Jones
Members:
3
Meetings:
8
Committee Chair:
Jo LeCouilliard
Members:
3
Meetings:
7
Committee Chair:
David Cook
Members:
6
Meetings:
2
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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61
B O A R D O F D I R E C T O R S
COMMITTEE
MEMBERSHIP KEY
Audit and Risk Committee
View report on page 72
Nomination Committee
View report on page 69
Remuneration Committee
View report on page 77
ESG Committee
View report on page 86
C
Committee Chair
David Cook
Independent Non-executive Chair
Peter Butterfield
Chief Executive Officer
Andrew Franklin
Chief Financial Officer
Jeyan Heper
Chief Operating Officer
COMMITTEE MEMBERSHIP AS AT 31 DECEMBER 2022
C
DATE JOINED
David joined the Board of Alliance as a Non-executive
Director in 2014 and was appointed Chair 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.
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.
EXPERIENCE
He is currently Chief Financial Officer and an Executive
Director of Ellipses Pharma, an international cancer
drug development company, and was previously Chief
Financial Officer and Chief Business Officer of Biotie
Therapies Corp, a drug development company quoted in
Helsinki and on NASDAQ. He has previously held senior
financial positions with Jazz Pharmaceuticals International,
EUSA Pharma and Zeneus Pharma.
David has extensive experience of financial and general
business management (including the implementation
of buy and build strategies) in the life sciences sector,
of financing those businesses and managing investor
relations across a number of stock markets globally.
Peter has over 20 years’ experience in the life sciences
sector and strong leadership experience gained in a
variety of contexts. Peter joined the Board of Alliance in
2010 with the acquisition of Cambridge Laboratories
where he spent five years, latterly as UK Commercial
Director. Prior to joining Cambridge Laboratories,
Peter spent six years at GlaxoSmithKline in a variety of
marketing and sales roles.
From 2010 to 2012 Andrew was Finance Director and
Company Secretary of Genzyme Therapeutics Ltd, the UK
and Ireland subsidiary of Genzyme Corporation. Prior to
that, he gained 12 years’ pharmaceutical experience with
Wyeth in a variety of senior financial positions.
Andrew is a Fellow of the Institute of Chartered
Accountants in England and Wales with extensive
experience of financial management of international
businesses, including significant prior experience in life
sciences companies.
Jeyan joined Alliance as Chief Operating Officer and
Board member on 1 February 2023. He has more than
25 years of diverse experience with a strong track record
of strategic leadership in the international consumer health
market, overseeing a number of global programmes and
driving growth in flagship brands.
Jeyan graduated from the Bosphorus University in Istanbul
with a Bachelor of Arts degree in Political Science and
International Relations.
Jeyan has held senior executive roles at Proctor & Gamble
and Danone Group. In addition, Jeyan was President
and General Manager of Ansell’s sexual wellness global
business before it was spun-out to become Lifestyles
Healthcare, a private equity/pharma-owned company
where Jeyan became CEO.
During his tenure as CEO at Lifestyles Healthcare,
Jeyan delivered significant growth through market and
category expansion, building a strong e-commerce
platform in China and the US, and improving operational
effectiveness. Most recently, Jeyan worked as Head of
Global Transformation at British American Tobacco (BAT)
and held a Non-Executive Director seat on the Board of
NASDAQ-listed Organigram Inc.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
62
B O A R D O F D I R E C T O R S C O N T I N U E D
COMMITTEE
MEMBERSHIP KEY
Audit and Risk Committee
View report on page 72
Nomination Committee
View report on page 69
Remuneration Committee
View report on page 77
ESG Committee
View report on page 86
C
Committee Chair
Jo LeCouilliard
Independent Non-executive Director
Richard Jones
Senior Independent Non-executive
Director
Kristof Neirynck
Independent Non-executive Director
Martin Sutherland
Independent Non-executive Director
COMMITTEE MEMBERSHIP AS AT 31 DECEMBER 2022
C C
DATE JOINED
C
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.
Martin joined Alliance as an independent Non-executive
Director on 1 February 2023.
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
companies Indivior plc and Niox Group plc (formally
Circassia Group plc). She is also on the Board of Recordati
S.p.A, a company listed on the Milan Stock Exchange.
Richard was appointed as Chief Financial Officer at UK
main market listed Medica Group PLC, an international
provider of high-quality telemedicine services. Prior to this,
Richard gained extensive experience in the healthcare
sector in his roles at UK AIM listed companies Mereo
BioPharma Group PLC and Shield Therapeutics PLC. At
Mereo, he had a leading role In the merger with US listed
OncoMed Pharmaceuticals, Inc and Mereo’s dual listing
on Nasdaq In 2019.
At Shield he had a leading role establishing the finance
operations and guiding Shield through its 2016 IPO.
His prior career in investment banking included 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 is Global Chief Marketing Officer and Managing
Director Western Europe 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.
Martin graduated from Oxford University with a Master of
Arts degree in Physics and The University College of London
with a Master of Science degree in Remote Sensing.
Martin is a senior executive with more than 30 years of
global business experience. He is currently a NED at
FTSE listed Forterra plc, a leading UK manufacturer of
essential clay and concrete building products, sitting
on their Nomination, Remuneration, Audit and Risk and
Sustainability Committees. Martin is also a NED on the
Board of Reliance Cyber, a privately held specialist
cyber security business where up until January 2023 he
was CEO.
Martin was CEO of De La Rue plc from 2014 to 2019
and previously held a variety of roles at Detica plc,
becoming Managing Director in 2008 on its acquisition
by BAE Systems plc delivery. He brings experience in
delivering growth through new product innovation, market
diversification and international expansion.
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Strategic Report
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Financial Statements
Additional Information
63
G O V E R N A N C E
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
2023 Budget
Presentations and budget approval
Corporate development
Review of historical acquisitions
Business reviews
Mainland Europe, Asia Pacific, US, various product and brand reviews, brand protection, Great Place to Work,
Innovation and Development
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, Board and senior management succession planning, NED recruitment, terms of reference
Remuneration Committee
Review of salary proposals 2022, Executive remuneration, 2022 corporate bonus awards, Review of incentive plans, 2022 Company
share option awards, 2023 corporate bonus scheme, objectives and targets, terms of reference
Audit and Risk Committee
Appointment of new auditor, key accounting estimates and judgements, significant accounting policies, annual audit process and fees,
external auditor, internal audit, foreign currency and hedging
ESG Committee
Sustainability framework and initiative, investor engagement, disclosure and accounting metrics, carbon action plan and environmental
strategy, TCFD reporting and corporate website disclosures
X
X
X
X
X
X
X
X
X
X
X
X
Governance & Legal
Includes the review of risk management framework, Board Effectiveness Review, Governance reporting, AGM Notice, litigation, Modern
Slavery Statement, review of gender pay, Group compliance
X
X
* Although there is no scheduled meeting in August, a management pack is circulated.
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Financial Statements
Additional Information
64
G O V E R N A N C E C O N T I N U E D
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.
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 which is communicated to
all employees by the management team 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 12 to 26.
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:
› maintaining the policy and decision-making process through
›
›
which the strategy is implemented;
checking that necessary financial and human resources are
in place to meet strategic aims;
providing entrepreneurial leadership within a framework of
good governance and sound risk management;
› monitoring performance against key financial and non-
financial indicators;
responsibility for risk management and systems of internal
control; and
setting values and standards in corporate governance matters.
›
›
THE BOARD AND ITS COMMITTEES
The Board currently comprises eight Directors, being the
Chair, four further independent Non-executive Directors and
three Executive Directors. Following David Cook’s departure,
there will be seven Directors comprising the Chair, three
further independent Non-executive Directors and three
Executive Directors.
The Chair
The Chair, 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 receive
the support from the Board necessary to progress the strategy.
As announced on 18 May 2022 David steps down as Chair
of the Company from the 2023 AGM and Jo LeCouilliard will
become Chair of the Board.
The Chair 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 Chair 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.
Since the announcement on 23 November 2022 that Peter
Butterfield was taking leave from the business, Andrew
Franklin has been acting CEO and continues to do so as
at the date of this Report. He has been carrying out these
responsibilities in Peter’s absence.
The Senior Independent Director (‘SID’)
On 1 February 2023, at the recommendation of the Nomination
Committee, we announced the appointment of Richard Jones as
SID. His role is to act as a sounding board and intermediary for
the Chair and other Board members. His responsibilities include
leading the performance evaluation of the Chair and attending
meetings with shareholders and analysts to obtain a balanced
understanding of any issues or concerns.
The Non-executive Directors
Non-executive Directors are required to commit the time
necessary to fulfil their role 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.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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G O V E R N A N C E C O N T I N U E D
Independence on the Board is reviewed and confirmed
annually by the Nomination Committee. 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. They are
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.
Meeting management
The Company Secretary is secretary to the Board and the
Board’s Committees. On behalf of the Chair, 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 Chair on all matters
relating to governance and is responsible for ensuring
governance, legal and regulatory compliance is considered,
recorded and implemented.
Board attendance, support and meeting management
Meeting attendance
Directors are expected to attend all Board meetings. This includes
a two-day strategy meeting in each year which is also attended
by all senior executives of the Group to review progress in
delivering the Group’s long-term strategic objectives.
Member
David Cook
Peter Butterfield*
Andrew Franklin
Kristof Neirynck
Jo LeCouilliard**
Richard Jones**
Role
Chair
CEO
CFO
NED
NED
NED
Status
Attendance
Independent
–
–
Independent
Independent
Independent
14/14
12/14
14/14
14/14
13/14
13/14
* Peter Butterfield took leave from the business with effect from 23 November 2022.
** Jo LeCouilliard and Richard Jones were recused from meetings in which they had an
interest.
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.
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.
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.
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.
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.
Director induction, training, and development
The Company Secretary is responsible for ensuring that all newly
appointed Directors receive a thorough formal tailored briefing
and induction on joining the Board aimed at providing Directors
with the information to become effective as soon as possible in
their role. The induction has the aim of:
›
›
›
building an understanding of the Company’s business
and markets;
building a link with the Company’s people and an
understanding of the Company’s main relationships; and
ensuring an understanding of the Board’s governance
framework and Board processes.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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G O V E R N A N C E C O N T I N U E D
Each Director received one-to-one inductions with Board and
SLT members and are provided with access to the Directors’
handbook. Both Jeyan Heper and Martin Sutherland received
tailored inductions which included but wasn’t limited to:
› meetings with each Board member and their roles and
responsibilities on the Board and the Committees;
› meetings with each SLT member to explain their areas of
responsibility within the business;
an explanation of the Company’s governance and
compliance framework, including Board procedures;
an explanation of Directors’ responsibilities under the AIM
Rules and other statutory and regulatory rules; and
pharmacovigilance and Good Distribution Practice inductions.
›
›
›
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.
BOARD RESPONSIBILITY FOR SUSTAINABILITY
The Board has overall responsibility for the Group’s sustainability
strategy and programme which includes climate policy and
action and TCFD reporting. In 2022 we continued to refine our
approach to our sustainability framework. The ESG Committee
is responsible for setting the Group’s overarching Sustainability
Strategy, including climate change, and you can read more
about the Committee’s work on pages 86 and 87.
CORPORATE CULTURE AND BUSINESS CONDUCT
Our culture is underpinned by a clear set of values, 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. We recognise
that investors are increasingly looking for socially responsible
companies to invest in, employees are seeking employers with
a strong ethics culture that aligns with their own moral code,
and customers are conducting enhanced due diligence on their
suppliers’ ethical and legal compliance controls.
The Board reviews and approves the Group’s policies that have
been implemented and communicated internally and externally
in the Company’s core languages to those who are expected to
adhere to them. For example, in addition to the codes of conduct,
this includes policies on diversity and inclusion, the prevention of
bribery and corruption, fair competition, conflicts of interest and
anti-slavery. Further information about our policies can be found
in Sustainability – Policies and Documents on our website.
STAKEHOLDER ENGAGEMENT
Engaging with the Company’s stakeholders is well embedded in
the business as we continue to look after our relationships with
shareholders, employees, customers, suppliers and consumers
and the wider communities. The Board is made aware of and
considers the needs and interests of these various stakeholders
and any impact of the decisions it makes.
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 upholds its values and
monitors behaviour for acceptability.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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Company Overview
Strategic Report
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Financial Statements
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67
G O V E R N A N C E C O N T I N U E D
PROMOTING THE SUCCESS OF THE COMPANY – S.172
The powers and duties of the Directors are determined
by legislation and the Company’s Articles of Association.
Collectively, they have a duty to promote the success of Alliance
for the benefit of its members over the long term.
The Directors are aware and mindful of their duties and
obligations under s.172 of the Companies Act 2006 (Section
172). They are required to act in good faith and their discussions
give due consideration to the impact of those decisions on the
Group’s strategy, values, and the interests of the Company’s
various stakeholders. Each Director is responsible for weighing
up all the relevant factors and how these ultimately promote
the long-term success of the Company for the benefit of its
shareholders as a whole. To help them reach well informed
decisions they are provided written reports, market reviews,
guidance, and presentations and briefings from both internal
members of staff and external advisers alongside which assists
them when assessing any risks.
Throughout this Annual Report there are various examples of how
the actions and behaviours of the business affect the interests of
its employees, customers, suppliers, the wider community and
the environment but in this section we also demonstrate how the
Directors have applied their duties under Section 172.
The likely consequences of
any decision in the long term
The interests of the
Company’s employees
The need to foster the Company’s business
relationships with suppliers, customers, and others
The Board considers the long-term consequences on
the business and its stakeholder group when setting
and approving the strategy and the annual budget.
For this purpose, the Directors consider the
assessment of risks and opportunities and how these
might benefit shareholders, and impact, for example,
consumers, suppliers and employees. A long-term
approach ensures the Directors take decisions that
mean a more sustainable business. The strategy is
explained on pages 12 to 17.
The Board considers the activities and welfare of the
Company’s employees at its meetings and from time
to time, employees are invited to attend Board and
Committee meetings to present on key operational,
financial, and strategic matters. There is regular
dialogue between the SLT and all employees through
Breakfast Briefings at which employees are briefed
on matters such as the outcome of surveys,
organisational changes, and other positive initiatives
to support their health and wellbeing. This helps to
ensure our employees remain engaged. They are
also able to participate in the Company’s employee
share option schemes to ensure they feel aligned with
the Company’s plans for growth over the longer term.
You can read more about our employee engagement
on pages 24 to 26 and on page 40.
When the Board reviews the Company’s strategy, the
annual budget and risks, due consideration business
relationships to ensure that they support the long-term
objectives. In addition, the Board reviews policies
and codes of conduct that govern these relationships
took into consideration of some elements for strategic
report and sustainability sections i.e., on anti- bribery
and corruption, human rights, as well as supply chain
resilience. More on the Company’s engagement with
its stakeholders can be found on pages 40 and 41.
The impact of the Company’s operations
on the community and the environment
The desirability of the Company maintaining a
reputation for high standards of business conduct
The need to act fairly as between
members of the Company
The work of the ESG Committee helps the Directors
consider their responsibilities in relation to the
environment and wider communities. They receive
updates on climate risk and the impact of the business
on the environment. All employees are also
encouraged to participate in the process to drive
positive change. When the Board is discussing
consumer products, it discusses the benefits and
timings of transitioning towards sustainable
packaging and considers solutions that help drive the
sustainability agenda. The Board’s commitment in this
area is demonstrated by approval of the Alliance
Environment Strategy and Carbon Action Plan. You
can read more on the Company’s sustainability
objectives on pages 29 to 39.
The Board ensures that the right culture is embedded
throughout the business and is in part attributable to
the Company’s values, attitudes and behaviours
when conducting its business and engaging with
stakeholders. Maintaining high standards promotes
the reputation of the Company, which is clearly
communicated via the Partner Code of Conduct –
available on the Company’s website.
Shareholders are kept informed of Company news
via stock exchange announcements, website and
hard copy communications. With the support of
Investor Relations all shareholders receive
information by their chosen method. In addition, the
Company sets up investor roadshows to meet with
shareholders and discuss any concerns they have.
More recently, the Board took the decision to appoint
a Senior Independent Director to assist the Chair with
shareholder engagement. All shareholders are also
encouraged to attend the Company’s AGM each
year, where they can ask questions freely.
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G O V E R N A N C E C O N T I N U E D
ENGAGEMENT WITH SHAREHOLDERS
The Board and its Committees recognise that to meet their
responsibilities to shareholders and other stakeholders,
it is important to ensure effective engagement with, and
encourage participation from, these parties.
When engaging with shareholders, the Directors are
supported by the Head of IR and Corporate Communications
(Head of IR).
Throughout the year, the CEO, CFO, Chair, Non-executive
Directors and Head of IR met with potential and existing
investors, and they fed back to the Board the key summary points
from their meetings. In addition to these meetings, there were 115
scheduled meetings held as part of the Company’s investor road-
shows for the annual 2021 and half-year 2022 results.
Feedback following an analysis of the Company’s investor
base at each Board meeting and research notes by sell-side
analysts is reported by the CEO. The Board also received
analysts’ notes, and brokers’ briefings to ensure, as far as
possible, a clear and up-to-date understanding of investors’
views. Information on investor sentiment is also provided to the
Board by the Company’s brokers and financial PR advisers.
A list of the Company’s major shareholders can be found in the
investor section of our website, and a list of notifiable holdings can
be found on page 88 of the Directors’ Report.
These are regularly updated following the formal notification of
movements to the Company.
The Company further communicates with shareholders through its
Annual Report and Accounts, half-year announcements, trading
updates and at the Company’s AGM. Such reports as well as other
relevant announcements and related information are all available
on the Group’s website, www.alliancepharmaceuticals.com.
The website also offers a facility to sign up for email alert
notifications of Company news and regulatory announcements.
BOARD EFFECTIVENESS REVIEW
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 Chair 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.
In last year’s Report we set out the feedback received following the
2022 review, which focused on four key areas including Board
planning and dynamics, focus on strategic performance, and
Committee remit and Board engagement. During the year, the
following progress was made which included:
›
›
›
Enhancing the Board’s planning framework to drive discipline
and behaviours. The Chair encourages the NEDs to feed into
the planning process any matters that they feel need to be
brought to the Board for discussion. Improving the reporting
to better support decision-making has been slower than
expected and this continues to be kept under review to ensure
greater focus on strategy and risk and less on operational
matters.
The strategy continues to be well formulated with more time
dedicated to discussing progress against the strategy with
ongoing commitment to understanding the impact of emerging
trends and envision the longer-term plans in the healthcare
sectors and markets.
The Committee Chairs worked with the Company Secretary to
ensure their work is discharged effectively, reviewing business
and compliance requirements in line with broader annual
planning. Succession planning is being developed more
strategically and the Company was pleased to appoint Jeyan
Heper as Chief Operating Officer on the Board.
The Board continues to work on improving its engagement with
investors and employees.
›
The 2023 evaluation consisted of one-to-one meetings between
the Chair and each Director to discuss various matters relating to
Board and Committee performance and their effectiveness.
Results and outcomes were reviewed, summarised and circulated
to Board members for discussion in February 2023.
The table below sets out the key focus areas arising from the
2023 review:
Areas of focus
Feedback and recommendations
Planning,
reporting
and risk
The Board can sometimes be too operationally focused.
Further improvements will be made to ensure alignment of
reporting against key risks and strategy and including less by
way of detailed operational updates.
Board structure
and dynamics
Succession
planning
Board
engagement
Alliance has a relatively small but engaged Board which
meets every month with members forming close working
relationships. This is a strength, but it is also important to
continue promoting healthy discussion and challenge.
Having two additional board members is welcomed
and they have been onboarded well. They add further
perspective and experience to the discussions at the Board.
The Nomination Committee will make it a priority to ensure
conclusion of the ongoing succession plans, dealing with
both long and short-term needs as required.
The Board needs to be more proactive when engaging
with shareholders and will be working with the Head of IR
and Communications and advisers to create shareholder
communication and IR plans. The SID will be expected
to take a leading role to promote good relations with the
Company’s shareholders.
The next review in relation to 2023 is scheduled for early 2024.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
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N O M I N A T I O N C O M M I T T E E R E P O R T
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
“ Our succession plans remain focused on
ensuring we retain a diverse leadership with the
right skills and experience to grow the business.”
Jo LeCouilliard, Nomination Committee Chair
CHAIR’S STATEMENT
I became Chair of the Nomination Committee (‘the
Committee’) shortly after the announcement that David Cook
would be stepping down from the Board. I am pleased to
be able to introduce the Committee’s Report which sets out
its responsibilities and the activities of the Committee during
the year.
This year the focus was on succession planning for the
Chairmanship and at the Executive and senior levels of the
organisation. This process included reviewing Board balance
and Committee composition, diversity of people and the skills
and experience needed to support growth and development.
The Committee, led by Kristof Neirynck, was able to work with
Executive Directors and the Chief People and Infrastructure
Officer to run the process for the nomination and appointment
of a successor for the Chairmanship. As announced on
18 May 2022, I am delighted to have accepted the role of
Chair of the Board when David steps down.
The Committee also ran the process for the appointment of
a new executive role of Chief Operating Officer and a new
independent Non-executive Director to strengthen the Board’s
skills and capabilities. We were pleased to announce the
appointments of both Jeyan Heper and Martin Sutherland
earlier this year. On 10 February 2023, we were pleased to
welcome Martin Sutherland as a member of the Committee.
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.
Jo LeCouilliard
Nomination Committee Chair
20 March 2023
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
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60
61
63
69
72
77
86
88
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N O M I N A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
SKILLS & EXPERIENCE MATRIX
DIRECTOR
ROLE
GENDER
FINANCE
CONSUMER
HEALTHCARE
PHARMA
INTERNATIONAL
GROWTH
FINANCIAL
MARKETS*
Peter Butterfield
Andrew Franklin
Kristof Neirynck
David Cook
Jo LeCouilliard
Richard Jones
Jeyan Heper
Martin Sutherland
CEO
CFO
INED
INED
INED
INED
COO
INED
M
M
M
M
F
M
M
M
* UK and overseas financial markets experience.
THE ROLE OF THE COMMITTEE
The 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 compliance with its Terms of
Reference.
MEMBERSHIP AND MEETING ATTENDANCE
Appointments to the Committee are made by the Board. During the
year the Committee comprised four independent Non-executive
Directors who have the right to attend meetings. Martin Sutherland
joined the Committee in February 2023. 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 processes.
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.
During the year, the Committee held a total of eight meetings:
two scheduled and six unscheduled. Members who are not
able to attend unscheduled meetings offer their apologies and
provide feedback to the Chair of the Committee in advance of
meetings. The two unscheduled meetings were held to deal with
the appointment of the successor to the Chair and review other
executive and senior level succession plans. When discussing the
succession to the Chairmanship of the Board, these meetings were
not attended by Non-executive Directors who formed the subject
of these discussions. Whilst David Cook attended these meetings,
he did not chair them; they were chaired by Kristof Neirynck.
Member
David Cook
Jo LeCouilliard*
Kristof Neirynck
Richard Jones*
Role
Chair
NED
NED
NED
Status
Attendance
Independent
Independent
Independent
Independent
8/8
6/8
8/8
6/8
* Board members were recused from meetings in which they were conflicted.
Board gender diversity
Whilst certain diversity targets are not directly imposed on AIM
companies, the Committee continues to monitor 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. The Company’s Diversity and Inclusion
Policy can be found on the Company’s website.
The Committee is aware of and has discussed the benefits of
diversity on the Board and at the senior management level as part
of the review of succession planning and any Director appointment
process. 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. The Committee discussed 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.
With currently only one female member on the Board, the Board
acknowledges that female representation on the Board is not
where it needs to be, but ensures that focus is maintained at all
stages of the Board recruitment process. The Company engages
and works with specialist recruitment consultants to help identify
talent and search for potential candidates that meet our objective
criteria. Jo LeCouilliard will become the Company’s first female
Chair with effect from the end of the 2023 AGM.
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N O M I N A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
ACTIVITIES OF THE COMMITTEE
The duties and activities of the Committee during the year included:
Duties
Activity in 2022
Review the structure, size, and composition
of the Board, including the independence
of Directors, diversity, skills, knowledge,
experience, and time commitments at least
annually and prior to commencing any
appointment process
Consider succession plans for Directors and
other senior executives
• The Committee considers there to be an appropriate balance between Executive and Non-executive Directors on the Board. Having considered the guidelines on independence,
on appointment as Chair, David Cook was independent and continues to be regarded by the Board as independent alongside Richard Jones, Jo LeCouilliard, and Kristof Neirynck.
• The Chair 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 61 and 62.
It is considered that the Chair and Non-executive Directors are not over-boarded and can allocate sufficient time and commitment to fulfil their duties to the Company.
• Prior to the search and recruitment process for new Directors, the Committee reviewed the skills, capabilities, diversity, and experience on the Board and concluded to specifically seek out skills
and experience in overseas territories and a listed environment.
• The Committee worked closely with the Board and, with the support of the Chief People and Infrastructure Officer, developed strategies in support of progressive and orderly succession planning
for Board and senior management. Planning included consideration of the challenges and opportunities facing the Company with 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.
• Reviewed succession plans in relation to the Chief Executive Officer and other members of the senior leadership team and approved the appointment of Jeyan Heper to the Board.
Nominate and recommend candidates to fill
Board vacancies and make recommendations
to the Board on matters such as Committee
membership, reappointment, and re-election
of Directors
• The Committee is responsible for the selection process for the recruitment of Directors. This process is supported by the Chief People and Infrastructure Officer and the Company engaged the
services of an external executive search and recruitment agency. The process is supported by a detailed recruitment process. Further information about the appointment and induction of Board
Directors can be found in the Chair’s Report on Governance on page 65.
• As announced last year, the nine-year tenure of the Chair will come to an end in early 2023, after which he is no longer considered to be independent. Accordingly, during the year, the
Committee considered succession for the role and shareholders were notified on 18 May 2022 that Jo LeCouilliard will become Chair of the Board following the 2023 AGM. Page 85 in the
Remuneration Committee Report sets out the term of appointment for each Director.
• Recommended the appointment of Jeyan Heper as a new Chief Operating Officer and to the Board.
• Recommended the appointment of new Non-executive Director Martin Sutherland to the Board.
Reviewing the need for a 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 Chair or other Board members. Richard Jones was
appointed SID with effect from 1 February 2023.
Reviewing the outcomes of the Board
evaluation insofar as these relate to
composition and time commitment of Directors
• The Committee reviewed the outcomes from the annual evaluation of the Board insofar as these 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.
Recommend 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 five Directors, being eligible, put themselves forward for annual re-election and both Jeyan Heper and Martin Sutherland stand for election at the Company’s
AGM.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
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Strategic Report
Governance
Financial Statements
Additional Information
72
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
A U D I T A N D R I S K C O M M I T T E E R E P O R T
“ The Committee reviews the integrity of the financial
statements and challenges systems of governance.”
Richard Jones, Audit and Risk Committee Chair
CHAIR’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.
This report is intended to provide shareholders with information
about the Committee’s responsibilities and report on the activities
of the Committee during the year.
During the year, alongside our regular work carefully reviewing
the Company’s annual financial statements and the associated
accounting treatment and disclosures, efforts focused on the
change of auditor. As detailed in last year’s Annual Report, we
initiated a tender process for the 2022 audit and the Company
was pleased to announce on 8 August 2022 the appointment
of Deloitte LLP (‘Deloitte’) as the Group’s auditor. Andrew
Wright is the lead audit partner and, as well as meeting up with
Deloitte without management being present, I also meet Andrew
regularly throughout the year.
There has also been a strong focus on the reporting of
performance and accounting treatment in relation to our
CBEC business in China, and acquisitions in the US: Biogix Inc.
(Amberen™) and ScarAway™ the largest silicone-based scar
treatment brand in the US, and the rights to sell Kelo-Cote™.
The Committee reviews the Group’s risk register quarterly, and
believes that the Group strategy has the support of a management
team who understand the risk management framework required
to deliver it. In addition, the risk framework and risk register are
shared with Deloitte, who consider and challenge the Committee
on our reporting and disclosure requirements.
On 10 February 2023, we were pleased to welcome Martin
Sutherland as a member of the Committee.
Richard Jones
Audit and Risk Committee Chair
20 March 2023
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Financial Statements
Additional Information
73
A U D I T A N D R I S K C O M M I T T E E R E P O R T C O N T I N U E D
THE ROLE OF THE COMMITTEE
The 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 taken 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;
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; and
reviewing the Company’s procedures for detecting fraud,
bribery and corruption and ensuring arrangements are
adequate for employees to raise concerns.
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 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.
MEMBERSHIP AND MEETING ATTENDANCE
During the year, the Committee held a total of eight meetings: six
scheduled and two unscheduled meetings, reporting on its
activities to the Board. Members who are not able to attend
unscheduled meetings offer their apologies and provide
feedback to the Chair of the Committee In advance of meetings.
The Committee comprised three independent Non-executive
Directors who have the right to attend meetings. Martin Sutherland
joined the Committee in February 2023.
Member
Richard Jones
David Cook
Jo LeCouilliard
Role
Chair
NED
NED
Status
Attendance
Independent
Independent
Independent
8/8
8/8
6/8
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.
During 2022, the three Non-executive Directors, all of whom have
an accountancy qualification, review internal controls and financial
reporting matters. They have a direct relationship with the external
auditor. All 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, Group Head of Finance and Group Financial
Controller are invited to attend all meetings, while other senior
financial managers attend as appropriate.
The external auditor also attends 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.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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alliancepharmaceuticals.com
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
74
A U D I T A N D R I S K C O M M I T T E E R E P O R T C O N T I N U E D
KEY ACTIVITIES OF THE COMMITTEE
Areas of focus
Key duties and responsibilities
Activities in the year ended 31 December 2022
Financial statements and
narrative reporting
The content and integrity of financial statements
and any formal announcements relating to
financial performance, including review of
the significant financial reporting judgements
contained therein
›
Review of the financial statements and narrative reporting in the Annual Report and Accounts for 2021 and 2022 with
reference to the reports being fair, balanced and understandable. This 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 and Annual Report and Accounts for the financial year ended 31 December 2021
›
Review of the unaudited half-year results to 30 June 2022.
›
Review of the preliminary results and Annual Report and Accounts for the financial year ended 31 December 2022.
›
› Consideration of reports from the external auditor in respect of the Annual Report and Accounts from 1 January 2022
to the date of this Report.
Going concern
Matters that have informed the Board’s
assessment of whether the Company is a
going concern
› A review of the going concern including methodology, assessment in support of the going concern assumption,
concluding the expectation that the Group has adequate resources to continue in operation existence for the
foreseeable future.
Accounting policies
and standards
Key accounting estimates and judgements
›
In respect of the preparation of the financial statements for the year ended 31 December 2022, the Committee
reviewed key accounting judgements and estimates including a review of the Group’s weighted average cost of
capital (‘WACC’).
Review of intangible assets, including consideration of impairment under IAS 36.
Review of alternative performance measures.
›
›
› Continued review and assessment under IFRS 15 and the revenue recognition in relation to a major cross-border
e-commerce distribution agreement.
Risk management and
internal controls
Financial and other internal controls and risk
management systems, including the Group’s
Principal Risks and Uncertainties
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 and Group risk register.
›
›
Review of the Principal Risks and Uncertainties reported in the Annual Report & Accounts 2022.
Review of progress to establish an internal audit function.
For more information visit
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Regulatory and compliance risk
›
Review of the Company’s Whistleblowing policy and procedures.
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
75
A U D I T A N D R I S K C O M M I T T E E R E P O R T C O N T I N U E D
KEY ACTIVITIES OF THE COMMITTEE CONTINUED
Areas of focus
Key duties and responsibilities
Activities in the year ended 31 December 2022
Review of external
auditor
The policy to control engagement of the
external auditor to supply non-audit services
›
Review of feedback received from the outgoing auditor and consideration of whether there were any areas of
financial oversight or governance to address concluding no changes were required.
› Conduct a tender process for the change of auditor.
›
Review the terms of appointment, areas of responsibility and duties of the auditor including fees for the 2022 external
audit and recommendation to the Board for approval.
Review of the scope and strategy for the 2022 external audit.
Review of the external auditor’s performance, independence, and objectivity 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 years ended 31 December 2021 and 2022.
›
›
›
External auditor’s independence and objectivity
and the effectiveness of the audit process
› 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 years ended 31 December 2021 and 2022.
Terms of Reference
Reporting to the Board on how the Committee
has discharged its responsibilities
›
The Committee reviewed its own Terms of Reference which are considered to be satisfactory. The Committee and
Board were satisfied that the Committee and its members continue to operate effectively individually and collectively
and had discharged all of the duties within its remit.
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.
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.
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.
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.
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Effectiveness and independence of the external auditor
The Committee is responsible for agreeing the terms of
engagement with the Company’s external auditor. The objectivity
and independence of the external auditor is safeguarded by
reviewing the auditor’s formal declarations, monitoring
relationships between key audit staff and the Company, and
tracking the level of non-audit fees payable to the external
auditor. The Committee annually reviews the scope and fees for
the annual audit of the Company.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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alliancepharmaceuticals.com
A U D I T A N D R I S K C O M M I T T E E R E P O R T C O N T I N U E D
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
Training and monitoring
›
›
›
›
›
INTERNAL AUDIT FUNCTION
The Committee asked management to establish an internal audit
function and is monitoring the establishment of the internal audit
function as we strengthen our internal audit capabilities by
investing in people and systems to assist with reporting and
auditing trails. This process is expected to complete in 2023.
SPEAK UP POLICY
The Company has a Speak Up Policy and procedures to help
with the detection and prevention of fraud. Reviewed annually,
the Policy was updated during the year and published on the
Company’s Intranet and 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
Change of auditor
During the year, the Committee led a formal tender process in
search of a new audit firm for the 2022 audit. The process
included issuing an audit tender letter, timetable, audit scope and
information on the Company. Potential firms were assessed
against set criteria with quality and challenge being primary
factors and in line with FRC recommended selection processes.
Following this process, we were pleased to notify the
appointment of Deloitte on 8 August 2022, when KPMG stepped
down as the Company’s auditor. KPMG did not participate in the
tender process.
Deloitte’s reappointment requires the approval of shareholders at
the AGM and accordingly, the Committee recommended that a
resolution be proposed for their appointment at this year’s AGM.
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.
Deloitte formally presented 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.
Alliance Pharma plcAnnual Report and Accounts 2022Alliance Pharma plc Annual Report and Accounts 2022 Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
77
R E M U N E R A T I O N C O M M I T T E E R E P O R T
“ We balance our remuneration
policies and practice with the size
and complexity of our business.”
Jo LeCouilliard, Remuneration Committee Chair
CHAIR’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.
This year, we held several meetings to review our remuneration
policy to ensure it remains appropriate for the size and
complexity of our business. The Committee continues to
believe 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. There were no changes to our Policy on Remuneration
this year. Key activities of the Committee included:
›
›
reviewing our remuneration policies and remuneration
levels (both fixed and variable) in the context of
appropriate AIM market comparisons;
ensuring our policy continues to achieve its objectives
and continues to attract, retain, and motivate a high-
quality management team to run the Alliance business
successfully for our shareholders;
›
reviewing the remuneration for the acting CEO;
›
› 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 2022;
approving the grant of share option awards under the
Company’s share incentive plans to the Executive Directors
and employees; and
reviewing the holding requirements under the Company’s
Share Ownership Policy.
›
›
On the 10th February 2023, we were pleased to welcome
Martin Sutherland to the Committee. The Committee continues
to monitor trends and developments in relation to
remuneration market practices and corporate governance,
and welcomes views from its shareholders. I will be available
to answer any shareholder questions on the Committee’s
activities at this year’s AGM. In the meantime, I would like to
thank our shareholders for their continued support.
Jo LeCouilliard
Remuneration Committee Chair
20 March 2023
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R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
THE ROLE OF THE REMUNERATION COMMITTEE
The role of the 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.
MEMBERSHIP AND MEETING ATTENDANCE
Appointments to the Committee are made by the Board
following 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. During
the year, the Committee held a total of seven meetings: three
scheduled and four unscheduled and reported on its activities to
the Board.
During the year, the Remuneration Committee comprised three
independent Non-executive Directors and their attendance was
as follows:
Member
Jo LeCouilliard
David Cook
Kristof Neirynck
Role
Chair
NED
NED
Status
Attendance
Independent
Independent
Independent
7/7
7/7
7/7
Martin Sutherland was appointed to the Committee in
February 2023.
ACTIVITIES OF THE COMMITTEE
During the year, matters reviewed and considered by the
Remuneration Committee included reviewing policies on
remuneration, the external environment, market comparators,
increases to annual base salaries, short-term and long-term
reward structures, 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 its external advisers, Ellason LLP. They 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.
REMUNERATION POLICY
Remuneration policy tables
As the Company is admitted to AIM, 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.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Financial Statements
Additional Information
79
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
POLICY TABLE IN RESPECT OF EXECUTIVE REMUNERATION
Element
Policy
Element
Policy
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 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.
Annual bonus
continued
Chief Executive Officer
A bonus of 20% of base salary, increasing on a sliding scale up to a maximum of 100% of base
salary, is payable upon the achievement of financial performance targets. 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.
Base salary
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% of salary. When appropriate to do so, Executive
Directors may take benefits as a salary cash supplement (which will ordinarily be reduced to take
account of the employer National Insurance Contributions).
Other benefits in kind include life assurance, healthcare and the provision of a cash allowance in lieu of
a company car.
Annual bonus
The delivery of the Group’s in-year, short-term corporate goals is incentivised by offering a cash-settled
bonus (‘Annual Bonus’) linked to two factors:
• the achievement of budgeted levels of underlying profit before tax, which is the key metric the Board
considers in monitoring corporate performance; and
Share incentive
schemes
• 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 using 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:
Share
ownership
Chief Financial Officer
A bonus of 20% of base salary, increasing on a sliding scale up to a maximum of 100% of base
salary, is payable upon the achievement of financial performance targets. 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.
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 HMRC approved limits.
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 pages 81 and 82.
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. 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 and COO are required to build an
interest equal to 150% of their salary. Further information can be found on page 85 of this Report.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
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Financial Statements
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80
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
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 Board 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.
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 Neirynck
Salary or fees
Other
Pension
Bonus
Total remuneration, excluding
share options
Exercised share
option gains
Total remuneration, including
share options
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
356,083
335,500
12,235
12,377
31,514
28,998
239,200
226,667
11,474
11,922
20,846
22,667
–
15,000
88,000
82,667
49,458
45,750
49,458
45,750
47,201
3,844
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
829,400
755,178
23,709
24,299
52,360
51,665
_
_
_
–
–
–
–
–
238,889
399,832
615,764
155,940
271,520
417,296
–
–
–
–
–
–
15,000
88,000
82,667
49,458
45,750
49,458
45,750
47,201
3,844
394,829
905,469
1,225,971
–
–
–
–
–
–
–
–
363,146
399,832
978,910
–
–
–
–
–
–
271,520
417,296
–
15,000
88,000
82,667
49,458
45,750
49,458
45,750
47,201
3,844
363,146
905,469
1,589,217
1 Nigel Clifford retired from the Board as a Non-executive Director on 30 April 2021.
No Director received any remuneration from a third party in respect of their service as a Director of the Company.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
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Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
81
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
BASE SALARY
During the year, the Committee undertook a review of market
benchmarks, including companies of similar size and sector, to
gauge the pay positioning of the executive directors and other
senior management; the review concluded that our total
remuneration levels were positioned materially below median.
To help improve the positioning, base salaries for the CEO and
CFO were increased during the year from £338,250 to
£365,000 for the CEO and from £230,000 to £243,800 for
the CFO. These increases took effect on 1 May 2022. In
addition, the Committee agreed an uplift of £7,000 per month to
Andrew Franklin in recognition of his additional responsibilities as
acting CEO since November 2022. Peter Butterfield earned his
fixed pay whilst on leave.
The annual base salary for the COO is £275,000.
PENSION AND BENEFITS
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. The
Executive Directors accrue retirement benefits 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 — 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.
No annual bonus payments have been paid to the Executive
Directors in respect of the year ending 31 December 2022 as the
required threshold level of PBT was not achieved.
NON-EXECUTIVE DIRECTORS’ FEES
An increase to Non-executive Directors’ fees was approved
during the year and took effect on 1 May 2022.
The annual fee paid to David Cook as Chair is £90,000. Jo
LeCouilliard and Richard Jones each receive an annual fee of
£46,128 plus a Committee Allowance of £5,000 for chairing the
Remuneration and Audit and Risk Committees, respectively.
Kristof Neirynck’s annual fees increased to £47,736.
No Committee Allowance is paid for the chairing of the
Nomination Committee.
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 89.
AWARDS UNDER THE ALLIANCE COMPANY SHARE
OPTION PLAN 2015 (‘CSOP’)
During the year, as part of the Company’s annual award
process, 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 2022, the Company granted Peter
Butterfield 182,500 share options under the CSOP and
Andrew Franklin 121,900 share options. These share options
were granted with an exercise price of 58.2p per share
(being the closing mid-market price of one 1p Ordinary share
in the Company at close of trading on 28 September 2022).
Based on the exercise price, the value of the awards as at the
date of grant was equal to £106,215 for the CEO and
£70,945 for the CFO. These awards will vest on the third
anniversary from the date of grant, 28 September 2025,
subject to meeting the EPS and TSR performance targets as set
out on the following page.
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 2022 with a face value of 55% of
base salary to Peter Butterfield, equal to £200,750 (344,931
option awards); and 45% of base salary to Andrew Franklin,
equal to £109,710 (188,505 option awards). The strike price
used to calculate the quantum of awards was 58.2p per share
(being the closing mid-market price of one 1p Ordinary share in
the Company at close of trading on 28 September 2022). These
awards will vest on the third anniversary from the date of grant,
28 September 2025, subject to meeting the EPS and TSR
performance targets on the following page.
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Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
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.
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 2022 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, equally weighted as set out below:
EPS Compound Annual Growth Rate
over the performance period
% of award that vests (of 50%)
< 5% CAGR
5% –10% CAGR
0%
Calculated on a straight-line
basis between 50% and 100%
> 10% CAGR
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 2021, to (ii) the EPS as
presented in the published Annual Report for the financial year ending 31 December 2024.
EPS Performance Period: means the period from 31 December 2021 to
31 December 2024 (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
Equal to or greater 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%
100%
Index: means the FTSE Small Cap Index, excluding investments trusts as determined by the
Company’s nominated adviser.
TSR: means total shareholder return calculated by reference to the Company’s share price
appreciation plus all dividend per share paid (based on ex 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: means the period starting on the Grant Date and ending on the
third anniversary of the Grant Date.
AWARDS VESTING DURING THE YEAR
On 5 December 2022, market value share options made in
2019 under the CSOP to Peter Butterfield and Andrew Franklin
vested 50% based on the achievement of the EPS target for
the financial year ending 31 December 2021 of 6.30p (being
RPI+2% per annum over the three-year performance period).
The remaining 50% of the CSOP awards lapsed as the TSR
element was not met.
Total Shareholder Return
3rd January 2022 to 29th December 2022
)
0
0
1
o
t
t
)
d
0
e
0
s
1
a
b
o
e
t
r
d
(
e
n
s
r
a
u
b
e
e
r
r
r
(
e
n
d
r
l
u
o
h
e
e
r
r
r
a
e
h
d
s
l
o
a
h
e
o
r
T
a
h
s
t
t
l
l
t
a
o
T
125
115
125
105
115
95
105
85
95
75
85
65
75
55
65
45
55
35
45
25
Dec
35
2021
25
Jan
2022
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Alliance
Mar
Feb
Dec
2021
Jan
2022
Alliance
Earnings Per Share
6.50
FTSE Small Cap (ex. Investment Trusts)
Apr May
Aug
Jun
Jul
FTSE AIM 100
Oct
Sep
Nov
FTSE Small Cap (ex. Investment Trusts)
FTSE AIM 100
)
p
(
S
P
E
)
p
(
S
P
E
6.50
6.25
6.25
6.00
6.00
5.75
5.75
5.50
5.50
5.25
Dec
2021
5.25
Dec
2021
Jan
2022
Jan
2022
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Feb
Mar
Apr
May
Source: Refinitiv Eikon as at 06 March 2023
Nov
Aug
Sep
Oct
Jul
Jun
Source: Refinitiv Eikon as at 06 March 2023
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83
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
LTIPs granted in 2019 also vested to Peter Butterfield and Andrew Franklin vested at 50% based on
the achievement of an EPS target for the financial year ending 31 December 2021 of 6.30p (being
RPI+2% p.a. over the five-year performance period). The remaining 50% of the LTIP awards lapsed
as the TSR element was not met.
Details of the number of shares vesting and the relevant exercise prices for these option awards are
set out in the table below and on page 84. The closing mid-market price of Ordinary shares on
31 December 2022 (being the last dealing day in the calendar year) was 53.0p and the range
during the year was from 35.3p to 121.6p.
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 2022 and who served during the year are as shown below. Shares are retained as
required to comply with the Company’s Share Ownership Policy for which details are provided on
page 79.
Peter Butterfield
Type of award
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
CSOP Unapproved
CSOP Approved
LTIP
CSOP Approved
CSOP Unapproved
LTIP
* No shares were exercised during 2022.
Date of grant
Exercise price (p)
Performance
condition
No. of
options granted
Vested
Exercised*
Lapsed
Number of options
capable of exercise
Exercisable from
Exercisable
to
27-Oct-16
05-Oct-18
05-Dec-19
05-Dec-19
23-Sep-20
23-Sep-20
29-Sep-21
29-Sep-21
29-Sep-21
29-Sep-22
29-Sep-22
29-Sep-22
47.50
81.60
76.90
Nil
73.70
Nil
102.80
102.80
Nil
58.20
58.20
Nil
EPS
EPS
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
1,000,000
1,000,000
500,000
1,250,000
1,250,000
137,500
196,684
165,000
246,269
139,943
29,182
180,970
1
182,499
344,931
68,750
98,342
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
68,750
98,342
500,000
27-Oct-21
27-Oct-26
1,250,000
05-Oct-21
05-Oct-28
68,750
98,342
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-23
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23-Sep-23
23-Sep-30
23-Sep-23
23-Sep-24
29-Sep-24
29-Sep-31
29-Sep-24
29-Sep-31
29-Sep-24
29-Sep-25
29-Sep-25
29-Sep-32
29-Sep-25
29-Sep-32
29-Sep-25
29-Sep-26
3,872,979
2,417,092
500,000
167,092
1,917,092
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
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Strategic Report
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Financial Statements
Additional Information
84
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
Andrew Franklin
Type of award
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Unapproved
CSOP Approved
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
CSOP Unapproved
LTIP
Date of grant
Exercise price (p)
Performance
condition
No. of
options granted
Vested
Exercised*
Lapsed
Number of options
capable of exercise
Exercisable from
Exercisable
to
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
29-Sep-22
29-Sep-22
46.75
47.50
47.50
53.00
81.60
76.90
76.90
Nil
73.70
Nil
102.80
Nil
58.20
Nil
No
EPS
EPS
EPS
EPS
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
EPS & TSR
1,935,829
1,935,829
1,435,829
155,000
400,000
170,000
178,000
39,011
55,989
111,183
110,000
134,328
115,000
100,681
121,900
188,505
155,000
400,000
170,000
178,000
19,505
27,994
55,592
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,505
27,994
55,592
–
–
–
–
–
–
500,000
155,000
400,000
170,000
178,000
19,505
27,994
55,592
–
–
–
–
–
–
04-Dec-18
04-Dec-25
27-Oct-19
27-Oct-26
27-Oct-21
27-Oct-26
15-Sep-20
15-Sep-27
05-Oct-21
05-Oct-28
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-29
05-Dec-22
05-Dec-23
23-Sep-23
23-Sep-30
23-Sep-23
23-Sep-24
29-Sep-24
29-Sep-31
29-Sep-24
29-Sep-25
29-Sep-25
29-Sep-32
29-Sep-25
29-Sep-26
3,815,426
2,941,920
1,435,829
103,091
1,506,091
* Neither Peter Butterfield nor Andrew Franklin exercised any share options during the year.
DIRECTORS’ INTERESTS, 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.
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R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
DIRECTORS’ INTERESTS, SHAREHOLDINGS & SHARE OWNERSHIP POLICY
CONTINUED
As at 14 March 2023, the Executive Directors hold the following interests in Ordinary shares of
the Company:
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.
Director
Peter Butterfield
Andrew Franklin
CEO
CFO
Percentage
of salary
2022 Base
salary
Shareholding
Vested but
unexercised
awards
Value of
holdings*
% achieved
200% £365,000
442,104
1,917,092
£371,233
150%
£243,800
128,384
1,506,092
£214,360
102%
88%
Peter Butterfield
Chief Executive
22/02/2010
Andrew Franklin
Chief Financial Officer
28/09/2015
Executive Director
Date of
appointment
Date of
current contract
Notice period
(Company)
Notice period
(Director)
* At the closing market price on 13 March 2023: 66.1p.
Jeyan Heper
Chief Operating Officer 01/02/2023
05/08/2010
Rolling 12 months
25/06/2015
Rolling 12 months
11/01/2023
Rolling 12 months
12 months
12 months
12 months
12 months
12 months*
12 months*
The following table shows the interests of the Directors (and their spouses and dependent children) in
the shares of the Company.
Director
Peter Butterfield
Andrew Franklin
David Cook
Richard Jones
Jo LeCouilliard
Kristof Neirynck
At 31 December 2021
At 31 December 2022
Beneficial
442,104
128,384
234,129
15,000
–
–
Non-
beneficial
–
–
–
–
–
–
Total
Beneficial
442,104
442,104
128,384
128,384
234,129
234,129
15,000
15,000
–
–
–
–
Non-
beneficial
–
–
–
–
–
–
Total
442,104
128,384
234,129
15,000
–
–
* 6-months’ written notice during first 12 months of employment and thereafter not less than 12-months written notice by either the Company
or the Director.
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
4 years
Nil
Jo LeCouilliard
Independent NED
01/01/2019
5 years
Richard Jones
Independent NED
01/01/2019
5 years
Kristof Neirynck
Independent NED
01/12/2021
5 years
Martin Sutherland
Independent NED
01/02/2023
5 years
9 Months
9 Months
46 Months
58 months
* David Cook will step down as Chair of the Board with effect from the AGM.
The Executive Directors’ service contracts and Chair 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.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
86
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
E S G C O M M I T T E E R E P O R T
“ Running our business in a responsible
way, minimises negative impacts so
we can make a positive contribution.”
David Cook, ESG Committee Chair
CHAIR’S STATEMENT
It gives me great pleasure to introduce this year’s report from
the ESG Committee (‘the Committee’).
The following pages set out the Committee’s responsibilities
and you can read about the activities the Committee
discussed during the year.
This year we have made significant strides into our
commitment to becoming a more sustainable business and in
setting our ESG priorities, ensuring that these priorities align
with the Company’s strategy. The Committee continues to
believe that operating our business in a responsible way,
minimises negative impacts on people and planet and makes
a positive contribution to society.
A lot of ground has been covered in the 12 months since the
last Committee’s report. We have witnessed progress in the
Company’s Net Zero Carbon strategy; have come to
understand our material sustainability issues, introduced or
reviewed policies to strengthen our governance framework
and improved our voluntary TCFD reporting.
I would like to thank those shareholders who also
continue to work with us to help us better understand
responsible investing.
You can also read more about our work on Sustainability
on the Company’s website.
David Cook
ESG Committee Chair
20 March 2023
For more information visit
alliancepharmaceuticals.com
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Financial Statements
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87
E S G C O M M I T T E E R E P O R T C O N T I N U E D
THE ROLE OF THE COMMITTEE
The ESG Committee’s primary role is to review the overarching
ESG vision for the Company, including climate change, and
ensure that the priorities are anchored and are an integral part of
the Company’s overall strategy.
DUTIES OF THE COMMITTEE
The duties of the Committee include:
›
›
›
›
›
›
›
›
To recommend the overarching ESG vision to the Board
and ensure that ESG priorities are anchored at the top of
the Company
To ensure ESG priorities are an integral part of the
Company’s overall strategy
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 the Board in defining and executing the Company’s
strategy and 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
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
MEMBERSHIP AND MEETING ATTENDANCE
All Board members currently attend Committee meetings. During
the year, the Committee held two scheduled meetings and
reported on its activities to the Board.
ACTIVITIES OF THE COMMITTEE
An overview of our approach and sustainability framework can
be found on pages 29 to 30 and can be found in our Online
Sustainability Report on our website.
Member
David Cook
Peter Butterfield
Andrew Franklin
Jo LeCouilliard
Richard Jones
Kristof Neirynck
Role
Chair
CEO
CFO
NED
NED
NED
Status
Attendance
Independent
–
–
Independent
Independent
Independent
2/2
2/2
2/2
2/2
2/2
2/2
The Committee works closely with the SLT, Investor Relations and
our Corporate Sustainability Lead who are invited to attend
meetings. Others are invited to attend as appropriate to support
the Committee with discussions.
Activities
›
Reviewed 2022 and 2023 objectives and sustainability
framework and initiatives
Established a sustainable packaging strategy programme to
review the Group’s product portfolio
Increased supply chain oversight through “Know your
Supplier” and published our Partner Code of Conduct
›
›
› Developed the carbon action plan which includes
understanding what the Company’s supply chain are doing
to reduce their Scopes 1,2 and 3 emissions
› Outlined current investment into environmental strategy and
carbon action plan by introducing EV schemes to encourage
behavioural changes
During the year, the Committee also invited ESG consultants to
present on the work that they have been doing with the business
on Net Zero Carbon strategy, understanding the Company’s
Scope 1, 2 and 3 emissions and setting the carbon action plan.
› Continued to work with the Company’s appointed energy
consultancy firm to help shape the medium-term ambition,
particularly in the areas of TCFD and Scope 3 emissions,
supply chain management and development of key metrics
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Financial Statements
Additional Information
88
D I R E C T O R S ’ R E P O R T
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 2022.
The Directors’ Report, required under the Companies Act 2006,
includes and comprises the Directors’ biographies on pages
61 and 62, the Governance statement on pages 58 to 68, the
Remuneration Committee Report on pages 77 to 85 and the
Strategic Report on pages 06 to 56.
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 56. 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 128 and 129 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 61 and 62. The
rules setting out the powers of Directors, their appointment and
replacement are set out in the Company’s Articles of Association.
Further information on the associated process can be found on
page 70 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 85. All Directors put themselves
forward for annual re-election at the Company’s AGM.
Directors’ indemnities
The Company’s Articles of Association contain provisions 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 17 March 2023 is
539,995,086 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 2022 of 0.592p per share (2021: 0.563p) which was
paid to shareholders on 19 January 2023. The Directors are
recommending a final dividend of 1.184p per share (2021:
1.128p) which, subject to shareholders’ approval at the AGM on
the 25 May 2023, will be paid on 18 July 2023 to shareholders
on the register at close of business on 23 June 2023.
The total dividend paid and proposed in respect of the year
ended 31 December 2022 is therefore 1.776p per share
(2021: 1.691p).
Substantial shareholdings
As at 17 March 2023, 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
DBAY Advisors Limited
Slater Investment
Van Lanschot Kempen
Rathbone plc
Royal Bank of Canada
Fidelity Mgt & Research
Investec Group
Mr John Dawson
Number of
shares held
Percentage of
issued share
capital
55,734,204
10.32%
51,906,041
49,854,026
20,879,002
20,645,236
19,644,025
17,264,547
16,200,462
9.61%
9.23%
3.87%
3.82%
3.64%
3.20%
3.00%
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Financial Statements
Additional Information
89
D I R E C T O R S ’ R E P O R T C O N T I N U E D
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 page 81.
The Alliance Long-Term Incentive Plan 2019 (‘LTIP’)
In 2019, the Company introduced the LTIP which forms part of the
remuneration strategy for the Executive Directors and members
of the Senior Leadership Team. Awards are granted in the form
of nil-cost share options based on a percentage of base salary.
All awards granted under the LTIP are subject to performance
conditions and malus and clawback provisions. Subject to
achieving the performance conditions set by the Committee, such
awards will vest three years from the date of grant and participants
will have 12 months in which to exercise any vested award.
Details in relation to awards granted to the Company’s Executive
Directors are contained in the Remuneration Report on pages
83 and 84.
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 84.
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 133 to 137.
Charitable donations
During the year ended 31 December 2022, the Group
contributed £58,790 (2021: £25,635) to charitable causes.
Political donations
No political donations or contributions were made, or political
expenditure incurred during the period.
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
90
D I R E C T O R S ’ R E P O R T C O N T I N U E D
Directors’ obligations to the auditor
The Directors confirm that: (a) so far as each of the Directors
is aware, there is no relevant audit information of which the
Company’s auditor is unaware; and (b) 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. This statement is given
in accordance of section 418 of the Companies Act 2006.
Company’s auditor
The Company announced the appointment of Deloitte LLP on
8 August 2022 to fill a casual vacancy until the next AGM.
Deloitte LLP has expressed its willingness to be formally
appointed as the Company’s auditor and a resolution will be
proposed at the AGM.
Annual General Meeting
This year’s AGM will be held on 25 May 2023, 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
Chair 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.
Totals
The total consumption (kWh) figures for reportable energy
supplies are shown as follows:
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 Link’s 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.
COMPLIANCE WITH THE STREAMLINED ENERGY AND
CARBON REPORTING REQUIREMENTS
Annual reporting figures
The total consumption and emissions figures for energy supplies
reportable by the Company.
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.
Utility and Scope
Grid-supplied electricity (Scope 2)
Gaseous and other fuels (Scope 1)
Transportation
(Scope 1 and 3)
Total
2022 Consumption
(kWh)
2021Consumption
(kWh)
229,932
8,604
193,853
432,389
256,103
10,644
144,186
410,933
The total emission (tCO2e) figures for reportable energy supplies
are set out below. Conversion factors utilised in these calculations
are detailed in the appendix on page 91:
Utility and Scope
Grid-supplied electricity (Scope 2)
Gaseous and other fuels (Scope 1)
Transportation
(Scope 1 and 3)
Total
2022 Consumption
(tCO2e)
2021 Consumption
(tCO2e)
44.46
1.57
45.38
91.42
54.38
1.95
33.68
90.01
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 on page 91,
and the results of this analysis are shown as follows:
Intensity Metric
tCO2e/£m turnover
tCO2e/£m headcount
2022 Intensity
Metric
2021 Intensity
Metric
0.79
0.48
0.70
0.50
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Financial Statements
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91
D I R E C T O R S ’ R E P O R T C O N T I N U E D
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 2022
In 2022, we submitted an application for full planning permission
and listed building consent for the installation of solar PV panels
on the roof of our Avonbridge site.
Measures prioritised for implementation in 2023
Subject to receipt of the required permissions and consents,
we plan to progress with the installation of the solar PV panels
in 2023.
Appendix to SECR
Reporting methodology
Scope 1, 2 and 3 consumption and CO2e emissions data
has been calculated in line with the 2019 UK Government
environmental reporting guidance. Emissions Factor Database
2022 version 1 has been used, utilising the published kWh gross
calorific value (CV) and kgCO2e emissions factors relevant for
reporting period 01/01/2022 – 31/12/2022.
Estimations undertaken to cover missing billing periods for
properties directly invoiced to Alliance were calculated on a
kWh/day pro-rata basis at the meter level. These estimations
equated to 8% of reported consumption.
For properties where Alliance is indirectly responsible for utilities
(i.e. via a landlord or service charge), an average consumption
for properties with similar operations was calculated at meter
level and applied to the properties with no available data. These
full-year estimations were applied to one electricity supply and
one gas supply.
Intensity metrics have been calculated using total tCO2e figures,
and the selected performance indicator agreed with Alliance for
the relevant report period:
›
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.
›
›
Total UK turnover in 2022: £115.5m (2021: £128.4m)
Total UK headcount in 2022: 190 (2021: 179)
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
Parent Company financial statements for each financial
year. Under the AIM Rules of the London Stock Exchange
they are required to prepare the Group financial statements
in accordance with 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;
› make judgements and estimates that are reasonable, relevant
›
›
and reliable;
state whether they have been prepared in accordance with
UK-adopted international accounting standards;
assess the Group and Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
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
Group General Counsel & Company Secretary
20 March 2023
Governance
Chair’s Introduction
Our Governance Structure
Board of Directors
Governance
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
ESG Committee Report
Directors’ Report
58
60
61
63
69
72
77
86
88
For more information visit
alliancepharmaceuticals.com
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Strategic Report
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Financial Statements
Additional Information
92
Alliance Pharma plc Annual Report and Accounts 2022
Financial
Statements
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
93
102
103
104
105
106
107
108
109
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Financial Statements
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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
93
102
103
104
105
106
107
108
109
I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S O F A L L I A N C E P H A R M A P L C
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. Opinion
In our opinion:
›
›
›
›
the financial statements of Alliance Pharma plc (the ‘parent company’) and its subsidiaries (the
‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 31 December 2022 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with United
Kingdom adopted international accounting standards;
the parent company financial statements have been properly prepared in accordance with
United Kingdom 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.
We have audited the financial statements which comprise:
›
›
›
›
›
›
›
›
the consolidated income statement;
the consolidated statement of comprehensive income;
the consolidated balance sheet;
the company balance sheet;
the consolidated statement of changes in equity;
the company statement of changes in equity;
the consolidated and company cash flow statements; and
the related notes 1 to 31.
The financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom adopted international accounting standards and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
For more information visit
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2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Materiality
Scoping
› Valuation of the Amberen Cash Generating Unit (‘CGU’)
›
Recoverability of Trade Receivables for a significant distributor
(‘distributor’)
The materiality that we used for the Group financial statements was
£1,500,000 which was determined on the basis of profit before tax
adjusted for impairment.
Our group scoping results in 82% of group revenues, 81% of group profit
before tax, and 95% of group net assets being subject to full scope audit
procedures.
Significant changes
in approach
The valuation of the Amberen Cash Generating Unit; and the recoverability
of trade receivables for a significant distributor are new key audit matters in
the current year.
In the prior year the key audit matters identified by the predecessor auditor
included the impairment of brand assets.
The predecessor auditor also identified the CMA infringement decision;
the accounting treatment of costs related to cloud-based software
arrangements; and the recoverability of parent company’s investment in
subsidiaries as additional key audit matters. We do not consider these to be
key audit matters in the current year.
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
›
›
›
›
›
›
›
assessing the financing facilities available to the group, including the nature of available
facilities, repayment terms and required covenants;
assessing the assumptions and sensitivity scenarios used in the forecasts;
assessing management’s identified potential mitigating actions and the appropriateness of the
inclusion of these in the going concern assessment;
assessing the historical accuracy of forecasts prepared by management;
testing the clerical accuracy and appropriateness of the model used to prepare the forecasts;
reading analyst reports, industry data and other external information to determine if it provided
corroborative or contradictory evidence in relation to assumptions used;
evaluating the disclosures made within the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the Group’s
and Parent Company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included 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.
5.1 Valuation of Amberen Cash Generating Unit (‘CGU’)
Key audit matter
description
Brand intangible CGUs are valued at £282.2m and allocated goodwill is valued at £21.5m.
The valuation of brand CGUs is dependent upon a number of estimates, including future
growth forecasts, assumed margins, long term growth, working capital requirements and the
selected discount rate.
The Amberen brand CGU has a fair value of £105.4m, following an impairment recognised
during the year of £12.0m in respect of allocated goodwill.
Our key audit matter relates to the revenue growth and discount rate assumptions linked to
the Amberen CGU, due to the significant sensitivities and judgement linked to each input,
with reasonable possible changes leading to a material difference. Where budgeted growth
rates are not achieved; or where interest rates continue to rise, further impairment may be
required.
Note 2.3 to the financial statements provides details of the key sources of estimation
uncertainty in respect of intangible assets.
Note 2.9 to the financial statements sets out the group’s accounting policy for intangible
assets acquired as part of a business combination (Brands, Patents and Distribution Rights),
goodwill and impairment of assets; and outlines the key assumptions involved in the
intangible asset impairment assessment.
Note 11 to the financial statements outlines sensitivity analysis for reasonable possible
changes in two key assumptions which could cause the carrying amount to exceed the
recoverable amount.
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
93
102
103
104
105
106
107
108
109
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5. Key audit matters continued
5.1 Valuation of Amberen Cash Generating Unit (‘CGU’) continued
5.2 Recoverability of trade receivables for a significant distributor (‘distributor’)
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls over management’s impairment
assessment.
Key audit matter
description
We considered indicators of impairment including with reference to historical performance,
external market data, and assessment of the group’s future strategy and budgets.
We challenged the revenue growth assumptions used in the cash flow forecasts through
enquiries of the finance teams and commercial teams within the United States and the United
Kingdom, as well as the directors of the company to understand the performance of the
brand.
We involved our valuations specialists to estimate an appropriate discount rate with
reference to market data and compared that to the rate used by management.
We tested the arithmetical accuracy of management’s impairment models and checked these
for consistency with approved forecasts.
We assessed the accuracy of management’s historical forecasts; and we evaluated the
impact of these on the current year forecasts.
We assessed sensitivities to calculations prepared by management for contradictory and
confirmatory evidence, to determine the impact on headroom of reasonably possible
changes in assumptions.
How the scope of our
audit responded to the
key audit matter
Key observations
Based on our work performed, we concur with management’s assessment of the valuation
of the Amberen brand CGU. We consider management’s reasonable case sensitivity
disclosures to be appropriate.
A distribution agreement is held for the sale of cross-border e-commerce sales of the
Kelo-Cote product to China. As at 31 December 2022, £12.1m of related trade receivables
were outstanding, with extended credit terms provided to 31 March 2023.
Cash receipts since the year end amount to £2.1m (received as an early settlement) with
£10.0m outstanding but not overdue at the time of our report.
We consider the recoverability of trade receivables of this distributor to be a key audit matter.
There is a critical judgement made by management in the recoverability of the balance
outstanding, given that this was made on extended credit terms to the distributor. In addition,
the distributor’s parent has irrevocably and unconditionally guaranteed to the group all of the
distributor’s obligations under the distribution agreement.
Note 2.3 to the financial statements provides details of the critical accounting judgements in
respect of the recoverability of trade receivables with the distributor.
Note 2.13 to the financial statements sets out the group’s accounting policy for trade
receivables and note 15 to the financial statements discloses the ageing of trade receivables.
We obtained an understanding of the relevant controls over trade receivables.
We evaluated the contract and agreement in place with the distributor to assess the extended
terms and to assess whether there are unusual terms.
We obtained an independent confirmation from the distributor, regarding sales made in the
financial period and the amount owing as at 31 December 2022.
We inspected credit checks performed by management, together with available public
records regarding the financial stability of the distributor and its parent as guarantor to the
agreement.
We obtained a breakdown of sales to the distributor in the year and reconciled the
outstanding balance as at 31 December 2022 to the invoices raised and cash receipts in the
year and post year-end.
We assessed the disclosure of the recoverability of trade receivables of the distributor as a
critical judgement.
Key observations
Based on our work performed, we concur with the group’s assessment that the amount
outstanding remains recoverable; and we consider the disclosure of this being a critical
judgement as at 31 December 2022 and as at the date of reporting appropriate.
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
93
102
103
104
105
106
107
108
109
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6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our audit work and in evaluating
the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a
whole as follows:
Profit before tax adjusted for impairment
£23.4m (2021: £32.2m)
Group materiality
£1.5m (2020: £1.5m)
Group materiality £1.5m
Component materiality range £0.4m to £1.4m
Audit Committee reporting threshold £0.075m
Materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
Group financial statements
Parent company financial statements
£1,500,000
(2021: predecessor auditor £1,500,000)
£600,000
(2021: predecessor auditor: £900,000)
6.4% of profit before tax adjusted for impairment.
Materiality equates to 0.9% of revenue.
0.5% of net assets, capped at 40% of group
materiality.
Adjusted PBT
Group materiality
In the prior year, the predecessor auditor
determined materiality which represented 4.7%
of profit before tax, normalised to exclude the
impairment of intangible assets and the CMA
provision.
Adjusted profit before tax is a key metric for the
principal users of the financial statements as
it derives the prediction of future share price,
the ability to pay dividends, and is therefore of
particular importance to both shareholders and
potential investors. Impairment of non-current
assets are also excluded for banking covenant
calculations.
In the prior year, the predecessor auditor
determined materiality based on 0.5% of total
assets.
The company is non-trading and operates
primarily as a holding company. As such,
we believe the net asset position is the most
appropriate benchmark to use.
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial
statements as a whole.
Group financial statements
Parent company financial statements
Performance
materiality
70% of group materiality (2021: predecessor
auditor: 75% of group materiality)
70% of parent company materiality (2021:
predecessor auditor: 75% of parent company
materiality)
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
› Our understanding of the group and its environment, together with changes in the business.
›
›
The overall quality of the control environment.
The nature, size and number of uncorrected misstatements identified in the prior year by the
predecessor auditor.
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
93
102
103
104
105
106
107
108
109
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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
93
102
103
104
105
106
107
108
109
I N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D
6. Our application of materiality continued
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit
differences in excess of £75,000 (2021: £75,000) as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk
Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
Revenue
9%
9%
7. An overview of the scope of our audit
7.1 Identification and scoping of components
Our audit scoping considered the significance of each component, including the nature of the
group and its environment and an assessment of the risks of material misstatement across the
group.
Full scope audit procedures have been completed for the following components:
› Alliance Pharma plc;
› Alliance Pharmaceuticals Limited; and
› Alliance Pharma, Inc.
Net assets
5%
A combination of specified balances and analytical procedures at a group level has been
completed for the remaining components of the group.
Our group scoping, as defined as scope A below, results in 82% of group revenues, 81% of group
profit before tax, and 95% of group net assets being subject to full scope audit procedures.
All of these procedures were performed by the group engagement team in the United Kingdom.
95%
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Profit before tax
16%
3%
82%
81%
Scope – A – Full scope components
Scope – B – Specified balances
Scope – C – Desktop review
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7. An overview of the scope of our audit continued
7.2 Our consideration of the control environment
The group operates a diverse IT infrastructure. With the involvement of our IT specialists,
we obtained an understanding of the relevant IT environment and assessed the design and
implementation of key general IT controls.
For all in scope components we obtained an understanding of the relevant controls associated with
the financial reporting process, key audit matters, accounting estimates and revenue recognition.
We did not plan to rely on controls in any areas of the audit and instead adopted a fully
substantive approach. This is due to the group being in the process of updating their controls and
processes, specifically to improve documentary evidence of the operation of controls.
7.3 Our consideration of climate-related risks
The group has assessed that climate did not have a material impact on the Group’s carrying value
of assets and liabilities at the balance sheet date.
We assessed the climate related risk of material misstatement and concur with management’s
assessment. With support from our climate specialists we read the related narrative in the
annual report to consider whether it is materially consistent with the financial statements and our
knowledge obtained in the audit.
8. Other information
The other information comprises the information included in the annual report other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
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 the directors either
intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
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 an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
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 the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
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
93
102
103
104
105
106
107
108
109
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I N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D
11. Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations, we considered the following:
›
›
›
the nature of the industry and sector, control environment and business performance including
the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus
levels and performance targets;
results of our enquiries of management, the directors and the audit committee about their own
identification and assessment of the risks of irregularities;
any matters we identified having obtained and reviewed the group’s documentation of their
policies and procedures relating to:
‒ identifying, evaluating and complying with laws and regulations and whether they were
aware of any instances of non-compliance, including the UK’s Competition and Market
Authority’s infringement decision, as described within the financial review section of the
annual report and note 20 of the financial statements;
‒ detecting and responding to the risks of fraud and whether they have knowledge of any
actual, suspected or alleged fraud;
‒ the internal controls established to mitigate risks of fraud or non-compliance with laws and
regulations
›
the matters discussed among the audit engagement team including tax, valuations, impairment,
IT and forensic specialists regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
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
93
102
103
104
105
106
107
108
109
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As a result of these procedures, we considered the opportunities and incentives that may exist
within the organisation for fraud and identified the greatest potential for fraud in the following
areas:
› Valuation of Amberen Cash Generating Unit
›
›
Revenue recognised, for a significant distributor
Recoverability of trade receivables, with a significant distributor
In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group
operates in, focusing on provisions of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the AIM rules, UK Companies Act, and tax
legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect
on the financial statements but compliance with which may be fundamental to the group’s ability to
operate or to avoid a material penalty. This includes the group’s ability to obtain relevant approvals
for the sale of products.
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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
93
102
103
104
105
106
107
108
109
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I N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D
11. Extent to which the audit was considered capable of detecting irregularities,
including fraud continued
11.2. Audit response to risks identified
As a result of performing the above, we identified the valuation of Amberen Cash Generating Unit
and the recoverability of trade receivables, with a significant distributor as key audit matters related
to the potential risk of fraud. The key audit matters section of our report explains the matters in more
detail and also describes the specific procedures we performed in response to those key audit
matters.
In addition to the above, our procedures to respond to risks identified included the following:
›
›
›
›
›
›
›
reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect
on the financial statements;
enquiring of management, the audit committee and in-house/external legal counsel
concerning actual and potential litigation and claims;
performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
reading minutes of meetings of those charged with governance, and reviewing
correspondence with HMRC;
engaging with fraud specialists to consider the risk of fraud within the group and to establish
appropriate and suitable substantive audit procedures;
in relation to the potential fraud risk in revenue, we obtained a confirmation letter from the
significant distributor confirming value of goods purchased in the 12 months ended 31
December 2022; obtained a breakdown of sales to the distributor in the year and traced these
through to signed delivery notes and cash receipts in the year and post year-end; and
in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the judgements
made in making accounting estimates are indicative of a potential bias; and evaluating the
business rationale of any significant transactions that are unusual or outside the normal course
of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
›
›
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified any material misstatements
in the strategic report or the directors’ report.
13. Opinion on other matter prescribed by our engagement letter
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the provisions of the Companies Act 2006 that would have applied
were the company a quoted company.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
› we have not received all the information and explanations we require for our audit; or
›
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.
›
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of directors’ remuneration have not been made.
We have nothing to report in respect of this matter.
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15. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Andrew Wright, FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Bristol, United Kingdom
21 March 2023
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
93
102
103
104
105
106
107
108
109
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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.
Financial Statements
Independent Auditor’s Report
93
Consolidated Income Statement
102
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
103
104
105
106
107
108
109
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C O N S O L I D A T E D I N C O M E S T A T E M E N T
Revenue
Cost of sales
Gross profit
Operating expenses
Administration and marketing expenses
Amortisation of intangible assets
Impairment of goodwill and
intangible assets
CMA provision
Note
3,31
5
5, 11
5
20
Share-based employee remuneration
7, 24
Operating profit
Finance costs
Interest payable and similar charges
Finance income
Profit before taxation
Taxation
Profit for the period attributable to
equity shareholders
Earnings per share
Basic (pence)
Diluted (pence)
6
6
4
8
10
10
Year ended 31 December 2022
Year ended 31 December 2021
Underlying
£000s
167,416
(65,733)
101,683
Non-underlying
£000s
(Note 5)
–
–
–
Total
£000s
167,416
(65,733)
Underlying
£000s
163,207
(53,757)
101,683
109,450
(63,955)
(1,964)
369
(63,586)
(7,238)
(9,202)
(60,202)
(1,362)
–
–
(92)
(18,234)
(18,234)
–
–
–
(92)
35,672
(25,103)
10,569
(5,433)
72
(5,361)
30,311
(7,234)
–
–
–
(25,103)
2,962
(5,433)
72
(5,361)
5,208
(4,272)
–
–
(2,250)
45,636
(3,646)
228
(3,418)
42,218
(8,033)
Non-underlying
£000s
(Note 5)
–
–
–
(2,843)
(7,168)
(6,150)
(7,900)
–
(24,061)
–
–
–
(24,061)
(2,805)
Total
£000s
163,207
(53,757)
109,450
(63,045)
(8,530)
(6,150)
(7,900)
(2,250)
21,575
(3,646)
228
(3,418)
18,157
(10,838)
23,077
(22,141)
936
34,185
(26,866)
7,319
4.28
4.23
0.17
0.17
6.39
6.30
1.37
1.35
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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
93
102
103
104
105
106
107
108
109
C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign exchange translation differences (gross)
Foreign exchange translation differences (deferred tax)
Foreign exchange forward contracts – cash flow hedge (gross)
Foreign exchange forward contracts – cash flow hedge (deferred tax)
Total comprehensive income for the year
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
936
7,319
16,438
(3,589)
111
(28)
13,868
586
50
(255)
64
7,764
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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
93
102
103
104
105
106
107
108
109
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C O N S O L I D A T E D B A L A N C E S H E E T
Assets
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Deferred tax asset
Derivative financial instruments
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
11
12
22
21
14
15
21
16
23
Note
31 December 2022
£000s
31 December 2021
£000s
Note
31 December 2022
£000s
31 December 2021
£000s
421,630
413,744
Loans and borrowings
Liabilities
Non-current liabilities
5,578
4,117
17
588
4,826
3,526
–
371
431,930
422,467
24,286
49,324
157
31,714
105,481
537,411
5,400
151,650
10,141
(329)
131
12,430
108,238
287,661
21,075
30,821
64
29,061
81,021
503,488
5,382
151,328
10,058
(329)
48
(419)
116,418
282,486
Other liabilities
Deferred tax liability
Current liabilities
Corporation tax
Trade and other payables
Provisions
Total liabilities
Total equity and liabilities
18
19
22
17
20
133,744
3,415
65,569
202,728
2,984
35,616
8,422
47,022
249,750
537,411
116,060
2,637
61,728
180,425
1,178
29,930
9,469
40,577
221,002
503,488
The financial statements were approved by the Board of Directors on 20 March 2023.
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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C O M P A N Y B A L A N C E S H E E T
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 2022
£000s
31 December 2021
£000s
The Company’s profit for the year was £5,429,000 (2021: £6,756,000).
As permitted by section 408 of the Companies Act 2006, no separate Income Statement
is presented in respect of the Parent Company.
The financial statements were approved by the Board of Directors on 20 March 2023.
Peter Butterfield
Director
Andrew Franklin
Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company number 04241478
13
15
16
23
17
197,253
199,348
93
50
143
39
141
180
197,396
199,528
5,400
151,650
10,214
29,377
196,641
755
–
755
5,382
151,328
8,962
33,064
198,736
368
424
792
Total equity and liabilities
197,396
199,528
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
93
102
103
104
105
106
107
108
109
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C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
Balance 1 January 2021
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)
Foreign exchange translation differences (net of deferred tax)
Total comprehensive income for the year
Balance - 31 December 2021
Balance 1 January 2022
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)
Foreign exchange translation differences (net of deferred tax)
Total comprehensive income for the year
Balance - 31 December 2022
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
5,329
150,645
(329)
239
(1,055)
8,426
117,703
280,958
53
–
–
53
–
–
–
–
683
–
–
683
–
–
–
–
–
–
–
–
–
–
–
–
5,382
151,328
(329)
–
–
–
–
–
(191)
–
(191)
48
–
–
–
–
–
–
636
636
–
–
1,632
1,632
–
–
–
–
–
(8,604)
–
(8,604)
7,319
–
–
736
(8,604)
1,632
(6,236)
7,319
(191)
636
7,319
7,764
(419)
10,058
116,418
282,486
5,382
151,328
(329)
48
(419)
10,058
116,418
282,486
18
–
–
18
–
–
–
–
322
–
–
322
–
–
–
–
–
–
–
–
–
–
–
–
5,400
151,650
(329)
–
–
–
–
–
83
–
83
131
–
–
–
–
–
–
12,849
12,849
–
–
83
83
–
–
–
–
–
340
(9,116)
(9,116)
–
83
(9,116)
(8,693)
936
936
–
–
83
12,849
936
13,868
12,430
10,141
108,238
287,661
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
93
102
103
104
105
106
107
108
109
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C O M P A N Y S T A T E M E N T O F C H A N G E S I N E Q U I T Y
Balance 1 January 2021
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the period and total comprehensive income
Balance 1 January 2022
Issue of shares
Dividend paid
Share options charge (including deferred tax)
Transactions with owners
Profit for the period and total comprehensive income
Ordinary share capital
£000s
Share premium account
£000s
Share option reserve
£000s
Retained earnings
£000s
5,329
150,645
7,955
53
–
–
53
–
683
–
–
683
–
18
–
–
18
–
322
–
–
322
–
–
–
1,007
1,007
–
8,962
34,912
–
(8,604)
–
(8,604)
6,756
33,064
Total equity
£000s
198,841
736
(8,604)
1,007
(6,862)
6,756
198,736
–
–
1,252
1,252
–
10,214
–
(9,116)
–
(9,116)
5,429
29,377
340
(9,116)
1,252
(7,524)
5,429
196,641
5,382
151,328
8,962
33,064
198,736
Balance 31 December 2021
5,382
151,328
Balance 31 December 2022
5,400
151,650
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
93
102
103
104
105
106
107
108
109
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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
93
102
103
104
105
106
107
108
109
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C O N S O L I D A T E D A N D C O M P A N Y C A S H F L O W S T A T E M E N T S
Cash flows from operating activities
Cash generated from operations
Tax paid
Cash flows from/(used in) operating activities
Investing activities
Dividend received
Acquisitions
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from reimbursement of property costs
Contribution from subsidiary
Proceeds from disposal of intangibles
Net cash (used in)/from investing activities
Financing activities
Interest paid and similar charges
Capital lease payments
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
Group
Company
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
24,929
(3,957)
20,972
–
(16,618)
(249)
(358)
200
–
–
(17,025)
(4,804)
(961)
341
(9,116)
14,925
(1,261)
(876)
3,071
29,061
(418)
31,714
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
(1,385)
–
(1,385)
–
–
–
–
–
10,069
–
10,069
–
–
341
(9,116)
–
–
(8,775)
(91)
141
–
50
(961)
–
(961)
2,600
–
–
–
–
6,073
–
8,673
–
–
736
(8,604)
–
–
(7,868)
(156)
297
–
141
Note
25
11
11
12
12
13
9
21
21
16
In the Company cash flow statement, the
‘contribution from subsidiary’ cash flows have
been reclassified from financing activities to
investing activities. This reclassification has
been made for both the year ended
31 December 2022 and the year ended
31 December 2021. In addition, no tax was
paid by the Company in the year ended
31 December 2021 and as such, the
‘tax paid’ cash flows of £1.5m, which
did not reflect a cash outflow, have been
removed from the cash flow statement. The
corresponding non-cash movement was
included within ‘contribution from subsidiary’
which has also been reduced by the
same amount.
The accompanying accounting policies
and notes form an integral part of these
financial statements.
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Additional Information
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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 20 March 2023.
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.
A number of amended standards became applicable for the
current reporting period. The application of these amendments
has not had any material impact on the disclosures, net assets or
results of the Group.
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:
›
Recoverability of trade receivables with a significant
distributor.
› Assessment of cloud-based software costs in relation to the
›
Group’s cloud hosted ERP system.
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).
Recoverability of trade receivables with a significant
distributor
As at 31 December 2022, £12.1m of related trade
receivables were outstanding with a significant distributor,
with extended credit terms provided to 31 March 2023.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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2. Summary of significant accounting policies
continued
2.3 Judgements and estimates continued
Cash receipts since the year end amount to £2.1m (received
as an early settlement) with £10.0m outstanding but not
overdue at the date of this report.
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. In the prior year, had the Group
concluded that it does not have control, a proportion of the costs
would have been expensed in the Income Statement.
The recoverability of the balance outstanding is considered
a critical judgement, given the size of the balance. The
distributor has no history of bad debt, and the distributor’s
parent has irrevocably and unconditionally guaranteed to the
Group all of the distributor’s obligations under the distribution
agreement. Having considered these factors, the Group
concludes that the amount outstanding remains recoverable.
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 the year ended 31 December 2021, in light of the IFRIC
agenda decision regarding cloud-based software, the Group
reviewed its service agreements in respect of its cloud-based
ERP system and 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.
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.
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).
› Determination of the useful economic lives for the intangible
brand and distribution rights 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.
Transaction price
The transaction price for each performance obligation comprises
the stand-alone selling price for the product excluding value-
added tax and net of rebates and discounts. Intra-Group sales
are eliminated in the consolidated financial statements.
Royalty income and the deductions relating to rebates and
discounts are based on the Group’s contractual obligations.
Certain of the rebate arrangements also include elements of
variable consideration. The Group does not consider these
elements to be significant; however, an estimate of variable
consideration is included where appropriate. The IFRS 15
exemption from estimating variable consideration has been
applied to the Group’s sales-based royalties.
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Financial Statements
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111
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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2. Summary of significant accounting policies
continued
2.4 Revenue recognition continued
The Group has considered whether it is an ‘agent’ or ‘principal’
under IFRS 15 for each commercial arrangement and accounted
for these accordingly. The Group is considered the ‘principal’
for all key commercial relationships relating to sale of goods,
except the relationship with certain supply partners as described
in full under ‘Specific revenue streams’. This is because the Group
controls each specified good before transfer to customers.
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 – delivery terms and delivery
at place: Recognition at a point in time when each unit
of pharmaceutical product is delivered 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 2022 were under this threshold, the Group
was exempt from any VPAS payments and, as a result, no
amounts were deducted from revenue (2021: 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 31) 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
have significantly influenced the timing of revenue recognition in
the year.
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Strategic Report
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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
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2. Summary of significant accounting policies
continued
2.5 Foreign currency
The consolidated financial statements are presented in
Sterling, which is the presentational currency of the Group
and the functional currency of the Company. Foreign currency
transactions by Group companies are booked at the exchange
rate ruling on the date of the transaction. Foreign currency
monetary assets and liabilities are retranslated into Sterling at
the rate of exchange ruling at the balance sheet date. Foreign
exchange differences arising on translation are recognised
in the Income Statement, except for differences arising on the
retranslation of a financial liability designated as a hedge of
the net investment in a foreign operation that is effective, or
qualifying cash flow hedges, which are recognised directly in
other comprehensive income.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation,
are translated to the Group’s presentational currency, Sterling,
at foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated
at an average rate for the year where this rate approximates
to the foreign exchange rates ruling at the dates of the
transactions. Exchange differences arising from translation
of foreign operations are reported in other comprehensive
income and accumulated in the translation reserve. Foreign
currency differences arising on the retranslation of a hedge of
a net investment in a foreign operation are reported in other
comprehensive income and accumulated in the translation
reserve, to the extent that the hedge is effective.
2.6 Operating segments
Operating segments are reported in a manner consistent with
the internal reporting provided to the Group’s Chief Operating
Decision Maker (‘CODM’). The Group’s Board of Directors
(‘the Board’) is the Group’s Chief Operating Decision Maker,
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 (‘CGUs’)
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.
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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
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2. Summary of significant accounting policies
continued
2.9 Intangible assets and goodwill continued
(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.
(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.
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.
Alliance Pharma plc Annual Report and Accounts 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
93
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103
104
105
106
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108
Notes to the Financial Statements 109
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2. Summary of significant accounting policies
continued
2.10 Inventories
Inventories are included at the lower of cost, less any provision
for impairment, or net realisable value. 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.
Alliance Pharma plc Annual Report and Accounts 2022
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. 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.
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 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
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Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
115
2. Summary of significant accounting policies
continued
2.13 Non-derivative financial instruments
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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Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
116
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
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108
Notes to the Financial Statements 109
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2. Summary of significant accounting policies
continued
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.
Restructuring provisions are recognised when the Group has
developed a detailed formal plan for the restructuring and has
raised a valid expectation in those affected that it will carry out
the restructuring by starting to implement the plan or announcing
its main features to those affected by it. The measurement of
a restructuring provision includes only the direct expenditures
arising from the restructuring, which are those amounts that are
both necessarily entailed by the restructuring and not associated
with the ongoing activities of the entity
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).
Alliance Pharma plc Annual Report and Accounts 2022
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.
In assessing whether an acquired set of assets and activities is a
business or an asset, management will first elect whether to apply
an optional concentration test to simplify the assessment. Where
the concentration test is applied, the acquisition will be treated
as the acquisition of an asset if substantially all of the fair value of
the gross assets acquired (excluding cash and cash equivalents,
deferred tax assets, and related goodwill) is concentrated in
a single asset or group of similar identifiable assets. Where
the concentration test is not applied, or is not met, a further
assessment of whether the acquired set of assets and activities is
a business will be performed.
2.18 Going concern
The Group is in a net current asset position of £58.5m (2021:
£40.4m). 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 and the directors have a reasonable expectation
that a refinancing of the facility will be concluded in the
coming months. The amount drawn as at 31 December 2022
was £134.1m (2021: £117.0m) and £134.0m as at
28 February 2023.
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Strategic Report
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Financial Statements
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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
93
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108
Notes to the Financial Statements 109
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2. Summary of significant accounting policies continued
2.18 Going concern continued
The Directors have prepared cash flow forecasts for a period of
12 months from the date of approval of these financial statements
(the going concern period). These indicate that the Group will
have sufficient funds, given the RCF financing available, to meet
its liabilities as they fall due for that period.
Also, the Directors have considered the sensitivity of cash flow
forecasts to severe downside scenarios, including the impact
of a potential payment of a £7.9m CMA fine. In particular, the
Directors considered a reasonably possible downside scenario
which models severe disruption to CBEC sales resulting in a
decline in EBITDA against budget of over 30%. Even in this
severe scenario, the forecasts indicate that the Group will
have sufficient funds to meet its liabilities as they fall due, and
will continue to comply with its loan covenants, throughout the
forecast period. Only interest rate rises above current market
projections would result in a breach of the interest cover covenant
under this scenario. In isolation, interest rates would need to rise
by over 2% (200bp) above current market projections to cause
a breach in the interest cover covenant, before the impact of any
mitigating actions.
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. All covenants have been fully
complied with to date. The Group considers that it is highly
unlikely it would be unable to exercise its right to roll-over the
debt based on the forecast covenant compliance in the severe
downside modelled above. Even in a more extreme scenario
there are mitigating actions (within the control of the Group)
it could take to maintain compliance with these conditions,
including future covenant requirements. The Directors therefore
believe that the Group has the ability and the intent to roll-
over the drawn RCF amounts when due and consequently has
presented the RCF as a non-current liability.
Consequently, the Directors are confident that the Company
will have sufficient funds to continue to meet its liabilities as
they fall due for at least 12 months from the date of approval
of the financial statements and have therefore determined it is
appropriate to adopt the going concern basis in preparing the
financial statements.
2.19 Alternative performance measures
The performance of the Group is assessed using Alternative
Performance Measures (‘APMs’). The Group’s results are
presented both before and after non-underlying items. Adjusted
profitability measures are presented excluding non-underlying
items as we believe this provides both management and
investors with useful additional information about the Group’s
performance and aids effective comparison of the Group’s
trading performance from one period to the next and with similar
businesses.
In addition, the Group’s results are described using certain
other measures that are not defined under IFRS and are
therefore considered to be APMs. These measures are used by
management to monitor ongoing business performance against
both shorter-term budgets and forecasts but also against the
Group’s longer-term strategic plans. APMs are presented in
note 31.
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.
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
118
3. Revenue and segmental information continued
Revenue
Operating segment results
Revenue information by brand
Consumer Healthcare brands:
Kelo-Cote™ franchise
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 2022
£000s
Year ended
31 December 2021
£000s
50,039
14,909
17,231
9,080
9,272
4,602
15,489
120,622
8,070
6,548
5,872
26,304
46,794
167,416
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
*
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 31.
Classification by geography is based on customer location.
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Year ended 31 December 2022
Consumer Healthcare £000s
Prescription Medicines
£000s
120,622
(43,019)
77,603
46,794
(22,714)
24,080
Consumer Healthcare £000s
Year ended 31 December 2021
Prescription Medicines
£000s
115,376
(31,545)
83,831
47,831
(22,212)
25,619
Total
£000s
167,416
(65,733)
101,683
Total
£000s
163,207
(53,757)
109,450
Major customers
The revenues from the Group’s largest customers in the year ended 31 December 2022 (customers
separately comprising more than 10% of the Group’s revenue) are as follows. In 2021, no
customers separately comprised 10% or more of revenue.
Major customer 1 (Consumer Healthcare sales in
EMEA and APAC)
Major customer 2 (Consumer Healthcare sales
in APAC)
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
21,461
14,228
17,898
11,064
For more information visit
alliancepharmaceuticals.com
Europe, Middle East and Africa (EMEA)
Asia Pacific and China (APAC)
Americas (AMER)
Total revenue
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
78,920
59,186
29,310
167,416
89,188
48,030
25,989
163,207
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
119
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 (covenant compliance and
other regulatory compliance services)
Amortisation of intangible assets
Impairment of intangible assets
CMA provision
Share options charge
Depreciation of plant, property and equipment
Gain on foreign exchange transactions
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
480
220
17
9,202
18,234
–
92
1,558
(56)
96
326
5
8,530
6,150
7,900
2,250
1,575
(205)
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.
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
Amortisation of acquired intangible assets
Impairment of goodwill and intangible assets
CMA provision
Restructuring costs
Other
(7,238)
(18,234)
–
–
369
Total non-underlying items before taxation
(25,103)
Taxation on non-underlying items
Impact of UK tax rate change from 19% to 25%
Non-underlying taxation
2,962
–
2,962
Total non-underlying items after taxation
(22,141)
(7,168)
(6,150)
(7,900)
(2,420)
(423)
(24,061)
2,167
(4,972)
(2,805)
(26,866)
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 2022
trading performance, and have been presented as non-underlying.
CMA provision
The CMA provision of £7.9m recognised in the year ended 31 December 2021 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.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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Strategic Report
Governance
Financial Statements
Additional Information
120
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
5. Non-underlying items continued
Restructuring costs
Costs of Group restructuring in the year ended 31 December 2021 (£2.4m) related to the closure
of the Milan and Los Angeles offices. These costs are a significant item considered unrelated to
2021 trading performance, and as such have been presented as non-underlying.
Other non-underlying items
The other non-underlying items relate to capitalised professional fees in relation to the ScarAway™
acquisition which completed in March 2022. These costs were incurred in 2021 as non-underlying
costs and capitalised in 2022 post-completion.
Impact of UK tax rate change from 19% to 25%
In the Budget on 3 March 2021, a 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 for the year
ended 31 December 2021.
7. Directors and employees
Employee benefit expenses for the Group (including Executive Directors) during the year were
as follows:
Wages and salaries
Social security costs
Other pension costs (note 28)
Share-based employee remuneration (note 24)
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
18,777
2,040
1,345
92
22,254
18,886
2,077
1,306
2,250
24,519
The average number of employees of the Group (including Directors) during the year was:
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
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
Management and administration
Year ended
31 December 2022
Number
Year ended
31 December 2021
Number
249
255
(4,668)
(648)
(117)
(5,433)
16
56
72
(2,904)
(639)
(103)
(3,646)
23
205
228
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 2022
£000s
Year ended
31 December 2021
£000s
1,699
114
1,813
3,442
121
3,563
For more information visit
alliancepharmaceuticals.com
Finance costs – net
(5,361)
(3,418)
During the year contributions were paid to defined contribution schemes for two Executive
Directors (2021: two).
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
121
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
7. Directors and employees continued
Gain on share options exercised by Executive Directors during the year was £90,000 (2021:
£363,000). The notional non-cash IFRS 2 share-based payment expense in respect
of Directors was £461,000 (2021: £256,000).
The amounts set out above include remuneration in respect of the highest-paid Director
as follows:
Emoluments for qualifying services
Pension contributions
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
368
32
400
587
29
616
The notional non-cash IFRS 2 share-based payment expense in respect of the Director was
£160,000 (2021: £177,000).
Average number of members of the Board of Directors (including Non-executive Directors) for the
year ended 31 December 2022 was six (2021: six).
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 2022
£000s
Year ended
31 December 2021
£000s
5,669
110
5,779
(837)
(670)
4,272
6,069
(65)
6,004
4,471
363
10,838
The difference between the total tax charge shown above and the amount calculated by applying
the standard rate of UK corporation tax to the profit before tax is as follows:
Profit before taxation
Profit before taxation multiplied by standard rate of
corporation tax in the United Kingdom of 19.00%
(2021: 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
Year ended
31 December 2022
£000s
5,208
Year ended
31 December 2021
£000s
18,157
989
3,449
2,583
–
(560)
(104)
(266)
(6)
1,427
315
(106)
4,272
1,888
(4)
298
4,972
114
246
96
(352)
131
10,838
A 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 31.
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
122
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
9. Dividends
An interim dividend of 0.592p per share for the 2022 financial year was paid on
19 January 2023.
Amounts recognised as distributions to
owners in 2022
Interim dividend for the 2021 financial year
Final dividend for the 2021 financial year
Total dividend
Year ended
31 December 2022
Pence/share
£000s
0.563
1.128
1.691
3,030
6,086
9,116
A reconciliation of the weighted average number of Ordinary shares used in the measures is
given below:
Basic EPS calculation
Employee share options
Diluted EPS calculation
Year ended
31 December 2022
Year ended
31 December 2021
539,480,306
535,295,583
5,800,317
7,039,113
545,280,623
542,334,696
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:
The interim dividend for 2021 was paid on 7 January 2022. The final dividend for 2021 was paid
on 7 July 2022.
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
Earnings for basic and diluted EPS
Non-underlying items (note 5)
Earnings for underlying basic and diluted EPS
0.536
1.074
1.610
2,857
5,747
8,604
The resulting EPS measures are:
The interim dividend for 2020 was paid on 7 January 2021. The final dividend for 2020 was paid
on 8 July 2021.
10. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to Ordinary shareholders by the
weighted average number of Ordinary shares in issue during the year. For diluted EPS, the
weighted average number of Ordinary shares in issue is adjusted to assume conversion of all
dilutive potential Ordinary shares. There are no differences in earnings used to calculate each
measure as a result of the dilutive employee share options.
Basic EPS
Diluted EPS
Underlying basic EPS
Underlying diluted EPS
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
936
22,141
23,077
7,319
26,866
34,185
Year ended
31 December 2022
Pence
Year ended
31 December 2021
Pence
0.17
0.17
4.28
4.23
1.37
1.35
6.39
6.30
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
Strategic Report
Governance
Financial Statements
Additional Information
123
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
11. Goodwill and intangible assets
The Group
Cost
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 2022
32,382
260,080
151,544 15,043 459,049
Additions
–
Exchange adjustments 2,244
16,386
15,296
–
249 16,635
1,147
– 18,687
At 31 December
2022
Amortisation and
impairment
34,626
291,762
152,691 15,292 494,371
At 1 January 2022
1,144
8,185
34,614 1,362 45,305
Goodwill
£000s
Consumer Healthcare brands
and distribution rights £000s
Prescription Medicines
brands and distribution rights
£000s
Computer
software
£000s
Total
£000s
At 1 January 2021
32,404
258,203
152,890
– 443,497
Transfer from
property, plant
and equipment
Additions
Acquisition
–
–
(183)
–
–
–
–
–
–
Exchange adjustments
161
1,877
(1,346)
11,037
11,037
4,006
4,006
–
–
(183)
692
At 31 December
2021
32,382
260,080
151,544
15,043 459,049
Amortisation and impairment
At 1 January 2021
1,144
6,459
23,022
–
30,625
Non-underlying
impairment for
the year
Non-underlying
amortisation for
the year
Underlying
amortisation for
the year
At 31 December
2022
Net book amount
At 31 December
2022
11,952
1,164
5,118
– 18,234
–
–
226
7,012
–
7,238
–
–
1,964
1,964
13,096
9,575
46,744
3,326 72,741
21,530
282,187
251,895
105,947 11,966 421,630
116,930 13,681 413,744
Non-underlying
impairment for
the year
Non-underlying
amortisation for
the year
Underlying
amortisation for
the year
At 31 December
2021
Net book amount
At 31 December
2021
–
–
–
1,500
4,650
226
6,942
–
–
6,150
7,168
–
–
1,362
1,362
1,144
8,185
34,614
1,362
45,305
For more information visit
alliancepharmaceuticals.com
At 1 January 2022
31,238
31,238
At 1 January 2021
31,260
251,895
251,744
116,930
13,681 413,744
129,868
– 412,872
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Governance
Financial Statements
Additional Information
124
11. Goodwill and intangible assets continued
Acquisitions
Included in additions in the year is £15.2m relating to the purchase of the ScarAway™ brand asset
which completed in March 2022 and £1.2m relating to the purchase of an Aloclair™ brand asset
which completed in October 2022.
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 considered all relevant
factors for each individual asset, including typical pharmaceutical asset life cycles and the potential
development of alternative treatments over time and the remaining useful lives of these brands are
considered to remain appropriate.
Useful economic lives
The Group segregates its portfolio of assets into two areas: Consumer Healthcare brands and
Prescription Medicines. The Directors have considered the continuing appropriateness of the useful
economic lives assigned to the assets.
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. 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.
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.
The Prescription Medicines brand assets have a weighted average remaining life of 17 years at
31 December 2022 (2021: 18 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.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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125
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
11. Goodwill and intangible assets continued
Useful economic lives continued
Amberen™
Nizoral™
Kelo-Cote™ (US rights and ScarAway™)
Vamousse™
MacuShield™
Ashton and Parsons
Aloclair™ (non-Sinclair)
Lefuzhi
Anbesol
Aiweidi
Opus range
Cambridge intangibles
Products acquired from Sinclair
Kelo-Cote™ (non EU, excluding US)
Kelo-Cote™ (EU)
Aloclair™ (Sinclair)
Atopiclair
Goodwill
£000s
4,983
–
–
–
1,748
–
–
–
–
–
1,849
598
–
–
–
–
For more information visit
alliancepharmaceuticals.com
Goodwill – Sinclair Prescription Medicines
Goodwill – Sinclair Consumer Healthcare
Assets with indefinite lives
1,722
10,630
21,530
Impairment
As explained in note 2.9, all intangible assets are stated at cost less accumulated amortisation and
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. 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 CGU, 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 2022, the following
impairment charges were identified:
› Goodwill relating to Amberen™ impaired by £12.0m (2021: £nil) due to a reduction in
expected cash flows because of challenging market conditions and an increase in the discount
rate applied to these cash flows which is the result of increasing market interest rates.
› Consumer healthcare brand and distribution rights assets impaired by £1.2m (2021: £1.5m)
›
due to viability of future sales in the current market.
Prescription medicine brand and distribution rights assets impaired by £5.1m (2021: £4.7m)
due to viability of future sales in the current market, supply issues, and increasing costs resulting
from changes in the regulatory framework.
31 December 2022
Consumer healthcare
brands and
distribution rights
£000s
Total
£000s
100,000
104,983
60,307
60,307
15,202
11,596
8,740
1,562
1,184
1,009
987
138
–
–
15,202
11,596
10,488
1,562
1,184
1,009
987
138
1,849
598
45,567
45,567
17,800
17,800
14,000
14,000
2,300
–
–
2,300
1,722
10,630
280,392
301,922
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022
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126
11. Goodwill and intangible assets continued
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):
Sensitivity analysis
The Group has conducted sensitivity analysis on the impairment tests. The valuations generally
indicate sufficient headroom and, except for Amberen™ which is detailed below, the Group does
not consider that any reasonably possible change in key assumptions could result in an impairment.
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 7.0%–12.4%, or pre-tax 9.4%–14.5% (2021: 6.3%–8.6%, or pre-
tax 7.9%–10.8%). The Group’s WACC has increased as a result of the increase in risk-free rate
due to changes in government bond yields, the increase in small stock premium to recognise
the Group’s reduction in market capitalisation, offset to an extent by a small reduction in the
equity beta based on sector market data.
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/decline rates between -5.5% to 2.0% (2021: -2.5% 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.
›
Management has identified that for the goodwill and brand and distribution rights related to
Amberen™, a reasonable possible change in two key assumptions could cause the carrying
amount to exceed the recoverable amount:
1) The recoverable amount is sensitive to changes in the discount rate applied, particularly in the
context of market volatility and increasing interest rates.
2) The recoverable amount is sensitive to changes in the cash flow forecasts which are dependent
on key revenue growth assumptions.
The following table shows the potential impact of reasonably possible changes to individual
assumptions on the estimated recoverable amount of the Amberen™ CGU. As the carrying value
is equal to the recoverable amount at 31 December 2022, this would result in an increase in
impairment.
Amberen™
Decrease in CGU recoverable amount £000s
2.0% (200bp) increase in
pre-tax discount rate
20% reduction in cash flow
forecasts, before the impact
of mitigating actions
(20,598)
(17,700)
Headroom
–
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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127
12. Property, plant and equipment
The Group
Cost
Computer
software and
equipment
£000s
Fixtures,
fittings &
equipment
£000s
Plant &
machinery
£000s
Right-of-
use lease
assets
£000s
Total
£000s
The Group
Cost
At 1 January 2021
At 1 January 2022
2,037
3,730
73
6,306 12,146
Additions
Additions
Transfers
Effects of movements in
exchange rates
Disposals
153
108
(30)
(69)
205
(108)
323
(206)
– 1,997
2,355
Transfer to intangible assets
–
–
Disposals
–
1
(172)
122
–
(2,901)
(3,176)
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 2022
2,199
3,944
74
5,230 11,447
Depreciation
At 1 January 2022
Provided in the year
Transfers
Effect of movements in exchange rates
Disposals
1,670
1,741
153
108
(5)
(69)
541
(108)
32
(6)
36
13
–
–
–
3,873
7,320
851
1,558
–
–
(60)
(33)
(2,901)
(2,976)
At 31 December 2022
1,857
2,200
49
1,763
5,869
Net book amount
At 31 December 2022
At 1 January 2022
342
1,744
367
1,989
25
37
3,467
5,578
2,433
4,826
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
1,620
1,408
186
–
446
(9)
(136)
(104)
8
28
–
–
3,373
915
–
6,409
1,575
(9)
(415)
(655)
At 31 December 2021
1,670
1,741
36
3,873
7,320
Net book amount
At 31 December 2021
At 1 January 2021
367
11,428
1,989
1,103
37
24
2,433
4,826
3,366
15,921
Property, plant and equipment of £3.2m is located within the United Kingdom (2021: £4.1m). The
remaining 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.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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128
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
13. Investments
The Company
Cost
At 1 January 2022
Net movements
At 31 December 2022
At 1 January 2021
Net movements
At 31 December 2021
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 2022 included interest charged of £8.4m
(2021: £6.1m), the recharge of the share option charge of £1.3m (2021: £1.1m), the dividend
received of £nil (2021: £2.6m) 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 2022 are shown below:
For more information visit
alliancepharmaceuticals.com
Company
Investment and loans to
subsidiary undertakings
£000s
Advanced Bio-Technologies Inc.
Alliance Pharma France SAS
Alliance Pharma S.r.l.
Country of registration
or incorporation
%
owned Nature of business
USA
France
Italy
100 Pharmaceutical sales
100 Pharmaceutical sales
100 Pharmaceutical sales
199,348
(2,095)
197,253
199,776
(428)
199,348
Alliance Pharmaceuticals Limited*
England & Wales
100 Pharmaceutical sales
Alliance Lifescience Technology (Shanghai)
Co., Limited
Alliance Pharmaceuticals Spain SL*
Alliance Pharma Inc.
China
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
India
100 Pharmaceutical sales
Alliance Pharma (Ireland) Limited
Republic of Ireland 100 Pharmaceutical sales
Alliance Pharmaceuticals GmbH*
Germany
100 Non-trading
Alliance Pharmaceuticals GmbH* – Swiss
Branch
Switzerland
100 Non-trading
Alliance Pharmaceuticals SAS*
France
100 Non-trading
Alliance Pharma (Singapore) Private Limited* Singapore
100 Non-trading
Alliance Pharmaceuticals (Asia) Limited*
Hong Kong
100 Non-trading
Opus Healthcare Limited
Republic of Ireland 100 Dormant
Alliance Consumer Health Limited
England & Wales
100 Dormant
Alliance Generics Limited
Alliance Health Limited
England & Wales
100 Dormant
England & Wales
100 Dormant
Alliance Healthcare Limited
England & Wales
100 Dormant
Caraderm Limited
Dermapharm Limited
Northern Ireland
100 Dormant
England & Wales
100 Dormant
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
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129
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
93
102
103
104
105
106
107
108
13. Investments continued
Company
Country of registration
or incorporation
%
owned Nature of business
MacuVision Europe Limited
England & Wales
100 Dormant
Maelor Laboratories Limited
England & Wales
100 Dormant
Opus Group Holdings Limited
England & Wales
100 Dormant
Opus Healthcare Limited
England & Wales
100 Dormant
*
Investments held directly by Alliance Pharma plc.
The registered address in each country is as follows:
Notes to the Financial Statements 109
Territory
Company
Registered Office Address
USA
Advanced Bio-Technologies Inc. 11000 Regency Pkwy, Ste 106, Cary NC
Alliance Pharma Inc.
27518, United States
11000 Regency Pkwy, Ste 106, Cary NC
27518, United States
France
Alliance Pharmaceuticals SAS
13 rue Paul Valéry, 75016, Paris, France
Alliance Pharma France SAS
13 rue Paul Valéry, 75016, Paris, France
China
Alliance Pharmaceuticals
Lifescience Technology
(Shanghai) Co.,Limited
Suite 701, NanFung Tower, No. 1568, Road
Huashan, Shanghai, 200030, P.R.China
Germany
Alliance Pharmaceuticals GmbH Niederkasseler Lohweg 175, 40547,
Dusseldorf, Germany
Hong Kong 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 United Drug House, Magna Drive, Dublin,
D24 X0CT, Ireland
For more information visit
alliancepharmaceuticals.com
Territory
Company
Registered Office Address
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 Casstellana, 259 C Planta 18, Cuatro Torres
Business area 28046, Madrid, Spain
Switzerland
(Branch)
Alliance Pharmaceuticals
GmbH Düsseldorf
Bahnhofstrasse 37, Postfach 2818, CH-8021
Zürich, Switzerland
Thailand
Alliance Pharmaceuticals
(Thailand) Co., Ltd
All Companies
England &
Wales
Northern
Ireland
No. 444 Olympia Thai Tower, 8th Floor,
Ratchadapisek Road, Samsennok Sub-district,
Huaykwang District, Bangkok, Thailand
Avonbridge House, Bath Road, Chippenham,
Wiltshire, SN15 2BB
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.
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130
14. Inventories
The Group
Finished goods
Work in progress
Raw materials
Inventory provision
31 December 2022
£000s
31 December 2021
£000s
21,804
416
5,083
(3,017)
24,286
20,111
23
4,177
(3,236)
21,075
Inventory costs expensed through the Income Statement during the year were £59,566,000
(2021: £52,932,000). During the year £993,000 (2021: £534,000) was recognised as an
expense relating to the write-down of inventories to net realisable value.
15. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Accrued income
The Group
The Company
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
44,764
23,929
2,775
1,094
691
1,953
3,102
1,837
49,324
30,821
–
85
8
–
93
–
31
8
–
39
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 2022
£000s
31 December 2021
£000s
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
41,642
2,514
432
176
–
20,405
2,573
633
318
–
44,764
23,929
Trade receivables, gross of estimated allowances for expected
credit losses
31 December 2022
£000s
31 December 2021
£000s
Not past due
1–30 days past due
31–60 days past due
61–90 days past due
Past 91 days
41,642
2,514
432
197
390
20,405
2,573
633
389
780
45,175
24,780
As at 31 December 2022, trade and other receivables of £411,000 (2021: £851,000) 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.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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131
16. Cash and cash equivalents
The Group
The Company
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
10,556
8,214
3,758
3,991
5,195
17,541
3,862
2,427
3,060
2,171
50
141
–
–
–
–
–
–
–
–
31,714
29,061
50
141
Sterling
Euros
US Dollars
Thai Baht
Other currencies
Cash at bank and in
hand
17. Trade and other payables
The Group
The Company
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
Trade payables
18,567
8,341
Other taxes and social
security costs
Accruals
Other payables
Lease liabilities
1,546
13,972
918
613
2,773
17,512
848
456
35,616
29,930
111
–
644
–
–
755
–
–
368
–
–
368
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
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. The loan commitments
are all ‘investment grade’ as at the balance sheet date.
The Group
The Company
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
Non-current
Bank loans:
Secured
134,065
117,025
Finance issue costs
(321)
(965)
133,744
116,060
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 2022
£000s
31 December 2021
£000s
116,060
13,664
–
648
3,372
138,328
(22,587)
–
628
(309)
133,744
116,060
*
Exchange movements on loans and borrowings with effective net investment hedges are reported in other comprehensive income and
accumulated in the translation reserve.
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
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Financial Statements
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132
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
For more information visit
alliancepharmaceuticals.com
19. Other non-current liabilities
The Group
The Company
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
Lease liabilities
Other non-current
liabilities
20. Provisions
3,219
196
3,415
2,426
211
2,637
–
–
–
At 1 January 2022
Provisions utilised during the year
Exchange differences
At 31 December 2022
CMA provision
(£000s)
7,900
–
–
7,900
Restructuring
provision
(£000s)
1,569
(1,078)
31
522
–
–
–
Total
(£000s)
9,469
(1,078)
31
8,422
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 £0.1m in 2022 (2021: £0.7m).
On 3 February 2022, the CMA announced its finding that four companies, including Alliance,
had infringed competition law (the ‘Infringement Decision’). The Alliance Board fundamentally
disagrees with the CMA’s finding.
The Group believes that it has a strong case and has appealed the CMA’s decision, and the
proposed fine of £7.9m, with its appeal now fixed to be heard at the Competition Appeal Tribunal
from 5 June 2023.
Despite its Appeal, the Directors believe that, as a result of the Infringement Decision, a provision of
£7.9m should be recorded at 31 December 2022 (2021: £7.9m).
This reflects the maximum 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 is appealing the
CMA decision, the Directors consider this to be the appropriate position given that, in the event that
the Group’s appeal proved 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 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 £0.5m at 31 December 2022 (2021: £1.6m) 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 remaining related outflows are
expected to occur in the year ending 31 December 2023.
Alliance Pharma plcAnnual Report and Accounts 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAlliance Pharma plc Annual Report and Accounts 2022 Company Overview
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Financial Statements
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133
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.
The Group also has access to an overdraft facility of £2.0m.
The maturity profile of the Group’s financial gross (capital and interest) liabilities, except forward
foreign exchange contracts for which maturity is disclosed separately, at the year-end is as follows:
31 December 2022
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
Total
£000s
35,003
134,065
613
169,681
–
–
594
594
–
–
1,263
1,263
–
–
35,003
134,065
1,362
3,832
1,362
172,900
Trade and other
payables
Bank loans*
Lease liabilities
*
Includes an amount of £130.1m (2021: £117.1m) 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 2022. 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 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
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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21. Financial instruments continued
Liquidity risk continued
The maturity profile of the Company’s financial gross liabilities (capital and interest) at the year end
is as follows:
Because of the size of the Euro-denominated loan, a 0.5% increase or decrease in EURIBOR
would not have affected pre-tax profits in 2022.
A 0.5% increase in US LIBOR would have reduced pre-tax profits by approximately £0.1m in
2022. A 0.5% decrease would have the opposite effect.
Trade and other payables
Interest rate risk
The Group’s debt is provided on a floating interest rate basis.
31 December 2022
In one year or less
£000s
31 December 2021
In one year or less
£000s
755
368
The interest rate exposure of the financial liabilities of the Group at the period end was:
Floating rate interest exposure
At 31 December 2022
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 2022
£000s
31 December 2021
£000s
96,817
6,987
30,261
134,065
(321)
96,817
7,895
12,313
117,025
(965)
133,744
116,060
The Sterling floating rate borrowings bear interest at a rate based on SONIA for the year ended
31 December 2022. 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 SONIA would have reduced pre-tax profits by approximately £0.5m in 2022.
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 25% of the Group’s sales are invoiced in Euro, 33% invoiced in US Dollars and 6%
invoiced in Hong Kong Dollars. 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 31) in 2022. On the same basis, 5%
weakening or strengthening of Sterling against the US Dollar would have resulted in a £0.7m gain
or loss to EBITDA in 2022.
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.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
21. Financial instruments continued
Fair value measurement
The Group has adopted IFRS 13 for financial instruments that are measured in the Group balance
sheet at fair value. This requires disclosure of fair value measurements by level of the following fair
value measurement hierarchy:
›
›
›
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
(Level 2); and
inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (Level 3).
The Group’s financial instruments held at fair value (or for which fair value is disclosed) in the scope
of IFRS 13 are as follows:
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.
Forward foreign exchange contract assets and liabilities are presented in ‘Derivative financial
instruments’ (either as assets or as liabilities) within the statement of financial position.
At 31 December 2022, the Group held the following forward exchange contracts to hedge
exposures to changes in foreign currency rates:
Forward foreign exchange
contracts
Level
2
31 December 2022
Carrying value
£000s
31 December 2021
Carrying value
£000s
174
174
64
64
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 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
117
1.195
1.131
–
40
1.200
1.123
–
17
1.196
1.120
–
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21. Financial instruments continued
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
–
–
–
–
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
31 December 2022
£000s
31 December 2021
£000s
44,764
691
31,714
174
77,343
23,929
1,837
29,061
64
54,891
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Loans and borrowings
Lease liabilities
31 December 2022
£000s
31 December 2021
£000s
33,457
134,108
3,832
171,397
36,166
117,057
2,882
156,105
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
31 December 2022
£000s
31 December 2021
£000s
–
31
31 December 2022
£000s
31 December 2021
£000s
Trade and other payables
755
368
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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21. Financial instruments continued
Reconciliation to cash flow movements
Cash flows
Non-cash changes
2021
£000s
Principal
£000s
Interest
£000s
Gross loans and borrowings
117,025
13,664
Prepaid arrangement fees
Accrued interest
Lease liabilities
(965)
32
2,882
–
–
(961)
–
–
(4,657)
(147)
Foreign
exchange*
£000s
3,376
–
–
Net additions
£000s
Amortisation
£000s
Interest
£000s
2022
£000s
–
–
–
–
644
–
–
–
–
4,668
134,065
(321)
43
117
3,832
(56)
1,997
*
Exchange movements on loans and borrowings with effective net investment hedges 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 2022
Assets/(Liabilities)
£000s
31 December 2021
Assets/(Liabilities)
£000s
157
17
174
64
–
64
The cash flow hedges were tested for
effectiveness both retrospectively and
prospectively as at 31 December 2022.
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 (2021: £nil). The amounts recognised
through the Income Statement in respect
of the forward foreign exchange contracts
during the year was a credit of £1,060,000
in revenue (2021: credit of £982,000).
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
22. Deferred tax
The Group
Accelerated capital allowances on tangible assets
Temporary differences: trading
Temporary differences: non-trading
31 December 2022
£000s
31 December 2021
£000s
1,057
205
1,630
(464)
291
915
Accelerated allowances on intangible assets
(14,085)
(13,452)
Initial recognition of intangible assets from
business combination
Share-based payments
Foreign exchange forward contracts
Losses and unrelieved interest
Recognised as:
Deferred tax asset
Deferred tax liability
(51,440)
167
(44)
1,058
(61,452)
4,117
(65,569)
(47,796)
1,819
(16)
501
(58,202)
3,526
(61,728)
Reconciliation of deferred tax movements:
The Group
Non-current assets
Intangible assets
1 January
2022
£000s
Transfers
£000s
Recognised
in other
comprehensive
income/directly
in equity
Recognised
in the income
statement
£000s
31 December
2022
£000s
(61,248)
(1,435)
(4,275)
1,433
(65,525)
Property, plant and equipment
(464)
1,435
–
86
1,057
Non-current liabilities
Derivative financial
instruments
Other non-current liabilities
Equity
(16)
915
Share option reserve
1,819
Temporary differences
Trading
Losses
Recognised as:
Deferred tax asset
Deferred tax liability
291
501
(58,202)
3,526
(61,728)
(58,202)
–
–
–
–
–
–
–
–
–
(28)
715
–
–
(44)
1,630
(1,169)
(483)
167
–
–
(86)
557
205
1,058
(4,757)
1,507
(61,452)
–
–
–
–
–
–
4,117
(65,569)
(61,452)
The Group has unrecognised deferred tax assets of £354,000 in relation to losses
(2021: £246,000).
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22. Deferred tax continued
23. Share capital
Transfers
£000s
(670)
670
–
–
–
–
–
–
Recognised
in other
comprehensive
income/directly
in equity
Recognised
in the income
statement
£000s
31 December
2021
£000s
(284)
(5,086)
(61,248)
–
(217)
(464)
40
292
–
–
(16)
915
At 1 January 2021 – Ordinary shares of 1p each
Issued during the year
At 31 December 2021 – Ordinary shares of
1p each
Issued during the year
Allotted, called up and fully paid
No. of shares
532,919,111
5,306,413
538,225,524
1,769,562
£000s
5,329
53
5,382
18
At 31 December 2022 – Ordinary shares of
1p each
539,995,086
5,400
Between 1 January 2022 and 31 December 2022 1,769,562 shares were issued on the exercise
of employee share options (2021: 5,306,413).
626
169
1,819
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.
–
–
(201)
501
291
501
674
(4,834)
(58,202)
3,526
(61,728)
(58,202)
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
93
102
103
104
105
106
107
108
The Group
Non-current assets
1 January
2021
£000s
Intangible assets
(55,208)
Property, plant and equipment
(917)
Non-current liabilities
Derivative financial
instruments
(56)
623
Notes to the Financial Statements 109
Other non-current liabilities
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)
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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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 (2021:
0.00p to 102.80p). 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
Exercise price
Pence
Exercise from
2012
2013
2014
2015
2015
2016
2016
2017
2018
2019
2019
2020
2020
2021
2021
2022
2022
29.25
37.25
33.75
43.75
46.75
47.50
47.50
53.00
81.60
76.90
0.00
73.70
0.00
102.80
0.00
58.20
0.00
2015
2016
2017
2018
2018
2019
2021
2020
2021
2022
2022
2023
2023
2024
2024
2025
2025
Scheme
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
CSOP
LTIP
CSOP
LTIP
CSOP
LTIP
CSOP
LTIP
31 December 2022
Number (000s)
31 December 2021
Number (000s)
–
233
281
350
500
619
1,400
2,366
3,241
4,412
226
4,231
542
6,044
468
7,837
877
41
263
321
719
500
1,077
1,800
2,877
4,171
5,422
529
5,042
628
7,012
531
–
–
33,627
30,933
The weighted average remaining contractual life at 31 December 2022 is 7.8 years (2021:
7.8 years).
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 2022 net debt was £ 102.0m (2021: £87.0m) (note 31), whilst shareholders’
equity was £287.7m (2021: 282.5m).
The business is profitable and cash-generative. The main financial covenants applying to bank
debt are that leverage (the ratio of net bank debt to EBITDA) should not exceed 3.0 times, and
interest cover (the ratio of EBITDA to finance charges) should not be less than 4.0 times. The Group
complied with both of these covenants in 2022 and 2021.
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.
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141
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:
2022
2021
Number
(000s)
30,933
8,759
(1,770)
(1,203)
(3,092)
Weighted
average price
Pence
71.62
52.34
50.96
63.21
75.53
Number
(000s)
36,583
7,674
(5,306)
(4,493)
(3,525)
33,627
67.54
30,933
13,628
64.71
11,845
Weighted
average price
Pence
47.02
93.94
50.07
56.12
74.65
71.62
60.12
Outstanding at start of
year
Granted
Exercised (issued)
Exercised (withheld)
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 55.40p and 120.20p 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 2022
Number (000s)
31 December 2021
Number (000s)
2013
2014
2015
2016
2016
2017
2018
2019
2019
2020
2020
2021
2021
2022
2022
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
58.20
0.00
2018
2017
2018
2019
2021
2020
2021
2022
2022
2023
2023
2024
2024
2025
2025
–
92
104
155
1,400
323
1,639
421
226
637
542
961
468
919
877
8,764
–
92
104
155
1,800
323
1,639
911
529
837
628
1,172
531
–
–
8,721
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
24. Share-based payments continued
The total expense for the year relating to share-based payment plans was £0.1m (2021: £2.3m),
of which £1.1m (2021: £1.1m) related to equity-settled transactions and a credit of £1.0m (2021:
debit of £1.2m) 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 2022
was £1,105,000. The model inputs were a market price of 58.2p, expected volatility of 31.93%
and a risk-free rate of 3.96%.
25. Cash generated from operations
Group
Company
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
936
4,272
7,319
10,838
5,429
1,280
6,756
945
5,433
3,646
–
–
(16)
(56)
–
(23)
(205)
–
1,558
1,575
27,436
(2,209)
14,680
1,842
(18,720)
(6,146)
7,281
(1,078)
92
–
(326)
9,469
2,250
–
(8,427)
(6,121)
–
–
–
–
–
(54)
387
–
–
–
–
–
–
–
–
(3)
62
–
–
(2,600)
24,929
44,919
(1,385)
(961)
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
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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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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26. Capital commitments
The Group had capital commitments at 31 December 2022 totalling £22,000 (2021: £nil).
29. Related party transactions
During the year, the Company entered into the following transactions with related parties:
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 and 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 and 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.
As at 31 December 2022 there are no contingent liabilities (2021: £nil).
28. Pensions
The Group operates a defined contribution pension scheme for the benefit of Executive Directors
and certain employees.
The Company
Transaction values for the year ended
Amount due from
related parties
31 December 2022
£000s
31 December 2021
£000s
31 December 2022
£000s
31 December 2021
£000s
Alliance Pharmaceuticals
Limited – Net funds
received
Alliance Pharmaceuticals
Limited – Interest received
Alliance Pharmaceuticals
Limited – Share-based
payment recharge
Alliance Pharmaceuticals
Limited – Dividend
declared and received
(11,814)
(10,170)
174,005
176,111
8,427
6,121
1,281
1,021
–
2,600
–
–
–
–
–
–
Net funds received represent net payments made against the intercompany loan by Alliance
Pharmaceuticals Limited.
The Group
31 December 2022
£000s
31 December 2021
£000s
Contributions payable by the Group for the year
1,345
1,306
30. 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.
31. 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.
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144
31. Alternative performance measures continued
These measures are used by management to monitor ongoing business performance against both
shorter-term budgets and forecasts but also against the Group’s longer-term strategic plans. APMs
used to explain and monitor Group performance are as follows:
Measure
Definition
Underlying
EBIT and
EBITDA
Earnings before interest, tax and non-underlying items (EBIT, also
referred to as underlying operating profit), then depreciation,
amortisation and 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
Net debt Net debt is defined as the Group’s gross bank debt position net of
Note C below
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.
Note D below
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.
Note E below
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.
Measure
Definition
Constant
exchange
rate (CER)
revenue
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
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 2022, like-for-like revenue
excludes the impact of ScarAway™ and Kelo-Cote™ US which were
acquired in March 2022.
Reconciliation
to GAAP measure
Note F below
Not needed
Operating
costs
Defined as underlying administration and marketing expenses,
excluding depreciation and underlying amortisation charges.
Not needed
A. Underlying EBIT and EBITDA
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)
Underlying EBITDA
Underlying EBITDA margin
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
5,208
25,103
30,311
5,361
35,672
1,558
1,964
39,194
22.8%
18,157
24,061
42,218
3,418
45,636
1,575
1,362
48,573
28.7%
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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31. Alternative performance measures continued
B. Free cash flow
E. See-through Income Statement
Reconciliation of free cash flow
Cash generated from operations (note 25)
Interest payable and similar charges
Capital expenditure
Tax paid
Free cash flow
C. Net debt
Reconciliation of net debt
Loans and borrowings – non-current
Cash and cash equivalents
Net debt
D. Underlying effective tax rate
Reconciliation of underlying effective tax rate
Total taxation charge for the year
Non-underlying tax debit/(credit) (note 5)
Underlying taxation charge for the year
Underlying profit before tax for the year
Underlying effective tax rate
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
24,929
(4,804)
(407)
(3,957)
15,761
44,919
(2,965)
(5,532)
(6,260)
30,162
Note
(18)
(16)
31 December 2022
£000s
31 December 2021
£000s
(133,744)
31,714
(102,030)
(116,060)
29,061
(86,999)
Year ended
31 December 2022
£000s
Year ended
31 December 2021
£000s
(4,272)
(2,962)
(7,234)
30,311
23.9%
(10,838)
2,805
(8,033)
42,218
19.0%
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
2022
Statutory
values
£000s
120,622
46,794
167,416
(65,733)
101,683
60.7%
2021
Statutory
values
£000s
115,376
47,831
163,207
(53,757)
109,450
67.1%
See-through
adjustment
£000s
4,594
–
4,594
(4,594)
–
–
See-through
adjustment
£000s
6,443
–
6,443
(6,443)
–
–
2022
See-through
values
£000s
125,216
46,794
172,010
(70,327)
101,683
59.1%
2021
See-through
values
£000s
121,819
47,831
169,650
(60,200)
109,450
64.5%
There is no impact from the see-through adjustment on Income Statement lines below
gross profit.
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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31. Alternative performance measures continued
F. Constant exchange rate revenue
LFL see-through revenue – Consumer
Healthcare brands
LFL see-through revenue – Prescription
Medicines
Like-for-like see-through revenue
Impact of acquisitions (ScarAway™ and
Kelo-Cote™ US)
See-through revenue (Note E)
LFL statutory revenue – Consumer
Healthcare brands
LFL statutory revenue – Prescription
Medicines
Like-for-like statutory revenue
Impact of acquisitions ( (ScarAway™ and
Kelo-Cote™ US
Statutory revenue
2022
AER
£000s
Foreign
exchange
impact
£000s
2022
CER
£000s
118,883
(5,994)
112,889
46,794
165,677
6,333
172,010
95
46,889
(5,899)
159,778
(774)
5,559
(6,673)
165,337
2022
AER
£000s
Foreign
exchange
impact
£000s
2022
CER
£000s
114,289
(5,994)
108,295
46,794
161,083
6,333
167,416
95
46,889
(5,899)
155,184
(774)
5,559
(6,673)
160,743
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
93
102
103
104
105
106
107
108
Notes to the Financial Statements 109
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Alliance Pharma plc Annual Report and Accounts 2022
Additional
Information
Additional Information
Unaudited Information
148
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
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U N A U D I T E D I N F O R M A T I O N
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
25 May 2023
Interim results announcement
19 September 2023
Year end
31 December 2023
Preliminary announcement
19 March 2024
Additional Information
Unaudited Information
148
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
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F I V E Y E A R S U M M A R Y
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 2018
£m
Year ended
31 December 2019
£m
Year ended
31 December 2020
£m
Year ended
31 December 2021
£m
Year ended
31 December 2022
£m
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
167.4
35.7
(25.1)
10.6
30.3
5.2
421.6
5.6
105.5
47.0
287.7
539.5
540.0
0.17
4.28
Additional Information
Unaudited Information
148
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
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A D V I S E R S A N D K E Y S E R V I C E P R O V I D E R S
Registered Office
Avonbridge House
Bath Road
Chippenham
Wiltshire
SN15 2BB
Company number
04241478
Auditor
Deloitte LLP
3 Rivergate
Temple Quay
Bristol
BS1 6GD
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
Bow 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
Additional Information
Unaudited Information
148
Five Year Summary
149
Advisers and Key Service Providers 150
Cautionary Statement
Glossary
151
152
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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.
C A U T I O N A R Y S T A T E M E N T
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.
Additional Information
Unaudited Information
148
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
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G L O S S A R Y
AGM
APAC
B2B
B2C
CBEC
CEO
CFO
CMA
CMO
EMEA
ERP
ESG
Annual General Meeting
Asia Pacific and China
Business-to-business
Business-to-consumer
Cross-border e-commerce
Chief Executive Officer
Chief Finance Officer
Competition and Markets Authority
Contract manufacturer
Europe, Middle East and Africa
Enterprise resource planning
Environmental, Social, and Governance
GPTW® Great Place To Work
HCP
I&D
IHP
J&J
LSP
NED
OTC
SECR
TCFD
Healthcare professional
Innovation and development
International Health Partners
Johnson & Johnson
Logistics service provider
Non-executive Director
Over the counter
Streamlined Energy and Carbon Reporting regulations
Task Force on Climate-related Financial Disclosures
Additional Information
Unaudited Information
148
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
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Additional Information
Unaudited Information
138
Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
139
140
141
142
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Five Year Summary
Advisers and Key Service Providers
Cautionary Statement
Glossary
149
150
151
152
Alliance Pharma plc
For more information visit
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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
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