International healthcare group Alliance Pharma (APH:AIM) delivered better than expected full year revenues and profit, driven by a strong performance in consumer brands and continued recovery in prescription medicines.
The company is confident of delivering ‘significant’ organic growth in 2022 and beyond as prior investments in distribution and marketing capabilities bear fruit.
The shares reacted positively to the earnings beat and outlook, gaining 4% to 115.6p.
Strong cash generation helped to reduce leverage with net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) dropping to 1.73 times.
This provides the firm with the financial firepower to make bolt-on acquisitions of brands to exploit its stronger global distribution platform. It is considering two potential US targets.
BRAND STRENGTH
Full year revenues to December 2021 grew 23% in constant currencies to £169.6 million. The stand-out performer was scar-prevention and treatment brand Kelo-cote which saw revenues jump 43% to £48.8 million.
Like-for-like revenues excluding the December 2020 acquisition of Amberen grew 12%. Amberen is a leading US brand providing vitamin mineral supplements for menopausal relief.
Growth is expected to accelerate towards the second half as the company looks to leverage the operating platform it has established in the US.
The group’s overall e-Commerce revenues now represent 25% of total sales.
HIGHER PROFITABILITY
Strong growth in higher margin brands plus changes to distribution arrangements for Kelo-cote and the acquisition of Amberen pushed gross profit up 32% to £109 million, representing a 4.3% higher margin of 64.5%.
Gross profit is sales less cost of goods sold.
Despite increased discretionary spending to improve operating capabilities and brand marketing support, underlying pre-tax profit increased 26% to £42.2 million, representing an increased margin of 24.9%.
Alliance Pharma appears well positioned to deliver on its medium- term ambition to grow revenues to between £225 million and £250 million.
The firm is targeting pre-tax profit of between £50 million and £60 million, representing a margin of 22%-to-25%.
EXPERT VIEWS
Paul Cudden, pharma analyst at Numis, commented: ‘Gross margins have come in better than we had expected, and lower finance costs results in FY22 Adjusted EPS of 6.3p coming in 6% ahead of our expectations.’
Andrew Whitney at Investec maintained his buy recommendation on Alliance Pharma and said: ‘Although we leave our near-term forecasts unchanged, our price target increases to 132p, as we tweak longer term growth assumptions to reflect the group’s ongoing strength.’
