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Sinclair IS Pharma handles slowdown

RESULT: Sinclair IS shows some promise in emerging markets, but the shares remain highly rated and are unlikely to outperform anytime soon
February 12, 2013

Sinclair IS Pharma's (SPH) results showed the dermatology specialist more or less holding its own against the twin pressures of a traditional first-half lull in sales, as customers destock over the summer, and increased competition on some of its existing products. When the effect of disposals and acquisitions is discounted, like-for-like sales rose 4.5 per cent during the half.

IC TIP: Hold at 26p

Sinclair IS faces its biggest problem in the five leading European markets that generate the biggest chunk of its sales. Price cuts for reimbursed medicines, increased competition to coagulant drug Variquel and anaesthetic Cryogesic meant sales in these developed markets fell by £3.7m to £13.8m. In addition, the company took a £2.5m non-cash impairment to the intangible value of Cryogesic's trademark. Management aims to reduce Sinclair's reliance on the reimbursed medicines market given the exposure to austerity cuts: the segment accounted for 45 per cent of revenues in the six month period, down from 50 per cent the previous year.

Overall sales were maintained by the rapid growth in Sinclair's emerging markets business, which grew underlying revenues by 18.9 per cent to £9.2m. To help boost its product portfolio, Sinclair also arranged a new £23.6m credit facility to refinance its existing debts and provide an acquisition fund worth £9m.

Canaccord Genuity forecasts full-year adjusted pre-tax profits of £5.3m and EPS of 1.1p (2012: £2.2m and 0.8p).

SINCLAIR IS PHARMA (SPH)

ORD PRICE:26pMARKET VALUE:£113m
TOUCH:25.75-26p12-MONTH HIGH:29.25pLOW: 20.5p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:27p*NET DEBT:7%

Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201123.4-5.55-1.4nil
201223.0-5.77-1.2nil
% change-2---

*Includes intangible assets of £132m, or 30p a share