Alliance Pharma's (APH) recent acquisition spree has more than doubled the group's sales, cash profits and free cash flow. The 27 products bought from fellow Alternative Investment Market (Aim) group Sinclair Pharma (SPH) are now fully integrated and have expanded Alliance's European reach. Meanwhile, the underlying business has continued its double-digit sales growth trajectory to £53.7m, while underlying EPS rose 11 per cent.
But the balance sheet has the market feeling anxious. True, net debt leverage of 2.8 times cash profits looks toppy, but reflects the high level of borrowing needed to fund the Sinclair deal. But, excluding the translational effect of the strong dollar and euro against the pound, net debt would have narrowed to £69m. With strong free cash flow of £13m, management expects net debt to fall into the targeted two times cash profits range by the end of the financial year.
Broker Numis expects more modest growth in the year to December 2017 and has forecast pre-tax profits of £24m and EPS of 3.9p (from £22m and 3.8p in FY2016). But the major catalyst for future growth will be the UK's approval of nausea medicine Diclectin, due in the second half. The drug currently makes $160m (£128m) of revenue for its US owners and similar success in Europe could generate £40m of licensed sales for Alliance.
ALLIANCE PHARMA (APH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 48p | MARKET VALUE: | £226m | |
| TOUCH: | 47-48p | 12-MONTH HIGH: | 54p | LOW: 41p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 37.9p* | NET DEBT | 16% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 44.8 | 10.8 | 3.6 | 0.8 |
| 2013 | 45.5 | 12.0 | 3.8 | 0.9 |
| 2014 | 43.5 | 10.2 | 3.2 | 1.0 |
| 2015 | 48.3 | 15.2 | 4.7 | 1.1 |
| 2016 | 97.5 | 22.2 | 3.9 | 1.2 |
| % change | +102 | +46 | -17 | +10 |
Ex-div: 15 Jun Payment: 12 Jul *Includes intangible assets of £265m, or 56p a share | ||||
