Alliance Pharma holds off cost crunch

Alliance Pharma (APH) could be a handy hedge for parents on the nuisance of headlice after the great return to school, given the company expects sales of its lice treatment product Vamousse to climb after a Covid-19-affected year. More broadly, the pharmaceutical company saw improved half-year profits thanks to its acquisition of Amberen, a supplement for women going through menopause. 

Its two divisions are consumer healthcare and prescription medicines. They both saw sales growth of 12 per cent on a like-for-like and constant currency basis, but including Amberen consumer healthcare saw sales climb more than a third. Chief executive Peter Butterfield said more acquisitions could be on the way and highlighted the “simple” integration of the new brand. Alliance bought Amberen owner Biogix last year for $110m (£80m). 

The company’s underlying gross margin climbed by 4.7 percentage points, to 63.8 per cent, well ahead of RBC analyst Charles Weston’s forecast of 61.5 per cent. He put it down to the Amberen addition. 

Looking ahead, Alliance said its full-year numbers would be consistent with market forecasts. Butterfield said the cost rises seen across the board had not affected the company “to any detrimental degree”, and highlighted a plan to consolidate outsourced manufacturing options that would see costs go down in future. 

Net debt, which rose from £55m a year ago to over £100m on the Amberen deal, is expected to be around £90m at the end of the year, according to finance chief Andrew Franklin. The reduction will come through higher second-half cash flow and helpful working capital movements. 

RBC sees cash profits of £45m for 2021, 16 per cent up on last year. Alliance is on track for a strong 2021 and beyond, although rising costs may yet bite. Hold.  

Last IC View: Hold, 88p, 23 Mar 2021