In the six months to June 2019, Alliance Pharma (APH) produced enough cash to increase the half-year dividend by 10 per cent and reduce net debt by more than £11m. As promised, leverage has fallen to less than two times adjusted cash profits, from 2.3 times at the end of 2018, thanks to the robust local brands portfolio that generates “significant profit and cash flow for the business”.
Still, management has decided to enlarge its debt facility, which gives further headroom to acquire more products. Targets are likely to fit into the ‘international star brands’ division, which delivered 21 per cent like-for-like top-line growth in the first six months on 2019 and was boosted by a full period of sales from newer products Nizoral and Xonvea. Continued strength of these new products means analysts expect adjusted EPS to rise to 5.03p in the year to December 2019, from 4.42p last year.
The only cloud comes from a Competition and Markets Authority (CMA) investigation into the price of one of the medicines Alliance licenses to another company. Alliance denies that it has any involvement in the pricing of prochlorperazine, which generated less than £0.2m of revenue in 2018, so this case shouldn’t cause investors to lose too much sleep. But a clampdown by the CMA on drug price inflation is not good news.
| ALLIANCE PHARMA (APH) | ||||
| ORD PRICE: | 75p | MARKET VALUE: | £388m | |
| TOUCH: | 74-75p | 12-MONTH HIGH: | 82p | LOW: 59p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 49.7p* | NET DEBT: | 29% | |
| Half-year to Jun 2019 | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 54.5 | 11.2 | 1.90 | 0.487 |
| 2019 | 66.0 | 15.2 | 2.34 | 0.536 |
| % change | +21 | +35 | +23 | +10 |
| Ex-div: | 19 Dec | |||
| Payment: | 10 Jan | |||
| *Includes intangible assets of £335m, or 64p a share | ||||
