Alliance Pharma shakes off covid

Alliance Pharma's (APH) full-year results showed a return to respectable growth as the consumer medicines company benefited from the ebbing effects of the pandemic on its core over-the-counter (OTC) medicines business. The company, which supplies wound-care products, women’s health products and medicated shampoo, reported stable pre-tax margins of 25 per cent and a new distribution agreement based on China’s cross-border e-commerce regulation (CBEC) which allows enhanced access for the import of goods.

In fact, the exposure to China – which experienced sales growth of 30 per cent during the year – was an interesting fact at a time of heightened concerns over the fragility of global trade amid the fallout from the war in Ukraine. China and Asia Pacific contributed £48mn to total sales for the year. Chief executive Peter Butterfield said: “As a company we are more insulated from a manufacturing point of view compared with those who have off-shored everything to China”. He added that trade risk was something that the company had to consider as part of its overall supply chain management. Still, in many ways the US is the key area for Alliance Pharma because of the sheer size of its OTC market and sales growth here was 287 per cent to £26mn.

The company is essentially a very straightforward investment proposition, with relatively low barriers to entry for OTC products. Broker Numis has Alliance Pharma priced at 17 times forward earnings for 2022. If it swerves disruption in its core markets, Alliance will be fine, but it is difficult to avoid the conclusion that the risk premium needs to higher. Hold

Last IC View: Hold, 105p, 21 Sep 2021