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UPDATE - Alliance Phama delighted with return to double-digit profit growth

Alliance Pharma lifted its annual profit by more than a tenth but said the growth rate was almost twice that stripping out anti-inflammatory steroid Deltacortril.
UPDATE - Alliance Phama delighted with return to double-digit profit growth

-- adds share price, CEO and broker comment --

Alliance Pharma (LON:APH) grew annual profit by more than a tenth but said the growth rate was almost twice that stripping out the drag of anti-inflammatory steroid Deltacortril.

The group's strategy is to “buy and build” mature prescription treatments deemed surplus to requirement by the major pharmas.

Pre-tax profits in 2013 rose 11% to £12mln on a modest rise in revenues to £45.5mln.

Deltacortril, acquired in 2006, has seen margins under pressure in recent years and since 2010 has seen an £11mln decline in its gross profit, though Alliance said it will no longer have an impact on the numbers going forward.

Turnover is also still being affected by the production problems at the maker of bladder cancer treatment ImmuCyst, Sanofi Pasteur, but Alliance expects sales to resume at the end of this year and revenues to build in 2015.

Growing demand for Hydromol helped make up for the ImmuCyst shortfall with sales of the eczema cream range 12% higher at £5.3mln.

Hydromol is now the company’s largest brand and manufacturing capacity is being expanded after demand outstripped production at one point during the year.

A cyclical peak in demand for a toxicology product also meant it made a significant contribution, while sales of Nu-Seals, the enteric-coated low-dose aspirin that is sold mainly in the Irish Republic, held up better than expected.

Broker Numis said the figures were ahead of its expectations and it upgraded its rating to ‘add’ from ‘hold’.

“The investment case hinges on delivery of meaningful acquisitions. We await further news flow in this regard but with our price target uplift from 38p to 39p…we see 18% upside from current levels”.

John Dawson, Alliance’s chief executive, said it was seeing plenty of opportunities for deals especially with many of the major groups seeking to rationalise their portfolios.

Stability of cashflow and sales were paramount in looking for assets to buy, he said, with the performacne over five years a key measure.

A five-year UK price regulation regime means it has to pay a rebate of 3.74% on sales, which will amount to £0.5mln this year, but despite this Dawson said he is “very bullish” on the current year as deal flow was healthy,finance was available while Deltacortril is “at rock bottom so that can’t do us any more damage.”  

Its joint venture in China, meanwhile, has taken a minority stake in Synthasia, which markets Swiss-made infant milk in the country.

The annual dividend got a 10% lift and the shares rose 1% to 33.8p.

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Alliance Pharma plc Timeline

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